Good morning, and welcome to the Vornado Realty Trust second quarter 2015 earnings call. My name is Richard, and I'll be your operator for today's call. This call is being recorded for replay purposes. [Operator Instructions] I will now turn the call over to Ms. Cathy Creswell, Director of Investor Relations. Please go ahead.

Thank you. Welcome to Vornado Realty Trust second quarter earnings call. Yesterday afternoon, we issued our second quarter earnings release and filed our quarterly report on Form 10-Q with the Securities and Exchange Commission. These documents, as well as our supplemental financial information package, are available on our website, www.VNO.com, under the Investor Relations section. In these documents and during today's call we will discuss certain non-GAAP financial measures. Reconciliations of these measures to the most directly comparable GAAP measures are included in our earnings release, Form 10-Q and financial supplements. Please be aware that statements made during this call may be deemed forward-looking statements and actual results may differ materially from these statements due to a variety of risks, uncertainties and other factors. Please refer to our filings with the Securities and Exchange Commission, including our Form 10-K, for more information regarding these risks and uncertainties. The call may include time-sensitive information that may be accurate only as of today's date. The company does not undertake a duty to update any forward-looking statements. On the call today from management for our opening comments are Steven Roth, Chairman of the Board and Chief Executive Officer; David Greenbaum, President of the New York Division; Mitchell Schear, President of the Washington, D.C. Division; and Stephen Theriot, Chief Financial Officer. Also in the room are Michael Franco, Executive Vice President and Chief Investment Officer; and Joseph Macnow, Executive Vice President and Chief Administrative Officer. I will now turn the call over to Steven Roth.

Thanks, Cathy. Good morning, everyone. Welcome to Vornado's second quarter call. Business is actually terrific. As David will tell you in a minute, in New York we are enjoying robust demand from all manner of tenants, led by financial services and creatives in all of our submarkets and at record rents. Ditto for our largest and best-in-class Manhattan street retail business. Here are some headline numbers from the quarter. Eight office deals in four separate buildings, totaling 223,000 square feet at rents over $100, actually $110; $82 average starting rent on new leases at 20% mark-to-market; 300% and 400% mark-to-market on several large street retail leases with more to come; a handful of Penn Plaza deals at over $70 a foot; and 220 Central Park South is breaking all records. In New York, we are basically full. In Washington, as Mitchell will tell you in a minute, green chutes are beginning to sprout. Washington has clearly bottomed. It's beginning to come back. It's just a matter of time. I'd like to begin this morning by mentioning that in Penn Plaza, we are the dominant owner with 9 million square feet. We have taken an important first step in the redevelopment of this district, with a test closure of 33rd Street between Seventh and Eighth Avenues. The idea here is to create a large public pedestrian plaza, where the street had been, which will provide amenities to the public, improve circulation and access to Penn Station, and connect our One Penn and Two Penn properties, which comprise 4.2 million square feet. This is an important first step in neighborhood change and creating a sense of place, being made possible by the support of government and the community. Now to acquisitions. We are increasing our exposure to the thriving West Chelsea submarket.…

Thank you, Steve. Yesterday we reported second quarter comparable FFO of $1.30 per share, up from $1.23 per share in the prior year second quarter, a 5.7% increase. After a deeper dive, you will see that our true performance is clouded by the inclusion of gains from asset sales and mark-to-market fair value adjustments of our real estate fund. Some might say, and Steve certainly did a minute ago, that FFO should exclude these gains, just like gains on sales of other depreciable real estate. If we were to treat earnings from the fund as not comparable, and maybe we should, comparable FFO per share this quarter would have increased 20%. Not surprisingly, most of the 20% growth comes from our very strong New York business. Total FFO for the second quarter was $1.71 per share compared to $1.15 per share in the prior year second quarter. Non-comparable FFO items this quarter were positive $76.9 million or $0.41 per share compared to negative $15 million or $0.08 per share for the second quarter of last year. This quarter's non-comparable FFO items include $90 million of income from the reversal of an allowance against deferred tax assets of our taxable REIT subsidiary, partially offset by $4.5 million of impairment losses and $4.1 million of acquisition-related transaction costs. Please see our press release or the overview in MD&A on Page 37 of our Form 10-Q for a detailed summary of non-comparable items. Second quarter comparable EBITDA was $400.2 million, ahead of last year's second quarter by 1.5%. Excluding the effect of the fund, our comparable EBITDA increased 9.5%. Our New York business produced $274.7 million of comparable EBITDA for the quarter, ahead of last year's second quarter by $29.5 million or 12%, driven by redeveloped properties coming back into service, primarily 7…

Thank you, Steve. Good morning. I'm going to begin with a brief overview of the market here in New York. The New York City economy continued to grow at a solid pace in the second quarter. Total employment in New York City reached an all-time high of 4.2 million jobs. The unemployment rate now stands at 5.9%, down from 7.3% just one year ago. Importantly, office using employment also reached a new high of 1.3 million jobs, up 32,000 in the last 12 months. While TAMI, technology, advertising, media and information, tenancies have been fueling the recovery, financial services tenants once again have become a leading factor in the city's economy. And over the past two years, they've added 22,000 jobs and now approach pre-recession levels. We now have a highly diversified local economy with both TAMI and the FIRE sector, financial, insurance and real estate, the two main engines driving the strong job growth in the city. Our portfolio of properties is well-positioned across product types and submarket, and enables us to compete for tenants in both of these key sectors. Be it Facebook at 770 Broadway, Amazon at 7 West 34th Street, Neuberger Berman at 1290 Avenue of the Americans or Guggenheim Partners at 330 Madison Avenue. The leasing market in the second quarter was highlighted by positive absorption, higher average asking rents and declining availability. And while overall Manhattan's leasing velocity is down slightly from the 2014 historic levels, it is still 11%-plus above 10-year rolling averages. Asking rents have now increased for nine successive quarters, the longest interrupted period since 2004 to 2008. Similar to the first quarter, leasing in the FIRE sector has been particularly strong for Midtown's top-tier assets, with Midtown outperforming the general marketplace, accounting for 62% of leasing activity year-to-date. Let me…

Thank you, David, and good morning, everyone. In Washington, the economy continues to improve. Unemployment now stands at 4.8%, which is down from 5.3% a year ago and below the national average of 5.5%. A recent headline in the Washington Post read, the job market is heating up in Washington summer. The employment story in Washington continues to be very positive. According to the Bureau of Labor Statistics, the Washington area added 68,500 jobs between June 2014 and June of 2015, the strongest period of year-over-year performance since the economy stalled. Important for us, the most significant job growth in Washington occurred in office-using professional services, where the number of jobs grew by 16,000. According to Steven Fuller, Director of George Mason University's Center for Regional Analysis, and I'll quote, it looks like we've come to terms with the consequences of sequestration. We haven't overcome it yet, but there is at least an early sign that economy has repositioned itself. The region is figuring out how to add higher value jobs on its own. With regard to the real estate market in the D.C. Metro area, while we're not out of the woods, the news is turning positive. For example, JLL's second quarter report on Northern Virginia reads, market posts strongest net absorption since 2010. As Steve mentioned, we can now see the green chutes. Specifically, in our portfolio, while the leasing landscape is competitive for sure, we are encouraged by the activity and by the volume of deals we are winning. In the quarter, we leased 430,000 square feet of office and retail space in 56 transactions, bringing our year-to-date total leasing to 1.2 million square feet in 111 transactions. Specifically, we're filling our space in Crystal City. In the second quarter alone, we completed 300,000 square feet of…

[Operator Instructions] Our first question on line comes from Mr. Jamie Feldman from Bank of America Merrill Lynch.

I guess just sticking with Washington, D.C. for now, you you've given guidance for 2015 that you still expect EBITDA to be in line with '14. Given the leasing activity and the ins and outs of the portfolio, would you say 2016 EBITDA at this point would be higher, lower or in line with '15?

We are not going to give guidance, Jamie. Good morning. We are not going to give guidance for 2016.

I was just thinking in terms of the leases that are signed, though. If you didn't do anything else at this point.

I'll say it again. We don't give guidance -- we're not going to give guidance for 2016. Obviously, from my remarks and Mitchell's remarks, we are constructive, we think Washington has bottomed. We think that it will recover. It's just a matter of time. But we're not going to do the math.

And then for my follow-up, you had mentioned the street closure at Penn Plaza. Can you just give some early read on the feedback and how you think it's going so far? I know it hasn't been that long, but just some early sentiment.

It will open at the end of the week. But I can tell you that lots of people are very excited about it. We will have food offerings, et cetera. So we're actually very excited about it.

Our next question on line comes from Manny Korchman from Citi.

Mitchell, in D.C. the leases pending balance is now just 7,000 square feet in Crystal City. Can you talk about your shadow pipeline of leases? And are we going to look at some leases that are going to be signed shortly or what does that look like?

Sure. What you're focusing on is the metric with respect to the specific BRAC space. So if you lump all of my space together, the BRAC space and the non-BRAC space, it just so happens that that particular metric in this particular quarter was low. But as I discussed, we leased a lot of space in Crystal City and our pipeline is good. It's been as good as it's been over the last, say, two or three quarters and we're pretty constructive on the leases in the pipeline.

And Steve, given your comments on capital flows for New York, can we see you selling some more core assets or assets that you've already redeveloped and captured some of that rent upside?

We have sold some assets in New York. I mean, we sold 1740 Broadway a couple of quarters ago for $1,000 a foot. So we consider each asset in our portfolio each quarter. So while we have nothing to announce now, it would not be unthinkable that we will have some capital transactions in the future. I'm not making a prediction, we have nothing in mind now, but we review everything here all the time.

Our next question on line comes from Steve Sakwa from Evercore.

Steve, I guess I'm just trying to square your comments from the last couple of quarters about just asset values being extensive. You guys have obviously put a decent amount of money to work, and I'm just trying to sort of get your views on whether you see these as kind of next cycle deals or some of these developments kind of being near term. And if you can provide any kind of all-in costs or ranges for what you think some of these assets may be and the kind of yields you're looking for?

I'm not sure I understood your question, Steve. But just to talk generally about it, we have said over the last few quarters that we think asset prices are high. I have said that I think the easy money has been made in this cycle. I have said that this is a time when the smart guys are starting to build cash. I've had a handful of very, very smart guys jump on top of that comment and say they agree with me. And I have said repeatedly that we do acquisitions very carefully at this point in the cycle. In each quarter we announce one or two acquisitions. If you look at the nature of what we're doing, they are generally what I would call bolt-on acquisitions. They are right in the neighborhoods that we are targeting. For example, in Penn Plaza or for example in West Chelsea and multiple retail acquisitions, which we are in the market for at all times. So we are always hunting. We are always looking. We are always tasting. But elephant hunting in this market is really difficult, because prices are really high. So I don't know if that responds directly to your question, but those are my thoughts which put it into context from the last -- actually these are valid thoughts for the last year or of so or even more.

I guess just kind of add on to that, I was just trying to get a sense, some of these where you talk about like the 260 Eleventh Avenue, you say the lease with New York goes to 2021. There's a parking lot next to it. I presume that you're sort of land banking, if you will, for the next cycle or can you see that maybe lease be bought out and something kind of more near-term be done. And just what kind of returns are you looking for on these deals when you're stabilized?

We don't publish our target returns. With respect to -- if you think about it, the asset is perfect. It was acquired for a ground lease, which is a non-cash transaction plus some shares. The income on the building covers the carryon that. We have carried from the tenant for five or six years. We will not discuss whether we can get that tenant out early or not. That's just not something that's appropriate for a call like this. We have a record of getting our hands on assets when we want them, by the way. And we are very excited about that asset. The mark-to-market on that asset in terms of the in-place rent from the existing tenant to the market rent is way more than a double. So we love the asset. It's in a great spot and we're very constructive on it.

And then I guess just as a follow-up, can you just maybe talk a little bit more about 220 Central Park South. And obviously you had the disclosure in the 10-Q about the sales in the 40%. Obviously, we don't know which units have been sold within the building and how maybe representative it is of an average price throughout the building. But is there any sort of information you could share at a high level, as to how to think about I guess the $1.4 billion or $1.6 billion of sales done for 40% of the space so far?

The sales are actually extremely well. I don't know what the word is, up and down the building. There is not one concentration of any apartment product type that has been hotter than the others. So the sales are very evenly disbursed up and down the building.

Our next question on line comes from Vance Edelson from Morgan Stanley.

With all the Amtrak and Jersey transit issues recently and talk of 100-year-old tunnels being the issue getting to Penn Station. Not to get into the politics or the potential solutions, but do you have any thoughts on the impact these issues have on the appeal of the Penn District and the impact of a new tunnel? Especially, if it led to a new destination in Manhattan, the impact that could have on the west side. So any big picture thoughts on Hudson River transit, as it relates to the Penn district?

Vance, that's a little over my pay grade. But nonetheless, that hasn't made me bashful in the past. Look, Penn Station is the real McCoy. It's the largest transportation hub in the United States. It is the largest obviously serving Manhattan. And it's inconceivable -- I mean, Penn Station is the dominant transportation facility in the city. Now, it's not the only one obviously, but it's the dominant one. The growth of the New Jersey side and the other arteries that come into Penn Station are obviously everybody knows that. The fact that the infrastructure that services Penn Station is a little bit tired, which is maybe an understatement or an overstatement, is nothing new. All of the infrastructure in New York is kind of in the same condition. So the fact that there is a bright light on the issue of expanding Penn Station is probably a good thing. And the dominance of Penn Station is an essential element in the growth and development of the west side of Manhattan. And the fact that we own all the buildings on top of Penn Station and surrounding Penn Station, we think it is absolutely a spectacular opportunity. So I don't know whether that responds to your question, I hope it does. Now, obviously, if there is a $5 billion, $10 billion, $15 billion construction project, which augments the dominance of Penn Station and the ability to get increasing volumes of commuter traffic into that facility, that will cause short-term disruption, but long-term enormous gain. So we couldn't be more delighted that there is a focus on this piece of infrastructure. By the way, we believe that our political leadership and government leadership should be focusing on all of the infrastructure in New York.

And then sticking with that area on the 260 Eleventh Ave purchase, are you viewing Hudson Yards and what that will eventually become as a net positive and brings more vibrancy to the entire area? And if that's the case, what about the element of competition in coming years with all that space coming online as it relates to 260 Eleventh side, how does that work into your thinking on the acquisition?

I've said publicly before, and we are obviously partners and friends with Related. I've said publicly before many times that we think that the advent of the Hudson Yards development is not a good thing for Vornado, it is a great thing for Vornado. So basically the Hudson Yards development which is now I mean in the tenth or twelfth year of this thing, this is not a new event, has put the west side of Manhattan on the map. So since we are the dominant owner in that region and since we think we have wonderfully located assets in that region, we think it's enormously to our benefit. Well, let me get to 260, okay. We had an interesting thing happen about a year ago and that is a very important tech firm, a very important tech firm named Facebook, came into New York and wanted to expand and enlarge their New York headquarters. They started with a small space of 50,000 feet, and they wanted to expand greatly which is appropriate, because they need a large presence in New York. Now, these guys are really efficient. And they came into town with a team. They surveyed the marketplace. In like one week they selected their top two candidates for their new, New York headquarters. One of which was ours 770 Broadway, which is a wonderful building with 77,000 square foot floor plates, high ceilings, lots of glass and a traditional -- it was a department store, which David and his team converted into a first class office space. In any event, so the choice was down to 770 Broadway or a new steel and glass building in a very similar neighborhood and they selected our building and we're finding that kind of thing happening all through the city. So it's not by chance that the buildings on Park Avenue South and the 260 Eleventh Avenue type buildings are in incredibly high demand by the class of tenant that doesn't want to work in a class building with a lot of old guys that wear ties of which I am one, by the way. So we relish the competition. Now, if you talk about the new space that Related is going to be bringing to market, that's a totally different kind of space than we offer. They're looking for 0.5 million and 1 million foot tenants. They need those tenants to fill those big, giant buildings up with those big giant financial services floor plates and the city needs them. We can operate wonderfully under the umbrella of their pricing and we will draft from what they do. So we think they're coming into the market -- this is going to sound a little silly, coming into our neighborhood is a great thing, and we couldn't be more pleased about the future. Well, that was a little too much, not my style, a little too much propaganda, but there you have it.

Our next question online comes from Ryan Peterson from Sandler O'Neill.

Just a quick question on 260 Eleventh. So you purchased that on a ground lease. Does fee simple still pencil in this environment or will we continue to see ground lease deals?

Basically the ground lease was a surrogate for the passage of time. We have a fixed price purchase option that is locked out until the happening of certain events, which I'm not going to mention here, but we will in the future buy the fee, which is what our intention is.

And then one other quick question. The DTA, you recognized $90 million of $95 million. Is there any reason in particular that you didn't recognize the whole $95 million?

Steve Theriot will take that one.

The reason there is there was a recent change in the New York state law around utilization of net operating losses that limit our ability to use certain of those NOLs in New York State and that's what caused the $5 million not to be recognized currently. We hope to realize that in the future, but it will not be realized through the 220 development.

Our next question online comes from John Bejjani from Green Street Advisors.

Steve, there has been talk recently of slowing New York City tourism in light of currency and other global economic issues.

I'm sorry, say that again, John, I didn't hear you.

Sorry, I was saying there's been talk recently of slowing New York City tourism in light of currency and other global economic issues. So on the street retail front, are you seeing or do you expect to see any change in behavior from either potential tenants or landlords and the rents they're looking for?

Some of our colleagues have already opined on that with a negative answer. I'll be a little bit different. We don't have yet the tourism statistics recently, but I believe that there is a slight, I'm talking about really slight diminution in tourism. Now, you have to remember that there's 55, I think million tourists that come into New York last year at the running rate 80% of which are domestic tourists. So those are not affected by the change in, by the strength or weakness of the dollar. So it's 20% of that tourism cohort, which would be, let's say, 11 million or 10 million individuals. And so at the margin, it's not going to be that significant. We do know that tourism is still continuing to be on the rise, because the wonders of New York continue to attract people from all over the world. So while sort of my belly tells me there's going to be a diminution, it's going to be at the margin I think very slight. That's step number one. Notwithstanding that, I've said this before on prior calls, I think retail rents have gotten to be very high and I think that landlords will -- and the number of tenants cruising, looking for spaces at these very highest in cycle rents are starting to decline. So I know we're recognizing that and we're making deals. And the deals are, as David said, in his mark-to-markets and what we're doing, the performance and the results and the financial value creation is still acceptable to extraordinary. So the answer is, is we are realists. We understand what the markets are. We don't hang out asking rents that are not obtainable in the marketplace and our job is to take this wonderful street retail portfolio and…

And then, Mitchell, can you please discuss the traction Crystal City's getting as a tech hub versus other submarkets like the Mt. Vernon Triangle. It seems the bulk of leasing this year has been nonprofits and associations, which seems it might be a little at odds with creating a tech ecosystem.

The way that I think about the Crystal City market is it really has four legs to it. So we continue to be a strategic location for government. We continue to be a strategic location for government contractors. We think that the not for profit and 501C3 cohort is another leg, and finally, the innovative and creative type. So I think they all intermix with one another and particularly if you focus on some of the start-ups and the innovative companies that are working with the big, big government prime contractors as well as the big government agencies, there really is natural synergy amongst and within those groups. So I think that the four pieces sort of fit within one another and then when you think of some of the 501C3s and nonprofits, many of them have youthful and millennial cohorts who are doing research and other kinds of work for the organization. So when you add them all up, I think you get a good and robust mix of tenants and there's synergies amongst the groups as well.

Our next question online comes from Brad Burke from Goldman Sachs.

I was little surprised with the cash balance at the end of the quarter. I know you have previously spoken about ending the year with about $2 billion in cash. So I was just hoping for an update on how you're thinking about ending the year in terms of cash now and how we should think about you getting there from where you're at, at the end of the second quarter?

We ran down our cash to handle, for example, the St. Regis acquisition, which was $700 million, which we basically bought for cash and we have no financing on it. So that asset will be financed shortly and there are several other assets that are similar. So basically we ran down our cash. We will run it back up again. We are on track.

What would be a level that we should think about you being comfortable at this kind of a run rate?

Gee, I don't know. I could tell you kind of perversely, as the cycle continues and gets more and more, where prices get more and more, I don't want to use the word bubbly, but I will, then we feel that there maybe more opportunities coming for the well-capitalized cash heavy, very liquid firms on the other side of that. So that's not an answer, but it is in a kind of a funny way an answer. But we have no target. We have no budget for cash. We believe that having liquidity to be able to take advantage of the opportunities that will undoubtedly be here, we don't know when, is a very important part of the strategy of how a firm such as ours should be run.

And then I had just another question on 220 Central Park South. It still looks like you have over $800 million to complete the project, which seems like a lot to do between now and the end of 2016. So just wanted to get an update on how you're thinking about timing of completion and whether there's any downside to the expected completion cost, and also if you can tell us how you're thinking about funding the construction from here on out.

The completion date of the project remains unchanged. The construction market in New York is very, very, very, very tight. People are experiencing shortages, which causes price disruption all the time. We have bought more than 50% of the project and so we're very respectful of what might happen in terms of the costs of the remainder of it. Not concerned about it, just attentive to it. We will finance the project out of the existing loans we have on it, plus a new loan that we are going to take to finance the remainder of it.

Is that the mezzanine loan that you've talked about previously or was this something new beyond that?

I'm not going to comment on that.

Our next question online comes from Vincent Chao from Deutsche Bank.

Just a couple of quick questions here. Just on the WeWork's project in DC, I know it's going to start delivering here in the end of the year, but when do you think WeWork's will be able to start leasing the residential units?

So the units are going to deliver late this year, very early next year, and will be immediately in the market to lease them at that juncture.

But at this point they're not being marketed as of yet?

Correct.

Just another quick one on WeWork. They've been in the news quite a bit. You and many of your peers are leasing space to them. I guess, if that is directionally where the office market or some portion of the office market is heading, obviously you don't want to create conflicts of interests with your own tenants, but just curious if that's something you would ever consider doing on your own separate from WeWork, some kind of space similar to that.

The question that, are we considering doing a look alike to WeWork ourselves in our own --

Well, would you ever consider something like that, I guess, yes, that is the question.

We would consider it, but we likely wouldn't do it. We're very comfortable with leases from important tenants with credit, et cetera, as opposed to leasing out the space desk-by-desk. And so we think that WeWork is very, very competent at it. That's a different business. That's not to say that WeWork might not attract a handful or two handfuls of competitors. But it likely would not be us.

Our next question online comes from Ross Nussbaum from UBS.

Can you talk a little bit about the multifamily business? As I strategically think about it you've got about 4,000 apartment units between New York and DC, and back of the envelope we're probably talking somewhere around $2 billion or north of $2 billion asset value. Where does that fit in as you think about this company going forward? We spent an hour and 15 minutes on the phone here, and multifamily maybe got a minute of time from Mitchell. Is this something that's still on the plate for, I would say, strategic disposition or how were you thinking about that?

We are an accidental participant in the residential business, if I can use that word. So what do I mean by that? In New York, we have two large, I mean, really large and important projects that are basically, what do you call it assistant housing kinds of projects where we bought, together with a partner who was the original owner of this inventory. Independence Plaza is the main one, which is, what is it 1,500 units, how many units is it, 1,328 units in Tribeca on the water, with high rises directly across the street from -- what's the name of Di Niro's restaurant? [multiple speakers] See, they don't let me out very often. So a spectacularly well located project. And we bought it at, I don't know, $0.25 on the dollar for per square foot per pound, and so what we're doing there is over time the rents will rise, et cetera. Enough said about that. So we invested in a residential product, but we did what we frequently do. We were very price sensitive, et cetera. So that's said enough of that. We also have an apartment project on 86th and Lexington, which is an important piece of property, which we bought because it was on top of the retail that we sought. So I'm saying this is sort of incidental into this business. We also have a couple of handfuls in New York again apartments in places like SoHo where they came along with retail assets that we acquired. So that's the current nature of our residential business in Manhattan. Would we get larger in Manhattan if the opportunity came up? Absolutely, yes. We're also by the way building a 300 unit apartment project in Rego Park, Queens, which is an Alexander's asset on top of…

I guess we're not selling. The second question --

The answer to that is, is we might sell. We might bring in -- we might likely bring in a JV partner to finance all of this, okay. But we won't sell raw land and low prices.

Second question is Hotel Penn. Obviously, hotel performance in New York has been a little weak lately. Does that cause you -- plus your long-term plans with the plaza, how much longer is Hotel Penn going to be a hotel? Are we going to resurrect the architect plans from the Merrill building at some point?

You know, we can't predict the future. We can only say that, yes, the hotel business in New York is soft. I think the folks tell me that New York is the only hotel market in the United States which has negative comps. I mean which is pretty startling, because it is the principal tourist attraction in the United States. But what's going on in New York is just oversupply, oversupply, oversupply. And when new entries open up, they cut the prices to get to stabilization and so whatever. Our numbers are lower. They are not seriously lower. They are what 5%, 7% lower, something like that. So we understand what's going on. So basically the Hotel Penn is either a hotel or a place saver as we see it. And as markets change, I can tell you that we have an enormous profit in the hotel now. We can tell the asset for an enormous profit. We believe that there is much more to come. We are unable to make a commitment now as to whether it's going to go into a teardown or a renovation. We are also unable to make a commitment now, as to whether it's going to go for a hotel use or an office use or whatever. We have all kinds of different conversations going on. I can only tell you one thing with incredible sincerity, it will be well worth the wait. Now, there is lots of things that we do that maybe take a while, where we have patience. It took eight years to assemble the 220 Central Park South site. And that will be well, well, well worth the wait. Hotel Penn fits into that category as well. Let's take one more question.

Our final question comes from Manny Korchman from Citi.

It's Michael Bilerman. Just a question on equity. And I recognize for 260 Eleventh Avenue doing units was an advantage and necessary to get that deal done. But in contrast of your comment last quarter, I think when asked about the stock, and you said you hated your stock price. How do you think about issuing at these levels, number one? And number two, more broadly about potential strategic things you may be thinking about to improve the stock.

First of all, I hate my stock price about $5 or $6 or $7 more than I hated it last quarter, number one. Number two is the shares that were issued in the 260 Eleventh Avenue acquisition had to be issued for tax purposes. It was the only way to make the deal. We have a long and deep relationship with this same group of sellers. I think I said or David said, I don't remember who, that this is the same group that we bought 770 Broadway from. And so while I hate putting out shares and won't put out shares at this price, $80 million of shares even if it's issued at a discount to what it's really worth in relation to the quality of the asset and the opportunity of creating that was we thought worth it, and it had to be in that transaction. I can tell you that from a policy point of view and a discipline point of view, we have no plans, and I almost want to say we won't issue shares at these prices. By the way, I almost would say that we have an extreme aversion to issuing shares almost at any price. That's a little silly. I mean there is a price. But understand that when we look at issuing shares is basically dilutive to our shareholders, and we don't look at the dilution in terms of what the current NAV is, we look at what the future NAV of the company would be two, thee, four, five, 10 years down the line. So issuing shares is not something that we think is a good strategy. With respect to the fact that our shares, together with almost everybody's shares, sell at a pretty significant discount to the private market values, and what we're going to do about that, the answer is, is we together with every management team in our industry is trying to figure that out right now. So we have shown -- our management team and Board has shown a willingness to do things, get out of the mall business, get out of the strip business, get out of the merchandise mart business, et cetera, et cetera, spin off our strip shopping center business to our shareholders. We have been I think more active than any other management team I think in terms of restructuring our company. As I've said before, everything is on the table and everything continues to be on the table.

Would you have considered, and I recognize the units are tax benefit and were necessary for the deal. And I guess would you have considered just buying back $80 million of your common shares to effectively make it neutral and recognize. I know the stock's not at a meaningful, meaningful enough discount to do a large scale buyback, but I'm just wondering with the cash balances, the refinancing proceeds, the asset sale proceeds, whether that was something you talked about and thought about of effectively keeping the equity base totally the same?

Michael, I never thought of that. I never thought of it.

I guess you can do it now, if you want.

I'm not saying we're going to do it now, but I do say we never thought of it.

Just a question on retail. I think in your opening comments you said, you talked about the retail rents and said there was more to come. There's about 60,000 square feet of retail expiring in the back half or under month-to-month and another I think 90,000 next year. Are you pulling forward some larger deals from future years or is there a certain volume that we should be thinking about relative to I think you've done about 40,000 square feet of retail leasing at obviously multiples in terms of spreads?

I really wasn't focusing on the renewals or re-renting the expiries, as they come off. I was really thinking about some of the stuff. We have a couple of important assets that are currently treading water, I'm more focused on those.

And then just about one last comment. You forgot Independence is across from Citigroup's headquarters. We're investing some billions of dollars and moving a lot of employees that eventually will need a place to rent their apartment to be close to work. So that's it.

One of your guys at Citi approached me about taking down one of the buildings and building a hotel for them at bargain prices. And we didn't think -- I don't know. We couldn't be more aware of the fact that Citi headquarters is adjacent to our Independence Plaza. I think that's it.

At this time, I see we have no further questions in queue. I'd like to turn the call over to Mr. Roth for any closing comments. End of Q&A

Thank you all very much. This was an-hour-and-a-half, so I appreciate you sticking with us for that time. Maybe next quarter we'll try and make it a little bit more succinct and be a little bit more cognizant of your time pressure. So anyway, thank you, we'll see you next quarter.

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