SL Green Realty Corp (SLG) 2008 Q3 法說會逐字稿

Good day ladies and gentlemen, and welcome to the Q3 2008 SL Green's Realty earnings conference call. My name is Sandy, and I will be your coordinator for today. At this time, all participants are in a listen-only mode. We will be facilitating a question and answer session towards the end of today's conference. (OPERATOR INSTRUCTIONS) Thank you everybody for joining us, and welcome to SL Green's Realty Corp's 2008 earnings results conference call. This conference call is being recorded. At this time the company would like to remind the listeners that during the call management may make forward-looking statements. Actual results may differ from predictions 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-Q and other reports filed with the Securities and Exchange Commission. Also during today's conference call, the company may discuss nonGAAP financial measures as defined by SEC Regulation G. The GAAP financial measure most directly comparable to each nonGAAP financial measure discussed and the reconciliation of the differences between each nonGAAP financial measure and the comparable GAAP financial measure can be found on the company's web site 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, we would like to ask that those of you participating in the Q&A portion of the call to please limit your question to two per person. Thank you and please go ahead, Mr. Holliday.

Okay, thank you. Good afternoon and thank you for joining us today. I think we should just get right into it as events of the past three months since our last call has raised a number of questions and concerns from shareholders and analysts. The basic theme seem to be questions regarding Gramercy, our structured finance portfolio, core New York City office metrics, and our balance sheet. We are keenly aware of investor uncertainty relating to these core items, and I believe we will be able to clarify much of it on this call and leave plenty of time for questions. Effective yesterday evening, I resigned my position as CEO and President of Gramercy Capital Corp. I have done so in the believe that Roger Cozzi Gramercy's new CEO, will be able to lead the company forward and tackle the significant challenges that the finance industry faces in the current economic climate. Roger has many years of experience in the finance business and is considered to be an expert in the area of structured debt and equity investments. In addition to his successful track record, Roger brings significant energy and a fresh outlook to a company that is operating in a very difficult credit environment.

We also announced this morning with the resignations of Andrew Mathias and Greg Hughes from their roles as executive officers of Gramercy. One or more of these positions are likely to be filled by new hires that I expect Roger will undertake in the future. To further underscore Gramercy's efforts to reposition itself, SL Green has agreed to reduce or eliminate a number of fees, which will improve Gramercy's operating performance and cash flow by approximately $20 million per annum. A significant reduction in the nonrenewal fee also paves the way for a complete internalization of the manager and all of its employees in the future. Greg, why don't you give some more color on the earning impact these modifications of SL Green for the third and future quarters?

Sure. I think as we talked about previously, our earnings contribution from Gramercy really comes from two sources -- one is the net management fee income and reimbursements that we receive pursuant to our management agreements, and the second is from our pro rata share of their FFO, resulting from our 15.8% interest that we own in that company. The net management income and reimbursements from GKK are summarized on page 20 on our supplemental and they had been running around $4 million to $5 million per quarter. These amounts will be substantially reduced with the elimination of the outsource fee, the collateral manager fee, and reduction of the base management fee to 1.5%. You will note that for the third quarter that the decline is already occurring, since the contribution is only around $2.3 million resulting from the CDO collateral manager fees and the incentive fees being waived for the third quarter.

For the quarter we estimate that our pro rata share of GKKs FFO will be approximately $4.9 million. We expect GKK to finalize its earnings in the next couple of days. Perspective contributions from SLG's stock investment in GKK will depend on future operating results of GKK. However, it is worth noting that GKK's total contribution to SLG for the quarter was approximately $0.12 per share or just 8% of our quarterly FFO of $1.45 which we reported today. At 9/30 our stock investment in GKK has a book carrying value of approximately $142 million. While Gramercy's book value is currently in excess of the carrying value of our investment, if GKK stock continues to trade at levels significantly below our carrying value, we will likely be required under GAAP to reduce the carrying value of this investment in future periods.

SL Green made these concessions in an attempt to help Gramercy succeed in stabilizing its financial condition in the near term while poising it for future growth when the credit markets unthawed. In the short term, SL Green's will be foregoing significant fees. However, we believe that these steps being undertaken to benefit Gramercy will result in long-term value for Green's holdings in the company. While Green has provided additional support to the company in the form of overhead reduction, there is no intention of SL Green's acquiring additional stock or making loans to the company. The only possibility under consideration right now would be a selective asset purchase or purchases of positions that are already co-owned by SL Green, but even if this were to occur, the approximate amount under consideration would not exceed $75 million. Today's announcements should dispel any false rumors that SL Green may acquire or that there are any crossover financial obligations or commitments agreeing to Gramercy, of which there are none.

In addition to our investment in Gramercy, we have received a number of questions regarding Green's structured finance portfolio. While most financial assets have decreased in value, SL Green's portfolio is unique in one very important aspect. That is that almost 70% of our total structured investment portfolio is secured by interest in Manhattan properties. I believe that the Manhattan centric composition of Green's structured finance program will prove to be a benefit, not a detriment as being viewed by some. The fact is, New York is relatively more liquid than other US office CBDs due to the presence of international capital, albeit temporarily sidelined and, a deep and diverse tenant base, notwithstanding the retrenchment within the Financial Services industry. A number of these investments have substantial sponsor cash equity that was invested at the time of origination, and in some cases subordinate financing that acts as a cushion to buffer declining values of properties, securing Green's portfolio.

It is noteworthy that of our 17 debt positions secured by interests in Manhattan office properties totaling $519 million, all are performing except in one instance, and we have an average last dollar exposure in this subset of $500 per square foot, a level we are generally comfortable with. While this doesn't mean we are immune from losses in this segment of the portfolio if credit remains frozen for an additional and protracted period of time, we do believe that the severity of loss will be less than what is occurring in diversified portfolios across the country, and certain of such investments may turn into future opportunities to acquire New York commercial properties at greatly reduced levels

As to the $190 million or $200 million or so represented in the non New York portfolio, this is clearly a higher level than we would prefer to have in today's market environment and one in which we are attempting to reduce in order to minimize potential future losses. We hope to be successful in ultimately collecting, restructuring, or selling portions of this portfolio, but losses in certain positions are possible and we have already taken I believe about $14 million of reserves against this non New York portfolio, and that's in total since this quarter and prior quarters.

I'd like to take a moment now and have Andrew expand on some of these comments and discuss some of our top exposures listed in the supplemental for the first time with you now.

Thanks, Marc. Our structured finance portfolio sits at an $855 million balance today after PAR repayments of $71.2 million since quarter end. No asset in the portfolio is directly financed and thus there are no term or mark-to-market issues associated with liabilities on this portfolio. In our supplemental this quarter, we provided further disclosure with respect to our ten largest positions representing 75% of the entire outstanding balance of the portfolio. We took a $9 million reserve this quarter against our non New York City structured finance positions as Marc indicated, and those positions aggregate approximately 22% of our current outstandings.

85% of the top ten positions are secured by New York City properties, the top ten out of aggregate subordinate cash equity invested of over $2.1 billion. Many of these positions are fixed rate, providing sponsors with enormous incentives to perform and enjoy the benefit of what is today below market financing. Although liquidity of these positions in today's markets is strained, we view these investments as ultimately liquid, and also in a downside case continue to view these properties as potential pipeline for the company.

The only meaningful new activity during the quarter was our mezzanine investment in the retail condominium at 666 Fifth Avenue. This deal was committed in June and closed in July and the investment thesis is our long-term belief in prime Fifth Avenue retail space. Jeff Sutton, who is partners with us in our retail business, also co-invested in this transaction with us. The deal futures $233 million of new subordinate cash equity from Carlyle Group and their partners and returns on the position are over 15% with fees amortized. This position shows up as the second position on the top ten list.

Okay. Thanks. While we spend time talking about Gramercy and structured finance, which clearly these items seem to overshadow what I would consider the most important component of our company, which is the core fundamentals of the New York real estate portfolio, which is ultimately paramount to the success of this company. I think that goes without saying. Buildings in our portfolio remain well leased at 96.5% with an expectation of a modest uptick as opposed to downtick in the fourth quarter. We continue to chip away at our near term exposure. Our leasing in 2008 as in prior years far exceeds contractual expirations during the year, and by doing this our singular focus is on chipping away at '09 and '10 exposure, which we've done throughout the year. We continue to do it in the month of October.

As you may have seen this morning with our additional post 9/30 leasing achievements that we announced. And additionally we have to our benefit buildings that are very well-positioned to retain tenants due to our superior management and well maintained infrastructure, which is primarily attributable to our portfolio repositioning that we've executed over the years. We can be aggressive if we want to retain tenants, which we do in this market for sure by leasing to levels that others couldn't since we have generally low basis and low leverage in our predominantly class A portfolio. We also enjoy the benefits of a very favorable starting point if you will with deeply embedded rental mark-to-market and I think the advantages of that are clearly evident in today's release. You saw the kind of mark-to-market we had in the third quarter as in the first nine months of the year and we were able to achieve that even in today's worsening leasing market.

Recall that we clearly forecasted rental declines back in December and acted accordingly and defensively. Even though rental market decline won't begin to be more fully visible and evidenced until 2009, we clearly have been operating in this defensive posture for all of 2008 and some of 2007. So with some more detail on our leasing achievements in the third quarter and today's announcement from this morning, I'd like to have Steve Durels run you through some of the data points.

There were a number of notable third quarter leases starting with BDO's lease covering 121,000 square feet for three base floors at 100 Park Avenue. This was a transaction we started working on in April. BDO will anchor our building and redevelopment, which at 100 Park Avenue, which won to the 2007/2008 BOMA Award for Best Renovated Building of the Year. The rent averaged $81 per square foot over a 15-year term and the lease is in addition to several recent partial power floor leases, where prebuilding space and starting rents have averaged $96 per square foot.

At 750 Third Avenue, we leased the entire ninth and part tenth floors to Regent's Business Centers for 52,000 square feet. Regent replaced RSM McGladry, who we relocated into a 27,500 square foot expansion at 1185 Avenue of the Americas after negotiating a buyout of an existing tenant to create the expansion opportunities.

At 810 Seventh Avenue we leased 26,000 square feet to Ion Media Networks, who is moving to 1330 Avenue of the Americas. They are taking the entire 30th and part 31st floors at an average rent of $83 per square foot. A big driver of their attraction to 810 is the ongoing capital program, which should be complete during the first quarter of 2009.

Additionally we continued with strong leasing at 461 Fifth Avenue, where we closed four leases covering 31,000 square feet at an average rent of $94 per square foot. Taking into account the leases already signed in the fourth quarter, we've closed leases with a combined square footage that exceeds our total 2007 production.

Leases signed in the past 30 days post Lehman Brothers bankruptcy include Work Environments at 1515 Broadway for approximately 65,000 square feet. Rent averaged $83 a square feet over ten years which is almost 89% above the previously escalated rent.

News America expanded by 54,000 square feet at 1185 Avenue of the Americas after we bought out the remaining term of an existing tenant and helped that tenant secure a sublease in a nearby building. The new rent is 83% greater than the prior tenant's rent. It's deals like that which show the difference between creating value using a strong inhouse leasing team versus simply filling space through third party brokers.

On a another front, Eisner LLP expanded by 34,000 square feet at 750 Third Avenue, where they are taking space previously scheduled to be vacant in June 2009. New rent is 33% above the existing in place rent. Also at 750 Third, the Permanent Mission of Poland is a new tenant leasing the entire 30th and 29th floors. In this case, we are cancelling an existing lease that was scheduled to expire in 2009. The rent is 47% above the current in place rent. Finally, late yesterday we secured an expansion of WPIX's lease, covering 104,000 square feet at 220 East 42nd Street. which takes that term out through March 2012. That's color on current leasing within the portfolio. I'm sure you'll have some questions, but before that Andrew will provide some detail on the investment landscape.

Thanks, Steve. Notwithstanding strong and active leasing performance, the investment activity in the market has slowed to a trickle, with the debt markets frozen and investor capital on the sideline in a game of wait and see for expected new pricing levels. Despite this freeze, we completed three substantive transactions since our last call, all on the sale side. Last week we closed on the previously announced sale of 1372 Broadway. The final price was $274 million, representing a 4.6% cap rate on net operating income and $539 per square foot. The buyer in this transaction assumed our loan on the building. Recall that we owned a 15% interest in this building, having sold 85% of the property at a $335 million valuation last year.

Also this period, we closed on the sale of 10120 White Plains Road in Westchester, which was held in a joint venture with Teachers. The sale price there was $48 million, representing a 6.25% cap rate and $227 per square foot. The buyer in this instance got new third party financing from a life insurance company at an advanced rate of between 50% and 60% loan to purchase price.

In the retail portfolio, we closed on the sale of 80% of our interests in 1551 Broadway to Jeff Sutton. With expected fees on this transaction, we will have earned a 40% IRR on our capital after payment of Jeff's [promote]. Whole dollar profits on this deal should be in excess of $23 million. We retained a 10% unpromoted interest in the property, and if you've been to the heart of Times Square lately, you've seen steel rising at the site at a rapid clip. We expect to turn the building over to American Eagle early next year.

Okay. With that, Greg is going to finish up with a discussion of Q3 operations and also a discussion about the current balance sheet position of the company. And I think this will enable us to finish up with strength because Q3 was I thought a very, very good quarter especially on a relative basis given all the challenges in today's market.

We were obviously quite pleased to be able to have achieved on an operating basis what we were able to achieve in the third quarter. And also when looking at our balance sheet, Greg is going to run you through a lot of different metrics, but the conclusion will be we've got a substantial amount of cash on hand. That cash most importantly in my mind will exceed or does exceed our recourse maturities over the next three years. That's balance of '08, all of '09, all of '10, all of '11. You can never have enough liquidity and that's for sure, but it does make us feel that the steps we have taken going all the way back to '06, whether it be property sales in excess of $2.5 billion over the past two years, or the capital raising that we did corporately in '06 and '07, all of that basically were steps that has positioned us to be in I think a relatively good position, understanding that we will continue to look for ways to monetize assets and build liquidity, because having money available at some point in the future to be very offensive as opposed to defensive is clearly a priority of ours, although not at the moment. Obviously we've been very quiet on the new investment front, and I think that's what you just heard from Andrew. Why don't I turn it over to Greg and take us through those pieces, Greg?

Sure, thanks, Marc. I'll go ahead and jump right into the liquidity section of the presentation, which I think is paramount in everybody's mind given what's happening in the credit markets today and I think we have a fairly good story here to tell. At 9/30, we had $711 million of cash on hand, which has increased subsequent to quarter end to over $800 million. Additionally, we have $48 million of availability remaining on our credit facility.

During the quarter, one of our line participants failed to funds its obligation under our credit facility, and this coupled with the turmoil in the financial markets led to the proactive decision to draw down on approximately 97% of our credit facility. In response to numerous inquiries that we have received we have expanded our disclosures on page 26 of our supplemental to summarize the significant covenant which govern this facility. A review of these covenant finds that our total debt to assets for the quarter at 49% compared to the 60% that's required, our fixed charge coverage at 2.01 times compared to the requirements of 1.5, and our secured debt to total assets, a ratio which has plagued a number of our REIT peers, at just 22% compared to the 50% requirement. Our corporate finance model has left us with substantial flexibility, as we currently have 17 high quality properties comprising 8.3 million square feet, which are not encumbered by specific mortgages.

Our maturity profile looks manageable. We have no remaining maturities for the balance of 2008, having recently completed two financings in September. We refinanced 717 Fifth Avenue, increasing the loan proceeds from $192 million to $245 million, with the ability to go as high as $285 million and we are borrowing there at a rate of LIBOR plus [275]. We also financed 28 West 44th Street, obtaining $125 million of financing at an average spread to LIBOR of 201 basis points. In addition to buttoning up any remaining maturities we had for 2008, these financing demonstrate that even in extremely turbulent times, quality New York assets can be financed. As we look out to 2009 and 2010, we have approximately $279 million in maturities in 2009, including $200 million at of unsecured notes, assume the connection with the Reckson acquisition. For 2010, we have approximately $550 million of scheduled maturities. In 2010 there is also the potential for $220 million of convertible notes to be put to us. Note that this amount reflect the reduction to this obligation of approximately $60 million from notes that we have recently redeemed subsequent to quarter end. Based on our current liquidity position and our projected operations, we believe we have sufficient liquidity to satisfy our near term debt obligations, even if we don't see a thawing in the financial markets.

One final note on liquidity. At 9/30, we had $105 million of restricted cash. Approximately two-thirds of this money is available for capital projects and the payment of operating expenses including taxes and insurance. The balance of this amount represents security deposits, which of course are generally not available for corporate purposes. Before I leave the balance sheet, I would offer the following observation related to our receivable balance, which is naturally something that we monitor closely during tough financial times and are happy to announce that we've experienced no change in our collections and we have had virtually no credit loss, which is a testament to the quality of our assets and the credit profile of our tenants.

Turning to the core performance of our portfolio and the related operations, as Marc pointed out, our core portfolio continues to perform exceptionally well. Occupancy was down slightly quarter over quarter due to scheduled lease expirations at 750 Third Avenue and 1550 Broadway. As you can see from this morning's leasing news, we have already addressed these vacancies and we expect to finish up the year just shy of 97% occupancy. While there are signs of weakness in the market, we once again had a very strong leasing quarter, with 359,000 square feet of space leased at an average rent of $66 with a mark-to-market of 55%. Note that once again, the actual rents achieved in the third quarter exceeded those that we have previously advertised as market rents in our lease expiration schedule.

It is also interesting to note that as of 9/30, the average rent on in place rents for our mid Manhattan portfolio is just $53 per foot, a very favorable price point as people try to evaluate where rents are headed from here. We did see an uptick during the quarter in TIs of free rent, which is principally a result of a number of large long-term leases signed during the quarter which Steve made mention of. On a 15-year deal that we signed at 100 Park, we provided a $50 work letter and 12 months of free rent. Excluding this deal, TIs free rent for the quarter would have been $23 in 2.9 months, much more in line with what we had experienced for the first six months of this year.

Our same store NOI for the quarter increased by approximately 9%, continuing to reflect the benefits of the strong leasing activity we have enjoyed over the last 24 months. As we have discussed before, NOI growth generally trails the leasing activity by a number of quarters pending the conservation of revenue recognition. As a result, the benefits of the strong leasing activity this year will not be felt until 2009. This is one of the reasons we believe we will still see good NOI growth from our portfolio in 2009, which we will detail in greater specifics during our investor conference.

As expected, there were seasonal expense increases in the third quarter similar to what we have historically experienced. This represents the principal reason for some quarter over quarter declines you see when comparing this quarter's operating results to the second quarter of this year. We have taken advantage of recent declines in energy prices to sign up a number of fixed contracts for certain of our utilities, which should provide meaningful expense savings in 2009.

Our structured finance income for the quarter was approximately $23 million. This number includes some contingent interest which we were able to recognize during the quarter and is also net of approximately $9 million of reserves during the quarter, which we took against certain of our non New York positions. This number also includes the benefits of the newly originated structured finance investment at 666 Fifth Avenue that Andrew that alluded to. Other income for the quarter was approximately $13.5 million. This amount excludes the GKK incentive fee and GKK CDO collateral manager fee which we'll waive for the quarter. Of the $13.5 million of other income, $8 million represents fees from GKK, and during the quarter we recognized just $188,000 of lease buyout income. MG&A for the quarter was down [five point] million (sic) for the quarter, which included certain one time expenditures related to the GKK AFR personnel addition and is also down as a result of lower incentive based compensation expense for the quarter. Note that this G&A number does include approximately $5.7 million of personnel costs related to Gramercy Capital. Combined interest for the quarter was roughly the same as it was last quarter.

And in conclusion, in terms of guidance and what we see for the balance of the year, we are going to go ahead and reaffirm our guidance of $6.20 to $6.25, which would require that we post roughly $1.35 of FFO for the fourth quarter. There are a number of significant variables that could impact the fourth quarter results, and I'm just going to tick them off quickly here for everybody. We are obviously going to maintain our sizable cash position, which we think is prudent in this environment and there is some negative carry associated with that. We do have $2.1 million of floating rate debt that is subject to the roller coaster ride currently being experienced in the LIBOR market, so we will have to take stock of where that is. LIBOR for the third quarter averaged 2.62% and now sits at approximately 3.2%. The Westchester property sales and the structured finance redemptions that Andrew referenced will reduce some of the earnings from those investments because they are no longer [active]. We do have a $5.1 million incentive fee that we had recognized in the first half of the year on Gramercy. This amount is subject to callback depending upon Gramercy's performance over the balance of the year. As I had mentioned earlier, the carrying value of our investment in Gramercy may be required to be written down and that could result in a fourth quarter charge, so we'll have to continue to monitor that situation. And lastly we have done some early extinguishment of debt and there will be some gains recognized from that exercise as well.

So a number of variables in the fourth quarter, but we feel okay going ahead and reaffirming our original guidance at this point in time. With that, I'm going to turn it back to Marc for some closing comments.

Okay. I think we tried to shorten as best we could that portion of the call so we could get right into questions. There is a lot of people on the phone today, so we are obviously are going to just try to get to as many as we can, so I would ask people to really try and limit the questions as best you can so that everyone or most people have a chance to get on the phone and ask what they want to ask of us. With that, operator, I would say let's get to questions.

(OPERATOR INSTRUCTIONS) Your first question comes from the line of Chris Haley of Wachovia. PLease proceed.

Good afternoon and congratulations.

Thank you, Chris.

I'm glad to see the GKK news and the recent hire. I'm sure you'll have more information on the GKK call, separately but for SL Green's benefit or detriment, can you offer any color on any potential callbacks or any other puts or issues that we should know about related to some of the investments at Gramercy and whether or not SL Green has any potential liability regarding some of those investments? Just want to make sure that you have the opportunity on this conference call to clarify any issues related to that.

I think, Chris, this is Greg, I alluded to the $5.1 million of incentive fees recognized on 6/30, which could be subject to callback, and I think that Marc made pretty clear there's no recourse obligation, there's no contractual obligations, there's no loans forthcoming. By the way, we do have crossover investments with that company which at some time in the future -- may or may not make sense to consolidate those positions, but there is no contractual obligation to do so.

The magnitude of those cross-overs?

Chris, let us maybe -- we may have it right here.

You can come back and go next question.

First of all, there's no indication Gramercy is necessarily selling, a seller of those positions. I mean we have several positions we've done with Gramercy over the years. Typical has been -- I would hazard to say 50/50 arrangements but that has varied from time to time. But I think Greg's point was if any of those positions are ultimately deemed (inaudible) by Gramercy in the future, we could be a natural buyer but we have no obligation to it and we would assess it as we would any other investment. I think that's the main point to your question.

Thank you.

Your next question comes from the line of Jay Habermann of Goldman Sachs. Please proceed.

Hey, good afternoon here with Sloan as well. You are just sticking with the structured finance I guess on balance sheet. Can you give us a little bit more detail? I know you went into a lot of specifics, but loan to value and where does that service coverage exist today, and as well you talked about the reserves, the $14 million you've taken to date -- can you give us a sense of how you arrived at those values? Are you looking specifically at cap rate changes or is it really a function of changes in occupants sitting in debt service coverage?

Why don't we hit the reserves first, because I think you need to understand the nature of the reserve we took this quarter, which may be different how you are looking at that -- Greg, why don't you do that.

On the reserves we've looked, we do detailed discounted cash flow valuations of the underlying collateral to come up with those. We are looking directly at what we think the real estate is worth. I think it's noteworthy -- we've gone ahead and set up those reserves, virtually all of those loans where we have reserves are still performing in accordance with their original terms. So we've tried to be proactive there, and it's based upon a range of cash flow that we developed for the underlying collateral.

How much of those decline in value did you calculate?

How much of a decline in value?

Percentage of total, the original investment.

By the way, I have to go back and look at our original underwriting.

Do you mean, Jay, for those loans where we took a reserve?

Right. Well, for the assets that are underlying those loans.

Right. We could maybe figure that out real quick. I don't think we have that, I mean obviously -- But is it 15% to 20%, just a ballpark? Well, it's different. If you have a feel by either product type market that you could generally -- everyone is different.

It varies by asset and a lot of our loans are on transitional assets, where there's lease up in various stages. So I would say typically to your first question we were originating a loan to cost or loan to value and our determination of between 60% and 80%. Most of the -- all of the positions in the top ten obviously are either B note, mezzanine loan, or preferred equity. We did not do much whole loan business in SL Green and I would say that debt yield in those positions, meaning the NOI at the property over the last dollar exposure of our debt obviously aggregated up for any senior debt, stands today at about 6.2%. That is skewed by many properties in that pool that are as I said in various stages of lease ups, so if they have large vacancies, they will obviously show at a very low debt yield. And also our positions in residential, where it is stabilized rent controlled assets where they are in the process of decontrolling tenancy and some other factors. But to give you a sense on the average, the debt yield is 6.2%.

Okay. And then second question, can you just comment broadly on the New York City office market -- what's the update sort of on sublet space, just vacancy trends, and also can you give us a sense of where you think cap rates are trending? I think you mentioned transaction are pretty much at a trickle.

Cap rates, I don't even know -- it would be very hard to asset that Jay, because it's just -- if no one is ready to sell in in New York at whatever pricing that might be relevant in a market where there's just no debt. So I think rather than try and predict cap rate, you just have basically buyers and sellers realizing this is not a good market to sell in. Buyers still are expecting very high prices. And sellers are expecting prices that are evident of a market without debt, and in rare instances where a debt does accompany a transaction in place assumable low rate debt, then the prices can still be high.

You saw this quarter our investment activity. We ranged between 4.6% in New York and 6.25% in the suburbs.

Right. So but -- the answer is cap rates are up structurally from where they were last year -- that's obvious. And where they are going to settle, I don't think people necessarily know, but when we run our numbers and you can settle them at different cap rates, 4%, 5%, 6%, 6.5%, 7%, 8%, you can do the whole matrix -- we still get to levels that we think are still very representative of making us view our stock as a good buy, and you saw we still continue to buy stock in, and I think that those cap rates, whatever they might be in this market, will start to compress again or at least return to more of a normal historical normal once there is debt to market. Right now there really is no debt -- I think you know that. On the leasing front, that has really surprised us to date in terms of its strength. I would not have guessed sitting here in October we had the ability to make an announcement like we did this morning. So that's been a surprise to the upside. Clearly there is a lot of sublet space that is somewhere between rumored and in the market. Steve, I think if you can target -- rumored is just, you just don't know and it's too speculative. Why don't you go with what is in the market or very close to being in the market?

Well, I think it's helpful to understand that if you watch the official steps, depending on who is producing them as far as sublease space availability goes, it's clearly increased over the past six to 12 months. A year ago we were roughly at 0.5 point of the availability was sublease space. Today it's officially 1.7%. That doesn't tell the whole story, though. The reality is over the past, I'm going to guess four or five months, anybody who's monitoring the market closely has run a parallel list. There's that amount of square footage which is officially listed for sublease. And then there is the shadow space that's out there, which all of us run a list on that. Assuming that whether it was a piece of Lehman Brothers space, or a piece of some other banking space or some other tenants space that was either expected to come on market or could be made available for market if there was a tenant ready to grab it. The interesting thing is that some of the shadow space has shifted over to being directly available for sublease. So that's what's driven that increase in the availability rate of sublease growing from 0.5% to 1.7%. And secondly I can't think of a major piece of new sublease space that's been added to the shadow list. Kind of interesting to see that it's fairly stabilized in a global overview. But we are expecting with the anticipation of some additional layoffs that there has to be some additional sublease space that will come on to the market. But right now the past several months, it really hasn't changed.

Okay. Thank you.

Your next question comes from the line of Lou Taylor of Deutsche Bank. Please proceed.

Good afternoon, guys, maybe I missed it but, Marc and Greg, can you talk about the preferred equity portfolio? Just what did the maturity schedule look like for the underlying senior debt there? Is there much coming due in 2009 or 2010?

You're asking about senior debt on the structured finance portfolio?

Correct.

Okay. Andrew, do you have that?

In every case it's co-terminance with our -- whatever type of investment we have, if it's mezzanine, preferred equity, or B note. It varies between longer term fixed rates and shorter term floating rate. But in every case we are matched up with the senior debt.

So roughly -- or can you give a rough profile in terms of holders of that debt, CMBS or light company bank debt, et cetera?

I think for the most part, the majority is CMBS. There are also some syndicated bank groups. But for the most part, it's CMBS on the senior debt.

Just last question, just in terms of the internalization of the GKK manager, I guess what track is that on -- is that something you expect to year end? Do you think it's going to drag into next year? Just what's the status of the process?

Well, I think the main part of the process has been culminated and announced as of last night or this morning. There is really just one of two outcomes. There's the contract matures at the end of '09. And part of the revisions were such to make a renewal or nonrenewal of that contract at the end of '09 much more feasible and executable for Gramercy than the terms that were previously in place. Or if there is reason to want to accelerate that into the next couple of quarters, we have the flexibility to do that now, but I would say that a lot of what the special committees wanted to accomplish in terms of reorganization, senior management changes -- on both sides, Green's and Gramercy -- fee reduction and making that back end perform of the contract non renewal fee something that was within parameters that Gramercy would be much more comfortable with, that's all occurred. And I would say that's substantively a lot of what special committees wanted to accomplish.

So for just our purposes, we just assume the contract would run its course through next year?

You could certainly assume that as your base case. If it internalizes earlier, it will but I would look at the two events as not having much economic differential at this point because of the fee concessions.

Thank you.

Next question comes from the line of James Feldman of UBS. Please proceed.

Thank you very much. Can you give a little bit more color on the whole Gramercy negotiation process? I've had a lot of questions from people. Just wondering about the arm's length nature of it and I think we should have some color on that?

I think it was as arm's length as you would want in this situation, which was completely arm's length. Two special committees, each committee made up of independents. So Steve and I were recused on each of those committee meetings. They met separately. They hired their own advisors -- in the case of SL Green they were advised by Citigroup and in the case of Gramercy they were advised by Goldman Sachs. Two separate sets of attorneys, neither of which was our common corporate counsel Clifford Chance, so in the case of Green it was Fried Frank; in the case of Gramercy it was Hogan and Hartson. And each committee ran numbers, decided I guess what was in each company's best interests. There was pretty protracted negotiations, as it turns out. This process was started, I seem to think three or four months ago. Certainly on the last conference call I had highlighted this, and really just culminated over the last several days.

So that was the process. I think it was, looking back both at the reaction from both Green and Gramercy shareholders as we heard it today, we think that it was a win/win for both companies given these economic conditions. I mean, everything that's done is done in the backdrop of an extraordinarily challenging operating environment. So I think each company tried to do the best that it could do and I think we've done that. And I think there's a lot of optimism now that this is a first step towards really advancing Gramercy to be able to really turn things around for itself by giving it at its core substantial reduction in G&A. And therefore better operating performance -- just that unto itself is a huge benefit for Gramercy -- and for Green in our 16% investment in the company it's a huge benefit for Green. So that's basically how the process came to be.

Okay. Thank you. Very helpful. Then, Steve, can you just talk a little bit about where you think normalized market TIs are right now? It sounds like the 100 Park deal was a little bit higher than average.

We had said I think consistently over the last several months -- certainly made the point at the last conference call that TIs for vacant space had been increasing. I think by and large where we are doing deals for raw space -- and again it always depends on the price point of a building you are dealing in, so if it's a $50 plus rent type of deal, then I think by and large TIs are in the $45 to $50 a foot range. I think free rent has been edging up and we said that last time as well, that it's been going up an extra month or two. And to some extent we were leading the charge in order to close out leases. So if I had to give the extra $5 or I had to give the extra month free rent, we were doing it in order to lock down our leases. So I think broadly speaking in the market right now, $50 a foot is probably the most common TI for vacant space. That would be less if we are doing renewals, it would be less if we were doing deals on space that's already has an installation that's salvageable. And I think free rent runs anywhere between six and eight months. Although there are plenty of comps out there that are both dramatically lower or dramatically higher, but I think those are good sort of general [sims].

One point I would make, Jamie, is that the concession packages will widen and and we are going to have to meet the market in order to make those deals and I think Steve is telling that you we are doing that. But I would also point out which is somewhat of a subtlety -- we have the capital to do it and many of our competitors in today's market do not. As Greg said earlier, there's $105 million restricted, two-thirds of that per leasing capital and some other reserves, so that's available specifically in and solely for these deals where those reserves exist. And then we have a sizeable cash balance that enables us to be able to do those transactions where others right now who are high basis, high leverage, cash strapped, maybe the early maturing debt -- they can't do that. So on the one hand, concessions are rising. We've said that consistently -- it's just now you are seeing it, but I've been talking about net effective rents as the measure and the first part of that concessions that you've seen gapping out and they are. Where that's headed -- I think maybe we will hopefully have a better handle on that in the next three to six months as we see how much of this shadow space that Steve was referring to actually converts into direct sublet space. And we'll see. But the point is for the deals we want to make, and think make sense, we have the capital to do it.

Thank you very much.

Your next question comes from the line of Mitch Germain of Banc of America. Please proceed.

Good afternoon, guys -- Greg, I think I missed this, what are the parameters for writing down the carrying value of the GKK investment?

Well, you have to look at a number of considerations, including the current trading value of the stock. But you need to look at the, where it's traded, how long it's traded for that period and make an assessment based upon the underlying value. There's a number of considerations that go into it, including the book value of the company, the trading value, and the timeframe under which the trade-in value has declined from its previous lows.

You don't know that timeframe off the top of your head?

I mean you can look at the historical stock chart of the company and that's one point of reference. It's very much like other than the temporary decline analysis that you find a lot of the securities and lending folk having to go through.

Thanks. And, Andrew, the investment markets have been somewhat void of distress so far outside of a few instances. Just based on your estimation, when should we expect some of that distress to potentially start to begin to enter the market?

I think you'll certainly see more in 2009 than we did in 2008 as interest reserves run short. And then the real forced selling -- to the extent that there's not a replacement debt market and to the -- depending on where cap rates shake out will be in '10 and '11 as you start getting floating rate maturities. There are unlikely to be a lot of final maturities next year without extension options. But we'll see the stress where people burn through interest reserves and don't come up with cash.

Great. Thanks.

Your next question comes from the line of Michael Bilerman of Citi. Please proceed.

Good afternoon. (inaudible) is on the phone with me as well. Marc, you talked a little bit about having liquidity and having cash obviously drawing down your credit lines to bolster and take that liquidity before it goes away. You also talked about buying back $60 million in your preferred post quarter end. Can you talk a little bit about where you were able to purchase those notes and how you thought about the effective yield there given the coupon was 4%, and where you were able to buy it, but also whether you are going to use any of this other liquidity to buy back any of the unsecured notes or redo another share repurchase program, and how you think about maintaining liquidity versus buying back securities?

All right, so the question is cash, buy back stock, buy back bonds, how do we look at it?

Specifically on the $60 million convert, where was the pricing that you were able to obtain?

I'm sorry, let me address my question, my interpretation of the question first. Because if we do intend to buy anywhere within that stack, I think as a company we are slightly better served by not necessarily broadcasting specifically where would we would intend to buy, so I assume you would want us to buy the best possible levels and certainly we do. So I actually -- when you say $50 million of converts, we have several offerings.

The $60 million that you purchased in the quarter.

In the quarter, okay. So what we've done already. In terms of how we look at it, with this putting aside whether the stock is ultimately the higher return analysis -- I guess if money was not an issue, we would want to buy all our stock back, right? Let's just call it what it is. If we had, instead of whatever is on that $800 million, plus or minus -- if we had $3.8 billion instead of $800 million, we would buy all the stockback, because we would look at that in the long run and in the long term as being the absolute best use of our cash if we had it. But we don't. So when you're constrained I think retirement of debt takes on a whole higher level and more attractive feel to it than retiring your permanent equity, and that's simply a result of the uncertainty.

If we knew in 2012 or 2013 markets would be back, we would be able to refinance at levels that we are accustomed to or anything close to it, if we had that certainty, you might still say let's use it all to buy back the stock and we will meet our debt maturity requirements in those years as and when you can. But nobody knows that -- everybody hopes and thinks that but nobody knows that. And if you don't know that, it sort of pushes you towards devoting that cash more towards retiring debt than equity even if you think the equity is the better buy. So again just on a pure heads up price per pound return basis, we probably would love to continue buying the equity, but I think due to the uncertainty until we see and better where credit markets are headed and will ultimately settle out, then I think you have to keep as much capacity on the balance sheet as you can and just deal with your near term maturities. Near term to us means -- you can sort of create your own interpretation what near term is, but near term to us is certainly less than four to five years.

Specifically on buying back $60 million of the convertible notes that's due in '10?

Yes.

I mean, what price would you buy that back at?

Look, I think it doesn't make sense to share the pricing at this point in time. You can safely assume it's a high teens plus return which we see as being attractive as anything else we are seeing in the market and having the added benefit of delevering the company in an environment where companies that are overlevered are clearly being punished in the stock market. So it has -- it's a benefit of being a very, very attractive return and delevering the company, so it's in our view a win/win.

But you'll effectively mark the differences into earnings next quarter?

Yes, that was one of the last variables that I had mentioned for the fourth quarter earnings -- there would be gains from those, yes.

And the converts have traded like $0.50 to $0.60 on the $1, is what I'm trying to -- ?

There is different classes out there. So that's.

Just going back to the structured finance book you have about $200 million maturing in each of the next, 2009 and 2010. What specific loans are coming due, and given the higher leverage levels, some of the leasing requirements in some of the cases, can you just talk about the potential of refinancing and maturities of those pieces?

Those are initial maturities on the maturity profile. I think a lot of the loans as I mentioned have extension options at a right. They were often structured as two-year loans with two or three one-year extension options mostly for cap purposes to try and lessen the burden of the cost of interest rate management products. But we expect most of those positions given the current refinancing environment to exercise those extension options.

How much, is there -- I guess from a LIBOR perspective you talked about having a lot of floating rate debt, I assume having $900 million of LIBOR based restructured finance, there's an offset.

Sorry, just to finish out, Michael, what was the last one? Trying to get everybody in there. What was the question?

We didn't hear that one, Michael.

Your next question comes from the line of Anthony Paolone of JPMorgan. Please proceed.

Thank you. With respect to leasing -- in your supplemental, you showed asking rents for the portfolio down just a little bit sequentially, maybe less than $2. And I was just wondering if that, how reflective how that may be of the market and how that may -- and how that percentage change or debt may look if you threw in what free rent looks like in TI, so how effective rents have really changed on lease economics?

The question is how close are those asking rents to taking or how close is the reduction in asking to reduction in taking? Just not sure I understand.

Just to get a sense as to how lease economics have pulled back thus far. Because looking at your supplemental, just the change in what you show as the [ask] is pretty modest so far.

By the way, I think as I mentioned Tony, for the third quarter the asking rents that we had published in June, the actual leasing activity for the third quarter exceed what those published rents are. And Steve actually goes through a very detailed review of each of the properties that rolls up into this, which he can walk you through and made modifications.

I think it's important to understand that with regards to the asking rents in the first place, we always have been very conservative as to the asking rents that we published. Consequently, where we have seen addition in the net effect of taking rents, the need to address -- to reduce our asking rent really isn't as great as you might otherwise think. Each of the buildings -- at the end of every quarter I go through and assign an average asking rent to every one of the buildings. And I think the numbers that we are using right now are very realistic as to where are our expectations are as far as ask -- assuming, again it depends on where you are in the building and it's space by space, but generally the taking rents are within 5% to 10% of the asking rent.

Maybe I'll ask this a little bit different, Steve. In the last few leases that you've actually signed, if you were to do those deals or look at those same deals a year ago, how far off are the economics on the deals you just signed versus what they would have been say at the peak on a percentage basis?

Tony, they are probably down 10% on the nominal rent with slightly bigger concession packages than we would have offered a year ago. So I think squarely within the 10% to 15% that we've been referencing in the past. Some less, not many more. Not many more on a net effective basis. It's very hard to tell you -- we do dozens and dozens of leases per quarter. But if you had to generalize, I think it's safe to say that we were taking most of those taking rents down by 10% what have we would have gotten earlier in the year.

I think we were one of the industry leaders to recognize a change in the market. I remember a year ago last summer or a year ago this past summer being on investor tours, and at that point we were signaling the world is changing, the leasing market is changing, we were ahead of it. We recognized it. We already started to adjust our asking rents. We started to adjust our transactions at that point in time and I think that's one of the reasons we've been successful at really keeping the portfolio full and still realizing deal volume where maybe it's contrary to what you are seeing in the rest of the market.

But someone raised the issue earlier on the call and you're right, the concession package for the quarter were higher -- and I think that's just a function of the market. So we don't think -- it's not surprising to us in terms of the incremental dollars we have to put on the table to close a deal, but they are higher than they were a year ago for sure. And I think the range that I gave you was a good range for where we see the market right now.

Okay. Thank you.

Your next question comes from the line of Michael Knott of Green Street Advisors. Please proceed.

Hey, guys, it sounds like you're addressing the near term debt maturities with the cash you drew down from your line. Can you talk about the '11 and '12 maturities and particularly the exchangeable debt that comes due or can be put back to you in '12? What would be your current plan even though it's a little ways off now, address that?

We have a plan for that. Greg, you want to talk about -- ?

Sure, I had made mention to -- so a bunch of the unencumbered notes that would come due, particularly the 2012 that we had issued last year which comes due in 2012, I think if the market didn't change dramatically from where it is today, first you would look to do -- corporate unsecured financing would be first choice to refinance those. That's probably not a viable alternative as we sit today. Don't know where it's going to be in four years from now. We do have -- the 8 million square feet that I referenced equates to roughly $4 billion plus worth of real estate, and so I think a likely outcome in 2012 would be to go ahead and mortgage those properties. And so when you, if you went around through the portfolio -- we own 1185 Sixth Avenue, we own 810 Seventh Avenue, we own 1350 Sixth Avenue, we own 750 Third Avenue, major fully occupied office buildings with credit tenants that don't have mortgages on them. You would go ahead and likely mortgage those and retire those obligations.

And you wouldn't come across covenants on your lines that would restrict that activity?

Well, again, I mean if you look at the covenant package, we are in very, very solid shape. We have the unencumbered asset pool is the one that we are probably closest to, but again if you mortgaging a property where we have tons and tons of room on the secured indebtedness test and you are using those proceeds to retire unsecured notes in the form of the converts that would be put, that helps the ratio.

You are delevering Michael, so if you are securing up and delevering, you are not worsening the covenant.

Okay. Then last question, can you just address Viacom and 1515 Broadway as well as the plan to refinance that debt in 2010?

Viacom is, we are not going to begin the refinancing plan until we know exactly where we stand with Viacom. That goes without saying. And that situation we would think would be much more clearer to us towards the end of November or December. But we are not -- if the debt doesn't mature until the middle of 2010 as I recall, so there's no, that's -- there's nothing to do in terms of refinancing it now in October until we know where we stand with Viacom in November or December.

I would add the property is relatively conservatively leveraged and the debt yield there is approximately 10%.

Okay.

Sorry, one moment, please.

Operator, a little fast on the trigger there? Michael?

If you would e-mail Heidi the question?

Or get back in the queue and maybe we can put you back in the queue. Sorry about that.

Your next question comes from the line of Jordan Sadler of KeyBanc Capital. Please proceed.

Thank you. Just following up off the last question in terms of capital, can you maybe talk about your view on the dividend as a source of capital -- you are paying out almost $200 million a year at this point. I recognize some of that is requisite for your REIT status, but have you looked at that as a source -- you've got an appropriately conservative posture with all this cash drawn down on the balance, just curious as to the thoughts on the dividend?

I mean, look, I think there's a lot of questions of, in that question and the one before about what does 2012 look like, because that sort of relates to the same thing. I think what we are saying -- what I said and what Greg said is that where we are, our cash exceeds our recourse indebtedness maturities for the balance of '0 8, all of '09, all of '10, all of '11. At some point you have to look and see -- try and get a feel of what are markets going to be look like in 2012 and beyond. That doesn't mean we don't plan for it today, but I think Greg rolled out a contingency plan which is if that if they are no better than they are today, they can always be worse and how much worse it's hard to project. But we look at it as if they are no worse than they are today and no better what's our plan, our plan would be probably to encumber some assets. Clearly if AFFO looks like it's not there to support the dividend, then you'd have to reevaluate the dividend. But I think we would look to the real estate first to encumber as a source to repay other debt because it's debt for debt. So as Greg said there's no lever up there, it's just replacing debt before we would cut the dividend if the AFFO covers it and if we think that's a prudent use of funds, which we do at this time. But if the situation changes and we thought the situation was not improving as we get out there towards 2012, then like every company you have to reevaluate your dividend. That's just not the situation as we sit here today.

A separate question -- just talking about your view in the market, I know its visibility is very difficult here and in the past you talked about a 10% to 15% market rent correction. If you were to underwrite market vacancy or peak market vacancy here, I know it's very difficult to do at this point, but including and in taking into account some of Steve's estimates of the shadow pipeline of sublease space, where do you think we might get this time on the downcycle in terms of total vacancy?

Boy, that's a very tough question. I mean we are sitting right now at around 8% or so and that includes the shadow, that includes direct vacancy that Steve was talking about, so 1.7% of direct. Steve, total square footage of sublet that you think in addition to that number that you think can be delivered in the next 24 months? I would rather look at it that way than predict a vacancy rate. But how much additional beyond the 1.7%?

I think it's widely believed that that can go up another 1 point or so, so it would be 2.5% of 3% of sublease space. But I think you have to be careful if you look at the overall availability of the market and you use that as any guidance as to the impact on our portfolio, because a lot of the vacancy that's reflected out there are in very large blocks of space, whether it's new construction at 11 Times Square that's come on or big blocks of space like Pfizer is putting on, which is basically almost the majority of [75] Third Avenue -- those are the kinds of numbers that move the needle on the availability stats. But then when you ask yourself, how does that impact our portfolio right now, recognizing that through the end of next year, we only have one or two pieces of space that I'm going to be marketing that's in excess of 70,000 square feet. So just because the availability goes up doesn't necessarily mean that that's, I'm competing against the same inventory. It's more of what's happening in the small to mid-size tenant space that's out there because that's the space I've got to fill over the next 12 months.

Jordan, I would add it's important to distinguish between midtown and other markets, so midtown and downtown, midtown and you see numbers quoted for the New York metro area which incorporates suburban activity which is very different. If you go back to the last downturn in the early 2000s, it got down as low as 87% to 88% occupancy, but if you look back then, we were able to outperform the market and operate it close to 10 points above that level, because what we did see then and I think you'll see again this time is tenants moving towards well capitalized landlords who operate their buildings professionally. So the performance back then was dramatically different than what the market was.

That's helpful. Thank you.

Next question comes from Michael Knott, one moment, please.

Michael?

Mr. Knott, your line is open.

I was going to ask, isn't the absolute dollar size of that loan today fairly problematic even though it is conservatively levered on an LTV basis?

I don't believe so.

It's not problematic, Michael, until you know what the leasing status is, and even if Viacom does renew, we have 18 months and funded reserves in the loan and a fairly loan rent per foot that we think -- that would be, that would be one of the least expensive products on the market today. If we offered that as we sit right now today. You have a lot of runway to lease it. So the answer is, I mean I think our first order of magnitude we would like to make a deal with Viacom and have been working with them on and off for years to try and make that occur. But I think they have their own needs that they will I think will come clearer to us over the next month or two, and if we make the deal then we'll know what our refinancing strategy is, and if we don't make the deal and we are delivering that to the market we think we can lease fairly aggressively, lease it up, and I agree with Andrew, the loan is --

I don't believe that $600 million takes it out of the syndicated loan market, not at all. I mean, we just closed $245 million with a sole arranger on a principal basis in September.

Thank you.

Any other questions, operator? Is that all we have at this time?

Your next question comes from the line of Nick Pirsos of [Acquire], please proceed.

The cumulative $14 million established reserves of your structured finance portfolio -- other than being from the non New York portfolio, have you been able to identify any common characteristics that are generating the losses?

No, just I would say each one -- the common characteristics is our non New York portfolio is performing as you might expect or would expect not as well as our New York portfolio. That's the common characteristic. Beyond that the property types involved vary, the locations vary. I would just say the common characteristic is they are in markets where values have dropped more precipitously than they have here in New York, and liquidity is less, and unfortunately that defines a lot of areas outside of Manhattan right now. So many of those loans or several of those loans we think are restructurable and/or will get repaid and/or we think we are in relatively good shape. Other will become problems. But what we tried to do was dimension the bucket of where we think the problems may stem from to a bucket of $200 million. Certainly not the whole $200 million. If that's not obvious I want to state that. But a portion of it -- we reserved I guess $14 million of that $190 million or $200 million, and if there's further deterioration we'll take more reserves as we see it. But beyond that there's no common characteristics.

Thank you.

Next question, Michael Bilerman of Citi.

My question was asked and answered.

Thanks, Michael. Are we all set, operator?

Your next question comes from the line of [Ross Lanner] of [Denetho] Capital. Please proceed.

A question now for why you chose to waive the management agreement for this quarter with GKK?

It was just part of the overall arrangement that the boards each came to determine was I guess fair and appropriate in light of all the back and forth considerations. So I can't tell you how one specific piece related to another, but it was an overall package that included some fee relief in Q3 and then additional relief in Q4. And the incentive fee for 2009 is still present, but with an option on the part of Gramercy to pay that in cash or stock if there is incentive owed in 2009, and it was all considered as part of the package.

Thank you.

Operator, that's our last question, so thank you everyone for calling in, and if there's anyone that we missed, we'll try -- please give us a call directly and thank you for listening on this call today. Operator, you can conclude.

Thank you for your participation in today's conference. This concludes the presentation and you may now disconnect. Have a great day.