Good morning and welcome to the Vornado Realty Trust Fourth Quarter 2023 Earnings Call. My name is Andrea and I will be your operator for today's call. This call is being recorded for replay purposes. [Operator Instructions] I will now turn the call over to Mr. Steve Borenstein, Senior President and Corporate Counsel. Please go ahead.

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 packages 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 can 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, 2023, 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 also present and available for questions. I will now turn the call over to Stephen Roth.

Thank you, Steve and good morning, everyone. We ended the year on a high note with a good fourth quarter. The quarter and the year were right on target. Although as expected, our results were negatively affected by the dramatic increase in interest rates. This will carry through next year but I expect will reverse as interest rates receive. It's important to note that our business has continued to perform well. Michael will review the quarter and the year with you in a moment. This year, our New York City office leasing team won the gold medal. In the fourth quarter, we leased 840,000 square feet. For the full year, we leased 2.1 million square feet. Average bidding rents for the quarter and the year were record-breaking at $100 and $99 per square foot, respectively. In more gold medal stuff for the year, we leased 1.2 million square feet at over $100 a square foot rents. The office leasing market is on the foothills of recovery but the capital markets still remain challenged and are even tightening -- and even tightening slightly as we speak. Foreclosures and givebacks are still in front of us and therefore, so is the opportunity. As Michael and I have said on the last few calls, retail in New York City has bottomed and is recovering rapidly. While rents have a way to go to reach peak pricing of 5 years ago, we feel very good about the activity level and strength of the retail recovery. And there's more big retail news. In 2 blockbuster deals announced in December, major global luxury retailer's product at time block front Upper Fifth Avenue properties for their own use as stores. One deal was $835 million and the other was $963 million. So in round numbers, call it…

Thank you, Steve and good morning, everyone. Though 2023 was a challenging year, our core of retail businesses proved to be resilient. Our overall New York business same-store cash NOI and was up a healthy 2.8% for the year and was up 2% in the fourth quarter compared to last year. Comparable FFO as adjusted was $2.61 per share for the year, down $0.54 from 2022 and largely due to increased interest expense which is in line with the expectations that we previously communicated. Fourth quarter comparable FFO as adjusted was $0.63 per share compared to $0.72 per share for last year's fourth quarter, a decrease of $0.09. Overall, the core business was flat and the entire decrease in the quarter was driven by increased G&A and lower FFO from sold properties. We have provided a quarter-over-quarter bridge in our earnings release and in our financial supplement. We recorded $73 million of noncash impairment charges during the fourth quarter, primarily related to joint venture assets that we intend to exit in the next few years. It should be noted that in accordance with NAREIT's FFO definition, this impairment charge is not included in FFO. Now turning to 2024. While forecasting remains challenging in the current economic environment, we expect our 2024 comparable FFO to continue to be impacted by higher interest rates and be down from 2023 which already seems to be in the market. We project a roughly $0.30 impact from higher net interest expense due to extending hedges at higher rates on our variable debt. Additionally, there will be a ding to earnings as we turn over certain spaces. Primarily at 1290 Avenue of the Americas, 770 Broadway and 280 Park Avenue. This is temporary as we have already leased up a good chunk of this space but…

[Operator Instructions] And our first question comes from Steve Sakwa of Evercore ISI.

I guess first question for Michael or maybe Glen, just kind of on that, I guess, pipeline, the 2 million square feet that you talked about, could you maybe tell us a little bit how much of that is for kind of the existing portfolio, how much of that is for the development such as PENN 2 and in that discussion, can you just talk about the upcoming expirations in '24? Are there any large known move-outs this year that you might know about that you could share with us?

Steve, it's Glen. So of the pipeline that we mentioned in the opening remarks, there is a good spread in there, including PENN1 and PENN2. So activity continues to strengthen at both properties. The reception at PENN 2 has been better than excellent tour volume is off the charts. Everyone thinks this thing is, wow, nothing they've ever seen. So the pipeline does include activity at both PENN 2 and PENN 1. As it relates to the bulge in '24 -- the expirations that we were facing, we've attacked, I think, very well thus far, at 1290, we've already leased more than 50% of the space that was expiring in '24 between better and equitable. At 280 Park, we released over 200,000 feet of the 275,000 feet expiring 24 and '25 and put away PJT which was expiring in '26. 770 Broadway, we continue to be in the market with that building, of course, is more of a big tech, big media building but we expect that building to perform as we move along here, given its great location and great bones.

Just a quick follow-up. Are you saying 770, does that have a meta expiration that?

It does. It is a matter of expiration of 275,000 feet in June of this year.

At risk, Meta [ph].

Yes. So, after that expiration, Steve, we'll have another 500,000 feet long term in the building.

Okay, great. And then just on the second question, I noticed that you pushed out the stabilization of PENN 2 by year which certainly makes sense just given the challenging market today but you, guys, also kept the -- I guess you kept the yield unchanged. So just can you kind of help us think through that? And I guess, from an accounting perspective, if leasing doesn't occur this year somewhat soon. Does that begin to create a potential earnings drag in '25 just from the lack of ability to continue to capitalize costs on that project.

Steve, it's Michael. The answer with respect to stabilization is that we did push it out to '26. It's taken a little longer to get going on take-up there. But as Glen just referenced the reaction as it's gotten to delivery here has been outstanding. So we expect that to pick up. But that being said, we're trying to be realistic as well and so we pushed it out. The yield is based on the $750 million [ph] cost does not include carry. So that's based NOI of the original cost. So that's a simple math for you. Trade [ph] drag beyond '25. If it's not done, I guess, potentially but we feel good about the pipeline and what we have baked in right now.

The next question comes from Michael Griffin of Citi.

Steve, I know in your opening remarks, you talked about the stressed opportunities you're seeing out there in the market. Can you maybe quantify kind of what those opportunities could be? And when you look at kind of capital allocation priorities, would it make sense to take advantage of those maybe relative to buying back your stock or starting new developments?

There are 3 opportunities, buying back our stock is the first one or usage of capital allocation. The second is paying off debt and deleveraging a little bit. And the third is offensively acquiring new assets. We are only interested in acquiring new assets at distressed prices. And I think as I've said, the foreclosures and the givebacks have not really has accelerated was the opportunities are still in front of us. I don't have any comments as to what we might do. But I think our number one priority is the debt that we need to -- the debt expiries. And then after that, we go on the assets. The stock, we will react opportunistically to the stock price over time.

Great. And then, I was wondering if you could comment on the recent news about a rent reduction from a tenant at 650 Madison. I know you only own 20% of this building but is there a worry that we should extrapolate this in terms of kind of future rent roll and maybe a sign of things to come from a leasing and rent perspective?

The interesting thing is some of the industry papers they always get it right. But in this case, they got dead row [ph]. The facts are that the $60 number was a net number. So if you gross it up, it's about $100 a foot. It's telling me it's a little less than $100 a foot but -- so it's in the low $90s, I guess.

The next question comes from Camille Bonnel of Bank of America.

Can you talk a bit more to the retention levels of the overall portfolio in 2023? How did it track versus your expectations? And with the lack of new supply on the horizon, do you think this will pick up in '24?

It's Glen. Our retention rate was strong. As I mentioned, the leasing that we've gotten done, the renewals that thing went better than we originally had thought the beginning of '23. And in our pipeline that we referenced, we have very good activity on forward lease expirations, we're definitely finding that CEOs, the decision makers of these tenants were expiring forward are now coming to us earlier than they have been over the past few years because there's less and less quality blocks of space available to them. So I would say definitively, the renewal program is stronger than it had been. We're in very good talks with many of our tenants going forward and I think it's showing in our leasing activity numbers, especially with the volume we had during '23 and what we're now seeing in '24 already.

You make a good point. I think you said with the lack of supply. So the dynamics which are going to cause the office market to get very, very healthy, pretty soon, you can't build anything in this capital market. So there will be no new supply coming on stream. The supply of buildings that were built in the last cycle over the last number of years, that base, it will be eaten up. And the next trend is that tenants seem to want high-quality buildings which are either brand new or buildings which have been completely retrofitted which is -- and so the older buildings and I think I said the stock of those are somewhere around 100 million to 150 million square feet. Those are just absolutely an irrelevant and with a buffery [ph]. So what we're dealing with is not 200 million -- 400 million [ph] square foot marketplace we're dealing with something which is somewhere in the high 200 million which is a totally different supply-demand equation.

Appreciate the color bar. And given retail seems to be a bit of a bright spot in your portfolio, can you also talk about how your leasing pipeline is looking for that side of the business?

Sure. I appreciate you recognizing the retail is a bright spot. I think it feels like investors wrote it off and with everything that's happened in the marketplace forgotten that we still own the most and the highest quality retail in New York City, as Steve alluded to in his opening remarks. So these are scarce propria assets. I think the value is being recognized, we've talked about the last couple of quarters and it continues our leasing pipeline. We got activity across the board, really on all our spaces where there's vacancy or rollover occurring we have tenant activity, in some cases, multiple tenants for those spaces. And rents are clearly rebounding. So I would just sort of say stay tuned. We're optimistic in terms of what's coming down the pipe based on what we're working on right now.

There is definitely a finite supply of the highest quality retail space which is what the marketplace wants. And then I hope you notice I have a new financial metric for retail which is called half block price. And we got a lot of half blocks in the best place.

I appreciate that. And just finally, on the G&A side, you've managed to control those costs quite well since the pandemic but it did pick up last year due to some additional stock expense. Is this a reoccurring event going forward? And are there any key considerations for '24 that will keep your G&A at the current or higher levels? Just for instance, less capitalized interest from your development program now that PENN 1 is out of the pool?

No, capital will be comparable. G&A, some of that will roll off given that was a onetime event. But I think what you're referencing generally is the compensation plans put in place which we felt important to retain our talent in a difficult environment. And so we implemented those one in June, heavily tied to entirely tied to stock performance over the next 3, 4 years. And the shareholders do quite well, then the employees will do quite well. So that expense was elevated in '23. And that will start to, I think, normalize as we get into this year.

How many years are we writing off the expense for the comp land? So it's 4 years, you were accelerated. So say again, you were accelerated. So the expense we're writing of the equity comp plan that we issued in June is over a 4-year period. So the G&A will benefit enormously shortly as that rolls off. And I think I said in my remarks, you climb the mountain and then you go to the other side of the mountain. So the rise in interest rates had penalized our earnings actually pretty substantially. That is going to reverse somewhere as the government begins to reduce which they will. And then similarly, well, I guess that's the big -- but those are the 2 -- that's the big thing. Now similarly, Michael said that our earnings were going to be hit or dinged, I think, was his word, by turnover independents from the bulls and expiry lease entry. Once again, those spaces will fill up, income will come on board. So these are temporary reductions in our earnings which will absolutely reverse.

The next question comes from John Kim of BMO.

Given all your commentary on street retail and how it's recovered, the pricing has been very strong. Are you going to be looking to sell into this strength? Or do you think market rents are going to improve? Or is this really just telling us to update or not estimates?

Hi, John. Well, the first thing is we're enjoying the bounce back from the retail. I mean, retail has a target on its back threatened by e-commerce, et cetera. And that is all evaporated and now retailers become the vote. We believe that the asset prices of the assets that we own has decreased dramatically from the bottom. And we may take advantage of those prices by selling assets for year-to-year every once in a while. We've already sold a chunk of assets that we really thought were not part of our core. So we've sold some, we may well sell some more and we're absolutely convinced that rents are going to rise where they rise to the peak pricing that they were 5 years ago? Probably not but they're certainly going to rise from here.

Okay. Do you think you'll get the same pricing you got originally when you established that joint venture? In other words, pricing and assets reached a certain level.

We're delighted with the pricing that we were able to achieve in a large joint venture. We're not going to speculate on what the pricing will be.

John, it's a speculation. I think if you look at the pricing that product in sharing paid. And Steve talked about the half blocks. And you analyze what our portfolio could be worth, then it's not a stretch to say that we're back at those levels or get back to those levels, right? Now and who knows over time. But I think what you're seeing is, I think the most important thing is you have two of the most important retailers in the world who are saying Fifth Avenue is critically important to us. We want to be there forever. We are prepared to pay a meaningful price to be there. And I think the history of these things is the animal spirits get going. You don't think that other retailers are behind them saying, maybe we need to make sure we have a place on fifth and secure our position. So I don't think it's a stretch to think that these aren't the last two transactions that occur on fit.

And Michael, you mentioned an impairment that you've taken this quarter ready to joint venture assets you're looking to exit. Is it this retail joint venture that you're discussing? Or there other assets? And if so which ones are they?

Yes, not the retail. Retail, the worst is past us as we've said. Now these were just a handful of smaller -- really -- all office assets they're in joint venture, the accounting treatment is you, guys, should know well by now, given the [indiscernible] accounting treatment, the impairment methodology is much different from joint ventures than for wholly owned assets and this is a handful of assets that we intend to exit over the next 2 to 3 years and that results in a different accounting approach and thus the impairment. It's an accounting connection with the ultimate proceeds will be realized TBD. But again, it relates to a handful of smaller assets.

But there is no doubt that in this cycle, values have fallen. So when interest rates go from 3.5% to 8% that has an enormous effect on value. And so therefore, I'm very pleased that the impairments were as small as they were actually.

And just to confirm, this does not include 1290 or 555 Cal?

That's correct. Thank you.

The next question comes from Dylan Burzinski of Green Street.

Okay. Just 2 quick ones on occupancy for both the office and retail side of things. So it sounds like for New York office, that occupancy should bottom throughout 2024. And as you guys have already leased up some of the move-outs that it should see a pretty swift recovery as we look out in 2025 and beyond? Is that sort of a fair characterization?

It's Glen. I think that's fair. I think you'll see it dip over the coming quarters based on what we talked about earlier. And based on the pipeline, we'll come right back up. I think it's fair would you characterize it.

Yes, probably flattish for '24 overall.

Just the one in -- just a word about occupancy. So the market occupancy is in the high teens. So our occupancy is, give or take, around 90%; other is out in 90% [ph] if you look back over our history, our normal occupancy is a hair over 95%, 96% they call it in -- the difference between 96% and 100% is kind of like structural vacancy, you never get to 100% on a large over 20 million square foot portfolio. So our occupancy is really the difference between our occupancy is really the difference between 96% and 90% [ph], let's say, 6% -- which we think is -- we can do better, we will do better but we think that's pretty good performance in a soft market. Now the next thing is that when we ramped up the space as the markets revert to normal, from 90% to 96%, that's a very significant increase in our earnings. So we have that in front of us for sure.

Great. And I think that kind of sort of leads into my next question is on the retail side of things. As we look at the portfolio today, I think in your disclosure, you, guys, say occupancies high 70s, pre-COVID you were mid-90s. I guess just how do we think about the recovery there given some of the comments that you, guys, laid out regarding the leasing pipeline?

Well, the retail occupancy is really sort of an anomaly. It includes the Manhattan Mall, JCPenney who made a couple of years ago. And that's 11 points of occupancy. Is that right? And what's the next what's the second one?

Yes, partly the retail there.

And then finally, we have slow billing on the Ninth Avenue saw so between those two, we're somewhere in the probably mid-80s.

The next question comes from Vikram Malhotra of Mizuho.

Just I wanted to just go back to your comment about FFO troughing in '24. So just 2 clarifications to what you've said first was The Facebook lease 770, is it -- was it clear that the 200-or-so square foot expiring there a move out but then the rest is there long term, number one? And number two, could we just roughly quantify the move-outs you mentioned, what is the FFO impact this year to that?

On the first question, the remaining meta 500,000 feet is long term. That's correct.

Right. So the 200,000 [ph] is just one component this year. And the remainder, Vikram but we don't give guidance, right? There's a number of ins and outs, Yes, you can just quantify the specific 3 situations we mentioned but there's other things that are going on as well. So I don't want to isolate and say on these 3, this is the impact because that doesn't give the full picture. Net-net, we expect it to be negative how big we have to see what transpires across the whole portfolio.

And so I guess just a second question to clarify. You're basically saying with the move outs with the interest rate impact, et cetera, ins and outs. Therefore, we'll go occupancy will dip. You're assuming the lease rate will eventually come back is what I'm assuming you're referring to and then the impact of all that leasing will help '25 recover FFO, right? Is that fair? Is any other big moving piece to that equation?

No, I think that's fair. Obviously, look, as we lease up Penn which in some of the other vacancy that Steve mentioned, not just natural turnover, it's going to power that as well. But I think your general comment is accurate.

I agree it is accurate. So to summarize. Interest rates have gone up and have been painful. They will go down. They're not going to go down all the way to zero but they will go down. And so that's only to increase our earnings from here. Our occupancy is going to climb from, say, 90% to whatever. And so that's going to increase our earnings. And then the big thing is over the next 2 years, to Penn will rent the income from that will come online. Now that's probably over $100 million. So these are fairly substantial numbers. But so overall, you're 100% correct. Thank you.

Okay, great. And then, Steve, just last one. You mentioned external growth opportunities at some point, obviously paying delevering. I'm assuming FFO growth is important. But so if you look to maybe as the Board and yourself, we look to award executive LTIPs going forward. What are maybe 1 or 2 of the top metrics that could be different the next 5 years versus the last 5 years in terms of gauging those LTIP awards.

I don't know how to answer that but we don't give guidance for the next quarter and it's very difficult to predict what's going to happen over the next 5 years. But a couple -- talk around that very sophisticated question, Vikram. We are a New York-centric company. I don't imagine that we will open up a new beach in where we don't have the same kind of depth of experience, knowledge and franchise that we have. So basically, what New York company, my guess is, that's something that I'm not contemplating comes up, we will stay a New York company. Now we opened up a beachhead in Washington some years ago, spun that off into a separate company. which I think is a terrific opportunity. And then we had a large northeastern shopping center company which we also -- so we have experience with different geographies. But my guess is that the main company will continue to be New York-centric. The likelihood is we will continue to be a large aggressive office company. But I think I've said this before, we will not make acquisitions of conventional office at full pricing. We will only be a buyer at -- I don't want to call it distress, if that's the right word, Michael. Okay, at distressed prices for office building. And we will only buy the finest of building. We have some residential. I'd like to do a little bit more of that. And then what we will develop in the Penn District is an extraordinarily important part of our company and maybe arguably the most important development in the country as we go forward. That you can't build anything in district today because of the frozen capital markets. You cannot do it the math doesn't work. But as that begins, we will consider residential building and developing residential in that marketplace and we might even sell a piece of it, land through a residential developer. So we can't predict what's going ahead to happen. In 5 years, we will be New York-centric. We will be minor and office company and the Penn District will be really important 5 years from now.

The next question comes from Alexander Goldfarb of Piper Sandler.

Good morning, Steve and Michael. Steve, just talking about the comp plan that you guys put in place around 350 Park at the year-end. Obviously, in the middle of last year, the stocks were on their back and you guys revised your comp plan understandably just given how the stock was depressed and I think we all understood that. At the end of the year, though, the 350 comp plan definitely surprised and especially that shareholders have to wait until the end of this year to figure out their dividend for 2024, the sub -- the 350 suburb side. So can you just walk through how we should think about that comp plan for a development project that doesn't deliver for another decade while you're talking about earnings still going down this year and shareholders having to wait another year for the dividend. Just want to understand that, especially in light of the midyear update that you, guys, did for the senior executives and upper generation last summer.

Sure. Alex. The -- let me go backwards first. Your comment about the dividend. We have had an enormous number of incomings from shareholders, analysts, et cetera, an industry, Peter [ph], saying what we did with the dividend was correct. And to continue to pay, by the way, we will rightsize the dividend but they continue to pay an overlay of dividend, et cetera, this capital markets is just not the most efficient use of capital. So you seem to be on the other than that, I can tell you that most of your friends and peers are, I think that what we did was the correct or [indiscernible] now I knew some of how we would have varied. So now that's going [ph].

Clarify I was there [ph].

Well, I'm not going to get into that. Now let's talk about the development fee comp plan. So this is something that we've been thinking about a long time. So the first thing is its objective is retention, reward to increase automation and to our most important employees. Retention, reward, motivation and in fit [ph]. So the first thing is that anything that is paying out on that comp plan comes from joint venture development projects. Now we don't do a lot of those. It is probably in my memory, the first one. We did -- we did 220, 100%. So we don't do -- and we own the Penn District 100% so this doesn't come into being until there is a joint venture partner that pays a development fee. Now I talked about incentives and motivation. We think that it's retention, shoulder to shoulder with our shareholders that we do this kind of investing. And we think it's also a shoulder to shoulder with our shareholders that we bring in outside third-party capital to us which has become most of our peers in the industry are using outside capital. We haven't done that in the past. So we want to do that in the future. So that's the beginning of it. By the way, it's a very small plan. We don't expect it to be substantial in any way. And as we look at it and as we review, our senior management compensation and even down the line, we find that our compensation is lower than almost all of our peers. So this is a way to have performance-based comp, a small amount -- a small amount, by the way. And this is other than stock-based comp because we can't control the stock price. But we can't control our performance in joint ventures. It's only payable out of third-party development fees, not development fees that Vornado would be paying. And we think it's highly appropriate. We probably made a mistake. We did a good job of socializing the June comp plan. We sort of didn't do it with this development top plan because we thought it was very small, we thought shareholders would get it. And frankly, I made a mistake. We should have -- to our shareholder base what we were going to do. I myself have -- hang on, I, myself, I'm extremely unhappy to get any negative comments about that. And -- but there it is. We think it's right. We think it's a good way of comping our people. We don't -- I think our people are underpaid, certainly at the highest level and at the highest level. And by the way, doing a 2 million square foot building in New York City is backbreaking work. It's nice since weekends, it's backbreaking work. And we think that the team deserves it.

Steve but to that point, if it's a small amount, it would seem like something that's just part of the annual comp committee, like, hey, you, guys, did a great job as part of your bonus for your 2023 or 2024. We're rewarding. So if it's a small number, it doesn't seem like that much of an incremental incentive. And two, it just seems like ordinary course that management is expected to do to drive value for shareholders and would be part of their regular course compensation. It's not clear why it would be a stand-alone.

Obviously, I don't want to agree with you. But this is -- I would like to agree with you. I would like you to agree with me but I'd like you to agree with me rather than me agree with you. But anyway, this land is paid unless it goes through the comp committee of the Board and they take all certain tenses [ph] into account. So there you have it.

Okay. Let me switch. Glen, on PENN 2, I believe you guys switched brokers from your original one to a new one. Just curious, the progress that you, guys, had on PENN 1 seemed pretty good. You toured us last year of the project, it certainly seemed to impress what you guys have done with PENN 1. It seemed like leasing was going well. What happened with PENN 2 that you found it necessary to switch brokers and is that sort of a repositioning of the asset, different tenants? Or was there something else that you learned through the process that caused you to switch brokers on PENN 2?

So we did not switch brokers. The Cushman & Wakefield team additive to my team. Something we do not do often, as you know but here, we decided to do it to cover the entire market, both regionally, locally and nationally. We brought in a great team. The team had just done all leasing over in Manhattan West, so it's additive, not a switch. PENN 1 remains the Vornado team and that was the reasoning for doing the PENN 2 and of Cushing and Wakefield but no switch, no change, normal course of business.

Alex, I'm confident that the gold medal team of Glen and the rest of his team in-house has the strength and the ability, the franchise to do the job. But we're in the no stone unturned business. And so we thought that adding Cushman to have that extra, look into the marketplace was a good piece of insurance and it's working out.

The next question comes from Keith Libero [ph] of Goldman Sachs.

This is Julien Blouin on for Caitlin. Steve, regarding the dividend and adding to Alex's question, last quarter, you provided a really helpful breakdown of your 2023 expected taxable income. I was wondering if you could provide the same for 2024. And should we assume that the fourth quarter dividend will be again at sort of the minimum required taxable income level?

The answer to that is that we have a broad idea of what the 2024 taxable income will be as you would expect. But it is not a number that we are comfortable enough with disclosing publicly. So that's the first one. The second point is, at this time, it's a financial policy of our Board to pay out the minimum dividend because from a capital allocation point of view, that's the right decision. We have had, as I said before, numerous investors, shareholders, analysts, peers tell us that's the right decision. The dividend, the most interesting part of the dividend, however, will likely be gains on asset sales because all of our assets have very low basis. So if we choose to sell an asset of 2 or 3 or 4 in '24, that will determine more than anything, what the dividend would be.

That's really helpful. And then maybe switching gears. To PENN 1, the ground lease renewal. I think you mentioned at the beginning of last year, you thought the final number could come in lower than the original $26 million estimate just based on evolving sort of market conditions. Is that still your expectation? And I guess what is the latest update on that process?

Well, that's absolutely my expectation but there's somebody on the other side that disagrees with that. So we're in the middle of the process, the arbitration process to determine what the number will be. And that's something we can't speculate on.

The next question comes from Nick Yulico of Scotiabank.

Just first, a question on PENN 1, based on the incremental yield you gave last quarter in the sup [ph], I know it's now in the, I guess, more stabilized pool. But it looks like there was eventually $59 million of future NOI, I assume there on a cash basis. Can you just let us know like how -- any of that's already been captured yet and just how to think about the impact of any of that dividend if there's any of that benefit assumed for this year?

Nick, it's Michael. I can't give you the exact numbers off hand. The answer is some of that is back in '24 but this is a rolling program and -- and so it will continue to come in next year as well. Obviously, there's vacancy there as that gets leased up, that will come online as well. So the answer is some of that there. I can tell you is and it's not in the development yields anymore this project is done. But our -- the last one we had published, we're confident in terms of hitting that and hopefully exceeding it. But we can sort of circle up and get to lower specifics. But some of that's in '24 but it will roll in over the next year or two as well.

I'd like to make a couple of comments. The first is that all of us focus on what the initial yield is on an asset. I think it's a very interesting exercise to say what can that asset produce in terms of revenue 3, 5, 7 years out. So we believe, for example, in the Penn District, we believe in the west side of Manhattan. We believe that when you combine Penn District with Manhattan West and Hudson Yards, I mean that's a hell of enablement. Highly sought after and whatever. So we believe that these assets will return a very satisfactory return at the get-go and will grow from there as we continue to own them over the next period of time; so there's that. We also believe that -- I mean there's some question about which is more important, Penn or Grand Central. Well, the answer is obviously, Grand Central is at the foot of Park Avenue. So that's very important. And I think everybody considers Park Avenue the principal business boulevard in the country, maybe even in the world. We have a representation of multiple assets on Park Avenue too. But it's interesting to note that New Jersey Transit comes into only Penn Station. And New Jersey is the growing suburb of New York. So we are very, very happy with our position.

Okay. Just second question is on PENN 1 and PENN 2. you, guys, give only the occupancy numbers in South and I'm just wondering if there's any way that you can give us a feel for like a lease rate for those assets or even think about how much of the leasing you've achieved so far of what your ultimate plan is on getting to these stabilized cash yields you talk about for the projects.

So much going to go to how much lease.

I mean, as Michael said, PENN 1 is a multiyear program. When we set out on the project, there were over 200 tenants in the property which we're rolling over the next, call it, 5, 6, 7 years. We've leased a considerable amount of space in PENN 1 to date and we continue to cycle through with these tenants expire year-to-year. And it's been very successful. We've leased over 8,000 [ph] feet this year, it rents north of 90%, we have a lot of action in the pipeline now. Similarly, at PENN 2, we talked about the pipeline, we have deals coming to 4 at PENN 2 as we speak. And you could stay tuned on that activity as we roll into the first, second quarter of '24.

Okay. Yes. And I appreciate all the commentary on the re-leasing. It's just honestly a little bit hard to understand where you guys are at in terms of the re-leasing of those projects? And at what point you're getting the NOI benefit because there's no like bridge provided anymore about the rolling out and the rolling in of NOI. So it's honestly very difficult to quantify what the benefit to the company is going to be over the next couple of years.

I mean I would say, Nick, let's go through it, right? PENN 2 we've got $1.2 million [ph] to lease, okay? PENN 1, we've probably taken care of. I'm going to rough guess and half the square footage to date, right? So there's probably another to go in terms of rolling that up market that to market, right? Between those 2 assets, in a short period of time and let's call it -- let's use the asset, 3 years, right? There's going to be an incremental $200 million that comes from an NOI that comes from those assets, maybe a little less from PENN 2 [ph] to in terms of remaining retail. But the bulk of that is on PENN 2. That's probably a net capitalized interest, another $150 million, right? So that's as crisp as I can give it to you, whether I'm a little bit early, a little bit late on the timing. That's the magnitude and it's going to happen.

Great. I appreciate that extra commentary.

The next question comes from Anthony Paolone of JPMorgan.

I just have one. Michael, if I got your comment right earlier, I think you mentioned debt markets are pretty open right now for retail. And so I was wondering if that creates any opportunities for you all to get paid back on your prep interest in the JV in the near term at all.

Tony, the -- we're pleased that the markets are opening. And the answer is we're starting to look at it. But -- we've got some leasing to do on a couple of those assets as well, right? If you think about a 689 or Fifth or the old space at 1540. So there's a little bit of leasing that has to get accomplished, stabilize 2 or 3 of the assets but as opposed to something that was sort of not on the table as a possibility. I think it's emerging as a possibility. And as markets continue to improve. The answer is we are absolutely focused on it. And we're sort of gathering data and looking at it. But it's one of those things where we got to do leasing. There's also a size limitation in terms of how much you can put through the system. But our goal is to repatriate that capital over time and the opportunities emerging.

I look at it differently. The markets are open which really means that lenders are prepared to give you money and 90% [ph]; that's not open to me because the cost of that capital is just too high. It will -- this is not the time to be aggressively borrowing unless you absolutely need it. So the answer is, as we look at it from an academic point of view but it would be very surprising to see our company aggressively refinance the preferred or anything else at these interest rates. Now, just a minute about our liquidity. We have a bid amount of cash. We consider at some point in time that the preferred is a source of liquidity. Not at 8% but lower. But if we had to, if the source of liquidity and that's $1.8 billion [ph]. And the next is, remember that Fed Plaza has no debt on it. So we've got PENN 1, debt-free, PENN 2, debt-free and probably PENN 3, debt-free and Hotel Penn site, debt-free. So we have an enormous source of liquidity which we think is pretty interesting. Thank you.

Next question comes from Ronald Kamden of Morgan Stanley.

Great. Just one for me as well. I was just looking at the 10-K in a footnote you put some really helpful details about where you expect to release some of the maturities on the office portfolio. I think it looks like flat or in some of the retail at sort of over 30% which I thought was helpful. But trying to connect the dots between those re-leasing spreads. I think we talked earlier on the call about occupancy potentially dipping in the first back part of the year before picking up can you put that all together for us and into a same-store NOI number? I know you don't give guidance but is there some broad strokes that we should be thinking about same-store NOI? Is it flat? Is it slightly down? How should we think about those pieces?

It's probably a little bit down in the aggregate. But again, it depends a little bit on what basis and when happens. So hard to give you any more guidance than that. But I think your overall characterization in the office on an average basis, flat is probably accurate. But as Glen has a history of doing we pull forward a number of leases that are going to roll and deal with those. So it's sort of hard to give you that number.

The next question is a follow-up from Steve Sakwa of Evercore ISI.

Just 2 quick follow-ups. Michael, I think on the G&A, you and Steve provide some color but I just wanted to -- so are you saying that in '24, you think the G&A will be flattish with '23 or it actually comes down in '24 versus '23?

Well, it's going to come down. The development on -- we're not going to be there, right? I mean it was a last item, I'm not going to reoccur this item, so that's going down. So the answer is yes, we think it will be down.

Okay. But just basically stripping that out, -- that's really the only kind of one-timer that would sort of come off the '23 number?

Yes. There's a little more in terms of things that were accelerated that aren't going to reoccur on historical vesting for certain people. But -- so the answer is, net-net, between development fee that -- I don't know, we're talking $10 million or so at neighborhood, probably somewhere in the neighborhood that comes off of '24.

Okay, great. And then just second follow-up, just on -- I think you've got a big refinancing that you're working on with your partner at 280 Park Avenue. Just any kind of color, I think that might have gone into special servicing. I assume that, that was maybe part of the mechanics of getting that loan refinanced. But just any color or commentary you could provide on that refinancing would be great.

Sure. I'm not going to say too much given we're still in the middle of the process but it is a CMBS going into special servicing is part of the process of working that out. And we and our partner are making good progress on that and we expect to get to a successful resolution with terms that we think are attractive. So more to come shortly there. But we've been hard at work for the last 6, 9 months. The CMBS loans are painful, complicated, given the way they're set up. But you have the great sponsorship and I think they recognize that. So we're getting closer to the finish line.

That concludes today's question-and-answer session. I would like to turn the conference back over to Steven Roth for any closing remarks.

Thank you, everybody. We appreciate your interest in our company. We learn from you every call. This was an interesting call. And we -- it's slowing into and we'll see you at the next call. When is the next call?

On May 7. Have a good day.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating and you may now disconnect.