ボルネード・リアルティ・トラスト（VNO）2026年第3四半期決算説明会：FFOは14%増、賃貸スプレッド拡大

主要ポイント

• 前年同期比で、比較可能FFO（事業キャッシュフロー）は1株当たり0.57ドルから14%増の0.65ドルとなりました。これはPENN 1およびPENN 2での賃料発生開始、パークアベニュー・プラザの買収、ならびに看板事業のNOI（純営業利益）増加が牽引しました。
• ニューヨークのオフィス既存物件NOIは、GAAPベースで11.9%増、キャッシュベースで8.7%増となりました。ニューヨークのオフィス入居率は93%に達し、前四半期比で80ベーシスポイント上昇、前年同期の88.4%からも上昇しました。
• 第3四半期のマンハッタンにおけるオフィス賃貸契約面積は合計48万9,000平方フィートで、平均当初賃料は1平方フィート当たり123ドルでした。マーク・ツー・マーケット（既存賃料との格差）のスプレッドは、GAAPベースで37.2%、キャッシュベースで25.9%となりました。
• GAAP業績に未反映の署名済み賃貸契約は2億400万ドルの収益に相当します。不動産レベルの税金や営業費用はすでに盛り込まれているため、経営陣はこの収益がおよそ5四半期かけて業績に反映され、その大部分が最終利益に寄与すると見込んでいます。
• ボルナードは、パークアベニュー350番地におけるシタデルの105万平方フィートの賃貸契約を含め、2026年通期のマンハッタン・オフィス賃貸契約面積を約240万平方フィートと予想しています。
• 経営陣は、第3四半期の比較可能FFOが2027年までの妥当な純ランレートであると述べ、金利コストの上昇、再開発に伴う稼働停止期間、テナント退去を考慮しつつも、2028年以降に大幅な追加成長を見込んでいることを明らかにしました。

主要財務データ

事業および業績動向

ニューヨーク・オフィス・ポートフォリオ

ボルナードは2026年最初の9か月間で、マンハッタンのオフィススペース115万平方フィートの賃貸契約を結び、平均当初賃料は1平方フィート当たり113ドルでした。GAAPベースおよびキャッシュベースのマーク・ツー・マーケット・スプレッドは、それぞれ23.5%と16.8%でした。

経営陣は、需要の加速、ボルナードが競合する約1億8,000万平方フィートの高品質ビルにおける空室率が5%前後に留まっていること、および新規供給の少なさを挙げ、マンハッタンのクラスAオフィス市場を貸手市場と評しました。同社によると、従来の賃貸借取引においてテナントは更新交渉を早期に開始しており、契約期間は長期化し、テナント内装工事補助金やフリーレント期間は縮小傾向にあるとのことです。

PENNディストリクト

ボルナードは、予算通り25億ドルを投じてPENNディストリクト再開発の第1期を完了しました。PENNディストリクトの主要資産には担保設定（借入）のない状態が維持されています。

PENN 1の賃貸率は96%です。第3四半期中にボルナードは、平均当初賃料1平方フィート当たり123ドル、平均マーク・ツー・マーケット上昇率40%で、24万8,000平方フィートに及ぶ10件の契約を完了しました。現在1平方フィート当たり68ドル支払われている約40万平方フィートが今後3年間で契約更新期を迎え、さらに8万3,000平方フィートが引き続き入居可能です。

PENN 2は、プロジェクト開始以来160万平方フィート以上の賃貸契約を経て、入居率は92%となっています。約15万平方フィートが引き続き入居可能で、足元の交渉賃料は1平方フィート当たり125ドルから135ドルの範囲です。

同社は2027年初頭に、7thアベニューと34thストリート沿いの店舗再開発、ならびに34thストリートと8thアベニューにおける480戸の賃貸住宅ビルの建設に着工する計画です。経営陣は住宅ユニットの引渡しを2029年と予想しています。

プラザおよびパークアベニュー・プロジェクト

ボルナードは四半期終了後、パークアベニュー350番地の合弁事業の組成手続（クローズ）を正式に完了しました。ケン・グリフィン氏が60%出資する財務パートナーで、ボルナードが36%、ルーディン家が4%を所有しています。同合弁会社は33億ドルの建設ローンと、シタデルとの105万平方フィートの賃貸契約も完了しました。

経営陣は、ボルナードに対するアンレバード（無負債）での総投資額リターンを9.2%、レバード（負債活用）でのリターンを13%超と見込んでいます。シタデルは最大33万平方フィートを追加する早期オプションを有しており、計画されている190万平方フィートのタワー最上部の52万平方フィートは引き続き募集中です。ボルナードは、建設コストの60%の契約が完了し、さらに20%が内諾済み（ソフトサークル）であると述べています。

5thアベニュー623番地において、ボルナードは1平方フィート当たり200ドルに近い当初賃料で、3万1,000平方フィートの初の賃貸契約を締結しました。同プロジェクトは2027年第4四半期にテナント引き渡しが予定されており、経営陣は追加の賃貸契約に向けた交渉が進んでいると述べました。

サンフランシスコ

カリフォルニアストリート555番地における第3四半期の賃貸契約面積は合計5万5,000平方フィートで、平均当初賃料は同物件で過去最高の1平方フィート当たり163ドルとなりました。GAAPベースおよびキャッシュベースのマーク・ツー・マーケット・スプレッドは、それぞれ59%と38%でした。年初からの累計契約面積は16万6,000平方フィートに達し、さらに15万5,000平方フィートの取引が保留・交渉中にあります。

店舗賃貸およびアセットライト型事業

ボルナードはタイムズスクエアのセフォラとの契約を10年間更新し、タイムズスクエア、5thアベニュー、PENNディストリクト全体で賃貸パイプラインが活発であることを報告しました。経営陣は、現在空室となっている店舗スペースを稼働安定化させることで、約5,000万ドルの収益が加算されると試算しています。

同社の看板、清掃、警備事業は合わせて1億2,000万ドルの収益を生み出しています。ボルナードによると、看板事業は過去5年間で年平均16%の成長を記録しています。経営陣は現在、これらの事業を売却・現金化するのではなく、継続保有する意向です。

経営陣の見通し（ガイダンス）

• 2026年通期の比較可能FFOは2025年の水準を上回る見込みです。
• 経営陣は、第3四半期の1株当たり比較可能FFO（0.65ドル）を、2027年までの四半期ベースの妥当な純ランレートとみなしています。これには支払利息の増加、再開発に伴う稼働停止、および判明している退去の影響が織り込まれています。
• ボルナードは、署名済み契約の賃料発生開始や一時的に稼働停止しているスペースの再賃貸が進むにつれ、2028年以降に大幅な追加利益成長を見込んでいます。
• 2026年通期のニューヨーク・オフィス賃貸契約面積は、2025年の370万平方フィートに続き、約240万平方フィートと予測されています。
• 経営陣は、堅調な既存物件NOIの伸びが2027年まで続くと予想しており、ニューヨークのオフィス成長率は現在の水準かそれを上回る可能性があります。
• 7.9倍と発表されたレバレッジ比率は、主に新たな収益の計上開始に伴い、2027年末または2028年初頭までに7倍台前半に向けて低下する見込みです。

リスクと注目点

• 金利上昇により資金調達コストが増加しています。経営陣は、2027年の業績に対して1株当たり約0.10ドルの影響があると試算しています。
• 34thストリートと7thアベニューの店舗および看板の再開発期間中、収益が一時的に停止します。
• 契約満了および退去が決定している物件には、アベニュー・オブ・ザ・アメリカス1290番地、ウエスト34thストリート330番地、7thアベニュー888番地のスペースが含まれます。
• ボルナードが最近締結した契約および将来の契約に資金を充当するため、経常的設備投資は今後1〜2年間高水準で推移する見込みです。
• パークアベニュー350番地のリターンは、アンカーテナントであるシタデルとの契約により予測の変動幅が抑えられているものの、残りの見込み賃貸スペースのリーシングと建設コストの管理に一部依存しています。
• 経営陣は、近年の金利上昇により売買投資活動が減速し、価格の変動が生じていると述べました。

アナリスト質疑応答の要点

• 店舗事業の上振れ余地：経営陣は、店舗ポートフォリオの入居率が安定水準に達した場合、約5,000万ドルの追加収益が発生すると試算しました。
• 2027年の契約満了：ボルナードは2027年に100万平方フィートをわずかに超える契約満了を控えていますが、主要な満了予定物件すべてにおいて活発な関心が寄せられていると述べました。以前に署名された更新契約は2027年の満了スケジュールから除外されています。
• 資産売却：2件の売却候補案件が詰めの段階にあります。経営陣によると、完了すれば10億ドルを超える新たなフリー・キャッシュフローを生み出す可能性がありますが、取引が完了する保証はなく、金利上昇に伴い価格調整が行われています。
• 資本配分：既存の開発プロジェクトへの資金調達は完了しています。資産売却による潜在的な収入は、機動的な投資や自社株買いに充てられる可能性がありますが、経営陣はいかなる決定も時期尚早であると述べています。
• 15 PENNの資金調達：プロジェクトの着工がまだ先であるため、ボルナードは資金調達構造を確定していません。経営陣は、計画がより具体的になった時点で同プロジェクトの資本構成を固めるとしています。
• オフィスの利用状況：経営陣は、ボルナードのニューヨークのビルにおける利用頻度が週少なくとも4日、多くは5日に達しており、これがテナントの拡張や更新交渉の早期化を後押ししていると述べました。

決算説明会トランスクリプト全文

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決算説明会の完全なトランスクリプト

経営陣による説明

Operator

Good morning, and welcome to the Vornado Realty Trust Third Quarter 2026 Earnings Call. My name is Nick, and I will be your operator for today's call. [Operator Instructions]

I will now turn the call over to Mr. Steve Borenstein, Executive Vice President and Corporation Counsel. Please go ahead.

Steven Borenstein

Welcome to Vornado Realty Trust Third Quarter Earnings Call. Yesterday afternoon, we issued our third quarter earnings release and filed our quarterly report on Form 10-Q with the Securities and Exchange Commission. These documents as well as our supplemental financial information package are available on our website, www.vno.com, under the Investor Relations section.

In these documents and during today's call, we will discuss certain non-GAAP financial measures. Reconciliations of these measures to the most directly comparable GAAP measures are included in our earnings release, Form 10-Q and financial supplement.

Please be aware that statements made during this call may be deemed forward-looking statements, and actual results may differ materially from these statements due to a variety of risks, uncertainties and other factors. Please refer to our filings with the Securities and Exchange Commission, including our annual report on Form 10-K for the year ended December 31, 2025, for more information regarding these risks and uncertainties.

The call may include time-sensitive information that may be accurate only as of today's date. The company does not undertake a duty to update any forward-looking statements.

On the call today from management for our opening comments are Steven Roth, Chairman and Chief Executive Officer; and Michael Franco, President and Chief Financial Officer. Our senior team is also present and available for questions.

I will now turn the call over to Steven Roth.

Steven Roth

Thank you, Steve, and good morning, everyone. On behalf of my hard-working colleagues at Vornado, it is my pleasure to welcome you to our third quarter call. Today is election day. Elections matter, our democracy matters and your vote matters. New Yorkers are choosing a governor and across the country, voters are choosing a Congress. We have a system of early voting, mail-in voting and in-person voting. Please make sure that you vote. If you work at Vornado, you're entitled to half a day off to facilitate your voting.

We have a lot to talk about this morning, but first, I want to mention something that is important to me and should be important to all of us. Two Wednesdays ago, Daryl and I attended the inaugural Blue Square Alliance Against Hate benefit gala. Blue Square is an organization created by Robert Kraft in 2019 in reaction to the very disturbing increase in antisemitism across America and that now combats hate of all kinds. Robert Kraft is a 5-foot 7-inch giant. He is self-funding this organization. And Daryl and I believe we should all follow his lead.

Now to business. We had another excellent quarter with eye-catching mark-to-market results and same-store growth. Comparable FFO was $0.65, up $0.08 or 14% from last year's third quarter and $0.02 ahead of analyst consensus. In a few minutes, Michael will review all the numbers in detail, but first, let me cover some highlights. We are the last New York office company to report, so we can see the competitive playing field clearly in front of us. Everyone's metrics were pretty good, but our metrics were outstanding in first place and second place was not even close.

As we have been predicting on these calls for the past 9 quarters, everyone, and I mean everyone, analysts, investors, the press and even out-of-town office companies now agree that the New York market is by far the strongest in the country and maybe even the strongest that it's ever been. As I have said over and over, we compete in a market of about 180 million square foot Class A better buildings, where demand for space is accelerating and the availability of good space is quickly evaporating. We are most definitely in the landlord's market. And most importantly, tenants and brokers know it and are acting accordingly.

Economics 101 says that with demand surging and supply not keeping pace, rents will rise, and they are, and there is no end in sight. $200 and $300 rents are now common in the conversation. Overall, Manhattan office leasing volume was up more than 9% from last year, and total leasing in 2026 is on pace to reach the highest total since 2000.

During the third quarter, overall Manhattan office leasing was a strong 10 million square feet, exceeding both the 5-year and 10-year quarterly averages. TAMI tenants took the lead this quarter with 27% of deal volume. And by the way, there are more postings for AI jobs in New York than any other market in the country by a wide margin.

Vacancy in the 180 million square foot Class A better building market in which we compete continues to tighten and is now down to the mid-single digits. There is a serious shortage of large blocks in the better buildings and new supply is minimal, takes as long as 5 years to deliver and requires rents upwards of $300 per square foot to pencil. Given these dynamics, we expect Class A rents to continue to grow well into the next decade.

That tells you everything about the strength of the demand in our market. I couldn't be more bullish. And by the way, the 10-year treasury run up to 5% may be impeding the supply of new builds, but it seems to be having absolutely no effect on tenant demand.

Vornado's best-in-class assets and ability to attract and retain an outstanding roster of tenants, including many of the world's leading companies, continues to set the standard for the New York office market. With the investments that we've made throughout the years and over the past year in such assets as Park Avenue Plaza, 623 Fifth Avenue and 350 Park, we now have a concentration of premier assets around the 2 most important transportation hubs in the city, in the PENN District and in the Plaza Park Avenue District. No other investable company has both.

Our portfolio of assets with best-in-class amenities is exactly what tenants are seeking, and we continue to achieve market-leading rents and a very significant mark-to-market results. Here is our scorecard. In the first 9 months of 2026, we leased 1.6 million square feet company-wide. For Manhattan office, we leased 1.15 million square feet at $113 per square foot average starting rents with mark-to-markets of 23.5% GAAP and 16.8% cash. As you will hear in the next paragraph, these metrics are accelerating as rents continue to rise even quarter-by-quarter.

As I mentioned during our last call, these mark-to-market stats do not include our leasing activity at PENN 2, where following our transformation, we are achieving rents that are about double the old rents. That would translate to 100% mark-to-market. But our numbers do include all of our assets, even our few clunkers. Everyone has clunkers, even us, no cherry picking for us. In the fourth quarter, we will recognize the 1.05 million square foot Citadel lease. And so we can now forecast that Manhattan office leasing for the full year 2026 should be about 2.4 million square feet.

In the third quarter in Manhattan, we executed 30 office deals totaling 489,000 square feet at an industry-leading average starting rent of $123 per square foot with an average term of 9.5 years. Mark-to-markets were a whopping 37.2% GAAP and 25.9% cash. Our budgets show that this strong performance will continue through 2028.

This quarter, our New York office same-store NOI was up 11.9% GAAP and 8.7% cash. Our New York street retail same-store NOI was up 8.4% GAAP and 9.3% cash. Our New York business overall, which includes Alexander's, was up 10.2% GAAP and 4.9% cash or 8.4% cash if excluding Bloomberg's rent abatement at 731 Lexington that we advanced forward 5 years for tax reasons.

Our signed leases that are not yet included in our GAAP results are $204 million of revenue, which, since the taxes and operating expenses are already included at the building level, will almost entirely drop to the bottom line. This will feed into our income over the next 5 or so quarters.

Phase 1 of our award-winning transformation and redevelopment of the PENN District is now complete with the new Moynihan Train Hall, Meta's 730,000 square foot Moynihan office complex, the new and expanded and fully re-tenanted Long Island Rail Road Concourse, the adjacent food hall and 70 new or reconstructed food and beverage offerings, the 33rd Street pedestrian plaza and the fully transformed and super-amenitized 2.5 million square foot PENN 1 and 1.8 million square foot PENN 2. So this is a good time to render a report card.

Capital spent to create all this was $2.5 billion, on budget and very well worth it. As you remember, we prefunded the capital required here, which turned out to be prescient. We continue to have no debt on the major PENN District assets. Since the start of physical redevelopment at PENN 1, we have leased 1.8 million square feet at average starting rents of $98. During the third quarter at PENN 1, we executed 10 deals totaling 248,000 square feet at average starting rents of $123 at an average mark-to-market of 40%. The office space here is now 96% leased.

Note that roughly 10% of PENN 1 rolls each year, so we will keep marching all rents up to market. This includes 400,000 square feet of currently paying only $68 per square foot, which rolls over the next 3 years, plus another 83,000 square feet of vacancy to lease. So there is much growth still to come here.

At the 1.8 million square foot PENN 2, we have leased over 1.6 million square feet since project inception, putting us at 92% occupied with availability now of only 150,000 square feet. Rents at PENN 2 continue to exceed even our own optimistic expectations with deal-making now squarely in the $125 to $135 square foot range. Tour activity and proposals across the remaining space remain at robust levels. We continue to escalate our rents here to match market demand.

We have created something truly unique at PENN. Together with our neighbors, Manhattan West and Hudson Yards, we are part of the new west side of Manhattan as well as being our own city within a city. Most importantly, tenants and the public love what we have done. Now the financial benefits of all this are enormous. Old rents will rise to market, and importantly, PENN's current market rents will rise to the levels at Manhattan West and Hudson Yards, and we are seeing that happen day by day.

Phase 1 may be complete, but we continue to invest in the transformation of the PENN District. We will develop the tired, old and junky retail on both sides of 7th Avenue and along 34th Street into attractive, modern and exciting retail offerings. This is the gateway to our PENN District and the transformation here will have big impact. We will also develop a 480-unit rental residential building on our 34th Street and 8th Avenue site, catty-corner to Moynihan Train Hall. Both of these projects will begin physical construction early next year.

Phase 2 at PENN District will be every bit as exciting and productive and will include PENN 15 and various other potential sites. There's a lot of chatter in the industry about fee income and a lot of Blackstone and Brookfield envy in REIT land. We have our fair share of fee income. But even better than that, I want to call attention to 2 of our high-growth businesses that get little attention. First, we have the largest and best sign business in Manhattan, which has grown at 5% CAGR over the last 10 years and 16% CAGR for the last 5 years. Our sign concentrations are on the 2 best blocks in Times Square bowtie where we own 50% with our retail JV partners and in the PENN District, where we own it all. By the way, PENN is the principal contributor to the 5-year CAGR and now at share produces nearly double the income of Times Square for us.

What differentiates our sign business from others, is, of course, our unique high-traffic real estate and that we own all the signs, which are attached to the real estate that we own. There are no leases, no expiration dates, no renewals, which equates to high margins and high values. Further, we are one of the few landlords that own our cleaning and security business, which services all of our buildings, giving us better control and better profits. Together, these 2 capital-light businesses currently produce $120 million of income, and they are growers.

We have recently added to our holdings in the Plaza Park Avenue District with the acquisitions of 623 Fifth Avenue, Park Avenue Plaza, 3 East 54th Street and 350 Park Avenue, which adds to 1290 Avenue of the Americas, 280 Park Avenue, 640 Fifth Avenue, 689 Fifth Avenue, 655 Fifth Avenue, 697 Fifth Avenue and 595 Madison Avenue. Our 623 Fifth Avenue development project, spectacularly well located on top of Saks Fifth Avenue is on schedule. We will deliver to tenants in the fourth quarter of 2027.

We signed our first lease here with a financial services firm for 31,000 square feet across 2 floors at an on-budget starting rent close to $200 a foot. The market reception to this high-end hospitality-driven project designed by Foster + Partners has been terrific. Tour volume is very strong, and we are currently negotiating multiple other deals.

In May, we acquired a 49% interest in Park Avenue Plaza for $950 per square foot, which, taking advantage of a low interest rate loan through 2030, would yield an 8% cash-on-cash return. This is a building with blue-chip tenants. We love the low basis here and even more so, we love the below-market rents. Good things are happening here as we speak.

In a milestone event just after quarter end in October, we formally closed the 350 Park Avenue joint venture with Ken Griffin as our 60% financial partner, Vornado owning 36% and the Rudin family owning the remaining 4%. Simultaneously, we closed on a $3.3 million (sic) [ $3.3 billion ] construction loan which is a record for an office deal and a 1.05 million square foot lease with Ken Griffin's Citadel. We disclosed on Page 21 of our financial supplement the cost and returns of this project. Our return on cost is over 9%. Note that this is an unlevered return. The levered return is over 13%.

Our 350 Park Avenue Tower is being designed by the same Foster + Partners team that designed the new JPMorgan headquarters down the block. 350 is huge at 1.9 million rentable square feet and topping out at 1,400 feet. Citadel has an early call option to grow by an additional up to 330,000 square feet with the early betting be that they will take it all. That leaves 520,000 square foot of 20 floors of column-free, high-ceiling, floor-to-ceiling windowed space at the very top of the building, actually beginning 850 feet in the air, all with majestic 360-degree panographic (sic) [ panoramic ] views up to the park and down to the harbor.

Glen and his team will be leasing this space on behalf of the venture. I hope you all saw our full page ad in the Wall Street Journal last Thursday announcing the project and clearly showing the available block. This block is the best available space on offer, and we are bringing it to market at exactly the right time.

And I must say, Ken has been a perfect partner, and his team as well. Ken has been personally involved in all major design decisions to create the most efficient workspace and world-class aesthetics. At our 2 million square foot 1290 Avenue of the Americas, many of you have toured our new amenity space and recognized them as best-in-class, and tenants are reacting accordingly. Since inception of our hospitality-driven transformation focused on our new pavilion and outdoor terrace space on the 17th floor, we have leased 650,000 square feet to new tenants at rents that are leading the pack on Sixth Avenue. The building is currently 97% occupied with an upcoming opportunistic expiry of 240,000 square feet next year, we will -- where we have lots of activity.

We acquired 1290 and 555 California Street in 2007 at the same time. 1290 is now the best building on Avenue of the Americas, and 555 California Street is the best building in San Francisco. Michael will have the pleasure of reporting to you the extraordinary leasing success of 555 California, validating its leadership in the market.

In the for-what-it's-worth department, I think NAV is a meaningful metric. Green Street has our NAV at $56 a share, which means our stock price trades at a 36% -- I'm sorry, 38% discount, the deepest discount in our office group. Last quarter, I told you we were in conversations to sell 2 assets, which would substantially increase our liquidity. Both are well advanced, and we expect to report more on our next call.

We all thought that the monster Wall Street law firms were forever institutions and creditworthy to boot. But as I read in the recent news, this is apparently not the case. But more relevant to us is that law firms' hourly billing rates have now risen to unreasonable levels. We need to fix that, and we are beginning to focus.

I end with this. Halloween was a couple of days ago. I have a 10-year-old grandson who is a trick-or-treater. We just switched over to daylight savings time, and all my friends are heading down to Florida for the winter. Thanksgiving is a few weeks away. Thanksgiving is a unique American holiday celebrated with a family feast. Since I have been boss, we have celebrated Thanksgiving by giving every single employee, no matter their rank, a Thanksgiving turkey.

In the beginning, we were a small New Jersey suburban company. Everybody drove to work. So we loaded frozen turkeys onto a truck and handed them out one by one. This is no longer possible today since we now have thousands of employees and everyone commutes to work using mass transit. So we now give out a money voucher sufficient to buy a turkey and all the fixings. I must say, I find this many decades old tradition very personally satisfying. Happy Thanksgiving to everybody.

Now over to Michael.

Michael Franco

Thank you, Steve, and good morning, everyone. Third quarter comparable FFO was $0.65 per share compared to $0.57 per share for last year's third quarter, an increase of 14% or $0.08. This increase was primarily due to higher FFO resulting from rent commencements, primarily at PENN 1 and PENN 2, net of lease expirations, higher FFO from our acquisition of Park Avenue Plaza and higher NOI from signage revenue, partially offset by higher net interest expense, largely due to the increase in rate on our 2033 senior unsecured bonds versus the retired bonds. We have provided a quarter-over-quarter bridge on Page 3 of our earnings release and on Page 7 of our financial supplement.

As Steve said, and it is worth repeating, this quarter, our New York office same-store NOI was up 11.9% GAAP and 8.7% cash. Our New York street retail same-store NOI was up 8.4% GAAP and 9.3% cash. Overall, our New York business was up 10.2% GAAP and 4.9% cash, or more accurately, 8.4% cash, excluding Bloomberg's rent abatement at 731 Lexington Avenue, which we accelerated for tax reasons. Based on our 2027 budget, we expect these strong same-store growth numbers to continue through next year.

In terms of our earnings outlook, as we have previously mentioned, full year 2026 comparable FFO will be higher than 2025. While we are still in the process of finalizing our 2027 budget, we still expect the current quarter to be a reasonable run rate through 2027, notwithstanding the additional impact of taking income offline to effectuate the 34th and 7th redevelopment and from a higher interest rate environment. As indicated on our previous calls, we expect significant additional growth in 2028 and beyond.

Turning to occupancy. Our New York office occupancy increased 80 basis points this quarter to 93%, up from 88.4% at this time last year. Last quarter, we said we expected to be north of 93% by year-end, so we are already ahead of plan. In addition to the just completed 1.05 million square foot Citadel lease at 350 Park, our New York office leasing pipeline remains strong with another 1.1 million square feet. As we look toward year-end, we project that total office leasing in New York should be about 2.4 million square feet for 2026, which comes on the heels of our 3.7 million square feet of leasing in 2025. To put it simply, we are firing on all cylinders at Vornado. We are now laser-focused on leasing 623 Fifth and 350 Park.

Speaking of 350 Park, we believe this is a big win, not just for Vornado, but also for New York. The project delivers on promise of the Greater East Midtown rezoning, an idea that Steve first proposed in his 2009 Chairman's letter after returning from London and seeing what that city had done, and then it was championed by others here.

Our project contributed a combined $150 million towards the upkeep of St. Patrick's Cathedral and St. Bartholomew's Church through the purchase of development rights, plus more than $35 million for the city's East Midtown Public Realm Improvement Fund, which will help fund the Park Avenue malls. And with the robust demand for and scarcity of trophy office space available, the new 350 Park will serve a growing need by the world's leading companies in the premium space to attract and retain talent here.

At the end of the day, though, it's all about the money. And the transaction is enormously attractive to Vornado as a developer and owner-operator. With our land marked up to the $900 million contribution value, the project pencils to a 9.2% return on cost to Vornado, as you can see on Page 21 in our supplemental. Assuming we don't bring in any capital partners, our incremental capital investment of $290 million will start in the middle of 2028 with the bulk in 2029 through 2031. We could not be more excited about this project and the value it will create for our shareholders.

The retail market continues to experience healthy activity as well. There is strong demand for the best locations and rents have returned close to or at peak levels. We signed a 10-year renewal with Sephora in Times Square this quarter. We had significant activity at our other Times Square asset, 1540 Broadway. Our pipeline is strong for Fifth Avenue in the PENN District also.

In San Francisco, our 555 California Street complex, the best building in town, continues to lead a market that is coming back fast. San Francisco tenant demand is at a record 8.4 million square feet, of which 60% is from AI and tech, and asking rents are up almost 10% year-over-year. This quarter, we leased 55,000 square feet at an average starting rent of $163 per square foot, our highest ever, with mark-to-market of positive 59% GAAP and positive 38% cash. Year-to-date, we have leased 166,000 square feet, and we have another 155,000 square feet of deals pending.

Turning to the capital markets. The backdrop has gotten more volatile over the past couple of months, but the markets remain open for quality New York assets. CMBS spreads have widened modestly, but New York Class A office refinancings continue to be very well received. The unsecured bond market remains open for office REITs also. Our 2033 bonds now trade about 160 basis points over treasuries, 30 to 40 basis points tighter than in April, so all-in new issue rates are higher given the higher base rates.

Given the recent volatility and move in rates, we're pleased we completed over $4 billion in refinancings early in the year when the markets were more favorable. In the investment sales market, the pace of transactions has slowed and pricing has been impacted a bit with the sharp jump in rates. But capital remains very interested in New York and deals are getting done.

Finally, turning to our balance sheet. Our liquidity is $1.9 billion, comprised of $724 billion (sic) [ $724 million ] of cash and restricted cash and $1.2 billion of undrawn credit lines.

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

Operator

[Operator Instructions] The first question will come from Floris Van Dijkum with Ladenburg Thalmann.

質疑応答

Floris Gerbrand Van Dijkum

A couple of things I wanted to ask you. Steve, I was actually very intrigued by your comments on the retail market. Obviously, your New York retail same-store was up 9 points -- over 9%. Maybe if you could touch on -- there's still a lot of vacancy in your New York retail. What was the peak occupancy? And what kind of -- I mean, ballpark figure, is there like a $90 million, almost $100 million NOI upside, getting back to peak occupancy. Could you maybe talk a little bit more about what you see happening in the retail portfolio?

Steven Roth

Floris, thanks. So Tom or Michael, if we lease up all of the vacancies in the retail portfolio, how much income does that generate? That's really Floris' question.

Thomas Sanelli

I would say approximately $50 million.

Michael Franco

Yes, I was going to say about $50 million.

Steven Roth

At $50 million. I think it's more than that, but my financial geniuses think that if we lease -- if we get to 100% occupancy or stabilized occupancy in retail, that would increase our income by $50 million.

Floris Gerbrand Van Dijkum

Great. That's helpful. That's certainly incremental to where we stand today. The other question I had is, obviously, you've got some pretty exciting development projects, and you've got potential capital required for 15 PENN as well. You've got, I think, $360 million of unencumbered NOI. As you think about how will you potentially fund the capital that's required to build out this massive project at 15 PENN, how do you think about sources and uses for that?

Steven Roth

Well, before we get to 15 PENN, we've got a lot of unbelievable stuff on our plate. So we've got 623 Fifth Avenue. We've got, obviously, 350 Park Avenue. What am I forgetting?

Michael Franco

34th and 8th.

Steven Roth

34th and 8th. We've got the...

Michael Franco

Retail redevelopment.

Steven Roth

8th Avenue apartment house. So we have multiple new high-growth projects on our plate. All of that is already funded. We have capital allocated for everything that we're doing that we have already started. So that's behind us. 15 PENN is a project that when we -- I mean, it's probably a fair amount of time away. As we get into it, we will capitalize it, okay? We haven't decided how we're going to do it yet, because it's really not -- it's not permanent yet.

Operator

The next question will come from Steve Sakwa with Evercore ISI.

Steve Sakwa

Michael, I guess I wanted to just go back to some comments that you made. You talked about the kind of signed, but not occupied, a little over $200 million, which is kind of roughly $1 or so in incremental FFO. But it sounds like there are some offsets. I guess there's this 1290 move-out, there's some of the retail you're taking offline. Are there other just kind of move-outs that might be known in the first half of the year that kind of might be weighing down the near-term earnings trajectory that as you backfill that space kind of provides more upside in the '28?

Michael Franco

Yes. I think, Steve, there are a few things. Look, I think the magnitude of the $200 million, I think, is pretty staggering and reflects, in particular, the success of PENN. The offsets are -- like we're in a normal leasing business. There's going to be expiries and move-outs. In particular, we got 1290, as you said, 330 West 34th, a few at 888 Seventh. We're taking the retail offline at 34th and Seventh and also taking the sign offline, which we decided to do recently, given we think the greater potential we're going to bring back. So that will take a little more income offline next year than we originally anticipated.

And then we're going to have -- with rates being higher, that probably has a, let's call it, a $0.10 impact next year. So those are the big picture items. But eventually, that will all get leased back up, and that will flow through over time.

Steven Roth

Steve, the fact is that the pipeline -- the financial pipeline of having $200-odd million of signed in-the-bag revenue that will flow through our income statement over the next, call it, 5 quarters or whatever, nobody has anything like that and it's a testament to the enormous success of our PENN District project and a testament also to be -- that we will have by far the highest growth at our segments, by far. And I guess that's one of the reasons why we have a multiple that shows that. So we're pretty proud of all that.

Steve Sakwa

Great. Thanks, Steve, for that follow-up. Maybe just one for Glen, just kind of on the overall leasing pipeline and just sort of tenant activity, and just sort of what is kind of the tenant mindset today given strong profitability out of the corporates, maybe offset a little bit by uncertainty over just kind of the AI workforce? What are tenants telling you? And how far out are you starting to see tenants coming to you for renewals in places like New York and San Francisco?

Glen Weiss

So we've never seen it as strong as it is right now. Not even close. Every industry class, every property, tenants are rabid for space, lots of expansions. And AI has complemented that. There's been a lot of AI leasing, a lot of AI job growth in Manhattan. So we've never seen it better. In addition, tenants are less rent-sensitive than I've ever seen and are less sensitive about length of term as well. So that's all boding great for our business.

Operator

The next question will come from John Kim with BMO Capital Markets.

John Kim

Steve, I wanted to ask on your, I guess, your statement that lease spreads will continue through 2028. This quarter, it was at 26% on a cash basis. I'm wondering if there were leases in a couple of buildings that drove that figure higher? Or was that widespread throughout your portfolio? And can these lease spreads extend beyond 2028?

Steven Roth

The number 2028, I focused on because that's really the length of our planning process, 2 years out or 2.5 years out. So I can't tell you what's going to happen in 2029 and 2030 because our budgets don't yet extend out to that period.

Michael Franco

But I would say, John, a couple of things to tack on. I think Steve in his remarks referenced the mark-to-markets either at PENN or at PENN 1. PENN 1, we are consistently achieving mark-to-markets in excess of the 26%, again, reflecting the transformation there. And if you think about what's happening in the market generally, where rents are going up, let's just say, 5% to 10%. I think they're going up higher for the higher quality. But let's just use 5% to 10%.

If that continues and given the minute amount of new supply, we certainly think that is going to continue, maybe even accelerate. There's going to be an increasing gap between what's expiring and where the market is. So while we don't put hard numbers beyond 2028, that sort of gap and potential mark-to-market should absolutely remain a strong possibility.

John Kim

Okay. And then my second question, I know you don't like to discuss guidance, but Michael, you did mention that this quarter is a good run rate for next year. That would put you at about $2.60, but you also talked about higher interest rates and redevelopment as headwinds. But that's still about $0.28 above 2025's FFO. So it's below the $0.40 uplift previously discussed for '27. I'm wondering what has happened besides interest rates that caused that perceived shortfall?

Michael Franco

I'm sorry, John. Say -- you're a little muffled. Say that again?

John Kim

It's like -- it's a shortfall from the $0.40 previously indicated for 2027 growth. I know some of that was pulled forward to '26, but...

Michael Franco

Yes. I don't know that, that's really the case, John. Some of that got pulled forward to this year. I think relative from last year to '27, I think it's still sort of similar magnitude. There's been some positives, some negatives, right? I mentioned taking a little bit more offline on 34th and Seventh, higher rates. At the same time, you have some positive leasing fundamentals. So net-net, I don't know that, that's really -- we've changed that view at all.

Operator

The next question will come from Nicholas Yulico with Scotiabank.

Nicholas Yulico

I just wanted to turn to 350 Park. And if you could just maybe tell us, from a modeling standpoint, if we could think about like the accounting treatment that's going to start in the fourth quarter. Any nuances to think about there and how it could sort of incrementally impact FFO?

Thomas Sanelli

Yes. So this is Tom. In terms of the accounting, we're basically going to capitalize all expenses and interest. And I think we said it previously on a couple of calls earlier this year that it's basically going to be a similar run rate where we were getting prior to the JV. So there really isn't going to be anything happening other than we believe we're going to capitalize interest and cost, and some development fee income is going to come in as well. And that should be approximately what we were getting prior to the structure.

Nicholas Yulico

Okay. And then second question is maybe you could just talk a little bit more about the leasing interest at 623 Fifth based on the deals you've done so far, sort of types of tenants and how you're thinking about, are you pushing rents even further now for that building?

Glen Weiss

It's Glen. So yes, we continue to push rents there weekly. Tour volume is enormous. It's a financial service building, think private equity, think hedge fund types, think family shops, et cetera. So we've signed our first lease. We have another one coming very soon and others behind that. So with the paucity of good supply in the Plaza District, it's the perfect time for 623. Construction is underway, and our time is really good there. So we're feeling better and better as we go.

Operator

The next question will come from Jana Galan with Bank of America.

Jana Galan

Congrats on the strong results. Following up on the comments on the signage and the cleaning and security businesses, could there be opportunities to kind of monetize these in the future?

Steven Roth

These businesses are very valuable. I would say that with respect to cleaning, we think cleaning is a strategic combination with owning the assets. We think that owning the cleaning business together with the real estate is a big, big plus. So I don't see selling that or monetizing that in the future.

The sign business, which is an unbelievably interesting asset-light business, which is growing like a weed. So right now, I'd rather hold the income for growth than monetize it, although it has enormous value. So if the sign business has the benefit of $100 million of income and growing, so you figure out what the multiple might be. And so it's a very, very, very valuable asset that right now, we're in the growing business, not in the selling business.

Jana Galan

And then maybe just on the apartment projects that's starting next year, if you could maybe share kind of expected yields and then when maybe those -- that could start delivering units.

Steven Roth

Have we published the...

Michael Franco

No, we're going to publish at year-end, Jana. So wait a little bit longer.

Steven Roth

You don't want to give the lady a break and foreshadow it.

Michael Franco

I'd rather see what the numbers look like based on the final budget. So wait 2 or 3 months.

Steven Roth

We already have the final budget, but that's...

Michael Franco

Yes, we're going to probably deliver units late '28, early '29.

Unknown Executive

'29.

Michael Franco

'29.

Operator

The next question will come from Dylan Burzinski with Green Street.

Dylan Burzinski

Steve, you mentioned having 2 assets in the advanced stages of the sale process. Are you able to share any light on what the potential total proceeds can be? Has price throughout those discussions changed at all now that rates are higher? Can you talk about the bidding tensions, anything like that?

Steven Roth

Not really. The proceeds, if all goes well, and there's no assurance of that, but both of them will be over $1 billion of new free cash. Obviously, earnings will be nicked a little bit because we're taking earnings out of the system. Pricing is -- pricing has wobbled a little bit, as you would expect, as interest rates have risen.

Dylan Burzinski

Appreciate that color. And then maybe just as it relates to use of proceeds. I mean I know in the past, you've mentioned that you view the stock as sort of very, very cheap. So is that a potential opportunity? Are you guys going to sort of save cash for the balance sheet given some of the development? Can you kind of just talk about sort of the use of those proceeds?

Steven Roth

It's premature to talk about what we would do from a capital allocation point of view with money that we don't yet have in the house. But I can tell you, as I said a few minutes ago, that the capital program that's in process now has already been handled. So I look upon this capital as being pretty much available for opportunistic investment, buy back stock, make investments, whatever. But when -- we're not at that point yet. When we get at that point, then we'll make you aware of it.

Operator

The next question will come from Vikram Malhotra with Mizuho.

Vikram Malhotra

I guess just first, I wanted to go back to the run rate you alluded to into '27 and maybe into 28. Just to clarify, you mentioned sort of a good run rate, but then there are offsetting factors like interest expense. Did you mean that run rate and then we need to ex that run rate for those offsetting factors? Or that's sort of a good net number to think about going into '27? Because it kind of felt like a little bit of a pushout of the growth you've been calling for into '27 now into '28. So if you could just clarify that?

Michael Franco

Yes. Vikram, just -- that's the net number. So that factors everything in.

Vikram Malhotra

So that would be for the higher interest expense, any asset sales you may do or anything else, any known move-outs that you have as of you note as of today, that would be sort of the true like a good run rate into '27?

Michael Franco

Correct.

Vikram Malhotra

Okay. And then just on the street retail, I guess, bigger picture opportunity, a, would you have a sense or give us some comps like how should we value the business today? Like I know there are very few marks for how to think about cap rates for your asset type or your quality of assets? And then maybe any bigger picture like numbers around the bigger redevelopment? Because you've talked about a bigger opportunity at PENN Station, and I don't know if there are others as well, but just how should we think about a potential NOI uplift?

Michael Franco

Look, on the street retail, what we own is absolutely unique, right? The Fifth Avenue assets are -- when you think about the number of assets that are not owned by users or landmarks or whatnot, right, there are very few blocks available on Fifth Avenue for lease or for sale. And we own a handful. So those are scarce, very valuable assets. And there's a reason they don't trade often because they're like that. So you saw the UNIQLO transaction we did, which was a very low cap rate. And I think Fifth Avenue continues to command those type of cap rates, and they continue to attract user interest at -- I would definitely tell you a sub-5% cap rates, and it could be much more aggressive than that.

Times Square, again, what we have there is the 2 best blocks, dead center bow tie with signage attached to it, probably the most world famous signage in the world and the numbers that come off that are significant. So again, that has not really been tested, but those are going to command premium cap rates, too. So those are the absolute pinnacle in terms of what retail values are and will be. And I think the rental market has recovered significantly as well back to where rents are basically back to either at peak or pretty close to peak there.

Your second one, I didn't quite understand PENN Station in terms of, I think, the retail opportunity, redeveloping the 34th and Seventh corridor. We have significant aspirations for that, both the retail and the signage. There's still other retail income to come out in other pockets, whether it's what we're going to do at 34th and 8th, still in the concourse, et cetera. I can't give you a precise number offhand. I have to aggregate that. So rather than guess, we'll come back on that.

But we think the opportunity is meaningful, and that, in addition, I think just helps drive office rents as well. The more we place make there and create that unique atmosphere, which I think we've done with all the restaurants, F&B we put in, that's going to continue to accrue to the office rents, which we're achieving. And again, I think it's worth pausing on when you think about the numbers that we are achieving in PENN 1, PENN 2, $125, $135 a foot rents relative to where we originally published those budgets. We are well ahead. That's what we aspire to eventually. We've gotten there quicker, and there's a lot more room to run in terms of the office rents.

Operator

The next question will come from Anthony Paolone with JPMorgan.

Anthony Paolone

Great. So first question, Michael, just on this '27 and the trajectory that you're talking about. It seemed like the prior expectation was maybe something in the $2.70s for next year and it now seems about $0.10, $0.15 inside of that. So wondering as you think about this 2-year planning that you all do, should some of that come back in '28 and sort of the trajectory, I think a lot of folks have been anticipating is still intact? Or is that kind of $0.10 to $0.15 implicitly that it seems to be coming in here a little bit going to persist because of interest costs or whatever the case may be?

Michael Franco

Just to be clear, Tony, the -- I think it was Vikram's question, the net number sort of factored all that in. So I'm not sort of backing off what I said last quarter, $0.10 to $0.15. I think that sort of run rate continues. And the run rate beyond that in terms of we look at growth is quite significant. So I'm not going to give you precise numbers, but I'm looking at a latest budget that factors everything in some higher interest rate, we roll over debt or hedges or whatnot. And that significant growth remains intact, and I'm not backing up '27 at all.

Anthony Paolone

Okay. And then second one, maybe for Glen, just as you talked about a lot of the leasing and how aggressive the tenants are being with taking down space, what's your sense as to what the utilization of the space is today versus tenants increasingly taking growth space? Just trying to understand what they're thinking of as they plan for their space needs.

Glen Weiss

Look, I think utilization is now at least 4 days a week, if not 5, particularly in New York and particularly in our buildings. Our buildings are humming just as they were in 2019. And in terms of growth, you're seeing a lot of growth out of the law firms, out of the financial companies, out of the tech. I mean, everywhere you're seeing growth. And then with the lack of available supply that's good space, you're seeing renewal activity increase and tenants accelerating those discussions now, which allows us to get into deal mode, benefiting us much earlier than we had been a year or 2, 3 years ago. So utilization is very high. Growth is very accelerated, and the renewal market is now robust because there's just no space out there that's worth looking at for a lot of these tenants.

Michael Franco

Tony, before we let you go, I've got to give you the gold star for today. Your 350 Park analysis, while it wasn't 100% dead on, it's pretty close. So kudos for your analysis.

Operator

The next question will come from Seth Bergey with Citi.

Seth Bergey

I just wanted to touch on kind of the 2027 expiration schedule. What proportion of the space is kind of currently under active discussion for leasing? And I guess just more broadly, with the tightening availability of high-quality space in New York, are you starting to see tenants address expirations earlier just to secure their space given the tightening of availability?

Glen Weiss

Yes. So on your second point, I just discussed that. Absolutely, there's an acceleration on renewal discussions very much that we're seeing that across the board. On the major expirations for '27, we have action on all of it. We have a little over 1 million feet coming available. We have good action, good mark-to-markets, really strong starting rents, a lot of activity, as you would expect in this type of market.

Seth Bergey

And then just with, again, kind of some of the leasing momentum that you're seeing within New York, are you seeing any changes to kind of lease economics, specifically just with respect to TIs or free rent that you're offering?

Glen Weiss

We're seeing a bunch of things. Number one, rents are going up a lot. The tenants are rent-insensitive. Number two, terms are lengthening longer, much longer, which is also a very good thing. We are seeing TIs tighten and free rents tighten. It depends a lot on the term of the lease and also the rent. So on the TIs on new construction, where you're seeing these rents at $300 plus, you're seeing higher TIs. But on the bread-and-butter leasing, TIs are tightening, free rent as well, but much more so what we're seeing is rents are up and terms are longer, which is very important.

Operator

The next question will come from Michael Lewis with Truist.

Michael Lewis

I was going to ask about 350 Park. How should we think about the upside or downside risk left in that 9.2% projected cash yield. So obviously, you have leasing and rent assumptions, but also construction costs that aren't locked. Just thinking about upside or downside in the underwriting there. And then, I guess, not in the unlevered number, but interest rate risk as well, or do you expect to hedge that?

Michael Franco

So look, I think the most important point is we have an anchored tenant lease for a little over 1 million square feet, which ensures a pretty attractive outcome. So the question is what's the spec space is going to lease for? That's, of course, a risk we know we're taking. And that spec space is at the top of the building. It's going to be the best space in the marketplace. So we're bullish about that opportunity.

And I think there's certainly upside in what we projected. Of course, the market can change with downside. But with the anchored tenant lease, the variability on what the ultimate yield is, is a little bit tighter. We obviously financed it in this market, and that budget reflects what the curve is, notwithstanding we're hedging that out some period of time.

And then on the construction costs comment...

Steven Roth

60% bought with another 20% soft circled. So we're in...

Michael Franco

We're in good shape.

Steven Roth

We're in good shape. We have a very, very, very strong outlook as to what the building will cost.

Michael Lewis

Okay. Great. And then lastly for me, I don't know if there's anything you could share regarding the dividend you expect to pay this year. And I was wondering if the 350 Park JV gain would impact your taxable minimum at all?

Michael Franco

No. On your latter question, no.

Operator

The next question will come from Alexander Goldfarb with Piper Sandler.

Alexander Goldfarb

Steve, I like the turkey tradition. That's pretty cool. So I have two questions for you. The first question is, you guys have said for several quarters now that tenants really are not price-sensitive when it comes to rent. Thinking historically, you always hear about companies that were trying to get the best deal. And now they seem to -- they can't pay enough in rent. So are either, one, companies and tenants accepting higher rents as a percent of their operating cost structure? Or is it that the tenant's profitability has so vastly increased over the past number of years that paying $200 or $300, whatever the new market rents are, is really not ideal -- an impact to them because as a percent of their operating costs, it's no different than when rents were $90 or $100.

Steven Roth

Alex, I don't remember anybody on my team ever saying that tenants don't care about the rent they pay. The -- our customers are responsible and each rent negotiation is relatively intense and done by responsible parties on both sides. So the tenants do care about every single terminal lease. Sorry to disavow you of that. I wish it wasn't so, but every lease is contested.

Alexander Goldfarb

No, I understand that, Steve, but it seems like right now that tenants are accepting significantly higher rents than historically. I didn't mean to be disparaging or dismissive.

Steven Roth

Of course, the marketplace is demanding that rents go up aggressively. Construction costs, scarcity and interest rates, all are factored into that. Tenants are realistic. They're very well advised. They know when they have to -- what they have to pay. And in order to make a deal, they're willing to pay the lowest price they have to pay in order to make a deal. That lowest price turns out to be higher than it was yesterday and the day before, that's the market.

Alexander Goldfarb

Okay. The second question is on 888 Seventh. Is there any update on the ground rent renegotiation? The loan has been in special servicing as you guys addressed the ground rent reset. I'm just curious if there's any update on that process.

Steven Roth

No, sir. Actually -- it's actually 3 or 4 days -- 3 or 4 years away.

Michael Franco

It is 2 years away.

Steven Roth

Two years away. So it will start pretty soon.

Operator

The next question will come from Ronald Kamdem with Morgan Stanley.

Ronald Kamdem

Just two quick ones. Starting with the same-store NOI commentary. I think you said the 8% plus, 8% to 9% this year, that could continue into '27 and 2028. And just wondering if that was correct and if there's the move-outs or all that other one-timers that you mentioned sort of factored in. And how we should think about that?

Michael Franco

So I don't know that I said a specific number. What I said is that the strong same-store numbers would continue similar to that period, maybe a little higher, maybe a little lower, but it's going to be quite strong. And I think certainly with respect to the New York office, it's going to be at or above those numbers as I look through 2027. So retail is a little bit lumpier. But overall, the numbers are going to be sort of in that ilk, certainly on average for the year and definitely for the office.

Ronald Kamdem

Okay. Perfect. And then so my follow-up was just going to be, if I think about the recurring CapEx for this year, annualizing it, I have it at $167 million. Obviously, a lot of leasing has been done. So this is good news. But how do we think about what that run rate could be? And how much that could come down as you take occupancy?

Michael Franco

I think the next year or 2 is still going to be high, just given we're funding the leases that either have been signed or will be signed. I think, as you know, there's a lag effect when we sign these leases and when the tenant actually calls for the capital. It tends to be typically actually quite a bit later than we normally expect. So that's going to flow into next year and then next year leases in the following year. But I think a couple of years out, that starts to come down as the portfolio reaches the kind of stable numbers we've talked about.

Operator

There is time for one additional question. Caitlin Burrows from Goldman Sachs is on the line with the final question for the call.

Caitlin Burrows

Maybe just on the leverage path. I see that you guys are at 7.9x now. So with all that you have going on development-wise, EBITDA upside, possible dispositions, how do you see that shifting over 2027 and '28? Or what level of range do you think you'll aim to manage around?

Michael Franco

We're not managing around anything. We like having a strong balance sheet. We're proud of the progress we've made. And I think just if you look at the -- what's the natural -- where does it sort of naturally settle out to given the income coming offline, it's going to continue to trend down, we think, in the probably the low 7s by the end of next year, beginning of the following year.

Steven Roth

The biggest thing in that calculation is the income which will be coming on board will force that metric lower. And of course, the money -- the capital we have to spend will force it higher. So that battle, I think, will go in favor of a more favorable metric. There's an enormous amount of income coming online, which will help that metric enormously.

Caitlin Burrows

Okay. And then just a follow-up on the lease expirations in 2027. I was wondering to the extent that you previously signed renewals on '27 expirations, are those shown in the expiration table as '27 expiration or in the new year? So like are those unaddressed lease expirations or all lease expirations, if that makes sense?

Steven Roth

That's a good question.

Thomas Sanelli

Yes. So to the extent we signed a renewal that would get taken out of 2027 and pushed to the year that it would then expire.

Steven Roth

That sounds logical. Good.

Operator

There are no further questions at this time, sir.

Steven Roth

Well, I'll tell you, thank you all very much for joining. While we have been talking, we have gotten multiple requests for turkeys from non-affiliated listeners on this call. So I guess the message is Happy Thanksgiving to everybody. It's a wonderful American holiday, and that we wish everybody well. We had what we consider to be an outstanding quarter, and we're anxious to see you again on our next call in 3 months. Have a good day, everybody.

Operator

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