美國沃那多房產 (VNO) 2013 Q1 法說會逐字稿

Good morning and welcome to the Vornado Realty Trust first-quarter 2013 earnings call. My name is Larissa and I will be your operator for today's call. This call is being recorded for replay purposes. All lines are in a listen-only mode. Our speakers will address your questions at the end of the presentation during the question-and-answer session. (Operator Instructions)

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

Thank you. Welcome to Vornado Realty Trust's first-quarter earnings call. Yesterday afternoon we issued our first-quarter earnings release and filed our quarterly report on Form 10-Q with the Securities and Exchange Commission. These documents, as well as our supplemental financial information package, are available on our 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 supplement. 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 annual report on Form 10-K for more information regarding these risks and uncertainties.

The call may include time-sensitive information that may be accurate only as of today's date. The Company does not undertake a duty to update any forward-looking statements.

On the call today from management for our opening comments are Steven Roth, Chairman of the Board and Chief Executive Officer; David Greenbaum, President of the New York division; Mitchell Schear, President of the Washington, DC, division; and Joseph Macnow, Chief Financial Officer. Also in the room are Wendy Silverstein and Michael Franco, Executive Vice Presidents, Co-Heads of Acquisitions and Capital Markets.

I will now turn the call over to Steven Roth.

Thanks, Cathy. Good morning, everyone. Welcome to Vornado's first-quarter earnings call. On the macro environment, as I said in my recent shareholders letter, it feels to me that we are on the foothills of a major economic expansion in America. What is going on in the real economy -- housing, autos, innovation, etc. -- is the Real McCoy.

It also feels to me like interest rates will stay low for a very long time. I don't expect cap rates to rise anytime soon. In fact, I may even make the provocative comment that the next move in cap rates may well be down.

The New York economy is also doing quite well. Specifically, in New York, retail and office assets are both selling at all-time highs. Retail rents are clearly at all-time highs; office rents are not.

Interestingly, office rents and values seem to be equalizing among the various submarkets of Manhattan. For-sale residential apartment prices for the best product are, say, $5,000 per foot, with isolated sales as high as $8,000 per foot -- all records.

Now turning to Vornado. Our first-quarter comparable FFO was $1.14 per share, or 16.3% better than last year's first quarter. I am very pleased with our comparable financial results and with our cash position, which today is $1.3 billion with zero drawn under our $2.5 billion revolving credit facility.

Our all-in results include a variety of noncomparable items which are outlined in our earnings release and in our Form 10-Q. Beginning with this quarter, our comparable results exclude FFO from Toys "R" Us and LNR, and FFO from Lexington Realty Trust in excess of its dividend. Of course, the prior year's quarter has been conformed to the current quarter's presentation. Joe will take you through the numbers a little later in the call.

Our New York business performed extremely well and leads our peers in key performance metrics, including occupancy, leasing volume, mark-to-market rent increases, and same-store EBITDA increases. David will elaborate on these metrics shortly.

On dispositions, to date in 2013 we have sold over $1.1 billion of non-core assets, resulting in an aggregate net gain of $288 million. This is on top of $1.7 billion of non-core asset sales closed in 2012, which produced an aggregate net gain of $454 million.

In the first quarter we closed on the sale of Green Acres Mall for $500 million, with a $202 million net gain, which was 1031-ed into the Retail at 666 Fifth Avenue. In the second quarter to date we closed on the sale of four non-core assets aggregating $549 million, with a net gain of $64 million, consisting of LNR for $241 million; The Plant power center in San Jose, California, for $203 million; the Market Street Philadelphia retail property for $60 million; and our 50% interest in the Boston Downtown Crossing site for $45 million.

In addition, we contracted to sell the Harlem Park land for $65 million; that will produce a net gain of $22 million, which is expected to close in the second quarter. We also placed our 19.9% interest in Suffolk Downs in a trust, pending sale. And of course we sold 10 million J.C. Penney shares in the open market, significantly reducing our position.

Our basic instinct is to build, acquire, and grow. But my belly tells me that prices are now higher than future prospects; and therefore we will buy carefully and this year likely sell more than we buy.

We are excited about the value-creating opportunities we have internally, and we will focus hard on them. We have over $1.75 billion of non-income-producing assets plus many development and redevelopment opportunities for internal mining.

I once again reiterate our commitment to simplify and focus our business, and we will make our fortress balance sheet even stronger. We have great assets in great locations, in the most important markets, managed by great people.

Let me comment on this morning's important press release. In the evolution of our organization and management team, I have asked Joe Macnow, my partner for 32 years, to assume an expanded role in the management of the Company. He is going to take on the new title of Chief Administrative Officer, live more in our New York headquarters, and participate even more in management, strategy, and decision making.

As we also announced this morning we are delighted to have recruited Steve Theriot as our new Chief Financial Officer. Steve was our audit partner at Deloitte & Touche, and we know him well for a very long time. Steve has a deep institutional knowledge of our Company and of our people, has all the technical skills and great judgment. He will represent us very effectively with our shareholders, analysts, financial counterparts, and clients.

Joe and I and our Board and senior management partners couldn't be more delighted to welcome Steve. Joe will have more to say about Steve a little later in the call. Now I turn it over to David to cover our New York business.

Thank you, Steve. Good morning, everyone. Let me begin with a brief overview of what we are seeing here in the New York market.

Overall, Manhattan's office market has had healthy levels of leasing activity, with tenants across many industry types and different price points, including the TAMI tenants that I discussed on our last call -- technology, advertising, media, and information. Value and efficiency remain the overall themes of the market, and tenants seeking to save the CapEx of a move are driving renewals to higher than historic norms.

Looking forward, economic sentiment continues to improve with a rising stock market and strong corporate profit. In fact, the New York City economy continues to be one of the healthiest in the nation, having recovered 178% of the total jobs lost in the Recession, second only to Houston and its energy concentration. Office-using employment is now back to pre-Recession levels, having recovered all the jobs lost, some 95,000 jobs.

We are finding there is good depth to the market, with strong activity for our available space, everywhere within the portfolio, not just one sub-market. We are also encouraged by the diversity of the tenants looking for space -- media, technology, advertising, legal, accounting, healthcare, and retailing.

The smaller financial firms, money managers, hedge funds, private equity groups are also quite active. And at 280 Park we and SL Green recently announced 100,000 square feet of leasing activity with Blue Mountain Capital and the Promontory Financial Group, both doubling in size. Our general thinking remains that we will see increased growth in the market for the second half of the year and into 2014.

The Penn Plaza Class A sub-market continues to absorb many TAMI tenants from an expanding Midtown South market, driving the Penn Plaza vacancy rate even lower to 5%, the lowest vacancy rate in Midtown. The Penn Plaza market, which represents only 16% of the total Midtown inventory, accounted for a third of all Midtown leases in the first quarter, led by the largest lease signed in the quarter, the 646,000 square foot renewal we completed with Macy's at 11 Penn Plaza. With this renewal we have solidified Macy's commitment to 11 Penn for an additional 20 years, through 2035.

Let me turn now to Vornado's overall office performance in the first quarter. We signed 30 leases for a total of 909,000 square feet. Our average starting rent was $56.88. We had strong positive mark-to-markets of 15.1% GAAP and 0.8% cash; and our office occupancy rate increased 10 basis points to a very full 96%. Our average lease term was a little over 15 years, and TIs and leasing commissions were a low 7.6% of starting rents.

As we look at the balance of 2013, our office expirations are quite modest, with only 587,000 square feet expiring. In 2014, we have some 1 million square feet expiring. Of that 1 million square feet some 25%, about 250,000 square feet, is made up of three large tenants we know are vacating at 1290 Avenue of the Americas. No surprises here -- Morrison & Foerster, ABN AMRO, and Microsoft.

With the lobby renovation at 1290 now almost complete, which has received rave reviews from the tenant and brokerage community, we have prepared for these lease expirations. In fact, in the first quarter we landed State Street Bank for 106,000 square feet, effectively filling two-thirds of the space that Microsoft will be vacating next year.

On the last call I also mentioned that AXA had placed on the sublease market about 300,000 square feet of their space in 1290. AXA now has subleases out on all of that space. Tenants are now focusing on our direct space availabilities, and we have good activity.

Turning now to Manhattan street retail, in the first quarter we completed 32,000 square feet of leases with very strong mark-to-markets of 228% GAAP and 194% cash, reflecting the growth potential of our street retail portfolio, including our Fifth Avenue, Madison Avenue, and Times Square properties. The highlight for the quarter was a lease at 1540 at a net rent of $2,025 per square foot net, a record for this sub-market.

We also completed a lease with TD Bank for the corner at 1290 Avenue of the Americas at a starting rent of $500 per square foot. And I am sure you all saw the recent reports that rents have crossed the $1,000 per square foot mark in SoHo on Broadway, where we also own a strong concentration of assets.

As Steve said in his Chairman's letter, the Penn Plaza district, where we own 6.7 million square feet of office space plus significant street retail and the 1,700-room Hotel Pennsylvania, is anchored by Penn Station, the busiest commuter hub in North America, which is the subject of much discussion about its future appearance, as well as being anchored by Madison Square Garden and the Macy's flagship store, both of which are currently undergoing transformative renovations.

Redefining the streetscape, retail, and feel for the whole Penn Plaza district is an important opportunity for our Company. A key element of our Penn Plaza strategy is dramatically improving the Hotel Pennsylvania. This includes renovating the Hotel's 1,700 rooms and, importantly, transforming the public areas at the base of the building to invigorate the entire Penn Plaza area with exciting new restaurants and retail. With record tourism in New York, 52 million visitors per annum, the Hotel Pennsylvania showed significant operating improvements in the first quarter, driving both ADRs and occupancy, resulting in a 17% increase in RevPAR compared to the first quarter of last year.

Let me spend a moment now on our Companywide sustainability efforts. Vornado here is the industry leader. This was recently recognized by the federal government, which named Vornado a 2013 ENERGY STAR Partner of the Year.

As a company, we now have 30 million square foot of LEED-certified space nationwide, including 12 million square feet in New York, more than any other owner; 10 million square feet in Washington, again more than any other owner. The 555 California complex is also LEED-certified and the Merchandise Mart in Chicago just had its LEED certification upgraded to Gold.

As Steve mentioned in his Chairman's letter, the New York division has now taken on general oversight of the 3.5 million square foot Merchandise Mart building in Chicago. This asset is managed by Myron Maurer, a 26-year veteran of this building, who has just completed re-stacking the building to prepare for Google.

To produce the 572,000 square feet of contiguous space which was critical for attracting Google to the building, we relocated 102 gift and furnishings tenants, including managing custom buildouts on over 400,000 square feet of space. This re-stacking was completed in record time, and we have now delivered possession to Google.

The occupancy of the Merchandise Mart is now over 95%. While I have general oversight of this asset, it is included for reporting purposes in the Other segment.

To conclude my remarks, let me summarize the entire New York division. We had a very strong quarter. Our key performance metrics are industry-leading, including 909,000 square feet of office leasing, office occupancy of 96%, office mark-to-market rent increases of 15.1% GAAP, and same-store EBITDA increases for the overall division of 9.1% cash and 4.6% GAAP.

With that, I will turn the call over to Mitchell Schear to cover Washington.

Thank you, David. Good morning, everyone. I will also start with an overview of the Washington market and then talk about our business more specifically.

As we have said, 2013 is starting out to be a sluggish year in Washington. The long-anticipated automatic federal spending cuts of sequestration are now in progress.

Until there is more certainty and confidence, based upon a final approved budget, the Washington economy will continue its slower pace of growth. Notwithstanding, we expect the private sector will continue to fill the gap left by the government.

Our sense is that agencies and contractors have been preparing for a lower rate of government spending for many months. And to that extent, they have already decreased headcount and increased space efficiencies.

Washington has a very diverse economy and has continued to grow, albeit modestly, despite numerous fiscal cliffs, cuts, and deadlines. In 2012, the DC economy grew by 2.4% as compared to the national average of 2.2%. We expect a strong -- we expect a growth rate of about 2.1% in 2013 and believe there will be strong momentum in 2014.

In our own portfolio, we are repositioning buildings by supplementing government tenants with more private-sector tenants. This strategy is not only diversifying our tenant base, it is providing positive rent growth.

A good example is at 1750 Pennsylvania Avenue. Last year, the United States Treasury lease for 121,000 square feet and the IRS lease for 92,000 square feet, or a total of 213,000 square feet, were expiring. Through a combination of renewals and re-leasing we have repositioned this 276,000 square foot building for the next 10 years.

First, we renewed the United States Treasury for 121,000 square feet for a 10-year term. Then we re-leased nearly 100,000 square feet to new high-caliber private-sector tenants, including the United Nations Foundation for 84,000 square feet and AOL for 15,000 square feet. The repositioning also includes a popular gourmet Italian market and a new fitness center. Through this leasing we have grown rents from $40 per square foot to $47 per square foot.

We also made progress at the Warner Building. Last August we signed a 16-year 88,000 square foot lease with the national law firm of Cooley LLP. We were appropriately aggressive to make this deal by assuming their remaining lease obligation of 54,000 square feet, which we have now re-leased at better terms than we underwrote.

In Crystal City, in the first quarter we leased 101,000 square feet at an average initial rent of $43.55 per square foot, with a positive GAAP mark-to-market of 4.3%. This activity was predominantly new private-sector tenants relocating to Crystal City from other markets.

The leasing included 50,000 square feet of first-generation space with Management Services International, which signed in March, who is relocating its headquarters from downtown to Crystal City. This first-generation lease, which is not included in our mark-to-market statistics, has an initial rent of $43.50 per square foot, a 9.1% increase over the 10-month expired prior tenant's rent of $39.88 per square foot. Other recent private-sector tenants relocating to Crystal City include Aerospace Corporation and Digital Management, Incorporated, each approximately 20,000 square feet.

For the entire Washington business, we signed 44 deals in the quarter, aggregating 297,000 square feet at an average rent of $40.68 per square foot, generating a positive mark-to-market of 5.5% GAAP and 3.5% cash. TIs and leasing commissions were $8.45 per square foot per annum, or 20.7% of initial rent, unusually high due to two outlier deals.

One was a shorter term than usual, Facebook; and another that converted free rent to TI allowance, MSI. Excluding these two deals, TIs and leasing commissions were a more normal $4.17 per square foot per annum, or 10.9% of initial rent.

Government leases accounted for 21% of the activity in the quarter, and private-sector tenants accounted for 79%. Occupancy was 83.8% at quarter end, down 30 basis points from year end.

At Skyline, occupancy dropped from 60% to 56.6%, due to the impact of BRAC. Excluding Skyline, occupancy is 89.1%, up 30 basis points from year end.

Our full 2013 lease expirations are at a historic low of 839,000 square feet, compared with the annual average over the past four years of 2.2 million square feet. After the first quarter we have only 578,000 square feet expiring for the remainder of the year.

When comparing same-store EBITDA for Q1 2013 to Q1 2012, we were down 7.4% on a GAAP basis and 9.4% on a cash basis, almost entirely due to BRAC. We have resolved approximately 900,000 square feet of the 2.4 million square feet of DoD lease expirations, and almost all of the Department of Defense moveouts are behind us. We expect EBITDA growth to begin in 2014.

We are very pleased with our residential portfolio, which is now 2,414 units in Arlington and DC, which had a same-store EBITDA increase of 3.1% for the quarter, following an 8.3% increase last year. And today it is 97.7% occupied.

We will shortly start the development of a new 700-unit residential project in Pentagon City, which will have a 37,000 square foot Whole Foods Market at the base of the building. Signing the lease with Whole Foods is a home run by any measure for the project and the neighborhood. Whole Foods has a history of increasing value to its surrounding neighbors, which we fully expect will happen here, where we own two big parcels of adjacent land that will surround Whole Foods.

On the same block, we can build an additional 1,400 residential units. And across the street we are planning for 1.8 million square feet of office and 300 hotel or residential units at our Penn Place site.

The total cost to build the 700-unit Pentagon City residential project is estimated at $250 million, or $293 million if you include the value of our land. We expect to deliver the first apartments in the third quarter of 2016. These residential units and the Whole Foods Market are game-changers for Pentagon City, and for Crystal City as well.

I thank you very much, and I will now turn it back over to Steve.

Thanks, Mitchell. Okay. Let me touch on our strip shopping centers and malls, which had a strong quarter. Strip shopping center occupancy was 93.7% at quarter end, up 10 basis points from year end. Occupancy at the malls was 93.3%, up 60 basis points from year end.

We leased 644,000 square feet at the strip shopping centers, including seven TJX renewals totaling over 245,000 square feet. The mark-to-market on all leasing was 9.2% cash and 12.9% GAAP. We leased 159,000 square feet at the malls with a 3.4% cash and 9.1% GAAP mark-to-market.

The combination of solid trade area incomes, strategic locations, and strong anchor base is driving leasing in both the strips and the malls. With only one quarter of the year gone, over 75% of our 2013 new and renewal leasing objectives have been achieved.

Now back to Joe for the financial review.

Thank you, Steve. Hello, everyone, and thank you to everybody out there who sent me such nice notes this morning. Yesterday we reported comparable funds from operations of $1.14 per share versus $0.98 in the prior year's first quarter. That is a $0.16 per share increase, or 16.3%.

Total FFO was $1.08 per share, versus $1.82 per share for the prior year's first quarter. Please see either our press release or the overview of MD&A on page 39 of our Form 10-Q for a complete summary of the non-comparable items for the quarter.

Comparable EBITDA was $375.3 million in the first quarter, ahead of last year's first quarter by $25.6 million or 7.3%. All of these numbers are on page 10 of our supplemental for anyone who wants to go there.

Our New York division, our largest business, produced $217.5 million of comparable EBITDA this quarter, representing 58% of the entire Company. New York was $27.1 million or 14.2% ahead of last year's first quarter.

Our Washington business produced $86.2 million of comparable EBITDA this quarter, which together with the New York business represents 81% of the entire Company. Washington's first quarter was $9.7 million or $0.05 per share behind last year's first quarter due to BRAC. This EBITDA reduction is at the midpoint of the range of EBITDA diminution we project for the year.

We are not changing the range we set for this year. We expect a reduction in Washington's EBITDA in both the second and third quarters to be largely offset by an increase in the fourth quarter.

Our strips and mall business produced $53.3 million of comparable EBITDA this quarter, which together with New York and Washington's businesses accounts for 95% of the entire Company. The strips and malls are $1.1 million ahead of last year's first quarter, with 75% of the 2013 lease expirations already behind us.

The remaining 5% of comparable EBITDA includes the 3.5 million square foot Merchandise Mart property anchored by Motorola Mobility -- Google -- and the 1.8 million square foot 555 California Street office complex in San Francisco as well as our real estate fund.

Now turning to capital markets, we were very active in the quarter. We closed a 10-year 3.61% interest-only $390 million mortgage on 666 Fifth Avenue retail in the quarter. This property was previously unencumbered.

We closed a 10-year 3.56% interest-only $300 million mortgage on the Bergen Town Center in the quarter. This property was previously encumbered by a $282 million floating-rate loan.

We extended a $1.25 billion tranche of our $2.5 billion unsecured revolving credit facilities by two years to June 2017, with two six-month extensions. The interest rate was reduced from LIBOR plus 1.35% with a 30 basis point facility fee, whether drawn or undrawn, to LIBOR plus 1.15% with a 20 basis point fee.

We also issued $300 million of 5.4% perpetual preferred shares and redeemed $262 million of 6.75% perpetual preferred, which lowered our annual cost by $3.5 million and resulted in a $9.2 million non-comparable expense from the write-off of the deferred issuance cost of the shares redeemed.

As of today, we have $3.8 billion in liquidity, consisting of $1.3 billion of cash and $2.5 billion of undrawn revolving credit facilities. Our consolidated debt to enterprise value is 36.5% and our consolidated debt to EBITDA is 6.7 times.

Now let me spend a minute on the larger non-comparable FFO items in the quarter. We received $124 million in cash in settlement of our rent claim against Stop & Shop, which resulted in a 59.6% of non-comparable FFO. We sold 10 million shares, or 43%, of our investment in J.C. Penney, which resulted in a $36.8 million net loss from the year-end carrying amount. We also recognized a $39.5 million impairment loss on the remaining 8.6 million shares of J.C. Penney that we own and $22.5 million mark-to-market loss on the 4.8 million J.C. Penney derivative shares we own.

The J.C. Penney results are also part of noncomparable FFO. We carry our remaining investment in J.C. Penney at $15.11 per share, the closing price on March 31, 2013.

As Steve mentioned earlier, Toys FFO for both this year and last year has been shown as noncomparable FFO. In last year's fourth quarter we recorded a $40 million non-cash impairment loss on our investment in Toys to bring it to fair value; and we disclosed we wouldn't increase the carrying value as a result of recognizing Toys income.

Accordingly, in the first quarter of this year, we recorded our share of Toys fourth-quarter net income, their holiday quarter, of $78.5 million and a corresponding non-cash impairment loss of the same amount, the effect of which is to hold our $475 million carrying value flat to year end. We have a $396 million economic cost basis here. If Toys historical seasonality and earnings continues this year, our share of Toys net losses during the remainder of 2013 would reduce our GAAP carrying value close to economic cost.

Steve also mentioned that FFO from LNR, which was sold in April, has been treated as non-comparable. In the second quarter of 2013 the sale of LNR for $1.05 billion was completed, and we received net proceeds of $241 million for our interest.

This was equal to our GAAP basis which, for accounting purposes on the equity method, was built up from 2.5 years of LNR's undistributed net income. LNR provided a 40.4% IRR over this holding period. Even taking into account the write-down on the loan to LNR prior to the re-capitalization in July of 2010, the investment provided an 11.9% IRR over the eight-year holding period.

We were thrilled to be able to recruit Steve Theriot as our new Chief Financial Officer. Having been the partner on our account for five years, he knows Vornado's people, business, and systems well. Steve is 53, has 30 years of experience with Deloitte, and is currently the managing partner in the firm's Northeast real estate practice.

His learning curve will be short. Steve is my friend, and I will help him in every way I can in his transition.

At this time I would like to turn the call over to the operator for Q&A.

(Operator Instructions) Michael Bilerman, Citigroup.

Yes, good morning. Josh Attie is on the phone with me as well. Steve, in your opening comments you talked about prices equalizing across the different submarkets in New York. I am just curious.

As you think about your disposition plans, you have obviously had great success on a lot of the non-core sales, generating significant proceeds for the last 18 months. Would you entertain, as you look at pricing, sales of more office and retail assets in New York and DC, given your views on pricing around the City?

Michael, hi. Sure, although that is not our highest priority. Our highest priority continues to be to divest non-core assets, of which we have more than we should. So our hands are full on that.

With respect to core assets, our thinking is as follows, okay? If an asset is mature and has gotten to the point where we don't think it is going to grow appropriately, it is a candidate. The second part of that is tax considerations are extremely important, especially with these very large assets. And the third part of it is -- the age-old question is, what do you do with the proceeds?

So the answer is sure; we look at every asset in our portfolio very carefully every year. And we look at selected assets more frequently than that. But in terms of your future expectations our focus is to work very hard on the non-core assets, and that is our immediate focus.

Just as a follow-up, you also talked about mining the portfolio for a lot of the opportunities that you have to create value, versus going out and buying. One opportunity that you didn't talk about in the Chairman's letter or on this call is 220 Central Park South. Can you just provide an update where you stand with that and where things are with Extell?

Not really. Let's talk about that asset just a little bit. First of all, it is a wonderful asset. It is arguably and consensus the best residential development site in town.

And it is for for-sale condos, which really is not our business focus. We are an income-producing property business.

So we are very happy to have bought it. We think we have a profit in the land which is a multiple of our acquisition price. We are obviously in a dialog with our neighbor; and beyond that I don't think that it is appropriate right now for me to comment, although we love the asset.

Steve Sakwa, ISI Group.

Good morning. Steve, I just wanted to maybe follow up on Michael's comment and some of your early comments about great time to be a seller. Prices may continue to even go up. As you say, cap rates may continue to compress.

Can you just help us think through what inning you are in, in the disposition of these non-core assets? If you go back to the Chairman's letter from last year, you have ticked off a lot of those things but there are still a few to come.

So maybe can you help us frame the size of what is left? Are we in the fourth inning, seventh inning, top of the ninth? How do we think about that?

Yes, let me -- my baseball is a little rusty. Let me focus on dollars as opposed to innings for a minute. Hi, Steve. How are you?

Here is what I think. We have sold the better part of $3 million already over the last 18 months or so. We are very happy with that progress.

We have teed up now, either in contract or in the sales process, somewhere over $300 million. We will easily get to $500 million and likely $1 billion of dispositions this year. That is what our internal budget is.

That does not include what I will call now for a moment the Main Events, which is Toys, J.C. Penney, or assets like that. Nor does it include anything having to do with 220 Central Park South.

So our expectation is $500 million for sure this year, and $1 billion is possible. There are other assets beyond that; but that is what we are focused on for this year.

Okay. Then I guess given the liquidity that you mentioned, I think you said $1.3 billion, it obviously seems very difficult for you to put cash to work at these levels. And you're likely to build up more liquidity as the year unfolds.

How do we think about you deploying that capital, either through acquisitions, share repurchases, special dividends, just raising the regular dividend? How do we assume you use that capital?

Well, the first thing is, cash is good. We like cash. We have $1.3 billion, and that is a fairly large swing if you look at our year-end balance sheet. So the changes in our year-end balance sheet to our current balance sheet, which we predicted at year end of course, happened exactly right on the money.

We expect to build cash fairly aggressive with asset dispositions and what have you. So now you're main question is -- what do we do with the money?

Well, the first thing is, investing today is very difficult. As I have said, several times we believe that we will be selling more than we will be buying in this market.

That is not because we are not looking very hard and we are not trying; but it is very difficult. Pricing is very aggressive for us.

By the way, our peer group is in the same condition. There is not a lot of publicly traded blue chip REITs that are aggressively buying right now. So that is step one.

Step two is, the first Public Enemy Number One in terms of what to do with our cash, for example, is to pay down some of our overpriced debt. So we have a $400 million -- I think they're the VONDs? Is that correct? They are VONDs; they are open to be prepaid. They are a 30-year instrument at 7 7/8% -- I think it is almost 8%.

So as soon as we can get our hands on those we are going to use our cash, which is earning nil, to retire those. That is $400 million at the better part of 8%; that is a $32 million increase in our earnings. And we can't invest money at anywhere near 8% today.

There are other instances like that. We have got preferreds which are callable. So in terms of the first thing we do with our cash is to focus on our balance sheet, which will actually be, interestingly enough, a delevering of our balance sheet.

So what we would hope is a double whammy, where our earnings go up aggressively from the use of that cash which is earning right now nil, and the second is that our multiple may -- please the heavens -- expand in relation to the fact that the recognition on the part of the market that our balance sheet is really strong, getting stronger, and we are a very low-levered company.

In terms of share repurchases, we have said multiple times that that is not a large focus for us unless there was a very wide discrepancy between what we thought NAV was and the trading price. So for that, that is not imminent, I don't believe, Steve.

In terms of acquisitions, we would love to find productive places to put capital. As I said, we are having trouble with it.

So I am not happy with that answer but that is where we are. That is the facts. Love to be able to put out money aggressively in our core business if we could.

Jamie Feldman, Bank of America.

Thanks and good morning. I guess first, congratulations, Joe, on the change. And a question for Steve. Can you just update us on the latest --?

Hey, Jamie? I second that. Congratulations.

Thank you.

I'm sorry, I didn't mean to interrupt, but I did.

No, well-deserved, well-deserved. So, Steve, I guess can you just talk a little bit more about update on the plans for the CEO role? And then also how is it going for you in the role, and how have Mike's responsibilities been divided up in the Company?

Sure. I think my friend Mort Zuckerman said on his call last week that -- because he just gave up the CEO position to Owen, that he had been -- not been the CEO for 98% of his tenure with the company. My response to that is I have been the CEO for 98% of my tenure with the Company; so I am used to this role.

I miss Mike, but nonetheless, everything is fine. In terms of Mike's activities, we were all here when Mike was here. It is pretty obvious that the move that we have just made in adjusting Joe's responsibilities and giving him greater responsibilities is to take over some of the administrative and leadership things that Mike had done before.

The rest of Mike's activities have been split up between me, of course, as CEO, and Michael Franco and Wendy Silverstein, who run our Acquisitions and Capital Markets group. And that is an area where Mike had spent a great deal of time, enormously talented in that area. I hope that answers your question.

Okay, helpful. Then just a follow-up, David, focusing on New York. There has been a lot of discussion about how Sixth Avenue has been a little bit less competitive given the age of some of those buildings. Can you give your comments on that?

And then also, what was the New York office same-store EBITDA if you do back out Hotel Penn? I think in the supplemental it only shows it sequentially rather than year-over-year.

The New York same-store EBITDA is 9.8% cash and 4.5% GAAP for the quarter.

The question was, if you back out Hotel Penn. Do we have that number anywhere?

Hotel Penn was up $300,000 in the quarter.

That is if you back out Hotel Penn. Just looking at the New York office business, I think our numbers actually were right in line with the, quote, overall divisional members including the Hotel Pennsylvania, the retail, and all the assets in the division.

That will be updated $26.8 million exclusive of the Hotel Penn.

So the number is almost exactly the same. They are basically spot-on.

In terms of your question regarding Sixth Avenue, there is some fair amount of space that has come onto the market on Sixth Avenue. Availability rates on Sixth Avenue right now are hovering around 12%, 13%, maybe even 14%.

I think the one thing that we have come to understand is that what is critical to attracting tenants to our buildings is continuing to reinvest in the assets. And as I mentioned to you, at 1290 we have undertaken a dramatic transformation program, initially starting with the mechanical systems in the building and now culminating with the overall redesign, redevelopment of the lobby, vertical transportation in the building, and sustainability.

In fact, I will tell you that Steve got a nice note on Sunday night from one of our competitive owners saying he walked by the building on Sunday night and said -- wow, what a transformation in the asset.

So I think the key in any market and certainly the key in a market that is competitive is upgrading the product, maintaining its competitive nature both from a mechanical and infrastructure point of view, as well as obviously just dramatically changing the appearance of these assets.

I might add one other thing, Jamie, and that is is that Sixth Avenue is famous for these very, very large buildings with large financial services floorplates and big tenants, 700,000-foot tenants, million-foot tenants. As a business we have shied away from that kind of product, because it is great when it is full but it is just brutal when these big tenants decide to move.

And even in a renewal negotiation, the size of these tenants -- the landlord is never on the right side of that deal. So we shy away from that kind of product. We prefer two- and three-floor tenancies where we can actually have less exposure, less risk, and higher rents.

Now an example of that is we had a very large Macy's tenancy in Penn Plaza of 650,000 square feet approximately. And while that lease was not due and we were not anywhere close to the expiration date, both we and this very important tenant decided that it was a good time to renegotiate that lease and extend it. And we did it. And we did it very aggressively, and we are very happy that we did.

Michael Knott, Green Street Advisors.

Yes, Steve, I just have a question on the retail platform. Can you just give us your thoughts on what that is going to look like when you are all done with asset sales? Are you going to have much in the way of malls left? What about strip centers? Are you going to focus just on Manhattan street retail?

The answer is that it is too early to predict, Michael, what we are going to do with that. We love, love, love the Manhattan street retail business. Pound for pound I think it is a superb business which each year keeps giving and giving and giving. We are aggressive buyers of Manhattan street retail, and it is a very, very, very cherished business in our portfolio.

We like our strip shopping center business. In fact, it is our feeling -- we have individual single assets and miscellaneous assets that we have accumulated over time that we would prefer to sell, and so we are pruning that business to get it down to what we believe are core assets that are great investments.

If I was pressed, I would say that the strip business is a mispriced business. In this environment and compared to other assets that are available in the marketplace, a 6.5% cap rate, good strip shopping center I believe is a better investment than it is a sale. And especially when you think that you can product sub-4% leverage on that asset and get almost a 10% return, there is very little CapEx that has to go into strip shopping centers.

So we like that business. Whether it ends up being over the long term a marriage partner to the New York Towers that we have is a whole different question -- which we will get to, but that is not number one on our Hit Parade today.

The mall business, we have said publicly that while we have the management capability and history and legacy of running mall assets and running them well, we don't have enough bulk to really compete in that business. We can't grow; and therefore we have shown our intention by selling several very important assets.

Once again, we have done the lion's share of the financial harvesting out of the mall business. The remainder of our mall assets are smaller.

And they won't be given away. If we can get good pricing on them, I don't know. But once again, it is not a very high priority for us.

So the long and the short of the answer is we cherish our Manhattan street retail business. We think the strip business and the mall business, where the returns are good, are good businesses. Whether they over the years are a marriage partner for our New York Tower business is a different question.

Okay, thanks. Then just one more for me would be a devil's advocate question on your macro view. If you feel like interest rates are going to stay low, but we also have a strong recovery coming, wouldn't that be a perfect scenario for commercial real estate? And therefore wouldn't pricing today look very attractive?

You know, I don't have that good a crystal ball. I can only tell you that my view is not novel. I think prices are high; they are likely to go higher.

I am not calling a top. I am not saying anything like that. That is not my business, and I may not be smart enough to do that.

I do know that compared to historic prices, asset values are very high. They may go higher. If interest rates stay low, who knows?

The issue is that interest rates may be a lot different than three or four years, and so that may affect asset pricing. I can only tell you that historically from an investment point of view there are two things that really make or break investments.

The first is what you buy, the quality of what you buy, whether that be a building or a stock or a whatever. And the second is the vintage of when you buy. Lots of commentators say the vintage is the single most important thing.

What I am basically saying is I am not sure that this is the right vintage to be buying. There are lots of variables out there. We are going to be very cautious.

One other thing is that my personal orientation is that if you take a 10-year cycle, there are three years in any 10-year cycle that are the right times to be buying aggressively; and then there are two or three years when it's the right time to be selling; and the rest of the time is confusing. So what I am basically saying is we are certainly not in the aggressive buying three years, and we may very well be in the confusing years.

Alexander Goldfarb, Sandler O'Neill.

Yes, hi. Good morning and congrats again, Joe. The two questions. Steve, first up, you just picked a new CFO; and as you think about who you would want to replace you in the CEO role, how do you invasion your participation in Vornado going forward after the new CEO?

Do you envision the partnership where you were quite active along with Mike? Or do you envision more of a scenario where you're letting the new team run the reins and you sit back in more of an advisory-type role?

Alexander, thank you for your question. I am going to answer it obtusely. I am 71 and a half. That is my answer.

Okay. That makes sense. Then the second question is --

By the way, that wasn't a wise guy answer. I am not a wise guy, okay? I am 71 and a half, and it is not appropriate for me to be the head of this Company for another 10 years. It is just not appropriate, and it won't be.

Okay. I appreciate your candor, Steve.

The next question then is, you guys talked a little bit in response to Jamie's question about the importance of spending on older buildings to make them competitive. Just given the trends in increased office efficiency and the trends of the new workers, how do you think about CapEx, or how should we think about CapEx over the next few years?

It sounds like it is going to step up as the older buildings get renovated, new lobbies, new systems, and such. So is there a way to quantify what level of spend you guys are thinking about in terms of keeping the building set competitive?

The answer is -- the first part of that is that we are very rigorous in keeping our buildings, whether they be newer vintages or older vintages or what have you, totally and completely up-to-date. We think it is essential for the profitability of our business, our tenant retention, tenant satisfaction, our reputation in the industry, etc.

So we don't own a single asset that is starved for CapEx in any way. So that is the first thing.

The second thing is that the difference between a new building and an old building is not as great as one might think. The difference is principally three -- ceiling heights, column spacing, and the window line at the facade. Those are the three differences.

We find that in our buildings they are competitive except for a million-foot user who wants a totally custom-made building in terms of the physical plan. The second thing that we find is that in many instances location is as important as the ceiling height, whether you get an extra half a foot more in ceiling height or what have you.

So actually we think that New York is one market where buildings which have a little patina on them, a little gray on them, are actually very well thought of and in very, very high demand. So I don't believe that you will see any significant change or meaningful change in the amount of CapEx that we invest in our buildings going forward in New York.

Washington is a little bit more difficult, because in Washington we believe the CapEx in our buildings will go up in a measured way. But New York, what we have been spending in the past I think you can use as a prediction for what we will spend in the future.

David, do you have any other comments?

No; I think, Steve, what you said is fair. That is, these buildings day in, day out we are maintaining and doing whatever we have to do to make these buildings technologically proficient for tenant demand, both tenant satisfaction and tenant requirements, whether it is power, HVAC, backup generation.

Where we are seeing -- where we are spending potentially some significant monies are buildings that we are acquiring effectively for redevelopment, like 280 Park Avenue and of course 1290, which is something that we acquired four or five years ago and are now undertaking the major capital upgrade.

Mitchell just handed me a note. For our corporate headquarters in Washington, our own offices where Mitchell's -- how large is the office?

About 45,000.

About 45,000 square feet of our Washington, DC, office, we bulldozed our old offices, which were traditional with cubicle -- with offices and whatever, and installed -- Mitchell installed a modern style, up-to-date, open-plan kind of a scheme which would be for two persons. A, his people work better. He likes it better. It is all white; that is his taste.

And the second reason is that he shows clients what can be done. Now this is in an older building, and it works wonderfully well.

Ross Nussbaum, UBS.

Hi, it's Ross Nussbaum from UBS. Steve, just to follow up on some of the questions before. With respect to your tenure in the CEO role, are you suggesting that your plan is to stay in the role for a couple of years? Or is there an active search underway for your successor at the moment?

Hi, Ross. There is no active search underway for my successor. The plan is -- we have some work to do to get the Company into fighting shape and get it focused. The current management team has been charged by the Board to do that, and we will do that.

When we get to the end of that journey, then obviously we do have -- at that point, I will be more than 71 and a half. And at that point we have issues we will have to deal with.

Okay. Fair enough. Then on the clean-up side, guess I have been a little surprised that the stake in Lexington is still something that is on the books. What needs to happen for that not to be on the books?

Well, actually I am very pleased with the Lexington investment. You know its history. It's a legacy investment. It started out as a Newkirk investment; it then was merged into Lexington.

And the Lexington investment has performed awfully well for us. The stock is over $13 now, and the management team of Lexington has done a very good job of surfacing values. And we have been there all along, rooting for them and with them and counseling with them.

What happened at Lexington is that Lexington was an outlier on the negative side in an industry that is a fairly tight net lease company industry. And the two premier competitors in that field had balance sheets which were much, much better; that is the principal differentiator between Lexington and the two better competitors who sold at 5 or 6 multiple turns better than Lexington, maybe even more at the low point in the cycle.

So the Lexington management in consultation with -- we were in there rooting for them and advising them and whatever. Set about a multiyear program to fix their balance sheet and try to close that gap between their multiple and the better competitors. They have done a very good job of doing that.

We thought that heretofore our selling that stock would have been a mistake and premature for two reasons. A, we thought it was a large asymmetrical risk on the upside that the stock would go up, and go up aggressively. And on that one we were right.

And the second is that it produces a 4.5% or more dividend; and the other option would be to sell it and put it into cash earning nil. So the answer is that we are pleased with the investment heretofore, and we understand that it is an investment that we will liquidate at some point in the future; and I don't really think it is appropriate for us to begin to predict exactly when that might be.

I am not saying -- the question is not if we will sell it; we will. The question is when. And that is something that I don't think it is appropriate to discuss now. I hope that answers the question, Ross.

David Harris, Imperial Capital.

Hey, thanks. Good morning, all. There was a very sizable term -- lease termination contribution in the first quarter. Can you give some color on that and give an indication as to whether any sizable contribution will be made from that line as we look the rest, the balance of the year?

That lease contribution, David, was the payment from Stop & Shop in settlement of the litigation.

Oh, okay.

Joe, I think it was $60 million, or high 59s, right in there. We talked about that in the preparation of our financial statement because I was -- we thought somebody would find it an aberrant number, as you did.

Joe and our accounting teams -- it was basically a payment with regard to a lease. So literally it is a lease cancellation, but it is certainly an irregular lease cancellation.

But that is (multiple speakers). It is $60 million from Stop & Shop.

Good, thanks. Right. Thanks for the explanation. Then a quick question for Mitchell if I may.

By the way, one comment about that. That was a 10-year litigation. I can tell you that from the point of view of the management of this Company, we hate litigation.

And the second part of that is we hate even doubly litigation with an important customer and counterparty. But we had no choice, and -- better than we wanted; but we hated it.

Right, okay. A question for Mitchell on DC. Is it reasonable to assume that we are at the low point in occupancy given that you worked so well through the BRAC expirations? And what your -- in the context of the comments of your state of the market.

I think as I said in the comment, there is still some uncertainty so I wouldn't want to make a comment or a prediction today that we are absolutely at the bottom. I think that we are either at the bottom or close to the bottom or flattish for the moment; but I think it is going to take a couple more quarters for things to settle down before we see them start moving up.

I think the fourth quarter of last year there was quite a bit of slowdown and things were not really moving as a result of the pending budget debate at the time. So people sort of just froze and stood still.

I think during the first quarter and what we have already seen in the second quarter of this year, you see more movement, more activity, more action. That will hopefully translate into more leases and more absorption as we go through the year and into next year.

Just to add to what Mitchell said, David, because almost all -- not all, but almost all of the BRAC-related moveouts are behind us, that makes it fairly easy to call that we are fairly close to the bottom. There are some left, but almost all of them are done.

So we seem to be getting there. Now we wait for the turn and an improvement in the market.

Vance Edelson, Morgan Stanley.

Hi there. Good morning. In New York, with the migration continuing from Midtown to Downtown, partially due to the lower rents, you did mention in the prepared remarks that equalization that is ongoing. So more specifically, what are the prospects for seeing those Downtown rents really move higher to take advantage of the increasing demand?

I think the tenants that today are looking at Downtown obviously have numerous availabilities, both for large blocks of space as well as for some of the smaller tenants. What we have seen is a couple of these larger blocks of space, in fact, absorbed.

I do think what we are seeing in the market, as I said in my prepared remarks, was this notion of value and efficiency. I think one reason tenants today, which otherwise might have been looking at Midtown South, they are migrating to our Penn Plaza market, they are migrating to Downtown. It is still a value story that has driven some of the activity Downtown.

I don't think -- I think Downtown has not seen all of the space that is going to hit the market. So I think in terms of some of the givebacks of BofA and Merrill, I think in terms of the new space that is coming on the market, in terms of the World Trade Center, and other givebacks that we are seeing, if you ask me my prediction is that vacancy rates in fact Downtown will be increasing, not decreasing.

So I think it is going to be probably some time before we are going to start seeing increases in rents. I think some of the asking rents Downtown are going to be going up because of the nature of the products coming on the market. But obviously what is important is not the asking rents but where the deals are being made.

Okay. That makes sense.

Just to add to that, there's different markets. So there is the large-tenant market, which is one pricing point Downtown. And then there is the smaller boutique market, which is a different pricing point.

And then Downtown is a word which really has different sub-markets. So pricing in the Meatpacking district or in Chelsea or in the Highline district or in the Penn Plaza district is different for boutique-y kinds of space than it is all the way Downtown.

So it is complicated. But it's interesting that you can get space on Park Avenue today for $85 a foot. You can also have to pay for space in the Meatpacking district, around the Highline more than $85 a foot for space. So that is what I meant in my prepared remarks.

Okay. That's very helpful. Then as a quick follow-up, a question on redevelopment. The focus has pretty much been confined to New York right now, with some exceptions like Pentagon City.

Do you see that focus shifting toward DC? And if so, maybe just give us a feel for the timing and the magnitude.

I didn't hear the question. I'm sorry, I didn't hear the question. Could you repeat it?

Sure. The redevelopment focus is largely on New York now. When do you see that focus shifting more towards DC? What would the timing be and the potential magnitude?

We have an enormous amount of inventory in Washington. Just to tick off some of the assets, in Pentagon City we have three large apartment sites, one of which we announced in the call and recently in our documents. We are going to start a 700,000 square foot for-rent apartment project with a 37,000 square-foot Whole Foods in its base.

We have adjacent to that two apartment sites which will support 1,400 units of housing. So that is 2,100 units that we have in inventory of which 700 we are going to be acting on.

We have what we call the Penn Place development site, which is 10 acres which is directly across the highway from the Pentagon, which is zoned for 1.8 million square feet of office plus hotel plus a little bit of residential as well.

We have in Crystal City between 4 million and 5 million square feet of redevelopment rights which will involve razing buildings and replacing them with larger building, so that is obviously a very long-term prospect. But it is essential in creating enormous long-term values in refashioning Crystal City, which as you remember is on the shores of the Potomac River across from the Capital, into a whole different kind of modern office complex.

And then we have the site in Rosslyn, which is the waterfront site on the Potomac River, directly across from the Kennedy Center so arguably -- not arguably, for sure, the best development site in Northern Virginia.

So we have an enormous development program. All we need is a strong and stronger and strengthening market to be able to perfect that.

Now, all of these assets are held basically free and clear, and basically are not really in our NAV anywhere. So we are pretty excited about the long-term prospects for value creation in Washington.

Mitchell has been extremely rigorous and his team in prosecuting approvals and entitlements for all this inventory, and we are in excellent shape in that regard. We are focused -- at every quarter we are focused on what the timing is, when to begin to move on some of these opportunities.

Michael Bilerman, Citigroup.

Steve, can you spend some time on Alexander's? Obviously with the sales of Kings the majority of the value is now in 731 Lex. I guess, how do you think about that investment?

It is clearly an important one for Vornado and an important one for you and your partners, and it is also an entity that is externally managed by Vornado. I guess, is that sustainable long-term? How do you think about it progressing?

Hi, Michael. Welcome back. I think the past is prologue for that asset. We did harvest Kings Plaza in the process of -- for, we thought, a very fair price. It resulted in a $600-million-odd gain on a $700-million-odd sales price, so obviously it was on the books for a very low number.

We I think appropriately chose to payout a one-time capital gain dividend to our shareholders, which we were able to rush to get that done in the 2012 calendar year. We have said publicly many times that -- do not expect a business combination between Alexander's and Vornado for lots of different reasons. So that leaves us with what happens to Alexander's, and we are not unhappy with its present condition as a dividend paying stock. The quality of its real estate is arguably the best quality of any publicly traded real estate company around, albeit it is a tiny -- well, it is not a tiny; it is multiple billion dollars; but it is a smallish publicly traded company.

That gets us to the other question which is -- Vornado has 1.64 million shares which represents $500-million-odd of value, which represents $300-million-odd of -- maybe even more than that of gain. Now when I use these numbers, you have to understand that that is after having received a $200 million capital gain dividend, which is Vornado's share of Alexander's Kings Plaza proceeds, which was received from Alexander's and simultaneously paid out to Vornado's shareholders.

So it has been actually a marvelous investment where we have made over or in the high $500 million of gain. And there you have it.

We have begun to consider what to do with that $500 million piece of value on our books and the tax ramifications of that and what have you. So, where I am is -- it's not likely that anything happens in terms of -- it's unlikely that anything happens in terms of a business combination between Alexander's and Vornado. It is also not likely that anything happens in terms of Alexander's selling 731 Lexington Avenue.

It is in our long-range thinking as to what to do with Vornado's 1.64 million shares of Alexander's in terms of harvesting value. But nothing is imminent.

Michael, if you have another one, we will take it.

David Harris, Imperial Capital.

Okay. This is a question for either Wendy or for Joe. Could you just touch upon the refinancing that is coming up on Independent Plaza? It is a fairly sizable float. It looks like floating rate (technical difficulty) for you?

Well, it is in process, David, and we expect to realize over $100 million of additional proceeds. And it is imminent.

Would you go to fixed, Joe?

Yes.

Yes.

David, we're in the market for a five-year fixed-rate financing on that asset. The reason we are in the market for five years as opposed to 10 years or more is because we expect the incomes on that asset to rise very aggressively as the apartments turn over.

We are thrilled with the investment. It was born out of a distressed debt purchase; and so the refinancing for over $500 million at five-year fixed is imminent.

Michael Bilerman, Citigroup.

I promise the last one. Just wanted a clarification, Steve, in response to a question, you talked about this year's pending sales. $300 million for sure, $500 million likely, upwards of $1 billion.

How do we think about the split between what is non-income-producing? So like the Harlem Park, Downtown Crossing, where you are getting money but you are not losing any income, versus income-producing assets? Are you able to put some of that within some bucket so that we can understand and be able to model forward?

For that, Michael, I'd have to go to a couple of sheets of paper. By the way, Joe is of course available at least for the next month to -- my attempt at a wee bit of humor -- to handle that question.

The assets that are in the queue are earning subpar returns. They are not non-income-producing; but they are earning subpar returns. So that I would think that the proceeds, while they will be temporarily invested at nil, they would be substantially below what we could reinvest them in prime income-producing assets.

But in terms of modeling, I think my goal is -- better to Joe.

Great, thank you.

Thank you. So I have been told that we have handled all the questions, and I thank everyone for listening and participating in our first-quarter earnings call. We look forward to your participation in our second-quarter call which is scheduled for August 16 on the calendar. I'm sorry, August 6. Wow, that was -- August 6. I will say it again, August 6 on the calendar.

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