SL Green Realty Corp. Q2 FY2025 earnings call

• Leasing activity: Over 540,000 sq ft leased in Q2, YTD total 1.3 million sq ft, with a pipeline of over 1 million sq ft for near-term execution.
• 522 Fifth deal: Realized nearly $90M profit on a $130M investment in well under a year.
• 625 Madison sale: Sold 50% participation interest, generating over $300M cash proceeds.
• Fund commitments: Closed over $500M, total $1B in fund commitments, over $2B liquidity available.
• Casino bid: Filed response to state's RFP for Caesars Palace Times Square project, a 13,000 page document.
• SUMMIT: Second quarter results slightly below expectations due to Ascent experience offline, expected back online by end of summer.

In the second quarter, SL Green concluded over 540,000 square feet of leasing, bringing the year-to-date total to 1.3 million square feet of space leased. The pipeline of near-term execution is over 1 million square feet, with 80% of those leases being 25,000 square feet and under. Half of the pipeline is financial services, and the other half includes a broad range of legal, professional services, government, nonprofit, TAMI, and real estate sectors.

Raised earnings guidance midpoint by $0.40 a share. Drivers include $0.69 a share incremental FFO from 522 sale, offset by $0.19 a share reserve on 625 Madison, $0.50 a share uplift from debt and preferred equity, offset by $0.10 a share higher interest expense. Maintained $20M discounted debt gains assumption, with potential for more gains from debt extinguishment.

• Market volatility and economic backdrop posing challenges.
• Potential impact of mayoral elections on leasing, though no evidence of impact seen yet.
• Special servicing designations with potential for more distressed situations.
• Rent freeze proposals potentially impacting office to resi conversions negatively.

Q: Concern about occupancy dip and timing of deals A: Management dismisses as a silly overreaction, states pipeline is full, leasing velocity strong, and reiterated guidance Q: Investment in 522 and accounting disclosure A: Investment had range of outcomes, CMBS investment not disclosed like preferred equity, gain could be larger than guidance Q: Impact of mayoral primary on leasing A: No impact seen on ongoing tenant negotiations Q: Progress on development sites and competition A: Working on multiple opportunities, priorities remain, deals take time Q: Capital markets and foreign buyers A: Equity markets healthy, trophy assets trading, no signs of foreign buyers pausing Q: SUMMIT additional locations A: Target cities include Tokyo, London, Seoul, hope to announce by end of year Q: Concessions and rent trends A: Concessions flat, face rents rising, rent freezes could impact market negatively Q: Comfort with leasing goal A: Confident in hitting 2 million sq ft goal, pipeline continues to grow Q: Casino bid status A: Filed application, one of 8 or 7 bids for 3 licenses