Vornado Realty Trust Reit (VNO) Q2 2025 Earnings Call Transcript

Vornado Realty Trust Reit (NYSE: VNO) Q2 2025 Earnings Call dated Aug. 05, 2025

Corporate Participants:

Steven Borenstein — Executive Vice President and Corporation Counsel

Steven Roth — Chairman of the Board and Chief Executive Officer

Michael J. Franco — President and Chief Financial Officer

Glen J. Weiss — Executive Vice President – Office Leasing and Co-Head of Real Estate

Analysts:

Steve Sakwa — Analyst

Floris Van Dijkum — Analyst

John Kim — Analyst

Dylan Burzinski — Analyst

Seth Bergey — Analyst

Alexander Goldfarb — Analyst

Jana Galan — Analyst

Vikram Malhotra — Analyst

Caitlin Burrows — Analyst

Ronald Kamdem — Analyst

Brendan Lynch — Analyst

Presentation:

Operator

Good morning Good morning, and welcome to the Vornado Realty Trust’s Second Quarter 2025 Earnings Call. My name is Michael, and I will be your operator for today’s call. This call is being recorded for replay purposes. All lines are in a listen-only mode. Our speakers will address your questions at the end-of-the presentation during the question-and-answer session. At that time, please press star then 1 on your touchtone phone.I will now turn the call over to Mr Steve Borenstein, Executive Vice-President and Corporation Counsel. Please go-ahead.

Steven Borenstein — Executive Vice President and Corporation Counsel

Welcome to Burnado Realty Trust’s second-quarter earnings call. Yesterday afternoon, we issued our second-quarter earnings release and filed our quarterly report on Form 10-Q with the Securities and Exchange Commission. These documents as well as our supplemental financial information package are available on our website, www.vno.com under the Investor Relations section. In these documents and during today’s call, we will discuss certain non-GAAP financial measures.

Reconciliations of these measures to the most directly-comparable GAAP measures are included in our earnings release, Form 10-Q and financial supplements. Please be aware that statements made during this call may be deemed forward-looking statements and actual results may differ materially from these statements due to a variety of risks, uncertainties and other factors. Please refer to our filings with the Securities and Exchange Commission, including our annual report on Form 10-K for the year ended, 31, 2024 for more information regarding these risks and uncertainties.

The call may include time-sensitive information that may be accurate only as of today’s date. The company does not undertake a duty to update any forward-looking statements. On the call today from management for our opening comments are Stephen Ross, Chairman and Chief Executive Officer; and Michael Franco, President and Chief Financial Officer. Our senior team is also present and available for questions.

I will now turn the call over to Steven Roth.

Steven Roth — Chairman of the Board and Chief Executive Officer

Thank you, Steve, and good morning, everyone. Let me start by expressing our sorrow about the tragic and senseless shootings at 345 Park Avenue last week. Our deep consolences go out to the victims, families and friends. We have many friends in that building in ownership and occupiers and we stand with them as they deal with this terrible tragedy. To continue, here at Grenado, our business continues to be strong, is getting stronger, and I remain incredibly enthusiastic about our future prospects.

Our stock performance leads the office sector have increased 42% over the trailing-12 months, almost double the S&P 500. I was quite surprised that broadly speaking, every other office REIT, whether East Coast or West Coast, including all the other New York office specialists were negative during that period. We had an excellent quarter and Michael will cover the results shortly.

By excellent, I mean leasing, balance sheet and PEN, all excellent. Let me once again discuss what we see on-the-ground and our business strategy. We are 90% New York-centric company. Actually, we are a 90% prime pitch Manhattan-centric company. We do own a single large building in Chicago, the Mart and a single complex of 5×5 California Street, the number-one building in San Francisco. These two assets may be on the for-sale list for the right deal at the right time. Manhattan is universally claimed to be the strongest real-estate market in the country, and I mean the strongest by far. While Manhattan may have nearly 420 million square feet of office space, we actually compete in a much smaller 180 million-square-foot Class-A better building market. Our clients are expanding, demand is strong broad-based and here’s the punchline. Available space continues to evaporate quickly. Replacement cost for a Class-8 tower in Manhattan has risen to, Call-IT $2,500 per square-foot. With interest rates at 6% or 6-plus percent, rents in the 200s are now commonplace. Think about it, $100 rents were rare only a few years ago. I believe this math is telling us there will only be a trickle of new supply for the foreseeable future, at least through the end-of-the decade. Remember, it takes five years from start to deliver a new-build tower in New York. And that trickle of supply, however unlikely, will undoubtedly be spoken for and not create speculative space available to the market. Taken together, all this is the very definition of a landlord market with tight availability in Class-A better buildings in the Manhattan and. And no new supply coming for the rest of the decade. I believe the next few years have the potential to be one of the strongest periods of rental growth we’ve seen in decades and it’s already started. That said, logically and for certain, values will increase as well. Here is our industry-leading lease — leasing scorecard. During the first-half of 2025, we leased 2.7 million square feet overall, of which point — of which 2.2 million square feet was Manhattan office. That includes the 1.1 million-square-foot master lease with with 770 Broadway, the largest New York office lease in 2019, which by the way, absorbed 500,000 square feet of vacancy at that property. The remaining 1.1 million square feet of leasing during the first-half was at $97 per square-foot average starting rents with mark-to-markets of plus 10.7% GAAP and plus 7.7% cash. During the second-quarter in Manhattan, we executed 27 deals totaling 1.5 million square feet, including NYU. Excluding NYU, the remaining 400,000 square feet of Manhattan office leasing for the quarter was at $101 per square-foot starting rents with mark-to-markets of plus 11.8% GAAP and 8.7 plus 8.7% cash. We continue to achieve the highest average rents in the city. This quarter leasing was 190,000 square feet-in Penn and 210,000 square feet at our other Manhattan assets. Importantly, importantly, our leasing this quarter included 12 transactions for 183,000 square feet at PEN1 and an average spotting rent of $101 per square-foot, bringing occupancy here to 91%. And here’s an interesting factor. Since the start of physical development, we have leased 1.6 million square feet at PEN1 at average rents of $94. At PENN, we are handily exceeding both our initial underwriting and our increased underwriting. Here’s another way to look at it. Looking towards the future, everyone is modeling large increases in earnings as leases at PEN1 and PEN2 come online as they should. This is all based on rents of say $100 per square-foot. But our neighbors to the West are achieving $150 per square-foot and over-time, so will we. Think about it, PEN1, PEN2 and Farley together comprise 5 million square feet. So the math says every $10 a foot uptick in Red, $50 million to the bottom-line. And what’s more, when the uptick, i.e., market rents get to $150 per square-foot, about 5 million square feet, that’s an increment of $250 million per year. Same-store asset appreciation over-time is the ticket to success in the property business. These tenants are expanding in the Penn district. As an example, in the last quarter, Samsung doubled its space at Pennel 1. And since its first 220,000 square-foot lease signed in 2020, our major tech tenant at PET11 has expanded three more times, now occupying 460,000 square feet-in that building. Last week, after the quarter ended and not included in the leasing statistics, we announced a 23,000 square-foot headquarters lease at Benzu with Verizon Communications, one of the world’s leading telecommunications companies. Verizon now joins other top-tier tenants, Madison Square Garden, Major League Soccer and Universal Music Group at Pen 2. We are of course delighted to welcome Verizon. Verizon’s choice of Penn and their enthusiasm for their new-home can best be described by lifting a quote from their press release by one of their senior executives. New York City isn’t just where we work, it’s who we are. Our employees deserve a workplace that is just as vibrant as our culture. Is more than an office. It’s a space designed to bring us together to collaborate, to celebrate, to think boldly, to build the future side-by-side closed quarter. The Verizon folks get it. This is a very important deal and continues to validate the product. This is a very important deal. Occupancy at Penn 2 is now 62% and we have multiple deals in the circle which will keep our occupancy marching upward. The Penn District, our three block long city within a city continues to amaze and impress tenants and stakeholders. We sit atop the nexus of Pennsylvania Station and the New York City subway system adjacent to our good neighbors to the West and Hudson Yards. The three of us combined represent the new booming west side of Manhattan. At Penn, we are creating a campus of multiple interconnected buildings under one ownership. We’re delivering exactly as we said we would and there is much more to come. As a starter, we are well along in the development process for a 475-year rental residential project on our 34th Street site, Caddy Corner to the Moynihan train Hall. Next, we are going to transform as much as 700 front feet of tired oil retail on both sides of 7th Avenue along 34 Street into attractive, modern and exciting retail offerings. The Gateway depended 7th Avenue at 34th Street. This stretch across the street from Macy’s used to be a top three location and returning to top three is our goal. As I said before, the Penn District will be a growth engine for company for years to come with rising rents in future development projects, including Penn15, defensive Insight and potential residential opportunities. We also continue to add to our already impressive food offerings in the district with our newest restaurant, the Dynamo Room, which opened last month-to great reviews. Avril will open at Farley in the fall. And our rooftop park at Pentu called the Perk, named the Perch is the best spot in the city for view, food, gathering or just chilling. Come see Pen for yourself. I invite you to come to Penn Dist at any time, but especially at Happy Hour, where you will see every scene at every restaurant and amenity whether it’s indoors or outdoors filled with happy employees of our tenants. Our unmatched amenity package of 180,000 square feet is surely doing its job in spades to attract and delight our tenants. Our New York office leasing popular pipeline is robust with a total of 560,000 square feet of leases signed or in negotiations, setting up the 3rd-quarter, plus more than 1 million square feet at various stages of proposal. As we announced on our last call, after two years of intense deliberations, the arbitration panel issued its ruling on the PEN1 ground lease-rent reset. The PEN1 ground lease has fully extended goes to 2098. Days ago, Ground filed an 11th hour Hail Mary motion in New York County Supreme Court to vacate the rent research panel ground rent determination. We believe the motion is entirely without merit and intend to vigorously oppose it. We also completed the following financing transactions as we continue to bolster our liquidity and handle our debt maturities. In April, we completed a $450 million financing of 1,535 Broadway using $407 million of net proceeds to partially redeem our retail JV equity on the asset. The preferred outstanding — the preferred equity outstanding balance is now $1.079 billion, down from $1.828 billion. In June, we completed a five-year $675 million refinancing of Independent Plaza, a joint-venture in which we own a 50.1% ownership interest. In July, we completed a five-year $450 million refinancing of PET11, paying down this previous loan by $50 billion. We have meaningfully delevered our balance sheet over the past couple of quarters. . Since the beginning of the year, we have generated $1.5 billion of net proceeds from sale, financings and the NYU deal. We paid down $965 million of debt and increased our cash by $540 million. Our cash balances are now $1.36 billion and together with our undrawn credit lines of $1.56 billion. We have immediate liquidity of $2.9 billion. Our net-debt to EBITDA metric has improved by 1.4 turns to 7.2 times from 8.6 times. And our fixed — fixed-charge coverage ratio as expected is steadily rising. Please see Page 23 of our financial supplement for details. Finally, we remain very excited about the redevelopment of 350 — 350 Park Avenue as as our anchor tenant and Ken Griffin as our partner. The process to create this grand foster and partners design 1.8 million-square-foot tower on the best side of Park Avenue has begun and is that — and this new building will stand-out as dealings being truly best-in-class. DDs are complete, i.e., the building is basically designed and CDs are progressing. Last month, the City Planning Commission voted to approve the project and we expect the final approval from the City Council this fall. Is currently building out their interim swing space, which will allow us to commence the evolution of the existing 350 Park Avenue building in spring. Thank you all for listening. And now over to Michael to cover our financials.

Michael J. Franco — President and Chief Financial Officer

Thank you, Steve, and good morning, everyone. Second-quarter comparable FFO was $0.56 per share, which beat analyst consensus of $0.53 per share and essentially flat compared to last year’s second-quarter. We have lower net interest income from retail preferred repayments and lower NOI from asset sales, offset by lower real-estate taxes at the net of tax tenant reimbursements.

We have provided a quarter-over-quarter bridge on Page 2 of our earnings release on Page 6 of our financial supplement. In addition, our cash NOI is lower this quarter, primarily due to the previously discussed one-time 1 ground rent true-up payment made in April and free rent associated with recently commenced leases from backfilling the previously-announced known move-outs.

On our last earnings call, we said that we expected 2025 comparable FFO to be essentially flat compared to 2024 comparable FFO of $2.26 per share. This is still a good assumption as we sit here today. As previously discussed, we still expect the full positive impact of the lease-up of PEN1 and PEN2 in 2027, resulting in significant earnings growth by 2027.

New York office occupancy increased this quarter to 86.7% from 84.4% last quarter, primarily due to the full building master lease at 770 Broadway. As we continue to execute on our leasing pipeline, we anticipate that our occupancy will increase into the low-90s over the next year or so. Lastly, the financing markets are liquid and we have been active in refinancing our 2025 maturities. On-top of the recent independence Plaza and PEN11 refinancings, we have several others in the works. The investment sales market is also picking-up as the financing markets recover and as confidence in New York City’s recovery grows.

With that, I’ll turn it over to the operator for Q&A.

Questions and Answers:

Operator

Thank you. Thank you. We will now begin the question-and-answer session. If you have a question, please press star then 1 on your touchstone phone. If you wish to be removed from the queue, please press star then 2. If you are using a speaker phone, you may need to pick-up the handset first before pressing the numbers. Once again, if you have a question, please press star then one on your touchtone phone. Each caller will be allowed to ask a question and a follow-up question before we move on to the next caller.Steve Sakwa from Evercore ISI is on the line with a question. Please go-ahead.

Steve Sakwa

Yes, thanks. Good morning. Steve, I guess I wanted to tie two comments together. You said PEN — PEN2 was 62% occupied with multiple deals in the on circle. And then you talked about the LOIs of like 560,000 feet plus 1 million of proposal. So can you just maybe help us understand how much of that sort of pending activity is geared towards 2 and how much is for the rest of the New York City portfolio?

Steven Roth

Glen, do you want to take that?

Glen J. Weiss

Sure. Good morning, Steve. It’s Glen. So of the 560,000 feet, those are leases out in negotiation. The Verizon lease is included in the 560. In our pipeline, we have about 1.4 million feet-in the pipeline in various lease proposal stages and about 50% of that is at PENN 2. That’s the breakdown.

Steve Sakwa

Great. And then for my follow-up, Steve, you made some comments early-on about the Mart and 55 California sort of being for-sale at the right price. And I feel like that’s maybe a little bit of a shift or change in your thinking. So maybe could you just expand upon that and is your goal to really sort of get back to being just kind of a pure New York City company in the shorter versus longer-term.

Steven Roth

Hi, how are you? We worked very hard to focus the company, stick to our knitting and focus on the financials and our stock price. So our mission is to increase our stock price. That’s our sole mission. We think that those two assets are valuable. We think one of them is free and clear, the other one has some financing on it.

We think that 555 California is the single best asset in San Francisco. San Francisco has — is in a recovery phase now, which we think is going to be very dramatic. So as I said, those two assets, we will sell for the right price at the right time they’re not sacred. By the way, nothing is sacred. So we look upon them as a financial asset and we will do what we think is the best financial outcome for the company.

Steve Sakwa

Great, thank you.

Operator

And your next question comes from Floris Van Diecom with Ladenburg Thalmann. Please go-ahead.

Floris Van Dijkum

Hey, thanks guys. Maybe if you can talk a little bit about your — your signed not open pipeline. You talked about your occupancy, your leased occupancy being around I think 85.2% in New York. What’s the physical occupancy? And i.e., what is — how much rent is coming online over the next presumably 12, 12 months by the time that becomes activated

Michael J. Franco

For us, good morning. It’s Michael. Welcome back and congrats on your new position. In terms of the signed, but not commenced, we’re going to have to come back to you on that number. I don’t want to — I don’t want to give you a guesstimate and swag. We’ll have to come back on that. But obviously, you know, with Verizon sign, the occupancy number will continue to migrate up close to 88%.

Obviously, there’s ins and outs. We continue to believe that we’ll be north of 90% as we get into next year and that income generally — I think we’ve been consistent on this point will from an FFO standpoint, kick-in heavily in 2027, right? So ’26 continues to be a year where we have the leases sign, but they don’t kick-in. ’27, I think you’re going to see a significant increase and that I think it’s consistently said the last couple of quarters. But in terms of specific dollars, I’ll come back to you on that.

Floris Van Dijkum

Thanks, Michael. And maybe if I can ask one follow-up. I was sort of — Steve, you peaked my interest about the upside potential in your Penn district, I think in the past, you’ve talked about sort of stabilized NOI at around 325 how do you see that changing or how much has that changed over the past six months based on-market rents going higher and obviously your lease activity at PEN2 in particular?

Steven Roth

Flori, hi. I couldn’t be more enthusiastic about what we’re doing at PEN and what PEN’s value accretion to the company will be over-time. So right now, we are leasing PEN1 and PEN2 and the — we predicted that the market rents would be — that we would achieve $100 of rent. We were achieving that and we’re achieving more. So we — we’re doing better than our underwriting. But the Interesting thing is that our neighbors are getting $150 a foot and more. So we believe that over-time, we will also in PEN1, PEN2 and whatever other buildings we build, we’ll be able to achieve rents that will be approximately maybe just a pinch below those buildings. So if you think about it, if you look at real-estate as a — not as a quarter-to-quarter business, but as a — on a five-year planning cycle or something like that. If the market rents in Penn go up on the 5 million square feet that we already have by $10 a foot, that increment is $50 million to the bottom-line. That’s $0.20 a share, that’s a fairly big number. If they should go up by $50 a foot from $100 to $150, over-time the company will realize a $250 million increase in its income. Now there’s going to be some expenses — some minor expenses about that, real-estate taxes will go up marginally, but the numbers are very big. So what I’m saying is the best part of the real-estate business is great assets over-time. And we believe that the buildings that we now have are under market so that as the market appreciates it, as the market comes to our buildings, these buildings will get more-and-more valuable each year.

Floris Van Dijkum

So, Steve as you think about that is there a possibility that the district could generate maybe up to $400 million of NOI in five years time?

Steven Roth

Easily. By the way, and that would be — that’s with no new construction, no new buildings. The existing inventory that we have now, what you’re saying is, can it go up by $100 million over three or four years? Sure.

Floris Van Dijkum

Thanks.

Operator

And your next question comes from John Kim with BMO Capital Markets. Please go-ahead.

John Kim

Good. I know there’s a few different occupancy numbers out there, but just focusing on your occupancy stats on Page 32, New York occupancy went up 85% to 85.2%, which is a sequential improvement, which is great. But it is lower than the 86.2% that you noted post the NYU lease last quarter. So I was wondering what the headwinds were this quarter that brought that down 100 basis-points or so.

Michael J. Franco

I think — John, good morning. Yeah, I think a couple of things. One is, I think that’s an area of New York number office and retail. I think the office numbers are generally consistent with what we said, a little bit timing and Verizon got signed a few days after the quarter. So obviously, if that happened before, we would have been above even what we said last-time.

So a little bit of timing. I think the biggest impact there was retail. We had two Forever 21 leases of 1,540 and 435/7, where they were paying low rent coming obviously went bankrupt again and they vacated those stores and that knocked off, I think about 10 percentage points off the retail occupancy, which in total took us to the aggregate number you see there.

So wasn’t a lot of rent coming out of either one of those stores that are frankly placeholders, particularly at Penn, and so we had a really sort of redevelop that whole stretch as Steve alluded to in his remarks. But from a occupancy standpoint, I think that was the biggest driver.

John Kim

Yeah. And then on 555 calendar mark, Steve, you talked about potentially selling this. I wanted to see if you had any more commentary on timing, if this is something that could be listed in the next 12 months and how should we think about use of proceeds between developments, acquisitions and reduction of debt. We did notice that you provided new disclosure on-net debt-to-EBITDA. So I’m wondering if that’s a KPI going-forward as far as maintaining or lowering net-debt to EBITDA.

Steven Roth

On the first question, we are not listing those buildings in the next year or whatever. If we sell those buildings, it will probably — it will probably be an opportunistic incoming where somebody wants them. But what I’m saying is we’re not actively marketing the buildings and we have no prediction on timing, but they are available if the deal is correct and the timing is correct. The other half of your question was what sir our use of proceeds. Use the lever, John?

Michael J. Franco

Yeah. So again, to Steve’s point, nothing is imminent but for the right price will transact. And at the time, we’ll assess the best way to utilize that capital, whether it’s to pay-down debt, whether it’s to deploy those into development, etc. I appreciate you recognizing the good work we’ve done on the leverage front. We’re proud of that.

We’ve worked hard to get our leverage debt down and we think we’re now quickly moving ahead of the class there and so we want to continue that. So — but you know, when something is more right, then we’ll assess exactly how we’ll utilize those proceeds.

Steven Roth

I want to — I want to tack-on to what Michael said. One of the very important things that happened over the last short period of time is the improvement in our balance sheet of taking our leverage ratio down by 1.4 turns is a really big thing, rebuilding our cash balances, having lots of availability and having a very strong balance sheet is one of the important things that we do and I’m very proud of what has — what the team has accomplished over the last period of time. I think it’s a really big thing

John Kim

Thank you.

Operator

And the next question comes from Dylan Burzinski with Green Street. Please go-ahead.

Dylan Burzinski

Hi guys. Thanks for thanks for taking the question. Just can you sort of talk about just — I know you guys talked about how strong the leasing pipeline is. Obviously, you mentioned occupancy will continue to increase into the low-90s sometime next year. But can you guys talk about just the ability to push net effective rents in that environment and strong backdrop

Michael J. Franco

Yeah, why don’t I start, Glenn jump-in here. You know, if you look at the current environment in the marketplace, whether it’s Park Avenue, 6th Avenue, etc, vacancy rates are generally under 10% for Class-A buildings, probably Park Avenue under 5%. And in general, citywide in Midtown and the West Side, very tight. And I think in terms of large blocks of space, I think there’s less than a handful of a couple of hundred thousand feet or larger, PEN2 being one of those and I think widely viewed as the best of those.

So Steve talked about, we’re a landlords market and we certainly feel that. I think tenants feel that there’s strong demand in the marketplace. You have a number of tenants that are focused on expires in three years out, they’re worried about whether they’re going to be able to you either consolidate in a single-location, have enough expansion space, etc.

So the dynamics have shifted and we are, I would say, on a weekly basis, evaluating our space and trying to determine how much we can push rents. And we’re going to continue to push rents, I think across-the-board. We’ve done it aggressively on Park. We’re doing in other buildings in Midtown and we’re doing pen.

I think what you’re hearing and what you’re seeing in terms of the stat is a continued movement to push up rents there where I think we started at Penn 1 in the mid 80s, maybe $90 and now we’re achieving rents north of $100. We’re going to continue to push those same on PEN2. So we’re pretty optimistic in terms of what’s going to happen to rental rate growth just given the lack of quality space available and the demand-side we’re seeing. So I think we have the potential to see growth rates we haven’t seen in quite some time. And we’re going to push. We’re going to find the resistance level as we move-out here.

Dylan Burzinski

That’s helpful. And then I guess one last one for me. Are you able to talk about the A known B note investments you guys did.

Michael J. Franco

It’s on a site in Midtown. It’s a note that we’ve legged into in two phases. It’s a high-quality site and it can go either way. We’re on one-hand, we might just collect the coupon and learn a reasonable return relatively good earning cash. And alternatively, it could be an opportunity to own the asset and capitalize on the opportunity there. So it could go either way, but we just view it As it’s a high-quality asset and we’re happy if we earn the return and may leverage into a broader opportunity. And that’s as much as we can say right now.

Dylan Burzinski

I appreciate it.

Operator

Okay. And your next question comes from Seth Bergie with Citi. Please go-ahead.

Seth Bergey

Hi, hi, thanks for taking my question. I think on the last call you spoke to kind of hitting the 80% target for by year end. I guess just given the recent leasing activity and it sounds like ask the $1.4 billion development pipeline is kind of on leases out on 2. Do you think you could kind of exceed that target

Steven Roth

I said I doubt it. The question is can we exceed 80% that I’m saying I doubt it. Go-ahead, Glenn.

Glen J. Weiss

I mean, look, we’re feeling very good about where we are at PEN2. We’ll feel we’ll get there. I will say we’re being patient, we’re being smart. I might even say we’re being a little choosy in terms of our credit profile, our tenant mix and we do keep looking at our price — increasing it. So we’re not rushing just the lease space.

That’s not what we do. So while we think we’ll get there, we’re being careful and smart about our strategy, we’re in it for the long-term, not for the short-term statistics.

Steven Roth

Well said

Operator

And your next question comes from Alexander Goldfarb with Piper Sandler. Please go-ahead.

Alexander Goldfarb

Hey, good morning and congrats to you guys on the Verizon deal. So that was nice to see. Glenn, you partially answered my question on the leasing ex-NYU. It sounds like you guys are choosier on the types of deals that you’re doing, especially in this market. But what stood out in the quarter is ex-NYU, the average lease term was just 6.8 years, which given you know CBD leasing would expect that longer. So can you just give us a little bit more color?

Clearly, you’re on for big whale of deals. But on the smaller deals, can you just give a context of the types of tenants and space and tenure because again, we’d expect deals to be longer than averaging 6.8 years?

Glen J. Weiss

Yeah, of course. Hi, Alex. So I look at it for the full-year, the half year thus far, our average is 12 years on 1.1 million feet of leasing outside of NYU, of course. For the quarter, it’s an outlier this quarter. It was a mix of large renewals that were less than 10 years with a lot of pre-build deals at Penn 1 and other buildings that are multi-tenant like the Fuller building and others.

So it was an odd mix of leasing this quarter. I certainly would not say there will be a trend of this type of average lease term, particularly, you know us and our averages are normally at least 10 years. I mean, it’s an outlier and I’m not concerned at all.

Alexander Goldfarb

Okay. The second question is, Steve, I appreciate your comments on the cash balance for Vornado. But when we look at Alexander’s, it seems to be the inverse in the sense of the dividend overpayment, the cash needs for the Bloomberg in 2029 replacing Home Depot. So can you just help us understand the dividend overpayment relative to the cash balance relative to how we should think about Alexander’s on a go-forward basis

Steven Roth

This is a call. I think it’s inappropriate to get into Alexander’s. We had this conversation at last quarter as I remember. There are things going on at Alexander’s that you don’t know about and as a result of that, you know, I quibble with your analysis. Is going to be just fine.

Alexander Goldfarb

Okay. I appreciate that, Steve. Thank you.

Steven Roth

And just to clarify just a little bit more. I mean, there are some assets that are going to be sold at Alexander’s, which will how do I say it probably surprise you greatly and it’s not the big

Alexander Goldfarb

I like surprises, so I appreciate that I appreciate your time, Steve. Thank you.

Steven Roth

Thank you.

Operator

And your next question comes from Gina with Bank of America. Please go-ahead.

Jana Galan

Thank you. Good morning. Maybe just following-up on the retail leasing environment. Can you talk a little bit more about the timing around the vision for the 34th Street quarter and then the potential timing of backfilling the Forever 21 space?

Steven Roth

Hi, thanks. This is a long-term activity. We have held that space off the mark. Well, first of all, let’s talk about the quality of the real-estate. 34th Street over the years has been one of the top two or three shopping streets in Manhattan. The subway stations are the second busiest and the third busiest in the entire system.

The footfall is amazing. The traffic is getting accelerating now with all of the office buildings that have been built-in the district. And when you look at the transportation system, the transportation system really is at 7th Avenue and 33rd Street and 6th Avenue and 33rd Street. So all of the buildings to the West,

The people in order to get into the transportation system basically come east into our neighborhood. So we’re very enthusiastic about the quality of the retail, the Street has gotten the — dare I say shacky. We have held lots of space, maybe even all the space off the market waiting for the right timing.

The timing is now. So what I said was that we’re going to take — it looks like it’s 700 front feet. 700 front feet is basically 3.5 blocks. Nobody has that kind of concentration under one ownership. So we’re very excited about the opportunity. With respect to when the Forever 21 space gets released, it may be reconfigured and I really can’t predict what it’s — what the timing is going to be. It will undoubtedly be a different building and it will take some time and be patient with us. But what’s going to happen is going to be a great result.

Jana Galan

Great. Thank you, Steve. And question for Michael. Thank you for the comments on the comparable FFO for this year versus last. But can you help us think about kind of the revenue ramp at the end-of-the year? I’m just trying to help us kind of think about the full impact of PEN1 and PEN2 being in 2027, but kind of how will that trend quarter-to-quarter?

Michael J. Franco

It sounds like you’re asking for guidance now which we don’t give. I think I think it will build over those quarters but it’s going to be as — as we think about both Penn and Penn 2, it’s going to be more back-ended there. But I don’t think — and start building a little more towards 4th-quarter this year and then into next year.

But I think most of it’s going to happen in 2027 from a run-rate standpoint. So I don’t want to give you a ’26 prediction here today. We haven’t done our budgets yet. Obviously, the market is moving positively. We’ll see where we end-up. But I think most that will hit going to be pretty steep growth from ’26 to 27.

Jana Galan

Great. Thank you.

Operator

And your next question comes from Vikram Alhotra with Mizuho. Please go-ahead.

Vikram Malhotra

Thanks so much for taking the question. Michael, I guess I want to just get some more color on that last few comments. So you obviously talked about the ’27 growth. We’re not looking for a number for ’26, but just are there any big moving pieces we should be aware of as we model this out, like anything that will really I guess, depress ’26 or is it just a step-function change as we go into from ’26 to ’27?

Michael J. Franco

Yeah. I think it’s largely just step-function. Yeah, I don’t think it’s anything unusual. I mean, look, we have space releasing up really across-the-board, both New York, some space in California, Chicago, and we got activity on the retail area. That will kick-in as well. So I think generally across-the-board, nothing unusual, but largely, as I said, just given timing of when we sign those leases stepping heavily in.

Vikram Malhotra

Okay. So no big move-outs or like interest expense, I guess, any swaps or anything expiring that like pressure ’26 relative to ’25 before we get a step-up in ’27?

Michael J. Franco

No, I mean, look, it’s in terms of move-outs. I mean we’re in the leasing business, right? And there’s going to be a certain amount of tenants that move-out, certain amounts you keep. So you’re going to have to grow, certainly Contract. I think we’re more in the grow than contract right now. But you know, apparently, there’s always some level of move-up. So in New York office, and you’re going to have — we’ll just have to see what sort of comes about over the course of the next year. I will say on the interest expense side, and I think we talked about this on the last quarter. I think we’re generally on the downhill trajectory on that. And we had been fairly well hedged. And we’re now, A, between delevering the balance sheet and I think we’re generally rolling over assets I would say flat in terms of interest, maybe a little bit down, maybe a little bit up, but generally flat, but with less debt, the interest expense is coming down. So if short-term rates come down, that will help a little bit more. So I think we’re — I think we’re on the backside on the interest front.

Steven Roth

Yeah, hang on for a minute. Think about it from the big-picture point-of-view, we operate our business 90% of our business in the single best market in the country by far. We are in the best building category, which is a smaller market than the entirety. It’s 180 million-square-foot market. The vacancies in that market, our customers are expanding, our customers are doing well. The demand for space is robust, aggressive in the market that we serve.

Vacancies are evaporating, the markets are getting tighter. So that all orders to a a better business and shareholder value-creation. So that’s where we are.

Vikram Malhotra

Okay. I just wanted to clarify. So I guess, Steve, you mentioned San Francisco likely to come back very, very, I guess, I don’t know if it was the word ferocious and then obviously New York doing very well. I’m just wondering, does this create an opportunity for to use some capital to buy assets, invest in debt. I know you’re paying down debt, but just like what are the investment opportunities today for Vernado?

Steven Roth

The answer is capital allocation is probably the single most important thing that we have to do and we are going to be very vigorous and very disciplined in what we do. We look at everything that comes up and we invest cautiously and we invest aggressively when we think there’s something that creates real shareholder value. So I don’t have anything in the way of predictions for you other than the fact that we are very responsible in our capital allocation.

Operator

Thank you. And your next question comes from Caitlin Burrows with Goldman Sachs. Please go-ahead.

Caitlin Burrows

Hi, good morning. Earlier somebody asked about net effective rents and you talked about pushing rents across New York City. I guess on the tenant improvement and leasing commission side, you show it as a percent of initial rent and it’s up in New York City for the second — sorry, for 2Q and the first-half to like 12% to 13% of initial rent. So I was wondering, would you say that 2025 outcome is a result of something in particular or is that just the reality of leasing today and what will it take for that to change

Steven Roth

Go-ahead

Glen J. Weiss

Just gonna say that TIs have stabilized haven’t come down yet, but we are seeing free rent come down, which is not in that percentage. But we expect as things tighten, I meant the TIs will eventually come down. But free rent certainly is starting to come down in our deal-making with rents rising. So I think that’s a great start to the net effect of story strengthening for owners like us for sure.

Caitlin Burrows

Got it. Okay. And then I was wondering if you could just give any update on your dividend thoughts as it relates either to 2025 or just broadly and having a quarterly dividend reinstated?

Michael J. Franco

Good morning,. So on the dividend front, obviously, that’s a Board decision and we’ll meet with the Board, discuss it with the Board as we get at year end. I would say a couple of things though. Given the positive trends in the business, you where taxable income is expected to be.

And there’s still things that could move it around you in a number of different ways, including some — you’ve seen us sell a couple of small assets, et-cetera. But I would say as we get towards year-end, our expectation given the trends are at a minimum, we think we’ll pay as much as we paid last year, which was $0.74 a share.

And so that’s — that’s for ’25. And again, we’ll get with the Board at year end. I think as we look out, and I think Steve made this comment maybe a couple of quarters ago, as the environment heals, we’ll look towards more of a regular dividend. I think that’s something we’ll also look hard at year end and get back to a more normalized quarterly dividend, whether that results in any different outcome and there’s a total, you know, I can’t comment on that.

But I think certainly as we — as we enter this year, no less than last year the expectation. And again, given the positive trends, you know, we think that the dividend will start growing over-time, particularly as we get into that 2027 significant increase in earnings.

Caitlin Burrows

Thanks.

Operator

And your next question comes from Ronald Camden with Morgan Stanley. Please go-ahead.

Ronald Kamdem

Hey, I just got two quick ones. Just on the — going back to the same-store NOI and some of the call-outs. Just wondering if any high-level thoughts as you sort of anniversary this period in ’26 or ’27, just any sort of color on where that same-store could look like or how we should think about it without asking for guidance.

Michael J. Franco

I think that — in NOI, we got a lot going on because obviously 77 comes out in there. Now we obviously paid-off the debt too. But look, I think as we get to particularly next year, we’ll start seeing positive same-store NOI and beyond. I can’t give you the percentages yet. But again, just given the leasing pipeline, we expect that will be the case?

Ronald Kamdem

Makes sense. And then my second question, just some updated thoughts. I mean, I think the hotel pen land site, some of the activity on sort of fifth Avey and retail monetization. Just curious if you can give us a pulse on those assets and how you’re thinking through about potential monetization there or what you’re hearing? Thanks

Steven Roth

Pen 15 site is I believe the single best site in the West New York market. Obviously it will require a new-build. A new-build now is, as I’ve said in my prepared remarks, the escalation in cost of the new-builds is fairly dramatic. So we will — we’re trolling for tenants. We talked — we see every large requirement that comes along. And when the right tenant comes along, we will make a deal and develop the develop the land. The timing on that is uncertain, but it certainly will not be imminent or quick.

Operator

And your next question comes from Brendan Lynch with Barclays. Please go-ahead. John.

Brendan Lynch

Great. Thanks for taking my question. As you guys mentioned in San Francisco showing broad sense of improvement in-demand. Can you give us an update on progress for renewing or re-leasing some of the upcoming expirations at 55 California,

Michael J. Franco

Do you want to take that?

Glen J. Weiss

I’m sorry, just in San Francisco a few days ago. Things are markedly improved, the streets feel-good, safer, cleaner, buildings are busier and the good news is leasing is starting to tick-up and improve. It feels a lot like New York, I’d say, probably 18 months ago or so where things are starting to happen in a positive way.

The beat is better, the brokers are smiling a little bit all of a sudden, so it all feels good. We’ve just completed a huge run of leasing there about 600,000 feet. We have some vacancy to contend with right now 100,000 feet bits and parts and we have a couple tenants moving on next year. We have action on everything. Our tour volume is great almost daily in the building, everyone is coming through and the building continues to outperform everybody by a Long-shot. The best tenants with the highest rents are all coming to 55. We feel great about our prospects. But overall, the market seems to be coming on now. The mayor has done an excellent job improving the environment, working well with landlords like us and with our tenant base. So we feel like things are signaling to improvement and strength.

Brendan Lynch

Great. Thanks. That’s helpful. And maybe more broadly on the demand picture. Our checks with brokers have suggested that a lot of the demand that they’ve seen in recent quarters has reflected real-time needs and urgency among tenants versus more traditional longer-term capacity planning needs that would have been a more of a characteristic of the past cycles.

Have you seen any shift in recent quarters in how the tenant base is approaching their need for space in terms of real-time needs versus longer-term planning

Steven Roth

Glen, sure.

Glen J. Weiss

So Verizon is a perfect example. It’s a deal that started percolating to us in mid-June and closed at the end of July. That’s fast. We love that. A tenant decided to move their headquarters, acted quickly, concisely perfectly and smoothly. And so that’s something we see. We have other activity at Penn 2 and one and elsewhere in the portfolio similar, where tenants are now coming quickly. It’s not as much of our lease expires in two years or three years or four years.

It’s — it’s the action that we like a landlord’s market type of action. And a lot of it is both relocation and expansion. There’s a lot of expansion, particularly in New York right now, where we’re seeing signs of growth and people are acting very quickly and even in some cases, we have tenants now battling for space throughout the portfolio. So I think your comment is on queue in terms of what we’re seeing.

Brendan Lynch

Great. Thanks,.

Operator

And the next question is a follow-up from Alexander Goldfarb with Piper Sandler. Please go-ahead.

Alexander Goldfarb

Hey, and thank you. Glen and Steve, I just want to go back. Steve, you mentioned $100 in-place. I think it was in-place in Penn that could go to $150 if you guys get the same rents as your neighbors to the West. But I thought the new deals that you were signing were in sort of the 120, 130 range.

I thought that’s where the new deals are commanding. So maybe I’m wrong, but maybe you can just provide a little perspective versus what are in-place rents at the PEN — PEN1, PEN2 versus where you guys are signing rents. As I said, I thought your signed rents had been moving up steadily.

Steven Roth

Glen, do you want to hang left for a minute?

Glen J. Weiss

Certainly, we’re moving steadily up. As Michael said, we were in the 80s and the 90s, now in the hundreds. That’s on average. We, of course, have seen deals well into the hundreds, the 110s, the 120s, the 130s. And so we are certainly seeing month-to-month improvement, rising rates. We expect that to continue. So our average rents have risen quarter-to-quarter and then we’re seeing deals well into the hundreds now. You’re correct, Alex.

Alexander Goldfarb

Okay, cool. Thank you. Thank you.

Operator

This concludes our question-and-answer session. I would like to turn the conference back over to Mr Steve Roth for any closing remarks.

Steven Roth

Thank you for joining us today, everybody, and we’ll — we continue to be very excited about a lot of things. We’re very excited about Penn, obviously. We’re very, very proud of what we’ve done with our balance sheet over the last couple of quarters. And business is actually pretty terrific. We’ll see you next quarter. Thank you.

Operator

Ladies and gentlemen, this concludes today’s conference. Thank you for your participation. You may now disconnect