SL Green Realty Corp (SLG) 2025 Q4 法說會逐字稿

Thank you, everybody, for joining us, and welcome to the SL Green Realty Corp.'s Fourth Quarter 2025 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.

You should not rely on forward-looking statements as predictions of future events as actual results and events may differ from any forward-looking statements that management may make today. All forward-looking statements made by management on this call are based on their assumptions and beliefs as of today.

Additional information regarding the risks, uncertainties and other factors that could cause such differences to appear are set forth in the Risk Factors and MD&A sections of the company's latest Form 10-K, and other subsequent reports filed by the company with the Securities and Exchange Commission. During today's conference call the company may discuss non-GAAP financial measures as defined by Regulation G under the Securities Act.

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 measures can be found on both the company's website at www.slgreen.com, by selecting the press release regarding the company's fourth quarter 2025 earnings, and in our supplemental information included in our current report on Form 8-K relating to our fourth quarter 2025 earnings.

Before turning it 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 to please limit your questions to two per person. Thank you.

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

Okay. Thank you for joining us this afternoon as we kick off the year. It's been just weeks since our investor conference, but we've already hit the ground running on our business plan for 2026. We are about a month into the Mamdani administration and know there's a lot of pressure and focus on the Mayor coming out of the gate.

But it's going to take some time for the Mayor Mamdani to put an imprint on how he'll govern. He's still putting his team together and they're at the very early stages of getting their arms around the city. We did see an early test this week with a major snowstorm here in New York, about a foot of snow in Manhattan on Sunday, and the administration did a great job getting the city back to normal quickly with the Mayor being very visible and communicating effectively.

At the same time, there's a lot of political maneuvering going on as we enter budget season in Albany. This is the time of year when the city makes its case to get the biggest chunk of the state budget as possible for the coming fiscal year, reflecting the city's enormous contribution to the state economy. This is especially true with the new administration eager to invest in the initiatives and promises made on the campaign trail.

I know there's been a lot of talk recently about potential city budget deficits, $2 billion this coming fiscal year and up to $10 billion, the following. My own view is that the city starts off every budgetary period with a gap that needs to be plugged and this year is no different. It's not just about expenditures on the revenue side, there's a lot of good news with tax collections 8.5% up in 2025, a big portion of which came from growth in personal income.

One thing that's certain is that the business economy in New York City had an incredible year in 2025, and I believe that when the new revenue forecast come out in the next few weeks we'll see that the city will be projecting significant additional revenue increases that will help defray the current deficit.

Remember, the city's budget is required by law to be balanced at the beginning of every fiscal year, and we continue to remain confident in the city's fiscal stability and strength. Let's not forget that New York City's credit rating is AA and was reaffirmed by S&P as recently as October, which noted that the city has the budgetary reserves needed to navigate any near-term risks.

At our Investor Conference in December, I made the case for what I believe was shaping up to be a stellar 2026. As we sit here on January 29, I feel the same. In short, I think 2026 is setting up to be quite an amazing year for the commercial office sector in terms of occupancy gains, rental achievement and business growth. Given the lens I look through today, the fundamentals are strong.

Businesses are still leasing space and expanding, growing their businesses and making lots of money. The big five banks just reported increases to earnings year-over-year with profits in the fourth quarter up 6.7%, and investment banking revenues up 12.6%.

And we're expecting when Wall Street member firms finally report fourth quarter profits, they will come close to meeting, or exceeding the current all-time high of $61 billion, as the number stood at $48 billion through the first nine months.

Between Wall Street, the big five banks reporting and what we see going on in our own portfolio, it all reaffirms our view at investor conference that New York City is differentiating itself from other U.S. cities in significant ways, and will continue to be the central focus of investors looking to deploy capital in debt and equity this year and beyond.

Case in point, I led a contingency from SL Green that just finished a 10-day swing through Asia, where we collectively held two dozen meetings with debt and equity capital sources, investors, buyers, sellers, asset managers and sovereigns. I can tell you that the appetite to invest in New York was as strong as I have ever seen. As we continue our travels around the world, we expect to see a similar theme play out.

I expect that transaction volume for 2026 will be even higher than last year, which was $23 billion, an amount that was roughly equivalent to that of 2019. And it will only facilitate the company's execution on our $7 billion refinance plan and our $2.5 billion disposition plan.

We set lofty goals for ourselves in December, as we always do, and note you all will be monitoring our progress every step of the way. As you should. We like that pressure, and we've never been more motivated to meet or exceed those goals in this year. What emboldens me is that the private markets completely get it.

One point I highlighted at investor conference, Paramount trading at under $4 a share and then selling for nearly $7 was not lost on anyone. The private markets see economic growth in real terms, the coalescing of young and highly educated talent and strong business demand right here in New York City.

So we're going back to work on what we can control and keep putting numbers on the board until we see it reflected in stock price, which I know we will because the disconnect now is simply too big to ignore, between the value of our premier assets in this company and our share price.

And to be clear, one of those premier assets is our human capital. The people of SL Green, who will generate more than $100 million in fee revenue from institutional investors who look to us to develop, manage and monetize investments on their behalf. I hope everyone out there appreciates our efforts and the enormity of the plan we have for 2026, and thank you for continuing to support our company.

Now I'd like to turn it over to our Chief Investment Officer, Harry Sitomer, who will add some color on how we're progressing on our business plan.

Thank you, Marc. On the capital markets front, 2026 is off to a busy start. First, in the credit markets, we have seen a continued tightening of senior loans as demonstrated by our recent financing of Park Avenue Tower, which priced at a spread of 1.58% at our full proceeds ask.

Most notably, we saw AAAs representing over 50% of the transaction, sell as tight as 112 basis points over the treasury rate. While this rate is a compelling borrowing rate I will remind everyone that in 2018 and '19, we saw similar classes trading in the 60 basis point range over treasuries.

So there's still a substantial amount of room for further rate tightening across the capital stack and, of course, in the index. We will continue to benefit from this momentum as we execute on our $7 billion financing strategy this year, highlighted by the refinancings of One Madison Avenue, 245 Park Avenue and our corporate credit facility, which total approximately $5 billion of the $7 billion plan.

We are in various stages of executing on each of these financings, and you should expect to see us roll out a series of announcements through the balance of the year as we enjoy a tightening senior borrowing market for quality assets and sponsors.

In the equity markets, we are seeing a wide array of new entrants rejoin this market as a result of improving sentiment and investors realizing the relative value of New York City commercial office properties, versus alternative investment opportunities in an economic climate where hard assets are otherwise trading at premiums.

We had a busy New Year's Eve closing out our partnership with Rockpoint at [ 100 Park ] where we quickly realized on a substantial premium from the acquisition 11 months prior. With the building now 100% leased, us and Rockpoint together will fund the necessary cost to complete the capitalization of the project. We welcome Rockpoint to our blue-chip roster of reliable partners.

They are a great firm, and we expect to do more together. This was Rockpoint's first major office deal in six years, a testament to the recovery in New York City. We are in negotiations on contracts and term sheets on four additional transactions in our $2.5 billion plan and look forward to sharing updates as we further our JV and counterparty roster.

On that note, and to reiterate Marc's earlier color, I will add what a difference a few years makes in the private markets. After our investor conference, my phone and inbox was flooded with inbounds looking to explore participating in our capital markets plan for the year.

And Marc talked about Asia, but the interest is really across the globe. I'm seeing it domestically in Canada, Europe and the Middle East as well. I haven't seen this widespread of demand since pre-2020, and New York is clearly defining itself as far and away the city to invest capital in today.

On the fund side, while we have seen stability in the senior lending markets where we are borrowers, we still are seeing inefficiencies and imbalance in the subordinate credit space where our fund is focused. We are tracking for $150 million to $175 million of deployment per quarter, and the team is hard at work deploying that capital for our customers.

We are also pleased to announce that we will be launching fundraising for our next fund focused on senior credit lending as we continue to bulk up our fund business. More on this to come over the next few months. Finally, last but not least, a shadow to Green Loan Services, which is now the largest active special servicer of SASB loans in the country, now servicing 5 of the top 10 largest specialty serviced loans.

With that exciting news, I will pass it over to Matt.

Thanks, Harry. Clearly, out of the gates, strong here in January, no matter how many snow days people in the market seem to want to take recently. As excited as we are for what's ahead, I want to take a minute to highlight the results we posted for the fourth quarter where many of our operating metrics exceeded the expectations we just laid out in early December at our investor conference.

From an earnings perspective, we printed an FFO beat of $0.02 a share, driven by higher NOI due to lower expenses, net of reimbursements, which came through both in the earnings beat and in same-store cash NOI that was better than we expected for the quarter.

Results in improved contribution from our hospitality business, which saw a solid fourth quarter of activity and lower G&A, which, as I highlighted back in December, is already low based on our AUM and relative to the comparable peer set.

These positives were partially offset by lower operating profit from Summit, which is affected by the later-than-expected opening of the Ascent premium experience in mid-November, and some additional maintenance costs we incur related to it.

And finally, for those who like to refer to FAD, hopefully, you took note that we actually beat the initial guidance we gave back in December of 2024 by $65 million, almost $20 million of which happened in the fourth quarter alone.

On the leasing front, we closed out another banner year. Congrats to Steve and his team with almost 800,000 square feet of Manhattan office leasing in the quarter, bringing the annual total to 2.6 million square feet, and our three-year total to almost 8 million feet. And the strong leasing in December specifically allowed us to ultimately exceed our mark-to-market expectations for both the fourth quarter and the full year.

Our same-store leased occupancy objective was also met, albeit a couple of weeks later than we expected. We ended the year at 93%, which is sector-leading and reflects an increase of almost 400 basis points since the lows at the end of the first quarter of 2024.

Yes, we did say we would end the year at 93.2%. However, some tenants in our pipeline that we expected to sign in December, decided they wanted to enjoy the holidays with friends and family, versus answering Steve's phone calls and signing leases, so they waited until January. Including the same-store leases that were signed after January 1 in our December occupancy, we would have been at 93.2%.

So it's simply a matter of timing, nothing more. More importantly, with 142,000 square feet signed so far in January, and a pipeline of more than 1 million square feet behind that, we are well on our way to achieving our 2026 leasing goals, including our same-store occupancy objective 94.8% by the end of the year.

All in all, a very solid fourth quarter, puts us on great footing to achieve the objectives we laid out for 2026, and for earnings growth in the years beyond.

With that, I'll turn it back over to the operator for questions.

(Operator Instructions)

Alexander Goldfarb, Piper Sandler

Great. Hey. Good afternoon. Thank you. Steve, maybe just hitting AI upfront. We've now had AI out there for quite a while. And the market seems to be shaking out. But you see like law firms, for example, they're bidding aggressively for associates. You see the demand that you guys and others are showing for office.

And at the same time, other industries are talking about downsizing from AI. So can you just give an update how your tenants and the tenants who are driving the market, how they are incorporating AI? And are they truly downsizing any people? Or this is just all like part of the mix, and therefore, AI is part of their business, but it's not affecting their hiring plans or how their -- or how much space they need to take?

Well. That's a lot of ask to get that insightful into exactly what our tenants are using AI. But I'll give you what we're seeing from a leasing perspective, which is, I've not heard of a single instance of the deals that we've done where tenants have downsized as a result of AI.

Just the opposite, many of the deals that we're working on, I would say, quite frankly, the vast majority of the deals we're working on have some element of growth. Whether that's growth because AI is making it more efficient and more profitable and delivering more opportunities to develop their business, one can only speculate. But maybe pivoting a little bit more on to the AI demand side of the equation.

The AI tenants leased 1 million square feet last year. There's currently 80 tech tenants in the market right now with active searches for over 8 million square feet. Of that, there are 13 known AI requirements for over 1,200,000 square feet. So to the extent that there's any space savings on other businesses, is clearly being offset by an exploding growth of AI demand in the marketplace.

Okay. And then, Marc, on your Asian adventure, you sound like some productive meetings over there. Are there any areas of interest where the overseas investors want that surprised you? Or how are they talking to you about the money in terms of, are you giving them the ideas of, hey, we can invest here and there?

Or they're saying, hey, here are the areas that we want to focus on, and this is where we'll give you more money? I'm trying to figure out which way the horse race is being driven and if it's countering up some new opportunities or maybe just reaffirming your existing game plan?

Well, I think the way I would characterize it is the way, I've seen it in the past, but really only, several years out of three decades where the money inflows into these institutions seems to be so great, and real estate has to, sort of maintain its certain percentage of total AUM for these different investors. And many of these, country investors have kind of maxed out their investments in their local economies, and they really can't invest more.

So they are, almost forced, if you will, to look outside their borders. And when they do that, it was quite evident to me that there's really only a couple of areas that they feel comfortable investing in worldwide and certainly in the US and the constant theme of New York City, Midtown Manhattan, real estate being sort of the real estate equivalent of US Treasuries, I think really resonated in terms of, risk adjusted.

Downside safety and a path towards real returns where you can still earn double-digit returns on good core real estate assets because interest rates in the US are still relatively high and cap rates are still relatively high and that translates well for a lot of these investors. So there was a lot of our counterparties. Telling us that they are looking to us to help them deploy capital in various different ways, debt and equity, development and core assets.

Some is more opportunistic. In some cases, people have interest in the summit platform and sponsoring growth in the summit platform and various markets, etc. So, it was, it's just great meetings. Our franchise in those markets is very well known and highly regarded. There seems to be a lot of capital deployed in '26 and notwithstanding some of the geopolitical events with, particularly with tariffs.

Both ways, US tariffs of foreign goods and foreign tariffs on American goods. It seems that there's still a desire to convert money to dollars and put it to work in New York City and in many cases with us. So it was a very good trip all around. Thank you.

John Kim, BMO Capital Markets

Thank you. On the new disclosure that's provided on Page 31, Matt, on the difference between the physical and economic occupancy. I guess it would suggest that there's another $7 million, $8 million of rental revenue coming to SL Green from leases that have already commenced. So I'm wondering when as far as timing, when you will recognize that on both a GAAP and cash basis?

That's about the most specific question I've got in a while. Look, we gave economic occupancy as a new stat we would be referring to back in December. So -- and we guided to where it was going to end 2026 property by property. Obviously, you need a starting point for that, so we threw it into December.

How the growth from the December number, December '25 to December '26 number plays out, we don't give quarterly guidance, so I'm not going to layer it in first quarter, second, third and fourth. But we gave you full year NOI guidance. It translates into significant same-store NOI growth, 3.5% to 4.5% over the course of the year.

So you say it's coming in over the course of the year. How it bleeds in somewhat out of our control because the tenants control when they finish their space and can move in, and that's what triggers revenue recognition. So for that, among other reasons, we give it on an annual basis and can't give you how it bleeds in over the course of the year.

But can you give us like a rough estimate, like would half of it come this year and half in the following years?

I cannot.

Okay. My second question for you is the fat [outperformance] that you mentioned, $20 million this quarter, what drove that? Is any of this timing related? And how does that impact your views on the dividend?

How does it impact you views --

On maintaining the dividend?

So FAD and dividend are unrelated topics. So I'll start with that. As it relates to FAD outperformance, I think part of that is being very vigilant about capital spend. And also gives evidence to the unpredictability of FAD, which is why office companies like us don't guide to it, because it's largely out of our control when it comes to the tenant's capital spend.

If they elect to build out space and call capital that we have to fund that. If they defer or just spend slower, we can't control that. So I think the combination of those things plus just FFO outperformance, pure earnings outperformance all drove the overall FAD beat.

As it relates to dividend, FAD is not the governor of dividend. FAD is a stat just like FFO is. And so the dividend is an accumulation of taxable income items, and that's what will drive our dividend on a go-forward basis.

Nicholas Yulico, Scotiabank GBM.

Thanks. I guess just going to the asset sales guidance that you've given, the $2.5 billion, and you gave some NOI impact this year that was expected. Is it right to think that that's the timing of the asset sales is more of a back half of the year impact? And can you just give us any sort of range on how to think about cap rates for the different asset classes that you're selling?

So you're right to say that it's mostly back half. We do have some asset sales, Harrison commented that there are term sheets contracts in advanced discussions. So maybe we can get some of those wrapped up in the first half of the year. But by and large, a lot of it is second half.

And we're selling probably the most diverse group of assets we ever have. We have some stabilized office. We have development sites. We have residential. We have retail, a little bit of everything. I wouldn't hazard to put a blanket cap rate on all of that. And when you talk about the development side, there is no cap rate. I don't know, Harrison, do you want to add anything to that?

No, I think that's right. Also for competitive purposes, I wouldn't want to put a cap rate out there that you want us negotiating the best price. But I would add that we put out that business plan only a couple of weeks ago. We have a very high degree of confidence in executing on that plan.

That's why we put it in front of everybody. And we are hard at work at getting that plan done. And as I mentioned, four of those deals are already in term sheet, or contract negotiations. So hopefully, some more news to come over the coming months.

Okay. And then I just want to follow up on the dividend question. I know you mentioned on FAD and how it doesn't impact necessarily the thinking on the dividend. But I was just wanting to see if you could give us a little bit more of the thought process of the Board.

Because ahead of the March decision on the dividend, how the Board is thinking about it? Because we're all seeing that FFO and likely FAD is going down this year, and so it kind of raises questions about the dividend. Any additional commentary there would be helpful.

Yeah. I would -- it's premature to have a dividend conversation right now. We'll take it up with the Board. I can tell you the Board doesn't just look at the next quarter, two or three. The Board takes a holistic look and we're going to look at things in the coming years.

I think '27 is going to be a really strong year. So we don't -- we don't peg the policy quarter-to-quarter. It's intended to be underpinning of a long-term plan of investment, and harvesting, repatriation and creating free cash flow.

And one of the biggest parts of that plan now, which is different than it used to be, is the creation of pure net fee income, unlocking the value in the platform over and above just our asset value. And that money, if you will, is kind of in place of what used to be DPE income.

And I think you get a much higher multiple, it's much stickier, and it's core to who we are to build up this asset management business. Further, you heard Harry talk about the launching of a new fund, which we will do in '26, and that's not even in those numbers.

So I feel very good about the earnings trajectory of the company as all this development we did and all these leases start activating and coming into recurring FFO in '26, maybe back half and certainly beyond, '27 and beyond. And those are the kinds of things we're looking at in addition to taxable income. And in addition to cash flow, when setting a dividend policy.

So I think what you're hearing is we're generally optimistic as it relates to the business plan. Where we peg the dividend at a moment in time is something the Board will take up in, I guess, March or April. March. March. And there's not a lot more I can add to that.

But you mentioned something about declining or falling earnings this year. This portfolio is without question the best portfolio of assets with the highest earning capacity this company has ever had. And at the end of our $7 billion refinancing plan, our $2.5 billion disposition plan, the balance sheet is going to be exactly set to where we wanted to be at the end of this year.

And we're poised for opportunity and growth, earnings growth and value growth. So the dividend we'll have to [ suss ] out in March. But this is not a company that feels like it's in a moment of decline. I think we're at a moment of expansion on all levels. And I think the private market gets that.

And I hope the public market comes to realize the great successes we're having in this market and follow suit with support. But until then, we're happy it's a necessity that we have extraordinary support from global investors.

Alright. That's helpful. Thanks Marc.

Anthony Paolone, JPMorgan Chase & Co.

Great. Thanks. And Matt, maybe just to clarify, just to make sure you got this right. This new occupancy, or economic occupancy, you gave us the 86.7% for year-end 2025 for the same store. So the number in your guidance for '26, is that apples-to-apples with that for year-end '26? Or is that the average across the year?

Just to make sure we got this right.

The economic occupancy we published at the investor conference is your question, Tony? Was that end of year was --

What's the year-end?

That was -- year-end is higher. Year-end is higher.

Okay. And that -- but that is apples-to-apples then with this 86.7% that you now gave us?

Yeah. The -- well, the published number is as of the end of December we guided to in at the investor conference for '26 was on average, the year-end '26 number would be higher, but in order to kind of get people to an average annual guidance to give a year-end number. It's not really given a picture as to how the earnings growth might look over the course of the year, we did an average by building.

Okay. Got it. That's helpful. And then just second one for me. Just curious, Worldwide Plaza has been in the news a bit. Can you remind us like what that FFO impact is? Like is that thing running at an FFO loss, or is interest in like penalty interest? Like how does that work for your earnings right now?

It generates $7 million of FFO.

Okay. Got it. Thank you.

Blaine Heck, Wells Fargo Securities.

Great. Thanks. Marc, I just wanted to follow up on your trip to Asia and dig into the drivers of the increased appetite since foreign investment has been lower over the past few years. Weakness in the dollar has been a big headline over the past few days and weeks. So I hear you on rebalancing domestic versus international exposure for those clients and them searching for higher yields.

But how much of a part of their increased appetite do you think a weaker dollar is playing, if at all? And if that continues? Or are you expecting that to provide you access to additional partners for fund investments or acquisitions? Or does that just mean more competition for assets and just higher values across the market?

The second part of that question, you said with respect to the valuation push, what exactly did you ask?

Yeah. Just does that increase appetite for investment in Manhattan? Just -- do you think of that as providing you access to additional partners for fund investments or acquisitions? Or does that just mean more competition for assets and higher values across the market?

Okay. So it's interesting. When the dollar was strengthening and other currencies were weakening, you could have made an argument that maybe U.S. assets would become less attractive, but we didn't experience that. Because at that moment in time, people wanted to get their foreign currency into U.S.

currency because they felt that U.S. had great real growth prospects. And once that money is here, I think the intention with a lot of these investors is it stays here and gets reinvested. They're not just rifle-shotting certain asset investments opportunistically, but they're looking to set up investment platforms in domestic markets here in the U.S.

And there's -- at that moment in time, there was kind of an intentional directive to diversify some money into, what was in, a strengthening dollar. And I didn't see that hurt our ability to raise money really at all. And plus a lot of these sophisticated investors have hedging strategies that I think mitigates some of that risk. Now with the dollar depreciating it obviously makes the assets somewhat less expensive.

But also remember, that means rates are rising in their home countries. So that relative advantage we had, the U.S. rate versus home country rate is probably narrowing a bit, but still decidedly in favor of U.S. And yes, I think the appetite picks up more with the depreciating dollar, which creates more demand, will certainly push pricing.

But nothing pushes pricing as much as interest rates. If you're looking for a push on pricing, maintaining or falling rates, I think, would have an explosive effect on values in the city. Right now, maintenance of rates, I think it's a fair market and we outcompete in that market.

And I think it makes it more attractive for investors to invest. And there was -- there was very little talk about the exchange ratio being a barrier in any way. And in some cases, it was certainly a benefit. So I think it's a good trend, but I don't want to give the implication that if that reverses itself and the dollar started strengthening again, that I would expect a dramatic tapering off.

Because I still think there's a diversification play, a global diversification play into markets where they're underrepresented investments. I think that's the number one reason we're seeing these money flows in our direction. Harry, you have any thoughts on that?

The only other thing I would add is what you heard me talk about in December and in my intro, which is just the relative value of commercial office properties in New York. A lot of what we're hearing from investors, to Marc's point about waiting is they're heavyweight in data centers and other asset classes that have seen big appreciation in pricing over the past three to four years.

They haven't seen -- we haven't seen that type of appreciation for the past few years in commercial office assets. And that's what's enticing them into this market is the relative value versus other opportunities and other asset classes.

Okay. Very helpful commentary. Second question, you have a significant disposition target for '26 and a solid occupancy trajectory forecast for the year. Can you give us any idea of how much of the occupancy gain is related to selling off under leased buildings? And how much of the gain is related to organic leasing of vacancy throughout the portfolio?

It's Matt. I would say the occupancy objective is very nominally, if at all, affected by asset sales. There are some asset sales that we have in there that are lower occupancy, that we could not consummate and still meet our objective based on the leasing trajectory we're seeing.

So will it have an effect, potentially? It was it factored into our objective 94.8%, achieving it or not, yes. So we could do without the disposition plan and likely achieve our targets.

Blaine, I would point you in the direction of a slide we used in the investor conference. I thought it was a pretty impactful slide, which listed, I think, a subset of mostly all our buildings, or all material buildings, if you will, in terms of current occupancy and where we expected to be at the end of the year.

And those are same-store, obviously, between '25 and '26. And it showed not only in almost every case, maybe not every case, but the vast majority of cases occupancy gains being projected, which underlie the March forward from 93% to 94%-plus in 2026. But shows you two stories.

One, we're operating at the highest levels, I think, in the market at getting to 95% and above on a major segment of our portfolio. But still, we want to see those properties 100% leased. And people say, well, it's impossible, fictional, whatever. We've got properties that are 99% and 100% leased. And in a tight market, I think 97%-plus is not unachievable.

We've achieved it in the past. And every 100 basis points for this company has a dramatic impact on the bottom line. So I just think referring back to that slide will give you a good visualization of where we see the occupancy gains coming from.

Great. Thank you.

(Operator Instructions)

Brendan Lynch, Barclays Services Corp

Great. Thanks for taking my questions. Maybe one for Harry. I appreciate the color on the spreads tightening over the past couple of years. What do you think could get us back to the tight spreads of the pre-COVID era? Is that more macro-related or more office sentiment related? And kind of what's the house view on the trajectory and timeline of spreads tightening going forward?

Yeah. I think it's more macro and relative yield focused. I will say just even through the Park Ave Tower financing, that was tightening like up to the last hour of bidding out those bonds. And I think we're going to continue to see a trajectory over the next 6 to 12 months that the spreads, like you saw us go from 11 Madison into Park Ave Tower, next to One Madison.

And then you'll see 245 Park, you'll continue, so long as we stay on the current trajectory, to see those spreads tighten as we go throughout the year. And a lot of that is new entrants coming into the bond market that are recircling.

I met with someone this morning a North American-based investor coming back into the bond market that wasn't there for quite some time. So we're going to continue to see that momentum and that will continue to tighten the spreads.

Great. Thanks. That's helpful. And maybe another question on the trends within concessions. It looked like the TI packages and free rent ticked up in the second half of the year despite the really strong demand that you guys are seeing. How should we think about those packages going forward?

Broadly speaking, I'd say much of what we saw last year continues today, which is concessions have been very stable. There's been opportunities to tighten them up in certain instances where -- whether it's on certain parts of the market where there's a lot of landlord leverage, particularly on renewals and the sort of, call it, the small- to medium-sized tenants.

We're seeing some improvement on the concessions there. But I think what you'll see this year is free rent will start to come down a little bit. And I think TI will be the last thing to change. Although, again, on the small to midsize and particularly on the renewal side, we've got the leverage to be able to improve -- reduce the amount of TI that we're giving on those transactions.

And I think what you saw in this particular quarter is simply a reflection of the complexion of deals. There were a lot of bigger deals, new transactions than those naturally carry the bigger TI packages.

Great. Thank you for the color.

Manus Ebbecke, Evercore ISI.

Thanks for taking the question. Just wanted to see if we can provide some color on the pipeline, specifically for leasing demand outside of Park Avenue?

The pipeline, despite all of that big leasing in the fourth quarter, we've kept the pipeline full. Over 1 million square feet of pipeline, I think what is most notable, and I think this is important for people to hear. Of the over 1 million square feet of pipeline, 800,000 square feet of that pipeline are leases that are out.

So these are not just hoped for transactions that will convert 800 million square feet of leases that are in negotiation and many of them are close to execution form. Also within that pipeline, there's 900,000 square feet of new tenants as opposed to renewals.

And then as far as the types of tenants heavily weighted towards finance, half the pipeline is financial service businesses, the balance being tech and legal tenants.

Got you. And maybe a quick follow-up, just like how would you classify like Sixth Avenue or Third Avenue right now like just in that mix.

Sixth Avenue is the new Park Avenue. Park Avenue is the tightest market -- some market in the country, Sixth Avenue posted some really big deals. You're seeing rents rise dramatically on the avenue given the tightening of supply. What we've experienced, in particular, I think, is a really good case study of what the strengthening marketing on Sixth Avenue is.

Many of you have inquired about the vacancy, or the rollover that we had at [inaudible] over the past couple of years. We had four big tenants that rolled out of the building or, in one case, one more tenant still to go. Almost 700,000 square feet of that coming 25 floors of space.

Since that period, we've leased 434,000 square feet. We have leases out on 135,000 square feet. Deals pending on 131,000 square feet which leaves us only 24,000 square feet to deal with of that almost 700,000 square feet of roll, which I think is an amazing case study to the strengthening of the submarket to say nothing of the strength of the leasing team, of course

Got you. Perfect. Thank you. I appreciate it.

Ronald Kamdem, Morgan Stanley.

Hey, great. Just two quick ones. On the same-store NOI guide of 4%, I think last year, there were some headwinds from sort of SUMMIT operator. I was just curious if we could sort of decompmentalize that guide in terms of the benefit from SUMMIT versus occupancy versus other factors? Just to get a sense of that 4%.

I would say SUMMIT has an impact on it, but it's not going to be the main driver of it. Clearly, the driver is occupancy increases. As I said in my earlier commentary, we've driven same-store occupancy from -- up 400 basis points in a period of three, seven quarters that starts to flow through.

That's why we show economic occupancy as a new metric taking forward with still growth thereafter that translates into, obviously, same-store NOI growth of the 3.5% to 4.5% this year, and 10%-plus in 2027. The SUMMIT effect that it had an effect. So it will be helpful in 2026 clearly to have a sent back up and running and SUMMIT it back on a great footing. But it's not the driver.

Helpful. My second one is just going back to the dividend payout ratio. I appreciate that is not the right sort of way to look at it, but I guess my question is, when you think about sort of the cash flow statement that you guys published and that it's out, there's always sort of a big delta between the operating cash flow and the dividend payment because you have a lot of JVs.

I guess the question is like how do we think about the recurring cash flow payments of the JVs? And is that something that when the Board is thinking about the dividend payment, is that the right way to sort of think about the consideration versus FAD? Thanks.

Well, I can -- I look at cash flow, and cash flow is comprised, for this company, of operating cash flow and the gains we take on sales. Because we are an active seller of real estate. This is -- we are just not a buy and hold company.

And if you evaluate us and our dividend only from the lens of buy and hold, which I don't -- a nonactive way of managing the real estate, then we'd have to look at different metrics as a Board. But as a Board, we look at buying things that are -- is like unformed clay in some cases.

Breathing new life and goal to buildings, developing new buildings, entering the transactions to create high IRR. And we often will monetize. I think we've sold much more real estate than we currently own, and we own 30 million square feet. So that's saying something.

And to only look at one metric for purposes of total return and dividend, et cetera, coverage, I just would -- my opinion, I think the Board's opinion would be, don't look at it that way, look at it in its totality for all the revenue we generate. Because all of that revenue, which often is taxable, is what goes -- which I think is what Matt is saying is that's our metric, and that's our barometer for setting of the dividend.

We don't just occasionally harvest gains. This year, it's a $2.5 billion plan. Last year was a couple of billion. A year before that, I think it was a $5 billion plan. I mean this is what we do and who we are. You guys know that. You absolutely know Green buys, improves, develops, stabilizes, harvest, move on, does it again. I've been doing here with this company for 27 years.

And it has not changed much over the 27 years. The assets have just gotten better. The number is bigger. But the culture and the ethos the same. So it's not a debate per se. It's just -- this is how we look at it at the board level. And we've been able to keep a good dividend policy, I think, over those years as we possibly could, given the ups and downs of the markets.

And we're just going to stay on that theme and keep evaluating it through that telescope of the different types of businesses we do and the contributory cash flows to that business, the taxes that result there on and the setting of the dividend, we think at a proper level.

Peter Dylan Abramowitz, Deutsche Bank.

Yes. Thanks for the time and thanks for taking the question. Just wanted to go back, Matt, you had some comments on maintenance costs at SUMMIT in the quarter. Just want to confirm, are those sort of onetime just related to Ascent ? And is there any change in sort of the '26 outlook you gave in December for SUMMIT?

No change in the '26 outlook unique to the fourth quarter.

Okay. Got it. And then I guess, either for Harry or for Marc. You talked about some of the deployment you're starting to look at out of the debt fund. Could you just give us a sense of sort of where you're underwriting returns on some of those initial investments?

Yeah. Sure. I mean the -- we given out a slide at the investor conference, that fund targets gross returns of mid-teens.

Okay. And so largely, what you've seen so far is fairly consistent with what you talked about at the Investor Day?

Yeah, absolutely. I mean, no change in the past few weeks. Mostly focused on subordinate credit for all the reasons I gave in my introduction, and we're still seeing opportunities there to get the capital out in very interesting opportunities.

All right. That's all for me.

Seth Bergey, Citi.

Hi. Thanks for taking my question. It might be a little early, but just in the context of one of your peers you (inaudible) the Street announced some pre-leasing. I guess could you talk a little bit about, I know any early indications of the demand for the 346 Madison development site?

Well, advanced demand -- we just debuted it last week we closed, I think, in September or October. Somebody can correct me. Within those few months, we conducted a fulsome design competition, went through a range of different designs to get to something that we settled on as being something that we think is really going to be world-class to try and stay within the spirit of doing efficient buildings, or really attractive buildings and et cetera. We're excited for this project.

We think it's the right project at the right time. I think we just formally availed it last week, and I know Steve, your phone has been ringing, and you've had some pre conversations. So where are we at?

Yeah. Listen, my only wish is that we had the building built and ready to go today because it would be more than enough demand to fill it. Just to give you a sense of the kind of large tenant demand that's out there, there's 250 tenants that are being tracked in the market right now covering 26 million square feet of tenant demand.

Of that, there are 32 tenants with requirements of over 250,000 square feet, and another 37 tenants with requirements between 100,000 and 250,000 square feet. There is a there is a dearth of supply for high-quality, particularly large block spaces.

If you look at the high end of the market, the best of the best part of the market, there's a 3.7% availability rates. And there are no 100,000 square foot blocks in the -- what's considered the best of the best part of the market. So consequently, let's get the building built as we'll fill it like, pronto.

Great. Thanks for the color.

Vikram Malhotra, Mizuho Securities USA LLC.

Thanks for taking the questions. I guess just first, you've talked a lot about the leasing pipeline trajectory getting to that occupancy number. One of your peers yesterday said New York on new leasing, you're doing double-digit roll-ups. We can see that in your reported numbers; you see roll ups. I'm just trying to understand as it stands today with the pipeline, like where would you peg your portfolio mark-to-market today?

Well, yeah. We gave guidance or our objective for the year back at the investor conference. We don't mark to market the portfolio as in -- its entirety because you can't market this in one shot, but I would say our pipeline reflects the exact range that we gave in December.

What was the range in December? Do you recall?

To be high single digits.

Okay. Just -- I know I'm not going to like what is FAD. Does it cover your dividend or not? Does it matter? But just one component, given the leasing you've done last year that's commencing and then entertaining, spending money, and all the leasing you're doing this year, how should we just think about actual dollars in terms of TIs that are hitting that FAD calculation this year versus last year?

Thank you for leading in by saying you're not going to compare the FAD to the dividend. I appreciate that. As it relates to trajectory, we are still funding as we did in '25, leasing that we've done for the last couple of years. That, though, as volumes slow as we get the portfolio full once you get to -- we're going to get to close to 95% by the end of the year.

So volumes will drift lower. And then we -- Steve is seeing concessions kind of moderate, then that spend goes down. It's kind of the natural progression, and that follows with the NOI growth that we're seeing next year and thereafter.

Yeah. It's worth noting that over the next four years, we have the lowest rollover that I recall in the company's history, typically 900,000 square feet of leases expiring each year over the next four years, whereas typically we were [ $1.2 million ] to [ $1.5 million ] or more in certain years.

I think another way to look at it is, I think over the past two years, we did 6 million square feet of leasing.

[ 8 million ] in three years.

[ 8 million ] in 3 years, [ 6 million ] two years. I think our projection for the year is like [ 1.6 million or 1.5 million ], in that range, [ 1.5 million, 1.6 million ]. We don't have a projection for next year, but we -- that we've been public with, we certainly have our own internal projections.

And suffice it to say, as we continue to fill these buildings and get towards occupancy, the volume of leasing necessary to generate high occupancy becomes somewhat less capital associated with that becomes less. And the scarcity value allows you to trim in renewal TIs and free rent back to levels that are (inaudible).

So there's multiple reasons why we would see a big improvement in that FAD number in '27, which is what I was trying to allude to two or three questions to go on FAD. And -- this is just the reality of 6 million feet of leasing in two years. You have to pay the capital to. But now we've got 1.5 million square feet that we're going to lease this year unless we over exceed that.

And the projection for the year after, and the year after as Steve just said, are going to be relatively modest because of the less role and the tightening of the packages.

So that's where it is, but it's a good news problem guys. It's a good news reality that we're paying to install a lot of 10, 15, in some cases, 20-year tenancy off at a triple-digit rent. What was our average rent for the quarter, Matt?

Low 90s.

We're in the 90s to hundreds now for average rents in this portfolio, and you can -- that's where you start to make some real margin to cover the concessions and contribute to the cash flow of the company. But it took a lot of work over the past few years to get here.

And now we're here, and we're kind of enjoying that. So I think we're 6 or 12 months ahead of, I think, the narrative here, looking out to '27 and beyond, and we see a lot of great recovery there in both FAD and earnings, which will be the subject of discussions in the second half of this year.

No, I just -- I appreciate that. I guess we're just trying to understand you through the 10% same-store number for next year, which is a great acceleration. But just trying to understand whether it's like delayed TI spend, or debt refi, or asset sale impacts, which will -- may or may not be dilutive.

But just as we go that how much of that 10% in gets offset so that maybe the FAD growth gets pushed out again one year? That's kind of, I guess -- I'm just trying to make one big piece of it, that's been a headwind in the last three years, and you're saying it's going to be a tailwind. But ultimately, I guess we're just trying to understand how much of that 10% next year gets eaten up?

I think Marc gave you all the commentary you need. We have 10% NOI growth and capital should be moderating.

Yeah.

That's it. That's the end game.

Michael Lewis, Truist Securities.

Great. Thank you. I apologize if I'm just blanking on this, but why is Landmark Square now 733,000 square feet, versus 863,000 square feet a quarter before. Did 130,000 come out of service for something?

Yeah. There's -- that's a campus made up of multiple buildings. One of the buildings is under development, so got popped out of the operating property square footage and it's over in the development square footage.

Okay. Great.

Well done. That would have been my -- that's a good pass.

Did I pass?

Yeah. We have some exciting things we're working on, on one of the buildings. Do you want to?

We got approval last year to convert the [re] Landmark Square to residential. We just received the approval from the town and now working on capitalizing that deal.

Right. Okay. Thank you. Okay. And then my second question, there were questions about rent and mark-to-market and cash rent spreads. This is one of the things with office, I think that gets confusing. I just tried to do a quick back of the envelope, I looked at the last five quarters that you're leasing for rent, term free rent TIs.

And then I did the same thing for the trailing five quarters in 2019. And it's not clear to me, rightly -- so TIs and free rent periods are up like 60%, 70% since then. Rents only up like 20%, 25%. It's not clear to me that the total lease economics are better. I just wonder, how do you think about that? First of all, as a signal of strength in the market or what's happening in the market?

And also in negotiating, right, because these concessions could get sticky, people get used to them. I don't know any thoughts on that about the change in (inaudible).

You got to amortize the TI over the term of the lease to get to -- I mean, yes, it's a nominal onetime number. The upfront TI, but on a 15-year lease, just make sure -- I'm not questioning your math, I'm just saying make sure that when you're comparing a 20% annual rent increase, make sure you're looking at the annual TI increase. It's not 60% annually. It's -- you guys spread over the term of the lease. I mean that's the only thing I would say to that.

But to the more fundamental question --

Also, more leasing being done in new deals right, new tenants coming in as opposed to renewals.

I think you look at the -- where it all comes home to roost is in price per square foot for premium assets. So when you put everything through the rents, and TI, and the free rent and downtime, asset values today for, I'll call it, the top 20% of the market, 25% of the market is, I think, solidly between $1,000 and $2,000 a square foot below $1,500 a foot for older but well-located renovated product, and probably $1,800 to $2,500 a foot, maybe even $3,000 a foot for the best new product.

And so in order to achieve those kind of price per foot, they have to be supported with the net effective increase of rents minus concessions. And certainly, if you look back to '18 or whatever period of time you were looking at, asset values were not there.

So look, the -- there is a part of the market that's still recovering. And I think the story is yet to be told on assets where the average rents are below $100 a foot. And yet, you're right, the TI and free rent is relatively high relative to those leases.

But for buildings that are enjoying average rents well north of [ $100 ] a foot, I think the improvement is both nominal and net effective. And so I wouldn't paint the whole market with one brush. There's different categories of buildings that we're referring to and what we're referring to mostly is that upper echelon and building in East Midtown.

Yeah. Thanks. The economic occupancy addition, I thought was great and really helpful. It may be kind of a dream of a metric where maybe we could put the whole value of the lease together right?

You got to dream.

Pulling himself up off the floor. Hold on, I have dreams, Mike. He's pulling himself up off the floor.

They're to dream. Thank you.

Guys. All right. Thank you.

Caitlin Burrows, Goldman Sachs Group Inc.

Hi. Hopefully, two short ones. Just first on the income statement, it showed that 4Q other income was almost $40 million, which was up meaningfully year-over-year. Just wondering what led to that other increase in 4Q and what was included in there?

The fee income, which flows through other income is lumpy, as we said, that causes some quarters to look high in other quarters we -- that's when we see the -- we missed. It's often a function of when transactions close.

So we had a couple of transactions like 100 Park and 800 Third and those things closed in the fourth quarter, as well as some other special servicing fees that came through in the fourth quarter that drove that number higher just for the quarter.

Got it. Okay. And then back to those SUMMIT onetime expenses, sorry to bring them up again. I was just wondering, were they shown in the SUMMIT operator expenses line or SL Green's operating expenses? Because it looked like operating expenses were up again in 4Q.

But I know last quarter, we talked about AC costs being highest in 3Q. So yes, wondering where those showed up and if it wasn't in the operating expenses, then what drove that?

So the SUMMIT expenses were in SUMMIT operator. Operating expenses, along with other consolidated lines went up in large part because 800 Third became a consolidated asset during the quarter when we bought out our partners. Operator is that it.

Got it. Thank you.

Thank you. Operator is that it?

Yes. This concludes our question-and-answer session. I would now like to turn it back over to Marc Holliday for closing remarks.

Okay. No closing remarks, operator. I think we've been on for quite some time. So thank you to all who stayed with us throughout. Thank you for the questions, and we'll speak to you all again in three months.

Thank you for your participation in today's conference. This does conclude the program. You may now disconnect. Everyone, have a great day.