SL Green Realty Corp. (SLG) Q3 2012 Earnings Report, Transcript and Summary

Heidi Gillette - Director of Investor Relations Marc Holliday - Chief Executive Officer, Director and Member of Executive Committee Andrew W. Mathias - President James E. Mead - Chief Financial Officer and Principal Accounting Officer Matt DiLiberto Steven M. Durels - Executive Vice President and Director of Leasing David Schonbraun - Co-Chief Investment Officer

David Toti - Cantor Fitzgerald & Co., Research Division Joshua Attie - Citigroup Inc, Research Division Alexander David Goldfarb - Sandler O'Neill + Partners, L.P., Research Division James C. Feldman - BofA Merrill Lynch, Research Division Robert Stevenson - Macquarie Research Brendan Maiorana - Wells Fargo Securities, LLC, Research Division John W. Guinee - Stifel, Nicolaus & Co., Inc., Research Division Steve Sakwa - ISI Group Inc., Research Division Jordan Sadler - KeyBanc Capital Markets Inc., Research Division Michael Knott - Green Street Advisors, Inc., Research Division Ross T. Nussbaum - UBS Investment Bank, Research Division Omotayo T. Okusanya - Jefferies & Company, Inc., Research Division

Good day, ladies and gentlemen, and welcome to the Third Quarter 2012 SL Green Realty Earnings Conference Call. My name is Keith and I'll be your operator for today. [Operator Instructions] As a reminder, today's conference is being recorded for replay purposes. And with that, I'd now like to turn the conference over to your host for today, Ms. Heidi Gillette. Please go ahead.

Thank you everybody for joining today. At this time, the company would like to remind listeners that during the call, management may make forward-looking statements. Actual results may differ from forward-looking statements that management may make today. Additional information regarding the factors that could cause such differences appear in the MD&A section of the company's Form 10-K and other reports filed by the company with the SEC. Also during today's conference call, the company may discuss non-GAAP financial measures as defined by SEC Regulation G. The GAAP financial measure most directly comparable to each non-GAAP financial measure discussed and the reconciliation of the differences between each non-GAAP financial measure and the comparable GAAP financial measure can be found on the company's website at www.slgreen.com, by selecting the press release regarding the company's third quarter earnings. Before turning the call over to Marc Holliday, Chief Executive Officer of SL Green Realty Corp., I ask that those of you participating in the Q&A portion of the call, please limit your questions to 2 per person. Thank you. Please go ahead, Marc.

Okay, good afternoon, and thank you, everyone, for calling in today. After releasing earnings last night, I retired for the evening, with our performance -- with myself being fairly pleased with our performance and that we had good results for the quarter highlighted by substantial leasing, demonstrated gains and harvesting, certain debt and equity investments, new investments in an array of value-add opportunities, additional originations and structured financial portfolio and continuing affirmative steps taken to strengthen the balance sheet. I woke up only to read a number of analyst reports stating that they perceived we had a different kind of quarter and we would certainly like to use the next hour or so to review our results and discuss the many achievements of the quarter, which I believe are indicative of a market in which we are still able to take advantage of opportunities and create significant value through the investment and repositioning and leasing of real property and also through continued gains in our core same-store portfolio. First I would like to specifically address the leasing results for our Manhattan portfolio in the third quarter and then convey some additional thoughts on the broader marketplace. Based on our internal budgeted projections and by historical standards, the 471,000 square feet of leases signed in the third quarter is, in our opinion, a very robust amount of leasing given that the quarter encompasses July and August, which are typically our slowest leasing months of the year. That's nearly 2 million square feet of leasing on an annualized basis, versus our original projections for the year of 1.5 million square feet of leasing. And further, such activity was dominated by new leasing filling existing vacancy. These leases were signed at starting cash rents, which were higher than previously occupied expiring rents and does not reflect the effect of the contractual base rent increases that we will be entitled to throughout the terms of the leases. This leasing volume was higher than I anticipated for the third quarter and I've been very pleased with the level of activity in our portfolio since Labor Day. Any notion that the third quarter leasing results underperformed our expectations would be inaccurate. Evidence of this success is our same-store NOI increase for the quarter of approximately 5%, which is consistent with the increases experienced in the first 2 quarters and puts us on the high end of the same-store increases in the office sector. As important, and in my opinion, as impressive as these statistics are, especially in light of the neutral leasing market, I would continue to point you to our pipeline leasing statistics as a very good indicator of where the portfolio is heading over the next 3 to 6 months. In the 25 days since the end of the third quarter, we've signed over 123,000 square feet of leases in 18 different transactions and we have another 53 leases in advanced negotiation covering some 435,000 square feet, much of this we will obviously hope to conclude in the fourth quarter. Most tellingly, there is another 745,000 square feet of term sheets in negotiation that we believe have a high probability of being converted to lease, much of which would occur in the first few quarters of 2013. In total, we have 1.2 million square feet of pipeline in the third quarter, which is actually greater than the 1.16 million square feet of pipeline we had at the end of the second quarter. You can see why I think our leasing results are reflective or slightly better than the general market conditions in New York where increasing office-using jobs are absorbing the supply on the market from several of the newly constructed buildings. A number of job statistics bode very well for New York City in 2013 and over the long term. Specifically, there are 73,000 more jobs today than there were at the prior peak in this market in 2007, of which approximately 43,000 such jobs are office-using jobs. While new job growth in New York has been steady through much of 2011 and 2012, we do see a slight deceleration in new office-using jobs, which rang in at only 6,000 in the plus column for the fourth quarter. However, while decelerating, the fact that New York has added 43,000 office-using jobs this year bucks the conventional notion that New York is losing jobs. This is simply not the case. Rather, I believe, what you're seeing is job growth, which is essentially keeping pace with new inventory, which has kept a lid on rents. Job growth has also been mitigated or absorbed by the efficiencies that many of today's tenants are looking for when rebuilding their spaces. So between new construction and forced efficiencies, I think that's why you've seen a fairly steady vacancy rate in the 9.5% range. However, the good news is that, at this current moment, there's about 1.1 million square feet of leases pending at 11x, 250 West 55th Street and the Coach building, such that much of this inventory will be reduced, if and when those transactions are finalized. Thus allowing for 2013 job growth to directly impact the existing commercial inventory. The vacancy in Manhattan, as I mentioned earlier, is about 9.6%, which is relative equilibrium, that's less than 2 percentage points of sublet space and the balance being directly offered. And we remain optimistic about the prospects for our portfolio over the next 6 months given our substantial leasing pipeline, given the job growth in New York City and given the reducing supply of new construction that was put in place over the last few years. We will be well positioned, I believe, in the balance of this year and next year, to take advantage of these market dynamics as we have a very modest amount of lease expirations scheduled to expire to the balance of this year, about 290,000 square feet and throughout 2013 only less than 1.1 million square feet set to expire. These amounts having been substantially reduced and chipped away at all year through our aggressive early leasing program to reduce these amounts to very, very small amounts relative to our overall portfolio. With the core portfolio stabilized and delivering modest but market-leading same-store NOI growth, the focus has been on leasing up the more recently acquired assets where we have been having enormous success and are tracking well ahead of original underwriting in terms of timing and economics. Notably this morning, we announced the signing of several additional lease transactions: 131,000 square-foot lease to The City of New York at 100 Church Street, bringing that building up to 97% occupancy, a long, long way from the 40% occupancy when we acquired the building just a couple of years ago; And additional leasing at 125 Park Avenue where we are backfilling the planned vacancy we acquired and now how that building's occupancy in excess of 80%. We will continue to focus 3 Columbus, where we also announced a substantial upsizing in the Young & Rubicam lease, bringing that building's office occupancy to an excess of 73%. So at this point, I'm going to turn the call over to Andrew, who will now discuss the capital and property market dynamics we see in this current environment and the activities we've undertaken and we've executed to take advantage of these substantial opportunities that present themselves to us. That will be followed by Jim, who will give a strategic overview and framework for our balance sheet activities, and then Matt will drill into some of the specific highlights of the third quarter results. Thank you.

Thanks, Marc, good afternoon, everybody. The third quarter continued 2012's furious pace of activity, both in the Manhattan market and within SL Green's portfolio. This activity has accelerated of late given market tightening in the debt markets, which I'll get into further. Midtown saw many transactions go to contract at aggressive pricing metrics, demonstrating strong, continued investor demand from Manhattan real estate. 450 Lexington, 350 Madison, 285 Madison, 575 Lexington, 1411 Broadway and 386 Park Avenue South, were just some of the properties changing hands outside of SL Green's universe, with Worldwide Plaza and 75 Rockefeller Center reportedly closing in on contracts in the very short term as well. And the pipeline for year end is robust, with 11 Madison, the Sony building and several other high-profile assets, we expect to come to market this fall and winter. This transaction activity was helped by significant tightening in the CMBS market, which really started in July and continues to this week, where we expect several additional transactions, bellwether-type transactions to price. This tightening has caused other providers of debt capital, like insurance companies and commercial banks to tighten their rates as well, as they have to compete with lower CMBS costs. 3-handle rates seem to be the new norm in the market in tenure reasonably levered fixed rate deals, down 100 basis points or even more from rates just earlier this year. The other notable trend to watch in the debt markets is the return of the single asset securitization market, another very positive development for Manhattan assets. We expect to see several very large Manhattan assets avail themselves of this market as it re-gels and redevelops and the initial indications are that spreads in single asset securitizations will be competitive to pretty much on top of spreads and pool deals, which bodes very well for both Manhattan assets and Manhattan values. Within our portfolio, we announced the off-market purchase of 635, 641 Sixth Avenue. This exciting redevelopment project has Steve Durels brushing up on his tech talk and also talking big rents with almost 100,000 square feet of vacant office space in the tightest submarket in the country available for 2014 delivery. Plus, 200 square feet of prime retail frontage on Sixth Avenue, a meaningful amount of that retail, is vacant and available to these. Once again, our acquisition and legal team showed their ability to creatively structure a deal to meet all of the seller's objectives swiftly and discreetly as of this off-market deal did not reach the press, until we put it in the press. Kudos to the teams and particularly our Co-CIO, Isaac Zion, on this one. Today, we also announced our contract to sell a 49% joint venture interest in 521 Fifth Avenue to new partners for our portfolio, the international investors at Jones Lang LaSalle and Quantum. These partners share our vision for this property and the extraordinary long-term value we believe we can continue -- we believe we can continue creating here. The transaction was struck at a gross property value of $315 million or about $650 a foot, which is about a 4.5% cap rate on in place NOI. Elsewhere in the portfolio, we acquired a second site downtown at 33 Beekman near Pace University, where we will construct a second world-class facility for Pace on a 30-year commitment from them. This comes as we're on track to TCO our project in 180 Broadway in short order, on-time and on budget, a real coup by our construction team. That project went so well and Pace was so pleased with the project -- the progress that we made there and the finished product, they were willing to commit to another building, which we'd expect to bring online in late 2015 for them. We've also stayed active on the structure finance front, funding a major refinancing of an asset on the far west side of Manhattan and directly originating several other acquisition loans. The pipeline for a structure finance book looks very robust going into the fourth quarter, as our market leadership in that business continues and the transaction volume that I discussed earlier continues to build. Thus far, we don't see much of a drop in our returns for that business even with the senior debt tightening I described earlier. And with that, I'd like to turn it over to Jim Mead to go through the balance sheet.

Thank you, Andrew. Good afternoon, everyone. We've also had a very strong quarter with regard to our balance sheet. Starting with liquidity. We ended the quarter with $200 million outstanding on our $1.5 billion line of credit. And $115 million in unrestricted cash on hand, providing well in excess of our targeted $1 billion in liquidity. The line of credit balance increased from $80 million last quarter, primarily because we purchased 635, 641 Sixth Avenue unencumbered by debt. This is consistent with our broader rating strategy to increase the company's number of unencumbered assets. This purchases adds 2 assets to that unencumbered base. You will recall that we purchased 304 Park Avenue South unencumbered and we have plans to unencumber additional assets as we move into year end. To give some sense of the proportion of our liquidity today, our available liquidity covers all of our debt maturities for the next 2 years by 1.3x. Turning to a couple of credit metrics. Our debt-to-EBITDA at the end of the quarter was below 8x and our fixed charge coverage was 1.9x, both strong metrics. And as I've mentioned in prior calls, we expect improvements in our NOI and our corresponding credit metrics as our recent property investments lease-up and mature. I think it's notable then in the last few months, much of the leasing that we accomplished is highly strategic in nature and that it relates to achieving this additional NOI growth, which we said in the past will grow to almost $100 million annually in the next few years. Yesterday and today, we announced, for example, the completion of the lease up at 100 Church, which is now at 97%. The additional leasing at 3 Columbus -- that takes us -- takes the office occupancy into the mid-70s and the leasing at 125 Park, which is now into the mid-80s percent lease up. And we refinanced expensive preferred stock this quarter with a new issuance, taking advantage of the current window of low interest rates. We raised about $230 million in 6.5% perpetual preferred stock and redeemed $200 million in total of 7 7/8% and 7 5/8% preferred. These activities will have a small but beneficial impact to our future earnings and fixed charge coverage. The bank markets are also very liquid today, so we're looking at the current environment as an opportunity to potentially recast and improve our line of credit once again. More to come on this in the upcoming weeks. One final comment. You saw in the earnings release we closed on a $175 million loan with JPMorgan to finance debt positions. The nature of our lending business has evolved with the market cycle, and we're finding that best way to increase the probability of our involvement in a deal and the way that best maximizes our retained yield is to commit to the entire debt stack and once we control the debt to subsequently syndicate, an A note either in whole or in pieces. A great example of what I'm describing was a loan we made to finance the old New York Times building. We committed to an entire $166 million loan to Blackstone and subsequently brought in a conventional bank lender to take a $116 million senior piece. This enabled us to get an almost 12% return on the $50 million piece that we retained. We didn't have this new loan facility in place at the time but if we had, it would've provided nonrecourse liquidity to bridge the A note portion without burdening the broader balance sheet of the company. It's also important to note that this type of loan has not been common since the last downturn and the willingness of JPMorgan to provide this debt is a strong testament to the high quality of our existing loan portfolio and of the loans that we are originating today. Now I'll turn the call over to Matt to review the numbers in the quarter.

Thanks, Jim. As I try to do every quarter, rather than just giving a simple rundown of all of our operating results, I'd like to focus on a handful of items that give rise to variances against prior periods or may require some additional explanation. Focusing first on our property operations, as Marc highlighted, combined same-store cash NOI growth was very strong at 4.7% for the third quarter and 5.4% for the full 9 months, trending well ahead of the expectations we set out at the beginning of the year of 3% to 4% and some of the best growth of the industry. Our occupancy remained strong, leasing is being executed at a healthy pace and new rents are consistent with what we projected. Those searching for any negatives in our cash NOI growth this quarter, particularly on a sequential quarter basis, may look to the reported increase in operating expenses. However I would hesitate to call this increase unexpected because it was consistent with both our internal projections and historical trends. In the first 6 months of the year, we enjoyed a significant savings and operating expenses due primarily to the temperate winter and spring we had here in New York City. It would be nice to carry that through the whole year, but the summer months did not follow suit. As such, utility expenses were higher by $6.8 million over the prior quarter in the same-store portfolio, primarily in electric and steam costs. Keep in mind that an expense increase from second to third quarter is very common as a result of seasonality. Yes, a significant portion of increased expenses can be passed through to our tenants. We have put in place very attractive utility contracts to mitigate our costs, but that doesn't totally insulate us from expense fluctuations. One other item to note when comparing our third quarter same-store operating results to the prior quarter, is a percentage rent payment that we received in the second quarter from the Minskoff Theater at 1515 Broadway. This year that payment totaled about $2.5 million and was included in our second quarter rental revenues. This payment is always received in the second quarter of each year and is not replicated or accrued in any other quarter. Turning from same-store results to the consolidated income statement. The increase in rental revenues and operating expenses likely appears more pronounced on a sequential quarter basis than most were expecting. This is due in large part to the consolidation of our interest in the West Coast office portfolio, that some people still refer to it as the Ardner-Cobby [ph] portfolio, for the months of August and September. During which time we owned approximately 2/3 of the equity in the venture and controlled its activities. Consolidating this portfolio for 2 months increased our consolidated rental revenues by around $14 million and consolidated operating expenses, including real estate taxes, by around $9 million. With the consummation of the Blackstone transaction, we are no longer the majority owner and Blackstone operates the portfolio on behalf of the venture so our remaining 28% interest in that portfolio will be accounted for as an off balance sheet JV on a go-forward basis. Investment income was free from any unusual items this quarter and reflects a reasonable run rate going forward on the debt and preferred equity portfolio before any additional investment activity. More notably though, the $1.1 billion portfolio, which is yielding an average of 9.6% is now comprised entirely of investments collateralized by New York City real estate and none of them are on non-accrual status. Recall that last quarter we recognized $4.7 million related to the accelerated recognition of unamortized discount on our mortgage investment in London, when as moved from the debt portfolio to real estate held-for-sale. As an update, we remain optimistic that the sale of that asset by the receiver will close before the end of the year, ultimately resulting in an IRR north of 20% on our investment. In other income, we recognized lease termination fees of approximately $2.1 million in the quarter, about $1.1 million higher than the second quarter, but $600,000 less than what we achieved in the third quarter of last year, when termination income included our share of an $8.7 million termination payment at our property in Jericho, Long Island. Also included in other income for the third quarter of 2012 was an acquisition fee of approximately $1.3 million related to the Pace development site at 33 Beekman and real estate tax refunds of just over $1 million, representing our share of refunds related to legacy Reckson properties in the Suburban portfolio. Income from our unconsolidated JV portfolio in the quarter was positively affected by our share of the discounted payoff of the mortgage at the Meadows of approximately $10.7 million. However, the effect of this gain on the bottom line was largely offset by a significant one-time expense item. This expense totaling over $10 million and appearing further down the income statement relates to the write-off of initial issuance costs and discounts pursuant to the redemption of all $100 million of our 7 7/8% Series D preferred shares and another $100 million of our 7 5/8% Series C preferred shares in August. Because of the timing of this redemption, our preferred stock dividends were also $500,000 higher in the third quarter than what they will be on a recurring basis. Interest expense was up sequentially, due primarily to the full quarter effect of the $230 million mortgage financing at 100 Church Street, which contributed $2.3 million of additional interest expense in the quarter. In addition, consolidated interest expense was impacted by the on-balance sheet treatment of the West Coast office portfolio for August and September, which added around $5 million to our reported interest expense. These increases are partially offset by the continued sparing use of our $1.5 billion revolving credit facility. Looking ahead to the remainder of the year, with only a couple of months remaining, and after giving consideration to the effect of the transactions we announced this morning, we feel very comfortable leaving our previously provided guidance levels unchanged and I look forward to speaking to all of you about our expectations for 2013 in December at our Investor Conference. With that I'll turn the call back over to Marc.

Yes, well, before we take questions, Heidi is going to give a little bit of information as to some of our shareholder activities upcoming over the next 5 or 6 weeks.

Hello, again. As noted in the earnings report last evening, SL Green will be hosting its Annual Institutional Investor Conference on Monday, December 3 in New York City. Details of the event will be available next week. If you wish to preregister, or to verify that you are on the invite list, please email slg2012@slgreen.com. Of note, we will be hosting a property tour before the luncheon and presentation this year, likely starting the tour around 10 a.m. so for those of you arriving from out of town Monday morning, please plan accordingly. Additionally, given the timing of the NAREIT Conference this year and its close proximity to our Investor Conference, Jim Mead, Matt DiLiberto and Steven Durels will be representing the company at NAREIT, while the rest of the executive team will remain in New York City, focused on the Investor Conference. With that, I will turn it over to the operator for Q&A. Operator, please go ahead.

[Operator Instructions] And your first question is from the line of David Toti with Cantor Fitzgerald. David Toti - Cantor Fitzgerald & Co., Research Division: A couple of quick questions, and it's been a while since I think I've talked to you about the Suburban portfolio. There's definitely some leasing spread improvement in the quarter. But can you maybe talk a little bit about your long-term strategy for those assets? It's a radically different kind of performance stat from your core Midtown portfolio and I'm just wondering how you're thinking about that group of assets today.

Well, I think, we haven't talk about it directly with each other, but we've certainly been asked a question about what our intentions are for this portfolio of assets and I think the -- we've been fairly consistent in saying that it's a portfolio that we manage at the moment for stability and very aggressive leasing that we try to execute there this quarter. We signed 160,000 square feet of leases, 31 deals, the markdown to mark was only 1.5. So about as close to flat as we've been in some time, which I think means we're getting very close to having right-sized this portfolio in terms of a rental status and our occupancy is in excess of 81%, which bodes very well to the Westchester market, which is 23% vacant and the Connecticut market, which is mostly Class A in Stamford, which is also about 23%, 24% vacancy. So we've got markets that are very challenging Suburban markets. Within those markets are our team is doing a wonderful job keeping the buildings relatively very well-leased and keeping that income flow in place. It's a largely unencumbered portfolio so we have no financial risk, per se on -- no direct secured financial risk on that portfolio and the portfolio has been very stable. There is a point at which -- I mean it's hard for us to predict when we expect those markets will get healthier and I think the leading indicator of that health is going to be when the housing markets in a lot of those Upper Westchester and Fairfield Connecticut markets start to get more robust, more active. And when that happens, there's a lot of ancillary business activity that we think will start to benefit these markets and when that happens, I think you'll see the debt markets return, when the debt markets return, you'll see liquidity return. So at this point, what we've said generally, and the reason why we're over 90% invested in Manhattan, 90% of our assets, 90% of our revenues, 90% of our resources -- it's probably over 92%, maybe, is focused in Manhattan, specifically is because of liquidity, it’s all about liquidity. Liquidity drives new businesses. It drives refinancing opportunities, sales, JVs, et cetera. There's not a lot of liquidity right now in these markets and without liquidity, we're in a very active and aggressive asset management phase and we have a best of class team up in Westchester based in White Plains executing upon them. David Toti - Cantor Fitzgerald & Co., Research Division: That's helpful. And then if I can just position one follow-up question. Relative to some of the big transactions that you mentioned earlier in the call, it was our understanding that some of those were going to be delayed into next year. It sounds like, and obviously you're much closer to these, it sounds like some of them will happen before the end of the year. Do you suspect that there's any kind of change in pricing around those assets relative to conditions in the market today given delays in decision-making? Any change in the mix of sort of asset value versus forward rent underwriting? Any kind of additional color you can provide relative to those transactions? And I know some of them are a little bit hairy by relative standards.

Yes. The challenge is every building has its own set of below market leases, above market leases, vacant space or fully occupied. So it's very hard. Sellers have expectations going into these processes and for the most part, what we've seen is patient sellers in New York. So people are not afraid not to transact if they don't get their prices. And the market is giving them prices that are compelling enough for them to trade at. So in the case of 285 Madison, an asset which YNR is vacating to move into 3 Columbus and we had some preferential rights to buy that building, we gave them sort of our valuation of the building and they said, "Thanks, but no thanks. We're going to test the market." And we're able to achieve, significantly -- significantly higher price than we had valued that particular building at by going into the market with getting almost $575 a square foot for a vacant older, office building in Midtown. So it's really -- there's strength in the market, there's strength in a lot of these deals. And we saw a lot of assets that go to contract that I listed out in the third quarter and we do expect some of the big ones I mentioned to be in contract by year end.

[Operator Instructions] And your next question is from the line of Josh Attie with Citi.

Can you talk about the composition of the leasing pipeline? How much of it is new versus renewal? And how much is there in the way of growth or expansion from tenants versus taking share from other buildings?

Well, I don't know if I ever broken down that granular as far as specific numbers, but I'll tell you that generally speaking on the pipeline, we've got several large transactions that have significant -- or driven by significant growth. We're seeing, I would say, probably in that 700,000 square feet there's probably 1/3 of it is renewal and then there's a big chunk of it, which is filling vacancy.

Okay. And if I could just follow up one. One of the leases in the quarter, it looks like there was a very large roll down at 100 Park Avenue. Can you just talk about what that was and why the roll down was so large?

The Rothchild deal, which was 2,700 square feet.

How large are you showing on your sheets?

I saw 23,000 square feet going to $54 from $85. And it seemed to be a big driver of the roll down on what commenced.

Just hold on one second.

That's a -- just to clarify, you're coming off the leasing schedule with the total leasing at 100 Park of 23,000 feet, not all of that is mark-to-market. So to Steve's point, the mark-to-market component of the leasing at 100 Park was around 2,700 square feet.

So otherwise said the other 21,000 feet was replacing vacancy, which is not mark-to-market. So the only mark-to-market negative, if you will, which was, I guess, substantial, I'm trying to see -- it was a substantial roll down was this -- Rothchild, no it was a new and it was replacing the old for 2,700 square feet. So you have like an optic, it is a significant roll down, but it's on inconsequential amount of space is actually absorption over a space that had been static or vacant.

Which underlies on a larger point, if you look at the mark-to-market particularly on commenced, that is only 100,000 square feet. So it's very difficult to extrapolate that out to the entire portfolio.

Your next question is from the line of Alexander Goldfarb with Sandler O'Neill. Alexander David Goldfarb - Sandler O'Neill + Partners, L.P., Research Division: Just on the Cabby [ph] portfolio, what are your long term thoughts there? You guys are back in the black, no pun intended. So are you guys planning to hold this for several years? Or is your thought that we may see an exit sometime in the near term?

Well, I think what our thoughts are, we were happy to recapitalize that transaction. That's probably still our thought today because that was a 5-year investment that saw the very, very highs, the very lows then the very uncertainty of how everything was going to resolve itself and then a little bit of a victory dance, if you will, at the end because we were able to pull so many different pieces together: subordinate equity, priming mezzanine debt, mortgage extension, new venture capital, et cetera, et cetera. So I think at this point, the portfolio itself is on very stable footing. It's stable because the debt, the mortgage debt, to which I refer, has been extended for upwards of 3 years. And with our new partner, Blackstone, they have brought to the table some capital for deleveraging, such that the only mortgage indebtedness on the property right now is about $700 -- actually it's about $675 million and then total with mezzanine indebtedness is below $750 million, about $746 million. So it's got -- the debt was right-sized, there are reserves established for leasing that are substantial and should be able to take the properties from what was an under-managed situation of around 76%, 77% and not under managed necessarily as a statement about competency but more as a statement about an improper capitalization. Now we think that occupancies can be taken up to well into the 80s, possibly 90% or 92% or so with the reserves that have been put in place. So I think our business plan, if you will, is to allow Blackstone and their EOP subsidiary or manager, if you will, to execute a very aggressive leasing program since we have such low basis in the deal. I think the last dollar of debt tops out at around $167 a foot. So -- and the rest behind that is equity. So that certainly means that we can be aggressive on leasing and we should be able to hit, I would think, our leasing velocity and economic -- our leasing velocity and economic targets. There is going to be a real focus on paring down some of the assets early to amortized the debt even further, but it's way too early for me to give you an estimate on how much or when. But there will be a focus on paring that portfolio down through sales, because the market -- in many of these submarkets has picked up considerably and now we have the flexibility with the restructured debt to start selling assets. So you will see asset sales, I would say, almost certainly in the first year of the venture. And then the rest is to -- the rest of the plan will be to optimize assets and then decide on the best strategy once it's stabilized. It could be exit, sale, recap, JV, partner. Who knows? I mean, it's just too early. But it's that -- it's a transitional portfolio that we're looking to optimize and stabilize and then looking to monetize, if you will.

Blackstone is very enthusiastic about this -- at this basis. And obviously, their return requirements are significant as an opportunity fund and they feel highly confident in their ability to achieve those returns with this investment. So we're pretty content to ride along with them for the time being, I would say.

Sitting here with David Schonbraun who is sort of the architect of this transaction is running me through the myriad of numbers associated with this deal and he's fairly optimistic that we're going to be able to recapture our investment basis in this deal and hopefully significant profits above. Alexander David Goldfarb - Sandler O'Neill + Partners, L.P., Research Division: Okay, that's helpful. And just the second question is, why do you think mezz and structured finance deals have held the way they have? If you think about senior yields have come down a lot, even core funds and opportunity funds, their return thresholds have come down. Why do you think -- I mean it's great for you guys and other people who are in the mezz business, but given all the competition, why do you think mezz and the structured finance yields have been able to hang in there?

I don't think there's as much competition in the mezz arena as there is in the senior debt arena and we have seen enormous new competition in the senior debt arena, which has contributed to the spread tightening from different pockets of guys that I went through CMBS, commercial banks, insurance companies. You don't have that broad variety playing in subordinate debt, and you still have banks and other institutions coming up against risk-weighted capital ratings for subordinate paper, which are crushing and which make it impossible for them to hold this type of paper. So we've not seen as much competition. There's been spread tightening in certain deals that we've seen. But we're still finding more than our fair share at the type of conservative underwriting that we've been originating over the last 18 months or so.

Your next question is from the line of Jamie Feldman with Bank of America.

There's been a lot of talk this earnings season about new and efficient buildings and efficient floor plates, and I think, Marc, in your opening comments, you've mentioned that as well. Can you talk a little bit about your appetite from the redevelopment side for some of the older buildings in town? And then also from a leasing perspective, I mean, some of your older buildings, what's the appetite from tenants for those or how are you positioning those?

Well, I'm not, when you say older buildings, I mean, any building that's not being tapped out is an older building, it's 400 million square feet of existing inventory in Manhattan, most of which dates back to 25 years ago or older. So I just can't -- I mean, it's 400 million feet of space. The characterization of the demand for these buildings that, I guess, not sure what the question is exactly, but were constructed anywhere from most recently, the mid- to late-80s when there was lot of buildings completed to the 70s, wherein a lot of inventory is 50s, 60s, and then there's a small subset of the portfolio which is pre-war. Those buildings are being met a very high demand as evidenced by our leasing velocity and occupancy rates and I think success in driving same-store NOI. It's the value part of the market. I would say that the market, for the most part today, is driven by small to mid-sized tenants looking for affordable rents, and that's why we've done 3.4 million square feet of leasing. This year, we've been delivering to the part of the market. The newer buildings, let's not miss the main message. They're leasing now where they weren't for the past couple of years for one reason only. The owners of those buildings, traditionally, are dropping their rents substantially in order to meet demand because they were unable, in 2010 and 2011, to fill up those buildings. In some cases, 2007, '08, '09, but let's say, 2007 to 2011, they were unable to fill those buildings at the originally pro forma-ed rents or anything near that because I think, what we've always said, it's about location. It's not so much about the vintage of the building, people want to pay to be near the primary modes of public transportation, near the infill locations, which have -- which attract employees today with diversity of services and restaurants and nightlife, as well as convenience, and that's where our portfolio sits and that's why it leases well and we've been able to increase our rents over the past few years while the preponderance of newer buildings have generally been in the newer pioneering or fringe locations where there was a hope or an objective of getting rents to fill those buildings in the -- you pick the number, 80s, 90s, 100s, low 100s and that just didn't transpire. So I think what you've seen this year is a realization that to compete against, I think what you're calling older buildings, what I would call well-located buildings in the infill locations, that the rents had to drop precipitously in those buildings and now, at a level where they're starting to get traction, which is good. It's good for the city, good for those businesses, good for the real estate market to clear some of the idle inventory. And I think there's been about 400,000 or 500,000 square feet signed this year with another 1.1 million square feet pending. So I think my point I was trying to make earlier is eventually, those buildings will fill up and when they do fill up, or at least get closer to full occupancy, then the job growth that the city is experiencing will be imposed almost directly on the existing inventory instead of now sort of arbitraged in the opportunities between existing inventory and new construction.

Okay. But I guess you had also mentioned, like the Coach Building, I assume you're talking about Coach new development.

I'm talking, about new construction. It is a whole -- I mean, I can through the list, but I would say it's -- there's many more buildings being built than Coach right now. I don't know if -- we can go -- we'll go through the...

No, no. I guess what I was asking is, or thinking about asking is that, if you're thinking the Coach Building gets underway, does that open up a whole new part of the city?

I'm talking about new construction in the non-infill areas of Midtown. There's probably 7 or 8 buildings that fit within that profile of buildings. Coach is...

We're talking about the new Coach building, which is on Terra Firma, it doesn't require the platform to be built. So we don't consider it opening up of a new area in Manhattan because it's -- it doesn't necessitate the platform the rest of that development does.

Okay. And along the same line, just where do you guys stay now in terms of concessions and tenant demands for buildout?

I don't think it's changed in the third quarter versus where we -- what we experienced in the first half of the year. If you're smaller tenants, meaning, under 10,000 square feet, then we've been doing a lot of pre-build spaces or build-to-suit type of leasing. And if you're a bigger tenant, then generally, it's $65, $70 a foot where the space is raw on a long-term lease and the space requires full buildout. And then there's sort of everything in between. There's a lot of deals that we do, a lot of leasing that gets done where it's a contribution to retrofit space. But I certainly haven't felt that, nor have we experienced concessions increasing over the past quarter. And I don't see that trend changing -- I don't see a change in the trend.

Your next question is from the line of Rob Stevenson with Macquarie.

You expanded the structured finance portfolio this quarter by about $100 million or so, seems like you guys continue to find good opportunities there but very little debt maturities until 2013. Does the book continue to expand towards $1.5 billion as you find opportunities? You looked to sell down some of these existing positions to keep it at the $1 billion level, plus or minus, how should we be thinking about that over the next 12 to 18 months?

Well, we've traditionally had a sales-imposed 10% cap -- 10% of total market capitalization, which if put to $1.5 billion is sort of a level in which we're comfortable at and it's really going to be opportunity-driven depending on what we see out there and what yields are available as to whether we're going to take the existing balance up to that $1.5 billion level or not. But we definitely wouldn't see it going beyond that.

Okay. And then a question for Steve. Can you give us a sort of update on recent activity, et cetera and thoughts on 180 Maiden, Harper Collins, 280 Park?

Sure. Let's start with 280 Park. We are in the early stages of the construction. We spent most of the year doing design developments, but if you've been by the building, you've some of the sheds and protection going up. We've got a marketing for it that's getting tuned up right now. We're exchanging lease proposals for a couple of hundred thousand square feet with tenants, which is encouraging. I don't think we expected to see the level of activity that we have given that it's expensive space and given that we're nowhere near to being unveiling any finished product yet. So we're still feel very bullish about the project. And I can tell you given these design concepts that we're building up, I think it's going to be a spectacular project. 180 Maiden Lane, we're in the early stages of design and development. Everybody is anxious for it to see some renderings as to what we're going to ultimately do with the building. We don't get the space back from AIG until the middle of '14. But even there, where we have not commenced a marketing program, I would say we've had a lot of guys coming through, kicking the tires. And my biggest problem has been not having the space earlier rather than later. We've got proposals out for -- and I think there's sort of a less than 50-50 chance that we'll land any of the guys we we're talking to right now, but we've got several hundred thousand square feet of paper being traded with people. And I think the strategy there is to capitalize on the building's amenities that we're inheriting, meaning that there's a conference center, there's an auditorium, there's a cafeteria, there's a Goldman Sachs former infrastructure that was invested into the building. And the fact that we're going to be the lower price point alternative for glass and steel construction. And I think that's why we've seen people migrating towards us early in the fight.

And Harper Collins?

Harper is -- they're out looking at the markets, they've made no decisions. They've looked downtown, Midtown, we've talked to them about staying. I think they're a complete unknown at this point in time. But just to remind you, I guess, is that like 180 Maiden, we bought the building with the expectation that Harper would not stay so that if we're able to retain them, it would be big, big positive news for us. But we're expecting they'll leave. We're in design development there. We got that space below '14, and I think it's still early in the game.

Yes, 10 East is one of those buildings that we've programmed for a substantial redevelopment, as Steve said, that's in the process of being designed and developed right now. That's a 2013 redevel, and the Harper counties, as I recall, is mid '14. So we're going to be delivering that space in '14, '15 at a much, much higher price point. And therefore, we when we do go into situations like that, we underwrite very high level of attrition if the rent goes up by a substantial margin in response to the redevel. So we'll see what happens.

Your next question is from the line of Brendan Maiorana with Wells Fargo.

I was wondering if you guys could give an update on the plan for 100 Church, given that you've got the lease that was out announced today and that asset's fully stabilized or is that at long-term hold or is that something you guys have looked to monetize?

We put 10-year fixed rate down on the asset in June. So for now, that's in the long-term stable hold portfolio. We're going to be enjoying more than $26 million of NOI there on our basis, which is going to be probably less than $250 million when we're done.

Okay. Question for Steve, I appreciate the pipeline. It sounds like it's up a little bit from where it was in Q2. It sounds like activity is good. Has there been any slowdown in terms of the pace of deal closing, so that -- or has that been pretty consistent with where it was earlier in the year?

No. I think just the opposite. If you really look at it carefully though, the beginning of the year for us, we were sort of the opposite where the market was, right? The overall market was pretty slow in the first half of the year. We had record leasing and driven by a number of very, very large transactions in the portfolio. Now, as we came into the third quarter, there's this -- I think there's this perception out there that leasing is generally slow, and I think if you really stop and think about it, it's more slow relative to expectation coming off of a very busy year in 2011. But if you look at more of on a historical basis, sort of on a 10-year average, leasing for this year is only off by about 5%. And in fact, third quarter leasing velocity, market wise, is up over the second quarter. So we've got a good pipeline and had a good second -- third quarter. I think we're going to see good going into fourth quarter and first quarter next year.

Okay. And so the pace is good and the rent economics. Your view is that there's any of the sort of commentary of sluggishness from brokers or just overall market perception that there may have been a slowdown. Leasing economics for you guys and pace of deal closings is still the same as you expected earlier?

My feeling on brokers is that they are generally very good as sort of the thermometer of the moment. But they kind blow with the wind depending on where things head in the future. So no, I'm feeling like we're holding our own. I think the rents are holding. And to have a bigger conversation, you really start -- need to chop the market apart for various submarkets and various price points.

Your next question is from the line of John Guinee with Stifel, Nicolaus. John W. Guinee - Stifel, Nicolaus & Co., Inc., Research Division: It's getting late guys, so we'll give you a few easy ones, which means short answers. First, 3 Columbus Circle looks like the tenant, Young & Rubicam, bought that at about $670 a square foot. Does that result in any unusual accounting and/or is there a gain for SL Green based on that transaction? And then the second is, can you discuss the terms of the ground lease reset and what that does for you, both in the short and long term?

Let's hit the first one.

I'll take the first one, John. So we did close on the sale of the condo in the quarter. Your base assumption is right or your sale price assumption is right. The usual accounting, and of course, it comes with unusual accounting, is that we don't actually get to record a gain in the current period. We work into the deal an option to reassemble the building at some point in the future based on what happens with the leased premises in the building. The space that [indiscernible] our leases. That means, ultimately, a deferral of the gain until that option is resolved in some way, shape or form.

It's worth noting that, that price point was for the weaker part of the buildings. They bought -- their condo portion is in the bottom of the building, so it didn't reflect the premium space at the top of the house, nor the retail.

We negotiated hard for that reassembly option, if you will, John. We didn't want them leaving the leased premises and owning just an orphan condo in the building. We wanted the ability to sort of put Humpty back together. John W. Guinee - Stifel, Nicolaus & Co., Inc., Research Division: Okay. And then how about the 673 First, what does that do in the near term and long term for you?

Well, it's a 50-year lease extension. So to me, it's like a wholesale resetting of the asset. And it turns a medium-term leasehold into something that's almost fee or fee like. So I think from that perspective, it's a sizable value accretion. The lease has in it, and will continue to have in it, escalation provisions, so they'll be -- those rents will increase over time. Matt, I don't know if the next increase is in our numbers you had coming, I mean...

No, there's no adjustment for it yet. So it just closed at the beginning of the month of October. But there will be an adjustment coming as the term with the bumps will require you to straight line the rents back, which will be about $500,000 a month or $6 million a year of incremental straight-line rent expense. John W. Guinee - Stifel, Nicolaus & Co., Inc., Research Division: So you're going to go from $3 million to $9 million a year in ground lease?

That's about right.

That's $9 million a year, which is going to stay flat for how many years.

The straight line, that will be the permanent amount.

But the cash amount will obviously be lower.

The $9 million is some accounting straight line, but the cash number...

The new ground rent is just under $7 million. John W. Guinee - Stifel, Nicolaus & Co., Inc., Research Division: Got you, okay. And then the last question is you guys have essentially about $1.1 billion of structured finance average term of about 2.5 years. When you're doing these relatively short-term structured finance deals, are you able to reserve or have 100% of your income covered out of either current cash flow or the reserves? Or are there essentially interest earned that really isn't guaranteed, if you follow me?

It depends. I mean, it's really deal by deal. In the case of the deal that Jim Mead talked about, the old New York Times building, there -- that's a redevelopment project. So a lot of the interest was reserved at closing, and it's being paid out of the reserve as they lease up that project, invest capital to redevelop it. Whereas, the other deal I've talked about, the restructuring on the far west side, that covers debt service currently so that their interest is being paid currently. So it really depends on the profile of the asset.

Your next question is from the line of Steve Sakwa with ISI Group.

I guess this question is really for Steve Durels. As you kind of look at the deals that you're doing with tenants currently in the deals that are in the hopper, what are you seeing in terms of space usage per person? And I guess, to speak to Marc's point about job growth, to what extent does that job growth is being somewhat offset by less space per person?

Well, I think that was Marc's point entirely, it that some the job growth is offsetting absorption in the market because there's clearly a sort of a generational trend that's here to stay for a while, which is businesses are working to move to more of an open plan layout with many of them adopting the benching concept of their employees working off the equivalent of the trading desk and densifying their occupancy so that they have less square footage per employee. And I think we're seeing that in a lot of different industries. It's not unique to Financial Services. We're seeing it in the other service businesses like accounting, marketing, engineering. We're seeing it in sales organizations. We've even seeing with the city. This is moving towards much more dense operations. So that's driving some of the decisions that are out there. I think it's healthy, overall, for business. There's no doubt about that, that businesses are being more prudent as to how they use the space and they're piling more bodies into it. It also makes it very difficult in the future if they're going to sublease the space. But I think that trend is going to be around for a while.

It doesn't -- I guess as you guys think about deals, whether you're selling or buying, I mean, to what extent does that force you to potentially change your underwriting criteria as you think about rent growth? I mean, have you altered maybe how you think about the market improving over the next 2, 3, 4 years?

Well, think we did that back in December. We projected this year basically flat to what was it, 3% to 5% or 2% to 4%, and we're right in that stroke. So Steve, this is not a trend that's like snuck up on us. This is, I mean, you got to go back to December and listen -- roll back the tape on what we said about our expectations for rent and market velocity this year. We are somewhere between dead on target where we might even be slightly ahead. So it is something that we do take into account, it's something we have taken into account and we moderate that as market conditions change. Sometimes, we see a lot of embedded growth in the market and we put in more robust rental growth and often times, we don't and that has given rise to what I've stated on other calls where we often are 10%, 15% below a marketed process, a project that goes to market for sale because we don't put in a high level of growth into our models and haven't for some time now. And as a result, the vast majority of the activity you've seen us do over the past 2, 2.5 years has been kind of more off market, OP unit, opportunistic stuff, not fully marketed deals because our rental assumptions have been in line with the market. So I don't personally think rents that are up 2% to 4% a year is a bad market. It's a neutral market. We've been talking about market equilibrium and neutral markets, and that's where we've been in since we hit about 9%, 9.5%. And that's where it will continue to be until it absorbs further. So we haven't given any guidance at this moment for next year in terms of where we see absorption. And our rent projections headed in December, we certainly will share that. But this efficiency is not a new phenomenon. I mean, firms have been doing this for years and years. Some are satisfied, some will be highly dissatisfied and will rebuild their space again and may -- and go back. It's not -- when Steve says it's a trend, some of the financial companies who are under pressure to cut expenses, I think, are doing this. The majority of tenants that we lease to are not on a benching and trading desk platform. It's still conventional space -- conventional square foot per employee. So this is just something that is particularly for some of the larger tenants, they're looking to gain efficiencies of 10% to 20% of by squeezing more bodies into less space. It could work for them in the near term when they're under the gun to cut costs. It may be a harbinger of bad things to come when they have any whiff of growth or dissatisfaction because they're not going to have a lot of flexibility like they have in years past, and that could give rise to a very -- a very strong position for landlords on new rents when -- given that they'll be -- have no growth programmed into that space.

Okay. And I know you guys have touched on downtown a little bit and had somebody ask about 180. But just in general, given how much vacancy there is either downtown or coming downtown, I guess Steve, are using the landlords down there getting more aggressive on rents and making proposals for Midtown tenants?

Well, I think there are a number of Midtown tenants that are exploring the downtown market because that's where the cheaper rents are. But that was no different than when we took over 100 Church Street and we saw midtown tenants visit that building as well. So midtown is still a pretty healthy market and I think there -- we are expecting to see, quite frankly, to see some of the Midtown South, Technology New Media tenants who would like to be in that market, come visit the downtown market. I think there's a good shot that we'll see some of that activity at 180 Maiden Lane and elsewhere in the downtown market because the natural place for that industry, which there's very little space available, is Midtown South. And the guys who need a bigger footprint are going to have no choice but to go push a little further.

And your next question is from the line of Jordan Sadler with KeyBanc Capital Markets.

I'll keep it quick. There's been a few transactions, unstable actions at best [ph] so 521 is helpful. I think you said 4.5% cap in place NOI, which I think in the South, you have about 85.6% occupancy. What would the cap rate be on a fully leased basis? Like what's the investor expecting the stabilized cap to be?

I think between 5% and 5.5%.

And just a more administrative quick one for Matt. On 521, that one's been in the non-same-store portfolio since 1Q '11. Any reason that hasn't made into the same-store portfolio? Is it sort of the transactions?

Yes, I would love to put it in same-store portfolio for all of our reporting. Unfortunately, the rules that govern how we report the same-store pool say you need to own it in the same manner for equivalent periods. And so since we've bought out our partner in the beginning part of 2011, it has not been able to be included in the technical definition of our same-store portfolio. That said, we do, when we present our numbers in our press release, adjust for that situation at 521 and also for 1515. So we do present numbers that reflect them in the same-store pool in our press release, the supplemental has to present it differently because we're governed by different rules in the supplemental.

Your next question is from the line of Michael Knott with Green Street Advisors.

Marc or Andrew, I'm just curious if you still plan to be a seller of assets beyond the stake in 521 as you had previously mentioned. And as part of that, just curious why -- maybe this was incorrect reporting, but we thought we had read that you were marketing, or planning to market Tower 45, which seemed curious just given the high vacancy there. So just curious, your thoughts on that.

I think the 521 gives us -- getting that deal done at a value and a structure that we're really pleased with gives us a lot of flexibility to either sell additional assets or take our time. Tower 45, we are talking to several people about that asset and sort of entertaining some interest there that came unsolicited and prompted us to go through -- start a little bit broader process. But we're going to be patient sellers. And I still think, as we said on the last call, we think it's a decent point in the cycle to definitely recycle out of some assets, which we achieved through 521 and Tower 45 is one of many of the buildings that have seen unsolicited interest, sort of on an ongoing basis. And we're sort of always evaluating our various options with respect to most of the portfolio.

I would only add, if it's not that, it will be another one. I mean, well, the answer is yes, we'll sell more assets. We always do and we will. Probably, not this year because this was likely it for the year. But I'm sure in the next 3 to 6 months, we'll have hopefully something else that we can harvest and have good news about.

Okay. And then just last question for me would be, is it too early to talk at all about some of the future expirations? I think sometimes the press has written about Credit Suisse, Citigroup may be looking at other options when those leases expire and those are obviously quite large. Is there anything that you would sort of say about that today?

Fortunately, we got a lot of term left with each of those tenants and I would say, we're in front of these guys. We have great relationships at the very senior level with all of our top tenants, certainly those 2 guys included. So we're in sort of constantly in dialogue with these guys. And as their needs and thoughts evolve, we're in front of them and we'll be -- stand ready to work with them and hopefully meet all their needs as they change.

And your next question is from the line of Ross Nussbaum with UBS.

I'll try to be brief. In the structured finance portfolio, there's about $600 million, give or take, maturing in 2014. How confident are you that you're going to be able to backfill that volume over the next 2 years such that the income coming off of that portfolio isn't lower if we roll the clock ahead 2 years from today?

Well, it's tough to exactly predict the future. I mean, I would just note, that we had a bunch of repayments last year, Matt, 6 and 6 1/5 [ph] and a couple of other very lumpy repayments and worked hard and we're able to rebuild the book up to where it is today. Right now, we're enjoying the position of dominance in this business in Manhattan and we don't foresee that changing. So we'd hope to be able to replace the investments. But we're always -- we're risk adjusted return investors, and if we don't feel like debt is the right place to play at that point, we think equity is a more interesting place to play, we may take their money and redeploy into equity, or we may redeploy them into more debt over -- as those assets pay off. It just really depends on what the investing environment is like at that time.

Is it fair to say that the improvement that you're noting in the CMBS market over the past 6 months works against you a little bit in deploying additional mezz and junior mortgage capital out the door?

No, because they still -- the improvement has been solely in price. The rates are just falling through the floor. Their underwriting standards have not gotten more aggressive. And Moody's and S&P are still relatively tough in terms of where they're cutting off investment grade. So the competition among the lenders has really just been on price, not been on proceeds.

Okay. And then really quick. Any comments on the assemblage you have on Vanderbilt next to Grand Central in terms of more clarity on the timing of the development breaking ground there?

I would say more to come later on that. Maybe in December, we'll have some more commentary. But at this moment, no change from what we have previously stated, which is in process.

Your next question is from the line of Tayo Okusanya with Jefferies & Company. Omotayo T. Okusanya - Jefferies & Company, Inc., Research Division: The question I had was just a follow-up to Ross' question. Just trying to understand the structured finance portfolio a little bit better and just again, you guys are getting some attractive yields on it, if that involves having to go lower in regards to lower tranches of debt to get the same type of yield, and if that's really changing the credit calculations of that portfolio.

I mentioned very earlier, we've been very consistent in terms of our underwriting on this portfolio within the last 24 months and it hasn't changed. Were still finding our sweet spot in the 70% to -- 70% to 72% maximum loan to cost-type investing and acquisition deals.

Your final question is a follow-up from the line of Josh Attie with Citi.

Yes, as a quick follow-up for Michael Bilerman, just sticking with Andrew, can you just talk about the composition of buyers for New York assets and whether that has changed at all over the last 6 months, particularly as it the rates on new financings have come down and has that driven any sort of other buyers and has it changed the composition at all?

It's so hard to generalize, Michael, because it's -- and I go through the list of 450 Lexington was RXR, 350 Madison was RFR, it was a buyer we had not seen been active in the Manhattan market for some time and then all of a sudden, bought 2 assets, bought 350 Madison and 285 Madison. 575 Lex was a joint venture of Normandy and New York Life. New York Life was an insurance company we hadn't seen been active on the equity side. They bought 2 assets this year, 575 Lex and 1372 Broadway. 1411 Broadway was Ivanhoe Cambridge. 386 Park Avenue South was Billy Macklowe. I mean it's all over the board in terms of individual investors, domestic money, foreign money, it's always -- and every year, on Investor Day, I show you the slide with all the money flying in from all the different Porsche [ph] sectors of the world. We're going to have, maybe, a new sector this year in December to be revealed. But it's very difficult to sort of characterize. There hasn't been a rush of buyers for the latest deals in any one sector that you can sort of generalize.

And that will conclude the Q&A session today, ladies and gentlemen. I'd like to turn it back to Mr. Marc Holliday for some closing remarks.

Okay, thank you for the elongated call for those of you that's still on, and we look forward to seeing everybody in December. Thank you.

Ladies and gentlemen, that will conclude today's conference. Thank you very much for joining us, and you may now disconnect. Have a great day, everyone.