SL Green Realty Corp. (NYSE:SLG) Q4 2023 Earnings Call Transcript
SL Green Realty Corp. (NYSE:SLG) Q4 2023 Earnings Call Transcript January 25, 2024
SL Green Realty Corp. isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).
Operator: Thank you, everybody, for joining us, and welcome to SL Green Realty Corp.'s Fourth Quarter 2023 Earnings Results Conference Call. This conference call is being recorded. At this time, the company would like to remind listeners that during the call, management may make forward-looking statements [Technical Difficulty] cannot rely on forward-looking statements as predictions of the future events as actual results and events may differ from any forward-looking statements that management may make today. All forward-looking statements made by management on this call are based on their assumptions and beliefs as of today. Additional information regarding the uncertainties and other factors that could cause such differences to appear are set forth in the Risk Factors and in D&A section of the company's latest Form 10-K and other subsequent reports filed by the company with the Securities and Exchange Commission.
Also during today's conference call, the company may discuss non-GAAP financial measures as defined by Regulation G under the Securities Act. The GAAP financial measures most directly comparable to each non-GAAP financial measure discussed and the reconciliation of the differences between each non-GAAP financial measures and the comparable GAAP financial measures can be found on both the company's website at www.slgreen.com by selecting the press release regarding the company's first quarter 2023 earnings and in our supplemental information included in our current report on Form 8-K relating to our fourth quarter 2023 earnings. Before turning the call over to Marc Holliday, Chairman and Chief Executive Officer of SL Green Realty Corp, I would like to ask those of you participating in the question-and-answer session.
of the call, please limit your questions to 2 per person. Thank you. I would like to turn the call over to Marc Holliday. Please go ahead, Marc.
Marc Holliday: Okay. Thank you. Good afternoon and glad everybody could join us today. I'm extremely happy, and I'm extremely proud with how we ended 2023, navigating what was a challenging year and showing that we have turned the corner going into 2024. We're just a few weeks into the year and only 7 weeks on from our investor conference, but we already have so much new activity that we want to talk about and share with you today. Normally, I don't like to repeat the earnings press release. Most of you have it. You've read it and I don't like to do that on these calls. But I think today is different. I think it deserves a moment to reflect on what we have achieved in the fourth quarter and at the outset of the year during these first few weeks.
At 2 Herald, we increased our ownership in a well-located asset and fully resolved a $182.5 million leasehold mortgage, all of which was accomplished for very little out of pocket. There's more work to be done for sure, but we are on our way to stabilizing this asset. There was seismic news in New York City retail this month with Jeff Sutton our long-term partner and friend and among the best retail deal makers in the city, wait, Jeff, if you're listening in, I know what you're thinking, the best retail deal maker in the city, pulled off not 1, but 2 amazing deals. 717 Fifth Avenue sold for $963 million generating full repayment of the capital stack plus distributions to Sutton and ourselves equating to approximately $8,000 per square foot of sale price.
And to prove this as an outlier right across the street, add another legacy Green Warton asset, Prada bought 720 and 724 Fifth Half for $835 million a deal that was also just recently closed. And these deals developed quickly and confidently and I think it's very, very exciting for the city. We had a third great example of user acquisitions in the retail space in the past 30 days with the Swiss retailer Acre buying the entire retail condo that we owned at 21 East sixth Street for over $40 million and exceeding $7,000 per square foot thereby putting an exclamation point on the trend of retailers making permanent commitments to New York City through the purchase of desirable retail assets. This is Acre's second purchase from SL Green over the past year.
We expect this trend to continue as we are already aware of another transaction in the works in that part of town. Obviously, 717 wasn't an anomaly in confidence in Fifth Avenue and high street retail in New York City is once again on the rise. But let me remind you some of the headlines from the past few years, relatively recent headlines. When FT declared the death of High Street retail, Cranes talked about a retail apocalypse on fifth and New York Times concluded that retail has abandoned Manhattan. My point here is simply that people often underestimate how quickly things can change from these sort of historical media headlines to record-setting transactions just a few years later. I urge you all to keep this in mind when you read similar headlines about the office sector.
Speaking of office, we ended the year strong with over 500,000 square feet of New York office leasing in the fourth quarter, which enabled us to report an uptick in occupancy for the second consecutive quarter after having stated publicly last summer that we believe the market has essentially hit bottom. And JLL recently reported that SL Green signed the greatest number of triple-digit leases in all of New York City last year. There's good news on the debt front as well. We gave you a business plan in early December with ambitious plans to extend, modify upwards of $5 billion in debt. which certainly gives new meeting to the definition of stretch goal. Happy to report that even before the year ended, we put the first 1 on the Board with 7 day, which we successfully extended for 3 years at terms that are favorable for the asset and should help us get our JV done on that asset.
Another aspirational goal we set of $1 billion of debt reduction this year on the heels of $1 billion of debt reduction last year. And we've accomplished already over $200 million of that reduction sitting here in sort of mid-Jan. So not to be overshadowed by all this great news, our premier development on 760 Madison which has really set, I think, a new standard for Upper East Side, bespoke New York luxury, and we just signed a contract this morning for the ninth floor, bringing us to 6 out of 10 units spoken for with a contract out on a seventh. So we're off to a great start, certainly confident in our business plan and optimistic about the city's continued recovery where we have some positive indicators to report. The city's OMB forecast for 2024 is hot off the press and looks really good with over 90,000 private sector jobs forecasted for this year and another 97,000 jobs forecasted for 2025, certainly continuing to bring New York's employment base to record highs.
As or more importantly, after a year where we saw slippage in the office using employment, the city is forecasting a robust reversal that is -- will more than make up for those losses with 42,000 office-using jobs projected for this year, and that would also set office using record in 2024. So kudos to the Adams and Hochul administrations and all involved for helping them bring back tourism, improve security and implement pro-business policies. As a result of all that, we are launching our fundraising efforts to amass a minimum of a $1 billion capital allocation to become active participants in this city's ongoing recovery and resiliency. In fact, after we get off the phone, we're heading to the airport, and we're on a plane to Asia to formally kick off those efforts.
We're excited about the prospects of this. We got a lot of excellent response and inbound inquiries on these efforts. Most importantly, what we're doing, along with other announced deals, shows that new capital is forming in this market. The second indicator that we passed the bottom, of course, the first indicated being our statements to you in July of last year. With that, happy to open it up for questions. Thanks.
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