Good morning, and welcome to the Vornado Realty Trust Third Quarter 2014 Earnings Call. My name is Larisa, and I will be your operator for today's call. This call is being recorded for replay purposes. [Operator Instructions] I'll now turn the call over to Ms. Cathy Creswell, Director of Investor Relations. Please go ahead.

Welcome to Vornado Realty Trust third quarter earnings call. Yesterday afternoon, we issued our third quarter earnings release and filed our quarterly report on Form 10-Q with the Securities and Exchange Commission. These documents as well as our supplemental financial information package are available on our website, www.vno.com, under the Investor Relations section. In these documents and during today's call, we will discuss certain non-GAAP financial measures. Reconciliations of these measures to the most directly comparable GAAP measures are included in our earnings release, Form 10-Q and financial supplement. Please be aware that statements made during this call may be deemed forward-looking statements, and actual results may differ materially from these statements due to a variety of risks, uncertainties and other factors. Please refer to our filings with the Securities and Exchange Commission, including our Form 10-K, for more information regarding these risks and uncertainties. The call may include time-sensitive information that may be accurate only as of today's date. The company does not undertake a duty to update any forward-looking statements. On the call today from management for our opening comments are Steven Roth, Chairman of the Board and Chief Executive Officer; David Greenbaum, President of the New York division; Mitchell Schear, President of the Washington, D.C. division; and Stephen Theriot, Chief Financial Officer. Also in the room are Wendy Silverstein and Michael Franco, Executive Vice President, Co-heads of Acquisitions and Capital Markets; and Joseph Macnow, Executive Vice President, Finance and Chief Administrative Officer. I will now turn the call over to Stephen Roth.

Thank you, Cathy. Good morning, everyone. Welcome to Vornado's third quarter call. It's election day across America. As I hope everyone knows by now, we are committed to running a focused business, and we have made remarkable progress toward that end. We had a strong third quarter, and I'm very pleased with our financial results. Our third quarter comparable FFO was $1.31 per share, 6.5% higher than last year's third quarter. The increase is actually a much higher 12% after adjusting for a $12.1 million onetime unusually large lease termination fee in last year's third quarter from a single tenant at 1290 Avenue of the Americas. We have lease terminations every quarter but this one is unusually distorted because of the size and, therefore, we call it out for you. Our spin-off of the retail strips and malls is on schedule and is expected to be completed as of the end of the year, subject to SEC approval. In September, we filed Amendment 1 to the Form 10. SpinCo will be named Urban Edge Properties and trade on the New York Stock Exchange under the ticker symbol UE. Jeff Olson, Chairman and CEO of Urban Edge Properties started on September 1. Trustees will include: Jeff Olson; myself; Steve Gutman, former longtime CEO of Federal Realty who put together most of Federal's portfolio; Michael Gould, former longtime CEO of Bloomingdale's; and Kevin O'Shea, CFO of Avalon Bay. Several more trustees will be named shortly. We are truly excited about UE's prospects. Now to recent acquisitions. We made 3 investments during the quarter. The joint venture in which we are a 50% partner entered into a 99-year ground lease for 61 Ninth Avenue on the Southwest Corner of Ninth Avenue and 15th Street in the heart of the Meatpacking District adjacent to…

Thank you, Steve. Yesterday, we reported third quarter comparable FFO of $1.31 per share, up from $1.23 in the prior year's third quarter, a 6.5% increase. But as Steve just mentioned, the increase actually much higher, 12%, after adjusting for the $12.1 million lease termination fee in last year's third quarter. We normally don't call a lease termination fee income onetimers, but this one was unusually large and, therefore, distortive. And like what we did in last year's third quarter call, when this fee was initially recognized, we are highlighting this item. Including non-comparable items, total third quarter FFO was $1.15 as compared to $1.12 in the prior year's third quarter. I will discuss this quarter's non-comparable FFO items in a minute. Third quarter comparable EBITDA was $426.4 million. Our New York business produced $250.6 million of comparable EBITDA for the quarter, ahead of last year's third quarter by 1%. But after adjusting for the $12.1 million lease termination fee I just mentioned, the increase is 5.7%. Our Washington business produced $83.7 million of comparable EBITDA for the quarter, lower than last year's third quarter by $3.2 million or 3.7%. Washington's year-to-date comparable EBITDA is 252 -- $252.7 million, lower than last year's 9 months by $5.3 million or 2%. We expect Washington's 2014 full year comparable EBITDA will be approximately $5 million to $10 million, lower than 2013, an improvement from our prior guidance of between $10 million and $15 million. More than offsetting the expected decline in comparable EBITDA, we realized a reduction in interest expense of $16 million in 2014 from the restructuring of the Skyline mortgage loan. Net-net, we expect our Washington segment's contribution to comparable FFO to be between $6 million and $11 million, ahead of last year. Our retail strips and malls business produced…

Steve, I want to jump back in. I misspoke in describing the financial numbers of the important 1740 Broadway sales, so let me correct my mistake. We're selling 1740 Broadway, which is a 601,000-square-foot office building, and the sales price is $605 million, $1,000 a foot. The financial statement gain on the sale will be $443 million, not $43 million that I said. $443 million financial statement gain. The tax gain will be approximately $483 million. So the sales price is $605 million. It's $1,000 a foot. The financial statement gain will be approximately $443 million. The tax gain is approximately $483 million. I apologize. David?

Steve, thank you. Good morning, everyone. Before I turn to our results for the quarter, I'll spend a few minutes on the market. New York City office using employment has now approached its all-time peak reached in 2001. And with that, Manhattan office vacancy rates have now fallen below 10% to 9.7%, the lowest level since 2008. Not quite a landlord's market but we are getting there. This job growth has continue to be achieved without the benefit of the traditional drivers of growth: large financial services and law firms. The creative industries have fueled much of the growth with the TAMI sector, technology, advertising, media, information, continuing to increase its share of leasing activity Manhattan, with TAMI tenants committing to more than 6.6 million square feet through the third quarter, some 33% of the total leasing activity, up from 25% last year. As tenants have been shifting their focus from the cost-cutting mindset of the past few years to a focus on top line growth, tenant relocations, spurred by the quest for efficiency, has also been an important trend in the market in 2014, with the 14 of the top 20 leases being for new space as compared to only 5 of 20 last year. And we have seen the same trend in our own portfolio. We have completed major new headquarters leases with Neuberger Berman at 1296 Avenue and New York and Co., Yodle and Deutsche Advertising all at 230 West 34th Street. Leasing velocity continues to be brisk, some 25-plus million square feet year-to-date, over 30% higher than the same time last year, with net absorption in the 4 million to 6 million square foot range depending upon the brokerage report through the first 3 quarters of this year equal to the absorption achieved for all of…

Thank you, David, and good morning, everybody. In Washington, we are pleased with leasing velocity, which is showing some signs of life, and we are capturing more than our share of that activity. We are doggedly determined to be competitive and aggressive to keep our existing tenants and bring new ones to fill vacant space. In the quarter, we completed 472,000 square feet of office and retail leases in 52 transactions. Altogether, thus far in 2014, we have signed leases for 1.2 million square feet of office and retail space in 167 transactions. Important to note, of this 1.2 million square feet, more than half, or 678,000 square feet, is new leasing. With about 60 leases currently being negotiated for more than 1.1 million square feet of new leases and renewals, we expect a very active end of 2014 and beginning of 2015. And we are out ahead of our 2015 contractual expirations, which total about 1.95 million square feet. We are in lease with 607,000 square feet, expect to renew another 486,000 square feet, plan to take 153,000 square feet out of service for redevelopment and will extend 350,000 square feet into 2016 on a short-term basis. Altogether, these numbers total about 1.6 million square feet or about 82% of our 1.95 million square feet of 2015 expirations. Overall, office leases signed in the third quarter generated a GAAP mark-to-market of negative 2.7% and a cash mark-to-market of negative 7.3%. Not great metrics, but producing the leasing velocity we need. We expect this trend to continue, given the ongoing competitive leasing market in Washington. Our total occupancy, including residential was 83.4%, down slightly by 10 basis points from Q2, which is way down by Skyline's declining occupancy. Skyline was 53.2% at Q3, down 520 basis points from 58.5% at…

[Operator Instructions] Our first question comes from Manny Korchman [ph] from Citi.

It's Michael Bilerman, here with Manny. Stephen, I heard from the comments you talked about a sale list but unfortunately, I didn't hear the amounts. I didn't know if I heard millions or billions. And I was wondering if you can review a little bit about sort of what's on target. And how do you envision recycling proceeds, whether it'll be more around 131. [ph] Or taking cash and distributing it to shareholders if there's another large gain like you had with 1740.

The for-sale list currently is over $300 million. I know that we have sold approximately $4 billion over the last couple of years, trimming off our portfolio, getting out of noncore assets and the like. We review our portfolio continuously, for both acquisitions, and in this case, dispositions. And while we currently have in the marketplace over $300 million, that does not mean that we will not sell more over time. We have the luxury of that almost all of our assets had gains in them. Most of them, very, very large gains, and so that's a good thing. And how we handle those gains varies from case to case. So we have over $300 million in assets now, although, that's not just a positive number and we're certainly are not finished. We have the concept of pruning, and selling assets is a continuous event.

And then as a follow-up, in your opening comments, you reiterated the D.C. comment that it's better to be soft today you don't think that there's much -- any value for the vacancy in the upside over time. The stock is at 110, it's up a few bucks over the year. I think if you think back to the stock performance, how much of that was a move in the market in terms of the value of assets in the marketplace, in terms of cap rates compressing? Or was there other things that you think were undervalued and there still remains another piece? Just talk a little bit about sort of reiterating that comment with the movement in the stock.

Oh, God. The stock market is all-knowing and all right, and I can't deem to predict or comment on the stock market's activity. I mean, it's very clear that several years ago, we were grossly undervalued for lots of different reasons, which we set about to fix. And I think, we've done a remarkable job in doing that, and we're pleased with the recognition the stock market has given us. But we ain't done yet by a long shot, and so we think the stock continues to be undervalued, and we will continue to put up the numbers and show results and expect that the stock will follow.

Our next question comes from Ryan Peterson from Sandler O'Neill.

I just wanted to ask if you guys would consider selling a stake in 555 California, given that the current pricing for CD office has been strong and the fact that people have shown a willingness in San Francisco to pay ahead for upside. It seems like it might be an opportunity to recognize a portion of that upside now.

The answer to that is we consider what the right financial strategy is with all of our assets every day. And obviously, everyday is not literal. Every quarter, we are continuously evaluating. We have thought about that asset. We continue to cherish that asset. It is probably the best asset in California, and its performance now it's spiking. So we think about it, although, it is not currently for sale.

Okay. And then one other question, just if you guys could provide any details on the rate or terms of mezz financing for 222 Central Park South.

The interest rate is in the high-high single digits. That's a standby commitment, which we -- which is available to us. It's up to $500 million. It will permit that project to self-finance and self-finance with no recourse to the parent, and the interest rate is very close to a double-digit interest rate.

Our next question comes from Brad Burke from Goldman Sachs.

On Washington, D.C, as I look at the expirations for 2015, they seem to be getting bigger, not smaller. So I'm wondering how much the leasing you've done on Washington, how much of that is related to shorter-term extensions. And I'm not sure if this is related, but as I look at your EBITDA to date for Washington, D.C., you continue to track above that $10 million to $15 million decline that you originally guided us towards. So I'm wondering whether some of this expected decline has been pushed forward into 2015.

Mitchell, do you want to comment on the -- please comment on the vacancies, and I'll take the guidance question.

Sure. Brad, on the -- with respect to the 2015 expirations, I went through that in some detail on my comments. But we have 1.95 million square feet, and the business is lumpy, so different properties have different lease expirations, different years. So the 1.95 million just happens to be how those leases come up. And I think I accounted for 82% of them, in terms of being renewed, being extended and whatnot. Would you like any further color on that?

No, and I appreciate the detail on the 2015 expirations, but I was asking more about the 1.2 million square feet that you have leased thus far in Washington, D.C. for 2014. How much of that is shorter-term extension in nature that would be causing the 2015 expirations to increase?

Oh, I see. So there will be very little of the 2014 activity that would have any impact on adding square footage to 2015.

Brad, on the guidance question, with respect Washington that you asked, we had guided to EBITDA being down $10 million to $15 million this quarter. Yesterday, I guess, it is, we adjusted that guidance. We approved that guidance to down $5 million to $10 million. We are hopeful that we will come in at the low end of that number, so that's an improvement. The reason for the change in guidance is improved operating results in the business, so that's a good thing. I would remind you that we have pointed out in our filings that if you just take the interest savings alone from the Skyline loan, so while our EBITDA will be down, our FFO will be improved by virtue of the fact that the interest savings exceeds the decline in EBITDA. So I hope that answers your question.

That's helpful. And then the second one, just on the real estate fund, now that you sold a couple of the larger assets, can you give us an update on how you're thinking about the remaining assets within this fund? Whether you might be looking to sell those in the near to intermediate term.

We're actually very pleased with the financial results of the fund. Actually, quite, quite pleased. I don't really want to comment on the timing of those sales. There's not a lot of assets in there. Some of the assets are better held for a little bit longer term. So obviously, everything that's in the fund will be sold over the intermediate term. And with respect to the specific timing of those sales, it's not something that I think we're ready to get into right now.

Our next question comes from John Guinee from Stifel. John W. Guinee - Stifel, Nicolaus & Company, Incorporated, Research Division: Real quick question, both for Mitchell and, I guess, Steve. You continue to talk about The Street not giving you credit for the vacancy, Crystal City, Skyline. So 2 questions. One is, if you're buying vacancy in Crystal City, what will you pay for that in a per-square-foot basis if you are a buyer? And then, second, is there any economics for you at all-in Skyline? Or has that all been essentially taken by the lenders?

John, we're not -- I'm not criticizing the stock market's valuation machine, with respect to it. I'm just making the observation that the way I do the math, when you buy a share of Vornado stock, you get x numbers of square feet of empty space in Washington for free. And I think that, that may be appropriate. So I guess, I would answer your question what would we pay for the empty space, the vacant space in Washington, something more than 0, actually, probably, something substantially more than 0. But that's not the main event. The main event is to not look at it as being distressed. The main event is for us to hunker down and lease that space, which may take us an X number of years and require a Y amount of capital, all of which is predictable, to get that space income-producing and then values will be quite substantial. So that's the way we will look at it. Basically, the space is worth more than 0, but nowhere near what it will be worth, when it is -- when it is becomes tenanted. John W. Guinee - Stifel, Nicolaus & Company, Incorporated, Research Division: Okay. We value it at $150 a square, and I'm just trying to figure out if that's a good number in your mind.

We probably think it's a little more than that, but I mean, I'm not going to quibble with that number. And once again, it's not a big number in our entire enterprise, so there's, let's say, there's arguably 2 million square feet, that's not a correct number but it's directionally correct, the vacancy's there. So whether we would quibble with your number by $50 a foot, one way or the other, it's actually a pretty small number. So we're talking about dollars per share, one way or the other, in value. Not fives of dollars or tens of dollars. Now with respect to Skyline, which, for those of us who understand the market down there is obviously metro-deprived and, therefore, a more difficult submarket, which we admit. What we have created there is by restructuring the loan, we have created the ability to hold that asset for a very long period of time waiting for submarket for the market to turn and then, we will be able to -- as the market gets tighter, over time, which could take years, we believe that we will have better luck at leasing that space. So what we have done there is we have basically stretched the loan out, and also bifurcated the loan to allow us to put capital in releasing, leasing capital, as needed. We expect Skyline to be at the very end of the lease-up program in Washington. John W. Guinee - Stifel, Nicolaus & Company, Incorporated, Research Division: Perfect, okay. So there is some value to, essentially, your preferred position, but it's a long time in being monetized.

We think that our -- the capital that we are in, in between the APs and the BPs, we think that dollar good. We don't think that's risk capital.

Our next question comes from Ross Nussbaum.

Can you talk a little bit about the 220 Central Park South just with respect to the activity you've been seeing over at Extell's project at 157? And just some commentary on the direction you think that ultra high-end market is going. Obviously, the press has been fascinated this year with the slowdown in sales activity over at 57.

I'm not sure I heard all your question, Ross, but let me try and take a shot at it. So the first thing is that we are not yet in the market to sell product, although -- and we will probably enter the market in the first quarter of 2015. We have a very large and very robust list of incomings, which we sort of call, the friends and family list, of people who -- and they're largely domestic and largely New Yorkers, interestingly enough. Some non, some offshore people, whatever, who have basically heard about the building, seen some material on the building and are excited about the building and have inquired. And that does not include the real estate -- the residential real estate brokerage community, who, I am told, anecdotally every major broker has a small handful of people who are very anxious to get in and look at the building. So that's what we think is the state of the market. With respect to 157, which, I guess, was the building that started the market movement, they're down to cats and dogs there. They've sold all the good products, and they have some odds and ends left, and so it's not that all surprised that if they're having multiple price rises so the product is really expensive, having sold all the good products and being down to odds and ends, that sales are slowing, that's predictable.

I appreciate that. On a separate topic, is NYRT [ph] something that you guys are pursuing? Or is that not up your alley?

The answer to that is we're not going to comment on that.

Our next question comes from Manny Korchman from Citi.

Yes, it's Mike Bilerman, back for Manny. So just a question, David, just in terms of the Marriott Marquis and the signage, I was wondering if you can just talk a little bit about, looking at the existing signage income at Vornado it's up 10% year-over-year, but it was down 11% in the quarter. I didn't know if there was something funky last year or something this quarter. But as you think about the $450 million of total cost, how should we think about the income recognition heading into next year or the sign kicking off this November, in terms of the return for that capital for the Marriott? And I know there's still the -- I think you still have the lease out to host and I didn't know if that was something that you would trigger the buyout for next year, or you'd wait a little bit.

A couple of things. Number one, we're really excited about this asset. It's a dominating asset. We now own both sides of the bow tie in Times Square, which is one of the top retail submarkets in town. When you go into Times Square, you can barely walk on the streets because it's so crowded. It's a tourist mecca, et cetera. It's also the entry to the theater district, so we're very happy with our position in Times Square. By the way, rents have appreciated in Times Square enormously, probably second only to Upper Fifth, so the -- and that's a result of a couple of things. Number one, the advent of conventional retail in Times Square is relatively new. So obviously, that is causing business to improve. The second thing is our stores in Times Square are open to 1:00 in the morning. So this is sort of different kind of -- it's an all-day all-night kind of retailing. The volumes are extraordinary, and so we're delighted with our position in Times Square. The -- we partnered with Marriott who owned the property. There is a buy -- we have an option to buy, they have an option to sell to us. Those options don't start to open up for some years now, so this is not an imminent thing. Our ability to buy is delayed, they have the first right to sell to us in a shorter time frame -- what is it, about the first fund is about 5 years from now.

The first time is upon stabilization and there's certain time savings.

So I mean, there are various sequences when they can sell to us, but we can't exercise our first buy for more than 10 years. So that's, that. We expect to have very high single digit returns on our capital investment in this asset, which means we expect to make a fair amount of money. We expect to do well with this asset, and we are very pleased.

It's Manny here. Steve, can you provide us an update at leasing on 640 Fifth? And maybe also comment on whether there's been any increased competition from 685 Fifth at GGP until recently [indiscernible]

I couldn't hear the back half of your question, Manny.

Has there been any increased competition from 685 Fifth which Thor and GGP partnered up to buy?

Well, first of all, there's -- we've done some leasing, office leasing in 640 Fifth. David, can you describe that? We've done some leasing there over $100 a foot.

Yes, two of the leases that we talked about north of the $100 leases. In fact, we're at -- the 640, that market, as it relates to the office in that building -- I mean, it's a great space overlooking the Channel Gardens, overlooking Saint Pat's, we're very optimistic about that space. A lot of the building was leased about 10 to 12 years ago. So a number of those leases, in fact, are coming up, and we think we have some very nice mark-to-markets in the office space.

So the location of -- lease of the office space is a more bifurcated question into office and retail. So the location vis-a-vis office space is terrific. The quality of the glass box that we put on top of that base-free [ph] building 10 years ago or 12 years ago is first class, best in the city. And so we're getting triple-digit rents there, so we're very pleased with that. With respect to the retail, obviously, location is superb, and we are talking to multiple tenants about leasing the retail space in that -- in the retail segment of 640. With respect to competition, we compete with everybody, and so there is almost always -- tenants almost always have multiple choices, not just one choice, that's a very rare event. And so generally, there's 2 or 3 spots on the street that are available, and so we enjoy competition all the time, but there's enough for everybody. I believe, that with respect to the more northern part of Fifth Avenue, I'm talking in the high 50s, rather than the low 50s, where this 640 is, the pricing is even higher. So I'm not sure that we're going to be competing for the same tenants that would want to go on 55th Street versus 51st Street.

There are no further questions at this time. I'll now turn the call back over to Stephen Roth for closing remarks.

Thank you, all, very much for listening and participating. Remember, it is election day. And we look forward to your participation on our fourth quarter earnings call, which is scheduled for Wednesday, February 18, in 2015. So have a good day, everybody. And we'll see you and talk to you at the next call.