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

vrt10q63010.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:   

June 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 oNo 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 June 30, 2010, 182,290,243 of the registrant’s common shares of beneficial interest are outstanding.

 

 


 

 

 

 

 

 

 

Part I.

 

 

Financial Information:

 

Page Number

 

 

 

 

 

 

 

Item 1.

 

Financial Statements:

 

 

 

 

 

 

 

 

 

 

 

Consolidated Balance Sheets (Unaudited) as of

 

 

 

 

 

June 30, 2010 and December 31, 2009

 

3

 

 

 

 

 

 

 

 

 

Consolidated Statements of Income (Unaudited) for the

 

 

 

 

 

Three and Six Months Ended June 30, 2010 and 2009

 

4

 

 

 

 

 

 

 

 

 

Consolidated Statements of Changes in Equity (Unaudited)

 

 

 

 

 

for the Six Months Ended June 30, 2010 and 2009

 

5

 

 

 

 

 

 

 

 

 

Consolidated Statements of Cash Flows (Unaudited)

 

 

 

 

 

for the Six Months Ended June 30, 2010 and 2009

 

6

 

 

 

 

 

 

 

 

 

Notes to Consolidated Financial Statements (Unaudited)

 

8

 

 

 

 

 

 

 

 

 

Report of Independent Registered Public Accounting Firm

 

33

 

 

 

 

 

 

 

Item 2.

 

Management's Discussion and Analysis of Financial

 

 

 

 

 

Condition and Results of Operations

 

34

 

 

 

 

 

 

 

Item 3.

 

Quantitative and Qualitative Disclosures About Market Risk

 

67

 

 

 

 

 

 

 

Item 4.

 

Controls and Procedures

 

68

 

 

 

 

 

 

 

 

 

 

 

 

Part II.

 

 

Other Information:

 

 

 

 

 

 

 

 

 

Item 1.

 

Legal Proceedings

 

69

 

 

 

 

 

 

 

Item 1A.

 

Risk Factors

 

70

 

 

 

 

 

 

 

Item 2.

 

Unregistered Sales of Equity Securities and Use of Proceeds

 

70

 

 

 

 

 

 

 

Item 3.

 

Defaults Upon Senior Securities

 

70

 

 

 

 

 

 

 

Item 5.

 

Other Information

 

70

 

 

 

 

 

 

 

Item 6.

 

Exhibits

 

70

 

 

 

 

 

 

Signatures

 

 

 

 

71

 

 

 

 

 

 

Exhibit Index

 

 

 

 

72

 

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)

 

June 30,

 

December 31,

ASSETS

 

2010 

 

2009 

Real estate, at cost:

 

 

 

 

 

 

 

Land

 

$

 4,617,946 

 

$

 4,606,065 

 

Buildings and improvements

 

 

 13,055,659 

 

 

 12,902,086 

 

Development costs and construction in progress

 

 

 214,804 

 

 

 313,310 

 

Leasehold improvements and equipment

 

 

 130,929 

 

 

 128,056 

 

 

Total

 

 

 18,019,338 

 

 

 17,949,517 

 

Less accumulated depreciation and amortization

 

 

 (2,683,233)

 

 

 (2,494,441)

Real estate, net

 

 

 15,336,105 

 

 

 15,455,076 

Cash and cash equivalents

 

 

 652,121 

 

 

 535,479 

Short-term investments

 

 

 - 

 

 

 40,000 

Restricted cash

 

 

 139,562 

 

 

 293,950 

Marketable securities

 

 

 305,292 

 

 

 380,652 

Accounts receivable, net of allowance for doubtful accounts of $52,810 and $46,708

 

 

 157,725 

 

 

 157,325 

Investments in partially owned entities, including Alexander's of $198,318 and $193,174

 

 

 833,884 

 

 

 799,832 

Investments in Toys "R" Us

 

 

 495,800 

 

 

 409,453 

Mezzanine loans receivable, net of allowance of $192,638 and $190,738

 

 

 136,857 

 

 

 203,286 

Receivable arising from the straight-lining of rents, net of allowance of $5,150 and $4,680

 

 

 718,809 

 

 

 681,526 

Deferred leasing and financing costs, net of accumulated amortization of $204,656 and $183,224

 

 

 330,789 

 

 

 311,825 

Due from officers

 

 

 13,182 

 

 

 13,150 

Other assets

 

 

 770,751 

 

 

 903,918 

 

 

 

 

$

 19,890,877 

 

$

 20,185,472 

 

 

 

 

 

 

 

 

 

LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND EQUITY

 

 

 

 

 

 

Notes and mortgages payable

 

$

 8,400,599 

 

$

 8,445,766 

Senior unsecured notes

 

 

 1,224,866 

 

 

 711,716 

Exchangeable senior debentures

 

 

 487,685 

 

 

 484,457 

Convertible senior debentures

 

 

 404,850 

 

 

 445,458 

Revolving credit facility debt

 

 

 152,218 

 

 

 852,218 

Accounts payable and accrued expenses

 

 

 458,628 

 

 

 475,242 

Deferred credit

 

 

 652,449 

 

 

 682,384 

Deferred compensation plan

 

 

 83,787 

 

 

 80,443 

Deferred tax liabilities

 

 

 17,704 

 

 

 17,842 

Other liabilities

 

 

 98,265 

 

 

 88,912 

 

Total liabilities

 

 

 11,981,051 

 

 

 12,284,438 

Commitments and contingencies

 

 

 

 

 

 

Redeemable noncontrolling interests:

 

 

 

 

 

 

 

Class A units - 13,857,608 and 13,892,313 units outstanding

 

 

 1,010,913 

 

 

 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

 

 

 1,270,913 

 

 

 1,251,628 

Vornado shareholders' equity:

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

 

shares; issued and outstanding 33,949,284 and 33,952,324 shares

 

 

 823,534 

 

 

 823,686 

 

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

 

 

 

 

 

 

 

 

250,000,000 shares; issued and outstanding 182,290,243 and 181,214,161 shares

 

 

 7,262 

 

 

 7,218 

 

Additional capital

 

 

 6,944,410 

 

 

 6,961,007 

 

Earnings less than distributions

 

 

 (1,581,176)

 

 

 (1,577,591)

 

Accumulated other comprehensive income

 

 

 37,597 

 

 

 28,449 

 

 

Total Vornado shareholder's equity

 

 

 6,231,627 

 

 

 6,242,769 

Noncontrolling interest in consolidated subsidiaries

 

 

 407,286 

 

 

 406,637 

 

Total equity

 

 

 6,638,913 

 

 

 6,649,406 

 

 

 

 

$

 19,890,877 

 

$

 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 Six

 

 

 

Months Ended June 30,

 

Months Ended June 30,

 

 

 

2010 

 

2009 

 

2010 

 

2009 

(Amounts in thousands, except per share amounts)

 

 

 

 

 

 

 

 

 

 

 

 

REVENUES:

 

 

 

 

 

 

 

 

 

 

 

 

 

Property rentals

 

$

 575,776 

 

$

 554,516 

 

$

 1,136,726 

 

$

 1,104,303 

 

Tenant expense reimbursements

 

 

 88,080 

 

 

 83,375 

 

 

 181,001 

 

 

 181,404 

 

Fee and other income

 

 

 32,249 

 

 

 35,899 

 

 

 74,709 

 

 

 66,649 

Total revenues

 

 

 696,105 

 

 

 673,790 

 

 

 1,392,436 

 

 

 1,352,356 

EXPENSES:

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating

 

 

 267,925 

 

 

 269,711 

 

 

 546,980 

 

 

 548,609 

 

Depreciation and amortization

 

 

 135,265 

 

 

 136,686 

 

 

 271,089 

 

 

 268,342 

 

General and administrative

 

 

 49,582 

 

 

 49,632 

 

 

 98,312 

 

 

 128,697 

 

Litigation loss accrual and acquisition costs

 

 

 1,930 

 

 

 - 

 

 

 11,986 

 

 

 - 

Total expenses

 

 

 454,702 

 

 

 456,029 

 

 

 928,367 

 

 

 945,648 

Operating income

 

 

 241,403 

 

 

 217,761 

 

 

 464,069 

 

 

 406,708 

Income applicable to Alexander's

 

 

 7,066 

 

 

 6,614 

 

 

 13,526 

 

 

 24,747 

(Loss) income applicable to Toys "R" Us

 

 

 (21,004)

 

 

 (327)

 

 

 104,866 

 

 

 96,820 

(Loss) income from partially owned entities

 

 

 (2,614)

 

 

 (22,797)

 

 

 2,270 

 

 

 (30,340)

Interest and other investment income (loss), net

 

 

 3,876 

 

 

 (98,153)

 

 

 18,584 

 

 

 (84,094)

Interest and debt expense (including amortization of deferred

 

 

 

 

 

 

 

 

 

 

 

 

 

financing costs of $4,543 and $4,313 in each three-month

 

 

 

 

 

 

 

 

 

 

 

 

 

period, respectively, and $8,969 and $8,732 in each six-month

 

 

 

 

 

 

 

 

 

 

 

 

 

period, respectively)

 

 

 (149,887)

 

 

 (159,063)

 

 

 (289,622)

 

 

 (316,823)

Net (loss) gain on early extinguishment of debt

 

 

 (1,072)

 

 

 17,684 

 

 

 (1,072)

 

 

 23,589 

Net gains on disposition of wholly owned and partially owned

 

 

 

 

 

 

 

 

 

 

 

 

 

assets other than depreciable real estate

 

 

 4,382 

 

 

 - 

 

 

 7,687 

 

 

 - 

Income (loss) before income taxes

 

 

 82,150 

 

 

 (38,281)

 

 

 320,308 

 

 

 120,607 

Income tax expense

 

 

 (4,939)

 

 

 (5,457)

 

 

 (10,553)

 

 

 (10,506)

Income (loss) from continuing operations

 

 

 77,211 

 

 

 (43,738)

 

 

 309,755 

 

 

 110,101 

Income from discontinued operations

 

 

 - 

 

 

 3,363 

 

 

 - 

 

 

 5,955 

Net income (loss)

 

 

 77,211 

 

 

 (40,375)

 

 

 309,755 

 

 

 116,056 

Net (income) loss attributable to noncontrolling interests, including

 

 

 

 

 

 

 

 

 

 

 

 

 

unit distributions

 

 

 (5,105)

 

 

 2,740 

 

 

 (23,097)

 

 

 (13,581)

Net income (loss) attributable to Vornado

 

 

 72,106 

 

 

 (37,635)

 

 

 286,658 

 

 

 102,475 

Preferred share dividends

 

 

 (14,266)

 

 

 (14,269)

 

 

 (28,533)

 

 

 (28,538)

NET INCOME (LOSS) attributable to common shareholders

 

$

 57,840 

 

$

 (51,904)

 

$

 258,125 

 

$

 73,937 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

INCOME (LOSS) PER COMMON SHARE - BASIC:

 

 

 

 

 

 

 

 

 

 

 

 

 

Income (loss) from continuing operations, net

 

$

 0.32 

 

$

 (0.32)

 

$

 1.42 

 

$

 0.41 

 

Income from discontinued operations, net

 

 

 - 

 

 

 0.02 

 

 

 - 

 

 

 0.04 

 

Net income (loss) per common share

 

$

 0.32 

 

$

 (0.30)

 

$

 1.42 

 

$

 0.45 

 

Weighted average shares

 

 

 182,027 

 

 

 171,530 

 

 

 181,786 

 

 

 164,009 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

INCOME (LOSS) PER COMMON SHARE - DILUTED:

 

 

 

 

 

 

 

 

 

 

 

 

 

Income (loss) from continuing operations, net

 

$

 0.31 

 

$

 (0.32)

 

$

 1.41 

 

$

 0.41 

 

Income from discontinued operations, net

 

 

 - 

 

 

 0.02 

 

 

 - 

 

 

 0.04 

 

Net income (loss) per common share

 

$

 0.31 

 

$

 (0.30)

 

$

 1.41 

 

$

 0.45 

 

Weighted average shares

 

 

 183,644 

 

 

 171,530 

 

 

 183,598 

 

 

 165,183 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

DIVIDENDS PER COMMON SHARE

 

$

 0.65 

 

$

 0.95 

 

$

 1.30 

 

$

 1.90 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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)

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 102,475 

 

 

 - 

 

 

 (3,700)

 

 

 98,775 

Dividends paid on common

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

shares

 

 

 - 

 

 

 - 

 

 

 4,849 

 

 

 194 

 

 

 188,792 

 

 

 (315,159)

 

 

 - 

 

 

 - 

 

 

 (126,173)

Dividends paid on preferred

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

shares

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 (28,540)

 

 

 - 

 

 

 - 

 

 

 (28,540)

Proceeds from the issuance of

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

common shares

 

 

 - 

 

 

 - 

 

 

 17,250 

 

 

 690 

 

 

 709,536 

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 710,226 

Conversion of Series A

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

preferred shares to common

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

shares

 

 

 (2)

 

 

 (89)

 

 

 2 

 

 

 - 

 

 

 89 

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 - 

Deferred compensation shares

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

and options

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 2 

 

 

 9,967 

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 9,969 

Common shares issued:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Upon redemption of Class A

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating Partnership units,

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

at redemption value

 

 

 - 

 

 

 - 

 

 

 1,167 

 

 

 46 

 

 

 49,944 

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 49,990 

 

Under employees' share

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

option plan

 

 

 - 

 

 

 - 

 

 

 8 

 

 

 (14)

 

 

 548 

 

 

 (351)

 

 

 - 

 

 

 - 

 

 

 183 

Change in unrealized net gain

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

or loss on securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

available-for-sale

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 (12,213)

 

 

 - 

 

 

 (12,213)

Our share of partially owned

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

entities OCI adjustments

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 (16,556)

 

 

 - 

 

 

 (16,556)

Voluntary surrender of equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

awards on March 31, 2009

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 32,588 

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 32,588 

Adjustments to redeemable

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Class A Operating Partnership

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

units

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 194,183 

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 194,183 

Other

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 (646)

 

 

 6 

 

 

 (183)

 

 

 (4,086)

 

 

 (4,909)

Balance, June 30, 2009

 

 

 33,952 

 

$

 823,718 

 

 

 178,562 

 

$

 7,113 

 

$

 7,210,977 

 

$

 (1,288,909)

 

$

 (35,851)

 

$

 405,127 

 

$

 7,122,175 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 286,658 

 

 

 - 

 

 

 1,194 

 

 

 287,852 

Dividends paid on common

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

shares

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 (236,279)

 

 

 - 

 

 

 - 

 

 

 (236,279)

Dividends paid on preferred

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

shares

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 (28,533)

 

 

 - 

 

 

 - 

 

 

 (28,533)

Conversion of Series A

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

preferred shares to common

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

shares

 

 

 (3)

 

 

 (152)

 

 

 4 

 

 

 - 

 

 

 152 

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 - 

Deferred compensation shares

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

and options

 

 

 - 

 

 

 - 

 

 

 17 

 

 

 1 

 

 

 3,905 

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 3,906 

Common shares issued:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Upon redemption of Class A

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating Partnership units,

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

at redemption value

 

 

 - 

 

 

 - 

 

 

 495 

 

 

 20 

 

 

 35,691 

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 35,711 

 

Under employees' share

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

option plan

 

 

 - 

 

 

 - 

 

 

 548 

 

 

 22 

 

 

 8,989 

 

 

 (25,433)

 

 

 - 

 

 

 - 

 

 

 (16,422)

 

Under dividend reinvestment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

plan

 

 

 - 

 

 

 - 

 

 

 12 

 

 

 1 

 

 

 801 

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 802 

Change in unrealized net gain

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

or loss on securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

available-for-sale

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 25,531 

 

 

 - 

 

 

 25,531 

Our share of partially owned

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

entities OCI adjustments

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 (15,965)

 

 

 - 

 

 

 (15,965)

Adjustments to redeemable

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Class A Operating Partnership

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

units

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 (66,075)

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 (66,075)

Other

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 (60)

 

 

 2 

 

 

 (418)

 

 

 (545)

 

 

 (1,021)

Balance, June 30, 2010

 

 

 33,949 

 

$

 823,534 

 

 

 182,290 

 

$

 7,262 

 

$

 6,944,410 

 

$

 (1,581,176)

 

$

 37,597 

 

$

 407,286 

 

$

 6,638,913 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See notes to consolidated financial statements (unaudited).

 

5

 


 

VORNADO REALTY TRUST

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

 

 

 

 

 

 

 

 

 

 

 

 

 

For the Six Months Ended

 

 

 

 

June 30,

 

 

 

 

2010 

 

2009 

(Amounts in thousands)

 

 

 

 

 

 

Cash Flows from Operating Activities:

 

 

 

 

 

 

Net income

 

$

 309,755 

 

$

 116,056 

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

 

 

 

 

 

 

 

Depreciation and amortization (including amortization of deferred financing costs)

 

 

 280,058 

 

 

 277,806 

 

Equity in income of partially owned entities, including Alexander’s and Toys “R” Us

 

 

 (114,664)

 

 

 (91,227)

 

Straight-lining of rental income

 

 

 (38,557)

 

 

 (53,002)

 

Amortization of below market leases, net

 

 

 (32,209)

 

 

 (37,542)

 

Distributions of income from partially owned entities

 

 

 18,517 

 

 

 15,131 

 

Other non-cash adjustments

 

 

 17,007 

 

 

 25,069 

 

Litigation loss accrual

 

 

 10,056 

 

 

 - 

 

Net gain on dispositions of assets other than depreciable real estate

 

 

 (7,687)

 

 

 - 

 

Net gain resulting from Lexington Realty Trust’s March 2010 stock issuance

 

 

 (5,998)

 

 

 - 

 

Net loss (gain) on early extinguishment of debt

 

 

 1,072 

 

 

 (23,589)

 

Mezzanine loans loss accrual

 

 

 6,900 

 

 

 122,738 

 

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

 

 

 - 

 

 

 32,588 

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Accounts receivable, net

 

 

 (400)

 

 

 15,654 

 

 

Other assets

 

 

 53,598 

 

 

 (17,773)

 

 

Accounts payable and accrued expenses

 

 

 23,576 

 

 

 7,715 

 

 

Other liabilities

 

 

 11,341 

 

 

 (10,185)

Net cash provided by operating activities

 

 

 532,365 

 

 

 379,439 

Cash Flows from Investing Activities:

 

 

 

 

 

 

 

Restricted cash

 

 

 133,888 

 

 

 60,786 

 

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

 

 

 122,956 

 

 

 9,115 

 

Proceeds from repayment of mezzanine loans receivable

 

 

 105,061 

 

 

 45,472 

 

Additions to real estate

 

 

 (68,925)

 

 

 (84,750)

 

Development costs and construction in progress

 

 

 (68,499)

 

 

 (267,124)

 

Proceeds from sales of real estate and related investments

 

 

 49,544 

 

 

 43,873 

 

Investments in mezzanine loans receivable and other

 

 

 (48,339)

 

 

 - 

 

Investments in partially owned entities

 

 

 (41,920)

 

 

 (25,712)

 

Proceeds from maturing short-term investments

 

 

 40,000 

 

 

 - 

 

Deposits in connection with real estate acquisitions

 

 

 (15,128)

 

 

 991 

 

Purchases of marketable securities

 

 

 (13,917)

 

 

 (11,597)

 

Distributions of capital from partially owned entities

 

 

 12,638 

 

 

 9,636 

Net cash provided by (used in) investing activities

 

 

 207,359 

 

 

 (219,310)

 

 

 

 

 

 

 

 

 

See notes to consolidated financial statements (unaudited).

 

 

 

 

 

 

 

 

 

 

6

 


 

VORNADO REALTY TRUST

 

CONSOLIDATED STATEMENT OF CASH FLOWS - CONTINUED

(UNAUDITED)

 

 

 

 

 

 

 

 

 

 

 

 

 

For the Six Months Ended

 

 

 

 

June 30,

 

 

 

 

2010 

 

2009 

(Amounts in thousands)

 

 

 

 

 

 

Cash Flows from Financing Activities:

 

 

 

 

 

 

 

Repayments of borrowings

 

$

 (1,197,525)

 

$

 (644,011)

 

Proceeds from borrowings

 

 

 901,040 

 

 

 520,137 

 

Dividends paid on common shares

 

 

 (236,279)

 

 

 (126,174)

 

Dividends paid on preferred shares

 

 

 (28,533)

 

 

 (28,540)

 

Distributions to noncontrolling interests

 

 

 (27,665)

 

 

 (20,931)

 

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

 

 

 (15,396)

 

 

 (522)

 

Purchases of outstanding preferred units

 

 

 (13,000)

 

 

 (24,331)

 

Debt issuance costs

 

 

 (5,724)

 

 

 (4,338)

 

Proceeds from issuance of common shares

 

 

 - 

 

 

 710,226 

Net cash (used in) provided by financing activities

 

 

 (623,082)

 

 

 381,516 

Net increase in cash and cash equivalents

 

 

 116,642 

 

 

 541,645 

Cash and cash equivalents at beginning of period

 

 

 535,479 

 

 

 1,526,853 

Cash and cash equivalents at end of period

 

$

 652,121 

 

$

 2,068,498 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Supplemental Disclosure of Cash Flow Information:

 

 

 

 

 

 

 

Cash payments for interests (including capitalized interest of $875 and  $10,078)

 

$

 270,997 

 

$

 321,065 

 

Cash payments for income taxes

 

$

 3,861 

 

$

 3,840 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-Cash Transactions:

 

 

 

 

 

 

 

Adjustments to redeemable Class A Operating Partnership units

 

$

 (66,075)

 

$

 194,183 

 

Conversion of Class A Operating Partnership units to common shares, at redemption value

 

 

 35,711 

 

 

 49,990 

 

Unrealized net gain (loss) on sale of securities available for sale

 

 

 25,531 

 

 

 (12,213)

 

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

 

 

 20,500 

 

 

 - 

 

Dividends paid in common shares

 

 

 - 

 

 

 188,986 

 

Unit distributions paid in Class A units

 

 

 - 

 

 

 16,280 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See notes to consolidated financial statements (unaudited).

 

 

 

 

 

 

 

 

 

 

7

 


 

VORNADO REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(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 92.5% of the common limited partnership interest in the Operating Partnership at June 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.

 

On July 8, 2010, we completed the first closing of Vornado Capital Partners, L.P., our real estate investment fund (the “Fund”) with initial 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 serve as the general partner and investment manager of the Fund and it will be our exclusive investment vehicle during its three-year investment period for all investments that fit within the Fund’s investment parameters.  The Fund’s investment parameters include debt, equity and other interests in real estate, and excludes (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) non-controlling 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.  In the six months ended June 30, 2010, we expensed $2,730,000 of Fund organization costs, which is included as a component of “general and administrative” expenses on our consolidated statement of income, and expect to incur additional expenses of approximately $3,700,000 in the third quarter of 2010.   

 

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 six months ended June 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.    Investments in Partially Owned Entities

 

Toys “R” Us (“Toys”)

As of June 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 June 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.

 

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

 

 

(Amounts in thousands)

 

 

 

 

 

 

Balance as of

 

 

Balance Sheet:

 

 

 

 

 

May 1, 2010

 

October 31, 2009

 

 

 

Assets

 

 

 

 

 

 

$

 11,410,000 

 

$

 12,589,000 

 

 

 

Liabilities

 

 

 

 

 

 

 

 9,877,000 

 

 

 11,198,000 

 

 

 

Noncontrolling interests

 

 

 

 

 

 

 

 - 

 

 

 112,000 

 

 

 

Toys “R” Us, Inc. equity

 

 

 

 

 

 

 

 1,533,000 

 

 

 1,279,000 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the Three

 

For the Six

 

 

 

 

 

Months Ended

 

Months Ended

 

 

Income Statement:

May 1, 2010

 

May 2, 2009

 

May 1, 2010

 

May 2, 2009

 

 

 

Total revenues

$

 2,608,000 

 

$

 2,477,000 

 

$

 8,465,000 

 

$

 7,938,000 

 

 

 

Net (loss) income attributable to Toys

$

 (71,000)

 

$

 (50,000)

 

$

 308,000 

 

$

 242,000 

 

 

 

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

 

As of June 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 June 30, 2010, Alexander’s owed us $58,817,000 in fees under these agreements. 

 

Based on Alexander’s June 30, 2010 closing share price of $302.92, the market value (“fair value” pursuant to ASC 820) of our investment in Alexander’s is $501,050,000, or $302,732,000 in excess of the June 30, 2010 carrying amount on our consolidated balance sheet.  As of June 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 $60,169,000.  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.

 

9

 


 

VORNADO REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

 

 

 

4.    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:

 

 

 

 

 

 

June 30, 2010

 

December 31, 2009

 

 

 

Assets

 

 

 

 

 

 

$

 1,696,000 

 

$

 1,704,000 

 

 

 

Liabilities

 

 

 

 

 

 

 

 1,363,000 

 

 

 1,389,000 

 

 

 

Noncontrolling interests

 

 

 

 

 

 

 

 3,000 

 

 

 2,000 

 

 

 

Stockholders' equity

 

 

 

 

 

 

 

 330,000 

 

 

 313,000 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the Three

 

For the Six

 

 

 

Months Ended

 

Months Ended

 

 

Income Statement:

June 30, 2010

 

June 30, 2009

 

June 30, 2010

 

June 30, 2009

 

 

 

Total revenues

$

 59,000 

 

$

 55,000 

 

$

 118,000 

 

$

 108,000 

 

 

 

Net income attributable to Alexander’s

$

 15,000 

 

$

 13,000 

 

$

 31,000 

 

$

 59,000 

 

 

 

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

 

As of June 30, 2010, we own 18,468,969 Lexington common shares, or approximately 13.8% 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 June 30, 2010 closing share price of $6.01, the market value (“fair value” pursuant to ASC 820) of our investment in Lexington was $110,999,000, or $55,355,000 in excess of the June 30, 2010 carrying amount on our consolidated balance sheet.  As of June 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 $71,885,000.  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:

 

 

 

 

 

 

March 31, 2010

 

September 30, 2009

 

 

 

Assets

 

 

 

 

 

 

$

 3,537,000 

 

$

 3,702,000 

 

 

 

Liabilities

 

 

 

 

 

 

 

 2,199,000 

 

 

 2,344,000 

 

 

 

Noncontrolling interests

 

 

 

 

 

 

 

 86,000 

 

 

 94,000 

 

 

 

Shareholders’ equity

 

 

 

 

 

 

 

 1,252,000 

 

 

 1,264,000 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the Three Months

 

For the Six Months

 

 

 

 

Ended March 31,

 

Ended March 31,

 

 

Income Statement:

2010 

 

2009 

 

2010 

 

2009 

 

 

 

Total revenues

$

 89,000 

 

$

 93,000 

 

$

 179,000 

 

$

 192,000 

 

 

 

Net loss attributable to Lexington

$

 (27,000)

 

$

 (65,000)

 

$

 (73,000)

 

$

 (79,000)

 

 

10

 


 

VORNADO REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

 

 

 

4.     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)  

 

 

  

 

 

 

  

 

June 30,

  

 

December 31,

  

Investments:    

 

 

  

 

 

 

  

 

2010 

  

 

2009 

  

Toys   

 

 

  

 

 

 

  

 

$

 495,800 

  

 

$

 409,453 

  

 

 

 

 

 

   

 

 

  

 

 

 

  

 

 

  

 

 

 

  

Alexander’s  

 

 

  

 

 

 

  

 

$

 198,318 

  

 

$

 193,174 

  

Partially owned office buildings  

 

 

  

 

 

 

  

 

 

 158,063 

  

 

 

 158,444 

  

India real estate ventures  

 

 

  

 

 

 

  

 

 

 124,607 

  

 

 

 93,322 

  

Lexington  

 

 

  

 

 

 

  

 

 

 55,644 

  

 

 

 55,106 

  

Other equity method investments   

 

 

  

 

 

 

  

 

 

 297,252 

  

 

 

 299,786 

  

   

 

 

  

 

 

 

  

 

$

 833,884 

  

 

$

 799,832 

  

 

 

 

 

 

   

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

 

 

   

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

 

 

   

For the Three Months

  

 

For the Six Months

  

(Amounts in thousands)  

Ended June 30,

  

 

Ended June 30,

  

Our Share of Net (Loss) Income:  

2010 

  

 

2009 

  

 

2010 

  

 

2009 

  

Toys:  

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

32.7% share of:   

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

Equity in net (loss) income before income taxes  

$

 (47,314)

  

 

$

 (25,854)

  

 

$

 126,236 

  

 

$

 122,531 

  

 

 

 

Income tax benefit (expense)  

 

 24,123 

  

 

 

 9,634 

  

 

 

 (25,587)

  

 

 

 (43,457)

  

 

 

 

Equity in net (loss) income  

 

 (23,191)

  

 

 

 (16,220)

  

 

 

 100,649 

  

 

 

 79,074 

  

 

 

 

Non-cash purchase price accounting adjustments  

 

 - 

  

 

 

 13,946 

  

 

 

 - 

  

 

 

 13,946 

  

 

Interest and other income  

 

 2,187 

  

 

 

 1,947 

  

 

 

 4,217 

  

 

 

 3,800 

  

 

 

 

 

 

   

$

 (21,004)

  

 

$

 (327)

  

 

$

 104,866 

  

 

$

 96,820 

  

Alexander’s:  

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

32.4% share of:  

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

Equity in net income before reversal of stock   

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

appreciation rights compensation expense  

$

 4,920 

  

 

$

 3,767 

  

 

$

 8,697 

  

 

$

 7,622 

  

 

 

Reversal of stock appreciation rights   

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

compensation expense  

 

 - 

  

 

 

 - 

  

 

 

 - 

  

 

 

 11,105 

  

 

 

Equity in net income   

 

 4,920 

  

 

 

 3,767 

  

 

 

 8,697 

  

 

 

 18,727 

  

 

Management and leasing fees  

 

 2,092 

  

 

 

 2,199 

  

 

 

 4,170 

  

 

 

 4,092 

  

 

Development fees  

 

 54 

  

 

 

 648 

  

 

 

 659 

  

 

 

 1,928 

  

   

$

 7,066 

  

 

$

 6,614 

  

 

$

 13,526 

  

 

$

 24,747 

  

 

 

 

 

 

   

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

Lexington – 13.8% share in 2010 and 16.1%  

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

share in 2009 of  equity in net (loss) income  

$

 (428)

  

 

$

 (6,876)

 (1)

 

$

 5,617 

 (2)

 

$

 (9,915)

 (1)

 

 

 

 

 

   

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

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

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

share of equity in net income (loss)  

 

 606 

  

 

 

 (784)

  

 

 

 2,257 

  

 

 

 (921)

  

   

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

Other, net  (3)

 

 (2,792)

  

 

 

 (15,137)

 (4)

 

 

 (5,604)

  

 

 

 (19,504)

 (4)

 

 

 

 

 

   

$

 (2,614)

  

 

$

 (22,797)

  

 

$

 2,270 

  

 

$

 (30,340)

  

___________________________________  

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

 

 

   

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 (1)

 

 

Includes $4,580 for our share of impairment losses recorded by Lexington.

 

 

 

 

 

   

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 (2)

 

 

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

 

 

 

 

 

   

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 (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.

 

 

 

 

 

   

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 (4)

 

 

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

 

11

 


 

VORNADO REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

 

 

 

4.     Investments in Partially Owned Entities - continued

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

 

 

 

 

100% of

 

 Partially Owned Entities’ Debt at

(Amounts in thousands)

June 30,

 

December 31,

 

 

 

2010 

 

2009 

Toys (32.7% interest) (as of May 1, 2010 and October 31, 2009, respectively):

 

 

 

 

 

 

10.75% senior unsecured notes, due 2017 (Face value – $950,000)

$

 926,970 

 

$

925,931 

 

8.50% senior unsecured notes, due 2017 (Face value $725,000)

 

 715,098 

 

 

 - 

 

$2.0 billion credit facility, due 2012, LIBOR plus 1.00% – 4.25%

 

 - 

 

 

418,777 

 

$800 million secured term loan facility, due 2012, LIBOR plus 4.25% (4.60% at

 

 

 

 

 

 

 

June 30, 2010)

 

 798,255 

 

 

797,911 

 

Senior U.K. real estate facility, due 2013, with interest at 5.02%

 

 536,167 

 

 

578,982 

 

7.625% bonds, due 2011 (Face value – $500,000)

 

 493,220 

 

 

490,613 

 

7.875% senior notes, due 2013 (Face value – $400,000)

 

 383,673 

 

 

381,293 

 

7.375% senior notes, due 2018 (Face value – $400,000)

 

 341,202 

 

 

338,989 

 

$181 million unsecured term loan facility, due 2013, LIBOR plus 5.00% (5.35% at

 

 

 

 

 

 

 

June 30, 2010)

 

 180,529 

 

 

180,456 

 

4.51% Spanish real estate facility, due 2013

 

 172,004 

 

 

191,436 

 

Japan borrowings, due 2011

 

 171,550 

 

 

168,720 

 

Japan bank loans, due 2011 – 2014, 1.20% – 2.85%

 

 161,155 

 

 

172,902 

 

6.84% Junior U.K. real estate facility, due 2013

 

 94,076 

 

 

101,861 

 

4.51% French real estate facility, due 2013

 

 82,978 

 

 

92,353 

 

8.750% debentures, due 2021 (Face value – $22,000)

 

 21,038 

 

 

21,022 

 

Mortgage loan, due 2010, LIBOR plus 1.30%

 

 - 

 

 

800,000 

 

European and Australian asset-based revolving credit facility, due 2012, LIBOR/EURIBOR

 

 

 

 

 

 

 

plus 4.00%

 

 - 

 

 

102,760 

 

Other

 

 149,508 

 

 

136,206 

 

 

 

 

 5,227,423 

 

 

5,900,212 

Alexander’s (32.4% interest):

 

 

 

 

 

 

731 Lexington Avenue mortgage note payable collateralized by the office space, due in

 

 

 

 

 

 

 

February 2014, with interest at 5.33% (prepayable without penalty after December 2013)

 

 357,419 

 

 

362,989 

 

731 Lexington Avenue mortgage note payable, collateralized by the retail space, due in

 

 

 

 

 

 

 

July 2015, with interest at 4.93% (prepayable without penalty after December 2013)

 

 320,000 

 

 

320,000 

 

Rego Park construction loan payable, due in December 2010, LIBOR plus 1.20% (1.55% at

 

 

 

 

 

 

 

June 30, 2010)

 

 282,615 

 

 

266,411 

 

Kings Plaza Regional Shopping Center mortgage note payable, due in June 2011, with interest at

 

 

 

 

 

 

 

7.46% (prepayable without penalty after December 2010)

 

 153,540 

 

 

183,319 

 

Rego Park mortgage note payable, due in March 2012 (prepayable without penalty)

 

 78,246 

 

 

78,246 

 

Paramus mortgage note payable, due in October 2011, with interest at 5.92% (prepayable

 

 

 

 

 

 

 

without penalty)

 

 68,000 

 

 

68,000 

 

 

 

 

 1,259,820 

 

 

1,278,965 

 

Lexington (13.8% interest) (as of March 31, 2010 and September 30,  2009,  respectively)

 

 

 

 

 

 

 

Mortgage loans collateralized by Lexington’s real estate, due from 2010 to 2037,  with a

 

 

 

 

 

 

 

weighted average interest rate of 5.78% at March 31, 2010 (various prepayment terms)

 

 2,002,650 

 

 

2,132,253 

 

12

 


 

VORNADO REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

 

 

 

4.     Investments in Partially Owned Entities - continued

 

 

 

100% of

 

 

 

Partially Owned Entities’ Debt at

 

June 30,

 

December 31,

(Amounts in thousands)

2010 

 

2009 

Partially owned office buildings:

 

 

 

 

 

 

330 Madison Avenue (25% interest) $150,000 mortgage note payable, due in June 2015,

$

 150,000 

 

$

 150,000 

 

 

 LIBOR plus 1.50% (1.87% at June 30, 2010)

 

 

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

 

 

 

 

 

 

 

payable, collateralized by the partnerships’ real estate, due 2011, with a weighted

 

 

 

 

 

 

 

average interest rate of 5.85% at June 30, 2010 (various prepayment terms)

 

 140,444 

 

 

141,547 

 

100 Van Ness, San Francisco office complex (9% interest) up to $132 million construction

 

 

 

 

 

 

 

 loan payable, due in July 2013, LIBOR plus 2.75% (3.10% at June 30, 2010)

 

 

 

 

 

 

 

with an interest rate floor of 6.50%

 

 85,249 

 

 

85,249 

 

Fairfax Square (20% interest) mortgage note payable, due in December 2014,

 

 

 

 

 

 

 

 with interest at 7.00% (prepayable without penalty after July 2014)

 

 72,138 

 

 

72,500 

 

Rosslyn Plaza (46% interest) mortgage note payable, due in December 2011,

 

 

 

 

 

 

 

LIBOR plus 1.00% (1.34% at June 30, 2010)

 

 56,680 

 

 

56,680 

 

330 West 34th Street (34.8% interest) mortgage note payable, collateralized by land, due in July 

 

 

 

 

 

 

 

2022, with interest at 5.71%; we obtained a fee interest in the land upon foreclosure

 

 

 

 

 

 

 

of our $9,041 mezzanine loan

 

 50,150 

 

 

 - 

 

West 57th Street (50% interest) mortgage note payable, due in February 2014,

 

 

 

 

 

 

 

with interest at 4.94% (prepayable without penalty)

 

 23,086 

 

 

29,000 

 

825 Seventh Avenue (50% interest) mortgage note payable, due in October 2014,

 

 

 

 

 

 

 

with interest at 8.07% (prepayable without penalty after April 2014)

 

 20,794 

 

 

20,773 

India Real Estate Ventures:

 

 

 

 

 

 

TCG Urban Infrastructure Holdings (25% interest) mortgage notes payable, collateralized

 

 

 

 

 

 

 

by the  entity’s real estate, due from 2010 to 2022, with a weighted average interest rate

 

 

 

 

 

 

 

 of 12.78% at June 30, 2010 (various prepayment terms)

 

 189,031 

 

 

178,553 

 

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

 

 

 

 

 

 

 

 maturity in March 2010

 

 - 

 

 

77,000 

Verde Realty Operating Partnership (8.3% interest) mortgage notes payable,

 

 

 

 

 

 

collateralized by the partnerships’ real estate, due from 2010 to 2025, with a weighted 

 

 

 

 

 

 

average interest rate of 5.85% at June 30, 2010 (various prepayment terms)

 

 582,982 

 

 

607,089 

Green Courte Real Estate Partners, LLC (8.3% interest) (as of March 31, 2010

 

 

 

 

 

 

and September 30, 2009), mortgage notes payable, collateralized by the partnerships’

 

 

 

 

 

 

real estate, due from 2010 to  2018, with a weighted average interest rate of 5.29% at

 

 

 

 

 

 

June 30, 2010 (various prepayment terms)

 

 303,263 

 

 

304,481 

Waterfront Associates, LLC (2.5% interest) construction and land loan up to $250 million

 

 

 

 

 

 

 payable, due in September 2011 with a six month extension option, LIBOR

 

 

 

 

 

 

 plus 2.00% - 3.50%  (2.56% at June 30, 2010)

 

 209,606 

 

 

183,742 

Monmouth Mall (50% interest) mortgage note payable, due in September 2015,

 

 

 

 

 

 

 with interest at 5.44% (prepayable without penalty after July 2015)

 

 165,000 

 

 

165,000 

San Jose, California  (45% interest) construction loan, due in  March 2013,

 

 

 

 

 

 

 LIBOR plus 4.00% (4.38% at June 30, 2010)

 

 130,215 

 

 

132,570 

Wells/Kinzie Garage (50% interest) mortgage note payable, due in December 2013,

 

 

 

 

 

 

 with interest at 6.87%

 

 14,576 

 

 

14,657 

Orleans Hubbard Garage (50% interest) mortgage note payable, due in December 2013,

 

 

 

 

 

 

with interest at  6.87%

 

 10,045 

 

 

10,101 

Other

 

 431,784 

 

 

425,717 

 

 

 

 

 

 

 

 

          Based on our ownership interest in the partially owned entities above, our pro rata share of the debt of these partially owned entities was $2,844,923,000 and $3,149,640,000 as of June 30, 2010 and December 31, 2009, respectively.

 

13

 


 

VORNADO REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

 

 

5.    Marketable Securities

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

 

 

 

  

As of June 30, 2010

 

As of December 31, 2009

 

 

 

  

 Carrying

 

Fair

 

Carrying

 

Fair

 

 

(Amounts in thousands)

Amount

 

Value

 

 Amount

 

Value

 

 

 

Marketable equity securities - available for sale

$

 104,712 

 

$

 104,712 

 

$

 79,925 

 

$

 79,925 

 

 

 

Debt securities(1)

 

 200,580 

 

 

 200,580 

 

 

 300,727 

 

 

 319,393 

 

 

 

  

$

 305,292 

 

$

 305,292 

 

$

 380,652 

 

$

 399,318 

 

 

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

(1)

In the three months ended June 30, 2010, we sold certain of our investments in debt securities that were classified as “held-to-maturity,” for an aggregate of $122,294 in cash and recognized a $3,774 net gain, which is included as a component of “net gains on disposition of wholly owned and partially owned assets other than depreciable real estate” on our consolidated statement of income.  In connection therewith, we reclassified $184,697 of investments in debt securities that were previously classified as “held-to-maturity” to “available for sale” and recorded a $14,135 unrealized gain, which is included as a component of “accumulated other comprehensive income” on our consolidated balance sheet. 

 

 

 

 

 

 

 

 

 

 

 

At June 30, 2010 and December 31, 2009, we had $37,175,000 and $13,026,000, respectively, of gross unrealized gains.  There were no unrealized losses at June 30, 2010 and $1,223,000 of gross unrealized losses at December 31, 2009.

 

 

6.    Mezzanine Loans Receivable

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

 

 

 

 

  

 

 

Interest Rate

 

 

 

  

 

 

 

 

 

 (Amounts in thousands)

 

 

as of

 

Carrying Amount as of

 

 

Mezzanine Loans Receivable:

Maturity

 

June 30, 2010

 

June 30, 2010

  

 

December 31, 2009

 

 

 

Riley HoldCo Corp.  (1)

02/15

 

10.00%

 

$

 74,437 

  

 

$

 74,437 

 

 

 

Tharaldson Lodging Companies  

04/11

 

4.65%

 

 

 72,856 

  

 

 

 74,701 

 

 

 

280 Park Avenue  

06/16

 

10.25%

 

 

 70,352 

  

 

 

 73,750 

 

 

 

Equinox (2)

n/a

 

n/a

 

 

 - 

  

 

 

 97,968 

 

 

 

Other, net  

11/11-8/15

 

1.45% - 8.95%

 

 

 111,850 

  

 

 

 73,168 

 

 

 

 

  

 

 

 

 

 

 329,495 

  

 

 

 394,024 

 

 

 

Valuation allowance (3)

 

 

 

 

 

 (192,638)

  

 

 

 (190,738)

 

 

 

 

  

 

 

 

 

$

 136,857 

  

 

$

 203,286 

 

 

  

 

 

 

 

 

 

  

 

 

 

 

 

 

 

  

 

 

 

 

 

 

  

 

 

 

 

 

(1)

 

On July 29, 2010, as part of LNR Property Corporation’s (“LNR”) recapitalization, we acquired a 26.2% equity interest in LNR for a new investment of $116,000 in cash and conversion into equity of our mezzanine loan made to LNR’s parent, Riley HoldCo Corp.  At June 30, 2010, the carrying amount of the loan was $15,000, after a $52,537 loss accrual recognized in 2009 and $6,900 in the current quarter.  LNR is the industry leading servicer and special servicer of commercial mortgage loans and CMBS and a diversified real estate, investment, finance and management company.  We will account for our investment in LNR on the equity method from the date of the recapitalization.

 

 

 

 

  

 

 

 

 

 

 

  

 

 

 

 

 

 (2)

 

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. 

 

 

 

 

  

 

 

 

 

 

 

  

 

 

 

 

 

 (3)

 

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.

 

 

14

 


 

VORNADO REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

 

 

7.    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 June 30, 2010 and December 31, 2009.

 

 

 

 Balance as of

 

 

 

June 30,

 

December 31,

 

 

(Amounts in thousands)

2010 

 

2009 

 

 

Identified intangible assets (included in other assets):

 

 

 

 

 

 

 

Gross amount

$

 742,453 

 

$

 755,467 

 

 

Accumulated amortization

 

 (338,372)

 

 

 (312,957)

 

 

Net

$

 404,081 

 

$

 442,510 

 

 

Identified intangible liabilities (included in deferred credit):

 

 

 

 

 

 

 

Gross amount

$

 928,349 

 

$

 942,968 

 

 

Accumulated amortization

 

 (331,657)

 

 

 (309,476)

 

 

Net

$

 596,692 

 

$

 633,492 

 

 

Amortization of acquired below-market leases, net of acquired above-market leases resulted in an increase to rental income of $16,302,000 and $19,560,000 for the three months ended June 30, 2010 and 2009, respectively, and $32,209,000 and $37,542,000 for the six months ended June 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 

$

 58,657 

 

 

2012 

 

 54,359 

 

 

2013 

 

 46,429 

 

 

2014 

 

 40,471 

 

 

2015 

 

 37,608 

 

 

Amortization of all other identified intangible assets (a component of depreciation and amortization expense) was $15,814,000 and $17,778,000 for the three months ended June 30, 2010 and 2009, respectively, and $30,728,000 and $33,564,000 for the six months ended June 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 

$

 51,724 

 

 

2012 

 

 46,397 

 

 

2013 

 

 38,908 

 

 

2014 

 

 20,099 

 

 

2015 

 

 14,993 

 

 

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 June 30, 2010 and 2009, respectively and $1,018,000 and $1,066,000 for the six months ended June 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 

 

 

15

 


 

VORNADO REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

 

 

8.    Debt

 

 

 

  

 

 

 

 

 

 

 

 

 

The following is a summary of our debt:

 

 

 

 

 

 

 

 

 

 

 

 

  

 

 

 

 

 

 

 

 

 

 

  

 

 

Interest

 

 

 

 

 

 

 

(Amounts in thousands)

 

 

Rate at

 

Balance at

 

 

 

  

 

 

June 30,

 

June 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%

 

 

 429,417 

 

 

 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%

 

 

 279,932 

 

 

 282,492 

 

 

 

909 Third Avenue

04/15

 

5.64%

 

 

 208,862 

 

 

 210,660 

 

 

 

Eleven Penn Plaza

12/11

 

5.20%

 

 

 201,241 

 

 

 203,198 

 

 

 

  

 

 

 

 

 

 

 

 

 

 

 

Washington, DC Office:

 

 

 

 

 

 

 

 

 

 

 

 

Skyline Place

02/17

 

5.74%

 

 

 678,000 

 

 

 678,000 

 

 

 

Warner Building

05/16

 

6.26%

 

 

 292,700 

 

 

 292,700 

 

 

 

River House Apartments

04/15

 

5.43%

 

 

 195,546 

 

 

 195,546 

 

 

 

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

01/25

 

7.09%

 

 

 112,297 

 

 

 113,267 

 

 

 

Bowen Building

06/16

 

6.14%

 

 

 115,022 

 

 

 115,022 

 

 

 

Universal Buildings

04/14

 

6.36%

 

 

 104,854 

 

 

 106,630 

 

 

 

Reston Executive I, II, and III

01/13

 

5.57%

 

 

 93,000 

 

 

 93,000 

 

 

 

2011 Crystal Drive

08/17

 

7.30%

 

 

 81,845 

 

 

 82,178 

 

 

 

1550 and 1750 Crystal Drive

11/14

 

7.08%

 

 

 80,638 

 

 

 81,822 

 

 

 

1235 Clark Street

07/12

 

6.75%

 

 

 52,786 

 

 

 53,252 

 

 

 

2231 Crystal Drive

08/13

 

7.08%

 

 

 47,465 

 

 

 48,533 

 

 

 

1750 Pennsylvania Avenue

06/12

 

7.26%

 

 

 45,507 

 

 

 45,877 

 

 

 

241 18th Street

10/10

 

6.82%

 

 

 45,097 

 

 

 45,609 

 

 

 

1225 Clark Street

08/13

 

7.08%

 

 

 28,391 

 

 

 28,925 

 

 

 

1800, 1851 and 1901 South Bell Street

12/11

 

6.91%

 

 

 14,821 

 

 

 19,338 

 

 

 

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

n/a

 

n/a

 

 

 - 

 

 

 85,910 

 

 

 

  

 

 

 

 

 

 

 

 

 

 

 

Retail:

 

 

 

 

 

 

 

 

 

 

 

 

Springfield Mall (including present value of purchase option)(3)

10/12-04/13

 

9.01%

 

 

 245,254 

 

 

 242,583 

 

 

 

Montehiedra Town Center

07/16

 

6.04%

 

 

 120,000 

 

 

 120,000 

 

 

 

Broadway Mall

07/13

 

5.30%

 

 

 91,419 

 

 

 92,601 

 

 

 

828-850 Madison Avenue Condominium

06/18

 

5.29%

 

 

 80,000 

 

 

 80,000 

 

 

 

Las Catalinas Mall

11/13

 

6.97%

 

 

 58,534 

 

 

 59,304 

 

 

 

Other(4)

12/10-05/36

 

  4.75%-10.70%

 

 156,003 

 

 

 156,709 

 

 

 

  

 

 

 

 

 

 

 

 

 

 

 

Merchandise Mart:

 

 

 

 

 

 

 

 

 

 

 

 

Merchandise Mart

12/16

 

5.57%

 

 

 550,000 

 

 

 550,000 

 

 

 

High Point Complex(5)

09/16

 

10.35%

 

 

 220,456 

 

 

 217,815 

 

 

 

Boston Design Center

09/15

 

5.02%

 

 

 69,105 

 

 

 69,667 

 

 

 

Washington Design Center

11/11

 

6.95%

 

 

 43,849 

 

 

 44,247 

 

 

 

  

 

 

 

 

 

 

 

 

 

 

 

Other:

 

 

 

 

 

 

 

 

 

 

 

 

555 California Street

09/11

 

5.79%

 

 

 639,754 

 

 

 664,117 

 

 

 

Industrial Warehouses

10/11

 

6.95%

 

 

 24,622 

 

 

 24,813 

 

Total fixed rate notes and mortgages payable

 

 

6.12%

 

$

 6,507,971 

 

$

 6,640,012 

 

___________________

 

 

 

 

 

 

 

 

 

 

 

 

See notes on page 18.

 

 

 

 

 

 

 

 

 

 

16

 


 

VORNADO REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

 

 

 

 

8.    Debt - continued

 

 

  

 

 

 

 

 

 

 

 

 

 

 

  

 

 

  

Interest

 

 

 

 

 

 

 

 

(Amounts in thousands)

 

 

  

Rate at

 

Balance at

 

 

 

 

  

 

 

Spread over

June 30,

 

June 30,

 

December 31,

 

 

Notes and mortgages payable:

Maturity (1)

 

LIBOR

2010 

 

2010 

 

2009 

 

 

Variable rate:

 

 

  

 

 

 

 

 

 

 

 

 

 

New York Office:

 

 

  

 

 

 

 

 

 

 

 

 

 

 

Manhattan Mall

02/12

 

L+55

0.90%

 

$

 232,000 

 

$

 232,000 

 

 

 

 

866 UN Plaza  

05/11

 

L+40

0.88%

 

 

 44,978 

 

 

 44,978 

 

 

 

Washington, DC Office:

 

 

  

 

 

 

 

 

 

 

 

 

 

 

2101 L Street  

02/13

 

L+120

1.53%

 

 

 150,000 

 

 

 150,000 

 

 

 

 

West End 25 (construction loan)

02/11

 

L+130

1.65%

 

 

 93,998 

 

 

 85,735 

 

 

 

 

1101 17th, 1140 Connecticut, 1730 M and  

 

 

  

 

 

 

 

 

 

 

 

 

 

 

    1150 17th Street(2)

06/14

 

L+140

1.94%

 

 

 84,966 

 

 

 - 

 

 

 

 

220 20th Street (construction loan)

01/11

 

L+115

1.60%

 

 

 81,239 

 

 

 75,629 

 

 

 

 

River House Apartments

04/18

 

n/a(6)

1.67%

 

 

 64,000 

 

 

 64,000 

 

 

 

 

2200/2300 Clarendon Boulevard

01/15

 

L+75

1.10%

 

 

 62,204 

 

 

 65,133 

 

 

 

Retail:

 

 

  

 

 

 

 

 

 

 

 

 

 

 

Green Acres Mall  

02/13

 

L+140

1.74%

 

 

 335,000 

 

 

 335,000 

 

 

 

 

Bergen Town Center (construction loan)

03/13

 

L+150

1.84%

 

 

 261,903 

 

 

 261,903 

 

 

 

 

Beverly Connection (7)

07/12

 

L+350(7)

5.00%

 

 

 100,000 

 

 

 100,000 

 

 

 

 

4 Union Square South  

04/14

 

L+325

3.62%

 

 

 75,000 

 

 

 75,000 

 

 

 

 

435 Seventh Avenue (8)

08/14

 

L+300(8)

5.00%

 

 

 52,000 

 

 

 52,000 

 

 

 

 

Other

11/12

 

L+375

4.11%

 

 

 22,612 

 

 

 22,758 

 

 

 

Other:

 

 

  

 

 

 

 

 

 

 

 

 

 

 

220 Central Park South

11/10

 

L+235–L+245

2.74%

 

 

 123,750 

 

 

 123,750 

 

 

 

 

Other (9)

09/10-02/12

 

Various

1.85%-4.00%

 

 

 108,978 

 

 

 117,868 

 

 

 

Total variable rate notes and mortgages payable

 

 

  

2.09%

 

 

 1,892,628 

 

 

 1,805,754 

 

 

 

Total notes and mortgages payable

 

 

  

5.21%

 

$

 8,400,599 

 

$

 8,445,766 

 

 

 

 

  

 

 

  

 

 

 

 

 

 

 

 

 

Senior unsecured notes:

 

 

  

 

 

 

 

 

 

 

 

 

 

Senior unsecured notes due 2015 (10)

04/15

 

  

4.25%

 

$

 499,214 

 

$

 - 

 

 

 

Senior unsecured notes due 2039(11)

10/39

 

  

7.88%

 

 

 460,000 

 

 

 446,134 

 

 

 

Senior unsecured notes due 2010  

12/10

 

  

4.75%

 

 

 148,292 

 

 

 148,240 

 

 

 

Senior unsecured notes due 2011  

02/11

 

  

5.60%

 

 

 117,360 

 

 

 117,342 

 

 

 

Total senior unsecured notes

 

 

  

5.80%

 

$

 1,224,866 

 

$

 711,716 

 

 

 

 

  

 

 

  

 

 

 

 

 

 

 

 

 

3.88% exchangeable senior debentures due 2025  

 

 

  

 

 

 

 

 

 

 

 

 

 

(see page 19)  

04/12

 

  

5.32%

 

$

 487,685 

 

$

 484,457 

 

 

 

 

  

 

 

  

 

 

 

 

 

 

 

 

 

Convertible senior debentures: (see page 19)

 

 

  

 

 

 

 

 

 

 

 

 

 

3.63% due 2026(12)

11/11

 

  

5.32%

 

 

 383,338 

 

 

 424,207 

 

 

 

2.85% due 2027  

04/12

 

  

5.45%

 

 

 21,512 

 

 

 21,251 

 

 

 

Total convertible senior debentures (13)

 

 

  

5.33%

 

$

 404,850 

 

$

 445,458 

 

 

 

 

  

 

 

  

 

 

 

 

 

 

 

 

 

Unsecured revolving credit facilities:

 

 

  

 

 

 

 

 

 

 

 

 

 

$1.595 billion unsecured revolving credit facility  

09/12

 

L+55

0.88%

 

$

 152,218 

 

$

 427,218 

 

 

 

$.965 billion unsecured revolving credit facility

 

 

  

 

 

 

 

 

 

 

 

 

 

 

($21,947 reserved for outstanding letters of credit)  

06/11

 

L+55

 - 

 

 

 - 

 

 

 425,000 

 

 

 

Total unsecured revolving credit facilities  

 

 

  

0.88%

 

$

 152,218 

 

$

 852,218 

 

 

___________________________

 

 

  

 

 

 

 

 

 

 

 

 

 

See notes on the following page.

 

 

  

 

 

 

 

 

 

 

 

 

17

 


 

VORNADO REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

 

 

 

8.    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% (1.94% at June 30, 2010) and matures in June 2011, with three one-year extension options.

 

(3)         In the fourth quarter of 2009, we requested that the Springfield Mall mortgage loan with a principal balance of $163,554 be placed with the special servicer.  In March 2010, we received notice from the special servicer that the loan was in default.  We are in negotiations with the special servicer; there can be no assurance as to the timing and ultimate resolution of these negotiations.

 

(4)         In March 2010, we requested that the mortgage loan on a California retail property with a principal balance of $17,540 be placed with the special servicer.  We have not made debt service payments since March and are in default.  We are in negotiations with the special servicer; there can be no assurance as to the timing and ultimate resolution of these negotiations.

 

(5)         In March 2010, we requested that the High Point Complex mortgage loan be placed with the special servicer.  We have not made debt service payments since March and are in default.  We are in negotiations with the special servicer; there can be no assurance as to the timing and ultimate resolution of these negotiations.

 

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

 

(7)         This loan has a LIBOR floor of 1.50%.

 

(8)         This loan has a LIBOR floor of 2.00%.

 

(9)         In June 2010, we extended the maturity date of a $50,000 construction loan to February 2011, with a one-year extension option.  In addition, in July 2010, we extended the maturity date of a $36,000 loan which had matured in October 2009, to September 2010, and are in negotiations to further extend this loan.

 

(10)      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.

 

(11)      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.

 

(12)      In the second quarter of 2010, we purchased $45,251 aggregate face amount ($44,170 aggregate carrying amount) of our convertible senior debentures for $45,242 in cash, resulting in a net loss of $1,072.

 

(13)      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.

 

18

 


 

VORNADO REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

 

 

 

8.    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.

 

 

 

 

 

$1.4 Billion Convertible

 

$1 Billion Convertible

 

$500 Million Exchangeable

 

 

(Amounts in thousands, except per share amounts)

Senior Debentures

 

Senior Debentures

 

Senior Debentures

 

 

 

 

 

June 30,

 

December 31,

 

June 30,

 

December 31,

 

June 30,

 

December 31,

 

 

Balance Sheet:

2010 

 

2009 

 

2010 

 

2009 

 

2010 

 

2009 

 

 

 

Principal amount of debt component

$

 22,479 

 

$

 22,479 

 

$

 392,046 

 

$

 437,297 

 

$

 499,982 

 

$

 499,982 

 

 

 

Unamortized discount

 

 (967)

 

 

 (1,228)

 

 

 (8,708)

 

 

 (13,090)

 

 

 (12,297)

 

 

 (15,525)

 

 

 

Carrying amount of debt component

$

 21,512 

 

$

 21,251 

 

$

 383,338 

 

$

 424,207 

 

$

 487,685 

 

$

 484,457 

 

 

 

Carrying amount of equity component

$

 2,104 

 

$

 2,104 

 

$

 21,027 

 

$

 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)

Pursuant to the provisions of ASC 470-20, we are required to disclose the conversion price and the number of shares on which the aggregate consideration to be delivered upon conversion is determined (principal plus excess value).  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 June 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 2,641 common shares, respectively.

 

 

 

 

Three Months Ended

 

Six Months Ended

(Amounts in thousands)

June 30,

 

June 30,

Income Statement:

2010 

 

2009 

 

2010 

 

2009 

$1.4 Billion Convertible Senior Debentures:

 

 

 

 

 

 

 

 

 

 

 

 

Coupon interest

$

 160 

 

$

 9,660 

 

$

 320 

 

$

 19,512 

 

Discount amortization – original issue

 

 23 

 

 

 1,305 

 

 

 46 

 

 

 2,631 

 

Discount amortization – ASC 470-20 implementation

 

 107 

 

 

 6,111 

 

 

 215 

 

 

 12,316 

 

 

$

 290 

 

$

 17,076 

 

$

 581 

 

$

 34,459 

 

 

 

 

 

 

 

 

 

 

 

 

 

$1 Billion Convertible Senior Debentures:

 

 

 

 

 

 

 

 

 

 

 

 

Coupon interest

$

 3,842 

 

$

 8,856 

 

$

 7,805 

 

$

 17,826 

 

Discount amortization – original issue

 

 447 

 

 

 959 

 

 

 903 

 

 

 1,936 

 

Discount amortization – ASC 470-20 implementation

 

 1,198 

 

 

 2,567 

 

 

 2,416 

 

 

 5,180 

 

 

$

 5,487 

 

$

 12,382 

 

$

 11,124 

 

$

 24,942 

 

 

 

 

 

 

 

 

 

 

 

 

 

$500 Million Exchangeable Senior Debentures:

 

 

 

 

 

 

 

 

 

 

 

 

Coupon interest

$

 4,844 

 

$

 4,844 

 

$

 9,688 

 

$

 9,688 

 

Discount amortization – original issue

 

 384 

 

 

 375 

 

 

 762 

 

 

 733 

 

Discount amortization – ASC 470-20 implementation

 

 1,241 

 

 

 1,215 

 

 

 2,466 

 

 

 2,375 

 

 

$

 6,469 

 

$

 6,434 

 

$

 12,916 

 

$

 12,796 

 

19

 


 

VORNADO REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

 

 

9.    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

 

 17,281 

 

 

Distributions

 

 (20,931)

 

 

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

 

 (49,990)

 

 

Adjustment to carry Class A redeemable units at redemption value

 

 (194,183)

 

 

Other, net

 

 5,944 

 

 

Balance at June 30, 2009

$

 936,099 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at December 31, 2009

$

 1,251,628 

 

 

Net income

 

 21,903 

 

 

Distributions

 

 (27,338)

 

 

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

 

 (35,711)

 

 

Adjustment to carry Class A redeemable units at redemption value

 

 66,075 

 

 

Redemption of Series D-12 redeemable units

 

 (13,000)

 

 

Other, net

 

 7,356 

 

 

Balance at June 30, 2010

$

 1,270,913 

 

 

As of June 30, 2010 and December 31, 2009, the aggregate redemption value of our Class A operating partnership units was $1,010,913,000 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 $61,122,000 and $60,271,000 as of June 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.

 

20

 


 

VORNADO REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

 

 

10.  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 primarily of (i) marketable securities, (ii) the assets of our deferred compensation plan, which are primarily marketable equity securities and equity investments in limited partnerships, (iii) short-term investments (CDARS classified as available-for-sale) and (iv) 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 June 30, 2010 and December 31, 2009, respectively. 

 

 

 

 

 

As of June 30, 2010

 

 

 (Amounts in thousands)

Total

 

Level 1

 

Level 2

 

Level 3

 

 

 

Marketable securities

$

 305,292 

 

$

 305,292 

 

$

 - 

 

$

 - 

 

 

 

Deferred compensation plan assets (included in other assets)

 

 83,787 

 

 

 40,189 

 

 

 - 

 

 

 43,598 

 

 

 

 

Total assets

$

 389,079 

 

$

 345,481 

 

$

 - 

 

$

 43,598 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mandatorily redeemable instruments (included in other liabilities)

$

 61,122 

 

$

 61,122 

 

$

 - 

 

$

 - 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As of December 31, 2009

 

 

 (Amounts in thousands)

Total

 

Level 1

 

Level 2

 

Level 3

 

 

 

Marketable equity securities

$

 79,925 

 

$

79,925 

 

$

 - 

 

$

 - 

 

 

 

Deferred compensation plan assets (included in other assets)

 

 80,443 

 

 

40,854 

 

 

 - 

 

 

 39,589 

 

 

 

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 fair value of Level 3 “deferred compensation plan assets” represents equity investments in certain limited partnerships.  The tables below summarize the changes in these assets for the three and six months ended June 30, 2010 and 2009, respectively.

 

 

 

 

For the Three Months Ended

 

For the Six Months Ended

 

 

 (Amounts in thousands)

2010 

 

2009 

 

2010 

 

2009 

 

 

Beginning balance

$

 43,263 

 

$

 32,426 

 

$

 39,589 

 

$

 34,176 

 

 

Total realized/unrealized gains

 

 41 

 

 

 2,806 

 

 

 1,149 

 

 

 1,310 

 

 

Purchases, sales, other settlements and issuances, net

 

 294 

 

 

 936 

 

 

 2,860 

 

 

 682 

 

 

Ending balance

$

 43,598 

 

$

 36,168 

 

$

 43,598 

 

$

 36,168 

 

 

21

 


 

VORNADO REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

 

 

 

10.    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 June 30, 2010 and December 31, 2009.

 

 

 

 

 

As of June 30, 2010

 

As of December 31, 2009

 

 

 

 

 

Carrying

 

Fair

 

Carrying

 

Fair

 

 

(Amounts in thousands)

Amount

 

Value

 

Amount

 

Value

 

 

 

Mezzanine loans receivable

$

 136,857 

 

$

 128,591 

 

$

 203,286 

 

$

 192,612 

 

 

 

Debt:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Notes and mortgages payable

$

 8,400,599 

 

$

 8,236,755 

 

$

 8,445,766 

 

$

 7,858,873 

 

 

 

 

Senior unsecured notes

 

 1,224,866 

 

 

 1,228,601 

 

 

 711,716 

 

 

 718,302 

 

 

 

 

Exchangeable senior debentures

 

 487,685 

 

 

 537,481 

 

 

 484,457 

 

 

 547,480 

 

 

 

 

Convertible senior debentures

 

 404,850 

 

 

 414,497 

 

 

 445,458 

 

 

 461,275 

 

 

 

 

Revolving credit facility debt

 

 152,218 

 

 

 152,218 

 

 

 852,218 

 

 

 852,218 

 

 

 

 

 

$

 10,670,218 

 

$

 10,569,552 

 

$

 10,939,615 

 

$

 10,438,148 

 

 

11.    Discontinued Operations

    

         The table below sets forth the combined results of operations of assets related to discontinued operations for the three and six months ended June 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 Six Months

 

 

(Amounts in thousands)

 

Ended June 30,

 

Ended June 30,

 

 

 

 

2010 

 

2009 

 

2010 

 

2009 

 

 

Total revenues

 

$

 - 

 

$

 5,042 

 

$

 - 

 

$

 8,490 

 

 

Total expenses

 

 

 - 

 

 

 1,679 

 

 

 - 

 

 

 2,535 

 

 

Income from discontinued operations

 

$

 - 

 

$

 3,363 

 

$

 - 

 

$

 5,955 

 

 

12.    Fee and Other Income

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

 

 

For The Three Months

 

For The Six Months

 (Amounts in thousands)

Ended June 30,

 

Ended June 30,

 

2010 

 

2009 

 

2010 

 

2009 

Tenant cleaning fees

$

 13,468 

 

$

 12,420 

 

$

 27,120 

 

$

 25,192 

Management and leasing fees

 

 3,380 

 

 

 3,017 

 

 

 12,520 

 

 

 5,418 

Lease termination fees

 

 2,841 

 

 

 1,124 

 

 

 9,276 

 

 

 2,748 

Other income

 

 12,560 

 

 

 19,338 

 

 

 25,793 

 

 

 33,291 

 

$

 32,249 

 

$

 35,899 

 

$

 74,709 

 

$

 66,649 

 

          Fee and other income above includes management fee income from Interstate Properties, a related party, of $192,000 and $183,000 for the three months ended June 30, 2010 and 2009, respectively, and $392,000 and $381,000 for the six months ended June 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 4 – Investments in Partially Owned Entities).

 

22

 


 

VORNADO REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

 

 

13.    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 six months ended June 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 $8,480,000 and $5,651,000 in the quarter ended June 30, 2010 and 2009, respectively, and $14,957,000 and $15,900,000 in the six months ended June 30, 2010 and 2009, respectively.

 

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. 

 

 

14.     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 Six Months

 

 

  

 

Ended June 30,

 

Ended June 30,

 

 

  

 

2010 

 

2009 

 

2010 

 

2009 

Dividends and interest on marketable securities

 

$

 7,377 

 

$

 6,095 

 

$

 14,622 

 

$

 12,513 

Mezzanine loans receivable loss accrual

 

 

 (6,900)

 

 

 (122,738)

 

 

 (6,900)

 

 

 (122,738)

Interest on mezzanine loans

 

 

 2,325 

 

 

 9,780 

 

 

 5,040 

 

 

 20,104 

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

 

 

 (986)

 

 

 6,210 

 

 

 1,777 

 

 

 416 

Other, net

 

 

 2,060 

 

 

 2,500 

 

 

 4,045 

 

 

 5,611 

  

 

$

 3,876 

 

$

 (98,153)

 

$

 18,584 

 

$

 (84,094)

__________________________

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 (1)

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

 

23

 


 

VORNADO REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

 

 

15.    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 Six Months

(Amounts in thousands, except per share amounts)

 

Ended June 30,

 

Ended June 30,

 

 

 

 

 

  

 

2010 

 

2009 

 

2010 

 

2009 

Numerator:

 

 

 

 

 

 

 

 

 

 

 

 

 

Income (loss) from continuing operations, net of income  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

attributable to noncontrolling interests

 

$

 72,106 

 

$

 (40,998)

 

$

 286,658 

 

$

 96,520 

 

Income from discontinued operations, net of income attributable to  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

noncontrolling interests

 

 

 - 

 

 

 3,363 

 

 

 - 

 

 

 5,955 

 

Net income (loss) attributable to Vornado

 

 

 72,106 

 

 

 (37,635)

 

 

 286,658 

 

 

 102,475 

 

Preferred share dividends

 

 

 (14,266)

 

 

 (14,269)

 

 

 (28,533)

 

 

 (28,538)

 

Net income (loss) attributable to common shareholders

 

 

 57,840 

 

 

 (51,904)

 

 

 258,125 

 

 

 73,937 

 

Earnings allocated to unvested participating securities

 

 

 (29)

 

 

 (55)

 

 

 (49)

 

 

 (110)

 

Numerator for basic income (loss) per share

 

 

 57,811 

 

 

 (51,959)

 

 

 258,076 

 

 

 73,827 

 

Impact of assumed conversions:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Convertible preferred share dividends

 

  

 

 

 - 

 

 

 - 

 

 

 81 

 

 

 - 

 

Numerator for diluted income (loss) per share

 

$

 57,811 

 

$

 (51,959)

 

$

 258,157 

 

$

 73,827 

 

 

 

 

 

  

 

 

 

 

 

 

 

 

 

 

 

 

Denominator:

 

 

 

 

 

 

 

 

 

 

 

 

 

Denominator for basic income (loss) per share –  

 

 

 182,027 

 

 

 171,530 

 

 

 181,786 

 

 

 164,009 

 

 

weighted average shares   

 

 

 

 

 

 

 

 

 

 

 

 

 

Effect of dilutive securities(1):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Employee stock options and restricted share awards

 

 

 1,617 

 

 

 - 

 

 

 1,741 

 

 

 1,174 

 

 

Convertible preferred shares

 

 

 - 

 

 

 - 

 

 

 71 

 

 

 - 

 

Denominator for diluted income (loss) per share –  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

weighted average shares and assumed conversions

 

 

 183,644 

 

 

 171,530 

 

 

 183,598 

 

 

 165,183 

 

 

 

 

 

  

 

 

 

 

 

 

 

 

 

 

 

 

INCOME (LOSS) PER COMMON SHARE – BASIC:

 

 

 

 

 

 

 

 

 

 

 

 

 

Income (loss) from continuing operations, net

 

$

 0.32 

 

$

 (0.32)

 

$

 1.42 

 

$

 0.41 

 

Income from discontinued operations, net

 

 

 - 

 

 

 0.02 

 

 

 - 

 

 

 0.04 

 

Net income (loss) per common share

 

$

 0.32 

 

$

 (0.30)

 

$

 1.42 

 

$

 0.45 

 

 

 

 

 

  

 

 

 

 

 

 

 

 

 

 

 

 

INCOME (LOSS) PER COMMON SHARE – DILUTED:

 

 

 

 

 

 

 

 

 

 

 

 

 

Income (loss) from continuing operations, net

 

$

 0.31 

 

$

 (0.32)

 

$

 1.41 

 

$

 0.41 

 

Income from discontinued operations, net

 

 

 - 

 

 

 0.02 

 

 

 - 

 

 

 0.04 

 

Net income (loss) per common share

 

$

 0.31 

 

$

 (0.30)

 

$

 1.41 

 

$

 0.45 

 

 

 

 

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

 

 

 

 

 

 

 

 

 

 

 

(1)

 

The effect of dilutive securities above excludes anti-dilutive weighted average common share equivalents. Accordingly the three months ended June 30, 2010 and 2009 exclude 20,075 and 22,729 weighted average common share equivalents, respectively, and the six months ended June 30, 2010 and 2009 exclude 19,941 and 21,551 weighted average common share equivalents, respectively.

 

24

 


 

VORNADO REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

 

 

16.    Comprehensive Income (Loss)

 

 

For The Three Months

 

For The Six Months

 (Amounts in thousands)

Ended June 30,

 

Ended June 30,

 

 

2010 

 

2009 

 

2010 

 

2009 

Net income (loss)

$

 77,211 

 

$

 (40,375)

 

$

 309,755 

 

$

 116,056 

Other comprehensive income (loss)

 

 7,644 

 

 

 10,946 

 

 

 9,148 

 

 

 (28,952)

Comprehensive income (loss)

 

 84,855 

 

 

 (29,429)

 

 

 318,903 

 

 

 87,104 

Less:  Comprehensive income (loss) attributable to noncontrolling interests

 

 5,640 

 

 

 (1,853)

 

 

 23,737 

 

 

 11,236 

Comprehensive income (loss) attributable to Vornado

$

 79,215 

 

$

 (27,576)

 

$

 295,166 

 

$

 75,868 

 

        Substantially all of other comprehensive income (loss) for the three and six months ended June 30, 2010 and 2009 relates to income or loss 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.

 

17.    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.

 

 

18.    Subsequent Event

          On July 29, 2010, as part of LNR Property Corporation’s (“LNR”) recapitalization, we acquired a 26.2% equity interest in LNR for a new investment of $116,000,000 in cash and conversion into equity of our mezzanine loan made to LNR’s parent, Riley HoldCo Corp.  At June 30, 2010, the carrying amount of the loan was $15,000,000, after a $52,537,000 loss accrual recognized in 2009 and $6,900,000 in the current quarter.  LNR is the industry leading servicer and special servicer of commercial mortgage loans and CMBS and a diversified real estate, investment, finance and management company.  We will account for our investment in LNR on the equity method from the date of the recapitalization.

 

25

 


 

VORNADO REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

 

 

19.    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 June 30, 2010, the aggregate dollar amount of these guarantees and master leases is approximately $254,042,000.

 

At June 30, 2010, $21,947,000 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 $217,800,000, of which $200,000,000 is committed to our real estate Fund.

 

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. 

 

26

 


 

VORNADO REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

 

 

19.    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.  We anticipate that a trial date will be set for some time in 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.

 

On May 24, 2007, we acquired a 70% controlling interest in 1290 Avenue of the Americas and the 555 California Street complex.  Our 70% interest was acquired through the purchase of all of the shares of a group of foreign companies that own, through U.S. entities, the 1% sole general partnership interest and a 69% limited partnership interest in the partnerships that own the two properties.  The remaining 30% limited partnership interest is owned by Donald J. Trump.  In August 2005, Mr. Trump brought a lawsuit in the New York State Supreme Court against, among others, the general partners of the partnerships referred to above relating to a dispute over the sale of properties located on the former Penn Central rail yards between West 59th and 72nd Streets in Manhattan which were formerly owned by the partnerships.  In decisions issued in 2006, 2007 and 2009, the New York State Supreme Court dismissed all of Mr. Trump’s claims, and those decisions were affirmed by the Appellate Division.  Mr. Trump cannot further appeal those decisions.  In April 2010, Mr. Trump notified us of his intent to file a new suit claiming, among other things, that the limited partnerships should be dissolved.  On April 29, 2010, we filed a motion for declaratory judgment in New York courts seeking to dispose of this claim.  In June 2010, our motion was granted and a final judgment was entered that disposed of Mr. Trump’s claims with prejudice.

 

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.  We have filed a notice of appeal and the Trial Court’s judgment is stayed pending the 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.

 

27

 


 

VORNADO REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

 

 

20.    Segment Information

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

 

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

(Amounts in thousands)

For the Three Months Ended June 30, 2010

 

 

  

 

 

 

New York

 

Washington, DC

 

 

 

Merchandise

 

 

 

  

 

 

  

 

Total

 

Office

 

Office

 

Retail

 

Mart

 

Toys

 

Other(3)

Property rentals

 

$

 541,839 

 

$

 195,248 

 

$

 146,059 

 

$

 97,000 

 

$

 60,932 

 

$

 - 

 

$

 42,600 

Straight-line rents:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

Contractual rent increases

 

 

 12,824 

 

 

 6,387 

 

 

 1,626 

 

 

 3,672 

 

 

 847 

 

 

 - 

 

 

 292 

 

Amortization of free rent

 

 

 4,811 

 

 

 868 

 

 

 (687)

 

 

 4,134 

 

 

 (59)

 

 

 - 

 

 

 555 

Amortization of acquired below-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

 

market leases, net

 

 

 16,302 

 

 

 9,134 

 

 

 615 

 

 

 4,957 

 

 

 15 

 

 

 - 

 

 

 1,581 

Total rentals

 

 

 575,776 

 

 

 211,637 

 

 

 147,613 

 

 

 109,763 

 

 

 61,735 

 

 

 - 

 

 

 45,028 

Tenant expense reimbursements

 

 

 88,080 

 

 

 32,431 

 

 

 13,376 

 

 

 36,073 

 

 

 3,937 

 

 

 - 

 

 

 2,263 

Fee and other income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

Tenant cleaning fees

 

 

 13,468 

 

 

 20,639 

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 (7,171)

 

Management and leasing fees

 

 

 3,380 

 

 

 1,393 

 

 

 2,384 

 

 

 321 

 

 

 19 

 

 

 - 

 

 

 (737)

 

Lease termination fees

 

 

 2,841 

 

 

 2,297 

 

 

 82 

 

 

 428 

 

 

 34 

 

 

 - 

 

 

 - 

 

Other

 

 

 12,560 

 

 

 4,513 

 

 

 5,055 

 

 

 1,063 

 

 

 784 

 

 

 - 

 

 

 1,145 

Total revenues

 

 

 696,105 

 

 

 272,910 

 

 

 168,510 

 

 

 147,648 

 

 

 66,509 

 

 

 - 

 

 

 40,528 

Operating expenses

 

 

 267,925 

 

 

 111,055 

 

 

 52,052 

 

 

 56,604 

 

 

 31,812 

 

 

 - 

 

 

 16,402 

Depreciation and amortization

 

 

 135,265 

 

 

 44,271 

 

 

 36,533 

 

 

 27,714 

 

 

 12,674 

 

 

 - 

 

 

 14,073 

General and administrative

 

 

 49,582 

 

 

 4,767 

 

 

 6,200 

 

 

 6,827 

 

 

 7,181 

 

 

 - 

 

 

 24,607 

Litigation loss accrual and acquisition

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

costs

 

 

 1,930 

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 1,930 

Total expenses

 

 

 454,702 

 

 

 160,093 

 

 

 94,785 

 

 

 91,145 

 

 

 51,667 

 

 

 - 

 

 

 57,012 

Operating income (loss)

 

 

 241,403 

 

 

 112,817 

 

 

 73,725 

 

 

 56,503 

 

 

 14,842 

 

 

 - 

 

 

 (16,484)

Income applicable to Alexander's

 

 

 7,066 

 

 

 195 

 

 

 - 

 

 

 198 

 

 

 - 

 

 

 - 

 

 

 6,673 

Loss applicable to Toys

 

 

 (21,004)

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 (21,004)

 

 

 - 

(Loss) income from partially owned

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

 entities

 

 

 (2,614)

 

 

 1,142 

 

 

 188 

 

 

 931 

 

 

 55 

 

 

 - 

 

 

 (4,930)

Interest and other investment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

income, net

 

 

 3,876 

 

 

 163 

 

 

 23 

 

 

 186 

 

 

 12 

 

 

 - 

 

 

 3,492 

Interest and debt expense

 

 

 (149,887)

 

 

 (33,047)

 

 

 (34,304)

 

 

 (21,000)

 

 

 (16,255)

 

 

 - 

 

 

 (45,281)

Net loss on early extinguishment of

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

 debt

 

 

 (1,072)

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 (1,072)

Net gain on disposition of wholly

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

owned and partially owned assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

other than depreciable real estate

 

 

 4,382 

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 (31)

 

 

 - 

 

 

 4,413 

Income (loss) before income taxes

 

 

 82,150 

 

 

 81,270 

 

 

 39,632 

 

 

 36,818 

 

 

 (1,377)

 

 

 (21,004)

 

 

 (53,189)

Income tax (expense) benefit

 

 

 (4,939)

 

 

 (335)

 

 

 620 

 

 

 - 

 

 

 (402)

 

 

 - 

 

 

 (4,822)

Net income (loss)

 

 

 77,211 

 

 

 80,935 

 

 

 40,252 

 

 

 36,818 

 

 

 (1,779)

 

 

 (21,004)

 

 

 (58,011)

Net (income) loss attributable to  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

noncontrolling interests, including

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

unit distributions

 

 

 (5,105)

 

 

 (2,556)

 

 

 - 

 

 

 256 

 

 

 - 

 

 

 - 

 

 

 (2,805)

Net income (loss) attributable to

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

 Vornado

 

 

 72,106 

 

 

 78,379 

 

 

 40,252 

 

 

 37,074 

 

 

 (1,779)

 

 

 (21,004)

 

 

 (60,816)

Interest and debt expense(2)

 

 

 207,512 

 

 

 31,595 

 

 

 34,943 

 

 

 22,526 

 

 

 16,478 

 

 

 42,093 

 

 

 59,877 

Depreciation and amortization(2)

 

 

 184,103 

 

 

 42,736 

 

 

 39,694 

 

 

 28,500 

 

 

 12,785 

 

 

 34,444 

 

 

 25,944 

Income tax (benefit) expense(2)

 

 

 (19,140)

 

 

 335 

 

 

 (617)

 

 

 - 

 

 

 402 

 

 

 (24,123)

 

 

 4,863 

EBITDA(1)

 

$

 444,581 

 

$

 153,045 

 

$

 114,272 

 

$

 88,100 

 

$

 27,886 

 

$

 31,410 

 

$

 29,868 

 

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

See notes on page 32.

 

28

 


 

VORNADO REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

 

 

 

20.    Segment Information – continued

 

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

(Amounts in thousands)

For the Three Months Ended June 30, 2009

 

 

  

 

 

 

New York

 

Washington, DC

 

 

 

Merchandise

 

 

 

  

 

 

  

 

Total

 

Office

 

Office

 

Retail

 

Mart

 

Toys

 

Other(3)

Property rentals

 

$

 512,696 

 

$

 190,226 

 

$

 133,424 

 

$

 89,083 

 

$

 60,954 

 

$

 - 

 

$

 39,009 

Straight-line rents:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

Contractual rent increases

 

 

 13,297 

 

 

 7,474 

 

 

 3,156 

 

 

 2,161 

 

 

 652 

 

 

 - 

 

 

 (146)

 

Amortization of free rent

 

 

 8,963 

 

 

 767 

 

 

 3,645 

 

 

 4,109 

 

 

 271 

 

 

 - 

 

 

 171 

Amortization of acquired below-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

 

market leases, net

 

 

 19,560 

 

 

 9,885 

 

 

 946 

 

 

 8,267 

 

 

 12 

 

 

 - 

 

 

 450 

Total rentals

 

 

 554,516 

 

 

 208,352 

 

 

 141,171 

 

 

 103,620 

 

 

 61,889 

 

 

 - 

 

 

 39,484 

Tenant expense reimbursements

 

 

 83,375 

 

 

 32,092 

 

 

 14,514 

 

 

 30,148 

 

 

 4,512 

 

 

 - 

 

 

 2,109 

Fee and other income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

Tenant cleaning fees

 

 

 12,420 

 

 

 17,818 

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 (5,398)

 

Management and leasing fees

 

 

 3,017 

 

 

 999 

 

 

 1,987 

 

 

 413 

 

 

 (43)

 

 

 - 

 

 

 (339)

 

Lease termination fees

 

 

 1,124 

 

 

 256 

 

 

 700 

 

 

 100 

 

 

 68 

 

 

 - 

 

 

 - 

 

Other

 

 

 19,338 

 

 

 5,358 

 

 

 4,712 

 

 

 1,189 

 

 

 1,525 

 

 

 - 

 

 

 6,554 

Total revenues

 

 

 673,790 

 

 

 264,875 

 

 

 163,084 

 

 

 135,470 

 

 

 67,951 

 

 

 - 

 

 

 42,410 

Operating expenses

 

 

 269,711 

 

 

 109,646 

 

 

 54,514 

 

 

 53,419 

 

 

 34,470 

 

 

 - 

 

 

 17,662 

Depreciation and amortization

 

 

 136,686 

 

 

 43,153 

 

 

 34,186 

 

 

 28,784 

 

 

 13,767 

 

 

 - 

 

 

 16,796 

General and administrative

 

 

 49,632 

 

 

 4,531 

 

 

 5,560 

 

 

 6,393 

 

 

 6,930 

 

 

 - 

 

 

 26,218 

Total expenses

 

 

 456,029 

 

 

 157,330 

 

 

 94,260 

 

 

 88,596 

 

 

 55,167 

 

 

 - 

 

 

 60,676 

Operating income (loss)

 

 

 217,761 

 

 

 107,545 

 

 

 68,824 

 

 

 46,874 

 

 

 12,784 

 

 

 - 

 

 

 (18,266)

Income applicable to Alexander's

 

 

 6,614 

 

 

 193 

 

 

 - 

 

 

 262 

 

 

 - 

 

 

 - 

 

 

 6,159 

Loss applicable to Toys

 

 

 (327)

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 (327)

 

 

 - 

(Loss) income from partially owned

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

 entities

 

 

 (22,797)

 

 

 1,252 

 

 

 2,044 

 

 

 794 

 

 

 35 

 

 

 - 

 

 

 (26,922)

Interest and other investment (loss)  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

income, net

 

 

 (98,153)

 

 

 240 

 

 

 179 

 

 

 (198)

 

 

 41 

 

 

 - 

 

 

 (98,415)

Interest and debt expense

 

 

 (159,063)

 

 

 (33,356)

 

 

 (31,109)

 

 

 (22,609)

 

 

 (12,964)

 

 

 - 

 

 

 (59,025)

Net gain on early extinguishment of

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

 debt

 

 

 17,684 

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 17,684 

(Loss) income before income taxes

 

 

 (38,281)

 

 

 75,874 

 

 

 39,938 

 

 

 25,123 

 

 

 (104)

 

 

 (327)

 

 

 (178,785)

Income tax expense

 

 

 (5,457)

 

 

 (260)

 

 

 (755)

 

 

 (111)

 

 

 (665)

 

 

 - 

 

 

 (3,666)

(Loss) income from continuing

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

 operations

 

 

 (43,738)

 

 

 75,614 

 

 

 39,183 

 

 

 25,012 

 

 

 (769)

 

 

 (327)

 

 

 (182,451)

Income from discontinued operations

 

 

 3,363 

 

 

 - 

 

 

 2,184 

 

 

 1,179 

 

 

 - 

 

 

 - 

 

 

 - 

Net (loss) income  

 

 

 (40,375)

 

 

 75,614 

 

 

 41,367 

 

 

 26,191 

 

 

 (769)

 

 

 (327)

 

 

 (182,451)

Net loss (income) attributable to  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

noncontrolling interests, including

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

unit distributions

 

 

 2,740 

 

 

 (1,744)

 

 

 - 

 

 

 497 

 

 

 - 

 

 

 - 

 

 

 3,987 

Net (loss) income attributable to

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

 Vornado

 

 

 (37,635)

 

 

 73,870 

 

 

 41,367 

 

 

 26,688 

 

 

 (769)

 

 

 (327)

 

 

 (178,464)

Interest and debt expense(2)

 

 

 197,512 

 

 

 31,675 

 

 

 32,237 

 

 

 24,459 

 

 

 13,190 

 

 

 15,578 

 

 

 80,373 

Depreciation and amortization(2)

 

 

 181,528 

 

 

 41,969 

 

 

 35,904 

 

 

 29,625 

 

 

 13,883 

 

 

 31,754 

 

 

 28,393 

Income tax (benefit) expense(2)

 

 

 (3,784)

 

 

 260 

 

 

 761 

 

 

 111 

 

 

 665 

 

 

 (9,634)

 

 

 4,053 

EBITDA(1)

 

$

 337,621 

 

$

 147,774 

 

$

 110,269 

 

$

 80,883 

 

$

 26,969 

 

$

 37,371 

 

$

 (65,645)

 

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

See notes on page 32.

 

29

 


 

VORNADO REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

 

 

 

20.    Segment Information – continued

 

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

(Amounts in thousands)

For the Six Months Ended June 30, 2010

 

 

  

 

 

 

New York

 

Washington, DC

 

 

 

Merchandise

 

 

 

  

 

 

  

 

Total

 

Office

 

Office

 

Retail

 

Mart

 

Toys

 

Other(3)

Property rentals

 

$

 1,065,960 

 

$

 387,852 

 

$

 285,939 

 

$

 192,764 

 

$

 122,376 

 

$

 - 

 

$

 77,029 

Straight-line rents:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

Contractual rent increases

 

 

 26,324 

 

 

 13,280 

 

 

 3,823 

 

 

 7,508 

 

 

 1,230 

 

 

 - 

 

 

 483 

 

Amortization of free rent

 

 

 12,233 

 

 

 1,769 

 

 

 1,770 

 

 

 6,674 

 

 

 1,055 

 

 

 - 

 

 

 965 

Amortization of acquired below-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

 

market leases, net

 

 

 32,209 

 

 

 18,339 

 

 

 1,347 

 

 

 9,498 

 

 

 (106)

 

 

 - 

 

 

 3,131 

Total rentals

 

 

 1,136,726 

 

 

 421,240 

 

 

 292,879 

 

 

 216,444 

 

 

 124,555 

 

 

 - 

 

 

 81,608 

Tenant expense reimbursements

 

 

 181,001 

 

 

 65,683 

 

 

 29,126 

 

 

 73,716 

 

 

 8,024 

 

 

 - 

 

 

 4,452 

Fee and other income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

Tenant cleaning fees

 

 

 27,120 

 

 

 41,057 

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 (13,937)

 

Management and leasing fees

 

 

 12,520 

 

 

 2,850 

 

 

 10,480 

 

 

 545 

 

 

 33 

 

 

 - 

 

 

 (1,388)

 

Lease termination fees

 

 

 9,276 

 

 

 3,025 

 

 

 528 

 

 

 3,836 

 

 

 1,887 

 

 

 - 

 

 

 - 

 

Other

 

 

 25,793 

 

 

 8,923 

 

 

 10,922 

 

 

 1,803 

 

 

 2,784 

 

 

 - 

 

 

 1,361 

Total revenues

 

 

 1,392,436 

 

 

 542,778 

 

 

 343,935 

 

 

 296,344 

 

 

 137,283 

 

 

 - 

 

 

 72,096 

Operating expenses

 

 

 546,980 

 

 

 226,104 

 

 

 108,715 

 

 

 110,178 

 

 

 71,031 

 

 

 - 

 

 

 30,952 

Depreciation and amortization

 

 

 271,089 

 

 

 87,978 

 

 

 73,216 

 

 

 55,695 

 

 

 26,029 

 

 

 - 

 

 

 28,171 

General and administrative

 

 

 98,312 

 

 

 9,346 

 

 

 12,097 

 

 

 13,832 

 

 

 14,411 

 

 

 - 

 

 

 48,626 

Litigation loss accrual and acquisition

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

costs

 

 

 11,986 

 

 

 - 

 

 

 10,056 

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 1,930 

Total expenses

 

 

 928,367 

 

 

 323,428 

 

 

 204,084 

 

 

 179,705 

 

 

 111,471 

 

 

 - 

 

 

 109,679 

Operating income (loss)

 

 

 464,069 

 

 

 219,350 

 

 

 139,851 

 

 

 116,639 

 

 

 25,812 

 

 

 - 

 

 

 (37,583)

Income applicable to Alexander's

 

 

 13,526 

 

 

 388 

 

 

 - 

 

 

 409 

 

 

 - 

 

 

 - 

 

 

 12,729 

Income applicable to Toys

 

 

 104,866 

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 104,866 

 

 

 - 

Income (loss) from partially owned

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

 entities

 

 

 2,270 

 

 

 2,252 

 

 

 (4)

 

 

 2,111 

 

 

 231 

 

 

 - 

 

 

 (2,320)

Interest and other investment  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

income, net

 

 

 18,584 

 

 

 327 

 

 

 50 

 

 

 191 

 

 

 25 

 

 

 - 

 

 

 17,991 

Interest and debt expense

 

 

 (289,622)

 

 

 (65,733)

 

 

 (68,788)

 

 

 (38,899)

 

 

 (29,042)

 

 

 - 

 

 

 (87,160)

Net loss on early extinguishment of

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

 debt

 

 

 (1,072)

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 (1,072)

Net gain on disposition of wholly  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

owned and partially owned assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

other than depreciable real estate

 

 

 7,687 

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 765 

 

 

 - 

 

 

 6,922 

Income (loss) before income taxes

 

 

 320,308 

 

 

 156,584 

 

 

 71,109 

 

 

 80,451 

 

 

 (2,209)

 

 

 104,866 

 

 

 (90,493)

Income tax expense

 

 

 (10,553)

 

 

 (809)

 

 

 (100)

 

 

 (35)

 

 

 (596)

 

 

 - 

 

 

 (9,013)

Net income (loss)

 

 

 309,755 

 

 

 155,775 

 

 

 71,009 

 

 

 80,416 

 

 

 (2,805)

 

 

 104,866 

 

 

 (99,506)

Net (income) loss attributable to  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

noncontrolling interests, including

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

unit distributions

 

 

 (23,097)

 

 

 (4,848)

 

 

 - 

 

 

 498 

 

 

 - 

 

 

 - 

 

 

 (18,747)

Net income (loss) attributable to

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

 Vornado

 

 

 286,658 

 

 

 150,927 

 

 

 71,009 

 

 

 80,914 

 

 

 (2,805)

 

 

 104,866 

 

 

 (118,253)

Interest and debt expense(2)

 

 

 403,699 

 

 

 62,587 

 

 

 70,114 

 

 

 41,880 

 

 

 29,487 

 

 

 83,233 

 

 

 116,398 

Depreciation and amortization(2)

 

 

 370,252 

 

 

 84,810 

 

 

 79,535 

 

 

 57,311 

 

 

 26,267 

 

 

 69,771 

 

 

 52,558 

Income tax expense(2)

 

 

 36,566 

 

 

 809 

 

 

 107 

 

 

 35 

 

 

 655 

 

 

 25,587 

 

 

 9,373 

EBITDA(1)

 

$

 1,097,175 

 

$

 299,133 

 

$

 220,765 

 

$

 180,140 

 

$

 53,604 

 

$

 283,457 

 

$

 60,076 

 

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

See notes on page 32.

 

30

 


 

VORNADO REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

 

 

 

20.    Segment Information – continued

 

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

(Amounts in thousands)

For the Six Months Ended June 30, 2009

 

 

  

 

 

 

New York

 

Washington, DC

 

 

 

Merchandise

 

 

 

  

 

 

  

 

Total

 

Office

 

Office

 

Retail

 

Mart

 

Toys

 

Other(3)

Property rentals

 

$

 1,019,779 

 

$

 378,988 

 

$

 262,798 

 

$

 177,233 

 

$

 123,955 

 

$

 - 

 

$

 76,805 

Straight-line rents:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

Contractual rent increases

 

 

 26,793 

 

 

 14,189 

 

 

 5,775 

 

 

 5,615 

 

 

 1,271 

 

 

 - 

 

 

 (57)

 

Amortization of free rent

 

 

 20,189 

 

 

 2,307 

 

 

 7,069 

 

 

 10,417 

 

 

 293 

 

 

 - 

 

 

 103 

Amortization of acquired below-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

 

market leases, net

 

 

 37,542 

 

 

 19,808 

 

 

 2,048 

 

 

 13,536 

 

 

 41 

 

 

 - 

 

 

 2,109 

Total rentals

 

 

 1,104,303 

 

 

 415,292 

 

 

 277,690 

 

 

 206,801 

 

 

 125,560 

 

 

 - 

 

 

 78,960 

Tenant expense reimbursements

 

 

 181,404 

 

 

 67,249 

 

 

 33,044 

 

 

 67,216 

 

 

 9,831 

 

 

 - 

 

 

 4,064 

Fee and other income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

Tenant cleaning fees

 

 

 25,192 

 

 

 34,590 

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 (9,398)

 

Management and leasing fees

 

 

 5,418 

 

 

 2,094 

 

 

 3,952 

 

 

 691 

 

 

 14 

 

 

 - 

 

 

 (1,333)

 

Lease termination fees

 

 

 2,748 

 

 

 298 

 

 

 1,682 

 

 

 100 

 

 

 668 

 

 

 - 

 

 

 - 

 

Other

 

 

 33,291 

 

 

 10,407 

 

 

 10,150 

 

 

 1,648 

 

 

 2,863 

 

 

 - 

 

 

 8,223 

Total revenues

 

 

 1,352,356 

 

 

 529,930 

 

 

 326,518 

 

 

 276,456 

 

 

 138,936 

 

 

 - 

 

 

 80,516 

Operating expenses

 

 

 548,609 

 

 

 223,190 

 

 

 111,490 

 

 

 106,199 

 

 

 73,665 

 

 

 - 

 

 

 34,065 

Depreciation and amortization

 

 

 268,342 

 

 

 87,263 

 

 

 69,909 

 

 

 51,790 

 

 

 27,146 

 

 

 - 

 

 

 32,234 

General and administrative

 

 

 128,697 

 

 

 13,693 

 

 

 14,469 

 

 

 18,144 

 

 

 17,894 

 

 

 - 

 

 

 64,497 

Total expenses

 

 

 945,648 

 

 

 324,146 

 

 

 195,868 

 

 

 176,133 

 

 

 118,705 

 

 

 - 

 

 

 130,796 

Operating income (loss)

 

 

 406,708 

 

 

 205,784 

 

 

 130,650 

 

 

 100,323 

 

 

 20,231 

 

 

 - 

 

 

 (50,280)

Income applicable to Alexander's

 

 

 24,747 

 

 

 385 

 

 

 - 

 

 

 411 

 

 

 - 

 

 

 - 

 

 

 23,951 

Income applicable to Toys

 

 

 96,820 

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 96,820 

 

 

 - 

(Loss) income from partially owned

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

 entities

 

 

 (30,340)

 

 

 2,454 

 

 

 3,628 

 

 

 1,986 

 

 

 160 

 

 

 - 

 

 

 (38,568)

Interest and other investment (loss)  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

income, net

 

 

 (84,094)

 

 

 522 

 

 

 319 

 

 

 53 

 

 

 71 

 

 

 - 

 

 

 (85,059)

Interest and debt expense

 

 

 (316,823)

 

 

 (66,474)

 

 

 (61,954)

 

 

 (44,778)

 

 

 (25,800)

 

 

 - 

 

 

 (117,817)

Net gain on early extinguishment of

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

 debt

 

 

 23,589 

 

 

 - 

 

 

 - 

 

 

 769 

 

 

 - 

 

 

 - 

 

 

 22,820 

Income (loss) before income taxes

 

 

 120,607 

 

 

 142,671 

 

 

 72,643 

 

 

 58,764 

 

 

 (5,338)

 

 

 96,820 

 

 

 (244,953)

Income tax expense

 

 

 (10,506)

 

 

 (260)

 

 

 (1,188)

 

 

 (277)

 

 

 (908)

 

 

 - 

 

 

 (7,873)

Income (loss) from continuing

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

 operations

 

 

 110,101 

 

 

 142,411 

 

 

 71,455 

 

 

 58,487 

 

 

 (6,246)

 

 

 96,820 

 

 

 (252,826)

Income from discontinued operations

 

 

 5,955 

 

 

 - 

 

 

 4,012 

 

 

 1,943 

 

 

 - 

 

 

 - 

 

 

 - 

Net income (loss)

 

 

 116,056 

 

 

 142,411 

 

 

 75,467 

 

 

 60,430 

 

 

 (6,246)

 

 

 96,820 

 

 

 (252,826)

Net (income) loss attributable to  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

noncontrolling interests, including

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

unit distributions

 

 

 (13,581)

 

 

 (3,621)

 

 

 - 

 

 

 615 

 

 

 - 

 

 

 - 

 

 

 (10,575)

Net income (loss) attributable to

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

 Vornado

 

 

 102,475 

 

 

 138,790 

 

 

 75,467 

 

 

 61,045 

 

 

 (6,246)

 

 

 96,820 

 

 

 (263,401)

Interest and debt expense(2)

 

 

 399,689 

 

 

 63,113 

 

 

 63,838 

 

 

 47,518 

 

 

 26,248 

 

 

 50,761 

 

 

 148,211 

Depreciation and amortization(2)

 

 

 361,118 

 

 

 84,730 

 

 

 73,147 

 

 

 53,695 

 

 

 27,431 

 

 

 67,011 

 

 

 55,104 

Income tax expense(2)

 

 

 54,283 

 

 

 260 

 

 

 1,195 

 

 

 277 

 

 

 973 

 

 

 43,457 

 

 

 8,121 

EBITDA(1)

 

$

 917,565 

 

$

 286,893 

 

$

 213,647 

 

$

 162,535 

 

$

 48,406 

 

$

 258,049 

 

$

 (51,965)

 

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

See notes on the following page.

 

31

 


 

VORNADO REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

 

 

 

20.    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 Six Months

  

(Amounts in thousands)

Ended June 30,

  

Ended June 30,

  

 

 

 

 

 

  

 

2010 

 

 

2009 

  

2010 

  

2009 

  

Alexander's

$

 14,260 

 

$

 14,061 

  

$

 28,659 

  

$

 38,460 

  

Lexington

 

 11,435 

 

 

 6,603 

  (2)

 

 29,283 

  (3)

 

 16,992 

  (2)

555 California Street

 

 11,136 

 

 

 10,157 

  

 

 22,624 

  

 

 21,795 

  

Hotel Pennsylvania

 

 6,616 

 

 

 3,617 

  

 

 6,169 

  

 

 4,224 

  

Industrial warehouses

 

 768 

 

 

 1,369 

  

 

 1,607 

  

 

 2,683 

  

Other investments

 

 8,423 

 

 

 (9,114)

  (4)

 

 20,157 

  

 

 (5,167)

  (4)

  

 

 52,638 

 

 

 26,693 

  

 

 108,499 

  

 

 78,987 

  

Corporate general and administrative expenses (1)

 

 (20,642)

 

 

 (16,564)

  

 

 (39,956)

  

 

 (38,032)

  

Investment income and other, net (1)

 

 13,235 

 

 

 25,293 

  

 

 22,912 

  

 

 37,775 

  

Net (income) loss attributable to noncontrolling interests, including  

 

 

 

 

 

  

 

 

  

 

 

  

 

unit distributions

 

 (2,805)

 

 

 3,987 

  

 

 (18,747)

  

 

 (10,575)

  

Mezzanine loans receivable loss accrual

 

 (6,900)

 

 

 (122,738)

  

 

 (6,900)

  

 

 (122,738)

  

Real estate Fund organization costs

 

 (2,656)

 

 

 - 

  

 

 (2,730)

  

 

 - 

  

Costs of acquisitions not consummated

 

 (1,930)

 

 

 - 

  

 

 (1,930)

  

 

 - 

  

Net (loss) gain on early extinguishment of debt

 

 (1,072)

 

 

 17,684 

  

 

 (1,072)

  

 

 22,820 

  

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

 

 

 

 

 

  

 

 

  

 

 

  

 

awards

 

 - 

 

 

 - 

  

 

 - 

  

 

 (20,202)

  

 

 

 

 

 

  

$

 29,868 

 

$

 (65,645)

  

$

 60,076 

  

$

 (51,965)

  

 

 

 

 

 

  

 

 

 

 

 

  

 

 

  

 

 

  

 

 

 

 

 

  

 

 

 

 

 

  

 

 

  

 

 

  

(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 $4,580 for our share of impairment losses recorded by Lexington.

  

 

 

 

 

 

  

 

 

 

 

 

  

 

 

  

 

 

  

(3)

 

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

  

 

 

 

 

 

  

 

 

 

 

 

  

 

 

  

 

 

  

(4)

 

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

  

 

32

 


 

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 June 30, 2010, and the related consolidated statements of income for the three-month and six-month periods ended June 30, 2010 and 2009, and of changes in equity and cash flows for the six-month periods ended June 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

August 3, 2010

 

33

 


 

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 six months ended June 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.

 

34

 


 

 

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 ending June 30, 2010:

 

 

 

 

 

 

Total Return(1)

 

 

 

 

 

 

Vornado

 

RMS

 

SNL

 

 

 

One-year

 

 

 67.1%

 

 55.2%

 

 55.2%

 

 

 

Three-year

 

 

 (26.2%)

 

 (25.0%)

 

 (22.4%)

 

 

 

Five-year

 

 

 9.2%

 

 0.5%

 

 3.9%

 

 

 

Ten-year

 

 

 241.8%

 

 151.6%

 

 164.7%

 

 

 

 

 

 

 

 

 

 

  

 

 

 

 

 

 

 

 

 

 

  

 

 

(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.

 

On July 8, 2010, we completed the first closing of Vornado Capital Partners, L.P., our real estate investment fund (the “Fund”) with initial 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 serve as the general partner and investment manager of the Fund and it will be our exclusive investment vehicle during its three-year investment period for all investments that fit within the Fund’s investment parameters.  The Fund’s investment parameters include debt, equity and other interests in real estate, and excludes (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) non-controlling 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.  In the six months ended June 30, 2010, we expensed $2,730,000 of Fund organization costs, which is included as a component of “general and administrative” expenses on our consolidated statement of income, and expect to incur additional expenses of approximately $3,700,000 in the third quarter of 2010.   

 

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 a 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.

 

35

 


 

 

Overview - continued

 

Quarter Ended June 30, 2010 Financial Results Summary

 

Net income attributable to common shareholders for the quarter ended June 30, 2010 was $57,840,000, or $0.31 per diluted share, compared to a net loss of $51,904,000, or $0.30 per diluted share, for the quarter ended June 30, 2009.  Net loss for the quarter ended June 30, 2009 includes $500,000 for our share of net gains on sale of real estate.  In addition, the quarters ended June 30, 2010 and 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, decreased net income attributable to common shareholders for the quarter ended June 30, 2010 by $12,596,000, or $0.07 per diluted share and increased net loss attributable to common shareholders for the quarter ended June 30, 2009 by $91,516,000, or $0.53 per diluted share.

 

Funds from operations attributable to common shareholders plus assumed conversions (“FFO”) for the quarter ended June 30, 2010 was $204,772,000, or $1.11 per diluted share, compared to $93,515,000, or $0.54 per diluted share, for the prior year’s quarter.  FFO for the quarters ended June 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, decreased FFO for the quarter ended June 30, 2010 by $12,596,000, or $0.07 per diluted share and decreased FFO for the quarter ended June 30, 2009 by $92,700,000 or $0.54 per diluted share.

 

 

 

 

 

 

 

For the Three Months

 

 

 

 

 

 

Ended June 30,

(Amounts in thousands, except per share amounts

 

2010 

 

2009 

Items that affect comparability (income) expense:

 

 

 

 

 

 

 

Mezzanine loans receivable loss accrual

 

$

 6,900 

 

$

 122,738 

 

Default interest and fees accrued on three loans in special servicing

 

 

 

 6,558 

 

 

 - 

 

Net gain on redemption of perpetual perferred units

 

 

 (4,818)

 

 

 - 

 

Real estate Fund organization costs

 

 

 

 2,656 

 

 

 - 

 

Costs of acquisitions not consummated

 

 

 1,930 

 

 

 - 

 

Net loss (gain) on early extinguishment of debt

 

 

 1,072 

 

 

 (17,684)

 

Other, net

 

 

 (722)

 

 

 (4,209)

 

 

 

 

 13,576 

 

 

 100,845 

Noncontrolling interests’ share of above adjustments

 

 

 (980)

 

 

 (8,145)

Items that affect comparability, net

 

$

 12,596 

 

$

 92,700 

 

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 June 30, 2010 over the quarter ended June 30, 2009 and the trailing quarter ended March 31, 2010 are summarized below.

 

 

 

 

 

 

New York
Office

 

Washington, DC
Office

 

  

 

Merchandise
Mart

  

Same Store EBITDA:

 

 

 

 

Retail

 

  

 

June 30, 2010 vs. June 30, 2009

 

  

 

  

 

  

 

 

  

 

 

GAAP basis

 

 2.2%

 

6.9%

 

 12.3%

 

 2.6%

  

 

 

Cash Basis

 

 3.5%

 

 13.2%

 

 12.7%

 

 3.1%

  

 

June 30, 2010 vs. March 31, 2010

 

  

 

  

 

  

 

 

  

 

 

GAAP basis

 

 

 3.6%

 

 3.1%

 

 1.5%

 

 19.1%

 (1)

 

 

Cash Basis

 

 

 4.8%

 

 6.7%

 

 0.1%

 

 22.1%

 (1)

 

 

 

 

 

  

 

  

 

  

 

 

  

 

 

 

 

 

  

 

  

 

  

 

 

  

(1)

Primarily from the timing of trade shows.

 

36

 


 

 

Overview – continued

Six Months Ended June 30, 2010 Financial Results Summary

 

Net income attributable to common shares for the six months ended June 30, 2010 was $258,125,000, or $1.41 per diluted share, compared to $73,937,000, or $0.45 per diluted share, for the six months ended June 30, 2009.  Net income for the six months ended June 30, 2010 and 2009 include $307,000 and $673,000, respectively, for our share of net gains on sale of real estate.  In addition, the six months ended June 30, 2010 and 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, decreased net income attributable to common shareholders for the six months ended June 30, 2010 by $10,552,000, or $0.06 per diluted share and decreased net income attributable to common shareholders for the six months ended June 30, 2009 by $107,531,000, or $0.65 per diluted share.

 

FFO for the six months ended June 30, 2010 was $565,066,000, or $2.98 per diluted share, compared to $355,777,000, or $2.15 per diluted share, for the prior year’s six months.  FFO for the six months ended June 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, decreased FFO for the six months ended June 30, 2010 by $10,861,000, or $0.06 per diluted share and decreased FFO for the six months ended June 30, 2009 by $108,194,000, or $0.66 per diluted share.

 

 

 

 

 

 

 

For the Six Months

 

 

 

 

 

 

Ended June 30,

(Amounts in thousands, except per share amounts

 

2010 

 

2009 

Items that affect comparability (income) expense:

 

 

 

 

 

 

 

Litigation loss accrual and costs of acquisitions not consummated

 

$

 11,986 

 

$

 - 

 

Net gain on redemption of perpetual preferred units

 

 

 (6,972)

 

 

 - 

 

Mezzanine loans receivable loss accrual

 

 

 6,900 

 

 

 122,738 

 

Default interest and fees accrued on three loans in special servicing

 

 

 6,558 

 

 

 - 

 

Net gain resulting from Lexington's March 2010 stock issuance

 

 

 (5,998)

 

 

 - 

 

Net gain on sale of condominiums

 

 

 (3,149)

 

 

 - 

 

Real estate Fund organization costs

 

 

 2,730 

 

 

 - 

 

Net loss (gain) on early extinguishment of debt

 

 

 1,072 

 

 

 (23,589)

 

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

 

 

 - 

 

 

 32,588 

 

Alexander's stock appreciation rights

 

 

 - 

 

 

 (11,105)

 

Other, net

 

 

 (1,447)

 

 

 (2,335)

 

 

 

 

 11,680 

 

 

 118,297 

Noncontrolling interests’ share of above adjustments

 

 

 (819)

 

 

 (10,103)

Items that affect comparability, net

 

$

 10,861 

 

$

 108,194 

 

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

 

 

 

 

 

 

New York

 

Washington, DC

 

  

 

Merchandise

Same Store EBITDA:

 

 

Office

 

Office

 

Retail

 

Mart

 

June 30, 2010 vs. June 30, 2009

 

  

 

  

 

  

 

  

 

 

GAAP basis

 

 1.7%

 

 6.5%

 

 7.8%

 

 (1.0%)

 

 

Cash Basis

 

 2.7%

 

 10.8%

 

 11.2%

 

 (1.9%)

 

 

 

 

 

  

 

  

 

  

 

  

  

 

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.

 

37

 


 

 

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 June 30, 2010:

 

Office

 

Office

 

Retail (3)

 

Office

 

Showroom

 

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%

 

 

 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

Leasing Activity:

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

Quarter Ended June 30, 2010:

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

Square feet  

 

 

 308 

 

 

 363 

 

 

 453 

 

 

 306 

 

 

 288 

 

Initial rent per square foot (1)

 

$

 49.69 

 

$

 36.96 

 

$

 21.47 

 

$

 24.51 

 

$

 25.78 

 

Weighted average lease terms (years)

 

 

 7.5 

 

 

 3.9 

 

 

 8.6 

 

 

 14.4 

 

 

 3.3 

 

Rent per square foot - relet space:

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

Square feet

 

 

 245 

 

 

 285 

 

 

 169 

 

 

 42 

 

 

 288 

 

 

Initial rent - cash basis (1)

 

$

 49.64 

 

$

 37.25 

 

$

 16.54 

 

$

 25.37 

 

$

 25.78 

 

 

Prior escalated rent - cash basis

 

$

 53.52 

 

$

 35.21 

 

$

 16.30 

 

$

 25.49 

 

$

 26.34 

 

 

Percentage (decrease) increase:

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Cash basis

 

 

 (7.3%)

 

 

 5.8%

 

 

 1.5%

 

 

 (0.5%)

 

 

 (2.1%)

 

 

 

GAAP Basis

 

 

 (7.1%)

 

 

 10.2%

 

 

 9.0%

 

 

 23.3%

 

 

 0.2%

 

Rent per square foot - vacant space:

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

Square feet

 

 

 63 

 

 

 78 

 

 

 284 

 

 

 264 

 

 

 - 

 

 

Initial rent (1)

 

$

 49.90 

 

$

 35.89 

 

$

 24.40 

 

$

 24.37 

 

$

 - 

 

Tenant improvements and leasing

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

commissions:

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Per square foot

 

$

 55.70 

 

$

 15.24 

 

$

 10.69 

 

$

 92.52 

 

$

 3.46 

 

 

 

Per square foot per annum

 

$

 7.46 

 

$

 3.91 

 

$

 1.25 

 

$

 6.43 

 

$

 1.05 

 

 

 

Percentage of initial rent

 

 

 15.0%

 

 

 10.6%

 

 

 5.8%

 

 

 26.2%

 

 

 4.1%

 

 

 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

Six Months Ended June 30, 2010:

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

Square feet  

 

 

 614 

 

 

 723 

 

 

 731 

 

 

 308 

 

 

 770 

 

Initial rent per square foot (1)

 

$

 47.27 

 

$

 38.39 

 

$

 21.29 

 

$

 24.48 

 

$

 24.74 

 

Weighted average lease terms (years)

 

 

 7.3 

 

 

 3.8 

 

 

 8.1 

 

 

 14.3 

 

 

 4.0 

 

Rent per square foot - relet space:

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

Square feet

 

 

 478 

 

 

 522 

 

 

 282 

 

 

 44 

 

 

 770 

 

 

Initial rent - cash basis (1)

 

$

 48.50 

 

$

 38.79 

 

$

 14.25 

 

$

 25.37 

 

$

 24.74 

 

 

Prior escalated rent - cash basis

 

$

 52.56 

 

$

 35.87 

 

$

 13.62 

 

$

 25.49 

 

$

 26.34 

 

 

Percentage (decrease) increase:

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Cash basis

 

 

 (7.7%)

 

 

 8.1%

 

 

 4.6%

 

 

 (0.5%)

 

 

 (6.1%)

 

 

 

GAAP Basis

 

 

 (7.5%)

 

 

 13.0%

 

 

 10.2%

 

 

 23.3%

 

 

 (0.8%)

 

Rent per square foot - vacant space:

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

Square feet

 

 

 136 

 

 

 201 

 

 

 449 

 

 

 264 

 

 

 - 

 

 

Initial rent (1)

 

$

 42.96 

 

$

 37.35 

 

$

 25.72 

 

$

 24.34 

 

$

 - 

 

Tenant improvements and leasing

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

commissions:

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Per square foot

 

$

 52.18 

 

$

 11.53 

 

$

 12.81 

 

$

 91.94 

 

$

 3.98 

 

 

 

Per square foot per annum

 

$

 7.17 

 

$

 3.03 

 

$

 1.59 

 

$

 6.43 

 

$

 1.00 

 

 

 

Percentage of initial rent

 

 

 15.2%

 

 

 7.9%

 

 

 7.5%

 

 

 26.3%

 

 

 4.0%

 

 

 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

See notes on the following table.

 

38

 


 

 

Overview - continued

 

 

 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

(Square feet in thousands)

 

New York  

 

Washington, DC

 

 

  

 

Merchandise Mart

 

 

 

 

 

  

 

Office

 

Office

 

Retail (3)

 

Office

 

Showroom

As of March 31, 2010:

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

Square feet (in service)

 

 

 16,175 

 

 

 18,530 

 

 

 22,684 

 

 

 2,470 

 

 

 6,301 

 

Number of properties

 

 

 28 

 

 

 84 

 

 

 164 

 

 

 8 

 

 

 8 

 

Occupancy rate

 

 

 95.3%

 

 

 94.1%(2)

 

 

 91.2%

 

 

 87.5%

 

 

 89.1%

 

 

 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

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 June 30, 2009:

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

Square feet (in service)

 

 

 16,154 

 

 

 18,073 

 

 

 21,925 

 

 

 2,430 

 

 

 6,337 

 

Number of properties

 

 

 28 

 

 

 82 

 

 

 164 

 

 

 8 

 

 

 8 

 

Occupancy rate

 

 

 96.1%

 

 

 94.7%(2)

 

 

 91.3%

 

 

 95.4%

 

 

 90.2%

 

 

 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

(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.

 

 

 

June 30, 2010

94.8%

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

March 31, 2010

94.6%

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

December 31, 2009

94.6%

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

June 30, 2009

95.1%

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

(3)

 

Mall sales per square foot, including partially owned malls, for the trailing twelve months ended June 30, 2010 and 2009 were $462 and $476,

 

 

 

respectively.

 

 

 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

 

 

 

 

39

 


 

 

Overview - continued

 

          On July 29, 2010, as part of LNR Property Corporation’s (“LNR”) recapitalization, we acquired a 26.2% equity interest in LNR for a new investment of $116,000,000 in cash and conversion into equity of our mezzanine loan made to LNR’s parent, Riley HoldCo Corp.  At June 30, 2010, the carrying amount of the loan was $15,000,000, after a $52,537,000 loss accrual recognized in 2009 and $6,900,000 in the current quarter.  LNR is the industry leading servicer and special servicer of commercial mortgage loans and CMBS and a diversified real estate, investment, finance and management company.  We will account for our investment in LNR on the equity method from the date of the recapitalization.

 

 

2010 Financing Activities:

 

On March 26, 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.

 

On June 1, 2010, we refinanced a cross-collateralized loan of approximately $85,000,000, secured by 1101 17th, 1140 Connecticut, 1730 M and 1150 17th Streets, in Washington, DC.  The new loan, which is guaranteed by the Operating Partnership, has a rate of LIBOR plus 1.40% (1.94% at June 30, 2010) and matures in June 2011, with three one-year extension options.

 

In the second quarter of 2010, we purchased $45,251,000 aggregate face amount ($44,170,000 aggregate carrying amount) of our convertible senior debentures for $45,242,000 in cash, resulting in net loss of $1,072,000. 

 

In June 2010, we extended the maturity date of a $50,000,000 construction loan to February 2011, with a one-year extension option.  In addition, in July 2010, we extended the maturity date of a $36,000,000 loan which had matured in October 2009, to September 2010, and are in negotiations to further extend this loan. 

 

 

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

 


 

 

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

 

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

(Amounts in thousands)

For the Three Months Ended June 30, 2010

 

 

  

 

 

 

New York

 

Washington, DC

 

 

 

Merchandise

 

 

 

  

 

 

  

 

Total

 

Office

 

Office

 

Retail

 

Mart

 

Toys

 

Other(3)

Property rentals

 

$

 541,839 

 

$

 195,248 

 

$

 146,059 

 

$

 97,000 

 

$

 60,932 

 

$

 - 

 

$

 42,600 

Straight-line rents:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

Contractual rent increases

 

 

 12,824 

 

 

 6,387 

 

 

 1,626 

 

 

 3,672 

 

 

 847 

 

 

 - 

 

 

 292 

 

Amortization of free rent

 

 

 4,811 

 

 

 868 

 

 

 (687)

 

 

 4,134 

 

 

 (59)

 

 

 - 

 

 

 555 

Amortization of acquired below-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

 

market leases, net

 

 

 16,302 

 

 

 9,134 

 

 

 615 

 

 

 4,957 

 

 

 15 

 

 

 - 

 

 

 1,581 

Total rentals

 

 

 575,776 

 

 

 211,637 

 

 

 147,613 

 

 

 109,763 

 

 

 61,735 

 

 

 - 

 

 

 45,028 

Tenant expense reimbursements

 

 

 88,080 

 

 

 32,431 

 

 

 13,376 

 

 

 36,073 

 

 

 3,937 

 

 

 - 

 

 

 2,263 

Fee and other income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

Tenant cleaning fees

 

 

 13,468 

 

 

 20,639 

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 (7,171)

 

Management and leasing fees

 

 

 3,380 

 

 

 1,393 

 

 

 2,384 

 

 

 321 

 

 

 19 

 

 

 - 

 

 

 (737)

 

Lease termination fees

 

 

 2,841 

 

 

 2,297 

 

 

 82 

 

 

 428 

 

 

 34 

 

 

 - 

 

 

 - 

 

Other

 

 

 12,560 

 

 

 4,513 

 

 

 5,055 

 

 

 1,063 

 

 

 784 

 

 

 - 

 

 

 1,145 

Total revenues

 

 

 696,105 

 

 

 272,910 

 

 

 168,510 

 

 

 147,648 

 

 

 66,509 

 

 

 - 

 

 

 40,528 

Operating expenses

 

 

 267,925 

 

 

 111,055 

 

 

 52,052 

 

 

 56,604 

 

 

 31,812 

 

 

 - 

 

 

 16,402 

Depreciation and amortization

 

 

 135,265 

 

 

 44,271 

 

 

 36,533 

 

 

 27,714 

 

 

 12,674 

 

 

 - 

 

 

 14,073 

General and administrative

 

 

 49,582 

 

 

 4,767 

 

 

 6,200 

 

 

 6,827 

 

 

 7,181 

 

 

 - 

 

 

 24,607 

Litigation loss accrual and acquisition

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

costs

 

 

 1,930 

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 1,930 

Total expenses

 

 

 454,702 

 

 

 160,093 

 

 

 94,785 

 

 

 91,145 

 

 

 51,667 

 

 

 - 

 

 

 57,012 

Operating income (loss)

 

 

 241,403 

 

 

 112,817 

 

 

 73,725 

 

 

 56,503 

 

 

 14,842 

 

 

 - 

 

 

 (16,484)

Income applicable to Alexander's

 

 

 7,066 

 

 

 195 

 

 

 - 

 

 

 198 

 

 

 - 

 

 

 - 

 

 

 6,673 

Loss applicable to Toys

 

 

 (21,004)

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 (21,004)

 

 

 - 

(Loss) income from partially owned

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

 entities

 

 

 (2,614)

 

 

 1,142 

 

 

 188 

 

 

 931 

 

 

 55 

 

 

 - 

 

 

 (4,930)

Interest and other investment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

income, net

 

 

 3,876 

 

 

 163 

 

 

 23 

 

 

 186 

 

 

 12 

 

 

 - 

 

 

 3,492 

Interest and debt expense

 

 

 (149,887)

 

 

 (33,047)

 

 

 (34,304)

 

 

 (21,000)

 

 

 (16,255)

 

 

 - 

 

 

 (45,281)

Net loss on early extinguishment of

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

 debt

 

 

 (1,072)

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 (1,072)

Net gain on disposition of wholly

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

owned and partially owned assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

other than depreciable real estate

 

 

 4,382 

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 (31)

 

 

 - 

 

 

 4,413 

Income (loss) before income taxes

 

 

 82,150 

 

 

 81,270 

 

 

 39,632 

 

 

 36,818 

 

 

 (1,377)

 

 

 (21,004)

 

 

 (53,189)

Income tax (expense) benefit

 

 

 (4,939)

 

 

 (335)

 

 

 620 

 

 

 - 

 

 

 (402)

 

 

 - 

 

 

 (4,822)

Net income (loss)

 

 

 77,211 

 

 

 80,935 

 

 

 40,252 

 

 

 36,818 

 

 

 (1,779)

 

 

 (21,004)

 

 

 (58,011)

Net (income) loss attributable to  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

noncontrolling interests, including

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

unit distributions

 

 

 (5,105)

 

 

 (2,556)

 

 

 - 

 

 

 256 

 

 

 - 

 

 

 - 

 

 

 (2,805)

Net income (loss) attributable to

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

 Vornado

 

 

 72,106 

 

 

 78,379 

 

 

 40,252 

 

 

 37,074 

 

 

 (1,779)

 

 

 (21,004)

 

 

 (60,816)

Interest and debt expense(2)

 

 

 207,512 

 

 

 31,595 

 

 

 34,943 

 

 

 22,526 

 

 

 16,478 

 

 

 42,093 

 

 

 59,877 

Depreciation and amortization(2)

 

 

 184,103 

 

 

 42,736 

 

 

 39,694 

 

 

 28,500 

 

 

 12,785 

 

 

 34,444 

 

 

 25,944 

Income tax (benefit) expense(2)

 

 

 (19,140)

 

 

 335 

 

 

 (617)

 

 

 - 

 

 

 402 

 

 

 (24,123)

 

 

 4,863 

EBITDA(1)

 

$

 444,581 

 

$

 153,045 

 

$

 114,272 

 

$

 88,100 

 

$

 27,886 

 

$

 31,410 

 

$

 29,868 

 

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

See notes on page 43.

 

41

 


 

 

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

 

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

(Amounts in thousands)

For the Three Months Ended June 30, 2009

 

 

  

 

 

 

New York

 

Washington, DC

 

 

 

Merchandise

 

 

 

  

 

 

  

 

Total

 

Office

 

Office

 

Retail

 

Mart

 

Toys

 

Other(3)

Property rentals

 

$

 512,696 

 

$

 190,226 

 

$

 133,424 

 

$

 89,083 

 

$

 60,954 

 

$

 - 

 

$

 39,009 

Straight-line rents:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

Contractual rent increases

 

 

 13,297 

 

 

 7,474 

 

 

 3,156 

 

 

 2,161 

 

 

 652 

 

 

 - 

 

 

 (146)

 

Amortization of free rent

 

 

 8,963 

 

 

 767 

 

 

 3,645 

 

 

 4,109 

 

 

 271 

 

 

 - 

 

 

 171 

Amortization of acquired below-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

 

market leases, net

 

 

 19,560 

 

 

 9,885 

 

 

 946 

 

 

 8,267 

 

 

 12 

 

 

 - 

 

 

 450 

Total rentals

 

 

 554,516 

 

 

 208,352 

 

 

 141,171 

 

 

 103,620 

 

 

 61,889 

 

 

 - 

 

 

 39,484 

Tenant expense reimbursements

 

 

 83,375 

 

 

 32,092 

 

 

 14,514 

 

 

 30,148 

 

 

 4,512 

 

 

 - 

 

 

 2,109 

Fee and other income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

Tenant cleaning fees

 

 

 12,420 

 

 

 17,818 

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 (5,398)

 

Management and leasing fees

 

 

 3,017 

 

 

 999 

 

 

 1,987 

 

 

 413 

 

 

 (43)

 

 

 - 

 

 

 (339)

 

Lease termination fees

 

 

 1,124 

 

 

 256 

 

 

 700 

 

 

 100 

 

 

 68 

 

 

 - 

 

 

 - 

 

Other

 

 

 19,338 

 

 

 5,358 

 

 

 4,712 

 

 

 1,189 

 

 

 1,525 

 

 

 - 

 

 

 6,554 

Total revenues

 

 

 673,790 

 

 

 264,875 

 

 

 163,084 

 

 

 135,470 

 

 

 67,951 

 

 

 - 

 

 

 42,410 

Operating expenses

 

 

 269,711 

 

 

 109,646 

 

 

 54,514 

 

 

 53,419 

 

 

 34,470 

 

 

 - 

 

 

 17,662 

Depreciation and amortization

 

 

 136,686 

 

 

 43,153 

 

 

 34,186 

 

 

 28,784 

 

 

 13,767 

 

 

 - 

 

 

 16,796 

General and administrative

 

 

 49,632 

 

 

 4,531 

 

 

 5,560 

 

 

 6,393 

 

 

 6,930 

 

 

 - 

 

 

 26,218 

Total expenses

 

 

 456,029 

 

 

 157,330 

 

 

 94,260 

 

 

 88,596 

 

 

 55,167 

 

 

 - 

 

 

 60,676 

Operating income (loss)

 

 

 217,761 

 

 

 107,545 

 

 

 68,824 

 

 

 46,874 

 

 

 12,784 

 

 

 - 

 

 

 (18,266)

Income applicable to Alexander's

 

 

 6,614 

 

 

 193 

 

 

 - 

 

 

 262 

 

 

 - 

 

 

 - 

 

 

 6,159 

Loss applicable to Toys

 

 

 (327)

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 (327)

 

 

 - 

(Loss) income from partially owned

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

 entities

 

 

 (22,797)

 

 

 1,252 

 

 

 2,044 

 

 

 794 

 

 

 35 

 

 

 - 

 

 

 (26,922)

Interest and other investment (loss)  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

income, net

 

 

 (98,153)

 

 

 240 

 

 

 179 

 

 

 (198)

 

 

 41 

 

 

 - 

 

 

 (98,415)

Interest and debt expense

 

 

 (159,063)

 

 

 (33,356)

 

 

 (31,109)

 

 

 (22,609)

 

 

 (12,964)

 

 

 - 

 

 

 (59,025)

Net gain on early extinguishment of

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

 debt

 

 

 17,684 

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 17,684 

(Loss) income before income taxes

 

 

 (38,281)

 

 

 75,874 

 

 

 39,938 

 

 

 25,123 

 

 

 (104)

 

 

 (327)

 

 

 (178,785)

Income tax expense

 

 

 (5,457)

 

 

 (260)

 

 

 (755)

 

 

 (111)

 

 

 (665)

 

 

 - 

 

 

 (3,666)

(Loss) income from continuing

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

 operations

 

 

 (43,738)

 

 

 75,614 

 

 

 39,183 

 

 

 25,012 

 

 

 (769)

 

 

 (327)

 

 

 (182,451)

Income from discontinued operations

 

 

 3,363 

 

 

 - 

 

 

 2,184 

 

 

 1,179 

 

 

 - 

 

 

 - 

 

 

 - 

Net (loss) income  

 

 

 (40,375)

 

 

 75,614 

 

 

 41,367 

 

 

 26,191 

 

 

 (769)

 

 

 (327)

 

 

 (182,451)

Net loss (income) attributable to  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

noncontrolling interests, including

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

unit distributions

 

 

 2,740 

 

 

 (1,744)

 

 

 - 

 

 

 497 

 

 

 - 

 

 

 - 

 

 

 3,987 

Net (loss) income attributable to

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

 Vornado

 

 

 (37,635)

 

 

 73,870 

 

 

 41,367 

 

 

 26,688 

 

 

 (769)

 

 

 (327)

 

 

 (178,464)

Interest and debt expense(2)

 

 

 197,512 

 

 

 31,675 

 

 

 32,237 

 

 

 24,459 

 

 

 13,190 

 

 

 15,578 

 

 

 80,373 

Depreciation and amortization(2)

 

 

 181,528 

 

 

 41,969 

 

 

 35,904 

 

 

 29,625 

 

 

 13,883 

 

 

 31,754 

 

 

 28,393 

Income tax (benefit) expense(2)

 

 

 (3,784)

 

 

 260 

 

 

 761 

 

 

 111 

 

 

 665 

 

 

 (9,634)

 

 

 4,053 

EBITDA(1)

 

$

 337,621 

 

$

 147,774 

 

$

 110,269 

 

$

 80,883 

 

$

 26,969 

 

$

 37,371 

 

$

 (65,645)

 

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

See notes on the following page.

 

42

 


 

 

Net Income and EBITDA by Segment for the Three Months Ended June 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 June 30,

  

 

 

 

 

 

 

 

  

 

2010 

 

 

2009 

  

 

 

Alexander's

$

 14,260 

 

$

 14,061 

  

 

 

Lexington

 

 11,435 

 

 

 6,603 

  (2)

 

 

555 California Street

 

 11,136 

 

 

 10,157 

  

 

 

Hotel Pennsylvania

 

 6,616 

 

 

 3,617 

  

 

 

Industrial warehouses

 

 768 

 

 

 1,369 

  

 

 

Other investments

 

 8,423 

 

 

 (9,114)

  (3)

 

 

 

 

 

 

 

  

 

 52,638 

 

 

 26,693 

  

 

 

Corporate general and administrative expenses (1)

 

 (20,642)

 

 

 (16,564)

  

 

 

Investment income and other, net (1)

 

 13,235 

 

 

 25,293 

  

 

 

Net (income) loss attributable to noncontrolling interests, including unit distributions

 

 (2,805)

 

 

 3,987 

  

 

 

Mezzanine loans receivable loss accrual

 

 (6,900)

 

 

 (122,738)

  

 

 

Real estate Fund organization costs

 

 (2,656)

 

 

 - 

  

 

 

Costs of acquisitions not consummated

 

 (1,930)

 

 

 - 

  

 

 

Net (loss) gain on early extinguishment of debt

 

 (1,072)

 

 

 17,684 

  

 

 

 

 

 

 

 

  

$

 29,868 

 

$

 (65,645)

  

 

 

 

 

 

 

 

  

 

 

 

 

 

  

 

 

 

 

 

 

 

  

 

 

 

 

 

  

 

 

(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 $4,580 for our share of impairment losses recorded by Lexington.

 

 

 

 

 

 

  

 

 

 

 

 

  

 

 

(3)

 

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

 

43

 


 

 

Results of Operations – Three Months Ended June 30, 2010 Compared to June 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 $696,105,000 for the quarter ended June 30, 2010, compared to $673,790,000 in the prior year’s quarter, an increase of $22,315,000. 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

 

$

 (2,097)

  

 

$

 - 

  

 

$

 (904)

  

 

$

 (1,193)

  

 

$

 - 

  

 

$

 - 

  

 

Development/redevelopment

 

 

 3,746 

  

 

 

 - 

  

 

 

 2,533 

  

 

 

 1,213 

  

 

 

 - 

  

 

 

 - 

  

 

Amortization of acquired below-market  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

leases, net

 

 

 (3,258)

  

 

 

 (751)

  

 

 

 (331)

  

 

 

 (3,310)

  

 

 

 3 

  

 

 

 1,131 

  

 

Hotel Pennsylvania

 

 

 5,369 

  

 

 

 - 

  

 

 

 - 

  

 

 

 - 

  

 

 

 - 

  

 

 

 5,369 

  (1)

 

Trade shows

 

 

 2,021 

  

 

 

 - 

  

 

 

 - 

  

 

 

 - 

  

 

 

 2,021 

  

 

 

 - 

  

 

Leasing activity (see page 38)

 

 

 15,479 

  

 

 

 4,036 

  

 

 

 5,144 

  

 

 

 9,433 

  

 

 

 (2,178)

  

 

 

 (956)

  

Increase (decrease) in property rentals

 

 

 21,260 

  

 

 

 3,285 

  

 

 

 6,442 

  

 

 

 6,143 

  

 

 

 (154)

  

 

 

 5,544 

  

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

Tenant expense reimbursements:

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

Acquisitions/development

 

 

 689 

  

 

 

 - 

  

 

 

 39 

  

 

 

 650 

  

 

 

 - 

  

 

 

 - 

  

 

Operations

 

 

 4,016 

  

 

 

 339 

  

 

 

 (1,177)

  

 

 

 5,275 

  

 

 

 (575)

  

 

 

 154 

  

Increase (decrease) in tenant expense  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

reimbursements

 

 

 4,705 

  

 

 

 339 

  

 

 

 (1,138)

  

 

 

 5,925 

  

 

 

 (575)

  

 

 

 154 

  

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

Fee and other income:

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

Lease cancellation fee income

 

 

 1,717 

  

 

 

 2,041 

  

 

 

 (618)

  

 

 

 328 

  

 

 

 (34)

  

 

 

 - 

  

 

Management and leasing fees

 

 

 363 

  

 

 

 394 

  

 

 

 397 

  

 

 

 (92)

  

 

 

 62 

  

 

 

 (398)

  

 

BMS cleaning fees

 

 

 1,048 

  

 

 

 2,821 

  

 

 

 - 

  

 

 

 - 

  

 

 

 - 

  

 

 

 (1,773)

  (2)

 

Other

 

 

 (6,778)

  

 

 

 (845)

  

 

 

 343 

  

 

 

 (126)

  

 

 

 (741)

  

 

 

 (5,409)

  (3)

(Decrease) increase in fee and other income

 

 

 (3,650)

  

 

 

 4,411 

  

 

 

 122 

  

 

 

 110 

  

 

 

 (713)

  

 

 

 (7,580)

  

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

Total increase (decrease) in revenues

 

$

 22,315 

  

 

$

 8,035 

  

 

$

 5,426 

  

 

$

 12,178 

  

 

$

 (1,442)

  

 

$

 (1,882)

  

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

(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 45.

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

(3)

 

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

 

44

 


 

 

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

 

Expenses

Our expenses, which consist primarily of operating, depreciation and amortization and general and administrative expenses, were $454,702,000 for the quarter ended June 30, 2010, compared to $456,029,000 in the prior year’s quarter, a decrease of $1,327,000. Below are the details of the (decrease) increase by segment:

 

(Amounts in thousands)

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

  

 

 

 

  

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

  

 

 

 

  

 

New York

  

 

Washington, DC

  

 

 

  

 

Merchandise

  

 

 

 

  

(Decrease) increase due to:

 

Total

  

 

Office

  

 

Office

  

 

Retail

  

 

Mart

  

 

Other

  

Operating:

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

Acquisitions and other  

 

$

 (4,102)

  

 

$

 (2,144)

  

 

$

 (136)

  

 

$

 (1,822)

  

 

$

 - 

  

 

$

 - 

  

 

Development/redevelopment

 

 

 424 

  

 

 

 - 

  

 

 

 1,082 

  

 

 

 (658)

  

 

 

 - 

  

 

 

 - 

  

 

Hotel activity

 

 

 3,259 

  

 

 

 - 

  

 

 

 - 

  

 

 

 - 

  

 

 

 - 

  

 

 

 3,259 

  

 

Trade shows activity

 

 

 1,408 

  

 

 

 - 

  

 

 

 - 

  

 

 

 - 

  

 

 

 1,408 

  

 

 

 - 

  

 

Operations

 

 

 (2,775)

  

 

 

 3,553 

  (1)

 

 

 (3,408)

  

 

 

 5,665 

  

 

 

 (4,066)

  

 

 

 (4,519)

  (2)

 

(Decrease) increase in operating expenses

 

 

 (1,786)

  

 

 

 1,409 

  

 

 

 (2,462)

  

 

 

 3,185 

  

 

 

 (2,658)

  

 

 

 (1,260)

  

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

Depreciation and amortization:

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

Acquisitions/development  

 

 

 (99)

  

 

 

 - 

  

 

 

 109 

  

 

 

 (208)

  

 

 

 - 

  

 

 

 - 

  

 

Operations (due to additions to buildings  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

and improvements)

 

 

 (1,322)

  

 

 

 1,118 

  

 

 

 2,238 

  

 

 

 (862)

  

 

 

 (1,093)

  

 

 

 (2,723)

  

 

(Decrease) increase in depreciation and  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

amortization

 

 

 (1,421)

  

 

 

 1,118 

  

 

 

 2,347 

  

 

 

 (1,070)

  

 

 

 (1,093)

  

 

 

 (2,723)

  

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

General and administrative:

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

Mark-to-market of deferred compensation  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

plan liability  (3)

 

 

 (7,196)

  

 

 

 - 

  

 

 

 - 

  

 

 

 - 

  

 

 

 - 

  

 

 

 (7,196)

  

 

Real estate Fund organization costs

 

 

 2,656 

  

 

 

 - 

  

 

 

 - 

  

 

 

 - 

  

 

 

 - 

  

 

 

 2,656 

  

 

Operations  

 

 

 4,490 

  

 

 

 236 

  

 

 

 640 

  

 

 

 434 

  

 

 

 251 

  

 

 

 2,929 

  (4)

 

(Decrease) increase in general and administrative

 

 

 (50)

  

 

 

 236 

  

 

 

 640 

  

 

 

 434 

  

 

 

 251 

  

 

 

 (1,611)

  

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

Litigation loss accrual and acquisition costs

 

 

 1,930 

  

 

 

 - 

  

 

 

 - 

  

 

 

 - 

  

 

 

 - 

  

 

 

 1,930 

  

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

Total (decrease) increase in expenses

 

$

 (1,327)

  

 

$

 2,763 

  

 

$

 525 

  

 

$

 2,549 

  

 

$

 (3,500)

  

 

$

 (3,664)

  

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

(1)

 

Results from a $2,742 increase in BMS operating expenses and a $2,017 increase in reimbursable operating expenses, partially offset by a $1,206 decrease in non-reimbursable operating expenses.

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

(2)

 

Primarily from the elimination of inter-company fees from operating segments upon consolidation.  See note (2) on page 44.

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

(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.

 

45

 


 

 

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

 

Income Applicable to Alexander’s

 

Our 32.4% share of Alexander’s net income (comprised of our share of Alexander’s net income, management, leasing, and development fees) was $7,066,000 for the three months ended June 30, 2010, compared to $6,614,000 in the prior year’s quarter,  an increase of $452,000.

 

 

(Loss) Income Applicable to Toys

 

During the quarter ended June 30, 2010, we recognized a net loss of $21,004,000 from our investment in Toys, comprised of $23,191,000 for our 32.7% share of Toys’ net loss ($47,314,000 before our share of Toys’ income tax benefit) and $2,187,000 of interest and other income.

 

During the quarter ended June 30, 2009, we recognized a net loss of $327,000 from our investment in Toys, comprised of (i) $16,220,000 for our 32.7% share of Toys’ net loss ($25,854,000 before our share of Toys’ income tax benefit), partially offset by (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) $1,947,000 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 June 30, 2010 and 2009.

 

 

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

 

 

  

 

For the Three Months Ended

 

 

 

 

 

  

 

June 30,

 

 

(Amounts in thousands)

 

2010 

 

2009 

 

 

Equity in Net (Loss) Income:

 

 

 

  

 

 

 

  

 

 

Lexington - 13.8% share in 2010 and 16.1% share in 2009 of equity in net loss

 

$

 (428)

  

 

$

 (6,876)

  (1)

 

 

  

 

 

 

  

 

 

 

  

 

 

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

 

 

 606 

  

 

 

 (784)

  

 

 

  

 

 

 

  

 

 

 

  

 

 

Other, net (2)

 

 

 (2,792)

  

 

 

 (15,137)

  (3)

 

 

 

 

 

  

 

$

 (2,614)

  

 

$

 (22,797)

  

 

 

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 (1)

Includes $4,580 for our share of impairment losses recorded by Lexington.

 

 

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 (2)

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.

 

 

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 (3)

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

 

 

 

 

 

  

 

 

 

  

 

 

 

  

 

 

46

 


 

 

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

 

Interest and Other Investment Income (Loss), net

Interest and other investment income (loss), net (comprised of interest income on mezzanine loans receivable, other interest income and dividend income) was income of $3,876,000 for the three months ended June 30, 2010, compared to a loss of $98,153,000 in the prior year’s quarter, an increase in income of $102,029,000. This increase resulted from:

 

 

 

 

 

 

 

 

  

 

 

(Amounts in thousands)

 

 

 

  

 

 

Mezzanine loans receivable loss accrual ($6,900 in this quarter compared to $122,738 in the prior

 

 

 

  

 

 

 

year's quarter)

 

$

 115,838 

  

 

 

Lower average mezzanine loan investments ($137,260 in this quarter compared to $459,682 in the

 

 

 

  

 

 

 

prior year's quarter)

 

 

 (7,455)

  

 

 

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)

 

 

 (7,196)

  

 

 

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

 

 

 

  

 

 

 

quarter)

 

 

 (1,552)

  

 

 

Increase in dividends and interest on marketable securities

 

 

 1,282 

  

 

 

Other, net

 

 

 1,112 

  

 

 

 

 

 

 

$

 102,029 

  

 

 

Interest and Debt Expense

Interest and debt expense was $149,887,000 for the three months ended June 30, 2010, compared to $159,063,000 in the prior year’s quarter, a decrease of $9,176,000.  This decrease was primarily due to savings of (i) $24,727,000 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) $7,903,000 from the repayment of $400,000,000 of cross-collateralized debt secured by our portfolio of 42 strip shopping centers, partially offset by (iii) $14,411,000 of interest 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) $6,558,000 of default interest and fees accrued on three loans that are currently in special servicing and (v) $2,527,000 from new financings and refinancings.

 

 

Net (Loss) Gain on Early Extinguishment of Debt

In the three months ended June 30, 2010, we recognized a $1,072,000 net loss on the early extinguishment of debt, compared to a $17,684,000 net gain in the prior year’s quarter.  The current year’s loss resulted from the purchase of $45,251,000 aggregate face amount ($44,170,000 aggregate carrying amount) of our convertible senior debentures for $45,242,000 in cash.  The prior year’s gain resulted primarily from the acquisition and retirement of our convertible senior debentures.

 

 

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

Net gains on disposition of wholly owned and partially owned assets other than depreciable real estate was $4,382,000 in the three months ended June 30, 2010 and was primarily comprised of net gains on sale of marketable securities.

 

 

Income Tax Expense

Income tax expense was $4,939,000 in the three months ended June 30, 2010, compared to $5,457,000 in the prior year’s quarter, a decrease of $518,000.

 

47

 


 

 

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

 

 

 

 

  

 

June 30,

 

 

(Amounts in thousands)

 

2010 

 

2009 

 

 

 

 

  

 

 

  

 

 

  

 

 

Total revenues

 

$

 - 

 

$

 5,042 

 

 

Total expenses

 

 

 - 

 

 

 1,679 

 

 

Income from discontinued operations

 

$

 - 

 

$

 3,363 

 

 

 

 

  

 

 

  

 

 

  

 

 

 

 

  

 

 

.

 

 

  

 

 

 

 

  

 

 

  

 

 

  

 

 

Net (Income) Loss Attributable to Noncontrolling Interests, Including Unit Distributions

 

In the three months ended June 30, 2010, we recorded $5,105,000 of net income attributable to noncontrolling interests, compared to a net loss of $2,740,000 in the prior year’s quarter.  Net income and net loss attributable to noncontrolling interests for the three months ended June 30, 2010 and 2009, respectively, is comprised of (i) allocations of income and loss to redeemable noncontrolling interests of $4,451,000 and $4,358,000, respectively, (ii) net income and net loss attributable to noncontrolling interests in consolidated subsidiaries of $981,000 and $3,200,000, respectively, (iii) preferred unit distributions of the Operating Partnership of $4,491,000 and $4,818,000, respectively and (iv) a net gain of $4,818,000 on the redemption of the remaining portion of the Series D-12 perpetual preferred units in the current period.  The increase of $8,809,000 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 $14,266,000 for the three months ended June 30, 2010, compared to $14,269,000 for the prior year’s quarter.

 

48

 


 

 

Results of Operations – Three Months Ended June 30, 2010 Compared to June 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 June 30, 2010, compared to the three months ended June 30, 2009.

 

 

 

 

New York

 

Washington, DC

 

 

 

 

Merchandise

(Amounts in thousands)

Office

 

Office

 

Retail

 

 Mart

EBITDA for the three months ended  June 30, 2010

$

 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

 

 (2,314)

 

 

 (1,874)

 

 

 (3,616)

 

 

 (879)

GAAP basis same store EBITDA for the three months

 

 

 

 

 

 

 

 

 

 

 

 

 

ended  June 30, 2010

 

 155,498 

 

 

 118,598 

 

 

 91,311 

 

 

 34,188 

 

Less: Adjustments for straight-line rents,

 

 

 

 

 

 

 

 

 

 

 

 

 

amortization of below-market leases, net and other

 

 

 

 

 

 

 

 

 

 

 

 

 

non-cash adjustments

 

 (14,622)

 

 

 (586)

 

 

 (10,623)

 

 

 (803)

Cash basis same store EBITDA for the three months

 

 

 

 

 

 

 

 

 

 

 

 

 

ended  June 30, 2010

$

 140,876 

 

$

 118,012 

 

$

 80,688 

 

$

 33,385 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

EBITDA for the three months ended  June 30, 2009

$

 147,774 

 

$

 110,269 

 

$

 80,883 

 

$

 26,969 

 

Add-back: non-property level overhead

 

 

 

 

 

 

 

 

 

 

 

 

 

expenses included above

 

 4,531 

 

 

 5,560 

 

 

 6,393 

 

 

 6,930 

 

Less: EBITDA from acquisitions, dispositions

 

 

 

 

 

 

 

 

 

 

 

 

 

and other non-operating income or expenses

 

 (119)

 

 

 (4,862)

 

 

 (5,946)

 

 

 (582)

GAAP basis same store EBITDA for the three months

 

 

 

 

 

 

 

 

 

 

 

 

 

ended  June 30, 2009

 

 152,186 

 

 

 110,967 

 

 

 81,330 

 

 

 33,317 

 

Less: Adjustments for straight-line rents,

 

 

 

 

 

 

 

 

 

 

 

 

 

amortization of below-market leases, net and other

 

 

 

 

 

 

 

 

 

 

 

 

 

non-cash adjustments 

 

 (16,080)

 

 

 (6,754)

 

 

 (9,747)

 

 

 (935)

Cash basis same store EBITDA for the three months

 

 

 

 

 

 

 

 

 

 

 

 

 

ended  June 30, 2009

$

 136,106 

 

$

 104,213 

 

$

 71,583 

 

$

 32,382 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Increase in GAAP basis same store EBITDA for

 

 

 

 

 

 

 

 

 

 

 

 

 

the three months ended  June 30, 2010 over the

 

 

 

 

 

 

 

 

 

 

 

 

 

three months ended June 30, 2009

$

 3,312 

 

$

 7,631 

 

$

 9,981 

 

$

 871 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Increase in Cash basis same store EBITDA for

 

 

 

 

 

 

 

 

 

 

 

 

 

the three months ended  June 30, 2010 over the

 

 

 

 

 

 

 

 

 

 

 

 

 

three months ended June 30, 2009

$

 4,770 

 

$

 13,799 

 

$

 9,105 

 

$

 1,003 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

% increase in GAAP basis same store EBITDA

 

 2.2%

 

 

 6.9%

 

 

 12.3%

 

 

 2.6%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

% increase in Cash basis same store EBITDA

 

 3.5%

 

 

 13.2%

 

 

 12.7%

 

 

 3.1%

 

49

 


 

 

Net Income and EBITDA by Segment for the Six Months Ended June 30, 2010 and 2009

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

 

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

(Amounts in thousands)

For the Six Months Ended June 30, 2010

 

 

  

 

 

 

New York

 

Washington, DC

 

 

 

Merchandise

 

 

 

  

 

 

  

 

Total

 

Office

 

Office

 

Retail

 

Mart

 

Toys

 

Other(3)

Property rentals

 

$

 1,065,960 

 

$

 387,852 

 

$

 285,939 

 

$

 192,764 

 

$

 122,376 

 

$

 - 

 

$

 77,029 

Straight-line rents:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

Contractual rent increases

 

 

 26,324 

 

 

 13,280 

 

 

 3,823 

 

 

 7,508 

 

 

 1,230 

 

 

 - 

 

 

 483 

 

Amortization of free rent

 

 

 12,233 

 

 

 1,769 

 

 

 1,770 

 

 

 6,674 

 

 

 1,055 

 

 

 - 

 

 

 965 

Amortization of acquired below-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

 

market leases, net

 

 

 32,209 

 

 

 18,339 

 

 

 1,347 

 

 

 9,498 

 

 

 (106)

 

 

 - 

 

 

 3,131 

Total rentals

 

 

 1,136,726 

 

 

 421,240 

 

 

 292,879 

 

 

 216,444 

 

 

 124,555 

 

 

 - 

 

 

 81,608 

Tenant expense reimbursements

 

 

 181,001 

 

 

 65,683 

 

 

 29,126 

 

 

 73,716 

 

 

 8,024 

 

 

 - 

 

 

 4,452 

Fee and other income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

Tenant cleaning fees

 

 

 27,120 

 

 

 41,057 

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 (13,937)

 

Management and leasing fees

 

 

 12,520 

 

 

 2,850 

 

 

 10,480 

 

 

 545 

 

 

 33 

 

 

 - 

 

 

 (1,388)

 

Lease termination fees

 

 

 9,276 

 

 

 3,025 

 

 

 528 

 

 

 3,836 

 

 

 1,887 

 

 

 - 

 

 

 - 

 

Other

 

 

 25,793 

 

 

 8,923 

 

 

 10,922 

 

 

 1,803 

 

 

 2,784 

 

 

 - 

 

 

 1,361 

Total revenues

 

 

 1,392,436 

 

 

 542,778 

 

 

 343,935 

 

 

 296,344 

 

 

 137,283 

 

 

 - 

 

 

 72,096 

Operating expenses

 

 

 546,980 

 

 

 226,104 

 

 

 108,715 

 

 

 110,178 

 

 

 71,031 

 

 

 - 

 

 

 30,952 

Depreciation and amortization

 

 

 271,089 

 

 

 87,978 

 

 

 73,216 

 

 

 55,695 

 

 

 26,029 

 

 

 - 

 

 

 28,171 

General and administrative

 

 

 98,312 

 

 

 9,346 

 

 

 12,097 

 

 

 13,832 

 

 

 14,411 

 

 

 - 

 

 

 48,626 

Litigation loss accrual and acquisition

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

costs

 

 

 11,986 

 

 

 - 

 

 

 10,056 

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 1,930 

Total expenses

 

 

 928,367 

 

 

 323,428 

 

 

 204,084 

 

 

 179,705 

 

 

 111,471 

 

 

 - 

 

 

 109,679 

Operating income (loss)

 

 

 464,069 

 

 

 219,350 

 

 

 139,851 

 

 

 116,639 

 

 

 25,812 

 

 

 - 

 

 

 (37,583)

Income applicable to Alexander's

 

 

 13,526 

 

 

 388 

 

 

 - 

 

 

 409 

 

 

 - 

 

 

 - 

 

 

 12,729 

Income applicable to Toys

 

 

 104,866 

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 104,866 

 

 

 - 

Income (loss) from partially owned

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

 entities

 

 

 2,270 

 

 

 2,252 

 

 

 (4)

 

 

 2,111 

 

 

 231 

 

 

 - 

 

 

 (2,320)

Interest and other investment  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

income, net

 

 

 18,584 

 

 

 327 

 

 

 50 

 

 

 191 

 

 

 25 

 

 

 - 

 

 

 17,991 

Interest and debt expense

 

 

 (289,622)

 

 

 (65,733)

 

 

 (68,788)

 

 

 (38,899)

 

 

 (29,042)

 

 

 - 

 

 

 (87,160)

Net loss on early extinguishment of

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

 debt

 

 

 (1,072)

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 (1,072)

Net gain on disposition of wholly  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

owned and partially owned assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

other than depreciable real estate

 

 

 7,687 

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 765 

 

 

 - 

 

 

 6,922 

Income (loss) before income taxes

 

 

 320,308 

 

 

 156,584 

 

 

 71,109 

 

 

 80,451 

 

 

 (2,209)

 

 

 104,866 

 

 

 (90,493)

Income tax expense

 

 

 (10,553)

 

 

 (809)

 

 

 (100)

 

 

 (35)

 

 

 (596)

 

 

 - 

 

 

 (9,013)

Net income (loss)

 

 

 309,755 

 

 

 155,775 

 

 

 71,009 

 

 

 80,416 

 

 

 (2,805)

 

 

 104,866 

 

 

 (99,506)

Net (income) loss attributable to  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

noncontrolling interests, including

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

unit distributions

 

 

 (23,097)

 

 

 (4,848)

 

 

 - 

 

 

 498 

 

 

 - 

 

 

 - 

 

 

 (18,747)

Net income (loss) attributable to

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

 Vornado

 

 

 286,658 

 

 

 150,927 

 

 

 71,009 

 

 

 80,914 

 

 

 (2,805)

 

 

 104,866 

 

 

 (118,253)

Interest and debt expense(2)

 

 

 403,699 

 

 

 62,587 

 

 

 70,114 

 

 

 41,880 

 

 

 29,487 

 

 

 83,233 

 

 

 116,398 

Depreciation and amortization(2)

 

 

 370,252 

 

 

 84,810 

 

 

 79,535 

 

 

 57,311 

 

 

 26,267 

 

 

 69,771 

 

 

 52,558 

Income tax expense(2)

 

 

 36,566 

 

 

 809 

 

 

 107 

 

 

 35 

 

 

 655 

 

 

 25,587 

 

 

 9,373 

EBITDA(1)

 

$

 1,097,175 

 

$

 299,133 

 

$

 220,765 

 

$

 180,140 

 

$

 53,604 

 

$

 283,457 

 

$

 60,076 

 

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

See notes on page 52.

 

50

 


 

 

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

 

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

(Amounts in thousands)

For the Six Months Ended June 30, 2009

 

 

  

 

 

 

New York

 

Washington, DC

 

 

 

Merchandise

 

 

 

  

 

 

  

 

Total

 

Office

 

Office

 

Retail

 

Mart

 

Toys

 

Other(3)

Property rentals

 

$

 1,019,779 

 

$

 378,988 

 

$

 262,798 

 

$

 177,233 

 

$

 123,955 

 

$

 - 

 

$

 76,805 

Straight-line rents:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

Contractual rent increases

 

 

 26,793 

 

 

 14,189 

 

 

 5,775 

 

 

 5,615 

 

 

 1,271 

 

 

 - 

 

 

 (57)

 

Amortization of free rent

 

 

 20,189 

 

 

 2,307 

 

 

 7,069 

 

 

 10,417 

 

 

 293 

 

 

 - 

 

 

 103 

Amortization of acquired below-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

 

market leases, net

 

 

 37,542 

 

 

 19,808 

 

 

 2,048 

 

 

 13,536 

 

 

 41 

 

 

 - 

 

 

 2,109 

Total rentals

 

 

 1,104,303 

 

 

 415,292 

 

 

 277,690 

 

 

 206,801 

 

 

 125,560 

 

 

 - 

 

 

 78,960 

Tenant expense reimbursements

 

 

 181,404 

 

 

 67,249 

 

 

 33,044 

 

 

 67,216 

 

 

 9,831 

 

 

 - 

 

 

 4,064 

Fee and other income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

Tenant cleaning fees

 

 

 25,192 

 

 

 34,590 

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 (9,398)

 

Management and leasing fees

 

 

 5,418 

 

 

 2,094 

 

 

 3,952 

 

 

 691 

 

 

 14 

 

 

 - 

 

 

 (1,333)

 

Lease termination fees

 

 

 2,748 

 

 

 298 

 

 

 1,682 

 

 

 100 

 

 

 668 

 

 

 - 

 

 

 - 

 

Other

 

 

 33,291 

 

 

 10,407 

 

 

 10,150 

 

 

 1,648 

 

 

 2,863 

 

 

 - 

 

 

 8,223 

Total revenues

 

 

 1,352,356 

 

 

 529,930 

 

 

 326,518 

 

 

 276,456 

 

 

 138,936 

 

 

 - 

 

 

 80,516 

Operating expenses

 

 

 548,609 

 

 

 223,190 

 

 

 111,490 

 

 

 106,199 

 

 

 73,665 

 

 

 - 

 

 

 34,065 

Depreciation and amortization

 

 

 268,342 

 

 

 87,263 

 

 

 69,909 

 

 

 51,790 

 

 

 27,146 

 

 

 - 

 

 

 32,234 

General and administrative

 

 

 128,697 

 

 

 13,693 

 

 

 14,469 

 

 

 18,144 

 

 

 17,894 

 

 

 - 

 

 

 64,497 

Total expenses

 

 

 945,648 

 

 

 324,146 

 

 

 195,868 

 

 

 176,133 

 

 

 118,705 

 

 

 - 

 

 

 130,796 

Operating income (loss)

 

 

 406,708 

 

 

 205,784 

 

 

 130,650 

 

 

 100,323 

 

 

 20,231 

 

 

 - 

 

 

 (50,280)

Income applicable to Alexander's

 

 

 24,747 

 

 

 385 

 

 

 - 

 

 

 411 

 

 

 - 

 

 

 - 

 

 

 23,951 

Income applicable to Toys

 

 

 96,820 

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 96,820 

 

 

 - 

(Loss) income from partially owned

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

 entities

 

 

 (30,340)

 

 

 2,454 

 

 

 3,628 

 

 

 1,986 

 

 

 160 

 

 

 - 

 

 

 (38,568)

Interest and other investment (loss)  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

income, net

 

 

 (84,094)

 

 

 522 

 

 

 319 

 

 

 53 

 

 

 71 

 

 

 - 

 

 

 (85,059)

Interest and debt expense

 

 

 (316,823)

 

 

 (66,474)

 

 

 (61,954)

 

 

 (44,778)

 

 

 (25,800)

 

 

 - 

 

 

 (117,817)

Net gain on early extinguishment of

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

 debt

 

 

 23,589 

 

 

 - 

 

 

 - 

 

 

 769 

 

 

 - 

 

 

 - 

 

 

 22,820 

Income (loss) before income taxes

 

 

 120,607 

 

 

 142,671 

 

 

 72,643 

 

 

 58,764 

 

 

 (5,338)

 

 

 96,820 

 

 

 (244,953)

Income tax expense

 

 

 (10,506)

 

 

 (260)

 

 

 (1,188)

 

 

 (277)

 

 

 (908)

 

 

 - 

 

 

 (7,873)

Income (loss) from continuing

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

 operations

 

 

 110,101 

 

 

 142,411 

 

 

 71,455 

 

 

 58,487 

 

 

 (6,246)

 

 

 96,820 

 

 

 (252,826)

Income from discontinued operations

 

 

 5,955 

 

 

 - 

 

 

 4,012 

 

 

 1,943 

 

 

 - 

 

 

 - 

 

 

 - 

Net income (loss)

 

 

 116,056 

 

 

 142,411 

 

 

 75,467 

 

 

 60,430 

 

 

 (6,246)

 

 

 96,820 

 

 

 (252,826)

Net (income) loss attributable to  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

noncontrolling interests, including

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

unit distributions

 

 

 (13,581)

 

 

 (3,621)

 

 

 - 

 

 

 615 

 

 

 - 

 

 

 - 

 

 

 (10,575)

Net income (loss) attributable to

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

 Vornado

 

 

 102,475 

 

 

 138,790 

 

 

 75,467 

 

 

 61,045 

 

 

 (6,246)

 

 

 96,820 

 

 

 (263,401)

Interest and debt expense(2)

 

 

 399,689 

 

 

 63,113 

 

 

 63,838 

 

 

 47,518 

 

 

 26,248 

 

 

 50,761 

 

 

 148,211 

Depreciation and amortization(2)

 

 

 361,118 

 

 

 84,730 

 

 

 73,147 

 

 

 53,695 

 

 

 27,431 

 

 

 67,011 

 

 

 55,104 

Income tax expense(2)

 

 

 54,283 

 

 

 260 

 

 

 1,195 

 

 

 277 

 

 

 973 

 

 

 43,457 

 

 

 8,121 

EBITDA(1)

 

$

 917,565 

 

$

 286,893 

 

$

 213,647 

 

$

 162,535 

 

$

 48,406 

 

$

 258,049 

 

$

 (51,965)

 

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

See notes on the following page.

 

51

 


 

 

Net Income and EBITDA by Segment for the Six Months Ended June 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 Six Months

  

 

 

(Amounts in thousands)

Ended June 30,

  

 

 

 

 

 

 

 

  

 

2010 

  

 

 

2009 

  

 

 

Lexington

$

 29,283 

  (2)

 

$

 16,992 

  (3)

 

 

Alexander's

 

 28,659 

  

 

 

 38,460 

  

 

 

555 California Street

 

 22,624 

  

 

 

 21,795 

  

 

 

Hotel Pennsylvania

 

 6,169 

  

 

 

 4,224 

  

 

 

Industrial warehouses

 

 1,607 

  

 

 

 2,683 

  

 

 

Other investments

 

 20,157 

  

 

 

 (5,167)

  (4)

 

 

 

 

 

 

 

  

 

 108,499 

  

 

 

 78,987 

  

 

 

Corporate general and administrative expenses (1)

 

 (39,956)

  

 

 

 (38,032)

  

 

 

Investment income and other, net (1)

 

 22,912 

  

 

 

 37,775 

  

 

 

Net income attributable to noncontrolling interests, including unit distributions

 

 (18,747)

  

 

 

 (10,575)

  

 

 

Mezzanine loans receivable loss accrual

 

 (6,900)

  

 

 

 (122,738)

  

 

 

Real estate Fund organization costs

 

 (2,730)

  

 

 

 - 

  

 

 

Costs of acquisitions not consummated

 

 (1,930)

  

 

 

 - 

  

 

 

Net (loss) gain on early extinguishment of debt

 

 (1,072)

  

 

 

 22,820 

  

 

 

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

 

 - 

  

 

 

 (20,202)

  

 

 

 

 

 

 

 

  

$

 60,076 

  

 

$

 (51,965)

  

 

 

 

 

 

 

 

  

 

 

  

 

 

 

  

 

 

 

 

 

 

 

  

 

 

  

 

 

 

  

 

 

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

 

 

 

 

 

 

  

 

 

  

 

 

 

  

 

 

(3)

 

Includes $4,580 for our share of impairment losses recorded by Lexington.

 

 

 

 

 

 

  

 

 

  

 

 

 

  

 

 

(4)

 

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

 

52

 


 

 

Results of Operations – Six Months Ended June 30, 2010 Compared to June 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 $1,392,436,000 for the six months ended June 30, 2010, compared to $1,352,356,000 in the prior year’s six months, an increase of $40,080,000. 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

 

$

 (176)

  

 

$

 - 

  

 

$

 (904)

  

 

$

 (288)

  

 

$

 2,064 

  

 

$

 (1,048)

  

 

Development/redevelopment

 

 

 6,332 

  

 

 

 - 

  

 

 

 4,302 

  

 

 

 2,030 

  

 

 

 - 

  

 

 

 - 

  

 

Amortization of acquired below-market  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

leases, net

 

 

 (5,333)

  

 

 

 (1,469)

  

 

 

 (701)

  

 

 

 (4,038)

  

 

 

 (147)

  

 

 

 1,022 

  

 

Hotel Pennsylvania

 

 

 3,945 

  

 

 

 - 

  

 

 

 - 

  

 

 

 - 

  

 

 

 - 

  

 

 

 3,945 

  (1)

 

Trade shows

 

 

 1,682 

  

 

 

 - 

  

 

 

 - 

  

 

 

 - 

  

 

 

 1,682 

  

 

 

 - 

  

 

Leasing activity (see page 38)

 

 

 25,973 

  

 

 

 7,417 

  

 

 

 12,492 

  

 

 

 11,939 

  

 

 

 (4,604)

  

 

 

 (1,271)

  

Increase (decrease) in property rentals

 

 

 32,423 

  

 

 

 5,948 

  

 

 

 15,189 

  

 

 

 9,643 

  

 

 

 (1,005)

  

 

 

 2,648 

  

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

Tenant expense reimbursements:

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

Acquisitions/development

 

 

 707 

  

 

 

 - 

  

 

 

 (40)

  

 

 

 996 

  

 

 

 - 

  

 

 

 (249)

  

 

Operations

 

 

 (1,110)

  

 

 

 (1,566)

  

 

 

 (3,878)

  

 

 

 5,504 

  

 

 

 (1,807)

  

 

 

 637 

  

(Decrease) increase in tenant expense  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

reimbursements

 

 

 (403)

  

 

 

 (1,566)

  

 

 

 (3,918)

  

 

 

 6,500 

  

 

 

 (1,807)

  

 

 

 388 

  

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

Fee and other income:

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

Lease cancellation fee income

 

 

 6,528 

  

 

 

 2,727 

  

 

 

 (1,154)

  

 

 

 3,736 

  

 

 

 1,219 

  

 

 

 - 

  

 

Management and leasing fees

 

 

 7,102 

  

 

 

 756 

  

 

 

 6,528 

  (2)

 

 

 (146)

  

 

 

 19 

  

 

 

 (55)

  

 

BMS cleaning fees

 

 

 1,928 

  

 

 

 6,467 

  

 

 

 - 

  

 

 

 - 

  

 

 

 - 

  

 

 

 (4,539)

  (3)

 

Other

 

 

 (7,498)

  

 

 

 (1,484)

  

 

 

 772 

  

 

 

 155 

  

 

 

 (79)

  

 

 

 (6,862)

  (4)

Increase (decrease) in fee and other income

 

 

 8,060 

  

 

 

 8,466 

  

 

 

 6,146 

  

 

 

 3,745 

  

 

 

 1,159 

  

 

 

 (11,456)

  

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

Total increase (decrease) in revenues

 

$

 40,080 

  

 

$

 12,848 

  

 

$

 17,417 

  

 

$

 19,888 

  

 

$

 (1,653)

  

 

$

 (8,420)

  

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

(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 54.

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

(4)

 

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

 

53

 


 

 

Results of Operations – Six Months Ended June 30, 2010 Compared to June 30, 2009 - continued

 

Expenses

Our expenses, which consist primarily of operating, depreciation and amortization and general and administrative expenses, were $928,367,000 for the six months ended June 30, 2010, compared to $945,648,000 in the prior year’s six months, a decrease of $17,281,000. Below are the details of the (decrease) increase by segment:

 

(Amounts in thousands)

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

  

 

 

 

  

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

  

 

 

 

  

 

New York

  

 

Washington, DC

  

 

 

  

 

Merchandise

  

 

 

 

  

(Decrease) increase due to:

 

Total

  

 

Office

  

 

Office

  

 

Retail

  

 

Mart

  

 

Other

  

Operating:

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

Acquisitions and other  

 

$

 (3,875)

  

 

$

 (3,666)

  

 

$

 (136)

  

 

$

 (1,147)

  

 

$

 1,770 

  

 

$

 (696)

  

 

Development/redevelopment

 

 

 2,207 

  

 

 

 - 

  

 

 

 2,481 

  

 

 

 (274)

  

 

 

 - 

  

 

 

 - 

  

 

Hotel activity

 

 

 3,870 

  

 

 

 - 

  

 

 

 - 

  

 

 

 - 

  

 

 

 - 

  

 

 

 3,870 

  

 

Trade shows activity

 

 

 1,118 

  

 

 

 - 

  

 

 

 - 

  

 

 

 - 

  

 

 

 1,118 

  

 

 

 - 

  

 

Operations

 

 

 (4,949)

  

 

 

 6,580 

  (1)

 

 

 (5,120)

  

 

 

 5,400 

  

 

 

 (5,522)

  

 

 

 (6,287)

  (2)

 

(Decrease) increase in operating expenses

 

 

 (1,629)

  

 

 

 2,914 

  

 

 

 (2,775)

  

 

 

 3,979 

  

 

 

 (2,634)

  

 

 

 (3,113)

  

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

Depreciation and amortization:

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

Acquisitions/development  

 

 

 1,846 

  

 

 

 - 

  

 

 

 1,584 

  

 

 

 869 

  

 

 

 - 

  

 

 

 (607)

  

 

Operations (due to additions to buildings  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

and improvements)

 

 

 901 

  

 

 

 715 

  

 

 

 1,723 

  

 

 

 3,036 

  

 

 

 (1,117)

  

 

 

 (3,456)

  

 

Increase (decrease) in depreciation and  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

amortization

 

 

 2,747 

  

 

 

 715 

  

 

 

 3,307 

  

 

 

 3,905 

  

 

 

 (1,117)

  

 

 

 (4,063)

  

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

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)

 

 

 1,361 

  

 

 

 - 

  

 

 

 - 

  

 

 

 - 

  

 

 

 - 

  

 

 

 1,361 

  

 

Real estate Fund organization costs

 

 

 2,730 

  

 

 

 - 

  

 

 

 - 

  

 

 

 - 

  

 

 

 - 

  

 

 

 2,730 

  

 

Operations  

 

 

 (1,888)

  

 

 

 (896)

  

 

 

 759 

  

 

 

 481 

  

 

 

 (2,472)

  (5)

 

 

 240 

  

 

Decrease in general and administrative

 

 

 (30,385)

  

 

 

 (4,347)

  

 

 

 (2,372)

  

 

 

 (4,312)

  

 

 

 (3,483)

  

 

 

 (15,871)

  

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

Litigation loss accrual and acquisition costs

 

 

 11,986 

  

 

 

 - 

  

 

 

 10,056 

  (6)

 

 

 - 

  

 

 

 - 

  

 

 

 1,930 

  

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

Total (decrease) increase in expenses

 

$

 (17,281)

  

 

$

 (718)

  

 

$

 8,216 

  

 

$

 3,572 

  

 

$

 (7,234)

  

 

$

 (21,117)

  

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

(1)

 

Results from a $6,358 increase in BMS operating expenses.

 

 

 

(2)

 

Primarily from the elimination of inter-company fees from operating segments upon consolidation.  See note (2) on page 53.

 

 

 

(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 increase in expense is entirely offset by a corresponding increase 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 65.

 

54

 


 

 

Results of Operations – Six Months Ended June 30, 2010 Compared to June 30, 2009 - continued

 

Income Applicable to Alexander’s

 

Our 32.4% share of Alexander’s net income (comprised of our share of Alexander’s net income, management, leasing, and development fees) was $13,526,000 in the six months ended June 30, 2010, compared to $24,747,000 for the prior year’s six months, a decrease of $11,221,000. This decrease was primarily due to $11,105,000 of income for our share of the reversal of accrued stock appreciation rights compensation expense in the prior year.

 

Income Applicable to Toys

 

During the six months ended June 30, 2010, we recognized $104,866,000 of income from our investment in Toys, comprised of $100,649,000 for our 32.7% share of Toys’ net income ($126,236,000 before our share of Toys’ income tax expense) and $4,217,000 of interest and other income.

 

During the six months ended June 30, 2009, we recognized $96,820,000 of income from our investment in Toys, comprised of (i) $79,074,000 for our 32.7% share of Toys’ net income ($122,531,000 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) $3,800,000 of interest and other income.

 

 

Income (Loss) from Partially Owned Entities

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

 

 

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

 

 

  

 

For the Six Months Ended

 

 

 

 

 

  

 

June 30,

 

 

(Amounts in thousands)

 

2010 

 

2009 

 

 

Equity in Net Income (Loss):

 

 

 

  

 

 

 

  

 

 

Lexington - 13.8% share in 2010 and 16.1% share in 2009 of equity in  

 

$

 5,617 

  (1)

 

$

 (9,915)

  (2)

 

 

 

net income (loss)

  

 

 

 

  

 

 

 

  

 

 

  

 

 

 

  

 

 

 

  

 

 

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

 

 

 2,257 

  

 

 

 (921)

  

 

 

  

 

 

 

  

 

 

 

  

 

 

Other, net (3)

 

 

 (5,604)

  

 

 

 (19,504)

  (4)

 

 

 

 

 

  

 

$

 2,270 

  

 

$

 (30,340)

  

 

 

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 (1)

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

 

 

 

 

 (2)

Includes a $4,580 for our share of impairment losses recorded 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.

 

 

 

 

  

 

 

 

  

 

 

 

  

 

 

55

 


 

 

Results of Operations – Six Months Ended June 30, 2010 Compared to June 30, 2009 - continued

 

Interest and Other Investment Income (Loss), net

Interest and other investment income (loss), net (comprised of interest income on mezzanine loans receivable, other interest income and dividend income) was income of $18,584,000 for the six months ended June 30, 2010, compared to a loss of $84,094,000 in the prior year’s six months, an increase in income of $102,678,000. This increase resulted from:

 

 

 

 

 

 

 

 

  

 

 

(Amounts in thousands)

 

 

 

  

 

 

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

 

 

 

  

 

 

 

the prior year's six months)

 

$

 115,838 

  

 

 

Lower average mezzanine loan investments ($127,925 in this year's six months compared to $466,272

 

 

 

  

 

 

 

in the prior year's six months)

 

 

 (15,064)

  

 

 

Lower average yields on investments (0.2% in this year's six months compared to 0.5% in the prior

 

 

 

  

 

 

 

year's six months)

 

 

 (3,659)

  

 

 

Increase in dividends and interest on marketable securities

 

 

 2,109 

  

 

 

Increase 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)

 

 

 1,361 

  

 

 

Other, net

 

 

 2,093 

  

 

 

 

 

 

 

$

 102,678 

  

 

 

Interest and Debt Expense

Interest and debt expense was $289,622,000 for the six months ended June 30, 2010, compared to $316,823,000 in the prior year’s six months, a decrease of $27,201,000.  This decrease was primarily due to savings of (i) $51,507,000 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) $16,449,000 from the repayment of $400,000,000 of cross-collateralized debt secured by our portfolio of 42 strip shopping centers, partially offset by (iii) $23,764,000 of interest 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) $9,158,000 of lower capitalized interest and (v) $6,558,000 of default interest and fees accrued on three loans that are currently in special servicing.

 

 

Net (Loss) Gain on Early Extinguishment of Debt

In the six months ended June 30, 2010, we recognized a $1,072,000 net loss on the early extinguishment of debt, compared to a $23,589,000 net gain in the prior year’s six months.  The current year’s loss resulted from the purchase of $45,251,000 aggregate face amount ($44,170,000 aggregate carrying amount) of our convertible senior debentures for $45,242,000 in cash.  The prior year’s gain resulted primarily from the acquisition and retirement of our convertible senior debentures.

 

 

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

Net gains on disposition of wholly owned and partially owned assets other than depreciable real estate was $7,687,000 in the six months ended June 30, 2010 and was primarily comprised of net gains on the sale of marketable securities and net gains on sale of condominiums at our 40 East 66th Street property.

 

 

Income Tax Expense

Income tax expense was $10,553,000 in the six months ended June 30, 2010, compared to $10,506,000 in the prior year’s six months.

 

56

 


 

 

Results of Operations – Six Months Ended June 30, 2010 Compared to June 30, 2009 - continued

 

Discontinued Operations

The table below sets forth the combined results of operations of assets related to discontinued operations for the six months ended June 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 Six Months Ended

 

 

 

 

  

 

June 30,

 

 

(Amounts in thousands)

 

2010 

 

2009 

 

 

 

 

  

 

 

  

 

 

  

 

 

Total revenues

 

$

 - 

 

$

 8,490 

 

 

Total expenses

 

 

 - 

 

 

 2,535 

 

 

Income from discontinued operations

 

$

 - 

 

$

 5,955 

 

 

 

 

  

 

 

  

 

 

  

 

 

 

 

  

 

 

  

 

 

  

 

 

 

 

  

 

 

  

 

 

  

 

 

Net (Income) Loss Attributable to Noncontrolling Interests, Including Unit Distributions

 

In the six months ended June 30, 2010 and 2009, we recorded $23,097,000 and $13,581,000, respectively, of net income attributable to noncontrolling interests. Net income attributable to noncontrolling interests for the six months ended June 30, 2010 and 2009 is comprised of (i) allocations of income to redeemable noncontrolling interests of $19,666,000 and $7,644,000, respectively, (ii) net income and net loss attributable to noncontrolling interests in consolidated subsidiaries of $1,194,000 and $3,700,000, respectively, (iii) preferred unit distributions of the Operating Partnership of $9,209,000 and $9,637,000, 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 $12,022,000 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 $28,533,000 for the six months ended June 30, 2010, compared to $28,538,000 for the prior year’s six months.

 

57

 


 

 

Results of Operations – Six Months Ended June 30, 2010 Compared to June 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 six months ended June 30, 2010, compared to the six months ended June 30, 2009.

 

 

 

 

New York

 

Washington, DC

 

 

 

 

Merchandise

(Amounts in thousands)

Office

 

Office

 

Retail

 

 Mart

EBITDA for the six months ended June 30, 2010

$

 299,133 

 

$

 220,765 

 

$

 180,140 

 

$

 53,604 

 

Add-back: non-property level overhead

 

 

 

 

 

 

 

 

 

 

 

 

 

expenses included above

 

 9,346 

 

 

 12,097 

 

 

 13,832 

 

 

 14,411 

 

Less: EBITDA from acquisitions, dispositions

 

 

 

 

 

 

 

 

 

 

 

 

 

and other non-operating income or expenses

 

 (2,938)

 

 

 758 

 

 

 (10,753)

 

 

 (3,607)

GAAP basis same store EBITDA for the six months

 

 

 

 

 

 

 

 

 

 

 

 

 

ended  June 30, 2010

 

 305,541 

 

 

 233,620 

 

 

 183,219 

 

 

 64,408 

 

Less: Adjustments for straight-line rents,

 

 

 

 

 

 

 

 

 

 

 

 

 

amortization of below-market leases, net and other

 

 

 

 

 

 

 

 

 

 

 

 

 

non-cash adjustments

 

 (30,230)

 

 

 (5,048)

 

 

 (20,014)

 

 

 (2,179)

Cash basis same store EBITDA for the six months

 

 

 

 

 

 

 

 

 

 

 

 

 

ended  June 30, 2010

$

 275,311 

 

$

 228,572 

 

$

 163,205 

 

$

 62,229 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

EBITDA for the six months ended June 30, 2009

$

 286,893 

 

$

 213,647 

 

$

 162,535 

 

$

 48,406 

 

Add-back: non-property level overhead

 

 

 

 

 

 

 

 

 

 

 

 

 

expenses included above

 

 13,693 

 

 

 14,469 

 

 

 18,144 

 

 

 17,894 

 

Less: EBITDA from acquisitions, dispositions

 

 

 

 

 

 

 

 

 

 

 

 

 

and other non-operating income or expenses

 

 (129)

 

 

 (8,708)

 

 

 (10,783)

 

 

 (1,250)

GAAP basis same store EBITDA for the six months

 

 

 

 

 

 

 

 

 

 

 

 

 

ended  June 30, 2009

 

 300,457 

 

 

 219,408 

 

 

 169,896 

 

 

 65,050 

 

Less: Adjustments for straight-line rents,

 

 

 

 

 

 

 

 

 

 

 

 

 

amortization of below-market leases, net and other

 

 

 

 

 

 

 

 

 

 

 

 

 

non-cash adjustments 

 

 (32,322)

 

 

 (13,042)

 

 

 (23,112)

 

 

 (1,605)

Cash basis same store EBITDA for the six months

 

 

 

 

 

 

 

 

 

 

 

 

 

ended  June 30, 2009

$

 268,135 

 

$

 206,366 

 

$

 146,784 

 

$

 63,445 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Increase (decrease) in GAAP basis same store EBITDA for

 

 

 

 

 

 

 

 

 

 

 

 

 

the six months ended June 30, 2010 over the

 

 

 

 

 

 

 

 

 

 

 

 

 

six months ended June 30, 2009

$

 5,084 

 

$

 14,212 

 

$

 13,323 

 

$

 (642)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Increase (decrease) in Cash basis same store EBITDA for

 

 

 

 

 

 

 

 

 

 

 

 

 

the six months ended June 30, 2010 over the

 

 

 

 

 

 

 

 

 

 

 

 

 

six months ended June 30, 2009

$

 7,176 

 

$

 22,206 

 

$

 16,421 

 

$

 (1,216)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

% increase (decrease) in GAAP basis same store EBITDA

 

 1.7%

 

 

 6.5%

 

 

 7.8%

 

 

 (1.0%)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

% increase (decrease) in Cash basis same store EBITDA

 

 2.7%

 

 

 10.8%

 

 

 11.2%

 

 

 (1.9%)

 

58

 


 

 

SUPPLEMENTAL INFORMATION

 

Three Months Ended June 30, 2010 vs. Three Months Ended March 31, 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 June 30, 2010, compared to the three months ended March 31, 2010.

 

 

 

  

New York

 

Washington, DC

 

 

 

 

Merchandise

(Amounts in thousands)

Office

 

Office

 

Retail

 

 Mart

EBITDA for the three months ended June 30, 2010

$

 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

 

 (2,314)

 

 

 (1,874)

 

 

 (3,616)

 

 

 86 

GAAP basis same store EBITDA for the three months

 

 

 

 

 

 

 

 

 

 

 

 

ended  June 30, 2010

 

 155,498 

 

 

 118,598 

 

 

 91,311 

 

 

 35,153 

 

Less: Adjustments for straight-line rents, amortization of

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 (14,622)

 

 

 (586)

 

 

 (10,623)

 

 

 (803)

Cash basis same store EBITDA for the three months

 

 

 

 

 

 

 

 

 

 

 

 

ended  June 30, 2010

$

 140,876 

 

$

 118,012 

 

$

 80,688 

 

$

 34,350 

 

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

 

 

 

 

 

 

 

 

 

 

EBITDA for the three months ended March 31, 2010(1)

$

 146,088 

 

$

 106,493 

 

$

 92,040 

 

$

 25,718 

 

Add-back: non-property level overhead expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

included above  

 

 4,579 

 

 

 5,897 

 

 

 7,005 

 

 

 7,230 

 

Less: EBITDA from acquisitions, dispositions  

 

 

 

 

 

 

 

 

 

 

 

 

 

and other non-operating income or expenses

 

 (624)

 

 

 2,630 

 

 

 (9,081)

 

 

 (3,430)

GAAP basis same store EBITDA for the three months

 

 

 

 

 

 

 

 

 

 

 

 

ended  March 31, 2010

 

 150,043 

 

 

 115,020 

 

 

 89,964 

 

 

 29,518 

 

Less: Adjustments for straight-line rents, amortization of

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 (15,608)

 

 

 (4,461)

 

 

 (9,391)

 

 

 (1,376)

Cash basis same store EBITDA for the three months

 

 

 

 

 

 

 

 

 

 

 

 

ended  March 31, 2010

$

 134,435 

 

$

 110,559 

 

$

 80,573 

 

$

 28,142 

 

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

 

 

 

 

 

 

 

 

 

 

Increase in GAAP basis same store EBITDA for  

 

 

 

 

 

 

 

 

 

 

 

 

the three months ended June 30, 2010 over the

 

 

 

 

 

 

 

 

 

 

 

 

three months ended March 31, 2010

$

 5,455 

 

$

 3,578 

 

$

 1,347 

 

$

 5,635 

 

 

  

 

 

 

 

 

 

 

 

 

 

 

Increase in Cash basis same store EBITDA for  

 

 

 

 

 

 

 

 

 

 

 

 

the three months ended June 30, 2010 over the

 

 

 

 

 

 

 

 

 

 

 

 

three months ended March 31, 2010

$

 6,441 

 

$

 7,453 

 

$

 115 

 

$

 6,208 

 

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

 

 

 

 

 

 

 

 

 

 

% increase in GAAP basis same store EBITDA

 

 3.6%

 

 

 3.1%

 

 

 1.5%

 

 

 19.1%

 

 

  

 

 

 

 

 

 

 

 

 

 

 

% increase in Cash basis same store EBITDA

 

 4.8%

 

 

 6.7%

 

 

 0.1%

 

 

 22.1%

 

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

 

 

 

 

 

 

 

 

 

 

 (1)

Below is the reconciliation of net income (loss) to EBITDA for the three months ended March 31, 2010.

 

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

  

New York

 

Washington, DC

 

 

 

Merchandise

(Amounts in thousands)

Office

 

Office

 

Retail

 

 Mart

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

 

 

 

 

 

 

 

 

 

 

 

 

ended March 31, 2010

$

 72,548 

 

$

 30,757 

 

$

 43,840 

 

$

 (1,026)

Interest and debt expense

 

 30,992 

 

 

 35,171 

 

 

 19,354 

 

 

 13,009 

Depreciation and amortization

 

 42,074 

 

 

 39,841 

 

 

 28,811 

 

 

 13,482 

Income tax expense

 

 474 

 

 

 724 

 

 

 35 

 

 

 253 

EBITDA for the three months ended March 31, 2010

$

 146,088 

 

$

 106,493 

 

$

 92,040 

 

$

 25,718 

 

59

 


 

 

LIQUIDITY AND CAPITAL RESOURCES

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.  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.

 

We have raised, and may continue to raise, capital for future real estate acquisitions through our real estate investment Fund.  On July 8, 2010, we completed the first closing of the Fund with initial 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 serve as the general partner and investment manager of the Fund and it will be 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 Six Months Ended June 30, 2010

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 $652,121,000 at June 30, 2010, a $116,642,000 increase over the balance at December 31, 2009.  This increase resulted from $532,365,000 of net cash provided by operating activities and $207,359,000 of net cash provided by investing activities, partially offset by, $623,082,000 of net cash used in financing activities.

 

Our consolidated outstanding debt was $10,670,218,000 at June 30, 2010, a $269,397,000 decrease over the balance at December 31, 2009.  This decrease was primarily due to net repayments of $700,000,000 under our revolving credit facilities, partially offset by the public offering of $500,000,000 of 4.25% senior unsecured notes in March 2010.  During the remainder of 2010 and 2011, $373,000,000 and $1,981,000,000 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.

 

Our share of debt of unconsolidated subsidiaries was $2,844,923,000 at June 30, 2010, a $304,717,000 decrease from the balance at December 31, 2009. 

 

Cash flows provided by operating activities of $532,365,000 was comprised of (i) net income of $309,755,000, (ii) $115,978,000 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 $18,517,000, and (iv) the net change in operating assets and liabilities of $88,115,000.

 

Net cash provided by investing activities of $207,359,000 was comprised of (i) restricted cash of $133,888,000, (ii) proceeds from sales of marketable securities of $122,956,000, (iii) proceeds received from repayment of mezzanine loans receivable of $105,061,000, (iv) proceeds from the sale of real estate and related investments of $49,544,000, (v) proceeds from maturing short-term investments of $40,000,000 and (vi) distributions of capital from partially owned entities of $12,638,000, partially offset by (vii) additions to real estate of $68,925,000, (viii) development and redevelopment expenditures of $68,499,000, (ix) investments in mezzanine loans receivable and other of $48,339,000, (x) investments in partially owned entities of $41,920,000, (xi) deposits in connection with real estate acquisitions of $15,128,000, and (xii) purchases of marketable equity securities of $13,917,000.

 

Net cash used in financing activities of $623,082,000 was comprised of (i) proceeds from borrowings of $901,040,000, offset by, (ii) repayments of borrowings, including the purchase of our senior unsecured notes, of $1,197,525,000, (iii) dividends paid on common shares of $236,279,000, (iv) dividends paid on preferred shares of $28,533,000, (v) distributions to noncontrolling interests of $27,665,000, (vi) repurchase of shares related to stock compensation arrangements and related tax withholdings of $15,396,000, (vii) purchases of outstanding preferred units of $13,000,000 and (viii) debt issuance costs of $5,724,000.

 

60

 


 

 

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 six months ended June 30, 2010.

 

 

 

 

 

 

 

 

New York

 

Washington, DC

 

 

 

 

Merchandise

 

 

 

(Amounts in thousands)

Total

 

Office

 

Office

 

Retail

 

Mart

 

Other

Capital Expenditures (accrual basis):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Expenditures to maintain assets

$

 20,389 

 

$

 10,237 

 

$

 3,161 

 

$

 1,539 

 

$

 2,721 

 

$

 2,731 

Tenant improvements

 

 70,845 

 

 

 25,300 

 

 

 6,127 

 

 

 7,045 

 

 

 27,550 

 

 

 4,823 

Leasing commissions

 

 15,516 

 

 

 6,781 

 

 

 2,283 

 

 

 1,416 

 

 

 3,804 

 

 

 1,232 

Non-recurring capital expenditures

 

 3,985 

 

 

 - 

 

 

 - 

 

 

 898 

 

 

 - 

 

 

 3,087 

Total capital expenditures and leasing

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

commissions (accrual basis)

 

 110,735 

 

 

 42,318 

 

 

 11,571 

 

 

 10,898 

 

 

 34,075 

 

 

 11,873 

Adjustments to reconcile to cash basis:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Expenditures in the current year 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 applicable to prior periods

 

 47,536 

 

 

 26,786 

 

 

 7,803 

 

 

 6,772 

 

 

 2,777 

 

 

 3,398 

 

 

Expenditures to be made in future

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

periods for the current period

 

 (73,756)

 

 

 (22,985)

 

 

 (7,149)

 

 

 (9,278)

 

 

 (28,644)

 

 

 (5,700)

Total capital expenditures and leasing

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 commissions (cash basis)

$

 84,515 

 

$

 46,119 

 

$

 12,225 

 

$

 8,392 

 

$

 8,208 

 

$

 9,571 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Tenant improvements and leasing commissions:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Per square foot per annum

$

 3.93 

 

$

 7.17 

 

$

 3.03 

 

$

 1.59 

 

$

 4.19 

 

$

 - 

 

Percentage of initial rent

 

12.5%

 

 

15.2%

 

 

7.9%

 

 

7.5%

 

 

17.0%

 

 

 - 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Development and Redevelopment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 Expenditures:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Wasserman Venture

$

 10,275 

 

$

 - 

 

$

 - 

 

$

 - 

 

$

 - 

 

$

 10,275 

West End 25

 

 7,639 

 

 

 - 

 

 

 7,639 

 

 

 - 

 

 

 - 

 

 

 - 

1540 Broadway

 

 6,182 

 

 

 - 

 

 

 - 

 

 

 6,182 

 

 

 - 

 

 

 - 

Green Acres Mall

 

 6,085 

 

 

 - 

 

 

 - 

 

 

 6,085 

 

 

 - 

 

 

 - 

Bergen Town Center

 

 5,976 

 

 

 - 

 

 

 - 

 

 

 5,976 

 

 

 - 

 

 

 - 

220 20th Street

 

 3,794 

 

 

 - 

 

 

 3,794 

 

 

 - 

 

 

 - 

 

 

 - 

Beverly Connection

 

 3,184 

 

 

 - 

 

 

 - 

 

 

 3,184 

 

 

 - 

 

 

 - 

North Bergen, New Jersey

 

 3,078 

 

 

 - 

 

 

 - 

 

 

 3,078 

 

 

 - 

 

 

 - 

Garfield, New Jersey

 

 1,288 

 

 

 - 

 

 

 - 

 

 

 1,288 

 

 

 - 

 

 

 - 

Poughkeepsie, New York

 

 953 

 

 

 - 

 

 

 - 

 

 

 953 

 

 

 - 

 

 

 - 

Other

 

 20,045 

 

 

 3,742 

 

 

 7,758 

 

 

 2,999 

 

 

 824 

 

 

 4,722 

 

 

 

 

$

 68,499 

 

$

 3,742 

 

$

 19,191 

 

$

 29,745 

 

$

 824 

 

$

 14,997 

 

61

 


 

 

LIQUIDITY AND CAPITAL RESOURCES - continued

 

Cash Flows for the Six Months Ended June 30, 2009

Our cash and cash equivalents were $2,068,498,000 at June 30, 2009, a $541,645,000 increase over the balance at December 31, 2008.  This increase resulted from $379,439,000 of net cash provided by operating activities and $381,516,000 of net cash provided by financing activities, partially offset by $219,310,000 of net cash used in investing activities. 

 

Our consolidated outstanding debt was $11,652,801,000 at June 30, 2009, a $426,654,000 decrease from the balance at December 31, 2008.  This decrease resulted primarily from the repurchase of a portion of our convertible senior debentures and senior unsecured notes during 2009.  As of June 30, 2009 and December 31, 2008, $648,250,000 and $358,468,000, respectively, was outstanding under our revolving credit facilities. 

 

Our share of debt of unconsolidated subsidiaries was $3,068,868,000 at June 30, 2009, a $127,717,000 decrease from the balance at December 31, 2008.  This resulted primarily from a decrease in our share of Toys “R” Us outstanding debt. 

 

Cash flows provided by operating activities of $379,439,000 was primarily comprised of (i) net income of $116,056,000, adjusted for $252,841,000 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 $15,131,000, partially offset by (iii) the net change in operating assets and liabilities of $4,589,000.

 

Net cash used in investing activities of $219,310,000 was primarily comprised of (i) development and redevelopment expenditures of 267,124,000, (ii) investments in partially owned entities of $25,712,000, (iii) additions to real estate of $84,750,000, partially offset by, (iv) $60,786,000 of restricted cash and (v) $45,472,000 received from mezzanine loan receivables repayments.

 

Net cash provided by financing activities of $381,516,000 was primarily comprised of (i) $710,226,000 of proceeds from the issuance of common shares in April 2009, (ii) proceeds from borrowings of $520,137,000, partially offset by, (iii) repayments of borrowings of $644,011,000, (iv) dividends paid on common shares of $126,174,000, (v) distributions to noncontrolling interests of $20,931,000 and (vi) dividends paid on preferred shares of $28,540,000.

 

 

62

 


 

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 six months ended June 30, 2009.

 

 

 

 

 

 

 

 

New York

 

Washington, DC

 

 

 

 

Merchandise

 

 

 

(Amounts in thousands)

Total

 

Office

 

Office

 

Retail

 

Mart

 

Other

Capital Expenditures (accrual basis):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Expenditures to maintain assets

$

 15,274 

 

$

 7,564 

 

$

 3,561 

 

$

 843 

 

$

 3,306 

 

$

 - 

Tenant improvements

 

 34,078 

 

 

 18,765 

 

 

 13,369 

 

 

 429 

 

 

 1,515 

 

 

 - 

Leasing commissions

 

 10,243 

 

 

 6,138 

 

 

 3,925 

 

 

 180 

 

 

 - 

 

 

 - 

Non-recurring capital expenditures

 

 10,323 

 

 

 3,511 

 

 

 4,314 

 

 

 34 

 

 

 - 

 

 

 2,464 

Total capital expenditures and leasing

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

commissions (accrual basis)

 

 69,918 

 

 

 35,978 

 

 

 25,169 

 

 

 1,486 

 

 

 4,821 

 

 

 2,464 

Adjustments to reconcile to cash basis:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Expenditures in the current year 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 applicable to prior periods

 

 53,373 

 

 

 17,135 

 

 

 30,092 

 

 

 2,885 

 

 

 3,344 

 

 

 (83)

 

 

Expenditures to be made in future

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

periods for the current period

 

 (27,623)

 

 

 (12,037)

 

 

 (14,477)

 

 

 (610)

 

 

 (300)

 

 

 (199)

Total capital expenditures and leasing

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 commissions (cash basis)

$

 95,668 

 

$

 41,076 

 

$

 40,784 

 

$

 3,761 

 

$

 7,865 

 

$

 2,182 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Tenant improvements and leasing commissions:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Per square foot per annum

$

 2.60 

 

$

 5.51 

 

$

 3.39 

 

$

 0.14 

 

$

 0.90 

 

$

 - 

 

Percentage of initial rent

 

7.3%

 

 

10.4%

 

 

8.5%

 

 

0.8%

 

 

3.4%

 

 

 - 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Development and Redevelopment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 Expenditures:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

West End 25

$

 45,763 

 

$

 - 

 

$

 45,763 

 

$

 - 

 

$

 - 

 

$

 - 

Bergen Town Center

 

 39,215 

 

 

 - 

 

 

 - 

 

 

 39,215 

 

 

 - 

 

 

 - 

220 20th Street

 

 28,650 

 

 

 - 

 

 

 28,650 

 

 

 - 

 

 

 - 

 

 

 - 

Wasserman Venture

 

 25,776 

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 25,776 

Manhattan Mall

 

 17,359 

 

 

 - 

 

 

 - 

 

 

 17,359 

 

 

 - 

 

 

 - 

South Hills Mall

 

 13,955 

 

 

 - 

 

 

 - 

 

 

 13,955 

 

 

 - 

 

 

 - 

North Bergen, New Jersey

 

 13,749 

 

 

 - 

 

 

 - 

 

 

 13,749 

 

 

 - 

 

 

 - 

2101 L Street

 

 12,397 

 

 

 - 

 

 

 12,397 

 

 

 - 

 

 

 - 

 

 

 - 

1999 K Street

 

 8,107 

 

 

 - 

 

 

 8,107 

 

 

 - 

 

 

 - 

 

 

 - 

Other

 

 62,153 

 

 

 7,903 

 

 

 14,492 

 

 

 24,560 

 

 

 4,014 

 

 

 11,184 

 

 

 

 

$

 267,124 

 

$

 7,903 

 

$

 109,409 

 

$

 108,838 

 

$

 4,014 

 

$

 36,960 

 

63

 


 

 

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 June 30, 2010, the aggregate dollar amount of these guarantees and master leases is approximately $254,042,000.

 

At June 30, 2010, $21,947,000 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 $217,800,000, of which $200,000,000 is committed to our real estate Fund.

 

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.

 

64

 


 

 

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.  We anticipate that a trial date will be set for some time in 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.

 

On May 24, 2007, we acquired a 70% controlling interest in 1290 Avenue of the Americas and the 555 California Street complex.  Our 70% interest was acquired through the purchase of all of the shares of a group of foreign companies that own, through U.S. entities, the 1% sole general partnership interest and a 69% limited partnership interest in the partnerships that own the two properties.  The remaining 30% limited partnership interest is owned by Donald J. Trump.  In August 2005, Mr. Trump brought a lawsuit in the New York State Supreme Court against, among others, the general partners of the partnerships referred to above relating to a dispute over the sale of properties located on the former Penn Central rail yards between West 59th and 72nd Streets in Manhattan which were formerly owned by the partnerships.  In decisions issued in 2006, 2007 and 2009, the New York State Supreme Court dismissed all of Mr. Trump’s claims, and those decisions were affirmed by the Appellate Division.  Mr. Trump cannot further appeal those decisions.  In April 2010, Mr. Trump notified us of his intent to file a new suit claiming, among other things, that the limited partnerships should be dissolved.  On April 29, 2010, we filed a motion for declaratory judgment in New York courts seeking to dispose of this claim.  In June 2010, our motion was granted and a final judgment was entered that disposed of Mr. Trump’s claims with prejudice.

 

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.  We have filed a notice of appeal and the Trial Court’s judgment is stayed pending the 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.

 

65

 


 

 

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 15 – Income Per Share, in the notes to our consolidated financial statements on page 24 of this Quarterly Report on Form 10-Q.

 

FFO for the Three and Six Months Ended June 30, 2010, and 2009

 

FFO attributable to common shareholders plus assumed conversions for the three months ended June 30, 2010 was $204,772,000, or $1.11 per diluted share, compared to $93,515,000, or $0.54 per diluted share for the prior year’s quarter.  FFO attributable to common shareholders plus assumed conversions for the six months ended June 30, 2010 was $565,066,000 or $2.98 per diluted share, compared to $355,777,000, or $2.15 per diluted share for the prior year’s six months.  Details of certain items that affect comparability are discussed in the financial results summary of our “Overview.” 

 

 

For The Three

 

For The Six

(Amounts in thousands, except per share amounts)

Months Ended June 30,

 

Months Ended June 30,

Reconciliation of our net income (loss) to FFO:

2010 

 

2009 

 

2010 

 

2009 

Net income (loss) attributable to Vornado

$

 72,106 

 

$

 (37,635)

 

$

 286,658 

 

$

 102,475 

Depreciation and amortization of real property

 

 127,181 

 

 

 128,662 

 

 

 254,795 

 

 

 252,789 

Proportionate share of adjustments to equity in net income of

 

 

 

 

 

 

 

 

 

 

 

 

Toys, to arrive at FFO:

 

 

 

 

 

 

 

 

 

 

 

 

 

Depreciation and amortization of real property

 

 17,663 

 

 

 15,566 

 

 

 35,164 

 

 

 32,146 

 

 

Income tax effect of Toys' adjustments included above

 

 (6,182)

 

 

 (5,448)

 

 

 (12,307)

 

 

 (11,251)

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

 

 19,533 

 

 

 19,348 

 

 

 39,074 

 

 

 33,956 

 

 

Net gains on sale of real estate

 

 - 

 

 

 (500)

 

 

 (307)

 

 

 (673)

Noncontrolling interests' share of above adjustments

 

 (11,303)

 

 

 (12,209)

 

 

 (22,474)

 

 

 (25,212)

FFO

 

 218,998 

 

 

 107,784 

 

 

 580,603 

 

 

 384,230 

Preferred share dividends

 

 (14,266)

 

 

 (14,269)

 

 

 (28,533)

 

 

 (28,538)

FFO attributable to common shareholders

 

 204,732 

 

 

 93,515 

 

 

 552,070 

 

 

 355,692 

Interest on 3.875% exchangeable senior debentures

 

 - 

 

 

 - 

 

 

 12,915 

 

 

 - 

Convertible preferred dividends

 

 40 

 

 

 - 

 

 

 81 

 

 

 85 

FFO attributable to common shareholders plus assumed conversions

$

 204,772 

 

$

 93,515 

 

$

 565,066 

 

$

 355,777 

 

 

 

 

 

 

 

 

 

 

 

 

Reconciliation of Weighted Average Shares

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding

 

 182,027 

 

 

 171,530 

 

 

 181,786 

 

 

 164,009 

 

Effect of dilutive securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

3.875% exchangeable senior debentures

 

 - 

 

 

 - 

 

 

 5,736 

 

 

 - 

 

 

Employee stock options and restricted share awards

 

 1,617 

 

 

 1,371 

 

 

 1,741 

 

 

 1,174 

 

 

Convertible preferred shares

 

 71 

 

 

 - 

 

 

 71 

 

 

 74 

 

Denominator for FFO per diluted share

 

 183,715 

 

 

 172,901 

 

 

 189,334 

 

 

 165,257 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

FFO attributable to common shareholders plus assumed conversions per diluted share

$

 1.11 

 

$

 0.54 

 

$

 2.98 

 

$

 2.15 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

66

 


 

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 June 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

$

 2,044,846 

 

2.00%

 

$

 20,448 

 

$

 2,657,972 

 

1.67%

 

Fixed rate

 

 8,625,372 

 

5.99%

 

 

 - 

 

 

 8,281,643 

 

5.89%

 

 

 

$

 10,670,218 

 

5.23%

 

 

 20,448 

 

$

 10,939,615 

 

4.86%

Pro-rata share of debt of non-

 

 

 

 

 

 

 

 

 

 

 

 

 

consolidated entities (non-recourse):

 

 

 

 

 

 

 

 

 

 

 

 

Variable rate – excluding Toys

$

 289,428 

 

2.85%

 

 

 2,894 

 

$

 331,980 

 

2.87%

 

Variable rate – Toys

 

 425,439 

 

4.65%

 

 

 4,254 

 

 

 852,040 

 

3.45%

 

Fixed rate (including $1,285,497, and

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 2,130,056 

 

7.36%

 

 

 - 

 

 

 1,965,620 

 

7.16%

 

 

 

$

 2,844,923 

 

6.49%

 

 

 7,148 

 

$

 3,149,640 

 

5.70%

Redeemable noncontrolling interests’ share of above

 

 

 

 

 

 

 (1,987)

 

 

 

 

 

Total change in annual net income

 

 

 

 

 

$

 25,609 

 

 

 

 

 

Per share-diluted

 

 

 

 

 

$

0.14 

 

 

 

 

 

 

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 June 30, 2010, variable rate debt with an aggregate principal amount of $507,750,000 and a weighted average interest rate of 2.58% was subject to LIBOR caps.  These caps are based on a notional amount of $507,750,000 and cap LIBOR at a weighted average rate of 5.39%. 

 

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 June 30, 2010, the estimated fair value of our consolidated debt was $10,569,552,000.

 

67

 


 

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 June 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.

 

68

 


 

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.  We anticipate that a trial date will be set for some time in 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.

 

On May 24, 2007, we acquired a 70% controlling interest in 1290 Avenue of the Americas and the 555 California Street complex.  Our 70% interest was acquired through the purchase of all of the shares of a group of foreign companies that own, through U.S. entities, the 1% sole general partnership interest and a 69% limited partnership interest in the partnerships that own the two properties.  The remaining 30% limited partnership interest is owned by Donald J. Trump.  In August 2005, Mr. Trump brought a lawsuit in the New York State Supreme Court against, among others, the general partners of the partnerships referred to above relating to a dispute over the sale of properties located on the former Penn Central rail yards between West 59th and 72nd Streets in Manhattan which were formerly owned by the partnerships.  In decisions issued in 2006, 2007 and 2009, the New York State Supreme Court dismissed all of Mr. Trump’s claims, and those decisions were affirmed by the Appellate Division.  Mr. Trump cannot further appeal those decisions.  In April 2010, Mr. Trump notified us of his intent to file a new suit claiming, among other things, that the limited partnerships should be dissolved.  On April 29, 2010, we filed a motion for declaratory judgment in New York courts seeking to dispose of this claim.  In June 2010, our motion was granted and a final judgment was entered that disposed of Mr. Trump’s claims with prejudice.

 

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.  We have filed a notice of appeal and the Trial Court’s judgment is stayed pending the 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

 


 

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 second quarter of 2010, we issued 29,782 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.

 

70

 


 

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:  August 3, 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)

 

71

 


 

 

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.

 

 

72

 


 

 

 

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.

 

 

73

 


 

 

 

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.

 

 

74

 


 

 

 

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.

 

 

75

 


 

 

 

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.

 

 

76

 


 

 

 

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.

 

 

77

 


 

 

 

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.

 

 

78

 


 

 

 

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

 

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

 

 

 

 

 

 

_______________________

 

 

 

*

 

 

Incorporated by reference.

 

 

 

**

 

 

Management contract or compensatory agreement.

 

 

79