Vornado Realty Trust
Q4 2012 Earnings Call Transcript

Published: 28 Feb 2013

[Operator:]

Good morning, Welcome to the Vornado Realty Trust Fourth Quarter 2012 Earnings Call. My name is Lorraine, and I will be your operator for today's call. This call is being recorded for replay purposes. [Operator Instructions] I will now turn the call over to Ms. Cathy Creswell, Director of Investor Relations. Please go ahead.

[Catherine Creswell:]

Thank you. Welcome to Vornado Realty Trust Fourth Quarter Earnings Call. Yesterday afternoon, we issued our fourth quarter earnings release and filed our annual report on Form 10-K 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-K and financial supplements. Please be aware that statements made during this call may be deemed forward-looking statements and actual results may differ materially from these statements due to a variety of risks, uncertainties and other factors. Please refer to our filings with the Securities and Exchange Commission, including our Form 10-K, for more information regarding these risks and uncertainties. The call may include time-sensitive information that may be accurate only as of today’s date. The company does not undertake a duty to update any forward-looking statements. On the call today from management for our opening comments are

[Steven Roth:]

Thank you, Cathy. Good morning, everybody. Thank you all for joining the call. Earlier this morning, we announced that after 16 great years, our friend and colleague, Mike Fascitelli, has decided that now is the time for him to give up his day-to-day responsibilities, and that he is stepping down as President and CEO of Vornado effective April 15. Mike is family. This was entirely his decision. The Board has asked that I come back for another tour as CEO. Mike and I had been partners in running Vornado for the last 16 years, as such the transition will be seamless. Vornado will continue its business plan of measured growth in its core New York and Washington businesses, simplification and balance sheet fortification. Mike will continue to be a member of our Vornado family. He will remain a member of the Board of Trustees, maintain an office at 888, our headquarters in New York, and be available for advice and counsel. Mike has made an indelible impact on the history of Vornado. He joined Vornado 16 years ago as President, Chief Growth Officer, and my partner. He came from Goldman Sachs where he was partner in charge of the firm's real estate practice. His past 16 years at Vornado had been a period of unprecedented growth and change. During his tenure, Mike led our Vornado teams in 172 separate acquisitions totaling over $17 billion, all of which were fueled by 125 capital market transactions totaling $27 billion, outstanding performance. It's certainly been a great run. Mike is a highly intelligent, capable and caring leader. The friendships and relationships that were forged between me -- between Mike and me, our trustees and all our colleagues are enduring. The Vornado Board and I could not be more appreciative of his efforts and accomplishments these last 16 years. Thank you, Mike. Your turn.

[Michael D. Fascitelli:]

Thank you, Steve. As Steve said, I've decided to step down as President and CEO of Vornado as of April 15. Vornado has been my consuming passion for 16 years. It's a great company, one of the largest and most respected businesses in the United States. I'm extremely fortunate and proud to be part of its storied history and long-term growth. I'm a firm believer in not being afraid to try something new. It's why I left the great job at McKinsey to join Goldman back 1985. It's why I left my friends at Goldman after 12 incredible years there, when Steve lured me to Vornado in 1997 to assist him in the challenge of helping him run a major REIT. Steve has been a great partner over the last 16 years. I'm enormously grateful for the opportunities he's created and proud of what we've accomplished together. In recent years, we have successfully executed our strategy of growing smartly, focusing our holdings and fortifying our balance sheet, maybe not as fast as a lot of you guys like sometimes, but we really made great progress there. Simply put, I have concluded that now is the right time for me to take a break before doing something different. I am deeply confident and invested in Vornado's future. I intend to stay on the Board, maintain an office here and be available for advice and counsel after I step down. I've been lucky enough to work with an extraordinary group of people at all levels, no more exemplified by the people that you'll hear after on this call and many of our other colleagues at Vornado, that helped Steve and I build this great company. My thanks to all of them. I know many of you, if not most of you, on this call. And over the years, we've gotten to know each other. We haven't always agreed, but we certainly have had an open and honest dialogue. I take great pride in the relationships that we have and I have and Joe has in all these years with many of the investors here on the calls. I look forward to you guys continuing to be great supporters of the company. I look forward to seeing you guys in Florida, too, at the conference for many of you. Steve and my countless other friends at Vornado know that I'll do everything I can to support them in the future. I'd like to turn now to the quarterly earnings and our normally scheduled conference call that we're going to go through today. I'm going to make some opening remarks before David and Mitchell talk about our New York and Washington business and followed by Joe with a financial review. Then we will answer your questions. We'll end at 11

[David R. Greenbaum:]

Thank you, Michael. Good morning, everyone. Before I turn to the results for the quarter, I want to spend a couple of minutes recapping the overall market’s performance in 2012 and what we're expecting for 2013. I'm sure everyone on this call reads the various market reports produced by the brokerage community. These reports generally describe the market as stable, stuck in neutral with flat absorption and modestly positive asking rents. Rather than rehashing these reports, let me give you my take on some of the larger trends in the marketplace. One of the most important trends we are witnessing is the continuing resurgence of urban centers, whether it's New York, San Francisco or Chicago. Tenants are relocating from the suburbs to the urban cores in order to recruit and retain the best and brightest of the younger generation which values a lifestyle and vibrant energy of the city. The other day, I was talking to one of the brokers that helped us last year move Motorola Mobility from suburban Liberty Hill to the Merchandise Mart in the hot river north section of Chicago. He tells me the vacancy rate in the Chicago suburbs is now over 25%. Here in New York, the job numbers prove that the city is a magnet for talent. Total employment has recovered 139% since the trough and most importantly office-using employment has reached levels we last saw during the peak 2000 period having added 41,000 positions last year. Looking more closely at the office-using jobs, the high paying securities industry shed some 1,000 positions last year and is projected to lose up to 4,000 more this year. The new jobs last year largely were concentrated in the information and professional services sectors. An important subset of these 2 categories is now known as TAMI, technology, advertising, media and information, and is driving the strong demand in the Midtown South market. No surprise, since these types of tenants have more the younger generation of employees who seek that urban lifestyle. Many in the brokerage community now consider our Penn Plaza part of an expanding Midtown South market. In fact, Jones Lang LaSalle just reported that Penn Plaza was the strongest submarket in Manhattan, with year-over-year asking rents driving over 9-plus percent and with less than a 6% class A vacancy rate. An analysis of our Penn Plaza portfolio shows that we have 45 TAMI tenants, including some household names

[Michael D. Fascitelli:]

Thanks, David. Let's turn to Mitchell now to discuss our Washington business.

[Mitchell N. Schear:]

Thanks, Mike. Good morning, everyone. I will also start with an overview of the Washington market and then talk about our business more specifically. While the near-term story is sluggish, we believe in Washington for the long term. The near-term sluggishness in Washington is a result of the uncertainty surrounding the budget crisis, which has been stifling for many areas around the country. Local economists, businesses and jurisdictions are spending a lot of time measuring the impact and potential impact of government cuts on the Washington market. While there is endless speculation on the effects of a possible sequestration, the fact is that spending cuts have already happened and will likely continue to happen. Since 1980, government spending in Washington has increased every single year until 2011. In the past 2 years, federal government spending in D.C. dropped by $7 billion, down a total of 8% reflective of cuts that have already happened. Notwithstanding the decline in government spending, the Washington economy still grew and added 28,000 new private sector jobs in 2012. This is well above the 10-year average. While the federal government sorts out its issues, the private sector will help make up the gap resulting from the decline in federal spending. We believe Washington will continue to grow and will continue to be one of the top markets in the country. In fact, Washington is projected by McKinsey Global Institute to be one of the top 5 growth markets in the U.S. between now and 2025. So where is the growth coming from? Much of it will be from the private sector. Recently, Forbes ranked the Washington area as the second in the U.S. in technology job growth, ahead of Silicon Valley. Washington has the second-highest growth rate in the nation in high tech and science technology, engineering and mathematics-related jobs also known as STEM jobs. David may have TAMI in New York but we have STEM in Washington. These types of jobs are driving growth and attracting bright and talented workers. In addition, corporate relocations and expansions continue to ramp up. Northrop Grumman, Bechtel and Siemens have all recently relocated their headquarters to Washington. In our own portfolio, just last week, DRS relocated their national headquarters to 2345 Crystal Drive, taking 93,000 square feet. In fact, 4 out of 6 of our largest leases in 2012 reflected an expansion of private-sector tenants, including corporate executive boards, United Nations Foundation and the law firm Cooley in addition to DRS. Over the next 5 years, 240,000 new jobs are expected to be added mostly in the private sector areas of professional and business services. This should create real demand for office space. With 82% of our portfolio in Washington D.C. and Arlington, we are well positioned for the trend David mentioned, where most of the pronounced growth is happening in closed-in urban areas where young talented workers want to be. Not to say there won't be difficult times in Washington. 2012 was a tough year in particular as Washington reached the peak of BRAC-related vacancy. The leasing activity was brisk. In fact, on par with the 15-year average of 32 million square feet annually, Washington had a negative net absorption of 2.9 million square feet for the year. Throughout the year, we found that rents held steady although concessions have increased. We expect 2013 to be a year in transition. With a budget resolution, growing confidence, private sector employment growth and limited new supply over the next several years, we expect the Washington market to gain real traction beginning in 2014. Our view is that Washington's future is compelling. The workforce is the most highly educated in the country. The housing market is strong. At 5.3%, Washington has the lowest unemployment among major metro areas. The federal government is here to stay. Washington is a forever market. Now turning specifically to our Washington portfolio. Leasing velocity has been strong. We signed a total of 201 deals aggregating over 2.1 million square feet for the year at an average rent of $40.55 per square foot, generating a positive mark-to-market 3.4% GAAP and 0.4% cash. Government activity accounted for 31.5% of the leases and private sector leases accounted for the remaining 68.5%. Specifically in Crystal City, for the year it was 982,000 square feet at an average rent of $40.47 per square foot with a positive mark-to-market of 3.7% GAAP and 1.6% cash, not bad in such tough market where flat rents would be good. We continue to enjoy good activity and consistently execute more than our fair share of deals at good rents. During 2012, we signed 6 new over 50,000 square foot leases. In fact, 4 are over 75,000 square feet as compared to just 1 new lease over 25,000 square feet in all of 2011. In the fourth quarter, we leased 482,000 square feet in 50 transactions at an average initial rent of $41.46 per square foot with a mark-to-market decrease of 2.4% and 2.6% cash. Of those fourth quarter leases, government activity accounted for 20% and private sector leases accounted for the remaining 80%. Our occupancy was 84.1% at year end, close to the bottom. Our 2013 lease expirations will be at a historic low of 839,000 square feet. As a point of reference, our scheduled expirations over the past 4 years have aggregated 2.2 million square feet per year. For the entire Washington, D.C. segment same-store EBITDA for the quarter was down 14.3% on a GAAP basis and 14.9% on a cash basis, almost entirely due to BRAC. By way of an update on BRAC, almost all the Department of Defense relocations from our portfolio have taken place and we have resolved approximately 900,000 square feet of the 2.4 million square feet of DoD lease expirations. Releasing the remainder of the BRAC space is a function of time and we will emerge stronger when complete. Our 2012 EBITDA decline of $54.9 million was less than the low end of our original projection of $55 million to $65 million. We estimate that 2013 EBITDA will be between $5 million and $15 million lower than 2012. We had expected 2012 to be the trough of the cycle, but now expect it will be 2013. Growth in EBITDA will resume in 2014 from our releasing. Our residential portfolio, which consist of 2,414 units in Arlington and D.C. and representing about 12% of our EBITDA today had a same-store EBITDA increase of 6.6% for the quarter and is 97.9% occupied. We continue to attract great companies to our portfolio. We signed a lease with Facebook who will relocate their Washington headquarters to our Warner building. Also at the Warner, we welcome the law firm Cooley as they open their new 88,000 square foot office and we expanded our relationship with AOL when we signed a new lease at 1750 Pennsylvania Avenue for their Washington, D.C. Office. As you may remember, AOL has their headquarters location in 225,000 square feet at our 770 Broadway in New York. We invite you to visit our new offices the next time you're in D.C. More than a great place to work, we are touring prospective tenants to our offices as a model of how next-generation space can be accommodated in existing Crystal City buildings. Thank you very much, and I turn it back over to Mike.

[Michael D. Fascitelli:]

Thanks, Mitchell. Let me now touch on our retail strips and mall business. The strip shopping center which are concentrated in affluent markets within a density populated, high barrier-to-entry tri-state area had been resilient even in this difficult leasing environment. Occupancy was 93.6% at year end, unchanged from the third quarter, with 82% for spaces under 10,000 square feet and 95% for spaces over 10,000 square feet. We leased 322,000 square feet in the quarter and the positive mark-to-markets were up 6.2% cash and 8.7% GAAP. We leased 1.3 million square feet for the year, and the positive mark-to-markets were 9.6% cash and 20.5% GAAP, including leases with quality tenants such as Costco, TJ Maxx, Home Goods and L.A. Fitness. Occupancy in our 5 operating regional malls were 92.7%, up 10 basis points over the prior quarter. We leased 75,000 square feet in the quarter, including a 428,000 square foot deal with Forever 21 at Monmouth's Mall. Positive mark-to-markets were 2.3% cash and 10.4% GAAP. We leased 146,000 square feet for the year and the positive mark-to-markets were at 6.7% cash and 13% GAAP. We continue to be especially pleased with the performance of the Bergen Town Center, which posted another strong year of sales growth. We continue to see strong demand for any space that becomes available at the Bergen Town Center. I mentioned earlier in my opening remarks the Springfield Mall in Virginia is in the midst of a total transformation that will make it the dominant fashion offering for an affluent and underserved trade area in the south side of the D.C. Metro area. The new Springfield Town Center will include existing anchors, J.C. Penney, Macy's and Target, as well as a new cinema, health club and duly anchoring offices, along with 45,000 square feet of restaurants, a new food court and 450,000 square feet of mall shops. The construction leasings are on schedule for summer 2014 opening, and we will be announcing additional lead tenants later this year. As it relates to the mart business, we have substantially completed a sell-down, a 3.5 million square foot Merchandise Mart building in Chicago remains, which beginning in 2013, which will be included in the Other segment instead of it being a separate segment. Year-over-year EBITDA growth for the continuing business was a positive 4.5% GAAP and 0.7% cash. In summary, our management team has made great progress in improving Vornado's portfolio of high-quality office and retail assets, and is committed to continuing to make Vornado a simpler company while staying focused on generating the highest total return for our shareholders. We thank our shareholders and other stakeholders for their continued support. Now I will turn it over to Joe for the financial review.

[Joseph Macnow:]

Thanks, Mike. Yesterday, we reported comparable funds from operations of $1.22 per share versus $1.03 for the prior year's fourth quarter, a $0.19 or 18.4% increase. Total FFO was $0.30 per share versus $1.46 for the prior year's fourth quarter. First call was at $1.19 per share, as some of the analysts factor in noncomparable items into their estimates and others do not. Turning to results for the full year. We reported comparable FFO of $5.17 per share versus $4.90 per share in 2011, a $0.27 or 5.5% increase. Importantly, this increase is after the $54.9 million reduction in Washington's EBITDA that Mitchell talked about resulting from BRAC. Total FFO was $4.39 per share versus $6.42 per share in 2011, the details of the difference between those 2 numbers can be found in the 10-K in the MD&A overview on Pages 70 and 71 or in our press release. Definitionally, gains and losses on the sale of real estate are not part of FFO. That's Nary's [ph] definition. Our fourth quarter included net income from such gains of $282 million, primarily from the sale of Kings Plaza, Reston and a portion of the $105 million gain that Mike talked about in Independence Plaza, representing the mark-to-market on the value of the appreciation and the value of the asset. These gains were partially offset by noncash impairment losses aggregating $118 million, primarily on Broadway Mall as we anticipate disposing of additional noncore assets. In the fourth quarter, consistent with our conservative nature, we deemed a diminution in the market value the 18.6 million shares of J.C. Penney we own as "other than temporary" the GAAP term for when you take it through the income statement. And therefore we recorded a $224.9 million noncash, noncomparable charge, as well as the regular $22.5 million P&L item coming from the mark-to-market on the derivative which is 4.8 million shares. We also recorded a $40 million noncash write-down on our investment in Toys“R”Us. Based on, among other factors, the continued compression of earnings multiples of comparable retailers. After this write-down, our December 31, 2012, GAAP-carrying amount with Toys is $478 million. That's compares to our economic cost basis of $396 million. In the first quarter of 2013, we will entirely offset the income we record from Toys' holiday fourth quarter, remember we're on a one quarter lag with Toys' with a noncash write-down so that our GAAP-carrying amount does not increase as of March 31. For the remainder of the year, Toys has historically had losses in the second, third and fourth quarter of their year -- second, third and fourth quarter of our year; first, second and third quarter of their year. We'll recognize those losses and that will have the effect of reducing the GAAP-carrying amount much closer to our economic cost. Beginning in 2013, we will present Toys as part of noncomparable FFO for both current and prior periods. Let me spend one second on LNR. Under the equity method of accounting, the undistributed income we record over the life of this investment has built up the carrying amount to the approximate $241 million of net proceeds Mike said we'll receive from the sale of this asset when it closes in the second quarter. Accordingly, there will probably be a very small gain recognition when the sale closes. We will cease income recognition on LNR as of January 1, 2013, and we're going to treat LNR's FFO as noncomparable for all periods presented including 2012's quarterly FFO which amounted to $13.5 million, $9.7 million, $16.8 million and $27.2 million for the first, second, third & fourth quarters, respectively. Our -- on capital market transactions in November, we completed the refinancing of 1290 Avenue of the Americas and a single asset CMBS for a $950 million, about $500 a foot, 3.3% interest only for 10 years which replaced the existing 6.82%, $409 million mortgage. We also completed a refinancing of 4 Union Square South for $120 million, retaining net proceeds of $45 million. This 7 year loan bears interest of LIBOR plus 2.15%, 110 basis points lower than the old loan and begins to amortize after 3 years using a 30-year schedule. Due to tax considerations of certain significant transactions close to year end, our revolving credit facilities had a higher-than-usual outstanding balance of $1.17 billion at December 31, 2012. We expect the revolver's outstanding balance at the end of the first quarter to be reduced close to 0 and in fact, it's about $350 million today. At December 31, 2012, we had over $2.4 billion in liquidity, our consolidated debt to enterprise value was 38.6% and our consolidated debt to EBITDA was 7.2x, that's higher than normal reflecting the unusual balance in the revolver. As we pay down the revolver in the first quarter, the consolidated debt to EBITDA will return to a more normal 6x. In the fourth quarter, we raised our quarterly common dividend to $0.73 a share, a new annual run rate of $2.92 per share or 5.8% more than the previous $2.76 run rate. I reiterate that Mitchell mentioned earlier Washington segment 2013 EBITDA is expected to be between $5 million and $15 million lower than 2012's EBITDA. FFO might be less of a diminution than that. Earlier this month, we received $124 million in full settlement of our rent claim against Stop & Shop which will result in $60 million of cash income in the first quarter of 2013. This ends 10 years of litigation and we are, of course, very satisfied with the outcome. One last administrative note. We have recently passed -- posted on our website the tentative dates and times for each of our 2013 quarterly earnings press releases and conference calls. At this time, I will turn the call over to Mike.

[Michael D. Fascitelli:]

I just want to apologize for the lengthy comments but this is actually a very -- full report about the quarter and the year, and recognizing that's taking up quite a bit of the -- our allotted time. And in the other news disseminated on the call, we are happy to let this go as long as you'd like to go beyond that hour and answer any questions. So I just want to make that comment given the time it's taken to get through these materials that we're happy to extend the call beyond the hour. So with that, we'll open it up to questions.

[Operator:]

[Operator Instructions] And our first question comes from Josh Attie from Citi.

[Michael Bilerman:]

It's Michael Bilerman. Mike, Steve, I certainly appreciate all the comments, and Mike you will be extremely missed. But that's nothing against Steve on your second tour of duty in the CEO slot. But obviously we do have a lot of respect for Mike. I wanted sort of get a better understanding of what exactly drove the decision and sort of why now you feel is the right time? The company has obviously made a lot progress in the simplification over the last year and I think you would both agree that there are still more to go and we're still sort of early in that process. And so I'm just curious in terms of

[Steven Roth:]

Thanks. I'll start off by saying I agree completely with your comments about Mike's talent and that he will be missed. It was entirely Mike's decision. And the balance of the question, I'll let Mike handle a little bit. We'll interchange as we answer your question, Michael.

[Michael D. Fascitelli:]

Michael, thanks again. I -- there's never a great time to do this, but we thought it was a good time. We really embarked on a very rigorous program and it's not over yet, as you point out but it's well on its way. This was the end of the year, it was a good time as we wrapped up the year and that to go forward with the team we have in place, everything should be pretty seamless. So my departure I think won't affect that at all. There's absolutely no disagreement between Steve and I, or the other members of the Board on this strategy or the timing of that. I think you investors, tend to want things to happen at a quicker pace but sometimes, we've done what the market would allow, but I think the pace is very measured and that pace of -- measure pace will continue.

[Michael Bilerman:]

Just in terms of a follow-up, Steve, corporate governance obviously is a hot topic and has been a hot topic with the company over the years in terms of proposals, a, from the staggered board but, b, obviously you had split the Chairman and CEO roles a number of years ago which did satisfy some of those issues. And so I'm just curious from that level with you stepping into the CEO role, how do you sort of move forward from a corporate governance perspective? And sort of how do you and the Board think about this tour of duty going forward?

[Steven Roth:]

Well, our governance record is, to some people, not the best in the world. I can tell you that we grapple. Our board is extremely focused on governance, extremely focused on doing the right thing and extremely focused on creating shareholder value. There's an enormous amount of shareholders in our board room when we meet each time. And -- but we recognize that our position on some of the governance issues have been less than what some of you all would like. To be honest with you, Michael, I don't anticipate that changing. With respect to -- although, it's practically the season, that's -- and that's going to come out shortly. With respect to the Chairman and CEO role, 4 years ago when Mike succeeded me as CEO, we sort of got an uptick in that grade. We're about to go down to a downtick in that grade, but the answer is we debated this long and hard. By the way, this kind of -- we've gotten some comments this morning that Mike's decision seems very abrupt and very unexpected. We apologize very much for that, for it seeming like that. But you can be assured, that's the external take on it because we're a public company, this is an important piece of news. And obviously, we couldn't be gambing [ph] about it in the marketplace while we were thinking through these arrangements. Internally, certainly, at the Board level, this is something that has been considered extensively for not a long time but certainly not a short time. The Board decided that the right thing was for me to do another tour of duty and there you have it. With respect to me, I'm a Vornado lifer and so that's what it is. I mean, I've been the CEO before and -- but I would leave you with one thought. I mean, I'm not going to do this forever. I'm not saying that I'm going to do it shortly, but I'm saying I'm not going to do it forever. With respect to one other point. Mike and I, really when I -- I think one of the material says, I lured or recruited Mike from Goldman Sachs 16 years ago, which is true. When he joined, he joined as a full partner in every regard in terms of how we treated each other and decision-making, et cetera. And we've been sort of full partners and interchangeable for these 16 years. The business plan that we have followed for this 16 years is something that we jointly agreed upon and the business plan that we will continue which is basically simplification, fortifying our balance sheet and acquiring selectively and carefully in our 2 wonderful markets, New York and Washington, is what we have been pursuing for some years now and we will pursue in the future. I hope that answers your question, Michael.

[Operator:]

And our next question comes from George Auerbach from ISI Group.

[George D. Auerbach:]

Mike, I think we all echo Michael's comments. Steve, I guess the company was very focused in 2012 on asset sales. And as you sort of return to the CEO role, any change to the strategy on asset sales going forward, either accelerating the pace of stabilized asset sales as you think about Toys“R”Us or J.C. Penney? And I guess also, what should we expect in terms of 2013 sales, what's sort of pipeline?

[Steven Roth:]

The asset sales program which was started, not in 2012, but a few years before, which accelerated in 2012, will be based on market conditions and our ability to get good prices will continue. It will continue in a measured way, we have a list of, we have a for-sale list, a to-do list and I can tell you that -- let's talk about how we come up with the list. That list basically is -- I mean, the first way -- criteria is assets that we would rather have the cash, than own the asset. Meaning, that we -- either it doesn't fit, it's not strategic, it's not or we don't like its growth prospects or every once in a while we have a few mistakes. I mean, when you have a $30 billion company and when you made $20 billion of acquisitions over the years, not every asset works out perfectly. So that's -- and also, our basis in the asset, tax gains and everything. There's a whole long criteria list but it's mainly assets that we would rather have the cash than have the asset and the growth prospects. So we will execute on those as we are able to in the marketplace, getting prices which we think are right prices. This is a very good time to sell assets. We're aware of that, we will continue aggressively to sell what we don't want to own. With respect to Toys and J.C. Penney, those are more complicated. I mean, it's fairly -- it's very well known, we've been extremely transparent in this. We've written about it in my letter. Mike has said it frequently. Toys was a business that we bought to sell. It was a business that we bought with Bain and KKR of the great LBO firms, and everybody knows what their business model is. And so that is an asset that we or a business that we, together with our partners, aggressively would like to sell. We've been struggling to sell it. The IPO market has deteriorated, notwithstanding the fact that the business has performed actually pretty damn well. So that, the exit of Toys is something based upon market conditions and that may take some time and we have told you all that that's on the for-sale list, but it's a function of when we can execute. J.C. Penney is a newer investment which is struggling right now. J.C. Penney has its earnings call this afternoon, I think after the market closes. I'm a Director of J.C. Penney so I really can't talk very much about it, but J.C. Penney is an investment which is in progress now and I -- really, it's inappropriate for me to talk about what our holding period might be or what our future plans in terms of sale or not sale and the timing. It's just not appropriate in that particular investment. I hope that answered your question, George.

[Michael D. Fascitelli:]

The only thing I would add to the last part of your question, which is we have a robust pipeline of assets activity for future sales in 2013. That is ongoing and each asset's assessed and we have -- at least expect to continuing that program, as you said George, for the rest of 2013. And you'll get the specifics in that more closely from Joe once we go through that.

[Operator:]

And our next question comes from Ross Nussbaum from UBS.

[Ross T. Nussbaum:]

Mike, I wanted to follow up on a comment you had made at the beginning of the script, which was you thought that now was the right time and, I guess, I think about major decisions I have made in my life, whether they're professional or personal and I think about, okay, is what I'm going doing going to make me happier as a human being? And I guess I'm trying to relate that thought to your change here in so far as was there something occurring at Vornado that wasn't challenging you or making you as happy as you wanted to be?

[Michael D. Fascitelli:]

Well, that's a very philosophical question but I'll attempt to answer, Ross. These are very personal decisions, as you point out. And as I mentioned in Michael's question, there's no perfect time to do this. I have a great admiration for the company. It's part of the fabric of my being. Steve and I and the colleagues in this room, David, Mitchell, Joe, and all the other colleagues that are not in the room that helped build a great company and it's just not -- it's like having a child. So as Steve said, it's been an intense 16 years, too. Not all of it has been perfect, not all of it has been fun but it's certainly been a great, rewarding experience. At some point -- I'm 56 years old, I've been doing it for 16 years, it's -- it just felt like the right time for a change. I -- my objective is I'm not unhappy but I got probably a lot of interests that I like to think about pursuing after I take some time off. I -- this is not an easy job, as you guys know, and part of the difficulties of the job stem from probably dealing with you guys sometimes because it's not that easy. But -- so we really have done our best and we can go down, take in -- and from my standpoint, I just think that the company is in great shape. It's got great assets, it's got great people and I'm going to stay involved with Vornado. I'm going to be on the board. I've got a significant stake in the company, I'm available to help in any way I can and you never leave your child. And from my standpoint, as my continued support, just I want to explore, doing something very different. I'll take some time off, take a break. And I'm not getting any younger, and now is the time to do it.

[Steven Roth:]

Let me add on to that a little bit, if I can. As I've said I think 2 or 3 times on this call so far, this was entirely Mike's decision, okay? Entirely Mike's decision. Mike is family, this was entirely Mike's decision. The second is, he works like an animal and each year at this job, and running a company of this scale, size and complexity is like dog years. I will tell you that personally I think he got the better of the deal. I'm saying, he's leaving, number one. Number two is he has, and I'm proud of this, had an unbelievably rich experience and I have had too being partners for these 16 years. He's created a great deal of wealth which is he hasn't been able to enjoy and I think the decision that he made, while I am unhappy to lose somebody of this -- of his obvious talents, skills and abilities, I think it's an unbelievably courageous decision that there is life after Vornado, there's life after working like a dog for 30-some-odd years and I think that that's an unbelievable, courageous decision. I think if you look at where we are in the business cycle, in terms of the real estate business cycle, I think that's also something. I mean, it's hard to invest money, it's hard to make money, the stocks are in flat line and so it's not as if this is easy. This is a very difficult business, very difficult industry. And I must tell you that I think I admire Mike's courage for making a decision, a personal decision like this. By the way, his kids, they don't want him sitting home.

[Ross T. Nussbaum:]

And Steve, just a quick follow up. Was there any thought process at the Board to look internally or externally for the next CEO of Vornado or was it just a sort of a de facto that you are the guy?

[Steven Roth:]

The answer to that is I don't think it's appropriate to get into confidential board deliberations like that. I can tell you that obviously this was not something that was sudden, that's a fact. Number one, this was not an emergency. Number two is we have candidates internally who are unbelievably talented and who are full well able to run businesses on their own. Number 2 is, there's lots of candidates on the outside but the Board's deliberations were to slot me in for a second tour and I mean, I think that's all I'm going to say about it.

[Operator:]

And our next question comes from Michael Knott from Green Street Advisors.

[Michael Knott:]

Steve, I just wanted to kind of follow on that question in how you think about succession planning. Now you, yourself, said you won't do this forever. Obviously the sales program is important and continuing the job that's at hand but part of succession planning for after tour of duty 2.0 up on your list? Obviously we are going to focus on succession planning

[Steven Roth:]

Obviously, we're going to focus hard on succession planning. It's not imminent. It's not something that's a crisis, but it's a something that obviously we have to focus on and we will. I am not -- I'm unable to and I'm not going to and it's inappropriate to give anybody a time line on what -- when and how that will happen, okay? We think we have management team -- we don't think, we are confident and certain we have a management team in place that can run this company, as well as it's ever been run and hopefully, we're going to thrive. In terms of putting a timing on succession, it's not something I can do now.

[Michael Knott:]

A couple of easier ones. I'd be interested in sort of a self-assessment on the LNR experiment, did it work out how you thought, any thoughts on that? And then also, what are your thoughts on timing of exiting the mart business or the remaining mart asset?

[Steven Roth:]

I'll tell, Michael, I was more comfortable in the first 3 conference calls where all the questions went to Mike. Okay, let me handle the question. Yes, we're actually delighted with the LNR investment. I think as Joe said if you look at the investment from the beginning of time, which was an 8-year period, which had a write-down and a restructuring, it was a 12% IRR, if I'm not mistaken. Is that the right number?

[Unknown Executive:]

Yes.

[Steven Roth:]

And if you look at it from the infusion of the additional $100-plus million a couple of years ago, it's a 40-odd percent IRR, okay? Having said that, so in terms of the financial performance of the investment, we're fine. The theory as to why -- this was not a dabble, okay? This was not a wayward investment. This was something that we thought was strategically an important investment to advance our business and that was the servicing -- the largest servicing company -- some special service there in the country which has eyes, earn, tentacle and what have you into an enormous portfolio of hundreds of billions of dollars or a hundred-plus billions of dollars of finance, some of which gets into trouble which, of course, is right down our main street. And so we were happy with the investment. The reason the investment was sold is that we had 5 partners. We were a minority partner. And the fund investors wanted to sell and we decided, I think, rightly that if we would prefer to either own it all or sell along with our other partners. And we declined to own it all and so, therefore, we're selling. What I'm saying basically, the financial side of the investment, I think, worked out fine. The raise on debt from making the investment strategically, I think, also worked out fine and it was just the ownership structure where we just decided we didn't want to be -- own this thing at $1 billion. So I think -- I mean, there you have that. What was the second half of your question, by the way, Michael?

[Michael Knott:]

Just timing on the mart.

[Steven Roth:]

Well, the mart is basically done. And so Mike and the team did a great job over the last 1.5 years of selling the business in pieces. We try to sell it 3 or 4 or 5 years ago multiple times as an entity. We were unable to do -- to get an execution of that. And so we decided that the business -- our business plan was to exit the business and we did so by selling it off in pieces. That execution, the cornerstone of which was -- the largest part of which was the sale of the 350 West -- what's the address 350?

[Unknown Executive:]

West Bart.

[Steven Roth:]

West Bard building to Shorenstein [ph] was the largest, that was a multi-hundred million dollar transaction. The rest of the assets were basically sold off. What we remain now with is the big 3.5 million square feet Merchandise Mart building in Chicago where we just made the 570,000 square-foot lease with Motorola Mobility-Google, and I'll talk about that in a minute. The trade shows, which operate out of that business, and a small circle of other trade shows, the -- a small investment in New York City, which very small, that we don't have to get into. The 7 West 34th Street building which is an important asset that was originally -- that will go to the -- that would be turned over to the New York office business next year, and I think there's a development project in Cleveland. So basically it's down to the one big large mart building. We are going to hold the Merchandise Mart building in Chicago. We think it is just on the foothills of creating value as it climbs up of the value creation. We think it is in Ground Zero in terms of the tech and office demand for modern, younger office space in the Chicago market, right in the Ground Zero and with Google going in, it is now Ground Zero. And we think as we transform that asset into more of a modern tech office building with his huge 200,000 square foot floors, the values will go up, the cap rate will go down. So for the moment, we're going to hold that business, that building and improve it. We expect there's a lot of value creation there. The mart division as a separate accounting segment will cease to exist in 2013. The mart building will be in the other segment and the mart division has gone away.

[Operator:]

And our next question comes from David Harris from Imperial Capital.

[David Harris:]

I have a question for Joe. Joe, variable debt as a percentage of total rose to 27%. I did hear your remarks on the credit line being reduced to 0, but even if it goes down to 24%, 25% you're still -- it's a very high level right at the sector. Any view as to where you go with this?

[Joseph Macnow:]

Well, I don't think it's going higher but our floating rate debt has always been proportional, always been used when an asset is in a state of redevelopment or re-tenanting. You are absolutely right, David. It's unusually high because of the $1.1 billion, which as I said today is $350 million outstanding on another revolving credit, but we're comfortable in the 20% plus/minus floating rate to total debt range.

[David Harris:]

You're not unnerved at all by quantitative easing, turnaround quantitative easing and what's happening in some of the treasury market move?

[Michael D. Fascitelli:]

Well, we've taken -- we've looked at the financing. We've done a couple of billion dollars, and many of those, as David talked about what some of the assets were on for 10 years 6666 Avenue -- I mean, Fifth Avenue.

[Joseph Macnow:]

1290.

[Michael D. Fascitelli:]

1290. That alone is close to $1.4 billion of fixed-rate 10-year deals. So we believe these rates on a long-term basis are quite attractive and quite attractive relative to even what we bought 664, we got a better yield than we expected. So we like the long-term market. Some assets aren't warranted, either because of the cash flows, the nature of their redevelopment. They just belong on the floating rate basis. So I think it's proportional, but we are really taking advantage where we can of the long-term interest rate market and the debt markets.

[Steven Roth:]

David, the numbers that you're referring to are aberrant because there is a bubble in short-term line borrowing this year, which hasn't happened before, basically to bridge several transactions which had to be done in late December before financing could be done on them. So basically that's an aberrant and as Joe said to you, that floating rate debt will be paid down to 0 and maybe even lower than 0, which means that -- perhaps more causative cash balance, hopefully, by the end of this quarter, so those numbers are aberrant. Number two is, the yield curve is fairly flat. It's not flat on a percentage basis but it's flat on an absolute basis. So if you can borrow in the low 3s, mid-3s 10-year and the evidence of that is we just did a 3.6% loan on -- for $390 million on 666 retail. We did an enormously important and advantageous loan of $950 million on 1290 Avenue of the Americas which, by the way, is about $500 a foot so it's not nothing. In the low 3s for 10 years, so keep that in your mind. And the short-term debt is if we borrow a variable, it's in the low 2s. So there's only 100 basis points to go out and lock in 10 year money so we're aware of that.

[David Harris:]

Okay. Now the -- Mike's part as CEO isn't only change in CEO that is kind of part of your universe. Jerry Storch is leaving Toys and it kind of leads me to ask the question as to -- is the property element of these stories which we always sort of related to the part and we were both in Toys, as well as J.C. Penney. We understood that the focus really on improving operations and much less on the property dimension. With those investments playing out the way they are, is there a reconsideration of, perhaps, becoming more active on the property side?

[Michael D. Fascitelli:]

In those deals or in general, David?

[David Harris:]

Those 2 specific deals.

[Michael D. Fascitelli:]

Well, we still think we have a tremendous amount of real estate value in Toys. And Toys was more based on the real estate underpinnings of the U.S. real estate than Penney's was, and we still think there's an opportunity to harvest the Toys' real estate both on a financial basis and on an operating basis in the U.S. particularly, and so that isn't something that we're very much actively looking at in Toys. Obviously, you look at -- I mean, you see there's a pretty big spread in multiples continuing as you see by a lot of people in the REIT today who are between operating companies, which are trading at 6-plus and property companies which are trading at 12, 15, 20 whatever. So there's still quite an opportunity for financial value-added in the Toys situation.

[David Harris:]

Can you add any comment as to the replacement of Gerald?

[Michael D. Fascitelli:]

I think Jerry had been also at it for close to 8 years in a rather difficult business and as Steve said, he made quite an improvement to the EBITDA of that company and then it sort of flattened out. And I think in that, in the LBO world, the private equity world, that's a pretty long cycle and I wanted to move on and to do something different. Toys again has quite a good bench of people and in that case, we do have a search going on for a new CEO of Toys.

[David Harris:]

Any time frame?

[Michael D. Fascitelli:]

As soon as we can. They take their time and we've got to get the right candidates as opposed to pick up a week or 2.

[Operator:]

And our next question comes from Alexander Goldfarb from Sandler O'Neill.

[Alexander David Goldfarb:]

Steve, because I don't normally get a chance to speak to you. So just want to get your take. You guys have worked hard on trying to simplify the company. You obviously have created a huge success in Alexander's which is a really focused pure play. At what point would you say if the markets not recognizing the sum of the parts value of Vornado would you say, "Hey, it's time to split up into office, retail and create a spinoff of the other bucket where there's more than noise but it's not really driving the EBITDA of the company." How long would you think of pursuing this altogether strategy versus saying, "You know what, if market value is more of stand-alones, let's pursue that."

[Steven Roth:]

That is a strategy that we have considered, are considering and will consider. And I want to be very careful here as to not create any speculation but we have no current plans to do that. Although I would tell you that these are strategies that we understand, we have done before and we have looked at extensively. But I don't want to cause that any speculation, okay? The advent of Mike's decision should not also cause any speculation.

[Alexander David Goldfarb:]

Okay, okay. And then the second question is on 220 Central Park South, just given how condo cycles come and go quickly. Obviously, the market for condos, high-end condos is quite incredible, and it takes time for you -- for any condo project to come to fruition. What are your thoughts on just selling the project, selling the rights, crystalize the value in the market today and let someone else take risk of building out, delivering, et cetera?

[Steven Roth:]

The answer is I think that's a very good question and a timely question. We have and my partner David, David Greenbaum is here, has worked tirelessly for 5 years to get occupancy of that building. We've not taken the old rental apartment house down to the garage where we have an irritant, as I think everybody knows. Well, he maybe an irritant to us but we're an irritant to him because we're in front of him, so I think everybody knows the dynamics of the situation. And I think -- I do want to say anything more about the because that will get all over the newspapers. We are aware of the dynamics and the timing of the market. We're aware of all of the opportunities and potential in an asset. You should know that we believe it's the single best, and I think it's universally believed by the marketplace as the single best condo site in town and that we are hard -- we are focused hard on trying to get resolution and create value.

[Operator:]

And we have a follow-up question from Josh Attie from Citi.

[Michael Bilerman:]

Yes, it's Michael Bilerman again. Steve, just going back to sort of the cash side of things and I think you'll have -- once you pay down the line and execute on the stuff that you've already announced on, almost $1 billion of cash on the balance sheet, and so -- and the balance sheet leverage is obviously in a great place from that perspective also. And so I'm curious because now we're sort of having almost a 1-year anniversary on the shareholders' letter in terms of everything being on the table. The stock has been volatile over that time frame, but effectively we're at the same spot. So I'm curious, as now your role as Chairman of the Board and CEO of the company, do you think about using that cash more aggressively to put a share buyback in place and use that if you feel that there's still a disconnect between effective in the value that has been created and all the wonderful things that Vornado still has to come and where the stock trades?

[Steven Roth:]

We are intent as a management team and that, by the way, I would point out to you that I now -- since Mike sits on the Board and I'm management, I now work for Mike, which is something we were all sort of giggling about yesterday. And he is relentless on creating value as is the rest of our board. We're focused on closing the gap between what the shares might be worth and what they're selling for. There are various techniques to do that. Buybacks is something that we have considered if there's -- and I don't want to speculate on it. And we do know how to do a buyback, I would remind you 100 years ago in the beginning of time in the 1980s, we did the largest buyback in the history of the stock exchange, which basically created the modern Vornado. So we're aware of that technique and yet I don't want to speculate but I'm not sure that, that would be my #1 or #2 value creator right now.

[Michael Bilerman:]

I guess, what are the #1 and #2 value creators?

[Steven Roth:]

We're not going to speculate on that either, but that's a very -- you're very sharp to pick that up, Michael.

[Michael Bilerman:]

I guess, in terms of roles and responsibilities it, obviously, is a tough job being a CEO of the company and you guys said it's -- and clearly as evidenced by the number of things that Mike has to take care of as a public company CEO, I'm just curious having been partners for so long, how do you replicate within your deep bench, the roles and responsibilities that effectively you and Mike have done over the years amongst others? Or are you going to be working now double duty and working even more like an animal? So I'm just curious how do you sort of go forward?

[Steven Roth:]

Well, I will tell you that this morning we had an all-hands senior management meeting at dawn to talk about all these things and announce some of the things that were announced on the stock market. And one of the things I said was I was going to put a closing time limit on the 45th floor and the 44th floor at 6

[Michael D. Fascitelli:]

I think -- one comment, I think the management team, this had been a closer one. Well, attended management team. We've been together a lot so people pitch in. So after we had this conversation, David said to me, "I got a few more things to do now. A few more -- a little bit more work." And everyone is going to step up and the people below them are going to step up, and sometimes change is very good for a company. It gets excited and people want to step up and fill those acts and those voids. So I'm fully confident that'll happen. Steve and I overlap a lot, too. Don't we do things that are somewhat overlapping? It will be done by Steve. So I think it's going to be more seamless, Michael, than you might anticipate and there will be some transitions in that, but I feel it'll be a good opportunity for not only the people in this room but the people below them to step up and do more things.

[Steven Roth:]

Michael, continuing on this point. The cornerstone of our businesses is that I think we have in New York and Washington the 2 best operating platforms in the business. Certainly, the best-in-class and that involves running buildings, managing buildings, repositioning buildings, renovating buildings and most important, leasing buildings, okay? There's nobody better there may be few people there that are almost as good as we are, but there's nobody better than we are. Those businesses are run by very talented managers. You know them and those -- that's not affected by what happens in the senior executive suite. In our business, it's generally a dozen major decisions a year that create the value and create the direction of the business, okay? Those decisions have to be done thoughtfully in a measured way and we are aware of what those decisions are and we are full well confident that we're going to make the right decisions. The other activities which is in terms of financing and dealing and dealmaking, the finance -- Mike was very heavily involved as was I as partners almost interchangeable in financing decisions, those are half a dozen or 9 or 8 or 7 a year and the big area is in the area of dealing where we have a very, very active dealer organization in New York and Washington and we're going to be fine. Mike is not going that far. If I need him to come back, he'll -- to do -- to work an all-nighter or to do something, he's going to do it.

[Michael Bilerman:]

Is there any separation agreement? Obviously, it Sounds like it's Mike's decision and he's resigning. There's no separate -- there shouldn't be any separation agreement or some form of continuation in terms of count -- payment for -- I don't know if it's restricted stock or options or anything like that or consulting agreement? What -- how should we think about any financial impact at all going forward?

[Steven Roth:]

There will be no -- no financial. There will be no -- what's the word?

[Michael Bilerman:]

Severance?

[Joseph Macnow:]

No. There's no accounting charge for Mike's leaving.

[Steven Roth:]

There's no accounting charge for Mike's leaving. There will be an 8-K filed probably I think tomorrow which will have all of the information that you seek, okay?

[Operator:]

And our last question comes from Michael Knott from Green Street Advisors.

[Michael Knott:]

Mike, everyone will wish you well as you move on to the next phase of your professional life. I did want to ask sort of related to Michael's question just now. Is there going to be a noncompete? And then also sort of related to that, how would the board seat dynamic and if Mike wound up being a competitor down the road? Or is that even a potential outcome at all?

[Steven Roth:]

I'll answer and Mike will answer it. There is a noncompete, which is in his employment agreement, which lasts for 1 year. Obviously, we want Mike to stay on the board. He's valuable. He has unbelievable institutional knowledge of our company and general knowledge of business. If he became a competitor of Vornado in the future, which would be after a year from now, and I'll bet you he can comment about that, obviously, he can no longer be a Director.

[Michael D. Fascitelli:]

First of all, thank you, Michael. I don't plan to be a competitor. My interest and my desire is right now completely not in the area. And I -- if I ever got to that situation, I certainly won't be able to be on the Board of Vornado and I think Steve and I and the Board recognize that. So right now it's not something that's on the horizon. If it ever gets to be, we'll deal with it then. But I look forward to being able to take a little perspective and basically help out from a board perspective as opposed to day-to-day running of the company.

[Michael Knott:]

Okay. And then last question would be for you, Steve. I know you're committed to the J.C. Penney investment. But just a question, does being on the Board there somewhat compromise your independence, so to speak, to potentially exit that investment if that was deemed to be the best thing to do?

[Steven Roth:]

Yes.

[Michael Knott:]

Yes, it does compromise?

[Steven Roth:]

Yes. The answer to your question, Michael, is yes.

[Michael Knott:]

Is it the best thing for Vornado, for you to be on the Board there?

[Steven Roth:]

I'm not -- I can't comment on that.

[Operator:]

And we will take the last question from John Guinee from Stifel.

[John W. Guinee:]

David and Mitchell, you guys have done a remarkable job of holding rents in the mid-50s in New York and plus or minus $40 in D.C. and that price point appears to be one where there's not that much pushback from tenants. Is that sustainable over the long term for the downside? And then what's the upside from those particular price points for product in which you specialize? And then another quick question is regarding Toys, Bain and KKR are both midterm money funds that they've assembled. Lenders have a midterm mentality. What's the timing pressure from a Bain, the KKR and the lenders on Toys?

[David R. Greenbaum:]

John, I can start it. It's David. I think as I said in my remarks, value has been a trend in the office market now for the last 24-plus months and I think your comment which is generally tenants have been looking and the sweet spot effectively has been in the kind of sub $60 space. Actually has benefited us I think in enormously as I said the Penn Plaza area. In fact, in that area, as I've said, we've seen rents actually rise pretty significantly over the last 12, 18 months. In terms of the long-term picture, I remain pretty bullish on New York. I think the challenge that you have right now is the fact the there is a lot of space downtown which realistically could attract some tenants in fact, what I call reverse migration from midtown to downtown at relatively low rents. I still think that our portfolio and the locations that we have right in transportation hubs Penn Plaza and around Grand Central and long-term basis kind of feel very good about rents. And as you look at the general statistics, I don't see new construction that's talked about. I think most of the new construction realistically is in the ground today. Obviously, we've got a building going up in Hudson Yards. But these buildings are all potentially enormous. These are all 2-plus million square foot buildings. It's hard to put these things up and I'm not concerned about "a lot of space being dumped on the market."

[Michael D. Fascitelli:]

Mitchell, do you want to comment on DC?

[Mitchell N. Schear:]

Yes. John, the way I would address it is you're asking if these rents are sustainable. I think if you sort of think about it in a couple of different segments. First off, the rents today have been holding. What we've seen and what I think we'll see in 2013 is concessions will continue to be out there and be at a high level notwithstanding that the rents are relatively flat until we sort of clear all the space out of the market that we've got. There is not a lot of new space in the pipeline. And as we continue to build up demand, I think that we'll see a pickup of rent over time. So I think long-term I think that those rents absolutely should grow and if you just look at some of the new builds down, you're seeing rents in the $55 triple net rent when you gross them up $83 to $85 and those are pretty, pretty strong numbers, notwithstanding the marketplace that we're in. So long term, I think we're in good shape.

[Michael D. Fascitelli:]

Just to briefly comment on Toys that we're ramping up. Obviously, Steve made a comment that [indiscernible] Toys, KKR and Bain and us are on the same page about trying to seek liquidity in the investment. I wouldn't call it pressure in that you have to get out and do something that if I would say, rash. The company, the Toys' balance sheet is actually quite good. There's quite a bit of cash inventory the balance sheet. You'll see there our numbers shortly. There is actually, all the debt of Toys, there a maturity of at least 3, 4 years and only -- the only -- there's opportunistic things to do with the Toys' from refinancing as opposed to defensively. So I think we're going to seek an exit and seek a measured exit. I think everyone feels kind of responsible to do that but I wouldn't characterize it as pressure, John, to get out of any price to do something that's not in keeping with a really good execution. So we're working hard on it so that's what I would comment on Toys. I'd just like to end this, if I could, by saying thank you to all of you guys again for your support. You guys are challenging. You're probing. You have questions. You are constantly probing Steve, Joe, Cathy, et cetera. We know you're doing that you guys are shareholders and investors and we appreciate that faith and confidence. On a personal note, I will not miss these conference calls, I'm going to be honest, but I will miss you guys. And I will hope that I'll be able to keep in touch but I want to thank you again for all your good wishes and support. Thank you very much.

[Operator:]

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