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Essential IR Insights Newsletter - February 2023

SL Green execs trumpet leasing numbers in bold market assessment

CEO Marc Holliday gave anotherglowing assessment of Manhattan office market leasing, in a further departure fromremarks he made at theoutset of the year positing a potential leasing slowdown in the market.

At times on the company's earningscall July 21, Holliday seemedto make light of his own suggestion in January that there may be leasing "headwinds"in the city.

"Fortunately for shareholders, and unfortunately for [Directorof Leasing and Real Property] Steve Durels and his leasing team, we must and areincreasing our full-year guidance for completed Manhattan office leases to 2.6 millionsquare feet for the full year," the executive said, later adding: "Thatsound you just heard was Steve hitting the floor. You can pick yourself up, Steve.Let's just put the best face on and go forward, OK?"

SL Green executed 620,000 square feet of Manhattan office leasesduring the second quarter. The company's leasing pipeline as of July 21 is 1.6 millionsquare feet, the "vast majority" of which comprises pending leases, Hollidaysaid.

"These leasing results and our projection of second-halfperformance is driven by continual demand for high-quality, well-located, reasonablypriced office space — which, descriptively, is the sweet spot of our entire portfolio,"the executive said.

Durels described the tenant mood during renewal and new leasedeal negotiations today as "no different" than it was a year ago.

"The general mood from the tenants that we speak to was,they feel good about their businesses," he explained. "They think they'rein a healthy position. I think it depends on the type of industry you're talkingabout as to how bullish they are, but most people are still in the mindset of expandingtheir businesses, making capital commitments as far as restacking or rebuildingand changing how they like to use their space. And I don't think that's … goingto go away for the next several years to come — because it's a bit of a culturalthing."

Tenants with 2017 and 2018 lease expirations are engaging inearly renewals in greater numbers also, Durels added.

Holliday ultimately sought to downplay the significance of thecompany's upcoming lease expirations. "I just want to make sure we're clear,"he said, "we have very little in the way of rollover exposure for the balanceof this year and next year."