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VORNADO REALTY TRUST - Quarter Report: 2016 March (Form 10-Q)

vno1q201610q.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:   

March 31, 2016

 

Or

 

o

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from:

 

to

 

 

Commission File Number:

001-11954

 

 

VORNADO REALTY TRUST

(Exact name of registrant as specified in its charter)

 

Maryland

 

22-1657560

(State or other jurisdiction of incorporation or organization)

 

(I.R.S. Employer Identification Number)

 

 

 

888 Seventh Avenue, New York, New York

 

10019

(Address of principal executive offices)

 

(Zip Code)

 

 

(212) 894-7000

(Registrant’s telephone number, including area code)

 

N/A

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

 

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

 

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

 

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

 

x Large Accelerated Filer

 

o Accelerated Filer

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

 

o Smaller Reporting Company

 

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

 

As of March 31, 2016, 188,771,002 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

 

 

 

 

 

 

March 31, 2016 and December 31, 2015

 

3

 

 

 

 

  

 

 

 

 

 

 

Consolidated Statements of Income (Unaudited) for the

 

 

 

 

 

 

Three Months Ended March 31, 2016 and 2015

 

4

 

 

 

 

  

 

 

 

 

 

 

Consolidated Statements of Comprehensive Income (Unaudited)  

 

 

 

 

 

 

for the Three Months Ended March 31, 2016 and 2015

 

5

 

 

 

 

  

 

 

 

 

 

 

Consolidated Statements of Changes in Equity (Unaudited) for the

 

 

 

 

 

 

Three Months Ended March 31, 2016 and 2015

 

6

 

 

 

 

  

 

 

 

 

 

 

Consolidated Statements of Cash Flows (Unaudited) for the

 

 

 

 

 

 

Three Months Ended March 31, 2016 and 2015

 

8

 

 

 

 

  

 

 

 

 

 

 

Notes to Consolidated Financial Statements (Unaudited)

 

10

 

 

 

 

  

 

 

 

 

 

 

Report of Independent Registered Public Accounting Firm  

 

30

 

 

 

 

  

 

 

 

 

Item 2.

 

Management's Discussion and Analysis of Financial Condition

 

 

 

 

 

 

and Results of Operations

 

31

 

 

 

 

  

 

 

 

 

Item 3.

 

Quantitative and Qualitative Disclosures About Market Risk

 

58

 

 

 

 

  

 

 

 

 

Item 4.

 

Controls and Procedures

 

58

 

 

 

 

  

 

 

 

 

 

 

 

 

 

PART II.

 

 

Other Information:

 

 

 

 

 

 

 

 

 

 

 

Item 1.

 

Legal Proceedings

 

59

 

 

 

 

  

 

 

 

 

Item 1A.

 

Risk Factors

 

59

 

 

 

 

  

 

 

 

 

Item 2.

 

Unregistered Sales of Equity Securities and Use of Proceeds

 

59

 

 

 

 

  

 

 

 

 

Item 3.

 

Defaults Upon Senior Securities

 

59

 

 

 

 

  

 

 

 

 

Item 4.

 

Mine Safety Disclosures

 

59

 

 

 

 

  

 

 

 

 

Item 5.

 

Other Information

 

59

 

 

 

 

  

 

 

 

 

Item 6.

 

Exhibits

 

59

 

 

 

 

  

 

 

SIGNATURES

 

  

 

60

 

 

 

 

  

 

 

EXHIBIT INDEX

 

  

 

61

 

 

 

 

  

 

 

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)

 

March 31, 2016

 

December 31, 2015

ASSETS

 

 

 

 

Real estate, at cost:

 

 

 

 

 

 

 

Land

 

$

 4,164,796 

 

$

 4,164,799 

 

Buildings and improvements

 

 

 12,358,371 

 

 

 12,582,671 

 

Development costs and construction in progress

 

 

 1,305,849 

 

 

 1,226,637 

 

Leasehold improvements and equipment

 

 

 109,536 

 

 

 116,030 

 

 

Total

 

 

 17,938,552 

 

 

 18,090,137 

 

Less accumulated depreciation and amortization

 

 

 (3,352,986)

 

 

 (3,418,267)

Real estate, net

 

 

 14,585,566 

 

 

 14,671,870 

Cash and cash equivalents

 

 

 1,673,566 

 

 

 1,835,707 

Restricted cash

 

 

 109,147 

 

 

 107,799 

Marketable securities

 

 

 162,091 

 

 

 150,997 

Tenant and other receivables, net of allowance for doubtful accounts of $11,200 and $11,908

 

 

 97,345 

 

 

 98,062 

Investments in partially owned entities

 

 

 1,553,250 

 

 

 1,550,422 

Real estate fund investments

 

 

 566,696 

 

 

 574,761 

Receivable arising from the straight-lining of rents, net of allowance of $2,539 and $2,751

 

 

 973,709 

 

 

 931,245 

Deferred leasing costs, net of accumulated amortization of $218,709 and $218,239

 

 

 485,283 

 

 

 480,421 

Identified intangible assets, net of accumulated amortization of $188,094 and $187,360

 

 

 218,388 

 

 

 227,901 

Assets related to discontinued operations

 

 

 36,514 

 

 

 37,020 

Other assets

 

 

 411,819 

 

 

 477,088 

 

 

 

 

$

 20,873,374 

 

$

 21,143,293 

 

 

 

 

 

 

 

 

 

LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND EQUITY

 

 

 

 

 

 

Mortgages payable, net

 

$

 9,844,242 

 

$

 9,513,713 

Senior unsecured notes, net

 

 

 844,514 

 

 

 844,159 

Unsecured revolving credit facilities

 

 

 -   

 

 

 550,000 

Unsecured term loan, net

 

 

 371,076 

 

 

 183,138 

Accounts payable and accrued expenses

 

 

 447,700 

 

 

 443,955 

Deferred revenue

 

 

 325,013 

 

 

 346,119 

Deferred compensation plan

 

 

 116,824 

 

 

 117,475 

Liabilities related to discontinued operations

 

 

 12,902 

 

 

 12,470 

Other liabilities

 

 

 433,863 

 

 

 426,965 

 

Total liabilities

 

 

 12,396,134 

 

 

 12,437,994 

Commitments and contingencies

 

 

 

 

 

 

Redeemable noncontrolling interests:

 

 

 

 

 

 

 

Class A units - 12,414,019 and 12,242,820 units outstanding

 

 

 1,172,256 

 

 

 1,223,793 

 

Series D cumulative redeemable preferred units - 177,101 units outstanding

 

 

 5,428 

 

 

 5,428 

 

 

Total redeemable noncontrolling interests

 

 

 1,177,684 

 

 

 1,229,221 

Vornado shareholders' equity:

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

 

shares; issued and outstanding 52,676,629 shares

 

 

 1,276,954 

 

 

 1,276,954 

 

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

 

 

 

 

 

 

 

 

250,000,000 shares; issued and outstanding 188,771,002 and 188,576,853 shares

 

 

 7,529 

 

 

 7,521 

 

Additional capital

 

 

 7,187,036 

 

 

 7,132,979 

 

Earnings less than distributions

 

 

 (1,999,994)

 

 

 (1,766,780)

 

Accumulated other comprehensive income

 

 

 53,399 

 

 

 46,921 

 

 

Total Vornado shareholders' equity

 

 

 6,524,924 

 

 

 6,697,595 

Noncontrolling interests in consolidated subsidiaries

 

 

 774,632 

 

 

 778,483 

 

Total equity

 

 

 7,299,556 

 

 

 7,476,078 

 

 

 

 

$

 20,873,374 

 

$

 21,143,293 

 

 

 

 

 

 

 

 

 

See notes to consolidated financial statements (unaudited).

3

 


 
 

VORNADO REALTY TRUST

CONSOLIDATED STATEMENTS OF INCOME

(UNAUDITED)

 

 

 

 

 

 

 

 

 

(Amounts in thousands, except per share amounts)

 

For the Three Months Ended March 31,

 

 

 

 

2016 

 

2015 

REVENUES:

 

 

 

 

 

 

 

Property rentals

 

$

 519,492 

 

$

 500,274 

 

Tenant expense reimbursements

 

 

 59,575 

 

 

 66,921 

 

Fee and other income

 

 

 33,970 

 

 

 39,607 

Total revenues

 

 

 613,037 

 

 

 606,802 

EXPENSES:

 

 

 

 

 

 

 

Operating

 

 

 256,349 

 

 

 254,493 

 

Depreciation and amortization

 

 

 142,957 

 

 

 124,122 

 

General and administrative

 

 

 48,704 

 

 

 58,492 

 

Impairment loss and acquisition and transaction related costs

 

 

 165,307 

 

 

 1,981 

Total expenses

 

 

 613,317 

 

 

 439,088 

Operating (loss) income

 

 

 (280)

 

 

 167,714 

Loss from partially owned entities

 

 

 (4,240)

 

 

 (2,743)

Income from real estate fund investments

 

 

 11,284 

 

 

 24,089 

Interest and other investment income, net

 

 

 3,518 

 

 

 10,792 

Interest and debt expense

 

 

 (100,489)

 

 

 (91,674)

Net gain on disposition of wholly owned and partially owned assets

 

 

 714 

 

 

 1,860 

(Loss) income before income taxes

 

 

 (89,493)

 

 

 110,038 

Income tax expense

 

 

 (2,831)

 

 

 (971)

(Loss) income from continuing operations

 

 

 (92,324)

 

 

 109,067 

Income from discontinued operations

 

 

 716 

 

 

 16,179 

Net (loss) income

 

 

 (91,608)

 

 

 125,246 

Less net (income) loss attributable to noncontrolling interests in:

 

 

 

 

 

 

 

Consolidated subsidiaries

 

 

 (9,678)

 

 

 (15,882)

 

Operating Partnership

 

 

 7,487 

 

 

 (5,287)

Net (loss) income attributable to Vornado

 

 

 (93,799)

 

 

 104,077 

Preferred share dividends

 

 

 (20,364)

 

 

 (19,484)

NET (LOSS) INCOME attributable to common shareholders

 

$

 (114,163)

 

$

 84,593 

 

 

 

 

 

 

 

 

 

(LOSS) INCOME PER COMMON SHARE - BASIC:

 

 

 

 

 

 

 

(Loss) income from continuing operations, net

 

$

 (0.61)

 

$

 0.37 

 

Income from discontinued operations, net

 

 

 -   

 

 

 0.08 

 

Net (loss) income per common share

 

$

 (0.61)

 

$

 0.45 

 

Weighted average shares outstanding

 

 

 188,658 

 

 

 187,999 

 

 

 

 

 

 

 

 

 

(LOSS) INCOME PER COMMON SHARE - DILUTED:

 

 

 

 

 

 

 

(Loss) income from continuing operations, net

 

$

 (0.61)

 

$

 0.37 

 

Income from discontinued operations, net

 

 

 -   

 

 

 0.08 

 

Net (loss) income per common share

 

$

 (0.61)

 

$

 0.45 

 

Weighted average shares outstanding

 

 

 188,658 

 

 

 189,336 

 

 

 

 

 

 

 

 

 

DIVIDENDS PER COMMON SHARE

 

$

 0.63 

 

$

 0.63 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See notes to consolidated financial statements (unaudited).

4

 


 
 

VORNADO REALTY TRUST

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(UNAUDITED)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(Amounts in thousands)

 

For the Three Months Ended March 31,

 

 

 

 

2016 

 

2015 

Net (loss) income

 

$

 (91,608)

 

$

 125,246 

Other comprehensive income (loss):

 

 

 

 

 

 

 

Increase (reduction) in unrealized net gain on available-for-sale securities

 

 

 11,094 

 

 

 (21,332)

 

Pro rata share of other comprehensive income of nonconsolidated subsidiaries

 

 

 6 

 

 

 157 

 

Reduction in value of interest rate swaps and other

 

 

 (4,195)

 

 

 (771)

Comprehensive (loss) income

 

 

 (84,703)

 

 

 103,300 

Less comprehensive income attributable to noncontrolling interests

 

 

 (2,618)

 

 

 (19,881)

Comprehensive (loss) income attributable to Vornado

 

$

 (87,321)

 

$

 83,419 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See notes to consolidated financial statements (unaudited).

5

 


 

VORNADO REALTY TRUST

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(UNAUDITED)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(Amounts in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

controlling

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings

 

Other

 

Interests in

 

 

 

 

 

 

 

Preferred Shares

 

Common Shares

 

Additional

 

Less Than

 

Comprehensive

 

Consolidated

 

Total

 

 

 

 

Shares

 

Amount

 

Shares

 

Amount

 

Capital

 

Distributions

 

Income

 

Subsidiaries

 

Equity

Balance, December 31, 2015

 

 

 52,677 

 

$

 1,276,954 

 

 

 188,577 

 

$

 7,521 

 

$

 7,132,979 

 

$

 (1,766,780)

 

$

 46,921 

 

$

 778,483 

 

$

 7,476,078 

Net loss attributable to Vornado

 

 

 -   

 

 

 -   

 

 

 -   

 

 

 -   

 

 

 -   

 

 

 (93,799)

 

 

 -   

 

 

 -   

 

 

 (93,799)

Net income attributable to

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

noncontrolling interests in 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

consolidated subsidiaries

 

 

 -   

 

 

 -   

 

 

 -   

 

 

 -   

 

 

 -   

 

 

 -   

 

 

 -   

 

 

 9,678 

 

 

 9,678 

Dividends on common shares

 

 

 -   

 

 

 -   

 

 

 -   

 

 

 -   

 

 

 -   

 

 

 (118,867)

 

 

 -   

 

 

 -   

 

 

 (118,867)

Dividends on preferred shares

 

 

 -   

 

 

 -   

 

 

 -   

 

 

 -   

 

 

 -   

 

 

 (20,364)

 

 

 -   

 

 

 -   

 

 

 (20,364)

Common shares issued:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Upon redemption of Class A

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 units, at redemption value

 

 

 -   

 

 

 -   

 

 

 157 

 

 

 6 

 

 

 14,476 

 

 

 -   

 

 

 -   

 

 

 -   

 

 

 14,482 

 

Under employees' share

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

option plan

 

 

 -   

 

 

 -   

 

 

 26 

 

 

 1 

 

 

 2,165 

 

 

 -   

 

 

 -   

 

 

 -   

 

 

 2,166 

 

Under dividend reinvestment plan

 

 

 -   

 

 

 -   

 

 

 4 

 

 

 -   

 

 

 357 

 

 

 -   

 

 

 -   

 

 

 -   

 

 

 357 

Distributions:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Real estate fund investments

 

 

 -   

 

 

 -   

 

 

 -   

 

 

 -   

 

 

 -   

 

 

 -   

 

 

 -   

 

 

 (13,487)

 

 

 (13,487)

 

Other

 

 

 -   

 

 

 -   

 

 

 -   

 

 

 -   

 

 

 -   

 

 

 -   

 

 

 -   

 

 

 (152)

 

 

 (152)

Deferred compensation shares

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

and options

 

 

 -   

 

 

 -   

 

 

 7 

 

 

 1 

 

 

 535 

 

 

 (186)

 

 

 -   

 

 

 -   

 

 

 350 

Increase in unrealized net gain on

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

available-for-sale securities

 

 

 -   

 

 

 -   

 

 

 -   

 

 

 -   

 

 

 -   

 

 

 -   

 

 

 11,094 

 

 

 -   

 

 

 11,094 

Pro rata share of other

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

comprehensive income of

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

nonconsolidated subsidiaries

 

 

 -   

 

 

 -   

 

 

 -   

 

 

 -   

 

 

 -   

 

 

 -   

 

 

 6 

 

 

 -   

 

 

 6 

Reduction in value of interest

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

rate swaps

 

 

 -   

 

 

 -   

 

 

 -   

 

 

 -   

 

 

 -   

 

 

 -   

 

 

 (4,195)

 

 

 -   

 

 

 (4,195)

Adjustments to carry redeemable

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Class A units at redemption value

 

 

 -   

 

 

 -   

 

 

 -   

 

 

 -   

 

 

 36,524 

 

 

 -   

 

 

 -   

 

 

 -   

 

 

 36,524 

Redeemable noncontrolling interests'

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

share of above adjustments

 

 

 -   

 

 

 -   

 

 

 -   

 

 

 -   

 

 

 -   

 

 

 -   

 

 

 (427)

 

 

 -   

 

 

 (427)

Other

 

 

 -   

 

 

 -   

 

 

 -   

 

 

 -   

 

 

 -   

 

 

 2 

 

 

 -   

 

 

 110 

 

 

 112 

Balance, March 31, 2016

 

 

 52,677 

 

$

 1,276,954 

 

 

 188,771 

 

$

 7,529 

 

$

 7,187,036 

 

$

 (1,999,994)

 

$

 53,399 

 

$

 774,632 

 

$

 7,299,556 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See notes to consolidated financial statements (unaudited).

 

6

 


 

VORNADO REALTY TRUST

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY - CONTINUED

(UNAUDITED)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(Amounts in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

controlling

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings

 

Other

 

Interests in

 

 

 

 

 

 

 

Preferred Shares

 

Common Shares

 

Additional

 

Less Than

 

Comprehensive

 

Consolidated

 

Total

 

 

 

 

Shares

 

Amount

 

Shares

 

Amount

 

Capital

 

Distributions

 

Income

 

Subsidiaries

 

Equity

Balance, December 31, 2014

 

 

 52,679 

 

$

 1,277,026 

 

 

 187,887 

 

$

 7,493 

 

$

 6,873,025 

 

$

 (1,505,385)

 

$

 93,267 

 

$

 743,956 

 

$

 7,489,382 

Net income attributable to Vornado

 

 

 -   

 

 

 -   

 

 

 -   

 

 

 -   

 

 

 -   

 

 

 104,077 

 

 

 -   

 

 

 -   

 

 

 104,077 

Net income attributable to

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

noncontrolling interests in 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

consolidated subsidiaries

 

 

 -   

 

 

 -   

 

 

 -   

 

 

 -   

 

 

 -   

 

 

 -   

 

 

 -   

 

 

 15,882 

 

 

 15,882 

Distribution of Urban Edge

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Properties

 

 

 -   

 

 

 -   

 

 

 -   

 

 

 -   

 

 

 -   

 

 

 (464,262)

 

 

 -   

 

 

 (341)

 

 

 (464,603)

Dividends on common shares

 

 

 -   

 

 

 -   

 

 

 -   

 

 

 -   

 

 

 -   

 

 

 (118,447)

 

 

 -   

 

 

 -   

 

 

 (118,447)

Dividends on preferred shares

 

 

 -   

 

 

 -   

 

 

 -   

 

 

 -   

 

 

 -   

 

 

 (19,484)

 

 

 -   

 

 

 -   

 

 

 (19,484)

Common shares issued:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Upon redemption of Class A

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 units, at redemption value

 

 

 -   

 

 

 -   

 

 

 210 

 

 

 8 

 

 

 23,485 

 

 

 -   

 

 

 -   

 

 

 -   

 

 

 23,493 

 

Under employees' share

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

option plan

 

 

 -   

 

 

 -   

 

 

 165 

 

 

 7 

 

 

 11,672 

 

 

 (2,579)

 

 

 -   

 

 

 -   

 

 

 9,100 

 

Under dividend reinvestment plan

 

 

 -   

 

 

 -   

 

 

 3 

 

 

 -   

 

 

 338 

 

 

 -   

 

 

 -   

 

 

 -   

 

 

 338 

Contributions:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Real estate fund investments

 

 

 -   

 

 

 -   

 

 

 -   

 

 

 -   

 

 

 -   

 

 

 -   

 

 

 -   

 

 

 51,350 

 

 

 51,350 

Distributions:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Real estate fund investments

 

 

 -   

 

 

 -   

 

 

 -   

 

 

 -   

 

 

 -   

 

 

 -   

 

 

 -   

 

 

 (52,882)

 

 

 (52,882)

 

Other

 

 

 -   

 

 

 -   

 

 

 -   

 

 

 -   

 

 

 -   

 

 

 -   

 

 

 -   

 

 

 (125)

 

 

 (125)

Conversion of Series A preferred

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

shares to common shares

 

 

 -   

 

 

 (12)

 

 

 1 

 

 

 -   

 

 

 12 

 

 

 -   

 

 

 -   

 

 

 -   

 

 

 -   

Deferred compensation shares

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

and options

 

 

 -   

 

 

 -   

 

 

 7 

 

 

 1 

 

 

 1,324 

 

 

 (359)

 

 

 -   

 

 

 -   

 

 

 966 

Reduction in unrealized net gain

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

on available-for-sale securities

 

 

 -   

 

 

 -   

 

 

 -   

 

 

 -   

 

 

 -   

 

 

 -   

 

 

 (21,332)

 

 

 -   

 

 

 (21,332)

Pro rata share of other

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

comprehensive income of

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

nonconsolidated subsidiaries

 

 

 -   

 

 

 -   

 

 

 -   

 

 

 -   

 

 

 -   

 

 

 -   

 

 

 157 

 

 

 -   

 

 

 157 

Reduction in value of interest

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

rate swap

 

 

 -   

 

 

 -   

 

 

 -   

 

 

 -   

 

 

 -   

 

 

 -   

 

 

 (776)

 

 

 -   

 

 

 (776)

Adjustments to carry redeemable

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Class A units at redemption value

 

 

 -   

 

 

 -   

 

 

 -   

 

 

 -   

 

 

 25,349 

 

 

 -   

 

 

 -   

 

 

 -   

 

 

 25,349 

Redeemable noncontrolling interests'

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

share of above adjustments

 

 

 -   

 

 

 -   

 

 

 -   

 

 

 -   

 

 

 -   

 

 

 -   

 

 

 1,288 

 

 

 -   

 

 

 1,288 

Other

 

 

 -   

 

 

 -   

 

 

 -   

 

 

 -   

 

 

 -   

 

 

 -   

 

 

 5 

 

 

 (90)

 

 

 (85)

Balance, March 31, 2015

 

 

 52,679 

 

$

 1,277,014 

 

 

 188,273 

 

$

 7,509 

 

$

 6,935,205 

 

$

 (2,006,439)

 

$

 72,609 

 

$

 757,750 

 

$

 7,043,648 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See notes to consolidated financial statements (unaudited).

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

7

 


 

VORNADO REALTY TRUST

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

 

 

 

 

 

 

 

 

 

(Amounts in thousands)

 

For the Three Months Ended March 31,

 

 

 

 

2016 

 

2015 

Cash Flows from Operating Activities:

 

 

 

 

 

 

Net (loss) income

 

$

 (91,608)

 

$

 125,246 

Adjustments to reconcile net (loss) income to net cash provided by operating activities:

 

 

 

 

 

 

 

Real estate impairment losses

 

 

 160,700 

 

 

 256 

 

Depreciation and amortization (including amortization of deferred financing costs)

 

 

 150,648 

 

 

 131,112 

 

Straight-lining of rental income

 

 

 (41,626)

 

 

 (29,474)

 

Distributions of income from partially owned entities

 

 

 29,860 

 

 

 15,874 

 

Amortization of below-market leases, net

 

 

 (17,507)

 

 

 (12,754)

 

Other non-cash adjustments

 

 

 15,248 

 

 

 15,865 

 

Return of capital from real estate fund investments

 

 

 14,676 

 

 

 72,208 

 

Net realized and unrealized gains on real estate fund investments

 

 

 (6,611)

 

 

 (17,639)

 

Loss from partially owned entities

 

 

 4,240 

 

 

 2,405 

 

Net gain on disposition of wholly owned and partially owned assets

 

 

 (714)

 

 

 (1,860)

 

Net gains on sale of real estate and other

 

 

 -   

 

 

 (32,243)

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Real estate fund investments

 

 

 -   

 

 

 (95,022)

 

 

Tenant and other receivables, net

 

 

 800 

 

 

 975 

 

 

Prepaid assets

 

 

 64,851 

 

 

 62,658 

 

 

Other assets

 

 

 (20,113)

 

 

 (13,093)

 

 

Accounts payable and accrued expenses

 

 

 12,774 

 

 

 (12,691)

 

 

Other liabilities

 

 

 1,027 

 

 

 (17,307)

Net cash provided by operating activities

 

 

 276,645 

 

 

 194,516 

 

 

 

 

 

 

 

 

 

Cash Flows from Investing Activities:

 

 

 

 

 

 

 

Development costs and construction in progress

 

 

 (127,283)

 

 

 (88,052)

 

Additions to real estate

 

 

 (77,243)

 

 

 (54,466)

 

Investments in partially owned entities

 

 

 (63,188)

 

 

 (23,912)

 

Distributions of capital from partially owned entities

 

 

 25,524 

 

 

 13,409 

 

Proceeds from sales of real estate and related investments

 

 

 2,867 

 

 

 334,725 

 

Restricted cash

 

 

 (1,348)

 

 

 1,282 

 

Acquisitions of real estate and other

 

 

 (938)

 

 

 (49,878)

 

Proceeds from sales and repayments of mortgage and mezzanine loans receivable and other

 11 

 

 

 16,763 

Net cash (used in) provided by investing activities

 

 

 (241,598)

 

 

 149,871 

 

 

 

 

 

 

 

 

 

See notes to consolidated financial statements (unaudited).

 

 

 

 

 

 

 

 

 

 

8

 


 

VORNADO REALTY TRUST

CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED

(UNAUDITED)

 

 

 

 

 

 

 

 

 

 

(Amounts in thousands)

 

For the Three Months Ended March 31,

 

 

 

 

 

2016 

 

2015 

Cash Flows from Financing Activities:

 

 

 

 

 

 

 

Repayments of borrowings

 

$

 (909,617)

 

$

 (907,431)

 

Proceeds from borrowings

 

 

 887,500 

 

 

 800,000 

 

Dividends paid on common shares

 

 

 (118,867)

 

 

 (118,447)

 

Distributions to noncontrolling interests

 

 

 (21,474)

 

 

 (60,287)

 

Dividends paid on preferred shares

 

 

 (20,364)

 

 

 (19,484)

 

Debt issuance and other costs

 

 

 (16,704)

 

 

 (5,076)

 

Proceeds received from exercise of employee share options

 

 

 2,523 

 

 

 12,018 

 

Repurchase of shares related to stock compensation agreements and related

 

 

 

 

 

 

 

 

tax withholdings and other

 

 

 (185)

 

 

 (2,939)

 

Cash included in the spin-off of Urban Edge Properties

 

 

 -   

 

 

 (225,000)

 

Contributions from noncontrolling interests

 

 

 -   

 

 

 51,350 

Net cash used in financing activities

 

 

 (197,188)

 

 

 (475,296)

Net decrease in cash and cash equivalents

 

 

 (162,141)

 

 

 (130,909)

Cash and cash equivalents at beginning of period

 

 

 1,835,707 

 

 

 1,198,477 

Cash and cash equivalents at end of period

 

$

 1,673,566 

 

$

 1,067,568 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Supplemental Disclosure of Cash Flow Information:

 

 

 

 

 

 

 

Cash payments for interest, excluding capitalized interest of $7,497 and $8,479

 

$

 91,719 

 

$

 91,702 

 

Cash payments for income taxes

 

$

 2,193 

 

$

 2,175 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-Cash Investing and Financing Activities:

 

 

 

 

 

 

 

Accrued capital expenditures included in accounts payable and accrued expenses

 

$

 113,755 

 

$

 87,232 

 

Adjustments to carry redeemable Class A units at redemption value

 

 

 36,524 

 

 

 25,349 

 

Write-off of fully depreciated assets

 

 

 (187,419)

 

 

 (18,790)

 

Non-cash distribution of Urban Edge Properties:

 

 

 

 

 

 

 

 

 

Assets

 

 

 -   

 

 

 1,722,263 

 

 

 

Liabilities

 

 

 -   

 

 

 (1,482,660)

 

 

 

Equity

 

 

 -   

 

 

 (239,603)

 

Transfer of interest in real estate to Pennsylvania Real Estate Investment Trust

 

 

 -   

 

 

 (145,313)

 

Financing assumed in acquisitions

 

 

 -   

 

 

 62,000 

 

Like-kind exchange of real estate:

 

 

 

 

 

 

 

 

 

Acquisitions

 

 

 -   

 

 

 57,722 

 

 

 

Dispositions

 

 

 -   

 

 

 (38,822)

 

Receipt of security deposits included in restricted cash and other liabilities

 

 

 -   

 

 

 42,346 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See notes to consolidated financial statements (unaudited).

 

 

 

 

 

 

 

 

 

 

9

 


 

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 all of its interests in properties are held by, Vornado Realty L.P., a Delaware limited partnership (the “Operating Partnership”).  Vornado is the sole general partner of, and owned approximately 93.6% of the common limited partnership interest in, the Operating Partnership at March 31, 2016.  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 its consolidated subsidiaries, including the Operating Partnership.  All inter-company 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 (“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, 2015, as filed with the SEC.

 

We have made estimates and assumptions that affect the reported amounts of assets and liabilities, 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 months ended March 31, 2016 are not necessarily indicative of the operating results for the full year.   

 

 

3.    Recently Issued Accounting Literature

 

In May 2014, the Financial Accounting Standards Board (“FASB”) issued an update ("ASU 2014-09") establishing Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers.  ASU 2014-09 establishes a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most of the existing revenue recognition guidance.  ASU 2014-09 requires an entity to recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services and also requires certain additional disclosures.  ASU 2014-09 is effective for interim and annual reporting periods in fiscal years that begin after December 15, 2017.  We are currently evaluating the impact of the adoption of ASU 2014-09 on our consolidated financial statements.

 

10

 


 
 

VORNADO REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(UNAUDITED)

 

 

3.    Recently Issued Accounting Literature - continued

 

In June 2014, the FASB issued an update (“ASU 2014-12”) to ASC Topic 718, Compensation – Stock Compensation.  ASU 2014-12 requires an entity to treat performance targets that can be met after the requisite service period of a share based award has ended, as a performance condition that affects vesting.  ASU 2014-12 is effective for interim and annual reporting periods in fiscal years that began after December 15, 2015.  The adoption of this update as of January 1, 2016, did not have any impact on our consolidated financial statements.

 

In February 2015, the FASB issued an update (“ASU 2015-02”) Amendments to the Consolidation Analysis to ASC Topic 810, Consolidation.  ASU 2015-02 affects reporting entities that are required to evaluate whether they should consolidate certain legal entities.  Specifically, the amendments: (i) modify the evaluation of whether limited partnerships and similar legal entities are variable interest entities ("VIEs") or voting interest entities, (ii) eliminate the presumption that a general partner should consolidate a limited partnership, (iii) affect the consolidation analysis of reporting entities that are involved with VIEs, and (iv) provide a scope exception for certain entities.  ASU 2015-02 is effective for interim and annual reporting periods beginning after December 15, 2015.  The adoption of this update on January 1, 2016 resulted in the identification of additional VIEs, but did not have an impact on our consolidated financial statements other than additional disclosures (see Note 12 - Variable Interest Entities (“VIEs”)).

 

In January 2016, the FASB issued an update (“ASU 2016-01”) Recognition and Measurement of Financial Assets and Financial Liabilities to ASC Topic 825, Financial Instruments (“ASC 825”).  ASU 2016-01 amends certain aspects of recognition, measurement, presentation and disclosure of financial instruments, including the requirement to measure certain equity investments at fair value with changes in fair value recognized in net income.  ASU 2016-01 is effective for interim and annual reporting periods in fiscal years beginning after December 15, 2017.  We are currently evaluating the impact of the adoption of ASU 2016-01 on our consolidated financial statements.

 

In February 2016, the FASB issued (“ASU 2016-02”) Leases, which sets out the principles for the recognition, measurement, presentation and disclosure of leases for both lessees and lessors.  ASU 2016-02 requires lessees to apply a dual approach, classifying leases as either finance or operating leases based on the principle of whether or not the lease is effectively a financed purchase.  Lessees are required to record a right-of-use asset and a lease liability for all leases with a term of greater than 12 months. Leases with a term of 12 months or less will be accounted for similar to existing guidance for operating leases.  Lessees will recognize expense based on the effective interest method for finance leases or on a straight-line basis for operating leases.  The new standard requires lessors to account for leases using an approach that is substantially equivalent to existing guidance.  ASU 2016-02 is effective for reporting periods beginning after December 15, 2018, with early adoption permitted.  We are currently evaluating the impact of the adoption of ASU 2016-02 on our consolidated financial statements.

 

In March 2016, the FASB issued an update (“ASU 2016-09”) Improvements to Employee Share-Based Payment Accounting to ASC Topic 718, Compensation—Stock Compensation (“ASC 718”).  ASU 2016-09 amends several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows.  ASU 2016-09 is effective for interim and annual reporting periods in fiscal years beginning after December 15, 2017.  We are currently evaluating the impact of the adoption of ASU 2016-09 on our consolidated financial statements.

11

 


 

VORNADO REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(UNAUDITED)

 

 

4.     Real Estate Fund Investments

 

We are the general partner and investment manager of Vornado Capital Partners Real Estate Fund (the “Fund”), which has an eight-year term and a three-year investment period that ended in July 2013. During the investment period, the Fund was our exclusive investment vehicle for all investments that fit within its investment parameters, as defined.  The Fund is accounted for under ASC 946, Financial Services – Investment Companies (“ASC 946”) 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, retaining the fair value basis of accounting.

 

We are also the general partner and investment manager of Crowne Plaza Times Square Hotel Co-Investment (the “Co-Investment”), which owns a 24.7% interest in the Crowne Plaza Times Square Hotel.  The Fund owns the remaining 75.3% interest.  The Co-Investment is also accounted for under ASC 946.  We consolidate the accounts of the Co-Investment into our consolidated financial statements, retaining the fair value basis of accounting.

 

At March 31, 2016, we had six real estate fund investments with an aggregate fair value of $566,696,000, or $200,549,000 in excess of cost, and had remaining unfunded commitments of $102,212,000, of which our share was $25,553,000.  Below is a summary of income from the Fund and the Co-Investment for the three months ended March 31, 2016 and 2015.

 

(Amounts in thousands)

  

 

For the Three Months Ended March 31,

 

 

  

 

2016 

 

2015 

Net investment income

 

$

 4,673 

 

$

 6,450 

Net realized gain on exited investments

 

 

 14,676 

 

 

 24,705 

Previously recorded unrealized gain on exited investment

 

 

 (14,254)

 

 

 (23,279)

Net unrealized gains on held investments

 

 

 6,189 

 

 

 16,213 

Income from real estate fund investments

 

 

 11,284 

 

 

 24,089 

Less income attributable to noncontrolling interests

 

 

 (5,973)

 

 

 (13,539)

Income from real estate fund investments attributable to Vornado (1)

 

$

 5,311 

 

$

 10,550 

 

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1)

Excludes management, leasing and development fees of $760 and $704 for the three months ended March 31, 2016 and 2015, respectively, which are included as a component of "fee and other income" on our consolidated statements of income.

 

5.    Marketable Securities

 

Below is a summary of our marketable securities portfolio as of March 31, 2016 and December 31, 2015.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(Amounts in thousands)

As of March 31, 2016

 

As of December 31, 2015

 

 

 

 

 

GAAP

 

Unrealized

 

 

 

 

GAAP

 

Unrealized

 

 

Fair Value

 

Cost

 

Gain

 

Fair Value

 

Cost

 

Gain

Equity securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Lexington Realty Trust

$

 158,833 

 

$

 72,549 

 

$

 86,284 

 

$

 147,752 

 

$

 72,549 

 

$

 75,203 

 

Other

 

 3,258 

 

 

 -   

 

 

 3,258 

 

 

 3,245 

 

 

 -   

 

 

 3,245 

 

 

$

 162,091 

 

$

 72,549 

 

$

 89,542 

 

$

 150,997 

 

$

 72,549 

 

$

 78,448 

12

 


 

VORNADO REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(UNAUDITED)

 

 

6.    Investments in Partially Owned Entities

 

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

As of March 31, 2016, we own 1,654,068 Alexander’s common shares, representing a 32.4% interest in Alexander’s.  We account for our investment in Alexander’s under the equity method.  We manage, lease and develop Alexander’s properties pursuant to agreements which expire in March of each year and are automatically renewable.

As of March 31, 2016, the market value (“fair value” pursuant to ASC 820) of our investment in Alexander’s, based on Alexander’s March 31, 2016 closing share price of $380.55, was $629,456,000, or $501,192,000 in excess of the carrying amount on our consolidated balance sheet.  As of March 31, 2016, 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 $40,162,000.  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.

 

Urban Edge Properties (“UE”) (NYSE: UE)

 

As of March 31, 2016, we own 5,717,184 UE operating partnership units, representing a 5.4% ownership interest in UE.  We account for our investment in UE under the equity method and record our share of UE’s net income or loss on a one-quarter lag basis.  During 2015, we provided transition services to UE, primarily for information technology, human resources, tax and financial planning.  In 2016, we continue to provide UE information technology support.  UE is providing us with leasing and property management services for (i) certain small retail properties that we plan to sell, and (ii) our affiliate, Alexander’s, Rego Park retail assets.  As of March 31, 2016, the fair value of our investment in UE, based on UE’s March 31, 2016 closing share price of $25.84, was $147,732,000, or $121,505,000 in excess of the carrying amount on our consolidated balance sheet.   

 

Pennsylvania Real Estate Investment Trust (“PREIT”) (NYSE: PEI)

 

As of March 31, 2016, we own 6,250,000 PREIT operating partnership units, representing an 8.1% interest in PREIT.  We account for our investment in PREIT under the equity method and record our share of PREIT’s net income or loss on a one-quarter lag basis.  As of March 31, 2016, the fair value of our investment in PREIT, based on PREIT’s March 31, 2016 closing share price of $21.85, was $136,563,000, or $8,495,000 in excess of the carrying amount on our consolidated balance sheet.  As of March 31, 2016, the carrying amount of our investment in PREIT exceeds our share of the equity in the net assets of PREIT by approximately $64,827,000.  The majority of this basis difference resulted from the excess of the fair value of the PREIT operating units received over our share of the book value of PREIT’s net assets.  Substantially all of this basis difference was allocated, based on our estimates of the fair values of PREIT’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 PREIT’s net loss.  The basis difference related to the land will be recognized upon disposition of our investment.

 

One Park Avenue

 

On March 7, 2016, we completed a $300,000,000 refinancing of our 55% owned joint venture, One Park Avenue, a 947,000 square foot Manhattan office building.  The loan matures in March 2021 and is interest only at LIBOR plus 1.75% (2.19% at March 31, 2016).  The property was previously encumbered by a 4.995%, $250,000,000 mortgage maturing in March 2016.

 

Mezzanine Loan – New York

 

On March 17, 2016, we entered into a joint venture, in which we own a 33.3% interest, which owns a $138,240,000 mezzanine loan.  The interest rate is LIBOR plus 8.875% (9.32% at March 31, 2016) and the debt matures in November 2016, with two three-month extension options.  At March 31, 2016, the joint venture has an $11,760,000 remaining commitment, of which our share is $3,920,000.  The joint venture’s investment is subordinate to $350,000,000 of third party debt.  We account for our investment in the joint venture under the equity method.

 

13

 


 
 

VORNADO REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(UNAUDITED)

 

 

6.    Investments in Partially Owned Entities – continued

Below are schedules summarizing our investments in, and income (loss) from, partially owned entities.

(Amounts in thousands)

 

Percentage

 

 

 

 

 

 

Ownership at

 

Balance as of

 

 

  

 

March 31, 2016

 

March 31, 2016

  

December 31, 2015

Investments:   

 

 

 

  

 

 

 

 

 

 

 

Partially owned office buildings (1)

 

 

 

Various  

 

$

 869,233 

  

$

 909,782 

 

Alexander’s

 

 

 

32.4% 

 

 

 128,264 

  

 

 133,568 

 

PREIT

 

 

 

8.1% 

 

 

 128,068 

  

 

 133,375 

 

India real estate ventures

 

 

 

4.1%-36.5%  

 

 

 48,037 

  

 

 48,310 

 

UE

 

 

 

5.4% 

 

 

 26,227 

  

 

 25,351 

 

Other investments (2)

 

 

 

Various  

 

 

 353,421 

  

 

 300,036 

 

 

  

 

 

 

  

 

$

 1,553,250 

  

$

 1,550,422 

 

 

  

 

 

 

  

 

 

 

 

 

 

 

 

 

 

 

 

  

 

 

 

 

 

 

(1)

Includes interests in 280 Park Avenue, 650 Madison Avenue, One Park Avenue, 666 Fifth Avenue (Office), 330 Madison Avenue, 512 West 22nd Street and others.

(2)

Includes interests in Independence Plaza, 85 Tenth Avenue, Fashion Center Mall, 50-70 West 93rd Street, Toys "R" Us, Inc. (which has a carrying amount of zero) and others.

 

(Amounts in thousands) 

Percentage  

 

 

 

 

 

 

 

  

Ownership at  

 

For the Three Months Ended March 31,

 

 

 

 

 

  

March 31, 2016  

 

2016 

  

2015 

Our Share of Net Income (Loss): 

 

  

 

 

 

 

 

 

 

Alexander's (see page 13 for details): 

 

  

 

 

 

 

 

 

 

 

Equity in net income   

 

32.4% 

 

$

 6,937 

  

$

 5,594 

 

 

Management, leasing and development fees 

 

  

 

 

 1,725 

  

 

 2,097 

 

 

 

 

 

  

 

  

 

 

 8,662 

  

 

 7,691 

 

 

 

 

 

  

 

  

 

 

 

 

 

 

 

UE (see page 13 for details): 

 

  

 

 

 

 

 

 

 

 

Equity in net earnings  

 

5.4% 

 

 

 876 

  

 

 -   

 

 

Management fees 

 

  

 

 

 209 

  

 

 584 

 

 

 

 

 

  

 

  

 

 

 1,085 

  

 

 584 

 

 

 

 

 

  

 

  

 

 

 

 

 

 

 

Partially owned office buildings (1)

 

Various  

 

 

 (14,249)

  

 

 (9,296)

 

 

 

 

 

  

 

  

 

 

 

 

 

 

 

PREIT (see page 13 for details) 

 

8.1% 

 

 

 (4,288)

  

 

 -   

 

 

 

 

 

  

 

  

 

 

 

 

 

 

 

India real estate ventures 

 

4.1%-36.5%  

 

 

 (686)

  

 

 (109)

 

 

 

 

 

  

 

  

 

 

 

 

 

 

 

Other investments (2)

 

Various  

 

 

 5,236 

  

 

 (1,613)

 

 

 

 

 

  

 

  

 

 

 

 

 

 

 

 

 

 

 

  

 

  

 

$

 (4,240)

  

$

 (2,743)

 

 

 

 

 

  

 

  

 

 

 

 

 

 

 

 

 

 

 

  

 

  

 

 

 

 

 

 

(1)

Includes interests in 280 Park Avenue, 650 Madison Avenue, One Park Avenue, 666 Fifth Avenue (Office), 330 Madison Avenue, 512 West 22nd Street and others.

(2)

Includes interests in Independence Plaza, 85 Tenth Avenue, Fashion Center Mall, 50-70 West 93rd Street, Toys "R" Us, Inc. and others.

14

 


 

VORNADO REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(UNAUDITED)

 

 

7.    Dispositions

 

 

The tables below set forth the assets and liabilities related to discontinued operations at March 31, 2016 and December 31, 2015 and their combined results of operations and cash flows for the three months ended March 31, 2016 and 2015.

 

(Amounts in thousands)

 

Balance as of

 

 

 

March 31, 2016

 

December 31, 2015

Assets related to discontinued operations:

 

 

 

 

 

 

Real estate, net

 

$

 29,517 

 

$

 29,561 

Other assets

 

 

 6,997 

 

 

 7,459 

 

 

$

 36,514 

 

$

 37,020 

 

 

 

 

 

 

 

 

Liabilities related to discontinued operations:

 

 

 

 

 

 

Other liabilities

 

$

 12,902 

 

$

 12,470 

 

 

$

 12,902 

 

$

 12,470 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(Amounts in thousands)

 

For the Three Months Ended March 31,

 

 

 

2016 

 

2015 

Income from discontinued operations:

 

 

 

 

 

 

Total revenues

 

$

 1,182 

 

$

 20,296 

Total expenses

 

 

 466 

 

 

 13,373 

 

 

 

 716 

 

 

 6,923 

Transaction related costs (primarily UE spin off)

 

 

 - 

 

 

 (22,645)

Net gain on sale of lease position in Geary Street, CA

 

 

 - 

 

 

 21,376 

Net gains on sale of real estate

 

 

 - 

 

 

 10,867 

Impairment losses

 

 

 - 

 

 

 (256)

Pretax income from discontinued operations

 

 

 716 

 

 

 16,265 

Income tax expense

 

 

 - 

 

 

 (86)

Income from discontinued operations

 

$

 716 

 

$

 16,179 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash flows related to discontinued operations:

 

 

 

 

 

 

Cash flows from operating activities

 

$

 1,654 

 

$

 (36,672)

Cash flows from investing activities

 

 

 - 

 

 

 310,069 

15

 


 

VORNADO REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(UNAUDITED)

 

 

8.    Identified Intangible Assets and Liabilities

 

The following summarizes our identified intangible assets (primarily above-market leases) and liabilities (primarily acquired below-market leases) as of March 31, 2016 and December 31, 2015.

 

 

(Amounts in thousands)

 Balance as of

 

 

 

March 31, 2016

 

December 31, 2015

 

 

Identified intangible assets:

 

 

 

 

 

 

 

Gross amount

$

 406,482 

 

$

 415,261 

 

 

Accumulated amortization

 

 (188,094)

 

 

 (187,360)

 

 

Net

$

 218,388 

 

$

 227,901 

 

 

Identified intangible liabilities (included in deferred revenue):

 

 

 

 

 

 

 

Gross amount

$

 607,241 

 

$

 643,488 

 

 

Accumulated amortization

 

 (307,858)

 

 

 (325,340)

 

 

Net

$

 299,383 

 

$

 318,148 

 

 

Amortization of acquired below-market leases, net of acquired above-market leases, resulted in an increase to rental income of $17,507,000 and $12,450,000 for the three months ended March 31, 2016 and 2015, 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, 2017 is as follows:

 

 

(Amounts in thousands)

 

 

 

 

2017 

$

 44,463 

 

 

2018 

 

 42,991 

 

 

2019 

 

 30,973 

 

 

2020 

 

 23,320 

 

 

2021 

 

 18,263 

 

 

Amortization of all other identified intangible assets (a component of depreciation and amortization expense) was $7,793,000 and $6,185,000 for the three months ended March 31, 2016 and 2015, 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, 2017 is as follows:

 

 

(Amounts in thousands)

 

 

 

 

2017 

$

 24,427 

 

 

2018 

 

 20,063 

 

 

2019 

 

 15,779 

 

 

2020 

 

 12,345 

 

 

2021 

 

 10,957 

 

 

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 $458,000 and $458,000 for the three months ended March 31, 2016 and 2015, respectively.  Estimated annual amortization of these below-market leases, net of above-market leases, for each of the five succeeding years commencing January 1, 2017 is as follows:

 

 

(Amounts in thousands)

 

 

 

 

2017 

$

 1,832 

 

 

2018 

 

 1,832 

 

 

2019 

 

 1,832 

 

 

2020 

 

 1,832 

 

 

2021 

 

 1,832 

 

16

 


 

VORNADO REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(UNAUDITED)

 

 

9.    Debt

 

On February 8, 2016, we completed a $700,000,000 refinancing of 770 Broadway, a 1,158,000 square foot Manhattan office building.  The five-year loan is interest only at LIBOR plus 1.75%, (2.19% at March 31, 2016) which was swapped for four and a half years to a fixed rate of 2.56%.  The Company realized net proceeds of approximately $330,000,000.  The property was previously encumbered by a 5.65%, $353,000,000 mortgage which was to mature in March 2016.

 

On March 15, 2016, we notified the servicer of the $678,000,000 mortgage loan on the Skyline properties in Virginia that cash flow will be insufficient to service the debt and pay other property related costs and expenses and that we were not willing to fund additional cash shortfalls.  Accordingly, at our request, the loan has been transferred to the special servicer. Consequently, based on our shortened estimated holding period for the underlying assets, we concluded that the excess of carrying amount over our estimate of fair value was not recoverable and recognized a $160,700,000 non-cash impairment loss in the first quarter of 2016.

 

The following is a summary of our debt:

 

 

(Amounts in thousands)

Interest Rate at

 

Balance at

 

 

 

 

 

 

 

March 31, 2016

 

March 31, 2016

 

December 31, 2015

 

 

Mortgages Payable:

 

  

 

 

 

 

 

 

 

 

 

Fixed rate

 

4.04% 

 

$

 6,695,401 

 

$

 6,356,634 

 

 

 

Variable rate

 

2.25% 

 

 

 3,259,067 

 

 

 3,258,204 

 

 

 

 

Total

 

 

 

3.46% 

 

 

 9,954,468 

 

 

 9,614,838 

 

 

 

Deferred financing costs, net and other

 

 

 

 

 (110,226)

 

 

 (101,125)

 

 

 

 

Total, net

 

 

 

 

 

$

 9,844,242 

 

$

 9,513,713 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unsecured Debt:

 

 

 

 

 

 

 

 

 

 

 

Senior unsecured notes

 

3.68% 

 

$

 850,000 

 

$

 850,000 

 

 

 

Deferred financing costs, net and other

 

 

 

 

 (5,486)

 

 

 (5,841)

 

 

 

 

Senior unsecured notes, net

 

 

 

 

 844,514 

 

 

 844,159 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unsecured term loan

 

1.58% 

 

 

 375,000 

 

 

 187,500 

 

 

 

Deferred financing costs, net and other

 

 

 

 

 (3,924)

 

 

 (4,362)

 

 

 

 

Unsecured term loan, net

 

 

 

 

 371,076 

 

 

 183,138 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unsecured revolving credit facilities

 

-

 

 

 -   

 

 

 550,000 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total, net

 

 

 

 

 

$

 1,215,590 

 

$

 1,577,297 

 

17

 


 

VORNADO REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(UNAUDITED)

 

 

10.    Redeemable Noncontrolling Interests

 

Redeemable noncontrolling interests on our consolidated balance sheets are comprised primarily of Class A Operating Partnership units held by third parties and 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, 2014

$

 1,337,780 

 

 

Net income

 

 5,287 

 

 

Other comprehensive loss

 

 (1,288)

 

 

Distributions

 

 (7,280)

 

 

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

 

 (23,493)

 

 

Adjustments to carry redeemable Class A units at redemption value

 

 (25,349)

 

 

Other, net

 

 19,133 

 

 

Balance at March 31, 2015

$

 1,304,790 

 

 

 

 

 

 

 

Balance at December 31, 2015

$

 1,229,221 

 

 

Net loss

 

 (7,487)

 

 

Other comprehensive income

 

 427 

 

 

Distributions

 

 (7,835)

 

 

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

 

 (14,482)

 

 

Adjustments to carry redeemable Class A units at redemption value

 

 (36,524)

 

 

Other, net

 

 14,364 

 

 

Balance at March 31, 2016

$

 1,177,684 

 

 

As of March 31, 2016 and December 31, 2015, the aggregate redemption value of redeemable Class A units was $1,172,256,000 and $1,223,793,000, 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 $50,561,000 as of March 31, 2016 and December 31, 2015.    Changes in the value from period to period, if any, are charged to “interest and debt expense” on our consolidated statements of income. 

18

 


 

VORNADO REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(UNAUDITED)

 

 

11.    Accumulated Other Comprehensive Income (“AOCI”)

 

The following tables set forth the changes in accumulated other comprehensive income by component.

 

(Amounts in thousands)

 

 

 

Securities

  

Pro rata share of

 

Interest

 

 

  

 

 

 

available-

  

nonconsolidated

 

rate

 

 

  

 

Total

 

for-sale

  

subsidiaries' OCI

 

swaps

 

Other

For the Three Months Ended March 31, 2016

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance as of December 31, 2015

 

$

 46,921 

 

$

 78,448 

  

$

 (9,319)

 

$

 (19,368)

 

$

 (2,840)

 

OCI before reclassifications

 

 

 6,478 

 

 

 11,094 

  

 

 6 

 

 

 (4,195)

 

 

 (427)

 

Amounts reclassified from AOCI

 

 

 -   

 

 

 -   

  

 

 -   

 

 

 -   

 

 

 -   

Net current period OCI

 

 

 6,478 

 

 

 11,094 

  

 

 6 

 

 

 (4,195)

 

 

 (427)

Balance as of March 31, 2016

 

$

 53,399 

 

$

 89,542 

  

$

 (9,313)

 

$

 (23,563)

 

$

 (3,267)

 

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the Three Months Ended March 31, 2015

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance as of December 31, 2014

 

$

 93,267 

 

$

 133,774 

  

$

 (8,992)

 

$

 (25,803)

 

$

 (5,712)

 

OCI before reclassifications

 

 

 (20,658)

 

 

 (21,332)

  

 

 157 

 

 

 (776)

 

 

 1,293 

 

Amounts reclassified from AOCI

 

 

 -   

 

 

 -   

  

 

 -   

 

 

 -   

 

 

 -   

Net current period OCI

 

 

 (20,658)

 

 

 (21,332)

  

 

 157 

 

 

 (776)

 

 

 1,293 

Balance as of March 31, 2015

 

$

 72,609 

 

$

 112,442 

  

$

 (8,835)

 

$

 (26,579)

 

$

 (4,419)

 

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

12.    Variable Interest Entities (“VIEs”)

 

At March 31, 2016 and December 31, 2015, we have several unconsolidated VIEs.  We do not consolidate these entities because we are not the primary beneficiary and the nature of our involvement in the activities of these entities does not give us power over decisions that significantly affect these entities’ economic performance.  We account for our investment in these entities under the equity method (see Note 6 – Investments in Partially Owned Entities).  As of March 31, 2016 and December 31, 2015, the net carrying amounts of our investment in these entities were $361,921,000 and $379,939,000, respectively, and our maximum exposure to loss in these entities, is limited to our investments.

 

We adopted ASU 2015-02 on January 1, 2016 which resulted in the identification of several VIEs at March 31, 2016.  Prior to the adoption of ASU 2015-02, these entities were consolidated under the voting interest model.  Our most significant consolidated VIEs are our Operating Partnership, real estate fund investments, and certain properties that have non-controlling interests.  These entities are VIEs because the non-controlling interests do not have substantive kick-out or participating rights.  We consolidate these entities because we control all significant business activities.

 

We conduct our business through, and all of our assets and liabilities are held by, our Operating Partnership which is a VIE.

19

 


 

VORNADO REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(UNAUDITED)

 

 

13.    Fair Value Measurements

 

ASC 820 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 on a Recurring Basis

 

Financial assets and liabilities that are measured at fair value on our consolidated balance sheets consist of (i) marketable securities, (ii) real estate fund investments, (iii) the assets in our deferred compensation plan (for which there is a corresponding liability on our consolidated balance sheet), (iv) mandatorily redeemable instruments (Series G-1 through G-4 convertible preferred units and Series D-13 cumulative redeemable preferred units), and (v) interest rate swaps.  The tables below aggregate the fair values of these financial assets and liabilities by their levels in the fair value hierarchy as of March 31, 2016 and December 31, 2015, respectively.

 

(Amounts in thousands)

As of March 31, 2016

 

 

  

Total

 

Level 1

 

Level 2

 

Level 3

Marketable securities  

$

 162,091 

 

$

 162,091 

 

$

 -   

 

$

 -   

Real estate fund investments (75% of which is attributable to

 

 

 

 

 

 

 

 

 

 

 

 

noncontrolling interests)

 

 566,696 

 

 

 -   

 

 

 -   

 

 

 566,696 

Deferred compensation plan assets (included in other assets)

 

 116,824 

 

 

 59,640 

 

 

 -   

 

 

 57,184 

Interest rate swap (included in other assets)

 

 5,039 

 

 

 -   

 

 

 5,039 

 

 

 -   

 

Total assets

$

 850,650 

 

$

 221,731 

 

$

 5,039 

 

$

 623,880 

 

 

  

 

 

 

 

 

 

 

 

 

 

 

Mandatorily redeemable instruments (included in other liabilities)

$

 50,561 

 

$

 50,561 

 

$

 -   

 

$

 -   

Interest rate swaps (included in other liabilities)

 

 28,914 

 

 

 -   

 

 

 28,914 

 

 

 -   

 

Total liabilities

$

 79,475 

 

$

 50,561 

 

$

 28,914 

 

$

 -   

 

 

  

 

 

 

 

 

 

 

 

 

 

 

(Amounts in thousands)

As of December 31, 2015

 

 

  

Total

 

Level 1

 

Level 2

 

Level 3

Marketable securities  

$

 150,997 

 

$

 150,997 

 

$

 -   

 

$

 -   

Real estate fund investments (75% of which is attributable to

 

 

 

 

 

 

 

 

 

 

 

 

noncontrolling interests)

 

 574,761 

 

 

 -   

 

 

 -   

 

 

 574,761 

Deferred compensation plan assets (included in other assets)

 

 117,475 

 

 

 58,289 

 

 

 -   

 

 

 59,186 

 

Total assets

$

 843,233 

 

$

 209,286 

 

$

 -   

 

$

 633,947 

 

 

  

 

 

 

 

 

 

 

 

 

 

 

Mandatorily redeemable instruments (included in other liabilities)

$

 50,561 

 

$

 50,561 

 

$

 -   

 

$

 -   

Interest rate swaps (included in other liabilities)

 

 19,600 

 

 

 -   

 

 

 19,600 

 

 

 -   

 

Total liabilities

$

 70,161 

 

$

 50,561 

 

$

 19,600 

 

$

 -   

 

20

 


 

VORNADO REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(UNAUDITED)

 

 

13.  Fair Value Measurements – continued

 

Financial Assets and Liabilities Measured at Fair Value on a Recurring Basis - continued

 

Real Estate Fund Investments

 

At March 31, 2016, we had six real estate fund investments with an aggregate fair value of $566,696,000, or $200,549,000 in excess of cost.  These investments are classified as Level 3.  We use a discounted cash flow valuation technique to estimate the fair value of each of these investments, which is updated quarterly by personnel responsible for the management of each investment and reviewed by senior management at each reporting period.  The discounted cash flow valuation technique requires us to estimate cash flows for each investment over the anticipated holding period, which currently ranges from 1.3 to 4.8 years.  Cash flows are derived from property rental revenue (base rents plus reimbursements) less operating expenses, real estate taxes and capital and other costs, plus projected sales proceeds in the year of exit.  Property rental revenue is based on leases currently in place and our estimates for future leasing activity, which are based on current market rents for similar space plus a projected growth factor.  Similarly, estimated operating expenses and real estate taxes are based on amounts incurred in the current period plus a projected growth factor for future periods.  Anticipated sales proceeds at the end of an investment’s expected holding period are determined based on the net cash flow of the investment in the year of exit, divided by a terminal capitalization rate, less estimated selling costs. 

 

The fair value of each property is calculated by discounting the future cash flows (including the projected sales proceeds), using an appropriate discount rate and then reduced by the property’s outstanding debt, if any, to determine the fair value of the equity in each investment. Significant unobservable quantitative inputs used in determining the fair value of each investment include capitalization rates and discount rates.  These rates are based on the location, type and nature of each property, and current and anticipated market conditions, industry publications and from the experience of our Acquisitions and Capital Markets departments.  Significant unobservable quantitative inputs in the table below were utilized in determining the fair value of these real estate fund investments at March 31, 2016 and December 31, 2015.

 

 

 

 

 

 

 

 

 

Weighted Average

 

 

 

 

Range

 

(based on fair value of investments) 

Unobservable Quantitative Input

 

March 31, 2016

 

December 31, 2015

 

March 31, 2016

 

December 31, 2015

 

Discount rates

 

12.0% to 14.9%

 

12.0% to 14.9%

 

13.5%

 

13.6% 

 

Terminal capitalization rates

 

4.8% to 6.1%

 

4.8% to 6.1%

 

5.4%

 

5.5% 

 

The above inputs are subject to change based on changes in economic and market conditions and/or changes in use or timing of exit.  Changes in discount rates and terminal capitalization rates result in increases or decreases in the fair values of these investments.  The discount rates encompass, among other things, uncertainties in the valuation models with respect to terminal capitalization rates and the amount and timing of cash flows.  Therefore, a change in the fair value of these investments resulting from a change in the terminal capitalization rate, may be partially offset by a change in the discount rate.  It is not possible for us to predict the effect of future economic or market conditions on our estimated fair values. 

 

The table below summarizes the changes in the fair value of real estate fund investments that are classified as Level 3, for the three months ended March 31, 2016 and 2015.

 

(Amounts in thousands)

 

For the Three Months Ended March 31,

 

 

 

2016 

 

2015 

Beginning balance

 

$

 574,761 

 

$

 513,973 

Purchases

 

 

 -   

 

 

 95,000 

Dispositions / distributions

 

 

 (14,676)

 

 

 (72,186)

Net unrealized gains

 

 

 6,189 

 

 

 16,213 

Net realized gains

 

 

 422 

 

 

 1,426 

Ending balance

 

$

 566,696 

 

$

 554,426 

 

 

 

 

 

 

 

 

 

21

 


 
 

VORNADO REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(UNAUDITED)

 

 

13.    Fair Value Measurements – continued

 

Financial Assets and Liabilities Measured at Fair Value on a Recurring Basis - continued

 

Deferred Compensation Plan Assets

 

Deferred compensation plan assets that are classified as Level 3 consist of investments in limited partnerships and investment funds, which are managed by third parties.  We receive quarterly financial reports from a third-party administrator, which are compiled from the quarterly reports provided to them from each limited partnership and investment fund.  The quarterly reports provide net asset values on a fair value basis which are audited by independent public accounting firms on an annual basis.  The third-party administrator does not adjust these values in determining our share of the net assets and we do not adjust these values when reported in our consolidated financial statements.

 

The table below summarizes the changes in the fair value of deferred compensation plan assets that are classified as Level 3, for the three months ended March 31, 2016 and 2015. 

 

(Amounts in thousands)

 

For the Three Months Ended March 31,

 

 

 

2016 

 

2015 

Beginning balance

 

$

 59,186 

 

$

 63,315 

Purchases

 

 

 1,166 

 

 

 624 

Sales

 

 

 (1,372)

 

 

 (438)

Realized and unrealized (loss) gain

 

 

 (1,907)

 

 

 1,335 

Other, net

 

 

 111 

 

 

 -   

Ending balance

 

$

 57,184 

 

$

 64,836 

               

 

Fair Value Measurements on a Nonrecurring Basis

 

Assets measured at fair value on a nonrecurring basis on our consolidated balance sheets consist primarily of real estate assets required to be measured for impairment at March 31, 2016.  There are no assets or liabilities measured at fair value on a nonrecurring basis at December 31, 2015.  The fair values of real estate assets required to be measured for impairment were determined using widely accepted valuation techniques, including (i) discounted cash flow analysis, which considers, among other things, leasing assumptions, growth rates, discount rates and terminal capitalization rates, (ii) income capitalization approach, which considers prevailing market capitalization rates, and (iii) comparable sales activity.

 

 

 (Amounts in thousands)

As of March 31, 2016

 

 

 

Total

 

Level 1

 

Level 2

 

Level 3

 

 

Real estate assets (Skyline properties)

$

 192,003 

 

$

 -   

 

$

 -   

 

$

 192,003 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

22

 


 

VORNADO REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(UNAUDITED)

 

 

13.    Fair Value Measurements – continued

 

Financial Assets and Liabilities not Measured at Fair Value

 

Financial assets and liabilities that are not measured at fair value on our consolidated balance sheets include cash equivalents (primarily money market funds, which invest in obligations of the United States government), and our secured and unsecured debt.  Estimates of the fair value of these instruments are determined by the standard practice of modeling the contractual cash flows required under the instrument and discounting them back to their present value at the appropriate current risk adjusted interest rate, which is provided by a third-party specialist.  For floating rate debt, we use forward rates derived from observable market yield curves to project the expected cash flows we would be required to make under the instrument.  The fair value of cash equivalents and borrowings under our unsecured revolving credit facilities and unsecured term loan are classified as Level 1.  The fair value of our secured and unsecured debt is classified as Level 2.  The table below summarizes the carrying amounts and fair value of these financial instruments as of March 31, 2016 and December 31, 2015.

 

(Amounts in thousands)

As of March 31, 2016

 

As of December 31, 2015

 

 

Carrying

  

Fair

 

Carrying

 

Fair

 

 

Amount

  

Value

 

Amount

 

Value

Cash equivalents

$

 1,445,442 

  

$

 1,445,000 

 

$

 1,295,980 

 

$

 1,296,000 

Debt:

 

 

  

 

 

 

 

 

 

 

 

 

Mortgages payable

$

 9,954,468 

  

$

 9,705,000 

 

$

 9,614,838 

 

$

 9,306,000 

 

Senior unsecured notes

 

 850,000 

  

 

 887,000 

 

 

 850,000 

 

 

 868,000 

 

Unsecured term loan

 

 375,000 

  

 

 375,000 

 

 

 187,500 

 

 

 187,500 

 

Unsecured revolving credit facilities

 

 -   

  

 

 -   

 

 

 550,000 

 

 

 550,000 

 

Total

$

 11,179,468 

  (1)

$

 10,967,000 

 

$

 11,202,338 

 

$

 10,911,500 

 

 

 

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 (1)

Excludes $119,636 of deferred financing costs, net and other.

 

14.    Incentive Compensation

 

Our 2010 Omnibus Share Plan (the “Plan”) provides for grants of incentive and non-qualified stock options, restricted shares, restricted Operating Partnership units and Out-Performance Plan awards to certain of our employees and officers.  We account for all equity-based compensation in accordance with ASC 718, Compensation – Stock Compensation.  Equity-based compensation expense was $14,571,000 and $20,142,000 for the three months ended March 31, 2016 and 2015, respectively.

23

 


 

VORNADO REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(UNAUDITED)

 

 

15.    Fee and Other Income

 

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

 

(Amounts in thousands)

 

For the Three Months Ended March 31,

 

  

 

2016 

  

2015 

BMS cleaning fees

 

$

 18,146 

  

$

 22,633 

Management and leasing fees

 

 

 4,799 

  

 

 4,192 

Lease termination fees

 

 

 2,405 

  

 

 3,747 

Other income

 

 

 8,620 

  

 

 9,035 

  

 

$

 33,970 

  

$

 39,607 

               

 

Management and leasing fees include management fees from Interstate Properties, a related party, of $134,000 and $139,000 for the three months ended March 31, 2016 and 2015, respectively.  The above table excludes fee income from partially owned entities, which is included in “loss from partially owned entities” (see Note 6 – Investments in Partially Owned Entities).

 

16.     Interest and Other Investment Income, Net

 

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

 

(Amounts in thousands)

 

For the Three Months Ended March 31,

 

 

  

 

2016 

 

2015 

Dividends on marketable securities

 

$

 3,215 

 

$

 3,203 

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

 

 

 (1,938)

 

 

 2,859 

Interest on loans receivable

 

 

 748 

 

 

 2,824 

Other, net

 

 

 1,493 

 

 

 1,906 

  

 

$

 3,518 

 

$

 10,792 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1)

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

 

17.     Interest and Debt Expense

 

The following table sets forth the details of interest and debt expense:

 

(Amounts in thousands)

 

For the Three Months Ended March 31,

 

 

  

 

2016 

 

2015 

Interest expense

 

$

 100,295 

 

$

 95,328 

Amortization of deferred financing costs

 

 

 9,265 

 

 

 7,456 

Capitalized interest and debt expense

 

 

 (9,071)

 

 

 (11,110)

  

 

$

 100,489 

 

$

 91,674 

 

 

  

 

 

 

 

 

 

24

 


 

VORNADO REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(UNAUDITED)

 

 

18.    (Loss) Income Per Share

 

 

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

 

(Amounts in thousands, except per share amounts) 

 

For the Three Months Ended March 31,

 

 

 

 

  

 

2016 

 

2015 

 

Numerator:  

 

 

 

 

 

 

 

 

(Loss) income from continuing operations, net of income attributable 

 

 

 

 

 

 

 

 

 

to noncontrolling interests 

 

$

 (94,471)

 

$

 88,848 

 

 

Income from discontinued operations, net of income attributable to noncontrolling interests 

 

 

 672 

 

 

 15,229 

 

 

Net (loss) income attributable to Vornado 

 

 

 (93,799)

 

 

 104,077 

 

 

Preferred share dividends 

 

 

 (20,364)

 

 

 (19,484)

 

 

Net (loss) income attributable to common shareholders 

 

 

 (114,163)

 

 

 84,593 

 

 

Earnings allocated to unvested participating securities 

 

 

 (16)

 

 

 (19)

 

 

Numerator for basic and diluted (loss) income per share 

 

$

 (114,179)

 

$

 84,574 

 

 

 

 

  

 

 

 

 

 

 

 

Denominator: 

 

 

 

 

 

 

 

 

Denominator for basic (loss) income per share – weighted average shares 

 

 

 188,658 

 

 

 187,999 

 

 

Effect of dilutive securities(1):

 

 

 

 

 

 

 

 

 

Employee stock options and restricted share awards  

 

 

 -   

 

 

 1,337 

 

 

Denominator for diluted (loss) income per share – weighted average 

 

 

 

 

 

 

 

 

 

shares and assumed conversions 

 

 

 188,658 

 

 

 189,336 

 

 

 

 

  

 

 

 

 

 

 

 

(LOSS) INCOME PER COMMON SHARE – BASIC: 

 

 

 

 

 

 

 

 

(Loss) income from continuing operations, net 

 

$

(0.61)

 

$

0.37 

 

 

Income from discontinued operations, net 

 

 

 -   

 

 

0.08 

 

 

Net (loss) income per common share 

 

$

(0.61)

 

$

0.45 

 

 

 

 

  

 

 

 

 

 

 

 

(LOSS) INCOME PER COMMON SHARE – DILUTED: 

 

 

 

 

 

 

 

 

(Loss) income from continuing operations, net 

 

$

(0.61)

 

$

0.37 

 

 

Income from discontinued operations, net 

 

 

 -   

 

 

0.08 

 

 

Net (loss) income per common share 

 

$

(0.61)

 

$

0.45 

 

 

 

 

  

 

 

 

 

 

 

 

 

 

 

  

 

 

 

 

 

 

 

(1)

The effect of dilutive securities for the three months ended March 31, 2016 and 2015 excludes an aggregate of 13,281 and 11,488 weighted average common share equivalents, respectively, as their effect was anti-dilutive.

 

 

 

19.    Commitments and Contingencies

 

Insurance 

 

We maintain general liability insurance with limits of $300,000,000 per occurrence and per property, and all risk property and rental value insurance with limits of $2.0 billion per occurrence, with sub-limits for certain perils such as flood and earthquake. Our California properties have earthquake insurance with coverage of $180,000,000 per occurrence and in the annual aggregate, subject to a deductible in the amount of 5% of the value of the affected property. We maintain coverage for terrorism acts with limits of $4.0 billion per occurrence and in the aggregate, and $2.0 billion per occurrence and in the aggregate for terrorism involving nuclear, biological, chemical and radiological (“NBCR”) terrorism events, as defined by Terrorism Risk Insurance Program Reauthorization Act of 2015, which expires in December 2020.

 

25

 


 

VORNADO REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(UNAUDITED)

 

 

19.    Commitments and Contingencies - continued

 

Insurance - continued

 

Penn Plaza Insurance Company, LLC (“PPIC”), our wholly owned consolidated subsidiary, acts as a re-insurer with respect to a portion of all risk property and rental value insurance and a portion of our earthquake insurance coverage, and as a direct insurer for coverage for acts of terrorism including NBCR acts. 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. For NBCR acts, PPIC is responsible for a deductible of $2,400,000 per occurrence and 16% of the balance of a covered loss and the Federal government is responsible for the remaining 84% of a covered loss. We are ultimately responsible for any loss incurred 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 the future.

 

Our debt instruments, consisting of mortgage loans secured by our properties which are non-recourse to us, senior unsecured notes 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

 

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 is not expected to have a material adverse effect on our financial position, results of operations or cash flows.

 

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.

 

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 March 31, 2016, the aggregate dollar amount of these guarantees and master leases is approximately $481,000,000.

 

At March 31, 2016, $32,540,000 of letters of credit were outstanding under one of our unsecured revolving credit facilities.  Our unsecured revolving 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 unsecured revolving 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.

 

As of March 31, 2016, we expect to fund additional capital to certain of our partially owned entities aggregating approximately $80,000,000.

 

As of March 31, 2016, we have construction commitments aggregating approximately $810,700,000. 

26

 


 

VORNADO REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(UNAUDITED)

 

 

20.    Segment Information

 

Below is a summary of net income and a reconciliation of net income to EBITDA(1) by segment for the three months ended March 31, 2016 and 2015.  

 

 

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

(Amounts in thousands)

For the Three Months Ended March 31, 2016

 

 

  

 

Total

  

New York

  

Washington, DC

  

Other

  

Total revenues

 

$

 613,037 

  

$

 410,825 

  

$

 128,012 

  

$

 74,200 

  

Total expenses

 

 

 613,317 

  

 

 269,595 

  

 

 256,565 

  

 

 87,157 

  

Operating (loss) income

 

 

 (280)

  

 

 141,230 

  

 

 (128,553)

  

 

 (12,957)

  

(Loss) income from partially owned entities

 

 

 (4,240)

  

 

 (3,563)

  

 

 (2,043)

  

 

 1,366 

  

Income from real estate fund investments

 

 

 11,284 

  

 

 -   

  

 

 -   

  

 

 11,284 

  

Interest and other investment income, net

 

 

 3,518 

  

 

 1,115 

  

 

 58 

  

 

 2,345 

  

Interest and debt expense

 

 

 (100,489)

  

 

 (54,586)

  

 

 (15,935)

  

 

 (29,968)

  

Net gain on disposition of wholly owned and partially

 

 

 

 

 

 

 

 

 

 

 

 

 

 

owned assets

 

 

 714 

  

 

 -   

  

 

 -   

  

 

 714 

  

(Loss) income before income taxes

 

 

 (89,493)

  

 

 84,196 

  

 

 (146,473)

  

 

 (27,216)

  

Income tax expense

 

 

 (2,831)

  

 

 (959)

  

 

 (264)

  

 

 (1,608)

  

(Loss) income from continuing operations

 

 

 (92,324)

  

 

 83,237 

  

 

 (146,737)

  

 

 (28,824)

  

Income from discontinued operations

 

 

 716 

  

 

 -   

  

 

 -   

  

 

 716 

  

Net (loss) income

 

 

 (91,608)

  

 

 83,237 

  

 

 (146,737)

  

 

 (28,108)

  

Less net (income) loss attributable to noncontrolling interests

 

 

 (2,191)

  

 

 (3,429)

  

 

 -   

  

 

 1,238 

  

Net (loss) income attributable to Vornado

 

 

 (93,799)

  

 

 79,808 

  

 

 (146,737)

  

 

 (26,870)

  

Interest and debt expense(2)

 

 

 126,120 

  

 

 71,198 

  

 

 19,406 

  

 

 35,516 

  

Depreciation and amortization(2)

 

 

 174,811 

  

 

 108,403 

  

 

 42,681 

  

 

 23,727 

  

Income tax expense (2)

 

 

 3,261 

  

 

 1,090 

  

 

 265 

  

 

 1,906 

  

EBITDA(1)

 

$

 210,393 

  

$

 260,499 

 (3)

$

 (84,385)

 (4)

$

 34,279 

 (5)

 

 

 

 

  

 

 

 

 

 

 

 

 

 

 

 

 

  

(Amounts in thousands)

 

For the Three Months Ended March 31, 2015

 

 

  

 

Total

  

New York

  

Washington, DC

  

Other

  

Total revenues

 

$

 606,802 

  

$

 399,513 

  

$

 133,968 

  

$

 73,321 

  

Total expenses

 

 

 439,088 

  

 

 252,760 

  

 

 92,997 

  

 

 93,331 

  

Operating income (loss)

 

 

 167,714 

  

 

 146,753 

  

 

 40,971 

  

 

 (20,010)

  

(Loss) income from partially owned entities

 

 

 (2,743)

  

 

 (5,663)

  

 

 131 

  

 

 2,789 

  

Income from real estate fund investments

 

 

 24,089 

  

 

 -   

  

 

 -   

  

 

 24,089 

  

Interest and other investment income, net

 

 

 10,792 

  

 

 1,862 

  

 

 13 

  

 

 8,917 

  

Interest and debt expense

 

 

 (91,674)

  

 

 (45,351)

  

 

 (18,160)

  

 

 (28,163)

  

Net gain on disposition of wholly owned and partially

 

 

 

 

 

 

 

 

 

 

 

 

 

 

owned assets

 

 

 1,860 

  

 

 -   

  

 

 -   

  

 

 1,860 

  

Income (loss) before income taxes

 

 

 110,038 

  

 

 97,601 

  

 

 22,955 

  

 

 (10,518)

  

Income tax (expense) benefit

 

 

 (971)

  

 

 (943)

  

 

 674 

  

 

 (702)

  

Income (loss) from continuing operations

 

 

 109,067 

  

 

 96,658 

  

 

 23,629 

  

 

 (11,220)

  

Income from discontinued operations

 16,179 

  

 

 -   

  

 

 -   

  

 

 16,179 

  

Net income

 

 

 125,246 

  

 

 96,658 

  

 

 23,629 

  

 

 4,959 

  

Less net income attributable to noncontrolling interests

 

 

 (21,169)

  

 

 (1,506)

  

 

 -   

  

 

 (19,663)

  

Net income (loss) attributable to Vornado

 

 

 104,077 

  

 

 95,152 

  

 

 23,629 

  

 

 (14,704)

  

Interest and debt expense(2)

 

 

 114,675 

  

 

 58,667 

  

 

 21,512 

  

 

 34,496 

  

Depreciation and amortization(2)

 

 

 156,450 

  

 

 94,124 

  

 

 40,752 

  

 

 21,574 

  

Income tax (benefit) expense(2)

 

 

 (739)

  

 

 1,002 

  

 

 (2,636)

  

 

 895 

  

EBITDA(1)

 

$

 374,463 

  

$

 248,945 

 (3)

$

 83,257 

 (4)

$

 42,261 

 (5)

 

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

See notes on the following pages.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

27

 


 

VORNADO REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(UNAUDITED)

 

 

20.    Segment Information – continued

 

 

 

 

 

 

  

 

 

 

 

 

 

 

Notes to preceding tabular information:

 

 

 

 

 

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1)

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(2)

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(3)

The elements of "New York" EBITDA are summarized below.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(Amounts in thousands)

 

For the Three Months Ended March 31,

 

 

 

 

 

 

  

 

2016 

 

2015 

 

 

Office(a)

 

$

 152,729 

 

$

 154,309 

 

 

Retail

 

 

 93,323 

 

 

 81,305 

 

 

Residential

 

 

 6,350 

 

 

 5,050 

 

 

Alexander's  

 

 

 11,569 

 

 

 10,407 

 

 

Hotel Pennsylvania

 

 

 (3,472)

 

 

 (2,126)

 

 

 

Total New York

 

$

 260,499 

 

$

 248,945 

 

 

 

 

 

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(a)

2015 includes $3,540 of EBITDA from 20 Broad Street which was sold in December 2015. Excluding this item, EBITDA was $150,769.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(4)

The elements of "Washington, DC" EBITDA are summarized below.  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(Amounts in thousands)

 

For the Three Months Ended March 31,

 

 

 

 

 

 

  

 

2016 

 

2015 

 

 

Office, excluding the Skyline properties (a)

 

$

 61,988 

 

$

 67,385 

 

 

Skyline properties

 

 

 5,092 

 

 

 6,055 

 

 

Skyline properties impairment loss

 

 

 (160,700)

 

 

 -   

 

 

 

Total Office

 

 

 (93,620)

 

 

 73,440 

 

 

Residential

 

 

 9,235 

 

 

 9,817 

 

 

 

Total Washington, DC

 

$

 (84,385)

 

$

 83,257 

 

 

 

 

 

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(a)

2015 includes $1,923 of EBITDA from 1750 Pennsylvania Avenue which was sold in September 2015. Excluding this item, EBITDA was $65,462.

 

28

 


 

VORNADO REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(UNAUDITED)

 

 

20.    Segment Information – continued

 

 

 

 

 

 

  

 

 

 

 

 

 

Notes to preceding tabular information - continued:

 

 

 

 

 

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(5)

The elements of "Other" EBITDA are summarized below.

 

 

 

 

 

 

  

 

 

 

 

 

 

 

(Amounts in thousands)

For the Three Months Ended March 31,

 

 

 

 

 

 

  

2016 

 

2015 

 

 

Our share of real estate fund investments:

 

 

 

 

 

 

 

 

Income before net realized/unrealized gains

$

 2,231 

 

$

 1,614 

 

 

 

Net realized/unrealized gains on investments

 

 1,561 

 

 

 5,548 

 

 

 

Carried interest  

 

 1,519 

 

 

 3,388 

 

 

Total

 

 5,311 

 

 

 10,550 

 

 

theMART (including trade shows)

 

 23,028 

 

 

 21,041 

 

 

555 California Street

 

 11,615 

 

 

 12,401 

 

 

India real estate ventures

 

 1,319 

 

 

 1,841 

 

 

Other investments

 

 12,322 

 

 

 6,759 

 

 

  

 

 53,595 

 

 

 52,592 

 

 

Corporate general and administrative expenses(a) (b)

 

 (30,606)

 

 

 (35,942)

 

 

Investment income and other, net(a)

 

 6,975 

 

 

 8,762 

 

 

Acquisition and transaction related costs

 

 (4,607)

 

 

 (1,981)

 

 

UE and residual retail properties discontinued operations(c)

 

 721 

 

 

 22,257 

 

 

Net gain on sale of residential condominiums

 714 

 

 

 1,860 

 

 

Net income attributable to noncontrolling interests in the Operating Partnership

 

 7,487 

 

 

 (5,287)

 

 

 

 

 

 

  

$

 34,279 

 

$

 42,261 

 

 

 

 

 

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(a)

The amounts in these captions (for this table only) exclude the results of the mark-to-market of our deferred compensation plan of $1,938 loss for the three months ended March 31, 2016 and $2,859 income for the three months ended March 31, 2015.

 

 

(b)

The three months ended March 31, 2015 includes a cumulative catch up of $4,542 from the acceleration of recognition of compensation expense related to the modification of the 2012-2014 Out-Performance Plans.

 

 

(c)

The three months ended March 30, 2015 includes $22,645 of transaction costs related to the spin-off of our strip shopping centers and malls.

29

 


 

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 March 31, 2016, and the related consolidated statements of income, comprehensive income, changes in equity, and cash flows for the three month periods ended March 31, 2016 and 2015.  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, 2015, and the related consolidated statements of income, comprehensive income, changes in equity, and cash flows for the year then ended (not presented herein); and in our report dated February 16, 2016, we expressed an unqualified opinion on those consolidated financial statements and included an explanatory paragraph regarding the Company’s adoption of Accounting Standards Update No. 2014-08, Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity.  In our opinion, the information set forth in the accompanying consolidated balance sheet as of December 31, 2015 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

May 2, 2016

30

 


 

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

 

 

Certain statements contained in this Quarterly Report 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.  We also note the following forward-looking statements: in the case of our development and redevelopment projects, the estimated completion date, estimated project cost and cost to complete; and estimates of future capital expenditures, dividends to common and preferred shareholders and operating partnership distributions.  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, as amended, for the year ended December 31, 2015.  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 months ended March 31, 2016.  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.  The results of operations for the three months ended March 31, 2016 are not necessarily indicative of the operating results for the full year.  Certain prior year balances have been reclassified in order to conform to current year presentation.

31

 


 

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 FTSE NAREIT Office Index (“Office REIT”) and the MSCI US REIT Index (“MSCI”) for the following periods ended March 31, 2016:

 

 

 

 

Total Return(1)

 

 

 

 

Vornado

 

Office REIT

 

MSCI(2)

 

 

 

Three-month

 (4.8%)

 

 0.4% 

 

 6.3% 

 

 

 

One-year

 (13.4%)

 

 (5.6%)

 

 4.1% 

 

 

 

Three-year

 35.8% 

 

 24.1% 

 

 34.7% 

 

 

 

Five-year

 40.7% 

 

 40.9% 

 

 75.0% 

 

 

 

Ten-year

 58.1% 

 

 43.6% 

 

 87.6% 

 

 

 

 

 

 

 

 

  

 

 

 

 

 

 

 

 

 

 

 

(1)

 Past performance is not necessarily indicative of future performance.

 

(2)

 Formerly known as the Morgan Stanley REIT Index.

 

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

·      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 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 these 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, sales prices, 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 global, 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, population and employment trends.  See “Item 1A. Risk Factors” in our Annual Report on Form 10-K, as amended, for the year ended December 31, 2015, for additional information regarding these factors.

 

32

 


 
 

Overview – continued

 

 

Quarter Ended March 31, 2016 Financial Results Summary

 

Net loss attributable to common shareholders for the quarter ended March 31, 2016 was $114,163,000, or $0.61 per diluted share, compared to net income attributable to common shareholders of $84,593,000, or $0.45 per diluted share, for the prior year’s quarter.  Net loss for the quarter ended March 31, 2016 includes $165,053,000, of which $160,700,000 relates to the Skyline properties, of real estate impairment losses.  Net income for the quarter ended March 31, 2015 includes $10,867,000 of net gains on sale of real estate.  In addition, the quarters ended March 31, 2016 and 2015 include certain other items that affect comparability, which are listed in the table below.  The aggregate of net gains on sale of real estate, real estate impairment losses and the items in the table below, net of amounts attributable to noncontrolling interests, increased net loss attributable to common shareholders for the quarter ended March 31, 2016 by $156,408,000, or $0.83 per diluted share, and increased net income attributable to common shareholders for the quarter ended March 31, 2015 by $23,057,000, or $0.12 per diluted share.

 

Funds From Operations attributable to common shareholders plus assumed conversions (“FFO”) for the quarter ended March 31, 2016 was $203,137,000, or $1.07 per diluted share, compared to $220,084,000, or $1.16 per diluted share, for the prior year’s quarter.  FFO for the quarters ended March 31, 2016 and 2015 include certain items that affect comparability, which are listed in the table below.  The aggregate of these items, net of amounts attributable to noncontrolling interests, decreased FFO for the quarter ended March 31, 2016 by $2,505,000, or $0.01 per diluted share, and increased FFO for the quarter ended March 31, 2015 by $17,163,000, or $0.09 per diluted share.

 

 

 

 

 

(Amounts in thousands)

For the Three Months Ended March 31,

 

 

 

2016 

 

2015 

Items that affect comparability income (expense):

 

 

 

 

 

 

Acquisition and transaction related costs

$

 (4,607)

 

$

 (1,981)

 

FFO from discontinued operations and sold properties

 

 721 

 

 

 14,188 

 

Net gain on sale of residential condominiums

 

 714 

 

 

 1,860 

 

Toys FFO

 

 500 

 

 

 1,454 

 

Other

 

 -   

 

 

 2,721 

 

 

 

 

 (2,672)

 

 

 18,242 

Noncontrolling interests' share of above adjustments

 

 167 

 

 

 (1,079)

Items that affect comparability, net

$

 (2,505)

 

$

 17,163 

 

The percentage increase (decrease) in same store Earnings Before Interest, Taxes, Depreciation and Amortization (“EBITDA”) and cash basis same store EBITDA of our operating segments for the quarter ended March 31, 2016 over the quarter ended March 31, 2015 and the trailing quarter ended December 31, 2015 are summarized below.

 

 

 

 

 

 

 

 

  

 

 

 

 

 

 

 

 

 

 

 

 

New York

 

Washington, DC

 

 

 

Same Store EBITDA:

 

 

 

 

  

 

 

 

 

 

 

 

 

March 31, 2016 vs. March 31, 2015

 

 

 

  

 

 

 

 

 

 

 

 

 

Same store EBITDA

 

5.5 

%

 (1)

 

(2.9

%)

  

 

 

 

 

 

Cash basis same store EBITDA

 

1.1 

%

 (1)

 

(3.1

%)

  

 

 

 

 

March 31, 2016 vs. December 31, 2015

 

 

 

  

 

 

 

 

 

 

 

 

 

Same store EBITDA

 

(2.9

%)

 (2)

 

(0.1

%)

  

 

 

 

 

 

Cash basis same store EBITDA

 

(1.3

%)

 (2)

 

1.2 

%

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1)

Excluding Hotel Pennsylvania, same store EBITDA increased by 6.0% and by 1.7% on a cash basis.

 

 

(2)

Excluding Hotel Pennsylvania, same store EBITDA increased by 1.6% and by 4.4% on a cash basis.

 

 

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.

 

33

 


 
 

Overview – continued

 

 

2016 Investments

 

On March 17, 2016, we entered into a joint venture, in which we own a 33.3% interest, which owns a $138,240,000 mezzanine loan.  The interest rate is LIBOR plus 8.875% (9.32% at March 31, 2016) and the debt matures in November 2016, with two three-month extension options.  At March 31, 2016, the joint venture has an $11,760,000 remaining commitment, of which our share is $3,920,000.  The joint venture’s investment is subordinate to $350,000,000 of third party debt.  We account for our investment in the joint venture under the equity method.

 

2016 Financings

 

 

On February 8, 2016, we completed a $700,000,000 refinancing of 770 Broadway, a 1,158,000 square foot Manhattan office building.  The five-year loan is interest only at LIBOR plus 1.75%, (2.19% at March 31, 2016) which was swapped for four and a half years to a fixed rate of 2.56%.  We realized net proceeds of approximately $330,000,000.  The property was previously encumbered by a 5.65%, $353,000,000 mortgage which was to mature in March 2016.

 

On March 7, 2016, we completed a $300,000,000 refinancing of our 55% owned joint venture, One Park Avenue, a 947,000 square foot Manhattan office building.  The loan matures in March 2021 and is interest only at LIBOR plus 1.75% (2.19% at March 31, 2016).  The property was previously encumbered by a 4.995%, $250,000,000 mortgage maturing in March 2016.

 

 

Recently Issued Accounting Literature

 

In May 2014, the Financial Accounting Standards Board (“FASB”) issued an update ("ASU 2014-09") establishing Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers.  ASU 2014-09 establishes a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most of the existing revenue recognition guidance.  ASU 2014-09 requires an entity to recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services and also requires certain additional disclosures.  ASU 2014-09 is effective for interim and annual reporting periods in fiscal years that begin after December 15, 2017.  We are currently evaluating the impact of the adoption of ASU 2014-09 on our consolidated financial statements.

 

In June 2014, the FASB issued an update (“ASU 2014-12”) to ASC Topic 718, Compensation – Stock Compensation.  ASU 2014-12 requires an entity to treat performance targets that can be met after the requisite service period of a share based award has ended, as a performance condition that affects vesting.  ASU 2014-12 is effective for interim and annual reporting periods in fiscal years that began after December 15, 2015.  The adoption of this update as of January 1, 2016, did not have any impact on our consolidated financial statements.

 

In February 2015, the FASB issued an update (“ASU 2015-02”) Amendments to the Consolidation Analysis to ASC Topic 810, Consolidation.  ASU 2015-02 affects reporting entities that are required to evaluate whether they should consolidate certain legal entities.  Specifically, the amendments: (i) modify the evaluation of whether limited partnerships and similar legal entities are variable interest entities ("VIEs") or voting interest entities, (ii) eliminate the presumption that a general partner should consolidate a limited partnership, (iii) affect the consolidation analysis of reporting entities that are involved with VIEs, and (iv) provide a scope exception for certain entities.  ASU 2015-02 is effective for interim and annual reporting periods beginning after December 15, 2015.  The adoption of this update on January 1, 2016 resulted in the identification of additional VIEs, but did not have an impact on our consolidated financial statements other than additional disclosures.

 

In January 2016, the FASB issued an update (“ASU 2016-01”) Recognition and Measurement of Financial Assets and Financial Liabilities to ASC Topic 825, Financial Instruments (“ASC 825”).  ASU 2016-01 amends certain aspects of recognition, measurement, presentation and disclosure of financial instruments, including the requirement to measure certain equity investments at fair value with changes in fair value recognized in net income.  ASU 2016-01 is effective for interim and annual reporting periods in fiscal years beginning after December 15, 2017.  We are currently evaluating the impact of the adoption of ASU 2016-01 on our consolidated financial statements.

 

34

 


 

Overview – continued

 

Recently Issued Accounting Literature - continued

 

In February 2016, the FASB issued (“ASU 2016-02”) Leases, which sets out the principles for the recognition, measurement, presentation and disclosure of leases for both lessees and lessors.  ASU 2016-02 requires lessees to apply a dual approach, classifying leases as either finance or operating leases based on the principle of whether or not the lease is effectively a financed purchase.  Lessees are required to record a right-of-use asset and a lease liability for all leases with a term of greater than 12 months. Leases with a term of 12 months or less will be accounted for similar to existing guidance for operating leases.  Lessees will recognize expense based on the effective interest method for finance leases or on a straight-line basis for operating leases.  The new standard requires lessors to account for leases using an approach that is substantially equivalent to existing guidance.  ASU 2016-02 is effective for reporting periods beginning after December 15, 2018, with early adoption permitted.  We are currently evaluating the impact of the adoption of ASU 2016-02 on our consolidated financial statements.

 

In March 2016, the FASB issued an update (“ASU 2016-09”) Improvements to Employee Share-Based Payment Accounting to ASC Topic 718, Compensation—Stock Compensation (“ASC 718”).  ASU 2016-09 amends several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows.  ASU 2016-09 is effective for interim and annual reporting periods in fiscal years beginning after December 15, 2017.  We are currently evaluating the impact of the adoption of ASU 2016-09 on our consolidated financial statements.

 

 

Critical Accounting Policies

 

A summary of our critical accounting policies is included in our Annual Report on Form 10-K, as amended, for the year ended December 31, 2015 in Management’s Discussion and Analysis of Financial Condition. There have been no significant changes to our policies during 2016.

 

35

 


 

Overview - continued

 

Leasing Activity:

 

The leasing activity and related statistics in the table below are based on leases signed during the period and are not intended to coincide with the commencement of rental revenue in accordance with accounting principles generally accepted in the United States of America (“GAAP”).  Second generation relet space represents square footage that has not been vacant for more than nine months and tenant improvements and leasing commissions are based on our share of square feet leased during the period.

 

(Square feet in thousands)

 

New York

 

Washington, DC

  

 

 

 

 

 

 

 

 

 

Office

 

Retail

 

Office

  

 

Three Months Ended March 31, 2016

 

 

 

 

 

 

 

 

 

 

 

 

Total square feet leased

 

 

 737 

 

 

 38 

 

 

 569 

  

 

 

Our share of square feet leased:

 

 

 552 

 

 

 29 

 

 

 563 

  

 

 

 

Initial rent (1)

 

$

 84.32 

 

$

 272.01 

 

$

 38.36 

  

 

 

 

Weighted average lease term (years)

 

 

 12.1 

 

 

 11.9 

 

 

 3.3 

  

 

 

 

Second generation relet space:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Square feet

 

 

 525 

 

 

 21 

 

 

 451 

  

 

 

 

 

Cash basis:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Initial rent (1)

 

$

 84.15 

 

$

 229.26 

 

$

 38.62 

  

 

 

 

 

 

Prior escalated rent

 

$

 65.63 

 

$

 218.35 

 

$

 39.59 

  

 

 

 

 

 

Percentage increase (decrease)

 

 

 28.2% 

 

 

 5.0% 

 

 

 (2.5%)

  

 

 

 

 

GAAP basis:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Straight-line rent (2)

 

$

 85.49 

 

$

 239.55 

 

$

 36.25 

  

 

 

 

 

 

Prior straight-line rent

 

$

 64.46 

 

$

 206.78 

 

$

 37.74 

  

 

 

 

 

 

Percentage increase (decrease)

 

 

 32.6% 

 

 

 15.8% 

 

 

 (3.9%)

  

 

 

 

Tenant improvements and leasing commissions:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Per square foot

  

 

$

 82.59 

 

$

 122.08 

 

$

 9.93 

  

 

 

 

 

 

Per square foot per annum

  

 

$

 6.83 

 

$

 10.26 

 

$

 3.01 

  

 

 

 

 

 

     Percentage of initial rent

 

 

 8.1% 

 

 

 3.8% 

 

 

 7.8% 

  

 

 

 

 

 

 

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(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.

                                                                         

 

36

 


 

Overview - continued

 

 

 

 

 

 

 

 

 

 

 

 

 

Square footage (in service) and Occupancy as of March 31, 2016:

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

(Square feet in thousands)

 

  

 

 

Square Feet (in service)

 

 

  

 

 

 

 

 

Number of

 

Total

 

Our

 

 

  

 

 

 

 

 

Properties

 

Portfolio

 

Share

 

Occupancy %

New York:

 

  

 

 

 

 

 

 

 

  

 

Office

  

35 

 

 20,187 

 

 17,141 

 

96.4%

  

 

Retail

  

64 

 

 2,675 

 

 2,463 

 

94.2%

  

 

Residential - 1,711 units

11 

 

 1,561 

 

 827 

 

94.5%

  

 

Alexander's, including 312 residential units

  

 

 2,419 

 

 784 

 

93.6%

  

 

Hotel Pennsylvania

  

 

 1,400 

 

 1,400 

 

 

  

 

 

 

 

 

 

 

 28,242 

 

 22,615 

 

96.2%

  

 

 

 

 

 

 

 

 

 

 

 

 

 

Washington, DC:

 

  

 

 

 

 

 

 

 

  

 

Office, excluding the Skyline properties  

49 

 

 12,978 

 

 10,620 

 

90.6%

  

 

Skyline properties

  

 

 2,648 

 

 2,648 

 

47.4%

  

 

Total Office

  

57 

 

 15,626 

 

 13,268 

 

81.9%

  

 

Residential - 2,414 units

 

 2,597 

 

 2,455 

 

96.8%

  

 

Other

  

 

 598 

 

 598 

 

100.0%

  

 

 

 

 

 

 

 

 18,821 

 

 16,321 

 

84.8%

  

 

 

 

 

 

 

 

 

 

 

 

 

 

Other:

 

  

 

 

 

 

 

 

 

 

 

theMART

 

 3,662 

 

 3,653 

 

97.8%

  

 

555 California Street

 

 1,736 

 

 1,215 

 

93.3%

  

 

Other

 

 763 

 

 763 

 

100.0%

  

 

 

 

 

 

 

 

 6,161 

 

 5,631 

 

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

Total square feet at March 31, 2016

  

 

 

 53,224 

 

 44,567 

 

 

  

 

37

 


 

Overview - continued

  

 

 

 

 

 

 

 

 

 

 

 

 

 

Square footage (in service) and Occupancy as of December 31, 2015:

  

 

 

 

 

 

 

 

 

 

 

 

 

 

(Square feet in thousands)

  

 

 

 

Square Feet (in service)

 

 

  

 

 

 

 

 

Number of

 

Total

 

Our

 

 

  

 

 

 

 

 

properties

 

Portfolio

 

Share

 

Occupancy %

New York:

  

 

 

 

 

 

 

 

 

 

 

Office

 

35 

 

 21,288 

 

 17,627 

 

96.3%

  

 

Retail

 

63 

 

 2,641 

 

 2,418 

 

96.2%

  

 

Residential - 1,711 units

11 

 

 1,561 

 

 827 

 

94.1%

  

 

Alexander's, including 296 residential units

 

 

 2,419 

 

 784 

 

99.7%

  

 

Hotel Pennsylvania

 

 

 1,400 

 

 1,400 

 

 

  

 

 

 

 

 

 

 

 29,309 

 

 23,056 

 

96.4%

  

 

 

 

 

 

 

 

 

 

 

 

 

  

Washington, DC:

  

 

 

 

 

 

 

 

 

  

 

Office, excluding the Skyline properties  

49 

 

 13,136 

 

 10,781 

 

90.0%

  

 

Skyline Properties

 

 

 2,648 

 

 2,648 

 

50.1%

  

 

Total Office

 

57 

 

 15,784 

 

 13,429 

 

82.1%

  

 

Residential - 2,414 units

 

 2,597 

 

 2,455 

 

96.1%

  

 

Other

 

 

 597 

 

 597 

 

100.0%

  

 

 

 

 

 

 

 

 18,978 

 

 16,481 

 

84.8%

  

 

 

 

 

 

 

 

 

 

 

 

 

  

Other:

  

 

 

 

 

 

 

 

 

  

 

theMART

 

 

 3,658 

 

 3,649 

 

98.5%

  

 

555 California Street

 

 

 1,736 

 

 1,215 

 

93.3%

  

 

Other

 

 

 763 

 

 763 

 

100.0%

  

 

 

 

 

 

 

 

 6,157 

 

 5,627 

 

 

  

 

 

 

 

 

 

 

 

 

 

 

 

  

Total square feet at December 31, 2015

 

 

 

 54,444 

 

 45,164 

 

 

  

 

38

 


 

Overview - continued

 

 

Washington, DC Segment

 

Comparable EBITDA for the three months ended March 31, 2016, was $5,019,000 behind the prior year's three months and consistent with our expected results for the first quarter.  We expect that Washington’s 2016 comparable EBITDA will be approximately $7,000,000 to $11,000,000 lower than 2015, comprised of:

 

(i)            core business being flat to $4,000,000 higher, offset by, 

(ii)          occupancy of Skyline properties declining further, decreasing EBITDA by approximately $6,500,000, and

(iii)         1726 M Street and 1150 17th Street being taken out of service (to prepare for the development in the future of a new Class A office building) decreasing EBITDA by approximately $4,500,000.

 

Of the 2,395,000 square feet subject to the effects of the Base Realignment and Closure (“BRAC”) statute, 348,000 square feet has been taken out of service for redevelopment and 1,452,000 square feet has been leased or is pending.  The table below summarizes the status of the BRAC space as of March 31, 2016.

 

 

 

Rent Per

 

Square Feet

 

 

 

 

 

Square Foot

 

Total

 

Crystal City

 

Skyline

 

Rosslyn

Resolved:

 

 

  

 

 

 

 

 

 

 

 

 

Relet as of March 31, 2016

 

$

37.36 

 

 1,442,000 

 

 969,000 

 

 389,000 

 

 84,000 

 

Leases pending

 

 

39.39 

 

 10,000 

 

 -   

 

 10,000 

 

 -   

 

Taken out of service for redevelopment

 

 

  

 

 348,000 

 

 348,000 

 

 -   

 

 -   

 

 

 

 

 

 

  

 

 1,800,000 

 

 1,317,000 

 

 399,000 

 

 84,000 

 

 

 

 

 

 

  

 

 

 

 

 

 

 

 

To Be Resolved:

 

 

  

 

 

 

 

 

 

 

 

 

Vacated as of March 31, 2016

 

 

34.78 

 

 595,000 

 

 119,000 

 

 412,000 

 

 64,000 

 

 

 

 

 

 

  

 

 

 

 

 

 

 

 

Total square feet subject to BRAC

 

 

  

 

 2,395,000 

 

 1,436,000 

 

 811,000 

 

 148,000 

39

 


 

Net Income and EBITDA by Segment for the Three Months Ended March 31, 2016 and 2015

Below is a summary of net income and a reconciliation of net income to EBITDA(1) by segment for the three months ended March 31, 2016 and 2015.

 

 

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

(Amounts in thousands)

For the Three Months Ended March 31, 2016

 

 

  

 

Total

  

New York

  

Washington, DC

  

Other

  

Total revenues

 

$

 613,037 

  

$

 410,825 

  

$

 128,012 

  

$

 74,200 

  

Total expenses

 

 

 613,317 

  

 

 269,595 

  

 

 256,565 

  

 

 87,157 

  

Operating (loss) income

 

 

 (280)

  

 

 141,230 

  

 

 (128,553)

  

 

 (12,957)

  

(Loss) income from partially owned entities

 

 

 (4,240)

  

 

 (3,563)

  

 

 (2,043)

  

 

 1,366 

  

Income from real estate fund investments

 

 

 11,284 

  

 

 -   

  

 

 -   

  

 

 11,284 

  

Interest and other investment income, net

 

 

 3,518 

  

 

 1,115 

  

 

 58 

  

 

 2,345 

  

Interest and debt expense

 

 

 (100,489)

  

 

 (54,586)

  

 

 (15,935)

  

 

 (29,968)

  

Net gain on disposition of wholly owned and partially

 

 

 

 

 

 

 

 

 

 

 

 

 

 

owned assets

 

 

 714 

  

 

 -   

  

 

 -   

  

 

 714 

  

(Loss) income before income taxes

 

 

 (89,493)

  

 

 84,196 

  

 

 (146,473)

  

 

 (27,216)

  

Income tax expense

 

 

 (2,831)

  

 

 (959)

  

 

 (264)

  

 

 (1,608)

  

(Loss) income from continuing operations

 

 

 (92,324)

  

 

 83,237 

  

 

 (146,737)

  

 

 (28,824)

  

Income from discontinued operations

 

 

 716 

  

 

 -   

  

 

 -   

  

 

 716 

  

Net (loss) income

 

 

 (91,608)

  

 

 83,237 

  

 

 (146,737)

  

 

 (28,108)

  

Less net (income) loss attributable to noncontrolling interests

 

 

 (2,191)

  

 

 (3,429)

  

 

 -   

  

 

 1,238 

  

Net (loss) income attributable to Vornado

 

 

 (93,799)

  

 

 79,808 

  

 

 (146,737)

  

 

 (26,870)

  

Interest and debt expense(2)

 

 

 126,120 

  

 

 71,198 

  

 

 19,406 

  

 

 35,516 

  

Depreciation and amortization(2)

 

 

 174,811 

  

 

 108,403 

  

 

 42,681 

  

 

 23,727 

  

Income tax expense (2)

 

 

 3,261 

  

 

 1,090 

  

 

 265 

  

 

 1,906 

  

EBITDA(1)

 

$

 210,393 

  

$

 260,499 

 (3)

$

 (84,385)

 (4)

$

 34,279 

 (5)

 

 

 

  

 

 

 

 

 

 

 

 

 

 

 

 

  

(Amounts in thousands)

 

For the Three Months Ended March 31, 2015

 

 

  

 

Total

  

New York

  

Washington, DC

  

Other

  

Total revenues

 

$

 606,802 

  

$

 399,513 

  

$

 133,968 

  

$

 73,321 

  

Total expenses

 

 

 439,088 

  

 

 252,760 

  

 

 92,997 

  

 

 93,331 

  

Operating income (loss)

 

 

 167,714 

  

 

 146,753 

  

 

 40,971 

  

 

 (20,010)

  

(Loss) income from partially owned entities

 

 

 (2,743)

  

 

 (5,663)

  

 

 131 

  

 

 2,789 

  

Income from real estate fund investments

 

 

 24,089 

  

 

 -   

  

 

 -   

  

 

 24,089 

  

Interest and other investment income, net

 

 

 10,792 

  

 

 1,862 

  

 

 13 

  

 

 8,917 

  

Interest and debt expense

 

 

 (91,674)

  

 

 (45,351)

  

 

 (18,160)

  

 

 (28,163)

  

Net gain on disposition of wholly owned and partially

 

 

 

 

 

 

 

 

 

 

 

 

 

 

owned assets

 

 

 1,860 

  

 

 -   

  

 

 -   

  

 

 1,860 

  

Income (loss) before income taxes

 

 

 110,038 

  

 

 97,601 

  

 

 22,955 

  

 

 (10,518)

  

Income tax (expense) benefit

 

 

 (971)

  

 

 (943)

  

 

 674 

  

 

 (702)

  

Income (loss) from continuing operations

 

 

 109,067 

  

 

 96,658 

  

 

 23,629 

  

 

 (11,220)

  

Income from discontinued operations

 16,179 

  

 

 -   

  

 

 -   

  

 

 16,179 

  

Net income

 

 

 125,246 

  

 

 96,658 

  

 

 23,629 

  

 

 4,959 

  

Less net income attributable to noncontrolling interests

 

 

 (21,169)

  

 

 (1,506)

  

 

 -   

  

 

 (19,663)

  

Net income (loss) attributable to Vornado

 

 

 104,077 

  

 

 95,152 

  

 

 23,629 

  

 

 (14,704)

  

Interest and debt expense(2)

 

 

 114,675 

  

 

 58,667 

  

 

 21,512 

  

 

 34,496 

  

Depreciation and amortization(2)

 

 

 156,450 

  

 

 94,124 

  

 

 40,752 

  

 

 21,574 

  

Income tax (benefit) expense(2)

 

 

 (739)

  

 

 1,002 

  

 

 (2,636)

  

 

 895 

  

EBITDA(1)

 

$

 374,463 

  

$

 248,945 

 (3)

$

 83,257 

 (4)

$

 42,261 

 (5)

 

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

See notes on the following pages.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

40

 


 
 

Net Income and EBITDA by Segment for the Three Months Ended March 31, 2016 and 2015 - continued

 

 

 

 

 

 

 

  

 

 

 

 

 

 

 

Notes to preceding tabular information:

 

 

 

 

 

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 (1)

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

 

 

 

 

 

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 (2)

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

 

 

 

 

 

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 (3)

The elements of "New York" EBITDA are summarized below.

 

 

 

 

 

 

  

 

 

 

 

 

 

 

 

(Amounts in thousands)

 

For the Three Months Ended March 31,

 

 

 

 

 

 

  

 

2016 

 

2015 

 

 

Office(a)

 

$

 152,729 

 

$

 154,309 

 

 

Retail

 

 

 93,323 

 

 

 81,305 

 

 

Residential

 

 

 6,350 

 

 

 5,050 

 

 

Alexander's

 

 

 11,569 

 

 

 10,407 

 

 

Hotel Pennsylvania

 

 

 (3,472)

 

 

 (2,126)

 

 

 

Total New York

 

$

 260,499 

 

$

 248,945 

 

 

 

 

 

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(a)

2015 includes $3,540 of EBITDA from 20 Broad Street which was sold in December 2015. Excluding this item, EBITDA was $150,769.

 

 

 

 

 

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 (4)

The elements of "Washington, DC" EBITDA are summarized below.

 

 

 

 

 

 

  

 

 

 

 

 

 

 

 

(Amounts in thousands)

 

For the Three Months Ended March 31,

 

 

 

 

 

 

  

 

2016 

 

2015 

 

 

Office, excluding the Skyline properties (a)

 

$

 61,988 

 

$

 67,385 

 

 

Skyline properties

 

 

 5,092 

 

 

 6,055 

 

 

Skyline properties impairment loss

 

 

 (160,700)

 

 

 -   

 

 

 

Total Office

 

 

 (93,620)

 

 

 73,440 

 

 

Residential

 

 

 9,235 

 

 

 9,817 

 

 

 

Total Washington, DC

 

$

 (84,385)

 

$

 83,257 

 

 

 

 

 

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(a)

2015 includes $1,923 of EBITDA from 1750 Pennsylvania Avenue which was sold in September 2015. Excluding this item, EBITDA was $65,462.

 

41

 


 

Net Income and EBITDA by Segment for the Three Months Ended March 31, 2016 and 2015 - continued

 

 

 

 

 

 

  

 

 

 

 

 

 

Notes to preceding tabular information - continued:

 

 

 

 

 

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 (5)

The elements of "Other" EBITDA are summarized below.

 

 

 

 

 

 

  

 

 

 

 

 

 

 

(Amounts in thousands)

For the Three Months Ended March 31,

 

 

 

 

 

 

  

2016 

 

2015 

 

 

Our share of real estate fund investments:

 

 

 

 

 

 

 

 

Income before net realized/unrealized gains

$

 2,231 

 

$

 1,614 

 

 

 

Net realized/unrealized gains on investments

 

 1,561 

 

 

 5,548 

 

 

 

Carried interest   

 

 1,519 

 

 

 3,388 

 

 

Total  

 

 5,311 

 

 

 10,550 

 

 

theMART (including trade shows)

 

 23,028 

 

 

 21,041 

 

 

555 California Street

 

 11,615 

 

 

 12,401 

 

 

India real estate ventures

 

 1,319 

 

 

 1,841 

 

 

Other investments

 

 12,322 

 

 

 6,759 

 

 

  

 

 53,595 

 

 

 52,592 

 

 

Corporate general and administrative expenses(a) (b)

 

 (30,606)

 

 

 (35,942)

 

 

Investment income and other, net(a)

 

 6,975 

 

 

 8,762 

 

 

Acquisition and transaction related costs

 

 (4,607)

 

 

 (1,981)

 

 

UE and residual retail properties discontinued operations(c)

 

 721 

 

 

 22,257 

 

 

Net gain on sale of residential condominiums

 

 714 

 

 

 1,860 

 

 

Net loss (income) attributable to noncontrolling interests in the Operating Partnership

 

 7,487 

 

 

 (5,287)

 

 

 

 

 

 

  

$

 34,279 

 

$

 42,261 

 

 

 

 

 

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(a)

The amounts in these captions (for this table only) exclude the results of the mark-to-market of our deferred compensation plan of $1,938 loss for the three months ended March 31, 2016 and $2,859 income for the three months ended March 31, 2015.

 

 

(b)

The three months ended March 31, 2015 includes a cumulative catch up of $4,542 from the acceleration of recognition of compensation expense related to the modification of the 2012-2014 Out-Performance Plans.

 

 

(c)

The three months ended March 31, 2015 includes $22,645 of transaction costs related to the spin-off of our strip shopping centers and malls.

 

EBITDA by Region

 

Below is a summary of the percentages of EBITDA by geographic region, excluding discontinued operations and other items that affect comparability.

 

 

 

 

 

For the Three Months Ended March 31,

 

 

 

 

 

2016 

 

2015 

 

 

Region:

 

 

 

 

 

 

 

New York City metropolitan area

 

70%

 

68%

 

 

 

Washington, DC / Northern Virginia area

21%

 

23%

 

 

 

Chicago, IL

 

6%

 

6%

 

 

 

San Francisco, CA

 

3%

 

3%

 

 

 

 

100%

 

100%

 

42

 


 

Results of Operations – Three Months Ended March 31, 2016 Compared to March 31, 2015

 

 

Revenues

Our revenues, which consist primarily of property rentals, tenant expense reimbursements, and fee and other income, were $613,037,000 for the three months ended March 31, 2016, compared to $606,802,000 for the prior year’s three months, an increase of $6,235,000.  Below are the details of the increase (decrease) by segment:

 

(Amounts in thousands)

 

Total

  

 

New York

  

 

Washington, DC

  

 

Other

  

Increase (decrease) due to:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Property rentals:

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

Acquisitions, dispositions and other

 

$

 753 

  

 

$

 3,335 

  

 

$

 (2,582)

  

 

$

 -   

  

 

Development and redevelopment

 

 

 481 

  

 

 

 (90)

  

 

 

 (56)

  

 

 

 627 

  

 

Hotel Pennsylvania

 

 

 (2,482)

  

 

 

 (2,482)

  

 

 

 -   

  

 

 

 -   

  

 

Trade shows

 

 

 (653)

  

 

 

 -   

  

 

 

 -   

  

 

 

 (653)

  

 

Same store operations  

 

 

 21,119 

  

 

 

 21,166 

  

 

 

 (1,641)

  

 

 

 1,594 

  

 

 

 

 19,218 

  

 

 

 21,929 

  

 

 

 (4,279)

  

 

 

 1,568 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Tenant expense reimbursements:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Acquisitions, dispositions and other

 

 

 (195)

  

 

 

 (96)

  

 

 

 (99)

  

 

 

 -   

  

 

Development and redevelopment

 

 

 587 

  

 

 

 5 

  

 

 

 5 

  

 

 

 577 

  

 

Same store operations

 

 

 (7,738)

  

 

 

 (4,413)

 (1)

 

 

 (1,734)

  

 

 

 (1,591)

  

 

 

 

 

 (7,346)

  

 

 

 (4,504)

  

 

 

 (1,828)

  

 

 

 (1,014)

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fee and other income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

BMS cleaning fees

 

 

 (4,487)

  

 

 

 (4,644)

 (2)

 

 

 -   

  

 

 

 157 

  

 

Management and leasing fees

 

 

 607 

  

 

 

 111 

  

 

 

 117 

  

 

 

 379 

  

 

Lease termination fees

 

 

 (1,297)

  

 

 

 (1,333)

  

 

 

 36 

  

 

 

 -   

  

 

Other income

 

 

 (460)

  

 

 

 (247)

  

 

 

 (2)

  

 

 

 (211)

  

 

 

 

 (5,637)

  

 

 

 (6,113)

  

 

 

 151 

  

 

 

 325 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total increase (decrease) in revenues

 

$

 6,235 

  

 

$

 11,312 

  

 

$

 (5,956)

  

 

$

 879 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1)

Primarily from lease expirations in 2015.

(2)

Primarily from the termination of a third party cleaning arrangement in 2015.

 

43

 


 
 

Results of Operations – Three Months Ended March 31, 2016 Compared to March 31, 2015 - continued

 

 

Expenses

Our expenses, which consist primarily of operating, depreciation and amortization and general and administrative expenses, were $613,317,000 for the three months ended March 31, 2016, compared to $439,088,000 for the prior year’s three months, an increase of $174,229,000.  Below are the details of the increase (decrease) by segment:

 

(Amounts in thousands)

 

Total

  

 

New York

  

 

Washington, DC

  

 

Other

  

Increase (decrease) due to:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

Acquisitions, dispositions and other

 

$

 3,922 

  

 

$

 5,179 

  

 

$

 (1,257)

  

 

$

 -   

  

 

Development and redevelopment

 

 

 284 

  

 

 

 (32)

  

 

 

 88 

  

 

 

 228 

  

 

Non-reimbursable expenses, including bad debt  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

 

reserves

 

 

 736 

  

 

 

 44 

  

 

 

 907 

  

 

 

 (215)

  

 

Hotel Pennsylvania

 

 

 (1,162)

  

 

 

 (1,162)

  

 

 

 -   

  

 

 

 -   

  

 

Trade shows

 

 

 (230)

  

 

 

 -   

  

 

 

 -   

  

 

 

 (230)

  

 

BMS expenses

 

 

 (3,694)

  

 

 

 (3,886)

 (1)

 

 

 -   

  

 

 

 192 

  

 

Same store operations  

 

 

 2,000 

  

 

 

 4,503 

  

 

 

 (1,222)

  

 

 

 (1,281)

  

 

 

 

 

 1,856 

  

 

 

 4,646 

  

 

 

 (1,484)

  

 

 

 (1,306)

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

Depreciation and amortization:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

Acquisitions, dispositions and other

 

 

 4,261 

  

 

 

 4,838 

  

 

 

 (577)

  

 

 

 -   

  

 

Development and redevelopment

 

 

 2,025 

  

 

 

 (242)

  

 

 

 2,291 

  

 

 

 (24)

  

 

Same store operations

 

 

 12,549 

  

 

 

 9,670 

  

 

 

 378 

  

 

 

 2,501 

  

 

 

 

 

 

 18,835 

  

 

 

 14,266 

  

 

 

 2,092 

  

 

 

 2,477 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

General and administrative:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

Mark-to-market of deferred compensation plan

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

liability

 

 

 (4,797)

  

 

 

 -   

  

 

 

 -   

  

 

 

 (4,797)

 (2)

 

Same store operations

 

 

 (4,991)

  

 

 

 (2,077)

 (3)

 

 

 2,260 

 (4)

 

 

 (5,174)

 (5)

 

 

 

 

 (9,788)

  

 

 

 (2,077)

  

 

 

 2,260 

  

 

 

 (9,971)

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Impairment loss and acquisition and transaction

 

 

 

 

 

 

 

  

 

 

 

  

 

 

 

 

 

related costs

 

 

 163,326 

  

 

 

 -   

  

 

 

 160,700 

 (6)

 

 

 2,626 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

 

 

 

Total increase (decrease) in expenses

 

$

 174,229 

  

 

$

 16,835 

  

 

$

 163,568 

  

 

$

 (6,174)

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1)

Primarily from the termination of a third party cleaning arrangement in 2015.

(2)

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

(3)

Results primarily from (i) the three months ended March 31, 2015 including a cumulative catch up of $986 from the acceleration of recognition of compensation expense related to the modification of the 2012-2014 Out-Performance Plans and (ii) higher capitalized leasing payroll in 2016.

(4)

Results primarily from higher capitalized payroll in 2015.

(5)

The three months ended March 31, 2015 includes a cumulative catch up of $4,542 from the acceleration of recognition of compensation expense related to the modification of the 2012-2014 Out-Performance Plans.

(6)

On March 15, 2016, we notified the servicer of the $678,000,000 mortgage loan on the Skyline properties in Virginia that cash flow will be insufficient to service the debt and pay other property related costs and expenses and that we were not willing to fund additional cash shortfalls.  Accordingly, at our request, the loan has been transferred to the special servicer. Consequently, based on our shortened estimated holding period for the underlying assets, we concluded that the excess of carrying amount over our estimate of fair value was not recoverable and recognized a $160,700,000 non-cash impairment loss in the first quarter of 2016.

 

44

 


 
 

Results of Operations – Three Months Ended March 31, 2016 Compared to March 31, 2015 - continued

 

 

Loss from Partially Owned Entities

Summarized below are the components of loss from partially owned entities for the three months ended March 31, 2016 and 2015.

 

 

(Amounts in thousands)

 

Percentage

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ownership at

 

For the Three Months Ended March 31,

 

 

 

 

 

 

  

 

March 31, 2016

 

2016 

  

 

2015 

 

 

Our Share of Net (Loss) Income:

 

 

 

 

 

 

 

 

 

 

 

Partially owned office buildings (1)

 

Various

 

$

 (14,249)

  

 

$

 (9,296)

 

 

Alexander's

32.4%

 

 

 8,662 

  

 

 

 7,691 

 

 

Pennsylvania Real Estate Investment Trust ("PREIT")

 

8.1%

 

 

 (4,288)

  

 

 

 -   

 

 

Urban Edge Properties ("UE")

 

5.4%

 

 

 1,085 

  

 

 

 584 

 

 

India real estate ventures

 

4.1%-36.5%

 

 

 (686)

  

 

 

 (109)

 

 

Other investments (2)

 

Various

 

 

 5,236 

  

 

 

 (1,613)

 

 

 

 

 

 

  

 

 

 

$

 (4,240)

  

 

$

 (2,743)

 

 

 

 

 

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1)

Includes interests in 280 Park Avenue, 650 Madison Avenue, One Park Avenue, 666 Fifth Avenue (Office), 330 Madison Avenue, 512 West 22nd Street and others.

 

 

(2)

Includes interests in Independence Plaza, 85 Tenth Avenue, Fashion Center Mall, 50-70 West 93rd Street, Toys "R" Us, Inc. and others.

 

 

Income from Real Estate Fund Investments

 

Below are the components of the income from our real estate fund investments for the three months ended March 31, 2016 and 2015.

 

 

  

 

 

 

 

 (Amounts in thousands)

  

 

For the Three Months Ended March 31,

 

 

 

  

 

2016 

 

2015 

 

 

Net investment income  

 

$

 4,673 

 

$

 6,450 

 

 

Net realized gain on exited investments

 

 

 14,676 

 

 

 24,705 

 

 

Previously recorded unrealized gain on exited investment

 

 

 (14,254)

 

 

 (23,279)

 

 

Net unrealized gains on held investments

 

 

 6,189 

 

 

 16,213 

 

 

Income from real estate fund investments

 

 

 11,284 

 

 

 24,089 

 

 

Less income attributable to noncontrolling interests

 

 

 (5,973)

 

 

 (13,539)

 

 

Income from real estate fund investments attributable to Vornado (1)

 

$

 5,311 

 

$

 10,550 

 

 

 

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1)

Excludes management, leasing and development fees of $760 and $704 for the three months ended March 31, 2016 and 2015, respectively, which are included as a component of "fee and other income" on our consolidated statements of income.

 

 

45

 


 

Results of Operations – Three Months Ended March 31, 2016 Compared to March 31, 2015 - continued

 

 

Interest and Other Investment Income, net

 

Interest and other investment income, net was $3,518,000 for the three months ended March 31, 2016, compared to $10,792,000 for the prior year’s three months, a decrease of $7,274,000.  This decrease resulted primarily from a $4,797,000 decrease in the value of investments in our deferred compensation plan (offset by a corresponding decrease in the liability for plan assets in general and administrative expenses) and a $2,076,000 decrease in interest on loans receivable as a result of lower outstanding loan balances.

 

Interest and Debt Expense

 

Interest and debt expense was $100,489,000 for the three months ended March 31, 2016, compared to $91,674,000 for the prior year’s three months, an increase of $8,815,000.  This increase was primarily due to (i) $6,697,000 of higher interest expense from the financings of the St. Regis Retail, 150 West 34th Street, 100 West 33rd Street, and the unsecured term loan, and (ii) $2,039,000 of lower capitalized interest.

 

Net Gain on Disposition of Wholly Owned and Partially Owned Assets

 

For the three months ended March 31, 2016 and 2015, we recognized net gains from the sale of residential condominiums of $714,000 and $1,860,000, respectively.

 

Income Tax Expense

 

For the three months ended March 31, 2016 and 2015, we recognized income tax expense related to our taxable REIT subsidiaries of $2,831,000 and $971,000, respectively.  The increase in expense resulted primarily from the three months ended March 31, 2015 including the reversal of $1,100,000 deferred tax liabilities related to our Washington, DC business.

 

46

 


 

Results of Operations – Three Months Ended March 31, 2016 Compared to March 31, 2015 - continued

 

 

Income from Discontinued Operations

We have reclassified the revenues and expenses of the UE portfolio and other retail properties that were sold or are currently held for sale to “income from discontinued operations” and the related assets and liabilities to “assets related to discontinued operations” and “liabilities related to discontinued operations” for all the periods presented in the accompanying financial statements.  The table below sets forth the combined results of assets related to discontinued operations for the three months ended March 31, 2016 and 2015.

 

 

 

  

 

 

  

 

 

 

 

 

(Amounts in thousands)

 

For the Three Months Ended March 31,

 

 

 

 

  

 

2016 

 

2015 

 

 

Total revenues

 

$

 1,182  

 

$

 20,296 

 

 

Total expenses

 

 

 466  

 

 

 13,373 

 

 

  

 

 

 716  

 

 

 6,923 

 

 

Transaction related costs (primarily UE spin off)

 

 

 -    

 

 

 (22,645)

 

 

Net gain on sale of lease position in Geary Street, CA

 

 

 -    

 

 

 21,376 

 

 

Net gains on sale of real estate

 

 

 -    

 

 

 10,867 

 

 

Impairment losses

 

 

 -    

 

 

 (256)

 

 

Pretax income from discontinued operations

 

 

 716  

 

 

 16,265 

 

 

Income tax expense

 

 

 -    

 

 

 (86)

 

 

Income from discontinued operations

 

$

 716  

 

$

 16,179 

 

 

Net Income Attributable to Noncontrolling Interests in Consolidated Subsidiaries

 

Net income attributable to noncontrolling interests in consolidated subsidiaries was $9,678,000 for the three months ended March 31, 2016, compared to $15,882,000 for the prior year’s three months, a decrease of $6,204,000.  This decrease resulted primarily from lower net income allocated to the noncontrolling interests, including noncontrolling interests of our real estate fund investments.

 

Net Loss (Income) Attributable to Noncontrolling Interests in the Operating Partnership

 

Net loss attributable to noncontrolling interests in the Operating Partnership was $7,487,000 for the three months ended March 31, 2016, compared to income of $5,287,000 for the prior year’s three months, a decrease in income of $12,774,000.  This decrease resulted primarily from lower net income subject to allocation to unitholders.

 

Preferred Share Dividends

 

Preferred share dividends were $20,364,000 for the three months ended March 31, 2016, compared to $19,484,000 for the prior year’s three months, an increase of $880,000. 

 

47

 


 

Results of Operations – Three Months Ended March 31, 2016 Compared to March 31, 2015 - 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 also present same store EBITDA on 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 reconciliations of EBITDA to same store EBITDA for each of our segments for the three months ended March 31, 2016, compared to three months ended March 31, 2015.

 

 

 

 

 

  

 

  

 

 

(Amounts in thousands)

  

 

New York

  

Washington, DC

  

EBITDA for the three months ended March 31, 2016

 

$

 260,499 

  

$

 (84,385)

  

 

Add-back:

 

 

 

 

 

 

 

 

 

Non-property level overhead expenses included above

 

 

 9,967 

  

 

 7,964 

  

 

Less EBITDA from:

 

 

 

 

 

 

 

 

 

Acquisitions

 

 

 (11,173)

  

 

 -   

  

 

 

Dispositions

 

 

 410 

  

 

 (34)

  

 

 

Properties taken out-of-service for redevelopment

 

 

 (5,860)

  

 

 733 

  

 

 

Other non-operating income, net

 

 

 1,563 

  

 

 160,535 

  

Same store EBITDA for the three months ended March 31, 2016

 

$

 255,406 

  

$

 84,813 

  

 

 

 

 

 

 

 

 

 

 

 

 

EBITDA for the three months ended March 31, 2015

 

$

 248,945 

  

$

 83,257 

  

 

Add-back:

 

 

 

 

 

 

 

 

 

Non-property level overhead expenses included above

 

 

 12,044 

  

 

 5,704 

  

 

Less EBITDA from:

 

 

 

 

 

 

 

 

 

Acquisitions

 

 

 (338)

  

 

 -   

  

 

 

Dispositions

 

 

 (3,346)

  

 

 (1,982)

  

 

 

Properties taken out-of-service for redevelopment

 

 

 (5,009)

  

 

 468 

  

 

 

Other non-operating income, net

 

 

 (10,173)

  

 

 (129)

  

Same store EBITDA for the three months ended March 31, 2015

 

$

 242,123 

  

$

 87,318 

  

 

 

 

 

 

 

 

 

 

 

 

 

Increase (decrease) in same store EBITDA -

 

 

 

 

 

 

 

 

Three months ended March 31, 2016 vs. March 31, 2015

 

$

 13,283 

 (1)

$

 (2,505)

 (3)

 

 

 

 

  

 

 

 

  

 

 

 

% increase (decrease) in same store EBITDA

 

 

 5.5% 

 (2)

 

 (2.9%)

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See notes on following page.

 

48

 


 

Results of Operations – Three Months Ended March 31, 2016 Compared to March 31, 2015 - continued

 

 

Notes to preceding tabular information:

 

 

New York:

 

(1)     The $13,283,000 increase in New York same store EBITDA resulted primarily from increases in Office and Retail EBITDA of $9,740,000 and $3,209,000, respectively, partially offset by a decrease in Hotel Pennsylvania EBITDA of $1,346,000.  The Office and Retail EBITDA increases resulted primarily from higher rents, including signage.

 

(2)     Excluding Hotel Pennsylvania, same store EBITDA increased by 6.0%.

 

Washington, DC:

 

(3)     The $2,505,000 decrease in Washington, DC same store EBITDA resulted primarily from lower rental revenue of $1,641,000 and higher net operating expenses of $512,000.

 

 

Reconciliation of Same Store EBITDA to Cash Basis Same Store EBITDA

 

 

(Amounts in thousands)

  

 

New York

  

Washington, DC

Same store EBITDA for the three months ended March 31, 2016

 

$

 255,406 

  

$

 84,813 

Less: Adjustments for straight line rents, amortization of acquired

 

 

 

 

 

 

 

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

 

 

 (44,983)

  

 

 (5,864)

Cash basis same store EBITDA for the three months ended

 

 

 

 

 

 

 

March 31, 2016

 

$

 210,423 

  

$

 78,949 

 

 

 

 

 

 

 

 

 

 

 

Same store EBITDA for the three months ended March 31, 2015

 

$

 242,123 

  

$

 87,318 

Less: Adjustments for straight line rents, amortization of acquired

 

 

 

 

 

 

 

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

 

 

 (34,015)

  

 

 (5,841)

Cash basis same store EBITDA for the three months ended

 

 

 

 

 

 

 

March 31, 2015

 

$

 208,108 

  

$

 81,477 

 

 

 

 

 

 

 

 

 

 

 

Increase (decrease) in cash basis same store EBITDA -  

 

 

 

 

 

 

 

Three months ended March 31, 2016 vs. March 31, 2015

 

$

 2,315 

  

$

 (2,528)

 

 

 

 

  

 

 

 

  

 

 

% increase (decrease) in cash basis same store EBITDA

 

 

 1.1% 

 (1)

 

 (3.1%)

 

 

 

 

 

 

 

 

  

 

 

 

 

 

 

 

 

 

 

  

 

 

(1)

Excluding Hotel Pennsylvania, same store EBITDA increased by 1.7% on a cash basis.

49

 


 

SUPPLEMENTAL INFORMATION

 

Reconciliation of Net Income to EBITDA for the Three Months Ended December 31, 2015

 

(Amounts in thousands)

  

New York

  

Washington, DC

Net income attributable to Vornado for the three months ended December 31, 2015

  

$

 272,620 

  

$

 15,571 

Interest and debt expense

  

 

 64,347 

  

 

 19,973 

Depreciation and amortization

  

 

 105,131 

  

 

 43,101 

Income tax expense

  

 

 1,398 

  

 

 246 

EBITDA for the three months ended December 31, 2015

  

$

 443,496 

  

$

 78,891 

 

 

 

 

  

 

 

 

 

 

                   

 

 

Reconciliation of EBITDA to Same Store EBITDA – Three Months Ended March 31, 2016 Compared to December 31, 2015

 

(Amounts in thousands)

  

 

New York

  

Washington, DC

EBITDA for the three months ended March 31, 2016

 

$

 260,499 

  

$

 (84,385)

 

Add-back:

 

 

 

 

 

 

 

 

Non-property level overhead expenses included above

 

 

 9,967 

  

 

 7,964 

 

Less EBITDA from:

 

 

 

 

 

 

 

 

Acquisitions

 

 

 (1,040)

  

 

 -   

 

 

Dispositions

 

 

 410 

  

 

 (34)

 

 

Properties taken out-of-service for redevelopment

 

 

 (7,954)

  

 

 733 

 

 

Other non-operating income, net

 

 

 1,563 

  

 

 160,535 

Same store EBITDA for the three months ended March 31, 2016

 

$

 263,445 

  

$

 84,813 

 

 

 

 

 

 

 

 

 

 

 

EBITDA for the three months ended December 31, 2015

 

$

 443,496 

  

$

 78,891 

 

Add-back:

 

 

 

 

 

 

 

 

Non-property level overhead expenses included above

 

 

 6,788 

  

 

 7,553 

 

Less EBITDA from:

 

 

 

 

 

 

 

 

Acquisitions

 

 

 (239)

  

 

 -   

 

 

Dispositions, including net gains on sale

 

 

 (159,843)

  

 

 41 

 

 

Properties taken out-of-service for redevelopment

 

 

 (5,107)

  

 

 830 

 

 

Other non-operating income, net

 

 

 (13,761)

  

 

 (2,451)

Same store EBITDA for the three months ended December 31, 2015

 

$

 271,334 

  

$

 84,864 

 

 

 

 

 

 

 

 

 

 

 

Decrease in same store EBITDA -

 

 

 

 

 

 

 

Three months ended March 31, 2016 vs. December 31, 2015

 

$

 (7,889)

  

$

 (51)

 

 

 

 

  

 

 

 

  

 

 

% decrease in same store EBITDA

 

 

 (2.9%)

 (1)

 

 (0.1%)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1)

Excluding Hotel Pennsylvania, same store EBITDA increased by 1.6%.

 

50

 


 

SUPPLEMENTAL INFORMATION – CONTINUED

 

Reconciliation of Same Store EBITDA to Cash Basis Same Store EBITDA – Three Months Ended March 31, 2016 Compared to December 31, 2015

 

 

(Amounts in thousands)

  

 

New York

  

Washington, DC

Same store EBITDA for the three months ended March 31, 2016

 

$

 263,445 

  

$

 84,813 

Less: Adjustments for straight line rents, amortization of acquired

 

 

 

 

 

 

 

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

 

 

 (49,584)

  

 

 (5,864)

Cash basis same store EBITDA for the three months ended

 

 

 

 

 

 

 

March 31, 2016

 

$

 213,861 

  

$

 78,949 

 

 

 

 

 

 

 

 

 

 

 

Same store EBITDA for the three months ended December 31, 2015

 

$

 271,334 

  

$

 84,864 

Less: Adjustments for straight line rents, amortization of acquired

 

 

 

 

 

 

 

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

 

 

 (54,605)

  

 

 (6,851)

Cash basis same store EBITDA for the three months ended

 

 

 

 

 

 

 

December 31, 2015

 

$

 216,729 

  

$

 78,013 

 

 

 

 

 

 

 

 

 

 

 

(Decrease) increase in cash basis same store EBITDA -  

 

 

 

 

 

 

 

Three months ended March 31, 2016 vs. December 31, 2015

 

$

 (2,868)

  

$

 936 

 

 

 

 

  

 

 

 

  

 

 

% (decrease) increase in cash basis same store EBITDA

 

 

 (1.3%)

 (1)

 

 1.2% 

 

 

 

 

 

 

 

 

  

 

 

 

 

 

 

 

 

 

 

  

 

 

(1)

Excluding Hotel Pennsylvania, same store EBITDA increased by 4.4% on a cash basis.

51

 


 

Liquidity and Capital Resources

 

Property rental income is our primary source of cash flow and is dependent upon the occupancy and rental rates of our properties.   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.  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.    

 

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 may require funding from borrowings and/or equity offerings.

 

We may from time to time purchase or retire outstanding debt securities or redeem our equity 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.

 

 

Cash Flows for the Three Months Ended March 31, 2016

 

Our cash and cash equivalents were $1,673,566,000 at March 31, 2016, a $162,141,000 decrease from the balance at December 31, 2015.  Our consolidated outstanding debt was $11,059,832,000 at March 31, 2016, a $31,178,000 decrease from the balance at December 31, 2015.  As of March 31, 2016 and December 31, 2015, $0 and $550,000,000, respectively, was outstanding under our revolving credit facilities.  During the remainder of 2016 and 2017, $708,603,000 and $363,842,000, respectively, of our outstanding debt matures; we may refinance this maturing debt as it comes due or choose to repay it.

 

Cash flows provided by operating activities of $276,645,000 was comprised of (i) net loss of $91,608,000, (ii) $264,378,000 of non-cash adjustments, which include depreciation and amortization expense, impairment losses, the effect of straight-lining of rental income, and loss from partially owned entities, (iii) distributions of income from partially owned entities of $29,860,000, (iv) return of capital from real estate fund investments of $14,676,000, and (v) the net change in operating assets and liabilities of $59,339,000.

 

Net cash used in investing activities of $241,598,000 was comprised of (i) $127,283,000 of development costs and construction in progress, (ii) $77,243,000 of additions to real estate, (iii) $63,188,000 of investments in partially owned entities, (iv) $1,348,000 of changes in restricted cash, and (v) $938,000 of acquisitions of real estate and other, partially offset by (vi) $25,524,000 of capital distributions from partially owned entities, (vii) $2,867,000 of proceeds from sales of real estate and related investments, and (viii) $11,000 of proceeds from sales and repayments of mortgage and mezzanine loans receivable and other.

 

Net cash used in financing activities of $197,188,000 was comprised of (i) $909,617,000 for the repayments of borrowings, (ii) $118,867,000 of dividends paid on common shares, (iii) $21,474,000 of distributions to noncontrolling interests, (iv) $20,364,000 of dividends paid on preferred shares, (v) $16,704,000 of debt issuance and other costs, and (vi) $185,000 for the repurchase of shares related to stock compensation agreements and related tax withholdings and other, partially offset by (vii) $887,500,000 of proceeds from borrowings, and (viii) $2,523,000 of proceeds received from the exercise of employee share options.

 

 

Capital Expenditures

 

Capital expenditures consist of expenditures to maintain assets, tenant improvement allowances and leasing commissions.  Recurring capital expenditures 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.

 

52

 


 

Liquidity and Capital Resources – continued

 

Capital Expenditures - continued

 

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 three months ended March 31, 2016.

 

 

 

 

 

 

 

 

 

 

 

 

 

(Amounts in thousands)

Total

 

New York

 

Washington, DC

 

Other

Expenditures to maintain assets

$

 14,046 

 

$

 9,443 

 

$

 2,255 

 

$

 2,348 

Tenant improvements

 

 29,792 

 

 

 27,216 

 

 

 2,219 

 

 

 357 

Leasing commissions

 

 15,023 

 

 

 13,962 

 

 

 1,061 

 

 

 -   

Non-recurring capital expenditures

 

 8,004 

 

 

 5,498 

 

 

 2,241 

 

 

 265 

Total capital expenditures and leasing commissions (accrual basis)

 

 66,865 

 

 

 56,119 

 

 

 7,776 

 

 

 2,970 

Adjustments to reconcile to cash basis:

 

 

 

 

 

 

 

 

 

 

 

 

 

Expenditures in the current year applicable to prior periods

 

 50,564 

 

 

 39,550 

 

 

 9,533 

 

 

 1,481 

 

 

Expenditures to be made in future periods for the current period

 

 (23,182)

 

 

 (24,146)

 

 

 (5,323)

 

 

 6,287 

Total capital expenditures and leasing commissions (cash basis)

$

 94,247 

 

$

 71,523 

 

$

 11,986 

 

$

 10,738 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Tenant improvements and leasing commissions:

 

 

 

 

 

 

 

 

 

 

 

Per square foot per annum

$

 6.16 

 

$

 6.99 

 

$

 3.01 

 

$

n/a

 

Percentage of initial rent

 

9.3%

 

 

7.5%

 

 

7.8%

 

 

n/a

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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 capitalized interest, debt and operating costs until the property is substantially completed and ready for its intended use.  Our development project budgets below include initial leasing costs, which are reflected as non-recurring capital expenditures in the table above.  

           

We are constructing a residential condominium tower containing 397,000 salable square feet on our 220 Central Park South development site.  The incremental development cost of this project is approximately $1.3 billion, of which $361,000,000 has been expended as of March 31, 2016.

 

We are developing The Bartlett, a 699-unit residential project in Pentagon City, which is expected to be completed in 2016.  The project will include a 40,000 square foot Whole Foods Market at the base of the building.  The incremental development cost of this project is approximately $250,000,000, of which $191,000,000 has been expended as of March 31, 2016.

 

We are developing a 173,000 square foot Class-A office building, located along the western edge of the High Line at 512 West 22nd Street in the West Chelsea submarket of Manhattan (55% owned).  The incremental development cost of this project is approximately $130,000,000, of which our share is $72,000,000.  As of March 31, 2016, $15,000,000 has been expended, of which our share is $8,000,000.

 

We are developing 61 Ninth Avenue, located on the Southwest corner of Ninth Avenue and 15th Street in the West Chelsea submarket of Manhattan.  In February 2016, the venture purchased an adjacent five story loft building and air rights in exchange for a 10% common and preferred equity interest in the venture valued at $19,400,000, which reduced our ownership interest to 45.1% from 50.1%.  The venture’s current plans are to construct an office building, with retail at the base, of approximately 167,000 square feet.  The incremental development cost of this project is approximately $150,000,000, of which our share is $68,000,000.  As of March 31, 2016, $15,000,000 has been expended, of which our share is $7,000,000.

 

We plan to demolish two adjacent Washington, DC office properties, 1726 M Street and 1150 17th Street in 2016 and replace them in the future with a new 335,000 square foot Class A office building, to be addressed 1700 M Street.  The incremental development cost of the project is approximately $170,000,000.

 

We are also evaluating other development and redevelopment opportunities at certain of our properties in Manhattan, including the Penn Plaza District, and in Washington, including Crystal City, Rosslyn and Pentagon City.

 

There can be no assurance that any of our development or redevelopment projects will commence, or if commenced, be completed, or completed on schedule or within budget.

 

53

 


 

Liquidity and Capital Resources – continued

 

Development and Redevelopment Expenditures - continued

 

Below is a summary of development and redevelopment expenditures incurred in the three months ended March 31, 2016.  These expenditures include interest of $9,071,000, payroll of $3,166,000 and other soft costs (primarily architectural and engineering fees, permits, real estate taxes and professional fees) aggregating $27,514,000, that were capitalized in connection with the development and redevelopment of these projects.

 

 

 

 

 

 

 

 

 

 

 

 

 

(Amounts in thousands)

Total

 

New York

 

Washington, DC

 

Other

220 Central Park South

$

 55,291 

 

$

 -   

 

$

 -   

 

$

 55,291 

The Bartlett

 

 25,911 

 

 

 -   

 

 

 25,911 

 

 

 -   

640 Fifth Avenue

 

 9,755 

 

 

 9,755 

 

 

 -   

 

 

 -   

2221 South Clark Street (residential conversion)

 

 9,310 

 

 

 -   

 

 

 9,310 

 

 

 -   

90 Park Avenue

 

 6,635 

 

 

 6,635 

 

 

 -   

 

 

 -   

Wayne Towne Center

 

 3,777 

 

 

 -   

 

 

 -   

 

 

 3,777 

Penn Plaza

 

 2,744 

 

 

 2,744 

 

 

 -   

 

 

 -   

330 West 34th Street

 

 1,790 

 

 

 1,790 

 

 

 -   

 

 

 -   

Other

 

 12,070 

 

 

 2,406 

 

 

 4,829 

 

 

 4,835 

 

 

 

 

$

 127,283 

 

$

 23,330 

 

$

 40,050 

 

$

 63,903 

 

 

Cash Flows for the Three Months Ended March 31, 2015

 

Our cash and cash equivalents were $1,067,568,000 at March 31, 2015, a $130,909,000 decrease from the balance at December 31, 2014.  The decrease is primarily due to cash flows from operating and investing activities, partially offset by cash flows from financing activities, as discussed below.

 

Cash flows provided by operating activities of $194,516,000 was comprised of (i) net income of $125,246,000, (ii) return of capital from real estate fund investments of $72,208,000, (iii) $55,668,000 of non-cash adjustments, which include depreciation and amortization expense, the effect of straight-lining of rental income, loss from partially owned entities and impairment losses on real estate, and (iv) distributions of income from partially owned entities of $15,874,000, partially offset by (v) the net change in operating assets and liabilities of $74,480,000 (including the acquisition of real estate fund investments of $95,022,000).

 

Net cash provided by investing activities of $149,871,000 was comprised of (i) $334,725,000 of proceeds from sales of real estate and related investments, (ii) $16,763,000 of proceeds from sales and repayments of mortgage and mezzanine loans receivable and other, (iii) $13,409,000 of capital distributions from partially owned entities, and  (iv) $1,282,000 of changes in restricted cash, partially offset by (v) $88,052,000 of development costs and construction in progress, (vi) $54,466,000 of additions to real estate, (vii) $49,878,000 of acquisitions of real estate and other, and (viii) $23,912,000 of investments in partially owned entities.

 

Net cash used in financing activities of $475,296,000 was comprised of (i) $907,431,000 for the repayments of borrowings, (ii) $225,000,000 of distributions in connection with the spin-off of Urban Edge Properties, (iii) $118,447,000 of dividends paid on common shares, (iv) $60,287,000 of distributions to noncontrolling interests, (v) $19,484,000 of dividends paid on preferred shares, (vi) $5,076,000 of debt issuance and other costs, and (vii) $2,939,000 for the repurchase of shares related to stock compensation agreements and related tax withholdings and other, partially offset by (viii) $800,000,000 of proceeds from borrowings, (ix) $51,350,000 of contributions from noncontrolling interests, and (x) $12,018,000 of proceeds received from the exercise of employee share options.

 

54

 


 
 

Liquidity and Capital Resources – continued

 

 

Capital Expenditures in the three months ended March 31, 2015

 

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 three months ended March 31, 2015.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(Amounts in thousands)

Total

 

New York

 

Washington, DC

 

Other

Expenditures to maintain assets

$

 20,935 

 

$

 12,810 

 

$

 1,986 

 

$

 6,139 

Tenant improvements

 

 50,900 

 

 

 9,762 

 

 

 37,011 

 

 

 4,127 

Leasing commissions

 

 8,281 

 

 

 3,744 

 

 

 3,748 

 

 

 789 

Non-recurring capital expenditures

 

 35,987 

 

 

 19,774 

 

 

 16,129 

 

 

 84 

Total capital expenditures and leasing commissions (accrual basis)

 

 116,103 

 

 

 46,090 

 

 

 58,874 

 

 

 11,139 

Adjustments to reconcile to cash basis:

 

 

 

 

 

 

 

 

 

 

 

 

Expenditures in the current year applicable to prior periods

 

 40,209 

 

 

 26,220 

 

 

 6,924 

 

 

 7,065 

 

Expenditures to be made in future periods for the current period

 

 (88,136)

 

 

 (28,594)

 

 

 (54,612)

 

 

 (4,930)

Total capital expenditures and leasing commissions (cash basis)

$

 68,176 

 

$

 43,716 

 

$

 11,186 

 

$

 13,274 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Tenant improvements and leasing commissions:

 

 

 

 

 

 

 

 

 

 

 

Per square foot per annum

$

 8.04 

 

$

 8.95 

 

$

 7.60 

 

$

n/a

 

Percentage of initial rent

 

15.2%

 

 

10.8%

 

 

21.7%

 

 

n/a

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Development and Redevelopment Expenditures in the three months ended March 31, 2015

 

Below is a summary of development and redevelopment expenditures incurred in the three months ended March 31, 2015.  These expenditures include interest of $11,110,000, payroll of $1,026,000 and other soft costs (primarily architectural and engineering fees, permits, real estate taxes and professional fees) aggregating $29,134,000, that were capitalized in connection with the development and redevelopment of these projects.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(Amounts in thousands)

Total

 

New York

 

Washington, DC

 

Other

220 Central Park South

$

 20,277 

 

$

 -   

 

$

 -   

 

$

 20,277 

Springfield Town Center

 

 14,478 

 

 

 -   

 

 

 -   

 

 

 14,478 

The Bartlett

 

 13,791 

 

 

 -   

 

 

 13,791 

 

 

 -   

330 West 34th Street

 

 11,902 

 

 

 11,902 

 

 

 -   

 

 

 -   

Marriott Marquis Times Square - retail and signage

 

 10,651 

 

 

 10,651 

 

 

 -   

 

 

 -   

90 Park Avenue

 

 5,173 

 

 

 5,173 

 

 

 -   

 

 

 -   

Wayne Towne Center

 

 2,362 

 

 

 -   

 

 

 -   

 

 

 2,362 

Penn Plaza

 

 1,163 

 

 

 1,163 

 

 

 -   

 

 

 -   

2221 South Clark Street (residential conversion)

 

 1,127 

 

 

 -   

 

 

1,127 

 

 

 -   

Other

 

 7,128 

 

 

 2,254 

 

 

 4,628 

 

 

 246 

 

 

 

 

$

 88,052 

 

$

 31,143 

 

$

 19,546 

 

$

 37,363 

 

55

 


 

Liquidity and Capital Resources – continued

 

 

Other Commitments and Contingencies

 

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 is not expected to have a material adverse effect on our financial position, results of operations or cash flows.

 

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.

 

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 March 31, 2016, the aggregate dollar amount of these guarantees and master leases is approximately $481,000,000.

 

At March 31, 2016, $32,540,000 of letters of credit were outstanding under one of our unsecured revolving credit facilities.  Our unsecured revolving 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 unsecured revolving 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.

 

As of March 31, 2016, we expect to fund additional capital to certain of our partially owned entities aggregating approximately $80,000,000.

 

As of March 31, 2016, we have construction commitments aggregating approximately $810,700,000.

56

 


 

Funds From Operations (“FFO”)

 

FFO is computed in accordance with the definition adopted by the Board of Governors of the National Association of Real Estate Investment Trusts (“NAREIT”). NAREIT defines FFO as GAAP net income or loss adjusted to exclude net gains from sales of depreciated real estate assets, real estate impairment losses, depreciation and amortization expense from real estate assets and other specified non-cash items, including the pro rata share of such adjustments of unconsolidated subsidiaries.  FFO and FFO per diluted share are non-GAAP financial measures 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 Note 18 – Income per Share, in our consolidated financial statements on page 25 of this Quarterly Report on Form 10-Q.

 

FFO for the Three Months Ended March 31, 2016 and 2015

 

FFO attributable to common shareholders plus assumed conversions was $203,137,000, or $1.07 per diluted share for the three months ended March 31, 2016, compared to $220,084,000, or $1.16 per diluted share, for the prior year’s three months.  Details of certain items that affect comparability are discussed in the financial results summary of our “Overview”.

 

(Amounts in thousands, except per share amounts)

 

For the Three Months Ended March 31,

 

 

 

 

2016 

 

2015 

Reconciliation of our net (loss) income to FFO:

 

 

 

 

 

 

Net (loss) income attributable to Vornado

 

$

 (93,799)

 

$

 104,077 

Depreciation and amortization of real property

 

 

 134,121 

 

 

 118,256 

Net gains on sale of real estate

 

 

 -   

 

 

 (10,867)

Real estate impairment losses

 

 

 160,700 

 

 

 256 

Proportionate share of adjustments to equity in net loss of partially owned entities to arrive at FFO:

 

 

 

 

 

 

 

Depreciation and amortization of real property

 

 

 39,046 

 

 

 36,272 

 

Real estate impairment losses

 

 

 4,353 

 

 

 -   

Noncontrolling interests' share of above adjustments

 

 

 (20,942)

 

 

 (8,448)

FFO attributable to Vornado

 

 

 223,479 

 

 

 239,546 

Preferred share dividends

 

 

 (20,364)

 

 

 (19,484)

FFO attributable to common shareholders

 

 

 203,115 

 

 

 220,062 

Convertible preferred share dividends

 

 

 22 

 

 

 22 

FFO attributable to common shareholders plus assumed conversions

 

$

 203,137 

 

$

 220,084 

 

 

 

 

 

 

 

 

 

Reconciliation of Weighted Average Shares

 

 

 

 

 

 

 

Weighted average common shares outstanding

 

 

 188,658 

 

 

 187,999 

 

Effect of dilutive securities:

 

 

 

 

 

 

 

 

Employee stock options and restricted share awards

 

 

 964 

 

 

 1,337 

 

 

Convertible preferred shares

 

 

 42 

 

 

 45 

 

Denominator for FFO per diluted share

 

 

 189,664 

 

 

 189,381 

 

 

 

 

 

 

 

 

 

FFO attributable to common shareholders plus assumed conversions per diluted share

 

$

 1.07 

 

$

 1.16 

57

 


 

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)

2016 

 

2015 

 

 

 

 

 

  

 

Weighted

 

Effect of 1%

 

 

 

 

Weighted

 

 

 

March 31,

  

 

Average

 

Change In

 

December 31,

 

Average

 

 

 

Balance

  

 

Interest Rate

 

Base Rates

 

Balance

 

Interest Rate

Consolidated debt:

 

 

  

 

 

 

 

 

 

 

 

 

 

 

Variable rate

$

 3,634,067 

  

 

2.18%

 

$

 36,341 

 

$

 3,995,704 

 

2.00%

 

Fixed rate

 

 7,545,401 

  

 

4.00%

 

 

 -   

 

 

 7,206,634 

 

4.21%

 

 

 

$

 11,179,468 

  

 

3.41%

 

 

 36,341 

 

$

 11,202,338 

 

3.42%

Pro rata share of debt of non-consolidated

 

 

  

 

 

 

 

 

 

 

 

 

 

 

entities (non-recourse):

 

 

  

 

 

 

 

 

 

 

 

 

 

 

Variable rate – excluding Toys "R" Us, Inc.

$

 673,469 

  

 

2.13%

 

 

 6,735 

 

$

 485,160 

 

1.97%

 

Variable rate – Toys "R" Us, Inc.

 

 830,907 

  

 

7.43%

 

 

 8,309 

 

 

 1,164,893 

 

6.61%

 

Fixed rate (including $702,402 and $661,513

 

 

  

 

 

 

 

 

 

 

 

 

 

 

 

of Toys "R" Us, Inc. debt in 2016 and 2015)

 

 2,662,008 

  

 

6.63%

 

 

 -   

 

 

 2,782,025 

 

6.37%

 

 

 

$

 4,166,384 

  

 

6.06%

 

 

 15,044 

 

$

 4,432,078 

 

5.95%

Noncontrolling interests’ share of above

 

 

  

 

 

 

 

 (3,186)

 

 

 

 

 

Total change in annual net income

 

 

  

 

 

 

$

 48,199 

 

 

 

 

 

Per share-diluted

 

 

  

 

 

 

$

 0.25 

 

 

 

 

 

 

 

 

 

 

  

 

 

 

 

 

 

 

 

 

 

 

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 March 31, 2016, we have an interest rate swap on a $416,000,000 mortgage loan on Two Penn Plaza that swapped the rate from LIBOR plus 1.65% (2.09% at March 31, 2016) to a fixed rate of 4.78% through March 2018 and an interest swap on a $375,000,000 mortgage loan on 888 Seventh Avenue that swapped the rate from LIBOR plus 1.60% (2.04% at March 31, 2016) to a fixed rate of 3.15% through December 2020.

 

In connection with the $700,000,000 refinancing of 770 Broadway, we entered into an interest rate swap from LIBOR plus 1.75% (2.19% at March 31, 2016) to a fixed rate of 2.56% through September 2020.

 

Fair Value of Debt

 

The estimated fair value of our consolidated debt is calculated based on current market prices and discounted cash flows at the current rate at which similar loans would be made to borrowers with similar credit ratings for the remaining term of such debt.  As of March 31, 2016, the estimated fair value of our consolidated debt was $10,967,000,000.

 

 

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 March 31, 2016, 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.

 

58

 


 
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 is not expected to have a material adverse effect on our financial position, results of operations or cash flows.

 

 

Item 1A. Risk Factors

 

 

There were no material changes to the Risk Factors disclosed in our Annual Report on Form 10-K, as amended, for the year ended December 31, 2015.

 

 

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

 

None.

 

 

Item 3.   Defaults Upon Senior Securities

        None.

 

 

Item 4.   Mine Safety Disclosures

        Not applicable.

 

 

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.

 

59

 


 
 

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:  May 2, 2016

By:

/s/ Stephen W. Theriot

 

 

Stephen W. Theriot, Chief Financial Officer
(duly authorized officer and principal financial and
accounting officer)

60

 


 
 

EXHIBIT INDEX

 

 

 

 

 

 

 

Exhibit No.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

     

 

 

 

 

 

 

 

 

 

 

 

61