Michael Franco
President & Chief Financial Officer at Vornado Realty Trust
Thank you, Steve, and good morning, everyone. As Steve mentioned, we had a strong year despite experiencing headwinds from rising interest rates. For the year, comparable FFO as adjusted was $3.15 per share, up $0.29 or 10.1% from 2021. Fourth quarter comparable FFO as adjusted was $0.72 per share compared to $0.81 for last year's fourth quarter, a decrease of $0.09 or 11.1%. While earnings for the quarter were down, driven primarily by higher net interest expense from increased rates and the noncash straight-line impact of the estimated 2023 PENN 1 ground rent expense, our core business had strong performance from the rent commencement on new office and retail leases. We have provided a quarter-over-quarter bridge in our earnings release and our financial supplement.
We had several noncomparable items in the quarter, primarily gains from 220 Central Park South sales and other noncore asset dispositions, which in total increased FFO by $0.19 per share. As previously announced, we recorded $595 million of noncash impairment charges during the fourth quarter, of which approximately $483 million relates to our equity investment in the Fifth Avenue and Times Square Retail joint venture. It should be noted as impairment charge is not included in FFO.
Company-wide same-store cash NOI for the fourth quarter increased by 7.9% over the prior year's fourth quarter. Our overall same-store office business was up 8% compared to the prior year's fourth quarter, while our New York same-store office business was up 5.4%, primarily due to cash rents at Farley coming online. Our retail same-store cash NOI was up a very strong 7.9%, primarily due to the rent commencement on several important leases.
Now turning to 2023. While the current economic environment makes forecasting more difficult than usual, we expect our 2023 comparable FFO to be down from 2022 given the known impact of certain items. These include roughly $0.40 from additional interest expense as a result of a full year of higher rates on variable rate debt, net of higher interest income and capitalized interest, assuming the current SOFR curve; $0.10 from the prior period property tax accrual at theMART was recognized during the second half of 2022; and $0.05 of lower FFO from the sale of assets in 2022. These reductions could potentially be offset by a lower result on the PENN 1 ground rent reset that is currently running through our earnings, which Steve mentioned earlier.
Now turning to the leasing markets. We see 2023 as a year of both challenges and opportunities. The pace of leasing has slowed in the past few months, and the activity is lumpier as businesses generally are feeling cost pressures and are exercising more caution. Companies are still grappling with hybrid work policies and the right level of flexibility, but overall sentiment is shifting more closely to pre-pandemic norms. We are seeing a real pickup in the return to office throughout our portfolio, particularly Tuesday through Thursday. Utilization rates are approaching 60% and momentum is improving month by month. Both employers and employees clearly recognize the productivity, collaboration, creativity and cultural benefits of working in the office together.
Flight-to-quality continues to be the prevalent theme for tenants. However, leasing activity is broadening out. We are seeing a pickup in activity in the traditional multi-tenant Class A buildings as tenants are dealing with the aforementioned cost pressures and are not at all willing to pay new construction rents. One thing we do think will begin to emerge this year is a heightened focus on the quality of the landlord. Many landlords, particularly private ones, are beginning to struggle with high leverage levels, which may limit their ability to invest capital in their buildings, or in some cases, even retain their assets. Tenants and their brokers are smart enough to figure out which buildings these issues are at and avoid them.
Strong well-capitalized landlords like Vornado will benefit. A perfect example of flight-to-quality was strong sponsorship as the previously announced 350 Park Avenue transaction with Citadel. We began our relationship with Citadel at 350 Park in the beginning of 2020 with an initial 120,000 square foot lease and are proud of the relationship we have built with our team, which has culminated in this master lease and a future potential partnership for a new 1.7 million square foot world-class building at the site.
Our overall leasing pipeline in New York remains healthy at almost 1.2 million square feet of leases with 275,000 square feet of leases being finalized and another 900,000 square feet of activity in various stages of negotiation. The financial sector, in particular, continues to be active.
Turning to Retail. With the rebound in tourism and daily workers, we are continuing to see more retailers search Manhattan for new store locations. Retailer sales are generally back prepandemic levels, which is spurring retailers to become more confident and active in taking new spaces. They are still concerned about inflation in the overall economy but are starting to lock in deals given rents are at much more attractive levels.
Turning to the capital markets now. The financing markets remain highly constrained, driven by the volatility from the Fed's sharp rate increases. Banks are dealing with an increase in problem loans and remain cautious in lending and the CMBS market is still largely closed. While financing is available for the highest quality sponsors and properties, the markets will take some time to thaw, which likely won't happen until the Fed ends its tightening cycle.
On the asset sale front, there continues to be active interest from investors in New York office and retail assets, but without a stable financing market, it remains difficult to transact large assets without in-place debt right now. In these volatile times, we remain focused on maintaining balance sheet strength. Our current liquidity is a strong $3.4 billion, including $1.5 billion of cash, restricted cash and investments in U.S. T-bills and $1.9 billion undrawn under our $2.5 billion revolving credit facilities. In addition, as a result of our refinancing activities early last year, we have no significant maturities through mid-2024.
With that, I'll turn it over to the operator for Q&A.
