Cathy Creswell - Director IR Steven Roth - Chairman, CEO David Greenbaum - President of the New York Division Mitchell Schear - President of the Vornado/Charles E. Smith Washington DC Division Steve Theriot - CFO.

Manny Korchman - Citi Steve Sakwa - Evercore ISI Alex Goldfarb - Sandler O'Neill Jamie Feldman - Bank of America Merrill Lynch Brad Burke - Goldman Sachs John Guinee - Stifel John Bejjani - Green Street Advisors Vance Edelson - Morgan Stanley Ross Nussbaum - UBS Vincent Chao - Deutsche Bank Derek Van Dijkum - Credit Suisse Michael Bilerman - Citi.

Good morning and welcome to the Vornado Realty Trust First Quarter 2015 Earnings Call. My name is Helen, and I'll be your operator for today's call. Please call is being recorded for replay purposes. All lines are in a listen-only mode. Our speakers will address your questions at the end of the presentation during the question-and-answer session.

[Operator Instructions] I would now turn the call over to Ms. Cathy Creswell, Director of Investor Relations. Please go ahead..

Thank you. Welcome to Vornado Realty Trust's first quarter earnings call. Yesterday afternoon, we issued our first quarter earnings release and filed our quarterly report on form 10-Q with the Securities and Exchange Commission.

These documents, as well as our supplemental financial information package, are available on our website, www.vno.com, under the Investor Relations section. In these documents, and during today's call, we will discuss certain non-GAAP financial measures.

Reconciliations of these measures to the most directly-comparable GAAP measures are included in our earnings release, Form 10-Q and financial supplement.

Please be aware that statements made during this call may be deemed forward-looking statements, and actual results may differ materially from these statements due to a variety of risks, uncertainties and other factors.

Please refer to our filings with the Securities and Exchange Commission, including our Form 10-K, for more information regarding these risks and uncertainties. The call may include time-sensitive information that may be accurate only as of today's date. The company does not undertake a duty to update any forward-looking statements.

On the call today from management for our opening comments are Steven Roth, Chairman of the Board and Chief Executive Officer; David Greenbaum, President of the New York division; Mitchell Schear, President of the Washington DC division; and Stephen Theriot, Chief Financial Officer.

Also in the room is Joseph Macnow, Executive Vice President and Chief Administrative Officer, Michael Franco, Executive Vice President and Chief Investment Officer is on jury duty and is not with us today. I will now turn the call over to Steven Roth..

Thank you, Cathy. Good morning, everyone. Welcome to Vornado's first quarter call. It has been just three weeks since the release of my annual letter to shareholders, so my opening remarks this morning will be brief. Starting with recent acquisitions.

In January, we increased our ownership interest in the Times Square Crowne Plaza property to 33% from 11%. This property located at 48th Street and Broadway is comprised of a 795 key hotel, 7700 square feet of prime retail space, signage, 197,000 square feet of office space and a 159 space parking garage.

In March, we completed the previously announced acquisition of the Center Building, an eight story, 437,000 square foot office building located on Northern Boulevard in Long Island City, New York. This building is 98% leased.

The purchase price was $142 million, including the assumption of an existing $62 million, 4.43% mortgage maturing in October 2018. In April, we entered into a joint venture in which we have a 55% interest, which will develop a 173,000 square feet Class A office building on the western side of the High Line at 510 West 72nd Street.

And remember, we are also developing a 130,000 square foot newbuild in the same part of town as 61 9th Avenue at 15th Street. Now to dispositions, in March, we completed the transfer of Springfield Town Center to PREIT.

Proceeds to us were $485.3 million comprised of $340 million in cash and 6,250,000 common units valued at $23.25 per share -- per unit, actually, or $145.3 million, which I might mention is $20 million above the collared $20 per unit price in the deal.

The units were tax-protected in favor of our original seller and accordingly are not currently for sale. In March, our real estate fund sold 520 Broadway and Santa Monica in California for $91.7 million, realizing a $24.7 million net gain over the holding period.

During the first quarter, we sold six non-Manhattan retail assets, properties that were not transferred to Urban Edge and which were classified as held-for-sale on our balance sheet for aggregate proceeds of $45 million. Now to operations. We had a very strong first quarter and I'm very pleased with our financial results.

Our first quarter comparable FFO was $1.10 per share, 11.1% higher than last year's first quarter. Companywide, in the quarter, we leased 1,541,000 square feet at 132 transactions. In Manhattan, we leased 553,000 square feet of office space with positive mark-to-markets of 17.1% cash and 18.2% GAAP.

A couple of weeks ago, and not included in the first quarter leasing activity I just mentioned, we completed two 15-year leases for all of the space at our St. Regis retail property on 5th Avenue at 55th Street that we had acquired just five months ago. The tenant is Swatch Group for its luxury brands, including Harry Winston.

These large and important leases were completed in the five short months since we acquired the property.

What made this property so attractive to us was the short-term nature of the in-place leases enabling us to get to market rents quickly, as well as, of course, its prime pitch location on 5th Avenue, as well as the physical configuration of the space, which is perfect for creating small boutique stores for luxury retailers.

These leases more than achieved our underwriting and will have a mark-to-market cash increase of 400% when we report them next quarter. The leases will commence when the incumbent tenants' leases expire.

Our strategy here was to sell a generic 1950s office building, 1740 Broadway, and reinvest the proceeds from the sale through a like-kind exchange into the St. Regis retail, a much higher quality, totally unique 5th Avenue retail asset. We will also achieve slightly higher initial yields on the new property and expect much higher growth prospects.

We think this was a spectacular trade for us. I am delighted to announce that Edward P. Hogan, Jr. is joining Vornado as Head of Retail Leasing.

Ed will be responsible for leasing, asset management, redeveloping and growing our best-in-class Manhattan retail portfolio, which today encompasses 2.8 million square feet in 61 properties concentrated in the principal shopping districts of Madison Avenue, 5th Avenue, Times Square, 14th Street, Penn Plaza, Herald Square and Soho.

Ed is trained as an architect and will be part of the leadership team working to transform our vast holdings in the Penn Plaza District. He comes to us following a stellar 19-year career at Brookfield Office Properties and its predecessors where he served as National Director of Retail Leasing.

Among his many accomplishments there, Ed led the team that created the merchandise plan and executed the leasing of the highly successful just opened 375,000 square foot retail center at the base of Brookfield Place in Lower Manhattan, which project features many luxury retail tenants and extensive food offerings.

Ed will be succeeding Sherri White, who, after 13 successful – after a 13-year successful career with us, will be leaving Vornado for a senior position at the Wyckoff Group. Thanks to Sherri for all she has done and we wish her all good luck.

In our Washington DC portfolio, we leased 754,000 square feet of office space with negative mark-to-markets of 17.6% cash and 17.0% GAAP. Excluding the U.S. Marshals lease, which was a large and very important retention to for us, the mark-to-markets would have been negative 0.4%, basically 40 bps cash and negative 3.1% GAAP.

I will sum up as I wrote in my letter to shareholders. I'm delighted with the scale, speed and financial outcome of our simplification program. I am very constructive on New York where demand, activity and absorption are accelerating and where office rents are now rising.

With respect to Washington, we are confident that we will do very well in Washington as over time we raise the occupancy rate and income level back to normal. And we will continue to execute on the trove of development opportunities we have in both Washington and New York.

One last comment with respect to our 220 Central Park South super tall luxury condo project. Pending the completion of our full marketing center, which will be completed later this year, we have opened a small sales gallery to a limited audience.

In just six short weeks, without any advertising, marketing or outreach whatsoever, we already have commitments for over $1.1 billion, representing about one-third of the building. So one-third of the building is now sold. We will be delivering here the best-ever residences in terms of location, Central Park views, amenities, design and detail.

Acceptance by brokers and buyers has been extraordinary and unprecedented. One last comment before I turn it over to Steve to cover our financial results. We have on the line, in his role as a retired investor, one Ross Morrison.

So this is the first time in 31 years that Ross is on the other end of the phone as opposed to sitting right here next to me. Good morning, Ross. Now I will turn it over to Steve..

Thank you, Steve. And I will pile on, good morning, Ross. Yesterday, we reported first quarter comparable FFO of $1.10 per share up from $0.99 per share in the prior year’s first quarter and 11.1% increase. Total FFO for the first quarter was $1.16 per share compared to $1.31 per share in the prior year’s first quarter.

On January 15, we completed the spin-off of Urban Edge properties, the results of UE are included in discontinued operations in all periods presented and are excluded from our comparable results. First quarter comparable EBITDA was $358.5 million ahead of last year's first quarter by 4.9%.

Our New York business produced $248.9 million of comparable EBITDA for the quarter, ahead of last year's first quarter by 9.3% driven in almost equal measures by increases in same-store, property acquisitions and redevelop properties coming back into service.

Our Washington business produced $83.3 million of comparable EBITDA for the quarter, lower than last year's first quarter by a scant 1%. We expect Washington's 2015 comparable EBITDA will be flat with 2014. Let me spend a minute on our 25% owned real estate fund.

In the first quarter, the fund sold 520 Broadway located in Santa Monica, California and we recognized our share of the net gain and carried interest of $6.1 million. During 2014, the fund sold 1 Park Avenue and its 50% interest in the shops at George Town Park and we recognized our share of the net gains and carried interest of $43.9 million.

We do not expect further net gains and carried interests from asset sales during the remainder of 2015.

General and administrative expenses in this year's first quarter included a $11.1 million from the acceleration in the timing of the recognition of compensation expense resulting from a change in the vesting criteria of award in our out performance plan such as they fully vested 865.

This is only timing as the accelerated expense results in lower general and administrative expense during the remainder of 2015 of $3.2 million and $7.9 million thereafter.

Non-comparable FFO items this quarter were positive $11.5 million or $0.06 per share of income compared to positive 63 million or $0.31 per share of income for the first quarter of last year.

This quarter's non-comparable FFO items include $23.3 million of net gains from the sale of non-depreciable assets and $8.6 million of FFO from discontinued operations partially offset by $24.6 million, a one-time transaction cost almost entirely related to the UE spin-off.

Please see our press release or overview in MD&A on Page 34 of our Form 10-Q for a detailed summary of non-comparable items. Now turning to capital markets. In January when they first become freely repayable, we repaid the $500 million a four and a quarter percent senior unsecured notes due April 2015.

In April, we completed a $308 million refinancing of RiverHouse apartments, a three building 1670 unit rental complex located in Arlington, Virginia and realized net proceeds of approximately $43 million. The loan is interest only at LIBOR plus 1.28% and it matures in 2025.

The property was previously encumbered by 5.43%, $195 million mortgage maturing in April 2015 and $64 million mortgage at LIBOR plus 1.5% maturing in 2018. As of today, we have $3.5 billion in liquidity comprised of $1 billion of cash, restricted cash in marketable securities and our $2.5 billion revolving credit facilities with no outstandings.

Our total debt to enterprise value is 32.2% and our total debt to EBITDA ratio is 7x.

Our debt mix is balanced with fixed rate debt accounting for 77% of the total with a weighted average rate of 4.37% and a weighted average term of 5.2 years and floating-rate debt accounting for 23% of the total with a weighted average interest rate of 2.32% and a weighted average term of 4.2 years.

Our remaining 2015 maturities total just $229 million. I will now turn the call over to David Greenbaum to cover our New York business..

Steve, thank you. My remarks this morning will be brief reflecting that our year-end call was just some 10 weeks ago.

On that call, we discussed a detailed overview of the Manhattan marketplace for 2014, which focused on the job growth in the creative industries, which has been fueling the continued growth of TAMI tenants, technology, advertising, media and information.

The first quarter of the New Year started off with leasing activity in Manhattan dominated by what I call the traditional industry, the FIRE tenants, financial services, insurance and real estate. In our own portfolio, some 60% of our leasing activity was with financial services tenants.

In the first quarter, we completed 42 office leasing transactions, a total of 553,000 square feet. Our first quarter occupancy was 97.3%, up 40 basis points from the fourth quarter. Average starting rent this quarter was a robust $77.85 with a very strong positive mark-to-market of 18.2% GAAP and 17.1% cash.

Continuing the trend we've seen in our portfolio over the last 12 months, in this quarter, 45% of our leasing activity represented tenants new to or expanding in New York. As I call it, real expansion, real growth. The high-end market also has remained very active.

Since the beginning of the year, taking into account signed deals and leases currently out for signature, we have a total of 300,000 square feet of leasing activity in 13 separate leases at average starting rents north of $105 per square foot. These triple digit leases are in six different buildings in our portfolio, each a trophy property.

Our activity has been particularly strong at the newly transformed 280 Park Avenue, including two major financial services leases, one with Franklin Templeton for 127,000 square feet and the other with a growing investment bank, PJT Partners, for 99,000 square feet, which is gearing up for a major expansion and its announced spin-off to Blackstone Group shareholders.

In addition, at 280 Park Avenue, we now have leases out on another 125,000 square feet, two with tenants expanding and the third with an outside new tenant. Since we acquired the building in 2011, with these additional new leases, we will have leased 838,000 square feet at 280 Park Avenue. Our renovation program has been a resounding success.

At 90 Park Avenue, where our capital program to reposition the building is just now underway, FactSet expanded its headquarters lease with us by 20,000 square feet and now occupies 122,000 square feet. Through the end of the year, we will be getting back some 145,000 square feet in this building formerly leased by Sanofi and Sterling Winthrop, STWB.

We are well-positioned to release the space as the building transformation program is scheduled to be completed by year-end and expect mark-to-markets in excess of 20%.

I should note that we expect occupancy in the portfolio will trend somewhat lower by as much as 150 basis points over the course of the year reflecting these scheduled expirations at 90 Park Avenue. In Midtown South at 770 Broadway, we signed an 80,000 square foot expansion with Facebook.

In May of 2013, Facebook signed their initial lease of 770 Broadway for about 100,000 square feet. Over the past 20 plus months, Facebook has now expanded to 275,000 square feet, truly incredible growth. In the first quarter, we completed six small retail leases with a positive mark-to-market of 37.1% GAAP and 16.8% cash.

This leasing does not include the Saint Regis retail leasing in April that Steve talked about earlier. At 1535 Broadway, the bow tie of Times Square, we completed a lease with Invicta watches, which will be joining T-Mobile at this premier asset. We remain in active discussions with multiple tenants for the remaining retail stores and signage.

Turning now to our 1.8 million square foot 555 California Street in San Francisco, we completed a 53,000 square foot renewal and expansion with top international law firm, Sidley & Austin, at a 57% mark-to-market.

At theMart, our 3.5 million square foot building located at the center of the hot Chicago River North Market, Yelp expanded and now leases 60,000 square feet. Over the last two years, we have transformed the tenant makeup of the building bringing in tech tenants, Motorola Mobility, Braintree, Yelp, Matter and 1871.

Just last week at a dinner with all the major leasing brokers in Chicago, we launched our redevelopment plans, the next step in the reinvention of the iconic Mart.

We are adding new life to the first two floors of the building with dramatic communal spaces, including a grand stair with bleacher seating for our tenants to congregate and as a presentation venue.

Along with new food options, including a reimagined food hall, a cafe with outdoor seating overlooking the Chicago River and a food truck park on the river promenade. The plan has been incredibly well-received and we are actively working on several significant transactions with brand-name tech tenants.

To conclude my remarks, let me summarize the entire New York division. We had a very strong quarter with same-store EBITDA increases for the overall division of 5.5% cash and 3.2% GAAP. Isolating just the New York office business, our same-store EBITDA increased 4% cash and 1.5% GAAP. Let me spend a minute commenting on that.

I mentioned this in our fourth quarter call in addition. In the first quarter and for the balance of 2015, in addition to the same-store EBITDA increase, growth, just as importantly, will be coming from placing 280 Park Avenue, 7 West 34th Street and 330 West 34th Street back into service.

In summary, we continue to be very constructive on the New York marketplace. Our portfolio is full; we continue to realize double-digit mark-to-markets on our leasing activity. Our activity remains strong and our pipeline of leases is robust. And with that, I will turn the call over to Mitchell Schear to cover Washington..

Thank you, Dave, and good morning, everyone. In Washington, we continue to see signs of an improving economy. Unemployment has dropped again to 4.7%, which is down from 5.2% a year ago and below the national average of 5.5%. Jobs continue to grow with 50,700 jobs added from March to March.

Importantly, office using professional and business services grew by 12,900 jobs, a marked improvement from last year where the number was negative. While it will take more time for the recovering economy to translate into robust demand and rent growth, we believe the tide is shifting and the worst is behind us in DC.

Specifically, in our portfolio, we continue to expect our EBITDA for 2015 to be about even with 2014. We had a strong volume of leasing in the first quarter. In the quarter, we leased 763,000 square feet of office and retail space in 55 transactions. About 70% of this was in new leasing and 30% represents renewals.

Our biggest deal was the new lease signed for 371,000 square feet for the U.S. Marshals headquarters in Crystal City. As we mentioned on our last call, the Marshals have been our tenant in Crystal City for the last 15 years and it was important that we retain them for another 15 years.

We relocated them from 1750 Crystal Drive down several blocks to our building at 1215 South Clark Street. We took them from a building in a bulls eye location right at the metro and at our main entrance to Crystal city and moved them to a less prime location at 1215 South Clark. This was the building that Boeing vacated in the first quarter.

As a reminder, Boeing moved just down the street in Crystal City into a new headquarters that they built and own. So we're delighted to have both resolved Boeing's vacancy in our gateway building and freed up one of our best buildings right at the Metro for re-leasing. More on that in the development story, which I will get to in just a minute.

I mentioned the Marshals specifically not only because it was the largest transaction in the region so far this year, but also because frankly it skewed our metrics a bit. Overall, office leases signed in the first quarter generated a GAAP mark-to-market of negative 17% and a cash mark-to-market of negative 17.6%.

These results are heavily weighted downward by the U.S. Marshals lease. Boeing's rent had grown significantly during a short-term extension and we needed to be aggressive to win the Marshals competition. As you would expect, we had a significant roll-down in rent on this big deal.

Without the Marshals deal, the cash mark-to-market on the remaining 403,000 square feet of leasing in the quarter was basically flat, down 0.4%. The deals in the DC market continue to require significant TIs.

TIs and leasing commissions for the leases we signed during the first quarter were 21.7% of initial rents, or $7.60 per square foot per annum as compared to Q4 2014 at 17.7% and $6.54 per square foot. Once again, the U.S. Marshals deal required TIs that were higher than normal at $8.19 per square foot or 25.6%.

Without the Marshals deal, our first quarter metrics would have been 16% of initial rents or $6.16 per square foot per annum, better than the Q4 2014 metrics. For Q1 2015 versus Q1 2014, we reported negative same-store EBITDA of minus 0.2% GAAP and minus 5.5% cash.

Overall occupancy, including residential and skyline, was up by 40 basis points from Q4 2014 to 84.2% and up by 90 basis points from Q1 2014. Office occupancy, including skyline, was up 60 basis points to 81.5% and a full 100 basis points above Q1 2014. Skyline's occupancy fell to 53.4%, an obvious drag on our overall performance.

Without skyline, our overall occupancy, including residential, is now 90.1% and our office occupancy is 88.2%. Crystal City's office occupancy rose by 150 basis points to 86.7%. It's our policy to provide enhanced disclosure on BRAC space. For Q1 2015, we resolved another 123,000 square feet of BRAC space, almost all of it in Crystal City.

As a result, in Crystal City, we have now resolved 1.2 million of the 1.4 million square feet of BRAC space. Overall, we've now resolved almost 70% of the original 2.4 million square feet of BRAC space.

Of the remaining 742,000 square feet to resolve, almost 60% of it, or 430,000 square feet, is in skyline, so that's where we are on our office leasing. On the residential side, we continue to be pleased. We are full with occupancy at 97.1%. Crystal City continues to be our greatest focus in Washington. Here is what is happening.

First, we are seeing an increasing influx of associations and non-profits. Crystal City is a great alternative to DC for these organizations.

The combination of Metro, proximity to Capitol Hill, adjacency to Reagan National Airport, an abundance of hotels, our wide cadre of amenities have made Crystal City the location of choice for over 40 associations and non-profits. In addition, Crystal City is a great value play for the associations and non-profits.

In 2014, we did 190,000 square feet of leasing in Crystal City to associations and non-profits and thus far in 2015, we have an additional 116,000 square feet of leases either signed or currently pending. Next, we are focused on creative innovation in Crystal City.

As has been widely reported, on April 16, we announced a new partnership with 1776, a global startup incubator and seed fund that will open a campus in our rapidly growing innovation hub in Crystal City.

The tech environment in Washington is focused on major global priorities – cyber, drones, energy, health, defense and more, all with growing mandates to innovate in new ways. Partnerships between startups, corporations and government are beginning to redefine the future of innovation in Crystal City.

With our existing deep base of agencies, indigenous defense tech companies and now a growing startup community, we believe Crystal City is a natural environment for this kind of collaboration. On the development front, we have a lot of action in Crystal City, Pentagon City, Roslyn and downtown.

Currently in Crystal City, we are well along on the renovation of a 165,000 square building for WeWork's residential concept, which is scheduled to open later this year. In addition, we are actively exploring several invigorating concepts for exciting new retail, residential and other placemaking concepts that will change the face of Crystal City.

We are particularly excited about the intersection of Crystal Drive and 18th Street, both for the repositioning of the building that the Marshals will be vacating at the Metro and for some significant retail that we are planning on that block. Our development pipeline in Crystal City alone is extensive and we are carefully studying our next move.

In adjacent Pentagon City, our 699 unit apartment project, the Bartlett and Whole Foods is on track for delivery about a year from now. We just poured the 12th floor and believe that that building will not only be a premier residential property for us, but an important connector between Crystal City and Pentagon City.

Downtown, early in 2016, we will be demolishing two older contiguous buildings where we will develop our new 335,000 square foot corner trophy office building, 1700 M Street. The building will be located right off Connecticut Avenue in the heart of the central business district.

We are hard at work in Washington and look forward to harvesting our opportunity. Thank you. And I will now turn the call over to the operator for Q&A..

Thank you. We will now begin the question-and-answer session. [Operator Instructions] Our first question is from Michael Bilerman with Citi. Please proceed..

Good morning, everyone. Manny Korchman here with Michael. Steve, you are clearly advancing your Penn Plaza plans. You've hired Mark and Ed. You have shown what spend you've done there. You have an asset under contract for $355 million.

Maybe you can give us some more details on when we should expect decisions to be made about the overall plan, when capital will be spent? And on that asset under contract, if you can give us any details as to how that fits into the plan or what type of building that is, that would be helpful. Thank you..

Good morning. We couldn't be more excited about the opportunities that lie ahead of us in the Penn Plaza district, where we have vast holdings and an enormous position, and where the marketplace is converging from the West, from the East and from the South.

Having said all that, it is premature to – we are building a team, we are involved in a very significant, I mean very significant planning activity. We are in contact with all of the counterparties that you would expect us to be; governments, the railroads, all kinds of different things, neighbors, but it's premature.

So the answer is that we have an enormous opportunity there. We are excited about it. We will disclose undoubtedly through government officials when our plans get to be precise. And it's premature now and I apologize for that. I understand that you are looking for more information.

I understand that our shareholders are excited about it, but I really can't go into any more detail than that. With respect to the assets that we have described, in its dollar amount, we will disclose the details of that when we close it, which will be I think in the next quarter..

Maybe just one follow-up to that, Steve, and I appreciate that you can't really speak publicly about what the plan is, but have you guys decided internally as to what that might look like and how you are planning to go through the approval process, or are you still at the stage where you are still sitting internally and discussing what that might look like?.

We are closer to having a plan internally than you think. We are very close to a plan. We've been in contact with counterparties, the governments, et cetera..

Thank you..

The next question Steve Sakwa with Evercore ISI..

Operator, hang on, I want to go back for one minute about Penn Plaza. I just want to say one more thing, okay? There are multiple facets of what we intend to do in Penn Plaza. There's lots of focus on the part of market participants in what we are going to do with the retail and the street level and the pedestrian areas.

That's all very, very important. But to me, the defining part of it is to take all of the office space that we own there and make that office space much more valuable by doing what we do to buildings.

So we own a 2.5 million foot building, a 1.5 million foot building, a 1 million foot building, improving those buildings for our office customer is really the main event. So I'm sorry, continue with the next question..

Steve Sakwa with Evercore ISI is on the line with the question. Please proceed..

Thanks. Good morning, Steve. Two questions. First, I just wanted to make sure I heard you correctly. You said that the rent at the Saint Regis I guess would be up about 400% on a cash basis. If I recall correctly that deal was about a 2% cash yield when you bought it.

Can you just kind of confirm those numbers?.

If what you are going for, it is going to be 8% or 9% that is not accurate..

Okay. I guess that's what I was going for..

So the answer is that is not accurate..

Do you care to clarify or give us a range?.

We have a pretty tight confi on that deal with this particular important tenant. I can only tell you that the market rents that we have achieved give us a – are above what our underwriting was when we acquired the asset only five months ago and will give us a very satisfactory market rate of return. We did fine..

Okay. I guess on the 220 Central Park South, it sounds like you got that project off to a good start.

Can you give us any – I realize you won't disclose pricing on individual units, but could you give us an average sense of what the average selling price was on that $1.1 billion and kind of where did those units stack up within the building?.

The answer is I am not going to disclose what our average price is for lots of different reasons, including competitive reasons. I will say, however, that there is no doubt that it is a record in Manhattan real estate. We are doing beyond well there. We are thrilled.

What has been accomplished in five or six weeks has never been done before and so we think we have the dominant project. So I hope that answers your question. What you said also is the sales are evenly arrayed from the top of the building to the bottom of the building. And they are also evenly arrayed in size of product..

Okay. Thanks..

Alex Goldfarb with Sandler O'Neill is on line with the question. Please proceed..

Good morning. Good to see people out spending money in Central Park South. Few questions here, Steve. Actually the first one is for Mitch. Can you just comment, obviously, DC, the occupancy has been improving. There have been some news articles about increased defense lobbying and obviously, we can all read about the new bomber proposal.

You spoke about increased tech investing.

So can you comment what you are seeing as far as increased defense, whether it is lobbying, contractors, et cetera and if you are seeing that materialize as far as demand for office space, or if this is just all news articles talking?.

Okay. Good morning, Alex.

So with respect to your specific question with respect to defense, not necessarily seeing anything in the context of defense lobbying, but what we are seeing is everything, as you said, in the articles about possible increased spending through budgets, but what we are really seeing is some optimism through the contracting community and as they are closely, closely monitoring what is happening within the government and within DoD.

I think they are seeing that there is likely to be some increases within the budget year upcoming and in terms of what's in the proposed budget that is out there that is pending right now.

In terms of whether that translates into them or the government leasing any additional space at this point in time, I think it is too early to make any of those conclusions..

Okay. And then, Steve, in your Chairman's letter, you reemphasized that everything is on the table, including separating out street retail in DC. Just curious, obviously, DC is at a low point. Would seem inopportune to spin-off and one can argue for a lot of synergies between street retail and New York.

So curious from your perspective, is it just to emphasize to folks that you constantly are reviewing the business in the new and improved Vino, or is it some sort of managerial decision that having these different elements really is too difficult to manage all under one umbrella and they are likely better off ultimately as individual standalones?.

Good morning, Alex. The answer to your question is yes, yes and no. Clearly, we think about this every day in terms of how do we achieve the appropriate business model and how do we achieve the appropriate values and shareholder values.

With respect to management, we have no problem focusing on – we've got the business to the point where we are extremely focused, extremely tightly managed and we are very happy with that. So we have no trouble managing the street retail and the office buildings. We have no trouble managing New York and Washington.

So if we were to do something, it would not necessarily be because it would improve our ability to manage these. It's all a matter of values and what is the right construct going forward. So people – there's been lots of swirling around, simplifications, there's oversimplification.

There's more things coming, all kinds of different rumors and so I don't want to contribute to the rumors, but all I want to say is we think about this every day; that is our job. And everything is possible and I'm not saying we are going to do something; I'm not saying we're not going to do something.

I'm only going to tell you that we are doing our job; we are thinking about it..

Okay. Thank you, Steve..

Jamie Feldman with Bank of America Merrill Lynch is on line with the question. Please proceed..

Great. Thank you. And good morning. I guess I want to focus on 555 California. You sold Santa Monica, exiting some of your California assets. We've seen in the last week a little bit of a scare on salesforce potentially being for sale. LinkedIn's numbers not coming through quite as well as they had expected.

Any thoughts here on the San Francisco market in general and when might be a good time to harvest that asset?.

We think San Francisco is just fine. We think it is – while we have an obvious bias towards New York, we think San Francisco is a very, very strong market. We think that the Bank of America building, the 555 California, is the best building in the marketplace. We have an incredible roster of conventional tenants, financial tenants and now tech tenants.

I mean Microsoft is not going anywhere. So we think the building is terrific. We think the financial performance of the building is improving. Having said all that, we are open for business..

Okay. And then, David, if you could just maybe talk through what you are seeing in terms of rent growth in New York City across the different submarkets. I know you had said the higher-end boutique financial services are doing very well. But just generally if you could give a little bit more color, that would be great..

So as you look across the basic submarkets, year-over-year, rent increases in Midtown were probably in kind of the 5%, 6% range. We did see rent increases in Midtown South continue in probably the low double digits and the downtown marketplace with some of the significant absorption over the last year, you also saw low double-digit rent increases.

I think as you look forward now, I think where we may begin to see some of the largest rent increases, in fact, are in Midtown. So as you look at Midtown today off of the trough going back seven, eight years, we have probably seen the lowest rent growth. Midtown South today is above where it was in 2007, 2008. Midtown still has a ways to go.

And I think as it relates to our Penn Plaza assets, where obviously we've got the significant, significant 8 million square foot portfolio and we effectively have, in a sense, our peep and in a sense own that marketplace.

We have been aggressively pushing rents in Penn Plaza as you've seen in terms of what we've done at 330 West 34th Street and 1 Penn. So generally I would tell you, I feel very good about where the marketplace is. We think we are going to start to see some significant rent increases.

Listen, there is always space that comes back to the market and as you look at the published numbers for the first quarter, we actually did see negative absorption in the first quarter and it is several large blocks of space that were put back into the market. 28 Liberty, 1271 6th Avenue, 75 Rock, which was – finally came into the statistics.

This is a big marketplace, but generally I feel very constructive in terms of where rents are going..

And then how does the new space available downtown into the Hudson Yards play into that? It sounds like you think rent is going to accelerate here actually, even though that supply is actually coming online now..

It's a big marketplace, Jamie, and I will tell you, when we are adding 3 million, 5 million square feet onto the marketplace, the reality, that's 1% of the stock of the city and a city that really has seen very little growth in its stock, in fact, virtually no growth in its stock over a 20-year period of time.

So I don't see any significant impact from a couple of these buildings coming online..

Okay. Thank you..

Brad Burke with Goldman Sachs is on line with the question. Please proceed..

Good morning. Wanted to ask a question about what you are targeting for year-end liquidity. Right now, you are at $1.1 billion. You closed on Springfield on March 31. I assume the $340 million of cash is included in that balance. So even allowing for the refinancing at St.

Regis that still comes up short of the $2 billion balance you had previously indicated. So – and particularly if you close on the Penn Plaza acquisition. So I wanted to know whether we should expect additional refinancings or dispositions or whether you might come in under that $2 billion balance..

We are going to try to get very close to the $2 billion balance and you can expect another refinancing or two..

Okay. And then another one just on your letter. You said that this might be a better time to harvest than invest, so was hoping that you could give us a sense of the magnitude you might be considering for dispositions and just general comments on what types of assets you might be targeting..

The statement that I made was basically a general market outlook as opposed to something that would point to our specific plan within our company. We have done $5 billion odd of dispositions in offloading assets that we – that don't fit our business model or that we no longer wanted.

Now we are down to a very tight core of assets that we are very happy with. So we don't have any rotten apples, so to speak and if we sell anything, it would be because it would be an offensive move. So we don't have – I don't think you can expect a very large disposition program from us right now, notwithstanding my comments about the market.

You can expect us to be very careful about acquisitions because we do think that prices are high..

Okay. That's helpful, thank you..

Thank you..

John Guinee with Stifel is on the line with the question. Please proceed..

Great. First up, a macro question, then a micro question. This is Lexington Property Trust, LXP, a few years ago, this was a $12 stock and it seemed pretty pricey, but I thought to myself, well, the guys at Vornado are on the Board and they have a lot of good real-time information, so it must be going up because otherwise they would sell.

And now it's a $9.75 stock with very little investor interest.

Can you give us some insight on your position at LXP, what you are thinking?.

I guess you are saying I was wrong..

No, no, never would say that. I was wrong. Not you..

LXP seems to be a bit of a value trap right now. If you look at all the metrics, the stock is very, very cheap compared to its industry group. It continues to get a little cheaper. So I can't predict stock prices. I can only tell you that we are not a long-term holder of LXP..

Got you. Okay. And then --.

By the way, the LXP has two other little nuances. Number one, it is part of our liquidity pool; it is very liquid. It is a high dividend-paying stock, so we are earning – while we have a declining stock price, we are earning a dividend on that declining stock price.

And the second thing is we have a very large tax gain in that position, which we have been trying to manage a little bit. So it is – but it's certainly – LXP is certainly on the for-sale list..

Do you have any good tax losses you can match shortly?.

We are trying..

Okay. And then second, for Mitchell, just so we can help underwrite other companies we follow in the DC area. I'm doing a little bit of math on the U.S. Marshals lease and obviously, that was a must-do lease. Can you talk a little bit – I'm going to just give you some numbers and you can fill in the blanks.

It looks to me like TIs plus leasing commissions retending cost was about $130 a foot.

How much of that would have been base building, how much is TIs, how much is leasing commission? Can you add in the free rent on that deal and also add in the, looks to me like about a $33.50 gross rent, what the OpEx would be on that building? And then was it a full RFP process or how did the deal come about?.

Okay. So just to address your first question, this is a full government procurement process, so it went through with prospectus approval, as well as through the various different stages. So we responded to the request for proposals that were issued by the government.

And in their request for proposal, they basically say to all of the bidders, in order to comply and meet the minimum requirements of the proposal, you must provide a certain amount of allowances, which includes the basic tenant allowance, as well as security, as well as what they refer to as a warm lit shell. And with the leasing commission as well.

So those numbers add up to the bulk of the expenses in terms of what we had to put into the deal, not a whole lot in terms of base building expenses. In terms of the OpEx on a building like that, you are probably looking about $12 per square foot and in terms of the free rent; I'm not going to comment on that..

Okay..

So John, let me pipe in on this because Mitchell had all of his partners involved in this decision and in this deal. So a couple of things. Number one, and I said in my brief remarks that this was a must-do retention. So this was a 350,000 square foot odd deal. So it's a 370,000 square foot deal.

We were very reluctant to spring another 370,000 square foot hole, number one. Number two, in the negotiations, the financial deal is rugged. There is no doubt about that, but we – and if this was a freestanding deal, you might not have done it; you might have walked away from it.

But the way we looked at it was that if we didn't do this deal, there was a likelihood based upon the current competitive position in the marketplace that that space might be empty for two, three years. Who knows? Certainly not one year.

So when you bogey the deal against having a rent paying tenant in occupancy versus having an empty building for another number of years, the financial comparisons get to be tolerable.

The last part of it is, and Mitchell has said this on this call and prior calls, we were able to orchestrate a musical chairs with this important client so that he -- they vacated a building right on top of the Metro, right at 18th Street, right at the entry to Crystal City, which we think is probably one of our best one or two buildings and is going to be a prime candidate for redevelopment and we will do very well with that building that they are vacating.

And they are moving down the block to a building, which is in a lesser location, which could remain vacant for two or three or four years. So that is the logic of it. We understand the economics of the deal and I'm just trying to give you just a little bit of color as to what our thinking was..

Great. A follow-up. Just one – couple quick add-ons. Refresh my memory, 1215 South Clark, what is the cross street there and what was the roughly year that building was built, floor plate size, et cetera? And then second, Mitchell, they ultimately took 370,000 square feet.

Do you have any sense as to what their square footage was in the prior space, i.e.

was it an upsize or downsize or a lateral equal move in size?.

Sure. So let me see if I got all of those follow-ons. I think you may have exceeded the two questions. But with respect to – just to go back to your earlier point, your total package number that you quoted that you were sort of reverse engineering is too high of a number. It is lower than the number that you quoted.

The building is basically at Crystal Drive and 12th Street and also intersects at South Clark. It's at the North end and it's sort of one long block at that point away from the Bartlett in Pentagon City that we are building at 12th Street in terms of the orientation.

The building is 1980s stock and the building itself is about – the main building is about 350,000 square feet, so they spill over into more than just 1215 South Clark. And the floor plates are in the mid-20s per floor on a per square foot basis.

And the final question in terms of size, we talked about this on the last call, they currently lease 411,000 square feet.

They will ultimately lease 371,000 square feet, so there is a bit a reduction, although those leases for the balance between 371,000 and 411,000 square feet continue for another 3 to 5 years whether the government backfills that space or what remains to be seen, but we will continue to lease for at least another three or four years the full 411,000 square feet to the Marshals through the GSA..

Great. Thank you very much..

Thanks John..

John Bejjani with Green Street Advisors is on line with the question. Please proceed..

Good morning, guys.

Steve or David, for the couple developments you've announced the last couple quarters in the Chelsea area, were the deals structured as JVs out of necessity, or why not try to go solo for smaller projects like that?.

One was a JV, which we were invited into by a land owner and we had no choice. And the second we JVed with an adjacent property owner. So in both cases, they were sort of JVs of necessity..

Okay.

Are you able to share a projected development cost on the West 22nd project? And I guess in general should we expect to see you guys pursuing more ground-up development given where current asset pricing is?.

The answer is we are not ready to share the development statistics currently. These are fairly new transactions. We will publish them at the appropriate time. The second thing is that our company historically on a legacy basis for 30, 40 years has a massive development expertise in big projects and small projects.

We did the multi-billion dollar Bloomberg Tower. We're doing the multi-billion dollar 220 and more and more and more, we have that expertise in Washington, we have it locally. We also have redevelopment capability where we take an office building and totally renovate the front of the house, the back of the house, the systems and what have you.

So it is a skill set that we have and we use as we are able to find appropriate opportunities and as the markets turn. So we actually like development.

We prefer to buy somebody else's building at $0.80 on the $1 at the right part of the cycle, or $0.70 on the $1, but we do have the development skills and we do partake at we think the appropriate time..

All right. That's it for me. Thanks..

Thanks John..

Vance Edelson with Morgan Stanley is on line with the question. Please proceed..

Thanks and good morning.

Maybe for David, if we could focus on Midtown South for a moment, could you comment on whether the TAMI strength is bringing others that need to be close to those types of tenants to the neighborhood and perhaps having a multiplicative effect when you think about the venture capitalists and lawyers and others that might want to be in the vicinity? Are you seeing any benefit there? Thanks..

Remember, TAMI is a broad kind of category that includes technology, advertising, information, media. So we are seeing those tenants migrating effectively to areas that you are referring to, to Midtown South.

Have we seen a significant migration there of some of the other service professionals that may be working with some of the TAMI tenants or lawyers, et cetera? I would tell you I don't think the answer to that is yes. We have not really seen that.

In terms of the financial service guys, the venture capital guys, as you look at the sites that we are redeveloping right now, as you look at what we are doing over at 85 10th and there's another deal that we are working on basically in that kind of west side market, the finance guys, while we think of them in the traditional, as I referred to it this morning, FIRE tenancy, the reality is they love these kind of locations just like the TAMI guys do..

Okay. Thanks for that. And then just sticking with Midtown South, something we've been hearing about is the higher property assessments and resulting higher taxes for buildings that are just much more valuable today than in years past.

Do you have any thoughts on the higher property taxes making their way into rents over time and perhaps taking some of the appeal out of Midtown South if this narrows the gap at all with rental rates elsewhere, or is that just not an issue?.

One thing that seems to be a truism is that real estate taxes go up over time. Real estate taxes historically there was a wide gap kind of in taxes as it related to Midtown South and what I will call traditional Midtown. These increases in taxes get phased in based off of an income and expense methodology over a five-year period of time.

So as the rents have gone up in Midtown South, the question is, Vance, are we going to continue to see a narrowing of the gap of the real estate taxes, which will be passed through to the tenants in Midtown South and Midtown. I think the answer to that is yes..

But Vance, what's happening is, is Tom Friedman wrote a book said the world is flat. Well, David is going to write a book that says Manhattan is flat.

So it's not just the real estate taxes that are starting to rise; it's the rents have risen so that if you look at the various submarkets, whether they be Midtown or downtown or center of town, whether they be North – whether they be on the West side or center of the island, rents are converging as are asset prices.

So you can spend over $1000 a foot for a building that's in Chelsea right now; that was unheard of. And so the point I'm trying to make is that the island is flattening, rents, asset values, tenancies are all now getting to be very similar across the entire – each submarket of the island..

Okay. Makes sense. I will leave it there. Thanks, guys..

Ross Nussbaum with UBS is on line with the question. Please proceed..

Hey, guys. Good morning.

Steve, on 220 Central Park South, would you, at this point, take the over – if I just simply took the $1.1 billion that you roughly said you sold for a third of the building, multiplied by 3, what is your confidence level at this point that you're going to end up with greater than $3.3 billion of total sales there?.

Ross, I really don't want to speculate. We're going to do – we are thrilled with it. We are delivering the best product that has ever been delivered into the Manhattan residential market. So we are very confident in the quality of the product, the design.

We are very confident in the location and we're going to do very well with it, we're going to get a fair price for a fair product and I don't want to speculate as to where we are going to end up..

Okay. Fair enough. My follow-up is a corporate governance topic and I guess the question is, and you've talked about this a little in the past, which is you've got a staggered board and I think in the past you have acknowledged that it may not be ideal, but wasn't necessarily changing anytime soon.

But beyond that, I sort of look at the composition and say you've got four Board members over the age of 75, you've got three of them who've been on the Board for more than 30 years.

I guess the question is, with the “increased” level of activism that has been going around the REIT sector in the last year, does it cause you to rethink the structure and/or composition of your Board as you go forward?.

Take out Warren Buffet's annual report and give it a quick read. I think his Board is older and more seasoned than mine by a long-shot, although we can't – anyway, so the long and the short of it is, is our Board is extraordinarily competent. They are senior.

They have been involved in the management operations and development of the company for a long time. And the answer to that is, is our Board thinks that they are very competent, qualified and doing a great job, as do I. Now we believe in youth. We believe in change; we also believe in continuity.

And so every once in a while, we recruit and attract a new Board number and if you look at the proxy – I don't want to single anybody out, but we have added over the last years an extraordinary individual, another one and another one. And we're going to continue to do that.

So I know some of the folks that the activists have been putting on some of these boards and I can tell you that the individuals that are on our Board are not more competent, much more competent. So there you have it..

All right. Appreciate the thoughts. Thanks..

Vincent Chao with Deutsche Bank is on line with the question. Please proceed..

Yes. Good morning. I have a question on the balance sheet here. You mentioned floating-rate debt going up to 23%. I think it was about 17% last quarter. And you've got RiverHouse coming on in the next quarter here.

Just curious how high you are willing to let that go up to, or if there's plans to maybe reverse that percentage over the next couple quarters..

That's a very difficult question. It's a very sophisticated question. We have no bogey with respect to the ratio and the mix of fixed-rate and floating-rate debt.

Generally speaking, we look at each asset – as you know and I wrote about it in the shareholder's letter this year, we have more project-level, non-recourse debt than we do have unsecured guaranteed debt. So that's number one in terms of the mix of debt.

Number two is, is that, if an asset is mature with long-term leasing and stabilized income, that's a candidate for fixed-rate debt? If an asset is on the for-sale list, or if it's in the development pre-stabilization stage or if we think the income is going to change, then it is more of a candidate for shorter-term floating-rate debt where we can prepay it.

Our decisions are based upon two or three things. One is our view on where interest rates are going, which is a very, very risky thing to start predicting the interest rate market. Number two is the status of the asset and what is a better capital structure for the individual asset.

And the third is, is that I will tell you that, call me crazy, but if you look at a 25-year cycle, the price of shorter-term floating rate debt has been vastly more favorable to fixed-rate debt in almost every year of the entire 25-year cycle. So having said all that, we do it asset by asset. We have no bogey.

We do understand that fixed-rate debt is something that is -- you can model as opposed to floating rate debt, which fluctuates. And there's one other thing. Floating rate debt has the advantage that you can pay it off generally at par with no penalties or almost a very small penalty.

Fixed-rate debt, which has defeasance and the defeasance goes to a treasury, a short-term rate, is very, very, very expensive to pay off. So when you take fixed-rate debt, you have to be pretty much resigned that that debt is going to last on that asset till maturity.

So those are some of the things that go into our decisions and we think that a capital structure which has one quarter floating and three quarters fixed is absolutely an appropriate – certainly not an out-of-line capital structure..

Okay. Thanks for that. And then another question just --.

Hang on, by the way, let me just add a couple more things to that. We, and many of the blue chips in our industry, have very, very low rates of debt. So we have a debt ratio, which is somewhere in the low 30s of percent of the value of our assets.

So in terms of a risk point of view and what have you, the better companies in our industry, ourselves included have very low levels of debt. So that is also something that is very much in our mind as we – and we will continue that way – as we manage our balance sheet..

Okay. Thank you for that. Just another question, moving back to street retail. Last quarter, you talked about – there was a question about tourism and if there was any impact on street retail and you had mentioned hotel bookings as a little bit of an early warning sign.

I was just wondering if you could update us on what you are seeing as it relates to tourism's impact on street retail..

Sure. Just, anecdotally, the hotels are getting a little bit impacted by the strength of the dollar. Obviously, retail will be impacted by it. We don't see a lot of that. What we do see is that, asset prices have gotten extraordinarily high and therefore, rents that owners are asking the retailers to pay are also very high.

So the single biggest thing that is affecting the street retail business is the high rents, which I think has a much larger effect than the fluctuations in the dollar..

Okay. Thank you..

Derek Van Dijkum with Credit Suisse is on line with the question. Please proceed..

Hi. Good morning. I was wondering if you could just give some more color on pricing for fully marked up street retail leases..

Can you put some bones on that question for me, Derek?.

Well, you have been borrowing street retail call it sub 3 caps and now, for example, the St. Regis property.

Now that you have fully marked up the rents at that property, what do you think market pricing for an asset like that should be?.

Let me see.

I think what you are saying is, if you have a fully stabilized retail asset, which has a lease, which is at market as opposed to below market, what would the cap rate be?.

Correct..

Okay. Well, the answer to that is it depends upon the submarket in New York and it depends upon the quality of the asset. So if it's a so-so asset on 2nd Avenue or something like that, I don't know. But if it's a first-class asset in prime 5th Avenue or prime Times Square, or whatever, I think it's going to be probably sub 4..

Okay. Interesting. Thank you..

Now you have to remember, the street retail business, these assets are the scarcest asset in all of real estate. High street retail is a very, very – there's a very limited supply of this merchandise..

Okay. Thank you..

Michael Bilerman with Citi is on the line with the question. Please proceed..

Yes. Steve, I just had two quick follow-ups on cap structure. In your shareholder's letter, you talked about unsecured debt and secured debt and I'm just curious your view today.

Is there anything – you only have two issuances left – is there anything in that unsecured covenant package that you don't like? And then as you think about – you made a comment in the letter about taking leverage up on the secured, in assets up to 60% and effectively unencumbering a bunch of others.

Do you think you are going to do that by leveraging up assets or by issuing unsecured debt to pay down secured debt?.

We are not going to do it either way. So first of all, Vornado is an investment-grade company. We covet our investment grade. We live by the covenants in our debt instruments. You said we don't like any of them. The answer is we have huge tolerances to any of them so they really don't influence the management of our business at all.

Said again, we're investment grade. We are going to stay investment grade. We love our covenants. We honor our covenants and we have enormous tolerance to each of our covenants, which means we have lots of capacity. Michael, your second question was – I put a couple of paragraphs in my letter this year to give a sum of how I think about debt.

And the point of it is, is that and the point I was making was that we have I think it was $8 billion or something like that of project-level secured non-recourse debt against $20 billion of assets at market. So that ratio was kind of out of kilter is the point I was making.

So we have – the secured debt is at 40% of those assets that secure the debt, whereas a normalized ratio might be 60%. So therefore, if we wanted to, we could do one of two things. We could take the assets down from $20 million to $16 million and unencumber $4 billion of assets or we could take the debt level up higher.

We have no current intention of doing either of them. That was just a little bit of arithmetic to give you and your colleagues some idea of how we think..

Right, I just didn't know if you were going to be a little bit more aggressive overall on the balance sheet to make that happen, or if there was something on the unsecured side that --.

We have no current intention of being aggressive in our balance sheet and we have a current intention of being extremely conservative, being cash heavy, being debt light as we always have been..

And then my second question, just sticking with capital structure and thinking about the stock, you have been reluctant to do a share repurchase program in the more recent history of Vornado. Obviously, you were very active a number of decades ago.

I guess how would you think about using some of your firepower to buy back the stock at these levels and if you weren't going to do that, should be expect more strategic type of moves like you have been doing to narrow that discount relative to your perception of where NAV is?.

Michael, I hate our stock price. I hate it. So that's step one and I take it personally. Step two is, what we are going to do about it. Well, over the last two some odd years, we've done a lot about it.

And some of the things that I put in our letter this year was to subtly indicate that we intend to continue to do and manage the company, manage our strategy, manage our business, manage our balance sheet to enhance values and realize the values that we think our business is worth. So I hate our stock price. I think it's – I just hate it.

That's enough. And without being specific, there are tools that we have to begin to – whether it's spinning this or buying that or doing – but we have nothing specific to announce now and I think – I did put a section in the letter this year about the history of buybacks and the history of issuing stock.

And we have a history of buying stock back when it is much cheaper. So I don't have anything to say about buybacks and I have nothing to say about spins. All I have to say is I hate our stock price..

Okay. Thanks, Steve..

There are no further questions at this time..

Thank you all very much. I would make one observation and that is we learn as much from these calls and your questions and the interaction with you all than I think you do with us, so we value the interaction and we will see you next quarter..

Thank you, ladies and gentlemen. This concludes today's conference. Thank you for your participation. You may now disconnect..