Project America

In March 2007 we contracted to acquire a controlling 70% partnership interest in 1290 Avenue of the Americas, a great 2 million square foot asset in the heart of New York's corporate headquarters district, and 555 California, the Bank of America building, a 1.8 million square foot building, arguably the best tower in all of California. We internally code-named this transaction "Project America."

Even for us, this is a big deal with a total purchase price for our 70% interest of $1.8 billion, requiring us to write a $1+ billion check. We allocate the purchase price $775 per square foot for 1290 Avenue of the Americas and $575 per square foot for 555 California, prices which are favorable to recent comps.

This transaction came with tax structuring and litigation complications. Our interest is being acquired through the purchase of all the shares of a group of foreign companies that own, through U.S. entities, a 70% controlling interest in the partnerships that own the two properties. The remaining 30% limited partnership interest is owned by Donald Trump, a long time friend.

A little history here will help. Thirteen years ago, Donald Trump (30%) and the sellers (70%) entered into a partnership to develop the former Penn Central rail yards between West 59th and 72nd Streets in Manhattan. Two years ago the sellers, as was their right, sold three rental apartment buildings and the undeveloped land that remained for $1.76 billion and 1031 exchanged the proceeds into

the two buildings that we are buying. Donald contended that the sale should have been at $3 billion, thereby denying him his share of the increment, and he sued. We will indemnify the sellers against loss from this claim, an undertaking we are willing to make because, among other things, we were involved two years ago in the sale process and, in fact, may have been the under-bidder. We are convinced that the price paid for the land was then market or even a pinch better, confirmed by our own inability to reach that price, as well as the inability of all other bidders. Donald has also sued the sellers alleging multiple claims arising out of their partnership.

Donald knows that we would be happy to have him continue as a partner indefinitely (the partnership extends to 2044) or, alternatively, that we would buy his interest for a substantial sum, which we think is a full and fair price, but he does not yet think so.

David Greenbaum will be responsible for both assets. We will account for the Bank of America building in the "Other" segment.

This opportunity to buy world class assets was made possible by our franchise - our deal flow, the ability to write a $1+ billion check, the deal skills to evaluate the litigation and complex tax structures. Mike and David did the deal with Dan Guglielmone as deal captain. Kudos to Craig Stern on the tax side.