Alexander's Earnings Call Contradictions: 555 California Saleability and 350 Park JV Buyer Pool Claims Clash

<<>>

Date of Call: Aug 4, 2026

Guidance:

• Expect full year 2026 comparable FFO to be higher than 2025, with Q2 comparable.
• Expect significant earnings growth in 2027.
• New York office occupancy expected to grow to north of 92%.
• Project third-quarter mark-to-markets of over 20%.
• Leasing pipeline includes 2.2 million square feet of leases in negotiation, over 500,000 in the Penn District.
• TI and capital expenditure bills expected to be fairly consistent year-over-year.
• Leverage expected to trend down into the sevens and potentially sub-seven in the out years.

Business Commentary:

Strong Leasing Activity in New York:

• Vornado Realty Trust reported leasing $978,000 in the first half of 2026, with Manhattan office leasing at $600,000, achieving 9.5% gap and 7.1% cash market increases.
• The company executed 29 office deals totaling 328,000 square feet in Manhattan during the second quarter, with an industry-leading 7.7% gap and 5.0% cash increase.
• This growth is driven by a strong demand for office space in New York, a landlord's market, and limited new supply.

Increase in Occupancy and Market Dynamics:

• New York office occupancy increased by 60 basis points, significantly from a trough of 84.4% in the first quarter, reflecting a strong leasing market.
• The occupancy increase is supported by a robust pipeline of over 2.2 million square feet of leases in negotiation and strong tenant demand across various industries.

Significant FFO Growth:

• The company reported a comparable FFO of $0.67 per share, an increase of 11 cents from the previous year's second quarter.
• This growth was primarily due to higher FFO from increased signage revenue and the impact of rent commencements at Penn 1 and Penn 2.

Strategic Asset Management and Signage Business:

• Vornado's signage business has grown at a rate of 5% per year, with plans to expand signage in the Penn District.
• The company's strategy involves leveraging its owned assets in high-traffic locations like Times Square and Penn Station to enhance its signage revenue.

Balance Sheet Management and Share Repurchase:

• Vornado has maintained strong liquidity with a cash balance of $1.2 billion and undrawn credit lines of $789 million.
• The company has repurchased shares, including 1.8 million shares in the second quarter, viewing its stock as undervalued.

Sentiment Analysis:

Overall Tone: Positive

• Stephen Roth stated, 'We had another strong quarter with a comparable FFO of $0.67.' Michael Franco noted, 'New York office same-store NOI was up 13. Our New York retail same-store NOI was up 7.3%.' Stephen Roth added, 'The landlord's market that we've been predicting... is here' and 'I believe our stock is still stupid cheap.'

Q&A:

• Question from Floris van Dijkum (Ladenburg): Could you talk about economic occupancy today and the gap between economic occupancy and physical occupancy, and how much more runway there is?
  Response: Historically ran at 95-96% physical occupancy; currently at over 92%, expect to return to mid-90s in next couple of years as leases commence.

• Question from Floris van Dijkum (Ladenburg): What kind of occupancy suggests that 350 Park Avenue will pencil out at $350 a square foot, and will having high-end properties impact adjacent buildings?
  Response: Approximately correct; scarcity and market strength will cause older buildings to appreciate, making new buildings like 350 Park Avenue viable.

• Question from Alexander Goldfarb (Piper Sandler): What's caused the target construction rents to go from around $300 to $350 to make new deals pencil?
  Response: Market dynamics require mid-to-high $300s for new buildings; market rents are in mid-to-high $200s, but aspirations and scarcity drive the need for higher rents.

• Question from Alexander Goldfarb (Piper Sandler): Can you talk about the level of conversation for early renewals in New York and acceleration in the back half?
  Response: About 1.2 million square feet of renewals; tenants generally want to stay, but management is being strategic and careful not to lock in too quickly as market strengthens.

• Question from Dylan Brzezinski (Green Street): Are you interested in taking assets to market to test private bids to continue buying stock?
  Response: In conversations to sell a handful of non-essential assets; proceeds would be used to buy stock, which is perceived as cheap relative to NAV.

• Question from Dylan Brzezinski (Green Street): Is there any upside for Vornado from Verizon's sublease space?
  Response: Did not participate; deal was between Verizon and subtenant, but declined recapture option to keep the Verizon credit.

• Question from Steve Sakwa (Evercore ISI): Does the 40-cent FFO growth still apply, or has some shifted into 2026 dampening 2027 growth?
  Response: Some of the $0.40 was relative to a flattish comment; meaningful growth still expected in 2027, though dynamics may alter the timing.

• Question from Steve Sakwa (Evercore ISI): How did you weigh doing the Citadel JV now versus leasing the building further down the road?
  Response: Decision made years ago; JV with Ken Griffin is a continuation, with building designed and drawings done over the past few years.

• Question from Jana Gallant (Bank of America): Were the short-term retail leases due to strategy or tenant decisions?
  Response: Mix of not wanting to lock up space long-term until appropriate level and tenants needing more time to commit.

• Question from Jana Gallant (Bank of America): Any update on Pier 94 occupancy and prospects?
  Response: Occupancy already up to high 80s by end of July; activity excellent with top tenants, feeling very good for second half and into 2027.

• Question from Anthony Pelloni (J.P. Morgan): What does the 36% stake in the 350 Park Avenue JV mean in terms of capital requirements and equity timing?
  Response: Will contribute land at $900M value; incremental capital requirements minimal, equity back-ended with significant contributions likely not until 2029 and thereafter.

• Question from Anthony Pelloni (J.P. Morgan): How do you assess the gap between stabilized assets around $3,000 and new projects over $4,000 a square foot?
  Response: Dispersion is wide; owning many buildings trading at land value, rents must rise meaningfully, values must appreciate; bullish on stock as it trades cheap.

• Question from Vikram Malhotra (Mizuho): How does the TI and maintenance capex bill look for next year?
  Response: TI comparable year-over-year; concessions tightening, free rents down; capital expenditure fairly consistent.

• Question from Vikram Malhotra (Mizuho): How do you differentiate between New York and San Francisco opportunities for future capital allocation?
  Response: San Francisco is a recovering market; focus is on existing buildings, acquisitions, stock, and Penn District; no plans for new San Francisco acquisitions currently.

• Question from Seth Berge (Citi): What is the buyer pool for the 350 Park Avenue JV?
  Response: Targeting high net worth family offices for a club deal, not a large institutional buyer.

• Question from Seth Berge (Citi): Any impact from potential tax changes on retail leasing?
  Response: Not at all; tax has not affected retail leasing interest for Vornado.

• Question from Ronald Camden (Morgan Stanley): What is the leverage trajectory and CapEx outlook?
  Response: Leverage to trend down into the sevens, potentially sub-seven; CapEx fairly consistent year-over-year.

• Question from Ronald Camden (Morgan Stanley): Any thoughts on transacting Hotel Penn or retail assets?
  Response: Hotel Penn is a piece of land in Manhattan not for sale; focus is on core assets and specific opportunities.

• Question from Caitlin Burrows (Goldman Sachs): Would planned asset sales be considered non-core, higher cap rate?
  Response: React based on acquisition opportunities; assets must be in core, best locations, target market, and moneymakers.

• Question from Brendan Lynch (Barclays): Are the two assets for sale the ones previously mentioned?
  Response: No, 555 California is not for sale at current prices; asset only for sale at right time and price.

• Question from Brendan Lynch (Barclays): Is there a limit to signage in the Penn District, and is the 5% growth mostly volume or price?
  Response: No limit; signage is asset-like, grows with developments; growth from both volume and price increases, optimized via digital signs.

• Question from Steve Sakwa (Evercore ISI): Can you bifurcate the $180 million leasing pipeline between Penn 2 and the rest?
  Response: Roughly 60% is from Penn 2, based on lease sizes.

Contradiction Point 1

Status and Saleability of 555 California

Contradictory statements on whether the San Francisco asset is for sale.

Brendan Lynch (Barclays) - Brendan Lynch (Barclays)

2026Q2: 555 California is a strong asset in a recovering market... only for sale at the right time and right price, not at current 'toxic' market prices. - Stephen Roth(CEO)

What is the current status of the consideration to sell 555 California in San Francisco? - Ronald Camden (Morgan Stanley)

2026Q2: The two assets for sale are different from 555 California... - Stephen Roth(CEO)

Contradiction Point 2

Primary Buyer Pool for 350 Park Avenue JV

Inconsistent description of the target investors for the joint venture.

Seth Berge (Citi) - Seth Berge (Citi)

2026Q2: The target buyers are high-net-worth family offices and private real estate clubs, not institutional funds. - Stephen Roth(CEO)

What is the target market for the 350 Park Avenue joint venture, given its high-end nature? - Seth Berge (Citi)

2026Q2: It would be a club deal involving individuals with substantial capital... - Stephen Roth(CEO)

Contradiction Point 3

Nature and Focus of Asset Sales Program

Contradiction on whether sales are for non-core assets or to unlock value in core assets.

Dylan Brzezinski (Green Street) - Dylan Brzezinski (Green Street)

2026Q2: The company is in conversations to sell a handful of non-core assets... - Stephen Roth(CEO)

Is Vornado still pursuing asset sales to test private bids and use proceeds for stock buybacks due to NAV disconnect? - Vikram Malhotra (Mizuho) & Brendan Lynch (Barclays)

2026Q2: A combination of both: the assets are non-core and sales will help unlock value. - Stephen Roth(CEO)

Contradiction Point 4

Capital Allocation Priority

The priority for using cash reserves shifts from being secondary to becoming a primary focus.

"What are Green Street's earnings projections for the next quarter?" - Dylan Brzezinski (Green Street)

2026Q2: The company is in conversations to sell... The stock is considered extremely cheap relative to this future potential. - Stephen Roth(CEO)

Is Vornado still interested in selling assets to test private market bids and using proceeds for stock buybacks due to its perceived disconnect from NAV? - Dylan Brzezinski (Green Street)

2025Q1: Cash will be used for opportunistic investments, paying down higher-cost debt, and maintaining a buffer. - Michael Franco(CFO)

Contradiction Point 5

Leasing Pipeline Composition

The proportion of the leasing pipeline expected to drive occupancy shifts from "a very significant portion" to being more pipeline-dependent.

Glenn (Vornado Realty Trust) - Glenn (Vornado Realty Trust)

2026Q2: A very significant portion of the pipeline will increase occupancy... - Glenn Weiss(SVP – Leasing)

Are there expectations for an acceleration in tenant early renewals in the back half of the year? - Steve Sacqua (Evercore ISI)

2025Q1: The pipeline is about 50% PEN1/PEN2, with strong activity at PEN2... Confidence in hitting 80% occupancy is high... - Glenn Weiss(SVP – Leasing)

<<>>