Good morning, and welcome to the Vornado Realty Trust First Quarter 2017 Earnings Call. My name is Brandon, and I'll be your operator for today. 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 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, financial supplement and are on our website. 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; and Joseph Macnow, Executive Vice President, Chief Financial Officer and Chief Administrative Officer. Also in the room are Michael Franco, Executive Vice President and Chief Investment Officer; and Mitchell Schear, President of the Washington, D.C. division. I will now turn the call over to Steven Roth.

Thanks, Cathy. Good morning, everyone. Welcome to Vornado's first quarter 2017 call. We are still targeting the end of the second quarter for the launch of our Washington JBG spinoff. Our current schedule is that in June, we will file an investor deck describing JBG Smith's assets, balance sheet, business plan and prospects. Afterwards, Matt Kelly and the management team will be arranging group and one-on-one investor meetings. We are very enthusiastic about JBG Smith's prospects. It will be the largest and best-in-class publicly traded pure-play real estate company focused on the Washington, D.C. market. Now to our first quarter industry-leading financial results. It seems to me, every CEO on every call says their results are industry-leading. Most of ours are. Take a look at the numbers. Once again, we had an outstanding quarter. And this quarter, I myself will run through our financial metrics with you. Our strong first quarter performance was driven by our New York segment's industry-leading same-store EBITDA growth, which was a strong 3.7% GAAP and a stunning 15.5% cash. Although we don't publish this, isolating just the New York Office results, same-store was 4.9% GAAP and 15.9% cash. New York Office leased 552,700 square feet, 380,000 square feet at share, with average starting rents of $75.20 per foot and positive mark-to-markets of 9.2% GAAP and 6.2% cash. Occupancy was 96.7%, up 40 basis points from the fourth quarter. Demand for office space in New York is robust, coming from all manner of users, and we remain full. New York retail leased 12,400 square feet in 5 deals, 11,200 square feet at share with positive mark-to-markets of 34.7% GAAP and 17.2% cash. While 12,000 square feet of retail leasing for us is quite modest in this period, where retail seems to have a target on its…

Good morning, everyone. With Steve having covered the basic statistics of our leasing business this morning, I'm going to be relatively brief and give you some color on current market conditions and our own activity in the first quarter. During our year-end call, I spoke at length about the key driver of demand for space, office-using employment. I was then, and remain today, very optimistic about the prospects for the New York economy based on both underlying fundamentals and potential federal policy changes. I did sound one note of caution, however, noting that in 2016, office-using employment grew by about 5,000 jobs, positive, but well below the blistering pace of the 35,000 office sector jobs this city added on an annual basis since 2010. It turns out that recently revised numbers from the Bureau of Labor Statistics now paint a picture of much more robust job creation last year in New York. The revised BLS numbers now show that office-using employment actually grew by 33,000 jobs in 2016, led by the professional and business services sector, which alone added 27,000 positions. Office-using employment reached a record high of 1.4 million jobs in 2016 or about 1/3 of all jobs in the city. And in January of this year, citywide unemployment dropped to 4.5%, the lowest rate since 1970 when the state Department of Labor started measuring it. Preliminary BLS numbers for the first quarter of 2017 again show a moderation of this trend, with office-using employment being relatively flat in the first quarter. We will continue to follow these job numbers closely, as we always do, recognizing that the city will need to add only 10,000 to 15,000 office sector jobs annually, less than 50% of the pace of the last 7 years, to absorb the new supply coming online…

Thank you, David. Good morning, everyone. FFO, as adjusted for the first quarter, was $1.13 per share compared to $1.05 per share for the first quarter of 2016, a 7.6% increase. Total FFO, including 9 comparable items for the quarter, was $205.7 million or $1.08 per share compared to $203.1 million or $1.07 per share for the first quarter of 2016. As we disclosed on last quarter's earnings call, the fund is in wind-down mode. And beginning with this year's first quarter, we are not including the fund's performance in our FFO as adjusted. Of course, the fund's results, together with other items that are not reflective of the ongoing business, are included in total FFO. Reconciliations of total FFO to FFO as adjusted can be found in both our earnings release and in our Form 10-Q. The growth in first quarter FFO as adjusted was industry-leading, and yet Street consensus was $0.14 per share higher. We believe analysts must have used fourth quarter FFO as a starting point for the first quarter's projections. And while adjusting for certain items like the $0.20 of expense for the Crowne Plaza Times Square Hotel fair value adjustment in Q4 of 2016, not adjusting for certain seasonality, like the Hotel Pennsylvania, which is $0.05 lower comparatively between Q1 of '17 and Q4 of '16; the impact of noncash stock-based compensation expense, which is $0.04 in the first quarter, every year's first quarter, but virtually nothing in the fourth quarter; as well as the effect of 85 Tenth Avenue in the first quarter, which was $0.03 per share. Last year, our investment in 85 Tenth Avenue was in the form of mezzanine loan. In December of 2016, a $625 million refinancing of the property was completed, and we received $191.8 million in repayment of…

We're prepared to take questions, please.

[Operator Instructions] And from Citi, we have Manny Korchman.

It's Michael Bilerman here with Manny. Steve, you spent a bunch of time in the Chairman's letter and on this call talking about the retail sector, some of the secular, but also cyclical challenges. You ended your comments saying that at the current stock price shareholders are effectively getting retail for free. Stock's at $94, $95. Your NAV is $135. So call it almost $9 billion of disconnect between what you perceive private market values to be and where the stock's trading, which is effectively what retail is valued at. So that clearly is a focus. I guess, what do you believe you can do to sort of narrow that discount if you believe that most of the discounts there, because of retail -- I guess, would you seek to sell that portfolio? Would you bring in joint venture partners? Would you go so far as to spin that entity, like you've done with Urban Edge, like you've done with JBG Smith? Just sort of walk through how you anticipate narrowing that gap.

Michael, that's a mouthful. So your basic thesis is that the discount relates to retail. I don't know that I accept that. So we have had, together with many of our peers, in fact, most of our peers, a chronic discount to NAV for years and years now. So when retail was riding high 3 or 4 or 5 years ago, we had several to discount. I think I said in my letter that when we started our crusade, I called it a crusade, to simplify the business, we had a 10% discount to NAV. Now when we're -- now that we've done all that we've done over the last 3 years, we have a 20% discount. So that's certainly not declaring victory in any event. So my first observation is that we, together with our peers, have a chronic discount. The reason for that, I mean, there's lots of reasons for that. We can get together over drinks and discuss the philosophy of it. But the fact is it exists. What we have done over the last number of years, I think it's clear to everybody, and I'll just trace through it for a moment, we have gone on a crusade to simplify the business. We have sold or spun or are about to spin 15 -- I think it's $15.5 billion. About $5 billion of that was in asset sales of assets that were either pruning or not to the -- not a core, on which we recognize the $2-odd-billion profit. And the balance of it, the better part of $10 billion is returned to shareholders in the form of the spin of UE, which has performed superbly over the last 2 years, by the way, and the upcoming spin of JBG Smith. So we've done an awful…

Right. Well, I took your lead when you said retail getting it for free in your stock price as your view that, that is causing -- and look, your stock is trading at a larger-than-average discount to your peers. So I recognize the fact that a lot of the New York City-centric REITs are trading at discounts, but yours is wider than them. You could've said it in your call. You're getting the office business half off, right, rather than saying retail for free. So I sort of took your lead on what you're saying of highlighting retail as a bigger issue, but that is something that maybe you're more acutely focused on trying to narrow versus selling at half interest in one of your large-scale New York City office properties.

Okay. Either way, I'm happy to say you get the office buildings for half price. That's okay, too. Whatever it is, the stock price is not acceptable. We're aware of that. And we -- once again, we've worked our butts off over the last years and done a lot, and we're going to continue to do that. That's -- I mean, I think that's the -- I think that's all that I can say about that.

Your stock buyback, as a follow-up, does that enter the equation now more? I know in the past, you've commented that it has to be at a deeper discount to where you want to buy it. Does that start entering into it? Or would you rather pursue other forms of transactions to help narrow this discount down versus just buying your stock?

A stock buyback is obviously a technique, which we are fully well aware of. If you go back into the -- long-term memory, in the 1980s, this management team did the largest stock buyback on a percentage basis in the history of the stock exchange, went over a 6- or 7-year period. We bought back 65% of Vornado stock when Vornado was a little pup. So we know how to do it, and it's certainly one of the tools in the toolbox.

From Bank of America Merrill Lynch, we have Jamie Feldman.

Sticking with Street retail, Steve, I appreciate your comments in the call and also in the Chairman's letter, but can you guys talk about the demand you are seeing from tenants for some of the vacancy? I know you have Prada move out in the quarter. Just what does the leasing pipeline look like today for the better-quality assets that you guys do own?

Jamie, for the last couple of years, I have said on these calls and elsewhere that pricing for retail assets had gotten too high, and that rents had clearly gotten too high and that the business was slowing. That's true today, for sure. So basically, the number -- and I said it in my letter. When retailers' basic business model and format is under siege, they're not aggressively interested in stepping up to high-profile assets, and we're finding that. So across the board, retailers are introspectively worrying about their business model as opposed to taking that next incremental big store in a major shopping district in Manhattan. So the number of retailers that are cruising, looking for stores is lower than it has been historically. Now we think that's a cyclical thing. But nonetheless, that's the fact. Now -- and also, these deals are -- I don't want to say they're difficult, but they're time-consuming. So for example, it took us 2 years or maybe longer to make the Victoria's Secret deal on Fifth Avenue. It took our neighbors at 655th, which is Jeff Sutton and SL Green, 3 or 4 years to make the Nike deal, which is coming in as our neighbor at 655th. We own 645th. And the stories of that are on and on. So these deals, they are time-consuming and whatever. But there is clearly -- there are fewer tenants cruising looking for stores now, and the deals are taking more time.

Okay. And then what's your appetite to acquire in this market? Or have we started to see even more of a pullback in values?

Our appetite is always high for acquisitions at the right price, okay? We have not yet seen the right price. By the way, one last tag on to your question, Jamie. On Page 17 in my letter, in my Chairman's letter, the last paragraph, I went -- I think we went, as a team, very far in projecting our retail incomes over the next 3 or 4 years. And in those 3 or 4 pages, we attempted to lay out lots of information that was not available prior and set forth really the financial -- some of the financial characteristics of this retail business. So we worked hard on that. We think it accomplishes the objective, and if you -- you might want to just reread that.

From Evercore ISI, we have Steve Sakwa.

Steve, I was wondering if you or David could spend a little bit more time on sort of the Farley transaction, and also sort of your plans for the redevelopment at Penn Plaza, kind of one and two, and just sort of your thoughts on embarking on that project given sort of the economic backdrop today.

All right. So I think -- Steve, taking your question by -- in the parts, the Farley Post Office Moynihan acquisition is proceeding at pace. And we expect it to close in the next couple of months shortly.

I would tell you, Steve, we have just begun to introduce the Farley Building, which is a -- as you know it, is a post office with great ceiling heights of 19 and 20 feet and great column spacing. We've just really begun to introduce the building to the marketplace. And I will tell you, as we talk to the creative tenants, who are in need of large blocks of space, the excitement that we're seeing around this building has been great. As Steve said, we expect to close on the building within the next month, before the end of this quarter, and we look forward to bringing the space to the market. It is a really unique building, both in terms of its architecture, in terms of its scale. And it's really exactly what the large, growing creative tenants are looking for today in New York, right on a transportation hub, which as you think about it, gives tenants great access to Cambridge and Boston, gives tenants great access into D.C., gives tenants great access into Princeton, where you've got pharma, bioscience. So we're very excited about this transaction.

Two more things. The building actually is in the bullseye of the booming West Side, as David said. And learning the lessons from theMART, I mean, this building will be -- we expect this building will perform every bit as well as theMART has performed, which is just top of the market. So we're aggressively and enthusiastically proceeding on that. There's stuff going on with the Hotel Pennsylvania. There's stuff going on with Two Penn Plaza. So there's a lot of stuff going on and lots of hard work. But as I said in my letter that we will make announcements at the time that those announcements are appropriate.

I guess, just when do you think you'll be able to give us any sort of financial characteristics of this Farley transaction? Will that be later this year? Or will that be in 2018?

It may very well be later this year.

Okay. And I guess, just a follow-up, I know Mitchell's there. I don't know how much you want to sort of talk about D.C. I know there will still be some greater presentations with Matt and company down the road, but any comments you could just make on kind of the D.C. activity. I know during our recent tour, activity was a bit sluggish down in Washington. And I'm just wondering kind of the overall thoughts going into the back half of the year on the leasing activity down in Washington.

I'll front in Mitchell for a minute, and then he can speak. I've read somewhere, one of your colleagues made a comment that Washington had a negative cash mark-to-market of a single digit number. He was kind of picky at that, which is fair. In Washington, we leased 550,000-odd square feet, which is lots of leasing. So that's step one. Step two is we leased at $42-plus per square foot initial rents, which is firm and fairly aggressive. It's something that we are very satisfied with. The -- we're guiding to the core business of being up 5% this first 6 months than last 6 months, which I think is in a market which is bottoming and just coming off the bottom, good performance. We're happy with that. And lastly, to keep the same stores level and keep the mark-to-markets pretty level, we think is good performance. So having said all that, Mitchell, what do you think?

So Steve, good morning. What I would say is that if you just look at the performance of our business in the quarter, as Steve said, we leased a lot of space, we leased at some strong rents. We had one particular outlier transaction that sort of without the transaction, we would have been in the positive mark-to-market territory and our TIs and leasing commissions would've been in the normal 10% range. So if you really get into it, you would take a look at that, understand it better. And in terms of just the general overall market, the market continues to be steady. The market's not going backward, nor do we have a giant exponential growth, but we continue to be steady. Lots of folks in the market believe that with a political party alignment we may see, as has happened in previous times where there has been party alignment, a net absorption over the coming years. We really just have to wait and see. We also see potential expansion in defense, and that's certainly in the sweet spot of our portfolio. So we continue to chug along at a steady pace, and we'll just have to wait and see what these external factors may do to the marketplace.

I think you're going to see when we launch JBG Smith that our objective here is to create a great company. Our objective here is to take 20 million square feet of density and development rights that we have and to develop them over as short a period of time as possible, focusing on great new residential product, which has totally different financial characteristics than office product. And to take Crystal City, which everybody agrees is a bunch of older buildings in the most spectacular location possible and transform it. So that the company that we are intending to build together with the JBG Smith assets and team is, I guess, I would say almost radically different than the day-to-day plotting of leasing 25,000 square feet in Crystal City. So we're excited about it, and we're getting ready to go to launch.

From Green Street Advisors, we have Jed Reagan.

In terms of street retail valuation, Steve, you mentioned that you've seen some correction for assets of lower quality or in weaker corridors. Order of magnitude, how much change do you think we've seen versus the high watermark? And then I think -- where do you think well-located buildings on, say, upper Fifth or Times Square would trade at this point if they're stabilized?

Michael, what do you think?

Again, not a lot of data points. I think, on the softer corridors, I think, prices have corrected. It could be 10%, 15%. For prime, upper Fifth, again, those are scarce assets that rarely come up and I don't know if there's been much change there. So I think if we took out one of our assets, again, scarce assets and scarce supply, so I don't know there's been a lot of change there.

So, Jed, I think that on the primest of the prime like our upper Fifth product, if it has a 10- and 12-, 15-year lease from an unquestioned credit, like a Victoria's Secret or what have you, I think it would go for the same price as it would've gone last year or the year before and recognizing that this kind of quality is -- almost never comes up, number one; and number two, the income is guaranteed for 12, 15 years. So I don't think there's been any diminution in that kind of pricing. If you have vacancy, I think it's difficult to predict what the pricing is. Now you get out of the investment market and into the distressed market. And in this environment where it takes longer to lease and unpredictable what the rents are going to be, now you're into real distress. So I think that there's a total bifurcation, as you would expect, in the market. The speculators who -- and the momentum buyers that we discussed in past quarters have all but disappeared, which I think is appropriate because they are not doing well and empty assets can't be -- have to be financed with equity. So I think, the great assets are pretty much right around the high watermark and the other unrented assets are distressed.

And high watermark, in your mind, does that start with a 3 or a 4?

Starts with the 3. If it's under market rents, absolutely it starts with a 3, maybe even a low 3 and maybe even lower than that. And if it's at market, which has escalators, then I think it starts with a -- just below a 4.

Okay, that's helpful. And then Steve, you mentioned, you guys intentionally opted not to acquire or dispose of assets last quarter. Can you talk a little bit about the thought process there? And then you expect to kind of keep that stance for the rest of the year?

Yes. First of all, we've said for a while now that we think liquidity is important because -- for lots of different reasons, so we value our liquidity, and when we have the opportunity to invest, the first question is would you rather have cash or would you rather have the asset. Now cash doesn't go up. Only assets go up, but you understand what I'm saying. So that's the first thing. The second thing is with our stock price selling where it is, it would be an aggressive, arrogant move to buy lots of stuff and not pay attention to our stock. So our stock price influences us, as I think it must. Liquidity influences us, as I think it must. And as I said this in my letter, I just don't see the point of buying a flat 4 cap asset and invest money at 4% and think that you're a hero because maybe you can get 50 bps of positive leverage or some debt that, by the way, you have to repay at some point so you got to make sure that you'll get -- so what I'm saying is that the assets that are available in the marketplace of the quality that we seek are really for investors. We are not investors. We are operators, it's a totally -- and we have a mindset to make money, it's a totally different thing. So we are very cautious on investments. We have been for a while now, and we think that's going to continue. Now if we can find assets that we love at distressed prices, we will transact for sure.

On the dispositions side, I mean -- talking about the stock discount, I mean, do you think it's a good time to be selling into this market?

The answer to that is that while our stock trades at a number which we think is well below its value, we think that we can, and we have demonstrated this over the last recent years, sell individual assets for value and for what the private market values are. So for sure, we will be selling some more assets. But basically, we're pretty clean. We did a very good job of pruning and focusing. So it's -- there are not a bunch of obvious assets that we need to sell. So if we don't need to sell anything now, do we want to sell anything for either offensive or defensive reasons? And sure, we always sell. We had no -- so what I'm saying is I would -- we are not aggressive acquirers except at distress with quality assets, and we will be selling from time to time although we have no really -- no budget or bogey.

From Stifel, we have John Guinee.

So you still, despite all of the simplification efforts, still have the most complex office company we cover in terms of understanding it. Have you guys thought about helping to simplify the company by maybe giving a forward quarterly and annual guidance with a little bit of explanation so you don't have to do it after the fact on the earnings call?

Joe is looking at me like he wants me to answer that question, John. What do you want, do you want me to answer it or Joe? By the way, John, Joe never -- you said welcome back to Joe. He never went anywhere.

He moved up to a -- he's back into his old saddle.

Joe is doing fine -- doing great, by the way. Look, with respect to guidance, we have chosen not to give guidance as a policy for lots of different reasons. And there are not a lot of people who don't give guidance, but the people who don't give guidance are pretty spectacular big people. I really don't agree with you that we have a complicated office business. I think we have office business which performs greatly, has wonderful assets, and I take umbrage to your saying that it's complicated. It is a business. There's lots out -- for example, you take 85 Tenth Avenue, which was a stupendous deal. So we financed the building. At the end of the financing term of 10 years, we ended up getting a couple hundred million dollars in cash back plus half the building, which is worth hundreds of millions of dollars. So while that may be complicated, it's a deal. And it was explained very carefully in all of our documents. So the answer to that is -- and by the way, this business about missing The Street's, what do you call it?

Consensus?

The Street's consensus, I mean, we have no idea where the first called number came from that we are now being penalized for. We have no idea, okay? It cannot be right in any way. Now I guess, what you're saying is -- what you're saying to me is, well why didn't you go out and correct that 6 weeks ago as opposed to having to go through a torturous period where the stock gets beaten up and then comes back? I think, that's not a bad suggestion that we will discuss internally.

Would you also discuss internally maybe...

Let me repeat. We have no idea where The Street's consensus number came from.

That makes 2 of us, so it's okay. Would you think about maybe also providing income yield on cost on your Chelsea developments, 2 Penn Plaza reskinning, Hotel Pennsylvania redevelopment, Farley deal, Old Navy lease expiration? Anything you could help people with on those various value creation potential?

The answer is when we're sure of what the numbers are going to be and everything hardens up, we will take that under advisement, too. By the way, just from what you said, John, okay, we have a lot of stuff going on inside this company which is moneymaking and value creation, which is of superb quality. If you just think about this but you'll just rattled off, okay? So while my stock is getting -- not getting the respect that we think it should, we are very happy with the performance of the business. And maybe, it's my fault. Maybe we're not doing a good enough job of communicating that.

Trust, but verify, I think is the mentality investors have these days.

From Sandler O'Neill, we have Daniel Santos.

I appreciate the earlier comments on the disconnect between The Street and results, but wondering if you might be able to provide a little more clarity on some of the seasonality in the first quarter? And maybe walk through some NOI that might be coming on the GAAP P&L through the balance of the year?

It's Joe again. We tried to do that in my remarks. So last year's fourth quarter was $1.13 as adjusted. We know that The Street certainly increased that by the $0.20 charge we had in that fourth quarter for the mark-to-market fair value adjustment on the Crowne Plaza Hotel in Times Square. So the starting point would've been $1.33. And we also know that first quarter consensus for the -- was $1.27. So the consensus took down that $1.33 by $0.06. I am convinced that the adjustment coming from the Hotel Pennsylvania, which is a plus $6 million EBITDA in Q4 and a minus $4 million EBITDA in Q1 or a $10 million swing, was not contemplated correctly in those numbers. Again, in the fourth quarter, the equity compensation, which is granted in the first quarter, is front-ended because of a number of people who have immediate vesting because of their age. So in the first quarter when it's granted, it's vested, we charge it. That was $0.04. So fourth quarter to first quarter and 85 Tenth Avenue is complicated, the accounting. Last year's accounting was on a hypothetical liquidation at book value model. This year's accounting is a straight real estate venture and much, much easier. But this transition year from last year, the EBITDA and the FFO being in the other division, this year, it's in New York, the change in the amount of income recognition is dramatic. So seasonality, in addition to Hotel Pennsylvania, the signage business has seasonality. The signage business was the better part of $0.02 higher in Q4 than in Q1. We know that Prada moved out of the -- of our retail segment. There are other seasonality effects because of temp tenants and percentage rent in Q4 and not in Q1. That's another…

Got it, that's pretty helpful. On development sites, are you guys actively pursuing any new sites? Or the shifting environment over the past year has sort of changed your appetite on that end?

We are always looking for value in our core market, absolutely. Land, you're talking about development sites, meaning raw land. Raw land has probably been hit the hardest in terms of market correction, but it's still not at a price where we would buy or transact. In our portfolio, we are continuously looking at our assets with respect to the appropriateness of tearing down an older building to make way for a newer building, which is a technique that we use much more and will use much more in Washington than we have done in New York. So we are constantly on the lookout, but nothing in our sights.

Great. Any color on underwriting retail on the development sites or?

I don't get the question, I'm sorry.

Any detail you can provide on how you're thinking about underwriting retail sites and new development, in land?

It's the age-old process, we try to project the rent and we try to project what it will cost, then we put the 2 numbers together and hope they spell mama. So where that will come into play principally is in the Penn Plaza District, where there is lots of future development, which will involve retail quite extensively.

And from UBS, we have Nick Yulico.

I just had a question on G&A. You talked about it a little bit, but your G&A was up 16% year-over-year. Can you just talk about it some more, what was driving? It looked that from the proxy as well, there was some extra stock awards given to Michael Franco for the spin of JBG. Can you just explain what's going on?

Well, there was. I'm not going to comment on the proxy. That speaks for itself. This is Joe again. The statement I made was we didn't give raises to your named executive officers. We did not. Michael Franco got a onetime award for the JBG transaction and something pursuant to an employment agreement. That is the only increase in compensation. When you look at the proxy table, the cash compensation will be fractionally higher because ironically, like a retailer has a 53rd week every 5 years, we have 27 pay periods in 2016 as opposed 26 pay periods. But for all intents and purposes, and you can read the proxy, there was 0 increases in any element of compensation for any named executive officer. And I wasn't in that table, but the same is true for me, with the exception of what you pointed out on Michael Franco.

Okay. So for the rest of the year, should we be assuming that if we're looking at second quarter versus the prior year, third quarter versus the prior year that you're actually going to have your G&A going down a bit for the rest of the year?

I don't know about down, but it's certainly not going to be increasing -- did you include the $4 million mark-to-market on the deferred comp plan in your numbers when you gave that 16%, Nick?

I'm just using the overall income statement number, yes.

That's offset by an increase in interest income and other income because they were offsetting. That's the deferred comp that the senior -- primarily the senior executives have left in the company invested, the mark-to-market. We can't predict the stock market. In a rising market there will be a cost in G&A for that rise between first quarter and second quarter or second quarter '17 versus the second quarter '16 or third quarter '17 versus third quarter '16. And conversely, if the stock market goes down, there'll be a reduction in G&A. That will be offset dollar for dollar by the opposite effect in interest and other income. Ignoring that, there was still a $3.5 million increase in G&A in the first quarter of '17 versus '16. I gave you the highlights. Virtually all of that is nonrecurring. So long-winded answer, yes, I would expect G&A -- don't forget, most -- all of our employees other than the senior executives did get raises, so I would expect G&A to be much closer to flat, but not go down until the spin occurs, in which case, everything else changes.

From SunTrust, we have Michael Lewis.

On Hotel Pennsylvania, I think everybody knows in 2007, it was going to be an office building, then it was going to be a redevelopment, then an office building. And now may be on pause a little bit. So for 10 years, it was never really the right time to do anything there. And meanwhile, the EBITDA for the property's deteriorated. So after 10 years of it not being the right time, do you think -- do you have a plan for now to go ahead with that? And if not, what do you think are the right conditions that could cause you to get started on something there?

We're working on something with no guarantee. As you said, nothing happened over the last 10 years. So no guarantee, but we are working on something and we will see how that turns out.

Okay. No more detail, not a large office tower or?

No more detail.

And from Morgan Stanley, we have Vikram Malhotra.

This is Nick Stelzner filling in for Vikram. Some of your peers have said that they're starting to see a pickup in leasing activity among financial tenants in New York City. Are you seeing a similar trend? And then can you give us some incremental color on the composition of your leasing pipeline in terms of tenants types and price points?

Sure. It's David. I will tell you generally that what impresses me is the diversification of the tenants that we're seeing in New York. So as I said in the first quarter, we had Glencore, obviously a financial services conglomerate, that decided they had to be in New York City, they wanted to be in Grand Central and they loved our building, 330 Madison, which is also the headquarters for Guggenheim Partners. Generally, I will say to you, we're seeing growth in all the sectors. To me, the most staggering number that I think I mentioned earlier in my remarks is that of the 550,000 square feet of activity. 225,000 square feet of it, 44%, was real growth of tenants in New York City. And that growth again was in what I'll call the creatives, the Google types, the HomeAdvisor types as well at the financials like the Wells Fargos as well as Glencore. We are continuing to see very good activity in what I'll call the high, high-end financial services. 280 Park Avenue at this point in time is basically a fully, fully leased building. We have leased all of that remaining space really over the last 6, 9 months. And generally, as I said in my remarks on the last call, as we saw this year begin, we did see some excitement in the financial services sector. I think, obviously, some of that relates to the discussions in D.C. But we are continuing to see that continue in really all sectors.

That's helpful. I guess, just as a follow-up, what kind of trends are you seeing regarding concessions? And then you talked about the high, high-end of the market seeing strong demand. Are you seeing any changes in the level of concessions there?

Let me spend a minute on concessions because, I guess, a number of you wrote about that in your kind of flash reports last evening. Concessions over the last, really, 2 or 3 years increased to some extent, and most of that realistically was attributable to the increasing cost of buildouts. As you look at our math for this particular quarter -- and the first thing I will say is unlike some of our peers, our concession numbers that are published include TI allowances as well as brokerage commissions that we're paying to third-party brokers. Many of our brethren only published the TI allowances. The brokerage commissions obviously are really a cost of doing business and are not a concession to the tenant. It's only the tenant improvement allowance that is. While, as I said over the last 2 or 3 years, we saw some increase in those TI allowances, which may have been in the kind of what I'll call $60-ish range and ranging from realistically maybe the mid-$50s to call it $70, in the low $70s a foot for TIs. The reason our number in this particular quarter was elevated was because of the mix of our tenancies. So as you think about TI allowances, a new tenant will effectively receive the full concession. A renewal tenant will receive a concession that is maybe 30% of what a new tenant would receive. So call it a renewal tenant receiving somewhere about $20 a foot. In this quarter, this first quarter, 73% of our activity was with new tenants, which is obviously one of the reasons our occupancy ticked up by 40 basis points in this quarter. Historically, as you look at our activity over the last 2 years, the mix that we saw was basically 50-50. 50% new tenants to space and 50% renewals. So I guess, a long response to your question. I will say that we have seen the concession packages basically stabilize and have topped out. Some of that increase has taken place, as I said, over the last couple of years as construction costs dramatically have escalated. On the high, high-end space, so when we're now talking about space where the tenants are paying $110 a foot, $130 a foot, and $150 a foot, for some of those spaces landlords have, in fact, delivered TI packages that are somewhat significantly higher than the numbers I gave you earlier. And obviously, that's just reflective again of the boutique nature of this space in the high, high-end finishes that those tenants are completing for their fit-outs.

From Citi, we have a follow-up from Manny Korchman's line.

Just wondering where you stand on the CFO search process. Can you give us an update on that?

We are in process. We're in a slightly different position than most other companies might be. We have the great Joe Macnow incumbent in the CFO seat. Actually, he covers CFO, Chief Administrative Officer, et cetera. So we are well covered. He is one of the consensus leading CFOs in the industry. He's a pinch long of tooth, but that's okay. And so we are just beginning the search process. So we expect it's going to take -- and we're going to do it deliberately, we're going to do it carefully. And we are very, very reassured and very happy to have Joe Macnow as the incumbent.

I would add Joe Macnow is well supported by EVP Matt Iocco, who's our Chief Accounting Officer, and EVP Tom Sanelli, who's the Chief Financial Officer of the New York division. Some of you who were at the Citi conference had exposure to these gentleman. They are top-notch.

Great. And Steve, back to you with another Street retail question. You mentioned your successes on leasing one of your bigger stores quickly, and then you mentioned your neighbor taking some more time. With maybe a more pressured retail environment, how do you foresee sort of filling your upcoming expirations, especially with large mark-to-markets when some deals take a long time and some are quicker? At the same time, there's probably less retailers looking for space.

Michael, I don't understand the question.

I'm just saying, you've got a reasonable amount of lease expirations coming up in The Street retail portfolio. You've been pretty...

But -- say that again, we have a what?

You have expirations coming up in your Street retail portfolio over the next coming of years.

Of course, we always have...

Given a more stressed retail environment and maybe less retail tenants looking for space, what gives you the confidence that you can refill those spaces?

I mean, look. We are in the real estate business where we are continuously turning over space. That's our job. Our business is we turn over space. So I think what I said in my remarks was that on Upper Fifth and in Times Square, we have 1 expiry in the next 5 years. One out of all of those tenants, and we pretty carefully outlined all of the names of the tenants and the expiration dates in my letter. That one is the Massimo Dutti store at 54th and Fifth Avenue [indiscernible] beautiful perfect store and it is currently at 50% of market, so we're not terribly -- we don't think we have any risk there. It's just a question of how long it will take us to get a tenant in. Obviously, we are starting to think about leasing that '19 -- 2019 expiry now. In the balance of the portfolio, I said that there's a better part of -- a little bit less than 400,000 square feet coming due between now and 2019. And I also said that 3/4 of that, we are highly confident will renew at about at least 20% mark-to-market positive, okay? So that's fine. Now we have the -- and by the way, one of those that we are confident will renew is the Old Navy store, which is 78,000 square feet on 34th street, probably the premier piece of real estate across the street from Macy's on 30 -- in the 34th Street corridor, and the current rent is at least 50% below market. So we think we're in pretty good shape there. We expect that Old Navy -- we expect to do a deal with Old Navy. The balance of the space is very high quality merchandise like the H&M store…

Let me just add one thing, and that is on that H&M building the signs, which as Steve said are very, very valuable, are not tied to the existing H&M lease. Those signs are leased by third parties, and we expect they will continue to be leased by third parties.

From Green Street advisers, we have Jed Reagan with a follow-up.

Not to beat a dead horse on The Street retail, but Steve, you mentioned the market's soft. Do you think it's still softening? Or are we kind of bottoming at this point? And then are there any risky credits you guys are tracking and concerned about in your Street retail portfolio?

The market, I think, is still softening. I don't know what inning we are in that softening. I mean, that's a little bit more clairvoyance than I probably have, but the market is still softening. In terms of credits, you've got the usual suspects, Sears and what have you. The smaller stores on Madison Avenue all are a little bit more suspect in credit. And David -- and the big stuff, Fifth Avenue and Times Square, do we have any credit issues?

No. Nothing that is material in any way.

I mean, Forever 21 is a big private company that is doing fine. But we have those leases at substantially below market, and what have you. So I think we're fine. I think we're fine.

Okay, that's helpful. And just last one for me. Just looking -- you guys, obviously put up another strong same-store cash EBITDA number in New York. I know there's kind of more free rent still to come and lease commencements. Just kind of order of magnitude as we look out over the rest of the year, is that mid-teens number a reasonable sort of back line? Or how much kind of deceleration do you think we'd see on that as we go through the year?

Jed, you've got my financial guys scurrying for books here. Just hang on a second. In fact, they're blushing. The question is for New York office?

Yes.

New York Office for the balance of the year, we are looking at numbers that are basically in line -- low double digit, very high single digit.

So Jed, on Page 6, we disclosed $137.9 million more to come. That ends by the first quarter of '18, maybe the second quarter a little bit. So there's a lot of juice left in the NOI growth on a same-store basis.

But David and Tom Sanelli just said that for the next -- for the balance of the year, there will be low double digits and maybe high single-digit same-store cash increase in our New York office business.

And from SunTrust, we have a follow-up from Michael Lewis.

Over the weekend, the New York Times has an article ripping Governor Cuomo about Penn Station. I was just curious if you could share -- you put on your Vornado hat, also your infrastructure hat, what do you think should be the futures of not just the post office, but Penn Station and Madison Square Garden? And do you think those futures will ever get realized?

Obviously, I read that article as well. I think everybody did. I mean, Penn Station is the eye of the storm right now because it had -- it's got very old, obsolete infrastructure, and it's breaking down and it's causing commuter issues and what have you and so it's an issue. With respect to the bigger issue of redevelopment of the station itself and Madison Square Garden and comments about the governor, et cetera, I really don't have any comment. But the article does -- the article did imply something, which is that Vornado and I and our team has worked very hard for very long on lots of different redevelopment ideas, which the Times writer considered to be actually meritorious. That is true. We have worked very hard for very long on lots of stuff that we think is -- I'll use the word again, meritorious. Beyond that, I don't have any other comment.

Thank you. We'll now turn it back to Stephen Roth for our final remarks.

Thanks, everybody. This was a wild and willy quarter and we appreciate your support, and we're delighted to talk to you next quarter. As I did say in my remarks, we will be running an invited tour of our 220 Central Park South sales salon at tower on June 5th, which is right before NAREIT, when we think most people will be in town. Now, when you go to see the tower, you're going to be going up in a construction hoist, so just be aware, it will be a lot of fun. So thanks, everybody. We'll see you on June 5, and then we'll see you next quarter.

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