Vornado(VNO)2023-08-01 19:40Financial Data and Key Metrics Changes - Second quarter comparable FFO as adjusted was 0.83 in the same quarter last year, a decrease of 13.3% primarily due to higher net interest expense from increased rates [13][14] - The principal difference in numbers this year compared to last year is attributed to the rise in interest rates, with the overall economy being more resilient than expected [9][10] - The company expects 2023 comparable FFO to be down from 2022, with a known impact of certain items totaling a 91.57 per square foot, reflecting a positive mark-to-market of 5.7% cash and 9.9% GAAP [17] - The average starting rents for the first six months of the year were 3.2 billion, including 1.3 billion in cash and restricted cash [27] Management's Comments on Operating Environment and Future Outlook - Management believes that the office sector will recover, similar to the resurgence of malls, despite current challenges [8] - The financing markets remain highly constrained, particularly for office, but there is more appetite for retail [23] - Management is optimistic about the leasing pipeline, with 580,000 square feet of leases in negotiation and an additional 1.2 million square feet in the pipeline [21] Other Important Information - The company has been active in selling assets, recently announcing the sale of four small retail assets in Manhattan [26] - The restructuring of the St. Regis retail loan was completed, adding five years of term [24] - The new compensation plan was implemented to incentivize retention and performance during challenging times [45][49] Q&A Session Summary Question: Can you elaborate on the leasing pipeline and how much relates to PENN2? - Approximately 40% of the leasing activity was at PENN1, with a strong pipeline of nearly 600,000 square feet of leases in negotiation [30] Question: What is the updated thought on the dividend and the pace of buybacks? - The company is being opportunistic about selling assets and will evaluate the dividend based on cash versus stock mix at the end of the year [34] Question: Can you quantify the mark-to-market opportunity for expiries through 2024? - It is difficult to predict mark-to-market values, but there is positive momentum in key submarkets with sub 10% vacancy rates [38] Question: What are the expectations for NOI in retail and office for the second half of the year? - The company is not providing specific guidance for the second half, indicating it is premature to predict [57] Question: How does the company view leasing activity in San Francisco and Chicago? - San Francisco has been successful with 555 Cal, while Chicago is experiencing a lack of tenant demand, particularly for larger spaces [52] Question: Are there plans to sell a joint venture stake in the Farley building? - The company is not commenting on future plans for the Farley building but acknowledges it as a strong asset [59] Question: What is the recurring versus one-time impact on the 0.72 FFO in the quarter? - The significant one-time impact was from a tenant termination at 345 Montgomery, totaling $0.07, with other minor adjustments [62]