Marc Holliday - Chief Executive Officer Steven Durels - EVP and Director of Leasing Matthew Diliberto - Chief Accounting Officer Andrew Mathias - President

James Feldman - Bank of America Merrill Lynch Ross Nussbaum - UBS John Guinee - Stifel Brendan Maiorana - Well Fargo Alex Goldfarb - Sandler O Neill Jed Reagan - Green Street Advisors Ian Wiseman - Credit Suisse Brad Burke - Goldman Sachs Jordan Saddler - Keybanc Markets Vance Edelson - Morgan Stanley

Thank you everybody for joining us and welcome to SL Green Realty Corp. Fourth Quarter and Full 2014 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 fourth quarter and full year 2014 earnings. Before turning the call over to Marc Holliday, Chief Executive Officer of SL Green Realty Corp, I ask that those of you participating in the Q&A portion of the call, please limit your questions to two per person. Thank you. I’ll now turn the call over to Marc Holliday. Please go ahead Marc.

Okay, thank you and good afternoon everyone. I think you’ll all be fairly pleased with our abbreviated format for today’s call which follows our extremely fulsome investor presentation last month. I think that December’s presentation was by far the strongest and most comprehensive one yet and I think that that was affirmed by the extremely positive feedback we got from shareholders and analysts since that date and has reflected not in substantially in the stock price since that time as well. So we are still very much on track with a lot of the goal and objectives we put out there about six or seven weeks ago. I think the market is forming up in a way which will still enable us to be right on track with our fairly aggressive goals that we set for ourselves and so I’ll just take this opportunity now to highlight a few items occurring since that time before opening it up for Q&A. Last night, and pretty notably we achieved a significant milestone in the One Vanderbilt entitlement process. After lengthy negotiations in numerous meetings with Manhattan Borough President Gail Brewer and her staff the Borough President has recommended approval of the project inclusive of certain improvements we have agreed to make. There continues to be strong community support from groups like the coalition for a Better Grand Central and the straphangers campaign, both of which greatly helped us achieve this important milestone along with many other groups for which we are thankful for their support. At the investor conference in December Rob Schiffer explained in some detail that the euro process contains 40 steps the first being the local community board followed by the Manhattan Borough President recommendation yesterday, then onto city planning commission and finally city council. Next week we will be presenting the project to the city planning commission the third stop at a hearing where we hope to receive significant support from all of the key stake holders, unions, coalitions and civic groups. The Borough President’s approval gives us great momentum as we enter into the final stages of this process and we remain confident that we will achieve our goal of the special permit for One Vanderbilt this coming May which is consistent with the timeline we set out for everybody in December. So, turning now towards leasing, we obviously went through a fairly exhaustive amount of information on the portfolio in the market in December and that supported I think our contention that when we would be taking a fairly sizeable step forward this year and into next year over the next 12 to 18 months and I will say right now the market environment is such that it’s forming up in a way that these are meeting or exceeding our expectations. Just since December 8th we’ve signed about 230,000 square feet of leases and 18 different transactions that’s in the Manhattan portfolio and as you saw for the quarter, fourth quarter we were up about 13% or slightly more than that mark-to-market and nearly 15% mark-to-market for the entire year 2014. So I would say that that’s still the primary engine on the operating side, the core earning side of what we are looking to and as I go through the pipeline with Steve Durels, I see that –we’ve got on top of that another 1.1 million in the pipeline as we sit here today, that’s as of 28th, which is about 70 somewhat thousand square feet out for signature, half a million square feet of leasing in negotiation and then another half a million square feet that are pipeline deals in their term sheet negotiation. So again, anytime that pipeline exceeds or approaches a million square feet, I would call that fairly robust for the kinds of targets we had for the year which, Matt, if my memory serves me right we are about 1.8 million square feet for the year. And that’s something that I think we still feel very good about given the demand that we see out there and the winnowing supply as the absorption in this market continues to accelerate. We had a pleasant surprise at the end of the year which I don’t think has been fully – had not been really communicated in a formal way to the market yet as it relates to the Suburban leasing activity. Since December 8, the investor meeting there was a 185,000 square feet of leasing, since then 122,000 square feet of that representing new leases, total of 19 transactions and true to form, the suburban group signed eight of those deals on December 31, right into New Years eve. Eight different transactions, 60,000 feet [ph] which were encompassed in that 185,000 feet which made for quite a – it put quite exclamation point on the end of the year for in improving suburban market outlook as we see it, and I think you saw some of the metrics relating to mark-to-market and occupancy also trended up in the fourth quarter. So that was good news. I think the leasing is also punctuated by two of the recent announcement this morning. The Swarovski deal at 10 East 53rd I think its affirmation of the excellent job, the construction and design team and leasing team have done in reposition and redeveloping that asset in a way to capture these type of high quality profile tenants. Swarovski is our first new office tenant, new office tenant lease post redevelopment and that’s on top of the Equinox deal we announced previously for major fitness center down in that building. So we still are very, very bullish on the prospects for 10 East 53rd this year. And on top of that you heard, many of you heard Brett Herschenfeld talk about significant mark-to-market in the retail portfolio back in December and I think one great example of how we’ve now monetized just a small piece, but a significant piece of that mark-to-market was with their announce diesel deal of 625, Madison with many more deals in the pipeline to come from the retail leasing side. So that was very strong. And the debt and preferred equity front, our balances remain roughly the same through year end. I think that people saw a slight dip in the average yield reported on fourth quarter activity about 8.3%, that’s actually fairly consistent with our guidance of around 8.5% and it’s still leads a portfolio that’s averaging 10.5% on a $1.4 billion, so I wouldn’t get too overly focus on the quarterly ups and downs. We have some quarters that exceed to 10%, this quarter was 8.3%. I would look to the average on the $1.4 billion, 10.5% I think that the best depiction of the earnings power of that portfolio for 2015. And by way of example just already into this year we’ve originated about $111 million of new debt and preferred equity investments which had a yield of just slightly under 10% in the high nine, so again that pipeline is still – we think extremely strong. We have fairly lofty origination goals of adding an incremental $250 million to our net balances by the end of 2015 and that’s an increment that’s on top of whatever the expected pay offs and redemptions are this year. So that could approximate activity certainly in excess of $600 million of gross originations. And looking at a pipeline in front of me now, which is about a dozen deals or so that would make a significant dent in that total and its only January. So I think that’s reflective of a market that’s got a very high amount of transaction activity and as a result of that transaction activity it drives financing opportunities and debt and preferred equity investments for people like us. Lastly, Andrew Mathias talked about unlocking opportunity in the liability side of the balance sheet and talked about all the opportunities we’ve saw to take higher rate debt and either unsecured certain assets or term it out using lower more efficient and cheaper forms of secured and/or corporate bond financing is available in today’s market. And I think one example of where we’ve now monetized or illuminated that since the Investor Meeting in on 3 Columbus where we’ve signed a commitment with the lender for $350 million financing at a interest rate of about 3.6% which is locked for ten years, which is a very – we think a very good piece of financing in terms of both repatriation of our substantial equity investment into that deal for a long term lock-in of rates that are very advantageous level and there is more of that to come as you remember when you extrapolate that to the whole portfolio, we should you the kinds of interest savings number that could be achieved on a full mark-to-market at today’s rates, and today’s rates are lower than what we projected back in December 8 due to the rise – recent rise in treasury prices. So all-in-all I think good news to report. It was a very good quarter and as important the prospects for 2015 look to be very much in line with how we hope to execute. And with that, I would turn it over for questions and answers.

Thank you. [Operator Instructions] Our first question comes from James Feldman of Bank of America/Merrill Lynch. Your line is open.

Great. Thank you. I guess just starting out for Steve Durels or anyone in general at the investor day you had commented you'd see a premium in 2015 for big blocks of space. Can you give your latest thoughts on what's happening in the big block market today in terms of the lease-to-demand pipeline? And then, also your thoughts on competitive big blocks that will be in the market this year?

Sure. There’s a great step which I think support that which is fact that the number of the scarcity of big block availabilities in Midtown. There’s only five spaces available in Midtown that are 250,000 square feet or greater compared to ten units from year ago. So from a supply side certainly it’s drying up fast. The number of large leases that were signed last year sort of give you trend line was dramatically larger. There were 58 leases signed last year for 100,000 square feet or more compared to 43 leases from the prior year, but more telling was the fact that there were 33 relocations rather than just renewal deals compared to only 17 large leases to prior year and those large block deals were 7.5 million square feet compared to 3.4 square feet. So clearly from the demand side and offset by the lack of supply makes us very bullish as to why this is going to premium on the big block.

Okay. And then secondly, on the suburban market, can you just talk more about who is signing leases out there and what kind of assets they’re looking for? Are they rail? Are they transit served or not, just little more color on why there was a pick up in the fourth quarter?

Sure. This is Isaac. You are clearly seeing more activity in the transit-oriented buildings in White Plains and Stamford. And in terms of tenant types it’s really across the board. You’ve got legal financial services, tech, healthcare; we signed probably three or four leases north of 50,000 square feet. So there are also larger tenants coming back into the market as well and that’s striving both occupancy and mark-to-market both of which have been really, really positive.

That’s giving sense.

So for example we signed up Legal Aid for close to 30,000 square feet. Cummings & Lockwood, which is a law firm, for 55,000 feet, Sony for 53,000 feet. So it’s across – it’s really across the board. And this is the first time in the last two to three years that we’ve seen positive direction from different tenant types not just healthcare, not just education, so it’s across the entire gamut.

And are these tenants coming out of the city, or they are local tenants that are expanding?

The vast, vast majority are local tenants. They are either moving, they are expanding, both the positive thing here is we have seen them actually getting bigger. So if it was a 20,000 square foot tenant moving from building X to one of ours, they are now taking 22,000, 23, 000 so that’s actually really positive sign.

Just as a note on our portfolio performance versus the market, our performance is trending towards around 84% which is better than the market. I mean, we are – I think group, the Reckson group in White Plains and Stamford are doing an excellent job of outperforming the market. So I think what Isaac is telling to you are the types of tenants we’re attracting and we’re wining and we’re doing it on economic terms that are accretive which I think is not necessarily illustrative of the market as a whole which is improving but I don’t think improving is rapidly as our portfolio.

Got it. All right. Thank you.

Thank you. Our next question comes from Ross Nussbaum of UBS. Your line is open.

Hey, guys. Good afternoon. We saw some market reports that you guys might have made some leasing progress at 280 Park Ave. Can you talk a little bit about where that project stands currently?

Sure. As we said right now we are – the only reason we didn’t put a press release out covering because there’s a large deal that we signed in early January with Fiduciary Trust for 126,000 square feet was generally reported in the local papers. So that was deal that we’ve been working on for quite a while. There was for 3.5 base floors of the building at rents that were well within our underwrite numbers, leases with 302,000 square feet of remaining office space left in the building which is about 24% of the office space. We have leases out on another 110,000 square feet of that availability. And then we have another close to 80,000 square feet of term sheets that we’re very hopeful we’ll get converted into leases within the next couple of weeks. So we’ve basically completed I’d say 95% of the capital program and as soon as we unveil the lobby and if you been through the building and seen the second half of the lobby that recently opened. It really opened up the floodgates as far as tenant demand. And where we were very optimistic and bullish on the project early last year, now it sort of high five because everybody is coming through one right after another and we’re going to -- we close everything that we’re working on. We’ll be down to the only one base floor left in the building and beyond that, a smattering of partial spaces up in the tower. So we’ll be – we should have the building stabilized this year without too much fear. And rents were on rise and as we saw all last it all financial service, nothing but financial services.

Great. Appreciate that. Second question either Andrew or Marc, General Growth did announce the Crown building deal on Fifth and 57th. So I guess it's a two-part question. One is, are you guys looking at – have an opportunity of putting some mezz on that deal? And then number two, I'm guessing you took a hard look at it, if General Growth can hit their 6% stabilized yield target in three years, I'm curious. That doesn't seem like an unreasonable number relative to where our cap rates are in Manhattan. What was it about that deal that you guys didn't see?

I’ll let Andrew take that one.

We are – I’m going to not comment on the acquisition. I’ll just say, we obviously underwrote the deal carefully. We knew the sellers and we didn’t see that type of earning potential on our plan for the asset. And the mezzanine – we’re – I honestly don’t know what GGP is doing in terms of that capital stock there. So it’s not an opportunity that’s crossed our desk. We would certainly look at if it did. But he has generally -- the deals he bought thus far in Manhattan is generally used lower leverage and used some master leases and other structures to get its debt cost very low. So, I don’t if he’ll do the same on Crown or not.

Thank you. Appreciate it.

Thank you. Our next question comes from John Guinee of Stifel. Your line is open.

John Guinee, I'm just curious because you've never brought this up before, but One Vanderbilt, I guess you've got about 700,000 or 800,000 square feet in place, up-zoned to about 1.6 million square feet. Can you provide, I guess just on a square foot basis, what you think your land basis is going to be including your building costs, all of your fees, infrastructure cost, demo cost and so people can get a sense for whether your land basis is $200 a foot or $2,000 a buildable foot? And then what you think your total development cost is going to be on One Vanderbilt?

John, I think what we said in the December, we went through the building program fairly extensively in the design and the entitlement process. We are completely focused on those elements right now and getting through what’s – it’s been a long road of assemblage acquisition, possession and now entitlements over time. At the conclusion of that effort when it’s done and we know what we have and we know the total cost in and what we’re – total envelope of the building and the exact program. I think we’ll go into that in much greater detail, but that’s kind of a – that’s a later in the year kind of event for us. I know we’ve been saying that for some time now but it’s still is the case because there’s a lot of different moving pieces. You saw even yesterday we had to make some modifications to the property that we think were good improvements and certainly good for public benefit and public realm improvement, but until everything sort of – until we have everything isolate and identified, it would be premature to going through numbers. But you can certainly look back and see what our acquisition cost are for the assemblage and that’s the bulk of cost but then obviously there’s all the public realm improvements, we’ve been pretty specific on $210 million of cost associated with public realm improvement. And then obviously a lot of predevelopment possession cost on top of that which like I said when it’s all settled we’ll be able to give it better picture of.

Just intellectual curiosity, when you are taking down 800,000 square feet brick by brick, have you got any preliminary demo costs on that yet?

Yes.

Okay.

In line with, I mean, we do a lot of demolition in the city. This isn’t the first and I would say it’s certainly not the most material of items on the budget and consistent with – the kind of demolition cost we experience throughout the city. We do annually enormous volumes of demolition of space and occasionally structures.

Great. Thank you.

Thank you. Our next question comes from Michael Bilerman of Citi. Your line is open.

Hey, guys, [indiscernible] Michael. Just wonder if you can comment on any changes you’re seeing to the investment landscape in Manhattan and maybe if you could focus on any changing trends you’re seeing from foreign buyers?

I think we went through specifically at Investor Day that the trends emerging in terms of a lot of Chinese capital coming into the market. Canadian capital continuing to play a dominate role. I’d say since Investor Day we’ve seen Japanese capital with Mitsui Fudosan making a large investment in to Hudson Yards with related. So there’s a lot of Japanese capital circulating around – there is just continued demand from all different points on the globe and in all different property types that are driving the market. I think you’re seeing that at a trophy level and you’re also seeing it a very deep level of demand for properties like 315 Park Avenue South which traded within the last quarter. And other sort of side-street and less high profile glass and steel building, which are trading at record levels throughout the city.

Have you seen any impacts from just drop in crude prices more recently or has that really not trickle down to the buyer pool yet?

Hasn’t trickle down to the buyer pool quite yet. I read about it as having more direct impact on condo buyers, individuals but not on the commercial land at all.

Thanks so much.

Thank you. Our next question comes from Brendan Maiorana of Well Fargo. Your line is open.

Thanks. Good afternoon. The retail disclosure that you guys provided it’s helpful, I think you talked about that at the Investor Day when you gave the outlook on the significant amount of rent growth. I think there was $165 million of rent growth over the next several years. If we look stabilized retail asset either kind of retail at the base of an office building or standalone retail, how do you think the valuation of those cap rate basis stabilized retail would compare to stabilize office in the city?

Yes. I think it’s similar, I mean, I think stabilized retail is getting slightly more aggressive bids than stabilized office. So stabilized office is sort of 4 caps stabilized retail would be 3.5, 3, 3.25 cap on prime areas. But it’s hard to generalize because every property has its own market issue or opportunities that play a role in cap rates.

Okay, understood. That's helpful. And then just maybe second one for Steve Durels. So you gave very helpful color on 280 Park. You did the Swarovski deal at 10 East 53rd, and I think you are targeting stabilization or leasing of that asset more in 2016 than 2015. But can you give us a sense of how the pipeline shapes up at 10 East 53rd?

Yes. Remember we sign the Swarovski deal for two floors that was right on the tail of signing the two floor lease with Equinox. We have another lease out right now that we just went to documents with yesterday. The capital program is pretty well advanced. If you went over there today you’d see probably 80% of the lobby work is complete, still a construction zone but when you walk in there you clearly get a sense of the scale of what’s happening at the ground floor and how impactful that’s going to be that to reposition this building. The windows have all been replace. The façade has been recolored. A lot of infrastructure works been done. And we’ve got very strong tour activity from a mix of type of tenants. I’d say for two-third of the space on the floors that are the 9,000 footers, its primarily financial services and international companies. And then ground stairs on the few floors that are little bit larger 16,000 foot floors those are more general service businesses. We’ve got four or five proposals out there we’re trading with tenant. Most of them for the top third of the building and rents in that part of the building are anywhere from 95 to 115 a foot as far as the term sheet numbers that we’re going back in forth with [indiscernible] so we’re feeling like we’re right on plan for that.

Okay. Great. And just Steve, quickly, at the base of the building, the rent differential between that sort of 100 to 110 at the top?

So, it’s a tale of two cities in that building. The bottom nine floors, two of which have already is lease, so it’s only some floors left of space to worry about. Our 16,000 feet there, they don’t have the big open views of Central Park we have upstairs. But that still sort of low 70s rents, which are right in line with underwriting and put it in a very good place far as been competitive in the market.

Great. Thanks for the time.

Thank you. Our next question comes from Alex Goldfarb of Sandler O’Neill. Your line is open.

Yes. Good afternoon, thanks. Two questions here. One, Marc, on the One Vanderbilt approvals from last night, I think you said the Manhattan Borough President, she approved it. What about Dan Garodnick [indiscernible] his name, but Dan the local district councilmember, is he also signed off on it now?

Yes. The city – the project comes before city council as I guess what we will call the last stop or the fourth prong of what I describe earlier. So Dan Garodnick is the local councilman who is been sort of intimately involved and knowledgeable with the project. I mean the entire city council will act on this. And so, Dan and rest of council are extremely important in terms of obtaining final approval. But that comes later on in April and May.

Okay. So the Borough President, she signed off on it. Now the next political hurdle is going to the Council as a whole. But presumably Dan is on board if the Borough…

The Borough President gave his recommend, gave her recommendation yesterday last night. And that goes now before the City Planning Commission, because there’s a lot of – there’s a lot of technical features to this project that have to go first before the City Administration Planning. And then with hopefully with their support and informative vote it then goes to the city council for final vote.

Okay, cool. Second question – and Matt, again, thank you for the enhanced retail disclosure. Just curious, the vacancy when you look in the columns, obviously you show the current in-place rent versus what you think the mark to market would be. And then there's the vacancy where obviously there's nothing in place, but there's the market rent of that vacant space. And all of that vacant space is materially higher than what you had in place as far as what the mark to market is on the in-place. So is this stuff that you – is this vacancy that you've acquired, or this is stuff that you're holding vacant off market waiting to obviously hit those numbers?

No. this is more vacancy that we’ve acquired recently if you think particularly about what we’ve acquired in 2014. We acquired a lot of things with that were either vacant or were anticipated to be vacant so we could re-tenant them. So those are more recent vantage than the occupied space.

Okay. And just for sense markup can you sort of what the old rents that used to be on this spaces were?

It did vary by property, but it’s measured not in percentages, it’s measured in multiples.

Okay. That’s cool. Thank you.

Thank you. Our next question comes from Jed Reagan of Green Street Advisors. Your line is open.

Hi, guys. Its look like on the concession side, tenant improvement dollars came in a little bit last quarter but free rents on the higher side. Just wondering if you can talk broadly about trends you’re seeing with concessions and when you expect those might start to improve in a meaningful way?

The number in any one quarter are so widely driven by whether or not we’re doing large deals or small deals and how many of the deals we’re doing are renewals is oppose to new transactions on space that’s completely raw and needs a full concession package. So I don’t know that you can glean a lot from the number from one quarter to the next. I’ll tell you that broadly speaking there’s seem to be greater willingness on tenants to absorb rent increases as oppose to reduction of concessions, concessions are slowly coming down a little bit, certainly by comparison two years ago they’re down materially. But I think construction cost for tenants are going up not only because commodity prices are up and labors up, but also because how much tenants have to spend as they densify their office. Their build-out, their needs are greater, more infrastructure, more furniture, more telecom. Everything that just goes into putting a lot of people in same piece of space, and therefore that explains why the tenants are willing to pay more rent but resistant to really knocking down the concession. So I think it’s going to be a slower reduction in concessions over the year where we’ll see alternatively a bigger pop in rents as the years go forward.

Okay. That’s helpful. And then with the U.S. dollars strengthening recent, I just curious if you’re seeing any evidence of impact in your retail portfolio just in terms of fall off in tourist traffic or weaker sales, and does that strong dollar change your growth strategy for Manhattan Street or New York Street retail at all?

No, I mean to the contrary we’re busy on the leasing in the retail portfolio as evidence by the diesel lease and haven’t seen any – seen any reported changes or certainly haven’t felt throughout the portfolio.

Okay. That’s helpful. And actually any color you can offer on the diesel lease in terms of economics?

It was an 83 increase from the prior rent which was a Baccarat space in a very strong deal and there’s lot of demand on Madison.

Okay. Thank you.

Thank you. Our next question comes from Ian Wiseman of Credit Suisse. Your line is open.

Thank you. Just a quick follow-up on the diesel deal, what was a motivating factor behind their move, I think they’ve only been in that location for five years?

You are referring to the Fifth Avenue location

Yes. Assuming they are leaving there?

Somebody paid them a fortune to leave.

Let me ask you this question. What would be the rent differential between space in that for space on the Fifth Avenue location today versus what you’re getting?

Probably 50%.

50% higher. Okay.

No. Double, so the rent on Fifth Avenue was more than twice the rent on Madison.

Got you. And moment they’re lease up, it wasn’t. How much term did they have left?

I think that that was sub lease I think they had through 18, but I’m not positive.

Okay. All right. Thank you.

Thank you. Our next question comes from Brad Burke of Goldman Sachs. Your line is open.

Hi. Thank you. Good afternoon. I had a follow-up to Manny’s question on investment trends, I wanted to know as you have been talking to source as a capital over the past month, do you have a sense of how their allocations are trending this year versus what they were allocating last year?

Allocations to…

Allocations to new investments in New York office specifically.

So allocations specifically Manhattan office.

Right.

I don’t know if we had that data, that’s hard to sell with the relative allocation is – I would say that anyone who is investing domestically and in the commercial sectors here one, I mean Manhattan is generally at the top of the list in terms of desire to allocate. It’s hard to say what percentage either of the whole portfolio or vis-a-vis other markets. But I think the – I can’t say the desire is increased, I think it’s always there as their primary goal we get calls daily. And that’s not an exaggeration or embellishment, I mean everyday multiple, multiple calls from foreign domestic institutional, non-institutional people who either want to buy a joint venture. So it’s hard to put that into a percentage allocation. It’s just a – it’s a very, very deep demand I think for every asset we have it’s really a matter of price. I mean if demand is almost always there it’s a question of terms and price, which is I think you see what’s driving this market and driving these values to in many cases new peak levels over the prior peak in ’06 and ’07. But I think if you don’t have any sense specifically of percentage outlook.

No I don’t, but I think what you are saying, maybe it’s still very strong, it’s not maybe a little bit higher because you are seeing some foreign investors looking at different product type, not just the trophy, glass and steel they are looking at more of your B building, side street product type like, Joeva [ph] which is a Japanese group buying 449 and 24, and 28 west 25 and 40 west 25. I think historically you wouldn’t have seen that, so clearly appetite is strong because those are the assets that are available.

Okay, that's helpful. And then maybe moving out of the city to the suburbs. Obviously you've had some leasing momentum there, and I know you wanted to sell more in the suburbs. Can you give us a sense of what you're seeing in cap rate momentum? And do you also have a sense whether there are buyers that are getting sticker shock in the city and are looking to allocate more to suburban property?

There still haven’t been enough trades to see exactly where our cap rates are actually going. And every building they are so unique in terms of tripling their leases, all the buildings are 50% leased but we have seen some transactions in Connecticut and in Northern Jersey that are basically been people who have owned lands or building some Brooklyn, Queens the city and they are 10 30 [ph] running out of those assets into the old same Connecticut and Westchester. So we are seeing that as a little bit of a trend.

I think the sequence is generally the market first and I think we’re seeing market improvement, then the financing, the finance ability of these assets and we are seeing decent bids out there from lenders and securitized and non-securitized lenders, willing to lend at attractive rates up in some of these metro markets outside of New York city proper. And I think the last piece of that is then the investor demand driving cap rates to compress which I would think that’s probably will be happening this year. Yes just based on the first two province being in place, can’t say that we can give you evidence or specifics to that effect, but you always don’t want to be looking in the rear view mirror, so if you want to go out on the [Indiscernible] make a bit of forecast, I would say you will start to see those cap rates compress this year.

Okay. That’s interesting, thank you.

Thank you. Our next question comes from Jordan Saddler, Keybanc Markets. Your line is open

Thank you. Good afternoon. I wanted to follow up a little bit I think tangent ally [ph] to the last question. And I appreciate the update since the investor day in early December. I can't help but notice that interest rates are down a full 50 basis points as you pointed out. So it increases the opportunity on the liability side of the balance sheet as you talked about. But what are you guys thinking on the asset side of the balance sheet given this pretty material shift?

So I think that on the asset side, there is really two things. It enhances our strategy of selectively disposing of assets. We did a substantial amount of dispositions in 2014 that was kind of punctuated by the almost $0.5 billion of sales, 180 Maiden lane which just closed, I think this month. So that’s a fairly significant deal right on the heels of 2 Herald which I think also closed there in the fourth quarter of December. So we will continue to sell into that market. I don’t think the 50 basis points means we’ll sell more or less. I mean we had a plan, we’re on plan maybe it means on the margins we are going to get some higher pricing. I don’t think the 50 basis points of treasury is necessarily basis point or basis point equal to reduction and financing rates because when you get below 3.5% for 10 year money, I think it starts to get a bit sticky in terms of what the absolute rate will be for 10 year, I owe money. But clearly the financing rates have come in and we’ll take advantage of that on the liability side as Andrew talked about, it should add incrementally to the sales and obviously on our acquisitions we are underwriting lower rates right now, so either higher levered returns or it could drive pricing a bit further. But we tend to model on our underwriting everything is towards stabilized markets, so we are never just taking the spot market cap rate, the spot market financing rate on acquisitions, we are always modeling the curve, we often – on like where we’ve modeled the curve plus a 50 basis point cushion which I think many of you, some of you may not. We hold our exit cap rates pretty stable at levels far in excess of where the spot market, the cap rates are today and I think that hurts us a bit on cap rate, but it certainly protects us in the future against any kind of cap rate increase and we keep our absolute level of returns pretty consistent looking to stabilize at 6% or more current cash returns and 8% to 10% levered returns and that probably translates into 6.5% to 8% returns. So that I think is not varying greatly because of the interest rate decline, but on the margin it certainly is up.

Thanks for the color. And a follow up for Steve on the demand for space from financial services specifically I’m kind of curious, you guys had mentioned that in December and it sounds like its materializing. What’s the nature of it and how deep is it?

I would say it’s the largest user group in our portfolio as far as prospects right now. Total number of transactions in the pipeline, total square footage, part of that is reflective of the inventory that we currently have available so I don’t know that it’s a barometer, gives you the inside as to the overall market color but based upon the kinds of buildings, the kinds of floors in other price points that we currently have availability 10 East 53rd Street Tower 46 280 Park Avenue being best examples. Based on – all geared towards financial service industry tenants. Behind that we’ve got some pretty good pipeline with the TAMI industry information services in particular, where we’ve got high hopes that we are going to converse some of that over to some significant transactions.

Okay. That’s helpful. Thank you.

Thank you. Our final question comes from Vance Edelson of Morgan Stanley. Your line is open.

Terrific, thanks. I’ll just start with another Suburban question, would you describe your sentiment around the Suburbs is flexible at all not just on cap rates and financing rates, but given all the leasing sign at the end of December and that you are winning in the market with these assets, what’s your appetite for curtailing dispositions or is it less a cyclical decision in more a secular feel for where you want to focus long term?

Our Suburban portfolio has I think serves an important function in terms of it’s fairly consistent cash flow. I mean, it’s fairly low, it’s a low consumer on the capital end of things as compared to the Manhattan portfolio so that’s certainly a great attraction to the portfolio on why I think it’s always play the key role for us is that it’s a relatively unencumbered portfolio, its maintained occupancy in the low eighties, I think since we acquired it, sort of at a very tough period of time in 2007, 2008. The capital budget for that portfolio is very manageable and the market is picking up, so it’s a contributor to the bottom line. So we like that portfolio, it was pruned down from a much larger portfolio at the time we originally closed on the western transaction and we kept what we felt were the best properties and the best markets and I think that proved to be true during the downturn and we had the team of about 30 people up there that run this portfolio in White Plains and Stanford that are I think best in class. And so everything we do there is no wholesale decision to hold, there is no wholesale decision to sell, I think everything is we look at is fairly opportunistic and if we can bring properties to stabilizations and a very strong bid comes back in the market and we have redeployment opportunities then I think you will see us execute on that program as we have in the past, but I don’t see current conditions driving that significantly in one direction or the other, I think we are just going to continue with…

Okay that's helpful. Then back on the tenant strength by vertical, so it's pretty widespread in the suburbs, and you also mentioned 280 Park being all financial services so to speak. And financial services representing the biggest user group now. If you had to compare the traditional verticals to TAMI though, can you just give us a feel -- do the traditional still pale in comparison to tech and so forth when it comes to growth and your feel for future growth, or is it really becoming a more balanced market?

Well I think I think we’ve been saying for the past couple of years quite frankly that the good news is that Manhattan is not as dependent upon financial services is what everybody felt years ago, because of one, the emergence of TAMI as being a big driver in the market place. So now it’s TAMI legal and financial services and then followed by general business services. So you’ve got really four big groups providing diversification as far as tenant demand goes. On the financial service side, I think it’s mostly the same as what we’ve seen for the past year, year and a half which is the profile of that group has been asset management, hedge funds, private equity the commercial banking. You haven’t yet seen the really big banks and the investment banks active in the market, although I think there is a couple of requirements kicking around today that weren’t there a year, year and a half ago. And part of that’s driven on the investment banking requirements either by consolidations or lease expirations that are coming up. And one of the brokers that I speak to and now I think generally have a shared view which is that the banks are hopefully past understanding the regulations, they are new world environment, they are short on space nobody is sitting on a lot of excess inventory and they are sort of primed [ph] to start to come back into the market as they figure out how they can grow their businesses. So we think that’s going to be a big tribute in the period to come.

Okay. That’s good color. Thank you.

Thank you. I’m not showing any further questions in queue. I would like to turn the call back over to management for any further remarks.

Nothing further. We brought it in under an hour, so we thank all of you for listening in and look forward to the next time.

Ladies and gentlemen, thank you for participating in today’s conference. This concludes today’s program. You may all disconnect. Everyone have a great day.