[NYguy]

https://www.zonebourse.com/amp/cours...Call-42481379/

Transcript : SL Green Realty Corp. - Special Call

Presenter Speech
Harrison Sitomer

.....that focus on growth this year has been narrowly targeted towards acquiring premier, well-located office assets on Park Avenue that are highly sought after by tenants, attractive to international LPs and importantly, priced at a discount to pre-COVID trade.

So why are we so focused on the Park Avenue Spine. First, this has been and continues to be in the center of our backyard. Second, it's where everyone wants to be. Park Avenue's recognition as the premier commercial submarket was further enhanced this year with the ongoing development of JPMorgan's 2.3 million square foot headquarters at 270 Park, Blackstone's lease extension at 345 Park and the nearly completed deal with a major financial institution at 350 Park. And with the city of options, why are we all choosing Park? Look, first, the most important amenity and neighborhood has to offer, its restaurants. You will recognize a few of our well-known spots, including Joji Sushi, Michelin [ Starleaf and Fasano ]. Further, the neighborhood offers residences, social clubs and hotels like the [ Aman ] and 432 Park. No other market offers a suite of amenities like this for New York City's business community.

And our portfolio continues to benefit from these well-established offerings, and we are proud to announce 2 additions to this portfolio this year at 450 Park and 245 Park.

.....We've been jocking to control 245 for over 5 years now. The building features blue chip investment-grade tenants is a super block adjacent to Grand Central with direct connectivity and it's across the street from JPMorgan's headquarters. Additionally, the building provides an incredible repositioning opportunity with 30% vacancy that is well suited for enhancement. Let me take you guys through the time line of this deal.

245 Park came on the market in 2016. The asset traded to HNA for a price above where we identified value. However, we did see an opportunity for our DPE program and originated $55 million of mezzanine financing demonstrating our commitment to seeking the best risk-adjusted return. A year after closing with our foot in the door through that loan and HNA's financial distress back in China, HNA thought us out to provide them $185 million pref equity investment, which was over $400 million inside of their basis.

Knowing this could potentially be headed into problems down the road, we made the investment with full legal protections guarantees and day-to-day management authority. Despite HMA's continued management roadblocks, we were still able to get close to 500,000 square feet in leasing done at the building. A testament to Ed, Megan, Steve and their teams as well as the quality of the real estate and the location. But all the success of the building couldn't prevent HNA from getting out of their own way and escaping their corporate problems and following almost all of their assets worldwide into bankruptcy, including 245.

Feeling confident that we would ultimately prevail in acquiring the asset out of the bankruptcy, our biggest focus is we're protecting the collateral from HNA, expediting the process to keep costs down and reinstating the attractive 4.3% all-in fixed rate debt through 2027 in an unreliable financing market. We immediately got to work on all 3 items. But we knew with multiple sophisticated lenders with the right to renegotiate terms pursuant to that bankruptcy, we are in for a fight. Not to mention HNA was acting nefariously along the way, trying to constantly delay and savitage our well-intentioned plans.

Despite that behavior from HNA, one by one, we signed up the lenders to reinstate their debt on the same terms. It's in volatile markets like these where a thorough business plans, repositioning experience and deep relationships prove to be extremely valuable.

With all that debt in place, we closed on the acquisition in September. The acquisition was completed inclusive of all costs on a basis still $400 million inside of HNA's basis. Not to mention, we did retain a $185 million judgment against HNA, which we will continue to pursue and expect to receive some proceeds here in the future.

Now that we own the asset, what is the plan? Our strategy is to deploy efficient and value maximizing capital into the building. The program, which we have developed with [ Con Pederson Fox ], the same architectural team from OVA and OMA will allow us to manage our all-in basis while also attracting the highest caliber tenants on Park Avenue. Let's take a look at a few of these images.

First, you will see the Park Avenue entry of the building with an over cloud [ Tarikoto ] facade and an extensively upgraded and enhanced public plaza on the avenue. We are only over cladding the facade on Park and extending the overcloud returns on 46 and 47 to 4 base. As we walk into the Park Avenue entry, you will notice a bright and sophisticated lobby, which will feature never before seen lit connectivity between the Park and [ Lexington ] entrances.

Further, the lobby will feature direct state direct access to a state-of-the-art amenity program featuring a new gym, a new wellness center and F&B run by [ Daniel Balu ].

As we make our way to the top of the house, you will see the brand-new rooftop amenity, which will serve all tenants in the building and serve as a source of ancillary income for the asset. With a total base building budget of $171 million and the SLG management team at the helm, we are well suited to push rents, lease up vacancy and retain existing tenants.

After completion of this transformative base building program, 245 will be one of the top 3 renovated assets on Park Avenue in a peer set with [ Seagrams ] and [ Weaver ] house with an expected all-in basis before leasing costs at approximately $1,200 a foot.

..... There are presently 318 active tenant searches being tracked, covering almost 19 million square feet, 2/3 of which are in the fire and [ TAMI ] sectors.

Looking forward, there's 85 million square feet of lease expirations over the next 5 years or about an average of 17 million square feet per year as compared to only 14 million square feet in 2022 and 9% of expiring leases between 2023 to 2027 or 0.25 million square feet or larger, and the majority of those are between 10,000 and 100,000 square feet. Our portfolio is particularly well positioned to capture those larger tenants given that we have 4 of our best buildings with contiguous blocks of high-quality space.