Vornado Realty Trust Q4 2023 Earnings Call Transcript

Participants

Corporate Executives

• Steven Borenstein, Senior Vice President and Corporate Counsel
• Steven Roth, Chairman of the Board and Chief Executive Officer
• Michael J. Franco, President and Chief Financial Officer
• Glen J. Weiss, Executive Vice President of Office Leasing and Co-Head of Real Estate
• Thomas Sanelli, Executive Vice President of Finance and Chief Administrative Officer
• Barry S. Langer, Executive Vice President, Development and Co-Head of Real Estate

Analysts

• Steve Sakwa, Evercore ISI
• Michael Griffin, Smith Barney Citigroup
• Camille Bonnel, BofA Securities
• John Kim, BMO Capital Markets
• Dylan Burzinski, Green Street Advisors
• Vikram Malhotra, Mizuho
• Alexander Goldfarb, Piper Sandler Companies
• Julien Blouin, The Goldman Sachs Group, Inc.
• Nicholas Yulico, Scotiabank
• Anthony Paolone, JPMorgan Chase & Co.
• Ronald Kamdem, Morgan Stanley

Presentation

[Operator]

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. 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 Mr. Steve Borenstein, Senior Vice President and Corporate Counsel. Please go ahead.

[Steven Borenstein, Senior Vice President and Corporate Counsel at Vornado Realty Trust]

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 may differ materially from -- to 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 statement.

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 Steven Roth.

[Steven Roth, Chairman of the Board and Chief Executive Officer at Vornado Realty Trust]

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 recede. It's important to note that our businesses 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 starting rents for the quarter and the year were record breaking at $100 and $99 per square foot, respectively. And 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 evening tightening -- and even tightening slightly as we speak. The 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 five years ago, we feel very good about the activity level and strength of the retail recovery. And there's more big retail news. In two blockbuster deals announced in December, major global luxury retailers Prada and Kering, bought prime 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 about $900 million for a half block front on upper Fifth Avenue. So we now have the most important retailers in the world investing aggressively in real estate for their own use on the most important retail street in our country. This is only happening in the most important world cities, New York, London, Paris.

Now, we take this mark very personally, because we own in our retail joint venture, so 52% our share, a 26% market share of available fifth -- upper Fifth Avenue and four blocks half blocks -- and four half blocks of similar AAA quality. I'm sure you can all do the math here. We also own in that same joint venture the two best full blocks. So, that would be four half blocks in Times Square. And we have the largest sign business in town. It's been a long ride and we have now just about completed construction of our renovation of the double block-wide PENN 2, and we are about 90% complete with the surrounding plazas.

The huge plaza in front of PENN 2, combined with the 33rd Street promenade and the 33rd Street setback at PENN 1 have created an enormous open public space, which I might say will be quite majestic. Directly across 7th Avenue, the Hotel Penn is now down to ground, creating our PENN 15 site. All this taken together is, for sure, a game-changer. If you are a shareholder of Vornado or are interested in Vornado, this is an immediate must go see. The world turns in funny ways and creates opportunity. The retail apocalypse is now passing, having handily survived the e-commerce attack. But now, we have a CBD office apocalypse involving the work from home threat and the total blacklisting of office in the capital markets.

In the end, the major cities of America will continue to grow and thrive with New York, our hometown, leading the pack. Office workers will gather in offices with their colleagues rather than be alone at home at their kitchen table. And in the end, the supply/demand equation will come into balance and bring on a landlord's market, marked by a total cutoff of new supply. You can't build anything in these frozen capital markets and in New York, the evaporation or irrelevance of, say, 100 million square feet of old, obsolete, unrentable space. This cycle is not over yet. There remain challenges, but for forward-looking investors, the time is now. My colleagues and I at Vornado are optimistic and excited.

Now, over to Michael.

[Michael J. Franco, President and Chief Financial Officer at Vornado Realty Trust]

Thank you, Steve, and good morning, everyone.

Though 2023 was a challenging year, our core office and retail businesses proved to be resilient. Our overall New York business same-store cash NOI 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, 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 non-cash 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 dinged 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 the GAAP earnings from these leases won't begin in 2024. We expect 2024 will represent the trough in our earnings and for earnings to increase meaningfully from there as rates trend down and as income from the lease-up of PENN and other vacancies comes online.

Now, turning to the leasing markets. New York is clearly leading the leasing charge nationally as the city continues to experience strong employment growth. 2023 leasing in Manhattan ended on a strong note and as we entered 2024, market conditions are more favorable than any year since the pandemic ensued in March 2020, providing support for the continued recovery in the Class A office market. The economy is healthy. Most employers are back in the office at least three days to four days per week. Competitive sub-lease space is thinning and the market for higher-end space is tightening, fueled by a decline in the new development pipeline.

Now that companies have greater clarity on their space needs, tenant demand is growing, which is translating into more leasing transactions. With new supply evaporating, tenants are increasingly focused on the highest quality redeveloped Class A buildings near PENN Station and Grand Central Station, as they seek to attract and retain talent. Activity in the best buildings has been strong, with vacancy at less than 10% and rents rising.

Our best-in-class portfolio has been a major beneficiary of this trend and the stats bear out this, that we consistently outperform the marketplace, as Steve mentioned earlier. In 2023, we leased 2.1 million square feet at average starting rents of industry-leading $99 per square foot with 1.2 million feet at triple-digit starting rents. Importantly, we made significant strides in addressing our upcoming vacancy and tenant roll at some of our most important assets, with leases with the following important customers.

Citadel at 350 Park Avenue; PJT Partners and GIC at 280 Park Avenue; King & Spalding, Selendy and Gay, and Cushman & Wakefield at 1290 Avenue of the Americas; and Shopify at 85 Tenth Avenue. Additionally, at PENN 1, we maintained strong momentum with another 300,000 square feet of deals, highlighted by new leases with Samsung and Canaccord Genuity. Just as a reminder, since we started our redevelopment efforts in the PENN District, we have leased over 2.5 million square feet of office at average starting rents of $94 per square foot, a significant increase from what these buildings achieved previously.

Our fourth quarter activity led the overall market's leasing volume upturn as we completed 17 leases, comprising 840,000 feet at starting rents of $100 per square foot. Even with our very strong close to 2023, our leasing pipeline heading into 2024 is robust. We currently have almost 300,000 feet of leases in negotiation, with another 2 million feet in our pipeline at different stages of negotiation, including a balanced mix of new and renewal deals.

Turning to the capital markets now. While the financing markets for office remain very challenging as banks continue to deal with problem loans, we are starting to see some stability with the Fed potentially cutting rates in 2024. Fixed income investors are constructive again on high-quality office, and unsecured bond spreads for office have tightened significantly over the past couple of quarters. That being said, we are still ways away from a healthy mortgage financing market in office, and most office loans will have to be restructured or extended as they aren't refinanceable at their current levels.

More broadly, lenders have no appetite for construction financing across most property types, which should keep a lid on new supply. Conversely, the financing market for retail is now wide open now that the sector has bottomed. As always, we continue to remain focused on maintaining balance sheet strength. Even in this challenging financing environment, our balance sheet remains in very good shape with strong liquidity.

We are actively working with our lenders and making good progress pushing out the maturities on our loans, which mature this year. Our current liquidity is a strong $3.2 billion, including $1.3 billion of cash and restricted cash, and $1.9 billion undrawn under our $2.5 billion revolving credit facilities.

With that, I'll turn it over to the operator for Q&A.

Questions and Answers

[Operator]

We will now begin the question-and-answer session. [Operator Instructions] And our first question comes from Steve Sakwa of Evercore ISI. Please go ahead.

[Steve Sakwa, Analyst at Evercore ISI]

Thanks. I guess, first question for Michael or maybe Glen, just kind of on that, I guess, pipeline to 2 million square feet that you talked about. Could you maybe tell us a little bit, how much of that's 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?

[Glen J. Weiss, Executive Vice President of Office Leasing and Co-Head of Real Estate at Vornado Realty Trust]

Hey, Steve, it's Glen. So, of the pipeline that we mentioned in the opening remarks, there is a good spread in there, including PENN 1 and PENN 2. 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, oh, wow, nothing they've ever seen. So the pipeline does include activity at both PENN 2 and PENN 1.

As a result relates to the bulge in '24, the expirations that we were facing, we've attacked it, I think, very well thus far. At 1290, we've already leased more than 50% of the space that was expiring in '24 between Ventable and Equitable. At 280 Park, we re-leased over 200,000 feet of the 275,000 feet expiring between '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 bonds.

[Steve Sakwa, Analyst at Evercore ISI]

Sorry, just a quick follow-up. Are you saying 770 is -- does that have a Meta expiration that...

[Glen J. Weiss, Executive Vice President of Office Leasing and Co-Head of Real Estate at Vornado Realty Trust]

It does. It has a Meta expiration of 275,000 feet in June of this year.

[Michael J. Franco, President and Chief Financial Officer at Vornado Realty Trust]

Of what's left. The rest is Meta.

[Glen J. Weiss, Executive Vice President of Office Leasing and Co-Head of Real Estate at Vornado Realty Trust]

Yeah. So, Meta, after that expiration, Steve, will have another 500,000 feet long term in the building.

[Steve Sakwa, Analyst at Evercore ISI]

Okay, great. Thanks. And then just on the second question, I noticed that you've 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? Thanks.

[Michael J. Franco, President and Chief Financial Officer at Vornado Realty Trust]

Hi. Good morning, Steve. It's Michael. The answer with respect to stabilization is, 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 cost, does not include carry. So, that's based NOI over the original cost. So that's a simple math for you. We feel it creates 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.

[Steve Sakwa, Analyst at Evercore ISI]

Great. Thanks. That's it.

[Operator]

The next question comes from Michael Griffin of Citi. Please go ahead.

[Michael Griffin, Analyst at Smith Barney Citigroup]

Great, thanks. 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?

[Steven Roth, Chairman of the Board and Chief Executive Officer at Vornado Realty Trust]

There are three opportunities. Buying back our stock is the first one, or uses 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 happened at an accelerating -- accelerated pace. So, the opportunities are still in front of us. I don't have any comments as to what we might do, but I think our first -- our number one priority is the debt that we need to -- the debt expiries. And then after that, we go on the offense. The stock, we will react opportunistically to the stock price over time.

[Michael Griffin, Analyst at Smith Barney Citigroup]

Great, thanks. 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?

[Steven Roth, Chairman of the Board and Chief Executive Officer at Vornado Realty Trust]

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

[Michael Griffin, Analyst at Smith Barney Citigroup]

Great. That's it for me. Thanks for the time.

[Steven Roth, Chairman of the Board and Chief Executive Officer at Vornado Realty Trust]

Yes, sir. Thank you.

[Operator]

The next question comes from Camille Bonnel of Bank of America. Please go ahead.

[Camille Bonnel, Analyst at BofA Securities]

Good morning. 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?

[Glen J. Weiss, Executive Vice President of Office Leasing and Co-Head of Real Estate at Vornado Realty Trust]

Hi, it's Glen. Our retention rate was strong. As I mentioned, the leasing that we've gotten done, the renewals, I think, went better than we originally had thought at 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 who are expiring forward, are now coming to us earlier than they had been over the past few years, because there's less and less quality blocks and 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.

[Steven Roth, Chairman of the Board and Chief Executive Officer at Vornado Realty Trust]

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 are -- 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 space is all being 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 square feet to 150 million square feet. Those are just obsolete and irrelevant and will evaporate. So, what we're dealing with is not a 400 million square foot marketplace. We're dealing with something which is somewhere in the high-200, which is a totally different supply/demand equation.

[Camille Bonnel, Analyst at BofA Securities]

Appreciate the color there. 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?

[Michael J. Franco, President and Chief Financial Officer at Vornado Realty Trust]

Sure. 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 trophy assets. I think the value is being recognized. We've talked about the last couple of quarters and it continues our leasing pipeline. We've 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 pike based on what we're working on right now.

[Steven Roth, Chairman of the Board and Chief Executive Officer at Vornado Realty Trust]

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 the half block price. And we got a lot of half blocks in the best place.

[Camille Bonnel, Analyst at BofA Securities]

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?

[Michael J. Franco, President and Chief Financial Officer at Vornado Realty Trust]

No, capitalized interest will be comparable. G&A, some of that will roll off, given that was a one-time 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 three years, four years. And if the shareholders do quite well, then the employees will do quite well. So, that expense was elevated in '23, and that'll start to, I think, normalize as we get into this year.

[Steven Roth, Chairman of the Board and Chief Executive Officer at Vornado Realty Trust]

Tom, how many years are we writing off the expense for the comp plan?

[Thomas Sanelli, Executive Vice President of Finance and Chief Administrative Officer at Vornado Realty Trust]

So, it's four years. Accelerating.

[Steven Roth, Chairman of the Board and Chief Executive Officer at Vornado Realty Trust]

Say that again.

[Thomas Sanelli, Executive Vice President of Finance and Chief Administrative Officer at Vornado Realty Trust]

You are accelerating.

[Steven Roth, Chairman of the Board and Chief Executive Officer at Vornado Realty Trust]

So the expense for writing off the equity comp plan that we issued in June is over a four-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 have penalized our earnings actually pretty substantially. That is going to reverse somewhere as the government begins to reduce rates, which they will. And then similarly -- well, I guess, that's the big -- those are the two -- 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 in the tenants from the bulging expiry -- lease expiries. Now, once again, those spaces will fill up, income will come on board. So, these are temporary reductions in our earnings, which will absolutely reverse.

[Operator]

The next question comes from John Kim of BMO. Please go ahead.

[John Kim, Analyst at BMO Capital Markets]

Thank you. 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 our NAV estimates?

[Steven Roth, Chairman of the Board and Chief Executive Officer at Vornado Realty Trust]

Hi, John. How are you? Well, the first thing is, we're enjoying the bounce-back from -- of the retail. I mean, retail had a target on its back, threatened by e-commerce, etc., then and that has all evaporated. And now, retail has become the vogue. We believe that the asset prices of the assets that we own has increased dramatically from the bottom, and we may take advantage of those prices by selling assets for year-to-year -- from here -- 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. Will they rise to the peak pricing that they were five years ago? Probably not. But they're certainly going to rise from here.

[John Kim, Analyst at BMO Capital Markets]

Okay. Do you think we'll get -- you'll get the same pricing you got originally when you established that joint venture? In other words, have pricing and assets reached peak levels from...

[Steven Roth, Chairman of the Board and Chief Executive Officer at Vornado Realty Trust]

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.

[Michael J. Franco, President and Chief Financial Officer at Vornado Realty Trust]

John, that's speculation. But I think if you look at the pricing that Prada and Kering 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 Fifth.

[John Kim, Analyst at BMO Capital Markets]

And Michael, you mentioned an impairment that you've taken this quarter related to joint venture assets you're looking to exit. Is it this retail joint venture that you're discussing, or are there other assets?

[Michael J. Franco, President and Chief Financial Officer at Vornado Realty Trust]

No.

[John Kim, Analyst at BMO Capital Markets]

And if so, which ones are they?

[Michael J. Franco, President and Chief Financial Officer at Vornado Realty Trust]

Yeah, 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, as you guys should know well by now, given the street retail event, the 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 two years to three years, and that results in a different accounting approach, and thus the impairment. It's an accounting convention, what the ultimate proceeds will be realized, TBD. But again, it relates to a handful of smaller assets.

[Steven Roth, Chairman of the Board and Chief Executive Officer at Vornado Realty Trust]

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.

[John Kim, Analyst at BMO Capital Markets]

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

[Michael J. Franco, President and Chief Financial Officer at Vornado Realty Trust]

No.

[Steven Roth, Chairman of the Board and Chief Executive Officer at Vornado Realty Trust]

That's correct.

[John Kim, Analyst at BMO Capital Markets]

Great. Thank you.

[Steven Roth, Chairman of the Board and Chief Executive Officer at Vornado Realty Trust]

Thank you.

[Operator]

The next question comes from Dylan Burzinski of Green Street. Please go ahead.

[Dylan Burzinski, Analyst at Green Street Advisors]

Hi, guys. Thanks for taking the question. Just two 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-out, that it should see a pretty swift recovery as we look out to 2025 and beyond. Is that sort of a fair characterization?

[Glen J. Weiss, Executive Vice President of Office Leasing and Co-Head of Real Estate at Vornado Realty Trust]

Hi, it's Glen. I think that's fair. I think you'll see a 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 what you're characterizing, yes.

[Michael J. Franco, President and Chief Financial Officer at Vornado Realty Trust]

Probably flattish for '24, though, overall.

[Steven Roth, Chairman of the Board and Chief Executive Officer at Vornado Realty Trust]

Just a word on...

[Dylan Burzinski, Analyst at Green Street Advisors]

And then on...

[Steven Roth, Chairman of the Board and Chief Executive Officer at Vornado Realty Trust]

Hang on. Hang on. Just a word about occupancy. So the market occupancy is in the high-teens. So our occupancy is, give or take, around 90% -- a hair north or a hair south of 90%. If you look back over our history, our normal occupancy is a hair over 95% -- in the 96% -- they call it 96%. 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 vacancy is really the difference between 96% and 90%, 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 rent 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.

[Dylan Burzinski, Analyst at Green Street Advisors]

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 occupancy is high-70s. Pre-COVID, you were mid-90s. I guess, just how do we think about the recovery there, given some of the comments you guys laid out regarding the leasing pipeline?

[Steven Roth, Chairman of the Board and Chief Executive Officer at Vornado Realty Trust]

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

[Thomas Sanelli, Executive Vice President of Finance and Chief Administrative Officer at Vornado Realty Trust]

Yeah, Farley, the retail there.

[Steven Roth, Chairman of the Board and Chief Executive Officer at Vornado Realty Trust]

And then Farley, we have slow going on the 9th Avenue side. So, between those two, we're somewhere in probably mid-80s.

[Dylan Burzinski, Analyst at Green Street Advisors]

That's helpful. Thanks, guys.

[Operator]

The next question comes from Vikram Malhotra of Mizuho. Please go ahead.

[Vikram Malhotra, Analyst at Mizuho]

Good morning. Thanks for taking the question. Just -- I want to just go back to your comment about FFO troughing in '24. So, just two clarifications to what you've said first. One is, the Facebook lease, 770, is it -- was it clear that the 200,000 or so square foot expiring, they're a move-out, but then the rest is there long term? Number one. And number two, could you just roughly quantify the move-outs you mentioned? What is the FFO impact this year to that?

[Steven Roth, Chairman of the Board and Chief Executive Officer at Vornado Realty Trust]

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

[Michael J. Franco, President and Chief Financial Officer at Vornado Realty Trust]

Right. So the -- yeah, so the 270,000 feet is just the one component of this, yeah. The remainder, Vikram, that we don't give guidance, right? There's a number of ins and outs. Yes, you can just quantify the specific three 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 three, this is the impact, because it -- 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.

[Vikram Malhotra, Analyst at Mizuho]

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

[Michael J. Franco, President and Chief Financial Officer at Vornado Realty Trust]

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

[Steven Roth, Chairman of the Board and Chief Executive Officer at Vornado Realty Trust]

So, to summarize -- I agree, it's 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 going 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 two years, 2 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.

[Vikram Malhotra, Analyst at Mizuho]

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 as you look to, maybe as the Board and yourself, you look -- we look to award executives LTIPs going forward. What are maybe one or two of the top metrics that could be different the next five years versus the last five years in terms of gauging those LTIP awards?

[Steven Roth, Chairman of the Board and Chief Executive Officer at Vornado Realty Trust]

I don't know how to answer that question. I -- we don't give guidance for next quarter, and it's very difficult to predict what's going to happen over the next five years. But a couple of -- to 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 beachhead where we don't have the same kind of depth of experience, knowledge, and franchise that we have. So, basically, we're a New York company. My guess is that 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 spun off. So, we have experience with different geographies. But my guess is 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. What's the right word, Michael? Okay. At distressed prices for office buildings, and we will only buy the finest office buildings.

We have some residential, and we might do a little 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. You can't build anything in the PENN District today because of the frozen capital markets. You cannot do it. The math doesn't work. But as the math -- as that begins to thaw, we will consider residential build -- building and developing residential in that marketplace, and we might even sell a piece of land to a residential developer. So, we can't predict what's going to happen. But in five years, we will be New York centric. We will be majority an office company, and the PENN District will be really important five years from now.

[Operator]

The next question comes from Alexander Goldfarb of Piper Sandler. Please go ahead.

[Alexander Goldfarb, Analyst at Piper Sandler Companies]

Hey, good morning. Good morning, Steve, Steve and Michael. Steve, just talking about the comp plan that you guys put in place around 350 Park 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 till the end of this year to figure out their dividend for 2024, the stub -- the $0.30 stub aside. 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 mid-year update that you guys did for the senior executives and upper generation last summer.

[Steven Roth, Chairman of the Board and Chief Executive Officer at Vornado Realty Trust]

Sure. How are you, Alex? The -- let me go backwards first. Your comment about the dividend. We have had an enormous number of incomings from shareholders, analysts, etc., and industry peers saying what we did with the dividend was correct and to continue to pay -- by the way, we will rightsize the dividend, but to continue to pay and overpay a dividend, etc., in this capital markets is just not the most efficient use of capital. So, you seem to be on the other side of that. I can tell you that most of your friends and peers think that what we did was the correct thing. Pardon me. Now -- I need some hot water, Barry. So, now that's -- now that's going to be...

[Barry S. Langer, Executive Vice President, Development and Co-Head of Real Estate at Vornado Realty Trust]

I'd bring you a cup if I was there.

[Steven Roth, Chairman of the Board and Chief Executive Officer at Vornado Realty Trust]

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 motivation and to incent our most important employees. Retention, reward, motivation, and incent. So, the first thing is that anything that is paid out in -- on that comp plan comes from joint venture development projects. Now, we don't do a lot of those. 350 Park is probably, in my memory, the first one. We did 220 a 100%. So, we don't do a -- 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 shoulder to shoulder with our shareholders that we do this kind of investing. And we think it's also shoulder to shoulder with our shareholders that we bring in outside third-party capital to fund this, which has become -- most of our peers in the industry are using outside capital. We haven't done that in the past. So, we wouldn't 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 of -- 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 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 comp plan, because we thought it was very small, we thought shareholders would get it. And frankly, I made a mistake. We should have told our shareholder base what we were going to do. I myself am -- hang on. I myself am 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 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 nights, it's weekends. It's backbreaking work. And we think that the team deserves it.

[Alexander Goldfarb, Analyst at Piper Sandler Companies]

So, 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 standalone.

[Steven Roth, Chairman of the Board and Chief Executive Officer at Vornado Realty Trust]

Obviously. I don't agree with you.

[Alexander Goldfarb, Analyst at Piper Sandler Companies]

Okay.

[Steven Roth, Chairman of the Board and Chief Executive Officer at Vornado Realty Trust]

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, the -- now, no comp under this plan is paid unless it goes through the comp committee of the Board and they take all circumstances into account. So, there you have it.

[Alexander Goldfarb, Analyst at Piper Sandler Companies]

Okay. 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 impressive 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?

[Glen J. Weiss, Executive Vice President of Office Leasing and Co-Head of Real Estate at Vornado Realty Trust]

So, we did not switch brokers. The Cushman & Wakefield team is 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 the leasing over in Manhattan West. So it's additive, not a switch. At PENN 1, it remains the Vornado team, and that was the reasoning for doing the PENN 2 ahead of Cushman & Wakefield. But no switch, no change. Normal course of business.

[Steven Roth, Chairman of the Board and Chief Executive Officer at Vornado Realty Trust]

Alex, I'm confident that the gold medal team of Glen and the rest of his team in-house have the strength, 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.

[Operator]

The next question comes from Caitlin Burrows of Goldman Sachs. Please go ahead.

[Julien Blouin, Analyst at The Goldman Sachs Group]

Hi. Thank you. This is Julien Blouin on for Caitlin. Thank you for taking the question. 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 set at sort of the minimum required taxable income level?

[Steven Roth, Chairman of the Board and Chief Executive Officer at Vornado Realty Trust]

The answer to that is that we have a broad idea of what the 2024 what 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 point. The second point is, at this time, it's the 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 or two or three or four in '24, that will determine more than anything what the dividend would be.

[Julien Blouin, Analyst at The Goldman Sachs Group]

That's really helpful. Thank you. And then maybe switching gears to PENN 1, the ground lease renewal. I think you mentioned at the beginning of last year that 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?

[Steven Roth, Chairman of the Board and Chief Executive Officer at Vornado Realty Trust]

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.

[Julien Blouin, Analyst at The Goldman Sachs Group]

Okay, great. Thank you.

[Steven Roth, Chairman of the Board and Chief Executive Officer at Vornado Realty Trust]

Yes, sir.

[Operator]

The next question comes from Nick Yulico of Scotiabank. Please go ahead.

[Nicholas Yulico, Analyst at Scotiabank]

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

[Michael J. Franco, President and Chief Financial Officer at Vornado Realty Trust]

Nick, it's Mike. I can give you the exact numbers off-hand. The answer is, some of that is factored in '24, but this is a rolling program and so, it'll continue to come in next year as well. Obviously, there's vacancy there that -- as that gets leased up, that'll come online as well. So the answer is, some of that's there, I can tell you is, and it's not in the development yields anymore just because the 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 a little more specifics. But some of that's in '24, but it'll roll in over the next year or two as well.

[Nicholas Yulico, Analyst at Scotiabank]

Okay. Thanks.

[Steven Roth, Chairman of the Board and Chief Executive Officer at Vornado Realty Trust]

I would 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, three years, five years, seven 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 a neighborhood, 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. I -- and I think everybody considers Park Avenue to be the principal business boulevard in the country, maybe in -- 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 fastest growing suburb of New York. So, we are very, very happy with our position.

[Nicholas Yulico, Analyst at Scotiabank]

Okay, thanks for that. Just second question is on PENN 1 and PENN 2. You guys give only the occupancy numbers in the sup, and I'm just wondering if there's any way that you can give us a feel for, like a leased 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.

[Michael J. Franco, President and Chief Financial Officer at Vornado Realty Trust]

So, how much -- how much PENN 1, the lease, how much you have to go.

[Glen J. Weiss, Executive Vice President of Office Leasing and Co-Head of Real Estate at Vornado Realty Trust]

I mean, as Michael said, PENN 1 is a multi-year program. When we set out on the project, there were over 200 tenants in the property which were rolling over the next, call it five years, six years, seven years. We've leased a considerable amount of space in PENN 1 to date and we continue to cycle through as these tenants expire year-to-year. So it's been very successful. We've leased over 30,000 feet this year. It rents north of 90 and we have a lot of action in the pipeline now. Similarly at PENN 2, we talked about the pipeline. We have deals coming to fore at PENN 2 as we speak, and you could stay tuned on that activity as we roll into the first quarter, second quarter of '24.

[Nicholas Yulico, Analyst at Scotiabank]

Okay. Yeah. No, 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.

[Michael J. Franco, President and Chief Financial Officer at Vornado Realty Trust]

I mean, I would -- I would say, Nick, let's go through it, right? PENN 2, we've got a 1.4 million to lease up, okay? PENN 1, we've probably taken care of, I'm going to rough guess, Glen, half the square footage to date, right? So there's probably another 1.2 million to go in terms of rolling that up and marking that to market, right? Between those two assets, in a short period of time -- and let's call it -- let's use the asset, three years, right? There's going to be an incremental $200 million that comes from -- in NOI that comes from those assets. Maybe a little less from Farley, too, in terms of remaining retail. But the bulk of that is PENN 1, PENN 2. That's probably in net of 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.

[Nicholas Yulico, Analyst at Scotiabank]

Great. Thanks. No, I appreciate that extra commentary, Michael.

[Michael J. Franco, President and Chief Financial Officer at Vornado Realty Trust]

Okay. Yeah.

[Operator]

The next question comes from Anthony Paolone of JPMorgan. Please go ahead.

[Anthony Paolone, Analyst at JPMorgan Chase & Co.]

Thanks. 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.

[Michael J. Franco, President and Chief Financial Officer at Vornado Realty Trust]

Tony, good morning. We're pleased that the markets are opening, and the answer is, we're starting to look at it, but we've got -- we got some leasing to do on a couple of those assets as well, if you think about a 689 or a Fifth or the old space at 1540. So there's a little bit of leasing has to get accomplished, stabilize two or three 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 the 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 as opportunities emerge.

[Steven Roth, Chairman of the Board and Chief Executive Officer at Vornado Realty Trust]

I look at it differently. The markets are open, which really means that lenders are prepared to give you money at 8%. That's not open to me, because the cost of that capital is just too high, and it will -- this is not the time to be aggressively borrowing unless you absolutely need it. So, the answer is, 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 in this market at these interest rates. Now, just a minute about our liquidity. We have $1 billion some odd in 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, it's a source of liquidity, and that's $1.8 billion. And the next is, remember that PENN Plaza has no debt on it. So we've got PENN 1 debt-free, PENN 2 debt-free, Farley debt-free, and the Hotel Penn site debt-free. So, we have an enormous source of liquidity, which we think is pretty interesting.

[Anthony Paolone, Analyst at JPMorgan Chase & Co.]

Okay. Thank you.

[Steven Roth, Chairman of the Board and Chief Executive Officer at Vornado Realty Trust]

Thank you.

[Operator]

The next question comes from Ronald Kamdem of Morgan Stanley. Please go ahead.

[Ronald Kamdem, Analyst at Morgan Stanley]

Great. Just one from 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 re-lease some of the maturities on the office portfolio. I think it looks like flat or -- and 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 part of the year before picking up. Can you put that all together for us 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? Thanks.

[Michael J. Franco, President and Chief Financial Officer at Vornado Realty Trust]

It's probably a little bit down in the aggregate. But again, it's -- it depends a little bit on what spaces and when it happens. So, hard to give you any more guidance in that. But I think your overall characterization in the office, on an average basis, flat, is probably accurate. But as Glen and his team have 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.

[Ronald Kamdem, Analyst at Morgan Stanley]

Got it. Thanks so much.

[Operator]

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

[Steve Sakwa, Analyst at Evercore ISI]

Yeah, thanks. Just two quick follow-ups. Michael, I think on the G&A, you and Steve had provided some color, but I just wanted to see. 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?

[Michael J. Franco, President and Chief Financial Officer at Vornado Realty Trust]

Well, it's going to come down. The development fee bonus are not going to be there, right? I mean, that was a last year item. That's not going to reoccur, this item. So, that's going down. So, the answer is yes, we think it will be down.

[Steve Sakwa, Analyst at Evercore ISI]

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?

[Michael J. Franco, President and Chief Financial Officer at Vornado Realty Trust]

Yeah. There's a little bit more in terms of things that were accelerated that aren't going to reoccur just based on historical vesting for certain people. But -- on -- and so the answer is, net-net, between development fee that -- I don't know, Tom. We're talking $10 million total, that neighborhood? Probably somewhere in the neighborhood that comes off the books in '24.

[Steve Sakwa, Analyst at Evercore ISI]

Okay, great. Thanks. 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. Thanks.

[Michael J. Franco, President and Chief Financial Officer at Vornado Realty Trust]

Sure. I'm not going to say too much, given we're still in the middle of the process, but it -- it is a CMBS loan. 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 six months, nine months. These CMBS loans are painful, complicated, given the way they're set up. But you have the right sponsorship, and I think they recognize that. So, we're getting closer to the finish line.

[Steve Sakwa, Analyst at Evercore ISI]

Great. That's it for me. Thanks.

[Steven Roth, Chairman of the Board and Chief Executive Officer at Vornado Realty Trust]

Thank you.

[Operator]

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

[Steven Roth, Chairman of the Board and Chief Executive Officer at Vornado Realty Trust]

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 snowing in New York, and we'll see you at the next call. When is the next call?

[Steven Borenstein, Senior Vice President and Corporate Counsel at Vornado Realty Trust]

May 7th.

[Steven Roth, Chairman of the Board and Chief Executive Officer at Vornado Realty Trust]

On May 7th. Have a good day.

[Operator]

[Operator Closing Remarks]