At December 31, 2008, the Company reserved the entire amount of Lehman Brothers’ accrued straight-line rent balance related to its occupancy of approximately 436,723 square feet of the Company’s building at 399 Park Avenue, or approximately 25.7% of the building’s aggregate net rentable square feet. In addition, for the year ended December 31, 2008, Lehman Brothers’ annual lease payments of approximately $45 million represented approximately 32% of the building’s total rental revenue. The write-off of accrued straight-line rent is a non-cash charge which does not translate into

an immediate dollar-for-dollar loss in the underlying value of a property. In assessing impairment of 399 Park Avenue, we evaluated the impact on undiscounted cash flows resulting from the anticipated rejection of the lease by Lehman Brothers, historic rates of occupancy during our period ownership (which have exceeded 90%), re-leasing prospects for the Lehman Brothers space (including the impact that current market rents will have on future cash flows) and costs associated with re-leasing the space. In addition, we considered our ability and intent to hold the property over the long term and note that the Company continues to view 399 Park Avenue as an iconic office property that is among its most important core holdings. Based on these assessments, we determined that this property was not impaired because the carrying value of the asset, which was purchased in 2002, will be recovered by aggregating the undiscounted future cash flows expected to result from the use and eventual disposition of the asset.

approving, and once approved, amending or making any material deviations from each annual operating plan and budget (an “Operating Plan”); provided, however, in the event a member makes any reasonable objection to any proposed revisions to any proposed Operating Plan, the members shall cooperate with each other to resolve any questions with respect to the proposed revisions and shall use their reasonable efforts to agree upon an Operating Plan for the fiscal year in question. If an Operating Plan (or line items thereof) for any fiscal year is not unanimously approved prior to the commencement of such fiscal year, then, pending final resolution of any such dispute, the Company shall continue to manage the activities for which the Operating Plan was proposed in accordance with the prior fiscal year’s approved Operating Plan subject to an escalation factor for each line item that has not been unanimously approved equal to the increase, if any, in the CPI over the CPI for the previous fiscal year plus 3.5% until a new Operating Plan is approved. The Company is authorized during any such interim period to reasonably exceed the prior year’s budgeted amounts for necessary expenses, and without duplication, any committed obligations under leases previously entered into and other discretionary items not within the reasonable control of the Company and increases in contract services and personnel costs to the extent required to maintain the same level of service provided during the previous fiscal year.

entering into, materially amending or terminating any lease which exceeds 66,000 square feet. As part of the annual Operating Plan, the Company and USREO agree on and appoint a third-party arbitrator to resolve any deadlocks on these lease proposals. If the Company and USREO are unable to agree on such a lease proposal, the parties will, within 24 hours of such a deadlock, bring the proposal to the arbitrator for a decision.

other than ordinary trade payables that conform with the approved Operating Plan, borrowing money, issuing evidences of indebtedness or granting any mortgages or other encumbrances on or security interests in the assets of the Venture or any subsidiary, including, without limitation, any direct or indirect financing or refinancing of the property or any portion thereof, or materially modifying, extending, renewing, increasing or otherwise changing or prepaying or defeasing in whole or in part any borrowing, credit extension, financing or refinancing, or making any commitments to borrow funds.

The capped call was purchased in connection with an offering of 3.625% exchangeable senior notes due 2014 (the “Notes”) and was intended to reduce the potential dilution upon future exchange of the Notes in the event that the market value per share of the Common stock, as measured under the terms of the capped call transaction, at the time of settlement is greater than the strike price of the capped call transaction. We considered

SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities,” as amended and interpreted and (“EITF 00-19”) “Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, a Company’s Own Stock” in connection with the accounting for the purchase of the capped call as additional paid in capital (“APIC”). We determined the capped call is a free standing instrument recorded in APIC and is not accounted for as a derivative under SFAS No. 133 due to the 11a scope exception which provides “the reporting entity shall not consider the following contracts to be derivative instruments for purposes of this Statement:

the Company is not required to net cash settle the contracts;

the Company could settle the contracts in unregistered shares; and

the contracts limit the maximum number of shares issuable.

Holders of OPP Units have received distributions equal to 1/10^th of the regular distributions payable on an OP Unit. The Company considered the need to include the unvested OPP Unit awards in the calculation of earnings per share under EITF 03-06 as the unvested OPP Unit awards participate, albeit at a reduced rate, in the dividends paid by the Company. Under EITF 03-06, the Task Force reached a consensus that stock options and non–vested stock issued to employees or non–employees as compensation that contain a right to receive dividends declared on the common stock of the issuer are not subject to the guidance in EITF 03-06 until such time as the options or stock are fully vested. As disclosed in Note 21 to the Company’s Consolidated Financial Statements, the Company will adopt FSP EITF 03-06-1 “Determining Whether Instruments Granted in Share-Based Payment Transactions are Participating Securities” during the first quarter of 2009 and will then consider the unvested OPP Units in the calculation of earnings per share.