Welcome to the Q2 2013 Vornado Realty Trust Earnings Release. My name is Vanessa, and I will be your operator for today's call. [Operator Instructions] Please note that this conference is being recorded. And I will now turn the call over to Cathy Creswell, Director of Investor Relations. You may begin.

Thank you. Welcome to Vornado Realty Trust's Second Quarter Earnings Call. Yesterday afternoon, we issued our second 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; Joseph Macnow, Chief administrative officer; and Stephen Theriot, Chief Financial Officer. Also in the room are Wendy Silverstein and Michael Franco, Executive Vice Presidents, 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 second quarter earnings call. I'd like to begin by reiterating our commitment to our strategy of simplifying and focusing the business. We are making very good progress and steady progress in that regard. And we will continue to do so. As I've said several times recently, in this market, we will buy carefully, and this year sell more than we buy. We will be net sellers this year. We will continue to focus internally where we have much to do and a lot to harvest. We will build cash reserves to further fortify our fortress balance sheet and to take advantage of opportunities that will undoubtedly present themselves in the future. Our cash position today is $1.1 billion, with over $2.4 billion available on our $2.5 billion of revolvers. Overall, our current liquidity position today is $1 billion better than it was at the start of the year. We had a super second quarter, and I'm very pleased with our financial results. Our second quarter comparable FFO was 22.6%-plus, better than last year's second quarter. I'll preview what David and Mitchell are going to share with you in a few minutes. Leasing in New York is extremely active, and I believe steadily marching towards the tipping point to a landlord's market. Our New York business continues to put up very strong, industry-leading metrics. I guess that the loss of income from the BRAC-related vacancies in Washington is the eye of the storm for our company. As Mitchell will tell you in a few minutes, we use the Patent Trade Office move-out a decade ago to totally transform Crystal City. And we will do it again. Truth be known, I am a little -- it is going a little slower than I would…

Thank you, Steve. Before I dive into the highlights of a real strong quarter, I want to say how pleased I am to be part of the great team here at Vornado. It is an honor to lead the world-class financial organization built by Joe Macnow. I look forward to meeting all of you who own our shares and who follow our company. Turning to the quarter, yesterday we reported comparable funds from operations of $1.30 per share versus $1.06 for the prior year's second quarter, a 22.6% increase. Total FFO was $1.25 per share versus $0.89 for the prior year second quarter, a 40.4% increase. Please see our press release or the overview and MD&A on Page 42 of our Form 10-Q for a summary of the noncomparable items. Comparable EBITDA was $418.6 million, ahead of last year's second quarter by $40.9 million, or 10.8%. Our New York division, our largest business, produced $235.7 million of comparable EBITDA, which is $28.2 million or 13.6% ahead of last year's second quarter. Our Washington business produced $84.8 million of comparable EBITDA, which is $6.1 million behind last year's second quarter, primarily due to the effects of BRAC move-outs and the sluggish leasing environment in Washington. Washington's year-to-date comparable EBITDA is $15.8 million behind last year's first 6 months and is above the range of EBITDA diminution of $5 million to $15 million we had previously projected for the full year. We expect the reduction in Washington's EBITDA in the first half of the year and the expected further reduction in the third quarter, will be partially offset by an increase in the fourth quarter. We now estimate that Washington's full year 2013 EBITDA will be approximately $10 million to $15 million lower than 2012. Our strips and malls business produced $53.9…

Steve, welcome aboard, and thank you. Good morning to everyone. I'm going to begin today with a brief overview of what we're seeing here in the New York marketplace. I think one of the brokerage houses in its latest monthly report got it precisely right: Over the past 3 months, the market, as they said, has been "warming up." Manhattan leasing activity increased significantly in the second quarter to 6.7 million square feet, with leasing activity for the first half of the year 11% higher than the first half of 2012. The Midtown submarket, in particular, has warmed up the most, with leasing activity 17.6% higher than last year. Despite many large blocks coming to the market, absorption in the Midtown in the second quarter was flat to positive, reversing some of the negative 1 million square feet in the first quarter. We are finding there is good depth to the market with tenants, including financial services, media, technology, advertising and law firms, all active in the market and closing transactions. Creative class tenants and technology firms continue to be the driving force behind Midtown South activity, including most notably, 100,000 square foot lease we signed with Facebook at our 770 Broadway. More on that later in my remarks. Value space continues to be a strong market theme. And in a positive sign, we have seen a reduction in sublease space. Midtown Class A sublease space now is at its lowest level in a year. For example, at our 2 million square foot 1290 Sixth Avenue, where AXA put some 300,000-plus square feet on the sublease market had very aggressive pricing, the speed with which they were able to sublease the space and the quality of the tenants that took the space: Morgan Stanley; Sirius XM Radio; and Rémy Martin;…

Thanks, David, and good morning, everybody. I will start with a quick overview of the second quarter and then talk more broadly about the market and how we think our -- think about our business specifically. For the second quarter, we leased about what we did in the first quarter, 275,000 square feet in 47 transactions at a healthy average starting rent of $43.10. We generated a GAAP mark-to-market of positive 2.8%, and our cash mark-to-market was down by 1.1%. Overall, our occupancy was down 20 basis points from the first quarter to 83.6%, which is penalized by Skyline's 54.8% occupancy. Excluding Skyline, our overall occupancy was better, 89.2%. Our tenant improvements in leasing commissions for leases signed in the quarter were 12.8% of starting rents, 80 basis points higher than in 2012, which is the trend in the D.C. market today. In Crystal City in the second quarter, we leased 108,000 square feet in 18 deals at a very respectable initial rent of $44.10, generating a GAAP mark-to-market of positive 3.8%, and a cash mark-to-market of positive 0.5%. Our 2,400-unit apartment business in Arlington and Georgetown is 97.1% occupied, and second quarter EBITDA is 3.8% ahead of last year's second quarter. Now let me turn to what we hear, read and what we see firsthand in the marketplace. The Washington economy is beginning to show some signs of recovery. Economists are projecting solid job growth in the professional and business services sector of about 20% between 2013 and 2017. We are encouraged by those projections. While the current real estate market in the Washington area continues to be tepid, we have begun to see positive absorption, albeit slight, in the first half of 2013 in contrast to the negative absorption for all of 2012. Much of the activity we're…

Thank you, Mitchell. Let me first touch on our strip shopping centers and malls, both of which had a strong quarter. Strip shopping center occupancy was 94.1% at quarter end, up 20 basis points from the first quarter and 20 basis points from last year's second quarter. Occupancy at the malls was 93.5%, again up 20%, 20 basis points from the first quarter, and 40 basis points from last year's second quarter. We leased 256,000 square feet at the strip shopping centers with a positive mark-to-market of 18% GAAP and 10.3% cash. We leased 135,000 square feet at the malls, with a positive mark-to-market of 11.1% GAAP and 6.3% cash. The combination of solid trade area incomes, strategic, hard barrier-to-entry locations and strong anchors continues to drive leasing at both the strips and the malls. At Springfield Town Center, Steve mentioned our major mall redevelopment in Northern Virginia. Construction is on schedule for a late 2014 opening, and it is leasing well. Turning to capital markets. As of today, we have $3.5 billion in liquidity, comprised of $1.1 billion of cash, $2.4 billion of undrawn revolving credit facilities. Overall, $1 billion better than at the start of last year. $1 billion better than 12/31/12. Our consolidated debt-to-enterprise value was 36.4%, and our consolidated debt-to-EBITDA is 7x. In June, we completed a $550 million refinancing of the Independence Plaza residential complex in Tribeca, in which we own a 50% interest. This interest-only loan is at 3.48% and has a 5-year term. The net proceeds of $219 million, after repaying the existing $323 million mortgage and closing costs, were distributed to the partners, of which our share was $137 million. During the second quarter, we redeemed all of our outstanding 6 7/8% Series D-15 preferred units for $36.9 million or an $8.1…

[Operator Instructions] And our first question comes from Steve Sakwa with ISI Group.

I don't know it if this is for Joe or for Mitchell, but obviously, you guys are making progress with this Fish and Wildlife deal. I guess I'm trying to take that comment and the leasing that you're doing down there with Joe's comment about the special servicing. I noticed that you guys also broke out some of the leasing stats, kind of x Skyline. And I guess I'm just trying to put together, how do you lease and market a project that's still in special servicing? And how do you guys think about the economics if you don't really know kind of what the debt restructuring looks like?

Steve, it's Steve. We do know what the negotiation with the second -- the special servicer will end up in. We've been -- Wendy Silverstein, who's here in the room, has been working on it for quite some time now. It's fairly baked. It's just not ready for publication because the deal isn't completely finalized. But we do know. The arrangement will allow us to infuse the capital that's necessary to release that building in approximately the middle of the capital stock of the loan where we think we have a secure interest. The long and the short of it is, after analysis, it's fairly clear to our management team that we would rather renegotiate the loan. And by the way, the lender would also rather have us stay in and operate the property and lease up the property that there will be more value created than, so to speak, giving back the keys right now. So that's where we are.

And do you have a sense, Steve, for when that will become public?

Wendy, what do you think?

I think 2 to 3 months to do the documents.

Wendy says 2 to 3 months to do the documents, but that's sort of speculating. We have a good relationship with the special service, and we've been in dialogue with them for a fairly long time. We have a handshake on the structure of the deal, and we believe we will conclude that deal.

Okay. And then just to kind of follow up on Springfield Mall. I don't know if that's for Joe, or for Mitchell. Could you guys just give us maybe an update on kind of the progress, what you spend today, kind of where you are in the leasing? And how do we think about the return on that asset, maybe by 2015?

My guys are looking at me. So I'll answer that question, also. The leasing is progressing well. The -- we divide the leasing into 3 categories. Mall shops is one category. The restaurant offering, which is very important for this property and for all major regional malls, is the second. And then many anchors, such as Dick's, the theater, et cetera, is the third. We're well along with the many anchors. We're almost completed with the restaurant offerings. And we are well more than 50% committed for the mall shop section of 450,000 square feet. Most importantly, with respect to the mall shop section, we are either signed or in lease draft with a dozen very important lead tenants, which are the core to a successful mall. So we're more than satisfied with the leasing progress. In terms of returns, I think that was also in your question, Steve. Our pro forma is that on the incremental money that we will be investing, which is I think -- what's our last disclosed number, $230 million?

$225 million.

I have a 200 -- I have $230 million in my head, so Joe says $225 million, and I'm sure he's right. We are budgeting a low double-digit return, okay? So on the increment. So that's pretty satisfactory. On the -- if you combine that number with the sum cost of our previous investment in the land together with its carry, that number goes down to, give or take, 6%.

And our next question comes from Michael Bilerman with Citi.

Steve, you mentioned in your opening comments that based on the value that the stock market is valuing D.C., adding your stock price, that you would be a buyer rather than a seller of that business all day long. And so I'm curious just with the extremely strong execution on the asset sale front, the enormous liquidity that you have today that is only expected to grow in the future. Should we expect that as Chairman of the Board and CEO of the company that you recommend that company go down the road of a share repurchase program? Because I'm assuming that D.C is not the only misvalued piece of the company that you perceive in the company.

We consider share repurchases, I won't say at every board meeting, but at many board meetings, and we have not heretofore decided to launch a share repurchase program. By the way, thank you. We -- for your acknowledging. We are happy with our asset disposition program. It will continue apace. We are happy with our cash position, and it will also continue to grow.

Our next question comes from Anthony Paolone with JPMorgan. Anthony Paolone - JP Morgan Chase & Co, Research Division: You mentioned about $500 million plus in the -- in sort of the forward pipeline of asset sales. Can you get a little more specific and give us some sense of either assets, or the nature of what's in the offer there?

I don't think so, Anthony. They are principally retail assets. A couple of them are troubled. A couple of them are terrific. But out of our main core geography, but I don't really want at this point to get into the details of the -- or which assets they are or what our price expectations are. But we will complete this cycle, and then we'll fill in with another cycle right on top of it. Anthony Paolone - JP Morgan Chase & Co, Research Division: When you mean that cycle, do you mean sort of the next couple of quarters?

Well, we have more assets to sell. Anthony Paolone - JP Morgan Chase & Co, Research Division: Okay, and just another question. Your 2014 and 2015 lease expirations get a little bit heavier than maybe the last couple of years. Can you comment on where the current mark-to-market stands? I know there's a hefty one in the retail area, but just more broadly provide some color on that?

Well, I couldn't do that. Can anybody else in the room do that? So if -- as I understand your question, Anthony, is what's the mark-to-market and the current mark-to-market in the lease expirations in 2014 and '15? We'll have to get that back to you with that. I can only tell you with respect to the retail acquisitions, I think, David, what was the word you used?

Remarkable. Pretty remarkable at Fifth Avenue.

They're remarkable. So anyway, Anthony, I'm embarrassed I can't give you that off my head. Nobody else in the room can either. We'll get back to you. Anthony Paolone - JP Morgan Chase & Co, Research Division: I mean, maybe just to ask slightly differently way: In New York, for instance, your quarterly spreads were pretty good. They're positive. Is that fairly indicative of where the portfolio stands right now, if market rents for the flat line? Or was this an anomaly?

Let me reword your question in another way. If we were to argue and then empty the portfolio and rerent it, we have a positive mark-to-market on the entire portfolio, certainly in New York office. With -- and remarkably in New York retail. With respect to Washington, as you've seen from the numbers, even though leasing is sluggish and soft, the pricing is holding up. So I would say that in Washington as well, in the current market as we see it, we have at least a push on the mark-to-market for the entire portfolio. And on the non-Manhattan retail, we also have fairly decent, probably give or take 10% or so mark-to-market and all that. By the way, the interesting thing about the -- you can't really do that on the strips and malls because a lot of that is anchored tenants with very long-term leases. So it's a very theoretical calculation. We can't really get our hands on those assets, normally speaking.

And our next question comes from Michael Knott with Green Street Advisors.

Steve or David, I'm curious, your thoughts on what's required or how much further we have to go until we reach that tipping point in New York where it does become a landlord's market? Are we -- how close are we?

I'll answer, and then David will answer. My answer is about 200 to 300 basis points more in the vacancy rate, going down into the high single digits from the low double digits.

Yes, I think that's a fair comment. I mean, as you look at availability around the city right now, it's in kind of the low double digits, about 12%, which is the vacancy plus available space; space that's going to be available over the next 12 months. I think we need some decent absorption to get those numbers down into the 9% range, plus/minus, at which point in time, we begin to see much more strength in the market. As I said, to me, a very positive sign this past quarter was pushing out, as I call it, sometimes barfing out some of the sublease space at cheap pricing, which just clears the market, enabling the direct space to achieve and really float to market pricing.

But, Michael, let's look at it in a slightly different way. There is not one homogeneous market for space in Manhattan. There are multiple -- as you know, multiple submarkets and geographies, and then there's also multiple types of space. So for example, the tech-tight marketplaces, which are Downtown, Midtown South, Park Avenue South, et cetera, are basically full with rents which are rising. Would you say rapidly or just rising, David?

I would say, at that this point in time, probably rising. And I think there was an enormous rise in rents at this point in time. They're still rising, but the...

Oh, so that type of space, for example, our 770 Broadway building and others' broad building and now coming in and pushing into Penn Plaza is in short supply, has already benefited from a supply-demand imbalance and has already risen and is continuing to rise. As David says in his remarks, high-end space in Midtown and the Plaza district -- Park Avenue district, et cetera, is in -- is also in short supply. Those kinds of users are growing. They're doing very well. They have a demand for space, and we're enjoying that. I mean, for example, at 280 Park Avenue, which we own in partnership with SL Green. And I think either Mark or Dirrell said this on their call, our strategy there is likely to lease that space out floor by floor or 2 floors at a time to smaller, well, and actually the large, but the smaller space using financial services, and there is good demand for that. If there is a softness in the marketplace, it's in the big blocks. And so we have the dynamics of the new builds over at Hudson Yards and Wall Street and down at the World Trade Center. And so 300,000, 500,000 foot blocks are a totally different kind of demand, and softer than what I've just mentioned. And we don't -- we -- I don't think we have one of those. So we're in pretty good shape. And anyway, so the -- what I'm trying to say is the market can be looked like as a homogeny. You have to take it apart geography by geography and user group by user group. I hope that answers.

Yes, that's helpful. And then second question would just be curious if there's any update on 220 Central Park South or any comment on press reports about your involvement in 650 Madison?

Those are 2 different questions. Let me do 6 -- 220 Central Park South first. So as we said many times, we have -- it's a wonderful site in the front row of -- with Park Avenue views, et cetera. the most sought-after space, the space that has benefited from apartments selling at $5,000, $6,000, $7,000, $8,000 and even higher a square foot. Interestingly, the Park Lane went under contract 2 weeks ago, I think it was. At $650 million for that site, it's a teardown. And if you add the cost of vacating the building and the cost of the demolition, it's more like $750 million, which equates to $3,000 a zoning square foot. And interestingly, our basis in our site, which is now 326,000 square feet, is a $1,000 a foot. So we think we have a -- I think the word of day is remarkable, so I'll use that work again -- a remarkable profit in just the land. With respect to the other issues with that site, we don't have -- I don't have anything more to say about the other issues of that site. With respect to 650 Madison, that was your second question, Michael?

Yes, that's right.

It's a fine property. It's a fairly modern building as opposed to the park -- the Madison Avenue buildings, which are -- have a different kind of context. This is a modern-ish kind of building. It's on Madison, the full block front between 59th and 60th. It's a fine asset in a fine location. Recently, we and Oxford Properties, an affiliate of the Ontario pension fund, joined 2 existing partners in the general partnership. So we have 1/4 of the general partnership, as does the other 3 partners. Our investment is $12.5 million. We're in the process of putting together the capital structure for this deal. So I would say it's actually premature for me to say anything more about it now.

Our next question comes from John Guinee with Stifel, Nicolaus. John W. Guinee - Stifel, Nicolaus & Co., Inc., Research Division: Great. Okay, 2 questions. One, first, a great shout out on Jim Creedon, excellent guy. I'm sure he will do a wonderful job at Crystal City. First, for David Greenbaum. What's interesting to me about the Facebook lease and the Google lease is neither of these buildings are particularly state-of-the-art. A lot of columns, very inefficient. What causes someone like Google and Facebook to go into these kind of buildings and pay pretty healthy rents?

You have to, John, kind of focus on the culture of these firms. It's -- I'm sitting here today with my tie on, and these guys, I don't think they've seen anyone with a tie in a long time. So I think when they walk into these properties, the idea of going into a glass new build, which, in fact, Facebook considered real hard down in Midtown South -- ultimately, the decision they made was, even though in a sense, the floor plate may be somewhat more efficient than an overbuilding, i.e., has fewer columns, from their point of view, it's just not the culture that they're all about. The building that we own is 100-plus-year-old building. It's a former department store. We did a renovation of that building about 15 years ago. And when you walk into the lot, they all will tell you, when tenants look at it, they say, "Wow, this thing is great." In fact, I don't think we would do anything differently in terms of the renovation that we did 15 years ago today. The floor plates are very large. The ceiling heights are great. The windows are big. So the light and air coming into the building is great. And these guys love to be on a big horizontal footprint. Google, obviously, did that here in New York. We did the same thing with Google and Motorola in River North at the Mart. They love these big floor plate buildings, whether that enables them to take their skateboards around the floor or obviously have the ability to have people interact all day, which is what that culture is all about. I mean, you'll find when you walk into the space that much of it is going to be open-space. We're excited to see the Facebook space. In fact, it's going to be a Frank Gehry design.

So let me jump on and add to what David said. Don't think for a moment that because these buildings are not brand-new steel-and-glass buildings that they are anything other than state-of-the-art in all of their services. All -- for example, in all of our buildings, the elevators are the same as you would have in a brand-new building, the mechanical systems, the Internet service, the emergency generation of power, et cetera, so that the only thing that's different than a 770 Broadway, which is the -- they want to make a department store that David just described that Facebook selected, is that it's a masonry building, which has some texture and some culture to it as opposed to a steel-and-glass building. John W. Guinee - Stifel, Nicolaus & Co., Inc., Research Division: Okay. And then as a follow-up question, a little more serious, is when 3 are out of service, it's almost 3 million square feet, 813,000 square feet in Crystal City; Rosslyn 170,000 square feet; Springfield Mall, 724,000 square feet, which you addressed; the strips in Northern Jersey, 6 strips 887,000 square feet; 330 West 34th Street, 258,000 square feet. There's probably a lot of value there. Do you lay that out anywhere where people can get a sense for your current booked versus anticipated further investment versus stabilized yield?

Joe?

John, it's Joe Macnow. No, when -- I'm sorry to say, we don't make it easy for you to put a real value on that. But your observation of how much is out of service and will soon hopefully be income-producing, certainly, it will be in Springfield. And David commented on 330. There's tremendous value there, and we'll consider and discuss now, putting together something to let you have a better opportunity. But that list, John, just shows we -- our company is a large company. We have lots of internal value that we're creating, and so this is -- it's keeping us busy.

And our next question comes from Jamie Feldman with Bank of America.

I guess going back to D.C. here, looking at the 10-K and the updated outlook for 2013 versus 2012, is it safe to assume you guys are thinking that 3Q '13 is now the bottom for D.C. and it goes up from here? Or is there a better way to think about it? And then also, have you changed at all your investment expectations to the dollars you expect to put to work in that market?

Mitchell?

So the answer with respect to the market price is that I think that, yes, we think that the third quarter will, in fact, be the -- will be the trough, and then we do expect to see positive movement. And some of the positive movements that you'll see in terms of EBITDA is really already in place, and it's recycling from where we were at a point a year ago. So it's not really speculative at all. So we will see the EBITDA grow based on contracts. And we expect to see the occupancy -- occupancies to grow as we continue to lease up. We're going to be leasing up now at a greater rate because we've really seen the preponderance of all the vacancies from BRAC, et cetera, come mostly upon us. So I think we will now sort of generally lease upward from that point. In terms of investment activity, I think that we're committed to our long-term program. We think we've got some great redevelopment opportunities and some great locations, whether it's on the offices or residential side. And at the right time, we will continue that program and put those projects forward.

Jamie, it's Steve. I'll jump in on that as well. From my point of view -- and this is from headquarter's point of view as opposed to in the field, so you can take it for what it's worth -- we are clearly bouncing along the bottom in the Washington and in our Washington business. The issue really is, is what's the duration to get back to stabilized occupancy and get the lost income back. So also from my point of view, it's going slower than I would have hoped. As I said in my prepared remarks, it won't be a year, but I don't think it'll be 3 years either. So there you have it. With respect to capital allocation, it's interesting. We have an open to buy in Washington if we can find something that was a bargain, okay? So in addition to our development pipeline, which is extremely robust -- as Mitchell said, we're starting a 700-unit apartment project now -- in addition to all of the development that we're doing in Washington and repositioning of our existing assets, we do have an open to buy of new assets if we can find something that was a -- I don't want to say it crudely -- if we find something where we have fair value sort of cheap, okay? Notwithstanding the fact that the recent market in Washington is slower than we would like, we really have had trouble finding investment opportunities down there. Said another way, for well-leased buildings in Washington, the investment demand is still extremely robust. Joe, you were going to add something?

Yes, Jamie, I want to put some math on that. If you would take the EBITDA from 2012's third and fourth quarters, that would total $169.5 million for the Washington segment. If you would take this quarter that we just finished, Q2 of '13, that's $84.8 million of EBITDA. So as long as it doesn't go down, the remaining 2 quarters would be at a running rate of $169.6 million, equivalent to last year's 2 quarters. Needless to say, because we projected between $10 million and $15 million, we expect this year's numbers to go up a little bit but not a whole lot from the running rate we now have.

Great. That's very helpful. And I guess, as you're thinking about 2014 and the leases that are signed, do you have a sense of what the baked in number is for EBITDA already?

The question is, based upon our existing pipeline of completed leases what's the EBITDA in 2014 going to be? You're not going to project that.

No, not yet.

Our next question comes from Alexander Goldfarb with Sandler O'Neill. Alexander David Goldfarb - Sandler O'Neill + Partners, L.P., Research Division: Two project-specific questions for you. The first is down at Independence Plaza, just sort of curious -- just given the long-term upside potential on that asset, just sort of curious why you sold down a bit of your position.

That was a commitment that we had made when we bought into it originally. Alexander David Goldfarb - Sandler O'Neill + Partners, L.P., Research Division: Is there any -- is there anymore commitment to sell any more down? Or is that the -- this was the...

No, no, no. We're very happy. Alexander David Goldfarb - Sandler O'Neill + Partners, L.P., Research Division: Okay, second question..

Very happy with that investment, but that was a commitment that we had made that -- it was a commitment. And we... Alexander David Goldfarb - Sandler O'Neill + Partners, L.P., Research Division: That sounds fine. My second question is switching to Alexander's, just a little more color on the apartment tower, quick -- sort of your expected rents. In our numbers, it looked like you may need like $2,800 a unit to get sort of a 6% return, which would seem a little at the high end for that market, but just a bit more color what your thoughts are of where rents are for that property and sort of who the target is.

I think your numbers are pretty close. We're projecting a slightly sub-$40 gross rent, which will yield a return on cost of approximately -- of something slightly more than 6%, which is pretty good in the apartment business. Alexander David Goldfarb - Sandler O'Neill + Partners, L.P., Research Division: And you think that market will support that?

We do.

And our next question is a follow-up question from Michael Bilerman with Citi.

Steve, it's Josh Attie. Can you talk about Puerto Rico? How much occupancy you expect to lose at that asset and when and then also, what the strategy is in the debt negotiation?

Well, it's a little awkward because it is in negotiation. Basically, the Montehiedra asset has deteriorated. It's a -- it's actually a well-located asset and an attractive asset, but it's under the gun of a couple of competitors that are hurting it. And so the income has deteriorated to the point where we thought it prudent to seek relief from the special servicer. Our strategy there is if we can conclude a successful negotiation with the special servicer, and Wendy is -- has a perfect score on all of these over the year so far. She's not smiling at me. I'm putting her under the gun. In any event, our strategy is to add capital to that asset and convert it to an outlet center. We have great experience at doing that in the enormously successful Bergen Mall in Bergen County, New Jersey. And towards that end, we have just concluded a deal with Nike for an outlet store in that center, which is the bell cow of the industry, so that bodes very well for our strategy. So we will add capital and redevelop and transform that asset in what we think will be very successful if we can reach a successful transaction with the special servicer. Notwithstanding all of that, this is not going to be a great, great home run financially either way.

And just so that we can model the earnings properly, how much -- you mentioned an occupancy decline and tenants coming out. How much of an occupancy decline do you expect? And when should we expect that to happen?

I need somebody else to help me with that.

We'll have to get back to you, Josh, we will.

Our next question comes from Vance Edelson with Morgan Stanley.

A question for Mitchell on Crystal City. The transition from government to private tenants, if you want to look at it that way, maybe just remind us of the current mix and then where you'd expect it to be, in say, a year's time?

Sure. I think if you just look back historically, before we went through the last re-leasing of the patent trademark office space, which was about 2 million square feet, we were at about 85% government and government contractor, and about 15% other. As a result of that re-leasing, the numbers shifted to 2/3, 1/3; so 2/3 government, government contractor and about 1/3 other. So I think that now with government space coming available, we're probably expecting that, that mix will either stay at that number or slightly increase with more private sector users as opposed to the government and government contractors. Or said differently, I think we still believe that the government sees Crystal City as a good market. The contractors see it as a good market, not just defense contractors but contractors to other agencies in terms of its great location. And then we're also seeing an increase of other users whether it is groups that are 501c-3 nonprofits, whether it's some technology companies, et cetera, et cetera. So I think there's a whole mix a private sector that we'll expect to see re-lease the space that we have there as well.

And then back on the New York City office and focusing in on the high-end versus the lower-end dynamic, both of which you want to target. Do you see even more strength at the low end, that you'd expect to expand upwards? Or are the trends pretty similar across the range?

No, I think what we've seen, probably the greatest increases in pricing, in fact, has been at the low-end product. We feel very good about the space we're going to be introducing to the market at 330 West 34th Street, as I talked about earlier. And I'll just remind you that we're going to be undertaking a similar program at 7 West 34th Street, which we're converting from a building that has had marked tenants to an office building. We're taking back much of that building effective January 1 with the balance of the building coming back to office over the next 2 years. So I think that space, which I consider to be relatively competitive space, probably is a space that is the most active in the marketplace for buildings that, as Steve characterized, have the infrastructure done in the buildings and can deliver absolutely modern space to tech, media types of tenants.

And as we -- and both David and I have both said, we're very constructive on the pricing of that kind of space, and we have -- that's our -- that's the sweet spot of our company.

Our next question comes from David Harris with Imperial Capital.

Let me try in fill the bold bracket void here. Steve, a question for you. If we think about life 12 months hence, do you think cap rates for your portfolio and the sort of properties that you'd be interested in acquiring would be the same, or higher or lower than where we are today?

I think, David, I hope the cap rates for our properties would lower, but the cap rates for what we want to acquire are going to be higher.

Right. And in the real world, Steve?

Cap rates traditionally are extremely sluggish. People think that when interest rates move steep that their cap rates are going to move similarly, they do not. And sellers are very reluctant to deal with future -- deal with the adversity of higher interest rates or what have you. So I think that -- and by the way, the market for acquisitions is very challenging if you're a buyer and very, very accommodating if you're a seller. And the acquisitions market for the best properties is being the buyers are underwriting and discounting fairly significant rent improvement and rent rises in the future. So I can't -- and I don't think it's appropriate for me to try to predict my stock price or my cap rates, but we're not terribly optimistic that cap rates are going to rise and give us, in the short term, a robust acquisitions market that we can feed on. So I, for one, think that -- don't think that interest rates are going to run away here. I don't think that they're going to rise to 5% -- that treasury is going to rise to 5%. I don't think the short rates are going to rise significantly for the next year or 2. And I think that we are benefiting from a worldwide, synchronized, I think I said in my letter, central bankers are Santa Claus, and I think they still are in the Santa Claus mood. So I don't think particularly forecast any significant trade -- change in cap rates over the next -- like a year as the time horizon.

Okay. Mike DeMarco just recently left. Are you filling the void? Or does it, in any way, represent an interruption to your sales activities?

No, the opposite. I mean, Mike is a good guy. He was with us for a short number of years. The -- his most-recent assignment was to handle the sale process of the -- of most of the Merchandise Mart assets, and as well, he was the team captain on selling the 2 big malls that we sold at the end of last year, at the beginning of this year. Albeit, that was such a significant transaction. The entire senior team, including me and Mike, and we were really involved in that. So Mike completed his task, and it was time for him to move on. We have staff headed by our existing senior management team, Michael Franco, Wendy Silverstein, et cetera. Plus all of the -- all of our platform heads get involved in these things. So we have plenty of buyers, and we have plenty of sellers. Mike's a good guy. I think he's got a good new position, and his task with us was finished.

And our next question comes from Vincent Chao with Deutsche Bank.

My questions have been answered.

Our next question comes from Michael Knott with Green Street Advisors.

Steve, I think earlier in the call, you made a comment in your prepared remarks about some harvesting that was on the horizon. Is there any more color on that? Or was that part of the $500 million of sales that you have out in the market? Or was that referring to something else?

No, that was referring to a couple of other situations, which are large and important, and David's -- we're going to go back to David's remarkable word, which we're not -- we just can't preannounce. We're hopeful that we'll conclude these deals shortly, but we can't really speculate about them. But when we do, they'll be fun.

All right. Well, we look forward to that. Just one other question if I could. Curious on the decision to spend redevelopment capital on 300 West 34th. I'm curious if it's an offensive decision because Penn Station, Penn Plaza is doing so well, or whether it's a defensive move ahead of Hudson Yards coming online in the next several years and presenting additional competition to the west.

David, you want to do that?

We look at it as an offensive situation. It's a building that has been the headquarters for a city government agency for upwards now of 20-plus years. The city finally took this agency. We've been trying to get this agency out of the building, in fact, over the last decade. The agency is finally now moving to Brooklyn, so we saw this is an opportunity to basically take this asset and aggressively and proactively attract the kind of tenants that we think are attracted today to Penn Plaza. As I said, the migrating tenants, which are the tech and the media tenants. So we are excited about this opportunity.

We all are -- you mentioned Hudson Yards, so let me jump on that for a second. Actually, what is going on at Hudson Yards, as you know, we are friendly with the developer. We are partners with the developer, and we know their team very well as they know ours. The Hudson Yards situation is an enormous plus for our company. The activity that Hudson Yards has created and the -- what they are doing is they are basically in front of every large tenant in the City of New York in an attempt to move them to Hudson Yards in their new builds. And so that activity has created a shift in market perceptions as to the west side of Manhattan, which, as we've said many times before, the city government and the planning community of New York has focused at as the next growth area. So since Penn Plaza is basically the same location as Hudson Yards, except they're on the river outward, sort of the Canary Wharf kind of a thing; and we are in board on top of Penn Station and adjacent to the enormous, the most important department store in America, Macy's, et cetera. So we benefit enormously from the activity that's being created around Hudson Yards. And we are rooting mightily for its success. Next point is, their price point right now is $30 above our price point, okay? So that gives us a huge umbrella under which to operate, and we are experiencing that their price point is sucking out our price point up, which is very good. The next part of it is, they're catering to the 300,000-, 500,000-, 700,000-foot customer. We do not. We cater to the 50,000-, 100,000-foot customer. So all things about Hudson Yards, we think accrues to our benefit. And as I said, we're rooting for them enormously. And the 330 West 34th Street is just another bow -- arrow in our quiver of supplying product into a growing and dynamic tech, media, et cetera marketplace.

So is there going to be additional projects like that in the rest of your Penn Plaza concentration? Or is that sort of a unique situation?

The answer is, is that internally in our planning sessions, we aspire to add capital to Penn Plaza because we think that may very well be the single most important place and the single most profitable place that we can invest capital to drive that marketplace where we're the dominant owner and to drive rents in that marketplace and to deliver better product to our customers. So the answer to that is yes, we're excited about the prospects of improving and adding capital to that district.

Our next question comes from Michael Bilerman with Citi. Oh, I'm so sorry. Our next question comes from Ross Nussbaum with UBS.

Steve, hopefully, I didn't miss this. Is there any thought of putting the San Francisco assets on the market given that -- I guess, is it a core market still for you guys given you have limited exposure there?

We have no -- we've said this publicly before. We have no current intention to expand in San Francisco, so I think that answers the second question. And the third question is it's a -- I mean, to answer your other question, it's a grand asset. It stands majestically in the Skyline. We know that there has been some movement in the tech, as in New York by the way, the tech market place is moving away, but the Bank of America building is still the Bank of America building. And while I'm not going to say it's for sale, I'm not going to say it's not for sale.

Okay. I know that Mike DeMarco left you guys a little earlier this year to go over to Cantor Fitzgerald. How have you shuffled up his prior responsibilities in light of, I guess, Fascitelli's departure as well? How have things sort of reshuffled in the executive ranks because of the -- DeMarco's loss?

I think as I said before, we have Michael Franco and Wendy Silverstein, the coheads of our acquisitions an and capital market group, are responsible -- as they were, by the way, when Mike was here -- for the sales process. And by the way, the sales of important assets around here gets everybody involved, including David if it's a David asset, Mitchell, the retail people. Everybody gets involved, even the financial people. Everybody gets a knee. Everybody gets involved in important sales.

All right. If I can a quickie here. On Toys "R" Us ...

What I'm saying is we don't want for management to handle it around here, but I think -- I don't want to boast about it, but we think we have the best senior management team in the business.

Okay. I appreciate it. On toys, given how strong the environment has been of late for demand for big boxes, and there's clearly a lack of supply in that business today, have you guys rethought whether it makes sense that some of those toy stores are worth more dead than alive? Is that a conversation that's getting revisited?

The answer to that is, yes. But it's a much more complex question than that. How do you extricate those boxes? Well, the first question is how do you extricate those boxes and still maintain a viable toys business. The second is how do you extricate them from the capital structure, et cetera. And so I assume what you're talking about is sale leaseback as opposed to just closing the stores and selling them out. Because that's not in our thinking right now. But the answer...

Or I mean, finding a way to monetize it through the real estate.

Yes. The answer is, we think about that all the time.

Anything imminent in your mind? Or it's sort of an ongoing thought?

It's an ongoing thought, which we don't have anything to say about right now.

And our next question comes from Michael Bilerman with Citi.

Great. Just want to come back to Penn Plaza and sort of, Steve, your comments on Hudson Yards, putting the hotel redevelopment -- Hotel Penn redevelopment aside, have you brushed off any sort of your plans to build new in that market given: a, your competitive position next to transit versus what Related is trying to do with Hudson Yards, what Brookfield's trying to do on Ninth Avenue?

I think we have -- how many -- what's the footage that we own there now?

About 8 million feet.

We have more than 8 million, somewhere between 8 million and 9 million feet extent at a basis, which is -- which would knock your socks off, okay? So our primary focus is to create value and increase the value and increase the incomes, et cetera, in the existing product. The new builds, we've decided -- we've already announced and we've already decided that it doesn't make any economic sense currently to take down the Hotel Pennsylvania and build an office building. We have, from time to time, including recently, considered taking down that hotel and put forth apartments, which is really the highest and best use for every square inch of new development in Manhattan anywhere. So our primary focus is on our existing buildings, and we are -- we have no imminent announcement of a new build in the Penn Plaza district.

The $3.4 million of acquisition-related cost, how much of that is 650 Madison versus other transactions?

[indiscernible]

Say it out loud.

Michael, that's all the fees related to underwriting buildings. 650 Madison will be part of that, absolutely, but there are others.

But those are dead deal costs.

Not dead deals costs. They're deal costs. All deal costs get expensed, dead or alive.

Capitalized, I think. Can you be more specific as to what that $3.4 million is?

No, we'll have to get back. Michael, if you want more detail, we'll have the get back to you.

Yes, I know. It just -- it seems like a -- just, Steve, given your comments about the acquisition market and pricing being a seller, I guess $3.4 million seem like a big number, and I recognize the cap structure and investment at 650 Madison is still moving around, but $12.4 million is not a lot of capital. $3.4 million relative to that seems like a lot. So I'm just trying to put things together and really understand the company, sort of what they're really -- what you're really doing on the acquisition front, and how active you want to be in where you're spending the money, effectively.

The fact is that 650 Madison would be a minor part of that $3.5 million or $3.4 million, number one. Number two is we look at everything as we have to, as you would expect us to. So the answer is we're going to get the detail of that number and get back to you.

We will have questions from John Guinee and Alexander Goldfarb. Our first question comes from John Guinee with Stifel, Nicolaus. John W. Guinee - Stifel, Nicolaus & Co., Inc., Research Division: One follow-up here. Your comment on Hudson Yard is very, very interesting. Talk about your current thoughts on Lower Manhattan because there isn't enough demand for both Hudson Yards and Lower Manhattan, I don't think, but tell me if we're wrong on that?

David, you want to take a shot at that?

I guess the general comment I would make first is that as you look at the stock of New York, the 400 million square feet, we're effectively at the same size we were in this city some 20 years ago. Compared to any other market around the country, John. So yes, we're going to have some new builds downtown. It looks like Larry is, in fact, going to start one more building. I guess that was announced when he announced his deal with GroupM, which could add about another 2 million square feet downtown. But I think, overall, the factor you've got to take account of is yes, the buildings downtown do have tax subsidies. Steven Roth and the guys at Hudson Yards, basically what they're doing is seeking tenants, and they'll only build the building when they have substantial pre-leasing.

I think the market will be able to absorb both, but David's point is, is that neither developer, whether it be Hudson Yards or the World Trade Center site, are going to build without tenants and financing. So I mean -- but look, the other thing is I think we've tried to emphasize this on this call. Our sweet spot is not the tenant that is susceptible to go to move into a 700,000-foot new build at either Hudson Yards or World Trade Center. We're in a different business, and we're intending to be a different business. And so we don't -- the buildings will come. Obviously, when a 600,000-foot tenant is sucked out of the Time -- the existing Time Warner Center or whatever, it has some effect on the marketplace. But I don't -- we don't think it's going to be a deep and troubling effect. And by the way, what I did say was, we are rooting for Hudson Yards because that's in our neighborhood, and that will have a -- as the 5 million or 6 million or 7 million square feet of office buildings that they're going to build over there over the next 5 or 10 years, fill up, the overflow and the activity that it creates in our neighborhood, 2 blocks away, will be enormous. I love Larry, but I'm rooting for Larry Silverstein a little less than I am rooting for Steve. That's going to get into the newspapers.

And our last question comes from Alexander Goldfarb with Sandler O'Neill. Alexander David Goldfarb - Sandler O'Neill + Partners, L.P., Research Division: Steve, you sort of answered my original question on the tax subsidies as far as competition for Penn Plaza but sort of bigger picture, if the tax incentives that the far west side in Downtown have received allow them to build new build for charging $70-type rents, does that mean that developers going forward are always going to demand for new construction, like with the Midtown zoning around Grand Central, that new developers anywhere get tax incentives? Has the city sort of opened that Pandora's box? Or You think that the city will be able to get back to tenants willing to pay the $100 for nonsubsidized development?

The city has a history of being extremely difficult in terms of giving a one-off tax subsidy for this tenant or that tenant. And in fact, over the last 10 or 15 years, the city has seen tenants bluff and then tenants even move, and still not yielded. So these 2 developments, the World Trade Center and the Hudson Yards project, are both, I believe, unique, large, important political imperatives to get the city to have a stock of new and growing products. Similarly, what's happening around Grand Central is sort of similar. In fact, we were involved in sponsoring that. Within my letter 3 and 4 years ago. I wrote that this was the idea that Park Avenue was -- we thought -- we think, we, New Yorkers, think Park Avenue is the principal business thoroughfare in the world, but it's getting old and tired. So the long and the short of it is, is that I don't think that this portends that there will be new buildings going up all over the place with tax deals. In fact, I think the opposite. I think the city will continue its policy of focusing the tax incentives in the particular outlying areas, and both of those areas are outlying. I would find it difficult, I think, for us to go in and say we want to build a new building on Sixth Avenue and get a tax deal.

And that was our final question. I will now turn the call over to Steven Roth for closing remarks.

Thank you, all, very much. We enjoyed your questions, and they're important. They make us think. We had a great quarter. We're proud of our financial results. We -- but some of the questions indicate the company still is too complex, and our strategy of simplifying and focusing the company continues to pace. So we're happy for your attendance. We'll look for you 3 months from now. We had a great quarter, and our simplification and focused program continues aggressively. Thanks very much.

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