q10vrt10q.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, 2010

 

Or

 

o

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from:

 

to

 

 

Commission File Number:

001-11954

 

 

VORNADO REALTY TRUST

(Exact name of registrant as specified in its charter)

 

Maryland

 

22-1657560

(State or other jurisdiction of incorporation or organization)

 

(I.R.S. Employer Identification Number)

 

 

 

888 Seventh Avenue, New York, New York

 

10019

(Address of principal executive offices)

 

(Zip Code)

 

 

(212) 894-7000

(Registrant’s telephone number, including area code)

 

N/A

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

 

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

 

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

 

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

 

x Large Accelerated Filer

 

o Accelerated Filer

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

 

o Smaller Reporting Company

 

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

 

As of March 31, 2010, 181,913,554 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, 2010 and December 31, 2009

3

 

 

 

 

 

 

Consolidated Statements of Income (Unaudited) for the Three Months
Ended March 31, 2010 and 2009

4

 

 

 

 

 

 

Consolidated Statements of Changes in Equity (Unaudited) for the Three
Months Ended March 31, 2010 and 2009

5

 

 

 

 

 

 

Consolidated Statements of Cash Flows (Unaudited) for the
Three Months Ended March 31, 2010 and 2009

6

 

 

 

 

 

 

Notes to Consolidated Financial Statements (Unaudited)

8

 

 

 

 

 

 

Report of Independent Registered Public Accounting Firm

31

 

 

 

 

 

Item 2.

Management’s Discussion and Analysis of Financial Condition
and Results of Operations

32

 

 

 

 

 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

54

 

 

 

 

 

Item 4.

Controls and Procedures

55

 

 

 

 

 

 

 

 

 

 

 

 

PART II.

 

Other Information:

 

 

 

 

 

 

Item 1.

Legal Proceedings

56

 

 

 

 

 

Item 1A.

Risk Factors

57

 

 

 

 

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

57

 

 

 

 

 

Item 3.

Defaults Upon Senior Securities

57

 

 

 

 

 

Item 5.

Other Information

57

 

 

 

 

 

Item 6.

Exhibits

57

 

 

 

 

Signatures

 

 

58

 

 

 

 

Exhibit Index

 

 

59

 

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)
ASSETS

 

March 31,
2010

 

December 31,
2009

 

Real estate, at cost:

 

 

 

 

 

 

 

Land

 

$

4,610,165

 

$

4,606,065

 

Buildings and improvements

 

 

13,003,703

 

 

12,902,086

 

Development costs and construction in progress

 

 

244,486

 

 

313,310

 

Leasehold improvements and equipment

 

 

129,600

 

 

128,056

 

Total

 

 

17,987,954

 

 

17,949,517

 

Less accumulated depreciation and amortization

 

 

(2,597,709

)

 

(2,494,441

)

Real estate, net

 

 

15,390,245

 

 

15,455,076

 

Cash and cash equivalents

 

 

788,940

 

 

535,479

 

Short-term investments

 

 

15,000

 

 

40,000

 

Restricted cash

 

 

307,849

 

 

293,950

 

Marketable securities

 

 

413,954

 

 

380,652

 

Accounts receivable, net of allowance for doubtful accounts of $50,797 and $46,708

 

 

159,805

 

 

157,325

 

Investments in partially owned entities, including Alexander’s of $197,181 and $193,174

 

 

839,476

 

 

799,832

 

Investment in Toys “R” Us

 

 

517,497

 

 

409,453

 

Mezzanine loans receivable, net of allowance of $185,738 and $190,738

 

 

126,777

 

 

203,286

 

Receivable arising from the straight-lining of rents, net of allowance of $5,108 and $4,680

 

 

701,733

 

 

681,526

 

Deferred leasing and financing costs, net of accumulated amortization of $201,565 and $183,224

 

 

326,743

 

 

311,825

 

Due from officers

 

 

13,182

 

 

13,150

 

Other assets

 

 

818,492

 

 

903,918

 

 

 

$

20,419,693

 

$

20,185,472

 

LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND EQUITY

 

 

 

 

 

 

 

Notes and mortgages payable

 

$

8,432,533

 

$

8,445,766

 

Senior unsecured notes

 

 

1,224,790

 

 

711,716

 

Exchangeable senior debentures

 

 

486,061

 

 

484,457

 

Convertible senior debentures

 

 

447,261

 

 

445,458

 

Revolving credit facility debt

 

 

500,217

 

 

852,218

 

Accounts payable and accrued expenses

 

 

491,464

 

 

475,242

 

Deferred credit

 

 

671,366

 

 

682,384

 

Deferred compensation plan

 

 

84,028

 

 

80,443

 

Deferred tax liabilities

 

 

17,789

 

 

17,842

 

Other liabilities

 

 

100,057

 

 

88,912

 

Total liabilities

 

 

12,455,566

 

 

12,284,438

 

Commitments and contingencies

 

 

 

 

 

 

 

Redeemable noncontrolling interests:

 

 

 

 

 

 

 

Class A units – 14,080,613 and 13,892,313 units outstanding

 

 

1,065,902

 

 

971,628

 

Series D cumulative redeemable preferred units – 10,953,847 and 11,200,000 units outstanding

 

 

273,846

 

 

280,000

 

Total redeemable noncontrolling interests

 

 

1,339,748

 

 

1,251,628

 

Vornado shareholders’ equity:

 

 

 

 

 

 

 

Preferred shares of beneficial interest: no par value per share; authorized 110,000,000
shares; issued and outstanding 33,949,584 and 33,952,324 shares

 

 

823,549

 

 

823,686

 

Common shares of beneficial interest: $.04 par value per share; authorized,
250,000,000 shares; issued and outstanding 181,913,554 and 181,214,161 shares

 

 

7,247

 

 

7,218

 

Additional capital

 

 

6,877,529

 

 

6,961,007

 

Earnings less than distributions

 

 

(1,520,690

)

 

(1,577,591

)

Accumulated other comprehensive income

 

 

29,953

 

 

28,449

 

Total Vornado shareholders’ equity

 

 

6,217,588

 

 

6,242,769

 

Noncontrolling interests in consolidated subsidiaries

 

 

406,791

 

 

406,637

 

Total equity

 

 

6,624,379

 

 

6,649,406

 

 

 

$

20,419,693

 

$

20,185,472

 

See notes to consolidated financial statements (unaudited).

3


VORNADO REALTY TRUST

CONSOLIDATED STATEMENTS OF INCOME

(UNAUDITED)

 

(Amounts in thousands, except per share amounts)

 

For The Three Months Ended
March 31,

 

 

 

2010

 

2009

 

REVENUES:

 

 

 

 

 

 

 

Property rentals

 

$

560,950

 

$

549,787

 

Tenant expense reimbursements

 

 

92,921

 

 

98,029

 

Fee and other income

 

 

42,460

 

 

30,750

 

Total revenues

 

 

696,331

 

 

678,566

 

EXPENSES:

 

 

 

 

 

 

 

Operating

 

 

279,055

 

 

278,898

 

Depreciation and amortization

 

 

135,824

 

 

131,656

 

General and administrative

 

 

48,730

 

 

79,065

 

Litigation loss accrual

 

 

10,056

 

 

 

Total expenses

 

 

473,665

 

 

489,619

 

Operating income

 

 

222,666

 

 

188,947

 

Income applicable to Alexander’s

 

 

6,460

 

 

18,133

 

Income applicable to Toys “R” Us

 

 

125,870

 

 

97,147

 

Income (loss) from partially owned entities

 

 

4,884

 

 

(7,543

)

Interest and other investment income, net

 

 

14,708

 

 

14,059

 

Interest and debt expense (including amortization of deferred
financing costs of $4,426 and $4,049)

 

 

(139,735

)

 

(157,760

)

Net gain on disposition of wholly owned and partially owned assets other than
depreciable real estate

 

 

3,305

 

 

 

Net gain on early extinguishment of debt

 

 

 

 

5,905

 

Income before income taxes

 

 

238,158

 

 

158,888

 

Income tax expense

 

 

(5,614

)

 

(5,049

)

Income from continuing operations

 

 

232,544

 

 

153,839

 

Income from discontinued operations

 

 

 

 

2,592

 

Net income

 

 

232,544

 

 

156,431

 

Net income attributable to noncontrolling interests, including unit distributions

 

 

(17,992

)

 

(16,321

)

Net income attributable to Vornado

 

 

214,552

 

 

140,110

 

Preferred share dividends

 

 

(14,267

)

 

(14,269

)

NET INCOME attributable to common shareholders

 

$

200,285

 

$

125,841

 

 

 

 

 

 

 

 

 

INCOME PER COMMON SHARE – BASIC:

 

 

 

 

 

 

 

Income from continuing operations, net

 

$

1.10

 

$

0.79

 

Income from discontinued operations, net

 

 

 

 

0.02

 

Net income per common share

 

$

1.10

 

$

0.81

 

Weighted average shares

 

 

181,542

 

 

155,991

 

 

 

 

 

 

 

 

 

INCOME PER COMMON SHARE – DILUTED:

 

 

 

 

 

 

 

Income from continuing operations, net

 

$

1.09

 

$

0.78

 

Income from discontinued operations, net

 

 

 

 

0.02

 

Net income per common share

 

$

1.09

 

$

0.80

 

Weighted average shares

 

 

183,445

 

 

157,103

 

 

 

 

 

 

 

 

 

DIVIDENDS PER COMMON SHARE

 

$

0.65

 

$

0.95

 

 

See notes to consolidated financial statements (unaudited).

4


VORNADO REALTY TRUST

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(UNAUDITED)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated
Other
Comprehensive
Income (Loss)

 

 

 

 

 


 

(Amounts in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings
L
ess Than
Distributions

 

 

 

 

Non-
c
ontrolling
Interests

 

 

 

 

Preferred Shares

 

 

Common Shares

 

 

Additional
Capital

 

 

 

 

 

 

 

 

Total
Equity

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

 

 

 

 

 

 

 

 

 

Balance, December 31, 2008

33,954

 

$

823,807

 

 

155,286

 

$

6,195

 

$

6,025,976

 

$

(1,047,340

)

$

(6,899

)

$

412,913

 

$

6,214,652

 

Net income (loss)

 

 

 

 

 

 

 

 

 

 

140,110

 

 

 

 

(463

)

 

139,647

 

Dividends paid on common shares

 

 

 

 

2,761

 

 

110

 

 

88,453

 

 

(147,678

)

 

 

 

 

 

(59,115

)

Dividends paid on preferred shares

 

 

 

 

 

 

 

 

 

 

(14,269

)

 

 

 

 

 

(14,269

)

Conversion of Series A preferred shares to
common shares

(2

)

 

(90)

 

 

3

 

 

 

 

90

 

 

 

 

 

 

 

 

 

Deferred compensation shares and options

 

 

 

 

 

 

2

 

 

23,288

 

 

 

 

 

 

 

 

23,290

 

Common shares issued:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Upon redemption of Class A Operating
Partnership units,at redemption value

 

 

 

 

221

 

 

8

 

 

10,938

 

 

 

 

 

 

 

 

10,946

 

Under employees’ share option plan

 

 

 

 

7

 

 

(14

)

 

505

 

 

(435

)

 

 

 

 

 

56

 

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

 

 

 

 

 

 

 

 

 

 

 

 

(39,305

)

 

 

 

(39,305

)

Voluntary surrender of equity awards on
March 31, 2009

 

 

 

 

 

 

 

 

13,722

 

 

 

 

 

 

 

 

13,722

 

Adjustments to redeemable Class A
Operating Partnership units

 

 

 

 

 

 

 

 

271,856

 

 

 

 

 

 

 

 

271,856

 

Other

 

 

 

 

 

 

 

 

(113

)

 

5

 

 

(593

)

 

 

 

(701

)

Balance, March 31, 2009

33,952

 

$

823,717

 

 

158,278

 

$

6,301

 

$

6,434,715

 

$

(1,069,607

)

$

(46,797

)

$

412,450

 

$

6,560,779

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

)

Conversion of Series A preferred
shares to common shares

(2

)

 

(137

)

 

4

 

 

 

 

137

 

 

 

 

 

 

 

 

 

Deferred compensation shares
and options

 

 

 

 

17

 

 

2

 

 

1,644

 

 

 

 

 

 

 

 

1,646

 

Common shares issued:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Upon redemption of Class A Operating
Partnership 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

 

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 redeemable Class
A Operating Partnership units

 

 

 

 

 

 

 

 

(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

 

 

See notes to consolidated financial statements (unaudited).

 

5


VORNADO REALTY TRUST

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

 

 

 

For The Three Months Ended
March 31,

 

(Amounts in thousands)

 

2010

 

2009

 

Cash Flows from Operating Activities:

 

 

 

 

 

 

 

Net income

 

$

232,544

 

$

156,431

 

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

 

 

 

 

 

 

 

Depreciation and amortization (including amortization of deferred financing costs)

 

 

140,250

 

 

136,178

 

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

 

 

(130,812

)

 

(107,737

)

Straight‑lining of rental income

 

 

(20,922

)

 

(27,138

)

Amortization of below market leases, net

 

 

(15,907

)

 

(17,982

)

Litigation loss accrual

 

 

10,056

 

 

 

Distributions of income from partially owned entities

 

 

7,123

 

 

8,381

 

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

 

 

(5,998

)

 

 

Net gain on dispositions of assets other than depreciable real estate

 

 

(3,305

)

 

 

Other non-cash adjustments

 

 

1,848

 

 

19,522

 

Net gain on early extinguishment of debt

 

 

 

 

(5,905

)

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

 

 

 

 

32,588

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

Accounts receivable, net

 

 

(2,480

)

 

7,469

 

Accounts payable and accrued expenses

 

 

26,137

 

 

14,887

 

Other assets

 

 

37,391

 

 

(40,320

)

Other liabilities

 

 

12,123

 

 

(6,562

)

Net cash provided by operating activities

 

 

288,048

 

 

169,812

 

Cash Flows from Investing Activities:

 

 

 

 

 

 

 

Proceeds received from repayment of mezzanine loans receivable

 

 

101,839

 

 

3,593

 

Proceeds from sales of real estate and related investments

 

 

38,879

 

 

20,858

 

Development costs and construction in progress

 

 

(37,598

)

 

(132,529

)

Investments in partially owned entities

 

 

(36,741

)

 

(9,582

)

Additions to real estate

 

 

(30,247

)

 

(38,916

)

Investments in mezzanine loans receivable and other

 

 

(28,873

)

 

 

Proceeds from maturing short-term investments

 

 

25,000

 

 

 

Purchases of marketable securities

 

 

(13,917

)

 

(9,882

)

Restricted cash

 

 

(13,899

)

 

(27,298

)

Distributions of capital from partially owned entities

 

 

7,617

 

 

7,504

 

Deposits in connection with real estate acquisitions

 

 

(5,003

)

 

(9

)

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

 

 

285

 

 

7,835

 

Net cash provided by (used in) investing activities

 

 

7,342

 

 

(178,426

)

 

See notes to consolidated financial statements (unaudited).

6


VORNADO REALTY TRUST

CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED

(UNAUDITED)

 

(Amounts in thousands)

 

For The Three Months
Ended March 31,

 

 

2010

 

2009

 

Cash Flows from Financing Activities:

 

 

 

 

 

 

 

Proceeds from borrowings

 

 

660,335

 

 

353,856

 

Repayments of borrowings

 

 

(525,246

)

 

(138,291

)

Dividends paid on common shares

 

 

(117,958

)

 

(59,115

)

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

 

 

(24,360

)

 

(32

)

Dividends paid on preferred shares

 

 

(14,267

)

 

(14,269

)

Distributions to noncontrolling interests

 

 

(13,082

)

 

(10,514

)

Purchase of outstanding preferred units

 

 

(4,000

)

 

(24,330

)

Debt issuance costs

 

 

(3,351

)

 

(94

)

Net cash (used in) provided by financing activities

 

 

(41,929

)

 

107,211

 

Net increase in cash and cash equivalents

 

 

253,461

 

 

98,597

 

Cash and cash equivalents at beginning of period

 

 

535,479

 

 

1,526,853

 

Cash and cash equivalents at end of period

 

$

788,940

 

$

1,625,450

 

 

 

Supplemental Disclosure of Cash Flow Information:

 

 

 

 

 

 

 

Cash payments for interest (including capitalized interest of $614 and $4,569)

 

$

121,573

 

$

132,208

 

Cash payments for income taxes

 

$

1,701

 

$

1,150

 

 

 

 

 

 

 

 

 

Non‑Cash Transactions:

 

 

 

 

 

 

 

Adjustments to redeemable Class A Operating Partnerships units

 

$

(104,247

)

$

271,856

 

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

 

 

18,128

 

 

10,946

 

Dividends paid in common shares

 

 

 

 

88,563

 

Unit distributions paid in Class A units

 

 

 

 

8,213

 

Unrealized net gain (loss) on securities available for sale

 

 

17,588

 

 

(39,305

)

 

See notes to consolidated financial statements (unaudited).

7


VORNADO REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

 

1.    Organization

Vornado Realty Trust (“Vornado”) is a fully‑integrated real estate investment trust (“REIT”) and conducts its business through Vornado Realty L.P., a Delaware limited partnership (the “Operating Partnership”).  Vornado is the sole general partner of, and owned approximately 92.4% of the common limited partnership interest in the Operating Partnership at March 31, 2010.  All references to “we,” “us,” “our,” the “Company” and “Vornado” refer to Vornado Realty Trust and its consolidated subsidiaries, including the Operating Partnership.

 

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

 

2.     Basis of Presentation

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

 

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

 

3.      Recently Issued Accounting Literature

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

 

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

 

 

8


VORNADO REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

 

4.       Investments in Partially Owned Entities

 

Toys “R” Us (“Toys”)

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

 

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

(Amounts in thousands)

 

Balance as of

 

Balance Sheet:

 

January 30, 2010

 

October 31, 2009

 

Assets

 

$

11,770,000

 

$

12,589,000

 

Liabilities

 

 

10,138,000

 

 

11,198,000

 

Noncontrolling interests

 

 

32,000

 

 

112,000

 

Toys “R” Us, Inc. equity

 

 

1,600,000

 

 

1,279,000

 

 

 

 

For the Three Months Ended

 

Income Statement:

 

January 30, 2010

 

January 31, 2009

 

Total revenue

 

$

5,857,000

 

$

5,461,000

 

Net income attributable to Toys

 

 

379,000

 

 

291,000

 

 

 

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

 

As of March 31, 2010, we own 32.4% of the outstanding common stock of Alexander’s.  We manage, lease and develop Alexander’s properties pursuant to agreements which expire in March of each year and are automatically renewable. As of March 31, 2010, Alexander’s owed us $58,660,000 in fees under these agreements. 

 

Based on Alexander’s March 31, 2010 closing share price of $299.13, the market value (“fair value” pursuant to ASC 820) of our investment in Alexander’s is $494,781,000, or $297,600,000 in excess of the March 31, 2010 carrying amount on our consolidated balance sheet.  As of March 31, 2010, the carrying amount of our investment in Alexander’s, excluding amounts owed to us, exceeds our share of the equity in the net assets of Alexander’s by approximately $60,226,000.  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 their real estate (land and buildi ngs).  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 or loss.  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, 2010

 

December 30, 2009

 

Assets

 

$

1,696,000

 

$

1,704,000

 

Liabilities

 

 

1,366,000

 

 

1,389,000

 

Noncontrolling interests

 

 

2,000

 

 

2,000

 

Shareholders’ equity

 

 

328,000

 

 

313,000

 

 

 

For the Three Months Ended

 

Income Statement:

 

March 31, 2010

 

March 31, 2009

 

Total revenue

 

$

59,000

 

$

53,000

 

Net income attributable to Alexander’s

 

 

15,000

 

 

46,000

 

 

 

9


VORNADO REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

 

4.       Investments in Partially Owned Entities - continued

 

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

 

As of March 31, 2010, we own 18,468,969 Lexington common shares, or approximately 13.9% of Lexington’s common equity.  We account for our investment in Lexington on the equity method because we believe we have the ability to exercise significant influence over Lexington’s operating and financial policies, based on, among other factors, our representation on Lexington’s Board of Trustees and the level of our ownership in Lexington as compared to other shareholders.  We record our pro rata share of Lexington’s net income or loss on a one-quarter lag basis because we file our consolidated financial statements on Form 10-K and 10-Q prior to the time that Lexington files its financial statements. 

 

Based on Lexington’s March 31, 2010 closing share price of $6.51, the market value (“fair value” pursuant to ASC 820) of our investment in Lexington was $120,233,000, or $60,833,000 in excess of the March 31, 2010 carrying amount on our consolidated balance sheet.  As of March 31, 2010, the carrying amount of our investment in Lexington was less than our share of the equity in the net assets of Lexington by approximately $63,000,000.  This basis difference resulted primarily from $107,882,000 of non-cash impairment charges we recognized during 2008.  The remainder of the basis difference related to 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 their carrying amounts in Lexington’s consolidated financial statements.  We are amortizing the basis difference related to the buildings into earnings as an adjustment to depreciation expense over their estimated useful lives.  This depreciation 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, 2009

 

September 30, 2009

 

Assets

 

$

3,580,000

 

$

3,702,000

 

Liabilities

 

 

2,283,000

 

 

2,344,000

 

Noncontrolling interests

 

 

89,000

 

 

94,000

 

Shareholders’ equity

 

 

1,208,000

 

 

1,264,000

 

 

 

 

 

 

 

For the Three Months Ended

 

Income Statement:

 

December 31, 2009

 

December 31, 2008

 

Total revenue

 

$

90,000

 

$

99,000

 

Net loss attributable to Lexington

 

 

(46,000

)

 

(14,000

)

 

 

 

10


VORNADO REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

 

4.       Investments in Partially Owned Entities - continued

 

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

 

(Amounts in thousands)

 

Balance as of

 

Investments:  

 

March 31, 2010

 

December 31, 2009

 

Toys

 

$

517,497

 

$

409,453

 

 

 

 

 

 

 

 

 

Alexander’s

 

$

197,181

 

$

193,174

 

Partially owned office buildings

 

 

159,566

 

 

158,444

 

India real estate ventures

 

 

125,529

 

 

93,322

 

Lexington

 

 

59,400

 

 

55,106

 

Other equity method investments

 

 

297,800

 

 

299,786

 

 

 

$

839,476

 

$

799,832

 

 

(Amounts in thousands)

 

For the Three Months
Ended March 31,

 

Our Share of Net Income (Loss):

 

2010

 

2009

 

Toys:

 

 

 

 

 

 

 

32.7% share of:

 

 

 

 

 

 

 

Equity in net income, before income taxes

 

$

173,550

 

$

148,385

 

Income tax expense

 

 

(49,710

)

 

(53,091

)

Equity in net income

 

 

123,840

 

 

95,294

 

Interest and other income

 

 

2,030

 

 

1,853

 

 

 

$

125,870

 

$

97,147

 

Alexander’s:

 

 

 

 

 

 

 

32.4% share of:

 

 

 

 

 

 

 

Equity in net income before stock appreciation rights

 

$

3,777

 

$

3,855

 

Reversal of stock appreciation rights compensation expense

 

 

 

 

11,105

 

Equity in net income

 

 

3,777

 

 

14,960

 

Management and leasing fees

 

 

2,078

 

 

1,893

 

Development fees

 

 

605

 

 

1,280

 

 

 

$

6,460

 

$

18,133

 

 

 

 

 

 

 

 

 

Lexington – 13.9% share in 2010 and 16.1% share in 2009 of
equity in net income (loss)

 

$

6,045

(1)

$

(3,039

)

 

 

 

 

 

 

 

 

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

 

 

1,651

 

 

(137

)

 

 

 

 

 

 

 

 

Other, net (2)

 

 

(2,812

)

 

(4,367

)

 

 

$

4,884

 

$

(7,543

)

_________________________

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

 

(2)     Represents equity in net income (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.

 

 

 

11


VORNADO REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

 

4.      Investments in Partially Owned Entities - continued

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



 

100% of
Partially Owned Entities’ Debt at


(Amounts in thousands)

 

March 31,
2010

 

December 31,
2009

Toys (32.7% interest) (as of January 30, 2010 and October 31, 2009, respectively):

 

 

 

 

 

 

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

 

$

926,444

 

$

925,931

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

 

 

714,849

 

 

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

 

 

 

 

418,777

$804 million secured term loan facility, due 2012, LIBOR plus 4.25%
(4.50% at March 31, 2010)

 

 

798,079

 

 

797,911

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

 

 

561,872

 

 

578,982

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

 

 

491,902

 

 

490,613

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

 

 

382,469

 

 

381,293

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

 

 

340,082

 

 

338,989

4.51% Spanish real estate facility, due 2013

 

 

179,835

 

 

191,436

$181 million unsecured term loan facility, due 2013, LIBOR plus 5.00%
(5.25% at March 31, 2010)

 

 

180,492

 

 

180,456

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

 

 

172,489

 

 

172,902

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

 

 

98,719

 

 

101,861

4.51% French real estate facility, due 2013

 

 

86,755

 

 

92,353

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

 

 

21,030

 

 

21,022

Mortgage loan, due 2010, LIBOR plus 1.30%

 

 

 

 

800,000

Japan borrowings, due 2010 – 2011

 

 

 

 

168,720

European and Australian asset-based revolving credit facility, due 2012,
LIBOR/EURIBOR plus 4.00%

 

 

 

 

102,760

Other

 

 

148,030

 

 

136,206

 

 

 

5,103,047

 

 

5,900,212

Alexander’s (32.4% interest):

 

 

 

 

 

 

731 Lexington Avenue mortgage note payable collateralized by the office space,
due in February 2014, with interest at 5.33% (prepayable without penalty after December 2013)

 

 

360,170

 

 

362,989

731 Lexington Avenue mortgage note payable, collateralized by the retail space,
due in July 2015, with interest at 4.93% (prepayable without penalty after December 2013)

 

 

320,000

 

 

320,000

Rego Park construction loan payable, due in December 2010, LIBOR plus 1.20%
(1.45% at March 31, 2010)

 

 

272,302

 

 

266,411

Kings Plaza Regional Shopping Center mortgage note payable, due in June 2011,
with interest at 7.46% (prepayable without penalty after December 2010)

 

 

154,651

 

 

183,319

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

 

 

78,246

 

 

78,246

Paramus mortgage note payable, due in October 2011, with interest at 5.92%
(prepayable without penalty)

 

 

68,000

 

 

68,000

 

 

 

1,253,369

 

 

1,278,965

Lexington (13.9% interest) (as of December 31, 2009 and September 30, 2009, respectively)
Mortgage loans collateralized by the trust’s real estate, due from 2010 to 2037, with a weighted
average interest rate of 5.67% at December 31, 2009 (various prepayment terms)

 

 

2,077,849

 

 

2,132,253

 

 

 

 

 

 

 

 

 

12


VORNADO REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

 

4.      Investments in Partially Owned Entities - continued

 

 

 

100% of
Partially Owned Entities’ Debt at

(Amounts in thousands)

 

March 31,
2010

 

December 31,
2009

Partially owned office buildings:

 

 

 

 

 

 

Kaempfer Properties (2.5% and 5.0% interests in two partnerships) mortgage notes payable,
collateralized by the partnerships’ real estate, due 2011, with a weighted
average interest rate of 5.84% at March 31, 2010 (various prepayment terms)

 

$

140,989

 

$

141,547

100 Van Ness, San Francisco office complex (9% interest) up to $132 million construction loan payable,
due in July 2013, LIBOR plus 2.75% (3.00% at March 31, 2010) with an interest rate floor of
6.50% and interest rate cap of 7.00%

 

 

85,249

 

 

85,249

330 Madison Avenue (25% interest) $150,000 mortgage note payable, due in June 2015, LIBOR
plus 1.50% (1.75% at March 31, 2010)

 

 

150,000

 

 

150,000

Fairfax Square (20% interest) mortgage note payable, due in December 2014, with interest at 7.00%
(prepayable without penalty after July 2014)

 

 

72,321

 

 

72,500

Rosslyn Plaza (46% interest) mortgage note payable, due in December 2011, LIBOR plus 1.0%
(1.25% at March 31, 2010)

 

 

56,680

 

 

56,680

West 57th Street (50% interest) mortgage note payable, due in February 2014, with interest at 4.94%
(prepayable without penalty)

 

 

23,165

 

 

29,000

825 Seventh Avenue (50% interest) mortgage note payable, due in October 2014,
with interest at 8.07% (prepayable without penalty after April 2014)

 

 

20,670

 

 

20,773

India Real Estate Ventures:

 

 

 

 

 

 

TCG Urban Infrastructure Holdings (25% interest) mortgage notes payable, collateralized by the
entity’s real estate, due from 2010 to 2022, with a weighted average interest rate of 13.54% at
March 31, 2010 (various prepayment terms)

 

 

184,488

 

 

178,553

India Property Fund L.P. (36.5% interest) revolving credit facility, repaid upon maturity in
March 2010

 

 

 

 

77,000

Waterfront Associates, LLC (2.5% interest) construction and land loan up to $250 million payable,
due in September 2011 with a six month extension option, LIBOR plus 2.00% - 3.50%
(2.47% at March 31, 2010)

 

 

206,500

 

 

183,742

Verde Realty Operating Partnership (8.3% interest) mortgage notes payable,
collateralized by the partnerships’ real estate, due from 2010 to 2025, with a weighted average
interest rate of 5.89% at March 31, 2010 (various prepayment terms)

 

 

607,474

 

 

607,089

Green Courte Real Estate Partners, LLC (8.3% interest) (as of December 31, 2009 and September 30,
2009), mortgage notes payable, collateralized by the partnerships’ real estate, due from 2010 to 2018,
 with a weighted average interest rate of 5.29% at March 31, 2010 (various prepayment terms)

 

 

302,927

 

 

304,481

Monmouth Mall (50% interest) mortgage note payable, due in September 2015, with interest
at 5.44%
(prepayable without penalty after July 2015)

 

 

165,000

 

 

165,000

San Jose, California Ground-up Development (45% interest) construction loan, due in March 2013,
LIBOR plus 4.00% (4.25% at March 31, 2010)

 

 

132,008

 

 

132,570

Wells/Kinzie Garage (50% interest) mortgage note payable, due in December 2013, with interest at 6.87%

 

 

14,614

 

 

14,657

Orleans Hubbard Garage (50% interest) mortgage note payable, due in December 2013, with interest at
6.87%

 

 

10,072

 

 

10,101

Other

 

 

430,979

 

 

425,717

 

 

 

Based on our ownership interest in the partially owned entities above, our pro rata share of the debt of these partially owned entities was $2,822,363,000 and $3,149,640,000 as of March 31, 2010 and December 31, 2009, respectively.

13


VORNADO REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

 

 

5.    Marketable Securities

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

 

 

 

As of March 31, 2010

 

As of December 31, 2009

 

(Amounts in thousands)

 

Carrying
Amount

 

Fair
Value

 

Carrying
Amount

 

Fair
Value

 

Marketable equity securities

 

$

111,023

 

$

111,023

 

$

79,925

 

$

79,925

 

Debt securities held-to-maturity

 

 

302,931

 

 

324,946

 

 

300,727

 

 

319,393

 

 

 

$

413,954

 

$

435,969

 

$

380,652

 

$

399,318

 

 

At March 31, 2010, aggregate unrealized gains and losses were $30,177,000 and $922,000, respectively.  At December 31, 2009, aggregate unrealized gains and losses were $13,026,000 and $1,223,000, respectively. 

 

 

 

6.       Mezzanine Loans Receivable

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

 

 (Amounts in thousands)

 

 

 

Interest Rate
as of

 

Carrying Amount as of

 

Mezzanine Loans Receivable:

 

Maturity

 

March 31,
2010

 

March 31,
2010

 

December 31,
2009

 

Riley HoldCo Corp. 

 

02/15

 

10.00%

 

$

74,437

 

$

74,437

 

Tharaldson Lodging Companies

 

04/11

 

4.47%

 

 

73,839

 

 

74,701

 

280 Park Avenue

 

06/16

 

10.25%

 

 

72,282

 

 

73,750

 

Equinox

 

(1)

 

(1)

 

 

(1)

 

97,968

 

Other, net

 

11/11-8/15

 

1.35% - 8.95%

 

 

91,957

 

 

73,168

 

 

 

 

 

 

 

 

312,515

 

 

394,024

 

Valuation allowance (2)

 

 

 

 

 

 

(185,738

)

 

(190,738

)

 

 

 

 

 

 

$

126,777

 

$

203,286

 

_____________________

 

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

 

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

 

14


VORNADO REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

 

 

7.       Identified Intangible Assets and Intangible Liabilities

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

 

 

 

Balance as of

 

(Amounts in thousands)

 

March 31,
2010

 

December 31,
2009

 

Identified intangible assets (included in other assets):

 

 

 

 

 

 

 

Gross amount

 

$

755,075

 

$

755,467

 

Accumulated amortization

 

 

(330,693

)

 

(312,957

)

Net

 

$

424,382

 

$

442,510

 

Identified intangible liabilities (included in deferred credit):

 

 

 

 

 

 

 

Gross amount

 

$

942,917

 

$

942,968

 

Accumulated amortization

 

 

(327,505

)

 

(309,476

)

Net

 

$

615,412

 

$

633,492

 

 

Amortization of acquired below-market leases, net of acquired above-market leases resulted in an increase to rental income of $15,907,000 and $17,982,000 for the three months ended March 31, 2010 and 2009, respectively.  Estimated annual amortization of acquired below-market leases, net of acquired above-market leases for each of the five succeeding years commencing January 1, 2011 is as follows:

 

(Amounts in thousands)

 

 

 

 

2011

 

$

58,723

 

2012

 

 

54,430

 

2013

 

 

46,496

 

2014

 

 

40,537

 

2015

 

 

37,686

 

 

Amortization of all other identified intangible assets (a component of depreciation and amortization expense) was $14,914,000 and $15,786,000 for the three months ended March 31, 2010 and 2009, respectively. Estimated annual amortization of all other identified intangible assets including acquired in-place leases, customer relationships, and third party contracts for each of the five succeeding years commencing January 1, 2011 is as follows:

 

(Amounts in thousands)

 

 

 

 

2011

 

$

51,775

 

2012

 

 

46,446

 

2013

 

 

38,957

 

2014

 

 

20,149

 

2015

 

 

15,043

 

 

We are a tenant under ground leases for certain properties.  Amortization of these acquired below-market leases resulted in an increase to rent expense of $509,000 and $533,000 for the three months ended March 31, 2010 and 2009, respectively.  Estimated annual amortization of these below-market leases for each of the five succeeding years commencing January 1, 2011 is as follows:

 

(Amounts in thousands)

 

 

 

 

2011

 

$

2,157

 

2012

 

 

2,157

 

2013

 

 

2,157

 

2014

 

 

2,157

 

2015

 

 

2,157

 

15


VORNADO REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

 

8.       Debt 

The following is a summary of our debt:

 (Amounts in thousands)

 

 

 

 

 

Balance at

 

Notes and mortgages payable:

 

Maturity (1)

 

Interest Rate at
March 31, 2010

 

March 31,
2010

 

December 31,
2009

 

Fixed rate:

 

 

 

 

 

 

 

 

 

 

 

New York Office:

 

 

 

 

 

 

 

 

 

 

 

1290 avenue of the Americas

 

01/13

 

5.97%

 

$

431,976

 

$

434,643

 

350 Park Avenue

 

01/12

 

5.48%

 

 

430,000

 

 

430,000

 

770 Broadway

 

03/16

 

5.65%

 

 

353,000

 

 

353,000

 

888 Seventh Avenue

 

01/16

 

5.71%

 

 

318,554

 

 

318,554

 

Two Penn Plaza

 

02/11

 

4.97%

 

 

281,182

 

 

282,492

 

909 Third Avenue

 

04/15

 

5.64%

 

 

209,735

 

 

210,660

 

Eleven Penn Plaza

 

12/11

 

5.20%

 

 

202,211

 

 

203,198

 

 

 

 

 

 

 

 

 

 

 

 

 

Washington, DC Office:

 

 

 

 

 

 

 

 

 

 

 

Skyline Place

 

02/17

 

5.74%

 

 

678,000

 

 

678,000

 

Warner Building

 

05/16

 

6.26%

 

 

292,700

 

 

292,700

 

River House Apartments

 

04/15

 

5.43%

 

 

195,546

 

 

195,546

 

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

 

01/25

 

7.09%

 

 

112,872

 

 

113,267

 

Bowen Building

 

06/16

 

6.14%

 

 

115,022

 

 

115,022

 

Reston Executive I, II, and III

 

01/13

 

5.57%

 

 

93,000

 

 

93,000

 

1101 17th, 1140 Connecticut, 1730 M and 1150 17th Street

 

08/10

 

6.74%

 

 

85,392

 

 

85,910

 

1550 and 1750 Crystal Drive

 

11/14

 

7.08%

 

 

81,235

 

 

81,822

 

Universal Buildings

 

04/14

 

6.35%

 

 

105,746

 

 

106,630

 

1235 Clark Street

 

07/12

 

6.75%

 

 

53,011

 

 

53,252

 

2231 Crystal Drive

 

08/13

 

7.08%

 

 

48,004

 

 

48,533

 

1750 Pennsylvania Avenue

 

06/12

 

7.26%

 

 

45,685

 

 

45,877

 

241 18th Street

 

10/10

 

6.82%

 

 

45,345

 

 

45,609

 

2011 Crystal Drive

 

08/17

 

7.30%

 

 

82,046

 

 

82,178

 

1225 Clark Street

 

08/13

 

7.08%

 

 

28,714

 

 

28,925

 

1800, 1851 and 1901 South Bell Street

 

12/11

 

6.91%

 

 

17,104

 

 

19,338

 

 

 

 

 

 

 

 

 

 

 

 

 

Retail:

 

 

 

 

 

 

 

 

 

 

 

Springfield Mall (including present value of purchase option) (2)

 

10/12-04/13

 

5.45%

 

 

242,031

 

 

242,583

 

Montehiedra Town Center

 

07/16

 

6.04%

 

 

120,000

 

 

120,000

 

Broadway Mall

 

07/13

 

5.33%

 

 

91,997

 

 

92,601

 

828-850 Madison Avenue Condominium

 

06/18

 

5.29%

 

 

80,000

 

 

80,000

 

Las Catalinas Mall

 

11/13

 

6.97%

 

 

58,923

 

 

59,304

 

Other (3)

 

12/10-05/36

 

4.75%-12.40%

 

 

155,955

 

 

156,709

 

 

 

 

 

 

 

 

 

 

 

 

 

Merchandise Mart:

 

 

 

 

 

 

 

 

 

 

 

Merchandise Mart

 

12/16

 

5.57%

 

 

550,000

 

 

550,000

 

High Point Complex (4)

 

09/16

 

10.35%

 

 

217,136

 

 

217,815

 

Boston Design Center

 

09/15

 

5.02%

 

 

69,378

 

 

69,667

 

Washington Design Center

 

11/11

 

6.95%

 

 

44,042

 

 

44,247

 

 

 

 

 

 

 

 

 

 

 

 

 

Other:

 

 

 

 

 

 

 

 

 

 

 

555 California Street

 

05/10-09/11

 

5.94%

 

 

664,750

 

 

664,117

 

Industrial Warehouses

 

10/11

 

6.95%

 

 

24,731

 

 

24,813

 

Total fixed interest notes and mortgages payable

 

 

 

6.01%

 

$

6,625,023

 

$

6,640,012

 

___________________

See notes on page 18.

 

16


VORNADO REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

 

8.       Debt - continued

 (Amounts in thousands)

 

 

 

 

 

 

Balance at

 

Notes and mortgages payable:

Maturity (1)

 

Spread over
LIBOR

 

Interest Rate at
March 31, 2010

 

March 31,
2010

 

December 31,
2009

 

Variable rate:

 

 

 

 

 

 

 

 

 

 

 

 

New York Office:

 

 

 

 

 

 

 

 

 

 

 

 

Manhattan Mall

02/12

 

L+55

 

0.78%

 

$

232,000

 

$

232,000

 

866 UN Plaza

05/11

 

L+40

 

0.65%

 

 

44,978

 

 

44,978

 

Washington, DC Office:

 

 

 

 

 

 

 

 

 

 

 

 

2101 L Street

02/13

 

L+120

 

1.45%

 

 

150,000

 

 

150,000

 

Courthouse Plaza One and Two

01/15

 

L+75

 

0.98%

 

 

63,666

 

 

65,133

 

220 20th Street (construction loan)

01/11

 

L+115

 

1.40%

 

 

79,472

 

 

75,629

 

West End 25 (construction loan)

02/11

 

L+130

 

1.55%

 

 

90,330

 

 

85,735

 

River House Apartments

04/18

 

(5)

 

1.60%

 

 

64,000

 

 

64,000

 

Retail:

 

 

 

 

 

 

 

 

 

 

 

 

Green Acres Mall

02/13

 

L+140

 

1.65%

 

 

335,000

 

 

335,000

 

Bergen Town Center (construction loan)

03/13

 

L+150

 

1.75%

 

 

261,903

 

 

261,903

 

Beverly Connection (6)

07/12

 

L+350(6)

 

5.00%

 

 

100,000

 

 

100,000

 

4 Union Square South

04/14

 

L+325

 

3.50%

 

 

75,000

 

 

75,000

 

435 Seventh Avenue (7)

08/14

 

L+300(7)

 

5.00%

 

 

52,000

 

 

52,000

 

Other

11/12

 

L+375

 

3.98%

 

 

22,987

 

 

22,758

 

Other:

 

 

 

 

 

 

 

 

 

 

 

 

220 Central Park South

11/10

 

L+235 – L+245

 

2.61%

 

 

123,750

 

 

123,750

 

Other (8)

5/10(8) – 11/11

 

Various

 

1.73% - 2.75%

 

 

112,424

 

 

117,868

 

Total Variable Interest Notes and Mortgages Payable

 

 

 

 

1.95%

 

 

1,807,510

 

 

1,805,754

 

Total Notes and Mortgages Payable

 

 

 

 

5.14%

 

$

8,432,533

 

$

8,445,766

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Senior unsecured notes:

 

 

 

 

 

 

 

 

 

 

 

 

Senior unsecured notes due 2015 (9)

04/15

 

 

 

4.25%

 

$

499,172

 

$

 

Senior unsecured notes due 2039 (10)

10/39

 

 

 

7.88%

 

 

460,000

 

 

446,134

 

Senior unsecured notes due 2010

12/10

 

 

 

4.75%

 

 

148,267

 

 

148,240

 

Senior unsecured notes due 2011

02/11

 

 

 

5.60%

 

 

117,351

 

 

117,342

 

Total senior unsecured notes

 

 

 

 

5.80%

 

$

1,224,790

 

$

711,716

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3.88% exchangeable senior debentures due 2025
(see page 19)

04/12

 

 

 

5.32%

 

$

486,061

 

$

484,457

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Convertible senior debentures: (see page 19)

 

 

 

 

 

 

 

 

 

 

 

 

2.85% due 2027

04/12

 

 

 

5.45%

 

$

21,380

 

$

21,251

 

3.63% due 2026

11/11

 

 

 

5.32%

 

 

425,881

 

 

424,207

 

Total convertible senior debentures

 

 

 

 

5.33%

 

$

447,261

 

$

445,458

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unsecured revolving credit facilities:

 

 

 

 

 

 

 

 

 

 

 

 

$1.595 billion unsecured revolving credit facility

09/12

 

L+55

 

0.76%

 

$

250,217

 

$

427,218

 

$.965 billion unsecured revolving credit facility
($30,652 reserved for outstanding letters of credit)

06/11

 

L+55

 

0.76%

 

 

250,000

 

 

425,000

 

Total unsecured revolving credit facilities

 

 

 

 

0.76%

 

$

500,217

 

$

852,218

 

 

____________________________

See notes on the following page.

 

 

 

17


VORNADO REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

 

8.    Debt - continued

Notes to preceding tabular information (Amounts in thousands):

 

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

 

(2)          In the fourth quarter of 2009, we requested that the Springfield Mall mortgage loan with a principal balance of $164,251 be placed with the special servicer.  In March 2010, we received notice from the special servicer that the loan was in default.  We are in negotiations with the special servicer; there can be no assurance as to the timing and ultimate resolution of these negotiations.

 

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

 

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

 

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

 

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

 

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

 

(8)          In April 2010, we extended the maturity date of a $59,000 construction loan to May 7, 2010 and are in negotiations to further extend this loan.  We are also in negotiations to extend or refinance a loan with an outstanding balance of $36,000, which matured on October 29, 2009.

 

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

 

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

 

 

 

 

 

18


VORNADO REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

 

8.    Debt - continued

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

 

(Amounts in thousands, except per share
amounts)

 

$1.4 Billion Convertible
Senior Debentures

 

$1 Billion Convertible
Senior Debentures

 

$500 Million Exchangeable
Senior Debentures

 

Balance Sheet:

 

March 31,
2010

 

December 31,
2009

 

March 31,
2010

 

December 31,
2009

 

March 31,
2010

 

December 31,
2009

 

Principal amount of debt component

$

22,479

$

22,479

$

437,297

$

437,297

$

499,982

$

499,982

 

Unamortized discount

 

(1,099

)

(1,228

)

(11,416

)

(13,090

)

(13,921

)

(15,525

)

Carrying amount of debt component

$

21,380

$

21,251

$

425,881

$

424,207

$

486,061

$

484,457

 

Carrying amount of equity component

$

2,104

$

2,104

$

23,457

$

23,457

$

32,301

$

32,301

 

Effective interest rate

 

5.45

%

5.45

%

5.32

%

5.32

%

5.32

%

5.32

%

Maturity date (period through which
discount is being amortized)

 

4/1/12

 

 

 

11/15/11

 

 

 

4/15/12

 

 

 

Conversion price per share, as adjusted

$

157.18

 

 

$

148.46

 

 

$

87.17

 

 

 

Number of shares on which the
aggregate consideration to be
delivered upon conversion is
determined

 

(1)

 

 

(1)

 

 

5,736

 

 

 

__________________

(1)     Pursuant to the provisions of ASC 470-20, we are required to disclose the conversion price and the number of shares on which the aggregate consideration to be delivered upon conversion is determined (principal plus excess value).  Our convertible senior debentures require that upon conversion, the entire principal amount is to be settled in cash, and at our option, any excess value above the principal amount may be settled in cash or common shares.  Based on the March 31, 2010 closing share price of our common shares and the conversion prices in the table above, there was no excess value; accordingly, no common shares would be issued if these securities were settled on this date.  The number of common shares on which the aggregate consideration that would be delivered upon conversion is 143 and 2,946 common shares, respectively.

 

 

 

(Amounts in thousands)

For the Three Months Ended
March 31,

 

Income Statement:

 

2010

 

2009

 

$1.4 Billion Convertible Senior Debentures:

 

 

 

 

 

Coupon interest

$

160

$

9,852

 

Discount amortization – original issue

 

23

 

1,325

 

Discount amortization – ASC 470-20 implementation

 

106

 

6,206

 

 

$

289

$

17,383

 

 

 

 

 

 

 

$1 Billion Convertible Senior Debentures:

 

 

 

 

 

Coupon interest

$

3,963

$

8,970

 

Discount amortization – original issue

 

455

 

976

 

Discount amortization – ASC 470-20 implementation

 

1,219

 

2,614

 

 

$

5,637

$

12,560

 

 

 

 

 

 

 

$500 Million Exchangeable Senior Debentures:

 

 

 

 

 

Coupon interest

$

4,844

$

4,844

 

Discount amortization – original issue

 

379

 

358

 

Discount amortization – ASC 470-20 implementation

 

1,225

 

1,160

 

 

$

6,448

$

6,362

 

 

 

19


VORNADO REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

 

9.       Redeemable Noncontrolling Interests

 

Redeemable noncontrolling interests on our consolidated balance sheets represent Operating Partnership units held by third parties and are comprised of Class A units and Series D-10, D-11, D‑12, D-14 and D-15 (collectively, “Series D”) cumulative redeemable preferred units.  Redeemable noncontrolling interests on our consolidated balance sheets are recorded at the greater of their carrying amount or redemption value at the end of each reporting period.  Changes in the value from period to period are charged to “additional capital” in our consolidated statements of changes in equity.  Below is a table summarizing the activity of redeemable noncontrolling interests.

 

 

 

 

 

(Amounts in thousands)

 

 

 

Balance at December 31, 2008

$

1,177,978

 

Net income

 

16,821

 

Distributions

 

(18,733

)

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

 

(10,946

)

Adjustment to carry Class A redeemable units at redemption value

 

(271,856

)

Other, net

 

14,045

 

Balance at March 31, 2009

$

907,309

 

 

 

 

 

 

 

 

 

Balance at December 31, 2009

$

1,251,628

 

Net income

 

17,779

 

Distributions

 

(13,082

)

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

 

(18,128

)

Adjustment to carry Class A redeemable 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

 

 

As of March 31, 2010 and December 31, 2009, the aggregate redemption value of our Class A operating partnership units was $1,065,902,000 and $971,628,000, respectively. 

 

Redeemable noncontrolling interests exclude our Series G convertible preferred units and Series D-13 cumulative redeemable preferred units, as they are accounted for as liabilities in accordance with ASC 480, Distinguishing Liabilities and Equity, because of their possible settlement by issuing a variable number of Vornado common shares.  Accordingly the fair value of these units is included as a component of “other liabilities” on our consolidated balance sheets and aggregated $60,925,000 and $60,271,000 as of March 31, 2010 and December 31, 2009, respectively.  

 

On March 5, 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, including unit distributions,” on our consolidated statement of income.

20


VORNADO REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

10.      Fair Value Measurements

ASC 820, Fair Value Measurement and Disclosures defines fair value and establishes a framework for measuring fair value.  The objective of fair value is to determine the price that would be received upon the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (the exit price).  ASC 820 establishes a fair value hierarchy that prioritizes observable and unobservable inputs used to measure fair value into three levels: Level 1 – quoted prices (unadjusted) in active markets that are accessible at th e 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, there can be no assurance that the fair values we present herein are indicative of amounts that may ultimately be realized upon sale or other disposition of these assets.   

 

Financial Assets and Liabilities Measured at Fair Value

 

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

 

 

 

 

 

As of March 31, 2010

 

 (Amounts in thousands)

Total

 

Level 1

 

Level 2

 

Level 3

 

Marketable equity securities

$

111,023

 

$

111,023

 

$

 

$

 

Deferred compensation plan assets (included in other assets)

 

84,028

 

 

40,765

 

 

 

 

43,263

 

Short-term investments

 

15,000

 

 

15,000

 

 

 

 

 

Total assets

$

210,051

 

$

166,788

 

$

 

$

43,263

 

Mandatorily redeemable instruments (included in other
liabilities)

$

60,925

 

$

60,925

 

$

 

$

 

 

 

 

 

 

As of December 31, 2009

 

 (Amounts in thousands)

Total

 

Level 1

 

Level 2

 

Level 3

 

Marketable equity securities

$

79,925

 

$

79,925

 

$

 

$

 

Deferred compensation plan assets (included in other assets)

 

80,443

 

 

40,854

 

 

 

 

39,589

 

Short-term investments

 

40,000

 

 

40,000

 

 

 

 

 

Total assets

$

200,368

 

$

160,779

 

$

 

$

39,589

 

Mandatorily redeemable instruments (included in other
liabilities)

$

60,271

 

$

60,271

 

$

 

$

 

 

 

The fair value of Level 3 “deferred compensation plan assets” represents equity investments in certain limited partnerships.  The following is a summary of changes in these assets for the three months ended March 31, 2010.

 (Amounts in thousands)

 

Beginning
Balance

 

Total Realized/
Unrealized
Gains

 

Purchases,
 Sales, Other
Settlements and
Issuances, net

 

Ending
Balance

 

For the three months ended March 31, 2010

$

39,589

$

1,108

 

$

2,566

 

$

43,263

 

 

 

 

 

 

 

 

 

 

 

 

 

21


VORNADO REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

 

10.  Fair Value Measurements - continued

Financial Assets and Liabilities not Measured at Fair Value

 

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

 

 

As of March 31, 2010

 

As of December 31, 2009

 

(Amounts in thousands)

 

Carrying
Amount

 

Fair
Value

 

Carrying
Amount

 

Fair
Value

 

Mezzanine loans receivable

 

$

126,777

 

$

118,164

 

$

203,286

 

$

192,612

 

Debt:

 

 

 

 

 

 

 

 

 

 

 

 

 

Notes and mortgages payable

 

$

8,432,533

 

$

7,950,328

 

$

8,445,766

 

$

7,858,873

 

Senior unsecured notes

 

 

1,224,790

 

 

1,235,080

 

 

711,716

 

 

718,302

 

Exchangeable senior debentures

 

 

486,061

 

 

546,855

 

 

484,457

 

 

547,480

 

Convertible senior debentures

 

 

447,261

 

 

463,574

 

 

445,458

 

 

461,275

 

Revolving credit facility debt

 

 

500,217

 

 

500,217

 

 

852,218

 

 

852,218

 

 

 

$

11,090,862

 

$

10,696,054

 

$

10,939,615

 

$

10,438,148

 

 

 

11.  Discontinued Operations

The table below sets forth the combined results of operations of assets related to discontinued operations for the three months ended March 31, 2010 and 2009 and include the operating results of 1999 K Street, which was sold on September 1, 2009 and 15 other retail properties, which were sold during 2009.

(Amounts in thousands)

 

For the Three Months
Ended March 31,

 

 

 

2010

 

2009

 

Total revenues

 

$

 

$

3,448

 

Total expenses

 

 

 

 

856

 

Income from discontinued operations

 

$

 

$

2,592

 

 

 

 

22


VORNADO REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

 

12.    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 awards 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, 2010 and 2009 consists of stock option awards, restricted stock awards, Operating Partnership unit awards and out-performance plan awards.  In the three months ended March 31, 2010 and 2009, we recognized $6,477,000 and $10,249,000 of stock-based compensation expense, respectively. 

 

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

 

 

13.    Fee and Other Income

 

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

 


(Amounts in thousands)

 

For the Three Months
Ended March 31,

 

 

 

2010

 

2009

 

Tenant cleaning fees

 

$

13,652

 

$

14,294

 

Management and leasing fees

 

 

9,140

 

 

2,401

 

Lease termination fees

 

 

6,435

 

 

1,624

 

Other income

 

 

13,233

 

 

12,431

 

 

 

$

42,460

 

$

30,750

 

 

Fee and other income above includes management fee income from Interstate Properties, a related party, of $200,000 and $198,000 for the three months ended March 31, 2010 and 2009, respectively. The above table excludes fee income from partially owned entities, which is included in income from partially owned entities (see Note 4 – Investments in Partially Owned Entities).

 

 

14.      Interest and Other Investment Income, net

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

 

 (Amounts in thousands)

 

For the Three Months
Ended March 31,

 

 

 

2010

 

2009

 

Dividends and interest on marketable securities

 

$

7,245

 

$

6,418

 

Interest on mezzanine loans

 

 

2,715

 

 

10,324

 

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

 

 

2,763

 

 

(5,794

)

Other, net

 

 

1,985

 

 

3,111

 

 

 

$

14,708

 

$

14,059

 

__________________________

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

 

23


VORNADO REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

15.    Income Per Share

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

 

(Amounts in thousands, except per share amounts)

For The Three Months
Ended March 31,

 

 

2010

 

2009

 

Numerator:

 

 

 

 

 

 

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

$

214,552

 

$

137,518

 

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

 

 

 

2,592

 

Net income attributable to Vornado

 

214,552

 

 

140,110

 

Preferred share dividends

 

(14,267

)

 

(14,269

)

Net income attributable to common shareholders

 

200,285

 

 

125,841

 

Earnings allocated to unvested participating securities

 

(20

)

 

(41

)

Numerator for basic income per share

 

200,265

 

 

125,800

 

Impact of assumed conversions:

 

 

 

 

 

 

Convertible preferred share dividends

 

41

 

 

43

 

Net income attributable to common shareholders

$

200,306

 

$

125,843

 

Denominator:

 

 

 

 

 

 

Denominator for basic income per share – weighted average shares

 

181,542

 

 

155,991

 

Effect of dilutive securities (1):

 

 

 

 

 

 

Employee stock options and restricted share awards

 

1,831

 

 

1,038

 

Convertible preferred shares

 

72

 

 

74

 

Denominator for diluted income per share – adjusted weighted average shares and
assumed conversions

 

183,445

 

 

157,103

 

INCOME PER COMMON SHARE – BASIC:

 

 

 

 

 

 

Income from continuing operations, net

$

1.10

 

$

0.79

 

Income from discontinued operations, net

 

 

 

0.02

 

Net income per common share

$

1.10

 

$

0.81

 

INCOME PER COMMON SHARE – DILUTED:

 

 

 

 

 

 

Income from continuing operations, net

$

1.09

 

$

0.78

 

Income from discontinued operations, net

 

 

 

0.02

 

Net income per common share

$

1.09

 

$

0.80

 

__________________

(1)       The effect of dilutive securities in the three months ended March 31, 2010 and 2009 excludes an aggregate of 21,029 and 21,576 weighted average common share equivalents, respectively, as their effect was anti-dilutive. 

 

 

24


VORNADO REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

 

 

16.    Comprehensive Income

 (Amounts in thousands)

 

For The Three Months
Ended March 31,

 

 

 

2010

 

2009

 

Net income

 

$

232,544

 

$

156,431

 

Other comprehensive income (loss)

 

 

1,504

 

 

(39,898

)

Comprehensive income

 

 

234,048

 

 

116,533

 

Less:  Comprehensive income attributable to noncontrolling interests

 

 

18,098

 

 

12,846

 

Comprehensive income attributable to Vornado

 

$

215,950

 

$

103,687

 

 

Substantially all of other comprehensive income (loss) for the three months ended March 31, 2010 and 2009 relates to income or losses from the mark-to-market of marketable equity securities classified as available-for-sale and our share of other comprehensive income or losses of partially owned entities.

 

 

17.    Retirement Plan

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

 

 

 

 

 

25


VORNADO REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

 

18.    Commitments and Contingencies

Insurance 

 

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

 

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

 

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

 

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

 

Other Commitments and Contingencies

 

Our mortgage loans are non-recourse to us.  However, in certain cases we have provided guarantees or master leased tenant space.  These guarantees and master leases terminate either upon the satisfaction of specified circumstances or repayment of the underlying loans.  As of March 31, 2010, the aggregate dollar amount of these guarantees and master leases is approximately $130,646,000.

 

At March 31, 2010, $30,652,000 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 $18,360,000.

 

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

 

26


VORNADO REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

 

18.    Commitments and Contingencies - continued

 

Litigation  

 

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

 

On January 8, 2003, Stop & Shop filed a complaint with the United States District Court for the District of New Jersey (“USDC-NJ”) claiming that we had no right to reallocate and therefore continue to collect the $5,000,000 of annual rent from Stop & Shop pursuant to the Master Agreement and Guaranty, because of the expiration of the East Brunswick, Jersey City, Middletown, Union and Woodbridge leases to which the $5,000,000 of additional rent was previously allocated. Stop & Shop asserted that a prior order of the Bankruptcy Court for the Southern District of New York dated February 6, 2001, as modified on appeal to the District Court for the Southern District of New York on February 13, 2001, froze our right to reallocate which effectively terminated our right to collect the additional rent from Stop & Shop. On March 3, 2003, a fter 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 mot ions for summary judgment. Both parties appealed the Court’s decision and on December 14, 2006, the Appellate Court division issued a decision affirming the Court’s decision.  On January 16, 2007, we filed a motion for the reconsideration of one aspect of the Appellate Court’s decision which was denied on March 13, 2007.  Discovery is now complete.  On October 19, 2009, Stop & Shop filed a motion for leave to amend its pleadings to assert new claims for relief, including a claim for damages in an unspecified amount, and an additional affirmative defense.  On April 26, 2010, Stop and Shop’s motion was denied.  We anticipate that a trial date will be set for some time in 2010.  We intend to continue to vigorously pursue our claims against Stop & Shop.  In our opinion, after consultation with legal counsel, the outcome of such matters will not have a material effect on our financial condition, results of operations or cash flows.

 

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

 

In July 2005, we acquired H Street Building Corporation (“H Street”) which has a subsidiary that owns, among other things, a 50% tenancy in common interest in land located in Arlington County, Virginia, known as "Pentagon Row," leased to two tenants, Street Retail, Inc. and Post Apartment Homes, L.P .  In April 2007, H Street acquired the remaining 50% interest in that fee.  On September 25, 2008, both tenants filed suit against us and the former owners claiming the right of first offer to purchase the fee interest, damages in excess of $75,000,000 and punitive damages.  On April 6, 2010, the Trial Court ruled, in favor of the tenants, that we sell the land to the tenants for a net sales price of $14,992,000, representing the Trial Court’s allocation of our purchase price for H Street.  The request for damages and punitive da mages was denied.  We intend to appeal the Trial Court’s decision and expect that the transfer of the land will be stayed pending the appeal.  As a result of the Trial Court’s decision, we have recorded a $10,056,000 loss accrual in the three months ended March 31, 2010, primarily representing previously recognized rental income.

27


VORNADO REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

 

19.          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, 2010 and 2009.

 

(Amounts in thousands)

 

For the Three Months Ended March 31, 2010

 

 

 

 

Total

 

New York
Office

 

Washington, DC
Office

 

Retail

 

Merchandise
Mart

 

Toys

 

Other (3)

 

Property rentals

 

$

524,121

 

$

192,604

 

$

139,880

 

$

95,764

 

$

61,444

 

$

 

$

34,429

 

Straight-line rents:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Contractual rent increases

 

 

13,500

 

 

6,893

 

 

2,197

 

 

3,836

 

 

383

 

 

 

 

191

 

Amortization of free rent

 

 

7,422

 

 

901

 

 

2,457

 

 

2,540

 

 

1,114

 

 

 

 

410

 

Amortization of acquired below-
market leases, net

 

 

15,907

 

 

9,205

 

 

732

 

 

4,541

 

 

(121

)

 


 

 

1,550

 

Total rentals

 

 

560,950

 

 

209,603

 

 

145,266

 

 

106,681

 

 

62,820

 

 

 

 

36,580

 

Tenant expense reimbursements

 

 

92,921

 

 

33,252

 

 

15,750

 

 

37,643

 

 

4,087

 

 

 

 

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

 

 

6,435

 

 

728

 

 

446

 

 

3,408

 

 

1,853

 

 

 

 

 

Other

 

 

13,233

 

 

4,410

 

 

5,867

 

 

740

 

 

2,000

 

 

 

 

216

 

Total revenues

 

 

696,331

 

 

269,868

 

 

175,425

 

 

148,696

 

 

70,774

 

 

 

 

31,568

 

Operating expenses

 

 

279,055

 

 

115,049

 

 

56,663

 

 

53,574

 

 

39,219

 

 

 

 

14,550

 

Depreciation and amortization

 

 

135,824

 

 

43,707

 

 

36,683

 

 

27,981

 

 

13,355

 

 

 

 

14,098

 

General and administrative

 

 

48,730

 

 

4,579

 

 

5,897

 

 

7,005

 

 

7,230

 

 

 

 

24,019

 

Litigation loss accrual

 

 

10,056

 

 

 

 

10,056

 

 

 

 

 

 

 

 

 

Total expenses

 

 

473,665

 

 

163,335

 

 

109,299

 

 

88,560

 

 

59,804

 

 

 

 

52,667

 

Operating income (loss)

 

 

222,666

 

 

106,533

 

 

66,126

 

 

60,136

 

 

10,970

 

 

 

 

(21,099

)

Income applicable to Alexander’s

 

 

6,460

 

 

193

 

 

 

 

211

 

 

 

 

 

 

6,056

 

Income applicable to Toys

 

 

125,870

 

 

 

 

 

 

 

 

 

 

125,870

 

 

 

Income (loss) from partially owned entities

 

 

4,884

 

 

1,110

 

 

(192

)

 

1,180

 

 

176

 

 

 

 

2,610

 

Interest and other investment income, net

 

 

14,708

 

 

164

 

 

27

 

 

5

 

 

13

 

 

 

 

14,499

 

Interest and debt expense

 

 

(139,735

)

 

(32,686

)

 

(34,484

)

 

(17,899

)

 

(12,787

)

 

 

 

(41,879

)

Net gain on dispostion of wholly owned and
partially owned assets other than
depreciable real estate

 

 

3,305

 

 

 

 

 

 

 

 

796

 

 

 

 

2,509

 

Income (loss) before income taxes

 

 

238,158

 

 

75,314

 

 

31,477

 

 

43,633

 

 

(832

)

 

125,870

 

 

(37,304

)

Income tax expense

 

 

(5,614

)

 

(474

)

 

(720

)

 

(35

)

 

(194

)

 

 

 

(4,191

)

Net income (loss)

 

 

232,544

 

 

74,840

 

 

30,757

 

 

43,598

 

 

(1,026

)

 

125,870

 

 

(41,495

)

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

 

 

(17,992

)

 

(2,292

)

 

 

 

242

 

 

 

 

 

 

(15,942

)

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 page 30.

28


VORNADO REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

 

19.          Segment Information – continued

(Amounts in thousands)

 

For the Three Months Ended March 31, 2009

 

 

 

 

Total

 

New York
Office

 

Washington, DC
Office

 

Retail

 

Merchandise
Mart

 

Toys

 

Other (3)

 

Property rentals

 

$

507,083

 

$

188,762

 

$

129,374

 

$

88,150

 

$

63,001

 

$

 

$

37,796

 

Straight-line rents:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Contractual rent increases

 

 

13,496

 

 

6,715

 

 

2,619

 

 

3,454

 

 

619

 

 

 

 

89

 

Amortization of free rent

 

 

11,226

 

 

1,540

 

 

3,424

 

 

6,308

 

 

22

 

 

 

 

(68

)

Amortization of acquired below-
market leases, net

 

 

17,982

 

 

9,923

 

 

1,102

 

 

5,269

 

 

29

 

 


 

 

1,659

 

Total rentals

 

 

549,787

 

 

206,940

 

 

136,519

 

 

103,181

 

 

63,671

 

 

 

 

39,476

 

Tenant expense reimbursements

 

 

98,029

 

 

35,157

 

 

18,530

 

 

37,068

 

 

5,319

 

 

 

 

1,955

 

Fee and other income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Tenant cleaning fees

 

 

14,294

 

 

18,294

 

 

 

 

 

 

 

 

 

 

(4,000

)

Management and leasing fees

 

 

2,401

 

 

1,095

 

 

1,965

 

 

278

 

 

57

 

 

 

 

(994

)

Lease termination fees

 

 

1,624

 

 

42

 

 

982

 

 

 

 

600

 

 

 

 

 

Other

 

 

12,431

 

 

3,527

 

 

5,438

 

 

459

 

 

1,338

 

 

 

 

1,669

 

Total revenues

 

 

678,566

 

 

265,055

 

 

163,434

 

 

140,986

 

 

70,985

 

 

 

 

38,106

 

Operating expenses

 

 

278,898

 

 

113,544

 

 

56,976

 

 

52,780

 

 

39,195

 

 

 

 

16,403

 

Depreciation and amortization

 

 

131,656

 

 

44,110

 

 

35,723

 

 

23,006

 

 

13,379

 

 

 

 

15,438

 

General and administrative

 

 

79,065

 

 

9,162

 

 

8,909

 

 

11,751

 

 

10,964

 

 

 

 

38,279

 

Total expenses

 

 

489,619

 

 

166,816

 

 

101,608

 

 

87,537

 

 

63,538

 

 

 

 

70,120

 

Operating income (loss)

 

 

188,947

 

 

98,239

 

 

61,826

 

 

53,449

 

 

7,447

 

 

 

 

(32,014

)

Income applicable to Alexander’s

 

 

18,133

 

 

192

 

 

 

 

149

 

 

 

 

 

 

17,792

 

Income applicable to Toys

 

 

97,147

 

 

 

 

 

 

 

 

 

 

97,147

 

 

 

(Loss) income from partially owned entities

 

 

(7,543

)

 

1,202

 

 

1,584

 

 

1,192

 

 

125

 

 

 

 

(11,646

)

Interest and other investment income, net

 

 

14,059

 

 

282

 

 

140

 

 

251

 

 

30

 

 

 

 

13,356

 

Interest and debt expense

 

 

(157,760

)

 

(33,118

)

 

(30,845

)

 

(22,169

)

 

(12,836

)

 

 

 

(58,792

)

Net gain on early extinguishment of debt

 

 

5,905

 

 

 

 

 

 

769

 

 

 

 

 

 

5,136

 

Income (loss) before income taxes

 

 

158,888

 

 

66,797

 

 

32,705

 

 

33,641

 

 

(5,234

)

 

97,147

 

 

(66,168

)

Income tax expense

 

 

(5,049

)

 

 

 

(433

)

 

(166

)

 

(243

)

 

 

 

(4,207

)

Income (loss) from continuing operations

 

 

153,839

 

 

66,797

 

 

32,272

 

 

33,475

 

 

(5,477

)

 

97,147

 

 

(70,375

)

Income from discontinued operations

 

 

2,592

 

 

 

 

1,828

 

 

764

 

 

 

 

 

 

 

Net income (loss)

 

 

156,431

 

 

66,797

 

 

34,100

 

 

34,239

 

 

(5,477

)

 

97,147

 

 

(70,375

)

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

 

 

(16,321

)

 

(1,877

)

 

 

 

118

 

 

 

 

 

 

(14,562

)

Net income (loss) attributable to Vornado

 

 

140,110

 

 

64,920

 

 

34,100

 

 

34,357

 

 

(5,477

)

 

97,147

 

 

(84,937

)

Interest and debt expense (2)

 

 

202,177

 

 

31,438

 

 

31,601

 

 

23,059

 

 

13,058

 

 

35,183

 

 

67,838

 

Depreciation and amortization(2)

 

 

179,590

 

 

42,761

 

 

37,243

 

 

24,070

 

 

13,548

 

 

35,257

 

 

26,711

 

Income tax expense (2)

 

 

58,067

 

 

 

 

434

 

 

166

 

 

308

 

 

53,091

 

 

4,068

 

EBITDA (1)

 

$

579,944

 

$

139,119

 

$

103,378

 

$

81,652

 

$

21,437

 

$

220,678

 

$

13,680

 

 

________________________

See notes on the following page.

29


VORNADO REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

 

19.     Segment Information – continued

 

Notes to preceding tabular information

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

 

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

 

(3)     Other EBITDA is comprised of:

 

(Amounts in thousands)

 

For the Three Months
Ended March 31,

 

 

 

2010

 

2009

 

Lexington

 

$

17,848

 

$

10,389

 

Alexander’s

 

 

14,399

 

 

24,399

 

555 California Street

 

 

11,488

 

 

11,638

 

Industrial warehouses

 

 

839

 

 

1,314

 

Hotel Pennsylvania

 

 

(447

)

 

607

 

Other investments

 

 

11,734

 

 

3,947

 

 

 

 

55,861

 

 

52,294

 

Investment income and other (1)

 

 

9,677

 

 

12,482

 

Corporate general and administrative expenses (1)

 

 

(19,388

)

 

(21,468

)

Net income attributable to noncontrolling interests, including unit distributions

 

 

(15,942

)

 

(14,562

)

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

 

 

 

 

(20,202

)

Net gain on early extinguishment of debt

 

 

 

 

5,136

 

 

 

$

30,208

 

$

13,680

 

________________________

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

30


 

 

 

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, 2010, and the related consolidated statements of income, changes in equity and cash flows for the three-month periods ended March 31, 2010 and 2009. These interim financial statements are the responsibility of the Company’s management.

 

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

 

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

 

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

 

 

/s/  DELOITTE & TOUCHE LLP

 

 

Parsippany, New Jersey

May 4, 2010

31


 

 

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& #8209;Q. Many of the factors that will determine the outcome of these and our other forward-looking statements are beyond our ability to control or predict. For further discussion of factors that could materially affect the outcome of our forward-looking statements, see “Item 1A. Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2009.  For these statements, we claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. You are cautioned not to place undue reliance on our forward-looking statements, which speak only as of the date of this Quarterly Report on Form 10-Q or the date of any document incorporated by reference. All subsequent written and oral forward-looking statements attributable to us or any person acting on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this section. We do not undertake any obligation to re lease 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, 2010. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates.

 

          Critical Accounting Policies

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

32


 

Overview

 

Business Objective and Operating Strategy

 

Our business objective is to maximize shareholder value, which we measure by the total return provided to our shareholders. Below is a table comparing our performance to the Morgan Stanley REIT Index (“RMS”) and the SNL REIT Index (“SNL”) for the following periods ending March 31, 2010:

 

 

 

Total Return (1)

 

 

 

Vornado

 

RMS

 

SNL

 

One-year

 

135.0%

 

110.5%

 

109.5%

 

Three-years

 

  (29.6%)

 

  (29.4%)

 

  (26.4%)

 

Five-years

 

  31.7%

 

   20.3%

 

  24.3%

 

Ten-years

 

269.7%

 

189.2%

 

205.4%

 

_________________________

(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;

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

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

 

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

 

We may also determine to raise capital for future real estate acquisitions through an institutional investment fund.  We would serve as the general partner of the fund and would also expect to be a limited partner of the fund and have the potential to earn certain incentives based on the fund’s performance.  The fund may serve as our exclusive investment vehicle for a limited period of time for all investments that fit within the fund’s investment parameters.  If we determine to raise capital through a fund, the partnership interests offered would not be registered under the Securities Act of 1933 and could not be offered or sold in the United States absent registration under that act or an applicable exemption from those registration requirements.

 

We have a large concentration of properties in the New York City metropolitan area and in the Washington, DC and Northern Virginia areas. We compete with a large number of real estate property owners and developers, some of which may be willing to accept lower returns on their investments. Principal factors of competition are rents charged, attractiveness of location, the quality of the property and breadth and quality of services provided. Our success depends upon, among other factors, trends of the national, regional and local economies, financial condition and operating results of current and prospective tenants and customers, availability and cost of capital, construction and renovation costs, taxes, governmental regulations, legislation and population trends.  See “Risk Factors” in Item 1A of our Annual Report on form 10-K for the year ended December 31, 2 009, for additional information regarding these factors.

 

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

33


Overview - continued

 

Quarter Ended March 31, 2010 Financial Results Summary

 

Net income attributable to common shareholders for the quarter ended March 31, 2010 was $200,285,000, or $1.09 per diluted share, compared to $125,841,000, or $0.80 per diluted share, for the quarter ended March 31, 2009.  Net income for the quarter ended March 31, 2010 and 2009 include $307,000 and $173,000, respectively, for our share of net gains on sale of real estate.  In addition, net income for the quarters ended March 31, 2010 and 2009 also include certain items that affect comparability which are listed in the table below.  The aggregate of the net gains on sale of real estate and the items in the table below, net of amounts attributable to noncontrolling interests, increased net income attributable to common shareholders for the quarter ended March 31, 2010 by $2,043,000, or $0.01 per diluted share and decreased net income attributable to common shareholders for the quarter ended March 31, 2009 by $15,687,000, or $0.10 per diluted share.

 

Funds from operations attributable to common shareholders plus assumed conversions (“FFO”) for the quarter ended March 31, 2010 was $353,826,000, or $1.87 per diluted share, compared to $268,582,000, or $1.65 per diluted share, for the prior year’s quarter.  FFO for the quarters ended March 31, 2010 and 2009 include certain items that affect comparability which are listed in the table below. The aggregate of these items, net of amounts attributable to noncontrolling interests, increased FFO for the quarter ended March 31, 2010 by $1,762,000, or $0.01 per diluted share and decreased FFO for the quarter ended March 31, 2009 by $15,895,000 or $0.10 per diluted share.

 

(Amounts in thousands)

 

For the Three Months Ended
March 31,

 

 

 

2010

 

2009

 

Items that affect comparability (income) expense:

 

 

 

 

 

 

 

Litigation loss accrual

 

$

10,056

 

$

 

Net gain resulting from Lexington’s March 2010 stock issuance

 

 

(5,998

)

 

 

Net gain on sale of condominiums

 

 

(2,427

)

 

 

Net gain on redemption of perpetual preferred units

 

 

(2,154

)

 

 

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

 

 

 

 

32,588

 

Our share of Alexander’s reversal of stock appreciation rights compensation expense

 

 

 

 

(11,105

)

Net gain on early extinguishment of debt

 

 

 

 

(5,905

)

Other, net

 

 

(1,373

)

 

1,874

 

 

 

 

(1,896

)

 

17,452

 

Noncontrolling interests’ share of above adjustments

 

 

134

 

 

(1,557

)

Items that affect comparability, net

 

$

(1,762

)

$

15,895

 

 

 

The percentage increase (decrease) in GAAP basis and cash basis same store Earnings Before Interest, Taxes, Depreciation and Amortization (“EBITDA”) of our operating segments for the quarter ended March 31, 2010 over the quarter ended March 31, 2009 and the trailing quarter ended December 31, 2009 are summarized below.

 

Same Store EBITDA:

 

New York
Office

 

Washington, DC
 Office

 

Retail

 

Merchandise
Mart

 

March 31, 2010 vs. March 31, 2009

 

 

 

 

 

 

 

 

 

GAAP basis

 

1.2%

 

6.4%

 

3.8%

 

(6.3%)

 

Cash basis

 

2.1%

 

8.4%

 

9.7%

 

(8.7%)

 

March 31, 2010 vs. December 31, 2009

 

 

 

 

 

 

 

 

 

GAAP basis

 

     (1.9%) (1)

 

2.6%

 

     (0.7%) (2)

 

(10.1%)

 

Cash basis

 

     (1.5%) (1)

 

3.0%

 

     (1.5%) (2)

 

(7.4%)

 

_________________________

(1)    Reflects a seasonal increase in utility costs.

(2)   Primarily due to rentals from holiday leasing and percentage rents recognized in the fourth quarter.

 

Calculations of same store EBITDA, reconciliations of 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.

 

34


Overview - continued

 

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

 

(Square feet in thousands)

 

 

New York
Office

 

 

Washington, DC
Office

 

 

 

 

 

Merchandise Mart

 

As of March 31, 2010:

 

 

 

 

 

 

Retail(3)

 

 

Office

 

 

Showroom

 

Square feet (in service)

 

 

16,175

 

 

18,530

 

 

22,684

 

 

2,470

 

 

6,301

 

Number of properties

 

 

28

 

 

84

 

 

164

 

 

8

 

 

8

 

Occupancy rate

 

 

95.3

%

 

94.4

%(2)

 

91.2

%

 

87.5

%

 

89.1

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Leasing Activity:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Quarter Ended March 31, 2010:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Square feet

 

 

306

 

 

360

 

 

278

 

 

 

 

482

 

Initial rent per square foot (1)

 

$

44.83

 

$

39.83

 

$

21.00

 

$

 

$

24.12

 

Weighted average lease terms (years)

 

 

7.1

 

 

3.8

 

 

7.3

 

 

 

 

4.5

 

Rent per square foot - relet space:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Square feet

 

 

233

 

 

237

 

 

113

 

 

 

 

482

 

Initial rent – cash basis (1)

 

$

47.31

 

$

40.64

 

$

10.83

 

$

 

$

24.12

 

Prior escalated rent – cash basis

 

$

51.55

 

$

36.68

 

$

9.64

 

$

 

$

26.34

 

Percentage (decrease) increase:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash basis

 

 

(8.2

%)

 

10.8

%

 

12.3

%

 

 

 

(8.4

%)

GAAP basis

 

 

(8.0

%)

 

16.3

%

 

13.0

%

 

 

 

(1.4

%)

Rent per square foot – vacant space

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Square feet

 

 

73

 

 

123

 

 

165

 

 

 

 

 

Initial rent (1)

 

$

37.00

 

$

38.28

 

$

28.00

 

$

 

$

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Tenant improvements and leasing
commissions:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Per square foot

 

$

48.65

 

$

7.80

 

$

16.27

 

$

 

$

4.25

 

Per square foot per annum

 

$

6.86

 

$

2.05

 

$

2.23

 

$

 

$

0.94

 

Percentage of initial rent

 

 

15.3

%

 

5.1

%

 

10.6

%

 

 

 

3.9

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As of December 31, 2009:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Square feet

 

 

16,173

 

 

18,560

 

 

22,553

 

 

2,464

 

 

6,301

 

Number of properties

 

 

28

 

 

84

 

 

164

 

 

8

 

 

8

 

Occupancy rate

 

 

95.5

%

 

93.6

%(2)

 

91.6

%

 

88.9

%

 

88.4

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As of March 31, 2009:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Square feet

 

 

16,138

 

 

17,963

 

 

22,224

 

 

2,438

 

 

6,337

 

Number of properties

 

 

28

 

 

82

 

 

176

 

 

8

 

 

8

 

Occupancy rate

 

 

95.9

%

 

94.6

%(2)

 

92.0

%

 

95.1

%

 

90.1

%

 

_______________________________

(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 office properties were 94.9%, 94.9% and 95.2% at March 31, 2010, December 31, 2009 and March 31, 2009, respectively.

(3)       Mall sales per square foot, including partially owned malls, for the trailing twelve months ended March 31, 2010 and 2009 were $466 and $488, respectively.

 

 

35


Overview - continued

 

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

 

 

Recently Issued Accounting Literature

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

 

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

 

 

36


Net Income and EBITDA by Segment for the Three Months Ended March 31, 2010 and 2009

 

Below is a summary of net income and a reconciliation of net income to EBITDA(1) by segment for the three months ended March 31, 2010 and 2009.

 

(Amounts in thousands)

 

For the Three Months Ended March 31, 2010

 

 

 

 

Total

 

New York
Office

 

Washington, DC
Office

 

Retail

 

Merchandise
Mart

 

Toys

 

Other (3)

 

Property rentals

 

$

524,121

 

$

192,604

 

$

139,880

 

$

95,764

 

$

61,444

 

$

 

$

34,429

 

Straight-line rents:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Contractual rent increases

 

 

13,500

 

 

6,893

 

 

2,197

 

 

3,836

 

 

383

 

 

 

 

191

 

Amortization of free rent

 

 

7,422

 

 

901

 

 

2,457

 

 

2,540

 

 

1,114

 

 

 

 

410

 

Amortization of acquired below-
market leases, net

 

 

15,907

 

 

9,205

 

 

732

 

 

4,541

 

 

(121

)

 


 

 

1,550

 

Total rentals

 

 

560,950

 

 

209,603

 

 

145,266

 

 

106,681

 

 

62,820

 

 

 

 

36,580

 

Tenant expense reimbursements

 

 

92,921

 

 

33,252

 

 

15,750

 

 

37,643

 

 

4,087

 

 

 

 

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

 

 

6,435

 

 

728

 

 

446

 

 

3,408

 

 

1,853

 

 

 

 

 

Other

 

 

13,233

 

 

4,410

 

 

5,867

 

 

740

 

 

2,000

 

 

 

 

216

 

Total revenues

 

 

696,331

 

 

269,868

 

 

175,425

 

 

148,696

 

 

70,774

 

 

 

 

31,568

 

Operating expenses

 

 

279,055

 

 

115,049

 

 

56,663

 

 

53,574

 

 

39,219

 

 

 

 

14,550

 

Depreciation and amortization

 

 

135,824

 

 

43,707

 

 

36,683

 

 

27,981

 

 

13,355

 

 

 

 

14,098

 

General and administrative

 

 

48,730

 

 

4,579

 

 

5,897

 

 

7,005

 

 

7,230

 

 

 

 

24,019

 

Litigation loss accrual

 

 

10,056

 

 

 

 

10,056

 

 

 

 

 

 

 

 

 

Total expenses

 

 

473,665

 

 

163,335

 

 

109,299

 

 

88,560

 

 

59,804

 

 

 

 

52,667

 

Operating income (loss)

 

 

222,666

 

 

106,533

 

 

66,126

 

 

60,136

 

 

10,970

 

 

 

 

(21,099

)

Income applicable to Alexander’s

 

 

6,460

 

 

193

 

 

 

 

211

 

 

 

 

 

 

6,056

 

Income applicable to Toys

 

 

125,870

 

 

 

 

 

 

 

 

 

 

125,870

 

 

 

Income (loss) from partially owned entities

 

 

4,884

 

 

1,110

 

 

(192

)

 

1,180

 

 

176

 

 

 

 

2,610

 

Interest and other investment income, net

 

 

14,708

 

 

164

 

 

27

 

 

5

 

 

13

 

 

 

 

14,499

 

Interest and debt expense

 

 

(139,735

)

 

(32,686

)

 

(34,484

)

 

(17,899

)

 

(12,787

)

 

 

 

(41,879

)

Net gain on dispostion of wholly owned and
partially owned assets other than
depreciable real estate

 

 

3,305

 

 

 

 

 

 

 

 

796

 

 

 

 

2,509

 

Income (loss) before income taxes

 

 

238,158

 

 

75,314

 

 

31,477

 

 

43,633

 

 

(832

)

 

125,870

 

 

(37,304

)

Income tax expense

 

 

(5,614

)

 

(474

)

 

(720

)

 

(35

)

 

(194

)

 

 

 

(4,191

)

Net income (loss)

 

 

232,544

 

 

74,840

 

 

30,757

 

 

43,598

 

 

(1,026

)

 

125,870

 

 

(41,495

)

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

 

 

(17,992

)

 

(2,292

)

 

 

 

242

 

 

 

 

 

 

(15,942

)

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 page 39.

 

37


Net Income and EBITDA by Segment for the Three Months Ended March 31, 2010 and 2009 – continued

 

 

(Amounts in thousands)

 

For the Three Months Ended March 31, 2009

 

 

 

 

Total

 

New York
Office

 

Washington, DC
Office

 

Retail

 

Merchandise
Mart

 

Toys

 

Other (3)

 

Property rentals

 

$

507,083

 

$

188,762

 

$

129,374

 

$

88,150

 

$

63,001

 

$

 

$

37,796

 

Straight-line rents:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Contractual rent increases

 

 

13,496

 

 

6,715

 

 

2,619

 

 

3,454

 

 

619

 

 

 

 

89

 

Amortization of free rent

 

 

11,226

 

 

1,540

 

 

3,424

 

 

6,308

 

 

22

 

 

 

 

(68

)

Amortization of acquired below-
market leases, net

 

 

17,982

 

 

9,923

 

 

1,102

 

 

5,269

 

 

29

 

 


 

 

1,659

 

Total rentals

 

 

549,787

 

 

206,940

 

 

136,519

 

 

103,181

 

 

63,671

 

 

 

 

39,476

 

Tenant expense reimbursements

 

 

98,029

 

 

35,157

 

 

18,530

 

 

37,068

 

 

5,319

 

 

 

 

1,955

 

Fee and other income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Tenant cleaning fees

 

 

14,294

 

 

18,294

 

 

 

 

 

 

 

 

 

 

(4,000

)

Management and leasing fees

 

 

2,401

 

 

1,095

 

 

1,965

 

 

278

 

 

57

 

 

 

 

(994

)

Lease termination fees

 

 

1,624

 

 

42

 

 

982

 

 

 

 

600

 

 

 

 

 

Other

 

 

12,431

 

 

3,527

 

 

5,438

 

 

459

 

 

1,338

 

 

 

 

1,669

 

Total revenues

 

 

678,566

 

 

265,055

 

 

163,434

 

 

140,986

 

 

70,985

 

 

 

 

38,106

 

Operating expenses

 

 

278,898

 

 

113,544

 

 

56,976

 

 

52,780

 

 

39,195

 

 

 

 

16,403

 

Depreciation and amortization

 

 

131,656

 

 

44,110

 

 

35,723

 

 

23,006

 

 

13,379

 

 

 

 

15,438

 

General and administrative

 

 

79,065

 

 

9,162

 

 

8,909

 

 

11,751

 

 

10,964

 

 

 

 

38,279

 

Total expenses

 

 

489,619

 

 

166,816

 

 

101,608

 

 

87,537

 

 

63,538

 

 

 

 

70,120

 

Operating income (loss)

 

 

188,947

 

 

98,239

 

 

61,826

 

 

53,449

 

 

7,447

 

 

 

 

(32,014

)

Income applicable to Alexander’s

 

 

18,133

 

 

192

 

 

 

 

149

 

 

 

 

 

 

17,792

 

Income applicable to Toys

 

 

97,147

 

 

 

 

 

 

 

 

 

 

97,147

 

 

 

(Loss) income from partially owned entities

 

 

(7,543

)

 

1,202

 

 

1,584

 

 

1,192

 

 

125

 

 

 

 

(11,646

)

Interest and other investment income, net

 

 

14,059

 

 

282

 

 

140

 

 

251

 

 

30

 

 

 

 

13,356

 

Interest and debt expense

 

 

(157,760

)

 

(33,118

)

 

(30,845

)

 

(22,169

)

 

(12,836

)

 

 

 

(58,792

)

Net gain on early extinguishment of debt

 

 

5,905

 

 

 

 

 

 

769

 

 

 

 

 

 

5,136

 

Income (loss) before income taxes

 

 

158,888

 

 

66,797

 

 

32,705

 

 

33,641

 

 

(5,234

)

 

97,147

 

 

(66,168

)

Income tax expense

 

 

(5,049

)

 

 

 

(433

)

 

(166

)

 

(243

)

 

 

 

(4,207

)

Income (loss) from continuing operations

 

 

153,839

 

 

66,797

 

 

32,272

 

 

33,475

 

 

(5,477

)

 

97,147

 

 

(70,375

)

Income from discontinued operations

 

 

2,592

 

 

 

 

1,828

 

 

764

 

 

 

 

 

 

 

Net income (loss)

 

 

156,431

 

 

66,797

 

 

34,100

 

 

34,239

 

 

(5,477

)

 

97,147

 

 

(70,375

)

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

 

 

(16,321

)

 

(1,877

)

 

 

 

118

 

 

 

 

 

 

(14,562

)

Net income (loss) attributable to Vornado

 

 

140,110

 

 

64,920

 

 

34,100

 

 

34,357

 

 

(5,477

)

 

97,147

 

 

(84,937

)

Interest and debt expense (2)

 

 

202,177

 

 

31,438

 

 

31,601

 

 

23,059

 

 

13,058

 

 

35,183

 

 

67,838

 

Depreciation and amortization(2)

 

 

179,590

 

 

42,761

 

 

37,243

 

 

24,070

 

 

13,548

 

 

35,257

 

 

26,711

 

Income tax expense (2)

 

 

58,067

 

 

 

 

434

 

 

166

 

 

308

 

 

53,091

 

 

4,068

 

EBITDA (1)

 

$

579,944

 

$

139,119

 

$

103,378

 

$

81,652

 

$

21,437

 

$

220,678

 

$

13,680

 

 

______________________________

See notes on following page.

38


Net Income and EBITDA by Segment for the Three Months Ended March 31, 2010 and 2009 - continued

 

Notes to preceding tabular information:

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

 

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

 

(3)   Other EBITDA is comprised of:

 

(Amounts in thousands)

 

For the Three Months
Ended March 31,

 

 

 

2010

 

2009

 

Lexington

 

$

17,848

 

$

10,389

 

Alexander’s

 

 

14,399

 

 

24,399

 

555 California Street

 

 

11,488

 

 

11,638

 

Industrial warehouses

 

 

839

 

 

1,314

 

Hotel Pennsylvania

 

 

(447

)

 

607

 

Other investments

 

 

11,734

 

 

3,947

 

 

 

 

55,861

 

 

52,294

 

Investment income and other (1)

 

 

9,677

 

 

12,482

 

Corporate general and administrative expenses (1)

 

 

(19,388

)

 

(21,468

)

Net income attributable to noncontrolling interests, including unit distributions

 

 

(15,942

)

 

(14,562

)

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

 

 

 

 

(20,202

)

Net gain on early extinguishment of debt

 

 

 

 

5,136

 

 

 

$

30,208

 

$

13,680

 

________________________

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

 

39


Results of Operations – Three Months Ended March 31, 2010 Compared to March 31, 2009

 

Revenues

Our revenues, which consist of property rentals, tenant expense reimbursements, hotel revenues, trade shows revenues, amortization of acquired below-market leases, net of above-market leases and fee income, were $696,331,000 for the quarter ended March 31, 2010, compared to $678,566,000 in the prior year’s quarter, an increase of $17,765,000. Below are the details of the increase (decrease) by segment:

 

(Amounts in thousands)

 

 

 

 

 

 

 

 

 

 

 

Increase (decrease) due to:

 

Total

 

New York
Office

 

Washington, DC
Office

 

Retail

 

Merchandise
Mart

 

Other

 

Property rentals:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Acquisitions and other

 

$

1,921

 

$

 

$

 

$

905

 

$

2,064

 

$

(1,048

)

Development/redevelopment

 

 

2,586

 

 

 

 

1,769

 

 

817

 

 

 

 

 

Amortization of acquired below-market
leases, net

 

 

(2,075

)

 

(718

)

 

(370

)

 

(728

)

 

(150

)

 

(109

)

Operations:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Hotel Pennsylvania

 

 

(1,424

)

 

 

 

 

 

 

 

 

 

(1,424

)(1)

Trade shows

 

 

(339

)

 

 

 

 

 

 

 

(339

)

 

 

Leasing activity (see page 35)

 

 

10,494

 

 

3,381

 

 

7,348

 

 

2,506

 

 

(2,426

)

 

(315

)

Increase (decrease) in property rentals

 

 

11,163

 

 

2,663

 

 

8,747

 

 

3,500

 

 

(851

)

 

(2,896

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Tenant expense reimbursements:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Acquisitions/development

 

 

18

 

 

 

 

(79

)

 

346

 

 

 

 

(249

)

Operations

 

 

(5,126

)

 

(1,905

)

 

(2,701

)

 

229

 

 

(1,232

)

 

483

 

(Decrease) increase in tenant expense reimbursements

 

 

(5,108

)

 

(1,905

)

 

(2,780

)

 

575

 

 

(1,232

)

 

234

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fee and other income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Lease cancellation fee income

 

 

4,811

 

 

686

 

 

(536

)

 

3,408

 

 

1,253

 

 

 

Management and leasing fees

 

 

6,739

 

 

362

 

 

6,131

(2)

 

(54

)

 

(43

)

 

343

 

BMS cleaning fees

 

 

880

 

 

3,646

 

 

 

 

 

 

 

 

(2,766

)(3)

Other

 

 

(720

)

 

(639

)

 

429

 

 

281

 

 

662

 

 

(1,453

)

Increase (decrease) in fee and other income

 

 

11,710

 

 

4,055

 

 

6,024

 

 

3,635

 

 

1,872

 

 

(3,876

)

Total increase (decrease) in revenues

 

$

17,765

 

$

4,813

 

$

11,991

 

$

7,710

 

$

(211

)

$

(6,538

)

 

______________________________

(1)          Primarily due to lower REVPAR.

 

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

 

(3)          Primarily from the elimination of inter-company fees from operating segments upon consolidation. See note (2) on page 41.

 

40


Results of Operations – Three Months Ended March 31, 2010 Compared to March 31, 2009 - continued

 

Expenses

Our expenses, which consist of operating, depreciation and amortization and general and administrative expenses, were $473,665,000 for the quarter ended March 31, 2010, compared to $489,619,000 in the prior year’s quarter, a decrease of $15,954,000. Below are the details of the (decrease) increase by segment:

 

(Amounts in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

Increase (decrease) due to:

 

Total

 

New York
Office

 

Washington, DC
Office

 

Retail

 

Merchandise
Mart

 

Other

 

 

Operating:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Acquisitions and other

 

$

227

 

$

(1,522

)

$

 

$

675

 

$

1,770

 

$

(696

)

Development/redevelopment

 

 

1,783

 

 

 

 

1,399

 

 

384

 

 

 

 

 

 

 

Hotel activity

 

 

611

 

 

 

 

 

 

 

 

 

 

611

 

Trade shows activity

 

 

(290

)

 

 

 

 

 

 

 

(290

)

 

 

Operations

 

 

(2,174

)

 

3,027

(1)

 

(1,712

)

 

(265

)

 

(1,456

)

 

(1,768

)(2)

Increase (decrease) in operating expenses

 

 

157

 

 

1,505

 

 

(313

)

 

794

 

 

24

 

 

(1,853

)

Depreciation and amortization:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Acquisitions/development

 

 

1,945

 

 

 

 

1,475

 

 

1,077

 

 

 

 

(607

)

Operations (due to additions to buildings
and improvements)

 

 

2,223

 

 

(403

)

 

(515

)

 

3,898

 

 

(24

)

 

(733

)

Increase (decrease) in depreciation and
amortization

 

 

4,168

 

 

(403

)

 

960

 

 

4,975

 

 

(24

)

 

(1,340

)

General and administrative:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Write-off of unamortized costs from the
voluntary surrender of equity awards
(3)

 

 

(32,588

)

 

(3,451

)

 

(3,131

)

 

(4,793

)

 

(1,011

)

 

(20,202

)

Mark-to-market of deferred compensation plan liability (4)

 

 

8,557

 

 

 

 

 

 

 

 

 

 

8,557

 

Operations

 

 

(6,304

)

 

(1,132

)

 

119

 

 

47

 

 

(2,723

)(5)

 

(2,615

) (6)

Decrease in general and
administrative

 

 

(30,335

)

 

(4,583

)

 

(3,012

)

 

(4,746

)

 

(3,734

)

 

(14,260

)

Litigation loss accrual (7)

 

 

10,056

 

 

 

 

10,056

 

 

 

 

 

 

 

Total (decrease) increase in expenses

 

$

(15,954

)

$

(3,481

)

$

7,691

 

$

1,023

 

$

(3,734

)

$

(17,453

)

 

______________________________

(1)    Results from a $3,616 increase in BMS operating expenses and a $1,098 increase in non-reimbursable operating expenses, partially offset by a $1,687 decrease in reimbursable operating expenses.

 

(2)    Primarily from the elimination of inter-company fees from operating segments upon consolidation.

 

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

 

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

 

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

 

(6)    Primarily from lower stock-based compensation as a result of the voluntary surrender of equity awards on March 31, 2009.  Stock-based compensation awards granted in March 2010 will result in an increase in expense in subsequent quarters of approximately $1,650 per quarter ($2,900 including our operating segments) over the prior year’s comparable amounts.

 

(7)    For additional information, see page 52.

41


Results of Operations – Three Months Ended March 31, 2010 Compared to March 31, 2009 - continued

 

Income Applicable to Alexander’s

 

Our 32.4% share of Alexander’s net income (comprised of our share of Alexander’s net income, management, leasing, and development fees) was $6,460,000 for the three months ended March 31, 2010, compared to $18,133,000 for the prior year’s first quarter, a decrease of $11,673,000. This decrease was primarily due to $11,105,000 of income for our share of the reversal of accrued stock appreciation rights compensation expense in the prior year’s quarter.

 

 

Income Applicable to Toys

 

During the quarter ended March 31, 2010, we recognized $125,870,000 of income 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.

 

During the quarter ended March 31, 2009, we recognized $97,147,000 of income from our investment in Toys, comprised of $95,294,000 for our 32.7% share of Toys’ net income ($148,385,000 before our share of Toys’ income tax expense) and $1,853,000 of interest and other income.

 

 

Income (loss) from Partially Owned Entities

Summarized below are the components of loss from partially owned entities for the three months ended March 31, 2010 and 2009.

 

(Amounts in thousands)

 

For The Three Months
Ended March 31,

 

 

 

2010

 

2009

 

Equity in Net Income (Loss):

 

 

 

 

 

Lexington – 13.9% in 2010 and 16.1% share in 2009 of equity in net income (loss)

 

$

6,045

(1)

$

(3,039

)

 

 

 

 

 

 

 

 

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

 

 

1,651

 

 

(137

)

 

 

 

 

 

 

 

 

Other, net (2)

 

 

(2,812

)

 

(4,367

)

 

 

$

4,884

 

$

(7,543

)

________________________

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

 

(2)  Represents equity in net 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.

 

42


Results of Operations – Three Months Ended March 31, 2010 Compared to March 31, 2009 - continued

 

Interest and Other Investment Income, net

Interest and other investment income, net (comprised of interest income on mezzanine loans receivable, other interest income and dividend income) was $14,708,000 for the three months ended March 31, 2010, compared to $14,059,000 in the prior year’s quarter, an increase of $649,000. This increase resulted from:

 

(Amounts in thousands)

 

 

 

 

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)

 

$

8,557

 

Lower average mezzanine loan investments ($148,852 in this quarter compared to $472,864 in the
prior year’s quarter)

 

 

(7,609

)

Lower average yield on investments (0.2% in this quarter compared to 0.6% in the prior
year’s quarter)

 

 

(1,126

)

Other, net

 

 

827

 

 

 

$

649

 

 

 

Interest and Debt Expense

Interest and debt expense was $139,735,000 for the three months ended March 31, 2010, compared to $157,760,000 in the prior year’s quarter, a decrease of $18,025,000.  This decrease resulted primarily from savings of $27,881,000 as a result of the acquisition, repayment and retirement of an aggregate of $2.1 billion of our convertible senior debentures and senior unsecured notes, partially offset by $9,056,000 of interest expense from the issuance of $460,000,000 of senior unsecured notes in September 2009.

 

 

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

Net gain on disposition of wholly owned and partially owned assets other than depreciable real estate was $3,305,000 in the three months ended March 31, 2010 and was primarily comprised of net gains on sale of condominiums at our 40 East 66th Street property.

 

 

Net Gain on Early Extinguishment of Debt

Net gain on early extinguishment of debt was $5,905,000 for the three months ended March 31, 2009 and resulted primarily from the acquisition and retirement of $81,534,000 of our senior unsecured notes.

 

 

Income Tax Expense

Income tax expense was $5,614,000 in the three months ended March 31, 2010, compared to $5,049,000 in the prior year’s quarter, an increase of $565,000.  This increase resulted primarily from higher income at 1290 Avenue of the Americas and 555 California Street, which are subject to federal withholding taxes on dividends paid to foreign corporations.

 

 

 

43


Results of Operations – Three Months Ended March 31, 2010 Compared to March 31, 2009 - continued

 

Discontinued Operations

The table below sets forth the combined results of operations of assets related to discontinued operations for the three months ended March 31, 2010 and 2009 and include the operating results of 1999 K Street, which was sold on September 1, 2009 and 15 other retail properties, which were sold during 2009.

 

 

(Amounts in thousands)

 

For the Three Months
Ended March 31,

 

 

 

2010

 

2009

 

Total revenues

 

$

 

$

3,448

 

Total expenses

 

 

 

 

856

 

Income from discontinued operations

 

$

 

$

2,592

 

 

 

Net Income Attributable to Noncontrolling Interests, Including Unit Distributions

 

Net income attributable to noncontrolling interests for the three months ended March 31, 2010 and 2009 is comprised of (i) allocations of income to redeemable noncontrolling interests of $15,215,000 and $12,002,000, respectively, (ii) net income and net loss attributable to noncontrolling interests in consolidated subsidiaries of $213,000 and $500,000, respectively, (iii) preferred unit distributions of the Operating Partnership of $4,718,000 and $4,819,000, respectively and (iv) a net of a net gain of $2,154,000 on the redemption of a portion of the Series D-12 perpetual preferred units in the current period.  The increase of $3,213,000 in allocations of income to redeemable noncontrolling interests resulted primarily from higher net income subject to allocation to unitholders.    

 

 

Preferred Share Dividends

Preferred share dividends were $14,267,000 for the three months ended March 31, 2010, compared to $14,269,000 for the prior year’s quarter.

44


Results of Operations – Three Months Ended March 31, 2010 Compared to March 31, 2009 - continued

 

Same Store EBITDA

Same store EBITDA represents EBITDA from property level operations which are owned by us in both the current and prior year reporting periods.  Same store EBITDA excludes segment-level overhead expenses, which are expenses that we do not consider to be property-level expenses, as well as other non-operating items.  We present same store EBITDA on both a GAAP basis and a cash basis, which excludes income from the straight-lining of rents, amortization of below-market leases, net of above-market leases and other non-cash adjustments. We present these non-GAAP measures to (i) facilitate meaningful comparisons of the operational performance of our properties and segments, (ii) make decisions on whether to buy, sell or refinance properties, and (iii) compare the performance of our properties and segments to those of our peers.  Same store EBITDA should not be consid ered 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, 2010, compared to the three months ended March 31, 2009.

 

(Amounts in thousands)

New York
Office

 

Washington, DC
Office

 

Retail

 

Merchandise
 Mart

 

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

 

 

5,897

 

 

7,005

 

 

7,230

 

Less: EBITDA from acquisitions, dispositions
and other non-operating income or expenses

 

(624

)

 

3,221

 

 

(7,137

)

 

(3,724

)

GAAP basis same store EBITDA for the three months
ended March 31, 2010

 

150,043

 

 

115,611

 

 

91,908

 

 

29,224

 

Less: Adjustments for straight-line rents,
amortization of below-market leases, net and other
non-cash adjustments

 

(15,608

)

 

(4,917

)

 

(9,391

)

 

(1,376

)

Cash basis same store EBITDA for the three months
ended March 31, 2010

$

134,435

 

$

110,694

 

$

82,517

 

$

27,848

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

EBITDA for the three months ended  March 31, 2009

$

139,119

 

$

103,378

 

$

81,652

 

$

21,437

 

Add-back: non-property level overhead
expenses included above

 

9,162

 

 

8,909

 

 

11,751

 

 

10,964

 

Less: EBITDA from acquisitions, dispositions
and other non-operating income or expenses

 

(10

)

 

(3,602

)

 

(4,837

)

 

(1,228

)

GAAP basis same store EBITDA for the three months
ended March 31, 2009

 

148,271

 

 

108,685

 

 

88,566

 

 

31,173

 

Less: Adjustments for straight-line rents,
amortization of below-market leases, net and other
non-cash adjustments 

 

(16,580

)

 

(6,608

)

 

(13,365

)

 

(670

)

Cash basis same store EBITDA for the three months
ended March 31, 2009

$

131,691

 

$

102,077

 

$

75,201

 

$

30,503

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Increase (decrease) in GAAP basis same store EBITDA for
the three months ended  March 31, 2010 over the
three months ended  March 31, 2009


$

1,772

 

$

6,926

 

$

3,342

 

$

(1,949

)

 

 

 

 

 

 

 

 

 

 

 

 

 

Increase (decrease) in Cash basis same store EBITDA for the
three months ended  March 31, 2010 over the three
months ended  March 31, 2009


$

2,744

 

$

8,617

 

$

7,316

 

$

(2,655

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

% increase (decrease) in GAAP basis same store EBITDA

 

1.2%

 

 

6.4%

 

 

3.8%

 

 

(6.3%)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

% increase (decrease) in Cash basis same store EBITDA

 

2.1%

 

 

8.4%

 

 

9.7%

 

 

(8.7%)

 

 

 

45


SUPPLEMENTAL INFORMATION

 

Three Months Ended March 31, 2010 vs. Three Months Ended December 31, 2009

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 ar e the same store EBITDA results on a GAAP and cash basis for each of our segments for the three months ended March 31, 2010, compared to the three months ended December 31, 2009.

(Amounts in thousands)

New York
Office

 

Washington, DC
Office

 

Retail

 

Merchandise
 Mart

 

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

 

 

5,897

 

 

7,005

 

 

7,230

 

Less: EBITDA from acquisitions, dispositions
and other non-operating income or expenses

 

(624

)

 

3,221

 

 

(6,677

)

 

(3,724

)

GAAP basis same store EBITDA for the three months
ended  March 31, 2010

 

150,043

 

 

115,611

 

 

92,368

 

 

29,224

 

Less: Adjustments for straight-line rents, amortization
of below-market leases, net and other non-cash
adjustments

 

(15,608

)

 

(4,917

)

 

(9,362

)

 

(1,376

)

Cash basis same store EBITDA for the three months
ended  March 31, 2010

$

134,435

 

$

110,694

 

$

83,006

 

$

27,848

 

 

 

 

 

 

 

 

 

 

 

 

 

 

EBITDA for the three months ended  December 31, 2009 (1)

$

149,052

 

$

110,243

 

$

71,699

 

$

25,810

 

Add-back: non-property level overhead
expenses included above

 

4,232

 

 

5,671

 

 

5,487

 

 

6,495

 

Less: EBITDA from acquisitions, dispositions
and other non-operating income or expenses

 

(296

)

 

(3,197

)

 

15,871

 

 

191

 

GAAP basis same store EBITDA for the three months
ended December 31, 2009

 

152,988

 

 

112,717

 

 

93,057

 

 

32,496

 

Less: Adjustments for straight-line rents, amortization
of below-market leases, net and other non-cash
adjustments 

 

(16,443

)

 

(5,294

)

 

(8,817

)

 

(2,433

)

Cash basis same store EBITDA for the three
months ended December 31, 2009

$

136,545

 

$

107,423

 

$

84,240

 

$

30,063

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(Decrease) increase in GAAP basis same store EBITDA for
the three months ended March 31, 2010 over the
three months ended December 31, 2009


$

(2,945

)

$

2,894

 

$

(689

)

$

(3,272

)

 

 

 

 

 

 

 

 

 

 

 

 

 

(Decrease) increase in Cash basis same store EBITDA for the
three months ended March 31, 2010 over the three
months ended December 31, 2009


$

(2,110

)

$

3,271

 

$

(1,234

)

$

(2,215

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

% (decrease) increase in GAAP basis same store EBITDA

 

(1.9%)

 

 

2.6%

 

 

(0.7%)

 

 

(10.1%)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

% (decrease) increase in Cash basis same store EBITDA

 

(1.5%)

 

 

3.0%

 

 

(1.5%)

 

 

(7.4%)

 

________________________

(1)   Below is a reconciliation of our net income (loss) to EBITDA for the three months ended December 31, 2009.

 

 (Amounts in thousands)

New York
Office

 

Washington, DC
Office

 

Retail

 

Merchandise
 Mart

 

Net income (loss) attributable to Vornado for the three months
ended December 31, 2009

$

73,969

 

$

31,619

 

$

20,023

 

$

(3,376

)

Interest and debt expense

 

31,910

 

 

35,792

 

 

24,494

 

 

13,299

 

Depreciation and amortization

 

42,686

 

 

42,484

 

 

27,179

 

 

15,499

 

Income tax expense

 

487

 

 

348

 

 

3

 

 

388

 

EBITDA for the three months ended December 31, 2009

$

149,052

 

$

110,243

 

$

71,699

 

$

25,810

 

46


 

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 significant acquisitions and development expenditures may require funding from borrowings and/or equity offerings.  We may from time to time purchase or retire outstanding debt securities.  Such purchases, if any, will depend on prevailing market conditions, liquidity requirements and other factors.  The amounts involved in connection with these transactions could be material to our consolidated financial statements.

 

We may also determine to raise capital for future real estate acquisitions through an institutional investment fund.  We would serve as the general partner of the fund and would also expect to be a limited partner of the fund and have the potential to earn certain incentives based on the fund’s performance.  The fund may serve as our exclusive investment vehicle for a limited period of time for all investments that fit within the fund’s investment parameters.  If we determine to raise capital through a fund, the partnership interests offered would not be registered under the Securities Act of 1933 and could not be offered or sold in the United States absent registration under that act or an applicable exemption from those registration requirements.

 

Cash Flows for the Three Months Ended March 31, 2010

Property rental income is our primary source of cash flow and is dependent upon the occupancy and rental rates of our properties.   Other sources of liquidity to fund cash requirements include proceeds from debt financings, including mortgage loans, senior unsecured borrowings, and our revolving credit facilities; proceeds from the issuance of common and preferred equity; and asset sales.  Our cash requirements include property operating expenses, capital improvements, tenant improvements, leasing commissions, distributions to common and preferred shareholders, as well as acquisition and development costs.  Our cash and cash equivalents were $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 prov ided by investing activities, partially offset by, $41,929,000 of net cash used in financing activities.

 

Our consolidated outstanding debt was $11,090,862,000 at March 31, 2010, a $151,247,000 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, partially offset by net repayments of $352,001,000 under our revolving credit facilities.  As of March 31, 2010 and December 31, 2009, $500,217,000 and $852,218,000 respectively, was outstanding under our revolving credit facilities.  During the remainder of 2010 and 2011, $532,138,000 and $2,278,715,000 of our outstanding debt matures, respectively. We may refinance such debt or choose to repay all or a portion, using existing cash balances or our revolving credit facilities.

 

Our share of debt of unconsolidated subsidiaries was $2,822,363,000 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 primarily comprised of (i) net income of $232,544,000, net of $24,790,000 of non-cash adjustments, including depreciation and amortization expense, the effect of straight-lining of rental income, equity in net income of partially owned entities, (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.

 

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 $24,360,000, (v) dividends paid on preferred shares of $14,267,000 and (vii) distributions to noncontrolling interests of $13,082,000.

 

 

47


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 interes t 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, 2010.

 

(Amounts in thousands)

 

 

Total

 

 

New York
Office

 

 

Washington, DC
Office

 

 

Retail

 

 

Merchandise
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

 

 

 

 

 

 

 

Wasserman Venture

 

 

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

 

 

 

 

48


LIQUIDITY AND CAPITAL RESOURCES - continued

 

Cash Flows for the Three Months Ended March 31, 2009

Our cash and cash equivalents were $1,625,450,000 at March 31, 2009, a $98,597,000 increase over the balance at December 31, 2008.  This increase resulted from $169,812,000 of net cash provided by operating activities and $107,211,000 of net cash provided by financing activities, partially offset by $178,426,000 of net cash used in investing activities.   

 

Our consolidated outstanding debt was $12,731,830,000 at March 31, 2009, a $220,160,000 increase over the balance at December 31, 2008.  This increase resulted primarily from $300,000,000 of draws under our revolving credit facilities during the first quarter, partially offset by the $81,534,000 purchase of our senior unsecured notes and $47,000,000 of repayments on our cross-collateralized retail mortgage.  As of March 31, 2009 and December 31, 2008, $658,468,000 and $358,468,000 respectively, was outstanding under our revolving credit facilities. 

 

Our share of debt of unconsolidated subsidiaries was $2,999,693,000 at March 31, 2009, a $196,892,000 decrease from the balance at December 31, 2008. 

 

Cash flows provided by operating activities of $169,812,000 was primarily comprised of (i) net income of $156,431,000, (ii) $29,526,000 of non-cash adjustments (including depreciation and amortization expense, the effect of straight-lining of rental income and equity in net income of partially owned entities), (iii) distributions of income from partially owned entities of $8,381,000, partially offset by (iv) the net change in operating assets and liabilities of $24,526,000.

 

Net cash used in investing activities of $178,426,000 was primarily comprised of (i) development and redevelopment expenditures of $132,529,000, (ii) additions to real estate of $38,916,000, (iii) restricted cash of $27,298,000, (iv) investments in partially owned entities of $9,582,000 and (v) purchases of marketable equity securities of $9,882,000, partially offset by (vi) proceeds from the sale of real estate of $20,858,000, (vii) proceeds from the sale of marketable equity securities of $7,835,000 and (viii) distributions of capital from partially owned entities of $7,504,000.

 

Net cash provided by financing activities of $107,211,000 was primarily comprised of (i) proceeds from borrowings of $353,856,000, partially offset by, (ii) repayments of borrowings, including the purchase of our senior unsecured notes, of $138,291,000, (iii) dividends paid on common shares of $59,115,000, (iv) distributions to noncontrolling interests of $10,514,000 and (v) dividends paid on preferred shares of $14,269,000.

 

 

 

49


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, 2009.

 

(Amounts in thousands)

 

Total

 

New York
Office

 

Washington, DC
Office

 

Retail

 

Merchandise
Mart

 

Other

 

Capital Expenditures (accrual basis):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Expenditures to maintain assets

 

$

8,625

 

$

4,555

 

$

2,044

 

$

73

 

$

1,953

 

$

 

Tenant improvements

 

 

9,121

 

 

2,059

 

 

5,992

 

 

455

 

 

615

 

 

 

Leasing commissions

 

 

3,222

 

 

983

 

 

2,080

 

 

159

 

 

 

 

 

Non-recurring capital expenditures

 

 

4,243

 

 

1,184

 

 

1,197

 

 

34

 

 

 

 

1,828

 

Total capital expenditures and leasing
commissions (accrual basis)

 

 

25,211

 

 

8,781

 

 

11,313

 

 

721

 

 

2,568

 

 

1,828

 

Adjustments to reconcile to cash basis:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Expenditures in the current year applicable to prior periods

 

 

29,631

 

 

12,953

 

 

12,818

 

 

1,818

 

 

2,155

 

 

(113

)

Expenditures to be made in future
periods for the current period

 

 

(10,566

)

 

(2,843

)

 

(7,006

)

 

(636

)

 

 

 

(81

)

Total capital expenditures and leasing commissions (cash basis)

 

$

44,276

 

$

18,891

 

$

17,125

 

$

1,903

 

$

4,723

 

$

1,634

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Tenant improvements and leasing commissions:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Per square foot per annum

 

$

2.58

 

$

3.36

 

$

3.69

 

$

0.45

 

$

1.16

 

$

 

Percentage of initial rent

 

 

7.4%

 

 

6.3%

 

 

9.2%

 

 

2.7%

 

 

3.8%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Development and Redevelopment Expenditures:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Bergen Town Center

 

$

25,477

 

$

 

$

 

$

25,477

 

$

 

$

 

West End 25

 

 

19,053

 

 

 

 

19,053

 

 

 

 

 

 

 

Wasserman venture

 

 

17,993

 

 

 

 

 

 

 

 

 

 

17,993

 

2101 L Street

 

 

11,611

 

 

 

 

11,611

 

 

 

 

 

 

 

 

Manhattan Mall

 

 

11,222

 

 

 

 

 

 

11,222

 

 

 

 

 

1999 K Street

 

 

8,594

 

 

 

 

8,594

 

 

 

 

 

 

 

North Bergen, New Jersey

 

 

6,792

 

 

 

 

 

 

6,792

 

 

 

 

 

Poughkeepsie, New York

 

 

6,761

 

 

 

 

 

 

6,761

 

 

 

 

 

220 20th Street

 

 

6,401

 

 

 

 

6,401

 

 

 

 

 

 

 

Other

 

 

18,625

 

 

1,955

 

 

3,747

 

 

5,780

 

 

1,472

 

 

5,671

 

 

 

$

132,529

 

$

1,955

 

$

49,406

 

$

56,032

 

$

1,472

 

$

23,664

 

 

 

50


LIQUIDITY AND CAPITAL RESOURCES - continued

 

 

Insurance 

 

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

 

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

 

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

 

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

 

Other Commitments and Contingencies

 

Our mortgage loans are non-recourse to us.  However, in certain cases we have provided guarantees or master leased tenant space.  These guarantees and master leases terminate either upon the satisfaction of specified circumstances or repayment of the underlying loans.  As of March 31, 2010, the aggregate dollar amount of these guarantees and master leases is approximately $130,646,000.

 

At March 31, 2010, $30,652,000 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 $18,360,000.

 

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.

 

51


LIQUIDITY AND CAPITAL RESOURCES - continued

 

 

Litigation

 

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

 

On January 8, 2003, Stop & Shop filed a complaint with the United States District Court for the District of New Jersey (“USDC-NJ”) claiming that we had no right to reallocate and therefore continue to collect the $5,000,000 of annual rent from Stop & Shop pursuant to the Master Agreement and Guaranty, because of the expiration of the East Brunswick, Jersey City, Middletown, Union and Woodbridge leases to which the $5,000,000 of additional rent was previously allocated. Stop & Shop asserted that a prior order of the Bankruptcy Court for the Southern District of New York dated February 6, 2001, as modified on appeal to the District Court for the Southern District of New York on February 13, 2001, froze our right to reallocate which effectively terminated our right to collect the additional rent from Stop & Shop. On March 3, 2003, a fter 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 mot ions for summary judgment. Both parties appealed the Court’s decision and on December 14, 2006, the Appellate Court division issued a decision affirming the Court’s decision.  On January 16, 2007, we filed a motion for the reconsideration of one aspect of the Appellate Court’s decision which was denied on March 13, 2007.  Discovery is now complete.  On October 19, 2009, Stop & Shop filed a motion for leave to amend its pleadings to assert new claims for relief, including a claim for damages in an unspecified amount, and an additional affirmative defense.  On April 26, 2010, Stop and Shop’s motion was denied.  We anticipate that a trial date will be set for some time in 2010.  We intend to continue to vigorously pursue our claims against Stop & Shop.  In our opinion, after consultation with legal counsel, the outcome of such matters will not have a material effect on our financial condition, results of operations or cash flows.

 

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

 

In July 2005, we acquired H Street Building Corporation (“H Street”) which has a subsidiary that owns, among other things, a 50% tenancy in common interest in land located in Arlington County, Virginia, known as "Pentagon Row," leased to two tenants, Street Retail, Inc. and Post Apartment Homes, L.P .  In April 2007, H Street acquired the remaining 50% interest in that fee.  On September 25, 2008, both tenants filed suit against us and the former owners claiming the right of first offer to purchase the fee interest, damages in excess of $75,000,000 and punitive damages.  On April 6, 2010, the Trial Court ruled, in favor of the tenants, that we sell the land to the tenants for a net sales price of $14,992,000, representing the Trial Court’s allocation of our purchase price for H Street.  The request for damages and punitive da mages was denied.  We intend to appeal the Trial Court’s decision and expect that the transfer of the land will be stayed pending the appeal.  As a result of the Trial Court’s decision, we have recorded a $10,056,000 loss accrual in the three months ended March 31, 2010, primarily representing previously recognized rental income.

 

 

52


 

FUNDS FROM OPERATIONS (“FFO”)

 

FFO is computed in accordance with the definition adopted by the Board of Governors of the National Association of Real Estate Investment Trusts (“NAREIT”). NAREIT defines FFO as GAAP net income or loss adjusted to exclude net gains from sales of depreciated real estate assets, depreciation and amortization expense from real estate assets, extraordinary items and other specified non-cash items, including the pro rata share of such adjustments of unconsolidated subsidiaries.  FFO and FFO per diluted share are used by management, investors and analysts to facilitate meaningful comparisons of operating performance between periods and among our peers because it excludes the effect of real estate depreciation and amortization and net gains on sales, which are based on historical costs and implicitly assume that the value of real estate diminishes predictably over ti me, rather than fluctuating based on existing market conditions.  FFO does not represent cash generated from operating activities and is not necessarily indicative of cash available to fund cash requirements and should not be considered as an alternative to net income as a performance measure or cash flow as a liquidity measure.  FFO may not be comparable to similarly titled measures employed by other companies.  The calculations of both the numerator and denominator used in the computation of income per share are disclosed in footnote 15 – Income Per Share, in the notes to our consolidated financial statements on page 24 of this Quarterly Report on Form 10-Q.

 

FFO for the Three Months Ended March 31, 2010, and 2009

 

FFO attributable to common shareholders plus assumed conversions was $353,826,000, or $1.87 per diluted share for the three months ended March 31, 2010, compared to $268,582,000, or $1.65 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.” 

 

(Amounts in thousands except per share amounts)

 

For The Three Months
Ended March 31,

 

Reconciliation of our Net Income to FFO:

 

2010

 

2009

 

Net income attributable to Vornado

 

$

214,552

 

$

140,110

 

Depreciation and amortization of real property

 

 

127,614

 

 

124,127

 

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

 

 

 

 

 

 

 

Depreciation and amortization of real property

 

 

17,501

 

 

16,580

 

Income tax effect of Toys adjustments included above

 

 

(6,125

)

 

(5,803

)

Proportionate share of adjustments to equity in net income of partially owned entities
excluding Toys, to arrive at FFO:

 

 

 

 

 

 

 

Depreciation and amortization of real property

 

 

19,541

 

 

14,608

 

Net gains on sale of real estate

 

 

(307

)

 

(173

)

Noncontrolling interests’ share of above adjustments

 

 

(11,171

)

 

(13,003

)

FFO

 

 

361,605

 

 

276,446

 

Preferred share dividends

 

 

(14,267

)

 

(14,269

)

FFO attributable to common shareholders

 

 

347,338

 

 

262,177

 

Interest on 3.875% exchangeable senior debentures

 

 

6,447

 

 

6,362

 

Convertible preferred dividends

 

 

41

 

 

43

 

FFO attributable to common shareholders plus assumed conversions

 

$

353,826

 

$

268,582

 

 

 

 

 

 

 

 

 

Reconciliation of Weighted Average Shares:

 

 

 

 

 

 

 

Weighted average common shares outstanding

 

 

181,542

 

 

155,991

 

Effect of dilutive securities:

 

 

 

 

 

 

 

3.875% exchangeable senior debentures

 

 

5,736

 

 

5,669

 

Employee stock options and restricted share awards

 

 

1,831

 

 

1,038

 

Convertible preferred shares

 

 

72

 

 

74

 

Denominator for diluted FFO per share

 

 

189,181

 

 

162,772

 

 

 

 

 

 

 

 

 

FFO attributable to common shareholders plus assumed conversions per diluted share

 

$

1.87

 

$

1.65

 

 

 

 

 

 

 

 

 

53


Item 3.    Quantitative and Qualitative Disclosures About Market Risk

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

 

(Amounts in thousands, except per share amounts)

As at March 31, 2010

 

As at December 31, 2009

Consolidated debt:

Balance

 

Weighted
Average
Interest Rate

 

Effect of 1%
Change In
Base Rates

 


Balance

 

Weighted
Average
Interest Rate

Variable rate

$

2,307,727

 

1.69%

 

$

23,077

 

$

2,657,972

 

1.67%

Fixed rate

 

8,783,135

 

5.91%

 

 

 

 

8,281,643

 

5.89%

 

$

11,090,862

 

5.03%

 

 

23,077

 

$

10,939,615

 

4.86%

Pro-rata share of debt of non-
consolidated entities (non-recourse):

 

 

 

 

 

 

 

 

 

 

 

 

Variable rate – excluding Toys

$

300,900

 

2.84%

 

 

3,009

 

$

331,980

 

2.87%

Variable rate – Toys

 

368,512

 

5.14%

 

 

3,685

 

 

852,040

 

3.45%

Fixed rate (including $1,300,695, and
$1,077,919 of Toys debt in 2010 and 2009)

 

2,152,951

 

7.33%

 

 

 

 

1,965,620

 

7.16%

 

$

2,822,363

 

6.57%

 

 

6,694

 

$

3,149,640

 

5.70%

Redeemable noncontrolling interests’ share of above

 

 

 

 

 

 

(2,173

)

 

 

 

 

Total change in annual net income

 

 

 

 

 

$

27,598

 

 

 

 

 

Per share-diluted

 

 

 

 

 

$

0.15

 

 

 

 

 

 

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, 2010, variable rate debt with an aggregate principal amount of $507,750,000 and a weighted average interest rate of 2.49% was subject to LIBOR caps.  These caps are based on a notional amount of $507,750,000 and cap LIBOR at a weighted average rate of 5.39%. 

 

Fair Value of Debt

 

The estimated fair value of our debt at March 31, 2010 was less than its aggregate carrying amount by approximately $394,808,000, 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.

 

 

 

54


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, 2010, such disclosure controls and procedures were effective.

 

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

 

55


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, a fter 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 mot ions for summary judgment. Both parties appealed the Court’s decision and on December 14, 2006, the Appellate Court division issued a decision affirming the Court’s decision.  On January 16, 2007, we filed a motion for the reconsideration of one aspect of the Appellate Court’s decision which was denied on March 13, 2007.  Discovery is now complete.  On October 19, 2009, Stop & Shop filed a motion for leave to amend its pleadings to assert new claims for relief, including a claim for damages in an unspecified amount, and an additional affirmative defense.  On April 26, 2010, Stop and Shop’s motion was denied.  We anticipate that a trial date will be set for some time in 2010.  We intend to continue to vigorously pursue our claims against Stop & Shop.  In our opinion, after consultation with legal counsel, the outcome of such matters will not have a material effect on our financial condition, results of operations or cash flows.

 

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

 

In July 2005, we acquired H Street Building Corporation (“H Street”) which has a subsidiary that owns, among other things, a 50% tenancy in common interest in land located in Arlington County, Virginia, known as "Pentagon Row," leased to two tenants, Street Retail, Inc. and Post Apartment Homes, L.P .  In April 2007, H Street acquired the remaining 50% interest in that fee.  On September 25, 2008, both tenants filed suit against us and the former owners claiming the right of first offer to purchase the fee interest, damages in excess of $75,000,000 and punitive damages.  On April 6, 2010, the Trial Court ruled, in favor of the tenants, that we sell the land to the tenants for a net sales price of $14,992,000, representing the Trial Court’s allocation of our purchase price for H Street.  The request for damages and punitive da mages was denied.  We intend to appeal the Trial Court’s decision and expect that the transfer of the land will be stayed pending the appeal.  As a result of the Trial Court’s decision, we have recorded a $10,056,000 loss accrual in the three months ended March 31, 2010, primarily representing previously recognized rental income.

 

56


 

Item 1A. Risk Factors

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

 

 

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

         In the first quarter of 2010, we issued 19,245 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 our Annual Report on Form 10-K for the year ended December 31, 2009, and such information is incorporated by reference herein.

 

 

Item 3.    Defaults Upon Senior Securities

         None.

 

 

Item 5.    Other Information

         None.

 

 

Item 6.    Exhibits

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

 

 

57


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 4, 2010

By:

/s/ Joseph Macnow

 

 

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

58


EXHIBIT INDEX

Exhibit No.

 

 

 

 

3.1

 

-

Articles of Restatement of Vornado Realty Trust, as filed with the State
 Department of Assessments and Taxation of Maryland on July 30, 2007 - Incorporated
by reference to Exhibit 3.75 to Vornado Realty Trust’s Quarterly Report on Form 10-Q
for the quarter ended June 30, 2007 (File No. 001-11954), filed on July 31, 2007

*

 

 

 

 

 

3.2

 

-

Amended and Restated Bylaws of Vornado Realty Trust, as amended on March 2, 2000 -
Incorporated by reference to Exhibit 3.12 to Vornado Realty Trust’s Annual Report on
Form 10-K for the year ended December 31, 1999 (File No. 001-11954), filed on
March 9, 2000
 

*

 

 

 

 

 

3.3

 

-

Second Amended and Restated Agreement of Limited Partnership of Vornado Realty L.P.,
dated as of October 20, 1997 (the “Partnership Agreement”) – Incorporated by reference
to Exhibit 3.26 to Vornado Realty Trust’s Quarterly Report on Form 10-Q for the quarter
ended March 31, 2003 (File No. 001-11954), filed on May 8, 2003         

*

 

 

 

 

 

3.4

 

-

Amendment to the Partnership Agreement, dated as of December 16, 1997 – Incorporated by
reference to Exhibit 3.27 to Vornado Realty Trust’s Quarterly Report on Form 10-Q for
the quarter ended March 31, 2003 (File No. 001-11954), filed on May 8, 2003     

*

 

 

 

 

 

3.5

 

-

Second Amendment to the Partnership Agreement, dated as of April 1, 1998 – Incorporated
by reference to Exhibit 3.5 to Vornado Realty Trust’s Registration Statement on Form S-3
(File No. 333-50095), filed on April 14, 1998              

*

 

 

 

 

 

3.6

 

-

Third Amendment to the Partnership Agreement, dated as of November 12, 1998 -
Incorporated by reference to Exhibit 3.2 to Vornado Realty Trust’s Current Report on
Form 8-K (File No. 001-11954), filed on November 30, 1998    

*

 

 

 

 

 

3.7

 

-

Fourth Amendment to the Partnership Agreement, dated as of November 30, 1998 -
Incorporated by reference to Exhibit 3.1 to Vornado Realty Trust’s Current Report on
Form 8-K (File No. 001-11954), filed on February 9, 1999        

*

 

 

 

 

 

3.8

 

-

Fifth Amendment to the Partnership Agreement, dated as of March 3, 1999 - Incorporated by
reference to Exhibit 3.1 to Vornado Realty Trust’s Current Report on Form 8-K

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

*

 

 

 

 

 

3.9

 

-

Sixth Amendment to the Partnership Agreement, dated as of March 17, 1999 - Incorporated
by reference to Exhibit 3.2 to Vornado
Realty Trust’s Current Report on Form 8-K
(File No. 001-11954), filed on July 7, 1999  

*

 

 

 

 

 

3.10

 

-

Seventh Amendment to the Partnership Agreement, dated as of May 20, 1999 - Incorporated
by reference to Exhibit 3.3 to Vornado
Realty Trust’s Current Report on Form 8-K
(File No. 001-11954), filed on July 7, 1999  

*

 

 

 

 

 

3.11

 

-

Eighth Amendment to the Partnership Agreement, dated as of May 27, 1999 - Incorporated
by reference to Exhibit 3.4 to Vornado
Realty Trust’s Current Report on Form 8-K
(File No. 001-11954), filed on July 7, 1999  

*

 

 

 

 

 

3.12

 

-

Ninth Amendment to the Partnership Agreement, dated as of September 3, 1999 -
Incorporated by reference to Exhibit 3.3 to Vornado
Realty Trust’s Current Report on
Form 8-K (File No. 001-11954), filed on October 25, 1999        

*

 

 

 

 

 

3.13

 

-

Tenth Amendment to the Partnership Agreement, dated as of September 3, 1999 -
Incorporated by reference to Exhibit 3.4 to Vornado
Realty Trust’s Current Report on
 Form 8-K (File No. 001-11954), filed on October 25, 1999       

*

 

 

 

 

 

 


*

 

_______________________
Incorporated by reference.

 

59


 

3.14

 

-

Eleventh Amendment to the Partnership Agreement, dated as of November 24, 1999 -
Incorporated by reference to Exhibit 3.2 to Vornado
Realty Trust’s Current Report on
Form 8-K (File No. 001-11954), filed on December 23, 1999    

*

 

 

 

 

 

3.15

 

-

Twelfth Amendment to the Partnership Agreement, dated as of May 1, 2000 - Incorporated
by reference to Exhibit 3.2 to Vornado
Realty Trust’s Current Report on Form 8-K
(File No. 001-11954), filed on May 19, 2000               

*

 

 

 

 

 

3.16

 

-

Thirteenth Amendment to the Partnership Agreement, dated as of May 25, 2000 -
Incorporated by reference to Exhibit 3.2 to Vornado
Realty Trust’s Current Report on
Form 8-K (File No. 001-11954), filed on June 16, 2000              

*

 

 

 

 

 

3.17

 

-

Fourteenth Amendment to the Partnership Agreement, dated as of December 8, 2000 -
Incorporated by reference to Exhibit 3.2 to Vornado
Realty Trust’s Current Report on
Form 8-K (File No. 001-11954), filed on December 28, 2000    

*

 

 

 

 

 

3.18

 

-

Fifteenth Amendment to the Partnership Agreement, dated as of December 15, 2000 -
Incorporated by reference to Exhibit 4.35 to Vornado Realty Trust’s Registration
Statement on Form S-8 (File No. 333-68462), filed on August 27, 2001 

*

 

 

 

 

 

3.19

 

-

Sixteenth Amendment to the Partnership Agreement, dated as of July 25, 2001 - Incorporated
by reference to Exhibit 3.3 to Vornado Realty Trust’s Current Report on Form 8-K
(File No. 001‑11954), filed on October 12, 2001         

*

 

 

 

 

 

3.20

 

-

Seventeenth Amendment to the Partnership Agreement, dated as of September 21, 2001 -
Incorporated by reference to Exhibit 3.4 to Vornado Realty Trust’s Current Report on
Form 8‑K (File No. 001-11954), filed on October 12, 2001        

*

 

 

 

 

 

3.21

 

-

Eighteenth Amendment to the Partnership Agreement, dated as of January 1, 2002 -
Incorporated by reference to Exhibit 3.1 to Vornado
Realty Trust’s Current Report on
Form 8-K/A (File No. 001-11954), filed on March 18, 2002      

*

 

 

 

 

 

3.22

 

-

Nineteenth Amendment to the Partnership Agreement, dated as of July 1, 2002 - Incorporated
by reference to Exhibit 3.47 to Vornado Realty Trust’s Quarterly Report on Form 10-Q
for the quarter ended June 30, 2002 (File No. 001-11954), filed on August 7, 2002             

*

 

 

 

 

 

3.23

 

-

Twentieth Amendment to the Partnership Agreement, dated April 9, 2003 - Incorporated by
reference to Exhibit 3.46 to Vornado
Realty Trust’s Quarterly Report on Form 10-Q for
the quarter ended March 31, 2003 (File No. 001-11954), filed on May 8, 2003

*

 

 

 

 

 

3.24

 

-

Twenty-First Amendment to the Partnership Agreement, dated as of July 31, 2003 -
Incorporated by reference to Exhibit 3.47 to Vornado Realty Trust’s Quarterly Report
on Form 10-Q for the quarter ended September 30, 2003 (File No. 001-11954), filed on
November 7, 2003          

*

 

 

 

 

 

3.25

 

-

Twenty-Second Amendment to the Partnership Agreement, dated as of November 17, 2003 –
Incorporated by reference to Exhibit 3.49 to Vornado Realty Trust’s Annual Report on
Form 10-K for the year ended December 31, 2003 (File No. 001-11954), filed on
March 3, 2004 

*

 

 

 

 

 

3.26

 

-

Twenty-Third Amendment to the Partnership Agreement, dated May 27, 2004 – Incorporated
by reference to Exhibit 99.2 to Vornado Realty Trust’s Current Report on Form 8-K
(File No. 001-11954), filed on June 14, 2004               

*

 

 

 

 

 

3.27

 

-

Twenty-Fourth Amendment to the Partnership Agreement, dated August 17, 2004 –
Incorporated by reference to Exhibit 3.57 to Vornado Realty Trust and Vornado Realty
L.P.’s Registration Statement on Form S-3 (File No. 333-122306), filed on
January 26, 2005            

*

 

 

 

 

 

 


*

 

_______________________
Incorporated by reference.

 

60


 

3.28

 

-

Twenty-Fifth Amendment to the Partnership Agreement, dated November 17, 2004 –
Incorporated by reference to Exhibit 3.58 to Vornado Realty Trust and Vornado Realty
L.P.’s Registration Statement on Form S-3 (File No. 333-122306), filed on
January 26, 2005            

*

 

 

 

 

 

3.29

 

-

Twenty-Sixth Amendment to the Partnership Agreement, dated December 17, 2004 –
Incorporated by reference to Exhibit 3.1 to Vornado Realty L.P.’s Current Report on
Form 8-K (File No. 000-22685), filed on December 21, 2004    

*

 

 

 

 

 

3.30

 

-

Twenty-Seventh Amendment to the Partnership Agreement, dated December 20, 2004 –
Incorporated by reference to Exhibit 3.2 to Vornado Realty L.P.’s Current Report on
Form 8-K (File No. 000-22685), filed on December 21, 2004    

*

 

 

 

 

 

3.31

 

-

Twenty-Eighth Amendment to the Partnership Agreement, dated December 30, 2004 -
Incorporated by reference to Exhibit 3.1 to Vornado Realty L.P.’s Current Report on
Form 8-K (File No. 000-22685), filed on January 4, 2005          

*

 

 

 

 

 

3.32

 

-

Twenty-Ninth Amendment to the Partnership Agreement, dated June 17, 2005 - Incorporated
by reference to Exhibit 3.1 to Vornado Realty L.P.’s Current Report on Form 8-K
(File No. 000-22685), filed on June 21, 2005               

*

 

 

 

 

 

3.33

 

-

Thirtieth Amendment to the Partnership Agreement, dated August 31, 2005 - Incorporated by
reference to Exhibit 3.1 to Vornado Realty L.P.’s Current Report on Form 8-K
(File No. 000-22685), filed on September 1, 2005       

*

 

 

 

 

 

3.34

 

-

Thirty-First Amendment to the Partnership Agreement, dated September 9, 2005 -
Incorporated by reference to Exhibit 3.1 to Vornado Realty L.P.’s Current Report on
Form 8-K (File No. 000-22685), filed on September 14, 2005   

*

 

 

 

 

 

3.35

 

-

Thirty-Second Amendment and Restated Agreement of Limited Partnership, dated as of
December 19, 2005 – Incorporated by reference to Exhibit 3.59 to Vornado Realty L.P.’s
Quarterly Report on Form 10-Q for the quarter ended March 31, 2006
(File No. 000-22685), filed on May 8, 2006

*

 

 

 

 

 

3.36

 

-

Thirty-Third Amendment to Second Amended and Restated Agreement of Limited
Partnership, dated as of April 25, 2006 – Incorporated by reference to Exhibit 10.2 to
Vornado Realty Trust’s Form 8-K (File No. 001-11954), filed on May 1, 2006

*

 

 

 

 

 

3.37

 

-

Thirty-Fourth Amendment to Second Amended and Restated Agreement of Limited
Partnership, dated as of May 2, 2006 – Incorporated by reference to Exhibit 3.1 to
Vornado Realty L.P.’s Current Report on Form 8-K (File No. 000-22685), filed on
May 3, 2006

*

 

 

 

 

 

3.38

 

-

Thirty-Fifth Amendment to Second Amended and Restated Agreement of Limited
Partnership, dated as of August 17, 2006 – Incorporated by reference to Exhibit 3.1 to
Vornado Realty L.P.’s Form 8-K (File No. 000-22685), filed on August 23, 2006

*

 

 

 

 

 

3.39

 

-

Thirty-Sixth Amendment to Second Amended and Restated Agreement of Limited
Partnership, dated as of October 2, 2006 – Incorporated by reference to Exhibit 3.1 to
Vornado Realty L.P.’s Form 8-K (File No. 000-22685), filed on January 22, 2007

*

 

 

 

 

 

3.40

 

-

Thirty-Seventh Amendment to Second Amended and Restated Agreement of Limited
Partnership, dated as of June 28, 2007 – Incorporated by reference to Exhibit 3.1 to
Vornado Realty L.P.’s Current Report on Form 8-K (File No. 000-22685), filed on
June 27, 2007

*

 

 

 

 

 

 


*

 

_______________________
Incorporated by reference.

 

61


 

3.41

 

-

Thirty-Eighth Amendment to Second Amended and Restated Agreement of Limited
Partnership, dated as of June 28, 2007 – Incorporated by reference to Exhibit 3.2 to
Vornado Realty L.P.’s Current Report on Form 8-K (File No. 000-22685), filed on
June 27, 2007

*

 

 

 

 

 

3.42

 

-

Thirty-Ninth Amendment to Second Amended and Restated Agreement of Limited
Partnership, dated as of June 28, 2007 – Incorporated by reference to Exhibit 3.3 to
Vornado Realty L.P.’s Current Report on Form 8-K (File No. 000-22685), filed on
June 27, 2007

*

 

 

 

 

 

3.43

 

-

Fortieth Amendment to Second Amended and Restated Agreement of Limited
Partnership, dated as of June 28, 2007 – Incorporated by reference to Exhibit 3.4 to
Vornado Realty L.P.’s Current Report on Form 8-K (File No. 000-22685), filed on
June 27, 2007

*

 

 

 

 

 

3.44

 

-

Forty-First Amendment to Second Amended and Restated Agreement of Limited
Partnership, dated as of March 31, 2008 – Incorporated by reference to Exhibit 3.44 to
Vornado Realty Trust’s Quarterly Report on Form 10-Q for the quarter ended March 31,
2008 (file No. 001-11954), filed on May 6, 2008

*

 

 

 

 

 

4.1

 

-

Indenture, dated as of June 24, 2002, between Vornado Realty L.P. and The Bank of New
York, as Trustee - Incorporated by reference to Exhibit 4.1 to Vornado Realty L.P.’s
Current Report on Form 8-K (File No. 000-22685), filed on June 24, 2002

*

 

 

 

 

 

4.2

 

-

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

*

 

 

 

 

 

4.3

 

-

Indenture, dated as of November 20, 2006, among Vornado Realty Trust, as Issuer, Vornado
Realty L.P., as Guarantor and The Bank of New York, as Trustee – Incorporated by
reference to Exhibit 4.1 to Vornado Realty Trust’s Current Report on Form 8-K
(File No. 001-11954), filed on November 27, 2006

*

 

 

 

 

 

 

 

 

Certain instruments defining the rights of holders of long-term debt securities of Vornado
Realty Trust and its subsidiaries are omitted pursuant to Item 601(b)(4)(iii) of Regulation
S-K. Vornado Realty Trust hereby undertakes to furnish to the Securities and Exchange
Commission, upon request, copies of any such instruments.

 

 

 

 

 

 

10.1

 

-

Master Agreement and Guaranty, between Vornado, Inc. and Bradlees New Jersey, Inc. dated
as of May 1, 1992 - Incorporated by reference to Vornado, Inc.’s Quarterly Report on
Form 10-Q for the quarter ended March 31, 1992 (File No. 001-11954), filed May 8, 1992

*

 

 

 

 

 

10.2

 

-

Registration Rights Agreement between Vornado, Inc. and Steven Roth, dated December 29,
1992 - Incorporated by reference to Vornado Realty Trust’s Annual Report on Form 10-K
for the year ended December 31, 1992 (File No. 001-11954), filed February 16, 1993

*

 

 

 

 

 

10.3

 

-

Stock Pledge Agreement between Vornado, Inc. and Steven Roth dated December 29, 1992 - 
     Incorporated by reference to Vornado, Inc.’s Annual Report on Form 10-K for the year 
     ended December 31, 1992 (File No. 001-11954), filed February 16, 1993

*

 

 

 

 

 

10.4

**

-

Management Agreement between Interstate Properties and Vornado, Inc. dated July 13, 1992 
    - Incorporated by reference to Vornado, Inc.’s Annual Report on Form 10-K for the year 
    ended December 31, 1992 (File No. 001-11954), filed February 16, 1993

*

 

 

 

 

 

 


*
**

 

_______________________
Incorporated by reference.
Management contract or compensatory agreement.

 

62


 

10.5

**

-

Employment Agreement, dated as of April 15, 1997, by and among Vornado Realty Trust,
The Mendik Company, L.P. and David R. Greenbaum - Incorporated by reference to
Exhibit 10.4 to Vornado Realty Trust’s Current Report on Form 8-K
(File No. 001-11954), filed on April 30, 1997

*

 

 

 

 

 

10.6

**

-

Promissory Note from Steven Roth to Vornado Realty Trust, dated December 23, 2005 –
Incorporated by reference to Exhibit 10.15 to Vornado Realty Trust Annual Report on
Form 10-K for the year ended December 31, 2005 (File No. 001-11954), filed on
February 28, 2006

*

 

 

 

 

 

10.7

**

-

Letter agreement, dated November 16, 1999, between Steven Roth and Vornado Realty Trust
- - Incorporated by reference to Exhibit 10.51 to Vornado Realty Trust’s Annual Report on
Form 10-K for the year ended December 31, 1999 (File No. 001-11954), filed on
March 9, 2000

*

 

 

 

 

 

10.8

 

-

Agreement and Plan of Merger, dated as of October 18, 2001, by and among Vornado Realty
Trust, Vornado Merger Sub L.P., Charles E. Smith Commercial Realty L.P., Charles E.
Smith Commercial Realty L.L.C., Robert H. Smith, individually, Robert P. Kogod,
individually, and Charles E. Smith Management, Inc. - Incorporated by reference to
Exhibit 2.1 to Vornado Realty Trust’s Current Report on Form 8-K (File No. 001-11954),
filed on January 16, 2002

*

 

 

 

 

 

10.9

 

-

Tax Reporting and Protection Agreement, dated December 31, 2001, by and among Vornado,
Vornado Realty L.P., Charles E. Smith Commercial Realty L.P. and Charles E. Smith
Commercial Realty L.L.C. - Incorporated by reference to Exhibit 10.3 to Vornado Realty
Trust’s Current Report on Form 8-K/A (File No. 1-11954), filed on March 18, 2002

*

 

 

 

 

 

10.10

 

-

Employment Agreement between Vornado Realty Trust and Michael D. Fascitelli, dated
March 8, 2002 - Incorporated by reference to Exhibit 10.7 to Vornado Realty Trust’s
Quarterly Report on Form 10-Q for the quarter ended March 31, 2002
(File No. 001-11954), filed on May 1, 2002

*

 

 

 

 

 

10.11

**

-

First Amendment, dated October 31, 2002, to the Employment Agreement between Vornado
Realty Trust and Michael D. Fascitelli, dated March 8, 2002 - Incorporated by reference
to Exhibit 99.6 to the Schedule 13D filed by Michael D. Fascitelli on November 8, 2002

*

 

 

 

 

 

10.12

**

-

Amendment to Real Estate Retention Agreement, dated as of July 3, 2002, by and between
Alexander’s, Inc. and Vornado Realty L.P. - Incorporated by reference to Exhibit
10(i)(E)(3) to Alexander’s Inc.’s Quarterly Report for the quarter ended June 30, 2002
(File No. 001-06064), filed on August 7, 2002

*

 

 

 

 

 

10.13

 

-

59th Street Real Estate Retention Agreement, dated as of July 3, 2002, by and between
Vornado Realty L.P., 731 Residential LLC and 731 Commercial LLC - Incorporated by
reference to Exhibit 10(i)(E)(4) to Alexander’s Inc.’s Quarterly Report for the quarter
ended June 30, 2002 (File No. 001-06064), filed on August 7, 2002

*

 

 

 

 

 

10.14

 

-

Amended and Restated Management and Development Agreement, dated as of July 3, 2002,
by and between Alexander’s, Inc., the subsidiaries party thereto and Vornado
Management Corp. - Incorporated by reference to Exhibit 10(i)(F)(1) to Alexander’s
Inc.’s Quarterly Report for the quarter ended June 30, 2002 (File No. 001-06064),
filed on August 7, 2002

*

 

 

 

 

 

10.15

 

-

59th Street Management and Development Agreement, dated as of July 3, 2002, by and
between 731 Residential LLC, 731 Commercial LLC and Vornado Management Corp. -
Incorporated by reference to Exhibit 10(i)(F)(2) to Alexander’s Inc.’s Quarterly Report
for the quarter ended June 30, 2002 (File No. 001-06064), filed on August 7, 2002

*

 

 

 

 

 

 


*
**

 

_______________________
Incorporated by reference.
Management contract or compensatory agreement.

 

63


 

10.16

 

-

Amendment dated May 29, 2002, to the Stock Pledge Agreement between Vornado Realty
Trust and Steven Roth dated December 29, 1992 - Incorporated by reference to Exhibit 5
of Interstate Properties’ Schedule 13D/A dated May 29, 2002 (File No. 005-44144), filed
on May 30, 2002

*

 

 

 

 

 

10.17

**

-

Vornado Realty Trust’s 2002 Omnibus Share Plan - Incorporated by reference to Exhibit 4.2
to Vornado Realty Trust’s Registration Statement on Form S-8 (File No. 333-102216)
filed December 26, 2002

*

 

 

 

 

 

10.18

**

-

Form of Stock Option Agreement between the Company and certain employees –
Incorporated by reference to Exhibit 10.77 to Vornado Realty Trust’s
Annual Report on Form 10-K for the year ended December 31, 2004
(File No. 001-11954), filed on February 25, 2005       

*

 

 

 

 

 

10.19

**

-

Form of Restricted Stock Agreement between the Company and certain employees –
Incorporated by reference to Exhibit 10.78 to Vornado Realty Trust’s Annual Report on
Form 10-K for the year ended December 31, 2004 (File No. 001-11954), filed on
February 25, 2005          

*

 

 

 

 

 

10.20

**

-

Amendment, dated March 17, 2006, to the Vornado Realty Trust Omnibus Share Plan –
Incorporated by reference to Exhibit 10.50 to Vornado Realty Trust’s Quarterly Report on
Form 10-Q for the quarter ended March 31, 2006 (File No. 001-11954), filed on
May 2, 2006    

*

 

 

 

 

 

10.21

**

-

Form of Vornado Realty Trust 2006 Out-Performance Plan Award Agreement, dated as of
April 25, 2006 – Incorporated by reference to Exhibit 10.1 to Vornado Realty Trust’s
Form 8-K (File No. 001-11954), filed on May 1, 2006

*

 

 

 

 

 

10.22

**

-

Form of Vornado Realty Trust 2002 Restricted LTIP Unit Agreement – Incorporated by
reference to Vornado Realty Trust’s Form 8-K (Filed No. 001-11954), filed on
May 1, 2006

*

 

 

 

 

 

10.23

**

-

Revolving Credit Agreement, dated as of June 28, 2006, among the Operating Partnership,
the banks party thereto, JPMorgan Chase Bank, N.A., as Administrative Agent, Bank of
America, N.A. and Citicorp North America, Inc., as Syndication Agents, Deutsche Bank
Trust Company Americas, Lasalle Bank National Association, and UBS Loan Finance
LLC, as Documentation Agents and Vornado Realty Trust – Incorporated by reference to
Exhibit 10.1 to Vornado Realty Trust’s Form 8-K (File No. 001-11954), filed on
June 28, 2006

*

 

 

 

 

 

10.24

**

-

Amendment No.2, dated May 18, 2006, to the Vornado Realty Trust Omnibus Share Plan
– Incorporated by reference to Exhibit 10.53 to Vornado Realty Trust’s Quarterly
 Report on Form 10-Q for the quarter ended June 30, 2006 (File No. 001-11954), filed
on August 1, 2006

*

 

 

 

 

 

10.25

**

-

Amended and Restated Employment Agreement between Vornado Realty Trust and Joseph
Macnow dated July 27, 2006 – Incorporated by reference to Exhibit 10.54 to Vornado
Realty Trust’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2006
(File No. 001-11954), filed on August 1, 2006

*

 

 

 

 

 

10.26

 

-

Guaranty, made as of June 28, 2006, by Vornado Realty Trust, for the benefit of JP Morgan
Chase Bank – Incorporated by reference to Exhibit 10.53 to Vornado Realty Trust’s
Quarterly Report on Form 10-Q for the quarter ended September 30, 2006
(File No. 001-11954), filed on October 31, 2006

*

 

 

 

 

 

 


*
**

 

_______________________
Incorporated by reference.
Management contract or compensatory agreement.

 

64


 

 

10.27

**

-

Amendment, dated October 26, 2006, to the Vornado Realty Trust Omnibus Share Plan –
Incorporated by reference to Exhibit 10.54 to Vornado Realty Trust’s Quarterly Report
on Form 10-Q for the quarter ended September 30, 2006 (File No. 001-11954), filed on
October 31, 2006

*

 

 

 

 

 

10.28

**

-

Amendment to Real Estate Retention Agreement, dated January 1, 2007, by and between
Vornado Realty L.P. and Alexander’s Inc. – Incorporated by reference to Exhibit 10.55
to Vornado Realty Trust’s Annual Report on Form 10-K for the year ended
December 31, 2006 (File No. 001-11954), filed on February 27, 2007

*

 

 

 

 

 

10.29

**

-

Amendment to 59th Street Real Estate Retention Agreement, dated January 1, 2007, by and
among Vornado Realty L.P., 731 Retail One LLC, 731 Restaurant LLC, 731 Office One
LLC and 731 Office Two LLC. – Incorporated by reference to Exhibit 10.56 to
Vornado Realty Trust’s Annual Report on Form 10-K for the year ended
December 31, 2006 (File No. 001-11954), filed on February 27, 2007

*

 

 

 

 

 

10.30

**

-

Employment Agreement between Vornado Realty Trust and Mitchell Schear, as of April 19,
2007 – Incorporated by reference to Exhibit 10.46 to Vornado Realty Trust’s Quarterly
Report on Form 10-Q for the quarter ended March 31, 2007 (File No. 001-11954),
filed on May 1, 2007

*

 

 

 

 

 

10.31

 

-

Revolving Credit Agreement, dated as of September 28, 2007, among Vornado Realty L.P. as
borrower, Vornado Realty Trust as General Partner, the Banks signatory thereto, each as a
Bank, JPMorgan Chase Bank, N.A. as Administrative Agent, Bank of America, N.A. as
Syndication Agent, Citicorp North America, Inc., Deutsche Bank Trust Company
Americas, and UBS Loan Finance LLC as Documentation Agents, and J.P. Morgan
Securities Inc. and Bank of America Securities LLC as Lead Arrangers and Bookrunners.
- - Incorporated by reference to Exhibit 10.1 to Vornado Realty Trust’s Current Report
on Form 8-K (File No. 001-11954), filed on October 4, 2007

*

 

 

 

 

 

10.32

 

-

Second Amendment to Revolving Credit Agreement, dated as of September 28, 2007, by and
among Vornado Realty L.P. as borrower, Vornado Realty Trust as General Partner, the
Banks listed on the signature pages thereof, and J.P. Morgan Chase Bank N.A., as
Administrative Agent for the Banks - Incorporated by reference to Exhibit 10.2 to
Vornado Realty Trust’s Current Report on Form 8-K (File No. 001-11954),
filed on October 4, 2007

*

 

 

 

 

 

10.33

**

-

Form of Vornado Realty Trust 2002 Omnibus Share Plan Non-Employee Trustee Restricted
LTIP Unit Agreement – Incorporated by reference to Exhibit 10.45 to Vornado Realty
Trust’s Annual Report on Form 10-K for the year ended December 31, 2007 (File No.
001-11954) filed on February 26, 2008

*

 

 

 

 

 

10.34

**

-

Form of Vornado Realty Trust 2008 Out-Performance Plan Award Agreement – Incorporated
by reference to Exhibit 10.46 to Vornado Realty Trust’s Quarterly Report on Form 10-Q
for the quarter ended March 31, 2008 (File No. 001-11954) filed on May 6, 2008

*

 

 

 

 

 

10.35

**

-

Amendment to Employment Agreement between Vornado Realty Trust and Michael D. 
     Fascitelli, dated December 29, 2008.  Incorporated by reference to Exhibit 10.47 to 
     Vornado Realty Trust’s Annual Report on Form 10-K for the year ended December 31, 
     2008 (File No. 001-11954) filed on February 24, 2009

*

 

 

 

 

 

10.36

**

-

Amendment to Employment Agreement between Vornado Realty Trust and Joseph Macnow,
dated December 29, 2008.  Incorporated by reference to Exhibit 10.48 to Vornado Realty
Trust’s Annual Report on Form 10-K for the year ended December 31, 2008 (File No.
001-11954) filed on February 24, 2009

*

 

 

 

 

 

 


*
**

 

_______________________
Incorporated by reference.
Management contract or compensatory agreement.

 

65


 

 

 

10.37

**

-

Amendment to Employment Agreement between Vornado Realty Trust and David R.
Greenbaum, dated December 29, 2008.  Incorporated by reference to Exhibit 10.49 to
Vornado Realty Trust’s Annual Report on Form 10-K for the year ended December 31,
2008 (File No. 001-11954) filed on February 24, 2009

*

 

 

 

 

 

10.38

**

-

Amendment to Indemnification Agreement between Vornado Realty Trust and David R.
Greenbaum, dated December 29, 2008.  Incorporated by reference to Exhibit 10.50 to
Vornado Realty Trust’s Annual Report on Form 10-K for the year ended December 31,
2008 (File No. 001-11954) filed on February 24, 2009

*

 

 

 

 

 

10.39

**

-

Amendment to Employment Agreement between Vornado Realty Trust and Mitchell N.
Schear, dated December 29, 2008.  Incorporated by reference to Exhibit 10.51 to Vornado
Realty Trust’s Annual Report on Form 10-K for the year ended December 31, 2008 (File
No. 001-11954) filed on February 24, 2009

*

 

 

 

 

 

10.40

**

-

Amendment to Employment Agreement between Vornado Realty Trust and Christopher G.
Kennedy, dated December 29, 2008.  Incorporated by reference to Exhibit 10.53 to
Vornado Realty Trust’s Annual Report on Form 10-K for the year ended December 31,
2008 (File No. 001-11954) filed on February 24, 2009

*

15.1

 

-

Letter regarding Unaudited Interim Financial Information

 

 

 

 

 

 

31.1

 

-

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

 

 

 

 

 

 

31.2

 

-

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

 

 

 

 

 

 

32.1

 

-

Section 1350 Certification of the Chief Executive Officer

 

 

 

 

 

 

32.2

 

-

Section 1350 Certification of the Chief Financial Officer

 

 

 

 

 

 

101

 

-

The following financial information from Vornado Realty Trust’s Quarterly Report on Form
10-Q for the quarter ended March 31, 2010, formatted in XBRL (eXtensible Buisness
Reporting Language):  (i) Consolidated Balance Sheets (unaudited), (ii) Consolidated
Statements of Income (unaudited), (iii) Consolidated Statements of Changes in Equity
(unaudited), (iv) Consolidated Statements of Cash Flows (unaudited) and (v) Notes to
Consolidated Financial Statements (unaudited), tagged as blocks of text.

 

 

 

 

 

 

 


*
**

 

_______________________
Incorporated by reference.
Management contract or compensatory agreement.

 

 

66


ex151.htm - Generated by SEC Publisher for SEC Filing

EXHIBIT 15.1

May 4, 2010

 

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, 2010 and 2009, as indicated in our report dated May 4, 2010; 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, 2010, 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

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 4, 2010

 


/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 4, 2010

 


/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, 2010 (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 4, 2010

 

 


/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, 2010 (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 4, 2010

 

 


/s/ Joseph Macnow

 

 

Name:

Joseph Macnow

 

 

Title:

Executive Vice President and
Chief Financial Officer