VORNADO REALTY TRUST 2012 ANNUAL REPORT
10JUL201211394241
6APR201118555177
This Annual Report is printed on recycled paper and is recyclable.
V O R N A D O C O M P A N Y P R O F I L E
Vornado Realty Trust is a fully-integrated real estate investment trust.
The Company owns all or portions of:
New York:
31 office properties aggregating 19.7 million square feet and four residential
properties containing 1,655 units;
49 Manhattan street retail properties aggregating 2.2 million square feet;
The 1,700 room Hotel Pennsylvania;
A 32.4% interest in Alexander’s, Inc. (NYSE:ALX) which owns six properties in
the greater New York metropolitan area including 731 Lexington Avenue, the 1.3
million square foot Bloomberg, L.P. headquarters building;
Washington:
73 properties aggregating 19.1 million square feet, including 59 office properties
aggregating 16.1 million square feet and seven residential properties containing
2,414 units;
Retail Properties:
120 strip shopping centers, malls, and single-tenant retail assets aggregating 20.8
million square feet, primarily in the northeast states, California and Puerto Rico;
Other Real Estate/Investments:
The 3.5 million square foot Merchandise Mart in Chicago, whose largest tenant is
Motorola Mobility, owned by Google, which leases 572,000 square feet;
A 70% controlling interest in 555 California Street, a three-building office
complex in San Francisco’s financial district aggregating 1.8 million square feet
known as Bank of America Center;
A 25% interest in Vornado Capital Partners, our $800 million real estate fund. We
are the general partner and investment manager of the fund;
A 32.6% interest in Toys “R” Us, Inc.;
A 6.1% interest in JC Penney Company, Inc. (NYSE:JCP); and
Other real estate and related investments.
Vornado’s common shares are listed on the New York Stock Exchange and are traded
under the symbol: VNO.
F I N A N C I A L H I G H L I G H T S
Year Ended December 31,
Revenues
EBITDA (before noncontrolling interests and gains on sale of real estate)*
Net income
Net income per sharebasic
Net income per sharediluted
Total assets
Total equity
Funds from operations*
Funds from operations per share*
EBITDA, adjusted for comparability*
Funds from operations adjusted for comparability*
Funds from operations adjusted for comparability per share*
2012
2,766,457,000
1,819,601,000
549,271,000
2.95
2.94
2011
2,732,836,000
2,266,691,000
601,771,000
3.26
3.23
$
$
$
$
$
21,965,975,000
$ 20,446,487,000
7,904,144,000
818,565,000
4.39
1,964,150,000
964,125,000
5.17
$
$
$
$
$
$
7,508,447,000
1,230,973,000
6.42
1,952,633,000
939,273,000
4.90
$
$
$
$
$
$
$
$
$
$
$
$
*
In these financial highlights and in the Chairman’s letter to our shareholders that follows, we present certain non-
GAAP measures, including EBITDA before Noncontrolling Interests and Gains on Sale of Real Estate, EBITDA
Adjusted for Comparability, Funds from Operations (“FFO”) and Funds from Operations Adjusted for
Comparability. We have provided reconciliations of these non-GAAP measures to the applicable GAAP measures
in the appendix section of this Chairman’s letter and in the Company’s Annual Report on Form 10-K, which
accompanies this letter or can be viewed at www.vno.com, under “Item 7 Management’s Discussion and Analysis
of Financial Condition and Results of Operations.”
To Our Shareholders
Vornado’s Funds from Operations Adjusted for Comparability (an apples-to-apples comparison of our
continuing business, eliminating certain one-timers) for the year ended December 31, 2012 was $964.1 million,
$5.17 per diluted share, compared to $939.3 million, $4.90 per diluted share for the year ended December 31, 2011.
Total Funds from Operations (apples-to-apples plus one-timers) for the year ended December 31, 2012 was
$818.6 million, $4.39 per diluted share, compared to $1,231.0 million, $6.42 per diluted share, for the year ended
December 31, 2011.
Net Income attributable to common shares for the year ended December 31, 2012 was $549.3 million, $2.94 per
diluted share, versus $601.8 million, $3.23 per diluted share, for the previous year.
Our core business is concentrated in New York and Washington, the two most important markets in the nation, is
office and retail centric, and represents 91% of our EBITDA.
We have run Vornado for 33 years. Cash flow from the core business has increased in both total dollars and on a
same-store basis for each of the first 32 years; however, this year both have decreased as a result of the decline in
Washington results due to BRAC.
Here are our financial results (presented in EBITDA format) by business segment:
($ IN MILLIONS)
EBITDA:
New York:
Office
Retail
Alexander’s
Hotel Pennsylvania
Total NewYork
Washington
Retail – Strips and Malls
Merchandise Mart
LNR
Real Estate Fund
Toys “R” Us
Other (see page 3 for details)
EBITDA before noncontrolling
interests and gains on sale of
real estate
2012
Same Store
% of 2012
EBITDA
Cash
GAAP
2012
2011
2010
1.0%
2.6%
32.7%
(3.4%)
2.0%
(9.8%)
1.3%
0.7%
2.4%
2.2%
(0.8%)
(3.4%)
2.0%
(8.6%)
1.2%
4.5%
35.6%
12.0%
2.6%
1.8%
52.0%
22.6%
15.0%
3.8%
5.0%
1.6%
n/a
561.6
189.5
40.4
28.4
819.9
355.5
236.4
60.1
79.5
24.6
334.6
1,910.6
(91.0)
538.9
186.8
39.6
30.0
795.3
410.3
229.9
52.7
41.6
9.3
339.0
1,878.1
388.6
518.9
180.2
39.3
23.8
762.2
413.3
224.6
52.7
6.1
0.5
340.0
1,799.4
484.2
100.0%
1,819.6
2,266.7
2,283.6
This letter and this Annual Report contain 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. The Company’s future results, financial
condition and business may differ materially from those expressed in these forward-looking statements. These forward-looking statements are subject to numerous
assumptions, risks and uncertainties. Many of the factors that will determine these items are beyond our ability to control or predict. For further discussion of these
factors, see “Forward-Looking Statements” and “Item 1A. Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2012, a
copy of which accompanies this letter or can be viewed at www.vno.com.
2
Other EBITDA is comprised of:
($ IN THOUSANDS)
Corporate general and administrative expenses
555 California Street
Investment income
Interest income on mortgages receivable
Lexington Realty Trust
Other investments
Non-cash write-downs:
JC Penney:
Impairment loss
Mark-to-market of derivative position
Toys “R” Us impairment
Other
Recognition of unamortized discount on the subordinated
debt of Independence Plaza
Gain on sale of Canadian trade shows
1290 Avenue of the Americas and 555 California Street
priority return
Mezzanine loans loss reversal and net gain on disposition
Net gain on extinguishment of debt
Net gain from Suffolk Downs sale of partial interest
Recognition of disputed receivable from Stop & Shop
Discontinued operations – EBITDA of properties sold
Other, net
Total
2012
(89,192)
40,544
12,319
13,861
31,283
39,386
(224,937)
(75,815)
(40,000)
(11,792)
60,396
31,105
13,222
--
--
--
--
87,023
21,597
(91,000)
2011
(85,922)
44,724
27,464
14,023
31,924
37,049
--
12,984
--
(13,794)
--
--
--
82,744
83,907
12,525
23,521
118,467
(1,016)
388,600
2010
(90,343)
45,392
26,617
10,319
41,000
63,232
--
130,153
--
(31,577)
--
--
--
53,100
92,150
--
--
139,871
4,286
484,200
3
The following chart reconciles Funds from Operations to Funds from Operations Adjusted for Comparability:
($ IN MILLIONS, EXCEPT SHARE DATA)
Funds from Operations, as Reported
Adjustments for certain items that affect comparability:
Non-cash impairment loss on JC Penney owned shares
(Loss) income from mark-to-market of derivative positions in JC Penney
Non-cash impairment loss on investment in Toys “R” Us
Recognition of unamortized discount on the subordinated debt
of Independence Plaza
1290 Avenue of the Americas and 555 California Street priority return and
income tax benefit
After tax net gain on sale of Canadian trade shows
Net gain resulting from Lexington’s stock issuance
Discontinued operations – FFO of real estate sold
Mezzanine loans loss reversal and gain on disposition
Net gain on extinguishment of debt
Recognition of disputed receivable from Stop & Shop
Write-off of development costs
Other
Noncontrolling interests’ share of above adjustments
Total adjustments
Funds from Operations Adjusted for Comparability
Funds from Operations Adjusted for Comparability per share
2012
818.6
2011
1,231.0
2010
1,251.5
(224.9 )
(75.8 )
(40.0 )
--
13.0
--
--
130.2
--
60.4
--
--
25.3
19.7
14.1
68.5
--
--
--
--
(2.4 )
9.6
(145.5 )
964.1
5.17
--
--
9.8
91.9
82.7
83.9
23.5
--
6.5
(19.6)
291.7
939.3
4.90
--
--
13.7
100.6
53.1
77.1
--
(30.0)
14.5
(24.6)
334.6
916.9
4.83
Funds from Operations Adjusted for Comparability increased $0.27 per share in 2012, or 5.5%, to $5.17 from $4.90,
as detailed below:
($ IN MILLIONS, EXCEPT PER SHARE)
Same Store Operations:
Amount
Per Share
New York
Washington
Retail
Merchandise Mart
Acquisitions, net of interest expense
Toys “R” Us
LNR
Vornado Capital Partners
Investment Income
Interest Expense
Other, primarily Washington properties taken out of
service (0.10 per share) and lease cancellation and
development fees last year
Accretion from decreased share count
Increase in Comparable FFO
15.6
(35.2)
2.8
3.5
12.7
14.7
39.0
15.4
(15.9)
(1.6)
(26.2)
--
24.8
0.08
(0.17)
0.01
0.02
0.06
0.07
0.19
0.08
(0.08)
(0.01)
(0.12)
0.14
0.27
4
In 2012, we realized net gains from the sale of real estate of $487.4 million.(1) These sales are summarized as
follows:
($ IN MILLIONS)
Kings Plaza Mall (32.4% interest)
Merchandise Mart:
350 West Mart Center
Canadian Trade Shows
Boston Design Center
Washington Design Center
LA Mart
Washington Office Center
Reston Executive Center
12 Non-Core Retail Assets
Independence Plaza – recapitalization
Total
Proceeds
243.3
228.0
53.0
72.4
50.0
53.0
200.0
126.2
156.7
--
1,182.6
Net
Gains
180.0
54.9
19.2
5.3
--
--
126.6
36.7
19.7
45.0
487.4
After costs, debt repayments and distributions to shareholders of $202 million, we realized $789 million. Thanks to
Mike DeMarco, who very ably took the lead in selling the Mart assets and the two big malls.
These gains were partially offset by non-cash impairment losses aggregating $139.3 million,(1) primarily
Broadway Mall and South Hills Center.
________________________________
1 NAREIT’s definition of FFO excludes gains or losses on sale of real estate.
5
Growth
As is our custom, we present the chart below that traces our ten-year record of growth, both in absolute dollars and
per share amounts:
($ AND SHARES IN THOUSANDS, EXCEPT PER SHARE DATA)
Adjusted for Comparability
FFO
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
EBITDA
1,964,150
1,952,633
1,865,310
1,794,950
1,805,524
1,725,957
1,385,243
1,040,257
933,732
794,461
785,026
Amount
964,125
939,273
916,884
758,603
743,635
721,230
559,361
523,661
500,786
402,175
367,967
Per
Share
5.17
4.90
4.83
4.37
4.54
4.39
3.59
3.61
3.76
3.45
3.27
Shares
Outstanding
197,310
196,541
195,746
194,082
168,903
167,672
166,513
156,487
145,407
137,754
129,586
FFO has grown at 10.1% per year over ten years (4.7% on a per share basis) and 5.98% per year over five years
(3.3% on a per share basis).
6
Acquisitions/Dispositions/Fund
Our external growth has never been programmed, formulaic or linear, i.e. we do not budget acquisition activity.
Each year, we mine our deal flow for opportunities and, as such, our acquisition volume is lumpy. Here is a ten-year
schedule of acquisitions and dispositions:
Acquisitions(2)
Dispositions
($ IN THOUSANDS)
2013 to date
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
Number of
Transactions
--
10
12
15
--
3
38
32
31
17
9
167
Asset
Cost
--
1,365,200
1,499,100
542,400
--
31,500
4,063,600
2,177,000
4,686,000
511,800
533,000
15,409,600
Number of
Transactions
4
23
7
5
16
6
5
3
--
1
3
73
Proceeds
1,004,000
1,222,274
389,212
137,792
262,838
493,172
186,259
105,187
--
12,900
299,852
4,113,486
Net
Gain
261,850
454,005
137,846
56,830
42,987
171,110
60,126
31,662
--
9,850
161,022
1,387,288
2012 was a good year for acquisitions (outlined below). Kudos to Michael Franco and Wendy Silverstein,
Co-Heads of Acquisitions, and the 45th floor team for outstanding performance.
($ IN THOUSANDS)
666 Fifth Avenue Retail
1535 Broadway (Marriott Marquis Retail and Signage)
Independence Plaza (58.8% interest)
50/70 West 93rd Street (49.9% interest)
608 Fifth Avenue – Office and Retail
701 Seventh Avenue Mezzanine Loan
NY
NY
NY
NY
NY
NY
Vornado Capital Partners(3) – 4 transactions (25% interest)
Square Feet/Residential Units
Our
Ownership
114,000
64,000
781 units
163 units
121,000
--
Total
114,000
64,000
1,328 units
327 units
121,000
--
132,800
531,200
Asset
Cost
707,000
240,000
159,800
50,900
33,900
93,700
79,900
1,365,200
In 2012, the Fund invested $320 million ($79.9 million our share) in four deals: 1100 Lincoln Road (Miami Beach -
Retail), 800 Corporate Pointe (Culver City - Office), 520 Broadway (Santa Monica - Office) and 501 Broadway
(New York - Retail). For further information, see page 5 of our 2012 Form 10-K.
________________________________
2 Excludes marketable securities.
3 We are the general partner, a 25% limited partner and the investment manager of Vornado Capital Partners (the “Fund”), an $800 million
real estate fund. It is our exclusive investment vehicle during its three-year investment period ending July 2013, excluding carve-outs for
land and ground-up development; investments using our securities; investments related to our current properties; and noncontrolling
interests in equity and debt securities.
7
Capital Markets
Since January 1, 2012, we have executed the following capital markets transactions:
We refinanced 1290 Avenue of the Americas in a single asset CMBS for $950 million ($452 per square foot)
3.3% interest-only for 10 years, which replaced the existing 6.82%, $409 million mortgage. (4)
We completed an additional ten financings secured by real estate aggregating $1.799 billion at a weighted
average interest rate of 3.30% and a weighted average term of 7.7 years. Four of these financings were to
support newly acquired assets; the other six yielded $74 million of net proceeds.
We extended a $1.250 billion tranche of our $2.5 billion unsecured revolving credit facilities by two years to
June 2017, with two 6-month extension options. The interest rate was lowered from LIBOR plus 1.35% with
a 0.30% facility fee (drawn or undrawn) to LIBOR plus 1.15% with a 0.20% fee. The second $1.250 billion
facility matures in November 2015 and has a one-year extension option.
We redeemed $500 million of exchangeable senior debentures, which had a GAAP interest rate of 5.32% and
repaid $200 million of secured debt, which had a weighted average interest rate of 5.89%.
We issued 5.4% Series L and 5.7% Series K perpetual preferred shares (callable after five years without
penalty) totaling $600 million, and we redeemed $517 million of preferred shares and units (at a $9 million
discount), which had a weighted average rate of 6.82%, resulting in an annual savings of $6.6 million.
At year-end we had $2.505 billion of liquidity, comprised of $1.175 billion of cash, restricted cash and marketable
securities(5) and $1.330 billion undrawn under our $2.5 billion revolving credit facilities. After unwinding year-end tax
stuff, we repaid the line in full. Today, we have $3.2 billion of liquidity.
Debt is now 36.2% of our market-value balance sheet. Since stock prices fluctuate, we believe an even better measure
of leverage may be debt to EBITDA – ours is currently 6.5x, down from 8.1x in 2008.
Vornado remains committed to maintaining our investment grade rating.
Our Capital Markets “A team” is headed by EVPs Michael Franco and Wendy Silverstein with SVPs Dan Guglielmone
and Richard Reczka. Thank you to Shannon Bauer and Adam Green.
________________________________
4
5
Think about it, we realized proceeds of $541 million at an interest cost of 64 basis points.
Excluding JC Penney securities.
8
Report Card
Here is a chart showing Vornado’s total return compared to the Office REIT and RMS indices for various periods
ending December 31, 2012 and for 2013 year-to-date:
2013 YTD
One-year
Three-year
Five-year
Ten-year
Fifteen-year
Twenty-year
Vornado
9.5%
9.2%
28.2%
9.6%
228.5%
248.7%
1,446.0%
Office
REIT
Index
10.2%
14.2%
34.1%
7.2%
135.6%
174.9%
n/a
RMS
Index
10.5%
17.8%
64.5%
31.2%
199.1%
251.8%
n/a
The Office REIT Index is compiled by NAREIT and was first published nineteen years ago. RMS is the Morgan Stanley REIT
Index and was first published fifteen years ago.
This year, for the first time, we have included for comparative purposes the Office REIT Index; after all, we are
primarily an office company. Interestingly, the Office REIT Index has under-performed the RMS across the board
(sort of indicating that office has underperformed other property types over all periods of time). We outperformed the
Office REIT Index for the five year period and both indices for the ten year period.
We are very pleased with 2012 performance overall and with our progress and accomplishments in achieving our goals
set forth in last year’s letter.
We commenced quarterly conference calls in 2012’s second quarter.
We sold out of the Mart business asset-by-asset in five separate transactions, realizing $456.4 million of proceeds and
$79.4 million of net gain. We are now down to the big building and tag ends. Beginning in 2013, we will no longer
show the Mart business as a separate segment. The Mart business has been good to us, yielding a 9.7% unlevered
IRR, a 13.9% levered IRR, over a 15-year holding period.
In July 2012, we completed a transformative 572,000 square foot headquarters lease at the Chicago Merchandise Mart
building with Motorola Mobility, owned by Google. This lease transformed the Mart building into the bull’s eye for
creative and tech tenants in the young and hip River North section of Chicago. And, the Mart building remains the
pre-eminent location for residential and contract furniture showrooms and related trade shows. We expect the income
and value of this giant 3.5 million square foot building to increase – as such it’s a keeper, for now. This asset will be
included in the “Other” segment, be managed in Chicago by the very capable Myron Maurer, reporting to New York
Division senior management.
We continue to own 7 West 34th Street, which will be converted back to an office building and transferred to the New
York Division.
We made real progress reducing our exposure to the enclosed mall business by selling Kings Plaza and Green Acres
for an aggregate of $1.25 billion. It was a good time to sell, and we did well here. The $304 million tax gain from
Green Acres was 1031’d into 666 Fifth Avenue retail; the $624 million tax gain from Kings Plaza was paid out to
shareholders as a long-term capital gain dividend (our share $202 million, $1.00 per share).
To trim non-strategic, non-geographic assets, we sold, or are under contract to sell, 15 retail properties for
approximately $430 million, realizing net gains of $98 million. More is yet to come.
9
LNR is under contract to be sold for $1.053 billion, our share $241 million, net.(6)
In the third quarter of 2012, we sold our equity investment in Verde to an affiliate of Brookfield Asset Management,
for $28 million, recognizing a loss of $4.9 million. We continue to hold $25 million of Verde 4.75% 2018 debentures.
In March 2013, we sold 10 million shares of JC Penney (43% of our position), reducing our ownership to 6.1%,
realizing an economic loss of $97.3 million. This has obviously been a difficult and very disappointing investment.
Exiting the privately held Toys “R” Us is proving to be more difficult.(7)
Our aim is to simplify everything in our business, including our 206-page 10-K. Beginning in 2012, we redefined the
New York segment to encompass all of our New York assets, including the 1.0 million square feet in 21 freestanding
Manhattan street retail assets (previously in the Retail segment) and Hotel Pennsylvania and Alexander’s (previously
in the Other segment). Beginning in 2013, we will no longer show the Mart business as a separate segment.
We will continue to simplify and prune.
_____________________________________
6
7
Our 8-year investment in LNR is scheduled to come to a close shortly. LNR is the nation’s largest special servicer of Commercial Mortgage
Backed Securities (CMBS). As such, it is a work out specialist who accedes to control as a result of an actual or anticipated default – just the
time when we become interested. When it was last sold in 2003, we were the under-bidder and then provided finance to the buyer in two
tranches: a $60 million tranche, which was repaid in full and a $75 million tranche, which was restructured in 2010. In connection with the
restructuring, we added $116 million of new capital becoming the largest single owner with 26.2% in a club of five investors. For the entire
investment our IRR is 11.9%; from the restructuring date when we added capital, our IRR is 40.4%. Because of the wonders of the equity
method of GAAP accounting, where our share of undistributed income is added to basis, we will realize very little accounting (or tax) gain
here. Beginning in the first quarter of 2013, LNR’s FFO will be treated as non-comparable.
In December 2012, we recorded a $40 million non-cash impairment charge on our investment in Toys “R” Us. Because of this impairment,
going forward, we must record losses, but cannot record gains. Beginning in 2013, we will present Toys as non-comparable FFO.
10
Operating Platforms…Lease, Lease, Lease
The mission of our business is to create value for shareholders by growing our asset base through the addition of
carefully selected properties and by adding value through intensive and efficient management. Our operating platforms
are where the rubber meets the road. And…in our business, leasing is the main event. As in past years, we present below
leasing and occupancy statistics for our businesses.
Merchandise Mart
(SQUARE FEET IN THOUSANDS)
Total
New York
Washington
Retail
Office
Showroom
Office
Retail
2012
Square feet leased
GAAP Mark-to-Market
Number of transactions
2011
Square feet leased
GAAP Mark-to-Market
Number of transactions
2010
Square feet leased
GAAP Mark-to-Market
Number of transactions
Occupancy rate:
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
6,648
1,950
9.1%
687
4.9%
139
6,902
13.6%
706
4,993
5.6%
798
91.5%
93.2%
94.5%
93.1%
94.2%
94.9%
94.1%
94.2%
94.2%
94.1%
3,211
18.4%
149
1,364
(1.9%)
154
95.9%
96.2%
96.1%
95.5%
96.7%
97.6%
97.5%
96.0%
95.5%
95.2%
192
29.5%
23
61
12.9%
9
44
47.0%
15
96.8%
95.6%
96.4%
(8)
(8)
(8)
(8)
(8)
(8)
(8)
2,111
3.4%
201
1,735
8.2%
206
1,678
10.0%
219
84.1%
90.6%
95.0%
93.3%
95.0%
93.3%
92.2%
91.2%
91.5%
93.9%
1,422
20.5 %
166
1,348
15.1 %
176
1,140
15.8 %
157
93.4 %
93.2 %
92.6 %
91.6 %
92.0 %
94.2 %
92.7 %
95.6 %
93.9 %
93.0 %
593
39.9%
4
241
15.7%
8
171
(6.1%)
15
90.0%
90.1%
90.9%
88.8%
96.5%
96.7%
97.4%
97.0%
96.5%
92.6%
380
11.0%
154
306
1.5%
158
596
4.0%
238
94.7%
89.8%
95.0%
89.4%
92.2%
93.7%
93.6%
94.7%
97.6%
95.1%
In 2012, we leased 6,648,000 square feet. Thank you to our all-star leasing captains: Glen Weiss, Brendan Owen, Jim
Creedon, Sherri White, Leigh Lyons, Michael Zucker and Paul Heinen.(9)
Since the beginning of 2012, we signed 15 leases of over 50,000 square feet, totaling 2,660,000 square feet. The big
deals of the year were the 646,000 square foot lease extension (to 2035) with Macy’s in Penn Plaza (17.8% GAAP mark-
to-market) and the 572,000 square foot headquarters lease with Motorola Mobility, owned by Google, at the Merchandise
Mart.(10)
________________________________
8
9
10
Included in New York Office.
And thank you to our Springfield Town Center leasing team headed by Michael Khouri, Jill Creps, Terry Furry and
Jessica Secreti, whose accomplishments will hit our leasing chart in 2014.
Runner-ups in the large-lease category were: 315,000 square foot leases with Interpublic Group at 909 Third Avenue and 100
West 33rd Street, and a 209,000 square foot lease with Information Builders at Two Penn Plaza.
11
In the Penn Plaza District of Manhattan, we own 6.7 million square feet of Class A office in five buildings, plus the 1,700-
room Hotel Pennsylvania, plus street retail. Four million square feet sits atop Penn Station, the busiest commuter hub in
North America, and is all interconnected below ground. The Penn Plaza District is anchored by Penn Station, Madison
Square Garden and Macy’s flagship (the largest store in the nation measured by both size and sales volume and,…as I like
to say, equivalent to ten regional malls). We sit at the gateway to Manhattan’s West Side at the northern edge of the
Midtown South submarket. We benefit from spillover from the Chelsea and Park Avenue South submarkets, which are
flooded by tech firms and workers who don’t wear ties. Interestingly, in 2012, the Penn Plaza District had the city’s
highest percentage increase in rental rate and the lowest vacancy rate (6.3%). We have a forever history of being full here,
averaging over 96% occupancy over the last ten years. Our average in-place rents in Penn Plaza have steadily grown from
$37.98 in 2003 to $51.16 in 2012. Our lease renewal rate fluctuates between a high 60% to a higher 70%. The streets are
teeming with people. Hotel Pennsylvania, all our street retail here, Moynihan Station are all opportunities in our future.
We are excited about the prospects for 280 Park Avenue (at 48th Street) where we (together with partner SL Green) are
well along in the stem-to-stern renovation of this 1.2 million square foot building. After renovation, 280 will be the most
modern building on Park Avenue, and… the best.
Our largest acquisition in 2012 was $707 million for 666 Fifth Avenue retail (Uniqlo’s flagship, Swatch, and Hollister
stores). We already owned 50% of the office building above. This deal certainly stands on its own, but we benefited here
from a double whammy, since it also served as a 1031 like-kind exchange for the Green Acres gain. Here’s the math: we
sold Green Acres at a 5.3% cash cap rate; we acquired 666 retail at a 4.4% cash cap rate, but at a 5.6% GAAP cap rate
(which adjusts for under-market rents). The icing on the cake was a ten year $390 million non-recourse mortgage at 3.6%
interest-only which leveraged our first-year cash return to 5.4%. And, the leases here have rent bumps every year. This
asset’s return is pure i.e., no capex will be expended during the 15-year initial lease terms. We are delighted to have
moved this capital to Fifth Avenue from Valley Stream.
We own a best-in-class 49-property, 2.2 million square foot street retail business in Manhattan. This portfolio is laden with
opportunity. This year’s to-do list for Sherri White and her team is re-leasing and creating value from three of our large
flagship locations whose old low-rent leases are expiring shortly… and, of course leasing the retail and signage at our
newest marquis site, the Marriott hotel, Times Square.
In Washington our focus, of course, continues to be re-leasing the BRAC move-outs. Last year, and again this year, we set
forth our estimate of the financial effect of BRAC – please see page 80 in our 2012 Form 10-K. The eye of the BRAC
storm is Skyline, where we are currently 40% vacant (by contrast Crystal City is 15% vacant). In Skyline, we have a $678
million ($257 per square foot) non-recourse mortgage and are currently in negotiation with the special servicer to
restructure this loan. Mitchell and team will lease all the BRAC space.
In 2012, we leased 2.1 million square feet in Washington, up from 1.7 million square feet in each of the two prior years.
Our mix is normally about 70% private sector and 30% government. We lease well more than our fair share in Washington.
We recently backed up this boast with hard statistics confirming that in almost every sub-market our lease signings are
double our market share (and in all sub-markets are at least greater than our market share). In fact, in Crystal City where
we have a 63% market share, we did 100% of all leases over 20,000 square feet.
We have many value-creating development opportunities in Washington, where we have: rights to add 3.6 million square
feet to Crystal City (above tear-downs), a 46% co-managing ownership interest in the best development site in Rosslyn, on
the edge of the Potomac River overlooking the Kennedy Center, and 20 acres of land in Pentagon City zoned for 2,100
residential units, plus office, plus hotel.
Subject to improving market conditions, we are preparing the first step in our ambitious redevelopment program
for Crystal City: 1900 Crystal Drive, a new 700,000 square foot glass office tower (replacing a 370,000 square
foot tear-down), which will rise 150 feet above the Crystal City skyline.
We currently own 2,414 residential rental units in Washington. In 2012 we were 97.8% occupied and enjoyed
8.3% rental growth. This fall we will begin development of a new-build of 700 rental units and a Whole Foods
Market in Pentagon City.
12
David Greenbaum has run our ever-growing New York flagship business since the very beginning. Mitchell Schear has
run our largest-in-the-market Washington business for ten years to the day (today is his anniversary). Both are recognized
leaders, most capable and deserve our deep thanks.
Bob Minutoli and team are doing a fine job polishing our core retail portfolio, while pruning certain unwanted assets.
We are excited about the total transformation of Springfield Town Center (Springfield, VA, southwest quadrant of the
Washington Beltway), which is well underway for a fall 2014 opening. Here, we are razing the existing mall and rebuilding
706,000 square feet of shops, theater, restaurants, etc. between an existing Macy’s, JC Penney and Target anchors. This is
a big deal, where we are investing $225 million of fresh capital on top of a like amount of existing investment. Bob
Minutoli with Bob Byrne and Bill Rowe are our very capable development team leaders here.
* * *
Stop & Shop Litigation
In February 2013, we received $124 million pursuant to a settlement agreement with Stop & Shop for our claim under a
1992 Agreement which provided for annual rent of $6 million for a period potentially through 2031. The settlement
terminates Vornado’s right to receive this rent and ends litigation between the parties which started ten years ago. In prior
years, Vornado recognized $48 million of rental income under the Agreement. This settlement, net of expenses, will result
in Vornado recognizing $59 million of income in the first quarter of 2013. Thank you to Joe, David and Rob, our great
Sullivan & Cromwell legal team.
Dividends
Dividends are an important portion of shareholder return. Our policy is to pay out our taxable income. In 2012, we paid a
regular dividend of $2.76 per share, of which $2.36 was ordinary income and $0.40 was long-term capital gain. We also
paid in December an additional $1.00 special long-term capital gain dividend from the sale of Kings Plaza. Based on 2012
year-end closing stock price of $80.08, our regular dividend yielded 3.4% and our total dividend yielded 4.7%. In January
2013, the dividend was raised to $0.73 per quarter, a new indicated annual rate of $2.92 per share. It’s too early to predict
whether and how much any special year-end dividend might be this year.
Sustainability
At Vornado, we believe that environmental sustainability is not only responsible citizenry, it is also good business. Our
goal is to be a leader in sustainability by creating a corporate culture that integrates the principles of environmental
responsibility and sustainable growth into our business practices. Highlights of our work in 2012 include the LEED
certification for Existing Buildings of 30 of our Washington properties, as well as winning the NAREIT Leader in the
Light Gold Award for the third year in a row, winning the 2013 ENERGY STAR Partner of the Year with over 25 million
square feet of EPA-designated Energy Star buildings and being first among real estate firms in Newsweek’s “Greenest
Companies” Listing. Thanks to Suki. Please see our website at www.vno.com for our annual sustainability report.
13
* * *
It feels to me that we are on the footholds of a major economic expansion in America. What’s going on in the real
economy - housing, autos, innovation, etc. is the real McCoy. It also feels to me like interest rates will stay lower for
longer than the pundits expect and that we are near the tipping point where market participants will start to believe and
act as if it’s their God-given right to zero-bound interest rates. I don’t expect cap rates to rise anytime soon.
We are, after all, in an extended period of easy money, worldwide – central bankers as Santa Claus. I have no idea, and
doubt that anyone does, how to unwind this easy money feast.
I can see the bubble on the horizon; the fat lady entering the building. In our industry and in our city, highly leveraged
players are back, facilitated by new credit market participants – 85-90% loans are again available, the whole menu of
PIK, mezz, participating this-and-that, are back.
A dear friend and real estate legend commented to me that recent events in Cyprus should increase the value of
New York real estate by 10%.
Our basic instinct is to build, acquire and grow. But, my belly tells me that prices are now higher than future prospects
and therefore, we will buy carefully and likely sell more than we buy.
Maybe low multiple businesses are low multiple for a reason. And…maybe low multiple businesses don’t belong inside
high multiple businesses.
I worry a lot about the Internet’s accelerating effect on commodity retail. I don’t worry too much about officing at
home, and such. I cannot worry about densification (more workers in less space); it is a trend that is here to stay and that
we will deal with.
* * *
14
Michael Fascitelli
After 16 years at Vornado, my friend and partner Mike Fascitelli has decided to step down as President and CEO
effective April 15th. Mike will remain a member of our Board of Trustees. Mike plans to take a break after which he
will pursue new challenges.
Mike has made an indelible impact on the history of Vornado. He joined 16 years ago as President, Chief Growth
Officer and my partner. These past 16 years at Vornado have been a period of growth and change. Mike led our
Vornado teams in acquisitions totaling over $22 billion…which were fueled by capital market transactions totaling
$28 billion. Outstanding performance. It has been a great run.
Mike is a highly intelligent, capable and caring leader. The Vornado Board and I could not be more appreciative of
his efforts and accomplishments these last 16 years…thank you, Mike.
* * *
Thanks to Mark Falanga, who left us in March 2013, after successfully completing the Mart’s transformation.
Thanks to Gerry Storch for his over seven years as CEO of Toys “R” Us.
Thanks to Tony Deering for his over seven years of service on our Board and its Audit Committee. Tony is a
seasoned CFO and CEO, a knowledgeable, wise and excellent director.
* * *
I’ll say it again and again…I am fortunate to work every day with the gold medal team. Our operating platforms are
the best in the business. Thanks to my partners, Michael Franco, David Greenbaum, Joe Macnow, Mitchell Schear,
Wendy Silverstein and Bob Minutoli and thanks to Glen Weiss, Sherri White and Laurie Kramer. Thank you as
well to our very talented and hard working 46 Senior Vice-Presidents and 88 Vice-Presidents who make the trains
run on time, every day.
Our Vornado family has grown with 20 marriages and 49 babies this year.
We all wish baby Scarlett a full and speedy recovery.
On behalf of Vornado’s senior management and 4,428 associates, we thank our shareholders, analysts and other
stakeholders for their continued support.
Again this year, I offer to assist shareholders with tickets to my wife’s productions on Broadway – this year, it’s
Kinky Boots, which I highly recommend. Please call if I can be of help.
Steven Roth
Chairman
April 5, 2013
15
Below is a reconciliation of Net Income to EBITDA:
($ IN MILLIONS)
Net Income
Interest and debt expense
Depreciation, amortization,
and income taxes
Cumulative effect of change
in accounting principle
EBITDA
Gains on sale of real estate
Real Estate impairment loss
Noncontrolling Interests
EBITDA before noncontrolling
interests and gains on sale of
real estate
Non-comparable items
2012
617.3
760.5
742.3
--
2,120.1
(487.4)
141.6
45.3
1,819.6
144.6
2011
2010
662.3
797.9
647.9
828.1
2009
106.2
826.8
2008
359.3
821.9
2007
541.5
853.5
2006
2005
2004
2003
2002
554.8
698.4
536.9
418.9
592.9
313.3
460.7
296.1
232.9
305.9
782.2
706.4
739.0
568.1
680.9
530.7
346.2
298.7
281.1
257.7
--
--
--
--
--
--
--
--
--
2,242.4
2,182.4
1,672.0
1,749.3
2,075.9
1,783.9
1,302.0
1,204.9
1,037.9
(61.4)
(63.0)
(46.7)
(67.0)
(80.5)
(45.9)
(34.5)
(78.8)
(168.5)
29.8
55.9
109.0
55.2
23.2
25.1
--
55.4
--
69.8
--
79.9
--
--
--
133.5
156.5
175.7
137.4
30.1
826.6
(3.4)
--
2,266.7
2,283.6
1,673.6
1,737.7
2,065.2
1,817.9
1,401.0
1,282.6
1,045.1
960.6
(314.1)
(418.3)
121.4
67.8
(339.2)
(432.7)
(360.7)
(348.9)
(250.6)
(175.6)
EBITDA adjusted for comparability
1,964.2
1,952.6
1,865.3
1,795.0
1,805.5
1,726.0
1,385.2
1,040.3
933.7
794.5
785.0
Below is a reconciliation of Net Income to FFO:
($ IN MILLIONS, EXCEPT SHARE AMOUNTS)
Net Income
Preferred share dividends
Net Income applicable to common shares
Depreciation and amortization of real property
Net gains on sale of real estate and insurance settlements
Real estate impairment loss
Cumulative effect of change in accounting principle
Partially-owned entity adjustments:
Depreciation and amortization of real property
Net gains on sale of real estate
Income tax effect of adjustments included above
Noncontrolling interests’ share of above adjustments
Interest on exchangeable senior debentures
Preferred share dividends
Funds From Operations
Funds From Operations per share
2009
106.2
(57.1)
49.1
508.6
(45.3)
23.2
--
140.6
(1.4)
(22.9)
(47.0)
--
0.2
605.1
$3.49
2008
2007
359.3
(57.1)
302.2
509.4
541.5
(57.1)
484.4
451.3
(57.5)
(60.8)
--
--
--
--
115.9
134.0
(9.5)
(23.2)
(49.7)
25.3
0.2
813.1
$4.97
(15.5)
(28.8)
(46.7)
25.0
0.3
943.2
$5.75
2006
554.8
(57.5)
497.3
337.7
(33.8)
--
--
105.6
(13.2)
(21.0)
(39.8)
24.7
0.7
858.2
$5.51
2005
2004
2003
2002
536.9
592.9
460.7
232.9
(46.5)
(21.9)
(20.8)
(23.2)
490.4
276.9
571.0
228.3
439.9
208.6
(31.6)
(75.8)
(161.8)
--
--
42.1
(2.9)
(4.6)
--
--
49.4
(3.0)
--
--
--
54.8
(6.8)
--
209.7
195.8
--
--
30.1
51.9
(3.4)
--
(32.0)
(28.0)
(20.1)
(50.5)
18.0
0.9
757.2
$5.21
--
8.1
750.0
$5.63
--
3.6
518.2
$4.44
--
6.2
439.8
$3.91
16
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FORM 10-K
For the Fiscal Year Ended: December 31, 2012
OR
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
(State or other jurisdiction of incorporation or organization)
22-1657560
(I.R.S. Employer Identification Number)
888 Seventh Avenue, New York, New York
(Address of Principal Executive Offices)
Registrant’s telephone number including area code:
(212) 894-7000
10019
(Zip Code)
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class
Common Shares of beneficial interest,
$.04 par value per share
Series A Convertible Preferred Shares
of beneficial interest, no par value
Cumulative Redeemable Preferred Shares of beneficial
interest, no par value:
6.75% Series F
6.625% Series G
6.75% Series H
6.625% Series I
6.875% Series J
5.70% Series K
5.40% Series L
Name of Each Exchange on Which Registered
New York Stock Exchange
New York Stock Exchange
New York Stock Exchange
New York Stock Exchange
New York Stock Exchange
New York Stock Exchange
New York Stock Exchange
New York Stock Exchange
New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: NONE
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
YES NO
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
YES NO
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days.
YES NO
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every
Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (232.405 of this chapter) during the
preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
YES NO
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not
be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III
of this Form 10-K or any amendment to this Form 10-K.
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.
Large Accelerated Filer
Non-Accelerated Filer (Do not check if smaller reporting company)
Accelerated Filer
Smaller Reporting Company
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
YES NO
The aggregate market value of the voting and non-voting common shares held by non-affiliates of the registrant, i.e. by persons other
than officers and trustees of Vornado Realty Trust, was $14,174,711,000 at June 30, 2012.
As of December 31, 2012, there were 186,734,711 of the registrant’s common shares of beneficial interest outstanding.
Documents Incorporated by Reference
Part III: Portions of Proxy Statement for Annual Meeting of Shareholders to be held on May 23, 2013.
Item
Financial Information:
Page Number
INDEX
PART I.
PART II.
PART III.
PART IV.
Signatures
1.
1A.
1B.
2.
3.
4.
5.
6.
7.
7A.
8.
9.
9A.
9B.
10.
11.
12.
13.
14.
15.
Business
Risk Factors
Unresolved Staff Comments
Properties
Legal Proceedings
Mine Safety Disclosures
Market for Registrant’s Common Equity, Related Stockholder Matters and
Issuer Purchases of Equity Securities
Selected Financial Data
Management's Discussion and Analysis of Financial Condition and
Results of Operations
Quantitative and Qualitative Disclosures about Market Risk
Financial Statements and Supplementary Data
Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure
Controls and Procedures
Other Information
Directors, Executive Officers and Corporate Governance(1)
Executive Compensation(1)
Security Ownership of Certain Beneficial Owners and Management
and Related Stockholder Matters(1)
Certain Relationships and Related Transactions, and Director Independence(1)
Principal Accounting Fees and Services(1)
Exhibits, Financial Statement Schedules
4
12
25
25
63
63
64
66
68
125
126
182
182
184
184
185
185
185
185
186
187
(1)
These items are omitted in whole or in part because the registrant will file a definitive Proxy Statement pursuant to Regulation
14A under the Securities Exchange Act of 1934 with the Securities and Exchange Commission no later than 120 days after
December 31, 2012, portions of which are incorporated by reference herein.
2
FORWARD-LOOKING STATEMENTS
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 Annual Report on Form
10-K. We also note the following forward-looking statements: in the case of our development and redevelopment projects, the
estimated completion date, estimated project cost and cost to complete; and estimates of future capital expenditures, dividends to
common and preferred shareholders and operating partnership distributions. Many of the factors that will determine the outcome of
these and our other forward-looking statements are beyond our ability to control or predict. For further discussion of factors that could
materially affect the outcome of our forward-looking statements, see “Item 1A. Risk Factors” in this Annual Report on Form 10-K.
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 Annual Report on Form 10-K or the date of any document incorporated by reference. All subsequent written and
oral forward-looking statements attributable to us or any person acting on our behalf are expressly qualified in their entirety by the
cautionary statements contained or referred to in this section. We do not undertake any obligation to release publicly any revisions to
our forward-looking statements to reflect events or circumstances occurring after the date of this Annual Report on Form 10-K.
3
ITEM 1.
BUSINESS
PART I
Vornado Realty Trust (“Vornado”) is a fully-integrated real estate investment trust (“REIT”) and conducts its business through,
and substantially all of its interests in properties are held by, Vornado Realty L.P., a Delaware limited partnership (the “Operating
Partnership”). Accordingly, Vornado’s cash flow and ability to pay dividends to its shareholders is dependent upon the cash flow of
the Operating Partnership and the ability of its direct and indirect subsidiaries to first satisfy their obligations to creditors. Vornado is
the sole general partner of, and owned approximately 94.0% of the common limited partnership interest in the Operating Partnership
at December 31, 2012. All references to “we,” “us,” “our,” the “Company” and “Vornado” refer to Vornado Realty Trust and its
consolidated subsidiaries, including the Operating Partnership.
As of December 31, 2012, we own all or portions of:
New York:
19.7 million square feet of Manhattan office space in 31 properties and four residential properties containing 1,655 units;
2.2 million square feet of Manhattan street retail space in 49 properties;
The 1,700 room Hotel Pennsylvania located on Seventh Avenue at 33rd Street in the heart of the Penn Plaza district;
A 32.4% interest in Alexander’s, Inc. (NYSE: ALX), which owns six properties in the greater New York metropolitan area,
including 731 Lexington Avenue, the 1.3 million square foot Bloomberg, L.P. headquarters building;
Washington, DC:
73 properties aggregating 19.1 million square feet, including 59 office properties aggregating 16.1 million square feet and
seven residential properties containing 2,414 units;
Retail Properties:
114 strip shopping centers and single tenant retail assets aggregating 15.6 million square feet, primarily in the northeast states
and California;
Six regional malls aggregating 5.2 million square feet, located in the northeast / mid-Atlantic states and Puerto Rico;
Other Real Estate and Related Investments:
The 3.5 million square foot Merchandise Mart in Chicago;
A 70% controlling interest in 555 California Street, a three-building office complex in San Francisco’s financial district
aggregating 1.8 million square feet, known as the Bank of America Center;
A 25.0% interest in Vornado Capital Partners, our $800 million real estate fund. We are the general partner and investment
manager of the fund;
A 32.6% interest in Toys “R” Us, Inc.;
A 10.7% interest in J.C. Penney Company, Inc. (NYSE: JCP); and
Other real estate and related investments and mortgage and mezzanine loans on real estate.
4
OBJECTIVES AND STRATEGY
Our business objective is to maximize shareholder value. We intend to achieve this 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;
Investing in retail properties in select under-stored locations such as the New York City metropolitan area;
Acquiring quality properties at a discount to replacement cost and where there is a significant potential for higher rents;
Developing and redeveloping our existing properties to increase returns and maximize value; and
Investing in operating companies that have a significant real estate component.
We expect to finance our growth, acquisitions and investments using internally generated funds, proceeds from possible asset
sales and by accessing the public and private capital markets. We may also offer Vornado common or preferred shares or Operating
Partnership units in exchange for property and may repurchase or otherwise reacquire these securities in the future.
VORNADO CAPITAL PARTNERS REAL ESTATE FUND (THE “FUND”)
In February 2011, the Fund’s subscription period closed with an aggregate of $800,000,000 of capital commitments, of which we
committed $200,000,000. We are the general partner and investment manager of the Fund, which has an eight-year term and a three-
year investment period. During the investment period, which concludes in July 2013, the Fund is our exclusive investment vehicle for
all investments that fit within its investment parameters, including debt, equity and other interests in real estate, and excluding (i)
investments in vacant land and ground-up development; (ii) investments acquired by merger or primarily for our securities or
properties; (iii) properties which can be combined with or relate to our existing properties; (iv) securities of commercial mortgage loan
servicers and investments derived from any such investments; (v) non-controlling interests in equity and debt securities; and (vi)
investments located outside of North America. The Fund’s investments are reported on its balance sheet at fair value, with changes in
value each period recognized in earnings. We consolidate the accounts of the Fund into our consolidated financial statements,
retaining the fair value basis of accounting.
During 2012, the Fund made four investments (described below) aggregating $203,700,000. As of December 31, 2012, the Fund
has nine investments with an aggregate fair value of $600,786,000, or $67,642,000 in excess of cost, and has remaining unfunded
commitments of $217,676,000, of which our share was $54,419,000.
800 Corporate Pointe
On November 30, 2012, the Fund acquired 800 Corporate Pointe, a 243,000 square foot office building and the accompanying
six-level parking structure (1,964 spaces) located in Culver City, Los Angeles, California, for $95,700,000 in cash.
501 Broadway
On August 20, 2012, the Fund acquired 501 Broadway, a 9,000 square foot retail property in New York for $31,000,000. The
purchase price consisted of $11,000,000 in cash and a $20,000,000 mortgage loan. The three-year loan bears interest at LIBOR plus
2.75%, with a floor of 3.50%, and has two one-year extension options.
1100 Lincoln Road
On July 2, 2012, the Fund acquired 1100 Lincoln Road, a 167,000 square foot retail property, the western anchor of the Lincoln
Road Shopping District in Miami Beach, Florida, for $132,000,000. The purchase price consisted of $66,000,000 in cash and a
$66,000,000 mortgage loan. The three-year loan bears interest at LIBOR plus 2.75% and has two one-year extension options.
520 Broadway
On April 26, 2012, the Fund acquired 520 Broadway, a 112,000 square foot office building in Santa Monica, California for
$61,000,000 in cash and subsequently placed a $30,000,000 mortgage loan on the property. The three-year loan bears interest at
LIBOR plus 2.25% and has two one-year extension options.
5
ACQUISITIONS AND INVESTMENTS
Independence Plaza
In 2011, we acquired a 51% interest in the subordinated debt of Independence Plaza, a three-building 1,328 unit residential
complex in the Tribeca submarket of Manhattan which has 54,500 square feet of retail space and 550 parking spaces, for $45,000,000
and a warrant to purchase 25% of the equity for $1,000,000. On December 21, 2012, we acquired a 58.75% interest in the property as
follows: (i) buying one of the equity partners’ 33.75% interest for $160,000,000, (ii) exercising our warrant for 25% of the equity and
(iii) contributing the appreciated value of our interest in the subordinated debt as preferred equity. In connection therewith, we
recognized income of $105,366,000, comprised of $60,396,000 from the accelerated amortization of the discount on the subordinated
debt immediately preceding the conversion to preferred equity, and a $44,970,000 purchase price fair value adjustment upon
exercising the warrant. The current transaction values the property at $844,800,000. The property is currently encumbered by a
$334,225,000 mortgage. We expect to refinance the $334,225,000 mortgage in 2013, substantially decreasing our cash
investment. We manage the retail space at the property and Stellar Management, our partner, manages the residential space.
666 Fifth Avenue - Retail
On December 6, 2012, we acquired a retail condominium located at 666 Fifth Avenue at 53rd Street for $707,000,000 in cash.
The property has 126 feet of frontage on Fifth Avenue and contains 114,000 square feet, 39,000 square feet in fee and 75,000 square
feet by long-term lease from the 666 Fifth Avenue office condominium, which is 49.5% owned by us.
Marriott Marquis Times Square - Retail and Signage
On July 30, 2012, we entered into a lease with Host Hotels & Resorts, Inc. (NYSE: HST) (“Host”), under which we will
redevelop the retail and signage components of the Marriott Marquis Times Square Hotel. The Marriott Marquis with over 1,900
rooms is one of the largest hotels in Manhattan. It is located in the heart of the bow-tie of Times Square and spans the entire block
front from 45th Street to 46th Street on Broadway. The Marriott Marquis is directly across from our 1540 Broadway iconic retail
property leased to Forever 21 and Disney flagship stores. We plan to spend over $140,000,000 to redevelop and substantially expand
the existing retail space, including converting the below grade parking garage into retail, and creating six-story, 300 foot wide block
front, dynamic LED signs. During the term of the lease we will pay fixed rent equal to the sum of $12,500,000, plus a portion of the
property’s net cash flow after we receive a 5.2% preferred return on our invested capital. The lease contains put/call options which, if
exercised, would lead to our ownership. Host can exercise the put option during defined periods following the conversion of the
project to a condominium. We can exercise our call option under the same terms, at any time after the fifteenth year of the lease term.
6
DISPOSITIONS
Merchandise Mart
On December 31, 2012, we completed the sale of the Boston Design Center, a 554,000 square foot showroom building in Boston,
Massachusetts, for $72,400,000 in cash, which resulted in a net gain of $5,252,000.
On July 26, 2012, we completed the sale of the Washington Design Center, a 393,000 square foot showroom building in
Washington, DC, and the Canadian Trade Shows, for an aggregate of $103,000,000 in cash. The sale of the Canadian Trade Shows
resulted in an after-tax net gain of $19,657,000.
On June 22, 2012, we completed the sale of L.A. Mart, a 784,000 square foot showroom building in Los Angeles, California for
$53,000,000, of which $18,000,000 was cash and $35,000,000 was nine-month seller financing at 6.0%, which was paid on December
28, 2012.
On January 6, 2012, we completed the sale of 350 West Mart Center, a 1.2 million square foot office building in Chicago, Illinois,
for $228,000,000 in cash, which resulted in a net gain of $54,911,000.
Washington, DC
On November 7, 2012, we completed the sale of three office buildings (“Reston Executive”) located in suburban Fairfax County,
Virginia, containing 494,000 square feet for $126,250,000, which resulted in a net gain of $36,746,000.
On July 26, 2012, we completed the sale of 409 Third Street S.W., a 409,000 square foot office building in Washington, DC, for
$200,000,000 in cash, which resulted in a net gain of $126,621,000. This building is contiguous to the Washington Design Center and
was sold to the same purchaser.
Retail Properties
On February 13, 2013, we entered into an agreement to sell the Plant, a power strip shopping center in San Jose, California, for
$203,000,000. The sale will result in net proceeds of approximately $93,000,000 after repaying the existing loan and closing costs,
and a financial statement gain of approximately $33,000,000. The sale, which is subject to customary closing conditions, is expected
to be completed by the second quarter of 2013.
On January 24, 2013, we completed the sale of the Green Acres Mall located in Valley Stream, New York, for $500,000,000,
which resulted in net proceeds of $185,000,000, after repaying the existing loan and closing costs. The financial statement gain of
$205,000,000 will be recognized in the first quarter of 2013 and the tax gain of $304,000,000 has been deferred as part of a like-kind
exchange.
In 2012, we sold 12 non-core retail properties in separate transactions, for an aggregate of $157,000,000 in cash, which resulted in
a net gain aggregating $22,266,000. In addition, we have entered into an agreement to sell a building on Market Street, Philadelphia,
which is part of the Gallery at Market East for $60,000,000, which will result in a net gain of approximately $35,000,000. The sale,
which is subject to customary closing conditions, is expected to be completed in the first quarter of 2013.
Other
On January 24, 2013, LNR Property LLC (“LNR”) entered into a definitive agreement to be sold. We own 26.2% of LNR and
expect to receive net proceeds of approximately $241,000,000. The sale, which is subject to customary closing conditions, is expected
to be completed in the second quarter of 2013.
7
FINANCING ACTIVITIES
Secured Debt
On November 16, 2012, we completed a $120,000,000 refinancing of 4 Union Square South, a 206,000 square foot Manhattan
retail property. The seven-year loan bears interest at LIBOR plus 2.15% (2.36% at December 31, 2012) and amortizes based on a 30-
year schedule beginning in the third year. We retained net proceeds of approximately $42,000,000, after repaying the existing loan and
closing costs.
On November 8, 2012, we completed a $950,000,000 refinancing of 1290 Avenue of the Americas (70% owned), a 2.1 million
square foot Manhattan office building. The 10-year fixed rate interest-only loan bears interest at 3.34%. The partnership retained net
proceeds of approximately $522,000,000, after repaying the existing loan and closing costs.
On August 17, 2012, we completed a $98,000,000 refinancing of 435 Seventh Avenue, a 43,000 square foot retail property in
Manhattan. The seven-year loan bears interest at LIBOR plus 2.25% (2.46% at December 31, 2012). We retained net proceeds of
approximately $44,000,000, after repaying the existing loan and closing costs.
On July 26, 2012, we completed a $150,000,000 refinancing of 2101 L Street, a 380,000 square foot office building located in
Washington, DC. The 12-year fixed rate loan bears interest at 3.97% and amortizes based on a 30-year schedule beginning in the third
year.
On March 5, 2012, we completed a $325,000,000 refinancing of 100 West 33rd Street, a 1.1 million square foot property located
on the entire Sixth Avenue block front between 32nd and 33rd Streets in Manhattan. The building contains the 257,000 square foot
Manhattan Mall and 848,000 square feet of office space. The three-year loan bears interest at LIBOR plus 2.50% (2.71% at December
31, 2012) and has two one-year extension options. We retained net proceeds of approximately $87,000,000, after repaying the
existing loan and closing costs.
On January 9, 2012, we completed a $300,000,000 refinancing of 350 Park Avenue, a 559,000 square foot Manhattan office
building. The five-year fixed rate loan bears interest at 3.75% and amortizes based on a 30-year schedule beginning in the third year.
The proceeds of the new loan and $132,000,000 of existing cash were used to repay the existing loan and closing costs.
Senior Unsecured Debt
In April 2012, we redeemed all of the outstanding exchangeable and convertible senior debentures at par, for an aggregate of
$510,215,000 in cash.
8
FINANCING ACTIVITIES - CONTINUED
Preferred Securities
In July 2012 and January 2013, we sold an aggregate of $600,000,000 of cumulative redeemable preferred securities with a
weighted average cost of 5.55%. The net proceeds aggregating $581,824,000 were used primarily to redeem outstanding cumulative
redeemable preferred securities with an aggregate face amount of $517,500,000 and a weighted average cost of 6.82%. The details of
these transactions are described below.
On February 19, 2013, we redeemed all of the outstanding 6.75% Series F Cumulative Redeemable Preferred Shares and 6.75%
Series H Cumulative Redeemable Preferred Shares at par, for an aggregate of $262,500,000 in cash, plus accrued and unpaid
dividends through the date of redemption.
On January 25, 2013, we sold 12,000,000 5.40% Series L Cumulative Redeemable Preferred Shares at a price of $25.00 per share
in an underwritten public offering pursuant to an effective registration statement. We retained aggregate net proceeds of
$290,853,000, after underwriters’ discounts and issuance costs and contributed the net proceeds to the Operating Partnership in
exchange for 12,000,000 Series L Preferred Units (with economic terms that mirror those of the Series L Preferred Shares). Dividends
on the Series L Preferred Shares are cumulative and payable quarterly in arrears. The Series L Preferred Shares are not convertible
into, or exchangeable for, any of our properties or securities. On or after five years from the date of issuance (or sooner under limited
circumstances), we may redeem the Series L Preferred Shares at a redemption price of $25.00 per share, plus accrued and unpaid
dividends through the date of redemption. The Series L Preferred Shares have no maturity date and will remain outstanding
indefinitely unless redeemed by us.
On August 16, 2012, we redeemed all of the outstanding 7.0% Series E Cumulative Redeemable Preferred Shares at par, for an
aggregate of $75,000,000 in cash, plus accrued and unpaid dividends through the date of redemption.
On July 19, 2012, we redeemed all of the outstanding 7.0% Series D-10 and 6.75% Series D-14 cumulative redeemable preferred
units with an aggregate face amount of $180,000,000 for $168,300,000 in cash, plus accrued and unpaid distributions through the date
of redemption.
On July 11, 2012, we sold 12,000,000 5.70% Series K Cumulative Redeemable Preferred Shares at a price of $25.00 per share in
an underwritten public offering pursuant to an effective registration statement. We retained aggregate net proceeds of $290,971,000,
after underwriters’ discounts and issuance costs and contributed the net proceeds to the Operating Partnership in exchange for
12,000,000 Series K Preferred Units (with economic terms that mirror those of the Series K Preferred Shares). Dividends on the
Series K Preferred Shares are cumulative and payable quarterly in arrears. The Series K Preferred Shares are not convertible into, or
exchangeable for, any of our properties or securities. On or after five years from the date of issuance (or sooner under limited
circumstances), we may redeem the Series K Preferred Shares at a redemption price of $25.00 per share, plus accrued and unpaid
dividends through the date of redemption. The Series K Preferred Shares have no maturity date and will remain outstanding
indefinitely unless redeemed by us.
9
DEVELOPMENT AND REDEVELOPMENT PROJECTS
In 2012, we commenced the re-tenanting and repositioning of 280 Park Avenue (50% owned), and the renovation of the
1.4 million square foot Springfield Mall, both of which are expected to be substantially completed in 2014. We budgeted
approximately $285,000,000 for these projects, of which $31,000,000 was expended in 2012 and $132,000,000 is expected to be
expended in 2013 and the balance is expected to be expended in 2014.
During 2012, we completed the demolition of the existing residential building down to the second-level, at 220 Central Park
South.
In addition, we continued lobby renovations at several of our office buildings in New York and Washington, as well as the re-
tenanting and repositioning of a number of our strip shopping centers.
We are also evaluating other development and redevelopment opportunities at certain of our properties in Manhattan, including
the Hotel Pennsylvania and in Washington, including 1900 Crystal Drive, Rosslyn and Pentagon City.
In 2010, two of our wholly owned subsidiaries entered into agreements with Cuyahoga County, Ohio (the “County”) to develop
and operate the Cleveland Medical Mart and Convention Center (the “Facility”), a 1,000,000 square foot showroom, trade show and
conference center in Cleveland’s central business district. The County is funding the development of the Facility, using the proceeds
it received from the issuance of general obligation bonds and other sources, up to the development budget of $418,000,000 and
maintains effective control of the property. During the 17-year development and operating period, our subsidiaries will receive net
settled payments of approximately $10,000,000 per year, which are net of a $36,000,000 annual obligation to the County. Our
subsidiaries’ obligation has been pledged by the County to the bondholders, but is payable by our subsidiaries only to the extent that
they first receive at least an equal payment from the County. Construction of the Facility is expected to be completed in 2013. As of
December 31, 2012, $379,658,000 of the $418,000,000 development budget was expended.
There can be no assurance that any of our development or redevelopment projects will commence, or if commenced, be
completed on schedule or within budget.
STOP & SHOP SETTLEMENT
On February 6, 2013, we received $124,000,000 pursuant to a settlement agreement with Stop & Shop for our claim under a 1992
agreement which provided for additional annual rent of $6,000,000 for a period potentially through 2031. The settlement terminates
our right to receive this rent under the 1992 agreement and ends litigation between the parties, which started ten years ago. In prior
years, we recognized $47,900,000 of rental income under the agreement. This settlement will result in $59,000,000 of net income that
will be recognized in the first quarter of 2013.
10
SEGMENT DATA
We operate in the following business segments: New York, Washington, DC, Retail Properties, Merchandise Mart and Toys “R” Us
(“Toys”). Financial information related to these business segments for the years ended December 31, 2012, 2011 and 2010 is set forth in
Note 26 – Segment Information to our consolidated financial statements in this Annual Report on Form 10-K. The Toys segment has 651
locations internationally.
SEASONALITY
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
its fiscal year net income. The New York and Washington, DC segments have historically experienced higher utility costs in the first and
third quarters of the year. The Retail Properties segment revenue in the fourth quarter is typically higher due to the recognition of percentage
and specialty rental income.
TENANTS ACCOUNTING FOR OVER 10% OF REVENUES
None of our tenants accounted for more than 10% of total revenues in any of the years ended December 31, 2012, 2011 and 2010.
CERTAIN ACTIVITIES
We do not base our acquisitions and investments on specific allocations by type of property. We have historically held our properties
for long-term investment; however, it is possible that properties in the portfolio may be sold as circumstances warrant. Further, we have not
adopted a policy that limits the amount or percentage of assets which could be invested in a specific property or property type. While we may
seek the vote of our shareholders in connection with any particular material transaction, generally our activities are reviewed and may be
modified from time to time by our Board of Trustees without the vote of shareholders.
EMPLOYEES
As of December 31, 2012, we have approximately 4,428 employees, of which 327 are corporate staff. The New York segment has
3,308 employees, including 2,641 employees of Building Maintenance Services LLC, a wholly owned subsidiary, which provides cleaning,
security and engineering services primarily to our New York and Washington, DC properties and 516 employees at the Hotel Pennsylvania.
The Washington, DC, Retail Properties and Merchandise Mart segments have 456, 110 and 227 employees, respectively. The foregoing does
not include employees of partially owned entities, including Toys or Alexander’s, of which we own 32.6% and 32.4%, respectively.
PRINCIPAL EXECUTIVE OFFICES
Our principal executive offices are located at 888 Seventh Avenue, New York, New York 10019; telephone (212) 894-7000.
MATERIALS AVAILABLE ON OUR WEBSITE
Copies of our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to those
reports, as well as Reports on Forms 3, 4 and 5 regarding officers, trustees or 10% beneficial owners of us, filed or furnished pursuant to
Section 13(a), 15(d) or 16(a) of the Securities Exchange Act of 1934 are available free of charge through our website (www.vno.com) as soon
as reasonably practicable after they are electronically filed with, or furnished to, the Securities and Exchange Commission. Also available on
our website are copies of our Audit Committee Charter, Compensation Committee Charter, Corporate Governance and Nominating
Committee Charter, Code of Business Conduct and Ethics and Corporate Governance Guidelines. In the event of any changes to these
charters or the code or guidelines, changed copies will also be made available on our website. Copies of these documents are also available
directly from us free of charge. Our website also includes other financial information, including certain non-GAAP financial measures, none
of which is a part of this Annual Report on Form 10-K. Copies of our filings under the Securities Exchange Act of 1934 are also available
free of charge from us, upon request.
11
ITEM 1A. RISK FACTORS
Material factors that may adversely affect our business, operations and financial condition are summarized below. The risks and
uncertainties described herein may not be the only ones we face. Additional risks and uncertainties not presently known to us or that
we currently believe to be immaterial may also adversely affect our business. See “Forward-Looking Statements” contained herein on
page 3.
REAL ESTATE INVESTMENTS’ VALUE AND INCOME FLUCTUATE DUE TO VARIOUS FACTORS.
The value of real estate fluctuates depending on conditions in the general economy and the real estate business. These conditions
may also adversely impact our revenues and cash flows.
The factors that affect the value of our real estate investments include, among other things:
changes in real estate taxes and other expenses;
national, regional and local economic conditions;
competition from other available space;
local conditions such as an oversupply of space or a reduction in demand for real estate in the area;
how well we manage our properties;
the development and/or redevelopment of our properties;
changes in market rental rates;
the timing and costs associated with property improvements and rentals;
whether we are able to pass all or portions of any increases in operating costs through to tenants;
whether tenants and users such as customers and shoppers consider a property attractive;
the financial condition of our tenants, including the extent of tenant bankruptcies or defaults;
availability of financing on acceptable terms or at all;
fluctuations in interest rates;
our ability to obtain adequate insurance;
changes in zoning laws and taxation;
government regulation;
consequences of any armed conflict involving, or terrorist attacks against, the United States;
potential liability under environmental or other laws or regulations;
natural disasters;
general competitive factors; and
climate changes.
The rents or sales proceeds we receive and the occupancy levels at our properties may decline as a result of adverse changes in
any of these factors. If rental revenues, sales proceeds and/or occupancy levels decline, we generally would expect to have less cash
available to pay indebtedness and for distribution to shareholders. In addition, some of our major expenses, including mortgage
payments, real estate taxes and maintenance costs generally do not decline when the related rents decline.
Capital markets and economic conditions can materially affect our financial condition and results of operations and the value
of our debt and equity securities.
There are many factors that can affect the value of our debt and equity securities, including the state of the capital markets and the
economy, which over the past few years have negatively affected substantially all businesses, including ours. Demand for office and
retail space may decline nationwide as it did in 2008 and 2009, due to bankruptcies, downsizing, layoffs and cost cutting.
Government action or inaction may adversely affect the state of the capital markets. The cost and availability of credit may be
adversely affected by illiquid credit markets and wider credit spreads, which may adversely affect our liquidity and financial
condition, and the liquidity and financial condition of our tenants. Our inability or the inability of our tenants to timely refinance
maturing liabilities and access the capital markets to meet liquidity needs may materially affect our financial condition and results of
operations and the value of our debt and equity securities.
12
Real estate is a competitive business.
Our business segments – New York, Washington, DC, Retail Properties, Merchandise Mart and Toys – operate in a highly
competitive environment. We have a large concentration of properties in the New York City metropolitan area and in the Washington,
DC / Northern Virginia area. We compete with a large number of property owners and developers, some of which may be willing to
accept lower returns on their investments than we are. Principal factors of competition include rents charged, sales prices,
attractiveness of location, the quality of the property and the 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 regulation,
legislation and population trends.
We depend on leasing space to tenants on economically favorable terms and collecting rent from tenants who may not be able
to pay.
Our financial results depend significantly on leasing space in our properties to tenants on economically favorable terms. In
addition, because a majority of our income comes from renting of real property, our income, funds available to pay indebtedness and
funds available for distribution to shareholders will decrease if a significant number of our tenants cannot pay their rent or if we are
not able to maintain occupancy levels on favorable terms. If a tenant does not pay its rent, we may not be able to enforce our rights as
landlord without delays and may incur substantial legal costs. During periods of economic adversity, there may be an increase in the
number of tenants that cannot pay their rent and an increase in vacancy rates.
Bankruptcy or insolvency of tenants may decrease our revenue, net income and available cash.
From time to time, some of our tenants have declared bankruptcy, and other tenants may declare bankruptcy or become insolvent
in the future. In the case of our shopping centers, the bankruptcy or insolvency of a major tenant could cause us to suffer lower
revenues and operational difficulties, including leasing the remainder of the property. As a result, the bankruptcy or insolvency of a
major tenant could result in decreased revenue, net income and funds available for the payment of indebtedness or for distribution to
shareholders.
We may incur costs to comply with environmental laws.
Our operations and properties are subject to various federal, state and local laws and regulations concerning the protection of the
environment, including air and water quality, hazardous or toxic substances and health and safety. Under some environmental laws, a
current or previous owner or operator of real estate may be required to investigate and clean up hazardous or toxic substances released
at a property. The owner or operator may also be held liable to a governmental entity or to third parties for property damage or
personal injuries and for investigation and clean-up costs incurred by those parties because of the contamination. These laws often
impose liability without regard to whether the owner or operator knew of the release of the substances or caused the release. The
presence of contamination or the failure to remediate contamination may impair our ability to sell or lease real estate or to borrow
using the real estate as collateral. Other laws and regulations govern indoor and outdoor air quality including those that can require the
abatement or removal of asbestos-containing materials in the event of damage, demolition, renovation or remodeling and also govern
emissions of and exposure to asbestos fibers in the air. The maintenance and removal of lead paint and certain electrical equipment
containing polychlorinated biphenyls (PCBs) and underground storage tanks are also regulated by federal and state laws. We are also
subject to risks associated with human exposure to chemical or biological contaminants such as molds, pollens, viruses and bacteria
which, above certain levels, can be alleged to be connected to allergic or other health effects and symptoms in susceptible individuals.
Our predecessor companies may be subject to similar liabilities for activities of those companies in the past. We could incur fines for
environmental compliance and be held liable for the costs of remedial action with respect to the foregoing regulated substances or
tanks or related claims arising out of environmental contamination or human exposure to contamination at or from our properties.
Each of our properties has been subject to varying degrees of environmental assessment. The environmental assessments did not,
as of this date, reveal any environmental condition material to our business. However, identification of new compliance concerns or
undiscovered areas of contamination, changes in the extent or known scope of contamination, discovery of additional sites, human
exposure to the contamination or changes in clean-up or compliance requirements could result in significant costs to us.
13
Inflation or deflation may adversely affect our financial condition and results of operations.
Although neither inflation nor deflation has materially impacted our operations in the recent past, increased inflation could have a
pronounced negative impact on our mortgages and interest rates and general and administrative expenses, as these costs could increase
at a rate higher than our rents. Inflation could also have an adverse effect on consumer spending which could impact our tenants’ sales
and, in turn, our percentage rents, where applicable. Conversely, deflation could lead to downward pressure on rents and other
sources of income. In addition, we own residential properties which are leased to tenants with one-year lease terms. Because these
are short-term leases, declines in market rents will impact our residential properties faster than if the leases were for longer terms.
Some of our potential losses may not be covered by 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 $180,000,000 per occurrence, subject to a deductible in
the amount of 5% of the value of the affected property, up to a $180,000,000 annual aggregate.
Penn Plaza Insurance Company, LLC (“PPIC”), our wholly owned consolidated subsidiary, acts as a re-insurer with respect to all
risk property and rental value insurance and a portion of our earthquake insurance coverage, and as a direct insurer for coverage for
acts of terrorism, including nuclear, biological, chemical and radiological (“NBCR”) acts, as defined by the Terrorism Risk Insurance
Program Reauthorization Act. Coverage for acts of terrorism (excluding NBCR acts) is fully reinsured by third party insurance
companies and the Federal government with no exposure to PPIC. Coverage for NBCR losses is up to $2.0 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 and revolving credit agreements contain customary covenants requiring us to maintain insurance. Although we believe that we
have adequate insurance coverage for purposes of these agreements, we may not be able to obtain an equivalent amount of coverage at
reasonable costs in the future. Further, if lenders insist on greater coverage than we are able to obtain it could adversely affect our
ability to finance our properties and expand our portfolio.
Because we operate a hotel, we face the risks associated with the hospitality industry.
We own and operate the Hotel Pennsylvania in New York City. The following factors, among others, are common to the hotel
industry and may reduce the revenues generated by the hotel, which would reduce cash available for distribution to our shareholders:
our hotel competes for guests with other hotels, a number of which have greater marketing and financial resources;
if there is an increase in operating costs resulting from inflation and other factors, we may not be able to offset such increase
by increasing room rates;
our hotel is subject to the fluctuating and seasonal demands of business travelers and tourism;
our hotel is subject to general and local economic and social conditions that may affect demand for travel in general,
including war and terrorism; and
physical condition, which may require substantial additional capital.
Because of the ownership structure of the Hotel Pennsylvania, we face potential adverse effects from changes to the
applicable tax laws.
Under the Internal Revenue Code, REITs like us are not allowed to operate hotels directly or indirectly. Accordingly, we lease the
Hotel Pennsylvania to our taxable REIT subsidiary (“TRS”). While the TRS structure allows the economic benefits of ownership to
flow to us, the TRS is subject to tax on its income from the operations of the hotel at the federal and state level. In addition, the TRS is
subject to detailed tax regulations that affect how it may be capitalized and operated. If the tax laws applicable to a TRS are modified,
we may be forced to modify the structure for owning the hotel, and such changes may adversely affect the cash flows from the hotel.
In addition, the Internal Revenue Service, the United States Treasury Department and Congress frequently review federal income tax
legislation, and we cannot predict whether, when or to what extent new federal tax laws, regulations, interpretations or rulings will be
adopted. Any such actions may prospectively or retroactively modify the tax treatment of the TRS and, therefore, may adversely affect
our after-tax returns from the hotel.
14
Compliance or failure to comply with the Americans with Disabilities Act or other safety regulations and requirements could
result in substantial costs.
The Americans with Disabilities Act (“ADA”) generally requires that public buildings, including our properties, meet certain
federal requirements related to access and use by disabled persons. Noncompliance could result in the imposition of fines by the
federal government or the award of damages to private litigants and/or legal fees to their counsel. From time to time persons have
asserted claims against us with respect to some of our properties under the ADA, but to date such claims have not resulted in any
material expense or liability. If, under the ADA, we are required to make substantial alterations and capital expenditures in one or
more of our properties, including the removal of access barriers, it could adversely affect our financial condition and results of
operations, as well as the amount of cash available for distribution to shareholders.
Our properties are subject to various federal, state and local regulatory requirements, such as state and local fire and life safety
requirements. If we fail to comply with these requirements, we could incur fines or private damage awards. We do not know whether
existing requirements will change or whether compliance with future requirements will require significant unanticipated expenditures
that will affect our cash flow and results of operations.
We face risks associated with our tenants being designated “Prohibited Persons” by the Office of Foreign Assets Control.
Pursuant to Executive Order 13224 and other laws, the Office of Foreign Assets Control of the United States Department of the
Treasury (“OFAC”) maintains a list of persons designated as terrorists or who are otherwise blocked or banned (“Prohibited Persons”)
from conducting business or engaging in transactions in the United States. Our leases, loans and other agreements may require us to
comply with OFAC requirements. If a tenant or other party with whom we conduct business is placed on the OFAC list we may be
required to terminate the lease or other agreement. Any such termination could result in a loss of revenue or otherwise negatively
affect our financial results and cash flows.
Our business and operations would suffer in the event of system failures.
Despite system redundancy, the implementation of security measures and the existence of a disaster recovery plan for our internal
information technology systems, our systems are vulnerable to damages from any number of sources, including computer viruses,
unauthorized access, energy blackouts, natural disasters, terrorism, war and telecommunication failures. Any system failure or
accident that causes interruptions in our operations could result in a material disruption to our business. We may also incur additional
costs to remedy damages caused by such disruptions.
The occurrence of cyber incidents, or a deficiency in our cybersecurity, could negatively impact our business by causing a
disruption to our operations, a compromise or corruption of our confidential information, and/or damage to our business
relationships, all of which could negatively impact our financial results.
A cyber incident is considered to be any adverse event that threatens the confidentiality, integrity, or availability of our
information resources. More specifically, a cyber incident is an intentional attack or an unintentional event that can include gaining
unauthorized access to systems to disrupt operations, corrupt data, or steal confidential information. As our reliance on technology has
increased, so have the risks posed to our systems, both internal and those we have outsourced. Our three primary risks that could
directly result from the occurrence of a cyber incident include operational interruption, damage to our relationship with our tenants,
and private data exposure. We have implemented processes, procedures and controls to help mitigate these risks, but these measures,
as well as our increased awareness of a risk of a cyber incident, do not guarantee that our financial results will not be negatively
impacted by such an incident.
15
OUR INVESTMENTS ARE CONCENTRATED IN THE NEW YORK CITY METROPOLITAN AREA AND
WASHINGTON, DC / NORTHERN VIRGINIA AREA. CIRCUMSTANCES AFFECTING THESE AREAS GENERALLY
COULD ADVERSELY AFFECT OUR BUSINESS.
A significant portion of our properties are located in the New York City / New Jersey metropolitan area and Washington, DC /
Northern Virginia area and are affected by the economic cycles and risks inherent to those areas.
In 2012, approximately 74% of our EBITDA, excluding items that affect comparability, came from properties located in the New
York City metropolitan areas and the Washington, DC / Northern Virginia area. We may continue to concentrate a significant portion
of our future acquisitions in these areas or in other geographic real estate markets in the United States or abroad. Real estate markets
are subject to economic downturns and we cannot predict how economic conditions will impact these markets in either the short or
long term. Declines in the economy or declines in real estate markets in these areas could hurt our financial performance and the value
of our properties. In addition to the factors affecting the national economic condition generally, the factors affecting economic
conditions in these regions include:
financial performance and productivity of the publishing, advertising, financial, technology, retail, insurance and real estate
industries;
space needs of, and budgetary constraints affecting, the United States Government, including the effect of a deficit reduction
plan and/or base closures and repositioning under the Defense Base Closure and Realignment Act of 2005, as amended;
business layoffs or downsizing;
industry slowdowns;
relocations of businesses;
changing demographics;
increased telecommuting and use of alternative work places;
infrastructure quality; and
any oversupply of, or reduced demand for, real estate.
It is impossible for us to assess the future effects of trends in the economic and investment climates of the geographic areas in
which we concentrate, and more generally of the United States, or the real estate markets in these areas. Local, national or global
economic downturns, would negatively affect our businesses and profitability.
Terrorist attacks, such as those of September 11, 2001 in New York City and the Washington, DC area, may adversely affect
the value of our properties and our ability to generate cash flow.
We have significant investments in large metropolitan areas, including the New York, Washington, DC and San Francisco
metropolitan areas. In the aftermath of a terrorist attack, tenants in these areas may choose to relocate their businesses to less
populated, lower-profile areas of the United States that may be perceived to be less likely targets of future terrorist activity and fewer
customers may choose to patronize businesses in these areas. This, in turn, would trigger a decrease in the demand for space in these
areas, which could increase vacancies in our properties and force us to lease space on less favorable terms. As a result, the value of our
properties and the level of our revenues and cash flows could decline materially.
Natural Disasters could have a concentrated impact on the areas where we operate and could adversely impact our results.
We have significant investments in large metropolitan areas, including the New York, Washington, DC and San Francisco
metropolitan areas. As much of our investments are concentrated along the Eastern Seaboard, natural disasters, such as those resulting
from Superstorm Sandy, could impact several of our properties. Additionally, natural disasters, including earthquakes, could impact
several of our properties in other areas in which we operate. Potentially adverse consequences of “global warming” could similarly
have an impact on our properties. As a result, we could become subject to significant losses and/or repair costs that may or may not
be fully covered by insurance and to the risk of business interruption. The incurrence of these losses, costs or business interruptions
may adversely affect our operating and financial results.
16
WE MAY ACQUIRE OR SELL ASSETS OR ENTITIES OR DEVELOP PROPERTIES. OUR FAILURE OR INABILITY
TO CONSUMMATE THESE TRANSACTIONS OR MANAGE THE RESULTS OF THESE TRANSACTIONS COULD
ADVERSELY AFFECT OUR OPERATIONS AND FINANCIAL RESULTS.
We have grown substantially since 2002 through acquisitions. We may not be able to maintain this growth and our failure to
do so could adversely affect our stock price.
We have grown substantially since 2002, increasing our total assets from approximately $9.0 billion at December 31, 2002 to
approximately $22.0 billion at December 31, 2012. We may not be able to maintain a similar rate of growth in the future or manage
growth effectively. Our failure to do so may have a material adverse effect on our financial condition and results of operations as well
as the amount of cash available for distributions to shareholders.
We may acquire or develop properties or acquire other real estate related companies and this may create risks.
We may acquire or develop properties or acquire other real estate related companies when we believe that an acquisition or
development is consistent with our business strategy. We may not, however, succeed in consummating desired acquisitions or in
completing developments on time or within budget. In addition, we may face competition in pursuing acquisition or development
opportunities that could increase our costs. When we do pursue a project or acquisition, we may not succeed in leasing or selling
newly-developed or acquired properties at rents or sales prices sufficient to cover costs of acquisition or development and operations.
Difficulties in integrating acquisitions may prove costly or time-consuming and could divert management’s attention. Acquisitions or
developments in new markets or industries where we do not have the same level of market knowledge may result in weaker than
anticipated performance. We may also abandon acquisition or development opportunities that we have begun pursuing and
consequently fail to recover expenses already incurred and have devoted management time to a matter not consummated.
Furthermore, acquisitions of new properties or companies will expose us to the liabilities of those properties or companies, some of
which we may not be aware of at the time of acquisition. Development of our existing properties presents similar risks.
From time to time we have made, and in the future we may seek to make, one or more material acquisitions. The
announcement of such a material acquisition may result in a rapid and significant decline in the price of our common shares.
We are continuously looking at material transactions that we believe will maximize shareholder value. However, an
announcement by us of one or more significant acquisitions could result in a quick and significant decline in the price of our common
shares.
It may be difficult to buy and sell real estate quickly, which may limit our flexibility.
Real estate investments are relatively difficult to buy and sell quickly. Consequently, we may have limited ability to vary our
portfolio promptly in response to changes in economic or other conditions.
We may not be permitted to dispose of certain properties or pay down the debt associated with those properties when we might
otherwise desire to do so without incurring additional costs. In addition, when we dispose of or sell assets, we may not be able to
reinvest the sales proceeds and earn similar returns.
As part of an acquisition of a property, or a portfolio of properties, we may agree, and in the past have agreed, not to dispose of
the acquired properties or reduce the mortgage indebtedness for a long-term period, unless we pay certain of the resulting tax costs of
the seller. These agreements could result in us holding on to properties that we would otherwise sell and not pay down or refinance. In
addition, when we dispose of or sell assets, we may not be able to reinvest the sales proceeds and earn returns similar to those
generated by the assets that were sold.
From time to time we make investments in companies over which we do not have sole control. Some of these companies
operate in industries that differ from our current operations, with different risks than investing in real estate.
From time to time we make debt or equity investments in other companies that we may not control or over which we may not
have sole control. These investments include but are not limited to, Alexander’s, Inc. (“Alexander’s”), Toys “R” Us (“Toys”),
Lexington Realty Trust (“Lexington”), J.C. Penney Company, Inc. (“J.C. Penney”), and other equity and mezzanine investments.
Although these businesses generally have a significant real estate component, some of them operate in businesses that are different
from our primary lines of business including, without limitation, operating or managing toy stores and department stores.
Consequently, investments in these businesses, among other risks, subjects us to the operating and financial risks of industries other
than real estate and to the risk that we do not have sole control over the operations of these businesses. From time to time we may
make additional investments in or acquire other entities that may subject us to similar risks. Investments in entities over which we do
not have sole control, including joint ventures, present additional risks such as having differing objectives than our partners or the
entities in which we invest, or becoming involved in disputes, or competing with those persons. In addition, we rely on the internal
controls and financial reporting controls of these entities and their failure to maintain effectiveness or comply with applicable
standards may adversely affect us.
17
We are subject to risks that affect the general retail environment.
A substantial portion of our properties are in the retail shopping center real estate market and we have a significant investment in
retailers such as Toys and J.C. Penney. This means that we are subject to factors that affect the retail environment generally, including
the level of consumer spending and consumer confidence, the threat of terrorism and increasing competition from discount retailers,
outlet malls, retail websites and catalog companies. These factors could adversely affect the financial condition of our retail tenants
and the retailers in which we hold an investment and the willingness of retailers to lease space in our shopping centers, and in turn,
adversely affect us.
Our investment in Toys subjects us to risks that are different from our other lines of business and may result in increased
seasonality and volatility in our reported earnings.
Because Toys is a retailer, its operations subject us to the risks of a retail company that are different than those presented by our
other lines of business. The business of Toys is highly seasonal. Historically, Toys fourth quarter net income accounts for more than
80% of its fiscal year net income. In addition, our fiscal year ends on December 31 whereas, as is common for retailers, Toys’ fiscal
year ends on the Saturday nearest to January 31. Therefore, we record our pro rata share of Toys’ net earnings on a one-quarter lag
basis. For example, our financial results for the year ended December 31, 2012 include Toys’ financial results for its first, second and
third quarters ended October 29, 2012, as well as Toys’ fourth quarter results of 2011. Because of the seasonality of Toys, our reported
quarterly net income shows increased volatility. We may also, in the future and from time to time, invest in other businesses that may
report financial results that are more volatile than our historical financial results.
We depend upon our anchor tenants to attract shoppers.
We own several regional malls and other shopping centers that are typically anchored by well-known department stores and other
tenants who generate shopping traffic at the mall or shopping center. The value of our properties would be adversely affected if
tenants or anchors failed to meet their contractual obligations, sought concessions in order to continue operations or ceased their
operations, including as a result of bankruptcy. If the sales of stores operating in our properties were to decline significantly due to
economic conditions, closing of anchors or for other reasons, tenants may be unable to pay their minimum rents or expense recovery
charges. In the event of a default by a tenant or anchor, we may experience delays and costs in enforcing our rights as landlord.
Our decision to dispose of real estate assets would change the holding period assumption in our valuation analyses, which
could result in material impairment losses and adversely affect our financial results.
We evaluate real estate assets for impairment based on the projected cash flow of the asset over our anticipated holding period.
If we change our intended holding period, due to our intention to sell or otherwise dispose of an asset, then under accounting
principles generally accepted in the United States of America, we must reevaluate whether that asset is impaired. Depending on the
carrying value of the property at the time we change our intention and the amount that we estimate we would receive on disposal, we
may record an impairment loss that would adversely affect our financial results. This loss could be material to our results of operations
in the period that it is recognized.
We invest in mortgage loans and subordinated or mezzanine debt of certain entities that have significant real estate assets.
We invest, and may in the future invest, in mortgage loans and subordinated or mezzanine debt of certain entities that have
significant real estate assets. These investments are either secured by the real property or by pledges of the equity interests of the
entities owning the underlying real estate. If a borrower defaults on debt to us or on debt senior to us, or declares bankruptcy, we may
not be able to recover some or all of our investment. In addition, there may be significant delays and costs associated with the process
of foreclosing on collateral securing or supporting these investments. The value of the assets securing or supporting our investments
could deteriorate over time due to factors beyond our control, including acts or omissions by owners, changes in business, economic
or market conditions, or foreclosure. Such deteriorations in value may result in the recognition of impairment losses and/or valuation
allowances on our statements of income. As of December 31, 2012, our investments in mortgage and mezzanine debt securities have
an aggregate carrying amount of $225,359,000.
18
We evaluate the collectibility of both interest and principal of each of our loans whenever events or changes in circumstances
indicate such amounts may not be recoverable. A loan is impaired when it is probable that we will be unable to collect all amounts
due according to the existing contractual terms. When a loan is impaired, the amount of the loss accrual is calculated by comparing the
carrying amount of the investment to the present value of expected future cash flows discounted at the loan’s effective interest rate, or
as a practical expedient, to the value of the collateral if the loan is collateral dependent. There can be no assurance that our estimates
of collectible amounts will not change over time or that they will be representative of the amounts we will actually collect, including
amounts we would collect if we chose to sell these investments before their maturity. If we collect less than our estimates, we will
record impairment losses which could be material.
We invest in marketable equity securities. The value of these investments may decline as a result of operating performance or
economic or market conditions.
We invest in marketable equity securities of publicly-traded companies, such as J.C. Penney. As of December 31, 2012, our
marketable securities have an aggregate carrying amount of $398,188,000, at market. Significant declines in the value of these
investments due to, among other reasons, operating performance or economic or market conditions, may result in the recognition of
impairment losses which could be material.
OUR ORGANIZATIONAL AND FINANCIAL STRUCTURE GIVES RISE TO OPERATIONAL AND FINANCIAL RISKS.
We may not be able to obtain capital to make investments.
We depend primarily on external financing to fund the growth of our business. This is because one of the requirements of the
Internal Revenue Code of 1986, as amended, for a REIT is that it distributes 90% of its taxable income, excluding net capital gains, to
its shareholders. There is a separate requirement to distribute net capital gains or pay a corporate level tax in lieu thereof. Our access
to debt or equity financing depends on the willingness of third parties to lend or make equity investments and on conditions in the
capital markets generally. Although we believe that we will be able to finance any investments we may wish to make in the
foreseeable future, there can be no assurance that new financing will be available or available on acceptable terms. For information
about our available sources of funds, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations
— Liquidity and Capital Resources” and the notes to the consolidated financial statements in this Annual Report on Form 10-K.
Vornado Realty Trust (“Vornado”) depends on dividends and distributions from its direct and indirect subsidiaries. The
creditors and preferred security holders of these subsidiaries are entitled to amounts payable to them by the subsidiaries before the
subsidiaries may pay any dividends or distributions to Vornado.
Substantially all of Vornado’s assets are held through its Operating Partnership that holds substantially all of its properties and
assets through subsidiaries. The Operating Partnership’s cash flow is dependent on cash distributions to it by its subsidiaries, and in
turn, substantially all of Vornado’s cash flow is dependent on cash distributions to it by the Operating Partnership. The creditors of
each of Vornado’s direct and indirect subsidiaries are entitled to payment of that subsidiary’s obligations to them, when due and
payable, before distributions may be made by that subsidiary to its equity holders. Thus, the Operating Partnership’s ability to make
distributions to holders of its units depends on its subsidiaries’ ability first to satisfy their obligations to their creditors and then to
make distributions to the Operating Partnership. Likewise, Vornado’s ability to pay dividends to holders of common and preferred
shares depends on the Operating Partnership’s ability first to satisfy its obligations to its creditors and make distributions payable to
holders of preferred units and then to make distributions to Vornado.
Furthermore, the holders of preferred units of the Operating Partnership are entitled to receive preferred distributions before
payment of distributions to holders of Class A units of the Operating Partnership, including Vornado. Thus, Vornado’s ability to pay
cash dividends to its shareholders and satisfy its debt obligations depends on the Operating Partnership’s ability first to satisfy its
obligations to its creditors and make distributions to holders of its preferred units and then to holders of its Class A units, including
Vornado. As of December 31, 2012, there were four series of preferred units of the Operating Partnership not held by Vornado with a
total liquidation value of $101,095,000.
In addition, Vornado’s participation in any distribution of the assets of any of its direct or indirect subsidiaries upon the
liquidation, reorganization or insolvency, is only after the claims of the creditors, including trade creditors and preferred security
holders, are satisfied.
19
We have outstanding debt, and the amount of debt and its cost may increase and refinancing may not be available on
acceptable terms.
As of December 31, 2012, we had approximately $14.7 billion of total debt outstanding, including our pro rata share of debt of
partially owned entities, and excluding $25.4 billion for our pro rata share of LNR’s liabilities related to its consolidated CMBS and
CDO trusts, which are non-recourse to LNR and its equity holders, including us. Our ratio of total debt to total enterprise value was
approximately 46%. When we say “enterprise value” in the preceding sentence, we mean market equity value of our common and
preferred securities plus total debt outstanding, including our pro rata share of debt of partially owned entities, and excluding LNR’s
liabilities related to its consolidated CMBS and CDO trusts. In the future, we may incur additional debt to finance acquisitions or
property developments and thus increase our ratio of total debt to total enterprise value. If our level of indebtedness increases, there
may be an increased risk of a credit rating downgrade or a default on our obligations that could adversely affect our financial condition
and results of operations. In addition, in a rising interest rate environment, the cost of existing variable rate debt and any new debt or
other market rate security or instrument may increase. Furthermore, we may not be able to refinance existing indebtedness in
sufficient amounts or on acceptable terms.
Covenants in our debt instruments could adversely affect our financial condition and our acquisitions and development
activities.
The mortgages on our properties contain customary covenants such as those that limit our ability, without the prior consent of the
lender, to further mortgage the applicable property or to discontinue insurance coverage. Our unsecured credit facilities, unsecured
debt securities and other loans that we may obtain in the future contain, or may contain, customary restrictions, requirements and other
limitations on our ability to incur indebtedness, including covenants that limit our ability to incur debt based upon the level of our ratio
of total debt to total assets, our ratio of secured debt to total assets, our ratio of EBITDA to interest expense, and fixed charges, and
that require us to maintain a certain level of unencumbered assets to unsecured debt. Our ability to borrow is subject to compliance
with these and other covenants. In addition, failure to comply with our covenants could cause a default under the applicable debt
instrument, and we may then be required to repay such debt with capital from other sources. Under those circumstances, other sources
of capital may not be available to us, or may be available only on unattractive terms.
We rely on debt financing, including borrowings under our unsecured credit facilities, issuances of unsecured debt securities and
debt secured by individual properties, to finance acquisitions and development activities and for working capital. If we are unable to
obtain debt financing from these or other sources, or refinance existing indebtedness upon maturity, our financial condition and results
of operations would likely be adversely affected. If we breach covenants in our debt agreements, the lenders can declare a default and,
if the debt is secured, can take possession of the property securing the defaulted loan.
Vornado may fail to qualify or remain qualified as a REIT and may be required to pay income taxes at corporate rates.
Although we believe that we will remain organized and will continue to operate so as to qualify as a REIT for federal income tax
purposes, we may fail to remain qualified in this way. Qualification as a REIT for federal income tax purposes is governed by highly
technical and complex provisions of the Internal Revenue Code for which there are only limited judicial or administrative
interpretations. Our qualification as a REIT also depends on various facts and circumstances that are not entirely within our control. In
addition, legislation, new regulations, administrative interpretations or court decisions may significantly change the tax laws with
respect to the requirements for qualification as a REIT or the federal income tax consequences of qualifying as a REIT.
If, with respect to any taxable year, we fail to maintain our qualification as a REIT and do not qualify under statutory relief
provisions, we could not deduct distributions to shareholders in computing our taxable income and would have to pay federal income
tax on our taxable income at regular corporate rates. The federal income tax payable would include any applicable alternative
minimum tax. If we had to pay federal income tax, the amount of money available to distribute to shareholders and pay our
indebtedness would be reduced for the year or years involved, and we would no longer be required to make distributions to
shareholders. In addition, we would also be disqualified from treatment as a REIT for the four taxable years following the year during
which qualification was lost, unless we were entitled to relief under the relevant statutory provisions. Although we currently intend to
operate in a manner designed to allow us to qualify as a REIT, future economic, market, legal, tax or other considerations may cause
us to revoke the REIT election or fail to qualify as a REIT.
20
We face possible adverse changes in tax laws, which may result in an increase in our tax liability.
From time to time changes in state and local tax laws or regulations are enacted, which may result in an increase in our tax
liability. The shortfall in tax revenues for states and municipalities in recent years may lead to an increase in the frequency and size of
such changes. If such changes occur, we may be required to pay additional taxes on our assets or income. These increased tax costs
could adversely affect our financial condition and results of operations and the amount of cash available for payment of dividends.
Loss of our key personnel could harm our operations and adversely affect the value of our common shares.
We are dependent on the efforts of Steven Roth, the Chairman of the Board of Trustees of Vornado, and Michael D. Fascitelli, the
President and Chief Executive Officer of Vornado. While we believe that we could find replacements for these and other key
personnel, the loss of their services could harm our operations and adversely affect the value of our common shares.
VORNADO’S CHARTER DOCUMENTS AND APPLICABLE LAW MAY HINDER ANY ATTEMPT TO ACQUIRE US.
Our Amended and Restated Declaration of Trust sets limits on the ownership of our shares.
Generally, for Vornado to maintain its qualification as a REIT under the Internal Revenue Code, not more than 50% in value of
the outstanding shares of beneficial interest of Vornado may be owned, directly or indirectly, by five or fewer individuals at any time
during the last half of Vornado’s taxable year. The Internal Revenue Code defines “individuals” for purposes of the requirement
described in the preceding sentence to include some types of entities. Under Vornado’s Amended and Restated Declaration of Trust,
as amended, no person may own more than 6.7% of the outstanding common shares of any class, or 9.9% of the outstanding preferred
shares of any class, with some exceptions for persons who held common shares in excess of the 6.7% limit before Vornado adopted
the limit and other persons approved by Vornado’s Board of Trustees. These restrictions on transferability and ownership may delay,
deter or prevent a change in control of Vornado or other transaction that might involve a premium price or otherwise be in the best
interest of the shareholders. We refer to Vornado’s Amended and Restated Declaration of Trust, as amended, as the “declaration of
trust.”
Vornado has a classified Board of Trustees and that may reduce the likelihood of certain takeover transactions.
Vornado’s Board of Trustees is divided into three classes of trustees. Trustees of each class are chosen for three-year staggered
terms. Staggered terms of trustees may reduce the possibility of a tender offer or an attempt to change control of Vornado, even
though a tender offer or change in control might be in the best interest of Vornado’s shareholders.
We may issue additional shares in a manner that could adversely affect the likelihood of certain takeover transactions.
Vornado’s declaration of trust authorizes the Board of Trustees to:
cause Vornado to issue additional authorized but unissued common shares or preferred shares;
classify or reclassify, in one or more series, any unissued preferred shares;
set the preferences, rights and other terms of any classified or reclassified shares that Vornado issues; and
increase, without shareholder approval, the number of shares of beneficial interest that Vornado may issue.
The Board of Trustees could establish a series of preferred shares whose terms could delay, deter or prevent a change in control of
Vornado or other transaction that might involve a premium price or otherwise be in the best interest of Vornado’s shareholders,
although the Board of Trustees does not now intend to establish a series of preferred shares of this kind. Vornado’s declaration of trust
and bylaws contain other provisions that may delay, deter or prevent a change in control of Vornado or other transaction that might
involve a premium price or otherwise be in the best interest of our shareholders.
21
The Maryland General Corporation Law contains provisions that may reduce the likelihood of certain takeover transactions.
Under the Maryland General Corporation Law, as amended, which we refer to as the “MGCL,” as applicable to REITs, certain
“business combinations,” including certain mergers, consolidations, share exchanges and asset transfers and certain issuances and
reclassifications of equity securities, between a Maryland REIT and any person who beneficially owns ten percent or more of the
voting power of the trust’s shares or an affiliate or an associate, as defined in the MGCL, of the trust who, at any time within the two-
year period before the date in question, was the beneficial owner of ten percent or more of the voting power of the then outstanding
voting shares of beneficial interest of the trust, which we refer to as an “interested shareholder,” or an affiliate of the interested
shareholder, are prohibited for five years after the most recent date on which the interested shareholder becomes an interested
shareholder. After that five-year period, any business combination of these kinds must be recommended by the board of trustees of the
trust and approved by the affirmative vote of at least (a) 80% of the votes entitled to be cast by holders of outstanding voting shares of
beneficial interest of the trust and (b) two-thirds of the votes entitled to be cast by holders of voting shares of beneficial interest of the
trust other than shares held by the interested shareholder with whom, or with whose affiliate, the business combination is to be
effected or held by an affiliate or associate of the interested shareholder. These supermajority voting requirements do not apply if the
trust’s common shareholders receive a minimum price, as defined in the MGCL, for their shares and the consideration is received in
cash or in the same form as previously paid by the interested shareholder for its common shares.
The provisions of the MGCL do not apply, however, to business combinations that are approved or exempted by the board of
trustees of the applicable trust before the interested shareholder becomes an interested shareholder, and a person is not an interested
shareholder if the board of trustees approved in advance the transaction by which the person otherwise would have become an
interested shareholder.
In approving a transaction, the Board may provide that its approval is subject to compliance, at or after the time of approval, with
any terms and conditions determined by the Board. Vornado’s Board has adopted a resolution exempting any business combination
between Vornado and any trustee or officer of Vornado or its affiliates. As a result, any trustee or officer of Vornado or its affiliates
may be able to enter into business combinations with Vornado that may not be in the best interest of Vornado’s shareholders. With
respect to business combinations with other persons, the business combination provisions of the MGCL may have the effect of
delaying, deferring or preventing a change in control of Vornado or other transaction that might involve a premium price or otherwise
be in the best interest of the shareholders. The business combination statute may discourage others from trying to acquire control of
Vornado and increase the difficulty of consummating any offer.
We may change our policies without obtaining the approval of our shareholders.
Our operating and financial policies, including our policies with respect to acquisitions of real estate or other companies, growth,
operations, indebtedness, capitalization and dividends, are exclusively determined by our Board of Trustees. Accordingly, our
shareholders do not control these policies.
OUR OWNERSHIP STRUCTURE AND RELATED-PARTY TRANSACTIONS MAY GIVE RISE TO CONFLICTS OF
INTEREST.
Steven Roth and Interstate Properties may exercise substantial influence over us. They and some of our other trustees and
officers have interests or positions in other entities that may compete with us.
As of December 31, 2012, Interstate Properties, a New Jersey general partnership, and its partners owned an aggregate of
approximately 6.5% of the common shares of Vornado and 26.3% of the common stock of Alexander’s, which is described below.
Steven Roth, David Mandelbaum and Russell B. Wight, Jr. are the three partners of Interstate Properties. Mr. Roth is the Chairman of
the Board of Vornado, the managing general partner of Interstate Properties and the Chairman of the Board and Chief Executive
Officer of Alexander’s. Messrs. Wight and Mandelbaum are trustees of Vornado and also directors of Alexander’s.
Because of these overlapping interests, Mr. Roth and Interstate Properties and its partners may have substantial influence over
Vornado and on the outcome of any matters submitted to Vornado’s shareholders for approval. In addition, certain decisions
concerning our operations or financial structure may present conflicts of interest among Messrs. Roth, Mandelbaum and Wight and
Interstate Properties and our other equity or debt holders. In addition, Mr. Roth, Interstate Properties and its partners, and Alexander’s
currently and may in the future engage in a wide variety of activities in the real estate business which may result in conflicts of interest
with respect to matters affecting us, such as which of these entities or persons, if any, may take advantage of potential business
opportunities, the business focus of these entities, the types of properties and geographic locations in which these entities make
investments, potential competition between business activities conducted, or sought to be conducted, competition for properties and
tenants, possible corporate transactions such as acquisitions and other strategic decisions affecting the future of these entities.
22
We currently manage and lease the real estate assets of Interstate Properties under a management agreement for which we receive
an annual fee equal to 4% of base rent and percentage rent. The management agreement has a one-year term and is automatically
renewable unless terminated by either of the parties on 60 days’ notice at the end of the term. Because of the relationship among
Vornado, Interstate Properties and Messrs. Roth, Mandelbaum and Wight, as described above, the terms of the management
agreement and any future agreements between us and Interstate Properties may not be comparable to those we could have negotiated
with an unaffiliated third party.
There may be conflicts of interest between Alexander’s and us.
As of December 31, 2012, we owned 32.4% of the outstanding common stock of Alexander’s. Alexander’s is a REIT that has six
properties, which are located in the greater New York metropolitan area. In addition to the 2.1% that they indirectly own through
Vornado, Interstate Properties, which is described above, and its partners owned 26.3% of the outstanding common stock of
Alexander’s as of December 31, 2012. Mr. Roth is the Chairman of the Board of Vornado, the managing general partner of Interstate
Properties, and the Chairman of the Board and Chief Executive Officer of Alexander’s. Messrs. Wight and Mandelbaum are trustees
of Vornado and also directors of Alexander’s and general partners of Interstate Properties. Michael D. Fascitelli is the President and
Chief Executive Officer of Vornado and the President of Alexander’s and Dr. Richard West is a trustee of Vornado and a director of
Alexander’s. In addition, Joseph Macnow, our Executive Vice President and Chief Financial Officer, holds the same position with
Alexander’s. Alexander’s common stock is listed on the New York Stock Exchange under the symbol “ALX.”
We manage, develop and lease Alexander’s properties under management and development agreements and leasing agreements
under which we receive annual fees from Alexander’s. These agreements have a one-year term expiring in March of each year and are
all automatically renewable. Because Vornado and Alexander’s share common senior management and because certain of the trustees
of Vornado constitute a majority of the directors of Alexander’s, the terms of the foregoing agreements and any future agreements
between us and Alexander’s may not be comparable to those we could have negotiated with an unaffiliated third party.
For a description of Interstate Properties’ ownership of Vornado and Alexander’s, see “Steven Roth and Interstate Properties may
exercise substantial influence over us. They and some of our other trustees and officers have interests or positions in other entities that
may compete with us” above.
23
THE NUMBER OF SHARES OF VORNADO REALTY TRUST AND THE MARKET FOR THOSE SHARES GIVE RISE
TO VARIOUS RISKS.
The trading price of our common shares has been volatile and may fluctuate.
The trading price of our common shares has been volatile and may continue to fluctuate widely as a result of a number of factors,
many of which are outside our control. In addition, the stock market is subject to fluctuations in the share prices and trading volumes
that affect the market prices of the shares of many companies. These broad market fluctuations have in the past and may in the future
adversely affect the market price of our common shares. Among the factors that could affect the price of our common shares are:
our financial condition and performance;
the financial condition of our tenants, including the extent of tenant bankruptcies or defaults;
actual or anticipated quarterly fluctuations in our operating results and financial condition;
our dividend policy;
the reputation of REITs and real estate investments generally and the attractiveness of REIT equity securities in
comparison to other equity securities, including securities issued by other real estate companies, and fixed income
securities;
uncertainty and volatility in the equity and credit markets;
changes in revenue or earnings estimates or publication of research reports and recommendations by financial analysts or
actions taken by rating agencies with respect to our securities or those of other REITs;
failure to meet analysts’ revenue or earnings estimates;
speculation in the press or investment community;
strategic actions by us or our competitors, such as acquisitions or restructurings;
the extent of institutional investor interest in us;
the extent of short-selling of our common shares and the shares of our competitors;
fluctuations in the stock price and operating results of our competitors;
general financial and economic market conditions and, in particular, developments related to market conditions for
REITs and other real estate related companies;
domestic and international economic factors unrelated to our performance; and
all other risk factors addressed elsewhere in this Annual Report on the Form 10-K.
A significant decline in our stock price could result in substantial losses for shareholders.
Vornado has many shares available for future sale, which could hurt the market price of its shares.
The interests of our current shareholders could be diluted if we issue additional equity securities. As of December 31, 2012, we
had authorized but unissued, 63,265,289 common shares of beneficial interest, $.04 par value and 58,766,023 preferred shares of
beneficial interest, no par value; of which 20,705,537 common shares are reserved for issuance upon redemption of Class A Operating
Partnership units, convertible securities and employee stock options and 11,200,000 preferred shares are reserved for issuance upon
redemption of preferred Operating Partnership units. Any shares not reserved may be issued from time to time in public or private
offerings or in connection with acquisitions. In addition, common and preferred shares reserved may be sold upon issuance in the
public market after registration under the Securities Act or under Rule 144 under the Securities Act or other available exemptions from
registration. We cannot predict the effect that future sales of our common and preferred shares or Operating Partnership Class A and
preferred units will have on the market prices of our outstanding shares.
Increased interest rates may hurt the value of our common and preferred shares.
We believe that investors consider the distribution rate on REIT shares, expressed as a percentage of the price of the shares,
relative to interest rates as an important factor in deciding whether to buy or sell the shares. If interest rates go up, prospective
purchasers of REIT shares may expect a higher distribution rate. Higher interest rates would likely increase our borrowing costs and
might decrease funds available for distribution. Thus, higher interest rates could cause the market price of our common and preferred
shares to decline.
24
ITEM 1B. UNRESOLVED STAFF COMMENTS
There are no unresolved comments from the staff of the Securities Exchange Commission as of the date of this Annual Report on
Form 10-K.
ITEM 2.
PROPERTIES
We operate in five business segments: New York, Washington, DC, Retail Properties, Merchandise Mart and Toys “R” Us. The
following pages provide details of our real estate properties.
25
ITEM 2.
PROPERTIES - Continued
%
Ownership
%
Occupancy
Weighted
Average
Annual Rent
PSF (1)
Square Feet
Total
Property
In Service
Under Development
or Not Available
for Lease
Encumbrances
(in thousands)
100.0 %
100.0 %
100.0 %
100.0 %
100.0 %
100.0 %
100.0 %
100.0 %
100.0 %
93.8 % $
99.6 %
94.4 %
98.4 %
53.1 %
97.0 %
100.0 %
96.1 %
99.9 %
55.30
120.38
62.29
49.88
172.76
53.70
55.84
152.94
57.35
2,233,000
269,000
2,502,000
2,233,000
269,000
2,502,000
1,560,000
50,000
1,610,000
1,560,000
50,000
1,610,000
1,082,000
17,000
1,099,000
1,082,000
17,000
1,099,000
100.0 %
88.4 %
49.90
836,000
836,000
100.0 %
96.1 %
115.09
256,000
256,000
-
-
-
-
-
-
-
-
-
-
-
$
-
425,000
330,000
Major Tenants
BMG Columbia House, Cisco, MWB Leasing,
Parsons Brinkerhoff, United Health Care,
United States Customs Department,
URS Corporation Group Consulting
Bank of America, Footaction, Kmart Corporation
LMW Associates, EMC, Forest Electric, IBI,
Madison Square Garden, McGraw-Hill Companies, Inc.
Chase Manhattan Bank
Macy's, Madison Square Garden, Rainbow Media Holdings
PNC Bank National Association
223,242 Draftfcb
101,758
JCPenney, Aeropostale, Express, Victoria's Secret
Property
NEW YORK:
Penn Plaza:
One Penn Plaza
(ground leased through 2098)
Two Penn Plaza
Eleven Penn Plaza
-Office
-Retail
-Office
-Retail
-Office
-Retail
100 West 33rd Street
Manhattan Mall
-Office
-Retail
330 West 34th Street
(ground leased through 2148 - 34.8%
ownership interest in the land)
-Office
-Retail
435 Seventh Avenue
-Retail
7 West 34th Street
484 Eighth Avenue
431 Seventh Avenue
488 Eighth Avenue
Total Penn Plaza
-Retail
-Retail
-Retail
-Retail
100.0 %
100.0 %
100.0 %
100.0 %
-
100.0 %
33.11
-
33.11
622,000
13,000
635,000
377,000
-
377,000
245,000
13,000
258,000
50,150
City of New York
100.0 %
100.0 %
240.18
43,000
43,000
100.0 %
100.0 %
203.75
21,000
21,000
100.0 %
80.6 %
69.09
16,000
16,000
100.0 %
100.0 %
54.33
10,000
10,000
100.0 %
100.0 %
63.93
6,000
6,000
-
-
-
-
-
98,000 Hennes & Mauritz
- Express
- T.G.I. Friday's
-
-
7,034,000
6,776,000
258,000
1,228,150
26
ITEM 2.
PROPERTIES - Continued
Property
NEW YORK (Continued):
Midtown East:
909 Third Avenue
(ground leased through 2063)
%
Ownership
%
Occupancy
Weighted
Average
Annual Rent
PSF (1)
Square Feet
Total
Property
In Service
Under Development
or Not Available
for Lease
Encumbrances
(in thousands)
Major Tenants
J.P. Morgan Securities Inc., CMGRP Inc.,
Forest Laboratories, Geller & Company, Morrison Cohen LLP,
Robeco USA Inc., United States Post Office,
-Office
100.0 %
98.5 % $
55.59 (2)
1,343,000
1,343,000
- $
199,198 The Procter & Gamble Distributing LLC.
150 East 58th Street
-Office
-Retail
715 Lexington
(ground leased through 2041)
-Retail
968 Third Avenue
-Retail
Total Midtown East
Midtown West:
888 Seventh Avenue
(ground leased through 2067)
1740 Broadway
57th Street
825 Seventh Avenue
-Office
-Retail
-Office
-Retail
-Office
-Retail
-Office
-Retail
Total Midtown West
Park Avenue:
280 Park Avenue
350 Park Avenue
-Office
-Retail
-Office
-Retail
100.0 %
100.0 %
100.0 %
96.7 %
100.0 %
96.8 %
62.51
168.76
62.90
535,000
2,000
537,000
535,000
2,000
537,000
100.0 %
100.0 %
221.85
23,000
23,000
50.0 %
100.0 %
209.66
6,000
6,000
1,909,000
1,909,000
100.0 %
100.0 %
100.0 %
100.0 %
100.0 %
100.0 %
50.0 %
50.0 %
50.0 %
50.0 %
100.0 %
49.5 %
49.5 %
49.5 %
100.0 %
100.0 %
100.0 %
96.3 %
100.0 %
96.4 %
100.0 %
100.0 %
100.0 %
100.0 %
79.8 %
94.3 %
100.0 %
100.0 %
100.0 %
100.0 %
100.0 %
100.0 %
96.0 %
100.0 %
96.1 %
81.58
100.37
81.90
64.01
31.50
62.98
55.78
52.88
54.96
45.44
234.47
49.91
86.59
127.11
87.19
83.59
183.90
86.59
860,000
15,000
875,000
583,000
19,000
602,000
135,000
53,000
188,000
165,000
4,000
169,000
860,000
15,000
875,000
583,000
19,000
602,000
135,000
53,000
188,000
165,000
4,000
169,000
1,834,000
1,834,000
1,198,000
18,000
1,216,000
550,000
17,000
567,000
668,000
12,000
680,000
550,000
17,000
567,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
530,000
6,000
536,000
-
-
-
Castle Harlan, Tournesol Realty LLC. (Peter Marino),
Various showroom tenants
-
- New York & Company, Zales
- Capital One Financial Corporation
199,198
318,554
New Line Realty, Soros Fund, TPG-Axon Capital,
Vornado Executive Headquarters
Redeye Grill L.P.
Davis & Gilbert, Limited Brands
Brasserie Cognac, Citibank
-
Various
20,434
19,554
358,542
738,228
300,000
Young & Rubicam
Lindy's
Cohen & Steers Inc., Credit Suisse (USA) Inc.,
General Electric Capital Corp., Investcorp International Inc.
Scottrade Inc.
Kissinger Associates Inc., Ziff Brothers Investment Inc.,
MFA Financial Inc., M&T Bank
Fidelity Investment, AT&T Wireless, Valley National Bank
Total Park Avenue
1,783,000
1,247,000
536,000
1,038,228
27
ITEM 2.
PROPERTIES - Continued
%
Ownership
%
Occupancy
Weighted
Average
Annual Rent
PSF (1)
Square Feet
Total
Property
In Service
Under Development
or Not Available
for Lease
Encumbrances
(in thousands)
Property
NEW YORK (Continued):
Grand Central:
90 Park Avenue
-Office
-Retail
330 Madison Avenue
-Office
-Retail
-Retail
510 Fifth Avenue
Total Grand Central
Madison/Fifth:
640 Fifth Avenue
-Office
-Retail
666 Fifth Avenue
-Office (Office Condo)
-Retail (Office Condo)
-Retail (Retail Condo)
595 Madison Avenue
689 Fifth Avenue
-Office
-Retail
-Office
-Retail
Total Madison/Fifth
United Nations:
866 United Nations Plaza
-Office
-Retail
$
-
Major Tenants
Alston & Bird, Amster, Rothstein & Ebenstein,
Capital One, First Manhattan Consulting
Citibank
Acordia Northeast Inc., Artio Global Management,
Dean Witter Reynolds Inc., GPFT Holdco LLC,
HSBC Bank AFS, Jones Lang LaSalle Inc.
Ann Taylor Retail Inc., Citibank
150,000
31,253
Joe Fresh
181,253
ROC Capital Management LP, Citibank,
Fidelity Investments, Janus Capital Group Inc.,
GSL Enterprises Inc., Scout Capital Management,
Legg Mason Investment Counsel
Citibank, Hennes & Mauritz
Citibank, Fulbright & Jaworski,
Integrated Holding Group, Vinson & Elkins LLP
HSBC Bank USA
Uniqlo, Hollister, Swatch
Beauvais Carpets, Levin Capital Strategies LP,
Cosmetech Mably Int'l LLC.
Coach, Prada
Yamaha Artist Services Inc.
MAC Cosmetics, Massimo Dutti
Fross Zelnick, Mission of Japan,
The United Nations, Mission of Finland
Citibank
-
1,109,700
-
-
1,109,700
44,978
100.0 %
100.0 %
96.6 % $
100.0 %
96.7 %
62.71
85.48
63.35
891,000
26,000
917,000
891,000
26,000
917,000
25.0 %
25.0 %
25.0 %
92.9 %
98.4 %
93.2 %
62.04
141.09
65.21
790,000
33,000
823,000
790,000
33,000
823,000
100.0 %
91.0 %
128.57
64,000
64,000
1,804,000
1,804,000
100.0 %
100.0 %
100.0 %
49.5 %
49.5 %
100.0 %
100.0 %
100.0 %
100.0 %
100.0 %
100.0 %
100.0 %
100.0 %
100.0 %
100.0 %
85.3 %
88.2 %
100.0 %
86.5 %
93.4 %
100.0 %
94.0 %
75.5 %
100.0 %
80.0 %
77.49
238.12
108.23
73.76
164.45
344.36
96.87
67.97
441.53
102.77
73.68
594.07
169.84
262,000
62,000
324,000
262,000
62,000
324,000
1,362,000
52,000
113,000 (3)
1,527,000
1,362,000
52,000
113,000
1,527,000
292,000
30,000
322,000
75,000
17,000
92,000
292,000
30,000
322,000
75,000
17,000
92,000
2,265,000
2,265,000
100.0 %
100.0 %
100.0 %
98.5 %
96.9 %
98.5 %
53.29
79.85
53.73
354,000
6,000
360,000
354,000
6,000
360,000
28
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
ITEM 2.
PROPERTIES - Continued
%
Ownership
%
Occupancy
Weighted
Average
Annual Rent
PSF (1)
Square Feet
Total
Property
In Service
Under Development
or Not Available
for Lease
Encumbrances
(in thousands)
Major Tenants
Property
NEW YORK (Continued):
Midtown South:
770 Broadway
-Office
-Retail
One Park Avenue
-Office
-Retail
4 Union Square South
-Retail
692 Broadway
-Retail
Total Midtown South
Rockefeller Center:
1290 Avenue of the Americas
-Office
-Retail
608 Fifth Avenue
(ground leased through 2026)
-Office
-Retail
Total Rockefeller Center
Wall Street/Downtown:
20 Broad Street
(ground leased through 2081)
-Office
40 Fulton Street
-Office
-Retail
Total Wall Street/Downtown
Times Square:
1540 Broadway
100.0 %
100.0 %
100.0 %
30.3 %
30.3 %
30.3 %
100.0 % $
100.0 %
100.0 %
94.9 %
90.3 %
94.5 %
58.24
56.04
57.91
43.51
57.69
44.70
943,000
166,000
1,109,000
943,000
166,000
1,109,000
861,000
79,000
940,000
861,000
79,000
940,000
100.0 %
100.0 %
79.35
206,000
206,000
100.0 %
100.0 %
46.50
35,000
35,000
2,290,000
2,290,000
70.0 %
70.0 %
70.0 %
100.0 %
100.0 %
100.0 %
95.0 %
88.2 %
94.8 %
71.34
111.72
72.59
2,037,000
65,000
2,102,000
2,037,000
65,000
2,102,000
80.5 %
94.0 %
85.4 %
52.50
178.08
83.64
91,000
30,000
121,000
91,000
30,000
121,000
2,223,000
2,223,000
100.0 %
99.3 %
52.12
472,000
472,000
100.0 %
100.0 %
100.0 %
96.3 %
100.0 %
96.5 %
36.06
28.46
35.82
244,000
8,000
252,000
244,000
8,000
252,000
724,000
724,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
AOL, J. Crew, Structure Tone, Nielsen Company (US) Inc.
Anne Taylor Retail Inc., Bank of America, Kmart Corporation
Coty Inc., New York University,
Public Service Mutual Insurance
Bank of Baroda, Citibank, Equinox One Park Avenue Inc.
$
353,000
250,000
120,000 Burlington Coat Factory, Whole Foods Market, DSW, Forever 21
- Equinox
723,000
AXA Equitable Life Insurance, Bank of New York Mellon,
Broadpoint Gleacher Securities Group, Bryan Cave LLP,
Microsoft Corporation, Morrison & Foerster LLP,
Warner Music Group, Cushman & Wakefield, Fitzpatrick,
Cella, Harper & Scinto, Columbia University
Duane Reade, JPMorgan Chase Bank, Sovereign Bank
950,000
Lacoste
-
950,000
- New York Stock Exchange
Graphnet Inc., Market News International Inc., Sapient Corp.
Duane Reade
-
-
Forever 21, Planet Hollywood, Disney
- MAC Cosmetics
-Retail
100.0 %
98.1 %
147.46
160,000
160,000
1535 Broadway (Marriott Marquis - retail and signage)
-Retail
Total Times Square
100.0 %
-
-
64,000
-
224,000
160,000
64,000
64,000
-
-
29
ITEM 2.
PROPERTIES - Continued
%
Ownership
%
Occupancy
Weighted
Average
Annual Rent
PSF (1)
Square Feet
Total
Property
In Service
Under Development
or Not Available
for Lease
Encumbrances
(in thousands)
Major Tenants
100.0 %
100.0 % $
126.93
85,000
85,000
-
$
- Top Shop, Madewell, J. Crew
100.0 %
93.8 %
89.60
48,000
48,000
100.0 %
100.0 %
99.02
7,000
7,000
100.0 %
100.0 %
155.34
7,000
7,000
147,000
147,000
100.0 %
100.0 %
492.12
18,000
18,000
100.0 %
100.0 %
416.52
8,000
8,000
100.0 %
100.0 %
492.68
11,000
11,000
-
-
-
-
-
-
-
- Sigrid Olsen
-
- Sandro
-
80,000 Gucci, Chloe, Cartier
- Anne Fontaine
- Dennis Basso, Nespresso USA, J. Crew
100.0 %
-
-
25,000
-
62,000
37,000
25,000
25,000
-
80,000
100.0 %
85.7 %
23.35
128,000
128,000
100.0 %
100.0 %
53.05
42,000
42,000
-
-
- Vornado's Administrative Headquarters
- Nike, Barneys
Property
NEW YORK (Continued):
Soho:
478-486 Broadway
-Retail
155 Spring Street
148 Spring Street
150 Spring Street
-Retail
-Retail
-Retail
Total Soho
Upper East Side:
828-850 Madison Avenue
-Retail
677-679 Madison Avenue
-Retail
40 East 66th Street
1131 Third Avenue
-Retail
-Retail
Total Upper East Side
New Jersey:
Paramus
Washington D.C.:
3040M Street
-Office
-Retail
New York Office:
Total
94.6% $
60.29
20,504,000
19,729,000
Vornado's Ownership Interest
95.9% $
60.17
17,259,000
16,751,000
New York Retail:
Total
96.7% $
182.92
2,325,000
2,217,000
Vornado's Ownership Interest
96.8% $
147.28
2,162,000
2,057,000
30
775,000
508,000
108,000
105,000
$
$
$
$
5,482,038
4,143,072
431,011
431,011
%
Ownership
%
Occupancy
Weighted
Average
Annual Rent
PSF (1)
Square Feet
Total
Property
In Service
Under Development
or Not Available
for Lease
Encumbrances
(in thousands)
Major Tenants
ITEM 2.
PROPERTIES - Continued
Property
NEW YORK (Continued):
ALEXANDER'S, INC.:
New York:
731 Lexington Avenue, Manhattan
-Office
-Retail
32.4 %
32.4 %
100.0 % $
100.0 %
100.0 %
93.02
164.35
104.74
885,000
174,000
1,059,000
885,000
174,000
1,059,000
Rego Park I, Queens (4.8 acres)
32.4 %
100.0 %
36.36
343,000
343,000
Rego Park II (adjacent to Rego Park I),
Queens (6.6 acres)
Flushing, Queens (4) (1.0 acre)
New Jersey:
Paramus, New Jersey
(30.3 acres ground leased to IKEA
through 2041)
Property to be Developed:
Rego Park III (adjacent to Rego Park II),
Queens, NY (3.4 acres)
Total Alexander's
Hotel Pennsylvania:
-Hotel (1700 Keys)
Residential:
50/70W 93rd Street (327 units)
32.4 %
32.4 %
96.8 %
100.0 %
40.02
15.74
610,000
610,000
167,000
167,000
32.4 %
100.0 %
32.4 %
-
-
-
-
-
-
-
99.1 %
68.66
2,179,000
2,179,000
100.0 %
-
49.9 %
95.1 %
-
-
1,400,000
1,400,000
284,000
284,000
Independence Plaza, Tribeca (1,328 units)
-Residential
-Retail
58.8 %
58.8 %
97.3 %
100.0 %
-
70.21
1,190,000
54,000
1,244,000
1,190,000
54,000
1,244,000
1,528,000
1,528,000
Total Residential
New York Segment:
Total
95.3% $
68.73
27,936,000
27,053,000
Vornado's Ownership Interest
96.2% $
69.70
22,400,000
21,787,000
(1) Weighted Average Annual Rent PSF excludes ground rent, storage rent and garages.
(2) Excludes US Post Office leased through 2038 (including five five-year renewal options) for which the annual escalated rent is $9.90 PSF.
(3) 75,000 square feet is leased from the office condo.
(4) Leased by Alexander's through January 2037.
31
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
$
327,425 Bloomberg
320,000 Hennes & Mauritz, The Home Depot, The Container Store
647,425
78,246 Sears, Burlington Coat Factory, Bed Bath & Beyond, Marshalls
272,245 Century 21, Costco, Kohl's, TJ Maxx, Toys "R" Us
- New World Mall LLC
68,000
IKEA (ground lessee)
-
1,065,916
-
45,825
334,225
380,050
883,000
613,000
$
$
7,359,015
4,804,438
ITEM 2.
PROPERTIES - Continued
Property
WASHINGTON, DC:
Crystal City:
2011-2451 Crystal Drive - 5 buildings
%
Ownership
%
Occupancy
Weighted
Average
Annual Rent
PSF (1)
Square Feet
Total
Property
In Service
Under Development
or Not Available
for Lease
Encumbrances
(in thousands)
Major Tenants
100.0 %
85.0 % $
42.65
2,313,000
2,313,000
-
$
270,922 General Services Administration, Lockheed Martin,
Conservation International, Smithsonian Institution,
Natl. Consumer Coop. Bank, Council on Foundations,
Vornado / Charles E. Smith Headquarters,
KBR, General Dynamics, Scitor Corp.,
Food Marketing Institute, DRS Technologies
S. Clark Street / 12th Street - 5 buildings
100.0 %
74.9 %
42.40
1,527,000
1,527,000
-
87,221 General Services Administration,
SAIC, Inc., Boeing, L-3 Communications,
The Int'l Justice Mission
100.0 %
91.5 %
41.18
1,484,000
1,259,000
225,000
117,390 General Services Administration,
Alion Science & Technologies, Booz Allen,
Arete Associates, Battelle Memorial Institute
100.0 %
95.5 %
39.30
870,000
507,000
363,000
- General Services Administration,
100.0 %
98.6 %
33.16
529,000
529,000
-
Lockheed Martin
- General Services Administration,
Public Broadcasting Service
100.0 %
100.0 %
39.57
309,000
84,000
225,000
- General Services Administration
100.0 %
100.0 %
100.0 %
100.0 %
72.0 %
60.8 %
94.5 %
35.94
31.52
45.74
162,000
162,000
81,000
57,000
81,000
57,000
-
-
-
- National Crime Prevention, Institute for Psychology
- Various
- Various
85.5 %
40.81
7,332,000
6,519,000
813,000
475,533
1550-1750 Crystal Drive /
241-251 18th Street - 4 buildings
1800, 1851 and 1901 South Bell Street
- 3 buildings
2100 / 2200 Crystal Drive - 2 buildings
223 23rd Street / 2221 South Clark Street
- 2 buildings
2001 Jefferson Davis Highway
Crystal City Shops at 2100
Crystal Drive Retail
Total Crystal City
Central Business District:
Universal Buildings
1825-1875 Connecticut Avenue, NW
- 2 buildings
Warner Building - 1299 Pennsylvania
Avenue, NW
100.0 %
90.8 %
43.39
682,000
682,000
55.0 %
64.5 %
61.25
612,000
612,000
2101 L Street, NW
100.0 %
97.7 %
61.71
380,000
380,000
1750 Pennsylvania Avenue, NW
1150 17th Street, NW
Bowen Building - 875 15th Street, NW
1101 17th Street, NW
1730 M Street, NW
100.0 %
100.0 %
100.0 %
55.0 %
100.0 %
85.4 %
85.9 %
96.7 %
86.5 %
86.0 %
46.89
46.06
64.83
45.85
44.84
277,000
277,000
240,000
240,000
231,000
231,000
215,000
215,000
203,000
203,000
32
-
-
-
-
-
-
-
-
93,226 Family Health International
292,700 Baker Botts LLP, General Electric, Cooley LLP
150,000 Greenberg Traurig, LLP, US Green Building Council,
American Insurance Association, RTKL Associates,
Cassidy & Turley
- General Services Administration, UN Foundation, AOL
28,728 American Enterprise Institute
115,022 Paul, Hastings, Janofsky & Walker LLP,
Millennium Challenge Corporation
31,000 AFSCME
14,853 General Services Administration
%
Ownership
%
Occupancy
Weighted
Average
Annual Rent
PSF (1)
Square Feet
Total
Property
In Service
Under Development
or Not Available
for Lease
Encumbrances
(in thousands)
Major Tenants
100.0 %
97.5 % $
40.78
91,000
91,000
-
$
- Aptima, Inc., Nelnet Corporation
2.5 %
5.0 %
100.0 %
-
-
1,058,000
-
1,058,000 *
-
98.4 %
76.4 %
59.60
79.21
380,000
380,000
128,000
128,000
-
-
- Sidley Austin LLP, UBS
- Bloomberg
87.0 %
52.61
4,497,000
3,439,000
1,058,000
725,529
100.0 %
50.2 %
34.13
2,125,000
2,125,000
100.0 %
100.0 %
32.80
518,000
518,000
100.0 %
60.0 %
33.69
2,643,000
2,643,000
100.0 %
90.8 %
41.93
635,000
635,000
46.2 %
79.0 %
36.93
733,000
733,000
86.7 %
40.24
1,368,000
1,368,000
-
-
-
-
-
-
564,901 General Services Administration, SAIC, Inc., Analytic Services
Northrop Grumman, Axiom Resource Management,
Booz Allen, Jacer Corporation, Intellidyne, Inc.
140,056 General Services Administration
704,957
47,353 Arlington County, General Services Administration,
AMC Theaters
-
General Services Administration, Corporate Executive Board
47,353
100.0 %`
90.7 %
29.96
418,000
399,000
19,000 *
- L-3 Communications, Allworld Language Consultants,
ITEM 2.
PROPERTIES - Continued
Property
WASHINGTON, DC (Continued):
1726 M Street, NW
Waterfront Station
1501 K Street, NW
1399 New York Avenue, NW
Total Central Business District
I-395 Corridor:
Skyline Place - 7 buildings
One Skyline Tower
Total I-395 Corridor
Rosslyn / Ballston:
2200 / 2300 Clarendon Blvd
(Courthouse Plaza) - 2 buildings
(ground leased through 2062)
Rosslyn Plaza - Office - 4 buildings
Total Rosslyn / Ballston
Reston:
Commerce Executive - 3 buildings
Rockville/Bethesda:
Democracy Plaza One
(ground leased through 2084)
Tysons Corner:
Fairfax Square - 3 buildings
Pentagon City:
Fashion Centre Mall
Washington Tower
Total Pentagon City
100.0 %
86.8 %
31.36
216,000
216,000
20.0 %
82.2 %
38.68
533,000
533,000
7.5 %
7.5 %
99.2 %
100.0 %
40.21
45.18
819,000
819,000
170,000
170,000
99.3 %
41.06
989,000
989,000
-
-
-
-
-
Total Washington, DC office properties
82.2 % $
42.13
17,996,000
16,106,000
Vornado's Ownership Interest
81.2 % $
41.57
14,495,000
13,637,000
1,890,000
858,000
$
$
33
BT North America
- National Institutes of Health
70,127 Dean & Company, Womble Carlyle
410,000 Macy's, Nordstrom
40,000 The Rand Corporation
450,000
2,473,499
1,855,482
ITEM 2.
PROPERTIES - Continued
%
Ownership
%
Occupancy
Weighted
Average
Annual Rent
PSF (1)
Square Feet
Total
Property
In Service
Under Development
or Not Available
for Lease
Encumbrances
(in thousands)
Major Tenants
Rosslyn Plaza - 2 buildings (196 units)
43.7 %
97.8 %
Property
WASHINGTON, DC (Continued):
Residential:
For rent residential:
Riverhouse - 3 buildings (1,670 units)
West End 25 (283 units)
220 20th Street (265 units)
Total Residential
Other:
Crystal City Hotel
Warehouses - 3 buildings
Other - 3 buildings
Total Other
100.0 %
100.0 %
100.0 %
98.0 % $
97.5 %
97.4 %
97.9 %
100.0 %
100.0 %
100.0 %
100.0 %
100.0 %
100.0 %
-
-
-
-
-
-
-
-
1,802,000
1,802,000
271,000
271,000
273,000
273,000
253,000
253,000
2,599,000
2,599,000
266,000
266,000
214,000
160,000
11,000
9,000
100.0 %
491,000
435,000
-
-
-
-
-
-
54,000 *
2,000 *
56,000
$
259,546
101,671
73,939
-
435,156
-
-
-
-
Total Washington, DC Properties
Vornado's Ownership Interest
84.8 % $
42.13
21,086,000
19,140,000
1,946,000
84.1 % $
41.57
17,444,000
16,529,000
915,000
$
$
2,908,655
2,290,639
* We do not capitalize interest or real estate taxes on this space.
(1) Weighted Average Annual Rent PSF excludes ground rent, storage rent and garages.
34
ITEM 2.
PROPERTIES - Continued
%
Ownership
%
Occupancy
Weighted
Average
Annual Rent
PSF (1)
Square Feet
In Service
Under Development
Total
Property
Owned by
Company
Owned By
Tenant
or Not Available
for Lease
Encumbrances
(in thousands)
Major Tenants
100.0 %
100.0 % $
29.60
717,000
29,000
287,000
401,000
$
-
J. C. Penney, Dick's Sporting Goods (lease not commenced)
100.0 %
100.0 %
24.20
410,000
204,000
206,000
100.0 %
100.0 %
19.01
271,000
177,000
94,000
-
-
75,000 Wal-Mart, BJ's Wholesale Club
25,217 (2) The Home Depot, Bed Bath & Beyond, Marshalls
100.0 %
100.0 %
26.80
305,000
21,000
149,000
135,000
- Wal-Mart
Union (Route 22 and Morris Avenue)
100.0 %
99.4 %
24.97
276,000
113,000
163,000
100.0 %
94.2 %
17.74
279,000
276,000
3,000
100.0 %
72.5 %
22.61
275,000
269,000
6,000
-
-
-
32,525 (2) Kohl's, ShopRite, Marshalls
32,916 (2) Lowe's, Toys "R" Us
41,283 (2) The Home Depot
100.0 %
100.0 %
34.15
269,000
26,000
167,000
76,000
-
Lowe's, REI
100.0 %
96.8 %
17.83
267,000
261,000
6,000
100.0 %
96.3 %
13.72
263,000
64,000
199,000
100.0 %
100.0 %
21.79
236,000
66,000
170,000
East Brunswick (325 - 333 Route 18 South)
100.0 %
100.0 %
16.15
232,000
222,000
10,000
Union (2445 Springfield Avenue)
100.0 %
100.0 %
17.85
232,000
232,000
-
100.0 %
95.9 %
13.93
231,000
179,000
52,000
100.0 %
83.9 %
22.29
227,000
87,000
140,000
100.0 %
100.0 %
17.72
219,000
7,000
-
212,000
-
Property
RETAIL PROPERTIES:
STRIP SHOPPING CENTERS:
New Jersey:
Wayne Town Center, Wayne
(ground leased through 2064)
North Bergen (Tonnelle Avenue)
Totowa
Garfield
Bricktown
Hackensack
Bergen Town Center - East, Paramus
East Hanover (240 Route 10 West)
Cherry Hill
Jersey City
Middletown
Woodbridge
North Plainfield
(ground leased through 2060)
Marlton
Manalapan
East Rutherford
-
-
-
-
-
-
-
29,010 (2) The Home Depot, Dick's Sporting Goods, Marshalls
14,115 (2) Wal-Mart, Toys "R" Us
20,642 (2) Lowe's, P.C. Richard & Son
25,328 (2) Kohl's, Dick's Sporting Goods, P.C. Richard & Son,
T.J. Maxx
29,010 (2) The Home Depot
17,685 (2) Kohl's, Stop & Shop
21,033 (2) Wal-Mart
-
-
-
-
17,574 (2) Kohl's (3), ShopRite, PetSmart
21,423 (2) Best Buy, Bed Bath & Beyond, Babies "R" Us
13,836 (2) Lowe's
11,995 (2) Lowe's, LA Fitness (lease not commenced)
96,000 *
-
ShopRite
-
-
21,758 (2) Kohl's, ShopRite
13,389 (2) ShopRite, T.J. Maxx
128,000 *
-
-
-
-
11,548 (2) National Wholesale Liquidators
15,342 (2) BJ's Wholesale Club
10,879 (2) The Home Depot, PetSmart
100.0 %
100.0 %
13.33
213,000
209,000
100.0 %
100.0 %
15.98
208,000
206,000
4,000
2,000
100.0 %
100.0 %
34.22
197,000
42,000
155,000
East Brunswick (339-341 Route 18 South)
100.0 %
100.0 %
-
196,000
33,000
163,000
Bordentown
Morris Plains
Dover
Delran
100.0 %
80.4 %
7.25
179,000
83,000
100.0 %
97.2 %
20.59
177,000
176,000
100.0 %
88.1 %
11.96
173,000
167,000
100.0 %
7.2 %
-
171,000
40,000
Lodi (Route 17 North)
100.0 %
100.0 %
11.24
171,000
171,000
-
1,000
6,000
3,000
-
Watchung
Lawnside
100.0 %
93.9 %
23.74
170,000
54,000
116,000
100.0 %
100.0 %
14.11
145,000
142,000
3,000
35
ITEM 2.
PROPERTIES - Continued
%
Ownership
%
Occupancy
Weighted
Average
Annual Rent
PSF (1)
Square Feet
In Service
Under Development
Total
Property
Owned by
Company
Owned By
Tenant
or Not Available
for Lease
Encumbrances
(in thousands)
Major Tenants
Property
RETAIL PROPERTIES (Continued):
Hazlet
100.0 %
100.0 % $
2.64
123,000
123,000
-
Kearny
100.0 %
43.5 %
16.11
104,000
91,000
13,000
Lodi (Washington Street)
100.0 %
64.2 %
Carlstadt (ground leased through 2050)
100.0 %
90.7 %
East Hanover (200 Route 10 West)
100.0 %
86.0 %
Paramus (ground leased through 2033)
100.0 %
100.0 %
North Bergen (Kennedy Boulevard)
100.0 %
100.0 %
South Plainfield (ground leased through 2039)
100.0 %
85.9 %
Englewood
100.0 %
79.7 %
East Hanover (280 Route 10 West)
100.0 %
94.0 %
100.0 %
100.0 %
23.99
22.42
23.27
42.23
31.20
21.45
26.09
32.00
23.34
85,000
85,000
78,000
78,000
76,000
76,000
63,000
63,000
-
-
-
-
62,000
6,000
56,000
56,000
56,000
41,000
41,000
26,000
26,000
18,000
18,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
$
-
Stop & Shop
- Marshalls
8,940
Rite Aid
-
Stop & Shop
9,930 (2) Loehmann's
-
24 Hour Fitness
5,188 (2) Waldbaum's
5,216 (2) Staples
11,924 New York Sports Club
4,631 (2) REI
2,678 (2) Whole Foods Market
7,441,000
4,219,000
2,174,000
1,048,000
550,015
Montclair
Total New Jersey
New York:
Poughkeepsie
Bronx (Bruckner Boulevard)
Buffalo (Amherst)
Huntington
Rochester
Mt. Kisco
100.0 %
85.6 %
8.62
517,000
517,000
-
100.0 %
93.0 %
21.30
501,000
387,000
114,000
100.0 %
85.6 %
8.23
296,000
227,000
69,000
100.0 %
97.9 %
14.09
209,000
209,000
-
100.0 %
100.0 %
-
205,000
-
205,000
100.0 %
100.0 %
22.08
189,000
72,000
117,000
Freeport (437 East Sunrise Highway)
100.0 %
100.0 %
18.61
173,000
173,000
Staten Island
Albany (Menands)
New Hyde Park (ground and building
leased through 2029)
Inwood
100.0 %
94.2 %
21.47
165,000
165,000
100.0 %
74.0 %
9.00
140,000
140,000
100.0 %
100.0 %
18.73
101,000
101,000
100.0 %
97.9 %
21.00
100,000
100,000
-
-
-
-
-
36
-
-
-
-
-
-
-
-
-
-
-
- Kmart, Burlington Coat Factory, ShopRite, Hobby Lobby,
Christmas Tree Shops, Bob's Discount Furniture
- Kmart, Toys "R" Us, Key Food
-
BJ's Wholesale Club (lease not commenced),
T.J. Maxx, Toys "R" Us
16,960 (2) Kmart, Marshalls, Old Navy
4,463 (2) Wal-Mart
28,637
Target, A&P
21,758 (2) The Home Depot, Staples
16,939 Western Beef
-
-
Bank of America
Stop & Shop
-
Stop & Shop
ITEM 2.
PROPERTIES - Continued
Property
RETAIL PROPERTIES (Continued):
North Syracuse
(ground and building leased through 2014)
%
Ownership
%
Occupancy
Weighted
Average
Annual Rent
PSF (1)
Square Feet
In Service
Total
Property
Owned by
Company
Owned By
Tenant
Under
Development
or Not Available
for Lease
Encumbrances
(in thousands)
Major Tenants
100.0 %
100.0 % $
-
98,000
-
98,000
-
$
- Wal-Mart
West Babylon
100.0 %
83.9 %
Bronx (1750-1780 Gun Hill Road)
100.0 %
78.7 %
100.0 %
100.0 %
100.0 %
100.0 %
17.19
34.77
37.24
21.45
79,000
79,000
77,000
77,000
56,000
56,000
47,000
47,000
100.0 %
100.0 %
20.46
46,000
46,000
100.0 %
100.0 %
20.28
44,000
44,000
100.0 %
100.0 %
27.83
16,000
16,000
3,059,000
2,456,000
603,000
100.0 %
93.1 %
14.76
627,000 (3)
270,000
357,000 (3)
100.0 %
83.3 %
13.33
329,000 (3)
204,000
125,000 (3)
100.0 %
100.0 %
4.70
228,000
58,000
170,000
100.0 %
98.9 %
100.0 %
100.0 %
100.0 %
95.3 %
100.0 %
100.0 %
11.49
11.09
7.07
8.69
185,000
177,000
8,000
169,000
147,000
22,000
167,000
164,000
3,000
110,000
110,000
100.0 %
100.0 %
25.75
102,000
100.0 %
100.0 %
6.53
81,000
10,000
41,000
100.0 %
100.0 %
18.26
47,000
47,000
-
92,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Best Market
- ALDI, Planet Fitness, T.G.I. Friday's
- New York Sports Club, Devry
-
PetSmart
-
Best Buy
-
Bob's Discount Furniture
-
Party City
88,757
30,517 (2) Wal-Mart (3), ShopRite, Burlington Coat Factory,
T.J. Maxx, Dick's Sporting Goods
20,201
Target (3), Babies "R" Us, Ross Dress for Less
5,495 (2) Lowe's, Weis Markets
15,147 (2) Kohl's, Ross Dress for Less, Staples
10,879 (2) Giant Food (3), A.C. Moore, PetSmart
5,691 (2) Giant Food, Petco
5,300 (2) Ashley Furniture
6,974 (2) Wal-Mart
40,000 *
- Ollie's Bargain Outlet
-
-
PetSmart
Queens
Commack
(ground and building leased through 2021)
Dewitt
(ground leased through 2041)
Freeport (240 West Sunrise Highway)
(ground and building leased through 2040)
Oceanside
Total New York
Pennsylvania:
Allentown
Wilkes-Barre
Lancaster
Bensalem
Broomall
Bethlehem
York
Glenolden
Wilkes-Barre
(ground and building leased through 2014)
Springfield
(ground and building leased through 2025)
Total Pennsylvania
2,045,000
1,228,000
777,000
40,000
100,204
37
ITEM 2.
PROPERTIES - Continued
%
Ownership
%
Occupancy
Weighted
Average
Annual Rent
PSF (1)
Square Feet
In Service
Under Development
Total
Property
Owned by
Company
Owned By
Tenant
or Not Available
for Lease
Encumbrances
(in thousands)
Major Tenants
Beverly Connection, Los Angeles
100.0 %
90.1 %
35.45
335,000
335,000
Pasadena (ground leased through 2077)
100.0 %
86.5 %
27.32
131,000
131,000
100.0 %
94.5 % $
29.71
647,000 (3)
492,000
155,000 (3)
Walnut Creek (1149 South Main Street)
100.0 %
100.0 %
Property
RETAIL PROPERTIES (Continued):
California:
San Jose
San Francisco (2675 Geary Street)
(ground and building leased through 2053)
Signal Hill
Vallejo
(ground leased through 2043)
Walnut Creek (Mt. Diablo)
Total California
Massachusetts:
Chicopee
Springfield
Milford
(ground and building leased through 2019)
Cambridge
(ground and building leased through 2033)
Total Massachusetts
Maryland:
Baltimore (Towson)
Annapolis
(ground and building leased through 2042)
Rockville
Wheaton
(ground leased through 2060)
Total Maryland
-
-
-
-
-
-
-
100.0 %
100.0 %
50.34
55,000
55,000
100.0 %
100.0 %
100.0 %
100.0 %
95.0 %
100.0 %
24.08
17.51
45.11
70.00
45,000
45,000
45,000
45,000
29,000
29,000
7,000
7,000
1,294,000
1,139,000
155,000
100.0 %
100.0 %
-
224,000
-
224,000
100.0 %
97.8 %
16.39
182,000
33,000
149,000
100.0 %
100.0 %
8.01
83,000
83,000
100.0 %
100.0 %
21.31
48,000
48,000
-
-
537,000
164,000
373,000
100.0 %
97.8 %
15.57
155,000
155,000
100.0 %
100.0 %
8.99
128,000
128,000
100.0 %
84.4 %
100.0 %
100.0 %
23.13
14.94
94,000
66,000
94,000
66,000
443,000
443,000
-
-
-
-
-
38
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
$
104,856
Target (3), The Home Depot, Toys "R" Us, Best Buy
-
-
-
-
-
Target, Marshalls, Old Navy,
Nordstrom Rack, Ross Dress for Less
T.J. Maxx, Trader Joe's
Best Buy
Best Buy
Best Buy
-
Barnes & Noble
- Anthropologie
104,856
8,452 (2) Wal-Mart
5,830 (2) Wal-Mart
- Kohl's
-
PetSmart
14,282
15,900 (2) Shoppers Food Warehouse, h.h.gregg, Staples,
Home Goods, Golf Galaxy
-
The Home Depot
-
-
Regal Cinemas
Best Buy
15,900
%
Ownership
%
Occupancy
Weighted
Average
Annual Rent
PSF (1)
Square Feet
In Service
Under Development
Total
Property
Owned by
Company
Owned By
Tenant
or Not Available
for Lease
Encumbrances
(in thousands)
Major Tenants
ITEM 2.
PROPERTIES - Continued
Property
RETAIL PROPERTIES (Continued):
Connecticut:
Newington
Waterbury
Total Connecticut
Florida
Tampa (Hyde Park Village)
Michigan:
Roseville
Battle Creek
Midland (ground leased through 2043)
Total Michigan
Virginia:
Norfolk
(ground and building leased through 2069)
Tyson's Corner
(ground and building leased through 2035)
Total Virginia
Illinois:
Lansing
Arlington Heights
(ground and building leased through 2043)
Chicago
(ground and building leased through 2051)
Total Illinois
Texas:
San Antonio
(ground and building leased through 2041)
100.0 %
100.0 % $
100.0 %
100.0 %
14.45
15.02
188,000
43,000
145,000
148,000
143,000
5,000
336,000
186,000
150,000
75.0 %
75.9 %
20.28
264,000
264,000
100.0 %
100.0 %
5.43
119,000
119,000
100.0 %
100.0 %
-
83.6 %
-
8.97
47,000
31,000
47,000
31,000
197,000
197,000
100.0 %
100.0 %
6.44
114,000
114,000
100.0 %
100.0 %
39.13
38,000
38,000
152,000
152,000
100.0 %
100.0 %
100.0 %
100.0 %
10.00
9.00
47,000
46,000
47,000
46,000
100.0 %
100.0 %
12.03
41,000
41,000
100.0 %
100.0 %
10.63
43,000
43,000
134,000
134,000
Texarkana (ground leased through 2013)
100.0 %
100.0 %
4.39
31,000
31,000
Total Texas
Ohio:
Springdale
(ground and building leased through 2046)
Tennessee:
Antioch
100.0 %
-
-
47,000
47,000
74,000
74,000
100.0 %
100.0 %
7.66
45,000
45,000
39
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
$
11,437 (2) Wal-Mart, Staples
14,226 (2) ShopRite
25,663
19,126
Pottery Barn, CineBistro, Brooks Brothers,
Williams Sonoma, Lifestyle Family Fitness
JCPenney
PetSmart
-
-
-
-
-
BJ's Wholesale Club
-
Best Buy
-
-
-
Forman Mills
RVI
-
Best Buy
-
-
Best Buy
- Home Zone
-
-
-
Best Buy
%
Ownership
%
Occupancy
Weighted
Average
Annual Rent
PSF (1)
Square Feet
In Service
Under Development
Total
Property
Owned by
Company
Owned By
Tenant
or Not Available
for Lease
Encumbrances
(in thousands)
Major Tenants
ITEM 2.
PROPERTIES - Continued
Property
RETAIL PROPERTIES (Continued):
South Carolina:
Charleston
(ground leased through 2063)
Wisconsin:
Fond Du Lac
(ground leased through 2073)
New Hampshire:
Salem
(ground leased through 2102)
Kentucky:
Owensboro
(ground and building leased through 2046)
Iowa:
Dubuque
(ground leased through 2043)
CALIFORNIA SUPERMARKETS
Colton (1904 North Rancho Avenue)
100.0 %
100.0 % $
15.42
45,000
45,000
100.0 %
100.0 %
7.83
43,000
43,000
-
-
100.0 %
100.0 %
-
37,000
-
37,000
100.0 %
100.0 %
7.66
32,000
32,000
100.0 %
100.0 %
9.90
31,000
31,000
100.0 %
100.0 %
San Bernadino (1522 East Highland Avenue)
100.0 %
100.0 %
Riverside (5571 Mission Boulevard)
100.0 %
100.0 %
Mojave (ground leased through 2079)
100.0 %
100.0 %
Corona (ground leased through 2079)
100.0 %
100.0 %
Yucaipa
Barstow
Moreno Valley
San Bernadino (648 West 4th Street)
Desert Hot Springs
Rialto
Total California Supermarkets
Total Strip Shopping Centers
Vornado's Ownership Interest
100.0 %
100.0 %
100.0 %
100.0 %
100.0 %
-
100.0 %
100.0 %
100.0 %
100.0 %
100.0 %
100.0 %
4.44
7.23
4.97
6.55
7.76
4.13
7.15
-
6.74
5.61
5.74
73,000
40,000
39,000
34,000
33,000
31,000
30,000
30,000
30,000
29,000
29,000
73,000
40,000
39,000
34,000
33,000
31,000
30,000
30,000
30,000
29,000
29,000
398,000
398,000
-
$
-
Best Buy
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
PetSmart
-
Babies "R" Us
-
Best Buy
-
PetSmart
Stater Brothers
Stater Brothers
Stater Brothers
Stater Brothers
Stater Brothers
Stater Brothers
Stater Brothers
Stater Brothers
Stater Brothers
Stater Brothers
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
93.5 % $
17.40
16,654,000
11,297,000
4,269,000
93.6 % $
17.39
16,072,000
11,231,000
3,753,000
1,088,000
1,088,000
$
$
918,803
914,022
40
ITEM 2.
PROPERTIES - Continued
Property
RETAIL PROPERTIES (Continued):
REGIONAL MALLS:
Monmouth Mall, Eatontown, NJ
%
Ownership
%
Occupancy
Weighted
Average
Annual Rent
PSF (1)
Square Feet
In Service
Under Development
Total
Property
Owned by
Company
Owned By
Tenant
or Not Available
for Lease
Encumbrances
(in thousands)
Major Tenants
50.0 %
92.9 % $
36.01 (5)
1,462,000 (4)
850,000
612,000 (4)
-
$
171,796 Macy's (4), JCPenney (4), Lord & Taylor, Boscov's,
Loews Theatre, Barnes & Noble
Springfield Mall, Springfield, VA
97.5 %
100.0 %
15.73 (5)
1,408,000 (4)
294,000
31.38 (5)
1,136,000 (4)
760,000
390,000 (4)
376,000 (4)
724,000
- Macy's, JCPenney (4), Target (4)
-
85,180 Macy's, IKEA, Target (4), National Amusement
Broadway Mall, Hicksville, NY
Bergen Town Center - West, Paramus, NJ
100.0 %
100.0 %
88.6 %
98.9 %
47.53 (5)
948,000
897,000
31,000
20,000
282,312
Target, Century 21, Whole Foods Market, Marshalls,
Nordstrom Rack, Saks Off 5th, Bloomingdale's Outlet,
Nike Factory Store, Old Navy,
Neiman Marcus Last Call Studio, Blink Fitness
Montehiedra, Puerto Rico
100.0 %
89.1 %
41.27 (5)
540,000
540,000
-
Las Catalinas, Puerto Rico
100.0 %
87.6 %
58.54 (5)
494,000 (4)
355,000
139,000 (4)
Total Regional Malls
Vornado's Ownership Interest
Total Retail Space
Vornado's Ownership Interest
92.8 % $
40.94
5,988,000
3,696,000
1,548,000
92.7 % $
41.86
4,334,000
3,264,000
344,000
93.4 %
93.4 %
22,642,000
14,993,000
5,817,000
1,832,000
20,406,000
14,495,000
4,097,000
1,814,000
-
-
744,000
726,000
120,000
The Home Depot, Kmart, Marshalls,
Caribbean Theatres, Tiendas Capri
54,101 Kmart, Sears (4)
$
$
$
$
713,389
627,491
1,632,192
1,541,513
* We do not capitalize interest or real estate taxes on this space.
(1) Weighted Average Annual Rent PSF excludes ground rent, storage rent and garages.
(2) These encumbrances are cross-collateralized under a blanket mortgage in the amount of $633,180 as of December 31, 2012.
(3) The lease for these former Bradlees locations is guaranteed by Stop & Shop.
(4) Includes square footage of anchors who own the land and building.
(5) Weighted Average Annual Rent PSF shown is for mall tenants only.
41
ITEM 2.
PROPERTIES - Continued
Property
MERCHANDISE MART:
Illinois:
Merchandise Mart, Chicago
%
Ownership
%
Occupancy
Weighted
Average
Annual Rent
PSF (1)
Square Feet
Total
Property
In Service
Under Development
or Not Available
for Lease
Encumbrances
(in thousands)
Major Tenants
100.0 %
95.2 % $
30.45
3,553,000
3,553,000
-
$
550,000 Motorola Mobility / Google (lease not commenced),
American Intercontinental University (AIU),
Baker, Knapp & Tubbs, Royal Bank of Canada,
CCC Information Services, Ogilvy Group (WPP),
Chicago Teachers Union, Publicis Groupe,
Office of the Special Deputy Receiver, Holly Hunt Ltd.,
Razorfish, TNDP, Merchandise Mart Headquarters,
Steelcase, Chicago School of Professional Psychology
Other
Total Illinois
New York
7 West 34th Street
50.0 %
100.0 %
33.01
19,000
19,000
95.2 %
30.47
3,572,000
3,572,000
100.0 %
70.4 %
37.70
419,000
419,000
Total Merchandise Mart
Vornado's Ownership Interest
92.6 % $
31.22
3,991,000
3,991,000
92.6 % $
31.22
3,982,000
3,982,000
-
-
-
-
-
23,730
573,730
- Kurt Adler
$
$
573,730
561,865
(1) Weighted Average Annual Rent PSF excludes ground rent, storage rent and garages.
42
ITEM 2.
PROPERTIES - Continued
Property
555 CALIFORNIA STREET:
555 California Street
315 Montgomery Street
345 Montgomery Street
Total 555 California Street
Vornado's Ownership Interest
%
Ownership
%
Occupancy
Weighted
Average
Annual Rent
PSF (1)
Square Feet
Total
Property
In Service
Under Development
or Not Available
for Lease
Encumbrances
(in thousands)
70.0 %
91.7 % $
54.89
1,503,000
1,503,000
-
$
600,000
Major Tenants
Bank of America, Dodge & Cox,
Goldman Sachs & Co., Jones Day,
Kirkland & Ellis LLP, Morgan Stanley & Co. Inc.,
McKinsey & Company Inc., UBS Financial Services
70.0 %
70.0 %
100.0 %
100.0 %
41.49
90.46
228,000
228,000
64,000
64,000
93.1 % $
54.53
1,795,000
1,795,000
93.1 % $
54.53
1,257,000
1,257,000
-
-
-
-
-
-
Bank of America
Bank of America
$
$
600,000
420,000
(1) Weighted Average Annual Rent PSF excludes ground rent, storage rent and garages.
43
ITEM 2.
PROPERTIES - Continued
Property
WAREHOUSES:
NEW JERSEY
East Hanover - Five Buildings
Total Warehouses
Vornado's Ownership Interest
%
Ownership
%
Occupancy
Weighted
Average
Annual Rent
PSF (1)
Square Feet
Total
Property
In Service
Under Development
or Not Available
for Lease
Encumbrances
(in thousands)
Major Tenants
100.0 %
55.9 % $
4.34
942,000
942,000
55.9 % $
55.9 % $
4.34
4.34
942,000
942,000
942,000
942,000
-
$
-
-
$
$
- Foremost Groups Inc., Fidelity Paper & Supply Inc.,
Consolidated Simon Distributors Inc., Givaudan Flavors Corp.,
Meyer Distributing Inc., Gardner Industries Inc.
-
-
(1) Weighted Average Annual Rent PSF excludes ground rent, storage rent and garages.
44
ITEM 2.
PROPERTIES - Continued
Property
VORNADO CAPITAL PARTNERS
REAL ESTATE FUND:
New York, NY:
One Park Avenue
- Office
- Retail
Lucida, 86th Street and Lexington Avenue
(ground leased through 2082)
- Retail
- Residential
11 East 68th Street Retail
Crowne Plaza Times Square
- Hotel (795 Keys)
- Retail
- Office
501 Broadway
Washington, DC:
Fund
Ownership %
%
Occupancy
Weighted
Average
Annual Rent
PSF (1)
Square Feet
Total
Property
In Service
Under Development
or Not Available
for Lease
Encumbrances
(in thousands)
Major Tenants
64.7 %
64.7 %
64.7 %
94.9 % $
90.3 %
94.5 %
43.51
57.69
44.70
861,000
79,000
940,000
861,000
79,000
940,000
100.0 %
100.0 %
100.0 %
100.0 %
124.85
-
95,000
51,000
146,000
95,000
51,000
146,000
100.0 %
100.0 %
518.49
9,000
9,000
38.2 %
38.2 %
100.0 %
100.0 %
337.28
32.88
51.74
14,000
212,000
226,000
14,000
212,000
226,000
100.0 %
-
-
9,000
9,000
-
-
-
-
-
-
-
-
-
-
-
Coty Inc., New York University,
Public Service Mutual Insurance
Bank of Baroda, Citibank, Equinox One Park Avenue Inc.
$
250,000
Barnes & Noble, Hennes & Mauritz,
Sephora, Bank of America
100,000
27,790 Belstaff, Joseph Inc.
American Management Association
255,750
20,000
Georgetown Park Retail Shopping Center
50.0 %
100.0 %
33.06
313,000
113,000
200,000
50,006 Hennes & Mauritz, J. Crew
Washington Sports, Dean & Deluca, Anthropologie,
Santa Monica, CA:
520 Broadway
Culver City, CA:
800 Corporate Pointe
Miami, FL:
1100 Lincoln Road
100.0 %
67.2 %
47.31
112,000
112,000
100.0 %
44.0 %
30.59
243,000
243,000
100.0 %
97.6 %
62.65
127,000
127,000
-
-
-
Premier Office Centers LLC, Diversified Mercury Comm,
30,000 Four Media Company
Meredith Corp., West Publishing Corp., Symantec Corp.,
- Syska Hennessy Group
66,000 Regal Cinema, Anthropologie, Banana Republic
Total Real Estate Fund
Vornado's Ownership Interest
72.6 %
18.1 %
84.6 %
84.6 %
2,125,000
1,925,000
374,000
349,000
200,000
25,000
$
$
799,546
132,060
(1) Weighted Average Annual Rent PSF excludes ground rent, storage rent and garages.
45
NEW YORK
As of December 31, 2012, our New York segment consisted of 65 properties aggregating 27.1 million square feet, of which we
own 21.9 million square feet. The 21.9 million square feet is comprised of 16.8 million square feet of office space in 31 properties,
2.1 million square feet of retail space in 49 properties, four residential properties containing 1,655 units, the 1.4 million square foot
Hotel Pennsylvania, and our interest in Alexander’s, Inc. (“Alexander’s”). The New York segment also includes 11 garages totaling
1.7 million square feet (5,159 spaces) which are managed by, or leased to, third parties.
New York lease terms generally range from five to seven years for smaller tenants to as long as 20 years for major tenants, and
may provide for extension options at market rates. Leases typically provide for periodic step-ups in rent over the term of the lease and
pass through to tenants their share of increases in real estate taxes and operating expenses over a base year. Electricity is provided to
tenants on a sub-metered basis or included in rent based on surveys and adjusted for subsequent utility rate increases. Leases also
typically provide for free rent and tenant improvement allowances for all or a portion of the tenant’s initial construction costs of its
premises.
As of December 31, 2012, the occupancy rate for our New York segment was 96.2%. The statistics provided in the following
sections include information on the office and retail space.
Occupancy and weighted average annual rent per square foot:
Office:
Retail:
As of December 31,
2012
2011
2010
2009
2008
Rentable
Square Feet
16,751,000
16,598,000
15,348,000
15,331,000
15,266,000
Occupancy
Rate
95.9 %
96.2 %
96.1 %
97.1 %
98.0 %
As of December 31,
2012
2011
2010
2009
2008
Rentable
Square Feet
2,057,000
2,000,000
1,924,000
1,820,000
1,787,000
Occupancy
Rate
96.8 %
95.6 %
96.4 %
97.0 %
94.0 %
$
Weighted
Average Annual
Rent Per
Square Foot
60.17
58.70
56.14
55.54
55.00
$
Weighted
Average Annual
Rent Per
Square Foot
147.28
110.17
106.52
101.53
100.84
46
NEW YORK – CONTINUED
2012 rental revenue by tenants’ industry:
Industry
Office:
Financial Services
Legal Services
Communications
Insurance
Family Apparel
Technology
Publishing
Real Estate
Pharmaceutical
Government
Banking
Engineering, Architect & Surveying
Advertising / Marketing
Not-for-Profit
Health Services
Other
Retail:
Family Apparel
Department Stores
Women's Apparel
Luxury Retail
Home Entertainment & Electronics
Banking
Discount Stores
Restaurants
Other
Percentage
16 %
7 %
6 %
6 %
6 %
4 %
4 %
4 %
3 %
3 %
3 %
2 %
2 %
2 %
1 %
8 %
77 %
5 %
3 %
3 %
2 %
2 %
2 %
1 %
1 %
4 %
23 %
Total
100 %
Tenants accounting for 2% or more of revenues:
Tenant
AXA Equitable Life Insurance
Macy’s
Limited Brands
Ziff Brothers Investments, Inc.
McGraw-Hill Companies, Inc.
Square Feet
Leased
2012
Revenues
423,000
598,000
465,000
287,000
480,000
$
35,039,000
31,816,000
26,052,000
24,176,000
24,155,000
Percentage of
New York
Revenues
2.9 %
2.6 %
2.2 %
2.0 %
2.0 %
Percentage
of Total
Revenues
1.3 %
1.2 %
0.9 %
0.9 %
0.9 %
47
NEW YORK – CONTINUED
2012 Leasing Activity:
Office:
Location
One Penn Plaza
Two Penn Plaza
100 West 33rd Street
909 Third Avenue
350 Park Avenue
280 Park Avenue
150 East 58th Street
1290 Avenue of Americas
770 Broadway
888 Seventh Avenue
666 Fifth Avenue
866 United Nations Plaza
One Park Avenue
330 Madison Avenue
40 Fulton Street
595 Madison Avenue
57th Street
90 Park Avenue
689 Fifth Avenue
20 Broad Street
Total
Location
4 Union Square South
1540 Broadway
Manhattan Mall
692 Broadway
One Penn Plaza
330 Madison Avenue
280 Park Avenue
150 East 58th Street
666 Fifth Avenue
Two Penn Plaza
689 Fifth Avenue
155 Spring Street
350 Park Avenue
Total
Weighted Average
Initial Rent Per
Square Foot (1)
Square
Feet
371,000
232,000
225,000
224,000
132,000
126,000
83,000
83,000
80,000
76,000
64,000
53,000
53,000
37,000
25,000
24,000
21,000
15,000
15,000
11,000
1,950,000
Square
Feet
93,000
32,000
23,000
17,000
9,000
4,000
4,000
3,000
3,000
1,000
1,000
1,000
1,000
192,000
$
59.37
47.45
45.79
50.08
78.91
81.75
59.84
70.00
40.00
79.61
76.27
51.38
48.00
75.49
35.72
64.81
60.00
63.20
57.84
35.93
58.53
57.15
$
65.33
93.31
94.53
58.58
150.73
308.46
239.97
337.74
170.66
479.00
2,700.00
376.45
152.70
114.21
Vornado's share
1,754,000
Retail:
Weighted Average
Initial Rent Per
Square Foot (1)
Vornado's share
185,000
110.71
(1) Represents the cash basis weighted average starting rents per square foot, which is generally indicative of market rents. Most leases include free rent and
periodic step-ups in rent, which are not included in the initial cash basis rent per square foot leased, but are included in the GAAP basis straight-line rent per
square foot (see "Overview - Leasing Activity" of Management's Discussion and Analysis of Financial Condition and Results of Operations).
48
NEW YORK – CONTINUED
Lease expirations as of December 31, 2012, assuming none of the tenants exercise renewal options:
Year
Office:
Month to month
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
Retail:
Month to month
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
(1)
Number of
Square Feet of
Expiring Leases Expiring Leases
Percentage of
New York
Square Feet
Weighted Average Annual
Rent of Expiring Leases
Total
Per Square Foot
35
88
149
171
135
98
73
62
82
54
56
6
37
23
34
18
10
31
20
17
9
9
55,000
646,000
1,203,000 (1)
2,105,000
1,214,000
1,239,000
1,067,000
910,000
1,522,000
1,060,000
1,177,000
14,000
128,000
71,000
104,000
210,000
169,000
206,000
95,000
79,000
34,000
54,000
0.3 %
4.0 %
7.4 %
12.9 %
7.5 %
7.6 %
6.6 %
5.6 %
9.4 %
6.5 %
7.2 %
0.7 %
6.0 %
3.3 %
4.8 %
9.8 %
7.9 %
9.6 %
4.4 %
3.7 %
1.6 %
2.5 %
$
2,759,000 $
33,411,000
75,086,000
115,079,000
71,848,000
71,850,000
71,529,000
56,035,000
85,580,000
64,268,000
72,365,000
$
684,000 $
14,003,000
14,196,000
22,887,000
19,427,000
9,211,000
37,389,000
20,448,000
8,355,000
6,595,000
6,387,000
50.16
51.72
62.42
54.67
59.18
57.99
67.04
61.58
56.23
60.63
61.48
48.86
109.40
199.94
220.07
92.51
54.50
181.50
215.24
105.76
193.97
118.28
Excludes 492,000 square feet at 909 Third Avenue leased to the U.S. Post Office through 2038 (including five 5-year renewal options) for
which the annual escalated rent is $9.90 per square foot.
Alexander’s
As of December 31, 2012, we own 32.4% of the outstanding common stock of Alexander’s, which owns six properties in the
greater New York metropolitan area aggregating 2.2 million square feet, including 731 Lexington Avenue, the 1.3 million square foot
Bloomberg L.P. headquarters building. Alexander’s had $1.06 billion of outstanding debt at December 31, 2012, of which our pro
rata share was $345 million, none of which is recourse to us.
Hotel Pennsylvania
We own the Hotel Pennsylvania which is located in New York City on Seventh Avenue opposite Madison Square Garden and
consists of a hotel portion containing 1,000,000 square feet of hotel space with 1,700 rooms and a commercial portion containing
400,000 square feet of retail and office space.
2012
Year Ended December 31,
2010
2009
2011
2008
Hotel:
Average occupancy rate
Average daily rate
Revenue per available room
Commercial:
Office space:
89.1 %
151.22
134.81
$
$
89.1 %
$
$
150.91
134.43
$
$
83.2 %
71.5 %
84.1 %
143.28
119.23
$
$
133.20
95.18
$
$
171.32
144.01
Average occupancy rate
Weighted average annual rent per square foot $
33.4 %
17.32
$
33.4 %
$
13.49
33.4 %
7.52
$
30.4 %
20.54
$
30.4 %
18.78
Retail space:
Average occupancy rate
Weighted average annual rent per square foot $
64.3 %
27.19
$
63.0 %
$
29.01
62.3 %
31.42
$
70.7 %
35.05
$
69.5 %
41.75
49
WASHINGTON, DC
As of December 31, 2012, our Washington, DC segment consisted of 73 properties aggregating 19.1 million square feet, of which
we own 16.5 million square feet. The 16.5 million square feet is comprised of 13.6 million square feet of office space in 59
properties, seven residential properties containing 2,414 units, a hotel property, and 20.8 acres of undeveloped land. The Washington,
DC segment also includes 56 garages totaling approximately 8.9 million square feet (29,611 spaces) which are managed by or leased
to third parties.
Washington, DC office lease terms generally range from five to seven years for smaller tenants to as long as 15 years for major
tenants, and may provide for extension options at either pre-negotiated or market rates. Leases typically provide for periodic step-ups
in rent over the term of the lease and pass through to tenants, the tenants’ share of increases in real estate taxes and certain property
operating expenses over a base year. Periodic step-ups in rent are usually based upon either fixed percentage increases or the
consumer price index. Leases also typically provide for free rent and tenant improvement allowances for all or a portion of the tenant’s
initial construction costs of its premises.
As of December 31, 2012, the occupancy rate for our Washington DC segment was 84.1% and 33.0% of the occupied space was
leased to various agencies of the U.S. Government. The statistics provided in the following sections include information on the office
and residential space.
Occupancy and weighted average annual rent per square foot:
Office:
Residential:
As of December 31,
2012
2011
2010
2009
2008
As of December 31,
2012
2011
2010
2009
2008
Rentable
Square Feet
13,637,000
14,162,000
14,035,000
14,035,000
13,916,000
Number of
Units
2,414
2,414
2,414
2,075
1,866
Occupancy
Rate
81.2 %
89.3 %
94.8 %
94.9 %
95.1 %
Average
Occupancy
Rate
97.8 %
97.1 %
93.8 %
87.5 %
87.2 %
Weighted
Average Annual
Rent Per
Square Foot
41.57
$
40.80
39.65
38.46
37.12
Average Monthly
Rent Per Unit
2,077
$
1,992
1,752
1,805
1,503
2012 rental revenue by tenants’ industry:
Industry
U.S. Government
Government Contractors
Membership Organizations
Legal Services
Business Services
Manufacturing
Management Consulting Services
State and Local Government
Real Estate
Food
Health Services
Computer and Data Processing
Communication
Education
Television Broadcasting
Other
50
Percentage
33 %
19 %
6 %
4 %
4 %
3 %
3 %
2 %
2 %
2 %
2 %
2 %
2 %
1 %
1 %
14 %
100 %
WASHINGTON, DC – CONTINUED
Tenants accounting for 2% or more of revenues:
Tenant
U.S. Government
Family Health International
Boeing
Lockheed Martin
2012 Leasing Activity:
Square Feet
Leased
3,763,000
456,000
377,000
347,000
$
2012
Revenues
165,076,000
18,444,000
16,610,000
13,625,000
Percentage of
Washington, DC
Revenues
29.8 %
3.3 %
3.0 %
2.5 %
Percentage
of Total
Revenues
6.0 %
0.7 %
0.6 %
0.5 %
Weighted Average
Initial Rent Per
Square Foot (1)
Location
2011-2451 Crystal Drive
S. Clark Street / 12th Street
Skyline Place / One Skyline Tower
1550-1750 Crystal Drive / 241-251 18th Street
Democracy Plaza One
Warner
1800, 1851 and 1901 South Bell Street
2200 / 2300 Clarendon Blvd (Courthouse Plaza)
1750 Pennsylvania Avenue, NW
2001 Jefferson Davis Highway and 223 23rd Street / 2221 South
Clark Street
Commerce Executive
1101 17th Street, NW
1726 M Street, NW
1730 M Street, NW
1150 17th Street, NW
2101 L Street, NW
Universal Buildings (1825 - 1875 Connecticut Avenue, NW)
2100 / 2200 Crystal Drive (Crystal Plaza 3 & 4)
Partially Owned Entities
Total
Vornado's share
Square
Feet
340,000
270,000
235,000
214,000
163,000
148,000
102,000
100,000
99,000
53,000
48,000
39,000
29,000
19,000
19,000
14,000
10,000
3,000
206,000
2,111,000
1,901,000
42.69
39.01
34.11
39.16
32.27
69.70
40.94
41.12
47.00
36.78
32.13
43.75
39.49
42.65
39.96
47.00
43.41
43.00
41.19
41.49
40.55
____________________
(1) Represents the cash basis weighted average starting rents per square foot, which is generally indicative of market rents. Most leases include free rent and
periodic step-ups in rent, which are not included in the initial cash basis rent per square foot leased, but are included in the GAAP basis straight-line rent per
square foot (see "Overview - Leasing Activity" of Management's Discussion and Analysis of Financial Condition and Results of Operations).
51
WASHINGTON, DC – CONTINUED
Lease expirations as of December 31, 2012, assuming none of the tenants exercise renewal options:
Year
Month to month
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
Number of
Square Feet of
Expiring Leases Expiring Leases
180,000
839,000
1,425,000
1,488,000
1,103,000
625,000
950,000
1,073,000
586,000
816,000
931,000
30
158
147
142
101
67
68
42
40
19
28
$
Percentage of
Washington, DC
Square Feet
1.7 %
8.1 %
13.7 %
14.3 %
10.6 %
6.0 %
9.2 %
10.3 %
5.6 %
7.9 %
9.0 %
Weighted Average Annual
Rent of Expiring Leases
Total
6,073,000 $
33,980,000
55,149,000
60,412,000
47,025,000
24,260,000
39,928,000
44,566,000
29,496,000
35,268,000
40,834,000
Per Square Foot
33.74
40.49
38.70
40.60
42.64
38.83
42.01
41.54
50.35
43.24
43.87
Base Realignment and Closure (“BRAC”)
Our Washington, DC segment was and continues to be impacted by the BRAC statute, which requires the Department of
Defense (“DOD”) to relocate from 2,395,000 square feet in our buildings in the Northern Virginia area to government owned military
bases. The table below summarizes the effects of BRAC on our Washington, DC segment for square feet leased by the DOD. See
page 80 for the impact on 2012 EBITDA and the estimated impact on 2013 EBITDA.
Resolved:
Relet as of December 31, 2012
Leases pending
Taken out of service for redevelopment
To Be Resolved:
Vacated as of December 31, 2012
Expiring in:
2013
2014
2015
Rent Per
Square Foot
$
39.76
45.00
Square Feet
Total
Crystal City
Skyline
Rosslyn
521,000
24,000
348,000
893,000
380,000
24,000
348,000
752,000
88,000
-
-
88,000
53,000
-
-
53,000
35.77
37.39
32.49
43.04
1,002,000
519,000
473,000
10,000
126,000
304,000
70,000
1,502,000
-
103,000
65,000
687,000
43,000
201,000
5,000
722,000
83,000
-
-
93,000
Total square feet subject to BRAC
2,395,000
1,439,000
810,000
146,000
In the first quarter of 2012, we notified the lender that due to scheduled lease expirations resulting primarily from the effects of
the BRAC statute, the Skyline properties had a 26% vacancy rate and rising (49.8% as of December 31, 2012) and, accordingly, cash
flows are expected to decrease. As a result, our subsidiary that owns these properties does not have and is not expected to have for
some time sufficient funds to pay all of its current obligations, including interest payments to the lender. Based on the projected
vacancy and the significant amount of capital required to re-tenant these properties, at our request, the mortgage loan was transferred
to the special servicer. In the second quarter of 2012, we entered into a forbearance agreement with the special servicer to apply cash
flows of the property, before interest on the loan, towards the repayment of $4,000,000 of tenant improvements and leasing
commissions we funded in connection with a new lease at these properties, which was repaid in the third quarter. The forbearance
agreement was amended January 31, 2013, to extend its maturity through April 1, 2013 and provides for interest shortfalls to be
deferred and added to the principal balance of the loan and not give rise to a loan default. As of December 31, 2012, the deferred
interest amounted to $26,957,000. We continue to negotiate with the special servicer to restructure the terms of the loan.
52
RETAIL PROPERTIES
As of December 31, 2012, our Retail Properties segment consisted of 120 retail properties, of which 114 are strip shopping
centers and single tenant retail assets located primarily in the Northeast, Mid-Atlantic and California and six are regional malls located
in New York, New Jersey, Virginia and San Juan, Puerto Rico. Our strip shopping centers and malls are generally located on major
highways in mature, densely populated areas, and therefore attract consumers from a regional, rather than a neighborhood market
place.
Retail Properties’ lease terms generally range from five years or less in some instances for smaller tenants to as long as 25 years
for major tenants. Leases generally provide for reimbursements of real estate taxes, insurance and common area maintenance charges
(including roof and structure in strip shopping centers, unless it is the tenant’s direct responsibility), and percentage rents based on
tenant sales volume. Percentage rents accounted for less than 1% of the Retail Properties total revenues during 2012.
Strip Shopping Centers
Our strip shopping centers contain an aggregate of 15.6 million square feet, of which we own 15.0 million square feet. These
properties are substantially (approximately 70%) leased to large stores (over 20,000 square feet). Tenants include destination retailers
such as discount department stores, supermarkets, home improvement stores, discount apparel stores and membership warehouse
clubs. Tenants typically offer basic consumer necessities such as food, health and beauty aids, moderately priced clothing, building
materials and home improvement supplies, and compete primarily on the basis of price and location.
Regional Malls
The Monmouth Mall in Eatontown, New Jersey, in which we own a 50% interest, contains 1.5 million square feet and is anchored
by Macy’s, Lord & Taylor, JC Penney and Boscov’s, three of which own their stores aggregating 612,000 square feet.
The Springfield Mall in Springfield, Virginia, contains 1.4 million square feet and is anchored by Macy’s, JC Penney and Target,
two of which own their stores aggregating 390,000 square feet. We have commenced the renovation of the mall, which is expected to
be substantially completed in 2014.
The Broadway Mall in Hicksville, Long Island, New York contains 1.1 million square feet and is anchored by Macy’s, Ikea,
National Amusement and Target, two of which owns its store aggregating 376,000 square feet.
The Bergen Town Center in Paramus, New Jersey contains 948,000 square feet and is anchored by Century 21, Whole Foods
Market and Target.
The Montehiedra Mall in San Juan, Puerto Rico contains 540,000 square feet and is anchored by The Home Depot, Kmart and
Marshalls.
The Las Catalinas Mall in San Juan, Puerto Rico, contains 494,000 square feet and is anchored by Kmart and Sears, which owns
its 139,000 square foot store.
53
RETAIL PROPERTIES – CONTINUED
As of December 31, 2012, the occupancy rate for the Retail Properties segment was 93.4%. The statistics provided in the
following sections includes information on the Strip Shopping Centers and Regional Malls.
Occupancy and weighted average annual rent per square foot:
Strip Shopping Centers:
As of December 31,
2012
2011
2010
2009
2008
Rentable
Square Feet
14,984,000
15,012,000
15,135,000
14,373,000
13,629,000
Occupancy
Rate
93.6 %
93.3 %
92.6 %
92.4 %
93.4 %
$
Weighted Average
Annual Net Rent
Per Square Foot
17.39
17.08
16.26
15.63
14.97
Regional Malls:
As of December 31,
2012
2011
2010
2009
2008
Rentable
Square Feet
3,608,000
3,800,000
3,653,000
3,607,000
3,426,000
Weighted Average Annual
Net Rent Per Square Foot
Mall and
Anchor
Tenants
Occupancy
Rate
92.7 % $
92.7 %
92.8 %
92.9 %
94.7 %
Mall
Tenants
41.86
37.68
38.08
38.11
35.75
$
22.46
21.98
22.77
21.72
21.25
54
RETAIL PROPERTIES – CONTINUED
2012 rental revenue by type of retailer
Industry
Discount Stores
Supermarkets
Home Improvement
Restaurants
Family Apparel
Home Entertainment and Electronics
Banking and Other Business Services
Personal Services
Home Furnishings
Women's Apparel
Sporting Goods, Toys and Hobbies
Membership Warehouse Clubs
Other
Percentage
18 %
10 %
10 %
8 %
7 %
6 %
4 %
4 %
4 %
4 %
4 %
2 %
19 %
100 %
Tenants accounting for 2% or more of revenues:
Tenant
The Home Depot
Wal-Mart
Stop & Shop / Koninklijke Ahold NV
Best Buy
Lowe's
The TJX Companies, Inc.
Kohl's
Sears Holding Company (Kmart Corp. and Sears Corp.)
Square Feet
Leased
1,135,000
1,426,000
633,000
575,000
976,000
588,000
610,000
637,000
$
2012
Revenues
23,037,000
17,143,000
15,868,000
13,567,000
12,666,000
11,285,000
8,589,000
8,084,000
Percentage of
Retail Properties
Revenues
5.8 %
4.4 %
4.0 %
3.4 %
3.2 %
2.9 %
2.2 %
2.1 %
Percentage of
Total
Revenues
0.8 %
0.6 %
0.6 %
0.5 %
0.5 %
0.4 %
0.3 %
0.3 %
55
RETAIL PROPERTIES – CONTINUED
2012 Leasing Activity:
Strip Shopping Centers:
Location
Lodi (Route 17 North), NJ
Totowa, NJ
Poughkeepsie, NY
Inwood, NY
Manalapan, NJ
Pasadena, CA
Tampa (Hyde Park Village), FL
North Bergen (Kennedy Blvd), NJ
West Babylon, NY
Morris Plains, NJ
Hackensack, NJ
Charleston, SC
South Plainfield , NJ
Lodi (Washington Street), NJ
Wilkes-Barre, PA
Beverly Connection, Los Angeles, CA
Barstow, CA
Towson, MD
Bricktown, NJ
Dover, NJ
Garfield, NJ
Bethlehem, PA
Huntington, NY
Allentown, PA
Union, NJ
Queens, NY
East Brunswick (325 - 333 Route 18 South), NJ
Other
Total
Vornado's share
Regional Malls:
Location
Monmouth Mall, Eatontown, NJ
Broadway Mall, Hicksville, NY
Montehiedra, Puerto Rico
Bergen Town Center, Paramus, NJ
Las Catalinas Mall, Puerto Rico
Total
Vornado's share
Weighted Average
Square Feet
171,000
114,000
81,000
66,000
64,000
61,000
57,000
56,000
47,000
46,000
46,000
45,000
35,000
31,000
31,000
30,000
30,000
26,000
13,000
12,000
25,000
23,000
17,000
17,000
12,000
12,000
10,000
98,000
1,276,000
1,276,000
Initial Rent Per
Square Foot (1)
$
11.44
13.32
14.10
16.45
14.85
26.32
20.37
11.42
13.45
18.94
24.72
14.19
21.53
23.40
6.60
39.57
7.15
19.30
34.27
12.51
17.00
11.94
22.61
16.35
29.81
44.18
24.20
30.14
18.65
18.65
Weighted Average
Initial Rent Per
Square Foot (1)
Square Feet
91,000
22,000
17,000
11,000
5,000
146,000
101,000
28.40
46.35
23.12
50.82
124.63
35.31
38.45
(1) Represents the cash basis weighted average starting rents per square foot, which is generally indicative of market rents. Most leases include free rent and
periodic step-ups in rent, which are not included in the initial cash basis rent per square foot leased, but are included in the GAAP basis straight-line rent per
square foot (see "Overview - Leasing Activity" of Management's Discussion and Analysis of Financial Condition and Results of Operations).
56
RETAIL PROPERTIES – CONTINUED
Lease expirations as of December 31, 2012, assuming none of the tenants exercise renewal options:
Year
Strip Shopping Centers:
Month to month
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
Regional Malls:
Month to month
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
Number of
Square Feet of
Expiring Leases Expiring Leases
Percentage of
Retail Properties
Square Feet
Weighted Average Annual
Net Rent of Expiring Leases
Total
Per Square Foot
15
79
94
66
70
66
78
47
29
40
49
18
30
38
33
42
26
28
25
21
18
10
67,000
608,000
1,279,000
588,000
771,000
549,000
1,613,000
999,000
787,000
653,000
961,000
58,000
84,000
180,000
186,000
117,000
348,000
67,000
89,000
94,000
414,000
48,000
0.4 %
3.6 %
7.7 %
3.5 %
4.6 %
3.3 %
9.7 %
6.0 %
4.7 %
3.9 %
5.8 %
0.3 %
0.5 %
1.1 %
1.1 %
0.7 %
2.1 %
0.4 %
0.5 %
0.6 %
2.5 %
0.3 %
$
$
1,295,000 $
9,834,000
15,590,000
12,473,000
11,516,000
9,252,000
24,907,000
18,518,000
10,095,000
11,271,000
12,071,000
1,981,000 $
3,959,000
4,807,000
5,582,000
4,820,000
2,879,000
3,599,000
4,480,000
4,025,000
5,492,000
1,845,000
19.37
16.17
12.19
21.20
14.94
16.86
15.44
18.54
12.82
17.25
12.57
34.33
47.20
26.73
29.95
41.10
8.28
53.72
50.52
42.92
13.27
38.75
57
MERCHANDISE MART
As of December 31, 2012, our Merchandise Mart segment consisted of the 3.5 million square foot Merchandise Mart in Chicago,
7 West 34th Street in New York City and 4 garages in Chicago totaling 558,000 square feet (1,681 spaces).
In 2012, we sold four properties and the Canadian Trade Shows for an aggregate of $456,400,000, which resulted in a net gain
aggregating $79,820,000.
In July 2012, we leased 572,000 square feet at the Merchandise Mart to Motorola Mobility, owned by Google, as their Corporate
headquarters for a 15-year term. In the first quarter of 2013, Motorola Mobility took possession of three floors aggregating 495,000
square feet and will take possession of the remaining space in the second quarter. As a result of this lease, the office component of the
building was increased to approximately 50%.
In 2014, 7 West 34th Street (currently a showroom building), will be converted to an office building and will be transferred to our
New York segment.
As a result of certain recent organizational changes and asset sales in 2012, the Merchandise Mart segment no longer meets the
criteria for it to be a separate reportable segment; accordingly, effective January 1, 2013, it will be reclassified to our Other segment.
In 2010, two of our wholly owned subsidiaries entered into agreements with Cuyahoga County, Ohio (the “County”) to develop
and operate the Cleveland Medical Mart and Convention Center (the “Facility”), a 1,000,000 square foot showroom, trade show and
conference center in Cleveland’s central business district. The County is funding the development of the Facility, using the proceeds
it received from the issuance of general obligation bonds and other sources, up to the development budget of $418,000,000 and
maintains effective control of the property. During the 17-year development and operating period, our subsidiaries will receive net
settled payments of approximately $10,000,000 per year, which are net of a $36,000,000 annual obligation to the County. Our
subsidiaries’ obligation has been pledged by the County to the bondholders, but is payable by our subsidiaries only to the extent that
they first receive at least an equal payment from the County. Construction of the Facility is expected to be completed in 2013. As of
December 31, 2012, $379,658,000 of the $418,000,000 development budget was expended.
As of December 31, 2012, the occupancy rate for the Merchandise Mart segment was 92.6%. The statistics provided in the
following sections include information on the office and showroom spaces.
Square feet by location and use as of December 31, 2012:
(Amounts in thousands)
Showroom
Total
Office
Total
Permanent
Temporary
Trade Show
Retail
Chicago, Illinois:
Merchandise Mart
Other
Total Chicago, Illinois
New York, New York:
7 West 34th Street
Total Merchandise Mart Properties
3,553
10
3,563
419
3,982
1,615
-
1,615
52
1,667
1,853
-
1,853
367
2,220
1,467
-
1,467
363
1,830
386
-
386
4
390
85
10
95
-
95
Merchandise Mart lease terms generally range from three to seven years for smaller tenants to as long as 15 years for major
tenants. Leases typically provide for periodic step-ups in rent over the term of the lease and pass through to tenants their share of
increases in real estate taxes and operating expenses over a base year. Electricity is provided to tenants on a sub-metered basis or
included in rent and adjusted for subsequent utility rate increases. Leases also typically provide for tenant improvement allowances for
all or a portion of the tenant’s initial construction of its premises.
The showrooms provide manufacturers and wholesalers with permanent and temporary space in which to display products for
buyers, specifiers and end users. The showrooms are also used for participating in trade shows for the contract furniture, casual
furniture, gift, carpet, crafts, apparel and design industries.
58
MERCHANDISE MART – CONTINUED
Occupancy and weighted average annual rent per square foot:
Office:
As of December 31,
2012
2011
2010
2009
2008
As of December 31,
2012
2011
2010
2009
2008
Rentable
Square Feet
1,667,000
1,129,000
1,043,000
1,054,000
1,058,000
Rentable
Square Feet
2,220,000
2,715,000
2,802,000
2,792,000
2,789,000
Occupancy Rate
90.0%
90.1%
90.9%
93.5%
94.2%
Occupancy Rate
94.7%
89.8%
95.0%
93.9%
96.4%
Weighted
Average Annual
Rent Per
Square Foot
24.70
$
24.18
23.50
21.84
21.91
Weighted
Average Annual
Rent Per
Square Foot
33.76
$
33.70
33.55
33.24
32.93
Showroom:
2012 rental revenues by tenants’ industry:
Office:
Industry
Advertising and Marketing
Business Services
Education
Insurance
Banking
Health Care
Telecommunications
Government
Other
Industry
Contract Furnishing
Residential Design
Gift
Casual Furniture
Apparel
Building Products
Percentage
24 %
22 %
21 %
11 %
7 %
5 %
3 %
1 %
6 %
100 %
Percentage
30 %
23 %
20 %
12 %
10 %
5 %
100 %
Showroom:
Tenants accounting for 2% or more of revenues:
Tenant
CCC Information Systems
WPP
Square Feet
Leased
2012
Revenues
109,000
102,000
$
3,141,000
2,826,000
Percentage of
Merchandise Mart
Revenues
2.4 %
2.1 %
Percentage
of Total
Revenues
0.1 %
0.1 %
59
MERCHANDISE MART – CONTINUED
2012 Leasing Activity:
In 2012, we leased 593,000 square feet of office space at a weighted average initial rent of $32.97 per square foot and 380,000
square feet of showroom space at an average initial rent of $38.67 per square foot.
Lease expirations as of December 31, 2012, assuming none of the tenants exercise renewal options:
Weighted Average Annual
Rent of Expiring Leases
Total
40,000 $
462,000
53,000
1,457,000
2,717,000
-
3,873,000
-
4,145,000
5,430,000
3,315,000
Per Square Foot
20.86
24.44
27.05
31.88
28.35
-
28.81
-
32.39
28.24
27.48
Weighted Average Annual
Rent of Expiring Leases
Total
1,591,000 $
9,234,000
7,392,000
7,534,000
7,591,000
12,088,000
6,785,000
3,706,000
2,531,000
3,535,000
1,959,000
Per Square Foot
40.86
42.47
40.81
38.02
38.00
38.31
37.66
42.83
44.78
37.10
37.86
Office:
Year
Month to month
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
Showroom:
Year
Month to month
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
Number of
Square Feet of
Expiring Leases Expiring Leases
2,000
19,000
2,000
46,000
96,000
-
134,000
-
128,000
192,000
121,000
2
9
2
5
3
-
3
-
2
3
2
Number of
Square Feet of
Expiring Leases Expiring Leases
39,000
217,000
181,000
198,000
200,000
316,000
180,000
87,000
57,000
95,000
52,000
11
84
72
100
43
56
25
21
15
13
7
$
$
Percentage of
Merchandise Mart
Office
Square Feet
0.1%
1.3%
0.1%
3.0%
6.4%
-
9.0%
-
8.5%
12.8%
8.0%
Percentage of
Merchandise Mart
Showroom
Square Feet
1.9%
10.3%
8.6%
9.4%
9.5%
15.0%
8.6%
4.1%
2.7%
4.5%
2.5%
60
TOYS “R” US, INC. (“TOYS”)
As of December 31, 2012 we own a 32.6% interest in Toys, a worldwide specialty retailer of toys and baby products, which has a
significant real estate component. Toys had $5.7 billion of outstanding debt at October 27, 2012, of which our pro rata share was $1.9
billion, none of which is recourse to us.
The following table sets forth the total number of stores operated by Toys as of December 31, 2012:
Total
Owned
Building
Owned on
Leased
Ground
288
78
366
224
26
250
875
651
1,526
155
1,681
Leased
363
547
910
Domestic
International
Total Owned and Leased
Franchised Stores
Total
OTHER INVESTMENTS
555 California Street
As of December 31, 2012, we own a 70% controlling interest in a three-building office complex containing 1.8 million square
feet, known as the Bank of America Center, located at California and Montgomery Streets in San Francisco’s financial district (“555
California Street”). 555 California Street is encumbered by a $600,000,000 mortgage loan that bears interest at a fixed rate of 5.10%
and matures in September 2021.
555 California Street lease terms generally range from five to seven years for smaller tenants to as long as 15 years for major
tenants, and may provide for extension options at market rates. Leases typically provide for periodic step-ups in rent over the term of
the lease and pass through to tenants their share of increases in real estate taxes and operating expenses over a base year. Leases also
typically provide for tenant improvement allowances for all or a portion of the tenant’s initial construction costs of its premises.
Occupancy and weighted average annual rent per square foot as of December 31, 2012:
As of
December 31,
2012
2011
2010
2009
2008
Rentable
Square Feet
1,257,000
1,257,000
1,257,000
1,256,000
1,252,000
Occupancy Rate
93.1%
93.1%
93.0%
94.8%
94.0%
Weighted Average
Annual Rent
Per Square Foot
54.53
$
54.40
55.97
57.25
57.98
2012 rental revenue by tenants’ industry:
Industry
Finance
Banking
Legal Services
Other
Percentage
42 %
41 %
15 %
2 %
100 %
61
OTHER INVESTMENTS – CONTINUED
555 California Street - continued
Tenants accounting for 2% or more of revenues:
Tenant
Bank of America
UBS Financial Services
Morgan Stanley & Company, Inc.
Kirkland & Ellis LLP
Goldman Sachs & Co.
Dodge & Cox
McKinsey & Company Inc.
Jones Day
KKR Financial LLC
Sidley Austin LLP
Square
Feet Leased
2012
Revenues
650,000 $
106,000
121,000
125,000
90,000
62,000
54,000
81,000
51,000
48,000
34,840,000
6,960,000
6,668,000
6,125,000
4,762,000
3,907,000
3,907,000
3,366,000
3,119,000
1,952,000
Percentage of
555 California
Street's
Revenues
37.2 %
7.4 %
7.1 %
6.5 %
5.1 %
4.2 %
4.2 %
3.6 %
3.3 %
2.1 %
Percentage of
Total
Revenues
1.3 %
0.3 %
0.2 %
0.2 %
0.2 %
0.1 %
0.1 %
0.1 %
0.1 %
0.1 %
Lexington Realty Trust (“Lexington”)
As of December 31, 2012, we own 10.5% of the outstanding common shares of Lexington, which has interests in 220 properties,
encompassing approximately 42.1 million square feet across 42 states, generally net-leased to major corporations. Lexington had
approximately $2.0 billion of outstanding debt at December 31, 2012, of which our pro rata share was $209 million, none of which is
recourse to us.
Vornado Capital Partners Real Estate Fund (the “Fund”)
As of December 31, 2012, the Fund has nine investments with an aggregate fair value of approximately $600,786,000, or
$67,642,000 in excess of its cost, and has remaining unfunded commitments of $217,676,000, of which our share is $54,419,000.
62
ITEM 3. LEGAL PROCEEDINGS
We are from time to time involved in legal actions arising in the ordinary course of business. In our opinion, after consultation
with legal counsel, the outcome of such matters, including the matter referred to below, is not expected to have a material adverse
effect on our financial position, results of operations or cash flows.
In 2003, Stop & Shop filed an action against us in the New York Supreme Court, claiming that we had no right to reallocate and
therefore continue to collect $5,000,000 ($6,000,000 beginning February 1, 2012) of annual rent from Stop & Shop pursuant to a
Master Agreement and Guaranty, because of the expiration of the leases to which the annual rent was previously allocated. Stop &
Shop asserted that an order of the Bankruptcy Court for the Southern District of New York, as modified on appeal by the District
Court, froze our right to reallocate and effectively terminated our right to collect the annual rent from Stop & Shop. We asserted a
counterclaim seeking a judgment for all of the unpaid annual rent accruing through the date of the judgment and a declaration that
Stop & Shop will continue to be liable for the annual rent as long as any of the leases subject to the Master Agreement and Guaranty
remain in effect. A trial was held in November 2010. On November 7, 2011, the Court determined that we had a continuing right to
allocate the annual rent to unexpired leases covered by the Master Agreement and Guaranty, and directed entry of a judgment in our
favor ordering Stop & Shop to pay us the unpaid annual rent accrued through February 28, 2011 in the amount of $37,422,000, a
portion of the annual rent due from March 1, 2011 through the date of judgment, interest, and attorneys’ fees. On December 16, 2011,
a money judgment based on the Court’s decision was entered in our favor in the amount of $56,597,000 (including interest and costs).
Stop & Shop appealed the Court’s decision and the judgment and posted a bond to secure payment of the judgment. On January 12,
2012, we commenced a new action against Stop & Shop seeking recovery of $2,500,000 of annual rent not included in the money
judgment, plus additional annual rent as it accrues. At December 31, 2012, we had a $47,900,000 receivable from Stop & Shop,
which is included as a component of “tenant and other receivables” on our consolidated balance sheet. On February 6, 2013, we
received $124,000,000 pursuant to a settlement agreement with Stop & Shop. The settlement terminates our right to receive
$6,000,000 of additional annual rent under the 1992 agreement, for a period potentially through 2031. As a result of this settlement,
we collected the aforementioned $47,900,000 receivable and will recognize approximately $59,000,000 of net income in the first
quarter of 2013.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
63
PART II
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND
ISSUER PURCHASES OF EQUITY SECURITIES
Vornado’s common shares are traded on the New York Stock Exchange under the symbol “VNO.”
Quarterly high and low sales prices of the common shares and dividends paid per common share for the years ended December
31, 2012 and 2011 were as follows:
Year Ended
December 31, 2012
Quarter
High
Low
Dividends
High
Year Ended
December 31, 2011
Low
Dividends
1st
2nd
3rd
4th
$
$
86.21
88.50
86.56
82.50
$
75.17
78.56
79.50
72.64
0.69
0.69
0.69
1.69 (1)
$
$
$
93.53
98.42
98.77
84.30
82.12
86.85
72.85
68.39
0.69
0.69
0.69
0.69
(1) Comprised of a regular quarterly dividend of $0.69 per share and a special long-term capital gain dividend of $1.00
per share.
On January 17, 2013, we increased our quarterly common dividend to $0.73 per share (a new indicated annual rate of $2.92 per
share). As of February 1, 2013, there were 1,206 holders of record of our common shares.
Recent Sales of Unregistered Securities
During the fourth quarter of 2012, we issued 46,047 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 this Annual Report on Form 10-K and such information is incorporated by reference herein.
Recent Purchases of Equity Securities
None
64
Performance Graph
The following graph is a comparison of the five-year cumulative return of our common shares, the Standard & Poor’s 500 Index
(the “S&P 500 Index”) and the National Association of Real Estate Investment Trusts’ (“NAREIT”) All Equity Index, a peer group
index. The graph assumes that $100 was invested on December 31, 2007 in our common shares, the S&P 500 Index and the NAREIT
All Equity Index and that all dividends were reinvested without the payment of any commissions. There can be no assurance that the
performance of our shares will continue in line with the same or similar trends depicted in the graph below.
2007
2008
2009
2010
2011
2012
Vornado Realty Trust
S&P 500 Index
The NAREIT All Equity Index
$
100 $
100
100
72 $
63
62
89 $
80
80
110 $
92
102
105 $
94
110
114
109
132
65
ITEM 6. SELECTED FINANCIAL DATA
(Amounts in thousands, except per share amounts)
Operating Data:
Revenues:
Property rentals
Tenant expense reimbursements
Cleveland Medical Mart development project
Fee and other income
Total revenues
Expenses:
Operating
Depreciation and amortization
General and administrative
Cleveland Medical Mart development project
Impairment losses, acquisition related costs
and tenant buy-outs
Total expenses
Operating income
Income applicable to Toys "R" Us
Income (loss) from partially owned entities
Income (loss) from Real Estate Fund
Interest and other investment (loss) income, net
Interest and debt expense
Net gain (loss) on extinguishment of debt
Net gain on disposition of wholly owned and partially
owned assets
Income (loss) before income taxes
Income tax (expense) benefit
Income from continuing operations
Income from discontinued operations
Net income
Less net (income) loss attributable to noncontrolling interests in:
Consolidated subsidiaries
Operating Partnership
Preferred unit distributions of the Operating Partnership
Net income attributable to Vornado
Preferred share dividends
Discount on preferred share and unit redemptions
Net income attributable to common shareholders
Per Share Data:
Income (loss) from continuing operations, net - basic
Income (loss) from continuing operations, net - diluted
Net income per common share - basic
Net income per common share - diluted
Dividends per common share
$
$
2012
Year Ended December 31,
2010
2011
2009
2008
$ 2,085,582
301,092
235,234
144,549
2,766,457
$ 2,114,255
314,752
154,080
149,749
2,732,836
$ 2,093,475 $ 2,006,207 $ 1,978,454
307,909
-
123,823
2,410,186
317,777
-
146,955
2,558,207
312,689
-
154,590
2,473,486
1,021,719
517,811
201,894
226,619
120,786
2,088,829
677,628
14,859
408,267
63,936
(260,945)
(500,361)
-
13,347
416,731
(8,132)
408,599
285,942
694,541
(32,018)
(35,327)
(9,936)
617,260
(76,937)
8,948
549,271
1.50
1.49
2.95
2.94
3.76 (1)
995,586
524,550
208,008
145,824
35,299
1,909,267
823,569
48,540
70,072
22,886
148,784
(526,175)
-
15,134
602,810
(23,925)
578,885
161,115
740,000
(21,786)
(41,059)
(14,853)
662,302
(65,531)
5,000
601,771
2.44
2.42
3.26
3.23
2.76
$
$
983,424
494,898
211,399
-
109,458
1,799,179
759,028
71,624
20,869
(303)
235,267
(539,370)
94,789
81,432
723,336
(22,137)
701,199
6,832
708,031
954,754
492,505
227,715
-
71,863
1,746,837
726,649
92,300
(21,471)
-
(116,436)
(597,105)
(25,915)
5,641
63,663
(20,134)
43,529
84,921
128,450
(4,920)
(44,033)
(11,195)
647,883
(55,534)
4,382
596,731 $
2,839
(5,834)
(19,286)
106,169
(57,076)
-
49,093 $
931,455
492,208
191,599
-
81,447
1,696,709
713,477
2,380
(160,620)
-
(3,017)
(591,419)
9,820
7,757
(21,622)
205,616
183,994
227,451
411,445
3,263
(33,327)
(22,084)
359,297
(57,091)
-
302,206
3.24 $
3.21
3.27
3.24
2.60
(0.16) $
(0.16)
0.28
0.28
3.20
0.63
0.61
1.96
1.91
3.65
$
$
Balance Sheet Data:
Total assets
Real estate, at cost
Accumulated depreciation
Debt
Total equity
$ 21,965,975
18,495,359
(3,097,074)
11,296,190
7,904,144
$ 20,446,487
16,703,757
(2,894,374)
10,076,607
7,508,447
(1) Includes a special long-term capital gain dividend of $1.00 per share.
66
$ 20,517,471 $ 20,185,472 $ 21,418,048
16,195,706
(2,212,111)
11,596,585
6,214,652
16,344,244
(2,228,425)
10,103,428
6,649,406
16,454,967
(2,530,945)
10,349,457
6,830,405
(Amounts in thousands)
Other Data:
Funds From Operations ("FFO")(1):
Net income attributable to Vornado
Depreciation and amortization of real property
Net gains on sale of real estate
Real estate impairment losses
Proportionate share of adjustments to equity in net income
of Toys, to arrive at FFO:
Depreciation and amortization of real property
Net gains on sale of real estate
Real estate impairment losses
Income tax effect of above adjustments
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
Net gains on sale of real estate
Real estate impairment losses
Noncontrolling interests' share of above adjustments
FFO
Preferred share dividends
Discount on preferred share and unit redemptions
FFO attributable to common shareholders
Convertible preferred share dividends
Interest on 3.88% exchangeable senior debentures
FFO attributable to common shareholders
plus assumed conversions(1)
2012
Year Ended December 31,
2010
2011
2009
2008
$
617,260 $
504,407
(245,799)
129,964
662,302 $
530,113
(51,623)
28,799
647,883 $
505,806
(57,248)
97,500
106,169 $
508,572
(45,282)
23,203
359,297
509,367
(57,523)
-
68,483
-
9,824
(27,493)
70,883
(491)
-
(24,634)
70,174
-
-
(24,561)
65,358
(164)
-
(22,819)
66,435
(719)
-
(23,223)
86,197
(241,602)
1,849
(16,649)
886,441
(76,937)
8,948
818,452
113
-
99,992
(9,276)
-
(40,957)
1,265,108
(65,531)
5,000
1,204,577
124
26,272
78,151
(5,784)
11,481
(46,794)
1,276,608
(55,534)
4,382
1,225,456
160
25,917
75,200
(1,188)
-
(47,022)
662,027
(57,076)
-
604,951
170
-
49,513
(8,759)
-
(49,683)
844,705
(57,091)
-
787,614
189
25,261
$
818,565 $ 1,230,973 $ 1,251,533 $
605,121 $
813,064
________________________________
(1) FFO is computed in accordance with the definition adopted by the Board of Governors of the National Association of Real Estate
Investment Trusts (“NAREIT”). NAREIT defines FFO as GAAP net income or loss adjusted to exclude net gain from sales of
depreciated real estate assets, real estate impairment losses, depreciation and amortization expense from real estate assets,
extraordinary items and other specified non-cash items, including the pro rata share of such adjustments of unconsolidated
subsidiaries. FFO and FFO per diluted share are used by management, investors and analysts to facilitate meaningful
comparisons of operating performance between periods and among our peers because it excludes the effect of real estate
depreciation and amortization and net gains on sales, which are based on historical costs and implicitly assume that the value of
real estate diminishes predictably over time, rather than fluctuating based on existing market conditions. FFO does not represent
cash generated from operating activities and is not necessarily indicative of cash available to fund cash requirements and should
not be considered as an alternative to net income as a performance measure or cash flows as a liquidity measure. FFO may not be
comparable to similarly titled measures employed by other companies.
67
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Overview
Overview - Leasing activity
Critical Accounting Policies
Net Income and EBITDA by Segment for the Years Ended
December 31, 2012, 2011 and 2010
Results of Operations:
Years Ended December 31, 2012 and 2011
Years Ended December 31, 2011 and 2010
Supplemental Information:
Net Income and EBITDA by Segment for the Three Months Ended
December 31, 2012 and 2011
Three Months Ended December 31, 2012 Compared to December 31, 2011
Three Months Ended December 31, 2012 Compared to September 30, 2012
Related Party Transactions
Liquidity and Capital Resources
Financing Activities and Contractual Obligations
Certain Future Cash Requirements
Cash Flows for the Year Ended December 31, 2012
Cash Flows for the Year Ended December 31, 2011
Cash Flows for the Year Ended December 31, 2010
Funds From Operations for the Three Months and Years Ended
December 31, 2012 and 2011
Page
Number
69
77
81
84
90
97
103
108
109
110
111
111
115
118
120
122
124
68
Overview
Vornado Realty Trust (“Vornado”) is a fully-integrated real estate investment trust (“REIT”) and conducts its business through,
and substantially all of its interests in properties are held by, Vornado Realty L.P., a Delaware limited partnership (the “Operating
Partnership”). Accordingly, Vornado’s cash flow and ability to pay dividends to its shareholders is dependent upon the cash flow of
the Operating Partnership and the ability of its direct and indirect subsidiaries to first satisfy their obligations to creditors. Vornado is
the sole general partner of, and owned approximately 94.0% of the common limited partnership interest in the Operating Partnership
at December 31, 2012. All references to “we,” “us,” “our,” the “Company” and “Vornado” refer to Vornado Realty Trust and its
consolidated subsidiaries, including the Operating Partnership.
We own and operate office and retail properties (our “core” operations) with large concentrations in the New York City
metropolitan area and in the Washington, DC / Northern Virginia area. In addition, we have a 32.6% interest in Toys “R” Us, Inc.
(“Toys”) which has a significant real estate component, a 32.4% interest in Alexander’s, Inc. (NYSE: ALX) (“Alexander’s”), which
has six properties in the greater New York metropolitan area, as well as interests in other real estate and related investments.
Our business objective is to maximize shareholder value, which we measure by the total return provided to our shareholders.
Below is a table comparing our performance to the Morgan Stanley REIT Index (“RMS”) and the SNL REIT Index (“SNL”) for the
following periods ended December 31, 2012:
One-year
Three-year
Five-year
Ten-year
Vornado
9.2%
28.2%
9.6%
228.5%
Total Return(1)
RMS
17.8%
64.5%
31.2%
199.1%
SNL
20.2%
67.9%
37.3%
218.5%
(1) Past performance is not necessarily indicative of future performance.
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;
Investing in retail properties in select under-stored locations such as the New York City metropolitan area;
Acquiring quality properties at a discount to replacement cost and where there is a significant potential for higher rents;
Developing and redeveloping existing properties to increase returns and maximize value; and
Investing in operating companies that have a significant real estate component.
We expect to finance our growth, acquisitions and investments using internally generated funds, proceeds from possible asset
sales and by accessing the public and private capital markets. We may also offer Vornado common or preferred shares or Operating
Partnership units in exchange for property and may repurchase or otherwise reacquire these securities in the future.
We compete with a large number of property owners and developers, some of which may be willing to accept lower returns on
their investments than we are. Principal factors of competition include rents charged, sales prices, attractiveness of location, the
quality of the property and the breadth and the quality of services provided. Our success depends upon, among other factors, trends of
the national, regional and local economies, the financial condition and operating results of current and prospective tenants and
customers, availability and cost of capital, construction and renovation costs, taxes, governmental regulations, legislation and
population trends. See “Risk Factors” in Item 1A for additional information regarding these factors.
69
Overview - continued
Year Ended December 31, 2012 Financial Results Summary
Net income attributable to common shareholders for the year ended December 31, 2012 was $549,271,000, or $2.94 per diluted
share, compared to $601,771,000, or $3.23 per diluted share for the year ended December 31, 2011. Net income for the years ended
December 31, 2012 and 2011 includes $487,401,000 and $61,390,000, respectively, of net gains on sale of real estate, and
$141,637,000 and $28,799,000, respectively, of real estate impairment losses. In addition, the years ended December 31, 2012 and
2011 include certain items that affect comparability which are listed in the table below. The aggregate of net gains on sale of real
estate, real estate impairment losses and the items in the table below, net of amounts attributable to noncontrolling interests, increased
net income attributable to common shareholders by $164,907,000, or $0.88 per diluted share for the year ended December 31, 2012
and $287,678,000, or $1.55 per diluted share for the year ended December 31, 2011.
Funds from operations attributable to common shareholders plus assumed conversions (“FFO”) for the year ended December 31,
2012 was $818,565,000, or $4.39 per diluted share, compared to $1,230,973,000, or $6.42 per diluted share for the prior year. FFO
for the years ended December 31, 2012 and 2011 includes certain items that affect comparability which are listed in the table below.
The aggregate of these items, net of amounts attributable to noncontrolling interests, decreased FFO by $145,560,000, or $0.78 per
diluted share for the year ended December 31, 2012, and increased FFO by $291,700,000, or $1.52 per diluted share for the year
ended December 31, 2011.
(Amounts in thousands)
Items that affect comparability income (expense):
Non-cash impairment loss on J.C. Penney owned shares
(Loss) income from the mark-to-market of J.C. Penney derivative position
Non-cash impairment loss on investment in Toys
FFO attributable to discontinued operations, including our share of discontinued operations
of Alexander's
Accelerated amortization of discount on investment in subordinated debt of Independence Plaza
1290 Avenue of the Americas and 555 California Street priority return and income tax benefit
After-tax net gain on sale of Canadian Trade Shows
Net gain resulting from Lexington Realty Trust's stock issuance
Net gain on extinguishment of debt
Mezzanine loan loss reversal and gain on disposition
Recognition of disputed receivable from Stop & Shop
Other, net
Noncontrolling interests' share of above adjustments
Items that affect comparability, net
For the Year Ended
December 31,
2012
2011
$
$
(224,937)
(75,815)
(40,000)
68,501
60,396
25,260
19,657
14,116
-
-
-
(2,339)
(155,161)
9,601
(145,560)
$
$
-
12,984
-
91,938
-
-
-
9,760
83,907
82,744
23,521
6,440
311,294
(19,594)
291,700
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 year ended December 31, 2012 over the year ended December 31, 2011
is summarized below.
Same Store EBITDA:
December 31, 2012 vs. December 31, 2011
GAAP basis
Cash basis
New York
Washington, DC
Retail
Properties
Merchandise
Mart
2.0%(1)
2.0%(1)
(8.6%)
(9.8%)
1.2%
1.3%
4.5%
0.7%
(1) Excluding the Hotel Pennsylvania, same store increased by 2.2% and 2.3% on a GAAP and Cash basis, respectively.
70
Overview - continued
Quarter Ended December 31, 2012 Financial Results Summary
Net income attributable to common shareholders for the quarter ended December 31, 2012 was $62,633,000, or $0.33 per diluted
share, compared to $69,508,000, or $0.37 per diluted share for the quarter ended December 31, 2011. Net income for the quarters
ended December 31, 2012 and 2011 includes $281,549,000 and $1,916,000, respectively, of net gains on sale of real estate, and
$117,883,000 and $28,799,000, respectively, of real estate impairment losses. In addition, the quarters ended December 31, 2012 and
2011 include certain other items that affect comparability which are listed in the table below. The aggregate of net gains on sale of
real estate, real estate impairment losses and the items in the table below, net of amounts attributable to noncontrolling interests,
decreased net income attributable to common shareholders by $18,670,000, or $0.10 per diluted share for the quarter ended December
31, 2012 and increased net income attributable to common shareholders by $48,566,000, or $0.26 per diluted share for the quarter
ended December 31, 2011.
FFO for the quarter ended December 31, 2012 was $55,890,000, or $0.30 per diluted share, compared to $280,369,000, or $1.46
per diluted share for the prior year’s quarter. FFO for the quarters ended December 31, 2012 and 2011 include certain items that
affect comparability which are listed in the table below. The aggregate of these items, net of amounts attributable to noncontrolling
interests, decreased FFO by $172,670,000, or $0.92 per diluted share for the quarter ended December 31, 2012, and increased FFO by
$82,493,000, or $0.43 per diluted share for the quarter ended December 31, 2011.
(Amounts in thousands)
Items that affect comparability income (expense):
Non-cash impairment loss on J.C. Penney owned shares
(Loss) income from the mark-to-market of J.C. Penney derivative position
Non-cash impairment loss on investment in Toys
Accelerated amortization of discount on investment in subordinated debt of Independence Plaza
1290 Avenue of the Americas and 555 California Street priority return and income tax benefit
Net gain resulting from Lexington Realty Trust's stock issuance
FFO attributable to discontinued operations, including our share of discontinued operations
of Alexander's
Recognition of disputed receivable from Stop & Shop
Other, net
Noncontrolling interests' share of above adjustments
Items that affect comparability, net
For the Three Months Ended
December 31,
2012
2011
$
$
(224,937)
(22,472)
(40,000)
60,396
25,260
14,116
12,736
-
(8,825)
(183,726)
11,056
(172,670)
$
$
-
40,120
-
-
-
-
25,398
23,521
(1,014)
88,025
(5,532)
82,493
The percentage increase (decrease) in GAAP basis and cash basis same store EBITDA of our operating segments for the quarter
ended December 31, 2012 over the quarter ended December 31, 2011 and the trailing quarter ended September 30, 2012 are
summarized below.
Same Store EBITDA:
December 31, 2012 vs. December 31, 2011
GAAP basis
Cash basis
December 31, 2012 vs. September 30, 2012
GAAP basis
Cash basis
New York
Washington, DC
Retail
Properties
Merchandise
Mart
0.2%(1)
4.0%(1)
4.3%(2)
6.8%(2)
(14.3%)
(14.9%)
(8.8%)
(7.7%)
(0.1%)
(0.8%)
1.8%
1.4%
0.2%
(5.7%)
14.0%(3)
6.6%(3)
(1) Excluding the Hotel Pennsylvania, same store increased by 0.2% and 4.4% on a GAAP and Cash basis, respectively.
(2) Excluding the Hotel Pennsylvania, same store increased by 2.5% and 4.8% on a GAAP and Cash basis, respectively.
(3) Primarily from the timing of trade shows.
Calculations of same store EBITDA, reconciliations of our net income to EBITDA and FFO and the reasons we consider these
non-GAAP financial measures useful are provided in the following pages of Management’s Discussion and Analysis of the Financial
Condition and Results of Operations.
71
Overview – continued
VORNADO CAPITAL PARTNERS REAL ESTATE FUND (THE “FUND”)
In February 2011, the Fund’s subscription period closed with an aggregate of $800,000,000 of capital commitments, of which we
committed $200,000,000. We are the general partner and investment manager of the Fund, which has an eight-year term and a three-
year investment period. During the investment period, which concludes in July 2013, the Fund is our exclusive investment vehicle for
all investments that fit within its investment parameters, including debt, equity and other interests in real estate, and excluding (i)
investments in vacant land and ground-up development; (ii) investments acquired by merger or primarily for our securities or
properties; (iii) properties which can be combined with or relate to our existing properties; (iv) securities of commercial mortgage loan
servicers and investments derived from any such investments; (v) non-controlling interests in equity and debt securities; and (vi)
investments located outside of North America. The Fund’s investments are reported on its balance sheet at fair value, with changes in
value each period recognized in earnings. We consolidate the accounts of the Fund into our consolidated financial statements,
retaining the fair value basis of accounting.
During 2012, the Fund made four investments (described below) aggregating $203,700,000. As of December 31, 2012, the Fund
has nine investments with an aggregate fair value of $600,786,000, or $67,642,000 in excess of cost, and has remaining unfunded
commitments of $217,676,000, of which our share was $54,419,000.
800 Corporate Pointe
On November 30, 2012, the Fund acquired 800 Corporate Pointe, a 243,000 square foot office building and the accompanying
six-level parking structure (1,964 spaces) located in Culver City, Los Angeles, California, for $95,700,000 in cash.
501 Broadway
On August 20, 2012, the Fund acquired 501 Broadway, a 9,000 square foot retail property in New York for $31,000,000. The
purchase price consisted of $11,000,000 in cash and a $20,000,000 mortgage loan. The three-year loan bears interest at LIBOR plus
2.75%, with a floor of 3.50%, and has two one-year extension options.
1100 Lincoln Road
On July 2, 2012, the Fund acquired 1100 Lincoln Road, a 167,000 square foot retail property, the western anchor of the Lincoln
Road Shopping District in Miami Beach, Florida, for $132,000,000. The purchase price consisted of $66,000,000 in cash and a
$66,000,000 mortgage loan. The three-year loan bears interest at LIBOR plus 2.75% and has two one-year extension options.
520 Broadway
On April 26, 2012, the Fund acquired 520 Broadway, a 112,000 square foot office building in Santa Monica, California for
$61,000,000 in cash and subsequently placed a $30,000,000 mortgage loan on the property. The three-year loan bears interest at
LIBOR plus 2.25% and has two one-year extension options.
72
Overview – continued
2012 Acquisitions and Investments
Independence Plaza
In 2011, we acquired a 51% interest in the subordinated debt of Independence Plaza, a three-building 1,328 unit residential
complex in the Tribeca submarket of Manhattan which has 54,500 square feet of retail space and 550 parking spaces, for $45,000,000
and a warrant to purchase 25% of the equity for $1,000,000. On December 21, 2012, we acquired a 58.75% interest in the property as
follows: (i) buying one of the equity partners’ 33.75% interest for $160,000,000, (ii) exercising our warrant for 25% of the equity and
(iii) contributing the appreciated value of our interest in the subordinated debt as preferred equity. In connection therewith, we
recognized income of $105,366,000, comprised of $60,396,000 from the accelerated amortization of the discount on the subordinated
debt immediately preceding the conversion to preferred equity, and a $44,970,000 purchase price fair value adjustment upon
exercising the warrant. The current transaction values the property at $844,800,000. The property is currently encumbered by a
$334,225,000 mortgage. We expect to refinance the $334,225,000 mortgage in 2013, substantially decreasing our cash
investment. We manage the retail space at the property and Stellar Management, our partner, manages the residential space.
666 Fifth Avenue - Retail
On December 6, 2012, we acquired a retail condominium located at 666 Fifth Avenue at 53rd Street for $707,000,000 in cash.
The property has 126 feet of frontage on Fifth Avenue and contains 114,000 square feet, 39,000 square feet in fee and 75,000 square
feet by long-term lease from the 666 Fifth Avenue office condominium, which is 49.5% owned by us.
Marriott Marquis Times Square - Retail and Signage
On July 30, 2012, we entered into a lease with Host Hotels & Resorts, Inc. (NYSE: HST) (“Host”), under which we will
redevelop the retail and signage components of the Marriott Marquis Times Square Hotel. The Marriott Marquis with over 1,900
rooms is one of the largest hotels in Manhattan. It is located in the heart of the bow-tie of Times Square and spans the entire block
front from 45th Street to 46th Street on Broadway. The Marriott Marquis is directly across from our 1540 Broadway iconic retail
property leased to Forever 21 and Disney flagship stores. We plan to spend over $140,000,000 to redevelop and substantially expand
the existing retail space, including converting the below grade parking garage into retail, and creating six-story, 300 foot wide block
front, dynamic LED signs. During the term of the lease we will pay fixed rent equal to the sum of $12,500,000, plus a portion of the
property’s net cash flow after we receive a 5.2% preferred return on our invested capital. The lease contains put/call options which, if
exercised, would lead to our ownership. Host can exercise the put option during defined periods following the conversion of the
project to a condominium. We can exercise our call option under the same terms, at any time after the fifteenth year of the lease term.
73
Overview – continued
2012 Dispositions
Merchandise Mart
On December 31, 2012, we completed the sale of the Boston Design Center, a 554,000 square foot showroom building in Boston,
Massachusetts, for $72,400,000 in cash, which resulted in a net gain of $5,252,000.
On July 26, 2012, we completed the sale of the Washington Design Center, a 393,000 square foot showroom building in
Washington, DC, and the Canadian Trade Shows, for an aggregate of $103,000,000 in cash. The sale of the Canadian Trade Shows
resulted in an after-tax net gain of $19,657,000.
On June 22, 2012, we completed the sale of L.A. Mart, a 784,000 square foot showroom building in Los Angeles, California for
$53,000,000, of which $18,000,000 was cash and $35,000,000 was nine-month seller financing at 6.0%, which was paid on December
28, 2012.
On January 6, 2012, we completed the sale of 350 West Mart Center, a 1.2 million square foot office building in Chicago, Illinois,
for $228,000,000 in cash, which resulted in a net gain of $54,911,000.
Washington, DC
On November 7, 2012, we completed the sale of three office buildings (“Reston Executive”) located in suburban Fairfax County,
Virginia, containing 494,000 square feet for $126,250,000, which resulted in a net gain of $36,746,000.
On July 26, 2012, we completed the sale of 409 Third Street S.W., a 409,000 square foot office building in Washington, DC, for
$200,000,000 in cash, which resulted in a net gain of $126,621,000. This building is contiguous to the Washington Design Center and
was sold to the same purchaser.
Retail Properties
On February 13, 2013, we entered into an agreement to sell the Plant, a power strip shopping center in San Jose, California, for
$203,000,000. The sale will result in net proceeds of approximately $93,000,000 after repaying the existing loan and closing costs,
and a financial statement gain of approximately $33,000,000. The sale, which is subject to customary closing conditions, is expected
to be completed by the second quarter of 2013.
On January 24, 2013, we completed the sale of the Green Acres Mall located in Valley Stream, New York, for $500,000,000,
which resulted in net proceeds of $185,000,000, after repaying the existing loan and closing costs. The financial statement gain of
$205,000,000 will be recognized in the first quarter of 2013 and the tax gain of $304,000,000 has been deferred as part of a like-kind
exchange.
In 2012, we sold 12 non-core retail properties in separate transactions, for an aggregate of $157,000,000 in cash, which resulted in
a net gain aggregating $22,266,000. In addition, we have entered into an agreement to sell a building on Market Street, Philadelphia,
which is part of the Gallery at Market East for $60,000,000, which will result in a net gain of approximately $35,000,000. The sale,
which is subject to customary closing conditions, is expected to be completed in the first quarter of 2013.
Other
On January 24, 2013, LNR Property LLC (“LNR”) entered into a definitive agreement to be sold. We own 26.2% of LNR and
expect to receive net proceeds of approximately $241,000,000. The sale, which is subject to customary closing conditions, is expected
to be completed in the second quarter of 2013.
74
Overview – continued
2012 Financing Activities
Secured Debt
On November 16, 2012, we completed a $120,000,000 refinancing of 4 Union Square South, a 206,000 square foot Manhattan
retail property. The seven-year loan bears interest at LIBOR plus 2.15% (2.36% at December 31, 2012) and amortizes based on a 30-
year schedule beginning in the third year. We retained net proceeds of approximately $42,000,000, after repaying the existing loan and
closing costs.
On November 8, 2012, we completed a $950,000,000 refinancing of 1290 Avenue of the Americas (70% owned), a 2.1 million
square foot Manhattan office building. The 10-year fixed rate interest-only loan bears interest at 3.34%. The partnership retained net
proceeds of approximately $522,000,000, after repaying the existing loan and closing costs.
On August 17, 2012, we completed a $98,000,000 refinancing of 435 Seventh Avenue, a 43,000 square foot retail property in
Manhattan. The seven-year loan bears interest at LIBOR plus 2.25% (2.46% at December 31, 2012). We retained net proceeds of
approximately $44,000,000, after repaying the existing loan and closing costs.
On July 26, 2012, we completed a $150,000,000 refinancing of 2101 L Street, a 380,000 square foot office building located in
Washington, DC. The 12-year fixed rate loan bears interest at 3.97% and amortizes based on a 30-year schedule beginning in the third
year.
On March 5, 2012, we completed a $325,000,000 refinancing of 100 West 33rd Street, a 1.1 million square foot property located
on the entire Sixth Avenue block front between 32nd and 33rd Streets in Manhattan. The building contains the 257,000 square foot
Manhattan Mall and 848,000 square feet of office space. The three-year loan bears interest at LIBOR plus 2.50% (2.71% at December
31, 2012) and has two one-year extension options. We retained net proceeds of approximately $87,000,000, after repaying the
existing loan and closing costs.
On January 9, 2012, we completed a $300,000,000 refinancing of 350 Park Avenue, a 559,000 square foot Manhattan office
building. The five-year fixed rate loan bears interest at 3.75% and amortizes based on a 30-year schedule beginning in the third year.
The proceeds of the new loan and $132,000,000 of existing cash were used to repay the existing loan and closing costs.
Senior Unsecured Debt
In April 2012, we redeemed all of the outstanding exchangeable and convertible senior debentures at par, for an aggregate of
$510,215,000 in cash.
75
Overview – continued
2012 Financing Activities – continued
Preferred Securities
In July 2012 and January 2013, we sold an aggregate of $600,000,000 of cumulative redeemable preferred securities with a
weighted average cost of 5.55%. The net proceeds aggregating $581,824,000 were used primarily to redeem outstanding cumulative
redeemable preferred securities with an aggregate face amount of $517,500,000 and a weighted average cost of 6.82%. The details of
these transactions are described below.
On February 19, 2013, we redeemed all of the outstanding 6.75% Series F Cumulative Redeemable Preferred Shares and 6.75%
Series H Cumulative Redeemable Preferred Shares at par, for an aggregate of $262,500,000 in cash, plus accrued and unpaid
dividends through the date of redemption.
On January 25, 2013, we sold 12,000,000 5.40% Series L Cumulative Redeemable Preferred Shares at a price of $25.00 per share
in an underwritten public offering pursuant to an effective registration statement. We retained aggregate net proceeds of $290,853,000,
after underwriters’ discounts and issuance costs and contributed the net proceeds to the Operating Partnership in exchange for
12,000,000 Series L Preferred Units (with economic terms that mirror those of the Series L Preferred Shares). Dividends on the Series
L Preferred Shares are cumulative and payable quarterly in arrears. The Series L Preferred Shares are not convertible into, or
exchangeable for, any of our properties or securities. On or after five years from the date of issuance (or sooner under limited
circumstances), we may redeem the Series L Preferred Shares at a redemption price of $25.00 per share, plus accrued and unpaid
dividends through the date of redemption. The Series L Preferred Shares have no maturity date and will remain outstanding
indefinitely unless redeemed by us.
On August 16, 2012, we redeemed all of the outstanding 7.0% Series E Cumulative Redeemable Preferred Shares at par, for an
aggregate of $75,000,000 in cash, plus accrued and unpaid dividends through the date of redemption.
On July 19, 2012, we redeemed all of the outstanding 7.0% Series D-10 and 6.75% Series D-14 cumulative redeemable preferred
units with an aggregate face amount of $180,000,000 for $168,300,000 in cash, plus accrued and unpaid distributions through the date
of redemption.
On July 11, 2012, we sold 12,000,000 5.70% Series K Cumulative Redeemable Preferred Shares at a price of $25.00 per share in
an underwritten public offering pursuant to an effective registration statement. We retained aggregate net proceeds of $290,971,000,
after underwriters’ discounts and issuance costs and contributed the net proceeds to the Operating Partnership in exchange for
12,000,000 Series K Preferred Units (with economic terms that mirror those of the Series K Preferred Shares). Dividends on the
Series K Preferred Shares are cumulative and payable quarterly in arrears. The Series K Preferred Shares are not convertible into, or
exchangeable for, any of our properties or securities. On or after five years from the date of issuance (or sooner under limited
circumstances), we may redeem the Series K Preferred Shares at a redemption price of $25.00 per share, plus accrued and unpaid
dividends through the date of redemption. The Series K Preferred Shares have no maturity date and will remain outstanding
indefinitely unless redeemed by us.
76
Overview - continued
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 presented below are based on square feet leased during the period.
Second generation relet space represents square footage that has not been vacant for more than nine months. The leasing activity for
the New York segment excludes Alexander’s, the Hotel Pennsylvania and residential.
(Square feet in thousands)
New York
Office
Retail
Washington, DC
Office
Retail Properties
Malls
Strips
Merchandise Mart
Office
Showroom
Quarter Ended December 31, 2012:
Total square feet leased
Our share of square feet leased
Initial rent (1)
Weighted average lease term (years)
Second generation relet space:
Square feet
Cash basis:
Initial rent (1)
Prior escalated rent
Percentage increase (decrease)
GAAP basis:
Straight-line rent (2)
Prior straight-line rent
Percentage increase (decrease)
Tenant improvements and leasing
commissions:
Per square foot
Per square foot per annum:
Percentage of initial rent
Year Ended December 31, 2012:
Total square feet leased
Our share of square feet leased
Initial rent (1)
Weighted average lease term (years)
Second generation relet space:
Square feet
Cash basis:
Initial rent (1)
Prior escalated rent
Percentage increase (decrease)
GAAP basis:
Straight-line rent (2)
Prior straight-line rent
Percentage increase
Tenant improvements and leasing
commissions:
Per square foot
Per square foot per annum:
Percentage of initial rent
457
437
53.98
8.6
373
52.61
50.86
3.4%
51.46
48.62
5.8%
6
5
$ 308.52
9.2
3
$ 459.69
$ 295.56
55.5%
$ 513.29
$ 283.01
81.4%
48.15
5.60
10.4%
$ 188.84
20.60
$
6.7%
1,950
1,754
57.15
9.3
1,405
57.88
55.31
4.6%
57.34
54.64
4.9%
192
185
$ 110.71
11.9
154
$ 110.21
88.47
$
24.6%
$ 115.97
89.52
$
29.5%
54.45
5.85
10.2%
$
$
32.52
2.73
2.5%
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
482
404
41.46
7.2
246
39.34
40.38
(2.6%)
37.94
38.86
(2.4%)
26.90
3.74
9.0%
2,111
1,901
40.55
7.3
1,613
39.27
39.13
0.4%
38.96
37.67
3.4%
35.49
4.86
12.0%
$
$
$
$
$
$
$
$
$
$
$
$
$
$
322
322
20.46 $
7.4
220
17.03 $
16.04 $
6.2%
17.16 $
15.79 $
8.7%
75
51
33.11
5.8
5
69.44
67.89
2.3%
71.83
65.06
10.4%
4.28 $
0.58 $
2.8%
27.38
4.72
14.3%
1,276
1,276
18.65 $
8.2
941
15.98 $
14.58 $
9.6%
16.49 $
13.69 $
20.5%
146
101
38.45
5.3
17
64.85
60.78
6.7%
66.24
58.61
13.0%
7.48 $
0.91 $
4.9%
18.66
3.52
9.2%
$
$
$
$
$
$
$
$
$
$
$
$
$
$
-
-
-
-
-
-
-
-%
-
-
-%
-
-
-
593
593
32.97
14.7
20
32.24
24.88
29.6%
32.38
23.15
39.9%
96.41
6.56 (3)
19.9%
58
58
41.19
6.5
58
41.19
39.42
4.5%
43.00
33.41
28.7%
7.55
1.16
2.8%
380
380
38.67
6.0
380
38.67
39.04
(0.9%)
39.15
35.28
11.0%
10.49
1.75
4.5%
$
$
$
$
$
$
$
$
$
$
$
$
$
$
See notes on the following page.
77
Overview - continued
Leasing Activity - continued
(Square feet in thousands)
Year Ended December 31, 2011:
Total square feet leased
Our share of square feet leased:
Initial rent (1)
Weighted average lease term (years)
Second generation relet space:
Square feet
Cash basis:
Initial rent (1)
Prior escalated rent
Percentage increase (decrease)
GAAP basis:
Straight-line rent(2)
Prior straight-line rent
Percentage increase
Tenant improvements and leasing
commissions:
Per square foot
Per square foot per annum:
Percentage of initial rent
$
$
$
$
$
$
$
New York
Office
Retail
Washington, DC
Office
Retail Properties
Malls
Strips
Merchandise Mart
Office
Showroom
3,211
2,432
55.37 $
9.2
61
61
133.02 $
10.1
1,735
1,557
41.35 $
5.6
1,109
1,109
18.03 $
9.1
239
207
33.82 $
6.0
241
241
26.43
8.4
2,089
52
1,396
470
48
241
56.21 $
47.66 $
18.0%
145.98 $
134.95 $
8.2%
56.19 $
47.47 $
18.4%
150.78 $
133.55 $
12.9%
41.01 $
38.77 $
5.8%
16.25 $
14.94 $
8.8%
30.65 $
27.79 $
10.3%
26.43
26.51
(0.3%)
40.54 $
37.47 $
8.2%
16.46 $
14.34 $
14.8%
32.15 $
27.26 $
17.9%
26.90
23.25
15.7%
48.28 $
5.25 $
9.5%
40.00 $
3.96 $
3.0%
25.01 $
4.47 $
10.8%
5.67 $
0.62 $
3.4%
9.00 $
1.50 $
4.4%
64.78
7.71
29.2%
306
306
36.67
5.6
306
36.67
38.60
(5.0%)
35.58
35.04
1.5%
6.20
1.11
3.0%
$
$
$
$
$
$
$
(1) Represents the cash basis weighted average starting rent per square foot, which is generally indicative of market rents. Most leases include free
rent and periodic step-ups in rent which are not included in the initial cash basis rent per square foot but are included in the GAAP basis
straight-line rent per square foot.
(2) Represents the GAAP basis weighted average rent per square foot that is recognized over the term of the respective leases, and includes the
effect of free rent and periodic step-ups in rent.
(3) Includes $6.50 per square foot per annum of tenant improvements and leasing commissions in connection with the 572,000 square foot
Motorola Mobility / Google lease.
78
Overview - continued
Square footage (in service) and Occupancy as of December 31, 2012:
(Square feet in thousands)
New York:
Office
Retail
Alexander's
Hotel Pennsylvania
Residential (1,655 units)
Washington, DC
Office
Residential (2,414 units)
Hotel and Warehouses
Retail Properties:
Strip Shopping Centers
Regional Malls
Merchandise Mart:
Office
Showroom
Other
555 California Street
Primarily Warehouses
Number of
Properties
31
49
6
1
4
59
7
7
114
6
2
2
3
5
Square Feet (in service)
Our
Share
Total
Portfolio
19,729
2,217
2,179
1,400
1,528
27,053
16,106
2,599
435
19,140
15,566
5,244
20,810
1,771
2,220
3,991
1,795
971
2,766
73,760
16,751
2,057
706
1,400
873
21,787
13,637
2,457
435
16,529
14,984
3,608
18,592
1,762
2,220
3,982
1,257
971
2,228
63,118
Total square feet at December 31, 2012
Square footage (in service) and Occupancy as of December 31, 2011:
Number of
Properties
Square Feet (in service)
Our
Share
Total
Portfolio
(Square feet in thousands)
New York:
Office
Retail
Alexander's
Hotel Pennsylvania
Washington, DC
Office
Residential (2,414 units)
Hotel and Warehouses
Retail Properties:
Strip Shopping Centers
Regional Malls
Merchandise Mart:
Office
Showroom
Other
555 California Street
Primarily Warehouses
Total square feet at December 31, 2011
30
46
6
1
59
7
7
114
6
2
2
3
5
79
19,571
2,239
2,179
1,400
25,389
16,623
2,599
404
19,626
15,595
5,448
21,043
1,229
2,715
3,944
1,795
971
2,766
72,768
16,598
1,982
706
1,400
20,686
14,161
2,457
404
17,022
15,012
3,800
18,812
1,220
2,715
3,935
1,257
971
2,228
62,683
Occupancy %
95.9%
96.8%
99.1%
96.9%
96.2%
81.2%
97.9%
100.0%
84.1%
93.6%
92.7%
93.4%
90.0%
94.7%
92.6%
93.1%
55.9%
Occupancy %
96.2%
95.6%
98.7%
96.2%
89.3%
96.6%
100.0%
90.6%
93.3%
92.7%
93.2%
90.1%
89.8%
89.9%
93.1%
45.3%
Overview - continued
Washington, DC Segment
As a result of the Base Realignment and Closure (“BRAC”) statute, we estimated that occupancy would decrease from 90% at
December 31, 2011, to between 82% and 84% at December 31, 2012 and that 2012 EBITDA before discontinued operations and gains
on sale of real estate would be lower than 2011 by approximately $55,000,000 to $65,000,000 (revised to $50,000,000 to $60,000,000
in the third quarter of 2012). At December 31, 2012, occupancy was 84.1% and 2012 EBITDA before discontinued operations and
gains on sale of real estate was lower than 2011 by $54,900,000.
We estimate that 2013 EBITDA will be between $5,000,000 and $15,000,000 lower than 2012 EBITDA.
Of the 2,395,000 square feet subject to BRAC, 348,000 square feet has been taken out of service for redevelopment and 545,000
square feet has been leased or is pending. The table below summarizes the status of the BRAC space as of December 31, 2012.
Resolved:
Relet as of December 31, 2012
Leases pending
Taken out of service for redevelopment
To Be Resolved:
Vacated as of December 31, 2012
Expiring in:
2013
2014
2015
Rent Per
Square Foot
Total
Square Feet
Crystal City Skyline
Rosslyn
$
39.76
45.00
521,000
24,000
348,000
893,000
380,000
24,000
348,000
752,000
88,000
-
-
88,000
53,000
-
-
53,000
35.77
1,002,000
519,000
473,000
10,000
37.39
32.49
43.04
126,000
304,000
70,000
1,502,000
-
103,000
65,000
687,000
43,000
201,000
5,000
722,000
83,000
-
-
93,000
Total square feet subject to BRAC
2,395,000
1,439,000
810,000
146,000
In the first quarter of 2012, we notified the lender that due to scheduled lease expirations resulting primarily from the effects of
the BRAC statute, the Skyline properties had a 26% vacancy rate and rising (49.8% as of December 31, 2012) and, accordingly, cash
flows are expected to decrease. As a result, our subsidiary that owns these properties does not have and is not expected to have for
some time sufficient funds to pay all of its current obligations, including interest payments to the lender. Based on the projected
vacancy and the significant amount of capital required to re-tenant these properties, at our request, the mortgage loan was transferred
to the special servicer. In the second quarter of 2012, we entered into a forbearance agreement with the special servicer to apply cash
flows of the property, before interest on the loan, towards the repayment of $4,000,000 of tenant improvements and leasing
commissions we funded in connection with a new lease at these properties, which was repaid in the third quarter. The forbearance
agreement was amended January 31, 2013, to extend its maturity through April 1, 2013 and provides for interest shortfalls to be
deferred and added to the principal balance of the loan and not give rise to a loan default. As of December 31, 2012, the deferred
interest amounted to $26,957,000. We continue to negotiate with the special servicer to restructure the terms of the loan.
80
Recently Issued Accounting Literature
In May 2011, the Financial Accounting Standards Board (“FASB”) issued Update No. 2011-04, Fair Value Measurements (Topic
820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRS (“ASU No.
2011-04”). ASU No. 2011-04 provides a uniform framework for fair value measurements and related disclosures between GAAP and
International Financial Reporting Standards (“IFRS”) and requires additional disclosures, including: (i) quantitative information about
unobservable inputs used, a description of the valuation processes used, and a qualitative discussion about the sensitivity of the
measurements to changes in the unobservable inputs, for Level 3 fair value measurements; (ii) fair value of financial instruments not
measured at fair value but for which disclosure of fair value is required, based on their levels in the fair value hierarchy; and
(iii) transfers between Level 1 and Level 2 of the fair value hierarchy. The adoption of this update on January 1, 2012 did not have a
material impact on our consolidated financial statements, but resulted in additional fair value measurement disclosures (See Note 13 to
the consolidated financial statements in this Annual Report on Form 10-K).
Critical Accounting Policies
In preparing the consolidated financial statements we have made estimates and assumptions that affect the reported amounts of
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. Set forth below is a summary of the accounting policies that we believe are
critical to the preparation of our consolidated financial statements. The summary should be read in conjunction with the more
complete discussion of our accounting policies included in Note 2 to the consolidated financial statements in this Annual Report on
Form 10-K.
Real Estate
Real estate is carried at cost, net of accumulated depreciation and amortization. Maintenance and repairs are expensed as incurred.
Depreciation requires an estimate by management of the useful life of each property and improvement as well as an allocation of the
costs associated with a property to its various components. If we do not allocate these costs appropriately or incorrectly estimate the
useful lives of our real estate, depreciation expense may be misstated. As real estate is undergoing development activities, all property
operating expenses directly associated with and attributable to, the development and construction of a project, including interest
expense, are capitalized to the cost of real property to the extent we believe such costs are recoverable through the value of the
property. The capitalization period begins when development activities are underway and ends when the project is substantially
complete. General and administrative costs are expensed as incurred.
Upon the acquisition of real estate, we assess the fair value of acquired assets (including land, buildings and improvements,
identified intangibles such as acquired above and below-market leases and acquired in-place leases and tenant relationships) and
acquired liabilities and we allocate purchase price based on these assessments. We assess fair value based on estimated cash flow
projections that utilize appropriate discount and capitalization rates and available market information. Estimates of future cash flows
are based on a number of factors, including historical operating results, known trends and market/economic conditions. Identified
intangibles are recorded at their estimated fair value, separate and apart from goodwill. Identified intangibles that are determined to
have finite lives are amortized over the period in which they are expected to contribute directly or indirectly to the future cash flows of
the property or business acquired.
As of December 31, 2012 and 2011, the carrying amounts of real estate, net of accumulated depreciation, were $15.4 billion and
$13.8 billion, respectively. As of December 31, 2012 and 2011, the carrying amounts of identified intangible assets (including
acquired above-market leases, tenant relationships and acquired in-place leases) were $370,602,000 and $287,844,000, respectively,
and the carrying amounts of identified intangible liabilities, a component of “deferred revenue” on our consolidated balance sheets,
were $463,432,000 and $466,743,000, respectively.
Our properties, including any related intangible assets, are individually reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount may not be recoverable. An impairment exists when the carrying amount of an asset
exceeds the aggregate projected future cash flows over the anticipated holding period on an undiscounted basis. An impairment loss is
measured based on the excess of the property’s carrying amount over its estimated fair value. Impairment analyses are based on our
current plans, intended holding periods and available market information at the time the analyses are prepared. If our estimates of the
projected future cash flows, anticipated holding periods, or market conditions change, our evaluation of impairment losses may be
different and such differences could be material to our consolidated financial statements. The evaluation of anticipated cash flows is
subjective and is based, in part, on assumptions regarding future occupancy, rental rates and capital requirements that could differ
materially from actual results. Plans to hold properties over longer periods decrease the likelihood of recording impairment losses.
81
Critical Accounting Policies – continued
Partially Owned Entities
We consolidate entities in which we have a controlling financial interest. In determining whether we have a controlling financial
interest in a partially owned entity and the requirement to consolidate the accounts of that entity, we consider factors such as
ownership interest, board representation, management representation, authority to make decisions, and contractual and substantive
participating rights of the partners/members as well as whether the entity is a variable interest entity (“VIE”) and we are the primary
beneficiary. We are deemed to be the primary beneficiary of a VIE when we have the power to direct the activities of the VIE that
most significantly impact the VIE’s economic performance and the obligation to absorb losses or receive benefits that could
potentially be significant to the VIE. When the requirements for consolidation are not met, we account for investments under the
equity method of accounting if we have the ability to exercise significant influence over the entity. Equity method investments are
initially recorded at cost and subsequently adjusted for our share of net income or loss and cash contributions and distributions each
period. Investments that do not qualify for consolidation or equity method accounting are accounted for on the cost method.
Investments in partially owned entities are reviewed for impairment whenever events or changes in circumstances indicate that
the carrying amount may not be recoverable. An impairment loss is measured based on the excess of the carrying amount of an
investment over its estimated fair value. Impairment analyses are based on current plans, intended holding periods and available
information at the time the analyses are prepared. The ultimate realization of our investments in partially owned entities is dependent
on a number of factors, including the performance of each investment and market conditions. If our estimates of the projected future
cash flows, the nature of development activities for properties for which such activities are planned and the estimated fair value of the
investment change based on market conditions or otherwise, our evaluation of impairment losses may be different and such
differences could be material to our consolidated financial statements. The evaluation of anticipated cash flows is subjective and is
based, in part, on assumptions regarding future occupancy, rental rates and capital requirements that could differ materially from
actual results.
As of December 31, 2012 and 2011, the carrying amounts of investments in partially owned entities, including Toys “R” Us, was
$1.704 billion and $1.740 billion, respectively.
Mortgage and Mezzanine Loans Receivable
We invest in mortgage and mezzanine loans of entities that have significant real estate assets. These investments are either
secured by the real property or by pledges of the equity interests of the entities owning the underlying real estate. We record these
investments at the stated principal amount net of any unamortized discount or premium. We accrete or amortize any discount or
premium over the life of the related receivable utilizing the effective interest method or straight-line method, if the result is not
materially different. We evaluate the collectability of both interest and principal of each of our loans whenever events or changes in
circumstances indicate such amounts may not be recoverable. A loan is impaired when it is probable that we will be unable to collect
all amounts due according to the existing contractual terms. When a loan is impaired, the amount of the loss accrual is calculated by
comparing the carrying amount of the investment to the present value of expected future cash flows discounted at the loan’s effective
interest rate, or as a practical expedient, to the value of the collateral if the loan is collateral dependent. If our estimates of the
collectability of both interest and principal or the fair value of our loans change based on market conditions or otherwise, our
evaluation of impairment losses may be different and such differences could be material to our consolidated financial statements. As
of December 31, 2012 and 2011, the carrying amounts of mortgage and mezzanine loans receivable were $225,359,000 and
$133,948,000, respectively.
82
Critical Accounting Policies – continued
Allowance For Doubtful Accounts
We periodically evaluate the collectability of amounts due from tenants and maintain an allowance for doubtful accounts
($37,674,000 and $43,241,000 as of December 31, 2012 and 2011) for estimated losses resulting from the inability of tenants to make
required payments under the lease agreements. We also maintain an allowance for receivables arising from the straight-lining of rents
($3,165,000 and $3,290,000 as of December 31, 2012 and 2011, respectively). This receivable arises from earnings recognized in
excess of amounts currently due under the lease agreements. Management exercises judgment in establishing these allowances and
considers payment history and current credit status in developing these estimates. These estimates may differ from actual results,
which could be material to our consolidated financial statements.
Revenue Recognition
We have the following revenue sources and revenue recognition policies:
Base Rent — income arising from tenant leases. These rents are recognized over the non-cancelable term of the related leases
on a straight-line basis which includes the effects of rent steps and rent abatements under the leases. We commence rental
revenue recognition when the tenant takes possession of the leased space and the leased space is substantially ready for its
intended use. In addition, in circumstances where we provide a tenant improvement allowance for improvements that are
owned by the tenant, we recognize the allowance as a reduction of rental revenue on a straight-line basis over the term of the
lease.
Percentage Rent — income arising from retail tenant leases that is contingent upon tenant sales exceeding defined thresholds.
These rents are recognized only after the contingency has been removed (i.e., when tenant sales thresholds have been
achieved).
Hotel Revenue — income arising from the operation of the Hotel Pennsylvania which consists of rooms revenue, food and
beverage revenue, and banquet revenue. Income is recognized when rooms are occupied. Food and beverage and banquet
revenue are recognized when the services have been rendered.
Trade Shows Revenue — income arising from the operation of trade shows, including rentals of booths. This revenue is
recognized when the trade shows have occurred.
Expense Reimbursements — revenue arising from tenant leases which provide for the recovery of all or a portion of the
operating expenses and real estate taxes of the respective property. This revenue is accrued in the same periods as the
expenses are incurred.
Management, Leasing and Other Fees — income arising from contractual agreements with third parties or with partially
owned entities. This revenue is recognized as the related services are performed under the respective agreements.
Cleveland Medical Mart — revenue arising from the development of the Cleveland Medical Mart. This revenue is recognized
as the related services are performed under the respective agreements using the criteria set forth in ASC 605-25, Multiple
Element Arrangements, as we are providing development, marketing, leasing, and other property management services.
Before we recognize revenue, we assess, among other things, its collectibility. If our assessment of the collectibility of revenue
changes, the impact on our consolidated financial statements could be material.
Income Taxes
We operate in a manner intended to enable us to continue to qualify as a Real Estate Investment Trust (“REIT”) under Sections
856-860 of the Internal Revenue Code of 1986, as amended. Under those sections, a REIT which distributes at least 90% of its REIT
taxable income as a dividend to its shareholders each year and which meets certain other conditions will not be taxed on that portion
of its taxable income which is distributed to its shareholders. We distribute to our shareholders 100% of our taxable income.
Therefore, no provision for Federal income taxes is required. If we fail to distribute the required amount of income to our
shareholders, or fail to meet other REIT requirements, we may fail to qualify as a REIT which may result in substantial adverse tax
consequences.
83
Net Income and EBITDA by Segment for the Years Ended December 31, 2012, 2011 and 2010
Effective January 1, 2012, as a result of certain organizational and operational changes, we redefined the New York business segment to
encompass all of our Manhattan assets by including the 1.0 million square feet in 21 freestanding Manhattan street retail assets (formerly in our
Retail segment), and the Hotel Pennsylvania and our interest in Alexander’s, Inc. (formerly in our Other segment). Accordingly, we have reclassified
the prior period segment financial results to conform to the current year presentation. See note (3) on page 87 for the elements of the New York
segment’s EBITDA. Below is a summary of net income and a reconciliation of net income to EBITDA(1) by segment for the years ended December
31, 2012, 2011 and 2010.
(Amounts in thousands)
For the Year Ended December 31, 2012
Property rentals
Straight-line rent adjustments
Amortization of acquired below-
market leases, net
Total rentals
Tenant expense reimbursements
Cleveland Medical Mart development
project
Fee and other income:
BMS cleaning fees
Signage revenue
Management and leasing fees
Lease termination fees
Other income
Total revenues
Operating expenses
Depreciation and amortization
General and administrative
Cleveland Medical Mart development
project
Impairment losses, acquisition related
costs and tenant buy-outs
Total expenses
Operating income (loss)
Income applicable to Toys
Income (loss) from partially owned
entities
Income from Real Estate Fund
Interest and other investment
(loss) income, net
Interest and debt expense
Net gain on disposition of wholly
owned and partially owned assets
Income (loss) before income taxes
Income tax expense
Income (loss) from continuing
operations
Income (loss) from discontinued
operations
Net income (loss)
Less net (income) loss attributable to
noncontrolling interests in:
Consolidated subsidiaries
Operating Partnership
Preferred unit distributions
of the Operating Partnership
Net income (loss) attributable to
Vornado
Interest and debt expense(2)
Depreciation and amortization(2)
Income tax expense (benefit)(2)
EBITDA(1)
$
Total
1,962,545
68,844
New York Washington, DC Properties
276,190
$ 1,004,078
9,379
52,117
467,972 $
5,727
$
Toys
Other
$
125,018 $
763
- $
-
89,287
858
Retail
Merchandise
Mart
54,193
2,085,582
301,092
31,552
1,087,747
160,133
2,043
475,742
40,742
14,902
300,471
88,545
-
125,781
4,343
235,234
-
-
-
235,234
67,584
20,892
21,867
2,361
31,845
2,766,457
1,021,719
517,811
201,894
94,965
20,892
5,639
1,136
4,472
1,374,984
602,883
226,653
30,053
-
-
12,775
643
24,126
554,028
194,523
138,296
27,237
-
-
3,131
74
1,778
393,999
141,732
76,835
23,654
-
-
231
508
1,574
367,671
65,337
33,778
18,899
226,619
-
-
-
226,619
-
-
-
-
-
-
-
-
-
-
-
-
-
-
120,786
2,088,829
677,628
14,859
408,267
63,936
-
859,589
515,395
-
207,773
-
-
360,056
193,972
-
(5,612)
-
103,400
345,621
48,378
-
1,458
-
(260,945)
(500,361)
4,230
(147,132)
126
(115,574)
27
(62,923)
13,347
416,731
(8,132)
-
580,266
(3,491)
-
72,912
(1,650)
8,491
(4,569)
-
-
344,633
23,038
-
729
-
-
(31,393)
-
(7,626)
(502)
-
-
-
14,859
-
-
-
-
-
14,859
-
5,696
95,841
7,329
-
(27,381)
-
91
-
(105)
75,775
17,244
42,249
102,051
-
17,386
178,930
(103,155)
-
203,919
63,936
(265,328)
(143,339)
4,856
(239,111)
(2,489)
408,599
576,775
71,262
(4,569)
(8,128)
14,859
(241,600)
285,942
694,541
(641)
576,134
167,766
239,028
42,926
38,357
75,144
67,016
-
14,859
747
(240,853)
(32,018)
(35,327)
(9,936)
617,260
760,523
735,293
7,026
2,120,102
$
(2,138)
-
-
573,996
187,855
252,257
3,751
$ 1,017,859 (3) $
-
-
-
239,028
133,625
157,816
1,943
532,412 $
1,812
-
-
40,169
73,828
86,529
-
-
-
-
-
-
-
67,016
35,423
39,596
12,503
14,859
147,880
135,179
(16,629)
200,526 (4) $
154,538 $ 281,289 $
(31,692)
(35,327)
(9,936)
(317,808)
181,912
63,916
5,458
(66,522)(5)
EBITDA for the New York, Washington, DC and Retail Properties segments above include income from discontinued operations and other
gains and losses that affect comparability which are described in the “Overview,” aggregating $197,998, $176,935 and $(35,875), respectively.
Excluding these items, EBITDA for the New York, Washington, DC and Retail Properties segments was $819,861, $355,477 and $236,401,
respectively.
___________________________________________________________________________
See notes on page 87.
84
Net Income and EBITDA by Segment for the Years Ended December 31, 2012, 2011 and 2010 - continued
(Amounts in thousands)
For the Year Ended December 31, 2011
Property rentals
Straight-line rent adjustments
Amortization of acquired below-
market leases, net
Total rentals
Tenant expense reimbursements
Cleveland Medical Mart development
project
Fee and other income:
BMS cleaning fees
Signage revenue
Management and leasing fees
Lease termination fees
Other income
Total revenues
Operating expenses
Depreciation and amortization
General and administrative
Cleveland Medical Mart development
project
Impairment losses, acquisition related
costs and tenant buy-outs
Total expenses
Operating income (loss)
Income applicable to Toys
Income (loss) from partially owned
entities
Income from Real Estate Fund
Interest and other investment
income (loss), net
Interest and debt expense
Net gain on disposition of wholly
owned and partially owned assets
Income (loss) before income taxes
Income tax expense
Income (loss) from continuing
operations
Income from discontinued
operations
Net income (loss)
Less net (income) loss attributable to
noncontrolling interests in:
Consolidated subsidiaries
Operating Partnership
Preferred unit distributions
of the Operating Partnership
Net income (loss) attributable to
Vornado
Interest and debt expense(2)
Depreciation and amortization(2)
Income tax expense (benefit)(2)
EBITDA(1)
$
Total
2,012,292
39,858
New York Washington, DC Properties
274,386
$
6,723
531,510 $
(2,569)
979,032
34,446
$
Toys
Other
$
136,404 $
(1,284)
- $
-
90,960
2,542
Retail
Merchandise
Mart
62,105
2,114,255
314,752
40,958
1,054,436
165,433
2,160
531,101
36,299
13,969
295,078
96,805
-
135,120
6,321
154,080
-
-
-
154,080
61,754
19,823
21,801
16,334
30,037
2,732,836
995,586
524,550
208,008
90,033
19,823
5,095
11,839
6,457
1,353,116
578,344
221,520
26,808
-
-
12,361
3,794
19,762
603,317
188,744
154,142
26,369
-
-
3,990
467
1,862
398,202
133,403
77,433
25,489
-
-
342
234
2,218
298,315
77,492
28,804
28,040
145,824
-
-
-
145,824
-
-
-
-
-
-
-
-
-
-
-
-
-
-
35,299
1,909,267
823,569
48,540
70,072
22,886
23,777
850,449
502,667
-
12,062
-
-
369,255
234,062
-
(6,381)
-
369
236,694
161,508
-
2,700
-
148,784
(526,175)
4,245
(152,386)
199
(115,456)
(32)
(70,952)
15,134
602,810
(23,925)
-
366,588
(2,084)
-
112,424
(2,690)
4,278
97,502
(34)
5,228
285,388
12,927
-
455
-
1
(31,208)
-
(17,825)
(1,572)
-
-
-
48,540
-
-
-
-
-
48,540
-
5,018
98,520
9,894
-
(28,279)
-
13
-
(262)
79,886
17,603
42,651
101,302
-
5,925
167,481
(87,595)
-
61,236
22,886
144,371
(156,173)
10,856
(4,419)
(17,545)
578,885
364,504
109,734
97,468
(19,397)
48,540
(21,964)
161,115
740,000
563
365,067
52,390
162,124
31,815
129,283
72,971
53,574
-
48,540
3,376
(18,588)
(21,786)
(41,059)
(14,853)
(10,042)
-
-
-
-
-
237
-
-
-
-
-
-
-
-
662,302
797,920
777,421
4,812
2,242,455
$
$
355,025
181,740
247,630
2,170
786,565 (3) $
162,124
134,270
181,560
3,123
481,077 $
129,520
82,608
91,040
34
303,202 (4) $
53,574
40,916
46,725
2,237
48,540
157,135
134,967
(1,132)
143,452 $ 339,510 $
(11,981)
(41,059)
(14,853)
(86,481)
201,251
75,499
(1,620)
188,649 (5)
EBITDA for the New York, Washington, DC and Retail Properties segments above include income from discontinued operations
and other gains and losses that affect comparability which are described in the “Overview,” aggregating $(8,698), $70,743 and
$73,275, respectively. Excluding these items, EBITDA for the New York, Washington, DC and Retail Properties segments was
$795,263, $410,334 and $229,927, respectively.
____________________________________
See notes on page 87.
85
Net Income and EBITDA by Segment for the Years Ended December 31, 2012, 2011 and 2010 - continued
(Amounts in thousands)
For the Year Ended December 31, 2010
New York Washington, DC Properties
256,654
$
9,401
536,947 $
6,089
944,322
51,385
$
Retail
Merchandise
Mart
Property rentals
Straight-line rent adjustments
Amortization of acquired below-
market leases, net
Total rentals
Tenant expense reimbursements
Fee and other income:
BMS cleaning fees
Signage revenue
Management and leasing fees
Lease termination fees
Other income
Total revenues
Operating expenses
Depreciation and amortization
General and administrative
Impairment losses, acquisition related
costs and tenant buy-outs
Total expenses
Operating income (loss)
Income applicable to Toys
Income (loss) from partially owned
entities
(Loss) from Real Estate Fund
Interest and other investment
income, net
Interest and debt expense
Net gain (loss) on extinguishment
of debt
Net gain on disposition of wholly
owned and partially owned assets
Income (loss) before income taxes
Income tax (expense) benefit
Income (loss) from continuing
operations
Income (loss) from discontinued
operations
Net income (loss)
Less net (income) loss attributable to
noncontrolling interests in:
Consolidated subsidiaries
Operating Partnership
Preferred unit distributions
of the Operating Partnership
Net income (loss) attributable to
Vornado
Interest and debt expense(2)
Depreciation and amortization(2)
Income tax (benefit) expense(2)
EBITDA(1)
$
Total
1,957,130
70,972
65,373
2,093,475
317,777
58,053
18,618
21,686
14,818
33,780
2,558,207
983,424
494,898
211,399
109,458
1,799,179
759,028
71,624
20,869
(303)
44,879
1,040,586
159,369
84,945
18,618
4,427
7,470
6,051
1,321,466
556,270
212,903
25,560
1,605
796,338
525,128
-
13,317
-
2,453
545,489
49,792
-
-
15,934
1,148
20,594
632,957
202,569
136,391
25,454
-
364,414
268,543
-
(564)
-
12,384
278,439
93,032
-
-
1,820
4,441
927
378,659
141,116
71,556
27,676
70,895
311,243
67,416
-
8,220
-
235,267
(539,370)
4,237
(145,406)
154
(125,272)
164
(63,265)
94,789
81,432
723,336
(22,137)
-
-
397,276
(2,167)
-
105,571
54,742
197,603
(1,679)
-
118,106
(37)
Toys
Other
$
132,120 $
301
- $
-
87,087
3,796
-
132,421
5,274
-
-
156
459
3,068
141,378
65,842
28,416
24,199
-
118,457
22,921
-
(179)
-
3
(31,208)
-
765
(7,698)
29
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
71,624
-
-
-
-
-
-
71,624
-
5,657
96,540
10,310
(26,892)
-
(651)
1,300
3,140
83,747
17,627
45,632
108,510
36,958
208,727
(124,980)
-
75
(303)
230,709
(174,219)
(10,782)
25,925
(53,575)
(18,283)
701,199
395,109
195,924
118,069
(7,669)
71,624
(71,858)
6,832
708,031
168
395,277
4,143
200,067
19,061
137,130
(20,948)
(28,617)
-
71,624
4,408
(67,450)
(4,920)
(44,033)
(11,195)
(9,559)
-
-
-
-
-
(778)
-
-
-
-
-
-
-
-
5,417
(44,033)
(11,195)
647,883
828,082
729,426
(23,036)
2,182,355
$
$
385,718
158,249
218,766
1,311
764,044 (3) $
200,067
136,174
159,283
2,027
497,551 $
136,352
79,545
86,629
37
302,563 (4) $
(28,617)
61,379
51,064
232
71,624
177,272
131,284
(45,418)
84,058 $ 334,762 $
(117,261)
215,463
82,400
18,775
199,377 (5)
EBITDA for the New York, Washington, DC and Retail Properties segments above include income from discontinued
operations and other gains and losses that affect comparability which are described in the “Overview,” aggregating $1,881,
$73,526 and $78,005, respectively. Excluding these items, EBITDA for the New York, Washington, DC and Retail Properties
segments was $762,163, $424,025 and $224,558, respectively.
___________________________
See notes on the following page.
86
Net Income and EBITDA by Segment for the Years Ended December 31, 2012, 2011 and 2010 - continued
Notes to preceding tabular information:
(1) EBITDA represents "Earnings Before Interest, Taxes, Depreciation and Amortization." We consider EBITDA a supplemental
measure for making decisions and assessing the unlevered performance of our segments as it relates to the total return on assets as
opposed to the levered return on equity. As properties are bought and sold based on a multiple of EBITDA, we utilize this measure
to make investment decisions as well as to compare the performance of our assets to that of our peers. EBITDA should not be
considered a substitute for net income. EBITDA may not be comparable to similarly titled measures employed by other
companies.
(2)
Interest and debt expense, depreciation and amortization and income tax expense (benefit) in the reconciliation of net income
(loss) to EBITDA includes our share of these items from partially owned entities.
(3) The elements of "New York" EBITDA are summarized below.
For the Year Ended December 31,
2011
2012
(Amounts in thousands)
Office(a)
Retail(b)
Alexander's(c)
Hotel Pennsylvania
Total New York
(a) 2012 includes income of $6,958, primarily from a priority return on our investment in 1290 Avenue of the Americas.
(b) 2011 includes a $23,777 expense for tenant buy-out costs.
(c) 2012 includes income of $179,934 for our share of a net gain on sale of real estate.
568,518
189,484
231,402
28,455
1,017,859
539,734
163,033
53,663
30,135
786,565
510,187
180,225
49,869
23,763
764,044
2010
$
$
$
$
$
$
(4) The elements of "Retail Properties" EBITDA are summarized below.
(Amounts in thousands)
Strip shopping centers(a)
Regional malls(b)
Total Retail properties
(a)
For the Year Ended December 31,
2011
2012
2010
$
$
172,708
27,818
200,526
$
$
210,022
93,180
303,202
$
$
180,323
122,240
302,563
Includes income from discontinued operations and other gains and losses that affect comparability, aggregating $515, $44,990 and
$15,541, respectively. Excluding these items, EBITDA was $172,193, $165,032 and $164,782, respectively.
Includes income from discontinued operations and other gains and losses that affect comparability, aggregating $(36,390), $28,285
and $62,464, respectively. Excluding these items, EBITDA was $64,208, $64,895 and $59,776, respectively.
(b)
87
Net Income and EBITDA by Segment for the Years Ended December 31, 2012, 2011 and 2010 - continued
Notes to preceding tabular information:
(5) The elements of "other" EBITDA are summarized below.
(Amounts in thousands)
Our share of Real Estate Fund:
Income before net realized/unrealized gains
Net unrealized gains
Net realized gains
Carried interest
Total
LNR (acquired in July 2010)
555 California Street
Lexington Realty Trust ("Lexington")
Other investments
Corporate general and administrative expenses(a)
Investment income and other, net(a)
Fee income from Alexander's (including a $6,423 sales commission in 2012)
Non-cash impairment loss on J.C. Penney owned shares
(Loss) income from the mark-to-market of J.C. Penney derivative position
Purchase price fair value adjustment and accelerated amortization of
discount on investment in subordinated debt of Independence Plaza
Net gain resulting from Lexington's stock issuance and asset acquisition
Impairment losses and acquisition related costs
Verde Realty impairment loss
Our share of impairment losses of partially owned entities
Net gain on sale of residential condominiums
Mezzanine loans loss reversal and net gain on disposition
Net gain from Suffolk Downs' sale of a partial interest
Real Estate Fund placement fees
Net loss on extinguishment of debt
Net income attributable to noncontrolling interests in the Operating Partnership
Preferred unit distributions of the Operating Partnership
For the Year Ended December 31,
2011
2012
2010
$
$
4,926
13,840
-
5,838
24,604
79,520
46,167
32,595
29,266
212,152
(90,567)
35,397
13,748
(224,937)
(75,815)
105,366
28,763
(17,386)
(4,936)
(4,318)
1,274
-
-
-
-
(35,327)
(9,936)
(66,522)
$
$
4,205
2,999
1,348
736
9,288
47,614
44,724
34,779
33,529
169,934
(85,922)
52,405
7,417
-
12,984
-
9,760
(5,925)
-
(13,794)
5,884
82,744
12,525
(3,451)
-
(41,059)
(14,853)
188,649
$
$
503
-
-
-
503
6,116
46,782
41,594
30,463
125,458
(90,343)
65,499
7,556
-
130,153
-
13,710
(36,958)
-
-
3,149
53,100
-
(5,937)
(10,782)
(44,033)
(11,195)
199,377
(a) The amounts in these captions (for this table only) exclude the mark-to-market of our deferred compensation plan assets and
offsetting liability.
88
Net Income and EBITDA by Segment for the Years Ended December 31, 2012, 2011 and 2010 - continued
EBITDA by Region
Below is a summary of the percentages of EBITDA by geographic region (excluding discontinued operations and other gains and
losses that affect comparability), from our New York, Washington, DC, Retail Properties and Merchandise Mart segments.
For the Year Ended December 31,
2011
2012
2010
Region:
New York City metropolitan area
Washington, DC / Northern Virginia metropolitan area
Chicago
California
Puerto Rico
Other geographies
66%
25%
4%
2%
1%
2%
100%
64%
28%
3%
2%
2%
1%
100%
63%
30%
3%
1%
2%
1%
100%
89
Results of Operations – Year Ended December 31, 2012 Compared to December 31, 2011
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 $2,766,457,000 in the year ended
December 31, 2012, compared to $2,732,836,000 in the prior year, an increase of $33,621,000. Below are the details of the increase
(decrease) by segment:
(Amounts in thousands)
Increase (decrease) due to:
Property rentals:
Acquisitions
Development (out of service)
Hotel Pennsylvania
Trade Shows
Amortization of acquired below-market
leases, net
Leasing activity (see page 77)
$
Tenant expense reimbursements:
Acquisitions/development
Operations
Cleveland Medical Mart development
project
Fee and other income:
BMS cleaning fees
Signage revenue
Management and leasing fees
Lease termination fees
Other income
Total
New York
Washington, DC
Properties
Mart
Other
Retail
Merchandise
$
15,139
(29,707)
1,113
(4,460)
(7,912)
(2,846)
(28,673)
(12,076)
(1,584)
(13,660)
$
9,528
(5,339)
1,113
-
(9,406)
37,415
33,311
(5,635)
335
(5,300)
$
5,611
(22,312)
-
-
(117)
(38,541)
(55,359)
1,081
3,362
4,443
$
-
(2,056)
-
-
933
6,516
5,393
(4,835)
(3,425)
(8,260)
$
-
-
-
(4,460)
-
(4,879)
(9,339)
-
(1,978)
(1,978)
-
-
-
-
678
(3,357)
(2,679)
(2,687)
122
(2,565)
81,154 (1)
-
-
-
81,154 (1)
-
5,830
1,069
66
(13,973)
1,808
(5,200)
4,932
1,069
544
(10,703)
(1,985)
(6,143)
-
-
414
(3,151)
4,364
1,627
-
-
(859)
(393)
(84)
(1,336)
-
-
(111)
274
(644)
(481)
898
-
78
-
157
1,133
Total increase (decrease) in revenues
$
33,621
$
21,868
$
(49,289)
$
(4,203)
$
69,356
$
(4,111)
(1) This increase in income is offset by an increase in development costs expensed in the period. See note (5) on page 91.
90
Results of Operations – Year Ended December 31, 2012 Compared to December 31, 2011 - continued
Expenses
Our expenses, which consist primarily of operating, depreciation and amortization and general and administrative expenses, were
$2,088,829,000 in the year ended December 31, 2012, compared to $1,909,267,000 in the prior year, an increase of $179,562,000.
Below are the details of the increase (decrease) by segment:
(Amounts in thousands)
Increase (decrease) due to:
Operating:
Acquisitions
Development (out of service)
Non-reimbursable expenses, including
bad-debt reserves
Hotel Pennsylvania
Trade Shows
BMS expenses
Operations
Depreciation and amortization:
Acquisitions/development
Operations
General and administrative:
Mark-to-market of deferred compensation
plan liability (1)
Real Estate Fund placement fees
Operations
Total
New York
Washington, DC
Properties
Mart
Other
Retail
Merchandise
$
7,422
(9,037)
$
6,617
(1,074)
$
3,492
(4,829)
$
-
(3,134)
$
$
-
-
(2,687)
-
7,745
2,594
(5,216)
5,139
17,486
26,133
(8,817)
2,078
(6,739)
5,151
(3,451)
(7,814)
(6,114)
(3,347)
2,594
-
4,241
15,508
24,539
2,323
2,810
5,133
-
-
3,245
3,245
2,662
-
-
-
4,454
5,779
15,060 (2)
-
-
-
(3,597)
8,329
(10,526) (3)
(5,320)
(15,846)
(614)
16
(598)
(6,630)
-
(5,216)
-
(309)
(12,155)
-
4,974
4,974
-
-
-
898
1,430
(359)
-
(402)
(402)
-
-
868
868
-
-
-
-
(1,835)
(1,835)
-
-
(9,141) (4)
(9,141)
5,151
(3,451)
(951)
749
-
80,795 (5)
-
103,031 (7)
(5,228)
11,461
Cleveland Medical Mart development
project
Impairment losses, acquisition related
costs and tenant buy-outs
80,795 (5)
-
85,487
(23,777) (6)
Total increase (decrease) in expenses
$
179,562
$
9,140
$
(9,199)
$
108,927
$
59,245
$
11,449
(1)
This increase in expense is entirely offset by a corresponding increase in income from the mark-to-market of the deferred compensation plan
assets, a component of “interest and other investment income (loss), net” on our consolidated statements of income.
(2) Primarily from a $16,820 reversal of the Stop & Shop accounts receivable reserve in the prior year.
(3) Primarily from depreciation expense on 1851 South Bell Street in the prior year, which was taken out of service for redevelopment.
(4) Primarily from lower payroll costs due to a reduction in workforce.
(5) This increase in expense is offset by the increase in development revenue in the period. See note (1) on page 90.
(6) Represents the buy-out of below-market leases in the prior year.
(7) Primarily from a non-cash impairment loss of $70,100 on the Broadway Mall.
91
Results of Operations – Year Ended December 31, 2012 Compared to December 31, 2011 - continued
Income Applicable to Toys
In the year ended December 31, 2012, we recognized net income of $14,859,000 from our investment in Toys, comprised of
$45,267,000 for our 32.6% share of Toys’ net income and $9,592,000 of management fees, partially offset by a $40,000,000 non-cash
impairment loss (see below).
In the year ended December 31, 2011, we recognized net income of $48,540,000 from our investment in Toys, comprised of
$39,592,000 for our 32.7% share of Toys’ net income and $8,948,000 of management fees.
We account for Toys on the equity method, which means our investment is increased for our pro rata share of Toys undistributed
net income. Since our acquisition in July 2005, the carrying amount of our investment has grown from $396,000,000 to $518,041,000
after we recognized our share of Toys third quarter net loss in our fourth quarter. We estimate that the fair value of our investment is
approximately $478,000,000 at December 31, 2012. We have concluded that the $40,000,000 decline in the value of our investment is
“other-than-temporary” based on, among other factors, compression of earnings multiples of comparable retailers and our inability to
forecast a recovery in the near term. Accordingly, we recognized a non-cash impairment loss of $40,000,000 in the fourth quarter.
We will continue to assess the recoverability of our investment each quarter. To the extent that the current facts don’t change, we
would recognize a non-cash impairment loss equal to our share of Toys fourth quarter net income in our 2013 first quarter. In the first
quarter of 2012, our share of Toys fourth quarter net income was approximately $114,000,000.
92
Results of Operations – Year Ended December 31, 2012 Compared to December 31, 2011 - continued
Income from Partially Owned Entities
Summarized below are the components of income (loss) from partially owned entities for the years ended December 31, 2012
and 2011.
(Amounts in thousands)
Equity in Net Income (Loss):
Alexander's (1)
Lexington (2)
LNR (see page 74) (3)
India real estate ventures (4)
Partially owned office buildings:
280 Park Avenue (acquired in May 2011)
Warner Building (5)
666 Fifth Avenue Office Condominium (acquired in
December 2011)
330 Madison Avenue
1101 17th Street
One Park Avenue (acquired in March 2011)
West 57th Street Properties
Rosslyn Plaza
Fairfax Square
Other partially owned office buildings
Other investments:
Independence Plaza Partnership
(see page 73) (6)
Verde Realty Operating Partnership (7)
Monmouth Mall
Downtown Crossing, Boston
Other investments (8)
Percentage
Ownership at
December 31, 2012
For the Year Ended
December 31,
2012
2011
32.4%
10.5%
26.2%
4.0%-36.5%
49.5%
55.0%
49.5%
25.0%
55.0%
30.3%
50.0%
43.7%-50.4%
20.0%
Various
n/a
n/a
50.0%
50.0%
Various
$
$
218,391
28,740
66,270
(5,008)
(11,510)
(10,186)
7,009
3,609
2,576
1,123
1,014
822
(132)
1,905
111,865
(5,703)
1,429
(1,309)
(2,638)
408,267
$
$
32,430
8,351
58,786
(14,881)
(18,079)
(18,875)
198
2,126
2,740
(1,142)
876
2,193
(42)
7,735
2,457
1,661
2,556
(1,461)
2,443
70,072
(1)
(2)
(3)
(4)
(5)
(6)
(7)
(8)
2012 includes $186,357 of income comprised of (i) a $179,934 net gain and (ii) $6,423 of commissions, in connection with the sale of
real estate.
2012 and 2011 include $28,763 and $9,760, respectively, of net gains resulting primarily from Lexington's stock issuances.
2011 includes $27,377 of income comprised of (i) a $12,380 income tax benefit, (ii) an $8,977 tax settlement gain and (iii) $6,020 of net
gains from asset sales.
2011 includes $13,794 for our share of an impairment loss.
2011 includes $9,022 for our share of expense, primarily for straight-line reserves and the write-off of tenant improvements in
connection with a tenant's bankruptcy.
2012 includes $105,366 of income comprised of (i) $60,396 from the accelerated amortization of discount on investment in
subordinated debt of the property and (ii) a $44,970 purchase price fair value adjustment from the exercise of a warrant to acquire 25%
of the equity interest in the property.
2012 includes a $4,936 impairment loss on our equity investment, which was sold in the third quarter.
2011 includes a $12,525 net gain from Suffolk Downs' sale of a partial interest.
93
Results of Operations – Year Ended December 31, 2012 Compared to December 31, 2011 - continued
Income from Real Estate Fund
Below are the components of the income from our Real Estate Fund for the year ended December 31, 2012 and 2011.
(Amounts in thousands)
Operating income
Net realized gain
Net unrealized gains
Income from Real Estate Fund
Less (income) attributable to noncontrolling interests
Income from Real Estate Fund attributable to Vornado (1)
For the Year Ended December 31,
2012
2011
$
$
8,575
-
55,361
63,936
(39,332)
24,604
$
$
5,500
5,391
11,995
22,886
(13,598)
9,288
___________________________________
(1) Excludes management, leasing and development fees of $2,780 and $2,695 for the years ended December 31, 2012 and 2011,
respectively, which are included as a component of "fee and other income" on our consolidated statements of income.
Interest and Other Investment (Loss) Income, net
Interest and other investment (loss) income, net (comprised of impairment losses on marketable equity securities, the mark-to-
market of derivative positions in marketable equity securities, interest income on mortgage and mezzanine loans receivable, other
interest income and dividend income) was a loss of $260,945,000 in the year ended December 31, 2012, compared to income of
$148,784,000 in the prior year, a decrease in income of $409,729,000. This decrease resulted from:
(Amounts in thousands)
Non-cash impairment loss on J.C. Penney owned shares in 2012
J.C. Penney derivative position ($75,815 mark-to-market loss in 2012, compared to a $12,984
mark-to-market gain in 2011)
Mezzanine loan loss reversal and net gain on disposition in 2011
Lower dividends and interest on marketable securities
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)
Other, net
$
(224,937)
(88,799)
(82,744)
(17,608)
5,151
(792)
(409,729)
$
Interest and Debt Expense
Interest and debt expense was $500,361,000 in the year ended December 31, 2012, compared to $526,175,000 in the prior year, a
decrease of $25,814,000. This decrease was primarily due to (i) $27,077,000 from the redemption of our exchangeable and
convertible senior debentures in April 2012 and November 2011, respectively, (ii) $15,604,000 of higher capitalized interest and (iii)
$12,082,000 from the refinancing of 350 Park Avenue in January 2012 (of which $7,274,000 was due to a lower rate and $4,808,000
was due to a lower outstanding loan balance), partially offset by (iv) $18,833,000 from the issuance of $400,000,000 of senior
unsecured notes in November 2011, (v) $6,093,000 from the refinancing of 100 West 33rd Street in March 2012 and (vi) $4,715,000
from borrowings under our revolving credit facilities.
Net Gain on Disposition of Wholly Owned and Partially Owned Assets
Net gain on disposition of wholly owned and partially owned assets was $13,347,000 in the year ended December 31, 2012,
compared to $15,134,000, in the prior year and resulted primarily from the sale of a land parcel in 2012 and sales of marketable
securities and residential condominiums in 2012 and 2011.
Income Tax Expense
Income tax expense was $8,132,000 in the year ended December 31, 2012, compared to $23,925,000 in the prior year, a decrease
of $15,793,000. This decrease resulted primarily from the reversal of a $12,038,000 tax liability in the current year, upon liquidation
of a taxable REIT subsidiary that was formed in connection with the acquisition of our 555 California Street property.
94
Results of Operations – Year Ended December 31, 2012 Compared to December 31, 2011 - continued
Income from Discontinued Operations
We have reclassified the revenues and expenses of the properties that were sold and that are currently held for sale to “income
from discontinued operations” and the related assets and liabilities to “assets related to discontinued operations” and “liabilities related
to discontinued operations” for all the periods presented in the accompanying financial statements. The table below sets forth the
combined results of assets related to discontinued operations for the years ended December 31, 2012 and 2011.
(Amounts in thousands)
Total revenues
Total expenses
Net gains on sale of real estate
Gain on sale of Canadian Trade Shows, net of $11,448 of
income taxes
Impairment losses
Net gain on extinguishment of High Point debt
Income from discontinued operations
For the Year Ended
December 31,
2012
2011
$
$
147,404
102,479
44,925
245,799
19,657
(24,439)
-
285,942
$
$
230,314
175,930
54,384
51,623
-
(28,799)
83,907
161,115
Net Income Attributable to Noncontrolling Interests in Consolidated Subsidiaries
Net income attributable to noncontrolling interests in consolidated subsidiaries was $32,018,000 in the year ended December 31,
2012, compared to $21,786,000 in the prior year, an increase of $10,232,000. This increase resulted primarily from a $25,734,000
increase in income allocated to the noncontrolling interests of our Real Estate Fund, partially offset by a $13,222,000 priority return
on our investment in 1290 Avenue of the Americas and 555 California Street.
Net Income Attributable to Noncontrolling Interests in the Operating Partnership
Net income attributable to noncontrolling interests in the Operating Partnership was $35,327,000 in the year ended December 31,
2012, compared to $41,059,000 in the prior year, a decrease of $5,732,000. This decrease resulted primarily from lower net income
subject to allocation to unitholders.
Preferred Unit Distributions of the Operating Partnership
Preferred unit distributions of the Operating Partnership were $9,936,000 in the year ended December 31, 2012, compared to
$14,853,000 in the year ended December 31, 2011, a decrease of $4,917,000. This decrease resulted primarily from the redemption of
the 7.0% Series D-10 and 6.75% Series D-14 cumulative redeemable preferred units in July 2012.
Preferred Share Dividends
Preferred share dividends were $76,937,000 in the year ended December 31, 2012, compared to $65,531,000 in the prior year, an
increase of $11,406,000. This increase resulted from the issuance of $246,000,000 of 6.875% Series J cumulative redeemable
preferred shares in April 2011 and $300,000,000 of 5.70% Series K cumulative redeemable preferred shares in July 2012, partially
offset by the redemption of $75,000,000 of 7.0% Series E cumulative redeemable preferred shares in August 2012.
Discount on Preferred Share and Unit Redemptions
Discount on preferred share and unit redemptions were $8,948,000 in the year ended December 31, 2012 and resulted primarily
from the redemption of all of the 7.0% Series D-10 and 6.75% Series D-14 cumulative redeemable preferred units, compared to a
$5,000,000 discount in the prior year, which resulted from the redemption of the Series D-11 cumulative redeemable preferred units.
95
Results of Operations – Year Ended December 31, 2012 Compared to December 31, 2011 - 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 because we use them to (i) facilitate meaningful comparisons of
the operational performance of our properties and segments, (ii) make decisions on whether to buy, sell or refinance properties, and
(iii) compare the performance of our properties and segments to those of our peers. Same store EBITDA should not be considered as
an alternative to net income or cash flow from operations and may not be comparable to similarly titled measures employed by other
companies.
Below are the same store EBITDA results on a GAAP and cash basis for each of our segments for the year ended December 31,
2012, compared to the year ended December 31, 2011.
(Amounts in thousands)
EBITDA for the year ended December 31, 2012
Add-back: non-property level overhead expenses
included above
Less: EBITDA from acquisitions, dispositions and other
non-operating income or expenses
GAAP basis same store EBITDA for the year ended
December 31, 2012
Less: Adjustments for straight-line rents, amortization of
below-market leases, net and other non-cash adjustments
Cash basis same store EBITDA for the year ended
December 31, 2012
EBITDA for the year ended December 31, 2011
Add-back: non-property level overhead expenses
included above
Less: EBITDA from acquisitions, dispositions and other
non-operating income or expenses
GAAP basis same store EBITDA for the year ended
December 31, 2011
Less: Adjustments for straight-line rents, amortization of
below-market leases, net and other non-cash adjustments
Cash basis same store EBITDA for the year ended
December 31, 2011
Increase (decrease) in GAAP basis same store EBITDA for
the year ended December 31, 2012 over the
year ended December 31, 2011
Increase (decrease) in Cash basis same store EBITDA for
the year ended December 31, 2012 over the
year ended December 31, 2011
$
$
$
$
$
$
New York
1,017,859
Washington, DC
532,412
$
Retail
Properties
Merchandise
Mart
$
200,526
$
154,538
30,053
27,237
23,654
18,899
(243,481)
(183,889)
33,082
(93,679)
804,431
375,760
257,262
(94,560)
(5,573)
(15,676)
709,871
786,565
$
$
370,187
$
241,586
481,077
$
303,202
$
$
79,758
(1,655)
78,103
143,452
26,808
26,369
25,489
28,040
(24,533)
(96,519)
(74,505)
(95,187)
788,840
410,927
254,186
(93,053)
(357)
(15,685)
76,305
1,284
695,787
$
410,570
$
238,501
$
77,589
15,591
$
(35,167)
$
3,076
$
3,453
14,084
$
(40,383)
$
3,085
$
514
% increase (decrease) in GAAP basis same store EBITDA
% increase (decrease) in Cash basis same store EBITDA
2.0%
2.0%
(8.6%)
(9.8%)
1.2%
1.3%
4.5%
0.7%
96
Results of Operations – Year Ended December 31, 2011 Compared to December 31, 2010
Revenues
Our revenues, which consist of property rentals, tenant expense reimbursements, hotel revenues, trade shows revenues,
amortization of acquired below-market leases, net of above-market leases and fee income, were $2,732,836,000 in the year ended
December 31, 2011, compared to $2,558,207,000 in the year ended December 31, 2010, an increase of $174,629,000. Below are the
details of the increase (decrease) by segment:
(Amounts in thousands)
Increase (decrease) due to:
Property rentals:
Acquisitions, sale of partial interests
and other
Development (out of service)
Hotel Pennsylvania
Trade Shows
Amortization of acquired below-market
leases, net
Leasing activity (see page 77)
$
Tenant expense reimbursements:
Acquisitions/development, sale of partial
interests and other
Operations
Total
New York
Washington, DC
Properties
Mart
Other
Retail
Merchandise
$
(10,242)
5,513
10,006
3,062
(3,268)
15,709
20,780
(5,094)
2,069
(3,025)
$
(1,608)
-
10,006
-
(3,921)
9,373
13,850
5,658
406
6,064
(26,936) (1) $
6,100
-
-
(293)
6,741
(14,388)
13,458 (2) $
(587)
-
-
1,585
2,183
16,639
(12,999) (1)
(494)
(13,493)
2,573 (2)
1,200
3,773
$
-
-
-
3,062
-
(363)
2,699
-
1,047
1,047
4,844
-
-
-
(639)
(2,225)
1,980
(326)
(90)
(416)
Cleveland Medical Mart development
project
154,080 (3)
-
Fee and other income:
BMS cleaning fees
Signage revenue
Management and leasing fees
Lease termination fees
Other
3,701
1,205
115
1,516
(3,743)
2,794
5,088
1,205
668
4,369
406
11,736
-
-
-
(3,573) (5)
2,646
(832)
(1,759)
-
154,080 (3)
-
-
-
2,170
(3,974)
935
(869)
-
-
186
(225)
(850)
(889)
(1,387) (4)
-
664
(1,300)
(3,402)
(5,425)
Total increase (decrease) in revenues
$
174,629
$
31,650
$
(29,640)
$
19,543
$
156,937
$
(3,861)
(1) Primarily from the deconsolidation of the Warner Building and 1101 17th Street resulting from the sale of a partial interest.
(2) Primarily from the consolidation of the San Jose Strip Shopping Center upon acquisition of the remaining 55% interest we did not previously
own.
(3) This income is offset by $145,824 of development cost expensed in the period. See note (7) on page 98.
(4) Primarily from the elimination of inter-company fees from operating segments upon consolidation.
(5) Primarily from leasing fees in the prior year in connection with our management of a development project.
97
Results of Operations – Year Ended December 31, 2011 Compared to December 31, 2010 - continued
Expenses
Our expenses, which consist primarily of operating, depreciation and amortization and general and administrative expenses, were
$1,909,267,000 in the year ended December 31, 2011, compared to $1,799,179,000 in the year ended December 31, 2010, an increase
of $110,088,000. Below are the details of the increase (decrease) by segment:
Total
New York
Washington, DC
Properties
Mart
Other
Retail
Merchandise
$
$
(374)
1,006
$
2,341
-
(14,123) (1) $
(248)
11,734 (2) $
1,254
$
-
-
(326)
-
(Amounts in thousands)
Increase (decrease) due to:
Operating:
Acquisitions, sale of partial interests
and other
Development projects placed into service
Non-reimbursable expenses, including
bad-debt reserves
Hotel Pennsylvania
Trade Shows
BMS expenses
Operations
Depreciation and amortization:
Acquisitions/development, sale of
partial interests and other
Operations
General and administrative:
Mark-to-market of deferred compensation
plan liability (5)
Real Estate Fund placement fees
Operations
(16,498)
3,330
(316)
3,262
21,752
12,162
(4,466)
34,118
29,652
(6,391)
(3,031)
6,031
(3,391)
3,412
3,330
-
6,349
6,642
22,074
786
7,831
8,617
-
-
1,248
1,248
Cleveland Medical Mart development
project
Impairment losses, acquisition related
costs and tenant buy-outs
145,824 (7)
-
(74,159)
22,172 (8)
(2,133)
-
-
-
2,679
(13,825)
(24,338) (3)
-
-
-
3,637
(7,713)
6,561
-
(316)
-
5,405
11,650
(10,261) (1)
28,012 (4)
17,751
5,009 (2)
868
5,877
-
388
388
-
-
(3,087)
3,389
(24)
-
(2,981)
(2,981)
-
-
915
915
-
-
-
-
(2,187)
(2,187)
-
-
3,841 (6)
3,841
(6,391)
(3,031)
2,214
(7,208)
-
145,824 (7)
-
(70,526) (9)
5,228
(31,033) (10)
Total increase (decrease) in expenses
$
110,088
$
54,111
$
4,841
$
(74,549)
$
166,931
$
(41,246)
(1)
Primarily from the deconsolidation of the Warner Building and 1101 17th Street resulting from the sale of a partial interest.
(2) Primarily from the consolidation of the San Jose Strip Shopping Center upon acquisition of the remaining 55% interest we did not previously
own.
Includes a $16,820 reversal for the Stop & Shop accounts receivable reserve.
Includes $25,000 of depreciation expense on 1851 South Bell Street, which was taken out of service for redevelopment.
(3)
(4)
(5) The decrease in expense is entirely offset by a corresponding decrease in the income from the mark-to-market of the deferred compensation
plan assets, a component of "interest and investment (loss) income, net on our consolidated statements of income.
(6)
Includes $4,226 of restructuring costs.
(7) This expense is entirely offset by development revenue in the year. See note (3) on page 97.
(8)
(9)
Primarily from the buy-out of below market leases.
Primarily from a $64,500 non-cash impairment loss on the Springfield Mall in 2010.
(10) Primarily from $30,013 of impairment losses on condominium units held for sale in 2010.
98
Results of Operations – Year Ended December 31, 2011 Compared to December 31, 2010 - continued
Income Applicable to Toys
In the year ended December 31, 2011, we recognized net income of $48,540,000 from our investment in Toys, comprised of
$39,592,000 for our 32.7% share of Toys’ net income and $8,948,000 of management fees.
In the year ended December 31, 2010, we recognized net income of $71,624,000 from our investment in Toys, comprised of
$61,819,000 for our 32.7% share of Toys’ net income and $9,805,000 of management fees.
Income from Partially Owned Entities
Summarized below are the components of income (loss) from partially owned entities for the years ended December 31, 2011
and 2010.
(Amounts in thousands)
Equity in Net Income (Loss):
Alexander's
Lexington (1)
LNR (2)
India real estate ventures (3)
Partially owned office buildings:
280 Park Avenue (acquired in May 2011)
Warner Building (4)
666 Fifth Avenue Office Condominium (acquired in
December 2011)
330 Madison Avenue
1101 17th Street
One Park Avenue (acquired in March 2011)
West 57th Street Properties (5)
Rosslyn Plaza
Fairfax Square
Other partially owned office buildings
Other equity method investments:
Verde Realty Operating Partnership
Independence Plaza Partnership
(acquired in June 2011)
Monmouth Mall
Downtown Crossing, Boston
Other investments (6)
Percentage
Ownership at
December 31, 2011
For the Year Ended
December 31,
2011
2010
32.4%
12.0%
26.2%
4.0%-36.5%
49.5%
55.0%
49.5%
25.0%
55.0%
30.3%
50.0%
43.7%-50.4%
20.0%
Various
8.3%
51.0%
50.0%
50.0%
Various
$
$
32,430
8,351
58,786
(14,881)
(18,079)
(18,875)
198
2,126
2,740
(1,142)
876
2,193
(42)
7,735
1,661
2,457
2,556
(1,461)
2,443
70,072
$
$
27,615
11,018
1,973
2,581
-
(344)
-
2,059
416
-
(10,990)
(2,419)
(28)
2,405
(537)
-
1,952
(1,155)
(13,677)
20,869
(1)
(2)
(3)
(4)
(5)
(6)
Includes net gains of $9,760 and $13,710 in 2011 and 2010, respectively, resulting from Lexington's stock issuances.
2011 includes $27,377 of income comprised of (i) a $12,380 income tax benefit, (ii) an $8,977 tax settlement gain and (iii) $6,020 of
net gains from asset sales.
2011 includes $13,794 for our share of an impairment loss.
2011 includes $9,022 for our share of expense, primarily for straight-line rent reserves and the write-off of tenant-improvements in
connection with a tenant's bankruptcy.
2010 includes $11,481 of impairment losses.
2011 includes a $12,525 net gain from Suffolk Downs' sale of a partial interest.
99
Results of Operations – Year Ended December 31, 2011 Compared to December 31, 2010 - continued
Income (loss) from Real Estate Fund
Below are the components of the income from our Real Estate Fund for the year ended December 31, 2011 and 2010.
(Amounts in thousands)
Operating income (loss)
Net realized gain
Net unrealized gains
Income (loss) from Real Estate Fund
Less (income) loss attributable to noncontrolling interests
Income from Real Estate Fund attributable to Vornado (1)
For the Year Ended December 31,
2011
2010
$
$
5,500
5,391
11,995
22,886
(13,598)
9,288
$
$
(303)
-
-
(303)
806
503
___________________________________
(1) Excludes management, leasing and development fees of $2,695 and $248 for the years ended December 31, 2011 and 2010,
respectively, which are included as a component of "fee and other income" on our consolidated statements of income.
Interest and Other Investment (Loss) Income, net
Interest and other investment income, net was $148,784,000 in the year ended December 31, 2011, compared to $235,267,000 in
the year ended December 31, 2010, a decrease of $86,483,000. This decrease resulted from:
(Amounts in thousands)
J.C. Penney derivative position (mark-to-market gain of $12,984 in 2011, compared to $130,153 in 2010)
Mezzanine loans ($82,744 loss reversal and net gain on disposition in 2011, compared to $53,100 loss
reversal in 2010)
Decrease in value of investments in the deferred compensation plan (offset by a corresponding decrease in
the liability for plan assets in general and administrative expenses)
Other, net
Interest and Debt Expense
$
(117,169)
29,644
(6,391)
7,433
(86,483)
$
Interest and debt expense was $526,175,000 in the year ended December 31, 2011, compared to $539,370,000 in the year ended
December 31, 2010, a decrease of $13,195,000. This decrease was primarily due to savings of (i) $22,865,000 applicable to the
repurchase and retirement of convertible senior debentures and repayment of senior unsecured notes, (ii) $18,157,000 from the
repayment of the Springfield Mall mortgage at a discount in December 2010 and (iii) $14,856,000 from the deconsolidation of the
Warner Building resulting from the sale of a 45% interest in October 2010, partially offset by (iv) $17,204,000 from the issuance of
$660,000,000 of cross-collateralized debt secured by 40 of our strip shopping centers in August 2010, (v) $14,777,000 from the
financing of 2121 Crystal Drive and Two Penn Plaza in the first quarter of 2011, (vi) $5,057,000 from the issuance of $500,000,000 of
senior unsecured notes in March 2010 and (vii) $3,854,000 from the consolidation of the San Jose Shopping Center resulting from the
October 2010 acquisition of the 55% interest we did not previously own.
Net Gain on Extinguishment of Debt
In the year ended December 31, 2010, we recognized a $94,789,000 net gain on the extinguishment of debt, primarily from our
acquisition of the mortgage loan secured by the Springfield Mall.
Net Gain on Disposition of Wholly Owned and Partially Owned Assets
In the year ended December 31, 2011, we recognized a $15,134,000 net gain on disposition of wholly owned and partially owned
assets (primarily from the sale of residential condominiums and marketable securities), compared to a $81,432,000 net gain in the year
ended December 31, 2010 (primarily from the sale of a 45% interest in the Warner Building and sales of marketable securities).
100
Results of Operations – Year Ended December 31, 2011 Compared to December 31, 2010 - continued
Income Tax Expense
Income tax expense was $23,925,000 in the year ended December 31, 2011, compared to $22,137,000 in the year ended
December 31, 2010 an increase of $1,788,000. This increase resulted primarily from higher taxable income of our taxable REIT
subsidiaries.
Income from Discontinued Operations
The table below sets forth the combined results of operations of assets related to discontinued operations for the years ended
December 31, 2011 and 2010.
(Amounts in thousands)
Total revenues
Total expenses
Net gain on extinguishment of High Point debt
Net gains on sale of real estate
Impairment losses and litigation loss accrual
Income from discontinued operations
For the Year Ended December 31,
2011
2010
$
$
230,314
175,930
54,384
83,907
51,623
(28,799)
161,115
$
$
267,008
227,626
39,382
-
2,506
(35,056)
6,832
Net Income Attributable to Noncontrolling Interests in Consolidated Subsidiaries
Net income attributable to noncontrolling interests in consolidated subsidiaries was $21,786,000 in the year ended December 31,
2011, compared to $4,920,000 in the year ended December 31, 2010, an increase of $16,866,000. This resulted primarily from a
$14,404,000 increase in income allocated to the noncontrolling interests of our Real Estate Fund.
Net Income Attributable to Noncontrolling Interests in the Operating Partnership
Net income attributable to noncontrolling interests in the Operating Partnership was $41,059,000 in the year ended December
31, 2011, compared to $44,033,000 in the year ended December 31, 2010, a decrease of $2,974,000.
Preferred Unit Distributions of the Operating Partnership
Preferred unit distributions of the Operating Partnership were $14,853,000 in the year ended December 31, 2011, compared to
$11,195,000 in the year ended December 31, 2010, an increase of $3,658,000.
Preferred Share Dividends
Preferred share dividends were $65,531,000 in the year ended December 31, 2011, compared to $55,534,000 in the year ended
December 31, 2010, an increase of $9,997,000. This increase resulted from the issuance of $246,000,000 of 6.875% Series J
cumulative redeemable preferred shares in 2011, partially offset by the redemption of $40,000,000 7.0% Series D-10 cumulative
redeemable preferred shares in 2010.
Discount on Preferred Share and Unit Redemptions
In the year ended December 31, 2011, we recognized a $5,000,000 discount from the redemption of 1,000,000 Series D-11
cumulative redeemable preferred units with a par value of $25.00 per unit, for an aggregate of $20,000,000 in cash, compared to a
$4,382,000 discount in the year ended December 31, 2010 from the redemption of 1,600,000 Series D-10 cumulative redeemable
preferred shares with a par value of $25.00 per share, for an aggregate of $35,618,000.
101
Results of Operations – Year Ended December 31, 2011 Compared to December 31, 2010 - continued
Same Store EBITDA
Below are the same store EBITDA results on a GAAP and cash basis for each of our segments for the year ended December 31,
2011, compared to the year ended December 31, 2010.
$
$
$
(Amounts in thousands)
EBITDA for the year ended December 31, 2011
Add-back: non-property level overhead expenses
included above
Less: EBITDA from acquisitions, dispositions
and other non-operating income or expenses
GAAP basis same store EBITDA for the year ended
December 31, 2011
Less: Adjustments for straight-line rents, amortization of
below-market leases, net and other non-cash adjustments
Cash basis same store EBITDA for the year ended
December 31, 2011
EBITDA for the year ended December 31, 2010
Add-back: non-property level overhead expenses
included above
Less: EBITDA from acquisitions, dispositions
and other non-operating income or expenses
GAAP basis same store EBITDA for the year ended
December 31, 2010
Less: Adjustments for straight-line rents, amortization of
below-market leases, net and other non-cash adjustments
Cash basis same store EBITDA for the year ended
New York
Washington, DC
481,077
$
786,565
Retail
Properties
Merchandise
Mart
$
303,202
$
143,452
26,808
26,369
25,489
28,040
(25,330)
(49,502)
(45,324)
(72,601)
788,043
457,944
283,367
(93,241)
694,802
764,044
(274)
(15,862)
$
$
457,670
497,551
$
$
267,505
302,563
$
$
25,560
25,454
27,676
98,891
2,642
101,533
84,058
24,199
(14,955)
(69,278)
(52,195)
(9,866)
774,649
453,727
278,044
98,391
(105,013)
(4,005)
(16,301)
(307)
December 31, 2010
$
669,636
$
449,722
$
261,743
$
98,084
Increase in GAAP basis same store EBITDA for
the year ended December 31, 2011 over the
year ended December 31, 2010
Increase in Cash basis same store EBITDA for
the year ended December 31, 2011 over the
year ended December 31, 2010
$
$
13,394
$
4,217
$
5,323
$
500
25,166
$
7,948
$
5,762
$
3,449
% increase in GAAP basis same store EBITDA
% increase in Cash basis same store EBITDA
1.7%
3.8%
0.9%
1.8%
1.9%
2.2%
0.5%
3.5%
102
Supplemental Information
Net Income and EBITDA by Segment for the Three Months Ended December 31, 2012 and 2011
Effective January 1, 2012, as a result of certain organizational and operational changes, we redefined the New York business segment to
encompass all of our Manhattan assets by including the 1.0 million square feet in 21 freestanding Manhattan street retail assets (formerly in our
Retail segment), and the Hotel Pennsylvania and our interest in Alexander’s, Inc. (formerly in our Other segment). Accordingly, we have reclassified
the prior period segment financial results to conform to the current year presentation. See note (3) on page 105 for the elements of the New York
segment’s EBITDA. Below is a summary of net income and a reconciliation of net income to EBITDA(1) by segment for the three months ended
December 31, 2012 and 2011.
(Amounts in thousands)
For the Three Months Ended December 31, 2012
Property rentals
Straight-line rent adjustments
Amortization of acquired below-
market leases, net
Total rentals
Tenant expense reimbursements
Cleveland Medical Mart development
project
Fee and other income:
BMS cleaning fees
Signage revenue
Management and leasing fees
Lease termination fees
Other income
Total revenues
Operating expenses
Depreciation and amortization
General and administrative
Cleveland Medical Mart development
project
Impairment losses, acquisition related
costs and tenant buy-outs
Total expenses
Operating income (loss)
(Loss) applicable to Toys
Income (loss) from partially owned
entities
Income from Real Estate Fund
Interest and other investment
(loss) income, net
Interest and debt expense
Net gain on disposition of wholly
owned and partially owned assets
Income (loss) before income taxes
Income tax benefit (expense)
Income (loss) from continuing
operations
Income (loss) from discontinued
operations
Net income (loss)
Less net (income) loss attributable to
noncontrolling interests in:
Consolidated subsidiaries
Operating Partnership
Preferred unit distributions
of the Operating Partnership
Net income (loss) attributable to
Vornado
Interest and debt expense(2)
Depreciation and amortization(2)
Income tax (benefit) expense(2)
EBITDA(1)
Total
$
503,820
13,681
14,668
532,169
75,734
51,220
18,147
6,640
5,333
1,189
7,222
697,654
263,160
131,128
51,316
49,492
116,472
611,568
86,086
(73,837)
354,776
26,364
(237,961)
(122,674)
8,491
41,245
9,187
New York Washington, DC Properties
70,272
$
2,120
111,513 $
1,345
268,491
9,783
$
Retail
Merchandise
Mart
7,776
286,050
41,272
-
24,489
6,640
1,602
802
1,023
361,878
154,973
58,262
8,073
-
-
221,308
140,570
-
187,428
-
1,064
(37,767)
-
291,295
(1,011)
506
113,364
10,271
4,957
77,349
22,559
-
-
-
-
2,993
387
5,280
132,295
50,600
30,901
7,388
-
-
491
-
417
100,816
35,232
19,545
4,851
-
-
-
88,889
43,406
-
(1,041)
-
29
(30,166)
-
12,228
(373)
103,400
163,028
(62,212)
-
418
-
3
(13,131)
8,491
(66,431)
-
Toys
Other
$
31,038 $
183
- $
-
22,506
250
-
31,221
641
51,220
-
-
43
-
353
83,478
16,219
12,205
4,586
49,492
-
82,502
976
-
169
-
-
(7,926)
-
(6,781)
(845)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(73,837)
-
-
-
-
-
(73,837)
-
1,429
24,185
991
-
(6,342)
-
204
-
149
19,187
6,136
10,215
26,418
-
13,072
55,841
(36,654)
-
167,802
26,364
(239,057)
(33,684)
-
(115,229)
11,416
50,432
290,284
11,855
(66,431)
(7,626)
(73,837)
(103,813)
41,461
91,893
(1)
290,283
36,787
48,642
8,286
(58,145)
6,272
(1,354)
-
(73,837)
(9,883)
(113,696)
(1,090)
(3,882)
(786)
86,135
193,258
182,499
(43,050)
418,842
$
5,128
-
-
-
-
-
1,504
-
-
-
-
-
-
-
-
(7,722)
(3,882)
(786)
295,411
47,561
63,777
1,074
407,823 (3) $
$
48,642
34,139
34,829
411
118,021 $
(56,641)
15,789
20,778
-
(20,074)(4) $
(1,354)
8,931
12,630
845
(73,837)
44,492
34,808
(34,611)
21,052 $ (29,148) $
(126,086)
42,346
15,677
(10,769)
(78,832)(5)
EBITDA for the New York, Washington, DC and Retail Properties segments above include income from discontinued operations and other
gains and losses that affect comparability which are described in the “Overview,” aggregating $189,571, $37,348 and $(82,967), respectively.
Excluding these items, EBITDA for the New York, Washington, DC and Retail Properties segments was $218,252, $80,673 and $62,893,
respectively.
__________________________
See notes on page 105.
103
Supplemental Information – continued
Net Income and EBITDA by Segment for the Three Months Ended December 31, 2012 and 2011 - continued
(Amounts in thousands)
For the Three Months Ended December 31, 2011
New York Washington, DC Properties
69,043
$
1,989
130,601 $
(431)
251,146
11,810
$
Retail
Merchandise
Mart
Property rentals
Straight-line rent adjustments
Amortization of acquired below-
market leases, net
Total rentals
Tenant expense reimbursements
Cleveland Medical Mart development
project
Fee and other income:
BMS cleaning fees
Signage revenue
Management and leasing fees
Lease termination fees
Other income
Total revenues
Operating expenses
Depreciation and amortization
General and administrative
Cleveland Medical Mart development
project
Impairment losses, acquisition related
costs and tenant buy-outs
Total expenses
Operating income (loss)
(Loss) applicable to Toys
Income (loss) from partially owned
entities
(Loss) from Real Estate Fund
Interest and other investment
income (loss), net
Interest and debt expense
Net gain on disposition of wholly
owned and partially owned assets
Income (loss) before income taxes
Income tax expense
Income (loss) from continuing
operations
(Loss) income from discontinued
operations
Net income (loss)
Less net (income) loss attributable to
noncontrolling interests in:
Consolidated subsidiaries
Operating Partnership
Preferred unit distributions
of the Operating Partnership
Net income (loss) attributable to
Vornado
Interest and debt expense(2)
Depreciation and amortization(2)
Income tax (benefit) expense(2)
EBITDA(1)
Total
$
503,824
13,598
12,979
530,401
75,745
45,877
15,275
5,077
5,141
3,856
8,587
689,959
226,885
150,903
53,940
44,187
12,844
488,759
201,200
(32,254)
15,037
(2,605)
53,698
(131,583)
7,159
110,652
(5,377)
7,785
270,741
39,512
-
23,120
5,077
1,535
2,663
3,066
345,714
142,825
56,489
6,399
-
7,219
212,932
132,782
-
(1,258)
-
1,076
(38,005)
-
94,595
(447)
563
130,733
9,057
2,972
74,004
23,817
-
-
-
-
2,732
781
4,446
147,749
46,533
57,202
6,873
-
-
922
178
690
99,611
18,504
19,019
5,443
-
-
-
110,608
37,141
-
(343)
-
334
43,300
56,311
-
1,479
-
80
(29,485)
(33)
(17,528)
-
7,393
(635)
4,278
44,507
(29)
Toys
Other
$
30,032 $
(23)
- $
-
23,002
253
-
30,009
1,333
45,877
-
-
(6)
234
427
77,874
15,411
7,885
5,672
44,187
2,188
75,343
2,531
-
163
-
-
(7,866)
-
(5,172)
(49)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(32,254)
-
-
-
-
-
(32,254)
-
1,659
24,914
2,026
-
(7,845)
-
(42)
-
(42)
19,011
3,612
10,308
29,553
-
3,103
46,576
(27,565)
-
14,996
(2,605)
52,575
(38,699)
2,881
1,583
(4,217)
105,275
94,148
6,758
44,478
(5,221)
(32,254)
(2,634)
(8,288)
96,987
165
94,313
1,116
7,874
6,948
51,426
(17,467)
(22,688)
-
(32,254)
950
(1,684)
(1,143)
(4,674)
(3,874)
87,296
198,252
215,683
(37,323)
463,908
$
(3,227)
-
-
-
-
-
41
-
-
-
-
-
-
-
-
91,086
49,492
66,019
526
207,123 (3) $
$
7,874
34,253
63,270
743
106,140 $
51,467
20,464
22,746
29
94,706 (4) $
(22,688)
8,891
12,093
26
(1,678) $
(32,254)
35,589
33,105
(31,046)
5,394 $
2,043
(4,674)
(3,874)
(8,189)
49,563
18,450
(7,601)
52,223 (5)
EBITDA for the New York, Washington, DC and Retail Properties segments above include income from discontinued
operations and other gains and losses that affect comparability which are described in the “Overview,” aggregating $(3,724),
$5,526 and $33,037, respectively. Excluding these items, EBITDA for the New York, Washington, DC and Retail Properties
segments was $210,847, $100,614 and $61,669, respectively.
__________________________
See notes on the following page.
104
Supplemental Information – continued
Net Income and EBITDA by Segment for the Three Months Ended December 31, 2012 and 2011 - continued
Notes to preceding tabular information:
(1) EBITDA represents "Earnings Before Interest, Taxes, Depreciation and Amortization." We consider EBITDA a
supplemental measure for making decisions and assessing the unlevered performance of our segments as it relates to the total
return on assets as opposed to the levered return on equity. As properties are bought and sold based on a multiple of
EBITDA, we utilize this measure to make investment decisions as well as to compare the performance of our assets to that of
our peers. EBITDA should not be considered a substitute for net income. EBITDA may not be comparable to similarly titled
measures employed by other companies.
(2)
Interest and debt expense, depreciation and amortization and income tax (benefit) expense in the reconciliation of net income
(loss) to EBITDA includes our share of these items from partially owned entities.
(3) The elements of "New York" EBITDA are summarized below.
For the Three Months Ended December 31,
2012
(Amounts in thousands)
Office(a)
141,325
Retail(b)
40,414
Alexander's(c)
13,631
Hotel Pennsylvania
11,753
Total New York
207,123
(a) 2012 includes income of $7,599 from a priority return on our investment in 1290 Avenue of the Americas.
(b) 2011 includes a $7,219 expense for tenant buy-out costs
(c) 2012 includes income of $179,934 for our share of a net gain on sale of real estate.
151,613
52,576
191,925
11,709
407,823
2011
$
$
$
$
(4) The elements of "Retail Properties" EBITDA are summarized below.
(Amounts in thousands)
Strip shopping centers(a)
Regional malls(b)
Total Retail properties
(a)
For the Three Months Ended December 31,
2012
2011
$
$
24,154
(44,228)
(20,074)
$
$
68,269
26,437
94,706
Includes income from discontinued operations and other gains and losses that affect comparability, aggregating
$(21,520) and $25,281, respectively. Excluding these items, EBITDA was $45,674 and $42,988, respectively.
(b)
Includes income from discontinued operations and other gains and losses that affect comparability, aggregating
$(61,447) and $7,756, respectively. Excluding these items, EBITDA was $17,219 and $18,681, respectively.
105
Supplemental Information – continued
Net Income and EBITDA by Segment for the Three Months Ended December 31, 2012 and 2011 - continued
Notes to preceding tabular information:
(5)
The elements of "other" EBITDA from continuing operations are summarized below.
(Amounts in thousands)
Our share of Real Estate Fund:
Income before net realized/unrealized gains
Net unrealized gain (loss)
Net realized gain
Carried interest
Total
LNR
555 California Street
Lexington
Other investments
Corporate general and administrative expenses(a)
Investment income and other, net(a)
Fee income from Alexander's (including a $6,423 sales commission in 2012)
Non-cash impairment loss on J.C. Penney owned shares
(Loss) income from the mark-to-market of J.C. Penney derivative position
Purchase price fair value adjustment and accelerated amortization of discount on
investment in subordinated debt of Independence Plaza
Net gain resulting from Lexington's stock issuance and asset acquisition
Impairment losses and acquisition related costs
Our share of impairment losses of partially owned entities
Net gain from Suffolk Downs' sale of a partial interest
Net income attributable to noncontrolling interests in the Operating Partnership
Preferred unit distributions of the Operating Partnership
For the Three Months
Ended December 31,
2012
2011
$
$
764
5,456
-
5,838
12,058
33,514
14,761
7,815
(2,678)
65,470
(23,627)
6,532
8,131
(224,937)
(22,472)
105,366
28,763
(13,072)
(4,318)
-
(3,882)
(786)
(78,832)
$
$
1,655
(1,803)
577
(929)
(500)
9,045
12,116
6,809
3,518
30,988
(22,958)
15,121
1,872
-
40,120
-
-
(3,103)
(13,794)
12,525
(4,674)
(3,874)
52,223
(a)
The amounts in these captions (for this table only) exclude the mark-to-market of our deferred compensation plan assets
and offsetting liability.
106
Supplemental Information – continued
Net Income and EBITDA by Segment for the Three Months Ended December 31, 2012 and 2011 - continued
EBITDA by Region
Below is a summary of the percentages of EBITDA by geographic region (excluding discontinued operations and other gains and
losses that affect comparability), from our New York, Washington, DC, Retail Properties and Merchandise Mart segments.
Region:
New York City metropolitan area
Washington, DC / Northern Virginia metropolitan area
Chicago
California
Puerto Rico
Other geographies
For the Three Months
Ended December 31,
2012
2011
69%
22%
4%
2%
1%
2%
100%
66%
26%
3%
2%
1%
2%
100%
107
Supplemental Information – continued
Three Months Ended December 31, 2012 Compared to December 31, 2011
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 because we use them to (i) facilitate meaningful comparisons of
the operational performance of our properties and segments, (ii) make decisions on whether to buy, sell or refinance properties, and
(iii) compare the performance of our properties and segments to those of our peers. Same store EBITDA should not be considered as
an alternative to net income or cash flow from operations and may not be comparable to similarly titled measures employed by other
companies.
Below are the same store EBITDA results on a GAAP and cash basis for each of our segments for the three months ended
December 31, 2012, compared to the three months ended December 31, 2011.
New York
Washington, DC
118,021
$
407,823
Retail
Properties
Merchandise
Mart
$
(20,074)
$
21,052
4,586
(6,894)
18,744
(1,075)
17,669
(1,678)
5,672
14,716
18,710
24
(Amounts in thousands)
EBITDA for the three months ended December 31, 2012
Add-back: non-property level overhead expenses
included above
Less: EBITDA from acquisitions, dispositions
and other non-operating income or expenses
GAAP basis same store EBITDA for the three months
ended December 31, 2012
Less: Adjustments for straight-line rents, amortization of
below-market leases, net and other non-cash adjustments
Cash basis same store EBITDA for the three months
ended December 31, 2012
EBITDA for the three months ended December 31, 2011
Add-back: non-property level overhead expenses
$
$
$
8,073
7,388
4,851
(205,738)
(39,787)
80,891
210,158
85,622
65,668
(705)
(4,161)
(19,668)
190,490
207,123
$
$
84,917
106,140
$
$
$
$
61,507
94,706
5,443
included above
6,399
6,873
Less: EBITDA from acquisitions, dispositions
and other non-operating income or expenses
GAAP basis same store EBITDA for the three months
ended December 31, 2011
Less: Adjustments for straight-line rents, amortization of
below-market leases, net and other non-cash adjustments
Cash basis same store EBITDA for the three months
(3,801)
(13,146)
(34,388)
209,721
99,867
65,761
(26,637)
(66)
(3,768)
ended December 31, 2011
$
183,084
$
99,801
$
61,993
$
18,734
Increase (decrease) increase in GAAP basis same store EBITDA
for the three months ended December 31, 2012 over
the three months ended December 31, 2011
Increase (decrease) in Cash basis same store EBITDA for
the three months ended December 31, 2012 over the
three months ended December 31, 2011
$
$
437
$
(14,245)
$
(93)
$
34
7,406
$
(14,884)
$
(486)
$
(1,065)
% increase (decrease) in GAAP basis same store EBITDA
% increase (decrease) in Cash basis same store EBITDA
0.2%
4.0%
(14.3%)
(14.9%)
(0.1%)
(0.8%)
0.2%
(5.7%)
108
Supplemental Information – continued
Three Months Ended December 31, 2012 Compared to September 30, 2012
Below are the same store EBITDA results on a GAAP and cash basis for each of our segments for the three months ended
December 31, 2012, compared to the three months ended September 30, 2012.
(Amounts in thousands)
EBITDA for the three months ended December 31, 2012
Add-back: non-property level overhead expenses
included above
Less: EBITDA from acquisitions, dispositions
and other non-operating income or expenses
GAAP basis same store EBITDA for the three months
ended December 31, 2012
Less: Adjustments for straight-line rents, amortization of
below-market leases, net and other non-cash adjustments
Cash basis same store EBITDA for the three months
ended December 31, 2012
EBITDA for the three months ended September 30, 2012(1)
Add-back: non-property level overhead expenses
included above
Less: EBITDA from acquisitions, dispositions
and other non-operating income or expenses
GAAP basis same store EBITDA for the three months
ended September 30, 2012
Less: Adjustments for straight-line rents, amortization of
below-market leases, net and other non-cash adjustments
Cash basis same store EBITDA for the three months
ended September 30, 2012
Increase (decrease) in GAAP basis same store EBITDA for
the three months ended December 31, 2012 over the
three months ended September 30, 2012
Increase (decrease) in Cash basis same store EBITDA for
the three months ended December 31, 2012 over the
three months ended September 30, 2012
New York
Washington, DC
Retail
Properties
Merchandise
Mart
$
407,823
$
118,021
$
(20,074)
$
21,052
8,073
7,388
4,851
(202,180)
(38,604)
80,891
213,716
(23,066)
190,650
206,663
$
$
86,805
(775)
86,030
217,567
$
$
6,739
6,668
65,668
(4,161)
61,507
73,505
6,103
$
$
4,586
(6,285)
19,353
(1,075)
18,278
44,942
4,120
(8,565)
(129,014)
(15,117)
(32,087)
204,837
(26,331)
95,221
(2,020)
64,491
(3,833)
16,975
171
178,506
$
93,201
$
60,658
$
17,146
8,879
$
(8,416)
$
1,177
$
2,378
12,144
$
(7,171)
$
849
$
1,132
$
$
$
$
$
% increase (decrease) in GAAP basis same store EBITDA
% increase (decrease) in Cash basis same store EBITDA
4.3%
6.8%
(8.8%)
(7.7%)
1.8%
1.4%
14.0%
6.6%
(1)
Below is the reconciliation of net income to EBITDA for the three months ended September 30, 2012.
(Amounts in thousands)
Net income attributable to Vornado for the three months
ended September 30, 2012
Interest and debt expense
Depreciation and amortization
Income tax expense (benefit)
EBITDA for the three months ended September 30, 2012
New York
Washington, DC
Retail
Properties
Merchandise
Mart
$
$
96,064
46,823
62,905
871
206,663
$
$
149,241
33,280
35,071
(25)
217,567
$
$
34,661
17,499
21,345
-
73,505
$
$
19,083
8,916
7,662
9,281
44,942
109
Related Party Transactions
Alexander’s
We own 32.4% of Alexander’s. Steven Roth, the Chairman of our Board, and Michael D. Fascitelli, our President and Chief
Executive Officer, are officers and directors of Alexander’s. We provide various services to Alexander’s in accordance with
management, development and leasing agreements. These agreements are described in Note 6 - Investments in Partially Owned
Entities to our consolidated financial statements in this Annual Report on Form 10-K.
Interstate Properties (“Interstate”)
Interstate is a general partnership in which Mr. Roth is the managing general partner. David Mandelbaum and Russell B.
Wight, Jr., Trustees of Vornado and Directors of Alexander’s, are Interstate’s two other partners. As of December 31, 2012, Interstate
and its partners beneficially owned an aggregate of approximately 6.5% of the common shares of beneficial interest of Vornado and
26.3% of Alexander’s common stock.
We manage and lease the real estate assets of Interstate pursuant to a management agreement for which we receive an annual fee
equal to 4% of annual base rent and percentage rent. The management agreement has a term of one year and is automatically
renewable unless terminated by either of the parties on 60 days’ notice at the end of the term. We believe, based upon comparable fees
charged by other real estate companies, that the management agreement terms are fair to us.
Other
On March 8, 2012, Mr. Roth repaid his $13,122,500 outstanding loan from the Company.
110
Liquidity and Capital Resources
Property rental income is our primary source of cash flow and is dependent upon the occupancy and rental rates of our properties.
Our cash requirements include property operating expenses, capital improvements, tenant improvements, debt service, leasing
commissions, dividends to shareholders and distributions to unitholders of the Operating Partnership, as well as acquisition and
development costs. Other sources of liquidity to fund cash requirements include proceeds from debt financings, including mortgage
loans, senior unsecured borrowings, and our revolving credit facilities; proceeds from the issuance of common and preferred equity;
and asset sales.
We anticipate that cash flow from continuing operations over the next twelve months will be adequate to fund our business
operations, cash distributions to unitholders of the Operating Partnership, cash dividends to shareholders, debt amortization and
recurring capital expenditures. Capital requirements for development expenditures and acquisitions (excluding Fund acquisitions)
may require funding from borrowings and/or equity offerings. Our Real Estate Fund has aggregate unfunded equity commitments of
$217,676,000 for acquisitions, including $54,419,000 from us.
We may from time to time purchase or retire outstanding debt securities. Such purchases, if any will depend on prevailing market
conditions, liquidity requirements and other factors. The amounts involved in connection with these transactions could be material to
our consolidated financial statements.
Dividends
On January 17, 2013, we increased our quarterly common dividend to $0.73 per share (a new indicated annual rate of $2.92 per
share). This dividend, if continued for all of 2013, would require us to pay out approximately $545,000,000 of cash for common share
dividends. In addition, during 2013, we expect to pay approximately $81,500,000 of cash dividends on outstanding preferred shares
and approximately $36,000,000 of cash distributions to unitholders of the Operating Partnership.
Financing Activities and Contractual Obligations
We have an effective shelf registration for the offering of our equity and debt securities that is not limited in amount due to our
status as a “well-known seasoned issuer.” Our revolving credit facilities contain financial covenants that require us to maintain
minimum interest coverage and maximum debt to market capitalization ratios, and provides 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. As of December 31, 2012, we are in compliance with all of the financial covenants
required by our revolving credit facilities.
As of December 31, 2012, we had $960,319,000 of cash and cash equivalents and $1,307,193,000 of borrowing capacity under
our revolving credit facilities, net of outstanding borrowings of $1,170,000,000 and letters of credit of $22,807,000. A summary of
our consolidated debt as of December 31, 2012 and 2011 is presented below.
(Amounts in thousands)
Consolidated debt:
Variable rate
Fixed rate
2012
2011
December 31,
Balance
$
$
3,167,181
8,129,009
11,296,190
Weighted
Average
Interest Rate
1.93%
5.18%
4.27%
December 31,
Balance
$
$
1,881,948
8,194,659
10,076,607
Weighted
Average
Interest Rate
2.35%
5.55%
4.95%
During 2013 and 2014, $1,069,682,000 and $240,001,000, respectively, of our outstanding debt matures. We may refinance
maturing debt as it comes due or choose to repay it using cash and cash equivalents or our revolving credit facilities. We may also
refinance or prepay other outstanding debt depending 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.
111
Liquidity and Capital Resources – continued
Financing Activities and Contractual Obligations – continued
Below is a schedule of our contractual obligations and commitments at December 31, 2012.
(Amounts in thousands)
Contractual cash obligations (principal and interest(1)):
Notes and mortgages payable
Operating leases
Senior unsecured notes due 2039 (PINES)
Revolving credit facilities
Senior unsecured notes due 2022
Senior unsecured notes due 2015
Capital lease obligations
Purchase obligations, primarily construction commitments
Total contractual cash obligations
Commitments:
Capital commitments to partially owned entities
Standby letters of credit
Total commitments
Less than
Total
1 Year
1 – 3 Years
3 – 5 Years
Thereafter
$ 10,775,483 $ 1,519,315 $ 1,495,932 $ 3,377,676 $ 4,382,560
1,229,169
1,247,894
-
480,833
-
359,792
-
$ 16,632,450 $ 1,862,164 $ 2,286,644 $ 4,783,394 $ 7,700,248
75,022
72,450
1,193,146
40,000
-
25,000
100
1,429,110
1,429,019
1,251,178
580,833
547,813
422,292
196,722
83,395
72,450
40,716
40,000
526,563
25,000
2,588
41,524
36,225
17,316
20,000
21,250
12,500
194,034
$
$
163,130 $
22,807
185,937 $
101,199 $
22,327
123,526 $
61,931 $
480
62,411 $
- $
-
- $
-
-
-
________________________
(1)
Interest on variable rate debt is computed using rates in effect at December 31, 2012.
Details of 2012 financing activities are provided in the “Overview” of Management’s Discussion and Analysis of Financial
Conditions and Results of Operations. Details of 2011 financing activities are discussed below.
Senior Unsecured Debt
On November 30, 2011, we completed a public offering of $400,000,000 aggregate principal amount of 5.0%, ten-year senior
unsecured notes and retained net proceeds of approximately $395,584,000. The notes were sold at 99.546% of their face amount to
yield 5.057%.
In 2011, we renewed both of our unsecured revolving credit facilities aggregating $2,500,000,000. The first facility, which was
renewed in June 2011, bears interest on drawn amounts at LIBOR plus 1.35% and has a 0.30% facility fee (drawn or undrawn). The
second facility, which was renewed in November 2011, bears interest on drawn amounts at LIBOR plus 1.25% and has a 0.25%
facility fee (drawn or undrawn). The LIBOR spread and facility fee on both facilities are based on our credit ratings. Both facilities
mature in four years and have one-year extension options.
112
Liquidity and Capital Resources – continued
Financing Activities and Contractual Obligations – continued
Secured Debt
On December 28, 2011, we completed a $330,000,000 refinancing of Eleven Penn Plaza, a 1.1 million square foot Manhattan
office building. The seven-year loan bears interest at LIBOR plus 2.35% and amortizes based on a 30-year schedule beginning in the
fourth year. We retained net proceeds of approximately $126,000,000, after repaying the existing loan and closing costs.
On September 1, 2011, we completed a $600,000,000 refinancing of 555 California Street, a three-building office complex
aggregating 1.8 million square feet in San Francisco’s financial district, known as the Bank of America Center, in which we own a
70% controlling interest. The 10-year fixed rate loan bears interest at 5.10% and amortizes based on a 30-year schedule beginning in
the fourth year. The proceeds of the new loan and $45,000,000 of existing cash were used to repay the existing loan and closing costs.
On May 11, 2011, we repaid the outstanding balance of the construction loan on West End 25, and closed on a $101,671,000
mortgage at a fixed rate of 4.88%. The loan has a 10-year term and amortizes based on a 30-year schedule beginning in the sixth year.
On February 11, 2011, we completed a $425,000,000 refinancing of Two Penn Plaza, a 1.6 million square foot Manhattan office
building. The seven-year loan bears interest at LIBOR plus 2.00%, which was swapped for the term of the loan to a fixed rate of
5.13%. The loan amortizes based on a 30-year schedule beginning in the fourth year. We retained net proceeds of approximately
$139,000,000, after repaying the existing loan and closing costs.
On February 10, 2011, we completed a $150,000,000 financing of 2121 Crystal Drive, a 506,000 square foot office building
located in Crystal City, Arlington, Virginia. The 12-year fixed rate loan bears interest at 5.51% and amortizes based on a 30-year
schedule beginning in the third year. This property was previously unencumbered.
On January 18, 2011, we repaid the outstanding balance of the construction loan on 220 20th Street and closed on a $76,100,000
mortgage at a fixed rate of 4.61%. The loan has a seven-year term and amortizes based on a 30-year schedule.
On January 10, 2011, we completed a $75,000,000 financing of North Bergen (Tonnelle Avenue), a 410,000 square foot strip
shopping center. The seven-year fixed rate loan bears interest rate at 4.59% and amortizes based on a 25-year schedule beginning in
the sixth year. This property was previously unencumbered.
On January 6, 2011, we completed a $60,000,000 financing of land under a portion of the Borgata Hotel and Casino complex.
The 10-year fixed rate loan bears interest at 5.14% and amortizes based on a 30-year schedule beginning in the third year.
Preferred Securities
On April 20, 2011, we sold 7,000,000 6.875% Series J Cumulative Redeemable Preferred Shares at a price of $25.00 per share,
in an underwritten public offering pursuant to an effective registration statement. On April 21, 2011, the underwriters exercised their
option to purchase an additional 1,050,000 shares to cover over-allotments. On May 5, 2011 and August 5, 2011 we sold an additional
800,000 and 1,000,000 shares, respectively, at a price of $25.00 per share. We retained aggregate net proceeds of $238,842,000, after
underwriters’ discounts and issuance costs and contributed the net proceeds to the Operating Partnership in exchange for 9,850,000
Series J Preferred Units (with economic terms that mirror those of the Series J Preferred Shares).
113
Liquidity and Capital Resources – continued
Acquisitions and Investments
Details of 2012 acquisitions and investments are provided in the “Overview” of Management’s Discussion and Analysis of
Financial Conditions and Results of Operations. Details of 2011 acquisitions and investments are discussed below.
1399 New York Avenue (the “Executive Tower”)
On December 23, 2011, we acquired the 97.5% interest that we did not already own in the Executive Tower, an 11-story, 128,000
square foot Class A office building located in the Washington, CBD East End submarket close to the White House, for $104,000,000
in cash.
666 Fifth Avenue Office
On December 16, 2011, we formed a joint venture with an affiliate of the Kushner Companies to recapitalize the office portion of
666 Fifth Avenue, a 39-story, 1.4 million square foot Class A office building in Manhattan, located on the full block front of Fifth
Avenue between 52nd and 53rd Street. We acquired a 49.5% interest in the property from the Kushner Companies, the current owner.
In connection therewith, the existing $1,215,000,000 mortgage loan was modified by LNR, the special servicer, into a $1,100,000,000
A-Note and a $115,000,000 B-Note and extended to February 2019; and a portion of the current pay interest was deferred to the B-
Note. We and the Kushner Companies have committed to lend the joint venture an aggregate of $110,000,000 (of which our share is
$80,000,000) for tenant improvements and working capital for the property, which is senior to the $115,000,000 B-Note. In addition,
we have provided the A-Note holders a limited recourse and cooperation guarantee of up to $75,000,000 if an event of default occurs
and is ongoing.
Independence Plaza
On June 17, 2011, a joint venture in which we are a 51% partner invested $55,000,000 in cash (of which we contributed
$35,000,000) to acquire a face amount of $150,000,000 of mezzanine loans and a $35,000,000 participation in a senior loan on
Independence Plaza, a three-building 1,328 unit residential complex in the Tribeca submarket of Manhattan.
280 Park Avenue Joint Venture
On March 16, 2011, we formed a 50/50 joint venture with SL Green Realty Corp to own the mezzanine debt of 280 Park Avenue,
a 1.2 million square foot office building located between 48th and 49th Streets in Manhattan (the “Property”). We contributed our
mezzanine loan with a face amount of $73,750,000 and they contributed their mezzanine loans with a face amount of $326,250,000 to
the joint venture. We equalized our interest in the joint venture by paying our partner $111,250,000 in cash and assuming $15,000,000
of their debt. On May 17, 2011, as part of the recapitalization of the Property, the joint venture contributed its debt position for 99% of
the common equity of a new joint venture which owns the Property. The new joint venture’s investment is subordinate to
$710,000,000 of third party debt.
114
Liquidity and Capital Resources – continued
Certain Future Cash Requirements
Capital Expenditures
The following table summarizes anticipated 2013 capital expenditures.
(Amounts in millions, except square foot data)
Expenditures to maintain assets
Tenant improvements
Leasing commissions
Total capital expenditures and leasing
$
Total
New York Washington, DC Properties
Mart
Other (2)
Retail
Merchandise
112.0 $
108.0
36.0
60.0 $
43.0
21.0
28.0 $
41.0
10.0
4.0 $
9.0
3.0
12.0 $
10.0
1.0
8.0
5.0
1.0
commissions
$
256.0 $
124.0 $
79.0 $
16.0 $
23.0 $
14.0
Square feet budgeted to be leased
(in thousands)
Weighted average lease term (years)
Tenant improvements and leasing
commissions:
Per square foot
Per square foot per annum
900
10
1,250
7
800
6
250
6
$
$
71.00 (1) $
7.10 (1) $
41.00 $
5.86 $
15.00 $
2.50 $
44.00
7.33
(1)
Comprised of tenant improvements and leasing commissions of $65.00 per square foot ($6.50 per square foot per annum) and $100.00 per
square foot ($10.00 per square foot per annum) for the office and retail components of our New York segment, respectively.
(2) Primarily 555 California Street and Warehouses.
The table above excludes anticipated capital expenditures of each of our partially owned non-consolidated subsidiaries, as these
entities fund their capital expenditures without additional equity contributions from us.
Development and Redevelopment Expenditures
In 2012, we commenced the re-tenanting and repositioning of 280 Park Avenue (50% owned), and the renovation of the
1.4 million square foot Springfield Mall, both of which are expected to be substantially completed in 2014. We budgeted
approximately $285,000,000 for these projects, of which $31,000,000 was expended in 2012 and $132,000,000 is expected to be
expended in 2013 and the balance is expected to be expended in 2014.
During 2012, we completed the demolition of the existing residential building down to the second-level, at 220 Central Park
South.
In addition, we continued lobby renovations at several of our office buildings in New York and Washington, as well as the re-
tenanting and repositioning of a number of our strip shopping centers.
We are also evaluating other development and redevelopment opportunities at certain of our properties in Manhattan, including
the Hotel Pennsylvania and in Washington, including 1900 Crystal Drive, Rosslyn and Pentagon City.
There can be no assurance that any of our development or redevelopment projects will commence, or if commenced, be
completed on schedule or within budget.
115
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 $180,000,000 per occurrence, subject to a deductible in
the amount of 5% of the value of the affected property, up to a $180,000,000 annual aggregate.
Penn Plaza Insurance Company, LLC (“PPIC”), our wholly owned consolidated subsidiary, acts as a re-insurer with respect to all
risk property and rental value insurance and a portion of our earthquake insurance coverage, and as a direct insurer for coverage for
acts of terrorism, including nuclear, biological, chemical and radiological (“NBCR”) acts, as defined by the Terrorism Risk Insurance
Program Reauthorization Act. Coverage for acts of terrorism (excluding NBCR acts) is fully reinsured by third party insurance
companies and the Federal government with no exposure to PPIC. Coverage for NBCR losses is up to $2.0 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 and revolving credit agreements contain customary covenants requiring us to maintain insurance. Although we believe that we
have adequate insurance coverage for purposes of these agreements, we may not be able to obtain an equivalent amount of coverage at
reasonable costs in the future. Further, if lenders insist on greater coverage than we are able to obtain it could adversely affect our
ability to finance our properties and expand our portfolio.
Other Commitments and Contingencies
Our mortgage loans are non-recourse to us. However, in certain cases we have provided guarantees or master leased tenant
space. These guarantees and master leases terminate either upon the satisfaction of specified circumstances or repayment of the
underlying loans. As of December 31, 2012, the aggregate dollar amount of these guarantees and master leases is approximately
$310,249,000.
At December 31, 2012, $22,807,000 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.
Two of our wholly owned subsidiaries that are contracted to develop and operate the Cleveland Medical Mart and Convention
Center, in Cleveland, Ohio, are required to fund $11,500,000, primarily for tenant improvements, and they are responsible for
operating expenses and are entitled to the net operating income, if any, upon the completion of development and the commencement
of operations. As of December 31, 2012, our subsidiaries have funded $1,100,000 of the commitment.
As of December 31, 2012, we expect to fund additional capital to certain of our partially owned entities aggregating
approximately $163,130,000.
116
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 matter referred to below, is not expected to have a material adverse
effect on our financial position, results of operations or cash flows.
In 2003, Stop & Shop filed an action against us in the New York Supreme Court, claiming that we had no right to reallocate and
therefore continue to collect $5,000,000 ($6,000,000 beginning February 1, 2012) of annual rent from Stop & Shop pursuant to a
Master Agreement and Guaranty, because of the expiration of the leases to which the annual rent was previously allocated. Stop &
Shop asserted that an order of the Bankruptcy Court for the Southern District of New York, as modified on appeal by the District
Court, froze our right to reallocate and effectively terminated our right to collect the annual rent from Stop & Shop. We asserted a
counterclaim seeking a judgment for all of the unpaid annual rent accruing through the date of the judgment and a declaration that
Stop & Shop will continue to be liable for the annual rent as long as any of the leases subject to the Master Agreement and Guaranty
remain in effect. A trial was held in November 2010. On November 7, 2011, the Court determined that we had a continuing right to
allocate the annual rent to unexpired leases covered by the Master Agreement and Guaranty, and directed entry of a judgment in our
favor ordering Stop & Shop to pay us the unpaid annual rent accrued through February 28, 2011 in the amount of $37,422,000, a
portion of the annual rent due from March 1, 2011 through the date of judgment, interest, and attorneys’ fees. On December 16, 2011,
a money judgment based on the Court’s decision was entered in our favor in the amount of $56,597,000 (including interest and costs).
Stop & Shop appealed the Court’s decision and the judgment and posted a bond to secure payment of the judgment. On January 12,
2012, we commenced a new action against Stop & Shop seeking recovery of $2,500,000 of annual rent not included in the money
judgment, plus additional annual rent as it accrues. At December 31, 2012, we had a $47,900,000 receivable from Stop & Shop,
which is included as a component of “tenant and other receivables” on our consolidated balance sheet. On February 6, 2013, we
received $124,000,000 pursuant to a settlement agreement with Stop & Shop. The settlement terminates our right to receive
$6,000,000 of additional annual rent under the 1992 agreement, for a period potentially through 2031. As a result of this settlement,
we collected the aforementioned $47,900,000 receivable and will recognize approximately $59,000,000 of net income in the first
quarter of 2013.
117
Liquidity and Capital Resources – continued
Cash Flows for the Year Ended December 31, 2012
Our cash and cash equivalents were $960,319,000 at December 31, 2012, a $353,766,000 increase over the balance at December
31, 2011. Our consolidated outstanding debt was $11,296,190,000 at December 31, 2012, a $1,219,583,000 increase over the balance
at December 31, 2011. As of December 31, 2012 and December 31, 2011, $1,170,000,000 and $138,000,000, respectively, was
outstanding under our revolving credit facilities. During 2013 and 2014, $1,069,682,000 and $240,001,000 of our outstanding debt
matures, respectively. We may refinance this maturing debt as it comes due or choose to repay it.
Cash flows provided by operating activities of $825,049,000 was comprised of (i) net income of $694,541,000, (ii) distributions
of income from partially owned entities of $226,172,000, (iii) return of capital from Real Estate Fund investments of $63,762,000, and
(iv) $151,954,000 of non-cash adjustments, which include depreciation and amortization expense, impairment loss on J.C. Penney
owned shares, the effect of straight-lining of rental income, equity in net income of partially owned entities and net gains on sale of
real estate, partially offset by (v) the net change in operating assets and liabilities of $311,380,000, including $262,537,000 related to
Real Estate Fund investments.
Net cash used in investing activities of $642,262,000 was comprised of (i) $673,684,000 of acquisitions of real estate and other,
(ii) $205,652,000 of additions to real estate, (iii) $191,330,000 for the funding of the J.C. Penney derivative collateral, (iv)
$156,873,000 of development costs and construction in progress, (v) $134,994,000 of investments in partially owned entities, (vi)
$94,094,000 investments in mortgage and mezzanine loans receivable and other, and (vii) $75,138,000 of changes in restricted cash,
partially offset by (viii) $445,683,000 of proceeds from sales of real estate and related investments, (ix) $144,502,000 of capital
distributions from partially owned entities, (x) $134,950,000 from the return of the J.C. Penney derivative collateral, (xi) $60,258,000
of proceeds from the sale of marketable securities, (xii) $52,504,000 of proceeds from the sale of the Canadian Trade Shows, (xiii)
$38,483,000 of proceeds from repayments of mezzanine loans receivable and other, and (xiv) $13,123,000 of proceeds from the
repayment of loan to officer.
Net cash provided by financing activities of $170,979,000 was comprised of (i) $3,593,000,000 of proceeds from borrowings,
(ii) $290,971,000 of proceeds from the issuance of preferred shares, (iii) $213,132,000 of contributions from noncontrolling interests
in consolidated subsidiaries, and (iv) $11,853,000 of proceeds from exercise of employee share options, partially offset by (v)
$2,747,694,000 for the repayments of borrowings, (vi) $699,318,000 of dividends paid on common shares, (vii) $243,300,000 for
purchases of outstanding preferred units and shares, (viii) $104,448,000 of distributions to noncontrolling interests, (ix) $73,976,000
of dividends paid on preferred shares, (x) $39,073,000 of debt issuance and other costs, and (xi) $30,168,000 for the repurchase of
shares related to stock compensation agreements and related tax withholdings.
118
Liquidity and Capital Resources - continued
Capital Expenditures in the Year Ended December 31, 2012
Capital expenditures consist of expenditures to maintain assets, tenant improvement allowances and leasing commissions.
Recurring capital improvements include expenditures to maintain a property’s competitive position within the market and tenant
improvements and leasing commissions necessary to re-lease expiring leases or renew or extend existing leases. Non-recurring capital
improvements include expenditures to lease space that has been vacant for more than nine months and expenditures completed in the
year of acquisition and the following two years that were planned at the time of acquisition, as well as tenant improvements and
leasing commissions for space that was vacant at the time of acquisition of a property. Below is a summary of capital expenditures,
leasing commissions and a reconciliation of total expenditures on an accrual basis to the cash expended in the year ended December
31, 2012.
(Amounts in thousands)
Expenditures to maintain assets
Tenant improvements
Leasing commissions
Non-recurring capital expenditures
Total capital expenditures and leasing
commissions (accrual basis)
Adjustments to reconcile to cash basis:
Expenditures in the current year
applicable to prior periods
Expenditures to be made in future
periods for the current period
Total capital expenditures and leasing
commissions (cash basis)
Tenant improvements and leasing commissions:
Per square foot per annum
Percentage of initial rent
$
$
$
Total
New York Washington, DC
69,912 $
177,743
57,961
6,902
27,434 $
71,572
27,573
5,822
Retail
Properties
4,676
9,052
2,368
-
20,582 $
50,384
13,151
-
Merchandise
Mart
Other
$
$
10,635
46,316
14,774
-
6,585
419
95
1,080
312,518
132,401
84,117
16,096
71,725
8,179
105,350
41,975
24,370
10,353
21,867
6,785
(170,744)
(76,283)
(43,600)
(7,754)
(42,688)
(419)
247,124 $
98,093 $
64,887 $
18,695
4.44 $
5.48 $
10.6%
8.8%
4.86 $
12.0%
1.04
5.2%
$
$
$
$
50,904
5.56 (1)
15.8%
14,545
-
-
(1) Includes $6.50 per square foot per annum of tenant improvements and leasing commissions in connection with the 572,000 square foot
Motorola Mobility / Google lease.
Development and Redevelopment Expenditures in the Year Ended December 31, 2012
Development and redevelopment expenditures consist of all hard and soft costs associated with the development or
redevelopment of a property, including tenant improvements, leasing commissions, capitalized interest and operating costs until the
property is substantially completed and ready for its intended use. Below is a summary of development and redevelopment
expenditures incurred in the year ended December 31, 2012.
(Amounts in thousands)
Springfield Mall
1290 Avenue of the Americas
Crystal Square 5
220 Central Park South
Bergen Town Center
510 Fifth Avenue
Marriott Marquis Times Square - retail
and signage
1851 South Bell Street (1900 Crystal Drive)
Amherst, New York
Other
$
$
Merchandise
Mart
$
$
- $
-
-
-
-
-
-
-
-
167
167 $
Other
-
-
-
12,191
-
-
-
-
-
75
12,266
Total
New York Washington, DC
18,278 $
16,778
15,039
12,191
11,404
10,206
- $
16,778
-
-
-
10,206
Retail
Properties
18,278
-
-
-
11,404
-
- $
-
15,039
-
-
-
9,092
6,243
5,585
52,057
156,873 $
9,092
-
-
15,484
51,560 $
-
6,243
-
18,052
39,334 $
-
-
5,585
18,279
53,546
119
Liquidity and Capital Resources – continued
Cash Flows for the Year Ended December 31, 2011
Our cash and cash equivalents were $606,553,000 at December 31, 2011, a $84,236,000 decrease over the balance at December
31, 2010. Our consolidated outstanding debt was $10,076,607,000 at December 31, 2011, a $272,850,000 decrease from the balance
at December 31, 2010.
Cash flows provided by operating activities of $702,499,000 was comprised of (i) net income of $740,000,000, (ii) distributions
of income from partially owned entities of $93,635,000, and (iii) $151,745,000 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, income from the
mark-to-market of derivative positions in marketable equity securities, impairment losses and tenant buy-out costs, net realized and
unrealized gains on Real Estate Fund assets and net gain on early extinguishment of debt, partially offset by (iv) the net change in
operating assets and liabilities of $282,881,000, of which $184,841,000 relates to Real Estate Fund investments.
Net cash used in investing activities of $164,761,000 was comprised of (i) $571,922,000 of investments in partially owned
entities, (ii) $165,680,000 of additions to real estate, (iii) $98,979,000 of investments in mortgage and mezzanine loans receivable and
other, (iv) $93,066,000 of development costs and construction in progress, (v) $90,858,000 of acquisitions of real estate and other, and
(vi) $43,850,000 for the funding of collateral for the J.C. Penney derivative, partially offset by (vii) $318,966,000 of capital
distributions from partially owned entities, (viii) $187,294,000 of proceeds from sales and repayments of mortgage and mezzanine
loans receivable and other, (ix) $140,186,000 of proceeds from sales of real estate and related investments, (x) changes in restricted
cash of $126,380,000, (xi) $70,418,000 of proceeds from sales of marketable securities, and (xii) $56,350,000 from the return of
derivative collateral.
Net cash used in financing activities of $621,974,000 was comprised of (i) $3,740,327,000 for the repayments of borrowings, (ii)
$508,745,000 of dividends paid on common shares, (iii) $116,510,000 of distributions to noncontrolling interests, (iv) $61,464,000 of
dividends paid on preferred shares, (v) $47,395,000 of debt issuance and other costs, (vi) $28,000,000 for the purchase of outstanding
preferred units and shares, and (vii) $964,000 for the repurchase of shares related to stock compensation agreements and related tax
withholdings, partially offset by (viii) $3,412,897,000 of proceeds from borrowings, (ix) $238,842,000 of proceeds from the issuance
of Series J preferred shares, (x) $204,185,000 of contributions from noncontrolling interests, and (xi) $25,507,000 of proceeds
received from exercise of employee share options.
120
Liquidity and Capital Resources – continued
Capital Expenditures in the Year Ended December 31, 2011
(Amounts in thousands)
Expenditures to maintain assets
Tenant improvements
Leasing commissions
Non-recurring capital expenditures
Total capital expenditures and leasing
commissions (accrual basis)
Adjustments to reconcile to cash basis:
Expenditures in the current year
applicable to prior periods
Expenditures to be made in future
periods for the current period
Total capital expenditures and leasing
Total
New York Washington, DC
Retail
Properties
Merchandise
Mart
Other
$
58,463 $
138,076
43,613
19,442
22,698 $
76,493
28,072
17,157
18,939 $
33,803
9,114
-
6,448 $
6,515
2,114
-
5,918 $
15,221
2,794
-
4,460
6,044
1,519
2,285
259,594
144,420
61,856
15,077
23,933
14,308
90,799
43,392
13,517
9,705
15,256
8,929
(146,062)
(79,941)
(33,530)
(7,058)
(14,185)
(11,348)
commissions (cash basis)
$
204,331 $
107,871 $
41,843 $
17,724 $
25,004 $
11,889
Tenant improvements and leasing commissions:
$
Per square foot per annum
Percentage of initial rent
3.81 $
9.1%
5.21 $
9.1%
4.47 $
10.8%
0.71 $
3.3%
3.95 $
12.3%
-
-
Development and Redevelopment Expenditures in the Year Ended December 31, 2011
(Amounts in thousands)
Bergen Town Center
510 Fifth Avenue
Other
Total
New York Washington, DC
Retail
Properties
Merchandise
Mart
Other
$
$
23,748 $
8,833
48,903
81,484 $
- $
8,833
6,627
15,460 $
- $
-
20,496
20,496 $
23,748 $
-
18,580
42,328 $
- $
-
898
898 $
-
-
2,302
2,302
121
Liquidity and Capital Resources – continued
Cash Flow for the Year Ended December 31, 2010
Our cash and cash equivalents were $690,789,000 at December 31, 2010, a $155,310,000 increase over the balance at December
31, 2009. Our consolidated outstanding debt was $10,349,457,000 at December 31, 2010, a $246,029,000 increase from the balance
at December 31, 2009.
Cash flows provided by operating activities of $771,086,000 was comprised of (i) net income of $708,031,000, (ii) $129,491,000
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, income from the mark-to-market of derivative positions in marketable equity securities, litigation
loss accrual and impairment losses, net gain on early extinguishment of debt, (iii) distributions of income from partially owned entities
of $61,037,000, (iv) interest received on repayment on mezzanine loan of $40,467,000, partially offset by (v) the net change in
operating assets and liabilities of $167,940,000, of which $144,423,000 relates to Real Estate Fund investments.
Net cash used in investing activities of $520,361,000 was comprised of (i) purchases of marketable equity securities, including
J.C. Penney Company, Inc. common shares, of $491,596,000, (ii) acquisitions of real estate of $173,413,000, (iii) investments in
partially owned entities of $165,170,000, (iv) development and redevelopment expenditures of $156,775,000, (v) additions to real
estate of $144,794,000, (vi) investments in mortgage and mezzanine loans receivable and other of $85,336,000, and (vii) $12,500,000
for the funding of collateral for the J.C. Penney derivative, partially offset by (viii) proceeds from the sale of marketable securities of
$280,462,000, (ix) restricted cash of $138,586,000, (x) proceeds from sales of real estate and related investments of $127,736,000, (xi)
proceeds received from repayment of mortgage and mezzanine loans receivable of $70,762,000, (xii) distributions of capital from
investments in partially owned entities of $51,677,000, and (xiii) proceeds from maturing short-term investments of $40,000,000.
Net cash used in financing activities of $95,415,000 was comprised of (i) repayments of borrowing, including the purchase of
our senior unsecured notes, of $2,004,718,000, (ii) dividends paid on common shares of $474,299,000 (iii) purchases of outstanding
preferred units of $78,954,000, (iv) dividends paid on preferred shares of $55,669,000, (v) distributions to noncontrolling interests of
$53,842,000, (vi) repurchase of shares related to stock compensation agreements and related tax withholdings of $25,660,000, (vii)
debt issuance costs of $14,980,000 partially offset by (viii) proceeds from borrowings of $2,481,883,000, (ix) contributions from
noncontrolling interests of $103,831,000 and (x) proceeds received from exercise of employee share options of $26,993,000.
122
Liquidity and Capital Resources – continued
Capital Expenditures in the Year Ended December 31, 2010
(Amounts in thousands)
Expenditures to maintain assets
Tenant improvements
Leasing commissions
Non-recurring capital expenditures
Total capital expenditures and leasing
commissions (accrual basis)
Adjustments to reconcile to cash basis:
Expenditures in the current year
applicable to prior periods
Expenditures to be made in future
periods for the current period
Total capital expenditures and leasing
Total
New York Washington, DC
Retail
Properties
Merchandise
Mart
Other
$
53,051 $
116,939
30,351
5,381
21,511 $
51,137
16,070
3,192
17,532 $
17,464
6,044
-
3,799 $
9,077
1,470
795
6,099 $
31,742
4,761
-
4,110
7,519
2,006
1,394
205,722
91,910
41,040
15,141
42,602
15,029
64,216
37,161
13,296
4,617
4,825
4,317
(87,289)
(36,332)
(13,989)
(10,077)
(20,580)
(6,311)
commissions (cash basis)
$
182,649 $
92,739 $
40,347 $
9,681 $
26,847 $
13,035
Tenant improvements and leasing commissions:
$
Per square foot per annum
Percentage of initial rent
3.73 $
10.0%
6.60 $
12.7%
2.92 $
7.6%
1.28 $
5.7%
4.01 $
11.5%
-
-
Development and Redevelopment Expenditures in the Year Ended December 31, 2010
(Amounts in thousands)
220 Central Park South
Bergen Town Center
Residential condominiums
West End 25
1540 Broadway
Green Acres Mall
Other
Total
New York Washington, DC
Retail
Properties
Merchandise
Mart
Other
$
$
46,769 $
18,783
15,600
9,997
8,091
7,679
49,856
156,775 $
- $
-
-
-
8,091
-
12,054
20,145 $
- $
-
-
9,997
-
-
16,592
26,589 $
- $
18,783
-
-
-
7,679
17,899
44,361 $
- $
-
-
-
-
-
2,667
2,667 $
46,769
-
15,600
-
-
-
644
63,013
123
Funds From Operations (“FFO”)
FFO is computed in accordance with the definition adopted by the Board of Governors of the National Association of Real Estate
Investment Trusts (“NAREIT”). NAREIT defines FFO as GAAP net income or loss adjusted to exclude net gains from sales of
depreciated real estate assets, real estate impairment losses, depreciation and amortization expense from real estate assets,
extraordinary items and other specified non-cash items, including the pro rata share of such adjustments of unconsolidated
subsidiaries. FFO and FFO per diluted share are used by management, investors and analysts to facilitate meaningful comparisons of
operating performance between periods and among our peers because it excludes the effect of real estate depreciation and amortization
and net gains on sales, which are based on historical costs and implicitly assume that the value of real estate diminishes predictably
over time, rather than fluctuating based on existing market conditions. FFO does not represent cash generated from operating
activities and is not necessarily indicative of cash available to fund cash requirements and should not be considered as an alternative to
net income as a performance measure or cash flows as a liquidity measure. FFO may not be comparable to similarly titled measures
employed by other companies.
FFO attributable to common shareholders plus assumed conversions was $818,565,000, or $4.39 per diluted share for the year
ended December 31, 2012, compared to $1,230,973,000, or $6.42 per diluted share for the year ended December 31, 2011. FFO
attributable to common shareholders plus assumed conversions was $55,890,000, or $0.30 per diluted share for the three months
ended December 31, 2012, compared to $280,369,000, or $1.46 per diluted share for the three months ended December 31, 2011.
Details of certain items that affect comparability are discussed in the financial results summary of our “Overview.”
(Amounts in thousands, except per share amounts)
Reconciliation of our net income to FFO:
Net income attributable to Vornado
Depreciation and amortization of real property
Net gains on sale of real estate
Real estate impairment losses
Proportionate share of adjustments to equity in net income of
Toys, to arrive at FFO:
Depreciation and amortization of real property
Net gains on sale of real estate
Real estate impairment losses
Income tax effect of above adjustments
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
Net gains on sale of real estate
Real estate impairment losses
Noncontrolling interests' share of above adjustments
FFO
Preferred share dividends
Discount on preferred share and unit redemptions
FFO attributable to common shareholders
Interest on 3.88% exchangeable senior debentures
Convertible preferred share dividends
FFO attributable to common shareholders plus assumed conversions
Reconciliation of Weighted Average Shares
Weighted average common shares outstanding
Effect of dilutive securities:
Employee stock options and restricted share awards
Convertible preferred shares
3.88% exchangeable senior debentures
Denominator for FFO per diluted share
For The Year
Ended December 31,
2012
2011
For The Three Months
Ended December 31,
2011
2012
$
617,260
504,407
$
(245,799)
129,964
$
662,302
530,113
(51,623)
28,799
$
86,135
125,069
(41,998)
116,453
87,296
152,655
-
28,799
68,483
-
9,824
(27,493)
86,197
(241,602)
1,849
(16,649)
886,441
(76,937)
8,948
818,452
-
113
818,565
$
70,883
(491)
-
(24,634)
99,992
(9,276)
-
(40,957)
1,265,108
(65,531)
5,000
1,204,577
26,272
124
1,230,973
$
17,777
-
1,430
(6,728)
20,387
(239,551)
-
418
79,392
(20,750)
(2,752)
55,890
-
-
55,890
$
18,039
-
-
(6,314)
26,699
(1,916)
-
(13,733)
291,525
(17,788)
-
273,737
6,602
30
280,369
$
185,810
184,308
186,267
184,571
670
50
-
186,530
1,658
55
5,736
191,757
599
-
-
186,866
1,392
52
5,736
191,751
FFO attributable to common shareholders plus assumed conversions per
diluted share
$
4.39
$
6.42
$
0.30
$
1.46
124
ITEM 7A. 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)
Consolidated debt:
Variable rate
Fixed rate
Prorata share of debt of non-
consolidated entities (non-recourse):
Variable rate – excluding Toys
Variable rate – Toys
Fixed rate (including $1,148,407 and
$1,270,029 of Toys debt in 2012 and 2011)
Redeemable noncontrolling interests’ share of
above
Total change in annual net income
Per share-diluted
$
$
$
$
December 31,
Balance
3,167,181
8,129,009
11,296,190
2012
Weighted
Average
Interest Rate
1.93%
5.18%
4.27%
2011
Effect of 1%
Change In
Base Rates
December 31,
Balance
$
31,672 $
-
31,672 $
1,881,948
8,194,659
10,076,607
Weighted
Average
Interest Rate
2.35%
5.55%
4.95%
264,531
703,922
3,030,476 (1)
3,998,929
2.88%
5.69%
7.04%
6.53%
2,645 $
7,039
284,372
706,301
-
9,684 $
3,208,472
4,199,145
2.85%
4.83%
6.96%
6.32%
$
$
(2,564)
38,792
0.21
(1) Excludes $25.4 billion for our 26.2% pro rata share of LNR's liabilities related to consolidated CMBS and CDO trusts which are non-recourse to
LNR and its equity holders, including us.
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 December 31, 2012, we have one interest rate cap with a principal amount of $60,000,000 and a weighted average interest rate of
2.36%. This cap is based on a notional amount of $60,000,000 and caps LIBOR at a rate of 7.00%. In addition, we have one interest
rate swap on a $425,000,000 mortgage loan that swapped the rate from LIBOR plus 2.00% (2.21% at December 31, 2012) to a fixed
rate of 5.13% for the remaining six-year term of the loan.
Fair Value of Debt
The estimated fair value of our consolidated debt is calculated based on current market prices and discounted cash flows at the
current rate at which similar loans would be made to borrowers with similar credit ratings for the remaining term of such debt. As of
December 31, 2012, the estimated fair value of our consolidated debt was $11,433,000,000.
Derivative Instruments
We have, and may in the future enter into, derivative positions that do not qualify for hedge accounting treatment, including our
economic interest in J.C. Penney common shares. Because these derivatives do not qualify for hedge accounting treatment, the gains
or losses resulting from their mark-to-market at the end of each reporting period are recognized as an increase or decrease in “interest
and other investment income (loss), net” on our consolidated statements of income. In addition, we are, and may in the future be,
subject to additional expense based on the notional amount of the derivative positions and a specified spread over LIBOR. Because the
market value of these instruments can vary significantly between periods, we may experience significant fluctuations in the amount of
our investment income or expense in any given period. In the years ended December 31, 2012 and 2011, we recognized a loss of
$75,815,000 and income of $12,984,000, respectively, from derivative instruments.
125
ITEM 8.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX TO FINANCIAL STATEMENTS
Report of Independent Registered Public Accounting Firm
Consolidated Balance Sheets at December 31, 2012 and 2011
Consolidated Statements of Income for the years ended December 31, 2012, 2011 and 2010
Consolidated Statements of Comprehensive Income for the years ended December 31, 2012, 2011 and 2010
Consolidated Statements of Changes in Equity for the years ended December 31, 2012, 2011 and 2010
Consolidated Statements of Cash Flows for the years ended December 31, 2012, 2011 and 2010
Notes to Consolidated Financial Statements
Page
Number
127
128
129
130
131
134
136
126
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Shareholders and Board of Trustees
Vornado Realty Trust
New York, New York
We have audited the accompanying consolidated balance sheets of Vornado Realty Trust (the “Company”) as of December 31,
2012 and 2011, and the related consolidated statements of income, comprehensive income, changes in equity, and cash flows for each
of the three years in the period ended December 31, 2012. Our audits also included the financial statement schedules listed in the
Index at Item 15. These financial statements and financial statement schedules are the responsibility of the Company’s management.
Our responsibility is to express an opinion on the financial statements and financial statement schedules based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Vornado Realty
Trust at December 31, 2012 and 2011, and the results of their operations and their cash flows for each of the three years in the period
ended December 31, 2012, in conformity with accounting principles generally accepted in the United States of America. Also, in our
opinion, such financial statement schedules, when considered in relation to the basic consolidated financial statements taken as a
whole, present fairly, in all material respects, the information set forth therein.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the
Company’s internal control over financial reporting as of December 31, 2012, based on the criteria established in Internal Control—
Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated
February 26, 2013 expressed an unqualified opinion on the Company’s internal control over financial reporting.
/s/ DELOITTE & TOUCHE LLP
Parsippany, New Jersey
February 26, 2013
127
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
VORNADO REALTY TRUST
CONSOLIDATED BALANCE SHEETS
(Amounts in thousands, except share and per share amounts)
ASSETS
Real estate, at cost:
Land
Buildings and improvements
Development costs and construction in progress
Leasehold improvements and equipment
Total
Less accumulated depreciation and amortization
Real estate, net
Cash and cash equivalents
Restricted cash
Marketable securities
Tenant and other receivables, net of allowance for doubtful accounts of $37,674 and $43,241
Investments in partially owned entities
Investment in Toys "R" Us
Real Estate Fund investments
Mortgage and mezzanine loans receivable
Receivable arising from the straight-lining of rents, net of allowance of $3,165 and $3,290
Deferred leasing and financing costs, net of accumulated amortization of $225,163 and $237,730
Identified intangible assets, net of accumulated amortization of $356,379 and $343,318
Assets related to discontinued operations
Due from officers
Other assets
LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND EQUITY
Mortgages payable
Senior unsecured notes
Revolving credit facility debt
Exchangeable senior debentures
Convertible senior debentures
Accounts payable and accrued expenses
Deferred revenue
Deferred compensation plan
Deferred tax liabilities
Liabilities related to discontinued operations
Other liabilities
Total liabilities
Commitments and contingencies
Redeemable noncontrolling interests:
Class A units - 11,215,682 and 12,160,771 units outstanding
Series D cumulative redeemable preferred units - 1,800,001 and 9,000,001 units outstanding
Total redeemable noncontrolling interests
Vornado shareholders' equity:
Preferred shares of beneficial interest: no par value per share; authorized 110,000,000
shares; issued and outstanding 51,184,609 and 42,186,709 shares
Common shares of beneficial interest: $.04 par value per share; authorized
250,000,000 shares; issued and outstanding 186,734,711 and 185,080,020 shares
Additional capital
Earnings less than distributions
Accumulated other comprehensive (loss) income
Total Vornado shareholders' equity
Noncontrolling interests in consolidated subsidiaries
Total equity
See notes to the consolidated financial statements.
128
December 31,
2012
December 31,
2011
$
$
$
$
$
$
4,553,978
12,895,355
920,662
125,364
18,495,359
(3,097,074)
15,398,285
960,319
183,256
398,188
195,718
1,226,256
478,041
600,786
225,359
765,518
408,092
370,602
374,476
-
381,079
21,965,975
8,768,182
1,358,008
1,170,000
-
-
484,746
498,510
105,200
15,305
315,448
402,280
13,117,679
898,152
46,000
944,152
4,399,419
12,062,001
116,126
126,211
16,703,757
(2,894,374)
13,809,383
606,553
98,068
741,321
171,798
1,233,650
506,809
346,650
133,948
702,360
364,753
287,844
1,049,643
13,127
380,580
20,446,487
8,072,880
1,357,661
138,000
497,898
10,168
423,512
515,816
95,457
13,315
506,960
145,696
11,777,363
934,677
226,000
1,160,677
1,240,278
1,021,660
7,440
7,195,438
(1,573,275)
(18,946)
6,850,935
1,053,209
7,904,144
7,373
7,127,258
(1,401,704)
73,729
6,828,316
680,131
7,508,447
$
21,965,975
$
20,446,487
VORNADO REALTY TRUST
CONSOLIDATED STATEMENTS OF INCOME
(Amounts in thousands, except per share amounts)
REVENUES:
Property rentals
Tenant expense reimbursements
Cleveland Medical Mart development project
Fee and other income
Total revenues
EXPENSES:
Operating
Depreciation and amortization
General and administrative
Cleveland Medical Mart development project
Impairment losses, acquisition related costs
and tenant buy-outs
Total expenses
Operating income
Income applicable to Toys "R" Us
Income from partially owned entities
Income (loss) from Real Estate Fund
Interest and other investment (loss) income, net
Interest and debt expense
Net gain on extinguishment of debt
Net gain on disposition of wholly owned and partially owned assets
Income before income taxes
Income tax expense
Income from continuing operations
Income from discontinued operations
Net income
Less net income attributable to noncontrolling interests in:
Consolidated subsidiaries
Operating Partnership
Preferred unit distributions of the Operating Partnership
Net income attributable to Vornado
Preferred share dividends
Discount on preferred share and unit redemptions
NET INCOME attributable to common shareholders
INCOME PER COMMON SHARE - BASIC:
Income from continuing operations, net
Income from discontinued operations, net
Net income per common share
Weighted average shares outstanding
INCOME PER COMMON SHARE - DILUTED:
Income from continuing operations, net
Income from discontinued operations, net
Net income per common share
Weighted average shares outstanding
2012
Year Ended December 31,
2011
2010
$
$
$
$
$
$
2,085,582
301,092
235,234
144,549
2,766,457
1,021,719
517,811
201,894
226,619
120,786
2,088,829
677,628
14,859
408,267
63,936
(260,945)
(500,361)
-
13,347
416,731
(8,132)
408,599
285,942
694,541
(32,018)
(35,327)
(9,936)
617,260
(76,937)
8,948
549,271
1.50
1.45
2.95
185,810
1.49
1.45
2.94
$
$
2,114,255
314,752
154,080
149,749
2,732,836
995,586
524,550
208,008
145,824
35,299
1,909,267
823,569
48,540
70,072
22,886
148,784
(526,175)
-
15,134
602,810
(23,925)
578,885
161,115
740,000
(21,786)
(41,059)
(14,853)
662,302
(65,531)
5,000
601,771
2.44
0.82
3.26
184,308
2.42
0.81
3.23
$
$
$
$
$
$
$
$
$
$
2,093,475
317,777
-
146,955
2,558,207
983,424
494,898
211,399
-
109,458
1,799,179
759,028
71,624
20,869
(303)
235,267
(539,370)
94,789
81,432
723,336
(22,137)
701,199
6,832
708,031
(4,920)
(44,033)
(11,195)
647,883
(55,534)
4,382
596,731
3.24
0.03
3.27
182,340
3.21
0.03
3.24
186,530
186,021
184,159
See notes to consolidated financial statements.
129
VORNADO REALTY TRUST
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Amounts in thousands)
Net income
Other comprehensive (loss) income:
Change in unrealized net (loss) gain on securities available-for-sale
Amounts reclassified from accumulated other comprehensive income:
Non-cash impairment loss on J.C. Penney owned shares
Gain on sale of securities available-for-sale
Pro rata share of other comprehensive (loss) income of
nonconsolidated subsidiaries
Change in value of interest rate swap
Other
Comprehensive income
Less comprehensive income attributable to noncontrolling interests
Comprehensive income attributable to Vornado
2012
Year Ended December 31,
2011
2010
$
694,541
$
740,000
$
708,031
(283,649)
41,657
55,891
224,937
(3,582)
(31,758)
(5,659)
329
595,159
(70,574)
524,585
$
-
(5,020)
12,859
(43,704)
(5,245)
740,547
(77,969)
662,578
$
-
(22,604)
11,853
-
(136)
753,035
(63,343)
689,692
$
See notes to consolidated financial statements.
130
VORNADO REALTY TRUST
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
Preferred Shares
Common Shares
Shares
181,214 $
Amount
Additional
Capital
Earnings
Less Than
Distributions
Accumulated
Other
Comprehensive
Income (Loss)
Non-
controlling
Interests
(Amounts in thousands)
Balance, December 31, 2009
Net income
Dividends on common shares
Dividends on preferred shares
Redemption of preferred shares
Common shares issued:
Upon redemption of Class A
units, at redemption value
Under Omnibus share plan
Under dividend reinvestment plan
Contributions:
Real Estate Fund
Other
Conversion of Series A preferred
shares to common shares
Deferred compensation shares
and options
Change in unrealized net gain
on securities available-for-sale
Gain on sale of securities
available-for-sale
Pro rata share of other
comprehensive income of
nonconsolidated subsidiaries
Adjustments to carry redeemable
Class A units at redemption value
Other
Balance, December 31, 2010
Shares
Amount
33,952 $ 823,686
-
-
-
(39,982)
-
-
-
(1,600)
-
-
-
-
-
-
-
-
-
-
(12)
(616)
-
-
-
-
-
-
-
-
-
-
-
-
32,340 $ 783,088
-
-
-
-
1,548
812
22
-
-
18
48
-
-
-
-
-
183,662 $
7,218 $
-
-
-
-
62
33
1
-
-
1
2
-
-
-
-
-
7,317 $
6,961,007 $
-
-
-
-
126,702
25,290
1,656
-
-
615
9,345
-
-
-
(191,826)
(61)
(1,577,591) $
647,883
(474,299)
(55,669)
4,382
-
(25,584)
-
-
-
-
-
-
-
-
-
2
6,932,728 $
(1,480,876) $
406,637 $
4,920
-
-
-
-
-
-
93,583
8,783
-
-
-
28,449 $
-
-
-
-
-
-
-
-
-
-
-
55,891
(22,604)
Total
Equity
6,649,406
652,803
(474,299)
(55,669)
(35,600)
126,764
(261)
1,657
93,583
8,783
-
9,347
55,891
(22,604)
11,853
-
11,853
-
(136)
73,453 $
-
772
514,695 $
(191,826)
577
6,830,405
See notes to consolidated financial statements.
131
VORNADO REALTY TRUST
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY - CONTINUED
Preferred Shares
Common Shares
Shares
183,662 $
Amount
Additional
Capital
Earnings
Less Than
Distributions
Accumulated
Other
Comprehensive
Income (Loss)
Non-
controlling
Interests
(Amounts in thousands)
Balance, December 31, 2010
Net income
Dividends on common shares
Dividends on preferred shares
Issuance of Series J preferred shares
Common shares issued:
Upon redemption of Class A
units, at redemption value
Under Omnibus share plan
Under dividend reinvestment plan
Contributions:
Real Estate Fund
Other
Distributions:
Real Estate Fund
Other
Conversion of Series A preferred
shares to common shares
Deferred compensation shares
and options
Change in unrealized net gain
on securities available-for-sale
Gain on sale of securities
available-for-sale
Pro rata share of other
comprehensive income of
nonconsolidated subsidiaries
Change in value of interest rate swap
Adjustments to carry redeemable
Class A units at redemption value
Redeemable noncontrolling interests'
share of above adjustments
Other
Balance, December 31, 2011
Shares
Amount
32,340 $ 783,088
-
-
-
238,842
-
-
-
9,850
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(3)
(165)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(105)
42,187 $ 1,021,660
-
-
-
-
798
590
21
-
-
-
-
5
4
-
-
-
-
-
-
-
185,080 $
7,317 $
-
-
-
-
6,932,728 $
-
-
-
-
(1,480,876) $
662,302
(508,745)
(65,694)
-
32
23
1
64,798
23,705
1,771
-
(13,289)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
165
-
-
-
-
-
10,608
(523)
-
-
-
-
98,092
-
-
-
-
-
41,657
(5,020)
12,859
(43,704)
-
73,453 $
-
-
-
-
-
-
-
-
-
-
-
-
-
Total
Equity
6,830,405
684,088
(508,745)
(65,694)
238,842
64,830
10,439
1,772
203,407
778
(49,422)
(15,604)
-
10,085
41,657
(5,020)
12,859
(43,704)
98,092
514,695 $
21,786
-
-
-
-
-
-
203,407
778
(49,422)
(15,604)
-
-
-
-
-
-
-
-
-
7,373 $
-
(4,609)
7,127,258 $
-
5,121
(1,401,704) $
(271)
(5,245)
73,729 $
-
4,491
680,131 $
(271)
(347)
7,508,447
See notes to consolidated financial statements.
132
VORNADO REALTY TRUST
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY - CONTINUED
Preferred Shares
Common Shares
Shares
185,080 $
Amount
(Amounts in thousands)
Balance, December 31, 2011
Net income
Dividends on common shares
Dividends on preferred shares
Issuance of Series K preferred shares
Redemption of Series E preferred
shares
Common shares issued:
Upon redemption of Class A
units, at redemption value
Under Omnibus share plan
Under dividend reinvestment plan
Upon acquisition of real estate
Contributions:
Real Estate Fund
Other
Distributions:
Real Estate Fund
Other
Conversion of Series A preferred
shares to common shares
Deferred compensation shares
and options
Change in unrealized net loss
on securities available-for-sale
Impairment loss on J.C. Penney
owned shares
Gain on sale of securities
available-for-sale
Pro rata share of other
comprehensive loss of
nonconsolidated subsidiaries
Change in value of interest rate swap
Adjustments to carry redeemable
Class A units at redemption value
Redeemable noncontrolling interests'
share of above adjustments
Discount on redemption of
preferred shares and units
Consolidation of partially owned
entity
Other
Balance, December 31, 2012
Shares
Amount
42,187 $ 1,021,660
-
-
-
290,971
-
-
-
12,000
(3,000)
(72,248)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(2)
(105)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
51,185 $ 1,240,278
Additional
Capital
Earnings
Less Than
Distributions
Accumulated
Other
Comprehensive
Income (Loss)
Non-
controlling
Interests
7,373 $
-
-
-
-
-
45
18
1
3
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
7,440 $
7,127,258 $
-
-
-
-
-
89,717
9,521
2,306
5,121
-
-
-
-
105
(1,401,704) $
617,260
(699,318)
(76,937)
-
-
-
(16,389)
-
-
-
-
-
-
-
13,527
(473)
-
-
-
-
-
(52,117)
-
-
-
-
7,195,438 $
-
-
-
-
-
-
-
8,948
-
(4,662)
(1,573,275) $
73,729 $
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(283,649)
224,937
(3,582)
(31,758)
(5,659)
-
6,707
-
-
329
680,131 $
32,018
-
-
-
-
-
-
-
-
195,029
18,103
(48,138)
(59)
-
-
-
-
-
-
-
-
-
-
176,132
(7)
(18,946) $ 1,053,209 $
Total
Equity
7,508,447
649,278
(699,318)
(76,937)
290,971
(72,248)
89,762
(6,850)
2,307
5,124
195,029
18,103
(48,138)
(59)
-
13,054
(283,649)
224,937
(3,582)
(31,758)
(5,659)
(52,117)
6,707
8,948
176,132
(4,340)
7,904,144
-
-
-
-
-
1,121
434
29
64
-
-
-
-
3
4
-
-
-
-
-
-
-
-
-
-
186,735 $
See notes to consolidated financial statements.
133
VORNADO REALTY TRUST
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
Cash Flows from Operating Activities:
Net income
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization (including amortization of deferred financing costs)
Equity in net income of partially owned entities, including Toys “R” Us
Net gains on sale of real estate
Distributions of income from partially owned entities
Non-cash impairment loss on J.C. Penney owned shares
Impairment losses, tenant buy-outs and litigation loss accrual
Loss (income) from the mark-to-market of J.C. Penney derivative position
Straight-lining of rental income
Return of capital from Real Estate Fund investments
Net realized and unrealized gains on Real Estate Fund assets
Amortization of below-market leases, net
Other non-cash adjustments
Gain on sale of Canadian Trade Shows
Net gain on disposition of wholly owned and partially owned assets
Net gain on extinguishment of debt
Mezzanine loans loss reversal and net gain on disposition
Recognition of disputed account receivable from Stop & Shop
Interest received on repayment of mezzanine loan
Changes in operating assets and liabilities:
Real Estate Fund investments
Tenant and other receivables, net
Prepaid assets
Other assets
Accounts payable and accrued expenses
Other liabilities
Net cash provided by operating activities
Cash Flows from Investing Activities:
Acquisitions of real estate and other
Proceeds from sales of real estate and related investments
Additions to real estate
Funding of J.C. Penney derivative collateral
Return of J.C. Penney derivative collateral
Development costs and construction in progress
Distributions of capital from partially owned entities
Investments in partially owned entities
Investments in mortgage and mezzanine loans receivable and other
Restricted cash
Proceeds from sales of, and return of investment in, marketable securities
Proceeds from the sale of Canadian Trade Shows
Proceeds from sales and repayments of mortgage and mezzanine loans
receivable and other
Proceeds from the repayment of loan to officer
Loan to officer
Purchases of marketable securities including J.C. Penney common
shares and other
Proceeds from maturing short-term investments
Net cash used in investing activities
Year Ended December 31,
2011
2012
2010
$
694,541
$
740,000
$
708,031
557,888
(423,126)
(245,799)
226,172
224,937
133,977
75,815
(69,648)
63,762
(55,361)
(54,359)
52,082
(31,105)
(13,347)
-
-
-
-
(262,537)
(23,271)
(10,549)
(46,573)
21,595
9,955
825,049
(673,684)
445,683
(205,652)
(191,330)
134,950
(156,873)
144,502
(134,994)
(94,094)
(75,138)
60,258
52,504
38,483
13,123
-
-
-
(642,262)
580,990
(118,612)
(51,623)
93,635
-
58,173
(12,984)
(45,788)
-
(17,386)
(63,044)
27,325
-
(15,134)
(83,907)
(82,744)
(23,521)
-
(184,841)
8,869
(7,779)
(89,186)
(28,699)
18,755
702,499
(90,858)
140,186
(165,680)
(43,850)
56,350
(93,066)
318,966
(571,922)
(98,979)
126,380
70,418
-
187,294
13,123
(13,123)
-
-
(164,761)
556,312
(92,493)
(2,506)
61,037
-
137,367
(130,153)
(76,926)
-
-
(66,202)
36,352
-
(81,432)
(97,728)
(53,100)
-
40,467
(144,423)
2,019
6,321
(68,305)
2,645
33,803
771,086
(173,413)
127,736
(144,794)
(12,500)
-
(156,775)
51,677
(165,170)
(85,336)
138,586
280,462
-
70,762
-
-
(491,596)
40,000
(520,361)
See notes to consolidated financial statements.
134
VORNADO REALTY TRUST
CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED
(Amounts in thousands)
Cash Flows from Financing Activities:
Proceeds from borrowings
Repayments of borrowings
Dividends paid on common shares
Proceeds from the issuance of preferred shares
Purchases of outstanding preferred units and shares
Contributions from noncontrolling interests
Distributions to noncontrolling interests
Dividends paid on preferred shares
Debt issuance and other costs
Repurchase of shares related to stock compensation agreements and related
tax withholdings
Proceeds received from exercise of employee share options
Acquisition of convertible senior debentures and senior unsecured notes
Net cash provided by (used in) financing activities
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period
Supplemental Disclosure of Cash Flow Information:
Cash payments for interest (net of amounts capitalized of $16,801, $1,197 and $864)
Cash payments for income taxes
Non-Cash Investing and Financing Activities:
Adjustments to carry redeemable Class A units at redemption value
Contribution of mezzanine loan receivable to joint venture
Write-off of fully depreciated assets
Common shares issued upon redemption of Class A units at redemption value
Change in unrealized net gain on securities available-for-sale
Like-kind exchange of real estate:
Acquisitions
Dispositions
Financing assumed in acquisitions
Financing transferred in dispositions
L.A. Mart seller financing
Marriott Marquis Times Square - retail and signage capital lease:
Asset (included in development costs and construction in progress)
Liability (included in other liabilities)
Increase in assets and liabilities resulting from the consolidation of partially
owned entities:
Real estate, net
Notes and mortgages payable
Decrease in assets and liabilities resulting from the deconsolidation of discontinued
operations and/or investments that were previously consolidated:
Real estate, net
Notes and mortgages payable
$
$
$
$
$
Year Ended December 31,
2011
2012
2010
3,593,000 $
(2,747,694)
(699,318)
290,971
(243,300)
213,132
(104,448)
(73,976)
(39,073)
3,412,897 $
(3,740,327)
(508,745)
238,842
(28,000)
204,185
(116,510)
(61,464)
(47,395)
2,481,883
(1,564,143)
(474,299)
-
(78,954)
103,831
(53,842)
(55,669)
(14,980)
(30,168)
11,853
-
170,979
353,766
606,553
960,319 $
(964)
25,507
-
(621,974)
(84,236)
690,789
606,553 $
(25,660)
26,993
(440,575)
(95,415)
155,310
535,479
690,789
491,869 $
531,174 $
549,327
21,709 $
26,187 $
23,960
(52,117) $
-
(177,367)
89,762
(283,649)
230,913
(230,913)
-
(163,144)
35,000
240,000
(240,000)
342,919
334,225
98,092 $
73,750
(72,279)
64,830
41,657
(191,826)
-
(63,007)
126,764
55,891
21,999
(45,625)
-
-
-
-
-
-
-
-
-
102,616
-
-
-
-
102,804
57,563
-
-
(145,333)
(232,502)
(401,857)
(316,490)
See notes to consolidated financial statements.
135
VORNADO REALTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Organization and Business
Vornado Realty Trust (“Vornado”) is a fully-integrated real estate investment trust (“REIT”) and conducts its business through,
and substantially all of its interests in properties are held by, Vornado Realty L.P., a Delaware limited partnership (the “Operating
Partnership”). Accordingly, Vornado’s cash flow and ability to pay dividends to its shareholders is dependent upon the cash flow of
the Operating Partnership and the ability of its direct and indirect subsidiaries to first satisfy their obligations to creditors. Vornado is
the sole general partner of, and owned approximately 94.0% of the common limited partnership interest in the Operating Partnership
at December 31, 2012. All references to “we,” “us,” “our,” the “Company” and “Vornado” refer to Vornado Realty Trust and its
consolidated subsidiaries, including the Operating Partnership.
As of December 31, 2012, we own all or portions of:
New York:
19.7 million square feet of Manhattan office space in 31 properties and four residential properties containing 1,655 units;
2.2 million square feet of Manhattan street retail space in 49 properties;
The 1,700 room Hotel Pennsylvania located on Seventh Avenue at 33rd Street in the heart of the Penn Plaza district;
A 32.4% interest in Alexander’s, Inc. (NYSE: ALX), which owns six properties in the greater New York metropolitan area,
including 731 Lexington Avenue, the 1.3 million square foot Bloomberg, L.P. headquarters building;
Washington, DC:
73 properties aggregating 19.1 million square feet, including 59 office properties aggregating 16.1 million square feet and
seven residential properties containing 2,414 units;
Retail Properties:
114 strip shopping centers and single tenant retail assets aggregating 15.6 million square feet, primarily in the northeast states
and California;
Six regional malls aggregating 5.2 million square feet, located in the northeast / mid-Atlantic states and Puerto Rico;
Other Real Estate and Related Investments:
The 3.5 million square foot Merchandise Mart in Chicago;
A 70% controlling interest in 555 California Street, a three-building office complex in San Francisco’s financial district
aggregating 1.8 million square feet, known as the Bank of America Center;
A 25.0% interest in Vornado Capital Partners, our $800 million real estate fund. We are the general partner and investment
manager of the fund;
A 32.6% interest in Toys “R” Us, Inc.;
A 10.7% interest in J.C. Penney Company, Inc. (NYSE: JCP); and
Other real estate and related investments and mortgage and mezzanine loans on real estate.
136
VORNADO REALTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. Basis of Presentation and Significant Accounting Policies
Basis of Presentation
The accompanying consolidated financial statements include the accounts of Vornado and the Operating Partnership. All inter-
company amounts have been eliminated. We account for unconsolidated partially owned entities under the equity method of
accounting, when we have the ability to exercise significant influence over the entity. Our consolidated financial statements are
prepared in accordance with accounting principles generally accepted in the United States of America, which require 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.
Recently Issued Accounting Literature
In May 2011, the Financial Accounting Standards Board (“FASB”) issued Update No. 2011-04, Fair Value Measurements (Topic
820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRS (“ASU No.
2011-04”). ASU No. 2011-04 provides a uniform framework for fair value measurements and related disclosures between GAAP and
International Financial Reporting Standards (“IFRS”) and requires additional disclosures, including: (i) quantitative information about
unobservable inputs used, a description of the valuation processes used, and a qualitative discussion about the sensitivity of the
measurements to changes in the unobservable inputs, for Level 3 fair value measurements; (ii) fair value of financial instruments not
measured at fair value but for which disclosure of fair value is required, based on their levels in the fair value hierarchy; and
(iii) transfers between Level 1 and Level 2 of the fair value hierarchy. The adoption of this update on January 1, 2012 did not have a
material impact on our consolidated financial statements, but resulted in additional fair value measurement disclosures (See Note 13 -
Fair Value Measurements).
Significant Accounting Policies
Real Estate: Real estate is carried at cost, net of accumulated depreciation and amortization. Betterments, major renewals and
certain costs directly related to the improvement and leasing of real estate are capitalized. Maintenance and repairs are expensed as
incurred. For redevelopment of existing operating properties, the net book value of the existing property under redevelopment plus the
cost for the construction and improvements incurred in connection with the redevelopment are capitalized to the extent the capitalized
costs of the property do not exceed the estimated fair value of the redeveloped property when complete. If the cost of the redeveloped
property, including the undepreciated net book value of the property carried forward, exceeds the estimated fair value of redeveloped
property, the excess is charged to expense. Depreciation is provided on a straight-line basis over estimated useful lives which range
from 7 to 40 years. Tenant allowances are amortized on a straight-line basis over the lives of the related leases, which approximate the
useful lives of the assets. Additions to real estate include interest expense capitalized during construction of $16,801,000 and
$1,197,000 for the years ended December 31, 2012 and 2011, respectively.
Upon the acquisition of real estate, we assess the fair value of acquired assets (including land, buildings and improvements,
identified intangibles, such as acquired above and below-market leases and acquired in-place leases and tenant relationships) and
acquired liabilities and we allocate the purchase price based on these assessments. We assess fair value based on estimated cash flow
projections that utilize appropriate discount and capitalization rates and available market information. Estimates of future cash flows
are based on a number of factors including historical operating results, known trends, and market/economic conditions. We record
acquired intangible assets (including acquired above-market leases, tenant relationships and acquired in-place leases) and acquired
intangible liabilities (including below–market leases) at their estimated fair value separate and apart from goodwill. We amortize
identified intangibles that have finite lives over the period they are expected to contribute directly or indirectly to the future cash flows
of the property or business acquired.
137
VORNADO REALTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. Basis of Presentation and Significant Accounting Policies - continued
Our properties, including any related intangible assets, are individually reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount may not be recoverable. An impairment exists when the carrying amount of an asset
exceeds the aggregate projected future cash flows over the anticipated holding period on an undiscounted basis. An impairment loss is
measured based on the excess of the property’s carrying amount over its estimated fair value. Impairment analyses are based on our
current plans, intended holding periods and available market information at the time the analyses are prepared. If our estimates of the
projected future cash flows, anticipated holding periods, or market conditions change, our evaluation of impairment losses may be
different and such differences could be material to our consolidated financial statements. The evaluation of anticipated cash flows is
subjective and is based, in part, on assumptions regarding future occupancy, rental rates and capital requirements that could differ
materially from actual results. Plans to hold properties over longer periods decrease the likelihood of recording impairment losses.
The table below summarizes the impairment losses, acquisition related costs and tenant buy-outs in the years ended December 31,
2012, 2011 and 2010.
(Amounts in thousands)
Impairment losses:
Real estate assets
Development projects
Condominium units held for sale (see page 140)
Acquisition related costs and tenant buy-outs
For the Year Ended December 31,
2011
2010
2012
$
$
107,000 $
-
2,538
11,248
120,786 $
- $
3,040
-
32,259
35,299 $
72,500
-
30,013
6,945
109,458
Partially Owned Entities: We consolidate entities in which we have a controlling financial interest. In determining whether we
have a controlling financial interest in a partially owned entity and the requirement to consolidate the accounts of that entity, we
consider factors such as ownership interest, board representation, management representation, authority to make decisions, and
contractual and substantive participating rights of the partners/members as well as whether the entity is a variable interest entity
(“VIE”) and we are the primary beneficiary. We are deemed to be the primary beneficiary of a VIE when we have the power to direct
the activities of the VIE that most significantly impact the VIE’s economic performance and the obligation to absorb losses or receive
benefits that could potentially be significant to the VIE. We generally do not control a partially owned entity if the entity is not
considered a VIE and the approval of all of the partners/members is contractually required with respect to major decisions, such as
operating and capital budgets, the sale, exchange or other disposition of real property, the hiring of a chief executive officer, the
commencement, compromise or settlement of any lawsuit, legal proceeding or arbitration or the placement of new or additional
financing secured by assets of the venture. We account for investments under the equity method when the requirements for
consolidation are not met, and we have significant influence over the operations of the investee. Equity method investments are
initially recorded at cost and subsequently adjusted for our share of net income or loss and cash contributions and distributions each
period. Investments that do not qualify for consolidation or equity method accounting are accounted for on the cost method.
Investments in partially owned entities are reviewed for impairment whenever events or changes in circumstances indicate that
the carrying amount may not be recoverable. An impairment loss is measured based on the excess of the carrying amount of an
investment over its estimated fair value. Impairment analyses are based on current plans, intended holding periods and available
information at the time the analyses are prepared. In the years ended December 31, 2012, 2011 and 2010, we recognized non-cash
impairment losses on investments in partially owned entities, excluding Toys, aggregating $4,936,000, $13,794,000 and $11,481,000,
respectively.
138
VORNADO REALTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. Basis of Presentation and Significant Accounting Policies – continued
Mortgage and Mezzanine Loans Receivable: We invest in mortgage and mezzanine loans of entities that have significant real
estate assets. These investments are either secured by the real property or by pledges of the equity interests of the entities owning the
underlying real estate. We record these investments at the stated principal amount net of any unamortized discount or premium. We
accrete or amortize any discount or premium over the life of the related receivable utilizing the effective interest method or straight-
line method, if the result is not materially different. We evaluate the collectibility of both interest and principal of each of our loans
whenever events or changes in circumstances indicate such amounts may not be recoverable. A loan is impaired when it is probable
that we will be unable to collect all amounts due according to the existing contractual terms. When a loan is impaired, the amount of
the loss accrual is calculated by comparing the carrying amount of the investment to the present value of expected future cash flows
discounted at the loan’s effective interest rate, or as a practical expedient, to the value of the collateral if the loan is collateral
dependent. Interest on impaired loans is recognized when received in cash.
Cash and Cash Equivalents: Cash and cash equivalents consist of highly liquid investments with original maturities of three
months or less and are carried at cost, which approximates fair value due to their short-term maturities. The majority of our cash and
cash equivalents consists of (i) deposits at major commercial banks, which may at times exceed the Federal Deposit Insurance
Corporation limit, (ii) United States Treasury Bills, and (iii) Certificate of Deposits placed through an Account Registry Service
(“CDARS”). To date, we have not experienced any losses on our invested cash.
Restricted Cash: Restricted cash consists of security deposits, cash restricted in connection with our deferred compensation plan
and cash escrowed under loan agreements for debt service, real estate taxes, property insurance and capital improvements.
Allowance for Doubtful Accounts: We periodically evaluate the collectibility of amounts due from tenants and maintain an
allowance for doubtful accounts for estimated losses resulting from the inability of tenants to make required payments under the lease
agreements. We also maintain an allowance for receivables arising from the straight-lining of rents. This receivable arises from
earnings recognized in excess of amounts currently due under the lease agreements. Management exercises judgment in establishing
these allowances and considers payment history and current credit status in developing these estimates. As of December 31, 2012 and
2011, we had $37,674,000 and $43,241,000, respectively, in allowances for doubtful accounts. In addition, as of December 31, 2012
and 2011, we had $3,165,000 and $3,290,000, respectively, in allowances for receivables arising from the straight-lining of rents.
Deferred Charges: Direct financing costs are deferred and amortized over the terms of the related agreements as a component of
interest expense. Direct costs related to successful leasing activities are capitalized and amortized on a straight line basis over the lives
of the related leases. All other deferred charges are amortized on a straight line basis, which approximates the effective interest rate
method, in accordance with the terms of the agreements to which they relate.
Stock-Based Compensation: Stock-based compensation consists of awards to certain employees and officers and consists of
stock options, restricted stock, restricted Operating Partnership units and out-performance plan awards. We account for all stock-
based compensation in accordance with ASC 718, Compensation – Stock Compensation.
139
VORNADO REALTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. Basis of Presentation and Significant Accounting Policies – continued
Revenue Recognition: We have the following revenue sources and revenue recognition policies:
• Base Rent — income arising from tenant leases. These rents are recognized over the non-cancelable term of the related leases
on a straight-line basis which includes the effects of rent steps and rent abatements under the leases. We commence rental
revenue recognition when the tenant takes possession of the leased space and the leased space is substantially ready for its
intended use. In addition, in circumstances where we provide a tenant improvement allowance for improvements that are
owned by the tenant, we recognize the allowance as a reduction of rental revenue on a straight-line basis over the term of the
lease.
•
Percentage Rent — income arising from retail tenant leases that is contingent upon tenant sales exceeding defined thresholds.
These rents are recognized only after the contingency has been removed (i.e., when tenant sales thresholds have been
achieved).
• Hotel Revenue — income arising from the operation of the Hotel Pennsylvania which consists of rooms revenue, food and
beverage revenue, and banquet revenue. Income is recognized when rooms are occupied. Food and beverage and banquet
revenue is recognized when the services have been rendered.
• Trade Shows Revenue — income arising from the operation of trade shows, including rentals of booths. This revenue is
recognized when the trade shows have occurred.
• Expense Reimbursements — revenue arising from tenant leases which provide for the recovery of all or a portion of the
operating expenses and real estate taxes of the respective property. This revenue is accrued in the same periods as the
expenses are incurred.
• Management, Leasing and Other Fees — income arising from contractual agreements with third parties or with partially
owned entities. This revenue is recognized as the related services are performed under the respective agreements.
• Cleveland Medical Mart — revenue arising from the development of the Cleveland Medical Mart. This revenue is
recognized as the related services are performed under the respective agreements using the criteria set forth in ASC 605-25,
Multiple Element Arrangements, as we are providing development, marketing, leasing, and other property management
services.
Condominium Units Held For Sale: Condominium units held for sale are carried at the lower of cost or fair value less costs to
sell and are included in “other assets” on our consolidated balance sheet. As of December 31, 2012 and 2011, the carrying amount of
these units were $53,737,000 and $60,785,000, respectively, and consist of substantially completed units at Granite Park in Pasadena
and The Bryant in Boston. Revenue from condominium unit sales is recognized upon closing of the sale (the “completed contract
method”), as all conditions for full profit recognition have been met at that time. We use the relative sales value method to allocate
costs to individual condominium units. Net gains on sales of condominiums units are included in “net gain on disposition of wholly
owned and partially owned assets” on our consolidated statements of income and were $1,274,000, $5,884,000 and $3,149,000 in the
years ended December 31, 2012, 2011 and 2010, respectively. Impairment losses on condominium units are included in “impairment
losses, acquisition related costs and tenant buy-outs” on our consolidated statements of income and were $2,538,000, $0 and
$30,013,000 in the years ended December 31, 2012, 2011 and 2010, respectively.
140
VORNADO REALTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. Basis of Presentation and Significant Accounting Policies – continued
Derivative Instruments and Hedging Activities: ASC 815, Derivatives and Hedging, as amended, establishes accounting and
reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging
activities. As of December 31, 2012 and 2011, our derivative instruments consisted primarily of a portion of our investment in J.C. Penney
common shares (see Note 5 – Marketable Securities and Derivative Instruments), an interest rate cap and an interest rate swap. We record all
derivatives on the balance sheet at fair value. The accounting for changes in the fair value of derivatives depends on the intended use of the
derivative and the resulting designation. Derivatives used to hedge the exposure to changes in the fair value of an asset, liability, or firm
commitment attributable to a particular risk, such as interest rate risk, are considered fair value hedges. Derivatives used to hedge the
exposure to variability in expected future cash flows, or other types of forecasted transactions, are considered cash flow hedges.
For derivatives designated as fair value hedges, changes in the fair value of the derivative and the hedged item related to the hedged risk
are recognized in earnings. For derivatives designated as cash flow hedges, the effective portion of changes in the fair value of the derivative
is initially reported in other comprehensive income (loss) (outside of earnings) and subsequently reclassified to earnings when the hedged
transaction affects earnings, and the ineffective portion of changes in the fair value of the derivative is recognized directly in earnings. We
assess the effectiveness of each hedging relationship by comparing the changes in fair value or cash flows of the derivative hedging
instrument with the changes in fair value or cash flows of the designated hedged item or transaction. For derivatives not designated as hedges,
changes in fair value are recognized in earnings.
Income Per Share: Basic income per share is computed based on weighted average shares outstanding. Diluted income per share
considers the effect of all potentially dilutive share equivalents, including outstanding employee stock options, restricted shares and
convertible or redeemable securities.
Income Taxes: We operate in a manner intended to enable us to continue to qualify as a REIT under Sections 856-860 of the Internal
Revenue Code of 1986, as amended. Under those sections, a REIT which distributes at least 90% of its REIT taxable income as a dividend to
its shareholders each year and which meets certain other conditions will not be taxed on that portion of its taxable income which is distributed
to its shareholders. We distribute to shareholders 100% of taxable income and therefore, no provision for Federal income taxes is required.
Dividends distributed for the year ended December 31, 2012, were characterized, for federal income tax income tax purposes, as 62.7%
ordinary income and 37.3% long term capital gain. Dividend distributions for the year ended December 31, 2011, were characterized, for
Federal income tax purposes, as 93.2% ordinary income and 6.8% long-term capital gain. Dividend distributions for the year ended
December 31, 2010 were characterized, for Federal income tax purposes, as 95.9% ordinary income, 2.8% long-term capital gain and 1.3%
return of capital.
We have elected to treat certain consolidated subsidiaries, and may in the future elect to treat newly formed subsidiaries, as taxable
REIT subsidiaries pursuant to an amendment to the Internal Revenue Code that became effective January 1, 2001. Taxable REIT subsidiaries
may participate in non-real estate related activities and/or perform non-customary services for tenants and are subject to Federal and State
income tax at regular corporate tax rates. Our taxable REIT subsidiaries had a combined current income tax expense of approximately
$20,336,000 and $26,645,000 at December 31, 2012 and 2011, respectively, and have immaterial differences between the financial reporting
and tax basis of assets and liabilities. The following table reconciles net income attributable to common shareholders to estimated taxable
income for the years ended December 31, 2012, 2011 and 2010.
(Amounts in thousands)
Net income attributable to common shareholders
Book to tax differences (unaudited):
Depreciation and amortization
Impairment losses on marketable equity securities
Straight-line rent adjustments
Earnings of partially owned entities
Stock options
Sale of real estate
Derivatives
Mortgage and mezzanine loans receivable
Other, net
Estimable taxable income
For the Year Ended December 31,
2011
2010
2012
$
549,271
$
601,771
$
596,731
205,155
211,328
(64,679)
(60,049)
(28,701)
(123,905)
71,228
-
17,080
776,728
$
225,802
-
(38,800)
(96,178)
(27,697)
(18,766)
(12,160)
(82,512)
(6,223)
545,237
$
216,473
-
(70,606)
(62,315)
(48,399)
12,899
(121,120)
(104,727)
48,915
467,851
$
The net basis of our assets and liabilities for tax reporting purposes is approximately $3.8 billion lower than its amount reported in our
consolidated financial statements.
141
VORNADO REALTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
3. Acquisitions
Independence Plaza
In 2011, we acquired a 51% interest in the subordinated debt of Independence Plaza, a three-building 1,328 unit residential
complex in the Tribeca submarket of Manhattan which has 54,500 square feet of retail space and 550 parking spaces, for $45,000,000
and a warrant to purchase 25% of the equity for $1,000,000. On December 21, 2012, we acquired a 58.75% interest in the property as
follows: (i) buying one of the equity partners’ 33.75% interest for $160,000,000, (ii) exercising our warrant for 25% of the equity and
(iii) contributing the appreciated value of our interest in the subordinated debt as preferred equity. In connection therewith, we
recognized income of $105,366,000, comprised of $60,396,000 from the accelerated amortization of the discount on the subordinated
debt immediately preceding the conversion to preferred equity, and a $44,970,000 purchase price fair value adjustment upon
exercising the warrant. The current transaction values the property at $844,800,000. The property is currently encumbered by a
$334,225,000 mortgage. We expect to refinance the $334,225,000 mortgage in 2013, substantially decreasing our cash
investment. We manage the retail space at the property and Stellar Management, our partner, manages the residential space. We
consolidate the accounts of this entity from the date of acquisition as it is a VIE, and we are deemed to be the primary beneficiary. We
are currently in the process of analyzing the fair value of the acquired leases; accordingly, our purchase price allocation is preliminary
and subject to change.
666 Fifth Avenue - Retail
On December 6, 2012, we acquired a retail condominium located at 666 Fifth Avenue at 53rd Street for $707,000,000. The
property has 126 feet of frontage on Fifth Avenue and contains 114,000 square feet, 39,000 square feet in fee and 75,000 square feet
by long-term lease from the 666 Fifth Avenue office condominium, which is 49.5% owned by us. We consolidate the accounts of the
property into our consolidated financial statements from the date of acquisition. We are currently in the process of analyzing the fair
value of the acquired leases; accordingly, our purchase price allocation is preliminary and subject to change.
Disclosure of the Company’s unaudited proforma information for the current and prior reporting periods as though the above
acquisitions of Independence Plaza and 666 Fifth Avenue – Retail had occurred at the beginning of the prior annual reporting period is
not considered practicable, as the Company does not have, and is unable to obtain, certain information required for such disclosure.
Marriott Marquis Times Square – Retail and Signage
On July 30, 2012, we entered into a lease with Host Hotels & Resorts, Inc. (NYSE: HST) (“Host”), under which we will
redevelop the retail and signage components of the Marriott Marquis Times Square Hotel. The Marriott Marquis with over 1,900
rooms is one of the largest hotels in Manhattan. It is located in the heart of the bow-tie of Times Square and spans the entire block
front from 45th Street to 46th Street on Broadway. The Marriott Marquis is directly across from our 1540 Broadway iconic retail
property leased to Forever 21 and Disney flagship stores. We plan to spend over $140,000,000 to redevelop and substantially expand
the existing retail space, including converting the below grade parking garage into retail, and creating six-story, 300 foot wide block
front, dynamic LED signs. During the term of the lease we will pay fixed rent equal to the sum of $12,500,000, plus a portion of the
property’s net cash flow after we receive a 5.2% preferred return on our invested capital. The lease contains put/call options which, if
exercised, would lead to our ownership. Host can exercise the put option during defined periods following the conversion of the
project to a condominium. We can exercise our call option under the same terms, at any time after the fifteenth year of the lease
term. We are accounting for this lease as a “capital lease” and have recorded a $240,000,000 capital lease asset and liability, which
are included as a component of “development costs and construction in progress” and “other liabilities,” respectively, on our
consolidated balance sheet. Although we have commenced paying the annual rent, there will be no income statement activity until the
redevelopment is substantially complete.
142
VORNADO REALTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
4. Vornado Capital Partners Real Estate Fund (the “Fund”)
In February 2011, the Fund’s subscription period closed with an aggregate of $800,000,000 of capital commitments, of which we
committed $200,000,000. We are the general partner and investment manager of the Fund, which has an eight-year term and a three-
year investment period. During the investment period, which concludes in July 2013, the Fund is our exclusive investment vehicle for
all investments that fit within its investment parameters, including debt, equity and other interests in real estate, and excluding (i)
investments in vacant land and ground-up development; (ii) investments acquired by merger or primarily for our securities or
properties; (iii) properties which can be combined with or relate to our existing properties; (iv) securities of commercial mortgage loan
servicers and investments derived from any such investments; (v) non-controlling interests in equity and debt securities; and (vi)
investments located outside of North America. The Fund’s investments are reported on its balance sheet at fair value, with changes in
value each period recognized in earnings. We consolidate the accounts of the Fund into our consolidated financial statements,
retaining the fair value basis of accounting.
During 2012, the Fund made the following investments:
800 Corporate Pointe
On November 30, 2012, the Fund acquired 800 Corporate Pointe, a 243,000 square foot office building and the accompanying
six-level parking structure (1,964 spaces) located in Culver City, Los Angeles, California, for $95,700,000 in cash.
501 Broadway
On August 20, 2012, the Fund acquired 501 Broadway, a 9,000 square foot retail property in New York for $31,000,000. The
purchase price consisted of $11,000,000 in cash and a $20,000,000 mortgage loan. The three-year loan bears interest at LIBOR plus
2.75%, with a floor of 3.50%, and has two one-year extension options.
1100 Lincoln Road
On July 2, 2012, the Fund acquired 1100 Lincoln Road, a 167,000 square foot retail property, the western anchor of the Lincoln
Road Shopping District in Miami Beach, Florida, for $132,000,000. The purchase price consisted of $66,000,000 in cash and a
$66,000,000 mortgage loan. The three-year loan bears interest at LIBOR plus 2.75% and has two one-year extension options.
520 Broadway
On April 26, 2012, the Fund acquired 520 Broadway, a 112,000 square foot office building in Santa Monica, California for
$61,000,000 in cash and subsequently placed a $30,000,000 mortgage loan on the property. The three-year loan bears interest at
LIBOR plus 2.25% and has two one-year extension options.
143
VORNADO REALTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
4. Vornado Capital Partners Real Estate Fund (the “Fund”) – continued
At December 31, 2012, the Fund had nine investments with an aggregate fair value of $600,786,000, or $67,642,000 in excess of
cost, and has remaining unfunded commitments of $217,676,000, of which our share was $54,419,000. At December 31, 2011, the
Fund had five investments with an aggregate fair value of $346,650,000.
Below is a summary of income (loss) from the Fund for the years ended December 31, 2012, 2011 and 2010.
(Amounts in thousands)
For the Year Ended December 31,
2011
2010
2012
Operating income (loss)
Net realized gains
Net unrealized gains
Income (loss) from Real Estate Fund
Less (income) loss attributable to noncontrolling interests
Income from Real Estate Fund attributable to Vornado (1)
$
$
8,575 $
-
55,361
63,936
(39,332)
24,604 $
5,500 $
5,391
11,995
22,886
(13,598)
9,288 $
(303)
-
-
(303)
806
503
(1) Excludes $2,780, $2,695 and $248 of management, leasing and development fees in the years ended December 31, 2012, 2011 and 2010,
respectively, which are included as a component of "fee and other income" on our consolidated statements of income.
5. Marketable Securities and Derivative Instruments
Our portfolio of marketable securities is comprised of equity securities that are classified as available-for-sale. Available-for-sale
securities are presented on our consolidated balance sheets at fair value. Unrealized gains and losses resulting from the mark-to-
market of these securities are included in “other comprehensive (loss) income.” Realized gains and losses are recognized in earnings
only upon the sale of the securities and are recorded based on the weighted average cost of such securities.
During 2012, 2011 and 2010 we sold certain marketable securities for aggregate proceeds of $58,718,000, $69,559,000, and
$281,486,000, respectively resulting in net gains of $3,582,000, $5,020,000, and $22,604,000, respectively, which are included as a
component of “net gain on disposition of wholly owned and partially owned assets” on our consolidated statements of income.
We evaluate our portfolio of marketable securities for impairment each reporting period. For each of the securities in our
portfolio with unrealized losses, we review the underlying cause of the decline in value and the estimated recovery period, as well as
the severity and duration of the decline. In our evaluation, we consider our ability and intent to hold these investments for a
reasonable period of time sufficient for us to recover our cost basis. We also evaluate the near-term prospects for each of these
investments in relation to the severity and duration of the decline. In the year ended December 31, 2012, we recognized a
$224,937,000 impairment loss on our investment in J.C. Penney (see below). No impairment losses were recognized in the years
ended December 31, 2011 and 2010.
144
VORNADO REALTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
5. Marketable Securities and Derivative Instruments - continued
Investment in J.C. Penney Company, Inc. (“J.C. Penney”) (NYSE: JCP)
We own 23,400,000 J.C. Penney common shares, or 10.7% of its outstanding common shares. Below are the details of our
investment.
We own 18,584,010 common shares at an average economic cost of $25.76 per share, or $478,691,000 in the aggregate. Of
these shares, 15,500,000 were acquired through the exercise of a call option in November 2010. Upon the exercise of the call option,
we recognized $112,537,000 of income, which increased the GAAP cost of these shares to $591,228,000. As of December 31, 2012,
based on J.C. Penney’s December 31, 2012 closing share price of $19.71 per share, these shares have an aggregate fair value of
$366,291,000, or $224,937,000 below our GAAP basis. We have concluded that our investment in J.C. Penney is “other-than-
temporarily” impaired and have recorded a $224,937,000 impairment loss in the fourth quarter. Our conclusion was based on the
severity of the decline in the stock price and our inability to forecast a recovery in the near term.
We also own an economic interest in 4,815,990 J.C. Penney common shares through a forward contract at a weighted average
strike price of $29.10 per share, or $140,138,000 in the aggregate. The forward contract was amended on October 8, 2012, such that,
among other things, the contract may be settled, at our election, in cash or common shares, in whole or in part, at any time prior to
October 9, 2014, or any anniversary thereof, or in the event we were to receive a credit downgrade. The forward contract strike price
increases at an annual rate of LIBOR plus 95 basis points during the first two years of the contract and LIBOR plus 80 basis points
thereafter. The contract is a derivative instrument that does not qualify for hedge accounting treatment. Gains and losses from the
mark-to-market of the underlying common shares are recognized in “interest and other investment (loss) income, net” on our
consolidated statements of income. In the year ended December 31, 2012, we recognized a loss of $75,815,000 from the mark-to-
market of the underlying common shares. In the years ended December 31, 2011 and 2010, we recognized gains of $12,984,000 and
$17,616,000, respectively, from the mark-to-market of the underlying common shares.
We review our investment in J.C. Penney on a continuing basis. Depending on various factors, including, without limitation,
J.C. Penney’s financial position and strategic direction, actions taken by its board, price levels of its common shares, other investment
opportunities available to us, market conditions and general economic and industry conditions, we may take such actions with respect
to J.C. Penney as we deem appropriate, including (i) purchasing additional common shares or other financial instruments related to
J.C. Penney, (ii) selling some or all of our beneficial or economic holdings, or (iii) engaging in hedging or similar transactions.
Below is a summary of our marketable securities portfolio as of December 31, 2012 and 2011.
Equity securities:
J.C. Penney
Other
Debt securities
As of December 31, 2012
GAAP
Cost
Fair Value
Maturity
Unrealized
Gain
Maturity
As of December 31, 2011
GAAP
Cost
Fair Value
Unrealized
Gain
n/a
n/a
n/a
$
366,291 $
31,897
-
366,291 $
12,021
-
$
398,188 $
378,312 $
-
19,876
-
19,876
$
n/a
n/a
04/13 - 10/18
653,228 $
30,568
57,525
$
741,321 $
591,069 $
14,585
53,941
659,595 $
62,159
15,983
3,584
81,726
145
VORNADO REALTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
6. Investments in Partially Owned Entities
The following is a summary of condensed combined financial information for all of our partially owned entities, including Toys
“R” Us, Alexander’s, Inc., Lexington Realty Trust and LNR Property Corporation, as of December 31, 2012 and 2011 and for the
years ended December 31, 2012, 2011 and 2010.
(Amounts in thousands)
Balance Sheet:
Assets(1)
Liabilities(1)
Noncontrolling interests
Equity
Income Statement:
Total revenue
Net income(2)
$
December 31,
2012
122,692,000 $
117,064,000
88,000
5,540,000
2011
153,861,000
147,854,000
132,000
5,875,000
For the Year Ended December 31,
2011
15,321,000 $
199,000
2012
15,119,000 $
1,091,000
2010
14,962,000
63,000
$
(1)
(2)
2012 and 2011 include $97 billion and $127 billion, respectively, of assets and liabilities of LNR related to consolidated CMBS and
CDO trusts which are non-recourse to LNR and its equity holders, including us.
2012 includes a $600,000 net gain on sale of real estate.
Toys “R” Us (“Toys”)
As of December 31, 2012, we own 32.6% 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 32.6% share of Toys net income or loss on a one-quarter lag basis because Toys’ fiscal year ends on the Saturday
nearest January 31, and our fiscal year ends on December 31.
Since our acquisition in July 2005, the carrying amount of our investment has grown from $396,000,000 to $518,041,000 after
we recognized our share of Toys third quarter net loss in our fourth quarter. We estimate that the fair value of our investment is
approximately $478,000,000 at December 31, 2012. We have concluded that the $40,000,000 decline in the value of our investment is
“other-than-temporary” based on, among other factors, compression of earnings multiples of comparable retailers and our inability to
forecast a recovery in the near term. Accordingly, we recognized a non-cash impairment loss of $40,000,000 in the fourth quarter.
We will continue to assess the recoverability of our investment each quarter. To the extent that the current facts don’t change, we
would recognize a non-cash impairment loss equal to our share of Toys fourth quarter net income in our 2013 first quarter.
Below is a summary of Toys’ latest available financial information on a purchase accounting basis:
(Amounts in thousands)
Balance Sheet:
Assets
Liabilities
Noncontrolling interests
Toys “R” Us, Inc. equity
Balance as of
October 27, 2012
October 29, 2011
$
12,953,000 $
11,190,000
44,000
1,719,000
13,221,000
11,530,000
-
1,691,000
For the Twelve Months Ended
Income Statement:
Total revenues
Net income attributable to Toys
October 27, 2012
13,698,000
$
138,000
146
October 29, 2011 October 30, 2010
$
13,956,000 $
121,000
13,749,000
189,000
VORNADO REALTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
6. Investments in Partially Owned Entities – continued
Alexander’s, Inc. (“Alexander’s”) (NYSE: ALX)
As of December 31, 2012, we own 1,654,068 Alexander’s commons shares, or approximately 32.4% of Alexander’s common
equity. We manage, lease and develop Alexander’s properties pursuant to the agreements described below which expire in March of
each year and are automatically renewable. As of December 31, 2012, Alexander’s owed us an aggregate of $46,445,000 pursuant to
such agreements.
On November 28, 2012, Alexander’s completed the sale of its Kings Plaza Regional Shopping Center located in Brooklyn, New
York, for $751,000,000. Upon completion of the sale, we recognized our share of the financial statement gain of $179,934,000.
Alexander’s distributed the taxable gain to its stockholders in December 2012 as a special long-term capital gain dividend, of which
our share was $201,796,000, and we in turn paid a $1.00 per Vornado share special long-term capital gain dividend to our common
shareholders in December 2012.
As of December 31, 2012 the market value (“fair value” pursuant to ASC 820) of our investment in Alexander’s, based on
Alexander’s December 31, 2012 closing share price of $330.80, was $547,166,000, or $376,153,000 in excess of the carrying amount
on our consolidated balance sheet. As of December 31, 2012, 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 $43,383,000. The majority of
this basis difference resulted from the excess of our purchase price for the Alexander’s common stock acquired over the book value of
Alexander’s net assets. Substantially all of this basis difference was allocated, based on our estimates of the fair values of Alexander’s
assets and liabilities, to real estate (land and buildings). We are amortizing the basis difference related to the buildings into earnings
as additional depreciation expense over their estimated useful lives. This depreciation is not material to our share of equity in
Alexander’s net income. The basis difference related to the land will be recognized upon disposition of our investment.
Management and Development Agreements
Effective December 1, 2012, as a result of the sale of the Kings Plaza Regional Shopping Center, the management and
development agreement with Alexander’s was amended. Pursuant to the amended agreement, we receive an annual fee for managing
Alexander’s and all of its properties equal to the sum of (i) $2,800,000, (ii) 2% of the gross income from the Rego Park II Shopping
Center, (iii) $0.50 per square foot of the tenant-occupied office and retail space at 731 Lexington Avenue, and (iv) $264,000,
escalating at 3% per annum, for managing the common area of 731 Lexington Avenue.
In addition, we are entitled to a development fee of 6% of development costs, as defined.
Leasing Agreements
We provide Alexander’s with leasing services for a fee of 3% of rent for the first ten years of a lease term, 2% of rent for the
eleventh through twentieth year of a lease term and 1% of rent for the twenty-first through thirtieth year of a lease term, subject to the
payment of rents by Alexander’s tenants. In the event third-party real estate brokers are used, our fee increases by 1% and we are
responsible for the fees to the third-parties. We are also entitled to a commission upon the sale of any of Alexander’s assets equal to
3% of gross proceeds, as defined, for asset sales less than $50,000,000, or 1% of gross proceeds, as defined, for asset sales of
$50,000,000 or more. The total of these amounts is payable to us in annual installments in an amount not to exceed $4,000,000 with
interest on the unpaid balance at one-year LIBOR plus 1.0% (2.13% at December 31, 2012). As a result of the sale of Kings Plaza, we
earned a $6,423,000 sales commission, which is net of a third party broker fee.
Other Agreements
Building Maintenance Services (“BMS”), our wholly-owned subsidiary, supervises the cleaning, engineering and security
services at Alexander’s 731 Lexington Avenue property for an annual fee of the costs for such services plus 6%. During the years
ended December 31, 2012, 2011 and 2010, we recognized $2,934,000, $2,970,000 and $2,775,000 of income, respectively, under
these agreements.
147
VORNADO REALTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
6. Investments in Partially Owned Entities - continued
Below is a summary of Alexander’s latest available financial information:
(Amounts in thousands)
Balance Sheet:
Assets
Liabilities
Noncontrolling interests
Stockholders' equity
$
Balance as of December 31,
2011
2012
$
1,482,000
1,150,000
-
332,000
1,771,000
1,408,000
4,000
359,000
Income Statement:
Total revenues
Net income attributable to Alexander’s (1)
For the Year Ended December 31,
2011
2010
2012
$
191,000
674,000
$
185,000 $
79,000
174,000
66,000
(1) 2012 includes a $600,000 net gain on sale of real estate.
Lexington Realty Trust (“Lexington”) (NYSE: LXP)
As of December 31, 2012, we own 18,468,969 Lexington common shares, or approximately 10.5% 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 December 31, 2012 closing share price of $10.45, the market value (“fair value” pursuant to ASC 820) of
our investment in Lexington was $193,001,000, or $117,459,000 in excess of the December 31, 2012 carrying amount on our
consolidated balance sheet. As of December 31, 2012, the carrying amount of our investment in Lexington was less than our share of
the equity in the net assets of Lexington by approximately $31,427,000. This basis difference resulted primarily from $107,882,000
of non-cash impairment charges recognized during 2008, partially offset by purchase accounting for our acquisition of an additional
8,000,000 common shares of Lexington in October 2008, of which the majority relates to our estimate of the fair values of
Lexington’s real estate (land and buildings) as compared to the carrying amounts in Lexington’s consolidated financial statements.
The basis difference related to the buildings is being amortized over their estimated useful lives as an adjustment to our equity in net
income or loss of Lexington. This amortization is not material to our share of equity in Lexington’s net income or loss. The basis
difference attributable to the land will be recognized upon disposition of our investment.
Below is a summary of Lexington’s latest available financial information:
(Amounts in thousands)
Balance Sheet:
Assets
Liabilities
Noncontrolling interests
Shareholders’ equity
Income Statement:
Total revenues
Net income (loss) attributable to Lexington
$
Balance as of September 30,
2011
2012
3,386,000 $
2,211,000
27,000
1,148,000
3,164,000
1,888,000
59,000
1,217,000
For the Twelve Months Ended September 30,
2011
2012
2010
$
333,000 $
196,000
315,000 $
(81,000)
330,000
(90,000)
148
VORNADO REALTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
6. Investments in Partially Owned Entities – continued
LNR Property Corporation (“LNR”)
On January 24, 2013, LNR entered into a definitive agreement to be sold. We own 26.2% of LNR and expect to receive net
proceeds of $241,000,000. The sale, which is subject to customary closing conditions, is expected to be completed in the second
quarter of 2013.
As of December 31, 2012, we own a 26.2% equity interest in LNR. We account for our investment in LNR under the equity
method and record our 26.2% share of LNR’s net income or loss on a one-quarter lag basis because we file our consolidated financial
statements on Form 10-K and 10-Q prior to receiving LNR’s consolidated financial statements.
LNR consolidates certain commercial mortgage-backed securities (“CMBS”) and Collateralized Debt Obligation (“CDO”) trusts
for which it is the primary beneficiary. The assets of these trusts (primarily commercial mortgage loans), which aggregate
approximately $97 billion as of September 30, 2012, are the sole source of repayment of the related liabilities, which are non-recourse
to LNR and its equity holders, including us. Changes in the fair value of these assets each period are offset by changes in the fair
value of the related liabilities through LNR’s consolidated income statement. As of December 31, 2012, the carrying amount of our
investment in LNR does not materially differ from our share of LNR’s equity.
$
Balance as of September 30,
2011
2012
128,536,000
98,530,000
127,809,000
97,643,000
55,000
8,000
672,000
879,000
$
For the Twelve
Months Ended
For the Period
July 29, 2010 to
September 30, 2011 September 30, 2010
23,000
$
8,000
208,000
224,000
$
Below is a summary of LNR’s latest available financial information:
(Amounts in thousands)
Balance Sheet:
Assets
Liabilities
Noncontrolling interests
LNR Property Corporation equity
Income Statement:
Total revenue
Net income attributable to LNR
For the Twelve
Months Ended
September 30, 2012
238,000
$
266,000
149
VORNADO REALTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
6. Investments in Partially Owned Entities - continued
Below is a schedule of our investments in partially owned entities as of December 31, 2012 and 2011.
(Amounts in thousands)
Investments:
Toys
Alexander’s
Lexington
LNR
India real estate ventures
Partially owned office buildings:
280 Park Avenue
Rosslyn Plaza
West 57th Street properties
One Park Avenue
666 Fifth Avenue Office Condominium
330 Madison Avenue
Warner Building
Fairfax Square
1101 17th Street
Other partially owned office buildings
Other investments:
Downtown Crossing, Boston
Monmouth Mall
Verde Realty Operating Partnership(3)
Independence Plaza Partnership(4)
Other investments(5)
___________________________________
(1)
32.7% at December 31, 2011.
Percentage
Ownership at
December 31, 2012
32.6 %(1)
32.4 %
10.5 %(2)
26.2 %
As of December 31,
2012
478,041
171,013
2011
506,809
189,775
$
$
$
$
75,542
57,402
224,724
174,408
4.0%-36.5%
95,516
80,499
49.5 %
43.7%-50.4%
50.0 %
30.3 %
49.5 %
25.0 %
55.0 %
20.0 %
55.0 %
Various
50.0 %
50.0 %
n/a
n/a
Various
197,516
62,627
57,033
50,509
35,527
30,277
8,775
5,368
-
9,315
184,516
53,333
58,529
47,568
23,655
20,353
2,715
6,343
20,407
11,547
48,122
7,205
-
-
147,187
1,226,256
$
46,691
7,536
59,801
48,511
140,061
1,233,650
$
(2)
(3)
(4)
(5)
12.0% at December 31, 2011.
In 2012, we converted our 2,015,151 units in Verde Realty Operating Partnership into 2,015,151 common shares of Verde Realty ("Verde"),
which we sold for $13.85 per share, or $27,910 in the aggregate. Accordingly, we recognized a $4,936 impairment loss in the third quarter,
based on the difference between the carrying amount of the investment and the cash received. We have reclassified the $25,000 of
convertible senior debentures that we continue to own to "other assets" on our consolidated balance sheets.
On December 21, 2012, we acquired a 58.75% interest in Independence Plaza and began to consolidate the accounts of the property into our
consolidated financial statements from the date of acquisition (see page 142 for details).
Includes interests in 85 10th Avenue, Farley Project, Suffolk Downs, Dune Capital L.P., Fashion Centre Mall and others.
150
VORNADO REALTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
6. Investments in Partially Owned Entities – continued
Below is a schedule of income from partially owned entities for the years ended December 31, 2012, 2011 and 2010.
Percentage
Ownership at
December 31, 2012
32.6 %
For the Year Ended December 31,
2011
2012
2010
(Amounts in thousands)
Our Share of Net Income (Loss):
Toys:
Equity in net income before income taxes
Income tax benefit
Equity in net income
Non-cash impairment loss (see page 146 for details)
Management fees
Alexander's:
Equity in net income
Management, leasing and development fees (1)
Gain on sale of real estate
Lexington:
Equity in net (loss)
Net gain resulting from Lexington's stock issuance and asset acquisition
LNR (acquired in July 2010):
Equity in net income
Income tax benefit, assets sales and tax settlement gains
India real estate ventures
Equity in net (loss)
Impairment loss
Partially owned office buildings:
Warner Building:
Equity in net (loss)
Straight-line reserves and write-off of tenant improvements
280 Park Avenue (acquired in May 2011)
666 Fifth Avenue Office Condominium (acquired in December 2011)
330 Madison Avenue
1101 17th Street
One Park Avenue (acquired in March 2011)
West 57th Street properties
Rosslyn Plaza
Fairfax Square
Other partially owned office buildings
Other investments:
Independence Plaza Partnership (acquired in June 2011) (2)
Verde Realty Operating Partnership (3)
Monmouth Mall
Downtown Crossing, Boston
Other investments (4)
32.4 %
10.5 %
26.2 %
4.0%-36.5%
55.0 %
49.5 %
49.5 %
25.0 %
55.0 %
30.3 %
50.0 %
43.7%-50.4%
20.0 %
Various
n/a
n/a
50.0 %
50.0 %
Various
$
$
$
28,638 $
16,629
45,267
(40,000)
9,592
14,859 $
38,460 $
1,132
39,592
-
8,948
48,540 $
24,709 $
13,748
179,934
218,391
25,013 $
7,417
-
32,430
(23)
28,763
28,740
66,270
-
66,270
(5,008)
-
(5,008)
(10,186)
-
(10,186)
(11,510)
7,009
3,609
2,576
1,123
1,014
822
(132)
1,905
(3,770)
111,865
(5,703)
1,429
(1,309)
(2,638)
103,644
408,267 $
$
(1,409)
9,760
8,351
31,409
27,377
58,786
(1,087)
(13,794)
(14,881)
(9,853)
(9,022)
(18,875)
(18,079)
198
2,126
2,740
(1,142)
876
2,193
(42)
7,735
(22,270)
2,457
1,661
2,556
(1,461)
2,443
7,656
16,401
45,418
61,819
-
9,805
71,624
20,059
7,556
-
27,615
(2,692)
13,710
11,018
1,973
-
1,973
2,581
-
2,581
(344)
-
(344)
-
-
2,059
416
-
(10,990)
(2,419)
(28)
2,405
(8,901)
-
(537)
1,952
(1,155)
(13,677)
(13,417)
___________________________________
(1)
(2)
2012 includes $6,423 of commissions in connection with the sale of real estate.
2012 includes $105,366 of income comprised of (i) $60,396 from the accelerated amortization of discount on investment in subordinated
debt of the property and (ii) a $44,970 purchase price fair value adjustment from the exercise of a warrant to acquire 25% of the equity
interest in the property (see page 142 for details).
(3)
(4)
2012 includes a $4,936 impairment loss (see note 3 on page 150).
2011 includes a $12,525 net gain from Suffolk Downs' sale of a partial interest.
151
70,072 $
20,869
VORNADO REALTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
6. Investments in Partially Owned Entities - continued
Below is a summary of the debt of our partially owned entities as of December 31, 2012 and 2011, none of which is recourse to us.
(Amounts in thousands)
Toys:
Notes, loans and mortgages payable
Alexander's:
Mortgages payable
Lexington:
Mortgages payable
LNR:
Mortgages payable
Liabilities of consolidated CMBS and CDO trusts
Partially owned office buildings:
666 Fifth Avenue Office Condominium mortgage
payable
280 Park Avenue mortgage payable
Warner Building mortgage payable
One Park Avenue mortgage payable
330 Madison Avenue mortgage payable
Fairfax Square mortgage payable
1101 17th Street mortgage payable
West 57th Street properties mortgages payable
Rosslyn Plaza mortgage payable
Other
India Real Estate Ventures:
TCG Urban Infrastructure Holdings mortgages
payable
Other:
Monmouth Mall mortgage payable
Verde Realty Operating Partnership mortgages
payable
Other(3)
(1) 32.7% at December 31, 2011.
(2) 12.0% at December 31, 2011.
Percentage
Ownership at
December 31,
2012
32.6 %(1)
32.4 %
10.5 %(2)
26.2 %
Interest
Rate at
December 31, December 31,
100% of
Partially Owned Entities’ Debt at
December 31,
2011
2012
Maturity
2012
2013-2021
7.34 %
$
5,683,733 $
6,047,521
2013-2018
3.87 %
$
1,065,916 $
1,330,932
2015-2037
5.29 %
$
1,994,179 $
1,712,750
2013-2031
n/a
4.62 %
5.40 %
$
$
309,787 $
97,211,734
97,521,521 $
353,504
127,348,336
127,701,840
49.5 %
02/19
6.76 %
$
1,109,700 $
1,035,884
49.5 %
55.0 %
30.3 %
25.0 %
20.0 %
55.0 %
50.0 %
43.7%-50.4%
Various
06/16
05/16
03/16
06/15
12/14
01/18
02/14
01/12
Various
6.65 %
6.26 %
5.00 %
1.71 %
7.00 %
1.46 %
4.94 %
n/a
6.37 %
$
738,228
292,700
250,000
150,000
70,127
31,000
20,434
-
69,704
2,731,893 $
737,678
292,700
250,000
150,000
70,974
-
21,864
56,680
70,230
2,686,010
25.0 %
2013-2022
13.22 %
$
236,579 $
226,534
50.0 %
09/15
5.44 %
$
159,896 $
162,153
n/a
Various
n/a
Various
n/a
5.02 %
-
990,647
1,150,543 $
340,378
992,872
1,495,403
$
(3)
Includes interests in Suffolk Downs, Fashion Centre Mall and others.
Based on our ownership interest in the partially owned entities above, our pro rata share of the debt of these partially owned
entities, was $29,443,128,000 and $37,531,298,000 as of December 31, 2012 and 2011, respectively. Excluding our pro rata share of
LNR’s liabilities related to consolidated CMBS and CDO trusts, which are non-recourse to LNR and its equity holders, including us,
our pro rata share of partially owned entities debt was $3,998,929,000 and $4,199,145,000 at December 31, 2012 and 2011,
respectively.
152
VORNADO REALTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
7. Mortgage and Mezzanine Loans Receivable
On October 19, 2012, we acquired a 25% participation in a $475,000,000 first mortgage and mezzanine loan for the acquisition
and redevelopment of a 10-story retail building at 701 Seventh Avenue in Times Square. The loan has an interest rate of LIBOR plus
10.2%, with a LIBOR floor of 1.0%. Of the $475,000,000, we have funded $93,750,000, representing our 25% share of the
$375,000,000 that has been funded. $25,000,000, our 25% share of the remaining $100,000,000, will be funded during the
development of the property.
As of December 31, 2012 and 2011, the carrying amount of mortgage and mezzanine loans receivable was $225,359,000 and
$133,948,000, respectively. These loans have a weighted average interest rate of 10.28% and maturities ranging from August 2014 to
May 2016.
8. Discontinued Operations
2012 Activity:
Merchandise Mart
On January 6, 2012, we completed the sale of 350 West Mart Center, a 1.2 million square foot office building in Chicago, Illinois,
for $228,000,000 in cash, which resulted in a net gain of $54,911,000.
On June 22, 2012, we completed the sale of L.A. Mart, a 784,000 square foot showroom building in Los Angeles, California, for
$53,000,000, of which $18,000,000 was cash and $35,000,000 was nine-month seller financing at 6.0%, which was paid on December
28, 2012.
On July 26, 2012, we completed the sale of the Washington Design Center, a 393,000 square foot showroom building in
Washington, DC and the Canadian Trade Shows, for an aggregate of $103,000,000 in cash. The sale of the Canadian Trade Shows
resulted in an after-tax net gain of $19,657,000.
On December 31, 2012, we completed the sale of the Boston Design Center, a 554,000 square foot showroom building in Boston,
Massachusetts, for $72,400,000 in cash, which resulted in a net gain of $5,252,000.
Washington, DC
On July 26, 2012, we completed the sale of 409 Third Street S.W., a 409,000 square foot office building in Washington, DC, for
$200,000,000 in cash, which resulted in a net gain of $126,621,000. This building is contiguous to the Washington Design Center and
was sold to the same purchaser.
On November 7, 2012, we completed the sale of three office buildings (“Reston Executive”) located in suburban Fairfax County,
Virginia, containing 494,000 square feet for $126,250,000, which resulted in a net gain of $36,746,000.
Retail Properties
On February 13, 2013, we entered into an agreement to sell the Plant, a power strip shopping center in San Jose, California, for
$203,000,000. The sale will result in net proceeds of approximately $93,000,000 after repaying the existing loan and closing costs,
and a financial statement gain of approximately $33,000,000. The sale, which is subject to customary closing conditions, is expected
to be completed by the second quarter of 2013.
On January 24, 2013, we completed the sale of the Green Acres Mall located in Valley Stream, New York, for $500,000,000,
which resulted in net proceeds of $185,000,000, after repaying the existing loan and closing costs. The financial statement gain of
$205,000,000 will be recognized in the first quarter of 2013 and the tax gain of $304,000,000 has been deferred as part of a like-kind
exchange.
In 2012, we sold 12 non-core retail properties in separate transactions, for an aggregate of $157,000,000 in cash, which resulted in
a net gain aggregating $22,266,000. In addition, we have entered into an agreement to sell a building on Market Street, Philadelphia,
which is part of the Gallery at Market East for $60,000,000, which will result in a net gain of approximately $35,000,000. The sale,
which is subject to customary closing conditions, is expected to be completed in the first quarter of 2013.
153
VORNADO REALTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
8. Discontinued Operations- continued
2011 Activity:
During 2011, we completed the disposition of the High Point Complex in North Carolina, which resulted in an $83,907,000 net
gain on extinguishment of debt and sold three non-core retail properties and two office buildings in Washington, DC for an aggregate
of $168,000,000 in cash, which resulted in a net gain aggregating $51,623,000.
2010 Activity:
During 2010, we completed the disposition of the Cannery, a retail property in California, and sold the fee interest in land located
in Arlington County, Virginia, known as Pentagon Row, to the tenants for an aggregate of $14,992,000 in cash.
In accordance with the provisions of ASC 360, Property, Plant, and Equipment, we have reclassified the revenues and expenses
of all the properties discussed above, as well as certain other properties that are currently held for sale to “income from discontinued
operations” and the related assets and liabilities to “assets related to discontinued operations” and “liabilities related to discontinued
operations” for all of the periods presented in the accompanying financial statements. The net gains resulting from the sale of the
properties below are included in “income from discontinued operations” on our consolidated statements of income.
The tables below set forth the assets and liabilities related to discontinued operations at December 31, 2012 and 2011, and their
combined results of operations for the years ended December 31, 2012, 2011 and 2010.
Assets Related to
Discontinued Operations as of
December 31,
Liabilities Related to
Discontinued Operations as of
December 31,
2012
2011
2012
2011
$
$
340,977
-
7,759
25,740
374,476
$
$
$
$
474,402
152,568
385,381
37,292
1,049,643
$
$
315,448
-
-
-
315,448
$
$
339,724
93,000
74,236
-
506,960
For the Year Ended December 31,
2011
2010
2012
147,404
102,479
44,925
245,799
19,657
(24,439)
-
285,942
$
$
230,314
175,930
54,384
51,623
-
(28,799)
83,907
161,115
$
$
267,008
227,626
39,382
2,506
-
(35,056)
-
6,832
(Amounts in thousands)
Retail
Washington, DC
Merchandise Mart
Other
Total
(Amounts in thousands)
Total revenues
Total expenses
Net gains on sale of real estate
Gain on sale of Canadian Trade Shows, net of $11,448 of
income taxes
Impairment losses and litigation loss accrual
Net gain on extinguishment of High Point debt
Income from discontinued operations
154
VORNADO REALTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
9. Identified Intangible Assets and Liabilities
The following summarizes our identified intangible assets (primarily acquired above-market leases) and liabilities (primarily
acquired below-market leases) as of December 31, 2012 and 2011.
(Amounts in thousands)
Identified intangible assets:
Gross amount
Accumulated amortization
Net
Identified intangible liabilities (included in deferred revenue):
Gross amount
Accumulated amortization
Net
Balance as of
December 31,
2012
December 31,
2011
$
$
$
$
726,981
(356,379)
370,602
805,811
(342,379)
463,432
$
$
$
$
631,162
(343,318)
287,844
838,103
(371,360)
466,743
Amortization of acquired below-market leases, net of acquired above-market leases resulted in an increase to rental income of
$54,193,000, $62,105,000 and $65,373,000 for the years ended December 31, 2012, 2011 and 2010, respectively. Estimated annual
amortization of acquired below-market leases, net of acquired above-market leases for each of the five succeeding years commencing
January 1, 2013 is as follows:
(Amounts in thousands)
2013
2014
2015
2016
2017
$
45,098
39,304
36,533
34,088
28,610
Amortization of all other identified intangible assets (a component of depreciation and amortization expense) was $51,244,000,
$54,126,000 and $56,949,000 for the years ended December 31, 2012, 2011 and 2010, respectively. Estimated annual amortization of
all other identified intangible assets including acquired in-place leases, customer relationships, and third party contracts for each of the
five succeeding years commencing January 1, 2013 is as follows:
(Amounts in thousands)
2013
2014
2015
2016
2017
$
47,959
29,785
24,812
22,300
19,735
We are a tenant under ground leases at certain properties. Amortization of these acquired below-market leases, net of above-
market leases resulted in an increase to rent expense of $1,712,000, $1,377,000 and $2,157,000 for the years ended December 31,
2012, 2011 and 2010, respectively. Estimated annual amortization of these below-market leases, net of above-market leases for each
of the five succeeding years commencing January 1, 2013 is as follows:
(Amounts in thousands)
2013
2014
2015
2016
2017
$
2,933
2,918
2,918
2,918
2,918
155
VORNADO REALTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
10. Debt
The following is a summary of our debt:
(Amounts in thousands)
Mortgages payable:
Fixed rate:
New York:
1290 Avenue of the Americas (70% owned)(2)
Two Penn Plaza
770 Broadway
888 Seventh Avenue
350 Park Avenue(3)
909 Third Avenue
828-850 Madison Avenue Condominium - retail
510 5th Avenue - retail
Washington, DC:
Skyline Properties(4)
River House Apartments
2101 L Street(5)
2121 Crystal Drive
Bowen Building
1215 Clark Street, 200 12th Street and 251 18th Street
West End 25
Universal Buildings
2011 Crystal Drive
1550 and 1750 Crystal Drive
220 20th Street
2231 Crystal Drive
1225 Clark Street
1235 Clark Street
1750 Pennsylvania Avenue
Retail Properties:
Cross-collateralized mortgages on 40 strip shopping centers
Montehiedra Town Center
Broadway Mall
North Bergen (Tonnelle Avenue)
Las Catalinas Mall
Other
Merchandise Mart:
Merchandise Mart
Other:
555 California Street (70% owned)
Borgata Land
Total fixed rate mortgages payable
___________________
See notes on page 158.
Interest
Rate at
Balance at
December 31, December 31, December 31,
2012
2011
2012
Maturity (1)
11/22
03/18
03/16
01/16
01/17
04/15
06/18
01/16
02/17
04/15
08/24
03/23
06/16
01/25
06/21
04/14
08/17
11/14
02/18
08/13
08/13
n/a
n/a
09/20
07/16
07/13
01/18
11/13
3.34 %
5.13 %
5.65 %
5.71 %
3.75 %
5.64 %
5.29 %
5.60 %
5.74 %
5.43 %
3.97 %
5.51 %
6.14 %
7.09 %
4.88 %
6.50 %
7.30 %
7.08 %
4.61 %
7.08 %
7.08 %
n/a
n/a
4.23 %
6.04 %
5.30 %
4.59 %
6.97 %
$
950,000 $
425,000
353,000
318,554
300,000
199,198
80,000
31,253
704,957
195,546
150,000
150,000
115,022
105,724
101,671
93,226
79,624
74,053
73,939
41,298
24,834
-
-
573,180
120,000
85,180
75,000
54,101
86,641
413,111
425,000
353,000
318,554
430,000
203,217
80,000
31,732
678,000
195,546
-
150,000
115,022
108,423
101,671
98,239
80,486
76,624
75,037
43,819
26,211
51,309
44,330
585,398
120,000
87,750
75,000
55,912
95,541
06/14-05/36 5.12%-7.30%
12/16
5.57 %
550,000
550,000
09/21
02/21
5.10 %
5.14 %
5.07 %
600,000
60,000
6,771,001 $
600,000
60,000
6,328,932
$
156
VORNADO REALTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
10. Debt - continued
(Amounts in thousands)
Mortgages payable:
Variable rate:
New York:
Independence Plaza (58.75% owned)
Eleven Penn Plaza
100 West 33rd Street - office and retail(6)
4 Union Square South - retail(7)
435 Seventh Avenue (8)
866 UN Plaza
Washington, DC:
River House Apartments
2200/2300 Clarendon Boulevard
1730 M and 1150 17th Street
2101 L Street (5)
Retail Properties:
Bergen Town Center
San Jose Strip Center
Cross-collateralized mortgages on 40 strip
shopping centers (10)
Beverly Connection
Other
Other:
220 Central Park South
Total variable rate mortgages payable
Total mortgages payable
Senior unsecured notes:
Senior unsecured notes due 2015
Senior unsecured notes due 2039 (11)
Senior unsecured notes due 2022
Total senior unsecured notes
Unsecured revolving credit facilities(12)
$1.25 billion unsecured revolving credit facility
($22,807 reserved for outstanding letters of credit)
$1.25 billion unsecured revolving credit facility
Total unsecured revolving credit facilities
3.88% Exchangeable senior debentures(13)
2.85% Convertible senior debentures(13)
___________________________
See notes on the following page.
Interest
Rate at
Balance at
December 31, December 31, December 31,
2012
2012
2011
1.15 %
2.56 %
2.71 %
2.36 %
2.46 %
1.46 %
1.63 %
0.96 %
1.61 %
n/a
1.71 %
4.25 %
2.36 %
n/a
3.97 %
2.96 %
2.22 %
4.42 %
4.25 %
7.88 %
5.00 %
5.70 %
1.53 %
1.43 %
1.43 %
n/a
n/a
$
334,225 $
330,000
325,000
120,000
98,000
44,978
64,000
47,353
43,581
-
282,312
104,856
60,000
-
19,126
-
330,000
232,000
75,000
51,353
44,978
64,000
53,344
43,581
150,000
283,590
112,476
60,000
100,000
19,876
123,750
1,997,181
8,768,182 $
123,750
1,743,948
8,072,880
499,627 $
460,000
398,381
1,358,008 $
499,462
460,000
398,199
1,357,661
20,000 $
1,150,000
1,170,000 $
-
138,000
138,000
- $
497,898
- $
10,168
$
$
$
$
$
$
$
Maturity (1)
Spread over
LIBOR
08/13
01/19
03/17
11/19
08/19
05/16
04/18
01/15
06/14
n/a
03/13
03/13
09/20
n/a
03/13
L+92
L+235
L+250
L+215
L+225
L+125
n/a (9)
L+75
L+140
n/a
L+150
L+400
L+136 (10)
n/a
L+375
10/13
L+275
04/15
10/39
01/22
06/16
11/16
L+135
L+125
n/a
n/a
157
VORNADO REALTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
10. 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.
(2) On November 8, 2012, we completed a $950,000 refinancing of this property. The 10-year fixed rate interest-only loan bears
interest at 3.34%. The partnership retained net proceeds of approximately $522,000, after repaying the existing loan and closing
costs.
(3) On January 9, 2012, we completed a $300,000 refinancing of this property. The five-year fixed rate loan bears interest at 3.75%
and amortizes based on a 30-year schedule beginning in the third year. The proceeds of the new loan and $132,000 of existing
cash were used to repay the existing loan and closing costs.
(4) In the first quarter of 2012, we notified the lender that due to scheduled lease expirations resulting primarily from the effects of
the Base Realignment and Closure statute, the Skyline properties had a 26% vacancy rate and rising (49.8% as of December 31,
2012) and, accordingly, cash flows are expected to decrease. As a result, our subsidiary that owns these properties does not have
and is not expected to have for some time sufficient funds to pay all of its current obligations, including interest payments to the
lender. Based on the projected vacancy and the significant amount of capital required to re-tenant these properties, at our
request, the mortgage loan was transferred to the special servicer. In the second quarter of 2012, we entered into a forbearance
agreement with the special servicer to apply cash flows of the property, before interest on the loan, towards the repayment of
$4,000 of tenant improvements and leasing commissions we funded in connection with a new lease at these properties, which
was repaid in the third quarter. The forbearance agreement was amended January 31, 2013, to extend its maturity through April
1, 2013 and provides for interest shortfalls to be deferred and added to the principal balance of the loan and not give rise to a
loan default. As of December 31, 2012, the deferred interest amounted to $26,957. We continue to negotiate with the special
servicer to restructure the terms of the loan.
(5) On July 26, 2012, we completed a $150,000 refinancing of this property. The 12-year fixed rate loan bears interest at 3.97% and
amortizes based on a 30-year schedule beginning in the third year.
(6) On March 5, 2012, we completed a $325,000 refinancing of this property. The three-year loan bears interest at LIBOR plus 2.50% and
has two one-year extension options. We retained net proceeds of approximately $87,000, after repaying the existing loan and closing
costs.
(7) On November 16, 2012, we completed a $120,000 refinancing of this property. The seven-year loan bears interest at LIBOR plus
2.15% and amortizes based on a 30-year schedule beginning in the third year. We retained net proceeds of approximately $42,000, after
repaying the existing loan and closing costs.
(8) On August 17, 2012, we completed a $98,000 refinancing of this property. The seven-year loan bears interest at LIBOR plus 2.25%.
We retained net proceeds of approximately $44,000, after repaying the existing loan and closing costs.
(9) Interest at the Freddie Mac Reference Note Rate plus 1.53%.
(10) LIBOR floor of 1.00%.
(11) 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.
(12) Our unsecured revolving credit facilities that mature in June 2016 and November 2016 require us to pay facility fees (drawn or
undrawn) of 0.30% and 0.25%, respectively.
(13) In April 2012, we redeemed all of the outstanding exchangeable and convertible senior debentures at par, for an aggregate of $510,215
in cash.
158
VORNADO REALTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
10. Debt – continued
The net carrying amount of properties collateralizing the mortgages payable amounted to $10.4 billion at December 31, 2012. As
of December 31, 2012, the principal repayments required for the next five years and thereafter are as follows:
(Amounts in thousands)
Year Ending December 31,
2013
2014
2015
2016
2017
Thereafter
$
Mortgages Payable
$
1,150,439
231,117
584,802
1,585,247
1,347,018
3,874,900
Senior Unsecured
Debt and
Revolving Credit
Facilities
-
-
500,000
1,170,000
-
860,000
We may refinance our maturing debt as it comes due or choose to repay it.
11. 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-15 and D-16 cumulative redeemable preferred units. Class A units may be
tendered for redemption to the Operating Partnership for cash; we, at our option, may assume that obligation and pay the holder either
cash or Vornado common shares on a one-for-one basis. Because the number of Vornado common shares outstanding at all times
equals the number of Class A units owned by Vornado, the redemption value of each Class A unit is equivalent to the market value of
one Vornado common share, and the quarterly distribution to a Class A unitholder is equal to the quarterly dividend paid to a Vornado
common shareholder. Below are the details of Operating Partnership units held by third-parties that are included in “redeemable
noncontrolling interests” as of December 31, 2012 and 2011.
(Amounts in thousands, except units and
per unit amounts)
Balance as of
December 31,
Units Outstanding at
December 31,
Per Unit
Preferred or
Annual
Liquidation Distribution
Unit Series
2012
2011
2012
2011
Preference
Rate
Common:
Class A
Perpetual Preferred: (1)
$
898,152 $
934,677
11,215,682
12,160,771
N/A $
2.76
6.875% D-15 Cumulative Redeemable
5.00% D-16 Cumulative Redeemable
7.00% D-10 Cumulative Redeemable(2)
6.75% D-14 Cumulative Redeemable(2)
$
$
45,000 $
1,000
-
-
46,000 $
45,000
1,000
80,000
100,000
226,000
1,800,000
1
-
-
1,800,001
25.00 $
1 $ 1,000,000.00 $
25.00 $
25.00 $
1.71875
50,000.00
1.75
1.6875
1,800,000 $
3,200,000 $
4,000,000 $
9,000,001
(1) Holders may tender units for redemption to the Operating Partnership for cash at their stated redemption amount; we, at our option, may assume
that obligation and pay the holders either cash or Vornado preferred shares on a one-for-one basis. These units are redeemable at our option at any
time.
(2) On July 19, 2012, we redeemed all of the outstanding 7.0% Series D-10 and 6.75% Series D-14 cumulative redeemable preferred units with an
aggregate face amount of $180,000 for $168,300 in cash, plus accrued and unpaid distributions through the date of redemption.
159
VORNADO REALTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
11. Redeemable Noncontrolling Interests - continued
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, 2010
Net income
Distributions
Conversion of Class A units into common shares, at redemption value
Adjustment to carry redeemable Class A units at redemption value
Redemption of Series D-11 redeemable units
Other, net
Balance at December 31, 2011
Net income
Distributions
Conversion of Class A units into common shares, at redemption value
Adjustment to carry redeemable Class A units at redemption value
Redemption of Series D-10 and Series D-14 redeemable units
Other, net
Balance at December 31, 2012
$
$
1,327,974
55,912
(50,865)
(64,830)
(98,092)
(28,000)
18,578
1,160,677
45,263
(54,315)
(89,762)
52,117
(168,300)
(1,528)
944,152
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 $55,011,000 and $54,865,000 as of
December 31, 2012 and 2011, respectively.
12. Shareholders’ Equity
Common Shares
As of December 31, 2012, there were 186,734,711 common shares outstanding. During 2012, we paid an aggregate of
$699,318,000 of common dividends comprised of quarterly common dividends of $0.69 per share, and a special long-term capital gain
dividend of $1.00 per share. On January 17, 2013, we increased our quarterly common dividend to $0.73 per share (a new indicated
annual rate of $2.92 per share).
160
VORNADO REALTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
12. Shareholders’ Equity – continued
Preferred Shares
On July 11, 2012, we sold 12,000,000 5.70% Series K Cumulative Redeemable Preferred Shares at a price of $25.00 per share in
an underwritten public offering pursuant to an effective registration statement. We retained aggregate net proceeds of $290,971,000,
after underwriters’ discounts and issuance costs and contributed the net proceeds to the Operating Partnership in exchange for
12,000,000 Series K Preferred Units (with economic terms that mirror those of the Series K Preferred Shares). Dividends on the
Series K Preferred Shares are cumulative and payable quarterly in arrears. The Series K Preferred Shares are not convertible into, or
exchangeable for, any of our properties or securities. On or after five years from the date of issuance (or sooner under limited
circumstances), we may redeem the Series K Preferred Shares at a redemption price of $25.00 per share, plus accrued and unpaid
dividends through the date of redemption. The Series K Preferred Shares have no maturity date and will remain outstanding
indefinitely unless redeemed by us.
On August 16, 2012, we redeemed all of the outstanding 7.0% Series E Cumulative Redeemable Preferred Shares at par, for an
aggregate of $75,000,000 in cash, plus accrued and unpaid dividends through the date of redemption.
The following table sets forth the details of our preferred shares of beneficial interest as of December 31, 2012 and 2011.
(Amounts in thousands, except share and
per share amounts)
Balance as of
December 31,
Shares Outstanding at
December 31,
Preferred Shares
2012
2011
2012
2011
Convertible Preferred:
Per Share
Annual
Liquidation Dividend
Rate(1)
Preference
6.5% Series A: authorized 83,977 shares(2)
$
1,682 $
1,787
34,609
36,709 $
50.00 $
3.25
Cumulative Redeemable:
6.75% Series F: authorized 6,000,000 shares(3)
6.625% Series G: authorized 8,000,000 shares(4)
6.75% Series H: authorized 4,500,000 shares(3)
6.625% Series I: authorized 10,800,000 shares(4)
6.875% Series J: authorized 9,850,000 shares(4)
5.70% Series K: authorized 12,000,000 shares(4)
7.0% Series E: authorized 3,000,000 shares(4)
144,720
144,720
193,135
193,135
108,549
108,549
262,379
262,379
238,842
238,842
-
290,971
72,248
-
$ 1,240,278 $ 1,021,660
6,000,000
8,000,000
4,500,000
10,800,000
9,850,000
12,000,000
-
51,184,609
6,000,000 $
8,000,000 $
4,500,000 $
10,800,000 $
9,850,000 $
- $
3,000,000 $
42,186,709
25.00 $
25.00 $
25.00 $
25.00 $
25.00 $
25.00 $
25.00 $
1.6875
1.656
1.6875
1.656
1.71875
1.425
1.75
(1) Dividends on preferred shares are cumulative and are payable quarterly in arrears.
(2) Redeemable at our option, under certain circumstances, at a redemption price plus accrued and unpaid dividends or, convertible at anytime at the
option of the holder for 1.4334 common shares per Series A Preferred Share.
(3) Redeemed on February 19, 2013 (See Note 25 - Subsequent Events).
(4) Redeemable at our option at a redemption price of $25.00 per share, plus accrued and unpaid dividends through the date of redemption.
Accumulated Other Comprehensive Income
Accumulated other comprehensive (loss) income was $(18,946,000) and $73,729,000 as of December 31, 2012 and 2011,
respectively, and primarily consists of (i) accumulated unrealized gains from the mark-to-market of marketable securities classified as
available-for-sale, (ii) our pro rata share of other comprehensive income of non-consolidated subsidiaries and (iii) changes in the value
of our interest rate swap.
161
VORNADO REALTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
13. Fair Value Measurements
ASC 820, Fair Value Measurement and Disclosures defines fair value and establishes a framework for measuring fair value. The
objective of fair value is to determine the price that would be received upon the sale of an asset or paid to transfer a liability in an
orderly transaction between market participants at the measurement date (the exit price). ASC 820 establishes a fair value hierarchy
that prioritizes observable and unobservable inputs used to measure fair value into three levels: Level 1 – quoted prices (unadjusted) in
active markets that are accessible at the measurement date for assets or liabilities; Level 2 – observable prices that are based on inputs
not quoted in active markets, but corroborated by market data; and Level 3 – unobservable inputs that are used when little or no
market data is available. The fair value hierarchy gives the highest priority to Level 1 inputs and the lowest priority to Level 3 inputs.
In determining fair value, we utilize valuation techniques that maximize the use of observable inputs and minimize the use of
unobservable inputs to the extent possible, as well as consider counterparty credit risk in our assessment of fair value. Considerable
judgment is necessary to interpret Level 2 and 3 inputs in determining the fair value of our financial and non-financial assets and
liabilities. Accordingly, our fair value estimates, which are made at the end of each reporting period, may be different than the
amounts that may ultimately be realized upon sale or disposition of these assets.
Financial Assets and Liabilities Measured at Fair Value on a Recurring Basis
Financial assets and liabilities that are measured at fair value on our consolidated balance sheets consist of (i) marketable
securities, (ii) Real Estate Fund investments, (iii) the assets in our deferred compensation plan (for which there is a corresponding
liability on our consolidated balance sheet), (iv) derivative positions in marketable equity securities, (v) interest rate swaps and (vi)
mandatorily redeemable instruments (Series G-1 through G-4 convertible preferred units and Series D-13 cumulative redeemable
preferred units). The tables below aggregate the fair values of these financial assets and liabilities by their levels in the fair value
hierarchy at December 31, 2012 and 2011, respectively.
(Amounts in thousands)
Marketable securities
Real Estate Fund investments (75% of which is attributable to
noncontrolling interests)
Deferred compensation plan assets (included in other assets)
J.C. Penney derivative position (included in other assets)(1)
Total assets
Mandatorily redeemable instruments (included in other liabilities)
Interest rate swap (included in other liabilities)
Total liabilities
Total
As of December 31, 2012
Level 2
Level 1
Level 3
$
398,188
$
398,188
$
-
$
-
600,786
105,200
11,165
1,115,339
55,011
50,070
105,081
$
$
$
$
$
$
-
42,569
-
440,757
55,011
-
55,011
$
$
$
-
-
11,165
11,165
-
50,070
50,070
$
$
$
(1) Represents the cash deposited with the counterparty in excess of the mark-to-market loss on the derivative position.
(Amounts in thousands)
Marketable securities
Real Estate Fund investments (75% of which is attributable to
noncontrolling interests)
Deferred compensation plan assets (included in other assets)
J.C. Penney derivative position (included in other assets)(1)
Total assets
Mandatorily redeemable instruments (included in other liabilities)
Interest rate swap (included in other liabilities)
Total liabilities
(1) Represents the mark-to-market gain on the derivative position.
Total
As of December 31, 2011
Level 2
Level 1
Level 3
$
741,321
$
741,321
$
-
$
346,650
95,457
30,600
1,214,028
54,865
41,114
95,979
$
$
$
$
$
$
-
39,236
-
780,557
54,865
-
54,865
$
$
$
-
-
30,600
30,600
-
41,114
41,114
$
$
$
346,650
56,221
-
402,871
-
-
-
162
600,786
62,631
-
663,417
-
-
-
-
VORNADO REALTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
13. Fair Value Measurements - continued
Financial Assets and Liabilities Measured at Fair Value on a Recurring Basis - continued
Real Estate Fund Investments
At December 31, 2012, our Real Estate Fund had nine investments with an aggregate fair value of $600,786,000, or $67,642,000
in excess of cost. These investments are classified as Level 3. We use a discounted cash flow valuation technique to estimate the fair
value of each of these investments, which is updated quarterly by personnel responsible for the management of each investment and
reviewed by senior management at each reporting period. The discounted cash flow valuation technique requires us to estimate cash
flows for each investment over the anticipated holding period, which currently ranges from 1.6 to 6.2 years. Cash flows are derived
from property rental revenue (base rents plus reimbursements) less operating expenses, real estate taxes and capital and other costs,
plus projected sales proceeds in the year of exit. Property rental revenue is based on leases currently in place and our estimates for
future leasing activity, which are based on current market rents for similar space plus a projected growth factor. Similarly, estimated
operating expenses and real estate taxes are based on amounts incurred in the current period plus a projected growth factor for future
periods. Anticipated sales proceeds at the end of an investment’s expected holding period are determined based on the net cash flow
of the investment in the year of exit, divided by a terminal capitalization rate, less estimated selling costs.
The fair value of each property is calculated by discounting the future cash flows (including the projected sales proceeds), using
an appropriate discount rate and then reduced by the property’s outstanding debt, if any, to determine the fair value of the equity in
each investment. Significant unobservable quantitative inputs used in determining the fair value of each investment include
capitalization rates and discount rates. These rates are based on the location, type and nature of each property, and current and
anticipated market conditions, which are derived from original underwriting assumptions, industry publications and from the
experience of our Acquisitions and Capital Markets departments. Significant unobservable quantitative inputs in the table below were
utilized in determining the fair value of these Fund investments at December 31, 2012.
Unobservable Quantitative Input
Discount rates
Terminal capitalization rates
Range
12.5% to 19.0%
5.3% to 6.3%
Weighted Average
(based on fair
value of investments)
14.7%
5.8%
The above inputs are subject to change based on changes in economic and market conditions and/or changes in use or timing of
exit. Changes in discount rates and terminal capitalization rates result in increases or decreases in the fair values of these investments.
The discount rates encompass, among other things, uncertainties in the valuation models with respect to terminal capitalization rates
and the amount and timing of cash flows. Therefore, a change in the fair value of these investments resulting from a change in the
terminal capitalization rate, may be partially offset by a change in the discount rate. It is not possible for us to predict the effect of
future economic or market conditions on our estimated fair values.
The table below summarizes the changes in the fair value of Fund investments that are classified as Level 3, for the years ended
December 31, 2012 and 2011.
(Amounts in thousands)
Beginning balance
Purchases
Sales/Returns
Realized gains
Unrealized gains
Other, net
Ending balance
Real Estate Fund Investments
For The Year Ended December 31,
2012
2011
$
$
346,650
262,251
(63,762)
-
55,361
286
600,786
$
$
144,423
248,803
(48,355)
5,391
11,995
(15,607)
346,650
163
VORNADO REALTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
13. Fair Value Measurements - continued
Financial Assets and Liabilities Measured at Fair Value on a Recurring Basis - continued
Deferred Compensation Plan Assets
Deferred compensation plan assets that are classified as Level 3 consist of investments in limited partnerships and investment
funds, which are managed by third parties. We receive quarterly financial reports from a third-party administrator, which are
compiled from the quarterly reports provided to them from each limited partnership and investment fund. The quarterly reports
provide net asset values on a fair value basis which are audited by independent public accounting firms on an annual basis. The third-
party administrator does not adjust these values in determining our share of the net assets and we do not adjust these values when
reported in our consolidated financial statements.
The table below summarizes the changes in the fair value of Deferred Compensation Plan Assets that are classified as Level 3, for
the years ended December 31, 2012 and 2011.
(Amounts in thousands)
Beginning balance
Purchases
Sales
Realized and unrealized gains
Other, net
Ending balance
Deferred Compensation Plan Assets
For The Year Ended December 31,
2012
2011
$
$
56,221
9,951
(8,367)
4,703
123
62,631
$
$
47,850
25,692
(18,801)
1,232
248
56,221
Fair Value Measurements on a Nonrecurring Basis
Assets measured at fair value on a nonrecurring basis on our consolidated balance sheets consist primarily of our investment in
Toys “R” Us and real estate assets that have been written-down to estimated fair value during 2012 and 2011. See Note 2 – Basis of
Presentation and Significant Accounting Policies for details of impairment losses recognized during 2012 and 2011. The fair values
of these assets are determined using widely accepted valuation techniques, including (i) discounted cash flow analysis, which
considers, among other things, leasing assumptions, growth rates, discount rates and terminal capitalization rates, (ii) income
capitalization approach, which considers prevailing market capitalization rates, and (iii) comparable sales activity. Generally, we
consider multiple valuation techniques when measuring fair values but in certain circumstances, a single valuation technique may be
appropriate. The tables below aggregate the fair values of these assets by their levels in the fair value hierarchy.
(Amounts in thousands)
Investment in Toys"R" Us
Real estate assets
Condominium units (included in other assets)
Total assets
(Amounts in thousands)
Real estate assets
Total
478,041 $
189,529
52,142
719,712 $
$
$
As of December 31, 2012
Level 2
Level 1
$
-
-
- $
Level 3
478,041
189,529
52,142
719,712
$
-
-
- $
Total
As of December 31, 2011
Level 2
Level 1
Level 3
$
62,033 $
- $
- $
62,033
164
VORNADO REALTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
13. Fair Value Measurements – continued
Financial Assets and Liabilities not Measured at Fair Value
Financial assets and liabilities that are not measured at fair value on our consolidated balance sheets include cash equivalents
(primarily U.S. Treasury Bills), mortgage and mezzanine loans receivable and our secured and unsecured debt. Estimates of the fair
value of these instruments are determined by the standard practice of modeling the contractual cash flows required under the
instrument and discounting them back to their present value at the appropriate current risk adjusted interest rate, which is provided by
a third-party specialist. For floating rate debt, we use forward rates derived from observable market yield curves to project the
expected cash flows we would be required to make under the instrument. The fair value of cash equivalents is classified as Level 1
and the fair value of our mortgage and mezzanine loans receivable is classified as Level 3. The fair value of our secured and
unsecured debt are classified as Level 2. The table below summarizes the carrying amounts and fair value of these financial
instruments as of December 31, 2012 and 2011.
(Amounts in thousands)
Cash equivalents
Mortgage and mezzanine loans receivable
Debt:
Mortgages payable
Senior unsecured notes
Revolving credit facility debt
Exchangeable senior debentures
Convertible senior debentures
$
$
$
As of December 31, 2012
Fair
Value
Carrying
Amount
As of December 31, 2011
Fair
Value
Carrying
Amount
543,000 $
225,359
768,359 $
543,000 $
221,446
764,446 $
- $
133,948
133,948 $
-
128,581
128,581
8,768,182 $
1,358,008
1,170,000
-
-
8,795,000 $
1,468,000
1,170,000
-
-
8,072,880 $
1,357,661
138,000
497,898
10,168
10,076,607 $
8,188,000
1,426,000
138,000
510,000
10,000
10,272,000
$
11,296,190 $
11,433,000 $
14. Variable Interest Entities
Consolidated Variable Interest Entities
As of December 31, 2012, we have variable interests in Independence Plaza (comprised of our equity interest and our preferred
equity interest), which we acquired in December 2012 (see Note 3 – Acquisitions). We are required to consolidate our interests in this
entity because we are deemed to be the primary beneficiary and have the power to direct the activities of the entity that most
significantly affect economic performance and the obligation to absorb losses and right to receive benefits that could potentially be
significant to the entity. The table below summarizes the assets and liabilities of the entity. The liabilities are secured only by the
assets of the entity, and are non-recourse to us.
(Amounts in thousands)
Total assets
Total liabilities
As of December 31,
2012
2011
$
$
858,656
$
344,820
$
-
-
Unconsolidated Variable Interest Entities
As of December 31, 2012, we also have a variable interest in the Warner Building. We are not required to consolidate our interest
in this entity because we are not deemed to be the primary beneficiary and the nature of our involvement in the activities of the entity
does not give us power over decisions that significantly affect the entity’s economic performance. We account for our interest in the
entity under the equity method of accounting (see Note 6 – Investments in Partially Owned Entities). As of December 31, 2012 and
2011, the carrying amount of our investment in this entity was $8,775,000 and $2,715,000, respectively, and our maximum exposure
to loss is limited to our investment in the entity.
165
VORNADO REALTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
15. Stock-based Compensation
Our Omnibus Share Plan (the “Plan”), which was approved in May 2010, provides the Compensation Committee of the Board (the
“Committee”) the ability to grant incentive and non-qualified stock options, restricted stock, restricted Operating Partnership units and out-
performance plan rewards to certain of our employees and officers. Under the Plan, awards may be granted up to a maximum of 6,000,000
shares, if all awards granted are Full Value Awards, as defined, and up to 12,000,000 shares, if all of the awards granted are Not Full Value
Awards, as defined, plus shares in respect of awards forfeited after May 2010 that were issued pursuant to our 2002 Omnibus Share Plan.
Full Value Awards are awards of securities, such as restricted shares, that, if all vesting requirements are met, do not require the payment of
an exercise price or strike price to acquire the securities. Not Full Value Awards are awards of securities, such as options, that do require the
payment of an exercise price or strike price. This means, for example, if the Committee were to award only restricted shares, it could award
up to 6,000,000 restricted shares. On the other hand, if the Committee were to award only stock options, it could award options to purchase
up to 12,000,000 shares (at the applicable exercise price). The Committee may also issue any combination of awards under the Plan, with
reductions in availability of future awards made in accordance with the above limitations. As of December 31, 2012, we have approximately
5,136,000 shares available for future grants under the Plan, if all awards granted are Full Value Awards, as defined.
On March 30, 2012, the Committee approved the 2012 formulaic annual incentive program for our senior executive management
team. Under the program, our senior executive management team, including our Chairman and our President and Chief Executive Officer,
will have the ability to earn annual incentive payments (cash or equity) if and only if we achieve comparable funds from operations
(“Comparable FFO”) of at least 80% or more of the prior year Comparable FFO. Moreover, even if we achieve the stipulated Comparable
FFO performance requirement, the Committee retains the right, consistent with best practices, to elect to make no payments under the
program. Comparable FFO excludes the impact of certain non-recurring items such as income or loss from discontinued operations, the sale
or mark-to-market of marketable securities or derivatives and early extinguishment of debt, restructuring costs and non-cash impairment
losses, among others, and thus the Committee believes provides a better metric than total FFO for assessing management’s performance for
the year. Aggregate incentive awards earned under the program are subject to a cap of 1.25% of Comparable FFO for the year, with
individual award allocations determined by the Committee based on an assessment of individual and overall performance.
In the years ended December 31, 2012, 2011 and 2010, we recognized an aggregate of $30,588,000, $28,853,000 and $34,614,000,
respectively, of stock-based compensation expense, which is included as a component of “general and administrative” expenses on our
consolidated statements of income. The details of the various components of our stock-based compensation are discussed below.
Out-Performance Plans (“OPP Units”)
On March 30, 2012, the Committee also approved the 2012 Out-Performance Plan, a multi-year, performance-based equity
compensation plan (the “2012 OPP”). The aggregate notional amount of the 2012 OPP is $40,000,000. Under the 2012 OPP, participants,
including our Chairman and our President and Chief Executive Officer, have the opportunity to earn compensation payable in the form of
equity awards if and only if we outperform a predetermined total shareholder return (“TSR”) and/or outperform the market with respect to a
relative TSR in any year during a three-year performance period. Specifically, awards under our 2012 OPP may be earned if we (i) achieve a
TSR above that of the SNL US REIT Index (the “Index”) over a one-year, two-year or three-year performance period (the “Relative
Component”), and/or (ii) achieve a TSR level greater than 7% per annum, or 21% over the three-year performance period (the “Absolute
Component”). To the extent awards would be earned under the Absolute Component of the 2012 OPP but we underperform the Index, such
awards would be reduced (and potentially fully negated) based on the degree to which we underperform the Index. In certain circumstances,
in the event we outperform the Index but awards would not otherwise be earned under the Absolute Component, awards may still be earned
under the Relative Component. To the extent awards would otherwise be earned under the Relative Component but we fail to achieve at least
a 6% per annum absolute TSR level, such awards would be reduced based on our absolute TSR performance, with no awards being earned in
the event our TSR during the applicable measurement period is 0% or negative, irrespective of the degree to which we may outperform the
Index. If the designated performance objectives are achieved, OPP Units are also subject to time-based vesting requirements. Dividends on
awards issued accrue during the performance period and are paid to participants if and only if awards are ultimately earned based on the
achievement of the designated performance objectives. Awards earned under the 2012 OPP vest 33% in year three, 33% in year four and
34% in year five. The fair value of the 2012 OPP on the date of grant, as adjusted for estimated forfeitures, was $12,250,000, and is being
amortized into expense over a five-year period from the date of grant, using a graded vesting attribution model.
In the years ended December 31, 2012, 2011 and 2010, we recognized $2,826,000, $740,000 and $5,062,000, respectively, of
compensation expense related to OPP Units. As of December 31, 2012, there was $9,435,000 of total unrecognized compensation cost
related to OPP Units, which will be recognized over a weighted-average period of 2.2 years. Distributions paid on unvested OPP Units are
charged to “net income attributable to noncontrolling interests in the Operating Partnership” on our consolidated statements of income and
amounted to $8,000, $32,000 and $815,000 in 2012, 2011 and 2010, respectively.
166
VORNADO REALTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
15. Stock-based Compensation - continued
Stock Options
Stock options are granted at an exercise price equal to the average of the high and low market price of our common shares on the
NYSE on the date of grant, generally vest over four years and expire 10 years from the date of grant. Compensation expense related
to stock option awards is recognized on a straight-line basis over the vesting period. In the years ended December 31, 2012, 2011 and
2010, we recognized $8,638,000, $8,794,000 and $7,916,000, respectively, of compensation expense related to stock options that
vested during each year. As of December 31, 2012, there was $12,300,000 of total unrecognized compensation cost related to
unvested stock options, which is expected to be recognized over a weighted-average period of 1.4 years.
Below is a summary of our stock option activity for the year ended December 31, 2012.
Weighted-
Average
Exercise
Price
Weighted-
Average
Remaining
Contractual
Term
Aggregate
Intrinsic
Value
Outstanding at January 1, 2012
Granted
Exercised
Cancelled or expired
Outstanding at December 31, 2012
Shares
4,514,341 $
47,720
(1,120,193)
(81,796)
3,360,072 $
Options vested and expected to vest at
December 31, 2012
Options exercisable at December 31, 2012
3,353,953 $
1,970,247 $
60.96
82.86
42.34
74.39
67.16
67.16
68.02
6.1 $
56,414,000
6.1 $
56,313,000
5.4 $
32,914,000
The fair value of each option grant is estimated on the date of grant using an option-pricing model with the following weighted-
average assumptions for grants in the years ended December 31, 2012, 2011 and 2010.
Expected volatility
Expected life
Risk free interest rate
Expected dividend yield
2012
36.00 %
5.0 years
1.05 %
4.30 %
December 31,
2011
35.00 %
7.1 years
2.90 %
4.40 %
2010
35.00 %
7.9 years
3.60 %
4.90 %
The weighted average grant date fair value of options granted during the years ended December 31, 2012, 2011 and 2010 was
$17.50, $21.42 and $16.96, respectively. Cash received from option exercises for the years ended December 31, 2012, 2011 and 2010
was $9,546,000, $23,736,000 and $25,338,000, respectively. The total intrinsic value of options exercised during the years ended
December 31, 2012, 2011 and 2010 was $40,887,000, $39,348,000 and $60,923,000, respectively.
167
VORNADO REALTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
15. Stock-based Compensation - continued
Restricted Stock
Restricted stock awards are granted at the average of the high and low market price of our common shares on the NYSE on the
date of grant and generally vest over four years. Compensation expense related to restricted stock awards is recognized on a straight-
line basis over the vesting period. In the years ended December 31, 2012, 2011 and 2010, we recognized $1,604,000, $1,814,000 and
$1,432,000, respectively, of compensation expense related to restricted stock awards that vested during each year. As of December
31, 2012, there was $2,823,000 of total unrecognized compensation cost related to unvested restricted stock, which is expected to be
recognized over a weighted-average period of 1.6 years. Dividends paid on unvested restricted stock are charged directly to retained
earnings and amounted to $200,000, $185,000 and $115,000 for the years ended December 31, 2012, 2011 and 2010, respectively.
Below is a summary of our restricted stock activity under the Plan for the year ended December 31, 2012.
Unvested Shares
Unvested at January 1, 2012
Granted
Vested
Cancelled or expired
Unvested at December 31, 2012
Weighted-Average
Grant-Date
Fair Value
Shares
61,228 $
11,060
(22,297)
(1,971)
48,020
79.28
83.96
83.61
72.97
78.61
Restricted stock awards granted in 2012, 2011 and 2010 had a fair value of $929,000, $1,042,000 and $3,922,000, respectively.
The fair value of restricted stock that vested during the years ended December 31, 2012, 2011 and 2010 was $1,864,000, $2,031,000
and $2,186,000, respectively.
Restricted Operating Partnership Units (“OP Units”)
OP Units are granted at the average of the high and low market price of our common shares on the NYSE on the date of grant,
vest ratably over four years and are subject to a taxable book-up event, as defined. Compensation expense related to OP Units is
recognized ratably over the vesting period using a graded vesting attribution model. In the years ended December 31, 2012, 2011 and
2010, we recognized $17,520,000, $17,505,000 and $20,204,000, respectively, of compensation expense related to OP Units that
vested during each year. As of December 31, 2012, there was $16,853,000 of total remaining unrecognized compensation cost related
to unvested OP Units, which is expected to be recognized over a weighted-average period of 1.5 years. Distributions paid on unvested
OP Units are charged to “net income attributable to noncontrolling interests in the Operating Partnership” on our consolidated
statements of income and amounted to $3,203,000, $2,567,000 and $2,285,000 in 2012, 2011 and 2010, respectively.
Below is a summary of restricted OP unit activity under the Plan for the year ended December 31, 2012.
Unvested Units
Unvested at January 1, 2012
Granted
Vested
Cancelled or expired
Unvested at December 31, 2012
Weighted-Average
Grant-Date
Fair Value
Units
699,659 $
209,663
(235,245)
(33,407)
640,670
65.29
78.52
63.82
75.93
69.61
OP Units granted in 2012, 2011 and 2010 had a fair value of $16,464,000, $18,727,000 and $31,437,000, respectively. The fair
value of OP Units that vested during the years ended December 31, 2012, 2011 and 2010 was $15,014,000, $10,260,000 and
$14,087,000, respectively.
168
VORNADO REALTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
16. Fee and Other Income
The following table sets forth the details of our fee and other income:
(Amounts in thousands)
BMS cleaning fees
Signage revenue
Management and leasing fees
Lease termination fees
Other income
2012
For the Year Ended December 31,
2011
2010
$
$
67,584
20,892
21,867
2,361
31,845
144,549
$
$
61,754
19,823
21,801
16,334
30,037
149,749
$
$
58,053
18,618
21,686
14,818
33,780
146,955
Management and leasing fees include management fees from Interstate Properties, a related party, of $794,000, $787,000, and
$815,000 for the years ended December 31, 2012, 2011, and 2010, respectively. The above table excludes fee income from partially
owned entities, which is typically included in “income from partially owned entities” (see Note 6 – Investments in Partially Owned
Entities).
17. Interest and Other Investment (Loss) Income, Net
The following table sets forth the details of our interest and other investment (loss) income:
(Amounts in thousands)
Non-cash impairment loss on J.C. Penney owned shares
(Loss) income from the mark-to-market of J.C. Penney derivative position
Interest on mortgage and mezzanine loans
Dividends and interest on marketable securities
Mark-to-market of investments in our deferred compensation plan (1)
Mezzanine loans loss reversal and net gain on disposition
Other, net
$
$
2012
(224,937) $
(75,815)
13,861
11,979
6,809
-
7,158
(260,945) $
-
12,984
14,023
29,587
1,658
82,744
7,788
148,784
$
$
-
130,153
10,319
25,772
8,049
53,100
7,874
235,267
For the Year Ended December 31,
2011
2010
__________________________
(1) This income is entirely offset by the expense resulting from the mark-to-market of the deferred compensation plan liability, which is included in
"general and administrative" expense.
18. Interest and Debt Expense
The following table sets forth the details of our interest and debt expense.
(Amounts in thousands)
Interest expense
Amortization of deferred financing costs
Capitalized interest
169
For the Year Ended December 31,
2011
2012
2010
$
$
493,067 $
24,095
(16,801)
500,361 $
507,387
19,985
(1,197)
526,175
$
$
523,905
16,329
(864)
539,370
VORNADO REALTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
19. 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 dilutive share equivalents. Dilutive share equivalents may include our Series A convertible preferred shares, employee stock
options and restricted stock and exchangeable senior debentures in 2011 and 2010.
(Amounts in thousands, except per share amounts)
Numerator:
Income from continuing operations, net of income attributable to noncontrolling interests
Income from discontinued operations, net of income attributable to noncontrolling
interests
Net income attributable to Vornado
Preferred share dividends
Discount on preferred share and unit redemptions
Net income attributable to common shareholders
Earnings allocated to unvested participating securities
Numerator for basic income per share
Impact of assumed conversions:
Convertible preferred share dividends
Numerator for diluted income per share
Denominator:
Denominator for basic income per share –
weighted average shares
Effect of dilutive securities (1):
Employee stock options and restricted share awards
Convertible preferred shares
Denominator for diluted income per share –
weighted average shares and assumed conversions
INCOME PER COMMON SHARE – BASIC:
Income from continuing operations, net
Income from discontinued operations, net
Net income per common share
INCOME PER COMMON SHARE – DILUTED:
Income from continuing operations, net
Income from discontinued operations, net
Net income per common share
Year Ended December 31,
2011
2012
2010
$
347,392
$
511,478
$
641,520
269,868
617,260
(76,937)
8,948
549,271
(202)
549,069
150,824
662,302
(65,531)
5,000
601,771
(221)
601,550
6,363
647,883
(55,534)
4,382
596,731
(120)
596,611
113
549,182
$
124
601,674
$
160
596,771
$
185,810
184,308
182,340
670
50
1,658
55
1,748
71
186,530
186,021
184,159
$
$
$
$
1.50
1.45
2.95
1.49
1.45
2.94
$
$
$
$
2.44
0.82
3.26
2.42
0.81
3.23
$
$
$
$
3.24
0.03
3.27
3.21
0.03
3.24
(1)
The effect of dilutive securities in the years ended December 31, 2012, 2011 and 2010 excludes an aggregate of 14,400, 18,896 and 19,684
weighted average common share equivalents, respectively, as their effect was anti-dilutive.
170
VORNADO REALTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
20. Leases
As lessor:
We lease space to tenants under operating leases. Most of the leases provide for the payment of fixed base rentals payable
monthly in advance. Office building leases generally require the tenants to reimburse us for operating costs and real estate taxes above
their base year costs. Shopping center leases provide for pass-through to tenants the tenant’s share of real estate taxes, insurance and
maintenance. Shopping center leases also provide for the payment by the lessee of additional rent based on a percentage of the tenants’
sales. As of December 31, 2012, future base rental revenue under non-cancelable operating leases, excluding rents for leases with an
original term of less than one year and rents resulting from the exercise of renewal options, are as follows:
(Amounts in thousands)
Year Ending December 31:
2013
2014
2015
2016
2017
Thereafter
$
1,842,355
1,738,439
1,578,559
1,400,020
1,249,904
6,134,903
These amounts do not include percentage rentals based on tenants’ sales. These percentage rents approximated $8,466,000,
$7,995,000 and $7,339,000, for the years ended December 31, 2012, 2011 and 2010, respectively.
None of our tenants accounted for more than 10% of total revenues in any of the years ended December 31, 2012, 2011 and 2010.
Former Bradlees Locations
Pursuant to a Master Agreement and Guaranty, dated May 1, 1992, we were due $5,000,000 of annual rent from Stop & Shop
which was allocated to certain Bradlees former locations. On December 31, 2002, prior to the expiration of the leases to which the
additional rent was allocated, we reallocated this rent to other former Bradlees leases also guaranteed by Stop & Shop. Stop & Shop
contested our right to reallocate the rent. On November 7, 2011, the Court determined that we had a continuing right to allocate the
annual rent to unexpired leases covered by the Master Agreement and Guaranty and directed entry of a judgment in our favor ordering
Stop & Shop to pay us the unpaid annual rent. At December 31, 2012, we had a $47,900,000 receivable from Stop and Shop, which is
included as a component of “tenant and other receivables” on our consolidated balance sheet. On February 6, 2013, we received
$124,000,000 pursuant to a settlement agreement with Stop & Shop (see Note 22 – Commitments and Contingencies – Litigation).
171
VORNADO REALTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
20. Leases - continued
As lessee:
We are a tenant under operating leases for certain properties. These leases have terms that expire during the next thirty years.
Future minimum lease payments under operating leases at December 31, 2012 are as follows:
(Amounts in thousands)
Year Ending December 31:
2013
2014
2015
2016
2017
Thereafter
$
41,524
42,321
41,074
37,054
37,968
1,229,169
Rent expense was $43,528,000, $35,436,000 and $34,611,000 for the years ended December 31, 2012, 2011 and 2010,
respectively.
We are also a lessee under a capital lease under which we will redevelop the retail and signage components of the Marriot
Marquis Times Square Hotel. The lease has put/call options, which if exercised would lead to our ownership. Capitalized leases are
recorded at the present value of future minimum lease payments or the fair market value of the property. Capitalized leases are
depreciated on a straight-line basis over the estimated life of the asset or life of the related lease. Depreciation expense on capital
leases is included in “depreciation and amortization” on our consolidated statements of income. As of December 31, 2012, future
minimum lease payments under this capital lease are as follows:
(Amounts in thousands)
Year Ending December 31:
2013
2014
2015
2016
2017
Thereafter
Total minimum obligations
Interest portion
Present value of net minimum payments
$
$
12,500
12,500
12,500
12,500
12,500
359,792
422,292
(182,292)
240,000
At December 31, 2012, the carrying amount of the property leased under the capital lease was $249,285,000, which is included as
a component of “development costs and construction in progress” on our consolidated balance sheet and present value of net
minimum payments of $240,000,000 is included in “other liabilities” on our consolidated balance sheet.
172
VORNADO REALTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
21. Multiemployer Benefit Plans
Our subsidiaries make contributions to certain multiemployer defined benefit plans (“Multiemployer Pension Plans”) and health
plans (“Multiemployer Health Plans”) for our union represented employees, pursuant to the respective collective bargaining
agreements.
Multiemployer Pension Plans
Multiemployer Pension Plans differ from single-employer pension plans in that (i) contributions to multiemployer plans may be
used to provide benefits to employees of other participating employers and (ii) if other participating employers fail to make their
contributions, each of our participating subsidiaries may be required to bear its then pro rata share of unfunded obligations. If a
participating subsidiary withdraws from a plan in which it participates, it may be subject to a withdrawal liability. As of
December 31, 2012, our subsidiaries’ participation in these plans were not significant to our consolidated financial statements.
In the years ended December 31, 2012, 2011 and 2010, our subsidiaries contributed $10,683,000, $10,168,000 and $9,629,000,
respectively, towards Multiemployer Pension Plans, which is included as a component of “operating” expenses on our consolidated
statements of income. Our subsidiaries’ contributions did not represent more than 5% of total employer contributions in any of these
plans for the years ended December 31, 2012, 2011 and 2010.
Multiemployer Health Plans
Multiemployer Health Plans in which our subsidiaries participate provide health benefits to eligible active and retired employees.
In the years ended December 31, 2012, 2011 and 2010, our subsidiaries contributed $26,759,000, $23,847,000 and $21,664,000,
respectively, towards these plans, which is included as a component of “operating” expenses on our consolidated statements of
income.
22. 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 $180,000,000 per occurrence, subject to a deductible in
the amount of 5% of the value of the affected property, up to a $180,000,000 annual aggregate.
Penn Plaza Insurance Company, LLC (“PPIC”), our wholly owned consolidated subsidiary, acts as a re-insurer with respect to all
risk property and rental value insurance and a portion of our earthquake insurance coverage, and as a direct insurer for coverage for
acts of terrorism, including nuclear, biological, chemical and radiological (“NBCR”) acts, as defined by Terrorism Risk Insurance
Program Reauthorization Act. Coverage for acts of terrorism (excluding NBCR acts) is fully reinsured by third party insurance
companies and the Federal government with no exposure to PPIC. Coverage for NBCR losses is up to $2.0 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 and revolving credit agreements contain customary covenants requiring us to maintain insurance. Although we believe that we
have adequate insurance coverage for purposes of these agreements, we may not be able to obtain an equivalent amount of coverage at
reasonable costs in the future. Further, if lenders insist on greater coverage than we are able to obtain it could adversely affect our
ability to finance our properties and expand our portfolio.
173
VORNADO REALTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
22. Commitments and Contingencies – continued
Other Commitments and Contingencies
Our mortgage loans are non-recourse to us. However, in certain cases we have provided guarantees or master leased tenant space.
These guarantees and master leases terminate either upon the satisfaction of specified circumstances or repayment of the underlying
loans. As of December 31, 2012, the aggregate dollar amount of these guarantees and master leases is approximately $310,249,000.
At December 31, 2012, $22,807,000 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.
Two of our wholly owned subsidiaries that are contracted to develop and operate the Cleveland Medical Mart and Convention
Center, in Cleveland, Ohio, are required to fund $11,500,000, primarily for tenant improvements, and they are responsible for
operating expenses and are entitled to the net operating income, if any, upon the completion of development and the commencement
of operations. As of December 31, 2012, our subsidiaries have funded $1,100,000 of the commitment.
As of December 31, 2012, we expect to fund additional capital to certain of our partially owned entities aggregating
approximately $163,130,000.
Litigation
We are from time to time involved in legal actions arising in the ordinary course of business. In our opinion, after consultation
with legal counsel, the outcome of such matters, including the matter referred to below, is not expected to have a material adverse
effect on our financial position, results of operations or cash flows.
In 2003, Stop & Shop filed an action against us in the New York Supreme Court, claiming that we had no right to reallocate and
therefore continue to collect $5,000,000 ($6,000,000 beginning February 1, 2012) of annual rent from Stop & Shop pursuant to a
Master Agreement and Guaranty, because of the expiration of the leases to which the annual rent was previously allocated. Stop &
Shop asserted that an order of the Bankruptcy Court for the Southern District of New York, as modified on appeal by the District
Court, froze our right to reallocate and effectively terminated our right to collect the annual rent from Stop & Shop. We asserted a
counterclaim seeking a judgment for all of the unpaid annual rent accruing through the date of the judgment and a declaration that
Stop & Shop will continue to be liable for the annual rent as long as any of the leases subject to the Master Agreement and Guaranty
remain in effect. A trial was held in November 2010. On November 7, 2011, the Court determined that we had a continuing right to
allocate the annual rent to unexpired leases covered by the Master Agreement and Guaranty, and directed entry of a judgment in our
favor ordering Stop & Shop to pay us the unpaid annual rent accrued through February 28, 2011 in the amount of $37,422,000, a
portion of the annual rent due from March 1, 2011 through the date of judgment, interest, and attorneys’ fees. On December 16, 2011,
a money judgment based on the Court’s decision was entered in our favor in the amount of $56,597,000 (including interest and costs).
Stop & Shop appealed the Court’s decision and the judgment and posted a bond to secure payment of the judgment. On January 12,
2012, we commenced a new action against Stop & Shop seeking recovery of $2,500,000 of annual rent not included in the money
judgment, plus additional annual rent as it accrues. At December 31, 2012, we had a $47,900,000 receivable from Stop & Shop,
which is included as a component of “tenant and other receivables” on our consolidated balance sheet. On February 6, 2013, we
received $124,000,000 pursuant to a settlement agreement with Stop & Shop. The settlement terminates our right to receive
$6,000,000 of additional annual rent under the 1992 agreement, for a period potentially through 2031. As a result of this settlement,
we collected the aforementioned $47,900,000 receivable and will recognize approximately $59,000,000 of net income in the first
quarter of 2013.
174
VORNADO REALTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
23. Related Party Transactions
Alexander’s
We own 32.4% of Alexander’s. Steven Roth, the Chairman of our Board, and Michael D. Fascitelli, our President and Chief
Executive Officer, are officers and directors of Alexander’s. We provide various services to Alexander’s in accordance with
management, development and leasing agreements. These agreements are described in Note 6 - Investments in Partially Owned
Entities.
Interstate Properties (“Interstate”)
Interstate is a general partnership in which Mr. Roth is the managing general partner. David Mandelbaum and Russell B.
Wight, Jr., Trustees of Vornado and Directors of Alexander’s, are Interstate’s two other partners. As of December 31, 2012, Interstate
and its partners beneficially owned an aggregate of approximately 6.5% of the common shares of beneficial interest of Vornado and
26.3% of Alexander’s common stock.
We manage and lease the real estate assets of Interstate pursuant to a management agreement for which we receive an annual fee
equal to 4% of annual base rent and percentage rent. The management agreement has a term of one year and is automatically
renewable unless terminated by either of the parties on 60 days’ notice at the end of the term. We believe, based upon comparable fees
charged by other real estate companies, that the management agreement terms are fair to us. We earned $794,000, $787,000, and
$815,000 of management fees under the agreement for the years ended December 31, 2012, 2011 and 2010.
Other
On March 8, 2012, Mr. Roth repaid his $13,122,500 outstanding loan from the Company.
24. Summary of Quarterly Results (Unaudited)
The following summary represents the results of operations for each quarter in 2012 and 2011:
(Amounts in thousands, except per share amounts)
2012
Revenues
Net Income
Attributable
to Common
Shareholders (1)
Net Income Per
Common Share (2)
Basic
Diluted
December 31
September 30
June 30
March 31
2011
December 31
September 30
June 30
March 31
$
$
697,654 $
710,538
683,985
674,280
689,959 $
689,190
679,084
674,603
62,633 $
232,393
20,510
233,735
69,508 $
41,135
91,913
399,215
0.34 $
1.25
0.11
1.26
0.38 $
0.22
0.50
2.17
0.33
1.24
0.11
1.25
0.37
0.22
0.49
2.12
_______________________________
(1) Fluctuations among quarters resulted primarily from non-cash impairment losses, mark-to-market of derivative instruments, net gains
on sale of real estate and from seasonality of business operations.
(2) The total for the year may differ from the sum of the quarters as a result of weighting.
175
VORNADO REALTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
25. Subsequent Events
On February 19, 2013, we redeemed all of the outstanding 6.75% Series F Cumulative Redeemable Preferred Shares and 6.75%
Series H Cumulative Redeemable Preferred Shares at par, for an aggregate of $262,500,000 in cash, plus accrued and unpaid
dividends through the date of redemption.
On January 25, 2013, we sold 12,000,000 5.40% Series L Cumulative Redeemable Preferred Shares at a price of $25.00 per share
in an underwritten public offering pursuant to an effective registration statement. We retained aggregate net proceeds of
$290,853,000, after underwriters’ discounts and issuance costs and contributed the net proceeds to the Operating Partnership in
exchange for 12,000,000 Series L Preferred Units (with economic terms that mirror those of the Series L Preferred Shares). Dividends
on the Series L Preferred Shares are cumulative and payable quarterly in arrears. The Series L Preferred Shares are not convertible
into, or exchangeable for, any of our properties or securities. On or after five years from the date of issuance (or sooner under limited
circumstances), we may redeem the Series L Preferred Shares at a redemption price of $25.00 per share, plus accrued and unpaid
dividends through the date of redemption. The Series L Preferred Shares have no maturity date and will remain outstanding
indefinitely unless redeemed by us.
176
VORNADO REALTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
26. Segment Information
Effective January 1, 2012, as a result of certain organizational and operational changes, we redefined the New York business segment to
encompass all of our Manhattan assets by including the 1.0 million square feet in 21 freestanding Manhattan street retail assets (formerly in our
Retail segment), and the Hotel Pennsylvania and our interest in Alexander’s, Inc. (formerly in our Other segment). Accordingly, we have reclassified
the prior period segment financial results to conform to the current year presentation. See note (4) on page 180 for the elements of the New York
segment’s EBITDA.
(Amounts in thousands)
For the Year Ended December 31, 2012
Property rentals
Straight-line rent adjustments
Amortization of acquired below-
market leases, net
Total rentals
Tenant expense reimbursements
Cleveland Medical Mart development
project
Fee and other income:
BMS cleaning fees
Signage revenue
Management and leasing fees
Lease termination fees
Other income
Total revenues
Operating expenses
Depreciation and amortization
General and administrative
Cleveland Medical Mart development
project
Impairment losses, acquisition related
costs and tenant buy-outs
Total expenses
Operating income (loss)
Income applicable to Toys
Income (loss) from partially owned
entities
Income from Real Estate Fund
Interest and other investment
(loss) income, net
Interest and debt expense
Net gain on disposition of wholly
owned and partially owned assets
Income (loss) before income taxes
Income tax expense
Income (loss) from continuing
operations
Income (loss) from discontinued
operations
Net income (loss)
Less net (income) loss attributable to
noncontrolling interests in:
Consolidated subsidiaries
Operating Partnership
Preferred unit distributions
of the Operating Partnership
Net income (loss) attributable to
Vornado
Interest and debt expense(2)
Depreciation and amortization(2)
Income tax expense (benefit)(2)
EBITDA(1)
Balance Sheet Data:
Real estate at cost
Investments in partially owned entities
Total assets
See notes on page 180.
$
Total
1,962,545
68,844
New York Washington, DC Properties
276,190
$ 1,004,078
9,379
52,117
467,972 $
5,727
$
Toys
Other
$
125,018 $
763
- $
-
89,287
858
Retail
Merchandise
Mart
54,193
2,085,582
301,092
31,552
1,087,747
160,133
2,043
475,742
40,742
14,902
300,471
88,545
-
125,781
4,343
235,234
-
-
-
235,234
67,584
20,892
21,867
2,361
31,845
2,766,457
1,021,719
517,811
201,894
94,965
20,892
5,639
1,136
4,472
1,374,984
602,883
226,653
30,053
-
-
12,775
643
24,126
554,028
194,523
138,296
27,237
-
-
3,131
74
1,778
393,999
141,732
76,835
23,654
-
-
231
508
1,574
367,671
65,337
33,778
18,899
226,619
-
-
-
226,619
-
-
-
-
-
-
-
-
-
-
-
-
-
-
120,786
2,088,829
677,628
14,859
408,267
63,936
-
859,589
515,395
-
207,773
-
-
360,056
193,972
-
(5,612)
-
103,400
345,621
48,378
-
1,458
-
(260,945)
(500,361)
4,230
(147,132)
126
(115,574)
27
(62,923)
13,347
416,731
(8,132)
-
580,266
(3,491)
-
72,912
(1,650)
8,491
(4,569)
-
-
344,633
23,038
-
729
-
-
(31,393)
-
(7,626)
(502)
-
-
-
14,859
-
-
-
-
-
14,859
-
5,696
95,841
7,329
-
(27,381)
-
91
-
(105)
75,775
17,244
42,249
102,051
-
17,386
178,930
(103,155)
-
203,919
63,936
(265,328)
(143,339)
4,856
(239,111)
(2,489)
408,599
576,775
71,262
(4,569)
(8,128)
14,859
(241,600)
285,942
694,541
(641)
576,134
167,766
239,028
42,926
38,357
75,144
67,016
-
14,859
747
(240,853)
(32,018)
(35,327)
(9,936)
617,260
760,523
735,293
7,026
2,120,102
$
(2,138)
-
-
573,996
187,855
252,257
3,751
$ 1,017,859 (3) $
-
-
-
239,028
133,625
157,816
1,943
532,412 $
1,812
-
-
40,169
73,828
86,529
-
-
-
-
-
-
-
67,016
35,423
39,596
12,503
14,859
147,880
135,179
(16,629)
200,526 (4) $
154,538 $ 281,289 $
(31,692)
(35,327)
(9,936)
(317,808)
181,912
63,916
5,458
(66,522)(5)
$ 18,495,359
1,704,297
21,965,975
$ 8,915,981
576,336
9,116,364
$
4,171,879 $ 3,009,816
7,083
3,589,633
95,670
4,196,694
$
772,372 $
3,567
1,246,975
- $ 1,625,311
543,600
3,338,268
478,041
478,041
177
VORNADO REALTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
26. Segment Information – continued
(Amounts in thousands)
For the Year Ended December 31, 2011
Property rentals
Straight-line rent adjustments
Amortization of acquired below-
market leases, net
Total rentals
Tenant expense reimbursements
Cleveland Medical Mart development
project
Fee and other income:
BMS cleaning fees
Signage revenue
Management and leasing fees
Lease termination fees
Other income
Total revenues
Operating expenses
Depreciation and amortization
General and administrative
Cleveland Medical Mart development
project
Impairment losses, acquisition related
costs and tenant buy-outs
Total expenses
Operating income (loss)
Income applicable to Toys
Income (loss) from partially owned
entities
Income from Real Estate Fund
Interest and other investment
income (loss), net
Interest and debt expense
Net gain on disposition of wholly
owned and partially owned assets
Income (loss) before income taxes
Income tax expense
Income (loss) from continuing
operations
Income from discontinued
operations
Net income (loss)
Less net (income) loss attributable to
noncontrolling interests in:
Consolidated subsidiaries
Operating Partnership
Preferred unit distributions
of the Operating Partnership
Net income (loss) attributable to
Vornado
Interest and debt expense(2)
Depreciation and amortization(2)
Income tax expense (benefit)(2)
EBITDA(1)
Balance Sheet Data:
Real estate at cost
Investments in partially owned entities
Total assets
See notes on page 180.
$
Total
2,012,292
39,858
New York Washington, DC Properties
274,386
$
6,723
531,510 $
(2,569)
979,032
34,446
$
Toys
Other
$
136,404 $
(1,284)
- $
-
90,960
2,542
Retail
Merchandise
Mart
62,105
2,114,255
314,752
40,958
1,054,436
165,433
2,160
531,101
36,299
13,969
295,078
96,805
-
135,120
6,321
154,080
-
-
-
154,080
61,754
19,823
21,801
16,334
30,037
2,732,836
995,586
524,550
208,008
90,033
19,823
5,095
11,839
6,457
1,353,116
578,344
221,520
26,808
-
-
12,361
3,794
19,762
603,317
188,744
154,142
26,369
-
-
3,990
467
1,862
398,202
133,403
77,433
25,489
-
-
342
234
2,218
298,315
77,492
28,804
28,040
145,824
-
-
-
145,824
-
-
-
-
-
-
-
-
-
-
-
-
-
-
35,299
1,909,267
823,569
48,540
70,072
22,886
23,777
850,449
502,667
-
12,062
-
-
369,255
234,062
-
(6,381)
-
369
236,694
161,508
-
2,700
-
148,784
(526,175)
4,245
(152,386)
199
(115,456)
(32)
(70,952)
15,134
602,810
(23,925)
-
366,588
(2,084)
-
112,424
(2,690)
4,278
97,502
(34)
5,228
285,388
12,927
-
455
-
1
(31,208)
-
(17,825)
(1,572)
-
-
-
48,540
-
-
-
-
-
48,540
-
5,018
98,520
9,894
-
(28,279)
-
13
-
(262)
79,886
17,603
42,651
101,302
-
5,925
167,481
(87,595)
-
61,236
22,886
144,371
(156,173)
10,856
(4,419)
(17,545)
578,885
364,504
109,734
97,468
(19,397)
48,540
(21,964)
161,115
740,000
563
365,067
52,390
162,124
31,815
129,283
72,971
53,574
-
48,540
3,376
(18,588)
(21,786)
(41,059)
(14,853)
(10,042)
-
-
-
-
-
237
-
-
-
-
-
-
-
-
662,302
797,920
777,421
4,812
2,242,455
$
$
355,025
181,740
247,630
2,170
786,565 (3) $
162,124
134,270
181,560
3,123
481,077 $
129,520
82,608
91,040
34
303,202 (4) $
53,574
40,916
46,725
2,237
48,540
157,135
134,967
(1,132)
143,452 $ 339,510 $
(11,981)
(41,059)
(14,853)
(86,481)
201,251
75,499
(1,620)
188,649 (5)
$ 16,703,757
1,740,459
20,446,487
$ 7,070,026
536,393
7,130,240
$
4,176,894 $ 3,102,983
7,747
3,748,303
113,536
4,150,140
$
746,498 $
3,589
1,226,084
- $ 1,607,356
572,385
3,684,911
506,809
506,809
178
VORNADO REALTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
26. Segment Information – continued
(Amounts in thousands)
For the Year Ended December 31, 2010
New York Washington, DC Properties
256,654
$
9,401
536,947 $
6,089
944,322
51,385
$
Retail
Merchandise
Mart
Property rentals
Straight-line rent adjustments
Amortization of acquired below-
market leases, net
Total rentals
Tenant expense reimbursements
Fee and other income:
BMS cleaning fees
Signage revenue
Management and leasing fees
Lease termination fees
Other income
Total revenues
Operating expenses
Depreciation and amortization
General and administrative
Impairment losses, acquisition related
costs and tenant buy-outs
Total expenses
Operating income (loss)
Income applicable to Toys
Income (loss) from partially owned
entities
(Loss) from Real Estate Fund
Interest and other investment
income, net
Interest and debt expense
Net gain (loss) on extinguishment
of debt
Net gain on disposition of wholly
owned and partially owned assets
Income (loss) before income taxes
Income tax (expense) benefit
Income (loss) from continuing
operations
Income (loss) from discontinued
operations
Net income (loss)
Less net (income) loss attributable to
noncontrolling interests in:
Consolidated subsidiaries
Operating Partnership
Preferred unit distributions
of the Operating Partnership
Net income (loss) attributable to
Vornado
Interest and debt expense(2)
Depreciation and amortization(2)
Income tax (benefit) expense(2)
EBITDA(1)
Balance Sheet Data:
Real estate at cost
Investments in partially owned entities
Total assets
See notes on the following page.
$
Total
1,957,130
70,972
65,373
2,093,475
317,777
58,053
18,618
21,686
14,818
33,780
2,558,207
983,424
494,898
211,399
109,458
1,799,179
759,028
71,624
20,869
(303)
44,879
1,040,586
159,369
84,945
18,618
4,427
7,470
6,051
1,321,466
556,270
212,903
25,560
1,605
796,338
525,128
-
13,317
-
2,453
545,489
49,792
-
-
15,934
1,148
20,594
632,957
202,569
136,391
25,454
-
364,414
268,543
-
(564)
-
12,384
278,439
93,032
-
-
1,820
4,441
927
378,659
141,116
71,556
27,676
70,895
311,243
67,416
-
8,220
-
235,267
(539,370)
4,237
(145,406)
154
(125,272)
164
(63,265)
94,789
81,432
723,336
(22,137)
-
-
397,276
(2,167)
-
105,571
54,742
197,603
(1,679)
-
118,106
(37)
Toys
Other
$
132,120 $
301
- $
-
87,087
3,796
-
132,421
5,274
-
-
156
459
3,068
141,378
65,842
28,416
24,199
-
118,457
22,921
-
(179)
-
3
(31,208)
-
765
(7,698)
29
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
71,624
-
-
-
-
-
-
71,624
-
5,657
96,540
10,310
(26,892)
-
(651)
1,300
3,140
83,747
17,627
45,632
108,510
36,958
208,727
(124,980)
-
75
(303)
230,709
(174,219)
(10,782)
25,925
(53,575)
(18,283)
701,199
395,109
195,924
118,069
(7,669)
71,624
(71,858)
6,832
708,031
168
395,277
4,143
200,067
19,061
137,130
(20,948)
(28,617)
-
71,624
4,408
(67,450)
(4,920)
(44,033)
(11,195)
(9,559)
-
-
-
-
-
(778)
-
-
-
-
-
-
-
-
5,417
(44,033)
(11,195)
647,883
828,082
729,426
(23,036)
2,182,355
$
$
385,718
158,249
218,766
1,311
764,044 (3) $
200,067
136,174
159,283
2,027
497,551 $
136,352
79,545
86,629
37
302,563 (4) $
(28,617)
61,379
51,064
232
71,624
177,272
131,284
(45,418)
84,058 $ 334,762 $
(117,261)
215,463
82,400
18,775
199,377 (5)
$ 16,454,967
1,375,006
20,517,471
$ 6,999,784
273,536
6,611,632
$
4,040,491 $ 3,076,114
6,251
3,591,244
149,295
3,872,209
$
741,188 $
4,183
1,435,714
- $ 1,597,390
494,407
4,559,338
447,334
447,334
179
VORNADO REALTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
26. 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 (benefit) in the reconciliation of net income
(loss) to EBITDA includes our share of these items from partially owned entities.
(3) The elements of "New York" EBITDA are summarized below.
(Amounts in thousands)
Office
Retail
Alexander's
Hotel Pennsylvania
Total New York
For the Year Ended December 31,
2011
2012
2010
$
$
568,518
189,484
231,402
28,455
1,017,859
$
$
539,734
163,033
53,663
30,135
786,565
$
$
510,187
180,225
49,869
23,763
764,044
(4) The elements of "Retail Properties" EBITDA are summarized below.
(Amounts in thousands)
Strip shopping centers
Regional malls
Total Retail properties
For the Year Ended December 31,
2011
2012
2010
$
$
172,708
27,818
200,526
$
$
210,022
93,180
303,202
$
$
180,323
122,240
302,563
180
VORNADO REALTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
26. Segment Information - continued
Notes to preceding tabular information:
(5) The elements of "other" EBITDA from continuing operations are summarized below.
(Amounts in thousands)
Our share of Real Estate Fund:
Income before net realized/unrealized gains
Net unrealized gains
Net realized gains
Carried interest
Total
LNR (acquired in July 2010)
555 California Street
Lexington
Other investments
Corporate general and administrative expenses(a)
Investment income and other, net(a)
Fee income from Alexander's (including a $6,423 sales commission in 2012)
Non-cash impairment loss on J.C. Penney owned shares
(Loss) income from the mark-to-market of J.C. Penney derivative position
Purchase price fair value adjustment and accelerated amortization of
discount on investment in subordinated debt of Independence Plaza
Net gain resulting from Lexington's stock issuance and asset acquisition
Acquisition related costs and impairment losses
Verde Realty impairment loss
Our share of impairment losses of partially owned entities
Net gain on sale of residential condominiums
Mezzanine loans loss reversal and net gain on disposition
Net gain from Suffolk Downs' sale of a partial interest
Real Estate Fund placement fees
Net loss on extinguishment of debt
Net income attributable to noncontrolling interests in the Operating Partnership
Preferred unit distributions of the Operating Partnership
For the Year Ended December 31,
2011
2012
2010
$
4,926 $
13,840
-
5,838
24,604
79,520
46,167
32,595
29,266
212,152
(90,567)
35,397
13,748
(224,937)
(75,815)
105,366
28,763
(17,386)
(4,936)
(4,318)
1,274
-
-
-
-
(35,327)
(9,936)
(66,522) $
$
4,205 $
2,999
1,348
736
9,288
47,614
44,724
34,779
33,529
169,934
(85,922)
52,405
7,417
-
12,984
-
9,760
(5,925)
-
(13,794)
5,884
82,744
12,525
(3,451)
-
(41,059)
(14,853)
188,649 $
503
-
-
-
503
6,116
46,782
41,594
30,463
125,458
(90,343)
65,499
7,556
-
130,153
-
13,710
(36,958)
-
-
3,149
53,100
-
(5,937)
(10,782)
(44,033)
(11,195)
199,377
(a) The amounts in these captions (for this table only) exclude the mark-to-market of our deferred compensation plan assets
and offsetting liability.
181
ITEM 9.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
None.
ITEM 9A. CONTROLS AND PROCEDURES
Disclosure Controls and Procedures: Our management, with the participation of our Chief Executive Officer and Chief Financial
Officer, has evaluated the effectiveness of our 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 annual report on Form 10-K. Based on such
evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of such period, our disclosure
controls and procedures are effective.
Internal Control Over Financial Reporting: There have not been any changes in our internal control over financial reporting (as
defined in Rule 13a-15(f) under the Securities and Exchange Act of 1934, as amended) during the fourth quarter of the fiscal year to
which this report relates that have materially affected, or are reasonably likely to materially affect, our internal control over financial
reporting.
MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
Management of Vornado Realty Trust, together with its consolidated subsidiaries (the “Company”), is responsible for establishing
and maintaining adequate internal control over financial reporting. Our internal control over financial reporting is a process designed
under the supervision of our principal executive and principal financial officers to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of our financial statements for external reporting purposes in accordance with
accounting principles generally accepted in the United States of America.
As of December 31, 2012, management conducted an assessment of the effectiveness of our internal control over financial
reporting based on the framework established in Internal Control – Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission. Based on this assessment, management has determined that our internal control over
financial reporting as of December 31, 2012 was effective.
Our internal control over financial reporting includes policies and procedures that pertain to the maintenance of records that, in
reasonable detail, accurately and fairly reflect transactions and dispositions of assets; provide reasonable assurances that transactions
are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles in
the United States, and that receipts and expenditures are being made only in accordance with authorizations of management and our
trustees; and provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of
our assets that could have a material effect on our financial statements.
The effectiveness of our internal control over financial reporting as of December 31, 2012 has been audited by Deloitte & Touche
LLP, an independent registered public accounting firm, as stated in their report appearing on page 183, which expresses an unqualified
opinion on the effectiveness of our internal control over financial reporting as of December 31, 2012.
182
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Shareholders and Board of Trustees
Vornado Realty Trust
New York, New York
We have audited the internal control over financial reporting of Vornado Realty Trust, together with its consolidated subsidiaries (the
“Company”) as of December 31, 2012, based on criteria established in Internal Control—Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission. The Company’s management is responsible for maintaining
effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial
reporting, included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to
express an opinion on the Company’s internal control over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over
financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over
financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of
internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances.
We believe that our audit provides a reasonable basis for our opinion.
A company’s internal control over financial reporting is a process designed by, or under the supervision of, the company’s principal
executive and principal financial officers, or persons performing similar functions, and effected by the company’s board of trustees,
management, and other personnel 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. A company’s internal control
over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that
transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting
principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management
and trustees of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper
management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis.
Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to
the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies
or procedures may deteriorate.
In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31,
2012, based on the criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the
consolidated financial statements and financial statement schedules as of and for the year ended December 31, 2012 of the Company
and our report dated February 26, 2013 expressed an unqualified opinion on those financial statements and financial statement
schedules.
/s/ DELOITTE & TOUCHE LLP
Parsippany, New Jersey
February 26, 2013
183
ITEM 9B. OTHER INFORMATION
None.
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Information relating to trustees of the Registrant, including its audit committee and audit committee financial expert, will be
contained in a definitive Proxy Statement involving the election of trustees under the caption “Election of Trustees” which the
Registrant will file with the Securities and Exchange Commission pursuant to Regulation 14A under the Securities Exchange Act of
1934 not later than 120 days after December 31, 2012, and such information is incorporated herein by reference. Also incorporated
herein by reference is the information under the caption “16(a) Beneficial Ownership Reporting Compliance” of the Proxy Statement.
The following is a list of the names, ages, principal occupations and positions with Vornado of the executive officers of Vornado
and the positions held by such officers during the past five years. All executive officers of Vornado have terms of office that run until
the next succeeding meeting of the Board of Trustees of Vornado following the Annual Meeting of Shareholders unless they are
removed sooner by the Board.
Name
Steven Roth
Age
71
Michael D. Fascitelli
56
Michael J. Franco
44
PRINCIPAL OCCUPATION, POSITION AND OFFICE
(Current and during past five years with Vornado unless otherwise stated)
Chairman of the Board; Chief Executive Officer from May 1989 to May 2009; Managing General
Partner of Interstate Properties, an owner of shopping centers and an investor in securities and
partnerships; Chief Executive Officer of Alexander’s, Inc. since March 1995, a Director since 1989,
and Chairman since May 2004.
Chief Executive Officer since May 2009; President and a Trustee since December 1996; President of
Alexander’s Inc. since August 2000 and Director since December 1996; Partner at Goldman, Sachs &
Co. in charge of its real estate practice from December 1992 to December 1996; and Vice President at
Goldman, Sachs & Co., prior to December 1992.
Executive Vice President - Co-Head of Acquisitions and Capital Markets since November 2010;
Managing Director (2003-2010) and Executive Director (2001-2003) of the Real Estate Investing
Group of Morgan Stanley.
David R. Greenbaum
61
President of the New York Division since April 1997 (date of our acquisition); President of Mendik
Realty (the predecessor to the New York Office division) from 1990 until April 1997.
Joseph Macnow
67
Mitchell N. Schear
Wendy Silverstein
54
52
Executive Vice President - Finance and Administration since January 1998 and Chief Financial
Officer since March 2001; Vice President and Chief Financial Officer of the Company from 1985 to
January 1998; Executive Vice President and Chief Financial Officer of Alexander's Inc. since August
1995.
President of Vornado/Charles E. Smith L.P. (our Washington, DC division) since April 2003;
President of the Kaempfer Company from 1998 to April 2003 (date acquired by us).
Executive Vice President - Co-Head of Acquisitions and Capital Markets since November 2010;
Executive Vice President of Capital Markets since 1998; Senior Credit Officer of Citicorp Real Estate
and Citibank, N.A. from 1986 to 1998.
The Registrant has adopted a Code of Business Conduct and Ethics that applies to, among others, Michael Fascitelli, its principal
executive officer, and Joseph Macnow, its principal financial and accounting officer. This Code is available on our website at
www.vno.com.
184
ITEM 11. EXECUTIVE COMPENSATION
Information relating to executive officer and director compensation will be contained in the Proxy Statement referred to above in
Item 10, “Directors, Executive Officers and Corporate Governance,” under the caption “Executive Compensation” and such
information is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
STOCKHOLDER MATTERS
Information relating to security ownership of certain beneficial owners and management will be contained in the Proxy Statement
referred to in Item 10, “Directors, Executive Officers and Corporate Governance,” under the caption “Principal Security Holders” and
such information is incorporated herein by reference.
Equity compensation plan information
The following table provides information as of December 31, 2012 regarding our equity compensation plans.
Number of securities to be
issued upon exercise of
outstanding options,
warrants and rights
Weighted-average
exercise price of
outstanding options,
warrants and rights
Number of securities remaining
available for future issuance
under equity compensation plans
(excluding securities reflected in
the second column)
4,625,981 (1)
-
4,625,981
$
$
67.16
-
67.16
5,136,249 (2)
-
5,136,249
Plan Category
Equity compensation plans approved
by security holders
Equity compensation awards not
approved by security holders
Total
___________________________
(1)
Includes an aggregate of 1,265,909 shares/units, comprised of (i) 48,020 restricted common shares, (ii) 832,425 restricted Operating Partnership units and (iii)
385,464 Out-Performance Plan units, which do not have an exercise price.
(2)
Based on awards being granted as "Full Value Awards," as defined. If we were to grant "Not Full Value Awards," as defined, the number of securities available
for future grants would be 10,272,498.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
Information relating to certain relationships and related transactions will be contained in the Proxy Statement referred to in Item
10, “Directors, Executive Officers and Corporate Governance,” under the caption “Certain Relationships and Related Transactions”
and such information is incorporated herein by reference.
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
Information relating to Principal Accounting fees and services will be contained in the Proxy Statement referred to in Item 10,
“Directors, Executive Officers and Corporate Governance,” under the caption “Ratification of Selection of Independent Auditors” and
such information is incorporated herein by reference.
185
ITEM 15.
EXHIBITS, FINANCIAL STATEMENT SCHEDULES
(a) The following documents are filed as part of this report:
PART IV
1. The consolidated financial statements are set forth in Item 8 of this Annual Report on Form 10-K.
The following financial statement schedules should be read in conjunction with the financial statements included in Item 8 of this
Annual Report on Form 10-K.
II--Valuation and Qualifying Accounts--years ended December 31, 2012, 2011 and 2010
III--Real Estate and Accumulated Depreciation as of December 31, 2012
Pages in this
Annual Report
on Form 10-K
188
189
Schedules other than those listed above are omitted because they are not applicable or the information required is included in the
consolidated financial statements or the notes thereto.
The following exhibits listed on the Exhibit Index, which is incorporated herein by reference, are filed with this Annual Report on
Form 10-K.
Exhibit No.
10.45
12
21
23
31.1
31.2
32.1
32.2
101.INS
101.SCH
101.CAL
101.DEF
101.LAB
101.PRE
Form of Vornado Realty Trust 2012 Outperformance Plan Award Agreement
Computation of Ratios
Subsidiaries of Registrant
Consent of Independent Registered Public Accounting Firm
Rule 13a-14 (a) Certification of Chief Executive Officer
Rule 13a-14 (a) Certification of Chief Financial Officer
Section 1350 Certification of the Chief Executive Officer
Section 1350 Certification of the Chief Financial Officer
XBRL Instance Document
XBRL Taxonomy Extension Schema
XBRL Taxonomy Extension Calculation Linkbase
XBRL Taxonomy Extension Definition Linkbase
XBRL Taxonomy Extension Label Linkbase
XBRL Taxonomy Extension Presentation Linkbase
186
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.
SIGNATURES
VORNADO REALTY TRUST
(Registrant)
Date: February 26, 2013
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)
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons
on behalf of the Registrant and in the capacities and on the dates indicated:
Signature
By:
/s/Steven Roth
(Steven Roth)
Title
Date
Chairman of the Board of Trustees
February 26, 2013
By:
/s/Michael D. Fascitelli
(Michael D. Fascitelli)
President and Chief Executive Officer
(Principal Executive Officer)
By:
/s/Candace K. Beinecke
(Candace K. Beinecke)
Trustee
By:
/s/Robert P. Kogod
(Robert P. Kogod)
By:
/s/Michael Lynne
(Michael Lynne)
Trustee
Trustee
By:
/s/David Mandelbaum
(David Mandelbaum)
Trustee
By:
/s/Ronald G. Targan
(Ronald G. Targan)
Trustee
By:
/s/Daniel R. Tisch
(Daniel R. Tisch)
By:
/s/Richard R. West
(Richard R. West)
Trustee
Trustee
By:
/s/Russell B. Wight
(Russell B. Wight, Jr.)
Trustee
February 26, 2013
February 26, 2013
February 26, 2013
February 26, 2013
February 26, 2013
February 26, 2013
February 26, 2013
February 26, 2013
February 26, 2013
By:
/s/Joseph Macnow
(Joseph Macnow)
Executive Vice President — Finance and
February 26, 2013
Administration and Chief Financial Officer
(Principal Financial and Accounting Officer)
187
VORNADO REALTY TRUST
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
December 31, 2012
(Amounts in Thousands)
Column A
Column B
Column D
Column E
Column C
Additions
Charged
Against
Balance at
Beginning
of Year
Uncollectible
Accounts
Operations Written-off
Balance
at End
of Year
Description
Year Ended December 31, 2012:
Allowance for doubtful accounts
Year Ended December 31, 2011:
Allowance for doubtful accounts
Year Ended December 31, 2010:
Allowance for doubtful accounts
$
46,531
$
140,780
$
239,785
$
$
$
9,697
(56,995)
(23,893)
$
$
$
(15,389)
(37,254)
(75,112)
$
$
$
40,839
46,531
140,780
188
VORNADO REALTY TRUST
SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
(Amounts in thousands)
COLUMN A
COLUMN B
COLUMN C
COLUMN D
Initial cost to company (1)
COLUMN E
Gross amount at which
carried at close of period
Encumbrances
Land
Building
and
improvements
Costs
capitalized
subsequent
to acquisition
Buildings
and
improvements
Land
Total (2)
Description
New York
New York
COLUMN F
Accumulated
depreciation
and
COLUMN G COLUMN H COLUMN I
Life on which
depreciation
in latest
income
statement
is computed
Date
acquired
Date of
amortization construction (3)
$
Manhattan
1290 Avenue of the Americas
350 Park Avenue
666 Fifth Avenue (Retail Condo)
One Penn Plaza
100 West 33rd Street (Manhattan Mall)
1540 Broadway
Two Penn Plaza
Manhattan Mall
1535 Broadway (Marriott Marquis)
770 Broadway
90 Park Avenue
888 Seventh Avenue
Eleven Penn Plaza
909 Third Avenue
640 Fifth Avenue
1740 Broadway
150 East 58th Street
595 Madison Avenue
828-850 Madison Avenue
4 Union Square South
866 United Nations Plaza
510 Fifth Avenue
478-482 Broadway
20 Broad Street
40 Fulton Street
40 East 66th Street
155 Spring Street
689 Fifth Avenue
435 Seventh Avenue
692 Broadway
715 Lexington Avenue
677-679 Madison Avenue
484-486 Broadway
431 Seventh Avenue
330 West 34th Street
1135 Third Avenue
1540 Broadway Garage
148 Spring Street
150 Spring Street
950,000 $ 515,539 $
300,000
-
-
223,242
-
425,000
101,758
-
353,000
-
318,554
330,000
199,198
-
-
-
-
80,000
120,000
44,978
31,253
-
-
-
-
-
-
98,000
-
-
-
-
-
-
-
-
-
-
265,889
188,359
-
242,776
105,914
53,615
88,595
-
52,898
8,000
-
40,333
-
38,224
26,971
39,303
62,731
107,937
24,079
32,196
34,602
20,000
-
15,732
13,616
13,700
19,721
19,893
6,053
-
13,070
10,000
16,700
-
7,844
4,086
3,200
3,200
923,653 $
363,381
469,461
412,169
247,970
214,208
164,903
113,473
240,000
95,686
175,890
117,269
85,259
120,723
25,992
102,890
80,216
62,888
28,261
55,220
37,534
18,728
13,375
28,760
26,388
34,635
30,544
13,446
19,091
22,908
26,903
9,640
6,688
2,751
8,599
7,844
8,914
8,112
5,822
106,998 $ 515,539 $
1,030,651 $ 1,546,190 $
393,113
469,461
580,044
256,614
237,475
245,204
186,003
249,285
181,355
213,093
217,303
139,305
177,668
139,331
141,131
109,543
81,660
28,271
57,727
46,622
36,359
41,141
56,179
37,251
34,756
32,907
22,378
19,128
25,792
26,903
10,028
11,444
2,751
15,666
13,393
8,914
8,396
5,959
659,002
657,820
580,044
499,390
343,389
297,893
274,600
249,285
234,253
221,093
217,303
179,638
177,668
177,555
168,102
148,846
144,391
136,208
81,806
78,818
70,961
61,141
56,179
52,983
48,372
46,607
42,099
39,021
31,845
26,903
23,098
21,444
19,451
15,666
13,393
13,000
11,596
9,159
265,889
188,359
-
242,776
105,914
52,689
88,597
-
52,898
8,000
-
40,333
-
38,224
26,971
39,303
62,731
107,937
24,079
32,196
34,602
20,000
-
15,732
13,616
13,700
19,721
19,893
6,053
-
13,070
10,000
16,700
-
-
4,086
3,200
3,200
29,732
-
167,875
8,644
23,267
79,375
72,532
9,285
85,669
37,203
100,034
54,046
56,945
113,339
38,241
29,327
18,772
10
2,507
9,088
17,631
27,766
27,419
10,863
121
2,363
8,932
37
2,884
-
388
4,756
-
7,067
(2,295)
-
284
137
189
1963
1960
-
1972
1911
-
1968
2009
-
1907
1964
1980
1923
1969
1950
1950
1969
1968
-
1965/2004
1966
-
2009
1956
1987
-
-
1925
2002
1923
2009
155,820
59,956
997
209,069
37,742
22,664
109,603
31,710
-
65,263
84,188
82,773
55,524
55,447
57,145
51,424
41,540
26,006
5,418
12,152
19,111
1,764
4,395
17,293
12,384
6,067
4,772
7,658
4,995
4,591
5,174
1,632
1,122
395
5,165
-
1,461
946
703
2007
2006
2012
1998
2007
2006
1997
2007
2012
1998
1997
1998
1997
1999
1997
1997
1998
1999
2005
1993
1997
2010
2007
1998
1998
2005
2007
1998
1997
2005
2001
2006
2007
2007
1998
1997
2006
2008
2008
(4)
(4)
(4)
(4)
(4)
(4)
(4)
(4)
(4)
(4)
(4)
(4)
(4)
(4)
(4)
(4)
(4)
(4)
(4)
(4)
(4)
(4)
(4)
(4)
(4)
(4)
(4)
(4)
(4)
(4)
(4)
(4)
(4)
(4)
(4)
(4)
(4)
(4)
(4)
COLUMN A
COLUMN B
COLUMN C
VORNADO REALTY TRUST
SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
(Amounts in thousands)
COLUMN D
COLUMN E
Gross amount at which
carried at close of period
Initial cost to company (1)
Building
and
improvements
Land
Costs
capitalized
subsequent
to acquisition
Buildings
and
improvements
Land
Total (2)
amortization construction (3)
Encumbrances
- $
$
-
-
-
-
-
3,574,983
1,693 $
10,650
-
3,856
1,483
-
2,112,458
6,507 $
1,767
-
762
697
5,548
4,445,475
545 $
- $
(4,674)
5,513
18
33
75,473
1,228,150
6,859
-
3,856
1,483
36,096
2,134,302
8,745 $
884
5,513
780
730
44,925
5,651,781
8,745 $
7,743
5,513
4,636
2,213
81,021
7,786,083
-
112
-
304
279
6,611
1,271,375
COLUMN F
Accumulated
depreciation
and
Date of
COLUMN G COLUMN H COLUMN I
Life on which
depreciation
in latest
income
statement
is computed
(4)
(4)
(4)
(4)
(4)
Date
acquired
2011
2007
2012
1997
1997
-
-
1932
-
-
334,225
309,848
527,588
(10)
309,848
527,578
837,426
366
1974
2012
-
-
-
24,254
1,033
23,221
24,254
14,991
1967
1987
-
29,904
121,712
75,865
29,904
197,577
227,481
74,266
1919
1997
3,909,208
2,452,210
5,094,775
1,328,259
2,475,087
6,400,157
8,875,244
1,360,998
(4)
(4)
(4)
270,922
100,935
409,920
121,589
100,228
532,216
632,444
162,833
1984-1989
2002
(4)
73,939
57,213
131,206
192,915
57,070
324,264
381,334
77,865
1964-1969
2002
117,390
259,546
460,093
87,221
101,671
150,000
-
47,353
115,022
140,056
46,860
-
-
46,366
-
64,817
118,421
41,986
47,594
67,049
32,815
37,551
-
30,077
12,266
36,303
33,481
104,473
33,090
106,946
218,330
125,078
221,869
177,373
5,039
51,642
118,806
105,475
98,962
75,343
82,004
67,363
55
61,316
1,326
66,934
60,515
26,615
64,652
138,696
41,862
47,465
68,198
39,768
37,551
-
30,176
12,231
35,886
34,178
87,666
32,726
83,400
27,022
105,980
82,520
(13,719)
31,720
1,335
34,625
3,704
2,439
(10,212)
(5,311)
(21,224)
190
285,429
165,318
248,608
204,524
109,870
127,209
105,087
137,195
100,198
110,003
86,125
69,105
6,650
56,369
3,648
350,081
304,014
290,470
251,989
178,068
166,977
142,638
137,195
130,374
122,234
122,011
103,283
94,316
89,095
87,048
81,804
24,203
71,548
60,481
8,647
21,412
28,021
43,164
19,192
30,706
15,617
2,432
-
10,246
1,330
1974-1980
-
1973-1984
1983-1987
-
1975
1968
1988-1989
2004
1988
1963
-
-
1956
-
2002
2007
2002
2002
2007
2003
2002
2002
2005
2002
2007
2011
2007
2007
2007
(4)
(4)
(4)
(4)
(4)
(4)
(4)
(4)
(4)
(4)
(4)
(4)
(4)
(4)
(4)
(4)
Description
334 Canal Street
488 Eighth Avenue
608 Fifth Avenue
484 Eighth Avenue
825 Seventh Avenue
Other (Primarily Signage)
Total New York
Residential
Independence Plaza
New Jersey
Paramus
Other Properties
Hotel Pennsylvania
Total New York
Washington, DC
Washington, DC
2011-2451 Crystal Drive
2001 Jefferson Davis Highway,
2100/2200 Crystal Drive, 223 23rd
Street, 2221 South Clark Street, Crystal
City Shops at 2100, 220 20th Street
1550-1750 Crystal Drive/
241-251 18th Street
Riverhouse Apartments
Skyline Place (6 buildings)
1215, 1225 S. Clark Street/ 200, 201
12th Street S.
1229-1231 25th Street (West End 25)
2101 L Street
1800, 1851 and 1901 South Bell Street
2200 / 2300 Clarendon Blvd
Bowen Building - 875 15th Street, NW
One Skyline Tower
1875 Connecticut Ave, NW
1399 New York Avenue, NW
H Street - North 10-1D Land Parcel
1825 Connecticut Ave, NW
Warehouses
COLUMN A
COLUMN B
COLUMN C
COLUMN D
Initial cost to company (1)
COLUMN E
Gross amount at which
carried at close of period
VORNADO REALTY TRUST
SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
(Amounts in thousands)
Building
and
improvements
Costs
capitalized
subsequent
to acquisition
Buildings
and
improvements
Encumbrances
- $
$
-
104,808
-
28,728
-
14,853
-
-
-
-
-
-
-
Land
15,826 $
13,401
10,292
8,000
23,359
20,020
10,095
9,450
-
-
11,541
4,009
1,763
-
2,064,828 1,052,773
53,894 $
58,705
58,351
47,191
24,876
30,032
17,541
22,062
33,628
20,465
178
6,273
641
51,767
2,376,711
16,089 $
13,471
(2,859)
8,945
14,859
1,951
9,701
2,969
(732)
5,952
(207)
(2,410)
41
(48,216)
727,001
Land
15,826 $
13,363
10,262
8,000
24,723
21,170
10,687
9,455
-
-
11,597
-
1,763
-
1,038,599
69,983 $
72,214
55,522
56,136
38,371
30,833
26,650
25,026
32,896
26,417
(85)
7,872
682
3,551
3,117,886
85,809 $
85,577
65,784
64,136
63,094
52,003
37,337
34,481
32,896
26,417
11,512
7,872
2,445
3,551
4,156,485
COLUMN F
Accumulated
depreciation
and
Total (2)
amortization construction (3)
Date of
COLUMN G COLUMN H COLUMN I
Life on which
depreciation
in latest
income
statement
is computed
(4)
(4)
(4)
(4)
(4)
(4)
(4)
(4)
(4)
(4)
(4)
(4)
(4)
Date
acquired
2002
2002
2002
2004
2002
2002
2002
2006
2002
2004
2007
2005
2005
1981
1985-1989
2001
1968
1970
1964
1963
1964
1987
2004
Description
1235 S. Clark Street
Commerce Executive
Seven Skyline Place
Crystal City Hotel
1150 17th Street
1750 Pennsylvania Avenue
1730 M Street
1726 M Street
Democracy Plaza One
Crystal Drive Retail
1109 South Capitol Street
South Capitol
H Street
Other
Total Washington, DC
Retail Properties
California
Los Angeles (Beverly Connection)
San Jose
Walnut Creek (1149 S. Main St)
Pasadena
Signal Hill
Walnut Creek (1556 Mount Diablo Blvd)
San Bernadino (1522 E. Highland Ave)
Corona
Vallejo
San Bernadino (648 W. 4th St)
Mojave
Barstow
Colton (1904 North Rancho Avenue)
Moreno Valley
Rialto
Desert Hot Springs
Yucaipa
Riverside (5571 Mission Blvd)
Total California
Connecticut
Waterbury
Newington
Total Connecticut
Florida
-
104,856
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
104,856
72,996
42,836
2,699
-
9,652
5,909
1,651
-
-
1,597
-
856
1,239
639
434
197
663
209
141,577
14,226
11,437
25,663
667
2,421
3,088
131,510
104,262
19,930
18,337
2,940
-
1,810
3,073
2,945
1,119
2,250
1,367
954
1,156
1,173
1,355
426
704
295,311
4,504
1,200
5,704
24,412
990
-
2,248
1
1,304
(675)
-
-
(1,204)
-
(460)
-
8
(355)
-
-
-
26,269
4,853
872
5,725
72,996
42,836
2,699
-
9,652
5,908
1,329
-
-
889
-
679
1,239
639
338
197
663
209
140,273
667
2,421
3,088
155,922
105,252
19,930
20,585
2,941
1,305
1,457
3,073
2,945
623
2,250
1,084
954
1,164
914
1,355
426
704
322,884
9,357
2,072
11,429
228,918
148,088
22,629
20,585
12,593
7,213
2,786
3,073
2,945
1,512
2,250
1,763
2,193
1,803
1,252
1,552
1,089
913
463,157
10,024
4,493
14,517
2008
2008
1969
1965
2005
2010
2006
2007
2006
2007
2004
2004
2006
2004
2004
2004
2004
2004
2004
2004
2004
2004
1969
1965
(4)
(4)
(4)
(4)
(4)
(4)
(4)
(4)
(4)
(4)
(4)
(4)
(4)
(4)
(4)
(4)
(4)
(4)
(4)
(4)
Tampa (Hyde Park Village)
19,126
8,000
23,293
5,841
6,724
30,410
37,134
6,005
2005
(4)
191
17,726
22,476
14,530
11,232
12,148
8,454
9,054
4,290
13,558
9,130
-
-
126
11
782,236
22,556
6,568
3,577
2,862
459
11
307
647
457
132
473
229
201
243
193
285
90
148
39,438
6,041
821
6,862
COLUMN A
COLUMN B
COLUMN C
COLUMN D
Initial cost to company (1)
COLUMN E
Gross amount at which
carried at close of period
VORNADO REALTY TRUST
SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
(Amounts in thousands)
Encumbrances
Land
Building
and
improvements
Costs
capitalized
subsequent
to acquisition
Buildings
and
improvements
Land
Total (2)
COLUMN F
Accumulated
depreciation
and
COLUMN G COLUMN H COLUMN I
Life on which
depreciation
in latest
income
statement
is computed
Date
acquired
Date of
amortization construction (3)
Description
Illinois
Lansing
Iowa
Dubuque
Maryland
Rockville
Baltimore (Towson)
Annapolis
Wheaton
Total Maryland
Massachusetts
Springfield
Chicopee
Cambridge
Total Massachusetts
Michigan
Roseville
Battle Creek
Midland
Total Michigan
New Hampshire
Salem
New Jersey
$
- $
2,135 $
1,064 $
71 $
2,135 $
1,135 $
3,270 $
175
-
-
1,479
-
-
1,479
1,479
230
-
15,900
-
-
15,900
5,830
8,452
-
14,282
-
-
-
-
3,470
581
-
-
4,051
2,797
895
-
3,692
30
1,264
-
1,294
20,599
3,227
9,652
5,367
38,845
2,471
-
-
2,471
6,128
2,144
133
8,405
100
10,109
-
-
10,209
592
-
260
852
1,461
(2,443)
86
(896)
3,470
581
-
-
4,051
2,797
895
-
3,692
30
264
-
294
20,699
13,336
9,652
5,367
49,054
3,063
-
260
3,323
7,589
701
219
8,509
24,169
13,917
9,652
5,367
53,105
5,860
895
260
7,015
7,619
965
219
8,803
4,032
4,781
2,454
839
12,106
849
-
121
970
2,005
109
92
2,206
1968
1993
1969
-
6,083
-
-
6,083
-
6,083
-
2006
2006
2005
1968
2005
2006
1966
1969
2005
2006
2006
2006
Paramus (Bergen Town Center)
North Bergen (Tonnelle Ave)
Union (Springfield Avenue)
East Rutherford
Wayne Towne Center
East Hanover I and II
Garfield
Lodi (Washington Street)
Englewood
Bricktown
North Plainfield
Hazlet
Totowa
Carlstadt
282,312
75,000
29,010
13,836
-
43,571
-
8,940
11,924
32,525
-
-
25,217
-
19,884
24,493
19,700
-
-
2,232
45
7,606
2,300
1,391
500
7,400
120
-
81,723
-
45,090
36,727
26,137
18,241
8,068
13,125
17,245
11,179
13,983
9,413
11,994
16,457
370,825
64,346
-
60
6,190
10,563
21,646
313
(6,827)
6,175
2,696
-
4,561
12
37,635
31,806
19,700
-
-
2,671
45
7,606
1,495
1,391
500
7,400
120
-
434,797
57,033
45,090
36,787
32,327
28,365
29,714
13,438
11,223
17,354
16,679
9,413
16,555
16,469
472,432
88,839
64,790
36,787
32,327
31,036
29,759
21,044
12,718
18,745
17,179
16,813
16,675
16,469
55,752
6,070
6,294
3,880
1,519
14,016
3,942
2,680
1,568
10,987
12,719
1,314
11,897
2,133
1957/2009
2009
2007
1962
2009
1968
1955
1957/1999
2003
2006
2007
2007
2010
1962/1998
1998
2004
2007
1968
1989
2007
1957
2007
192
(4)
(4)
(4)
(4)
(4)
(4)
(4)
(4)
(4)
(4)
(4)
(4)
(4)
(4)
(4)
(4)
(4)
(4)
(4)
(4)
(4)
(4)
(4)
(4)
(4)
(4)
COLUMN A
COLUMN B
COLUMN C
COLUMN D
Initial cost to company (1)
COLUMN E
Gross amount at which
carried at close of period
VORNADO REALTY TRUST
SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
(Amounts in thousands)
Building
and
improvements
Land
Costs
capitalized
subsequent
to acquisition
Buildings
and
improvements
Land
Total (2)
amortization construction (3)
COLUMN F
Accumulated
depreciation
and
Description
East Brunswick II (339-341 Route 18 S.) $
Marlton
Manalapan
Union (Route 22 and Morris Ave)
Hackensack
Cherry Hill
South Plainfield
Watchung
Dover
Lodi (Route 17 N.)
East Brunswick I (325-333 Route 18 S.)
Jersey City
Morris Plains
Middletown
Woodbridge
Delran
Lawnside
Kearny
Bordentown
North Bergen (Kennedy Blvd)
Montclair
Encumbrances
11,995 $
17,574
21,423
32,916
41,283
14,115
5,216
15,342
13,389
11,548
25,328
20,642
21,758
17,685
21,033
-
10,879
-
-
5,188
2,678
832,327
2,098 $
1,611
725
3,025
692
5,864
-
4,178
559
238
319
652
1,104
283
1,509
756
851
309
498
2,308
66
113,316
Total New Jersey
New York
Bronx (Bruckner Blvd)
Hicksville (Broadway Mall)
Poughkeepsie
Huntington
Mt. Kisco
Bronx (1750-1780 Gun Hill Road)
Staten Island
Inwood
Queens (99-01 Queens Blvd)
West Babylon
Buffalo (Amherst)
Freeport (437 E. Sunrise Highway)
Dewitt
Oceanside
-
85,180
-
16,960
28,637
-
16,939
-
-
-
-
21,758
-
-
66,100
126,324
12,733
21,200
22,700
6,427
11,446
12,419
7,839
6,720
5,743
1,231
-
2,710
10,949 $
3,464
7,189
7,470
10,219
2,694
10,044
5,463
6,363
9,446
6,220
7,495
6,411
5,248
2,675
4,468
3,164
3,376
3,176
636
419
425,971
259,503
48,904
12,026
33,667
26,700
11,885
21,262
19,097
20,392
13,786
4,056
4,747
7,116
2,306
2,888 $
10,122
5,620
2,469
1,687
3,637
1,469
1,545
2,986
-
2,764
468
952
1,951
1,779
734
1,220
1,211
1,178
48
381
525,669
2,098 $
1,611
1,046
3,025
692
4,864
-
4,441
559
238
319
652
1,104
283
1,539
756
851
309
713
2,308
66
137,843
512
(65,818)
17,142
191
416
18,541
787
519
2,099
69
8,520
1,419
-
-
66,100
75,179
8,469
21,200
23,297
6,428
11,446
12,419
7,839
6,720
5,107
1,231
-
2,710
13,837 $
13,586
12,488
9,939
11,906
7,331
11,513
6,745
9,349
9,446
8,984
7,963
7,363
7,199
4,424
5,202
4,384
4,587
4,139
684
800
927,113
15,935 $
15,197
13,534
12,964
12,598
12,195
11,513
11,186
9,908
9,684
9,303
8,615
8,467
7,482
5,963
5,958
5,235
4,896
4,852
2,992
866
1,064,956
260,015
34,231
33,432
33,858
26,519
30,425
22,049
19,616
22,491
13,855
13,212
6,166
7,116
2,306
326,115
109,410
41,901
55,058
49,816
36,853
33,495
32,035
30,330
20,575
18,319
7,397
7,116
5,016
8,536
7,220
8,124
4,815
8,971
4,050
1,438
3,665
6,057
3,127
8,777
2,428
6,620
5,254
2,496
5,152
4,099
3,392
4,022
428
674
234,116
38,965
6,007
4,506
4,375
3,351
3,165
4,921
3,881
4,925
2,003
4,718
5,029
1,101
322
193
Date of
1972
1973
1971
1962
1963
1964
COLUMN G COLUMN H COLUMN I
Life on which
depreciation
in latest
income
statement
is computed
(4)
(4)
(4)
(4)
(4)
(4)
(4)
(4)
(4)
(4)
(4)
(4)
(4)
(4)
(4)
(4)
(4)
(4)
(4)
(4)
(4)
Date
acquired
1972
1973
1971
1962
1963
1964
2007
1959
1964
1975
1957
1965
1985
1963
1959
1972
1969
1959
1958
1959
1972
1994
1964
1999
1957
1965
1961
1963
1959
1972
1969
1938
1958
1993
1972
2009
2009
1968
1981
2007
2005
2005
2007
2007
2005
2004
2004
2004
2007
1968
1981
2006
2007
(4)
(4)
(4)
(4)
(4)
(4)
(4)
(4)
(4)
(4)
(4)
(4)
(4)
(4)
COLUMN A
COLUMN B
COLUMN C
COLUMN D
Initial cost to company (1)
COLUMN E
Gross amount at which
carried at close of period
VORNADO REALTY TRUST
SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
(Amounts in thousands)
Description
Albany (Menands)
Rochester
Freeport (240 West Sunrise Highway)
Commack
New Hyde Park
Total New York
Encumbrances
- $
$
4,463
-
-
-
173,937
Building
and
improvements
Land
460 $
2,172
-
-
-
306,224
2,091 $
-
-
43
4
487,585
Costs
capitalized
subsequent
to acquisition
Buildings
and
improvements
Land
Total (2)
2,340 $
-
260
207
-
(12,796)
460 $
2,172
-
-
-
250,777
4,431 $
-
260
250
4
530,236
4,891 $
2,172
260
250
4
781,013
COLUMN F
Accumulated
depreciation
and
amortization construction (3)
Date of
COLUMN G COLUMN H COLUMN I
Life on which
depreciation
in latest
income
statement
is computed
(4)
(4)
(4)
(4)
(4)
Date
acquired
1965
1966
2005
2006
1976
1965
1966
1970
3,476
-
106
6
4
90,861
3,408
12,569
3,212
5,485
3,704
2,832
422
1,941
-
33,573
568
373
491
543
2,484
3,027
1957
1972/1999
1966
1970
1966
1966
1975
2007
1957
1972
1966
1970
1966
1966
1975
2005
2006
2006
2006
2006
2005
2006
2006
(4)
(4)
(4)
(4)
(4)
(4)
(4)
(4)
(4)
(4)
(4)
(4)
(4)
(4)
(4)
(4)
20,201
30,517
15,147
5,691
5,300
10,879
5,495
6,974
-
100,204
6,053
187
2,727
827
409
850
3,140
850
-
15,043
26,646
15,580
6,698
5,200
2,568
2,171
63
1,820
-
60,746
-
-
3,634
-
1,521
2,386
375
479
1,840
513
1,772
1,425
564
568
80
7,616
-
-
6,053
187
2,727
839
409
850
3,140
850
-
15,055
27,021
16,059
8,538
5,701
4,340
3,596
627
2,388
80
68,350
33,074
16,246
11,265
6,540
4,749
4,446
3,767
3,238
80
83,405
-
3,634
3,634
1,521
2,386
3,907
-
-
-
-
-
458
33
-
491
491
49,516
-
49,516
265,964
3,927
269,891
(58,248)
15
(58,233)
849
-
849
256,383
3,942
260,325
257,232
3,942
261,174
-
7,830
27,490
2,478
7,830
29,968
37,798
4,961
-
-
174
102
-
276
276
79
194
Pennsylvania
Wilkes-Barre
Allentown
Bensalem
Bethlehem
York
Broomall
Lancaster
Glenolden
Springfield
Total Pennsylvania
South Carolina
Charleston
Tennessee
Antioch
Texas
Texarkana
Virginia
Springfield (Springfield Mall)
Norfolk
Total Virginia
Washington, DC
3040 M Street
Wisconsin
Fond Du Lac
Description
Puerto Rico
Las Catalinas
Montehiedra
Total Puerto Rico
Other
Merchandise Mart
Illinois
Merchandise Mart, Chicago
527 W. Kinzie, Chicago
Total Illinois
New York
7 West 34th Street
MMPI Piers
Total New York
Ohio
Cleveland Medical Mart
COLUMN A
COLUMN B
COLUMN C
COLUMN D
Initial cost to company (1)
COLUMN E
Gross amount at which
carried at close of period
VORNADO REALTY TRUST
SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
(Amounts in thousands)
Encumbrances
Land
Building
and
improvements
Costs
capitalized
subsequent
to acquisition
Buildings
and
improvements
Land
Total (2)
COLUMN F
Accumulated
depreciation
and
COLUMN G COLUMN H COLUMN I
Life on which
depreciation
in latest
income
statement
is computed
Date
acquired
Date of
amortization construction (3)
$
54,101 $
120,000
174,101
15,280 $
9,182
24,462
64,370 $
66,751
131,121
8,916 $
5,830
14,746
15,281 $
9,267
24,548
73,285 $
72,496
145,781
88,566 $
81,763
170,329
26,746
27,961
54,707
1996
1996
2002
1997
-
-
-
5,345
-
5,345
5,345
374
(4)
(4)
(4)
Total Retail Properties
1,460,396
687,832
1,786,028
533,031
604,763
2,402,128
3,006,891
491,122
550,000
-
550,000
64,528
5,166
69,694
34,614
-
34,614
-
-
-
-
319,146
-
319,146
94,167
-
94,167
199,701
-
199,701
34,101
10,826
44,927
64,535
5,166
69,701
34,614
-
34,614
518,840
-
518,840
128,268
10,826
139,094
583,375
5,166
588,541
162,882
10,826
173,708
168,346
-
168,346
36,573
525
37,098
1930
1998
(4)
1901
2000
2008
(4)
(4)
-
-
167
-
167
167
-
2009
(4)
Total Merchandise Mart
550,000
104,308
413,313
244,795
104,315
658,101
762,416
205,444
Warehouse/Industrial
New Jersey
East Hanover
Total Warehouse/Industrial
Other
555 California Street
220 Central Park South
Borgata Land, Atlantic City, NJ
40 East 66th Residential
677-679 Madison
Other
Total Other
Leasehold Improvements
Equipment and Other
Total December 31, 2012
-
-
576
576
7,752
7,752
9,030
9,030
691
691
16,667
16,667
17,358
17,358
13,785
13,785
1972
1972
(4)
600,000
123,750
60,000
-
-
-
783,750
221,903
115,720
83,089
29,199
1,462
28,052
479,425
893,324
16,420
7
85,798
1,058
-
996,607
47,495
122,145
(4)
(77,582)
284
(16,769)
75,569
221,903
-
83,089
14,541
1,626
9,364
330,523
940,819
254,285
3
22,874
1,178
1,919
1,221,078
1,162,722
254,285
83,092
37,415
2,804
11,283
1,551,601
-
-
-
125,364
-
125,364
125,364
$
8,768,182 $ 4,777,124 $
10,675,186 $
3,043,049 $ 4,553,978 $
13,941,381 $ 18,495,359 $
2007
2005
2010
2005
2006
2005
(4)
(4)
(4)
(4)
(4)
(4)
142,842 1922/1969/1970
-
-
3,745
243
3
146,833
96,656
3,097,074
195
VORNADO REALTY TRUST
SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
Notes:
(1)
(2)
(3)
(4)
Initial cost is cost as of January 30, 1982 (the date on which Vornado commenced real estate operations)
unless acquired subsequent to that date see Column H.
The net basis of the Company’s assets and liabilities for tax purposes is approximately $3.8 billion lower
than the amount reported for financial statement purposes.
Date of original construction –– many properties have had substantial renovation or additional construction
–– see Column D.
Depreciation of the buildings and improvements are calculated over lives ranging from the life of the lease
to forty years.
196
VORNADO REALTY TRUST
SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
(AMOUNTS IN THOUSANDS)
The following is a reconciliation of real estate assets and accumulated depreciation:
Year Ended December 31,
2011
2010
2012
$ 16,703,757 $ 16,454,967 $ 16,344,244
514,950
1,615,077
18,833,784
338,425
347,345
324,114
17,015,703
560,736
$ 18,495,359 $ 16,703,757 $ 16,454,967
33,481
315,762
16,804,210
100,453
$
$
2,894,374 $
427,189
3,321,563
224,489
3,097,074 $
2,530,945 $
452,793
2,983,738
89,364
2,894,374 $
2,228,425
428,788
2,657,213
126,268
2,530,945
Real Estate
Balance at beginning of period
Additions during the period:
Land
Buildings & improvements
Less: Assets sold and written-off
Balance at end of period
Accumulated Depreciation
Balance at beginning of period
Additions charged to operating expenses
Less: Accumulated depreciation on assets sold and written-off
Balance at end of period
197
EXHIBIT INDEX
Exhibit No.
3.1
3.2
- 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
- Amended and Restated Bylaws of Vornado Realty Trust, as amended on March 2, 2000 -
Incorporated by reference to Exhibit 3.12 to Vornado Realty Trust’s Annual Report on
Form 10-K for the year ended December 31, 1999 (File No. 001-11954), filed on
March 9, 2000
3.3
- Articles Supplementary, 6.875% Series J Cumulative Redeemable Preferred Shares of
Beneficial Interest, liquidation preference $25.00 per share, no par value - Incorporated by
reference to Exhibit 3.2 of Vornado Realty Trust's Registration Statement on Form 8-A
(File No. 001-11954), filed on April 20, 2011
3.4
- Second Amended and Restated Agreement of Limited Partnership of Vornado Realty L.P.,
dated as of October 20, 1997 (the “Partnership Agreement”) – Incorporated by reference
to Exhibit 3.26 to Vornado Realty Trust’s Quarterly Report on Form 10-Q for the quarter
ended March 31, 2003 (File No. 001-11954), filed on May 8, 2003
*
*
*
*
3.5
- Amendment to the Partnership Agreement, dated as of December 16, 1997 – Incorporated by
*
reference to Exhibit 3.27 to Vornado Realty Trust’s Quarterly Report on Form 10-Q for
the quarter ended March 31, 2003 (File No. 001-11954), filed on May 8, 2003
3.6
- Second Amendment to the Partnership Agreement, dated as of April 1, 1998 – Incorporated
by reference to Exhibit 3.5 to Vornado Realty Trust’s Registration Statement on Form S-3
(File No. 333-50095), filed on April 14, 1998
3.7
- Third Amendment to the Partnership Agreement, dated as of November 12, 1998 -
Incorporated by reference to Exhibit 3.2 to Vornado Realty Trust’s Current Report on
Form 8-K (File No. 001-11954), filed on November 30, 1998
3.8
- Fourth Amendment to the Partnership Agreement, dated as of November 30, 1998 -
Incorporated by reference to Exhibit 3.1 to Vornado Realty Trust’s Current Report on
Form 8-K (File No. 001-11954), filed on February 9, 1999
*
*
*
3.9
- Fifth Amendment to the Partnership Agreement, dated as of March 3, 1999 - Incorporated by
*
reference to Exhibit 3.1 to Vornado Realty Trust’s Current Report on Form 8-K
(File No. 001-11954), filed on March 17, 1999
3.10
3.11
3.12
- 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
- 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
- Eighth Amendment to the Partnership Agreement, dated as of May 27, 1999 - Incorporated
by reference to Exhibit 3.4 to Vornado Realty Trust’s Current Report on Form 8-K
(File No. 001-11954), filed on July 7, 1999
3.13
- Ninth Amendment to the Partnership Agreement, dated as of September 3, 1999 -
Incorporated by reference to Exhibit 3.3 to Vornado Realty Trust’s Current Report on
Form 8-K (File No. 001-11954), filed on October 25, 1999
*
*
*
*
*
_______________________
Incorporated by reference.
198
3.14
- Tenth Amendment to the Partnership Agreement, dated as of September 3, 1999 -
Incorporated by reference to exhibit 3,4 to Vornado Realty Trust's Current Report on
Form 8-K (File No. 001-11954), filed on October 25, 1999
3.15
- Eleventh Amendment to the Partnership Agreement, dated as of November 24, 1999 -
Incorporated by reference to Exhibit 3.2 to Vornado Realty Trust’s Current Report on
Form 8-K (File No. 001-11954), filed on December 23, 1999
3.16
- Twelfth Amendment to the Partnership Agreement, dated as of May 1, 2000 - Incorporated
by reference to Exhibit 3.2 to Vornado Realty Trust’s Current Report on Form 8-K
(File No. 001-11954), filed on May 19, 2000
3.17
- Thirteenth Amendment to the Partnership Agreement, dated as of May 25, 2000 -
Incorporated by reference to Exhibit 3.2 to Vornado Realty Trust’s Current Report on
Form 8-K (File No. 001-11954), filed on June 16, 2000
3.18
- Fourteenth Amendment to the Partnership Agreement, dated as of December 8, 2000 -
Incorporated by reference to Exhibit 3.2 to Vornado Realty Trust’s Current Report on
Form 8-K (File No. 001-11954), filed on December 28, 2000
3.19
- Fifteenth Amendment to the Partnership Agreement, dated as of December 15, 2000 -
Incorporated by reference to Exhibit 4.35 to Vornado Realty Trust’s Registration
Statement on Form S-8 (File No. 333-68462), filed on August 27, 2001
3.20
3.21
- 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
- Seventeenth Amendment to the Partnership Agreement, dated as of September 21, 2001 -
Incorporated by reference to Exhibit 3.4 to Vornado Realty Trust’s Current Report on
Form 8 K (File No. 001-11954), filed on October 12, 2001
3.22
- Eighteenth Amendment to the Partnership Agreement, dated as of January 1, 2002 -
Incorporated by reference to Exhibit 3.1 to Vornado Realty Trust’s Current Report on
Form 8-K/A (File No. 001-11954), filed on March 18, 2002
3.23
3.24
- 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
- Twentieth Amendment to the Partnership Agreement, dated April 9, 2003 - Incorporated by
reference to Exhibit 3.46 to Vornado Realty Trust’s Quarterly Report on Form 10-Q for
the quarter ended March 31, 2003 (File No. 001-11954), filed on May 8, 2003
3.25
- Twenty-First Amendment to the Partnership Agreement, dated as of July 31, 2003 -
Incorporated by reference to Exhibit 3.47 to Vornado Realty Trust’s Quarterly Report
on Form 10-Q for the quarter ended September 30, 2003 (File No. 001-11954), filed on
November 7, 2003
3.26
3.27
- 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
- Twenty-Third Amendment to the Partnership Agreement, dated May 27, 2004 – Incorporated
by reference to Exhibit 99.2 to Vornado Realty Trust’s Current Report on Form 8-K
(File No. 001-11954), filed on June 14, 2004
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
_______________________
Incorporated by reference.
199
3.28
-
Twenty-Fourth Amendment to the Partnership Agreement, dated August 17, 2004 –
Incorporated by reference to Exhibit 3.57 to Vornado Realty Trust and Vornado Realty
L.P.’s Registration Statement on Form S-3 (File No. 333-122306), filed on
January 26, 2005
3.29
-
Twenty-Fifth Amendment to the Partnership Agreement, dated November 17, 2004 –
Incorporated by reference to Exhibit 3.58 to Vornado Realty Trust and Vornado Realty
L.P.’s Registration Statement on Form S-3 (File No. 333-122306), filed on
January 26, 2005
3.30
-
Twenty-Sixth Amendment to the Partnership Agreement, dated December 17, 2004 –
Incorporated by reference to Exhibit 3.1 to Vornado Realty L.P.’s Current Report on
Form 8-K (File No. 000-22685), filed on December 21, 2004
3.31
-
Twenty-Seventh Amendment to the Partnership Agreement, dated December 20, 2004 –
Incorporated by reference to Exhibit 3.2 to Vornado Realty L.P.’s Current Report on
Form 8-K (File No. 000-22685), filed on December 21, 2004
3.32
-
Twenty-Eighth Amendment to the Partnership Agreement, dated December 30, 2004 -
Incorporated by reference to Exhibit 3.1 to Vornado Realty L.P.’s Current Report on
Form 8-K (File No. 000-22685), filed on January 4, 2005
*
*
*
*
*
3.33
-
Twenty-Ninth Amendment to the Partnership Agreement, dated June 17, 2005 - Incorporated
*
by reference to Exhibit 3.1 to Vornado Realty L.P.’s Current Report on Form 8-K
(File No. 000-22685), filed on June 21, 2005
3.34
-
Thirtieth Amendment to the Partnership Agreement, dated August 31, 2005 - Incorporated by
*
reference to Exhibit 3.1 to Vornado Realty L.P.’s Current Report on Form 8-K
(File No. 000-22685), filed on September 1, 2005
3.35
-
Thirty-First Amendment to the Partnership Agreement, dated September 9, 2005 -
Incorporated by reference to Exhibit 3.1 to Vornado Realty L.P.’s Current Report on
Form 8-K (File No. 000-22685), filed on September 14, 2005
3.36
-
Thirty-Second Amendment and Restated Agreement of Limited Partnership, dated as of
December 19, 2005 – Incorporated by reference to Exhibit 3.59 to Vornado Realty L.P.’s
Quarterly Report on Form 10-Q for the quarter ended March 31, 2006
(File No. 000-22685), filed on May 8, 2006
3.37
-
Thirty-Third Amendment to Second Amended and Restated Agreement of Limited
Partnership, dated as of April 25, 2006 – Incorporated by reference to Exhibit 10.2 to
Vornado Realty Trust’s Form 8-K (File No. 001-11954), filed on May 1, 2006
3.38
-
Thirty-Fourth Amendment to Second Amended and Restated Agreement of Limited
Partnership, dated as of May 2, 2006 – Incorporated by reference to Exhibit 3.1 to
Vornado Realty L.P.’s Current Report on Form 8-K (File No. 000-22685), filed on
May 3, 2006
3.39
-
Thirty-Fifth Amendment to Second Amended and Restated Agreement of Limited
Partnership, dated as of August 17, 2006 – Incorporated by reference to Exhibit 3.1 to
Vornado Realty L.P.’s Form 8-K (File No. 000-22685), filed on August 23, 2006
3.40
-
Thirty-Sixth Amendment to Second Amended and Restated Agreement of Limited
Partnership, dated as of October 2, 2006 – Incorporated by reference to Exhibit 3.1 to
Vornado Realty L.P.’s Form 8-K (File No. 000-22685), filed on January 22, 2007
*
*
*
*
*
*
*
_______________________
Incorporated by reference.
200
3.41
3.42
3.43
3.44
3.45
3.46
3.47
3.48
4.1
4.2
-
-
-
-
-
-
-
-
-
-
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
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
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
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
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
*
*
*
*
*
Forty-Second Amendment to Second Amended and Restated Agreement of Limited Partnership, *
dated as of December 17, 2010 – Incorporated by reference to Exhibit 99.1 to Vornado
Realty L.P.'s Current Report on Form 8-K (File No. 000-22685), filed on December 21, 2010
Forty-Third Amendment to Second Amended and Restated Agreement of Limited Partnership,
dated as of April 20, 2011 – Incorporated by reference to Exhibit 3.1 to Vornado
Realty L.P.'s Current Report on Form 8-K (File No. 000-22685), filed on April 21, 2011
Forty-Fourth Amendment to Second Amended and Restated Agreement of Limited Partnership
dated as of July 18, 2012 – Incorporated by reference to Exhibit 3.1 to Vornado Realty L.P.’s
Current Report on Form 8-K (File No. 001-34482), filed on July 18, 2012
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
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
*
*
*
*
*
_______________________
Incorporated by reference.
201
10.1
10.2
- 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
- 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
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
**
- 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
10.7
10.8
10.9
- 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
- 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
- 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
*
*
*
*
10.10
- 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
10.11 **
- 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
10.12 **
- 59th Street Real Estate Retention Agreement, dated as of July 3, 2002, by and between
Vornado Realty L.P., 731 Residential LLC and 731 Commercial LLC - Incorporated by
reference to Exhibit 10(i)(E)(4) to Alexander’s Inc.’s Quarterly Report for the quarter
ended June 30, 2002 (File No. 001-06064), filed on August 7, 2002
_______________________
Incorporated by reference.
Management contract or compensatory agreement.
*
**
*
*
202
10.13
- 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
10.14
- 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
10.15
**
-
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
10.16
**
-
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
10.17
**
-
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
10.18
**
-
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
10.19
**
-
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
10.20
**
-
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
10.21
**
-
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
10.22
**
-
10.23
**
-
Amended and Restated Employment Agreement between Vornado Realty Trust and Joseph
Macnow dated July 27, 2006 – Incorporated by reference to Exhibit 10.54 to Vornado
Realty Trust’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2006
(File No. 001-11954), filed on August 1, 2006
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
10.24
**
- 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
*
*
*
*
*
*
*
*
*
*
*
**
_______________________
Incorporated by reference.
Management contract or compensatory agreement.
203
10.25
**
- 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
*
10.26
**
- 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
10.27
**
- 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
10.28
**
- 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
10.29
**
- 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
10.30
**
- Amendment to Employment Agreement between Vornado Realty Trust and Joseph Macnow,
dated December 29, 2008. Incorporated by reference to Exhibit 10.48 to Vornado Realty
Trust’s Annual Report on Form 10-K for the year ended December 31, 2008 (File No.
001-11954) filed on February 24, 2009
10.31
**
- 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
10.32
**
- 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
10.33
**
- 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
*
*
*
*
*
10.34
**
- Vornado Realty Trust's 2010 Omnibus Share Plan. Incorporated by reference to Exhibit 10.41 to
*
Vornado Realty Trust's Quarterly Report on Form 10-Q for the quarter ended June 30, 2010
(File No. 001-11954) filed on August 3, 2010
10.35 **
- Employment Agreement between Vornado Realty Trust and Michael J. Franco, dated
*
September 24, 2010. Incorporated by reference to Exhibit 10.42 to Vornado Realty Trust's
Quarterly Report on Form 10-Q for the quarter ended September 30, 2010 (File No. 001-11954)
filed on November 2, 2010
_______________________
Incorporated by reference.
Management contract or compensatory agreement.
*
**
204
10.36 **
- Form of Vornado Realty Trust 2010 Omnibus Share Plan Incentive / Non-Qualified Stock Option
Agreement. Incorporated by reference to Exhibit 99.1 to Vornado Realty Trust's Current
Report on Form 8-K (File No. 001-11954) filed on April 5, 2012
10.37 **
- Form of Vornado Realty Trust 2010 Omnibus Share Plan Restricted Stock Agreement.
Incorporated by reference to Exhibit 99.2 to Vornado Realty Trust's Current Report on Form
8-K (File No. 001-11954) filed on April 5, 2012
10.38 **
- Form of Vornado Realty Trust 2010 Omnibus Share Plan Restricted LTIP Unit Agreement.
Incorporated by reference to Exhibit 99.3 to Vornado Realty Trust's Current Report on Form
8-K (File No. 001-11954) filed on April 5, 2012
10.39 **
10.40 **
- Letter Agreement between Vornado Realty Trust and Michelle Felman, dated December 21, 2010.
Incorporated by reference to Exhibit 10.45 to Vornado Realty Trust's Annual Report on Form
10-K for the year ended December 31, 2010 (File No. 001-11954) filed on February 23, 2011
- Waiver and Release between Vornado Realty Trust and Michelle Felman, dated December 21,
2010. Incorporated by reference to Exhibit 10.46 to Vornado Realty Trust's Annual Report
on Form 10-K for the year ended December 31, 2010 (File No. 001-11954) filed on
February 23, 2011
*
*
*
*
*
10.41 **
- Revolving Credit Agreement dated as of June 8, 2011, by and among Vornado Realty L.P. as
*
borrower, Vornado Realty Trust as General Partner, the Banks listed on the signature pages
thereof, and J.P. Morgan Chase Bank N.A., as Administrative Agent for the Banks.
Incorporated by reference to Exhibit 10.46 to Vornado Realty Trust's Quarterly Report on
Form 10-Q for the quarter ended June 30, 2011 (File No. 001-11954) filed on August 1, 2011
10.42 **
10.43 **
- Letter Agreement between Vornado Realty Trust and Christopher G. Kennedy, dated August 5,
2011. Incorporated by reference to Exhibit 10.47 to Vornado Realty Trust’s Quarterly Report
on Form 10-Q for the quarter ended September 30, 2011 (File No. 001-11954) filed on
November 3, 2011
- Waiver and Release between Vornado Realty Trust and Christopher G. Kennedy, dated August 5,
2011. Incorporated by reference to Exhibit 10.48 to Vornado Realty Trust’s Quarterly Report
on Form 10-Q for the quarter ended September 30, 2011 (File No. 001-11954) filed on
November 3, 2011
*
*
10.44
- Revolving Credit Agreement dated on November 7, 2011, by and among Vornado Realty L.P. as
*
borrower, Vornado Realty Trust as General Partner, the Banks listed on the signature pages
thereof, and JP Morgan Chase Bank N.A., as administrative agent for the Banks.
Incorporated by reference to Exhibit 10.1 to Vornado Realty Trust’s Current Report on
Form 8-K (File No. 001-11954) filed on November 11, 2011
10.45
**
- Form of Vornado Realty Trust 2012 Outperformance Plan Award Agreement
*
**
_______________________
Incorporated by reference.
Management contract or compensatory agreement.
205
12
21
23
31.1
31.2
32.1
32.2
- Computation of Ratios
- Subsidiaries of the Registrant
- Consent of Independent Registered Public Accounting Firm
- Rule 13a-14 (a) Certification of the Chief Executive Officer
- Rule 13a-14 (a) Certification of the Chief Financial Officer
- Section 1350 Certification of the Chief Executive Officer
- Section 1350 Certification of the Chief Financial Officer
101.INS
- XBRL Instance Document
101.SCH
- XBRL Taxonomy Extension Schema
101.CAL
- XBRL Taxonomy Extension Calculation Linkbase
101.DEF
- XBRL Taxonomy Extension Definition Linkbase
101.LAB
- XBRL Taxonomy Extension Label Linkbase
101.PRE
- XBRL Taxonomy Extension Presentation Linkbase
206
VORNADO CORPORATE INFORMATION
TRUSTEES
STEVEN ROTH
Chairman of the Board
CANDACE K. BEINECKE
Chair of Hughes Hubbard & Reed LLP
MICHAEL D. FASCITELLI
Former President and Chief Executive Officer
of Vornado
ROBERT P. KOGOD*
President of Charles E. Smith Management LLC
MICHAEL LYNNE
Principal of Unique Features
DAVID M. MANDELBAUM
Partner, Interstate Properties
RONALD G. TARGAN
President, Malt Products Corporation
DANIEL R. TISCH*
Managing Member,
TowerView LLC
RICHARD R. WEST*
Dean Emeritus, Leonard N. Stern School of Business,
New York University
RUSSELL B. WIGHT, JR.
Partner, Interstate Properties
*Members of the Audit Committee
OFFICERS
STEVEN ROTH
Chairman of the Board and
Chief Executive Officer
MICHAEL J. FRANCO
Executive Vice President –
Co-Head of Acquisitions and Capital Markets
DAVID R. GREENBAUM
President of the New York Division
JOSEPH MACNOW
Executive Vice President –
Finance and Administration and
Chief Financial Officer
ROBERT MINUTOLI
Executive Vice President - Retail
MITCHELL N. SCHEAR
President of the Vornado/Charles E. Smith
Washington DC Division
WENDY SILVERSTEIN
Executive Vice President –
Co-Head of Acquisitions and Capital Markets
COMPANY DATA
EXECUTIVE OFFICES
888 Seventh Avenue
New York, New York 10019
INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
Deloitte & Touche LLP
Parsippany, New Jersey
COUNSEL
Sullivan & Cromwell LLP
New York, New York
TRANSFER AGENT AND REGISTRAR
American Stock Transfer & Trust Co.
New York, New York
MANAGEMENT CERTIFICATIONS
The Company’s Chief Executive Officer and
Chief Financial Officer provided certifications
to the Securities and Exchange Commission as
required by Section 302 of the Sarbanes-Oxley
Act of 2002 and these certifications are included
in the Company’s Annual Report on Form 10-K
for the year ended December 31, 2012. In
addition, as required by Section 303A.12(a) of
the New York Stock Exchange (NYSE) Listed
Company Manual, on June 6, 2012 the
Company’s Chief Executive Officer submitted
to the NYSE the annual CEO certification
regarding the Company’s compliance with the
NYSE’s corporate governance listing standards.
REPORT ON FORM 10-K
Shareholders may obtain a copy of the
Company’s annual report on Form 10-K as filed
with the Securities and Exchange Commission
free of charge (except for exhibits), by writing
to the Secretary, Vornado Realty Trust,
888 Seventh Avenue, New York, New York
10019; or, visit the Company’s website at
www.vno.com and refer to the Company’s SEC
Filings.
ANNUAL MEETING
The annual meeting of shareholders of Vornado
Realty Trust, will be held at 11:30 AM on
May 23, 2013 at the Saddle Brook Marriott,
Interstate 80 and the Garden State Parkway,
Saddle Brook, New Jersey 07663.