SL Green Realty Corp. Q1 FY2025 earnings call

• Debt business: Strong Q1 performance with $200 million of DPE investments closed in the past 9 months and over $1.2 billion pipeline of new debt investments. Expects debt-related businesses to contribute increasing profits and has an upward bias to guidance if deals close.
• Equity portfolio: Acquired 500 Park, which is now 100% occupied; bought out partner in 100 Park, which is 97% leased.
• SUMMIT: Number one attended experience in Q1 and set a ticket presale record.
• Prebuilds: Prebuilds (build-to-suits) are a competitive advantage, executed well across the portfolio to meet tenant needs.
• Debt financing markets: New York City expected to be immune to macro turbulence, with a flight to quality, and the CMBS market has buyers but with higher risk premium.
• Casino license: As-of-right project, environmental review started in December 2024, expects license award by year-end 2027.
• Office to resi conversion: Activity consistent with Investor Day, multiple projects underway, with significant impact on vacancy levels.

Debt-related businesses: NOI exceeded forecasts, leasing results were well ahead, and debt-related profits were very strong. Equity portfolio: Acquired 500 Park, which is now 100% occupied; bought out partner in 100 Park, which is 97% leased. SUMMIT One Vanderbilt: Was the number one attended experience in Q1 and set a ticket presale record with over $0.5 million in advanced ticket revenues sold in one day.

• Debt-related businesses: Expect upward bias to guidance if current debt investments close.
• FFO: Comfortable with current guidance range, and the balance sheet is insulated from downside due to terming out debt and hedging most floating rate debt.
• Leasing and occupancy: Comfortable with 2 million sq ft leasing and 93.2% year-end occupancy targets, monitoring pipeline trends closely.

• Market volatility: Impact on credit markets and leasing activity.
• Macro uncertainty: Potential impact on corporate decision making and leasing pipeline.
• Tariffs: Uncertainty affecting market sentiment and leasing activity.

Q: Talk a little bit more about prebuilds since topic that we're hearing from further from you guys from other landlords? Just curious how that has gone in winning tenants, what the economic rent potential is versus raw space and how that's been going versus the market in general?

A: Steve Durels said prebuilds (build-to-suits) are competitive advantage, nearly mandatory for tenants 10,000 sq ft or less, as tenants want to take out cost mystery and accelerate timeline. SL Green has in-house design and construction expertise, executing well across portfolio.

Q: Talk about trends in the overall debt financing markets and if you have a sense for it?

A: Harrison Sitomer said New York City expected to be immune to macro turbulence, with flight to quality, and CMBS market has buyers but with higher risk premium; Marc Holliday added pricing gapped out but there are buyers unlike prior years with no activity.

Q: Can you talk about the casino license timeline?

A: Brett Herschenfeld said environmental review started in December 2024, expect license submission in June 2027, local approval by end September 2027, and license award by year-end 2027.

Q: Going back to the active leasing pipeline, your press release noted 1.1 million square feet. Would you say they're kind of following the typical leasing deal timeline or is there evidence that corporate decision making is pausing?

A: Steve Durels said it's a function of tenant types, no material change in sentiment or decision making, pipeline stable with 64 tenants in pipeline, 44% with expansion requirements.

Q: On the fee rents and TIs came down in 1Q. Can you talk a little bit more about how you kind of see that through the course of the year and what tenants are accepting?

A: Steve Durels said concessions stable, potential tightening in strong submarkets like Park Avenue and Sixth Avenue, face rents expected to go up driving potential concession pressure submarket by submarket.

Q: I want to ask about a couple of your objectives for the year, which includes 2 million square feet of leasing and 93.2% year-end leased occupancy. So in the first quarter, you're ahead of the pace, but occupancy did go down. And I'm wondering just given all the uncertainty in the markets today, if you still feel comfortable with those targets?

A: Marc Holliday said comfortable, budget in excess of 2 million sq ft, 100,000 sq ft leased year-to-date, monitoring pipeline, tenants still have real need for space.

Q: On the Investor Day, there was a lot of emphasis around office to resi conversion and the opportunities and how regulatory [indiscernible]. Can you just give us an update in regards to that and how you're thinking about opportunities in your portfolio to do some of the potential more office to resi conversions?

A: Marc Holliday said office to resi conversion activity consistent with Investor Day, multiple projects underway, significant impact on vacancy levels, with projects like 750 Third, 675 Third, 767 Third, and Midtown South projects.