Thank you, everybody, for joining us, and welcome to SL Green Realty Corp's First Quarter 2020 Earnings Results Conference Call. This conference call is being recorded. At this time, the company would like to remind listeners that during the call, management may make forward-looking statements. Actual results may differ from 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 Securities and Exchange Commission. Also 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 in the reconciliation 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 first quarter 2020 earnings. Before turning the call over to Marc Holliday, Chairman and Chief Executive Officer of SL Green Realty Corp., I ask those of you participating in the Q&A portion of the call, please limit your questions to one per person. Thank you. I’ll now turn the call over to Marc Holliday. Please go ahead, Marc.

Okay, well what a difference a couple of months make. If we had this call at the beginning of March, I would have told you all about the great things happening in New York City and at SL Green, recapping another very strong year of accomplishments and a stock price performance relative to our New York City peers that was very strong. I would have told you about a record low unemployment and record high leasing pipeline, near zero vacancy across our portfolio, incredible progress on the construction and leasing of One Vanderbilt and a sense of growing stability in the retail sector. And I would have highlighted our plans to continue executing on our very defined corporate strategy of asset dispositions and stock buybacks. But that was eight weeks ago and for all intents and purposes, a lifetime ago. Suddenly, we are living in unprecedented times, experiencing a disruption to our lives and businesses, the extent of which most of us have never seen. The COVID-19 pandemic and the subsequent dramatic reduction of global economic activity, have rendered the best-laid plans and projections uncertain and injected volatility into the marketplace. We don't yet know how long it will take to bring the pandemic under control nor whether New York's economy will rebound quickly as it often has in the past, or face a more protracted decline. What we do know, however, is that SL Green is built to withstand these times. It's in moments of crisis and market disruption that our team shines the brightest. Every member of our leadership team has been with the company for at least a dozen years, and many of us have been together since the very beginning. Our strategic position as New York's commercial real estate sharpshooters means that we are better prepared…

Thank you, Marc, and I echo your sentiments. We couldn't perform at the level of performing in this emergency if it wasn't for yours and Andrew's leadership as well as full support of the board. Here we are, seven weeks and it feels like seven years. As many of you have been through your share of crises and emergencies throughout my career everything from 1993 World Trade Center bombing, 9/11, Northeast blackout in 2003, the steam blessed in 2007, H1N1 in 2009 and who can forget super storm Sandy in 2012. When COVID-19 first hit, it was about initial risk containment and we immediately formed a steering committee to understand and address the evolving situation. And we were early in implementing that expanded cleaning system and protocol, identifying how to quickly isolate and sanitize areas exposed to COVID-19. We made sure that we were managing and disseminating information real time and that our tenants were fully informed, but also our employees while keeping the building fully operational. We took our in-house technology group; John Mathews, Jeff Kurkjian, A.J. and the rest of the gang with Brian Allicock to make sure that we were connected, zoomed in like a sniper's crosshair. Governor Cuomo's directive to restrict nonessential workers from reporting to the office was reflected in our building occupancy. As a result, we needed to make some very difficult decisions, but we held out for as long as we could because of the loyalty of the workers that Marc referenced and we scaled back accordingly. Our frontline people kept the buildings running safe, sanitized and clean. We're not only looking forward to ramping up operations as soon as this mandate is lifted, but we already, and I can assure you that the team has been manning, training, equipping, and as soon…

Thank you, Ed. There's no question about your passionate commitment to the task at hand and you've got a great team on it and we thank you for it. And the tenants are going to be better off for it. And now, it's time for us to look ahead. As you can imagine, we are completely reassessing our business plan for 2020 to recognize and adapt to the current situation and to be prepared to move decisively as conditions continue to evolve through late spring and beyond. Fortunately, the moves we made over the past four years now look prescient and put us in a position to come out of this crisis stronger than ever. By monetizing nearly $10 billion of real estate since 2016 de-leveraging our balance sheet with proceeds and buying back stock on an accretive basis, we've created a more streamlined company that’s narrowly focused on our very best Manhattan office assets. We couldn't have predicted the current moment, but we're comfortable with where we sit today with substantial cash and liquidity, generally long dated assets and liabilities and a stable base of credit tenants. On the tenancy and leasing front, we are very fortunate to have largely creditworthy office tenants and long-term rent roles. And accordingly, we did not experience significant delinquency or fallout on office collections in April. Having collected over 90% of our office rents, over 60% of our retail rents and we will exceed 86% of collections overall. Those are stats we are enormously proud of not only because of the tenant base that we built, knowing that they were built like we are to withstand times like this. But also, we've had conversations with every single tenant in the portfolio and everyone who can pay for all intents and purposes has, April…

Thanks, Marc. On the debt and preferred equity book, we received 98% of our scheduled interest payments in the first quarter with two positions representing approximately $25 million of book balance having not paid. Both the assets are retail assets where the tenants didn't pay rent. One of those interest payments is additionally backed by a debt service guarantee. We took some marks at the end of the fourth quarter and over the first quarter, partly attributed to CECL where we ran multiple different scenarios and based on percentage likelihood of each scenario, adjusted book balances. Those reserves may or may not come to pass, but it's important to note that we did take reserves through CECL against the two positions that did not pay in the first quarter that I just mentioned. There is obviously a lot of uncertainty surrounding rental payments over the next few months, and if that choppiness continues, it's possible that the rate of collections may temporarily fall below the level we achieved for the first quarter and not as in all downturns, some assets may end up in foreclosure. That's part of this business and an outcome that we are comfortable with that's the way we underwrite every position is to the worst outcome. Given that roughly 70% of our portfolio is comprised of loans secured by office properties and another 23% by residential properties, we wouldn't expect the level of non-payment to rise dramatically, and any rise in non-payment will most likely be short-lived. Additionally, we took reserves against assets that we anticipate selling in the second quarter based on management's best estimates of where the loans would price in today's market. Based on where we sit today, we hope to have a $100 million to $150 million or so of loan sales closed in the next four weeks and pricing may well exceed the levels we marked them to. We don't see any debt assets trading below their marks. There's been a lot of chatter in the market with respect to loan sales. People are obviously free to believe what they want of press reports but shareholders shouldn't confuse SL Green evaluating bids on multiple loans in our portfolio, with a mortgage REIT's must trade bid list in a forced sale due to repo debt margin calls. Across the entire DPE portfolio, we have $140 million of total debt against only first lien debt positions. And as we sit here today, we expect that balance to be down to $50 million or so within the next couple of weeks based upon a repayment we expect to come in that's already been committed by take-out lenders. If we're not in the market at least evaluating opportunities to optimize our portfolio or raising liquidity, our view is we're not doing our jobs. With that Matt, I'll turn it over to you to take us through earnings.

Thank you, Andrew. Before I get to guidance, I just want to touch on liquidity where an underpinning of our corporate credit profile has always been maintaining a sufficient amount of liquidity, both as a protective measure and when market conditions dictate that it's prudent to be opportunistic. In the current environment, cash is king and we have taken our desire for liquidity one step further by looking to increase our cash balances from the $580 million we had at quarter-end to at least $1 billion over the next 45 to 60 days. The most cash we have ever had by executing a solid plan that we have a high degree of confidence in. We actually call this the billion dollar plan. As the first step, we drew an additional $150 million off our credit facility in early April, bringing us to within $50 million of total capacity and putting our cash balance at $730 million. Drawing down the credit facility seems to be the norm these days, but that's actually a playbook out of the SL Green playbook I've heard back in the financial crisis and just protects us from any dislocation that may happen in the broader financial markets. That said, we always strive to keep our line balances close to zero as possible and we expect to pay down the facility with other cash sources in the near-term, including the pending financing of 220 East 42nd Street, which will generate the proceeds of about $0.5 billion. Also, on the financing front, we are moving ahead with our refinancing of 410 10th Avenue, given the incredible leasing success we have had there. That closing will not only repatriate about $25 million of cash to us, but it will also cover any future spend that would have come out…

Okay. Well, this was a little longer than usual. We had a lot to say, not only Matt's detail on the revised guidance but also sort of the state of the market as we see it, steps we've taken to reopen the portfolio to welcome back tenants, which I think is, is the most exciting thing we have to look forward to in May right now, it's just getting people back into the city. And I think the Governor and Mayor hopefully committed to doing that, if the trends keep going in the right direction for the next two to four weeks. So we want to open it up for questions. We're going to – yes, well, let's take two questions per, operator. We'll try, but – let's try and cut through it quickly. It seems there is a lot of people on the line, lot of questions. It's already quarter to three. So let's start out with two questions each, we'll see if we can cut through it. So I'll turn it over for questions.

Our first question comes from the line of Michael Lewis from SunTrust. Your question please.

Great, thank you. My first question, I wanted to ask a little more about the DPE bookings. The decision to sell some loans here presumably below par when you have some investments maturing anyway, you have some cash built up. So maybe just talk about the decision to do that and kind of the direct use of proceeds beyond growing the cash pellets?

Well, you know I think they break down into a couple of different categories. Some of the sales that we're doing are of senior positions where we're optimizing our retained yield. Some of the sales we're doing are just opportunistic where there are assets that we feel we want to trade out of and we have better use of the cash and then some of them are strictly for liquidity purposes. So it goes - it sort of cuts across those different categories. We have discussed with the Board a plan, as Matt said, to have a $1 billion plus of cash liquidity available to us and our unencumbered DPE positions are best source of shorter-term liquidity. So we have turned to that book and the market is going to mandate less than par, just based on required yields on some of the assets. Some of the assets we expect to clear very close to par.

Yes, that $1 billion of liquidity that Andrew references, you know it is - it's a measured number but it's also an arbitrary number. It's the number we think if we have that kind of liquidity in the bank with our liability structure and our asset structure, it makes us - is closest and penetrable as we can get. And that's where we want to be. Could it be $900 million? Sure, it could be $800 million. We're cash flow positive. So you can argue it will be a lot less than that. But with that, we feel like anything beyond $1 billion which we will raise and probably would be raising those moneys after the second half of the year, that's our sensitive capital. I mean, we will be in this market in the future with offensive capital after we have what we consider - what I would refer to as the impenetrable hard deck. And just recognize that we were obviously there with the closing of 220 East 42nd. We were there and more. So, all we're doing really is substituting different forms of capital for a sale that didn't go as planned, but we still have the asset and it's a great asset and its long-term lease and its credit tenants. So it's, I think it shows the testament to the program that even in this market, which is a tough market, we do have extraordinary liquidity in that debt book, which I don't think everybody can say. So I think it's a testament to New York City, kind of assets and kind of we underwrite. It's not to say there won't be some charges, there have been. And that's part of the business, but it's dwarfed as a measure of the revenues we generate and the other benefits we get in the program.

Thanks. For my second question, I wanted to ask about One Vanderbilt. How - this unprecedented situation, how that kind of impacts the timeline, how construction is progressing. I see you still expect certificate of occupancy in 3Q 2020. Is there anything to say on what the timeline looks like and maybe with the initial yields and whatever else you could say about how this impacts that project specifically?

Yes, on the construction, we were three months ahead of schedule that you probably know. And so this will eat into that time somewhat. We haven't fully given up on an August 4th. We have - there are people, we have a fairly robust crew on site right now, because remember, there is a lot of transit work that is with that and public improvements and other site and safety work that is being undertaken. We probably have 200 people plus on site and how - today and that will grow as the construction sites reopen in May. So we've lost some time. Some of that we can make up by going to multiple shifts starting in May, June and hopefully the City of New York will consider in the right locations, waiving some of the afterhours work rules. That's one of the things that we and a lot of others in the industry will be pushing for. I think a lot of the workers will waive premium time or substantially reduce premium time so as not to - to get people back working, working through shifts - by working in shifts you can keep distancing because you can allow them space, you don't have to be a 100% for one shift. You can be 50% for two or three shifts or even less. So there is some changes that are going to take place. There are opportunities to make up time. We still expect to finish ahead of schedule, whether it's, like I said, it's going to be August 4th or not, I think that's going to be a tough task. We're hopeful for August, hopefully not later than beginning of September. So, we're certainly not projecting more than a month or so of delay to account for what…

Yes, I'll add to the fact that pre-COVID, we had another seven deals that were in ongoing term sheet in the negotiation covering about 150,000 square feet. We've kept in touch with those tenants obviously, the larger ones of that group still are signaling that they want to reengage once they have clarity when everybody is back in the office. So, we closed these past two deals out in pretty quick order over the past 10 days, and the one other lease that we've got pending for about 27,000 square feet, we've had an ongoing series of meetings with them, video chats obviously, and that continues to move forward.

Thank you. Next question?

Thank you. Our next question comes from the line of Derek Johnston from Deutsche Bank. Your question please.

Hi everybody, good afternoon. I appreciate the strong liquidity position. However, what levers can you pull to raise further cash to reignite the buyback program, especially at this valuation and I do mean besides the DPE book? And I guess it's really part of the same question, but what are your thoughts on the capital recycling environment going forward?

Well, I think we'll look to JVs, most likely, and potentially asset sales. We're out in a very soft way with some different scenarios, trying to gauge the market right now. And obviously, most of the capital that's running around the market right now is sort of opportunistic capital or capital that's looking for distressed type situations. But we think, as in past cycles that will quickly turn to core buyers recognizing that they have a good opportunity to get into a market. This is the type of market where we bought, in the last cycle, 600 Lex and 125 Park, you know really strong assets at good pricing. So it- we've seen it turn quickly from sort of a distressed buyer environment to a more core, stable buyer environment and as those core stable buyers re-enter the market, they'll be interested in, in the type of assets we'll be offering.

Okay, great. And just a quick one for Matt. On the accounting and assumptions in place for the $11.2 million reserve set aside for DPE. Does this only relate to the loans you're looking to sell and what's the time period this reserve covers?

So, there are two components of that number that you referenced the $11 million-plus number. About $4 million of that is related to CECL. So CECL is implemented in two phases. One is a larger number that reflects your view as of December 31st and is recorded in the first quarter. That phase is the implementation, the initial implementation of the rule. And then you record any changes in that view through earnings each quarter. That's the incremental $4 million that we took. So we really thoroughly reviewed every position and beat them up pretty hard and took another $4 million charge for CECL. The other $6 million and change is for the sale positions. The $100 million-plus that we've talked about, we expect those to sell in the next couple of weeks.

Yes, those sales positions, by the way, I don't know if Andrew, if you'd made the point earlier. You probably did, they're credit-wise money good. You know these are - you know it's a shame because not all reserves are created equal and I guess we took about $10 million or so of reserves on trade assets, assets we intend to sell thereabouts?

This quarter - yes, well over the last six?

Last six, how much, six, six?

Yes, untraded.

You know and - that's cost of capital. Its cost of capital to get to where we want to be. Little bit of a penalty for not having closed the 220 deal. But none of the assets we're trading have credit issues and anything in the portfolio, we largely dealt with prior to COVID because you know we had taken - we have pruned a lot of the portfolio and I guess these CECL charge is hopefully taking care of. Whatever else is in there on kind of a statistical basis, so that's where we are right now in that portfolio and we will look at it as a source of continued liquidity for us if we want to monetize those assets and we have great places to deploy it into, as you mentioned, like our stock or otherwise.

Thanks guys.

Thank you. Our next question comes from the line of Alexander Goldfarb from Piper Sandler, your question please.

Yes, hi, good afternoon. Just a few questions here, and thank you. Can you just talk a little bit - you mentioned about the JV that you're thinking about for 1 Madison and I forgot the other property, but maybe you could just talk a little bit about what percent of the property that you're planning on doing joint venturing and specifically at 1 Madison? And then, as we think about value creation, yes, it would seem like you're better - you've created value at 1 Madison 100% and then JV-ing later as you did sort of with One Vanderbilt. So thoughts on selling more down at One Vanderbilt versus initial JV at 1 Madison or maybe it's that the JV initially is a small part of 1 Madison, therefore SL Green is keeping most of the value of the value upside?

Yes, a compound question and I'm going to hit 1 Madison first, 49.5% is what we're anticipating to sell there. So I don't know if there was a further question on 1 Madison beyond that. One Vanderbilt, no intentions this year to sell any additional percentage of that deal now. We're going to complete the lease up there, finish the construction and complete the lease-up. That would be something we explore for the future years. Beyond that, the rest of the question Andrew was on- was there a...

Yes Marc, it was if you're doing that much JV at 1 Madison, you guys create a lot of value at One Vanderbilt. So why give up half of 1 Madison on the value creation before you've even done it?

I got it. You know because that's - it's a good - by the way, we could have said the same thing on One Vanderbilt and it's a good question. It's really how we intended to structure the deal whereby contributing the deal as it sits and raising 49.5% we via upfront equity. We don't have to fund any incremental equity. I think that's right, either de minimis or no incremental equity on top of the construction loan that we're - that we intend to close on in the summer. So that's just how we conceive the deal. Right or wrong, I mean, yes, we are selling off upside in asset we think like One Vanderbilt has tremendous upside, but also, you got to remember, those dollars have been and will continue to go into the stock buyback program. I mean we're still committed to that program and - but we've always said we're only committed to it out-of-sale proceeds. Had 220 closed, we would have bought out of those proceeds. So that's still what we consider to be the best investment in our landscape. It's even putting aside the market at the moment. At today's prices, we think it's even more compelling obviously than where it was. So it's still - where our general direction is to create monetizations to redeploy into our own stock because we're just buying more of the best assets we own and that really fundamentally hasn't changed. We've just taken a pause.

Okay. And then the second question is, you gave rent collection for April. Is it your - do you think that May will be the same? Do you think it will be worse, better, just some thoughts that maybe nuanced around office versus street retail?

Well, I mean look, that's conjecture. I mean we hope it's the same, I guess we hope it's not worse because hopefully in May they'll be - there'll be movement toward a reopening. And I think just that sheer element of retailers getting - being able to get back into their locations and restaurants, being able to open and whatever else. If there is that much light on the horizon, then people who had to muscle through hopefully the worst of it in April will feel at least as good in May and see light at the end of the tunnel. I can't really give you a projection on that beyond that being our intention. I don't know - we're not modeling improvement or un-improvement. We're, I guess, thinking it will be roughly similar. The collections were very good, as I mentioned just about retail. I don't know that we have a breakdown between street retail and high street - regular retail, but the overall retail, I think it should end somewhere between 63% and 64%, in that range. We're over 60% today and there is still, I think, one or two tenants that have indicated that they're going to pay in whole or part before the month is over.

Thank you, Marc.

Thanks.

Thank you. And as a reminder, ladies and gentlemen, please limit yourself to two questions each. Our next question comes from the line of Emmanuel Korchman from Citi. Your question please.

Hey, thanks. Maybe to follow-up on Alex's question, the NOI projections, and I guess the deferral projections you guys have given. All those follow the guidelines that Marc presented where - with a partial reopening in May and then more fuller in June and July, is that the right way to think about it?

That's accurate.

Okay. And then, Andrew, are you and your team still underwriting new DPE deals where you might actually have an opportunity to lend against or own assets that others aren't looking at in this environment or is the DPE program in contraction, no new investment mode?

Yes. I think, as Matt said, we haven't modelled new investments over the course of the year, because the capital will likely be conserved as cash or deployed as Marc outlined in our offensive plan. That said, we have a lot of interested third party sources of capital that we manage on behalf of and that will keep us active in the investment market. David Schonbraun could give an overview of where he thinks some of the opportunities may lie and what kind of early, early indications he is you seeing of good opportunities out there, David?

Sure. Thanks, Andrew. Yes, I think our team is always focused on working and underwriting and making sure we see everything out there, whether or not the bias is to putting more money out or selling positions. We're always looking at things, but at the end of the day, it's just cost of capital, and where the best opportunities are. So we're always engaged in the market and seeing opportunities. I think right now some of the bridge stuff is - has a real gap just because of the mortgage rates weren't levered and some of the other specialty finance companies can put that money out, and then some of the mezz guys are on the sides and local player who knows all the buildings like we do has an advantage because if people aren't able to tour right now or can't travel to the extent people need to do something quickly, we have an advantage. We'll see how much or if we take advantage of it but that's definitely a position we have that no one else does.

Right, thanks guys.

Thank you. Our next question comes from the line of Jamie Feldman from Bank of America. Your question please.

Great, thank you. And I appreciate all the detail on the call. So you had switched to a monthly distribution rather than quarterly and you're talking about AFFO actually rising. So can you talk more about that decision and your visibility on the distribution going forward?

It was a question about dividend?

Yes.

Well, I mean, look, that's a board-level decision. So there's not much we can really add here. We did go monthly because we felt that for this period of time that we wanted to have very real-time visibility into collections as well as whatever kind of revised guidance we come out with. And you're right, we came out – because we didn't know where it was all going to come out at the end, we came out and we said, oh my God, your AFFO was up $20 million. And we didn't really sacrifice anything, to be honest. I mean, a lot of it's really just deferred leasing capital. So it's called the good news money. When we do the leasing, there'll be the capital. And if we defer that out, the AFFO went up, we deferred, a couple of projects here, but nothing that, in any way, were of an emergent nature or anything we had to deal with this year. So we feel like we're in a reasonably good position, but we think it's prudent to monitor this monthly. We'll have a conversation with the Board more frequently than usual now, it's on this monthly basis and come to a decision. But clearly, April for all the things it could have been, we did reasonably well.

Okay. And then have – how have discussions with some of your largest pending expirations changed in terms of likelihood of renewals? Or just maybe even across the market, in a downturn, obviously, people tend to stay in place a lot longer. Have any of the tenants have maybe – tenants who thought you might be moving out are now talking renewals? Or is it still too early? And I'm thinking specifically about News America later this year and advance in early 2021?

Yes. We'll recall that at 750 third, where Conde Nast, which is part of advance. All of that space previously has been sublet. And I think you're spot on, your inquiry is that as a result of the current circumstance, we've engaged a number of those subtenants, where previously we had expected them to vacate and are now in discussion with them about the potential of a good number of them staying for some significant pieces of space. And I think we'll probably see some of that across the portfolio, tenants that were thinking about consolidations or relocations. We have an enhanced chance of retaining them in the portfolio. And probably doing on shorter deals, two to five year type deals from the tenant's perspective, where they want to preserve their capital and to see where the world shakes out. But from our side of the table, with a 95% occupied portfolio, every tenant that we can renew and retain capital and cut those costs, is big news for us.

Thank you. Our next question comes from the line of Nick Yulico from Scotiabank. Your question please.

Thanks. I was just hoping to get a feel for how your cash same-store NOI guidance might be changing?

I could generically say lower, but I assume you want more detail than that, Nick. It is – as currently modeled, adjusting for the two things we adjust for lease termination income and the free rent at 1515 Broadway, we expect to be down between 1% and 2%.

Okay. That's helpful. And I guess maybe just a follow-up, some of the drivers that might be behind that in terms of how we should think about what occupancy at the end of the year, how much loss you're expecting this year? And then also, in terms of rents, your mark-to-market assumption, I'm assuming, is also lower. It's kind of hard to guess where market rents are, but any info on that would also be helpful. Thanks.

So I mean, part of the things you're getting into there, Nick, deal with some of our goals and objectives. I think we had 16 or 18 of them that we set out at the beginning of the year. And we're going to have to rereview those. We've did everything we could to come out with this updated guidance for this call and commend the team for basically doing four weeks – three months of works in four weeks. We have not yet updated the goals and objectives. In looking at them, I think we're still optimistic we can achieve about half of them. Others, like occupancy, we had out there aggressively 96 and change. I don't know that we'll be able to get there by year-end or it was possible. But I think we got to wait until the next call. Our goal is – our goal is to do revised goals and objectives in July, three months from now, and we have better visibility into that. And like I said, we're hopeful that half will hold and half will change, but I don't – we don't have those numbers exactly yet. But this is the type of platform where a stat like occupancy isn't going to change that much. Even in the worst of times, I don't know that we're ever below 92%, 92%. Although, Matt, you might have a better…

Yes, that’s right.

Insight into that. And we went into this downturn in a very healthy market from job growth perspective and supply and demand perspective. And so I think that's helping here because there was really very little go-space overlay. There was – just all the metrics for December, Jan and February are very, very good. So we're hopeful to still be able to come out of this thing over the summer and then start to rebuild and hopefully not lose much in the way of occupancy. But we'll have more on that in a few months.

Okay, appreciate that. Thanks.

Thank you. Our next question comes from the line of John Kim from BMO Capital Markets. Your question please.

Thank you. Just summarizing diesel accounting. So you assessed the entire DPE portfolio to fair market value at least once a quarter, and you can only write it down, but you can't write it up in following periods. Did I summarize that correctly?

Generically, yes. I mean, the CECL requirement – I mean even before CECL, we had to assess every position every quarter. What CECL requires is a much more robust process around it, much more analysis, introducing probabilities and stress tests and things like that. And we pushed on those really, really hard at the end of the year to take the majority of the hit upon implementation through equity in the first quarter. Then you do reassess every position on a quarterly basis, position by position but also market conditions. And so we stress them further in the first quarter to come up with the incremental $4 million charge or so that we took through earnings. Any charges on a go-forward basis are through earnings, but there is the chance that goes the other way too. So there are fluctuations in your thoughts around reserves that can cause you to reverse previously taken reserves. I'll also say even beyond CECL, if we sell a position because Andrew alluded to it, if we sell a position at a better price than where we marked it, we will reverse that reserve as well. So if in one of these loan positions, we execute at better than where we marked it, and there's a reasonable likelihood that we will, we would reverse that portion of the reserve.

Does CECL change your views on the size of the DP book? I know you're shrinking it this year already, but going forward? And also, your views on reporting a core FFO figure going forward?

So our view of DPE is separate aside from CECL. CECL is a rule that we and every other lender has to abide by, among other rules. That didn't influence our view of the size of the portfolio. The market we're in, the size of the company, the opportunities that are out there really dictate and our liquidity position, dictate the size of the book. As to reporting core FFO, we try to be very diligent about reporting FFO in accordance with NAREIT's rules and not try to create our own. We do put the information out there in our release to say, here are the things that are nonrecurring. So that people can derive their own FFO if they want to. And we call out the reserves that you can add those back because they are nonrecurring in nature. But as to presenting an unusual form of FFO, I don't know that that's the best practice.

Thank you.

Thank you. Our next question comes from the line of John Guinee from Stifel. Your question please.

Great. First, thank you very much for this much effort, particularly, Ed, nice job. Two quick questions. One is what you're thinking about the observatory at One Vandy these days? And then second, Andrew, when you – you had said that your DPE book was 98% collected. How much of that is tech-payment kind or how much of that is that of a reserve account? And how much of that is actually the property generating the cash to pay the debt service?

Well, on Ob deck, I'll just take that one. I guess, David will give you a chance to try and calculate that number if you have the resources to do that. On the Ob deck, John, I think it's going to be spectacular. What we're designing and will unveil this December, we've always kind of sort of said, not quite there yet, not quite there yet. This December, we will be able to share with you our plans for not just the observatory per se, but the entire experience front to back I think it will really find its place in the market of good objects throughout the city. It is – let’s say, the experience by its nature is, I think is very conducive to whatever people's feelings are going to be about in 2022 about distancing, because it is a large facility spread over three floors, column-free, tall ceilings, slab removed, so – and a lot of outdoor experience. So I think it's not a very congested experience by its design. It's a – it's intended to be almost what we call a like a borderless or boundary less experience and people will have the opportunity to wander, to experience and I think not to feel very compressed because we're only – I think our models are underwriting, as I've mentioned to you in the past, there is only two million people a year, which I think would put it at the low end of all Ob decks in terms of occupancy. That's not because we don't think it'll be populous. It's just because that's – the experience is not, we haven't designed it for a high volume close in proximity mass market experience. So, the launch of Ob deck is end of 2021. I don't think we project stabilization into our five-year bridge, you'll – seems like a long time ago, we did that five-year bridge, but back in December, the real numbers for Ob deck kick in, I think in 2024 or 2025. So I'm very hopeful that by then, this will not only fare well, but it will actually be the kind of – the kind of experience, almost like a form of escapism where everybody who has been cooped up and can't wait to go out and experience things on a destination basis that's other than, like I said earlier, your bedroom or your kitchen or wherever it is. I think this will play extremely well into that and we're still very optimistic. What was the other...

I think we got to come back to you. I don't want to give you a number that's not completely accurate, a breakdown between what comes from reserves, what…

And in the best…

What's pick and what's…

Especially want to make up, you know what I mean.

All right, John, we're going to have

We have a lot of funded reserves on the loan to pay interest. So is that – that we review as cash proceeds, not.

Right. So John, if somebody is put up as part of your closing equity reserves to pay interest, I mean, that's – we get our interest paid, it's just – they put the money up in advance. That's prudent on our part. And then we draw from the reserve. I don't know if that's pick or not, in your mind. But I think – let's just do this, do we know what's true pick – forget everything else, just what's paying the crew? Forget everything else. I can only think of like – okay. I don't think it's much, John, but we'll have to come back to you...

All right, thank you very much. Well done.

Thanks.

Thank you. Our next question comes from the line of Peter Abramowitz from Jefferies. Your question please.

Yes, my questions were answered actually. So, thank you.

Thanks Peter.

Thank you.

Thank you. Our next question comes from the line of Craig Mailman from KeyBanc Capital Markets. Your question please.

Thanks guys. Could you give a little bit more color on the NASA deal in terms of kind of dollars out the door? I think you guys said maybe you're going to have a JV partner there and maybe just timing.

Sure. I think we're planning on starting construction on that project in the fall and we plan to put a construction loan and a JV partner in place before we start building there and we've made significant progress on both of those fronts, which we expect to be successful in announcing both a construction loan and a JV partner in the next three to five months, I would say. So it's a build-to-suit for a large institution downtown and we don't expect to have a significant equity investment there. We expect really be building it primarily on behalf of third-party capital.

Okay, that's helpful. Then, I know this one maybe a little bit tough to answer. It's a little bit early here, but I guess, assuming as you guys were kind of trying to put our opportunistic dollars today, kind of, where would you try to underwrite market rents versus in-place rents and may be kind of break that out if it was an office or a retail asset?

Yes, I mean, I think we got to let – we got to let this market play out a little bit and see. I mean, I'm not – we are hopeful that that rents are going to hold because I think what you're going to see is just a period of stalemate. It's not going to be a period of rent decline. I think you're going to see people who have put deals on hold and will revisit, and Steve, you can add onto this. We'll revisit – we're hoping they all come back. You know that pipeline I gave you earlier, I just want to be clear, that 850,000 pipeline that was excluding 600,000 feet of additional pipeline that was – we would have told you two months ago we were going to make and has been put on hold not dead deals but hold. Now not all of that 600,000 will come back. But even if half of that 600,000 comes back or a fraction of it on top of the existing pipeline that would still support our business plan. I mean, maybe tenants are going to look for some additional concession on free rent that – Steve, you want to speak to that?

Well, let me – maybe it'll be helpful to add a little bit granularity to our pipeline. As we sit here today, we have 275,000 square feet of leases that are either out for execution or in active document negotiation. We've another 540,000 square feet of term sheets. Those are term sheets that we think have a reasonably high probability of converting over to leases. But then on the transactions that were delayed, as a result of COVID, we have 267,000 square feet of leases that were out in negotiation and another 340,000 square feet of term sheets. So another 600,000 square feet that make up the combination of all that is the $1.4 billion the markets was talking about. That delayed amount of deals, I don't think those requirements are going away, so that – we have a high degree of hope that those tenants reengage with us and it's a matter of time and when. And I think Marc's right on is that what – the feedback that we're getting from tenants right now is people are going to wait and see as far as where the market goes, but the immediate reaction is probably a push on the concession side, whether that's a few more months free rent or a little more in TI and not as much as a dramatic drop in face rents.

Great, thank you.

Thank you. Our next question comes from the line of Steve Sakwa from Evercore ISI. Your question please.

Thanks. Just a clarification on the collections numbers Marc that you provided. Are those pure cash numbers or does that in any way includes security deposits, I know one of your peers gave numbers kind of both ways.

That is pure cash, Steve.

Steve, that hurts. Come on, Steve.

I’m just clarifying, thank you.

You really got to ask that question. Cash rent.

Thank you. And then secondly, Steve, just as it relates to tenants and kind of their space needs as they think about coming back in and getting people into the buildings. How do you think they're thinking about sort of space? And I guess, secondly, on the rent side, you do so kind of mark-to-market or at least projections of market rent against expirations in the supplemental. And those numbers did come down quite a bit from the fourth quarter. So I'm just curious how you're thinking about those declines because it did seem that it was about a 10% or 15% change in the spreads in 2020 and 2021?

Yes. So let me take that one first. I think from our perspective on the rent side, that's the kind of the immediate quick shock to the rents. I don't think those are where we view the markets, certainly in the medium to long term. But as we come back to the office over the next quarter or two, we take the rents down just, I think, as a measure of conservatism. Not knowing where the world actually heads. And as far as space needs, it's an interesting conversation. There's a lot of discussion with tenants who are trying to figure out exactly how they're going to plan for their space. There's no doubt that the phenomenon of densification, which really started in 2011, had played itself out and that even before COVID, there were a lot of businesses that were starting to go the opposite direction where they were going to assign more square footage per employee than before. And I think now as a result of COVID, there's a consistent message that we're feeling – that we're getting back from tenants that they're going to come back, they're going to redesign spaces, they're going to allocate more square footage in order to provide distancing between employees. And so does that mean that tenants actually end up taking more space in the long run? Maybe yes, maybe no. It will probably be offset by some tenants that then don't do consolidations, but split their operations for diversity. So I think the story still needs to be written. But clearly, the phenomenon of densification, that's gone.

Great, thank you.

Thank you. Our next question comes from the line of Vikram Mahotra from Morgan Stanley. Your question please?

Thanks for taking the questions. I just wanted to clarify that on – more so on Street retail. You talked about just those numbers and expirations being conservative. But maybe just give us some specific color around your views on Street retail rents? And then especially the deferrals in Street retail, any sense of payback, the length of the deferral? Any more color on that would be helpful.

So what was the question? Street retail rent.

Street retail.

Directionally rents, we are most focused on getting the businesses back open, getting the customers back in stores. And so it would be premature to really speculate at all about the direction of rents. I mean, there's no retail pipeline right now. There's office pipeline, there's no retail pipeline. It's a business in transformation, and we have a lot of very strong tenants that are – we're hoping will reopen and customers will get back in their stores. So that's the primary focus right now in terms of market rent direction. The collections in retail were all over the spectrum in terms of most of our big credit tenants paid rent as is their obligation, some didn't and some – we have deals in place – deferral deals with several of them, some we do not. And the smaller tenants, interestingly, was sort of the same. We had many smaller tenants pay rent as per their leases. And then tenants that were negatively affected that we're working with, as Marc said, so to generalize in terms of how April collections went on the retail front.

I mean, retail was tenuous as we went into COVID. So I mean, we were – we thought – we felt like we had found a reasonable place. This certainly is not going to be helpful. Most of our retail portfolio is long-term credit lease. So what is interesting, sort of an interim commentary, we had good collections in April. And that doesn't include some of the tenants who didn't pay who really are credit. Otherwise, I mean, these numbers will be higher. And again, I just want to state that I think it's unfortunate that larger credit retail tenants, be it office or retail, don't step up to the plate, like almost everybody else in this portfolio and pay because all they're doing is making it harder for us to work with the smaller guys. It's not just us. I mean, it's everybody in this industry. So I mean, it's – the latitudes got to go to the small guys who are – who need it the most. And by and large, everyone did that. But as Andrew referenced, there were a couple small – count them on one hand or less, five fingers or less, who didn't see it that way, that rent is still money good and those collections would be higher because we will obtain – they will eventually have to step forward. And that's the way it should be because we need to focus whatever resources we have. We have our own obligations, as you know, and whatever resources we can focus to help the Street retail community who needs it the most, we're going to do that.

Thank you. Our next question comes from the line of Blaine Heck of Wells Fargo. Your question please.

Thanks for taking the question. So to me, it sounds like you guys aren't too broken up about not getting the 220 deal done, and you're expecting to close on the new financing in the near term. I guess, how should we think about that asset longer-term maybe when the investment sales market comes back, is that earmarked to be put back on the market? Or is there any sort of change in strategy at that asset?

Well yes I think it's because of the long-term nature of the leases there, it's a great JV asset coming out of sort of the tumult in the market. We do intend to put the financing in place, as Matt said. Obviously, preference would have been to close the deal that we contracted on, but the buyer didn't perform. And it's our job to adapt and react. And we did that in terms of lining up financing. And ultimately, we'll probably look to JV the asset.

Okay, that's helpful. And then just wanted to ask about WeWork in particular, and maybe you can comment on co-working in general. But obviously, it's been widely reported that WeWork may not pay rent at some asset. You guys have two leases with them. So are they current on rent? And is your expectation that they'll continue to pay rent for the remainder of the year?

I think they are current on two of their leases with us. And they're current on one and not current on the other and there's discussions ongoing. So I probably can't comment beyond that.

All right thanks.

Thank you. Our final question for today is a follow-up from the line of Emmanuel Korchman from Citi. Your question please.

Thank you. It's Michael Bilerman. Marc, I wanted to ask you sort of a big picture, more strategic question, taking off your comments about the future of office space needs from corporates. And I do agree with you. In a remote environment, it's really hard to have the team building, the collaboration, the creativity, the comradery. But the COVID-19 pandemic has basically forced a trial of work-from-home for every single office tenant that's out there. And I would imagine that there's a lot of Chairman, CEOs, Boards that will look at something financially and say, you know what, and I'm going to put aside the social distancing and the density part because we're going to – hopefully, we'll get over that. But a lot of – I would think a lot of corporates will say, let's see. So let's try more remote, let's use less office space and see how it goes and then react to see if they're not getting the right outcomes. So I guess what gives you the confidence that there's not going to be a bigger shift because we're going to start from a base of 100% of tenants that are working remote that a portion of them, I would assume, are going to try to do it more effectively going forward?

Well, look, part of it is my opinion, part of it is what I'm hearing from our tenant base. I mean we're talking to these guys and there is always someone who – yes, if people want to be at home, there is always – even before COVID there were people who want to work from home. I mean there are some people who would rather be home than be at work, that's not – whether that's going to be heightened now or not, we'll see. But we're hearing from our tenant base, most people are saying, this doesn't work. How do you do new business solicitations? I mean how do you – it's one thing to do internal meetings or a Friday Happy Hours amongst your employees, or may be having these virtual Happy Hours, or may be doing some other kinds of meetings with existing relationships. But the business itself is a personal, physical business. It has to be done more safely because people especially with COVID being as a bureau and it is. But I haven't heard anybody – I haven't heard anybody say it's preferable to be on a computer screen at home, than in the office. And all this technology, Michael it existed pre-COVID. This is not new technology. People had been doing video conferencing as we have and I'm sure you guys have for years and years. There is nothing new. Whatever I'm looking at right now is exactly what I've done 50 to 100 times previously and never liked it then and don't like it now. So, look, now everyone has been exposed to as opposed to some people and maybe there'll be some people who say well it works or maybe even preferable. But I think the combination of what we're going…

Right. I remember if it was – I don't know if it was this Investor Day or the one before, everything is blending in of your video on the densification calling the end of it, which totally makes sense.

Well, I was – you don't always have to be right for the right reasons, but Steve is again mounting rest in peace. I see him right now [Speech Overlap].

Well, let me – I'll add briefly to what Marc was saying is that, it's one other component of that that people aren't thinking about. There a lot of good companies do hoteling, the concept of having a 120 employees but only 100 seats that phenomenon, who is going to start to go away, such that every employee is going to want their own seat. I'm not going to want to share my seat with somebody else because everybody is going to have a heightened sense of cleanliness and that plus de-densification will add to these space allocation per employee as we go forward and help to offset any of the small amount of employees that work from home.

Clearly the element of being together and collaborating it makes, I think, we all want to get back to that point.

That's for sure. Michael. Well, thank you for the question. Thank you everybody. This was a little longer than usual, but it's certainly, I think was warranted and hopefully informational. But most importantly, hopefully everyone – stakeholders of this company come away with a feeling that we're doing our best under very difficult situations like everybody is around the city and country right now. I don't think anybody is having an easy time of it. And the best antiseptic to this would be getting back to work whenever that time comes and hopefully it comes soon. And then, hopefully with that, we begin – we begin normalization. And if that takes three months, six months, nine, twelve, eighteen whatever it is, with $1 billion hard deck, we are ready for it and hopefully beyond that, we'll be back to our usual position of being able to invest and take advantage of opportunities on behalf of shareholders. So thank you.

Thank you, ladies and gentlemen for your participation in today’s conference. This does conclude the program. You may now disconnect. Good day.