Good morning, and welcome to the Vornado Realty Trust First Quarter 2015 Earnings Call. My name is Ellen, and I will 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 First Quarter Earnings Call. Yesterday afternoon, we issued our first quarter earnings release and filed our quarterly report on Form 10-Q with the Securities and Exchange Commission. These documents as well as our supplemental financial information package are available on our website, www.vno.com, under the Investor Relations section. In these documents and during today's call, we will discuss certain non-GAAP financial measures. Reconciliations of these measures to the most directly comparable GAAP measures are included in our earnings release, Form 10-Q and financial 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 [ph] 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 is Joseph Macnow, Executive Vice President and Chief Administrative Officer. Michael Franco, Executive Vice President and Chief Investment Officer is on jury duty and is not with us today. I will now turn the call over to Steven Roth.

Thank you, Cathy. Good morning, everyone. Welcome to Vornado's first quarter call. It has been just 3 weeks since the release of my annual letter to shareholders, so my opening remarks this morning will be brief. Starting with recent acquisitions. In January, we increased our ownership interest in the Times Square Crowne Plaza property to 33% from [ph] 11%. This property located at 48th Street and Broadway is comprised of a 795-key hotel, 7,700 square feet of prime retail space signage, 197,000 square feet of office space and a 159-space parking garage. In March, we completed the previously announced acquisition of the Center Building, an 8-story 437,000-square-foot office building located on Northern Boulevard in Long Island City, New York. This building is 98% leased. The purchase price was $142 million, including the assumption of an existing $62 million 4.43% mortgage maturing on October 2018. In April, we entered into a joint venture in which we have a 55% interest, which we'll develop a 173,000-square-foot Class A office building on the western side of the High Line at 510 West 72nd Street. And remember, we are also developing a 130,000-square-foot newbuild in a venture in the same part of town at 61 Ninth Avenue at 15th Street. Now to dispositions. In March, we completed the transfer of Springfield Town Center to PREIT. Proceeds to us were $485.3 million comprised of $340 million in cash and 6,250,000 common units valued at $23.25 per share -- per unit, actually, or $145.3 million, which I might mention is $20 million above the collared $20 per-unit price in the deal. The units are tax-protected in favor of our original seller and, accordingly, are not currently for sale. In March, our real estate fund sold 520 Broadway in Santa Monica, California, for $91.7 million, realizing a…

Thank you, Steve. And I'll pile on, good morning, Ross. Yesterday, we reported first quarter comparable FFO of $1.10 per share, up from $0.99 per share in the prior year's first quarter, an 11.1% increase. Total FFO for the first quarter was $1.16 per share compared to $1.31 per share in the prior year's first quarter. On January 15, we completed the spinoff of Urban Edge Properties. The results of UE are included in discontinued operations in all periods presented and are excluded from our comparable results. First quarter comparable EBITDA was $358.5 million, ahead of last year's first quarter by 4.9%. Our New York business produced $248.9 million of comparable EBITDA for the quarter, ahead of last year's first quarter by 9.3%, driven in almost equal measures by increases in same-store, property acquisitions and redeveloped properties coming back into service. Our Washington business produced $83.3 million of comparable EBITDA for the quarter, lower than last year's first quarter by a scant 1%. We expect Washington's 2015 comparable EBITDA will be flat with 2014. Let me spend a minute on our 25% owned real estate fund. In the first quarter, the fund sold 520 Broadway, located in Santa Monica, California, and we recognized our share of the net gain and carried interest of $6.1 million. During 2014, the fund sold One Park Avenue and its 50% interest in the shops at Georgetown Park, and we recognized our share of the net gains and carried interest of $43.9 million. We do not expect further net gains and carried interest from asset sales during the remainder of 2015. General and administrative expenses in this year's first quarter included $11.1 million from the acceleration in the timing of the recognition of compensation expense resulting from a change in the vesting criteria of awards…

Steve, thank you. My remarks this morning will be brief reflecting that our year end call was just some 10 weeks ago. On that call, we discussed the detailed overview of the Manhattan marketplace for 2014, which focused on the job growth in the creative industries, which has been fueling the continued growth of TAMI tenants: technology, advertising, media and information. The first quarter of the new year started off with leasing activity in Manhattan dominated by what I call the traditional industry, the FIRE tenants: financial services, insurance and real estate. In our own portfolio, some 60% of our leasing activity was with financial services tenants. In the first quarter, we completed 42 office leasing transactions, a total of 553,000 square feet. Our first quarter occupancy was 97.3%, up 40 basis points from the fourth quarter. Average starting rent this quarter was a robust $77.85 with a very strong positive mark-to-market of 18.2% GAAP and 17.1% cash. Continuing the trend we have seen in our portfolio over the last 12 months, in this quarter, 45% of our leasing activity represented tenants new to or expanding in New York; as I call it, real expansion, real growth. The high-end market also has remained very active. Since the beginning of the year, taking into account signed deals and leases currently out for signature, we have a total of 300,000 square feet of leasing activity in 13 separate leases at average starting rents north of $105 per square foot. These triple-digit leases are in 6 different buildings in our portfolio, each a trophy property. Our activity has been particularly strong at the newly transformed 280 Park Avenue, including 2 major financial services leases, one with Franklin Templeton for 127,000 square feet and the other with a growing investment bank, PJT Partners, for…

Thank you, David, and good morning, everyone. In Washington, we continue to see signs of an improving economy. Unemployment has dropped again to 4.7%, which is down from 5.2% a year ago and below the national average of 5.5%. Jobs continue to grow with 50,700 jobs added from March to March. Importantly, office-using professional and business services grew by 12,900 jobs, a marked improvement from last year where the number was negative. While it will take more time for the recovery in the economy to translate into robust demand and rent growth, we believe the tide is shifting and the worst is behind us in D.C. Specifically, in our portfolio, we continue to expect our EBITDA for 2015 to be about even with 2014. We had a strong volume of leasing in the first quarter. In the quarter, we leased 763,000 square feet of office and retail space in 55 transactions. About 70% of this was in new leasing and 30% represents renewals. Our biggest deal was the new lease signed for 371,000 square feet for the U.S. Marshals headquarters in Crystal City. As we mentioned in our last call, the Marshals have been our tenant in Crystal City for the last 15 years, and it was important that we retain them for another 15 years. We relocated them from 1750 Crystal Drive down several blocks to our building at 1215 South Clark Street. We took them from a building in a bull's-eye location right at the metro and at our main entrance to Crystal City and moved them to a less prime location at 1215 South Clark. This was the building that Boeing vacated in the first quarter. As a reminder, Boeing moved just down the street in Crystal City into a new headquarters that they built and own.…

[Operator Instructions] Our first question is from Michael Bilerman with Citi.

Manny Korchman here with Michael. Steve, you're clearly advancing your Penn Plaza plans. You've hired Mark and Ed. You've shown what spend you've done there. You have an asset under contract for $355 million. Maybe you can give us some more details on when we should expect decisions to be made about the overall plan and when capital will be spent? And on that asset under contract, if you can give us any details as to how that fits into the plan or what type of building that is, That'll be helpful.

We couldn't be more excited about the opportunities that lie ahead of us in the Penn Plaza District, where we have a vast holdings and an enormous position and where the marketplace is converging from the West, from the East and from the South. Having said all that, it's premature to -- we are building a team. We are involved in a very significant, I mean, very significant planning activity. We are in contact with all of the counterparties that you would expect us to be: governments, the railroads, all kinds of different things, neighbors. But it's premature. So the answer is that we have an enormous opportunity there. We are excited about it. We will disclose undoubtedly through government officials when our plans get to be precise, and it's premature now, and I apologize for that. I understand that you're looking for more information. I understand that our shareholders are excited about it, but I really can't go into any more detail than that. With respect to the asset that we have described in its dollar amount, we will disclose the details of that when we close it, which will be, I think, in the next quarter.

Maybe just one follow-up to that, Steve. And I appreciate that you can't really speak publicly about what the plan is, but have you guys decided internally as to what that might look like and how you're planning to go through the approval process? Are you still at the stage where you're still sitting internally and discussing what that might look like?

We're closer to having a plan internally than you think. We are very close to a plan. We've been in contact with counterparties, the government, et cetera.

The next question, Steve Sakwa with Evercore ISI.

Operator, hang on. I want to go back for a minute about Penn Plaza. I just want to say one more thing, okay. There are multiple facets of what we intend to do in Penn Plaza. There's lots of focus on the part of market participants in what we're going to do with the retail and the street level and the pedestrian areas, so that's all very, very important. But to me, the defining part of it is, is to take all of the office space that we own there and make that office space much more valuable by doing what we do to buildings. So we own a 2.5-million-foot building, a 1.5-million-foot building, a 1-million-foot building; improving those buildings for our office customer is really the main event. So I'm sorry, continue with the next question.

Steve Sakwa with Evercore ISI is on the line with a question.

Steve, 2 questions. First, I just wanted to make sure I heard you correctly. You said that the rent at the St. Regis, I guess, would be up about 400% on a cash basis. If I recall correctly, that deal was about a 2% cash yield when you bought it. Can you just kind of confirm those numbers?

If what you're going for, it's going to be 8% or 9%, that's not accurate.

Okay. I guess, that's what I was going for.

So the answer is that's not accurate.

Do you care to clarify or give us a range?

We have a pretty tight confi on that deal with this particular important tenant. I can only tell you that the market rents that we have achieved give us a -- are above what our underwriting was when we acquired the asset only 5 months ago and will give us a very satisfactory market rate of return. We're doing -- we did fine.

Okay. I guess on the 220 Central Park South, it sounds like you got that project off to a good start. Can you give us any -- I realize you won't disclose pricing on individual units, but could you give us an average sense of what the average selling price was on that 1.1 billion and kind of where did those units stack up within the building?

The answer is, is I'm not going to disclose what our average price is for lots of different reasons, including competitive reasons. I will say, however, that there is no doubt that it is a record in Manhattan real estate. We are doing beyond well there. We are thrilled. What has been accomplished in 5 or 6 weeks has never been done before. And so we think we have the dominant project. So I hope that answers your question. What you said also is the sales are evenly arrayed from the top of the building to the bottom of the building. And they're also evenly arrayed in size of product.

Alex Goldfarb with Sandler O'Neill is on line with a question. Alexander David Goldfarb - Sandler O'Neill + Partners, L.P., Research Division: Good to see people out spending money in Central Park. So 2 questions here, Steve. Or actually, the first one is for Mitch. Can you just comment -- obviously, D.C., the occupancy has been improving. There have been some news articles about increased defense lobbying and obviously we can all read about the new bomber proposal you spoke about increased tech investing. So can you comment what you're seeing as far as increased defense, whether it's lobbying, contractors, et cetera, and If you're seeing that materialize as far as demand for office space or if this is just all news articles talking?

Okay. So with respect to your specific question with respect to defense, not necessarily seeing anything in the context of defense lobbying, but what we are seeing is everything, as you said in the articles about possible increased spending through budgets. But what we're really seeing is some optimism through the contracting community. And as they're closely, closely monitoring what's happening within the government and within DoD, I think they're seeing that there's likely to be some increases within the budget year upcoming and in terms of what's in the proposed budget that's out there that's pending right now. In terms of whether that translates into them or the government leasing any additional space at this point in time, I think it's too early to make any of those conclusions. Alexander David Goldfarb - Sandler O'Neill + Partners, L.P., Research Division: Okay. And then Steve, in your Chairman's letter, you reemphasized that everything is on the table, including separating out street retail in D.C. Just curious, obviously, D.C., hit a low point. Would seem inopportune to spin off and one can argue for a lot of synergies between street retail and New York. So curious from your perspective, is it just to emphasize to folks that you constantly are reviewing the business in the new and improved VNO? Or is it some sort of managerial decision that having these different elements really is too difficult to manage all under one umbrella, and they're likely better off ultimately as individual standalones.

The answer to your question is yes, yes, and no. Clearly, we think about this every day in terms of how do we achieve the appropriate business model, and how do we achieve the appropriate values and shareholder values. With respect to management, we have no problem focusing on -- we've got the business to the point where we are extremely focused, extremely tightly managed, and we're very happy with that. So we have no trouble managing the street retail and the office buildings. We have no back -- trouble managing New York and Washington. So if we were to do something, it would not necessarily be because it would improve the -- our ability to manage these. It's all a matter of values and what is the right construct going forward. So people, there's been lots of swirling around, simplification is over, simplification is -- there's more things coming, all kinds of different rumors, and so I don't want to contribute to the rumors, but all I want to say is, we think about this every day; that is our job. And everything is possible, and there is a -- I'm not saying we're going to do something, I'm not saying we're not going to do something, and what I'm going to tell you is that we are doing our job; we're thinking about it.

Jamie Feldman with Bank of America Merrill Lynch is online with a question.

I guess I want to focus on 555 California. You sold Santa Monica exiting some of your California assets. We've seen in the last week a little bit of a scare on sales force potentially being for sale. LinkedIn's number is not coming through quite as well as we they had expected. Any thoughts here on -- just on the San Francisco market in general? And when might be a good time to harvest that asset?

We think San Francisco is just fine. We think it is -- while we have an obvious bias towards New York, we think San Francisco is a very, very strong market. We think that the Bank of America building, 555 California, is the best building in the marketplace. We have an incredible roster of conventional tenants, financial tenants and, now, tech tenants. I mean, Microsoft is not going anywhere. So we think the building is terrific. We think the financial performance of the building is improving. Having said all that, we are open for business.

Okay. And then David, if you could just maybe talk through what you're seeing in terms of rent growth in New York City across the different submarkets? I know you had said the kind of higher-end boutique financial services are doing very well. But just generally, if you could give a little bit more color, that would be great.

So as you look across the basic submarkets, year-over-year, rent increases in Midtown were probably in the kind of 5%, 6% range. We did see rent increases in Midtown South continue in probably the low double digits. And the downtown marketplace with some of the significant absorption over the last year, you also saw low-double-digit rent increases. I think if you look forward now, I think where we may begin to see some of the largest rent increases, in fact, are Midtown. So as you look at Midtown today, off of the trough going back 7, 8 years, we've probably seen the lowest rent growth. Midtown South today is above where it was in 2007, 2008. Midtown still has a ways to go. And I think as it relates to our Penn Plaza assets, where obviously we've got a significant, significant 8-million-square-foot portfolio, and we effectively have, in a sense, our beat, and in a sense, own that marketplace. We have been aggressively pushing rents in Penn Plaza as you've seen in terms of what we've done at 330 West 34th Street and One Penn. So generally, I would tell you, I feel very good about where the marketplace is. We think we are going to start to see some significant rent increases. Listen, there's always space that comes back to the market. And as you look at the published numbers for the first quarter, we actually did see negative absorption in the first quarter, and it's several large blocks of space that were put back into the market, 28 Liberty, 1271 Sixth Avenue, 75 Rock, which was -- finally came into the statistics. This is a big marketplace, but generally, I feel very constructive in terms of where rents are going.

And then how was -- how does the new space available downtown and at the Hudson Yards play into that? It sounds like you think rent is going to accelerated here actually even though that supply is actually coming online now.

It's a big marketplace, Jamie, and I will tell you, when we're adding 3 million, 5 million square feet onto the marketplace, the reality that's 1% of the stock of the city in a city that really has seen very little growth in its stock. In fact, virtually no growth in its stock over a 20-year period of time. So I don't see any significant impact from a couple of these buildings coming online.

Brad Burke with Goldman Sachs is on line with a question.

Wanted to ask a question about what you're targeting for year end liquidity. Right now, you're at $1.1 billion. You closed on Springfield on March 31, I assume that the $340 million of cash is included in that balance. So even allowing for the refinancing at St. Regis, that still come up short of the $2 billion balance you had previously indicated. So and particularly if you close on the Penn Plaza acquisition, so I wanted to know whether we should expect additional refinancings or dispositions, or whether you might come in under that $2 billion balance?

We're going to try to get very close to the $2 billion balance, and you can expect another refinancing or 2.

Okay. And then another one, just on your letter, you said that this might be a better time to harvest than invest so was hoping that you could give us a sense of the magnitude you might be considering for dispositions and just general comments on what types of assets you might be targeting.

The answer -- the statement that I made was basically a general market outlook as opposed to something that would point to our specific plan within our company. We have done $5-odd billion of dispositions in offloading assets that we -- that don't fit our business model or that we no longer wanted. Now we're down to a very tight core of assets that we are very happy with. So we don't have any rotten apples so to speak. And if we sell anything, it would be because it would be an offensive move. So we don't have -- I don't think you can expect a very large disposition program from us right now. Notwithstanding my comments about the market, you will and you can expect us to be very careful about acquisitions because we do think that prices are high.

John Guinee with Stifel is on the line with a question. John W. Guinee - Stifel, Nicolaus & Company, Incorporated, Research Division: Great. First up, a macro question and then a micro question. This is Lexington Property Trust, LXP. A few years ago, this was a $12 stock, and it seemed pretty pricey, but I thought to myself, well, the guys at Vornado are on the board and they have a lot of good realtime information, so it must be going up because otherwise, they would sell. And now it's a $9.75 stock with very little investor interest. Can you give us some insight on your position at LXP, what you're thinking?

I guess you're saying I was wrong. John W. Guinee - Stifel, Nicolaus & Company, Incorporated, Research Division: No, no, never I would say that. I was wrong, not you.

LXP is a -- seems to be a bit of a value trap right now. If you look at all the metrics, the stock is very, very cheap compared to its industry group. It continues to get a little cheaper, so I can't predict stock prices. I can only tell you that we are not a long-term holder of LXP. John W. Guinee - Stifel, Nicolaus & Company, Incorporated, Research Division: Got you. Okay. And then...

By the way, the LXP has 2 other little nuances. Number one, it is part of our liquidity pool; it's very liquid. It is a high-dividend-paying stock, so we are earning, while we have a declining stock price, we are earning a dividend on that declining stock price. But -- and the second thing is, we have a very large tax gain in that position, which we have been trying to manage a little bit. So it's -- but it's certainly -- LXP is certainly on the for-sale list. John W. Guinee - Stifel, Nicolaus & Company, Incorporated, Research Division: Do you have any good tax losses you can match shortly?

We're trying. John W. Guinee - Stifel, Nicolaus & Company, Incorporated, Research Division: Okay. And then second, for Mitchell, just so we can help underwrite other companies we follow in the D.C. area. I'm doing a little bit of math on the U.S. Marshals lease, and obviously, at that time that was a must-do lease. Can you talk a little bit -- I'm going to just give you some numbers; you can fill in the blanks. It looks to me like TIs plus leasing commissions retending cost was about $130 a foot. How much of that would've been base building? How much is TIs? How much is leasing commission? Can you add in the free rent on that deal? And also add in the -- looks to me like about a $33.50 gross rent [ph] what the OpEx would be on that building? And then was it a full RFP process? Or how did the deal come about?

Okay. So just to address your first question, this is a full government procurement process, so it went through with prospectus approval as well as through the various different stages. So we responded to the request for proposals that were issued by the government. And in their request for proposal, they basically say to all of the bidders, in order to comply and meet the minimum requirements of the proposal, you must provide a certain amount of allowances, which includes the basic tenant allowance as well as some security as well as what they refer to as a warm-lit shell. So those -- and with the leasing commission as well. So those numbers add up to the bulk of the expenses in terms of what we had to put into the deal, not a whole lot in terms of base building expenses. In terms of the OpEx on a building like that, you're probably looking at about $12 per square foot. And in terms of the free rent, I'm not going to comment on that.

So John, let me pipe in on this because Mitchell had all of his partners involved in this decision and in this deal. So a couple of things. Number one, and I said in my brief remarks that this was a must-do retention. So this was a 350,000-square-foot-odd deal. So it's a 370,000-square-foot deal. We were very reluctant to spring another 370,000-square-foot hole number one. Number two, in the negotiations, the financial deal is rugged. There's no doubt about that, but we -- and if this was a freestanding deal, you might not have done it; you might have walked away from it. But the way we looked at it was that if we didn't do this deal, there was a likelihood based upon the current competitive position in the marketplace that, that space might be empty for 2, 3 years, who knows. Certainly not 1 year. So when you bogey the deal against having a rent-paying tenant in occupancy versus having an empty building for another number of years, the financial comparisons get to be tolerable. The last part of it is, and Mitchell has said this on this call and prior calls, we were able to orchestrate a musical chairs with this important client so that he -- they vacated a building right on top of the Metro, right at 18th Street, right at the entry to Crystal City, which we think is probably one of our best 1 or 2 buildings and is going to be a prime candidate for redevelopment. And we will do very well with that building that they're vacating, and they're moving down the block to a building which is in a lesser location, which could remain vacant for 2 or 3 or 4 years. So that's the logic of it. We understand the economics of the deal, and I'm just trying to give you just a little bit of color as to what our thinking was. John W. Guinee - Stifel, Nicolaus & Company, Incorporated, Research Division: Great. A follow-up, just one -- couple of quick add-ons. Refresh my memory, 1215 South Clark, what's the cross street there and what was the roughly year that building was built, floor plate size, et cetera? And then second, Mitchell, they ultimately took 370,000 square feet. Do you have any sense as to what their square footage was in the prior space, i.e., did -- was it an upsize or a downsize or a lateral -- equal move in size?

Sure. So let me see if I got all of those follow-ons. I think you may have exceeded the 2 questions, but with respect to -- just to go back to your earlier point, your total package number that you quoted that you're sort of reverse-engineering was -- is too high of a number. It's lower than the number that you quoted. The building is basically at Crystal Drive and 12th Street and also intersects at South Clark. it's at the north end, and it's sort of one long block at that point away from the Bartlett in Pentagon City that we're building at 12th Street in terms of the orientation. The building is 1980s stock, and the building itself is about 3 -- the main building is about 350,000 square feet, so they spill over into more than just 1215 South Clark. And the floor plates are in the mid-20s per floor on a per-square-foot basis. And the final question, in terms of size, we talked about this on the last call, they currently lease 411,000 square feet. They will ultimately lease 371,000 square feet, so there is a bit of a reduction, although those leases for the balance between 371,000 and 411,000 square feet continue for another 3 to 5 years whether the government backfills that space or what remains to be seen. But we will continue to lease for at least another 3 or 4 years the full 411,000 square feet to the Marshals through the GSA.

John Bejjani with the Green Street Advisors is online with a question.

Steve or David, for the couple developments you've announced last couple quarters in the Chelsea area, were the deals structured as JVs out of necessity? Or why not try to go solo for smaller projects like that?

One was a JV, which we were invited into by a land owner, and we had no choice. And the second, we JV-ed with an adjacency -- an adjacent property owner. So in both cases, they were sort of JVs of necessity.

Okay. And are you able to share a projected development cost on the West 22nd Street -- West 22nd project? And I guess, in general, should we expect to see you guys pursuing more ground-up development given where our current asset pricing is?

The answer is we're not ready to share the development statistics currently. These are fairly new transactions. We will publish them at the appropriate time. The second thing is, is that our company historically, on a legacy basis for 34 years, has a massive development expertise in big projects and small projects. We did multibillion-dollar Bloomberg Tower. We're doing the multibillion-dollar 220 and more and more and more. We have that expertise in Washington. We have it locally. We also have redevelopment capability where we take an office building and totally renovate the front of the house, the back of the house, the systems and what have you. So it's a skill set that we have and we use as the -- as we are able to find appropriate opportunities and as the markets turn. So we actually like development. We prefer to buy somebody else's building at $0.80 on the dollar at the right part of the cycle or $0.70 on the dollar. But we do have the development skills, and we do partake of then and we think be the appropriate time.

Vance Edelson with Morgan Stanley is on line with a question.

Maybe for David, if we could focus on Midtown South for a moment, could you comment on whether the TAMI strength is bringing others that need to be close to those types of tenants to the neighborhood and perhaps having a multiplicative effect when you think about the venture capitalists and lawyers and others that might want to be in the vicinity? Are you seeing any benefit there?

Remember, TAMI is a broad kind of category that includes technology, advertising, information, media. So we are seeing those tenants migrating effectively to areas that you're referring to Midtown South. Have we seen a significant migration there of some of the other service professionals that may be working with some of the TAMI tenants, lawyers, et cetera. I would tell you, we -- I don't think the answer to that is yes. I mean, we have not really seen that. In terms of the financial service guys, the venture capital guys, as you look at the sites that we are redeveloping right now, as you look at what we are doing over at 85 10th and there's another deal that we're working on basically in that kind of Westside market. The finance guys, while we think of them in the traditional, as I referred to it this morning, fire tenancy, the reality is they love these kind of locations just like the TAMI guys do.

Okay. And then just sticking with Midtown South, something we've been hearing about is the higher property assessments and resulting higher taxes for buildings that are just much more valuable today than in years past. Do you have any thoughts on the higher property taxes making their way into rents over time and perhaps taking some of the appeal out of Midtown South if this narrows the gap at all with rental rates elsewhere? Or is that just not an issue?

One thing that seems to be a truism is that real estate taxes go up over time. Real estate taxes historically, there was a wide gap kind of in taxes as it related to Midtown South and what I call traditional Midtown. These increases in taxes get phased in based off of an income and expense methodology over a 5-year period of time. So as the rents have gone up in Midtown South, the question is, Vance, are we going to continue to see a narrowing of the gap of the real estate taxes which will be passed through to the tenants in Midtown South and Midtown, I think the answer to that is yes.

But, Vance, what's happening is, is Tom Friedman wrote a book, said the world is flat, well, David is going to write a book that says Manhattan is flat. So it's not just the real estate taxes that are starting to rise. It's the rents have risen, so that if you look at the various submarkets, whether they be Midtown or Downtown or center of town, whether they be north, or whether they be on the west side or center of the island, rents are converging as are asset prices. So you can spend over $1,000-a-foot for a building that's in Chelsea right now, but that was unheard of. And so the point I'm trying to make is, is that the island is flattening, rents, asset values, tenancies are all now getting to be very similar across the entire -- each submarket of the island.

Ross Nussbaum with UBS is online with a question.

Steve, on 220 Central Park South, would you at this point take the over -- if I just simply took the $1.1 billion that you roughly said you sold 1/3 of the building, multiply it by 3, what's your confidence level at this point that you're going to end up with greater than $3.3 billion of total sales there?

Ross, I really don't want to speculate. We're going to do -- we're thrilled with it. We're delivering the best product that's ever been delivered into the Manhattan residential market. So we're very confident in the quality of the product, the design. We're very confident in the location, and we're going to do very well with it. We're going to get a fair price for a fair product, but I don't want to speculate as to where we're going to end up.

Okay, fair enough. My thought to corporate governance topic, and I guess the question is -- and you've talked about this a little in the past, which is you've got a staggered board, and I think in the past, you've acknowledged that it may not be ideal but wasn't necessarily changing anytime soon. But beyond that, I sort of look at the composition and say you've got 4 board members over the age of 75. You've got 3 of them who've been on the board for more than 30 years. I guess the question is with the "increased level of activism" that's been going around in the REIT sector in the last year, does it cause you to rethink the structure and/or composition of your board as you go forward?

Probably. [ph] Take out Warren Buffett's annual report and give it a quick read. I think his board is older and more seasoned than mine by a long shot, although we can't -- anyway, so the long and the short of it is, is our board is extraordinarily competent. They are senior. They have been involved in the management operations and development of the company for a -- for a long time. And the answer to that is, is our board thinks that they are very confident and qualified in doing a great job as do I. Now we believe in youth. We believe in change. We also believe in continuity. And so every once in a while, we recruit and attract a new board member, and if you look at the proxy -- I don't want single anybody out, but we have added over the last years an extraordinary individual, another one and another one, and we're going to continue to do that. So I know some of the folks that the activists have been putting on some of these boards. And I can tell you that the individuals that are on our board are not more competent, much more competent. So there you have it.

Vincent Chao with Deutsche Bank is on line with a question.

I just want to have a question on the balance sheet here. You mentioned the floating rate debt going up to 23%. I think it was about 17% last quarter. And you've got RiverHouse coming on in the next quarter here. And just [ph] how high you're willing to let that go up to or if there's plans to maybe reverse that percentage over the next couple quarters.

That's a very difficult question. It's a very sophisticated question. We have no bogey with respect to the ratio and the mix of fixed rate and floating rate debt. Generally speaking, we look at each asset -- well we -- as you know, when I wrote about it in the shareholders letter this year, we have more project-level nonrecourse debt than we do have unsecured guaranteed debt. So that's number one in terms of the mix of debt. Number two is, is that if an asset is mature with long-term leasing and stabilized income, it's -- that's a candidate for fixed-rate debt. If an asset is on the for-sale list or if it's in a development prestabilization stage, or if we think the income is going to change and then it's more of a candidate for shorter-term floating rate debt where we can prepay it. There is 2 -- our decisions are based upon 2 or 3 things. One is our view on where interest rates are going, which is a very, very risky thing to start predicting the interest rate market. Number two is, the status of the asset and what is a better capital structure for the individual asset. And the third is, is that I will tell you that, call me crazy, but if you look at a 25-year cycle, the price of shorter-term floating rate debt has been vastly more favorable to fixed-rate debt in almost every year of the entire 25-year cycle. So having said all that, we do it asset by asset. We have no bogey. We do understand that fixed-rate; debt is something that is you can model as opposed to floating rate debt, which fluctuates. And there's one other thing. Floating rate debt has the advantage that you can pay it off with generally at par with no penalties or almost a very small penalty. Fixed-rate debt, which has defeasance, and I think defeasance goes to a treasury -- a short-term rate is very, very, very expensive to pay off. So when you take fixed-rate debt, you have to be pretty much resigned that, that debt is going to last on that asset to maturity. So those are some of the things that go into our decisions, and we think that a capital structure which has 1/4 floating and 3/4 fixed is absolutely an appropriate -- certainly not an out-of-line capital structure.

Okay. And then another question just...

Hang on, by the way, let me just add a couple of more things to that. We and many of the blue chips in our industry have very, very low rates of debt. So we have a debt ratio which is somewhere in the low 30s of percent of the values of our assets. So in terms of a risk point of view and what have you, the better companies in our industry, us and ourselves included, have very low levels of debt. So that's also something that's very much in our mind as we -- and we will continue that way -- as we continue -- as we manage our balance sheet.

Just another question moving back to street retail. Last quarter, you talked about there was a question about tourism and if there's an impact on street retail, and you had mentioned hotel bookings. As a little bit of an early warning sign, just wondering if you could update us on what you're seeing from -- as it relates to tourism's impact on street retail?

Yes, sure. I mean, just anecdotally, the hotels are getting a little bit impacted by the strength of the dollar. Obviously, retail will be impacted by -- we don't see a lot of that. What we do see is that asset prices have gotten extraordinarily high and, therefore, rents that owners are asking the retailers to pay is -- are also very high. So the single thing -- the biggest thing that's affecting the street retail business is the high rents, which I think has a much larger effect than the fluctuations in the dollar.

Derek Van Dijkum with Crédit Suisse is on the line with a question.

I was wondering if you could just give some more color on pricing for fully marked-up street retail leases.

Can you put some bones on that question for me, Derek?

Well, you've been borrowing street retail at, call it, sub-3 caps. And now, for example, the St. Regis property. Now that you've fully marked up the rents at that property, what do you think market pricing for an asset like that should be?

Let me see. I think what you're saying is if you have a fully stabilized retail asset, which has a lease which is at market as opposed to below market, what would the cap rate be?

Correct.

Okay. Well, the answer to that is it depends upon the submarket in New York, and it depends upon the quality of the asset. So if it's a so-so asset on Second Avenue or something like that, I don't know. But if it's a first-class asset in prime Fifth Avenue or prime Times Square or whatever, I think it's going to be probably sub-4. Now you have to remember, the street retail business, these assets are the scarcest asset in all of real estate. There's -- our street retail is a very, very -- there is a very limited supply of this merchandise.

Michael Bilerman with Citi is on the line with a question.

Steve, I just had 2 quick follow-ups on cap structure. In your shareholder's letter, you talked about unsecured debt and secured debt, and I'm just curious your view today. Is there anything -- you only have 2 issuances left. Is there anything in that unsecured covenant package that you don't like? And then as you think about -- you made a comment in the letter about taking leverage up on the secured -- in assets up to 60% and effectively unencumbering a bunch of others. Do you think you're going to do that by leveraging up assets? Or by issuing unsecured debt to pay down secured debt?

We're not going to do it either way. So first of all, Vornado is an investment-grade company. We covet our investment grade. We live by the covenants in our debt instruments. We -- as you said, we don't like any of them. The answer is, is we have huge tolerances to any of them, so they really don't influence the management of our business at all. Said again, we're investment grade. We're going to just stay investment grade. We love our covenants. We honored our covenants, and we have enormous tolerance to each of our covenants, which means we have lots of capacity. Michael, your second question was -- I put a couple of paragraphs in my letter this year to give a sum of how I think about debt. And the point of it is, is that -- and the point I was making was that we have -- I think it was $8 billion or something like that of project-level secured nonrecourse debt against $20 billion of assets at market. So that ratio was kind of out of kilter is what I was -- point I was making. So we had -- the secured debt is at 40% of those assets that secure the debt, whereas a normalized ratio might be 60%. So therefore, if we wanted to, we could do 1 of 2 things. We could take the assets down from $20 million to $16 million and unencumber $4 billion of assets, or we could take the debt level up higher. We have no current intention of doing either of them. That was just a little bit of arithmetic to give you and your colleagues some idea of how we think.

Right. I didn't know if you're going to make -- be a little bit more aggressive overall on the balance sheet to make that happen, or if there was something on the unsecured side that...

We have no current intention of being aggressive in our balance sheet. And we have a current intention of being extremely conservative, being cash heavy, being debt light as we always have been.

And then my second question -- just sticking with capital structure and thinking about the stock. You've been reluctant to do a share-repurchase program in the more recent history of Vornado. Obviously, you're very active a number of decades ago. I guess, how would you think about using some of your firepower to buy back the stock at these levels? And if you weren't going to do that, should we expect more strategic type of moves like you've been doing to narrow that discount relative to your perception of where NAV is?

Michael, I hate our stock price. I hate it. So that's step one. And I take it personally. Step two is what we're going to do about it. Well, over the last 2-some-odd years, we've done a lot about it. And some of the things that I put in our letter this year was to suddenly indicate that we intend to continue to do and manage the company, manage our strategy, manage our business, manage our balance sheet to enhance values and realize the values that we think our business is worth. So I hate our stock price. I think it's -- I just, I hate it. That's enough. And without being specific, there are tools that we have to begin to -- whether it's spinning this or buying that or doing -- but we have nothing specific to announce now. And I think -- I did put a section in the letter this year about the history of buybacks and the history of issuing stock, and we have a history of buying stock back when it's much cheaper. So I don't have anything to say about buybacks, and I have nothing to say about spins. All I have to say is I hate our stock price.

There are no further questions at this time.

Thank you, all, very much. I would make one observation, and that is we learn as much from these calls and your questions and the interaction with you, all, than I think you do with us. So we value the interaction, and we'll see you next quarter.

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