Start Time: 01:00 End Time: 02:12 Vornado Realty Trust (VNO) Q2 2012 Earnings Call August 7, 2012 01:00 PM ET Executives Cathy Creswell – Director of Investor Relations Michael Fascitelli – President and Chief Executive Officer Joseph Macnow – Chief Financial Officer Steven Roth – Chairman David Greenbaum – President - New York City Office Division Mitchell Schear – President of the Washington D.C. Division Analysts Steve Sakwa – ISI Group Michael Bilerman – Citigroup Jeff Spector – Bank of America/Merrill Lynch James Feldman – Bank of America/Merrill Lynch Anthony Paolone – JPMorgan Michael Knott – Green Street Advisors, Inc. Ross Nussbaum – UBS Chris Caton – Morgan Stanley Alexander Goldfarb – Sandler O’Neill & Partners John Guinee – Stifel Nicolaus David Harris – Imperial Capital Tom Truxillo – Bank of America Presentation Operator
Please be aware of the statements made during this call maybe be in 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-Q for more information regarding these risks and uncertainties.The call may include non-sensitive information that maybe accurate only as of today’s date, August 7, 2012. The Company does not undertake a duty to update any forward-looking statements. On the call today for management for our opening comments are Michael Fascitelli, President and Chief Executive Officer and Joseph Macnow, Chief Financial Officer. In addition Steven Roth, Chairman of the Board, David Greenbaum, President of the New York Division and Mitchell Schear, President of the Washington D.C. Division are here to answer questions during the question-and-answer session. I will now turn the call over to Michael Fascitelli. Michael Fascitelli Thanks, Cathy. Good afternoon and welcome to our first earnings call. There is quite a few on the phone, we are happy and delighted and that you all are joining us today. We’d appreciate your time and attention. After my prepared remarks, Joe Macnow, our Chief Financial Officer will provide a financial overview and then we will answer your questions. We will end at approximately 2 PM. It has been a very productive quarter for us and we are making significant progress on the We Will statements made in these shareholders letter. We have had substantial progress on simplifying the company and are committed to continue this. I would like to remind everyone that 80% of our earnings come from New York and Washington office and retails holdings where we have great platforms and great management teams. Let’s start out by talking about asset sales. As we said in the past, we are exiting the mart business. In the second quarter we sold or contracted to sell four mart assets for $228 million, the L.A. Mart, the Boston Design Center, the Washington Design Center and the Canadian Trade Show Business.
And as a remainder, in the first quarter we completed the sale of 350 West Mart Center for coincidently $228 million. In the second quarter we also sold our Washington Office Center which is contiguous to the Washington Design Center and six non-core retail properties.The total proceeds from second quarter sales of $500 million with a net gain of $177 million. Together with sales in the first quarter, total proceeds are $821 million with a net gain of $232 million. In the second half of the year, we are contemplating the sale of over $1 billion of assets. Including the beginning of the mall disposition program and continuing the pruning of our strip center portfolio. We are currently marketing Green Acres Regional Mall and Kings Plaza Regional Mall as well as our 650,000 square foot power ship center, known as the plant in San Jose California today in my field. Let me now talk about acquisitions. In the second quarter we focused on street retail which I would like to review. First we contracted to buy 114,000 square foot retail condominium at 666 Fifth Avenue for $707 million and 4.5% going in cash cap rate and 5.6% GAAP cap rate. This deal is expected to close in the fourth quarter. As you probably know, we acquired quite a co-controlling 49% interest in the 666 office condominium in December 2011. Second, we announced last week that we entered into a lease with Host Hotels & Resorts under which we will redevelop the retail and science departments of the New York Marriott Marquis Times Square Hotel. This leads gives us effective control of the retail site that contains options based upon – based on cash flow which effect size (ph) will lead to our ownership and reward us for our redevelopment efforts.
The property is located in the bow tie in the heart of Times Square and snaps the entire block from 45 th Street to 46 th Street on Broadway directly across our iconic 1540 Broadway retail property, formerly the home of the famous Virgin Record Store in sign.Host Hotels & Resorts slowly transformed our property where we added Disney and Forever 21 flagship stores to create a full block front of state-of-the-art dynamic LED signage. Read the rest of this transcript for free on seekingalpha.com