Vornado Realty Trust (VNO) Q2 2026 earnings call transcript

Welcome to Bernardo Realty Trust's second quarter earnings call. Yesterday afternoon, we issued our second 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 Supplements. 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 opening comments are Stephen Ross, 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 Stephen Ross.

Thank you, Steve, and good morning, everyone. We had another strong quarter with comparable FFO of 67 cents, leading analysts' consensus by 10 cents or 17.5%. Michael will review it all shortly. But first, let me cover what we are seeing on the ground. New York is clearly the best, strongest, and most important real estate market in the country and the most resilient.

We are a Manhattan-centric office and street retail company with best-in-class assets which are benefiting from these dynamics. The stock market seems to appreciate this given our stock price performance year-to-date and over the past two years and the past three years has been the best in our peer group. And there is more to come. I believe our stock is still stupid cheap. For example, Green Street shows us at a 23% NAB discount, much deeper than our peers.

The landlord's market that we've been predicting for the past many quarters is here. It is broad-based and it is strengthening. Alters leasing volume in Manhattan is at its highest level in 25 years. Tenants are expanding all over the city. Available space and sublease space continues to evaporate, and office-to-residential conversions continue to remove square footage from the office inventory.

There is a serious shortage of large-block availability. Vacancies in the 180 million square foot class A better building market in which we compete is now down to 6.2%, clearly a landlord's market. There is limited new supply on the horizon, and remember, new supply takes as long as five years to deliver and requires upwards of $300 rent to petrol. And to add to all that, interest rates are rising. As a result of all this good stuff, rents are going up. I couldn't be more constructive. In New York, tenant demand spans across all industries.

Law firms alone leased 2.3 million square feet this quarter. Legal tech and media accounted for eight of the top ten leases signed. This isn't one industry having a moment. All of our clients are growing. Interestingly, a real estate platform that tracks these kinds of things recently reported that AI companies are now leasing more space in New York than in San Francisco. So, all good.

At Renato, our singular focus is on executing our plan to deliver the highest growth in our sector based on our lineup of high-quality assets and in-process projects. Here is our 2026 scorecard. During the first half of 2026, we leased 978,000 square feet overall. For Manhattan office, we leased 659,000 square feet at $105 per square foot average starting rents, with mark-to-markets of positive 9.5% gap and positive 7.1% cash. I would note that these mark-to-market stats do not include our leasing activity at PEN2. We are following our transformation. We are achieving rents that are just about double the old rents.

This is as good a place as any to take a victory lap for what we have accomplished at PEN1 and PEN2, financially, physically, and aesthetically. Think about it. At Penn One, broadly speaking, we invested $200 per square foot to achieve a $50 a foot uptick in rents, which, when all gets said and done, is a 25% return.

Rents and Penn are now well above our underwriting and are now the best value in town. So plenty of room to grow here. Our physical transformation is stunning and game-changing and award-winning. Please go take a look. During the second quarter in Manhattan, we executed 29 office deals totaling 328,000 square feet at industry-leading $107 per square foot average starting rent, with market markets of positive 7.7% cap and positive 5.0% cash.

This quarter's leasing volume included 181,000 square feet in the Penn District and 167,000 square feet in our other Manhattan assets. We are now consistently achieving triple visit average starting rents. I suggest that mark-to-markets is a squishy metric, which depends entirely upon which leases are included in the calculation and their rents. And so it's pretty random. Rather, I submitted it's better to look at starting rents for new leases as a much more fine-tuned metric which would allow for better comparisons of buildings to buildings and companies to companies.

I confess to talking my book here since our starting rents have led the New York office public peers for years now.

In the Penn District at Penn II, we have 67,000 quid-lisks leases out for signature, and we expect to be fully leased here, down to dribs and grabs by year end. At 10-1, we have 246,000 square feet of leases out for signature and an average mark-to-market of a whopping 44%. Company-wide, we are projecting third-quarter mark-to-markets of over 20%. I guess you could call this all soft guidance.

With all of this activity, we continue to review our pricing here on a biweekly basis. importantly given the roughly 10% of the space of Penn one rolls each year we expect continuous strong growth from Penn one as we keep marching old reds up the market we continue to be delighted with our two most recent acquisitions 623 Fifth Avenue and Park Avenue Plaza thanks to Harrison for giving us a shout out for these two deals on his call 623 Fifth Avenue is our spectacularly well located and by By that I mean, in the center of everything, 383,000-squid-foot assets, which sits on top of Saks Fifth Avenue, that we are redeveloping to be the 220 Central Park South version of boutique office space.

We are off to a great start here, receiving outstanding reaction from brokers and tenants. We are about to execute our first lease of the two floors with a financial services firm that rents consistent with our underwriting. Of note, even at this early stage, market demand is telling us to increase our asking rents above original underwriting.

As you know, we recently acquired a half-interest partnering with Fizzabubbers and Park Avenue Plaza, a 1.2 million square foot tower on 53rd Street. The deal was at a valuation of $950 a foot, which for Prime Park Avenue is a third of replacement costs. This asset taking advantage of the in-place 2.9% mortgage loan with six years of term remaining is a coupon clipper at 8% cash on cash. So the way I look at this, we are earning double the risk-free bond rate from risk-free Park Avenue AAA real estate.

Better yet, the in-place leases at Park Avenue Plaza are at, give or take, half current market. So we expect very substantial capital appreciation here to go hand-in-hand with above-market current earnings. Our market-leading signage business in the two most important and highest traffic locations in the Times Square and the Penn District continues to grow at a healthy rate. We love this business. It's capital-like and has been growing at 5% per year. We intend to add more signage in the Penn District where we control almost all of the real estate around Penn Station and Madison Square Garden. If you drive a walk past Park Avenue at 52nd You will see that our 350 Park Avenue site is now under construction, actually under demolition.

We intend to shortly exercise our investment option to participate in this deal at our maximum ownership percentage of 36%, alongside Ken Griffin as our 60% partner and the Citadel as our 1 million square foot anchor tenant. Several commentators and analysts have suggested that we take the money and run. No, no, no. That would be incredibly short-sighted. In our business, there is no better place to invest than Prime Park Avenue with a billion square foot tenant and a 60% partner already committed.

We are contributing to our existing land and 65-year-old building at a $900 million valuation. We have the balance sheet resources to support this deal and all of our other financial requirements as well. We have a $3.3 billion construction loan ready to go. I think $3.3 billion may be a record. The partnership, and by that I mean all partners, is contemplating selling down at 25% interest at a price which will give us an appropriate profit and also give the buyers an appropriate profit.

We expect the joint venture closing will take place in September. We are extremely excited and bullish about the potential returns from this project. The brokerage and tenant community is buzzing, and we are already getting incoming to available space, all of which is use-based from 600 feet to 1,000 feet, from clients seeking the very best and for whom our delivery date fits their needs.

At Frenado, management of our balance sheet is the highest priority. Michael and his team have worked very hard to get our debt ratio down into the sevens. We keep dry powder for offense and liquidity for defense in all cycles. We are in conversation to sell two non-essential assets, which would very substantially increase our liquidity profile.

Here is the status of our stock buyback program. This quarter, we repurchased 1.8 million shares at $29.92 per share. Since we have started buying back shares in 2023, we have repurchased 8 million shares at $26.61 per share. We will continue to take advantage of the stock as the opportunity presents itself.

Just for kicks, on a final and interesting note, I recently heard an interview with Taylor Shetterman, the screenwriter, director, producer, and actor best known for creating the massively successful Yellowstone universe. I confess that I'm addicted to his stuff. Here's what he said about New York. Quote, I leaping love New York. It's the first place I lived after Chicago. It's a phenomenal city, and it's a city that I feel is much tougher.

It endures a bad politician or two, and you can't tank it. New York just shakes off this stuff like a case of bad sleeves and keeps going. It doesn't matter the industry you're in in New York. If you're successful here, if you're a bricklayer, you're one of the best frigging bricklayers on the planet because there are 8 million people competing for your job. New York just mandates excellence of everybody in every way and in every field. End quote. By the way, when somebody asks who doesn't know me, what I do for a living, I say I'm a bricklayer. Now, Austin Michael.

Thank you, Steve, and good morning, everyone. Second quarter comparable FFO was $0.67 per share, compared to $0.56 per share for last year's second quarter, an increase of $0.11. This significant increase was primarily due to higher FFO resulting from rent commencements at Penn 1 and Penn 2, the impact from the NYU master lease at 770 Broadway being in the prior year, and higher NOI from signage revenue, partially offset by higher net interest expense. We have provided a quarter-over-quarter bridge on page 2 of our earnings release and on page 6 of our financial supplement.

Our core office and retail businesses are performing increasingly well and are now beginning to reflect the growth from leasing up Penn as well as our other vacancies. Our New York office same-store NOI was up 13.7% for GAAP and 11.9% for cash. Our New York retail same-store NOI was up 7.3% for GAAP and 5.7% for cash. And our New York business overall was up 11 for GAAP and 6 for cash We now clearly expect full year 2026 comparable FFO to be higher than 2025 with second quarter comparable FFO being a decent average run rate for the rest of the year. As previously indicated, we expect there to be significant earnings growth in 2027, as the positive impact from the lease-up of PIN 1, PEM 2 and our other vacancies continues to take effect, as well as the positive impact of the recent acquisition of Park Avenue Plaza.

Turning to occupancy, New York office occupancy increased 60 basis points this quarter to 92.2% from last quarter and up significantly from the trough of 84.4% in the first quarter of 2025. This significant pickup is reflective of the successful execution of our plans and the Manhattan Class A office market dynamics that we've been talking about over the past couple of years. Our New York office pipeline is robust and has over 2.2 million square feet of leases in negotiation and various stages of proposal, including the 1 million square foot Citadel lease at 350 Park Avenue and over 500,000 square feet in the Penn District.

Based on our strong leasing pipeline, we anticipate that our occupancy will grow to north of 93% by year-end with further gains thereafter. Demand for our retail assets also continues to pick up. We are seeing new retailers, including many international ones, enter the market, as well as retailers in prime locations looking to renew their spaces early so as not to lose them upon expiry.

Finally, turning to our balance sheet, our liquidity remains strong at $2 billion, which is comprised of cash of $789 million and our undrawn credit lines of $1.2 billion. We hope to bolster this further with the asset sales Steve referenced earlier.

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

Good morning, Flores. So, you know, historically, you know, we ran at, you know, 95, 96 percent occupancy on a physical basis.

I think maybe touched a little bit higher occasion, but I would say that was a pretty consistent run rate. You know, today we're at a little over 92 percent.

You know, we expect that we'll get back to our historical run rate in the next couple of years. You know, given the pace of the market, it could happen, you know, sooner than that. So we're pretty confident about that. From an economic perspective, just given the sign that commenced leases, obviously that number is lower. I think on what's called a gap basis, which probably relates most directly to earnings, we're probably 83%, 84% relative to the 92.2. So physically, you know, we should get back into the mid-90s, and obviously on a gap basis, you know, that'll close up as those leases come online.

Flores, I'll put a little more meat on that. Our sign, but not in occupancy and not in our earnings number, the revenue side of that rents are $180 million, which is probably somewhere around $150 million, a little bit more than that of FFO. So that will give you the number as to where we stand now. And that number, obviously, sadly haven't commenced yet, so that's in the bag.

Thanks, Steve. Thanks, Michael.

The rents on the new buildings, your number is approximately correct. will create an umbrella at all of the older buildings which have in place rents of less than that. And Park Avenue Plaza has rents of about a third of what you just mentioned. It will all suck them all up. So that what's going to happen is the combination of scarcity, the combination of everybody in New York expanding and looking for space, and the fact that there's a scarcity of new supply and the combination of construction costs, interest rates, et cetera, require a very high rent for a new building. That will cause the well-located older buildings to go up in value enormously.

And obviously, that's the reason we bought Park Avenue Plaza.

I'm not sure I understand the question, but none of these numbers are written in stone, Alex. I mean, they're sort of like ranges.

The market doesn't really need 350 a foot to start a new building. The market and our competitors would find a new building somewhere in the probably mid to high threes. I'm sorry, mid to high twos.

And what the market is doing is giving a bargain rent to the anchor tenant with hopes and aspirations that the follow-on smaller tenants and higher rents will make the whole thing pencil. But in the whole, you know, you think about it, if a new building on Park Avenue costs $3,000 a foot, you can do the math.

So as Michael said in our script remarks, putting aside Citadel, we have about $1.2 million in our pipeline, which is a really strong mix of new expansion renewal and we're strategic about renewals we're not going to do a renewal unless we like the terms so while we're talking to a lot of tenants expiring next year the year after etc as the market continues to quicken and strength and pace and as we feel better and better every week with what's happening we're being very careful in terms locking in too quickly. But our tenants, you know, generally want to stay. And we're in a lot of discussions in that regard, but we're being careful and smart about it.

I think what you're saying is that we should sell buildings at the private market value and buy stock, which is Green Street's formula for success. We sort of believe in that. We sort of also believe that our buildings are going to appreciate value. We are actually in conversations with selling two buildings, the proceeds of which would be a very significant cash amount, which accomplishes our financial objectives in the short term.

The history in New York has been that almost every time you sell a building, in almost any cycle, you've been lost.

And that goes for our street retail assets and our office assets. So we do have a handful of assets that we are happy to sell and want to sell. We have a couple of assets that we are actively in conversations to sell, and we're very happy owning the rest of them until at some point they become more valuable, and then maybe we would sell them.

With respect to our stock, we still think our stock is extremely cheap. As you know, the NAV calculations are basically based upon what is in place now and what assets we own now. It doesn't give any credit for what will happen in the future with any of our – I mean, for example, there's no credit for the 350 Park Avenue deal and the profit that will undoubtedly come from that or the Park Avenue Plaza uptick in rents or the 623 development that we're doing. So the NAV number is a static number, which is backwards looking. When we sit in our council room, we look at that number very hard, but we also look at the future value.

And so that's my answer, sir.

We didn't participate in that deal. That was a deal between Verizon and the sub-pen. We did, however, decline our recapture option, choosing instead to keep the Verizon credit for the 20-year term.

You know we not going to get too much into guidance given we don give it You know if you remember we made that comment I think we started off talking about the year being flattish relative to last year Obviously, we're significantly outperforming that. But, you know, the $0.40 was relative to that flattish comment. So, you know, I think we were at $2.35 last year, $0.40 on top of that, you know, $2.75, you know. So some of the growth is occurring earlier this year than we expected. at the same time, we still think we have meaningful growth next year. So, you know, our comment on sort of significant growth still to come in 27 remains intact.

You know, some of that 40 cents, you know, got started flowing through this year. But certainly relative to where we started, beginning of the year is still intact. And, you know, given the dynamics, hopefully there will be an excess of that.

We made a decision to do the deal with Ken Griffin and Citadel years ago. And our deal with Ken was signed probably, I don't know, three years ago, something like that. So this is just the continuation of that path, which was decided three years ago. So during that time, between now and then, Barry and his team and the Citadel team have designed the building with the Foster Partners architectural firm and done the drawings, and, you know, we're now under construction. So these decisions were made three years ago, maybe even four years ago.

By the way, before I get into that, let me finish the last question a little bit more. If you do the math, and we do the math, I mean, we really groove on math around here. If you do the math, notwithstanding the fact that there is a time delay from the time that you demolish the old building and give up the income on the old building to the time you get the new building, the new building, which will have rents in the stratosphere, so to speak, which is the market, which is required, are substantially, enormously more profitable than keeping the old 65-year-old building, dumping money into that building, because in 10 years, that's going to be a 75-year-old building, and you know what that means.

So anyway, the decision really was not that difficult to make to demolish and build a new building. I'm sorry, now to the next question.

Good morning, Jenna. I would say in general, it was just a number of short-term deals, some in-place tenants that we extended, some short-term deals that we don't want to lock up the space. We continue to view the market as getting stronger, and so we don't want to commit to space long-term until we get to an appropriate level. In some cases, tenants need more time to make decisions on how long they want to come in for, et cetera. So a mix of those.

But I think most of those, as we said, short-term in nature.

It's it's, Glenn. I'll take this one. So the occupancy is already up into the high 80s by the end of July. So we had a couple vacates at the end of June, which is why you see the number you're seeing and already back up to where we were with a lot more activity in the pipeline.

I mean, Glenn, why don't you just comment on the user's experience and reaction to the fear?

Yeah, I mean, the activity has been excellent. The users are all, you know, top of class, head of class, you know, Google, Netflix, Paramount, Apple, all the names we want. And as they go on and on, the experience has been A+. The reports back from them have been excellent. So we're feeling very good as we head into the second half of this year into 27 that, you know, really great things are going to happen. And the project's really the best in town.

and certainly the users coming in are recognizing that as they use it.

You have to remember this asset, which we are partners with Blackstone and Hudson Pacific, is kind of analogous to a long-stay hotel. So this is not an office building which has 10, 20, and 30-year leases. the tenants that come into this building and use it as a production facility for shows that are in process. So that can be, you know, three months or a year or what have you. So the occupancy will fluctuate. But we do feel we have a unique asset. It's the only asset in Manhattan. It's very well located, and it's being extremely well received, even at these early stages, by all of the, might I say, all of the big boys.

Michael. Good morning, Tony. so we'll lay out all the details when we close the venture in terms of cost, financing, etc Steve referenced the construction financing that we've lined up we're contributing our land in at the $900 million value and so incremental capital requirements from us over time are in the $350 million neighborhood that doesn't really start for probably two and a half, maybe even three years in any significant scale, given that Ken has to true up his equity with ours, and then the bank wants to get money out. We like that environment. The banks want to start putting money out. So our equity is back-ended and really won't come, I would say, meaningfully until 2029 and then thereafter.

We would buy 100% of Park Avenue at $1,000 a foot if we could. Now, Tony, you're making the case for exactly what Steve said earlier, right, that that dispersion is very wide, that, you know, buildings like Park Avenue Plaza, if the market continues to hold its strength, and we know there's not going to be a lot of supply, you know, those buildings have to appreciate significantly. And, you know, we own many of those buildings, which is why we're bullish on our stock and the value that we have and where it's going. So 100%. You know, rents have to rise there. Values have to appreciate meaningfully because they're basically creating a land value in a lot of cases.

But don't get the impression that the people who are paying $250 or $75 or $300 a foot are stupid. They are not stupid. They are the most important and largest and major companies in the country. There is a difference in the value of a brand-new building in its design and its function.

But the answer is it's not the difference between $100 a foot and $300 a foot. So the $100-a-foot buildings are going to go up in value substantially, but not to the same rental rate as a new building would command.

I'll hit the first one. Glenn can hit the second. I think in terms of, you know, TIs this year versus next year, I mean, again, given we're in that lease-up mode, you know, given, frankly, when the tenants call for the money, I know the number's right in front of me, Bekram, but I think it's pretty comparable year over year. so not not meaningfully different enough that I think in 28 is when that starts to you know tail down you know as we're is worth that big leasing but again it depends on when tenants call for the money it tends to be a little bit later then you know when when we normally expect so that's that's my commentary on the capital side.

Glenn you want to talk about TI trends? Yeah hi Vikram so we're seeing concessions come down. Rents are going up. We're tightening concessions. I had sent on a couple calls in a row now, free rents coming down, and we're now seeing tightening on the TIs.

Certainly anything we're turn-keying now has a cap on the tenant fund. So overall, I would tell you all the metrics are trending absolutely in the landlord's direction, which is very good for us. and we continue that. We expect that to continue as we go as the market continues to get better and better.

We love San Francisco. It's a recovery market. The interesting thing about it is we own the best building in San Francisco, differentiated. It's not a tech building per se, although we do have a few tech tenants. It's a financial services building. All of the major financial services players are in that building. And notwithstanding the fact that vacancies grew to very high numbers in San Francisco and rents plummeted, that building, 555 California, the rents went up and occupancy stayed by and large pretty high. now with respect to New York and capital allocation. I mean, look at what we've done in the past as a prelude to what we'll do in the future. We have invested in two or three new acquisitions.

We invest in our existing buildings by leasing them up in the TI and in keeping them modern and pristine and ahead of the market. We invest in our buildings in terms of amenities. We invest in our stock So we investing in new acquisitions our existing assets our common stock and of course the Penn District So we have a very full plate But at the same time, bringing down leverage while doing that.

Yeah, how did you do that? A little sleight of hand now. Asset sales, et cetera, and we're growing income. By the way, our budgets show that after the bubble, the good bubble of this very large leasing period is over, and the free rent burns off and the TIs are paid, our financials become extraordinary. Our positive cash flow becomes positive and grows fairly significantly.

So there's a one- or two-year period, and then there's a very, very, very, very, we're very, very constructive about our company in the future years. That's why when I say we look at the future NAV harder even than we look at the current NAV.

Hang on. Michael's going to . I think you asked about the mention that I made that we were contemplating selling down 25% of the ownership of the building and inviting a new group of investors to come into the asset now.

And so what's your question about that?

We're basically targeting high net worth family offices. And it would be a club deal, not a – so it would be a club deal, people investing $100 million or maybe $200 million, not a billion.

That's our current target.

Not at all. We don't expect that that's going to affect shopping or tourism or domestic spending or whatever. So the answer to that is not at all. By the way, we're not really in that business. I mean, we don't have a current condo job under construction, although we have developed the most successful one in history, that's in the past. And that sold out, by the way. We do hear from the marketplace that the tax has affected the interest of buyers in the over $10 million category. But that's not firsthand. That's second and third hand from just gossip that I'm hearing from the marketplace.

Michael. Morning, Ronald. From the quick reading of your report, it sounds like we have a fairly wide disparity on any of you both viewpoints.

CAPEX, you know, I think I said earlier, I think it's going to be fairly consistent this year to next year, just as the, you know, large amount of leases, particularly at PEN2, and the remainder of Penn 1 get funded.

Even a lot of leases that get signed this year, that won't get funded until next year, and maybe even slobbers over a little bit to 28. But I think fairly consistent year over year. And on the leverage side, I think it will continue to trend down into the sevens over the course of this year. And as the income comes online in the out years, obviously there's a lot that's going to happen between now and then, But that number could go sub-7. I think it probably will go sub-7 absent other investing, et cetera.

Hotel Pen. No, it's not Hotel Penn. Hotel Penn doesn't exist anymore, by the way. It's a piece of land which we consider being the best development site in the west side of Manhattan. And that's not for sale.

One and one.

You know, the answer is we react to everything that's available in the marketplace, and we move quickly to acquire an asset that we like. our assets, the assets that we like have to be basically in our core. They have to be on the best location. They have to be part of the 180 billion square feet that we feel is our target market, the market in which our clients want to rent space. And they have to be moneymakers. So when we see it, we act.

And we can't predict, we don't have a crystal ball, but we do know that there are cycles. There are cycles in when to invest heavily, and there are cycles in when to pull back. And so we've been doing this for a long time, and that's our outlook on acquisitions.

By the way, the other side of that is that trees don't grow under the sky. We do have business cycles. I don't know whether we're going to have another recession or downturn. I guess we will. It's been a long time since we've had a downturn. But there will be a downturn in the future, and we have to be prepared for it. Now, you can't prepare for it. When the downturn starts, it's too late. You have to be prepared for it ahead.

And so that's what we try to do, and we always try to do. And keeping a very strong balance sheet with a ton of cash is part of our long-time business strategy.

those two assets are not the two assets might be one of them but I can tell you that right now 555 California is a strong recovery market and Glenn has done a spectacular job of leasing this market at the top thick prices in San Francisco you know in the high 100s of dollars a foot in the tower So that asset has plenty of room to go and is extremely strong. So that asset is only for sale at the right time and at the right price.

No. Okay.

I'll start, and then Michael can finish. Basically, the thing that differentiates our signage business is that our signs go with the buildings that we own. So we are almost all of the people in this sector, They're the science companies. They rent space to put their science. We don't. We own the space. So our margins obviously are much higher.

And since we own the prime space in Times Square and we own everything in the Penn District where there's enormous traffic, both from Madison Square Garden and the retail at Macy's and Penn Station, so we own those assets. And so as we continue to develop in the Penn District, we will build more buildings. We're now totally changing the entrance to the Penn District on 7th Avenue and 34th Street. So we're building, we're going to tear down the older buildings. We're going to build new buildings. Those are signage opportunities. We're going to build a tower on Penn 15. That's another signage opportunity, et cetera. So the answer is that we love the business. Asset might, it goes along with our new signs go along with our new developments.

Just to tack on, Brendan, yes, volume or price, both. You know, the pricing has continued to go up year over year for the last several years. And, you know, part of what we do, you know, by having, you know, digital signs is, you know, we slice and dice those. And we it's like revenue management. We're optimizing how many slots we can sell and how much we can sell those for. So, you know, we have both dynamics working, which is helping to propel the business, and you saw that come through this quarter.

I know you weren't going to let us off so easy, Steve, without a numbers question. You know, I would say I'm going to guess here because I don't have the exact numbers in front of me. Obviously, like PEN2 is a huge, you know, development that we're completing and that income is coming online. So if I had to guess, I would say probably 60% of it is Penn 2. Rough cut.

That guess better be right.

Yeah, I think it's pretty close.

Okay, well, thank you, everybody. We're happy with this quarter. We hope you all appreciate it. And we're even more happy with our future prospects. So having said that, thank you all for attending, and we'll see you next quarter.