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VORNADO REALTY TRUST - Quarter Report: 2010 September (Form 10-Q)

vrt10q3q2010.htm - Generated by SEC Publisher for SEC Filing

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark one)

 

x

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

 

 

For the quarterly period ended:   

September 30, 2010

 

 

Or

 

o

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from:

 

to

 

 

Commission File Number:

001-11954

 

 

VORNADO REALTY TRUST

(Exact name of registrant as specified in its charter)

 

Maryland

 

22-1657560

(State or other jurisdiction of incorporation or organization)

 

(I.R.S. Employer Identification Number)

 

 

 

888 Seventh Avenue, New York, New York

 

10019

(Address of principal executive offices)

 

(Zip Code)

 

 

(212) 894-7000

(Registrant’s telephone number, including area code)

 

N/A

(Former name, former address and former fiscal year, if changed since last report)

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes x No o

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes x No o

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

x Large Accelerated Filer

 

o Accelerated Filer

o Non-Accelerated Filer (Do not check if smaller reporting company)

 

o Smaller Reporting Company

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes o No x

 

As of September 30, 2010, 182,670,995 of the registrant’s common shares of beneficial interest are outstanding.

 

x

 


 

 

 

 

 

 

 

Part I.

 

 

Financial Information:

 

Page Number

 

 

 

 

 

 

 

Item 1.

 

Financial Statements:

 

 

 

 

 

 

 

 

 

 

 

Consolidated Balance Sheets (Unaudited) as of

 

 

 

 

 

September 30, 2010 and December 31, 2009

 

3

 

 

 

 

 

 

 

 

 

Consolidated Statements of Income (Unaudited) for the

 

 

 

 

 

Three and Nine Months Ended September 30, 2010 and 2009

 

4

 

 

 

 

 

 

 

 

 

Consolidated Statements of Changes in Equity (Unaudited)

 

 

 

 

 

for the Nine Months Ended September 30, 2010 and 2009

 

5

 

 

 

 

 

 

 

 

 

Consolidated Statements of Cash Flows (Unaudited)

 

 

 

 

 

for the Nine Months Ended September 30, 2010 and 2009

 

6

 

 

 

 

 

 

 

 

 

Notes to Consolidated Financial Statements (Unaudited)

 

8

 

 

 

 

 

 

 

 

 

Report of Independent Registered Public Accounting Firm

 

36

 

 

 

 

 

 

 

Item 2.

 

Management's Discussion and Analysis of Financial

 

 

 

 

 

Condition and Results of Operations

 

37

 

 

 

 

 

 

 

Item 3.

 

Quantitative and Qualitative Disclosures About Market Risk

 

71

 

 

 

 

 

 

 

Item 4.

 

Controls and Procedures

 

72

 

 

 

 

 

 

 

 

 

 

 

 

Part II.

 

 

Other Information:

 

 

 

 

 

 

 

 

 

Item 1.

 

Legal Proceedings

 

73

 

 

 

 

 

 

 

Item 1A.

 

Risk Factors

 

74

 

 

 

 

 

 

 

Item 2.

 

Unregistered Sales of Equity Securities and Use of Proceeds

 

74

 

 

 

 

 

 

 

Item 3.

 

Defaults Upon Senior Securities

 

74

 

 

 

 

 

 

 

Item 5.

 

Other Information

 

74

 

 

 

 

 

 

 

Item 6.

 

Exhibits

 

74

 

 

 

 

 

 

Signatures

 

 

 

 

75

 

 

 

 

 

 

Exhibit Index

 

 

 

 

76

 

2

 


 

PART I. FINANCIAL INFORMATION

Item 1.    Financial Statements

 

VORNADO REALTY TRUST

CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

 

 

 

 

 

 

 

 

 

(Amounts in thousands, except share and per share amounts)

 

September 30,

 

December 31,

ASSETS

 

2010 

 

2009 

Real estate, at cost:

 

 

 

 

 

 

 

Land

 

$

 4,619,205 

 

$

 4,606,065 

 

Buildings and improvements

 

 

 13,092,999 

 

 

 12,902,086 

 

Development costs and construction in progress

 

 

 202,841 

 

 

 313,310 

 

Leasehold improvements and equipment

 

 

 128,004 

 

 

 128,056 

 

 

Total

 

 

 18,043,049 

 

 

 17,949,517 

 

Less accumulated depreciation and amortization

 

 

 (2,772,079)

 

 

 (2,494,441)

Real estate, net

 

 

 15,270,970 

 

 

 15,455,076 

Real Estate Fund investments (see Note 4)

 

 

 62,500 

 

 

 - 

Cash and cash equivalents

 

 

 846,254 

 

 

 535,479 

Restricted cash

 

 

 148,246 

 

 

 293,950 

Short-term investments

 

 

 - 

 

 

 40,000 

Marketable securities

 

 

 355,800 

 

 

 380,652 

Accounts receivable, net of allowance for doubtful accounts of $56,894 and $46,708

 

 

 192,895 

 

 

 157,325 

Investments in partially owned entities

 

 

 953,011 

 

 

 799,832 

Investment in Toys "R" Us

 

 

 457,141 

 

 

 409,453 

Mezzanine loans receivable, net of allowance of $133,216 and $190,738

 

 

 144,473 

 

 

 203,286 

Receivable arising from the straight-lining of rents, net of allowance of $5,901 and $4,680

 

 

 726,248 

 

 

 681,526 

Deferred leasing and financing costs, net of accumulated amortization of $214,199 and $183,224

 

 

 353,847 

 

 

 311,825 

Due from officers

 

 

 13,182 

 

 

 13,150 

Identified intangible assets, net of accumulated amortization of $354,199 and $312,957

 

 

 385,337 

 

 

 442,510 

Other assets

 

 

 724,224 

 

 

 461,408 

 

 

 

 

$

 20,634,128 

 

$

 20,185,472 

 

 

 

 

 

 

 

 

 

LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND EQUITY

 

 

 

 

 

 

Notes and mortgages payable

 

$

 8,992,805 

 

$

 8,445,766 

Senior unsecured notes

 

 

 1,231,196 

 

 

 711,716 

Exchangeable senior debentures

 

 

 489,332 

 

 

 484,457 

Convertible senior debentures

 

 

 396,714 

 

 

 445,458 

Revolving credit facility debt

 

 

 - 

 

 

 852,218 

Accounts payable and accrued expenses

 

 

 507,755 

 

 

 475,242 

Deferred credit

 

 

 632,427 

 

 

 682,384 

Deferred compensation plan

 

 

 88,559 

 

 

 80,443 

Deferred tax liabilities

 

 

 17,648 

 

 

 17,842 

Other liabilities

 

 

 372,695 

 

 

 88,912 

 

Total liabilities

 

 

 12,729,131 

 

 

 12,284,438 

Commitments and contingencies

 

 

 

 

 

 

Redeemable noncontrolling interests:

 

 

 

 

 

 

 

Class A units - 13,530,016 and 13,892,313 units outstanding

 

 

 1,157,222 

 

 

 971,628 

 

Series D cumulative redeemable preferred units - 10,400,000 and 11,200,000 units outstanding

 

 

 260,000 

 

 

 280,000 

 

 

Total redeemable noncontrolling interests

 

 

 1,417,222 

 

 

 1,251,628 

Vornado shareholders' equity:

 

 

 

 

 

 

 

Preferred shares of beneficial interest: no par value per share; authorized 110,000,000

 

 

 

 

 

 

 

 

shares; issued and outstanding 32,348,784 and 33,952,324 shares

 

 

 783,527 

 

 

 823,686 

 

Common shares of beneficial interest: $.04 par value per share; authorized,

 

 

 

 

 

 

 

 

250,000,000 shares; issued and outstanding 182,670,995 and 181,214,161 shares

 

 

 7,277 

 

 

 7,218 

 

Additional capital

 

 

 6,809,905 

 

 

 6,961,007 

 

Earnings less than distributions

 

 

 (1,604,889)

 

 

 (1,577,591)

 

Accumulated other comprehensive income

 

 

 45,272 

 

 

 28,449 

 

 

Total Vornado shareholders' equity

 

 

 6,041,092 

 

 

 6,242,769 

Noncontrolling interest in consolidated subsidiaries

 

 

 446,683 

 

 

 406,637 

 

Total equity

 

 

 6,487,775 

 

 

 6,649,406 

 

 

 

 

$

 20,634,128 

 

$

 20,185,472 

See notes to the consolidated financial statements (unaudited).

 

3

 


 

VORNADO REALTY TRUST

CONSOLIDATED STATEMENTS OF INCOME

(UNAUDITED)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the Three

 

For the Nine

 

 

 

Months Ended September 30,

 

Months Ended September 30,

 

 

 

2010 

 

2009 

 

2010 

 

2009 

(Amounts in thousands, except per share amounts)

 

 

 

 

 

 

 

 

 

 

 

 

REVENUES:

 

 

 

 

 

 

 

 

 

 

 

 

 

Property rentals

 

$

 576,896 

 

$

 550,054 

 

$

 1,713,622 

 

$

 1,654,357 

 

Tenant expense reimbursements

 

 

 97,835 

 

 

 89,530 

 

 

 278,836 

 

 

 270,934 

 

Fee and other income

 

 

 32,301 

 

 

 31,635 

 

 

 107,010 

 

 

 98,284 

Total revenues

 

 

 707,032 

 

 

 671,219 

 

 

 2,099,468 

 

 

 2,023,575 

EXPENSES:

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating

 

 

 281,548 

 

 

 265,952 

 

 

 828,528 

 

 

 814,561 

 

Depreciation and amortization

 

 

 134,755 

 

 

 130,503 

 

 

 405,844 

 

 

 398,845 

 

General and administrative

 

 

 56,557 

 

 

 51,684 

 

 

 154,869 

 

 

 180,381 

 

Litigation loss accrual, impairment losses and acquisition costs

 

 

 5,921 

 

 

 - 

 

 

 17,907 

 

 

 - 

Total expenses

 

 

 478,781 

 

 

 448,139 

 

 

 1,407,148 

 

 

 1,393,787 

Operating income

 

 

 228,251 

 

 

 223,080 

 

 

 692,320 

 

 

 629,788 

(Loss) income applicable to Toys "R" Us

 

 

 (2,557)

 

 

 22,077 

 

 

 102,309 

 

 

 118,897 

(Loss) income from partially owned entities

 

 

 (1,996)

 

 

 2,513 

 

 

 13,800 

 

 

 (3,080)

(Loss) from Real Estate Fund (of which $1,091 is allocated

 

 

 

 

 

 

 

 

 

 

 

 

 

to noncontrolling interests)

 

 

 (1,410)

 

 

 - 

 

 

 (1,410)

 

 

 - 

Interest and other investment income (loss), net

 

 

 47,352 

 

 

 20,486 

 

 

 65,936 

 

 

 (63,608)

Interest and debt expense (including amortization of deferred

 

 

 

 

 

 

 

 

 

 

 

 

 

financing costs of $5,200 and $4,350 in each three-month

 

 

 

 

 

 

 

 

 

 

 

 

 

period, respectively, and $14,169 and $12,722 in each nine-month

 

 

 

 

 

 

 

 

 

 

 

 

 

period, respectively)

 

 

 (152,358)

 

 

 (158,205)

 

 

 (441,980)

 

 

 (475,028)

Net (loss) gain on early extinguishment of debt

 

 

 (724)

 

 

 3,407 

 

 

 (1,796)

 

 

 26,996 

Net gain on disposition of wholly owned and partially owned

 

 

 

 

 

 

 

 

 

 

 

 

 

assets other than depreciable real estate

 

 

 5,072 

 

 

 4,432 

 

 

 12,759 

 

 

 4,432 

Income before income taxes

 

 

 121,630 

 

 

 117,790 

 

 

 441,938 

 

 

 238,397 

Income tax expense

 

 

 (5,498)

 

 

 (5,267)

 

 

 (16,051)

 

 

 (15,773)

Income from continuing operations

 

 

 116,132 

 

 

 112,523 

 

 

 425,887 

 

 

 222,624 

Income from discontinued operations

 

 

 - 

 

 

 43,321 

 

 

 - 

 

 

 49,276 

Net income

 

 

 116,132 

 

 

 155,844 

 

 

 425,887 

 

 

 271,900 

Net income attributable to noncontrolling interests, including

 

 

 

 

 

 

 

 

 

 

 

 

 

unit distributions

 

 

 (11,880)

 

 

 (15,227)

 

 

 (34,977)

 

 

 (28,808)

Net income attributable to Vornado

 

 

 104,252 

 

 

 140,617 

 

 

 390,910 

 

 

 243,092 

Preferred share dividends

 

 

 (13,442)

 

 

 (14,269)

 

 

 (41,975)

 

 

 (42,807)

Discount on preferred share redemptions

 

 

 4,382 

 

 

 - 

 

 

 4,382 

 

 

 - 

NET INCOME attributable to common shareholders

 

$

 95,192 

 

$

 126,348 

 

$

 353,317 

 

$

 200,285 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

INCOME PER COMMON SHARE - BASIC:

 

 

 

 

 

 

 

 

 

 

 

 

 

Income from continuing operations, net

 

$

 0.52 

 

$

 0.48 

 

$

 1.94 

 

$

 0.91 

 

Income from discontinued operations, net

 

 

 - 

 

 

 0.23 

 

 

 - 

 

 

 0.27 

 

Net income per common share

 

$

 0.52 

 

$

 0.71 

 

$

 1.94 

 

$

 1.18 

 

Weighted average shares

 

 

 182,462 

 

 

 178,689 

 

 

 182,014 

 

 

 168,820 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

INCOME PER COMMON SHARE - DILUTED:

 

 

 

 

 

 

 

 

 

 

 

 

 

Income from continuing operations, net

 

$

 0.52 

 

$

 0.48 

 

$

 1.92 

 

$

 0.90 

 

Income from discontinued operations, net

 

 

 - 

 

 

 0.22 

 

 

 - 

 

 

 0.27 

 

Net income per common share

 

$

 0.52 

 

$

 0.70 

 

$

 1.92 

 

$

 1.17 

 

Weighted average shares

 

 

 184,168 

 

 

 180,977 

 

 

 183,826 

 

 

 170,378 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

DIVIDENDS PER COMMON SHARE

 

$

 0.65 

 

$

 0.65 

 

$

 1.95 

 

$

 2.55 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See notes to consolidated financial statements (unaudited).

 

4

 


 

VORNADO REALTY TRUST

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(UNAUDITED)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

(Amounts in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings

 

Other

 

Non-

 

 

 

 

 

 

 

Preferred Shares

 

Common Shares

 

Additional

 

Less Than

 

Comprehensive

 

controlling

 

Total

 

 

 

 

Shares

 

Amount

 

Shares

 

Amount

 

Capital

 

Distributions

 

Income (Loss)

 

Interests

 

Equity

Balance, December 31, 2008

 

 

 33,954 

 

$

 823,807 

 

 

 155,286 

 

$

 6,195 

 

$

 6,025,976 

 

$

 (1,047,340)

 

$

 (6,899)

 

$

 412,913 

 

$

 6,214,652 

Net income (loss)

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 243,092 

 

 

 - 

 

 

 (3,442)

 

 

 239,650 

Dividends paid on common

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

shares

 

 

 - 

 

 

 - 

 

 

 5,736 

 

 

 230 

 

 

 236,920 

 

 

 (431,237)

 

 

 - 

 

 

 - 

 

 

 (194,087)

Dividends paid on preferred

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

shares

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 (42,809)

 

 

 - 

 

 

 - 

 

 

 (42,809)

Common shares issued:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

In connection with April 2009

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

public offering

 

 

 - 

 

 

 - 

 

 

 17,250 

 

 

 690 

 

 

 709,536 

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 710,226 

 

Upon redemption of Class A

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

units, at redemption value

 

 

 - 

 

 

 - 

 

 

 1,222 

 

 

 48 

 

 

 53,043 

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 53,091 

 

Under employees' share

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

option plan

 

 

 - 

 

 

 - 

 

 

 28 

 

 

 (14)

 

 

 1,219 

 

 

 (440)

 

 

 - 

 

 

 - 

 

 

 765 

Conversion of Series A

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

preferred shares to common

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

shares

 

 

 (2)

 

 

 (89)

 

 

 2 

 

 

 - 

 

 

 89 

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 - 

Deferred compensation shares

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

and options

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 2 

 

 

 11,527 

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 11,529 

Change in unrealized net gain

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

or loss on securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

available-for-sale

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 4,099 

 

 

 - 

 

 

 4,099 

Our share of partially owned

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

entities OCI adjustments

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 11,846 

 

 

 - 

 

 

 11,846 

Voluntary surrender of equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

awards on March 31, 2009

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 32,588 

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 32,588 

Adjustments to carry redeemable

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Class A units at redemption value

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 (77,004)

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 (77,004)

Other

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 (763)

 

 

 7 

 

 

 7,443 

 

 

 (3,325)

 

 

 3,362 

Balance, September 30, 2009

 

 

 33,952 

 

$

 823,718 

 

 

 179,524 

 

$

 7,151 

 

$

 6,993,131 

 

$

 (1,278,727)

 

$

 16,489 

 

$

 406,146 

 

$

 6,967,908 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, December 31, 2009

 

 

 33,952 

 

$

 823,686 

 

 

 181,214 

 

$

 7,218 

 

$

 6,961,007 

 

$

 (1,577,591)

 

$

 28,449 

 

$

 406,637 

 

$

 6,649,406 

Net income

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 390,910 

 

 

 - 

 

 

 1,490 

 

 

 392,400 

Dividends paid on common

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

shares

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 (354,937)

 

 

 - 

 

 

 - 

 

 

 (354,937)

Dividends paid on preferred

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

shares

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 (42,100)

 

 

 - 

 

 

 - 

 

 

 (42,100)

Redemption of preferred shares

 

 

 (1,600)

 

 

 (39,982)

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 4,382 

 

 

 - 

 

 

 - 

 

 

 (35,600)

Common shares issued:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Upon redemption of Class A

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 units, at redemption value

 

 

 - 

 

 

 - 

 

 

 822 

 

 

 33 

 

 

 62,573 

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 62,606 

 

Under employees' share

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

option plan

 

 

 - 

 

 

 - 

 

 

 596 

 

 

 24 

 

 

 10,922 

 

 

 (25,583)

 

 

 - 

 

 

 - 

 

 

 (14,637)

 

Under dividend reinvestment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

plan

 

 

 - 

 

 

 - 

 

 

 17 

 

 

 1 

 

 

 1,231 

 

 

 - 

 

 

 - 

 

 

 

 

 

 1,232 

Real Estate Fund limited

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

partners' contributions

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 37,698 

 

 

 37,698 

Conversion of Series A

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

preferred shares to common

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

shares

 

 

 (3)

 

 

 (177)

 

 

 5 

 

 

 - 

 

 

 177 

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 - 

Deferred compensation shares

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

and options

 

 

 - 

 

 

 - 

 

 

 17 

 

 

 1 

 

 

 6,155 

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 6,156 

Change in unrealized net gain

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

or loss on securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

available-for-sale

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 34,497 

 

 

 - 

 

 

 34,497 

Our share of partially owned

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

entities OCI adjustments

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 (12,080)

 

 

 - 

 

 

 (12,080)

Adjustments to carry redeemable

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Class A units at redemption value

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 (232,099)

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 (232,099)

Other

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 (61)

 

 

 30 

 

 

 (5,594)

 

 

 858 

 

 

 (4,767)

Balance, September 30, 2010

 

 

 32,349 

 

$

 783,527 

 

 

 182,671 

 

$

 7,277 

 

$

 6,809,905 

 

$

 (1,604,889)

 

$

 45,272 

 

$

 446,683 

 

$

 6,487,775 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See notes to consolidated financial statements (unaudited).

 

5

 


 

VORNADO REALTY TRUST

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

 

 

 

 

 

 

 

 

 

 

 

 

 

For the Nine Months Ended

 

 

 

 

September 30,

 

 

 

 

2010 

 

2009 

(Amounts in thousands)

 

 

 

 

 

 

Cash Flows from Operating Activities:

 

 

 

 

 

 

Net income

 

$

 425,887 

 

$

 271,900 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

 

 

Depreciation and amortization (including amortization of deferred financing costs)

 

 

 419,638 

 

 

 413,697 

 

Equity in income of Toys “R” Us

 

 

 (102,309)

 

 

 (118,897)

 

Straight-lining of rental income

 

 

 (55,581)

 

 

 (75,702)

 

Amortization of below-market leases, net

 

 

 (49,144)

 

 

 (56,270)

 

Distributions of income from partially owned entities

 

 

 36,829 

 

 

 21,484 

 

Other non-cash adjustments

 

 

 36,058 

 

 

 119 

 

Income from the mark-to-market of derivative positions in marketable equity securities

 

 

 (32,249)

 

 

 - 

 

Litigation loss accrual and impairment losses

 

 

 15,197 

 

 

 - 

 

Net gain on dispositions of assets other than depreciable real estate

 

 

 (12,759)

 

 

 (4,432)

 

Equity in income of partially owned entities

 

 

 (13,800)

 

 

 3,080 

 

Mezzanine loans loss accrual

 

 

 6,900 

 

 

 122,738 

 

Net loss (gain) on early extinguishment of debt

 

 

 1,796 

 

 

 (26,996)

 

Net gain on sale of real estate

 

 

 - 

 

 

 (42,655)

 

Write-off of unamortized costs from the voluntary surrender of equity awards

 

 

 - 

 

 

 32,588 

 

Amortization of discount on convertible and exchangeable senior debentures

 

 

 - 

 

 

 29,106 

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Real Estate Fund investments

 

 

 (62,500)

 

 

 - 

 

 

Accounts receivable, net

 

 

 (6,468)

 

 

 11,611 

 

 

Prepaid assets

 

 

 (45,104)

 

 

 (119,608)

 

 

Other assets

 

 

 (59,614)

 

 

 (43,004)

 

 

Accounts payable and accrued expenses

 

 

 78,153 

 

 

 70,511 

 

 

Other liabilities

 

 

 13,791 

 

 

 217 

Net cash provided by operating activities

 

 

 594,721 

 

 

 489,487 

Cash Flows from Investing Activities:

 

 

 

 

 

 

 

Investments in partially owned entities

 

 

 (159,053)

 

 

 (28,738)

 

Proceeds from sales of, and return of investment in, marketable securities

 

 

 126,015 

 

 

 59,873 

 

Restricted cash

 

 

 125,204 

 

 

 81,195 

 

Proceeds from repayment of mezzanine loans receivable

 

 

 109,594 

 

 

 46,339 

 

Additions to real estate

 

 

 (98,789)

 

 

 (145,981)

 

Development costs and construction in progress

 

 

 (86,871)

 

 

 (384,655)

 

Investments in mezzanine loans receivable and other

 

 

 (75,697)

 

 

 - 

 

Proceeds from sales of real estate and related investments

 

 

 48,998 

 

 

 291,652 

 

Distributions of capital from partially owned entities

 

 

 45,613 

 

 

 13,112 

 

Proceeds from maturing short-term investments

 

 

 40,000 

 

 

 - 

 

Purchases of marketable securities

 

 

 (13,917)

 

 

 (11,597)

 

Deposits in connection with real estate acquisitions

 

 

 (10,000)

 

 

 1,000 

Net cash provided by (used in) investing activities

 

 

 51,097 

 

 

 (77,800)

 

 

 

 

 

 

 

 

 

See notes to consolidated financial statements (unaudited).

 

 

 

 

 

 

 

 

 

 

6

 


 

VORNADO REALTY TRUST

 

CONSOLIDATED STATEMENT OF CASH FLOWS (CONTINUED)

(UNAUDITED)

 

 

 

 

 

 

 

 

 

 

 

 

 

For the Nine Months Ended

 

 

 

 

September 30,

 

 

 

 

2010 

 

2009 

(Amounts in thousands)

 

 

 

 

 

 

Cash Flows from Financing Activities:

 

 

 

 

 

 

 

Proceeds from borrowings

 

$

 1,603,359 

 

$

 1,208,204 

 

Repayments of borrowings

 

 

 (1,462,652)

 

 

 (996,218)

 

Dividends paid on common shares

 

 

 (354,937)

 

 

 (194,087)

 

Purchases of outstanding preferred units and shares

 

 

 (48,600)

 

 

 (24,330)

 

Dividends paid on preferred shares

 

 

 (42,100)

 

 

 (42,809)

 

Distributions to noncontrolling interests

 

 

 (41,055)

 

 

 (30,291)

 

Contributions from noncontrolling interests

 

 

 39,351 

 

 

 - 

 

Repurchase of shares related to stock compensation agreements and related tax witholdings

 

 

 (13,467)

 

 

 22 

 

Debt issuance costs

 

 

 (14,942)

 

 

 (9,246)

 

Proceeds from issuance of common shares

 

 

 - 

 

 

 710,226 

Net cash (used in) provided by financing activities

 

 

 (335,043)

 

 

 621,471 

Net increase in cash and cash equivalents

 

 

 310,775 

 

 

 1,033,158 

Cash and cash equivalents at beginning of period

 

 

 535,479 

 

 

 1,526,853 

Cash and cash equivalents at end of period

 

$

 846,254 

 

$

 2,560,011 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Supplemental Disclosure of Cash Flow Information:

 

 

 

 

 

 

 

Cash payments for interest (including capitalized interest of $875 and  $14,054)

 

$

 409,953 

 

$

 461,802 

 

Cash payments for income taxes

 

$

 5,348 

 

$

 6,880 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-Cash Investing and Financing Activities:

 

 

 

 

 

 

 

Investment in J.C. Penney, Inc

 

$

 271,372 

 

$

 - 

 

Adjustments to carry redeemable Class A units at redemption value

 

 

 (232,099)

 

 

 (77,004)

 

Redemption of Class A Operating Partnership units for common shares, at redemption value

 

 

 62,606 

 

 

 53,091 

 

Unrealized net gain on securities available for sale

 

 

 34,497 

 

 

 4,099 

 

Extinguishment of a liability in connection with the acquisition of real estate

 

 

 20,500 

 

 

 - 

 

Dividends paid in common shares

 

 

 - 

 

 

 237,150 

 

Unit distributions paid in Class A units

 

 

 - 

 

 

 20,072 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See notes to consolidated financial statements (unaudited).

 

 

 

 

 

 

 

 

 

 

7

 


 

VORNADO REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

 

 

1.     Organization

Vornado Realty Trust (“Vornado”) is a fully‑integrated real estate investment trust (“REIT”) and conducts its business through Vornado Realty L.P., a Delaware limited partnership (the “Operating Partnership”).  Vornado is the sole general partner of, and owned approximately 92.8% of the common limited partnership interest in the Operating Partnership at September 30, 2010.  All references to “we,” “us,” “our,” the “Company” and “Vornado” refer to Vornado Realty Trust and its consolidated subsidiaries, including the Operating Partnership.

 

Substantially all of Vornado’s assets are held through subsidiaries of the Operating Partnership. Accordingly, Vornado’s cash flow and ability to pay dividends to its shareholders is dependent upon the cash flow of the Operating Partnership and the ability of its direct and indirect subsidiaries to first satisfy their obligations to creditors.

 

 

2.    Basis of Presentation

The accompanying consolidated financial statements are unaudited and include the accounts of Vornado, and the Operating Partnership and its consolidated partially owned entities.  All intercompany amounts have been eliminated. In our opinion, all adjustments (which include only normal recurring adjustments) necessary to present fairly the financial position, results of operations and changes in cash flows have been made. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) have been condensed or omitted.  We have made estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates.

 

These condensed consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q of the Securities and Exchange Commission (the “SEC”) and should be read in conjunction with the consolidated financial statements and notes thereto included in our Annual Reports on Form 10-K and Form 10-K/A for the year ended December 31, 2009, as filed with the SEC. The results of operations for the three and nine months ended September 30, 2010 are not necessarily indicative of the operating results for the full year.

 

 

3.    Recently Issued Accounting Literature

On January 21, 2010, the Financial Accounting Standards Board (“FASB”) issued an update to Accounting Standards Codification (“ASC”) 820, Fair Value Measurements and Disclosures, adding new requirements for disclosures about transfers into and out of Levels 1 and 2 fair value measurements and additional disclosures about the activity within Level 3 fair value measurements.  The application of this guidance on January 1, 2010 did not have a material effect on our consolidated financial statements.

 

In June 2009, the FASB issued an update to ASC 810, Consolidation, which modifies the existing quantitative guidance used in determining the primary beneficiary of a variable interest entity (“VIE”) by requiring entities to qualitatively assess whether an enterprise is a primary beneficiary, based on whether the entity has (i) power over the significant activities of the VIE, and (ii) an obligation to absorb losses or the right to receive benefits that could be potentially significant to the VIE.  The adoption of this guidance on January 1, 2010 did not have a material effect on our consolidated financial statements.

 

8

 


 

VORNADO REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

 

 

4.     Vornado Capital Partners, L.P.

On July 6, 2010, we completed the first closing of Vornado Capital Partners, L.P., our real estate investment fund (the “Fund”), with aggregate equity commitments of $550,000,000, of which we committed $200,000,000.  We expect to raise an additional $450,000,000 bringing total commitments to $1 billion.  We are the general partner and investment manager of the Fund and it is our exclusive investment vehicle during the three-year investment period for all investments that fit within the Fund’s investment parameters, including debt, equity and other interests in real estate, and excluding (i) investments in vacant land and ground-up development; (ii) investments acquired by merger or primarily for our securities or properties; (iii) properties which can be combined with or relate to our existing properties; (iv) securities of commercial mortgage loan servicers and investments derived from any such investments; (v) noncontrolling interests in equity and debt securities; and (vi) investments located outside of North America.   The Fund has a term of eight years from the final closing date.  The Fund is accounted for under the AICPA Investment Company Guide and its investments are reported on its balance sheet at fair value, with changes in value each period recognized in earnings.  We consolidate the accounts of the Fund into our consolidated financial statements.  In the three and nine months ended September 30, 2010, we expensed $3,752,000 and $6,482,000, respectively, for organization costs, which are included as a component of “general and administrative” expenses on our consolidated statement of income.

In September 2010, the Fund received $59,240,000 of capital from partners, including $21,542,000 from us.  In October 2010, the Fund received an additional $53,300,000 of capital from partners, including $19,382,000 from us, for total capital contributions to date of $112,540,000.  In the third quarter of 2010, the Fund acquired two investments aggregating $42,500,000 in cash, and in October 2010, the Fund acquired a third investment for $168,000,000, of which $100,000,000 was mortgage financed and $68,000,000 was paid in cash.  In addition, the Fund reimbursed us for $1,500,000 of organization costs.

 

5.    Derivative Instruments and Marketable Securities

Investment in J.C. Penney Company, Inc. (“J.C. Penney”) (NYSE: JCP)

 

We currently own an economic interest in 23,400,000 common shares of J.C Penney, or 9.9% of its outstanding common shares.  Below are the details of our investment.

In September 2010, we acquired 2,684,010 common shares at an average price of $26.87 per share, or $72,107,000 in the aggregate.  These shares are included as a component of marketable equity securities on our consolidated balance sheet and are classified as “available for sale.”  Gains or losses resulting from the mark-to-market of these shares are recognized as an increase or decrease in “accumulated other comprehensive income” (a component of shareholders’ equity on our consolidated balance sheet) and not recognized in income.  In the quarter ended September 30, 2010, we recognized an $845,000 unrealized gain based on J.C. Penney’s September 30, 2010 closing share price of $27.18 per share.  In October 2010, we acquired an additional 400,000 common shares at an average price of $27.46 per share, or $10,983,000 in the aggregate.  Accordingly, we currently own 3,084,010 common shares at an average price of $26.94 per share, or $83,090,000 in the aggregate.

On September 28, 2010, we acquired call options to purchase 15,500,000 common shares at a strike price of $12.2437 per share for $199,265,000, which expire on March 27, 2012.  We may exercise all or portions of the options prior to expiration.  The options may be settled, at our election, in cash or common shares.  These options are derivative instruments that do not qualify for hedge accounting treatment.  Gains or losses resulting from the mark-to-market of the derivative instruments are recognized as an increase or decrease in “interest and other investment income (loss), net” on our consolidated statement of income.  In the quarter ended September 30, 2010, we recognized a $32,249,000 net gain, based on J.C. Penney’s September 30, 2010 closing share price of $27.18 per share and our weighted average cost of $25.10 per share.  At September 30, 2010, the $199,265,000 cost of the options and the $32,249,000 mark-to-market increase in the value of the options are included in “other assets” and the $199,265,000 settled on October 1, 2010 is included in “other liabilities” on our consolidated balance sheet.

On October 7, 2010, we entered into a forward contract to acquire 4,815,990 common shares at an initial weighted average strike price of $28.41 per share.  We may accelerate settlement, in whole or in part, at any time prior to October 9, 2012.  The counterparty may accelerate settlement, in whole or in part, upon one year’s notice to us.  The forward contract may be settled, at our election, in cash or common shares.  Pursuant to the terms of the contract, the strike price for each share increases at an annual rate of LIBOR plus 80 basis points and decreases for dividends received on the shares.  The contract is a derivative instrument that does not qualify for hedge accounting treatment.  Gains or losses resulting from the mark-to-market of the derivative instrument are recognized as an increase or decrease in “interest and other investment income (loss), net” on our consolidated statement of income.

 

9

 


 

VORNADO REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

 

 

5.    Derivative Instruments and Marketable Securities - continued

 

Marketable Securities

 

The carrying amount of marketable securities classified as available for sale on our consolidated balance sheets and their corresponding fair values at September 30, 2010 and December 31, 2009 are as follows:

 

 

 

  

As of September 30, 2010

 

As of December 31, 2009

 

 

 

  

 Carrying

 

Fair

 

Carrying

 

Fair

 

 

(Amounts in thousands)

Amount

 

Value

 

 Amount

 

Value

 

 

 

Equity securities

$

 159,980 

 

$

 159,980 

 

$

 79,925 

 

$

 79,925 

 

 

 

Debt securities

 

 195,820 

 

 

 195,820 

 

 

 300,727 

 

 

 319,393 

 

 

 

  

$

 355,800 

 

$

 355,800 

 

$

 380,652 

 

$

 399,318 

 

 

In the nine months ended September 30, 2010, we sold certain of our investments in marketable securities for an aggregate of $155,118,000 and recognized an $8,960,000 net gain, of which $5,052,000 was recognized in the third quarter of 2010.  Such gain is included as a component of "net gain on disposition of wholly owned and partially owned assets other than depreciable real estate" on our consolidated statement of income.  At September 30, 2010 and December 31, 2009, our marketable securities portfolio had $40,990,000 and $13,026,000, respectively, of gross unrealized gains.  There were no unrealized losses at September 30, 2010 and $1,223,000 of gross unrealized losses at December 31, 2009.

 

 

6.    Investments in Partially Owned Entities

 

LNR Property Corporation (“LNR”)

 

On July 29, 2010, as a part of LNR’s recapitalization, we acquired a 26.2% equity interest in LNR for $116,000,000 in cash and conversion into equity of our $15,000,000 mezzanine loan (the then current carrying amount) made to LNR’s parent, Riley Holdco Corp.  The recapitalization involved an infusion of a total of $417,000,000 in new cash equity and the reduction of LNR’s total debt to $425,000,000 from $1.3 billion, excluding liabilities related to the consolidated CMBS and CDO trusts described below. We account for our equity interest in LNR under the equity method.  Upon finalization of purchase accounting in the fourth quarter, we will recognize our 26.2% pro-rata share of LNR’s earnings for the period from July 29, 2010 (date of acquisition) to September 30, 2010, which will not be material to our consolidated statement of income, as well as our share of their fourth quarter earnings.

LNR consolidates certain commercial mortgage-backed securities (“CMBS”) and Collateralized Debt Obligation (“CDO”) trusts for which it is the primary beneficiary.  The assets of these trusts (primarily commercial mortgage loans) are the sole source of repayment of the related liabilities, which are non-recourse to LNR and its equity holders, including us.  Changes in the estimated fair value of the assets and liabilities of these trusts each period are recognized in LNR’s consolidated income statement and allocated to the noncontrolling interests,  which is applied to “appropriated deficit” on LNR’s consolidated balance sheet and not to LNR’s equity holders, including us.

Below is a summary of LNR’s consolidated balance sheet at July 29, 2010:

 

 

(Amounts in thousands)

 

As of

 

 

 

 

 

Balance Sheet:

 

July 29, 2010

 

 

 

 

 

 

Assets

 

$

 120,569,958 

 

 

 

 

 

 

Liabilities

 

 

 142,795,134 

 

 

 

 

 

 

Noncontrolling interests

 

 

 55,754 

 

 

 

 

 

 

Stockholders' deficiency (including appropriated deficit of $22,479,116)

 

 

 (22,280,930)

 

 

 

 

 

10

 


 

VORNADO REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

 

 

 

6.    Investments in Partially Owned Entities - continued

 

Toys “R” Us (“Toys”)

As of September 30, 2010, we own 32.7% of Toys.  The business of Toys is highly seasonal.  Historically, Toys’ fourth quarter net income accounts for more than 80% of its fiscal year net income.  We account for our investment in Toys under the equity method and record our 32.7% share of Toys net income or loss on a one-quarter lag basis because Toys’ fiscal year ends on the Saturday nearest January 31, and our fiscal year ends on December 31.  As of September 30, 2010, the carrying amount of our investment in Toys does not differ materially from our share of the equity in the net assets of Toys on a purchase accounting basis.

 

On May 28, 2010, Toys filed a registration statement with the SEC for the offering and sale of its common stock.  The offering, if completed, would result in a reduction of our percentage ownership of Toys’ equity.  The size of the offering and its completion are subject to market and other conditions.

 

In August 2010, in connection with certain financing and refinancing transactions, Toys paid us an aggregate of $9,600,000 for our share of advisory fees.  Since Toys has capitalized these fees and is amortizing them over the term of the related debt, we recorded the fees as a reduction of the basis of our investment in Toys and will amortize the fees into income over the term of the related debt.

 

Below is a summary of Toys’ latest available financial information on a purchase accounting basis:

 

 

(Amounts in thousands)

 

 

 

 

 

 

Balance as of

 

 

Balance Sheet:

 

 

 

 

 

July 31, 2010

 

October 31, 2009

 

 

 

Assets

 

 

 

 

 

 

$

 11,243,000 

 

$

 12,589,000 

 

 

 

Liabilities

 

 

 

 

 

 

 

 9,717,000 

 

 

 11,198,000 

 

 

 

Noncontrolling interests

 

 

 

 

 

 

 

 - 

 

 

 112,000 

 

 

 

Toys “R” Us, Inc. equity

 

 

 

 

 

 

 

 1,526,000 

 

 

 1,279,000 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the Three Months Ended

 

For the Nine Months Ended

 

 

Income Statement:

July 31, 2010

 

August 1, 2009

 

July 31, 2010

 

August 1, 2009

 

 

 

Total revenues

$

 2,565,000 

 

$

 2,567,000 

 

$

 11,030,000 

 

$

 10,505,000 

 

 

 

Net (loss) income attributable to Toys

$

 (15,500)

 

$

 62,000 

 

$

 292,500 

 

$

 304,000 

 

 

 

Alexander’s, Inc. (“Alexander’s”) (NYSE: ALX)

 

As of September 30, 2010, we own 32.4% of the outstanding common stock of Alexander’s.  We manage, lease and develop Alexander’s properties pursuant to agreements which expire in March of each year and are automatically renewable. As of September 30, 2010, Alexander’s owed us $58,409,000 in fees under these agreements. 

 

Based on Alexander’s September 30, 2010 closing share price of $315.78, the market value (“fair value” pursuant to ASC 820) of our investment in Alexander’s is $522,322,000, or $322,634,000 in excess of the September 30, 2010 carrying amount on our consolidated balance sheet.  As of September 30, 2010, the carrying amount of our investment in Alexander’s, excluding amounts owed to us, exceeds our share of the equity in the net assets of Alexander’s by approximately $59,868,000.  The majority of this basis difference resulted from the excess of our purchase price for the Alexander’s common stock acquired over the book value of Alexander’s net assets.  Substantially all of this basis difference was allocated, based on our estimates of the fair values of Alexander’s assets and liabilities, to the real estate (land and buildings).  The basis difference related to the buildings is being amortized over their estimated useful lives as an adjustment to our equity in net income of Alexander’s.  This amortization is not material to our share of equity in Alexander’s net income or loss.  The basis difference related to the land will be recognized upon disposition of our investment.

 

 

 

 

11

 


 

VORNADO REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

 

 

6.    Investments in Partially Owned Entities - continued

 

Alexander’s, Inc. (“Alexander’s”) (NYSE: ALX) – continued

 

Below is a summary of Alexander’s latest available financial information:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(Amounts in thousands)

 

 

 

 

 

 

Balance as of

 

 

Balance Sheet:

 

 

 

 

 

 

September 30, 2010

 

December 31, 2009

 

 

 

Assets

 

 

 

 

 

 

$

 1,718,000 

 

$

 1,704,000 

 

 

 

Liabilities

 

 

 

 

 

 

 

 1,379,000 

 

 

 1,389,000 

 

 

 

Noncontrolling interests

 

 

 

 

 

 

 

 3,000 

 

 

 2,000 

 

 

 

Stockholders' equity

 

 

 

 

 

 

 

 336,000 

 

 

 313,000 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the Three Months Ended

 

For the Nine Months Ended

 

 

Income Statement:

September 30, 2010

 

September 30, 2009

 

September 30, 2010

 

September 30, 2009

 

 

 

Total revenues

$

 61,000 

 

$

 58,000 

 

$

 179,000 

 

$

 166,000 

 

 

 

Net income attributable to Alexander’s

$

 18,000 

 

$

 58,000 

 

$

 49,000 

 

$

 117,000 

 

 

 

Lexington Realty Trust (“Lexington”) (NYSE: LXP)

 

As of September 30, 2010, we own 18,468,969 Lexington common shares, or approximately 13.7% of Lexington’s common equity.  We account for our investment in Lexington on the equity method because we believe we have the ability to exercise significant influence over Lexington’s operating and financial policies, based on, among other factors, our representation on Lexington’s Board of Trustees and the level of our ownership in Lexington as compared to other shareholders.  We record our pro rata share of Lexington’s net income or loss on a one-quarter lag basis because we file our consolidated financial statements on Form 10-K and 10-Q prior to the time that Lexington files its financial statements. 

 

Based on Lexington’s September 30, 2010 closing share price of $7.16, the market value (“fair value” pursuant to ASC 820) of our investment in Lexington was $132,238,000, or $80,804,000 in excess of the September 30, 2010 carrying amount on our consolidated balance sheet.  As of September 30, 2010, the carrying amount of our investment in Lexington was less than our share of the equity in the net assets of Lexington by approximately $69,788,000.  This basis difference resulted primarily from $107,882,000 of non-cash impairment charges recognized during 2008, partially offset by purchase accounting for our acquisition of an additional 8,000,000 common shares of Lexington in October 2008, of which the majority relates to our estimate of the fair values of Lexington’s real estate (land and buildings) as compared to the carrying amounts in Lexington’s consolidated financial statements.  The basis difference related to the buildings is being amortized over their estimated useful lives as an adjustment to our equity in net income or loss of Lexington.  This amortization is not material to our share of equity in Lexington’s net income or loss.  The basis difference attributable to the land will be recognized upon disposition of our investment.  Below is a summary of Lexington’s latest available financial information:

 

 

(Amounts in thousands)

 

 

 

 

 

 

Balance as of

 

 

Balance Sheet:

 

 

 

 

 

 

June 30, 2010

 

September 30, 2009

 

 

 

Assets

 

 

 

 

 

 

$

 3,513,000 

 

$

 3,702,000 

 

 

 

Liabilities

 

 

 

 

 

 

 

 2,224,000 

 

 

 2,344,000 

 

 

 

Noncontrolling interests

 

 

 

 

 

 

 

 79,000 

 

 

 94,000 

 

 

 

Shareholders’ equity

 

 

 

 

 

 

 

 1,210,000 

 

 

 1,264,000 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the Three Months Ended June 30,

 

For the Nine Months Ended June 30,

 

 

Income Statement:

2010 

 

2009 

 

2010 

 

2009 

 

 

 

Total revenues

$

 86,000 

 

$

 94,000 

 

$

 264,000 

 

$

 284,000 

 

 

 

Net loss attributable to Lexington

$

 (24,000)

 

$

 (77,000)

 

$

 (97,000)

 

$

 (156,000)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

12

 


 

VORNADO REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

 

 

 

6.    Investments in Partially Owned Entities - continued

The carrying amount of our investments in partially owned entities and income (loss) recognized from such investments are as follows:

 

 

 

 

 

   

 

 

  

 

 

 

  

 

Balance as of

  

(Amounts in thousands)  

 

 

  

 

 

 

  

 

September 30,

  

 

December 31,

  

Investments:    

 

 

  

 

 

 

  

 

2010 

  

 

2009 

  

Toys   

 

 

  

 

 

 

  

 

$

 457,141 

  

 

$

 409,453 

  

 

 

 

 

 

   

 

 

  

 

 

 

  

 

 

  

 

 

 

  

Alexander’s  

 

 

  

 

 

 

  

 

$

 199,688 

  

 

$

 193,174 

  

Partially owned office buildings  

 

 

  

 

 

 

  

 

 

 155,754 

  

 

 

 158,444 

  

LNR (see page 10)  

 

 

  

 

 

 

  

 

 

 131,000 

  

 

 

 - 

  

India real estate ventures  

 

 

  

 

 

 

  

 

 

 126,211 

  

 

 

 93,322 

  

Lexington  

 

 

  

 

 

 

  

 

 

 51,434 

  

 

 

 55,106 

  

Other equity method investments   

 

 

  

 

 

 

  

 

 

 288,924 

  

 

 

 299,786 

  

   

 

 

  

 

 

 

  

 

$

 953,011 

  

 

$

 799,832 

  

 

 

 

 

 

   

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

 

 

   

For the Three Months

  

 

For the Nine Months

  

(Amounts in thousands)  

Ended September 30,

  

 

Ended September 30,

  

Our Share of Net (Loss) Income:  

2010 

  

 

2009 

  

 

2010 

  

 

2009 

  

Toys:  

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

32.7% share of:   

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

Equity in net (loss) income before income taxes  

$

 (32,574)

  

 

$

 (15,985)

  (1)

 

$

 93,662 

  

 

$

 106,545 

  (1)

 

 

 

Income tax benefit (expense)  

 

 27,501 

  

 

 

 36,122 

  

 

 

 1,914 

  

 

 

 (7,335)

  

 

 

 

Equity in net (loss) income  

 

 (5,073)

  

 

 

 20,137 

  (1)

 

 

 95,576 

  

 

 

 99,210 

  (1)

 

Non-cash purchase price accounting adjustments  

 

 - 

  

 

 

 - 

  

 

 

 - 

  

 

 

 13,946 

  

 

Interest and other income  

 

 2,516 

  

 

 

 1,940 

  

 

 

 6,733 

  

 

 

 5,741 

  

 

 

 

 

 

   

$

 (2,557)

  

 

$

 22,077 

  

 

$

 102,309 

  

 

$

 118,897 

  

   

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

Alexander’s – 32.4% share of:

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

Equity in net income before reversal of stock   

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

appreciation rights compensation expense  

$

 4,971 

  

 

$

 5,088 

  

 

$

 13,668 

  

 

$

 12,906 

  

 

 

Income tax benefit and reversal of stock   

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

appreciation rights compensation expense  

 

 641 

  

 

 

 13,668 

  

 

 

 641 

  

 

 

 24,773 

  

 

 

Equity in net income   

 

 5,612 

  

 

 

 18,756 

  

 

 

 14,309 

  

 

 

 37,679 

  

 

Management, leasing and development fees  

 

 1,945 

  

 

 

 2,541 

  

 

 

 6,774 

  

 

 

 8,365 

  

   

 

 7,557 

  

 

 

 21,297 

  

 

 

 21,083 

  

 

 

 46,044 

  

 

 

 

 

 

   

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

Lexington – 13.7% share in 2010 and 16.1%  

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

share in 2009 of  equity in net (loss) income  

 

 (2,301)

  

 

 

 (15,054)

  (2)

 

 

 3,316 

  (3)

 

 

 (24,969)

  (2)

 

 

 

 

 

   

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

India real estate ventures – 4% to 36.5% range in our

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

share of equity in net (loss) income  

 

 (195)

  

 

 

 (465)

  

 

 

 2,062 

  

 

 

 (1,386)

  

   

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

Other, net (4)

 

 (7,057)

  

 

 

 (3,265)

  

 

 

 (12,661)

  

 

 

 (22,769)

  (5)

 

 

 

 

 

   

$

 (1,996)

  

 

$

 2,513 

  

 

$

 13,800 

  

 

$

 (3,080)

  

___________________________________  

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

 

 

   

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 (1)

 

 

Includes $10,200 for our share of income from a litigation settlement.

 

 

 

 

 

   

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 (2)

 

 

The three and nine months ended September 30, 2009  include $14,541 and $19,121, respectively, for our share of non-cash impairment losses recognized by Lexington.

 

 

 

 

 

   

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 (3)

 

 

Includes a $5,998 net gain resulting from Lexington’s March 2010 stock issuance.

 

 

 

 

 

   

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 (4)

 

 

Represents equity in net income or loss of partially owned office buildings in New York and Washington, DC, the Monmouth Mall, Verde Realty Operating Partnership, 85 10th Avenue Associates and others.

 

 

 

 

 

   

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 (5)

 

 

Includes $7,650 of expense for our share of the Downtown Crossing, Boston lease termination payment.

 

13

 


 

VORNADO REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

 

 

 

6.    Investments in Partially Owned Entities – continued

 

Below is a summary of the debt of our partially owned entities as of September 30, 2010 and December 31, 2009; none of which is recourse to us.

 

 

  

 

 

Interest

 

100% of

  

 

 

Rate at

 

 Partially Owned Entities’ Debt at

(Amounts in thousands)

 

 

September 30,

 

September 30,

 

December 31,

 

 

  

Maturity

 

2010 

 

2010 

 

2009 

Toys (32.7% interest) (as of July 31, 2010 and October 31, 2009,

 

 

 

 

 

 

 

 

 

respectively):

 

 

 

 

 

 

 

 

 

 

Senior unsecured notes (Face value – $950,000)

07/17

 

10.75 %

 

$

 927,499 

 

$

925,931 

 

Senior unsecured notes (Face value – $725,000)

12/17

 

8.50 %

 

 

 715,339 

 

 

 - 

 

$1.6 billion credit facility

05/12

 

5.25 %

 

 

 52,510 

 

 

418,777 

 

$800 million secured term loan facility

07/12

 

4.51 %

 

 

 798,433 

 

 

797,911 

 

Senior U.K. real estate facility

04/13

 

5.02 %

 

 

 550,037 

 

 

578,982 

 

7.625% bonds (Face value – $500,000)

08/11

 

8.82 %

 

 

 494,566 

 

 

490,613 

 

7.875% senior notes (Face value – $400,000)

04/13

 

9.50 %

 

 

 384,905 

 

 

381,293 

 

7.375% senior notes (Face value – $400,000)

10/18

 

9.99 %

 

 

 342,351 

 

 

338,989 

 

$181 million unsecured term loan facility

01/13

 

5.26 %

 

 

 180,567 

 

 

180,456 

 

Spanish real estate facility

02/13

 

4.51 %

 

 

 168,432 

 

 

191,436 

 

Japan borrowings

03/11

 

0.83 %

 

 

 127,600 

 

 

168,720 

 

Japan bank loans

01/11-08/14

 

1.20%-2.85%

 

 

 175,367 

 

 

172,902 

 

Junior U.K. real estate facility

04/13

 

6.84 %

 

 

 96,380 

 

 

101,861 

 

French real estate facility

02/13

 

4.51 %

 

 

 81,255 

 

 

92,353 

 

8.750% debentures (Face value – $21,600)

09/21

 

9.17 %

 

 

 21,046 

 

 

21,022 

 

Mortgage loan

n/a

 

n/a

 

 

 - 

 

 

800,000 

 

European and Australian asset-based revolving credit facility

10/12

 

n/a

 

 

 - 

 

 

102,760 

 

Other

Various

 

8.50 %

 

 

 152,543 

 

 

136,206 

 

 

  

 

 

 

 

 

 5,268,830 

 

 

5,900,212 

Alexander’s (32.4% interest):

 

 

 

 

 

 

 

 

 

 

731 Lexington Avenue mortgage note payable, collaterallized by

 

 

 

 

 

 

 

 

 

 

 

the office space (prepayable without penalty after 12/13)

02/14

 

5.33 %

 

 

 354,630 

 

 

362,989 

 

731 Lexington Avenue mortgage note payable, collateralized by

 

 

 

 

 

 

 

 

 

 

 

the retail space (prepayable without penalty after 12/13)

07/15

 

4.93 %

 

 

 320,000 

 

 

320,000 

 

Rego Park construction loan payable

12/10

 

1.66 %

 

 

 296,665 

 

 

266,411 

 

Kings Plaza Regional Shopping Center mortgage note payable

 

 

 

 

 

 

 

 

 

 

 

(prepayable without penalty after 12/10)

06/11

 

7.46 %

 

 

 152,408 

 

 

183,319 

 

Rego Park mortgage note payable (prepayable without penalty)

03/12

 

0.75 %

 

 

 78,246 

 

 

78,246 

 

Paramus mortgage note payable (prepayable without penalty)

10/11

 

5.92 %

 

 

 68,000 

 

 

68,000 

 

 

  

 

 

 

 

 

 1,269,949 

 

 

1,278,965 

Lexington (13.7% interest) (as of June 30, 2010 and

 

 

 

 

 

 

 

 

 

  September 30, 2009, respectively):  

 

 

 

 

 

 

 

 

 

 

Mortgage loans collateralized by Lexington’s real estate (various

 

 

 

 

 

 

 

 

 

 

 

prepayment terms)

2010-2037

 

5.78 %

 

 

 2,033,209 

 

 

2,132,253 

LNR (26.2% interest):

 

 

 

 

 

 

 

 

 

 

Mortgage notes payable

2011-2043

 

5.75 %

 

 

 512,360 

 

 

 - 

 

Liabilities of consolidated CMBS and CDO trusts

n/a

 

6.06 % 

 

 

 141,893,340 

 

 

 - 

 

 

  

 

 

 

 

 

 142,405,700 

 

 

 - 

 

14

 


 

VORNADO REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

 

 

 

6.    Investments in Partially Owned Entities - continued

 

 

  

 

 

Interest

 

100% of

 

 

  

 

 

Rate at

 

Partially Owned Entities’ Debt at

(Amounts in thousands)

 

 

September 30,

 

September 30,

 

December 31,

  

Maturity

 

2010 

 

2010 

 

2009 

Partially owned office buildings:

 

 

 

 

 

 

 

 

 

 

330 Madison Avenue (25% interest) mortgage note payable

06/15

 

 1.91 %

 

$

 150,000 

 

$

 150,000 

 

Kaempfer Properties (2.5% and 5.0% interests in two partnerships)

 

 

 

 

 

 

 

 

 

 

 

mortgage notes payable, collateralized by the partnerships’ real estate

11/11-12/11

 

 5.86 %

 

 

 139,896 

 

 

 141,547 

 

100 Van Ness, San Francisco office complex (9% construction interest)

 

 

 

 

 

 

 

 

 

 

 

up to $132 million loan payable

07/13

 

 6.50 %

 

 

 85,249 

 

 

 85,249 

 

Fairfax Square (20% interest) mortgage note payable (prepayable  

 

 

 

 

 

 

 

 

 

 

 

without penalty after 07/14)

12/14

 

 7.00 %

 

 

 71,953 

 

 

 72,500 

 

Rosslyn Plaza (46% interest) mortgage note payable

12/11

 

 1.47 %

 

 

 56,680 

 

 

 56,680 

 

330 West 34th Street (34.8% interest) mortgage note payable,  

 

 

 

 

 

 

 

 

 

 

 

collateralized by land; we obtained a fee interest in the land upon

 

 

 

 

 

 

 

 

 

 

 

foreclosure of our $9,041 mezzanine loan in 2010

07/22

 

 5.71 %

 

 

 50,150 

 

 

 - 

 

West 57th Street (50% interest) mortgage note payable (prepayable  

 

 

 

 

 

 

 

 

 

 

 

without penalty)

02/14

 

 4.94 %

 

 

 23,007 

 

 

 29,000 

 

825 Seventh Avenue (50% interest) mortgage note payable (prepayable  

 

 

 

 

 

 

 

 

 

 

 

without penalty after 04/14)

10/14

 

 8.07 %

 

 

 20,680 

 

 

 20,773 

India Real Estate Ventures:

 

 

 

 

 

 

 

 

 

 

TCG Urban Infrastructure Holdings (25% interest) mortgage notes

 

 

 

 

 

 

 

 

 

 

 

payable, collateralized by the entity’s real estate (various

 

 

 

 

 

 

 

 

 

 

 

prepayment terms)

2010-2022

 

 13.39 %

 

 

 198,360 

 

 

 178,553 

 

India Property Fund L.P. (36.5% interest) revolving credit facility,

 

 

 

 

 

 

 

 

 

 

 

repaid upon maturity in 03/10

n/a

 

n/a

 

 

 - 

 

 

 77,000 

Other:

 

 

 

 

 

 

 

 

 

 

Verde Realty Operating Partnership (8.3% interest) mortgage notes

 

 

 

 

 

 

 

 

 

 

 

 payable, collateralized by the partnerships’ real estate (various

 

 

 

 

 

 

 

 

 

 

 

prepayment terms)

2010-2025

 

 5.85 %

 

 

 582,982 

 

 

 607,089 

 

Green Courte Real Estate Partners, LLC (8.3% interest) (as of  

 

 

 

 

 

 

 

 

 

 

 

June 30, 2010 and September 30, 2009), mortgage notes payable,  

 

 

 

 

 

 

 

 

 

 

 

collateralized by the partnerships’ real estate (various  

 

 

 

 

 

 

 

 

 

 

 

prepayment terms)

2011-2018

 

 5.51 %

 

 

 299,601 

 

 

 304,481 

 

Waterfront Associates (2.5% interest) construction and land loan

 

 

 

 

 

 

 

 

 

 

 

up to $250 million payable

09/11

 

2.26% - 3.76%

 

 

 214,011 

 

 

 183,742 

 

Monmouth Mall (50% interest) mortgage note payable (prepayable

 

 

 

 

 

 

 

 

 

 

 

without penalty after 07/15)

09/15

 

 5.44 %

 

 

 165,000 

 

 

 165,000 

 

San Jose, California  (45% interest) construction loan(1)

03/13

 

 4.32 %

 

 

 127,917 

 

 

 132,570 

 

Wells/Kinzie Garage (50% interest) mortgage note payable

12/13

 

 6.87 %

 

 

 14,537 

 

 

 14,657 

 

Orleans Hubbard Garage (50% interest) mortgage note payable

12/13

 

 6.87 %

 

 

 10,019 

 

 

 10,101 

 

Other

 

 

 

 

 

 431,222 

 

 

 425,717 

 

 

  

 

 

 

 

 

 

 

 

 

 

 

  

 

 

 

 

 

 

 

 

 

(1)

 

On October 15, 2010, we acquired the remaining 55% interest in this property for $97,000, consisting of $27,000 in cash and the assumption of $70,000 of existing debt.  We will consolidate the accounts of this property into our consolidated financial statements in the fourth quarter, from the date of acquisition.

 

 

 

         Based on our ownership interest in the partially owned entities above, our pro rata share of the debt of these partially owned entities, was $40,139,660,000 and $3,149,640,000 as of September 30, 2010 and December 31, 2009, respectively.  Excluding our pro rata share of LNR’s liabilities related to consolidated CMBS and CDO trusts which are non-recourse to LNR and its equity holders, including us, our pro rata share of the debt is $3,000,497,000 at September 30, 2010 and $3,149,640,000 at December 31, 2009.

 

15

 


 

VORNADO REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

 

 

7.    Mezzanine Loans Receivable

The following is a summary of our investments in mezzanine loans as of September 30, 2010 and December 31, 2009. 

 

 

 

 

  

 

 

Interest Rate 

 

 

 

  

 

 

 

 

 

 (Amounts in thousands)

 

 

as of

 

Carrying Amount as of

 

 

Mezzanine Loans Receivable:

Maturity

 

September 30, 2010

 

September 30, 2010

  

 

December 31, 2009

 

 

 

Tharaldson Lodging Companies  

04/11

 

4.56 %

 

$

 71,959 

  

 

$

 74,701 

 

 

 

280 Park Avenue  

06/16

 

10.25 %

 

 

 68,422 

  

 

 

 73,750 

 

 

 

Equinox (1)

n/a

 

n/a

 

 

 - 

  

 

 

 97,968 

 

 

 

Riley HoldCo Corp. (see discussion of  

 

 

 

 

 

 

  

 

 

 

 

 

 

 

LNR in Note 6)

n/a

 

n/a

 

 

 - 

  

 

 

 74,437 

 

 

 

Other, net  

8/11-8/15

 

1.36% - 8.95%

 

 

 137,308 

  

 

 

 73,168 

 

 

 

 

  

 

 

 

 

 

 277,689 

  

 

 

 394,024 

 

 

 

Valuation allowance (2)

 

 

 

 

 

 (133,216)

  

 

 

 (190,738)

 

 

 

 

  

 

 

 

 

$

 144,473 

  

 

$

 203,286 

 

 

  

 

 

 

 

 

 

  

 

 

 

 

 

 

 

  

 

 

 

 

 

 

  

 

 

 

 

 

 (1)

 

In January 2010, Equinox prepaid the entire balance of this loan which was scheduled to mature in February 2013.  We received $99,314, including accrued interest, for our 50% interest in the loan which we acquired in 2006 for $57,500. 

 

 

 

 

  

 

 

 

 

 

 

  

 

 

 

 

 

 (2)

 

Represents loan loss accruals on certain mezzanine loans based on our estimate of the net realizable value of each loan.  Our estimates are based on the present value of expected cash flows, discounted at each loan’s effective interest rate, or if a loan is collateralized, based on the fair value of the underlying collateral, adjusted for estimated costs to sell.  The excess of the carrying amount over the net realizable value of a loan is recognized as a reduction of “interest and other investment income (loss), net” in our consolidated statements of income.

 

 

 

8.    Discontinued Operations

    

         The table below sets forth the combined results of operations of assets related to discontinued operations for the three and nine months ended September 30, 2010 and 2009 and includes the operating results of 1999 K Street, which was sold on September 1, 2009 and 15 other retail properties, which were sold during 2009.

 

 

 

 

For the Three Months

 

For the Nine Months

 

 

(Amounts in thousands)

 

Ended September 30,

 

Ended September 30,

 

 

 

 

2010 

 

2009 

 

2010 

 

2009 

 

 

Total revenues

 

$

 - 

 

$

 1,356 

 

$

 - 

 

$

 9,846 

 

 

Total expenses

 

 

 - 

 

 

 690 

 

 

 - 

 

 

 3,225 

 

 

Net income

 

 

 - 

 

 

 666 

 

 

 - 

 

 

 6,621 

 

 

Net gain on sale of 1999 K Street

 

 

 - 

 

 

 41,211 

 

 

 - 

 

 

 41,211 

 

 

Net gains on sale of other real estate

 

 

 - 

 

 

 1,444 

 

 

 - 

 

 

 1,444 

 

 

Income from discontinued operations

 

$

 - 

 

$

 43,321 

 

$

 - 

 

$

 49,276 

 

 

16

 


 

VORNADO REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

 

 

9.    Identified Intangible Assets and Intangible Liabilities

The following summarizes our identified intangible assets (primarily acquired above-market leases) and intangible liabilities (primarily acquired below-market leases) as of September 30, 2010 and December 31, 2009.

 

 

 

 Balance as of

 

 

 

September 30,

 

December 31,

 

 

(Amounts in thousands)

2010 

 

2009 

 

 

Identified intangible assets:

 

 

 

 

 

 

 

Gross amount

$

 739,536 

 

$

 755,467 

 

 

Accumulated amortization

 

 (354,199)

 

 

 (312,957)

 

 

Net

$

 385,337 

 

$

 442,510 

 

 

Identified intangible liabilities (included in deferred credit):

 

 

 

 

 

 

 

Gross amount

$

 925,845 

 

$

 942,968 

 

 

Accumulated amortization

 

 (348,845)

 

 

 (309,476)

 

 

Net

$

 577,000 

 

$

 633,492 

 

 

Amortization of acquired below-market leases, net of acquired above-market leases resulted in an increase to rental income of $16,935,000 and $18,728,000 for the three months ended September 30, 2010 and 2009, respectively, and $49,144,000 and $56,270,000 for the nine months ended September 30, 2010 and 2009, respectively.  Estimated annual amortization of acquired below-market leases, net of acquired above-market leases for each of the five succeeding years commencing January 1, 2011 is as follows:

 

 

(Amounts in thousands)

 

 

 

 

2011 

$

 58,593 

 

 

2012 

 

 54,285 

 

 

2013 

 

 46,355 

 

 

2014 

 

 40,397 

 

 

2015 

 

 37,555 

 

 

Amortization of all other identified intangible assets (a component of depreciation and amortization expense) was $15,198,000 and $15,698,000 for the three months ended September 30, 2010 and 2009, respectively, and $45,926,000 and $49,262,000 for the nine months ended September 30, 2010 and 2009, respectively. Estimated annual amortization of all other identified intangible assets including acquired in-place leases, customer relationships, and third party contracts for each of the five succeeding years commencing January 1, 2011 is as follows:

 

 

(Amounts in thousands)

 

 

 

 

2011 

$

 51,703 

 

 

2012 

 

 46,388 

 

 

2013 

 

 38,894 

 

 

2014 

 

 20,083 

 

 

2015 

 

 14,990 

 

 

We are a tenant under ground leases for certain properties.  Amortization of these acquired below-market leases, net of above-market leases resulted in an increase to rent expense of $509,000 and $533,000 for the three months ended September 30, 2010 and 2009, respectively and $1,527,000 and $1,599,000 for the nine months ended September 30, 2010 and 2009, respectively.  Estimated annual amortization of these below-market leases, net of above-market leases for each of the five succeeding years commencing January 1, 2011 is as follows:

 

 

(Amounts in thousands)

 

 

 

 

2011 

$

 2,036 

 

 

2012 

 

 2,036 

 

 

2013 

 

 2,036 

 

 

2014 

 

 2,036 

 

 

2015 

 

 2,036 

 

 

17

 


 

VORNADO REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

 

 

10.    Debt

 

The following is a summary of our debt:

 

  

 

 

Interest 

 

 

 

 

 

 

 

(Amounts in thousands)

 

 

Rate at

 

Balance at

 

 

 

  

 

 

September 30,

 

September 30,

 

December 31,

 

Notes and mortgages payable:

Maturity (1)

 

2010 

 

2010 

 

2009 

 

Fixed rate:

 

 

 

 

 

 

 

 

 

 

 

New York Office:

 

 

 

 

 

 

 

 

 

 

 

 

350 Park Avenue

01/12

 

5.48 %

 

$

 430,000 

 

$

 430,000 

 

 

 

1290 Avenue of the Americas

01/13

 

5.97 %

 

 

 426,826 

 

 

 434,643 

 

 

 

770 Broadway

03/16

 

5.65 %

 

 

 353,000 

 

 

 353,000 

 

 

 

888 Seventh Avenue

01/16

 

5.71 %

 

 

 318,554 

 

 

 318,554 

 

 

 

Two Penn Plaza

02/11

 

4.97 %

 

 

 278,667 

 

 

 282,492 

 

 

 

909 Third Avenue

04/15

 

5.64 %

 

 

 207,976 

 

 

 210,660 

 

 

 

Eleven Penn Plaza

12/11

 

5.20 %

 

 

 200,287 

 

 

 203,198 

 

 

 

  

 

 

  

 

 

 

 

 

 

 

 

Washington, DC Office:

 

 

  

 

 

 

 

 

 

 

 

 

Skyline Place

02/17

 

5.74 %

 

 

 678,000 

 

 

 678,000 

 

 

 

Warner Building (see page 28)

05/16

 

6.26 %

 

 

 292,700 

 

 

 292,700 

 

 

 

River House Apartments

04/15

 

5.43 %

 

 

 195,546 

 

 

 195,546 

 

 

 

Bowen Building

06/16

 

6.14 %

 

 

 115,022 

 

 

 115,022 

 

 

 

1215 Clark Street, 200 12th Street and 251 18th Street

01/25

 

7.09 %

 

 

 111,711 

 

 

 113,267 

 

 

 

Universal Buildings

04/14

 

6.37 %

 

 

 103,957 

 

 

 106,630 

 

 

 

Reston Executive I, II, and III

01/13

 

5.57 %

 

 

 93,000 

 

 

 93,000 

 

 

 

2011 Crystal Drive

08/17

 

7.30 %

 

 

 81,641 

 

 

 82,178 

 

 

 

1550 and 1750 Crystal Drive

11/14

 

7.08 %

 

 

 80,030 

 

 

 81,822 

 

 

 

1235 Clark Street

07/12

 

6.75 %

 

 

 52,557 

 

 

 53,252 

 

 

 

2231 Crystal Drive

08/13

 

7.08 %

 

 

 46,916 

 

 

 48,533 

 

 

 

1750 Pennsylvania Avenue

06/12

 

7.26 %

 

 

 45,326 

 

 

 45,877 

 

 

 

1225 Clark Street

08/13

 

7.08 %

 

 

 28,064 

 

 

 28,925 

 

 

 

1800, 1851 and 1901 South Bell Street

12/11

 

6.91 %

 

 

 12,486 

 

 

 19,338 

 

 

 

1101 17th, 1140 Connecticut, 1730 M and 1150 17th Street(2)

n/a

 

n/a

 

 

 - 

 

 

 85,910 

 

 

 

241 18th Street(3)

n/a

 

n/a

 

 

 - 

 

 

 45,609 

 

 

 

  

 

 

  

 

 

 

 

 

 

 

 

Retail:

 

 

  

 

 

 

 

 

 

 

 

 

Cross-collateralized mortgages on 40 strip shopping centers(4)

09/20

 

4.18 %

 

 

 600,000 

 

 

 - 

 

 

 

Springfield Mall (including present value of purchase option)(5)

10/12-04/13

 

9.02 %

 

 

 249,789 

 

 

 242,583 

 

 

 

Montehiedra Town Center

07/16

 

6.04 %

 

 

 120,000 

 

 

 120,000 

 

 

 

Broadway Mall

07/13

 

5.30 %

 

 

 90,833 

 

 

 92,601 

 

 

 

828-850 Madison Avenue Condominium

06/18

 

5.29 %

 

 

 80,000 

 

 

 80,000 

 

 

 

Las Catalinas Mall

11/13

 

6.97 %

 

 

 58,139 

 

 

 59,304 

 

 

 

Other(6)

09/11-05/36

 

5.10%-10.70%

 

 

 120,706 

 

 

 156,709 

 

 

 

  

 

 

  

 

 

 

 

 

 

 

 

Merchandise Mart:

 

 

  

 

 

 

 

 

 

 

 

 

Merchandise Mart

12/16

 

5.57 %

 

 

 550,000 

 

 

 550,000 

 

 

 

High Point Complex(7)

09/16

 

10.36 %

 

 

 225,372 

 

 

 217,815 

 

 

 

Boston Design Center

09/15

 

5.02 %

 

 

 68,828 

 

 

 69,667 

 

 

 

Washington Design Center

11/11

 

6.95 %

 

 

 43,654 

 

 

 44,247 

 

 

 

  

 

 

  

 

 

 

 

 

 

 

 

Other:

 

 

  

 

 

 

 

 

 

 

 

 

555 California Street

09/11

 

5.79 %

 

 

 640,332 

 

 

 664,117 

 

 

 

Industrial Warehouses

10/11

 

6.95 %

 

 

 24,512 

 

 

 24,813 

 

Total fixed rate notes and mortgages payable

 

 

5.96 %

 

$

 7,024,431 

 

$

 6,640,012 

 

___________________

 

 

 

 

 

 

 

 

 

 

 

 

See notes on page 20.

 

 

 

 

 

 

 

 

 

 

18

 


VORNADO REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

 

10.    Debt - continued

 

 

 

  

 

 

   

 

Interest 

 

 

 

 

 

 

 

 

(Amounts in thousands)

 

 

   

 

Rate at

 

Balance at

 

 

 

 

  

 

 

Spread over  

 

September 30,

 

September 30,

 

December 31,

 

 

Notes and mortgages payable:

Maturity (1)

 

LIBOR  

 

2010 

 

2010 

 

2009 

 

 

Variable rate:

 

 

   

 

 

 

 

 

 

 

 

 

 

 

New York Office:

 

 

   

 

 

 

 

 

 

 

 

 

 

 

 

Manhattan Mall

02/12

 

L+55 

 

0.81 %

 

$

 232,000 

 

$

 232,000 

 

 

 

 

866 UN Plaza  

05/11

 

L+40 

 

0.84 %

 

 

 44,978 

 

 

 44,978 

 

 

 

Washington, DC Office:

 

 

   

 

 

 

 

 

 

 

 

 

 

 

 

2101 L Street  

02/13

 

L+120 

 

1.69 %

 

 

 150,000 

 

 

 150,000 

 

 

 

 

West End 25 (construction loan)

02/11

 

L+130 

 

1.59 %

 

 

 95,220 

 

 

 85,735 

 

 

 

 

1101 17th, 1140 Connecticut, 1730 M and  

 

 

   

 

 

 

 

 

 

 

 

 

 

 

 

    1150 17th Street(2)

06/14

 

L+140 

 

1.66 %

 

 

 84,966 

 

 

 - 

 

 

 

 

220 20th Street (construction loan)

01/11

 

L+115 

 

1.52 %

 

 

 83,251 

 

 

 75,629 

 

 

 

 

River House Apartments

04/18

 

 n/a (8)

 

1.68 %

 

 

 64,000 

 

 

 64,000 

 

 

 

 

2200/2300 Clarendon Boulevard

01/15

 

L+75 

 

1.01 %

 

 

 60,750 

 

 

 65,133 

 

 

 

Retail:

 

 

   

 

 

 

 

 

 

 

 

 

 

 

 

Green Acres Mall  

02/13

 

L+140 

 

1.87 %

 

 

 335,000 

 

 

 335,000 

 

 

 

 

Bergen Town Center (construction loan)

03/13

 

L+150 

 

1.95 %

 

 

 273,651 

 

 

 261,903 

 

 

 

 

Beverly Connection(9)

07/12

 

L+350 (9)

 

5.00 %

 

 

 100,000 

 

 

 100,000 

 

 

 

 

4 Union Square South  

04/14

 

L+325 

 

3.66 %

 

 

 75,000 

 

 

 75,000 

 

 

 

 

Cross-collateralized mortgages on 40 strip  

 

 

   

 

 

 

 

 

 

 

 

 

 

 

 

     shopping centers (4)

09/20

 

L+136 (4)

 

2.36 %

 

 

 60,000 

 

 

 - 

 

 

 

 

435 Seventh Avenue (10)

08/14

 

L+300 (10)

 

5.00 %

 

 

 51,961 

 

 

 52,000 

 

 

 

 

Other

11/12

 

L+375 

 

4.01 %

 

 

 22,237 

 

 

 22,758 

 

 

 

Other:

 

 

   

 

 

 

 

 

 

 

 

 

 

 

 

220 Central Park South

01/11

 

L+235–L+245  

 

2.64 %

 

 

 123,750 

 

 

 123,750 

 

 

 

 

Other (11) (12)

09/10-02/12

 

Various  

 

1.76%-4.00%

 

 

 111,610 

 

 

 117,868 

 

 

 

Total variable rate notes and mortgages payable

 

 

   

 

2.11 %

 

 

 1,968,374 

 

 

 1,805,754 

 

 

 

Total notes and mortgages payable

 

 

   

 

5.11 %

 

$

 8,992,805 

 

$

 8,445,766 

 

 

 

 

  

 

 

   

 

 

 

 

 

 

 

 

 

 

Senior unsecured notes:

 

 

   

 

 

 

 

 

 

 

 

 

 

 

Senior unsecured notes due 2015 (13)

04/15

 

   

 

4.25 %

 

$

 499,255 

 

$

 - 

 

 

 

Senior unsecured notes due 2039(14)

10/39

 

   

 

7.88 %

 

 

 460,000 

 

 

 446,134 

 

 

 

Senior unsecured notes due 2010  

12/10

 

   

 

4.75 %

 

 

 148,318 

 

 

 148,240 

 

 

 

Senior unsecured notes due 2011 (15)

02/11

 

   

 

5.60 %

 

 

 100,373 

 

 

 117,342 

 

 

 

Floating rate senior unsecured notes due 2011

12/11

 

L+200 

 

2.26 %

 

 

 23,250 

 

 

 - 

 

 

 

Total senior unsecured notes

 

 

   

 

5.74 %

 

$

 1,231,196 

 

$

 711,716 

 

 

 

 

  

 

 

   

 

 

 

 

 

 

 

 

 

 

3.88% exchangeable senior debentures due 2025  

 

 

   

 

 

 

 

 

 

 

 

 

 

 

(see page 22)  

04/12

 

   

 

5.32 %

 

$

 489,332 

 

$

 484,457 

 

 

 

 

  

 

 

   

 

 

 

 

 

 

 

 

 

 

Convertible senior debentures: (see page 22)

 

 

   

 

 

 

 

 

 

 

 

 

 

 

3.63% due 2026(16)(17)

11/11

 

   

 

5.32 %

 

$

 375,069 

 

$

 424,207 

 

 

 

2.85% due 2027(16)(17)

04/12

 

   

 

5.45 %

 

 

 21,645 

 

 

 21,251 

 

 

 

Total convertible senior debentures (18)

 

 

   

 

5.33 %

 

$

 396,714 

 

$

 445,458 

 

 

 

 

  

 

 

   

 

 

 

 

 

 

 

 

 

 

Unsecured revolving credit facilities:

 

 

   

 

 

 

 

 

 

 

 

 

 

 

$1.595 billion unsecured revolving credit facility  

09/12

 

L+55 

 

 - 

 

$

 - 

 

$

 427,218 

 

 

 

$1.000 billion unsecured revolving credit facility

 

 

   

 

 

 

 

 

 

 

 

 

 

 

 

($14,233 reserved for outstanding letters of credit)  

06/11

 

L+55 

 

 - 

 

 

 - 

 

 

 425,000 

 

 

 

Total unsecured revolving credit facilities  

 

 

   

 

 - 

 

$

 - 

 

$

 852,218 

 

 

___________________________

 

 

   

 

 

 

 

 

 

 

 

 

 

 

See notes on the following page.

 

 

   

 

 

 

 

 

 

 

 

 

 

19

 


 

VORNADO REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

 

 

 

10.    Debt - continued

 

Notes to preceding tabular information (Amounts in thousands):

 

 

 

 

(1)

Represents the extended maturity for certain loans in which we have the unilateral right, ability and intent to extend.  In the case of our convertible and exchangeable debt, represents the earliest date holders may require us to repurchase the debentures.

 

 

 

 

(2)

On June 1, 2010, we refinanced this loan in the same amount.  The new loan, which is guaranteed by the Operating Partnership, has a rate of LIBOR plus 1.40% (1.66% at September 30, 2010) and matures in June 2011 with three one-year extension options.

 

 

 

 

(3)

On September 1, 2010, we repaid the $44,900 outstanding balance of this loan which was scheduled to mature in October 2010.

 

 

 

 

(4)

In August 2010, we sold $660,000 of 10-year mortgage notes in a single issuer securitization.  The notes are comprised of a $600,000 fixed rate component and a $60,000 variable rate component and are cross-collateralized by 40 strip shopping centers. The variable rate portion of the debt has a LIBOR floor of 1.00%. 

 

(5)

In the fourth quarter of 2009, we notified the master servicer of this debt that the cash flows currently generated from this property are insufficient to fund debt service payments and that we were not prepared to fund any cash shortfalls.  Accordingly, we requested that the loan be placed with the special servicer.  We have ceased making debt service payments and are currently in default.  Pursuant to the terms of the debt agreement and in accordance with GAAP, we have accrued interest on this loan at the default rate.  As a result, we have accrued $5,823 of additional interest expense in the nine months ended September 30, 2010, of which $3,038 was accrued in the current quarter.  We are in negotiations with the special servicer but there can be no assurance as to the timing and ultimate resolution of these negotiations.

 

(6)

In March 2010, we notified the master servicer of the mortgage loan on a retail property in California, that the cash flows generated from this property were insufficient to fund debt service payments and that we were not prepared to fund any cash shortfalls.  Accordingly, we requested that the loan be placed with the special servicer.  On October 14, 2010, the special servicer foreclosed on the property.  In the fourth quarter, we will remove the property and the related debt from our consolidated balance sheet, which will not have a material impact on our consolidated statement of income.

 

 

 

 

(7)

In March 2010, we notified the master servicer of this debt that the cash flows currently generated from this property are insufficient to fund debt service payments and that we were not prepared to fund any cash shortfalls.  Accordingly, we requested that the loan be placed with the special servicer.  We have ceased making debt service payments and are currently in default.  Pursuant to the terms of the debt agreement and in accordance with GAAP, we have accrued interest on this loan at the default rate.  As a result, we have accrued $5,913 of additional interest expense in the nine months ended September 30, 2010, of which $2,565 was accrued in the current quarter.  In October, 2010, the special servicer filed a motion to place the property in receivership.  There can be no assurance as to the timing and ultimate resolution of this matter.

 

(8)

This loan bears interest at the Freddie Mac Reference Note Rate plus 1.53%. 

 

 

 

 

(9)

This loan has a LIBOR floor of 1.50%.

 

 

 

 

(10)

This loan has a LIBOR floor of 2.00%.

 

 

 

 

20

 


 

VORNADO REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

 

 

 

10.    Debt - continued

 

Notes to preceding tabular information (Amounts in thousands):

 

 

 

 

(11)

In June 2010, we extended the maturity date of a $50,000 construction loan to February 2011, with a one-year extension option. 

 

 

 

 

(12)

In October 2010, we repaid a $36,000 loan which matured on September 30, 2010.

 

 

 

 

(13)

On March 26, 2010, we completed a public offering of $500,000 aggregate principal amount of 4.25% senior unsecured notes due April 1, 2015.  Interest on the notes is payable semi-annually on April 1 and October 1, commencing on October 1, 2010.  The notes were sold at 99.834% of their face amount to yield 4.287%.  The notes can be redeemed without penalty beginning January 1, 2015.  We retained net proceeds of approximately $496,000.

 

 

 

 

(14)

These notes may be redeemed at our option in whole or in part beginning on October 1, 2014, at a price equal to the principal amount plus accrued interest.  In the quarter ended March 31, 2010, we reclassified $13,866 of deferred financing costs to “deferred leasing and financing costs” on our consolidated balance sheet.

 

(15)

In the third quarter of 2010, we purchased $17,000 aggregate face amount ($16,981 aggregate carrying amount) of these senior unsecured notes for $17,382 in cash, resulting in a net loss of $401.

 

 

 

 

(16)

In 2010, we purchased $55,251 aggregate face amount ($53,972 aggregate carrying amount) of our convertible senior debentures for $55,367 in cash, resulting in a net loss of $1,395, of which $324 was recognized in the third quarter of 2010.

 

 

 

 

(17)

On October 1 2010, pursuant to our September 2, 2010 tender offer, we purchased $189,827 aggregate face amount of our 3.63% convertible senior debentures and $12,246 aggregate face amount of our 2.85% convertible senior debentures for an aggregate of $206,053 in cash, resulting in a net loss of approximately $8,500 which will be recognized in the fourth quarter of 2010.

 

 

 

 

(18)

The net proceeds from the offering of these debentures were contributed to the Operating Partnership in the form of an inter-company loan and the Operating Partnership fully and unconditionally guaranteed payment of these debentures.  There are no restrictions which limit the Operating Partnership from making distributions to Vornado and Vornado has no independent assets or operations outside of the Operating Partnership.

 

 

 

 

 

 

 

 

 

 

21

 


 

VORNADO REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

 

 

 

10.    Debt – continued

 

       Pursuant to the provisions of ASC 470-20, Debt with Conversion and Other Options, below is a summary of required disclosures related to our convertible and exchangeable senior debentures.

 

 

 

 

2.85% Convertible

 

3.63% Convertible

 

3.88% Exchangeable

(Amounts in thousands, except per share amounts)

Senior Debentures due 2027

 

Senior Debentures due 2026

 

Senior Debentures due 2025

 

 

 

September 30,

 

December 31,

 

September 30,

 

December 31,

 

September 30,

 

December 31,

Balance Sheet:

2010 

 

2009 

 

2010 

 

2009 

 

2010 

 

2009 

 

Principal amount of debt component

$

 22,479 

 

$

 22,479 

 

$

 382,046 

 

$

 437,297 

 

$

 499,982 

 

$

 499,982 

 

Unamortized discount

 

 (834)

 

 

 (1,228)

 

 

 (6,977)

 

 

 (13,090)

 

 

 (10,650)

 

 

 (15,525)

 

Carrying amount of debt component

$

 21,645 

 

$

 21,251 

 

$

 375,069 

 

$

 424,207 

 

$

 489,332 

 

$

 484,457 

 

Carrying amount of equity component

$

 2,104 

 

$

 2,104 

 

$

 20,490 

 

$

 23,457 

 

$

 32,301 

 

$

 32,301 

 

Effective interest rate

 

5.45%

 

 

5.45%

 

 

5.32%

 

 

5.32%

 

 

5.32%

 

 

5.32%

 

Maturity date (period through which

 

  

 

 

 

 

 

  

 

 

 

 

 

 

 

 

 

 

 

discount is being amortized)

 

4/1/12

 

 

 

 

 

11/15/11

 

 

 

 

 

4/15/12

 

 

 

 

Conversion price per share, as adjusted

$

157.18 

 

 

 

 

$

148.46 

 

 

 

 

$

87.17 

 

 

 

 

Number of shares on which the

 

  

 

 

 

 

 

  

 

 

 

 

 

 

 

 

 

 

 

aggregate consideration to be

 

  

 

 

 

 

 

  

 

 

 

 

 

 

 

 

 

 

 

delivered upon conversion is

 

  

 

 

 

 

 

  

 

 

 

 

 

 

 

 

 

 

 

determined

 

 - (1)

 

 

 

 

 

 - (1)

 

 

 

 

 

5,736 

 

 

 

__________________

 

  

 

 

 

 

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

 

 

 

 

  

 

 

 

 

 

 

 

 

 

 (1)

Our convertible senior debentures require that upon conversion, the entire principal amount is to be settled in cash, and at our option, any excess value above the principal amount may be settled in cash or common shares.  Based on the September 30, 2010 closing share price of our common shares and the conversion prices in the table above, there was no excess value; accordingly, no common shares would be issued if these securities were settled on this date.  The number of common shares on which the aggregate consideration that would be delivered upon conversion is 143 and 2,573 common shares, respectively.

 

 

 

Three Months Ended

 

Nine Months Ended

(Amounts in thousands)

September 30,

 

September 30,

Income Statement:

2010 

 

2009 

 

2010 

 

2009 

2.85% Convertible Senior Debentures due 2027:

 

 

 

 

 

 

 

 

 

 

 

 

Coupon interest

$

 160 

 

$

 8,693 

 

$

 480 

 

$

 28,204 

 

Discount amortization – original issue

 

 23 

 

 

 1,203 

 

 

 69 

 

 

 3,836 

 

Discount amortization – ASC 470-20 implementation

 

 110 

 

 

 5,631 

 

 

 325 

 

 

 17,958 

 

 

$

 293 

 

$

 15,527 

 

$

 874 

 

$

 49,998 

 

 

 

 

 

 

 

 

 

 

 

 

 

3.63% Convertible Senior Debentures due 2026:

 

 

 

 

 

 

 

 

 

 

 

 

Coupon interest

$

 3,523 

 

$

 8,102 

 

$

 11,328 

 

$

 25,929 

 

Discount amortization – original issue

 

 417 

 

 

 908 

 

 

 1,320 

 

 

 2,846 

 

Discount amortization – ASC 470-20 implementation

 

 1,117 

 

 

 2,430 

 

 

 3,533 

 

 

 7,616 

 

 

$

 5,057 

 

$

 11,440 

 

$

 16,181 

 

$

 36,391 

 

 

 

 

 

 

 

 

 

 

 

 

 

3.88% Exchangeable Senior Debentures due 2025:

 

 

 

 

 

 

 

 

 

 

 

 

Coupon interest

$

 4,844 

 

$

 4,844 

 

$

 14,532 

 

$

 14,585 

 

Discount amortization – original issue

 

 389 

 

 

 369 

 

 

 1,151 

 

 

 1,091 

 

Discount amortization – ASC 470-20 implementation

 

 1,258 

 

 

 1,193 

 

 

 3,724 

 

 

 3,532 

 

 

$

 6,491 

 

$

 6,406 

 

$

 19,407 

 

$

 19,208 

 

22

 


 

VORNADO REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

 

 

11.    Redeemable Noncontrolling Interests

 

Redeemable noncontrolling interests on our consolidated balance sheets represent Operating Partnership units held by third parties and are comprised of Class A units and Series D-10, D-11, D-14 and D-15 (collectively, “Series D”) cumulative redeemable preferred units.  Redeemable noncontrolling interests on our consolidated balance sheets are recorded at the greater of their carrying amount or redemption value at the end of each reporting period.  Changes in the value from period to period are charged to “additional capital” in our consolidated statements of changes in equity.  Below is a table summarizing the activity of redeemable noncontrolling interests.

 

 

(Amounts in thousands)

 

 

 

 

Balance at December 31, 2008

$

 1,177,978 

 

 

Net income

 

 32,250 

 

 

Distributions

 

 (31,313)

 

 

Conversion of Class A units into common shares, at redemption value

 

 (53,091)

 

 

Adjustment to carry redeemable Class A units at redemption value

 

 77,004 

 

 

Other, net

 

 9,937 

 

 

Balance at September 30, 2009

$

 1,212,765 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at December 31, 2009

$

 1,251,628 

 

 

Net income

 

 33,487 

 

 

Distributions

 

 (40,702)

 

 

Conversion of Class A units into common shares, at redemption value

 

 (62,606)

 

 

Adjustment to carry redeemable Class A units at redemption value

 

 232,099 

 

 

Redemption of Series D-12 redeemable units

 

 (13,000)

 

 

Other, net

 

 16,316 

 

 

Balance at September 30, 2010

$

 1,417,222 

 

 

As of September 30, 2010 and December 31, 2009, the aggregate redemption value of redeemable Class A units was $1,157,222,000 and $971,628,000, respectively. 

 

Redeemable noncontrolling interests exclude our Series G convertible preferred units and Series D-13 cumulative redeemable preferred units, as they are accounted for as liabilities in accordance with ASC 480, Distinguishing Liabilities and Equity, because of their possible settlement by issuing a variable number of Vornado common shares.  Accordingly the fair value of these units is included as a component of “other liabilities” on our consolidated balance sheets and aggregated $61,516,000 and $60,271,000 as of September 30, 2010 and December 31, 2009, respectively. 

 

In March and May of 2010, we redeemed 246,153 and 553,847 Series D-12 cumulative redeemable preferred units, respectively, for $16.25 per unit in cash, or $13,000,000 in the aggregate.  In connection with these redemptions, we recognized a $6,972,000 net gain, of which $4,818,000 was recognized in the second quarter of 2010.  Such gain is included as a component of “net income attributable to noncontrolling interests, including unit distributions,” on our consolidated statement of income.

 

 

12.    Shareholders’ Equity

 

In September 2010, we purchased all of the 1,600,000 outstanding Series D-10 preferred shares with a liquidation preference of $25.00 per share, for $22.25 per share in cash, or $35,600,000 in the aggregate.  In connection therewith, the $4,382,000 discount was included as “discount on preferred share redemptions” on our consolidated statement of income.

 

23

 


 

VORNADO REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

 

 

13.  Fair Value Measurements

ASC 820, Fair Value Measurement and Disclosures defines fair value and establishes a framework for measuring fair value.  The objective of fair value is to determine the price that would be received upon the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (the exit price).  ASC 820 establishes a fair value hierarchy that prioritizes observable and unobservable inputs used to measure fair value into three levels: Level 1 – quoted prices (unadjusted) in active markets that are accessible at the measurement date for assets or liabilities; Level 2 – observable prices that are based on inputs not quoted in active markets, but corroborated by market data; and Level 3 – unobservable inputs that are used when little or no market data is available. The fair value hierarchy gives the highest priority to Level 1 inputs and the lowest priority to Level 3 inputs. In determining fair value, we utilize valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible as well as consider counterparty credit risk in our assessment of fair value.  Considerable judgment is necessary to interpret Level 2 and 3 inputs in determining the fair value of our financial and non-financial assets and liabilities.  Accordingly, our fair value estimates, which are made at the end of each reporting period, may be different than the amounts that may ultimately be realized upon sale or disposition of these assets.   

 

Financial Assets and Liabilities Measured at Fair Value

 

Financial assets and liabilities that are measured at fair value in our consolidated financial statements consist of (i) marketable securities, (ii) derivative positions in marketable equity securities (iii) the assets of our deferred compensation plan, which are primarily marketable equity securities and equity investments in limited partnerships, (iv) Real Estate Fund investments, (v) short-term investments (CDARS classified as available-for-sale), and (vi) mandatorily redeemable instruments (Series G convertible preferred units and Series D-13 cumulative redeemable preferred units).  The tables below aggregate the fair values of financial assets and liabilities by the levels in the fair value hierarchy at September 30, 2010 and December 31, 2009, respectively. 

 

 

 

 

 

As of September 30, 2010

 

 

 (Amounts in thousands)

Total

 

Level 1

 

Level 2

 

Level 3

 

 

 

Marketable securities

$

 355,800 

 

$

 355,800 

 

$

 - 

 

$

 - 

 

 

 

Derivative positions in marketable equity securities

 

 231,514 

 

 

 - 

 

 

231,514 

 

 

 - 

 

 

 

Deferred compensation plan assets (included in other assets)

 

 88,559 

 

 

 42,522 

 

 

 - 

 

 

 46,037 

 

 

 

Real Estate Fund investments

 

 62,500 

 

 

 20,000 

 

 

 - 

 

 

 42,500 

 

 

 

 

Total assets

$

 738,373 

 

$

 418,322 

 

$

231,514 

 

$

 88,537 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mandatorily redeemable instruments (included in other liabilities)

$

 61,516 

 

$

 61,516 

 

$

 - 

 

$

 - 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As of December 31, 2009

 

 

 (Amounts in thousands)

Total

 

Level 1

 

Level 2

 

Level 3

 

 

 

Deferred compensation plan assets (included in other assets)

$

 80,443 

 

$

40,854 

 

$

 - 

 

$

 39,589 

 

 

 

Marketable equity securities

 

 79,925 

 

 

79,925 

 

 

 - 

 

 

 - 

 

 

 

Short-term investments

 

 40,000 

 

 

40,000 

 

 

 - 

 

 

 - 

 

 

 

 

Total assets

$

 200,368 

 

$

 160,779 

 

$

 - 

 

$

 39,589 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mandatorily redeemable instruments (included in other liabilities)

$

 60,271 

 

$

60,271 

 

$

 - 

 

$

 - 

 

 

The table below summarizes the changes in fair value of the Level 3 assets above for the three and nine months ended September 30, 2010 and 2009, respectively.

 

 

 

 

For the Three Months

 

For the Nine Months

 

 

 

 

Ended September 30,

 

Ended September 30,

 

 

 (Amounts in thousands)

2010 

 

2009 

 

2010 

 

2009 

 

 

Beginning balance

$

 43,598 

 

$

 36,168 

 

$

 39,589 

 

$

 34,176 

 

 

Total realized/unrealized gains

 

 487 

 

 

 688 

 

 

 1,637 

 

 

 1,998 

 

 

Purchases, sales, other settlements and issuances, net

 

 44,452 

 

 

 367 

 

 

 47,311 

 

 

 1,049 

 

 

Ending balance

$

 88,537 

 

$

 37,223 

 

$

 88,537 

 

$

 37,223 

 

 

Purchases in the three and nine months ended September 30, 2010, include the investments of our consolidated Real Estate Fund.

 

24

 


 

VORNADO REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

 

 

 

13.    Fair Value Measurements - continued

 Financial Assets and Liabilities not Measured at Fair Value

 

 Financial assets and liabilities that are not measured at fair value in our consolidated financial statements include mezzanine loans receivable and debt.  Estimates of the fair values of these instruments are based on our assessments of available market information and valuation methodologies, including discounted cash flow analyses.  The table below summarizes the carrying amounts and fair values of these financial instruments as of September 30, 2010 and December 31, 2009.

 

 

 

 

 

As of September 30, 2010

 

As of December 31, 2009

 

 

 

 

 

Carrying

 

Fair

 

Carrying

 

Fair

 

 

(Amounts in thousands)

Amount

 

Value

 

Amount

 

Value

 

 

 

Mezzanine loans receivable

$

 144,473 

 

$

 136,555 

 

$

 203,286 

 

$

 192,612 

 

 

 

Debt:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Notes and mortgages payable

$

 8,992,805 

 

$

 9,058,839 

 

$

 8,445,766 

 

$

 7,858,873 

 

 

 

 

Senior unsecured notes

 

 1,231,196 

 

 

 1,282,997 

 

 

 711,716 

 

 

 718,302 

 

 

 

 

Exchangeable senior debentures

 

 489,332 

 

 

 571,229 

 

 

 484,457 

 

 

 547,480 

 

 

 

 

Convertible senior debentures

 

 396,714 

 

 

 412,503 

 

 

 445,458 

 

 

 461,275 

 

 

 

 

Revolving credit facility debt

 

 - 

 

 

 - 

 

 

 852,218 

 

 

 852,218 

 

 

 

 

 

$

 11,110,047 

 

$

 11,325,568 

 

$

 10,939,615 

 

$

 10,438,148 

 

 

 

14.    Stock-based Compensation

On May 13, 2010, our shareholders approved the 2010 Omnibus Share Plan (the “Plan’), which replaces the 2002 Omnibus Share Plan.  Under the Plan, the Compensation Committee of the Board (the “Committee”) may grant eligible participants awards of stock options, stock appreciation rights, performance shares, restricted shares and other stock-based awards and operating partnership units, certain of which may provide for dividends or dividend equivalents and voting rights prior to vesting.  Awards may be granted up to a maximum of 6,000,000 shares, if all awards granted are Full Value Awards, as defined, and up to 12,000,000 shares, if all of the awards granted are Not Full Value Awards, as defined.  Full Value Awards are awards of securities, such as restricted shares, that, if all vesting requirements are met, do not require the payment of an exercise price or strike price to acquire the securities.  Not Full Value Awards are awards of securities, such as options, that do require the payment of an exercise price or strike price.  This means, for example, if the Committee were to award only restricted shares, it could award up to 6,000,000 restricted shares.  On the other hand, if the Committee were to award only stock options, it could award options to purchase up to 12,000,000 shares (at the applicable exercise price).  The Committee may also issue any combination of awards under the Plan, with reductions in availability of future awards made in accordance with the above limitations. 

 

We account for all stock-based compensation in accordance ASC 718, Compensation – Stock Compensation.  Stock-based compensation expense for the three and nine months ended September 30, 2010 and 2009 consists of stock option awards, restricted stock awards, Operating Partnership unit awards and out-performance plan awards.  Stock-based compensation expense was $11,210,000 and $5,639,000 in the quarter ended September 30, 2010 and 2009, respectively, and $26,167,000 and $21,539,000 in the nine months ended September 30, 2010 and 2009, respectively.  Stock-based compensation for the three and nine months ended September 30, 2010 includes $2,800,000 of expense resulting from accelerating the vesting of certain Operating Partnership units and our 2006 out-performance Plan units, which were scheduled to fully vest in the first quarter of 2011.

 

On March 31, 2009, our nine most senior executives voluntarily surrendered their 2007 and 2008 stock option awards and their 2008 out-performance plan awards.  Accordingly, we recognized $32,588,000 of expense in the first quarter of 2009 representing the unamortized portion of these awards, which is included as a component of “general and administrative” expense on our consolidated statement of income. 

 

25

 


 

VORNADO REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

 

 

15.    Fee and Other Income

         The following table sets forth the details of our fee and other income:

 

 

For The Three Months

 

For The Nine Months

 (Amounts in thousands)

Ended September 30,

 

Ended September 30,

 

2010 

 

2009 

 

2010 

 

2009 

Tenant cleaning fees

$

 13,613 

 

$

 11,842 

 

$

 40,733 

 

$

 37,034 

Management and leasing fees

 

 3,555 

 

 

 2,837 

 

 

 16,075 

 

 

 8,255 

Lease termination fees

 

 2,301 

 

 

 1,608 

 

 

 11,577 

 

 

 4,356 

Other income

 

 12,832 

 

 

 15,348 

 

 

 38,625 

 

 

 48,639 

 

$

 32,301 

 

$

 31,635 

 

$

 107,010 

 

$

 98,284 

 

          Fee and other income above includes management fee income from Interstate Properties, a related party, of $192,000 and $197,000 for the three months ended September 30, 2010 and 2009, respectively, and $584,000 and $578,000 for the nine months ended September 30, 2010 and 2009, respectively.  The above table excludes fee income from partially owned entities which is included in income from partially owned entities (see Note 6 – Investments in Partially Owned Entities).

 

 

16.     Interest and Other Investment Income (Loss), Net

          The following table sets forth the details of our interest and other investment income (loss):

 

 (Amounts in thousands)

 

For the Three Months

 

For the Nine Months

 

 

  

 

Ended September 30,

 

Ended September 30,

 

 

  

 

2010 

 

2009 

 

2010 

 

2009 

Income from the mark-to-market of derivative positions in marketable

 

 

 

 

 

 

 

 

 

 

 

 

 

equity securities

 

$

 32,249 

 

$

 - 

 

$

 32,249 

 

$

 - 

Dividends and interest on marketable securities

 

 

 6,445 

 

 

 6,071 

 

 

 21,068 

 

 

 18,584 

Mark-to-market of investments in our deferred compensation plan (1)

 

 

 3,907 

 

 

 5,687 

 

 

 5,684 

 

 

 6,103 

Interest on mezzanine loans

 

 

 2,620 

 

 

 6,521 

 

 

 7,660 

 

 

 26,625 

Mezzanine loans receivable loss accrual

 

 

 - 

 

 

 - 

 

 

 (6,900)

 

 

 (122,738)

Other, net

 

 

 2,131 

 

 

 2,207 

 

 

 6,175 

 

 

 7,818 

  

 

$

 47,352 

 

$

 20,486 

 

$

 65,936 

 

$

 (63,608)

 

 

  

 

 

 

 

 

 

 

 

 

 

 

 

__________________________

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 (1)

This income is entirely offset by the expense resulting from the mark-to-market of the deferred compensation plan liability, which is included in "general and administrative" expense.

 

26

 


 

VORNADO REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

 

 

17.    Income Per Share

The following table provides a reconciliation of both net income and the number of common shares used in the computation of (i) basic income per common share - which utilizes the weighted average number of common shares outstanding without regard to dilutive potential common shares, and (ii) diluted income per common share - which includes the weighted average common shares and potentially dilutive share equivalents. Potentially dilutive share equivalents include our Series A convertible preferred shares, employee stock options, restricted stock and exchangeable senior debentures due 2025.

 

 

 

 

 

 

  

 

For the Three Months

 

For the Nine Months

(Amounts in thousands, except per share amounts)

 

Ended September 30,

 

Ended September 30,

 

 

 

 

 

  

 

2010 

 

2009 

 

2010 

 

2009 

Numerator:

 

 

 

 

 

 

 

 

 

 

 

 

 

Income from continuing operations, net of income  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

attributable to noncontrolling interests

 

$

 104,252 

 

$

 100,518 

 

$

 390,910 

 

$

 197,038 

 

Income from discontinued operations, net of income attributable to  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

noncontrolling interests

 

 

 - 

 

 

 40,099 

 

 

 - 

 

 

 46,054 

 

Net income attributable to Vornado

 

 

 104,252 

 

 

 140,617 

 

 

 390,910 

 

 

 243,092 

 

Preferred share dividends

 

 

 (13,442)

 

 

 (14,269)

 

 

 (41,975)

 

 

 (42,807)

 

Discount on preferred share redemptions

 

 

 4,382 

 

 

 - 

 

 

 4,382 

 

 

 - 

 

Net income attributable to common shareholders

 

 

 95,192 

 

 

 126,348 

 

 

 353,317 

 

 

 200,285 

 

Earnings allocated to unvested participating securities

 

 

 (29)

 

 

 (38)

 

 

 (79)

 

 

 (147)

 

Numerator for basic income per share

 

 

 95,163 

 

 

 126,310 

 

 

 353,238 

 

 

 200,138 

 

Impact of assumed conversions:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Convertible preferred share dividends

 

  

 

 

 - 

 

 

 43 

 

 

 121 

 

 

 - 

 

Numerator for diluted income per share

 

$

 95,163 

 

$

 126,353 

 

$

 353,359 

 

$

 200,138 

 

 

 

 

 

  

 

 

 

 

 

 

 

 

 

 

 

 

Denominator:

 

 

 

 

 

 

 

 

 

 

 

 

 

Denominator for basic income per share –  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

weighted average shares   

 

 

 182,462 

 

 

 178,689 

 

 

 182,014 

 

 

 168,820 

 

Effect of dilutive securities(1):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Employee stock options and restricted share awards

 

 

 1,706 

 

 

 2,213 

 

 

 1,741 

 

 

 1,558 

 

 

Convertible preferred shares

 

 

 - 

 

 

 75 

 

 

 71 

 

 

 - 

 

Denominator for diluted income per share –  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

weighted average shares and assumed conversions

 

 

 184,168 

 

 

 180,977 

 

 

 183,826 

 

 

 170,378 

 

 

 

 

 

  

 

 

 

 

 

 

 

 

 

 

 

 

INCOME PER COMMON SHARE – BASIC:

 

 

 

 

 

 

 

 

 

 

 

 

 

Income from continuing operations, net

 

$

 0.52 

 

$

 0.48 

 

$

 1.94 

 

$

 0.91 

 

Income from discontinued operations, net

 

 

 - 

 

 

 0.23 

 

 

 - 

 

 

 0.27 

 

Net income per common share

 

$

 0.52 

 

$

 0.71 

 

$

 1.94 

 

$

 1.18 

 

 

 

 

 

  

 

 

 

 

 

 

 

 

 

 

 

 

INCOME PER COMMON SHARE – DILUTED:

 

 

 

 

 

 

 

 

 

 

 

 

 

Income from continuing operations, net

 

$

 0.52 

 

$

 0.48 

 

$

 1.92 

 

$

 0.90 

 

Income from discontinued operations, net

 

 

 - 

 

 

 0.22 

 

 

 - 

 

 

 0.27 

 

Net income per common share

 

$

 0.52 

 

$

 0.70 

 

$

 1.92 

 

$

 1.17 

 

 

 

 

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

 

 

 

 

 

 

 

 

 

 

 

(1)

 

The effect of dilutive securities above excludes anti-dilutive weighted average common share equivalents. Accordingly the three months ended September 30, 2010 and 2009 exclude 19,837 and 21,314 weighted average common share equivalents, respectively, and the nine months ended September 30, 2010 and 2009 exclude 19,843 and 21,418 weighted average common share equivalents, respectively.

 

27

 


 

VORNADO REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

 

 

18.    Comprehensive Income

 

 

For The Three Months

 

For The Nine Months

 (Amounts in thousands)

Ended September 30,

 

Ended September 30,

 

 

2010 

 

2009 

 

2010 

 

2009 

Net income

$

 116,132 

 

$

 155,844 

 

$

 425,887 

 

$

 271,900 

Other comprehensive income

 

 7,675 

 

 

 52,340 

 

 

 16,823 

 

 

 23,388 

Comprehensive income

 

 123,807 

 

 

 208,184 

 

 

 442,710 

 

 

 295,288 

Less:  Comprehensive income attributable to noncontrolling interests

 

 12,414 

 

 

 19,257 

 

 

 36,148 

 

 

 30,796 

Comprehensive income attributable to Vornado

$

 111,393 

 

$

 188,927 

 

$

 406,562 

 

$

 264,492 

 

        Substantially all of other comprehensive income for the three and nine months ended September 30, 2010 and 2009 relates to income from the mark-to-market of marketable securities classified as available-for-sale and our share of other comprehensive income or loss of partially owned entities.

 

19.    Retirement Plan

In the first quarter of 2009, we finalized the termination of the Merchandise Mart Properties Pension Plan, which resulted in a $2,800,000 pension settlement expense that is included as a component of “general and administrative” expense on our consolidated statement of income.

 

 

20.    Subsequent Events

          On October 8, 2010, we acquired 510 Fifth Avenue for $57,000,000, comprised of $24,700,000 in cash and $32,300,000 of existing mortgage debt.  This five-story building is located on the southwest corner of 43rd Street and Fifth Avenue in New York and consists of 60,000 square feet of retail and office space.  We will consolidate the accounts of this property into our consolidated financial statements in the fourth quarter, from the date of the acquisition.

          On October 20, 2010, we sold a 45% common ownership interest in 1299 Pennsylvania Avenue (the Warner Building) and 1101 17th Street NW, for $236,700,000, comprised of $91,000,000 in cash and the assumption of existing mortgage debt.  We retained the remaining 55% ownership interest and continue to manage and lease the properties.  Based on the Warner Building’s implied fair value of $445,000,000, we realized a net gain of $54,000,000 which will be recognized in the fourth quarter of 2010.  The gain on 1101 17th Street, based on an implied fair value of $81,000,000, will be recognized when we monetize our investment.

 

28

 


 

VORNADO REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

 

 

21.    Commitments and Contingencies

Insurance 

 

We maintain general liability insurance with limits of $300,000,000 per occurrence and all risk property and rental value insurance with limits of $2.0 billion per occurrence, including coverage for terrorist acts, with sub-limits for certain perils such as floods.  Our California properties have earthquake insurance with coverage of $150,000,000 per occurrence, subject to a deductible in the amount of 5% of the value of the affected property, up to a $150,000,000 annual aggregate.

 

Penn Plaza Insurance Company, LLC (“PPIC”), our wholly owned consolidated subsidiary, acts as a re-insurer with respect to a portion of our earthquake insurance coverage and as a direct insurer for coverage for acts of terrorism, including nuclear, biological, chemical and radiological (“NBCR”) acts, as defined by TRIPRA.  Coverage for acts of terrorism (excluding NBCR acts) is fully reinsured by third party insurance companies and the Federal government with no exposure to PPIC.  Our coverage for NBCR losses is up to $2 billion per occurrence, for which PPIC is responsible for a deductible of $3,200,000 and 15% of the balance of a covered loss and the Federal government is responsible for the remaining 85% of a covered loss.  We are ultimately responsible for any loss borne by PPIC.

 

We continue to monitor the state of the insurance market and the scope and costs of coverage for acts of terrorism.  However, we cannot anticipate what coverage will be available on commercially reasonable terms in future policy years.

 

Our debt instruments, consisting of mortgage loans secured by our properties which are non-recourse to us, senior unsecured notes, exchangeable senior debentures, convertible senior debentures and revolving credit agreements contain customary covenants requiring us to maintain insurance. Although we believe that we have adequate insurance coverage for purposes of these agreements, we may not be able to obtain an equivalent amount of coverage at reasonable costs in the future. Further, if lenders insist on greater coverage than we are able to obtain it could adversely affect our ability to finance and/or refinance our properties and expand our portfolio.

 

Other Commitments and Contingencies

 

Our mortgage loans are non-recourse to us.  However, in certain cases we have provided guarantees or master leased tenant space.  These guarantees and master leases terminate either upon the satisfaction of specified circumstances or repayment of the underlying loans.  As of September 30, 2010, the aggregate dollar amount of these guarantees and master leases is approximately $245,057,000.

 

At September 30, 2010, $14,233,000 of letters of credit were outstanding under one of our revolving credit facilities.  Our credit facilities contain financial covenants that require us to maintain minimum interest coverage and maximum debt to market capitalization ratios, and provide for higher interest rates in the event of a decline in our ratings below Baa3/BBB. Our credit facilities also contain customary conditions precedent to borrowing, including representations and warranties and also contain customary events of default that could give rise to accelerated repayment, including such items as failure to pay interest or principal.

 

Each of our properties has been subjected to varying degrees of environmental assessment at various times. The environmental assessments did not reveal any material environmental contamination. However, there can be no assurance that the identification of new areas of contamination, changes in the extent or known scope of contamination, the discovery of additional sites, or changes in cleanup requirements would not result in significant costs to us.

 

We are committed to fund additional capital to certain of our partially owned entities aggregating approximately $195,672,000, of which $178,458,000 is committed to the Fund.  In addition, we have agreed in principle to contribute up to $52,000,000 to a new investment management fund which will be managed by LNR.

 

As part of the process of obtaining the required approvals to demolish and develop our 220 Central Park South property into a new residential tower, we have committed to fund the estimated project cost of approximately $400,000,000 to $425,000,000. 

 

 

29

 


 

VORNADO REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

 

 

21.          Commitments and Contingencies - continued

 

Litigation  

 

We are from time to time involved in legal actions arising in the ordinary course of business. In our opinion, after consultation with legal counsel, the outcome of such matters, including the matters referred to below, are not expected to have a material adverse effect on our financial position, results of operations or cash flows.

 

On January 8, 2003, Stop & Shop filed a complaint with the United States District Court for the District of New Jersey (“USDC-NJ”) claiming that we had no right to reallocate and therefore continue to collect the $5,000,000 of annual rent from Stop & Shop pursuant to the Master Agreement and Guaranty, because of the expiration of the East Brunswick, Jersey City, Middletown, Union and Woodbridge leases to which the $5,000,000 of additional rent was previously allocated. Stop & Shop asserted that a prior order of the Bankruptcy Court for the Southern District of New York dated February 6, 2001, as modified on appeal to the District Court for the Southern District of New York on February 13, 2001, froze our right to reallocate which effectively terminated our right to collect the additional rent from Stop & Shop. On March 3, 2003, after we moved to dismiss for lack of jurisdiction, Stop & Shop voluntarily withdrew its complaint. On March 26, 2003, Stop & Shop filed a new complaint in New York State Supreme Court, asserting substantially the same claims as in its USDC-NJ complaint. We removed the action to the United States District Court for the Southern District of New York. In January 2005 that court remanded the action to the New York State Supreme Court. On February 14, 2005, we served an answer in which we asserted a counterclaim seeking a judgment for all the unpaid additional rent accruing through the date of the judgment and a declaration that Stop & Shop will continue to be liable for the additional rent as long as any of the leases subject to the Master Agreement and Guaranty remain in effect. On May 17, 2005, we filed a motion for summary judgment. On July 15, 2005, Stop & Shop opposed our motion and filed a cross-motion for summary judgment. On December 13, 2005, the Court issued its decision denying the motions for summary judgment. Both parties appealed the Court’s decision and on December 14, 2006, the Appellate Court division issued a decision affirming the Court’s decision.  On January 16, 2007, we filed a motion for the reconsideration of one aspect of the Appellate Court’s decision which was denied on March 13, 2007.  Discovery is now complete.  On October 19, 2009, Stop & Shop filed a motion for leave to amend its pleadings to assert new claims for relief, including a claim for damages in an unspecified amount, and an additional affirmative defense.  On April 26, 2010, Stop and Shop’s motion was denied.  A tentative trial date has been set for November 8, 2010.  We intend to continue to vigorously pursue our claims against Stop & Shop.  In our opinion, after consultation with legal counsel, the outcome of such matters will not have a material effect on our financial condition, results of operations or cash flows.

 

In July 2005, we acquired H Street Building Corporation (“H Street”) which has a subsidiary that owns, among other things, a 50% tenancy in common interest in land located in Arlington County, Virginia, known as "Pentagon Row," leased to two tenants, Street Retail, Inc. and Post Apartment Homes, L.P.  In April 2007, H Street acquired the remaining 50% interest in that fee.  On September 25, 2008, both tenants filed suit against us and the former owners claiming the right of first offer to purchase the fee interest, damages in excess of $75,000,000 and punitive damages.  In April 2010, the Trial Court entered judgment in favor of the tenants, that we sell the land to the tenants for a net sales price of $14,992,000, representing the Trial Court’s allocation of our purchase price for H Street.  The request for damages and punitive damages was denied.  The Trial Court’s judgment is stayed pending the outcome of our appeal.  As a result of the Trial Court’s decision, we recorded a $10,056,000 loss accrual in the three months ended March 31, 2010, primarily representing previously recognized rental income.

 

30

 


 

VORNADO REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

 

 

22.    Segment Information

        Below is a summary of net income and a reconciliation of net income to EBITDA(1) by segment for the three and nine months ended September 30, 2010 and 2009.

 

 

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

(Amounts in thousands)

For the Three Months Ended September 30, 2010

 

 

  

 

 

 

New York

 

Washington, DC

 

 

 

Merchandise

 

 

 

  

 

 

  

 

Total

 

Office

 

Office

 

Retail

 

Mart

 

Toys

 

Other(3)

Property rentals

 

$

 542,937 

 

$

 195,105 

 

$

 149,673 

 

$

 100,342 

 

$

 52,694 

 

$

 - 

 

$

 45,123 

Straight-line rents:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

Contractual rent increases

 

 

 12,765 

 

 

 5,998 

 

 

 1,625 

 

 

 4,489 

 

 

 291 

 

 

 - 

 

 

 362 

 

Amortization of free rent

 

 

 4,259 

 

 

 1,569 

 

 

 (1,243)

 

 

 3,563 

 

 

 (350)

 

 

 - 

 

 

 720 

Amortization of acquired below-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

 

market leases, net

 

 

 16,935 

 

 

 8,911 

 

 

 588 

 

 

 6,030 

 

 

 15 

 

 

 - 

 

 

 1,391 

Total rentals

 

 

 576,896 

 

 

 211,583 

 

 

 150,643 

 

 

 114,424 

 

 

 52,650 

 

 

 - 

 

 

 47,596 

Tenant expense reimbursements

 

 

 97,835 

 

 

 40,443 

 

 

 15,970 

 

 

 36,378 

 

 

 3,691 

 

 

 - 

 

 

 1,353 

Fee and other income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

Tenant cleaning fees

 

 

 13,613 

 

 

 21,721 

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 (8,108)

 

Management and leasing fees

 

 

 3,555 

 

 

 1,428 

 

 

 2,772 

 

 

 214 

 

 

 (2)

 

 

 - 

 

 

 (857)

 

Lease termination fees

 

 

 2,301 

 

 

 1,220 

 

 

 728 

 

 

 346 

 

 

 7 

 

 

 - 

 

 

 - 

 

Other

 

 

 12,832 

 

 

 5,505 

 

 

 5,567 

 

 

 1,026 

 

 

 812 

 

 

 - 

 

 

 (78)

Total revenues

 

 

 707,032 

 

 

 281,900 

 

 

 175,680 

 

 

 152,388 

 

 

 57,158 

 

 

 - 

 

 

 39,906 

Operating expenses

 

 

 281,548 

 

 

 124,323 

 

 

 60,390 

 

 

 54,105 

 

 

 28,832 

 

 

 - 

 

 

 13,898 

Depreciation and amortization

 

 

 134,755 

 

 

 44,235 

 

 

 37,266 

 

 

 27,061 

 

 

 12,671 

 

 

 - 

 

 

 13,522 

General and administrative

 

 

 56,557 

 

 

 4,514 

 

 

 5,985 

 

 

 8,846 

 

 

 7,353 

 

 

 - 

 

 

 29,859 

Impairment losses and acquisition

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

costs

 

 

 5,921 

 

 

 - 

 

 

 - 

 

 

 5,000 

 

 

 - 

 

 

 - 

 

 

 921 

Total expenses

 

 

 478,781 

 

 

 173,072 

 

 

 103,641 

 

 

 95,012 

 

 

 48,856 

 

 

 - 

 

 

 58,200 

Operating income (loss)

 

 

 228,251 

 

 

 108,828 

 

 

 72,039 

 

 

 57,376 

 

 

 8,302 

 

 

 - 

 

 

 (18,294)

(Loss) applicable to Toys

 

 

 (2,557)

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 (2,557)

 

 

 - 

(Loss) income from partially owned

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

 entities

 

 

 (1,996)

 

 

 1,705 

 

 

 (1,095)

 

 

 833 

 

 

 8 

 

 

 - 

 

 

 (3,447)

(Loss) from Real Estate Fund

 

 

 (1,410)

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 (1,410)

Interest and other investment  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

income, net

 

 

 47,352 

 

 

 139 

 

 

 81 

 

 

 209 

 

 

 12 

 

 

 - 

 

 

 46,911 

Interest and debt expense

 

 

 (152,358)

 

 

 (33,293)

 

 

 (33,459)

 

 

 (24,803)

 

 

 (15,657)

 

 

 - 

 

 

 (45,146)

Net (loss) on early extinguishment of

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

 debt

 

 

 (724)

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 (724)

Net gain on disposition of wholly

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

owned and partially owned assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

other than depreciable real estate

 

 

 5,072 

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 5,072 

Income (loss) before income taxes

 

 

 121,630 

 

 

 77,379 

 

 

 37,566 

 

 

 33,615 

 

 

 (7,335)

 

 

 (2,557)

 

 

 (17,038)

Income tax (expense) benefit

 

 

 (5,498)

 

 

 (861)

 

 

 (1,050)

 

 

 (2)

 

 

 714 

 

 

 - 

 

 

 (4,299)

Net income (loss)

 

 

 116,132 

 

 

 76,518 

 

 

 36,516 

 

 

 33,613 

 

 

 (6,621)

 

 

 (2,557)

 

 

 (21,337)

Net (income) loss attributable to  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

noncontrolling interests, including

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

unit distributions

 

 

 (11,880)

 

 

 (2,442)

 

 

 - 

 

 

 397 

 

 

 - 

 

 

 - 

 

 

 (9,835)

Net income (loss) attributable to

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

 Vornado

 

 

 104,252 

 

 

 74,076 

 

 

 36,516 

 

 

 34,010 

 

 

 (6,621)

 

 

 (2,557)

 

 

 (31,172)

Interest and debt expense(2)

 

 

 208,294 

 

 

 31,817 

 

 

 34,241 

 

 

 26,395 

 

 

 15,883 

 

 

 40,558 

 

 

 59,400 

Depreciation and amortization(2)

 

 

 179,148 

 

 

 42,531 

 

 

 41,394 

 

 

 28,024 

 

 

 12,782 

 

 

 30,079 

 

 

 24,338 

Income tax (benefit) expense(2)

 

 

 (23,013)

 

 

 861 

 

 

 1,054 

 

 

 2 

 

 

 (714)

 

 

 (27,501)

 

 

 3,285 

EBITDA(1)

 

$

 468,681 

 

$

 149,285 

 

$

 113,205 

 

$

 88,431 

 

$

 21,330 

 

$

 40,579 

 

$

 55,851 

 

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

See notes of page 35.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

31

 


 

VORNADO REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

 

 

 

22.    Segment Information – continued

 

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

(Amounts in thousands)

For the Three Months Ended September 30, 2009

 

 

  

 

 

 

New York

 

Washington, DC

 

 

 

Merchandise

 

 

 

  

 

 

  

 

Total

 

Office

 

Office

 

Retail

 

Mart

 

Toys

 

Other(3)

Property rentals

 

$

 509,968 

 

$

 189,896 

 

$

 137,139 

 

$

 91,286 

 

$

 52,269 

 

$

 - 

 

$

 39,378 

Straight-line rents:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

Contractual rent increases

 

 

 16,676 

 

 

 10,126 

 

 

 3,573 

 

 

 2,827 

 

 

 135 

 

 

 - 

 

 

 15 

 

Amortization of free rent

 

 

 4,682 

 

 

 (98)

 

 

 2,760 

 

 

 1,963 

 

 

 19 

 

 

 - 

 

 

 38 

Amortization of acquired below-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

 

market leases, net

 

 

 18,728 

 

 

 10,710 

 

 

 1,069 

 

 

 4,826 

 

 

 30 

 

 

 - 

 

 

 2,093 

Total rentals

 

 

 550,054 

 

 

 210,634 

 

 

 144,541 

 

 

 100,902 

 

 

 52,453 

 

 

 - 

 

 

 41,524 

Tenant expense reimbursements

 

 

 89,530 

 

 

 36,360 

 

 

 14,892 

 

 

 32,121 

 

 

 3,661 

 

 

 - 

 

 

 2,496 

Fee and other income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

Tenant cleaning fees

 

 

 11,842 

 

 

 17,989 

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 (6,147)

 

Management and leasing fees

 

 

 2,837 

 

 

 1,269 

 

 

 1,984 

 

 

 557 

 

 

 11 

 

 

 - 

 

 

 (984)

 

Lease termination fees

 

 

 1,608 

 

 

 1,226 

 

 

 234 

 

 

 - 

 

 

 9 

 

 

 - 

 

 

 139 

 

Other

 

 

 15,348 

 

 

 5,854 

 

 

 4,979 

 

 

 648 

 

 

 3,461 

 

 

 - 

 

 

 406 

Total revenues

 

 

 671,219 

 

 

 273,332 

 

 

 166,630 

 

 

 134,228 

 

 

 59,595 

 

 

 - 

 

 

 37,434 

Operating expenses

 

 

 265,952 

 

 

 117,362 

 

 

 57,889 

 

 

 49,304 

 

 

 26,469 

 

 

 - 

 

 

 14,928 

Depreciation and amortization

 

 

 130,503 

 

 

 42,621 

 

 

 35,187 

 

 

 24,091 

 

 

 13,654 

 

 

 - 

 

 

 14,950 

General and administrative

 

 

 51,684 

 

 

 4,895 

 

 

 6,079 

 

 

 6,802 

 

 

 7,198 

 

 

 - 

 

 

 26,710 

Total expenses

 

 

 448,139 

 

 

 164,878 

 

 

 99,155 

 

 

 80,197 

 

 

 47,321 

 

 

 - 

 

 

 56,588 

Operating income (loss)

 

 

 223,080 

 

 

 108,454 

 

 

 67,475 

 

 

 54,031 

 

 

 12,274 

 

 

 - 

 

 

 (19,154)

Income applicable to Toys

 

 

 22,077 

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 22,077 

 

 

 - 

Income (loss) from partially owned

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

 entities

 

 

 2,513 

 

 

 1,646 

 

 

 1,876 

 

 

 767 

 

 

 26 

 

 

 - 

 

 

 (1,802)

Interest and other investment  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

income, net

 

 

 20,486 

 

 

 190 

 

 

 254 

 

 

 10 

 

 

 12 

 

 

 - 

 

 

 20,020 

Interest and debt expense

 

 

 (158,205)

 

 

 (33,644)

 

 

 (32,454)

 

 

 (22,315)

 

 

 (13,088)

 

 

 - 

 

 

 (56,704)

Net gain on early extinguishment of

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

 debt

 

 

 3,407 

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 3,407 

Net gain on disposition of wholly

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

owned and partially owned assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

other than depreciable real estate

 

 

 4,432 

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 4,432 

Income (loss) before income taxes

 

 

 117,790 

 

 

 76,646 

 

 

 37,151 

 

 

 32,493 

 

 

 (776)

 

 

 22,077 

 

 

 (49,801)

Income tax expense

 

 

 (5,267)

 

 

 (585)

 

 

 (44)

 

 

 (39)

 

 

 (847)

 

 

 - 

 

 

 (3,752)

Income (loss) from continuing

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

 operations

 

 

 112,523 

 

 

 76,061 

 

 

 37,107 

 

 

 32,454 

 

 

 (1,623)

 

 

 22,077 

 

 

 (53,553)

Income from discontinued operations

 

 

 43,321 

 

 

 - 

 

 

 41,992 

 

 

 1,329 

 

 

 - 

 

 

 - 

 

 

 - 

Net income (loss)

 

 

 155,844 

 

 

 76,061 

 

 

 79,099 

 

 

 33,783 

 

 

 (1,623)

 

 

 22,077 

 

 

 (53,553)

Net (income) loss attributable to  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

noncontrolling interests, including

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

unit distributions

 

 

 (15,227)

 

 

 (2,817)

 

 

 - 

 

 

 15 

 

 

 - 

 

 

 - 

 

 

 (12,425)

Net income (loss) attributable to

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

 Vornado

 

 

 140,617 

 

 

 73,244 

 

 

 79,099 

 

 

 33,798 

 

 

 (1,623)

 

 

 22,077 

 

 

 (65,978)

Interest and debt expense(2)

 

 

 212,727 

 

 

 31,945 

 

 

 32,980 

 

 

 23,978 

 

 

 13,315 

 

 

 39,136 

 

 

 71,373 

Depreciation and amortization(2)

 

 

 178,436 

 

 

 41,101 

 

 

 37,116 

 

 

 25,029 

 

 

 13,772 

 

 

 34,357 

 

 

 27,061 

Income tax (benefit) expense(2)

 

 

 (30,479)

 

 

 585 

 

 

 47 

 

 

 39 

 

 

 847 

 

 

 (36,122)

 

 

 4,125 

EBITDA(1)

 

$

 501,301 

 

$

 146,875 

 

$

 149,242 

 

$

 82,844 

 

$

 26,311 

 

$

 59,448 

 

$

 36,581 

 

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

See notes of page 35.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

32

 


 

VORNADO REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

 

 

 

22.    Segment Information – continued

 

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

(Amounts in thousands)

For the Nine Months Ended September 30, 2010

 

 

  

 

 

 

New York

 

Washington, DC

 

 

 

Merchandise

 

 

 

  

 

 

  

 

Total

 

Office

 

Office

 

Retail

 

Mart

 

Toys

 

Other(3)

Property rentals

 

$

 1,608,897 

 

$

 582,957 

 

$

 435,612 

 

$

 293,106 

 

$

 175,070 

 

$

 - 

 

$

 122,152 

Straight-line rents:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

Contractual rent increases

 

 

 39,089 

 

 

 19,278 

 

 

 5,448 

 

 

 11,997 

 

 

 1,521 

 

 

 - 

 

 

 845 

 

Amortization of free rent

 

 

 16,492 

 

 

 3,338 

 

 

 527 

 

 

 10,237 

 

 

 705 

 

 

 - 

 

 

 1,685 

Amortization of acquired below-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

 

market leases, net

 

 

 49,144 

 

 

 27,250 

 

 

 1,935 

 

 

 15,528 

 

 

 (91)

 

 

 - 

 

 

 4,522 

Total rentals

 

 

 1,713,622 

 

 

 632,823 

 

 

 443,522 

 

 

 330,868 

 

 

 177,205 

 

 

 - 

 

 

 129,204 

Tenant expense reimbursements

 

 

 278,836 

 

 

 106,126 

 

 

 45,096 

 

 

 110,094 

 

 

 11,715 

 

 

 - 

 

 

 5,805 

Fee and other income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

Tenant cleaning fees

 

 

 40,733 

 

 

 62,778 

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 (22,045)

 

Management and leasing fees

 

 

 16,075 

 

 

 4,278 

 

 

 13,252 

 

 

 759 

 

 

 31 

 

 

 - 

 

 

 (2,245)

 

Lease termination fees

 

 

 11,577 

 

 

 4,245 

 

 

 1,256 

 

 

 4,182 

 

 

 1,894 

 

 

 - 

 

 

 - 

 

Other

 

 

 38,625 

 

 

 14,428 

 

 

 16,489 

 

 

 2,829 

 

 

 3,596 

 

 

 - 

 

 

 1,283 

Total revenues

 

 

 2,099,468 

 

 

 824,678 

 

 

 519,615 

 

 

 448,732 

 

 

 194,441 

 

 

 - 

 

 

 112,002 

Operating expenses

 

 

 828,528 

 

 

 350,427 

 

 

 169,105 

 

 

 164,283 

 

 

 99,863 

 

 

 - 

 

 

 44,850 

Depreciation and amortization

 

 

 405,844 

 

 

 132,213 

 

 

 110,482 

 

 

 82,756 

 

 

 38,700 

 

 

 - 

 

 

 41,693 

General and administrative

 

 

 154,869 

 

 

 13,860 

 

 

 18,082 

 

 

 22,678 

 

 

 21,764 

 

 

 - 

 

 

 78,485 

Litigation loss accrual, impairment  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

losses and acquisition costs

 

 

 17,907 

 

 

 - 

 

 

 10,056 

 

 

 5,000 

 

 

 - 

 

 

 - 

 

 

 2,851 

Total expenses

 

 

 1,407,148 

 

 

 496,500 

 

 

 307,725 

 

 

 274,717 

 

 

 160,327 

 

 

 - 

 

 

 167,879 

Operating income (loss)

 

 

 692,320 

 

 

 328,178 

 

 

 211,890 

 

 

 174,015 

 

 

 34,114 

 

 

 - 

 

 

 (55,877)

Income applicable to Toys

 

 

 102,309 

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 102,309 

 

 

 - 

Income (loss) from partially owned

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

 entities

 

 

 13,800 

 

 

 4,345 

 

 

 (1,099)

 

 

 3,353 

 

 

 239 

 

 

 - 

 

 

 6,962 

(Loss) from Real Estate Fund

 

 

 (1,410)

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 (1,410)

Interest and other investment  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

income, net

 

 

 65,936 

 

 

 466 

 

 

 131 

 

 

 400 

 

 

 37 

 

 

 - 

 

 

 64,902 

Interest and debt expense

 

 

 (441,980)

 

 

 (99,026)

 

 

 (102,247)

 

 

 (63,702)

 

 

 (44,699)

 

 

 - 

 

 

 (132,306)

Net (loss) on early extinguishment of

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

 debt

 

 

 (1,796)

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 (1,796)

Net gain on disposition of wholly  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

owned and partially owned assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

other than depreciable real estate

 

 

 12,759 

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 765 

 

 

 - 

 

 

 11,994 

Income (loss) before income taxes

 

 

 441,938 

 

 

 233,963 

 

 

 108,675 

 

 

 114,066 

 

 

 (9,544)

 

 

 102,309 

 

 

 (107,531)

Income tax (expense) benefit

 

 

 (16,051)

 

 

 (1,670)

 

 

 (1,150)

 

 

 (37)

 

 

 118 

 

 

 - 

 

 

 (13,312)

Net income (loss)

 

 

 425,887 

 

 

 232,293 

 

 

 107,525 

 

 

 114,029 

 

 

 (9,426)

 

 

 102,309 

 

 

 (120,843)

Net (income) loss attributable to  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

noncontrolling interests, including

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

unit distributions

 

 

 (34,977)

 

 

 (7,290)

 

 

 - 

 

 

 895 

 

 

 - 

 

 

 - 

 

 

 (28,582)

Net income (loss) attributable to

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

 Vornado

 

 

 390,910 

 

 

 225,003 

 

 

 107,525 

 

 

 114,924 

 

 

 (9,426)

 

 

 102,309 

 

 

 (149,425)

Interest and debt expense(2)

 

 

 611,993 

 

 

 94,404 

 

 

 104,355 

 

 

 68,275 

 

 

 45,370 

 

 

 123,791 

 

 

 175,798 

Depreciation and amortization(2)

 

 

 549,400 

 

 

 127,341 

 

 

 120,929 

 

 

 85,335 

 

 

 39,049 

 

 

 99,850 

 

 

 76,896 

Income tax expense (benefit)(2)

 

 

 13,553 

 

 

 1,670 

 

 

 1,161 

 

 

 37 

 

 

 (59)

 

 

 (1,914)

 

 

 12,658 

EBITDA(1)

 

$

 1,565,856 

 

$

 448,418 

 

$

 333,970 

 

$

 268,571 

 

$

 74,934 

 

$

 324,036 

 

$

 115,927 

 

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

See notes on page 35.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

33

 


 

VORNADO REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

 

 

 

22.    Segment Information – continued

 

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

(Amounts in thousands)

For the Nine Months Ended September 30, 2009

 

 

  

 

 

 

New York

 

Washington, DC

 

 

 

Merchandise

 

 

 

  

 

 

  

 

Total

 

Office

 

Office

 

Retail

 

Mart

 

Toys

 

Other(3)

Property rentals

 

$

 1,529,747 

 

$

 568,884 

 

$

 399,937 

 

$

 268,519 

 

$

 176,224 

 

$

 - 

 

$

 116,183 

Straight-line rents:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

Contractual rent increases

 

 

 43,469 

 

 

 24,315 

 

 

 9,348 

 

 

 8,442 

 

 

 1,406 

 

 

 - 

 

 

 (42)

 

Amortization of free rent

 

 

 24,871 

 

 

 2,209 

 

 

 9,829 

 

 

 12,380 

 

 

 312 

 

 

 - 

 

 

 141 

Amortization of acquired below-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

 

market leases, net

 

 

 56,270 

 

 

 30,518 

 

 

 3,117 

 

 

 18,362 

 

 

 71 

 

 

 - 

 

 

 4,202 

Total rentals

 

 

 1,654,357 

 

 

 625,926 

 

 

 422,231 

 

 

 307,703 

 

 

 178,013 

 

 

 - 

 

 

 120,484 

Tenant expense reimbursements

 

 

 270,934 

 

 

 103,609 

 

 

 47,936 

 

 

 99,337 

 

 

 13,492 

 

 

 - 

 

 

 6,560 

Fee and other income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

Tenant cleaning fees

 

 

 37,034 

 

 

 52,579 

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 (15,545)

 

Management and leasing fees

 

 

 8,255 

 

 

 3,363 

 

 

 5,936 

 

 

 1,248 

 

 

 25 

 

 

 - 

 

 

 (2,317)

 

Lease termination fees

 

 

 4,356 

 

 

 1,524 

 

 

 1,916 

 

 

 100 

 

 

 677 

 

 

 - 

 

 

 139 

 

Other

 

 

 48,639 

 

 

 16,261 

 

 

 15,129 

 

 

 2,296 

 

 

 6,324 

 

 

 - 

 

 

 8,629 

Total revenues

 

 

 2,023,575 

 

 

 803,262 

 

 

 493,148 

 

 

 410,684 

 

 

 198,531 

 

 

 - 

 

 

 117,950 

Operating expenses

 

 

 814,561 

 

 

 340,552 

 

 

 169,379 

 

 

 155,503 

 

 

 100,134 

 

 

 - 

 

 

 48,993 

Depreciation and amortization

 

 

 398,845 

 

 

 129,884 

 

 

 105,096 

 

 

 75,881 

 

 

 40,800 

 

 

 - 

 

 

 47,184 

General and administrative

 

 

 180,381 

 

 

 18,588 

 

 

 20,548 

 

 

 24,946 

 

 

 25,092 

 

 

 - 

 

 

 91,207 

Total expenses

 

 

 1,393,787 

 

 

 489,024 

 

 

 295,023 

 

 

 256,330 

 

 

 166,026 

 

 

 - 

 

 

 187,384 

Operating income (loss)

 

 

 629,788 

 

 

 314,238 

 

 

 198,125 

 

 

 154,354 

 

 

 32,505 

 

 

 - 

 

 

 (69,434)

Income applicable to Toys

 

 

 118,897 

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 118,897 

 

 

 - 

(Loss) income from partially owned

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

 entities

 

 

 (3,080)

 

 

 4,485 

 

 

 5,504 

 

 

 3,164 

 

 

 186 

 

 

 - 

 

 

 (16,419)

Interest and other investment (loss)  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

income, net

 

 

 (63,608)

 

 

 712 

 

 

 573 

 

 

 63 

 

 

 83 

 

 

 - 

 

 

 (65,039)

Interest and debt expense

 

 

 (475,028)

 

 

 (100,118)

 

 

 (94,408)

 

 

 (67,093)

 

 

 (38,888)

 

 

 - 

 

 

 (174,521)

Net gain on early extinguishment of

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

 debt

 

 

 26,996 

 

 

 - 

 

 

 - 

 

 

 769 

 

 

 - 

 

 

 - 

 

 

 26,227 

Net gain on disposition of wholly

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

owned and partially owned assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

other than depreciable real estate

 

 

 4,432 

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 4,432 

Income (loss) before income taxes

 

 

 238,397 

 

 

 219,317 

 

 

 109,794 

 

 

 91,257 

 

 

 (6,114)

 

 

 118,897 

 

 

 (294,754)

Income tax expense

 

 

 (15,773)

 

 

 (845)

 

 

 (1,232)

 

 

 (316)

 

 

 (1,755)

 

 

 - 

 

 

 (11,625)

Income (loss) from continuing

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

 operations

 

 

 222,624 

 

 

 218,472 

 

 

 108,562 

 

 

 90,941 

 

 

 (7,869)

 

 

 118,897 

 

 

 (306,379)

Income from discontinued operations

 

 

 49,276 

 

 

 - 

 

 

 46,004 

 

 

 3,272 

 

 

 - 

 

 

 - 

 

 

 - 

Net income (loss)

 

 

 271,900 

 

 

 218,472 

 

 

 154,566 

 

 

 94,213 

 

 

 (7,869)

 

 

 118,897 

 

 

 (306,379)

Net (income) loss attributable to  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

noncontrolling interests, including

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

unit distributions

 

 

 (28,808)

 

 

 (6,438)

 

 

 - 

 

 

 630 

 

 

 - 

 

 

 - 

 

 

 (23,000)

Net income (loss) attributable to

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

 Vornado

 

 

 243,092 

 

 

 212,034 

 

 

 154,566 

 

 

 94,843 

 

 

 (7,869)

 

 

 118,897 

 

 

 (329,379)

Interest and debt expense(2)

 

 

 612,416 

 

 

 95,058 

 

 

 96,818 

 

 

 71,496 

 

 

 39,563 

 

 

 89,897 

 

 

 219,584 

Depreciation and amortization(2)

 

 

 539,554 

 

 

 125,831 

 

 

 110,263 

 

 

 78,724 

 

 

 41,203 

 

 

 101,368 

 

 

 82,165 

Income tax expense(2)

 

 

 23,804 

 

 

 845 

 

 

 1,242 

 

 

 316 

 

 

 1,820 

 

 

 7,335 

 

 

 12,246 

EBITDA(1)

 

$

 1,418,866 

 

$

 433,768 

 

$

 362,889 

 

$

 245,379 

 

$

 74,717 

 

$

 317,497 

 

$

 (15,384)

 

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

See notes on the following page.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

34

 


 

VORNADO REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

 

 

 

22.     Segment Information - continued

 

 

 

Notes to preceding tabular information:

 

 

(1)

EBITDA represents "Earnings Before Interest, Taxes, Depreciation and Amortization."  We consider EBITDA a supplemental measure for making decisions and assessing the unlevered performance of our segments as it relates to the total return on assets as opposed to the levered return on equity. As properties are bought and sold based on a multiple of EBITDA, we utilize this measure to make investment decisions as well as to compare the performance of our assets to that of our peers. EBITDA should not be considered a substitute for net income. EBITDA may not be comparable to similarly titled measures employed by other companies.

(2)

Interest and debt expense, depreciation and amortization and income tax expense in the reconciliation of net income (loss) to EBITDA includes our share of these items from partially owned entities.

 

 

(3)

The tables below provide information about EBITDA from certain investments that are included in the "other" column of the preceding EBITDA by segment reconciliations.  The totals for each of the columns below agree to the total EBITDA for the "other" column in the preceding EBITDA by segment reconciliations.

 

 

 

 

 

 

  

 

 

 

 

 

  

 

 

  

 

 

  

 

 

 

 

 

  

For the Three Months

  

For the Nine Months

  

(Amounts in thousands)

Ended September 30,

  

Ended September 30,

  

 

 

 

 

 

  

 

2010 

 

 

2009 

  

2010 

  

2009 

  

Alexander's

$

 13,288 

 

$

 26,769 

  

$

 41,947 

  

$

 65,229 

  

555 California Street

 

 11,797 

 

 

 10,090 

  

 

 34,421 

  

 

 31,885 

  

Lexington

 

 8,092 

 

 

 (1,863)

  

 

 37,375 

  

 

 15,129 

  

Hotel Pennsylvania

 

 8,080 

 

 

 3,599 

  

 

 14,249 

  

 

 7,823 

  

Industrial warehouses

 

 460 

 

 

 1,219 

  

 

 2,067 

  

 

 3,902 

  

Other investments

 

 3,225 

 

 

 7,071 

  

 

 23,382 

  

 

 1,904 

  

  

 

 44,942 

 

 

 46,885 

  

 

 153,441 

  

 

 125,872 

  

Corporate general and administrative expenses (1)

 

 (20,712)

 

 

 (18,619)

  

 

 (60,668)

  

 

 (56,653)

  

Investment income and other, net (1)

 

 15,808 

 

 

 19,877 

  

 

 41,876 

  

 

 64,360 

  

Net income attributable to noncontrolling interests, including  

 

 

 

 

 

  

 

 

  

 

 

  

 

unit distributions

 

 (11,584)

 

 

 (14,969)

  

 

 (33,487)

  

 

 (32,250)

  

Income from the mark-to-market of derivative positions in marketable  

 

 

 

 

 

  

 

 

  

 

 

  

 

equity securities

 

 32,249 

 

 

 - 

  

 

 32,249 

  

 

 - 

  

Real Estate Fund organization costs

 

 (3,207)

 

 

 - 

  

 

 (5,937)

  

 

 - 

  

Costs of acquisitions not consummated

 

 (921)

 

 

 - 

  

 

 (2,851)

  

 

 - 

  

Net (loss) gain on early extinguishment of debt

 

 (724)

 

 

 3,407 

  

 

 (1,796)

  

 

 26,227 

  

Mezzanine loans receivable (loss) accrual

 

 - 

 

 

 - 

  

 

 (6,900)

  

 

 (122,738)

  

Write-off of unamortized costs from the voluntary surrender of equity  

 

 

 

 

 

  

 

 

  

 

 

  

 

awards

 

 - 

 

 

 - 

  

 

 - 

  

 

 (20,202)

  

 

 

 

 

 

  

$

 55,851 

 

$

 36,581 

  

$

 115,927 

  

$

 (15,384)

  

 

 

 

 

 

  

 

 

 

 

 

  

 

 

  

 

 

  

 

 

 

 

 

  

 

 

 

 

 

  

 

 

  

 

 

  

(1)

 

The amounts in these captions (for this table only) exclude the mark-to-market of our deferred compensation plan assets and offsetting liability.

 

35

 


 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

Shareholders and Board of Trustees
Vornado Realty Trust
New York, New York

 

We have reviewed the accompanying consolidated balance sheet of Vornado Realty Trust (the "Company") as of September 30, 2010, and the related consolidated statements of income for the three-month and nine-month periods ended September 30, 2010 and 2009, and of changes in equity and cash flows for the nine-month periods ended September 30, 2010 and 2009. These interim financial statements are the responsibility of the Company’s management.

 

We conducted our reviews in accordance with the standards of the Public Company Accounting Oversight Board (United States). A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the Public Company Accounting Oversight Board (United States), the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

 

Based on our reviews, we are not aware of any material modifications that should be made to such consolidated interim financial statements for them to be in conformity with accounting principles generally accepted in the United States of America.

 

We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheet of Vornado Realty Trust as of December 31, 2009, and the related consolidated statements of income, changes in equity, and cash flows for the year then ended (not presented herein); and in our report dated February 23, 2010, we expressed an unqualified opinion on those consolidated financial statements and included an explanatory paragraph relating to a change in method of accounting for debt with conversion options and noncontrolling interests in consolidated subsidiaries. In our opinion, the information set forth in the accompanying consolidated balance sheet as of December 31, 2009 is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.

 

 

/s/  DELOITTE & TOUCHE LLP

 

 

Parsippany, New Jersey

November 2, 2010

 

36

 


 

Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations

Certain statements contained herein constitute forward‑looking statements as such term is defined in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements are not guarantees of performance. They represent our intentions, plans, expectations and beliefs and are subject to numerous assumptions, risks and uncertainties. Our future results, financial condition and business may differ materially from those expressed in these forward-looking statements. You can find many of these statements by looking for words such as “approximates,” “believes,” “expects,” “anticipates,” “estimates,” “intends,” “plans,” “would,” “may” or other similar expressions in this Quarterly Report on Form 10‑Q. Many of the factors that will determine the outcome of these and our other forward-looking statements are beyond our ability to control or predict. For further discussion of factors that could materially affect the outcome of our forward-looking statements, see “Item 1A. Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2009.  For these statements, we claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. You are cautioned not to place undue reliance on our forward-looking statements, which speak only as of the date of this Quarterly Report on Form 10-Q or the date of any document incorporated by reference. All subsequent written and oral forward-looking statements attributable to us or any person acting on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this section. We do not undertake any obligation to release publicly any revisions to our forward-looking statements to reflect events or circumstances occurring after the date of this Quarterly Report on Form 10-Q.

 

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations includes a discussion of our consolidated financial statements for the three and nine months ended September 30, 2010. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates.

 

Critical Accounting Policies

A summary of our critical accounting policies is included in our Annual Report on Form 10-K for the year ended December 31, 2009 in Management’s Discussion and Analysis of Financial Condition. There have been no significant changes to our policies during 2010.

 

37

 


 

 

Overview

 

Business Objective and Operating Strategy

 

Our business objective is to maximize shareholder value, which we measure by the total return provided to our shareholders. Below is a table comparing our performance to the Morgan Stanley REIT Index (“RMS”) and the SNL REIT Index (“SNL”) for the following periods ended September 30, 2010:

 

 

 

 

 

 

Total Return(1)

 

 

 

 

 

 

Vornado

 

RMS

 

SNL

 

 

 

One-year

 

 

 37.1%

 

 30.5%

 

 31.1%

 

 

 

Three-year

 

 

 (15.6%)

 

 (18.8%)

 

 (16.2%)

 

 

 

Five-year

 

 

 18.7%

 

 9.8%

 

 13.0%

 

 

 

Ten-year

 

 

 290.6%

 

 169.3%

 

 184.1%

 

 

 

 

 

 

 

 

 

 

  

 

 

 

 

 

 

 

 

 

 

  

 

 

(1) Past performance is not necessarily indicative of how we will perform in the future.

 

 

 

 

 

 

 

 

 

 

  

 

We intend to achieve our business objective by continuing to pursue our investment philosophy and executing our operating strategies through:

 

·         Maintaining a superior team of operating and investment professionals and an entrepreneurial spirit;

·         Investing in properties in select markets, such as New York City and Washington, DC, where we believe there
is a high likelihood of capital appreciation;

·         Acquiring quality properties at a discount to replacement cost and where there is a significant potential for higher rents;

·         Investing in retail properties in select under-stored locations such as the New York City metropolitan area;

·         Investing in fully-integrated operating companies that have a significant real estate component; and

·         Developing and redeveloping our existing properties to increase returns and maximize value.

 

We expect to finance our growth, acquisitions and investments using internally generated funds, proceeds from possible asset sales and by accessing the public and private capital markets.  We may also offer Vornado common or preferred shares or Operating Partnership units in exchange for property and may repurchase or otherwise reacquire our shares or any other securities in the future.

 

We have a large concentration of properties in the New York City metropolitan area and in the Washington, DC and Northern Virginia areas. We compete with a large number of real estate property owners and developers, some of which may be willing to accept lower returns on their investments. Principal factors of competition are rents charged, attractiveness of location, the quality of the property and breadth and quality of services provided. Our success depends upon, among other factors, trends of the national, regional and local economies, financial condition and operating results of current and prospective tenants and customers, availability and cost of capital, construction and renovation costs, taxes, governmental regulations, legislation and population trends.  See “Risk Factors” in Item 1A of our Annual Report on form 10-K for the year ended December 31, 2009 for additional information regarding these factors.

 

The economic recession and illiquidity and volatility in the financial and capital markets during 2008 and 2009 negatively affected substantially all businesses, including ours.  Although signs of an economic recovery in 2010 have emerged, it is not possible for us to quantify the timing and impact of such a recovery, or lack thereof, on our future financial results. 

 

38

 


 

Overview - continued

 

 

2010 Acquisitions and Significant Investments

 

Investment in J.C. Penney Company, Inc. (“J.C. Penney”) (NYSE: JCP)

 

We currently own an economic interest in 23,400,000 common shares of J.C Penney, or 9.9% of its outstanding common shares.  Below are the details of our investment.

In September 2010, we acquired 2,684,010 common shares at an average price of $26.87 per share, or $72,107,000 in the aggregate.  These shares are included as a component of marketable equity securities on our consolidated balance sheet and are classified as “available for sale.”  Gains or losses resulting from the mark-to-market of these shares are recognized as an increase or decrease in “accumulated other comprehensive income” (a component of shareholders’ equity on our consolidated balance sheet) and not recognized in income.  In the quarter ended September 30, 2010, we recognized an $845,000 unrealized gain based on J.C. Penney’s September 30, 2010 closing share price of $27.18 per share.  In October 2010, we acquired an additional 400,000 common shares at an average price of $27.46 per share, or $10,983,000 in the aggregate.  Accordingly, we currently own 3,084,010 common shares at an average price of $26.94 per share, or $83,090,000 in the aggregate.

On September 28, 2010, we acquired call options to purchase 15,500,000 common shares at a strike price of $12.2437 per share for $199,265,000, which expire on March 27, 2012.  We may exercise all or portions of the options prior to expiration.  The options may be settled, at our election, in cash or common shares.  These options are derivative instruments that do not qualify for hedge accounting treatment.  Gains or losses resulting from the mark-to-market of the derivative instruments are recognized as an increase or decrease in “interest and other investment income (loss), net” on our consolidated statement of income.  In the quarter ended September 30, 2010, we recognized a $32,249,000 net gain, based on J.C. Penney’s September 30, 2010 closing share price of $27.18 per share and our weighted average cost of $25.10 per share.  At September 30, 2010, the $199,265,000 cost of the options and the $32,249,000 mark-to-market increase in the value of the options are included in “other assets” and the $199,265,000 settled on October 1, 2010, is included in “other liabilities” on our consolidated balance sheet.   

On October 7, 2010, we entered into a forward contract to acquire 4,815,990 common shares at an initial weighted average strike price of $28.41 per share.  We may accelerate settlement, in whole or in part, at any time prior to October 9, 2012.  The counterparty may accelerate settlement, in whole or in part, upon one year’s notice to us.  The forward contract may be settled, at our election, in cash or common shares.  Pursuant to the terms of the contract, the strike price for each share increases at an annual rate of LIBOR plus 80 basis points and decreases for dividends received on the shares.  The contract is a derivative instrument that does not qualify for hedge accounting treatment.  Gains or losses resulting from the mark-to-market of the derivative instrument are recognized as an increase or decrease in “interest and other investment income (loss), net” on our consolidated statement of income.  

 

Investment in LNR Property Corporation (“LNR”)

On July 29, 2010, as a part of LNR’s recapitalization, we acquired a 26.2% equity interest in LNR for $116,000,000 in cash and conversion into equity of our $15,000,000 mezzanine loan (the then current carrying amount) made to LNR’s parent, Riley Holdco Corp.  The recapitalization involved an infusion of a total of $417,000,000 in new cash equity and the reduction of LNR’s total debt to $425,000,000 from $1.3 billion, excluding liabilities related to the consolidated CMBS and CDO trusts described below.  We account for our equity interest in LNR under the equity method.  Upon finalization of purchase accounting in the fourth quarter, we will recognize our 26.2% pro rata share of LNR’s earnings for the period from July 29, 2010 (date of acquisition) to September 30, 2010, which will not be material to our consolidated statements of income, as well as our share of their fourth quarter earnings.

LNR consolidates certain commercial mortgage-backed securities (“CMBS”) and Collateralized Debt Obligation (“CDO”) trusts for which it is the primary beneficiary.  The assets of these trusts (primarily commercial mortgage loans) are the sole source of repayment of the related liabilities, which are non-recourse to LNR and its equity holders, including us.  Changes in the estimated fair value of the assets and liabilities of these trusts each period are recognized in LNR’s consolidated income statement and allocated to the noncontrolling interests, which is applied to “appropriated deficit” on LNR’s consolidated balance sheet, and not to LNR’s equity holders, including us.  As of July 29, 2010, LNR’s consolidated balance sheet included $119 billion of assets and $142 billion of liabilities related to CMBS and CDO trusts.

 

39

 


 

Overview - continued

 

 

2010 Acquisitions and Significant Investments

 

Vornado Capital Partners L.P.

On July 6, 2010, we completed the first closing of Vornado Capital Partners, L.P., our real estate investment fund (the “Fund”), with aggregate equity commitments of $550,000,000, of which we committed $200,000,000.  We expect to raise an additional $450,000,000 bringing total commitments to $1 billion.  We are the general partner and investment manager of the Fund and it is our exclusive investment vehicle during the three-year investment period for all investments that fit within the Fund’s investment parameters, including debt, equity and other interests in real estate, and excluding (i) investments in vacant land and ground-up development; (ii) investments acquired by merger or primarily for our securities or properties; (iii) properties which can be combined with or relate to our existing properties; (iv) securities of commercial mortgage loan servicers and investments derived from any such investments; (v) noncontrolling interests in equity and debt securities; and (vi) investments located outside of North America.   The Fund has a term of eight years from the final closing date.  The Fund is accounted for under the AICPA Investment Company Guide and its investments are reported on its balance sheet at fair value, with changes in value each period recognized in earnings.   We consolidate the accounts of the Fund into our consolidated financial statements.  In the three and nine months ended September 30, 2010, we expensed $3,752,000 and $6,482,000, respectively, for organization costs which are included as a component of “general and administrative” expenses on our consolidated statement of income.

In September 2010, the Fund received $59,240,000 of capital from partners, including $21,542,000 from us.  In October 2010, the Fund received an additional $53,300,000 of capital from partners, including $19,382,000 from us, for total capital contributions to date of $112,540,000.  In the third quarter of 2010, the Fund acquired two investments aggregating $42,500,000 in cash and in October 2010, the Fund acquired a third investment for $168,000,000, of which $100,000,000 was mortgage financed and $68,000,000 was paid in cash.  In addition, the Fund reimbursed us for $1,500,000 of organization costs. 

 

 

2010 Financing Activities

 

In 2010, through open market repurchases and tender offers, we purchased $257,324,000 aggregate face amount ($252,048,000 aggregate carrying amount) of our convertible senior debentures and $17,000,000 aggregate face amount ($16,981,000 aggregate carrying amount) of our senior unsecured notes for $261,420,000 and $17,382,000 in cash, respectively.

 

In August 2010, we sold $660,000,000 of 10-year mortgage notes in a single issuer securitization.  The notes are comprised of a $600,000,000 fixed rate component and a $60,000,000 variable rate component and are cross-collateralized by 40 strip shopping centers in the Mid-Atlantic region.  The $600,000,000 fixed rate portion bears interest at an initial rate of 4.18% and a weighted average rate of 4.31% over the 10-year term and amortizes based on a 30-year schedule.  The variable rate portion bears interest at LIBOR plus 1.36%, with a 1% floor (2.36% at September 30, 2010).

 

In March 2010, we completed a public offering of $500,000,000 aggregate principal amount of 4.25% senior unsecured notes due April 1, 2015.  Interest on the notes is payable semi-annually on April 1 and October 1, commencing on October 1, 2010.  The notes were sold at 99.834% of their face amount to yield 4.287%.  The notes can be redeemed without penalty beginning January 1, 2015.  We retained net proceeds of approximately $496,000,000.

 

 

Recently Issued Accounting Literature

On January 21, 2010, the Financial Accounting Standards Board (“FASB”) issued an update to Accounting Standards Codification (“ASC”) 820, Fair Value Measurements and Disclosures, adding new requirements for disclosures about transfers into and out of Levels 1 and 2 fair value measurements and additional disclosures about the activity within Level 3 fair value measurements.  The application of this guidance on January 1, 2010 did not have a material effect on our consolidated financial statements.

 

In June 2009, the FASB issued an update to ASC 810, Consolidation, which modifies the existing quantitative guidance used in determining the primary beneficiary of a variable interest entity (“VIE”) by requiring entities to qualitatively assess whether an enterprise is a primary beneficiary, based on whether the entity has (i) power over the significant activities of the VIE, and (ii) an obligation to absorb losses or the right to receive benefits that could be potentially significant to the VIE.  The adoption of this guidance on January 1, 2010 did not have a material effect on our consolidated financial statements.

 

40

 


 

Overview - continued

 

Quarter Ended September 30, 2010 Financial Results Summary

 

Net income attributable to common shareholders for the quarter ended September 30, 2010 was $95,192,000, or $0.52 per diluted share, compared to $126,348,000, or $0.70 per diluted share, for the quarter ended September 30, 2009.  Net income for the quarter ended September 30, 2009 includes $43,329,000 of net gains on sale of real estate.  In addition, the quarters ended September 30, 2010 and September 30, 2009 include certain items that affect comparability which are listed in the table below.  The aggregate of the net gains on sale of real estate and the items in the table below, net of amounts attributable to noncontrolling interests, increased net income attributable to common shareholders by $18,043,000, or $0.10 per diluted share for the quarter ended September 30, 2010, and $52,847,000, or $0.29 per diluted share for the quarter ended September 30, 2009.

 

Funds from operations attributable to common shareholders plus assumed conversions (“FFO”) for the quarter ended September 30, 2010 was $248,964,000, or $1.31 per diluted share, compared to $234,246,000, or $1.25 per diluted share, for the prior year’s quarter.  FFO for the quarters ended September 30, 2010 and 2009 include certain items that affect comparability which are listed in the table below. The aggregate of these items, net of amounts attributable to noncontrolling interests, increased FFO by $18,043,000, or $0.09 per diluted share for the quarter ended September 30, 2010, and $12,870,000 or $0.07 per diluted share for the quarter ended September 30, 2009.

 

 

 

 

 

 

 

For the Three Months

 

 

 

 

 

 

Ended September 30,

(Amounts in thousands, except per share amounts)

 

2010 

 

2009 

Items that affect comparability (income) expense:

 

 

 

 

 

 

 

(Income) from the mark-to-market of derivative positions in marketable equity securities

 

$

 (32,249)

 

$

 - 

 

Impairment losses and costs of acquisitions not consummated

 

 

 

 5,921 

 

 

 - 

 

Default interest and fees accrued on three loans in special servicing

 

 

 

 5,887 

 

 

 - 

 

Discount on redemption of preferred shares

 

 

 

 (4,382)

 

 

 - 

 

Real Estate Fund organization costs

 

 

 

 3,752 

 

 

 - 

 

Net loss (gain) on early extinguishment of debt

 

 

 724 

 

 

 (3,407)

 

Our share of partially owned entities:

 

 

 

 

 

 

 

 

Alexander's – income tax benefit

 

 

 (641)

 

 

 (13,668)

 

 

Lexington Realty Trust - impairment losses

 

 

 - 

 

 

 14,541 

 

 

Toys "R" Us – litigation settlement income

 

 

 - 

 

 

 (10,200)

 

Other, net

 

 

 1,564 

 

 

 (1,172)

 

 

 

 

 (19,424)

 

 

 (13,906)

Noncontrolling interests’ share of above adjustments

 

 

 1,381 

 

 

 1,036 

Items that affect comparability, net

 

$

 (18,043)

 

$

 (12,870)

 

The percentage increase in GAAP basis and cash basis same store Earnings Before Interest, Taxes, Depreciation and Amortization (“EBITDA”) of our operating segments for the quarter ended September 30, 2010 over the quarter ended September 30, 2009 and the trailing quarter ended June 30, 2010 are summarized below.

 

 

 

 

 

 

New York

 

Washington, DC

 

  

 

Merchandise

  

Same Store EBITDA:

 

 

Office

 

Office

 

Retail

 

Mart

  

 

September 30, 2010 vs. September 30, 2009

 

  

 

  

 

  

 

 

  

 

 

GAAP basis

 

 3.3%

 

 4.7%

 

 12.3%

 

 (5.4%)

  

 

 

Cash Basis

 

 4.8%

 

 9.5%

 

 9.8%

 

 (4.7%)

  

 

September 30, 2010 vs. June 30, 2010

 

  

 

  

 

  

 

 

  

 

 

GAAP basis

 

 

 (0.7%)

 

 (0.9%)

 

 5.3%

 

 (17.8%)

 (1)

 

 

Cash Basis

 

 

 (0.9%)

 

 (0.5%)

 

 5.4%

 

 (15.7%)

 (1)

 

 

 

 

 

  

 

  

 

  

 

 

  

 

 

 

 

 

  

 

  

 

  

 

 

  

(1)

Primarily from the timing of trade shows.

 

41

 


 

 

Overview – continued

Nine Months Ended September 30, 2010 Financial Results Summary

 

Net income attributable to common shareholders for the nine months ended September 30, 2010 was $353,317,000, or $1.92 per diluted share, compared to $200,285,000, or $1.17 per diluted share, for the nine months ended September 30, 2009.  Net income for the nine months ended September 30, 2010 and 2009 includes $307,000 and $44,002,000, respectively, of net gains on sale of real estate.  In addition, the nine months ended September 30, 2010 and 2009 include certain items that affect comparability which are listed in the table below.  The aggregate of net gains on sale of real estate and the items in the table below, net of amounts attributable to noncontrolling interests, increased net income attributable to common shareholders for the nine months ended September 30, 2010 by $7,475,000, or $0.04 per diluted share and decreased net income attributable to common shareholders for the nine months ended September 30, 2009 by $55,408,000, or $0.33 per diluted share.

 

FFO for the nine months ended September 30, 2010 was $814,030,000, or $4.29 per diluted share, compared to $602,825,000, or $3.42 per diluted share, for the prior year’s nine months.  FFO for the nine months ended September 30, 2010 and 2009 includes certain items that affect comparability which are listed in the table below. The aggregate of these items, net of amounts attributable to noncontrolling interests, increased FFO for the nine months ended September 30, 2010 by $7,206,000, or $0.04 per diluted share and decreased FFO for the nine months ended September 30, 2009 by $96,077,000, or $0.55 per diluted share.

 

 

 

 

 

 

 

For the Nine Months

 

 

 

 

 

 

Ended September 30,

(Amounts in thousands, except per share amounts)

 

2010 

 

2009 

Items that affect comparability (income) expense:

 

 

 

 

 

 

 

(Income) from the mark-to-market of derivative positions in marketable equity securities

 

$

 (32,249)

 

$

 - 

 

Litigation loss accrual, impairment losses and costs of acquisitions not consummated

 

 

 17,907 

 

 

 - 

 

Default interest and fees accrued on three loans in special servicing

 

 

 12,445 

 

 

 - 

 

Discount on redemption of preferred units and shares

 

 

 (11,354)

 

 

 - 

 

Mezzanine loans receivable loss accrual

 

 

 6,900 

 

 

 122,738 

 

Real Estate Fund organization costs

 

 

 6,482 

 

 

 - 

 

Net gain resulting from Lexington's March 2010 stock issuance

 

 

 (5,998)

 

 

 - 

 

Net loss (gain) on early extinguishment of debt

 

 

 1,796 

 

 

 (26,996)

 

Write-off of unamortized costs from the voluntary surrender of equity awards

 

 

 - 

 

 

 32,588 

 

Our share of partially owned entities:

 

 

 

 

 

 

 

 

Alexander's - income tax benefit and stock appreciation rights

 

 

 (641)

 

 

 (24,773)

 

 

Toys - purchase accounting adjustments and litigation settlement income

 

 

 - 

 

 

 (24,146)

 

 

Lexington - impairment losses

 

 

 - 

 

 

 19,121 

 

 

Filene's, Boston - lease termination payment

 

 

 - 

 

 

 7,650 

 

Other, net

 

 

 (3,032)

 

 

 (1,791)

 

 

 

 

 (7,744)

 

 

 104,391 

Noncontrolling interests’ share of above adjustments

 

 

 538 

 

 

 (8,314)

Items that affect comparability, net

 

$

 (7,206)

 

$

 96,077 

 

The percentage increase (decrease) in GAAP basis and cash basis same store EBITDA of our operating segments for the nine months ended September 30, 2010 over the nine months ended September 30, 2009 is summarized below.

 

 

 

 

 

 

New York

 

Washington, DC

 

  

 

Merchandise

Same Store EBITDA:

 

 

Office

 

Office

 

Retail

 

Mart

 

September 30, 2010 vs. September 30, 2009

 

  

 

  

 

  

 

  

 

 

GAAP basis

 

 2.2%

 

 5.7%

 

 9.7%

 

 (2.4%)

 

 

Cash Basis

 

 3.4%

 

 8.1%

 

 11.1%

 

 (2.8%)

 

Calculations of same store EBITDA, reconciliations of our net income to EBITDA and FFO and the reasons we consider these non-GAAP financial measures useful are provided in the following pages of Management’s Discussion and Analysis of the Financial Condition and Results of Operations.

 

42

 


 

Overview - continued

 

The following table sets forth certain information for the properties we own directly or indirectly, including leasing activity. The leasing activity presented below is based on leases signed during the period and is not intended to coincide with the commencement of rental revenue in accordance with accounting principles generally accepted in the United States of America (“GAAP”).  Tenant improvements and leasing commissions are presented below based on square feet leased during the period, on a per square foot and per square foot per annum basis, based on weighted average lease terms and as a percentage of initial rent per square foot.

 

 

(Square feet in thousands)

 

New York  

 

Washington, DC

 

 

  

 

Merchandise Mart

As of September 30, 2010:

 

Office

 

Office

 

Retail (3)

 

Office

 

Showroom

 

Square feet (in service)

 

 

 16,180 

 

 

 18,566 

 

 

 22,907 

 

 

 2,633 

 

 

 6,161 

 

Number of properties

 

 

 28 

 

 

 84 

 

 

 163 

 

 

 8 

 

 

 8 

 

Occupancy rate

 

 

 96.0%

 

 

 94.7%(2)

 

 

 92.5%

 

 

 91.1%

 

 

 91.5%

 

 

 

 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

Leasing Activity:

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

Quarter Ended September 30, 2010:

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

Square feet  

 

 

 417 

 

 

 566 

 

 

 291 

 

 

 21 

 

 

 155 

 

Initial rent per square foot (1)

 

$

 50.12 

 

$

 38.19 

 

$

 31.09 

 

$

 24.66 

 

$

 22.81 

 

Weighted average lease terms (years)

 

 

 8.3 

 

 

 5.3 

 

 

 10.6 

 

 

 4.9 

 

 

 3.8 

 

Rent per square foot - relet space:

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

Square feet

 

 

 390 

 

 

 527 

 

 

 66 

 

 

 21 

 

 

 155 

 

 

Initial rent - cash basis (1)

 

$

 50.82 

 

$

 38.09 

 

$

 26.25 

 

$

 24.66 

 

$

 22.81 

 

 

Prior escalated rent - cash basis

 

$

 51.67 

 

$

 35.78 

 

$

 23.33 

 

$

 23.71 

 

$

 23.74 

 

 

Percentage (decrease) increase:

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Cash basis

 

 

 (1.6%)

 

 

 6.5%

 

 

 12.5%

 

 

 4.0%

 

 

 (3.9%)

 

 

 

GAAP basis

 

 

 2.2%

 

 

 10.2%

 

 

 16.6%

 

 

 (5.6%)

 

 

 1.1%

 

Rent per square foot - vacant space:

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

Square feet

 

 

 27 

 

 

 39 

 

 

 225 

 

 

 - 

 

 

 - 

 

 

Initial rent (1)

 

$

 39.81 

 

$

 39.49 

 

$

 32.52 

 

$

 - 

 

$

 - 

 

Tenant improvements and leasing

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

commissions:

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Per square foot

 

$

 52.33 

 

$

 11.75 

 

$

 10.30 

 

$

 18.14 

 

$

 3.09 

 

 

 

Per square foot per annum:

 

$

 6.30 

 

$

 2.22 

 

$

 0.97 

 

$

 3.70 

 

$

 0.81 

 

 

 

 

Percentage of initial rent

 

 

 12.6%

 

 

 5.8%

 

 

 3.1%

 

 

 15.0%

 

 

 3.6%

 

 

 

 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

Nine Months Ended September 30, 2010:

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

Square feet  

 

 

 1,031 

 

 

 1,289 

 

 

 1,022 

 

 

 329 

 

 

 925 

 

Initial rent per square foot (1)

 

$

 48.42 

 

$

 38.30 

 

$

 24.09 

 

$

 29.15 

 

$

 24.41 

 

Weighted average lease terms (years)

 

 

 7.7 

 

 

 4.5 

 

 

 8.8 

 

 

 13.7 

 

 

 4.0 

 

Rent per square foot - relet space:

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

Square feet

 

 

 868 

 

 

 1,050 

 

 

 348 

 

 

 65 

 

 

 925 

 

 

Initial rent - cash basis (1)

 

$

 49.54 

 

$

 38.44 

 

$

 16.53 

 

$

 26.05 

 

$

 24.41 

 

 

Prior escalated rent - cash basis

 

$

 52.16 

 

$

 35.83 

 

$

 15.47 

 

$

 24.90 

 

$

 25.90 

 

 

Percentage (decrease) increase:

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Cash basis

 

 

 (5.0%)

 

 

 7.3%

 

 

 6.9%

 

 

 4.6%

 

 

 (5.8%)

 

 

 

GAAP basis

 

 

 (3.2%)

 

 

 11.6%

 

 

 12.0%

 

 

 17.6%

 

 

 (0.5%)

 

Rent per square foot - vacant space:

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

Square feet

 

 

 163 

 

 

 239 

 

 

 674 

 

 

 264 

 

 

 - 

 

 

Initial rent (1)

 

$

 42.63 

 

$

 37.70 

 

$

 27.99 

 

$

 29.92 

 

$

 - 

 

Tenant improvements and leasing

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

commissions:

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Per square foot

 

$

 52.24 

 

$

 11.62 

 

$

 12.29 

 

$

 88.33 

 

$

 4.09 

 

 

 

Per square foot per annum:

 

$

 6.78 

 

$

 2.58 

 

$

 1.40 

 

$

 6.46 

 

$

 1.02 

 

 

 

 

Percentage of initial rent

 

 

 14.0%

 

 

 6.7%

 

 

 5.8%

 

 

 22.2%

 

 

 4.2%

 

 

 

 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

See notes on the following table

 

43

 


 

 

Overview - continued

 

 

 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

(Square feet in thousands)

 

New York  

 

Washington, DC

 

 

  

 

Merchandise Mart

 

 

 

 

 

  

 

Office

 

Office

 

Retail (3)

 

Office

 

Showroom

As of June 30, 2010:

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

Square feet (in service)

 

 

 16,187 

 

 

 18,558 

 

 

 22,767 

 

 

 2,630 

 

 

 6,166 

 

Number of properties

 

 

 28 

 

 

 84 

 

 

 164 

 

 

 8 

 

 

 8 

 

Occupancy rate

 

 

 95.5%

 

 

 95.0%(2)

 

 

 92.3%

 

 

 91.1%

 

 

 91.7%

 

 

 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

As of December 31, 2009:

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

Square feet (in service)

 

 

 16,173 

 

 

 18,560 

 

 

 22,553 

 

 

 2,464 

 

 

 6,301 

 

Number of properties

 

 

 28 

 

 

 84 

 

 

 164 

 

 

 8 

 

 

 8 

 

Occupancy rate

 

 

 95.5%

 

 

 93.3%(2)

 

 

 91.6%

 

 

 88.9%

 

 

 88.4%

 

 

 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

As of September 30, 2009:

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

Square feet (in service)

 

 

 16,167 

 

 

 18,156 

 

 

 22,096 

 

 

 2,447 

 

 

 6,319 

 

Number of properties

 

 

 28 

 

 

 81 

 

 

 164 

 

 

 8 

 

 

 8 

 

Occupancy rate

 

 

 96.0%

 

 

 93.5%(2)

 

 

 91.6%

 

 

 87.1%

 

 

 88.9%

 

 

 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

(1)

 

Most leases include periodic step-ups in rent which are not reflected in the initial rent per square foot leased.

 

 

 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

(2)

 

Excluding residential and other properties, occupancy rates for the office properties were as follows.

 

 

 

September 30, 2010

94.3%

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

June 30, 2010

94.8%

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

December 31, 2009

94.6%

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

September 30, 2009

94.5%

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

(3)

 

Mall sales per square foot, including partially owned malls, for the trailing twelve months ended September 30, 2010 and 2009 were $465 and

 

 

 

$471, respectively.

 

 

 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

 

 

 

 

44

 


 

Net Income and EBITDA by Segment for the Three Months Ended September 30, 2010 and 2009

Below is a summary of net income and a reconciliation of net income to EBITDA(1) by segment for the three months ended September 30, 2010 and 2009.

 

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

(Amounts in thousands)

For the Three Months Ended September 30, 2010

 

 

  

 

 

 

New York

 

Washington, DC

 

 

 

Merchandise

 

 

 

  

 

 

  

 

Total

 

Office

 

Office

 

Retail

 

Mart

 

Toys

 

Other(3)

Property rentals

 

$

 542,937 

 

$

 195,105 

 

$

 149,673 

 

$

 100,342 

 

$

 52,694 

 

$

 - 

 

$

 45,123 

Straight-line rents:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

Contractual rent increases

 

 

 12,765 

 

 

 5,998 

 

 

 1,625 

 

 

 4,489 

 

 

 291 

 

 

 - 

 

 

 362 

 

Amortization of free rent

 

 

 4,259 

 

 

 1,569 

 

 

 (1,243)

 

 

 3,563 

 

 

 (350)

 

 

 - 

 

 

 720 

Amortization of acquired below-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

 

market leases, net

 

 

 16,935 

 

 

 8,911 

 

 

 588 

 

 

 6,030 

 

 

 15 

 

 

 - 

 

 

 1,391 

Total rentals

 

 

 576,896 

 

 

 211,583 

 

 

 150,643 

 

 

 114,424 

 

 

 52,650 

 

 

 - 

 

 

 47,596 

Tenant expense reimbursements

 

 

 97,835 

 

 

 40,443 

 

 

 15,970 

 

 

 36,378 

 

 

 3,691 

 

 

 - 

 

 

 1,353 

Fee and other income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

Tenant cleaning fees

 

 

 13,613 

 

 

 21,721 

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 (8,108)

 

Management and leasing fees

 

 

 3,555 

 

 

 1,428 

 

 

 2,772 

 

 

 214 

 

 

 (2)

 

 

 - 

 

 

 (857)

 

Lease termination fees

 

 

 2,301 

 

 

 1,220 

 

 

 728 

 

 

 346 

 

 

 7 

 

 

 - 

 

 

 - 

 

Other

 

 

 12,832 

 

 

 5,505 

 

 

 5,567 

 

 

 1,026 

 

 

 812 

 

 

 - 

 

 

 (78)

Total revenues

 

 

 707,032 

 

 

 281,900 

 

 

 175,680 

 

 

 152,388 

 

 

 57,158 

 

 

 - 

 

 

 39,906 

Operating expenses

 

 

 281,548 

 

 

 124,323 

 

 

 60,390 

 

 

 54,105 

 

 

 28,832 

 

 

 - 

 

 

 13,898 

Depreciation and amortization

 

 

 134,755 

 

 

 44,235 

 

 

 37,266 

 

 

 27,061 

 

 

 12,671 

 

 

 - 

 

 

 13,522 

General and administrative

 

 

 56,557 

 

 

 4,514 

 

 

 5,985 

 

 

 8,846 

 

 

 7,353 

 

 

 - 

 

 

 29,859 

Impairment losses and acquisition

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

costs

 

 

 5,921 

 

 

 - 

 

 

 - 

 

 

 5,000 

 

 

 - 

 

 

 - 

 

 

 921 

Total expenses

 

 

 478,781 

 

 

 173,072 

 

 

 103,641 

 

 

 95,012 

 

 

 48,856 

 

 

 - 

 

 

 58,200 

Operating income (loss)

 

 

 228,251 

 

 

 108,828 

 

 

 72,039 

 

 

 57,376 

 

 

 8,302 

 

 

 - 

 

 

 (18,294)

(Loss) applicable to Toys

 

 

 (2,557)

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 (2,557)

 

 

 - 

(Loss) income from partially owned

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

 entities

 

 

 (1,996)

 

 

 1,705 

 

 

 (1,095)

 

 

 833 

 

 

 8 

 

 

 - 

 

 

 (3,447)

(Loss) from Real Estate Fund

 

 

 (1,410)

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 (1,410)

Interest and other investment  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

income, net

 

 

 47,352 

 

 

 139 

 

 

 81 

 

 

 209 

 

 

 12 

 

 

 - 

 

 

 46,911 

Interest and debt expense

 

 

 (152,358)

 

 

 (33,293)

 

 

 (33,459)

 

 

 (24,803)

 

 

 (15,657)

 

 

 - 

 

 

 (45,146)

Net (loss) on early extinguishment of

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

 debt

 

 

 (724)

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 (724)

Net gain on disposition of wholly

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

owned and partially owned assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

other than depreciable real estate

 

 

 5,072 

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 5,072 

Income (loss) before income taxes

 

 

 121,630 

 

 

 77,379 

 

 

 37,566 

 

 

 33,615 

 

 

 (7,335)

 

 

 (2,557)

 

 

 (17,038)

Income tax (expense) benefit

 

 

 (5,498)

 

 

 (861)

 

 

 (1,050)

 

 

 (2)

 

 

 714 

 

 

 - 

 

 

 (4,299)

Net income (loss)

 

 

 116,132 

 

 

 76,518 

 

 

 36,516 

 

 

 33,613 

 

 

 (6,621)

 

 

 (2,557)

 

 

 (21,337)

Net (income) loss attributable to  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

noncontrolling interests, including

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

unit distributions

 

 

 (11,880)

 

 

 (2,442)

 

 

 - 

 

 

 397 

 

 

 - 

 

 

 - 

 

 

 (9,835)

Net income (loss) attributable to

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

 Vornado

 

 

 104,252 

 

 

 74,076 

 

 

 36,516 

 

 

 34,010 

 

 

 (6,621)

 

 

 (2,557)

 

 

 (31,172)

Interest and debt expense(2)

 

 

 208,294 

 

 

 31,817 

 

 

 34,241 

 

 

 26,395 

 

 

 15,883 

 

 

 40,558 

 

 

 59,400 

Depreciation and amortization(2)

 

 

 179,148 

 

 

 42,531 

 

 

 41,394 

 

 

 28,024 

 

 

 12,782 

 

 

 30,079 

 

 

 24,338 

Income tax (benefit) expense(2)

 

 

 (23,013)

 

 

 861 

 

 

 1,054 

 

 

 2 

 

 

 (714)

 

 

 (27,501)

 

 

 3,285 

EBITDA(1)

 

$

 468,681 

 

$

 149,285 

 

$

 113,205 

 

$

 88,431 

 

$

 21,330 

 

$

 40,579 

 

$

 55,851 

 

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

See notes on page 47.

 

45

 


 

 

Net Income and EBITDA by Segment for the Three Months Ended September 30, 2010 and 2009 - continued

 

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

(Amounts in thousands)

For the Three Months Ended September 30, 2009

 

 

  

 

 

 

New York

 

Washington, DC

 

 

 

Merchandise

 

 

 

  

 

 

  

 

Total

 

Office

 

Office

 

Retail

 

Mart

 

Toys

 

Other(3)

Property rentals

 

$

 509,968 

 

$

 189,896 

 

$

 137,139 

 

$

 91,286 

 

$

 52,269 

 

$

 - 

 

$

 39,378 

Straight-line rents:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

Contractual rent increases

 

 

 16,676 

 

 

 10,126 

 

 

 3,573 

 

 

 2,827 

 

 

 135 

 

 

 - 

 

 

 15 

 

Amortization of free rent

 

 

 4,682 

 

 

 (98)

 

 

 2,760 

 

 

 1,963 

 

 

 19 

 

 

 - 

 

 

 38 

Amortization of acquired below-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

 

market leases, net

 

 

 18,728 

 

 

 10,710 

 

 

 1,069 

 

 

 4,826 

 

 

 30 

 

 

 - 

 

 

 2,093 

Total rentals

 

 

 550,054 

 

 

 210,634 

 

 

 144,541 

 

 

 100,902 

 

 

 52,453 

 

 

 - 

 

 

 41,524 

Tenant expense reimbursements

 

 

 89,530 

 

 

 36,360 

 

 

 14,892 

 

 

 32,121 

 

 

 3,661 

 

 

 - 

 

 

 2,496 

Fee and other income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

Tenant cleaning fees

 

 

 11,842 

 

 

 17,989 

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 (6,147)

 

Management and leasing fees

 

 

 2,837 

 

 

 1,269 

 

 

 1,984 

 

 

 557 

 

 

 11 

 

 

 - 

 

 

 (984)

 

Lease termination fees

 

 

 1,608 

 

 

 1,226 

 

 

 234 

 

 

 - 

 

 

 9 

 

 

 - 

 

 

 139 

 

Other

 

 

 15,348 

 

 

 5,854 

 

 

 4,979 

 

 

 648 

 

 

 3,461 

 

 

 - 

 

 

 406 

Total revenues

 

 

 671,219 

 

 

 273,332 

 

 

 166,630 

 

 

 134,228 

 

 

 59,595 

 

 

 - 

 

 

 37,434 

Operating expenses

 

 

 265,952 

 

 

 117,362 

 

 

 57,889 

 

 

 49,304 

 

 

 26,469 

 

 

 - 

 

 

 14,928 

Depreciation and amortization

 

 

 130,503 

 

 

 42,621 

 

 

 35,187 

 

 

 24,091 

 

 

 13,654 

 

 

 - 

 

 

 14,950 

General and administrative

 

 

 51,684 

 

 

 4,895 

 

 

 6,079 

 

 

 6,802 

 

 

 7,198 

 

 

 - 

 

 

 26,710 

Total expenses

 

 

 448,139 

 

 

 164,878 

 

 

 99,155 

 

 

 80,197 

 

 

 47,321 

 

 

 - 

 

 

 56,588 

Operating income (loss)

 

 

 223,080 

 

 

 108,454 

 

 

 67,475 

 

 

 54,031 

 

 

 12,274 

 

 

 - 

 

 

 (19,154)

Income applicable to Toys

 

 

 22,077 

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 22,077 

 

 

 - 

Income (loss) from partially owned

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

 entities

 

 

 2,513 

 

 

 1,646 

 

 

 1,876 

 

 

 767 

 

 

 26 

 

 

 - 

 

 

 (1,802)

Interest and other investment  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

income, net

 

 

 20,486 

 

 

 190 

 

 

 254 

 

 

 10 

 

 

 12 

 

 

 - 

 

 

 20,020 

Interest and debt expense

 

 

 (158,205)

 

 

 (33,644)

 

 

 (32,454)

 

 

 (22,315)

 

 

 (13,088)

 

 

 - 

 

 

 (56,704)

Net gain on early extinguishment of

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

 debt

 

 

 3,407 

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 3,407 

Net gain on disposition of wholly

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

owned and partially owned assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

other than depreciable real estate

 

 

 4,432 

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 4,432 

Income (loss) before income taxes

 

 

 117,790 

 

 

 76,646 

 

 

 37,151 

 

 

 32,493 

 

 

 (776)

 

 

 22,077 

 

 

 (49,801)

Income tax expense

 

 

 (5,267)

 

 

 (585)

 

 

 (44)

 

 

 (39)

 

 

 (847)

 

 

 - 

 

 

 (3,752)

Income (loss) from continuing

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

 operations

 

 

 112,523 

 

 

 76,061 

 

 

 37,107 

 

 

 32,454 

 

 

 (1,623)

 

 

 22,077 

 

 

 (53,553)

Income from discontinued operations

 

 

 43,321 

 

 

 - 

 

 

 41,992 

 

 

 1,329 

 

 

 - 

 

 

 - 

 

 

 - 

Net income (loss)

 

 

 155,844 

 

 

 76,061 

 

 

 79,099 

 

 

 33,783 

 

 

 (1,623)

 

 

 22,077 

 

 

 (53,553)

Net (income) loss attributable to  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

noncontrolling interests, including

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

unit distributions

 

 

 (15,227)

 

 

 (2,817)

 

 

 - 

 

 

 15 

 

 

 - 

 

 

 - 

 

 

 (12,425)

Net income (loss) attributable to

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

 Vornado

 

 

 140,617 

 

 

 73,244 

 

 

 79,099 

 

 

 33,798 

 

 

 (1,623)

 

 

 22,077 

 

 

 (65,978)

Interest and debt expense(2)

 

 

 212,727 

 

 

 31,945 

 

 

 32,980 

 

 

 23,978 

 

 

 13,315 

 

 

 39,136 

 

 

 71,373 

Depreciation and amortization(2)

 

 

 178,436 

 

 

 41,101 

 

 

 37,116 

 

 

 25,029 

 

 

 13,772 

 

 

 34,357 

 

 

 27,061 

Income tax (benefit) expense(2)

 

 

 (30,479)

 

 

 585 

 

 

 47 

 

 

 39 

 

 

 847 

 

 

 (36,122)

 

 

 4,125 

EBITDA(1)

 

$

 501,301 

 

$

 146,875 

 

$

 149,242 

 

$

 82,844 

 

$

 26,311 

 

$

 59,448 

 

$

 36,581 

 

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

See notes on the following page.

 

46

 


 

 

Net Income and EBITDA by Segment for the Three Months Ended September 30, 2010 and 2009 - continued

 

Notes to preceding tabular information:

(1)   EBITDA represents “Earnings Before Interest, Taxes, Depreciation and Amortization.”  We consider EBITDA a supplemental measure for making decisions and assessing the unlevered performance of our segments as it relates to the total return on assets as opposed to the levered return on equity. As properties are bought and sold based on a multiple of EBITDA, we utilize this measure to make investment decisions as well as to compare the performance of our assets to that of our peers. EBITDA should not be considered a substitute for net income. EBITDA may not be comparable to similarly titled measures employed by other companies.

 

(2)   Interest and debt expense, depreciation and amortization and income tax expense in the reconciliation of net income (loss) to EBITDA includes our share of these items from partially owned entities.

 

(3)   The tables below provide information about EBITDA from certain investments that are included in the “other” column of the preceding EBITDA by segment reconciliations.  The totals for each of the columns below agree to the total EBITDA for the “other” column in the preceding EBITDA by segment reconciliations.

 

 

 

 

 

 

  

 

 

 

 

 

  

 

 

 

 

 

 

 

  

For the Three Months

  

 

 

(Amounts in thousands)

Ended September 30,

  

 

 

 

 

 

 

 

  

 

2010 

 

 

2009 

  

 

 

Alexander's

$

 13,288 

 

$

 26,769 

  (2)

 

 

555 California Street

 

 11,797 

 

 

 10,090 

  

 

 

Lexington

 

 8,092 

 

 

 (1,863)

  (3)

 

 

Hotel Pennsylvania

 

 8,080 

 

 

 3,599 

  

 

 

Industrial warehouses

 

 460 

 

 

 1,219 

  

 

 

Other investments

 

 3,225 

 

 

 7,071 

  

 

 

 

 

 

 

 

  

 

 44,942 

 

 

 46,885 

  

 

 

Corporate general and administrative expenses (1)

 

 (20,712)

 

 

 (18,619)

  

 

 

Investment income and other, net (1)

 

 15,808 

 

 

 19,877 

  

 

 

Net income attributable to noncontrolling interests, including unit distributions

 

 (11,584)

 

 

 (14,969)

  

 

 

Income from the mark-to-market of derivative positions in marketable equity securities

 

 32,249 

 

 

 - 

  

 

 

Real Estate Fund organization costs

 

 (3,207)

 

 

 - 

  

 

 

Costs of acquisitions not consummated

 

 (921)

 

 

 - 

  

 

 

Net (loss) gain on early extinguishment of debt

 

 (724)

 

 

 3,407 

  

 

 

 

 

 

 

 

  

$

 55,851 

 

$

 36,581 

  

 

 

 

 

 

 

 

  

 

 

 

 

 

  

 

 

 

 

 

 

 

  

 

 

 

 

 

  

 

 

(1)

 

The amounts in these captions (for this table only) exclude the mark-to-market of our deferred compensation plan assets and offsetting

 

 

 

liability.

 

 

 

 

 

 

  

 

 

 

 

 

  

 

 

(2)

 

Includes $13,668 for our share of an income tax benefit.

 

 

 

 

 

  

 

 

 

 

 

 

 

  

 

 

 

 

 

  

 

 

(3)

 

Includes $14,541 for our share of non-cash impairment losses recognized by Lexington.

 

47

 


 

 

Results of Operations – Three Months Ended September 30, 2010 Compared to September 30, 2009

 

Revenues

Our revenues, which consist of property rentals, tenant expense reimbursements, hotel revenues, trade shows revenues, amortization of acquired below-market leases, net of above-market leases and fee income, were $707,032,000 for the quarter ended September 30, 2010, compared to $671,219,000 in the prior year’s quarter, an increase of $35,813,000. Below are the details of the increase (decrease) by segment:

 

(Amounts in thousands)

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

  

 

 

 

  

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

  

 

 

 

  

 

New York

  

 

Washington, DC

  

 

 

  

 

Merchandise

  

 

 

 

  

Increase (decrease) due to:

 

Total

  

 

Office

  

 

Office

  

 

Retail

  

 

Mart

  

 

Other

  

Property rentals:

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

Acquisitions and other

 

$

 (1,296)

  

 

$

 - 

  

 

$

 (1,124)

  

 

$

 (172)

  

 

$

 - 

  

 

$

 - 

  

 

Development/redevelopment

 

 

 3,612 

  

 

 

 - 

  

 

 

 3,104 

  

 

 

 508 

  

 

 

 - 

  

 

 

 - 

  

 

Amortization of acquired below-market  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

leases, net

 

 

 (1,793)

  

 

 

 (1,799)

  

 

 

 (481)

  

 

 

 1,204 

  

 

 

 (15)

  

 

 

 (702)

  

 

Hotel Pennsylvania

 

 

 6,651 

  

 

 

 - 

  

 

 

 - 

  

 

 

 - 

  

 

 

 - 

  

 

 

 6,651 

  (1)

 

Trade shows

 

 

 320 

  

 

 

 - 

  

 

 

 - 

  

 

 

 - 

  

 

 

 320 

  

 

 

 - 

  

 

Leasing activity (see page 43)

 

 

 19,348 

  

 

 

 2,748 

  

 

 

 4,603 

  

 

 

 11,982 

  

 

 

 (108)

  

 

 

 123 

  

Increase in property rentals

 

 

 26,842 

  

 

 

 949 

  

 

 

 6,102 

  

 

 

 13,522 

  

 

 

 197 

  

 

 

 6,072 

  

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

Tenant expense reimbursements:

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

Acquisitions/development

 

 

 2,691 

  

 

 

 - 

  

 

 

 (32)

  

 

 

 2,723 

  

 

 

 - 

  

 

 

 - 

  

 

Operations

 

 

 5,614 

  

 

 

 4,083 

  

 

 

 1,110 

  

 

 

 1,534 

  

 

 

 30 

  

 

 

 (1,143)

  

Increase (decrease) in tenant expense  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

reimbursements

 

 

 8,305 

  

 

 

 4,083 

  

 

 

 1,078 

  

 

 

 4,257 

  

 

 

 30 

  

 

 

 (1,143)

  

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

Fee and other income:

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

Lease cancellation fee income

 

 

 693 

  

 

 

 (6)

  

 

 

 494 

  

 

 

 346 

  

 

 

 (2)

  

 

 

 (139)

  

 

Management and leasing fees

 

 

 718 

  

 

 

 159 

  

 

 

 788 

  

 

 

 (343)

  

 

 

 (13)

  

 

 

 127 

  

 

BMS cleaning fees

 

 

 1,771 

  

 

 

 3,732 

  

 

 

 - 

  

 

 

 - 

  

 

 

 - 

  

 

 

 (1,961)

  (2)

 

Other

 

 

 (2,516)

  

 

 

 (349)

  

 

 

 588 

  

 

 

 378 

  

 

 

 (2,649)

  (3)

 

 

 (484)

  

Increase (decrease) in fee and other income

 

 

 666 

  

 

 

 3,536 

  

 

 

 1,870 

  

 

 

 381 

  

 

 

 (2,664)

  

 

 

 (2,457)

  

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

Total increase (decrease) in revenues

 

$

 35,813 

  

 

$

 8,568 

  

 

$

 9,050 

  

 

$

 18,160 

  

 

$

 (2,437)

  

 

$

 2,472 

  

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

(1)

 

Primarily due to higher REVPAR.

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

(2)

 

Primarily from the elimination of inter-company fees from operating segments upon consolidation. See note (2) on page 49.

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

(3)

 

Primarily due to $1,650 of income in the prior year in connection with a tenant surrendering its space.

 

48

 


 

 

Results of Operations – Three Months Ended September 30, 2010 Compared to September 30, 2009 - continued

 

Expenses

Our expenses, which consist primarily of operating, depreciation and amortization and general and administrative expenses, were $478,781,000 for the quarter ended September 30, 2010, compared to $448,139,000 in the prior year’s quarter, an increase of $30,642,000. Below are the details of the increase (decrease) by segment:

 

(Amounts in thousands)

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

  

 

 

 

  

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

  

 

 

 

  

 

New York

  

 

Washington, DC

  

 

 

  

 

Merchandise

  

 

 

 

  

Increase (decrease) due to:

 

Total

  

 

Office

  

 

Office

  

 

Retail

  

 

Mart

  

 

Other

  

Operating:

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

Acquisitions and other  

 

$

 (2,063)

  

 

$

 (2,672)

  

 

$

 (46)

  

 

$

 655 

  

 

$

 - 

  

 

$

 - 

  

 

Development/redevelopment

 

 

 427 

  

 

 

 - 

  

 

 

 415 

  

 

 

 12 

  

 

 

 - 

  

 

 

 - 

  

 

Hotel activity

 

 

 2,964 

  

 

 

 - 

  

 

 

 - 

  

 

 

 - 

  

 

 

 - 

  

 

 

 2,964 

  

 

Trade shows activity

 

 

 (670)

  

 

 

 - 

  

 

 

 - 

  

 

 

 - 

  

 

 

 (670)

  

 

 

 - 

  

 

Operations

 

 

 14,938 

  

 

 

 9,633 

  (1)

 

 

 2,132 

  

 

 

 4,134 

  

 

 

 3,033 

  

 

 

 (3,994)

  (2)

 

Increase (decrease) in operating expenses

 

 

 15,596 

  

 

 

 6,961 

  

 

 

 2,501 

  

 

 

 4,801 

  

 

 

 2,363 

  

 

 

 (1,030)

  

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

Depreciation and amortization:

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

Acquisitions/development  

 

 

 (776)

  

 

 

 - 

  

 

 

 (943)

  

 

 

 167 

  

 

 

 - 

  

 

 

 - 

  

 

Operations (due to additions to buildings  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

and improvements)

 

 

 5,028 

  

 

 

 1,614 

  

 

 

 3,022 

  

 

 

 2,803 

  

 

 

 (983)

  

 

 

 (1,428)

  

 

Increase (decrease) in depreciation and  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

amortization

 

 

 4,252 

  

 

 

 1,614 

  

 

 

 2,079 

  

 

 

 2,970 

  

 

 

 (983)

  

 

 

 (1,428)

  

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

General and administrative:

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

Acquisitions and other  

 

 

 855 

  

 

 

 - 

  

 

 

 - 

  

 

 

 855 

  

 

 

 - 

  

 

 

 - 

  

 

Mark-to-market of deferred compensation  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

plan liability  (3)

 

 

 (1,780)

  

 

 

 - 

  

 

 

 - 

  

 

 

 - 

  

 

 

 - 

  

 

 

 (1,780)

  

 

Real Estate Fund organization costs

 

 

 3,207 

  

 

 

 - 

  

 

 

 - 

  

 

 

 - 

  

 

 

 - 

  

 

 

 3,207 

  

 

Operations  

 

 

 2,591 

  

 

 

 (381)

  

 

 

 (94)

  

 

 

 1,189 

  

 

 

 155 

  

 

 

 1,722 

  (4)

 

Increase (decrease) in general and

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

administrative

 

 

 4,873 

  

 

 

 (381)

  

 

 

 (94)

  

 

 

 2,044 

  

 

 

 155 

  

 

 

 3,149 

  

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

Litigation loss accrual, impairment losses and  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

acquisition costs

 

 

 5,921 

  

 

 

 - 

  

 

 

 - 

  

 

 

 5,000 

  

 

 

 - 

  

 

 

 921 

  

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

Total increase in expenses

 

$

 30,642 

  

 

$

 8,194 

  

 

$

 4,486 

  

 

$

 14,815 

  

 

$

 1,535 

  

 

$

 1,612 

  

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

(1)

 

Results from increases in (i) reimbursable operating expenses of $5,621, (ii) BMS operating expenses of $2,863, and (iii) non-reimbursable operating expenses of $1,149.

(2)

 

Primarily from the elimination of inter-company fees from operating segments upon consolidation.  See note (2) on page 48.

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

(3)

 

This decrease in expense is entirely offset by a corresponding decrease in income from the mark-to-market of the deferred compensation plan assets, a component of “interest and other investment income (loss), net” on our consolidated statements of income.

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

(4)

 

Primarily from higher stock-based compensation expense as a result of awards granted in March 2010.

 

49

 


 

 

Results of Operations – Three Months Ended September 30, 2010 Compared to September 30, 2009 - continued

 

 

(Loss) Income Applicable to Toys

 

During the quarter ended September 30, 2010, we recognized a net loss of $2,557,000 from our investment in Toys, comprised of $5,073,000 for our 32.7% share of Toys’ net loss ($32,574,000 before our share of Toys’ income tax benefit) and $2,516,000 of interest and other income.

 

During the quarter ended September 30, 2009, we recognized net income of $22,077,000 from our investment in Toys, comprised of $20,137,000 for our 32.7% share of Toys’ net income (a net loss of $15,985,000 before our share of Toys’ income tax benefit), and $1,940,000 of interest and other income.

 

 

(Loss) Income from Partially Owned Entities

Summarized below are the components of loss from partially owned entities for the three months ended September 30, 2010 and 2009.

 

 

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

 

 

  

 

For the Three Months Ended

 

 

 

 

 

  

 

September 30,

 

 

(Amounts in thousands)

 

2010 

 

2009 

 

 

Equity in Net (Loss) Income:

 

 

 

  

 

 

 

  

 

 

Alexander's - 32.4% share of equity in net income

 

$

 7,557 

  

 

$

 21,297 

  (1)

 

 

  

 

 

 

  

 

 

 

  

 

 

Lexington - 13.7% share in 2010 and 16.1% share in 2009 of equity in net loss

 

 

 (2,301)

  

 

 

 (15,054)

  (2)

 

 

  

 

 

 

  

 

 

 

  

 

 

India real estate ventures - 4% to 36.5% range in our share of equity in net loss

 

 

 (195)

  

 

 

 (465)

  

 

 

  

 

 

 

  

 

 

 

  

 

 

Other, net (3)

 

 

 (7,057)

  

 

 

 (3,265)

  

 

 

 

 

 

  

 

$

 (1,996)

  

 

$

 2,513 

  

 

 

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 (1)

Includes $13,668 for our share of an income tax benefit.

 

 

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 (2)

Includes $14,541 for our share of non-cash impairment losses recognized by Lexington.

 

 

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 (3)

Represents equity in net income or loss of partially owned office buildings in New York and Washington, DC, the Monmouth Mall, Verde Realty Operating Partnership, 85 10th Avenue Associates and others.

 

 

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

Loss from Real Estate Fund

In the three months ended September 30, 2010, we recognized a $1,410,000 loss from our Real Estate Fund, primarily from $1,500,000 of organization costs.  Of this loss, $1,091,000 is allocated to the noncontrolling interest and is included as a reduction of “net income attributable to noncontrolling interests, including unit distributions,” on our consolidated statement of income.

 

50

 


 

 

Results of Operations – Three Months Ended September 30, 2010 Compared to September 30, 2009 - continued

 

Interest and Other Investment Income, net

Interest and other investment income, net (comprised of the mark-to-market of derivative positions in marketable equity securities, interest income on mezzanine loans receivable, other interest income and dividend income) was $47,352,000 for the three months ended September 30, 2010, compared to $20,486,000 in the prior year’s quarter, an increase of $26,866,000. This increase resulted from:

 

 

 

 

 

 

 

 

  

 

 

(Amounts in thousands)

 

 

 

  

 

 

 

 

 

 

  

 

 

Mark-to-market of derivative positions in marketable equity securities in 2010

 

 

$

 32,249 

  

 

 

Lower average mezzanine loan investments ($111,000 in this quarter compared to $268,000 in the

 

 

 

  

 

 

 

prior year's quarter)

 

 

 (3,901)

  

 

 

Decrease in the value of investments in our deferred compensation plan (offset by a corresponding

 

 

 

  

 

 

 

decrease in the liability for plan assets in general and administrative expenses)

 

 

 (1,780)

  

 

 

Other, net

 

 

 298 

  

 

 

 

 

 

 

$

 26,866 

  

 

 

Interest and Debt Expense

Interest and debt expense was $152,358,000 for the three months ended September 30, 2010, compared to $158,205,000 in the prior year’s quarter, a decrease of $5,847,000.  This decrease was primarily due to savings of (i) $21,825,000 from the acquisition and retirement of an aggregate of $2.1 billion of our convertible senior debentures and senior unsecured notes in 2009 and (ii) $8,027,000 from the repayment of $400,000,000 of cross-collateralized debt secured by our portfolio of 42 strip shopping centers, partially offset by (iii) $14,309,000 from the issuance of $460,000,000 of senior unsecured notes in September 2009 and $500,000,000 of senior unsecured notes in March 2010, (iv) $5,887,000 of default interest and fees accrued on three loans in special servicing and (v) $3,175,000 from the issuance of $660,000,000 of cross-collateralized debt secured by 40 of our strip shopping centers.

 

 

Net (Loss) Gain on Early Extinguishment of Debt

In the three months ended September 30, 2010, we recognized a $724,000 net loss on the early extinguishment of debt, compared to a $3,407,000 net gain in the prior year’s quarter.  The current year’s loss and the prior year’s gain resulted from the acquisition and retirement of our convertible senior debentures and senior unsecured notes.

 

 

Net Gain on Disposition of Wholly Owned and Partially Owned Assets Other Than Depreciable Real Estate

Net gain on disposition of wholly owned and partially owned assets other than depreciable real estate was $5,072,000 in the three months ended September 30, 2010, compared to $4,432,000 in the prior year’s quarter and was primarily comprised of net gains on sale of marketable securities.

 

 

Income Tax Expense

Income tax expense was $5,498,000 in the three months ended September 30, 2010, compared to $5,267,000 in the prior year’s quarter.

 

51

 


 

 

Results of Operations – Three Months Ended September 30, 2010 Compared to September 30, 2009 - continued

 

Discontinued Operations

The table below sets forth the combined results of operations of assets related to discontinued operations for the three months ended September 30, 2010 and 2009 and include the operating results of 1999 K Street, which was sold on September 1, 2009 and 15 other retail properties, which were sold during 2009.

 

 

 

 

  

 

 

  

 

 

  

 

 

 

 

  

 

For the Three Months Ended

 

 

 

 

  

 

September 30,

 

 

(Amounts in thousands)

 

2010 

 

2009 

 

 

 

 

  

 

 

  

 

 

  

 

 

Total revenues

 

$

 - 

 

$

 1,356 

 

 

Total expenses

 

 

 - 

 

 

 690 

 

 

Net income

  

 

 

 - 

 

 

 666 

 

 

Net gain on sale of 1999 K Street

  

 

 

 - 

 

 

 41,211 

 

 

Net gain on sale of other real estate

  

 

 

 - 

 

 

 1,444 

 

 

Income from discontinued operations

 

$

 - 

 

$

 43,321 

 

 

 

 

  

 

 

  

 

 

  

 

 

 

 

  

 

 

.

 

 

  

 

 

 

 

  

 

 

  

 

 

  

 

 

Net Income Attributable to Noncontrolling Interests, Including Unit Distributions

 

Net income attributable to noncontrolling interests was $11,880,000, in the three months ended September 30, 2010, compared to $15,227,000 in the prior year’s quarter.  Net income attributable to noncontrolling interests for the three months ended September 30, 2010 and 2009 is comprised of (i) allocations of income to redeemable noncontrolling interests of $7,119,000 and $10,151,000, respectively, (ii) net income attributable to noncontrolling interests in consolidated subsidiaries of $296,000 and $258,000, respectively, and (iii) preferred unit distributions of the Operating Partnership of $4,465,000 and $4,818,000, respectively. 

 

 

Preferred Share Dividends

Preferred share dividends were $13,442,000 for the three months ended September 30, 2010, compared to $14,269,000 for the prior year’s quarter.

 

 

Discount on Preferred Share Redemptions

Discount on preferred share redemptions of $4,382,000 in the three months ended September 30, 2010 resulted from the redemption of 1,600,000 Series D-10 preferred shares.

 

52

 


 

 

Results of Operations – Three Months Ended September 30, 2010 Compared to September 30, 2009 - continued

 

Same Store EBITDA

Same store EBITDA represents EBITDA from property level operations which are owned by us in both the current and prior year reporting periods.  Same store EBITDA excludes segment-level overhead expenses, which are expenses that we do not consider to be property-level expenses, as well as other non-operating items.  We present same store EBITDA on both a GAAP basis and a cash basis, which excludes income from the straight-lining of rents, amortization of below-market leases, net of above-market leases and other non-cash adjustments. We present these non-GAAP measures to (i) facilitate meaningful comparisons of the operational performance of our properties and segments, (ii) make decisions on whether to buy, sell or refinance properties, and (iii) compare the performance of our properties and segments to those of our peers.  Same store EBITDA should not be considered as an alternative to net income or cash flow from operations and may not be comparable to similarly titled measures employed by other companies. 

 

Below are the same store EBITDA results on a GAAP and cash basis for each of our segments for the three months ended September 30, 2010, compared to the three months ended September 30, 2009.

 

 

 

 

New York

 

Washington, DC

 

 

 

 

Merchandise

(Amounts in thousands)

Office

 

Office

 

Retail

 

 Mart

EBITDA for the three months ended  September 30, 2010

$

 149,285 

 

$

 113,205 

 

$

 88,431 

 

$

 21,330 

 

Add-back: non-property level overhead

 

 

 

 

 

 

 

 

 

 

 

 

 

expenses included above

 

 4,514 

 

 

 5,985 

 

 

 8,846 

 

 

 7,353 

 

Less: EBITDA from acquisitions, dispositions

 

 

 

 

 

 

 

 

 

 

 

 

 

and other non-operating income or expenses

 

 585 

 

 

 (1,634)

 

 

 (735)

 

 

 251 

GAAP basis same store EBITDA for the three months

 

 

 

 

 

 

 

 

 

 

 

 

 

ended  September 30, 2010

 

 154,384 

 

 

 117,556 

 

 

 96,542 

 

 

 28,934 

 

Less: Adjustments for straight-line rents,

 

 

 

 

 

 

 

 

 

 

 

 

 

amortization of below-market leases, net and other

 

 

 

 

 

 

 

 

 

 

 

 

 

non-cash adjustments

 

 (14,845)

 

 

 (110)

 

 

 (11,136)

 

 

 44 

Cash basis same store EBITDA for the three months

 

 

 

 

 

 

 

 

 

 

 

 

 

ended  September 30, 2010

$

 139,539 

 

$

 117,446 

 

$

 85,406 

 

$

 28,978 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

EBITDA for the three months ended  September 30, 2009

$

 146,875 

 

$

 149,242 

 

$

 82,844 

 

$

 26,311 

 

Add-back: non-property level overhead

 

 

 

 

 

 

 

 

 

 

 

 

 

expenses included above

 

 4,895 

 

 

 6,079 

 

 

 6,802 

 

 

 7,198 

 

Less: EBITDA from acquisitions, dispositions

 

 

 

 

 

 

 

 

 

 

 

 

 

and other non-operating income or expenses

 

 (2,284)

 

 

 (42,998)

 

 

 (3,686)

 

 

 (2,924)

GAAP basis same store EBITDA for the three months

 

 

 

 

 

 

 

 

 

 

 

 

 

ended  September 30, 2009

 

 149,486 

 

 

 112,323 

 

 

 85,960 

 

 

 30,585 

 

Less: Adjustments for straight-line rents,

 

 

 

 

 

 

 

 

 

 

 

 

 

amortization of below-market leases, net and other

 

 

 

 

 

 

 

 

 

 

 

 

 

non-cash adjustments 

 

 (16,334)

 

 

 (5,088)

 

 

 (8,193)

 

 

 (184)

Cash basis same store EBITDA for the three months

 

 

 

 

 

 

 

 

 

 

 

 

 

ended  September 30, 2009

$

 133,152 

 

$

 107,235 

 

$

 77,767 

 

$

 30,401 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Increase (decrease) in GAAP basis same store EBITDA for

 

 

 

 

 

 

 

 

 

 

 

 

 

the three months ended  September 30, 2010 over the

 

 

 

 

 

 

 

 

 

 

 

 

 

three months ended September 30, 2009

$

 4,898 

 

$

 5,233 

 

$

 10,582 

 

$

 (1,651)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Increase (decrease) in Cash basis same store EBITDA for

 

 

 

 

 

 

 

 

 

 

 

 

 

the three months ended  September 30, 2010 over the

 

 

 

 

 

 

 

 

 

 

 

 

 

three months ended September 30, 2009

$

 6,387 

 

$

 10,211 

 

$

 7,639 

 

$

 (1,423)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

% increase (decrease) in GAAP basis same store EBITDA

 

 3.3%

 

 

 4.7%

 

 

 12.3%

 

 

 (5.4%)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

% increase (decrease) in Cash basis same store EBITDA

 

 4.8%

 

 

 9.5%

 

 

 9.8%

 

 

 (4.7%)

 

53

 


 

Net Income and EBITDA by Segment for the Nine Months Ended September 30, 2010 and 2009

Below is a summary of net income and a reconciliation of net income to EBITDA(1) by segment for the nine months ended September 30, 2010 and 2009.

 

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

(Amounts in thousands)

For the Nine Months Ended September 30, 2010

 

 

  

 

 

 

New York

 

Washington, DC

 

 

 

Merchandise

 

 

 

  

 

 

  

 

Total

 

Office

 

Office

 

Retail

 

Mart

 

Toys

 

Other(3)

Property rentals

 

$

 1,608,897 

 

$

 582,957 

 

$

 435,612 

 

$

 293,106 

 

$

 175,070 

 

$

 - 

 

$

 122,152 

Straight-line rents:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

Contractual rent increases

 

 

 39,089 

 

 

 19,278 

 

 

 5,448 

 

 

 11,997 

 

 

 1,521 

 

 

 - 

 

 

 845 

 

Amortization of free rent

 

 

 16,492 

 

 

 3,338 

 

 

 527 

 

 

 10,237 

 

 

 705 

 

 

 - 

 

 

 1,685 

Amortization of acquired below-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

 

market leases, net

 

 

 49,144 

 

 

 27,250 

 

 

 1,935 

 

 

 15,528 

 

 

 (91)

 

 

 - 

 

 

 4,522 

Total rentals

 

 

 1,713,622 

 

 

 632,823 

 

 

 443,522 

 

 

 330,868 

 

 

 177,205 

 

 

 - 

 

 

 129,204 

Tenant expense reimbursements

 

 

 278,836 

 

 

 106,126 

 

 

 45,096 

 

 

 110,094 

 

 

 11,715 

 

 

 - 

 

 

 5,805 

Fee and other income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

Tenant cleaning fees

 

 

 40,733 

 

 

 62,778 

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 (22,045)

 

Management and leasing fees

 

 

 16,075 

 

 

 4,278 

 

 

 13,252 

 

 

 759 

 

 

 31 

 

 

 - 

 

 

 (2,245)

 

Lease termination fees

 

 

 11,577 

 

 

 4,245 

 

 

 1,256 

 

 

 4,182 

 

 

 1,894 

 

 

 - 

 

 

 - 

 

Other

 

 

 38,625 

 

 

 14,428 

 

 

 16,489 

 

 

 2,829 

 

 

 3,596 

 

 

 - 

 

 

 1,283 

Total revenues

 

 

 2,099,468 

 

 

 824,678 

 

 

 519,615 

 

 

 448,732 

 

 

 194,441 

 

 

 - 

 

 

 112,002 

Operating expenses

 

 

 828,528 

 

 

 350,427 

 

 

 169,105 

 

 

 164,283 

 

 

 99,863 

 

 

 - 

 

 

 44,850 

Depreciation and amortization

 

 

 405,844 

 

 

 132,213 

 

 

 110,482 

 

 

 82,756 

 

 

 38,700 

 

 

 - 

 

 

 41,693 

General and administrative

 

 

 154,869 

 

 

 13,860 

 

 

 18,082 

 

 

 22,678 

 

 

 21,764 

 

 

 - 

 

 

 78,485 

Litigation loss accrual, impairment  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

losses and acquisition costs

 

 

 17,907 

 

 

 - 

 

 

 10,056 

 

 

 5,000 

 

 

 - 

 

 

 - 

 

 

 2,851 

Total expenses

 

 

 1,407,148 

 

 

 496,500 

 

 

 307,725 

 

 

 274,717 

 

 

 160,327 

 

 

 - 

 

 

 167,879 

Operating income (loss)

 

 

 692,320 

 

 

 328,178 

 

 

 211,890 

 

 

 174,015 

 

 

 34,114 

 

 

 - 

 

 

 (55,877)

Income applicable to Toys

 

 

 102,309 

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 102,309 

 

 

 - 

Income (loss) from partially owned

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

 entities

 

 

 13,800 

 

 

 4,345 

 

 

 (1,099)

 

 

 3,353 

 

 

 239 

 

 

 - 

 

 

 6,962 

(Loss) from Real Estate Fund

 

 

 (1,410)

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 (1,410)

Interest and other investment  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

income, net

 

 

 65,936 

 

 

 466 

 

 

 131 

 

 

 400 

 

 

 37 

 

 

 - 

 

 

 64,902 

Interest and debt expense

 

 

 (441,980)

 

 

 (99,026)

 

 

 (102,247)

 

 

 (63,702)

 

 

 (44,699)

 

 

 - 

 

 

 (132,306)

Net (loss) on early extinguishment of

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

 debt

 

 

 (1,796)

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 (1,796)

Net gain on disposition of wholly  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

owned and partially owned assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

other than depreciable real estate

 

 

 12,759 

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 765 

 

 

 - 

 

 

 11,994 

Income (loss) before income taxes

 

 

 441,938 

 

 

 233,963 

 

 

 108,675 

 

 

 114,066 

 

 

 (9,544)

 

 

 102,309 

 

 

 (107,531)

Income tax (expense) benefit

 

 

 (16,051)

 

 

 (1,670)

 

 

 (1,150)

 

 

 (37)

 

 

 118 

 

 

 - 

 

 

 (13,312)

Net income (loss)

 

 

 425,887 

 

 

 232,293 

 

 

 107,525 

 

 

 114,029 

 

 

 (9,426)

 

 

 102,309 

 

 

 (120,843)

Net (income) loss attributable to  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

noncontrolling interests, including

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

unit distributions

 

 

 (34,977)

 

 

 (7,290)

 

 

 - 

 

 

 895 

 

 

 - 

 

 

 - 

 

 

 (28,582)

Net income (loss) attributable to

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

 Vornado

 

 

 390,910 

 

 

 225,003 

 

 

 107,525 

 

 

 114,924 

 

 

 (9,426)

 

 

 102,309 

 

 

 (149,425)

Interest and debt expense(2)

 

 

 611,993 

 

 

 94,404 

 

 

 104,355 

 

 

 68,275 

 

 

 45,370 

 

 

 123,791 

 

 

 175,798 

Depreciation and amortization(2)

 

 

 549,400 

 

 

 127,341 

 

 

 120,929 

 

 

 85,335 

 

 

 39,049 

 

 

 99,850 

 

 

 76,896 

Income tax expense (benefit)(2)

 

 

 13,553 

 

 

 1,670 

 

 

 1,161 

 

 

 37 

 

 

 (59)

 

 

 (1,914)

 

 

 12,658 

EBITDA(1)

 

$

 1,565,856 

 

$

 448,418 

 

$

 333,970 

 

$

 268,571 

 

$

 74,934 

 

$

 324,036 

 

$

 115,927 

 

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

See notes on page 56.

 

54

 


 

 

Net Income and EBITDA by Segment for the Nine Months Ended September 30, 2010 and 2009 - continued

 

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

(Amounts in thousands)

For the Nine Months Ended September 30, 2009

 

 

  

 

 

 

New York

 

Washington, DC

 

 

 

Merchandise

 

 

 

  

 

 

  

 

Total

 

Office

 

Office

 

Retail

 

Mart

 

Toys

 

Other(3)

Property rentals

 

$

 1,529,747 

 

$

 568,884 

 

$

 399,937 

 

$

 268,519 

 

$

 176,224 

 

$

 - 

 

$

 116,183 

Straight-line rents:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

Contractual rent increases

 

 

 43,469 

 

 

 24,315 

 

 

 9,348 

 

 

 8,442 

 

 

 1,406 

 

 

 - 

 

 

 (42)

 

Amortization of free rent

 

 

 24,871 

 

 

 2,209 

 

 

 9,829 

 

 

 12,380 

 

 

 312 

 

 

 - 

 

 

 141 

Amortization of acquired below-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

 

market leases, net

 

 

 56,270 

 

 

 30,518 

 

 

 3,117 

 

 

 18,362 

 

 

 71 

 

 

 - 

 

 

 4,202 

Total rentals

 

 

 1,654,357 

 

 

 625,926 

 

 

 422,231 

 

 

 307,703 

 

 

 178,013 

 

 

 - 

 

 

 120,484 

Tenant expense reimbursements

 

 

 270,934 

 

 

 103,609 

 

 

 47,936 

 

 

 99,337 

 

 

 13,492 

 

 

 - 

 

 

 6,560 

Fee and other income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

Tenant cleaning fees

 

 

 37,034 

 

 

 52,579 

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 (15,545)

 

Management and leasing fees

 

 

 8,255 

 

 

 3,363 

 

 

 5,936 

 

 

 1,248 

 

 

 25 

 

 

 - 

 

 

 (2,317)

 

Lease termination fees

 

 

 4,356 

 

 

 1,524 

 

 

 1,916 

 

 

 100 

 

 

 677 

 

 

 - 

 

 

 139 

 

Other

 

 

 48,639 

 

 

 16,261 

 

 

 15,129 

 

 

 2,296 

 

 

 6,324 

 

 

 - 

 

 

 8,629 

Total revenues

 

 

 2,023,575 

 

 

 803,262 

 

 

 493,148 

 

 

 410,684 

 

 

 198,531 

 

 

 - 

 

 

 117,950 

Operating expenses

 

 

 814,561 

 

 

 340,552 

 

 

 169,379 

 

 

 155,503 

 

 

 100,134 

 

 

 - 

 

 

 48,993 

Depreciation and amortization

 

 

 398,845 

 

 

 129,884 

 

 

 105,096 

 

 

 75,881 

 

 

 40,800 

 

 

 - 

 

 

 47,184 

General and administrative

 

 

 180,381 

 

 

 18,588 

 

 

 20,548 

 

 

 24,946 

 

 

 25,092 

 

 

 - 

 

 

 91,207 

Total expenses

 

 

 1,393,787 

 

 

 489,024 

 

 

 295,023 

 

 

 256,330 

 

 

 166,026 

 

 

 - 

 

 

 187,384 

Operating income (loss)

 

 

 629,788 

 

 

 314,238 

 

 

 198,125 

 

 

 154,354 

 

 

 32,505 

 

 

 - 

 

 

 (69,434)

Income applicable to Toys

 

 

 118,897 

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 118,897 

 

 

 - 

(Loss) income from partially owned

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

 entities

 

 

 (3,080)

 

 

 4,485 

 

 

 5,504 

 

 

 3,164 

 

 

 186 

 

 

 - 

 

 

 (16,419)

Interest and other investment (loss)  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

income, net

 

 

 (63,608)

 

 

 712 

 

 

 573 

 

 

 63 

 

 

 83 

 

 

 - 

 

 

 (65,039)

Interest and debt expense

 

 

 (475,028)

 

 

 (100,118)

 

 

 (94,408)

 

 

 (67,093)

 

 

 (38,888)

 

 

 - 

 

 

 (174,521)

Net gain on early extinguishment of

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

 debt

 

 

 26,996 

 

 

 - 

 

 

 - 

 

 

 769 

 

 

 - 

 

 

 - 

 

 

 26,227 

Net gain on disposition of wholly

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

owned and partially owned assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

other than depreciable real estate

 

 

 4,432 

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 4,432 

Income (loss) before income taxes

 

 

 238,397 

 

 

 219,317 

 

 

 109,794 

 

 

 91,257 

 

 

 (6,114)

 

 

 118,897 

 

 

 (294,754)

Income tax expense

 

 

 (15,773)

 

 

 (845)

 

 

 (1,232)

 

 

 (316)

 

 

 (1,755)

 

 

 - 

 

 

 (11,625)

Income (loss) from continuing

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

 operations

 

 

 222,624 

 

 

 218,472 

 

 

 108,562 

 

 

 90,941 

 

 

 (7,869)

 

 

 118,897 

 

 

 (306,379)

Income from discontinued operations

 

 

 49,276 

 

 

 - 

 

 

 46,004 

 

 

 3,272 

 

 

 - 

 

 

 - 

 

 

 - 

Net income (loss)

 

 

 271,900 

 

 

 218,472 

 

 

 154,566 

 

 

 94,213 

 

 

 (7,869)

 

 

 118,897 

 

 

 (306,379)

Net (income) loss attributable to  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

noncontrolling interests, including

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

unit distributions

 

 

 (28,808)

 

 

 (6,438)

 

 

 - 

 

 

 630 

 

 

 - 

 

 

 - 

 

 

 (23,000)

Net income (loss) attributable to

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

 Vornado

 

 

 243,092 

 

 

 212,034 

 

 

 154,566 

 

 

 94,843 

 

 

 (7,869)

 

 

 118,897 

 

 

 (329,379)

Interest and debt expense(2)

 

 

 612,416 

 

 

 95,058 

 

 

 96,818 

 

 

 71,496 

 

 

 39,563 

 

 

 89,897 

 

 

 219,584 

Depreciation and amortization(2)

 

 

 539,554 

 

 

 125,831 

 

 

 110,263 

 

 

 78,724 

 

 

 41,203 

 

 

 101,368 

 

 

 82,165 

Income tax expense(2)

 

 

 23,804 

 

 

 845 

 

 

 1,242 

 

 

 316 

 

 

 1,820 

 

 

 7,335 

 

 

 12,246 

EBITDA(1)

 

$

 1,418,866 

 

$

 433,768 

 

$

 362,889 

 

$

 245,379 

 

$

 74,717 

 

$

 317,497 

 

$

 (15,384)

 

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

See notes on the following page.

 

55

 


 

 

Net Income and EBITDA by Segment for the Nine Months Ended September 30, 2010 and 2009 - continued

 

Notes to preceding tabular information:

(1)   EBITDA represents “Earnings Before Interest, Taxes, Depreciation and Amortization.”  We consider EBITDA a supplemental measure for making decisions and assessing the unlevered performance of our segments as it relates to the total return on assets as opposed to the levered return on equity. As properties are bought and sold based on a multiple of EBITDA, we utilize this measure to make investment decisions as well as to compare the performance of our assets to that of our peers. EBITDA should not be considered a substitute for net income. EBITDA may not be comparable to similarly titled measures employed by other companies.

 

(2)   Interest and debt expense, depreciation and amortization and income tax (benefit) expense in the reconciliation of our net income (loss) to EBITDA includes our share of these items from partially owned entities.

 

(3)   The tables below provide information about EBITDA from certain investments that are included in the “other” column of the preceding EBITDA by segment reconciliations.  The totals for each of the columns below agree to the total EBITDA for the “other” column in the preceding EBITDA by segment reconciliations.

 

 

 

 

 

 

  

 

 

  

 

 

 

  

 

 

 

 

 

 

 

  

For the Nine Months

  

 

 

(Amounts in thousands)

Ended September 30,

  

 

 

 

 

 

 

 

  

 

2010 

  

 

 

2009 

  

 

 

Alexander's

$

 41,947 

  

 

$

 65,229 

  (2)

 

 

Lexington

 

 37,375 

  (3)

 

 

 15,129 

  (4)

 

 

555 California Street

 

 34,421 

  

 

 

 31,885 

  

 

 

Hotel Pennsylvania

 

 14,249 

  

 

 

 7,823 

  

 

 

Industrial warehouses

 

 2,067 

  

 

 

 3,902 

  

 

 

Other investments

 

 23,382 

  

 

 

 1,904 

  (5)

 

 

 

 

 

 

 

  

 

 153,441 

  

 

 

 125,872 

  

 

 

Corporate general and administrative expenses (1)

 

 (60,668)

  

 

 

 (56,653)

  

 

 

Investment income and other, net (1)

 

 41,876 

  

 

 

 64,360 

  

 

 

Net income attributable to noncontrolling interests, including unit distributions

 

 (33,487)

  

 

 

 (32,250)

  

 

 

Income from the mark-to-market of derivative positions in marketable equity securities

 

 32,249 

  

 

 

 - 

  

 

 

Mezzanine loans receivable (loss) accrual

 

 (6,900)

  

 

 

 (122,738)

  

 

 

Real Estate Fund organization costs

 

 (5,937)

  

 

 

 - 

  

 

 

Costs of acquisitions not consummated

 

 (2,851)

  

 

 

 - 

  

 

 

Net (loss) gain on early extinguishment of debt

 

 (1,796)

  

 

 

 26,227 

  

 

 

Write-off of unamortized costs from the voluntary surrender of equity awards

 

 - 

  

 

 

 (20,202)

  

 

 

 

 

 

 

 

  

$

 115,927 

  

 

$

 (15,384)

  

 

 

 

 

 

 

 

  

 

 

  

 

 

 

  

 

 

 

 

 

 

 

  

 

 

  

 

 

 

  

 

 

(1)

 

The amount in these captions (for this table only) exclude the mark-to-market of our deferred compensation plan assets and offsetting

 

 

 

liability.

 

 

 

 

 

 

  

 

 

  

 

 

 

  

 

 

(2)

 

Includes an aggregate of $24,773 of income for our share of an income tax benefit and the reversal of accrued stock appreciation rights

 

 

 

compensation expense.

 

 

 

 

 

 

  

 

 

  

 

 

 

  

 

 

(3)

 

Includes a $5,998 net gain resulting from Lexington's March 2010 stock issuance.

 

 

 

 

 

 

  

 

 

  

 

 

 

  

 

 

(4)

 

Includes $19,121 for our share of non-cash impairment losses recognized by Lexington.

 

 

 

 

 

 

  

 

 

  

 

 

 

  

 

 

(5)

 

Includes $7,650 of expense for our share of the Downtown Crossing, Boston lease termination payment.

 

56

 


 

 

Results of Operations – Nine Months Ended September 30, 2010 Compared to September 30, 2009

 

Revenues

Our revenues, which consist of property rentals, tenant expense reimbursements, hotel revenues, trade shows revenues, amortization of acquired below-market leases, net of above-market leases and fee income, were $2,099,468,000 for the nine months ended September 30, 2010, compared to $2,023,575,000 in the prior year’s nine months, an increase of $75,893,000. Below are the details of the increase (decrease) by segment:

 

(Amounts in thousands)

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

  

 

 

 

  

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

  

 

 

 

  

 

New York

  

 

Washington, DC

  

 

 

  

 

Merchandise

  

 

 

 

  

Increase (decrease) due to:

 

Total

  

 

Office

  

 

Office

  

 

Retail

  

 

Mart

  

 

Other

  

Property rentals:

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

Acquisitions and other

 

$

 (1,472)

  

 

$

 - 

  

 

$

 (2,028)

  

 

$

 (460)

  

 

$

 2,064 

  

 

$

 (1,048)

  

 

Development/redevelopment

 

 

 9,944 

  

 

 

 - 

  

 

 

 7,406 

  

 

 

 2,538 

  

 

 

 - 

  

 

 

 - 

  

 

Amortization of acquired below-market  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

leases, net

 

 

 (7,126)

  

 

 

 (3,268)

  

 

 

 (1,182)

  

 

 

 (2,834)

  

 

 

 (162)

  

 

 

 320 

  

 

Hotel Pennsylvania

 

 

 10,596 

  

 

 

 - 

  

 

 

 - 

  

 

 

 - 

  

 

 

 - 

  

 

 

 10,596 

  (1)

 

Trade shows

 

 

 2,002 

  

 

 

 - 

  

 

 

 - 

  

 

 

 - 

  

 

 

 2,002 

  

 

 

 - 

  

 

Leasing activity (see page 43)

 

 

 45,321 

  

 

 

 10,165 

  

 

 

 17,095 

  

 

 

 23,921 

  

 

 

 (4,712)

  

 

 

 (1,148)

  

Increase (decrease) in property rentals

 

 

 59,265 

  

 

 

 6,897 

  

 

 

 21,291 

  

 

 

 23,165 

  

 

 

 (808)

  

 

 

 8,720 

  

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

Tenant expense reimbursements:

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

Acquisitions/development

 

 

 3,398 

  

 

 

 - 

  

 

 

 (72)

  

 

 

 3,719 

  

 

 

 - 

  

 

 

 (249)

  

 

Operations

 

 

 4,504 

  

 

 

 2,517 

  

 

 

 (2,768)

  

 

 

 7,038 

  

 

 

 (1,777)

  

 

 

 (506)

  

Increase (decrease) in tenant expense  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

reimbursements

 

 

 7,902 

  

 

 

 2,517 

  

 

 

 (2,840)

  

 

 

 10,757 

  

 

 

 (1,777)

  

 

 

 (755)

  

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

Fee and other income:

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

Lease cancellation fee income

 

 

 7,221 

  

 

 

 2,721 

  

 

 

 (660)

  

 

 

 4,082 

  

 

 

 1,217 

  

 

 

 (139)

  

 

Management and leasing fees

 

 

 7,820 

  

 

 

 915 

  

 

 

 7,316 

  (2)

 

 

 (489)

  

 

 

 6 

  

 

 

 72 

  

 

BMS cleaning fees

 

 

 3,699 

  

 

 

 10,199 

  

 

 

 - 

  

 

 

 - 

  

 

 

 - 

  

 

 

 (6,500)

  (3)

 

Other

 

 

 (10,014)

  

 

 

 (1,833)

  

 

 

 1,360 

  

 

 

 533 

  

 

 

 (2,728)

  (4)

 

 

 (7,346)

  (5)

Increase (decrease) in fee and other income

 

 

 8,726 

  

 

 

 12,002 

  

 

 

 8,016 

  

 

 

 4,126 

  

 

 

 (1,505)

  

 

 

 (13,913)

  

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

Total increase (decrease) in revenues

 

$

 75,893 

  

 

$

 21,416 

  

 

$

 26,467 

  

 

$

 38,048 

  

 

$

 (4,090)

  

 

$

 (5,948)

  

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

(1)

 

Primarily due to higher REVPAR.

 

 

 

(2)

 

Primarily from leasing fees in connection with our management of a development project.

 

 

 

(3)

 

Primarily from the elimination of inter-company fees from operating segments upon consolidation. See note (2) on page 58.

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

(4)

 

Primarily due to $1,650 of income in the prior year in connection with a tenant surrendering its space.

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

(5)

 

Primariy due to $5,402 of income in the prior year, resulting from the termination of a lease with a partially owned entity.

 

57

 


 

 

Results of Operations – Nine Months Ended September 30, 2010 Compared to September 30, 2009 - continued

 

Expenses

Our expenses, which consist primarily of operating, depreciation and amortization and general and administrative expenses, were $1,407,148,000 for the nine months ended September 30, 2010, compared to $1,393,787,000 in the prior year’s nine months, an increase of $13,361,000. Below are the details of the increase (decrease) by segment:

 

(Amounts in thousands)

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

  

 

 

 

  

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

  

 

 

 

  

 

New York

  

 

Washington, DC

  

 

 

  

 

Merchandise

  

 

 

 

  

(Decrease) increase due to:

 

Total

  

 

Office

  

 

Office

  

 

Retail

  

 

Mart

  

 

Other

  

Operating:

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

Acquisitions and other  

 

$

 (5,938)

  

 

$

 (6,338)

  

 

$

 (182)

  

 

$

 (492)

  

 

$

 1,770 

  

 

$

 (696)

  

 

Development/redevelopment

 

 

 2,634 

  

 

 

 - 

  

 

 

 2,896 

  

 

 

 (262)

  

 

 

 - 

  

 

 

 - 

  

 

Hotel activity

 

 

 6,834 

  

 

 

 - 

  

 

 

 - 

  

 

 

 - 

  

 

 

 - 

  

 

 

 6,834 

  

 

Trade shows activity

 

 

 448 

  

 

 

 - 

  

 

 

 - 

  

 

 

 - 

  

 

 

 448 

  

 

 

 - 

  

 

Operations

 

 

 9,989 

  

 

 

 16,213 

  (1)

 

 

 (2,988)

  

 

 

 9,534 

  

 

 

 (2,489)

  

 

 

 (10,281)

  (2)

 

Increase (decrease) in operating expenses

 

 

 13,967 

  

 

 

 9,875 

  

 

 

 (274)

  

 

 

 8,780 

  

 

 

 (271)

  

 

 

 (4,143)

  

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

Depreciation and amortization:

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

Acquisitions/development  

 

 

 1,070 

  

 

 

 - 

  

 

 

 641 

  

 

 

 1,036 

  

 

 

 - 

  

 

 

 (607)

  

 

Operations (due to additions to buildings  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

and improvements)

 

 

 5,929 

  

 

 

 2,329 

  

 

 

 4,745 

  

 

 

 5,839 

  

 

 

 (2,100)

  

 

 

 (4,884)

  

 

Increase (decrease) in depreciation and  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

amortization

 

 

 6,999 

  

 

 

 2,329 

  

 

 

 5,386 

  

 

 

 6,875 

  

 

 

 (2,100)

  

 

 

 (5,491)

  

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

General and administrative:

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

Write-off of unamortized costs from the  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

voluntary surrender of equity awards  (3)

 

 

 (32,588)

  

 

 

 (3,451)

  

 

 

 (3,131)

  

 

 

 (4,793)

  

 

 

 (1,011)

  

 

 

 (20,202)

  

 

Mark-to-market of deferred compensation  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

plan liability  (4)

 

 

 (419)

  

 

 

 - 

  

 

 

 - 

  

 

 

 - 

  

 

 

 - 

  

 

 

 (419)

  

 

Real Estate Fund organization costs

 

 

 5,937 

  

 

 

 - 

  

 

 

 - 

  

 

 

 - 

  

 

 

 - 

  

 

 

 5,937 

  

 

Operations  

 

 

 1,558 

  

 

 

 (1,277)

  

 

 

 665 

  

 

 

 2,525 

  

 

 

 (2,317)

  (5)

 

 

 1,962 

  

 

Decrease in general and administrative

 

 

 (25,512)

  

 

 

 (4,728)

  

 

 

 (2,466)

  

 

 

 (2,268)

  

 

 

 (3,328)

  

 

 

 (12,722)

  

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

Litigation loss accrual, impairment losses

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 and acquisition costs

 

 

 17,907 

  

 

 

 - 

  

 

 

 10,056 

  (6)

 

 

 5,000 

  

 

 

 - 

  

 

 

 2,851 

  

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

Total increase (decrease) in expenses

 

$

 13,361 

  

 

$

 7,476 

  

 

$

 12,702 

  

 

$

 18,387 

  

 

$

 (5,699)

  

 

$

 (19,505)

  

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

(1)

 

Results from increases in (i) BMS operating expense of $9,221, (ii) reimbursable operating expenses of $5,407 and (iii) non-reimbursable operating expenses of $1,585.

 

 

 

(2)

 

Primarily from the elimination of inter-company fees from operating segments upon consolidation.  See note (3) on page 57.

 

 

 

(3)

 

On March 31, 2009, our nine most senior executives voluntarily surrendered their 2007 and 2008 stock option awards and their 2008 out-performance plan awards.  Accordingly, we recognized $32,588 of expense in the first quarter of 2009, representing the unamortized portion of these awards.

(4)

 

This decrease in expense is entirely offset by a corresponding decrease in income from the mark-to-market of the deferred compensation plan assets, a component of “interest and other investment income (loss), net” on our consolidated statements of income.

 

 

 

(5)

 

Primarily due to $2,800 of pension plan termination costs in 2009.

 

 

 

(6)

 

For additional information, see page 69.

 

58

 


 

 

Results of Operations – Nine Months Ended September 30, 2010 Compared to September 30, 2009 - continued

 

Income Applicable to Toys

 

During the nine months ended September 30, 2010, we recognized net income of $102,309,000 from our investment in Toys, comprised of $95,576,000 for our 32.7% share of Toys’ net income ($93,662,000 before our share of Toys’ income tax benefit) and $6,733,000 of interest and other income.

 

During the nine months ended September 30, 2009, we recognized net income of $118,897,000 from our investment in Toys, comprised of (i) $99,210,000 for our 32.7% share of Toys’ net income ($106,545,000 before our share of Toys’ income tax expense), (ii) $13,946,000 for our share of income from previously recognized deferred financing cost amortization expense, which we initially recorded as a reduction of the basis of our investment in Toys, and (iii) $5,741,000 of interest and other income.

 

 

Income (Loss) from Partially Owned Entities

Summarized below are the components of loss from partially owned entities for the nine months ended September 30, 2010 and 2009.

 

 

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

 

 

  

 

For the Nine Months Ended

 

 

 

 

 

  

 

September 30,

 

 

(Amounts in thousands)

 

2010 

 

2009 

 

 

Equity in Net Income (Loss):

 

 

 

  

 

 

 

  

 

 

Alexander's - 32.4% share of equity in net income

 

$

 21,083 

  

 

$

 46,044 

  (1)

 

 

 

 

 

  

 

 

 

  

 

 

 

  

 

 

Lexington - 13.7% share in 2010 and 16.1% share in 2009 of equity in  

 

 

 

  

 

 

 

  

 

 

 

net income (loss) (2)

 

 

 3,316 

  

 

 

 (24,969)

  

 

 

  

 

 

 

  

 

 

 

  

 

 

India real estate ventures - 4% to 36.5% range in our share of equity in net income (loss)

 

 

 2,062 

  

 

 

 (1,386)

  

 

 

  

 

 

 

  

 

 

 

  

 

 

Other, net (3)

 

 

 (12,661)

  

 

 

 (22,769)

  (4)

 

 

 

 

 

  

 

$

 13,800 

  

 

$

 (3,080)

  

 

 

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 (1)

Includes an aggregate of $24,773 of income for our share of an income tax benefit and the reversal of accrued stock appreciation rights compensation expense.

 

 (2)

2010 includes a $5,998 net gain resulting from Lexington's March 2010 stock issuance and 2009 includes $19,121 of expense for our share of non-cash impairment losses recognized by Lexington.

 

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 (3)

Represents our equity in net income or loss of partially owned office buildings in New York and Washington, DC, the Monmouth Mall, Verde Realty Operating Partnership, 85 10th Avenue Associates and others.

 

 

 

 

 (4)

Includes $7,650 of expense for our share of Downtown Crossing, Boston lease termination payment.

 

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

Loss from Real Estate Fund

In the nine months ended September 30, 2010, we recognized a $1,410,000 loss from our Real Estate Fund, primarily from $1,500,000 of organization costs.  Of this loss, $1,091,000 is allocated to the noncontrolling interest and is included as a reduction of “net income attributable to noncontrolling interests, including unit distributions,” on our consolidated statement of income.

 

59

 


 

 

Results of Operations – Nine Months Ended September 30, 2010 Compared to September 30, 2009 - continued

 

Interest and Other Investment Income (Loss), net

Interest and other investment income (loss), net (comprised of the mark-to-market of derivative positions in marketable equity securities, interest income on mezzanine loans receivable, other interest income and dividend income) was income of $65,936,000 for the nine months ended September 30, 2010, compared to a loss of $63,608,000 in the prior year’s nine months, an increase in income of $129,544,000. This increase resulted from:

 

 

 

 

 

 

 

 

  

 

 

(Amounts in thousands)

 

 

 

  

 

 

Mezzanine loans receivable loss accrual ($6,900 in this year's nine months compared to $122,738 in

 

 

 

  

 

 

 

the prior year's nine months)

 

$

 115,838 

  

 

 

Mark-to-market of derivative positions in marketable equity securities

 

 

 

 32,249 

  

 

 

Lower average mezzanine loan investments ($128,000 in this year's nine months compared to $403,000

 

 

 

  

 

 

 

in the prior year's nine months)

 

 

 (18,965)

  

 

 

Lower average yields on investments (0.1% in this year's nine months compared to 0.4% in the prior

 

 

 

  

 

 

 

year's nine months)

 

 

 (1,905)

  

 

 

Increase in dividends and interest on marketable securities

 

 

 2,484 

  

 

 

Decrease in the value of investments in our deferred compensation plan (offset by a corresponding

 

 

 

  

 

 

 

increase in the liability for plan assets in general and administrative expenses)

 

 

 (419)

  

 

 

Other, net

 

 

 262 

  

 

 

 

 

 

 

$

 129,544 

  

 

 

Interest and Debt Expense

Interest and debt expense was $441,980,000 for the nine months ended September 30, 2010, compared to $475,028,000 in the prior year’s nine months, a decrease of $33,048,000.  This decrease was primarily due to savings of (i) $76,111,000 from the acquisition, retirement and repayment of an aggregate of $2.1 billion of our convertible senior debentures and senior unsecured notes in 2009 and (ii) $24,486,000 from the repayment of $400,000,000 cross-collateralized debt secured by our portfolio of 42 strip shopping centers, partially offset by (iii) $38,073,000 from the issuance of $460,000,000 of senior unsecured notes in September 2009 and $500,000,000 of a senior unsecured notes in March 2010, (iv) $13,179,000 of lower capitalized interest, (v) $12,445,000 of default interest and fees accrued on three loans in special servicing and (vi) $3,175,000 from the issuance of $660,000,000 of cross-collateralized debt secured by 40 of our strip shopping centers.

 

 

Net (Loss) Gain on Early Extinguishment of Debt

In the nine months ended September 30, 2010, we recognized a $1,796,000 net loss on the early extinguishment of debt, compared to a $26,996,000 net gain in the prior year’s nine months.  The current year’s loss and the prior year’s gain resulted from the acquisition and retirement of our convertible senior debentures and senior unsecured notes.

 

 

Net Gain on Disposition of Wholly Owned and Partially Owned Assets Other Than Depreciable Real Estate

Net gain on disposition of wholly owned and partially owned assets other than depreciable real estate was $12,759,000 in the nine months ended September 30, 2010, compared to $4,432,000 in the prior year’s nine months and was primarily comprised of net gains on the sale of marketable securities.  The nine months ended September 30, 2010 also includes gains on sale of condominiums at our 40 East 66th Street property.

 

 

Income Tax Expense

Income tax expense was $16,051,000 in the nine months ended September 30, 2010, compared to $15,773,000 in the prior year’s nine months.

 

60

 


 

 

Results of Operations – Nine Months Ended September 30, 2010 Compared to September 30, 2009 - continued

 

Discontinued Operations

The table below sets forth the combined results of operations of assets related to discontinued operations for the nine months ended September 30, 2010 and 2009 and include the operating results of 1999 K Street, which was sold on September 1, 2009 and 15 other retail properties, which were sold during 2009.

 

 

 

 

  

 

 

  

 

 

  

 

 

 

 

  

 

For the Nine Months Ended

 

 

 

 

  

 

September 30,

 

 

(Amounts in thousands)

 

2010 

 

2009 

 

 

 

 

  

 

 

  

 

 

  

 

 

Total revenues

 

$

 - 

 

$

 9,846 

 

 

Total expenses

 

 

 - 

 

 

 3,225 

 

 

Income from discontinued operations

 

 

 - 

 

 

 6,621 

 

 

Net gain on sale of 1999 K Street

 

 

 - 

 

 

 41,211 

 

 

Net gains on sale of other real estate

 

 

 - 

 

 

 1,444 

 

 

Income from discontinued operations

 

$

 - 

 

$

 49,276 

 

 

Net Income Attributable to Noncontrolling Interests, Including Unit Distributions

 

Net income attributable to noncontrolling interests was $34,977,000 in the nine months ended September 30, 2010, compared to $28,808,000 in the prior year’s nine months. Net income attributable to noncontrolling interests for the nine months ended September 30, 2010 and 2009 is comprised of (i) allocations of income to redeemable noncontrolling interests of $26,785,000 and $17,795,000, respectively, (ii) net income and net loss attributable to noncontrolling interests in consolidated subsidiaries of $1,490,000 and $3,442,000, respectively, (iii) preferred unit distributions of the Operating Partnership of $13,674,000 and $14,455,000, respectively and (iv) a net gain of $6,972,000 on the redemption of all of the Series D-12 perpetual preferred units in the current year.  The increase of $8,990,000 in allocations of income to redeemable noncontrolling interests resulted primarily from higher net income subject to allocation to unitholders.   

 

 

Preferred Share Dividends

Preferred share dividends were $41,975,000 for the nine months ended September 30, 2010, compared to $42,807,000 for the prior year’s nine months.

 

 

Discount on Preferred Share Redemptions

Discount on preferred share redemptions of $4,382,000 in the nine months ended September 30, 2010 resulted from the redemption of 1,600,000 Series D-10 preferred shares.

 

61

 


 

 

Results of Operations – Nine Months Ended September 30, 2010 Compared to September 30, 2009 - continued

 

Same Store EBITDA

Same store EBITDA represents EBITDA from property level operations which are owned by us in both the current and prior year reporting periods.  Same store EBITDA excludes segment-level overhead expenses, which are expenses that we do not consider to be property-level expenses, as well as other non-operating items.  We present same store EBITDA on both a GAAP basis and a cash basis, which excludes income from the straight-lining of rents, amortization of below-market leases, net of above-market leases and other non-cash adjustments. We present these non-GAAP measures to (i) facilitate meaningful comparisons of the operational performance of our properties and segments, (ii) make decisions on whether to buy, sell or refinance properties, and (iii) compare the performance of our properties and segments to those of our peers.  Same store EBITDA should not be considered as an alternative to net income or cash flow from operations and may not be comparable to similarly titled measures employed by other companies. 

 

Below are the same store EBITDA results on a GAAP and cash basis for each of our segments for the nine months ended September 30, 2010, compared to the nine months ended September 30, 2009.

 

 

 

 

New York

 

Washington, DC

 

 

 

 

Merchandise

(Amounts in thousands)

Office

 

Office

 

Retail

 

 Mart

EBITDA for the nine months ended September 30, 2010

$

 448,418 

 

$

 333,970 

 

$

 268,571 

 

$

 74,934 

 

Add-back: non-property level overhead

 

 

 

 

 

 

 

 

 

 

 

 

 

expenses included above

 

 13,860 

 

 

 18,082 

 

 

 22,678 

 

 

 21,764 

 

Less: EBITDA from acquisitions, dispositions

 

 

 

 

 

 

 

 

 

 

 

 

 

and other non-operating income or expenses

 

 (2,353)

 

 

 (812)

 

 

 (10,633)

 

 

 (3,363)

GAAP basis same store EBITDA for the nine months

 

 

 

 

 

 

 

 

 

 

 

 

 

ended  September 30, 2010

 

 459,925 

 

 

 351,240 

 

 

 280,616 

 

 

 93,335 

 

Less: Adjustments for straight-line rents,

 

 

 

 

 

 

 

 

 

 

 

 

 

amortization of below-market leases, net and other

 

 

 

 

 

 

 

 

 

 

 

 

 

non-cash adjustments

 

 (45,075)

 

 

 (5,156)

 

 

 (31,150)

 

 

 (2,135)

Cash basis same store EBITDA for the nine months

 

 

 

 

 

 

 

 

 

 

 

 

 

ended  September 30, 2010

$

 414,850 

 

$

 346,084 

 

$

 249,466 

 

$

 91,200 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

EBITDA for the nine months ended September 30, 2009

$

 433,768 

 

$

 362,889 

 

$

 245,379 

 

$

 74,717 

 

Add-back: non-property level overhead

 

 

 

 

 

 

 

 

 

 

 

 

 

expenses included above

 

 18,588 

 

 

 20,548 

 

 

 24,946 

 

 

 25,092 

 

Less: EBITDA from acquisitions, dispositions

 

 

 

 

 

 

 

 

 

 

 

 

 

and other non-operating income or expenses

 

 (2,413)

 

 

 (51,197)

 

 

 (14,471)

 

 

 (4,182)

GAAP basis same store EBITDA for the nine months

 

 

 

 

 

 

 

 

 

 

 

 

 

ended  September 30, 2009

 

 449,943 

 

 

 332,240 

 

 

 255,854 

 

 

 95,627 

 

Less: Adjustments for straight-line rents,

 

 

 

 

 

 

 

 

 

 

 

 

 

amortization of below-market leases, net and other

 

 

 

 

 

 

 

 

 

 

 

 

 

non-cash adjustments 

 

 (48,656)

 

 

 (12,083)

 

 

 (31,303)

 

 

 (1,789)

Cash basis same store EBITDA for the nine months

 

 

 

 

 

 

 

 

 

 

 

 

 

ended  September 30, 2009

$

 401,287 

 

$

 320,157 

 

$

 224,551 

 

$

 93,838 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Increase (decrease) in GAAP basis same store EBITDA for

 

 

 

 

 

 

 

 

 

 

 

 

 

the nine months ended September 30, 2010 over the

 

 

 

 

 

 

 

 

 

 

 

 

 

nine months ended September 30, 2009

$

 9,982 

 

$

 19,000 

 

$

 24,762 

 

$

 (2,292)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Increase (decrease) in Cash basis same store EBITDA for

 

 

 

 

 

 

 

 

 

 

 

 

 

the nine months ended September 30, 2010 over the

 

 

 

 

 

 

 

 

 

 

 

 

 

nine months ended September 30, 2009

$

 13,563 

 

$

 25,927 

 

$

 24,915 

 

$

 (2,638)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

% increase (decrease) in GAAP basis same store EBITDA

 

 2.2%

 

 

 5.7%

 

 

 9.7%

 

 

 (2.4%)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

% increase (decrease) in Cash basis same store EBITDA

 

 3.4%

 

 

 8.1%

 

 

 11.1%

 

 

 (2.8%)

 

62

 


 

SUPPLEMENTAL INFORMATION

 

Three Months Ended September 30, 2010 vs. Three Months Ended June 30, 2010

Our revenues and expenses are subject to seasonality during the year which impacts quarterly net earnings, cash flows and funds from operations, and therefore impacts comparisons of the current quarter to the previous quarter. The business of Toys is highly seasonal. Historically, Toys’ fourth quarter net income, which we record on a one-quarter lag basis in our first quarter, accounts for more than 80% of Toys’ fiscal year net income. The Office and Merchandise Mart segments have historically experienced higher utility costs in the first and third quarters of the year. The Merchandise Mart segment also has experienced higher earnings in the second and fourth quarters of the year due to major trade shows occurring in those quarters. The Retail segment revenue in the fourth quarter is typically higher due to the recognition of percentage rental income.  Below are the same store EBITDA results on a GAAP and cash basis for each of our segments for the three months ended September 30, 2010, compared to the three months ended June 30, 2010.

 

 

 

  

New York

 

Washington, DC

 

 

 

 

Merchandise

(Amounts in thousands)

Office

 

Office

 

Retail

 

 Mart

EBITDA for the three months ended September 30, 2010

$

 149,285 

 

$

 113,205 

 

$

 88,431 

 

$

 21,330 

 

Add-back: non-property level overhead expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

included above

 

 4,514 

 

 

 5,985 

 

 

 8,846 

 

 

 7,353 

 

Less: EBITDA from acquisitions, dispositions  

 

 

 

 

 

 

 

 

 

 

 

 

 

and other non-operating income or expenses

 

 839 

 

 

 (1,634)

 

 

 (735)

 

 

 251 

GAAP basis same store EBITDA for the three months

 

 

 

 

 

 

 

 

 

 

 

 

ended September 30, 2010

 

 154,638 

 

 

 117,556 

 

 

 96,542 

 

 

 28,934 

 

Less: Adjustments for straight-line rents, amortization of

 

 

 

 

 

 

 

 

 

 

 

 

 

below-market leases, net and other non-cash adjustments

 

 (14,845)

 

 

 (110)

 

 

 (11,136)

 

 

 44 

Cash basis same store EBITDA for the three months

 

 

 

 

 

 

 

 

 

 

 

 

ended September 30, 2010

$

 139,793 

 

$

 117,446 

 

$

 85,406 

 

$

 28,978 

 

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

 

 

 

 

 

 

 

 

 

 

EBITDA for the three months ended June 30, 2010(1)

$

 153,045 

 

$

 114,272 

 

$

 88,100 

 

$

 27,886 

 

Add-back: non-property level overhead expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

included above  

 

 4,767 

 

 

 6,200 

 

 

 6,827 

 

 

 7,181 

 

Less: EBITDA from acquisitions, dispositions  

 

 

 

 

 

 

 

 

 

 

 

 

 

and other non-operating income or expenses

 

 (2,059)

 

 

 (1,855)

 

 

 (3,221)

 

 

 120 

GAAP basis same store EBITDA for the three months

 

 

 

 

 

 

 

 

 

 

 

 

ended June 30, 2010

 

 155,753 

 

 

 118,617 

 

 

 91,706 

 

 

 35,187 

 

Less: Adjustments for straight-line rents, amortization of

 

 

 

 

 

 

 

 

 

 

 

 

 

below-market leases, net and other non-cash adjustments

 

 (14,622)

 

 

 (592)

 

 

 (10,652)

 

 

 (803)

Cash basis same store EBITDA for the three months

 

 

 

 

 

 

 

 

 

 

 

 

ended June 30, 2010

$

 141,131 

 

$

 118,025 

 

$

 81,054 

 

$

 34,384 

 

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

 

 

 

 

 

 

 

 

 

 

(Decrease) increase in GAAP basis same store EBITDA for  

 

 

 

 

 

 

 

 

 

 

 

 

the three months ended September 30, 2010 over the

 

 

 

 

 

 

 

 

 

 

 

 

three months ended June 30, 2010

$

 (1,115)

 

$

 (1,061)

 

$

 4,836 

 

$

 (6,253)

 

 

  

 

 

 

 

 

 

 

 

 

 

 

(Decrease) increase in Cash basis same store EBITDA for  

 

 

 

 

 

 

 

 

 

 

 

 

the three months ended September 30, 2010 over the

 

 

 

 

 

 

 

 

 

 

 

 

three months ended June 30, 2010

$

 (1,338)

 

$

 (579)

 

$

 4,352 

 

$

 (5,406)

 

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

 

 

 

 

 

 

 

 

 

 

% (decrease) increase in GAAP basis same store EBITDA

 

 (0.7%)

 

 

 (0.9%)

 

 

 5.3%

 

 

 (17.8%)

 

 

  

 

 

 

 

 

 

 

 

 

 

 

% (decrease) increase in Cash basis same store EBITDA

 

 (0.9%)

 

 

 (0.5%)

 

 

 5.4%

 

 

 (15.7%)

 

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

 

 

 

 

 

 

 

 

 

 

 (1)

Below is the reconciliation of net income (loss) to EBITDA for the three months ended June 30, 2010

 

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

  

New York

 

Washington, DC

 

 

 

Merchandise

(Amounts in thousands)

Office

 

Office

 

Retail

 

 Mart

Net income (loss) attributable to Vornado for the three months

 

 

 

 

 

 

 

 

 

 

 

 

ended June 30, 2010

$

 78,379 

 

$

 40,252 

 

$

 37,074 

 

$

 (1,779)

Interest and debt expense

 

 31,595 

 

 

 34,943 

 

 

 22,526 

 

 

 16,478 

Depreciation and amortization

 

 42,736 

 

 

 39,694 

 

 

 28,500 

 

 

 12,785 

Income tax expense (benefit)

 

 335 

 

 

 (617)

 

 

 - 

 

 

 402 

EBITDA for the three months ended June 30, 2010

$

 153,045 

 

$

 114,272 

 

$

 88,100 

 

$

 27,886 

 

63

 


 

LIQUIDITY AND CAPITAL RESOURCES

Property rental income is our primary source of cash flow and is dependent upon the occupancy and rental rates of our properties.  Other sources of liquidity to fund cash requirements include proceeds from debt financings, including mortgage loans, senior unsecured borrowings, and our revolving credit facilities; proceeds from the issuance of common and preferred equity; and asset sales.  Our cash requirements include property operating expenses, capital improvements, tenant improvements, leasing commissions, distributions to common and preferred shareholders, as well as acquisition and development costs.  Our cash and cash equivalents were $846,254,000 at September 30, 2010, a $310,775,000 increase over the balance at December 31, 2009.  This increase resulted from $594,721,000 of net cash provided by operating activities, $61,205,000 of net cash provided by investing activities, partially offset by $345,151,000 of net cash used in financing activities.  Our consolidated outstanding debt was $11,110,047,000 at September 30, 2010, a $170,432,000 increase over the balance at December 31, 2009.

 

We anticipate that cash flow from continuing operations over the next twelve months will be adequate to fund our business operations, cash distributions to unitholders of the Operating Partnership, cash dividends to shareholders, debt amortization and recurring capital expenditures.  During the remainder of 2010 and 2011, $184,000,000 and $2,087,000,000 of our outstanding debt matures, respectively. We may refinance such debt or choose to repay all or a portion, using existing cash balances or our revolving credit facilities.  Capital requirements for development expenditures and acquisitions (excluding Fund acquisitions as described below), may require funding from borrowings and/or equity offerings.  We may from time to time purchase or retire outstanding debt securities.  Such purchases, if any, will depend on prevailing market conditions, liquidity requirements and other factors.  The amounts involved in connection with these transactions could be material to our consolidated financial statements.

 

In the fourth quarter of 2009 and the first quarter of 2010, we notified the master servicers of three non-recourse loans secured by properties in San Francisco, California, High Point, North Carolina, and Springfield, Virginia that the cash flows generated from these properties were insufficient to fund debt service payments and that we were not prepared to fund any cash shortfalls.  Accordingly, we requested that each of these loans be placed with their respective special servicers.  We have ceased making debt service payments on these loans and are in default.  These defaults have not had, nor are expected to have, any material impact on our current or future business operations, our ability to raise capital or our credit ratings.  On October 14, 2010, the special servicer of the loan secured by our San Francisco property foreclosed on the property.  As a result, in the fourth quarter, we will remove this property and related debt from our consolidated balance sheet, which will not have a material impact on our consolidated statement of income.  In October 2010, the special servicer of the loan secured by our property in High Point, North Carolina filed a motion to place the property in receivership.  We continue to negotiate with the special servicer of the loan secured by our property in Springfield, Virginia.  There can be no assurance as to the timing and ultimate resolution of these matters.  In the three and nine months ended September 30, 2010, we have accrued $5,887,000 and $12,445,000, respectively, of default interest on these loans.

 

We have raised, and may continue to raise, capital for future real estate acquisitions through our Real Estate Fund.  On July 6, 2010, we completed the first closing of the Fund with aggregate equity commitments of $550,000,000, of which we committed $200,000,000.  We expect to raise an additional $450,000,000 bringing total commitments to $1 billion.  We are the general partner and investment manager of the Fund and it is our exclusive investment vehicle for all investments that fit within the Fund’s investment parameters during its three-year investment period. 

 

Cash Flows for the Nine Months Ended September 30, 2010

Cash flows provided by operating activities of $594,721,000 was comprised of (i) net income of $425,887,000, (ii) $213,747,000 of non-cash adjustments, including depreciation and amortization expense, the effect of straight-lining of rental income, equity in net income of partially owned entities, (iii) distributions of income from partially owned entities of $36,829,000, partially offset by (iv) the net change in operating assets and liabilities of $81,742,000, of which $62,500,000 relates to Real Estate Fund investments.

 

Net cash provided by investing activities of $51,097,000 was comprised of (i) proceeds from sales of marketable securities of $126,015,000, (ii) restricted cash of $125,204,000, (iii) proceeds received from repayment of mezzanine loans receivable of $109,594,000, (iv) proceeds from the sale of real estate and related investments of $48,998,000, (v) distributions of capital from partially owned entities of $45,613,000, (vi) proceeds from maturing short-term investments of $40,000,000, partially offset by (vii) investments in partially owned entities of $159,053,000, (viii) additions to real estate of $98,789,000, (ix) development and redevelopment expenditures of $86,871,000, (x) investments in mezzanine loans receivable and other of $75,697,000, (xi) purchases of marketable equity securities of $13,917,000 and (xii) deposits in connection with real estate acquisitions of $10,000,000.

 

Net cash used in financing activities of $335,043,000 was comprised of (i) repayments of borrowings, including the purchase of our senior unsecured notes, of $1,462,652,000, (ii) dividends paid on common shares of $354,937,000, (iii) purchases of outstanding preferred units and shares of $48,600,000, (iv) dividends paid on preferred shares of $42,100,000, (v) distributions to noncontrolling interests of $41,055,000, (vi) debt issuance costs of $14,942,000, and (vii) repurchase of shares related to stock compensation arrangements and related tax withholdings of $13,467,000, partially offset by (viii) proceeds from borrowings of $1,603,359,000, and (ix) contributions from noncontrolling interests of $39,351,000.

 

64

 


 

 

LIQUIDITY AND CAPITAL RESOURCES - continued

Capital Expenditures

Our capital expenditures consist of expenditures to maintain assets, tenant improvement allowances and leasing commissions.  Recurring capital improvements include expenditures to maintain a property’s competitive position within the market and tenant improvements and leasing commissions necessary to re-lease expiring leases or renew or extend existing leases.  Non-recurring capital improvements include expenditures completed in the year of acquisition and the following two years that were planned at the time of acquisition as well as tenant improvements and leasing commissions for space that was vacant at the time of acquisition of a property.  Our development and redevelopment expenditures include all hard and soft costs associated with the development or redevelopment of a property, including tenant improvements, leasing commissions, capitalized interest and operating costs until the property is substantially complete and ready for its intended use. 

 

Below are the details of capital expenditures, leasing commissions and development and redevelopment expenditures and a reconciliation of total expenditures on an accrual basis to the cash expended in the nine months ended September 30, 2010.

 

 

 

 

 

 

 

 

New York

 

Washington, DC

 

 

 

 

Merchandise

 

 

 

(Amounts in thousands)

Total

 

Office

 

Office

 

Retail

 

Mart

 

Other

Capital Expenditures (accrual basis):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Expenditures to maintain assets

$

 32,861 

 

$

 14,233 

 

$

 7,263 

 

$

 3,032 

 

$

 4,360 

 

$

 3,973 

Tenant improvements

 

 98,465 

 

 

 41,678 

 

 

 11,146 

 

 

 11,701 

 

 

 28,905 

 

 

 5,035 

Leasing commissions

 

 23,884 

 

 

 12,560 

 

 

 4,352 

 

 

 1,702 

 

 

 3,982 

 

 

 1,288 

Non-recurring capital expenditures

 

 5,514 

 

 

 - 

 

 

 - 

 

 

 915 

 

 

 - 

 

 

 4,599 

Total capital expenditures and leasing

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

commissions (accrual basis)

 

 160,724 

 

 

 68,471 

 

 

 22,761 

 

 

 17,350 

 

 

 37,247 

 

 

 14,895 

Adjustments to reconcile to cash basis:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Expenditures in the current year 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 applicable to prior periods

 

 55,822 

 

 

 29,758 

 

 

 12,781 

 

 

 5,793 

 

 

 4,085 

 

 

 3,405 

 

 

Expenditures to be made in future

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

periods for the current period

 

 (97,385)

 

 

 (38,665)

 

 

 (13,045)

 

 

 (13,027)

 

 

 (27,159)

 

 

 (5,489)

Total capital expenditures and leasing

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 commissions (cash basis)

$

 119,161 

 

$

 59,564 

 

$

 22,497 

 

$

 10,116 

 

$

 14,173 

 

$

 12,811 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Development and Redevelopment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 Expenditures:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Bergen Town Center

$

 12,588 

 

$

 - 

 

$

 - 

 

$

 12,588 

 

$

 - 

 

$

 - 

Wasserman Venture

 

 11,806 

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 11,806 

West End 25

 

 9,011 

 

 

 - 

 

 

 9,011 

 

 

 - 

 

 

 - 

 

 

 - 

1540 Broadway

 

 7,493 

 

 

 - 

 

 

 - 

 

 

 7,493 

 

 

 - 

 

 

 - 

Green Acres Mall

 

 6,991 

 

 

 - 

 

 

 - 

 

 

 6,991 

 

 

 - 

 

 

 - 

220 20th Street

 

 3,946 

 

 

 - 

 

 

 3,946 

 

 

 - 

 

 

 - 

 

 

 - 

Beverly Connection

 

 3,452 

 

 

 - 

 

 

 - 

 

 

 3,452 

 

 

 - 

 

 

 - 

Poughkeepsie, New York

 

 2,396 

 

 

 - 

 

 

 - 

 

 

 2,396 

 

 

 - 

 

 

 - 

Other

 

 29,188 

 

 

 4,702 

 

 

 8,115 

 

 

 10,515 

 

 

 1,180 

 

 

 4,676 

 

 

 

 

$

 86,871 

 

$

 4,702 

 

$

 21,072 

 

$

 43,435 

 

$

 1,180 

 

$

 16,482 

 

65

 


 

 

LIQUIDITY AND CAPITAL RESOURCES - continued

 

Cash Flows for the Nine Months Ended September 30, 2009

Our cash and cash equivalents were $2,560,011,000 at September 30, 2009, a $1,033,158,000 increase over the balance at December 31, 2008.  This increase resulted from $489,487,000 of net cash provided by operating activities and $621,471,000 of net cash provided by financing activities, partially offset by $77,800,000 of net cash used in investing activities.

 

Our consolidated outstanding debt was $12,728,012,000 at September 30, 2009, a $290,089,000 increase from the balance at December 31, 2008.  This increase resulted primarily from the issuance of $460,000,000 of 7.875% senior unsecured notes on September 30, 2009 which are due October 2039. 

 

Cash flows provided by operating activities of $489,487,000 was primarily comprised of (i) net income of $271,900,000, adjusted for $276,376,000 of non-cash adjustments, including depreciation and amortization expense, mezzanine loan loss accruals, the effect of straight-lining of rental income, equity in net income of partially owned entities and amortization of below market leases, net of above market leases, (ii) distributions of income from partially owned entities of $21,484,000 partially offset by (iii) the net change in operating assets and liabilities of $80,273,000.

 

Net cash used in investing activities of $77,800,000 was primarily comprised of (i) development and redevelopment expenditures of $384,655,000, (ii) investments in partially owned entities of $28,738,000, (iii) additions to real estate of $145,981,000, partially offset by, (iv) proceeds from the sale of real estate of $291,652,000, (v) $81,195,000 of restricted cash (vi) proceeds from the sale of marketable securities of $59,873,000 and (vii) $46,339,000 received from mezzanine loan receivables repayments.

 

Net cash provided by financing activities of $621,471,000 was primarily comprised of (i) $710,226,000 of proceeds from the issuance of common shares in April 2009, (ii) proceeds from borrowings of $1,208,204,000, partially offset by, (iii) repayments of borrowings of $996,218,000, (iv) dividends paid on common shares of $194,087,000, (v) dividends paid on preferred shares of $42,809,000 (vi) distributions to noncontrolling interests of $30,291,000 and (vii) the purchase of outstanding Series G Preferred Units of $24,330,000.  

 

66

 


 

LIQUIDITY AND CAPITAL RESOURCES - continued

Capital Expenditures

Below are the details of capital expenditures, leasing commissions and development and redevelopment expenditures and a reconciliation of total expenditures on an accrual basis to the cash expended in the nine months ended September 30, 2009.

 

 

 

 

 

 

 

 

New York

 

Washington, DC

 

 

 

 

Merchandise

 

 

 

(Amounts in thousands)

Total

 

Office

 

Office

 

Retail

 

Mart

 

Other

Capital Expenditures (accrual basis):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Expenditures to maintain assets

$

 29,744 

 

$

 11,804 

 

$

 12,013 

 

$

 1,953 

 

$

 3,974 

 

$

 - 

Tenant improvements

 

 43,976 

 

 

 25,571 

 

 

 14,518 

 

 

 946 

 

 

 2,941 

 

 

 - 

Leasing commissions

 

 14,435 

 

 

 8,289 

 

 

 5,339 

 

 

 732 

 

 

 75 

 

 

 - 

Non-recurring capital expenditures

 

 21,705 

 

 

 11,343 

 

 

 644 

 

 

 34 

 

 

 - 

 

 

 9,684 

Total capital expenditures and leasing

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

commissions (accrual basis)

 

 109,860 

 

 

 57,007 

 

 

 32,514 

 

 

 3,665 

 

 

 6,990 

 

 

 9,684 

Adjustments to reconcile to cash basis:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Expenditures in the current year 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 applicable to prior periods

 

 97,888 

 

 

 53,067 

 

 

 33,515 

 

 

 4,134 

 

 

 4,693 

 

 

 2,479 

 

 

Expenditures to be made in future

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

periods for the current period

 

 (51,661)

 

 

 (32,103)

 

 

 (15,515)

 

 

 (1,164)

 

 

 (1,280)

 

 

 (1,599)

Total capital expenditures and leasing

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 commissions (cash basis)

$

 156,087 

 

$

 77,971 

 

$

 50,514 

 

$

 6,635 

 

$

 10,403 

 

$

 10,564 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Development and Redevelopment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 Expenditures:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

West End 25

$

 50,975 

 

$

 - 

 

$

 50,975 

 

$

 - 

 

$

 - 

 

$

 - 

Bergen Town Center

 

 49,323 

 

 

 - 

 

 

 - 

 

 

 49,323 

 

 

 - 

 

 

 - 

Wasserman Venture

 

 38,238 

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 38,238 

220 20th Street

 

 36,468 

 

 

 - 

 

 

 36,468 

 

 

 - 

 

 

 - 

 

 

 - 

1999 K Street (sold in September 2009)

 

 31,874 

 

 

 - 

 

 

 31,874 

 

 

 - 

 

 

 - 

 

 

 - 

Manhattan Mall

 

 20,144 

 

 

 - 

 

 

 - 

 

 

 20,144 

 

 

 - 

 

 

 - 

North Bergen, New Jersey

 

 19,495 

 

 

 - 

 

 

 - 

 

 

 19,495 

 

 

 - 

 

 

 - 

South Hills Mall

 

 17,446 

 

 

 - 

 

 

 - 

 

 

 17,446 

 

 

 - 

 

 

 - 

Garfield, New Jersey

 

 15,404 

 

 

 - 

 

 

 - 

 

 

 15,404 

 

 

 - 

 

 

 - 

2101 L Street

 

 12,865 

 

 

 - 

 

 

 12,865 

 

 

 - 

 

 

 - 

 

 

 - 

Other

 

 92,423 

 

 

 11,814 

 

 

 20,490 

 

 

 39,569 

 

 

 5,636 

 

 

 14,914 

 

 

 

 

$

 384,655 

 

$

 11,814 

 

$

 152,672 

 

$

 161,381 

 

$

 5,636 

 

$

 53,152 

 

67

 


 

 

LIQUIDITY AND CAPITAL RESOURCES - continued

 

 

Insurance 

 

We maintain general liability insurance with limits of $300,000,000 per occurrence and all risk property and rental value insurance with limits of $2.0 billion per occurrence, including coverage for terrorist acts, with sub-limits for certain perils such as floods.  Our California properties have earthquake insurance with coverage of $150,000,000 per occurrence, subject to a deductible in the amount of 5% of the value of the affected property, up to a $150,000,000 annual aggregate.

 

Penn Plaza Insurance Company, LLC (“PPIC”), our wholly owned consolidated subsidiary, acts as a re-insurer with respect to a portion of our earthquake insurance coverage and as a direct insurer for coverage for acts of terrorism, including nuclear, biological, chemical and radiological (“NBCR”) acts, as defined by TRIPRA.  Coverage for acts of terrorism (excluding NBCR acts) is fully reinsured by third party insurance companies and the Federal government with no exposure to PPIC.  Our coverage for NBCR losses is up to $2 billion per occurrence, for which PPIC is responsible for a deductible of $3,200,000 and 15% of the balance of a covered loss and the Federal government is responsible for the remaining 85% of a covered loss.  We are ultimately responsible for any loss borne by PPIC.

 

We continue to monitor the state of the insurance market and the scope and costs of coverage for acts of terrorism.  However, we cannot anticipate what coverage will be available on commercially reasonable terms in future policy years.

 

Our debt instruments, consisting of mortgage loans secured by our properties which are non-recourse to us, senior unsecured notes, exchangeable senior debentures, convertible senior debentures and revolving credit agreements contain customary covenants requiring us to maintain insurance. Although we believe that we have adequate insurance coverage for purposes of these agreements, we may not be able to obtain an equivalent amount of coverage at reasonable costs in the future. Further, if lenders insist on greater coverage than we are able to obtain it could adversely affect our ability to finance and/or refinance our properties and expand our portfolio.

 

Other Commitments and Contingencies

 

Our mortgage loans are non-recourse to us.  However, in certain cases we have provided guarantees or master leased tenant space.  These guarantees and master leases terminate either upon the satisfaction of specified circumstances or repayment of the underlying loans.  As of September 30, 2010, the aggregate dollar amount of these guarantees and master leases is approximately $245,057,000.

 

At September 30, 2010, $14,233,000 of letters of credit were outstanding under one of our revolving credit facilities.  Our credit facilities contain financial covenants that require us to maintain minimum interest coverage and maximum debt to market capitalization ratios, and provide for higher interest rates in the event of a decline in our ratings below Baa3/BBB. Our credit facilities also contain customary conditions precedent to borrowing, including representations and warranties and also contain customary events of default that could give rise to accelerated repayment, including such items as failure to pay interest or principal.

 

Each of our properties has been subjected to varying degrees of environmental assessment at various times. The environmental assessments did not reveal any material environmental contamination. However, there can be no assurance that the identification of new areas of contamination, changes in the extent or known scope of contamination, the discovery of additional sites, or changes in cleanup requirements would not result in significant costs to us.

 

We are committed to fund additional capital to certain of our partially owned entities aggregating approximately $195,672,000, of which $178,458,000 is committed to the Fund.  In addition, we have agreed in principle to contribute up to $52,000,000 to a new investment management fund which will be managed by LNR.

 

As part of the process of obtaining the required approvals to demolish and develop our 220 Central Park South property into a new residential tower, we have committed to fund the estimated project cost of approximately $400,000,000 to $425,000,000.

 

68

 


 

 

LIQUIDITY AND CAPITAL RESOURCES - continued

 

 

Litigation

 

We are from time to time involved in legal actions arising in the ordinary course of business. In our opinion, after consultation with legal counsel, the outcome of such matters, including the matters referred to below, are not expected to have a material adverse effect on our financial position, results of operations or cash flows.

 

On January 8, 2003, Stop & Shop filed a complaint with the United States District Court for the District of New Jersey (“USDC-NJ”) claiming that we had no right to reallocate and therefore continue to collect the $5,000,000 of annual rent from Stop & Shop pursuant to the Master Agreement and Guaranty, because of the expiration of the East Brunswick, Jersey City, Middletown, Union and Woodbridge leases to which the $5,000,000 of additional rent was previously allocated. Stop & Shop asserted that a prior order of the Bankruptcy Court for the Southern District of New York dated February 6, 2001, as modified on appeal to the District Court for the Southern District of New York on February 13, 2001, froze our right to reallocate which effectively terminated our right to collect the additional rent from Stop & Shop. On March 3, 2003, after we moved to dismiss for lack of jurisdiction, Stop & Shop voluntarily withdrew its complaint. On March 26, 2003, Stop & Shop filed a new complaint in New York State Supreme Court, asserting substantially the same claims as in its USDC-NJ complaint. We removed the action to the United States District Court for the Southern District of New York. In January 2005 that court remanded the action to the New York State Supreme Court. On February 14, 2005, we served an answer in which we asserted a counterclaim seeking a judgment for all the unpaid additional rent accruing through the date of the judgment and a declaration that Stop & Shop will continue to be liable for the additional rent as long as any of the leases subject to the Master Agreement and Guaranty remain in effect. On May 17, 2005, we filed a motion for summary judgment. On July 15, 2005, Stop & Shop opposed our motion and filed a cross-motion for summary judgment. On December 13, 2005, the Court issued its decision denying the motions for summary judgment. Both parties appealed the Court’s decision and on December 14, 2006, the Appellate Court division issued a decision affirming the Court’s decision.  On January 16, 2007, we filed a motion for the reconsideration of one aspect of the Appellate Court’s decision which was denied on March 13, 2007.  Discovery is now complete.  On October 19, 2009, Stop & Shop filed a motion for leave to amend its pleadings to assert new claims for relief, including a claim for damages in an unspecified amount, and an additional affirmative defense.  On April 26, 2010, Stop and Shop’s motion was denied.  A tentative trial date has been set for November 8, 2010.  We intend to continue to vigorously pursue our claims against Stop & Shop.  In our opinion, after consultation with legal counsel, the outcome of such matters will not have a material effect on our financial condition, results of operations or cash flows. 

 

In July 2005, we acquired H Street Building Corporation (“H Street”) which has a subsidiary that owns, among other things, a 50% tenancy in common interest in land located in Arlington County, Virginia, known as "Pentagon Row," leased to two tenants, Street Retail, Inc. and Post Apartment Homes, L.P.  In April 2007, H Street acquired the remaining 50% interest in that fee.  On September 25, 2008, both tenants filed suit against us and the former owners claiming the right of first offer to purchase the fee interest, damages in excess of $75,000,000 and punitive damages.  In April 2010, the Trial Court entered judgment in favor of the tenants, that we sell the land to the tenants for a net sales price of $14,992,000, representing the Trial Court’s allocation of our purchase price for H Street.  The request for damages and punitive damages was denied.  The Trial Court’s judgment is stayed pending the outcome of our appeal.  As a result of the Trial Court’s decision, we recorded a $10,056,000 loss accrual in the three months ended March 31, 2010, primarily representing previously recognized rental income.

 

69

 


 

FUNDS FROM OPERATIONS (“FFO”)

 

FFO is computed in accordance with the definition adopted by the Board of Governors of the National Association of Real Estate Investment Trusts (“NAREIT”). NAREIT defines FFO as GAAP net income or loss adjusted to exclude net gains from sales of depreciated real estate assets, depreciation and amortization expense from real estate assets, extraordinary items and other specified non-cash items, including the pro rata share of such adjustments of unconsolidated subsidiaries.  FFO and FFO per diluted share are used by management, investors and analysts to facilitate meaningful comparisons of operating performance between periods and among our peers because it excludes the effect of real estate depreciation and amortization and net gains on sales, which are based on historical costs and implicitly assume that the value of real estate diminishes predictably over time, rather than fluctuating based on existing market conditions.  FFO does not represent cash generated from operating activities and is not necessarily indicative of cash available to fund cash requirements and should not be considered as an alternative to net income as a performance measure or cash flow as a liquidity measure.  FFO may not be comparable to similarly titled measures employed by other companies.  The calculations of both the numerator and denominator used in the computation of income per share are disclosed in footnote 17 – Income Per Share, in the notes to our consolidated financial statements on page 27 of this Quarterly Report on Form 10-Q.

 

FFO for the Three and Nine Months Ended September 30, 2010, and 2009

 

FFO attributable to common shareholders plus assumed conversions for the three months ended September 30, 2010 was $248,964,000, or $1.31 per diluted share, compared to $234,246,000, or $1.25 per diluted share for the prior year’s quarter.  FFO attributable to common shareholders plus assumed conversions for the nine months ended September 30, 2010 was $814,030,000 or $4.29 per diluted share, compared to $602,825,000, or $3.42 per diluted share for the prior year’s nine months.  Details of certain items that affect comparability are discussed in the financial results summary of our “Overview.” 

 

 

For The Three

 

For The Nine

(Amounts in thousands, except per share amounts)

Months Ended September 30,

 

Months Ended September 30,

Reconciliation of our net income to FFO:

2010 

 

2009 

 

2010 

 

2009 

Net income attributable to Vornado

$

 104,252 

 

$

 140,617 

 

$

 390,910 

 

$

 243,092 

Depreciation and amortization of real property

 

 126,987 

 

 

 122,760 

 

 

 381,782 

 

 

 375,549 

Net gains on sale of real estate

 

 - 

 

 

 (42,653)

 

 

 - 

 

 

 (42,653)

Proportionate share of adjustments to equity in net income of

 

 

 

 

 

 

 

 

 

 

 

 

Toys, to arrive at FFO:

 

 

 

 

 

 

 

 

 

 

 

 

 

Depreciation and amortization of real property

 

 18,132 

 

 

 17,685 

 

 

 53,296 

 

 

 49,831 

 

 

Net gains on sale of real estate

 

 - 

 

 

 (164)

 

 

 - 

 

 

 (164)

 

 

Income tax effect of Toys' adjustments included above

 

 (6,347)

 

 

 (6,133)

 

 

 (18,654)

 

 

 (17,384)

Proportionate share of adjustments to equity in net income of

 

 

 

 

 

 

 

 

 

 

 

 

partially owned entities, excluding Toys, to arrive at FFO:

 

 

 

 

 

 

 

 

 

 

 

 

 

Depreciation and amortization of real property

 

 19,481 

 

 

 18,552 

 

 

 58,555 

 

 

 52,508 

 

 

Net gains on sale of real estate

 

 - 

 

 

 (512)

 

 

 (307)

 

 

 (1,185)

Noncontrolling interests' share of above adjustments

 

 (11,011)

 

 

 (8,146)

 

 

 (33,485)

 

 

 (33,358)

FFO

 

 251,494 

 

 

 242,006 

 

 

 832,097 

 

 

 626,236 

Preferred share dividends

 

 (13,442)

 

 

 (14,269)

 

 

 (41,975)

 

 

 (42,807)

Discount on preferred share redemptions

 

 4,382 

 

 

 - 

 

 

 4,382 

 

 

 - 

FFO attributable to common shareholders

 

 242,434 

 

 

 227,737 

 

 

 794,504 

 

 

 583,429 

Interest on 3.875% exchangeable senior debentures

 

 6,490 

 

 

 6,466 

 

 

 19,405 

 

 

 19,268 

Convertible preferred dividends

 

 40 

 

 

 43 

 

 

 121 

 

 

 128 

FFO attributable to common shareholders plus assumed conversions

$

 248,964 

 

$

 234,246 

 

$

 814,030 

 

$

 602,825 

 

 

 

 

 

 

 

 

 

 

 

 

Reconciliation of Weighted Average Shares

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding

 

 182,462 

 

 

 178,689 

 

 

 182,014 

 

 

 168,820 

 

Effect of dilutive securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

3.875% exchangeable senior debentures

 

 5,736 

 

 

 5,764 

 

 

 5,736 

 

 

 5,764 

 

 

Employee stock options and restricted share awards

 

 1,706 

 

 

 2,213 

 

 

 1,741 

 

 

 1,558 

 

 

Convertible preferred shares

 

 70 

 

 

 75 

 

 

 71 

 

 

 76 

 

Denominator for FFO per diluted share

 

 189,974 

 

 

 186,741 

 

 

 189,562 

 

 

 176,218 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

FFO attributable to common shareholders plus assumed conversions per diluted share

$

 1.31 

 

$

 1.25 

 

$

 4.29 

 

$

 3.42 

 

70

 


 

Item 3.   Quantitative and Qualitative Disclosures About Market Risk

We have exposure to fluctuations in market interest rates. Market interest rates are sensitive to many factors that are beyond our control. Our exposure to a change in interest rates on our consolidated and non-consolidated debt (all of which arises out of non-trading activity) is as follows:

 

(Amounts in thousands, except per share amounts)

As at September 30, 2010

 

As at December 31, 2009

 

 

 

 

 

  

 

Weighted

 

Effect of 1%

 

 

 

Weighted

 

 

 

 

 

  

 

Average

 

Change In

 

 

 

Average

Consolidated debt:

Balance

  

 

Interest Rate

 

Base Rates

 

Balance

Interest Rate

 

Variable rate

$

 1,991,624 

  

 

2.11%

 

$

 19,916 

 

$

 2,657,972 

 

1.67%

 

Fixed rate

 

 9,118,423 

  

 

5.88%

 

 

 - 

 

 

 8,281,643 

 

5.89%

 

 

 

$

 11,110,047 

  

 

5.20%

 

 

 19,916 

 

$

 10,939,615 

 

4.86%

Pro-rata share of debt of non-

 

 

  

 

 

 

 

 

 

 

 

 

 

 

consolidated entities (non-recourse):

 

 

  

 

 

 

 

 

 

 

 

 

 

Variable rate – excluding Toys

$

 420,375 

  

 

1.85%

 

 

 4,204 

 

$

 331,980 

 

2.87%

 

Variable rate – Toys

 

 429,304 

  

 

4.68%

 

 

 4,293 

 

 

 852,040 

 

3.45%

 

Fixed rate (including $1,295,184 and

 

 

  

 

 

 

 

 

 

 

 

 

 

 

 

$1,077,919 of Toys debt in 2010 and 2009)

 

 2,150,818 

 (1)

 

7.37%

 

 

 - 

 

 

 1,965,620 

 

7.16%

 

 

 

$

 3,000,497 

  

 

6.21%

 

 

 8,497 

 

$

 3,149,640 

 

5.70%

Redeemable noncontrolling interests’ share of above

 

 

  

 

 

 

 

 (2,032)

 

 

 

 

 

Total change in annual net income

 

 

  

 

 

 

$

 26,381 

 

 

 

 

 

Per share-diluted

 

 

  

 

 

 

$

0.14 

 

 

 

 

 

 

 

 

 

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

 

 

 

 

 

 

 

 

 

(1)

Excludes $37 billion for our 26.2% pro rata shares of liabilities related to consolidated CMBS and CDO trusts which are non-recourse to LNR and its equity holders, including us.

 

 

We may utilize various financial instruments to mitigate the impact of interest rate fluctuations on our cash flows and earnings, including hedging strategies, depending on our analysis of the interest rate environment and the costs and risks of such strategies. As of September 30, 2010, variable rate debt with an aggregate principal amount of $567,711,408 and a weighted average interest rate of 2.49% was subject to LIBOR caps.  These caps are based on a notional amount of $567,711,408 and cap LIBOR at a weighted average rate of 6.18%. 

 

Fair Value of Debt

 

The estimated fair value of our consolidated debt is calculated based on current market prices and discounted cash flows at the current rate at which similar loans would be made to borrowers with similar credit ratings for the remaining term of such debt.  As of September 30, 2010, the estimated fair value of our consolidated debt was $11,325,568,000.

 

Derivative Instruments

 

We have, and may in the future enter into, derivative positions that do not qualify for hedge accounting treatment, including our economic interest in J.C. Penney common shares.  Because these derivatives do not qualify for hedge accounting treatment, the gains or losses resulting from their mark-to-market at the end of each reporting period are recognized as an increase or decrease in “interest and other investment income (loss), net” on our consolidated statements of income. In addition, we are, and may in the future be, subject to additional expense based on the notional amount of the derivative positions and a specified spread over LIBOR. Because the market value of these instruments can vary significantly between periods, we may experience significant fluctuations in the amount of our investment income or expense in any given period. In the three and nine months ended September 30, 2010, we recognized a $32,249,000 net gain from the mark-to-market of our derivative position in J.C. Penney's common shares.   

 

71

 


 

Item 4.   Controls and Procedures

Disclosure Controls and Procedures:  The Company’s management, with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the Company’s disclosure controls and procedures (as such term is defined in Rule 13a‑15(e) under the Securities Exchange Act of 1934, as amended) as of the end of the period covered by this report. Based on such evaluation, the Company’s Chief Executive Officer and Chief Financial Officer have concluded that, as of September 30, 2010, such disclosure controls and procedures were effective.

 

Internal Control Over Financial Reporting:  There have not been any changes in the Company’s internal control over financial reporting (as such term is defined in Rule 13a-15(f) under the Securities and Exchange Act of 1934, as amended) during the fiscal quarter to which this report relates that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

 

72

 


 

PART II.   OTHER INFORMATION

 

Item 1.  Legal Proceedings

 

 

We are from time to time involved in legal actions arising in the ordinary course of business. In our opinion, after consultation with legal counsel, the outcome of such matters, including the matters referred to below, are not expected to have a material adverse effect on our financial position, results of operations or cash flows.

 

On January 8, 2003, Stop & Shop filed a complaint with the United States District Court for the District of New Jersey (“USDC-NJ”) claiming that we had no right to reallocate and therefore continue to collect the $5,000,000 of annual rent from Stop & Shop pursuant to the Master Agreement and Guaranty, because of the expiration of the East Brunswick, Jersey City, Middletown, Union and Woodbridge leases to which the $5,000,000 of additional rent was previously allocated. Stop & Shop asserted that a prior order of the Bankruptcy Court for the Southern District of New York dated February 6, 2001, as modified on appeal to the District Court for the Southern District of New York on February 13, 2001, froze our right to reallocate which effectively terminated our right to collect the additional rent from Stop & Shop. On March 3, 2003, after we moved to dismiss for lack of jurisdiction, Stop & Shop voluntarily withdrew its complaint. On March 26, 2003, Stop & Shop filed a new complaint in New York State Supreme Court, asserting substantially the same claims as in its USDC-NJ complaint. We removed the action to the United States District Court for the Southern District of New York. In January 2005 that court remanded the action to the New York State Supreme Court. On February 14, 2005, we served an answer in which we asserted a counterclaim seeking a judgment for all the unpaid additional rent accruing through the date of the judgment and a declaration that Stop & Shop will continue to be liable for the additional rent as long as any of the leases subject to the Master Agreement and Guaranty remain in effect. On May 17, 2005, we filed a motion for summary judgment. On July 15, 2005, Stop & Shop opposed our motion and filed a cross-motion for summary judgment. On December 13, 2005, the Court issued its decision denying the motions for summary judgment. Both parties appealed the Court’s decision and on December 14, 2006, the Appellate Court division issued a decision affirming the Court’s decision.  On January 16, 2007, we filed a motion for the reconsideration of one aspect of the Appellate Court’s decision which was denied on March 13, 2007.  Discovery is now complete.  On October 19, 2009, Stop & Shop filed a motion for leave to amend its pleadings to assert new claims for relief, including a claim for damages in an unspecified amount, and an additional affirmative defense.  On April 26, 2010, Stop and Shop’s motion was denied.  A tentative trial date has been set for November 8, 2010.  We intend to continue to vigorously pursue our claims against Stop & Shop.  In our opinion, after consultation with legal counsel, the outcome of such matters will not have a material effect on our financial condition, results of operations or cash flows. 

 

In July 2005, we acquired H Street Building Corporation (“H Street”) which has a subsidiary that owns, among other things, a 50% tenancy in common interest in land located in Arlington County, Virginia, known as "Pentagon Row," leased to two tenants, Street Retail, Inc. and Post Apartment Homes, L.P.  In April 2007, H Street acquired the remaining 50% interest in that fee.  On September 25, 2008, both tenants filed suit against us and the former owners claiming the right of first offer to purchase the fee interest, damages in excess of $75,000,000 and punitive damages.  In April 2010, the Trial Court entered judgment in favor of the tenants, that we sell the land to the tenants for a net sales price of $14,992,000, representing the Trial Court’s allocation of our purchase price for H Street.  The request for damages and punitive damages was denied.  The Trial Court’s judgment is stayed pending the outcome of our appeal.  As a result of the Trial Court’s decision, we recorded a $10,056,000 loss accrual in the three months ended March 31, 2010, primarily representing previously recognized rental income.

 

73

 


 

Item 1A. Risk Factors

There were no material changes to the Risk Factors disclosed in our Annual Report on Form 10-K for the year ended December 31, 2009.

 

 

Item 2.   Unregistered Sales of Equity Securities and Use of Proceeds

In the third quarter of 2010, we issued 56,153 common shares upon the redemption of Class A units of the Operating Partnership held by persons who received units, in private placements in earlier periods, in exchange for their interests in limited partnerships that owned real estate. The common shares were issued without registration under the Securities Act of 1933 in reliance on Section 4 (2) of that Act.

 

Information relating to compensation plans under which our equity securities are authorized for issuance is set forth under Part III, Item 12 of the Annual Report on Form 10-K for the year ended December 31, 2009, and such information is incorporated by reference herein.

 

 

Item 3.   Defaults Upon Senior Securities

        None.

 

 

Item 5.   Other Information

        None.

 

 

Item 6.   Exhibits

Exhibits required by Item 601 of Regulation S-K are filed herewith or incorporated herein by reference and are listed in the attached Exhibit Index.

 

74

 


 

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

 

 

VORNADO REALTY TRUST

 

 

(Registrant)

 

 

 

 

 

 

 

 

 

 

 

 

Date:  November 2, 2010

By:

/s/ Joseph Macnow

 

 

Joseph Macnow, Executive Vice President -
Finance and Administration and
Chief Financial Officer (duly authorized officer
and principal financial and accounting officer)

 

75

 


 

 

EXHIBIT INDEX

 

 

 

 

 

 

 

Exhibit No.

 

 

 

 

 

 

3.1 

 

-

Articles of Restatement of Vornado Realty Trust, as filed with the State

*

 

 

 

 

 

Department of Assessments and Taxation of Maryland on July 30, 2007 - Incorporated

 

 

 

 

 

 

by reference to Exhibit 3.75 to Vornado Realty Trust’s Quarterly Report on Form 10-Q

 

 

 

 

 

 

for the quarter ended June 30, 2007 (File No. 001-11954), filed on July 31, 2007

 

 

 

 

 

 

 

 

 

3.2 

 

-

Amended and Restated Bylaws of Vornado Realty Trust, as amended on March 2, 2000 -

*

 

 

 

 

 

Incorporated by reference to Exhibit 3.12 to Vornado Realty Trust’s Annual Report on

 

 

 

 

 

 

Form 10-K for the year ended December 31, 1999 (File No. 001-11954), filed on

 

 

 

 

 

 

March 9, 2000

 

 

 

 

 

 

 

 

 

3.3 

 

-

Second Amended and Restated Agreement of Limited Partnership of Vornado Realty L.P.,

*

 

 

 

 

 

dated as of October 20, 1997 (the “Partnership Agreement”) – Incorporated by reference

 

 

 

 

 

 

to Exhibit 3.26 to Vornado Realty Trust’s Quarterly Report on Form 10-Q for the quarter

 

 

 

 

 

 

ended March 31, 2003 (File No. 001-11954), filed on May 8, 2003

 

 

 

 

 

 

 

 

 

3.4 

 

-

Amendment to the Partnership Agreement, dated as of December 16, 1997 – Incorporated by

*

 

 

 

 

 

reference to Exhibit 3.27 to Vornado Realty Trust’s Quarterly Report on Form 10-Q for

 

 

 

 

 

 

the quarter ended March 31, 2003 (File No. 001-11954), filed on May 8, 2003

 

 

 

 

 

 

 

 

 

3.5 

 

-

Second Amendment to the Partnership Agreement, dated as of April 1, 1998 – Incorporated

*

 

 

 

 

 

by reference to Exhibit 3.5 to Vornado Realty Trust’s Registration Statement on Form S-3

 

 

 

 

 

 

(File No. 333-50095), filed on April 14, 1998

 

 

 

 

 

 

 

 

 

3.6 

 

-

Third Amendment to the Partnership Agreement, dated as of November 12, 1998 -

*

 

 

 

 

 

Incorporated by reference to Exhibit 3.2 to Vornado Realty Trust’s Current Report on

 

 

 

 

 

 

Form 8-K (File No. 001-11954), filed on November 30, 1998

 

 

 

 

 

 

 

 

 

3.7 

 

-

Fourth Amendment to the Partnership Agreement, dated as of November 30, 1998 -

*

 

 

 

 

 

Incorporated by reference to Exhibit 3.1 to Vornado Realty Trust’s Current Report on

 

 

 

 

 

 

Form 8-K (File No. 001-11954), filed on February 9, 1999

 

 

 

 

 

 

 

 

 

3.8 

 

-

Fifth Amendment to the Partnership Agreement, dated as of March 3, 1999 - Incorporated by

*

 

 

 

 

 

reference to Exhibit 3.1 to Vornado Realty Trust’s Current Report on Form 8-K

 

 

 

 

 

 

(File No. 001-11954), filed on March 17, 1999

 

 

 

 

 

 

 

 

 

3.9 

 

-

Sixth Amendment to the Partnership Agreement, dated as of March 17, 1999 - Incorporated

*

 

 

 

 

 

by reference to Exhibit 3.2 to Vornado Realty Trust’s Current Report on Form 8-K

 

 

 

 

 

 

(File No. 001-11954), filed on July 7, 1999

 

 

 

 

 

 

 

 

 

3.10

 

-

Seventh Amendment to the Partnership Agreement, dated as of May 20, 1999 - Incorporated

*

 

 

 

 

 

by reference to Exhibit 3.3 to Vornado Realty Trust’s Current Report on Form 8-K

 

 

 

 

 

 

(File No. 001-11954), filed on July 7, 1999

 

 

 

 

 

 

 

 

 

3.11 

 

-

Eighth Amendment to the Partnership Agreement, dated as of May 27, 1999 - Incorporated

*

 

 

 

 

 

by reference to Exhibit 3.4 to Vornado Realty Trust’s Current Report on Form 8-K

 

 

 

 

 

 

(File No. 001-11954), filed on July 7, 1999

 

 

 

 

 

 

 

 

 

3.12 

 

-

Ninth Amendment to the Partnership Agreement, dated as of September 3, 1999 -

*

 

 

 

 

 

Incorporated by reference to Exhibit 3.3 to Vornado Realty Trust’s Current Report on

 

 

 

 

 

 

Form 8-K (File No. 001-11954), filed on October 25, 1999

 

 

 

 

 

 

 

 

 

3.13 

 

-

Tenth Amendment to the Partnership Agreement, dated as of September 3, 1999 -

*

 

 

 

 

 

Incorporated by reference to Exhibit 3.4 to Vornado Realty Trust’s Current Report on

 

 

 

 

 

 

Form 8-K (File No. 001-11954), filed on October 25, 1999

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

_______________________

 

 

 

*

 

 

Incorporated by reference.

 

 

76

 


 

 

 

3.14

 

-

Eleventh Amendment to the Partnership Agreement, dated as of November 24, 1999 -

*

 

 

 

 

 

Incorporated by reference to Exhibit 3.2 to Vornado Realty Trust’s Current Report on

 

 

 

 

 

 

Form 8-K (File No. 001-11954), filed on December 23, 1999

 

 

 

 

 

 

 

 

 

3.15

 

-

Twelfth Amendment to the Partnership Agreement, dated as of May 1, 2000 - Incorporated

*

 

 

 

 

 

by reference to Exhibit 3.2 to Vornado Realty Trust’s Current Report on Form 8-K

 

 

 

 

 

 

(File No. 001-11954), filed on May 19, 2000

 

 

 

 

 

 

 

 

 

3.16

 

-

Thirteenth Amendment to the Partnership Agreement, dated as of May 25, 2000 -

*

 

 

 

 

 

Incorporated by reference to Exhibit 3.2 to Vornado Realty Trust’s Current Report on

 

 

 

 

 

 

Form 8-K (File No. 001-11954), filed on June 16, 2000

 

 

 

 

 

 

 

 

 

3.17

 

-

Fourteenth Amendment to the Partnership Agreement, dated as of December 8, 2000 -

*

 

 

 

 

 

Incorporated by reference to Exhibit 3.2 to Vornado Realty Trust’s Current Report on

 

 

 

 

 

 

Form 8-K (File No. 001-11954), filed on December 28, 2000

 

 

 

 

 

 

 

 

 

3.18

 

-

Fifteenth Amendment to the Partnership Agreement, dated as of December 15, 2000 -

*

 

 

 

 

 

Incorporated by reference to Exhibit 4.35 to Vornado Realty Trust’s Registration

 

 

 

 

 

 

Statement on Form S-8 (File No. 333-68462), filed on August 27, 2001

 

 

 

 

 

 

 

 

 

3.19

 

-

Sixteenth Amendment to the Partnership Agreement, dated as of July 25, 2001 - Incorporated

*

 

 

 

 

 

by reference to Exhibit 3.3 to Vornado Realty Trust’s Current Report on Form 8-K

 

 

 

 

 

 

(File No. 001 11954), filed on October 12, 2001

 

 

 

 

 

 

 

 

 

3.20

 

-

Seventeenth Amendment to the Partnership Agreement, dated as of September 21, 2001 -

*

 

 

 

 

 

Incorporated by reference to Exhibit 3.4 to Vornado Realty Trust’s Current Report on

 

 

 

 

 

 

Form 8 K (File No. 001-11954), filed on October 12, 2001

 

 

 

 

 

 

 

 

 

3.21

 

-

Eighteenth Amendment to the Partnership Agreement, dated as of January 1, 2002 -

*

 

 

 

 

 

Incorporated by reference to Exhibit 3.1 to Vornado Realty Trust’s Current Report on

 

 

 

 

 

 

Form 8-K/A (File No. 001-11954), filed on March 18, 2002

 

 

 

 

 

 

 

 

 

3.22

 

-

Nineteenth Amendment to the Partnership Agreement, dated as of July 1, 2002 - Incorporated

*

 

 

 

 

 

by reference to Exhibit 3.47 to Vornado Realty Trust’s Quarterly Report on Form 10-Q

 

 

 

 

 

 

for the quarter ended June 30, 2002 (File No. 001-11954), filed on August 7, 2002

 

 

 

 

 

 

 

 

 

3.23

 

-

Twentieth Amendment to the Partnership Agreement, dated April 9, 2003 - Incorporated by

*

 

 

 

 

 

reference to Exhibit 3.46 to Vornado Realty Trust’s Quarterly Report on Form 10-Q for

 

 

 

 

 

 

the quarter ended March 31, 2003 (File No. 001-11954), filed on May 8, 2003

 

 

 

 

 

 

 

 

 

3.24

 

-

Twenty-First Amendment to the Partnership Agreement, dated as of July 31, 2003 -

*

 

 

 

 

 

Incorporated by reference to Exhibit 3.47 to Vornado Realty Trust’s Quarterly Report

 

 

 

 

 

 

on Form 10-Q for the quarter ended September 30, 2003 (File No. 001-11954), filed on

 

 

 

 

 

 

November 7, 2003

 

 

 

 

 

 

 

 

 

3.25

 

-

Twenty-Second Amendment to the Partnership Agreement, dated as of November 17, 2003 –

*

 

 

 

 

 

Incorporated by reference to Exhibit 3.49 to Vornado Realty Trust’s Annual Report on

 

 

 

 

 

 

Form 10-K for the year ended December 31, 2003 (File No. 001-11954), filed on

 

 

 

 

 

 

March 3, 2004

 

 

 

 

 

 

 

 

 

3.26

 

-

Twenty-Third Amendment to the Partnership Agreement, dated May 27, 2004 – Incorporated

*

 

 

 

 

 

by reference to Exhibit 99.2 to Vornado Realty Trust’s Current Report on Form 8-K

 

 

 

 

 

 

(File No. 001-11954), filed on June 14, 2004

 

 

 

 

 

 

 

 

 

3.27

 

-

Twenty-Fourth Amendment to the Partnership Agreement, dated August 17, 2004 –

*

 

 

 

 

 

Incorporated by reference to Exhibit 3.57 to Vornado Realty Trust and Vornado Realty

 

 

 

 

 

 

L.P.’s Registration Statement on Form S-3 (File No. 333-122306), filed on

 

 

 

 

 

 

January 26, 2005

 

 

 

 

 

 

_______________________

 

 

 

*

 

 

Incorporated by reference.

 

 

77

 


 

 

 

3.28

 

-

Twenty-Fifth Amendment to the Partnership Agreement, dated November 17, 2004 –

*

 

 

 

 

 

Incorporated by reference to Exhibit 3.58 to Vornado Realty Trust and Vornado Realty

 

 

 

 

 

 

L.P.’s Registration Statement on Form S-3 (File No. 333-122306), filed on

 

 

 

 

 

 

January 26, 2005

 

 

 

 

 

 

 

 

 

3.29

 

-

Twenty-Sixth Amendment to the Partnership Agreement, dated December 17, 2004 –

*

 

 

 

 

 

Incorporated by reference to Exhibit 3.1 to Vornado Realty L.P.’s Current Report on

 

 

 

 

 

 

Form 8-K (File No. 000-22685), filed on December 21, 2004

 

 

 

 

 

 

 

 

 

3.30

 

-

Twenty-Seventh Amendment to the Partnership Agreement, dated December 20, 2004 –

*

 

 

 

 

 

Incorporated by reference to Exhibit 3.2 to Vornado Realty L.P.’s Current Report on

 

 

 

 

 

 

Form 8-K (File No. 000-22685), filed on December 21, 2004

 

 

 

 

 

 

 

 

 

3.31

 

-

Twenty-Eighth Amendment to the Partnership Agreement, dated December 30, 2004 -

*

 

 

 

 

 

Incorporated by reference to Exhibit 3.1 to Vornado Realty L.P.’s Current Report on

 

 

 

 

 

 

Form 8-K (File No. 000-22685), filed on January 4, 2005

 

 

 

 

 

 

 

 

 

3.32

 

-

Twenty-Ninth Amendment to the Partnership Agreement, dated June 17, 2005 - Incorporated

*

 

 

 

 

 

by reference to Exhibit 3.1 to Vornado Realty L.P.’s Current Report on Form 8-K

 

 

 

 

 

 

(File No. 000-22685), filed on June 21, 2005

 

 

 

 

 

 

 

 

 

3.33

 

-

Thirtieth Amendment to the Partnership Agreement, dated August 31, 2005 - Incorporated by

*

 

 

 

 

 

reference to Exhibit 3.1 to Vornado Realty L.P.’s Current Report on Form 8-K

 

 

 

 

 

 

(File No. 000-22685), filed on September 1, 2005

 

 

 

 

 

 

 

 

 

3.34

 

-

Thirty-First Amendment to the Partnership Agreement, dated September 9, 2005 -

*

 

 

 

 

 

Incorporated by reference to Exhibit 3.1 to Vornado Realty L.P.’s Current Report on

 

 

 

 

 

 

Form 8-K (File No. 000-22685), filed on September 14, 2005

 

 

 

 

 

 

 

 

 

3.35

 

-

Thirty-Second Amendment and Restated Agreement of Limited Partnership, dated as of

*

 

 

 

 

 

December 19, 2005 – Incorporated by reference to Exhibit 3.59 to Vornado Realty L.P.’s

 

 

 

 

 

 

Quarterly Report on Form 10-Q for the quarter ended March 31, 2006

 

 

 

 

 

 

(File No. 000-22685), filed on May 8, 2006

 

 

 

 

 

 

 

 

 

3.36

 

-

Thirty-Third Amendment to Second Amended and Restated Agreement of Limited

*

 

 

 

 

 

Partnership, dated as of April 25, 2006 – Incorporated by reference to Exhibit 10.2 to

 

 

 

 

 

 

Vornado Realty Trust’s Form 8-K (File No. 001-11954), filed on May 1, 2006

 

 

 

 

 

 

 

 

 

3.37

 

-

Thirty-Fourth Amendment to Second Amended and Restated Agreement of Limited

*

 

 

 

 

 

Partnership, dated as of May 2, 2006 – Incorporated by reference to Exhibit 3.1 to

 

 

 

 

 

 

Vornado Realty L.P.’s Current Report on Form 8-K (File No. 000-22685), filed on

 

 

 

 

 

 

May 3, 2006

 

 

 

 

 

 

 

 

 

3.38

 

-

Thirty-Fifth Amendment to Second Amended and Restated Agreement of Limited

*

 

 

 

 

 

Partnership, dated as of August 17, 2006 – Incorporated by reference to Exhibit 3.1 to

 

 

 

 

 

 

Vornado Realty L.P.’s Form 8-K (File No. 000-22685), filed on August 23, 2006

 

 

 

 

 

 

 

 

 

3.39

 

-

Thirty-Sixth Amendment to Second Amended and Restated Agreement of Limited

*

 

 

 

 

 

Partnership, dated as of October 2, 2006 – Incorporated by reference to Exhibit 3.1 to

 

 

 

 

 

 

Vornado Realty L.P.’s Form 8-K (File No. 000-22685), filed on January 22, 2007

 

 

 

 

 

 

 

 

 

3.40

 

-

Thirty-Seventh Amendment to Second Amended and Restated Agreement of Limited

*

 

 

 

 

 

Partnership, dated as of June 28, 2007 – Incorporated by reference to Exhibit 3.1 to

 

 

 

 

 

 

Vornado Realty L.P.’s Current Report on Form 8-K (File No. 000-22685), filed on

 

 

 

 

 

 

June 27, 2007

 

 

 

 

 

 

_______________________

 

 

 

*

 

 

Incorporated by reference.

 

 

78

 


 

 

 

3.41

 

-

Thirty-Eighth Amendment to Second Amended and Restated Agreement of Limited

*

 

 

 

 

 

Partnership, dated as of June 28, 2007 – Incorporated by reference to Exhibit 3.2 to

 

 

 

 

 

 

Vornado Realty L.P.’s Current Report on Form 8-K (File No. 000-22685), filed on

 

 

 

 

 

 

June 27, 2007

 

 

 

 

 

 

 

 

 

3.42

 

-

Thirty-Ninth Amendment to Second Amended and Restated Agreement of Limited

*

 

 

 

 

 

Partnership, dated as of June 28, 2007 – Incorporated by reference to Exhibit 3.3 to

 

 

 

 

 

 

Vornado Realty L.P.’s Current Report on Form 8-K (File No. 000-22685), filed on

 

 

 

 

 

 

June 27, 2007

 

 

 

 

 

 

 

 

 

3.43

 

-

Fortieth Amendment to Second Amended and Restated Agreement of Limited

*

 

 

 

 

 

Partnership, dated as of June 28, 2007 – Incorporated by reference to Exhibit 3.4 to

 

 

 

 

 

 

Vornado Realty L.P.’s Current Report on Form 8-K (File No. 000-22685), filed on

 

 

 

 

 

 

June 27, 2007

 

 

 

 

 

 

 

 

 

3.44

 

-

Forty-First Amendment to Second Amended and Restated Agreement of Limited

*

 

 

 

 

 

Partnership, dated as of March 31, 2008 – Incorporated by reference to Exhibit 3.44 to

 

 

 

 

 

 

Vornado Realty Trust’s Quarterly Report on Form 10-Q for the quarter ended March 31,

 

 

 

 

 

 

2008 (file No. 001-11954), filed on May 6, 2008

 

 

 

 

 

 

 

 

 

4.1

 

-

Indenture, dated as of November 25, 2003, between Vornado Realty L.P. and The Bank of

*

 

 

 

 

 

New York, as Trustee - Incorporated by reference to Exhibit 4.10 to Vornado Realty

 

 

 

 

 

 

Trust’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2005

 

 

 

 

 

 

(File No. 001-11954), filed on April 28, 2005

 

 

 

 

 

 

 

 

 

4.2

 

-

Indenture, dated as of November 20, 2006, among Vornado Realty Trust, as Issuer, Vornado

*

 

 

 

 

 

Realty L.P., as Guarantor and The Bank of New York, as Trustee – Incorporated by

 

 

 

 

 

 

reference to Exhibit 4.1 to Vornado Realty Trust’s Current Report on Form 8-K

 

 

 

 

 

 

(File No. 001-11954), filed on November 27, 2006

 

 

 

 

 

 

 

 

 

 

 

 

Certain instruments defining the rights of holders of long-term debt securities of Vornado

 

 

 

 

 

 

Realty Trust and its subsidiaries are omitted pursuant to Item 601(b)(4)(iii) of Regulation

 

 

 

 

 

 

S-K. Vornado Realty Trust hereby undertakes to furnish to the Securities and Exchange

 

 

 

 

 

 

Commission, upon request, copies of any such instruments.

 

 

 

 

 

 

 

*

 

10.1

 

-

Master Agreement and Guaranty, between Vornado, Inc. and Bradlees New Jersey, Inc. dated

 

 

 

 

 

 

as of May 1, 1992 - Incorporated by reference to Vornado, Inc.’s Quarterly Report on

 

 

 

 

 

 

Form 10-Q for the quarter ended March 31, 1992 (File No. 001-11954), filed May 8, 1992

 

 

 

 

 

 

 

*

 

10.2

 

-

Registration Rights Agreement between Vornado, Inc. and Steven Roth, dated December 29,

 

 

 

 

 

 

1992 - Incorporated by reference to Vornado Realty Trust’s Annual Report on Form 10-K

 

 

 

 

 

 

for the year ended December 31, 1992 (File No. 001-11954), filed February 16, 1993

 

 

 

 

 

 

 

*

 

10.3

 

-

Stock Pledge Agreement between Vornado, Inc. and Steven Roth dated December 29, 1992 -

 

 

 

 

 

 

Incorporated by reference to Vornado, Inc.’s Annual Report on Form 10-K for the year

 

 

 

 

 

 

ended December 31, 1992 (File No. 001-11954), filed February 16, 1993

 

 

 

 

 

 

 

*

 

10.4

**

-

Management Agreement between Interstate Properties and Vornado, Inc. dated July 13, 1992

 

 

 

 

 

 

- Incorporated by reference to Vornado, Inc.’s Annual Report on Form 10-K for the year

 

 

 

 

 

 

ended December 31, 1992 (File No. 001-11954), filed February 16, 1993

 

 

 

 

 

 

_______________________

 

 

 

*

 

 

Incorporated by reference.

 

 

 

**

 

 

Management contract or compensatory agreement.

 

 

79

 


 

 

 

10.5 

**

-

Employment Agreement, dated as of April 15, 1997, by and among Vornado Realty Trust,

*

 

 

 

 

 

The Mendik Company, L.P. and David R. Greenbaum - Incorporated by reference to

 

 

 

 

 

 

Exhibit 10.4 to Vornado Realty Trust’s Current Report on Form 8-K

 

 

 

 

 

 

(File No. 001-11954), filed on April 30, 1997

 

 

 

 

 

 

 

 

 

10.6 

**

-

Promissory Note from Steven Roth to Vornado Realty Trust, dated December 23, 2005 –

*

 

 

 

 

 

Incorporated by reference to Exhibit 10.15 to Vornado Realty Trust Annual Report on

 

 

 

 

 

 

Form 10-K for the year ended December 31, 2005 (File No. 001-11954), filed on

 

 

 

 

 

 

February 28, 2006

 

 

 

 

 

 

 

 

 

10.7 

**

-

Letter agreement, dated November 16, 1999, between Steven Roth and Vornado Realty Trust

*

 

 

 

 

 

- Incorporated by reference to Exhibit 10.51 to Vornado Realty Trust’s Annual Report on

 

 

 

 

 

 

Form 10-K for the year ended December 31, 1999 (File No. 001-11954), filed on

 

 

 

 

 

 

March 9, 2000

 

 

 

 

 

 

 

 

 

10.8 

 

-

Agreement and Plan of Merger, dated as of October 18, 2001, by and among Vornado Realty

*

 

 

 

 

 

Trust, Vornado Merger Sub L.P., Charles E. Smith Commercial Realty L.P., Charles E.

 

 

 

 

 

 

Smith Commercial Realty L.L.C., Robert H. Smith, individually, Robert P. Kogod,

 

 

 

 

 

 

individually, and Charles E. Smith Management, Inc. - Incorporated by reference to

 

 

 

 

 

 

Exhibit 2.1 to Vornado Realty Trust’s Current Report on Form 8-K (File No. 001-11954),

 

 

 

 

 

 

filed on January 16, 2002

 

 

 

 

 

 

 

 

 

10.9 

 

-

Tax Reporting and Protection Agreement, dated December 31, 2001, by and among Vornado,

*

 

 

 

 

 

Vornado Realty L.P., Charles E. Smith Commercial Realty L.P. and Charles E. Smith

 

 

 

 

 

 

Commercial Realty L.L.C. - Incorporated by reference to Exhibit 10.3 to Vornado Realty

 

 

 

 

 

 

Trust’s Current Report on Form 8-K/A (File No. 1-11954), filed on March 18, 2002

 

 

 

 

 

 

 

 

 

10.10

 

-

Employment Agreement between Vornado Realty Trust and Michael D. Fascitelli, dated

*

 

 

 

 

 

March 8, 2002 - Incorporated by reference to Exhibit 10.7 to Vornado Realty Trust’s

 

 

 

 

 

 

Quarterly Report on Form 10-Q for the quarter ended March 31, 2002

 

 

 

 

 

 

(File No. 001-11954), filed on May 1, 2002

 

 

 

 

 

 

 

 

 

10.11 

**

-

First Amendment, dated October 31, 2002, to the Employment Agreement between Vornado

*

 

 

 

 

 

Realty Trust and Michael D. Fascitelli, dated March 8, 2002 - Incorporated by reference

 

 

 

 

 

 

to Exhibit 99.6 to the Schedule 13D filed by Michael D. Fascitelli on November 8, 2002

 

 

 

 

 

 

 

 

 

10.12 

**

-

Amendment to Real Estate Retention Agreement, dated as of July 3, 2002, by and between

*

 

 

 

 

 

Alexander’s, Inc. and Vornado Realty L.P. - Incorporated by reference to Exhibit

 

 

 

 

 

 

10(i)(E)(3) to Alexander’s Inc.’s Quarterly Report for the quarter ended June 30, 2002

 

 

 

 

 

 

(File No. 001-06064), filed on August 7, 2002

 

 

 

 

 

 

 

 

 

10.13 

 

-

59th Street Real Estate Retention Agreement, dated as of July 3, 2002, by and between

*

 

 

 

 

 

Vornado Realty L.P., 731 Residential LLC and 731 Commercial LLC - Incorporated by

 

 

 

 

 

 

reference to Exhibit 10(i)(E)(4) to Alexander’s Inc.’s Quarterly Report for the quarter

 

 

 

 

 

 

ended June 30, 2002 (File No. 001-06064), filed on August 7, 2002

 

 

 

 

 

 

 

 

 

10.14 

 

-

Amended and Restated Management and Development Agreement, dated as of July 3, 2002,

*

 

 

 

 

 

by and between Alexander’s, Inc., the subsidiaries party thereto and Vornado

 

 

 

 

 

 

Management Corp. - Incorporated by reference to Exhibit 10(i)(F)(1) to Alexander’s

 

 

 

 

 

 

Inc.’s Quarterly Report for the quarter ended June 30, 2002 (File No. 001-06064),

 

 

 

 

 

 

filed on August 7, 2002

 

 

 

 

 

 

 

 

 

10.15 

 

-

59th Street Management and Development Agreement, dated as of July 3, 2002, by and

*

 

 

 

 

 

between 731 Residential LLC, 731 Commercial LLC and Vornado Management Corp. -

 

 

 

 

 

 

Incorporated by reference to Exhibit 10(i)(F)(2) to Alexander’s Inc.’s Quarterly Report

 

 

 

 

 

 

for the quarter ended June 30, 2002 (File No. 001-06064), filed on August 7, 2002

 

 

 

 

 

 

_______________________

 

 

 

*

 

 

Incorporated by reference.

 

 

 

**

 

 

Management contract or compensatory agreement.

 

 

80

 


 

 

 

10.16

 

-

Amendment dated May 29, 2002, to the Stock Pledge Agreement between Vornado Realty

*

 

 

 

 

 

Trust and Steven Roth dated December 29, 1992 - Incorporated by reference to Exhibit 5

 

 

 

 

 

 

of Interstate Properties’ Schedule 13D/A dated May 29, 2002 (File No. 005-44144), filed

 

 

 

 

 

 

on May 30, 2002

 

 

 

 

 

 

 

 

 

10.17

**

-

Vornado Realty Trust’s 2002 Omnibus Share Plan - Incorporated by reference to Exhibit 4.2

*

 

 

 

 

 

to Vornado Realty Trust’s Registration Statement on Form S-8 (File No. 333-102216)

 

 

 

 

 

 

filed December 26, 2002

 

 

 

 

 

 

 

 

 

10.18

**

-

Form of Stock Option Agreement between the Company and certain employees –

*

 

 

 

 

 

Incorporated by reference to Exhibit 10.77 to Vornado Realty Trust’s

 

 

 

 

 

 

Annual Report on Form 10-K for the year ended December 31, 2004

 

 

 

 

 

 

(File No. 001-11954), filed on February 25, 2005

 

 

 

 

 

 

 

 

 

10.19

**

-

Form of Restricted Stock Agreement between the Company and certain employees –

*

 

 

 

 

 

Incorporated by reference to Exhibit 10.78 to Vornado Realty Trust’s Annual Report on

 

 

 

 

 

 

Form 10-K for the year ended December 31, 2004 (File No. 001-11954), filed on

 

 

 

 

 

 

February 25, 2005

 

 

 

 

 

 

 

 

 

10.20

**

-

Amendment, dated March 17, 2006, to the Vornado Realty Trust Omnibus Share Plan –

*

 

 

 

 

 

Incorporated by reference to Exhibit 10.50 to Vornado Realty Trust’s Quarterly Report on

 

 

 

 

 

 

Form 10-Q for the quarter ended March 31, 2006 (File No. 001-11954), filed on

 

 

 

 

 

 

May 2, 2006

 

 

 

 

 

 

 

 

 

10.21

**

-

Form of Vornado Realty Trust 2006 Out-Performance Plan Award Agreement, dated as of

*

 

 

 

 

 

April 25, 2006 – Incorporated by reference to Exhibit 10.1 to Vornado Realty Trust’s

 

 

 

 

 

 

Form 8-K (File No. 001-11954), filed on May 1, 2006

 

 

 

 

 

 

 

 

 

10.22

**

-

Form of Vornado Realty Trust 2002 Restricted LTIP Unit Agreement – Incorporated by

*

 

 

 

 

 

reference to Vornado Realty Trust’s Form 8-K (Filed No. 001-11954), filed on

 

 

 

 

 

 

May 1, 2006

 

 

 

 

 

 

 

 

 

10.23

**

-

Revolving Credit Agreement, dated as of June 28, 2006, among the Operating Partnership,

*

 

 

 

 

 

the banks party thereto, JPMorgan Chase Bank, N.A., as Administrative Agent, Bank of

 

 

 

 

 

 

America, N.A. and Citicorp North America, Inc., as Syndication Agents, Deutsche Bank

 

 

 

 

 

 

Trust Company Americas, Lasalle Bank National Association, and UBS Loan Finance

 

 

 

 

 

 

LLC, as Documentation Agents and Vornado Realty Trust – Incorporated by reference to

 

 

 

 

 

 

Exhibit 10.1 to Vornado Realty Trust’s Form 8-K (File No. 001-11954), filed on

 

 

 

 

 

 

June 28, 2006

 

 

 

 

 

 

 

 

 

10.24

**

-

Amendment No.2, dated May 18, 2006, to the Vornado Realty Trust Omnibus Share Plan

*

 

 

 

 

 

– Incorporated by reference to Exhibit 10.53 to Vornado Realty Trust’s Quarterly

 

 

 

 

 

 

 Report on Form 10-Q for the quarter ended June 30, 2006 (File No. 001-11954), filed

 

 

 

 

 

 

on August 1, 2006

 

 

 

 

 

 

 

 

 

10.25

**

-

Amended and Restated Employment Agreement between Vornado Realty Trust and Joseph

*

 

 

 

 

 

Macnow dated July 27, 2006 – Incorporated by reference to Exhibit 10.54 to Vornado

 

 

 

 

 

 

Realty Trust’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2006

 

 

 

 

 

 

(File No. 001-11954), filed on August 1, 2006

 

 

 

 

 

 

 

 

 

10.26

 

-

Guaranty, made as of June 28, 2006, by Vornado Realty Trust, for the benefit of JP Morgan

*

 

 

 

 

 

Chase Bank – Incorporated by reference to Exhibit 10.53 to Vornado Realty Trust’s

 

 

 

 

 

 

Quarterly Report on Form 10-Q for the quarter ended September 30, 2006

 

 

 

 

 

 

(File No. 001-11954), filed on October 31, 2006

 

 

 

 

 

 

 

 

 

 

 

 

 

_______________________

 

 

 

*

 

 

Incorporated by reference.

 

 

 

**

 

 

Management contract or compensatory agreement.

 

 

81

 


 

 

 

10.27

**

-

Amendment, dated October 26, 2006, to the Vornado Realty Trust Omnibus Share Plan –

*

 

 

 

 

 

Incorporated by reference to Exhibit 10.54 to Vornado Realty Trust’s Quarterly Report

 

 

 

 

 

 

on Form 10-Q for the quarter ended September 30, 2006 (File No. 001-11954), filed on

 

 

 

 

 

 

October 31, 2006

 

 

 

 

 

 

 

 

 

10.28

**

-

Amendment to Real Estate Retention Agreement, dated January 1, 2007, by and between

*

 

 

 

 

 

Vornado Realty L.P. and Alexander’s Inc. – Incorporated by reference to Exhibit 10.55

 

 

 

 

 

 

to Vornado Realty Trust’s Annual Report on Form 10-K for the year ended

 

 

 

 

 

 

December 31, 2006 (File No. 001-11954), filed on February 27, 2007

 

 

 

 

 

 

 

 

 

10.29

**

-

Amendment to 59th Street Real Estate Retention Agreement, dated January 1, 2007, by and

*

 

 

 

 

 

among Vornado Realty L.P., 731 Retail One LLC, 731 Restaurant LLC, 731 Office One

 

 

 

 

 

 

LLC and 731 Office Two LLC. – Incorporated by reference to Exhibit 10.56 to

 

 

 

 

 

 

Vornado Realty Trust’s Annual Report on Form 10-K for the year ended

 

 

 

 

 

 

December 31, 2006 (File No. 001-11954), filed on February 27, 2007

 

 

 

 

 

 

 

 

 

10.30

**

-

Employment Agreement between Vornado Realty Trust and Mitchell Schear, as of April 19,

*

 

 

 

 

 

2007 – Incorporated by reference to Exhibit 10.46 to Vornado Realty Trust’s Quarterly

 

 

 

 

 

 

Report on Form 10-Q for the quarter ended March 31, 2007 (File No. 001-11954),

 

 

 

 

 

 

filed on May 1, 2007

 

 

 

 

 

 

 

 

 

10.31

 

-

Revolving Credit Agreement, dated as of September 28, 2007, among Vornado Realty L.P. as

*

 

 

 

 

 

borrower, Vornado Realty Trust as General Partner, the Banks signatory thereto, each as a

 

 

 

 

 

 

Bank, JPMorgan Chase Bank, N.A. as Administrative Agent, Bank of America, N.A. as

 

 

 

 

 

 

Syndication Agent, Citicorp North America, Inc., Deutsche Bank Trust Company

 

 

 

 

 

 

Americas, and UBS Loan Finance LLC as Documentation Agents, and J.P. Morgan

 

 

 

 

 

 

Securities Inc. and Bank of America Securities LLC as Lead Arrangers and Bookrunners.

 

 

 

 

 

 

- Incorporated by reference to Exhibit 10.1 to Vornado Realty Trust’s Current Report

 

 

 

 

 

 

on Form 8-K (File No. 001-11954), filed on October 4, 2007

 

 

 

 

 

 

 

 

 

10.32

 

-

Second Amendment to Revolving Credit Agreement, dated as of September 28, 2007, by and

*

 

 

 

 

 

among Vornado Realty L.P. as borrower, Vornado Realty Trust as General Partner, the

 

 

 

 

 

 

Banks listed on the signature pages thereof, and J.P. Morgan Chase Bank N.A., as

 

 

 

 

 

 

Administrative Agent for the Banks - Incorporated by reference to Exhibit 10.2 to

 

 

 

 

 

 

Vornado Realty Trust’s Current Report on Form 8-K (File No. 001-11954),

 

 

 

 

 

 

filed on October 4, 2007

 

 

 

 

 

 

 

 

 

10.33

**

-

Form of Vornado Realty Trust 2002 Omnibus Share Plan Non-Employee Trustee Restricted

*

 

 

 

 

 

LTIP Unit Agreement – Incorporated by reference to Exhibit 10.45 to Vornado Realty

 

 

 

 

 

 

Trust’s Annual Report on Form 10-K for the year ended December 31, 2007 (File No.

 

 

 

 

 

 

001-11954) filed on February 26, 2008

 

 

 

 

 

 

 

 

 

10.34

**

-

Form of Vornado Realty Trust 2008 Out-Performance Plan Award Agreement – Incorporated

*

 

 

 

 

 

by reference to Exhibit 10.46 to Vornado Realty Trust’s Quarterly Report on Form 10-Q

 

 

 

 

 

 

for the quarter ended March 31, 2008 (File No. 001-11954) filed on May 6, 2008

 

 

 

 

 

 

 

 

 

10.35

**

-

Amendment to Employment Agreement between Vornado Realty Trust and Michael D.

*

 

 

 

 

 

Fascitelli, dated December 29, 2008.  Incorporated by reference to Exhibit 10.47 to

 

 

 

 

 

 

Vornado Realty Trust’s Annual Report on Form 10-K for the year ended December 31,

 

 

 

 

 

 

2008 (File No. 001-11954) filed on February 24, 2009

 

 

 

 

 

 

 

 

 

10.36

**

-

Amendment to Employment Agreement between Vornado Realty Trust and Joseph Macnow,

*

 

 

 

 

 

dated December 29, 2008.  Incorporated by reference to Exhibit 10.48 to Vornado Realty

 

 

 

 

 

 

Trust’s Annual Report on Form 10-K for the year ended December 31, 2008 (File No.

 

 

 

 

 

 

001-11954) filed on February 24, 2009

 

 

 

 

 

 

 

 

 

 

 

 

 

_______________________

 

 

 

*

 

 

Incorporated by reference.

 

 

 

**

 

 

Management contract or compensatory agreement.

 

 

82

 


 

 

 

10.37

**

-

Amendment to Employment Agreement between Vornado Realty Trust and David R.

*

 

 

 

 

 

Greenbaum, dated December 29, 2008.  Incorporated by reference to Exhibit 10.49 to

 

 

 

 

 

 

Vornado Realty Trust’s Annual Report on Form 10-K for the year ended December 31,

 

 

 

 

 

 

2008 (File No. 001-11954) filed on February 24, 2009

 

 

 

 

 

 

 

 

 

10.38

**

-

Amendment to Indemnification Agreement between Vornado Realty Trust and David R.

*

 

 

 

 

 

Greenbaum, dated December 29, 2008.  Incorporated by reference to Exhibit 10.50 to

 

 

 

 

 

 

Vornado Realty Trust’s Annual Report on Form 10-K for the year ended December 31,

 

 

 

 

 

 

2008 (File No. 001-11954) filed on February 24, 2009

 

 

 

 

 

 

 

 

 

10.39

**

-

Amendment to Employment Agreement between Vornado Realty Trust and Mitchell N.

*

 

 

 

 

 

Schear, dated December 29, 2008.  Incorporated by reference to Exhibit 10.51 to Vornado

 

 

 

 

 

 

Realty Trust’s Annual Report on Form 10-K for the year ended December 31, 2008 (File

 

 

 

 

 

 

No. 001-11954) filed on February 24, 2009

 

 

 

 

 

 

 

 

 

10.40

**

-

Amendment to Employment Agreement between Vornado Realty Trust and Christopher G.

*

 

 

 

 

 

Kennedy, dated December 29, 2008.  Incorporated by reference to Exhibit 10.53 to

 

 

 

 

 

 

Vornado Realty Trust’s Annual Report on Form 10-K for the year ended December 31,

 

 

 

 

 

 

2008 (File No. 001-11954) filed on February 24, 2009

 

 

 

 

 

 

 

 

 

10.41

**

-

Vornado Realty Trust's 2010 Omnibus Share Plan.  Incorporated by reference to Exhibit 10.41 to

*

 

 

 

 

 

Vornado Realty Trust's Quarterly Report on Form 10-Q for the quarter ended June 30, 2010

 

 

 

 

 

 

 (File No. 001-11954) filed on August 3, 2010

 

 

 

 

 

 

 

 

 

10.42

**

-

Employment Agreement between Vornado Realty Trust and Michael J. Franco, dated

 

 

 

 

 

 

September 24, 2010.

 

 

 

 

 

 

 

 

 

15.1

 

-

Letter regarding Unaudited Interim Financial Information

 

 

 

 

 

 

 

 

 

31.1

 

-

Rule 13a-14 (a) Certification of the Chief Executive Officer

 

 

 

 

 

 

 

 

 

31.2

 

-

Rule 13a-14 (a) Certification of the Chief Financial Officer

 

 

 

 

 

 

 

 

 

32.1

 

-

Section 1350 Certification of the Chief Executive Officer

 

 

 

 

 

 

 

 

 

32.2

 

-

Section 1350 Certification of the Chief Financial Officer

 

 

 

 

 

 

 

 

 

101.INS

 

-

XBRL Instance Document

 

 

 

 

 

 

 

 

 

101.SCH

 

-

XBRL Taxonomy Extension Schema

 

 

 

 

 

 

 

 

 

101.CAL

 

-

XBRL Taxonomy Extension Calculation Linkbase

 

 

 

 

 

 

 

 

 

101.DEF

 

-

XBRL Taxonomy Extension Definition Linkbase

 

 

 

 

 

 

 

 

 

101.LAB

 

-

XBRL Taxonomy Extension Label Linkbase

 

 

 

 

 

 

 

 

 

101.PRE

 

-

XBRL Taxonomy Extension Presentation Linkbase

 

 

 

 

 

 

_______________________

 

 

 

*

 

 

Incorporated by reference.

 

 

 

**

 

 

Management contract or compensatory agreement.

 

 

 

83