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. 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’ll now turn the call over to Ms. Cathy Creswell, Director of Investor Relations. Please go ahead.

Thank you. Welcome to Vornado Realty Trust’s first quarter earnings call. Yesterday afternoon, we issued our first quarter earnings release and filed our quarterly report on Form 10-Q with the Securities and Exchange Commission. These documents as well as our supplemental financial information package are available on our Web site, 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 supplements and are on our Web site. 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 maybe 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 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 spin off. Our current schedule is that in June we will file an investor deck describing JBG Smith's assets, balance sheet, business plan and prospects. After which 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 largest investment class publicly traded pure play, real estate company focused on the Washington DC 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 as share with average starting rents of $75.20 per foot. And positive mark-to-market 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 five deals. 11,200 square feet as share with positive mark-to-market 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…

Good morning, everyone. With Steve having covered the basic statistics of our leasing business this morning, I am 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 spaces. Office using employment. I was then and remain today very optimistic about the prospects, the New York economy based on both underlying fundamentals and potential federal policy change. I did sound one note of caution, however, noting that in 2016, office using employment grew by about 5000 jobs, positive but well below the blistering pace of the 35,000 office sector jobs the city added on 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 sectors which alone added 27,000 positions. Office using employment will stay record high of 1.4 million jobs in 2016 or about one-third 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 last seven years to absorb the new…

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 non-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 lying 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-leasing 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 at 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 non-cash 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 reference of 85 Tenth Avenue was in the form of mezzanine loan. In December 2016, a $625 million refinancing of the property was completed and we received $191.8 million in repayment of…

We are prepared to take questions, please.

[Operator Instructions] And from Citi we have Manny Korchman. Please go ahead.

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 at the current stock price, shareholders are effectively getting retail for free. The stock is 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 is 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 the discount. If you believe that most of the discount there is 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 have done with Urban Edge, like you have done with JBG Smith, to sort of walk through how you anticipate narrowing that gap.

Michael, good morning. 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, three or four or five years ago, we had a similar 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 that we have done all that, we have done over the last three 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 is 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 is clear to everybody and I will 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, I think it's $15.5 billion, about $5 billion of that was in asset sales of assets that we’re either pruning or not a core, on which we recognized the $2 billion odd profit. And the balance of it, the better part of $10 billion is returned to shareholders in the form of the spin off UE, which has performed superbly over the last two years by the way. And the upcoming spin of JBG Smith. So we have done an awful lot…

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, getting 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 discount but yours is wider than them. You could have said it in your call, you are getting the office business half off rather than saying retail for free. So I sort of took your lead on what you are saying. It's highlighting retail as a bigger issue that that is something that maybe you are more acutely focused on trying to narrow versus selling your half interest in one of your large scale New York City office properties.

Okay. Either way I am 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 are aware of that and we have worked our butts off over the last years and done a lot and we are going to continue to do that. I mean I think that’s all that I can say about that.

Do stock buyback, as a follow up, does that enter the equation now more? I know in the past you have commented that it has to be 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 versus just buying your stock?

You know a stock buyback is obviously a technique which we are fully well aware off. 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, when over a six or seven 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. Please go ahead.

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

Jamie, hi. Good morning. For the last couple of years I had 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 of that -- and I said in my letter, when retailers basic business model and format is under siege, they are not aggressively interested in stepping up to high profile assets, and we are finding that. So across the board, retailers are introspectively worrying about their business model as opposed to taking that next incremental big store at 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 these deals are -- I don’t want to say they are difficult but they are time consuming. So for example, it took us two years or maybe longer to make the Victoria's Secret deal on Fifth Avenue. It took our neighbors at 655th, which is Jeff Stutton and SL Green, three or four 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 appetite to acquire in this market or if we start 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 must tag on to -- to your question, Jamie, on page 17 in my letter, in my Chairman's letter, the last paragraph. I think we went as a team very far in projecting our retail incomes over the next three or four years. And in those three or four pages, we attempted to lay out lots of information that was not available prior and sets forth really the financial -- some of the financial characteristics of this retail business. So we work hard on that. We think it accomplishes the objective and if you -- you might want to just re-read that.

From Evercore ISI we have Steve Sakwa. Please go ahead.

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

Hi, Steve. Good morning. Taking your question in the parts. The Farley Post Office, Moynihan acquisition is proceeding apace. And we expect it to close the next couple of months shortly.

I would tell you, Steve, good morning, we have just begun to introduce the Farley building which is, as you know, is a post office with great ceiling heights of 19 and 20 feet and great column spacing. We have just really begun to introduce the building to the market place 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 are 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 its really exactly what the large, growing creative tenants are looking for, I would say 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 DC, gives tenants great access into Princeton where you have got pharma, bioscience. So we are very excited about this transaction.

Two more things. The buildings actually is in the bull's eye of the booming Westside, 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 are aggressively and enthusiastically proceeding on that. There is stuff going on with the Hotel Pennsylvania. There is stuff going on with Two Penn Plaza. So there is lots 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 when do you think you will be able to give us any sort of financial characteristics of this Farley transaction. Will that be later this year or that would be in 2018?

It may very well be later this year.

Okay. And I guess just a follow-up, I know Mitchell is there. I don’t know how much you want to sort of talk about DC. 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 DC activity. I know that on a recent tour, activity was bit sluggish down in Washington and I am just wondering, kind of the overall thoughts going into the back half of the year on the leasing activity down Washington.

I will front for Mitch and then he can speak. I read somewhere one of your colleagues made a comment that Washington had a negative cash mark-to-market of a single digit number and 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 superb and fairly aggressive and something that we are very satisfied with. We are guiding to the core business being up 5% for the six months than last six months, which I think is in a market which is bottoming and just coming off the bottom. Good performance. We are 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?

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 have 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 TI's and leasing commission would have 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 is 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 time where there has been party alignment, a net absorption over the coming year. 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 will just have to wait and see what these external factors may do to the marketplace.

I think you are going to see, when we launch JBG Smith, 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 products which has so many different financial characteristics than office products. And to Crystal City which everybody agrees is a bunch of older buildings in the most spectacular location possible and transforming. 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 are excited about it and we are getting ready to go to the launch.

From Green Street Advisors we have Jed Reagan. Please go ahead.

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

Michael, what do you think?

Not a lot of data points. I think on the softer corridors, I think prices have corrected, could be 10%-15%. Or prime Upper Fifth, again, those are scarce assets, they rarely come up. And I don’t know if there has been much change there. So I think if we took out of one of our assets, again, I think scarce assets and scarce supply. So I don’t know if there has been a lot of change there.

So, Jed, hi. I think that on the primest of the prime, like our Upper Fifth product, if it has a 10, 12, 15 year lease from unquestioned credit like a Victoria's Secret or what have you, I think it would go for the same price as it would have got less year or the year before. And recognizing that this kind of quality almost never comes up, number one, and number two, the income is guaranteed for 12 to 15 years. So I don’t think there has 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 distress market. And in this environment where it takes longer to lease and unpredictable what the rents are going to be, now you are into real distress. So I think that there is a total bifurcation as you would expect in the market. The speculators and the momentum buyers that we discussed in past quarters, had all but disappeared which I think is appropriate because they are not doing well and empty assets have to financed with equity. So I think the great assets are pretty much right around the high watermark and the unrented assets are distress.

And high watermark to your mind, does it start with a three or a four?

It starts with a three. If it's under market rent, absolutely it starts with a three. Maybe even a low three and maybe even lower than that. And if it's at market, which has escalators, then I think it starts with just below a four.

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

Yes. Here's the moral, we have said for a while now that we think liquidity is important for lots of different reasons. So we value all liquidity and when we have the opportunity to invest, first question is, would you rather have the cash or would you rather have the asset. Now cash doesn’t go up, only assets go up but you understand what I am saying. So that’s the first thing. The second thing is, we have 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 influence is, as I think it must. Liquidity influence is, also as I think it must. And I said this in my letter, I just don’t see the point of buying a flat four cap asset and invest money in 4% and think that you are a hero because maybe you could get to 50 bps of positive leverage of some debt. That by the way you have to repay at some point, so you got to make sure that you get it. So what I am saying is is that the assets that are available in the market of the quality that we seek, are really for investors. We are not investors, we are operators. It's a totally -- 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 distress prices, we will transact for sure.

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

The answer to that is, 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 asset for value and for what the private market values are. So for sure, we will be selling some more assets but basically we are pretty clean. We did a very good job of pruning and focusing. So 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 office or if we find some reasons, than sure we always sell. So what I am saying is, we are not aggressive acquirers except at distress with quality assets. And we will be selling from time to time although we had no, really no budget or [both] [ph].

From Stifel we have John Guinee. Please go ahead.

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 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 that. By the way, John, Joe never -- you said welcome back to Joe, he never went anywhere.

Well, he moved up -- he is back in his old saddle.

Yes. 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 lot 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 a office business which performs greatly. Has wonderful assets and I would take umbrage to your saying that it's complicated. It is a business that’s locked up. 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 ten years, we ended up getting a couple of $100 million 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 consensus, I mean we have no idea where the first call number came from that we are now being penalized for. We have no idea, okay. It cannot be right in anyway. Now, I guess what you are seeing is -- what you are saying to me is, well, why didn’t you go out and correct that six weeks ago as opposed to having to go through a torturous terrain 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...

As I was saying, we had no idea where the Street's consensus number came from.

That makes two of us. It's okay. Would you think about maybe also providing some yield on cost on your Chelsea developments, Two Penn Plaza re-skinning, Hotel Pennsylvania redevelopment, Farley deal, Old Navy lease expiration. Anything you could help people with on those various value creation potential.

The answer is, is when are sure of what the numbers are going to be and everything hardens up, we will take that under advisement. By the way, just from what you said, John, okay, we have a lot of stuff going on inside this company which is money-making and value creation, which is of superb quality. If you just think about the list that you just rattled off, okay. So while my stock 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 are not doing 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. Please go ahead.

Appreciate the earlier comments on the disconnect between the Street's and results. But wondering if you might be able to provide a little bit 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.

Hi, it's Joe again. We tried to do that in my remarks. So on 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 have been $1.33 and we also know that first quarter consensus 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 in Q1, or $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 has complicated the accounting. Last year's accounting was on a hypothetical liquidation, it took the 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 up 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. Signage business was the better part of $0.02 higher than Q4 than in Q1. We know that product moved out of our retail segment. There were other seasonality effects because of temp tenants and percentage rent in Q4 and not in Q1. That’s another $2 million or --…

Got it. That’s pretty helpful. On development sites, are you guys actively pursuing any new sites or this 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 are talking about development pipe meaning loan land. Loan 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 look out but nothing in our sights.

Great. Thanks. Any color on underwriting retail on the development side?

I don’t get the question, I am sorry?

Any detail you can provide on how you are thinking about underwriting retail sides and new development in land.

You know it's the age old process. We try to project a rent and we try to project what it will cost and we put the two 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 help our retail quite extensively.

And from UBS we have Nick Yulico. Please go ahead.

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 some more on what was driving that? It looks like from the proxies, while there were 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 am not going to comment on the proxy. That speaks for itself. It's Joe again. The statement I made was we didn’t give raises to our names executive officers, we did not. Michael Franco has got a onetime award for the JBG transaction in something pursuant to an employment agreement. That’s the only increase and compensation. When you look at the proxy table, the cash compensation will be fractionally higher because, ironically like a retail has a 53rd week every five years, we have 27 pay periods in 2016 as opposed to 26 pay periods. But for all intents and purposes and you can read the proxy, there was zero increases in any element of compensation to 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 for looking at second quarter versus the prior year's third quarter, versus the prior year that you are 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?

Yes. I mean I am just using the overall income statement number, yes.

So that one, that’s offset by an increase in interest income and other income because they were offsetting. That’s the deferred comp that primarily the senior executives have left in the company, invested to mark-to-market. We can't predict the stock market. A rising market, there will be a cost in G&A for that rise between first quarter and second quarter, for second quarter '17 versus second quarter '16, third quarter '17 versus third quarter '16. And conversely, if the stock market goes down, there will be a reduction in G&A. That will be offset dollar for dollar by the opposite effect in interest and other income. Ignoring that, we are 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 non-recurring. So long-winded answer. Yes, I would expect G&A, don’t forget that 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 at cards in which case everything else changes.

From SunTrust we have Michael Lewis. Please go ahead.

On Hotel Pennsylvania, I think everybody knows in 2007 it was going to be an office building that there was going to redevelopment at an office building and now maybe on pause a little bit. So for ten years it was never really the right time to do anything there. I mean while the EBITDA for the properties deteriorated. So after ten years of it not being the right time, 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 are working on something which no guarantee, as you said that nothing happened over the last ten 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. Please go ahead.

This is [Nick Stalner] [ph] filling in for Vikram. Some of your peers have said that they are starting to see a pickup in leasing activity among financial tenants in New York City. I guess 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, good morning. I will tell you generally that what impresses me is the diversification of the tenants that we are 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 love their building, 330, Madison, which is also the headquarters for Guggenheim Partners. Generally I will say to you we are seeing growth in all the sectors. To me most staggering number that I think I mentioned earlier in my remarks is that of the 550,000 square feet of activity, 225,000 of it, 44% was real growth of tenants in New York City. And that growth again was in, what I would call the creatives, the Google types, the Home Advisor types, as well as the financials like the Wells Fargos, as well as Glencore. We are continuing to see very good activity in what I will 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 six, nine 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 discussions in DC 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?

Well, 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 two or three 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, 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 are paying to third party brokers. Many of our brethren only publish the TI allowances. The brokerage commission is obviously 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 two or three years we saw some increase in those TI allowances which may have been in the kind of what I will call $60ish range and ranging from realistically maybe the mid-50s to call it 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 tenancy. 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 the new tenant would receive. So call it a renewal tenant receiving somewhere about $20 a foot. In this quarter, the 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 this quarter. Historically, as you look at our activity over the last two 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 increases taking place as I said over the last couple of years as construction costs dramatically have escalated. On the high high end space. So we are not now talking about space where the tenants are paying $110 a foot, a $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 the 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. Please go ahead.

Just wondering where you are stand in the CFO search process. If you can give an update on that?

We are in process. We are 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, the administrative office etcetera. So we are well covered. He is one of the consensus leading CFOs in the industry. He is 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, we are going to do it deliberately. We are 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 is our Chief Accounting Officer, and EVP Tom Sanelli who is the Chief Financial Officer of the New York division. Some of you who are at the Citi conference had exposure to these gentlemen. They are top notch.

Great. And then, Steve, back to you with another street retail question. You mentioned your success on leasing of one of your bigger stores quickly. Then you mentioned your neighbor taking some more time. With maybe 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 is probably less weeks others looking for space.

Michael, I don’t understand the question.

You have got a reasonable amount of lease expirations coming up in street retail portfolio.

I am sorry [indiscernible] of what?

You have expirations coming up in your street retail portfolio over the next couple of years. Give 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 REIT space business where we are continuously turning over space. That’s out job. Our job 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 one expiry in the next five years. One, out of all those tenants and we pretty carefully outlined all of the names of the tenants and the expiration dates in my letter. One is Massimo Dutti store at 54th Avenue. Beautiful, perfect store and it is currently at 50% of market, so we are 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. And obviously we are starting to think about leasing that 2019 expiry now. In the balance of the portfolio, I said that there have been a thought of little bit less than 400,000 square feet coming through between now and 2019, and I also said that three quarters of that, we are highly confident we will renew at about, at least 20% mark-to-market positive. So that’s why. Now we have -- and by the way, one of those that we are confident we 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 in the 34th street corridor. And the current rent is at least 50% below market. So we think we are in pretty good shape there. We expect that Old Navy -- we expect to do a deal with Old Navy. The balance of this space is very high quality merchandize like the H&M store on the corner of Seventh Avenue in 34th Street. So what it is, is the market is soft. We have said it is soft, we admitted soft. We are not ducking that, and leasing is hard and we will be hard at work in leasing it. By the way, for an NAV based investor, the assets have value and they continue to have value. So we will lease the space. And by the way, the other things is, is that our basis, we own the -- I can't say this, Joe, can I? We own the H&M store on 34th Street and Seventh Avenue for, I think the number is $34 million or $36 million. It produces almost that in income. Well, not quite that in income but well into the 20s of income. So the asset is probably worth the better part of $400 million-$500 million, we owned it for 30. So at our basis, we can be realistic in pricing. By the way, the signs on that building are very valuable. So at our basis, we have a history of being realistic in pricing. We take what the market will give us and we move on. So we will be fine.

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

From Green Street Advisors we have Jed Reagan with a follow up. Please go head.

Not to beat a dead horse on the street retail, but Steve you mentioned the market is 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?

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

No. Nothing that is materially in any way.

I mean for every 21 is a big private company that is doing fine but we have those leases at substantially below market. I think we are fine. I think we are fine.

Okay. That’s helpful. And then just last one from me. Looking, you guys obviously put up another strong same store cash EBITDA number in New York. I know there is kind of more free rents still to come and lease commencements. Just kind of order of magnitude as we look out the rest of the year. Is that mid-teens numbers reasonable sort of [indiscernible], or how much kind of deceleration do you think we see on that as we go through the year?

I bet you have got my financial guys scurrying for [books] [ph], so hang on a second. In fact, they are blushing. The question is for New York office?

Yes.

The New York office for the balance of the year, we are looking at numbers that are basically in line, low double digits, very high single digits.

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

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

We have time for one final question and from SunTrust we have a follow up from Michael Lewis. Please go ahead.

Just got one in. Over the weekend The New York Times had 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. 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 gotten very old, obsolete infrastructure and it's breaking down and it's causing commuter issues and what have you. With respect to the bigger issue of redevelopment of the station itself at Madison Square Garden and comments about the governor, I really don’t have any comments. But the article did imply something which is that Vornado and I and our team have 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 months of stuff that we think is, I will use the word again, meritorious. Beyond that I don’t have any other comment.

Thank you. We will now turn it back to Steven Roth for final remarks.

Thanks, everybody. This was a wild and wily quarter and we appreciate your support and we are 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 and tower on June 5, which is right before NAREIT, when we think most people will be in town. When you go to see the tower you got to be going up in a construction hoist so just be aware there will be a lot of fun. So, thanks everybody. We will see you on June 5 and then we will see you next quarter.

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