2026-02-10 16:00Financial Data and Key Metrics Changes - Comparable FFO for 2025 was $2.32 per share, slightly higher than 2024 and better than anticipated [23] - Fourth quarter comparable FFO was $0.55 per share, down from $0.61 per share in Q4 2024, primarily due to higher net interest expense and lease termination income from the previous year [24] - Company same-store GAAP NOI increased by 5% for the quarter, while same-store cash NOI decreased by 8.3% [24] Business Line Data and Key Metrics Changes - In 2025, the company leased 4.6 million sq ft of office space, with 3.7 million sq ft in Manhattan, marking the highest Manhattan leasing volume in over a decade [6] - Average starting rents in Manhattan were $98 per sq ft, with marked markets showing +10.4% GAAP and +7.8% cash [7] - Office occupancy rose from 88.8% to 91.2% [11] Market Data and Key Metrics Changes - The New York office market is experiencing a tightening landlords market, with robust tenant demand from finance, tech, and other industries [4] - The financing markets for class A assets are strong, with CMBS spreads at their tightest since 2021 [26] - The company has a liquidity of $2.39 billion, including cash balances of $978 million and undrawn credit lines of $1.41 billion [20] Company Strategy and Development Direction - The company is focused on its Manhattan-centric office strategy, with significant developments planned, including 350 Park Avenue and 623 Fifth Avenue [5][14] - The company aims to create high-quality office spaces and enhance its retail offerings in the Penn District [13][19] - The management team is committed to maintaining a cash-heavy balance sheet while exploring stock buybacks due to perceived undervaluation [21][22] Management's Comments on Operating Environment and Future Outlook - Management believes the current fundamentals in Manhattan are the best in 20 years, with expectations for continued tightening in the landlords market [4] - The company anticipates significant earnings growth in 2027 as the positive impact from PENN 1 and PENN 2 lease uptakes materializes [25] - Management acknowledges the disconnect between stock price and asset value, viewing it as a potential buying opportunity [22] Other Important Information - The company has extended maturities on nearly $3.5 billion of debt through 2031 and has been active in refinancing to bolster liquidity [27][28] - The company is planning to develop a 475-unit rental residential building and enhance retail offerings along 34th Street [18] Q&A Session Summary Question: Changes in the structure of 350 Park Avenue - Management confirmed that there were amendments related to the overall deal, allowing for flexibility in equity percentage [30] Question: Overall leasing pipeline and tenant conversations - The leasing pipeline remains strong, with over half of the activity from new tenants and significant expansions from financial services and tech sectors [34] Question: Share buybacks and asset dispositions - Management expressed strong interest in pursuing share buybacks, viewing the stock as undervalued [35] Question: Difference between cash and GAAP same-store NOI - Management indicated that the inflection point for cash NOI turning positive is expected in the second half of 2026 [37] Question: Retail market performance on Upper Fifth Avenue - The retail market is improving but still struggling to meet top rents from four or five years ago [39] Question: GAAP occupancy and lease occupancy differences - Management clarified that the $200 million difference is not annualized and will be recognized as tenants build out their spaces [40]