Cathy Creswell - Director, IR Steven Roth - Chairman & CEO David Greenbaum - President, New York Division Joseph Macnow - EVP, CFO & Chief Administrative Officer Michael Franco - EVP & CIO.

Michael Belman - Citi Jamie Feldman - Bank of America John Guinee - Stifel Vikram Malhotra - Morgan Stanley Steve Sakwa - Evercore Alexander Goldfarb - Sandler O’Neill Jed Reagan - Green Street Advisors Nick Yulico - UBS.

Good morning, and welcome to the Vornado Realty Trust Third Quarter 2017 Earnings Call. My name is Adrienne and I’ll be your operator for today’s call. [Operator Instructions] I'll now turn the call over to Ms. Cathy Creswell, Director of Investor Relations. Please go ahead..

Thank you. Welcome to Vornado Realty Trust’s third quarter earnings call. Yesterday afternoon, we issued our third 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 maybe 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; and Joseph Macnow, Executive Vice President, Chief Financial Officer and Chief Administrative Officer.

Also in the room is Michael Franco, Executive Vice President and Chief Investment Officer. I will now turn the call over to Steven Roth..

Thank you, Cathy. Good morning, everyone. Welcome to Vornado's third quarter 2017 call. I will start with our third quarter financial results which were truly outstanding and industry leading. Please note that this is the first quarter that we are reporting to the New York-centric Vornado RemainCo without Washington.

GAAP FFO as adjusted for comparability for the quarter was $0.99 per share compared to $0.93 per share last year, a very strong 6.5% increase. Cash FFO as adjusted for the quarter was $0.87 per share compared to $0.70 per share last year, a truly outstanding 24.3% increase. Our same-store metrics are also outstanding and industry leading.

Our York New segment EBITDA was positive 5% GAAP, and positive 13.8% cash. theMART in Chicago was positive 11.3% GAAP and positive 17.0% cash. 555 California was positive 1.7% GAAP and positive 13.2% cash. This quarter's outperformance validates our strategy of deconglomerating and focusing on RemainCo's New York centric business.

And if past performance matters, I think it does. Vornado RemainCo has been the leader among all of the blue chip peer in same-store NOI growth since 2006. Please see Page 13 of our September 2017 deck on our website. This is one of my favorite charts. David will dive in shortly, here are some of the highlights.

New York office leased 452,000 square feet, 405,000 square feet a share with record-breaking average rent starting at $83 per foot and that's outstanding. Mark-to-markets were 11.9% GAAP and 11.2% cash. We are full at 97% occupancy up 30 basis points from last year. Demand for office space in New York is robust coming from all manner of users.

We invest in our buildings, they are developed and modernized, well-positioned to attract tenants across all market sectors. A few years ago I coined the phrase the island of Manhattan is tilting to the West and to the South. Today the hottest submarkets in town run from Hudson Yards to Penn Plaza and extend South through Chelsea and [indiscernible].

Anticipating these trends we have structured our office portfolio so that half of our square footage is on this district. In our New York street retail business, we leased 38,000 square feet including a 16,000 square foot leased at Safora at our 1535 Broadway in Times Square. This store will be Safora's largest in the U.S.

and will replace their existing store across the street which we understand is their highest grossing in the U.S. As David will get into in a moment, we are in final drafts of a 12,000 square foot lease with a major national retailer also at 1535 Broadway.

With these two deals we will be 100% leased at our two Times Square properties which are the two best platforms on both sides of the [indiscernible]. New York retail occupancy was 95.7% up 40 basis points from last quarter. Retail mark-to-market for the quarter were negative 20.5% GAAP and positive 2.5% cash.

The negative GAAP mark is the victim of a single midblock 20,800 square foot a share, short-term renewal at 1290 Avenue of the Americas. The rent on the expiring lease was marked up as a SaaS 141 adjustment when we acquired the building in 2007. Excluding the SaaS 141 adjustment, the GAAP basis increase would have been positive 8.0%.

We chose to extend this bank branch tenant for three years with us having an early termination right at the same rent depending on redevelopment of the states.

Notwithstanding our recent success in Times Square which by the way demonstrate that the best real estate wins the race, as I have said before the general retail market even on the streets of New York continues to be quite soft.

In my annual letter to shareholders last year on Pages 15 through 17, I laid out my views on retail and general and on our retail business in particular including 2017 cash guidance. I reaffirm that guidance today. In fact, our budget show that 2017 may even come in a couple of percent higher.

I will repeat what I said on last year's call, our Upper Fifth Avenue on Time Square retail assets where the majority of our retail value is are buttoned up for term, with great tenants and great [guidance]. These are great assets, they are unique, extremely scarce, irreplaceable as on the highest quality of the world. Here is an interesting fact.

In all of our Upper Fifth Avenue and Time Square properties, we have only one lease expiry in the next five years, that being the Massimo Dutti store, a Zara division at our 689 Fifth Avenue, which expires in mid-2019 at a below-market REIT. Now turning to the investment of financing markets.

Investment sales activity is down appreciably from last year, largely a function of buyer caution, lesser quality product being brought to market and owners electing to refinance rather than sell. Demand and pricing from office assets located South and West in Manhattan is very strong as evidenced by the recent Twitter, Red Bull and St.

John's building sales. We also believe that if a true trophy asset were brought to market, pricing would be as strong as ever. Moreover, while it has been the much discussed slowdown in Chinese capital flows recently, that continues to be robust interest in New York assets from all manner of capital sources both domestic and foreign.

Retail investment sales are suffering from buyer skittishness. Debt markets for New York assets are on fire and remain as liquid and strong as we have ever seen with all markets CMBS, Bank, life companies that even the [indiscernible] and BPs markets worldwide open at very competitive pricing.

And as I just said, given this relative strength of the debt markets many owners are opting to refinance rather than to sell. We will continue to prune and focus the business. We have identified another $1 billion of assets that we will be selling over the next several years and that does not include the expected proceeds from 220 Central Park South.

Let me conclude by saying as many of you know I had bypass surgery in mid-August. I am now better than new and have been back to work for a while now. I want to thank everyone for your good wishes, very much appreciated. Thank you. Now over to David..

Steve thank you, and good morning everyone. As in our last few calls, I'll start by offering some thoughts on the market and then dive deeper into our third quarter activity. Let me first start with the critical employment measure we track.

Office using employment which had 14,000 new jobs through the third quarter is well within the range we like to see of 10,000 and 15,000 annually that we estimated as needed to absorb the new supply coming online over the next five years.

The story for this year continues to be one of strong growth in professional and business services, as well as resurgence in financial services employment which in the third quarter finally reached its pre-financial crisis level. Some of these jobs were offset by a very modest decline in [TAMI] jobs.

That is not to say however that tech employment in this city is dropping. All signs point to continued growth in technology positions within non-tech companies.

As I discussed last quarter, when it comes to pursuing talent both new and old industries are converging on the same group of people driving century-old companies such as Aetna, Allstate and ConAgra to creative class buildings that can better attract talented young professionals.

A recent report by the state comptroller estimates that out of 240,000 technology jobs in New York City, over 46% 112,000 jobs are tech jobs in traditional companies from retail to healthcare to insurance and to banking.

And there is reason to anticipate continued strong growth in the years ahead including with the recent opening of the Cornell Tech campus on Roosevelt Islands. That’s just one of an array of cities date and university efforts that are underway. On the market leasing front, performance has been robust through the third quarter.

You can see this in the town of all of the brokerage reports. JLL's most recent report is entitled “strength on Manhattan's West Side drives leasing higher and vacancy lower”.

And Cushman Wakefield they state “The market office performed well in the third quarter of 2017 highlighted by an uptick in leasing and positive absorption” Total leasing in Manhattan reached 9.4 million square feet in the third quarter with year-to-date total leasing now at 30.6 million square feet continuing on track to approach the record leasing year of 2014 when citywide 42 million square feet of leases were completed.

Overall vacancy improved 20 basis points to 9%, average asking rents in Manhattan approached $73 per square foot, absorption was a positive 2.3 million square feet and sublease space declined by 6.2%. With major new lease commitments by Blackrock, Amazon and Accenture in Hudson Yards and Manhattan West.

We believe our asset in Penn Plaza with its unrivaled transit access both our existing buildings and our development opportunities continue to become more and more valuable. Let me turn now to our portfolio where we had a very strong third quarter. We remain full with our office occupancy up 30 basis points to 97%.

We leased over 450,000 square feet of office space in the quarter in 33 transactions. With average starting rents of $83 a foot, the quarter reflects both the quality of our assets and the breadth of our multitenant portfolio.

100,000 square feet of our leasing activity or 22% or that triple digit numbers, and at One Penn Plaza we achieved $70 average starting rents, a new record. While RTI's and leasing commissions were on the high side that is in large part a reflection of the average lease term which approached 10 years.

Our mark-to-markets remain strong 11.9% GAAP and 11.2% cash. These mark-to-markets are a result of the success of the redevelopment efforts. Over the past five years since the start of 2013 mark-to-market and our office portfolio have averaged 18% GAAP and 13% cash.

And same-store numbers in the office portfolio also remain industry-leading during the third quarter at 7.1% GAAP and 13.5% cash. As with our mark-to-market our same-store performance has remained at an industry-leading level over an extended period of time. Since 2013 again for five years we have averaged same-store growth of 4.6% GAAP and 7.7% cash.

In Penn Plaza work is now well underway to transform the Farley building into the dramatic Moynihan train hall with 730,000 square feet of best-in-class creative office space on unique floor plates and 120,000 square feet of ancillary retail space.

In mid-August, Governor Cuomo celebrated the start of major construction in the cavernous space that will become the train hall where our construction partner Skanska has been busy cutting openings down to Penn station platforms for the new escalators and elevators.

From the street you can see the two cranes building the soaring skylights that enclose the newly 100 foot high main train hall. We have begun to introduce the office space for tenants and brokers and the early response has been a wow, as you'd expect for an asset as unique as this one.

Imaginary actions we get when we take people up onto the roof and show them the potential for a 50,000 square foot outdoor roof deck amenity space in the heart of Manhattan. It's truly spectacular.

As you would expect, the Farley building was front and center in our submission to the city for inclusion in the city's proposal to host Amazon's HQ2 headquarters. We pointed out Farley could accommodate Amazon's near-term needs with significant room to grow in the existing buildings and development sites we own in the Penn Plaza district.

We were pleased to see in the public materials that the city released Midtown West anchored by Penn Plaza was front and center in the proposals to Amazon. The city noted that the area is accessible by 15 subway lines, four commuter rail lines and Amtrak with direct connective in place or plan to all three regional airports.

With Amazon already having committed to 800,000 square feet in two sites that bookend our Penn Plaza holdings, 450,000 square feet at our own 7 West 34th Street and an additional 360,000 square feet in Manhattan West across the street from Farley but the New York win HQ2 raise or not, Amazon will have a long-term significant presence in the district for years to come.

With the end of the year approaching, we have a negligible amount of 2017 office lease expirations remaining. At 97% occupancy, we are full. Our single largest block of space currently available is 70,000 square feet in One Penn Plaza.

We see a relatively quiet fourth quarter and Glen and his team continues to address our lease expirations of 950,000 square feet in 2018 and 775,000 square feet in 2019.

Over a third of our lease expirations over the next two years are concentrated in One Penn Plaza, where we are now finalizing our plan for the total redevelopment and modernization of this asset including a new lobby, store fronts, plages, amenity spaces and state-of-the-art infrastructure.

We have a proven formula for repositioning our assets, just look at our track record at 90 Park Avenue, 280 Park Avenue, 1296 Avenue, 330 West 34th street and the Mart, to just name a few. We expect to commence this redevelopment of One Penn Plaza next summer.

Turning to our irreplaceable High Street retail business, as Steve mentioned, the highlight of our activity has been the completion of a 16,000 square foot flagship lease with Safora at 1535 Broadway at the heart of the heart of the bowtie in Times Square.

We also are in final drafts for another flagship lease the major national retailer for the remaining 12,000 square feet at 1535.

The balance of our retail leasing activity for the third quarter related to the renewal of two leases and the base of our office buildings not what we would call "High Street Retail" at cash mark-to-market of a positive 2.5%, but as Steve mentioned with a negative 20.5% GAAP mark-to-market, solely attributable to a FAS 141 purchase price adjustment, that was made back in 2007.

A same store numbers for our Street retail business for the quarter were strong positive 13.8% cash and a flattish negative 0.6% GAAP. Let me now turn to theMART in Chicago, where our leasing continues to benefit from our development efforts over the last several years.

During the third quarter we entered into a 36,000 square feet of office and showroom leases, at average starting rents exceeding $54 a foot. These leases represented mark-to-market of 36.4% GAAP and 23.1% cash.

Occupancy stands at 98% for the showroom and retail space and over 99% for office, demonstrating the extraordinary depth for space by existing tenants seeking to expand and new tenants looking to join our blue-chip roster.

As a result, we are in the process of taking back an additional 40,000 square of showroom space from the apparel tenants on the ninth floor in order to create more best-in-class office space. Our same-store numbers at theMART for the third quarter were positive, 11.3% GAAP and 17% cash.

Similar to our industry leading numbers for our New York performance, looking back over the last five years since 2013, our average mark-to-market at theMART have been 22.7% gap and 14.8% cash. That’s an average for the last five years.

Our average same-store growth at theMART over the past five years has been even more extraordinary at 8.9% on a GAAP basis and 8.8% cash. Let me repeat that one more time. At theMART, our same store increases both on a GAAP and a cash basis have averaged around 9% per annum through each of the last five years.

While it was a quiet quarter at 555 California Street, we were active at the adjacent 315 Montgomery Street building. Last quarter, I told you that we had two leases out for five floors representing 60,000 square feet. We completed those deals during the third quarter at $72 starting rents.

315 Montgomery, a historical building with good bonds and a great location just a few years back was a class D building with rents only $35 to $40 per square foot. Having completed our modernization of the 315 building earlier this year, we’ve now leased the total of 7 floors this year.

We have just 3 floors left to complete and leased up of this asset. And we’re in term sheets for negotiation for all of this space.

Let me just conclude by saying, our strong leasing performance in the third quarter is a reflection of both the continued health of our markets as well as a portfolio that is largely renovated and concentrated in the growth area of this city. And with that, I’ll turn the call over to Joe..

Thank you David, good morning everyone. I remind you that on July 17 of this year, we completed the spinoff of our Washington business, and accordingly our third quarter comparable results of Vornado RemainCo without Washington.

Washington results have been reclassified to discontinued operations and now included in non-comparable items for all periods presented, along with the $53.6 million of transaction cost in the quarter. Another non-comparable item in the third quarter was a $44.5 million non-cash impairment on our shares in Pennsylvania REIT.

We received Pennsylvania REIT’s operating partnership newness as part of the proceeds, when we sold them to Springfield Mall in March 2015. I reemphasize what Steve and David say. FFO as adjusted for comparability of 6.5%, is very strong.

Cash FFO as adjusted for comparability of 24.3%, the industry leading same-store EBITDA and NOI metrics, the positive leasing mark-to-market, and the occupancy in the high 90% up percent, all trends led into a truly outstanding results for this quarter for Vornado RemainCo.

And our continues effort to improve our reporting to shareholders, this quarter is supplement includes additional information, regarding our disclosure of trailing 12months pro forma cash NOI on page 9.

Specifically, we’re providing a summary by quarter of $183.7 million of incremental revenue from signed leases commences, as well as a $37.8 GAAP equivalent. We also have disclosed a $89.2 million of capital remaining to be spend related to this incremental revenue. Now, I’m turning to financing activities.

On July 19, our 25% owned joint venture that owns 330 Madison Avenue and 845,000 square foot Manhattan office building completed a $500 million refinancing. The seven year interest-only loan matures in August 2024, and has a fixed rate of 3.425%. The property was previously encumbered by a $150 million mortgage at LIBOR plus 1.30%.

We realized net proceeds of approximately $85 million, after repayment of the existing loan and closing cost. On August 23, our 50% owned joint ventures, that owns 280 Park Avenue, a 1.25 million square foot Manhattan office building completed a $1.2 billion refinancing.

This interest-only loans matures in September 2024 as extended, and has interest of LIBOR plus 1.73%. We realized net proceeds of approximately $140 million, after closing course and repayment of the existing loans, with were interest at LIBOR plus 2%.

On October 17, we extended one of our two $1.25 billion unsecured revolving credit facilities, from November 2019 to January 2022 with 2 six month extension option. This resulted us over subscribe and very well executed. The interest rate on the extended facility was lower from LIBOR plus 1.05%, to LIBOR plus 1%.

The facility fee remains unchanged at 20 basis points. The interest rate and facility's fees are as the same as our other $1.25 billion revolving credit facility, which matures in February 2021, with two six months extension option. Vornado RemainCo has no remaining 2017 consolidated or partially owned entity debt maturities.

2018 consolidated debt maturities are $120 million, and our share of partially owned entities 2017 maturities is $444.6 million. The largest of which is $275.6 million at our share for Independence Plaza, a three tower, 327-unit residential rental complex in Tribeca in which we owned 50.1% interest.

Excluding the financing on our 220 Central Park South Project which will self-liquidate as signed contracts close, our consolidated debt metrics are fixed rate debt account 78% of debt with a weighted average rate of 3.65% and a weighted average term of 4.2 years, and floating rate debt accounted to 22% of debt with the weighted average interest rate of 3.06% and a weighted average term of 3.6 years.

Debt to enterprise value is 27.1% based on last night's closing stock price. Consolidated debt net of cash to EBITDA is 5.9 times, including our share of partially owned entities debt other than 666 Fifth Avenue Office and Toys "R" Us debt net of cash to EBITDA is 7 times.

In closing, Vornado has a fortress balance sheet with modest leverage and well staggered debt maturities. Post to JBJS spin-off we have $4.1 billion in liquidity comprised of $1.6 billion of cash, restricted cash and marketable securities and our undrawn $2.5 billion revolving credit facilities. I will now turn the call back to Steve. .

Thank you. We happy to take your questions. .

[Operator Instructions] And the first question comes from Manny from Citi. Please go ahead. .

It's Michael Belman here with Manny from Citi. Steve, in your opening comments you've talked about I think you said $1 billion of proceeds from potential sales over the next several years. And I just wanted to get a little bit more clarity in terms of gross versus net to the company.

And what are the some of the big pieces that we comprise that $1 billion of proceeds?.

I think your question is what's in the $1 billion? Is that your question Michael?.

That is the $1 billion question. .

So we've got some stocks which are going to be for sale. I mean they are Lexington, 10 REIT, Urban Edge et cetera. So we've got a it could be the better part of the $0.5 billion of common stocks. We have several assets which were not contributed to the JBG Smith spinoff which are in the Washington market and basically are not in our core.

So those amount to whatever. We have some debt positions that are coming do, we have some shopping center that we still retained that will be sold et cetera. So when you added all up, it comes to significantly more than be, quite a lot significantly more than $1 billion, number one.

Number two, the sales will come over some of them have some tax protections, some of them have some other reasons locked out because of spinoff regulations et cetera. But over the next several years, we will realized over $1 billion from that.

And what's more, that doesn't include the expected proceeds from the completion of 220 Central Park South which will be as well a very significant number. .

And then just secondly, David talked about starting 110 the redevelopment, a lot of the things you're going to do.

Can you talk a little bit more about sort of the total budget for that plan and whether there's anything you're waiting for from city to state to go forward and do that next summer or is there other parts of the 10 Plaza redevelopment that you would want to open before you get some of that funding from different government agencies?.

The One Penn redevelopment does require some actions by city planning. We expect to have those actions in place in the second half of next year although we do expect in fact to commence the redevelopment program even in advance of those final approvals. Steve, you wanted to comment about the budgets at this point on..

Well let me just tack on to what David said. The city planning approvals that we did our serial they really involve - it’s the conversion of Plaza space into - so we’re jiggering that around a little bit to the benefit of we think the public in the building.

If we for some untoward reason which won't happen but if it did happen that we don't get that approval, we still have a major redevelopment and improvement of that asset that will proceed okay. So we look at as basically unconditional.

Now with respect to the budget we have not published it yet and we will likely publish it may be in the – when we report fourth quarter..

And Steve it’s great that you're back better than ever..

Thank you very much Michael. By the way with respect to One Penn, One Penn is a massive assets its 2.6 million square feet of rentable space it dominates the district we are now achieving $70 starting rents.

So the asset is its an important asset, it sits right on top of the train station and we had very, very, very high aspirations for the future growth of this asset..

And our next question comes from Jamie Feldman from Bank of America. Please go ahead..

I know you gave some steps on leasing spreads first thing for retail but I guess as you think through the leases you signed and the potential lease you have in the works at Times Square.

Can you talk through kind of what the same-store outlook looks like over the next few years given that it sounds like things are pretty much buttoned up?.

You're talking about retail office or both?.

Street retail..

Street retail is soft we said that this is the second year now one might say it's a challenging environment for street retail. We believe, if we can hold street retail level until the cycle ends that would be doing very well. And we think we will - so we go into this period with the following weapons.

Okay, number one, we have an extremely low basis in this great green street retail portfolio. So we have flexibility to be competitive that other competitors don't. Number two, we have very, very low debt on this portfolio.

If you take our flagship assets which are our Fifth Avenue assets and our Times Square assets you put them together, we don't have $1 billion of debt we have somewhere at 800, some odd billion dollars of debt on that which is against the portfolio that is five or six times more valuable than that. So maybe we have below 20% debt on these assets.

So those two things low basis low debt puts us in a very competitive position. Next, these assets are the very best assets in the marketplace and these are the assets that retailers need to have. So that also makes us very competitive. Next we have long-term leases on all of the Fifth Avenue and Times Square assets.

We are leased up for term, I mean we have one extra in the next five years as I think we said and this is all with very, very great retailers and very good credits. Almost all of those leases have upticks in them and I think we published recently that we had if you look at our portfolio there are $8 million is that GAAP or NOI..

NOI.

We have $8 million of cash books in our retail portfolio which will protect the portability to some degree. Now there are going to be lease rolled out, they will be insubstantial and in relation to the multi-hundred million dollars I mean over $300 million of income coming in they will be insubstantial.

We will compete, we will keep our portfolio for we think we are in a very, very strong position..

And then I guess as you're thinking about the future, where would say rents are versus the peak in the key sub markets?.

I mean that's a very difficult - this is a very thin market Jamie where there are very few tenants trolling there are very few deals that are being made okay, I can tell you that the two leases that we talk about here in Times Square.

The Safora lease and the unnamed lease which we expect to be signed very, very shortly they are within spitting distance of the top tick okay and they are fair rents which the retailers can make a lot of money and so what I'm saying is - they’re within spitting distance of the top tick.

We believe that while that may not be atypical in other words if you have to look for the clearing price when there are no tenants out there that could be very bloody that does not have any characterization of our portfolio..

And then just last, any thoughts on we work Lord & Taylor deal and what it means for either your 34th Street assets or retail or office in the city?.

I wrote about we work in my last year's letter, we know these folks we know them well. We think what they're doing is unbelievably impressive.

I won’t comment on valuations, but I think that - we welcome them as a neighborhood, we’re happy to have them and we think they’ll improve, I think that obviously this was a financially driven transaction that recapitalizes Lord & Taylor and so I think that’s good.

The fact that Lord & Taylor will be closing or either shrinking down to 25% of their previous store or maybe even closing it entirely is of no moment whatsoever to us..

And our next question comes from John Guinee from Stifel. Please go ahead..

Steve, assets are better than new and the CEO is better than new congratulations, question?.

Is that a well wish, thank you..

That is a well wish. Joe looks to me like your run rate on your G&A is about $140 million, DSPs around 111 million SO grain is about 100 million and that includes a fairly vibrant DCE business would probably cost him about 20 million a year.

What you think about your G&A in 2018 given that NAV discounts matter less and cash flow matters more?.

We have to reconcentrate our assets on reducing G&A. I will tell you that we plan to publish in the supplemental analysis of G&A which gives you a better shot of understanding. We still supply services to Urban Edge that shows us fee income and G&A. We supply a lot of services to JBG Smith that shows us fee income and G&A.

We service Alexander's that fee income and G&A. So we want to do a better job of portraying you to real, real net rate of G&A but that is high and we have to work on it we’re committed to work on it..

And then the second question, tax issues on your LXT stock your Urban Edge stock your Penn REIT stock are you able to sell these without incurring a tax hit or are these all going to be taxable transactions?.

LXT is - we have basis that is about 80% of the market price. So there will be small, I think 20% of the sales proceeds will be taxable, so that step one.

On Urban Edge, what's our basis in Urban Edge?.

No tax. .

What?.

No tax on Urban tax. I'm sorry, there is..

So just looking at Urban Edge. It looks like Urban Edge we have basis for 50% of the market value and 50% will be taxable.

And the last one Penn REIT, Penn REIT I think is tax protected for of unknown, what?.

No tax. .

It is tax protected, we can’t sell it. We have a lockout on sale until a individual passage.

What’s the tax basis on Penn REIT?.

We won’t have taxable income allocated to us from the sale of Penn REIT. So when Steve gave you the $1billion number before, that was cash retained by Vornado. There are some taxable gains, most of which you just heard Steve talk about that the absence of other capital loss carryovers would be distributions to shareholders.

But the $1 billion you talked about was cash we retained. .

All right. Thank you. .

John, let me say slightly in other way and Joe is absolutely correct. These assets are slightly different than most of our buildings in our portfolio. And that is that we are able to sell most of these assets, maybe even all of these assets and retain almost all of the proceeds. .

And the next question comes from Vikram Malhotra from Morgan Stanley. Please go ahead. .

Congrats Steve as well for brief coming back well and healthy. Just a follow-up on the Street retail business. In your opinion, and you have laid out well kind of the bigger broader challenges with retail and how the Vornado portfolio is different.

In your view, where are we in the correction? Said in other way, we seen rents come down at least asking rents as reported by the Real Estate Board of New York.

Where are we in that correction? What are you monitoring? And is there any signs in certain submarkets that things are turning?.

Yes, there were bottom Fishers that are coming into the market, I am sorry about tenants. There is a pickup in activity. I am not willing to call a bottom. .

And then just as a follow up. Some of your comments on the redevelopment of Penn Plaza. Can you give us some color on and maybe that’s that includes Farley as well. Can you give us some color on the types of conversation you are having with perspective tenants? Let’s say, the Amazon headquarter deal does not come through.

Are you having conversations or, this make sure discussions with large which users that may needs the large amount of space? And is there demand for that type of space in the Penn Plaza area?.

The answer to that is there is demand, we are in conversations. But they're not in a position to talk about any speculate on any event..

And your next question comes from Steve Sakwa from Evercore. Please go ahead..

I guess David, just on the office side.

Can you just maybe talk about the discussions you are having with tenants kind of on the 2018, 2019? And kind of where is the sort of sense of urgency to kind of due deals, or tenants coming in early trying to get renewals done? And just sort of what is that dynamic look like today?.

Listen our portfolio is a real multitenant portfolio. What I said earlier is the single largest piece of vacant space we have, the 70,000 square feet in the entire portfolio. So as you look at the expirations that we have coming up over the next couple of years, much of it is tenants that have 5,000 feet, 10,000 feet, 30,000 feet.

And these are regular discussions that we have with tenants all the time. We are in active dialogue right now with tenants in the portfolio as well as some new tenants of somewhere in the 440,000, 450,000 square feet. And we have proposal of out going back in forth. In addition to that of the better part of 800,000 to 900,000 square feet.

Realistically, what I’ll call them normal locking and tackling. The question that Vikram had asked about, some of the big fish hunting that realistically relates today to what we have in the Farley building.

And as I’ve said on this call and on the prior call, as you begin to witness and understand the grander of this extraordinarily full blocked building. The truly unique nature of these footprints, where we can deliver 250,000 feet of floor. It is extraordinarily attractive to the creative types of tenants. I’ll give you just kind of one data point.

And that is in early August, the entire senior team here, went to the West Coast. And we’ve spent the better part of 2-3 days, visiting some of our tenants and customers, as well as other companies, just to understand the nature what these campuses are in Silicon Valley.

You go to Facebook, and you’ll see a new Frank Gehry building, which is a one story building, parking at the base of 450,000 square footprints. As you think about that, that’s 10 acres, with the park on top. You go to Apple’s headquarters, it’s 820,000 square feet, first floor with the park effectively in the middle of the ring.

And you see there’s over and over again, when you go to Samsung, Nvidea and other tenants. So, what we think is truly unique about the Farley building is the ability to deliver truly a horizontal campus, in New York what I said earlier, is on great roof deck space in the heart of the City, with views all around.

So, but most of our business, what we do every day, what Glen does every day, it’s really going after the tenants that are less than 100,000 square feet, in terms of what our normal tenant fee is. .

Steve it's actually, as you would expect, as it always is. Demand is different submarket-to-submarket. And there are submarkets that we are focused on our tighter supply as supposed to some of the other submarkets. .

And then I guess, Steve I know that the $1 billion as you talked about is over a multiyear period. So, maybe a little bit premature to sort of think about uses of capital.

But, how do you sort of think about those use as a capital today? Is it geared for share buybacks, or is it geared for redevelopment, acquisitions? I mean, how would you sort of prioritize the use in capital?.

Yes, I agree with you. It is premature. .

And then I guess, just last question. And I realize it’s early on the whole Amazon H 2Q. Just if you sort of think about the requirements that they led out. New York meet many of them that you talked about, but maybe housing and affordability of housing is kind of the issue.

I mean, do you sort of any sense as to kind of how those priority stack up? And how do you think New York stacks up relative to some of the other cities?.

I think, that the process that Amazon is, and it hasn't marked down is truly a big. I don’t think, we’ve ever seen anything like this before. We’ve got brother fighting, and it gets brother out there, to all these difference cities. There’s 200 some more like different applicants.

So we can’t begin to predict the result, but we can’t even begin to predict who’s a final 5 or 10 is going to be. Having said that, New York is obviously, we really know is the high cost area. I won’t comment about how business friendly it is, we think it's very business friendly.

We think transportation is amazing, we think the quality of the workforce is unparallel, we think that, there are not only our option, but there are other options that could satisfy even and even they’re like Amazon. But, in terms of where that comes out, Steve, I don’t know. .

And your next question comes from Alexander Goldfarb with Sandler O’Neill. Please go ahead..

Good morning. And certainly Steve good to have back on the call, and so vigor..

Thank you..

Two questions, how much does revolution are poised play into your billion dollars, I get the tax potential as far as would you guys look at the different stock positions and other assets that you may sell.

How much of it is tied to whatever happens with Toys are both here and whatever happens with their Asia division versus both the $1 billion of sales in Toys are two separate discussions?.

I think your question is how much does the potential of $400 million tax write-off coming from Toys, shield $1 billion okay. And the answer is Joe..

The $1 billion is the portion will retain without any utilization of the Toys write-off and none of it comes from Toys it’s all from assets other than Toys..

So well in terms of Toys being used as a shield to retain that $1 billion the answer is that icing on the cake we haven't used that at all in our internal budget..

So then as a follow-up to that, so if you went hopefully Toys is resolved does that mean we should think about an additional amount of dispositions or you would use that shield for something else?.

Once again I can’t predict that okay, I just can’t predict that I mean we sell..

Okay, we’ll stick with….

Hang on, we sell assets from time to time for lots of different reasons, either we think we got to the level of maturity where we have created the value that we can that they are not in our core.

For other miscellaneous reasons why we don't want either to take a large profit or because we no longer think they are useful or they no longer growing or we no longer want them and in a rare instance where even once in a while where we made a mistake, we don’t really do get into sales based upon tax reasons, we try to do it based upon real estate business reasons.

So Toys potential of a Toys shield that shield going forward is just icing on the cake and you can remember we have a very big business.

We've done $15 million or $17 million of transactions in the last recent years so this $400 million tax shield which will really on a capital gain basis be in a hundreds of millions of dollars of tax savings its really - it doesn't say this is not - this will be the tail wedding the door okay..

And then Joe second question, you guys have obviously good reactions stock there you guys have put out a lot of releases on all the impacts over the past quarter that assessed this quarter. When we think about that 38 million of GAAP equivalent NOI that’s going to come online over the next - within a year, year and a half.

How should we think about that heading into next year does all of it come in next year to does some leak into 2019?.

It’s the timing of the NOI interests..

The GAAP NOI..

Hang on, Joe is looking in through some papers..

The NOI comes in $29 million fourth quarter of this year, $45 million next year, $8 million the year after. We gave up our quarter on Page 9 of the supplement. The EBITDA equivalent is $10 million in Q4 this year, $19 million in 2018, $8.5 million in 2019 again given by quarter on Page 9 of the supplement..

And Joe that's GAAP or cash as I thinking about FFO..

The second set of numbers I gave was GAAP, the first set of numbers I gave you was NOI cash. The first set of numbers totaled $84 million, the second set of numbers totaled $38 million. $38 million is the GAAP, $84 is the cash..

And our next question comes from Jed Reagan from Green Street Advisors. Please go ahead..

Steve first of all very glad to hear you're feeling a lot better..

Thank you..

I guess along those lines has your thinking changed at all in terms of your day-to-day involvement with the company going forward and maybe if you can talk it all about the approach or timeline in terms of succession planning if that’s evolving at all on your mind at the Board level?.

Obviously it’s top of mind - in my mind then at the Board level, I mean obviously I’m back nine I may even be on the back half of the back nine. Having said that, the Board is very involved in the future plan and the management team and the future management team of this company as I am I.

Having said that over the last number of years we had totally transformed this business. We have done and restructured it which we think has benefited enormously with the corporate's. That's something that I think the Board thought that I was the best person to do and we still have more to do so, I’m not quite done yet and we still have more to do.

Having said that, you can be assured that we have a robust succession plan and I don't think I have anything more to say then that..

Simply you guys provided some helpful cost details on the Farley project in the supplemental, just wondering if you’re in a position to provide a stabilized yield expectation for that project?.

Not really our aspirations are high. We think it's a best piece of real estate in that jumbler in town so our aspirations are very high we think that the down side also yields a very acceptable return. We’re not really ready to make predictions which the real estate market will use and so it's just let’s us do our thing.

We think we do it better than anybody let’s do our thing..

And maybe last one appreciate the color on the One Penn timeline, can you offer any kind of timeline expectation for the two Penn redevelopment at this point?.

The answer to that is the two Penn redevelopment lives will be simple or complex and so right now we can’t - it’s inappropriate for us to give any information on two Penn right now..

And our next question comes from Nick Yulico from UBS. Please go ahead..

Just a question about 666 Fifth, what your latest thoughts there and how that plan may evolve?.

That's an evolving plan, that’s the first step. The second is it’s a very, very attractive piece of real estate, I have said this many times before its overleveraged which is an issue. Our position we look upon our position in that we own 100% of the retail at the bottom building on Fifth Avenue we own 50% of the office building.

We think the asset is brilliant well located. The office building is over leveraged okay, the retail has leverage on it to but proportionate leverage okay. So our position in that building and we look upon it as if it’s a mezz loan warrant where we have a relatively modest amount of capital in there for our 50% position in any event.

There have been rumors in the marketplace more than rumors they have been published it in the marketplace about tearing the buildings down and doing all manner of fairly grand development schemes. It’s likely that those are not feasible so it's likely that the building will revert to an office building.

And so we're working on that we're working on capital plans, we’re working on venture arrangements et cetera so it’s a work in process..

And so is that a situation where you would like to increase your ownership in the building rather than look to sell off your existence stake?.

I said last year or so maybe even longer than that that we were likely a seller into the grand scheme of the - grand scheme has gone away and I don't want to speculate on whether we are a buyer or seller or increasing our position in the deal. This building and our adventure are the subject of current discussions and that's leave it with that..

Thank you. Ladies and gentlemen this concludes today's conference. Thank you for participation and you may now disconnect..

Thanks everybody. And I appreciate very much your well wishes with respect to my health which is - I am fine, thanks..

Thank you ladies and gentlemen..