Marc Holliday - CEO Matt DiLiberto - CFO Andrew Mathias - President Steven Durels - EVP, Leasing and Real Property David Schonbraun - Co-Chief Investment Officer

John Kim - BMO Capital Markets Vincent Chao - Deutsche Bank Jamie Feldman - Bank of America Merrill Lynch Alexander Goldfarb - Sandler O’Neill Manny Korchman - Citi Michael Lewis - SunTrust Steve Sakwa - Evercore ISI Craig Mailman - KeyBanc Capital Jordan Sadler - KeyBanc Capital Nick Yulico - UBS Vikram Malhotra - Morgan Stanley Jon Petersen - Jefferies John Guinee - Stifel Jed Reagan - Green Street Advisors

Thank you everybody for joining us and welcome to SL Green Realty Corp. Second Quarter 2017 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 also 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 measures can be found on the Company’s website at www.slgreen.com, by selecting the press release regarding the Company’s second quarter 2017 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 will now turn the call over to Marc Holliday. Please go ahead, Marc.

Okay. Thank you and good afternoon, everyone. With the second quarter now in the books, I’m pleased to state that we finished up the first half of the year on plan. In certain areas like earnings and mark-to-market on Manhattan leases, we are trending ahead such that we are likely to end the year at the upper end of our guidance ranges. In other areas, like lease termination fees, we are trending behind our annual averages but this is likely a positive as we are nonetheless on track with earnings and implies less tenants looking to buy out of the spaces. Each year, we set out for our sales between 16 and 20 fairly robust stretch goals for the Company, as you know. And nearly seven months into the year, I’m confident that we will meet the vast majority of our stated objectives for 2017. Also notable in the quarter is the initiation of stock repurchases at very attractive pricing which we believe represents an exceptionally good opportunity for the Company, given our strong liquidity position and balance sheet. Recall, approximately one year ago, the Company authorized up to $1 billion of stock repurchases due to the prolonged disconnect between the stock price and the underlying value of our real estate assets. After executing on approximately $7 billion of asset sales, in 2015 and 2016 we generated nearly $2 billion of net proceeds that we use to retire debt and to build a store house of capacity for opportunities going forward. As there continues to be significant investment interest from foreign and domestic capital sources for well-located high quality Manhattan office assets, we developed our own internal convection that repurchasing our stock represents among the most attractive investment opportunities for the Company at this time. SL Green’s Manhattan office portfolio from which we obviously generate the vast majority of our revenues, has been undervalued in the market for quite some time. And back in December, we set forth in detail the financial rational underlying this belief. Over this period of time, we have been quite successful at confirming our net asset values through voluminous sales of assets and the market has also confirmed pricing from many other comparable non-SL Green assets. The debt markets are liquid, competitive and quite stable, and the interest rates continue to hover around levels close to historic lows. The New York City economy continues to appear quite strong with a record low 4.3% unemployment rate and an increasing labor force participation rate. Office using employment in New York City, the statistic that we monitor closely, is up at seasonally adjusted 20,000 jobs through May of this year, which is on par with the last several years. And recall that those years were at -- or had set historic highs in terms of office using employment levels and increment to employment base. And this 20,000 jobs through May will likely result in an upward revision to the city’s full year estimates, assuming the Depart of Labor stats that are due out this afternoon, continue to show growth in June. The big five New York City banks also reported earnings up 4.5% Q2 over Q2, although most of the office using job growth is coming from the diversified business services sector and not from the fire sector. Also of note is the leasing velocity and leasing volumes in the first half of the year, which amounted to about 2 million square feet of net absorption in Manhattan. And our own leasing pipeline bears out this increasing leasing velocity as our pipeline stands at 1 million square feet, over half of which are represented by leases out to signature or under negotiation that’s obviously up substantially from last quarter. The one area of weakness that we see in the market is in the retail sector where demand in some sub markets has slackened and valuations have adjusted accordingly. Fortunately, our retail portfolio is in great shape with almost all of our high street retail holdings leased for term to credit tenants with the only exceptions being 609 Fifth Ave, which we will begin redeveloping next year and 719 Seventh where construction was recently completed. I think good evidence of the strength in our high street retail portfolio was the culmination of the complete re-tenanting of the Aeropostale space in the second quarter with the final piece to the puzzle as it were a lease out to -- a lease that was consummated with Kiko Cosmetics, an Italian cosmetics firm. That brought to bear a full 30% plus in revenues, turning a situation that many had thought would be a negative, into a huge positive for the Company. Accordingly, given all of that, we view stock repurchases as a very attractive and viable use of investment capital. And we may continue to make similar investments in our own portfolio, side by side with shareholders, so long as these dynamics persist. As not to say, the stock repurchases will define the sole use of our available capital but rather we believe that stock repurchases have a place alongside a balanced investment strategy that includes asset purchases and potentially special cash distributions. We believe that this balanced approach will enable us to maximize value for shareholders while maintaining an opportunistic approach to growth through asset purchases and dispositions. With that I would like to open up the call for Q&A.

Thank you. [Operator Instructions] Our first question comes from John Kim with BMO Capital Markets.

Marc, in your prepared remarks, you said you were confident in hitting many of your 2017 goals and objectives. A couple of them seem like they would be difficult to achieve including 97% same-store occupancy as well as the greater than 2.5% same-store NOI growth. So, I’m wondering, if those two components in particular, you still feel confident in.

Yes. I don’t -- I mean, as I said, I think it’s very, very outset. We’re right on plan. With those two metrics in particular, Matt can elaborate more, but I think that we would -- we feel based on the pipeline and second on activity and everything else that we’re going to be right on top of, so we head slightly behind those exact numbers, which is I think what I affirmed at the beginning of the call. But, Matt, do you have any color on that?

Yes. I am just going to add a little color to the same-store NOI number. There is a variable for lease termination income in there. And so, Marc alluded to the fact that we’re behind, for the first half of year, on lease termination income, almost $2 million behind our expectations, and we had some layered into the balance of the year. And if that materializes, we’re good; if it comes up a little shy, we will be at the lower end of our guidance range. But, we will have to let that play out. But our target of 2.5, the midpoint of our guidance range is maintained at this point.

And my second question is in relation to a clampdown in Chinese institution. I realize, there is a difference between sovereign wealth funds and state-owned enterprises. But, I am wondering if this clampdown impacts you at all in terms of directly or how you feel about how that impacts Manhattan office pricing?

It’s Andrew, John. We haven’t seen any direct impact from the clampdown. Obviously, we saw 245 Park trade in the first half of the year to HNA, which is a Chinese company. And we continue to see Chinese investors actively look at both equity and debt opportunities in the market. So, it hasn’t changed from our perspective the appetite from that sector of the world.

Our next question is from Vincent Chao with Deutsche Bank.

Just last quarter, we had a pretty healthy discussion around concessions in the market, and it does look like the free rent and TI per square feet per year were up in the portfolio this quarter. I was just curious, if you could comment on the level of concessions that you are seeing, both in your own portfolio but also across the broader market?

Before we get to broader market, Matt, do you have those numbers? Let’s just go through the numbers. I think sometimes they are talking little…

Yes. Because we all keep reading that there is something going on in the market with increased concessions, and I won’t address that part of it. But in our numbers, the concessions are up, concessions are up. And I think what gets lost in the stats that are published are not only what properties leases are being done at but more importantly the new and renewal mix. So, we did as we took a look at the last two years and quarter-by-quarter new versus renewal leases to see what the true net effect of rents are. And consistent with what we said last quarter and at the end of the year and with our expectations, net effective rents are up on all, call four metrics. So new and renewal leases, both on a signed and commenced spaces, our net effective rents are up. So, while the stats may give the allusion of concessions being up, you are not appreciating the fact that there may be a higher mix of new leases this year versus renewals last.

So, that’s with respect to our portfolio where I do believe that robust discussion we had last quarter was mostly around our TIs, our free rent, our concessions, which had been trending somewhere between stable and down year-over-year. And I think through Q2, other than the mix of new to renewal but on a apples to apples basis, new to new, renew to renew, we are Matt, what, stable?

Yes.

Yes. So, with respect to the markets, Steve, do you want to address that?

I don’t think they’ve changed materially this year. The concept of increased TI in connection with buying up rents, you have seen it in the market driven by couple of landlords in particular. But that was sort of in the market mid last year or maybe even a little bit earlier. Certainly, we have experienced where we have to do turnkey installations for tenants, construction cost rose last year. But I don’t think there has been any noticeable change through the beginning of this year to as we see it today.

And then, just second question, just on the FFO guidance. I’m just curious, if the fee that we generated this quarter, the 19% total, was that all contemplated in the original range.

Yes. I saw -- a lot of that -- if you refer to as onetime, I just want to clarify, we have a substantial joint venture management business and from that we generate substantial fees of all natures that are in our guidance every year. And I don’t really understand the one-time nature of that. I think that is -- there will be much more fees coming out of One Vanderbilt investment as a result of our joint venture, as well as countless other joint ventures we have. So, that’s just in our book, JV fee income. I’m not sure, onetime or it relates to there. It could be considered larger project but there are significant fees that this company will experience over the development lease-up, the stabilization of One Vanderbilt bill as well as other projects that we’re working on. So, I think that’s something that you will see in some greater or lesser magnitudes as we continue to go forward.

Thank you. Our next question comes from Jamie Feldman with Bank of America Merrill Lynch.

Steve, I was hoping you could just give some more color on what you’re seeing in the leasing market. I know you guys referenced good net absorption in the market. But we also know, there has been good activity for some of the new development, especially the Hudson Yards. So, maybe, if you could just talk bigger picture about where the demand is, how it matches up with your portfolio, what you think we may see going forward, and may be tie in the leasing pipeline, the 1 million square-foot pipeline that Marc mentioned.

So, I think there is a sentiment in the market that you can see in the press and some of the mix reports that are out there from the brokerage community, sort of colors the picture and to trace reality a little bit. I think the pipeline that we’ve got, says it all. With 1 million square feet, a pipeline that is growing from first quarter to the second quarter really is representative of the strength of the overall market. Yes, tenants are migrating to new and redeveloped type products. I think that’s a good think. I think Manhattan has been star for new construction for many years, because we even have the benefit of new construction being in the product mix. If we had this discussion a year or three ago, everybody would have been scared about the prospects of filling new construction. But obviously Hudson Yards and downtown, wherever there is new buildings, tenants are migrating to it. That bodes well I think for our prospect at One Vanderbilt. And certainly the increased number of tenant presentations and request for proposals that we’re experiencing at One Vanderbilt further evidences the demand for high-quality product. Our pipeline has continuing a mix of types of business, led heavily by financial services interestingly enough of the over 500,000 square feet of leases that we have out, over 200,000 square feet of it all of our financial services related. And then after that it’s a wide variety of different types of businesses. So, like we saw at the beginning of the year or even towards the end of last year, good demand across the broad at all price points and all geographic locations.

And how much of that pipeline is for One Vanderbilt?

I don’t want to break that out. It’s a small -- it’s a relatively small portion of the total million. But the leasing for One Vanderbilt, we have pretty much on track for 2018 second half and beyond. Anything we do ahead of that is kind of good news early stuff. We’re sitting here in the middle of 2017, coming out of the ground, building a lot of enthusiasm. Clearly, we are having a lot of meetings, we are trading some paper for sure on One Vanderbilt, but we are not going to revise what otherwise I think a very conservative but prudent lease-up projection that begins in the second half of 2018, we’re a year away from that. And our focus right now is predominantly and primarily on our portfolio, which comprises the bulk of that 1 million square feet.

And that’s mostly stuff you think gets done this year, is that a better way to think about it?

I hope so. Otherwise, we are not going make our guidance, but I reaffirmed at the beginning. So, I feel pretty confident that we are going to make 1.6 million this year.

I’ll add to that a little bit because some of the analyst reports noticed that second quarter number of leases that we signed this quarter was lower than maybe their expectation was. This quarter could have easily tipped by 100 to 150,000 square feet of additional lease signed. It’s really just a function of documents sitting on tenants’ desk for execution. So, if not for vagaries of a week here or a week there, it’s actually stronger than the numbers suggest.

[Operator Instructions] Our next question comes from Alexander Goldfarb with Sandler O’Neill.

Marc, can you just -- on the stock buybacks, can you just talk a little bit more about it. The news reports out that you guys are contemplating looking at Worldwide Plaza, there is this potential JV of 1515, so you have proceeds that will be generated. Can you just talk in general how you think about buying assets, presumably at market versus your stock which is at substantive discounts?

Well, as I said earlier, I think we are taking a balanced approach. There is no all-in approach on stock buyback or investments or do nothing in stockpile equity. I think that’s a bad approach, because any one of those can be the right or wrong approach at a given time. I think a much more prudent way to look at it is that as we generate substantial amounts of liquidity through joint ventures and sales, and at this point internally generated funds from operations because with a mostly leased portfolio we are generating sizable cash flow, how we invest those moneys. And those moneys are being invested in what we think in the aggregate will give us good risk reward returns, be it development or redevelopment of projects, new acquisitions, stock and [indiscernible] debt reduction, although now given where debt levels stand, we don’t foresee further deleveraging but clearly we’ve done extraordinary amount of deleveraging over the past few years. And then, there is always a potential depending on the tax situation at a point in time for special dividends. So, I think that balanced approach is what will give our stock and this Company the highest return over time, not taking a point of view on any one of those approaches. But that combined approach, we feel will maximize NAV. I mean, we’re looking to just increase our NAV per share from where it stands today to something significantly higher for the balance of this year into next year. And stock buybacks have a big role to play in that but there are still deals out there that we think we can -- we have a pipeline that we feel we can acquire at attractive pricing, make significant unlevered and levered returns. And in those instances where we do the partnerships, significant fee and promote income which really adds between 300 to 500 basis points of returns to those investments which puts them on par with many other opportunities we have for the money. So, I think that’s the approach we’re taking. I think it’s working well and we will continue on that approach for the foreseeable future.

Okay. And then, switching to retail, you mentioned the softness in retail. And I think the two buildings cited, one was the American Girl and the other one was the new signage in the Times Square. So, can you talk, if given the change in retail with your expectations from mark to market on American Girl or your expectations for the signage building have changed? And then, are there any other material retail exposures coming up in the next sort of 12 to 18 months?

It’s Andrew, Alex. I don’t think our expectation for mark to market has changed on those assets. I would say our guidance was more in line with our own internal modeling and the market as opposed to may be where the perception was the market was going to go, because people are modeling some pretty explosive growth on those assets. So, we’re still confident in our numbers there. And I don’t think beyond those two. 609, the tenant is still in occupancy until the beginning of next year; and then 719, obviously we just finished construction. Beyond those two, we don’t see any other major retail vacancies coming up in the portfolio.

Thank you. Our next question comes from Manny Korchman with Citi.

And Marc, just as another -- two on the buyback. Was there anything specific that change in your mind, I mean just asking [ph] at a discount for credit while that transaction environment’s probably been frothy but stable. And so was there anything that changed whether that you saw that you’re being incrementally priced out, is that sort of a proper concept of deals or was it -- sort of what made you change your mind from going to be a non-buyer stock with [indiscernible] to actually using that tool.

Sorry. Non-buyer stock, what was the rest of that?

Versus actually using the buyback and actually...

Well, I mean, I don’t know if there was a flashpoint. I would say that we wanted to see some real I would say longevity and proof and evidence of the fact that the capital markets in 2017 were still functioning well and asset values were holding and that there was so reasonably high -- the demand for the kind of well-located assets we talked about. And as we were out there talking with all sorts of investors globally and domestically about existing deals, new deals, One Vanderbilt et cetera, it became very evident to us, as there is just a ton of equity out there for private market, direct real estate investment. It’s kind of like the opposite of what seems to exist in this overall REIT sector where I think the flow seem more challenging but in the direct equity space there just seems to be an incredible appetite, desire, demand, again for the best markets, best located assets with great sponsorship. And for those situations, it just appears to us like that. The pricing levels are still very firm, the amount of equity out there is still significant. The debt capital to finance those deals and finance them efficiently is competitive as we have seen. I mean, it’s really quite competitive and it’s competitive at rates that are, as I said earlier, at or near historic lows. So, when you take the totality of that kind of environment and appetite for assets and we put it through our own models and get to our evaluations, which as we sell assets, we can prove against our own work the validity and veracity of our internal investments against market. And the more we saw that market holding up, those numbers holding up, the more it became clear and obvious to us that at current trading levels of the stock, it seemed so dislocated and such a glaringly obvious investment opportunity that we wanted to use some of our own capacity in that direction and using that capacity that we had built up quite intentionally from 2015 and 2016. So, I think all things came together. But beyond that I can say there was flipping of the switch.

Maybe one for Steve. Steve, there has been a little bit more focus on sub lease states in the city recently. Have you seen that and how does that sort of impact whether it’d be your leasing momentum or hitting that 1.6 million square-foot goal by year-end.

Yes. It’s in the statistics. We haven’t experienced in our portfolio and certainly have it, felt it from a competitive element. I can’t say we’ve lost any deals to sub leases. It’s still at a -- on historical basis, on the very low end, as far as the ability goes. So, it popped up; it was driven by a few specifics. It doesn’t seem to be a broad trend and certainly nothing that I can put my finger on, anything to worry about right now.

Our next question comes from Michael Lewis with SunTrust.

You have been asked a little bit about how you could hit guidance and some of the pieces of it. I want to flip that around a little bit because as I look at the numbers, where you did 335 in the first half, even if you exclude the $0.09 promo [ph] and the $0.10 of fees in the second quarter, you still did 159. So, you are running ahead of the upper end of the range. You are going to have a tailwind from the share repurchase in the back half. I don’t know maybe you could comment if you have any more -- if you expect anymore JVs this year. You already said that there may be some lease termination fees. I guess are there some offsets there because just the way the numbers lay out, it actually looks like to me at least that maybe you’re a little ahead?

Matt will answer it. We may be a little ahead. I don’t know -- I think you are reading too much into it. We certainly feel like we’ll be in the upper end of the range. You get down to a level of pennies, upper end, right on, little above the high. I mean there is still six months to go. So, I have to see how the year plays out. But earnings wise, I think we are doing quite well, which is why it kind of surprised me to read some of the things in the report, filing the earnings release. That particular is amongst our strongest. And I said earlier, I think it will be at the high end of our range. Your point is, could it be a little higher, don’t know, we will see where we end up at year end. But certainly towards the higher end is currently what we’re managing to and trying to achieve through all of our activities between now and end of the year. Matt, do you have anything to add to that?

Yes. And Mike, I’d say the one big variable, I touched on it earlier, you alluded to it, lease termination income for the first half of the year, it was about $2.5 million short of our expectations; and for the balance of the year, we have another $4 million baked in. So, if that doesn’t materialize your 6.5 million -- or $0.065 to the bad. Now that we go into every year modeling that same amount of lease termination income $8 million a year because that is the six year historical average. So, it’s not just pulled out of thin air, but it hasn’t shown up this year, may not show up for the balance of the year. And if you run that out and you come out to the high end of the guidance range, well then you shouldn’t raise guidance. That’s Marc’s point. And move guidance, move it materially and for good reason and with confidence. And so, we like the way it is.

I don’t want to use my second question on this, but so this is will be part B of the first question.

No, too much in the pipeline here; we got one more bullet.

All right, let me shift and I want to ask about the increase in the debt and preferred equity investments, it’s up quite a bit over last year, especially in this quarter. And you know when you talk about your uses of funds, debt capital being available but maybe there are some holes in the capital structure that you guys still fill. How do you kind think of that, could you grow that a little bit more and how is that attractiveness versus the other uses you might have?

Well, I think the book did spike up a bit this quarter because the 2 Herald investment that we made has been well-publicized. That was sort of an extraordinary opportunity that we took advantage of, quick close and was probably outside of our normal sort of projections for the business for the year. So that’s that -- balance is being a little bit higher than we anticipated. However, we had a significant originations model for the second half of the year, which we’re in the process of lining up. So, I think we’re still very comfortable operating around that 10% of total assets level on the structure finance portfolio and continue to see very good both, short trading type opportunities and longer term investment type opportunities in that business.

Thank you. Our next question comes from Steve Sakwa with Evercore ISI.

Most of my questions have been I guess asked and answered, but just circling back to the pipeline Marc and sort of 1 million feet that needs to be done in the back half of the year. Realizing that you have 1 million square foot pipeline today and I assume that there is some fall out, something won’t happen around or renewal might not happen, a new deal doesn’t happen. What does the sort of shadow, shadow pipeline look like, and what would need to happen to the extent that some of this 1 million feet doesn’t materialize, what sort of the backup plan or what else could happen between now and December to feel that gap?

So, a couple of things, Steve. We’re setting here July 20th, I guess, right, 20, 21? And remember, I think you’re referencing the June 30. It’s a very dynamic shot, Steve. You sign a lease a day, 250 a year, one every business. I think that’s what Steve Durels likes to tell. So, you should assume we’ve already signed some between now -- between year-end and today. So, the pipeline we are giving you is as of today. We are ahead of 6, maybe closer to 7 or 6, I don’t exactly the numbers, but it’s probably right. And so, for another 900,000 feet, we have over 1 million square feet specified already and there is term sheets for a bunch more. So, we think we will get there and that’s route for us, Steve. That’s -- we usually don’t miss, we usually overachieve. And between July and December, we will have new deals, like new deals that aren’t even yet on our pipeline. It’s still I won’t say early but it’s not late. So, we will have new pipeline like the moment we hang up the phone. So, we are just giving you our best estimate. We have done our reforecast; we have looked at our leasing volumes occupancy for the end of the year. We think we will hit a 1.6 million and I hope we do.

Yes, let me sort of just reaffirm what Marc just said. It’s interesting that how frequently the pipeline number changes, in fact Matt and Marc come to me with regularity saying, can you update the pipeline, and everybody gets surprised because literally in a 10-day period the numbers can change, and frequently to the positive. So, it’s just a function of we’re out there obviously marketing every day. And the numbers that comprise the pipeline or leases out for execution and term sheets that are being negotiated which are those term sheets that we think are highly likely to convert to a lease. There is a whole slew of proposals that are being traded within the leasing departments and the brokerage community on deals that we are fighting to get on the shortlist of a tenant’s prospect. So, at time goes by, those will get filtered down, some number of those will convert over to leases out as well. So, it’s a very fluid number.

Okay. So, it sounds like between things you’ve done in the last couple of weeks plus the pipeline, you are more than adequate to hit the 1.6 million. So, thank you. I guess just on going back to the DPE book that Michael Lewis asked about. Just sort of what is the market like today? And I know you sort of talked about that book maybe getting up to 2 billion, and it’s pretty much there today. So, at this point anything that’s newly originated does that either get sold down and you only keep a small piece of it, you expect more kind of payoffs or do you think that that book actually grows kind of well beyond the $2 billion figure?

Hi. It’s David Schonbraun. I think, look, it’s a very fluid market, so we are going to have payoffs along with originations. So, I think we are going to keep the balances in line with what we projected. So, you’ll probably see a couple of loans pay off and new ones be originated. I think it’s an active market. There is a lot of new capital coming in. I think we’ve been able to kind of hold the yields around where we projected, but it’s definitely a lot more competitive. I think in the past couple of months, activity has picked up which gives us a lot more opportunities.

Thank you. Our next question comes from Craig Mailman with KeyBanc Capital.

Thanks, guys. Marc, you talked earlier about maybe doing more in the buyback which I think would be helpful. But assuming maybe that doesn’t move the needle here on closing the gap to NAV, I mean would you guys -- and private market values stay where they are, would you guys consider accelerating asset sales meaningfully to prove the value and potentially the special back to shareholders?

Well, there’s a couple of different things in that question. I mean first, in terms of the accelerating sales, 7 billion in 24 months, I have to think that’s sector leading. I’m not sure because I don’t have that data in front of me but it feels like it, certainly in the New York City marketplace. So, could we accelerate that even further? We could, but it’s not -- to me, it’s not about acceleration, it’s about selling into a recapping when it’s prudent to do so. I mean, we are in the market right now with 1515 that has nothing to do per se with buybacks. That has to do with having a business plan for the asset which we have achieved -- that which we have yet to achieve because there is still a lot more growth in that asset that we see coming down the pike. And we think it’s just prudent in an asset of that size to bring in a partner right now. And like I said, we will take those moneys and decide how to deploy it, or I think to your question, potentially special dividend it if it’s otherwise not tax protected. And that comes down to a matter of figuring out the mix of what you sell to generate gains and/or losses and comes down to tax structuring. But I don’t think there is a notion here that where accelerating the plan per se from what we have for this year, we think it’s a good plan. We are selling some assets this year; we are JVing some assets; we are right on plan; and we will come up with a plan for 2018 shortly and roll out some more assets and also roll in some more acquisitions, maybe some buybacks, maybe some stock dividends. But no, I would say it’s not like -- I don’t think there is a -- I don’t think it’s a swaying in our strategy, the speed at which we are executing. The other thing you said is, if it doesn’t close the gap on NAV. It closes the gap on NAV. The issue as to whether the stock price reflects that or not is the separate issue. But, when we buy our stock back at $103 a share average and if we have a underlying valuation on the implied models in December 140 or more, you have created NAV, whether or not the stock reflects that. So, we are focused on creating value. The stock is going to have react the way it should react in a good market, and be reflective of NAV but it may or may not. But at a minimum for investors, we are creating value -- when we make investments, we think we are creating values through these buybacks.

Hey Marc, it’s Jordan Sadler. Thanks for that. Now that you’re something of a REIT investor, I have a follow-up. Not long ago, SL Green was the best and really only pure play New York office REIT, and today there is three other at least similar players for investors to choose from. And surely, you guys are among the biggest and well leased, but how is SL Green going to differentiate itself from the rest of the field over the next three to five years, how should we be thinking about that?

Well, I think that we are differentiated. I would like to think others are becoming more like the model we set. But our model is always changing. When we see opportunity in the retail sector, we were big retail buyers; then as the market cooled, we haven’t really invested much in retail, and stabilized that portfolio. We I think are taking a pretty affirmative and leadership role here in getting out there, buying back our stock, a lot of I think our peers out there will also look to their stock as being somewhat dislocated. But, we want to be very affirmative with that. And to do that, you have to be a seller. And I think we sell more than most; I think we sell the most. And I think that’s not something that’s just a 2015, 2016 phenomena, you can go back 20 years. We own 28 million feet. We probably owned and sold over 20 million feet. I mean, we’re a regenerator of capital. We like to eliminate value; we like to deploy that where we think we can make the most money. And for the moment, the stock we repurchase is very attractive. It’s hard to say looking three to five years out, it will depend on a lot of things, with market, with the stock price and what part of the market do we like at the moment in time, office equity, retail, multi, debt and preferred equity, we have a lot of tools that are at disposal. But, first and for most we’re commercial owner. And I would think three to five-year out, we will still be a very significant, if not the largest and hopefully the best commercial owner. But what will be relative sizing, we will see. But whatever it is, I just hope that the stock price is 50% more-higher than where we see it today.

Thank you. Our next question comes from Nick Yulico with UBS.

Just turning back to 1515 Broadway and if you were to do a JV and sale there, what is the likelihood of being able to do something that’s other than a 1031, where you could tax protect some of the proceeds.

I think one of our goals at 1515 is to structure that transaction in a tax efficient manner. And we have a couple of creative solutions that we’re working on to achieve that goal. So, I would expect that the transaction there will be executed tax efficiently.

Okay. And then just going back to the guidance on same-store, Matt. Your year to date 1.5% same-store NOI growth, ex lease term income, the goal is still for 2.5% for the year. What are the items that help you in the back half of the year?

Sure. Our guidance was with lease term. So, we’re actually trending even better ex lease term than the goal for 2.5% would indicate. But the back half of the year, you start to see the benefits of last year’s leasing at properties like 919 Third, 280 Park, 711 Third, 125 Park, this is Bloomberg in 919, 280 Park’s been leasing up, it’s going be 1% vacancy by the end of the year, 711 where you saw the vacancy for the second quarter tick up; that leasing that we’ve already done, kicks in, in the second half of the year. So, you’re seeing the 6 to 12-month leasing activity start to flow through in the back half of the year.

Thank you. Our next question comes from Vikram Malhotra with Morgan Stanley.

On the none move-outs that you highlighted, can you just sort of give us an update, where are you in terms of backfilling some of that and can you remind us of any of other larger move-outs over the next 12 months?

Yes. It’s Matt, Vikram. The three properties you’re referencing, we reference in our press release. The 485 Lexington that’s city space that rolled out in the first and second quarter that’s a lease-up plan for late this year, primarily next. The other two spaces are really leased up. It’s vacancy from Omnicom at 220 East 42nd Street, that space’s been leased to VNS, a 300,000 feet. They will be in middle of next year, obviously not in the numbers yet. And 1515 is the Aeropostale space which as Marc just touched on earlier, has been fully leased. Some of that income will start to roll through the back half of this year and be fully in place next.

And on the move-outs, any other larger move-outs for the back half or the next few months?

No.

Okay. And then, just on One Vanderbilt, I guess from your Investor Day or just maybe over the last 12 months, you referenced the leasing pipeline keeps changing, it’s very dynamic. I am just sort of wondering, over the past year, has your thought process in terms of either type of tenants or size of tenants or mix of the building, has that changed at all?

No, really hasn’t. I mean, we’ve presented to prospective tenants that have been everything from single floor users all the way up to 1 million square-foot users. The predominant profiles of the tenants have been heavily skewed towards financial services, where we have seen some big international corporate headquarters requirements as well. So, we still think that the building will ultimately is likely to be another two, maybe three tenants of size, meaning 150,000 to 200,000 square feet in the size and the balance of the building be single floor users. If we get lucky, we’ll have somebody bigger, that’d be good news, but our expectation is unchanged.

Thank you. Our next question comes from Jon Petersen with Jefferies.

Great, thanks. I was hoping you could touch a little bit on the suburb. Leasing velocity seems to be picking up there a little bit, occupancy’s been trending higher. And we noticed that market forecasts from CBRE are kind of rosy right for the suburbs which is the first in quite a while. And so, kind of pairing that together with some of the buildings you sold recently, just kind of wondering against that backdrop, are you viewing the improvement in the market as an opportunity to liquidate your suburban assets, do you want to hold on a bit and let NOI trend higher, or will there always be a suburban component for SL Green?

There is a lot in that question too.

Yes.

So, start with the market, I guess, is that suburban…

The market is strong. The market up there again in White Plains and in Stamford in particular has been strong. We have taken advantage of that, the team up there has really been working very, very hard. They have done about two -- about 300,000 square feet of leasing year-to-date. I think we anticipate another couple of hundred thousand feet before the end of the year. And we are actually pretty far ahead. So, that’s been very, very strong. With respect to what we are going to do on a going forward basis with the rest of that portfolio that…

Right now, I think we had a -- trying to think a goal for this year of about 100, and we have met our eclipsed that already. So, there is one objective, if we can take it to the table. So right now, we have nothing more that we are concerned at the moment. Second half of the year, we will revisit, again going back to the concept of acceleration where -- I mean it’s a very -- that market up there has improved. I think on the margins, we probably will try to identify another asset that we think is somewhat stabilized and/or would meet the margin nicely and try and get some optimum pricing, whether that’s second half of this year or beginning of next year have no idea because that hasn’t -- it’s not what I’ll call the focal part of the strategy for the rest of the year, having got those original sales done. And given the fact that as I said, markets are improving; mark-to-markets are up; occupancies are up. So that’s all very good and really credit to the excellent team we have up there in White Plains, who on a much more limited capital regimen, manage to keep that portfolio really sort of best in class up there in that metro area. So, I think that’s what we can really say about that.

Well, I mean I guess just to push a little harder on that. I’m just kind of curious; I always viewed the suburban asset as something that you did eventually want to dispose off. So, I guess the question is since things are improving, is now the time to do a portfolio sell or a number of buildings, and I don’t mean maybe in the second half of this year but just over the next couple of years, is that a possibility?

That may be your feeling or opinion, I’m not sure we have ever. I’d say, it’s never been really us, I say, we have always looked at it as a relatively high yielding portfolio, the cap rates in the suburbs 6, 7, 8%. Since it’s very stable and requires very little capital, and the people out there are doing excellent job, I think we have always tried to strategically pair it down where we think like I said, either book ends, something is highly stabilized or on the other end something where we just don’t think we could make much of it, so smaller deals on the left hand and mature deals on the right hand. But I would say in general -- I know Steve, you just did a couple of deals up there and it’s from Manhattan...

Well, the Manhattan relationships where Omnicom just expanded by 25,000 square feet for that market which is a very -- a large deal with a highly priced tenants. There have been a number of deals that in 16 Court, which is part of the suburban portfolio. That building stabilized at this point and continues to have very good activity. So, I think now more than ever, we have seen the Manhattan portfolio and the suburban portfolio really working in tandem with one another.

I think it sounds probably less than 5% of revenues at this point, and shrinking each year. So, I hear what you are saying but I would say -- I think the approach we are on right now is the best approach for us, given the way we look at it. But I guess we will always be looking at that to recalibrate our thinking.

We do have our next question from John Guinee with Stifel.

I guess, if I was to connect all these dots, assets sales, share repurchase, special dividend, running the DPE book over 2 billion, stock price not appropriately valuing on a NAV basis. The next logical conclusion, I have is that perhaps you guys are no longer going to play by the REIT rule book and lever up to a level that management is comfortable with, rather than what the street might expect. Is that a fair statement to say, it’s appropriate to lever up a bit?

I think we started the year -- if you measure leverage as debt to EBITDA which has its own flaws in and of itself, which I think everyone recognizes, but we still use it. 6 -- what’s Matt, next 6.6, 6.7? 6.7 we sit -- with all those dots and all those things we have done, I think the 6.7 -- it’s 6.8. So, 6.7 to 6.8 is lever up. I guess it is up a tenth of a turn. But no, I think that -- I do think the industry in general is at a somewhat of a competitive disadvantage in growth, operating at between 30% to 40% debt level depending on whether you’re at low end or high end of the spectrum when you have most of the real estate investment rolled out there, investing closer to call it 50 to 55, maybe 60%. So, I think that’s an issue that the industry faces. I have been pretty vocal about that that -- we are executing within the parameters of I think where REIT shareholders want to see debt levels. But, I think query, whether those debt levels are a reason why the growth levels for certain REITs in many markets for at least for office companies, I’ll speak to them in particular, I can’t speak to other sectors as much but certainly for office companies are not as accurate and not as competitive. Combined with the fact that office companies have acquired so much over the time, a lot of them and us are digesting what we have, leasing up, redeveloping, executing, JVing and the like. So, it’s not simply a matter of operating within low leverage levels but clearly when you do go after an opportunity, if you think it’s a good opportunity to stay within these parameters, it does take a little bit more cleverness and ingenuity and resourcefulness to compete with the players out there that are operating in some cases nearly two times the debt levels. So, I would say, no, I think that our debt levels are relatively consistent with where they’ve been. I think our guidance at the beginning of the year was seven or below and that’s where we’re, and I don’t really see that changing now through year end.

Great. And then, a second question, this would be more of an education question, Matt. You did the 2 Herald Square, bought the mortgage, the first trust as it appears on page 30 of your DPE book. You obviously quoted the default rate of 11.1%. Can you sort of educate as to how much will you actually collect in current income on a loan investment like this and how much you’d accrue and then how you would unwind that accounting eventually?

Well, I mean the accounting rules tell you, you’re only allowed to book income that you expect to collect. Our expectation is that we will collect the default rate and therefore we’ve accrued at that rate. If we do get repaid and I think the handicap at this point is that we will, we will get paid the default rate from the period of time that we bought it through repayments in cash. And that’s I think likely at some point over the next few months.

So, you buy the loan at 2.50 and then you accrue at 11% and you’re able to get paid back at 2.50 plus 11%.

Yes.

Or you get hold of the building.

That’s the ultimate remedy in all loan position, but yes, that’s right.

Thank you. Our next question comes from Jed Reagan with Green Street Advisors.

It seems like there has been a slowdown in transaction volumes so far this year in Manhattan but you mentioned earlier that there is still lot of equity capital out there and debt capital is still healthy. Curious, how you guys kind of bridge that disconnect. Are you seeing bid [ph] spreads widen out between buyers and sellers in the market, or are you seeing cap rates moving higher for office and street retail this year?

Well, I think part of the -- there’s been a fair amount of volume this year, although it is off from record levels in the last couple of years. The refinancing market is creating a very attractive alternative to sellers that can’t achieve sort of very high expectations of pricing. So, we’re seen several assets sort of tested on the market, if you will, and then the ownership deciding to refinance in lieu of selling at levels that are below their expectations. But, there is also quite a backlog now of deals which we would expect to be consummated in the second half of the year. So, we will definitely expect volumes to be up in the second half of the year. Just there’s been a little bit of a standoff between buyers and sellers out there, and I would say deals are taking a little bit longer to get done.

And as far as where things are transacting value-wise, any noticeable changes on the office, street retail side?

I think we haven’t really seen any changes, positively or negatively. Obviously, every asset’s unique. So, it’s hard to sort of generalize on cap rates. But, I think the -- you are still seeing good office buildings trade, north of a 1,000 a foot sort of across the city.

I would just add to that, it’s very disciplined equity. It’s a lot of equity, that was my point earlier and I do believe there is a lot of equity out there but it’s disciplined. So, at a price, you can have six offers and 5% higher, there may be none or one. And if you are the seller who is trying, not just to sort of get value but as a seller, a lot of these are irreplaceable assets, you have a tendency to want to push not just for value but value plus, that’s where that standoff may get created, or that’s where that elongation may arrive. I think that is more of the issue with people really trying to sort of get -- you can only sell it once, so you try to get that optimum execution. And if you are what I call realistic transactors like we are, hence we sell and JV and do a lot of deals, because especially in the context of JVs, we want to do well, we want the partners to do well. So, I think that’s why we transact as much. But for sellers who are kind of one and done, they hold out for a high price and it doesn’t mean there’s not a lot of equity out there, it just means maybe that gap, that gap maybe solved by concession, or that gap maybe solved through a financing as Andrew said, but it doesn’t mean there is not a lot of participants in these deals.

That’s helpful. And maybe just a quick one for Steve. Are you seeing any changes in taking rents and Midtown office these days and are there any sub markets where you guys are having to cut rates to track tenants?

No, not the least. I can’t think of an instance where we’ve cut our rents in the past six months, and just the opposite of couple of the buildings, I think the gap between they ask and the take has narrowed a bit.

And broader brush that kind of feels consistent with the market in terms of rent environment?

Yes. I am not hearing anything from the brokerage community that would be contrary to that.

Thank you.

That’s it. We are all set?

That is correct.

Thank you very much everyone and we look forward to speaking again after the summer. Enjoy.

Ladies and gentlemen, this concludes today’s conference. Thank you for your participation. You may all disconnect and have a wonderful day.