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SL Green Realty Corporation (NYSE:SLG)
Q4 2020 Earnings Call
Jan 28, 2021, 2:00 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Thank you everybody for joining us and welcome to SL Green Realty Corp's Fourth Quarter 2020 Earnings Results Conference Call. This conference call is being recorded.

At this time, the company would like to remind listeners that during the call, management may make forward-looking statements. Actual results may differ from any forward-looking statements that management may make today. Additional information regarding the risks, uncertainties and other factors that could cause such differences appear in Risk Factors and M&A [phonetic] section of the company's latest Form 10-K and other subsequent reports filed by the company with the Securities and Exchange Commission.

Also, during today's conference call, the company may discuss non-GAAP financial measures as defined by the Regulation G under the Securities Act. The GAAP financial measure most directly comparable to each non-GAAP financial measure discussed and the reconciliation of the differences between each non-GAAP financial measure and the comparable GAAP financial measure can be found on the company's website at www.slgreen.com by selecting the press release regarding the company's fourth quarter 2020 earnings and in our supplemental information filed with our current report on Form 8-K relating to our fourth quarter 2020 earnings.

Before turning the call over to Marc Holliday, Chairman and Chief Executive Officer of SL Green Realty Corp., I ask that those of you participating in the Q&A portion of the call, please limit your questions to two per person. Thank you.

I will now turn the call over to Marc Holliday. Please go ahead, Marc.

Marc Holliday -- Chairman & Chief Executive Officer

Appreciate you calling in today. The entire SLG team is here at 420 Lexington Avenue, where we are doing our final earnings call from our Board room in the landmark Graybar building as our next call will be done from our new offices at One Vanderbilt Avenue.

For almost 22 years, Graybar has been our headquarters and base of operation for all that we've accomplished. But now, 2021 heralds a change for SL Green as we move across the street into our extraordinary, newly completed building that we will soon call home and we could not be more excited about it.

For us, the move begins a new chapter for the company that coincides with a period of reconstruction in New York City, marked by the rollout of the COVID vaccine, the easing of COVID-related restrictions, the promise of federal stimulus for cities and states, and a gradual return of the workforce to offices and other places of business. And there are many more reasons for optimism as we begin the return to normalcy this year.

The financial and tech sectors in New York City, which account for over half of the office space demand, are doing extremely well and they added 5,000 office using jobs in December alone. The city is forecasting a significant amount of new office jobs in 2021, such that we would return to pre-pandemic office employment levels by the fourth quarter of this year, recouping all of the 165,000 office jobs lost at the outset of the pandemic.

The credit markets remain quite strong with commercial mortgage interest rate levels in and around the 2.5% level and new construction activity has substantially declined, which combined with job growth will enable supply to come back into balance with tenant demand.

And on the topic of demand, SL Green had a very productive seven weeks since our Investor Conference on December 7, where we held a live in-person event at One Vanderbilt. During that seven-week period, we signed 200,000 square feet of Manhattan office leases while adding 240,000 square feet of new pipeline, thus increasing our current pipeline as we sit here today to 700,000 square feet, higher than on December 7.

With the leases we expect to sign over the next 60 days, we anticipate being on schedule for our total projected volume for the year of 1.3 million square feet; one of the 18 or so goals and objectives we laid out for everybody in the investor conference.

Of particular note are the lease transactions we announced yesterday, starting with the Beam Suntory deal for 100,000 square feet at 11 Madison Avenue, filling the space which had been vacant since April of 2019. Suntory is relocating its headquarters from Chicago to New York City to better align its global brand building efforts with all that New York offers. The Suntory deal and the 92,000 square foot Freshly deal at 63 Madison Avenue, also recently announced, affirms the development strategy that is the underpinning of our One Madison Avenue development project, which is now fully financed and bound with the GMP construction contract from Tishman Construction.

With building permit now in hand, structural demolition has commenced, and we will be delivering the finished project in 2023. Leasing velocity at One Vanderbilt has been strong since the third quarter and that velocity is carried into 2021 with the signing of two notable leases.

Our pipeline at One Vanderbilt includes three more leases in negotiation and four term sheets that are in advanced stages of discussion. So, we are currently 73% leases as we sit now. And at this pace, we are on a trajectory to meet or exceed our year-end estimate of 85%.

Furthermore, our net effective rents that we're achieving on these deals during the pandemic for all signed and pending leases remain within our underwriting assumptions. There is no other building in Manhattan enjoying this kind of success and it's very, very gratifying to see businesses respond in such a positive way to what we've constructed.

In keeping with our custom for abbreviated opening remarks on the January earnings call that follows the deep dive we take in our December investor meetings, we will open up the line now for questions. Thanks.

Questions and Answers:

Operator

[Operator Instructions] Our first question comes from the line of Michael Lewis with Truist Securities.

Michael Lewis -- Truist Securities -- Analyst

Great. Thank you. Marc, hearing you talk about the leasing activity, the pipeline, even the net effective rents at One Vanderbilt, it feels different than a few months ago, right? So, you have this good leasing activity for the quarter, you had two or three press releases out separately about leasing. Is there a change in psychology, you think, maybe as we get closer to bringing people back to the city? I guess in other words, this call feels different to me just in your brief remarks. Does it feel lot different than a few months ago? Are things really changing quickly on the ground or am I reading too much into this?

Marc Holliday -- Chairman & Chief Executive Officer

I think it's yes and no. As it relates to the leases, what we're closing out now are leases that we've been working on, I'd say, Steve, maybe for three to six months.

Steven M. Durels -- Executive Vice President, Director of Leasing and Real Property

Yes.

Marc Holliday -- Chairman & Chief Executive Officer

So, while we are announcing them now and reviewing them now, this is, I would say, really since mid-summer. When the pandemic hit -- March, April, May -- everything just stopped. I think that's across everything. And then when we got to June, July, August, at least within our portfolio, we felt things start to pick up. And I think if you go back to maybe the October call, I think you would hear some of that occur in our call as it relates to the reemergence of people who had hit the pause button coming back because people are planning for 10-15 years out, not to next six to 12 months. And the initial activity was a lot of shorter dated renewal activity, that changed to longer-dated renewal activity. Something I didn't mentioned in my remarks that is just occurring to me now is we also signed three significant deals over at 245 Park as agent for HNA owner. And the total of that square foot is probably also over 200,000 feet.

Steven M. Durels -- Executive Vice President, Director of Leasing and Real Property

220,000.

Marc Holliday -- Chairman & Chief Executive Officer

220,000 feet. So, we did that as well. For us, it's like any other deal. We had to negotiate and get those across the finish line, which, well, we just did.

So, it's -- so in one sense, that leasing production you see has been developed and pent-up, I'd say, for the last six months. But in terms of psychology, you mentioned psychology and the feel of the market. Yes, things -- I don't want to say feel better, but it feels like more than ever there is an exit strategy and a path to what the governor calls reconstruction; having -- in his words -- been through a war, which I guess it sort of feels like.

So, the psychology and I think the market vibe is much better. It's no longer talking to people who say, I'll be -- we'll be back next year. Now, we're hearing and seeing schedules of move in dates that have already begun and will gradually ramp up through the summer to the point where there is an expectation that everybody will be fully vaccinated, restrictions will have been largely lifted and then there is some people who feel like there'll be a gradual rise from there, and there's others who feel like there'll be an explosive come back due to the lock-up of what was going on almost one year that when the all-clear signal is sounded that the resurgent won't be gradual, it'll be quite immediate.

So, yes, I'd say you probably hear a little hitch in our step. And also, as I said, we're really excited to be moving into One Vanderbilt. So, that's sort of plays into everything, not just for what it signifies, but it really, I think, is at this stage in our cycle where everything we're focused on, on the investment side, pretty much revolves around new development.

It's very energizing and we want to be in the right space in order to kind of enhance that creativity even further than Graybar and certainly anything more than you get sitting at home.

Michael Lewis -- Truist Securities -- Analyst

Great. Thanks. You answered a couple of my questions there. I'm going to ask one that's maybe more of a housekeeping question then for Matt. Maybe I was hoping you could just break down that other income line item for me. What's in that $26 million that you recorded in 4Q? How much was lease termination income and anything else material? I know in 3Q, there was a legal settlement gain in there. But that number still was a little bit higher than maybe I was expecting.

Matthew J. DiLiberto -- Chief Financial Officer

Yes, no problem. Happy to do housekeeping. The balance at the end of the year, the $26 million recorded consistent with what we expected only over by about a $1 million. So, half of that number are the fees we alluded to, and then we're able to recognize in the fourth quarter related to the sale of the JV interest in One Madison and the outright sale of 410 Tenth.

So, we had fees that we had to wait till those deals closed to recognize. That was about half. We had no lease termination income in the quarter. And the bulk of the remainder of that balance was the somewhere between $6 million and $8 million a quarter that we recognize of third-party management fees, leasing fees, management fees, construction management fees, those types of things.

Michael Lewis -- Truist Securities -- Analyst

Okay, got it. Thanks a lot.

Matthew J. DiLiberto -- Chief Financial Officer

Yes.

Operator

Our next question comes from Rick Skidmore with Goldman Sachs.

Rick Skidmore -- Goldman Sachs -- Analyst

Hey, Marc. Good afternoon. Just following up on the return to office comments that you just made. What are the tenants that you have saying about their timing of the return to office? And then just a follow-up on the new leases that you've signed; how are the space configurations changing or not with those tenants regarding densification and desk hoteling, number of employees per square foot, etc.? Thanks.

Marc Holliday -- Chairman & Chief Executive Officer

Well, as it relates to schedule, it's sort of all over the place. I'd say, consistently, the refrain is by middle to late summer back and back. Unclear if that needs a 100% or certainly greater than 50%, but it's -- in their eyes it's end of work-from-home or the beginning of end of work-from-home at that point. And there are firms already moved into One Vanderbilt and we have several hundred people a day that are occupying that building.

We see some occupancy increases after the New Year in other parts of our buildings that got quite low in December. And it's -- I think it's hard to pinpoint anything more than to say, between now and mid-summer or late summer. I know that sounds like, well that's a long way away, but it's a blink of an eye, right? Before you know, it will be in summer. And therefore, there will be a vibe. I'm confident that there will be a significant return by mid end of summer; and hopefully by end of summer, we are completely back, completely vaccinated and everybody will be celebrating the opening of our great new observation deck at the Summit at One Vanderbilt on October 21.

As it relates to configuration, Steve, you want address that?

Steven M. Durels -- Executive Vice President, Director of Leasing and Real Property

Well, I think you're hard pressed to really get good examples of people that have changed the design of their space for the long term. Most of the people you talk to, the answer to the question is -- well, we're changing our furniture configuration for the next, for immediate reentry. What that generally means is taking the workspaces, spreading it more apart but ultimately planning to return to a densified environment, but not as dense as we were pre-COVID. And you've heard us say that before that the trend of densification had already started to shift back to dedensification pre-COVID. COVID accelerated that trend. And the tenants who speak to architects, it's clear to me at least that long term we're still going to be in a densified world. It's just going to be not as much as it was before.

The other trend I will say is, there is a growing belief that tenants will want a greater amount of landlord-provided amenities. And we've certainly experienced that firsthand with the lease-up at One Vanderbilt, because we have probably the single best amenity floor in the city right now, and that has been a huge bonus to our leasing effort in the building.

And I think you -- we've started to develop some of those concepts through our portfolio. I think you'll see us continue to do so in the years going forward, particularly as we rollout the development plan for One Madison.

Rick Skidmore -- Goldman Sachs -- Analyst

Thank you.

Operator

Our next question comes from Manny Korchman with Citi.

Manny Korchman -- Citi -- Analyst

Hey. Good afternoon, everyone. Marc, when you talk to the New York City retail environment, how long do you think we have to wait to see some green shoots there? Is it a matter of getting everyone in and then those tenants that can reopen and make some money and also new tenants looking to expand start coming in? Or do you think we might be able to see a little bit of that during sort of the early phases of reopening, as you laid out?

Marc Holliday -- Chairman & Chief Executive Officer

Well, I mean, retail is a much tougher topic than I guess what we were just discussing to-date. It's going to, I think, lag substantially because a lot of the retail green shoots as you put it are going to be dependent on a return of leisure, hospitality and tourism; not all, but certainly a big part of it.

And right now, that is completely shut down. In fact, while there were 5,000 jobs added, office jobs added in December, there were 19,000 private sector jobs eliminated. And almost all of those jobs came out of the leisure and hospitality and restaurant industries, unfortunately, sort of, tragically.

So, that's going to take longer to come back. While the city is forecasting a return to pre-pandemic levels for office jobs, end of '21; they're not projecting a return of total private sector jobs until sometime in '23. So, you can see that's a pretty significant left, not insubstantial. So, I think that restaurants and retail will just lag. And I would say that while we've had some good success, so I wouldn't sort of buck the trend a little bit, but we did sign a good lease at One Vanderbilt with One Medical in the fourth quarter, I guess that was previously announced. And we have another deal pending, which hopefully will be a first quarter event.

The demand is still tepid and the environment isn't really quite right yet with all the restrictions, where I would say we're seeing any kind of forward momentum there.

Manny Korchman -- Citi -- Analyst

Great, thanks. And I think in your opening remarks, you talked about stimulus for cities as sort of an important factor you're thinking about. If that stimulus doesn't come through, if there are delays in the stimulus or just it doesn't shape out, are you worried about sort of the longer-term health of cities like New York?

Marc Holliday -- Chairman & Chief Executive Officer

No, I mean, am I worried? It's something we focus on, so we're vigilant about it. But the city has balanced its budget for 2021 and 2022 fiscal year with the assumption of zero stimulus. So, the stimulus comes on top of what's already a balanced budget. The budget was balanced for 2021. Obviously, in June of this year, you go to the new budget, '21 and '22. And through various means the city has managed to budget in a tough operating environment. I can't imagine that next years operating by will be as tough as the one we just went through.

They have attrition rules now. I think three attrition for every one new hire. They've made other cuts. Fortunately, the personal income tax side of the equation is reportedly better than projected, so that is offsetting some of the property tax collection losses or reductions that the city is experiencing. And net-net, they have a plan to get it done at least through the middle of '22. That doesn't rely on any stimulus. So, you want to add to that?

Matthew J. DiLiberto -- Chief Financial Officer

I would all say there's a lot of different forms of stimulus and infrastructure in New York City has more shovel-ready projects than anywhere else in the United States, and they're lobbying hard for the gateway tunnel and expansion of transportation and a bunch of other projects. So, that's another way stimulus could make its way to New York, not just through direct bailout funds if you will and changes in the tax code where there is a potential rework of the SALT credit, state and local tax credit, which could also benefit residents of New York.

So, there are other ways you can see stimulus coming to the area and not just through the direct federal subsidies.

Manny Korchman -- Citi -- Analyst

Thank you, both.

Operator

Our next question comes from Alexander Goldfarb with Piper Sandler.

Alexander Goldfarb -- Piper Sandler -- Analyst

Hey, good afternoon. So, Marc, just along those lines on the office restoration, I mean there are a bunch of things in there, right? It's not just getting the offices to reopening and employers telling the people to come back. There is what you guys have highlighted, which are the incentives. So, I don't know how many of your tenants are offering incentives to help their tenants or help the workers, ask them to come back. But there's also the city life, I mean you go into Midtown and like half the restaurants, bars, everything that supports the office workers are scarce, are closed or heavily shut down. So, it's sort of a twofold -- plus you the mayor role. Basically, the November mayor election is in June, because whoever wins that decides to follow-up the mayor. So, there is a lot of sort of unknowns and a lot of hindrances to getting the city fully back. So, beyond just the office, what's your view on the city doing its part to -- because Midtown is empty from all the city life amenities that are on the street and beyond the landlord's control. So, how do you view that as opposed to optimistic comments that everyone is fully back in sort of Q4?

Marc Holliday -- Chairman & Chief Executive Officer

Well, again back in Q3, Q4, but it's still going to be low occupancy levels in Q1 and probably even Q2. Some of the things, one program that the state has initiated -- it was part of the state of the State address if you heard. It's something called the Safe Offices pledge, where we and a number of other large owners took a -- made a commitment to set aside space within our buildings and in our portfolio to fully identify a range for a testing provider to operate out of that space and the tenants make arrangements in that space with that testing provider to have all their employees tested on as much as a weekly basis, if that's what they choose. And with the concept being that that's a first step to building the confidence level to get people back ahead of the time when everyone is fully vaccinated.

So, we support that. We endorse it. We've done something similar with our own employee base for months now. And we think that's the kind of thing that will help.

Now, we've contacted every tenant -- at least every major tenant in the portfolio and mid-sized tenant portfolio -- and gave them the suite of incentives that we provide to our employees and tried to demonstrate to them how easy it is to implement these incentives and how well received they are, etc. And we're hopeful that companies will enact those incentives as a means of bringing people back.

But I will say, obviously, as we sit here between 10% and 15% total building occupancy, that has not yet taken hold and it may not until the third quarter. That just -- it just may be the case and we're hopeful that's not the case. And every time another firm comes back, it puts competitive pressure on the ones that haven't to get back also. And I do see more of that. But it's gradual, it's only January.

So, we think this is a trend that will take some time, but there are efforts -- and the reopening of restaurants, right? So, as of last night with heavy and vocal pressure being applied by the restaurant industry, and more importantly numbers that have improved in New York State since that spike as a result of the holidays, it looks like 25% into a dining either is or may be coming back or highly likely coming back next week, or at least that's what we're hearing yesterday and this morning, and hopefully that is the case.

And again, that's the start hopefully toward 50%. And I think all restaurant toward agree at 50% with outdoor, they can make a go of it. So, they're one step closer and everything will just have to build off itself.

I look at the reconstruction process as a nine to 12-month process, not something that's going to be the next month or two.

Alexander Goldfarb -- Piper Sandler -- Analyst

Okay. And then Steve, at the Investor Day you made the comment in the Q&A portion that, sort of, the easy part of your leasing job is done because the tenants who want to renew have renewed; the tough part is coming, which is backfilling the tenants who are leaving. And your comments were definitely striking.

So, just sort of curious, now that you're a few months further in, the vaccines are rolling out, do you still see the replacement of tenants who are vacating as sort of as challenging as you characterized at the Investor Day? Is it the same, is it getting better, hopefully it's not getting worse?

Steven M. Durels -- Executive Vice President, Director of Leasing and Real Property

Well, I think it's getting better, and maybe the statistics I'm going to give you proves that. Of the 260,000 square feet of leases that we have, are either out for signature or in document negotiation. A 120,000 square feet of that are new tenants.

So, new tenants migrating into the portfolio, so almost 50-50 split between renewal and new tenants. Which as we've -- as I also said or Marc said at the Investor Conference, all we need is velocity in the marketplace, and we have a good enough portfolio and we have a good enough leasing team, and we are here every day working very hard. We're going to get more than our fair share of the deals that are in the market. So, as soon as tenants are out there, we'll feel the portfolio. We'll keep it full the way we have every year in the past.

Alexander Goldfarb -- Piper Sandler -- Analyst

Okay, thanks.

Operator

Our next question comes from Jamie Feldman with Bank of America.

Jamie Feldman -- Bank of America -- Analyst

Thank you. With your view of things getting better, I'm curious what your thoughts are on the value-add acquisition market? Where you think pricing is and will we start to see more capital step in? It seems like so many of the transactions have been high quality credit tenant, long-term leases. Just curious where you think that market is right now?

Marc Holliday -- Chairman & Chief Executive Officer

Well, I think the financing market is generally tightening up. CMBS spreads are in and there's more banks looking to lend. And I think that will drive that value-add market. The issue has been assets like for 410 Tenth, which is fully leased, are getting the best bids because of in place income. But as lenders are willing to underwrite lease up again, I think you'll start to see that market get more liquid and start to have some pickup in activity.

Jamie Feldman -- Bank of America -- Analyst

I mean, would you -- did you pay cap rates at this point or what IRRs are, or what people are looking for and how much capital is out there? Is there a meaningful change in appetite people circling?

Matthew J. DiLiberto -- Chief Financial Officer

I mean, cap rates on value add, you're saying as leased, so stabilized cap rate or --. Going in cap rates are not a meaningful metric because there's large vacancy. I think people are underwriting to 10% to 12% IRRs on value-add type opportunities, and I think that means they're probably leasing the assets to, my guess, is far between 5% and 5.5% cash on cost if they are taking lease-up risk going in; where, if they're buying in place income, it's more in that 4.5% to 5% range on average.

Jamie Feldman -- Bank of America -- Analyst

Okay. And then for Steve -- thank you, by the way. And then for Steve, you had mentioned financial and tech are about half of office demand in the city right now. How much of that would you say is expansion space? And I mean, are there large tech leases in the pipeline?

Steven M. Durels -- Executive Vice President, Director of Leasing and Real Property

Well, our pipeline are you asking, or are you talking about just generally in the marketplace?

Jamie Feldman -- Bank of America -- Analyst

Generally.

Steven M. Durels -- Executive Vice President, Director of Leasing and Real Property

Well, I couldn't tell you how much in the overall market pipeline, how much of it is expansion or we're just replacing con. Within our pipeline, I would say we're very heavily weighted toward financial services right now, and maybe a new growing trend that I'm starting to hear from sort of the early parts of searches is you're starting to see some of the law firms come back in the market as well, where they were very quiet last year.

What's -- the only market that's very slow right now is the advertising media portion of the market, but that's made up obviously by the tech side. So, this gives me the opportunity to sort of stress the point that I think is worth noting for everybody, which is, New York City's rebound will be driven by the fact that we have a very diversified tenant base as opposed to the West Coast, which is sort of a one-trick pony. New York City has got because of what we've seen over the past couple of decades, technology, education, healthcare finance, media, and that diversification is going to be the strength of our rebound.

Jamie Feldman -- Bank of America -- Analyst

Okay. Thanks for your thoughts.

Operator

Our next question comes from John Kim with BMO Capital Markets.

John Kim -- BMO Capital Markets -- Analyst

Thank you. Marc, question on co-working. One of your peers took a stance yesterday with the writedown. Today, the Journal is reporting that WeWork is looking to go public, potentially get back. Can you just remind us what your views of WeWork and co-working tenants are as a going concerned tenant?

Marc Holliday -- Chairman & Chief Executive Officer

I think we have -- what is it Matt, less than 2% remaining?

Matthew J. DiLiberto -- Chief Financial Officer

Yes.

Marc Holliday -- Chairman & Chief Executive Officer

Less than 2% co-working, that was a strategic decision by us. I think the asset class is here to stay and there'll always be demand in the market for co-working type opportunities. We certainly love to see WeWork go public and is back or otherwise. I think it's a force that will always be around. We have our own fractional office space division, which has been around for 20 years or so. So, we're in the business ourselves. We just don't see it as a very large part of our portfolio.

John Kim -- BMO Capital Markets -- Analyst

As a follow-up, are they -- is WeWork current on rents? And how did rent deferrals and abatement trend this quarter versus last quarter and is that number excluded from your rent collection number?

Marc Holliday -- Chairman & Chief Executive Officer

Well, as it tracks to gross rent collections, we're about between 95%, 96%?

Matthew J. DiLiberto -- Chief Financial Officer

Yes, on office we're actually at 97% and we calculated on gross contractual rents. So, we don't net out any deferral or abatement from that number. If they owed us $100 and we agreed that they only have to pay us $50 and they paid us $50, that's not 100%, that's 50%, that's how we calculate it. That's how we think everybody should calculate it.

Marc Holliday -- Chairman & Chief Executive Officer

If we -- I think there's a lot of different ways that people seem to be doing this. If we express collections based on current contractual obligations, we'd probably be at like 98% to 99%.

Matthew J. DiLiberto -- Chief Financial Officer

That's correct.

Marc Holliday -- Chairman & Chief Executive Officer

But we're not. We're -- to try and give people a look into collections today versus what the rent schedule was back in, let's call, Jan, Feb of last year, which I think is really the only meaningful metric; that's where that 97% office and overall 95%, 96% when you factor in retail, which is probably down around 80%

Matthew J. DiLiberto -- Chief Financial Officer

Yes, correct.

Marc Holliday -- Chairman & Chief Executive Officer

Or thereabout?

Matthew J. DiLiberto -- Chief Financial Officer

Yes.

Marc Holliday -- Chairman & Chief Executive Officer

That's the way we look at it. So, for somebody like WeWork, they are 100% current as far as I know on their current contractual. But that represents a modification that was done last year where we lowered the rent, gave a little bit of abatement in return for an enhanced security package to what was already a pretty robust security package.

Now, it's in our eyes very well secured. We thought that was a good trade. We don't even look at that and there's always a concession. We think we upped the credit, which offset whatever those economic concessions were in their current -- all the economic concessions. So, that's one tenant in particular, but we've managed almost 900 tenants, many of them one by one if there are small business or retailers predominantly, but the vast majority of the portfolio are good credit rent paying tenants.

John Kim -- BMO Capital Markets -- Analyst

And as mentioned that the deferrals and abatements would trend down this year, is that still correct?

Marc Holliday -- Chairman & Chief Executive Officer

Yes, they did. The bulk of the deals that were cut were done in second and third quarter. They've -- just a handful done since that time in the fourth quarter, and I'm not even aware of into '21.

Steven M. Durels -- Executive Vice President, Director of Leasing and Real Property

We've got some very small ones that were providing some additional deferral too, but nothing that really moves the needle. And we haven't done any abatement deals, certainly in the past six months, where we didn't get something on the trade, whether it was a part of a restructured lease, where we got a longer-term or enhanced security deposits or the tenants surrendered some capital contributions that we were required to make. So, even though the vast majority of any of the deals that we did were deferral deals, not abatement deals. On the few abatement deals that we did do, we got something for it.

John Kim -- BMO Capital Markets -- Analyst

Great. Thank you.

Operator

Our next question comes from Steve Sakwa with Evercore ISI.

Steve Sakwa -- Evercore ISI -- Analyst

Thanks. I guess going back to the comment, Marc, I think you talked about the pipeline being 700,000, which was up a little bit from December. I was just curious if you could give us kind of a broad break down of what was new in that? And what are renewals in -- are those renewals mostly 2021, or is any of that pulling forward in terms of '22 activity?

Steven M. Durels -- Executive Vice President, Director of Leasing and Real Property

Well, boy, it's hard to really give you a specific answer to that, Steve, only because the pipeline is very fluid from the week-to-week or month-to-month, so some of them as a result of deals that were signed, so it came out of the pipeline. Others, deals just didn't make, but it was backfilled with nude shows that are in there.

I think the easiest way for me to answer is the way I answered it before. If you zero in just on the portion of the pipeline that is the leases that are out, which is 260,000 square feet of the 700,000 foot pipeline, half of that or almost half of that are new transactions and the other half are renewal deals. There are no significant deal -- there is one significant deal that's roughly 90,000 square feet in the deals pending portion of the pipeline. That is a new deal and that's a renewal deal. And that's a -- it would be an early renewal. Other than that, it's kind of business as usual, attending to the '21 and the '22 expirations as we do every year at the beginning of the year.

Steve Sakwa -- Evercore ISI -- Analyst

Okay. And just as a quick follow-up, are you seeing any maybe non-economic lease terms changing, maybe tenants looking for maybe early exit right or termination rights? Is there anything changing kind of maybe below the economics of the deal that we should be aware of?

Steven M. Durels -- Executive Vice President, Director of Leasing and Real Property

Well, I mean, yes, it's no surprise as we've seen every time there is a major disruption in the marketplace when tenants go on the defensive, they value flexibility. So, whether that's shorter-term deals or an ability to expand in the near-term or expand mid-term or shed space mid-term or right of cancellation at some point, that becomes part of the conversation. And I'd say on the deals that are large enough to warrant that kind of flexibility, then we're meeting the market to do it. It's certainly not the vast majority of our deals.

So, if you're a tenant that's 5,000 or 10,000 square feet, you don't get that kind of flexibility. If you're a big tenant, you're taking multiple floors and you want to write to -- if I'm doing a 15-year deal with you, you want a write to shed some of the space 10 years out, we have that conversation with the tenant base for that rights. But -- by the way, as soon as the economy tightens up, those concessions will get running out of those discussions very quickly.

Steve Sakwa -- Evercore ISI -- Analyst

Right. That makes sense. Okay, and maybe just second question on sublease space kind of in the more --

Marc Holliday -- Chairman & Chief Executive Officer

I don't know, we may call fallow on that one, Steve. Go ahead.

Matthew J. DiLiberto -- Chief Financial Officer

What do you got?

Marc Holliday -- Chairman & Chief Executive Officer

2.5.

Matthew J. DiLiberto -- Chief Financial Officer

4

Steve Sakwa -- Evercore ISI -- Analyst

While, just sublease space in general, just kind of in the New York City market and then maybe sublease within your portfolio, anything that's kind of come up lately that concern you in the market or things within your own portfolio?

Steven M. Durels -- Executive Vice President, Director of Leasing and Real Property

Well, as you've read in the papers, there is a lot of space has been added to the availability in the sublease from subleases. But what is most interesting in that statistic is the amount of sublease available today is still below the amount of sublease space that was as part of the availability after 9/11, and as part of the availability during the financial crisis.

So today, 27% of the overall availability is sublease space, compared to that is 47% of the availability with sublease space during the dot com bust and 31% during the financial crisis. And what we see a lot of times is that tenants come, they double lot of space on the market, but then they rapidly pull it off the market as well when things start to improve.

So, you see a lot of tenants that will test the waters, and maybe they've got a big portfolio, and we are seeing this right now with a tenant in Grand Central that's putting 500,000 square feet on the market, but they've said also publicly they only intend to lease 200,000 to 250,000 square feet of it. So, it skews the statistics and creates the perception that may not be I think as bad as what you otherwise may think.

Another point to make on that is that of the sublease spaces on the market, 40% of it has a term of four years or less, which does not make it competitive to direct space. So, I think it's important for people to understand that just because there's sublease space in the market that doesn't necessarily have the corresponding impact to the where rents are headed or where lease up velocity will trade on a direct basis.

Steve Sakwa -- Evercore ISI -- Analyst

Got it, thanks.

Operator

[Operator Instructions] our next question comes from Blaine Heck with Wells Fargo.

Blaine Heck -- Wells Fargo -- Analyst

Great. Thanks, good afternoon. Steve, can you talk a little bit about TIs and free rent trends out there, especially since you guys were able to get some large long-term leases signed during the quarter, which it seems to be a rarity these days. So, any commentary on the concessions associated with those leases would definitely be helpful?

Steven M. Durels -- Executive Vice President, Director of Leasing and Real Property

I think it's sort of leveled off from -- in line with where we spoke about it during Investor Conference. I think free rent is up kind of 12 months pre-COVID, now it's somewhere in the 14 to 15. And there are examples of extreme amounts of free rent beyond that. But by and large, it's up three or four months more than where it was pre-COVID. And I think TIs, if they were at 100 to 110 pre-COVID, they're kind of in that 130 to 135. And if you're are very high price point building, then they are above that as well, above that number only because it's sort of proportionate to the rent you're paying. But I haven't sense that they've been increasing over the past month or two. They've sort of -- they spiked up in the fourth quarter. I think they've sort of held and I see no reason why they won't continue to sort of stay this way at least for the next quarter or two.

When you talk about net effective rents, which is interesting. We've said this on the last earnings call, we said at Investor Conference was face rents are not down that much. They're kind of down 5% to 7%, where the real trade has been on the concession side. And as you'd expect, during a time of disruption tenants play defense and they'll pay rent over the next 10 years, but they want their concessions upfront. They want to have their capital, and they want the landlord to pay the concession, so they don't have to come out of pocket.

Blaine Heck -- Wells Fargo -- Analyst

Okay, great. That's helpful. And then Marc or maybe even Steve can chime in on this one too. But Marc, you talked a little bit about the timing on the reopening. But can you give us some commentary around how you expect the leasing decision process and timetable to play out for large tenants? I guess I'm wondering once tenants are physically back into the office, to whatever extent they will be, how long do you think it will take the business leaders to determine how work-from-home and hoteling or dedensification, all of those trends, how they're going to impact what their ultimate space requirements are going to be? And obviously, they typically can act on that until their expiration. But I'm more interested in that first assessments and planning and decision process and how long that could take?

Marc Holliday -- Chairman & Chief Executive Officer

Yes, it's a hard question to answer, because there are some tenants and particularly the ones we're in dialog with now about opportunities in the next 12 to 18 months, we seem to have a pretty definite view on what they want to do. And most of those that have that point of view are the ones who are probably going to be completely or mostly work from office. So, there'll be issues around physical layouts and whether they want to increase workstations by foot or two, and whether they want to put up some kind of glass partitioning at workstations and other choices they will get in order to enhance air filtration and things of that sort. But by and large, I'd say there is a school of tenants that feel like they're going to be most are all back to work.

I don't labor under the illusion that work-from-home is a good thing. So, it's hard for me to answer this question. I think when I look at it, but I'm biased, I think everyone is going to be back to work, because those that work from home really solely to accommodate commutation issues or at least predominantly commutation issues, I think those firms will suffer competitively. It's not a question of spiritually is it better or not. I think it's a question of are firms more efficient, productive, capable and competitive if they are -- not just work from office, work from office is sort of just the tip of it. It's being on the road, developing relationships. Business is just not conducted out of a home. And I don't see it happening that way. I know we could not have accomplished half of what we accomplished in the past 10 months if the entire workforce were home. It just would have been impossible given what we do in a given day, and we are not even a good example because there are other firms that really make their living off of customers where they have to be in the customer, entertaining the customer, meeting the relationship.

So, I just don't really see it for the bulk of the firms that we deal with. There is a reason why we have 900 tenants who have substantial square footage. There might be more flexibility, maybe it will be a four-day week and one day at home. May be some firms will, I guess, permanently go to homes. I know some of the tech firms have originally said they would, and now they're reconsidering it and we're hearing that they're not going to go 100% work-from-home.

So, I can't really tell you what that decision matrix is, only that the firms we're in dialog with tend to think there'll be predominantly work from office and want to be. For those that don't or aren't, we're probably not in dialog with those tenants is my guess. And whether businesses will work those things out over the next 12 to 18 months? I think they will. But as circumstances change, their decisions may change. And as they feel the need to be more competitive and to do what they want to do in order to be most efficient, I think they may come back to the center, which is why this market has 400 million square feet of office space.

Work from home is not birth new out of the pandemic. I mean, it's something that's been around for years and years and has been tested and the technology this year was the same with last year and the year prior. It's just -- it's suboptimal, and I think most people would agree and those that don't will work-from-home.

Blaine Heck -- Wells Fargo -- Analyst

Okay. Appreciate the thoughts.

Operator

Our next question comes from Craig Mailman with KeyBanc Capital Markets.

Craig Mailman -- KeyBanc Capital Markets -- Analyst

Hi, guys. We've just been hearing from a couple of private owners in the city that their tax assessments are coming in probably lighter than they expected. I'm just kind of curious if that is the experience that you guys are having this year and whether you think if you are that sustainable just given kind of the fiscal situation of the city?

Marc Holliday -- Chairman & Chief Executive Officer

Well, I think the assessments have come out lower. The city hasn't set the mill rate yet. So, the question is, there is two components of the taxes, the assessment and then there is the mill rate. So, I would say we're reserving until we see where the mill rate shakes out.

Craig Mailman -- KeyBanc Capital Markets -- Analyst

Thanks. And then just one house cleaning for Matt. Just the leases that you did at 245, is that going to lead to any outsized other income from just leasing fees in the first quarter?

Matthew J. DiLiberto -- Chief Financial Officer

Sure. Lot of housekeeping. People must know what I do at home. It's, the 245 leasing we get paid commissions on, we do budget for that stuff coming into the year, so it will result in commissions that we recognize in other income, but nothing outside of what we had projected.

Craig Mailman -- KeyBanc Capital Markets -- Analyst

So, if we had to kind of do a run rate quarter-over-quarter, should we assume a decent step down in that as the fees from the credit actions closing last quarter kind of go away?

Matthew J. DiLiberto -- Chief Financial Officer

Yes, good looking quarter-to-quarter. Yes, I mean those fees recognized in the fourth quarter would not be replicated in the first. But as to the 245 Park commissions or any other that's in that kind of $6 million to $8 million every quarter of fees we generate from our JV partners for managing and leasing.

Craig Mailman -- KeyBanc Capital Markets -- Analyst

All right. Thanks.

Operator

Our next question comes from Vikram Malhotra with Morgan Stanley.

Vikram Malhotra -- Morgan Stanley -- Analyst

Thanks for taking the question. Matt, I'm not going to call it housekeeping or cleaning, I'll just call it model question, because you're the expert there. Can you remind us what percent of bad debt reserve stake in the fourth quarter on the portfolio? And then, how should we anticipate potential additional reserves in '21 and potentially any reversals?

Matthew J. DiLiberto -- Chief Financial Officer

Yes, so in the fourth quarter -- I appreciate not going to housekeeping -- the reserves we took in the fourth quarter were about $6.6 million, between $6.6 million, $6.7million on AR, so actual receivable reserves, that's across the portfolio consolidated joint venture. We took no incremental reserves on straight line. So overall, reserves are down in total and roughly flat on the actual reserve -- around the actual AR.

Trend this year, we leave some conservatism in our numbers historically and even more so in this environment for potential reserves. We can't project those forward, otherwise we'd have to take them now. So, I'll just say we put conservatism into our numbers for '21.

Vikram Malhotra -- Morgan Stanley -- Analyst

Okay, fair enough. And then just maybe another question just on the DPE book. I think the -- two parts to it. I think one, you took some losses, I believe, on retained positions. And I don't know if that was sort of just part of your quarterly CECL review. But also just your view of recovery in the market overall, can you talk about how you think DPE opportunities may trend for you in the balance of the year?

Marc Holliday -- Chairman & Chief Executive Officer

Yes, I'll take the first part of that. That is part of the CECL review we do every quarter. We sold one position during the quarter, but that was at par, so we didn't have to take much remark there. The reserves on retained were part of CECL and they were on retained retail investments, and then I'll leave the opportunities question to either Andrew or David.

Andrew Mathias -- President

Well, we did -- on the goals and objectives -- talk about finding some interesting deployment opportunities in DPE to the tune of $100 million or so. And yes, I think we're starting to see that market materialize, where there are some interesting capital opportunities and we're definitely -- the shingle is still out and we're still evaluating opportunities and conveying that to everybody in the market, and I think we will see some very interesting opportunities hopefully in the early part of this year.

Vikram Malhotra -- Morgan Stanley -- Analyst

Great. Thank you.

Operator

Our next question comes from Anthony Paolone with JPMorgan.

Anthony Paolone -- JPMorgan -- Analyst

Thanks. I guess first question is for Steve on One Madison. Can you talk about just activity there, put brackets around maybe what types of requirements you're seeing in the market back to line up with that asset?

Steven M. Durels -- Executive Vice President, Director of Leasing and Real Property

Yes, I mean, we've got a couple of tenants that we are in early conversation with. But let's remind everybody that the process for marketing a large development like that is we start with educating the brokerage community, then we go after the tenants, then we ultimately see the deals.

I think we're ahead of schedule as far as the level of tenant inquiries about the building, and we're feeling really strong about the feedback that we're getting from both the brokers and the tenants that we presented the building to with regards to the product that we're offering, the development plan that we've got and the timing of delivering the building at the end of '23, which I think is going to be sort of like write-offs. Spot on is the perfect time to deliver or be blocked off the best space in Midtown town.

Anthony Paolone -- JPMorgan -- Analyst

Okay. And then I guess just one question for Matt. Is there a way to think about, you mentioned in the last, I think, question around the reserves and stuff in there. I think you had 95% of collections roughly in the quarter. Is there a way to think about what was recognized like in your NOI for FFO purposes, like is it some number in between what you collected and what it was actually scheduled or --?

Matthew J. DiLiberto -- Chief Financial Officer

There's no easy way to correlate it. So, the answer to question is no. The numbers that run through your income statement reflect straight line. They smooth out deals that you've done. So, collections are definitely correlated to cash NOI and our cash flow, but you're not as likely to find a good correlation in the earnings side to collections.

Anthony Paolone -- JPMorgan -- Analyst

Okay, fair enough. Thanks.

Operator

Our next question comes from Nick Yulico with Scotiabank.

Nick Yulico -- Scotiabank -- Analyst

Thanks. First question is just going back to the expirations this year. If you had just a sense for kind of how many of those you feel confident about getting renewed at this point? And then also just kind of relating it back to -- I know you had the 93% same-store occupancy goal for this year. And how that factors into that as well?

Marc Holliday -- Chairman & Chief Executive Officer

Well, I think the answer is the same to both questions, which is there are no surprises with regards to lease expirations this year. No new surprises beyond what we already have in our budget. Everybody that has a lease expiration for this year and next year, we're in deep dialog with. We have, I think, very good clarity as to who is likely to stay and who is likely to go, and there has been no change in our expectation since the Investor Day when we rolled out our renewal goal and objective for the year.

Nick Yulico -- Scotiabank -- Analyst

And I guess just in terms of just relating it back to again kind of holding occupancy somewhat flat for the year, does that mean that you just assume a very high retention rate? Is there anything in terms of vacancy being filled up in the portfolio we should think about?

Marc Holliday -- Chairman & Chief Executive Officer

It's a combination of both of those things. So, when we looked out over our leasing of 1.3 million square feet, there is a good portion of that that is renewal. What is not could be leased up later this year or into next. But offsetting that additional vacancy is the lease up of vacancy that we recognized this year. So, we had some vacancy at 45 Lexington, as example, or 1185 that came in 2020 and early '21, that's getting leased up later in '21 such that at the end of the year you remain roughly flat.

Nick Yulico -- Scotiabank -- Analyst

Okay, thanks. That's helpful. I guess just the last question is on Marc going back to the idea about -- you seem positive about the work environment saying people now on -- businesses not wanting to work-from-home. I guess I'm wondering, are you actually actively spending time sort of surveying a broad piece of the corporate America on this topic? Or is a lot of that based on sort of what you said where you're talking to people and that's what they're telling you, but maybe missing some of the other conversation? Just trying to understand how kind of what's backing this confidence level that you have?

Marc Holliday -- Chairman & Chief Executive Officer

Well, I mean, in terms of surveying, the partnership I think has done one or two surveys of all the businesses in New York. But that was last year and that was more to get a sense of timeline for return as opposed to what go-forward new program would be.

So, my data points, my survey are discussions with tenants in our portfolio, period. I mean, that's -- we have, like I said, 900 tenants. We uniquely cover the gamut from small tenants to the largest, most affordable rents to the highest premium rents and everything in between.

So, I feel like, man if we don't have a good handle on a cross-section of New York City business and tenants, then shame on us. But -- because that's a pretty good pool of -- a sample pool, if you will, to get a sense of what businesses thinking about New York City.

And there is very few conversations I have where companies are saying to me, we're going to go work entirely from home or predominantly from home or even half from home. So, to your point and maybe people will tell me what they -- I think they want to hear. I mean, I can't -- it's not a scientific survey, it's more anecdotal, but it's many months of many conversations. And all I can say is that the preponderance of those conversations go anything like this -- we can't wait to get back, we're dying to get back; this work-from-home sucks. I mean, I can go on and on.

I'm trying to think of people who say, "Boy, we're just never going to return to the office. We're going to keep a large --." I don't-we don't have it. I don't see it. So, is that the case in California or Silicon Valley? I can't tell you. Is that the case for tenants not in our portfolio? Can't tell you.

But with the large and small and medium sized financial institutions, small business that really needs to have a presence here or they become irrelevant, which is the majority of our portfolio at least by number of tenants, right? The dynamic system and the action I think happens within the city, I don't think it happens at home. So, I'm also going a bit on my own gut instinct 30 years in the business, and I have a point of view and I think that's hopefully an educated point of view that by and large when the all-clear signal is, people will return.

Now, might there be 5% or 10% that either going to work from home or works on some kind of a hoteling basis? Yes, possible. But might not space requirements on a space per employee basis go up by 5% or 10% to kind of de-densify, which we have dedensified, right? So, we're not that unique. So, if we took our footprint that was designed pre COVID, went back dedensified it by about 5% or 10%, I don't see why everyone is not going to do that. And everyone who asks us for advice on it, we give them our program, which is a 5% or 10% densification, whether they follow it or not.

So, I guess I'm thinking that those two things will largely offset and we'll be in good shape once we get past this period of time. But it's not a survey. It's certainly not national and it's quite possible that I'm missing the voices of people not in the portfolio.

Nick Yulico -- Scotiabank -- Analyst

All right, thanks. Appreciate the color, Marc.

Marc Holliday -- Chairman & Chief Executive Officer

Thank you. All right. So, I think with that, we are at the end, just right after 3:00 on the nose. So, thank you for whoever still made it to the end and listening, and let's hope for better times ahead and looking forward already to having some good results to put up on the board in April.

Operator

[Operator Closing Remarks]

Duration: 65 minutes

Call participants:

Marc Holliday -- Chairman & Chief Executive Officer

Steven M. Durels -- Executive Vice President, Director of Leasing and Real Property

Matthew J. DiLiberto -- Chief Financial Officer

Andrew Mathias -- President

Michael Lewis -- Truist Securities -- Analyst

Rick Skidmore -- Goldman Sachs -- Analyst

Manny Korchman -- Citi -- Analyst

Alexander Goldfarb -- Piper Sandler -- Analyst

Jamie Feldman -- Bank of America -- Analyst

John Kim -- BMO Capital Markets -- Analyst

Steve Sakwa -- Evercore ISI -- Analyst

Blaine Heck -- Wells Fargo -- Analyst

Craig Mailman -- KeyBanc Capital Markets -- Analyst

Vikram Malhotra -- Morgan Stanley -- Analyst

Anthony Paolone -- JPMorgan -- Analyst

Nick Yulico -- Scotiabank -- Analyst

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