Good morning, and welcome to the Vornado Realty Trust First Quarter 2013 Earnings Call. My name is Larissa, and I'll be your operator for today's call. This call is being recorded for replay purposes. [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 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 supplements. Please be aware that statements made during this call may be deemed forward-looking statements and actual results may differ materially from these statements due to a variety of risks, uncertainties and other factors. Please refer to our filings with the Securities and Exchange Commission, including our annual report on Form 10-K, for 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, D.C. Division; and Joseph Macnow, Chief Financial Officer. Also in the room are Wendy Silverstein; and Michael Franco, Executive Vice President, Co-Heads of Acquisitions and Capital Markets. I will now turn the call over to Steven Roth.

Thanks, Cathy. Good morning, everyone, welcome to Vornado's First Quarter Earnings Call. On the macro environment, as I said in my recent shareholders letter, it feels to me that we are on the foothills of a major economic expansion in America. What's going on in the real economy, housing, autos, innovation, et cetera, is the real McCoy. It also feels to me like interest rates will stay low for a very long time. I don't expect cap rates to rise any time soon. In fact, I may even make the provocative comment that the next move in cap rates may well be down. The New York economy is also doing quite well. Specifically in New York, retail and office assets are both selling at all-time highs. Retail rents are clearly at all-time highs, office rents are not. Interestingly, office rents and value seem to be equalizing among the various submarkets of Manhattan. For-sale residential apartment prices for the best product are, say, $5,000 per foot, with isolated sales as high as $8,000 per foot, all records. Now turning to Vornado. Our first quarter comparable FFO was $1.14 per share, or 16.3% better than last year's first quarter. I'm very pleased with our comparable financial results and with our cash position, which today is $1.3 billion with 0 drawn under our $2.5 billion revolving credit facilities. Our all-in results include a variety of noncomparable items, which are outlined in our earnings release, and in our Form 10-Q. Beginning with this quarter, our comparable results exclude FFO from Toys "R" Us and LNR, and FFO from Lexington Realty trust in excess of its dividend. Of course, the prior year's quarter has been conformed to the current quarter's presentation. Joe will take you through the numbers a little later in the call. Our…

Thank you, Steve. Good morning, everyone. Let me begin with a brief overview of what we are seeing here in the New York market. Overall, Manhattan's office market has had healthy levels of leasing activity with tenants across many industry types and different price points, including the TAMI tenants that I discussed on our last call, technology, advertising, media and information. Value and efficiency remain the overall themes of the market, and tenants seeking to save the CapEx of the move are driving renewals to higher-than-historic norms. Looking forward, economic sentiment continues to improve with the rising stock market and strong corporate profits. In fact, the New York City economy continues to be one of the healthiest in the nation, having recovered 178% of the total jobs lost in the recession, second only to Houston and its energy concentration. Office-using employment is now back to prerecession levels, having recovered all the jobs lost, some 95,000 jobs. We are finding there is good depth to the market with strong activity for our available space, everywhere within the portfolio, not just 1 submarket. We're also encouraged by the diversity of the tenants looking for space: media, technology, advertising, legal, accounting, healthcare and retail. The smaller financial firms, money managers, hedge funds, private equity groups, are also quite active. And at 280 Park, we and SL Green recently announced 100,000 square feet of leasing activity with Blue Mountain Capital and the Promontory Financial Group, both doubling in size. Our general thinking remains that we will see increased growth in the markets in the second half of the year and into 2014. The Penn Plaza Class A submarket continues to absorb many TAMI tenants from expanding Midtown South market, driving the Penn Plaza vacancy rate even lower to 5%, the lowest vacancy rate in…

Thank you, David. Good morning, everyone. I will also start with an overview of the Washington market and then talk about our business more specifically. As we have said, 2013 is starting out to be a sluggish year in Washington. The long anticipated automatic federal spending cuts of sequestration are now in progress. Until there's more certainty and confidence based upon a final approved budget, the Washington economy will continue its slower pace of growth. Notwithstanding, we expect the private sector will continue to fill the gap left by the government. Our sense is that agencies and contractors have been preparing for a lower rate of government spending for many months. And to that extent, they have already decreased headcount and increased space efficiency. Washington has a very diverse economy and has continued to grow albeit modestly, despite numerous fiscal cliffs, cuts and deadlines. In 2012, the D.C. economy grew by 2.4% as compared to the national average of 2.2%. We expect a strong -- we expect a growth rate of about 2.1% in 2013, and believe there will be strong momentum in 2014. In our own portfolio, we are repositioning buildings by supplementing government tenants with more private-sector tenants. This strategy is not only diversifying our tenant base, it's providing positive rent growth. A good example is at 1750 Pennsylvania Avenue. Last year, the United States treasury lease for 121,000 square feet and the IRS lease for 92,000 square feet or a total of 213,000 square feet were expiring. Through a combination of renewals and releasing, we have repositioned this 276,000 square-foot building for the next 10 years. First, we renewed the United States Treasury for 121,000 square feet for a 10-year term, then we released nearly 100,000 square feet to new high-caliber private-sector tenants, including the United Nations…

Thanks, Mitchell. Okay, let me touch on our strip shopping centers and malls, which had a strong quarter. Strip shopping center occupancy was 93.7% at quarter end, up 10 basis points from year end. Occupancy at the malls was 93.3%, up 60 basis points from year end. We lease 644,000 square feet at the strip shopping centers, including 7 TJX renewals, totaling over 245,000 square feet. The mark to market on all leasing was 9.2% cash and 12.9% GAAP. We leased 159,000 square feet at the malls, with a 3.4% cash and 9.1% GAAP mark to market. The combination of solid-trade area incomes, strategic locations and strong anchor base is driving leasing in both the strips and the malls. With only one quarter of the year gone, over 75% of our 2013 new and renewal leasing objectives have been achieved. Now back to Joe for the financial review.

Thank you, Steve. Hello, everyone, and thank you to everybody out there who sent me such nice notes this morning. Yesterday, we reported comparable funds from operations of $1.14 per share versus $0.98 in the prior year's first quarter. That's a $0.16 per share increase or 16.3%. Total FFO was $1.08 per share versus $1.82 per share for the prior year's first quarter. Please see either our press release or the overview of MD&A on Page 39 of our Form 10-Q for a complete summary of the noncomparable items for the quarter. Comparable EBITDA was $375.3 million in the first quarter, ahead of last year's first quarter by $25.6 million or 7.3%. All of these numbers are on Page 10 of our supplement for anyone who wants to go there. Our New York division, our largest business, produced $217.5 million of comparable EBITDA this quarter, representing 58% of the entire company. New York was $27.1 million or 14.2% ahead of last year's first quarter. Our Washington business produced $86.2 million of comparable EBITDA this quarter, which together with the New York business, represents 81% of the entire company. Washington's first quarter was $9.7 million or $0.05 per share behind last year's first quarter due to BRAC. This EBITDA reduction is at the midpoint of the range of EBITDA diminution we project for the year. We are not changing the range we've set for this year. We expect a reduction in Washington's EBITDA in both the second and third quarters to be largely offset by an increase in the fourth quarter. Our strips and mall business produced $53.3 million of comparable EBITDA this quarter, which together with New York and Washington's businesses, accounts for 95% of the entire company. The strips and malls are $1.1 million ahead of last year's first…

[Operator Instructions] The first question is from Michael Bilerman from Citigroup.

Josh Attie is on the phone with me as well. Steve, in your opening comments, you talked about prices equalizing across the different submarkets in New York. And I'm just curious as you think about your disposition plans, you've obviously had a great success on a lot of the noncore sales generating significant proceeds over the last 18 months. Would you entertain, as you sort of look at pricing, sales of more office and retail assets in New York and D.C., given your sort of views on pricing around the city?

Michael, hi, sure. Although that's not our highest priority, our highest priority continues to be to divest noncore assets of which we have more than we should. And so our hands are full on that. With respect to core assets, our thinking is as follows, okay. If an asset has -- is mature and has gotten to the point where we don't think it's going to grow appropriately, it is a candidate. The second part of that is, as tax considerations are extremely important, especially with these very large assets. And the third part of it is -- the age-old question of what do you do with the proceeds? To the answer is sure, we look at every asset in our portfolio very carefully every year, and we look at selected assets more frequently than that. But hang on -- but in terms of your future expectations, our focus is to work very hard on the noncore assets and that's our immediate focus.

And just as a follow-up, you also talked about mining the portfolio for a lot of the opportunities you have to create value versus going out and buying. One opportunity that you didn't talk about in the Chairman's letter or on this call is 220 Central Park South. Can you just sort of provide an update where you stand with that and where things are with Extell?

Not really. Let's talk about that asset just a little bit. First of all, it's a wonderful asset. It's arguably, and consensus, the best residential development site in town. And it is for-sale condos, which really is not our business focus, we are an income-producing property business. So we're very happy to have bought it. We think we have a profit which, in the land, which is a multiple of our acquisition price. We are obviously in a dialogue with our neighbor. And beyond that, I don't think that it's appropriate right now for me to comment, although we love the asset.

The next question comes from Steve Sakwa from ISI Group.

Steve, I just wanted to come -- maybe follow-up on Michael's comment and some of your early comments about great time to kind of be a seller. Prices may continue to even go up, as you say, cap rates may continue to compress. Can you just kind of help us think through what inning you're in, in kind of a disposition of these noncore assets? If you kind of go back to the Chairman's letter from last year, you've ticked off a lot of those things, but there's still a few to come. So maybe, can you help us frame kind of the size of what's left? And are we in the fourth inning, the seventh inning? Top of the ninth? How do we think about that?

Yes, let me -- my baseball is a little rusty. Let me focus on dollars as opposed to innings for a minute. Here's what I think. We've sold the better part of $3 million already over the last 18 months or so. We are very happy with that progress. We have teed up now either in contract or in the sales process somewhere over $300 million. We will easily get to $500 million, and likely $1 billion of dispositions this year, that's what our internal budget is. That does not include what I'll call now for a moment the main events, which is Toys, J.C. Penney or assets like that, nor does it include anything having to do with 220 Central Park South. So our expectation is $500 million for sure this year, and $1 billion is possible. There are other assets beyond that, but that's what we're focused on for this year.

Okay. And then I guess given the liquidity you mentioned, I think you said $1.3 billion. It obviously seems very difficult for you to put cash to work at these levels, and you're likely to build up more liquidity as the year unfolds. Kind of how do we think about you deploying that capital either through acquisitions, share repurchases, special dividends, just raising the regular dividend? How do we assume you use that capital?

Well, the first thing is, cash is good. We like cash. We have $1.3 billion, and that's a fairly large swing if you look at our year-end balance sheet. And so the changes in our year-end balance sheet to our current balance sheet, which we predicted at year end, of course, happened exactly right on the money. We expect to build cash fairly aggressively with asset dispositions and what have you. So now your main question is what do we do with the money? Well, the first thing is, is investing today is very difficult. And as I've said several times, we believe that we will be -- we will be selling more than we will be buying in this market. That's not because we are not looking very hard and we are not trying, but it's very difficult. Pricing is very aggressive for us. By the way, our peer group is in the same condition, there's not a lot of publicly-traded blue-chip REITS that are aggressively buying right now. So that's step 1. Step 2 is, the first public enemy #1 in terms of what to do with our cash, for example, is to pay down some of our overpriced debt. So we have a $400 million -- I think they're the VNODs, is that correct? VNODs, they're open to be prepaid, they're a 30-year instrument at 7 and 7/8%. I think it's almost 8%. And so as soon as we can get our hands on those, we are going to use our cash, which is earning 0, to retire those, that's $400 million. At the better part of 8%, that's a $32 million increase in our earnings, and we can't invest money at anywhere 8% today. There are other instances like that, we've got preferreds which are callable. So in terms of the first thing we do with our cash is to focus on our balance sheet, which will actually be interestingly enough a delevering of our balance sheet. And so what we would hope is a double whammy where our earnings go up aggressively from the use of that cash, which is earning right now 0, is that our multiple may, please the heavens, expand in relation to the fact that the recognition on the part of the market that our balance sheet is really strong, getting stronger, and we are a very low-levered company. In terms of share repurchases, we've said multiple times that, that's not a large focus for us unless there was a very wide discrepancy between what we thought NAV was and the trading price. So for that, that's not imminent right now, I don't believe, Steve. In terms of acquisitions, we'd love to find productive places to put capital. As I said, we've had -- we're having trouble with it. So I'm not happy with that answer, but that's where we are, that's the facts. Love to be able to put out aggressively in our core business, if we could.

The next question comes from Jamie Feldman from Bank of America.

I guess, first, congratulations, Joe on the change. And I think for Steve, can you just update us on the latest plans...

Jamie, I second that. Congratulations.

Thank you.

I'm sorry. I didn't mean to interrupt, but I did.

No, I -- well deserved, well deserved. So Steve, I guess can you just talk a little bit more about the update on the plans with CEO role? And then also, kind of how's it going for you in the role? And how had Mike's responsibilities been divided up in the company?

Sure. I think my friend Mort Zuckerman said on his call last week that because he just gave up the CEO position to Owen that he had been -- not been the CEO for 98% of his tenure with the company, my response to that is I have been the CEO for 98% of my tenure with the company. So I'm used to this role. I miss Mike, but nonetheless, everything is fine. In terms of Mike's activities -- we were all here when Mike was here, it's pretty obvious that the move that we have just made in adjusting Joe's responsibilities and giving him greater responsibilities is to take over some of the administrative and leadership things that Mike had done before. The rest of Mike's activities are -- have been split up between me, of course, as CEO, and Michael Franco and Wendy Silverstein, who run our acquisitions in capital markets group, and that's an area where Mike had spent a great deal of time, enormously talented in that area. And I hope that answers your question.

Okay, helpful. And then just a follow-up, David, focusing on New York. There's been a lot of discussion about how Sixth Avenue's been a little bit less competitive given the age of some of those buildings, can you give your comments on that? And then also, what was the New York office same-store EBITDA if you do back out of Hotel Penn? I think in the supplemental it only showed the sequentially rather than year-over-year.

The New York same-store EBITDA is 9.8% cash and 4.5% GAAP for the quarter.

The question was if you back out Hotel Penn, do we have that number anywhere?

Hotel Penn was up 300,000 in the quarter.

That's if you back out Hotel Penn. Just looking at the New York office business, I think our numbers actually were right in line with the "overall divisional numbers" including Hotel Pennsylvania, the retail and all the assets in the division.

So that will be updated $26.8 million, exclusive of the Hotel Penn. $27.9 million...

So the number is almost exactly the same. Basically spot on.

In terms of your question regarding Sixth Avenue, there is some fair amount of space that's come on to the market on Sixth Avenue. Availability rates on Sixth Avenue right now are hovering around 12%, 13% maybe even 14%. I think the one thing that we've come to understand is that's what -- critical to attracting tenants to our buildings is continuing to reinvest in the assets. And as I mentioned to you at 1290, we've undertaken a dramatic transformation program, initially starting with the mechanical systems in the building and now culminating with the overall redesign, redevelopment of the lobby, vertical transportation in the building and sustainability. In fact, I'll tell you that Steve got a nice note on Sunday night from one of our competitive owners, saying he walked by the building on Sunday night and said, "Wow! What a transformation in the asset." So I think the key in any market and, certainly, the key in a market that's competitive is upgrading the product, maintaining its competitive nature both from a mechanical and infrastructure point of view as well as, obviously, just dramatically changing the appearance of these assets.

I might add one other thing, Jamie, and that is that Sixth Avenue is famous for these very, very large buildings with large financial services, floor plates and big tenants, 700,000-foot tenants, 1 million-foot tenants. As a business, we have shied away from that kind of product because it's great when it's full but it's just brutal when these big tenants decide to move. And even in a renewal negotiation, the size of these tenants, the landlords are never on the right side of that deal. So we shy away from that kind of product. We prefer 2- and 3-floor tenancies where we can actually have less exposure, less risk and higher rents. Now an example of that is we had a very large Macy's tenancy in Penn Plaza, 650,000 square feet approximately. And while that lease was not due and this was -- we were not anywhere close to the expiration date, both we and this very important tenant decided that it was a good time to renegotiate that lease and extend it. And we did it. And we did it very aggressively and we're very happy that we did.

The next question comes from Michael Knott from Green Street Advisors.

Steve, I just have a question on the retail platform. Can you just give us sort of your thoughts on what's that going to look like when you're all done with asset sales. Are you going to have much in the way of malls left? What about strip centers? Are you going to focus just on Manhattan street retail?

The answer is that it's too early to predict, Michael, what we're going to do with that. We love, love, love, the Manhattan street retail business, pound-for-pound, I think it's a superb business, which keeps -- which, each year, keeps giving and giving and giving. We are aggressive buyers of Manhattan street retail and it's a very, very, very cherished business in our portfolio. We like our strip shopping center business. In fact, it's our feeling -- we have individual single assets and miscellaneous assets that we have accumulated over time that we would prefer to sell, and so we are pruning that business to get it down to what we believe are core assets that are great investments. If I was pressed, I would say that the strip business is a mispriced business in this environment, and compared to other assets that are available in the marketplace, a 6.5% cap rate, good strip shopping center, I believe is a better investment that it is a sale. And especially when you think that you can put a sub-4% leverage on that asset and get almost a 10% return, there's very little CapEx that has to go into strip shopping centers, so we like that business. Whether it ends up being, over the long-term, a marriage partner to the New York towers that we have is a whole different question, which we will get to, but that's not #1 on our hit parade today. The mall business, we've said publicly that while we have the management capability and history and legacy of running mall assets and running them well, we don't have enough bulk to really compete in that business. We can't grow. And therefore, we have shown our intention by selling several very important assets. Once again, we've done the lion's share of the financial harvesting out of the mall business, the lender of our mall assets are smaller and they won't be given away. And if we can get good pricing on them, I don't know. But once again, it's not a very high priority for us. So the long and the short of the answer is, we cherish our Manhattan street retail business, we think the strip business and the mall business, where the returns are good, are good businesses. Whether they, over the years, are a marriage partner for our New York tower business is a different question.

Okay. And them just one more from me would be a devil's advocate question on your macro view. If you feel like interest rates are going to stay low, but we also have a strong recovery coming, wouldn't that be sort of a perfect scenario for a commercial real estate and, therefore, when pricing today, it'd look very attractive?

I don't have that good a crystal ball. I can only tell you that my view is not novel. I think prices are high. They are likely to go higher. I am not calling it up, I am not saying anything like that, and that's not my business and I may not be smart enough to do that. I do know that, compared to historic prices, asset values are very high, they may go higher. If interest rates stay low, who knows? The issue is that interest rates may be a lot different in 3 or 4 years and so that may affect asset pricing. I can only tell you that, historically, from an investment point of view, there are 2 things that really make or break investments. The first is what you buy, the quality of what you buy, whether that be a building or a stock or whatever; and the second is, the vintage of when you buy. And lots of commentators say the vintage is the single more important thing. What I'm basically saying is I'm not sure that this is the right vintage to be buying. There are lots of variables out there. We're going to be very cautious. One other thing is that my personal orientation is that if you take a 10-year cycle, there are 3 years in any 10-year cycle that are the right times to be buying aggressively and then there are 2 or 3 years when it's a right time to be selling, and the rest of the time is confusing. So what I'm basically saying is we are certainly not in the aggressive buying 3 years and we may very well be in the confusing years.

Our next question comes from Alexander Goldfarb from Sandler O'Neill. Alexander David Goldfarb - Sandler O'Neill + Partners, L.P., Research Division: Congrats, again, Joe. The 2 questions. Steve, first up. You just picked a new CFO. And as you think about who you would want to replace you in the CEO role, how do you envision your participation, Vornado going forward after the new CEO, do you envision sort of the partnership where you were quite active along with Mike? Or do you envision more of a scenario where the new team -- you're letting the new team run the reins and you sort of sit back in a more of an advisory type role?

Alexander, thank you for your question. I'm going to answer it obtusely. I'm 71.5, that's my answer. Alexander David Goldfarb - Sandler O'Neill + Partners, L.P., Research Division: Okay. That makes sense. Then the second question is...

And by the way, that wasn't a wiseguy answer. I'm not a wiseguy, okay? I'm 71.5 and it's not appropriate for me to be the head of this company for another 10 years, it's just not appropriate. And it won't be. Alexander David Goldfarb - Sandler O'Neill + Partners, L.P., Research Division: Okay. I appreciate your candor, Steve. The next question then is you guys talked a little bit, in response to Jamie's question, about the importance of spending on older buildings to make them competitive. And just given the trends in sort of increased office efficiency and the trends of the new workers, how do you think about CapEx -- or how should we think about CapEx over the next few years? It sounds like it's going to step up as the older buildings get renovated, new lobbies, new systems and such. So is there sort of a way to quantify what sort of level of spend you guys are thinking about in terms of keeping the buildings that competitive?

The answer is -- the first part of that is that we are very rigorous in keeping our buildings, whether they be newer vintages or older vintages or what have you, totally and completely up-to-date. We think it's essential for our -- the profitability of our business, our tenant retention, tenant satisfaction, our reputation in the industry, et cetera. So there -- we don't own a single asset that is star for CapEx in any way. So that's the first thing. The second thing is that the difference between a new building and an old building is not as great as one might think. The difference is principally 3: ceiling heights, column spacing and the window line at the façade. Those are the 3 differences. We find that in our buildings, they are competitive except for a 1 million-foot user who wants a totally custom-made building in terms of the physical plant. The second thing that we find is that, in many instances, location is as important as the ceiling height, whether you're going to have an extra 1/2 foot more in ceiling height or what have you. So actually, we think that -- New York is one market where buildings which have a little patina on then, a little gray on them, are actually very well sought of and in very, very high demand. So I don't believe that you will see any significant change or meaningful change in the amount of CapEx that we invest in our buildings going forward in New York. Washington is a little bit more difficult because in Washington, we believe the CapEx in our buildings will go up in a measured way. But New York, if you -- what we've been spending in the past, I think you can use as a prediction for what we will spend in the future. David, do have any other comments?

No. I think, Steve, what you said is fair. And that is these buildings, day in-day out, we are maintaining and doing whatever we have to do to make these buildings technologically proficient for tenant demand, both tenant satisfaction and tenant requirements, whether it's power, HVAC, back-up generation. Where we are seeing, where we're spending potentially some significant monies are buildings that we are acquiring effectively for redevelopment like 280 Park Avenue and, of course, 1290 which is something that we acquired 4, 5 years ago and are now undertaking the major capital upgrade.

Mitchell just handed me a note. For our corporate headquarters in Washington, our own offices, where Mitchell's -- how large is the office?

About 45,000.

About 45,000 square feet of our Washington, D.C. office, we bulldozed our old offices, which were traditional, with cubicle -- with offices and whatever and installed -- Mitchell installed a modern style, up-to-date, open plan kind of a scheme which would be -- for 2 purposes. A is people work better, he likes it better. It's all white, that's his taste. And the second reason is that he shows clients what can be done. Now this is in an older building and it works wonderfully well.

The next question comes from Ross Nusslebaum [sic] from UBS.

It's Ross Nussbaum from UBS. Steve, just a follow up on some of the questions before. With respect to your tenure in the CEO role, are you suggesting that your plan is to stay in the role for a couple of years or is there an active search underway for your successor at the moment?

Ross, there is no active search underway for my successor. The plan is -- we have some work to do to get the company into fighting shape and get it focused. The current management team has been charged by the Board to do that and we will do that. When we get to the end of that journey then, obviously, we do have -- at that point, I'll be more than 71.5. And at that point, we have issues that we'll have to deal with.

Okay. Fair enough. And then on the cleanup side, I guess I've been a little surprised that the stake in Lexington is still something that's on the books. What needs to happen for that not to be on the books?

Well, actually, I'm very pleased with the Lexington investment. You know its history, it was a legacy investment. It started out as a Newkirk investment, it then was merged into Lexington. And the Lexington investment has performed awfully well for us. The stock is over $13 now and the management team of Lexington has done a very good job of surfacing values. And we've been there all along rooting for them and with them and counseling with them. What happened at Lexington is that Lexington was an outlier on the negative side in an industry that is a fairly tight net lease company industry. And the 2 premier competitors in that field had balance sheets which were much, much better -- that's the principal differentiator between Lexington and the 2 better competitors who sold that 5 or 6 multiple turns better than Lexington, maybe even more at the low point of the cycle. And so, the Lexington management, in consultation then with -- we were in there rooting for them and advising them and then whatever, set about a multiyear program to fix their balance sheet and try to close that gap between their multiple and the better competitors. They have done a very good job of doing that. We thought that, heretofore, our selling that stock would have been a mistake and premature for 2 reasons: a, we thought it was an asymmetrical -- a large asymmetrical risk on the upside that the stock would go up and go up aggressively, and on that one, we were right; and the second is, that it produces a 4.5%-or-more dividend and the other option would be to sell it and put it into cash, earning nil. So the answer is that we are pleased with the investment heretofore. And we understand that we -- that the -- we understand that it's an investment that we will liquidate at some point in the future. And I don't really think it's appropriate for us to begin to predict exactly when that might be. I'm not saying -- the question is not if we will sell it, we will. The question is when. And that's something that -- I don't think it's appropriate to discuss out -- discuss now. I hope that answers the question, Ross.

David Harris from Imperial Capital is on line with a question.

It was a very sizable term -- lease termination contribution in the first quarter. Can you give some color on that and give an indication as to whether any sizable contribution will be made from that line as we look to the rest of the balance of the year?

That lease contribution, David, was the payment from Stop & Shop and settlement of the litigation. Joe, I think it was $60 million or high 59s, right in there.

[indiscernible]

And we talked about that in the preparation of our financial statement because I was -- we thought somebody would find it an aberrant number as you did. And Joe and our accounting teams, they said it was basically a payment with regard to a lease. So literally, it's a lease cancellation. But it's, certainly, in a regular lease cancellation. But that's [indiscernible]. It's $60 million from Stop & Shop.

Right. And a quick question for Mitchell, if I may.

By the way, one comment about that. I mean that was a 10-year litigation. I can tell you that from the point of view of the management of this company, we hate litigation. And the second part of that is we hate even doubly litigation with an important customer and counter-party. But we had no choice and done better than we wanted, but we hated it.

Right. Okay. And the question for Mitchell, on D.C., is it reasonable to assume that we're at the low point in occupancy given that you kind of worked so well through the BRAC explorations and what your -- in the context of the comments of your state of the market?

I think as I said in the comment, there's still some uncertainty, so I wouldn't want to make a comment or prediction today that we are absolutely at the bottom. I think that we are either at the bottom or close to the bottom or flattish for the moment. But I think it's going to take a couple more quarters for things to settle down before we see them start moving up. I think the fourth quarter of last year, there was quite a bit of a slowdown and things were not really moving as a result of the pending budget debate at the time, so people sort of just froze and stood still. I think during the first quarter and what we've already seen in the second quarter of this year, you see more movement, more activity, more action that will hopefully translate into more leases and more absorption as we go through the year and into next year.

Just to add to what Mitchell said, David, because almost all -- not all, but almost all of the BRAC-related move-outs have -- are behind us, that makes it fairly easy to call that we're fairly close to the bottom. There are some left, but almost all of them are done. So we seem to be getting there. Now we wait for the turn and an improvement in the market.

The next question comes from Vance Edelson form Morgan Stanley.

In New York, with the migration continuing from midtown to downtown partially due to the lower rents, you did mention in the prepared remarks the equalization that's ongoing. So more specifically, what are the prospects we're seeing those downtown rents really move higher to take advantage of the increasing demand?

Now I think that tenants that today are looking at downtown -- obviously, had numerous availabilities, both for large lots of space as well as for some of the smaller tenants. What we've seen is a couple of these larger blocks of space, in fact, absorbed. I do think -- what we're seeing in the market, as I've said in my prepared remarks, was this notion of value and efficiency. So I think one reason tenants today, which otherwise might have been looking at midtown south, they're migrating to our Penn Plaza markets, they're migrating to downtown, it is still a value story that has driven some of the activity downtown. I don't think -- I do -- I think downtown has not seen all of the space that's going to hit the market. So I think in terms of some of the givebacks of BofA and Merrill, I think in terms of the new space that's coming on the market, in terms of the World Trade Center and other givebacks that we're seeing, if you ask me, my prediction is that vacancy rates, in fact, downtown will be increasing, not decreasing. So I think it's going to be probably some time before we're going to start seeing increases in rent. So I think some of the asking rents downtown are going to be going up because of the nature of the product coming on the market. But obviously, what's important is not the asking rents but where the deals are being made.

Just to add to that. I mean there's different markets. So there is the large tenant market, which is 1 pricing point downtown. And then there's the smaller boutique market, which is a different pricing point. And then downtown is a word which really has different submarkets. So pricing in the Meatpacking District or in Chelsea or in the High Line district or in the Penn Plaza district is different for boutique-y kind of space than it is all the way downtown. So it's complicated, but it's interesting that you can get space on Park Avenue today for $85 a foot. You can also -- have to pay for space in the Meatpacking District, around the High Line, more than $85 a foot for space. So that's what I meant in my prepared remark.

Okay, that's very helpful.

Thank you.

And then as a quick follow-up, a question on redevelopment. The focus has pretty much been confined to New York right now, with some exceptions like Pentagon City, do you see that focus shifting toward D.C.? And if so, maybe just give us a feel for the timing and the magnitude?

I didn't hear the question.

Redevelopment.

I'm sorry, I didn't hear the question, could you repeat it?

Sure. So the redevelopment focus is largely on New York now. When do you see that focus shifting more towards D.C.? What would the timing be and the potential magnitude?

We have an enormous amount of inventory in Washington. And just to tick off some of the assets, in Pentagon City, we have 3 large apartment sites, one of which we announced in the call and recently in our documents. We're going to start a 700,000 square foot for-rent apartment project with a 37,000 square foot Whole Foods at its base. We have, adjacent to that, 2 apartment sites which will support 1,400 units of housing. So that's 2,100 units that we have in inventory, of which 700 we're going to be acting on. We have the -- what we call the Penn Place development site which is 10 acres, which is directly across the highway from the Pentagon, which is owned for 1.8 million square feet of office plus hotel plus a little bit of residential as well. We have in Crystal City between 4 million and 5 million square feet of redevelopment rights, which will involve raising buildings and replacing them with larger buildings so that's, obviously, a very long-term prospect, but it's essential in creating enormous long-term values and refashioning Crystal City which, as you'll remember, is on the shores of the Potomac River, across from the capital into a whole different kind of modern office complex. And then we have the site in Rosslyn, which is the waterfront site on the Potomac River, directly across from the Kennedy Center. So arguably -- not arguably -- for sure, the best development site in Northern Virginia. So we have an enormous development program. All we need is a strong and stronger and strengthening market to be able to perfect that. Now all of these assets are held basically free and clear, and basically are not really in our NAV anywhere. And so, we're pretty excited about the long-term prospects for value creation in Washington. And we -- Mitchell has been extremely rigorous, and his team, in prosecuting approvals and entitlements for all this inventory. And we are in pretty -- we are in excellent shape in that regard. And we are focused -- at every quarter, we are focused on what the timing is, when to begin to move on some of these opportunities.

[Operator Instructions] Mike Bilerman from Citigroup is on line with a question.

So could you spend some time on Alexander's -- obviously, with the sales of Kings, the majority of the value is now in 731 Lex, I guess how do you think about that investment? It's clearly an important one for Vornado and an important one for you and your partners and it's also an entity that's externally managed by Vornado. I guess is that sustainable long-term? And how do you think about it progressing?

Michael, welcome back. I think the past is a prologue for that asset. We did harvest Kings Plaza. In the process of -- for a -- we thought a very fair price, the -- it resulted in a $600 million-odd gain on the $700 million-odd sales price. So obviously, it was on the books for a very low number. And we, I think, appropriately chose to pay out a onetime capital gain dividend to our shareholders which we were able to rush to get that done in the 2012 calendar year. The -- we've said publicly many times that do not expect a business combination between Alexander's and Vornado for lots of different reasons. So that leaves us with what happens to Alexander's and we're not unhappy with its present condition as a dividend-paying stock. The quality of its real estate is arguably the best quality of any publicly traded real estate company around, albeit it's a -- it's a tiny -- well, not a tiny, it's multiple billion dollars -- but it's a smallish publicly traded company. That gets us to the other question which is Vornado has 1.64 million shares which represents $500-odd million of value, which represents $300-odd million of -- maybe even more than that -- of gain. Now when I use these numbers, you have to understand that that is after having received a $200 million capital gain dividend, which is Vornado's share of Alexander's Kings Plaza proceeds, which was paid out -- which was received from Alexander's and simultaneously paid out to Vornado shareholders. So it's been actually a marvelous investment where we have made over -- in the high $500 million of gain. And there you have it. We have begun to consider what to do with that $500 million piece of value on our books and the tax ramifications of that and what have you. So where I am is it's not likely that anything happens in terms of -- it's unlikely that anything happens in terms of a business combination between Alexander's and Vornado. It's also not likely that anything happens in terms of Alexander's selling 731 Lexington Avenue. It is in our long-range thinking as to what to do with Vornado's 1.64 million shares of Alexander's in terms of harvesting value, but nothing is imminent. Mike, if you have another one, we'll take it.

The last question comes from David Harris from Imperial Capital.

This is a question for either Wendy or for Joe. Could you just touch upon the refinancing that's coming up on Independence Plaza? It's a fairly sizable -- it looks like floating rate [indiscernible] lease for you?

Well it's in process, David, and we expect to realize over $100 million of additional proceeds and it's imminent.

Would you go to fixed, Joe?

Yes.

Yes.

David, we're in the market for a 5-year fixed rate financing on that asset. The reason we're in the market for 5 years as opposed to 10 years or more is because we expect the incomes on that asset to rise very aggressively as the apartments turn over. We're thrilled with the investment. It was born out of a distressed debt purchase. And so we're -- the refinancing for over $500 million at 5-year fixed is imminent.

Michael Bilerman from Citigroup is on line with a question.

Promise, the last one. Just wanted a clarification, Steve, in response to a question. You talked about this year's pending sales, $300 million for sure, $500 million likely, upwards to the $1 billion. How do we think about the split between what's not an income-producing, so sort of like the Harlem Park, Downtown Crossing, where you're getting money but you're not losing any income, versus income-producing assets? And I'm just -- are you able to put some of that within some buckets so that we can understand and be able to model forward?

For that, Michael, I have to go to a couple of sheets of paper and -- by the way, Joe is, of course, available at least for the next month to -- my attempt at a wee bit of humor to handle that question. The assets that are in the queue are earning subpar returns. They are not non-income-producing -- not income-producing, but they are earning subpar returns, so that I would think that the proceeds, while they will be temporarily invested at nil, they would be substantially below what we could reinvest them in prime income-producing assets. So -- but in terms of modeling, I think, Michael, always better get to Joe. So I've been told that the -- we've handled all the questions and I thank everyone for listening and participating in our first quarter earnings call. We look forward to your participation in our second quarter call, which is scheduled for August 16 on the calendar.

August 6.

I'm sorry, August 6. Wow, that was -- August 6. I'll say it again, August 6 on the calendar. Thank you, all, very much. Have a great day.

Thank you, ladies and gentlemen, this concludes today's conference. Thank you for participating. You may now disconnect.