Catherine Creswell Steven Roth - Chairman, Chief Executive Officer, and Chairman of Executive Committee Stephen W. Theriot - Chief Financial Officer and Principal Accounting Officer David R. Greenbaum - President of New York Division Mitchell N. Schear - President of Charles E Smith Commercial Realty Joseph Macnow - Chief Administrative Officer and Executive Vice President of Finance Michael J. Franco - Executive Vice President and Co-Head of Acquisitions & Capital Markets Michael D. Fascitelli - Non-Independent Trustee and Member of Executive Committee

John W. Guinee - Stifel, Nicolaus & Co., Inc., Research Division Alexander David Goldfarb - Sandler O'Neill + Partners, L.P., Research Division Michael Bilerman - Citigroup Inc, Research Division Steve Sakwa - ISI Group Inc., Research Division Michael Knott - Green Street Advisors, Inc., Research Division James C. Feldman - BofA Merrill Lynch, Research Division Vance H. Edelson - Morgan Stanley, Research Division Michael Burke - Argus Research Company

Good morning, and welcome to Vornado Realty Trust Third Quarter 2013 Earnings Conference Call. My name is Jeanine, and I'll be your operator for today's call. This call is being recorded for replay purposes. [Operator Instructions] I will now turn the call over to Ms. Cathy Creswell, Director of Investor Relations. Please go ahead.

Thank you. Welcome to Vornado Realty Trust's third quarter earnings call. Yesterday afternoon, we issued our third quarter earnings release and filed our quarterly report on Form 10-Q with the Securities and Exchange Commission. These documents, as well as our supplemental financial information package are available on our website, www.vno.com, under the Investor Relations section. In these documents and during today's call, we will discuss certain non-GAAP financial measures. Reconciliation to 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, DC 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, and Co-Heads of Acquisitions and Capital Markets. I will now turn the call over to Steven Roth.

Thanks to you, Cathy. Good's morning, everyone. Welcome to Vornado's third quarter earnings call. I'd like to begin by reaffirming our commitment to our strategy of simplifying, pruning and focusing the business. We are making very good steady progress in that regard, and we will continue to do so. As I've said before, in this market, we will buy carefully, and this year sell more than we buy. 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 to take advantage of opportunities that will undoubtedly present themselves in the future. We had a very strong, very strong third quarter and I'm very pleased with our financial results. Our third quarter comparable FFO was 23.3% higher than last year's third quarter. I'll briefly preview what David and Mitchell are going to share with you in a few minutes. Our New York business continues to put up very strong industry-leading metrics. Same-store EBITDA increased 7% and the mark-to-market's for New York office leasing were positive 8.9% cash and 8.0% GAAP. In Washington, the loss of income from the BRAC-related vacancies is the eye of the storm for our company. Truth be known, leasing is going slower than I would like, but it's pretty clear to us that the market has now bottomed. I believe, the vacant square footage in Washington is not valued at all in our stock, and therefore represents tremendous upside that we will realize as we lease up. In Washington, we have completed the restructuring of the Skyline debt which Mitch will elaborate on in a few minutes. The restructuring bifurcated the existing $678 million loan into a senior $350 million, $132 per square foot position and a junior…

Thank you, Steve. Yesterday we reported comparable funds from operations of $1.27 per share versus $1.03 for the prior year's third quarter, a 23.3% increase. Comparable EBITDA was $416.5 million, ahead of last year's third quarter by $55.4 million or 15.3%. Our New York division produced $251 million of comparable EBITDA for the quarter, that's a running rate for our New York business of $1 billion a year, quite a milestone. New York division EBITDA, about 60% of our total was $47.4 million or 23.3% ahead of last year's third quarter, primarily driven by a 7% same-store increase, property acquisitions and a $12.1 million share of a lease termination fee. Please remember that consistent with our past practice, lease termination fees are excluded from same-store results. Our Washington business produced $86.9 million of comparable EBITDA, which is $1.9 million behind last year's third quarter, primarily due to effects of BRAC move outs and sluggish leasing environment in Washington. Washington's year-to-date EBITDA is $17.7 million behind last year. We continue to expect that Washington's full-year 2013 comparable EBITDA will be approximately $10 million to $15 million lower than 2012. Our strips and malls business produced $56.8 million of comparable EBITDA this quarter, which is $3.7 million or a strong 7.1% ahead of last year's third quarter. Our New York and Washington businesses together with our strips and malls account for approximately 90% of our company's comparable EBITDA. This is our focus and our core business. Total FFO was $1.12 per share, down from $1.34 in the prior year's third quarter, resulting from noncomparable items being a loss of $27.6 million this quarter, as compared to income of $58.8 million in the same quarter last year. This year's third quarter included $22.3 million of negative noncash FFO from Toys, representing our share…

Steve, thank you. Good morning, everyone. I'm going to begin with a brief overview of what we're seeing here in the New York City marketplace. New York City feels good. Traffic on the streets is bustling and the sidewalks are overcrowded. We like traffic. When it's hard to get around that means people are at work, shopping in the stores and filling the hotels, all great for Vornado's New York business. This buzz of activity we're feeling is, in fact, reflected in the market statistics. Private sector jobs are up some 90,000 year-to-date, 52 million tourists will visit the city this year, a record number; and sales volumes in our flagship Stores, are at or approaching new heights. Manhattan office leasing activity was strong in the third quarter, at over 6 million square feet, producing some 1.6 million square feet of positive absorption, reducing the availability rate by 40 basis points to 12.3%. The preliminary reports I read last evening for the month of October, show continuing strong activity with the availability rate coming down in October by an additional 20 basis points. At the beginning of the year, there were 83 blocks of space larger than 100,000 square feet available. That number is now down to 68. While value space is still the key demand driver, we're also seeing real activity in the high-value triple digit market. In the city, there have been 50 leases this year signed at over $100 per square foot, 6 of those are ours. In the third quarter, we signed 37 leases for a total of 396,000 square feet, taking our leasing year-to-date to 1,851,000 square feet. Again, this quarter, we had strong activity from tenants new to or expanding in New York; about 25% of our activity, or 93,000 of the 396,000 square…

Thank you, David. Good morning, everyone. I will start with an overview of the third quarter and then talk more broadly about the market and how we're thinking about our business. Our Washington business had an exceptionally large volume of leasing in the third quarter. In a slow leasing market we're particularly excited about what we accomplished. In the quarter, we leased a total of 1,076,000 square feet in 57 office and retail transactions. Year-to-date, we have leased 1,691,000 square feet in 132 office and 40 retail transactions. We completed the 2 largest transactions in the Washington market this quarter. One was the largest lease in Northern Virginia and the other was the largest in DC. In Northern Virginia, at Skyline, we signed a 182,700 square-foot lease with the United States Government to house the U.S. Fish and Wildlife Service. This was one of the most hotly contested awards of the year and was the largest lease in Northern Virginia in an existing building this year. We expect the agency to occupy their new space by June. That's really fast for a user of this size. This 418,000 square foot building was our single biggest concentration of BRAC vacancy and is now 65% leased. This lease also reduced our overall BRAC exposure by 12% and brings us to the half way mark in resolving BRAC. Other pieces of our Skyline repositioning strategy are also falling into place including having now finalized our Skyline debt restructuring. Joe will talk more about this in a moment. In addition to new leasing, we are very focused on retaining our tenants. Since January, we have renewed 717,400 square feet in our portfolio. The largest of these renewals was completed in early August with the global law firm Sibley for 289,000 square feet at The…

Thanks, Mitchell. Let me first touch on our strip shopping centers and malls, both of which had a strong quarter. Strip shopping center occupancy was 94.3% at quarter end, up 20 basis points in the second quarter, and up 70 basis points from last year's third quarter. Occupancy of the remaining malls was 94%, up 50 basis points from the second quarter, and 140 basis points from last year's third quarter. We leased 288,000 square feet at the strip shopping centers with a positive mark-to-market of 13.7% GAAP and 7.4% cash. We leased 243,000 square feet at the malls, with a positive mark-to-market of 11.4% GAAP and 3.6% cash, a strong, strong quarter for our strip shopping centers and malls. Now turning to capital markets. As of today, we have $3 billion in liquidity, comprised of $800 million of cash and $2.2 billion of undrawn revolving credit facilities; overall, $400 million better than at the start of the year. And that's after using $500 million for recent acquisitions and debt repayments. Our objective is to build liquidity which will happen as we continue to sell non-core assets and finance-core assets. Our consolidated debt-to-enterprise value is 36.6%, and our consolidated debt-to-EBITDA is 7.0x. As Steve mentioned, in October, we completed the restructuring of the $678 million, 5.74% Skyline mortgage loan. The loan has been separated into 2 tranches. A senior $315 million position, which as Steve said is $132 square-foot, and a junior $328 million position. The maturity date has been extended from February, 2017 to February, 2022 and we have a 1 year extension option. The effective interest rate is 2.965% for the term of the loan. The capital we will invest to re-lease the property will be seen in our $328 million junior position, in other words, it will come in right over $132 a foot. Our debt mix is balanced, with 86.5% fixed-rate with a weighted average of 5.03% and 13.5% floating with the current weighted average interest rate of 2.32%. Remaining 2013 and '14 maturities are just $145 million. As we refinance our fixed-rate portfolio at lower rates, even after the season, a significant increase in earnings will results. At this time, I will turn the call over to the operator for Q&A.

[Operator Instructions] John Guinee from Stifel is on the line with a question. John W. Guinee - Stifel, Nicolaus & Co., Inc., Research Division: Wonderfully active quarter. 3 quick questions in 1. One, Steve, if you could talk about the upcoming mayoral change and how do you feel about that? Two, can someone give a little more color on Hotel Pennsylvania? And then three, what sort of value do you think the street should assign to the current vacancy in the DC portfolio on a per square foot basis?

The election is today. So we will know I guess, tonight, what the polls are predicting. The polls are predicting very strongly that Mr. De Blasio will be the next Mayor. So let me make a few comments about this gentleman. #1, he is tall, really tall. I think he may be the tallest politician in the land. He's a strong leader. He is very intelligent. He is obviously a caring man, he cares for people, which is very important in this, especially in this city. He is a very professional politician and that's obvious to the people who don't know him and how he rose to the top in a very, very long and contested primary. So this is a man, who is a professional politician, knows the game, has been there before although, not as visible as some of his predecessors. He is intelligent and caring. He is a Clinton Democrat and I think, we all know what that means. So we are quite optimistic that he will be a good steward of the city. This city is in a phenomenal shape. It has been improving. It is certainly the most important city in the U.S. And obviously, one of the most in the world. And we are optimistic that soon to be elected Mayor De Blasio will be a good steward for the legacy of New York. Your second -- by the way, there may be a little bit of tax increase here and there around the edges. I mean, that's happening in every major city in the world is basically under fiscal pressure, as is the Federal Government. So in return for what we get here, we're happy to pay a little bit more. But just a little bit. Your second question was the Hotel Pennsylvania.…

Next call comes from Alexander Goldfarb from Sandler O'Neill. Alexander David Goldfarb - Sandler O'Neill + Partners, L.P., Research Division: 2 questions here. The first question, Steve. You guys, obviously have chopped a lot of wood recently. Skyline 220, I mean, the list goes on, but there is a lot that really happened recently. As we looked, you talk about possibly another billion dollars of dispositions, $500 million in the works and another $500 million on debt. As we look out over the next 6 to 12 months, what do you think we're going to see, is it going to be some of the big ticket items to clean up or is it going to be more individual assets? What should we be looking for?

Well, I agree with you. We have chopped a lot of wood and I appreciate very much, your recognition of that. And the team, that's assembled in the room here, and the company's working very hard at the chopping of wood. I think, your estimate of a year or a 1.5 year from now is we expect to accomplish an awful lot in that 1.5 year. We have, I think I said $0.5 billion of assets in the market now, we have double that amount, $1.5 billion in the on deck circle and maybe even more than that. We expect and we're hopeful that in an 18-month time frame, we will complete all of that. We can run into speed bumps along the way. We can get an asset -- that some of these assets are clinkers, obviously, and not in our core. So we may get into a situation where we can't get the pricing we want or something else happens. But by and large, our mission is to prune the business down to the core and we're working very hard to do that, and I would be very hopeful that all of those assets that we have teed up will be transacted between now and 1.5 year from now. I think, you alluded to in your question, is there going to be something bigger than that? And I don't have any idea what you mean Alexander. Alexander David Goldfarb - Sandler O'Neill + Partners, L.P., Research Division: What I mean, there are some big items that's maybe that's better for offline.

No, I mean, there are some big things in there, obviously we've got an isolated building out in San Francisco called 555 California Street, which is certainly the best building in the financial district of San Francisco. Undoubtedly the best building in the entire city and arguably, one of the top couple of buildings in the entire state. But that's an isolated building. It's complicated, we have a complex structure. But that's a building that is great. It's improving, rents are going up. The team, David and the team are handling the rent thing well. But it's not a building that we intend to own forever. We've said that publicly. We got another big asset on California called the Beverly Connection. That's not an asset also that we've [indiscernible] so those are very large numbers and they are certainly, in our sights. Alexander David Goldfarb - Sandler O'Neill + Partners, L.P., Research Division: Okay. The next question is, maybe a Joe question. Trea [ph] is set to expire next December '14. And just speaking to some commercial insurance brokers, they were noting that policies can't be written with the option of if Congress fixes it after the fact you get retro coverage. You guys self insure for part of the Boneda [ph] portfolio, part of the Alexander's, how does this factor in? Do you think there's going to be much pricing impact if it looks like you're going to have to buy it in the open market or how are you handling this?

Alex, first, let me just correct one thing. We do not self insure, we reinsure everything that our captive takes on in liability, other than NBCA, the Nuclear Biological et cetera, et cetera. If Trea does not get extended, we now have $4 billion of terrorism coverage, that will equate to our pecking order in being able to buy the equivalent insurance, if Trea is not there, at 15% of that or some $600 million. But if Trea is not there, for sure, that insurance is going to be much more expensive than it is today.

Next question comes from Michael Bilerman from Citi.

Steve and Mitchell, I just wanted to come back to some sort of the DC comments, Steve, I think in your opening remarks, you talked about market has bottomed, but then later on you talked about bottoming with green shoots and I'm just trying to get a perspective of, as we look forward to 2014, in terms of what the pipeline looks like to get to our arms around both sort of the vacancy, within Crystal City and the BRAC releasing and how we should think about EBITDA heading into 2014? But then, just more broadly about when we see that -- when we can start to see that turn and really -- is it bottom in the fourth quarter or is it bottoming where we can still see some slippage? And what sort of gives you the confidence, heading into next year?

I think, in our remarks, Michael, both Mitchell and I said that the market is bottoming. I won't quibble with the terminology, the difference bottoming and bottomed. I'm not that exacting. Markets make bottoms by basically, they jiggle around a little bit, the real issue is we're pretty sure that it's bottomed or bottoming, we're pretty sure that is going to jiggle. How quickly we will jump off that bottom and how quickly we will fill the hole of the $70 odd million, maybe even $80 million, of -- that which is the EBITDA cost of the vacancy in Washington, it's something that sort of unknowable, because the demand is not yet robust. So -- and I also said in my opening remarks, that I'm disappointed with the pace of leasing down there. One of the things that's our job is to be totally transparent and if we -- so I'm not the least bit bashful to tell you that I am disappointed. I would love that it would be different. I can't predict -- then maybe I'm going to throw it over to Mitchell and let him stick his neck out -- I can't predict whether it will be 2 years from now or 3 years from now or God forbid longer. I don't think it will be longer. Mitchell also said, sort of subtly in his remarks, that we are now starting to see for the first time in a couple of years or 3 years or whatever it is, some fairly large elephants trolling the market, looking for space. We feel that we can compete aggressively for those elephants. We have the space and we have the ability to compete pricewise. So the long and the short of it is that we feel that we have bottomed. We might jiggle down a $1 million or $2 million, a $1 million here or there in the EBITDA area. We're not able or we're not so adventurous that we can predict what the ramping up will be off the bottom. I have also said that I believe, as I do the math, the vacancy in Washington is valued at 0 in our stock. So basically, that's a sort of a way of saying when you buy our stock, you get that couple of million feet, 2.5 million feet of vacancy for free. It's not worth 0 and clearly enormous values will be created as we rent up that space over the next number of, hopefully, short years. Mitchell do, you have anything else to add?

Steve, the only thing I would add is, I totally agree with you that we're -- we just can't possibly predict. And I'm obviously on the ground and in the trenches every day. So I think, I completely agree with the notion that we are bottoming. We too would like to know what the trajectory will be. So we're fighting it out in the trenches, deal-by-deal, space-by-space. As I mentioned in my remarks earlier, we are starting to see really a palpable increase of activity. I think, when sequestration came upon us in earlier in the year, I think there really was sort of a moment in time that you might liken to what was going to happen when we hit Y2K. People weren't quite sure so they just sort of held on. And now that we've gotten through it, and we keep seeing job growth on the private sector side and we see some loosening up, we are pleased with what we're seeing, but we're obviously going to continue to monitor it, on a daily, weekly, and monthly basis.

Let me tack on 1 or 2 more thoughts, Michael. The first is, we have a large and important business in Washington. We are the largest owner down there by a factor of 2, maybe even more than 2. The bull's-eye of our business is Crystal City. Crystal City is one of the brilliantly located pieces of real estate, it's big, it's important. It's got scale. It's on -- It's contiguous to Reagan Airport on the shores of the Potomac, it's 7 minutes from the district. It has, it will be, when we figure out these and re-rent and transform and continue, it is going to be one of the great investments ever made. We're already $2 billion ahead on the investment, notwithstanding the vacancies. or maybe even $3 million ahead. So that's number 1. We are very, very confident of the, I guess, the slang would be the dirt that we own. The second thing is that Mitchell has the -- an infinite amount of resources, both human and financial, to work down there and to accomplish his goals, which are leasing the space. We have a great team down there on the leasing side. We have a great team on the development side. And Mitchell, quite frankly is under -- Mitchell's policy down there is we take no prisoners. We will compete aggressively in the trenches for every single deal.

And just a second question. Just to clarify some of the stuff that you have on the market. I think you talked about the $500 million plus another $1 billion or more, sort of on deck. Does that include security stakes or the private companies stakes, or in the case of Lexington the $200 million or the case of Toys, which is carrying $350 million [indiscernible]. Is that in there at all or is it all sort of assets? And then just clarify, if that is your share, when you're talking about these dollars, or gross?

Hang on, I'm looking at a piece of paper. The answer is a very specific answer to the question, is we have mentioned we have $500 million of assets for -- in the market now, that includes neither toys nor any securities. In the -- I also mentioned, we have doubled that amount in the on-deck circle. That would -- that number, which would indicate $1 billion, would not include either Toys nor Lexington.

So both of those are the part of a plan to eventually liquidate and could come in.

I'm sorry, say again, Michael?

Both of those will be part of a plan to simplify and could occur, it's just not necessarily that they are on-deck per se?

Yes. The answer is that the numbers that we read in this call are intended to be assets, which are likely to be able to be transacted. As we've said, Toys is proving to be quite difficult to exit. And so, and also we can't predict what the price will be right now. So it would be disingenuous for us to say that it's in that number. So it's not. So anyway, let me just say, once again for clarity, our position on those 2 assets that you mentioned, Toys is, from our point of view, definitely a seller, and we have said that it's proving very difficult to accomplish that objective. Lexington, I think it's best said for Lexington is that we are not a forever holder of Lexington.

S Michael, the second part of your question is, was that our share of the numbers Steve talked about? The answer is absolutely, yes.

We have Steve Sakwa from ISI Group on line with the questions.

Steve, I guess I wanted to ask about kind of the acquisition market, obviously, it's difficult for you guys to put money out. And I'm just wondering have you guys sort of rethought or gone back and looked at your underwriting and kind of rethought the rent growth that you might be using in the markets? And I'm wondering, the rent growth that you're using kind of, versus, maybe the winning buyers. How far off do you think you are, or is it just they're willing to accept much lower returns than you guys are today?

That's a very complicated question. First of all, we are not quite as formulaic as your question indicates. We basically -- and I think, I mentioned that in the last 2 years, every single asset we have bought has been in Manhattan. And every single asset that we have bought has been of the highest quality. So there's lots of -- our basic outlook on investing is, what's an asset is going to be worth in 3,5,7 years from now, not at what it's going to be worth in the next quarter. So that's step 1. Step 2 is, as I've said, and I think as I read the transcript of other folks' calls, everybody seems to agree that the price of assets is high. And that doesn't mean they're not going to go higher. But clearly the price of assets is high. So the buy decision now is much more complicated than at other times. So it's one of the philosophies that I live by, Steve, is that, if you take a 10-year cycle, there is 2 or 3 years which are definitely the times to be buying. And by the way, those are the times when you wake up in the morning and your stomach is in a knot because of fear. That's the buy cycle. Then there are 2 or 3 years at the other end of that, that dumb bell, which are clearly the sell times. And everything in middle, where it's sort of in between. And so we're clearly not in the years, which are the easy buys. We are probably pretty close to the years that are probably the sale, but I can't -- and I'm not making a call. So the answer to your question is we don't do it formulaically. We have said clearly that we will buy selectively. And we said clearly that we'll be a net seller and probably even a very substantial net seller over the next short period of time. Michael Franco, who runs our acquisitions and Wendy. Do you have guys anything else to say?

No. I think that to your question, certainly in New York, the amount of capital from core funds and foreign sources has been significant and probably an overwhelming factor, and I think those sources are -- probably have a lower cost of capital than players like us on the margins. So that's a determining factor and I think that trend is going to continue. So I think, it will continue to be tough to buy high quality assets at prices that we deem as attractive.

And that's okay, we have patience. And as I've said also, 1 of our business strategies is to build cash for the inevitable opportunities that will be coming, we just don't know exactly when they're coming.

Okay. And then I guess, just to clarify. And there was lot of numbers on the DC market. But on page 32 of the supplemental, you kind of show that the overall occupancy rate in DC was sort of flat sequentially, but it would have gone down if you took out Skyline. And I think, Mitchell, you said you brought on 1818. Does that account for, I guess, the lion's share of that decline or are we just seeing kind of, move outs in other parts of the DC portfolio, that were timing issues?

Yes. Steve, but for -- the bringing that building back on that was that 26% leased. The occupancy would've been 120 basis points higher or flat.

S And it was 251 18th Street, Steve is that you're referring to.

Okay, Sorry. Thank you.

Does that answer your question?

Yes, it does.

We have Michael Knott from Green Street Advisors on the line with question.

Few questions on DC. Curious, just on the EBITDA range seems still kind of wide for being this deep in the year, just curious on that. And then do you expect to give '14 guidance at some point on DC or was that just a onetime event with what's happened in DC last couple of years? And then, my, I guess more important question on DC is I'm just curious, Mitchell you've talked about all of the things that have stalled your market's progress. Just curious, if the next hit from the next round of sequestration and the next debt showdown, will any of those continue to stunt your market or do you think those kind of shocks are already factored in to some extent?

Let me take the first, Michael and then Mitchell can take the second. I agree with you, the 10 to 15 is a little bit wide right now. We sort of looked at each other over the last 2 or 3 days saying we should widen it, but we didn't think it was necessary. Our best guess is that the number will be probably over 12 and little bit under 15. So we're probably -- if I had to give you a bullet number now, that would be 13, someone? Give me the number?

13.4?

13.4, very precise 13.4. So Joe says 13.4. Steve, you have a number too. So if we have to guess at number right now it will be 13.4. It has been our policy, as a result of the magnitude of the BRAC ding to our numbers to guide with respect to our expectations of that; and my guess is, that we will continue to guide until we get very close to the resolution of this. We think it's something -- we think it's the transparent way to handle it. We think it's something that will benefit our shareholders. But what I'm saying is, we will continue to guide on that -- on the BRAC affect on our EBITDA. Now the second part of your question is, will the next sequestration and deadline, how will that affect the market do you think?

I think, my view is, we've really taken the punches at this point. And I don't think there really are any more surprises and I think people -- as they've now come to expect the kind of situation to exist and we'll operate and we'll work through sequestration. There is a tremendously powerful marketplace. The service sector is fully functioning and the technology sector is growing. So I think we may not see the same kind of traditional tenancy of government and some specific government contractors. You may see a little more diversity in that. But at the end of the day, I think, the government will in fact still be a player, I think the contractors will be a player. They always figure out how to help the government, they're expert at doing that. So again, I think that we'll continue to push through, whatever really comes upon us at this point.

Michael, I'll give you my take on that, if I might. First of all, another round of sequestration, another round of debt limit confrontation, can't be good. So if you had to make a directional bet, if it's going to help us and the world and economy or not, you have to take the not side of it, so that's pretty simple. Is the market conditioned to all of this theater in Washington? I think, pretty clearly, yes. I think it's an amazing thing that they took the last debt prices down to the evening before, and the markets and the stock market they said it just didn't have a single -- not a reaction at all. The markets were 100% certain that it would be resolved, so I leave that as a fact as to what it is. I think Mitchell made a very strong point, and these are absolutely facts, that Washington is -- government is an extremely strong economy with very low unemployment, very, very educated labor force, work force et cetera. So we have a great deal of confidence as a company and we think economists in the region share that view, that the private sector in Washington is thriving. The other side of that is, is we note in our numbers, that the private sector portion of our leasing is increasing, to the point that is now well over 50%. So our business initiative is to, obviously, we want every customer we can get. But obviously we are trolling for private sector tenants and hopeful.

I think, I would just say that out of those $1 million plus square feet in the third quarter, half of it was..

Half of it was what, Mitchell?

Half of it was private sector.

Jamie Feldman from Bank of America is online with question.

I'm hoping you can talk a little bit about your largest expirations in 2014, what you're thinking in terms of renewals or potential vacancy and also, mark-to-market?

That's above my pay grade, Jamie, so I'll give it over to the finance team or David and Mitchell or all of the above.

In New York some of the major expirations that we're looking at in '14 we've actually already talked about. So it's Morrison & Foerster, which we talked about at 1290 and Citibank at 666. We have planned for those expirations. We've repositioned these buildings. And as I said earlier, we've got very good action as it relates to the spaces that are coming up. So as I look out over the next 12 months, kind of feel very good about where we are and where I think our occupancy is going to be as we look out over the next 15, 18 months. In terms of mark-to-markets, I think, realistically, as we look at what we've been achieving, which is year-to-date Joe, the numbers are in the 7% to 8% range plus minus. I think realistically, it's all going to depend upon the particular pieces of space of course that we lease. But as I look at kind of, across our portfolio, in terms of where market rents are and where our escalated rents are, again, I think, what we've been achieving is generally reflective of where I see the mark-to-markets.

So, let me jump in on DC. I wouldn't really make any prediction with respect to the mark-to-markets at this point. As David said, it's always depending on a particular piece of space that's coming back and what the new deal is juxtaposed with that. In terms of overall expirations, we don't have a particularly heavy year for us. We do have a few remaining BRAC leases coming back to us that we know will in fact be vacant. But as far as the non-BRAC related space for 2014, I think that we view it as a reasonably manageable year.

I would add just one thing, to what Mitchell said. The first is, actually 2 things. The first is that, the Washington leasing this quarter was basically flat market-to-market. I think, the cash was up a pinch and the GAAP was down a pinch, but basically, flat. I think, that is a very, very, very satisfactory result in Washington in a very soft market. So I can tell you that I am very pleased with a flat, basically flat mark-to-market in Washington. The second thing is, and this relates to our New York business and our Washington business, one of our strategies has been, in acquisitions and in the management of our business, to avoid buildings that had 700,000, 800,000, million foot huge mega tenants. And so if you look at the profile of our tenancy, it is valued at -- 300,000 foot tenants is not small by any measure. But a 300,000 foot move out you can handle, Okay? A million foot move out you can't. So one of the things that we have done as a company, as a strategy, is to be very careful to have diversification in the size of our tenants and the industries to which we cater. And I think, we have a history of being -- having the highest occupancy rate of anybody in New York, and I think that is partly, that is the result of that strategy.

I'd just add one other comment, which is, what we talked about earlier on the call, and that is as it relates to the retail portfolio. We do have some expiries coming up at 608 5th Avenue and 640 5th Avenue, we've talked about some of these in the past. And I think, we're going to see some extraordinary mark-to-markets, as it relates to the turnover of some of these great, great retail spaces.

Good point.

Yes, I was actually going to ask about the retail also. When you look across the entire portfolio, I assume you're talking about 2014 but just across the entire portfolio, what do you think the mark-to-market is for the New York Street retail?

I don't want to the speculate on that. We'll get back to you. We don't have that number. Jamie, we don't have that number handy and I don't want to guess.

And then just finally, what are your thoughts on New York City rent growth? I guess, effective rent growth? And what it's been and what do you think is going to happen here?

We've been constructive on the market, Jamie. We've seen some good absorption. We've seen as I said earlier availability rates come down. The reality is, we are still in a tenant market. I think it's going to take us a couple of 100 basis points of absorption for us really to get to a landlords' market. So I don't think we're going to see any rents that are dramatically spiking, but as it relates to rent growth, we have continued to see the ability on a net effective basis as it relates to both space rents, pre-rent and work allowances, to see some good growth, which I think, as you kind of look around the marketplace, it's been on the kind of, 5-ish 6%, 7% range in Midtown and certainly, higher in Midtown South.

The point that David makes about Midtown South is extremely interesting. The New York market is broken down into multiple submarkets. The interesting thing that has happened is, is there used to be a very, very delineated hierarchy of the submarkets where the Plaza District was the highest and then the Park Avenue District and then going down -- there was a hierarchal chain. That has basically -- what's the word, leveled. And so the city, in terms of office leasing, the rents had leveled, and the city is basically has a slight tilt to the south. Now maybe not all the way south, but clearly, the Midtown South, the Chelsea Market, the Penn Plaza District et cetera are benefiting enormously and are very tight. So we may see increases in rents which are not historically -- which we've never seen historically in some of those submarkets, at the expense of the traditional financial service industry locations. It's all very interesting what's happened. And actually, kind of exciting.

We have Vance Edelson from Morgan Stanley on the line with the question.

A kind of rhetorical question, but on the joint purchase of 615 Mad, could you comment on the relative appeal of the retail versus the office component, just given that you're not buying much in office? In your mind is retail, what primarily got you excited, or could the deal have happened on the merits of the office space alone?

Like I think from our perspective, a couple of things. We love the site. It's in a outstanding location on Madison, a full block front. And you have 200 feet of retail there frontage. And so I think, that was the most compelling dynamic, this site overall. And then the retail, the retail rolls over in 5 years to 7 years entirely and so we saw an opportunity to capture that uplift. And particularly, as retail, Madison has lagged rent wise and so we saw an opportunity for huge uptick there. The office, there's vacancy there that can be leased up, and again as David commented, that high-value boutique space is starting to move at a faster rate. And so that was attractive. But I think, absent retail, would it have been attractive? It's a theoretical question but it would have certainly been much less attractive. We obviously, if you look at everything we've done, retail has been the predominant focus and the retail made up a meaningful chunk of the value. I'm not going to break it out specifically, but it was a big chunk of value, and ultimately it sits on a great site, which theoretically could be redeveloped one day.

Okay, that's helpful. And on the acquisition front, granted, you'll be disciplined. But could you give us some feel for the size of the active pipeline that you might move forward with and how this compares to levels over the past year? Is this really the smallest it's been because of the valuations or are you still pretty busy on that front?

I'll handle that. As we say every year in the letter that I write to our shareholders, we have no budget for acquisitions and acquisitions have a tendency to be chunky, based upon what's available in the marketplace, what the pricing is et cetera. So we really don't keep a list -- a comparative list of a pipeline so to speak. We are always in the market. We are always looking at everything that's in the market. We see every deal in the market, either first, second or third; and so, even though, we are not -- we may not be buying at a particular time, or we may not like the pricing of the particular asset, we go through every single important asset that comes on the market. So we're always busy, although part of the rigor and the discipline is when to say yes and when to say no.

We have John Guinee from Stifel online with a question. John W. Guinee - Stifel, Nicolaus & Co., Inc., Research Division: Decided not to list into Lexington, 1 follow up question, Steve,. Basically everything you said -- acquisition market tough, net sellers, not getting any credit for your square foot of vacancy, $3 billion of liquidity, you're probably trading by a lot of people's numbers at a 6 in buy Cap -- all that would sort of head towards some sort of share buyback. Is that -- do you have a share buyback out there?

No, we don't. John W. Guinee - Stifel, Nicolaus & Co., Inc., Research Division: Any thoughts on it?

Well, I long for the old days, we just did some history. And in the 1980s, we bought back 50% of the stock of Vornado. And -- but we were buying that stock back at 40% and 50% of what we thought its values was. I think that buybacks are very tricky. We talked about them at, not every board meeting, but we talk about them at least once a year, maybe even more frequently. And it's not something that I, that we have, we don't have a buyback authorization outstanding. And it's not something that we think is an extraordinary -- it's not something that we have in the forefront of our minds right now.

We have Steve Sakwa on the line from ISI Group.

I just wanted to clarify, on that $70 million you're talking about of lost earnings. Are you assuming that DC portfolio kind of gets up to say 93%, and assuming kind of a basic $40 rent? Is that kind of your math?

The math would be getting up to historic occupancies in the low '90s, maybe even -- 93 is a decent guess at about what we think the market rents are yes. By the way it could be little bit more than that, too. But it's a big hole that we intend to fill.

That was a short enough question and we're going to take one last.

One more question, operator. Last question.

Our last question comes from Michael Bilerman from Citi.

Actually, I had 2 follow-ups, hopefully I can ask them. 220 Central Park South not clearly resolving the conflict with Barnett, and being able to sort of get the air rights and move forward; and Steve, you talked about having $500 million in today, thinking it's worth $1 billion, just as it is. How do you think about putting incremental capital into residential to be able to get at that gain versus selling off today and maybe it's not as big of a gain at the end of the day. But it goes along the path of simplification, pruning and focus? And just how you think about Vornado's exposure to a project of that size, which obviously has a little bit longer of a tail to its ultimate resolution, if you were to move forward alone?

Well, first of all, we couldn't be more delighted to be the proud parents of that site. It is by consensus the best site in town. It took 8 years to get it to this condition, the 8 years were clearly worth it. I would like to take credit for it, but I can't. Basically the market has risen to the point where the delay was enormously to our benefit. And we think the site is worth well more than $1 billion, as a raw site. We own the site free and clear. So we've got an enormous amount of financial flexibility. And we have lots of options all the way from selling the site, and we get calls on it weekly, all the way to building it ourselves, all the way to doing a hybrid which is inviting a financial partner in to share the bounty. All of those are on the table. As we, and this is the important thing, as we move forward in the development process without any hesitation to build the job. And so, the interesting thing about it is, because we have to do that, we may -- while we may take in a financial partner or do any other extraordinary kind of financial transaction, we will move forward as if in the process of building the job. The equity that we have in this property is so significant that we can build the job with nonrecourse debt without putting any capital whatsoever in it. I think, what I said was, we're delighted with the site. We have an extraordinary profit in it. I'd like to take credit for it, but I shan't. And we have lots of financial options, all of which we will investigate as you would expect.

And then can you just comment on Mart and the Strip site? I assume neither of those were included in that call at $1.5 billion or $2 billion of those assets on the market and on deck. Just, how those sort of play into your simplify-prune focus?

The answer to that is, the Mart building, which we have said over the last period of time, is a keeper. We think we have extraordinary value creation in front of us there. We think that the Motorola- Google deal is transformative. And we think that building is now the bull's-eye in the today tech kind of tenancies. So we have a lot to do out there and we're quite excited about that actually. With respect to this, the other shopping centers, clearly, the list of dispositions includes some assets that are retail. Certainly, nothing in Manhattan, but, there we do have some outlying non-core geographically and even non-core from the quality point of view, retail assets that are on the disposition list.

Operator, thank you. You may close the call now.

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