Steven Roth
Chairman of the Board and Chief Executive Officer at Vornado Realty Trust
Thank you, Cathy, and good morning, everyone. I hope everyone is healthy, continues to be vigilant, and gets vaccinated. Let me say it again. Everybody, please get vaccinated. I'll start by sharing a few things that are happening on the ground, which I hope you all find interesting. The U.S. economy is resilient, it's growing. I might even say is booming, and so is New York. Financial, tech, and almost all industries are achieving record results. In New York, apartment occupancy, which had dropped to as low as 70% during COVID, is now rapidly climbing back with record numbers of new leases being signed each week at higher and higher rents.
Condo sales, which had stalled during COVID, are now active, albeit at discounted pricing, except I'm proud to say that our 220 Central Park South where resales are at a premium. This apartment and condo demand is coming from folks who live and work in New York, and that's a very good sign.
At 220 Central Park South, where we are basically sold out, resale pricing is up, and that's an understatement. A recent spectacular example, which is now public, is a two-floor 12,000 square foot resale that traded at a record-breaking $13,000 per square foot, think about that. Our New York office division is now experiencing record incoming RFPs and requests for tours, including from many large and important occupiers who had been on the sidelines during COVID. Glen and his team are very busy. By the way, Big Tech is now very active looking for more space in New York to take advantage of New York's large, highly educated, and diverse workforce.
Here's an interesting fact, a Fortune 100 occupier household name who dropped out of the market during COVID has come back to market. They were originally looking for 300,000 square feet to house 2,800 employees. Post-COVID, after extensive study and space planning, they now need and are seeking 400,000 square feet, a 30% increase to house the same 2,800 employees. In both instances, their projected in-office occupancy is the same 60%. The fact that this occupier needs 30% more space post-COVID is contrary to all analyst expectations, but that is the fact. And we are hearing the same from many, although not all, but many of our tenants that they will need more space, not less post-COVID.
One of our analysts and a friend recently wrote that our company suffers from PENN fatigue, true. It took us over a decade to assemble our vast PENN District hoardings, but as the same goes, this is our time. Here's where we stand. At Farley, we have delivered to Facebook all of their 730,000 square feet. Their tenant work is going full bore. The West Side of Seventh Avenue, along the three blocks stretching from 31st Street to 34th Street, is now a massive construction site, where we are transforming the 4.4 million square foot PENN one and PENN two into the nucleus of our cutting-edge connected campus. The 34th Street PENN one lobby just opened, and our unrivaled three-level amenity offering will be completed at year-end. Our full building PENN two transformation, including the bustle and reskinning, is 98% bought out on budget and off to a fair start. We couldn't be more excited.
Our 14,000 square foot sales center the Seventh Floor of PENN one is now open to rate reviews from brokers and occupiers. It's busy. It is that -- the sales office is designed as a dealmaking conference and presentation center with multiple building models and videos that tell our story in a clear, persuasive, and unique way. After working with Glen and Josh in the sales center, the market is understanding our ambitious plans to make the PENN District, the crown jewel of the west side of the new New York.
By the way, every quarter and every year, the Westside is punching way above its weight, measured by high and growing leasing share -- market share of leases signed. The -- aside of our confidence and the market's enthusiasm, even at this early date, we are raising our PENN asking rents. We will shortly begin demolition of the Hotel Pennsylvania to create the best development site in town. We expect demolition and shutdown costs to be about $150 million, which you should look at as land cost. Our book basis in this property today is $203 million. And we are midstream in the process to make the unique high-growth PENN District a separate investable public security. Our best in the business team leaders in the PENN District are Glen Weiss Leasing, Barry Langer Development, and Dave Mandelbaum Construction.
Michael will cover our operating results in a moment, but I can say that, overall, leasing and occupancy statistics in New York tell a misleading story. While overall availability is 18%, assets newly built or repositioned since 2000 have a much lower direct vacancy rate of 11%. Last quarter, 88% of new leasing activity in Midtown was a Class A product. It's clear that the market is voting for new and repositioned assets As you would expect, Class A assets command higher pricing than Class B, in fact, one-third higher. Obviously, this is the place to be and you should know that substantially all of our assets are repositioned and in this competitive set. New York is coming back to life. Residential neighborhoods are bustling, less so the commercial canyons where office utilization is now approximately 23%.
Remember, it's August, the vacation month. The largest employers in Manhattan have mandated a return to work by Labor Day or shortly thereafter, some with full staff in office and others with a flexible program allowing some work from home. As I have said before, I do not believe that the office will be threatened by the kitchen table. And I do not believe that even one or two work from home days per week by some number of a tenant's employees will be a negative to us. I, for one, I'm unable to predict whether it will take a month or a quarter for office buildings to be back to full up and the canyons to be teeming again. There is no magic date. All that matters is that it will happen soon enough.
Last week, we announced that Wegmans, the premier grocer in the Northeast region, is opening its first store in Manhattan at our 770 Broadway replacing Kmart. And you can bet that we will do several more Manhattan deals with Wegmans. The fact that Wegmans is coming is creating excitement with it at last count, 43 print and broadcast press articles celebrating the announcement. Here is an interesting fact to it. Wegmans expects that as much as 50% of its volume will be from in-home delivery -- appropriately from to home delivery. We will be investing $13 million in TIs, leasing commissions, and free rent in this long-term lease with a 65% GAAP mark-to-market increase over Kmart's rent.
This quarter, we announced that we exercised a ROFO to acquire our partner's 45% interest in One Park Avenue in a transaction that values the building at $870 million. Based on the in-place floating rate loan, we project $18 million, $0.09 cents per share first-year accretion. Last summer, we brought 555 California Street to market for sale and are unable to achieve fair value, we withdrew, understandable at the height of COVID with travel restrictions and so forth. At that time, we said we will refinance and this past quarter, we did to the tune of $1.2 billion netting us approximately $467 million at share. We can just carry on the new floating rate loan is almost exactly the same as the old much smaller fixed-rate loan. So one might say the $460 million is free money. Ironically, I believe, continuing to own this outstanding asset with this superb accretive financing is actually a better outcome.
In New York replacement cost is rising quickly over the past many decades, replacement costs with a dip here and there has risen relentlessly. And if past this is pro-log, replacement costs will undoubtedly continue to rise as far as the eye can see. Replacement cost has always been a key predictor of future value a rising umbrella lifting all similar real estate values. And New York is the poster child of this phenomenon. Here is updated guidance for our retail business.
For 2021, we guided cash NOI of $135 million. And now halfway through the year, we expect to do a little bit. For 2022, we guided cash NOI of $160 million, which we affirm. For 2023, we announced new cash NOI guidance of not less than $175 million. You should know that, as expected, Swatch exercised the termination option for a portion of their space at St. Regis, which is effective March 2023 with a $9 million termination fee. The Swatch-owned Harry Winston store will remain under lease through its June 2031 expiry. The guidance above takes account of the Swatch termination. If I were a betting man, and I guess in some ways, I am, I would bet that we have already put in the bottom in New York that the worst of the best stuff is behind us and that New York will get better and better and so will New York real estate in space. In our case, occupancy rate, TIs, and pricing have bottomed.
Finally, we have a great talented leasing, development, and operations team, all thanks to them. Thank you. Now to Michael.
