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SL Green Realty Corporation (SLG) Q1 2019 Earnings Call Transcript

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SL Green Realty Corporation  (NYSE: SLG)
Q1 2019 Earnings Call
April 18, 2019, 2:00 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Thank you everybody for joining us and welcome to SL Green Realty Corp's First Quarter 2019 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. Actual results may differ from the forward-looking statements that management may make today. Additional information regarding the factors that could cause such differences appear in the MD&A section of the Company's Form 10-K and other 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 SEC Regulation G. The GAAP financial measure most directly comparable to each non-GAAP financial measure discussed and the reconciliation of the differences between each non-GAAP financial measure and the comparable GAAP financial measure can be found on the Company's website at www.slgreen.com by selecting the press release regarding the Company's first quarter 2019 earnings.

Before turning the call over to Marc Holliday, Chairman and Chief Executive Officer of SL Green Realty Corp, I ask that those of you participating in the question-and-answer portion of the call, please limit your questions to two per person.

Thank you. And I will now turn the call over to Marc Holliday. Please go ahead, Marc.

Marc Holliday -- Chairman and Chief Executive Officer

Okay. Thank you. Good afternoon everyone and thank you for joining us today. The first quarter of 2019 was an another strong period of performance for SL Green and for the New York City economy that continues to drive our success. Yet again, SL Green was far and away the most active player in our market, signing significant leases, hitting major milestones in our development portfolio, moving swiftly to originate debt and preferred equity opportunities and contracting to dispose mature and non-core assets that fund our aggressive share buyback program thereby capitalizing on the unprecedented discount in our stock.

At our Investor Conference in December, we detailed 18 specific goals and objectives contained within seven broad categories of performance. In the leasing category, Q1 is typically our slowest leasing quarter, however we executed over 400,000 square feet of Manhattan office leases, more than doubling our internal expectations for the quarter. And to start April, we have already inked another 235,000 square feet of leases in the Manhattan portfolio and still have over 680,000 square feet of deals in pipeline. The three new leases announced yesterday is further evidence of a market moving in the right direction as each of them represented organic growth in space leased. Clearly, the confluence of a strong New York City employment growth along with the winnowing supply of suitable office inventory is driving improvement in net effective rents and increasing average asking rents. Notably our mark-to-market for the quarter was 4.5%, above the high-end of the range we provided to you in December and there is 20 million square feet of active tenant searches that we are closing to tracking.

In the area of investments, the market continues to demonstrate good support for the deals priced at the market. There were several sizable deals consummated in the otherwise typically quiet first quarter. 30 Hudson Yards sold for $2 billion, 237 Park completed a partial sale at $1.25 billion valuation. And 250 Church sold for an excess of $860 per square foot, fairly attractive price for downtown asset. And of course SL Green participated in this market by entering into a contract to sell 521 Fifth Avenue for 300 and $81 million of price level that was above our own internal NAV for this asset. During the first quarter, there was $39 billion of private capital raised for global real estate investment, $8 billion more than the prior quarter and it is now estimated to be at $338 billion of total dry powder for real estate, representing almost $1 trillion of potential buying power for real estate around the world. And certainly New York City will continue to garner more than its fair share of that dry powder as it did in 2018 with over $50 billion of commercial transactions. Obviously, the public market concern with New York City stands in stark contrast to the views and actions of private market investors who are targeting the exact type of product that we invest in and know better than anyone.

These investors are typically looking to invest in assets with global appeal and strong credit tenancy in a market with enormous depth and liquidity. We think private investors which make-up the vast majority of the real estate investment market have the market analysis right and we trust that the public market will eventually recalibrate and return to a fair valuation for our highly sought after assets. Through all of this incredible work, we remain true to our core mission of investing, managing, developing world class properties in New York City. We continue to demonstrate our ability to undertake complex development projects with over $7 billion worth of assets now or soon to be in development or redevelopment.

Our One Vanderbilt construction progress has been just as vigorous as our leasing activity. As of April the building superstructure reached the 60th floor which is just above the height of the off-deck (ph) and steel is projected to top out in October of this year, months ahead of the original plan. So far this year, we signed expansion deals at One Vanderbilt with the Carlyle Group and McDermott Will & Emery along with a new lease to KPS Capital Partners, bringing the project to 57% lease with more leases pending. So we are well on the way to our upsized goal of 65% leased by the end of 2019. Building on the success of One Vanderbilt, we announced plans in December to reassemble the same design and development team, KPS, Hines and Gensler are for a sweeping redevelopment of One Madison Avenue, the Class A office tower across from Madison Square Park. We are excited to break ground in this project in 2020 as we believe One Madison will transform Midtown South in the same dramatic way that One Vanderbilt has already done for East Midtown. We commenced our leasing program for the redevelopment of OMA (ph) and are getting very strong response from tenants confirming the excellence of the design of our development plan.

When you put all these pieces together, you can see that we have a comprehensive plan in place to outperform our peers and stay at the top of our game. But that we know is not enough. Our entire Executive team is deeply invested in our stock and we share your laser focus on doing everything in our power to restore the connection between our share price and the underlying value of our assets. In 2019, we will continue to monetize assets and redeploy capital into share buybacks, because every time we buy a share, we're buying more of a better portfolio and we know it's only a matter of time before the public market follows the private market and recognizing that New York real estate remains a stable, profitable and desirable investment.

So with that we'll open it up for questions.

Questions and Answers:

Operator

Thank you. (Operator Instructions) And our first question comes from the line of Emmanuel Korchman with Citi. Your line is now open.

Emmanuel Korchman -- Citigroup Global Markets, Inc. -- Analyst

Hey everyone, good afternoon. Marc, maybe it's more appropriate for Andrew. If we're looking at your DPE business, you've had a few assets specific to retail that you've repossessed in the last couple of quarters. Can you just talk about how you envisioned the rest of the assets with net book performing and also just maybe an update on the retail environment overall.

Andrew Mathias -- President

Sure. I think we have -- as of the end of Q1, we have six retail DPE positions remaining after 106 Spring team onboard as part of the portfolio. We anticipate repayments in two of those over the next 60 days or so. So it will be down to four assets remaining. So I think that in terms of retail assets coming back from the book we're probably toward the end of that unless we find new distressed assets to acquire which I definitely wouldn't rule out and we did in the case of 2 Herald. Generally, the retail market, we think most of the major sub-markets have bottomed out and we've seen -- If you take for example 106 Spring, we're going to be reducing asking rents on that property from where our borrower was asking to where we're going to ask as the new owner probably in excess of 30%. So you'll see we think that'll generate activity at that property and you see activity in other properties where owners are able to meet the market on rents. There are tenants active in all the major retail sub-markets in Manhattan. So I think it's, we think most of the sub-markets have bottomed out.

Emmanuel Korchman -- Citigroup Global Markets, Inc. -- Analyst

Great, thanks. And Marc in your prepared remarks I think you said there's 20 million square feet of active tenant demand in New York. Could you break that down for us into maybe how much of that is maybe on musical chairs and how much of that is tenants either expanding or looking for new space in market?

Marc Holliday -- Chairman and Chief Executive Officer

No, I can't Emmanuel, but I can tell you that a good chunk of it is growth space for sure. I mean you're seeing in our portfolio and elsewhere enormous growth in the market, which is driven by employment growth. Last year was another big year for employment growth in the city. We're off to a good start, private sector job growth is over 20,000 jobs I think through February of this year already. So as long as there's new jobs, new office using jobs, there's gonna be growth in that segment. First Republic lease that we announced yesterday is a great example of that where that most if not all of that Steve I believe is growth.

So I mean that's just enormous and enormously favorable and that's why financial services have reemerged as a one of the leading sector for both tenant with releasing but also growing and that's I think contrary to what certainly people we've spoken with in the past had thought would be the case a year, two, three years ago. There's significant growth obviously in the technology industry and so that's, there's a big -- I'd say most of the technology demand within that 20 million is almost entirely growth, because they're new to the sector. So when you see technology taking down in a given year, let's say 15% of $30 million fee for, between 3 million to 5 million square feet of space, that's all growth, because they're not really or mostly growth, because they're not rolling legacy leases. They're new to the market. So I can't give you an exact number of the $20 million, but I'd (inaudible) to say at least 20% to 25% of that represents growth. But I just want to caution, I'm giving you sort of an off the cuff answer based on just extrapolating from the experience in our own portfolio.

Emmanuel Korchman -- Citigroup Global Markets, Inc. -- Analyst

Thanks Marc.

Operator

Thank you. And our next question comes from the line of Alexander Goldfarb with Sandler O'Neill. Your line is now open.

Alexander Goldfarb -- Sandler O'Neill + Partners, L.P. -- Analyst

Thank you. Good afternoon. Good afternoon (inaudible). So two questions. First, on a modeling perspective, Diesel came out I'm guessing that, that will get offset later this year by PUMA coming on but then you have the Ralph Lauren expiration at the end of this year which would leave a $30 million NOI hole in next year. So maybe you could just provide some perspective on how we should think about the Diesel and PUMA interchange this year and how we should be thinking about what you guys are doing to backfill that $31 million Ralph Lauren NOI that's going away at the end of this year, so the impact of next year.

Andrew Mathias -- President

I'll cover the first part on Diesel and PUMA. The Diesel outcome is not yet certain so we have to see that play out over the next couple of months before I know the impact and the number is expected to be nominal. The charge you took in the first quarter is related to write-off of straight line, that's a non-cash adjustment that we have to take because of the uncertainty of the future depending on what happens, I don't expect there to be a big impact for that deal and of course PUMA coming on is important not so much for '19, because it's probably the back half of the year very late in the year, but more so for '20 so we'll highlight that in December and I'll let Marc address the 625 situation.

Marc Holliday -- Chairman and Chief Executive Officer

Well I, mean at 625 in the Ralph Lauren I think I have numbers here somewhere is about 385,000 square feet. Every year in the portfolio we have anywhere between 1.25 million and 1.5 million square feet that rolls. Polo seems to get a lot of attention. I think if it goes in the paper it gets a lot of attention if it doesn't, go in the paper it doesn't. We had a very large tenant at the news building that rolled and then we backfilled with VNS (ph) and you know I can and we can go on and on. We had vacancy at 10 East 53rd, now it's a lease building, a vacancy at Tower 46 now is the lease building, so we'll have vacancy at 625 Madison will lease, it will be lease, so how we going to deal with it. I don't see dealing with it in a different fashion than we deal with all of the role in the portfolio. We have 30 million square feet that we own and manage in any given year as I said about 1.25 million, 1.5 million square feet role. So in 2019 at the end of '19, Polo we'll be a part of that. I don't think it's exceptional or notable in its size nor how we'll deal with it, our typical approach for any building, certainly for 625 which has been in earnings force for 15 years will be to go through some level of redevelopment of that building and then long-term lease that space to replace Polo, but again I don't know, I don't see a different and notable than what we've done over the decades in any building we have when we have a tenant rollout of what I'll call space that needs to be upgraded, because Polo within that space where I think 15 years. So this space and the building itself is probably you know in need of a revisit and that's kind of what we do, Alex, it's just, is repositioned turn and then we let the building which is why we're 96% leased and I don't think really ever been below 94% leased in the history of the company.

Alexander Goldfarb -- Sandler O'Neill + Partners, L.P. -- Analyst

Right. No, Marc, I understand just thanks from a perspective that a permanent long-term tenant or rehab is on hold until you guys reset the ground lease. That's why I was asking. Yeah, there's a --

Marc Holliday -- Chairman and Chief Executive Officer

No. I wouldn't say necessarily. I mean we feel very confident in our position in 625. I think I said that on the last call as well. We're maybe at the Citigroup -- as know, I said that -- maybe was at the city meeting that we had, but one of those two venues. I mentioned that we are very experienced as both lease holder and a fee owner. I think we've had probably in the aggregate more experience in those two as almost any other owner in the city and we have an expectation of where rents will land on reevaluation and we're going to be actively marketing this space in 2020, but you can't really market this kind of space which you can elaborate on until you have possession you white box it and you have redevelopment plan, but I could say that about 20 other buildings. So we're not going to really treat this any different and we think we have a manageable plan for the rent reset which we fully anticipated when we originally bought the building and now the data is here and we'll deal with it, but, I don't know Steve do you want to add a thing to that?

Steven Durels -- Executive Vice President

Well I mean as we said here at this point in time, we're deep into design development for the repositioning of the space. Polo has the majority of the building. The buildings bonds were obviously great. It's got one of the best locations in the city. It's pricing will be extremely competitive relative to other large blocks of space in that part of town and we think we've got a very appealing capital program for the -- that we're designing for the lobby, elevator cabs and entrance to the building.

Alexander Goldfarb -- Sandler O'Neill + Partners, L.P. -- Analyst

Okay. And then second question is just with the recent passage today of the the Energy Act that the City Council did upgrade all the buildings you have the commercial rent control discussion market you know is still in discussions. Have you seen any change in the way people are underwriting commercial real estate or NOI profiles or anything that would go into how you guys look at buildings given what's been passed by City Hall today and what potentially could be passed?

Marc Holliday -- Chairman and Chief Executive Officer

Not our buildings, because we've been -- its been passed -- potentially being passed by City Council is being proposed in any case. It's something along the lines of what we've been doing for 10 years and a lot of the major owners, you know are on this, being good corporate citizens and making their buildings as green as possible and lowest carbon emission with a very smart building management systems today and materials that are extraordinary at preserving electricity and conservation and everything goes along with it. So I think 63% of our portfolio is LEED certified, we have something like 24 ENERGY STAR labels, we're another -- again in 2018 EPA, Energy Star Partner of the year. We rank very high on a number of the rating scales that are published and shareholders see like the Bloomberg index I know for one, I think we're we're on top of performance in our sector. So this is -- if you own older buildings that you haven't been investing in and the bill passes as contemplated, there will be certainly some one time cost to renovate the benefited as your operating costs are lowered, but for buildings like ours that I think are already at the leading edge, there'll be some additional compliance, but we would have done it anyway, because that's the path we're on. You've heard me speak many times about wanting to be a lead partner in the administration's goal of reducing energy emissions 80% by 2050 and we have our own internal goals that are more accelerated than that. So look there are elements of the bill that I think badly do need to be massaged and revisited, because they've taken in some cases a one shoe fits all approach which isn't appropriate. So there are there are details of the bill that we're hoping get changed in the final hour to reflect more fully the input that we have had with the Urban Green Council and other owners have had, and we hope City Council doesn't turned a blind eye to some of those recommendations. But you know in the general spirit of having a framework within which to continue down a path of making our buildings more sustainable, I feel like we're already on that path.

John Kim -- BMO Capital Markets -- Analyst

Thank you.

Operator

(Operator Instructions) Our next call comes from the line of Craig Mailman with KeyBanc Capital. Your line is now open.

Craig Mailman -- KeyBanc Capital -- Analyst

Hey, good afternoon guys. Just going back to the DPE book, you guys have a big origination quarter in 1Q. But I know the target for the year is to kind of shrink it by $75 million. So could you maybe just give us how you guys seeing the trajectory for the balance through the rest of the year?

David Schonbraun -- Co-Chief Investment Officer

Sure, it's David, I don't think there's any change in our guidance. You know we can 100% control when we get payoffs and when we find attractive origination. So I think you'll have probably as you're seeing higher front end originations and we expect to get more payoffs starting in next quarter and by the end of the year we'll be at the level that we set.

Craig Mailman -- KeyBanc Capital -- Analyst

Helpful. And then just on the sales environment you guys got 521 done. Just curious kind of what the depth to the buyer pool was there and maybe just update us on what you guys currently have in the market, maybe what else may maybe marketed here in the near term?

Andrew Mathias -- President

Sure. It's Andrew. We had great demand for that asset both foreign and domestic. There were -- we went to contract on that asset without a due diligence period. So, there were still hard offers which is kind of unique to the New York market. And I felt very strong about the process there. Second part of the question?

Marc Holliday -- Chairman and Chief Executive Officer

What do we have at the market --

Andrew Mathias -- President

Out to market, we're sort of, other than the suburban portfolio which we've discussed, we're evaluating next steps and which asset will be most appropriate to roll out next to meet the healthy demand.

Craig Mailman -- KeyBanc Capital -- Analyst

That's helpful. What was the cap rate on 521?

Andrew Mathias -- President

4.6

Marc Holliday -- Chairman and Chief Executive Officer

4.6

Craig Mailman -- KeyBanc Capital -- Analyst

Okay. Thank you.

Operator

Thank you. And our next question comes from the line of John Kim with BMO Capital Markets. Your line is now open.

John Kim -- BMO Capital Markets -- Analyst

Thank you. On your DPE looking at 2020, I know you don't want to give guidance on that now. But you do have $1.3 billion of maturities next year and realizing there's a lot of extension options in this portfolio. Can you just discuss your ability and willingness to replenish this amount of capital?

Marc Holliday -- Chairman and Chief Executive Officer

Well, I think we originate well over $1 billion a year and we're very active working with existing borrowers on extending loans. So I think our average kind of life is usually somewhere between two and three years in general. So I don't -- maybe it's a little larger than it has been in some prior years. It's probably provided some chunkier positions, but we're working with owners right now to do some extended deals and given the historical pipeline we have -- I think we all will have no issue at the levels end up exactly where we want them to be.

Andrew Mathias -- President

Yes. Just I would also just add to that. There's always this kind of push pull we hear from shareholders, balance too high, can you keep the balance size. The balance too high you can keep the balance high. And so it's always confused us over the years so we just sort of manage it to roughly that 10% mark and it's been a great business, obviously a hugely profitable business and this year it's yielded a number of very interesting and compelling investment opportunities for us which is -- it doesn't, isn't always the case but over the years we can probably rattle off a dozen or more properties that the DPE program led to direct ownership. So the program's great. I think we have very good management of it. But in this sort of unique moment in time as yields on this paper hover around 9% and I think the FFO yield on buying back our own stock is probably close to 7% or 8%. The conversion of structured finance investment balances that we don't reinvest for any reason into either further debt paydown, but also on a leverage neutral basis into equity into the -- buying our own shares is almost to push earnings was. So it's a very interesting time for us where you mentioned that $1.3 (ph) billion of money coming back now, we expect to be very active in the originations front, next year as is this year. But again next year is next year, we'll have to gauge the market and things could change in which case maybe we're not. But with the stock where it is and the yields almost at parity we certainly have a very interesting alternative if we choose for whatever reason not to put out the same levels into DPE next year.

John Kim -- BMO Capital Markets -- Analyst

Okay. And Marc you referenced in your prepared remarks the public markets will eventually recalibrate to private market valuation.

Marc Holliday -- Chairman and Chief Executive Officer

Yeah.

John Kim -- BMO Capital Markets -- Analyst

Can you just --

Marc Holliday -- Chairman and Chief Executive Officer

I think so.

John Kim -- BMO Capital Markets -- Analyst

What the catalyst will be for that, because I think a lot of us thought the catalyst would have been selling assets and buying back shares and it hasn't happened yet.

Marc Holliday -- Chairman and Chief Executive Officer

Well I think then we just continue, right. I mean I've taken to its extreme. We've got assets worth what they're worth. I mean again 521 we put out, we talk about NAV at levels much higher than I guess $87 a share, much, much higher. The NAV underlies that and 521 went for us north of NAV. So again and that's just -- and that's the same as 3 Columbus, that's the same as 1745 Broadway. So when we sold those assets last year. So we have a high degree of confidence in being able to properly value or I would almost say conservatively value our portfolio, and as we just keep realizing it's not a theory, it's when you sell it you actually get the cash at or above the NAV, and then buyback the shares at the very discounted value so that taken to its limit is almost self-fulfilling.

So whether or not that'll be a catalyst for people to come in and buy the shares. We hope so and we would expect so, but if not, we certainly can continue our program of doing that and fully expect to because this is as I've said before, probably one of the greatest investment opportunities we've seen in our 21 years as a public company.

John Kim -- BMO Capital Markets -- Analyst

Thank you.

Operator

Thank you. And our next question comes from the line of Jamie Feldman with BoA Merrill Lynch. Your line is now open.

Jamie Feldman -- BOA Merrill Lynch -- Analyst

Great. Thank you. Matt it looks like on some of your portfolio metrics you're trending ahead of where your full year guidance would be like same store NOI, leasing spread. Can you talk about how those -- how you expect those trend for the rest of the year and looks like you maintain guidance. But just what's your thoughts are around that?

Matthew DiLiberto -- Chief Financial Officer

Sure. Yes. There are three months actually across the board, we were ahead FFO, we were ahead of our expectations, leasing volume, mark-to- market, same store occupancy, same store NOI growth everything was ahead. But you know it's three months in so we're encouraged by that but not in a position to adjust at this point any of our guidance or goals that we set out back in December. But happy to see trending ahead of course.

Jamie Feldman -- BOA Merrill Lynch -- Analyst

Okay. And then maybe for Steve, can you talk more about just tenant discussions and what types of tenants you might think might be interested in One Madison and even for the rest of One Vanderbilt?

Steven Durels -- Executive Vice President

Sure let's start with One Vanderbilt. We've got active discussions with several tenants at One Vanderbilt that are all financial services related. Or in this case one good sized tenant call it business services type tenant. But I would think as we finish off the podium of the building and focus our attention toward the upper third of the house it almost be exclusively Financial Services. The signing of KPS, we've got another lease that we're well down the line with a private equity firm. And we're doing tours over there of the site tours and the boardroom presentations almost on a -- if not daily every other day basis. So it is -- the momentum is really feeding on itself at this point.

With regards to One Madison, the obvious tenant base there is Tammy. But having said that we've received RFPs from a large financial services business. So I wouldn't be surprised for sort of a Fintech type of tenant to be a likely candidate for that building. But we've been in front of maybe a dozen 15 tenants at this point, people who are really enthusiastic about the development plan for the building because it's bringing a brand new large scale state-of-the-art product to a sub-market where that that opportunity doesn't exist. And we're sitting right on top of a subway line across the street from the park. So it checks all the boxes, whether your financial services or whether you're a Tammy type tenant. But that building, I think is going to be a wild success from a leasing perspective.

Jamie Feldman -- BOA Merrill Lynch -- Analyst

And you think it's a four building user based on discussions?

Steven Durels -- Executive Vice President

I think it'll be large space users. So whether that's four building or it's 300,000, 400,000, 500,000 square foot tenants, I don't think it will one off leasing the way, one variable four hundred thousand square foot tenants, five hundred thousand square foot tenants. I don't think it'll be you know one -- off leasing the way, One Vanderbilt who is going finish off its leasing program.

Jamie Feldman -- BOA Merrill Lynch -- Analyst

Okay. All right. Thank you.

Operator

Thank you.And our next question comes from the line of Derek Johnston with Deutsche Bank. Your line is now open.

Derek Johnston -- Deutsche Bank -- Analyst

Good afternoon and thank you. Just on pricing, power and trends. Could you separate out concessions and leasing trends with your in-place portfolio versus the development, redeveloped assets. And give us any significant differences that are notable?

Marc Holliday -- Chairman and Chief Executive Officer

Steve?

Steven Durels -- Executive Vice President

Let's see. Let's go through a broad structure on that. That's a mouthful. Certainly on new construction and redeveloped buildings, which you could put the vast majority of our portfolio into the camp of redeveloped buildings. There's been a flight to quality over the past year or two where there's been a lot of tenant demand for better quality buildings. Now we're the beneficiary of that because we have a portfolio where we've reinvested into the buildings, and we continue on new acquisitions like 460 West 34th Street to make heavy capital investments in those buildings, and as evidenced by the First Republic lease finding strong tenant demand for it.

As far as concessions go, there's this odd situation where new construction actually carries a slight TI savings. I don't think we've having given a tenant at One Vanderbilt but we have example more than $95 a square foot with all the leasing we've done in that building. Yet, you can go through other buildings and more commodity buildings where you sometimes have to spend more than a $100 a foot in order to land a tenant paying a lot less in rent. But I think that's a function of supply and demand where the best quality product is in high demand and TI doesn't have to be as fulsome in that case.

Derek Johnston -- Deutsche Bank -- Analyst

Okay great. And just switching gears. Any update on the suburban markets and interest in the marketed portfolio that you have out there?

Andrew Mathias -- President

Sure. It's Andrew. Isaac is not with us today. The capital markets are significantly more challenging in the suburbs. We continue to work through the portfolio and generate decent leasing activity including our recent renewal with Skadden, Arps at 360 Hamilton and White Plains which is a big deal for us. But what we're trying to be patient because we don't want to accept kind of distressed prices for the assets if you will. So we expect over the course of the year to execute some different strategies and wind up the resolution of the portfolio.

Derek Johnston -- Deutsche Bank -- Analyst

Thank you.

Operator

Thank you. And our next question comes from the line of Nick Yulico with Scotiabank. Your line is now open.

Nick Yulico -- Scotiabank -- Analyst

Thanks. Just turning back to the stock buyback, Marc, you talked about willingness to do more over time if that's what's needed to do to close the valuation gap. But can you just remind us where you're at in terms of where there is a tax issue or right role issue that would prevent you from doing a larger buyback once this current program ends?

Marc Holliday -- Chairman and Chief Executive Officer

Well, there's nothing that prevents us that I'm aware of. We've got Andy Levine and he'll correct me. So that's some of the -- it's a question of source of funds and we have source of funds that's completely tax efficient, partially tax efficient and in some case tax inefficient. But at the moment we have a $2.5 billion authorization. I think we're about $1.8 billion or so into that authorization, may be $1.050 billion. So at least for the foreseeable future we have sources of revenue that we feel more than comfortable that can finance those acquisitions in a debt neutral way to get to that $2.5 billion and then when we get there we'll evaluate going further, but somebody on the call earlier referenced -- yes, I mean I guess taken to its extreme $2.3 billion of cash that we had invested in the DPE portfolio, which just -- I was just making the point coincidentally has a yield that's not too differentiated from the FFO yield on share repurchase. So clearly that is another formidable source that could go well beyond the $2.5 billion. So I mean -- we don't, we haven't taken it much further than that nor do we need to sitting here in 2019 with a plan that we think is executable for the balance of this year and probably -- a fairly obvious plan for next year, but beyond that, we have other strategies we have developed, have not yet deployed, which would enable us to go further. But I don't want to get ahead of yourself, I think is -- our goal is to see that price reach its natural level, which would be equal to the value of the assets. And if that happens then there is probably no more buyback program, once that occurred and certainly we hope in the next year or two we'll see that kind of increase occur as it should.

Nick Yulico -- Scotiabank -- Analyst

Okay. Second question, here you mentioned 30 Hudson earlier. I'd like to hear a little more, what you thought about the pricing of that asset and we heard it was around a five cap rate 20 year lease long term credit deal. I guess I'm wondering is that indicative of what a long term credit deal with trade in the market or is the condo within a building. Did that affect the valuation there? Thanks.

Marc Holliday -- Chairman and Chief Executive Officer

I think certainly it's a very large transaction. So it makes the universe of buyers smaller given $2 billion of aggregate size. And I think given that it's not multi-tenanted and you have sort of this bullet exploration if you will -- whole the entire space expiring it takes a certain type of buyer. So I think in terms of (inaudible) we achieved around the same or were we inside of that.

David Schonbraun -- Co-Chief Investment Officer

We were inside of that.

Marc Holliday -- Chairman and Chief Executive Officer

So, I think between 4.5 and 5 cap depending on the circumstances -- the per foots where the rent stands versus market is a good estimate for sort of large single tenant credit tenant leases in the city right now.

Nick Yulico -- Scotiabank -- Analyst

Thanks everyone.

Operator

Thank you. And our next question comes from the line of Jason Green with Evercore. Your line is now open.

Jason Green -- Evercore -- Analyst

Good afternoon. As we look out over the next two or three years are there any other kind of early renewals similar to Viacom that we should be taking into account from a cash NOI perspective?

Marc Holliday -- Chairman and Chief Executive Officer

Well, we have several larger leases when you go out in time, but those are three to five years out. And most of them have significant mark-to-market increase expectations. In the case, for instance, at 753rd Avenue where we have advanced magazine and Fairchild publications that's part of county national, that space has been with sublease years ago to a variety of different sub-tenants. The prime lease in that case, tenants paying us sub $50 a foot. So we're going to see a big uptick in rent on there and we're already trading paper, big chunks of that space. So I think there's going to be a couple of big opportunities for us to have a very positive outcome.

Jason Green -- Evercore -- Analyst

Okay. And then at One Vanderbilt you guys set a goal for being 65% leased by the end of the year. You delivered as said in Q3 of next year. I guess how long after delivering should we expect the asset to be stabilized?

Marc Holliday -- Chairman and Chief Executive Officer

Well we put numbers out there, I think at the last two or three December conferences which had the full lease up schedule right through the end. I don't have that at my fingertips. I thought it was '21 or '22, I don't remember. We have to get back to you on that one because I missed, Matt do you have it?

Matthew DiLiberto -- Chief Financial Officer

I think wraps up in '21, and you're probably in the stabilized year, '23 on a full year basis.

Jason Green -- Evercore -- Analyst

'23 full year I think is stabilized, but I think that's what was on the schedule.

Marc Holliday -- Chairman and Chief Executive Officer

Right. But for revenue recognition purposes the standard is when the tenant space is ready for its intended use, you start to recognize revenue. So looking at its earliest, we started turning space over to tenants later this year.

David Schonbraun -- Co-Chief Investment Officer

Yeah. We started...

Marc Holliday -- Chairman and Chief Executive Officer

And the building opens in August of 2020 with space then, so it should be ready for tenant to use with some of these tenants so you could start to see at the base of the building revenue recognition as early as late 2020.

Andrew Mathias -- President

Yeah. A quarter of the building, we turn it over for tenants to start their construction by the summer of this year. So a year in advance of completing construction of the building and having a TCO in hand. So all of those tenants will construct their space and move in probably within 30 to 60 days of the TCO dates which means we'll be recognizing revenue at that point.

Jason Green -- Evercore -- Analyst

Okay. Thank you.

Operator

Thanks you. And our next question comes from the line of John Guinee with Stifel. Your line is now open.

John Guinee -- Stifel Nicolaus -- Analyst

Great. Thank you. First a quick one for Matthew DiLiberto. If you look at the right for use of the asset the operating lease is about $400 million of value. Do you think that's a good assessment of value to the ground lessor of that, those ground leases.

Matthew DiLiberto -- Chief Financial Officer

No. So the simple answer is no. That is the new lease accounting for our ground leases finally coming out of the balance sheet. The decades long odyssey that all the accounts have gone through to get to this point. That is not an indication of value you put it on the balance sheet using discounted cash flows at some assumed rate and you put it on the balance sheet it just grosses up assets and liabilities and is no indication of value and it's probably of no value to the readers of the financial statements either.

John Guinee -- Stifel Nicolaus -- Analyst

Thought so. Okay. Thanks. And/or I'm not sure who, but if I look at One Madison and if this is in your Investor Day slide deck just direct me that way, but what's the gross and net rents in place now. What's your total net rentable square feet going to be when you redevelop it and have you come, have you created a development budget yet and figure it out who is going to come in as a JV partner or how are you going to finance it?

Matthew DiLiberto -- Chief Financial Officer

The question is One Madison. Yes. So on One Madison, I don't -- what's in place now -- I mean, it's 1.1 million square feet now. It's going to a 1.5 million square feet as redeveloped. The in-place escalated rents around $82 a foot, gross and the redevelopment budget, the redevelopment budget is probably, what -- the actual construction course alone order magnitude 600 million plus or minus. The redevelopment budget obviously will be higher than that to include -- we'll work it up and have probably by this December's meeting. Everything with TI, marketing, (inaudible) when we give a budget, yeah, like everyone get it this way, we give a fully loaded soup to nuts interests -- land at costs with whatever market JV partner comes in at, all the TI commissions and everything. So, but the actual physical work for completely reimagining the podium and adding the tower for which we've spent extraordinary amount of time over the past 12 months designing and estimating, we think will be somewhere in the range of about $600 million of hard cost.

John Guinee -- Stifel Nicolaus -- Analyst

And do you have a sense for what sort of gross or net rent you have to hit for this to be sort of value creative?

Matthew DiLiberto -- Chief Financial Officer

The answer is yes. We know up and down. I think we're going to sort of -- we're going to unveil it all in December as we did with One Vanderbilt, because I think having pieces of it without the whole picture can lead people to confusion. So we want to give people a very good sense of those rents which obviously are much much higher than $82 gross if that's where the current escalated is even for the podium, alone let alone in the tower. So the average rents would be much higher price point than that, but still for a product that we expect to deliver in 2023, middle of '23 we're going to have a rent point there for what we think will be among the most desirable buildings in all of Midtown South of the downtown markets at rents that are being achieved daily today in 2019.

So we're not pricing in inflation, doesn't mean we don't expect there to be rent inflation. It just means we're modeling this building based on a rental market that exists today not one we hope to exist in 2023, although we hope it's higher. So this deal underwrites extremely well like One Vanderbilt did. In some ways it's a little bit of a easier exercise, because the building exists and it's a large scale redevelopment at its base, but it's new construction, very attractive construction in its tower, but it's not a high rise tower, it's a medium rise tower. So the cost, less the timing is more efficient. And I think when we unveil the financial metrics both in terms of cost, returns, rental points, et cetera, the deal will certainly hold its own with any deal we have in the portfolio.

John Guinee -- Stifel Nicolaus -- Analyst

Great. Thank you.

Marc Holliday -- Chairman and Chief Executive Officer

Okay. Operator. I think that's the last question. Yes.

Operator

Correct sir.

Marc Holliday -- Chairman and Chief Executive Officer

Okay good. Well, listen, we finished up 10 minutes early today. So tremendous. Thank you for your questions. You know it was a great quarter. We look forward to more of the same in Q2 and most importantly everybody have a very happy holiday, upcoming holiday season, this weekend Happy Easter and (inaudible) and see you and speak to you soon.

Operator

Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program and you may all disconnect. Everyone have a wonderful day.

Duration: 48 minutes

Call participants:

Marc Holliday -- Chairman and Chief Executive Officer

Emmanuel Korchman -- Citigroup Global Markets, Inc. -- Analyst

Andrew Mathias -- President

Alexander Goldfarb -- Sandler O'Neill + Partners, L.P. -- Analyst

Steven Durels -- Executive Vice President

John Kim -- BMO Capital Markets -- Analyst

Craig Mailman -- KeyBanc Capital -- Analyst

David Schonbraun -- Co-Chief Investment Officer

Jamie Feldman -- BOA Merrill Lynch -- Analyst

Matthew DiLiberto -- Chief Financial Officer

Derek Johnston -- Deutsche Bank -- Analyst

Nick Yulico -- Scotiabank -- Analyst

Jason Green -- Evercore -- Analyst

John Guinee -- Stifel Nicolaus -- Analyst

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