SL Green Realty (NYSE:SLG) Q3 2020 Earnings Call

0:00 Thank you everybody for joining us and welcome to the SL Green Realty Corp's third quarter 2020 earnings results conference call. This conference call is being recorded. At this time, the company would like to remind listeners that during the call, management may make forward-looking statements. Actual results may differ from any forward-looking statements that management may make today. Additional information regarding the risk, uncertainties, and other factors that could cause such differences appear in the MDMA section of the company's latest form, 10-K, and other subsequent reports filed by the company with the Securities and Exchange Commission. Also, during today's conference call, the company may discuss non-GAAP financial measures as defined by Regulation G under the Securities Act.

0:49 The GAAP financial measure most directly comparable to each non-GAAP financial measure discussed and the reconciliation of the differences between each non-GAAP financial measure and the comparable GAAP financial measure can be found on both the company's website at www.slgreen.com by selecting the press release regarding the company's third quarter 2020 earnings and in our supplemental information filed with our current report on Form 8K. relating to our third quarter 2020 earnings. Before turning the call over to Marc Holliday, Chairman and Chief Executive Officer of SL Green Realty Corp, I ask that those of you participating in the Q&A portion of the call, please limit your questions to two per person.

1:37 Thank you. I will now turn the call over to Marc Holliday. Please go ahead, Marc.

1:42 Thank you. Good afternoon, everyone, and thank you for being with us today. I'm joined here by Andrew Mathias, Matt DiLiberto, Ed Piccinich, Steve Durels, David Schombraun, Andy Levine, and Maggie Hui, as well as several others. And we're all together here socially distant and looking forward to a good earnings call today. So yesterday we released our earnings for the third quarter of 2020. And for the most part, the results and achievements met or exceeded our expectations. and are aligned with our corporate goals, which were, of course, altered back in March and April at the outset of the pandemic, which you might recall from our Q1 call.

2:27 Our earnings for the quarter were in line as we track towards the higher end of our revised guidance rate, so we're pleased with that. And our office and overall collections remain relatively strong, surprisingly strong, at 97% and 92% respectively, something that we're quite quite proud of as it relates to the rigorous nature of our underwriting and our diligence and just the superior quality of our tenant base this far into the pandemic. Our occupancy dipped but finished the quarter above 94%. We are aggressively managing our operating expenses in order to maximize our bottom line throughout generating of savings in excess of $30 million of operating expenses year to date realized without sacrificing service to our tenants.

3:18 We leased approximately 187,000 square feet of Manhattan office spaces, slightly less than we had hoped for, but the pipeline looks very good at 825,000 square feet of leases and term sheets pending or in negotiation. So that pipeline number has actually increased. While we do not expect to certainly close all of that activity by year end, We are on track to lease 1.2 million square feet for the full year, a lofty goal we reset for ourselves in April at a time of great uncertainty when there was not really good visibility as to what we could achieve. And as we sit here now, we feel that it's attainable and working hard to make those numbers for the year.

4:08 Through additional focused reductions in savings We also managed to reduce total G&A by $10 million to approximately $90 million projected for the full year. And we, along with others, are benefiting from significant interest savings due to the Fed's easy monetary policy. While generally pleased with these results, it doesn't nearly tell the entire story of what we have achieved as a company in the past seven months, how we achieved it, or what our current metrics are for measuring success in the pandemic economy. The city's economy is essentially on pause right now as much focus is on the containment of COVID-19 and the traditional financial measures that we in our industry look to. We don't think they really apply during these highly irregular times.

5:03 The focus has changed. And at this moment in time, our focus has shifted and we are driven more than ever to help promote this great city, work with our hardest hit tenants to sustain their businesses, create a safe and secure environment within our portfolio for building occupants and their employees, invest in the future of New York City and lead by example. And I'm happy to say that we feel there's no real estate company in our market that exceeds our efforts in these areas We are batting 1,000 in these areas. It all stems from SL Green's extraordinary employees who are 100% work from office, not from home. We accomplish this safely, smartly, and with enthusiasm for doing something positive for our families, our company, and our economy.

5:59 We wish and encourage other companies to do the same for the sake of their employees, many of whom feel disconnected and frustrated by the isolation of working from home for the sake of local businesses who want to work and want to call their employees back to business and who rely on the 1.5 million office-using workforce in New York City for their sales. These businesses need everyone back in the city and back in their office spaces to make a go of it. And for the sake of the city, which has provided so much to so many, So lots of reasons that go far beyond the productivity of work from office, but that really relate to the whole ecosystem of an economy, which is why we have such a stout belief in work from office and school from classrooms and all the rest.

6:58 So on June 15th, SL Green employees returned to work at 420 Lexington Avenue. and inner satellite office building offices and we are working overtime with a sense of purpose and urgency that has expressed itself in many ways over these past months. First and foremost, we quickly established new operating procedures and protocols for our buildings combined with infrastructure upgrades which make the building safe and secure for the employees that have returned to work and the employees that work in the buildings, the building employees themselves. and the feedback so far has been nothing short of excellent. Next, we worked to secure several construction sites so that construction could continue uninterrupted, on schedule and on budget. We then went to work with our most impacted retail tenants and in many cases worked out arrangements to provide deferrals and concessions to help them through this difficult period.

7:59 Turning now to our office tenants, We recognized this interim period as a moment of uncertainty, so we injected flexibility into the conversation with short-term lease extensions and increased free rent, both of which was met with real appreciation for those tenants that wanted to take advantage of those parameters, particularly those who had near-term lease expiration. So a lot of our activity recently, as Steve can sort of expound upon, has been in the renewal area, much more so than prior years. Next, S.L. Green and Chef Daniel Balloud established Food First, a nonprofit foundation created to provide free, nutritious meals to frontline medical personnel, first responders, and the many food insecure New Yorkers.

8:51 On the same token, the organization has helped the hard-hit restaurant industry reopen some of their kitchens and re-employ staff who have been laid off due to closures. To date, we are proud to have prepared and delivered 400,000 free meals to over 100 locations throughout the city, the logistics of which are managed entirely by SL Green. On the business front, SL Green continues to invest in New York in many ways that we believe create long-term value for the company. and there was no greater example of this than the completion of one Vanderbilt on September 14th, three months ahead of schedule and $100 million below budget.

9:37 50 invited guests, industry leaders, civic advocates and elected officials attended the ribbon cutting that we held in the newly completed Vanderbilt Plaza as we celebrated this great and permanent achievement for New York, including $220 million of public realm and transportation improvements. Just two weeks later, we were a top 185 Broadway for the on-time topping out of the project, which is the first new residential construction in downtown being built under the affordable New York housing program. And just blocks away from 185, SL Green commenced demolition of 126 Nassau Street for a $220 million fully committed development project for Pace University, inclusive of dorms, classrooms, and other school and educational facilities.

10:34 It's a major, major project for Pace and for their expansion, and this project is completely capitalized with joint venture equity and construction financing that we closed during this quarter. Finally, there were a number of other sale and DPE disposition transactions concluded during the quarter, the proceeds of which fortified our $1 billion liquidity plan that we set forth back in April, reduced corporate indebtedness, and enabled us to continue our share repurchase program. So you see that we've been quite busy these past three months over the summer and accomplished quite a lot with much more to come in Q4.

11:19 Yes, it's true that economic activity in New York City slowed considerably in the third quarter. Leasing activity was sharply reduced, vacancies rose, and investment sales declined. However, this is entirely to be expected from a city on pause and a city whose number one priority right now is containment of COVID to such a degree that the city is one of the safest cities by most COVID measures than any city in the country. Further digging into the data, there are encouraging signs. Wall Street profits for the first half of the year were spectacular, nearly $28 billion, which is much higher than an average full year of earnings for these banks.

12:11 After a seismic 820,000 private sector jobs were shed in April, nearly one-third of them have since been restored, a rate of recovery that is actually faster than we saw after the tech crash in early 2000 and the great financial recession in 07-08, albeit recovering from a lower starting point. The office-using job recovery is somewhat slower. but there has been sequential office using job growth in July and August and September and we hope to see that trend continue in October and throughout the year. Notwithstanding that the city projected a loss of $9 billion of tax revenues, its $90 billion budget is balanced for fiscal year ending 2021 and the city is now working on balancing the budget for fiscal year 22 helped by reduced interest costs, higher than expected profits from the financial sector that I mentioned earlier, retail spending that is actually holding up fairly well and further aided by the prior stimulus benefit that many of New York residents and businesses received and hopes for future stimulus in the near term. So while we read the analyst reports last night that were fairly neutral on our results and Somewhat pessimistic on New York City fundamentals, we have an entirely different view on how we measure

13:44 the quarter. We think it was an extraordinary quarter. We think we accomplished much for the company, for our employees, for our tenants, and the local businesses, and the city's economy, of which we are an inextricable part. and we take great pride in what we've done and what is yet to come. So this city we all know has been written off many times before and has always rebounded stronger than ever. New York City is our home. We are fully committed here and we believe strongly in its future. The city's future in many ways is Essel Green's future and we have conviction that its underlying fundamentals, spirit, diversity and everything great about this city will continue to set New York apart as the greatest city in the world. So before we open it up for questions, which we'll do momentarily, I want to talk about one further piece of good news, which is our investor conference slated for December 7th of this year. After much deliberation and input from the investor community, we have decided, true to form, that our 2020 investor conference will be live and in person at the now iconic One Vanderbilt Avenue Auditorium on our new amenity floor, which will be sort of unveiled in December

15:17 and open in January to tenants. And we will have all COVID precautions in place. So at this event, we will obviously look forward to presenting our business plan for 2021 and our outlook for the future of New York City. With that, operator, I'd like to turn it over for questions. Ladies and gentlemen, to ask a question, please press star 1 in your touch-tone telephone. To remove yourself from the question queue, please press the pound key. Again, press star 1 in your touch-tone telephone. Please stand by while we compile the Q&A roster. Our first question comes from the line of John Kemp of BMO Capital Markets. Your line is open.

16:01 Thank you, good afternoon. Marc, I was wondering if you can give the breakdown of your 825,000 square feet of leasing in the pipeline as far as how much is renewal versus new or expansion space and how much of that is in your new developments?

16:18 This is Steve Durels, so I'll respond to that. So in the pipeline, we've got 825,000 square feet, 51% of that are new transactions, and 49% are renewal transactions, heavily weighted by legal, financial and publishing industries and heavily centered around the Grand Central area where we see the most leasing activity right now. In particular, a lot of activity at 1 Vanderbilt and then our buildings at 45 Lexington, 753 Graybar and 800 3rd Avenue.

17:02 As a follow-up, I'd like to ask about dispositions and how much you're looking to sell, and in particular, the media reports on 410 10th Avenue. Just given it's your foothold in the hunting yards area, it's leased to a great tenant, why sell that asset at this time?

17:18 Well, Andrew will talk about why and everything else going on, but we have a We've been selling fairly robustly our mature and non-core assets since 2015. 2020 is no different. We've been able to accomplish much year to date. We have several assets in the market now we can chat about. But this is all part of a long-term plan. Volumes may be altered slightly by COVID, but really nothing new here. Everything we talked about in December about recycling of capital, monetizing of gains, and paying down of debt and repurchasing of shares, which we're well along for this year.

18:04 Maybe not quite $500 million, but closing in on it. So some of the specifics, Andrew, what we're doing.

18:11 Well, I mean, particularly with 410, it's an asset that is drawing a lot of interest given where interest rates sit today. and the extraordinary job Steven and his team did leasing that asset up. So we don't have to sell it. We're evaluating bids. We actually closed the financing on the deal over the summer, $600 million financing, which funds all the capital improvements, which was part of our business plan for the year. But we did get approached with some interesting offers and decided to test the market. So, you know, 410 is out there on the market along with several other assets. I haven't made a decision yet about whether to pull the trigger on a sale or not.

18:57 Is there an update as to how much in total you're looking to sell?

19:02 No. I mean, I think the guidance for the year is unchanged. And if we're opportunistic sellers, so if we like prices for assets we have in the market, you know, we'll transact. But otherwise... There's no pressure to sell. Great. Thank you. Thank you. Our next question comes from the line of Jamie Feldman of Bank of America. Your line is open.

19:32 Great. Thank you. And I appreciate all the color on SL Green's efforts to keep the city moving here. You had talked about your efforts to market the city and promote the city and bring people back. Can you talk about the feedback from tenants, both large tenants and small tenants, just in terms of are they changing their attitude at all on how soon they want to bring people back? And then as you think about the leasing among both small and large tenants, what are they saying lately about their space needs and maybe shrinking or expanding?

20:04 Well, let's handle the first part of the question, which is what are these business leaders, what are they saying in terms of wanting to get their people back to work? I would say, you know, out of the 900 tenants plus, you know, in the portfolio and the hundreds we've spoken with directly at the senior levels, almost to a person, they all express a desire to have their employee base back in the city. You know, they recognize the benefits, they recognize the need to do it, and I think they recognize an urgency to it. Surprisingly, what I read into it mostly is a concern over liability, which surprises us because there's actually very little in the way of employer or landlord liability if you do things right, and right means following all the DOL, DOH, OSHA guidelines for what you need to do in your space.

21:14 which we and most other landlords in New York City are doing. So the buildings themselves are among the safest places. We know many people in our company are using mass transit. Andrew and I and others use mass transit. The mass transit is clean, efficient, much more so than it was previously because they're taking extra steps for sanitization overnight and throughout the day. Everyone's wearing masks or, you know, most people are adhering to masks and, you know, by and large. So there's it's hard to put a finger on it. It's always, you know, sort of right around the corner. We're hearing, you know, in in in in August, it'll be right after Labor Day and Labor Day.

22:04 It's October. So it feels imminent. And yet the numbers. don't bear that out. We're still, as a portfolio, right around the city average of probably 15% to 20% back to work, back to office work. And that's out of 1.5 million office workers. So that means 80%, 85% of the people that work in office buildings are still home. And that's frustrating. And I think they will be back. The reality, whether they're back next month, December, January, March, that doesn't, in our estimation, affect any of the long-term fundamentals of the things we look at. I mean, the sooner the better. And I would expect by December to see those numbers be somewhere between 20% and 30% up from 15% to 20% today.

22:59 And then hopefully it just grows from there. But the important things are that we're heading in the right direction and a lot of the stats I gave you earlier indicate we are heading in the right direction both from a COVID containment and you know job recovery and more and more people coming in and MTA ridership and I can go on and on which I won't now maybe I will in December but the point is you know the narrative is people want to be back now how that's going to dovetail with some There's going to be allowance for larger spaces. Everybody, as they're returning, is kind of de-densifying. And how long that de-densification trend will last, don't know, but for now that is.

23:46 And how that will be mitigated by some work-from-home policy. Steve, what do you think?

23:52 Well, I don't think anybody out there has a clear picture as to exactly where the trend is going to head. When lockdown started, there was a lot of conversation and speculation about how work from home is going to sort of overtake all of our lives. And as time has gone by, that conversation has done 180 degree shift where almost every day there's a constant barrage of discussions with tenants who continually express frustration about being home, the isolation of being home, the inefficiency of working from home, So whether or not it's a, you know, they're staying at home because of all the press with COVID and the short-term fears.

24:46 I think when they look past that, you're hard-pressed to find a business manager out there that really has locked down a point of view as to how they're going to operate their space and manage their employees going forward, other than the fact that they all recognize they want to be back in the office. So in the short term, it'll mean changes to the furniture environment, some of the design elements of spaces. But I think, you know, looking past that, and if you talk a little bit more about the pipeline of deals that we're working on with tenants, they're looking past the immediate disruption of COVID and saying, okay, we recognize there's now a lot in a tunnel, you know, whether that's six or 12 months out.

25:31 but they're starting to begin to plan for their offices and how they're going to run their space but I don't think they have a firm point of view as to how much of that is work from home or how much of that is hoteling. It's all over the board right now.

25:46 Okay, and then just to follow up, small versus large tenants, are you seeing a change there or a difference there just in terms of giving back more space or giving up leases or how they're thinking about their space plans?

26:00 Now, you know, what you're seeing is it's in the second and third quarters of the year, there was a lot of renewal activity, a lot of short-term renewal activity, anything from a year to five years. And I don't think that was exclusive to larger or small tenants. I guess you could argue that some of the very small tenants, and I'm talking very, very small, you know, a couple thousand square feet, It was easy for those types of tenants to just simply say, I'll work from home. But our average size tenant in the portfolio is 25,000 square feet. Things have started to decidedly shift. In the second quarter, 77% of the transactions in our portfolio were renewals.

26:48 In the third quarter, it was 56%. As we see it here today, 51% of my pipeline are new transactions. The tides are shifting where tenants are beginning to look past it, and they're now saying, let's talk about relocations and let's talk about longer-term planning as opposed to where the thinking was earlier in the year.

27:13 Okay, great. Thank you. Thank you. Our next question comes from the line of Michael Lewis of Truist Securities. Your line is open. Great.

27:27 Thank you. I wanted to ask for a little more color on 885-3rd, which, you know, was a preferred equity investment. It looks like the common now you don't ascribe any value to. It looks like there's also a large expiration right around the corner. Maybe just your thoughts on, you know, keeping that building leased and the strategy there.

27:53 Well, I'll start off doing sort of follow in. A85 is a great building, 53rd and 3rd, otherwise known as Lipstick Building. It's a very iconic, beautiful building that right now is going, nothing to do with COVID, it was going through a transition because one of their larger tenants was rolling out, I think, essentially now or over the course of the next few months. Next year is probably when they stop paying rent. So that building, from our standpoint, you know, fits the category of one that we will, you know, we have and will develop and will execute a full building repositioning and updating and cleaning and COVID compliant of that building to position it as kind of, you know, the best or among the best buildings on 3rd Avenue. Our basis is quite low. Our last dollar prep There is, you know, it's quite low. David, I want to say around six something a foot, you know, as we enter, you know, as we transition control to ourselves, we actually now have operating and managerial control of the property. We'll be executing a redevelopment plan, which is, I mean, it's really modest.

29:20 I call it a redevelopment plan, but the building... is a recent vintage and it's in excellent shape. So we'll go into it in more detail in December, but the goal is to invest an adequate amount of money to bring it up to the standards of, as I said, best on third, and then have a leasing program that we will execute over the next two plus years. In fact, there's a lease out on two floors already. So it's Better Laid Plans. We have a two-year lease-up plan, but there is activity at the building right now, but we still are committed to going in this direction. And upon completion, I think you've really got something that's kind of a world-class asset that would have both domestic and a lot of foreign interest, because it's just that kind of icon building.

30:15 David, what do you want to add?

30:18 Thank you. We're kind of taking over given capitalization issues of the sponsor. The asset just needs money to reposition, do a small redevelopment and release. And the sponsorship wasn't in the position to do that, so we're stepping in. But the asset is iconic. As Marc said, there's lots of people in the U.S. and internationally of interest. And in a couple weeks, we've already had strong leasing demand. Thank you. How much for a hurdle you think that is? What it all means?

31:21 Well, overall in the market, the availability rate on sublease is 2.9% of the total availability. And between the third and second quarters, sublease inventory, as far as availability rate, increased by 25%. We did not see a similar increase of availability listings within our portfolio. In fact, Since COVID, and I'm not talking just since the last quarter, I'm talking about since the work from home mandate. So over the past six or seven months, we've seen less than 200,000 square feet of sublease listings added within our 28 million square foot portfolio.

32:07 And I guess on historical terms, you know, We don't have any large blocks of space available for sublease in our portfolio. It's a lot of more kind of 5,000 to 30,000 square foot type spaces. So I don't really view it as competitive pressure. And remember, even though there'll be a lot of sublease, and I think there's more sublease inventory to come on the broader market, it's always damaged goods. It's term-constrained. The sub-lessors typically are not funding work letters. They can't offer renewal and expansion options. The credit of the sub-landlords is always a question mark. So there are going to be tenants out there that take advantage of that marketplace, but there's always something more from a direct lease basis that we have to offer, which is why we always seem to do well irrespective of the sub-lease inventory.

33:08 Thanks a lot. Thank you. Our next question comes from the line of Rick Skidmore of Goldman Sachs. Your question, please.

33:19 Good afternoon. Marc and Matt, can you just talk about how you're thinking about leverage in terms of debt to EBITDA? Debt to EBITDA has gone north of 10 times. If you annualize the third quarter, it's probably north of 12 times. Can you just talk about how you think about leverage and use of capital as you go forward between leverage and share repurchase? Thanks.

33:44 Rick, it's Matt. I'll hit the math first. I think if you're annualizing a quarter, you're going to come up with a bad number. And of course, everybody does debt to EBITDA differently. And debt to EBITDA is, of course, the most unreliable and least relevant leverage metric you can use in real estate, particularly when you do a lot of construction. So we look at our leverage as still holding steady. We look at an LTV basis in the mid to high 40s in a market that generally sees 70%. So 50 plus percent equity cushion is where we feel comfortable and we've been managing that very closely as we balance capital in between debt repayment and share repurchases. With the construction that we have and use debt to EBITDA, you're basically saying one Vanderbilt, one Madison, 410 10th, 185 Broadway are all worth zero.

34:36 And I don't think anybody on the call would actually say that. So we look at leverage differently and we feel we're were comfortably protected.

34:44 Yeah, Rick, I would just urge you to consider what Matt says. I've been hearing we're over-leveraged for 21 years, and we're a company that's always got a large pipeline of active projects that we're going through heavy redevelopment or ground-up development, and by its nature, we incur... a lot of financing on those projects. In the case of One Vanderbilt, something that's finished and yet are recognizing little to no income and it skews those numbers. So if you take the leverage associated with properties not in service out, our operating portfolio is wildly under leveraged. And then on an overall LTV basis, even including all the leverage on assets that are among the most, the irony is the most valuable assets in the portfolio are the ones that have the leverage and aren't yet producing income.

35:41 You know, so, you know, right now, one Vanderbilt, soon to be one Madison, 410 10th, which is fully leased, but, you know, we're not recognizing income yet. What else you got? 185 Broadway, which is going to be, I think, one of the best rental buildings in downtown, but obviously, you know, not yet leased up because we don't have our TCO. So, you know, you got to dig, you know, we don't have to, but we would suggest that People dig way beyond debt to EBITDA and really dig into property by property, loan to value, look at stabilized values, look at the quality of the earnings. But we, on an LTV basis, probably 45% or less, tons of interest coverage, a lot of capacity, very little outstanding on our line of credit, and we think we're in no near-term maturities, which I actually think is more important than Thank you.

36:35 Our next question comes from Peter Abramowitz of Jefferies. Your line is open.

37:03 Yes, thank you. I just wanted to ask about, it looks like you have a couple of upcoming lease expirations with News Corp at 1185 6th Avenue and then Fairchild Publications as well. So I just wanted to ask, you know, with those coming up, kind of how are those discussions going? Are they definitely renewing and kind of how are they considering renewing? are they considering changing their space needs based on the current environment?

37:35 Now, you know, the leases at 750 Fairchild, which is the largest tenant over there, they moved out of the building years ago. 100% of that space was subleased to a variety of different tenants probably, and I'm going back in time, I'm going to guess three or four years ago. So there was never a chance, they're part of Condé Nast, so their whole operation moved down to the Trade Center a long time ago. We are in active discussion with probably 25 to 30% of the sub-tenants that we think there's a good probability that we'll be able to convert them over to a direct tenant basis.

38:24 And then, was there a second tenant you asked about? and News Corp at 1185. No, they made the election probably 18 months ago that they were going to consolidate into News Corp's headquarters. But that's a building. The space that I'll get back from them, it's upper floors, a building that we recently completed a significant capital program, redoing the lobby, the entrance, the elevator cabs. Corridors Bathrooms. So that building is very well positioned to be able to retent at that space.

39:04 Got it. That's helpful. And then from a high level, any other factors either from move outs or from incremental vacancy leasing to think about as we try to forecast your occupancy over the next six to 12 months?

39:21 Well, I don't think there's anything that's not already within our budget to date. I mean, we've not been hit with any big surprises. As we've said in the past, one of the silver linings of this whole experience is that we've probably been able to have a fighting shot to keep some of the sub-tenants and keep some of the direct lease tenants that were otherwise anticipated to be vacating, just through the natural course of their Business Management. So I can think of at least six or seven tenants that we're probably going to end up keeping, and tenants of decent size, whether they're long-term or medium-term type tenancies, but clearly it will preserve the cash flow in some of these buildings that we were otherwise budgeting interruptions.

40:20 Got it. That's all for me. Thank you. Thank you. Our next question comes from Alexander Goldfarb of Piper Sandler. Your question, please.

40:33 Oh, good afternoon down there. So the first question is on the DPE book. One, clearly congrats for being able to transact in the current market. So I think it's a testament to the positions. But just to that point, you guys did take a little bit of a haircut on the on the DPs that were sold in the quarter. And then you had the write-offs of your equity position in the ground position at Lipstick as well. So I'm curious, there was no CECL impact. You guys were clear that you didn't have to take any marks there. How does it, just for us, because we're all getting new to CECL, how does it work as far as taking an impact on the remaining positions?

41:18 Do individual sales during a quarter not impact Thank you very much.

41:52 Those had not been reserved previously. We took pricing mark on those to generate the liquidity to put back into debt repayment and share repurchase on an accretive basis. We took 885 a long time ago when we started evaluating that, probably 12 months ago. As to CECL, CECL is an ongoing analysis. We are required to look at the portfolio under CECL every quarter. We were very conservative. You're looking at a whole bunch of inputs, a whole bunch of potential outcomes and probabilities when you do that. You recall back in the first quarter, we took a significant amount of marks. We were very conservative in looking out through COVID and the impacts and erring towards the side of conservatism. And when we evaluated the entirety of the retained portfolio again at the end of the third quarter, there was no additional reserve required.

42:44 It's not impacted by the sales we do because, again, we're electing to sell things at a dollar price that we feel is appropriate so we can take those proceeds in and go buy back stock or pay down debt. The retained portfolio is looked at on a hold basis based on potential outcomes and no additional reserve was necessary. And we'll look at it again at the end of the year.

43:04 Okay, Matt, that's helpful. And then, Marc, just going back, I think, to Jamie's question on the city and COVID, there was that lettering of I'm guessing that you were part of it, you know, from a bunch of the city leaders to the mayor's office about addressing concerns with the city, safety, trash removal, etc. And it seems like a lot of, just speaking to folks, it seems like a lot of the issues are people aren't necessarily worried about the office per se, it's sort of getting to and from the office. So in your dialogue, so the best that you can say, how do you think that City Hall is understanding it? to placate the letter that, you know, a lot of business leaders put out addressing those concerns, which, to your point, is what seems to be the necessity to get people to feel comfortable coming back, you know, commuting back into the city.

43:54 Well, just a couple of points on that. One, there were, you know, two letters delivered, I think, one from real estate industry, another from the partnership. and all the, we work very closely with the city, with the state on all of these kinds of issues that you mentioned. We were not signatory to the letter, but we have a very, we have a voice in that as others expressed. We may have different views as how to achieve it. As it relates to mass transit in particular, The notion out there that, you know, I want to come to work but I don't feel safe.

44:42 You know, from my, this is a purely personal perspective I'm giving you now. It's not even necessarily a company position or anything else. Personal, I don't believe in that. I believe that if it's okay for me and others and essential personnel and people who who grind into the city day in day out and have been doing so since March 1st. Mass transit is a viable alternative and I think there are people out there, I don't believe 85% of the people not coming to work are not coming to work because they have concerns over mass transit. I think that at its core there's a lot of people who don't want to come back to work because they've given the choice between I can stay home You know, in my room, get paid full and save an hour or two or commute a day.

45:38 There are some who will opt for that, and maybe many. And, you know, it's just not something I believe in. So I think that while the city has done and can do a lot more to make the mass transit, you know, safe, and I believe it's up to the individuals to exit their homes, get into the city, by whatever means possible, and get to work. People do it all day long. Our building employees, our construction workers, our employees at SL Green, our executive team, I can go on and on. And like I said, we take cars, we take mass transit.

46:34 And it just depends on time of day, where you're going, and what you're doing. And we're not medical professionals. I'm not here to espouse the safety level of it. I can only give you anecdotally, I've been doing it since March 1st, along with many, many, many other people I know, and we've made it through, fortunately. and Safely, and we adhere to the protocols. And some, you know, COVID's very real. But, you know, I'll just give you another example. Aside from mass transit, another thing, a refrain we hear is, well, my kid's school is not in session, so we have to stay home with them and proctor them for online schooling, which is like a tragedy.

47:24 So we implemented, among our many incentives here at SL Green, the latest incentive, which kicked off about two or three weeks ago, is something we're all very proud of. We were fortunate enough to be able to take some unused space in this building that was built. And with very minor modifications, we turned it into pods of classrooms. And we went out and hired tutors from Ivy Tutors. who are very good qualified tutors that stay with small groups of kids who are the children of our employees who have the choice of letting these kids sit at home and literally forego an education for a lot of these kids because when you poll these kids they all say they're getting a horrible education at home and the participation rate is terrible.

48:21 They come here will have on any given day between 6 and 10 kids. We've got several tutors. The kids are entirely engaged. They're online. They get extra help. They do some things during the downtime, and the feedback has been extraordinary from our employees. So, you know, business has to step up and give their employees some incentives, whether it's, you know, subsidized commutation, you know, which might include parking. Meals for those that don't want to go out and get meals. You've got to box them up and deliver meals to the desks. Subsidized childcare at home for primary caregivers. If they're your employees and they don't otherwise have already a means of childcare, I think you've got to look at that and we do that. And this latest thing, I don't even know what you call it, but I call it, I guess, online school proctoring for students.

49:21 We've got 100% attendance, and I think morale is good and people are happy. So, yeah, you know, you could look at government and say government's got to do more, and it can always do more, but I think you've got to look at the businesses and the individuals. We've all got to chip in, make some concessions, take some risks, get out there and get the economy going again. Thank you. Thank you. Our next question comes from the line of Emmanuel Corkman of Citi. Your question, please.

49:53 Sure. Hey, it's Michael Billerman here with Manny. And, Marc, I share your same enthusiasm about being back in the office. I'm here right now. I got to go out for lunch with my colleagues. So it is very refreshing to be back into a live, in-person environment. And we spent a lot of time obviously talking about New York because that's clearly where you're focused. But I guess it's – which also New York has its share of complexities – But you look across everywhere, whether it's Boston, D.C., San Fran, London, Toronto, doesn't matter what country or what city, office densities are very low. Maybe there's some differential 15 here, 10 here, 20% here, but it's all within the same realm.

50:38 So it feels obviously much more of an office issue than maybe just a New York issue. And so do you think there's a shift that comes with what types of jobs or industries End up in certain cities or predicting a return to the way things were. How do you reposition or adjust for potentially those types of changes?

51:01 First of all, Michael, glad to hear you're back in the office first and foremost. We speak to a lot of folks out there that are, as we hear, prohibited either from coming to the office because of company policy issues and or prohibited from taking one on one meetings with, you know, people like us. And, you know, that's very frustrating. So welcome back. Just to make sure I understand the question, your question is, how do we think the profile of industry demand for space in New York is going to shift or change relative to other let's call them gateway cities? Is that a relative question?

51:44 Yeah, I mean, part of it is just you step back and all these markets are having differences. Right, and how does New York adjust relative to those other metrics that are seeing the same issues? And I think a lot of the things you talk about where the business has to step up, unfortunately, businesses right now, we're still in the pandemic. I think what's great what you're doing on the child care but you know not enough companies are doing that's a real concern healthcare is still a concern of many people of adding that risk the commute where they may be living right now I mean this is not just a New York thing it's in every city right it's not like you know all of a sudden Boston is running at 80% density even in the suburbs and so it just seems that this is a massive office issue and how is it going to when things do come back Does what the city have, is it going to change? Is the type of roles and responsibilities that are in New York City going to change relative to where it was before?

52:42 Okay, I got it.

52:44 So look, New York is a 400 million square foot office market. And I think it's probably five times larger than the next biggest city in terms of that density. and it got to be that because of insatiable demand for office space. It's not a situation where there was just loads and loads of government-built projects or spec projects that took decades and decades to fill. Work from home is not a new concept. This is a concept that's been around for a long time and has been tried and or utilized by companies for a long time. There just generally has been and I believe continues to be a realization that in highly competitive markets, which New York is, I don't care if it's tech or healthcare or finance or advertising or any creative work, certainly building business services, lawyers, accountants, whatever, that the work is more structured and efficient, the teams are more bonded, the client relationships are stronger when it's face to face, in person, in the office. And I don't think this period of time is gonna

54:15 change that paradigm which has been proven out over decades and decades of people wanting to be not only in offices generally, but in very highly functional offices, wired with state of the art technology, high ceiling, natural light, sustainable, well serviced, amenitized, you know, I can go on and on. I still believe that is the best way to conduct businesses for almost all industries and between now and December, we'll try and think about who we think are those outlier industries that might actually do better from home because I can't think of them offhand, to be honest. I know that I'll speak to and I'll just, you know, I'll broadly say the lawyers and they'll say, yeah, I'm just as productive at home as, you know, I can often be in the thing.

55:12 It's false and wrong from the client opinion. The attorneys may believe that. I can tell you as a client that has closed like, I mean, how many, 30 transactions in the past seven months, you know, leasing, JVs, financing, sales, whatever. It is not. And we now demand our vendors, you know, to be in the office with us. If we're here, they've got to be here. We're not going to do Zoom calls with vendors who are sitting on the beach or at a lake house or anything like that. Now, it doesn't mean they can't. It's just we won't use, you know, we want a certain type. And I think people will demand what we demand, which is, you know, real service, 100%, all in, face-to-face, at all times, morning, noon, and night. and to do that you gotta be in an office. You can't have 10 attorneys sitting around at 10 different homes across the country dialing in with technology.

56:01 I don't think it works. So your question was will the business change? I think it'll change and you know what? It'll change for the better. I said it with the densification. Densification, while it worked against SL Green and other companies like us, it was a good thing for companies, viruses aside. It was efficient use because, you know, companies were not using their space efficiently. And the way they changed it, putting people closer together but creating amenity spaces, it was a great shift even though it resulted in space that had to be absorbed. So now if companies look internally and they decide, you know, 5% or 10% of their workforce maybe can work, you know, three days in the office, two days at home, or I don't know, some variant of that. and if that works for those companies and their company's clients or customers, have at it and that's good.

56:55 But if the notion is that everybody is all of a sudden going to start sort of working from home because somehow it's better than work from office, I don't buy it.

57:05 Now if we look specifically at your portfolio, can you talk a little bit about sort of how much of your square footage is actually open if people wanted to come in. So how many of your tenant spaces, right, so we're fortunate Citi reopened their offices, you know, post-Labor Day, we were able to come in here.

57:24 How many tenants are open?

57:26 Oh, we have, I mean, Ed, I know your buildings are open, but the tenant spaces in terms of, and then maybe you can talk a little bit about the differences between Larger tenants versus smaller tenants because I would imagine... Michael, let me tell you what we have.

57:44 Let me tell you what we have. Ed Piccinich and his team have the card swipes, every tenant, every building, every company, and we track the larger companies. I don't know if we track every single company. Maybe you do it because you're here at work and not home, so I know you probably have it. Just very succinctly, what do we have in terms of You know, what percentage of our tenants are open? You know, doors open, people coming into their spaces, whether it's 1% or 100% or nobody's at 100, except for us.

58:15 I think Marc mentioned it earlier. Right, except for us. Marc mentioned it earlier, 15% to 20%. We were both here when it dropped off to 1.5%, and we've been counting each week as the percentages go up. And I could say... that that percentage will continue to grow. He mentioned 40, 50% by December. That's the trend we're seeing. And across the portfolio, when you look at that attendance, it varies. Some of the bigger companies don't have as many as the smaller companies and vice versa. So we have been seeing a trend throughout. And I think a lot of it in large measure is due to the program we have in place. Everything from PPE to you know the additional filters where we went above and beyond what's called for by the executive orders and things of that sort so the activity if you walk into any one of our lobbies you'll see tenants going about their business the only difference is is that they're wearing a mask now do we have situations where somebody's getting turned away because they get picked off by a silent sentinel because of High Fever.

59:25 I could probably count on one hand throughout our entire portfolio where someone was turned around. But otherwise, that growth continues on a percentage basis.

59:33 So, Ed, are there any generalities, you could say, where larger tenants have more or less population in their offices or smaller tenants or by sector, like, you know, the business services firms are more in the office but the financial services are home? Any trends like that?

59:50 I don't think there's, like I said, the larger tenants, obviously their numbers are larger because they have bigger footprints, so they're able to have more of their employees, and maybe some of the smaller ones are dealing with the social distancing requirements and somewhere ahead of the game and putting up what we did, they put up plexiglass so that people can still work within their cubicles, but The difference in our lobbies is that you see the activity, but people are walking around with masks. Other than that, you know, growth continues.

1:00:23 Okay. I think we need the financial firms and the lawyers back. I would say just let's leave it at that, Michael. We need those guys back. Once those guys are back, you know, and whenever they're going to come back and each leader will make their own decisions about, you know, How much and when and on what timeline and when to mandate and when to make it optional. But if we can get financial services and lawyers back, I think things will cascade from there. So can we move on maybe to the next question, Michael? Thank you. Thank you. Our next question comes from the line of Craig Melman of KeyBank Capital Markets. Your line is open.

1:01:02 Hey, guys. Just curious, you know, you are kind of active here in the sales market. Just Want to know what the feedback has been, kind of what bidding pools look like, and just how do you think people are getting comfortable underwriting cash flows today given kind of expectations where you may have negative net effect as people are trying to get their arms around CapEx? Kind of how are people getting comfortable and what's pricing starting to look like?

1:01:30 Well, I think there's more focus on weighted average lease term than there was previously, so Assets with longer contractual lease streams sell with more, there's a lot more liquidity for those assets, like you saw with our sale of 609 Fifth Avenue, the Puma Retail Condo. But the bidding pools are very strong. Even large assets like a 410 tenth got enormous amount of tours and interest. Foreign capital generally If they can bid without a site visit, they're interested as well. If anything, you do lose some foreign buyers who aren't able to get to New York to do a site visit. But I think we see a fair amount of liquidity out there.

1:02:25 Financing rates are so attractive that people's levered returns are very significant. even at cap rates that people still, you know, we still find compelling to sell at.

1:02:37 Do you think people are significantly changing their required returns to be in office or be in the Gateway City?

1:02:45 No, because I think you have this dual impact of much lower rates and they're fixing out, you know, 10-year interest rates at 3% or some 3% in some cases. So, you know, they're able to achieve higher levered returns at not far off of earlier this year's market cap rates.

1:03:08 Great, thanks. Thank you. Our next question comes from the line of Vikram Mahatra. Morgan Stanley, your line is open.

1:03:19 Thanks for taking the questions. So just building on the last question, I guess you've outlined jobs are coming back, utilization is inching upwards. You know, you're hoping things look different in three to six months. Can you sort of maybe give us your current view on where market rent growth or where market rents are going to shake out, you know, versus pre-COVID? And similarly, just values, what's your sense, kind of everything said and done, if we do see this recovery, you're sort of starting to outline where are the marks on both those issues?

1:03:59 Yeah, Vikram, I think December is the forum for that. I mean, I know I don't want to mention that a couple of times. It's only six weeks away or something. We have not given yet our estimates or projections of rents and vacancies and all that for 21. You know us. We will dive into the detail in December when we have the fulsomeness to get up there and present What's going on in our portfolio? We need to take a deep dive into our portfolio, which is part of the budgeting process that goes on right now. It doesn't end until like mid-November. We roll it all up and then we run into the meeting on December 7th. And we'll have, you know, views on 21 for our portfolio, for the market generally.

1:04:47 It'd be premature right now, especially as I mentioned earlier, this is a city in pause. And by the way, it's a lot of cities in pause right now. And to try and take away anything Thank you for joining us. since there's been people, you know, really to talk to, you know, because over the summer, you know, people's focus was in different areas, like, you know, hygienity and staying virus-free. So that's still a focus, but, you know, people are now working through the questions you asked, which are, you know, what's the future of their space going to look like? How are they going to de-densify?

1:05:51 How are they going to balance work from office, work from home, if they're going to balance that at all and allow any work from home? And that'll all impact the trends in rents and vacancies. So I think it's, I don't think we're in a position to handle that now. It's not that, you know, we want to answer that question as much as you want to hear the answer. But I would say let's table that until December and then we'll have a discussion on that and hopefully, you know, more discovery between now and then.

1:06:20 Okay.

1:06:21 And then to our current rents, I mean, why don't you speak to our current, you know, rental levels. I mean, it hasn't been much, but it's, you know, the rents are down probably 10%, you know, plus or minus, but we've been getting, you know, good traction, I'd say, by and large.

1:06:37 Yeah. You know, we've answered this question a couple times in the past, and where we've seen the shift in the market is less on the rents and more on concessions. So I would say rents are probably down, depending on the building, anywhere from 5% to probably less than 10%. But concessions are up. So if it used to be $100 in TI, depending on the building, or if it was $80 in TI, they're probably up $20, $25 a foot. If free rent was at 11 months, it's probably at 13, 14 months. So as a percentage, concessions... are getting more pressure. And to no surprise, every time there's this disruption in the market and tenants are on the defensive, they want to husband their cash and they want the landlord to fund the near-term cost of tending their space.

1:07:31 So they look for the free rent and the TI, but they're willing to absorb the rent cost over the life of the lease.

1:07:38 That's fair. Thanks for that, Culler. Just as a follow-up to just sort of the longer-term issue or potential issue, I should say, If you hear what corporates globally are talking about now in various industries, not just financial, it's pretty clear that some are thinking about their office footprints. And they may not have specific numbers or, hey, we're cutting by X percent like Fujitsu in Japan has been very clear. But I'm just wondering, in your portfolio, has anyone approached you to talk about spaces that they may have where there's maybe longer lease terms or shorter lease terms and think about a restructuring over call it the next six or 12 months, this be driven by sort of a post-COVID view.

1:08:23 No, because, you know, as I said earlier, so many of the tenants and I think the vast majority of tenants don't have a definitive point of view as to what their long-term needs are going to be. Until their employees are all back in the office they don't know the condition of their business, they don't know how their head count is gonna be, they don't know what the impact from work from home is, they don't know what the impact of densification or hoteling is going to be. And the conversation is very fluid. So much of the discussion six months ago, if we'd taken our cue off of where people were speculating at that point in time, would be radically different than where the conversations are today. So I think the only thing you can say is that there's a great unknown out there.

1:09:18 Nobody's really figured it out. And I don't think we're going to know it until we're past COVID and people are largely back in their office. And then business managers can really start to establish a game plan for the real estate.

1:09:34 Okay, great. Thanks so much. And congrats on having a space allocated to school and kids. I think that's a great effort and a great gesture. Thank you. Our next question comes from Steve Sakala of Evercore ISI. Your line is open.

1:09:55 Thanks. Just two questions. I guess your largest DPE loan, I guess, went non-accrual this quarter, Marc. I'm just wondering if you can sort of provide any commentary around that and, you know, sort of cure periods or how we should be thinking about that.

1:10:11 Andrew's handling that one. Why don't you...

1:10:13 Hey, Steve. Yeah, so that position is a loan opportunity we saw in 625 Madison, a loan on the fee where we control the leasehold separately. And it was an opportunistic loan on a situation that's pretty fluid given the ground lease reval. And we decided to take a conservative approach And given that the loan is paying kind, stop recognizing income, you know, probably for the pendency of the revaluation, but not sure.

1:10:57 Sorry, so we should kind of assume moving forward until the ground lease is resolved that that would be kind of a non-cash paying loan? Yeah.

1:11:07 Correct. We'll keep it on non-accrual, correct?

1:11:09 Yeah, and the valuation date is middle of next year? Middle of 22.

1:11:15 The determination is middle of next year.

1:11:18 Middle of next year determination. So, you know, whether we keep it on non-accrual through the actual reset date, which is middle of 22, or through the determination date, because that's sort of rubber meets the road on the determination date, that's middle of 21, I think, right? So another six to nine months.

1:11:38 Got it. Thank you. And then I guess just going back to the new leasing activity that Steve mentioned, I guess it's a little over maybe 400,000 feet. Steve, are the tenants that you're talking to kind of in similar size space today? So it's a similar size move? Are they downsizing and coming into the 400 if all those deals got made? Or are they expanding? Just looking to see if there's any change in density on the most recent set of new deals.

1:12:07 Well, most of them are, I'd say, it's a mixed bag. You know, we've got one large tenant in that group that's actually moving into New York, and I think that'll be a big surprise to people, but they're a 100,000 square foot tenant that plans to actually bring bodies from outside the city into the city. We've got 79,000 square feet of leases out at one Vanderbilt. and all of those tenants are coming from smaller spaces. And then we've got a mixed bag of renewals and smaller transactions. So I don't think, if your question is are there size requirements being impacted by COVID, I haven't seen it yet as based upon the deals that we're currently working on.

1:12:58 Doesn't mean there won't be a shift down the road, but in the current pipeline, it's not been part of the conversation. I think the bigger conversation for these crop of tenants is just how are they going to use their space? How are they going to design the space? How are they going to furnish it? And that they're working through with their architects. Got it. Thank you.

1:13:21 All right. I think it's going on an hour and 15 minutes. And I think we have one more question in the queue. So we'll take the last question, operator. Thank you. Our final question comes from the line of Nick Yalico of Scotiabank. Your line is open.

1:13:40 Thanks. So I guess one of the themes of the call is that you feel very optimistic. Cities have come back. Cities are on pause right now. But you did talk about already you're giving some more free rent. You're doing some shorter-term renewals. There has been rents down. I guess the question is, how do you change your strategy if you're wrong? If the city is not just on pause, but the city has a structural problem for the next two years, how does that change your leasing decisions? Is this an issue where you can be more competitive on price? Does that make your portfolio more competitive?

1:14:26 How should we think about the scenarios where hopefully it doesn't happen, but the city is on pause for a while or just structurally problematic for a couple years.

1:14:37 Sure. A couple of points of clarification. In saying the city's on pause and we're investing for the future and it will recover, But what if it goes two years? This could go two years. I don't want to, you know, if I didn't want, I don't know, hopefully the common thing come across is like there's going to be some kind of, you know, V-shaped recovery right after January. You know, I don't, in December we'll have a forum, we'll express a forum view, but that's not our forum view. So, you know, this is, but I look at, I guess the difference, Nick, between, you know, how you pose and how I say it, I don't look at two years as a long time, you know. I look at, you know, if you said to me there's going to be sort of a, you know, a one to two year, you know, not pause in the sense we are now because every month we see things improving somewhat, but I'll call it a very slow recovery over the next one to two years before things get, you know, sort of cooking again.

1:15:38 We don't want that and hopefully it'll be quicker than that, but, you know, that's not something where we change the, you know, fundamentally these are One Vanderbilt's built for 100 years, and one Madison we're going to deliver and lease in 2024. So whether it's one or two years, the goal for companies like us right now is to stabilize and get through this. You buy time. The way we buy time is we renew our tenants. When you say the tenants are demanding free rent and shorter terms, Nick, we went to those guys. They didn't ask for it. We had a program. I think we might have talked about the last call. We went to every single tenant that had a renewal in the next one to three years and proactively said to them, do you want some free rent in exchange for, you know, signing up for an additional one, three, five years?

1:16:32 And if they did, great. If they didn't, it was to help them because we knew they needed and wanted that free rent most during the early months of this pandemic. and for us, whether we give free rent now or a year or two from now when they actually did their renewal, it didn't matter to us because we have plenty of cash liquidity. So we went to these guys and said, look, you need this help now. We'll give you this help now. And let's talk about a short-term extension so you don't have to make, you know, we could have pigeonholed them and said, listen, fill or kill. You've got to either sign up or move out. And it's not what we did. and you know don't know what the answer would have been had we done that. It seemed much more prudent to us to go to them almost as partners and say listen here's some free rent sign up for an extra one to three years which is why you see shorter terms and then let's work on a longer term restructuring of your lease whatever that means whether it's you know for more equal or less space because they don't really know right now. So what we're doing now is very proactive on this company's part. I don't know if other companies are doing the same thing or not you'd have to Check away with those companies, but that's what we're doing, and we're sort of, because we are 30 million feet in the city, we sort of drive that market.

1:17:52 If this sort of scenario plays out where we're making the earnings we're making and we're 96% collection and 94% lease, we want growth as much as our shareholders do, but I wouldn't call another one to two years before a sharp recovery anything that couldn't be expected or negative. I think that's positive for the city. After two years, we're sharply coming out of this. Hopefully after one year. I mean, we'll have to gauge that. But again, it's really up to people. I think as soon as people come back in, so there's your mark. As soon as the 85% that are at home are sitting in their offices, we started this pandemic in a very good, tight market.

1:18:42 and I think we'll be right back there. I don't know that I have the ability or anyone here around has the ability to project when people will come. And we thought it would be after Labor Day. We were wrong. You know, now we're hoping after, you know, by year end or shortly thereafter. I don't know. We hope so. But the good news is every month is more. So whether we get there quickly or slowly, our assets are, you know, the best assets in this city. and this city is still highly sought after. You heard Andrew talk about the demand for these assets. These investors who are buying these buildings and who are bidding for these buildings, they have foreign views. They're smart. They have a point of view. I don't think they are buying it based on whether people come back six, 12, 18 months from now.

1:19:30 But their view is this city will be back. And if you want to be an investor in this city, you've got to have a view it'll be back. And if you don't think that, You're not going to invest in the city. But there are investors. We know that because we're selling assets. We know that because we're marketing other assets. That changes and changes. But right now, in kind of the worst of times, there's still, I would almost call it, decent demand at an asset level. David is selling DP assets at very strong marks. We've got multiple bidders for assets like 410 and others. So, you know, investors are out there, tenants are out there. You know, Steve's got $865,000 a pipe, half of which is new. So that's got to mean there's a lot of interest in signing up new. So I think the trends are good. That's how I come to my, you know, people may differ.

1:20:18 That's what makes a market. But that's how we come to our conclusion that, you know, we'll get through this, New York will be back. How long it will take, you know, it's a little bit of a crystal ball, and we're not really in a position to give that right now. but we've been 31 years in the business exclusively in New York City and this feels like one we can get through.

1:20:42 And that's helpful and then I guess in terms of the portfolio then as we think to next year is it still a lot of renewal activity and the new lease activity stays challenged if it is a market where things are on hold, and 50% of people are back in offices and not 100%. I mean, does that just tip the scale to a lot more of this dynamic of renewals, short-term renewals, you offering free rent to keep tenants, which makes sense as a strategy to hold occupancy?

1:21:19 Nick, I guess when we see you in December, we'll give more color commentary on it, but I'm sure you heard me say earlier that 50% of my staff 825,000 square foot pipeline are new transactions. So to focus and say is it just going to be more of the same of short-term renewals, you're just not hearing what we're saying is that it was short-term renewals earlier in the year. It started to change the corner and as we sit here in going into the fourth quarter, clearly the new deal activity is ramping back up. and, you know, knock on wood, that'll continue to go forward as the months pass going down the road. Okay, thank you.

1:22:07 Okay, thank you, everyone. I think we've reached the end of the call list, so operators, if there's no further questions, we're going to sign off. Yes, sir, ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.