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VORNADO REALTY TRUST - Quarter Report: 2011 June (Form 10-Q)

vrt2q2011.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, 2011

 

 

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 No

 

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 No

 

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 No

 

As of June 30, 2011, 184,427,825 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, 2011 and December 31, 2010  

  

3

  

  

  

  

   

  

  

  

  

  

  

Consolidated Statements of Income (Unaudited) for the  

  

  

  

  

  

  

Three and Six Months Ended June 30, 2011 and 2010  

  

4

  

  

  

  

   

  

  

  

  

  

  

Consolidated Statements of Comprehensive Income (Unaudited) for the  

  

  

  

  

  

  

Three and Six Months Ended June 30, 2011 and 2010  

  

5

  

  

  

  

   

  

  

  

  

  

  

Consolidated Statements of Changes in Equity (Unaudited) for the  

  

  

  

  

  

  

Six Months Ended June 30, 2011 and 2010  

  

6

  

  

  

  

   

  

  

  

  

  

  

Consolidated Statements of Cash Flows (Unaudited) for the  

  

  

  

  

  

  

Six Months Ended June 30, 2011 and 2010  

  

7

  

  

  

  

   

  

  

  

  

  

  

Notes to the Consolidated Financial Statements (Unaudited)  

  

9

  

  

  

  

   

  

  

  

  

  

  

Report of Independent Registered Public Accounting Firm   

  

35

  

  

  

  

   

  

  

  

  

Item 2.

  

Management's Discussion and Analysis of Financial   

  

  

  

  

  

  

Condition and Results of Operations  

  

36

  

  

  

  

   

  

  

  

  

Item 3.

  

Quantitative and Qualitative Disclosures about Market Risk  

  

72

  

  

  

  

   

  

  

  

  

Item 4.

  

Controls and Procedures  

  

73

  

  

  

  

   

  

  

  

  

  

  

   

  

  

PART II.

  

  

Other Information:  

  

  

  

  

  

  

   

  

  

  

  

Item 1.

  

Legal Proceedings  

  

74

  

  

  

  

   

  

  

  

  

Item 1A.

  

Risk Factors  

  

75

  

  

  

  

   

  

  

  

  

Item 2.

  

Unregistered Sales of Equity Securities and Use of Proceeds  

  

75

  

  

  

  

   

  

  

  

  

Item 3.

  

Defaults Upon Senior Securities  

  

75

  

  

  

  

   

  

  

  

  

Item 5.

  

Other Information  

  

75

  

  

  

  

   

  

  

  

  

Item 6.

  

Exhibits  

  

75

  

  

  

  

   

  

  

Signatures

  

   

  

76

  

  

  

  

   

  

  

Exhibit Index

  

   

  

77

  

  

  

  

   

  

  

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

  

2011 

  

2010 

Real estate, at cost:

  

  

  

  

  

  

  

Land

  

$

 4,592,075 

  

$

 4,598,303 

  

Buildings and improvements

  

  

 12,753,909 

  

  

 12,733,487 

  

Development costs and construction in progress

  

  

 236,393 

  

  

 218,156 

  

Leasehold improvements and equipment

  

  

 126,784 

  

  

 124,976 

  

  

Total

  

  

 17,709,161 

  

  

 17,674,922 

  

Less accumulated depreciation and amortization

  

  

 (2,941,929) 

  

  

 (2,763,997) 

Real estate, net

  

  

 14,767,232 

  

  

 14,910,925 

Cash and cash equivalents

  

  

 591,515 

  

  

 690,789 

Restricted cash

  

  

 155,320 

  

  

 200,822 

Marketable securities

  

  

 791,676 

  

  

 766,116 

Accounts receivable, net of allowance for doubtful accounts of $71,939 and $62,979

  

  

 168,624 

  

  

 157,146 

Investments in partially owned entities

  

  

 1,160,292 

  

  

 927,672 

Investment in Toys "R" Us

  

  

 558,755 

  

  

 447,334 

Real Estate Fund investments

  

  

 255,795 

  

  

 144,423 

Mezzanine loans receivable, net

  

  

 155,613 

  

  

 202,412 

Receivable arising from the straight-lining of rents, net of allowance of $8,148 and $7,323

  

  

 739,784 

  

  

 720,806 

Deferred leasing and financing costs, net of accumulated amortization of $236,577 and $223,131

  

  

 366,421 

  

  

 368,314 

Identified intangible assets, net of accumulated amortization of $363,341 and $338,508

  

  

 317,257 

  

  

 348,745 

Assets related to discontinued operations

  

  

 - 

  

  

 234,464 

Due from officers

  

  

 13,183 

  

  

 13,187 

Other assets

  

  

 497,397 

  

  

 384,316 

  

  

  

  

$

 20,538,864 

  

$

 20,517,471 

  

  

  

  

  

  

  

  

  

LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND EQUITY

  

  

  

  

  

  

Notes and mortgages payable

  

$

 8,575,022 

  

$

 8,259,298 

Senior unsecured notes

  

  

 982,629 

  

  

 1,082,928 

Exchangeable senior debentures

  

  

 494,403 

  

  

 491,000 

Convertible senior debentures

  

  

 187,994 

  

  

 186,413 

Revolving credit facility debt

  

  

 300,000 

  

  

 874,000 

Accounts payable and accrued expenses

  

  

 436,229 

  

  

 438,479 

Deferred credit

  

  

 555,709 

  

  

 583,369 

Deferred compensation plan

  

  

 100,374 

  

  

 91,549 

Deferred tax liabilities

  

  

 13,256 

  

  

 13,278 

Liabilities related to discontinued operations

  

  

 - 

  

  

 255,922 

Other liabilities

  

  

 104,257 

  

  

 82,856 

  

Total liabilities

  

  

 11,749,873 

  

  

 12,359,092 

Commitments and contingencies

  

  

  

  

  

  

Redeemable noncontrolling interests:

  

  

  

  

  

  

  

Class A units - 12,561,359 and 12,804,202 units outstanding

  

  

 1,170,467 

  

  

 1,066,974 

  

Series D cumulative redeemable preferred units - 10,000,001 and 10,400,001 units outstanding

  

  

 251,000 

  

  

 261,000 

  

  

Total redeemable noncontrolling interests

  

  

 1,421,467 

  

  

 1,327,974 

Vornado shareholders' equity:

  

  

  

  

  

  

  

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

  

  

  

  

  

  

  

  

shares; issued and outstanding 41,188,509 and 32,340,009 shares

  

  

 997,446 

  

  

 783,088 

  

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

  

  

  

  

  

  

  

  

250,000,000 shares; issued and outstanding 184,427,825 and 183,661,875 shares

  

  

 7,347 

  

  

 7,317 

  

Additional capital

  

  

 6,885,223 

  

  

 6,932,728 

  

Earnings less than distributions

  

  

 (1,244,254) 

  

  

 (1,480,876) 

  

Accumulated other comprehensive income

  

  

 114,479 

  

  

 73,453 

  

  

Total Vornado shareholders' equity

  

  

 6,760,241 

  

  

 6,315,710 

Noncontrolling interests in consolidated subsidiaries

  

  

 607,283 

  

  

 514,695 

  

Total equity

  

  

 7,367,524 

  

  

 6,830,405 

  

  

  

  

$

 20,538,864 

  

$

 20,517,471 

  

  

  

  

  

  

  

  

  

See notes to 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,

(Amounts in thousands, except per share amounts)

  

2011 

  

2010 

  

2011 

  

2010 

  

  

  

  

  

  

  

  

  

  

  

  

  

REVENUES:

  

  

  

  

  

  

  

  

  

  

  

  

  

Property rentals

  

$

 573,646 

  

$

 565,412 

  

$

 1,144,806 

  

$

 1,117,869 

  

Tenant expense reimbursements

  

  

 82,325 

  

  

 86,420 

  

  

 173,284 

  

  

 178,350 

  

Cleveland Medical Mart development project

  

  

 32,369 

  

  

 - 

  

  

 73,068 

  

  

 - 

  

Fee and other income

  

  

 41,811 

  

  

 32,157 

  

  

 76,104 

  

  

 73,084 

Total revenues

  

  

 730,151 

  

  

 683,989 

  

  

 1,467,262 

  

  

 1,369,303 

EXPENSES:

  

  

  

  

  

  

  

  

  

  

  

  

  

Operating

  

  

 273,152 

  

  

 261,845 

  

  

 563,925 

  

  

 536,538 

  

Depreciation and amortization

  

  

 131,898 

  

  

 133,277 

  

  

 264,125 

  

  

 267,070 

  

General and administrative

  

  

 50,251 

  

  

 49,540 

  

  

 109,254 

  

  

 98,170 

  

Cleveland Medical Mart development project

  

  

 29,940 

  

  

 - 

  

  

 68,218 

  

  

 - 

  

Acquisition and other costs

  

  

 1,897 

  

  

 1,930 

  

  

 20,167 

  

  

 1,930 

Total expenses

  

  

 487,138 

  

  

 446,592 

  

  

 1,025,689 

  

  

 903,708 

Operating income

  

  

 243,013 

  

  

 237,397 

  

  

 441,573 

  

  

 465,595 

(Loss) income applicable to Toys "R" Us

  

  

 (22,846) 

  

  

 (21,004) 

  

  

 90,098 

  

  

 104,866 

Income from partially owned entities

  

  

 26,403 

  

  

 4,452 

  

  

 42,687 

  

  

 15,796 

Income from Real Estate Fund (of which $12,102 and $12,028 is

  

  

  

  

  

  

  

  

  

  

  

  

  

allocated to noncontrolling interests, in the three and six months

  

  

  

  

  

  

  

  

  

  

  

  

  

ended June 30, 2011, respectively)

  

  

 19,058 

  

  

 - 

  

  

 20,138 

  

  

 - 

Interest and other investment income, net

  

  

 8,007 

  

  

 3,876 

  

  

 125,115 

  

  

 18,580 

Interest and debt expense (including amortization of deferred

  

  

  

  

  

  

  

  

  

  

  

  

  

financing costs of $5,235 and $4,514 in each three-month

  

  

  

  

  

  

  

  

  

  

  

  

  

period, respectively, and $9,868 and $8,915 in each six-month

  

  

  

  

  

  

  

  

  

  

  

  

  

period, respectively)

  

  

 (137,202) 

  

  

 (142,175) 

  

  

 (271,967) 

  

  

 (277,902) 

Net (loss) on extinguishment of debt

  

  

 - 

  

  

 (1,072) 

  

  

 - 

  

  

 (1,072) 

Net gain on disposition of wholly owned and partially owned assets

  

  

 - 

  

  

 4,382 

  

  

 6,677 

  

  

 7,687 

Income before income taxes

  

  

 136,433 

  

  

 85,856 

  

  

 454,321 

  

  

 333,550 

Income tax expense

  

  

 (5,922) 

  

  

 (4,964) 

  

  

 (12,304) 

  

  

 (10,544) 

Income from continuing operations

  

  

 130,511 

  

  

 80,892 

  

  

 442,017 

  

  

 323,006 

Income (loss) from discontinued operations

  

  

 458 

  

  

 (3,681) 

  

  

 134,773 

  

  

 (13,251) 

Net income

  

  

 130,969 

  

  

 77,211 

  

  

 576,790 

  

  

 309,755 

Less:

  

  

  

  

  

  

  

  

  

  

  

  

  

Net income attributable to noncontrolling interests in

  

  

  

  

  

  

  

  

  

  

  

  

  

consolidated subsidiaries

  

  

 (13,657) 

  

  

 (981) 

  

  

 (15,007) 

  

  

 (1,194) 

  

Net income attributable to noncontrolling interests in the

  

  

  

  

  

  

  

  

  

  

  

  

  

Operating Partnership, including unit distributions

  

  

 (8,731) 

  

  

 (4,124) 

  

  

 (40,539) 

  

  

 (21,903) 

Net income attributable to Vornado

  

  

 108,581 

  

  

 72,106 

  

  

 521,244 

  

  

 286,658 

Preferred share dividends

  

  

 (16,668) 

  

  

 (14,266) 

  

  

 (30,116) 

  

  

 (28,533) 

NET INCOME attributable to common shareholders

  

$

 91,913 

  

$

 57,840 

  

$

 491,128 

  

$

 258,125 

  

  

  

  

  

  

  

  

  

  

  

  

  

  

INCOME PER COMMON SHARE - BASIC:

  

  

  

  

  

  

  

  

  

  

  

  

  

Income from continuing operations, net

  

$

 0.50 

  

$

 0.34 

  

$

 1.98 

  

$

 1.49 

  

(Loss) income from discontinued operations, net

  

  

  

  

 (0.02) 

  

  

 0.69 

  

  

 (0.07) 

  

Net income per common share

  

$

 0.50 

  

$

 0.32 

  

$

 2.67 

  

$

 1.42 

  

Weighted average shares

  

  

 184,268 

  

  

 182,027 

  

  

 184,129 

  

  

 181,786 

  

  

  

  

  

  

  

  

  

  

  

  

  

  

INCOME PER COMMON SHARE - DILUTED:

  

  

  

  

  

  

  

  

  

  

  

  

  

Income from continuing operations, net

  

$

 0.49 

  

$

 0.33 

  

$

 1.97 

  

$

 1.48 

  

(Loss) income from discontinued operations, net

  

  

  

  

 (0.02) 

  

  

 0.66 

  

  

 (0.07) 

  

Net income per common share

  

$

 0.49 

  

$

 0.31 

  

$

 2.63 

  

$

 1.41 

  

Weighted average shares

  

  

 186,144 

  

  

 183,644 

  

  

 191,736 

  

  

 183,598 

  

  

  

  

  

  

  

  

  

  

  

  

  

  

DIVIDENDS PER COMMON SHARE

  

$

 0.69 

  

$

 0.65 

  

$

 1.38 

  

$

 1.30 

  

  

  

  

  

  

  

  

  

  

  

  

  

  

See notes to consolidated financial statements (unaudited).

4

 


 
 

 

VORNADO REALTY TRUST

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(UNAUDITED)

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

For the Three

  

For the Six

  

  

  

Months Ended June 30,

  

Months Ended June 30,

(Amounts in thousands)

  

2011 

  

2010 

  

2011 

  

2010 

  

  

  

  

  

  

  

  

  

  

  

  

  

Net income

  

$

 130,969 

  

$

 77,211 

  

$

 576,790 

  

$

 309,755 

Other comprehensive income:

  

  

  

  

  

  

  

  

  

  

  

  

  

Change in unrealized net gain on securities available-for-sale

  

  

 (27,195) 

  

  

 7,943 

  

  

 40,844 

  

  

 25,531 

  

Pro rata share of other comprehensive income of

  

  

  

  

  

  

  

  

  

  

  

  

  

     nonconsolidated subsidiaries

  

  

 30,156 

  

  

 (277) 

  

  

 26,365 

  

  

 (15,965) 

  

Change in value of interest rate swap and caps

  

  

 (10,887) 

  

  

 - 

  

  

 (18,034) 

  

  

 - 

  

Other

  

  

 (5,105) 

  

  

 (22) 

  

  

 (5,045) 

  

  

 (418) 

Comprehensive income

  

  

 117,938 

  

  

 84,855 

  

  

 620,920 

  

  

 318,903 

Less:

  

  

  

  

  

  

  

  

  

  

  

  

  

Comprehensive income attributable to noncontrolling interests

  

  

 (21,875) 

  

  

 (5,640) 

  

  

 (58,650) 

  

  

 (23,737) 

Comprehensive income attributable to Vornado

  

$

 96,063 

  

$

 79,215 

  

$

 562,270 

  

$

 295,166 

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

See notes to consolidated financial statements (unaudited).

5

 


 

 

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, 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 on common shares

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 (236,279) 

  

  

 - 

  

  

 - 

  

  

 (236,279) 

Dividends on preferred shares

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 (28,533) 

  

  

 - 

  

  

 - 

  

  

 (28,533) 

Common shares issued:

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

Upon redemption of Class A

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

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 

Conversion of Series A

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

preferred shares to common

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

shares

  

  

 (3) 

  

  

 (152) 

  

  

 4 

  

  

 - 

  

  

 152 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 - 

Deferred compensation shares

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

and options

  

  

 - 

  

  

 - 

  

  

 17 

  

  

 1 

  

  

 3,905 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 3,906 

Change in unrealized net gain

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

on securities available-for-sale

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 25,531 

  

  

 - 

  

  

 25,531 

Pro rata share of other

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

comprehensive income of

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

nonconsolidated subsidiaries

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 (15,965) 

  

  

 - 

  

  

 (15,965) 

Adjustments to carry redeemable

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

Class A units at redemption value

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 (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 

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

 

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

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, 2010

  

  

 32,340 

  

$

 783,088 

  

  

 183,662 

  

$

 7,317 

  

$

 6,932,728 

  

$

 (1,480,876) 

  

$

 73,453 

  

$

 514,695 

  

$

 6,830,405 

Net income

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 521,244 

  

  

 - 

  

  

 15,007 

  

  

 536,251 

Dividends on common shares

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 (254,099) 

  

  

 - 

  

  

 - 

  

  

 (254,099) 

Dividends on preferred shares

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 (30,116) 

  

  

 - 

  

  

 - 

  

  

 (30,116) 

Issuance of Series J preferred shares

  

  

 8,850 

  

  

 214,538 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 214,538 

Common shares issued:

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

Upon redemption of Class A

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

 units, at redemption value

  

  

 - 

  

  

 - 

  

  

 401 

  

  

 16 

  

  

 35,192 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 35,208 

  

Under employees' share

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

option plan

  

  

 - 

  

  

 - 

  

  

 343 

  

  

 14 

  

  

 20,434 

  

  

 (397) 

  

  

 - 

  

  

 - 

  

  

 20,051 

  

Under dividend reinvestment

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

plan

  

  

 - 

  

  

 - 

  

  

 10 

  

  

 - 

  

  

 883 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 883 

Contributions:

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

Real Estate Fund

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 109,241 

  

  

 109,241 

  

Other

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 364 

  

  

 364 

Distributions:

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

Real Estate Fund

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 (20,796) 

  

  

 (20,796) 

  

Other

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 (15,604) 

  

  

 (15,604) 

Conversion of Series A preferred

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

shares to common shares

  

  

 (1) 

  

  

 (75) 

  

  

 2 

  

  

 - 

  

  

 75 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 - 

Deferred compensation shares

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

and options

  

  

 - 

  

  

 - 

  

  

 10 

  

  

 - 

  

  

 5,122 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 5,122 

Change in unrealized net gain

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

on securities available-for-sale

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 40,844 

  

  

 - 

  

  

 40,844 

Pro rata share of other

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

comprehensive income of

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

nonconsolidated subsidiaries

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 26,365 

  

  

 - 

  

  

 26,365 

Change in value of interest rate caps

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 (18,034) 

  

  

 - 

  

  

 (18,034) 

Adjustments to carry redeemable

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

Class A units at redemption value

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 (104,693) 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 (104,693) 

Redeemable noncontrolling interests'

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

share of above adjustments

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 (3,104) 

  

  

 - 

  

  

 (3,104) 

Other

  

  

 - 

  

  

 (105) 

  

  

 - 

  

  

 - 

  

  

 (4,518) 

  

  

 (10) 

  

  

 (5,045) 

  

  

 4,376 

  

  

 (5,302) 

Balance, June 30, 2011

  

  

 41,189 

  

$

 997,446 

  

  

 184,428 

  

$

 7,347 

  

$

 6,885,223 

  

$

 (1,244,254) 

  

$

 114,479 

  

$

 607,283 

  

$

 7,367,524 

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

See notes to consolidated financial statements (unaudited).

6

 


 

 

VORNADO REALTY TRUST

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

  

  

  

  

  

  

  

  

  

  

  

  

  

For the Six Months Ended

  

  

  

  

June 30,

  

  

  

  

2011 

  

2010 

(Amounts in thousands)

  

  

  

  

  

  

Cash Flows from Operating Activities:

  

  

  

  

  

  

Net income

  

$

 576,790 

  

$

 309,755 

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

  

  

  

  

  

  

  

Depreciation and amortization (including amortization of deferred financing costs)

  

  

 273,980 

  

  

 280,058 

  

Equity in net income of partially owned entities, including Toys “R” Us

  

  

 (132,785) 

  

  

 (120,662) 

  

Net (gain) loss on extinguishment of debt

  

  

 (83,907) 

  

  

 1,072 

  

Mezzanine loans loss (reversal) accrual and net gain on disposition

  

  

 (82,744) 

  

  

 6,900 

  

Net gain on sales of real estate

  

  

 (51,623) 

  

  

 - 

  

Distributions of income from partially owned entities

  

  

 43,741 

  

  

 18,517 

  

Amortization of below-market leases, net

  

  

 (33,704) 

  

  

 (32,209) 

  

Straight-lining of rental income

  

  

 (22,291) 

  

  

 (38,557) 

  

Other non-cash adjustments

  

  

 15,173 

  

  

 17,007 

  

Unrealized gain on Real Estate Fund assets

  

  

 (13,570) 

  

  

 - 

  

Income from the mark-to-market of J.C. Penney derivative position

  

  

 (10,401) 

  

  

 - 

  

Net gain on disposition of wholly owned and partially owned assets

  

  

 (6,677) 

  

  

 (7,687) 

  

Litigation loss accrual

  

  

 - 

  

  

 10,056 

  

Changes in operating assets and liabilities:

  

  

  

  

  

  

  

  

Real Estate Fund investments

  

  

 (97,802) 

  

  

 - 

  

  

Accounts receivable, net

  

  

 (11,478) 

  

  

 (400) 

  

  

Prepaid assets

  

  

 (117,503) 

  

  

 79,289 

  

  

Other assets

  

  

 (10,424) 

  

  

 (25,691) 

  

  

Accounts payable and accrued expenses

  

  

 13,250 

  

  

 23,576 

  

  

Other liabilities

  

  

 12,015 

  

  

 11,341 

Net cash provided by operating activities

  

  

 260,040 

  

  

 532,365 

Cash Flows from Investing Activities:

  

  

  

  

  

  

  

Investments in partially owned entities

  

  

 (426,376) 

  

  

 (41,920) 

  

Distributions of capital from partially owned entities

  

  

 271,375 

  

  

 12,638 

  

Proceeds from sales of real estate and related investments

  

  

 130,789 

  

  

 49,544 

  

Proceeds from sales and repayments of mezzanine loans

  

  

 99,990 

  

  

 105,061 

  

Restricted cash

  

  

 91,127 

  

  

 133,888 

  

Additions to real estate

  

  

 (86,944) 

  

  

 (68,925) 

  

Investments in mezzanine loans receivable and other

  

  

 (43,516) 

  

  

 (48,339) 

  

Development costs and construction in progress

  

  

 (32,489) 

  

  

 (68,499) 

  

Proceeds from sales of marketable securities

  

  

 19,301 

  

  

 122,956 

  

Proceeds from maturing short-term investments

  

  

 - 

  

  

 40,000 

  

Purchases of marketable securities

  

  

 - 

  

  

 (13,917) 

  

Acquisitions of real estate and other

  

  

 - 

  

  

 (15,128) 

Net cash provided by investing activities

  

  

 23,257 

  

  

 207,359 

  

  

  

  

  

  

  

  

  

See notes to consolidated financial statements (unaudited).

  

  

  

  

  

  

  

  

  

7

 


 

 

 

VORNADO REALTY TRUST

CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED

(UNAUDITED)

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

For the Six Months Ended

  

  

  

  

  

June 30,

  

  

  

  

  

2011 

  

2010 

(Amounts in thousands)

  

  

  

  

  

  

Cash Flows from Financing Activities:

  

  

  

  

  

  

  

Repayments of borrowings

  

$

 (1,636,817) 

  

$

 (1,197,525) 

  

Proceeds from borrowings

  

  

 1,284,167 

  

  

 901,040 

  

Dividends paid on common shares

  

  

 (254,099) 

  

  

 (236,279) 

  

Proceeds from the issuance of Series J preferred shares

  

  

 214,538 

  

  

 - 

  

Contributions from noncontrolling interests

  

  

 109,605 

  

  

 - 

  

Distributions to noncontrolling interests

  

  

 (62,111) 

  

  

 (27,665) 

  

Dividends paid on preferred shares

  

  

 (27,117) 

  

  

 (28,533) 

  

Debt issuance and other costs

  

  

 (23,319) 

  

  

 (5,724) 

  

Proceeds received from exercise of employee share options

  

  

 21,330 

  

  

 9,827 

  

Purchases of outstanding preferred units

  

  

 (8,000) 

  

  

 (13,000) 

  

Repurchase of shares related to stock compensation agreements and related

  

  

  

  

  

  

  

  

tax withholdings

  

  

 (748) 

  

  

 (25,223) 

Net cash used in financing activities

  

  

 (382,571) 

  

  

 (623,082) 

Net (decrease) increase in cash and cash equivalents

  

  

 (99,274) 

  

  

 116,642 

Cash and cash equivalents at beginning of period

  

  

 690,789 

  

  

 535,479 

Cash and cash equivalents at end of period

  

$

 591,515 

  

$

 652,121 

  

  

  

  

  

  

  

  

  

  

  

  

  

  

Supplemental Disclosure of Cash Flow Information:

  

  

  

  

  

  

  

Cash payments for interest (including capitalized interest of $0 and $875)

  

$

 256,776 

  

$

 270,997 

  

Cash payments for income taxes

  

$

 5,416 

  

$

 3,861 

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

Non-Cash Investing and Financing Activities:

  

  

  

  

  

  

  

Change in unrealized gain on securities available-for-sale

  

$

 40,844 

  

$

 25,531 

  

Contribution of mezzanine loan receivable to a joint venture

  

  

 73,750 

  

  

 - 

  

Exchange of real estate

  

  

 (45,625) 

  

  

 - 

  

Adjustments to carry redeemable Class A units at redemption value

  

  

 (104,693) 

  

  

 (66,075) 

  

Common shares issued upon redemption of Class A units, at redemption value

  

  

 35,208 

  

  

 35,711 

  

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

  

  

 - 

  

  

 20,500 

  

Decrease in assets and liabilities resulting from deconsolidation

  

  

  

  

  

  

  

  

of discontinued operations:

  

  

  

  

  

  

  

  

  

Assets related to discontinued operations

  

  

 (145,333) 

  

  

 - 

  

  

  

Liabilities related to discontinued operations

  

  

 (232,502) 

  

  

 - 

  

Write-off of fully depreciated assets

  

  

 (32,794) 

  

  

 (31,079) 

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

See notes to consolidated financial statements (unaudited).

  

  

  

  

  

  

  

  

  

  

8

 


 
 

 

VORNADO REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

1.     Organization

 

Vornado Realty Trust (“Vornado”) is a fully‑integrated real estate investment trust (“REIT”) and conducts its business through, and substantially all of its interests in properties are held by, Vornado Realty L.P., a Delaware limited partnership (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.  Vornado is the sole general partner of, and owned approximately 93.3% of the common limited partnership interest in the Operating Partnership at June 30, 2011.  All references to “we,” “us,” “our,” the “Company” and “Vornado” refer to Vornado Realty Trust and its consolidated subsidiaries, including the Operating Partnership.

 

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.  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 Report on Form 10-K, as amended, for the year ended December 31, 2010, as filed with the SEC.

 

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.  The results of operations for the three and six months ended June 30, 2011 are not necessarily indicative of the operating results for the full year.

 

3.     Acquisitions

 

Vornado Capital Partners, L.P. and Vornado Capital Partners Parallel, L.P. (the “Fund”)

 

We are the general partner and investment manager of an $800,000,000 real estate investment Fund, to which we have committed $200,000,000.  The Fund has a term of eight years and is our exclusive investment vehicle during its three-year investment period, which concludes in July 2013, for all investments that fit within the Fund’s investment parameters, as defined.  The Fund is accounted for under the AICPA Audit and Accounting Guide for Investment Companies and its investments are reported on its balance sheet at fair value, with changes in value each period recognized in earnings.  We consolidate the accounts of the Fund into our consolidated financial statements.

 

From inception through June 30, 2011, the Fund received aggregate capital contributions from partners of $256,100,000, including $64,031,000 from us, and as of June 30, 2011, has five investments aggregating approximately $243,836,000. In the three and six months ended June 30, 2011, the Fund recognized $19,058,000 and $20,138,000 of income, respectively, of which $12,102,000 and $12,028,000, respectively, is attributable to noncontrolling interests.  Included in the Fund’s total income for the three and six months ended June 30, 2011 was $12,872,000 and $13,570,000, respectively, of net unrealized gains from the mark-to-market of investments in the Fund, and $3,085,000 of net realized gains from the disposition of an investment.  Our share of income from the Fund in the three and six months ended June 30, 2011, net of amounts attributable to noncontrolling interests, was $6,956,000 and $8,110,000, respectively, and includes $2,140,000 of accrued carried interest.  In addition, in the three and six months ended June 30, 2011, we recognized $865,000 and $1,165,000, respectively, of management and leasing fees which are included as a component of “fee and other income,” and incurred $403,000 and $3,451,000, respectively, of placement fees in connection with the February 2011 closing of the Fund, which are included in “general and administrative” expenses.

 

One Park Avenue

 

On March 1, 2011, we as a co-investor, together with the Fund, acquired a 95% interest in One Park Avenue, a 932,000 square foot office building located between 32nd and 33rd Streets in New York, for $374,000,000.  The purchase price consisted of $137,000,000 in cash and 95% of a new $250,000,000 5-year mortgage that bears interest at 5.0%.  The Fund accounts for its 64.7% interest in the property at fair value in accordance with the AICPA Audit and Accounting Guide for Investment Companies.  We account for our directly owned 30.3% equity interest under the equity method of accounting.

9

 


 
 

VORNADO REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

 

 

4.    Marketable Securities and Derivative Instruments

Marketable Securities  

 

Our portfolio of marketable securities is comprised of debt and equity securities that are classified as available for sale.  Available for sale securities are presented on our consolidated balance sheets at fair value.  Gains and losses resulting from the mark-to-market of these securities are recognized as an increase or decrease in “accumulated other comprehensive income” (a component of shareholders’ equity on our consolidated balance sheet) and not recognized in income.  Gains and losses are recognized in earnings only upon the sale of the securities and are recorded based on the weighted average cost of such securities. Below is a summary of our marketable securities portfolio as of June 30, 2011 and December 31, 2010.

 

  

  

  

As of June 30, 2011

  

As of December 31, 2010

  

  

  

  

  

  

  

  

GAAP

  

Unrealized

  

  

  

  

  

  

GAAP

  

Unrealized

  

  

  

Maturity

  

Fair Value

  

Cost

  

Gain

  

Maturity

  

Fair Value

  

Cost

  

Gain

Equity securities:

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

J.C. Penney

  

n/a

  

$

 641,892 

  

$

 590,366 

  

$

 51,526 

  

n/a

  

$

 600,449 

  

$

 590,215 

  

$

 10,234 

  

Other

  

n/a

  

  

 35,413 

  

  

 13,561 

  

  

 21,852 

  

n/a

  

  

 47,399 

  

  

 26,632 

  

  

 20,767 

Debt securities

  

04/13 - 10/18

  

  

 114,371 

  

  

 101,816 

  

  

 12,555 

  

08/11 - 10/18

  

  

 118,268 

  

  

 104,180 

  

  

 14,088 

  

  

  

  

  

$

 791,676 

  

$

 705,743 

  

$

 85,933 

  

  

  

$

 766,116 

  

$

 721,027 

  

$

 45,089 

 

In the six months ended June 30, 2011 and 2010, we sold certain marketable securities for aggregate proceeds of $19,301,000 and $122,956,000, resulting in net gains of $2,139,000 and $3,908,000, respectively, of which $48,000 and $3,797,000 were recognized in the three months ended June 30, 2011 and 2010.

 

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

 

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

 

We own 18,584,010 common shares at an average cost of $25.71 per share, or $477,829,000 in the aggregate.  These shares, which have an aggregate fair value of $641,892,000 at June 30, 2011, are included in marketable equity securities on our consolidated balance sheet and are classified as “available for sale.”  During the six months ended June 30, 2011, we recognized $41,292,000 from the mark-to-market of these shares, which is included in “other comprehensive income.”

 

We also own an economic interest in 4,815,990 common shares through a forward contract executed on October 7, 2010, at a weighted average strike price of $28.72 per share, or $138,327,000 in the aggregate.  The contract may be settled, at our election, in cash or common shares, in whole or in part, at any time prior to October 9, 2012.  The counterparty may accelerate settlement, in whole or in part, upon one year’s notice to us.  The strike price per share increases at an annual rate of LIBOR plus 80 basis points.  The contract is a derivative instrument that does not qualify for hedge accounting treatment.  Mark-to-market adjustments on the underlying common shares are recognized in “interest and other investment income, net” on our consolidated statements of income.  During the three and six months ended June 30, 2011, we recognized a loss of $6,762,000 and income of $10,401,000, respectively, from the mark-to-market of the underlying common shares, based on J.C. Penney’s closing share price of $34.54 per share at June 30, 2011.

 

We review our investment in J.C. Penney on a continuing basis.  Depending on various factors, including, without limitation, J.C. Penney’s financial position and strategic direction, actions taken by its board, price levels of its common stock, other investment opportunities available to us, market conditions and general economic and industry conditions, we may take such actions with respect to J.C. Penney as we deem appropriate, including, without limitation, purchasing additional common stock, or other financial instruments related to J.C. Penney, or selling some or all of our beneficial or economic holdings, or engage in hedging or similar transactions.

 

As of June 30, 2011, the aggregate economic net gain on our investment in J.C. Penney was $192,079,000, based on J.C. Penney’s closing share price of $34.54 per share and our weighted average cost of $26.33 per share.

10

 


 

VORNADO REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

 

 

5.    Investments in Partially Owned Entities

 

Toys “R” Us (“Toys”)

As of June 30, 2011, 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, 2011, 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, as amended, 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:

  

  

  

  

  

  

April 30, 2011

  

October 30, 2010

  

  

  

  

Assets

  

  

  

  

  

  

$

 11,951,000 

  

$

 12,810,000 

  

  

  

  

Liabilities

  

  

  

  

  

  

  

 10,115,000 

  

  

 11,317,000 

  

  

  

  

Toys “R” Us, Inc. equity

  

  

  

  

  

  

  

 1,836,000 

  

  

 1,493,000 

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

For the Three Months Ended

  

For the Six Months Ended

  

  

  

Income Statement:

April 30, 2011

  

May 1, 2010

  

April 30, 2011

  

May 1, 2010

  

  

  

  

Total revenues

$

 2,636,000 

  

$

 2,608,000 

  

$

 8,608,000 

  

$

 8,465,000 

  

  

  

  

Net (loss) income attributable to Toys

  

 (77,000) 

  

  

 (71,000) 

  

  

 262,000 

  

  

 308,000 

  

  

 

 

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

 

As of June 30, 2011, we own 1,654,068 Alexander’s common shares, or approximately 32.4% of Alexander’s common equity.  We manage, lease and develop Alexander’s properties pursuant to the agreements described below which expire in March of each year and are automatically renewable.  As of June 30, 2011, Alexander’s owed us $43,316,000 in fees under these agreements.

 

As of June 30, 2011, the fair value of our investment in Alexander’s, based on Alexander’s June 30, 2011 closing share price of $397.00, was $656,665,000, or $467,479,000 in excess of the carrying amount on our consolidated balance sheet.  As of June 30, 2011, the carrying amount of our investment in Alexander’s, excluding amounts owed to us, exceeds our share of the equity in the net assets of Alexander’s by approximately $59,367,000.  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 real estate (land and buildings).  We are amortizing the basis difference related to the buildings into earnings as additional depreciation expense over their estimated useful lives.  This depreciation is not material to our share of equity in Alexander’s net income.  The basis difference related to the land will be recognized upon disposition of our investment.

 

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

 

  

(Amounts in thousands)

  

  

  

  

  

  

Balance as of

  

  

  

Balance Sheet:

  

  

  

  

  

  

June 30, 2011

  

December 31, 2010

  

  

  

  

Assets

  

  

  

  

  

  

$

 1,772,000 

  

$

 1,679,000 

  

  

  

  

Liabilities

  

  

  

  

  

  

  

 1,421,000 

  

  

 1,335,000 

  

  

  

  

Noncontrolling interests

  

  

  

  

  

  

  

 2,000 

  

  

 3,000 

  

  

  

  

Stockholders' equity

  

  

  

  

  

  

  

 349,000 

  

  

 341,000 

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

For the Three Months Ended

  

For the Six Months Ended

  

  

  

Income Statement:

June 30, 2011

  

June 30, 2010

  

June 30, 2011

  

June 30, 2010

  

  

  

  

Total revenues

$

 62,000 

  

$

 59,000 

  

$

 125,000 

  

$

 118,000 

  

  

  

  

Net income attributable to Alexander’s

  

 20,000 

  

  

 15,000 

  

  

 38,000 

  

  

 31,000 

  

  

                                 

11

 


 

VORNADO REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

 

 

 

5.    Investments in Partially Owned Entities – continued

 

 

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

 

As of June 30, 2011, we own 18,468,969 Lexington common shares, or approximately 11.7% of Lexington’s common equity.  We account for our investment in Lexington under 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 consolidated financial statements. 

 

Based on Lexington’s June 30, 2011 closing share price of $9.13, the fair value of our investment in Lexington was $168,622,000, or $104,583,000 in excess of the June 30, 2011 carrying amount on our consolidated balance sheet.  As of June 30, 2011, the carrying amount of our investment in Lexington was less than our share of the equity in the net assets of Lexington by approximately $43,446,000.  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, 2011

  

September 30, 2010

  

  

  

  

Assets

  

  

  

  

  

  

$

 3,223,000 

  

$

 3,385,000 

  

  

  

  

Liabilities

  

  

  

  

  

  

  

 1,904,000 

  

  

 2,115,000 

  

  

  

  

Noncontrolling interests

  

  

  

  

  

  

  

 76,000 

  

  

 71,000 

  

  

  

  

Shareholders’ equity

  

  

  

  

  

  

  

 1,243,000 

  

  

 1,199,000 

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

For the Three Months Ended

  

For the Six Months Ended

  

  

  

Income Statement:

March 31, 2011

  

March 31, 2010

  

March 31, 2011

  

March 31, 2010

  

  

  

  

Total revenues

$

 83,000 

  

$

 82,000 

  

$

 169,000 

  

$

 168,000 

  

  

  

  

Net (loss) attributable to Lexington

  

 (17,000) 

  

  

 (27,000) 

  

  

 (5,000) 

  

  

 (73,000) 

  

  

 

 

LNR Property LLC (“LNR”)

As of June 30, 2011, we own a 26.2% equity interest in LNR, which we acquired in July 2010.  We account for our investment in LNR under the equity method and record our 26.2% share of LNR’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 receiving LNR’s consolidated financial statements.

LNR consolidates certain commercial mortgage-backed securities (“CMBS”) and Collateralized Debt Obligation (“CDO”) trusts for which it is the primary beneficiary.  The assets of these trusts (primarily commercial mortgage loans), which aggregate approximately $141 billion as of March 31, 2011, are the sole source of repayment of the related liabilities, which are non-recourse to LNR and its equity holders, including us.  Changes in the fair value of these assets each period are offset by changes in the fair value of the related liabilities through LNR’s consolidated income statement.  As of June 30, 2011, the carrying amount of our investment in LNR does not materially differ from our share of LNR’s equity.

12

 


 

VORNADO REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

 

 

 

5.    Investments in Partially Owned Entities – continued

 

LNR Property LLC (“LNR”) – continued

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

 

  

(Amounts in thousands)

  

Balance as of

  

  

  

Balance Sheet:

  

March 31, 2011

  

September 30, 2010

  

  

  

  

Assets

  

$

 141,759,000 

  

$

 143,266,000 

  

  

  

  

Liabilities

  

  

 141,118,000 

  

  

 142,720,000 

  

  

  

  

Noncontrolling interests

  

  

 20,000 

  

  

 37,000 

  

  

  

  

LNR equity

  

  

 621,000 

  

  

 509,000 

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

For the Three Months Ended

  

For the Six Months Ended

  

  

  

Income Statement:

  

March 31, 2011

  

March 31, 2011

  

  

  

  

Total revenues

  

$

 47,000 

  

$

 83,000 

  

  

  

  

Net income attributable to LNR

  

  

 42,000 

  

  

 100,000 

  

  

 

 

280 Park Avenue Joint Venture

 

On March 16, 2011, we formed a 50/50 joint venture with SL Green Realty Corp (“SL Green”) to own the mezzanine debt of 280 Park Avenue, a 1.2 million square foot office building located between 48th and 49th Streets in Manhattan (the “Property”).  We contributed our mezzanine loan with a face amount of $73,750,000, and they contributed their mezzanine loans with a face amount of $326,250,000 to the joint venture.  We equalized our interest in the joint venture with SL Green by paying them $111,250,000 in cash and assuming $15,000,000 of their debt.  On May 17, 2011, as part of the recapitalization of the Property, the joint venture contributed its debt position for 99% of the common equity of a new joint venture which owns the Property.  The new joint venture expects to spend $150,000,000 for re-tenanting and repositioning the Property.  We account for our 49.5% equity interest in the Property under the equity method of accounting from the date of recapitalization. 

 

Independence Plaza

 

On June 17, 2011, a joint venture in which we are a 51% partner invested $55,000,000 in cash (of which we contributed $35,000,000) to acquire a face amount of $150,000,000 of mezzanine loans and a $35,000,000 participation in a senior loan in Independence Plaza, a residential complex comprised of three 39-story buildings in the Tribeca submarket of Manhattan.  We share control over major decisions with our joint venture partner.  Accordingly, we account for our 51% interest in the joint venture under the equity method of accounting from the date of acquisition.

13

 


 

VORNADO REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

 

 

 

5.    Investments in Partially Owned Entities - continued

 

Investments in partially owned entities as of June 30, 2011 and December 31, 2010 and income recognized from these investments for the three and six months ended June 30, 2011 and 2010 are as follows:

  

  

  

  

  

    

  

  

  

   

  

Percentage

  

  

Balance as of

    

(Amounts in thousands)   

  

  

  

   

  

Ownership as of

  

  

June 30,

   

  

December 31,

    

Investments:     

  

  

  

   

  

June 30, 2011

  

  

2011 

   

  

2010 

    

Toys    

  

  

  

   

  

  

  

32.7 %

  

  

$

 558,755 

   

  

$

 447,334 

   

  

  

  

  

  

    

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

Alexander’s   

  

  

  

   

  

  

  

32.4 %

  

  

$

 189,186 

   

  

$

 186,811 

   

Lexington   

  

  

  

   

  

  

  

11.7 %

  

  

  

 64,039 

   

  

  

 57,270 

   

LNR   

  

  

  

   

  

  

  

26.2 %

  

  

  

 158,269 

   

  

  

 132,973 

   

India real estate ventures   

  

  

  

   

  

  

  

4%-36.5%

  

  

  

 103,488 

   

  

  

 127,193 

   

Partially owned office buildings (1)

  

  

  

   

  

  

  

Various

  

  

  

 445,669 

   

  

  

 181,838 

   

Other equity method investments (2)

  

  

  

   

  

  

  

Various

  

  

  

 199,641 

   

  

  

 241,587 

   

    

  

  

  

   

  

  

  

   

  

  

$

 1,160,292 

   

  

$

 927,672 

   

  

  

  

  

  

    

  

  

  

   

  

  

  

   

  

  

  

    

  

  

  

  

  

    

  

For the Three Months Ended

  

  

For the Six Months Ended

    

     

  

Ended June 30,

  

  

Ended June 30,

    

Our Share of Net Income (Loss):   

  

2011 

   

  

  

2010 

  

  

2011 

   

  

2010 

    

Toys – 32.7% share of:  

  

  

  

   

  

  

  

    

  

  

  

  

   

  

  

  

    

  

Equity in net (loss) income before income taxes   

  

$

 (49,017) 

   

  

  

$

 (47,314)  

  

  

$

 130,822 

   

  

$

 126,236 

    

  

Income tax benefit (expense)   

  

  

 23,969 

   

  

  

  

 24,123 

  

  

  

 (45,049) 

   

  

  

 (25,587) 

   

  

Equity in net (loss) income   

  

  

 (25,048) 

   

  

  

  

 (23,191)  

  

  

  

 85,773 

   

  

  

 100,649 

    

  

Interest and other income   

  

  

 2,202 

   

  

  

  

 2,187 

  

  

  

 4,325 

   

  

  

 4,217 

   

  

  

  

  

  

    

  

$

 (22,846) 

   

  

  

$

 (21,004)  

  

  

$

 90,098 

   

  

$

 104,866 

   

    

  

  

  

   

  

  

  

   

  

  

  

  

   

  

  

  

   

Alexander’s – 32.4% share of:  

  

  

  

   

  

  

  

   

  

  

  

  

   

  

  

  

   

  

Equity in net income    

  

$

 6,351 

   

  

  

$

 4,920 

  

  

$

 12,070 

   

  

$

 8,697 

   

  

Management, leasing and development fees   

  

  

 2,287 

   

  

  

  

 2,146 

  

  

  

 4,579 

   

  

  

 4,829 

   

    

  

  

 8,638 

   

  

  

  

 7,066 

  

  

  

 16,649 

   

  

  

 13,526 

   

  

  

  

  

  

    

  

  

  

   

  

  

  

   

  

  

  

  

   

  

  

  

   

Lexington – 11.7% share in 2011 and 13.8% share in 2010 of   

  

  

  

   

  

  

  

   

  

  

  

  

   

  

  

  

   

  

equity in net income (loss)  (3) 

  

  

 8,654 

   

  

  

  

 (428)  

  

  

  

 10,826 

   

  

  

 5,617 

   

  

  

  

  

  

    

  

  

  

   

  

  

  

   

  

  

  

  

   

  

  

  

   

LNR – 26.2% share of equity in net income (acquired in   

  

  

  

   

  

  

  

   

  

  

  

  

   

  

  

  

   

  

July 2010)  (4) 

  

  

 11,003 

   

  

  

  

 - 

  

  

  

 26,257 

   

  

  

 - 

   

  

  

  

  

  

     

  

  

  

   

  

  

  

   

  

  

  

  

   

  

  

  

   

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

  

  

  

   

  

  

  

   

  

  

  

  

   

  

  

  

   

  

share of equity in net income (loss)   

  

  

 205 

   

  

  

  

 606 

  

  

  

 (2) 

   

  

  

 2,257 

   

  

  

  

  

  

    

  

  

  

   

  

  

  

   

  

  

  

  

   

  

  

  

   

Partially owned office buildings   (5) 

  

  

 (2,366) 

   

  

  

  

 1,023 

  

  

  

 (6,990) 

   

  

  

 1,778 

   

    

  

  

  

   

  

  

  

   

  

  

  

  

   

  

  

  

   

Other equity method investments   

  

  

 269 

   

  

  

  

 (3,815)  

  

  

  

 (4,053) 

   

  

  

 (7,382) 

   

  

  

  

  

  

    

  

$

 26,403 

   

  

  

$

 4,452 

  

  

$

 42,687 

   

  

$

 15,796 

   

___________________________________   

  

  

  

   

  

  

  

   

  

  

  

  

   

  

  

  

   

 (1) 

  

  

Includes interests in 330 Madison Avenue (25%), One Park Avenue (30.3%), 280 Park Avenue (49.5%), 825 Seventh Avenue (50%), Warner Building and 1101 17th Street (55%), Fairfax Square (20%), Kaempfer equity interests in three office buildings (2.5% to 5.0%), Rosslyn Plaza (46%) and West 57th Street properties (50%).

  

  

  

  

  

    

  

  

  

   

  

  

  

   

  

  

  

  

   

  

  

  

   

 (2) 

  

  

Includes interests in Monmouth Mall, Verde Realty Operating Partnership, 85 10th Avenue Associates and redevelopment ventures, including Harlem Park and Farley.

  

  

  

  

  

    

  

  

  

   

  

  

  

   

  

  

  

  

   

  

  

  

   

 (3) 

  

  

Includes net gains of $8,308 in the three months ended June 30, 2011, and $9,760 and $5,998 in the six months ended June 30, 2011 and 2010, respectively, resulting from Lexington's stock issuances.

  

  

  

  

  

    

  

  

  

   

  

  

  

   

  

  

  

  

   

  

  

  

   

 (4) 

  

  

The three and six months ended June 30, 2011 include $6,020 for our share of net gains from asset sales. The six months ended June 30, 2011 also includes $8,977 for our share of a tax settlement gain.

  

  

  

  

  

    

  

  

  

   

  

  

  

   

  

  

  

  

   

  

  

  

   

 (5) 

  

  

The six months ended June 30, 2011 includes $9,022 for our share of expense, primarily for straight-line rent reserves and the write-off of tenant improvements in connection with a tenant's bankruptcy at the Warner Building.

  

  

  

  

  

    

  

  

  

   

  

  

  

   

  

  

  

  

   

  

  

  

   

14

 


 

VORNADO REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

 

 

 

5.    Investments in Partially Owned Entities – continued

Below is a summary of the debt of our partially owned entities as of June 30, 2011 and December 31, 2010, none of which is recourse to us.

  

  

   

  

  

Interest  

  

100% of

   

  

  

Rate at  

  

 Partially Owned Entities’ Debt at

(Amounts in thousands)  

  

  

June 30,  

  

June 30,

  

December 31,

  

  

   

Maturity

  

2011   

  

2011 

  

2010 

Toys (32.7% interest) (as of April 30, 2011 and October 30, 2010,  

  

  

   

  

  

  

  

  

  

  respectively):  

  

  

   

  

  

  

  

  

  

  

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

07/17

  

10.75 %

  

$

 929,183 

  

$

 928,045 

  

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

12/17

  

8.50 %

  

  

 716,070 

  

  

 715,577 

  

$700 million secured term loan facility  

09/16

  

6.00 %

  

  

 686,979 

  

  

 689,757 

  

Senior U.K. real estate facility  

04/13

  

5.02 %

  

  

 583,423 

  

  

 561,559 

  

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

08/11

  

8.82 %

  

  

 498,787 

  

  

 495,943 

  

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

04/13

  

9.50 %

  

  

 388,781 

  

  

 386,167 

  

7.375% senior secured notes (Face value – $350,000)  

09/16

  

7.38 %

  

  

 349,750 

  

  

 350,000 

  

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

10/18

  

9.99 %

  

  

 345,970 

  

  

 343,528 

  

Japan bank loans  

03/12-02/16

  

1.85%-2.85%

  

  

 184,662 

  

  

 180,500 

  

Spanish real estate facility  

02/13

  

4.51 %

  

  

 189,580 

  

  

 179,511 

  

Junior U.K. real estate facility  

04/13

  

6.81%-7.84%

  

  

 101,828 

  

  

 98,266 

  

Japan borrowings  

03/12

  

0.98 %

  

  

 99,792 

  

  

 141,360 

  

French real estate facility  

02/13

  

4.51 %

  

  

 91,457 

  

  

 86,599 

  

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

09/21

  

9.17 %

  

  

 21,071 

  

  

 21,054 

  

$1.85 billion credit facility  

08/15

  

-

  

  

 - 

  

  

 519,810 

  

European and Australian asset-based revolving credit facility  

10/12

  

-

  

  

 - 

  

  

 25,767 

  

Other  

Various

  

Various

  

  

 171,350 

  

  

 156,853 

  

  

   

  

  

   

  

  

 5,358,683 

  

  

 5,880,296 

  

  

   

  

  

   

  

  

  

  

  

  

Alexander’s (32.4% interest):  

  

  

   

  

  

  

  

  

  

  

731 Lexington Avenue mortgage note payable, collateralized by  

  

  

   

  

  

  

  

  

  

  

  

the office space  

02/14

  

5.33 %

  

  

 345,875 

  

  

 351,751 

  

731 Lexington Avenue mortgage note payable, collateralized by  

  

  

   

  

  

  

  

  

  

  

  

the retail space  

07/15

  

4.93 %

  

  

 320,000 

  

  

 320,000 

  

Rego Park construction loan payable  

12/11

  

1.50 %

  

  

 277,200 

  

  

 277,200 

  

Kings Plaza Regional Shopping Center mortgage note payable (1)

06/16

  

1.95 %

  

  

 250,000 

  

  

 151,214 

  

Rego Park mortgage note payable  

03/12

  

0.75 %

  

  

 78,246 

  

  

 78,246 

  

Paramus mortgage note payable  

10/11

  

5.92 %

  

  

 68,000 

  

  

 68,000 

  

  

   

  

  

   

  

  

 1,339,321 

  

  

 1,246,411 

  

  

   

  

  

   

  

  

  

  

  

  

Lexington (11.7% interest) (as of March 31, 2011 and  

  

  

   

  

  

  

  

  

  

  September 30, 2010, respectively):   

  

  

   

  

  

  

  

  

  

  

Mortgage loans collateralized by Lexington’s real estate  

2011-2037

  

5.81 %

  

  

 1,721,643 

  

  

 1,927,729 

  

  

   

  

  

   

  

  

  

  

  

  

LNR (26.2% interest) (as of March 31, 2011 and   

  

  

   

  

  

  

  

  

  

  September 30, 2010):  

  

  

   

  

  

  

  

  

  

  

Mortgage notes payable  

2011-2043

  

4.75 %

  

  

 353,803 

  

  

 508,547 

  

Liabilities of consolidated CMBS and CDO trusts  

n/a

  

5.28 %

  

  

 140,615,139 

  

  

 142,001,333 

  

  

    

  

  

   

  

  

 140,968,942 

  

  

 142,509,880 

  

  

    

  

  

   

  

  

  

  

  

  

  

  

    

  

  

   

  

  

  

  

  

  

(1)

  

On June 10, 2011, Alexander's completed a $250,000 refinancing of this loan.  The five-year interest only loan is at LIBOR plus 1.70%.

  

  

    

  

  

   

  

  

  

  

  

  

15

 


 
 

VORNADO REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

 

 

 

5.    Investments in Partially Owned Entities - continued

  

  

   

  

  

Interest  

  

100% of

  

  

   

  

  

Rate at

  

Partially Owned Entities’ Debt at

(Amounts in thousands)  

  

  

June 30,

  

June 30,

  

December 31,

   

Maturity

  

2011 

  

2011 

  

2010 

Partially owned office buildings:  

  

  

   

  

  

  

  

  

  

  

280 Park Avenue (49.5% interest) mortgage notes payable   

  

  

   

  

  

  

  

  

  

  

  

(Face value - $740,000 at 6.37%)  

06/16

  

3.93 %

  

$

 823,629 

  

$

 - 

  

One Park Avenue (30.3% interest) mortgage note payable  

03/16

  

5.00 %

  

  

 250,000 

  

  

 - 

  

Warner Building (55% interest) mortgage note payable  

05/16

  

6.26 %

  

  

 292,700 

  

  

 292,700 

  

330 Madison Avenue (25% interest) mortgage note payable  

06/15

  

1.77 %

  

  

 150,000 

  

  

 150,000 

  

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

  

  

   

  

  

  

  

  

  

  

  

mortgage notes payable, collateralized by the partnerships’ real estate  

11/11-12/11

  

5.86 %

  

  

 138,084 

  

  

 139,337 

  

Fairfax Square (20% interest) mortgage note payable  

12/14

  

7.00 %

  

  

 71,376 

  

  

 71,764 

  

Rosslyn Plaza (46% interest) mortgage note payable  

12/11

  

1.30 %

  

  

 56,680 

  

  

 56,680 

  

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

  

  

   

  

  

  

  

  

  

  

  

collateralized by land   

07/22

  

5.71 %

  

  

 50,150 

  

  

 50,150 

  

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

02/14

  

4.94 %

  

  

 22,466 

  

  

 22,922 

  

825 Seventh Avenue (50% interest) mortgage note payable  

10/14

  

8.07 %

  

  

 20,327 

  

  

 20,565 

  

  

   

  

  

   

  

  

  

  

  

  

India Real Estate Ventures:  

  

  

   

  

  

  

  

  

  

  

TCG Urban Infrastructure Holdings (25% interest) mortgage notes  

  

  

   

  

  

  

  

  

  

  

  

payable, collateralized by the entity’s real estate  

2011-2022

  

11.53 %

  

  

 255,741 

  

  

 196,319 

  

  

   

  

  

   

  

  

  

  

  

  

Other:  

  

  

   

  

  

  

  

  

  

  

Verde Realty Operating Partnership (8.3% interest) mortgage notes  

  

  

   

  

  

  

  

  

  

  

  

 payable, collateralized by the partnerships’ real estate  

2013-2025

  

5.93 %

  

  

 541,852 

  

  

 581,086 

  

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

  

  

   

  

  

  

  

  

  

  

  

March 31, 2011 and September 30, 2010), mortgage notes  

  

  

   

  

  

  

  

  

  

  

  

payable, collateralized by the partnerships’ real estate  

2011-2018

  

5.60 %

  

  

 295,441 

  

  

 296,991 

  

Monmouth Mall (50% interest) mortgage note payable  

02/14-09/15

  

5.35 %

  

  

 172,384 

  

  

 164,474 

  

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

12/17

  

5.00 %

  

  

 14,917 

  

  

 15,022 

  

Orleans Hubbard Garage (50% interest) mortgage note payable  

12/17

  

5.00 %

  

  

 9,442 

  

  

 9,508 

  

Waterfront Station (2.5% interest)  

n/a

  

n/a

  

  

 - 

  

  

 217,106 

  

Other  

Various

  

4.58 %

  

  

 663,162 

  

  

 418,339 

 

 

Based on our ownership interest in the partially owned entities above, our pro rata share of the debt of these partially owned entities was $40,339,296,000 and $40,443,346,000 as of June 30, 2011 and December 31, 2010, respectively.  Excluding our pro rata share of LNR’s liabilities related to consolidated CMBS and CDO trusts which are non-recourse to LNR and its equity holders, including us, our pro rata share of partially owned entities debt is $3,534,690,000 and $3,275,917,000 at June 30, 2011 and December 31, 2010, respectively.

16

 


 

VORNADO REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

 

 

6.    Mezzanine Loans Receivable

On March 2, 2011, we sold our mezzanine loan in the Tharaldson Lodging Companies for $70,848,000 in cash, which had a carrying amount of $60,416,000 and recognized a net gain of $10,474,000.  The gain is included as a component of “interest and other investment income, net” on our consolidated statement of income.

 

In the first quarter of 2011, we recognized $72,270,000 of income, representing the difference between the fair value of our 280 Park Avenue Mezzanine Loan of $73,750,000, and its carrying amount of $1,480,000.  The $72,270,000 of income, which is included in “interest and other investment income, net” on our consolidated statement of income, is comprised of $63,145,000 from the reversal of the loan loss reserve and $9,125,000 of previously unrecognized interest income.  Our decision to reverse the loan loss reserve was based on the increase in value of the underlying collateral.  On March 16, 2011, we contributed this mezzanine loan to a 50/50 joint venture with SL Green (see Note 5 – Investments in Partially Owned Entities). 

 

As of June 30, 2011 and December 31, 2010, the carrying amount of mezzanine loans receivable was $155,613,000 and $202,412,000, respectively, net of allowances of $0 and $73,216,000, respectively.  These loans have a weighted average interest rate of 5.62% and maturities ranging from November 2011 to August 2015.

 

 

7.    Discontinued Operations

 

On March 31, 2011, the receiver completed the disposition of the High Point Complex in North Carolina.  In connection therewith, the property and related debt were removed from our consolidated balance sheet and we recognized a net gain of $83,907,000 on the extinguishment of debt.

 

In the first half of 2011, we sold (i) 1140 Connecticut Avenue and 1227 25th Street for $127,000,000 in cash, which resulted in a $45,862,000 net gain, and (ii) three retail properties in separate transactions for an aggregate of $40,990,000 in cash, which resulted in net gains aggregating $5,761,000.

 

The tables below set forth the assets and liabilities related to discontinued operations at June 30, 2011 and December 31, 2010, and their combined results of operations for the three and six months ended June 30, 2011 and 2010.

 

  

  

  

  

Assets Related to

  

Liabilities Related to

  

  

  

(Amounts in thousands)

  

Discontinued Operations as of

  

Discontinued Operations as of

  

  

  

  

  

June 30,

  

December 31,

  

June 30,

  

December 31,

  

  

  

  

  

2011 

  

2010 

  

2011 

  

2010 

  

  

  

High Point

  

$

 - 

  

$

 154,563 

  

$

 - 

  

$

 236,974 

  

  

  

1227 25th Street

  

  

 - 

  

  

 43,630 

  

  

 - 

  

  

 - 

  

  

  

1140 Connecticut Avenue

  

  

 - 

  

  

 36,271 

  

  

 - 

  

  

 18,948 

  

  

  

Total

  

$

 - 

  

$

 234,464 

  

$

 - 

  

$

 255,922 

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

For The Three Months

  

For The Six Months

  

  

  

(Amounts in thousands)

  

Ended June 30,

  

Ended June 30,

  

  

  

  

  

2011 

  

2010 

  

2011 

  

2010 

  

  

  

Total revenues

  

$

 - 

  

$

 12,116 

  

$

 5,987 

  

$

 23,137 

  

  

  

Total expenses

  

  

 - 

  

  

 15,797 

  

  

 6,744 

  

  

 26,332 

  

  

  

  

  

  

 - 

  

  

 (3,681) 

  

  

 (757) 

  

  

 (3,195) 

  

  

  

Net gain on extinguishment of High Point debt

  

  

 - 

  

  

 - 

  

  

 83,907 

  

  

 - 

  

  

  

Net gain on sale of 1140 Connecticut Avenue

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

and 1227 25th Street

  

  

 - 

  

  

 - 

  

  

 45,862 

  

  

 - 

  

  

  

Net gain on sales of other real estate

  

  

 458 

  

  

 - 

  

  

 5,761 

  

  

 - 

  

  

  

Litigation loss accrual

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 (10,056) 

  

  

  

Income (loss) from discontinued operations

  

$

 458 

  

$

 (3,681) 

  

$

 134,773 

  

$

 (13,251) 

  

  

17

 


 

VORNADO REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

 

 

8.    Identified Intangible Assets and Liabilities

The following summarizes our identified intangible assets (primarily acquired above-market leases) and liabilities (primarily acquired below-market leases) as of June 30, 2011 and December 31, 2010.

 

  

  

 Balance as of

  

  

  

June 30,

  

December 31,

  

  

(Amounts in thousands)

2011 

  

2010 

  

  

Identified intangible assets:

  

  

  

  

  

  

  

Gross amount

$

 680,598 

  

$

 687,253 

  

  

Accumulated amortization

  

 (363,341) 

  

  

 (338,508) 

  

  

Net

$

 317,257 

  

$

 348,745 

  

  

Identified intangible liabilities (included in deferred credit):

  

  

  

  

  

  

  

Gross amount

$

 877,836 

  

$

 870,623 

  

  

Accumulated amortization

  

 (374,438) 

  

  

 (341,718) 

  

  

Net

$

 503,398 

  

$

 528,905 

  

 

Amortization of acquired below-market leases, net of acquired above-market leases, resulted in an increase to rental income of $16,812,000 and $16,284,000 for the three months ended June 30, 2011 and 2010, respectively, and $33,571,000 and $32,055,000 for the six months ended June 30, 2011 and 2010, 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, 2012 is as follows:

 

  

(Amounts in thousands)

  

  

  

  

2012 

$

 52,025 

  

  

2013 

  

 44,095 

  

  

2014 

  

 38,240 

  

  

2015 

  

 35,472 

  

  

2016 

  

 32,093 

  

 

Amortization of all other identified intangible assets (a component of depreciation and amortization expense) was $13,623,000 and $15,757,000 for the three months ended June 30, 2011 and 2010, respectively, and $27,885,000 and $30,610,000 for the six months ended June 30, 2011 and 2010, 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, 2012 is as follows:

 

  

(Amounts in thousands)

  

  

  

  

2012 

$

 44,777 

  

  

2013 

  

 37,281 

  

  

2014 

  

 18,885 

  

  

2015 

  

 13,929 

  

  

2016 

  

 11,325 

  

 

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 $334,000 and $509,000 for the three months ended June 30, 2011 and 2010, respectively, and $648,000 and $1,018,000 for the six months ended June 30, 2011 and 2010, respectively.  Estimated annual amortization of these below-market leases, net of above-market leases, for each of the five succeeding years commencing January 1, 2012 is as follows:

 

  

(Amounts in thousands)

  

  

  

  

2012 

$

 1,377 

  

  

2013 

  

 1,377 

  

  

2014 

  

 1,377 

  

  

2015 

  

 1,377 

  

  

2016 

  

 1,377 

  

18

 


 
 

VORNADO REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

 

 

9.    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)

  

2011 

  

2011 

  

2010 

  

Fixed rate:  

  

  

   

  

  

  

  

  

  

  

  

New York Office:  

  

  

   

  

  

  

  

  

  

  

  

  

350 Park Avenue  

01/12

  

5.48 %

  

$

 430,000 

  

$

 430,000 

  

  

  

Two Penn Plaza (2)

03/18

  

5.13 %

  

  

 425,000 

  

  

 277,347 

  

  

  

1290 Avenue of the Americas  

01/13

  

5.97 %

  

  

 418,657 

  

  

 424,136 

  

  

  

770 Broadway  

03/16

  

5.65 %

  

  

 353,000 

  

  

 353,000 

  

  

  

888 Seventh Avenue  

01/16

  

5.71 %

  

  

 318,554 

  

  

 318,554 

  

  

  

909 Third Avenue  

04/15

  

5.64 %

  

  

 205,142 

  

  

 207,045 

  

  

  

Eleven Penn Plaza  

12/11

  

5.20 %

  

  

 197,260 

  

  

 199,320 

  

  

  

   

  

  

    

  

  

  

  

  

  

  

  

Washington, DC Office:  

  

  

    

  

  

  

  

  

  

  

  

  

Skyline Place  

02/17

  

5.74 %

  

  

 678,000 

  

  

 678,000 

  

  

  

River House Apartments  

04/15

  

5.43 %

  

  

 195,546 

  

  

 195,546 

  

  

  

2121 Crystal Drive (3)

03/23

  

5.51 %

  

  

 150,000 

  

  

 - 

  

  

  

Bowen Building  

06/16

  

6.14 %

  

  

 115,022 

  

  

 115,022 

  

  

  

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

01/25

  

7.09 %

  

  

 109,891 

  

  

 110,931 

  

  

  

Universal Buildings  

04/14

  

6.38 %

  

  

 101,182 

  

  

 103,049 

  

  

  

West End 25 (4)

06/21

  

4.88 %

  

  

 101,671 

  

  

 - 

  

  

  

Reston Executive I, II, and III  

01/13

  

5.57 %

  

  

 93,000 

  

  

 93,000 

  

  

  

2011 Crystal Drive  

08/17

  

7.30 %

  

  

 81,005 

  

  

 81,362 

  

  

  

1550 and 1750 Crystal Drive  

11/14

  

7.08 %

  

  

 78,142 

  

  

 79,411 

  

  

  

220 20th Street (5)

02/18

  

4.61 %

  

  

 75,704 

  

  

 - 

  

  

  

1235 Clark Street  

07/12

  

6.75 %

  

  

 51,815 

  

  

 52,314 

  

  

  

2231 Crystal Drive  

08/13

  

7.08 %

  

  

 45,211 

  

  

 46,358 

  

  

  

1750 Pennsylvania Avenue  

06/12

  

7.26 %

  

  

 44,734 

  

  

 45,132 

  

  

  

1225 Clark Street  

08/13

  

7.08 %

  

  

 27,044 

  

  

 27,616 

  

  

  

1800, 1851 and 1901 South Bell Street  

12/11

  

6.91 %

  

  

 5,162 

  

  

 10,099 

  

  

  

   

  

  

    

  

  

  

  

  

  

  

  

Retail:  

  

  

    

  

  

  

  

  

  

  

  

  

Cross-collateralized mortgages on 40 strip shopping centers  

09/20

  

4.19 %

  

  

 591,327 

  

  

 597,138 

  

  

  

Montehiedra Town Center  

07/16

  

6.04 %

  

  

 120,000 

  

  

 120,000 

  

  

  

Broadway Mall  

07/13

  

5.30 %

  

  

 88,994 

  

  

 90,227 

  

  

  

828-850 Madison Avenue Condominium  

06/18

  

5.29 %

  

  

 80,000 

  

  

 80,000 

  

  

  

North Bergen (Tonnelle Avenue) (6)

01/18

  

4.59 %

  

  

 75,000 

  

  

 - 

  

  

  

Las Catalinas Mall  

11/13

  

6.97 %

  

  

 56,912 

  

  

 57,737 

  

  

  

510 5th Avenue  

01/16

  

5.60 %

  

  

 31,961 

  

  

 32,189 

  

  

  

Other  

  03/12-05/36

  

5.10%-7.33%

  

  

 100,476 

  

  

 101,251 

  

  

  

   

  

  

    

  

  

  

  

  

  

  

  

Merchandise Mart:  

  

  

    

  

  

  

  

  

  

  

  

  

Merchandise Mart  

12/16

  

5.57 %

  

  

 550,000 

  

  

 550,000 

  

  

  

Boston Design Center  

09/15

  

5.02 %

  

  

 67,947 

  

  

 68,538 

  

  

  

Washington Design Center  

11/11

  

6.95 %

  

  

 43,021 

  

  

 43,447 

  

  

  

   

  

  

    

  

  

  

  

  

  

  

  

Other:  

  

  

    

  

  

  

  

  

  

  

  

  

555 California Street  

09/11

  

5.79 %

  

  

 642,163 

  

  

 640,911 

  

  

  

Borgata Land (7)

02/21

  

5.14 %

  

  

 60,000 

  

  

 - 

  

  

  

Industrial Warehouses  

n/a

  

n/a

  

  

 - 

  

  

 24,358 

  

Total fixed rate notes and mortgages payable  

  

  

5.59 %

  

$

 6,808,543 

  

$

 6,253,038 

  

___________________  

  

  

   

  

  

  

  

  

  

  

  

  

See notes on page 21.  

  

  

   

  

  

  

  

  

  

19

 


 

VORNADO REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

 

 

 

9.    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   

  

  

2011 

  

2011 

  

2010 

  

  

Variable rate:  

  

  

    

  

  

   

  

  

  

  

  

  

  

  

  

New York Office:  

  

  

    

  

  

   

  

  

  

  

  

  

  

  

  

  

Manhattan Mall  

02/12

  

L+55   

  

  

0.74 %

  

$

 232,000 

  

$

 232,000 

  

  

  

  

866 UN Plaza (8)

05/16

  

L+125  (8)

  

  

1.52 %

  

  

 44,978 

  

  

 44,978 

  

  

  

Washington, DC Office:  

  

  

    

  

  

   

  

  

  

  

  

  

  

  

  

  

2101 L Street   

02/13

  

L+120   

  

  

1.45 %

  

  

 150,000 

  

  

 150,000 

  

  

  

  

River House Apartments  

04/18

  

 n/a  (9)

  

  

1.53 %

  

  

 64,000 

  

  

 64,000 

  

  

  

  

2200/2300 Clarendon Boulevard  

01/15

  

L+75   

  

  

0.94 %

  

  

 56,320 

  

  

 59,278 

  

  

  

  

1730 M and 1150 17th Street  

06/14

  

L+140   

  

  

1.65 %

  

  

 43,581 

  

  

 43,581 

  

  

  

  

West End 25 (4)

n/a

  

 n/a   

  

  

n/a

  

  

 - 

  

  

 95,220 

  

  

  

  

220 20th Street (5)

n/a

  

 n/a   

  

  

n/a

  

  

 - 

  

  

 83,573 

  

  

  

Retail:  

  

  

     

  

  

   

  

  

  

  

  

  

  

  

  

  

Green Acres Mall   

02/13

  

L+140   

  

  

1.65 %

  

  

 325,045 

  

  

 335,000 

  

  

  

  

Bergen Town Center  

03/13

  

L+150   

  

  

1.77 %

  

  

 279,044 

  

  

 279,044 

  

  

  

  

San Jose Strip Center  

03/13

  

L+400   

  

  

4.25 %

  

  

 117,025 

  

  

 120,863 

  

  

  

  

Beverly Connection (10)

07/12

  

L+350  (10)

  

  

5.00 %

  

  

 100,000 

  

  

 100,000 

  

  

  

  

4 Union Square South   

04/14

  

L+325   

  

  

3.52 %

  

  

 75,000 

  

  

 75,000 

  

  

  

  

Cross-collateralized mortgages on 40 strip   

  

  

     

  

  

   

  

  

  

  

  

  

  

  

  

  

     shopping centers (11)

09/20

  

L+136  (11)

  

  

2.36 %

  

  

 60,000 

  

  

 60,000 

  

  

  

  

435 Seventh Avenue (12)

08/14

  

L+300  (12)

  

  

5.00 %

  

  

 51,603 

  

  

 51,844 

  

  

  

  

Other  

11/12

  

L+375   

  

  

3.94 %

  

  

 21,733 

  

  

 21,862 

  

  

  

Other:  

  

  

     

  

  

   

  

  

  

  

  

  

  

  

  

  

220 Central Park South  

10/11

  

L+235–L+245   

  

  

2.58 %

  

  

 123,750 

  

  

 123,750 

  

  

  

  

Other  

11/11

  

L+250   

  

  

2.78 %

  

  

 22,400 

  

  

 66,267 

  

  

  

Total variable rate notes and mortgages payable  

  

  

    

  

  

2.17 %

  

  

 1,766,479 

  

  

 2,006,260 

  

  

  

Total notes and mortgages payable  

  

  

    

  

  

4.89 %

  

$

 8,575,022 

  

$

 8,259,298 

  

  

  

  

   

  

  

    

  

  

   

  

  

  

  

  

  

  

  

Senior unsecured notes:  

  

  

    

  

  

   

  

  

  

  

  

  

  

  

  

Senior unsecured notes due 2015  

04/15

  

    

  

  

4.25 %

  

$

 499,379 

  

$

 499,296 

  

  

  

Senior unsecured notes due 2039 (13)

10/39

  

    

  

  

7.88 %

  

  

 460,000 

  

  

 460,000 

  

  

  

Floating rate senior unsecured notes due 2011  

12/11

  

L+200   

  

  

2.30 %

  

  

 23,250 

  

  

 23,250 

  

  

  

Senior unsecured notes due 2011   

n/a

  

    

  

  

n/a

  

  

 - 

  

  

 100,382 

  

  

  

Total senior unsecured notes  

  

  

    

  

  

5.90 %

  

$

 982,629 

  

$

 1,082,928 

  

  

  

  

   

  

  

    

  

  

   

  

  

  

  

  

  

  

  

3.88% exchangeable senior debentures due 2025   

  

  

    

  

  

   

  

  

  

  

  

  

  

  

  

(see page 22)   

04/12

  

    

  

  

5.32 %

  

$

 494,403 

  

$

 491,000 

  

  

  

  

   

  

  

    

  

  

   

  

  

  

  

  

  

  

  

Convertible senior debentures: (see page 22)  

  

  

    

  

  

   

  

  

  

  

  

  

  

  

  

3.63% due 2026  

11/11

  

    

  

  

5.32 %

  

$

 177,954 

  

$

 176,499 

  

  

  

2.85% due 2027  

04/12

  

    

  

  

5.45 %

  

  

 10,040 

  

  

 9,914 

  

  

  

Total convertible senior debentures (14)

  

  

    

  

  

5.33 %

  

$

 187,994 

  

$

 186,413 

  

  

  

  

   

  

  

    

  

  

   

  

  

  

  

  

  

  

  

Unsecured revolving credit facilities:  

  

  

    

  

  

   

  

  

  

  

  

  

  

  

  

$1.595 billion unsecured revolving credit facility   

09/12

  

L+55   

  

  

0.72 %

  

$

 300,000 

  

$

 669,000 

  

  

  

$1.25 billion unsecured revolving credit facility  

  

  

    

  

  

   

  

  

  

  

  

  

  

  

  

  

($21,534 reserved for outstanding letters of credit) (15)

06/16

  

L+135   

  

  

-

  

  

 - 

  

  

 205,000 

  

  

  

Total unsecured revolving credit facilities   

  

  

    

  

  

0.72 %

  

$

 300,000 

  

$

 874,000 

  

  

___________________________  

  

  

    

  

  

   

  

  

  

  

  

  

  

  

  

See notes on the following page.  

  

  

    

  

  

   

  

  

  

  

  

  

  

20

 


 

VORNADO REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

 

 

 

9.    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 February 11, 2011, we completed a $425,000 refinancing of this property.  The seven-year loan bears interest at LIBOR plus 2.00%, which was swapped for the term of the loan to a fixed rate of 5.13%.  The loan amortizes based on a 30-year schedule beginning in the fourth year.  We retained net proceeds of approximately $139,000, after repaying the existing loan and closing costs.

  

  

  

  

(3)

On February 10, 2011, we completed a $150,000 financing of this property.  The 12-year fixed rate loan bears interest at 5.51% and amortizes based on a 30-year schedule beginning in the third year.  This property was previously unencumbered.

  

  

  

  

(4)

In May 2011, we repaid the outstanding balance of the variable-rate construction loan on this property and closed on a $101,671 mortgage at a fixed rate of 4.88%.  The loan has a 10-year term and amortizes based on a 30-year schedule beginning in the sixth year.

  

  

  

  

(5)

On January 18, 2011, we repaid the outstanding balance of the variable-rate construction loan on this property and closed on a $76,100 mortgage at a fixed rate of 4.61%.  The loan has a seven-year term and amortizes based on a 30-year schedule.

  

  

  

  

(6)

On January 10, 2011, we completed a $75,000 financing on this property.  The seven-year fixed rate loan bears interest at 4.59% and amortizes based on a 25-year schedule beginning in the sixth year.  This property was previously unencumbered.

  

  

  

  

(7)

In January 2011, we completed a $60,000 financing of this property.  The 10-year fixed rate loan bears interest at 5.14% and amortizes based on a 30-year schedule beginning in the third year.

  

  

  

  

(8)

On May 10, 2011, we refinanced this loan for the same amount.  The five-year interest only loan is at LIBOR plus 1.25%.

  

  

  

  

(9)

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

  

  

  

  

(10)

This loan has a LIBOR floor of 1.50%.  The spread over LIBOR increases from 3.50% currently to 5.00% in August 2011.

  

  

  

  

(11)

This loan has a LIBOR floor of 1.00%.

  

  

  

  

(12)

This loan has a LIBOR floor of 2.00%.

  

  

  

  

(13)

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.

  

  

  

  

(14)

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 virtually no independent assets or operations outside of the Operating Partnership.

  

  

  

  

(15)

On June 8, 2011, we renewed this facility and increased it to $1,250,000 from $1,000,000.  The renewed facility matures in four years, has a one-year extension option and bears interest on drawn amounts at LIBOR plus 1.35% plus a .30% facility fee (drawn or undrawn), based on our credit ratings.

21

 


 

VORNADO REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

 

 

 

9.    Debt – continued

 

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

 

  

  

  

2.85% Convertible 

  

3.63% Convertible 

  

3.88% Exchangeable

(Amounts in thousands, except per share amounts)

Senior Debentures due 2027

  

Senior Debentures due 2026

  

Senior Debentures due 2025

  

  

  

June 30,   

  

December 31,

  

June 30,   

  

December 31,

  

June 30,

  

December 31,

Balance Sheet:

2011    

  

2010 

  

2011    

  

2010 

  

2011 

  

2010 

  

Principal amount of debt component

$

 10,233    

  

$

 10,233 

  

$

 179,052    

  

$

 179,052 

  

$

 499,982 

  

$

 499,982 

  

Unamortized discount

  

 (193)   

  

  

 (319)  

  

  

 (1,098)   

  

  

 (2,553)  

  

  

 (5,579)  

  

  

 (8,982)  

  

Carrying amount of debt component

$

 10,040    

  

$

 9,914 

  

$

 177,954    

  

$

 176,499 

  

$

 494,403 

  

$

 491,000 

  

Carrying amount of equity component

$

 956    

  

$

 956 

  

$

 9,604    

  

$

 9,604 

  

$

 32,301 

  

$

 32,301 

  

Effective interest rate

  

5.45 %  

  

  

5.45 %

  

  

5.32 %  

  

  

5.32 %

  

  

5.32 %

  

  

5.32 %

  

Maturity date (period through which

  

    

  

  

   

  

  

    

  

  

   

  

  

   

  

  

   

  

  

discount is being amortized)

  

4/1/12   

  

  

   

  

  

11/15/11   

  

  

   

  

  

4/15/12

  

  

   

  

Conversion price per share, as adjusted

$

157.18    

  

  

   

  

$

148.46    

  

  

   

  

$

87.17 

  

  

   

  

Number of shares on which the

  

     

  

  

   

  

  

    

  

  

   

  

  

   

  

  

   

  

  

aggregate consideration to be

  

     

  

  

   

  

  

    

  

  

   

  

  

   

  

  

   

  

  

delivered upon conversion is

  

     

  

  

   

  

  

    

  

  

   

  

  

   

  

  

   

  

  

determined

  

 -  (1)

  

  

   

  

  

 -  (1)

  

  

   

  

  

5,736 

  

  

   

__________________

  

    

  

  

   

  

  

    

  

  

   

  

  

   

  

  

   

  

  

  

  

    

  

  

   

  

  

    

  

  

   

  

  

   

  

  

   

 (1) 

Our convertible senior debentures require that upon conversion, the entire principal amount is to be settled in cash, and at our option, any excess value above the principal amount may be settled in cash or common shares.  Based on the June 30, 2011 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 65 and 1,206 common shares, respectively.

 

  

  

Three Months Ended

  

Six Months Ended

  

(Amounts in thousands)

June 30,

  

June 30,

  

Income Statement:

2011 

  

2010 

  

2011 

  

2010 

  

2.85% Convertible Senior Debentures due 2027:

  

  

  

  

  

  

  

  

  

  

  

  

  

Coupon interest

$

 72 

  

$

 160 

  

$

 145 

  

$

 320 

  

  

Discount amortization – original issue

  

 11 

  

  

 23 

  

  

 22 

  

  

 46 

  

  

Discount amortization – ASC 470-20 implementation

  

 52 

  

  

 107 

  

  

 104 

  

  

 215 

  

  

  

$

 135 

  

$

 290 

  

$

 271 

  

$

 581 

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

3.63% Convertible Senior Debentures due 2026:

  

  

  

  

  

  

  

  

  

  

  

  

  

Coupon interest

$

 1,622 

  

$

 3,842 

  

$

 3,245 

  

$

 7,805 

  

  

Discount amortization – original issue

  

 200 

  

  

 447 

  

  

 396 

  

  

 903 

  

  

Discount amortization – ASC 470-20 implementation

  

 533 

  

  

 1,198 

  

  

 1,059 

  

  

 2,416 

  

  

  

$

 2,355 

  

$

 5,487 

  

$

 4,700 

  

$

 11,124 

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

3.88% Exchangeable Senior Debentures due 2025:

  

  

  

  

  

  

  

  

  

  

  

  

  

Coupon interest

$

 4,844 

  

$

 4,844 

  

$

 9,688 

  

$

 9,688 

  

  

Discount amortization – original issue

  

 404 

  

  

 384 

  

  

 803 

  

  

 762 

  

  

Discount amortization – ASC 470-20 implementation

  

 1,309 

  

  

 1,241 

  

  

 2,600 

  

  

 2,466 

  

  

  

$

 6,557 

  

$

 6,469 

  

$

 13,091 

  

$

 12,916 

  

22

 


 
 

VORNADO REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

 

 

10.    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, D-15 and D-16 (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, 2009

$

 1,251,628 

  

  

Net income

  

 21,903 

  

  

Distributions

  

 (27,338) 

  

  

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

  

 (35,711) 

  

  

Adjustments to carry redeemable Class A 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 

  

  

  

  

  

  

  

  

  

  

  

  

Balance at December 31, 2010

$

 1,327,974 

  

  

Net income

  

 40,539 

  

  

Distributions

  

 (25,711) 

  

  

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

  

 (35,208) 

  

  

Adjustments to carry redeemable Class A units at redemption value

  

 104,693 

  

  

Redemption of Series D-11 redeemable units

  

 (8,000) 

  

  

Other, net

  

 17,180 

  

  

Balance at June 30, 2011

$

 1,421,467 

  

 

As of June 30, 2011 and December 31, 2010, the aggregate redemption value of redeemable Class A units was $1,170,467,000 and $1,066,974,000, respectively. 

 

Redeemable noncontrolling interests exclude our Series G-1 through G-4 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 $55,097,000 as of June 30, 2011 and December 31, 2010.

 

In June 2011, we redeemed 400,000 Series D-11 cumulative redeemable preferred units for $8,000,000 in cash.  In March and May of 2010, we redeemed 246,153 and 553,847 Series D-12 cumulative redeemable preferred units, respectively, for an aggregate of $13,000,000 in cash.

23

 


 

VORNADO REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

 

 

11.  Shareholders’ Equity

 

On April 20, 2011, we sold 7,000,000 6.875% Series J Cumulative Redeemable Preferred Shares at a price of $25.00 per share, in an underwritten public offering pursuant to an effective registration statement.  On April 21, 2011, the underwriters exercised their option to purchase an additional 1,050,000 shares to cover over-allotments.  On May 5, 2011, we sold an additional 800,000 shares at a price of $25.00 per share.  We retained aggregate net proceeds of $214,538,000, after underwriters’ discounts and issuance costs and contributed the net proceeds to the Operating Partnership in exchange for 8,850,000 Series J Preferred Units (with economic terms that mirror those of the Series J Preferred Shares).  Dividends on the Series J Preferred Shares are cumulative and payable quarterly in arrears.  The Series J Preferred Shares are not convertible into, or exchangeable for, any of our properties or securities.  On or after five years from the date of issuance (or sooner under limited circumstances), we, at our option, may redeem the Series J Preferred Shares at a redemption price of $25.00 per share, plus accrued and unpaid dividends through the date of redemption.  The Series J Preferred Shares have no maturity date and will remain outstanding indefinitely unless redeemed by us.  

 

12.  Fair Value Measurements

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

 

Financial Assets and Liabilities Measured at Fair Value

 

Financial assets and liabilities that are measured at fair value in our consolidated financial statements consist of (i) marketable securities, (ii) derivative positions in marketable equity securities, (iii) the assets of our deferred compensation plan, which are primarily marketable equity securities and equity investments in limited partnerships, (iv) Real Estate Fund investments, and (v)  mandatorily redeemable instruments (Series G-1 through G-4 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, 2011 and December 31, 2010, respectively.

  

  

  

As of June 30, 2011

  

 (Amounts in thousands)

Total

  

Level 1

  

Level 2

  

Level 3

  

  

Marketable securities

$

 791,676 

  

$

 791,676 

  

$

 - 

  

$

 - 

  

  

Real Estate Fund investments (75% of which is attributable to

  

  

  

  

  

  

  

  

  

  

  

  

  

  

noncontrolling interests)

  

 255,795 

  

  

 - 

  

  

 - 

  

  

 255,795 

  

  

Deferred compensation plan assets (included in other assets)

  

 100,374 

  

  

 46,650 

  

  

 - 

  

  

 53,724 

  

  

Derivative positions in marketable equity securities

  

  

  

  

  

  

  

  

  

  

  

  

  

  

(included in other assets)

  

 28,017 

  

  

 - 

  

  

 28,017 

  

  

 - 

  

  

  

Total assets

$

 1,175,862 

  

$

 838,326 

  

$

 28,017 

  

$

 309,519 

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

Mandatorily redeemable instruments (included in other liabilities)

$

 55,097 

  

$

 55,097 

  

$

 - 

  

$

 - 

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

As of December 31, 2010

  

 (Amounts in thousands)

Total

  

Level 1

  

Level 2

  

Level 3

  

  

Marketable securities

$

 766,116 

  

$

 766,116 

  

$

 - 

  

$

 - 

  

  

Real Estate Fund investments (75% of which is attributable to

  

  

  

  

  

  

  

  

  

  

  

  

  

  

noncontrolling interests)

  

 144,423 

  

  

 - 

  

  

 - 

  

  

 144,423 

  

  

Deferred compensation plan assets (included in other assets)

  

 91,549 

  

  

 43,699 

  

  

 - 

  

  

 47,850 

  

  

Derivative positions in marketable equity securities

  

  

  

  

  

  

  

  

  

  

  

  

  

  

(included in other assets)

  

 17,616 

  

  

 - 

  

  

 17,616 

  

  

 - 

  

  

  

Total assets

$

 1,019,704 

  

$

 809,815 

  

$

 17,616 

  

$

 192,273 

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

Mandatorily redeemable instruments (included in other liabilities)

$

 55,097 

  

$

 55,097 

  

$

 - 

  

$

 - 

  

24

 


 

VORNADO REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

 

 

 

12.  Fair Value Measurements - continued

Financial Assets and Liabilities Measured at Fair Value - continued

 

The tables below summarize the changes in the fair value of the Level 3 assets above, by category, for the three and six months ended June 30, 2011 and 2010.

 

  

Real Estate Fund Investments:

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

For the Three Months Ended June 30,

  

For the Six Months Ended June 30,

  

  

 (Amounts in thousands)

  

2011 

  

2010 

  

2011 

  

2010 

  

  

Beginning balance

  

$

 230,657 

  

$

 - 

  

$

 144,423 

  

$

 - 

  

  

Purchases

  

  

 22,808 

  

  

 - 

  

  

 123,047 

  

  

 - 

  

  

Sales

  

  

 (12,831) 

  

  

 - 

  

  

 (12,831) 

  

  

 - 

  

  

Realized and unrealized gains

  

  

 15,957 

  

  

 - 

  

  

 16,655 

  

  

 - 

  

  

Other, net

  

  

 (796) 

  

  

 - 

  

  

 (15,499) 

  

  

 - 

  

  

Ending balance

  

$

 255,795 

  

$

 - 

  

$

 255,795 

  

$

 - 

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

Deferred Compensation Plan Assets:

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

For the Three Months Ended June 30,

  

For the Six Months Ended June 30,

  

  

 (Amounts in thousands)

  

2011 

  

2010 

  

2011 

  

2010 

  

  

Beginning balance

  

$

 51,612 

  

$

 43,263 

  

$

 47,850 

  

$

 39,589 

  

  

Purchases

  

  

 17,818 

  

  

 3,210 

  

  

 19,104 

  

  

 6,342 

  

  

Sales

  

  

 (16,347) 

  

  

 (3,014) 

  

  

 (17,494) 

  

  

 (3,580) 

  

  

Realized and unrealized gains

  

  

 594 

  

  

 41 

  

  

 4,217 

  

  

 1,149 

  

  

Other, net

  

  

 47 

  

  

 98 

  

  

 47 

  

  

 98 

  

  

Ending balance

  

$

 53,724 

  

$

 43,598 

  

$

 53,724 

  

$

 43,598 

  

 

 

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, 2011 and December 31, 2010.

 

  

  

  

  

As of June 30, 2011

  

As of December 31, 2010

  

  

  

  

  

Carrying

  

Fair

  

Carrying

  

Fair

  

  

(Amounts in thousands)

Amount

  

Value

  

Amount

  

Value

  

  

  

Mezzanine loans receivable

$

 155,613 

  

$

 149,948 

  

$

 202,412 

  

$

 197,581 

  

  

  

Debt:

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

Notes and mortgages payable

$

 8,575,022 

  

$

 8,757,884 

  

$

 8,259,298 

  

$

 8,450,812 

  

  

  

  

Senior unsecured notes

  

 982,629 

  

  

 1,046,369 

  

  

 1,082,928 

  

  

 1,119,512 

  

  

  

  

Exchangeable senior debentures

  

 494,403 

  

  

 564,355 

  

  

 491,000 

  

  

 554,355 

  

  

  

  

Convertible senior debentures

  

 187,994 

  

  

 190,391 

  

  

 186,413 

  

  

 191,510 

  

  

  

  

Revolving credit facility debt

  

 300,000 

  

  

 300,000 

  

  

 874,000 

  

  

 874,000 

  

  

  

  

  

$

 10,540,048 

  

$

 10,858,999 

  

$

 10,893,639 

  

$

 11,190,189 

  

25

 


 

VORNADO REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

 

 

13.    Stock-based Compensation

           

Our Share Option Plan (the “Plan”) provides for grants of incentive and non-qualified stock options, restricted stock, restricted Operating Partnership units and out-performance plan rewards to certain of our employees and officers.  We account for all stock-based compensation in accordance ASC 718, Compensation – Stock Compensation.  Stock-based compensation expense for the three months ended June 30, 2011 and 2010 consists of stock option awards, restricted stock awards, Operating Partnership unit awards and out-performance plan awards.  Stock-based compensation expense was $6,919,000 and $8,480,000 in the three months ended June 30, 2011 and 2010, respectively, and $14,065,000 and $14,957,000 in the six months ended June 30, 2011 and 2010, respectively.

 

 

14.    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,

  

  

  

  

   

2011 

  

2010 

  

2011 

  

2010 

  

  

  

Tenant cleaning fees

   

$

 15,409 

  

$

 13,468 

  

$

 30,832 

  

$

 27,120 

  

  

  

Management and leasing fees

   

  

 6,989 

  

  

 3,380 

  

  

 11,095 

  

  

 12,520 

  

  

  

Lease termination fees

   

  

 7,323 

  

  

 2,841 

  

  

 8,499 

  

  

 7,811 

  

  

  

Other income

   

  

 12,090 

  

  

 12,468 

  

  

 25,678 

  

  

 25,633 

  

  

  

  

   

$

 41,811 

  

$

 32,157 

  

$

 76,104 

  

$

 73,084 

  

  

  

  

  

   

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

   

  

  

  

  

  

  

  

  

  

  

  

  

  

 

          Fee and other income above includes management fee income from Interstate Properties, a related party, of $194,000 and $192,000 for the three months ended June 30, 2011 and 2010, respectively, and $391,000 and $392,000 for the six months ended June 30, 2011 and 2010, respectively.  The above table excludes management fee income from partially owned entities which is included in income from partially owned entities (see Note 5 – Investments in Partially Owned Entities).

 

 

15.     Interest and Other Investment Income, Net

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

 

  

   

  

For the Three Months

  

For the Six Months

  

  

 (Amounts in thousands)  

  

Ended June 30,

  

Ended June 30,

  

  

  

  

   

  

2011 

  

2010 

  

2011 

  

2010 

  

  

Mezzanine loans loss (accrual) reversal and net gain on disposition  

  

$

 - 

  

$

 (6,900) 

  

$

 82,744 

  

$

 (6,900) 

  

  

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

  

  

 1,793 

  

  

 (986) 

  

  

 6,745 

  

  

 1,777 

  

  

(Loss) income from the mark-to-market of J.C. Penney derivative position  

  

  

 (6,762) 

  

  

 - 

  

  

 10,401 

  

  

 - 

  

  

Dividends and interest on marketable securities  

  

  

 7,669 

  

  

 7,377 

  

  

 15,336 

  

  

 14,622 

  

  

Interest on mezzanine loans  

  

  

 3,083 

  

  

 2,325 

  

  

 5,727 

  

  

 5,040 

  

  

Other, net  

  

  

 2,224 

  

  

 2,060 

  

  

 4,162 

  

  

 4,041 

  

  

   

  

$

 8,007 

  

$

 3,876 

  

$

 125,115 

  

$

 18,580 

  

  

__________________________  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

   

  

  

  

  

  

  

  

  

  

  

  

  

  

  

 (1) 

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

  

26

 


 

VORNADO REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

 

 

16.    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,

  

  

  

  

    

2011 

  

2010 

  

2011 

  

2010 

  

Numerator:    

  

  

  

  

  

  

  

  

  

  

  

  

  

Income from continuing operations, net of income    

  

  

  

  

  

  

  

  

  

  

  

  

  

  

attributable to noncontrolling interests   

$

 108,152 

  

$

 75,787 

  

$

 395,099 

  

$

 299,909 

  

  

Income (loss) from discontinued operations, net of income

  

  

  

  

  

  

  

  

  

  

  

  

  

  

attributable to noncontrolling interests   

  

 429 

  

  

 (3,681) 

  

  

 126,145 

  

  

 (13,251) 

  

  

Net income attributable to Vornado   

  

 108,581 

  

  

 72,106 

  

  

 521,244 

  

  

 286,658 

  

  

Preferred share dividends   

  

 (16,668) 

  

  

 (14,266) 

  

  

 (30,116) 

  

  

 (28,533) 

  

  

Net income attributable to common shareholders   

  

 91,913 

  

  

 57,840 

  

  

 491,128 

  

  

 258,125 

  

  

Earnings allocated to unvested participating securities   

  

 (48) 

  

  

 (29) 

  

  

 (184) 

  

  

 (49) 

  

  

Numerator for basic income per share   

  

 91,865 

  

  

 57,811 

  

  

 490,944 

  

  

 258,076 

  

  

Impact of assumed conversions:   

  

  

  

  

  

  

  

  

  

  

  

  

  

  

Interest on 3.88% exchangeable senior debentures   

  

 - 

  

  

 - 

  

  

 13,090 

  

  

 - 

  

  

  

Convertible preferred share dividends   

  

 - 

  

  

 - 

  

  

 64 

  

  

 81 

  

  

Numerator for diluted income per share   

$

 91,865 

  

$

 57,811 

  

$

 504,098 

  

$

 258,157 

  

  

  

  

    

  

  

  

  

  

  

  

  

  

  

  

  

Denominator:    

  

  

  

  

  

  

  

  

  

  

  

  

  

Denominator for basic income per share –    

  

  

  

  

  

  

  

  

  

  

  

  

  

  

weighted average shares     

  

 184,268 

  

  

 182,027 

  

  

 184,129 

  

  

 181,786 

  

  

Effect of dilutive securities (1):

  

  

  

  

  

  

  

  

  

  

  

  

  

  

3.88% exchangeable senior debentures   

  

 - 

  

  

 - 

  

  

 5,736 

  

  

 - 

  

  

  

Employee stock options and restricted share awards   

  

 1,876 

  

  

 1,617 

  

  

 1,815 

  

  

 1,741 

  

  

  

Convertible preferred shares   

  

 - 

  

  

 - 

  

  

 56 

  

  

 71 

  

  

Denominator for diluted income per share –    

  

  

  

  

  

  

  

  

  

  

  

  

  

  

weighted average shares and assumed conversions    

  

 186,144 

  

  

 183,644 

  

  

 191,736 

  

  

 183,598 

  

  

  

  

      

  

  

  

  

  

  

  

  

  

  

  

  

INCOME PER COMMON SHARE – BASIC:    

  

  

  

  

  

  

  

  

  

  

  

  

  

Income from continuing operations, net    

$

 0.50 

  

$

 0.34 

  

$

 1.98 

  

$

 1.49 

  

  

(Loss) income from discontinued operations, net    

  

  

  

 (0.02) 

  

  

 0.69 

  

  

 (0.07) 

  

  

Net income per common share    

$

 0.50 

  

$

 0.32 

  

$

 2.67 

  

$

 1.42 

  

  

  

  

      

  

  

  

  

  

  

  

  

  

  

  

  

INCOME PER COMMON SHARE – DILUTED:    

  

  

  

  

  

  

  

  

  

  

  

  

  

Income from continuing operations, net    

$

 0.49 

  

$

 0.33 

  

$

 1.97 

  

$

 1.48 

  

  

(Loss) income from discontinued operations, net    

  

  

  

 (0.02) 

  

  

 0.66 

  

  

 (0.07) 

  

  

Net income per common share    

$

 0.49 

  

$

 0.31 

  

$

 2.63 

  

$

 1.41 

  

  

  

  

    

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

    

  

  

  

  

  

  

  

  

  

  

  

  

(1)

  

The effect of dilutive securities above excludes anti-dilutive weighted average common share equivalents of 18,349 and 20,075 in the three months ended June 30, 2011 and 2010, respectively, and 12,922 and 19,941 in the six months ended June 30, 2011 and 2010, respectively.

  

27

 


 

VORNADO REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

 

 

17.          Cleveland Medical Mart Development Project

 

During 2010, two of our wholly owned subsidiaries entered into agreements with Cuyahoga County, Ohio (the “County”) to develop and operate the Cleveland Medical Mart and Convention Center (the “Facility”), a 1,000,000 square foot showroom, trade show and conference center in Cleveland’s central business district.  The County will fund the development of the Facility, using the proceeds it received from the issuance of general obligation bonds and other sources, up to the development budget of $465,000,000 and maintain effective control of the property.  During the 17-year development and operating period, our subsidiaries will receive net settled payments of approximately $10,000,000 per year, which are net of its $36,000,000 annual obligation to the County.  Our subsidiaries’ obligation has been pledged by the County to the bondholders, but is payable by our subsidiaries only to the extent that they first receive at least an equal payment from the County.  Our subsidiaries engaged a contractor to construct the Facility pursuant to a guaranteed maximum price contract; although our subsidiaries are ultimately responsible for cost overruns, the contractor is responsible for all costs incurred in excess of its contract and has provided a completion guaranty.  Construction of the Facility is expected to be completed in 2013.  Upon completion, our subsidiaries are required to fund $11,500,000, primarily for tenant improvements, and they are responsible for operating expenses and are entitled to the net operating income, if any, of the Facility.  The County may terminate the operating agreement five years from the completion of development and periodically thereafter, if our subsidiaries fail to achieve certain performance thresholds. 

 

We account for these agreements using criteria set forth in ASC 605-25, Multiple-Element Arrangements, as our subsidiaries are providing development, marketing, leasing, and other property management related services over the 17-year term.  We recognize development fees using the percentage of completion method of accounting.  In the three and six months ended June 30, 2011, we recognized $32,369,000 and $73,068,000 of revenue, respectively, which is offset by development costs expensed of $29,940,000 and $68,218,000, respectively.

 

 

18.    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 the Terrorism Risk Insurance Program Reauthorization Act.  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 our properties and expand our portfolio.

28

 


 
 

VORNADO REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

 

 

18.    Commitments and Contingencies – continued

 

 

          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, 2011, the aggregate dollar amount of these guarantees and master leases is approximately $168,124,000.

 

At June 30, 2011, $21,534,000 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 $189,300,000, of which $135,969,000 is committed to our Real Estate Fund.  In addition, we have agreed in principle to contribute up to $52,000,000 to a new investment management fund which will be managed by LNR.

 

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

 

 

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 matter referred to below, is 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.  A trial was held in November 2010 and closing arguments were held in March 2011.  As of June 30, 2011, we have a $39,483,000 receivable from Stop & Shop, of which $21,855,000 has been reserved.  We believe, after consultation with counsel, that the maximum reasonably possible loss is up to the total amount of the receivable of $39,483,000.

29

 


 

VORNADO REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

 

 

19.    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, 2011 and 2010.

 

  

  

   

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

    

(Amounts in thousands)  

For the Three Months Ended June 30, 2011

  

  

   

  

  

  

New York

  

Washington, DC

  

  

  

Merchandise

  

  

  

   

  

  

   

  

Total

  

Office

  

Office

  

Retail

  

Mart

  

Toys

  

Other(3)

Property rentals  

  

$

 548,485 

  

$

 197,135 

  

$

 141,770 

  

$

 106,662 

  

$

 56,363 

  

$

 - 

  

$

 46,555   

Straight-line rent adjustments  

  

  

 8,349 

  

  

 3,890 

  

  

 (706) 

  

  

 3,730 

  

  

 653 

  

  

 - 

  

  

 782   

Amortization of acquired below-  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

   

  

market leases, net  

  

  

 16,812 

  

  

 8,178 

  

  

 512 

  

  

 6,996 

  

  

 17 

  

  

 - 

  

  

 1,109   

Total rentals  

  

  

 573,646 

  

  

 209,203 

  

  

 141,576 

  

  

 117,388 

  

  

 57,033 

  

  

 - 

  

  

 48,446   

Tenant expense reimbursements  

  

  

 82,325 

  

  

 31,483 

  

  

 8,936 

  

  

 36,636 

  

  

 3,744 

  

  

 - 

  

  

 1,526   

Cleveland Medical Mart development   

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

   

  

project  

  

  

 32,369 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 32,369 

  

  

 - 

  

  

 -   

Fee and other income:  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

   

  

Tenant cleaning fees  

  

  

 15,409 

  

  

 23,679 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 (8,270)  

  

Management and leasing fees  

  

  

 6,989 

  

  

 2,112 

  

  

 4,074 

  

  

 1,343 

  

  

 200 

  

  

 - 

  

  

 (740)  

  

Lease termination fees  

  

  

 7,323 

  

  

 5,571 

  

  

 900 

  

  

 852 

  

  

 - 

  

  

 - 

  

  

 -   

  

Other  

  

  

 12,090 

  

  

 5,103 

  

  

 5,317 

  

  

 1,692 

  

  

 (158) 

  

  

 - 

  

  

 136   

Total revenues  

  

  

 730,151 

  

  

 277,151 

  

  

 160,803 

  

  

 157,911 

  

  

 93,188 

  

  

 - 

  

  

 41,098   

Operating expenses  

  

  

 273,152 

  

  

 116,221 

  

  

 49,748 

  

  

 57,194 

  

  

 32,861 

  

  

 - 

  

  

 17,128   

Depreciation and amortization  

  

  

 131,898 

  

  

 45,854 

  

  

 34,065 

  

  

 27,750 

  

  

 11,113 

  

  

 - 

  

  

 13,116   

General and administrative  

  

  

 50,251 

  

  

 4,579 

  

  

 6,462 

  

  

 7,291 

  

  

 6,848 

  

  

 - 

  

  

 25,071   

Cleveland Medical Mart development   

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

   

  

project  

  

  

 29,940 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 29,940 

  

  

 - 

  

  

 -   

Acquisition and other costs  

  

  

 1,897 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 1,897   

Total expenses  

  

  

 487,138 

  

  

 166,654 

  

  

 90,275 

  

  

 92,235 

  

  

 80,762 

  

  

 - 

  

  

 57,212   

Operating income (loss)  

  

  

 243,013 

  

  

 110,497 

  

  

 70,528 

  

  

 65,676 

  

  

 12,426 

  

  

 - 

  

  

 (16,114)  

(Loss) applicable to Toys  

  

  

 (22,846) 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 (22,846) 

  

  

 -   

Income (loss) from partially owned  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

   

  

entities  

  

  

 26,403 

  

  

 (845) 

  

  

 (767) 

  

  

 924 

  

  

 178 

  

  

 - 

  

  

 26,913   

Income from Real Estate Fund  

  

  

 19,058 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 19,058   

Interest and other investment   

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

   

  

income (loss), net  

  

  

 8,007 

  

  

 148 

  

  

 48 

  

  

 (6) 

  

  

 9 

  

  

 - 

  

  

 7,808   

Interest and debt expense  

  

  

 (137,202) 

  

  

 (35,033) 

  

  

 (30,729) 

  

  

 (23,344) 

  

  

 (9,437) 

  

  

 - 

  

  

 (38,659)  

Income (loss) before income taxes  

  

  

 136,433 

  

  

 74,767 

  

  

 39,080 

  

  

 43,250 

  

  

 3,176 

  

  

 (22,846) 

  

  

 (994)  

Income tax expense  

  

  

 (5,922) 

  

  

 (440) 

  

  

 (569) 

  

  

 - 

  

  

 (911) 

  

  

 - 

  

  

 (4,002)  

Income (loss) from continuing  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

   

  

operations  

  

  

 130,511 

  

  

 74,327 

  

  

 38,511 

  

  

 43,250 

  

  

 2,265 

  

  

 (22,846) 

  

  

 (4,996)  

Income from discontinued   

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

   

  

operations  

  

  

 458 

  

  

 - 

  

  

 - 

  

  

 458 

  

  

 - 

  

  

 - 

  

  

 -   

Net income (loss)  

  

  

 130,969 

  

  

 74,327 

  

  

 38,511 

  

  

 43,708 

  

  

 2,265 

  

  

 (22,846) 

  

  

 (4,996)  

Less:  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

   

  

Net income attributable to   

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

   

  

  

noncontrolling interests in  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

   

  

  

consolidated subsidiaries  

  

  

 (13,657) 

  

  

 (2,325) 

  

  

 - 

  

  

 (69) 

  

  

 - 

  

  

 - 

  

  

 (11,263)  

  

Net income attributable to   

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

   

  

  

noncontrolling interests in the  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

   

  

  

Operating Partnership, including  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

   

  

  

unit distributions  

  

  

 (8,731) 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 (8,731)  

Net income (loss) attributable to  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

   

  

Vornado  

  

  

 108,581 

  

  

 72,002 

  

  

 38,511 

  

  

 43,639 

  

  

 2,265 

  

  

 (22,846) 

  

  

 (24,990)  

Interest and debt expense(2)

  

  

 202,956 

  

  

 36,953 

  

  

 34,093 

  

  

 24,468 

  

  

 9,595 

  

  

 43,393 

  

  

 54,454   

Depreciation and amortization(2)

  

  

 182,496 

  

  

 47,621 

  

  

 38,306 

  

  

 28,400 

  

  

 11,227 

  

  

 32,896 

  

  

 24,046   

Income tax (benefit) expense(2)

  

  

 (17,343) 

  

  

 440 

  

  

 607 

  

  

 - 

  

  

 911 

  

  

 (23,969) 

  

  

 4,668   

EBITDA(1)

  

$

 476,690 

  

$

 157,016 

  

$

 111,517 

  

$

 96,507 

  

$

 23,998 

  

$

 29,474 

  

$

 58,178   

  

  

   

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

   

  

  

   

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

   

See notes of page 34.  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

   

30

 


 

VORNADO REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

 

 

 

19.    Segment Information – continued

  

  

   

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

    

(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  

  

$

 531,576 

  

$

 195,248 

  

$

 142,952 

  

$

 96,335 

  

$

 54,441 

  

$

 - 

  

$

 42,600   

Straight-line rent adjustments  

  

  

 17,552 

  

  

 7,255 

  

  

 964 

  

  

 7,761 

  

  

 725 

  

  

 - 

  

  

 847   

Amortization of acquired below-  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

   

  

market leases, net  

  

  

 16,284 

  

  

 9,134 

  

  

 621 

  

  

 4,933 

  

  

 15 

  

  

 - 

  

  

 1,581   

Total rentals  

  

  

 565,412 

  

  

 211,637 

  

  

 144,537 

  

  

 109,029 

  

  

 55,181 

  

  

 - 

  

  

 45,028   

Tenant expense reimbursements  

  

  

 86,420 

  

  

 32,431 

  

  

 12,546 

  

  

 35,351 

  

  

 3,829 

  

  

 - 

  

  

 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  

  

  

 12,468 

  

  

 4,513 

  

  

 5,061 

  

  

 1,005 

  

  

 744 

  

  

 - 

  

  

 1,145   

Total revenues  

  

  

 683,989 

  

  

 272,910 

  

  

 164,610 

  

  

 146,134 

  

  

 59,807 

  

  

 - 

  

  

 40,528   

Operating expenses  

  

  

 261,845 

  

  

 111,055 

  

  

 50,013 

  

  

 55,648 

  

  

 28,727 

  

  

 - 

  

  

 16,402   

Depreciation and amortization  

  

  

 133,277 

  

  

 44,271 

  

  

 36,018 

  

  

 27,528 

  

  

 11,387 

  

  

 - 

  

  

 14,073   

General and administrative  

  

  

 49,540 

  

  

 4,767 

  

  

 6,202 

  

  

 6,807 

  

  

 7,157 

  

  

 - 

  

  

 24,607   

Acquisition and other costs  

  

  

 1,930 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 1,930   

Total expenses  

  

  

 446,592 

  

  

 160,093 

  

  

 92,233 

  

  

 89,983 

  

  

 47,271 

  

  

 - 

  

  

 57,012   

Operating income (loss)  

  

  

 237,397 

  

  

 112,817 

  

  

 72,377 

  

  

 56,151 

  

  

 12,536 

  

  

 - 

  

  

 (16,484)  

(Loss) applicable to Toys  

  

  

 (21,004) 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 (21,004) 

  

  

 -   

Income from partially owned  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

   

  

entities  

  

  

 4,452 

  

  

 1,337 

  

  

 188 

  

  

 1,129 

  

  

 55 

  

  

 - 

  

  

 1,743   

Interest and other investment   

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

   

  

income, net  

  

  

 3,876 

  

  

163 

  

  

23 

  

  

186 

  

  

12 

  

  

 - 

  

  

3,492   

Interest and debt expense  

  

  

 (142,175) 

  

  

(33,047)

  

  

(34,068)

  

  

(20,315)

  

  

(9,464)

  

  

 - 

  

  

(45,281)  

Net (loss) on extinguishment  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

   

  

of debt  

  

  

 (1,072) 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 (1,072)  

Net gain (loss) on disposition of wholly  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

   

  

owned and partially owned assets  

  

  

 4,382 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 (31) 

  

  

 - 

  

  

 4,413   

Income (loss) before income taxes  

  

  

 85,856 

  

  

 81,270 

  

  

 38,520 

  

  

 37,151 

  

  

 3,108 

  

  

 (21,004) 

  

  

 (53,189)  

Income tax (expense) benefit  

  

  

 (4,964) 

  

  

 (335) 

  

  

 595 

  

  

 - 

  

  

 (402) 

  

  

 - 

  

  

 (4,822)  

Income (loss) from continuing  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

   

  

operations  

  

  

 80,892 

  

  

 80,935 

  

  

 39,115 

  

  

 37,151 

  

  

 2,706 

  

  

 (21,004) 

  

  

 (58,011)  

(Loss) income from discontinued   

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

   

  

operations  

  

  

 (3,681) 

  

  

 - 

  

  

 1,137 

  

  

 (333) 

  

  

 (4,485) 

  

  

 - 

  

  

 -   

Net income (loss)  

  

  

 77,211 

  

  

 80,935 

  

  

 40,252 

  

  

 36,818 

  

  

 (1,779) 

  

  

 (21,004) 

  

  

 (58,011)  

Less:  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

   

  

Net (income) loss attributable to  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

   

  

  

noncontrolling interests in   

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

   

  

  

consolidated subsidiaries  

  

  

 (981) 

  

  

 (2,556) 

  

  

 - 

  

  

 256 

  

  

 - 

  

  

 - 

  

  

 1,319   

  

Net income attributable to   

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

   

  

  

noncontrolling interests in the  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

   

  

  

Operating Partnership, including  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

   

  

  

unit distributions  

  

  

 (4,124) 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 (4,124)  

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 of page 34.  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

   

31

 


 

VORNADO REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

 

 

 

19.    Segment Information – continued

  

  

   

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

    

(Amounts in thousands)  

For the Six Months Ended June 30, 2011

  

  

   

  

  

  

New York

  

Washington, DC

  

  

  

Merchandise

  

  

  

   

  

  

   

  

Total

  

Office

  

Office

  

Retail

  

Mart

  

Toys

  

Other(3)

Property rentals  

  

$

 1,088,957 

  

$

 391,377 

  

$

 280,654 

  

$

 214,109 

  

$

 118,928 

  

$

 - 

  

$

 83,889   

Straight-line rent adjustments  

  

  

 22,278 

  

  

 11,760 

  

  

 (711) 

  

  

 7,911 

  

  

 1,443 

  

  

 - 

  

  

 1,875   

Amortization of acquired below-  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

   

  

market leases, net  

  

  

 33,571 

  

  

 16,355 

  

  

 978 

  

  

 13,956 

  

  

 34 

  

  

 - 

  

  

 2,248   

Total rentals  

  

  

 1,144,806 

  

  

 419,492 

  

  

 280,921 

  

  

 235,976 

  

  

 120,405 

  

  

 - 

  

  

 88,012   

Tenant expense reimbursements  

  

  

 173,284 

  

  

 65,359 

  

  

 18,233 

  

  

 75,967 

  

  

 7,767 

  

  

 - 

  

  

 5,958   

Cleveland Medical Mart development   

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

   

  

project  

  

  

 73,068 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 73,068 

  

  

 - 

  

  

 -   

Fee and other income:  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

   

  

Tenant cleaning fees  

  

  

 30,832 

  

  

 47,109 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 (16,277)  

  

Management and leasing fees  

  

  

 11,095 

  

  

 3,607 

  

  

 6,959 

  

  

 1,898 

  

  

 303 

  

  

 - 

  

  

 (1,672)  

  

Lease termination fees  

  

  

 8,499 

  

  

 5,636 

  

  

 2,011 

  

  

 852 

  

  

 - 

  

  

 - 

  

  

 -   

  

Other  

  

  

 25,678 

  

  

 9,866 

  

  

 10,662 

  

  

 3,099 

  

  

 1,878 

  

  

 - 

  

  

 173   

Total revenues  

  

  

 1,467,262 

  

  

 551,069 

  

  

 318,786 

  

  

 317,792 

  

  

 203,421 

  

  

 - 

  

  

 76,194   

Operating expenses  

  

  

 563,925 

  

  

 238,130 

  

  

 98,584 

  

  

 117,874 

  

  

 74,807 

  

  

 - 

  

  

 34,530   

Depreciation and amortization  

  

  

 264,125 

  

  

 92,000 

  

  

 67,749 

  

  

 56,291 

  

  

 22,175 

  

  

 - 

  

  

 25,910   

General and administrative  

  

  

 109,254 

  

  

 9,943 

  

  

 12,999 

  

  

 15,313 

  

  

 14,446 

  

  

 - 

  

  

 56,553   

Cleveland Medical Mart development  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

   

  

project  

  

  

 68,218 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 68,218 

  

  

 - 

  

  

 -   

Acquisition and other costs  

  

  

 20,167 

  

  

 - 

  

  

 - 

  

  

 15,000 

  

  

 3,040 

  

  

 - 

  

  

 2,127   

Total expenses  

  

  

 1,025,689 

  

  

 340,073 

  

  

 179,332 

  

  

 204,478 

  

  

 182,686 

  

  

 - 

  

  

 119,120   

Operating income (loss)  

  

  

 441,573 

  

  

 210,996 

  

  

 139,454 

  

  

 113,314 

  

  

 20,735 

  

  

 - 

  

  

 (42,926)  

Income applicable to Toys  

  

  

 90,098 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 90,098 

  

  

 -   

Income (loss) from partially owned  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

   

  

entities  

  

  

 42,687 

  

  

 243 

  

  

 (4,682) 

  

  

 1,242 

  

  

 254 

  

  

 - 

  

  

 45,630   

Income from Real Estate Fund  

  

  

 20,138 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 20,138   

Interest and other investment   

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

   

  

income, net  

  

  

 125,115 

  

  

 320 

  

  

 80 

  

  

 2 

  

  

 18 

  

  

 - 

  

  

 124,695   

Interest and debt expense  

  

  

 (271,967) 

  

  

 (68,119) 

  

  

 (59,655) 

  

  

 (46,413) 

  

  

 (18,775) 

  

  

 - 

  

  

 (79,005)  

Net gain on disposition of wholly   

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

   

  

owned and partially owned assets  

  

  

 6,677 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 6,677   

Income before income taxes  

  

  

 454,321 

  

  

 143,440 

  

  

 75,197 

  

  

 68,145 

  

  

 2,232 

  

  

 90,098 

  

  

 75,209   

Income tax expense  

  

  

 (12,304) 

  

  

 (959) 

  

  

 (1,307) 

  

  

 (5) 

  

  

 (1,321) 

  

  

 - 

  

  

 (8,712)  

Income from continuing  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

   

  

operations  

  

  

 442,017 

  

  

 142,481 

  

  

 73,890 

  

  

 68,140 

  

  

 911 

  

  

 90,098 

  

  

 66,497   

Income from discontinued operations  

  

  

 134,773 

  

  

 - 

  

  

 46,466 

  

  

 5,761 

  

  

 82,546 

  

  

 - 

  

  

 -   

Net income  

  

  

 576,790 

  

  

 142,481 

  

  

 120,356 

  

  

 73,901 

  

  

 83,457 

  

  

 90,098 

  

  

 66,497   

Less:  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

   

  

Net (income) loss attributable to   

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

   

  

  

noncontrolling interests in   

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

   

  

  

consolidated subsidiaries  

  

  

 (15,007) 

  

  

 (4,596) 

  

  

 - 

  

  

 86 

  

  

 - 

  

  

 - 

  

  

 (10,497)  

  

Net income attributable to  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

   

  

  

noncontrolling interests in the   

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

   

  

  

Operating Partnership, including  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

   

  

  

unit distributions  

  

  

 (40,539) 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 (40,539)  

Net income attributable to  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

   

  

Vornado  

  

  

 521,244 

  

  

 137,885 

  

  

 120,356 

  

  

 73,987 

  

  

 83,457 

  

  

 90,098 

  

  

 15,461   

Interest and debt expense(2)

  

  

 401,804 

  

  

 68,947 

  

  

 66,314 

  

  

 48,632 

  

  

 22,502 

  

  

 83,528 

  

  

 111,881   

Depreciation and amortization(2)

  

  

 368,344 

  

  

 92,714 

  

  

 80,205 

  

  

 57,376 

  

  

 22,402 

  

  

 67,569 

  

  

 48,078   

Income tax expense(2)

  

  

 49,485 

  

  

 959 

  

  

 1,455 

  

  

 5 

  

  

 1,321 

  

  

 45,049 

  

  

 696   

EBITDA(1)

  

$

 1,340,877 

  

$

 300,505 

  

$

 268,330 

  

$

 180,000 

  

$

 129,682 

  

$

 286,244 

  

$

 176,116   

  

  

   

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

   

  

  

   

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

   

See notes on page 34.  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

   

32

 


 

VORNADO REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

 

 

 

19.    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  

  

$

 1,048,199 

  

$

 387,852 

  

$

 279,778 

  

$

 191,442 

  

$

 112,098 

  

$

 - 

  

$

 77,029   

Straight-line rent adjustments  

  

  

 37,615 

  

  

 15,049 

  

  

 5,172 

  

  

 14,119 

  

  

 1,827 

  

  

 - 

  

  

 1,448   

Amortization of acquired below-  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

   

  

market leases, net  

  

  

 32,055 

  

  

 18,339 

  

  

 1,242 

  

  

 9,449 

  

  

 (106) 

  

  

 - 

  

  

 3,131   

Total rentals  

  

  

 1,117,869 

  

  

 421,240 

  

  

 286,192 

  

  

 215,010 

  

  

 113,819 

  

  

 - 

  

  

 81,608   

Tenant expense reimbursements  

  

  

 178,350 

  

  

 65,683 

  

  

 27,463 

  

  

 72,946 

  

  

 7,806 

  

  

 - 

  

  

 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  

  

  

 7,811 

  

  

 3,025 

  

  

 528 

  

  

 3,836 

  

  

 422 

  

  

 - 

  

  

 -   

  

Other  

  

  

 25,633 

  

  

 8,923 

  

  

 10,898 

  

  

 1,745 

  

  

 2,706 

  

  

 - 

  

  

 1,361   

Total revenues  

  

  

 1,369,303 

  

  

 542,778 

  

  

 335,561 

  

  

 294,082 

  

  

 124,786 

  

  

 - 

  

  

 72,096   

Operating expenses  

  

  

 536,538 

  

  

 226,104 

  

  

 104,770 

  

  

 108,775 

  

  

 65,937 

  

  

 - 

  

  

 30,952   

Depreciation and amortization  

  

  

 267,070 

  

  

 87,978 

  

  

 72,230 

  

  

 55,325 

  

  

 23,366 

  

  

 - 

  

  

 28,171   

General and administrative  

  

  

 98,170 

  

  

 9,346 

  

  

 12,095 

  

  

 13,748 

  

  

 14,355 

  

  

 - 

  

  

 48,626   

Acquisition and other costs  

  

  

 1,930 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 1,930   

Total expenses  

  

  

 903,708 

  

  

 323,428 

  

  

 189,095 

  

  

 177,848 

  

  

 103,658 

  

  

 - 

  

  

 109,679   

Operating income (loss)  

  

  

 465,595 

  

  

 219,350 

  

  

 146,466 

  

  

 116,234 

  

  

 21,128 

  

  

 - 

  

  

 (37,583)  

Income applicable to Toys  

  

  

 104,866 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 104,866 

  

  

 -   

Income (loss) from partially owned  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

   

  

entities  

  

  

 15,796 

  

  

 2,640 

  

  

 (4) 

  

  

 2,520 

  

  

 231 

  

  

 - 

  

  

 10,409   

Interest and other investment   

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

   

  

income, net  

  

  

 18,580 

  

  

 327 

  

  

 49 

  

  

 189 

  

  

 24 

  

  

 - 

  

  

 17,991   

Interest and debt expense  

  

  

 (277,902) 

  

  

 (65,733) 

  

  

 (68,225) 

  

  

 (37,957) 

  

  

 (18,827) 

  

  

 - 

  

  

 (87,160)  

Net (loss) on extinguishment  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

   

  

of debt  

  

  

 (1,072) 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 (1,072)  

Net gain on disposition of wholly  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

   

  

owned and partially owned assets  

  

  

 7,687 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 765 

  

  

 - 

  

  

 6,922   

Income (loss) before income taxes  

  

  

 333,550 

  

  

 156,584 

  

  

 78,286 

  

  

 80,986 

  

  

 3,321 

  

  

 104,866 

  

  

 (90,493)  

Income tax expense  

  

  

 (10,544) 

  

  

 (809) 

  

  

 (91) 

  

  

 (35) 

  

  

 (596) 

  

  

 - 

  

  

 (9,013)  

Income (loss) from continuing  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

   

  

operations  

  

  

 323,006 

  

  

 155,775 

  

  

 78,195 

  

  

 80,951 

  

  

 2,725 

  

  

 104,866 

  

  

 (99,506)  

(Loss) from discontinued operations  

  

  

 (13,251) 

  

  

 - 

  

  

 (7,186) 

  

  

 (535) 

  

  

 (5,530) 

  

  

 - 

  

  

 -   

Net income (loss)  

  

  

 309,755 

  

  

 155,775 

  

  

 71,009 

  

  

 80,416 

  

  

 (2,805) 

  

  

 104,866 

  

  

 (99,506)  

Less:  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

   

  

Net (income) loss attributable to  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

   

  

  

noncontrolling interests in   

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

   

  

  

consolidated subsidiaries  

  

  

 (1,194) 

  

  

 (4,848) 

  

  

 - 

  

  

 498 

  

  

 - 

  

  

 - 

  

  

 3,156   

  

Net income attributable to   

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

   

  

  

noncontrolling interests in the   

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

   

  

  

Operating Partnership, including  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

   

  

  

unit distributions  

  

  

 (21,903) 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 (21,903)  

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 the following page.  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

   

33

 


 

VORNADO REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

 

 

 

19.    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 (benefit) expense in the reconciliation of net income (loss) to EBITDA includes our share of these items from partially owned entities.

  

  

(3)

The components of other EBITDA are summarized below.  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,

   

  

  

  

  

  

    

2011 

  

2010 

   

2011 

   

2010 

   

Our share of Real Estate Fund:  

  

  

  

  

  

   

  

  

   

  

  

   

  

Operations  

$

 827 

  

$

 - 

   

$

 1,807 

   

$

 - 

   

  

Net unrealized gains  

  

 3,218 

  

  

 - 

   

  

 3,392 

   

  

 - 

   

  

Net realized gains  

  

 771 

  

  

 - 

   

  

 771 

   

  

 - 

   

  

Carried interest  

  

 2,140 

  

  

 - 

   

  

 2,140 

   

  

 - 

   

Total  

  

 6,956 

  

  

 - 

   

  

 8,110 

   

  

 - 

   

Alexander's  

  

 15,821 

  

  

 14,260 

   

  

 30,989 

   

  

 28,659 

   

Lexington (1)

  

 17,313 

  

  

 11,435 

   

  

 29,306 

    

  

 29,283 

    

LNR (acquired in July 2010) (2)

  

 13,410 

  

  

 - 

   

  

 22,800 

   

  

 - 

   

555 California Street  

  

 10,423 

  

  

 11,136 

   

  

 21,388 

   

  

 22,624 

   

Hotel Pennsylvania  

  

 8,677 

  

  

 6,616 

   

  

 8,609 

   

  

 6,169 

   

Other investments  

  

 11,735 

  

  

 8,469 

    

  

 19,936 

   

  

 18,615 

    

   

  

 84,335 

  

  

 51,916 

   

  

 141,138 

   

  

 105,350 

   

Corporate general and administrative expenses (3)

  

 (20,024) 

  

  

 (20,642) 

   

  

 (41,379) 

   

  

 (39,956) 

   

Investment income and other, net (3)

  

 11,954 

  

  

 14,554 

   

  

 26,330 

   

  

 26,068 

   

Mezzanine loans loss (accrual) reversal and net gain on disposition  

  

 - 

  

  

 (6,900) 

   

  

 82,744 

   

  

 (6,900) 

   

(Loss) income from the mark-to-market of J.C. Penney derivative  

  

  

  

  

  

   

  

  

   

  

  

   

  

position  

  

 (6,762) 

  

  

 - 

   

  

 10,401 

   

  

 - 

   

Net gain on sale of condominiums  

  

 - 

  

  

 722 

   

  

 4,586 

   

  

 3,149 

   

Acquisition costs  

  

 (2,191) 

  

  

 (1,930) 

   

  

 (3,714) 

   

  

 (1,930) 

   

Real Estate Fund placement fees  

  

 (403) 

  

  

 (2,656) 

   

  

 (3,451) 

   

  

 (2,730) 

   

Net loss on extinguishment of debt  

  

 - 

  

  

 (1,072) 

   

  

 - 

   

  

 (1,072) 

   

Net income attributable to noncontrolling interests in the Operating   

  

  

  

  

  

   

  

  

   

  

  

   

  

Partnership, including unit distributions  

  

 (8,731) 

  

  

 (4,124) 

   

  

 (40,539) 

   

  

 (21,903) 

   

  

  

  

  

  

   

$

 58,178 

  

$

 29,868 

   

$

 176,116 

   

$

 60,076 

   

  

  

  

  

  

   

  

  

  

  

  

   

  

  

   

  

  

   

  

  

  

  

  

   

  

  

  

  

  

   

  

  

   

  

  

   

(1)

  

Includes net gains of $8,308 in the three months ended June 30, 2011, and $9,760 and $5,998 in the six months ended June 30, 2011 and 2010,

  

  

respectively, resulting from Lexington's stock issuances.

  

  

  

  

  

   

  

  

  

  

  

   

  

  

   

  

  

   

(2)

  

The three and six months ended June 30, 2011 include $6,020 for our share of net gains from asset sales. The six months ended June 30, 2011

  

  

also includes $8,977 for our share of a tax settlement gain.

  

  

  

  

  

   

  

  

  

  

  

   

  

  

   

  

  

   

(3)

  

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

34

 


 
 

 

 

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, 2011, and the related consolidated statements of income and comprehensive income for the three-month and six-month periods ended June 30, 2011 and 2010, and of changes in equity and cash flows for the six-month periods ended June 30, 2011 and 2010.  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, 2010, 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, 2011, we expressed an unqualified opinion on those consolidated financial statements.  In our opinion, the information set forth in the accompanying consolidated balance sheet as of December 31, 2010 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 1, 2011

35

 


 
 

  

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” in our Annual Report on Form 10-K for the year ended December 31, 2010.  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, 2011.  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, 2010 in Management’s Discussion and Analysis of Financial Condition. There have been no significant changes to our policies during 2011.

36

 


 

  

Overview

Business Objective and Operating Strategy

Our business objective is to maximize shareholder value, which we measure by the total return provided to our shareholders. Below is a table comparing our performance to the Morgan Stanley REIT Index (“RMS”) and the SNL REIT Index (“SNL”) for the following periods ended June 30, 2011:

 

  

  

  

Total Return(1)

  

  

  

  

Vornado

  

RMS

  

SNL  

  

  

  

One-year

 31.6% 

  

 34.1% 

  

 34.7%  

  

  

  

Three-year

 17.2% 

  

 17.1% 

  

 20.8%  

  

  

  

Five-year

 13.2% 

  

 12.7% 

  

 17.4%  

  

  

  

Ten-year

 278.8% 

  

 173.1% 

  

 186.6%  

  

  

  

  

  

  

  

  

   

  

  

  

  

  

  

   

  

  

(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;

·      Developing and redeveloping existing properties to increase returns and maximize value; and

·      Investing in operating companies that have a significant real estate component.

 

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

 

We 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 the breadth and the quality of services provided. Our success depends upon, among other factors, trends of the national, regional and local economies, the 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 “Item 1A. Risk Factors” in our Annual Report on Form 10-K, as amended, for additional information regarding these factors.

 

37

 


 

  

Overview - continued

 

 

2011 Acquisitions and Investments

 

 

One Park Avenue

 

On March 1, 2011, we as a co-investor, together with the Fund, acquired a 95% interest in One Park Avenue, a 932,000 square foot office building located between 32nd and 33rd Streets in New York, for $374,000,000. The purchase price consisted of $137,000,000 in cash and 95% of a new $250,000,000 5-year mortgage that bears interest at 5.0%.

 

 

280 Park Avenue Joint Venture

 

On March 16, 2011, we formed a 50/50 joint venture with SL Green Realty Corp (“SL Green”) to own the mezzanine debt of 280 Park Avenue, a 1.2 million square foot office building located between 48th and 49th Streets in Manhattan (the “Property”).  We contributed our mezzanine loan with a face amount of $73,750,000 and they contributed their mezzanine loans with a face amount of $326,250,000 to the joint venture.  We equalized our interest in the joint venture with SL Green by paying them $111,250,000 in cash and assuming $15,000,000 of their debt.  On May 17, 2011, as part of the recapitalization of the Property, the joint venture contributed its debt position for 99% of the common equity of a new joint venture which owns the Property.  The new joint venture expects to spend $150,000,000 for re-tenanting and repositioning the Property.

 

 

Independence Plaza

 

On June 17, 2011, a joint venture in which we are a 51% partner invested $55,000,000 in cash (of which we contributed $35,000,000) to acquire a face amount of $150,000,000 of mezzanine loans and a $35,000,000 participation in a senior loan in Independence Plaza, a residential complex comprised of three 39-story buildings in the Tribeca submarket of Manhattan. 

       

2011 Dispositions

 

On March 31, 2011, the receiver completed the disposition of the High Point Complex in North Carolina.  In connection therewith, the property and related debt were removed from our consolidated balance sheet and we recognized a net gain of $83,907,000 on the extinguishment of debt.

 

In the first half of 2011, we sold (i) 1140 Connecticut Avenue and 1227 25th Street for $127,000,000 in cash, which resulted in a $45,862,000 net gain, and (ii) three retail properties in separate transactions for an aggregate of $40,990,000 in cash, which resulted in net gains aggregating $5,761,000.

38

 


 

  

Overview - continued

 

 

2011 Financing Activities

 

 

In January 2011, we completed a $60,000,000 financing of land under a portion of the Borgata Hotel and Casino complex. The 10-year fixed rate loan bears interest at 5.14% and amortizes based on a 30-year schedule beginning in the third year.

 

On January 10, 2011, we completed a $75,000,000 financing of North Bergen (Tonnelle Avenue), a 410,000 square foot strip shopping center.  The seven-year fixed rate loan bears interest rate at 4.59% and amortizes based on a 25-year schedule beginning in the sixth year. This property was previously unencumbered.

 

On January 18, 2011, we repaid the outstanding balance of the construction loan on 220 20th Street and closed on a $76,100,000 mortgage financing at a fixed rate of 4.61%.  The loan has a seven-year term and amortizes based on a 30-year schedule.

 

On February 10, 2011, we completed a $150,000,000 financing of 2121 Crystal Drive, a 506,000 square foot office building located in Crystal City, Arlington, Virginia.  The 12-year fixed rate loan bears interest at 5.51% and amortizes based on a 30-year schedule beginning in the third year.  This property was previously unencumbered.

 

On February 11, 2011, we completed a $425,000,000 refinancing of Two Penn Plaza, a 1.6 million square foot Manhattan office building.  The seven-year loan bears interest at LIBOR plus 2.00%, which was swapped for the term of the loan to a fixed rate of 5.13%.  The loan amortizes based on a 30-year schedule beginning in the fourth year.  We retained net proceeds of approximately $139,000,000 after repaying the existing loan and closing costs.

 

On April 20, 2011, we sold 7,000,000 6.875% Series J Cumulative Redeemable Preferred Shares at a price of $25.00 per share, in an underwritten public offering pursuant to an effective registration statement.  On April 21, 2011, the underwriters exercised their option to purchase an additional 1,050,000 shares to cover over-allotments.  On May 5, 2011 we sold an additional 800,000 shares at a price of $25.00 per share.  We retained aggregate net proceeds of $214,538,000, after underwriters’ discounts and issuance costs and contributed the net proceeds to the Operating Partnership in exchange for 8,850,000 Series J Preferred Units (with economic terms that mirror those of the Series J Preferred Shares).  Dividends on the Series J Preferred Shares are cumulative and payable quarterly in arrears.  The Series J Preferred Shares are not convertible into, or exchangeable for, any of our properties or securities.  On or after five years from the date of issuance (or sooner under limited circumstances), we, at our option, may redeem the Series J Preferred Shares at a redemption price of $25.00 per share, plus accrued and unpaid dividends through the date of redemption.  The Series J Preferred Shares have no maturity date and will remain outstanding indefinitely unless redeemed by us.

 

In May 2011, we repaid the outstanding balance of the construction loan on West End 25, and closed on a $101,671,000 mortgage at a fixed rate of 4.88%.  The loan has a 10-year term and amortizes based on a 30-year schedule beginning in the sixth year.

 

On June 8, 2011, we renewed one of our two unsecured revolving credit facilities, and increased it to $1,250,000,000 from $1,000,000,000.  The renewed facility matures in four years, has a one-year extension option and bears interest on drawn amounts at LIBOR plus 1.35% plus a .30% facility fee (drawn or undrawn), based on our credit ratings.  We plan to extend our second revolving credit facility of $1,595,000,000, which matures in September 2012.  Our total revolving credit facilities are now $2,845,000,000, of which $300,000,000 is outstanding at June 30, 2011.

39

 


 
 

  

 

 

Overview - continued

Quarter Ended June 30, 2011 Financial Results Summary

 

Net income attributable to common shareholders for the quarter ended June 30, 2011 was $91,913,000, or $0.49 per diluted share, compared to $57,840,000, or $0.31 per diluted share, for the quarter ended June 30, 2010.  Net income for the quarter ended June 30, 2011 includes $3,069,000 of net gains on sale of real estate.  In addition, the quarters ended June 30, 2011 and 2010 include certain other items that affect comparability, which are listed in the table below.  The aggregate of net gains on sale of real estate and the items in the table below, net of amounts attributable to noncontrolling interests, increased net income attributable to common shareholders by $11,036,000, or $0.06 per diluted share for the quarter ended June 30, 2011 and decreased net income attributable to common shareholders for the quarter ended June 30, 2010 by $13,298,000, or $0.07 per diluted share.

 

Funds From Operations attributable to common shareholders plus assumed conversions (“FFO”) for the quarter ended June 30, 2011 was $243,418,000, or $1.27 per diluted share, compared to $204,772,000, or $1.11 per diluted share, for the prior year’s quarter.  FFO for the quarters ended June 30, 2011 and 2010 include certain items that affect comparability which are listed in the table below.  The aggregate of these items, net of amounts attributable to noncontrolling interests, increased FFO by $8,184,000, or $0.04 per diluted share for the quarter ended June 30, 2011 and decreased FFO for the quarter ended June 30, 2010 by $9,980,000, or $0.05 per diluted share.

 

  

  

  

For the Three Months Ended

  

  

  

June 30,

(Amounts in thousands)

2011 

  

2010 

Items that affect comparability income (expense):

  

  

  

  

  

  

Net gain resulting from Lexington's stock issuances

$

 8,308 

  

$

 - 

  

Our share of LNR's net gain from asset sales

  

 6,020 

  

  

 - 

  

Discount on redemption of perpetual preferred units

  

 2,000 

  

  

 4,818 

  

Loss from the mark-to-market of J.C. Penney derivative position

  

 (6,762) 

  

  

 - 

  

Real Estate Fund placement fees

  

 (403) 

  

  

 (2,656) 

  

Mezzanine loans loss accrual

  

 - 

  

  

 (6,900) 

  

Default interest and fees accrued on loans in special servicing

  

 - 

  

  

 (6,558) 

  

Net loss on extinguishment of debt

  

 - 

  

  

 (1,072) 

  

FFO attributable to discontinued operations

  

 - 

  

  

 2,819 

  

Other, net

  

 (430) 

  

  

 (1,208) 

  

  

  

  

 8,733 

  

  

 (10,757) 

Noncontrolling interests' share of above adjustments

  

 (549) 

  

  

 777 

Items that affect comparability, net

$

 8,184 

  

$

 (9,980) 

 

The percentage increase (decrease) 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, 2011 over the quarter ended June 30, 2010 and the trailing quarter ended March 31, 2011 are summarized below.

 

  

  

  

  

New York

   

  

Washington, DC  

  

  

   

  

Merchandise

    

Same Store EBITDA:

  

Office

   

  

Office  

  

Retail

   

  

Mart

    

  

June 30, 2011 vs. June 30, 2010

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

  

GAAP basis

(1.3%

)

   

  

0.3%

    

  

4.6%

   

   

  

(2.0%

)

   

  

  

Cash Basis

0.2%

   

   

  

1.8%

    

  

10.3%

   

   

  

(1.8%

)

   

  

June 30, 2011 vs. March 31, 2011

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

  

GAAP basis

  

4.0%

   

   

  

(0.3%

)  

  

0.1%

   

   

  

1.6%

   

    

  

  

Cash Basis

  

5.8%

   

   

  

0.3%

    

  

1.0%

   

   

  

2.1%

   

    

40

 


 

  

 

Overview - continued

Six Months Ended June 30, 2011 Financial Results Summary

Net income attributable to common shareholders for the six months ended June 30, 2011 was $491,128,000, or $2.63 per diluted share, compared to $258,125,000, or $1.41 per diluted share, for the six months ended June 30, 2010. Net income for the six months ended June 30, 2011 and 2010 include $55,883,000 and $307,000, respectively, for our share of net gains on sale of real estate.  In addition, six months ended June 30, 2011 and 2010 include certain items that affect comparability which are listed in the table below.  The aggregate of net gains on sale of real estate and the items in the table below, net of amounts attributable to noncontrolling interests, increased net income attributable to common shareholders for the six months ended June 30, 2011 by $228,075,000, or $1.19 per diluted share, and decreased net income attributable to common shareholders for the six months ended June 30, 2010 by $10,913,000, or $0.06 per diluted share.

 

FFO for the six months ended June 30, 2011 was $749,349,000, or $3.91 per diluted share, compared to $565,066,000, or $2.98 per diluted share, for the six months ended June 30, 2010.  FFO for six months ended June 30, 2011 and 2010 includes certain items that affect comparability which are listed in the table below. The aggregate of these items, net of amounts attributable to noncontrolling interests, increased FFO for the six months ended June 30, 2011 by $175,711,000, or $0.92 per diluted share, and decreased FFO for the six months ended June 30, 2010 by $4,753,000, or $0.03 per diluted share.

 

  

  

  

For the Six Months Ended

  

  

  

June 30,

(Amounts in thousands)

2011 

  

2010 

Items that affect comparability income (expense):

  

  

  

  

  

  

Net gain (loss) on extinguishment of debt

$

 83,907 

  

$

 (1,072) 

  

Mezzanine loans loss (accrual) reversal and net gain on disposition

  

 82,744 

  

  

 (6,900) 

  

Our share of LNR's asset sales and tax settlement gains

  

 14,997 

  

  

 - 

  

Income from the mark-to-market of J.C. Penney derivative position

  

 10,401 

  

  

 - 

  

Net gain resulting from Lexington's stock issuances

  

 9,760 

  

  

 5,998 

  

Net gain on sale of condominiums

  

 4,586 

  

  

 3,149 

  

Discount on redemption of perpetual preferred units

  

 2,000 

  

  

 6,972 

  

Buy-out of a below-market lease

  

 (15,000) 

  

  

 - 

  

Real Estate Fund placement fees

  

 (3,451) 

  

  

 (2,730) 

  

Litigation loss accrual

  

 - 

  

  

 (10,056) 

  

Default interest and fees accrued on loans in special servicing

  

 - 

  

  

 (6,558) 

  

(Negative FFO) FFO attributable to discontinued operations

  

 (757) 

  

  

 6,569 

  

Other, net

  

 (1,666) 

  

  

 (483) 

  

  

 187,521 

  

  

 (5,111) 

Noncontrolling interests' share of above adjustments

  

 (11,810) 

  

  

 358 

Items that affect comparability, net

$

 175,711 

  

$

 (4,753) 

 

The percentage increase (decrease) in GAAP basis and cash basis same store EBITDA of our operating segments for the six months ended June 30, 2011 over the six months ended June 30, 2010 is summarized below.

 

  

  

  

  

  

New York  

  

Washington, DC  

  

   

  

Merchandise  

Same Store EBITDA:

  

  

Office  

  

Office  

  

Retail  

  

Mart  

  

June 30, 2011 vs. June 30, 2010

  

   

  

   

  

   

  

   

  

  

GAAP basis

  

 (1.5%)  

  

 2.8%  

  

 4.2%  

  

 3.5%  

  

  

Cash Basis

  

 (0.2%)  

  

 6.1%  

  

 8.5%  

  

 4.1%  

 

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.

41

 


 

  

Overview - continued

 

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 presented below are based on our share of square feet leased during the period.

 

(Square feet in thousands)  

  

New York   

  

Washington, DC  

  

  

   

  

Merchandise Mart

As of June 30, 2011:  

  

Office  

  

Office  

  

Retail (4)

  

Office

  

Showroom

  

Total square feet (in service)  

  

  

 19,651   

  

  

 20,550   

  

  

 25,443   

  

  

 2,624   

  

  

 4,187   

  

Our share of square feet (in service)  

  

  

 17,110   

  

  

 17,821   

  

  

 23,472   

  

  

 2,624   

  

  

 4,187   

  

Number of properties  

  

  

 30   

  

  

 82   

  

  

 158   

  

  

 6   

  

  

 6   

  

Occupancy rate  

  

  

 94.8%  

  

  

 93.1%(3)

  

  

 92.3%  

  

  

 90.9%  

  

  

 92.9%  

  

  

  

  

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

Leasing Activity:  

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

Quarter Ended June 30, 2011:  

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

Total square feet leased  

  

  

 561   

  

  

 383   

  

  

 392   

  

  

 40   

  

  

 104   

  

Our share of square feet leased:  

  

  

 448   

  

  

 361   

  

  

 369   

  

  

 40   

  

  

 104   

  

  

Initial rent (1)

  

$

 68.66   

  

$

 40.37   

  

$

 18.43   

  

$

 30.27   

  

$

 32.80   

  

  

Weighted average lease term (years)  

  

  

 6.6   

  

  

 5.1   

  

  

 6.5   

  

  

 6.4   

  

  

 4.3   

  

  

Relet space (included above):  

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

  

Square feet  

  

  

 366   

  

  

 331   

  

  

 197   

  

  

 40   

  

  

 104   

  

  

  

Cash basis:  

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

  

  

Initial rent (1)

  

$

 72.08   

  

$

 40.32   

  

$

 11.57   

  

$

 30.27   

  

$

 32.80   

  

  

  

  

Prior escalated rent  

  

$

 63.04   

  

$

 39.67   

  

$

 11.48   

  

$

 28.24   

  

$

 34.30   

  

  

  

  

Percentage increase (decrease)  

  

  

 14.3%   

  

  

 1.6%  

  

  

 0.8%  

  

  

 7.2%  

  

  

 (4.4%)  

  

  

  

GAAP basis:  

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

  

  

Straight-line rent (2)

  

$

 71.82   

  

$

 38.78   

  

$

 12.03   

  

$

 30.35   

  

$

 30.62   

  

  

  

  

Prior straight-line rent  

  

$

 62.57   

  

$

 37.30   

  

$

 10.97   

  

$

 23.90   

  

$

 30.93   

  

  

  

  

Percentage increase (decrease)  

  

  

 14.8%   

  

  

 4.0%  

  

  

 9.7%  

  

  

 27.0%  

  

  

 (1.0%)  

  

  

Tenant improvements and leasing  

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

  

commissions:  

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

  

Per square foot  

  

$

 44.15   

  

$

 22.79   

  

$

 4.70   

  

$

 37.45   

  

$

 3.43   

  

  

  

Per square foot per annum:  

  

$

 6.69   

  

$

 4.47   

  

$

 0.72   

  

$

 5.84   

  

$

 0.80   

  

  

  

  

Percentage of initial rent  

  

  

 9.7%  

  

  

 11.1%  

  

  

 3.9%  

  

  

 19.3%  

  

  

 2.4%  

  

  

  

  

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

Six Months Ended June 30, 2011:  

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

Total square feet leased  

  

  

 1,233   

  

  

 787   

  

  

 745   

  

  

 40   

  

  

 220   

  

Our share of square feet leased:  

  

  

 784   

  

  

 672   

  

  

 715   

  

  

 40   

  

  

 220   

  

  

Initial rent (1)

  

$

 60.84   

  

$

 39.07   

  

$

 24.78   

  

$

 30.27   

  

$

 34.52   

  

  

Weighted average lease term (years)  

  

  

 9.7   

  

  

 4.5   

  

  

 7.8   

  

  

 6.4   

  

  

 5.7   

  

  

Relet space (included above):  

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

  

Square feet  

  

  

 549   

  

  

 599   

  

  

 272   

  

  

 40   

  

  

 220   

  

  

  

Cash basis:  

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

  

  

Initial rent (1)

  

$

 67.16   

  

$

 38.61   

  

$

 15.63   

  

$

 30.27   

  

$

 34.52   

  

  

  

  

Prior escalated rent  

  

$

 58.45   

  

$

 37.72   

  

$

 14.15   

  

$

 28.24   

  

$

 35.99   

  

  

  

  

Percentage increase (decrease)  

  

  

 14.9%   

  

  

 2.4%  

  

  

 10.5%  

  

  

 7.2%  

  

  

 (4.1%)  

  

  

  

GAAP basis:  

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

  

  

Straight-line rent (2)

  

$

 66.57   

  

$

 38.39   

  

$

 16.15   

  

$

 30.35   

  

$

 33.01   

  

  

  

  

Prior straight-line rent  

  

$

 57.58   

  

$

 36.01   

  

$

 13.62   

  

$

 23.90   

  

$

 33.16   

  

  

  

  

Percentage increase (decrease)  

  

  

 15.6%   

  

  

 6.6%  

  

  

 18.6%  

  

  

 27.0%  

  

  

 (0.5%)  

  

  

Tenant improvements and leasing  

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

  

commissions:  

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

  

Per square foot  

  

$

 50.12   

  

$

 17.81   

  

$

 7.27   

  

$

 37.45   

  

$

 3.26   

  

  

  

Per square foot per annum:  

  

$

 5.16   

  

$

 3.96   

  

$

 0.93   

  

$

 5.84   

  

$

 0.57   

  

  

  

  

Percentage of initial rent  

  

  

 8.5%  

  

  

 10.1%  

  

  

 3.8%  

  

  

 19.3%  

  

  

 1.7%  

  

  

  

  

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

  

  

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

See notes on the following table

42

 


 

  

 

Overview - continued  

  

  

  

  

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

  

  

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

(Square feet in thousands)  

  

New York   

  

Washington, DC  

  

  

   

  

Merchandise Mart

  

  

  

  

  

  

    

  

Office  

  

Office  

  

Retail (4)

  

Office

  

Showroom

As of March 31, 2011:  

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

Total square feet (in service)  

  

  

 18,445   

  

  

 21,171   

  

  

 25,266   

  

  

 2,621   

  

  

 4,191   

  

Our share of square feet (in service)  

  

  

 16,501   

  

  

 17,829   

  

  

 23,424   

  

  

 2,621   

  

  

 4,191   

  

Number of properties  

  

  

 29   

  

  

 82   

  

  

 160   

  

  

 6   

  

  

 6   

  

Occupancy rate  

  

  

 95.7%  

  

  

 93.4%  (3)

  

  

 92.4%  

  

  

 90.8%  

  

  

 93.1%  

  

  

  

  

  

  

   

  

  

    

  

  

    

  

  

    

  

  

    

  

  

    

As of December 31, 2010:  

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

Total square feet (in service)  

  

  

 17,454   

  

  

 21,149   

  

  

 25,557   

  

  

 2,608   

  

  

 4,204   

  

Our share of square feet (in service)  

  

  

 16,194   

  

  

 17,823   

  

  

 23,453   

  

  

 2,608   

  

  

 4,204   

  

Number of properties  

  

  

 28   

  

  

 82   

  

  

 161   

  

  

 6   

  

  

 6   

  

Occupancy rate  

  

  

 95.6%  

  

  

 94.3%  (3)

  

  

 92.3%  

  

  

 91.5%  

  

  

 93.2%  

  

  

  

  

  

  

   

  

  

    

  

  

    

  

  

    

  

  

    

  

  

    

As of June 30, 2010:  

  

   

  

   

  

   

  

  

  

  

  

Total square feet (in service)  

  

  

 17,499   

  

  

 21,186   

  

  

 25,159   

  

  

 2,598   

  

  

 4,211   

  

Our share of square feet (in service)  

  

  

 16,187   

  

  

 18,239   

  

  

 22,767   

  

  

 2,598   

  

  

 4,211   

  

Number of properties  

  

  

 28   

  

  

 82   

  

  

 164   

  

  

 6   

  

  

 6   

  

Occupancy rate  

  

  

 95.5%  

  

  

 95.1%  (3)

  

  

 92.3%  

  

  

 91.0%  

  

  

 93.3%  

  

  

  

  

  

  

   

  

  

   

  

  

    

  

  

   

  

  

   

  

  

   

  

  

  

  

  

  

   

  

  

   

  

  

    

  

  

   

  

  

   

  

  

   

 

  

  

  

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

  

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

(1)

  

Represents the cash basis weighted average starting rent per square foot, which is generally indicative of market rents.  Most leases include free rent and periodic step-ups in rent which are not included in the initial cash basis rent per square foot but are included in the GAAP basis straight-line rent per square foot.

  

  

  

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

(2)

  

Represents the GAAP basis weighted average rent per square foot that is recognized over the term of the respective leases, and includes the effect of free rent and periodic step-ups in rent.

  

  

  

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

(3)

  

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

  

  

  

June 30, 2011

92.2%  

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

  

March 31, 2011

92.5%  

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

  

December 31, 2010

94.0%  

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

  

June 30, 2010

94.8%  

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

  

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

(4)

  

Mall sales per square foot, including partially owned malls, for the trailing twelve months ended June 30, 2011 and 2010 were $465 and

  

  

$468, respectively.

  

  

  

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

43

 


 

  

Net Income and EBITDA by Segment for the Three Months Ended June 30, 2011 and 2010

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, 2011 and 2010.

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

      

(Amounts in thousands)  

For the Three Months Ended June 30, 2011

  

  

   

  

   

  

New York

  

Washington, DC

  

   

  

Merchandise

  

   

  

    

  

  

   

  

Total

  

Office

  

Office

  

Retail

  

Mart

  

Toys

  

Other(3)

Property rentals  

  

$

 548,485 

  

$

 197,135 

  

$

 141,770 

  

$

 106,662 

  

$

 56,363 

  

$

 - 

  

$

 46,555    

Straight-line rent adjustments  

  

  

 8,349 

  

  

 3,890 

  

  

 (706)  

  

  

 3,730 

  

  

 653 

  

  

 - 

  

  

 782    

Amortization of acquired below-  

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

    

  

market leases, net  

  

  

 16,812 

  

  

 8,178 

  

  

 512 

  

  

 6,996 

  

  

 17 

  

  

 - 

  

  

 1,109    

Total rentals  

  

  

 573,646 

  

  

 209,203 

  

  

 141,576 

  

  

 117,388 

  

  

 57,033 

  

  

 - 

  

  

 48,446    

Tenant expense reimbursements  

  

  

 82,325 

  

  

 31,483 

  

  

 8,936 

  

  

 36,636 

  

  

 3,744 

  

  

 - 

  

  

 1,526    

Cleveland Medical Mart development   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

    

  

project  

  

  

 32,369 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 32,369 

  

  

 - 

  

  

 -    

Fee and other income:  

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

    

  

Tenant cleaning fees  

  

  

 15,409 

  

  

 23,679 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 (8,270)   

  

Management and leasing fees  

  

  

 6,989 

  

  

 2,112 

  

  

 4,074 

  

  

 1,343 

  

  

 200 

  

  

 - 

  

  

 (740)   

  

Lease termination fees  

  

  

 7,323 

  

  

 5,571 

  

  

 900 

  

  

 852 

  

  

 - 

  

  

 - 

  

  

 -    

  

Other  

  

  

 12,090 

  

  

 5,103 

  

  

 5,317 

  

  

 1,692 

  

  

 (158)  

  

  

 - 

  

  

 136    

Total revenues  

  

  

 730,151 

  

  

 277,151 

  

  

 160,803 

  

  

 157,911 

  

  

 93,188 

  

  

 - 

  

  

 41,098    

Operating expenses  

  

  

 273,152 

  

  

 116,221 

  

  

 49,748 

  

  

 57,194 

  

  

 32,861 

  

  

 - 

  

  

 17,128    

Depreciation and amortization  

  

  

 131,898 

  

  

 45,854 

  

  

 34,065 

  

  

 27,750 

  

  

 11,113 

  

  

 - 

  

  

 13,116    

General and administrative  

  

  

 50,251 

  

  

 4,579 

  

  

 6,462 

  

  

 7,291 

  

  

 6,848 

  

  

 - 

  

  

 25,071    

Cleveland Medical Mart development   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

    

  

project  

  

  

 29,940 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 29,940 

  

  

 - 

  

  

 -    

Acquisition and other costs  

  

  

 1,897 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 1,897    

Total expenses  

  

  

 487,138 

  

  

 166,654 

  

  

 90,275 

  

  

 92,235 

  

  

 80,762 

  

  

 - 

  

  

 57,212    

Operating income (loss)  

  

  

 243,013 

  

  

 110,497 

  

  

 70,528 

  

  

 65,676 

  

  

 12,426 

  

  

 - 

  

  

 (16,114)   

(Loss) applicable to Toys  

  

  

 (22,846)  

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 (22,846)  

  

  

 -    

Income (loss) from partially owned  

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

    

  

entities  

  

  

 26,403 

  

  

 (845)  

  

  

 (767)  

  

  

 924 

  

  

 178 

  

  

 - 

  

  

 26,913    

Income from Real Estate Fund  

  

  

 19,058 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 19,058    

Interest and other investment   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

    

  

income (loss), net  

  

  

 8,007 

  

  

 148 

  

  

 48 

  

  

 (6)  

  

  

 9 

  

  

 - 

  

  

 7,808    

Interest and debt expense  

  

  

 (137,202)  

  

  

 (35,033)  

  

  

 (30,729)  

  

  

 (23,344)  

  

  

 (9,437)  

  

  

 - 

  

  

 (38,659)   

Income (loss) before income taxes  

  

  

 136,433 

  

  

 74,767 

  

  

 39,080 

  

  

 43,250 

  

  

 3,176 

  

  

 (22,846)  

  

  

 (994)   

Income tax expense  

  

  

 (5,922)  

  

  

 (440)  

  

  

 (569)  

  

  

 - 

  

  

 (911)  

  

  

 - 

  

  

 (4,002)   

Income (loss) from continuing  

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

    

  

operations  

  

  

 130,511 

  

  

 74,327 

  

  

 38,511 

  

  

 43,250 

  

  

 2,265 

  

  

 (22,846)  

  

  

 (4,996)   

Income from discontinued   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

    

  

operations  

  

  

 458 

  

  

 - 

  

  

 - 

  

  

 458 

  

  

 - 

  

  

 - 

  

  

 -    

Net income (loss)  

  

  

 130,969 

  

  

 74,327 

  

  

 38,511 

  

  

 43,708 

  

  

 2,265 

  

  

 (22,846)  

  

  

 (4,996)   

Less:  

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

    

  

Net income attributable to   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

    

  

  

noncontrolling interests in  

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

    

  

  

consolidated subsidiaries  

  

  

 (13,657)  

  

  

 (2,325)  

  

  

 - 

  

  

 (69)  

  

  

 - 

  

  

 - 

  

  

 (11,263)   

  

Net income attributable to   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

    

  

  

noncontrolling interests in the  

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

    

  

  

Operating Partnership, including  

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

    

  

  

unit distributions  

  

  

 (8,731)  

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 (8,731)   

Net income (loss) attributable to  

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

    

  

Vornado  

  

  

 108,581 

  

  

 72,002 

  

  

 38,511 

  

  

 43,639 

  

  

 2,265 

  

  

 (22,846)  

  

  

 (24,990)   

Interest and debt expense(2)

  

  

 202,956 

  

  

 36,953 

  

  

 34,093 

  

  

 24,468 

  

  

 9,595 

  

  

 43,393 

  

  

 54,454    

Depreciation and amortization(2)

  

  

 182,496 

  

  

 47,621 

  

  

 38,306 

  

  

 28,400 

  

  

 11,227 

  

  

 32,896 

  

  

 24,046    

Income tax (benefit) expense(2)

  

  

 (17,343)  

  

  

 440 

  

  

 607 

  

  

 - 

  

  

 911 

  

  

 (23,969)  

  

  

 4,668    

EBITDA(1)

  

$

 476,690 

  

$

 157,016 

  

$

 111,517 

  

$

 96,507 

  

$

 23,998 

  

$

 29,474 

  

$

 58,178    

____________________

See notes on page 46.

44

 


 

  

 

Net Income and EBITDA by Segment for the Three Months Ended June 30, 2011 and 2010 - continued

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

      

(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  

  

$

 531,576 

  

$

 195,248 

  

$

 142,952 

  

$

 96,335 

  

$

 54,441 

  

$

 - 

  

$

 42,600    

Straight-line rent adjustments  

  

  

 17,552 

  

  

 7,255 

  

  

 964 

  

  

 7,761 

  

  

 725 

  

  

 - 

  

  

 847    

Amortization of acquired below-  

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

    

  

market leases, net  

  

  

 16,284 

  

  

 9,134 

  

  

 621 

  

  

 4,933 

  

  

 15 

  

  

 - 

  

  

 1,581    

Total rentals  

  

  

 565,412 

  

  

 211,637 

  

  

 144,537 

  

  

 109,029 

  

  

 55,181 

  

  

 - 

  

  

 45,028    

Tenant expense reimbursements  

  

  

 86,420 

  

  

 32,431 

  

  

 12,546 

  

  

 35,351 

  

  

 3,829 

  

  

 - 

  

  

 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  

  

  

 12,468 

  

  

 4,513 

  

  

 5,061 

  

  

 1,005 

  

  

 744 

  

  

 - 

  

  

 1,145    

Total revenues  

  

  

 683,989 

  

  

 272,910 

  

  

 164,610 

  

  

 146,134 

  

  

 59,807 

  

  

 - 

  

  

 40,528    

Operating expenses  

  

  

 261,845 

  

  

 111,055 

  

  

 50,013 

  

  

 55,648 

  

  

 28,727 

  

  

 - 

  

  

 16,402    

Depreciation and amortization  

  

  

 133,277 

  

  

 44,271 

  

  

 36,018 

  

  

 27,528 

  

  

 11,387 

  

  

 - 

  

  

 14,073    

General and administrative  

  

  

 49,540 

  

  

 4,767 

  

  

 6,202 

  

  

 6,807 

  

  

 7,157 

  

  

 - 

  

  

 24,607    

Acquisition and other costs  

  

  

 1,930 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 1,930    

Total expenses  

  

  

 446,592 

  

  

 160,093 

  

  

 92,233 

  

  

 89,983 

  

  

 47,271 

  

  

 - 

  

  

 57,012    

Operating income (loss)  

  

  

 237,397 

  

  

 112,817 

  

  

 72,377 

  

  

 56,151 

  

  

 12,536 

  

  

 - 

  

  

 (16,484)   

(Loss) applicable to Toys  

  

  

 (21,004)  

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 (21,004)  

  

  

 -    

Income from partially owned  

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

    

  

entities  

  

  

 4,452 

  

  

 1,337 

  

  

 188 

  

  

 1,129 

  

  

 55 

  

  

 - 

  

  

 1,743    

Interest and other investment   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

    

  

income, net  

  

  

 3,876 

  

  

163 

  

  

23 

  

  

186 

  

  

12 

  

  

 - 

  

  

3,492    

Interest and debt expense  

  

  

 (142,175)  

  

  

(33,047)

  

  

(34,068)

  

  

(20,315)

  

  

(9,464)

  

  

 - 

  

  

(45,281)   

Net (loss) on extinguishment  

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

    

  

of debt  

  

  

 (1,072)  

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 (1,072)   

Net gain (loss) on disposition of wholly  

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

    

  

owned and partially owned assets  

  

  

 4,382 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 (31)  

  

  

 - 

  

  

 4,413    

Income (loss) before income taxes  

  

  

 85,856 

  

  

 81,270 

  

  

 38,520 

  

  

 37,151 

  

  

 3,108 

  

  

 (21,004)  

  

  

 (53,189)   

Income tax (expense) benefit  

  

  

 (4,964)  

  

  

 (335)  

  

  

 595 

  

  

 - 

  

  

 (402)  

  

  

 - 

  

  

 (4,822)   

Income (loss) from continuing  

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

    

  

operations  

  

  

 80,892 

  

  

 80,935 

  

  

 39,115 

  

  

 37,151 

  

  

 2,706 

  

  

 (21,004)  

  

  

 (58,011)   

(Loss) income from discontinued   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

    

  

operations  

  

  

 (3,681)  

  

  

 - 

  

  

 1,137 

  

  

 (333)  

  

  

 (4,485)  

  

  

 - 

  

  

 -    

Net income (loss)  

  

  

 77,211 

  

  

 80,935 

  

  

 40,252 

  

  

 36,818 

  

  

 (1,779)  

  

  

 (21,004)  

  

  

 (58,011)   

Less:  

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

    

  

Net (income) loss attributable to  

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

    

  

  

noncontrolling interests in   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

    

  

  

consolidated subsidiaries  

  

  

 (981)  

  

  

 (2,556)  

  

  

 - 

  

  

 256 

  

  

 - 

  

  

 - 

  

  

 1,319    

  

Net income attributable to   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

    

  

  

noncontrolling interests in the  

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

    

  

  

Operating Partnership, including  

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

    

  

  

unit distributions  

  

  

 (4,124)  

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 (4,124)   

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 the following page.

45

 


 

  

 

Net Income and EBITDA by Segment for the Three Months Ended June 30, 2011 and 2010 - 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 these measures 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 components of other EBITDA are summarized below.  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,

   

  

  

  

  

  

  

  

   

  

2011 

   

  

2010 

   

  

  

Our share of Real Estate Fund:  

  

  

   

  

  

   

  

  

  

Operations  

$

 827 

   

$

 - 

   

  

  

  

Net unrealized gains  

  

 3,218 

   

  

 - 

   

  

  

  

Net realized gains  

  

 771 

   

  

 - 

   

  

  

  

Carried interest  

  

 2,140 

   

  

 - 

   

  

  

Total  

  

 6,956 

   

  

 - 

   

  

  

Lexington (1)

  

 17,313 

   

  

 11,435 

    

  

  

Alexander's  

  

 15,821 

   

  

 14,260 

    

  

  

LNR (acquired in July 2010) (2)

  

 13,410 

   

  

 - 

   

  

  

555 California Street  

  

 10,423 

   

  

 11,136 

   

  

  

Hotel Pennsylvania  

  

 8,677 

   

  

 6,616 

   

  

  

Other investments  

  

 11,735 

   

  

 8,469 

    

  

  

  

  

  

  

  

   

  

 84,335 

   

  

 51,916 

   

  

  

Corporate general and administrative expenses (3)

  

 (20,024) 

   

  

 (20,642) 

   

  

  

Investment income and other, net (3)

  

 11,954 

   

  

 14,554 

   

  

  

Loss from the mark-to-market of  J.C. Penney derivative position  

  

 (6,762) 

   

  

 - 

   

  

  

Acquisition costs  

  

 (2,191) 

   

  

 (1,930) 

   

  

  

Real Estate Fund placement fees  

  

 (403) 

   

  

 (2,656) 

   

  

  

Mezzanine loans loss accrual  

  

 - 

   

  

 (6,900) 

   

  

  

Net loss on extinguishment of debt  

  

 - 

   

  

 (1,072) 

   

  

  

Net gain on sale of condominiums  

  

 - 

   

  

 722 

   

  

  

Net income attributable to noncontrolling interests in the Operating Partnership,   

  

  

   

  

  

   

  

  

  

including unit distributions  

  

 (8,731) 

   

  

 (4,124) 

   

  

  

  

  

  

  

  

   

$

 58,178 

   

$

 29,868 

   

  

  

  

  

  

  

  

   

  

  

   

  

  

   

  

  

  

  

  

  

  

   

  

  

   

  

  

   

  

  

(1)

  

Includes net gains of $8,308 in the three months ended June 30, 2011, resulting from Lexington's stock issuances.

  

  

  

  

  

  

  

   

  

  

   

  

  

   

  

  

(2)

  

The three months ended June 30, 2011 includes $6,020 for our share of net gains from asset sales.

  

  

  

  

  

  

  

   

  

  

   

  

  

   

  

  

(3)

  

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

  

  

  

  

and offsetting liability.

  

  

  

  

  

  

  

   

  

  

   

  

  

   

  

46

 


 

  

 

Net Income and EBITDA by Segment for the Three Months Ended June 30, 2011 and 2010 - continued

 

Below is a summary of the percentages of EBITDA by geographic region (excluding discontinued operations and other gains and losses that affect comparability), from our New York Office, Washington DC Office, Retail and Merchandise Mart segments. 

 

  

  

  

  

For the Three Months

  

  

  

  

  

  

Ended June 30,

  

  

  

  

  

  

2011 

  

2010 

  

  

  

Region:

  

  

  

  

  

  

  

  

New York City metropolitan area

  

60%

  

60%

  

  

  

  

Washington, DC / Northern Virginia metropolitan area

  

29%

  

30%

  

  

  

  

California

  

2%

  

2%

  

  

  

  

Chicago

  

5%

  

5%

  

  

  

  

Puerto Rico

  

2%

  

1%

  

  

  

  

Other geographies

  

2%

  

2%

  

  

  

  

  

  

100%

  

100%

  

  

47

 


 

  

Results of Operations – Three Months Ended June 30, 2011 Compared to June 30, 2010

 

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 $730,151,000 for the three months ended June 30, 2011, compared to $683,989,000 in the prior year’s quarter, an increase of $46,162,000, of which $32,369,000 relates to the Cleveland Medical Mart development project.  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, sale of partial interests  

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

and other  

  

$

 (4,616) 

   

  

$

 (1,919) 

   

  

$

 (8,384) 

   

  

$

 4,138 

   

  

$

 - 

   

  

$

 1,549 

   

  

Development  

  

  

 2,414 

   

  

  

 - 

   

  

  

 1,932 

   

  

  

 482 

   

  

  

 - 

   

  

  

 - 

   

  

Hotel Pennsylvania  

  

  

 3,058 

   

  

  

 - 

   

  

  

 - 

   

  

  

 - 

   

  

  

 - 

   

  

  

 3,058 

    

  

Trade Shows  

  

  

 661 

   

  

  

 - 

   

  

  

 - 

   

  

  

 - 

   

  

  

 661 

   

  

  

 - 

   

  

Amortization of acquired below-market   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

leases, net  

  

  

 342 

   

  

  

 (956) 

   

  

  

 (109) 

   

  

  

 2,063 

   

  

  

 2 

   

  

  

 (658) 

   

  

Leasing activity (see page 42)  

  

  

 6,375 

   

  

  

 441 

   

  

  

 3,600 

   

  

  

 1,676 

   

  

  

 1,189 

   

  

  

 (531) 

   

   

  

  

 8,234 

   

  

  

 (2,434) 

   

  

  

 (2,961) 

   

  

  

 8,359 

   

  

  

 1,852 

   

  

  

 3,418 

   

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

Tenant expense reimbursements:  

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

Acquisitions/development, sale of partial  

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

interests and other  

  

  

 (1,575) 

   

  

  

 - 

   

  

  

 (3,588) 

   

  

  

 2,013 

   

  

  

 - 

   

  

  

 - 

   

  

Operations  

  

  

 (2,520) 

   

  

  

 (948) 

   

  

  

 (22) 

   

  

  

 (728) 

   

  

  

 (85) 

   

  

  

 (737) 

   

  

   

  

  

 (4,095) 

   

  

  

 (948) 

   

  

  

 (3,610) 

   

  

  

 1,285 

   

  

  

 (85) 

   

  

  

 (737) 

   

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

Cleveland Medical Mart development  

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

    

  

project  

  

  

 32,369 

   (1) 

  

  

 - 

   

  

  

 - 

   

  

  

 - 

   

  

  

 32,369 

  (1) 

  

  

 - 

    

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

Fee and other income:  

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

BMS cleaning fees  

  

  

 1,941 

   

  

  

 3,040 

   

  

  

 - 

   

  

  

 - 

   

  

  

 - 

   

  

  

 (1,099) 

   (2) 

  

Management and leasing fees  

  

  

 3,609 

   

  

  

 719 

    

  

  

 1,690 

    

  

  

 1,022 

   

  

  

 181 

   

  

  

 (3) 

   

  

Lease cancellation fee income  

  

  

 4,482 

   

  

  

 3,274 

   

  

  

 818 

   

  

  

 424 

   

  

  

 (34) 

   

  

  

 - 

   

  

Other  

  

  

 (378) 

   

  

  

 590 

   

  

  

 256 

    

  

  

 687 

   

  

  

 (902) 

    

  

  

 (1,009) 

    

   

  

  

 9,654 

   

  

  

 7,623 

   

  

  

 2,764 

   

  

  

 2,133 

   

  

  

 (755) 

   

  

  

 (2,111) 

   

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

Total increase (decrease) in revenues  

  

$

 46,162 

   

  

$

 4,241 

   

  

$

 (3,807) 

   

  

$

 11,777 

   

  

$

 33,381 

   

  

$

 570 

   

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

(1)

  

$29,940 is offset by development costs expensed in the quarter.  See note (3) on page 49.

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

(2)

  

Primarily from the elimination of intercompany fees from operating segments upon consolidation. See note (1) on page 49.

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

48

 


 

  

 

Results of Operations – Three Months Ended June 30, 2011 Compared to June 30, 2010 - continued

 

Expenses

Our expenses, which consist primarily of operating, depreciation and amortization and general and administrative expenses, were $487,138,000 for the three months ended June 30, 2011, compared to $446,592,000 in the prior year’s quarter, an increase of $40,546,000, of which $29,940,000 relates to the Cleveland Medical Mart development project.  Below are the details of the increase (decrease) by segment:

 

(Amounts in thousands)  

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

   

  

  

  

   

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

   

  

  

  

   

  

New York

   

  

Washington, DC

   

  

  

    

  

Merchandise

   

  

  

  

   

Increase (decrease) due to:  

  

Total

   

  

Office

   

  

Office

   

  

Retail

   

  

Mart

   

  

Other

   

Operating:  

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

Acquisitions, sale of partial interests  

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

and other  

  

$

 (1,790) 

   

  

$

 - 

   

  

$

 (4,769) 

   

  

$

 2,979 

   

  

$

 - 

   

  

$

 - 

   

  

Development/redevelopment  

  

  

 35 

   

  

  

 - 

   

  

  

 (164) 

   

  

  

 199 

   

  

  

 - 

   

  

  

 - 

   

  

Non-reimbursable expenses, including   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

    

  

  

  

   

  

  

bad debt reserves  

  

  

 1,527 

   

  

  

 663 

   

  

  

 1,529 

   

  

  

 (3,010) 

   

  

  

 2,345 

    

  

  

 - 

   

  

Hotel Pennsylvania  

  

  

 917 

   

  

  

 - 

   

  

  

 - 

   

  

  

 - 

   

  

  

 - 

   

  

  

 917 

   

  

Trade Shows  

  

  

 1,040 

   

  

  

 - 

   

  

  

 - 

   

  

  

 - 

   

  

  

 1,040 

   

  

  

 - 

   

  

BMS expenses  

  

  

 2,717 

   

  

  

 2,717 

   

  

  

 - 

   

  

  

 - 

   

  

  

 - 

   

  

  

 - 

   

  

Operations  

  

  

 6,861 

   

  

  

 1,786 

    

  

  

 3,139 

   

  

  

 1,378 

    

  

  

 749 

   

  

  

 (191) 

   (1) 

  

   

  

  

 11,307 

   

  

  

 5,166 

   

  

  

 (265) 

   

  

  

 1,546 

   

  

  

 4,134 

   

  

  

 726 

   

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

Depreciation and amortization:  

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

Acquisitions/development, sale of partial  

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

interests and other  

  

  

 (1,782) 

   

  

  

 - 

   

  

  

 (2,990) 

   

  

  

 1,208 

   

  

  

 - 

   

  

  

 - 

   

  

Operations    

  

  

 403 

   

  

  

 1,583 

   

  

  

 1,037 

   

  

  

 (986) 

   

  

  

 (274) 

   

  

  

 (957) 

   

  

  

   

  

  

 (1,379) 

   

  

  

 1,583 

   

  

  

 (1,953) 

   

  

  

 222 

   

  

  

 (274) 

   

  

  

 (957) 

   

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

General and administrative:  

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

Mark-to-market of deferred compensation   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

plan liability  (2) 

  

  

 2,779 

   

  

  

 - 

   

  

  

 - 

   

  

  

 - 

   

  

  

 - 

   

  

  

 2,779 

   

  

Real Estate Fund placement fees  

  

  

 (2,253) 

   

  

  

 - 

   

  

  

 - 

   

  

  

 - 

   

  

  

 - 

   

  

  

 (2,253) 

   

  

Operations   

  

  

 185 

   

  

  

 (188) 

   

  

  

 260 

   

  

  

 484 

   

  

  

 (309) 

    

  

  

 (62) 

    

  

   

  

  

 711 

   

  

  

 (188) 

   

  

  

 260 

   

  

  

 484 

   

  

  

 (309) 

   

  

  

 464 

   

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

Cleveland Medical Mart development  

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

project   

  

  

 29,940 

   (3) 

  

  

 - 

   

  

  

 - 

   

  

  

 - 

   

  

  

 29,940 

   (3) 

  

  

 - 

   

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

Acquisition and other costs  

  

  

 (33) 

   

  

  

 - 

   

  

  

 - 

    

  

  

 - 

    

  

  

 - 

   

  

  

 (33) 

   

  

  

   

  

  

  

   

  

  

  

   

  

  

  

    

  

  

  

   

  

  

  

   

  

  

  

   

Total increase (decrease) in expenses  

  

$

 40,546 

   

  

$

 6,561 

   

  

$

 (1,958) 

   

  

$

 2,252 

   

  

$

 33,491 

   

  

$

 200 

   

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

(1)

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

  

  

  

(2)

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, net” on our consolidated statements of income.

  

  

  

(3)

This expense is entirely offset by development revenue in the quarter.  See note (1) on page 48.

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

49

 


 

  

 

Results of Operations – Three Months Ended June 30, 2011 Compared to June 30, 2010 - continued

 

 

Loss Applicable to Toys

 

In the three months ended June 30, 2011, we recognized net loss of $22,846,000 from our investment in Toys, comprised of $25,048,000 for our 32.7% share of Toys’ net loss ($49,017,000 before our share of Toys’ income tax benefit) and $2,202,000 of interest and other income.

 

In the three months ended June 30, 2010, we recognized 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.

 

 

Income from Partially Owned Entities

Summarized below are the components of income from partially owned entities for the three months ended June 30, 2011 and 2010.

 

  

  

  

  

   

  

For the Three Months Ended

  

  

  

  

  

   

  

June 30,

  

  

(Amounts in thousands)  

  

2011 

  

2010 

  

  

Equity in Net Income (Loss):  

  

  

  

   

  

  

  

   

  

  

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

  

$

 8,638 

   

  

$

 7,066 

    

  

  

  

  

  

    

  

  

  

   

  

  

  

    

  

  

Lexington - 11.7% share in 2011 and 13.8% share in 2010 of equity in net income (loss)  (1) 

  

  

 8,654 

    

  

  

 (428) 

    

  

  

  

  

  

    

  

  

  

    

  

  

  

    

  

  

LNR - 26.2% share of equity in net income (acquired in July 2010) (2)

  

  

 11,003 

    

  

  

 - 

    

  

  

   

  

  

  

   

  

  

  

   

  

  

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

  

  

 205 

   

  

  

 606 

   

  

  

   

  

  

  

   

  

  

  

   

  

  

Partially owned office buildings  

  

  

 (2,366) 

   

  

  

 1,023 

   

  

  

   

  

  

  

   

  

  

  

   

  

  

Other equity method investments (3)

  

  

 269 

   

  

  

 (3,815) 

    

  

  

  

  

  

   

  

$

 26,403 

   

  

$

 4,452 

   

  

  

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

  

  

   

  

  

  

   

  

  

  

   

  

  

 (1) 

The three months ended June 30, 2011 includes an $8,308 net gain resulting from Lexington's stock issuances.

  

  

  

  

   

  

  

  

   

  

  

  

   

  

  

 (2) 

Includes $6,020 for our share of net gains from asset sales.

  

  

  

  

   

  

  

  

   

  

  

  

   

  

  

 (3) 

Represents our equity in net income or loss of Verde Realty Operating Partnership, 85 10th Avenue Associates and others.

 

 

Income from Real Estate Fund

In the three months ended June 30, 2011, we recognized $19,058,000 of income from the Fund, including $12,872,000 of net unrealized gains from the mark-to-market of investments in the Fund, and $3,085,000 of net realized gains from the disposition of an investment.  Of the $19,058,000, $12,102,000 is attributable to noncontrolling interests.  Accordingly, our share of the Fund’s income was $6,956,000 and includes $2,140,000 of accrued carried interest.  In addition, we recognized $865,000 of management and leasing fees which are included as a component of “fee and other income,” and incurred $403,000 of placement fees in connection with the February 2011 closing of the Fund, which is included in “general and administrative” expenses.

50

 


 

  

 

Results of Operations – Three Months Ended June 30, 2011 Compared to June 30, 2010 - continued

 

Interest and Other Investment Income, net

Interest and other investment income, net (comprised of the mark-to-market of derivative positions in marketable equity securities, interest income on mezzanine loans receivable, other interest income and dividend income) was $8,007,000 in the three months ended June 30, 2011, compared to $3,876,000 in the prior year’s quarter, an increase of $4,131,000. This increase resulted from:

 

  

  

  

  

  

  

  

   

  

  

(Amounts in thousands)

  

  

  

   

  

  

Mezzanine loan loss accrual in 2010

  

  

$

 6,900 

   

  

  

Loss from the mark-to-market of J.C. Penney derivative position

  

  

  

 (6,762) 

   

  

  

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)

  

  

 2,779 

   

  

  

Other, net

  

  

 1,214 

   

  

  

  

  

  

  

$

 4,131 

   

  

 

 

Interest and Debt Expense

Interest and debt expense was $137,202,000 in the three months ended June 30, 2011, compared to $142,175,000 in the prior year’s quarter, a decrease of $4,973,000.  This decrease was primarily due to savings of (i) $7,001,000 from the repayment of the Springfield Mall mortgage at a discount in December 2010, (ii) $4,630,000 from the deconsolidation of the Warner Building resulting from the sale of a 45% interest in October 2010, and (iii) $3,288,000 applicable to the repurchase and retirement of our convertible senior debentures, partially offset by (iv) $6,549,000 from the issuance of $660,000,000 of cross-collateralized debt secured by 40 of our strip shopping centers, and (v) $4,070,000 from the financing of 2121 Crystal Drive and Two Penn Plaza in the first quarter of 2011.

 

 

Net Gain on Disposition of Wholly Owned and Partially Owned Assets

Net gain on disposition of wholly owned and partially owned assets was $4,382,000 in the three months ended June 30, 2010 and resulted primarily from the sale of marketable securities.

 

 

Income Tax Expense

Income tax expense was $5,922,000 in the three months ended June 30, 2011, compared to $4,964,000 in the prior year’s quarter, an increase of $958,000.  This increase resulted primarily from higher taxable income of our taxable REIT subsidiaries.

51

 


 

  

 

Results of Operations – Three Months Ended June 30, 2011 Compared to June 30, 2010 - continued

 

Income (Loss) from Discontinued Operations

The table below sets forth the combined results of assets related to discontinued operations for the three months ended June 30, 2011 and 2010, including the High Point Complex in North Carolina, which was disposed by the receiver on March 31, 2011.

 

  

  

  

   

  

  

   

  

  

   

  

  

  

  

   

  

For the Three Months Ended

  

  

  

  

   

  

June 30,

  

  

(Amounts in thousands)  

  

2011 

  

2010 

  

  

Total revenues  

  

$

 -   

  

$

 12,116   

  

  

Total expenses  

  

  

 -   

  

  

 15,797   

  

  

   

  

  

 -   

  

  

 (3,681)  

  

  

Net gain on sale of real estate  

  

  

 458   

  

  

 -   

  

  

Income (loss) from discontinued operations  

  

$

 458   

  

$

 (3,681)  

  

 

 

Net Income Attributable to Noncontrolling Interests in Consolidated Subsidiaries

 

Net income attributable to noncontrolling interests in consolidated subsidiaries was $13,657,000 in the three months ended June 30, 2011, compared to $981,000 in the prior year’s quarter, an increase of $12,676,000.  This increase resulted primarily from $12,102,000 of income allocated to the noncontrolling interests in our Real Estate Fund.

 

 

Net Income Attributable to Noncontrolling Interests in the Operating Partnership, including Unit Distributions

 

Net income attributable to noncontrolling interests in the Operating Partnership, including unit distributions for the three months ended June 30, 2011 and 2010 is primarily comprised of allocations of income to redeemable noncontrolling interests of $6,283,000 and $4,451,000, respectively, and preferred unit distributions of the Operating Partnership of $4,448,000 and $4,491,000, respectively.  The increase of $1,832,000 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 $16,668,000 for the three months ended June 30, 2011, compared to $14,266,000 for the prior year’s quarter, an increase of $2,402,000.  This increase resulted from the issuance of Series J preferred shares during the second quarter of 2011.

52

 


 

  

 

Results of Operations – Three Months Ended June 30, 2011 Compared to June 30, 2010 - 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, 2011, compared to the three months ended June 30, 2010.

 

  

  

  

New York

  

Washington, DC

  

  

  

  

Merchandise

(Amounts in thousands)

Office

  

Office

  

Retail

  

 Mart 

EBITDA for the three months ended June 30, 2011

$

 157,016 

  

$

 111,517 

  

$

 96,507 

  

$

 23,998 

  

Add-back: non-property level overhead

  

  

  

  

  

  

  

  

  

  

  

  

  

expenses included above

  

 4,579 

  

  

 6,462 

  

  

 7,291 

  

  

 6,848 

  

Less: EBITDA from acquisitions, dispositions

  

  

  

  

  

  

  

  

  

  

  

  

  

and other non-operating income or expenses

  

 (7,864) 

  

  

 (2,348) 

  

  

 (8,083) 

  

  

 (1,002) 

GAAP basis same store EBITDA for the three months

  

  

  

  

  

  

  

  

  

  

  

  

  

ended June 30, 2011

  

 153,731 

  

  

 115,631 

  

  

 95,715 

  

  

 29,844 

  

Less: Adjustments for straight-line rents,

  

  

  

  

  

  

  

  

  

  

  

  

  

amortization of below-market leases, net, and other

  

  

  

  

  

  

  

  

  

  

  

  

  

non-cash adjustments

  

 (12,286) 

  

  

 1,095 

  

  

 (5,884) 

  

  

 (670) 

Cash basis same store EBITDA for the three months

  

  

  

  

  

  

  

  

  

  

  

  

  

ended June 30, 2011

$

 141,445 

  

$

 116,726 

  

$

 89,831 

  

$

 29,174 

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

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 

  

  

 6,202 

  

  

 6,807 

  

  

 7,157 

  

Less: EBITDA from acquisitions, dispositions

  

  

  

  

  

  

  

  

  

  

  

  

  

and other non-operating income or expenses

  

 (2,103) 

  

  

 (5,187) 

  

  

 (3,366) 

  

  

 (4,595) 

GAAP basis same store EBITDA for the three months

  

  

  

  

  

  

  

  

  

  

  

  

  

ended June 30, 2010

  

 155,709 

  

  

 115,287 

  

  

 91,541 

  

  

 30,448 

  

Less: Adjustments for straight-line rents,

  

  

  

  

  

  

  

  

  

  

  

  

  

amortization of below-market leases, net, and other

  

  

  

  

  

  

  

  

  

  

  

  

  

non-cash adjustments 

  

 (14,578) 

  

  

 (586) 

  

  

 (10,097) 

  

  

 (740) 

Cash basis same store EBITDA for the three months

  

  

  

  

  

  

  

  

  

  

  

  

  

ended June 30, 2010

$

 141,131 

  

$

 114,701 

  

$

 81,444 

  

$

 29,708 

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

(Decrease) increase in GAAP basis same store EBITDA for

  

  

  

  

  

  

  

  

  

  

  

  

  

the three months ended June 30, 2011 over the

  

  

  

  

  

  

  

  

  

  

  

  

  

three months ended June 30, 2010

$

 (1,978) 

  

$

 344 

  

$

 4,174 

  

$

 (604) 

  

  

  

  

  

  

  

  

  

  

  

  

  

  

Increase (decrease) in Cash basis same store EBITDA for

  

  

  

  

  

  

  

  

  

  

  

  

  

the three months ended June 30, 2011 over the

  

  

  

  

  

  

  

  

  

  

  

  

  

three months ended June 30, 2010

$

 314 

  

$

 2,025 

  

$

 8,387 

  

$

 (534) 

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

% (decrease) increase in GAAP basis same store EBITDA

  

 (1.3%) 

  

  

 0.3% 

  

  

 4.6% 

  

  

 (2.0%) 

  

  

  

  

  

  

  

  

  

  

  

  

  

  

% increase (decrease) in Cash basis same store EBITDA

  

 0.2% 

  

  

 1.8% 

  

  

 10.3% 

  

  

 (1.8%) 

53

 


 

  

Net Income and EBITDA by Segment for the Six Months Ended June 30, 2011 and 2010

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, 2011 and 2010.

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

      

(Amounts in thousands)  

For the Six Months Ended June 30, 2011

  

  

   

  

   

  

New York

  

Washington, DC

  

   

  

Merchandise

  

   

  

    

  

  

   

  

Total

  

Office

  

Office

  

Retail

  

Mart

  

Toys

  

Other(3)

Property rentals  

  

$

 1,088,957 

  

$

 391,377 

  

$

 280,654 

  

$

 214,109 

  

$

 118,928 

  

$

 - 

  

$

 83,889    

Straight-line rent adjustments  

  

  

 22,278 

  

  

 11,760 

  

  

 (711)  

  

  

 7,911 

  

  

 1,443 

  

  

 - 

  

  

 1,875    

Amortization of acquired below-  

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

    

  

market leases, net  

  

  

 33,571 

  

  

 16,355 

  

  

 978 

  

  

 13,956 

  

  

 34 

  

  

 - 

  

  

 2,248    

Total rentals  

  

  

 1,144,806 

  

  

 419,492 

  

  

 280,921 

  

  

 235,976 

  

  

 120,405 

  

  

 - 

  

  

 88,012    

Tenant expense reimbursements  

  

  

 173,284 

  

  

 65,359 

  

  

 18,233 

  

  

 75,967 

  

  

 7,767 

  

  

 - 

  

  

 5,958    

Cleveland Medical Mart development   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

    

  

project  

  

  

 73,068 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 73,068 

  

  

 - 

  

  

 -    

Fee and other income:  

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

    

  

Tenant cleaning fees  

  

  

 30,832 

  

  

 47,109 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 (16,277)   

  

Management and leasing fees  

  

  

 11,095 

  

  

 3,607 

  

  

 6,959 

  

  

 1,898 

  

  

 303 

  

  

 - 

  

  

 (1,672)   

  

Lease termination fees  

  

  

 8,499 

  

  

 5,636 

  

  

 2,011 

  

  

 852 

  

  

 - 

  

  

 - 

  

  

 -    

  

Other  

  

  

 25,678 

  

  

 9,866 

  

  

 10,662 

  

  

 3,099 

  

  

 1,878 

  

  

 - 

  

  

 173    

Total revenues  

  

  

 1,467,262 

  

  

 551,069 

  

  

 318,786 

  

  

 317,792 

  

  

 203,421 

  

  

 - 

  

  

 76,194    

Operating expenses  

  

  

 563,925 

  

  

 238,130 

  

  

 98,584 

  

  

 117,874 

  

  

 74,807 

  

  

 - 

  

  

 34,530    

Depreciation and amortization  

  

  

 264,125 

  

  

 92,000 

  

  

 67,749 

  

  

 56,291 

  

  

 22,175 

  

  

 - 

  

  

 25,910    

General and administrative  

  

  

 109,254 

  

  

 9,943 

  

  

 12,999 

  

  

 15,313 

  

  

 14,446 

  

  

 - 

  

  

 56,553    

Cleveland Medical Mart development  

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

    

  

project  

  

  

 68,218 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 68,218 

  

  

 - 

  

  

 -    

Acquisition and other costs  

  

  

 20,167 

  

  

 - 

  

  

 - 

  

  

 15,000 

  

  

 3,040 

  

  

 - 

  

  

 2,127    

Total expenses  

  

  

 1,025,689 

  

  

 340,073 

  

  

 179,332 

  

  

 204,478 

  

  

 182,686 

  

  

 - 

  

  

 119,120    

Operating income (loss)  

  

  

 441,573 

  

  

 210,996 

  

  

 139,454 

  

  

 113,314 

  

  

 20,735 

  

  

 - 

  

  

 (42,926)   

Income applicable to Toys  

  

  

 90,098 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 90,098 

  

  

 -    

Income (loss) from partially owned  

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

    

  

entities  

  

  

 42,687 

  

  

 243 

  

  

 (4,682)  

  

  

 1,242 

  

  

 254 

  

  

 - 

  

  

 45,630    

Income from Real Estate Fund  

  

  

 20,138 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 20,138    

Interest and other investment   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

    

  

income, net  

  

  

 125,115 

  

  

 320 

  

  

 80 

  

  

 2 

  

  

 18 

  

  

 - 

  

  

 124,695    

Interest and debt expense  

  

  

 (271,967)  

  

  

 (68,119)  

  

  

 (59,655)  

  

  

 (46,413)  

  

  

 (18,775)  

  

  

 - 

  

  

 (79,005)   

Net gain on disposition of wholly   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

    

  

owned and partially owned assets  

  

  

 6,677 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 6,677    

Income before income taxes  

  

  

 454,321 

  

  

 143,440 

  

  

 75,197 

  

  

 68,145 

  

  

 2,232 

  

  

 90,098 

  

  

 75,209    

Income tax expense  

  

  

 (12,304)  

  

  

 (959)  

  

  

 (1,307)  

  

  

 (5)  

  

  

 (1,321)  

  

  

 - 

  

  

 (8,712)   

Income from continuing  

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

    

  

operations  

  

  

 442,017 

  

  

 142,481 

  

  

 73,890 

  

  

 68,140 

  

  

 911 

  

  

 90,098 

  

  

 66,497    

Income from discontinued operations  

  

  

 134,773 

  

  

 - 

  

  

 46,466 

  

  

 5,761 

  

  

 82,546 

  

  

 - 

  

  

 -    

Net income  

  

  

 576,790 

  

  

 142,481 

  

  

 120,356 

  

  

 73,901 

  

  

 83,457 

  

  

 90,098 

  

  

 66,497    

Less:  

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

    

  

Net (income) loss attributable to   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

    

  

  

noncontrolling interests in   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

    

  

  

consolidated subsidiaries  

  

  

 (15,007)  

  

  

 (4,596)  

  

  

 - 

  

  

 86 

  

  

 - 

  

  

 - 

  

  

 (10,497)   

  

Net income attributable to  

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

    

  

  

noncontrolling interests in the   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

    

  

  

Operating Partnership, including  

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

    

  

  

unit distributions  

  

  

 (40,539)  

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 (40,539)   

Net income attributable to  

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

    

  

Vornado  

  

  

 521,244 

  

  

 137,885 

  

  

 120,356 

  

  

 73,987 

  

  

 83,457 

  

  

 90,098 

  

  

 15,461    

Interest and debt expense(2)

  

  

 401,804 

  

  

 68,947 

  

  

 66,314 

  

  

 48,632 

  

  

 22,502 

  

  

 83,528 

  

  

 111,881    

Depreciation and amortization(2)

  

  

 368,344 

  

  

 92,714 

  

  

 80,205 

  

  

 57,376 

  

  

 22,402 

  

  

 67,569 

  

  

 48,078    

Income tax expense(2)

  

  

 49,485 

  

  

 959 

  

  

 1,455 

  

  

 5 

  

  

 1,321 

  

  

 45,049 

  

  

 696    

EBITDA(1)

  

$

 1,340,877 

  

$

 300,505 

  

$

 268,330 

  

$

 180,000 

  

$

 129,682 

  

$

 286,244 

  

$

 176,116    

____________________

See notes on page 56.

54

 


 

  

 

Net Income and EBITDA by Segment for the Six Months Ended June 30, 2011 and 2010 - 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  

  

$

 1,048,199 

  

$

 387,852 

  

$

 279,778 

  

$

 191,442 

  

$

 112,098 

  

$

 - 

  

$

 77,029    

Straight-line rent adjustments  

  

  

 37,615 

  

  

 15,049 

  

  

 5,172 

  

  

 14,119 

  

  

 1,827 

  

  

 - 

  

  

 1,448    

Amortization of acquired below-  

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

    

  

market leases, net  

  

  

 32,055 

  

  

 18,339 

  

  

 1,242 

  

  

 9,449 

  

  

 (106)  

  

  

 - 

  

  

 3,131    

Total rentals  

  

  

 1,117,869 

  

  

 421,240 

  

  

 286,192 

  

  

 215,010 

  

  

 113,819 

  

  

 - 

  

  

 81,608    

Tenant expense reimbursements  

  

  

 178,350 

  

  

 65,683 

  

  

 27,463 

  

  

 72,946 

  

  

 7,806 

  

  

 - 

  

  

 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  

  

  

 7,811 

  

  

 3,025 

  

  

 528 

  

  

 3,836 

  

  

 422 

  

  

 - 

  

  

 -    

  

Other  

  

  

 25,633 

  

  

 8,923 

  

  

 10,898 

  

  

 1,745 

  

  

 2,706 

  

  

 - 

  

  

 1,361    

Total revenues  

  

  

 1,369,303 

  

  

 542,778 

  

  

 335,561 

  

  

 294,082 

  

  

 124,786 

  

  

 - 

  

  

 72,096    

Operating expenses  

  

  

 536,538 

  

  

 226,104 

  

  

 104,770 

  

  

 108,775 

  

  

 65,937 

  

  

 - 

  

  

 30,952    

Depreciation and amortization  

  

  

 267,070 

  

  

 87,978 

  

  

 72,230 

  

  

 55,325 

  

  

 23,366 

  

  

 - 

  

  

 28,171    

General and administrative  

  

  

 98,170 

  

  

 9,346 

  

  

 12,095 

  

  

 13,748 

  

  

 14,355 

  

  

 - 

  

  

 48,626    

Acquisition and other costs  

  

  

 1,930 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 1,930    

Total expenses  

  

  

 903,708 

  

  

 323,428 

  

  

 189,095 

  

  

 177,848 

  

  

 103,658 

  

  

 - 

  

  

 109,679    

Operating income (loss)  

  

  

 465,595 

  

  

 219,350 

  

  

 146,466 

  

  

 116,234 

  

  

 21,128 

  

  

 - 

  

  

 (37,583)   

Income applicable to Toys  

  

  

 104,866 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 104,866 

  

  

 -    

Income (loss) from partially owned  

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

    

  

entities  

  

  

 15,796 

  

  

 2,640 

  

  

 (4)  

  

  

 2,520 

  

  

 231 

  

  

 - 

  

  

 10,409    

Interest and other investment   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

    

  

income, net  

  

  

 18,580 

  

  

 327 

  

  

 49 

  

  

 189 

  

  

 24 

  

  

 - 

  

  

 17,991    

Interest and debt expense  

  

  

 (277,902)  

  

  

 (65,733)  

  

  

 (68,225)  

  

  

 (37,957)  

  

  

 (18,827)  

  

  

 - 

  

  

 (87,160)   

Net (loss) on extinguishment  

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

    

  

of debt  

  

  

 (1,072)  

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 (1,072)   

Net gain on disposition of wholly  

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

    

  

owned and partially owned assets  

  

  

 7,687 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 765 

  

  

 - 

  

  

 6,922    

Income (loss) before income taxes  

  

  

 333,550 

  

  

 156,584 

  

  

 78,286 

  

  

 80,986 

  

  

 3,321 

  

  

 104,866 

  

  

 (90,493)   

Income tax expense  

  

  

 (10,544)  

  

  

 (809)  

  

  

 (91)  

  

  

 (35)  

  

  

 (596)  

  

  

 - 

  

  

 (9,013)   

Income (loss) from continuing  

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

    

  

operations  

  

  

 323,006 

  

  

 155,775 

  

  

 78,195 

  

  

 80,951 

  

  

 2,725 

  

  

 104,866 

  

  

 (99,506)   

(Loss) from discontinued operations  

  

  

 (13,251)  

  

  

 - 

  

  

 (7,186)  

  

  

 (535)  

  

  

 (5,530)  

  

  

 - 

  

  

 -    

Net income (loss)  

  

  

 309,755 

  

  

 155,775 

  

  

 71,009 

  

  

 80,416 

  

  

 (2,805)  

  

  

 104,866 

  

  

 (99,506)   

Less:  

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

    

  

Net (income) loss attributable to  

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

    

  

  

noncontrolling interests in   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

    

  

  

consolidated subsidiaries  

  

  

 (1,194)  

  

  

 (4,848)  

  

  

 - 

  

  

 498 

  

  

 - 

  

  

 - 

  

  

 3,156    

  

Net income attributable to   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

    

  

  

noncontrolling interests in the   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

    

  

  

Operating Partnership, including  

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

    

  

  

unit distributions  

  

  

 (21,903)  

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 (21,903)   

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 the following page.

55

 


 

  

 

Net Income and EBITDA by Segment for the Six Months Ended June 30, 2011 and 2010 - 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 these measures 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 components of other EBITDA are summarized below.  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,

   

  

  

  

  

  

  

  

    

2011 

   

2010 

   

  

  

Our share of Real Estate Fund:  

  

  

   

  

  

   

  

  

  

Operations  

$

 1,807 

   

$

 - 

   

  

  

  

Net unrealized gains  

  

 3,392 

   

  

 - 

   

  

  

  

Net realized gains  

  

 771 

   

  

 - 

   

  

  

  

Carried interest  

  

 2,140 

   

  

 - 

   

  

  

Total  

  

 8,110 

   

  

 - 

   

  

  

Alexander's  

  

 30,989 

   

  

 28,659 

   

  

  

Lexington (1)

  

 29,306 

    

  

 29,283 

    

  

  

LNR (acquired in July 2010) (2)

  

 22,800 

   

  

 - 

   

  

  

555 California Street  

  

 21,388 

   

  

 22,624 

   

  

  

Hotel Pennsylvania  

  

 8,609 

   

  

 6,169 

   

  

  

Other investments  

  

 19,936 

   

  

 18,615 

    

  

  

   

  

 141,138 

   

  

 105,350 

   

  

  

Corporate general and administrative expenses (3)

  

 (41,379) 

   

  

 (39,956) 

   

  

  

Investment income and other, net (3)

  

 26,330 

   

  

 26,068 

   

  

  

Mezzanine loans loss (accrual) reversal and net gain on disposition  

  

 82,744 

   

  

 (6,900) 

   

  

  

Income from the mark-to-market of J.C. Penney derivative position  

  

 10,401 

   

  

 - 

   

  

  

Net gain on sale of condominiums  

  

 4,586 

   

  

 3,149 

   

  

  

Acquisition costs  

  

 (3,714) 

   

  

 (1,930) 

   

  

  

Real Estate Fund placement fees  

  

 (3,451) 

   

  

 (2,730) 

   

  

  

Net loss on extinguishment of debt  

  

 - 

   

  

 (1,072) 

   

  

  

Net income attributable to noncontrolling interests in the Operating Partnership,   

  

  

   

  

  

   

  

  

  

including unit distributions  

  

 (40,539) 

   

  

 (21,903) 

   

  

  

  

  

  

  

  

   

$

 176,116 

   

$

 60,076 

   

  

  

  

  

  

  

  

   

  

  

   

  

  

   

  

  

  

  

  

  

  

   

  

  

   

  

  

   

  

  

(1)

  

Includes net gains of $9,760 and $5,998 in the six months ended June 30, 2011 and 2010, respectively, resulting from

  

  

  

  

Lexington's stock issuances.

  

  

  

  

  

  

   

  

  

   

  

  

   

  

  

(2)

  

The six months ended June 30, 2011 includes $6,020 for our share of net gains from asset sales and $8,977 for our share

  

  

  

 of a tax settlement gain.

  

  

  

  

  

  

   

  

  

   

  

  

   

  

  

(3)

  

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

  

  

  

  

and offsetting liability.

  

56

 


 

  

 

Net Income and EBITDA by Segment for the Six Months Ended June 30, 2011 and 2010 - continued

 

Below is a summary of the percentages of EBITDA by geographic region (excluding discontinued operations and other gains and losses that affect comparability), from our New York Office, Washington DC Office, Retail and Merchandise Mart segments.

 

  

  

  

  

For the Six Months

  

  

  

  

  

  

Ended June 30,

  

  

  

  

  

  

2011 

  

2010 

  

  

  

Region:

  

  

  

  

  

  

  

  

New York City metropolitan area

  

60%

  

60%

  

  

  

  

Washington, DC / Northern Virginia metropolitan area

  

30%

  

31%

  

  

  

  

California

  

2%

  

2%

  

  

  

  

Chicago

  

5%

  

5%

  

  

  

  

Puerto Rico

  

1%

  

1%

  

  

  

  

Other geographies

  

2%

  

1%

  

  

  

  

  

  

100%

  

100%

  

  

57

 


 

  

Results of Operations – Six Months Ended June 30, 2011 Compared to June 30, 2010

 

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 $1,467,262,000 for the six months ended June 30, 2011, compared to $1,369,303,000 in the prior year’s six months, an increase of $97,959,000, of which $73,068,000 relates to the Cleveland Medical Mart development project.  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, sale of partial interests  

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

and other  

  

$

 (6,592) 

   

  

$

 (1,919) 

   

  

$

 (16,794) 

   

  

$

 9,135 

   

  

$

 - 

   

  

$

 2,986 

   

  

Development  

  

  

 4,780 

   

  

  

 - 

   

  

  

 4,501 

   

  

  

 279 

   

  

  

 - 

   

  

  

 - 

   

  

Hotel Pennsylvania  

  

  

 5,072 

   

  

  

 - 

   

  

  

 - 

   

  

  

 - 

   

  

  

 - 

   

  

  

 5,072 

    

  

Trade Shows  

  

  

 2,975 

   

  

  

 - 

   

  

  

 - 

   

  

  

 - 

   

  

  

 2,975 

   

  

  

 - 

   

  

Amortization of acquired below-market   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

leases, net  

  

  

 1,516 

   

  

  

 (1,984) 

   

  

  

 (264) 

   

  

  

 4,507 

   

  

  

 140 

   

  

  

 (883) 

   

  

Leasing activity (see page 42)  

  

  

 19,186 

   

  

  

 2,155 

   

  

  

 7,286 

   

  

  

 7,045 

   

  

  

 3,471 

   

  

  

 (771) 

   

   

  

  

 26,937 

   

  

  

 (1,748) 

   

  

  

 (5,271) 

   

  

  

 20,966 

   

  

  

 6,586 

   

  

  

 6,404 

   

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

Tenant expense reimbursements:  

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

Acquisitions/development, sale of partial   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

interests and other  

  

  

 (3,792) 

   

  

  

 - 

   

  

  

 (7,409) 

   

  

  

 930 

   

  

  

 - 

   

  

  

 2,687 

   

  

Operations  

  

  

 (1,274) 

   

  

  

 (324) 

   

  

  

 (1,821) 

   

  

  

 2,091 

   

  

  

 (39) 

   

  

  

 (1,181) 

   

  

   

  

  

 (5,066) 

   

  

  

 (324) 

   

  

  

 (9,230) 

   

  

  

 3,021 

   

  

  

 (39) 

   

  

  

 1,506 

   

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

Cleveland Medical Mart development  

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

    

  

project  

  

  

 73,068 

   (1) 

  

  

 - 

   

  

  

 - 

   

  

  

 - 

   

  

  

 73,068 

  (1) 

  

  

 - 

    

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

Fee and other income:  

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

BMS cleaning fees  

  

  

 3,712 

   

  

  

 6,052 

   

  

  

 - 

   

  

  

 - 

   

  

  

 - 

   

  

  

 (2,340) 

   (2) 

  

Management and leasing fees  

  

  

 (1,425) 

   

  

  

 757 

    

  

  

 (3,521) 

   (3) 

  

  

 1,353 

   

  

  

 270 

   

  

  

 (284) 

   

  

Lease cancellation fee income  

  

  

 688 

   

  

  

 2,611 

   

  

  

 1,483 

   

  

  

 (2,984) 

   

  

  

 (422) 

   

  

  

 - 

   

  

Other  

  

  

 45 

   

  

  

 943 

   

  

  

 (236) 

    

  

  

 1,354 

   

  

  

 (828) 

    

  

  

 (1,188) 

    

   

  

  

 3,020 

   

  

  

 10,363 

   

  

  

 (2,274) 

   

  

  

 (277) 

   

  

  

 (980) 

   

  

  

 (3,812) 

   

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

Total increase (decrease) in revenues  

  

$

 97,959 

   

  

$

 8,291 

   

  

$

 (16,775) 

   

  

$

 23,710 

   

  

$

 78,635 

   

  

$

 4,098 

   

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

(1)

  

$68,218 is offset by development costs expensed in the period.  See note (4) on page 59.

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

(2)

  

Primarily from the elimination of intercompany fees from operating segments upon consolidation. See note (1) on page 59.

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

(3)

  

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

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

58

 


 

  

 

Results of Operations – Six Months Ended June 30, 2011 Compared to June 30, 2010 - continued

 

Expenses

Our expenses, which consist primarily of operating, depreciation and amortization and general and administrative expenses, were $1,025,689,000 for the six months ended June 30, 2011, compared to $903,708,000 in the prior year’s six months, an increase of $121,981,000, of which $68,218,000 relates to the Cleveland Medical Mart development project.  Below are the details of the increase (decrease) by segment:

 

(Amounts in thousands)  

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

   

  

  

  

   

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

   

  

  

  

   

  

New York

   

  

Washington, DC

   

  

  

    

  

Merchandise

   

  

  

  

   

Increase (decrease) due to:  

  

Total

   

  

Office

   

  

Office

   

  

Retail

   

  

Mart

   

  

Other

   

Operating:  

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

Acquisitions, sale of partial interests  

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

 and other   

  

$

 (221) 

   

  

$

 - 

   

  

$

 (9,565) 

   

  

$

 6,657 

   

  

$

 - 

   

  

$

 2,687 

   

  

Development/redevelopment  

  

  

 543 

   

  

  

 - 

   

  

  

 (175) 

   

  

  

 718 

   

  

  

 - 

   

  

  

 - 

   

  

Non-reimbursable expenses, including  

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

    

  

  

  

   

  

  

bad debt reserves  

  

  

 4,673 

   

  

  

 854 

   

  

  

 1,276 

   

  

  

 (2,297) 

   

  

  

 4,840 

    

  

  

  

   

  

Hotel Pennsylvania  

  

  

 2,479 

   

  

  

 - 

   

  

  

 - 

   

  

  

 - 

   

  

  

 - 

   

  

  

 2,479 

   

  

Trade Shows  

  

  

 2,002 

   

  

  

 - 

   

  

  

 - 

   

  

  

 - 

   

  

  

 2,002 

   

  

  

 - 

   

  

BMS expenses  

  

  

 5,437 

   

  

  

 5,437 

   

  

  

 - 

   

  

  

 - 

   

  

  

 - 

   

  

  

 - 

   

  

Operations  

  

  

 12,474 

   

  

  

 5,735 

    

  

  

 2,278 

   

  

  

 4,021 

    

  

  

 2,028 

   

  

  

 (1,588) 

   (1) 

  

   

  

  

 27,387 

   

  

  

 12,026 

   

  

  

 (6,186) 

   

  

  

 9,099 

   

  

  

 8,870 

   

  

  

 3,578 

   

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

Depreciation and amortization:  

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

Acquisitions/development, sale of partial   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

interests and other  

  

  

 (4,809) 

   

  

  

 - 

   

  

  

 (7,048) 

   

  

  

 2,239 

   

  

  

 - 

   

  

  

 - 

   

  

Operations    

  

  

 1,864 

   

  

  

 4,022 

   

  

  

 2,567 

   

  

  

 (1,273) 

   

  

  

 (1,191) 

   

  

  

 (2,261) 

   

  

  

   

  

  

 (2,945) 

   

  

  

 4,022 

   

  

  

 (4,481) 

   

  

  

 966 

   

  

  

 (1,191) 

   

  

  

 (2,261) 

   

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

General and administrative:  

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

Mark-to-market of deferred compensation   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

plan liability  (2) 

  

  

 4,968 

   

  

  

 - 

   

  

  

 - 

   

  

  

 - 

   

  

  

 - 

   

  

  

 4,968 

   

  

Real Estate Fund placement fees  

  

  

 721 

   

  

  

 - 

   

  

  

 - 

   

  

  

 - 

   

  

  

 - 

   

  

  

 721 

   

  

Operations   

  

  

 5,395 

   

  

  

 597 

   

  

  

 904 

   

  

  

 1,565 

   

  

  

 91 

    

  

  

 2,238 

   (3) 

  

   

  

  

 11,084 

   

  

  

 597 

   

  

  

 904 

   

  

  

 1,565 

   

  

  

 91 

   

  

  

 7,927 

   

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

Cleveland Medical Mart development  

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

project   

  

  

 68,218 

   (4) 

  

  

 - 

   

  

  

 - 

   

  

  

 - 

   

  

  

 68,218 

   (4) 

  

  

 - 

   

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

Acquisition and other costs  

  

  

 18,237 

   

  

  

 - 

   

  

  

 - 

    

  

  

 15,000 

   (5) 

  

  

 3,040 

   

  

  

 197 

   

  

  

   

  

  

  

   

  

  

  

   

  

  

  

    

  

  

  

   

  

  

  

   

  

  

  

   

Total increase (decrease) in expenses  

  

$

 121,981 

   

  

$

 16,645 

   

  

$

 (9,763) 

   

  

$

 26,630 

   

  

$

 79,028 

   

  

$

 9,441 

   

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

(1)

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

  

  

  

(2)

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, net” on our consolidated statements of income.

  

  

  

(3)

Primarily from higher payroll costs and stock-based compensation expense.

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

(4)

This expense is entirely offset by development revenue in the period.  See note (1) on page 58.

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

(5)

Represents the buy-out of a below-market lease.

59

 


 
 

  

 

Results of Operations – Six Months Ended June 30, 2011 Compared to June 30, 2010 - continued

 

Income Applicable to Toys

 

In the six months ended June 30, 2011, we recognized net income of $90,098,000 from our investment in Toys, comprised of $85,773,000 for our 32.7% share of Toys’ net income ($130,822,000 before our share of Toys’ income tax expense) and $4,325,000 of interest and other income.

 

In the six months ended June 30, 2010, we recognized net income of $104,866,000 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.

 

 

Income from Partially Owned Entities

Summarized below are the components of income from partially owned entities for the six months ended June 30, 2011 and 2010.

 

  

  

  

  

   

  

For the Six Months Ended

  

  

  

  

  

   

  

June 30,

  

  

(Amounts in thousands)  

  

2011 

  

2010 

  

  

Equity in Net Income (Loss):  

  

  

  

   

  

  

  

   

  

  

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

  

$

 16,649 

   

  

$

 13,526 

    

  

  

  

  

  

    

  

  

  

   

  

  

  

    

  

  

Lexington - 11.7% share in 2011 and 13.8% share in 2010 of equity in net income (1)

  

  

 10,826 

    

  

  

 5,617 

    

  

  

  

  

  

    

  

  

  

    

  

  

  

    

  

  

LNR - 26.2% share of equity in net income (acquired in July 2010) (2)

  

  

 26,257 

    

  

  

 - 

    

  

  

   

  

  

  

   

  

  

  

   

  

  

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

  

  

 (2) 

   

  

  

 2,257 

   

  

  

   

  

  

  

   

  

  

  

   

  

  

Partially owned office buildings (3)

  

  

 (6,990) 

   

  

  

 1,778 

   

  

  

   

  

  

  

   

  

  

  

   

  

  

Other equity method investments (4)

  

  

 (4,053) 

   

  

  

 (7,382) 

    

  

  

  

  

  

   

  

$

 42,687 

   

  

$

 15,796 

   

  

  

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

  

  

   

  

  

  

   

  

  

  

   

  

  

 (1) 

The six months ended June 30, 2011 and 2010 includes $9,760 and $5,998, respectively, of net gains resulting from Lexington's stock issuances.

  

  

  

  

   

  

  

  

   

  

  

  

   

  

  

 (2) 

Includes $8,977 for our share of a tax settlement gain and $6,020 for our share of net gains from asset sales.

  

  

  

  

   

  

  

  

   

  

  

  

   

  

  

 (3) 

The six months ended June 30, 2011 includes $9,022 for our share of expense, primarily for straight-line rent reserves and the write-off of tenant improvements in connection with a tenant's bankruptcy at the Warner Building.

  

  

  

  

   

  

  

  

   

  

  

  

   

  

  

 (4) 

Represents our equity in net income or loss of Verde Realty Operating Partnership, 85 10th Avenue Associates and others.

 

 

Income from Real Estate Fund

In the six months ended June 30, 2011, we recognized $20,138,000 of income from the Fund, including $13,570,000 of net unrealized gains from the mark-to-market of investments in the Fund, and $3,085,000 of net realized gains from the disposition of an investment.  Of the $20,138,000, $12,028,000 is attributable to noncontrolling interests.  Accordingly, our share of the Fund’s income was $8,110,000 and includes $2,140,000 of accrued carried interest.  In addition, we recognized $1,165,000 of management and leasing fees which are included as a component of “fee and other income,” and incurred $3,451,000 of placement fees in connection with the February 2011 closing of the Fund, which is included in “general and administrative” expenses.

60

 


 

  

 

 

Results of Operations – Six Months Ended June 30, 2011 Compared to June 30, 2010 - continued

 

Interest and Other Investment Income, net

Interest and other investment income, net (comprised of the mark-to-market of derivative positions in marketable equity securities, interest income on mezzanine loans receivable, other interest income and dividend income) was $125,115,000 in the six months ended June 30, 2011, compared to $18,580,000 in the prior year’s six months, an increase of $106,535,000. This increase resulted from:

 

  

  

  

  

  

  

  

   

  

  

(Amounts in thousands)

  

  

  

   

  

  

Mezzanine loans ($82,744 loss reversal and net gain on disposition in 2011, compared to a $6,900

  

  

  

  

   

  

  

  

loss accrual in 2010)

  

  

$

 89,644 

   

  

  

Income from the mark-to-market of J.C. Penney derivative position

  

  

  

 10,401 

   

  

  

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)

  

  

 4,968 

   

  

  

Other, net

  

  

 1,522 

   

  

  

  

  

  

  

$

 106,535 

   

  

 

 

Interest and Debt Expense

Interest and debt expense was $271,967,000 in the six months ended June 30, 2011, compared to $277,902,000 in the prior year’s six months, a decrease of $5,935,000.  This decrease was primarily due to savings of (i) $10,951,000 from the repayment of the Springfield Mall mortgage at a discount in December 2010, (ii) $9,209,000 from the deconsolidation of the Warner Building resulting from the sale of a 45% interest in October 2010, and (iii) $6,734,000 applicable to the repurchase and retirement of our convertible senior debentures, partially offset by (iv) $13,194,000 from the issuance of $660,000,000 of cross-collateralized debt secured by 40 of our strip shopping centers, (v) $5,630,000 from the financing of 2121 Crystal Drive and Two Penn Plaza in the first quarter of 2011, and (vi) $2,532,000 from the consolidation of the San Jose Shopping Center resulting from the October 2010 acquisition of the 55% interest we did not previously own.

 

 

Net Gain on Disposition of Wholly Owned and Partially Owned Assets

Net gain on disposition of wholly owned and partially owned assets was $6,677,000 in the six months ended June 30, 2011, compared to $7,687,000 in the prior year’s six months and resulted primarily from the sale of residential condominiums and marketable securities.

 

 

Income Tax Expense

Income tax expense was $12,304,000 in the six months ended June 30, 2011, compared to $10,544,000 in the prior year’s six months, an increase of $1,760,000.  This increase resulted primarily from higher taxable income of our taxable REIT subsidiaries.

61

 


 

  

 

Results of Operations – Six Months Ended June 30, 2011 Compared to June 30, 2010 - continued

 

Income (Loss) from Discontinued Operations

The table below sets forth the combined results of assets related to discontinued operations for the six months ended June 30, 2011 and 2010, including the High Point Complex in North Carolina, which was disposed by the receiver on March 31, 2011.

 

  

  

  

   

  

  

   

  

  

   

  

  

  

  

   

  

For the Six Months Ended

  

  

  

  

   

  

June 30,

  

  

(Amounts in thousands)  

  

2011 

  

2010 

  

  

Total revenues  

  

$

 5,987   

  

$

 23,137   

  

  

Total expenses  

  

  

 6,744   

  

  

 26,332   

  

  

   

  

  

 (757)  

  

  

 (3,195)  

  

  

Net gain on extinguishment of High Point debt  

  

  

 83,907   

  

  

 -   

  

  

Net gain on sale of 1140 Connecticut Avenue and 1227 25th Street

   

  

  

 45,862   

  

  

 -   

  

  

Net gain on sales of other real estate  

  

  

 5,761   

  

  

 -   

  

  

Litigation loss accrual  

  

  

 -   

  

  

 (10,056)  

  

  

Income (loss) from discontinued operations  

  

$

 134,773   

  

$

 (13,251)  

  

 

 

Net Income Attributable to Noncontrolling Interests in Consolidated Subsidiaries

 

Net income attributable to noncontrolling interests in consolidated subsidiaries was $15,007,000 in the six months ended June 30, 2011, compared to $1,194,000 in the prior year’s six months, an increase of $13,813,000.  This increase resulted primarily from $12,028,000 of income allocated to the noncontrolling interests in our Real Estate Fund.

 

 

Net Income Attributable to Noncontrolling Interests in the Operating Partnership, including Unit Distributions

 

 Net income attributable to noncontrolling interests in the Operating Partnership, including unit distributions for the six months ended June 30, 2011 and 2010 is primarily comprised of allocations of income to redeemable noncontrolling interests of $33,588,000 and $19,666,000, respectively, and preferred unit distributions of the Operating Partnership of $8,951,000 and $9,209,000, respectively.  The increase of $13,922,000 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 $30,116,000 for the six months ended June 30, 2011, compared to $28,533,000 for the prior year’s six months, an increase of $1,583,000.  This increase resulted from the issuance of Series J preferred shares during the second quarter of 2011, partially offset by the redemption of Series D-10 preferred shares in September 2010.

62

 


 

  

 

Results of Operations – Six Months Ended June 30, 2011 Compared to June 30, 2010 - 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, 2011, compared to the six months ended June 30, 2010.

 

  

  

  

New York

  

Washington, DC

  

  

  

  

Merchandise

(Amounts in thousands)

Office

  

Office

  

Retail

  

 Mart 

EBITDA for the six months ended June 30, 2011

$

 300,505 

  

$

 268,330 

  

$

 180,000 

  

$

 129,682 

  

Add-back: non-property level overhead

  

  

  

  

  

  

  

  

  

  

  

  

  

expenses included above

  

 9,943 

  

  

 12,999 

  

  

 15,313 

  

  

 14,446 

  

Less: EBITDA from acquisitions, dispositions

  

  

  

  

  

  

  

  

  

  

  

  

  

and other non-operating income or expenses

  

 (9,188) 

  

  

 (49,530) 

  

  

 (2,101) 

  

  

 (82,598) 

GAAP basis same store EBITDA for the six months

  

  

  

  

  

  

  

  

  

  

  

  

  

ended June 30, 2011

  

 301,260 

  

  

 231,799 

  

  

 193,212 

  

  

 61,530 

  

Less: Adjustments for straight-line rents,

  

  

  

  

  

  

  

  

  

  

  

  

  

amortization of below-market leases, net, and other

  

  

  

  

  

  

  

  

  

  

  

  

  

non-cash adjustments

  

 (26,325) 

  

  

 1,566 

  

  

 (12,718) 

  

  

 (1,477) 

Cash basis same store EBITDA for the six months

  

  

  

  

  

  

  

  

  

  

  

  

  

ended June 30, 2011

$

 274,935 

  

$

 233,365 

  

$

 180,494 

  

$

 60,053 

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

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 

  

  

 12,095 

  

  

 13,748 

  

  

 14,355 

  

Less: EBITDA from acquisitions, dispositions

  

  

  

  

  

  

  

  

  

  

  

  

  

and other non-operating income or expenses

  

 (2,727) 

  

  

 (7,468) 

  

  

 (8,482) 

  

  

 (8,535) 

GAAP basis same store EBITDA for the six months

  

  

  

  

  

  

  

  

  

  

  

  

  

ended June 30, 2010

  

 305,752 

  

  

 225,392 

  

  

 185,406 

  

  

 59,424 

  

Less: Adjustments for straight-line rents,

  

  

  

  

  

  

  

  

  

  

  

  

  

amortization of below-market leases, net, and other

  

  

  

  

  

  

  

  

  

  

  

  

  

non-cash adjustments 

  

 (30,186) 

  

  

 (5,497) 

  

  

 (19,126) 

  

  

 (1,721) 

Cash basis same store EBITDA for the six months

  

  

  

  

  

  

  

  

  

  

  

  

  

ended June 30, 2010

$

 275,566 

  

$

 219,895 

  

$

 166,280 

  

$

 57,703 

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

(Decrease) increase in GAAP basis same store EBITDA for

  

  

  

  

  

  

  

  

  

  

  

  

  

the six months ended June 30, 2011 over the

  

  

  

  

  

  

  

  

  

  

  

  

  

six months ended June 30, 2010

$

 (4,492) 

  

$

 6,407 

  

$

 7,806 

  

$

 2,106 

  

  

  

  

  

  

  

  

  

  

  

  

  

  

(Decrease) increase in Cash basis same store EBITDA for

  

  

  

  

  

  

  

  

  

  

  

  

  

the six months ended June 30, 2011 over the

  

  

  

  

  

  

  

  

  

  

  

  

  

six months ended June 30, 2010

$

 (631) 

  

$

 13,470 

  

$

 14,214 

  

$

 2,350 

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

% (decrease) increase in GAAP basis same store EBITDA

  

 (1.5%) 

  

  

 2.8% 

  

  

 4.2% 

  

  

 3.5% 

  

  

  

  

  

  

  

  

  

  

  

  

  

  

% (decrease) increase in Cash basis same store EBITDA

  

 (0.2%) 

  

  

 6.1% 

  

  

 8.5% 

  

  

 4.1% 

63

 


 
 

  

SUPPLEMENTAL INFORMATION

 

Three Months Ended June 30, 2011 vs. Three Months Ended March 31, 2011

 

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, 2011, compared to the three months ended March 31, 2011.

 

  

  

   

New York

  

Washington, DC

  

  

  

  

Merchandise

(Amounts in thousands)  

Office

  

Office

  

Retail

  

 Mart 

EBITDA for the three months ended June 30, 2011  

$

 157,016 

  

$

 111,517 

  

$

 96,507 

  

$

 23,998 

  

Add-back: non-property level overhead expenses  

  

  

  

  

  

  

  

  

  

  

  

  

  

included above  

  

 4,579 

  

  

 6,462 

  

  

 7,291 

  

  

 6,848 

  

Less: EBITDA from acquisitions, dispositions   

  

  

  

  

  

  

  

  

  

  

  

  

  

and other non-operating income or expenses  

  

 (7,864) 

  

  

 (2,269) 

  

  

 (4,965) 

  

  

 - 

GAAP basis same store EBITDA for the three months  

  

  

  

  

  

  

  

  

  

  

  

  

ended June 30, 2011  

  

 153,731 

  

  

 115,710 

  

  

 98,833 

  

  

 30,846 

  

Less: Adjustments for straight-line rents, amortization of  

  

  

  

  

  

  

  

  

  

  

  

  

  

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

  

 (12,286) 

  

  

 1,103 

  

  

 (8,125) 

  

  

 (670) 

Cash basis same store EBITDA for the three months  

  

  

  

  

  

  

  

  

  

  

  

  

ended June 30, 2011  

$

 141,445 

  

$

 116,813 

  

$

 90,708 

  

$

 30,176 

  

  

   

  

  

  

  

  

  

  

  

  

  

  

  

  

   

  

  

  

  

  

  

  

  

  

  

  

EBITDA for the three months ended March 31, 2011(1)

$

 143,489 

  

$

 156,813 

  

$

 83,493 

  

$

 105,684 

  

Add-back: non-property level overhead expenses  

  

  

  

  

  

  

  

  

  

  

  

  

  

included above   

  

 5,364 

  

  

 6,537 

  

  

 8,022 

  

  

 7,598 

  

Less: EBITDA from acquisitions, dispositions   

  

  

  

  

  

  

  

  

  

  

  

  

  

and other non-operating income or expenses  

  

 (1,070) 

  

  

 (47,262) 

  

  

 7,254 

  

  

 (82,919) 

GAAP basis same store EBITDA for the three months  

  

  

  

  

  

  

  

  

  

  

  

  

ended March 31, 2011  

  

 147,783 

  

  

 116,088 

  

  

 98,769 

  

  

 30,363 

  

Less: Adjustments for straight-line rents, amortization of  

  

  

  

  

  

  

  

  

  

  

  

  

  

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

  

 (14,038) 

  

  

 335 

  

  

 (8,983) 

  

  

 (807) 

Cash basis same store EBITDA for the three months  

  

  

  

  

  

  

  

  

  

  

  

  

ended March 31, 2011  

$

 133,745 

  

$

 116,423 

  

$

 89,786 

  

$

 29,556 

  

  

   

  

  

  

  

  

  

  

  

  

  

  

  

  

   

  

  

  

  

  

  

  

  

  

  

  

Increase (decrease) in GAAP basis same store EBITDA for   

  

  

  

  

  

  

  

  

  

  

  

  

the three months ended June 30, 2011 over the  

  

  

  

  

  

  

  

  

  

  

  

  

three months ended March 31, 2011  

$

 5,948 

  

$

 (378) 

  

$

 64 

  

$

 483 

  

  

   

  

  

  

  

  

  

  

  

  

  

  

Increase in Cash basis same store EBITDA for   

  

  

  

  

  

  

  

  

  

  

  

  

the three months ended June 30, 2011 over the  

  

  

  

  

  

  

  

  

  

  

  

  

three months ended March 31, 2011  

$

 7,700 

  

$

 390 

  

$

 922 

  

$

 620 

  

  

   

  

  

  

  

  

  

  

  

  

  

  

  

  

   

  

  

  

  

  

  

  

  

  

  

  

% increase (decrease) in GAAP basis same store EBITDA  

  

 4.0% 

  

  

 (0.3%) 

  

  

 0.1% 

  

  

 1.6% 

  

  

   

  

  

  

  

  

  

  

  

  

  

  

% increase in Cash basis same store EBITDA  

  

 5.8% 

  

  

 0.3% 

  

  

 1.0% 

  

  

 2.1% 

  

  

   

  

  

  

  

  

  

  

  

  

  

  

  

  

   

  

  

  

  

  

  

  

  

  

  

  

 (1) 

Below is the reconciliation of net income to EBITDA for the three months ended March 31, 2011

  

  

   

  

  

  

  

  

  

  

  

  

  

  

  

  

   

New York

  

Washington, DC

  

  

  

Merchandise

(Amounts in thousands)  

Office

  

Office

  

Retail

  

 Mart 

Net income attributable to Vornado for the three months  

  

  

  

  

  

  

  

  

  

  

  

  

ended March 31, 2011  

$

 65,883 

  

$

 81,845 

  

$

 30,348 

  

$

 81,192 

Interest and debt expense  

  

 31,994 

  

  

 32,221 

  

  

 24,164 

  

  

 12,907 

Depreciation and amortization  

  

 45,093 

  

  

 41,899 

  

  

 28,976 

  

  

 11,175 

Income tax expense  

  

 519 

  

  

 848 

  

  

 5 

  

  

 410 

EBITDA for the three months ended March 31, 2011  

$

 143,489 

  

$

 156,813 

  

$

 83,493 

  

$

 105,684 

64

 


 
 

  

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) may require funding from borrowings and/or equity offerings.  In addition, the Fund has aggregate unfunded equity commitments of $543,900,000 for acquisitions, including $135,969,000 from us.  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.

 

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, dividends to shareholders, distributions to unitholders of the Operating Partnership, as well as acquisition and development costs. 

 

 

Cash Flows for the Six Months Ended June 30, 2011

Our cash and cash equivalents were $591,515,000 at June 30, 2011, a $99,274,000 decrease over the balance at December 31, 2010.  This decrease was primarily due to cash flows from financing activities, partially offset by cash flows from operating activities, as discussed below.  

 

Our consolidated outstanding debt was $10,540,048,000 at June 30, 2011, a $353,591,000 decrease over the balance at December 31, 2010.  As of June 30, 2011 and December 31, 2010, $300,000,000 and $874,000,000, respectively, was outstanding under our revolving credit facilities.  During the remainder of 2011 $1,234,960,000 of our outstanding debt matures; we may refinance this maturing debt as it comes due or choose to repay it using a portion of our $3,136,515,000 of available capacity (comprised of $591,515,000 of cash and cash equivalents and $2,545,000,000 of availability under our revolving credit facilities).

 

Cash flows provided by operating activities of $260,040,000 was comprised of (i) net income of $576,790,000 and (ii) distributions of income from partially owned entities of $43,741,000, partially offset by (iii) $148,548,000 of non-cash adjustments, which include depreciation and amortization expense, the effect of straight-lining of rental income and equity in net income of partially owned entities, and (iv) the net change in operating assets and liabilities of $211,943,000, including $97,802,000 related to Real Estate Fund investments.

 

Net cash provided by investing activities of $23,257,000 was comprised of (i) $271,375,000 of capital distributions from partially owned entities, (ii) $130,789,000 of proceeds from sales of real estate and related investments, (iii) $99,990,000 of proceeds from sales and repayments of mezzanine loans (iv) changes in restricted cash of $91,127,000 and (v) $19,301,000 of proceeds from sales of, and return of investments in, marketable securities, partially offset by (vi) $426,376,000 of investments in partially owned entities, (vii) $86,944,000 of additions to real estate, (viii) $43,516,000 of investments in mezzanine loans receivable and other and (ix) $32,489,000 of development costs and construction in progress.

 

Net cash used in financing activities of $382,571,000 was comprised of (i) $1,636,817,000 for the repayments of borrowings, (ii) $254,099,000 of dividends paid on common shares, (iii) $62,111,000 of distributions to noncontrolling interests, (iv) $27,117,000 of dividends paid on preferred shares, (v) $23,319,000 of debt issuance and other costs and (vi) $8,000,000 for the purchase of outstanding preferred units and (vii) $748,000 for the repurchase of shares related to stock compensation agreements and related tax holdings, partially offset by (viii) $1,284,167,000 of proceeds from borrowings, (ix) $214,538,000 of proceeds from the issuance of Series J preferred shares, (x) $109,605,000 of contributions from noncontrolling interests and (xi) $21,330,000 of proceeds received from exercise of employee share options

65

 


 

  

 

LIQUIDITY AND CAPITAL RESOURCES – continued

 

Cash Flows for the Six Months Ended June 30, 2010

 

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.

 

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 and 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 from sales and repayments 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) acquisitions of real estate and other of $15,128,000, and (xii) purchases of marketable securities of $13,917,000.

 

Net cash used in financing activities of $623,082,000 was comprised of (i) repayments of borrowings, including the purchase of our senior unsecured notes, of $1,197,525,000, (ii) dividends paid on common shares of $236,279,000, (iii) dividends paid on preferred shares of $28,533,000, (iv) distributions to noncontrolling interests of $27,665,000, (v) repurchase of shares related to stock compensation arrangements and related tax withholdings of $25,223,000, (vi) purchases of outstanding preferred units of $13,000,000 and (vii) debt issuance costs of $5,724,000, partially offset by (viii) proceeds from borrowings of $901,040,000.

66

 


 

  

 

LIQUIDITY AND CAPITAL RESOURCES - continued

 

Capital Expenditures

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 to lease space that has been vacant for more than nine months and 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.  Below is a summary of capital expenditures, leasing commissions and a reconciliation of total expenditures on an accrual basis to the cash expended in the six months ended June 30, 2011.

 

  

  

  

  

  

   

  

New York

  

Washington, DC

  

  

   

  

Merchandise

  

  

  

(Amounts in thousands)

Total

  

Office

  

Office

  

Retail

  

Mart

  

Other

Expenditures to maintain assets

$

 20,864   

  

$

 7,803   

  

$

 4,124   

  

$

 2,984   

  

$

 4,326   

  

$

 1,627 

Tenant improvements

  

 38,972   

  

  

 21,584   

  

  

 12,608   

  

  

 2,319   

  

  

 2,139   

  

  

 322 

Leasing commissions

  

 10,142   

  

  

 6,854   

  

  

 2,177   

  

  

 916   

  

  

 72   

  

  

 123 

Non-recurring capital expenditures

  

 14,945   

  

  

 11,031   

  

  

 -   

  

  

 1,967   

  

  

 -   

  

  

 1,947 

Total capital expenditures and leasing

  

    

  

  

    

  

  

    

  

  

    

  

  

    

  

  

  

  

commissions (accrual basis)

  

 84,923   

  

  

 47,272   

  

  

 18,909   

  

  

 8,186   

  

  

 6,537   

  

  

 4,019 

Adjustments to reconcile to cash basis:

  

    

  

  

    

  

  

    

  

  

    

  

  

    

  

  

  

  

  

Expenditures in the current year 

  

    

  

  

    

  

  

    

  

  

    

  

  

    

  

  

  

  

  

  

 applicable to prior periods

  

 62,082   

  

  

 20,109   

  

  

 9,028   

  

  

 12,907   

  

  

 19,210   

  

  

 828 

  

  

Expenditures to be made in future

  

    

  

  

    

  

  

    

  

  

    

  

  

    

  

  

  

  

  

  

periods for the current period

  

 (49,923)   

  

  

 (29,135)   

  

  

 (13,547)   

  

  

 (5,194)   

  

  

 (2,047)   

  

  

 - 

Total capital expenditures and leasing

  

    

  

  

    

  

  

    

  

  

    

  

  

    

  

  

  

  

 commissions (cash basis)

$

 97,082   

  

$

 38,246   

  

$

 14,390   

  

$

 15,899   

  

$

 23,700   

  

$

 4,847 

  

  

  

  

  

    

  

  

   

  

  

   

  

  

   

  

  

   

  

  

  

Tenant improvements and leasing commissions:

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

  

  

Per square foot per annum

$

 3.31 

  

$

 5.16 

  

$

 3.96 

  

$

 0.93 

  

$

 1.47 

  

$

 - 

  

Percentage of initial rent

  

8.0%

  

  

8.5%

  

  

10.1%

  

  

3.8%

  

  

4.3%

  

  

 - 

 

Development and Redevelopment Expenditures

Development and redevelopment expenditures consist of 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 completed and ready for its intended use.  Below is a summary of development and redevelopment expenditures incurred in the six months ended June 30, 2011.

 

  

  

  

  

  

   

  

New York

  

Washington, DC

  

  

   

  

Merchandise

  

  

  

(Amounts in thousands)

Total

  

Office

  

Office

  

Retail

  

Mart

  

Other

Bergen Town Center

$

 10,105 

  

$

 - 

  

$

 - 

  

$

 10,105 

  

$

 - 

  

$

 - 

Green Acres Mall

  

 3,539 

  

  

 - 

  

  

 - 

  

  

 3,539 

  

  

 - 

  

  

 - 

West End 25

  

 1,841 

  

  

 - 

  

  

 1,841 

  

  

 - 

  

  

 - 

  

  

 - 

North Bergen, New Jersey

  

 1,494 

  

  

 - 

  

  

 - 

  

  

 1,494 

  

  

 - 

  

  

 - 

510 Fifth Avenue

  

 1,492 

  

  

 - 

  

  

 - 

  

  

 1,492 

  

  

 - 

  

  

 - 

Crystal City Hotel

  

 1,207 

  

  

 - 

  

  

 1,207 

  

  

 - 

  

  

 - 

  

  

 - 

Crystal Square

  

 1,046 

  

  

 - 

  

  

 1,046 

  

  

 - 

  

  

 - 

  

  

 - 

Crystal Plaza 5

  

 1,013 

  

  

 - 

  

  

 1,013 

  

  

 - 

  

  

 - 

  

  

 - 

Poughkeepsie, New York

  

 796 

  

  

 - 

  

  

 - 

  

  

 796 

  

  

 - 

  

  

 - 

Other

  

 9,956 

  

  

 2,055 

  

  

 3,559 

  

  

 2,164 

  

  

 310 

  

  

 1,868 

  

  

  

  

$

 32,489 

  

$

 2,055 

  

$

 8,666 

  

$

 19,590 

  

$

 310 

  

$

 1,868 

 

As of June 30, 2011, the estimated costs to complete the above projects are approximately $29,700,000.  In addition, during 2012, we plan to redevelop 1851 South Bell Street, a 348,000 square foot office building in Crystal City, into a new 700,000 square foot office building (readdressed as 1900 Crystal Drive).  The estimated cost of this project is approximately $300,000,000, or $425 per square foot.  There can be no assurance that this project will commence, or, if commenced, be completed on schedule or within budget. 

67

 


 

  

 

LIQUIDITY AND CAPITAL RESOURCES - continued

 

Below is a summary of capital expenditures and leasing commissions 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

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

 

Below is a summary of development and redevelopment expenditures incurred in the six months ended June 30, 2010.

 

  

  

  

  

  

  

  

New York

  

Washington, DC

  

  

  

  

Merchandise

  

  

  

(Amounts in thousands)

Total

  

Office

  

Office

  

Retail

  

Mart

  

Other

Residential condominiums

$

 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 

68

 


 
 

  

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 the Terrorism Risk Insurance Program Reauthorization Act. 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 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, 2011, the aggregate dollar amount of these guarantees and master leases is approximately $168,124,000.

 

At June 30, 2011, $21,534,000 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 $189,300,000, of which $135,969,000 is committed to our Real Estate Fund.  In addition, we have agreed in principle to contribute up to $52,000,000 to a new investment management fund which will be managed by LNR.

 

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

69

 


 

  

LIQUIDITY AND CAPITAL RESOURCES - continued

 

Other Commitments and Contingencies - continued

 

During 2010, two of our wholly owned subsidiaries entered into agreements with Cuyahoga County, Ohio (the “County”) to develop and operate the Cleveland Medical Mart and Convention Center (the “Facility”), a 1,000,000 square foot showroom, trade show and conference center in Cleveland’s central business district.  The County will fund the development of the Facility, using the proceeds it received from the issuance of general obligation bonds and other sources, up to the development budget of $465,000,000 and maintain effective control of the property.  During the 17-year development and operating period, our subsidiaries will receive net settled payments of approximately $10,000,000 per year, which are net of its $36,000,000 annual obligation to the County.  Our subsidiaries’ obligation has been pledged by the County to the bondholders, but is payable by our subsidiaries only to the extent that they first receive at least an equal payment from the County.  Our subsidiaries engaged a contractor to construct the Facility pursuant to a guaranteed maximum price contract; although our subsidiaries are ultimately responsible for cost overruns, the contractor is responsible for all costs incurred in excess of its contract and has provided a completion guaranty.  Construction of the Facility is expected to be completed in 2013.  Upon completion, our subsidiaries are required to fund $11,500,000, primarily for tenant improvements, and they are responsible for operating expenses and are entitled to the net operating income, if any, of the Facility.  The County may terminate the operating agreement five years from the completion of development and periodically thereafter, if our subsidiaries fail to achieve certain performance thresholds.

 

 

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 matter referred to below, is 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.  A trial was held in November 2010 and closing arguments were held in March 2011.  As of June 30, 2011, we have a $39,483,000 receivable from Stop and Shop, of which $21,855,000 has been reserved.  We believe, after consultation with counsel, that the maximum reasonably possible loss is up to the total amount of the receivable of $39,483,000.

70

 


 
 

  

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 gain 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 flows 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 16 – Income per Share, in the notes to our consolidated financial statements on page 27 of this Quarterly Report on Form 10-Q.

 

FFO for the Three and Six Months Ended June 30, 2011 and 2010

 

FFO attributable to common shareholders plus assumed conversions was $243,418,000, or $1.27 per diluted share for the three months ended June 30, 2011, compared to $204,772,000, or $1.11 per diluted share, for the prior year’s quarter. FFO attributable to common shareholders plus assumed conversions was $749,349,000, or $3.91 per diluted share, for the six months ended June 30, 2011, compared to $565,066,000, or $2.98 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 Months

  

For The Six Months

(Amounts in thousands, except per share amounts)

Ended June 30,

  

Ended June 30,

Reconciliation of our net income to FFO:

2011 

  

2010 

  

2011 

  

2010 

Net income attributable to Vornado

$

 108,581 

  

$

 72,106 

  

$

 521,244 

  

$

 286,658 

Depreciation and amortization of real property

  

 124,326 

  

  

 127,181 

  

  

 248,647 

  

  

 254,795 

Net gain on sales of real estate

  

 (458) 

  

  

 - 

  

  

 (51,623) 

  

  

 - 

Proportionate share of adjustments to equity in net income of Toys,

  

  

  

  

  

  

  

  

  

  

  

  

to arrive at FFO:

  

  

  

  

  

  

  

  

  

  

  

  

  

Depreciation and amortization of real property

  

 17,168 

  

  

 17,663 

  

  

 34,897 

  

  

 35,164 

  

  

Net gain on sales of real estate

  

 (491) 

  

  

 - 

  

  

 (491) 

  

  

 - 

  

  

Income tax effect of above adjustment

  

 (5,835) 

  

  

 (6,182) 

  

  

 (12,040) 

  

  

 (12,307) 

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

  

 22,233 

  

  

 19,533 

  

  

 46,202 

  

  

 39,074 

  

  

Net gain on sales of real estate

  

 (2,120) 

  

  

 - 

  

  

 (3,769) 

  

  

 (307) 

Noncontrolling interests' share of above adjustments

  

 (9,906) 

  

  

 (11,303) 

  

  

 (16,756) 

  

  

 (22,474) 

FFO

  

 253,498 

  

  

 218,998 

  

  

 766,311 

  

  

 580,603 

Preferred share dividends

  

 (16,668) 

  

  

 (14,266) 

  

  

 (30,116) 

  

  

 (28,533) 

FFO attributable to common shareholders

  

 236,830 

  

  

 204,732 

  

  

 736,195 

  

  

 552,070 

Interest on 3.88% exchangeable senior debentures

  

 6,556 

  

  

 - 

  

  

 13,090 

  

  

 12,915 

Convertible preferred share dividends

  

 32 

  

  

 40 

  

  

 64 

  

  

 81 

FFO attributable to common shareholders plus assumed conversions

$

 243,418 

  

$

 204,772 

  

$

 749,349 

  

$

 565,066 

  

  

  

  

  

  

  

  

  

  

  

  

Reconciliation of Weighted Average Shares

  

  

  

  

  

  

  

  

  

  

  

  

Weighted average common shares outstanding

  

 184,268 

  

  

 182,027 

  

  

 184,129 

  

  

 181,786 

  

Effect of dilutive securities:

  

  

  

  

  

  

  

  

  

  

  

  

  

3.88% exchangeable senior debentures

  

 5,736 

  

  

 - 

  

  

 5,736 

  

  

 5,736 

  

  

Employee stock options and restricted share awards

  

 1,876 

  

  

 1,617 

  

  

 1,815 

  

  

 1,741 

  

  

Convertible preferred shares

  

 55 

  

  

 71 

  

  

 56 

  

  

 71 

  

Denominator for FFO per diluted share

  

 191,935 

  

  

 183,715 

  

  

 191,736 

  

  

 189,334 

  

  

  

  

  

  

  

  

  

  

  

  

  

  

FFO attributable to common shareholders plus assumed conversions

  

  

  

  

  

  

  

  

  

  

  

  

per diluted share

$

 1.27 

  

$

 1.11 

  

$

 3.91 

  

$

 2.98 

71

 


 
 

  

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)

2011 

  

2010 

  

  

  

  

  

   

  

Weighted

  

Effect of 1%

  

  

  

Weighted

  

  

  

June 30,

   

  

Average

  

Change In

  

December 31,

Average

Consolidated debt:

Balance

   

  

Interest Rate

  

Base Rates

  

Balance

Interest Rate

  

Variable rate

$

 2,089,729 

   

  

1.96%

  

$

 20,897 

  

$

 2,903,510 

  

1.76%

  

Fixed rate

  

 8,450,319 

   

  

5.61%

  

  

 - 

  

  

 7,990,129 

  

5.66%

  

  

  

$

 10,540,048 

   

  

4.89%

  

  

 20,897 

  

$

 10,893,639 

  

4.62%

Pro-rata share of debt of non-consolidated

  

  

   

  

  

  

  

  

  

  

  

  

  

  

entities (non-recourse):

  

  

   

  

  

  

  

  

  

  

  

  

  

  

Variable rate – excluding Toys

$

 295,924 

   

  

2.79%

  

  

 2,959 

  

$

 345,308 

  

1.39%

  

Variable rate – Toys

  

 313,305 

   

  

6.38%

  

  

 3,133 

  

  

 501,623 

  

4.95%

  

Fixed rate (including $1,438,984,000 and

  

  

   

  

  

  

  

  

  

  

  

  

  

  

  

$1,421,820 of Toys debt in 2011 and 2010)

  

 2,925,461 

 (1)

  

6.96%

  

  

 - 

  

  

 2,428,986 

  

6.86%

  

  

  

$

 3,534,690 

   

  

6.56%

  

  

 6,092 

  

$

 3,275,917 

  

5.99%

Noncontrolling interests’ share of above

  

  

   

  

  

  

  

 (1,700) 

  

  

  

  

  

Total change in annual net income

  

  

   

  

  

  

$

 25,289 

  

  

  

  

  

Per share-diluted

  

  

   

  

  

  

$

0.13 

  

  

  

  

  

  

  

  

  

  

   

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

   

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

   

  

  

  

  

  

  

  

  

  

  

(1)

Excludes $36.8 billion for our 26.2% pro rata shares of liabilities related to consolidated CMBS and CDO trusts which are non-recourse to LNR and its equity holders, including us.

  

  

  

  

  

  

   

  

  

  

  

  

  

  

  

  

  

 

We may utilize various financial instruments to mitigate the impact of interest rate fluctuations on our cash flows and earnings, including hedging strategies, depending on our analysis of the interest rate environment and the costs and risks of such strategies. As of June 30, 2011, variable rate debt with an aggregate principal amount of $560,628,000 and a weighted average interest rate of 2.79% was subject to LIBOR caps.  These caps are based on a notional amount of $558,603,000 and cap LIBOR at a weighted average rate of 5.68%.  In addition, we have one interest rate swap on a $425,000,000 loan that swapped the rate from LIBOR plus 2.00% (2.19% at June 30, 2011) to a fixed rate of 5.13% for the remaining seven-year term of the loan. 

 

As of June 30, 2011, we have investments in mezzanine loans with an aggregate carrying amount of $74,845,000 that are based on variable interest rates which partially mitigate our exposure to a change in interest rates on our variable rate debt.

 

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 rate at which similar loans could be made currently to borrowers with similar credit ratings, for the remaining term of such debt.  As of June 30, 2011, the estimated fair value of our consolidated debt was $10,858,999,000.

 

Derivative Instruments

 

We have, and may in the future enter into, derivative positions that do not qualify for hedge accounting treatment, including our economic interest in J.C. Penney common shares.  Because these derivatives do not qualify for hedge accounting treatment, the gains or losses resulting from their mark-to-market at the end of each reporting period are recognized as an increase or decrease in “interest and other investment income, net” on our consolidated statements of income. In addition, we are, and may in the future be, subject to additional expense based on the notional amount of the derivative positions and a specified spread over LIBOR. Because the market value of these instruments can vary significantly between periods, we may experience significant fluctuations in the amount of our investment income or expense in any given period. During the six months ended June 30, 2011 we recognized $10,401,000 of income from derivative instruments.

72

 


 

  

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, 2011, 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.

 

73

 


 

  

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 matter referred to below, is 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.  A trial was held in November 2010 and closing arguments were held in March 2011.  As of June 30, 2011, we have a $39,483,000 receivable from Stop and Shop, of which $21,855,000 has been reserved.  We believe, after consultation with counsel, that the maximum reasonably possible loss is up to the total amount of the receivable of $39,483,000.

74

 


 

  

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, 2010.

 

 

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

In the second quarter of 2011, we issued 80,679 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, 2010, 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.

 

75

 


 

  

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 1, 2011

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)

76

 


 

  

  

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 

  

-

Articles Supplementary, 6.875% Series J Cumulative Redeemable Preferred Shares of

*

  

  

  

  

  

Beneficial Interest, liquidation preference $25.00 per share, no par value - Incorporated by

  

  

  

  

  

  

reference to Exhibit 3.2 of Vornado Realty Trust's Registration Statement on Form 8-A

  

  

  

  

  

  

(File No. 001-11954), filed on April 20, 2011

  

  

  

  

  

  

  

  

  

3.4 

  

-

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

  

  

  

  

  

  

  

  

  

3.5 

  

-

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

  

  

  

  

  

  

  

  

  

3.6 

  

-

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

  

  

  

  

  

  

  

  

  

3.7 

  

-

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

  

  

  

  

  

  

  

  

  

3.8 

  

-

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

  

  

  

  

  

  

  

  

  

3.9 

  

-

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

  

  

  

  

  

  

  

  

  

3.10

  

-

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

  

  

  

  

  

  

  

  

  

3.11 

  

-

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

  

  

  

  

  

  

  

  

  

3.12 

  

-

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

  

  

  

  

  

  

  

  

  

3.13 

  

-

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

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

_______________________

  

  

  

*

  

  

Incorporated by reference.

  

77

 


 

  

 

  

3.14

  

-

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

  

  

  

  

  

  

  

  

  

3.15

  

-

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

  

  

  

  

  

  

  

  

  

3.16

  

-

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

  

  

  

  

  

  

  

  

  

3.17

  

-

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

  

  

  

  

  

  

  

  

  

3.18

  

-

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

  

  

  

  

  

  

  

  

  

3.19

  

-

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

  

  

  

  

  

  

  

  

  

3.20

  

-

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

  

  

  

  

  

  

  

  

  

3.21

  

-

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

  

  

  

  

  

  

  

  

  

3.22

  

-

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

  

  

  

  

  

  

  

  

  

3.23

  

-

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

  

  

  

  

  

  

  

  

  

3.24

  

-

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

  

  

  

  

  

  

  

  

  

3.25

  

-

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

  

  

  

  

  

  

  

  

  

3.26

  

-

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

  

  

  

  

  

  

  

  

  

3.27

  

-

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

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

_______________________

  

  

  

*

  

  

Incorporated by reference.

  

78

 


 

  

 

  

3.28

  

-

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

  

  

  

  

  

  

  

  

  

3.29

  

-

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

  

  

  

  

  

  

  

  

  

3.30

  

-

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

  

  

  

  

  

  

  

  

  

3.31

  

-

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

  

  

  

  

  

  

  

  

  

3.32

  

-

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

  

  

  

  

  

  

  

  

  

3.33

  

-

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

  

  

  

  

  

  

  

  

  

3.34

  

-

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

  

  

  

  

  

  

  

  

  

3.35

  

-

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

  

  

  

  

  

  

  

  

  

3.36

  

-

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

  

  

  

  

  

  

  

  

  

3.37

  

-

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

  

  

  

  

  

  

  

  

  

3.38

  

-

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

  

  

  

  

  

  

  

  

  

3.39

  

-

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

  

  

  

  

  

  

  

  

  

3.40

  

-

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

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

_______________________

  

  

  

*

  

  

Incorporated by reference.

  

79

 


 

  

 

  

3.41

  

-

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

  

  

  

  

  

  

  

  

  

3.42

  

-

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

  

  

  

  

  

  

  

  

  

3.43

  

-

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

  

  

  

  

  

  

  

  

  

3.44

  

-

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

  

  

  

  

  

  

  

  

  

3.45

  

-

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

  

  

  

  

  

  

  

  

  

3.46

  

-

Forty-Second Amendment to Second Amended and Restated Agreement of Limited Partnership,

*

  

  

  

  

  

dated as of December 17, 2010 – Incorporated by reference to Exhibit 99.1 to Vornado

  

  

  

  

  

  

Realty L.P.'s Current Report on Form 8-K (File No. 000-22685), filed on December 21, 2010

  

  

  

  

  

  

  

  

  

3.47

  

-

Forty-Third Amendment to Second Amended and Restated Agreement of Limited Partnership,

*

  

  

  

  

  

dated as of April 20, 2011 – 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 April 21, 2011

  

  

  

  

  

  

  

  

  

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

  

  

  

  

  

  

______________________

  

  

  

*

  

  

Incorporated by reference.

  

80

 


 

  

 

  

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

  

  

  

  

  

  

  

  

  

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

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

_______________________

  

  

  

*

  

  

Incorporated by reference.

  

  

  

**

  

  

Management contract or compensatory agreement.

  

81

 


 

  

 

  

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

  

-

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

  

  

  

  

  

  

  

  

  

10.16

**

-

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

  

  

  

  

  

  

  

  

  

10.17

**

-

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

  

  

  

  

  

  

  

  

  

10.18

**

-

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

  

  

  

  

  

  

  

  

  

10.19

**

-

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

  

  

  

  

  

  

  

  

  

10.20

**

-

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

  

  

  

  

  

  

  

  

  

10.21

**

-

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

  

  

  

  

  

  

  

  

  

10.22

**

-

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

  

  

  

  

  

  

  

  

  

10.23

**

-

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

  

  

  

  

  

  

  

  

  

10.24

  

-

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.

  

82

 


 

  

 

  

  

  

  

  

  

  

  

10.25

**

-

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

  

  

  

  

  

  

  

  

  

10.26

**

-

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

  

  

  

  

  

  

  

  

  

10.27

**

-

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

  

  

  

  

  

  

  

  

  

10.28

**

-

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

  

  

  

  

  

  

  

  

  

10.29

  

-

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

  

  

  

  

  

  

  

  

  

10.30

  

-

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

  

  

  

  

  

  

  

  

  

10.31

**

-

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

  

  

  

  

  

  

  

  

  

10.32

**

-

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

  

  

  

  

  

  

  

  

  

10.33

**

-

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

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

_______________________

  

  

  

*

  

  

Incorporated by reference.

  

  

  

**

  

  

Management contract or compensatory agreement.

  

83

 


 

  

 

  

10.34

**

-

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

  

  

  

  

  

  

  

  

  

10.35

**

-

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

  

  

  

  

  

  

  

  

  

10.36

**

-

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

  

  

  

  

  

  

  

  

  

10.37

**

-

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

  

  

  

  

  

  

  

  

  

10.38

**

-

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

  

  

  

  

  

  

  

  

  

10.39

**

-

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

*

  

  

  

  

  

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

  

  

  

  

  

  

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

  

  

  

  

  

  

  

  

  

10.40

**

-

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

*

  

  

  

  

  

September 24, 2010.  Incorporated by reference to Exhibit 10.42 to Vornado Realty Trust's

  

  

  

  

  

  

Quarterly Report on Form 10-Q for the quarter ended September 30, 2010 (File No. 001-11954)

  

  

  

  

  

  

filed on November 2, 2010

  

  

  

  

  

  

  

  

  

10.41

**

-

Form of Vornado Realty Trust 2010 Omnibus Share Plan Stock Agreement.  Incorporated by

*

  

  

  

  

  

reference to Exhibit 10.42 to Vornado Realty Trust's Annual Report on Form 10-K for the year

  

  

  

  

  

  

ended December 31, 2010 (File No. 001-11954) filed on February 23, 2011

  

  

  

  

  

  

  

  

  

10.42

**

-

Form of Vornado Realty Trust 2010 Omnibus Share Plan Restricted LTIP Unit Agreement

*

  

  

  

  

  

Incorporated by reference to Exhibit 10.43 to Vornado Realty Trust's Annual Report on Form

  

  

  

  

  

  

10-K for the year ended December 31, 2010 (File No. 001-11954) filed on February 23, 2011

  

  

  

  

  

  

  

  

  

10.43

**

-

Form of Vornado Realty Trust 2010 Omnibus Share Plan Restricted Stock Agreement

*

  

  

  

  

  

Incorporated by reference to Exhibit 10.44 to Vornado Realty Trust's Annual Report on Form

  

  

  

  

  

  

10-K for the year ended December 31, 2010 (File No. 001-11954) filed on February 23, 2011

  

  

  

  

  

  

  

  

  

10.44

**

-

Letter Agreement between Vornado Realty Trust and Michelle Felman, dated December 21, 2010.

*

  

  

  

  

  

Incorporated by reference to Exhibit 10.45 to Vornado Realty Trust's Annual Report on Form

  

  

  

  

  

  

10-K for the year ended December 31, 2010 (File No. 001-11954) filed on February 23, 2011

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

_______________________

  

  

  

*

  

  

Incorporated by reference.

  

  

  

**

  

  

Management contract or compensatory agreement.

  

84

 


 

  

 

  

10.45

**

-

Waiver and Release between Vornado Realty Trust and Michelle Felman, dated December 21,

*

  

  

  

  

  

2010.  Incorporated by reference to Exhibit 10.46 to Vornado Realty Trust's Annual Report

  

  

  

  

  

  

on Form 10-K for the year ended December 31, 2010 (File No. 001-11954) filed on

  

  

  

  

  

  

February 23, 2011

  

  

  

  

  

  

  

  

  

10.46 

  

-

Revolving Credit Agreement dated as of June 8, 2011, 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

  

  

  

  

  

  

  

  

  

15.1

  

-

Letter regarding Unaudited Interim Financial Information

  

  

  

  

  

  

  

  

  

31.1

  

-

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

  

  

  

  

  

  

  

  

  

31.2

  

-

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

  

  

  

  

  

  

  

  

  

32.1

  

-

Section 1350 Certification of the Chief Executive Officer

  

  

  

  

  

  

  

  

  

32.2

  

-

Section 1350 Certification of the Chief Financial Officer

  

  

  

  

  

  

  

  

  

101.INS

  

-

XBRL Instance Document

  

  

  

  

  

  

  

  

  

101.SCH

  

-

XBRL Taxonomy Extension Schema

  

  

  

  

  

  

  

  

  

101.CAL

  

-

XBRL Taxonomy Extension Calculation Linkbase

  

  

  

  

  

  

  

  

  

101.DEF

  

-

XBRL Taxonomy Extension Definition Linkbase

  

  

  

  

  

  

  

  

  

101.LAB

  

-

XBRL Taxonomy Extension Label Linkbase

  

  

  

  

  

  

  

  

  

101.PRE

  

-

XBRL Taxonomy Extension Presentation Linkbase

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

______________________

  

  

  

*

  

Incorporated by reference.

  

  

  

**

  

Management contract or compensatory agreement.

  

85