SL Green Realty Corp (SLG) 2013 Q4 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the fourth-quarter 2013 SL Green Realty Corp. earnings conference call. My name is Philip, and I will be your operator for today. At this time, all participants are now in a listen-only mode. Later we will conduct a question and answer session. (Operator Instructions). As a reminder, this conference is being recorded for replay purposes.

I would now like to turn the conference over to your host, Heidi Gillette. Please proceed.

Thank you, everybody, for joining us, and welcome to SL Green Realty Corp.'s fourth-quarter and full-year 2013 earnings results conference call. This conference call, once again, 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 the forward-looking statements that management may make today. Additional information regarding the factors that could cause such differences appear in the MD&A section of the Company's Form 10-K and other reports filed by the Company with the SEC.

Also today during today's conference call, the Company may discuss non-GAAP financial measures as defined by SEC Regulation G. The GAAP financial measure most directly comparable to each non-GAAP financial measure discussed and the reconciliations of the differences between each non-GAAP financial measure and the comparable GAAP financial measure can be found on the Company's website at www.slgreen.com by selecting the press release regarding the Company's fourth-quarter and full-year 2013 earnings.

Before turning the call over to Marc Holliday, 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.

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

Good afternoon, everyone. Thanks for joining in. Many of you listening in today also attended or heard on the webcast our December investor presentation, which for us is always an excellent forum to give in-depth market color and discuss goals and objectives for 2014. So that presentation, which is always sort of the highlight for our year in terms of being able to measure performance and describe the shareholder strategies and objectives, was something that is of great benefit to us. And from the feedback we got after the presentation, I think we are confident that most shareholders found it to be very useful and informative as well. So we are still happy to put the kind of effort that goes into that presentation in order to do a full dissertation, if you will, on where we see ourselves in the market.

So having that just recently behind us, it's probably seven weeks fresh, I think today we are going to focus on primarily material events during that September period since the conference. And with that, I think you can put a circle around the Citicorp deal, the Citibank lease extension deal, which for us was really a crowning achievement for the Company. I think for all those who worked on it, I would say it was a personal achievement in getting that lease concluded for the Company, for our shareholders, after 18 months of negotiation and structuring and documentation and everything that went along with it. We were extraordinarily happy some time right after mid-December to get that signed up and announced, which made for good holidays for us, I can tell you that much.

And it was a deal where we had to do all that I just said while fending off the approaches of many, many suitors who were trying to convince Citi to relocate to various other locations and buildings throughout the city. I think it's a real affirmation and testimony to the relationship we have with that tenant, to the flexibility and ingenuity, I think, that we put into that lease in terms of structuring something that worked for us and worked for the tenant. I think it's a real affirmation of Tribeca as what has now become, I would say, one of the most desirable residential and commercial submarkets in Manhattan, which woe out over many other locations and were buildings that were deemed less desirable. And we couldn't be more pleased to have that behind us so that we can now, with Viacom put way for term, with Citi put away for term, it really allows us to focus very offensively on figuring out ways to maximize our opportunities, mark to market and income opportunities going forward with the balance of the tenant base.

So a little more detail, if you will, on the Citibank deal, I think that the deal is resoundingly successful for this Company both when measured against market conditions downtown and when just looked at in terms of absolute levels of investment returns that we and our partner, Ivanhoe Cambridge, will enjoy on this investment.

On relative terms I think we looked primarily at the more recent deals with GroupM and Jones Day -- GroupM at 3 World Trade; Jones Day at World Financial Center. And in that respect, we were able to negotiate for a gross rent beginning in 2021 that, depending on where OpEx and real estate taxes go, but assuming that is somewhere in the range of 3% to 4% increases over time, then that gross rent is somewhere right around $80 a foot. And that compares against starting rents for the GroupM deal of $68 a foot, starting rent at Jones Day at $60 a foot, each of which has a $5 bump. So that in the one case, the Tribeca location was about 22% to 23% better than a comparable vintage building in World Financial Center was able to obtain and 10% better than what new construction in the Trade Center was able to obtain.

So we feel the rent was very appropriate, if you will, given the physical plant of 388 to 390, which are exceptionally good for financial tenants. The 388 floor plate was determined through the process to be as or more efficient construction, and the 100,000 square-foot trading floor sizes at 390 are basically irreplaceable in that downtown market today. So that, combined with the location and the autonomy of control over that campus, if you will, I think was a major factor in helping us secure this tenant for our renewal.

And when you look at the concessions, I would say there to we were on a relative basis in a fairly -- fairly pleased with the outcome, if you will, where I think we had TIs of about $51 a foot, which is as against roughly $80 a foot on a nonrenewal deal, let's say, $80 a foot for a new deal plus free rent, which based on that gross rent in 2021 was about seven months free. And I think we've seen numbers in the market ranging from 16 to 34 months free. I think that 34 months free is on the Jones Day deal, if I'm not mistaken.

So that, I think, speaks volumes also to the quality of this building and the quality of the location that Citi saw in this specific property.

There were some reports, additionally, on some additional base building capital that we committed to this deal as part of the Citibank renewal. That's fairly standard for us, so I'm not exactly sure why in this instance it's called out as something unusual in the one or two reports we saw. I think there's about $67 a foot or so of base building capital that's going to go into the improvements of the building and the re-stacking of the floors to make it more efficient. And given that we had put $0 into the building over the past five or six years since acquisition and this is the sum and substance of what we will put into the building over the next 22 years, I think that $67 a foot amortized over 28 years of lease term is something -- obviously, $2.50 a foot on a straight-line basis.

So we put redevelopment capital into almost every building we purchase. In some cases, a little less. In many cases more. I guess the Viacom deal being a little less and 100 Park Avenue repositioning probably being more. So we think this is completely within the level of what's appropriate to invest not really in the form of a tenant concession, per se, but improvement to the asset, which we think is ultimately a good investment for us. And those are the economics of the deal.

Now, we measure it in terms of return, which is mostly how I like to look at these deals. I think we had an average yield through 2013 of about 9.25%. And, as a result of this deal going forward through -- I believe, through the option date, that's actually a double-digit yield of somewhere between 10% and 11%. And most importantly on an IRR basis, which I think brings it all home to roost, the IRR and the deal from acquisition through date of early adoption would be something in around 9.7% to 10%.

Now, I can tell you with certainty that our ability today to go out and find commercial space in prime Tribeca neighborhoods where we have a high credit tenant net lease, triple net lease, and with only about 50% or 53% loan to value achieve 10% levered returns would be highly challenging, and that may be an understatement.

So the deal itself is something we look at as a real victory for the Company, if you will. Our strategy of buying credit tenant net lease deals at the tops of markets -- this building was a 2007 purchase -- proved to be the right strategy insomuch as we were able to maintain a very high yield through the 2008 and 2009 downturn, and now we will be able to enjoy a consistently high and rising level of revenue, notwithstanding our financing costs fell during the first five years of this deal from $60 million a year to $34 million a year. So that is, in a nutshell, I think, how we evaluated the alternative of entering this deal, which on the one hand is a -- it's a lot of capital because it's a 2.6 million-square-foot lease. It's a big building. It's a lot of return. I think our share of the return of the net return from inception through earliest purchase date is something like $300 million net profit. So this has been an extraordinarily profitable enterprise now, and we are happy to say it will continue to be so over time, although we will have to invest some more capital into the deal. But certainly, as it relates to downtown metrics and I think as to just the measures by which we look to deploy capital then and today, it's worth our time. We did have as a backup to our strategy a residential conversion of the property, which we think also would have been quite exciting and quite profitable, which would have played out many, many years from now. But as it turned out, we were able to meet our objectives, and Citi seems to have also been able to meet their objectives with the lease renewal. And in our eyes, that was in the best interest of this Company and our shareholders. So we were happy to get that done.

There's some additional information that I think -- not really additional; it's just a summary of information that we posted on our website, which contains basically the data that has been disclosed in the press release, the supplemental and the 8-K, put it all in one place so people have the right data in front of them. And we can obviously answer any other questions, if you will, towards the back half of this conversation.

Other than that, I'm going to open it up for questions. I would just say that if I had to handicap the seven weeks since our December investor meeting, we are somewhere between on or ahead of expectations with respect to some fairly aggressive stretch goals and objectives we have put up on the day of the investor meeting, both in terms of leasing and cap rate philosophy. We have a good pipeline of leasing as it relates to the most -- January was typically not the most boisterous of months. We had a pipeline structure finance. We are working on other new equity investment deals, and the sales market is still robust. So on all levels, we still see this as a market that is very consistent with what we conveyed seven weeks ago. I think we will be able to execute our program this year, and we are made that much better by having the Citi lease renewal in the rearview mirror.

So with that, I would like to open it up for questions.

Jamie Feldman, Bank of America.

So I guess it's safe to assume you guys are maintaining your guidance from the Investor Day. And if that's the case, are there any changes to the underlying assumptions?

No, there are no changes to our guidance levels at this stage.

And then just following up on the structured finance comments, can you talk a little bit more about the book? If you look in the fourth quarter, it looks like your yields came down a little bit, and your volume was a little lower. Can you talk about maybe how you see that trending and maybe timing on new starts or new initiations?

So the yields actually -- they are actually, on the portfolio, up quarter over quarter. I think you are talking maybe the originations in total are down, but, remember, we syndicate out some of those senior positions, and that takes our yield on the retained piece up. So the portfolio actually ticks up on a fairly static balance.

Well, otherwise I said, I just want to make sure I intended the question. The yield on the portfolio, I think, is up 20 basis points quarter over quarter -- 10 basis points quarter over quarter. And that was done on a balance that was roughly (inaudible) and a composition that was slightly more weighted like 400 basis points weighted towards mezzanine. So (multiple speakers) --

We had some bridge loans to pay off in the fourth quarter, so that weighted the portfolio slightly more towards the subordinate paper in the portfolio.

Right. Separate and apart from that, there were new originations, quite a voluminous amount, which I think was $400-some-odd million, which averaged somewhere -- recollection is what, (inaudible)? So 10.something percent. If you are saying, well, that yield is less than the portfolio yield, if that's the question, that is true. But if you recall in our December investor meeting, we put right up on that screen our expectation that we wanted to convey to you guys that we thought spreads would compress in 2014 after almost five years, if you will, of spreads that were fairly well established, and there weren't a lot of market participants competing. That dynamic has changed. People have definitely come back in 2014 with allocations, with a desire to compete more for this business.

And that's not hindsight. We did say that in the beginning of December, and I think we actually modeled spreads as low as [850] over was our guidance back then. So I think we beat our guidance by a lot. But directionally, where we have shed light on the fact that we see compression spreads, I think it's important that people on the call understand that.

Vincent Chao, Deutsche Bank.

Just a question on the CapEx side of things for the Citi renewal. It just appears that this is like the Viacom deal where they choose the timing of the spend or just curious how much we should be baking in terms of the CapEx here.

It's not so much that they choose it. They have flexibilities to when they spend it, but there are stages as to when the capital is available to them. They get a little bit of money now, and it's spread out over the next five years as to when the balance of the money is available for them.

It's a combination of, one, when they are entitled to it, and, two, when they spend it. It's got to meet both those conditions so that we try to stage the money in over time, which -- that's even a further point that I didn't make in my prepared commentary. Most of the concessions granted in these markets are very much upfront weighted concessions. These concessions -- I don't have the exact schedule for you, nor do we know it because we don't know the timing of Citi's spend. But there's a PG component and benefit here to being able to spread it over five years and whatever the actual schedule turns out to be.

Okay. Thanks for that. And then I guess just if you could provide a little bit more detail on the option portion of the deal, starting in 2017, I think it is. I think a lot of the returns you discussed where as of the early option date. I'm just curious what those returns look like if they don't exercise and what your thinking is currently on whether or not they will take that option.

Well, there's really two parts to that. One is, if they don't exercise on the earliest date but if they exercise on the latest date, and the second question is what if they don't exercise at all. The difference between earliest date to latest date is really small because, on the one hand, there's a little bit of time value. On the other hand, we have rising rents due to CPI.

Our levered yield in the interim is right on top of the IRR. So it's (multiple speakers) --

I would say we are somewhat indifferent between when -- if the option is pulled between 2017 and 2021, from a return perspective. Now, if the option is not hit at all, our expectations are that it's certainly -- at least in this environment -- that would be accretive because their purchase option is roughly around 6%, 6.25% cap on projected NOI, if you will. And the cap rates today, we believe, would be less than that. However, it depends on what the cap rates are at that point in time. But certainly from an earnings standpoint, it's accretive. From a value standpoint, we think it would be accretive, but no way to answer that question until you are out there in 2021.

David Toti, Cantor Fitzgerald.

We have heard some reports of increasing property taxes and some pressure on assessments. Are you guys seeing any of that yet through the end of last year? Are you underwriting any pressure on that going forward, especially given the change in government?

Yes. And the property tax roles are out, and it's consistent with our estimates. So, as Matt said, our guidance for the year captured what we expected for property taxes this year. And it's an era of increasing budgetary constraints within the city. So we don't expect upward pressure on property taxes necessarily to abate. We just work hard with the city on the individual assessments for each of our buildings, making sure we keep those in line with reasonable market values. And not out of line. So generally I think we feel it's a well-managed area of the business.

Yes, and also, given that the portfolio is plus or minus 96% leased, a lot of the increases are absorbed by the tenants because these are gross leases with stops. And that doesn't make it any less undesirable to see increases that are higher than the rate of inflation, which is what we have been experiencing recently. But it does at least take away or mitigate the earnings impact of those increases.

It certainly hasn't had a negative impact on cap rates, either, because cap rates, if anything, are down quarter over quarter.

And that leads into my second question, actually, which is there haven't been a lot of large-scale transactions recently. And the commentary that we hear from some of our industry contacts in the broker community is that cap rates are relatively stable and that the consensus view is that cap rates probably won't compress much further. But I seem to be hearing otherwise from you. Do you have expectations for continued cap rate compression? Is that asset specific or market specific?

I think we indicate in December that we do expect cap rates to compress further, part and parcel with rental growth over the next three years that we are estimating at 20% to 25%. And I think you will see some trades that are in contract now that will close, some on the value of land, which continues to increase, and then some on some stabilized office assets, which are continuing to push, I would say, average cap rates down.

Jordan Sadler, KeyBank.

Marc, last quarter you talked about the leasing pipeline as being very strong heading into the fourth quarter and nailed the leasing number. And it sounds, again, like the guidance for or at least the pipeline for earlier this year is pretty strong. Do you care to offer a guess as to what leasing might look like next quarter? Could it be as strong as the fourth quarter?

Next quarter? Fourth quarter is going to be difficult, but Citi was more of an anomaly. Let's talk about Citi. Let's talk about Citi. What did we do net of Citi?

[750], I think, in the Citi.

Look, we had a 2 million-square-foot signed lease goal for the year. So that would be roughly 500,000 square feet in the quarter. I don't know if Durels is that good where he can -- if we can get it down to three months increments. Some of these deals are just -- we try to get them at the wire, and some do, and some sign two days later, and it trips to the next.

So I don't know. I think the velocity is good. I think we are on our 2 million-square-foot -- I don't want to say run rate because there are some things that have to go right to get there. But in a market like this, things tend to go right, and I think we will get there. And if we are not at the [770], as we did this last quarter -- which we probably won't be because that was, I think, exceptionally high -- I have every reason to believe we will be right around the straight-line average of leases, so around 500,000 feet.

Yes, I think it's going to be like last year. It was choppy from quarter to quarter, but that was not necessarily because the tenant demand wasn't there. There were a lot of deals we had in the pipeline. We got a big pipeline right now where we have 59 leases that are being negotiated to cover 900,000 square feet. I can tell you that some of the bigger deals that won't get done in the first quarter because they are complicated, and they are long dated type transactions. But I think it certainly gives us comfort that we will hit our 2 million mark for the year. And I think it's going to be -- we are going to have the first quarter will be less than the straight line, second quarter will be bigger. But behind all of that is what's happening in the marketplace, which is we continue to see good tenant demand across the board in all the buildings.

Okay. That's helpful. As the follow-up, any color you can offer around the new assemblage on the Fifth Avenue?

Obviously, given the vague disclosure, it's a highly sensitive and dynamic situation. So it's tough to offer much more color. We think it's a site with enormous upside, and it is highly, highly underutilized. There are just some incremental transactions we are working on, which will allow us to fully exploit the value of the site. So we purchased it completely off market, and we are trying to keep the balance of our discussions under the radar and off market. So more on that, certainly, later in the year.

Safe to say it's Midtown?

Safe to say, yes.

Josh Attie, Citigroup.

On 388 to 390, I just wanted to confirm what the total CapEx number was and then also better understand how it would be spent. So looking at the presentation you posted on your website, it looks like the three different pieces -- the TI allowance, the base building and the redevelopment -- all add up together to around $118 a foot. And if you add in the free rent, you get roughly to around $380 million. And my first question is, is that the right number? And my second question is, how is that treated if the purchase option is exercised?

Well, I don't want to -- the number -- I'm not sure how to respond. The numbers are exactly as they appear in that statement. Those are like to the dollar. So I don't want to characterize it one way or the other. Those are the numbers for the deal.

What was the second part of the question?

How is it treated?

How is it treated on the sale? Well, most of these costs are expected to be funded or extended by the time of the closing of the option. So, again, we are modeling generally over the next five years. That has been our (inaudible) through 2018. So there is a slight chance for a mismatch. But if there is any mismatch, unfunded concessions will be credited.

Yes, Citi would get credits.

So you should just assume the money spent and the option will be hit or not during the period that it can be hit or not. But most of that money will be spent within the first five years.

Okay. So the whole concession package, including the free rent, would be credited to the purchase price if the option is exercised?

The answer is yes, but you got -- yes but. Almost the vast majority has been funded or expended. So the credits, if any, at the end are very minimal. But the first closing can't occur until the end of 2017, as I recall. And they could, but I'm not sure it's likely. I think there's a lot of motivation way. If anything, they will close later than earlier. But who the hell knows? That's something nobody has a good point of view on. But we are at the beginning of 2014. The earliest closing is end of 2017. Most of the funds are expended. If there's a tail that's not, it will get credited.

Okay. And completely separate question -- at the Investor Day, you talked about having net growth in the retail and residential portfolio of around $750 million this year. Can you just talk about how the acquisition pipeline looks and whether it's more skewed towards retail or residential today?

It's more skewed towards retail today. We are looking at some residential deals as well, but I think from what we are planning on locking down in the first quarter, it's definitely more skewed towards retail. There's a lot of properties trading, a lot of good opportunities and continued strong tenant interest in our highly trafficked prime trade areas.

Aaron Aslakson, Stifel.

So $412 million was originated in the fourth quarter, but only about $80 million was actually kept on balance sheet. What were the syndication fees related to the originations there that you recognized in the fourth quarter?

No, we didn't recognize any syndication fees. If we had syndication fees, those would be one time. Generally, we will scrape a little bit of rate, more fees, and those get amortized in over the term of the loan. There are no one-time syndication fees in the fourth quarter.

So the effect of the positive ARB in the syndication is expressed in the retained yield on the $80 million, I think you said, if that's the right number, and that's (inaudible).

And that has always been the case from day one in terms of how we recognize that interest.

So the additional income recognized by the structured finance portfolio of $5-odd million in the quarter was all related to interest rates?

There was one repayment in the quarter. That's the primary difference that you are talking about. There was a repayment with an early prepayment penalty that we recognized in the fourth quarter. Otherwise, the rest of it is interest income.

Okay. And how much was the prepayment?

Roughly $2.5 million.

George Auerbach, ISI Group.

Suburban occupancy ticked up quarter over quarter, and spreads were a little bit better. Was this a one-off result or anything that you think suggests that business in the suburbs is getting better?

This is Isaac Zion. I think overall we've seen a lot of increased activity on well-located buildings in Stanford and White Plains across industry lines. And I think going into early 2014, we have got some vacancies that we have to deal with. But I fully anticipate that occupancy will remain around that 82% and then start to tick up toward the end of the year as things get better and better.

And then just one question on 1 Vanderbilt. You guys moved the assets that underlie the site or are on the side into that development. Can you just remind us of the timing of when you empty out those buildings, when you demo those? I think we talked about it a little bit at Investor Day. But any early conversations with the new administration about the East Side rezoning?

Well, on 1 Vanderbilt, we moved the asset to development. We are still working on various ways of seeing how we can get this development going under East Midtown, primarily, if that comes back this year as the mayor has committed to do several times publicly. And we are also looking to see if there are alternatives to the project we had originally proposed that would allow us to go forward under a different format.

So I think that the zoning was just voted down in November. So it has only been, let's say, two months or not quite. And we would expect this is going to be resolved over the next six months. So I think a few months from now we will have a better answer for you on that. But we are still moving ahead on all fronts with the expectation that this will be developed, the only difference being that as a result of whether the East Side zoning goes through or not, we may have alternate plans. But I think we can accommodate that under several different scenarios, and that's what we are working through now. And I would say maybe on the next call we will have more color on that, certainly within the next six months. And that's our timeline, over the next three to six months, to have this fully figured out as to what direction we will be headed, once we get through the planning process.

Vance Edelson, Morgan Stanley.

So, first, just shifting back to asset valuations, I think you would consider yourself largely in harvest mode now, although it's a relative term. And I'm sure you are regularly approached by others looking to buy, unsolicited or otherwise. So could you just provide any color on whether it's sovereign wealth or pension money, etc., that's knocking on the door these days? Is the trajectory of inquiries up or down the past several months, and is it mainly for the trophy type assets, or do you sense there's demand out there across the board?

Let me just give you the first part of that, and I think Andrew can talk about the composition of the players and trends. We are not in harvest mode. We sell because we always sell. We sell every year. We sold last year. We sold two years ago. I think we've sold almost every year over the past 10 years, except for maybe 2008 and 2009. That I'm not sure.

But short of that, we sell when it's right for the assets, when we feel we've gotten most of what there is to get out of the asset, and we can redeploy into more profitable new investments. We don't make calls on the market. I don't believe that we are in the business of only selling if we think the market is one way and only buying if it's the other way. We moderate and we buy more early and we buy less late and vice a versa. We sell more late and sell less early.

But with that said, we are still finding a lot of good new investment activity. Last year -- I forget the number, Matt -- there was well over $1 billion of new investment activity. A lot of that was equity. And while there was no major office acquisition last year, I certainly wouldn't extrapolate that out to this year because there are a couple of interesting statistics. The way we create value is typically highly structured and off market. And if we can get those deals done even in a market like this, which is a tight market, there are opportunities out there.

So you will see us certainly sell some assets this year, and that's -- as we did last year. And we set those goals in December. You will see us buy actively, and we are going to be recycling money into new value-add deals because this is a good market to do value add in. The leasing market is getting much better. And I think you're going to start to see good mark-to-market rents that are at least on target with what we projected.

So I would not -- I think people seem to be overly focused on interest rates. But I would just make sure you are not focusing on -- I don't mean you specifically, I just mean generally people don't focus on interest rates to the expense of focusing on rents because, as commercial rents go, so goes value and so goes the stock price. That's something I tried to put up on the screen in December to show the correlation between mark to market and value and stock price as opposed to interest rates, which had far less of a correlation.

So anyway, that's the first part. Andrew, the second there?

As is typical in January, I would say we have been visited by many, many sources of capital over the first couple weeks of the year who all have allocations for this year and are aggressively looking for new deals. So you have all the groups that Isaac went through in December at the investor meeting, the sovereign wealth funds, the pension funds, the individual investors. And we're seeing a lot of new entrants to the market, particularly Chinese capital, which we highlighted on Investor Day, but also Middle Eastern and Norwegian. And all of these guys are flush again with allocations for the year and are actively looking for deals.

So we expect transaction activity to be healthy in the first quarter.

Okay. That's very helpful. And then any updated thoughts on the potential repurposing of certain assets that you have mentioned in the past, the potential to tap into retail residential or hotel demand? Do you think you will see some of that down the road, and are you moving more in that direction on any assets?

I think -- we're always evaluating highest and best for any of the assets. Right now our big redevelopment focus is 10 East 53rd, which is an office redevelopment, but that project is launched, and we are going to be bringing to market top, top of the line Class A space and great floor plate on 53rd Street. That's our primary redevelopment focus right now.

Brendan Maiorana, Wells Fargo.

So probably for Marc or Andrew, but with two of your biggest assets put together, put to bed in terms of the tenants that you have there with Viacom and Citi, are you thinking about being more aggressive in terms of doing value-add deals? I know you talked that they are attractive. But you've got a growth portfolio that -- you call it $3 billion or so. Might we see that number move up because you've got some pretty stable assets that don't have a lot of risk in your portfolio now?

I think that's a reasonable assumption, given our view of market rents, which we talked about earlier, that you will see us continue to add growth assets where we can move the bottom line. And if we look to sell, it's going to be mostly stabilized bond type assets where we have done our redevelopment work and we have executed our business plan, and we think we can take the money and reinvest it into higher returning investments.

I would say also on the rental side, with coming expiries, it gives us the ability to, I think, push terms harder than we otherwise would if you had two major exposures out there. So with those put to bed, I think we can really try to help meet the market, if you will, and push the terms and see if we can't benefit from what seems to be a market that has got a lot of job growth, 94,000 jobs last year. The stats say not a lot of office using as in prior years, but it was still positive absorption. And I think that number belies the economic impact of 95,000 new jobs in New York City last year. That is an enormous amount of jobs that puts the total job count at over 4 million bodies. Citi is projecting another 50,000 or maybe 45,000 or 50,000 new jobs, private-sector jobs for this year. And it would somewhat seem understated relative to last year's tally and the general feedback we are getting from tenants right now who's businesses seem to be doing, on average, extremely well and tenants seem to be growing in almost all sectors, except financial and commercial banks.

So I think we can push rents, we can push terms, and we can be more aggressive, as Andrew said, on adding value-add assets.

Just switching gears, question probably for Jim. If I look at the mortgage on 380 to 390, it looks low from an overall principle. Is there, with the lease done now, is that something that you would think about refinancing, and could that be a source of funds as we think about it over the next year or two?

Yes. The answer is maybe. We are looking at it now, and it's got a high credit quality, very stable lease on it for the long-term. So it would appear to us to be an enormously good candidate to look at for refinancing. So the answer is we are looking at it. Of course, we tend to conservatively finance our properties and don't really drive leverage in our property level financings. So we are going to take a close look at it over the next few weeks and months.

Michael Knott, Green Street Advisors.

It's [Chad Reagan] here with Michael. I'm just wondering if you can talk a little bit about the leasing pipeline in terms of how that splits out between the high-end of the market and the more value-oriented price point. Are you seeing more momentum in one than the other?

Well, if you measured it from the last couple of weeks or so, where all of a sudden we've got a slew of offers in on the higher price point stuff, you would think that it was shifting towards that part of the market. But I think in reality, much like we said at the Investor Day. There's good demand across all price points as compared to a year and a half ago, where it was all about the bottom end of the market. Today it seems to be firing at both the bottom end and the top end of the market. Some good examples of that is 3 Columbus, where we are doing some deals in the tower of that building. We are mailing rents in the $78 to $80 range. 600 Lex, we have got five or six offers that we are negotiating in that building, and that's one of the higher price points in the portfolio. We just closed a deal a few days ago with 280 Park for a 25,000 foot tenant on the bottom of the building at rents that are still very, very heavy for that product.

So we are seeing it across the board. But I think, in particular, there's a continued improvement in the high-end of the market.

Great. Thanks. And sorry if I missed this, but can you just clarify leasing commissions for the Citi Group lease included in the TI numbers presented in the supplemental? And if not, can you just share how much additional cost that represents?

The leasing commissions that we pay are shown on the FFO-FAD page that shows the amount of capital expended related to the Citi deal, expended in 2013.

Alexander Goldfarb, Sandler O'Neill.

Just two really quick ones. First, is Citi putting in any of their own money into the renewal in addition to the TI that you guys are providing on the base building? Are they putting -- what are they putting in as part of this, if any?

We are not in a position to respond to that. Citi is going to do, I guess, what it decides to do. We are led to believe they are going to invest capital in the building to leaseback, make it more efficient and potentially make some improvements beyond our base buildings. We've seen situations where they do, and I think there are plans where they don't. So we're just not in a position to address that.

They have announced it's going to be the new global headquarters, though, and it's reasonable to assume.

Okay. That's helpful. I guess we can ask Citi on their call. Second question is, on the West 34th Street, you bought out two adjacent -- I'm sorry, you sold out of two adjacent properties both owned in joint venture, but you retained some development rights. Can you just comment on what your plans are for those development rights?

34th Steet -- we sold the stabilized retail condos and retained the air rights. You don't have any imminent plans for their rights. It is an area where there is a lot of new development going on, and there are future storehouses of value. We wanted to save and didn't feel like we could get adequately paid for today, so we sold the income producing portions of the property. But there's no immediate plans for those air rights.

And Andrew, how transferable are the air rights? Like how far of a radius can you transfer those around?

The block, which is a big -- between Fifth and Sixth is a very large block. So there's a lot of potential between 34th and 35th Street there on the north side of the block.

Ross Nussbaum, UBS.

Can you guys talk about just an update on when 80 Maiden Lane, as well as 280 Park Avenue in terms of different, I guess, timeframes in terms of repositioning, give us an update on how those are going so far?

So let's start, 280 being the most advanced of the two. Steve, why don't you --

Well, we profiled it at the Investor Day. So the construction there continues to advance. We think we will be materially done with all of the base building work by the end of the summer. We have a couple of moderate-sized leases that are in negotiation right now, and we just closed one for 25,000 square feet on the third floor of the building that made some of the papers. We didn't put an investment out, but we continue to see that primarily financial services are the tenants that are coming through the door. And I think we are on track as far as both the lease up schedule and the rents that we are achieving.

Yes. The finished lobby on Park looks, I think, spectacular, if anyone has an opportunity to look at them and see it. Our aim and goal was to have the nicest lobbying presence on Park Avenue, and I think we've achieved that.

On 180, the redevelopment plans -- we are working with the city to get the necessary approvals. AIG is finishing up their occupancy, and we are working with them on phase out, and we are actively showing the building to tenant prospects. So we've got lots and lots of showings, lots and lots of interested tenants. I think some of the dynamic of tenants being priced out of Midtown South is definitely starting to occur, and we are starting to see some of those tenants look downtown in the financial district. We expect that to be a big positive backing lease out there.

Andrew, do you have your arms around a capital budget for the repositioning of that asset?

I would say it's still in formation because it's somewhat reliant on city planning, the City Planning Commission, which has purview over all the public space, which a lot of that building, the ground floor is public space. But by next quarter, we will have much better color.

Okay. Thank you, everyone, for dialing in today, and we look forward to speaking with you again in April.

Ladies and gentlemen, that concludes today's conference. Thank you for your participation. You may all now disconnect, and have a wonderful day.