Winthrop Realty Trust's (FUR) CEO Michael Ashner on Q2 2016 Results - Earnings Call Transcript

| About: Winthrop Realty (FUR)

Winthrop Realty Trust (NYSE:FUR)

Q2 2016 Earnings Conference Call

July 28, 2016 12:00 ET

Executives

Amy Grucan - Investor Relations

Michael Ashner - Chairman and Chief Executive Officer

Carolyn Tiffany - President

John Garilli - Chief Financial Officer

Analysts

Dan Occhionero - Barclays

Michael Kim - Apollo Global Management

Stendy Kaba - Private Investor

Dusty Henderson - Eagle Asset

Bill Chen - Rhizome Partners

Raymond Howe - CFP

Timo Kennel - Private Investor

Operator

Greetings and welcome to the Winthrop Realty Trust Second Quarter 2016 Management Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host Ms. Amy Grucan, Investor Relations for Winthrop. Thank you. You may begin.

Amy Grucan

Good afternoon, everyone. Welcome to the Winthrop Realty Trust second quarter 2016 management conference call. With us today from senior management are Michael Ashner, Chairman and Chief Executive Officer; Carolyn Tiffany, President; John Garilli, Chief Financial Officer and other members of the management team.

This morning, July 28, we issued a press release disclosing certain financial information about Winthrop and providing updates on the liquidation process. The press release is available on our website at www.winthropreit.com in the News and Events section and which will be furnished on Form 8-K with the SEC. Additionally, we are hosting a live webcast of today’s call, which you can also access in the website’s News and Events section.

At this time, management would like to inform you that certain statements made during this conference call, which are not historical, might constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Although we believe the expectations reflected in any forward-looking statements are based on reasonable assumptions, we could give no assurance that these expectations will be attained. Factors and risks that could cause actual results to differ materially from those expressed or implied by forward-looking statements are detailed in the press release and from time-to-time in our filings with the SEC. We do not undertake a duty to update any forward-looking statements.

I will now turn the call over to Michael Ashner. Michael?

Michael Ashner

Thank you, Amy. Welcome to our discussion of our second quarter 2016 financial results and continuing discussion of our ongoing efforts with respect to the company’s planned liquidation. As it is our last scheduled call, I find it somewhat bittersweet. Once again, I will initiate a discussion with Carolyn Tiffany and John Garilli available to answer those truly difficult questions that maybe posed. As described, oftentimes, the adoption of a plan eliminates much of the content one finds in the standard earnings call.

We applied liquidation accounting and that accounting is based primarily on changes to asset valuations. These shades reflect our best current estimates that we expect to realize from the proceeds of asset sales and the cash flows prior to liquidation, taking into consideration numerous factors, including timing of each asset sale, its operating income prior to disposition, cost of liquidation, corporate G&A, etcetera.

On an apples-to-apples basis, the estimated liquidation proceeds decreased by $0.22 per share to $10.61 as compared to the first quarter estimate of $10.83 per share after deducting the $2 per share distribution declared and paid during the second quarter and the $1.25 distribution – per share distribution declared and paid on July 1. The $0.22 downward dip valuation on net asset value is well-described in the earnings release. For the record, we have not made any change to our most recent valuation of 20 Times Square investment. After almost two years of liquidation accounting, hindsight demonstrates that as real events actually occur, there will be changes to the NAV analysis each quarter one way or the other. We have been very busy the past 5 months.

First, let’s address sales activity during the second quarter and thereafter. On May 19, the venture in which the company held an 83.7% interest closed on the sale of the Stamford, Connecticut luxury apartment building, generating $90 million of gross sales proceeds inclusive of forfeited deposits. Funds from the sale were used to retire the outstanding indebtedness on this property as well as the existing mortgage indebtedness encumbering the remaining luxury apartment property in Houston, Mosaic.

In April, the company closed on the sale of its interest in a joint venture and mezzanine loan relating to the Sullivan Center office and retail property located in Chicago. The company realized approximately $95.3 million in proceeds. Our apartment property in Greensboro, North Carolina, Lake Brandt was sold on May 12 for gross proceeds of $20 million and net proceeds of $6.3 million after satisfaction of third mortgage indebtedness and closing costs.

On June 30, the company sold its warehouse property in Jacksonville, Florida for $10.5 million, of which $2 million received in cash after payment of closing costs, with the company providing seller finances of $8.4 million bearing interest of LIBOR plus 5% and mature in July 1, 2019. During the second quarter, we borrowed $45 million secured by Mosaic that last property in the ST Residential portfolio at a rate of LIBOR plus 2.75%, the proceeds of which were used in part to fund our July 1 distribution. We also financed our office building at 450 West 14th Street, New York City, New York, obtaining a $50.5 million replacement first mortgage. This loan bears interest of LIBOR plus 4.4% and matures on May 1, 2018.

Leasing activity was particularly compelling during the second quarter as our venture at 701 Seventh Avenue in Times Square otherwise known as 20 Times Square, entered into 2 significant lease agreements. The first lease was a joint venture between Cirque du Soleil and the National Football League, which will occupy the – fully occupy the second, third and fourth floors of the retail space. The Cirque venture plans to use the space for both entertainment and retail purposes. Our venture also entered into another long-term lease with Hershey Company in mid-July for approximately 6,940 square feet of ground floor space. The terms and rental rates of both leases are consistent with the valuation for the property that we have used in our liquidation analysis.

On June 10, a contract to sell on One East Erie in Chicago, Illinois, our office retail property became binding at a gross purchase price of $47.9 million. The buyer’s deposit of $1.25 million is now nonrefundable and we anticipate a closing during the third quarter. Similarly, the venture in which the company holds a 49.9% interest as well as a first mortgage entered into a binding agreement to sell its Mentor Retail property in Chicago for purchase price of $10.45 million. We also anticipate this sale to close during the third quarter.

As we indicated in our prior call, it was our intention and is our intention to generate as much cash as possible prior to formation of a liquidating trust for distribution to shareholders. As mentioned, we utilized refinancing proceeds from Mosaic to fund a portion of the $3.25 per share distribution during the second quarter through July 1. As you may have noticed, we improved our supplement, provide specifics with respect to each asset to total proceeds we anticipate realized. This gets us our best current projections to each asset’s value when the chaotic universe subs the future upward and downward adjustment.

Since the liquidation was adopted 2 years ago, the company has distributed approximately $80 million to its bondholders to retire its bonds, $120 million to its preferred shareholders to satisfy the liquidating preference on its preferred shares and approximately $282 million in aggregate distributions to common shareholders for $7.75 per share. The modified NAV range that we gave shareholders for the value of the common shares on the last day of 2013 has to those assets which have been sold to-date range between $524 million and $562 million. We have realized from those sales approximately $614 million.

Let me assure you that we will continue to exercise all efforts to exceed expectations post formation of the liquidating trust in order to continue to maximize shareholder value. The last day of trading of our common shares will be August 1 as the company will be transferring its remaining assets and liabilities to the liquidating trust on August 5 and coming to an end.

Our Board of Trustees has determined that the trustees of liquidating trust will be myself, Carolyn Tiffany and Howard Goldberg, our Lead Independent Trustee. A copy of the proxy statement, which describes in detail the tax and legal consequences for shareholders of owning a beneficial interest is available on the SEC’s website, www.sec.gov as well as the company’s website, www.winthropreit.com. We continue to recommend to everyone that they discuss any questions they may have with their personal tax and investment advisers.

I personally want to extend my heartfelt gratitude to our shareholders who have consistently supported management and our board both through good times and bad times. Whatever success we have enjoyed would not have occurred without the untiring commitment of our entire management team, our Board of Trustees and that support which we have received from the U.S. shareholders. I am personally extremely grateful for that support and the experience. It has been a long journey for all of us together and I hope a result with which you find satisfactory.

I would now like to open the floor to questions. Feel free to ask about liquidation process, our assets or any other questions which you might have including what people are reading, we are all happy to respond.

Question-and-Answer Session

Operator

Ladies and gentlemen, the floor is now open for questions. [Operator Instructions] Our first question is coming from Dan Occhionero of Barclays. Please proceed with your question.

Dan Occhionero

Good afternoon. Thanks for taking my question. I wanted to ask about New York hotels, there has been a lot of noise about supply concerns and I wanted to get your thoughts on how it might impact your Marriott development project and how it might affect the valuation and what you are kind of using as comps for the property?

Michael Ashner

Well, it’s certainly true that there is some concern about New York hotels going into the future. And I think there is like 11,000 rooms being added next year. But to my knowledge, there is no planned additional rooms for 2018. Much more importantly to me is that if you think about the submarkets, in which your hotel is situated, we are situated in the Times Square submarket. That is the – that submarket has the highest occupancy of any submarket in the City of New York. It has – it draws the most tourists of any submarket in the City of New York. So I am not greatly concerned and people who know me know that I am a pessimist, greatly concerned about the future operations of the occupancy or the value that hotel at this point in time. One can keep in mind that we will be the newest and I believe best hotel in that market when we open.

Operator

Sir do you have additional questions? We will move on. Our next question is coming from Michael Kim of Apollo Global Management. Please proceed with your question.

Michael Kim

Hi. Thanks for taking my questions. I have a number of questions, I will get back in the queue after a few. But just real quickly, obviously there is a lot of focus on just kind of the – on taxes going into liquidating trust, I am sure maybe this will be explained in the 10-Q, but at a high level, what do you think the split will be between rental income versus sale of assets and how should we think about the costs allocated for the remaining assets in terms of thinking about potential gains and taxable income?

John Garilli

Hi Michael, this is John. I will take this one. As of this point in time, we don’t anticipate a significant portion going to operations, so I would expect that to be minimal. We are still working on depending on what assets are there and then the final allocation between the price, the fair market value. There will be that discount between kind of what we are showing for a NAV and what the fair market value will be on that day. Obviously, anything that’s under contract will be allocated dollar for dollar. All of your basic assets, cash, receivables, your liabilities are going to be pretty much dollar for dollar. So then, whatever is left over, will get allocated to the assets themselves, the physical assets. Anything that’s under contract will be dollar for dollar. And then there will be – those that are further out will have a bigger discount in terms of that. So I would expect a majority of that discount is going to be a gain related as opposed to ordinary issue.

Michael Ashner

I think I want to add, I am not sure of the entire question, but if I can add one point. If the question is will we have costs on excess cash flow and cash flow from the remaining properties in excess are the costs of maintaining the trust. And I am fairly certain that there is substantial cash flow in excess of our cost of running the trust, even after the sale of Mentor and One East Erie.

Michael Kim

Okay. And I guess for some of the major remaining assets, so now let’s say like Mosaic and 450 West 14th Street maybe in particular, what is the allocated cost basis assigned to those assets?

John Garilli

That hasn’t been determined yet. We will know once we get a final price and then revisit how to allocate to each individual asset specifically.

Michael Kim

Okay, understood. The – when we think about fees, the remaining fees to be paid, how should we think about the timing of when those fees would be paid?

John Garilli

Are you referring to the incentive fee and the termination fee?

Michael Kim

Yes. How should we think about like the timing of when that cash would actually be paid out of the liquidating trust?

Michael Ashner

Both of them are significantly subordinated to distributions to shareholders. At this point in time, the termination fee, how much – John, do you know off top of your head how much more cash gets distributed before we get to termination fee per share, do you know it is on the gross basis or per share basis?

John Garilli

Yes. It’s – and this will be in the 10-Q, which should be filed this afternoon, roughly $364 million before we get to the incentive fee.

Michael Ashner

And what about the termination?

John Garilli

And that was before the $1.25 that was issued in July.

Michael Ashner

So that would be – okay. So that would be – that was, what was that number?

John Garilli

That was $45 million gross. So you are talking about $320 million.

Michael Kim

$320 million?

John Garilli

Yes.

Michael Ashner

Yes. And what about the termination fee, how much – that’s a different number.

John Garilli

Yes. That would be $215 million roughly.

Michael Ashner

So nothing gets paid to us on those fees until we have distributed out $215 million more, roughly, approximately and nothing on the incentive until we bag out another $360 million whatever – $320 million.

Carolyn Tiffany

From a practical standpoint Mike, given the weight of our assets to 701 Seventh Ave, practically speaking those won’t be paid until that asset is sold.

Michael Kim

Right, okay, understood. And then I just wanted to clarify, the shares owned by FUR Investors LLC, are those – those are intended to be held through the entire liquidation period, is that...?

Michael Ashner

That is true.

Michael Kim

Okay. And then just one quick question before I get into specific assets, are you able to buyback stock in the open market over the next two days?

Michael Ashner

We are.

Michael Kim

Okay, alright. Just moving along to the assets, I guess one particular asset, Churchill, Westinghouse, why did the value of this asset doubled during the quarter, I saw there was a $4 million increase to the trust share of that same asset?

Michael Ashner

We made a – we converted a lease, which is a short-term lease, with – who is our tenant?

Carolyn Tiffany

Westinghouse.

John Garilli

Westinghouse.

Michael Ashner

Westinghouse. We converted it into a 15-year lease by providing capital for them to rebuild – to renovate their property and build a road. So that kind of that is – it’s increased by the exact amount of the capital we invested in the property. By – when doing it, we increased the rent. The rent went up and we had a 15-year lease, which is much more salable [ph] than what we had before.

Michael Kim

Understood, okay. On the Jacksonville seller financing, was that sold during the quarter or...?

Michael Ashner

No, we are still holding the seller finance. We just sold...

John Garilli

We closed on the last day.

Michael Kim

I am sorry?

John Garilli

We closed on the last day of the quarter, so no that hasn’t closed yet, I mean hasn’t been sold. We still hold that.

Michael Ashner

We still hold the paper. The property was sold. We hold the loan.

Michael Kim

Okay. I may have missed it, I didn’t see it on the list of the remaining assets, but okay. And then just on 701, I guess could you just talk about what space is remaining to be leased between each level and maybe the square footage?

Michael Ashner

There is approximately 300,000 square feet of space on the ground floor. It’s the best space, I mean, in the sense that it’s the actual corner. There is the below ground – 2 levels below ground to be leased. Other than that, as to retail space, the rest of the building is leased. There is – we haven’t started doing anything with the signage, other than the portions of the signage that Hershey’s and Cirque du Soleil have. So, that’s, I guess, in the sense that’s remaining to be leased and we are looking forward to getting guests at our hotel.

Michael Kim

Right. And just to clarify on the way you guys have characterized the signage with Hershey and the joint venture with the NFL, you have mentioned that it’s external signage or superstructure sign. This is – just to clarify this is completely separate from the billboard, correct, this is just external signage on the building?

Michael Ashner

No, no. It’s part of the building. The Hershey’s because if you look at the – on the – I mean, how do I describe this? Hershey’s is along if you are in 47th Street looking east. If you are in Seventh Avenue looking east, the Hershey’s retail is on the northern portion of that. There is a cop portion of that going straight up above Hershey’s that Hershey’s would have. Then the bulk of it going from that portion wrapping around, we still have. At the other end, there is a stop space on 47th, which is visible from Seventh Avenue, I mean, visibility on Seventh Avenue, which Cirque du Soleil and the NFL will have. And we have rights – we have certain rights to use that space during certain times of the year.

Michael Kim

Okay, understood. Okay. And was this – the lease with Hershey Company, was this in line with what you would expect for space like this on the ground floor in Times Square or was it...

Michael Ashner

No, it was in line. It was absolutely in line. I would say that I want to make it clear. I don’t know if I have done this in the phone call. The Witkoff Group has done an exceptional job handling the leasing and the construction. And we have a lot of confidence in them, particularly Steve and Sherri White, but this was absolutely in line with the market rents for ground floor space in Times Square.

Michael Kim

I see. Okay. No, that’s helpful. And I will ask one more question on asset and then get back in the queue, but this 450 – or sorry, Mosaic, we have seen some revisions to your NAV estimate. And I was just curious could you provide for us what is the split in your NAV number between the expected cash flow to be earned from the asset versus the value of the asset upon its sale?

John Garilli

We don’t have that. It’s not public at this point, Michael.

Michael Kim

That’s something you wouldn’t be willing to breakout?

Michael Ashner

They are discussing it.

Carolyn Tiffany

Yes. I mean, we could break it out in the 10-Q.

Michael Kim

Yes, that would be helpful. I mean a split between the two and would you – another way to also ask it is...

Michael Ashner

It’s not – you know what, when they split it, I don’t believe you will find it to be material that has no effects with the underlying net asset value.

Carolyn Tiffany

That’s probably the best way. I don’t know if we could actually – because we are filing the 10-Q this afternoon, I don’t know that I could get it in there that quickly, but that’s – Michael is right, it’s not a material component of the value, the cash flow.

Michael Kim

The cash flow, okay. And I guess you mentioned in the release that you had changed the cap rate assumption on the asset, what magnitude of a change in cap rate was that assumption during the quarter or even over the past year, because I know you made a revision in, I think, I believe the fourth quarter of last year. Just kind of curious to what magnitude your cap rate assumption has moved over a time period?

John Garilli

Roughly 0.25 points, a little bit more than that.

Michael Kim

Okay. And the way you guys are computing this, I assume that you still own the 20,000 square feet of ground level retail space. And are you just using a cap rate on the entire cash flow of the project, the rental income from commercial and residential?

John Garilli

Yes, that’s correct. It’s a blended rate, yes.

Michael Kim

It’s a blended rate, okay. And the commercial asset, where do we stand in terms of occupancy right now?

John Garilli

We are fully occupied.

Michael Kim

Fully occupied. Okay, great. Alright, perfect. I will get back into queue. Thank you.

Operator

Thank you. [Operator Instructions] Our next question is coming from Stendy Kaba, a Private Investor. Please proceed with your question.

Stendy Kaba

Hi, guys. Thanks for your time. Just specific to Times Square, you guys have an estimated cash flow value something like $209 million. I am doing the waterfall math correctly, which I may not be, that gives somewhere near like a $1.16 million sale price before the debt. So, just it would be helpful as an investor if you guys could just be a little bit more granular in terms of how you are estimating that price? So, maybe some general ranges around maybe around per square footage price, non-ground square footage price. How we can think about cap rate, maybe affording the dealings and maybe how – a general range of price per room fee. I know some of the data is sensitive, you guys are trying to sell it, but if you could just provide general ranges dealing with floors that give me some inclination as to how to value it myself? That would be helpful.

Michael Ashner

Well, the valuation has been done in large measures were supported by an appraisal. Who did the appraisal, Cushman Wakefield?

John Garilli

Yes.

Michael Ashner

Yes, Cushman Wakefield, because of the complexity of the project under construction. I am not sure the numbers that we are throwing around are correct, but so let me give you rough numbers, rough, rough. And Carolyn is probably going to start raising it waving her hand to me, but you can figure your own mathematics on it. At roughly $1.150 billion, should we get back all of our capital plus a 12% return on our capital, which tie – which rolls into a portion of the value that we have for – value of the property for our investment assuming a sale at the end of – I am waiting for somebody to raise their hand, I can’t see. Above that, we are entitled to 15% – roughly 15% of the net sale proceeds that are realized for the property. That’s the easiest way for us to account for it. So, if you work backwards or reverse engineer, you will figure out, you will probably come to some conclusion as to how we value the property. We believe in it that it was the property will have in that valuation and in the Cushman Wakefield appraisal. There is a relatively low cap rate given for the retail property and a wider cap rate given for the hotel property, but anything more than that, I think it’s best that you work through the number yourself.

Stendy Kaba

Understand. So, I think...

Michael Ashner

Yes, sorry.

Stendy Kaba

So, I think this would be a very conservative number. And you can tell me if you can’t tell me, but in terms of cap rate because that’s very material for valuation, of course. Can we assume generally speaking probably less than 5%?

Michael Ashner

You can assume less than 5%.

Stendy Kaba

Okay, that’s helpful. Thank you. And then I guess my last question is future plans on filings and calls, I don’t know if you have spoken about that, but are you going to do quarterly filings? I am assuming you will update us whenever there is a sale like you have been, but can we speak to you every quarter, how is that going to work?

John Garilli

So at this point, we are waiting for the final response from the SEC. We do not at this point anticipate continuing to do quarterly filings and that will be required just to do annual filings. To the extent that there is a material transaction or something that is significant that occurs, we will continue to file 8-Ks, current events, detailing how the transaction and how that compares to our existing liquidation value.

Michael Ashner

I want to underscore two points. It is our strong intention to make beneficial interest owners, whatever you are called at that point, well aware of what happens, just like I would want to be aware of your thoughts if I was in your position – which I am in your position. We are not – this is not going to be quietly linking of various things occur with respect that our material, you will know about them as they occur. On a separate basis, I want to come back this 5% cap rate. I am not sure – we may have capped the hotel numbers. I have to look back – I would have to look back at a higher cap rate than 5%. I know the retail was below – was 5% or below, but the hotel may have been higher.

Stendy Kaba

Okay. Yes. For the room fee, I am looking at like very conservative, probably be like $600,000 of room fee that you have comp on valuing it, I don’t know if you want to give any more detail on that?

Michael Ashner

I can’t. The hands are waved. I have said what I can say on it.

Stendy Kaba

Yes. It’s probably to my interest. Thank you. Okay, that’s helpful. Thank you very much. I think we all appreciate it.

Michael Ashner

You’re welcome.

Operator

Thank you. Our next question is coming from Dusty Henderson of Eagle Asset. Please proceed with your question.

Dusty Henderson

Hi. Is the liquidating trust going to receive monthly rent payments from the properties and mortgage payments in Jacksonville?

Michael Ashner

Yes.

Dusty Henderson

How frequent do you anticipate cash flows to the trustees?

Michael Ashner

To the interest holders?

Dusty Henderson

Interest holders, yes.

Michael Ashner

Yes. You mean distributions, how frequently?

Dusty Henderson

Yes.

Michael Ashner

I think it’s I am in the same boat as you are. As soon as we aggregate enough cash to make a distribution that is meaningful, we are going to distribute the cash.

Dusty Henderson

Okay. And what would have to happen for this liquidation to drag on for longer than you plan?

Michael Ashner

Values would have to be increasing, in our view, on the assets that we hold at a rate which is better than any reasonable rate of reinvestment that we can see right now. So as long these assets – for example, we saw an X asset being – the X asset, because we will be talking about specific assets, was rising in value at a compounded level. For example, at a – which is just as an example, at a double-digit rate, we would likely hold on to that until the rate of growth and the value of that asset flattened out.

Dusty Henderson

Excellent. Thanks. And do you have any accurate ownership data for ETFs that own your stock and how are you allowed to share it if you do?

Carolyn Tiffany

We don’t have accurate information on that.

Michael Ashner

So the answer is no yet.

Dusty Henderson

Alright. Thank you very much.

Operator

Thank you. Our next question is coming from Jerry Yankowitz of [indiscernible] Limited. Please proceed with your question.

Unidentified Analyst

Thank you. Of the remaining $10.61, could you give us an estimate of how much you plan, you think is reasonable to distribute in the next 12 months, 18 months and 24 months?

Michael Ashner

Very tough. So the answer is no, I can’t. I would love to be done in 24 months, I would really love to be, but this is the timing of sales.

Carolyn Tiffany

If you go to our supplement, we do provide detail about – for liquidation-basis accounting, when we estimate assets will be sold. So you can get a sense of the timing of asset sales from the supplement.

Unidentified Analyst

Nothing more definitive than that in the remaining time period that would give you a little more clarity on that?

Carolyn Tiffany

No. At this point it’s a...

Michael Ashner

No. That’s our best estimate as to when assets get sold. And I think you would agree that we have made distributions as fast as we can after assets have been sold.

Unidentified Analyst

No, I agree. But you do think 2 years is still is your goal for final liquidation?

John Garilli

Yes.

Michael Ashner

Yes.

Unidentified Analyst

Thank you.

Operator

Thank you. Our next question is coming from Michael Kim of Apollo Global. Please proceed with your question.

Michael Kim

Hi. Just a couple more follow-ups, in terms of the assets that are marketed for sale, is there any update today relative to what’s been presented in the supplement as of the second quarter in terms of assets that are now marketed?

Michael Ashner

One East Erie is under a hard contract as I said, binding contracts. Metro was under binding contract. No more updates than that. We don’t discuss anything with respect to marketing, as a general rule, unless we are in a binding contract. So that’s all like historically, what we have done. And I can’t say more than that, Michael.

Michael Kim

Okay. I am just looking at some of these assets that have a disposition date for December, they are not...?

Michael Ashner

Most of those are loans that are going to be paid off in December. I am not looking at the list, but if you see a December, very often they are loans that are going to be paid off.

Michael Kim

Yes. I was just looking at the operating properties, not the loans, but...?

Carolyn Tiffany

No, we really can’t comment on the marketing process at this point for 550 and Churchill, which are the two that you are referring to.

Michael Kim

Yes. Okay, understood. So my last question is 450 West 14th Street, have you provided what that current cash flow profile looks like just net of the ground lease payments or what this might look like in a more normalized, stabilized environment?

Michael Ashner

I know that, can I respond to that or I don’t what we have done.

Carolyn Tiffany

We haven’t publicly put out asset-by-asset NOIs or cash flows. So at this point, we really can’t comment on it.

Michael Ashner

But I guess other than that, I can say this. Well I am glad to say this is sufficient cash flow to cover our preference on a current basis. That I believe I can say. After paying the ground lease and whatever other operating expenses the building has. So that’s an ongoing – that is what we are comfortable in saying.

Michael Kim

Okay. And I mean is it also fair to say that I believe maybe a couple of years ago, the six-month annualized NOI number for the asset was about $5.5 million, is it higher today than it was back then?

Michael Ashner

Carolyn, I don’t why you are waving your arms to me, Carolyn. It’s relatively the same as it was. When we took control of the building or became involved in the building with our partners, we – there were pretty much all of them is leased up, all of the office build portion was leased up with 10-year leases. So that’s not the apartment step-ups that are in-built in those leases. I don’t think there has been any significant increases to our revenue there.

Michael Kim

What kind of step-ups are there embedded in those leases?

Carolyn Tiffany

We haven’t put that – made that information public. And then also note that the retail space has not been leased. That retail space is vacant.

Michael Kim

Okay, understood. Alright. Thank you very much.

Operator

Thank you. Our next question is coming from Bill Chen of Rhizome Partners. Please proceed with your question. Mr. Chen, your line is live, do you have a question today.

Bill Chen

Yes. Hi, hello.

Michael Ashner

Yes.

Bill Chen

Hi. I was just wondering if you could disclose the duration of the Hershey’s and NFL lease that you signed?

Michael Ashner

I cannot, because I got arm waved. They are waving their arms at me, I cannot. And the reason is our partners have asked that since we are still in the market with the remaining ground floor space, that we don’t want to give any lease – any information concerning specifics of those leases to the market right now until soon enough before the remaining space has been leased.

Bill Chen

Got it. And my follow-up question is more of a market practice question, there is a – the rental rates for Times Square is fairly available out via various reports and whatnot. And I just want to better understand that those figures that are out there are they triple-net figures or do we – when we think about those figures, is there – to kind of go from that rent number to an NOI number, how do we – how should we think about it? Is that typically like a 90% NOI margin? Will you factor in few kind of taxes operating expenses, given these are very unique assets with very high rent per square foot, the expenses could be a very small component of it. So, if you can help us understand that and so that I could kind of bag into my baggage.

Michael Ashner

I said what I can tell you. I don’t want to go into details on our leases, alright? Having said that I can assure you that any lease that we do has, if it was not a net lease would have base year stops, so that any future increases will be passed through to the tenant.

Bill Chen

Got it. Okay.

Michael Ashner

I can’t go further than that, because there – I really don’t want to give information out to the market. I don’t want Sherri White, Steve Witkoff hunting me down with ball peen hammers to break my feet.

Bill Chen

Yes, yes. No, no, I wasn’t really asking about this asset specifically. It was more to you just I understand Times Square in general, if you could comment on industry standards. I don’t want you to comment on our lease specifically, but...

Michael Ashner

People – to that answer people do different deals in Times Square.

Bill Chen

Okay, okay. So the number that we see around – that the rent number as amended when you back into the NOI, that would be all different?

Michael Ashner

Sometimes they do net leases. Sometimes they do double net leases. Sometimes they do gross leases. Sometimes they do gross leases with stops. I mean, you can see all kinds of leases in Times Square.

Bill Chen

Got it. Got it. Well, that’s helpful. And that’s all the questions I have.

Michael Ashner

Alright.

Operator

Thank you. Our next question is coming from Raymond Howe of CFP. Please proceed with your questions.

Raymond Howe

Good afternoon. Can you tell me the scheduled occupancy dates for both the retail and hotel at Times Square?

Michael Ashner

I can tell you the completion date, the CO completion date is scheduled for the – on the retail is scheduled for the end of November and beginning of December. We have an 8-month leeway to deliver that space to our tenants beyond that portion of time to protect ourselves on the delays that occur. Hotel is supposed to be scheduled for completion late 2017. Having said that, I am always skeptical about what the people get it on the inside or on the outside when it comes to construction. So – but we have given ourselves more than enough leeway in the event that there is delays.

Raymond Howe

And can you comment on whether or not the company has bought back any shares since the end of the second quarter?

Michael Ashner

It has not.

Raymond Howe

Okay. And lastly, since this is the last conference call and you have begged people for as long as I have listened to asking what you are reading, so I am going to ask you what you are reading?

Michael Ashner

I have been begging – I am always looking for different conversation, at least you are reading these days. Well, I will tell you what’s good. Since you are all financial people, is Money Changes Everything, which came out a few weeks ago. It’s a great history of finance going back to the time of the Assyrians. It’s actually pretty fascinating. I will tell you what else is good that we finished, but was depressing is that book by Nick Bostrom, Super Intelligence. That was pretty good. What’s not good is – and I have read every one of his books and I like the other ones, but Max Hastings’ new book, Secret War, that was dull. It was about the espionage and intelligence services during World War II. And what I am reading now is a challenging book, which questions globalization. It’s a book by John Gray called False Dawn. So, that’s my reading.

Raymond Howe

Thanks for all you have done.

Michael Ashner

Thank you.

Operator

Thank you. Our next question is coming from Dan Occhionero of Barclays. Please proceed with your question.

Dan Occhionero

Hi. What is in the $51 million restricted cash balance?

John Garilli

It’s primarily the distribution that was paid on July 1. So, we had to fund it the day before. So, $45 million of that $51 million is related to that dividend or distribution.

Dan Occhionero

Okay. And the rest is cash reserves on the properties or...

John Garilli

Yes, correct.

Dan Occhionero

Alright, thanks.

Operator

Thank you. Our next question is coming from Timo Kennel, a Private Investor. Please proceed with your questions.

Timo Kennel

Hi, everyone. I have two questions and one follow-up question on the restricted cash held in the escrows on your balance sheet of $50.7 million, does that include the Erie sale or is that – that’s still in the investments of real state?

John Garilli

That’s still in the investments in real estate as just mentioned to Dan, you might have met. We have the dividend payable of $45.5 million. That was paid on July 1, but it was funded on June 30. So, that was in restricted cash.

Timo Kennel

Perfect, thank you very much. And the last question is you said earlier that you would like – when there is a meaningful cash amount, you will distribute it. What is the meaningful cash amount for you to make or what’s the minimum to make a distribution?

Michael Ashner

It’s really an amendment, but at this point, with assets the size that we have, I would like it to be at least for the time being at least $1 a share.

Timo Kennel

Okay, great. That’s all the questions I had. Thank you.

Operator

Thank you. Our next question is coming from Bill Chen of Rhizome Partners. Please proceed with your questions.

Bill Chen

Hi, gentlemen. I was just wondering could you provide a property tax figure for the entire building upon completion for 20 Times Square or an estimated?

Michael Ashner

No, we can’t, because it’s – first of all, we are always going to have a view as to what the correct taxes are. The city is going to have a view as to what they believe the taxes are. And what you actually experience is that its tax assessed in installments and you really won’t know what their property taxes will be for the building for 5 years.

Bill Chen

And then could I – I mean, is there like ranges, where you are comfortable saying that it’s certainly below a certain dollar figure or just a wide range would be helpful?

Michael Ashner

Well, no, the problem is that, that it certainly is going to be a range. And on a property like that, depending on what cap rate, a $1 million difference between what I tell you in that range is worth, I don’t know it’s worth, it’s worth $20 million of value to the building at least. So, it may sound like a trivial number, but any number within that range and if we are not accurate is going to lead people to have perhaps theoretically can materially give people the wrong sense of what the value of the building would be. This is not – we talked about property taxes as an expense, but it’s going to have an impact on valuations.

Bill Chen

Okay.

Michael Ashner

I mean, I think that if you want it, I mean that research is available and people want to look for comparable property taxes in Times Square, but it will be 5-year process before we know what our final tax numbers are.

Bill Chen

Got it, got it. That’s helpful. Thank you.

Operator

Thank you. At this time, I would like to turn the floor back over to management for any additional or closing comments.

Michael Ashner

We appreciate, as always, you are being with us for today’s call. If you have any additional questions, would like to discuss anything with us further, please feel free to contact myself or any member of the management team, preferably Carolyn. And I include the future. Do not be hesitant when you have questions. As if not shareholders, its beneficial trust holders to contact us if there is something you want to know about. You can look at our website. And I want to thank you all. Have a good afternoon.

Operator

Ladies and gentlemen, thank you for your participation. This concludes today’s teleconference. You may disconnect your lines at this time and have a wonderful day.

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