vrt1q2011.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, 2011

 

 

Or

 

o

TRANSITION REPORT PURSUANT TO SECTION  13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from:

 

to

 

 

Commission File Number:

001-11954

 

 

VORNADO REALTY TRUST

(Exact name of registrant as specified in its charter)

 

Maryland

 

22-1657560

(State or other jurisdiction of incorporation or organization)

 

(I.R.S. Employer Identification Number)

 

 

 

888 Seventh Avenue, New York, New York

 

10019

(Address of principal executive offices)

 

(Zip Code)

 

 

(212) 894-7000

(Registrant’s telephone number, including area code)

 

N/A

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

 

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

 

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

 

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

 

x Large Accelerated Filer

 

o Accelerated Filer

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

 

o Smaller Reporting Company

 

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

 

As of March 31, 2011, 184,239,623 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, 2011 and December 31, 2010  

  

3

  

  

  

  

   

  

  

  

  

  

  

Consolidated Statements of Income (Unaudited) for the  

  

  

  

  

  

  

Three Months Ended March 31, 2011 and 2010  

  

4

  

  

  

  

   

  

  

  

  

  

  

Consolidated Statements of Changes in Equity (Unaudited) for the  

  

  

  

  

  

  

Three Months Ended March 31, 2011 and 2010  

  

5

  

  

  

  

   

  

  

  

  

  

  

Consolidated Statements of Cash Flows (Unaudited) for the  

  

  

  

  

  

  

Three Months Ended March 31, 2011 and 2010  

  

6

  

  

  

  

   

  

  

  

  

  

  

Notes to the Consolidated Financial Statements (Unaudited)  

  

8

  

  

  

  

   

  

  

  

  

  

  

Report of the Independent Registered Public Accounting Firm   

  

32

  

  

  

  

   

  

  

  

  

Item 2.

  

Management's Discussion and Analysis of Financial   

  

  

  

  

  

  

Condition and Results of Operations  

  

33

  

  

  

  

   

  

  

  

  

Item 3.

  

Quantitative and Qualitative Disclosures about Market Risk  

  

55

  

  

  

  

   

  

  

  

  

Item 4.

  

Controls and Procedures  

  

56

  

  

  

  

   

  

  

  

  

  

  

   

  

  

PART II.

  

  

Other Information:  

  

  

  

  

  

  

   

  

  

  

  

Item 1.

  

Legal Proceedings  

  

57

  

  

  

  

   

  

  

  

  

Item 1A.

  

Risk Factors  

  

58

  

  

  

  

   

  

  

  

  

Item 2.

  

Unregistered Sales of Equity Securities and Use of Proceeds  

  

58

  

  

  

  

   

  

  

  

  

Item 3.

  

Defaults Upon Senior Securities  

  

58

  

  

  

  

   

  

  

  

  

Item 5.

  

Other Information  

  

58

  

  

  

  

   

  

  

  

  

Item 6.

  

Exhibits  

  

58

  

  

  

  

   

  

  

Signatures

  

   

  

59

  

  

  

  

   

  

  

Exhibit Index

  

   

  

60

  

  

  

  

   

  

  

 

 

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,

  

December 31,

ASSETS

  

2011 

  

2010 

Real estate, at cost:

  

  

  

  

  

  

  

Land

  

$

 4,594,154 

  

$

 4,598,303 

  

Buildings and improvements

  

  

 12,723,892 

  

  

 12,733,487 

  

Development costs and construction in progress

  

  

 220,356 

  

  

 218,156 

  

Leasehold improvements and equipment

  

  

 125,859 

  

  

 124,976 

  

  

Total

  

  

 17,664,261 

  

  

 17,674,922 

  

Less accumulated depreciation and amortization

  

  

 (2,841,824) 

  

  

 (2,763,997) 

Real estate, net

  

  

 14,822,437 

  

  

 14,910,925 

Cash and cash equivalents

  

  

 618,361 

  

  

 690,789 

Restricted cash

  

  

 234,273 

  

  

 200,822 

Marketable securities

  

  

 821,920 

  

  

 766,116 

Accounts receivable, net of allowance for doubtful accounts of $67,589 and $62,979

  

  

 167,621 

  

  

 157,146 

Investments in partially owned entities

  

  

 1,116,294 

  

  

 927,672 

Investment in Toys "R" Us

  

  

 556,189 

  

  

 447,334 

Real Estate Fund investments

  

  

 230,657 

  

  

 144,423 

Mezzanine loans receivable, net

  

  

 140,567 

  

  

 202,412 

Receivable arising from the straight-lining of rents, net of allowance of $7,972 and $7,323

  

  

 732,384 

  

  

 720,806 

Deferred leasing and financing costs, net of accumulated amortization of $233,987 and $223,131

  

  

 359,677 

  

  

 368,314 

Identified intangible assets, net of accumulated amortization of $350,104 and $338,508

  

  

 333,270 

  

  

 348,745 

Assets related to discontinued operations

  

  

 - 

  

  

 234,464 

Due from officers

  

  

 13,181 

  

  

 13,187 

Other assets

  

  

 345,569 

  

  

 384,316 

  

  

  

  

$

 20,492,400 

  

$

 20,517,471 

  

  

  

  

  

  

  

  

  

LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND EQUITY

  

  

  

  

  

  

Notes and mortgages payable

  

$

 8,594,920 

  

$

 8,259,298 

Senior unsecured notes

  

  

 982,588 

  

  

 1,082,928 

Exchangeable senior debentures

  

  

 492,690 

  

  

 491,000 

Convertible senior debentures

  

  

 187,198 

  

  

 186,413 

Revolving credit facility debt

  

  

 374,000 

  

  

 874,000 

Accounts payable and accrued expenses

  

  

 469,443 

  

  

 438,479 

Deferred credit

  

  

 578,629 

  

  

 583,369 

Deferred compensation plan

  

  

 97,951 

  

  

 91,549 

Deferred tax liabilities

  

  

 13,279 

  

  

 13,278 

Liabilities related to discontinued operations

  

  

 - 

  

  

 255,922 

Other liabilities

  

  

 90,338 

  

  

 82,856 

  

Total liabilities

  

  

 11,881,036 

  

  

 12,359,092 

Commitments and contingencies

  

  

  

  

  

  

Redeemable noncontrolling interests:

  

  

  

  

  

  

  

Class A units - 12,634,510 and 12,804,202 units outstanding

  

  

 1,105,520 

  

  

 1,066,974 

  

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

  

  

 261,000 

  

  

 261,000 

  

  

Total redeemable noncontrolling interests

  

  

 1,366,520 

  

  

 1,327,974 

Vornado shareholders' equity:

  

  

  

  

  

  

  

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

  

  

  

  

  

  

  

  

shares; issued and outstanding 32,339,009 and 32,340,009 shares

  

  

 782,933 

  

  

 783,088 

  

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

  

  

  

  

  

  

  

  

250,000,000 shares; issued and outstanding 184,239,623 and 183,661,875 shares

  

  

 7,340 

  

  

 7,317 

  

Additional capital

  

  

 6,935,735 

  

  

 6,932,728 

  

Earnings less than distributions

  

  

 (1,208,993) 

  

  

 (1,480,876) 

  

Accumulated other comprehensive income

  

  

 130,614 

  

  

 73,453 

  

  

Total Vornado shareholders' equity

  

  

 6,647,629 

  

  

 6,315,710 

Noncontrolling interests in consolidated subsidiaries

  

  

 597,215 

  

  

 514,695 

  

Total equity

  

  

 7,244,844 

  

  

 6,830,405 

  

  

  

  

$

 20,492,400 

  

$

 20,517,471 

  

  

  

  

  

  

  

  

  

See notes to the consolidated financial statements (unaudited).

 

 

3


 
 

 

VORNADO REALTY TRUST
CONSOLIDATED STATEMENTS OF INCOME

(UNAUDITED)

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

For the Three Months Ended March 31,

  

(Amounts in thousands, except per share amounts)

  

2011 

  

2010 

  

  

  

  

  

  

  

  

  

REVENUES:

  

  

  

  

  

  

  

  

Property rentals

  

$

 571,160 

  

$

 552,457 

  

  

Tenant expense reimbursements

  

  

 90,959 

  

  

 91,930 

  

  

Cleveland Medical Mart development project

  

  

 40,699 

  

  

 - 

  

  

Fee and other income

  

  

 34,293 

  

  

 40,927 

  

Total revenues

  

  

 737,111 

  

  

 685,314 

  

EXPENSES:

  

  

  

  

  

  

  

  

Operating

  

  

 290,773 

  

  

 274,693 

  

  

Depreciation and amortization

  

  

 132,227 

  

  

 133,793 

  

  

General and administrative

  

  

 59,003 

  

  

 48,630 

  

  

Cleveland Medical Mart development project

  

  

 38,278 

  

  

 - 

  

  

Acquisition and other costs

  

  

 18,270 

  

  

 - 

  

Total expenses

  

  

 538,551 

  

  

 457,116 

  

Operating income

  

  

 198,560 

  

  

 228,198 

  

Income applicable to Toys "R" Us

  

  

 112,944 

  

  

 125,870 

  

Income from partially owned entities

  

  

 16,284 

  

  

 11,344 

  

Income from Real Estate Fund

  

  

 1,080 

  

  

 - 

  

Interest and other investment income, net

  

  

 117,108 

  

  

 14,704 

  

Interest and debt expense (including amortization of deferred

  

  

  

  

  

  

  

  

financing costs of $4,633 and $4,426 respectively)

  

  

 (134,765) 

  

  

 (135,727) 

  

Net gain on disposition of wholly owned and partially owned assets

  

  

 6,677 

  

  

 3,305 

  

Income before income taxes

  

  

 317,888 

  

  

 247,694 

  

Income tax expense

  

  

 (6,382) 

  

  

 (5,580) 

  

Income from continuing operations

  

  

 311,506 

  

  

 242,114 

  

Income (loss) from discontinued operations

  

  

 134,315 

  

  

 (9,570) 

  

Net income

  

  

 445,821 

  

  

 232,544 

  

Net (income) attributable to noncontrolling interests in consolidated subsidiaries

  

  

 (1,350) 

  

  

 (213) 

  

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

  

  

  

  

  

  

  

  

including unit distributions

  

  

 (31,808) 

  

  

 (17,779) 

  

Net income attributable to Vornado

  

  

 412,663 

  

  

 214,552 

  

Preferred share dividends

  

  

 (13,448) 

  

  

 (14,267) 

  

NET INCOME attributable to common shareholders

  

$

 399,215 

  

$

 200,285 

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

INCOME PER COMMON SHARE - BASIC:

  

  

  

  

  

  

  

  

Income from continuing operations, net

  

$

 1.49 

  

$

 1.15 

  

  

Income (loss) from discontinued operations, net

  

  

 0.68 

  

  

 (0.05) 

  

  

Net income per common share

  

$

 2.17 

  

$

 1.10 

  

  

Weighted average shares

  

  

 183,988 

  

  

 181,542 

  

  

  

  

  

  

  

  

  

  

INCOME PER COMMON SHARE - DILUTED:

  

  

  

  

  

  

  

  

Income from continuing operations, net

  

$

 1.46 

  

$

 1.14 

  

  

Income (loss) from discontinued operations, net

  

  

 0.66 

  

  

 (0.05) 

  

  

Net income per common share

  

$

 2.12 

  

$

 1.09 

  

  

Weighted average shares

  

  

 191,529 

  

  

 183,445 

  

  

  

  

  

  

  

  

  

  

DIVIDENDS PER COMMON SHARE

  

$

 0.69 

  

$

 0.65 

  

  

  

  

  

  

  

  

  

  

See notes to consolidated financial statements (unaudited).

 

 

4


 
 

 

VORNADO REALTY TRUST
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(UNAUDITED)

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

Accumulated

  

  

  

  

  

  

(Amounts in thousands)

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

Earnings

  

Other

  

Non-

  

  

  

  

  

  

  

Preferred Shares

  

Common Shares

  

Additional

  

Less Than

  

Comprehensive

  

controlling

  

Total

  

  

  

  

Shares

  

Amount

  

Shares

  

Amount

  

Capital

  

Distributions

  

Income (Loss)

  

Interests

  

Equity

Balance, December 31, 2009

  

  

 33,952 

  

$

 823,686 

  

  

 181,214 

  

$

 7,218 

  

$

 6,961,007 

  

$

 (1,577,591) 

  

$

 28,449 

  

$

 406,637 

  

$

 6,649,406 

Net income

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 214,552 

  

  

 - 

  

  

 213 

  

  

 214,765 

Dividends paid on common

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

shares

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 (117,958) 

  

  

 - 

  

  

 - 

  

  

 (117,958) 

Dividends paid on preferred

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

shares

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 (14,267) 

  

  

 - 

  

  

 - 

  

  

 (14,267) 

Common shares issued:

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

Upon redemption of Class A

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

units, at redemption value

  

  

 - 

  

  

 - 

  

  

 268 

  

  

 11 

  

  

 18,117 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 18,128 

  

Under employees' share

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

option plan

  

  

 - 

  

  

 - 

  

  

 405 

  

  

 16 

  

  

 541 

  

  

 (25,428) 

  

  

 - 

  

  

 - 

  

  

 (24,871) 

  

Under dividend reinvestment

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

plan

  

  

 - 

  

  

 - 

  

  

 6 

  

  

 - 

  

  

 390 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 390 

Conversion of Series A

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

preferred shares to common

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

shares

  

  

 (2) 

  

  

 (137) 

  

  

 4 

  

  

 - 

  

  

 137 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 - 

Deferred compensation shares

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

and options

  

  

 - 

  

  

 - 

  

  

 17 

  

  

 2 

  

  

 1,644 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 1,646 

Change in unrealized net gain

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

on securities available-for-sale

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 17,588 

  

  

 - 

  

  

 17,588 

Our share of partially owned

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

entities' OCI adjustments

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 (15,688) 

  

  

 - 

  

  

 (15,688) 

Adjustments to carry redeemable

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

Class A units at redemption value

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 (104,247) 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 (104,247) 

Other

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 (60) 

  

  

 2 

  

  

 (396) 

  

  

 (59) 

  

  

 (513) 

Balance, March 31, 2010

  

  

 33,950 

  

$

 823,549 

  

  

 181,914 

  

$

 7,247 

  

$

 6,877,529 

  

$

 (1,520,690) 

  

$

 29,953 

  

$

 406,791 

  

$

 6,624,379 

 

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

Accumulated

  

  

  

  

  

  

(Amounts in thousands)

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

Earnings

  

Other

  

Non-

  

  

  

  

  

  

  

Preferred Shares

  

Common Shares

  

Additional

  

Less Than

  

Comprehensive

  

controlling

  

Total

  

  

  

  

Shares

  

Amount

  

Shares

  

Amount

  

Capital

  

Distributions

  

Income (Loss)

  

Interests

  

Equity

Balance, December 31, 2010

  

  

 32,340 

  

$

 783,088 

  

  

 183,662 

  

$

 7,317 

  

$

 6,932,728 

  

$

 (1,480,876) 

  

$

 73,453 

  

$

 514,695 

  

$

 6,830,405 

Net income

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 412,663 

  

  

 - 

  

  

 1,350 

  

  

 414,013 

Dividends paid on common

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

shares

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 (126,936) 

  

  

 - 

  

  

 - 

  

  

 (126,936) 

Dividends paid on preferred

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

shares

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 (13,559) 

  

  

 - 

  

  

 - 

  

  

 (13,559) 

Common shares issued:

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

Upon redemption of Class A

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

 units, at redemption value

  

  

 - 

  

  

 - 

  

  

 320 

  

  

 13 

  

  

 27,526 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 27,539 

  

Under employees' share

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

option plan

  

  

 - 

  

  

 - 

  

  

 240 

  

  

 10 

  

  

 15,027 

  

  

 (398) 

  

  

 - 

  

  

 - 

  

  

 14,639 

  

Under dividend reinvestment

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

plan

  

  

 - 

  

  

 - 

  

  

 5 

  

  

 - 

  

  

 434 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 434 

Limited partners' contribution:

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

Real Estate Fund

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 92,068 

  

  

 92,068 

  

Other

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 170 

  

  

 170 

Conversion of Series A

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

preferred shares to common

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

shares

  

  

 (1) 

  

  

 (50) 

  

  

 2 

  

  

 - 

  

  

 50 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 - 

Deferred compensation shares

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

and options

  

  

 - 

  

  

 - 

  

  

 11 

  

  

 - 

  

  

 2,370 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 2,370 

Change in unrealized net gain

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

or loss on securities

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

available-for-sale

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 68,039 

  

  

 - 

  

  

 68,039 

Our share of partially owned

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

entities' OCI adjustments

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 (3,791) 

  

  

 - 

  

  

 (3,791) 

Adjustments to carry redeemable

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

Class A units at redemption value

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 (42,227) 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 (42,227) 

Distributions to limited partners

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 (11,027) 

  

  

 (11,027) 

Other

  

  

 - 

  

  

 (105) 

  

  

 - 

  

  

 - 

  

  

 (173) 

  

  

 113 

  

  

 (7,087) 

  

  

 (41) 

  

  

 (7,293) 

Balance, March 31, 2011

  

  

 32,339 

  

$

 782,933 

  

  

 184,240 

  

$

 7,340 

  

$

 6,935,735 

  

$

 (1,208,993) 

  

$

 130,614 

  

$

 597,215 

  

$

 7,244,844 

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

See notes to consolidated financial statements (unaudited).

 

5


 
 

VORNADO REALTY TRUST

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

  

  

  

  

  

  

  

  

  

  

  

  

  

For the Three Months Ended

  

  

  

  

March 31,

  

  

  

  

2011 

  

2010 

(Amounts in thousands)

  

  

  

  

  

  

Cash Flows from Operating Activities:

  

  

  

  

  

  

Net income

  

$

 445,821 

  

$

 232,544 

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

  

  

  

  

  

  

  

Depreciation and amortization (including amortization of deferred financing costs)

  

  

 136,860 

  

  

 140,250 

  

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

  

  

 (129,228) 

  

  

 (137,214

  

Net gain on early extinguishment of debt

  

  

 (83,907) 

  

  

 - 

  

Mezzanine loans loss reversal and net gain on disposition

  

  

 (82,744) 

  

  

 - 

  

Net gain on sales of real estate

  

  

 (51,165) 

  

  

 - 

  

Distributions of income from partially owned entities

  

  

 25,921 

  

  

 7,123 

  

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

  

  

 (17,163) 

  

  

 - 

  

Amortization of below-market leases, net

  

  

 (16,892) 

  

  

 (15,907) 

  

Straight-lining of rental income

  

  

 (13,942) 

  

  

 (20,922) 

  

Other non-cash adjustments

  

  

 8,211 

  

  

 2,252  

  

Net gain on disposition of wholly owned and partially owned assets

  

  

 (6,677) 

  

  

 (3,305) 

  

Litigation loss accrual

  

  

 - 

  

  

 10,056 

  

Changes in operating assets and liabilities:

  

  

  

  

  

  

  

  

Real Estate Fund investments

  

  

 (85,536) 

  

  

 - 

  

  

Prepaid assets

  

  

 34,761 

  

  

 44,855 

  

  

Other assets

  

  

 2,947 

  

  

 (7,464) 

  

  

Accounts payable and accrued expenses

  

  

 30,906 

  

  

 26,137 

  

  

Accounts receivable, net

  

  

 (10,475) 

  

  

 (2,480) 

  

  

Other liabilities

  

  

 8,404 

  

  

 12,123 

Net cash provided by operating activities

  

  

 196,102 

  

  

 288,048 

Cash Flows from Investing Activities:

  

  

  

  

  

  

  

Investments in partially owned entities

  

  

 (316,129)

  

  

 (36,741) 

  

Distributions of capital from partially owned entities

  

  

 192,523 

  

  

 7,617 

  

Proceeds from sales of real estate and related investments

  

  

 127,199 

  

  

 38,879 

  

Proceeds from sales and repayments of mezzanine loans

  

  

 73,608 

  

  

 101,839 

  

Restricted cash

  

  

 12,174 

  

  

 (13,899) 

  

Additions to real estate

  

  

 (30,281) 

  

  

 (30,247) 

  

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

  

  

 15,162 

  

  

 285 

  

Development costs and construction in progress

  

  

 (10,994) 

  

  

 (37,598) 

  

Investments in mezzanine loans receivable and other

  

  

 (2,841) 

  

  

 (28,873) 

  

Proceeds from maturing short-term investments

  

  

 - 

  

  

 25,000 

  

Purchases of marketable securities

  

  

 - 

  

  

 (13,917) 

  

Acquisitions of real estate and other

  

  

 - 

  

  

 (5,003) 

Net cash provided by investing activities

  

  

 60,421 

  

  

 7,342 

  

  

  

  

  

  

  

  

  

See notes to consolidated financial statements (unaudited).

  

  

  

  

  

  

  

  

  

 

 

6


 
 

VORNADO REALTY TRUST

CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED

(UNAUDITED)

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

For the Three Months Ended

  

  

  

  

  

March 31,

  

  

  

  

  

2011 

  

2010 

(Amounts in thousands)

  

  

  

  

  

  

Cash Flows from Financing Activities:

  

  

  

  

  

  

  

Repayments of borrowings

  

$

 (1,197,312) 

  

$

 (525,246) 

  

Proceeds from borrowings

  

  

 937,518 

  

  

 660,335 

  

Dividends paid on common shares

  

  

 (126,936) 

  

  

 (117,958) 

  

Contributions from noncontrolling interests

  

  

 92,238 

  

  

 - 

  

Distributions to noncontrolling interests

  

  

 (23,639) 

  

  

 (13,082) 

  

Proceeds received from exercise of employee share options

  

  

 15,470 

  

  

 963 

  

Dividends paid on preferred shares

  

  

 (13,559) 

  

  

 (14,267) 

  

Debt issuance and other costs

  

  

 (12,161) 

  

  

 (3,351) 

  

Repurchase of shares related to stock compensation agreements and related

  

  

  

  

  

  

  

  

tax withholdings

  

  

 (570) 

  

  

 (25,323) 

  

Purchases of outstanding preferred units and shares

  

  

 - 

  

  

 (4,000) 

Net cash used in financing activities

  

  

 (328,951) 

  

  

 (41,929) 

Net (decrease) increase in cash and cash equivalents

  

  

 (72,428) 

  

  

 253,461 

Cash and cash equivalents at beginning of period

  

  

 690,789 

  

  

 535,479 

Cash and cash equivalents at end of period

  

$

 618,361 

  

$

 788,940 

  

  

  

  

  

  

  

  

  

  

  

  

  

  

Supplemental Disclosure of Cash Flow Information:

  

  

  

  

  

  

  

Cash payments for interest (including capitalized interest of $0 and $614)

  

$

 108,458 

  

$

 121,573 

  

Cash payments for income taxes

  

$

 2,509 

  

$

 1,701 

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

Non-Cash Investing and Financing Activities:

  

  

  

  

  

  

  

Net unrealized gain on securities available for sale

  

$

 68,039 

  

$

 17,588 

  

Contribution of mezzanine loan receivable to a joint venture

  

  

 73,750 

  

  

 - 

  

Exchange of real estate

  

  

 (45,625

  

  

 - 

  

Adjustments to carry redeemable Class A units at redemption value

  

  

 (42,227) 

  

  

 (104,247) 

  

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

  

  

 27,539 

  

  

 18,128 

  

Decrease in assets and liabilities resulting from deconsolidation

  

  

  

  

  

  

  

  

of discontinued operations:

  

  

  

  

  

  

  

  

  

Assets related to discontinued operations

  

  

 (145,333

  

  

 - 

  

  

  

Liabilities related to discontinued operations

  

  

 (232,502

  

  

 - 

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

See notes to consolidated financial statements (unaudited).

  

  

  

  

  

  

  

  

  

  

 

 

7


 
 

VORNADO REALTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

1.     Organization

 

Vornado Realty Trust (“Vornado”) is a fully‑integrated real estate investment trust (“REIT”) and conducts its business through, and substantially all of its interests in properties are held by, Vornado Realty L.P., a Delaware limited partnership (the “Operating Partnership”).  Accordingly, Vornado’s cash flow and ability to pay dividend to its shareholders is dependent upon the cash flow of the Operating Partnership and the ability of its direct and indirect subsidiaries to first satisfy their obligations to creditors.  Vornado is the sole general partner of, and owned approximately 93.3% of the common limited partnership interest in the Operating Partnership at March 31, 2011.  All references to “we,” “us,” “our,” the “Company” and “Vornado” refer to Vornado Realty Trust and its consolidated subsidiaries, including the Operating Partnership.

 

2.    Basis of Presentation

 

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

 

These condensed consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q of the Securities and Exchange Commission (the “SEC”) and should be read in conjunction with the consolidated financial statements and notes thereto included in our Annual Report on Form 10-K, as amended, for the year ended December 31, 2010, as filed with the SEC. The results of operations for the three months ended March 31, 2011 are not necessarily indicative of the operating results for the full year.

 

3.     Acquisitions

 

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

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

As of March 31, 2011, the Fund received $232,301,000 of capital from partners, including $58,076,000 from us and has five investments aggregating approximately $229,959,000.  In the first quarter of 2011, we incurred $3,048,000 of placement fees in connection with the February 2011 closing of the Fund, which are included in “general and administrative” expenses on our consolidated statement of income.

 

One Park Avenue

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

 

 

8


 
 

VORNADO REALTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

4.    Marketable Securities and Derivative Instruments

Marketable Securities  

 

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

 

As of March 31, 2011 and December 31, 2010, the fair value of marketable securities on our consolidated balance sheets, including the owned J.C. Penney common shares, as described below, was $821,920,000 and $766,116,000, respectively, and their average cost was $708,792,000 and $721,027,000, respectively.  Aggregate unrealized gains were $113,128,000 and $45,089,000 as of March 31, 2011 and December 31, 2010, respectively.  In the first quarter of 2011, we sold certain marketable securities for aggregate proceeds of $15,162,000, resulting in a net gain of $2,091,000 which is included as a component of "net gain on disposition of wholly owned and partially owned assets" on our consolidated statement of income.

 

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

 

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

 

We own 18,584,010 common shares at an average cost of $25.70 per share, or $477,678,000 in the aggregate.  These shares, which have an aggregate fair value of $667,352,000 at March 31, 2011, are included in marketable equity securities on our consolidated balance sheet and are classified as “available for sale.”  During the three months ended March 31, 2011, we recognized $66,903,000 from the mark-to-market of these shares, which is included in “accumulated other comprehensive income” (a component of shareholders’ equity on our consolidated balance sheet). 

 

We also own an economic interest in 4,815,990 common shares through a forward contract executed on October 7, 2010, at a weighted average strike price of $28.69 per share, or $138,163,000 in the aggregate.  The contract may be settled, at our election, in cash or common shares, in whole or in part, at any time prior to October 9, 2012.  The counterparty may accelerate settlement, in whole or in part, upon one year’s notice to us.  The strike price per share increases at an annual rate of LIBOR plus 80 basis points.  The contract is a derivative instrument that does not qualify for hedge accounting treatment.  Mark-to-market adjustments on the underlying common shares are recognized in “interest and other investment income, net” on our consolidated statements of income.  During the three months ended March 31, 2011, we recognized $17,163,000 of income from the mark-to-market of the underlying common shares, based on J.C.Penney’s closing share price of $35.91 per share at March 31, 2011.

 

As of March 31, 2011, the aggregate economic net gain on our investment in J.C. Penney was $224,453,000, based on J.C. Penney’s closing share price of $35.91 per share and our weighted average cost of $26.32 per share.

 

 

9


 
 

VORNADO REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

 

 

5.    Investments in Partially Owned Entities

 

Toys “R” Us (“Toys”)

As of March 31, 2011, we own 32.7% of Toys.  The business of Toys is highly seasonal.  Historically, Toys’ fourth quarter net income accounts for more than 80% of its fiscal year net income.  We account for our investment in Toys under the equity method and record our 32.7% share of Toys net income or loss on a one-quarter lag basis because Toys’ fiscal year ends on the Saturday nearest January 31, and our fiscal year ends on December 31.  As of March 31, 2011, the carrying amount of our investment in Toys does not differ materially from our share of the equity in the net assets of Toys on a purchase accounting basis.

 

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

 

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

 

  

(Amounts in thousands)

  

  

  

  

  

  

Balance as of

  

  

  

Balance Sheet:

  

  

  

  

  

  

January 29, 2011

  

October 30, 2010

  

  

  

  

Assets

  

  

  

  

  

  

$

 11,972,000 

  

$

 12,810,000 

  

  

  

  

Liabilities

  

  

  

  

  

  

  

 10,145,000 

  

  

 11,317,000 

  

  

  

  

Toys “R” Us, Inc. equity

  

  

  

  

  

  

  

 1,827,000 

  

  

 1,493,000 

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

For the Three Months Ended

  

  

  

Income Statement:

  

  

  

  

  

  

January 29, 2011

  

January 30, 2010

  

  

  

  

Total revenues

  

  

  

  

  

  

$

 5,972,000 

  

$

 5,857,000 

  

  

  

  

Net income attributable to Toys

  

  

  

  

  

  

  

 339,000 

  

  

 379,000 

  

  

 

 

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

 

As of March 31, 2011, we own 32.4% of the outstanding common shares of Alexander’s.  We manage, lease and develop Alexander’s properties pursuant to the agreements described below which expire in March of each year and are automatically renewable.  As of March 31, 2011, Alexander’s owed us $44,357,000 in fees under these agreements.

 

As of March 31, 2011, the fair value of our investment in Alexander’s, based on Alexander’s March 31, 2011 closing share price of $406.95, was $673,123,000, or $484,843,000 in excess of the carrying amount on our consolidated balance sheet.  As of March 31, 2011, the carrying amount of our investment in Alexander’s, excluding amounts owed to us, exceeds our share of the equity in the net assets of Alexander’s by approximately $59,643,000.  The majority of this basis difference resulted from the excess of our purchase price for the Alexander’s common stock acquired over the book value of Alexander’s net assets.  Substantially all of this basis difference was allocated, based on our estimates of the fair values of Alexander’s assets and liabilities, to real estate (land and buildings).  We are amortizing the basis difference related to the buildings into earnings as additional depreciation expense over their estimated useful lives.  This depreciation is not material to our share of equity in Alexander’s net income.  The basis difference related to the land will be recognized upon disposition of our investment.

 

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

 

  

(Amounts in thousands)

  

  

  

  

  

  

Balance as of

  

  

  

Balance Sheet:

  

  

  

  

  

  

March 31, 2011

  

December 31, 2010

  

  

  

  

Assets

  

  

  

  

  

  

$

 1,685,000 

  

$

 1,679,000 

  

  

  

  

Liabilities

  

  

  

  

  

  

  

 1,339,000 

  

  

 1,335,000 

  

  

  

  

Noncontrolling interests

  

  

  

  

  

  

  

 3,000 

  

  

 3,000 

  

  

  

  

Stockholders' equity

  

  

  

  

  

  

  

 343,000 

  

  

 341,000 

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

For the Three Months Ended

  

  

  

Income Statement:

  

  

  

  

  

March 31, 2011

  

March 31, 2010

  

  

  

  

Total revenues

  

  

  

  

  

  

$

 63,000 

  

$

 59,000 

  

  

  

  

Net income attributable to Alexander’s

  

  

  

  

  

  

  

 18,000 

  

  

 15,000 

  

  

                                 

 

 

10


 
 

VORNADO REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

 

 

 

5.    Investments in Partially Owned Entities – continued

 

 

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

 

As of March 31, 2011, we own 18,468,969 Lexington common shares, or approximately 12.6% of Lexington’s common equity.  We account for our investment in Lexington under the equity method because we believe we have the ability to exercise significant influence over Lexington’s operating and financial policies, based on, among other factors, our representation on Lexington’s Board of Trustees and the level of our ownership in Lexington as compared to other shareholders.  We record our pro rata share of Lexington’s net income or loss on a one-quarter lag basis because we file our consolidated financial statements on Form 10-K and 10-Q prior to the time that Lexington files its consolidated financial statements. 

 

Based on Lexington’s March 31, 2011 closing share price of $9.35, the fair value of our investment in Lexington was $172,685,000, or $115,251,000 in excess of the March 31, 2011 carrying amount on our consolidated balance sheet.  As of March 31, 2011, the carrying amount of our investment in Lexington was less than our share of the equity in the net assets of Lexington by approximately $62,315,000.  This basis difference resulted primarily from $107,882,000 of non-cash impairment charges recognized during 2008, partially offset by purchase accounting for our acquisition of an additional 8,000,000 common shares of Lexington in October 2008, of which the majority relates to our estimate of the fair values of Lexington’s real estate (land and buildings) as compared to the carrying amounts in Lexington’s consolidated financial statements.  The basis difference related to the buildings is being amortized over their estimated useful lives as an adjustment to our equity in net income or loss of Lexington.  This amortization is not material to our share of equity in Lexington’s net income or loss.  The basis difference attributable to the land will be recognized upon disposition of our investment.

 

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

 

  

(Amounts in thousands)

  

  

  

  

  

  

Balance as of

  

  

  

Balance Sheet:

  

  

  

  

  

  

December 31, 2010

  

September 30, 2010

  

  

  

  

Assets

  

  

  

  

  

  

$

 3,335,000 

  

$

 3,385,000 

  

  

  

  

Liabilities

  

  

  

  

  

  

  

 1,979,000 

  

  

 2,115,000 

  

  

  

  

Noncontrolling interests

  

  

  

  

  

  

  

 76,000 

  

  

 71,000 

  

  

  

  

Shareholders’ equity

  

  

  

  

  

  

  

 1,280,000 

  

  

 1,199,000 

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

For the Three Months Ended

  

  

  

Income Statement:

  

  

  

  

  

December 31, 2010

  

December 31, 2009

  

  

  

  

Total revenues

  

  

  

  

  

  

$

 86,000 

  

$

 86,000 

  

  

  

  

Net income (loss) attributable to Lexington

  

  

  

  

  

  

  

 12,000 

  

  

 (46,000) 

  

  

 

 

LNR Property LLC (“LNR”)

As of March 31, 2011, we own a 26.2% equity interest in LNR, which we acquired in July 2010.  We account for our investment in LNR under the equity method and record our 26.2% share of LNR’s net income or loss on a one-quarter lag basis because we file our consolidated financial statements on Form 10-K and 10-Q prior to receiving LNR’s consolidated financial statements.

LNR consolidates certain commercial mortgage-backed securities (“CMBS”) and Collateralized Debt Obligation (“CDO”) trusts for which it is the primary beneficiary.  The assets of these trusts (primarily commercial mortgage loans), which aggregate approximately $142 billion as of December 31, 2010, are the sole source of repayment of the related liabilities, which are non-recourse to LNR and its equity holders, including us.  Changes in the fair value of these assets each period are offset by changes in the fair value of the related liabilities through LNR’s consolidated income statement.  As of March 31, 2011, the carrying amount of our investment in LNR does not materially differ from our share of LNR’s equity.

 

 

11


 
 

VORNADO REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

 

 

 

5.    Investments in Partially Owned Entities – continued

 

LNR Property LLC (“LNR”) – continued

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

 

  

(Amounts in thousands)

  

Balance as of

  

  

Balance Sheet:

  

December 31, 2010

  

  

  

Assets

  

  

$

 143,327,000 

  

  

  

  

Liabilities

  

  

  

 142,723,000 

  

  

  

  

Noncontrolling interests

  

  

  

 34,000 

  

  

  

  

LNR equity

  

  

  

 570,000 

  

  

  

  

  

  

  

  

  

  

  

  

  

  

For the Three Months Ended

  

  

Income Statement:

  

December 31, 2010

  

  

  

Total revenues

  

  

$

 36,000 

  

  

  

  

Net income attributable to LNR

  

  

  

 58,000 

  

  

 

 

280 Park Avenue Mezzanine Loans Joint Venture

 

On March 16, 2011, we formed a 50/50 joint venture with SL Green Realty Corp (“SL Green”) to own the mezzanine debt of 280 Park Avenue, a 1.2 million square foot office building located between 48th and 49th Streets in Manhattan.  We contributed our mezzanine loan with a face amount of $73,750,000 and they contributed their mezzanine loans with a face amount of $326,250,000 to the joint venture.  We equalized our interest in the joint venture with SL Green by paying them $111,250,000 in cash and assuming $15,000,000 of their debt position.  We account for our 50% interest in the joint venture under the equity method of accounting from the date of contribution.

 

 

12


 
 

VORNADO REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

 

 

 

5.    Investments in Partially Owned Entities - continued

 

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

  

  

  

  

  

    

  

  

   

Percentage

    

  

Balance as of

    

(Amounts in thousands)   

  

  

   

Ownership as of

    

  

March 31,

   

  

December 31,

    

Investments:     

  

  

   

March 31, 2011

    

  

2011 

   

  

2010 

    

Toys    

  

  

   

32.7 %

   

  

$

 556,189 

   

  

$

 447,334 

   

  

  

  

  

  

    

  

  

   

   

   

  

  

   

  

  

  

   

Alexander’s   

  

  

   

32.4 %

   

  

$

 188,280 

   

  

$

 186,811 

   

Partially owned office buildings   

  

  

   

(1)

   

  

  

 220,050 

   

  

  

 181,838 

   

280 Park Avenue Mezzanine Loans (see page 12)   

  

  

   

50 %

   

  

  

 185,131 

   

  

  

 - 

   

LNR   

  

  

   

26.2 %

   

  

  

 148,227 

   

  

  

 132,973 

   

India real estate ventures   

  

  

   

4%-36.5%

   

  

  

 94,077 

   

  

  

 127,193 

   

Lexington   

  

  

   

12.6 %

   

  

  

 57,434 

   

  

  

 57,270 

   

Other equity method investments    

  

  

   

(2)

   

  

  

 223,095 

   

  

  

 241,587 

   

    

  

  

   

   

   

  

$

 1,116,294 

   

  

$

 927,672 

   

  

  

  

  

  

    

  

  

   

   

   

  

  

    

  

  

  

  

  

    

  

  

   

   

   

  

For the Three Months

    

     

  

  

   

   

   

  

Ended March 31,

    

Our Share of Net Income (Loss):   

  

   

    

   

  

2011 

   

  

2010 

    

Toys – 32.7% share of:  

  

  

   

    

   

  

  

  

   

  

  

  

    

  

Equity in net income before income taxes   

  

  

   

   

    

  

$

 179,839 

   

  

$

 173,550 

    

  

Income tax expense   

  

  

   

   

   

  

  

 (69,018) 

   

  

  

 (49,710) 

   

  

Equity in net income   

  

  

   

   

    

  

  

 110,821 

   

  

  

 123,840 

    

  

Interest and other income   

  

  

   

   

   

  

  

 2,123 

   

  

  

 2,030 

   

  

  

  

  

  

    

  

  

   

   

   

  

$

 112,944 

   

  

$

 125,870 

   

    

  

  

   

   

   

  

  

  

   

  

  

  

   

Alexander’s – 32.4% share of:  

  

  

   

   

   

  

  

  

   

  

  

  

   

  

Equity in net income    

  

  

   

   

   

  

$

 5,719 

   

  

$

 3,777 

   

  

Management, leasing and development fees   

  

  

   

   

   

  

  

 2,292 

   

  

  

 2,683 

   

    

  

  

   

   

   

  

  

 8,011 

   

  

  

 6,460 

   

  

  

  

  

  

    

  

  

   

   

   

  

  

  

   

  

  

  

   

Lexington – 12.6% share in 2011 and 13.9% share in 2010 of   

  

  

   

   

   

  

  

  

   

  

  

  

   

  

equity in net income  (3) 

  

  

   

   

   

  

  

 2,172 

   

  

  

 6,045 

   

  

  

  

  

  

    

  

  

   

   

   

  

  

  

   

  

  

  

   

LNR – 26.2% share of equity in net income (acquired in July 2010) (4)

  

  

   

   

   

  

  

 15,254 

   

  

  

 - 

   

  

  

  

  

  

     

  

  

   

   

   

  

  

  

   

  

  

  

   

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

  

  

   

   

   

  

  

  

   

  

  

  

   

  

share of equity in net (loss) income   

  

  

   

   

   

  

  

 (207) 

   

  

  

 1,651 

   

    

  

  

   

   

   

  

  

  

   

  

  

  

   

Other, net (including partially owned office buildings) (5)

  

  

   

   

   

  

  

 (8,946) 

   

  

  

 (2,812) 

   

  

  

  

  

  

    

  

  

   

   

   

  

$

 16,284 

   

  

$

 11,344 

   

___________________________________   

  

  

   

   

   

  

  

  

   

  

  

  

   

 (1) 

  

  

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

 (2) 

  

  

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

  

  

  

  

  

    

  

  

   

   

   

  

  

  

   

  

  

  

   

 (3) 

  

  

The three months ended March 31, 2011 and 2010 include $1,452 and $5,998, respectively, of net gains resulting from Lexington's stock issuances.

  

  

  

  

  

    

  

  

   

   

   

  

  

  

   

  

  

  

   

 (4) 

  

  

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

  

  

  

  

  

    

  

  

   

   

   

  

  

  

   

  

  

  

   

 (5) 

  

  

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

 

13


 
 

VORNADO REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

 

 

 

5.    Investments in Partially Owned Entities – continued

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

  

  

   

  

  

Interest  

  

100% of

   

  

  

Rate at  

  

 Partially Owned Entities’ Debt at

(Amounts in thousands)  

  

  

March 31,  

  

March 31,

  

December 31,

  

  

   

Maturity

  

2011   

  

2011 

  

2010 

Toys (32.7% interest) (as of January 29, 2011 and October 30, 2010,  

  

  

   

  

  

  

  

  

  

  respectively):  

  

  

   

  

  

  

  

  

  

  

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

07/17

  

10.75 %

  

$

 928,597 

  

$

 928,045 

  

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

12/17

  

8.50 %

  

  

 715,821 

  

  

 715,577 

  

$700 million secured term loan facility  

09/16

  

6.00 %

  

  

 688,357 

  

  

 689,757 

  

Senior U.K. real estate facility  

04/13

  

5.02 %

  

  

 554,621 

  

  

 561,559 

  

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

08/11

  

8.82 %

  

  

 497,349 

  

  

 495,943 

  

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

04/13

  

9.50 %

  

  

 387,459 

  

  

 386,167 

  

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

09/16

  

7.38 %

  

  

 348,219 

  

  

 350,000 

  

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

10/18

  

9.99 %

  

  

 344,734 

  

  

 343,528 

  

Japan bank loans  

03/12-01/16

  

2.45%-2.85%

  

  

 177,511 

  

  

 180,500 

  

Spanish real estate facility  

02/13

  

4.51 %

  

  

 175,186 

  

  

 179,511 

  

Japan borrowings  

06/13

  

0.81 %

  

  

 17,080 

  

  

 141,360 

  

Junior U.K. real estate facility  

04/13

  

6.81%-7.84%

  

  

 96,921 

  

  

 98,266 

  

French real estate facility  

02/13

  

4.51 %

  

  

 84,291 

  

  

 86,599 

  

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

09/21

  

9.17 %

  

  

 21,063 

  

  

 21,054 

  

$1.85 billion credit facility  

08/15

  

-

  

  

 - 

  

  

 519,810 

  

European and Australian asset-based revolving credit facility  

10/12

  

-

  

  

 - 

  

  

 25,767 

  

Other  

Various

  

Various

  

  

 176,137 

  

  

 156,853 

  

  

   

  

  

 

  

  

 5,213,346 

  

  

 5,880,296 

  

  

   

  

  

 

  

  

  

  

  

  

Alexander’s (32.4% interest):  

  

  

 

  

  

  

  

  

  

  

731 Lexington Avenue mortgage note payable, collateralized by  

  

  

 

  

  

  

  

  

  

  

  

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

02/14

  

5.33 %

  

  

 348,781 

  

  

 351,751 

  

731 Lexington Avenue mortgage note payable, collateralized by  

  

  

 

  

  

  

  

  

  

  

  

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

07/15

  

4.93 %

  

  

 320,000 

  

  

 320,000 

  

Rego Park construction loan payable  

12/11

  

1.50 %

  

  

 277,200 

  

  

 277,200 

  

Kings Plaza Regional Shopping Center mortgage note payable  

06/11

  

7.46 %

  

  

 150,375 

  

  

 151,214 

  

Rego Park mortgage note payable (prepayable without penalty)  

03/12

  

0.75 %

  

  

 78,246 

  

  

 78,246 

  

Paramus mortgage note payable (prepayable without penalty)  

10/11

  

5.92 %

  

  

 68,000 

  

  

 68,000 

  

  

   

  

  

 

  

  

 1,242,602 

  

  

 1,246,411 

  

  

   

  

  

 

  

  

  

  

  

  

Lexington (12.6% interest) (as of December 31, 2010 and  

  

  

 

  

  

  

  

  

  

  September 30, 2010, respectively):   

  

  

 

  

  

  

  

  

  

  

Mortgage loans collateralized by Lexington’s real estate (various  

  

  

 

  

  

  

  

  

  

  

  

prepayment terms)  

2011-2037

  

5.82 %

  

  

 1,792,761 

  

  

 1,927,729 

  

  

   

  

  

 

  

  

  

  

  

  

LNR (26.2% interest) (as of December 31, 2010 and   

  

  

 

  

  

  

  

  

  

  September 30, 2010):  

  

  

 

  

  

  

  

  

  

  

Mortgage notes payable  

2011-2043

  

5.75 %

  

  

 366,069 

  

  

 508,547 

  

Liabilities of consolidated CMBS and CDO trusts  

n/a

  

6.06 %

  

  

 142,197,352 

  

  

 142,001,333 

  

  

    

  

  

   

  

  

 142,563,421 

  

  

 142,509,880 

 

 

14


 
 

VORNADO REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

 

 

 

5.    Investments in Partially Owned Entities - continued

  

  

   

  

  

Interest  

  

100% of

  

  

   

  

  

Rate at

  

Partially Owned Entities’ Debt at

(Amounts in thousands)  

  

  

March 31,

  

March 31,

  

December 31,

   

Maturity

  

2011 

  

2011 

  

2010 

Partially owned office buildings:  

  

  

   

  

  

  

  

  

  

  

One Park Avenue (30.3% interest) mortgage note payable  

03/16

  

5.00 %

  

$

 250,000 

  

$

 - 

  

Warner Building (55% interest) mortgage note payable  

05/16

  

6.26 %

  

  

 292,700 

  

  

 292,700 

  

330 Madison Avenue (25% interest) mortgage note payable  

06/15

  

1.81 %

  

  

 150,000 

  

  

 150,000 

  

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

  

  

   

  

  

  

  

  

  

  

  

mortgage notes payable, collateralized by the partnerships’ real estate  

11/11-12/11

  

5.86 %

  

  

 138,705 

  

  

 139,337 

  

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

  

  

   

  

  

  

  

  

  

  

  

without penalty after 07/14)  

12/14

  

7.00 %

  

  

 71,571 

  

  

 71,764 

  

Rosslyn Plaza (46% interest) mortgage note payable  

12/11

  

1.30 %

  

  

 56,680 

  

  

 56,680 

  

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

  

  

   

  

  

  

  

  

  

  

  

collateralized by land   

07/22

  

5.71 %

  

  

 50,150 

  

  

 50,150 

  

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

  

  

   

  

  

  

  

  

  

  

  

without penalty)  

02/14

  

4.94 %

  

  

 22,720 

  

  

 22,922 

  

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

  

  

   

  

  

  

  

  

  

  

  

without penalty after 04/14)  

10/14

  

8.07 %

  

  

 20,447 

  

  

 20,565 

India Real Estate Ventures:  

  

  

   

  

  

  

  

  

  

  

TCG Urban Infrastructure Holdings (25% interest) mortgage notes  

  

  

   

  

  

  

  

  

  

  

  

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

  

  

   

  

  

  

  

  

  

  

  

prepayment terms)  

2011-2022

  

13.88 %

  

  

 202,029 

  

  

 196,319 

Other:  

  

  

   

  

  

  

  

  

  

  

Verde Realty Operating Partnership (8.3% interest) mortgage notes  

  

  

   

  

  

  

  

  

  

  

  

 payable, collateralized by the partnerships’ real estate (various  

  

  

   

  

  

  

  

  

  

  

  

prepayment terms)  

2011-2025

  

5.91 %

  

  

 564,270 

  

  

 581,086 

  

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

  

  

   

  

  

  

  

  

  

  

  

December 31, 2010 and September 30, 2010), mortgage notes  

  

  

   

  

  

  

  

  

  

  

  

payable, collateralized by the partnerships’ real estate (various   

  

  

   

  

  

  

  

  

  

  

  

prepayment terms)  

2011-2018

  

5.50 %

  

  

 296,991 

  

  

 296,991 

  

Waterfront Associates (2.5% interest) up to $250 million construction  

  

  

   

  

  

  

  

  

  

  

  

and land loan payable  

09/11

  

2.26% - 3.76%

  

  

 219,442 

  

  

 217,106 

  

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

  

  

   

  

  

  

  

  

  

  

  

without penalty after 07/15)  

09/15

  

5.44 %

  

  

 163,917 

  

  

 164,474 

  

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

12/17

  

5.00 %

  

  

 14,977 

  

  

 15,022 

  

Orleans Hubbard Garage (50% interest) mortgage note payable  

12/17

  

5.00 %

  

  

 9,480 

  

  

 9,508 

  

Other  

Various

  

5.39 %

  

  

 417,553 

  

  

 418,339 

 

 

Based on our ownership interest in the partially owned entities above, our pro rata share of the debt of these partially owned entities was $40,260,412,000 and $40,443,346,000 as of March 31, 2011 and December 31, 2010, respectively.  Excluding our pro rata share of LNR’s liabilities related to consolidated CMBS and CDO trusts which are non-recourse to LNR and its equity holders, including us, our pro rata share of partially owned entities debt is $3,041,677,000 and $3,275,917,000 at March 31, 2011 and December 31, 2010, respectively.

 

 

15


 
 

VORNADO REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

 

 

6.    Mezzanine Loans Receivable

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

 

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

 

As of March 31, 2011 and December 31, 2010, the carrying amount of mezzanine loans receivable was $140,567,000 and $202,412,000, respectively, net of allowances of $0 and $73,216,000, respectively.

 

 

7.    Discontinued Operations

 

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

 

In the first quarter of 2011, we sold (i) 1140 Connecticut Avenue and 1227 25th Street for $127,000,000 in cash, which resulted in a $45,862,000 net gain, and (ii) two retail properties in separate transactions for an aggregate of $38,711,000 in cash, which resulted in net gains aggregating $5,303,000.

 

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

 

  

  

  

Assets Related to

  

Liabilities Related to

  

  

  

(Amounts in thousands)

  

Discontinued Operations as of

  

Discontinued Operations as of

  

  

  

  

  

March 31,

  

December 31,

  

March 31,

  

December 31,

  

  

  

  

  

2011 

  

2010 

  

2011 

  

2010 

  

  

  

High Point

  

$

 - 

  

$

 154,563 

  

$

 - 

  

$

 236,974 

  

  

  

1227 25th Street

  

  

 - 

  

  

 43,630 

  

  

 - 

  

  

 - 

  

  

  

1140 Connecticut Avenue

  

  

 - 

  

  

 36,271 

  

  

 - 

  

  

 18,948 

  

  

  

Total

  

$

 - 

  

$

 234,464 

  

$

 - 

  

$

 255,922 

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

For The Three Months

  

  

  

(Amounts in thousands)

  

  

  

  

  

  

  

Ended March 31,

  

  

  

  

  

  

  

  

  

  

  

2011 

  

2010 

  

  

  

Total revenues

  

  

  

  

$

 5,987 

  

$

 11,021 

  

  

  

Total expenses

  

  

  

  

  

 6,744 

  

  

 10,535 

  

  

  

  

  

  

  

  

  

 (757) 

  

  

 486 

  

  

  

Net gain on extinguishment of High Point debt

  

  

  

  

  

 83,907 

  

  

 - 

  

  

  

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

  

  

 45,862 

  

  

 - 

  

  

  

Net gain on sales of other real estate

  

  

  

  

  

 5,303 

  

  

 - 

  

  

  

Litigation loss accrual

  

  

  

  

  

 - 

  

  

 (10,056) 

  

  

  

Income (loss) from discontinued operations

  

  

  

  

$

 134,315 

  

$

 (9,570) 

  

  

 

 

16


 
 

VORNADO REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

 

 

8.    Identified Intangible Assets and Liabilities

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

 

  

  

 Balance as of

  

  

  

March 31,

  

December 31,

  

  

(Amounts in thousands)

2011 

  

2010 

  

  

Identified intangible assets:

  

  

  

  

  

  

  

Gross amount

$

 683,374 

  

$

 687,253 

  

  

Accumulated amortization

  

 (350,104) 

  

  

 (338,508) 

  

  

Net

$

 333,270 

  

$

 348,745 

  

  

Identified intangible liabilities (included in deferred credit):

  

  

  

  

  

  

  

Gross amount

$

 883,451 

  

$

 870,623 

  

  

Accumulated amortization

  

 (358,794) 

  

  

 (341,718) 

  

  

Net

$

 524,657 

  

$

 528,905 

  

 

Amortization of acquired below-market leases, net of acquired above-market leases, resulted in an increase to rental income of $16,759,000 and $15,771,000 for the three months ended March 31, 2011 and 2010, respectively.  Estimated annual amortization of acquired below-market leases, net of acquired above-market leases, for each of the five succeeding years commencing January 1, 2012 is as follows:

 

  

(Amounts in thousands)

  

  

  

  

2012 

$

 52,016 

  

  

2013 

  

 44,087 

  

  

2014 

  

 38,236 

  

  

2015 

  

 35,472 

  

  

2016 

  

 32,093 

  

 

Amortization of all other identified intangible assets (a component of depreciation and amortization expense) was $14,262,000 and $14,853,000 for the three months ended March 31, 2011 and 2010, respectively.  Estimated annual amortization of all other identified intangible assets including acquired in-place leases, customer relationships, and third party contracts for each of the five succeeding years commencing January 1, 2012 is as follows:

 

  

(Amounts in thousands)

  

  

  

  

2012 

$

 44,777 

  

  

2013 

  

 37,281 

  

  

2014 

  

 18,885 

  

  

2015 

  

 13,929 

  

  

2016 

  

 11,325 

  

 

We are a tenant under ground leases for certain properties.  Amortization of these acquired below-market leases, net of above-market leases resulted in an increase to rent expense of $314,000 and $509,000 for the three months ended March 31, 2011 and 2010, respectively.  Estimated annual amortization of these below-market leases, net of above-market leases, for each of the five succeeding years commencing January 1, 2012 is as follows:

 

  

(Amounts in thousands)

  

  

  

  

2012 

$

 1,256 

  

  

2013 

  

 1,256 

  

  

2014 

  

 1,256 

  

  

2015 

  

 1,256 

  

  

2016 

  

 1,256 

  

 

17


 
 

VORNADO REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

 

9.    Debt

 

The following is a summary of our debt:

  

   

  

  

Interest 

  

  

  

  

  

  

  

(Amounts in thousands)  

  

  

Rate at

  

Balance at

  

  

  

   

  

  

March 31,

  

March 31,

  

December 31,

  

Notes and mortgages payable:  

Maturity (1)

  

2011 

  

2011 

  

2010 

  

Fixed rate:  

  

  

   

  

  

  

  

  

  

  

  

New York Office:  

  

  

   

  

  

  

  

  

  

  

  

  

350 Park Avenue  

01/12

  

5.48 %

  

$

 430,000 

  

$

 430,000 

  

  

  

Two Penn Plaza(2)

03/18

  

5.13 %

  

  

 425,000 

  

  

 277,347 

  

  

  

1290 Avenue of the Americas  

01/13

  

5.97 %

  

  

 421,345 

  

  

 424,136 

  

  

  

770 Broadway  

03/16

  

5.65 %

  

  

 353,000 

  

  

 353,000 

  

  

  

888 Seventh Avenue  

01/16

  

5.71 %

  

  

 318,554 

  

  

 318,554 

  

  

  

909 Third Avenue  

04/15

  

5.64 %

  

  

 206,069 

  

  

 207,045 

  

  

  

Eleven Penn Plaza  

12/11

  

5.20 %

  

  

 198,282 

  

  

 199,320 

  

  

  

   

  

  

    

  

  

  

  

  

  

  

  

Washington, DC Office:  

  

  

    

  

  

  

  

  

  

  

  

  

Skyline Place  

02/17

  

5.74 %

  

  

 678,000 

  

  

 678,000 

  

  

  

River House Apartments  

04/15

  

5.43 %

  

  

 195,546 

  

  

 195,546 

  

  

  

2121 Crystal Drive(3)

03/23

  

5.51 %

  

  

 150,000 

  

  

 - 

  

  

  

Bowen Building  

06/16

  

6.14 %

  

  

 115,022 

  

  

 115,022 

  

  

  

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

01/25

  

7.09 %

  

  

 110,509 

  

  

 110,931 

  

  

  

Universal Buildings  

04/14

  

6.38 %

  

  

 102,119 

  

  

 103,049 

  

  

  

Reston Executive I, II, and III  

01/13

  

5.57 %

  

  

 93,000 

  

  

 93,000 

  

  

  

2011 Crystal Drive  

08/17

  

7.30 %

  

  

 81,221 

  

  

 81,362 

  

  

  

1550 and 1750 Crystal Drive  

11/14

  

7.08 %

  

  

 78,782 

  

  

 79,411 

  

  

  

220 20th Street(4)

02/18

  

4.61 %

  

  

 75,982 

  

  

 - 

  

  

  

1235 Clark Street  

07/12

  

6.75 %

  

  

 52,057 

  

  

 52,314 

  

  

  

2231 Crystal Drive  

08/13

  

7.08 %

  

  

 45,790 

  

  

 46,358 

  

  

  

1750 Pennsylvania Avenue  

06/12

  

7.26 %

  

  

 44,926 

  

  

 45,132 

  

  

  

1225 Clark Street  

08/13

  

7.08 %

  

  

 27,389 

  

  

 27,616 

  

  

  

1800, 1851 and 1901 South Bell Street  

12/11

  

6.91 %

  

  

 7,658 

  

  

 10,099 

  

  

  

   

  

  

    

  

  

  

  

  

  

  

  

Retail:  

  

  

    

  

  

  

  

  

  

  

  

  

Cross-collateralized mortgages on 40 strip shopping centers  

09/20

  

4.19 %

  

  

 594,247 

  

  

 597,138 

  

  

  

Montehiedra Town Center  

07/16

  

6.04 %

  

  

 120,000 

  

  

 120,000 

  

  

  

Broadway Mall  

07/13

  

5.30 %

  

  

 89,598 

  

  

 90,227 

  

  

  

828-850 Madison Avenue Condominium  

06/18

  

5.29 %

  

  

 80,000 

  

  

 80,000 

  

  

  

North Bergen (Tonnelle Avenue)(5)

01/18

  

4.59 %

  

  

 75,000 

  

  

 - 

  

  

  

Las Catalinas Mall  

11/13

  

6.97 %

  

  

 57,328 

  

  

 57,737 

  

  

  

510 5th Avenue  

01/16

  

5.60 %

  

  

 32,071 

  

  

 32,189 

  

  

  

Other  

  03/12-05/36

  

5.10%-7.33%

  

  

 100,870 

  

  

 101,251 

  

  

  

   

  

  

    

  

  

  

  

  

  

  

  

Merchandise Mart:  

  

  

    

  

  

  

  

  

  

  

  

  

Merchandise Mart  

12/16

  

5.57 %

  

  

 550,000 

  

  

 550,000 

  

  

  

Boston Design Center  

09/15

  

5.02 %

  

  

 68,235 

  

  

 68,538 

  

  

  

Washington Design Center  

11/11

  

6.95 %

  

  

 43,227 

  

  

 43,447 

  

  

  

   

  

  

    

  

  

  

  

  

  

  

  

Other:  

  

  

    

  

  

  

  

  

  

  

  

  

555 California Street  

09/11

  

5.79 %

  

  

 641,551 

  

  

 640,911 

  

  

  

Borgata Land(6)

02/21

  

5.14 %

  

  

 60,000 

  

  

 - 

  

  

  

Industrial Warehouses  

10/11

  

6.95 %

  

  

 24,271 

  

  

 24,358 

  

Total fixed rate notes and mortgages payable  

  

  

5.61 %

  

$

 6,746,649 

  

$

 6,253,038 

  

___________________  

  

  

   

  

  

  

  

  

  

  

  

  

See notes on page 20.  

  

  

   

  

  

  

  

  

  

 

18


 
 

VORNADO REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

 

 

9.    Debt - continued

  

  

  

   

  

  

    

  

Interest 

  

  

  

  

  

  

  

  

(Amounts in thousands)  

  

  

    

  

Rate at

  

Balance at

  

  

  

  

   

  

  

Spread over   

  

March 31,

  

March 31,

  

December 31,

  

  

Notes and mortgages payable:  

Maturity (1)

  

LIBOR   

  

2011 

  

2011 

  

2010 

  

  

Variable rate:  

  

  

    

  

   

  

  

  

  

  

  

  

  

  

New York Office:  

  

  

    

  

   

  

  

  

  

  

  

  

  

  

  

Manhattan Mall  

02/12

  

L+55   

  

0.82 %

  

$

 232,000 

  

$

 232,000 

  

  

  

  

866 UN Plaza  

05/11

  

L+40   

  

0.71 %

  

  

 44,978 

  

  

 44,978 

  

  

  

Washington, DC Office:  

  

  

    

  

   

  

  

  

  

  

  

  

  

  

  

2101 L Street   

02/13

  

L+120   

  

1.45 %

  

  

 150,000 

  

  

 150,000 

  

  

  

  

West End 25 (construction loan)(7)

08/11

  

 n/a  (7)

  

2.75 %

  

  

 78,554 

  

  

 95,220 

  

  

  

  

River House Apartments  

04/18

  

 n/a  (8)

  

1.62 %

  

  

 64,000 

  

  

 64,000 

  

  

  

  

2200/2300 Clarendon Boulevard  

01/15

  

L+75   

  

1.01 %

  

  

 57,802 

  

  

 59,278 

  

  

  

  

1730 M and 1150 17th Street  

06/14

  

L+140   

  

1.66 %

  

  

 43,580 

  

  

 43,581 

  

  

  

  

220 20th Street(4)

n/a

  

 n/a   

  

n/a

  

  

 - 

  

  

 83,573 

  

  

  

Retail:  

  

  

     

  

   

  

  

  

  

  

  

  

  

  

  

Green Acres Mall   

02/13

  

L+140   

  

1.75 %

  

  

 325,045 

  

  

 335,000 

  

  

  

  

Bergen Town Center (construction loan)  

03/13

  

L+150   

  

1.79 %

  

  

 279,044 

  

  

 279,044 

  

  

  

  

San Jose Strip Center  

03/13

  

L+400   

  

4.32 %

  

  

 118,285 

  

  

 120,863 

  

  

  

  

Beverly Connection(9)

07/12

  

L+350 (9)

  

5.00 %

  

  

 100,000 

  

  

 100,000 

  

  

  

  

4 Union Square South   

04/14

  

L+325   

  

3.56 %

  

  

 75,000 

  

  

 75,000 

  

  

  

  

Cross-collateralized mortgages on 40 strip   

  

  

     

  

   

  

  

  

  

  

  

  

  

  

  

     shopping centers(10)

09/20

  

L+136 (10)

  

2.36 %

  

  

 60,000 

  

  

 60,000 

  

  

  

  

435 Seventh Avenue(11)

08/14

  

L+300 (11)

  

5.00 %

  

  

 51,725 

  

  

 51,844 

  

  

  

  

Other

11/12

  

L+375   

  

4.02 %

  

  

 22,108 

  

  

 21,862 

  

  

  

Other:  

  

  

     

  

   

  

  

  

  

  

  

  

  

  

  

220 Central Park South  

10/11

  

L+235–L+245

  

2.65 %

  

  

 123,750 

  

  

 123,750 

  

  

  

  

Other  

11/11

  

L+250   

  

2.80 %

  

  

 22,400 

  

  

 66,267 

  

  

  

Total variable rate notes and mortgages payable  

  

  

    

  

2.23 %

  

  

 1,848,271 

  

  

 2,006,260 

  

  

  

Total notes and mortgages payable  

  

  

    

  

4.88 %

  

$

 8,594,920 

  

$

 8,259,298 

  

  

  

  

   

  

  

    

  

    

  

  

  

  

  

  

  

  

Senior unsecured notes:  

  

  

    

  

    

  

  

  

  

  

  

  

  

  

Senior unsecured notes due 2015  

04/15

  

    

  

4.25 %

  

$

 499,338 

  

$

 499,296 

  

  

  

Senior unsecured notes due 2039(12)

10/39

  

    

  

7.88 %

  

  

 460,000 

  

  

 460,000 

  

  

  

Floating rate senior unsecured notes due 2011  

12/11

  

L+200   

  

2.30 %

  

  

 23,250 

  

  

 23,250 

  

  

  

Senior unsecured notes due 2011   

n/a

  

    

  

n/a

  

  

 - 

  

  

 100,382 

  

  

  

Total senior unsecured notes  

  

  

    

  

5.90 %

  

$

 982,588 

  

$

 1,082,928 

  

  

  

  

   

  

  

    

  

    

  

  

  

  

  

  

  

  

3.88% exchangeable senior debentures due 2025   

  

  

    

  

    

  

  

  

  

  

  

  

  

  

(see page 21)   

04/12

  

    

  

5.32 %

  

$

 492,690 

  

$

 491,000 

  

  

  

  

   

  

  

    

  

    

  

  

  

  

  

  

  

  

Convertible senior debentures: (see page 21)  

  

  

    

  

    

  

  

  

  

  

  

  

  

  

3.63% due 2026  

11/11

  

    

  

5.32 %

  

$

 177,221 

  

$

 176,499 

  

  

  

2.85% due 2027  

04/12

  

    

  

5.45 %

  

  

 9,977 

  

  

 9,914 

  

  

  

Total convertible senior debentures (13)

  

  

    

  

5.33 %

  

$

 187,198 

  

$

 186,413 

  

  

  

  

   

  

  

    

  

    

  

  

  

  

  

  

  

  

Unsecured revolving credit facilities:  

  

  

    

  

    

  

  

  

  

  

  

  

  

  

$1.595 billion unsecured revolving credit facility   

09/12

  

L+55   

  

0.79 %

  

$

 324,000 

  

$

 669,000 

  

  

  

$1.000 billion unsecured revolving credit facility  

 

 

 

 

 

 

 

 

 

 

 

  

  

  

  

($12,423 reserved for outstanding letters of credit)

06/11

  

L+55   

  

0.79 %

  

  

 50,000 

  

  

 205,000 

  

  

  

Total unsecured revolving credit facilities   

  

  

     

  

0.79 %

  

$

 374,000 

  

$

 874,000 

  

  

___________________________  

  

  

    

  

   

  

  

  

  

  

  

  

  

  

See notes on the following page.  

  

  

    

  

   

  

  

  

  

  

  

  

 

19


 
 

VORNADO REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

 

 

 

9.    Debt - continued

  

Notes to preceding tabular information (Amounts in thousands):

  

  

  

  

(1)

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

  

  

  

  

(2)

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

  

(3)

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

  

  

  

  

(4)

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

  

  

  

  

(5)

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

  

  

  

  

(6)

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

  

  

  

  

(7)

In February 2011, we repaid a portion of this loan and extended the maturity to August 2011.  This loan bears interest at the prime rate minus 0.50%.

  

(8)

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

  

  

  

  

(9)

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

  

  

  

  

(10)

This loan has a LIBOR floor of 1.00%.

  

  

  

  

(11)

This loan has a LIBOR floor of 2.00%.

  

  

  

  

(12)

These notes may be redeemed at our option in whole or in part beginning on October 1, 2014, at a price equal to the principal amount plus accrued interest.

  

(13)

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

  

  

  

 

 

20


 
 

VORNADO REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

 

 

 

9.    Debt – continued

 

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

 

  

  

  

2.85% Convertible 

  

3.63% Convertible 

  

3.88% Exchangeable

(Amounts in thousands, except per share amounts)

Senior Debentures due 2027

  

Senior Debentures due 2026

  

Senior Debentures due 2025

  

  

  

March 31,   

  

December 31,

  

March 31,   

  

December 31,

  

March 31,

  

December 31,

Balance Sheet:

2011    

  

2010 

  

2011    

  

2010 

  

2011 

  

2010 

  

Principal amount of debt component

$

 10,233    

  

$

 10,233 

  

$

 179,052    

  

$

 179,052 

  

$

 499,982 

  

$

 499,982 

  

Unamortized discount

  

 (256)   

  

  

 (319)  

  

  

 (1,831)   

  

  

 (2,553)  

  

  

 (7,292)  

  

  

 (8,982)  

  

Carrying amount of debt component

$

 9,977    

  

$

 9,914 

  

$

 177,221    

  

$

 176,499 

  

$

 492,690 

  

$

 491,000 

  

Carrying amount of equity component

$

 956    

  

$

 956 

  

$

 9,604    

  

$

 9,604 

  

$

 32,301 

  

$

 32,301 

  

Effective interest rate

  

5.45 %  

  

  

5.45 %

  

  

5.32 %  

  

  

5.32 %

  

  

5.32 %

  

  

5.32 %

  

Maturity date (period through which

  

    

  

  

   

  

  

    

  

  

   

  

  

   

  

  

   

  

  

discount is being amortized)

  

4/1/12   

  

  

   

  

  

11/15/11   

  

  

   

  

  

4/15/12

  

  

   

  

Conversion price per share, as adjusted

$

157.18    

  

  

   

  

$

148.46    

  

  

   

  

$

87.17 

  

  

   

  

Number of shares on which the

  

     

  

  

   

  

  

    

  

  

   

  

  

   

  

  

   

  

  

aggregate consideration to be

  

     

  

  

   

  

  

    

  

  

   

  

  

   

  

  

   

  

  

delivered upon conversion is

  

     

  

  

   

  

  

    

  

  

   

  

  

   

  

  

   

  

  

determined

  

 -  (1)

  

  

   

  

  

 -  (1)

  

  

   

  

  

5,736 

  

  

   

__________________

  

    

  

  

   

  

  

    

  

  

   

  

  

   

  

  

   

  

  

  

  

    

  

  

   

  

  

    

  

  

   

  

  

   

  

  

   

 (1) 

Our convertible senior debentures require that upon conversion, the entire principal amount is to be settled in cash, and at our option, any excess value above the principal amount may be settled in cash or common shares.  Based on the March 31, 2011 closing share price of our common shares and the conversion prices in the table above, there was no excess value; accordingly, no common shares would be issued if these securities were settled on this date.  The number of common shares on which the aggregate consideration that would be delivered upon conversion is 65 and 1,206 common shares, respectively.

 

  

  

  

  

  

  

  

  

For the Three Months Ended

  

(Amounts in thousands)

  

  

  

  

  

  

March 31,

  

Income Statement:

  

  

  

  

  

2011 

  

2010 

  

2.85% Convertible Senior Debentures due 2027:

  

  

  

  

  

  

  

  

  

  

  

  

  

Coupon interest

  

  

  

  

  

  

$

 73 

  

$

 160 

  

  

Discount amortization – original issue

  

  

  

  

  

  

  

 11 

  

  

 23 

  

  

Discount amortization – ASC 470-20 implementation

  

  

  

  

  

  

  

 52 

  

  

 106 

  

  

  

  

  

  

  

  

  

$

 136 

  

$

 289 

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

3.63% Convertible Senior Debentures due 2026:

  

  

  

  

  

  

  

  

  

  

  

  

  

Coupon interest

  

  

  

  

  

  

$

 1,623 

  

$

 3,963 

  

  

Discount amortization – original issue

  

  

  

  

  

  

  

 196 

  

  

 455 

  

  

Discount amortization – ASC 470-20 implementation

  

  

  

  

  

  

  

 526 

  

  

 1,219 

  

  

  

  

  

  

  

  

  

$

 2,345 

  

$

 5,637 

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

3.88% Exchangeable Senior Debentures due 2025:

  

  

  

  

  

  

  

  

  

  

  

  

  

Coupon interest

  

  

  

  

  

  

$

 4,844 

  

$

 4,844 

  

  

Discount amortization – original issue

  

  

  

  

  

  

  

 399 

  

  

 379 

  

  

Discount amortization – ASC 470-20 implementation

  

  

  

  

  

  

  

 1,291 

  

  

 1,225 

  

  

  

  

  

  

  

  

  

$

 6,534 

  

$

 6,448 

  

 

 

21


 
 

VORNADO REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

 

 

10.    Redeemable Noncontrolling Interests

 

Redeemable noncontrolling interests on our consolidated balance sheets represent Operating Partnership units held by third parties and are comprised of Class A units and Series D-10, D-11, D-14, D-15 and D-16 (collectively, “Series D”) cumulative redeemable preferred units.  Redeemable noncontrolling interests on our consolidated balance sheets are recorded at the greater of their carrying amount or redemption value at the end of each reporting period.  Changes in the value from period to period are charged to “additional capital” in our consolidated statements of changes in equity.  Below is a table summarizing the activity of redeemable noncontrolling interests.

 

  

(Amounts in thousands)

  

  

  

  

Balance at December 31, 2009

$

 1,251,628 

  

  

Net income

  

 17,779 

  

  

Distributions

  

 (13,082) 

  

  

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

  

 (18,128) 

  

  

Adjustments to carry redeemable Class A units at redemption value

  

 104,247 

  

  

Redemption of Series D-12 redeemable units

  

 (4,000) 

  

  

Other, net

  

 1,304 

  

  

Balance at March 31, 2010

$

 1,339,748 

  

  

  

  

  

  

  

  

  

  

  

  

Balance at December 31, 2010

$

 1,327,974 

  

  

Net income

  

 31,808 

  

  

Distributions

  

 (12,702) 

  

  

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

  

 (27,539) 

  

  

Adjustments to carry redeemable Class A units at redemption value

  

 42,227 

  

  

Other, net

  

 4,752 

  

  

Balance at March 31, 2011

$

 1,366,520 

  

 

As of March 31, 2011 and December 31, 2010, the aggregate redemption value of redeemable Class A units was $1,105,520,000 and $1,066,974,000, respectively. 

 

Redeemable noncontrolling interests exclude our Series G-1 through G-4 convertible preferred units and Series D-13 cumulative redeemable preferred units, as they are accounted for as liabilities in accordance with ASC 480, Distinguishing Liabilities and Equity, because of their possible settlement by issuing a variable number of Vornado common shares.  Accordingly the fair value of these units is included as a component of “other liabilities” on our consolidated balance sheets and aggregated $55,097,000 as of March 31, 2011 and December 31, 2010.

 

In March 2010, we redeemed 246,153 Series D-12 cumulative redeemable preferred units for $16.25 per unit in cash, or $4,000,000 in the aggregate.  In connection therewith, we recognized a $2,154,000 net gain which is included as a component of “net income attributable to noncontrolling interests in the Operating Partnership, including unit distributions,” on our consolidated statement of income for the three months ended March 31, 2010.

 

 

22


 
 

VORNADO REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

 

 

11.  Shareholders’ Equity

 

On April 20, 2011, we sold 7,000,000 6.875% Series J Cumulative Redeemable Preferred Shares at a price of $25.00 per share, or $175,000,000 in the aggregate, in an underwritten public offering pursuant to an effective registration statement.  On April 21, 2011, the underwriters exercised their option to purchase an additional 1,050,000 shares to cover over-allotments.  We retained aggregate net proceeds of $194,736,000, after underwriters’ discounts and issuance costs and contributed the net proceeds to the Operating Partnership in exchange for 8,050,000 Series J Preferred Units (with economic terms that mirror those of the Series J Preferred Shares).  Dividends on the Series J Preferred Shares are cumulative and payable quarterly in arrears.  The Series J Preferred Shares are not convertible into, or exchangeable for, any of our properties or securities.  On or after April 20, 2016 (or sooner under limited circumstances), we, at our option, may redeem the Series J Preferred Shares at a redemption price of $25.00 per share, plus accrued and unpaid dividends through the date of redemption.  The Series J Preferred Shares have no maturity date and will remain outstanding indefinitely unless redeemed by us.  

 

 

12.  Fair Value Measurements

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

 

Financial Assets and Liabilities Measured at Fair Value

 

Financial assets and liabilities that are measured at fair value in our consolidated financial statements consist of (i) marketable securities, (ii) derivative positions in marketable equity securities, (iii) the assets of our deferred compensation plan, which are primarily marketable equity securities and equity investments in limited partnerships, (iv) Real Estate Fund investments, and (v)  mandatorily redeemable instruments (Series G-1 through G-4 convertible preferred units and Series D-13 cumulative redeemable preferred units).  The tables below aggregate the fair values of financial assets and liabilities by the levels in the fair value hierarchy at March 31, 2011 and December 31, 2010, respectively.

 

  

  

  

  

As of March 31, 2011

  

  

 (Amounts in thousands)

Total

  

Level 1

  

Level 2

  

Level 3

  

  

  

Marketable securities

$

 821,920 

  

$

 821,920 

  

$

 - 

  

$

 - 

  

  

  

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

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

noncontrolling interests)

  

 230,657 

  

  

 - 

  

  

 - 

  

  

 230,657 

  

  

  

Deferred compensation plan assets (included in other assets)

  

 97,951 

  

  

 46,339 

  

  

 - 

  

  

 51,612 

  

  

  

Derivative positions in marketable equity securities

  

 34,779 

  

  

 - 

  

  

 34,779 

  

  

 - 

  

  

  

  

Total assets

$

 1,185,307 

  

$

 868,259 

  

$

 34,779 

  

$

 282,269 

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

Mandatorily redeemable instruments (included in other liabilities)

$

 55,097 

  

$

 55,097 

  

$

 - 

  

$

 - 

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

As of December 31, 2010

  

  

 (Amounts in thousands)

Total

  

Level 1

  

Level 2

  

Level 3

  

  

  

Marketable securities

$

 766,116 

  

$

 766,116 

  

$

 - 

  

$

 - 

  

  

  

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

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

noncontrolling interests)

  

 144,423 

  

  

 - 

  

  

 - 

  

  

 144,423 

  

  

  

Deferred compensation plan assets (included in other assets)

  

 91,549 

  

  

 43,699 

  

  

 - 

  

  

 47,850 

  

  

  

Derivative positions in marketable equity securities

  

 17,616 

  

  

 - 

  

  

 17,616 

  

  

 - 

  

  

  

  

Total assets

$

 1,019,704 

  

$

 809,815 

  

$

 17,616 

  

$

 192,273 

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

Mandatorily redeemable instruments (included in other liabilities)

$

 55,097 

  

$

 55,097 

  

$

 - 

  

$

 - 

  

 

 

23


 
 

VORNADO REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

 

 

 

12.  Fair Value Measurements - continued

Financial Assets and Liabilities Measured at Fair Value - continued

 

The tables below summarize the changes in the fair value of the Level 3 assets above, by category, for the three months ended March 31, 2011 and 2010.

 

  

Real Estate Fund Investments:

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

For the Three Months Ended March 31,

  

  

 (Amounts in thousands)

  

  

  

  

  

  

2011 

  

2010 

  

  

Beginning balance

  

  

  

  

  

  

$

 144,423 

  

$

 - 

  

  

Purchases

  

  

  

  

  

  

  

 100,238 

  

  

 - 

  

  

Realized and unrealized gains

  

  

  

  

  

  

  

 698 

  

  

 - 

  

  

Other, net

  

  

  

  

  

  

  

 (14,702) 

  

  

 - 

  

  

Ending balance

  

  

  

  

  

  

$

 230,657 

  

$

 - 

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

Deferred Compensation Plan Assets:

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

For the Three Months Ended March 31,

  

  

 (Amounts in thousands)

  

  

  

  

  

  

2011 

  

2010 

  

  

Beginning balance

  

  

  

  

  

  

$

 47,850 

  

$

 39,589 

  

  

Purchases

  

  

  

  

  

  

  

 1,286 

  

  

 3,132 

  

  

Realized and unrealized gains

  

  

  

  

  

  

  

 3,623 

  

  

 1,108 

  

  

Other, net

  

  

  

  

  

  

  

 (1,147) 

  

  

 (566) 

  

  

Ending balance

  

  

  

  

  

  

$

 51,612 

  

$

 43,263 

  

 

 

Financial Assets and Liabilities not Measured at Fair Value

 

 Financial assets and liabilities that are not measured at fair value in our consolidated financial statements include mezzanine loans receivable and debt.  Estimates of the fair values of these instruments are based on our assessments of available market information and valuation methodologies, including discounted cash flow analyses.  The table below summarizes the carrying amounts and fair values of these financial instruments as of March 31, 2011 and December 31, 2010.

 

  

  

  

  

As of March 31, 2011

  

As of December 31, 2010

  

  

  

  

  

Carrying

  

Fair

  

Carrying

  

Fair

  

  

(Amounts in thousands)

Amount

  

Value

  

Amount

  

Value

  

  

  

Mezzanine loans receivable

$

 140,567 

  

$

 135,330 

  

$

 202,412 

  

$

 197,581 

  

  

  

Debt:

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

Notes and mortgages payable

$

 8,594,920 

  

$

 8,857,040 

  

$

 8,259,298 

  

$

 8,450,812 

  

  

  

  

Senior unsecured notes

  

 982,588 

  

  

 1,033,680 

  

  

 1,082,928 

  

  

 1,119,512 

  

  

  

  

Exchangeable senior debentures

  

 492,690 

  

  

 558,105 

  

  

 491,000 

  

  

 554,355 

  

  

  

  

Convertible senior debentures

  

 187,198 

  

  

 191,958 

  

  

 186,413 

  

  

 191,510 

  

  

  

  

Revolving credit facility debt

  

 374,000 

  

  

 374,000 

  

  

 874,000 

  

  

 874,000 

  

  

  

  

  

$

 10,631,396 

  

$

 11,014,783 

  

$

 10,893,639 

  

$

 11,190,189 

  

 

 

13.    Stock-based Compensation

           

Our Share Option Plan (the “Plan”) provides for grants of incentive and non-qualified stock options, restricted stock, restricted Operating Partnership units and out-performance plan rewards to certain of our employees and officers.  We account for all stock-based compensation in accordance ASC 718, Compensation – Stock Compensation.  Stock-based compensation expense for the three months ended March 31, 2011 and 2010 consists of stock option awards, restricted stock awards, Operating Partnership unit awards and out-performance plan awards.  In the three months ended March 31, 2011 and 2010, we recognized $7,146,000 and $6,477,000 of stock-based compensation expense, respectively.

 

 

24


 
 

VORNADO REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

 

 

14.    Fee and Other Income

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

 

  

  

  

   

For the Three Months

  

  

  

 (Amounts in thousands)  

Ended March 31,

  

  

  

   

2011 

  

2010 

  

  

  

Tenant cleaning fees  

$

 15,423 

  

$

 13,652 

  

  

  

Management and leasing fees  

  

 4,106 

  

  

 9,140 

  

  

  

Lease termination fees  

  

 1,176 

  

  

 4,970 

  

  

  

Other income  

  

 13,588 

  

  

 13,165 

  

  

  

   

$

 34,293 

  

$

 40,927 

  

  

  

  

  

   

  

  

  

  

  

  

  

 

          Fee and other income above includes management fee income from Interstate Properties, a related party, of $197,000 and $200,000 for the three months ended March 31, 2011 and 2010, respectively.  The above table excludes fee income from partially owned entities which is included in income from partially owned entities (see Note 5 – Investments in Partially Owned Entities).

 

 

15.     Interest and Other Investment Income, Net

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

 

  

   

  

For the Three Months

  

  

 (Amounts in thousands)  

  

Ended March 31,

  

  

  

  

   

  

2011 

  

2010 

  

  

Mezzanine loans loss reversal and net gain on disposition  

  

$

 82,744 

  

$

 - 

  

  

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

  

  

 17,163 

  

  

 - 

  

  

Dividends and interest on marketable securities  

  

  

 7,667 

  

  

 7,245 

  

  

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

  

  

 4,952 

  

  

 2,763 

  

  

Interest on mezzanine loans  

  

  

 2,644 

  

  

 2,715 

  

  

Other, net  

  

  

 1,938 

  

  

 1,981 

  

  

   

  

$

 117,108 

  

$

 14,704 

  

  

__________________________  

  

  

  

  

  

  

  

  

  

  

   

  

  

  

  

  

  

  

  

 (1) 

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

  

 

 

16.    Comprehensive Income

  

  

  

For the Three Months

  

  

  

 (Amounts in thousands)

  

Ended March 31,

  

  

  

  

  

  

2011 

  

2010 

  

  

  

Net income

  

$

 445,821 

  

$

 232,544 

  

  

  

Other comprehensive income

  

  

 57,161 

  

  

 1,504 

  

  

  

Comprehensive income

  

  

 502,982 

  

  

 234,048 

  

  

  

Less:  Comprehensive income attributable to noncontrolling interests

  

  

 36,759 

  

  

 18,098 

  

  

  

Comprehensive income attributable to Vornado

  

$

 466,223 

  

$

 215,950 

  

  

                     

 

        Substantially all of other comprehensive income for the three months ended March 31, 2011 and 2010 relates to income from the mark-to-market of marketable securities classified as available-for-sale and our share of other comprehensive income or loss of partially owned entities.

 

25


 
 

VORNADO REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

 

 

17.    Income Per Share

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

 

  

  

  

   

  

  

  

  

For the Three Months

  

(Amounts in thousands, except per share amounts)  

  

  

  

  

Ended March 31,

  

  

  

  

   

  

  

  

  

2011 

  

2010 

  

Numerator:  

  

  

  

  

  

  

  

  

  

  

  

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

  

  

  

  

$

 286,947 

  

$

 224,122 

  

  

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

  

  

  

 125,716 

  

  

 (9,570) 

  

  

Net income attributable to Vornado  

  

  

  

  

  

 412,663 

  

  

 214,552 

  

  

Preferred share dividends  

  

  

  

  

  

 (13,448) 

  

  

 (14,267) 

  

  

Net income attributable to common shareholders  

  

  

  

  

  

 399,215 

  

  

 200,285 

  

  

Earnings allocated to unvested participating securities  

  

  

  

  

  

 (46) 

  

  

 (20) 

  

  

Numerator for basic income per share  

  

  

  

  

  

 399,169 

  

  

 200,265 

  

  

Impact of assumed conversions:  

  

  

  

  

  

  

  

  

  

  

  

  

Interest on 3.875% exchangeable senior debentures  

  

  

  

  

  

 6,534 

  

  

 - 

  

  

  

Convertible preferred share dividends  

  

  

  

  

  

 32 

  

  

 41 

  

  

Numerator for diluted income per share  

  

  

  

  

$

 405,735 

  

$

 200,306 

  

  

  

  

   

  

  

  

  

  

  

  

  

  

  

Denominator:  

  

  

  

  

  

  

  

  

  

  

  

Denominator for basic income per share –   

  

  

  

  

  

  

  

  

  

  

  

  

weighted average shares    

  

  

  

  

  

 183,988 

  

  

 181,542 

  

  

Effect of dilutive securities(1):

  

  

  

  

  

  

  

  

  

  

  

  

3.875% exchangeable senior debentures  

  

  

  

  

  

 5,736 

  

  

 - 

  

  

  

Employee stock options and restricted share awards  

  

  

  

  

  

 1,749 

  

  

 1,831 

  

  

  

Convertible preferred shares  

  

  

  

  

  

 56 

  

  

 72 

  

  

Denominator for diluted income per share –   

  

  

  

  

  

  

  

  

  

  

  

  

weighted average shares and assumed conversions  

  

  

  

  

  

 191,529 

  

  

 183,445 

  

  

  

  

    

  

  

  

  

  

  

  

  

  

  

INCOME PER COMMON SHARE – BASIC:  

  

  

  

  

  

  

  

  

  

  

  

Income from continuing operations, net  

  

  

  

  

$

 1.49 

  

$

 1.15 

  

  

Income (loss) from discontinued operations, net  

  

  

  

  

  

 0.68 

  

  

 (0.05) 

  

  

Net income per common share  

  

  

  

  

$

 2.17 

  

$

 1.10 

  

  

  

  

    

  

  

  

  

  

  

  

  

  

  

INCOME PER COMMON SHARE – DILUTED:  

  

  

  

  

  

  

  

  

  

  

  

Income from continuing operations, net  

  

  

  

  

$

 1.46 

  

$

 1.14 

  

  

Income (loss) from discontinued operations, net  

  

  

  

  

  

 0.66 

  

  

 (0.05) 

  

  

Net income per common share  

  

  

  

  

$

 2.12 

  

$

 1.09 

  

  

  

  

   

  

  

  

  

  

  

  

  

  

  

  

  

  

   

  

  

  

  

  

  

  

  

  

  

(1)

  

The effect of dilutive securities in the three months ended March 31, 2011 and 2010 excludes an aggregate of 12,787 and 21,029 weighted average common share equivalents, respectively, as their effect was anti-dilutive.

  

 

 

26


 
 

VORNADO REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

 

 

18.          Cleveland Medical Mart Development Project

 

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

 

We account for these agreements using criteria set forth in ASC 605-25, Multiple-Element Arrangements, as our subsidiaries are providing development, marketing, leasing, and other property management related services over the 17-year term.  We recognize development fees using the percentage of completion method of accounting.  In the first quarter of 2011, we recognized $40,699,000 of revenue, of which $38,278,000 is offset by development costs expensed in the quarter.

 

 

 19.   Commitments and Contingencies

 

Insurance 

 

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

 

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

 

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

 

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

 

 

27


 
 

VORNADO REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

 

 

19.    Commitments and Contingencies – continued

 

 

          Other Commitments and Contingencies

 

Our mortgage loans are non-recourse to us.  However, in certain cases we have provided guarantees or master leased tenant space.  These guarantees and master leases terminate either upon the satisfaction of specified circumstances or repayment of the underlying loans.  As of March 31, 2011, the aggregate dollar amount of these guarantees and master leases is approximately $203,250,000.

 

At March 31, 2011, $12,423,000 of letters of credit were outstanding under one of our revolving credit facilities.  Our credit facilities contain financial covenants that require us to maintain minimum interest coverage and maximum debt to market capitalization ratios, and provide for higher interest rates in the event of a decline in our ratings below Baa3/BBB. Our credit facilities also contain customary conditions precedent to borrowing, including representations and warranties, and also contain customary events of default that could give rise to accelerated repayment, including such items as failure to pay interest or principal.

 

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

 

We are committed to fund additional capital to certain of our partially owned entities aggregating approximately $195,255,000, of which $141,924,000 is committed to the Fund.  In addition, we have agreed in principle to contribute up to $52,000,000 to a new investment management fund which will be managed by LNR.

 

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

 

 

Litigation  

 

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

 

On January 8, 2003, Stop & Shop filed a complaint with the United States District Court for the District of New Jersey (“USDC-NJ”) claiming that we had no right to reallocate and therefore continue to collect the $5,000,000 of annual rent from Stop & Shop pursuant to the Master Agreement and Guaranty, because of the expiration of the East Brunswick, Jersey City, Middletown, Union and Woodbridge leases to which the $5,000,000 of additional rent was previously allocated. Stop & Shop asserted that a prior order of the Bankruptcy Court for the Southern District of New York dated February 6, 2001, as modified on appeal to the District Court for the Southern District of New York on February 13, 2001, froze our right to reallocate which effectively terminated our right to collect the additional rent from Stop & Shop. On March 3, 2003, after we moved to dismiss for lack of jurisdiction, Stop & Shop voluntarily withdrew its complaint. On March 26, 2003, Stop & Shop filed a new complaint in New York State Supreme Court, asserting substantially the same claims as in its USDC-NJ complaint. We removed the action to the United States District Court for the Southern District of New York. In January 2005, that court remanded the action to the New York State Supreme Court. On February 14, 2005, we served an answer in which we asserted a counterclaim seeking a judgment for all the unpaid additional rent accruing through the date of the judgment and a declaration that Stop & Shop will continue to be liable for the additional rent as long as any of the leases subject to the Master Agreement and Guaranty remain in effect. On May 17, 2005, we filed a motion for summary judgment. On July 15, 2005, Stop & Shop opposed our motion and filed a cross-motion for summary judgment. On December 13, 2005, the Court issued its decision denying the motions for summary judgment. Both parties appealed the Court’s decision and on December 14, 2006, the Appellate Court division issued a decision affirming the Court’s decision.  On January 16, 2007, we filed a motion for the reconsideration of one aspect of the Appellate Court’s decision which was denied on March 13, 2007.  A trial was held in November 2010 and closing arguments were held in March 2011.  We intend to continue to vigorously pursue our claims against Stop & Shop.

 

 

28


 
 

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, 2011 and 2010.

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

      

(Amounts in thousands)  

For the Three Months Ended March 31, 2011

  

  

   

  

   

  

New York

  

Washington, DC

  

   

  

Merchandise

  

   

  

    

  

  

   

  

Total

  

Office

  

Office

  

Retail

  

Mart

  

Toys

  

Other(3)

Property rentals  

  

$

 540,472 

  

$

 194,242 

  

$

 138,884 

  

$

 107,447 

  

$

 62,565 

  

$

 - 

  

$

 37,334    

Straight-line rent adjustments  

  

  

 13,929 

  

  

 7,870 

  

  

 (5)

  

  

 4,181 

  

  

 790 

  

  

 - 

  

  

 1,093    

Amortization of acquired below-  

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

    

  

  

market leases, net  

  

  

 16,759 

  

  

 8,177 

  

  

 466 

  

  

 6,960 

  

  

 17 

  

  

 - 

  

  

 1,139    

Total rentals  

  

  

 571,160 

  

  

 210,289 

  

  

 139,345 

  

  

 118,588 

  

  

 63,372 

  

  

 - 

  

  

 39,566    

Tenant expense reimbursements  

  

  

 90,959 

  

  

 33,876 

  

  

 9,297 

  

  

 39,331 

  

  

 4,023 

  

  

 - 

  

  

 4,432    

Cleveland Medical Mart development   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

    

  

  

project

  

  

 40,699 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 40,699 

  

  

 - 

  

  

 -    

Fee and other income:  

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

    

  

Tenant cleaning fees  

  

  

 15,423 

  

  

 23,430 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 (8,007)   

  

Management and leasing fees  

  

  

 4,106 

  

  

 1,495 

  

  

 2,885 

  

  

 555 

  

  

 103 

  

  

 - 

  

  

 (932)   

  

Lease termination fees  

  

  

 1,176 

  

  

 65 

  

  

 1,111 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 -    

  

Other  

  

  

 13,588 

  

  

 4,763 

  

  

 5,345 

  

  

 1,407 

  

  

 2,036 

  

  

 - 

  

  

 37    

Total revenues  

  

  

 737,111 

  

  

 273,918 

  

  

 157,983 

  

  

 159,881 

  

  

 110,233 

  

  

 - 

  

  

 35,096    

Operating expenses  

  

  

 290,773 

  

  

 121,909 

  

  

 48,836 

  

  

 60,680 

  

  

 41,946 

  

  

 - 

  

  

 17,402    

Depreciation and amortization  

  

  

 132,227 

  

  

 46,146 

  

  

 33,684 

  

  

 28,541 

  

  

 11,062 

  

  

 - 

  

  

 12,794    

General and administrative  

  

  

 59,003 

  

  

 5,364 

  

  

 6,537 

  

  

 8,022 

  

  

 7,598 

  

  

 - 

  

  

 31,482    

Cleveland Medical Mart development  

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

    

  

project  

  

  

 38,278 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 38,278 

  

  

 - 

  

  

 -    

Acquisition and other costs  

  

  

 18,270 

  

  

 - 

  

  

 - 

  

  

 15,000 

  

  

 3,040 

  

  

 - 

  

  

 230    

Total expenses  

  

  

 538,551 

  

  

 173,419 

  

  

 89,057 

  

  

 112,243 

  

  

 101,924 

  

  

 - 

  

  

 61,908    

Operating income (loss)

  

  

 198,560 

  

  

 100,499 

  

  

 68,926 

  

  

 47,638 

  

  

 8,309 

  

  

 - 

  

  

 (26,812)  

Income applicable to Toys  

  

  

 112,944 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 112,944 

  

  

 -    

Income (loss) from partially owned  

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

    

  

 entities  

  

  

 16,284 

  

  

 1,088 

  

  

 (3,915)

  

  

 318 

  

  

 76 

  

  

 - 

  

  

 18,717    

Income from Real Estate Fund  

  

  

 1,080 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 1,080    

Interest and other investment

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

    

  

income, net

  

  

 117,108 

  

  

 172 

  

  

 32 

  

  

 8 

  

  

 9 

  

  

 - 

  

  

116,887   

Interest and debt expense  

  

  

 (134,765)

  

  

 (33,086)

  

  

 (28,926)

  

  

 (23,069)

  

  

 (9,338)

  

  

 - 

  

  

 (40,346)  

Net gain on disposition of wholly   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

    

  

owned and partially owned assets

  

  

 6,677 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 6,677    

Income (loss) before income taxes  

  

  

 317,888 

  

  

 68,673 

  

  

 36,117 

  

  

 24,895 

  

  

 (944)

  

  

 112,944 

  

  

 76,203    

Income tax expense  

  

  

 (6,382)

  

  

 (519)

  

  

 (738)

  

  

 (5)

  

  

 (410)

  

  

 - 

  

  

 (4,710)  

Income (loss) from continuing  

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

    

  

 operations  

  

  

 311,506 

  

  

 68,154 

  

  

 35,379 

  

  

 24,890 

  

  

 (1,354)

  

  

 112,944 

  

  

 71,493    

Income from discontinued operations  

  

  

 134,315 

  

  

 - 

  

  

 46,466 

  

  

 5,303 

  

  

 82,546 

  

  

 - 

  

  

 -    

Net income  

  

  

 445,821 

  

  

 68,154 

  

  

 81,845 

  

  

 30,193 

  

  

 81,192 

  

  

 112,944 

  

  

 71,493    

Net (income) loss attributable to   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

    

  

noncontrolling interests in   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

    

  

consolidated subsidiaries  

  

  

 (1,350)

  

  

 (2,271)

  

  

 - 

  

  

 155 

  

  

 - 

  

  

 - 

  

  

 766    

Net (income) attributable to  

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

    

  

noncontrolling interests in the   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

    

  

Operating Partnership, including

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

    

  

unit distributions

  

  

 (31,808)

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 (31,808)  

Net income attributable to  

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

    

  

 Vornado  

  

  

 412,663 

  

  

 65,883 

  

  

 81,845 

  

  

 30,348 

  

  

 81,192 

  

  

 112,944 

  

  

 40,451    

Interest and debt expense(2)

  

  

 198,848 

  

  

 31,994 

  

  

 32,221 

  

  

 24,164 

  

  

 12,907 

  

  

 40,135 

  

  

 57,427    

Depreciation and amortization(2)

  

  

 185,848 

  

  

 45,093 

  

  

 41,899 

  

  

 28,976 

  

  

 11,175 

  

  

 34,673 

  

  

 24,032    

Income tax expense (benefit)(2)

  

  

 66,828 

  

  

 519 

  

  

 848 

  

  

 5 

  

  

 410 

  

  

 69,018 

  

  

 (3,972)   

EBITDA(1)

  

$

 864,187 

  

$

 143,489 

  

$

 156,813 

  

$

 83,493 

  

$

 105,684 

  

$

 256,770 

  

$

117,938   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

    

See notes on page 31.  

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

    

 

29


 
 

VORNADO REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

 

20.    Segment Information – continued

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

      

(Amounts in thousands)  

For the Three Months Ended March 31, 2010

  

  

   

  

   

  

New York

  

Washington, DC

  

   

  

Merchandise

  

   

  

    

  

  

   

  

Total

  

Office

  

Office

  

Retail

  

Mart

  

Toys

  

Other(3)

Property rentals  

  

$

 516,623 

  

$

 192,604 

  

$

 136,826 

  

$

 95,107 

  

$

 57,657 

  

$

 - 

  

$

 34,429    

Straight-line rent adjustments  

  

  

 20,063 

  

  

 7,794 

  

  

 4,208 

  

  

 6,358 

  

  

 1,102 

  

  

 - 

  

  

 601    

Amortization of acquired below-  

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

    

  

  

market leases, net  

  

  

 15,771 

  

  

 9,205 

  

  

 621 

  

  

 4,516 

  

  

 (121)

  

  

 - 

  

  

 1,550    

Total rentals  

  

  

 552,457 

  

  

 209,603 

  

  

 141,655 

  

  

 105,981 

  

  

 58,638 

  

  

 - 

  

  

 36,580    

Tenant expense reimbursements  

  

  

 91,930 

  

  

 33,252 

  

  

 14,917 

  

  

 37,595 

  

  

 3,977 

  

  

 - 

  

  

 2,189    

Fee and other income:  

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

    

  

Tenant cleaning fees  

  

  

 13,652 

  

  

 20,418 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 (6,766)  

  

Management and leasing fees  

  

  

 9,140 

  

  

 1,457 

  

  

 8,096 

  

  

 224 

  

  

 14 

  

  

 - 

  

  

 (651)  

  

Lease termination fees  

  

  

 4,970 

  

  

 728 

  

  

 446 

  

  

 3,408 

  

  

 388 

  

  

 - 

  

  

 -    

  

Other  

  

  

 13,165 

  

  

 4,410 

  

  

 5,837 

  

  

 740 

  

  

 1,962 

  

  

 - 

  

  

 216    

Total revenues  

  

  

 685,314 

  

  

 269,868 

  

  

 170,951 

  

  

 147,948 

  

  

 64,979 

  

  

 - 

  

  

 31,568    

Operating expenses  

  

  

 274,693 

  

  

 115,049 

  

  

 54,757 

  

  

 53,127 

  

  

 37,210 

  

  

 - 

  

  

 14,550    

Depreciation and amortization  

  

  

 133,793 

  

  

 43,707 

  

  

 36,212 

  

  

 27,797 

  

  

 11,979 

  

  

 - 

  

  

 14,098    

General and administrative  

  

  

 48,630 

  

  

 4,579 

  

  

 5,893 

  

  

 6,941 

  

  

 7,198 

  

  

 - 

  

  

 24,019    

Total expenses  

  

  

 457,116 

  

  

 163,335 

  

  

 96,862 

  

  

 87,865 

  

  

 56,387 

  

  

 - 

  

  

 52,667    

Operating income (loss)

  

  

 228,198 

  

  

 106,533 

  

  

 74,089 

  

  

 60,083 

  

  

 8,592 

  

  

 - 

  

  

 (21,099)  

Income applicable to Toys  

  

  

 125,870 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 125,870 

  

  

 -    

Income (loss) from partially owned  

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

    

  

 entities  

  

  

 11,344 

  

  

 1,303 

  

  

 (192)

  

  

 1,391 

  

  

 176 

  

  

 - 

  

  

 8,666    

Interest and other investment   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

    

  

income, net  

  

  

 14,704 

  

  

 164 

  

  

 26 

  

  

 3 

  

  

 12 

  

  

 - 

  

  

 14,499    

Interest and debt expense

  

  

 (135,727)

  

  

 (32,686)

  

  

 (34,157)

  

  

 (17,642)

  

  

 (9,363)

  

  

 - 

  

  

 (41,879)   

Net gain on disposition of wholly  

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

    

  

owned and partially owned assets  

  

  

 3,305 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 796 

  

  

 - 

  

  

 2,509    

Income (loss) before income taxes

  

  

 247,694 

  

  

 75,314 

  

  

 39,766 

  

  

 43,835 

  

  

 213 

  

  

 125,870 

  

  

 (37,304)   

Income tax expense

  

  

 (5,580)

  

  

 (474)

  

  

 (686)

  

  

 (35)

  

  

 (194)

  

  

 - 

  

  

 (4,191)   

Income (loss) from continuing

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

    

  

 operations 

  

  

 242,114 

  

  

 74,840 

  

  

 39,080 

  

  

 43,800 

  

  

 19 

  

  

 125,870 

  

  

 (41,495)   

(Loss) from discontinued operations

  

  

 (9,570)

  

  

 - 

  

  

 (8,323)

  

  

 (202)

  

  

 (1,045)

  

  

 - 

  

  

 -    

Net income (loss)

  

  

 232,544 

  

  

 74,840 

  

  

 30,757 

  

  

 43,598 

  

  

 (1,026)

  

  

 125,870 

  

  

 (41,495)   

Net (income) loss attributable to  

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

    

  

noncontrolling interests in   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

    

  

consolidated subsidiaries  

  

  

 (213)

  

  

 (2,292) 

  

  

 - 

  

  

 242 

  

  

 - 

  

  

 - 

  

  

 1,837    

Net (income) attributable to   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

    

  

noncontrolling interests in the   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

    

  

Operating Partnership, including

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

    

  

unit distributions  

  

  

 (17,779)

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 (17,779)   

Net income (loss) attributable to  

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

    

  

 Vornado 

  

  

 214,552 

  

  

 72,548 

  

  

 30,757 

  

  

 43,840 

  

  

 (1,026)

  

  

 125,870 

  

  

 (57,437)   

Interest and debt expense(2)

  

  

 196,187 

  

  

 30,992 

  

  

 35,171 

  

  

 19,354 

  

  

 13,009 

  

  

 41,140 

  

  

 56,521    

Depreciation and amortization(2)

  

  

 186,149 

  

  

 42,074 

  

  

 39,841 

  

  

 28,811 

  

  

 13,482 

  

  

 35,327 

  

  

 26,614    

Income tax expense(2)

  

  

 55,706 

  

  

 474 

  

  

 724 

  

  

 35 

  

  

 253 

  

  

 49,710 

  

  

 4,510    

EBITDA(1)

  

$

 652,594 

  

$

 146,088 

  

$

 106,493 

  

$

 92,040 

  

$

 25,718 

  

$

 252,047 

  

$

 30,208    

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

    

See notes on the following page.  

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

    

 

30


 
 

VORNADO REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

 

 

 

20.    Segment Information - continued

  

  

  

Notes to preceding tabular information:

  

  

(1)

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

(2)

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

  

  

(3)

The components of other EBITDA are summarized below.  The totals for each of the columns below agree to the total EBITDA for the "other" column in the preceding EBITDA by segment reconciliations.

 

  

  

  

  

  

  

    

For the Three Months

   

  

(Amounts in thousands)  

Ended March 31,

   

  

  

  

  

  

  

    

2011 

   

2010 

   

  

Alexander's  

$

 15,168 

   

$

 14,399 

   

  

Lexington  

  

 11,993 

    

  

 17,848 

    

  

555 California Street  

  

 10,965 

   

  

 11,488 

   

  

LNR (acquired in July 2010)  

  

 9,390 

   

  

 - 

   

  

Industrial warehouses  

  

 356 

   

  

 839 

   

  

Hotel Pennsylvania  

  

 (68) 

   

  

 (447) 

   

  

Other investments  

  

 8,999 

   

  

 9,307 

    

  

   

  

 56,803 

   

  

 53,434 

   

  

Corporate general and administrative expenses (1)

  

 (21,355) 

   

  

 (19,388) 

   

  

Investment income and other, net (1)

  

 14,376 

   

  

 11,514 

   

  

Mezzanine loans loss reversal and net gain on disposition  

  

 82,744 

   

  

 - 

   

  

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

  

 17,163 

   

  

 - 

   

  

Net gain on sale of condominiums  

  

 4,586 

   

  

 2,427 

   

  

Real Estate Fund placement fees  

  

 (3,048) 

   

  

 - 

   

  

Acquisition costs  

  

 (1,523) 

   

  

 - 

   

  

Net income attributable to noncontrolling interests in the Operating Partnership,   

  

  

   

  

  

   

  

  

including unit distributions  

  

 (31,808) 

   

  

 (17,779) 

   

  

  

  

  

  

  

   

$

 117,938 

   

$

 30,208 

   

  

  

  

  

  

  

   

  

  

   

  

  

   

  

  

  

  

  

  

   

  

  

   

  

  

   

  

(1)

  

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

  

  

  

and offsetting liability.

 

 

31


 
 

 

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, 2011, and the related consolidated statements of income, changes in equity, and cash flows for the three-month periods ended March 31, 2011 and 2010.  These interim financial statements are the responsibility of the Company’s management.

 

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

 

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

 

We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheet of Vornado Realty Trust as of December 31, 2010, and the related consolidated statements of income, changes in equity, and cash flows for the year then ended (not presented herein); and in our report dated February 23, 2011, we expressed an unqualified opinion on those consolidated financial statements.  In our opinion, the information set forth in the accompanying consolidated balance sheet as of December 31, 2010 is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.

 

/s/ DELOITTE & TOUCHE LLP

 

Parsippany, New Jersey

May 3, 2011

 

 

32


 
 

 

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

 

Certain statements contained herein constitute forward‑looking statements as such term is defined in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements are not guarantees of performance. They represent our intentions, plans, expectations and beliefs and are subject to numerous assumptions, risks and uncertainties. Our future results, financial condition and business may differ materially from those expressed in these forward-looking statements. You can find many of these statements by looking for words such as “approximates,” “believes,” “expects,” “anticipates,” “estimates,” “intends,” “plans,” “would,” “may” or other similar expressions in this Quarterly Report on Form 10‑Q.  Many of the factors that will determine the outcome of these and our other forward-looking statements are beyond our ability to control or predict. For further discussion of factors that could materially affect the outcome of our forward-looking statements, see “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2010.  For these statements, we claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. You are cautioned not to place undue reliance on our forward-looking statements, which speak only as of the date of this Quarterly Report on Form 10-Q or the date of any document incorporated by reference. All subsequent written and oral forward-looking statements attributable to us or any person acting on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this section. We do not undertake any obligation to release publicly any revisions to our forward-looking statements to reflect events or circumstances occurring after the date of this Quarterly Report on Form 10-Q.

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations includes a discussion of our consolidated financial statements for the three months ended March 31, 2011.  The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates.

 

Critical Accounting Policies

 

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

 

 

33


 
 

  

Overview

Business Objective and Operating Strategy

Our business objective is to maximize shareholder value, which we measure by the total return provided to our shareholders. Below is a table comparing our performance to the Morgan Stanley REIT Index (“RMS”) and the SNL REIT Index ("SNL") for the following periods ended March 31, 2011:

 

  

  

  

Total Return(1)

  

  

  

  

Vornado

  

RMS

  

SNL  

  

  

  

One-year

 19.2% 

  

 24.3% 

  

 24.9%  

  

  

  

Three-year

 12.6% 

  

 6.9% 

  

 11.2%  

  

  

  

Five-year

 8.2% 

  

 7.2% 

  

 11.9%  

  

  

  

Ten-year

 281.0% 

  

 191.9% 

  

 207.4%  

  

  

  

  

  

  

  

  

   

  

  

  

  

  

  

   

  

  

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

 

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

 

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

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

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

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

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

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

 

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

 

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

 

 

2011 Acquisitions and Investments

 

One Park Avenue

 

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

 

280 Park Avenue Mezzanine Loans Joint Venture

 

On March 16, 2011, we formed a 50/50 joint venture with SL Green Realty Corp (“SL Green”) to own the mezzanine debt of 280 Park Avenue, a 1.2 million square foot office building located between 48th and 49th Streets in Manhattan.  We contributed our mezzanine loan with a face amount of $73,750,000 and they contributed their mezzanine loans with a face amount of $326,250,000 to the joint venture.  We equalized our interest in the joint venture with SL Green by paying them $111,250,000 in cash and assuming $15,000,000 of their debt position.  We account for our 50% interest in the joint venture under the equity method of accounting from the date of contribution.

 

 

34


 
 

  

 

Overview - continued

 

 

2011 Dispositions

 

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

 

In the first quarter of 2011, we sold (i) 1140 Connecticut Avenue and 1227 25th Street for $127,000,000 in cash, which resulted in a $45,862,000 net gain, and (ii) two retail properties in separate transactions for an aggregate of $38,711,000 in cash, which resulted in net gains aggregating $5,303,000.

 

 

2011 Financing Activities

 

On April 20, 2011, we sold 7,000,000 6.875% Series J Cumulative Redeemable Preferred Shares at a price of $25.00 per share, or $175,000,000 in the aggregate, in an underwritten public offering pursuant to an effective registration statement.  On April 21, 2011, the underwriters exercised their option to purchase an additional 1,050,000 shares to cover over-allotments.  We retained aggregate net proceeds of $194,736,000, after underwriters’ discounts and issuance costs and contributed the net proceeds to the Operating Partnership in exchange for 8,050,000 Series J Preferred Units (with economic terms that mirror those of the Series J Preferred Shares).  Dividends on the Series J Preferred Shares are cumulative and payable quarterly in arrears.  The Series J Preferred Shares are not convertible into, or exchangeable for, any of our properties or securities.  On or after April 20, 2016 (or sooner under limited circumstances), we, at our option, may redeem the Series J Preferred Shares at a redemption price of $25.00 per share, plus accrued and unpaid dividends through the date of redemption.  The Series J Preferred Shares have no maturity date and will remain outstanding indefinitely unless redeemed by us.  

 

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

 

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

 

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

 

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

 

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

 

 

35


 
 

  

 

Overview - continued

Quarter Ended March 31, 2011 Financial Results Summary

 

Net income attributable to common shareholders for the quarter ended March 31, 2011 was $399,215,000, or $2.12 per diluted share, compared to $200,285,000, or $1.09 per diluted share, for the quarter ended March 31, 2010.  Net income for the quarters ended March 31, 2011 and 2010 include $51,165,000 and $307,000, respectively, of net gains on sale of real estate and certain other items that affect comparability, which are listed in the table below.  The aggregate of net gains on sale of real estate and the items in the table below, net of amounts attributable to noncontrolling interests, increased net income attributable to common shareholders by $215,400,000, or $1.12 per diluted share for the quarter ended March 31, 2011 and $2,389,000, or $0.01 per diluted share for the quarter ended March 31, 2010.

 

Funds From Operations attributable to common shareholders plus assumed conversions (“FFO”) for the quarter ended March 31, 2011 was $505,931,000, or $2.64 per diluted share, compared to $353,826,000, or $1.87 per diluted share, for the prior year’s quarter.  FFO for the quarters ended March 31, 2011 and 2010 include certain items that affect comparability which are listed in the table below.  The aggregate of these items, net of amounts attributable to noncontrolling interests, increased FFO by $167,473,000, or $0.87 per diluted share for the quarter ended March 31, 2011 and $5,248,000, or $0.03 per diluted share for the quarter ended March 31, 2010.

 

  

  

  

For the Three Months Ended

  

  

  

March 31,

(Amounts in thousands)

2011 

  

2010 

Items that affect comparability income (expense):

  

  

  

  

  

  

Net gain on extinguishment of debt

$

 83,907 

  

$

 - 

  

Mezzanine loans loss reversal and net gain on disposition

  

 82,744 

  

  

 - 

  

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

  

 17,163 

  

  

 - 

  

Our share of LNR's tax settlement gain

  

 8,977 

  

  

 - 

  

Net gain on sale of condominiums

  

 4,586 

  

  

 2,427 

  

Net gain resulting from Lexington's stock issuances

  

 1,452 

  

  

 5,998 

  

Net gain on redemption of perpetual preferred units

  

 - 

  

  

 2,154 

  

Buy-out of a below-market lease

  

 (15,000) 

  

  

 - 

  

Real Estate Fund placement fees

  

 (3,048) 

  

  

 - 

  

Litigation loss accrual

  

 - 

  

  

 (10,056) 

  

(Negative FFO) FFO attributable to discontinued operations

  

 (757) 

  

  

 3,750 

  

Other, net

  

 (1,236) 

  

  

 1,373 

  

  

  

  

 178,788 

  

  

 5,646 

Noncontrolling interests' share of above adjustments

  

 (11,315) 

  

  

 (398) 

Items that affect comparability, net

$

 167,473 

  

$

 5,248 

 

The percentage increase in GAAP basis and cash basis same store Earnings Before Interest, Taxes, Depreciation and Amortization (“EBITDA”) of our operating segments for the quarter ended March 31, 2011 over the quarter ended March 31, 2010 and the trailing quarter ended December 31, 2010 are summarized below.

 

  

  

  

  

  

New York

   

  

Washington, DC  

  

  

   

  

Merchandise

    

Same Store EBITDA:

  

  

Office

   

  

Office  

  

Retail

   

  

Mart

    

  

March 31, 2011 vs. March 31, 2010

  

  

   

  

   

  

  

   

  

  

   

  

  

GAAP basis

  

 (1.7%) 

   

  

 5.1%  

  

 3.9% 

   

  

 8.6% 

   

  

  

Cash Basis

  

 (0.7%) 

   

  

 10.7%  

  

 6.9% 

   

  

 9.6% 

   

  

March 31, 2011 vs. December 31, 2010

  

  

   

  

   

  

  

   

  

  

   

  

  

GAAP basis

  

  

 (3.7%) 

 (1)

  

 2.0%  

  

 (2.1%) 

 (2)

  

 5.8% 

    

  

  

Cash Basis

  

  

 (1.3%) 

 (1)

  

 2.3%  

  

 0.4% 

 (2)

  

 6.2% 

    

  

  

  

  

  

  

   

  

   

  

  

   

  

  

   

  

  

  

  

  

  

   

  

   

  

  

   

  

  

   

(1)

Reflects a seasonal increase in utility costs.

  

  

  

  

  

  

   

  

   

  

  

   

  

  

   

(2)

Primarily due to rents from holiday leasing and percentage rents recognized in the fourth quarter.

 

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.

 

 

36


 
 

  

Overview - continued

 

The leasing activity presented below is based on leases signed during the period and is not intended to coincide with the commencement of rental revenue in accordance with accounting principles generally accepted in the United States of America (“GAAP”).  Tenant improvements and leasing commissions presented below are based on our share of square feet leased during the period.

 

(Square feet in thousands)  

  

New York   

  

Washington, DC  

  

  

   

  

Merchandise Mart

As of March 31, 2011:  

  

Office  

  

Office  

  

Retail (3)

  

Office

  

Showroom

  

Total square feet (in service)  

  

  

 18,445   

  

  

 21,171   

  

  

 25,266   

  

  

 2,621   

  

  

 4,191   

  

Our share of square feet (in service)  

  

  

 16,501   

  

  

 17,829   

  

  

 23,424   

  

  

 2,621   

  

  

 4,191   

  

Number of properties  

  

  

 29   

  

  

 82   

  

  

 160   

  

  

 6   

  

  

 6   

  

Occupancy rate  

  

  

 95.7%  

  

  

 93.4%(2)

  

  

 92.4%  

  

  

 90.8%  

  

  

 93.1%  

  

  

  

  

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

Leasing Activity:  

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

Quarter Ended March 31, 2011:  

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

Total square feet leased  

  

  

 673   

  

  

 404   

  

  

 353   

  

  

 -   

  

  

 116   

  

Our share of square feet leased:  

  

  

 336   

  

  

 311   

  

  

 346   

  

  

 -   

  

  

 116   

  

  

Initial rent (1)

  

$

 50.38   

  

$

 37.57   

  

$

 31.56   

  

$

 -   

  

$

 36.06   

  

  

Weighted average lease term (years)  

  

  

 13.9   

  

  

 3.8   

  

  

 9.3   

  

  

 -   

  

  

 7.0   

  

  

Relet space (included above):  

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

  

Square feet  

  

  

 183   

  

  

 268   

  

  

 75   

  

  

 -   

  

  

 116   

  

  

  

Initial rent - cash basis (1)

  

$

 57.32   

  

$

 36.50   

  

$

 26.22   

  

$

 -   

  

$

 36.06   

  

  

  

Prior escalated rent - cash basis  

  

$

 49.27   

  

$

 35.32   

  

$

 21.09   

  

$

 -   

  

$

 37.48   

  

  

  

Percentage (decrease) increase:  

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

  

  

Cash basis  

  

  

 16.3%   

  

  

 3.3%  

  

  

 24.3%  

  

  

 -   

  

  

 (3.8%)  

  

  

  

  

GAAP basis  

  

  

 16.6%   

  

  

 10.2%  

  

  

 31.1%  

  

  

 -   

  

  

 -   

  

  

Tenant improvements and leasing  

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

  

commissions:  

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

  

Per square foot  

  

$

 58.08   

  

$

 12.04   

  

$

 10.01   

  

$

 -   

  

$

 3.11   

  

  

  

Per square foot per annum:  

  

$

 4.17   

  

$

 3.17   

  

$

 1.08   

  

$

 -   

  

$

 0.44   

  

  

  

  

Percentage of initial rent  

  

  

 8.3%  

  

  

 8.4%  

  

  

 3.4%  

  

  

 -   

  

  

 1.2%  

  

  

  

  

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

 

As of December 31, 2010:  

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

Total square feet (in service)  

  

  

 17,454   

  

  

 21,149   

  

  

 25,557   

  

  

 2,608   

  

  

 4,204   

  

Our share of square feet (in service)  

  

  

 16,194   

  

  

 17,823   

  

  

 23,453   

  

  

 2,608   

  

  

 4,204   

  

Number of properties  

  

  

 28   

  

  

 82   

  

  

 161   

  

  

 6   

  

  

 6   

  

Occupancy rate  

  

  

 95.6%  

  

  

 94.3%(2)

  

  

 92.3%  

  

  

 91.5%  

  

  

 93.2%  

  

  

  

  

  

  

   

  

  

    

  

  

    

  

  

    

  

  

    

  

  

    

As of March 31, 2010:  

  

   

  

   

  

   

  

  

  

  

  

Total square feet (in service)  

  

  

 17,489   

  

  

 20,551   

  

  

 25,075   

  

  

 2,470   

  

  

 6,301   

  

Our share of square feet (in service)  

  

  

 16,175   

  

  

 18,210   

  

  

 22,684   

  

  

 2,470   

  

  

 6,301   

  

Number of properties  

  

  

 28   

  

  

 82   

  

  

 164   

  

  

 8   

  

  

 8   

  

Occupancy rate  

  

  

 95.3%  

  

  

 94.1%(2)

  

  

 91.2%  

  

  

 87.5%  

  

  

 89.1%  

 

  

  

  

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

  

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

(1)

  

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

  

  

  

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

(2)

  

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

  

  

  

March 31, 2011

92.5%  

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

  

December 31, 2010

94.0%  

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

  

March 31, 2010

94.6%  

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

  

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

(3)

  

Mall sales per square foot, including partially owned malls, for the trailing twelve months ended March 31, 2011 and 2010 were $460 and

  

  

$468, respectively.

 

37


 
 

  

Net Income and EBITDA by Segment for the Three Months Ended March 31, 2011 and 2010

Below is a summary of net income and a reconciliation of net income to EBITDA(1) by segment for the three months ended March 31, 2011 and 2010.

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

      

(Amounts in thousands)  

For the Three Months Ended March 31, 2011

  

  

   

  

   

  

New York

  

Washington, DC

  

   

  

Merchandise

  

   

  

    

  

  

   

  

Total

  

Office

  

Office

  

Retail

  

Mart

  

Toys

  

Other(3)

Property rentals  

  

$

 540,472 

  

$

 194,242 

  

$

 138,884 

  

$

 107,447 

  

$

 62,565 

  

$

 - 

  

$

 37,334    

Straight-line rent adjustments  

  

  

 13,929 

  

  

 7,870 

  

  

 (5)

  

  

 4,181 

  

  

 790 

  

  

 - 

  

  

 1,093    

Amortization of acquired below-  

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

    

  

  

market leases, net  

  

  

 16,759 

  

  

 8,177 

  

  

 466 

  

  

 6,960 

  

  

 17 

  

  

 - 

  

  

 1,139    

Total rentals  

  

  

 571,160 

  

  

 210,289 

  

  

 139,345 

  

  

 118,588 

  

  

 63,372 

  

  

 - 

  

  

 39,566    

Tenant expense reimbursements  

  

  

 90,959 

  

  

 33,876 

  

  

 9,297 

  

  

 39,331 

  

  

 4,023 

  

  

 - 

  

  

 4,432    

Cleveland Medical Mart development   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

    

  

  

project  

  

  

 40,699 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 40,699 

  

  

 - 

  

  

 -    

Fee and other income:  

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

    

  

Tenant cleaning fees  

  

  

 15,423 

  

  

 23,430 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 (8,007)   

  

Management and leasing fees  

  

  

 4,106 

  

  

 1,495 

  

  

 2,885 

  

  

 555 

  

  

 103 

  

  

 - 

  

  

 (932)   

  

Lease termination fees  

  

  

 1,176 

  

  

 65 

  

  

 1,111 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 -    

  

Other  

  

  

 13,588 

  

  

 4,763 

  

  

 5,345 

  

  

 1,407 

  

  

 2,036 

  

  

 - 

  

  

 37    

Total revenues  

  

  

 737,111 

  

  

 273,918 

  

  

 157,983 

  

  

 159,881 

  

  

 110,233 

  

  

 - 

  

  

 35,096    

Operating expenses  

  

  

 290,773 

  

  

 121,909 

  

  

 48,836 

  

  

 60,680 

  

  

 41,946 

  

  

 - 

  

  

 17,402    

Depreciation and amortization  

  

  

 132,227 

  

  

 46,146 

  

  

 33,684 

  

  

 28,541 

  

  

 11,062 

  

  

 - 

  

  

 12,794    

General and administrative  

  

  

 59,003 

  

  

 5,364 

  

  

 6,537 

  

  

 8,022 

  

  

 7,598 

  

  

 - 

  

  

 31,482    

Cleveland Medical Mart development

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

    

  

project

  

  

 38,278 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 38,278 

  

  

 - 

  

  

 -    

Acquisition and other costs  

  

  

 18,270 

  

  

 - 

  

  

 - 

  

  

 15,000 

  

  

 3,040 

  

  

 - 

  

  

 230    

Total expenses  

  

  

 538,551 

  

  

 173,419 

  

  

 89,057 

  

  

 112,243 

  

  

 101,924 

  

  

 - 

  

  

 61,908    

Operating income (loss)  

  

  

 198,560 

  

  

 100,499 

  

  

 68,926 

  

  

 47,638 

  

  

 8,309 

  

  

 - 

  

  

 (26,812)   

Income applicable to Toys  

  

  

 112,944 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 112,944 

  

  

 -    

Income (loss) from partially owned  

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

    

  

 entities  

  

  

 16,284 

  

  

 1,088 

  

  

 (3,915)

  

  

 318 

  

  

 76 

  

  

 - 

  

  

 18,717    

Income from Real Estate Fund  

  

  

 1,080 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 1,080    

Interest and other investment

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

    

  

income, net

  

  

 117,108 

  

  

 172 

  

  

 32 

  

  

 8 

  

  

 9 

  

  

 - 

  

  

 116,887    

Interest and debt expense  

  

  

 (134,765)

  

  

 (33,086)

  

  

 (28,926)

  

  

 (23,069)

  

  

 (9,338)

  

  

 - 

  

  

 (40,346)   

Net gain on disposition of wholly   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

    

  

owned and partially owned assets  

  

  

 6,677 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 6,677    

Income (loss) before income taxes  

  

  

 317,888 

  

  

 68,673 

  

  

 36,117 

  

  

 24,895 

  

  

 (944)

  

  

 112,944 

  

  

 76,203    

Income tax expense  

  

  

 (6,382)

  

  

 (519)

  

  

 (738)

  

  

 (5)

  

  

 (410)

  

  

 - 

  

  

 (4,710)   

Income (loss) from continuing  

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

    

  

 operations  

  

  

 311,506 

  

  

 68,154 

  

  

 35,379 

  

  

 24,890 

  

  

 (1,354)

  

  

 112,944 

  

  

 71,493    

Income from discontinued operations  

  

  

 134,315 

  

  

 - 

  

  

 46,466 

  

  

 5,303 

  

  

 82,546 

  

  

 - 

  

  

 -    

Net income  

  

  

 445,821 

  

  

 68,154 

  

  

 81,845 

  

  

 30,193 

  

  

 81,192 

  

  

 112,944 

  

  

 71,493    

Net (income) loss attributable to   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

    

  

noncontrolling interests in   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

    

  

consolidated subsidiaries  

  

  

 (1,350)

  

  

 (2,271)

  

  

 - 

  

  

 155 

  

  

 - 

  

  

 - 

  

  

 766    

Net (income) attributable to  

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

    

  

noncontrolling interests in the   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

    

  

Operating Partnership, including  

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

    

  

unit distributions  

  

  

 (31,808)

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 (31,808)   

Net income attributable to  

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

    

  

 Vornado  

  

  

 412,663 

  

  

 65,883 

  

  

 81,845 

  

  

 30,348 

  

  

 81,192 

  

  

 112,944 

  

  

 40,451    

Interest and debt expense(2)

  

  

 198,848 

  

  

 31,994 

  

  

 32,221 

  

  

 24,164 

  

  

 12,907 

  

  

 40,135 

  

  

 57,427    

Depreciation and amortization(2)

  

  

 185,848 

  

  

 45,093 

  

  

 41,899 

  

  

 28,976 

  

  

 11,175 

  

  

 34,673 

  

  

 24,032    

Income tax expense (benefit)(2)

  

  

 66,828 

  

  

 519 

  

  

 848 

  

  

 5 

  

  

 410 

  

  

 69,018 

  

  

 (3,972)   

EBITDA(1)

  

$

 864,187 

  

$

 143,489 

  

$

 156,813 

  

$

 83,493 

  

$

 105,684 

  

$

 256,770 

  

$

 117,938    

____________________

See notes on page 40.

 

38


 
 

  

 

Net Income and EBITDA by Segment for the Three Months Ended March 31, 2011 and 2010 - continued

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

      

(Amounts in thousands)  

For the Three Months Ended March 31, 2010

  

  

   

  

   

  

New York

  

Washington, DC

  

   

  

Merchandise

  

   

  

    

  

  

   

  

Total

  

Office

  

Office

  

Retail

  

Mart

  

Toys

  

Other(3)

Property rentals  

  

$

 516,623 

  

$

 192,604 

  

$

 136,826 

  

$

 95,107 

  

$

 57,657 

  

$

 - 

  

$

 34,429    

Straight-line rent adjustments  

  

  

 20,063 

  

  

 7,794 

  

  

 4,208 

  

  

 6,358 

  

  

 1,102 

  

  

 - 

  

  

 601    

Amortization of acquired below-  

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

    

  

  

market leases, net  

  

  

 15,771 

  

  

 9,205 

  

  

 621 

  

  

 4,516 

  

  

 (121)

  

  

 - 

  

  

 1,550    

Total rentals  

  

  

 552,457 

  

  

 209,603 

  

  

 141,655 

  

  

 105,981 

  

  

 58,638 

  

  

 - 

  

  

 36,580    

Tenant expense reimbursements  

  

  

 91,930 

  

  

 33,252 

  

  

 14,917 

  

  

 37,595 

  

  

 3,977 

  

  

 - 

  

  

 2,189    

Fee and other income:  

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

    

  

Tenant cleaning fees  

  

  

 13,652 

  

  

 20,418 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 (6,766)   

  

Management and leasing fees  

  

  

 9,140 

  

  

 1,457 

  

  

 8,096 

  

  

 224 

  

  

 14 

  

  

 - 

  

  

 (651)   

  

Lease termination fees  

  

  

 4,970 

  

  

 728 

  

  

 446 

  

  

 3,408 

  

  

 388 

  

  

 - 

  

  

 -    

  

Other  

  

  

 13,165 

  

  

 4,410 

  

  

 5,837 

  

  

 740 

  

  

 1,962 

  

  

 - 

  

  

 216    

Total revenues  

  

  

 685,314 

  

  

 269,868 

  

  

 170,951 

  

  

 147,948 

  

  

 64,979 

  

  

 - 

  

  

 31,568    

Operating expenses  

  

  

 274,693 

  

  

 115,049 

  

  

 54,757 

  

  

 53,127 

  

  

 37,210 

  

  

 - 

  

  

 14,550    

Depreciation and amortization  

  

  

 133,793 

  

  

 43,707 

  

  

 36,212 

  

  

 27,797 

  

  

 11,979 

  

  

 - 

  

  

 14,098    

General and administrative  

  

  

 48,630 

  

  

 4,579 

  

  

 5,893 

  

  

 6,941 

  

  

 7,198 

  

  

 - 

  

  

 24,019    

Total expenses  

  

  

 457,116 

  

  

 163,335 

  

  

 96,862 

  

  

 87,865 

  

  

 56,387 

  

  

 - 

  

  

 52,667    

Operating income (loss)  

  

  

 228,198 

  

  

 106,533 

  

  

 74,089 

  

  

 60,083 

  

  

 8,592 

  

  

 - 

  

  

 (21,099)   

Income applicable to Toys  

  

  

 125,870 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 125,870 

  

  

 -    

Income (loss) from partially owned  

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

    

  

 entities  

  

  

 11,344 

  

  

 1,303 

  

  

 (192)

  

  

 1,391 

  

  

 176 

  

  

 - 

  

  

 8,666    

Interest and other investment   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

    

  

income, net  

  

  

 14,704 

  

  

 164 

  

  

 26 

  

  

 3 

  

  

 12 

  

  

 - 

  

  

 14,499    

Interest and debt expense  

  

  

 (135,727)

  

  

 (32,686)

  

  

 (34,157)

  

  

 (17,642)

  

  

 (9,363)

  

  

 - 

  

  

 (41,879)   

Net gain on disposition of wholly  

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

    

  

owned and partially owned assets  

  

  

 3,305 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 796 

  

  

 - 

  

  

 2,509    

Income (loss) before income taxes  

  

  

 247,694 

  

  

 75,314 

  

  

 39,766 

  

  

 43,835 

  

  

 213 

  

  

 125,870 

  

  

 (37,304)   

Income tax expense  

  

  

 (5,580)

  

  

 (474)

  

  

 (686)

  

  

 (35)

  

  

 (194)

  

  

 - 

  

  

 (4,191)   

Income (loss) from continuing  

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

    

  

 operations  

  

  

 242,114 

  

  

 74,840 

  

  

 39,080 

  

  

 43,800 

  

  

 19 

  

  

 125,870 

  

  

 (41,495)   

(Loss) from discontinued operations  

  

  

 (9,570)

  

  

 - 

  

  

 (8,323)

  

  

 (202)

  

  

 (1,045)

  

  

 - 

  

  

 -    

Net income (loss)  

  

  

 232,544 

  

  

 74,840 

  

  

 30,757 

  

  

 43,598 

  

  

 (1,026)

  

  

 125,870 

  

  

 (41,495)   

Net (income) loss attributable to  

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

    

  

noncontrolling interests in   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

    

  

consolidated subsidiaries  

  

  

 (213)

  

  

 (2,292)

  

  

 - 

  

  

 242 

  

  

 - 

  

  

 - 

  

  

 1,837    

Net (income) attributable to   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

    

  

noncontrolling interests in the   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

    

  

Operating Partnership, including  

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

    

  

unit distributions

  

  

 (17,779)

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 (17,779)   

Net income (loss) attributable to  

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

    

  

 Vornado  

  

  

 214,552 

  

  

 72,548 

  

  

 30,757 

  

  

 43,840 

  

  

 (1,026)

  

  

 125,870 

  

  

 (57,437)   

Interest and debt expense(2)

  

  

 196,187 

  

  

 30,992 

  

  

 35,171 

  

  

 19,354 

  

  

 13,009 

  

  

 41,140 

  

  

 56,521    

Depreciation and amortization(2)

  

  

 186,149 

  

  

 42,074 

  

  

 39,841 

  

  

 28,811 

  

  

 13,482 

  

  

 35,327 

  

  

 26,614    

Income tax expense(2)

  

  

 55,706 

  

  

 474 

  

  

 724 

  

  

 35 

  

  

 253 

  

  

 49,710 

  

  

 4,510    

EBITDA(1)

  

$

 652,594 

  

$

 146,088 

  

$

 106,493 

  

$

 92,040 

  

$

 25,718 

  

$

 252,047 

  

$

 30,208    

___________________________

See notes on the following page.

 

39


 
 

  

 

Net Income and EBITDA by Segment for the Three Months Ended March 31, 2011 and 2010 - continued

 

Notes to preceding tabular information:

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

 

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

 

(3)   The components of other EBITDA are summarized below.  The totals for each of the columns below agree to the total EBITDA for the “other” column in the preceding EBITDA by segment reconciliations.

  

  

  

  

  

  

    

For the Three Months

   

  

(Amounts in thousands)  

Ended March 31,

   

  

  

  

  

  

  

    

2011 

   

2010 

   

  

Alexander's  

$

 15,168 

   

$

 14,399 

   

  

Lexington  

  

 11,993 

    

  

 17,848 

    

  

555 California Street  

  

 10,965 

   

  

 11,488 

   

  

LNR (acquired in July 2010)  

  

 9,390 

   

  

 - 

   

  

Industrial warehouses  

  

 356 

   

  

 839 

   

  

Hotel Pennsylvania  

  

 (68) 

   

  

 (447) 

   

  

Other investments  

  

 8,999 

   

  

 9,307 

    

  

   

  

 56,803 

   

  

 53,434 

   

  

Corporate general and administrative expenses (1)

  

 (21,355) 

   

  

 (19,388) 

   

  

Investment income and other, net (1)

  

 14,376 

   

  

 11,514 

   

  

Mezzanine loans loss reversal and net gain on disposition  

  

 82,744 

   

  

 - 

   

  

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

  

 17,163 

   

  

 - 

   

  

Net gain on sale of condominiums  

  

 4,586 

   

  

 2,427 

   

  

Real Estate Fund placement fees  

  

 (3,048) 

   

  

 - 

   

  

Acquisition costs  

  

 (1,523) 

   

  

 - 

   

  

Net income attributable to noncontrolling interests in the Operating Partnership,   

  

  

   

  

  

   

  

  

including unit distributions  

  

 (31,808) 

   

  

 (17,779) 

   

  

  

  

  

  

  

   

$

 117,938 

   

$

 30,208 

   

  

  

  

  

  

  

   

  

  

   

  

  

   

  

  

  

  

  

  

   

  

  

   

  

  

   

  

(1)

  

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

  

  

  

and offsetting liability.

 

 

40


 
 

  

Results of Operations – Three Months Ended March 31, 2011 Compared to March 31, 2010

 

Revenues

Our revenues, which consist of property rentals, tenant expense reimbursements, hotel revenues, trade shows revenues, amortization of acquired below-market leases, net of above-market leases and fee income, were $737,111,000 for the three months ended March 31, 2011, compared to $685,314,000 in the prior year’s quarter, an increase of $51,797,000. Below are the details of the increase (decrease) by segment:

 

(Amounts in thousands)  

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

   

  

  

  

   

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

   

  

  

  

   

  

New York

   

  

Washington, DC

   

  

  

   

  

Merchandise

   

  

  

  

   

Increase (decrease) due to:  

  

Total

   

  

Office

   

  

Office

   

  

Retail

   

  

Mart

   

  

Other

   

Property rentals:  

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

Acquisitions and other  

  

$

 (1,976) 

   

  

$

 - 

   

  

$

 (8,410) 

   

  

$

 4,997 

   

  

$

 - 

   

  

$

 1,437 

   

  

Development  

  

  

 2,366 

   

  

  

 - 

   

  

  

 2,569 

   

  

  

 (203) 

   

  

  

 - 

   

  

  

 - 

   

  

Hotel Pennsylvania  

  

  

 2,014 

   

  

  

 - 

   

  

  

 - 

   

  

  

 - 

   

  

  

 - 

   

  

  

 2,014 

    

  

Trade Shows  

  

  

 2,314 

   

  

  

 - 

   

  

  

 - 

   

  

  

 - 

   

  

  

 2,314 

   

  

  

 - 

   

  

Amortization of acquired below-market   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

leases, net  

  

  

 1,174 

   

  

  

 (1,028) 

   

  

  

 (155) 

   

  

  

 2,444 

   

  

  

 138 

   

  

  

 (225) 

   

  

Leasing activity (see page 37)  

  

  

 12,811 

   

  

  

 1,714 

   

  

  

 3,686 

   

  

  

 5,369 

   

  

  

 2,282 

   

  

  

 (240) 

   

   

  

  

 18,703 

   

  

  

 686 

   

  

  

 (2,310) 

   

  

  

 12,607 

   

  

  

 4,734 

   

  

  

 2,986 

   

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

Tenant expense reimbursements:  

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

Acquisitions/development  

  

  

 (2,217) 

   

  

  

 - 

   

  

  

 (3,821) 

   

  

  

 (1,083) 

   

  

  

 - 

   

  

  

 2,687 

   

  

Operations  

  

  

 1,246 

   

  

  

 624 

   

  

  

 (1,799) 

   

  

  

 2,819 

   

  

  

 46 

   

  

  

 (444) 

   

  

   

  

  

 (971) 

   

  

  

 624 

   

  

  

 (5,620) 

   

  

  

 1,736 

   

  

  

 46 

   

  

  

 2,243 

   

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

Cleveland Medical Mart development  

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

    

  

project  

  

  

 40,699 

   (1) 

  

  

 - 

   

  

  

 - 

   

  

  

 - 

   

  

  

 40,699 

  (1) 

  

  

 - 

    

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

Fee and other income:  

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

BMS cleaning fees  

  

  

 1,771 

   

  

  

 3,012 

   

  

  

 - 

   

  

  

 - 

   

  

  

 - 

   

  

  

 (1,241) 

   (2) 

  

Management and leasing fees  

  

  

 (5,034) 

   

  

  

 38 

    

  

  

 (5,211) 

   (3) 

  

  

 331 

   

  

  

 89 

   

  

  

 (281) 

   

  

Lease cancellation fee income  

  

  

 (3,794) 

   

  

  

 (663) 

   

  

  

 665 

   

  

  

 (3,408) 

   

  

  

 (388) 

   

  

  

 - 

   

  

Other  

  

  

 423 

   

  

  

 353 

   

  

  

 (492) 

    

  

  

 667 

   

  

  

 74 

    

  

  

 (179) 

    

   

  

  

 (6,634) 

   

  

  

 2,740 

   

  

  

 (5,038) 

   

  

  

 (2,410) 

   

  

  

 (225) 

   

  

  

 (1,701) 

   

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

Total increase (decrease) in revenues  

  

$

 51,797 

   

  

$

 4,050 

   

  

$

 (12,968) 

   

  

$

 11,933 

   

  

$

 45,254 

   

  

$

 3,528 

   

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

(1)

  

$38,278 is offset by development costs expensed in the quarter.  See note (5) on page 42.

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

(2)

  

Primarily from the elimination of intercompany fees from operating segments upon consolidation. See note (2) on page 42.

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

(3)

  

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

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

 

 

41


 
 

  

 

Results of Operations – Three Months Ended March 31, 2011 Compared to March 31, 2010 - continued

 

Expenses

Our expenses, which consist primarily of operating, depreciation and amortization and general and administrative expenses, were $538,551,000 for the three months ended March 31, 2011, compared to $457,116,000 in the prior year’s quarter, an increase of $81,435,000. Below are the details of the increase (decrease) by segment:

 

(Amounts in thousands)  

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

   

  

  

  

   

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

   

  

  

  

   

  

New York

   

  

Washington, DC

   

  

  

    

  

Merchandise

   

  

  

  

   

Increase (decrease) due to:  

  

Total

   

  

Office

   

  

Office

   

  

Retail

   

  

Mart

   

  

Other

   

Operating:  

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

Acquisitions and other   

  

$

 1,569 

   

  

$

 - 

   

  

$

 (4,796) 

   

  

$

 3,678 

   

  

$

 - 

   

  

$

 2,687 

   

  

Development/redevelopment  

  

  

 508 

   

  

  

 - 

   

  

  

 (11) 

   

  

  

 519 

   

  

  

 - 

   

  

  

 - 

   

  

Hotel Pennsylvania  

  

  

 1,562 

   

  

  

 - 

   

  

  

 - 

   

  

  

 - 

   

  

  

 - 

   

  

  

 1,562 

   

  

Trade Shows  

  

  

 962 

   

  

  

 - 

   

  

  

 - 

   

  

  

 - 

   

  

  

 962 

   

  

  

 - 

   

  

Operations  

  

  

 11,479 

   

  

  

 6,860 

   (1) 

  

  

 (1,114) 

   

  

  

 3,356 

    

  

  

 3,774 

   

  

  

 (1,397) 

   (2) 

  

   

  

  

 16,080 

   

  

  

 6,860 

   

  

  

 (5,921) 

   

  

  

 7,553 

   

  

  

 4,736 

   

  

  

 2,852 

   

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

Depreciation and amortization:  

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

Acquisitions/development   

  

  

 (3,027) 

   

  

  

 - 

   

  

  

 (4,058) 

   

  

  

 1,031 

   

  

  

 - 

   

  

  

 - 

   

  

Operations    

  

  

 1,461 

   

  

  

 2,439 

   

  

  

 1,530 

   

  

  

 (287) 

   

  

  

 (917) 

   

  

  

 (1,304) 

   

  

  

   

  

  

 (1,566) 

   

  

  

 2,439 

   

  

  

 (2,528) 

   

  

  

 744 

   

  

  

 (917) 

   

  

  

 (1,304) 

   

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

General and administrative:  

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

Mark-to-market of deferred compensation   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

plan liability  (3) 

  

  

 2,189 

   

  

  

 - 

   

  

  

 - 

   

  

  

 - 

   

  

  

 - 

   

  

  

 2,189 

   

  

Real Estate Fund placement fees  

  

  

 3,048 

   

  

  

 - 

   

  

  

 - 

   

  

  

 - 

   

  

  

 - 

   

  

  

 3,048 

   

  

Operations   

  

  

 5,136 

   

  

  

 785 

   

  

  

 644 

   

  

  

 1,081 

   

  

  

 400 

    

  

  

 2,226 

   (4) 

  

   

  

  

 10,373 

   

  

  

 785 

   

  

  

 644 

   

  

  

 1,081 

   

  

  

 400 

   

  

  

 7,463 

   

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

Cleveland Medical Mart development  

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

project (5)

  

  

 38,278 

   

  

  

 - 

   

  

  

 - 

   

  

  

 - 

   

  

  

 38,278 

   (5) 

  

  

 - 

   

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

Acquisition and other costs  

  

  

 18,270 

   

  

  

 - 

   

  

  

 - 

    

  

  

 15,000 

   (6) 

  

  

 3,040 

   

  

  

 230 

   

  

  

   

  

  

  

   

  

  

  

   

  

  

  

    

  

  

  

   

  

  

  

   

  

  

  

   

Total increase (decrease) in expenses  

  

$

 81,435 

   

  

$

 10,084 

   

  

$

 (7,805) 

   

  

$

 24,378 

   

  

$

 45,537 

   

  

$

 9,241 

   

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

(1)

Results from increases in (i) reimbursable operating expenses of $3,980, (ii) BMS operating expenses of $2,720 and (iii) non-reimbursable operating expenses of $160.

(2)

Primarily from the elimination of intercompany fees from operating segments upon consolidation.  See note (2) on page 41.

  

  

  

(3)

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

  

  

  

(4)

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

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

(5)

See note (1) on page 41.

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

   

(6)

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

 

42


 
 

  

 

Results of Operations – Three Months Ended March 31, 2011 Compared to March 31, 2010 - continued

 

Income Applicable to Toys

 

In the three months ended March 31, 2011, we recognized net income of $112,944,000 from our investment in Toys, comprised of $110,821,000 for our 32.7% share of Toys’ net income ($179,839,000 before our share of Toys’ income tax expense) and $2,123,000 of interest and other income.

 

In the three months ended March 31, 2010, we recognized net income of $125,870,000 from our investment in Toys, comprised of $123,840,000 for our 32.7% share of Toys’ net income ($173,550,000 before our share of Toys’ income tax expense) and $2,030,000 of interest and other income.

 

 

Income from Partially Owned Entities

Summarized below are the components of income from partially owned entities for the three months ended March 31, 2011 and 2010.

 

  

  

  

  

   

  

For the Three Months Ended

  

  

  

  

  

   

  

March 31,

  

  

(Amounts in thousands)  

  

2011 

  

2010 

  

  

Equity in Net Income (Loss):  

  

  

  

   

  

  

  

   

  

  

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

  

$

 8,011 

   

  

$

 6,460 

    

  

  

  

  

  

    

  

  

  

   

  

  

  

    

  

  

Lexington - 12.6% share in 2011 and 13.9% share in 2010 of equity in net income (1)

  

  

 2,172 

    

  

  

 6,045 

    

  

  

  

  

  

    

  

  

  

    

  

  

  

    

  

  

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

  

  

 15,254 

    

  

  

 - 

    

  

  

   

  

  

  

   

  

  

  

   

  

  

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

  

  

 (207) 

   

  

  

 1,651 

   

  

  

   

  

  

  

   

  

  

  

   

  

  

Other, net (3)

  

  

 (8,946) 

   

  

  

 (2,812) 

    

  

  

  

  

  

   

  

$

 16,284 

   

  

$

 11,344 

   

  

  

  

  

  

   

  

  

  

   

  

  

  

   

  

  

  

  

  

   

  

  

  

   

  

  

  

   

  

  

 (1) 

The three months ended March 31, 2011 and 2010 include $1,452  and $5,998, respectively, of net gains resulting from Lexington's stock issuances.

  

  

  

  

   

  

  

  

   

  

  

  

   

  

  

 (2) 

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

  

  

  

  

   

  

  

  

   

  

  

  

   

  

  

 (3) 

Represents our equity in net income or loss of partially owned office buildings in New York and Washington, DC, the Monmouth Mall, Verde Realty Operating Partnership, 85 10th Avenue Associates and others.  The three months ended March 31, 2011 includes $9,022 for our share of expense, primarily for straight-line rent reserves and the write-off of tenant improvements in connection with a tenant's bankruptcy at the Warner Building.

 

 

Income from Real Estate Fund

In the three months ended March 31, 2011, we recognized income of $1,080,000 from our Real Estate Fund.

 

 

43


 
 

  

 

 

Results of Operations – Three Months Ended March 31, 2011 Compared to March 31, 2010 - continued

 

Interest and Other Investment Income, net

Interest and other investment income, net (comprised of the mark-to-market of derivative positions in marketable equity securities, interest income on mezzanine loans receivable, other interest income and dividend income) was $117,108,000 in the three months ended March 31, 2011, compared to $14,704,000 in the prior year’s quarter, an increase of $102,404,000. This increase resulted from:

 

  

  

  

  

  

  

  

   

  

  

(Amounts in thousands)

  

  

  

   

  

  

Mezzanine loans loss reversal and net gain on disposition

  

  

$

 82,744 

   

  

  

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

  

  

  

 17,163 

   

  

  

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

  

  

  

   

  

  

  

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

  

  

 2,189 

   

  

  

Other, net

  

  

 308 

   

  

  

  

  

  

  

$

 102,404 

   

  

 

 

Interest and Debt Expense

Interest and debt expense was $134,765,000 in the three months ended March 31, 2011, compared to $135,727,000 in the prior year’s quarter, a decrease of $962,000.  This decrease was primarily due to savings of (i) $6,196,000 applicable to the acquisition, retirement and repayment of our convertible senior debentures and senior unsecured notes, (ii) $4,579,000 from the deconsolidation of the Warner Building resulting from the sale of a 45% interest in October 2010, and (iii) $3,950,000 from the repayment of the Springfield Mall mortgage at a discount in December 2010, partially offset by (iv) $6,645,000 from the issuance of $660,000,000 of cross-collateralized debt secured by 40 of our strip shopping centers, (v) $5,057,000 from the issuance of $500,000,000 of senior unsecured notes in March 2010, and (vi) $1,262,000 from the consolidation of the San Jose Shopping Center resulting from our acquisition in October 2010 of the 55% interest we did not previously own.

 

 

Net Gain on Disposition of Wholly Owned and Partially Owned Assets

Net gain on disposition of wholly owned and partially owned assets was $6,677,000 in the three months ended March 31, 2011, compared to $3,305,000 in the prior year’s quarter and resulted primarily from the sales of residential condominiums and marketable securities.

 

 

Income Tax Expense

Income tax expense was $6,382,000 in the three months ended March 31, 2011, compared to $5,580,000 in the prior year’s quarter, an increase of $802,000.  This increase resulted primarily from higher taxable income of our taxable REIT subsidiaries.

 

 

44


 
 

  

 

Results of Operations – Three Months Ended March 31, 2011 Compared to March 31, 2010 - continued

 

Income (Loss) from Discontinued Operations

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

 

  

  

  

   

  

  

   

  

  

   

  

  

  

  

   

  

For the Three Months Ended

  

  

  

  

   

  

March 31,

  

  

(Amounts in thousands)  

  

2011 

  

2010 

  

  

Total revenues  

  

$

 5,987   

  

$

 11,021   

  

  

Total expenses  

  

  

 6,744   

  

  

 10,535   

  

  

   

  

  

 (757)  

  

  

 486   

  

  

Net gain on extinguishment of High Point debt  

  

  

 83,907   

  

  

 -   

  

  

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

   

  

  

 45,862   

  

  

 -   

  

  

Net gain on sales of other real estate  

  

  

 5,303   

  

  

 -   

  

  

Litigation loss accrual  

  

  

 -   

  

  

 (10,056)  

  

  

Income (loss) from discontinued operations  

  

$

 134,315   

  

$

 (9,570)  

  

 

 

Net Income Attributable to Noncontrolling Interests in Consolidated Subsidiaries

 

Net income attributable to noncontrolling interests in consolidated subsidiaries was $1,350,000 in the three months ended March 31, 2011, compared to $213,000 in the prior year’s quarter, an increase of $1,137,000.  This increase resulted primarily from higher income allocated to the noncontrolling interests at 555 California Street.

 

 

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

 

 Net income attributable to noncontrolling interests in the Operating Partnership, including unit distributions for the three months ended March 31, 2011 and 2010 is comprised of (i) allocations of income to redeemable noncontrolling interests of $27,305,000 and $15,215,000, respectively, (ii) preferred unit distributions of the Operating Partnership of $4,503,000 and $4,718,000, respectively, and (iii) a net gain of $2,154,000 on the redemption of a portion of the Series D-12 perpetual preferred units in the three months ended March 31, 2010.  The increase of $12,090,000 in allocations of income to redeemable noncontrolling interests resulted primarily from higher net income subject to allocation to unitholders.   

 

 

Preferred Share Dividends

Preferred share dividends were $13,448,000 for the three months ended March 31, 2011, compared to $14,267,000 for the prior year’s quarter, a decrease of $819,000.  This decrease resulted from the redemption of all of the Series D-10 preferred shares in September 2010.

 

 

45


 
 

  

 

Results of Operations – Three Months Ended March 31, 2011 Compared to March 31, 2010 - continued

 

Same Store EBITDA

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

 

Below are the same store EBITDA results on a GAAP and cash basis for each of our segments for the three months ended March 31, 2011, compared to the three months ended March 31, 2010.

 

  

  

  

New York

  

Washington, DC

  

  

  

  

Merchandise

(Amounts in thousands)

Office

  

Office

  

Retail

  

 Mart 

EBITDA for the three months ended March 31, 2011

$

 143,489 

  

$

 156,813 

  

$

 83,493 

  

$

 105,684 

  

Add-back: non-property level overhead

  

  

  

  

  

  

  

  

  

  

  

  

  

expenses included above

  

 5,364 

  

  

 6,537 

  

  

 8,022 

  

  

 7,598 

  

Less: EBITDA from acquisitions, dispositions

  

  

  

  

  

  

  

  

  

  

  

  

  

and other non-operating income or expenses

  

 (1,325) 

  

  

 (51,629) 

  

  

 5,982 

  

  

 (83,798) 

GAAP basis same store EBITDA for the three months

  

  

  

  

  

  

  

  

  

  

  

  

  

ended March 31, 2011

  

 147,528 

  

  

 111,721 

  

  

 97,497 

  

  

 29,484 

  

Less: Adjustments for straight-line rents,

  

  

  

  

  

  

  

  

  

  

  

  

  

amortization of below-market leases, net and other

  

  

  

  

  

  

  

  

  

  

  

  

  

non-cash adjustments

  

 (14,037) 

  

  

 469 

  

  

 (6,834) 

  

  

 (807) 

Cash basis same store EBITDA for the three months

  

  

  

  

  

  

  

  

  

  

  

  

  

ended March 31, 2011

$

 133,491 

  

$

 112,190 

  

$

 90,663 

  

$

 28,677 

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

EBITDA for the three months ended March 31, 2010

$

 146,088 

  

$

 106,493 

  

$

 92,040 

  

$

 25,718 

  

Add-back: non-property level overhead

  

  

  

  

  

  

  

  

  

  

  

  

  

expenses included above

  

 4,579 

  

  

 5,893 

  

  

 6,941 

  

  

 7,198 

  

Less: EBITDA from acquisitions, dispositions

  

  

  

  

  

  

  

  

  

  

  

  

  

and other non-operating income or expenses

  

 (624) 

  

  

 (6,091) 

  

  

 (5,116) 

  

  

 (5,776) 

GAAP basis same store EBITDA for the three months

  

  

  

  

  

  

  

  

  

  

  

  

  

ended March 31, 2010

  

 150,043 

  

  

 106,295 

  

  

 93,865 

  

  

 27,140 

  

Less: Adjustments for straight-line rents,

  

  

  

  

  

  

  

  

  

  

  

  

  

amortization of below-market leases, net and other

  

  

  

  

  

  

  

  

  

  

  

  

  

non-cash adjustments 

  

 (15,608) 

  

  

 (4,992) 

  

  

 (9,029) 

  

  

 (981) 

Cash basis same store EBITDA for the three months

  

  

  

  

  

  

  

  

  

  

  

  

  

ended March 31, 2010

$

 134,435 

  

$

 101,303 

  

$

 84,836 

  

$

 26,159 

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

(Decrease) increase in GAAP basis same store EBITDA for

  

  

  

  

  

  

  

  

  

  

  

  

  

the three months ended March 31, 2011 over the

  

  

  

  

  

  

  

  

  

  

  

  

  

three months ended March 31, 2010

$

 (2,515) 

  

$

 5,426 

  

$

 3,632 

  

$

 2,344 

  

  

  

  

  

  

  

  

  

  

  

  

  

  

(Decrease) increase in Cash basis same store EBITDA for

  

  

  

  

  

  

  

  

  

  

  

  

  

the three months ended March 31, 2011 over the

  

  

  

  

  

  

  

  

  

  

  

  

  

three months ended March 31, 2010

$

 (944) 

  

$

 10,887 

  

$

 5,827 

  

$

 2,518 

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

% (decrease) increase in GAAP basis same store EBITDA

  

 (1.7%) 

  

  

 5.1% 

  

  

 3.9% 

  

  

 8.6% 

  

  

  

  

  

  

  

  

  

  

  

  

  

  

% (decrease) increase in Cash basis same store EBITDA

  

 (0.7%) 

  

  

 10.7% 

  

  

 6.9% 

  

  

 9.6% 

 

 

46


 
 

SUPPLEMENTAL INFORMATION

 

Three Months Ended March 31, 2011 vs. Three Months Ended December 31, 2010

 

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

 

Below are the same store EBITDA results on a GAAP and cash basis for each of our segments for the three months ended March 31, 2011, compared to the three months ended December 31, 2010.

 

  

  

   

New York

  

Washington, DC

  

  

  

  

Merchandise

(Amounts in thousands)  

Office

  

Office

  

Retail

  

 Mart 

EBITDA for the three months ended March 31, 2011  

$

 143,489 

  

$

 156,813 

  

$

 83,493 

  

$

 105,684 

  

Add-back: non-property level overhead expenses  

  

  

  

  

  

  

  

  

  

  

  

  

  

included above  

  

 5,364 

  

  

 6,537 

  

  

 8,022 

  

  

 7,598 

  

Less: EBITDA from acquisitions, dispositions   

  

  

  

  

  

  

  

  

  

  

  

  

  

and other non-operating income or expenses  

  

 (1,070) 

  

  

 (51,629) 

  

  

 8,177 

  

  

 (82,919) 

GAAP basis same store EBITDA for the three months  

  

  

  

  

  

  

  

  

  

  

  

  

ended March 31, 2011  

  

 147,783 

  

  

 111,721 

  

  

 99,692 

  

  

 30,363 

  

Less: Adjustments for straight-line rents, amortization of  

  

  

  

  

  

  

  

  

  

  

  

  

  

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

  

 (14,038) 

  

  

 469 

  

  

 (9,029) 

  

  

 (807) 

Cash basis same store EBITDA for the three months  

  

  

  

  

  

  

  

  

  

  

  

  

ended March 31, 2011  

$

 133,745 

  

$

 112,190 

  

$

 90,663 

  

$

 29,556 

  

  

   

  

  

  

  

  

  

  

  

  

  

  

  

  

   

  

  

  

  

  

  

  

  

  

  

  

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

$

 139,451 

  

$

 163,581 

  

$

 136,535 

  

$

 9,124 

  

Add-back: non-property level overhead expenses  

  

  

  

  

  

  

  

  

  

  

  

  

  

included above   

  

 4,761 

  

  

 7,385 

  

  

 7,019 

  

  

 6,534 

  

Less: EBITDA from acquisitions, dispositions   

  

  

  

  

  

  

  

  

  

  

  

  

  

and other non-operating income or expenses  

  

 9,229 

  

  

 (61,441) 

  

  

 (41,747) 

  

  

 13,043 

GAAP basis same store EBITDA for the three months  

  

  

  

  

  

  

  

  

  

  

  

  

ended December 31, 2010  

  

 153,441 

  

  

 109,525 

  

  

 101,807 

  

  

 28,701 

  

Less: Adjustments for straight-line rents, amortization of  

  

  

  

  

  

  

  

  

  

  

  

  

  

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

  

 (17,930) 

  

  

 183 

  

  

 (11,524) 

  

  

 (858) 

Cash basis same store EBITDA for the three months  

  

  

  

  

  

  

  

  

  

  

  

  

ended December 31, 2010  

$

 135,511 

  

$

 109,708 

  

$

 90,283 

  

$

 27,843 

  

  

   

  

  

  

  

  

  

  

  

  

  

  

  

  

   

  

  

  

  

  

  

  

  

  

  

  

(Decrease) increase in GAAP basis same store EBITDA for   

  

  

  

  

  

  

  

  

  

  

  

  

the three months ended March 31, 2011 over the  

  

  

  

  

  

  

  

  

  

  

  

  

three months ended December 31, 2010  

$

 (5,658) 

  

$

 2,196 

  

$

 (2,115) 

  

$

 1,662 

  

  

   

  

  

  

  

  

  

  

  

  

  

  

(Decrease) increase in Cash basis same store EBITDA for   

  

  

  

  

  

  

  

  

  

  

  

  

the three months ended March 31, 2011 over the  

  

  

  

  

  

  

  

  

  

  

  

  

three months ended December 31, 2010  

$

 (1,766) 

  

$

 2,482 

  

$

 380 

  

$

 1,713 

  

  

   

  

  

  

  

  

  

  

  

  

  

  

  

  

   

  

  

  

  

  

  

  

  

  

  

  

% (decrease) increase in GAAP basis same store EBITDA  

  

 (3.7%) 

  

  

 2.0% 

  

  

 (2.1%) 

  

  

 5.8% 

  

  

   

  

  

  

  

  

  

  

  

  

  

  

% (decrease) increase in Cash basis same store EBITDA  

  

 (1.3%) 

  

  

 2.3% 

  

  

 0.4% 

  

  

 6.2% 

  

  

   

  

  

  

  

  

  

  

  

  

  

  

  

  

   

  

  

  

  

  

  

  

  

  

  

  

 (1) 

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

  

  

   

  

  

  

  

  

  

  

  

  

  

  

  

  

   

New York

  

Washington, DC

  

  

  

Merchandise

(Amounts in thousands)  

Office

  

Office

  

Retail

  

 Mart 

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

  

  

  

  

  

  

  

  

  

  

  

  

ended December 31, 2010  

$

 63,985 

  

$

 92,542 

  

$

 83,157 

  

$

 (19,191) 

Interest and debt expense  

  

 31,805 

  

  

 31,819 

  

  

 24,378 

  

  

 16,009 

Depreciation and amortization  

  

 43,164 

  

  

 38,354 

  

  

 29,000 

  

  

 12,015 

Income tax expense  

  

 497 

  

  

 866 

  

  

 - 

  

  

 291 

EBITDA for the three months ended December 31, 2010  

$

 139,451 

  

$

 163,581 

  

$

 136,535 

  

$

 9,124 

 

47


 
 

  

LIQUIDITY AND CAPITAL RESOURCES

We anticipate that cash flow from continuing operations over the next twelve months will be adequate to fund our business operations, cash distributions to unitholders of the Operating Partnership, cash dividends to shareholders, debt amortization and recurring capital expenditures.  Capital requirements for development expenditures and acquisitions (excluding Fund acquisitions) may require funding from borrowings and/or equity offerings.  In addition, the Fund has aggregate unfunded equity commitments of $567,699,000 for acquisitions, including $141,924,000 from us.  We may from time to time purchase or retire outstanding debt securities.  Such purchases, if any, will depend on prevailing market conditions, liquidity requirements and other factors.  The amounts involved in connection with these transactions could be material to our consolidated financial statements.

 

Property rental income is our primary source of cash flow and is dependent upon the occupancy and rental rates of our properties.   Other sources of liquidity to fund cash requirements include proceeds from debt financings, including mortgage loans, senior unsecured borrowings, and our revolving credit facilities; proceeds from the issuance of common and preferred equity; and asset sales.  Our cash requirements include property operating expenses, capital improvements, tenant improvements, leasing commissions, dividends to shareholders, distributions to unitholders of the Operating Partnership, as well as acquisition and development costs. 

 

 

Cash Flows for the Three Months Ended March 31, 2011

Our cash and cash equivalents were $618,361,000 at March 31, 2011, a $72,428,000 decrease over the balance at December 31, 2010.  This decrease was primarily due to cash flows from financing activities as discussed below.  

 

Our consolidated outstanding debt was $10,631,396,000 at March 31, 2011, a $262,243,000 decrease over the balance at December 31, 2010.  As of March 31, 2011 and December 31, 2010, $374,000,000 and $874,000,000, respectively, was outstanding under our revolving credit facilities.  During the remainder of 2011 and 2012, $1,435,142,000 and $1,715,165,000 of our outstanding debt matures, respectively. We may refinance our maturing debt as it comes due or choose to repay it.

 

Cash flows provided by operating activities of $196,102,000 was comprised of (i) net income of $445,821,000 and (ii) distributions of income from partially owned entities of $25,921,000, partially offset by (iii) $256,647,000 of non-cash adjustments, which include depreciation and amortization expense, the effect of straight-lining of rental income and equity in net income of partially owned entities, and (iv) the net change in operating assets and liabilities of $18,993,000, including $85,536,000 related to Real Estate Fund investments.

 

Net cash provided by investing activities of $60,421,000 was comprised of (i) $192,523,000 of capital distributions from partially owned entities, (ii) $127,199,000 of proceeds from sales of real estate and related investments, (iii) $73,608,000 of proceeds from sales and repayments of mezzanine loans (iv) $15,162,000 of proceeds from sales of, and return of investments in, marketable securities and (v) changes in restricted cash of $12,174,000, partially offset by (vi) $316,129,000 of investments in partially owned entities, (vii) $30,281,000 of additions to real estate, (viii) $10,994,000 of development costs and construction in progress and (ix) $2,841,000 of investments in mezzanine loans receivable and other.

 

Net cash used in financing activities of $328,951,000 was comprised of (i) $1,197,312,000 for the repayments of borrowings, (ii) $126,936,000 of dividends paid on common shares, (iii) $23,639,000 of distributions to noncontrolling interests, (iv) $13,559,000 of dividends paid on preferred shares, (v) $12,161,000 of debt issuance and other costs and (vi) $570,000 for the repurchase of shares related to stock compensation agreements and related tax holdings, partially offset by (vii) $937,518,000 of proceeds from borrowings, (viii) $92,238,000 of contributions from noncontrolling interests and (ix) $15,470,000 of proceeds received from exercise of employee share options

 

 

48


 
 

  

 

LIQUIDITY AND CAPITAL RESOURCES – continued

 

Cash Flows for the Three Months Ended March 31,  2010

 

Our cash and cash equivalents were $788,940,000 at March 31, 2010, a $253,461,000 increase over the balance at December 31, 2009.  This increase resulted from $288,048,000 of net cash provided by operating activities and $7,342,000 of net cash provided by investing activities, partially offset by $41,929,000 of net cash used in financing activities.

 

Our consolidated outstanding debt was $10,838,141,000 at March 31, 2010, a $152,438,000 increase over the balance at December 31, 2009.  This increase was primarily due to the public offering of $500,000,000 of 4.25% senior unsecured notes in March 2010.

 

Our share of debt of unconsolidated subsidiaries was $2,822,363,000 at March 31, 2010, a $327,277,000 decrease from the balance at December 31, 2009.   

 

Cash flows provided by operating activities of $288,048,000 was comprised of (i) net income of $232,544,000, (ii) distributions of income from partially owned entities of $7,123,000 and (iii) the net change in operating assets and liabilities of $73,171,000, partially offset by (iv) $24,790,000 of non-cash adjustments, including depreciation and amortization expense, non-cash impairment losses, the effect of straight-lining of rental income and equity in net income of partially owned entities.

 

Net cash provided by investing activities of $7,342,000 was primarily comprised of (i) proceeds received from repayment of mezzanine loans receivable of $101,839,000, (ii) proceeds from the sale of real estate and related investments of $38,879,000, (iii) proceeds from maturing short-term investments of $25,000,000 and (iv) distributions of capital from partially owned entities of $7,617,000, partially offset by (v) development and redevelopment expenditures of $37,598,000, (vi) investments in partially owned entities of $36,741,000, (vii) additions to real estate of $30,247,000, (viii) investments in mezzanine loans receivable and other of $28,873,000, (ix) purchases of marketable equity securities of $13,917,000, (x) restricted cash of $13,899,000 and (xi) deposits in connection with real estate acquisitions of $5,003,000.

 

Net cash used in financing activities of $41,929,000 was primarily comprised of (i) proceeds from borrowings of $660,335,000, partially offset by, (ii) repayments of borrowings, including the purchase of our senior unsecured notes, of $525,246,000, (iii) dividends paid on common shares of $117,958,000, (iv) repurchase of shares related to stock compensation arrangements and related tax withholdings of $25,323,000, (v) dividends paid on preferred shares of $14,267,000 and (vi) distributions to noncontrolling interests of $13,082,000.

 

 

49


 
 

  

 

LIQUIDITY AND CAPITAL RESOURCES - continued

 

Capital Expenditures

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

 

Below are the details of capital expenditures, leasing commissions and development and redevelopment expenditures and a reconciliation of total expenditures on an accrual basis to the cash expended in the three months ended March 31, 2011.

 

  

  

  

  

  

   

  

New York

  

Washington, DC

  

  

   

  

Merchandise

  

  

  

(Amounts in thousands)

Total

  

Office

  

Office

  

Retail

  

Mart

  

Other

Capital Expenditures (accrual basis):

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

  

Expenditures to maintain assets

$

 7,051   

  

$

 3,002   

  

$

 1,069   

  

$

 645   

  

$

 1,577   

  

$

 758 

Tenant improvements

  

 13,390   

  

  

 8,310   

  

  

 3,632   

  

  

 1,033   

  

  

 415   

  

  

 - 

Leasing commissions

  

 3,392   

  

  

 1,959   

  

  

 963   

  

  

 470   

  

  

 -   

  

  

 - 

Non-recurring capital expenditures

  

 11,881   

  

  

 9,237   

  

  

 -   

  

  

 1,967   

  

  

 -   

  

  

 677 

Total capital expenditures and leasing

  

    

  

  

    

  

  

    

  

  

    

  

  

    

  

  

  

  

commissions (accrual basis)

  

 35,714   

  

  

 22,508   

  

  

 5,664   

  

  

 4,115   

  

  

 1,992   

  

  

 1,435 

Adjustments to reconcile to cash basis:

  

    

  

  

    

  

  

    

  

  

    

  

  

    

  

  

  

  

  

Expenditures in the current year 

  

    

  

  

    

  

  

    

  

  

    

  

  

    

  

  

  

  

  

  

 applicable to prior periods

  

 27,096   

  

  

 13,804   

  

  

 3,608   

  

  

 4,802   

  

  

 4,564   

  

  

 318 

  

  

Expenditures to be made in future

  

    

  

  

    

  

  

    

  

  

    

  

  

    

  

  

  

  

  

  

periods for the current period

  

 (25,799)   

  

  

 (17,632)   

  

  

 (4,297)   

  

  

 (3,470)   

  

  

 (400)   

  

  

 - 

Total capital expenditures and leasing

  

    

  

  

    

  

  

    

  

  

    

  

  

    

  

  

  

  

 commissions (cash basis)

$

 37,011   

  

$

 18,680   

  

$

 4,975   

  

$

 5,447   

  

$

 6,156   

  

$

 1,753 

  

  

  

  

  

    

  

  

   

  

  

   

  

  

   

  

  

   

  

  

  

Tenant improvements and leasing commissions:

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

  

  

Per square foot per annum

$

 2.74 

  

$

 4.17 

  

$

 3.17 

  

$

 1.08 

  

$

 0.44 

  

$

 - 

  

Percentage of initial rent

  

7.0%

  

  

8.3%

  

  

8.4%

  

  

3.4%

  

  

1.2%

  

  

 - 

  

  

  

  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

  

Development and Redevelopment

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

  

  

 Expenditures:  

  

   

  

  

   

  

  

   

  

  

   

  

  

   

  

  

  

Bergen Town Center

$

 3,034 

  

$

 - 

  

$

 - 

  

$

 3,034 

  

$

 - 

  

$

 - 

Green Acres Mall

  

 2,982 

  

  

 - 

  

  

 - 

  

  

 2,982 

  

  

 - 

  

  

 - 

Poughkeepsie, New York

  

 535 

  

  

 - 

  

  

 - 

  

  

 535 

  

  

 - 

  

  

 - 

Other

  

 4,443 

  

  

 1,009 

  

  

 1,763 

  

  

 1,249 

  

  

 155 

  

  

 267 

  

  

  

  

$

 10,994 

  

$

 1,009 

  

$

 1,763 

  

$

 7,800 

  

$

 155 

  

$

 267 

 

 

50


 
 

  

 

LIQUIDITY AND CAPITAL RESOURCES - continued

 

Below are the details of capital expenditures, leasing commissions and development and redevelopment expenditures and a reconciliation of total expenditures on an accrual basis to the cash expended in the three months ended March 31, 2010.

 

  

  

  

  

  

  

  

New York

  

Washington, DC

  

  

  

  

Merchandise

  

  

  

(Amounts in thousands)

Total

  

Office

  

Office

  

Retail

  

Mart

  

Other

Capital Expenditures (accrual basis):

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

Expenditures to maintain assets

$

 7,784 

  

$

 4,505 

  

$

 1,118 

  

$

 383 

  

$

 614 

  

$

 1,164 

Tenant improvements

  

 19,673 

  

  

 11,686 

  

  

 1,991 

  

  

 3,944 

  

  

 2,052 

  

  

 - 

Leasing commissions

  

 4,565 

  

  

 3,221 

  

  

 795 

  

  

 505 

  

  

 - 

  

  

 44 

Non-recurring capital expenditures

  

 421 

  

  

 - 

  

  

 - 

  

  

 104 

  

  

 - 

  

  

 317 

Total capital expenditures and leasing

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

commissions (accrual basis)

  

 32,443 

  

  

 19,412 

  

  

 3,904 

  

  

 4,936 

  

  

 2,666 

  

  

 1,525 

Adjustments to reconcile to cash basis:

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

Expenditures in the current year 

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

 applicable to prior periods

  

 26,340 

  

  

 16,928 

  

  

 4,174 

  

  

 2,927 

  

  

 821 

  

  

 1,490 

  

  

Expenditures to be made in future

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

periods for the current period

  

 (20,884) 

  

  

 (11,017) 

  

  

 (2,361) 

  

  

 (4,553) 

  

  

 (1,355) 

  

  

 (1,598) 

Total capital expenditures and leasing

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

 commissions (cash basis)

$

 37,899 

  

$

 25,323 

  

$

 5,717 

  

$

 3,310 

  

$

 2,132 

  

$

 1,417 

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

Tenant improvements and leasing commissions:

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

Per square foot per annum

$

 3.14 

  

$

 6.86 

  

$

 2.05 

  

$

 2.23 

  

$

 0.94 

  

$

 - 

  

Percentage of initial rent

  

9.8%

  

  

15.3%

  

  

5.1%

  

  

10.6%

  

  

3.9%

  

  

 - 

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

Development and Redevelopment

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

 Expenditures:  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

West End 25

$

 4,521 

  

$

 - 

  

$

 4,521 

  

$

 - 

  

$

 - 

  

$

 - 

1540 Broadway

  

 4,030 

  

  

 - 

  

  

 - 

  

  

 4,030 

  

  

 - 

  

  

 - 

Bergen Town Center

  

 4,003 

  

  

 - 

  

  

 - 

  

  

 4,003 

  

  

 - 

  

  

 - 

220 20th Street

  

 3,762 

  

  

 - 

  

  

 3,762 

  

  

 - 

  

  

 - 

  

  

 - 

Residential condominiums

  

 2,982 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 2,982 

North Bergen, New Jersey

  

 2,688 

  

  

 - 

  

  

 - 

  

  

 2,688 

  

  

 - 

  

  

 - 

Poughkeepsie, New York

  

 1,548 

  

  

 - 

  

  

 - 

  

  

 1,548 

  

  

 - 

  

  

 - 

Beverly Connection

  

 1,528 

  

  

 - 

  

  

 - 

  

  

 1,528 

  

  

 - 

  

  

 - 

Garfield, New Jersey

  

 1,344 

  

  

 - 

  

  

 - 

  

  

 1,344 

  

  

 - 

  

  

 - 

Other

  

 11,192 

  

  

 1,899 

  

  

 4,419 

  

  

 1,592 

  

  

 321 

  

  

 2,961 

  

  

  

  

$

 37,598 

  

$

 1,899 

  

$

 12,702 

  

$

 16,733 

  

$

 321 

  

$

 5,943 

 

 

51


 
 

  

LIQUIDITY AND CAPITAL RESOURCES – continued

 

Insurance

 

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

 

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

 

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

 

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

 

Other Commitments and Contingencies

 

Our mortgage loans are non-recourse to us.  However, in certain cases we have provided guarantees or master leased tenant space.  These guarantees and master leases terminate either upon the satisfaction of specified circumstances or repayment of the underlying loans.  As of March 31, 2011, the aggregate dollar amount of these guarantees and master leases is approximately $203,250,000.

 

At March 31, 2011, $12,423,000 of letters of credit were outstanding under one of our revolving credit facilities.  Our credit facilities contain financial covenants that require us to maintain minimum interest coverage and maximum debt to market capitalization ratios, and provide for higher interest rates in the event of a decline in our ratings below Baa3/BBB. Our credit facilities also contain customary conditions precedent to borrowing, including representations and warranties, and also contain customary events of default that could give rise to accelerated repayment, including such items as failure to pay interest or principal.

 

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

 

We are committed to fund additional capital to certain of our partially owned entities aggregating approximately $195,255,000, of which $141,924,000 is committed to the Fund.  In addition, we have agreed in principle to contribute up to $52,000,000 to a new investment management fund which will be managed by LNR.

 

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

 

 

52


 
 

  

LIQUIDITY AND CAPITAL RESOURCES - continued

 

Other Commitments and Contingencies - continued

 

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

 

 

Litigation

 

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

 

On January 8, 2003, Stop & Shop filed a complaint with the United States District Court for the District of New Jersey (“USDC-NJ”) claiming that we had no right to reallocate and therefore continue to collect the $5,000,000 of annual rent from Stop & Shop pursuant to the Master Agreement and Guaranty, because of the expiration of the East Brunswick, Jersey City, Middletown, Union and Woodbridge leases to which the $5,000,000 of additional rent was previously allocated. Stop & Shop asserted that a prior order of the Bankruptcy Court for the Southern District of New York dated February 6, 2001, as modified on appeal to the District Court for the Southern District of New York on February 13, 2001, froze our right to reallocate which effectively terminated our right to collect the additional rent from Stop & Shop. On March 3, 2003, after we moved to dismiss for lack of jurisdiction, Stop & Shop voluntarily withdrew its complaint. On March 26, 2003, Stop & Shop filed a new complaint in New York State Supreme Court, asserting substantially the same claims as in its USDC-NJ complaint. We removed the action to the United States District Court for the Southern District of New York. In January 2005, that court remanded the action to the New York State Supreme Court. On February 14, 2005, we served an answer in which we asserted a counterclaim seeking a judgment for all the unpaid additional rent accruing through the date of the judgment and a declaration that Stop & Shop will continue to be liable for the additional rent as long as any of the leases subject to the Master Agreement and Guaranty remain in effect. On May 17, 2005, we filed a motion for summary judgment. On July 15, 2005, Stop & Shop opposed our motion and filed a cross-motion for summary judgment. On December 13, 2005, the Court issued its decision denying the motions for summary judgment. Both parties appealed the Court’s decision and on December 14, 2006, the Appellate Court division issued a decision affirming the Court’s decision.  On January 16, 2007, we filed a motion for the reconsideration of one aspect of the Appellate Court’s decision which was denied on March 13, 2007.  A trial was held in November 2010 and closing arguments were held in March 2011.  We intend to continue to vigorously pursue our claims against Stop & Shop. 

 

 

53


 
 

  

FUNDS FROM OPERATIONS (“FFO”)

FFO is computed in accordance with the definition adopted by the Board of Governors of the National Association of Real Estate Investment Trusts (“NAREIT”). NAREIT defines FFO as GAAP net income or loss adjusted to exclude net gain from sales of depreciated real estate assets, depreciation and amortization expense from real estate assets, extraordinary items and other specified non-cash items, including the pro-rata share of such adjustments of unconsolidated subsidiaries.  FFO and FFO per diluted share are used by management, investors and analysts to facilitate meaningful comparisons of operating performance between periods and among our peers because it excludes the effect of real estate depreciation and amortization and net gains on sales, which are based on historical costs and implicitly assume that the value of real estate diminishes predictably over time, rather than fluctuating based on existing market conditions.  FFO does not represent cash generated from operating activities and is not necessarily indicative of cash available to fund cash requirements and should not be considered as an alternative to net income as a performance measure or cash flows as a liquidity measure.  FFO may not be comparable to similarly titled measures employed by other companies.  The calculations of both the numerator and denominator used in the computation of income per share are disclosed in footnote 17 – Income per Share, in the notes to our consolidated financial statements on page 26 of this Quarterly Report on Form 10-Q.

 

FFO for the Three Months Ended March 31, 2011 and 2010

 

FFO attributable to common shareholders plus assumed conversions was $505,931,000, or $2.64 per diluted share for the three months ended March 31, 2011, compared to $353,826,000, or $1.87 per diluted share for the prior year’s quarter.  Details of certain items that affect comparability are discussed in the financial results summary of our “Overview.”

 

  

  

  

For The Three Months

(Amounts in thousands, except per share amounts)

  

  

Ended March 31,

Reconciliation of our net income to FFO:

  

  

  

  

2011 

  

2010 

Net income attributable to Vornado

  

  

  

  

  

  

$

 412,663 

  

$

 214,552 

Depreciation and amortization of real property

  

  

  

  

  

  

  

 124,321 

  

  

 127,614 

Net gain on sales of real estate

  

  

  

  

  

  

  

 (51,165) 

  

  

 - 

Proportionate share of adjustments to equity in net income of Toys, to arrive at FFO:

  

  

  

  

  

  

  

  

  

  

  

Depreciation and amortization of real property

  

  

  

  

  

  

  

 17,729 

  

  

 17,501 

  

  

Income tax effect of above adjustment

  

  

  

  

  

  

  

 (6,205) 

  

  

 (6,125) 

Proportionate share of adjustments to equity in net income of partially owned entities,

  

  

  

  

  

  

  

  

  

  

excluding Toys, to arrive at FFO:

  

  

  

  

  

  

  

  

  

  

  

  

  

Depreciation and amortization of real property

  

  

  

  

  

  

  

 23,969 

  

  

 19,541 

  

  

Net gain on sales of real estate

  

  

  

  

  

  

  

 (1,649) 

  

  

 (307) 

Noncontrolling interests' share of above adjustments

  

  

  

  

  

  

  

 (6,850) 

  

  

 (11,171) 

FFO

  

  

  

  

  

  

  

 512,813 

  

  

 361,605 

Preferred share dividends

  

  

  

  

  

  

  

 (13,448) 

  

  

 (14,267) 

FFO attributable to common shareholders

  

  

  

  

  

  

  

 499,365 

  

  

 347,338 

Interest on 3.875% exchangeable senior debentures

  

  

  

  

  

  

  

 6,534 

  

  

 6,447 

Convertible preferred share dividends

  

  

  

  

  

  

  

 32 

  

  

 41 

FFO attributable to common shareholders plus assumed conversions

  

  

  

  

  

  

$

 505,931 

  

$

 353,826 

  

  

  

  

  

  

  

  

  

  

  

  

Reconciliation of Weighted Average Shares

  

  

  

  

  

  

  

  

  

  

  

  

Weighted average common shares outstanding

  

  

  

  

  

  

  

 183,988 

  

  

 181,542 

  

Effect of dilutive securities:

  

  

  

  

  

  

  

  

  

  

  

  

  

3.875% exchangeable senior debentures

  

  

  

  

  

  

  

 5,736 

  

  

 5,736 

  

  

Employee stock options and restricted share awards

  

  

  

  

  

  

  

 1,749 

  

  

 1,831 

  

  

Convertible preferred shares

  

  

  

  

  

  

  

 56 

  

  

 72 

  

Denominator for FFO per diluted share

  

  

  

  

  

  

  

 191,529 

  

  

 189,181 

  

  

  

  

  

  

  

  

  

  

  

  

  

  

FFO attributable to common shareholders plus assumed conversions per diluted share

  

  

  

  

$

 2.64 

  

$

 1.87 

 

 

54


 
 

  

Item 3.   Quantitative and Qualitative Disclosures About Market Risk

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

 

(Amounts in thousands, except per share amounts)

2011 

  

2010 

  

  

  

  

  

   

  

Weighted

  

Effect of 1%

  

  

  

Weighted

  

  

  

March 31,

   

  

Average

  

Change In

  

December 31,

Average

Consolidated debt:

Balance

   

  

Interest Rate

  

Base Rates

  

Balance

Interest Rate

  

Variable rate

$

 2,245,521 

   

  

1.99%

  

$

 22,455 

  

$

 2,903,510 

  

1.76%

  

Fixed rate

  

 8,385,875 

   

  

5.63%

  

  

 - 

  

  

 7,990,129 

  

5.66%

  

  

  

$

 10,631,396 

   

  

4.86%

  

  

 22,455 

  

$

 10,893,639 

  

4.62%

Pro-rata share of debt of non-consolidated

  

  

   

  

  

  

  

  

  

  

  

  

  

  

entities (non-recourse):

  

  

   

  

  

  

  

  

  

  

  

  

  

  

Variable rate – excluding Toys

$

 296,541 

   

  

1.43%

  

  

 2,965 

  

$

 345,308 

  

1.39%

  

Variable rate – Toys

  

 283,000 

   

  

6.50%

  

  

 2,830 

  

  

 501,623 

  

4.95%

  

Fixed rate (including $1,417,000 and

  

  

   

  

  

  

  

  

  

  

  

  

  

  

  

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

  

 2,462,136 

 (1)

  

6.71%

  

  

 - 

  

  

 2,428,986 

  

6.86%

  

  

  

$

 3,041,677 

   

  

6.17%

  

  

 5,795 

  

$

 3,275,917 

  

5.99%

Noncontrolling interests’ share of above

  

  

   

  

  

  

  

 (1,780) 

  

  

  

  

  

Total change in annual net income

  

  

   

  

  

  

$

 26,470 

  

  

  

  

  

Per share-diluted

  

  

   

  

  

  

$

0.14 

  

  

  

  

  

  

  

  

  

  

   

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

   

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

   

  

  

  

  

  

  

  

  

  

  

(1)

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

  

  

  

  

  

  

   

  

  

  

  

  

  

  

  

  

  

 

We may utilize various financial instruments to mitigate the impact of interest rate fluctuations on our cash flows and earnings, including hedging strategies, depending on our analysis of the interest rate environment and the costs and risks of such strategies. As of March 31, 2011, variable rate debt with an aggregate principal amount of $562,010,000 and a weighted average interest rate of 2.84% was subject to LIBOR caps.  These caps are based on a notional amount of $558,725,000 and cap LIBOR at a weighted average rate of 5.68%.  In addition, we have one interest rate swap on a $425,000,000 loan that swapped the rate from LIBOR plus 2.00% (2.26% at March 31, 2011) to a fixed rate of 5.13% for the seven-year term of the loan. 

 

As of March 31, 2011, we have investments in mezzanine loans with an aggregate carrying amount of $78,544,000 that are based on variable interest rates which partially mitigate our exposure to a change in interest rates on our variable rate debt.

 

Fair Value of Debt

 

The estimated fair value of our consolidated debt is calculated based on current market prices and discounted cash flows at the 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, 2011, the estimated fair value of our consolidated debt was $11,014,783,000.

 

Derivative Instruments

 

We have, and may in the future enter into, derivative positions that do not qualify for hedge accounting treatment, including our economic interest in J.C. Penney common shares.  Because these derivatives do not qualify for hedge accounting treatment, the gains or losses resulting from their mark-to-market at the end of each reporting period are recognized as an increase or decrease in “interest and other investment income, net” on our consolidated statements of income. In addition, we are, and may in the future be, subject to additional expense based on the notional amount of the derivative positions and a specified spread over LIBOR. Because the market value of these instruments can vary significantly between periods, we may experience significant fluctuations in the amount of our investment income or expense in any given period. During the three months ended March 31, 2011 we recognized $17,163,000 of income from derivative instruments.

 

 

55


 
 

  

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, 2011, such disclosure controls and procedures were effective.

 

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

 

 

 

56


 
 

  

PART II.   OTHER INFORMATION

 

Item 1.  Legal Proceedings

 

 

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

 

On January 8, 2003, Stop & Shop filed a complaint with the United States District Court for the District of New Jersey (“USDC-NJ”) claiming that we had no right to reallocate and therefore continue to collect the $5,000,000 of annual rent from Stop & Shop pursuant to the Master Agreement and Guaranty, because of the expiration of the East Brunswick, Jersey City, Middletown, Union and Woodbridge leases to which the $5,000,000 of additional rent was previously allocated. Stop & Shop asserted that a prior order of the Bankruptcy Court for the Southern District of New York dated February 6, 2001, as modified on appeal to the District Court for the Southern District of New York on February 13, 2001, froze our right to reallocate which effectively terminated our right to collect the additional rent from Stop & Shop. On March 3, 2003, after we moved to dismiss for lack of jurisdiction, Stop & Shop voluntarily withdrew its complaint. On March 26, 2003, Stop & Shop filed a new complaint in New York State Supreme Court, asserting substantially the same claims as in its USDC-NJ complaint. We removed the action to the United States District Court for the Southern District of New York. In January 2005, that court remanded the action to the New York State Supreme Court. On February 14, 2005, we served an answer in which we asserted a counterclaim seeking a judgment for all the unpaid additional rent accruing through the date of the judgment and a declaration that Stop & Shop will continue to be liable for the additional rent as long as any of the leases subject to the Master Agreement and Guaranty remain in effect. On May 17, 2005, we filed a motion for summary judgment. On July 15, 2005, Stop & Shop opposed our motion and filed a cross-motion for summary judgment. On December 13, 2005, the Court issued its decision denying the motions for summary judgment. Both parties appealed the Court’s decision and on December 14, 2006, the Appellate Court division issued a decision affirming the Court’s decision.  On January 16, 2007, we filed a motion for the reconsideration of one aspect of the Appellate Court’s decision which was denied on March 13, 2007.  A trial was held in November 2010 and closing arguments were held in March 2011.  We intend to continue to vigorously pursue our claims against Stop & Shop. 

 

 

57


 
 

  

Item 1A. Risk Factors

There were no material changes to the Risk Factors disclosed in our Annual Report on Form 10-K for the year ended December 31, 2010.

 

 

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

In the first quarter of 2011, we issued 30,317 common shares upon the redemption of Class A units of the Operating Partnership held by persons who received units, in private placements in earlier periods, in exchange for their interests in limited partnerships that owned real estate. The common shares were issued without registration under the Securities Act of 1933 in reliance on Section 4 (2) of that Act.

 

Information relating to compensation plans under which our equity securities are authorized for issuance is set forth under Part III, Item 12 of the Annual Report on Form 10-K for the year ended December 31, 2010, and such information is incorporated by reference herein.

 

 

Item 3.   Defaults Upon Senior Securities

        None.

 

 

Item 5.   Other Information

        None.

 

 

Item 6.   Exhibits

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

 

 

 

58


 
 

  

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 3, 2011

By:

/s/ Joseph Macnow

 

 

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

 

 

59


 
 

  

  

EXHIBIT INDEX

  

  

  

  

  

  

  

Exhibit No.

  

  

  

  

  

  

3.1 

  

-

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

*

  

  

  

  

  

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

  

  

  

  

  

  

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

  

  

  

  

  

  

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

  

  

  

  

  

  

  

  

  

3.2 

  

-

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

*

  

  

  

  

  

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

  

  

  

  

  

  

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

  

  

  

  

  

  

March 9, 2000

  

  

  

  

  

  

  

  

  

3.3 

  

-

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

*

  

  

  

  

  

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

  

  

  

  

  

  

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

  

  

  

  

  

  

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

  

  

  

  

  

  

  

  

  

3.4 

  

-

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

*

  

  

  

  

  

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

  

  

  

  

  

  

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

  

  

  

  

  

  

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

  

  

  

  

  

  

  

  

  

3.5 

  

-

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

*

  

  

  

  

  

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

  

  

  

  

  

  

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

  

  

  

  

  

  

  

  

  

3.6 

  

-

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

*

  

  

  

  

  

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

  

  

  

  

  

  

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

  

  

  

  

  

  

  

  

  

3.7 

  

-

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

*

  

  

  

  

  

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

  

  

  

  

  

  

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

  

  

  

  

  

  

  

  

  

3.8 

  

-

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

*

  

  

  

  

  

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

  

  

  

  

  

  

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

  

  

  

  

  

  

  

  

  

3.9 

  

-

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

*

  

  

  

  

  

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

  

  

  

  

  

  

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

  

  

  

  

  

  

  

  

  

3.10

  

-

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

*

  

  

  

  

  

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

  

  

  

  

  

  

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

  

  

  

  

  

  

  

  

  

3.11 

  

-

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

*

  

  

  

  

  

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

  

  

  

  

  

  

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

  

  

  

  

  

  

  

  

  

3.12 

  

-

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

*

  

  

  

  

  

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

  

  

  

  

  

  

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

  

  

  

  

  

  

  

  

  

3.13 

  

-

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

*

  

  

  

  

  

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

  

  

  

  

  

  

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

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

_______________________

  

  

  

*

  

  

Incorporated by reference.

  

 

 

60


 
 

  

 

  

3.14

  

-

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

*

  

  

  

  

  

Incorporated by reference to exhibit 3,4 to Vornado Realty Trust's Current Report on

  

  

  

  

  

  

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

  

  

  

  

  

  

  

  

  

3.15

  

-

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

*

  

  

  

  

  

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

  

  

  

  

  

  

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

  

  

  

  

  

  

  

  

  

3.16

  

-

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

*

  

  

  

  

  

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

  

  

  

  

  

  

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

  

  

  

  

  

  

  

  

  

3.17

  

-

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

*

  

  

  

  

  

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

  

  

  

  

  

  

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

  

  

  

  

  

  

  

  

  

3.18

  

-

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

*

  

  

  

  

  

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

  

  

  

  

  

  

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

  

  

  

  

  

  

  

  

  

3.19

  

-

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

*

  

  

  

  

  

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

  

  

  

  

  

  

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

  

  

  

  

  

  

  

  

  

3.20

  

-

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

*

  

  

  

  

  

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

  

  

  

  

  

  

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

  

  

  

  

  

  

  

  

  

3.21

  

-

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

*

  

  

  

  

  

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

  

  

  

  

  

  

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

  

  

  

  

  

  

  

  

  

3.22

  

-

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

*

  

  

  

  

  

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

  

  

  

  

  

  

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

  

  

  

  

  

  

  

  

  

3.23

  

-

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

*

  

  

  

  

  

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

  

  

  

  

  

  

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

  

  

  

  

  

  

  

  

  

3.24

  

-

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

*

  

  

  

  

  

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

  

  

  

  

  

  

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

  

  

  

  

  

  

  

  

  

3.25

  

-

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

*

  

  

  

  

  

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

  

  

  

  

  

  

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

  

  

  

  

  

  

November 7, 2003

  

  

  

  

  

  

  

  

  

3.26

  

-

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

*

  

  

  

  

  

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

  

  

  

  

  

  

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

  

  

  

  

  

  

March 3, 2004

  

  

  

  

  

  

  

  

  

3.27

  

-

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

*

  

  

  

  

  

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

  

  

  

  

  

  

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

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

_______________________

  

  

  

*

  

  

Incorporated by reference.

  

 

 

61


 
 

  

 

  

3.28

  

-

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

*

  

  

  

  

  

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

  

  

  

  

  

  

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

  

  

  

  

  

  

January 26, 2005

  

  

  

  

  

  

  

  

  

3.29

  

-

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

*

  

  

  

  

  

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

  

  

  

  

  

  

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

  

  

  

  

  

  

January 26, 2005

  

  

  

  

  

  

  

  

  

3.30

  

-

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

*

  

  

  

  

  

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

  

  

  

  

  

  

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

  

  

  

  

  

  

  

  

  

3.31

  

-

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

*

  

  

  

  

  

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

  

  

  

  

  

  

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

  

  

  

  

  

  

  

  

  

3.32

  

-

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

*

  

  

  

  

  

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

  

  

  

  

  

  

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

  

  

  

  

  

  

  

  

  

3.33

  

-

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

*

  

  

  

  

  

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

  

  

  

  

  

  

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

  

  

  

  

  

  

  

  

  

3.34

  

-

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

*

  

  

  

  

  

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

  

  

  

  

  

  

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

  

  

  

  

  

  

  

  

  

3.35

  

-

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

*

  

  

  

  

  

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

  

  

  

  

  

  

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

  

  

  

  

  

  

  

  

  

3.36

  

-

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

*

  

  

  

  

  

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

  

  

  

  

  

  

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

  

  

  

  

  

  

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

  

  

  

  

  

  

  

  

  

3.37

  

-

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

*

  

  

  

  

  

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

  

  

  

  

  

  

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

  

  

  

  

  

  

  

  

  

3.38

  

-

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

*

  

  

  

  

  

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

  

  

  

  

  

  

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

  

  

  

  

  

  

May 3, 2006

  

  

  

  

  

  

  

  

  

3.39

  

-

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

*

  

  

  

  

  

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

  

  

  

  

  

  

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

  

  

  

  

  

  

  

  

  

3.40

  

-

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

*

  

  

  

  

  

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

  

  

  

  

  

  

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

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

_______________________

  

  

  

*

  

  

Incorporated by reference.

  

 

 

62


 
 

  

 

  

3.41

  

-

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

*

  

  

  

  

  

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

  

  

  

  

  

  

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

  

  

  

  

  

  

June 27, 2007

  

  

  

  

  

  

  

  

  

3.42

  

-

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

*

  

  

  

  

  

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

  

  

  

  

  

  

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

  

  

  

  

  

  

June 27, 2007

  

  

  

  

  

  

  

  

  

3.43

  

-

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

*

  

  

  

  

  

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

  

  

  

  

  

  

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

  

  

  

  

  

  

June 27, 2007

  

  

  

  

  

  

  

  

  

3.44

  

-

Fortieth Amendment to Second Amended and Restated Agreement of Limited

*

  

  

  

  

  

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

  

  

  

  

  

  

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

  

  

  

  

  

  

June 27, 2007

  

  

  

  

  

  

  

  

  

3.45

  

-

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

*

  

  

  

  

  

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

  

  

  

  

  

  

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

  

  

  

  

  

  

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

  

  

  

  

  

  

  

  

  

3.46

  

-

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

*

  

  

  

  

  

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

  

  

  

  

  

  

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

  

  

  

  

  

  

  

  

  

3.47

  

-

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

*

  

  

  

  

  

dated as of April 20, 2011 – Incorporated by reference to Exhibit 3.1 to Vornado

  

  

  

  

  

  

Realty L.P.'s Current Report on Form 8-K (File No. 000-22685), filed on April 21, 2011

  

  

  

  

  

  

  

  

  

4.1

  

-

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

*

  

  

  

  

  

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

  

  

  

  

  

  

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

  

  

  

  

  

  

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

  

  

  

  

  

  

  

  

  

4.2

  

-

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

*

  

  

  

  

  

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

  

  

  

  

  

  

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

  

  

  

  

  

  

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

  

  

  

  

  

  

  

  

  

  

  

  

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

  

  

  

  

  

  

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

  

  

  

  

  

  

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

  

  

  

  

  

  

Commission, upon request, copies of any such instruments.

  

  

  

  

  

  

  

  

  

10.1

  

-

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

*

  

  

  

  

  

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

  

  

  

  

  

  

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

  

  

  

  

  

  

  

  

  

10.2

  

-

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

*

  

  

  

  

  

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

  

  

  

  

  

  

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

  

  

  

  

  

  

______________________

  

  

  

*

  

  

Incorporated by reference.

  

 

 

63


 
 

  

 

  

10.3 

**

-

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

*

  

  

  

  

  

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

  

  

  

  

  

  

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

  

  

  

  

  

  

  

  

  

10.4 

**

-

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

*

  

  

  

  

  

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

  

  

  

  

  

  

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

  

  

  

  

  

  

  

  

  

10.5 

**

-

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

*

  

  

  

  

  

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

  

  

  

  

  

  

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

  

  

  

  

  

  

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

  

  

  

  

  

  

  

  

  

10.6 

**

-

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

*

  

  

  

  

  

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

  

  

  

  

  

  

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

  

  

  

  

  

  

February 28, 2006

  

  

  

  

  

  

  

  

  

10.7 

**

-

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

*

  

  

  

  

  

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

  

  

  

  

  

  

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

  

  

  

  

  

  

March 9, 2000

  

  

  

  

  

  

  

  

  

10.8 

  

-

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

*

  

  

  

  

  

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

  

  

  

  

  

  

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

  

  

  

  

  

  

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

  

  

  

  

  

  

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

  

  

  

  

  

  

filed on January 16, 2002

  

  

  

  

  

  

  

  

  

10.9 

  

-

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

*

  

  

  

  

  

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

  

  

  

  

  

  

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

  

  

  

  

  

  

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

  

  

  

  

  

  

  

  

  

10.10

  

-

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

*

  

  

  

  

  

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

  

  

  

  

  

  

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

  

  

  

  

  

  

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

  

  

  

  

  

  

  

  

  

10.11 

**

-

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

*

  

  

  

  

  

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

  

  

  

  

  

  

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

  

  

  

  

  

  

  

  

  

10.12 

**

-

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

*

  

  

  

  

  

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

  

  

  

  

  

  

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

  

  

  

  

  

  

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

  

  

  

  

  

  

  

  

  

10.13 

  

-

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

*

  

  

  

  

  

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

  

  

  

  

  

  

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

  

  

  

  

  

  

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

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

_______________________

  

  

  

*

  

  

Incorporated by reference.

  

  

  

**

  

  

Management contract or compensatory agreement.

  

 

 

64


 
 

  

 

  

10.14

  

-

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

*

  

  

  

  

  

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

  

  

  

  

  

  

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

  

  

  

  

  

  

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

  

  

  

  

  

  

filed on August 7, 2002

  

  

  

  

  

  

  

  

  

10.15

  

-

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

*

  

  

  

  

  

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

  

  

  

  

  

  

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

  

  

  

  

  

  

on May 30, 2002

  

  

  

  

  

  

  

  

  

10.16

**

-

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

*

  

  

  

  

  

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

  

  

  

  

  

  

filed December 26, 2002

  

  

  

  

  

  

  

  

  

10.17

**

-

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

*

  

  

  

  

  

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

  

  

  

  

  

  

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

  

  

  

  

  

  

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

  

  

  

  

  

  

  

  

  

10.18

**

-

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

*

  

  

  

  

  

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

  

  

  

  

  

  

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

  

  

  

  

  

  

February 25, 2005

  

  

  

  

  

  

  

  

  

10.19

**

-

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

*

  

  

  

  

  

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

  

  

  

  

  

  

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

  

  

  

  

  

  

May 2, 2006

  

  

  

  

  

  

  

  

  

10.20

**

-

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

*

  

  

  

  

  

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

  

  

  

  

  

  

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

  

  

  

  

  

  

  

  

  

10.21

**

-

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

*

  

  

  

  

  

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

  

  

  

  

  

  

May 1, 2006

  

  

  

  

  

  

  

  

  

10.22

**

-

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

*

  

  

  

  

  

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

  

  

  

  

  

  

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

  

  

  

  

  

  

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

  

  

  

  

  

  

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

  

  

  

  

  

  

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

  

  

  

  

  

  

June 28, 2006

  

  

  

  

  

  

  

  

  

10.23

**

-

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

*

  

  

  

  

  

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

  

  

  

  

  

  

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

  

  

  

  

  

  

on August 1, 2006

  

  

  

  

  

  

  

  

  

10.24

**

-

Amended and Restated Employment Agreement between Vornado Realty Trust and Joseph

*

  

  

  

  

  

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

  

  

  

  

  

  

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

  

  

  

  

  

  

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

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

_______________________

  

  

  

*

  

  

Incorporated by reference.

  

  

  

**

  

  

Management contract or compensatory agreement.

  

 

 

65


 
 

  

 

  

10.25

  

-

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

*

  

  

  

  

  

Chase Bank - Incorporated by reference to Exhibit 10.53 to Vornado Realty Trust's

  

  

  

  

  

  

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

  

  

  

  

  

  

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

  

  

  

  

  

  

  

  

  

10.26

**

-

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

*

  

  

  

  

  

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

  

  

  

  

  

  

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

  

  

  

  

  

  

October 31, 2006

  

  

  

  

  

  

  

  

  

10.27

**

-

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

*

  

  

  

  

  

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

  

  

  

  

  

  

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

  

  

  

  

  

  

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

  

  

  

  

  

  

  

  

  

10.28

**

-

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

*

  

  

  

  

  

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

  

  

  

  

  

  

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

  

  

  

  

  

  

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

  

  

  

  

  

  

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

  

  

  

  

  

  

  

  

  

10.29

**

-

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

*

  

  

  

  

  

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

  

  

  

  

  

  

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

  

  

  

  

  

  

filed on May 1, 2007

  

  

  

  

  

  

  

  

  

10.30

  

-

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

*

  

  

  

  

  

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

  

  

  

  

  

  

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

  

  

  

  

  

  

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

  

  

  

  

  

  

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

  

  

  

  

  

  

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

  

  

  

  

  

  

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

  

  

  

  

  

  

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

  

  

  

  

  

  

  

  

  

10.31

  

-

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

*

  

  

  

  

  

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

  

  

  

  

  

  

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

  

  

  

  

  

  

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

  

  

  

  

  

  

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

  

  

  

  

  

  

filed on October 4, 2007

  

  

  

  

  

  

  

  

  

10.32

**

-

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

*

  

  

  

  

  

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

  

  

  

  

  

  

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

  

  

  

  

  

  

001-11954) filed on February 26, 2008

  

  

  

  

  

  

  

  

  

10.33

**

-

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

*

  

  

  

  

  

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

  

  

  

  

  

  

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

  

  

  

  

  

  

  

  

  

10.34

**

-

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

*

  

  

  

  

  

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

  

  

  

  

  

  

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

  

  

  

  

  

  

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

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

_______________________

  

  

  

*

  

  

Incorporated by reference.

  

  

  

**

  

  

Management contract or compensatory agreement.

  

 

 

66


 
 

  

 

  

10.35

**

-

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

*

  

  

  

  

  

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

  

  

  

  

  

  

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

  

  

  

  

  

  

 001-11954) filed on February 24, 2009

  

  

  

  

  

  

  

  

  

10.36

**

-

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

*

  

  

  

  

  

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

  

  

  

  

  

  

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

  

  

  

  

  

  

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

  

  

  

  

  

  

  

  

  

10.37

**

-

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

*

  

  

  

  

  

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

  

  

  

  

  

  

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

  

  

  

  

  

  

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

  

  

  

  

  

  

  

  

  

10.38

**

-

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

*

  

  

  

  

  

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

  

  

  

  

  

  

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

  

  

  

  

  

  

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

  

  

  

  

  

  

  

  

  

10.39

**

-

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

*

  

  

  

  

  

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

  

  

  

  

  

  

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

  

  

  

  

  

  

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

  

  

  

  

  

  

  

  

  

10.40

**

-

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

*

  

  

  

  

  

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

  

  

  

  

  

  

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

  

  

  

  

  

  

  

  

  

10.41

**

-

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

*

  

  

  

  

  

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

  

  

  

  

  

  

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

  

  

  

  

  

  

filed on November 2, 2010

  

  

  

  

  

  

  

  

  

10.42

**

-

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

*

  

  

  

  

  

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

  

  

  

  

  

  

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

  

  

  

  

  

  

  

  

  

10.43

**

-

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

*

  

  

  

  

  

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

  

  

  

  

  

  

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

  

  

  

  

  

  

  

  

  

10.44

**

-

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

*

  

  

  

  

  

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

  

  

  

  

  

  

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

  

  

  

  

  

  

  

  

  

10.45

**

-

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

*

  

  

  

  

  

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

  

  

  

  

  

  

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

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

_______________________

  

  

  

*

  

  

Incorporated by reference.

  

  

  

**

  

  

Management contract or compensatory agreement.

  

 

 

67


 
 

  

 

  

10.46

**

-

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

*

  

  

  

  

  

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

  

  

  

  

  

  

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

  

  

  

  

  

  

February 23, 2011

  

  

  

  

  

  

  

  

  

15.1

  

-

Letter regarding Unaudited Interim Financial Infromation

  

  

  

  

  

  

  

  

  

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 fo the Chief Executive Officer

  

  

  

  

  

  

  

  

  

32.2

  

-

Section 1350 Certification fo the Chief Finacial Officer

  

  

  

  

  

  

  

  

  

101.INS

  

-

XBRL Instance Document

  

  

  

  

  

  

  

  

  

101.SCH

  

-

XBRL Taxonomy Extension Schema

  

  

  

  

  

  

  

  

  

101.CAL

  

-

XBRL Taxonomy Extension Calculation Linkbase

  

  

  

  

  

  

  

  

  

101.DEF

  

-

XBRL Taxonomy Extension Definition Linkbase

  

  

  

  

  

  

  

  

  

101.LAB

  

-

XBRL Taxonomy Extension Label Linkbase

  

  

  

  

  

  

  

  

  

101.PRE

  

-

XBRL Taxonomy Extension Presentation Linkbase

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

______________________

  

  

  

*

  

Incorporated by reference.

  

  

  

**

  

Management contract or compensatory agreement.

  

 

 

68


 
ex151.htm - Generated by SEC Publisher for SEC Filing

 

EXHIBIT 15.1

May 3, 2011

 

Vornado Realty Trust

New York, New York

 

We have reviewed, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the unaudited interim financial information of Vornado Realty Trust for the periods ended March 31, 2011 and 2010, as indicated in our report dated May 3, 2011; because we did not perform an audit, we expressed no opinion on that information.

We are aware that our report referred to above, which is included in your Quarterly Report on Form 10-Q for the quarter ended March 31, 2011, is incorporated by reference in the following registration statements of Vornado Realty Trust:

Registration Statement No. 333-68462 on Form S-8

Amendment No.1 to Registration Statement No. 333-36080 on Form S-3

Registration Statement No. 333-64015 on Form S-3

Amendment No.1 to Registration Statement No. 333-50095 on Form S-3

Registration Statement No. 333-52573 on Form S-8

Registration Statement No. 333-29011 on Form S-8

Registration Statement No. 333-09159 on Form S-8

Registration Statement No. 333-76327 on Form S-3

Amendment No.1 to Registration Statement No. 333-89667 on Form S-3

Registration Statement No. 333-81497 on Form S-8

Registration Statement No. 333-102216 on Form S-8

Amendment No.1 to Registration Statement No. 333-102215 on Form S-3

Amendment No.1 to Registration Statement No. 333-102217 on Form S-3

Registration Statement No. 333-105838 on Form S-3

Registration Statement No. 333-107024 on Form S-3

Registration Statement No. 333-109661 on Form S-3

Registration Statement No. 333-114146 on Form S-3

Registration Statement No. 333-114807 on Form S-3

Registration Statement No. 333-121929 on Form S-3

Amendment No.1 to Registration Statement No. 333-120384 on Form S-3

Registration Statement No. 333-126963 on Form S-3

Registration Statement No. 333-139646 on Form S-3

Registration Statement No. 333-141162 on Form S-3

Registration Statement No. 333-150592 on Form S-3

Registration Statement No. 333-150593 on Form S-8

Registration Statement No. 333-166856 on Form S-3

Registration Statement No. 333-172880 on Form S-8

and in the following joint registration statements of Vornado Realty Trust and Vornado Realty L.P.:

Amendment No. 4 to Registration Statement No. 333-40787 on Form S-3

Amendment No. 4 to Registration Statement No. 333-29013 on Form S-3

Registration Statement No. 333-108138 on Form S-3

Registration Statement No. 333-122306 on Form S-3

Registration Statement No. 333-138367 on Form S-3

Registration Statement No. 333-162775 on Form S-3 

We also are aware that the aforementioned report, pursuant to Rule 436(c) under the Securities Act of 1933, is not considered a part of the Registration Statement prepared or certified by an accountant or a report prepared or certified by an accountant within the meaning of Sections 7 and 11 of that Act.

 

 

/s/ DELOITTE & TOUCHE LLP

 

Parsippany, New Jersey

 

 


 
ex311.htm - Generated by SEC Publisher for SEC Filing  

 

EXHIBIT 31.1

CERTIFICATION

I, Michael D. Fascitelli, certify that:

1.     I have reviewed this Quarterly Report on Form 10-Q of Vornado Realty Trust;

2.     Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.     Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.   The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure control and procedures (as defined in Exchange Act Rules 13a‑15(e) and 15d‑15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)    Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)    Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)     Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)    Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.     The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)    All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b)    Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

 

May 3, 2011

 


/s/ Michael D. Fascitelli

 

Michael D. Fascitelli

 

President and Chief Executive Officer

 

 


 
ex312.htm - Generated by SEC Publisher for SEC Filing  

 

EXHIBIT 31.2

CERTIFICATION

I, Joseph Macnow, certify that:

1.     I have reviewed this Quarterly Report on Form 10-Q of Vornado Realty Trust;

2.     Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.     Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.     The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure control and procedures (as defined in Exchange Act Rules 13a‑15(e) and 15d‑15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)    Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)    Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)     Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)    Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.     The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)    All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b)    Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

 

May 3, 2011

 


/s/ Joseph Macnow

 

Joseph Macnow

 

Executive Vice President and Chief Financial Officer

 

 


 
ex321.htm - Generated by SEC Publisher for SEC Filing

 

EXHIBIT 32.1

CERTIFICATION

Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

(Subsection (a) and (b) of Section 1350 of Chapter 63 of Title 18 of the United States Code)

 

Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of Section 1350 of Chapter 63 of Title 18 of the United States Code), the undersigned officer of Vornado Realty Trust (the “Company”), hereby certifies, to such officer’s knowledge, that

 

The Quarterly Report on Form 10-Q for quarter ended March 31, 2011 (the “Report”) of the Company fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

 

 

 

 


May 3, 2011

 

 


/s/ Michael D. Fascitelli

 

 

Name:

Michael D. Fascitelli

 

 

Title:

President and Chief Executive Officer

         

 

 


 
ex322.htm - Generated by SEC Publisher for SEC Filing

 

EXHIBIT 32.2

CERTIFICATION

Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

(Subsection (a) and (b) of Section 1350 of Chapter 63 of Title 18 of the United States Code)

 

Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of Section 1350 of Chapter 63 of Title 18 of the United States Code), the undersigned officer of Vornado Realty Trust (the “Company”), hereby certifies, to such officer’s knowledge, that

 

The Quarterly Report on Form 10-Q for quarter ended March 31, 2011 (the “Report”) of the Company fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

 

 

 

 


May 3, 2011

 

 


/s/ Joseph Macnow

 

 

Name:

Joseph Macnow

 

 

Title:

Executive Vice President and
Chief Financial Officer