Alexander's, Inc. Q2 FY2026 earnings call

Market Position & Leasing Activity

• New York Manhattan Class A office market is a landlord's market, with overall vacancy down to 6.2%, driven by evaporating available/sublease space and office-to-residential conversions removing supply from inventory; new supply takes up to 5 years to deliver and requires $300+ per square foot rents to be feasible.
• Total leasing in H1 2026 was 978,000 square feet overall, with 659,000 square feet of Manhattan office leasing at an average starting rent of $105 per square foot, with positive 9.5% mark-to-market gap and positive 7.1% cash mark-to-market.
• Q2 2026 Manhattan office leasing: 29 deals totaling 328,000 square feet at $107 per square foot average starting rent, with 7.7% positive gap mark-to-market and 5.0% positive cash mark-to-market, with consistent triple-digit average starting rents.
• Transformation of Penn 1 and Penn 2 is complete: Penn 1 achieved a 25% return on $200 per square foot renovation investment, with current rents well above underwriting; Penn II is on track to be fully leased by end-2026, and Penn 1 has 246,000 square feet of leases out for signature with a 44% average mark-to-market.

Recent Acquisitions & Development Projects

• 623 Fifth Avenue: 383,000 square foot boutique office redevelopment above Saks Fifth Avenue is receiving strong broker/tenant feedback, with the first two-lease near execution at rents above original underwriting.
• Park Avenue Plaza: Half-interest acquisition in the 1.2 million square foot tower priced at $950 per square foot (1/3 of replacement cost) with an existing 2.9% mortgage has an 8% cash-on-cash return; in-place rents are roughly half current market, providing substantial upside for capital appreciation.
• 350 Park Avenue: Demolition is complete and construction is underway; Vornado will exercise its option to take its maximum 36% ownership stake alongside 60% partner Ken Griffin/Citadel (1 million square foot anchor tenant). A 25% interest sell-down to investors is planned for a September 2026 closing, with $3.3 billion in construction financing already arranged.
• Pier 94 (production facility): Occupancy dipped at end-Q2 due to scheduled vacates but recovered to the high 80% by end of July, with strong demand from leading media/tech firms, and occupancy will fluctuate naturally due to its short-term tenant model.

Balance Sheet & Capital Allocation

• Balance sheet strength is a top priority; net debt ratio has been reduced to the 70% range, with $2 billion in current liquidity ($789 million cash + $1.2 billion undrawn credit lines), which will be increased via planned sales of two non-core assets.
• Q2 2026: Repurchased 1.8 million shares at $29.92 per share; cumulative share repurchases since 2023 total 8 million shares at an average price of $26.61 per share; buybacks will continue as opportunities arise.
• Management believes Vornado stock is significantly undervalued, trading at a 23% discount to NAV that does not account for future upside from development projects.

1. New York Office: Same-store NOI increased 13.7% GAAP and 11.9% cash. Occupancy rose 60 bps quarter-over-quarter to 92.2%, up from a 84.4% trough in Q1 2025. Contribution: ~68% of total core operating value based on portfolio composition.
2. New York Retail: Same-store NOI increased 7.3% GAAP and 5.7% cash. Demand is picking up, with many international retailers entering the market and existing tenants seeking early renewals to secure prime locations. Contribution: ~22% of total core operating value based on portfolio composition.
3. Signage Business: Revenue grows at a consistent 5% per year, with both increasing pricing and optimized volume (via dynamic slot pricing for digital signs) driving growth. It is high-margin, low-capital, and contributes ~10% of core operating NOI.

• The company now expects full-year 2026 comparable FFO to be higher than 2025, with Q2 2026 comparable FFO of $0.67 per share representing a reasonable average run rate for the remainder of the year.
• Significant earnings growth is still expected for 2027, driven by continued lease-up of Penn 1/Penn 2, the full impact of the Park Avenue Plaza acquisition, and conversion of signed-but-not-commenced leases to operating revenue. Some previously projected 2027 growth has shifted to 2026, but total 2027 growth is still expected to meet or exceed prior projections.
• New York office occupancy is projected to rise above 93% by the end of 2026, with further gains expected after that; the company expects to return to its historical 95-96% physical occupancy run rate within the next few years, potentially sooner given current market momentum.
• Third-quarter 2026 mark-to-market gains are projected to exceed 20% company-wide.
• Capital expenditure is expected to remain fairly consistent between 2026 and 2027, and will begin to tail off in 2028 as major lease-up activity concludes; net leverage is expected to continue trending down into the low 70% range in 2026 and fall below 70% in future years as incremental income comes online.

• General macroeconomic risk: Management acknowledges that business cycles exist, and a future recession or market downturn is possible, so the firm maintains a strong balance sheet and high liquidity to prepare for adverse conditions ahead of time.
• New development execution risk: 350 Park Avenue has a multi-year construction timeline, with significant incremental equity requirements for Vornado back-ended to 2029 and beyond, exposing the project to potential future market shifts.
• Market pricing uncertainty: Mark-to-market metrics are dependent on which leases are included in the calculation, leading to potential inconsistency in performance measurement.
• San Francisco market exposure: While the firm's 555 California Street building has outperformed the broader San Francisco market, the overall San Francisco market is still in an earlier stage of occupancy and rent recovery compared to New York.

Q: What is the gap between current leased and economic occupancy, and what is the runway to reach historical peak occupancy? / A: Historically, Vornado ran at a consistent 95-96% physical occupancy. Current physical occupancy is 92.2%, while economic occupancy (including signed-but-not-commenced leases) is 83-84%. The firm expects to return to the historical mid-90% occupancy range within the next couple of years, possibly sooner given current market pace. Signed-but-not-commenced leases already represent $180 million in annual revenue and ~$150 million in incremental FFO, which will flow into earnings as leases commence.

Q: How will the high projected rents at new 350 Park Avenue impact adjacent older assets like your recently acquired Park Avenue Plaza? / A: High required rents for new construction create a pricing umbrella that lifts the value of well-located older buildings with lower in-place rents. Park Avenue Plaza has current in-place rents equal to roughly one-third of the projected rents for 350 Park Avenue, so it will see substantial rent and valuation upside from this dynamic, which is a core reason Vornado acquired the asset. The combination of limited new supply, strong tenant demand, and high construction/interest costs supports this upside.

Q: Is Vornado still planning to sell non-core assets to take advantage of private market valuations, and will proceeds be used for share buybacks? / A: Vornado is currently in active conversations to sell two non-essential assets, which will generate significant incremental cash to strengthen liquidity. The firm agrees with the logic of selling assets at private market values to repurchase undervalued shares, and management expects the static backward-looking NAV calculation does not credit future upside from development projects like 350 Park Avenue. Vornado only intends to sell non-core assets it is happy to part with, and will retain the rest of its portfolio to capture future appreciation.

Q: How much incremental capital will Vornado need to contribute to reach its 36% ownership stake in 350 Park Avenue, and when will these outlays occur? / A: Vornado is contributing its existing land and building at a $900 million valuation, so incremental capital requirements are only ~$350 million. Significant equity outlays are back-ended and will not occur meaningfully until 2029 or later, because construction financing will be drawn first, and the lead partner must contribute its equity before Vornado’s incremental equity is required. The $3.3 billion construction facility is already fully arranged.