Marc Holiday - CEO Matt DiLiberto - CFO Steve Green - Chairman

John Kim - BMO Capital Markets Alexander Goldfarb - Sandler O'Neill Jamie Feldman - Bank of America John Guinee - Stifel Jonathan Petersen - Jefferies Manny Korchman - Citi Dave Rodgers - Robert W. Baird Jed Reagan - Green Street Advisors Steve Sakwa - Evercore Blaine Heck - Wells Fargo Nick Yulico - UBS Craig Mailman - KeyBanc Capital Markets Brad Burke - Goldman Sachs

Thank you everybody for joining us and welcome to SL Green Realty Corp's Third Quarter 2016 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 measures most directly comparable to each non-GAAP financial measure discussed in 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 third quarter 2016 earnings. Before turning the call over to Matt DiLiberto, Chief Financial 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 will now turn the call over to Matt DiLiberto. Please go ahead, Matt.

Thank you operator, good afternoon everyone, before I turn the call over to Marc I just wanted to take the opportunity to remind everybody of our annual investor conference being held on Monday December 5th here in New York City at Jazz at Lincoln Center. For more information you can email SLG2016@ slgreen.com, the invitations should be going out in the next couple of weeks. The format has changed slightly this year, we will be beginning at 9 AM on Monday December 5th, the door is opening at 8:30 AM for a light breakfast and we would expect to be completed by 1:00 in the afternoon. So again for more information, please email SLG2016@slgreen.com. With that I will turn it over to our CEO Marc Holiday.

Okay, thank you Matt and thank you for dialing into the call today, we're happy to have the opportunity to review with you the results of the third quarter and provide some additional commentary on how we see things shaping up to New York City. Continuing a trend this year where we have outperformed many of our 2016 operating and financial goals, we had a very strong third quarter punctuated by 1.3 million square feet of Manhattan office leases signed at the market leading 29% mark to market. Once again SL Green has demonstrated its ability to outperform on the leasing and operational fronts notwithstanding any perceived or actual slowdown in the tenant market. In fact in the first 20 days of October, we've concluded nine additional Manhattan office leases for a total of 212,000 square feet highlighted by the two leases we announced this morning with Comcast and Nixon Peabody at Tower 46 and we welcome those two tenants to our portfolio. This brings our total Manhattan leasing production to 3 million square feet year-to-date that’s 50% more than we originally forecast and a 28% mark to market on replacement leases with is about double what we originally projected at the beginning of the year. These accomplishments are not just market leading, they are extraordinary by any measure and will rank among the two or three best leases years in our 19 year history as a public company. All the more notable because we achieved these results notwithstanding additional supply from Hudson Yards, making the point that high-quality, well-located and reasonably priced office space is still in very high demand. As further evidence of that tenant demand we have a current leasing pipeline of nearly 600,000 square feet approximately half of which are leases pending and held for signature. So I think that stat shows that notwithstanding we have cleared out a substantial amount of pipeline year-to-date, we still expect to achieve a lot more over the next two and a half months as we close out the year. Assuming the successful completion of these pending leases, we are looking at a rollover schedule in New York City for 2017 and ‘18 that averages less than 900,000 square feet per annum or just about 3% of our portfolio square footage each year. That's the lowest rollover rate in recent history. That places our portfolio and this company in an unusually excellent offensive and defensive position by allowing us to focus our efforts on those future rollover spaces as and when they come up over the next 24 months and selectively make early deals with those tenants, the ones that allow us to drive the best economics possible. Notwithstanding our track record of keeping our portfolio well leased through our market cycles, we get the inevitable question, whether we can continue to outperform the market and I believe the answer is absolutely and unequivocally yes. While office using job growth has slowed in the second half of the year, the information sector continues to add jobs while the losses in the financial sector have been quite modest through August even though prevailing view is much different and inaccurate that being significant shedding of jobs in the financial sector. The numbers simply don’t back that up and those are numbers that come right from OMB. September job numbers are not out yet but they are few interesting points to make about the health of the city economy up and through Q2 and part of these numbers are through September, each of the big five banks have reported third-quarter financial results and pre-tax earnings were up 50% year-over-year and revenues which were flat for Q1 and Q2 for the big five were up 20% year-over-year in Q3. Add to that the total New York City jobs has reached another record level this year of 4.3 million workers driven by private sector job growth through the second quarter of 77 new jobs with third-quarter numbers coming out imminently. Hotel occupancies are still as strong as last year in the high 80s percent occupancy range and only a slight decline in ADR, the average rate even though there is lot of new supply being observed this year as a result of construction that was taken place in years past and Airbnb continues to be a competitive force notwithstanding hotels having an excellent year showing that tourism in the city is still very robust and has not missed a beat as a result of Brexit or otherwise. So while New York's economy and job growth metrics aren’t on the same pace as last year’s record levels. By the way something we have forecasted to you at the beginning of the year, it is still shaping up to be a relatively good year with above-average job growth, economic performance and leasing activity along with below average sublet availability of well under 2%. We also have a positive outlook for longer-term trends and tenant demand due to the expectation that New York City will continue to benefit from nation leading population and job growth extremely low futures rates by any historical standard and fairly limited new contributions to office inventory over the next five years as compared to the total 400 million square foot inventory of office properties that currently exists in all of Manhattan. Today, we gathered, I'm sorry, Tuesday, it seems like today, but it was Tuesday, we gathered for a very proud moment in this company's history as we along with Mayor DeBlasio and many other elected officials formally broke ground on the development for 1 Vanderbilt, a spectacular project that will transform the skyline and establish new blueprint for the revitalization of East Midtown. This groundbreaking event followed on the heels of our announcements recently of the $1.5 billion construction loan closing and that was led by five different domestic and international banks and carries with it an up to seven year term which is largely unprecedented in the construction loan market. And also on top of that we announced the withdrawal litigation claims against the city and the project. So a lot accomplished since our last phone call in terms of clearing the decks for continued progress on the construction of the 1 Vanderbilt, the financing and along with that we continue to be on budget and on track with that project. Andrew and I are extremely proud of our team for these great accomplishments and we are excited to be a part of this truly historic project. We understand that investor sentiment is mixed but we look forward to fully educating everyone at our upcoming investor day that Matt just spoke about as to the incredible physical attributes of the building, the compelling economics of the project, given our cost basis and the transformative effect will have in the surrounding area in which the majority of invested dollars reside. So with that I'm sure there are people out there that have many questions on the quarter's results and we would like to get right into it and field the first one operator.

[Operator Instructions] Our first question comes from the line of John Kim with BMO Capital Markets. Your line is open.

I was wondering if you could provide an update on the Aeropostale lease as far as if termination fee is still being negotiated. And also, if you could discuss what the mark-to-market may be and, in comparison, where that fits on page 50 of your supplemental.

Let's start first with status of the leases, it’s beyond - John it’s Matt, Aero vacated early in the third quarter, so the space is now vacant, it’s out being marketed by our retail team. There is no termination fee involved that’s a bankruptcy. So we were able to get them out, so we can market the space and get the mark to market which we highlighted as being somewhere between 20% and 40% which is, Andrew can expand on that a little bit but there is no termination fee from that and Aero is now out.

As far as the retail leases on page 50 of your supplemental, is that the vacancy portion of it?

Yes, correct, in the vacancy.

Yes, they paid rent up and through the date of their occupancy.

They paid yes, so they paid all the way up through the day of their bankruptcy, they were current and then they paid through the end of their occupancy in early third-quarter.

And what are your views of street retail rents overall? It looks like it has been declining in most - some markets in Manhattan. Where do you see the trends as far as rents in the near term?

We haven't seen many declines, I mean, I would categorize rents generally as flat in the sub markets that we operate in primarily Fifth Avenue, Times Square, SoHo, and Upper Madison. We are still seeing tenant demand but I would say tenants are slower to make decisions which is led to some longer lead time in terms of leasing up vacant space, but there are still active tenants looking in the market and we are in discussions on a lot of our vacancy in the portfolio now.

I think we feel pretty good about being able to achieve our mark-to-market on the vacated Aeropostale space and that will ultimately come to pass as a positive event for the company, I think we feel highly confident.

Our next question comes from line of Alexander Goldfarb with Sandler O'Neill. Your line is open.

Just Marc, on 1 Vanderbilt, you guys have finished the construction loan, so sort of going against the list, the checklist that you guys signed off. As you guys think about - especially in light of the leasing activity that you have, as you think about next steps, whether it's JV or leasing, you guys have paid off like almost $1 billion I think of incremental debt, so in a sense you have shored up the balance sheet. Do you still feel like you need to JV it before you get substantially more leasing done? Or do you feel that if you get more leasing done there's more value to be extracted when you do, if you should bring in a JV partner?

It’s a great question Alex. I just want to clarify one thing I don't think we felt or feel the need to JV it, from day one I always said we had absolute flexibility to build it out of cash flow as we go forward the next four years or bring in a JV partner. So I would characterize it more as an intense and desire to bring in a JV partner which is there simply because of the field of project and for the significant amount of yield enhancement we can create by bringing in a JV partner obviously at the right time given that our cost basis in the property is low and there is lot of execution in terms of the development and leasing, for which there is lot of fee income that’s associated with that. So I think it is always been our goal from the outset to bring new JV partner, I think the kind of schedule we had - I had mentioned to investors at the beginning of the year that something along the lines of towards the end of this year start to get to what we would consider more serious discussions with investors knowing that we had to get a few milestones behind us in order to best position our presentation of this project to shareholders and I think we've done that I think we’ve done it as good as or better than I even could have contemplated in terms of we have best-in-class financing. The site is, you or others on the phone who haven't seen it recently, it’s really exciting and I think very impactful to walk over to 42nd and Vanderbilt just and get a sense of the scope of the project and the location of the project in its direct proximity to Grand Central and just how extraordinary it will be when that building is up in four years. The response from the tenant community so far has been nothing short of excellence in terms of having - I would say checked every single box of what we possible could check and what you would want to do in delivering the best-in-class office building with an understanding that tenants in the 50 to 250,000 square foot range typically are not making those kind of space commitments much more than 18 to 24 months ahead of time which given our schedule would put the bulk of that leasing effort sometimes towards the end of ‘17 and into ‘18. I think 2018 being kind of the sweet spot of our marketing efforts. So with that said, we are in front of, we are having discussions with a number of different potential JV partners, the good news is we are on a path and I feel very comfortable that we will be able to achieve our goals but obviously our goals are to make sure that the deal is probably structured with the kind of partner that shares our view and vision for long-term ownership and on an economic basis that’s equitable and fair for both parties. So I think that we are doing - we’re on track there and we’ll just see how it goes.

But the point is do you feel that it's better - it's more prudent to JV it because it's a really large project or it sounds like you don't feel like you're giving up upside because once you have more leasing done it would seem like a JV partner would pay more for it. As you said, Marc, your spend now through next year really isn't that much, given it's just dirt right now. It's not like you have a structure up.

And Alex, I'm not speaking as to the exact time. So whether it’s the beginning of the year or middle of the year, end of the year, next year. I mean, I think you got to trust us to do the right thing by the asset. I don’t think, we’ve done a lot of really successful joint ventures, successful for us, successful for our JV partners and I think we are very skilled at this in terms of most importantly selecting the right partner having the right structure, sharing the right vision and then obviously getting the right economic package for both parties. So I’m confident we will do a good job there, we don't feel pressure, we don't feel the need, there is a desire for the reasons that I mentioned, the timing, I think you got to leave it to us to see the measure of when the right time to do it is but we are not the kind of people that try to grab the last dollar, we don't warehouse space if we think rents are ticking up. It’s a business, we’ve got a lot of other projects and investment to focus on beyond 1 Vanderbilt, so we don't want to let it consume us. As important and spectacular as it is, it’s one investment and this is $20 billion plus company. So we have a lot of other things we’re focused on as well and I think you know we will take it in due course and we’ll time it for when it’s optimal to do it and I don't think we're going to ever look back, we never look back and say oh, [indiscernible] it will be fine when we get it up.

Okay, and just quickly second question. Matt, you didn't mention guidance. Your beat onto the Street was pretty big in the third quarter. Is there anything offsetting in the fourth quarter that we should be thinking about that would affect the run rate because it looks like otherwise it's like $1.35 type-ish number for the fourth quarter.

To be at the upper end of our range implies a 1.39 [ph] fourth quarter to be at the upper end of our either normalized or absolute guidance range. We are certainly trending at the high end of our range. Looking at fourth quarter there aren’t many anomalies like we are seeing in non-recurring items like we've seen in the third quarter so it should be pretty clean quarter and we look at within the range at the upper end to maybe a slightly ahead the but not warranting to change to guidance.

Our next question comes from the line of Jamie Feldman with Bank of America. Your line is open.

I guess going back to 1 Vanderbilt; I mean we have seen the higher end of the market, see some slowdown from hedge funds, financials under pressure. What are you guys monitoring as you think about - you remain confident in the project, but what are you monitoring? What should the Street be monitoring as they think about your prospects to be successful there and hit your target rents?

Well, it’s important to keep things in perspective as far as the timing goes. We don’t deliver this building until - for occupancy until 2020, so to measure the depth of the market by what's happening today in 2016 at the high-end of the market. I don't really think is necessarily the barometer that anybody should be focused on. I think that whether the market is robust or not, this is a unique product that offers a unique value propositions to those tenants that needs the finest office product in the world. And we know that it’s going to be receive a warm welcome because the feedback that we get from tenants today as they evaluate the project really don't look at it on a dollars per square foot basis, they looked at it on a cost per seat basis and what the building offers from an efficiency point of view meaning the amount of - the lesser amount of square footage per employee that tenants can occupy in this building offset because of the column-free floors, the amount of infrastructure that’s already baked into the building and the amount of amenity space the tenants house outside of their demised premises allows them to reduce their total occupancy costs per head. And I really think that as we get closer to the time lease-up period, we’re going to be converting those conversations that we’re already having with respective tenants over to leases. So and just I think and we'll speak to it in greater detail at the investor conference but the rents that we’re targeting are not the highest end of the market surprisingly enough. When you really normalize the rents for the majority of the office space in this building you get into a - what one could argue is an affordable rent for those tenants who need the best product in the world.

Okay. Are you able to quantify that in terms of the conversations you are having, like how many square feet of interest there really is at this point?

I have a presentation an hour after this call today for 0.5 million square foot tenant. I had two presentations last week and I'm probably running at a clip of one to three presentations almost every single week. The majority you will be interest to know are financial-related businesses and most of them are in the 100,000 to 200,000 square foot range, some as small as 30,000 to 60,000 square feet. So, and I point that out because when you're in that size range as Marc mentioned earlier, we are early to the game for those type of tenants to really pull the trigger on a decision, they have to be, you know, they are educating themselves as to the opportunity, they are preparing themselves to make a decision but you know they need it closer to the finish line for delivery before they actually pull the trigger.

Hopefully that answers your question Jamie, puts you a little bit at ease on 1 Vanderbilt, let’s move to the next question which hopefully is not 1 Vanderbilt.

Our next question comes from the line of John Guinee with Stifel. Your line is open.

Oh my God Marc, I was going to ask you a question on 1 Vanderbilt but...

All right, fire away. By the way, welcome to the third-quarter 1 Vanderbilt...

Actually, Steve, these are a couple softballs for you. First, Steve, how many tenants, when it's all said and done, do you think you would actually just pull from existing SL Green buildings, existing SL Green tenants? That's one. Then, second, are you thinking about this joint venture to appease the shareholders or it's the right real estate thing to do? Said another way, if doing a joint venture was not going to help your stock price, repeat not going to help your stock price, would you actually do it?

Well, all right, so I’ll take the first one and Marc will respond to the second one. We have shared the 1 Vanderbilt presentation with a couple of tenants within our portfolio and they are good candidates for the building. It’s an interesting conversation because in some of those discussions with those tenants, we point out to them assuming they’re the right profile tenants, we point out to them that where their anticipated escalated rent will be upon expiration of their current releases in our portfolio, which we can speak to obviously knowledgeably about that. Is that it puts them within $5 to $10 of what our pro-forma rent is for 1 Vanderbilt. The other one we further point out to them the ability for them to lease less square footage because of the relative attributes of the building that I spoke about earlier that in reality it would translate into an occupancy savings for those tenants. So, we’re having those conversations, we’ve targeted some of those tenants and we’re also actively getting in front of them.

All right, let me [indiscernible] I think because I’m not sure if it's exact end of what you said, but I think the question was JV [indiscernible]. The answer is and you have to just trust and believe in what we say, we’re not JVing it to get a few bucks in stock price that would be criminal, it would be outlandish to do something like that for the sole purpose of thinking stock is going to go up or down quickly. By the way it’s almost like everything we've heard for the past 18 months about do this, cost price will do X has been completely wrong. So if anything, I would take the under on that, we’re doing it to the same fundamental and sound reasons we would typically JV any large project, some diversification of investment opportunity, I mean he have other uses for the capital. And if properly structured economically, while we won’t maximize aggregate profit we should maximize aggregate return and that’s what we have always been about that’s how we have been able to drive 7.7% growth in FFO from the day of - compounded growth in FFO from the day for our IPO back in 1997. It’s how we have been able to drive outsized investment-class total return to shareholders and it's really how we do our business is by balancing aggregate gain which would drive you to retain everything versus maximizing return on capital which leads you to do a JV, maybe it’s a partial JV, maybe it's not half, maybe it’s 40% like we did with Pru at 11 Madison, maybe 35%, where 30% or 25% [indiscernible] and then you don't give up much in the way of governance but there is something between 30% and 50% where we can structure I think a very appropriate joint venture, introduce this product to the domestic and more weighted international community who loves to own best projects, best market, best location and you can check those three boxes, unusual you can check those three boxes but when you can there is deep demand for that product I think it’s warranted that we - and prudent that we do that for diversification for return maximization and I think that is a good course, we don't give up much by doing it. We will always own the majority of the project whether it's 51% or more, it will have SL Green’s brand on the building and it’s something that we are all going to be very, very proud of, no matter what - anyone who has reservations about this project now is going to be standing at that ribbon cutting in 2020 and is going to feel like a champion when we open the doors to a lease successful number one building in New York City and we are going to be able to stand up and say which many other can’t we did it profitably on time, on budget.

Thank you. Our next question comes from the line of Jonathan Petersen with Jefferies. Your line is open.

No 1 Vanderbilt question from me; I will let you off the hook. Maybe a little more straightforward in general though, on the balance sheet side of things you guys have obviously been a net seller over the last few quarters and the leverage levels continue to come down. Trying to figure out what the debt to EBITDA is right now, but probably somewhere maybe high 7s at best or in the 8s. I'm just curious; in the leverage metrics, have you guys got where you want to be? Maybe - I know you will probably talk about this in the investor day, but kind of give us a sneak peek on what you're thinking about in terms of leverage going into next year.

Yes, on a consolidated basis our debt to EBITDA is 6.5 times and on a combined basis that’s all in it’s about a turn higher than that. It’s about a full term on both metrics slower than we had originally projected to be at for the year, so we’re certainly comfortably in it 7.5 times and now we are at 6.5. So we’re right in the area we like to be with $2 billion of liquidity our target is 1 billion, we have a very comfortable liquidity position. So I think we are exactly where we wanted to be and slightly ahead and gives us a lot of flexibility on the balance sheet.

And I know as much as we try to orient the thinking on this particular topic to debt to value as opposed to debt to EBITDA because not all EBITDA is created the same and I think it is distortive metric to be used when applied towards all sorts of disparate companies. Putting that aside if you look at debt to value for those few people out there that still look at the traditional definition of a leverage ratio, we are right about 35% debt to value which I think by any measure in New York City maybe even nationally but certainly and Manhattan is considered to be at a very low level. So I still look at one out of every ten reports uses the word above-average leverage not exactly sure what that means but the reality is our leverage level based on our assets and the equity subordination we have in those assets something much closer to 35% which we have to compete against people who are 50%, 60%, 70% debt to value routinely and we do it, we do it because I like to think we have the best in class investment team here and we are able to do it, but it's obviously not as easy to achieve the kind of growth that we do achieve using more expensive capital than our competitors. So we just have to be that much better on the buy and that much better on the execution to make up for it and we have, but looking at it from that standpoint, not just debt to EBITDA, that is where our levels reside right about now.

Great. Thanks for the color.

Thank you. Our next question comes from the line of Manny Korchman with Citi. Your line is open.

Good afternoon, guys. Marc, appreciate your commentary earlier about sort of the oncoming supply. Given the fact that that supply is newer product, the fact that there is incentives that make it economically beneficial to the tenant, why wouldn't it be a bigger factor to sort of you realizing rental rate growth and you realizing leasing in your new project?

Well, I think there are two reasons. I'm going to give you a bit of a curveball here. The addition to supply of new inventory, Manhattan is a good thing, whether, I don't know how it’s gotten characterized, it’s kind of this awful thing, you didn't hear that from us. I mean, that's for sure, because what that addition is a representation of a great market because only great markets can create the demand to warrant the construction of new projects and do it in a way where the vacancy levels are unchanged, they are still roughly right around 9.5%, 10%, which is where they’ve been for several years now and do it in a way where there is very little sublet space and I think Steve, that's about 1.5% if I'm not mistaken. So historical lows and do it in a way that's very measured, so it's not all coming on in one year. So when you look at the inventory as we’ve done in depth and will do again in December when we meet with a lot of you folks on the phone, I won't take you through the math now, but you basically wind your way down to sort of, at most, I will say about 2.5 to 2.75 million square feet per year, and when you calculate the, sort of the breakeven job growth to absorb that incremental square footage, it's only about 10,000 office using jobs a year, and over the past five years, at least, the city has done two or three times that. So the issue is not the inventory to me, it's the job growth and if we have office using job growth, then we are going to have a drop in the vacancy level. Even with about a one, I guess that works out to be, no, not even to 75 basis points per year addition to inventories, we have 400 million square feet in Manhattan and as I said earlier, we’d be adding about 2.5 to 2.75 million square feet a year and that's if most everything goes, not everything necessarily will go, but if everything goes. And that's a healthy market and as evidence of that, in 2015 and ‘16, we competed against that, and yet we had two of our best years on record, last year and this year. Those are not aberrations. That is just a reflection of a market that can withstand this sort of incremental and pretty modest increase in inventory over the next few years. It's not going to be more than that. I would challenge anyone to show us a calculation where it’s more than about 75 basis points a year of increase, and as long as we have the job growth to offset or exceed that, we’re in great shape and even if the jobs fall below that in any one or two given years, I think the effect on the vacancy rate will be de minimis, and we seem to be able to outperform within the market anyway. So even I think we’re always going to get more than our fair share of leases. If anything, I see over the next two years, the issue for us is we’re not going to have that much space to lease. So, to kind of worry about what the effect of this incremental space delivery is going to be, much of which has been spoken for already and represents growth out of the space that’s been moved out of and we factor that into our analysis. We don't have a lot of space and we’re going to focus in hard on that space. Try to get it done ahead of time, the best economics possible. We can't renew, we’re going to re-tenant and I have no real concern that we won't be able to maintain a very high vacancy rate or a very high occupancy rate, vacancy rate. Right now, we are 97.5% leased. I mean, that's, I don't know if there is another company in New York City that's 97.5% leased same-store. And maybe by year-end, it will be higher than that. So it's mostly, we are very positive in what I’ll call the modest additions coming to market, and the fact that those additions are largely almost exclusively far west side and downtown, which, no matter what, are going to compete at a rental price point that is less than core midtown and that's not in any way to disparage those markets, those are important markets for companies that want to be there and want to sacrifice certain of the amenities and locational attributes of being in midtown for a lower rent price point, that’s fine, but for everyone that does, there is many that don't and that's why we leased 250 leases a year in midtown is because those 250 tenants don't want to be far west downtown. But there are some that too, and there is room for both, so I don't see as an issue.

Thank you for the detailed answer. Much shorter response to this one I think. The debt and preferred equity book, you added a project in Brooklyn. Can you give us any color on what the project is?

It's an officer repositioning project, large, very well located office repositioning in Brooklyn.

Thanks, guys.

Thank you. Our next question comes from the line of Dave Rodgers of Robert W. Baird. Your line is open.

Yeah. Maybe just quickly on operations and, I don't know, maybe this is for Matt. But NOI margin or NOI over revenues fell this quarter; same-store NOI kind of retrenched. If you said it earlier on the call, I didn't hear you; was there any kind of one-time impact or thing we should be thinking about that impacted the quarter that either repeats or doesn't repeat going forward, Matt?

Sure. The big thing that happened in the quarter that was non-recurring was aero where we not only lost about $2 million of rent like actual cash rent, but we had a $70 million write-off of old straight line and FAS 141 balances, that goes right through rental revenues on the income statement. That $2 million cash rent loss also flows through same-store. So, you had two factors in our same-store for this quarter, which obviously flow through the year and will flow through the balance of the year, sales will affect the fourth quarter. The loss rent from aero was about $2 million. We also gave free rein to Omnicom over 220 East 42nd streets as part of the recent renewal. That was about $1.2 million in the quarter and will be a slightly larger number in the fourth quarter. So we've kept our 6% same-store NOI target for the year, which is sector leading by a lot. We would be at 6.6% through the nine months, we are not for those couple of anomalies, we will work hard to maintain the 6% in spite of those couple of things for the full year, but that's what you saw in rental revenues and same-store.

Great. Second question and maybe two parts to it. But one, just thoughts on more or additional asset sales in your core Midtown markets, assets that maybe are stabilized. You are clearly a little concerned by getting ahead of some of the lease expirations. Are there more assets you can sell despite the fact that you are ahead of your own leverage targets? And if I would put a b) question in there, I'd say can you talk about the 11 Madison kind of repurchase that you might have to go through and what's the likelihood of that?

So, I will address the 11 Madison Park. That was a - the modification we’re going forward is customary, so there is a very, very nominal chance we have to buy that back, miniscule is probably a better word, what we had there was a closing that happened in kind of reverse order to traditional closings where normally you get that modification between contract signing and closing, we did it simultaneous and then left a little modification done, that will get done here in the next few weeks and alleviate the buyback.

Got it, thanks.

In terms of more asset sales, I mean we’re always evaluating asset sales. I would say getting 11 Madison done and getting the Blackrock recapitalization done in 57th Street, we've satisfied our targets in terms of generating liquidity and the liquidity position that we sit in, however it's a great market to be a seller of assets. There is still an enormous amount of demand for prime real estate assets and we are always sort of evaluating the next sales. So I wouldn't be surprised to see us explore the market for more asset sales, but none we are going to identify today.

Thanks.

Thank you. And our next question comes from the line of Jed Reagan with Green Street Advisors. Your line is open.

Hi, guys. What are you seeing in terms of rent growth trends in Manhattan today? Is it fair to characterize the market as flattening out in your view? And are you seeing any changes in the concession environment?

The rents have been pretty much as we anticipated this year. They have been on the low side through the 3% to 5% range, it depends on where you work, which submarket you are talking about and which part of the market place. Whether it is the high-end or the low end of market. Clearly, there is more velocity in the more commodity price point portion of the markets. Call it the $50 to $80 price point as compared to the above $100 price points, and particularly above $130. But there has been rent growth, we've seen rent growth in certain of our assets and clearly you get a sense of that from the mark to market that we’re posting. So, but on the concessions side, at the high price point end of the market, the concessions clearly have stepped up on the capital side, not on the free rent side, because you've seen a few landlords rather than adjust any kind of rents for very expensive space, simply sort of offset it with more capital to stay competitive, but I think that's a thin part of the market as opposed to the overall marketplace. Our concessions on average have been pretty consistent throughout the year.

Okay, thanks for that. There's been some chatter recently that you may be looking at an investment in NYRT. Would you say those rumors are off the mark?

Not going to, don't even ask. I mean for you to bring it up is absurd, I mean really absurd. Not doing down this rabbit hole second time with you guys. Next question.

Our next question comes from the line of Steve Sakwa with Evercore. Your line is open.

Hi. Thanks. I guess I wanted to ask about a little bit on the street retail. 650 Fifth is something that you guys have owned for a while and I know the last retailer it seemed like closed in the basement there. I'm just wondering if you could sort of just talk about that project. And just in particular I guess following up; what other investment opportunities do you think might unfold? And do you think you are a net seller or buyer in that business over the next 12 months?

Hey, Steve. On 650 Fifth, we are working hard, I mean, it's been a focus of ours, we've had seemed to be a little snake bitten on that project with a couple of deals that got within we thought spitting distance of getting over the finish line and then fell apart, but we continue to work hard on that project and we have a couple of interesting prospects for the space. So continue to be optimistic, we’ll have something to announce there hopefully in the near future. In terms of the street retail business and I think the pricing in the market for these assets has definitely moved us a bit to the sidelines. You haven't seen us be as active in retail, as we have in the past, and that's unfortunate in terms of our acquisition volumes, but it is very encouraging in terms of the value of the assets we own. When you’ve seen assets like 693 Fifth and many, many other assets trade at really core stabilized type values with enormous valuations. We feel emboldened about the inventory that we own, just difficult for us to really buy much value add out there, given the investment landscape now.

Okay. And then I guess can you just talk a little bit about the debt and preferred book? You guys were pretty active in the quarter. What is your expectation in the fourth quarter and how do you see that sort of trending over the next couple of years?

I think with the fourth quarter, we’re on track for our stated guidance of about another $150 million, which should put us right around $2 billion for year-end of balances. It's a good time in the market for the business, there is - the CMBS market has come back, but there are still a lot of uncertainty, regarding risk retention and that's moved quite a number of originators a bit to the sidelines. So it's pushing nontraditional capital to the forefront in terms of getting financings done and we feel very good about the opportunities that we are finding, and the debt we are originating now. So we've also been active syndicators which we have been in years past, and are on track this year to be another active syndicator, sort of verifying the liquidity and the positions that he own, and we would expect that to continue as well through the fourth quarter.

Okay, thanks.

Thank you. Our next question comes from the line of Blaine Heck with Wells Fargo. Your line is open.

Thanks, related to that last question, Matt, correct me if I'm wrong, but I think the $41 million of additional income from the recap of your debt investment was included in the investment income line, which would make the residual investment income a little over I'd say $34 million, which is a pretty substantial drop from the first two quarters. So is that right? And if so, is there anything else one-time in nature going on?

No. So, you are correct, the $41 million of incremental was in investment income, the balance are the income from the balances moves each quarter based on investments that are in there and an average balance we did originate a bunch this quarter, but I think on average, the balance was lower this quarter, and we had some pretty juicy investments pay off earlier in the year, like, 550 Madison, 605 West 42nd. So we’re on track for our full-year target on income the third quarter, barring that one $41 million item that you noted was below, but we are on track for balances and income for the year.

Okay, fair enough. And then, Steve, if I'm hearing you right from your earlier commentary with respect to some of the questions that were asked, it seems as though the higher price point segment in the market continues to be tough currently, but you think it can get better by the time you guys are delivering. So I guess is that right? And what do you think it is that might drive the improvement in demand in that segment?

Well, let's - again, let's kind of put it in perspective. If your view is the high-end market is well into the triple digit rents, there will be still a considerable number of leases signed this year and at that price point. In fact, there will be more square footage leased this year at $100 plus rents than there was all of last year. So there are fewer deals, but what's interesting is the size of the deals is growing in that sector of the market place. And I think it's misleading to evaluate where a marketplace will be four years from now, based upon where it's been over the past two quarters. So that's I think a lot of our faith or a lot of our confidence in our rents four years out based upon the kind of feedback that we get as to them recognizing the quality of the asset.

Okay, that's helpful. Thanks.

Thank you. Our next question comes from the line of Nick Yulico with UBS. Your line is open.

Thanks. Turning to the 28%, a little over that, mark-to-market you've done year-to-date on the new leases signed, how much of that will actually commence this year versus benefiting you next year?

I would say from a renewal perspective, obviously, those kick in immediately, certainly from a GAAP perspective. The new leasing, which is things like BNS or the Tower 46 leases, those have 9 to 12 months of lead time on them. I don't have the numbers on my fingertips in terms of exactly how much of the 3 million square feet we've done now will be next year, later this year or next year, I’d say the majority given where we are in the year, that's been signed in the last couple of months is more impactful to next year and certainly a new leasing is a next year impacting item.

Okay, and I guess you're going to go into some of this at the investor day, but if we use like say your lease expiration schedule on page 48 of the supplemental, it looks like your leases in place today are, call it, a little over 10% below where market asking rents are. So as we think about the 28% you've done this year versus this page which says it averages out at a little over 10%, how do we think about that sort of change in the mark-to-market and how it may affect some of your growth opportunities over the next couple of years?

I will say it's accurate that we will get into this in more detail in December, that's the lead off, but I would also say if you look back at where we thought our mark to market would be one year ago on what we did this year, it was not 28% either. So Steve has done a very good job in outperforming his own and our expectations and we’ll look at it into more detail on our expectations for next year in about six weeks.

Fair enough. Just one last one quickly on the banks. I know everyone talks about the banks maybe not being as impactful as they were in the last cycle. Banks have trimmed down space, maybe they don't shed some more space in the market. But I guess one of the things I'm wondering is - maybe Steve or someone else could comment on is there is still some non-headquarters bank space in the market that perhaps banks won't need all of that in the next five years as banks face some new capital rules that haven't even begun yet. How should we think about that risk of this potential excess space for banks in the market? Thanks.

Nick, I don't think we can do that on this call. It's a forecast that we think is the near or mid-term demand for banks and the impacts, we can take your questions duly noted and focus in on that in about a month and a half, but we can't say that in 60 seconds and I just want to leave it with, I don't think it's a foregone conclusion that banks are going to do poorly over the next few years or do great the next years. I mean, we sort of take it as we see the numbers come in, in terms of profitability and job growth. The banks right now are reasonably healthy, a lot of the leasing in the first half of the year was financial services driven, not just big one, but the financial sector. Whether that will be the case in the second half or not, we’ll see, but we are not seeing, I think what you've heard earlier, any major reductions in bank space demand or putting on the space of sublet space or anything that would raise sort of cautionary flags for us on the banks, it's a good trend that what used to be 40% of the market now is closer to 30% or 35% of the market, probably a third of the market. And maybe in 3 to 5 years, it will be 30% of the market, because you have healthcare growing, education growing, the government sector is growing, information is flowing, technology is growing, business services, so it's a dynamic market, that's the beauty of New York City, dynamic and you have so many calls, so many claims a limited amount of building inventory that it's just not easy for most tenants to lease space and when they can, they are relatively quick to do so. And let's see, we will forecast how we see banks play into that mix in December, but it's a complicated question, and I don't think we will do justice on this call, but it's duly noted, so thank you.

Appreciate it.

Thank you. Our next question comes from the line of Craig Mailman with KeyBanc Capital Markets. Your line is open.

Hey, guys. Just quickly I think you noted that you guys have actually checked off a lot of boxes of what I think investors had thought would move the stock, but you're still trading at a mid to high 20% discount to NAV. You guys put in the $1 billion share repurchase plan not too long ago. Just curious your thoughts on executing on part of that. How you view returns on buying back stock versus investing elsewhere and how you manage leverage potentially.

My first instinct is, let's handle that in December 2, but it's a fair question. So we put that program in place because, a, it would be imprudent not to. So we wanted to put something in place and make it meaningful so that we have a tool available to us if we see things happening within the stock that we feel are so violently dislocated that we view it as an opportunity that exceeds all other opportunities available to us at the time. And so one, it could be viewed as therefore moments in time and then there is a second view, which could be if there continues to be sort of the systematic dislocation between private sector valuations, which continue to be fairly robust and public market valuations, which I would say in general are below that and like us seem to be far below that, then I think you have to start looking at systematically dealing, how you approach that problem with stock buyback being one of the tools that can be used along with asset sales and dividends and special dividends and everything else. So it certainly isn't exclusive, but it's certainly something we are becoming increasingly focused on as we see a year like this year where there is going to be $40 billion of sales, probably by end of year, all of which are executed at cap rates and per square-foot prices, pretty much right on top of last year's record $60 billion or $65 billion of sales and while the volumes have decreased, the pricing for the well located redeveloped well position assets really haven't decreased and we could see scenarios where in 2017 that demand may increase because on a relative basis, the kinds of returns those assets produce which are anywhere between 5.5% to 6% unlevered and that might translate to 7% to 8% levered. Those are by and large, considered to be excellent core returns for great properties, which justify the pricing levels which are so dramatically ahead of what the implied pricing levels are in the public security. So I would say it’s there at a prudent - it’s there for opportunistic and maybe it will there systematically. If this diversion doesn't seem to correct itself at some point in time, but for now, we have not executed on it at this point and if not, I would say the current focus of us at the moment, because we have all these other what I consider to be excellent opportunities that we are taking to manage both in the equity, other equity investments and leasing and redeveloping and structured finance. So we are having a real buzz here, but it is there and it is something that I think we are going to pay a lot of attention.

Thanks for the color.

Thank you. And our last question comes from the line of Brad Burke with Goldman Sachs. Your line is open.

I'll just ask one question. Marc, a bigger picture question to follow up on your point about New York not needing much growth to offset the 75 basis points or so of annual supply growth. The office job growth in New York has been pretty robust over the last five years and it doesn't seem to have translated into meaningful improvement in Midtown availability rates. So if we are now looking at what looks like decelerating job growth, why wouldn't that translate into higher availability rates going forward?

Well, I think if you look, I don't know what period of time you are looking at, Brad, but if you look at, we can again do this in December. We've got a lot of stuff that we can knock off in December. If we look at from, I will call it the trough of the market to where we are today, I think the availability rate is in about 400 basis points, and that's what the job growth. It's the best I can tell because a lot of these are occupancy, our occupancy is up about 400 basis points, and I think availability has gone down from about 13.5 to 9.5. So that's a lot of space, 400 basis points, 400 million square feet and since a lot of the inventory is future inventory, all of the absorption if you will in reduction, I think, but seems like predominantly if not exclusive to job growth. So I think it has been there. The only reason you haven't seen it take a whole another route in 2016 is because while private sector job growth is almost 80,000 new jobs this year, which may put it on pace for 100 total by end of year, which would make it one of those rare record work, or near record years. The office using has lagged behind that, we may only get this year. I'm speculating about 10,000+ jobs which would be, let’s call it, half of the prior year, but as I mentioned earlier, the big five numbers are up and even though you can't punch everything off of that, looking more broadly at Wall street firms broadly define, their profits for the year were estimated to be by the city, $10 billion. In fact through the first half of the year, they were $9 billion and the city I believe will be revising its estimates for the full year, and it's going to be well in excess of $10 billion. So it's not to say by a long stretch that office using job growth for the balance of this year or into next year couldn't pivot and be the higher, but anyway, to answer your specific question, as to whether it's been translated or not, we will do a little study for December, but I think you have seen the correlation between job growth and reduction availability, which has been fairly programmatic through ‘15 and has leveled off a bit in’ 16.

I appreciate it, thank you.

Thank you. All right, everyone. Thank you for the call. We’re right about 3:05. So right on time. We are looking forward as we always do to a great investor day in the newly revamped style that Matt took you through at the beginning and I guess that will be the next time we have an opportunity to speak to everyone. So until then, we will keep working hard. Thank you very much.

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