보르나도 리얼티 트러스트 2026년 3분기 실적 발표: 뉴욕 임대 가속화로 FFO 14% 증가

핵심 요약

• 주요 동인은 PENN 1 및 PENN 2의 임대 개시, 파크 애비뉴 플라자(Park Avenue Plaza) 인수, 간판 순영업소득(NOI) 증가로, 주당 비교 가능 FFO는 전년 동기 $0.57에서 14% 증가한 $0.65를 기록했습니다.
• 뉴욕 오피스 동일 자산 NOI는 GAAP 기준 11.9%, 현금 기준 8.7% 증가했습니다. 뉴욕 가로변 리테일(Street retail) 동일 자산 NOI는 GAAP 기준 8.4%, 현금 기준 9.3% 증가했습니다.
• 뉴욕 오피스 점유율은 93%에 달해 전분기 대비 80bp 상승했으며, 전년 동기의 88.4%보다 올랐습니다. 경영진은 2026년 전체 뉴욕 오피스 임대 규모를 약 240만 제곱피트로 전망하고 있습니다.
• 3분기 맨해튼 오피스 임대 계약은 총 48만 9,000제곱피트로, 제곱피트당 평균 시작 임대료는 $123였습니다. 임대료 조정(Mark-to-market) 인상률은 GAAP 기준 37.2%, 현금 기준 25.9%였습니다.
• GAAP 실적에 아직 반영되지 않은 체결 계약 임대 수입은 2억 4,000만 달러 규모입니다. 경영진은 이 매출이 약 5분기에 걸쳐 이익에 반영될 것으로 예상하지만, 계약 만료, 재개발 중단 기간, 이자 비용 증가로 인해 이러한 수혜가 일부 상쇄될 것입니다.
• 경영진은 2026년 3분기 비교 가능 FFO 수준이 순기준으로 2027년까지 합리적인 분기 런레이트(run rate)라고 밝혔으며, 2028년 이후 상당한 추가 성장을 예상하고 있습니다.

핵심 재무 데이터

사업 및 운영 성과

보르나도는 2026년 첫 9개월 동안 전사적으로 160만 제곱피트의 임대 계약을 체결했습니다. 맨해튼 오피스 임대는 총 115만 제곱피트로 평균 시작 임대료는 제곱피트당 $113였으며, 임대료 조정 인상률은 GAAP 기준 23.5%, 현금 기준 16.8%였습니다.

경영진은 350 파크 애비뉴의 시타델(Citadel) 105만 제곱피트 임대를 포함해 2026년 전체 맨해튼 오피스 임대 규모를 약 240만 제곱피트로 예상하고 있습니다. 남아 있는 뉴욕 오피스 임대 파이프라인은 약 110만 제곱피트였습니다.

PENN 1의 임대율은 96%였습니다. 3분기 동안 보르나도는 24만 8,000제곱피트에 대해 10건의 계약을 완료했으며, 평균 시작 임대료는 $123, 평균 임대료 조정 인상률은 40%였습니다. 현재 제곱피트당 $68를 지불하는 약 40만 제곱피트의 계약이 향후 3년에 걸쳐 만료되며, 8만 3,000제곱피트는 추가로 임대 가능 상태로 남아 있습니다.

PENN 2는 프로젝트 개시 이후 160만 제곱피트 이상의 임대가 이루어져 점유율 92%를 기록했습니다. 임대 가능 공간은 15만 제곱피트만 남아 있으며, 현재 거래 가격대는 제곱피트당 $125에서 $135 수준입니다.

623 피프스 애비뉴에서는 제곱피트당 $200에 가까운 시작 임대료로 3만 1,000제곱피트에 달하는 첫 번째 임대 계약을 체결했습니다. 임차인 인도 예정 시기는 2027년 4분기로 유지됩니다. 경영진은 사모펀드 및 헤지펀드 임차인을 포함한 금융 서비스 기업들의 임대 관심이 집중되어 있다고 밝혔습니다.

보르나도는 또한 분기 말 이후 350 파크 애비뉴 합작투자를 마무리했습니다. 시타델은 105만 제곱피트 규모의 앵커 임대 계약을 체결했으며 최대 33만 제곱피트를 추가로 임대할 수 있는 조기 옵션을 보유하고 있습니다. 경영진은 보르나도의 투자가치 대비 수익률(return on cost)을 9.2%로 전망했으며, 건설 비용의 60%가 확보되었고 추가 20%는 잠정적으로 확보되었다고 밝혔습니다.

샌프란시스코의 555 칼리포니아 스트리트에서는 역대 최고 수준인 제곱피트당 평균 시작 임대료 $163에 5만 5,000제곱피트의 임대 계약을 완료했습니다. 임대료 조정 인상률은 GAAP 기준 59%, 현금 기준 38%였습니다. 연초 대비 누적 임대 규모는 16만 6,000제곱피트였으며, 추가로 15만 5,000제곱피트의 계약이 진행 중입니다.

경영진 가이던스

경영진은 2026년 전체 비교 가능 FFO가 2025년 수준을 상회할 것으로 예상합니다. 회사는 2026년 3분기 주당 비교 가능 FFO인 $0.65에 대해 재개발 중단 기간, 예정된 계약 만료, 이자 비용 증가 등 예상되는 상쇄 요인을 차감한 순기준으로 2027년까지 합리적인 분기 런레이트라고 설명했습니다.

회사는 견조한 동일 자산 NOI 성장이 2027년까지 지속될 것으로 예상합니다. 경영진은 뉴욕 오피스 성장이 현재 수준 이상으로 유지될 수 있는 반면, 리테일 실적은 상대적으로 불균등할 수 있다고 밝혔습니다.

체결된 임대 계약이 개시되고 재개발되거나 공실이 된 공간이 임대됨에 따라 2028년 이후 상당한 추가 이익 성장이 예상됩니다. 경영진은 또한 추가 수익이 발생함에 따라 2027년 말 또는 2028년 초까지 부채비율이 7배대 초반 수준으로 감소하는 추세를 보일 것으로 예상합니다.

리스크 및 주시해야 할 사항

고금리는 여전히 역풍으로 작용하고 있습니다. 경영진은 2027년에 주당 약 $0.10의 영향이 있을 것으로 추정했으며, 미국 국채 금리 상승과 조달 비용 증가가 신규 개발 수익성과 거래 가격 결정에 영향을 미칠 수 있다고 지적했습니다.

단기 이익 상쇄 요인으로는 1290 에비뉴 오브 더 아메리카스(1290 Avenue of the Americas), 330 웨스트 34가(330 West 34th Street), 888 세븐스 에비뉴(888 Seventh Avenue)의 계약 만료가 있습니다. 또한 34가 및 세븐스 에비뉴의 리테일 및 간판 재개발 기간 동안에는 해당 수익이 일시 중단될 예정입니다.

잠재적인 자산 매각 2건이 상당 부분 진전되었으며 매각 완료 시 10억 달러 이상의 잉여 현금을 창출할 수 있지만, 경영진은 매각 완료가 확정된 것은 아니며 금리 상승으로 가격 조건이 다소 약화되었다고 강조했습니다.

350 파크 애비뉴의 경우, 시타델의 앵커 임대 계약으로 프로젝트의 불확실성이 일부 제한되었지만, 수익률은 남아 있는 미임대(speculative) 공간의 임대 결과에 여전히 일부 의존하고 있습니다. 경영진은 또한 시장 상황에 따라 예상 수익률이 상승하거나 하락할 수 있음을 인정했습니다.

임차인 개선 공사비(TI) 지출은 일반적으로 임대 계약 체결 후에 발생하므로 향후 1~2년 동안 경상 자본적 지출(Capex)은 높은 수준을 유지할 것으로 예상됩니다. 경영진은 포트폴리오의 점유율이 안정화됨에 따라 이러한 자금 수요가 감소할 것으로 전망하고 있습니다.

애널리스트 Q&A 주요 내용

경영진은 현재의 리테일 공실을 안정적인 점유율 수준까지 임대할 경우 약 5,000만 달러의 수익이 추가될 수 있다고 추정했습니다. 또한 피프스 애비뉴와 타임스퀘어 자산은 희소 자산이라고 설명하며 핵심 지역의 리테일 임대료가 이전 전성기 수준에 근접하거나 회복되었다고 밝혔습니다.

보르나도는 623 피프스 애비뉴, 350 파크 애비뉴, 34가 리테일 재개발, 34가 및 8가에 위치한 480가구 규모의 임대주택 개발을 포함한 활성화 프로젝트들의 자금 조달이 이미 완료되었다고 밝혔습니다. PENN 15의 경우 프로젝트 일정이 아직 많이 남아 있어 조달 구조가 결정되지 않았습니다.

경영진은 금융 서비스, 법률, 기술 및 AI 관련 업종 전반에서 임차 수요가 광범위하게 나타나고 있다고 밝혔습니다. 보르나도의 뉴욕 건물의 오피스 이용률은 주당 최소 4일 수준으로 파악되었으며, 고품질 공간의 공급이 부족하여 임차인들이 갱신 협상을 더 일찍 시작하고 있습니다.

일반적인 임대 계약에서 임대 기간은 길어지고 있는 반면, 임차인 개선 공사 지원금(TI allowance) 및 렌트프리(무상 임대) 기간은 줄어들고 있습니다. 경영진은 협상이 여전히 치열하고 임차인들이 임대 경제성에 지속적으로 집중하고 있지만, 임대료는 계속 상승하고 있다고 말했습니다.

2027년 만료 예정 물량과 관련해 경영진은 약 100만 제곱피트가 약간 넘는 공간이 만료 대상이 되며, 주요 만료건 전체에서 임대 활동이 활발하게 이루어지고 있다고 보고했습니다. 이미 완료된 계약 갱신은 2027년 만료 일정에서 제외되어 새로 설정된 만료 연도로 이관되었습니다.

실적 발표 전화회의 전문

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전체 실적 발표 컨퍼런스 콜 녹취록

경영진 발표

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. This call is being recorded for replay purposes. [Operator Instructions]

I will now turn the call over to Mr. Steven 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 and voting and in-person voting. Please make sure that you vote. If you work at Vornado, you are 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, Darryl and I attended the inaugural Blue Square Alliance against Hate Benefit Gayla. Blue Square is an organization created by Robert Craft in 2019 in reaction to the very disturbing increase in antisemitism across America and that now combat hate of all kinds. Robert Craft is a 5-foot 7-inch giant. He is self-funding this organization, and Darryl 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 landlords 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. $2.000 -- $200 and $300 rents are now common in the conversation. Overall, Manhattan office leasing volume is 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 digit. There is a serious shortage of large box 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 achieve -- to achieve market-leading rents and 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 conquers, everyone has conquers 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 retenanted Long Island Railroad 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 spend 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 pressured. 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 and an average mark-to-market of 40%. The office space here is now 96% leased.

Note that roughly 10% of PENN1 rolls each year, so we will keep marching old rents up to market. This includes 400,000 square feet of currently paying only 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 a 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. All 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 Seventh 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, kitty-corner to Moynihan Train Hall. Both of these projects will begin physical construction early next year. Phase 2 at PENN District will be every bidders 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 signed business in Manhattan, which has grown at a 5% CAGR over the last 10 years and 16% CAGR for the last 5 years. Our signed 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 signed 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 in 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 Forrester and 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 construction loan which is a record for an office deal and a 1.05 million square foot lease with Ken Griffin 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 and 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 window space at the very top of the building, actually beginning 850 feet in the air, all with majestic 360-degree planographic views up to the park and down to the harbor. Glen and his team will be leasing the 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 recognize 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 introductions 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 tricker 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's 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 every good commutes to work using mass transit. So we now give out a money voucher sufficient to buy a turkey and all the fixes. 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 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 Seventh Retail 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 the 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. Mark Dollamus 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 the scarcity of trophy office space available, the new 350 Park will serve a growing need by the world's leading companies, who need 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 we 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 and 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 are 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. The 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 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.

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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, so Tom and 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 think approximately $50 million.

Michael Franco

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

Steven Roth

About $50 million. I think it's more than that, but my financial dean is to 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

Eighth 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, but because it's really not -- it's not proven 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's 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 space kind of provides more upside into '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 the normal leasing business. There's going to be expiries and move-outs -- in particular, we got 1290, as you said, 330 West 34th few at 888 Seventh. We're taking the retail offline at 34th and 7th and also taking the sign off line, 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 the -- that we will have by far the highest growth in our segment 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. 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? Like 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 rapid 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 have 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, the 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 focus 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

I would say, John, a couple of things to tack on. I think Steve in his remarks referenced the mark-to-markets at 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 price, 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 recovery development of 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 if what's happened besides interest rates that caused that perceived shortfall.

Michael Franco

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 '26 to '27 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 from last year to '27, I think it's still sort of similar order of magnitude. There's been some positives, some negatives, right? I mentioned taking a little bit more offline on 34th and 7 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 costs 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

And then second question is maybe you can 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, same family shops, et cetera. So we signed our first lease. We have another one coming very soon and others behind that.

So with the pause to be of good supply in the positive district, it's a perfect time for 623. Construction is underway. Our time is really good there. So we're feeling better and better as we go.

Operator

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

Jana Galen

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 signed business has the better part 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 Galen

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 could -- that could start delivering units?

Steven Roth

Have we published the.

Michael Franco

We're going to publish a year-end, Jana. So wait a little bit longer.

Steven Roth

We don't want to give the lady a break and channel 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 it.

Michael Franco

We're going to probably deliver units late '28, early '29 -- '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 pricing throughout those discussions changed at all now that rates are higher? Can you talk about the bidding tension, if 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 guys 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? And 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 a 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, but 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 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 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 bowtie 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 finish PENN Station in terms of, I think, the retail opportunity, redeveloping the 34th and 7th 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. 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 it 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

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 cost or whatever the case may be?

Michael Franco

Yes. 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 the 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. I'm not backing out '27, no.

Anthony Paolone

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 our 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 we're 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, is 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?

Steven Roth

Yes. 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-market, 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?

Steven Roth

We're seeing a bunch of things. Number one, rents are going up a lot. The tenants are rent sensitive. 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, 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 little 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?

Steven Roth

So look, I think the most important point is we have an anchor tenant lease for a little over 1 million square feet, which ensures a pretty attractive outcome. So the question is what 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 is 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 anchor tenant lease, the variability on what the ultimate yield 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, 60% bought with another 20% soft circle. 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

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. In the latter question, no.

Operator

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

Alexander Goldfarb

And Steve, I like the turkey tradition. That's pretty cool. So I have 2 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 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. 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 term in a 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 right now that tenants are accepting significantly higher rents than historically. I didn't mean to be disparaging or dismissing.

Steven Roth

Of course, the marketplace is demanding that rents go up aggressively. construction cost scarcity and interest rates all are factored into that. Tenants are realistic. They're very well advised. They know 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 we've got 3 -- it's actually 3 or 4 days -- 3 or 4 years away.

Michael Franco

It is 2 years away.

Steven Roth

2 years away. So it will start pretty soon.

Operator

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

Ronald Kamdem

Great. Just 2 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 onetimers that you mentioned was 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 certainly through that period, maybe a little higher, a little lower. but it's going to be quite strong.

And I think certainly with respect to New York office, it's going to be at or above those numbers as I look through 2027. So retail is a little bit lumpy. 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

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?

Steven Roth

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 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's leases in the following year. But I think a couple of years out, that start to come down as the portfolio reaches the kind of stabilized numbers we've talked about.

Operator

There is time for one additional question. Caitlin Burrows from Goldman Sachs is on the line with a 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 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 lease expiration table as '27 expirations 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.

Michael Franco

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.

Operator

There are no further questions at this time, sir.

Steven Roth

So 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 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.