Good morning, and welcome to the Vornado Realty Trust Fourth Quarter 2020 Earnings Call. My name is Karen, I'll be your operator for today's call. This call is being recorded for replay purposes. All lines are in a listen-only mode. Our speakers will address your questions at the end of the presentation, during the question-and-answer session. [Operator Instructions] I will now turn the call over to Ms. Cathy Creswell, Director of Investor Relations. Please go ahead.

Thank you. Welcome to Vornado Realty Trust fourth quarter earnings call. Yesterday afternoon, we issued our fourth quarter earnings release and filed our annual report on Form 10-K with the Securities and Exchange Commission. These documents as well as our supplemental financial information package are available on our website, www.vno.com, under the Investor Relations section. In these documents and during today's call, we will discuss certain non-GAAP financial measures. Reconciliations of these measures to the most directly comparable GAAP measures are included in our earnings release, Form 10-K and financial supplement. Please be aware that statements made during this call may be deemed forward-looking statements, and actual results may differ materially from these statements due to a variety of risks, uncertainties and other factors. Please refer to our filings with the Securities and Exchange Commission, including our annual report on Form 10-K for the year ended December 31, 2020 for more information regarding these risks and uncertainties. The call may include time-sensitive information that may be accurate only as of today's date. The company does not undertake a duty to update any forward-looking statements. On the call today from management for our opening comments are Steven Roth, Chairman and Chief Executive Officer; and Michael Franco, President and Chief Financial Officer. Our senior team is present and available for questions. I will now turn the call over to Steven Roth.

Thank you, Cathy, and good morning, everyone. I hope all of you continue to be safe and healthy. Before Michael gets into the business review in the numbers, let me make a few comments. Notwithstanding that this is a new year, 2021 still feels a lot like 2020. The COVID pandemic remains a significant health risk, normal life continues to be disrupted, gatherings and travel are still restricted and office building occupancy remains quite low. But there is light at the end of this long tunnel. Scientists and pharmas around the world have worked at warp speed. And with the rollout of various vaccines expected to accelerate in the coming months, we expect New York to begin to rebound with office workers and tourists returning in the second half. While New York's recovery will take the time, the city remains a magnet for talent, as evidenced by leading companies renewing their leases, and making large new space commitments even during the pandemic. For all the talk about working from home, I continue to believe that our natural human social inclinations, and the pent-up demand to interact, gather and experience all the city has to offer will carry the day. When life returns to normalcy, the many positives of having employees working in the same space, together with their colleagues will become self-evident. In the end, I believe that working at home in one’s kitchen, alone, day after day, week after week is not a long-term proposition. We have a new administration in Washington, which is committed to push through significant additional stimulus, and New York will certainly get its fair share. These dollars and the potential to modify or partially reverse, [ph] if that actually were to happen, we'll greatly benefit in New York and other large cities. Despite 2020…

Thank you, Steve, and good morning, everyone. I too hope you're all safe and healthy. I'll first cover our financial results and end with a few comments on the leasing in capital markets. Fourth quarter FFO as adjusted was $0.66 per share, compared to $0.89 for last year's fourth quarter, a decrease of $0.23. This decrease is reconciled for you in our earnings release on Page 5, and then our financial supplement on Page 7. It was driven by a few items, roughly one half, which is $0.12 from our variable businesses still being offline, roughly 20%, which is $0.05 from taking Penn District space out of service, and the balance from the J.C. Penney lease rejection at Manhattan Mall and other tenant issues, offset by some interest savings. None of these items are new news and are right in line with our statements over the past couple of quarters. Furthermore, most of these are temporary and the income will return over time. On January 29, we issued a press release summarizing fourth quarter non-comparable items for both net income and FFO. The biggest item was a $236.3 million non-cash impairment loss, relating primarily to wholly-owned retail properties, as required by GAAP accounting. With respect to rent collections, in the fourth quarter rent collections excluding deferrals improved 200 basis points to 95%, driven by a significant pick up in retail collections. The breakdown as we collected 97% of office rents, and 88% of retail rents, excluding deferrals. January and February collections are running at the same level. While, the aggregate headlines same-store cash NOI numbers are negative on their face, our core New York office business actually was a positive 1.4%. When you blend in Chicago and San Francisco also, our office business overall was essentially flat and negative 0.4%.…

Thank you. We will now begin the question-and-answer session. [Operator Instructions] And we do have our first question from Manny Korchman from Citi.

Hey, good morning, everyone. Michael, you talked about your expirations in '21 and '22, I think you said 325,000 square feet at PENN1. How much of that is captured in the mark-to-market footnote that you provided there that goes from $81 to $75 to $85? And especially on the PENN1 piece, pre-pandemic you spoke to a lot higher of a roll up there. Are your roll up expectations still in line with your previous comments?

Let me take the second question first, and then I'll go after the first and Glen jump in here. I think our expectations remain the same, Manny. Our confidence in the product, as Steve referenced given what brokers received particularly in the experience center, they bring it to light as we continue to evolve the amenity package. We think even more so coming out of this right. This is what tenants want, work, live, play in that environment. And so our expectations remain the same for both PENN1 and PENN2. On the roll ups, so I think that that reflects that comment your question in terms of that 352,000 feet on PENN1. No difference in expectations and the roll ups. It's a mix of what rolls over a year-by-year in terms of that square footage, and what the range of rents is, what's a mix of space off the pull out, what the detail is, but it's the best guess in terms of what those particular spaces may roll over forward, but excluding PENN1. Glen, do you want to add anything?

Manny, it's Glen. I would tell you as it relates to the roll up at the building and we're being very careful, because we know the product we're delivering is going to be fantastic. And the reception in the market has been spectacular, even as we work through the pandemic. So we're not going to jump to deals if we don't like the deals as early as for our initial underwriting. And I will tell you, we have a ton of action on the building from a bunch of small tenants to tenants as large as 70,000, 80,000 feet. So we feel very good about where this is going and where the rents are going on this asset.

Thanks. And then going back to the mark -- I think in your remarks and release last night, you talked about a return to trade shows in 2021. How much confidence do you have on that and approximate timing? Is that at some point in '21 or enough to sort of make a difference to income?

Our calendar, currently, we start coming back with the trade shows in August. Our major show NeoCon comes back, we have scheduled for the first week of October. So we're reading for those events as we speak.

Thanks, everyone.

And we do have our next question from Steve Sakwa from Evercore.

Thanks. Good morning. Steve, I don't know if you can say much about the asset sales you brought to market last year at 1290 and 555. And just sort of the refinancing expectations. I realize, the sales market was challenged last year. But, I would have thought a refinancing of that would have been perhaps easier, just given the low leverage level. So, just any comments that you could sort of make on those assets and how you're sort of looking at those in 2021?

Sure. Hi, Steve. So first of all, I will tell you that I was disappointed in the reception of the part of buyers to those assets. We found that there are the buyers were in two groups. They were bottom fishers, which were not for us. And the conventional long-term Institutional Investors weren't tentative. They couldn't travel, they couldn't see the product. And so as a result, we weren't getting the kind of reception that I had anticipated. And so we did the appropriate thing, we took them off the market. These are great buildings that should and will command premium pricing and deserve premium pricing with respect to that. With respect to refinancing the buildings, that's basically a layup. They're 555 is extremely under leveraged, probably somewhere in the neighborhood of 25% of market value or even lower. And so, we are gearing up to refinance that now. It has not yet been decided as to how much we will refinance that building for, but refinancing that building is in process and will not be a problem at all.

Steve, 1290 doesn't mature later next year, right. So our plan would not be to refinance that yet anyway?

The takeaway is that we were not happy with the sale market reception. The refinancing of those buildings is in process, and will not be a problem at all.

Okay. And I guess my follow up, Michael, you sort of talked about a number of tenants in the market today, and maybe you or Glen could just sort of speak to, I guess what I'm really looking for is space planning, how companies are thinking about densities and particularly for new deals, which, I think give everybody a blank slate to think about their footprints. What are you seeing from tenants today that are looking at new space? How are they configuring it? What are the densities look like? And what does that portend for rollovers on other deals moving forward?

Yes. That's Glen's question.

Hey, Steve, it's Glen. How are you? The first thing I would tell you, we're seeing a very large uptick in our presentations to big tenants coming out of the woodwork lots for this year. We've had five different presentations for large headquarter tenants in the last two weeks. That's number one. So you're starting to see people come out and start to see things and the reception has been excellent on our PENN project than 350 Park, number one. Number two, as it relates to tenants plans, we've been reviewing that in a very focused way. We've seen no change to what tenants were doing pre-pandemic to what we see them doing now during the pandemic for future occupancy. So I do not see a change at all. I think the one thing people are focused on is product type, as we keep saying quarter to quarter, people are more and more focused on the best buildings, as relates to redevelopment or new builds. And most importantly, even more recently, is the landlord that they're going to marry with, as it relates to services, amenities, infrastructure, sustainability, and everything people care about as we work through this cycle. But, in terms of your specific questions, we've not seen the change in planning from a space design standpoint.

Steve, we were -- the history of wellness [ph] is that in the old days, it used to be 250 or even 300 square foot per employee. And then along came Adam Neumann at WeWork and he tried to jam it down to 60 square feet per capita, which was his marketing effort. That's why his base was cheaper, because he put more heads into the same amount of space. So both extremes are absurd, and so we see it settling in somewhere in between. And we don't see any major change as Glen said. We were on the phone yesterday with the senior team with [Indiscernible] who I think does probably more of this space design than anybody else. And they confirmed what Glen is seeing in the marketplace. So, people have already gone through space planning, which is less formal, less rigid than the old fashion, offices lighting the perimeter windows. So one thing that we are seeing is that there's a reluctance on the part of people sharing offices or desks with other people. And so, that's sort of in a funny way seems to indicate that the concept of hoteling and hot desks is not going to be as popular going forward. So on the whole, there's more activity and the space planning activity is pretty much the same as it was before all this started.

Great. Thanks.

And we do have our next question from Jamie Feldman from Bank of America.

Great. Thank you, and good morning. Steve, I want to go back to your comments about fiscal stimulus and how you think New York City might benefit. Can you just talk about, generally what you think could be coming and how that will impact the local economy? And then also, I mean, we've seen plans from the governor on Midtown West, and then even conversions of vacant office buildings to maybe residential. Just want to get your thoughts on kind of all those topics and how you think that might impact the market and Vornado going forward? Thank you.

Good morning, Jamie. How are you? So the world has changed radically. We now have a Biden White House, and we have a Chuck Schumer, majority leader in the Senate, who I remind you is Brooklyn born and bred, and a friend. And so, we believe that there is an enormous trend now towards fiscal stimulus, towards supporting obviously the people who have been harmed by the COVID pandemic, but also to keep the major cities in this country well lubricated with finance and money because they've been hurt enormously. So we are expecting lots of government assistance to be supported by the new political regimes, including the majority leader who is all powerful. So there's that. Now, the governor, who is the master builder of our generation has put football -- he loves pet and he considers it to be the economic and transportation center of the universe. And if you look at his PowerPoints and Slideshows in his last number of state of the state speeches, et cetera you can see them very vividly. So his program for the west side is lots of work in PENN, which are both aesthetic and logistical, including expanding the track capacity of PENN by acquiring and developing the 780 Block which is the block that continuous to the South. And that is expanding with four tracks I think it is. Also including the Gateway Tunnel. I'm corrected by my Head of Development that there are eight tracks, okay. How did they fit eight tracks in that space?

Side by side.

A challenge. So, I’ll have to go with Barry, because he’s got eight tracks, which has been enormous increase in the capacity of PENN. But Gateway Tunnel, we know about expanding the high line, building a new unbelievably more attrition with much -- with triple the capacity bus terminal et cetera, et cetera. So, that the West side of Manhattan will be getting an enormous increase in infrastructure dollars over time, and the major concentration on the part of the government. So, we’re pretty enthusiastic about all that, I would say very enthusiastic. Obviously, we think we have the bullseye location, so we could be more excited about all that. Now, the one unknown was the campaign promises that they would reverse the Trump Acts Bill. The major portion of which was reversing sold, or if not reversing sold, significantly modifying that. I mean, well, I think that’s very good for New York residents and the big city residents. I don’t think that’s as big a slam dunk as the stimulus dollars that will come in. But, when that to happen, I think that that would be another major boost for New York. If that doesn’t happen, New York will do just fine without it.

Great. Thank you for the thoughts. And then, how do you think about Vornado’s participation in expanding Midtown West? I know the port authority is on the Docket 2 for renovation. Do you see a lot more growth in your development pipeline or ability to get active in these projects?

The bus -- getting active in the -- look, we understand public private partnership. So we were the major private partner in the [Indiscernible] development program as you know. So, we’re pre-familiar with this, but very-very intimate with the government and the state teams that do that kinds of stuff. As I sit here right now, I don’t think the bus terminal is for us. I will remind you we have the better part of 10 million square feet of future development in our neighborhood across the street and down the block, and around the bed. So, we have our hand full with what we already own in terms of doing that. We will look at other opportunities as well. But right now, our plate is full, our growth potential is huge, and if something else comes along in our neighborhood, of course, we will look at it.

Okay. Thanks a lot.

By the way, I would add one last thing. I would expect and history shows this to be the fact that when it comes to the government seeking a private partner, we’re the first call. And we had been on all of these things, so the question is how aggressive are we at answering that call.

Do you see the Midtown West plan competing with, I guess you can develop more to the East somewhere to like Manhattan Mall. I mean, it sounds like this is farther West than North. How do you think about just the interplay between those two, like your current land baying versus where it sounds like governor wants to expand?

Well, I mean most of the stuffs that the government is working on is infrastructure. I mean, obviously on the 780 Block which is 30th Street to 31st Street adjacent to the station, the plan there is to build only 3 or 4 million feet on top of the new expanded eight track expansion. Now, obviously, those buildings are interesting, but they’re 15 years away. So, we’ll worry about them when the time comes. We believe in mass, we believe in gathering, we believe in clustering. So, the most -- I mean, for example what we’re doing with PENN 1 and PENN 2, we believe that having 4.5 million feet in one cluster interconnected, underground and over ground, where we can share amenities, we can move tenants around, we can provide space for everybody that needs expansion is an enormous, plus infinitely more valuable that’s four separate one million square foot building, which is spread around the neighborhood. So, we think the clustering in the neighborhood creates value for the entire neighborhood. So we're okay with somebody building a building on the river. That's okay with us.

Okay. Thanks again.

And we do have our next question from Michael Lewis from Truist Sec.

Thank you. I wanted to come back to Steve Sakwa’s question about the mortgages coming due. You also have 909 3rd in the market this year and then 770 Broadway next year. Should we just assume those are all straightforward re-financings? And then as far as 555 California and 1290, do you think the presence of your 30% partner hurt the reception of those assets in the market? And maybe that needs to be addressed to get full value or do you think that didn't have much to do with it?

This is a very interesting and controversial man, who has -- a lot of people who like him and a lot of people who don't. As I remember the count is 74 million people who like him and 81 people who don't. From our point of view, he is our partner. We bought these buildings in 2007. He was not a politician then, he was a business guy like us. His role in these buildings is totally passive and he's okay with that, and I'm delighted with that. And there are some people who is present affect negatively. That's true, okay. It is not a sufficient issue to be of any trouble to us at all.

Okay. Understood.

And there was something else in the question.

On your second part of Michael on it, on the other mortgages, I would say they're all straightforward re-financings, couple are well down the road right now, including 909. Again, as I referenced in my comments, given how much the markets have recovered, I think you'll see the rates come down on the assets that were rolling over near-term. And then we'll start focusing on the mark, right after that 770 matures next year. So all these are sort of normal course business given the strength of the markets. We're going to push a lot through the system here near-term.

What Michael just said is a point to emphasize and dwell on for a moment, okay. Interest rates are at lifetime lows. The markets are extremely receptive. The markets are clamoring for product and we have product. If not, each of us has our own opinion as to whether interest rates are staying where they are, we're going to go lower or go higher. And I don't think it's relevant to get into that right now. They're plenty low enough. So our mission is to enhance our balance sheet by refinancing at lower interest rates, and also terming out where we can, which is our objective. So this is the best time to finance our product, and actually probably in my career, and we're taking advantage of it in a very aggressive but measured way.

Thanks. And then for my second question, Steve, did a good job explaining the changes in the development yields for that portfolio. I just wanted to ask, since you have kind of sparked development yields in your supplemental, should we think of it more as a range around those yields given cost changed a little bit this time? Maybe it's the leasing environment next time. What do you think is the likely range of outcomes? Is it a narrow range around those spot yields, you feel comfortable with those? Or maybe it's a little wider given we're in a pretty uncertain environment right now?

Budgets are budgets, they're not locked in stone, they're not guaranteed, they're not actual numbers, they’re budgets. So they will move. They are -- at least we take these budget very seriously. We spend an awful lot of time on them. There are reams of data that support the four or five numbers that finally get published in our supplement. We have great confidence in the numbers that we have offered. But you have to remember they are budgets. We do not -- and we are on the conservative side of life on that. So we do not expect them to change. Obviously, they can change a little here and there. By the way, they have as much of an opportunity of changing positively than changing negatively. But they are our budgets, they are well flow through. We're confident in them, and it's a serious piece of business.

Okay. Thank you.

We do have our next question from Alexander Goldfarb from Piper Sandler.

Thank you. Good morning, Steve. Good morning, Michael. So just quick clarification, hopefully you don't think we have the question for this. But in your response to Michael Lewis's question on 555 and 1290, it sounds like we should take from your response to him that the re-financing of 555 and any normal course leasing that sort of stuff, that nothing has been impacted by the fallout from January 6th. So basically, your ability to refinance, lease, all that stuff is on track. There's nothing that we should concern ourselves with. I just wanted to confirm that in your response to Michael Lewis?

Your statement is a little bit too on the positive side. Obviously, we wish as every American wishes that January 6th hasn't happened, okay. So obviously, that's not a good thing. Obviously, the stuff that happened in the Senate last week is also same comment. Having said that, we have some great buildings, we have great tenants in the buildings, and those assets speak for themselves. This is business, business is business. We will run the buildings without any issue, we will finance the buildings without any issue, and everything will be fine. Okay.

Okay. So then it accounts for my first question, Steve. You guys have always promoted your environment.

By the way, Alex, there was a big article which started all this stuff in the Wall Street Journal, it was probably a couple of weeks ago, which I read. And it was an interesting article, much of which was actually news to me. Go ahead.

Given the past few years of fake news versus real news, we'll leave that for a separate discussion, Steve.

No, I'm not getting into that.

You guys have always been a leader in environmental, right? You've been energy efficient, all that stuff, right. And yet, in your latest release on the Penn development, the cost went up by $125 million part for Farley retail, part for sustainability. I'm a little bit more focused and puzzled by the sustainability part, and one, because you guys have always been doing that. So I'm sort of curious, what's driving this increase in cost? And is this something that investors now have to think about as far as impact to returns? And that what you guys were doing was already making the buildings quite green. And now there are mandates that are far in excess that you're not getting a payback on. I just want a bit more color on that, because that definitely jumped out from your updated schedule.

I would rephrase your question. Since you guys are such leaders in -- I'm rephrasing your question now for you. Since you guys are such leaders in sustainability, why wasn't these two items, the triple pane glazing and the electrification in the original budget to start with, okay? I have no real answer for that. We decided as we went along and planning the building that we wanted to put into triple pane. I think the triple pane glazing is the first in Rio, is it not? So it's the first of this price. By the way, it's all over Europe, it's almost mandatory in Europe. It is nowhere in the United States or in New York, we're the first ones to do it here. We spent a great deal of time. So by saying we're the first one to do it here, is sort of a radical thing to do. It's not done in New York construction and development. So we spent a great deal of time researching it, we mocked it up, we did everything and we decided that it was worth the uptick in the dollars, in the budget to bring the building into the 21st and 22nd century in terms of its glazing, so we did it. Electrification, it's actually pretty simple. All buildings are going to go all electric because of the carbon footprint in the future. So anyway, I think these things speak for themselves. And we're not boastful and we are leaders in sustainability, it's very important to us, we take pride in it. And the team that does our sustainability is acknowledged to be, I think probably the best team around. So you're right, but I don't want you to think that this was an afterthought or this was an add on or a mistake. This was our making sure that the buildings were up to totally up to snuff as good as they could be, as tenant-friendly as they could be, and as carbon-friendly as they could be.

Okay. And then the second question, Steve, or maybe for Michael is the all favorite. I know you guys don't do guidance and certainly the fun of covering VNO is the modeling aspect. But is the fourth quarter of this year is at a good run rate? Or are there some big move outs or roll downs that we should be thinking about impacting the 2021 numbers?

You're talking about Vornado overall or just the retail?

No, overall, Michael, overall. I mean obviously, there are a lot of moving parts, but just anything big that we should think about or you would say, hey, Alex, fourth quarter FFO 66 number ex-items that's probably a pretty good number to think about.

Look, I think, a couple of 30,000 foot comments. I think it's a decent number to use as a run rate. I will say, just keep in mind in terms of first quarter, first quarter '21 was down from '20, because first quarter '20 was a pre-COVID quarter. And so obviously, with the variable businesses being offline, the first quarter being the last quarter that rolls through. But on a run rate basis, I think your comment is an appropriate one.

Okay. Thank you.

Thank you. And we do have a next question from Anthony Paolone from JPMorgan.

Okay. Thank you. My first question relates to the retail joint venture in your $1.8 billion there. Can you talk about your plans to potentially redeem that this year? If I recall, I think there was like a two year tax matter that prompted you to maybe wait before you get that money back.

What that is, is that there's a two year blackout under the tax provisions. After the two years, we can refinance it. We can't redeem it or pay it off, we can refinance it, because if we turned it into liquidity, that would trigger the $1.8 billion tax that was deferred. So the preferred either stays there or we can sell it. As long as it stays there, or we can refinance it with debt, which is a different proposition. But there's nothing imminent in our plans to transact with respect to that preferred right now.

Okay. Is it debt market there for those types of assets today?

The debt market would be less hospitable than I would like it to be because of the turmoil in the retail industry, notwithstanding the fact that we have long-term leases on most of those assets. The mark-to-market on those properties is unfavorable, and the debt market -- I mean, we could do something in there, but the debt market is not as favorable as we would like it to be.

Okay. And then just a second quick one, hopefully. I think in prior years in the K you'd give a budget for the year ahead on CapEx for things like TIs, commissions, maintenance, CapEx. I may have missed it, but do you have that for '21?

Hang on, our finance team is scrambling.

It's in the 10-K. We can get you the page number.

That's fine. I may have missed it, then. Appreciate it.

Standby please, Anthony.

We'll tell you -- Tom will tell you what the page number is supplementarily.

That's fine. I'll find it. I just missed it. That's all.

And we do have our next question from John Kim from BMO Capital Markets.

Thanks. Good morning. There's been some news of sublease space in your portfolio, whether it's Yelp or theMART or Apple taking some of the Macy's space. Can you provide to us how much space in your portfolio is up for sublease, and preferably by market?

Hi, John, it’s Glen Weiss. Apple was actually a direct lease where we took Macy's out. So, that was a positive. As it relates to sublease space in the portfolio, the only the big one that, we're aware of is PWC, in 90 Park, thinking about doing something with that block. Otherwise, it's a bunch of smaller tenants who have been thinking about putting space on.

What's the term on the PWC block?

The PWC lease goes till 2033. So obviously, we have great credit on that lease long-term, so not a concern for us. Macy's is subleasing the remaining piece of their space lease trying to, which is the space we didn't -- that Apple did not take. But generally speaking, as it relates our portfolio, not a lot of major overhang is relates to that question.

Sublease space is interesting. If there's a great deal of sublease space in the market, with tenants who are willing to take some huge discounts significant discounts to clear the space that obviously affects the entire market. When you have sublease, when you have a tenant subleasing in one of our buildings, that's an interesting thing. Because if we have term then we as landlords have no risk. If it is shorter term, the marketability of the sublease space depends upon the new tenant coming in dealing with us, at which point we have an advantage. So, the sublease space at our building, generally speaking is an opportunity for us and advantage to us. But too much sublease and everybody else's buildings where the tenants are prepared to take much lower prices, actually distorts the market and hurts the market. We've been through this is every cycle, and define of recovery is when the sublease space starts to clear, or be taken back because the tenant decides they need the space rather than get rid of it. So, the sublease space is something you're right to watching, it's very important. And at times, it's an issue and a challenge, at times, it's an advantage and an opportunity.

As it relates to the mark, you asked about Beam and Yelp. So Beam announced move of their executive office to Manhattan. But that in no way shape or form will impact their sublease from Motorola, Google, theMART. They have 113,000 feet there. That's a long-term deal for them until '28. We've spoken to them recently, and they will remain in that space, and there's no plans to put that space on the market. As it relates to Yelp, they have about 130,000 feet, their lease has another three years remaining. And they have announced they're going to try to sublease about half that space. We'll see how successful they are or not. And to see if we can maybe take advantage of that situation as they go through their process, we'll see what happens.

Okay. Thanks for that. My second question is on your expectation for FFO this year, as a follow-up to Alex's question. What are you expecting as far as the timing of reopening of your variable businesses? Are you expecting to provide any more write-offs or deferrals and abatements next year? It didn't seem like it move that much as far as deferrals and abatements this past quarter. But if you could provide any color on some of these FFO items, that would be great.

You are talking about -- good morning, John. You are talking about tenant side on the latter part abatements and deferrals.

Yes.

Okay. I mean, like, I think in our view, we did a pretty good job of vetting what tenants were still at risk on the second or third quarter, third quarter in particular, in terms of really assessing after several months, based on discussions with tenants, either which ones would not be able to continue to pay or not make it. And so obviously, you saw the number come down dramatically in the fourth quarter. And we feel like we've generally dealt with it. Obviously, anything can still happen, but there's nothing we see on the horizon, that is going to give rise to instrumenting [ph] material there. So, that's the kind of on the tenant. On the variable businesses, we're generally not expecting a gear up until the second half of the year. I think it tracks, as Steve said, when do office workers come back, when the tourists come back, that's going to be third, fourth quarter. And so therefore, the garage income, BMS, which are directly related to tenant occupancies and the buildings flow from that. And so that's going to be in the latter part of the year. Signage same thing coming out when tourism comes back up. So, that's the second half of the year. And it's not all of a sudden the light switch is turned on and it comes back immediately. We expect it to take some time to ramp up.

And are there any more thoughts of providing FFO guidance, just given you're not providing your NAV estimate anymore?

That was the first question I got asked by a number of people when I assumed Joe's role, which is difficult shoes to fill. But I thought Joe did a phenomenal job in a lot of areas, and that's a job, that's a path we're going to continue. So we have no plans to provide guidance. Certainly, starting in the middle of COVID would not be the wisest thing. But no plans to do that.

Okay. Thank you.

And we do have our next question from Vikram Malhotra from Morgan Stanley.

Thanks for taking the question. Two question, just first on street retail. Wondering if you can maybe give us a bit more on the puts and takes. You referenced sort of 4Q as being a good run rate. But given the bumps in the portfolio and the lease up opportunities you referenced, I'm just sort of wondering, what sort of keeping the NOI flat for the year? And related to that, just any lumpy expirations we should know about over the next call it 12 to 18 months?

I think that, in 2021, as I said, I think it's a pretty good run rate. And remember, we have as we start coming later in the year, we have leases that we signed that are going to start kicking in, whether that's Fendi, 595 Madison, Sephora and Union Square and so forth. So you've got leases that are kicking in, you have some rent bumps and frankly not a lot of expiries this year. And I think even next year I would say nothing that’s that material. None of the real high street as we characterize 5th Avenue, Times Square rolls in 2021, '22. We had a couple issues of 1540 in terms of bankruptcies, so that's obviously already made its way through the numbers. So, that's why in terms of giving you that run rate number, and as you said, those rent steps, so there's enough things that are coming online that have built in contractual bumps, that even if there's a few rollouts, which again, are not material on any one particular property, minimal will stay flat before beginning to grow from the lease up of both the vacancy as well as the other under development properties like Farley, like PENN1 and then ultimately PENN2.

Okay, got it. And then just a bigger picture question, maybe for Steven and you might address this in your annual letter. But if you could give us a sense of how you're thinking about bigger picture strategic moves, whether it's spin-offs or buybacks or bigger JVs or anything like that? Just given where we are, I know still in the pandemic, but given all the growth drivers you've outlined on a multi-year basis for both retail and office, just wondering how you're thinking about bigger sort of strategic moves.

We have nothing to announce or talk about that now. All addressed that in my letter. Clearly, we have talked about potentially separating the PENN district. I think last year I said perhaps the tracking stock that's still on the table. So there's other things that we're thinking about, but we have nothing to talk about right now.

Okay. Thanks.

And we have no further questions at this time. I will now turn the call over to CEO, Steve Roth.

Thanks, everybody. We appreciate everybody joining us this morning. Please stay safe and healthy. Our first quarter 2021 earnings call will be on Tuesday, May 4th. We will see you then if not before. Thanks very much.

Thank you, ladies and gentlemen. This concludes today's conference. Thank you for your participation. You may now disconnect.