Question-and-Answer Session
Operator
(Operator Instructions) Our first question comes from Richard B. Shane, Jr. - Jefferies & Company, Inc.
Richard B. Shane, Jr. - Jefferies & Company, Inc.
Historically there really hasn’t been a big difference I assume between FFO and taxable income but I want to make sure with the CDO repurchase being such a big contributor to the FFO this quarter that there’s not some nuance there that we’re missing. Can you explain that please?
John B. Roche
The CDO gains are taxable but as a function of the AFR acquisition and the amount of depreciation generated by the real estate portfolio. We have a significant amount of shelter in excess of the gains generated.
Richard B. Shane, Jr. - Jefferies & Company, Inc.
Given the investment opportunities that you’re looking at and the stock trading below half of book value, what about authorizing a repurchase or more importantly why not SL Green take a look at buying the whole company? I mean you’re trading at half of NAD or less.
Marc Holliday
I don’t think the company’s made any kind of decision to solicit any buyers in that regard. The opportunities I was referring to are mostly internal opportunities which we would describe as the lower hanging proof in that regard, clearly leasing up a substantial portion of the 2.5 million square feet all of which would be additive to the current NOI that I referred to earlier, $225 million, is probably one of our big focuses. Buying back CDO bonds where we think the price warrants it, we don’t always think it does and what can we do and we think that has been a very good use of capital for us particularly when some of those yields have approached anywhere between high teens to 20%. There’s also very efficient financing we get within the CDOs where we can originate new mortgages at much higher spreads than in the past and also put in AAA or subordinate AAA CMDS bonds where we have Joe Romano and his team cherry pick through different bond classes. We try to stay at the very highest levels in efficiently financing the CDOs. So that’s been a good strategy so our approach at trying to close that gap between where we trade and the book value, that’s over double where we trade currently. We think we can do relatively efficiently internally with some external opportunities as well. And I think that’s the course we’re focusing on right now.
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