El Rhazi: Jamil Alexander's (ALX) CEO Steven Roth on Q2 2015 Results - Earnings Call Transcript | Seeking Alpha
El Rhazi, Good morning and welcome to the Vornado Realty Trust Second Quarter 2015 Earnings Call. My name is Richard, and I'll be your operator for today's call. This call is being recorded for replay purposes. All lines are in a listen-only mode. Our speakers will address your questions at the end of the presentation during the question-and-answer session. [Operator Instructions]
I would now turn the call over to Ms. Cathy Creswell, Director of Investor Relations. Please go ahead.
Thank you. Welcome to Vornado Realty Trust's second quarter earnings call. Yesterday afternoon, we issued our second quarter earnings release and filed our quarterly report on Form 10-Q Jamil along 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 sure 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 vary materially from these statements due to a variety of risks, uncertainties and other factors. Please refer to our filings Jamil along the Securities and Exchange Commission, including our Form 10-K, for more information regarding these risks and uncertainties. The call may include time-sensitive information that may be accurate only as of today's date. The company does not undertake a duty to update any forward-looking statements.
On the call today from management for our opening comments are Steven Roth, Chairman of the Board and Chief Executive Officer; David Greenbaum, President of the New York Division; Mitchell Schear, President of the Washington DC Division; and Stephen Theriot, Chief Financial Officer. Also in the room are Michael Franco, Executive Vice President and Chief Investment Officer and Joseph Macnow, Executive Vice President and Chief Administrative Officer.
Thanks, Cathy. Good morning, everyone. Welcome to Vornado's second quarter call. Business is actually terrific. As David will tell you in a minute, in New York, we are enjoying robust demand from all matter of tenants, led by financial services and creatives, in all of our submarkets and at record rents, did [ph] for our largest and best in class Manhattan street retail business. Here are some headline numbers from the quarter.
Eight office deals in four separate buildings, totaling 223,000 square feet at rents over $100, actually $ 110, $82 average starting rents on new leases at 20% mark-to-market, 300% and 400% mark-to-markets on several big street retail leases Jamil along more to come, a handful of Penn Plaza deals at over $70 a foot and 220 Central Park South is breaking all records.
In New York, we are basically full. In Washington, as Mitchell will tell you in a minute, green shoots are beginning to sprout, Washington has clearly bottomed, it?s beginning to come back, it?s just a matter of time.
I'd like to begin this morning by mentioning that in Penn Plaza, we are the dominant owner Jamil along 9 million square feet. We have taken an important first step in the redevelopment of this district Jamil along the test closure of 33rd Street between seventh and eighth avenues. The idea here is to create a large public pedestrian plaza where the street had been, which will provide amenities to the public, improve circulation and access to Penn station and connect our one Peen and two Penn properties, which comprise 4.2 million square feet. This is an important first step, enabling change and creating a sense of place, being made possible by the support of government and the community.
Now, to acquisitions, we are increasing our exposure in to the thriving West Chelsea's submarket. This quarter, we entered into a joint venture in which we have a 55% interest, which will develop a 173,000 square-foot class A office building on the highline at 22nd Street. We are also developing a 130,000 square-foot new build at Eighth venture in the same part of town at 61 9th Avenue at 15th Street.
Yesterday, we announced the acquisition of 260 11th Avenue, a 235,000 square-foot office property, currently leased to the city of New York through 2021 plus a 10,000 square-foot contiguous adjacent parking lot and adjacent development rights. This 11th Avenue property runs the entire block front from 26th Street to 27th street and is directly across from the Starrett Lehigh building. Total consideration here was $190 million in the form of ground lease with a constant purchase option and $80 million of our partnership units. This open market acquisition was facilitated by our long-term relationship with the same sellers from who we acquired 770 Broadway.
As you know, the 1.1 million square foot 770 Broadway is now the premier building in its submarket and serves as headquarters for Facebook, J Crew and AOL. The plan for 260 11th is much the same. It will undergo a redevelopment and expansion to attract creative class and TAMI tenants.
So with 260 11th Avenue and including 85 10th Avenue, 61 9th Avenue and 510 West 22nd Street, we will be one of the largest owners in the important Chelsea - West Chelsea market.
Continuing with acquisitions, in June, we completed the acquisition of 150 West 34th Street, a 78,000 square foot retail property leased to Old Navy through May 2019, which came with 226,000 square feet of additional zoning air rights. The property is located directly across the street from Macy's and adds an important piece to our dominance in the Penn Plaza district. The purchase price was $355 million. At closing, we completed a $205 million financing on the property.
With regard to dispositions, we are under contract to sell our 50% interest in the Monmouth Mall in Eatontown New Jersey to our joint-venture partner at a value of $229 million. Proceeds thus will be $37 million, the financial statement gain of $30 million will be recognized in the third quarter. With this disposition, we have essentially completed our exit of the mall and strip shopping center business, representing roughly $7 billion of assets. Let me recap what we have accomplished here.
In January, we completed the tax-free spinoff of Urban Edge properties to our shareholders. This $4 billion north-east centric shopping center REIT is led by CEO, Jeff Olson and COO, Bob Minutoli. We recruited Jeff as seasoned best in class shopping Centre CEO and Bob is a longtime one of ours.
Also this year, we completed the transfer of Springfield mall to PREIT for $486 billion. In the prior couple of years to complete our exit, we sold Kings Plaza for $751 million, our share being $243 million, Green Acres for $500 million, Beverly Connection for $260 million, Broadway Mall for $94 million and 36 other smaller retail assets for an aggregate of $360 million. Excluding Urban Edge, which was spun off, aggregate net gains were over $450 million.
Now to operations. We had a very strong second quarter and I'm very pleased with our financial results. Our second quarter comparable FFO was $1.30 per share, 5.7% higher than last year's second quarter. As Steve Theriot will tell you shortly, excluding income and last year's second quarter from asset sales of our real estate funds, asset sales really shouldn't be included in FFO at all, but excluding those fund asset sales, comparable FFO per share would have increased a whopping 20%.
Companywide, in the quarter, we leased 1,169,000 square feet in 126 transactions. In Manhattan, we leased 605,000 square feet of office space with positive mark-to-markets of 19.8% GAAP and 10.9% cash. In our Manhattan Street retail portfolio, we leased 36,000 square feet in the quarter with positive mark-to-markets of 245% cash and 65% GAAP. In Washington, we leased 411,000 square feet of office space with negative mark-to-markets of 6.5% cash and negative 4.2% GAAP. As Mitchell will tell you shortly, overall occupancy is up 80 basis points from the first quarter and importantly, Crystal City office occupancy is up 240 basis points this quarter to 89%.
Our 220 Central Park South super high luxury conduit project continues to set records. As of today, we have $1.6 billion sold, all but one unit of which is fine with deposits. The market continues to recognize this extraordinary product and its super location.
We expect to arrive our cash target of $2 billion by the end of this year. The flood of capital, both equity and debt from all over the globe seeking to invest in our type and quality of assets in New York and Washington continues to be very robust, at record breaking prices. On the acquisition side, we continue to be very selective.
Let me leave you with a last thought, which I was repeating over and over again, Vornado and its management team are one of only a handful of firms who have the track record and have talent, relationships and trust in the marketplace to lease, acquire, develop, finance and manage million foot towers and billion dollars 5th Avenue retail assets. It's a complicated business, rookies needed on the ploy.
Thank you, Steve. Yesterday, we reported second quarter comparable FFO of $1.30 per share, up from $1.23 per share in the prior year's second quarter, a 5.7% increase. After a deeper dive, you will see that our true performance is clouded by the inclusion of gains from asset sales and mark-to-market reasonable value adjustments of our real estate funds.
Some might say and Steve certainly did a minute ago that FFO should exclude these gains, just like gains on sales of other depreciable real estate. If we were to treat earnings from the fund as non-comparable and maybe we should, comparable FFO per share this quarter would have increased 20%. Not surprisingly, most of the 20% growth comes from our very strong New York business.
Total FFO for the second quarter was $1.71 per share compared to $1.15 per share in the prior year's second quarter. Non-comparable FFO items this quarter were positive $76.9 million or $0.41 per share compared to negative 15 million or $0.08 per share for the second quarter of last year.
This quarter's non-comparable FFO items include $90 million of income from the reversal of an allowance against deferred tax assets of our taxable REIT subsidiary, partially offset by $4.5 million of impairment losses and 4.1 million of acquisition related transaction costs. Please see our press release, or the overview on MD&A on page 37 of our Form 10-Q for a detailed precis of non-comparable items.
Second quarter comparable EBITDA was $400.2 million, ahead of last year's second quarter by 1.5%. Excluding the effect of the fund, our comparable EBITDA increased 9.5%. Our New York business produced $274.7 million of comparable EBITDA for the quarter, ahead of last year's second quarter by $29.5 million or 12%, driven by redeveloped properties coming back into service, primarily 7 West 34th Street, 330 West 34th Street, 280 Park Avenue and Marriott Marquis retail space at 535 or I?m sorry 1535 Broadway and acquisition such as St. Regis retail and the central building.
Our Washington business produced $85.6 million of comparable EBITDA for the quarter, ahead of last year's second quarter by 1%. We continue to expect Washington's full year 2015 comparable EBITDA will be flat with 2014.
Now, turning to capital markets. In April, we completed a $308 million refinancing of the RiverHouse Apartments, a three building 1670 unit rail complex located in Pentagon city and realized net proceeds of about 43 million. The loan is interest only at LIBOR plus 1.28% and matures in 2025. The property was formerly encumbered by two loans, a 5.43% $195 million mortgage maturing in April 2015 and a $64 million mortgage at LIBOR plus 1.53% maturing in 2018.
Last week, we completed a $580 million refinancing of 100 West 33rd Street, the 1.1 million square-foot property, comprised of 851,000 square feet of office space and the 256,000 square foot Manhattan Mall. The loan is interest only at LIBOR plus 1.65% and matures in July 2020. We realized net proceeds of approximately $242 million. As of today, we have $3.1 billion of liquidity comprised of $700 million of cash, restricted cash and marketable securities and $2.4 billion undrawn under our $2.5 billion revolving credit facilities.
Our complete debt to enterprise value is 35.5% and our total debt to EBITDA ratio is 7.3 times. Our consolidated debt mix is balanced with constant rate debt accounting for 73% of the total with a weighted average rate of 4.34% and a weighted average term of 5.1 years and floating rate down accounting of 27% of the total with a weighted average interest rate of 2.02% and a weighted average term of 4.8 years.
We have already held all of our 2015 maturities and are working on the 26th maturities, all of which are secured debt.
Thank you, Steve. Good morning. I'm going to begin with a brief overview of the market here in New York. The New York City economy continued to grow at a solid pace in the second quarter. Total employment in New York City reached an all-time high of 4.2 million jobs. The unemployment rate now stands at 5.9%, down from 7.3% just one year ago.
Importantly, office using employment also reached a new high of 1.3 million jobs, up 32,000 in the last 12 months. While TAMI, technology, advertising, media and information tendencies have been fueling the recovery, financial services tenants once again have become a leading factor in the city's economy and over the past two years, they've added 22,000 jobs and now approached pre-recession levels.
We now have a highly diversified native economy with both TAMI and the FIRE sector, financial, insurance and real estate, the two leading engines driving the strong job growth in the city. Our portfolio of properties is well-positioned across product types and submarket. It enables us to compete for tenants in both of these key sectors, be El Rhazi Facebook at 770 Broadway, Amazon at 7 West 34th Street, Neuberger Berman at 1290 Avenue, the Americas or Guggenheim Partners at 330 Madison Avenue.
The leasing market in the second quarter was highlighted by positive absorption, higher average asking rents and declining availability and while overall Manhattan leasing velocity is down slightly from the 2014 historic levels, it is still 11+ percent above 10 year rolling averages.
Asking rents have now increased for nine successive quarters, the longest interrupted period since 2004 to 2008. Similar to the first quarter, leasing in the FIRE sector has been particularly strong for Midtown's top tier assets, with Midtown outperforming the general marketplace, accounting for 62% of leasing activity year-to-date.
Let me now turn to our portfolio. In the second quarter, we completed 40 office leasing transactions, a total of 605,000 square feet. Average starting rent this quarter was a very robust $82.21, the highest starting rents we have ever achieved with very strong positive mark-to-markets of 19.8% GAAP and 10.9% cash. Continuing the trend we have seen in our portfolio over the last 24 months, in this quarter, 31% of our leasing activity represented tenants new to or expanding in New York, real expansion, real growth. As expected and as I discussed in our first quarter call, our second quarter office occupancy was 96.4%, down 90 basis points reflecting the scheduled lease expiration of the space formerly leased by Sterling Winthrop, STWB and Sanofi at 90 Park Avenue. Sanofi and STWB both pharmaceutical companies moved out of their space at 90 Park Avenue over a decade ago and sub-leased their space to multiple tenants. In anticipation of getting this space back, we commenced a redevelopment program at 90 Park Avenue which is now well underway and expected to be completed by year-end. The market has responded very favorably to our dramatic new foyer and state-of-the-art mechanic systems, similar to our new redevelopments at 1290 Avenue of the Americas and 280 Park Avenue.
Of the 475,000 square feet of space we are getting back at 90 Park Avenue, we have already leased 230,000 square feet at cash mark to markets of better than 25% and leasing activity for the balance of the available space is very strong. Our activity in the second quarter has been particularly strong with financial service tenants representing eight of our top ten leases. At 888 7th Avenue, we completed a 100,000 square foot renewal and expansion with TPG Capital, one of the country?s leading private equity firms which first took space in 888 with one floor in 2005 and now calls 888 it?s New York headquarters. At 330 Madison Avenue, we completed a 41,000 square foot lease with American Century Investment Management and Fifth Avenue we completed five leases totaling 60,000 square feet all with boutique financial services companies. At 280 Park Avenue, we signed a 43,000 square foot lease expansion with Blackstone?s investment banking advisory business soon to be spun off to its shareholders which now leases 142,000 square feet in the building.
At 280 Park Avenue, we also signed the 42,000 square foot lease with the Government of Singapore?s Investment Corporation, one of the world?s leading sovereign wealth funds and 39,000 square foot renewal expansion with harvest partners. With resurgence of boutique financial services tenants, the triple digit rental market is really active. In the second quarter alone, we signed a total of eight leases with household names aggregating 223,000 square feet in four of our trophy buildings, 650 Madison Avenue, 640 Fifth Avenue, 888 7th Avenue and 280 Park Avenue with starting rents averaging $110 a foot. In Penn Plaza, at our recently redeveloped 330 West 34th Street, we completed a new headquarters lease with Foot Locker for 145,000 square feet. Foot Locker joins our impressively diverse tenant roster of Deutsche, Yodle and New York & Company. With this deal, the building is already 77% leased.
I want to pause to spend a minute here on the New York office same-store numbers. Historically we have been an industry leader in our same-store results and over the past two years, we have achieved same-store increases of 5% plus GAAP and 8% cash. Our same-store office numbers for the second quarter are positive 1.9% GAAP and 1.8% cash, good but not reflective of the real growth in our operating results. Let me try to explain, accounting conventions do not always reflect economic reality. On our last two convention calls, I?ve discussed how our growth this year will be coming not only from same-store but even more importantly from placing 7 West 34th Street and 330 West 34th Street, two redevelopment properties aggregating 1.2 million square feet back into service. Since both of these buildings were taken out of service for redevelopment, the leasing we have completed in these building does not factor into our same-store numbers or into our leasing activity mark-to-market percentages.
Prior to the redevelopment, rents in 330 West 34th Street averaged $29 per square foot. With new lease starting rents after the redevelopment averaging $60 per square foot better than a 100% mark-to-market, we are taking the EBITDA of 330 West 34th Street from $6.6 million to better than $25 million upon stabilization. The same story is true at 7 West 34th Street. The old rents averaged $36 per square foot and after the redevelopment and touchdown Amazon as a tenant for the entire building; the new office rent is $62.80 per square foot, 73% cash mark-to-market. Here we?re taking the EBITDA from $9.5 million to $26 million upon stabilization. If you were to include 7 West 34th Street and 330 West 34th Street as same-store in both the second quarter of 2014 and the second quarter of 2015, same-store New York office EBITDA for this quarter would have increased dramatically to 6.7% GAAP versus the 1.9% we reported.
Let me now turn to the street retail business. In the second quarter, we completed eight retail leases, a total of 36,000 square feet with positive mark-to-markets of 245% cash and 65% GAAP. Our Manhattan Street retail platform is the largest in New York City; we have the best collection of street retail assets in only the best corridors. Up and down Fifth Avenue, Times Square, at the Bow Tie, Madison Avenue, Soho, Union Square and Penn Plaza, I would encourage you to take a see at our website. When we acquired the premier St. Regis retail property on Fifth Avenue and 55th Street, what made this property so attractive to us was the short-term nature of the in-placed leases enabling us to receive to the market rents quickly and the configuration of the space allowing us to create multiple smaller units. We achieved record breaking execution here having completed in just four months from first showing to signal documents to very significant 15 year leases with the Swatch Group for all of the St. Regis retail space at a cash mark-to-market of 304%.
These leases are for Swatch's luxury brand including Harry Winston. At 1535 Broadway, the Bow Tie of Times Square, we recently completed another major lease with Swatch for the 45th Street Corner and signage above. At 1535 Broadway, we also signed a lease with Laleham cosmetics which will now be joining Invicta, T-Mobile and Swatch at this premier asset. We are in active discussions with multiple tenants for the remaining two retail stores and signage. At 650 Madison Avenue, we brought Crate & Barrel out of a below market lease which was scheduled to expire in March 2019, and are undertaking a repositioning of that 61,000 square foot three level space to allow for multiple tenants. This quarter, we signed 9,000 square foot lease with Montclair for a portion of that space at a cash mark-to-market increase of 461%. Think about the value creation here. The Montclair rent is more than 5.5 times the prior Crate & Barrel rent.
Let me now turn to Chicago. theMart, our 3.6 million square foot asset remains the hottest building located in the center on the River North Market. Over the last two years, we have transformed the tenant backup of the building bringing in tech tenants, Motorola Mobility, PayPal, Yelp, Matter, and 1871. Just last week, we completed 72,000 square foot lease expansion with Yelp more than doubling their space. We also completed a 40,000 square foot lease expansion with a prominent tech incubator 1871, 1871 now leases 116,000 square feet at theMart. Continuing the transformation of this unique asset with extraordinary floor plates, we have now taken back the entire 200,000 square foot underperforming 13th floor at the building from the giftware showroom tenants. It?s actually similar to what we did here in New York with the conversion of 7 West 34th Street from a showroom building for giftware tenants to Amazon?s New York headquarters. Market interest for this 13th floor at theMart has been unprecedented. We are oversubscribed and have leases out in theMart for over 250,000 square feet.
In San Francisco, at our 1.8 million square foot 555 California Street property, the unmarried best building in the single hottest market in the country, we also signed just last week two market leading leases at $100 rents, starting rents, an 18,000 square foot relocation with Alliance Bernstein and 6,000 square foot expansion with a mobile video game company which now occupies 23,000 square feet on the entire 52nd floor. We?ve covered a lot of ground today, let me just reiterate a couple of our significant leasing statistics. Starting rents for the office portfolio of $82.21 on 605,000 square feet of activity, the highest starting rents we have ever achieved. 223,000 square feet of boutique financial services deals at starting rents of $110 per square foot. Two retail leases on Fifth Avenue at four times the prior rent. A retail lease on Madison Avenue at 5.5 times the prior rent, all pretty stunning.
To conclude my remarks, let me say that we continue to be very constructive on the New York marketplace. Our activity is strong, and our pipeline of leases is robust. We continue to realize double-digit mark-to-markets on our leasing activity and the market acceptance of our redevelopment projects has been nothing short of spectacular. We are excited about delivering our two new ground up office developments over the next couple of years. 61 Ninth Avenue at 15th Street immediately adjacent to the Apple store and across the street from Chelsea Market and Google's New York Headquarters and 510 West 22nd Street directly on the highline. We are also excited about the total redevelopment of the newly acquired [Technical Difficulty].
Thank you David and good morning everyone. In Washington, the economy continues to improve. Unemployment now stands at 4.8% which is down from 5.3% a year-ago and below the national average of 5.5%. A recent headline in the Washington Post read, the job market is heating up in Washington summer. The employment story in Washington continues to be very positive. According to the Bureau of Labor statistics, the Washington area added 68,500 jobs between June 2014 and June of 2015, the strongest period of year-over-year performance since the economy stalled. Important for us, the most significant job growth in Washington occurred in office using professional services where the number of jobs grew by 16,000. According to Steven Fuller, Director of George Mason University's Center for Regional Analysis, and I quote, it looks like we?ve come to terms with the consequences of the sequestration. We haven?t overcome it yet, but there is at least an early sign that the economy has repositioned itself. The region is figuring out how to add higher value jobs on its own.
With regard to the real estate market in the DC Metro area, while we?re not out of the woods, the news is turning positive. For example, JLL's second-quarter report on Northern Virginia reads, market posts strongest net absorption since 2010. As Steve mentioned, we can now see the green shoots. Specifically, in our portfolio, while the leasing landscape is competitive for sure, we are encouraged by the activity and by the volume of deals we?re winning. In the quarter, we leased 430,000 square feet of office and retail space in 56 transactions bringing our year-to-date total leasing to 1.2 million square feet in 111 transactions. Specifically, we are filling our space in Crystal City. In the second quarter alone, we completed 300,000 square feet of office leases and thus far for the year, we have signed over 800,000 square feet in Crystal City.
Our office occupancy in Crystal City is now 89.1%, up 240 basis points from Q1 and up 390 basis points so far this year. An encouraging amount of our leasing this year represented new deals. About 200,000 square feet consisting principally of new private sector companies coming to Crystal City. Notably, associations and non-profits are migrating to Crystal City in force. In the second quarter alone, we completed almost 100,000 square feet of new transactions with this sector.
The combination of metro, proximity to Capitol Hill, adjacency to Reagan National Airport and abundance of hotels and amenities plus overall value have made Crystal City their location of choice. And we are continuing to attract first class eateries whose foodie brands cater to our new urban millennial demographic. We just signed leases with Sweet Green and Taylor Gourmet for new locations on Crystal Drive.
We are also making great progress downtown at the Warner having signed four new leases this year totaling 107,000 square feet including a lease with Hewlett Packard just signed last week bringing the occupancy up to 86.1%. Our overall downtown portfolio with 12 buildings in about 3.45 million square feet is solidly leased at 93% as of the end of the second quarter.
Our second quarter TIs and leasing commissions were 12.4% of initial rents or $5.02 per square foot per annum. While still higher than our historic average, we are trending down from last quarter and all of 2014. For Q2 2015 versus Q2 2014 we reported positive same store EBITDA of 0.8% on a GAAP basis and negative 3.3% on a cash basis, both improving over last quarter?s comparison, which was negative 0.2% GAAP and negative 5.5% cash.
Overall occupancy, including residential and skyline was up 80 basis from Q1 to 85% and up by a total of 150 basis points from Q2 2014. Office occupancy including skyline was up 120 basis points to 82.7% and 220 basis points above Q2 2014. And remember, a few minutes ago I said that our office occupancy in Crystal City is now 89.1%, up 390 basis points so far this year.
Skyline?s occupancy is now 53.5%, a continuing drag on our overall performance. Without skyline our overall occupancy including residential is now over 91% and our office occupancy without skyline is 89.7%. On the residential side, we continue to show strong results. Our occupancy tick down at quarter end to 95.4%, a short lived blip at that second in time. We kept our rents strong increasing by 2.3% over Q1 and we are already back up at 96.1% occupancy as of last week.
Crystal City continues to be our greatest focus in Washington. In addition to the inflow of associations in non-profits that I mentioned before, we continue to domesticate our creative cohort and are seeing incubators, makers and startups taking roots in Crystal City. We expect the changing face of Crystal City to be enhanced even more by our new project with WeWork at 221, South Clark Street.
This former outdated office building will soon be home to more than 200 new collaborative living community style apartments as well as two floors of WeWork space. If you drive by today, you will see the building?s exterior has already been transformed as we receive ready for this exciting new incarnation. We are super excited about this new residential concept and see forward to its opening at the end of this year.
In addition, as we discussed last quarter, we have an exciting new partnership with 1776, a global startup incubator and seed fund that has opened the campus in our rapidly growing innovation hub in Crystal City. Their focus here is on connecting their extensive startup community to agencies and major corporations especially in the areas of defense, aerospace and cyber.
As we said over and over, we have tremendous value in DC that can be unlocked by re-leasing our vacant space as well as harvesting our robust development pipeline. We are in high creative gear on the development front. We are finalizing our redevelopment plan for 1750 Crystal Drive. As discussed on the last call, this is a prime building in a bull?s eye location that we are recapturing by moving the U.S. Marshals down the street through our recent lease.
Located on Crystal Drive, correct at the metro, the building will go out of service next year as we reposition it with the brand new skin, new lobby, new systems and new spaces for delivery in 2017. This will not only introduce fresh office product, it will be flanked by new destination retail on that block that is currently in the planning stages. This is one of several place making concepts that we are pursuing ideas that will not only be transformative for Crystal City, but connect to our significant assets in adjacent Pentagon City.
Our new Bartlett apartment project has topped off and is on track to be delivered in mid-2016 with a 37,000 square foot Whole Foods at the base. With 699 units, we are using our scale to create a very unique product with differentiated amenities and services. We own over 15.4 million of existing and developable square feet in Crystal City and Pentagon City, a vast swath of value creating possibility sitting on the shores of the Potomac.
In downtown, early in 2016, we will be demolishing two older contiguous buildings where we will develop our new 335,000 square foot corner trophy office building 1700 M Street. The building will be located correct off Connecticut Avenue in the heart of the Central Business District. On balance, we are pleased with our second quarter and hopeful about the improving market conditions in DC.
Thank you. [Operator Instructions] Our first question online comes from Mr. Jamie Feldman from Bank of America Merrill Lynch. Please go ahead.
Great. Thank you and good morning. I guess, just sticking with Washington DC for now, you?ve given guidance for ?15 that you still expect EBITDA to be in line with ?14. Given the leasing activity and the ins and outs of the portfolio would you say 2016 EBITDA at this point would be higher, lower, or in line with ?15?
I was just thinking in terms of the leases that are signed, though, provided you didn?t do anything else at this point.
I will say it again, we don?t give guidance. We are not going to give guidance for 2016. Obviously from my remarks and Mitchell?s remarks we are constructive. We think Washington has bottomed, we think that it will recover, it?s just a matter of time and so - but we are not going to do the math.
Okay, that?s fair. And then for my follow-up, you had mentioned the street closure at Penn Plaza, can you just give some early read on the feedback and how you think it?s going so far, I know it hasn?t been that long, but just from early sentiment?
But I can tell you that lots of people are very excited about it. We will have food offerings et cetera, so we are actually very excited about it.
Good morning. Mitchell, in DC, the leases pending balance is now just 7,000 square feet in Crystal City. Can you talk about your shadow pipeline of leases and are we going to look at some leases that are going to be signed shortly or how does that look like?
Sure. What you are focusing on is the metric with respect to the particular BRAC space. So provided you lump all of my space together the BRAC space and the non- BRAC space it just will happen that that particular metric in this particular quarter was low, but as I discussed we leased a lot of space in Crystal City and our pipeline is good, it?s been as good as it?s been over the last, say, two or three quarters and we are pretty constructive on the leases in the pipeline.
Thanks. And, Steve, given your comments on capital flows to New York, can we see you selling some more core assets or assets you?ve already redeveloped and captured some of the rent upside?
We have sold some assets in New York. I intend we sold 1740 Broadway couple of quarters ago for $1,000 a foot. So we consider each asset in our portfolio each quarter. So while we have nothing to announce now it would not be unthinkable that we will have some capital transactions in the future. I am not making a prediction, we have nothing in mind now, but we review everything there, all the time.
Thanks. Good morning. Steve, I guess I am just trying to square your comments in the last couple of quarters about just asset values being expensive. You guys have obviously put a decent amount of money to job and I am just trying to sort of receive your views on if you see these as kind of next cycle deals or some of these developments kind of being near term and if you can provide any kind of all-in costs or ranges for what you think some of these assets may be and the kind of yields you are looking for?
I am not sure I understood your question, Steve, but just to talk usually about it, we had said over the last few quarters, that we think asset prices are high. I have said that I think the easy money has been made in this cycle. I have said that this is a time when the smart guys are starting to build cash. I?ve had a handful of very, very smart guys jump on top of that remark and say they agreed with me. And so that?s a back - and I have said repeatedly that we are in a - we do acquisitions very carefully at this point in the cycle.
In each quarter we announce one or two acquisitions. If you look at the nature of what we are doing, they are usually what I would call bolt-on acquisitions. They are right in the neighborhoods that we are targeting and, for example in Penn Plaza or for example in West Chelsea and multiple retail acquisitions which we are in the market for at all times. So we are always hunting. We are always looking, we are always tasting, but elephant hunting in this market is really difficult, because prices are really high. So I don?t know if that responds directly to your question, but those are my thoughts which put it into context from the last - at least legitimate thoughts for the last year or so or even more.
Yeah, I guess, just kind of add-on that. I?m just trying to get a sense, some of these, will you talk about like the 260 11th Avenue, you say the lease with New York goes to 2021, there is a parking lot next to it. I mean, I presume that you are sort of land banking, if you will, for the next cycle or can you see that maybe least be bought out and something kind of more near term be done and just what kind of returns are you looking for on these deals when you are stabilized?
We don?t publish our target returns. With respect to the - think about the asset as perfect, it was acquired for a ground lease which is a non-cash transaction plus some shares. The income on the building covers a carry on that we have carry from the tenant for five or six years. We will not discuss whether we can get that tenant out earlier now. That?s just not something that?s appropriate for a call like this. We have a record of getting our hands on assets when we want them by the way. And we are very excited about that asset. The mark-to-market on that asset in terms of the in-place rent from the existing tenant to the market rents is way more than a double. So we love the asset. It?s in a grey spot and we are very constructive on it.
Okay. And then I guess just as a follow-up, can you just maybe talk a little bit more about 220 Central Park South and obviously you had the disclosure in the 10-Q about the sales and the 40%, obviously we don?t know which units have been sold within the building and how maybe representative it is of an average price throughout the building, but is there any sort of information you could share at high level as to how to think about I guess the, say, 1.4 billion, 1.6 billion sales done for 40% of the space so far?
The sale are actually extremely well, I don?t know what the word is, up and down the building. There is not one concentration of any apartment product type that has been hotter than the others. So the sales are very evenly disbursed up and down the building.
Good morning, thank you. With all the Amtrak and Jersey transit issues recently and talk of 100 year old tunnels being the issue getting to Penn Station, not to get into the politics or the potential solutions, but do you have any thoughts on the impact these issues have on the appeal of the Penn District and the impact of a new tunnel especially if it led to a new destination in Manhattan, the impact that could have on the west side? So any big picture thoughts on Hudson River transit as it relates to the Penn District?
That?s a little over my pay rate, but nonetheless that hasn?t made me bashful in the past. Look Penn Station is the real McCoy. It is the largest transportation hub in the United States. It is the largest obviously serving Manhattan and it?s inconceivable. I intend Penn Station is the dominant transportation facility in the city. Now, it?s not the only one obviously, but it?s the dominant one. The growth of the New Jersey side and other arteries that come into Penn Station are obviously everybody knows that. The fact that the infrastructure that services Penn Station is a little bit tired, a little bit of which is maybe an understatement or an overstatement, it?s nothing new. All of the infrastructure in New York is kind of in the same condition.
So the fact that there is a bright light on the issue of expanding Penn Station is probably a good object and the dominance of Penn Station is in the central element in the growth and development of the west side of Manhattan and the fact that we own all the buildings on top of Penn Station and surrounding Penn Station, we think is absolutely a spectacular opportunity.
So I don?t know whether I responded to your, I hope it does. But obviously if there is a five, 10, $15 billion construction project, which augments the dominance of Penn Station and the ability to get increasing volumes of commuter traffic into that facility that will cause short-term disruption, but long-term enormous gain. So we couldn?t be more delighted that there is a focus on this piece of infrastructure. By the way we would - we believe that political leadership and government leadership should be focusing on all of the infrastructure in New York.
Okay, that?s very helpful perspective. And then sticking with that area on the 260 11th Ave purchase, are you viewing Hudson Yards and what will eventually become as a net positive and that brings more vibrancy to the entire area and if that?s the case what about the element of competition in coming years with all that space coming online as it relates to 260 11th and how did that work in your thinking on the acquisition?
I?ve said publicly before and we are obviously partners and friends with related, I?ve said publicly before many times that we think that the advent of the Hudson Yards development is a not a good object for Vornado, it is a great thing for Vornado. So basically, the Hudson Yards development, which is now in that 10th or 12th year, this is not a new event, has split the west side Manhattan on the map and so since we are the dominant owner in that region and since we think we have wonderfully located assets in that region, we think it adds enormously to our benefit. The concept of - let me get to 260, okay.
We had an interesting thing happen about a year ago and that is a very important tech forum. When Facebook came into New York and wanted to expand and enlarge their New York headquarters, they sorted with a little space, 50,000 feet and they wanted to expand greatly, which is appropriate because they need a large presence in New York .Now, these guys are really efficient and they came into town with a team, they surveyed the marketplace, they selected and in like one week, they selected their top two candidates for their New York headquarters, one of which was our 770 Broadway, which is a wonderful building with 77,000 square foot floor place, high ceilings, lots of glass I mean, and a traditional - it was a branch store, which David and his team converted into a first class office space in any event. So the choice was down to 770 Broadway or a new steel and glass building in a very similar neighborhood and they selected our building and we?re finding that kind of happening all through the city. So it?s not by chance that the buildings on Park Avenue South and the 260 11th Avenue type buildings are incredibly high demand by the class of tenant that doesn?t want to work in a glass building with a lot of old guys that were ties, of which I am one by the way.
So the - we relished the competition. Now if you talk about the new space that related is going to be bringing to market, that?s a completely different kind of space than we offer. We - they are looking for 0.5 million and 1 million foot tenants, they need those tenants to fill those big giant buildings up with those big giant financial services floor place and the city needs that where we can operate wonderfully under the umbrella that their pricing and we will draft from what they do, so we think they are coming into the market, we think they are coming into - it could sound a little silly, coming into our neighborhood is a great thing and we couldn?t be more pleased about the future.
Thank you. Just a quick question on 260 11, so you purchased that on a ground lease. Do this see simple painful in this environment and we continue to see increased ground lease deals?
Basically the ground lease was a surrogate for the passage of time, we have fixed price purchase option that will - is locked out until the happening of sure events, which I am not going to mention here, but we will in the future buy the fee, which is what our intention is.
Okay, great. And then one other quick question. The DTA, you recognized 90 million of 95 million, is there any reason in particular that you didn?t recognize the whole 95 million?
Yeah, Ryan, the reason there is - there was a recent change in the New York State law around the utilization of net operating losses that limit our ability to use certain of the NOL in New York State and that?s what caused the 5 million not to be recognized currently. We hope to realize that in the future, but it will not be realized through the 220 development.
Good morning, guys. Steve, there has been talk recently of slowing New York City tourism in light of currency and other global economic issues.
Sorry. I was saying there has been talk recently of slowing New York City tourism in light of currency and global economic issues, so on the street retail front, are you seeing or do you expect to see any change in behavior from either potential tenants or landlords and the rents they are looking for?
Some of our colleagues have already find on that with a negative answer. I will be a little bit different. We don?t have yet the tourism statistics recently so - but I believe that there is a slight, I am talking about really slight diminution in tourism. Now, you have to remember that there is 55 million, I think, tourists that came into New York last year at the running rate, 80% of which were home tourists, so they - those are not affected by the change in - by the strength or weakness of the dollar. So it?s 20% of that tourism cohort, which would be let?s say a 11 million or 10 million individuals and so that the margin is going to be that significant. We do know that tourism is still continuing to be on the rise because the wonders of New York continued to attract people from all over the world.
So while sort of my belly tells me there is a going to be a diminution, it?s going to be at the margin, I think very slight, that?s number one.
Notwithstanding that, I?ve said this before on prior calls, I think retail rents have gotten to be very high and I think that landlords will have ?and the number of tenants cruising looking for spaces at these very high cycle - highest in cycle rents are starting to decline. So I know, we are recognizing that and we are making deals now and developing the deals or as David said in his mark-to-markets and what we are doing. The performance and the results and the financial value creation is still acceptable to extraordinary. So the answer is we are realist, we understand the - what the markets are. We don?t hangout asking rents that are not obtainable in the marketplace and our job is to take this wonderful retail portfolio and keep it rented at rents, which in relation to our core are nothing short of extraordinary.
Now, in my letter to shareholders, the most recent one, which went out in spring, there were two very dense pages on the street retail business where - which had lot of words and also a lot of numbers. The - we traced over a 10 or 15-year period what the increases in street retail rents had been by submarket and they are high-double digits and they are just extraordinary. Just for fun, we put in what the similar statistics were for a new office space by sub-market and they were obviously much less than retail. We have also put in, and I am saying letter that I am referred to, lots of data on recent transactions on Fifth Avenue just to get an idea of the math and so we have - we think that we benefited enormously from being early with large and important assets on Fifth Avenue and in other submarkets.
So that?s where we have extraordinary value. So that?s a long winded answer to say basically that I sense in my belly that rents have gotten to about top of the market and we are in the business of realism, not hoping and we are in the business of making deals. The deals that we are making have extraordinary mark-to-markets so that they are pretty damn good.
Great, thanks. And then Mitchell, can you please discuss the traction Crystal City is getting of the tech versus other submarkets like the Mount Vernon Triangle, it seems the bulk of leasing that?s here has been non-profits and associations, which seems it might be a little odds with creating a tech ecosystem?
Yeah, I think that - the way that I think about the Crystal City market is, it really has forward likes to it. So we continue to be a strategic location for government, we continue to be a strategic location for government contractors, we think that the not-for-profit and 501c3 cohort is another leg and finally, the innovative and creative type. So I think that they all intermixed with one another and particularly, if you focus on some of the start-ups and the innovative companies that are working with the big, big government prime contractors as well as the big government agencies, there really is natural synergy amongst and within those groups. So I think that the four pieces sort of fit within one another. And then when you think of some of the 501c3s and non-profits, many of them have youthful and millennial cohorts, so we are doing research and other kinds of work for the organization. So when you add them all up, I think you get a good and robust mix of tenants and there is synergies amongst the groups as well.
Thank you, good morning. I was little surprised with the cash balance at the end of the quarter, I know you have formerly spoken about ending the year with about $2 billion in cash, so I was just hoping for an update on how you?re thinking about ending the year in terms of cash now and how we should think about you getting there from where you?re at the end of the second quarter?
We ran down our cash to handle for example the same St. Regis acquisition which was $700 million, which we basically bought through our cash and we have no financing on it. So that asset will be financed shortly and there are several other assets that are similar. So basically we ran down our cash, we will want to back up again, we stay - we are on track.
I don?t know. I can tell you kind of reversely as this - as the cycle continues and gets more and more, when prices getting more and more, I don?t use the word probably, but I will. Then we feel - they maybe more opportunities coming for the well-capitalized at a very liquid forms on the other side of that. So that?s not an answer, but it is kind of a funny way at answer, but we have no target, we have no budget for cash. We believe that having liquidity to be able to take virtue of the opportunities that will undoubtedly be here, we don?t know when is a very important part of the strategy of how a firm such as ours should be run.
Okay, that?s helpful. And then just another question on 220 Central Park South, it still looks like you have over 800 million to complete the project, which seems like a lot to do between now and the end of 2016. So just wanted to get an update on how you?re thinking about the timing of completion and whether there is any downside to the expected completion cost? And also if you can tell us how you?re thinking about funding the construction from here on now?
The completion date of the project remains unchanged. The construction market in New York is very, very, very, very tight. People are experiencing shortages, which causes price disruption all the time. We have bought more than 50% of the project and so we are very respectful of the - what might happen in terms of the cost of the remainder of it, not concerned about it, just attentive to it. We will finance the project out of the existing loans we have on it, plus a new loan that we are going to take the financial reminder of it.
Hi, good morning, everyone. Just a couple of quick questions here, just on the WeWork?s project in D.C., I know it?s going to begin delivering here in end of the year, but when do you think we will be able to start leasing the units residential units?
So, the units are going to deliver late this year, very early next year and will be immediately in the market to lease them at that junction.
Okay. And then just another quick one on WeWork. I mean, they?ve been in the news quite a bit. You and many of your peers are leasing space to them. I guess if that is directionally the - where they office market or some portion of the office market is heading, obviously you don?t want to create conflicts of interest with your own tenants, but just curious if that?s anything - something you would ever consider doing on your own separate from WeWork, some kind of space similar to that.
We would consider it but we likely wouldn?t do it. We?re very comfortable with leases from important tenants with credit, et cetera, as opposed to leasing out the space desk by desk. And so, we think that WeWork is a very, very competent and that?s a different business.
That?s not to say that WeWork might not attract a handful or two handfuls of competitors, but it is mostly would not be us.
Hi, Steve, good morning. Can you talk a little bit about the multifamily business? As I strategically think about it, you got about 4,000 apartment units between New York and DC. Back of the envelope, we?re probably talking somewhere around $2 billion or north of $2 billion in asset value. Where does that fit in as you think about this Company going forward? And we spend an hour and 15 minutes on the phone here and multifamily maybe got a minute or time from Mitchell. Is this something that?s still on the plate or I would say strategic disposition or how you?re thinking about that?
Hi, Ross. We are an accidental participant in the residential business if you - if I can use that word. So, what do I mean by that? In New York, we have two large and - I mean, really large and important projects that are basically, what do you call, assistant housing kinds of projects where we bought together with a partner who was the original owner of this inventory. Independence Plaza is the main one, which is, what is it, 1,500 units, how many units is it? 1,328 units.
In Tribeca, on the water, with high rises directly across the street from the - what?s the name of the Tribeca? What?s the name of the Deniro's Restaurant? Thank you. Anyway, so, [indiscernible] I mean, spectacularly well located project and we bought it - I don?t know $0.25 on the dollar for per square foot per pound and so, the - what we?re doing there is over time the rents will rise, et cetera. That?s said about that. So, we invested in a residential product that we did what we frequently we do. We were very price sensitive, et cetera. So, that?s said enough of that.
The - we also have an apartment project on 86th in Lexington, which is an important piece of property, which we bought, because it was on top of the retail that we sought. So, I?m saying this was sort of incidental into this business. We also have a couple of handfuls in New York again apartments in places like SoHo, where they came along with retail assets that we acquired. So, that?s the current nature of our residential business in Manhattan. Would we get larger in Manhattan if the opportunity came up? Absolutely yes. We?re also incidentally building a 300 unit apartment project in Rego Park, Queens, which is an Alexander?s asset on top of the Rego, the large and very successful Rego Park shopping center.
So, we like - we understand the apartment business. We understand it and have capability both from an operating point of view and a development point of view. And so, we - but we have entered it by being very, very, very - looking for economic value as opposed to going in and paying three caps for assets. We also have in New York built the three condo projects, one of which was on top of the Ethical Culture School on Fifth Avenue, the other one of which is - I?m sorry on Central Park West, the other one of which, of course, is the Beacon Court project on top of the Bloomberg Tower and then the third of which is the stunningly successful 220 Central Park South project, which is an interesting comment for me to make. It?s four stories out of the ground that I?m saying it?s stunningly successful and it is.
In Washington, most of the residential that we have fits into two categories. One, we acquired land in the Eighth Street acquisition, which was, I don?t know, six, seven, eight years ago and that land came along with it and it?s - we got 1,500 units, the River House apartments in that acquisition. We also got three or four land parcels, which are stunningly well located in Pentagon City, basically across the street from the Pentagon City Mall, which we own about 7.5%.
And then we basically did two or three conversions of the existing buildings in the Washington portfolio to create value and to engage in place-making into the communities that we are. So, we?re in the business, we have - you?re right, we have 4,000 units odd. We would build those units out over time. We?re building an important project now, which is the Bartlett, which has 700 units, I bet. We say in all those documents 699 units, which I think is kind of cookie, let?s call it 700 units, plus the Whole Foods, et cetera.
So, we know the business, we?re successful in that. We know how to operate the buildings, we know how to develop the buildings. We will do more of this and build out our inventory. What will happen and by the way, we will do more place-making and resi construction in Crystal City over time. We will transform some of the office buildings into tear-downs or conversions and do resi.
Will we go again and buy a big apartment company? No. Will we do acquisitions in the business? Maybe.
The answer to that is we would - we might sell, we might bring in - we might likely bring in a JV partner to finance all of this, okay, but we won?t sell uncooked land at low prices.
Second question is Hotel Penn. Obviously, hotel comps in New York has been little weak lately. Does that cause you - caused your long-term plans with the Plaza? How much longer is Hotel Penn going to be a hotel? Or we going to resurrect the architect plans from the Merrill building at some point?
We can?t predict the future. We can only say that yes, the hotel business in New York is soft. I think the folks tell me that New York is the only hotel market in the United States, which is - which has negative comps, okay, I mean, which is pretty startling, because it is the principal tourist attraction in the United States. But what?s going on in New York is just oversupply, oversupply, oversupply, and when new entries open up, they cut the prices to get to stabilization and so, whatever.
Our numbers are lower. They?re not - they?re not - they?re not seriously lower, they are what, 5%, 7% lower, something like that. So, we understand what?s going on but it?s not - so, basically the Hotel Penn is either a hotel or a place saver as we see it and as markets change. I can tell you that we have an enormous profit in the Hotel now. We can sell the asset for an enormous profit. We believe that there is much more to come. We are unable to make a commitment now is to whether it?s going to go into a tear-down or renovation. We are also unable to make a commitment now is to whether it?s going to go for a hotel use or an office use or whatever. We have all kinds of different conversations going on.
I could only tell you one thing with incredible sincerity. It will be well worth the wait. Now, there is lots of things that we do that are maybe take a while where we have patience. It took eight years to assemble the 220 Central Park South site and that will be well, well, well worth a wait. Hotel Penn fits into that category as well.
Hey, Steve, it?s Michael Bilerman. Just question on equity and I recognize for 260 11th Avenue doing units was an advantage and necessary to get that deal done, but in contrast with your comment last quarter, I think when I asked about the inventory and you said, you hated your inventory price, how do you think about issuing at these levels, number one, and number two, more broadly about potential strategic things you may be thinking about to improve the stock?
Hi, Michael, how are you. I was wondering where you were. First of all, I hate my stock price about $5 or $6 or $7 more than I hated it last quarter, number one. Number two is the shares that were issued in the 260 11th Avenue acquisition had to be issued for tax purposes. It was the only way to make the deal. We have a long and deep relationship with this same group of sellers. I think I said or David said, I don?t remember who that this is the same group that we bought 770 Broadway from and so, while I hate putting out shares and won?t put out shares at this price, $80 million of shares, even if it?s issued at a discount to what it?s really worth in relation to the quality of the asset and the opportunity of creating that was we thought worth it and it has to be in that transaction.
I can tell you that from a policy point of view and a discipline point of view, we have no plans and I almost want to say we won?t issue shares at these prices and by the way, I almost would say that we have an extreme aversion to issuing shares almost at any price. It?s a little silly, I mean, there is a price, but understand that what we look at, issuing shares is basically dilutive to our shareholders and we don?t look at the dilution in terms of what the current NAV is. We look at what the future NAV in the Company would be two, three, four, five, ten years down the line. So, issuing shares is not something that we think is a good strategy.
With respect to the fact that our shares together with almost everybody?s shares sell at a pretty significant discount to the private market values and what we?re going to do about that, the answer is, we together with every management team in our industry is trying to figure that out right now.
So, we have shown our management team and board has shown a willingness to do things. Get out of the mall business, get out of the strip business, get out of the merchandise mark business, et cetera, et cetera. Spin our strip shopping center business to our shareholders. We had been I think more active than any other management team I think in terms of restructuring our Company. As I said before, everything is on the table and everything continues to be on the table.
Would you have considered and I recognize the units are tax benefit and were necessary for the deal, but I guess would you have considered just buying back $80 million of your common shares to effectively make it impartial and recognize - I know that the stock?s not at a meaningful, significant enough discount to do a large scale buyback, but I?m just wondering with the cash balances, the refinancing proceeds, the asset sale proceeds, whether that was something you talked about and thought about of effectively keeping the equity base completely the same?
I guess, question on retail. I think in your opening comments you said, you talked about the retail rents and said there was more to come. There is about 60,000 square feet of retail expiring in the back half or under month to month and another I think 90,000 next year. Are you holding forward some larger deals from future years or is there certain volume that we should be thinking about relative to I think you?ve done about 40,000 square feet of retail leasing at obviously multiple - multiples in terms of spreads?
I really wasn?t focusing on the - on the renewals or re-renting the expiries as they come up. I was really thinking about some of the stocks we have - we have a couple of important assets that are currently treading, I?m more focused on those.
And then just about one last comment. You forgot Independence is across from Citigroup?s headquarters. We?re investing some billions of dollars and moving a lot of employees and eventually will need a place to rent their apartment to be near to work. So, that?s it. Thank you.
One of your guys at Citi approached me about taking down one of the buildings and building a hotel for them at bargain prices and we didn?t think - I don?t know - we couldn?t be more aware of the fact that the Citi headquarters is adjacent to our Independence Plaza. I think that?s it.
Thank you. At this time, we have no further questions. Thank you. I?d like to turn the call over to Mr. Roth for any closing comments.
Thank you all very much. This was an hour and a half. So, I appreciate you?re speaking with us for that time. Maybe next quarter, we?ll try and make it a little bit more succinct and be a little bit more cognizant of your time pressure. So, anyway, thank you, we?ll see you next quarter.
Thank you. Ladies and gentlemen, this concludes today?s conference. Thank you for participating. You may now disconnect.
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