UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D. C. 20549

FORM 10-K

 

x

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

 

For the Fiscal Year Ended:

December   31, 2008

 

 

OR

 

o

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

 

For the transition period from

to

 

 

Commission File Number:

1-11954

 

 

 

VORNADO REALTY TRUST

(Exact name of Registrant as specified in its charter)

 

Maryland

 

22-1657560

(State or other jurisdiction of incorporation or organization)

 

(I.R.S. Employer Identification Number)

 

 

 

888 Seventh Avenue, New York, New York

 

10019

(Address of Principal Executive Offices)

 

(Zip Code)

 

Registrant’s telephone number including area code:

(212) 894-7000

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of Each Class

 

Name of Each Exchange on Which Registered

Common Shares of beneficial interest,
$.04 par value per share

 

New York Stock Exchange

 

 

 

Series A Convertible Preferred Shares
of beneficial interest, no par value

 

New York Stock Exchange

 

 

 

Cumulative Redeemable Preferred Shares of beneficial
interest, no par value:

 

 

 

 

 

8.5% Series B

 

New York Stock Exchange

 

 

 

8.5% Series C

 

New York Stock Exchange

 

 

 

7.0% Series E

 

New York Stock Exchange

 

 

 

6.75% Series F

 

New York Stock Exchange

 

 

 

6.625% Series G

 

New York Stock Exchange

 

 

 

6.75% Series H

 

New York Stock Exchange

 

 

 

6.625% Series I

 

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  x      NO  o

 

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  o      NO  x

 

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

YES  x      NO  o

 

Indicate by check mark 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. o

 

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

 

x Large Accelerated Filer

 

o Accelerated Filer

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

 

o Smaller Reporting Company

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

YES  o NO  x

 

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 $11,989,973,000 at June 30, 2008.

 

As of February 6, 2009, there were 155,460,522 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 14, 2009.

 

This Annual Report on Form 10-K omits the financial statements of the Company’s equity investee, Lexington Realty Trust, required under Rule 3-09 of Regulation S-X. An amendment to this Form 10-K will be filed as promptly as practical following the availability of such financial statements.

 

 

 

 

 


INDEX

 

Item

Financial Information:

Page Number

 

 

 

 

PART I.

1.

Business

4

 

 

 

 

 

1A.

Risk Factors

9

 

 

 

 

 

1B.

Unresolved Staff Comments

21

 

 

 

 

 

2.

Properties

21

 

 

 

 

 

3.

Legal Proceedings

58

 

 

 

 

 

4.

Submission of Matters to a Vote of Security Holders
Executive Officers of the Registrant

59

 

 

 

 

PART II.

5.

Market for Registrant’s Common Equity, Related Stockholder Matters and
Issuer Purchases of Equity Securities

60

 

 

 

 

 

6.

Selected Financial Data

62

 

 

 

 

 

7.

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

64

 

 

 

 

 

7A.

Quantitative and Qualitative Disclosures about Market Risk

116

 

 

 

 

 

8.

Financial Statements and Supplementary Data

117

 

 

 

 

 

9.

Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure

176

 

 

 

 

 

9A.

Controls and Procedures

176

 

 

 

 

 

9B.

Other Information

178

 

 

 

 

PART III.

10.

Directors, Executive Officers and Corporate Governance (1)

178

 

 

 

 

 

11.

Executive Compensation (1)

178

 

 

 

 

 

12.

Security Ownership of Certain Beneficial Owners and Management
and Related Stockholder Matters (1)

178

 

 

 

 

 

13.

Certain Relationships and Related Transactions, and Director Independence (1)

178

 

 

 

 

 

14.

Principal Accounting Fees and Services

179

 

 

 

 

PART IV.

15.

Exhibits, Financial Statement Schedules

179

 

 

 

 

Signatures

 

 

180

 

 

 

 

_______________________

(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 not later than 120 days after December 31, 2008, portions of which are incorporated by reference herein. See “Executive Officers of the Registrant” on page 59 of this Annual Report on Form 10-K for information relating to executive officers.

 

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 projects, the estimated completion date, estimated project cost and cost to complete; and estimates of future capital expenditures, common and preferred share dividends 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

 

 


PART I

ITEM 1.

BUSINESS

THE COMPANY

Vornado Realty Trust (“Vornado”) is a fully-integrated real estate investment trust (“REIT”) and conducts its business through Vornado Realty L.P., a Delaware limited partnership (the “Operating Partnership”). Vornado is the sole general partner of, and owned approximately 90.6% of the common limited partnership interest in, the Operating Partnership at December 31, 2008. 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, 2008, we own directly or indirectly:

 

Office Properties :

(i)      all or portions of 28 office properties aggregating approximately 16.1 million square feet in the New York City metropolitan area (primarily Manhattan);

 

(ii)      all or portions of 84 office properties aggregating 17.7 million square feet in the Washington, DC / Northern Virginia areas;

 

(iii)     a 70% controlling interest in 555 California Street, a three-building complex aggregating 1.8 million square feet in San Francisco’s financial district;

 

Retail Properties :

(iv)     176 retail properties in 21 states, Washington, DC and Puerto Rico aggregating approximately 21.9 million square feet, including 3.7 million square feet owned by tenants on land leased from us;

 

Merchandise Mart Properties :

(v)      8 properties in 5 states and Washington, DC aggregating approximately 8.9 million square feet of showroom and office space, including the 3.5 million square foot Merchandise Mart in Chicago;

 

Toys “R” Us, Inc. :

(vi)     a 32.7% interest in Toys “R” Us, Inc. which owns and/or operates 1,561 stores worldwide, including 847 stores in the United States and 714 stores internationally;

 

Other Real Estate Investments :

 

(vii)    32.5% of the common stock of Alexander’s, Inc. (NYSE: ALX), which has seven properties in the greater New York metropolitan area;

 

(viii)   the Hotel Pennsylvania in New York City, consisting of a hotel portion containing 1.0 million square feet with 1,700 rooms and a commercial portion containing 400,000 square feet of retail and office space;

 

(ix)      mezzanine loans to entities that have significant real estate assets; and  

 

(x)      interests in other real estate, including interests in office, industrial and retail properties net leased to major corporations; 6 warehouse/industrial properties in New Jersey containing approximately 1.2 million square feet; and other investments and marketable securities.

 

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;

 

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

 

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

 

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

 

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

 

We expect to finance our growth, acquisitions and investments using internally generated funds, proceeds from possible asset sales and by accessing the public and private capital markets.

 

BUSINESS ENVIRONMENT

 

In the second half of 2007 the residential mortgage and capital markets began showing signs of stress, primarily in the form of escalating default rates on sub-prime mortgages, declining home values and increasing inventory nationwide. In 2008, the “credit crisis” spread to the broader commercial credit and financial markets resulting in illiquidity and volatility in the bond and equity markets. We are currently in an economic recession which has negatively affected all businesses, including ours. During the past year, real estate transactions have diminished significantly and capitalization rates have risen. Our real estate portfolio may be affected by declining demand for office and retail space and tenant bankruptcies, which may result in lower average occupancy rates and effective rents, and a corresponding decrease in net income, funds from operations and cash flow. In addition, the value of our assets, including investments in joint ventures, marketable securities, and mezzanine loans may also decline, and may result in impairment charges and/or valuation allowances and a corresponding decrease in net income and funds from operations.

 

ACQUISTIONS

 

There were no material real estate acquisitions or investments in partially owned entities and mezzanine loans during 2008.

 

5

 

 


DISPOSITIONS

 

On March 31, 2008, we sold our 47.6% interest in Americold, our Temperature Controlled Logistics segment, for $220,000,000, in cash, which resulted in a net gain of $112,690,000.

 

On June 6, 2008, we sold our Tysons Dulles Plaza office building complex located in Tysons Corner, Virginia for approximately $152,800,000, in cash, which resulted in a net gain of $56,831,000.

 

Pursuant to the sale of GMH Communities L.P. (“GMH”) military housing division and the merger of its student housing division with American Campus Communities, Inc (“ACC”) (NYSE: ACC), in June 2008 we received an aggregate of $105,180,000, consisting of $82,142,000 in cash and 753,126 shares of ACC common stock valued at $23,038,000 based on ACC’s then closing share price of $30.59, in exchange for our entire interest in GMH. We subsequently sold all of the ACC common shares. The above transactions resulted in a net gain of $2,038,000. The aggregate net income realized from inception of this investment in 2004 through its disposition was $77,000,000.

 

FINANCING ACTIVITIES

During 2008 we completed approximately $1.3 billion of property level financings and repaid approximately $241,000,000 of existing debt with a portion of the proceeds. In addition, we purchased $81,540,000 (aggregate face amount) of our 4.50% senior unsecured notes due August 15, 2009, for $80,408,000 in cash, resulting in a net gain on extinguishment of debt of $783,000. We also purchased $10,200,000 and $17,300,000 (aggregate face amounts) of our 3.63% and 2.85% convertible senior debentures, respectively, for an aggregate of $18,080,000 in cash, resulting in a net gain on extinguishment of debt of $9,037,000.

 

 

The net proceeds we received from dispositions and financings above were used primarily for general corporate purposes. We may seek to obtain additional capital through equity offerings, debt financings or asset sales, although there is no express policy with respect to these capital markets transactions. We may also offer Vornado common or preferred shares or Operating Partnership units in exchange for property and may repurchase or otherwise reacquire our shares or any other securities in the future.

 

 

6

 

 


DEVELOPMENT AND REDEVELOPMENT PROJECTS

 

We are currently engaged in various development/redevelopment projects for which we have budgeted approximately $1.2 billion. Of this amount, $393.4 million was expended prior to 2008 and $411.5 million was expended during 2008. Substantially all of the estimated costs to complete our development projects are anticipated to be expended during 2009, of which $266.1 million is expected to be funded by existing construction loans.

 

 

Our Share of

($ in millions)

In Progress:

Estimated
Completion
Date

 

Estimated
Project
Cost

Costs
Expended
in Year Ended
December 31,
2008

 

Estimated
Cost to
Complete

 

New York Office Properties:

 

 

 

 

 

 

 

 

 

 

 

330 Madison Avenue (25% interest) – rehabilitation of existing building
including new curtain wall, mechanical systems and lobby

2011

 

$

27.0

 

$

0.4

 

$

26.5

 

Other – 2 projects

2009

 

 

27.0

 

 

6.9

 

 

19.5

 

Washington, DC Office Properties:

 

 

 

 

 

 

 

 

 

 

 

West End 25 – redevelopment of former BNA office space to residential
apartments

2009

 

 

183.0

 

 

31.8

 

 

73.3

 

1999 K Street – construction of a 250,000 square foot office building

2009

 

 

165.0

 

 

50.8

 

 

40.8

 

220-20 th Street – redevelopment of Crystal Plaza Two office space
to residential apartments

2009

 

 

100.0

 

 

43.4

 

 

40.0

 

Retail Properties:

 

 

 

 

 

 

 

 

 

 

 

Bergen Town Center:

Redevelopment of existing mall containing 950,000 square feet of retail space

2009

 

 

202.0

 

 

106.9

 

 

24.4

 

Construction of an additional 250,000 square feet of retail space adjacent
to the mall

2010

 

 

25.0

 

 

2.6

 

 

22.4

 

North Bergen, New Jersey Ground-up Development – acquisition of
land and construction of 90,000 square feet of retail space and site
work for BJ’s Wholesale Club and Wal-Mart who will construct
their own stores

2009

 

 

77.0

 

 

14.2

 

 

12.8

 

Manhattan Mall – redevelopment and renovation of existing mall,
including construction of new JC Penney store

2009

 

 

84.0

 

 

41.7

 

 

28.9

 

South Hills Mall – conversion of existing mall into a 575,000
square foot strip shopping center

2009

 

 

36.0

 

 

16.6

 

 

15.8

 

Broome & Broadway – redevelopment and renovation of retail and
residential space

2009

 

 

32.0

 

 

14.1

 

 

10.2

 

Beverly Connection – final phase of retail space renovation

2010

 

25.0

 

 

 

 

25.0

 

Garfield – redevelopment of existing warehouse site into a 325,000
square foot strip shopping center

2010

 

 

25.0

 

 

13.8

 

 

7.0

 

Other Properties:

 

 

 

 

 

 

 

 

 

 

 

Residential condominiums in Boston and Pasadena

2009

 

 

194.0

 

 

68.3

 

 

50.5

 

 

 

 

$

1,202.0

 

$

411.5

 

$

397.1

 

 

We are evaluating other development opportunities for which final plans, budgeted costs and financing have yet to be determined.

 

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

 

7

 

 


SEASONALITY

Our revenues and expenses are subject to seasonality during the year which impacts quarter-by-quarter net earnings, cash flows and funds from operations. The business of Toys “R” Us, Inc. (“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 Office and Merchandise Mart segments have historically experienced higher utility costs in the first and third quarters of the year. The Merchandise Mart segment also has experienced higher earnings in the second and fourth quarters of the year due to major trade shows occurring in those quarters. The Retail segment revenue in the fourth quarter is typically higher due to the recognition of percentage rental income.

 

TENANTS ACCOUNTING FOR OVER 10% OF REVENUES

None of our tenants accounted for more than 10% of total revenues in each of the years ended December 31, 2008, 2007 and 2006.

 

CERTAIN ACTIVITIES

We are not required to 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. 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, 2008, we have approximately 3,529 employees, of which 340 are corporate staff. The New York Office Properties segment has 106 employees and an additional 2,054 employees of Building Maintenance Services LLC, a wholly owned subsidiary, which provides cleaning, security and engineering services to New York Office properties. The Washington, DC Office, Retail and Merchandise Mart segments have 222, 190 and 585 employees, respectively, and the Hotel Pennsylvania has 523 employees. The foregoing does not include employees of partially owned entities, including Toys or Alexander’s, in which we own 32.7% and 32.5%, respectively.

 

SEGMENT DATA

We operate in the following business segments: New York Office Properties, Washington, DC Office Properties, Retail Properties, Merchandise Mart Properties and Toys. Financial information related to these business segments for the years ended December 31, 2008, 2007 and 2006 are set forth in Note 20 – Segment Information to our consolidated financial statements in this Annual Report on Form 10-K. The Merchandise Mart Properties segment has trade show operations in Canada and Switzerland. The Toys segment has 714 locations internationally. In addition, we have five partially owned nonconsolidated investments in real estate partnerships located in India, which are included in the Other segment.

 

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 about us, including certain non-GAAP financial measures, none of which is a part of this Annual Report on Form 10-K.

 

8

 

 


ITEM 1A. RISK FACTORS

Material factors that may adversely affect our business, operations and financial condition are summarized below.

 

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 limit our revenues and available cash.

 

The factors that affect the value of our real estate investments include, among other things:

 

 

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;

 

changes in market rental rates;

 

the timing and costs associated with property improvements and rentals;

 

whether we are able to pass some or all of any increased operating costs through to tenants;

 

changes in real estate taxes and other expenses;

 

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 secure adequate insurance;

 

changes in taxation or zoning laws;

 

government regulation;

 

consequences of any armed conflict involving, or terrorist attack against, the United States;

 

potential liability under environmental or other laws or regulations; and

 

general competitive factors.

 

The rents 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 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 economy. In the second half of 2007 the residential mortgage and capital markets began showing signs of stress, primarily in the form of escalating default rates on sub-prime mortgages, declining home values and increasing inventory nationwide. In 2008, the “credit crisis” spread to the broader commercial credit and financial markets resulting in illiquidity and volatility in the bond and equity markets. We are currently in an economic recession which has negatively affected all businesses including ours. These conditions have contributed to volatility of unprecedented levels. As a result, the cost and availability of credit has been and may continue to be adversely affected by illiquid credit markets and wider credit spreads. Concern about the stability of the markets generally and the strength of counterparties specifically has led many lenders and institutional investors to reduce, and in some cases, cease to provide funding to borrowers, and may adversely affect our liquidity and financial condition, and the liquidity and financial condition of our tenants. If these market conditions continue, they may limit our ability and the ability of our tenants, to timely refinance maturing liabilities and access the capital markets to meet liquidity needs, resulting in materially adverse effects on our financial condition and results of operations and the value of our debt and equity securities.

 

9

 

 


Real estate is a competitive business.

Our business segments – Office, Retail, Merchandise Mart, Toys and Other – operate in highly competitive environments. We have a large concentration of properties in the New York City metropolitan area and in the Washington, DC / Northern Virginia areas. We compete with a large number of real estate property owners and developers, some of which may be willing to accept lower returns on their investments. Principal factors of competition are rents charged, attractiveness of location, the quality of the property and 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 regulations, 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 substantial 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 such as we are currently experiencing, 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 revenues 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 a lower level of net income and funds available for the payment of indebtedness or for distribution to shareholders. Circuit City, which leases 12 locations in our Retail Properties segment aggregating 380,000 square feet, approximately $8,100,000 of annual property rental income, recently announced that it is liquidating, pursuant to Bankruptcy Court approval. As a result, we wrote-off approximately $10,383,000 of unamortized costs at December 31, 2008, including tenant improvements, leasing commissions and receivables arising from the straight-lining of rent. The current economic environment may result in additional tenant bankruptcies and write-offs, which could, in the aggregate, be material to our results of operations in a particular period.

 

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. 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 cleanup or compliance requirements could result in significant costs to us.

 

10

 

 


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.

 

Some of our potential losses may not be covered by insurance.

We carry commercial liability and all risk property insurance ((i) fire, (ii) flood, (iii) extended coverage, (iv) “acts of terrorism” as defined in the Terrorism Risk Insurance Program Reauthorization Act of 2007 (“TRIPRA”) , which expires in December 2014, and (v) rental loss insurance) with respect to our assets. Our New York Office, Washington, DC Office, Retail and Merchandise Mart divisions have $2.0 billion of per occurrence all risk property insurance coverage, including terrorism coverage in effect through September 15, 2009. Our California properties have earthquake insurance with coverage of $150,000,000 per occurrence, subject to a deductible in the amount of 5% of the value of the affected property, and a $150,000,000 annual aggregate.

 

In June 2007 we formed Penn Plaza Insurance Company, LLC (“PPIC”), a wholly owned consolidated subsidiary, to act as a re-insurer with respect to a portion of our earthquake insurance coverage and as a direct insurer for coverage for “certified” acts of terrorism and for nuclear, biological, chemical and radiological (“NBCR”) acts, as defined by TRIPRA. Coverage for “certified” acts of terrorism is fully reinsured by third party insurance companies and the Federal government with no exposure to PPIC. Prior to the formation of PPIC, we were uninsured for NBCR losses. Subsequently, we have $2.0 billion of NBCR coverage under TRIPRA, for which PPIC is responsible for 15% of each NBCR loss and the insurance company deductible of $1,000,000. 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 generally non-recourse to us), senior unsecured notes, exchangeable senior debentures, convertible senior debentures and revolving credit agreements contain customary covenants requiring us to maintain insurance. Although we believe that we have adequate insurance coverage for purposes of these agreements, we may not be able to obtain an equivalent amount of coverage at reasonable costs in the future. Further, if lenders insist on greater coverage than we are able to obtain it could adversely affect our ability to finance and/or refinance our properties and expand our portfolio.

 

Because we operate one hotel property, we face the risks associated with the hospitality industry.

We own the Hotel Pennsylvania in New York City. If the hotel does not generate sufficient receipts, our cash flow would decrease, which could reduce the amount of cash available for distribution to shareholders. The following factors, among others, are common to the hotel industry, and may reduce the revenues generated by our hotel property:

 

 

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 our hotel, 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, or 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 of 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.

 

 

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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 generally requires that public buildings, including our properties, be made accessible to disabled persons. Noncompliance could result in the imposition of fines by the federal government or the award of damages to private litigants. From time to time persons have asserted claims against us with respect to some of our properties under this Act, but to date such claims have not resulted in any material expense or liability. If, under the Americans with Disabilities Act, 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.

 

OUR INVESTMENTS ARE CONCENTRATED IN THE NEW YORK CITY METROPOLITAN AREA AND WASHINGTON, DC / NORTHERN VIRGINIA AREAS. CIRCUMSTANCES AFFECTING THESE AREAS GENERALLY COULD ADVERSELY AFFECT OUR BUSINESS.

A significant portion of our properties are in the New York City / New Jersey metropolitan areas and Washington, DC / Northern Virginia areas are affected by the economic cycles and risks inherent to those areas.

During 2008, approximately 71% of our EBITDA, excluding items that affect comparability, came from properties located in the New York City / New Jersey metropolitan areas and the Washington, DC / Northern Virginia areas. 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, as they have been in the past, and we cannot predict how economic conditions will impact these markets in both the short and long term. Declines in the economy or a decline in the real estate markets in these areas could hurt our financial performance and the value of our properties. 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 the United States Government, including the effect of 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 with certainty the future effects of the current adverse 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. If these conditions persist or if there is any further local, national or global economic downturn, our businesses and future profitability will be adversely affected.

 

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, Chicago, Boston 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.

 

 

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WE MAY   ACQUIRE OR SELL ADDITIONAL ASSETS OR ENTITIES OR DEVELOP ADDITIONAL 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 rapidly through acquisitions. We may not be able to maintain this rapid growth and our failure to do so could adversely affect our stock price.

We have experienced rapid growth in recent years, increasing our total assets from approximately $565 million at December 31, 1997 to approximately $21.4 billion at December 31, 2008. 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 and ability to pay dividends 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 strategies. 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 newly developed or acquired properties at rents sufficient to cover our costs of acquisition and development or in operating the businesses we acquired. 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 poorer 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 at the time of acquisition. In addition, 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 will 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 and convertible and exchangeable securities.

 

It may be difficult to buy and sell real estate quickly.

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.

As part of an acquisition of a property, including our January 1, 2002 acquisition of Charles E. Smith Commercial Realty L.P.’s 13.0 million square foot portfolio, we may agree, and in the case of Charles E. Smith Commercial Realty L.P. did agree, with the seller that we will not dispose of the acquired properties or reduce the mortgage indebtedness on them for a period of 12 years, 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 indebtedness that we would otherwise pay down or refinance.

 

On January   1, 2002, we completed the acquisition of the 66% interest in Charles E. Smith Commercial Realty L.P. that we did not previously own. The terms of the merger restrict our ability to sell or otherwise dispose of, or to finance or refinance, the properties formerly owned by Charles E. Smith Commercial Realty L.P., which could result in our inability to sell these properties at an opportune time and increased costs to us.

As indicated above, subject to limited exceptions, we are restricted from selling or otherwise transferring or disposing of certain properties located in the Crystal City area of Arlington, Virginia for a period of 12 years. These restrictions, which currently cover approximately 13.0 million square feet of space, could result in our inability to sell these properties at an opportune time and increase costs to us.

 

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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., Toys “R” Us, Lexington Realty Trust, and equity and mezzanine investments in other entities that have significant real estate assets. 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 additional 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 comply with applicable standards may adversely affect us.

 

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 “R” Us. See “ Our investment in Toys “R” Us, Inc. subjects us to risks different from our other lines of business and may result in increased seasonality and volatility in our reported earnings ” below. 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.

 

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. 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 investment in Toys “R” Us, Inc. subjects us to risks different from our other lines of business and may result in increased seasonality and volatility in our reported earnings.

On July 21, 2005, a joint venture that we own equally with Bain Capital and Kohlberg Kravis Roberts & Co. acquired Toys “R” Us, Inc. (“Toys”). 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, 2008 include Toys’ financial results for its first, second and third quarters ended November 1, 2008, as well as Toys’ fourth quarter results of 2007. Because of the seasonality of Toys, our reported 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.

 

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We invest in subordinated or mezzanine debt of certain entities that have significant real estate assets. These investments involve greater risk of loss than investments in senior mortgage loans.

We invest, and may in the future invest, in subordinated or mezzanine debt of certain entities that have significant real estate assets. As of December 31, 2008, our mezzanine debt securities have an aggregate carrying amount of $472,539,000. These investments, which are subordinate to the mortgage loans secured by the real property, are generally secured by pledges of the equity interests of the entities owning the underlying real estate. These investments involve greater risk of loss than investments in senior mortgage loans which are secured by real property. 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. 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 on our statement of operations. In addition, there may be significant delays and costs associated with the process of foreclosing on collateral securing or supporting these investments.

 

We evaluate the collectibility of both interest and principal of each of our loans, if circumstances warrant, in determining whether they are impaired. A loan is impaired when based on current information and events, 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 value determined by discounting the expected future cash flows at the loan’s effective interest rate or, as a practical expedient, to the value of the collateral if repayment of 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 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 of companies that have significant real estate assets. The value of these investments may decline as a result of operating performance or economic or market conditions.

We invest, and may in the future invest, in marketable equity securities of publicly-traded real estate companies or companies that have significant real estate assets. During 2008, we recognized $76,352,000 of impairment losses on our investments in marketable securities, based on the severity and duration of the declines in the market value of these securities. As of December 31, 2008, our marketable securities have an aggregate carrying amount of $334,322,000. Significant declines in the value of these investments due to operating performance or economic or market conditions may result in the recognition of additional 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 net 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. As a result of the current capital markets and environmental conditions referred to above, we and other companies in the real estate industry are currently experiencing limited availability of financing and there can be no assurances as to when more financing will be available. Although we believe that we will be able to finance any investments we may wish to make in the foreseeable future, new financing may not be 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.

 

 

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Vornado Realty Trust 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 Realty Trust.

Substantially all of Vornado Realty Trust’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 Realty Trust’s cash flow is dependent on cash distributions to it by the Operating Partnership. The creditors of each of Vornado Realty Trust’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 Realty Trust’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 Realty Trust.

 

Furthermore, the holders of preferred units of the Operating Partnership are entitled to receive preferred distributions before payment of distributions to holders of common units of the Operating Partnership, including Vornado Realty Trust. Thus, Vornado Realty Trust’s ability to pay cash dividends to holders of its shares and satisfy its debt obligations 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 Realty Trust. As of December 31, 2008, there were eight series of preferred units of the Operating Partnership not held by Vornado Realty Trust that have preference over Vornado Realty Trust common shares with a total liquidation value of $372,094,000.

 

In addition, Vornado Realty Trust’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.

 

We have indebtedness, and this indebtedness, and its cost, may increase and debt refinancing may not be available on acceptable terms.

As of December 31, 2008, we had approximately $15.846 billion of total debt outstanding, including our pro rata share of debt of partially owned entities. Our ratio of total debt to total enterprise value was approximately 59%. When we say “enterprise value” in the preceding sentence, we mean market equity value of Vornado Realty Trust’s common and preferred shares plus total debt outstanding, including our pro rata share of debt of partially owned entities. 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, in the current “credit crisis” environment, 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 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 under these facilities is subject to compliance with certain financial 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 be available only on unattractive terms. Additionally, our ability to satisfy current or prospective lenders’ insurance requirements may be adversely affected if lenders generally insist upon greater insurance coverage against acts of terrorism than is available to us in the marketplace or on commercially reasonable 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.

 

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Vornado Realty Trust 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.

 

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 and Chief Executive Officer of Vornado Realty Trust, and Michael D. Fascitelli, the President of Vornado Realty Trust. While we believe that we could find replacements for these key personnel, the loss of their services could harm our operations and adversely affect the value of our common shares.

 

VORNADO REALTY TRUST'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 Realty Trust 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 Realty Trust may be owned, directly or indirectly, by five or fewer individuals at any time during the last half of Vornado Realty Trust’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 Realty Trust’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 Realty Trust adopted the limit and other persons approved by Vornado Realty Trust’s Board of Trustees. These restrictions on transferability and ownership may delay, deter or prevent a change in control of Vornado Realty Trust or other transaction that might involve a premium price or otherwise be in the best interest of the shareholders. We refer to Vornado Realty Trust’s Amended and Restated Declaration of Trust, as amended, as the “declaration of trust.”

 

We have a classified Board of Trustees and that may reduce the likelihood of certain takeover transactions.

 

Vornado Realty Trust’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 Realty Trust, even though a tender offer or change in control might be in the best interest of Vornado Realty Trust’s shareholders.

 

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We may issue additional shares in a manner that could adversely affect the likelihood of certain takeover transactions.

 

Vornado Realty Trust’s declaration of trust authorizes the Board of Trustees to:

cause Vornado Realty Trust 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 Realty Trust issues; and

increase, without shareholder approval, the number of shares of beneficial interest that Vornado Realty Trust 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 Realty Trust or other transaction that might involve a premium price or otherwise be in the best interest of Vornado Realty Trust’s shareholders, although the Board of Trustees does not now intend to establish a series of preferred shares of this kind. Vornado Realty Trust’s declaration of trust and bylaws contain other provisions that may delay, deter or prevent a change in control of Vornado Realty Trust or other transaction that might involve a premium price or otherwise be in the best interest of our shareholders.

 

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 shares of beneficial interest of the trust and (b) two-thirds of the votes entitled to be cast by holders of voting shares of the trust other than shares held by the interested shareholder with whom, or with whose affiliate, the business combination is to be effected, unless, among other conditions, 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 Realty Trust’s Board has adopted a resolution exempting any business combination between any trustee or officer of Vornado Realty Trust, or their affiliates, and Vornado Realty Trust. As a result, the trustees and officers of Vornado Realty Trust and their affiliates may be able to enter into business combinations with Vornado Realty Trust that may not be in the best interest of 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 Realty Trust 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 Realty Trust 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.

 

18

 

 


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, 2008, Interstate Properties, a New Jersey general partnership, and its partners owned approximately 8.8% of the common shares of Vornado Realty Trust and approximately 27.0% of the common stock of Alexander’s. Steven Roth, David Mandelbaum and Russell B. Wight, Jr. are the three partners of Interstate Properties. Mr. Roth is the Chairman of the Board and Chief Executive Officer of Vornado Realty Trust, 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 Realty Trust and also directors of Alexander’s.

 

As of December 31, 2008, the Operating Partnership owned 32.5% of the outstanding common stock of Alexander’s. Alexander’s is a REIT engaged in leasing, managing, developing and redeveloping properties, focusing primarily on the locations where its department stores operated before they ceased operations in 1992. Alexander’s has seven properties, which are located in the greater New York metropolitan area. Mr. Roth and Mr. Fascitelli, the President and a trustee of Vornado Realty Trust, are directors of Alexander’s. Messrs. Mandelbaum, West and Wight are trustees of Vornado Realty Trust and are directors of Alexander’s.

 

Because of these overlapping interests, Mr. Roth and Interstate Properties and its partners may have substantial influence over Vornado Realty Trust and on the outcome of any matters submitted to Vornado Realty Trust 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.

 

Vornado Realty Trust currently manages and leases the real estate assets of Interstate Properties under a management agreement for which it receives an annual fee equal to 4% of base rent and percentage rent and certain other commissions. 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. Vornado Realty Trust earned $803,000, $800,000, and $798,000 of management fees under the management agreement for the years ended December 31, 2008, 2007 and 2006. Because of the relationship among Vornado Realty Trust, Interstate Properties and Messrs. Roth, Mandelbaum and Wight, as described above, the terms of the management agreement and any future agreements between Vornado Realty Trust and Interstate Properties may not be comparable to those Vornado Realty Trust could have negotiated with an unaffiliated third party.

 

There may be conflicts of interest between Alexander’s and us.

As of December 31, 2008, the Operating Partnership owned 32.5% of the outstanding common stock of Alexander’s. Alexander’s is a REIT engaged in leasing, managing, developing and redeveloping properties, focusing primarily on the locations where its department stores operated before they ceased operations in 1992. Alexander’s has seven properties. Interstate Properties, which is described above, and its partners owned an additional 27.0% of the outstanding common stock of Alexander’s as of December 31, 2008. Mr. Roth, Chairman of the Board and Chief Executive Officer of Vornado Realty Trust, is Chief Executive Officer, a director of Alexander’s and managing general partner of Interstate, and Mr. Fascitelli, President and a trustee of Vornado Realty Trust, is President and a director of Alexander’s. Messrs. Mandelbaum, West and Wight, trustees of us, are also directors of Alexander’s and general partners of Interstate. 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.”

 

The Operating Partnership manages, develops and leases the Alexander’s properties under management and development agreements and leasing agreements under which the Operating Partnership receives 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 Realty Trust and Alexander’s share common senior management and because a majority of the trustees of Vornado Realty Trust also 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.

 

19


For a description of Interstate Properties’ ownership of Vornado Realty Trust 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.

 

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 recently been volatile and may fluctuate.

 

The trading price of our common shares has recently 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 adversely affected and may continue to adversely affect the market price of our common shares. Among the factors that could affect the price of our common shares are:

 

 

actual or anticipated quarterly fluctuations in our operating results and financial condition;

 

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;

 

the effect of the “credit crisis” on the broader commercial credit and financial markets and the resulting illiquidity and volatility in the equity and bond 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 real estate investment trusts;

 

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 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 real estate investment trusts and other real estate related companies; and

 

domestic and international economic factors unrelated to our performance.

 

A significant decline in our stock price could result in substantial losses for shareholders.

 

Vornado Realty Trust has many shares available for future sale, which could hurt the market price of its shares.

As of December 31, 2008, we had authorized but unissued, 94,714,097 common shares of beneficial interest, $.04 par value, and 76,045,876 preferred shares of beneficial interest, no par value, of which 68,045,876 preferred shares have not been reserved and remain available for issuance as a newly-designated class of preferred. We may issue these authorized but unissued shares from time to time in public or private offerings or in connection with acquisitions.

 

In addition, as of December 31, 2008, 13,543,949 common shares were reserved for issuance upon redemption of Operating Partnership common units. Some of these shares may be sold in the public market after registration under the Securities Act under registration rights agreements between Vornado Realty Trust and some holders of common units of the Operating Partnership. These shares may also be sold in the public market under Rule 144 under the Securities Act or other available exemptions from registration. In addition, we have reserved a number of common shares for issuance under employee benefit plans, and these common shares will be available for sale from time to time. We have awarded shares of restricted stock and granted options to purchase additional common shares to some of our executive officers and employees. Of the authorized but unissued common and preferred shares above, 47,085,164 common and 8,000,000 preferred shares, in the aggregate, were reserved for issuance upon the redemption of Operating Partnership units, conversion of outstanding convertible securities, under benefit plans or for other activity not directly under our control.

 

We cannot predict the effect that future sales of Vornado Realty Trust common and preferred shares or Operating Partnership common and preferred units will have on the market prices of Vornado Realty Trust’s outstanding shares.

 

20

 

 


Increased market interest rates may hurt the value of Vornado Realty Trust’s 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 market interest rates as an important factor in deciding whether to buy or sell the shares. If market 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 market interest rates could cause the market price of Vornado Realty Trust’s common and preferred shares to decline.

 

 

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 Office Properties, Washington, DC Office Properties, Retail Properties, Merchandise Mart Properties and Toys “R” Us (“Toys”). The following pages provide details of our real estate properties.

 

 

21

 

 


ITEM 2.           PROPERTIES - continued

 

 

 

 

 

 

Square Feet

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

In Service

 

Out of Service

 

 

 

 

 

 

%

 

%

 

Annualized

 

 

 

Owned by

 

Owned By

 

Under

 

Encumbrances

 

 

Property

 

Ownership

 

Occupancy

 

Rent PSF (1)

 

Total

 

Company

 

Tenant

 

Development

 

(in thousands)

 

Major Tenants

NEW YORK OFFICE:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

New York City:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Penn Plaza:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

One Penn Plaza

 

100.0%

 

96.5%

  $

53.02

 

2,437,000

 

2,437,000

 

-

 

-   

  $

-

 

BMG Columbia House, Buck Consultants, Cisco, Kmart, MWB Leasing, Parsons Brinkerhoff, United Health Care, United States Customs Department

 

(ground leased through 2098)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Two Penn Plaza

 

100.0%

 

96.7%

 

45.31

 

1,576,000

 

1,576,000

 

-

 

-

 

287,386

 

LMW Associates, EMC, Forest Electric, IBI,

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Madison Square Garden, McGraw-Hill Co., Inc.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Eleven Penn Plaza

 

100.0%

 

95.6%

 

48.52

 

1,058,000

 

1,058,000

 

-

 

-

 

206,877

 

Macy*s, Rainbow Media Holdings

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

100 West 33rd Street

 

100.0%

 

97.8%

 

45.51

 

846,000

 

846,000

 

-

 

-

 

159,361

 

Bank of America, Draft FCB

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

330 West 34th Street

 

100.0%

 

99.3%

 

32.76

 

637,000

 

637,000

 

-

 

-

 

-

 

City of New York, Interieurs Inc.,

(ground leased through 2148)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The Bank of New York

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Penn Plaza

 

 

 

96.8%

 

47.50

 

6,554,000

 

6,554,000

 

-

 

-

 

653,624

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

East Side:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

909 Third Avenue

(ground leased through 2063)

 

100.0%

 

93.3%

 

56.16

(2)

1,317,000

 

1,317,000

 

-

 

-

 

214,075

 

J.P. Morgan Securities Inc., Citibank, Forest Laboratories, Morrison Cohen LLP, Robeco USA Inc., nited States Post Office, Ogilvy Public Relations, The Procter & Gamble Distributing LLC.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

150 East 58th Street

 

100.0%

 

95.4%

 

55.63

 

535,000

 

535,000

 

-

 

-

 

-

 

Castle Harlan, Tournesol Realty LLC. (Peter Marino),

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Various showroom tenants

Total East Side

 

 

 

93.9%

 

56.00

 

1,852,000

 

1,852,000

 

-

 

-

 

214,075

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

West Side:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

888 Seventh Avenue

 

100.0%

 

98.4%

 

72.92

 

857,000

 

857,000

 

-

 

-

 

318,554

 

Kaplan Management LLC, New Line Realty, Soros Fund, TPG-Axon Capital, Vornado Executive Headquarters

(ground leased through 2067)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1740 Broadway

 

100.0%

 

99.4%

 

57.99

 

597,000

 

597,000

 

-

 

-

 

-

 

Davis & Gilbert, Limited Brands,

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dept. of Taxation of the State of N.Y.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

57th Street

 

50.0%

 

97.0%

 

49.93

 

188,000

 

188,000

 

-

 

-

 

29,000

 

Various

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

825 Seventh Avenue

 

50.0%

 

100.0%

 

43.73

 

165,000

 

165,000

 

-

 

-

 

21,426

 

Young & Rubicam

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total West Side

 

 

 

98.8%

 

62.93

 

1,807,000

 

1,807,000

 

-

 

-

 

368,980

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Park Avenue:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

350 Park Avenue

 

100.0%

 

96.9%

 

71.18

 

549,000

 

549,000

 

-

 

-

 

430,000

 

Tweedy Browne Company,

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Manufacturers & Traders Trust,

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Veronis Suhler & Associates,

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ziff Brothers Investment Inc.,

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Kissinger Associates, Inc.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Grand Central:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

90 Park Avenue

 

100.0%

 

97.9%

 

56.06

 

902,000

 

902,000

 

-

 

-

 

-

 

Alston & Bird, Amster, Rothstein & Ebenstein,

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sanofi-Synthelabo Inc., STWB Inc.,

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

First Manhattan Consulting

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

330 Madison Avenue

 

25.0%

 

93.4%

 

51.59

 

792,000

 

792,000

 

-

 

-

 

70,000

 

Acordia Northeast Inc., Bank Julius Baer,

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

BDO Seidman, Dean Witter Reynolds Inc.,

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

HSBC Bank AFS, Stanford Group Holdings Inc.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Grand Central

 

 

 

95.8%

 

53.97

 

1,694,000

 

1,694,000

 

-

 

-

 

70,000

 

 

 

22

 

 


ITEM 2.

PROPERTIES - Continued

 

 

 

 

 

 

 

 

 

 

 

Square Feet

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

In Service

 

Out of Service

 

 

 

 

 

 

%

 

%

 

Annualized

 

 

 

Owned by

 

Owned By

 

Under

 

Encumbrances

 

 

Property

 

Ownership

 

Occupancy

 

Rent PSF (1)

 

Total

 

Company

 

Tenant

 

Development

 

(in thousands)

 

Major Tenants

NEW YORK OFFICE (Continued):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Madison/Fifth:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

640 Fifth Avenue

 

100.0%

 

82.4%

  $

74.62

 

322,000

 

322,000

 

-

 

-

  $

-

 

ROC Capital Management LP,

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fidelity Investments, Hennes & Mauritz,

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Janus Capital Group Inc., GSL Enterprises Inc.,

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Scout Capital Management,

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Legg Mason Investment Counsel

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

595 Madison Avenue

 

100.0%

 

99.4%

 

63.66

 

312,000

 

312,000

 

-

 

-

 

-

 

Beauvais Carpets, Coach, Levin Capital Strategies LP,

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Prada, Cosmetech Mably Int'l LLC.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

689 Fifth Avenue

 

100.0%

 

98.9%

 

61.84

 

88,000

 

88,000

 

-

 

-

 

-

 

Elizabeth Arden, Red Door Salons, Zara,

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Yamaha Artist Services Inc.

Total Madison/Fifth

 

 

 

91.8%

 

68.33

 

722,000

 

722,000

 

-

 

-

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

United Nations:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

866 United Nations Plaza

 

100.0%

 

97.6%

 

51.82

 

353,000

 

353,000

 

-

 

-

 

44,978

 

Fross Zelnick, Mission of Japan,

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The United Nations, Mission of Finland

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Midtown South:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

770 Broadway

 

100.0%

 

99.8%

 

49.69

 

1,059,000

 

1,059,000

 

-

 

-

 

353,000

 

Time Warner / AOL, J. Crew, Kmart,

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

VIACOM International Inc., Nielson Company (US) Inc.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Rockefeller Center:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1290 Ave of the Americas

 

70.0%

 

99.2%

 

58.15

 

2,021,000

 

2,021,000

 

-

 

-

 

444,666

 

AXA Equitable Life Insurance, Bank of New York Mellon, Bryan Cave LLP, Microsoft Corporation, Morrison & Forester LLP, Warner Music Group, Cushman & Wakefield, Fitzpatrick, Cella, Harper & Scinto

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Downtown:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

20 Broad Street

 

100.0%

 

93.1%

 

48.64

 

472,000

 

472,000

 

-

 

-

 

-

 

New York Stock Exchange

(ground leased through 2081)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

40 Fulton Street

 

100.0%

 

90.7%

 

37.28

 

243,000

 

243,000

 

-

 

-

 

-

 

PBA/Health and Welfare Fund

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

40-42 Thompson Street

 

100.0%

 

100.0%

 

41.16

 

28,000

 

28,000

 

-

 

-

 

-

 

Crown Management

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Downtown

 

 

 

92.6%

 

44.64

 

743,000

 

743,000

 

-

 

-

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total New York City

 

 

 

96.6%

 

53.33

 

17,354,000

 

17,354,000

 

-

 

-

 

2,579,323

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

New Jersey

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Paramus

 

 

 

97.8%

 

20.03

 

131,000

 

131,000

 

-

 

-

 

-

 

Vornado's Administrative Headquarters

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total New York City Office

 

 

 

96.6%

$

53.15

 

17,485,000

 

17,485,000

 

-

 

-

$

2,579,323

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Vornado's Ownership Interest

 

 

 

96.7%

$

53.08

 

16,108,000

 

16,108,000

 

-

 

-

$

2,372,224

 

 

 

 

23

 

 


ITEM 2.

PROPERTIES - Continued

 

 

 

 

 

 

 

 

 

 

 

Square Feet

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

In Service

 

Out of Service

 

 

 

 

 

 

%

 

%

 

Annualized

 

 

 

Owned by

 

Owned By

 

Under

 

Encumbrances

 

 

Property

 

Ownership

 

Occupancy

 

Rent PSF (1)

 

Total

 

Company

 

Tenant

 

Development

 

(in thousands)

 

Major Tenants

WASHINGTON DC OFFICE:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Crystal City:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2011-2451 Crystal Drive - 5 buildings

 

100.0%

 

89.6%

  $

38.07

 

2,249,000

 

2,249,000

 

-

 

-  

  $

88,733

    

General Services Administration, Conservation International, Boeing, Smithsonian Institution, On-Site Sourcing, Natl. Consumer Coop. Bank, Archstone Trust, Council on Foundations, TKC Communications LLC, Vornado / Charles E. Smith Divisional Headquarters, Kellogg, Brown, & Root, General Dynamics, Scitor Corp., Food Marketing Institute, Lockheed Martin

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

S. Clark Street / 12th Street - 5 buildings

 

100.0%

 

98.3%

 

36.60

 

1,501,000

 

1,501,000

 

-

 

-

 

152,393

 

General Services Administration, SAIC, Inc., Boeing, Lockheed Martin,

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The Int'l Justice Mission

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1550-1750 Crystal Drive / 241-251 18th Street (4 buldings)

 

100.0%

 

98.7%

 

37.91

 

1,463,000

 

1,463,000

 

-

 

-

 

177,764

 

General Services Administration, - 4 buildings

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Lockheed Martin, Booz Allen, SAIC, Inc.,

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Arete Associates, L-3 Communications,

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Battelle Memorial Institute

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1800, 1851 and 1901 South Bell Street

 

100.0%

 

96.9%

 

34.43

 

858,000

 

858,000

 

-

 

-

 

27,801

 

General Services Administration,

- 3 buildings

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Lockheed Martin

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2100 / 2200 Crystal Drive - 2 buildings

 

100.0%

 

100.0%

 

31.50

 

529,000

 

529,000

 

-

 

-

 

-

 

General Services Administration,

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Public Broadcasting Service

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

223 23rd Street / 2221 South Clark Street

 

100.0%

 

81.9%

 

28.78

 

306,000

 

230,000

 

-

 

76,000

 

-

 

General Services Administration

- 2 buildings

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2001 Jefferson Davis Highway

 

100.0%

 

95.4%

 

34.31

 

161,000

 

161,000

 

-

 

-

 

 

 

SAIC, Inc., Lockheed Martin

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2100 Crystal Drive Retail

 

100.0%

 

63.1%

 

38.27

 

83,000

 

83,000

 

-

 

-

 

-

 

Various

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Crystal Drive Shops

 

100.0%

 

88.4%

 

45.04

 

57,000

 

57,000

 

-

 

-

 

-

 

Various

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Crystal City

 

100.0%

 

94.5%

 

35.53

 

7,207,000

 

7,131,000

 

-

 

76,000

 

446,691

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Central Business District:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Warner Building - 1299 Pennsylvania

 

100.0%

 

99.9%

 

65.91

 

605,000

 

605,000

 

-

 

-

 

292,700

 

Howrey LLP, Baker Botts, LLP,

Avenue, NW

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

General Electric

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Universal Buildings

 

100.0%

 

98.2%

 

43.39

 

610,000

 

610,000

 

-

 

-

 

59,728

 

Academy for Educational Development

1825-1875 Connecticut Avenue, NW

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    - 2 buildings

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

409 3rd Street, NW

 

100.0%

 

98.5%

 

38.49

 

384,000

 

384,000

 

-

 

-

 

-

 

General Services Administration

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1750 Pennsylvania Avenue, NW

 

100.0%

 

97.0%

 

43.52

 

254,000

 

254,000

 

-

 

-

 

46,570

 

General Services Administration,

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

PA Consulting Group Holdings

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Bowen Building - 875 15th Street, NW

 

100.0%

 

99.7%

 

62.68

 

232,000

 

232,000

 

-

 

-

 

115,022

 

Paul, Hastings, Janofsky & Walker LLP,

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Millennium Challenge Corporation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1150 17th Street, NW

 

100.0%

 

90.2%

 

44.47

 

231,000

 

231,000

 

-

 

-

 

29,659

 

American Enterprise Institute

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1101 17th Street, NW

 

100.0%

 

98.1%

 

43.32

 

211,000

 

211,000

 

-

 

-

 

24,561

 

American Federation of States

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1730 M Street, NW

 

100.0%

 

96.1%

 

41.16

 

198,000

 

198,000

 

-

 

-

 

15,335

 

General Services Administration

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1140 Connecticut Avenue, NW

 

100.0%

 

93.8%

 

43.03

 

185,000

 

185,000

 

-

 

-

 

18,166

 

Elizabeth Glaser Pediatric AIDS Foundation,

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

National Legal Aid and Defender Assoc.

 

24

 

 


ITEM 2.

PROPERTIES - Continued

 

 

 

 

 

 

 

 

 

 

 

Square Feet

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

In Service

 

Out of Service

 

 

 

 

 

 

%

 

%

 

Annualized

 

 

 

Owned by

 

Owned By

 

Under

 

Encumbrances

 

 

Property

 

Ownership

 

Occupancy

 

Rent PSF (1)

 

Total

 

Company

 

Tenant

 

Development

 

(in thousands)

 

Major Tenants

WASHINGTON DC OFFICE (Continued):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1227 25th Street, NW

 

100.0%

 

53.1%

  $

50.06

 

133,000

 

133,000

 

-

 

-

  $

-

 

Epstein, Becker & Green, P.C.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2101 L Street, NW

 

100.0%

 

84.5%

 

51.73

 

379,000

 

379,000

 

-

 

-

 

150,000

 

Greenberg Traurig, LLP, US Green Building Council, American Insurance Association

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1999 K Street, NW

 

100.0%

 

-

 

-

 

250,000

 

-

 

-

 

250,000

 

73,747

 

Mayer Brown LLP (lease not commenced)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1726 M Street, NW

 

100.0%

 

87.8%

 

40.46

 

88,000

 

88,000

 

-

 

-

 

-

 

Aptima, Inc., Nelnet Corporation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

South Capitol - 2 buildings

 

100.0%

 

-

 

-

 

58,000

 

-

 

-

 

58,000

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Kaempfer Interests:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

401 M Street, SW

 

2.5%

 

-

 

-

 

2,100,000

 

-

 

-

 

2,100,000

 

57,608

 

District of Columbia (lease not commenced)

 

- 5 buildings

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1501 K Street, NW

 

5.0%

 

98.9%

 

56.19

 

380,000

 

380,000

 

-

 

-

 

102,563

 

Sidley Austin LLP

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1399 New York Avenue, NW

 

2.5%

 

100.0%

 

84.32

 

124,000

 

124,000

 

-

 

-

 

40,459

 

Bloomberg

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Central Business District

 

 

 

96.6%

 

50.59

 

6,422,000

 

4,014,000

 

-

 

2,408,000

 

1,026,118

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

I-395 Corridor:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Skyline Place - 7 buildings

 

100.0%

 

95.5%

 

29.88

 

2,105,000

 

2,105,000

 

-

 

-

 

577,200

 

General Services Administration, SAIC,

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Inc., Northrop Grumman, Booz Allen,

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Jacer Corporation, System Research and Analysis

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

One Skyline Tower

 

100.0%

 

100.0%

 

27.15

 

473,000

 

473,000

 

-

 

-

 

100,800

 

General Services Administration

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total I-395 Corridor

 

100.0%

 

96.3%

 

29.35

 

2,578,000

 

2,578,000

 

-

 

-

 

678,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Rosslyn / Ballston:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2200 / 2300 Clarendon Blvd

 

100.0%

 

97.3%

 

37.42

 

628,000

 

628,000

 

-

 

-

 

70,774

 

Arlington County, General Services

(Courthouse Plaza) - 2 buildings

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Administration, AMC Theaters

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Rosslyn Plaza - Office - 4 buildings

 

46.0%

 

90.7%

 

32.38

 

722,000

 

722,000

 

-

 

-

 

56,679

 

General Services Administration

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Rosslyn / Ballston

 

 

 

95.0%

 

35.65

 

1,350,000

 

1,350,000

 

-

 

-

 

127,453

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Tysons Corner:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fairfax Square - 3 buildings

 

20.0%

 

90.6%

 

35.88

 

518,000

 

518,000

 

-

 

-

 

62,813

 

EDS Information Services

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Reston:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Reston Executive - 3 buildings

 

100.0%

 

92.2%

 

33.14

 

490,000

 

490,000

 

-

 

-

 

93,000

 

SAIC, Inc., Quadramed Corp

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commerce Executive - 3 buildings

 

100.0%

 

94.2%

 

28.04

 

416,000

 

391,000

 

-

 

25,000

 

50,222

 

L-3 Communications, SAIC, Inc.,

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Concert Management Services

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Reston

 

 

 

93.1%

 

30.85

 

906,000

 

881,000

 

-

 

25,000

 

143,222

 

 

 

25

 

 


ITEM 2.

PROPERTIES - Continued

 

 

 

 

 

 

 

 

 

 

 

 

Square Feet

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

In Service

 

Out of Service

 

 

 

 

 

 

%

 

%

 

Annualized

 

 

 

 

Owned by

 

Owned By

 

Under

 

Encumbrances

 

 

Property

 

Ownership

 

Occupancy

 

Rent PSF (1)

 

Total

 

 

Company

 

Tenant

 

Development

 

(in thousands)

 

Major Tenants

WASHINGTON DC OFFICE (Continued):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Rockville/Bethesda:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Democracy Plaza One

 

100.0%

 

95.9%

  $

41.53

 

213,000

 

213,000

 

-

 

-

  $

-

 

National Institutes of Health

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pentagon City:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fashion Centre Mall

 

7.5%

 

97.7%

 

36.75

 

819,000

 

819,000

 

-

 

-

 

152,271

 

Macy*s, Nordstrom

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Washington Tower

 

7.5%

 

100.0%

 

41.73

 

170,000

 

170,000

 

-

 

-

 

40,000

 

The Rand Corporation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Pentagon City

 

 

 

98.1%

 

37.62

 

989,000

 

989,000

 

-

 

-

 

192,271

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Washington, DC office properties

 

 

 

95.0%

$

37.33

 

20,183,000

 

17,674,000

 

-

 

2,509,000

$

2,676,568

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Vornado's Ownership Interest

 

 

 

95.0%

$

36.65

 

15,936,000

 

15,475,000

 

-

 

461,000

$

2,223,852

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Riverhouse Apartments (1,680 units)

 

100.0%

 

86.4%

$

-

 

1,802,000

 

1,802,000

 

-

 

-

$

259,546

 

 

- 3 buildings

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Crystal City Hotel

 

100.0%

 

100.0%

 

-

 

266,000

 

266,000

 

-

 

-

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Rosslyn Plaza - Residential - 2 buildings

 

43.7%

 

95.0%

 

-

 

253,000

 

253,000

 

-

 

-

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

West End 25, 1229-1231 25th Street, NW

 

100.0%

 

-

 

-

 

273,000

 

-

 

-

 

273,000

 

24,620

 

 

(283 unit residential development)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

220 20th Street

 

100.0%

 

-

 

-

 

270,000

 

-

 

-

 

270,000

 

40,701

 

 

(265 unit residential development)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other - 3 buildings

 

100.0%

 

100.0%

 

32.76

 

11,000

 

11,000

 

-

 

-

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Other

 

 

 

 

 

 

 

2,875,000

 

2,332,000

 

-

 

543,000

 

324,867

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Washington, DC Properties

 

 

 

94.3%

$

38.27

 

23,058,000

(3)

20,006,000

 

-

 

3,052,000

$

3,001,435

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Vornado's Ownership Interest

 

 

 

94.2%

$

37.70

 

18,670,000

 

17,666,000

 

-

 

1,004,000

$

2,548,719

 

 

 

 

26

 

 


 

ITEM 2.

PROPERTIES - Continued

 

 

 

 

 

 

 

 

 

 

 

Square Feet

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

In Service

 

Out of Service

 

 

 

 

 

 

%

 

%

 

Annualized

 

 

 

Owned by

 

Owned By

 

Under

 

Encumbrances

 

 

Property

 

Ownership

 

Occupancy

 

Rent PSF (1)

 

Total

 

Company

 

Tenant

 

Development

 

(in thousands)

 

Major Tenants

RETAIL:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

REGIONAL MALLS:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Green Acres Mall, Valley Stream, NY

 

100.0%

 

89.9%

   $

44.07

(4)  

1,837,000

 

1,719,000

 

79,000

 

39,000   

  $

335,000

 

Macy*s, Sears, Wal-Mart, JCPenney, Best Buy, BJ's Wholesale Club,

(10% ground and building leased

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

through 2039)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Monmouth Mall, Eatontown, NJ

 

50.0%

 

93.7%

 

38.32

(4)

1,476,000

(5)

716,000

 

719,000

(5)  

41,000

 

165,000

 

Macy*s, JCPenney, Lord & Taylor, Loews Theatre

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Springfield Mall, Springfield, VA

 

97.5%

 

100.0%

 

27.89

(4)

1,408,000

(5)

677,000

 

390,000

(5)

341,000

 

252,803

 

Macy*s, JCPenney, Target

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Bergen Town Center, Paramus, NJ

 

100.0%

 

100.0%

 

20.31

(4)

1,243,000

 

506,000

 

13,000

 

724,000

 

228,731

 

Target, Whole Foods Market, Century 21, Nordstrom's Rack, Saks Fifth Avenue Off 5th, Nike Outlet

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Broadway Mall, Hicksville, NY

 

100.0%

 

88.6%

 

34.47

(4)

1,141,000

(5)

765,000

 

376,000

(5)

-

 

94,879

 

Macy*s, Ikea, Target, National Amusement

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Montehiedra, Puerto Rico

 

100.0%

 

95.7%

 

42.19

(4)

541,000

 

541,000

 

-

 

-

 

120,000

 

The Home Depot, Kmart, Marshalls, Caribbean Theatres, Tiendas Capri

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Las Catalinas, Puerto Rico

 

100.0%

 

93.9%

 

51.58

(4)

496,000

(5)

356,000

 

140,000

(5)

-

 

60,766

 

Kmart, Sears

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Regional Malls

 

 

 

93.1%

$

37.60

 

8,142,000

 

5,280,000

 

1,717,000

 

1,145,000

$

1,257,179

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Vornado's Ownership Interest

 

 

 

93.0%

$

37.59

 

6,348,000

 

4,905,000

 

327,000

 

1,116,000

$

1,168,359

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

STRIP SHOPPING CENTERS:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

New Jersey:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

North Bergen (Tonnelle Avenue)

 

100.0%

 

-

$

-

 

410,000

 

-

 

-

 

410,000

$

-

 

Wal-Mart, BJ's Wholesale Club

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(under development by tenants)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

East Hanover I and II

 

100.0%

 

94.4%

 

17.83

 

353,000

 

347,000

 

6,000

 

-

 

25,136

(10)  

The Home Depot, Dick's Sporting Goods, Marshalls

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Garfield

 

100.0%

 

-

 

-

 

325,000

 

-

 

-

 

325,000

 

-

 

Wal-Mart, The Home Depot (under development

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

by tenant)

Totowa

 

100.0%

 

85.6%

 

18.59

 

318,000

 

224,000

 

94,000

 

-

 

27,201

(10)

The Home Depot, Bed Bath & Beyond (6) , Marshalls

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Bricktown

 

100.0%

 

99.5%

 

17.16

 

280,000

 

277,000

 

3,000

 

-

 

15,015

(10)

Kohl's, ShopRite, Marshalls

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Union (Route 22 and Morris Avenue)

 

100.0%

 

99.4%

 

23.33

 

276,000

 

113,000

 

163,000

 

-

 

30,891

(10)

Lowe's, Toys "R" Us

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Hackensack

 

100.0%

 

98.3%

 

21.31

 

275,000

 

209,000

 

66,000

 

-

 

23,033

(10)

The Home Depot, Pathmark

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cherry Hill

 

100.0%

 

99.2%

 

16.38

 

264,000

 

58,000

 

206,000

 

-

 

13,809

(10)

Wal-Mart, Toys "R" Us

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Jersey City

 

100.0%

 

100.0%

 

19.86

 

236,000

 

66,000

 

170,000

 

-

 

17,633

(10)

Lowe's

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Union (2445 Springfield Avenue)

 

100.0%

 

100.0%

 

17.85

 

232,000

 

232,000

 

-

 

-

 

-

 

The Home Depot

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

East Brunswick I

 

100.0%

 

83.9%

 

15.05

 

231,000

 

221,000

 

10,000

 

-

 

20,966

(10)

Kohl's, Dick's Sporting Goods,

(325 - 333 Route 18 South)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

T.J. Maxx

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Middletown

 

100.0%

 

100.0%

 

14.33

 

231,000

 

179,000

 

52,000

 

-

 

15,147

(10)

Kohl's, Stop & Shop

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Woodbridge

 

100.0%

 

100.0%

 

17.50

 

227,000

 

87,000

 

140,000

 

-

 

20,361

(10)

Wal-Mart, Syms

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

North Plainfield

 

100.0%

 

74.8%

 

7.83

 

219,000

 

219,000

 

-

 

-

 

10,023

(10)  

Kmart, Pathmark

(ground leased through 2060)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

27

 

 


ITEM 2.

PROPERTIES - Continued

 

 

 

 

 

 

 

 

 

 

 

Square Feet

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

In Service

 

Out of Service

 

 

 

 

 

 

%

 

%

 

Annualized

 

 

 

Owned by

 

Owned By

 

Under

 

Encumbrances

 

 

Property

 

Ownership

 

Occupancy

 

Rent PSF (1)

 

Total

 

Company

 

Tenant

 

Development

 

(in thousands)

 

Major Tenants

RETAIL (Continued):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Marlton

 

100.0%

 

100.0% 

  $

9.89

 

214,000

 

158,000

 

7,000

 

49,000

  $

11,221

(10)  

Kohl's (6), ShopRite

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Manalapan

 

100.0%

 

100.0%

 

15.69

 

208,000

 

206,000

 

2,000

 

-

 

11,540

(10)

Best Buy, Bed Bath & Beyond, Babies "R" Us

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

East Rutherford

 

100.0%

 

96.7%

 

31.09

 

197,000

 

42,000

 

155,000

 

-

 

-

 

Lowe's

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

East Brunswick II (339-341 Route 18 South)

 

100.0%

 

83.1%

 

-

 

196,000

 

33,000

 

163,000

 

-

 

-

 

Lowe's

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Bordentown

 

100.0%

 

100.0%

 

7.37

 

179,000

 

179,000

 

-

 

-

 

7,430

(10)

ShopRite

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Morris Plains

 

100.0%

 

100.0%

 

19.40

 

177,000

 

176,000

 

1,000

 

-

 

11,088

(10)

Kohl's, ShopRite

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dover

 

100.0%

 

98.1%

 

11.52

 

173,000

 

167,000

 

6,000

 

-

 

6,767

(10)

ShopRite, T.J. Maxx

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Delran

 

100.0%

 

76.6%

 

4.25

 

171,000

 

168,000

 

3,000

 

-

 

5,919

(10)

Sam's Club

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Lodi (Route 17 North)

 

100.0%

 

100.0%

 

9.99

 

171,000

 

171,000

 

-

 

-

 

8,647

(10)

National Wholesale Liquidators

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Watchung

 

100.0%

 

97.3%

 

21.49

 

170,000

 

54,000

 

116,000

 

-

 

12,464

(10)

BJ's Wholesale Club

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Lawnside

 

100.0%

 

100.0%

 

12.82

 

145,000

 

142,000

 

3,000

 

-

 

9,757

(10)

The Home Depot, Petsmart

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Hazlet

 

100.0%

 

100.0%

 

2.44

 

123,000

 

123,000

 

-

 

-

 

-

 

Stop & Shop

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Kearny

 

100.0%

 

100.0%

 

14.07

 

104,000

 

32,000

 

72,000

 

-

 

3,442

(10)

Pathmark, Marshalls

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Turnersville

 

100.0%

 

100.0%

 

6.25

 

96,000

 

89,000

 

7,000

 

-

 

3,763

(10)  

Haynes Furniture (6)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Lodi (Washington Street)

 

100.0%

 

100.0%

 

21.74

 

85,000

 

85,000

 

-

 

-

 

10,738

 

A&P

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Carlstadt

 

100.0%

 

100.0%

 

22.25

 

78,000

 

78,000

 

-

 

-

 

7,690

 

Stop & Shop

(ground leased through 2050)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

North Bergen (Kennedy Boulevard)

 

100.0%

 

100.0%

 

30.76

 

63,000

 

7,000

 

56,000

 

-

 

3,650

(10)

Waldbaum's

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

South Plainfield

 

100.0%

 

100.0%

 

20.40

 

56,000

 

56,000

 

-

 

-

 

-

 

Staples

(ground leased through 2039)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Englewood

 

100.0%

 

94.8%

 

30.22

 

41,000

 

41,000

 

-

 

-

 

12,380

 

New York Sports Club

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Eatontown

 

100.0%

 

100.0%

 

25.27

 

30,000

 

30,000

 

-

 

-

 

-

 

Petco

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Montclair

 

100.0%

 

100.0%

 

20.48

 

18,000

 

18,000

 

-

 

-

 

1,773

(10)

Whole Foods Market

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total New Jersey

 

 

 

 

 

 

 

6,572,000

 

4,287,000

 

1,501,000

 

784,000

 

347,484

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pennsylvania:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Allentown

 

100.0%

 

99.7%

 

14.52

 

627,000

 

270,000

 

357,000

 

-

 

21,406

(10)

Wal-Mart, Sam's Club, ShopRite, Burlington Coat Factory, T.J. Maxx, Dick's Sporting Goods

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Philadelphia

 

100.0%

 

78.1%

 

13.09

 

430,000

 

430,000

 

-

 

-

 

8,245

(10)

Kmart, Health Partners

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Wilkes-Barre

 

100.0%

 

83.3%

 

12.68

 

329,000

(5)

204,000

 

125,000

(5)

-

 

21,165

 

Target, Babies "R" Us,

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ross Stores

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Lancaster

 

100.0%

 

100.0%

 

4.55

 

228,000

 

58,000

 

170,000

 

-

 

-

 

Lowe's, Weis Markets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Bensalem

 

100.0%

 

100.0%

 

11.09

 

184,000

 

176,000

 

8,000

 

-

 

5,915

(10)

Kohl's (6), Ross Stores

 

28

 

 


ITEM 2.

PROPERTIES - Continued

 

 

 

 

 

 

 

 

 

 

 

Square Feet

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

In Service

 

Out of Service

 

 

 

 

 

 

%

 

%

 

Annualized

 

 

 

Owned by

 

Owned By

 

Under

 

Encumbrances

 

 

Property

 

Ownership

 

Occupancy

 

Rent PSF (1)

 

Total

 

Company

 

Tenant

 

Development

 

(in thousands)

 

Major Tenants

RETAIL (Continued):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Broomall

 

100.0%

 

100.0%  

   $

10.65

 

169,000

 

147,000

 

22,000

 

-   

   $

9,002

(10)    

Giant Food (6) , A.C. Moore, Petsmart

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Bethlehem

 

100.0%

 

87.1%

 

6.18

 

167,000

 

164,000

 

3,000

 

-

 

3,744

(10)

Giant Food, Superpetz

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Upper Moreland

 

100.0%

 

100.0%

 

9.75

 

122,000

 

122,000

 

-

 

-

 

6,400

(10)

Sam's Club

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

York

 

100.0%

 

100.0%

 

7.80

 

110,000

 

110,000

 

-

 

-

 

3,785

(10)

Ashley Furniture

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Levittown

 

100.0%

 

100.0%

 

6.25

 

105,000

 

105,000

 

-

 

-

 

3,025

(10)

Haynes Furniture

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Glenolden

 

100.0%

 

100.0%

 

23.13

 

102,000

 

10,000

 

92,000

 

-

 

6,751

(10)

Wal-Mart

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Wilkes-Barre

 

100.0%

 

50.1%

 

4.65

 

81,000

 

81,000

 

-

 

-

 

-

 

Ollie's Bargain Outlet

(ground and building leased through 2014)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Wyomissing

 

100.0%

 

89.0%

 

14.17

 

79,000

 

79,000

 

-

 

-

 

-

 

LA Fitness

(ground and building leased through 2065)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Pennsylvania

 

 

 

 

 

 

 

2,733,000

 

1,956,000

 

777,000

 

-

 

89,438

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

New York:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Poughkeepsie, NY

 

100.0%

 

100.0%

 

7.65

 

670,000

 

306,000

 

2,000

 

362,000

 

-

 

Christmas Tree Shops, Kmart,

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Burlington Coat Factory, ShopRite

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Bronx (Bruckner Boulevard)

 

100.0%

 

98.9%

 

17.74

 

501,000

 

387,000

 

114,000

 

-

 

-

 

Kmart, Toys "R" Us, Key Food

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Buffalo (Amherst) (ground leased

 

100.0%

 

45.0%

 

5.54

 

296,000

 

227,000

 

69,000

 

-

 

6,453

(10)

T.J. Maxx, Toys "R" Us

through 2017)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Huntington

 

100.0%

 

96.4%

 

12.96

 

208,000

 

208,000

 

-

 

-

 

16,072

 

Kmart

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Rochester

 

100.0%

 

100.0%

 

-

 

205,000

 

-

 

205,000

 

-

 

-

 

Wal-Mart

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mt. Kisco

 

100.0%

 

100.0%

 

21.35

 

188,000

 

71,000

 

117,000

 

-

 

29,992

 

Target, A&P

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Freeport (437 East Sunrise Highway)

 

100.0%

 

100.0%

 

17.29

 

167,000

 

167,000

 

-

 

-

 

13,630

(10)

The Home Depot, Cablevision

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Staten Island

 

100.0%

 

96.9%

 

18.62

 

165,000

 

165,000

 

-

 

-

 

17,448

 

Waldbaum's

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Rochester (Henrietta)

 

100.0%

 

89.2%

 

3.31

 

158,000

 

158,000

 

-

 

-

 

-

 

Kohl's, Ollie's Bargain Outlet

(ground leased through 2056)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Albany (Menands)

 

100.0%

 

74.0%

 

9.00

 

140,000

 

140,000

 

-

 

-

 

5,726

(10)

Bank of America

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

New Hyde Park (ground and building

 

100.0%

 

100.0%

 

17.25

 

101,000

 

101,000

 

-

 

-

 

6,879

(10)

Stop & Shop

leased through 2029)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Inwood

 

100.0%

 

93.4%

 

20.70

 

100,000

 

100,000

 

-

 

-

 

-

 

Stop & Shop

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

North Syracuse (ground and building

 

100.0%

 

100.0%

 

-

 

98,000

 

-

 

98,000

 

-

 

-

 

Wal-Mart

leased through 2014)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

West Babylon

 

100.0%

 

98.0%

 

12.87

 

79,000

 

79,000

 

-

 

-

 

6,687

 

Waldbaum's

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Bronx (1750-1780 Gun Hill Road)

 

100.0%

 

35.2%

 

35.59

 

74,000

 

46,000

 

-

 

28,000

 

-

 

T.G.I. Friday's

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Queens

 

100.0%

 

98.7%

 

37.17

 

58,000

 

58,000

 

-

 

-

 

-

 

New York Sports Club, Bank of America

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Oceanside

 

100.0%

 

100.0%

 

25.33

 

16,000

 

16,000

 

-

 

-

 

-

 

Party City

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total New York

 

 

 

 

 

 

 

3,224,000

 

2,229,000

 

605,000

 

390,000

 

102,887

 

 

 

29


ITEM 2.

PROPERTIES - Continued

 

 

 

 

 

 

 

 

 

 

 

Square Feet

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

In Service

 

Out of Service

 

 

 

 

 

 

%

 

%

 

Annualized

 

 

 

Owned by

 

Owned By

 

Under

 

Encumbrances

 

 

Property

 

Ownership

 

Occupancy

 

Rent PSF (1)

 

Total

 

Company

 

Tenant

 

Development

 

(in thousands)

 

Major Tenants

RETAIL (Continued):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Maryland:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Baltimore (Towson)

 

100.0%

 

78.6%

   $

15.39

 

142,000

 

142,000

 

-

 

-

   $

10,489

(10) 

Shoppers Food Warehouse, Staples, A.C. Moore

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Annapolis

 

100.0%

 

100.0%

 

8.99

 

128,000

 

128,000

 

-

 

-

 

-

 

The Home Depot

(ground and building leased through 2042)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Glen Burnie

 

100.0%

 

78.5%

 

10.06

 

121,000

 

65,000

 

56,000

 

-

 

5,398

(10)

Weis Markets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Rockville

 

100.0%

 

100.0%

 

22.94

 

94,000

 

94,000

 

-

 

-

 

14,344

 

Regal Cinemas

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Maryland

 

 

 

 

 

 

 

485,000

 

429,000

 

56,000

 

-

 

30,231

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Massachusetts:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Chicopee

 

100.0%

 

100.0%

 

-

 

224,000

 

-

 

224,000

 

-

 

-

 

Wal-Mart

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Springfield

 

100.0%

 

97.3%

 

14.86

 

150,000

 

33,000

 

117,000

 

-

 

2,878

(10)

Wal-Mart

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Milford

 

100.0%

 

100.0%

 

5.76

 

83,000

 

83,000

 

-

 

-

 

-

 

Kohl's

(ground and building leased through 2019)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Massachusetts

 

 

 

 

 

 

 

457,000

 

116,000

 

341,000

 

-

 

2,878

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

California:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

San Jose

 

45.0%

 

100.0%

 

29.18

 

651,000

(5)

404,000

 

158,000

(5)

89,000

 

132,128

 

Target (5) , The Home Depot, Toys "R" Us, Best Buy

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Beverly Connection, Los Angeles

 

50.0%

 

100.0%

 

35.79

 

322,000

 

219,000

 

-

 

103,000

 

100,000

 

Marshalls, Old Navy, Sports Chalet, Nordstrom’s Rack, Ross Dress for Less, Loehmann’s

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pasadena (ground leased through 2077)

 

100.0%

 

62.7%

 

30.53

 

133,000

 

133,000

 

-

 

-

 

-

 

Breakthru Fitness, Trader Joes

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

San Francisco (The Cannery) (2801

 

95.0%

 

34.6%

 

26.17

 

106,000

 

106,000

 

-

 

-

 

18,561

 

 

Leavenworth Street)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

San Francisco (275 Sacramento Street)

 

100.0%

 

100.0%

 

32.90

 

76,000

 

76,000

 

-

 

-

 

-

 

Open TV Inc.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

San Francisco (3700 Geary Boulevard)

 

100.0%

 

100.0%

 

30.00

 

30,000

 

30,000

 

-

 

-

 

-

 

OfficeMax

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Walnut Creek (1149 South Main Street)

 

100.0%

 

100.0%

 

39.79

 

29,000

 

29,000

 

-

 

-

 

-

 

Barnes & Noble

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Walnut Creek (1556 Mt. Diablo Boulevard)

 

95.0%

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total California

 

 

 

 

 

 

 

1,347,000

 

997,000

 

158,000

 

192,000

 

250,689

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Connecticut:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Newington

 

100.0%

 

100.0%

 

15.01

 

188,000

 

43,000

 

145,000

 

-

 

6,029

(10)

Wal-Mart, Staples

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Waterbury

 

100.0%

 

100.0%

 

14.68

 

148,000

 

143,000

 

5,000

 

-

 

5,684

(10)

Price Chopper

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Connecticut

 

 

 

 

 

 

 

336,000

 

186,000

 

150,000

 

-

 

11,713

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Virginia:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Norfolk

 

100.0%

 

100.0%

 

5.85

 

114,000

 

114,000

 

-

 

-

 

-

 

BJ's Wholesale Club

(ground and building leased through 2069)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Michigan:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Roseville

 

100.0%

 

97.5%

 

5.01

 

119,000

 

119,000

 

-

 

-

 

-

 

JCPenney

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Washington, DC

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3040 M Street

 

100.0%

 

100.0%

 

46.36

 

42,000

 

42,000

 

-

 

-

 

-

 

Barnes & Noble, Barneys

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

New Hampshire:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Salem (ground leased through 2102)

 

100.0%

 

100.0%

 

-

 

37,000

 

-

 

37,000

 

-

 

-

 

Babies "R" Us

 

30

 

 


ITEM 2.

PROPERTIES - Continued

 

 

 

 

 

 

 

 

 

 

 

Square Feet

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

In Service

 

Out of Service

 

 

 

 

 

 

%

 

%

 

Annualized

 

 

 

Owned by

 

Owned By

 

Under

 

Encumbrances

 

 

Property

 

Ownership

 

Occupancy

 

Rent PSF (1)

 

Total

 

Company

 

Tenant

 

Development

 

(in thousands)

 

Major Tenants

RETAIL (Continued):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

ACQUIRED FROM TOYS 'R' US

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Wheaton, MD

 

100.0%

 

100.0%

  $

13.58

 

66,000

 

66,000

 

-

 

-

   $

-

   

Best Buy

(ground leased through 2060)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

San Francisco, CA (2675 Geary Street)

 

100.0%

 

100.0%

 

45.76

 

55,000

 

55,000

 

-

 

-

 

-

 

Best Buy

(ground and building leased through 2043)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Coral Springs, FL

 

100.0%

 

100.0%

 

9.20

 

53,000

 

53,000

 

-

 

-

 

-

 

Best Buy

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cambridge, MA

 

100.0%

 

100.0%

 

19.84

 

48,000

 

48,000

 

-

 

-

 

-

 

Petsmart

(ground and building leased through 2033)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Battle Creek, MI

 

100.0%

 

-

 

-

 

47,000

 

47,000

 

-

 

-

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Bourbonnais, IL

 

100.0%

 

100.0%

 

9.95

 

47,000

 

47,000

 

-

 

-

 

-

 

Best Buy

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commack, NY

 

100.0%

 

59.0%

 

22.56

 

47,000

 

47,000

 

-

 

-

 

-

 

Petsmart

(ground and building leased through 2021)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Lansing, IL

 

100.0%

 

-

 

-

 

47,000

 

47,000

 

-

 

-

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Springdale, OH

 

100.0%

 

-

 

-

 

47,000

 

47,000

 

-

 

-

 

-

 

 

(ground and building leased through 2046)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Arlington Heights, IL

 

100.0%

 

100.0%

 

9.00

 

46,000

 

46,000

 

-

 

-

 

-

 

RVI

(ground and building leased through 2043)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Bellingham, WA

 

100.0%

 

-

 

-

 

46,000

 

46,000

 

-

 

-

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dewitt, NY

 

100.0%

 

100.0%

 

18.60

 

46,000

 

46,000

 

-

 

-

 

-

 

Best Buy

(ground leased through 2041)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Littleton, CO

 

100.0%

 

100.0%

 

13.93

 

46,000

 

46,000

 

-

 

-

 

-

 

Best Buy

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ogden, UT

 

100.0%

 

-

 

-

 

46,000

 

46,000

 

-

 

-

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Redding, CA

 

100.0%

 

49.7%

 

13.00

 

46,000

 

46,000

 

-

 

-

 

-

 

Petsmart

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Antioch, TN

 

100.0%

 

100.0%

 

6.96

 

45,000

 

45,000

 

-

 

-

 

-

 

Best Buy

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Charleston, SC

 

100.0%

 

100.0%

 

13.51

 

45,000

 

45,000

 

-

 

-

 

-

 

Best Buy

(ground leased through 2063)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dorchester, MA

 

100.0%

 

100.0%

 

29.85

 

45,000

 

45,000

 

-

 

-

 

-

 

Best Buy

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Signal Hill, CA

 

100.0%

 

100.0%

 

21.89

 

45,000

 

45,000

 

-

 

-

 

-

 

Best Buy

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Tampa, FL

 

100.0%

 

-

 

-

 

45,000

 

45,000

 

-

 

-

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Vallejo, CA

 

100.0%

 

100.0%

 

15.92

 

45,000

 

45,000

 

-

 

-

 

-

 

Best Buy

(ground leased through 2043)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Freeport, NY (240 West Sunrise Highway)

 

100.0%

 

100.0%

 

18.44

 

44,000

 

44,000

 

-

 

-

 

-

 

Bob's Discount Furniture

(ground and building leased through 2040)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fond Du Lac, WI

 

100.0%

 

100.0%

 

7.12

 

43,000

 

43,000

 

-

 

-

 

-

 

Petsmart

(ground leased through 2073)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

31

 

 


ITEM 2.

PROPERTIES - Continued

 

 

 

 

 

 

 

 

 

 

 

Square Feet

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

In Service

 

Out of Service

 

 

 

 

 

 

%

 

%

 

Annualized

 

 

 

Owned by

 

Owned By

 

Under

 

Encumbrances

 

 

Property

 

Ownership

 

Occupancy

 

Rent PSF (1)

 

Total

 

Company

 

Tenant

 

Development

 

(in thousands)

 

Major Tenants

RETAIL (Continued):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

San Antonio, TX

 

100.0%

 

100.0%

  $

9.06

 

43,000

 

43,000

 

-

 

-

  $

-

   

Best Buy

(ground and building leased through 2041)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Chicago, IL

 

100.0%

 

100.0%

 

10.94

 

41,000

 

41,000

 

-

 

-

 

-

 

Best Buy

(ground and building leased through 2051)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Springfield, PA

 

100.0%

 

100.0%

 

19.00

 

41,000

 

41,000

 

-

 

-

 

-

 

Petsmart

(ground and building leased through 2025)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Tyson's Corner, VA

 

100.0%

 

100.0%

 

35.57

 

38,000

 

38,000

 

-

 

-

 

-

 

Best Buy

(ground and building leased through 2035)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Miami, FL

 

100.0%

 

85.0%

 

11.25

 

33,000

 

33,000

 

-

 

-

 

-

 

Office Depot

(ground and building leased through 2034)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Owensboro, KY

 

100.0%

 

100.0%

 

6.96

 

32,000

 

32,000

 

-

 

-

 

-

 

Best Buy

(ground and building leased through 2046)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dubuque, IA

 

100.0%

 

100.0%

 

9.00

 

31,000

 

31,000

 

-

 

-

 

-

 

Petsmart

(ground leased through 2043)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Grand Junction, CO

 

100.0%

 

100.0%

 

10.84

 

31,000

 

31,000

 

-

 

-

 

-

 

Best Buy

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Merced, CA

 

100.0%

 

100.0%

 

13.27

 

31,000

 

31,000

 

-

 

-

 

-

 

Petsmart

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Midland, MI (ground leased through 2043)

 

100.0%

 

83.6%

 

8.38

 

31,000

 

31,000

 

-

 

-

 

-

 

Petsmart

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Texarkana, TX (ground leased through 2043)

 

100.0%

 

100.0%

 

4.39

 

31,000

 

31,000

 

-

 

-

 

-

 

Home Zone

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Vero Beach, FL

 

100.0%

 

100.0%

 

10.50

 

30,000

 

30,000

 

-

 

-

 

-

 

Petsmart

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Acquired From Toys 'R' Us

 

 

 

 

 

 

 

1,503,000

 

1,503,000

 

-

 

-

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CALIFORNIA SUPERMARKETS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Colton (1904 North Rancho Avenue)

 

100.0%

 

100.0%

 

4.44

 

73,000

 

73,000

 

-

 

-

 

-

 

Stater Brothers

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Riverside (9155 Jurupa Road)

 

100.0%

 

100.0%

 

6.00

 

42,000

 

42,000

 

-

 

-

 

-

 

Stater Brothers

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

San Bernadino (1522 East Highland Avenue)

 

100.0%

 

100.0%

 

7.23

 

40,000

 

40,000

 

-

 

-

 

-

 

Stater Brothers

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Riverside (5571 Mission Boulevard)

 

100.0%

 

100.0%

 

4.97

 

39,000

 

39,000

 

-

 

-

 

-

 

Stater Brothers

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mojave (ground leased through 2079)

 

100.0%

 

100.0%

 

6.55

 

34,000

 

34,000

 

-

 

-

 

-

 

Stater Brothers

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Corona (ground leased through 2079)

 

100.0%

 

100.0%

 

7.76

 

33,000

 

33,000

 

-

 

-

 

-

 

Stater Brothers

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Yucaipa

 

100.0%

 

100.0%

 

4.13

 

31,000

 

31,000

 

-

 

-

 

-

 

Stater Brothers

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Barstow

 

100.0%

 

100.0%

 

7.15

 

30,000

 

30,000

 

-

 

-

 

-

 

Stater Brothers

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Moreno Valley

 

100.0%

 

-

 

-

 

30,000

 

30,000

 

-

 

-

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

San Bernadino (648 West 4th Street)

 

100.0%

 

100.0%

 

6.74

 

30,000

 

30,000

 

-

 

-

 

-

 

Stater Brothers

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Beaumont

 

100.0%

 

100.0%

 

5.58

 

29,000

 

29,000

 

-

 

-

 

-

 

Stater Brothers

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Calimesa

 

100.0%

 

100.0%

 

6.99

 

29,000

 

29,000

 

-

 

-

 

-

 

Stater Brothers

 

32

 

 


ITEM 2.

PROPERTIES - Continued

 

 

 

 

 

 

 

 

 

 

 

Square Feet

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

In Service

 

Out of Service

 

 

 

 

 

 

%

 

%

 

Annualized

 

 

 

Owned by

 

Owned By

 

Under

 

Encumbrances

 

 

Property

 

Ownership

 

Occupancy

 

Rent PSF (1)

 

Total

 

Company

 

Tenant

 

Development

 

(in thousands)

 

Major Tenants

RETAIL (Continued):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Desert Hot Springs

 

100.0%

 

100.0%  

  $

5.61

 

29,000

 

29,000

 

-

 

-

  $

-

    

Stater Brothers

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Rialto

 

100.0%

 

100.0%

 

5.74

 

29,000

 

29,000

 

-

 

-

 

-

 

Stater Brothers

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Anaheim

 

100.0%

 

100.0%

 

7.02

 

26,000

 

26,000

 

-

 

-

 

-

 

Stater Brothers

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Colton (151 East Valley Boulevard)

 

100.0%

 

100.0%

 

6.03

 

26,000

 

26,000

 

-

 

-

 

-

 

Stater Brothers

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fontana

 

100.0%

 

100.0%

 

6.26

 

26,000

 

26,000

 

-

 

-

 

-

 

Stater Brothers

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Garden Grove

 

100.0%

 

100.0%

 

6.82

 

26,000

 

26,000

 

-

 

-

 

-

 

Stater Brothers

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Orange

 

100.0%

 

100.0%

 

9.81

 

26,000

 

26,000

 

-

 

-

 

-

 

Stater Brothers

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Santa Ana

 

100.0%

 

100.0%

 

7.23

 

26,000

 

26,000

 

-

 

-

 

-

 

Stater Brothers

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Westminster

 

100.0%

 

100.0%

 

9.09

 

26,000

 

26,000

 

-

 

-

 

-

 

Stater Brothers

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ontario

 

100.0%

 

100.0%

 

7.64

 

24,000

 

24,000

 

-

 

-

 

-

 

Stater Brothers

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Rancho Cucamonga

 

100.0%

 

100.0%

 

7.26

 

24,000

 

24,000

 

-

 

-

 

-

 

Stater Brothers

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Costa Mesa (707 West 19th Street)

 

100.0%

 

100.0%

 

10.56

 

18,000

 

18,000

 

-

 

-

 

-

 

Stater Brothers

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Costa Mesa (2180 Newport Boulevard)

 

100.0%

 

100.0%

 

11.63

 

17,000

 

17,000

 

-

 

-

 

-

 

Stater Brothers

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total California Supermarkets

 

 

 

 

 

 

 

763,000

 

763,000

 

-

 

-

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Strip Shopping Centers

 

 

 

92.0%

$

14.96

 

17,732,000

 

12,741,000

 

3,625,000

 

1,366,000

$

835,320

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Vornado's Ownership Interest

 

 

 

91.9%

$

14.52

 

17,021,000

 

12,404,000

 

3,351,000

 

1,266,000

$

711,722

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

MANHATTAN STREET RETAIL

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Manhattan Mall

 

100.0%

 

100.0%

$

111.34

 

243,000

 

80,000

 

-

 

163,000

$

72,640

 

JC Penney

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

4 Union Square South

 

100.0%

 

100.0%

 

49.99

 

203,000

 

203,000

 

-

 

-

 

-

 

Filene's Basement, Whole Foods Market,

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

DSW, Forever 21

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1540 Broadway

 

100.0%

 

80.0%

 

31.99

 

159,000

 

159,000

 

-

 

-

 

-

 

Forever 21, Planet Hollywood

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

478-486 Broadway

 

100.0%

 

100.0%

 

101.96

 

87,000

 

77,000

 

-

 

10,000

 

-

 

Top Shop, Madewell, J. Crew

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

25 West 14th Street

 

100.0%

 

100.0%

 

56.26

 

62,000

 

62,000

 

-

 

-

 

-

 

Guitar Center, Levi's

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

435 Seventh Avenue

 

100.0%

 

100.0%

 

165.32

 

43,000

 

43,000

 

-

 

-

 

-

 

Hennes & Mauritz

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

155 Spring Street

 

100.0%

 

85.3%

 

89.81

 

42,000

 

42,000

 

-

 

-

 

-

 

Sigrid Olsen

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

692 Broadway

 

100.0%

 

-

 

-

 

35,000

 

35,000

 

-

 

-

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1135 Third Avenue

 

100.0%

 

100.0%

 

98.43

 

25,000

 

25,000

 

-

 

-

 

-

 

The GAP

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

715 Lexington (ground leased through

 

100.0%

 

100.0%

 

155.56

 

23,000

 

23,000

 

-

 

-

 

-

 

New York & Company, Zales

2041)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

7 West 34th Street

 

100.0%

 

100.0%

 

186.04

 

21,000

 

21,000

 

-

 

-

 

-

 

Express

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

828-850 Madison Avenue

 

100.0%

 

100.0%

 

372.98

 

18,000

 

18,000

 

-

 

-

 

80,000

 

Gucci, Chloe, Cartier, Nicholas Petrou

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

484 Eighth Avenue

 

100.0%

 

100.0%

 

82.26

 

14,000

 

14,000

 

-

 

-

 

-

 

T.G.I. Friday's

 

33

 

 


ITEM 2.

PROPERTIES - Continued

 

 

 

 

 

 

 

 

 

 

 

Square Feet

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

In Service

 

Out of Service

 

 

 

 

 

 

%

 

%

 

Annualized

 

 

 

Owned by

 

Owned By

 

Under

 

Encumbrances

 

 

Property

 

Ownership

 

Occupancy

 

Rent PSF (1)

 

Total

 

Company

 

Tenant

 

Development

 

(in thousands)

 

Major Tenants

RETAIL (Continued):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

148 Spring Street

 

100.0%

 

43.3%

  $

100.67

 

11,000

 

11,000

 

-

 

-

  $

-

   

Briel

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

40 East 66th Street

 

100.0%

 

91.9%

 

404.39

 

10,000

 

10,000

 

-

 

-

 

-

 

Dennis Basso, Nespresso USA, Krizia

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

431 Seventh Avenue

 

100.0%

 

75.0%

 

49.38

 

10,000

 

10,000

 

-

 

-

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

387 West Broadway

 

100.0%

 

100.0%

 

120.68

 

9,000

 

9,000

 

-

 

-

 

-

 

Reiss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

677-679 Madison Avenue

 

100.0%

 

100.0%

 

314.33

 

8,000

 

8,000

 

-

 

-

 

-

 

Anne Fontaine

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

150 Spring Street

 

100.0%

 

78.8%

 

138.79

 

7,000

 

7,000

 

-

 

-

 

-

 

Puma

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

211-217 Columbus Avenue

 

100.0%

 

100.0%

 

274.93

 

6,000

 

6,000

 

-

 

-

 

-

 

Club Monaco

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

968 Third Avenue

 

50.0%

 

100.0%

 

161.29

 

6,000

 

6,000

 

-

 

-

 

-

 

ING Bank

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

386 West Broadway

 

100.0%

 

100.0%

 

177.64

 

4,000

 

4,000

 

-

 

-

 

4,518

 

Miss Sixty

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

825 Seventh Avenue

 

100.0%

 

100.0%

 

166.56

 

4,000

 

4,000

 

-

 

-

 

-

 

Lindy's

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Manhattan Street Retail

 

 

 

90.4%

$

97.47

 

1,050,000

 

877,000

 

-

 

173,000

$

157,158

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Vornado's Ownership Interest

 

 

 

90.4%

$

97.18

 

1,047,000

 

874,000

 

-

 

173,000

$

157,158

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Retail Space

 

 

 

92.2%

 

 

 

26,924,000

 

18,898,000

 

5,342,000

 

2,684,000

$

2,249,657

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Vornado's Ownership Interest

 

 

 

92.1%

 

 

 

24,416,000

 

18,183,000

 

3,678,000

 

2,555,000

$

2,037,239

 

 

 

 

34

 

 


ITEM 2.

PROPERTIES - Continued

 

 

 

 

 

 

 

 

 

 

 

Square Feet

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

In Service

 

Out of Service

 

 

 

 

 

 

%

 

%

 

Annualized

 

 

 

Owned by

 

Owned By

 

Under

 

Encumbrances

 

 

Property

 

Ownership

 

Occupancy

 

Rent PSF (1)

 

Total

 

Company

 

Tenant

 

Development

 

(in thousands)

 

Major Tenants

MERCHANDISE MART:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

ILLINOIS:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Merchandise Mart, Chicago

 

100.0%

 

96.5%

  $

29.41

 

3,493,000

 

3,493,000

 

-

 

-

  $

550,000

   

American Intercontinental University (AIU), Baker, Knapp & Tubbs, Bankers Life & Casualty, CCC Information Services, Ogilvy Group (WPP), Chicago Teachers Union, Publicis Groupe, Office of the Special Deputy Receiver, Royal Bank of Canada, Holly Hunt Ltd., Merchandise Mart Headquarters, Steelcase, Chicago School of Professional Psychology

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

350 West Mart Center, Chicago

 

100.0%

 

96.8%

 

27.73

 

1,211,000

 

1,211,000

 

-

 

-

 

-

 

21st Century Telecom/RCN, Ameritech, Bank of America, Chicago Sun-Times, Comcast, Fiserv Solutions, Ogilvy Group (WPP),

Illinois Institute of Art

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other

 

50.0%

 

100.0%

 

32.31

 

19,000

 

19,000

 

-

 

-

 

25,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Illinois

 

 

 

96.6%

 

28.99

 

4,723,000

 

4,723,000

 

-

 

-

 

575,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

WASHINGTON, DC

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Washington Design Center

 

100.0%

 

97.4%

 

35.08

 

392,000

 

392,000

 

-

 

-

 

44,992

 

General Services Administration

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

HIGH POINT, NORTH CAROLINA

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Market Square Complex

 

100.0%

 

90.0%

 

17.43

 

2,013,000

 

2,013,000

 

-

 

-

 

220,360

 

ART Furniture, Cambium Business, Canadel Furniture, Century Furniture Company, DMI Furniture, La-Z-Boy, Master Design, Legacy Classic Furniture, Progressive Furniture, Robinson & Robinson

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CALIFORNIA

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

L.A. Mart

 

100.0%

 

78.6%

 

20.37

 

781,000

 

781,000

 

-

 

-

 

-

 

Penstan Investments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NEW YORK

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

7 West 34th Street

 

100.0%

 

90.8%

 

38.12

 

420,000

 

420,000

 

-

 

-

 

-

 

Kurt Adler

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

MASSACHUSETTS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Boston Design Center

 

100.0%

 

98.0%

 

29.42

 

553,000

 

553,000

 

-

 

-

 

70,740

 

Boston Brewing/Fitch Puma, Robert Allen

(ground leased through 2060)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Merchandise Mart

 

 

 

93.3%

$

26.45

 

8,882,000

 

8,882,000

 

-

 

-

$

911,092

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Vornado's Ownership Interest

 

 

 

93.3%

$

26.45

 

8,873,000

 

8,873,000

 

-

 

-

$

898,592

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

35

 

 


ITEM 2.

PROPERTIES - Continued

 

 

 

 

 

 

 

 

 

 

 

Square Feet

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

In Service

 

Out of Service

 

 

 

 

 

 

%

 

%

 

Annualized

 

 

 

Owned by

 

Owned By

 

Under

 

Encumbrances

 

 

Property

 

Ownership

 

Occupancy

 

Rent PSF (1)

 

Total

 

Company

 

Tenant

 

Development

 

(in thousands)

 

Major Tenants

555 CALIFORNIA STREET:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

555 California Street

 

70.0%

 

92.9%

  $

58.95

 

1,497,000

 

1,497,000

 

-

 

-  

  $

720,671

(9)  

Bank of America, N.A., Dodge & Cox, Goldman Sachs & Co., Jones Day, Kirkland & Ellis LLP, Lehman Brothers Inc., McKinsey & Company Inc., UBS Financial Services, Morgan Stanley & Co. Inc.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

315 Montgomery Street

 

70.0%

 

100.0%

 

40.79

 

228,000

 

228,000

 

-

 

-

 

-

 

Bank of America, N.A.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

345 Montgomery Street

 

70.0%

 

100.0%

 

96.45

 

64,000

 

64,000

 

-

 

-

 

-

 

Bank of America, N.A.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total 555 California Street

 

 

 

94.0%

$

57.98

 

1,789,000

 

1,789,000

 

-

 

-

$

720,671

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Vornado's Ownership Interest

 

 

 

94.0%

$

57.98

 

1,252,000

 

1,252,000

 

-

 

-

$

512,512

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other California Properties:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

150 Van Ness Ave./155 Hayes St.

 

9.0%

 

100.0%

$

13.28

 

157,000

 

157,000

 

-

 

-

$

-

 

CSAA Inter-Insurance Bureau

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

150 Hayes Street

 

9.0%

 

100.0%

 

8.51

 

128,000

 

128,000

 

-

 

-

 

-

 

CSAA Inter-Insurance Bureau

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

100 Van Ness Ave.

 

9.0%

 

100.0%

 

12.54

 

414,000

 

414,000

 

-

 

-

 

85,249

 

CSAA Inter-Insurance Bureau

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Other California Properties

 

 

 

100.0%

$

11.97

 

699,000

 

699,000

 

-

 

-

$

85,249

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Vornado's Ownership Interest

 

 

 

100.0%

$

11.97

 

63,000

 

63,000

 

-

 

-

$

7,672

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

36

 

 


ITEM 2.

PROPERTIES - Continued

 

 

 

 

 

 

 

 

 

 

 

Square Feet

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

In Service

 

Out of Service

 

 

 

 

 

 

%

 

%

 

Annualized

 

 

 

Owned by

 

Owned By

 

Under

 

Encumbrances

 

 

Property

 

Ownership

 

Occupancy

 

Rent PSF (1)

 

Total

 

Company

 

Tenant

 

Development

 

(in thousands)

 

Major Tenants

WAREHOUSES :

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NEW JERSEY

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

East Hanover - Five Buildings

 

100.0%

 

100.0%

  $

5.10

 

942,000

 

942,000

 

-

 

-

  $

25,268

   

J, Leven & Company, Foremost Int'l Trading Inc.,

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Tri-coastal Design Group Inc.,

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fidelity Paper & Supply Inc., Gardner Industries,

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stephen Gould Paper Co., Givaudan Flavors Corp.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Edison

 

100.0%

 

100.0%

 

3.32

 

272,000

 

272,000

 

-

 

-

 

-

 

Propack Incorporated, Lamitech Inc.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Warehouses

 

 

 

100.0%

$

4.70

 

1,214,000

 

1,214,000

 

-

 

-

$

25,268

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Vornado's Ownership Interest

 

 

 

100.0%

$

4.70

 

1,214,000

 

1,214,000

 

-

 

-

$

25,268

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

37

 

 


ITEM 2.

PROPERTIES - Continued

 

 

 

 

 

 

 

 

 

 

Square Feet

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

In Service

 

Out of Service

 

 

 

 

 

 

%

 

%

 

Annualized

 

 

 

Owned by

 

Owned By

 

Under

 

Encumbrances

 

 

Property

 

Ownership

 

Occupancy

 

Rent PSF (1)

 

Total

 

Company

 

Tenant

 

Development

 

(in thousands)

 

Major Tenants

ALEXANDER'S INC.:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

New York:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

731 Lexington Avenue, Manhattan

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Office

 

32.5%

 

100.0%

  $

79.14

 

885,000

 

885,000

 

-

 

-

  $

373,637

 

Bloomberg, Citigroup

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Retail

 

32.5%

 

100.0%

 

147.23

 

174,000

 

174,000

 

-

 

-

 

320,000

 

Hennes & Mauritz, Home Depot,

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The Container Store

 

 

 

 

 

 

 

 

1,059,000

 

1,059,000

 

-

 

-

 

693,637

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Kings Plaza Regional Shopping Center,

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Brooklyn (24.3 acres)

 

32.5%

 

93.6%

 

39.78

 

1,098,000

 

759,000

 

339,000

(7)

-

 

199,537

 

Sears, Lowe's (ground lessee), Macy*s(7)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Rego Park I, Queens (4.8 acres)

 

32.5%

 

85.4%

 

27.57

 

351,000

 

351,000

 

-

 

-

 

78,386

 

Sears, Bed Bath & Beyond, Marshalls

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Flushing, Queens(8) (1.0 acre)

 

32.5%

 

100.0%

 

14.12

 

177,000

 

177,000

 

-

 

-

 

-

 

New World Mall LLC

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

New Jersey:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Paramus, New Jersey

 

32.5%

 

100.0%

 

-

 

-

 

-

 

-

 

-

 

68,000

 

IKEA (ground lessee)

(30.3 acres ground leased to IKEA

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

through 2041)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Property under Development:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Rego Park II (adjacent to Rego Park I),

 

32.5%

 

-

 

-

 

600,000

 

-

 

-

 

600,000

 

181,695

 

Century 21, Home Depot, Kohl's

Queens, NY (6.6 acres)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Property to be Developed:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Rego Park III (adjacent to Rego Park II),

 

32.5%

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

 

Queens, NY (3.4 acres)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Alexander's

 

 

 

 

 

 

 

3,285,000

 

2,346,000

 

339,000

 

600,000

$

1,221,255

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Vornado's Ownership Interest

 

 

 

 

 

 

 

1,067,625

 

762,450

 

110,175

 

195,000

$

396,908

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

38

 

 


ITEM 2.

PROPERTIES - Continued

 

 

(1)

Annualized 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 $9.68 PSF).

(3)

Excludes 918,000 square feet in two buildings owned by ground lessees on land leased from us, including
Pentagon Row Retail and Residential and Ritz Carlton (7.5% interest).

(4)

Annualized Base Rent shown is for mall tenants only. Below is the base rent per square foot including both mall
tenants and anchor tenants for each property:

 

Green Acres Mall, Valley Stream, NY

$18.43

 

Monmouth Mall, Eatontown, NJ

23.98

 

Springfield Mall, Springfield, VA (97.5% Ownership)

16.89

 

Bergen Town Center, Paramus, NJ

20.83

 

Broadway Mall, Hicksville, NY

17.43

 

Montehiedra, Puerto Rico

20.03

 

Las Catalinas, Puerto Rico

35.14

(5)

Includes square footage of anchors who own the land and building.

(6)

The leases for these former Bradlees locations are guaranteed by Stop and Shop (70% as to Totowa).

(7)

Owned by Macy*s, Inc.

(8)

Leased by Alexander's through January 2037.

(9)

Cross-collateralized by 555 California Street and 315 and 345 Montgomery Streets.

(10)

These encumbrances are cross-collateralized under a blanket mortgage in the amount of $448,115 as of December 31, 2008.

 

 

39


NEW YORK OFFICE PROPERTIES

 

As of December 31, 2008, we own 28 New York Office properties aggregating 16.1 million square feet, including 15.1 million square feet of office space, 817,000 square feet of retail space and 183,000 square feet of showroom space. In addition, the New York Office Properties segment includes 6 garages totaling 368,000 square feet (1,739 spaces) which are managed by or leased to third parties. The garage space is excluded from the statistics provided in this section.

 

Occupancy and average annual escalated rent per square foot, excluding retail space:

 

As of
December 31,

 

Rentable
Square Feet

 

Occupancy Rate

 

Average Annual
Escalated Rent
Per Square Foot

 

2008

 

16,108,000

 

96.7%

 

$

53.08

 

2007

 

15,994,000

 

97.6%

 

 

49.34

 

2006

 

13,692,000

 

97.5%

 

 

46.33

 

2005

 

12,972,000

 

96.0%

 

 

43.67

 

2004

 

12,989,000

 

95.5%

 

 

42.22

 

 

 

2008 New York Office Properties rental revenue by tenants’ industry:

 

Industry

 

Percentage

 

Retail

 

15%

 

Finance

 

13%

 

Legal Services

 

8%

 

Insurance

 

7%

 

Banking

 

7%

 

Communications

 

5%

 

Technology

 

5%

 

Publishing

 

5%

 

Government

 

4%

 

Pharmaceuticals

 

4%

 

Real Estate

 

4%

 

Advertising

 

3%

 

Service Contractors

 

2%

 

Not-for-Profit

 

2%

 

Engineering

 

2%

 

Health Services

 

1%

 

Other

 

13%

 

 

 

100%

 

 

New York Office Properties lease terms generally range from five to seven years for smaller tenant spaces 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, the tenant’s 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 tenant improvement allowances for all or a portion of the tenant’s initial construction costs of its premises.

 

40

 

 


NEW YORK OFFICE PROPERTIES - CONTINUED

 

Tenants accounting for 2% or more of 2008 New   York Office Properties total revenues:

 

 

Tenant

 

Square Feet
Leased

 

2008
Revenues

 

Percentage

of New York Office Properties
Revenues

 

Percentage

of Total
Company
Revenues

 

AXA Equitable Life Insurance

 

815,000

 

$

37,833,000

 

3.6%

 

1.4%

 

Macy*s, Inc.

 

539,000

 

 

23,410,000

 

2.2%

 

0.8%

 

McGraw-Hill Companies, Inc.

 

480,000

 

 

22,040,000

 

2.1%

 

0.8%

 

Rainbow Media Holdings

 

412,000

 

 

21,243,000

 

2.0%

 

0.8%

 

Limited Brands

 

368,000

 

 

20,937,000

 

2.0%

 

0.8%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2008 New York Office Properties Leasing Activity:

 

Location

 

Square
Feet

 

Average Initial
Rent Per
Square Foot (1)

 

1290 Avenue of the Americas

 

280,000

 

$

79.20

 

One Penn Plaza

 

219,000

 

 

64.66

 

825 Seventh Avenue

 

161,000

 

 

65.19

 

888 Seventh Avenue

 

129,000

 

 

93.04

 

90 Park Avenue

 

87,000

 

 

80.30

 

Two Penn Plaza

 

79,000

 

 

61.72

 

20 Broad Street

 

79,000

 

 

53.06

 

770 Broadway

 

76,000

 

 

75.00

 

330 Madison Avenue

 

59,000

 

 

80.08

 

909 Third Avenue

 

54,000

 

 

85.00

 

866 UN Plaza

 

41,000

 

 

48.89

 

350 Park Avenue

 

34,000

 

 

73.10

 

595 Madison Avenue

 

30,000

 

 

73.24

 

50 West 57 th Street

 

27,000

 

 

60.87

 

Manhattan Mall

 

24,000

 

 

51.07

 

40 Fulton Street

 

23,000

 

 

41.24

 

150 East 58 th Street

 

23,000

 

 

66.44

 

640 Fifth Avenue

 

20,000

 

 

106.79

 

31 West 57 th Street

 

17,000

 

 

57.20

 

29 West 57 th Street

 

8,000

 

 

70.91

 

689 Fifth Avenue

 

8,000

 

 

80.00

 

49 West 57 th Street

 

6,000

 

 

55.00

 

Total

 

1,484,000

 

 

71.79

 

Vornado’s Ownership Interest

 

1,246,000

 

 

71.69

 

_________________________________

 

(1)

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

 

 

In addition to the office space noted above, during 2008 we leased 13,468 square feet of retail space contained in office buildings at a weighted average initial rent of $205.39 per square foot.

 

41

 

 


NEW YORK OFFICE PROPERTIES - CONTINUED

 

Lease expirations as of December 31, 2008 assuming none of the tenants exercise renewal options:

 

Office Space:

 

 

 

 

 

Percentage of
New York

 

Annual Escalated
Rent of Expiring Leases

Year

 

Number of
Expiring Leases

 

Square Feet of
Expiring Leases

 

Office Properties
Square Feet

 

Total

 

Per Square Foot

Office Space:

 

 

 

 

 

 

 

 

 

 

 

 

Month to month

 

63

 

102,000

 

0.6%

 

$

4,277,000

 

$

41.93

2009

 

147

 

887,000

 

5.6%

 

 

47,202,000

 

 

53.22

2010

 

108

 

1,233,000

 

7.7%

 

 

61,740,000

 

 

50.07

2011

 

73

 

876,000

 

5.5%

 

 

49,076,000

 

 

56.02

2012

 

80

 

1,629,000

 

10.2%  

 

 

81,444,000

 

 

50.00

2013

 

54

 

828,000

(1)

5.2%

 

 

39,310,000

 

 

47.48

2014

 

62

 

761,000

 

4.8%

 

 

39,865,000

 

 

52.39

2015

 

53

 

1,967,000

 

12.3%  

 

 

102,503,000

 

 

52.11

2016

 

36

 

918,000

 

5.7%

 

 

45,959,000

 

 

50.06

2017

 

34

 

819,000

 

5.1%

 

 

45,244,000

 

 

55.24

2018

 

28

 

734,000

 

4.6%

 

 

46,395,000

 

 

63.21

Retail Space
(contained in office buildings)

 

 

 

 

 

 

 

 

 

 

 

 

Month to month

 

4

 

1,000

 

$

 

112,000

 

$

112.00

2009

 

6

 

29,000

 

0.2%

 

 

4,087,000

 

 

140.93

2010

 

9

 

13,000

 

0.1%

 

 

1,458,000

 

 

112.15

2011

 

5

 

38,000

 

0.2%

 

 

1,882,000

 

 

49.53

2012

 

8

 

26,000

 

0.2%

 

 

4,376,000

 

 

168.31

2013

 

16

 

49,000

 

0.3%

 

 

7,596,000

 

 

155.02

2014

 

9

 

73,000

 

0.5%

 

 

14,921,000

 

 

204.40

2015

 

9

 

32,000

 

0.2%

 

 

6,864,000

 

 

214.50

2016

 

4

 

319,000

 

2.0%

 

 

16,576,000

 

 

51.96

2017

 

2

 

22,000

 

0.1%

 

 

2,061,000

 

 

93.68

2018

 

8

 

115,000

 

0.7%

 

 

11,776,000

 

 

102.40

 

_________________________

 

(1)

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 $9.68 per square foot.

 

42

 

 


WASHINGTON, DC OFFICE PROPERTIES

 

As of December 31, 2008, we own 84 properties aggregating 17.7 million square feet in the Washington, DC / Northern Virginia area including 76 office buildings, 7 residential properties and a hotel property. As of December 31, 2008, three buildings are out of service for redevelopment. In addition, the Washington, DC Office Properties segment includes 48 garages totaling approximately 8.9 million square feet (28,000 spaces) which are managed by or leased to third parties. The garage space is excluded from the statistics provided in this section.

 

As of December 31, 2008, 29% percent of the space in our Washington, DC Office Properties was leased to various agencies of the U.S. government.

 

Occupancy and average annual escalated rent per square foot:

 

As of
December 31,

 

Rentable
Square Feet

 

Occupancy Rate

 

Average Annual
Escalated Rent
Per Square Foot

 

2008

 

17,666,000

 

95.0%

 

$

37.70

 

2007

 

17,483,000

 

93.3%

 

 

35.15

 

2006

 

17,456,000

 

92.6%

 

 

32.36

 

2005

 

17,112,000

 

90.9%

 

 

31.68

 

2004

 

13,773,000

 

91.3%

 

 

30.41

 

 

 

2008 Washington, DC Office Properties rental revenue by tenants’ industry:

 

Industry

 

Percentage

 

U.S. Government

 

35%

 

Government Contractors

 

24%

 

Legal Services

 

12%

 

Membership Organizations

 

8%

 

Manufacturing

 

3%

 

Real Estate

 

3%

 

Computer and Data Processing

 

3%

 

Communication

 

2%

 

Television Services

 

2%

 

Health Services

 

1%

 

Business Services

 

1%

 

Education

 

1%

 

Other

 

5%

 

 

 

100%

 

 

Washington, DC Office Properties lease terms generally range from four to seven years, 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 tenant improvement allowances for all or a portion of the tenant’s initial construction costs of its premises.

 

43

 

 


WASHINGTON, DC OFFICE PROPERTIES - CONTINUED

 

Tenants accounting for 2% or more of Washington, DC Office Properties total revenues:

 

Tenant

 

Square Feet
Leased

 

2008
Revenues

 

Percentage of
Washington, DC
Office Properties
Revenues

 

Percentage
of Total
Company
Revenues

 

U.S. Government

 

5,154,000

 

$

152,911,000

 

24.4%

 

5.7%

 

Howrey LLP

 

323,000

 

 

21,087,000

 

3.4%

 

0.8%

 

Boeing

 

359,000

 

 

13,985,000

 

2.2%

 

0.5%

 

SAIC, Inc.

 

438,000

 

 

13,952,000

 

2.2%

 

0.5%

 

Academy for Educational Development

 

335,000

 

 

12,989,000

 

2.1%

 

0.5%

 

 

 

2008 Washington, DC Office Properties Leasing Activity:

 

Location

 

Square Feet

 

Average Initial Rent Per Square Foot (1)

 

 

 

 

 

 

 

 

Skyline – 8 buildings

 

614,000

 

$

33.74

 

2011-2451 Crystal Drive – 5 buildings

 

395,000

 

 

37.65

 

S. Clark Street / 12 th Street – 5 buildings

 

204,000

 

 

39.55

 

2101 L Street

 

195,000

 

 

54.02

 

Partially Owned Entities

 

178,000

 

 

42.25

 

1800, 1851 and 1901 South Bell Street – 3 buildings

 

155,000

 

 

36.08

 

1550-1750 Crystal Drive / 241-251 18 th Street – 4 buildings

 

137,000

 

 

38.56

 

2001 Jefferson Davis Highway

 

64,000

 

 

33.15

 

Universal Building South

 

31,000

 

 

42.30

 

Courthouse Plaza

 

25,000

 

 

38.93

 

Reston Executive

 

20,000

 

 

34.27

 

1227 25 th Street NW

 

17,000

 

 

49.08

 

223 23 rd Street / 2221 South Clark Street – 2 buildings

 

15,000

 

 

29.05

 

1150 17 th Street

 

15,000

 

 

38.31

 

1730 M Street

 

15,000

 

 

41.85

 

Commerce Executive

 

13,000

 

 

29.81

 

1726 M Street

 

11,000

 

 

38.80

 

Universal Building North

 

11,000

 

 

42.46

 

1101 17 th Street

 

10,000

 

 

44.85

 

1140 Connecticut Avenue

 

8,000

 

 

41.96

 

2100 / 2200 Crystal Drive – 2 buildings

 

6,000

 

 

32.23

 

Democracy Plaza

 

6,000

 

 

33.10

 

Washington Office Center

 

5,000

 

 

44.33

 

Tysons Dulles

 

2,000

 

 

34.20

 

 

 

2,152,000

 

 

38.52

 

_________________________

 

(1)

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

 

 

44

 

 


WASHINGTON, DC OFFICE PROPERTIES - CONTINUED

 

Lease expirations as of December 31, 2008 assuming none of the tenants exercise renewal options:

 

Year

 

Number of
Expiring Leases

 

Square Feet of
Expiring Leases

 

Percentage of
Washington, DC
Office Properties
Square Feet

 

Annual Escalated
Rent of Expiring Leases

 

 

 

 

 

Total

 

Per Square Foot

 

Month to month

 

60

 

1,123,000

 

7.5%

 

$

22,696,000

 

$

20.21

 

2009

 

236

 

1,924,000

 

12.9%

 

 

64,322,000

 

 

33.43

 

2010

 

232

 

1,970,000

 

13.2%

 

 

70,820,000

 

 

35.96

 

2011

 

220

 

2,158,000

 

14.5%

 

 

77,026,000

 

 

35.68

 

2012

 

147

 

1,474,000

 

9.9%

 

 

56,747,000

 

 

38.49

 

2013

 

94

 

927,000

 

6.2%

 

 

37,116,000

 

 

40.02

 

2014

 

46

 

659,000

 

4.4%

 

 

21,893,000

 

 

33.21

 

2015

 

45

 

791,000

 

5.3%

 

 

29,686,000

 

 

37.52

 

2016

 

24

 

700,000

 

4.7%

 

 

26,899,000

 

 

38.43

 

2017

 

22

 

295,000

 

2.0%

 

 

10,023,000

 

 

33.93

 

2018

 

24

 

816,000

 

5.5%

 

 

39,652,000

 

 

48.62

 

 

 

45

 

 


RETAIL PROPERTIES

 

As of December 31, 2008, we own 176 retail properties, of which 146 are strip shopping centers located primarily in the Northeast, Mid-Atlantic and California; 7 are regional malls located in New York, New Jersey, Virginia and San Juan, Puerto Rico; and 23 are retail properties located in Manhattan (“Manhattan Street Retail”). 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.

 

Strip Shopping Centers

 

Our strip shopping centers contain an aggregate of 12.4 million square feet and are substantially (over 80%) 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 Green Acres Mall in Valley Stream, Long Island, New York contains 1.8 million square feet, and is anchored by Macy*s, Sears, Wal-Mart, J.C. Penney, Best Buy and a BJ’s Wholesale Club.

 

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 and J.C. Penney, two of which own their stores aggregating 457,000 square feet.

 

The Springfield Mall in Springfield, Virginia contains 1.4 million square feet and is anchored by Macy*s, J.C. Penney and Target who own their stores aggregating 390,000 square feet.

 

The Bergen Town Center in Paramus, New Jersey, upon completion of its redevelopment in 2009, will contain 950,000 square feet of retail space. The mall is anchored by Century 21, Whole Foods and Target under leases aggregating 416,000 square feet. In addition to the mall, we are developing 250,000 square feet of retail space on 27.5 acres of adjacent land which is expected to be completed in 2010.

 

The Broadway Mall in Hicksville, Long Island, New York contains 1.1 million square feet and is anchored by Macy*s, Ikea, Multiplex Cinema and Target, which owns its store containing 141,000 square feet.       

 

The Montehiedra Mall in San Juan, Puerto Rico contains 541,000 square feet and is anchored by Home Depot, Kmart, and Marshalls.

 

The Las Catalinas Mall in San Juan, Puerto Rico, contains 496,000 square feet and is anchored by Kmart and Sears, which owns its 140,000 square foot store.

 

Manhattan Street Retail

 

Manhattan Street Retail is comprised of 22 properties containing 1,047,000 square feet. These properties include 4 Union Square, which contains 203,000 square feet anchored by Whole Foods Market, Filenes Basement and DSW; the Manhattan Mall, which is under development and will include a new JC Penney store; 1540 Broadway in Times Square, which contains 159,000 square feet anchored by Forever 21, which will open their flagship store in Spring 2009, and Planet Hollywood; and properties on Madison Avenue, and in SoHo, occupied by retailers including H&M, Top Shop, Madewell, the GAP, Gucci, Chloe and Cartier. In addition, we own 817,000 square feet of retail space in certain of our New York office buildings, which is part of our New York Office Properties segment.

 

46

 

 


RETAIL PROPERTIES – CONTINUED

 

Occupancy and average annual net rent per square foot:

 

As of December 31, 2008, the aggregate occupancy rate for the entire Retail Properties segment of 21.9 million square feet was 92.1%. Details of our ownership interest in the strip shopping centers, regional malls and Manhattan Street retail for the past five years are provided below.

 

Strip Shopping Centers:

As of December 31,

 

Rentable
Square Feet

 

Occupancy Rate

 

Average Annual
Net Rent
Per Square Foot

 

2008

 

15,755,000

 

91.9%

 

$

14.52

 

2007

 

15,463,000

 

94.1%

 

 

14.12

 

2006

 

12,933,000

 

92.9%

 

 

13.48

 

2005

 

10,750,000

 

95.5%

 

 

12.07

 

2004

 

  9,931,000

 

94.5%

 

 

12.00

 

 

 

 

Regional Malls:

 

 

 

 

 

 

Average Annual Net Rent
Per Square Foot

 

As of December 31,

 

Rentable
Square Feet

 

Occupancy
Rate

 

Mall Tenants

 

Mall and
Anchor

Tenants

 

2008

 

5,232,000

 

93.0%

 

$

37.59

 

$

20.38

 

2007

 

5,528,000

 

96.1%

 

 

34.94

 

 

19.11

 

2006

 

5,640,000

 

93.4%

 

 

32.64

 

 

18.12

 

2005

 

4,817,000

 

96.2%

 

 

31.83

 

 

18.24

 

2004

 

3,766,000

 

93.1%

 

 

33.05

 

 

17.32

 

 

 

 

Manhattan Street Retail:

 

 

 

 

 

 

 

As of December 31,

 

Rentable
Square Feet

 

Occupancy
Rate

 

Average Annual
Net Rent per
Square Foot

 

2008

 

874,000

 

90.4%

 

$

97.18

 

2007

 

943,000

 

86.8%

 

 

89.86

 

2006

 

691,000

 

83.6%

 

 

83.53

 

2005

 

602,000

 

90.9%

 

 

81.94

 

2004

 

513,000

 

88.7%

 

 

72.81

 

 

 

47

 

 


RETAIL PROPERTIES – CONTINUED

 

2008 Retail Properties rental revenue by type of retailer:

 

Industry

 

Percentage

 

Discount Stores

 

12%

 

Family Apparel

 

11%

 

Supermarkets

 

9%

 

Home Entertainment and
Electronics

 

9%

 

Women’s Apparel

 

8%

 

Restaurants

 

6%

 

Home Improvement

 

6%

 

Banking and Other
Business Services

 

6%

 

Personal Services

 

4%

 

Home Furnishings

 

3%

 

Sporting Goods

 

2%

 

Department Stores

 

1%

 

Other

 

23%

 

 

 

100%

 

 

Retail Properties lease terms generally range from five years or less in some instances for smaller tenant spaces 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 2008.

 

Tenants accounting for 2% or more of 2008 Retail Properties total revenues:

 

Tenant

 

Square Feet
Leased

 

2008
Revenues

 

Percentage of
Retail Properties
Revenues

 

Percentage of
Total Company
Revenues

 

The Home Depot, Inc

 

990,000

 

$

17,766,000

 

3.3%

 

0.7%

 

Best Buy Co, Inc.

 

795,000

 

 

17,486,000

 

3.3%

 

0.7%

 

Wal-Mart/Sam’s Wholesale

 

1,667,000

 

 

16,417,000

 

3.1%

 

0.6%

 

Federated Department Stores

 

1,080,000

 

 

12,167,000

 

2.3%

 

0.5%

 

Sears Holdings Corporation (Sears and Kmart)

 

1,012,000

 

 

11,815,000

 

2.2%

 

0.4%

 

Stop & Shop Companies, Inc. (Stop & Shop)

 

498,000

 

 

11,793,000

 

2.2%

 

0.4%

 

 

 

48

 

 


RETAIL PROPERTIES – CONTINUED

Lease expirations as of December 31, 2008 assuming none of the tenants exercise renewal options:

 

Year

 

Number of
Expiring Leases

 

Square Feet of
Expiring Leases

 

Percentage of
Retail Properties
Square Feet

 

Annual Net Rent

of Expiring Leases

 

 

 

 

 

Total

 

Per Square Foot

 

Strip Shopping Centers:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Month to month

 

26

 

107,000

 

 

0.5%

 

$

1,575,000

 

$

14.67

 

2009

 

36

 

307,000

 

 

1.5%

 

 

4,508,000

 

 

14.69

 

2010

 

53

 

626,000

 

 

3.2%

 

 

9,329,000

 

 

14.91

 

2011

 

69

 

977,000

 

 

4.9%

 

 

10,047,000

 

 

10.28

 

2012

 

59

 

831,000

 

 

4.2%

 

 

11,898,000

 

 

14.32

 

2013

 

118 

 

2,125,000

 

 

10.7% 

 

 

24,367,000

 

 

11.47

 

2014

 

83

 

1,000,000

 

 

5.0%

 

 

15,717,000

 

 

15.72

 

2015

 

34

 

489,000

 

 

2.5%

 

 

8,398,000

 

 

17.17

 

2016

 

38

 

569,000

 

 

2.9%

 

 

9,215,000

 

 

16.20

 

2017

 

33

 

335,000

 

 

1.7%

 

 

4,705,000

 

 

14.05

 

2018

 

52

 

913,000

 

 

4.6%

 

 

14,120,000

 

 

15.46

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Malls:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Month to month

 

67

 

148,000

 

 

0.7%

 

$

4,750,000

 

$

32.00

 

2009

 

91

 

353,000

 

 

1.8%

 

 

8,970,000

 

 

25.38

 

2010

 

75

 

213,000

 

 

1.1%

 

 

6,811,000

 

 

32.00

 

2011

 

63

 

254,000

 

 

1.3%

 

 

7,517,000

 

 

29.55

 

2012

 

52

 

231,000

 

 

1.2%

 

 

6,032,000

 

 

26.10

 

2013

 

75

 

280,000

 

 

1.4%

 

 

8,404,000

 

 

30.03

 

2014

 

35

 

266,000

 

 

1.3%

 

 

4,612,000

 

 

17.33

 

2015

 

64

 

305,000

 

 

1.5%

 

 

7,810,000

 

 

25.58

 

2016

 

47

 

398,000

 

 

2.0%

 

 

4,902,000

 

 

12.31

 

2017

 

40

 

462,000

 

 

2.3%

 

 

7,506,000

 

 

16.26

 

2018

 

46

 

117,000

 

 

0.6%

 

 

5,176,000

 

 

44.13

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Manhattan Street Retail:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Month to month

 

2

 

3,000

 

 

 

$

72,000

 

$

21.72

 

2009

 

6

 

20,000

 

 

0.1%

 

 

1,924,000

 

 

99.81

 

2010

 

2

 

61,000

 

 

0.3%

 

 

1,889,000

 

 

31.06

 

2011

 

9

 

95,000

 

 

0.5%

 

 

6,124,000

 

 

64.28

 

2012

 

6

 

32,000

 

 

0.2%

 

 

1,652,000

 

 

51.66

 

2013

 

4

 

23,000

 

 

0.1%

 

 

2,887,000

 

 

124.67

 

2014

 

3

 

22,000

 

 

0.1%

 

 

4,202,000

 

 

193.67

 

2015

 

6

 

16,000

 

 

0.1%

 

 

1,837,000

 

 

111.88

 

2016

 

8

 

19,000

 

 

0.1%

 

 

4,817,000

 

 

248.26

 

2017

 

6

 

17,000

 

 

0.1%

 

 

2,448,000

 

 

146.97

 

2018

 

16

 

127,000

 

 

0.6%

 

 

20,822,000

 

 

163.51

 

 

 

49

 


RETAIL PROPERTIES – CONTINUED

2008 Retail Properties Leasing Activity:

Location

 

Square Feet

 

Average Initial Rent
Per SquareFoot (1)

 

1540 Broadway, New York, NY

 

92,000

 

 

$

96.98

 

Las Catalinas Mall, Puerto Rico

 

89,000

 

 

 

50.76

 

Bethlehem, PA

 

77,000

 

 

 

4.48

 

Monmouth Mall, Eatontown, NJ

 

61,000

 

 

 

25.01

 

Bergen Town Center, Paramus, NJ

 

60,000

 

 

 

40.39

 

Green Acres Mall, Valley Stream, NY

 

50,000

 

 

 

57.70

 

Broadway Mall, Hicksville, NY

 

40,000

 

 

 

33.80

 

North Bergen (Tonnelle Avenue), NJ

 

40,000

 

 

 

36.57

 

Glen Burnie, MD

 

39,000

 

 

 

10.02

 

Allentown, PA

 

35,000

 

 

 

9.71

 

Springfield Mall, Springfield, VA

 

35,000

 

 

 

35.45

 

Poughkeepsie, NY

 

32,000

 

 

 

15.79

 

Staten Island, NY

 

31,000

 

 

 

27.30

 

Texarkana, TX

 

31,000

 

 

 

4.39

 

692 Broadway, New York, NY

 

26,000

 

 

 

61.83

 

East Hanover I and II, NJ

 

24,000

 

 

 

32.00

 

Cambridge, MA

 

18,000

 

 

 

13.66

 

Montclair, NJ

 

18,000

 

 

 

23.34

 

Wilkes-Barre (Mondy Street), PA

 

18,000

 

 

 

16.23

 

Bricktown, NJ

 

17,000

 

 

 

20.59

 

Bronx (1750-1780 Gun Hill Road), NY

 

16,000

 

 

 

49.24

 

Manhattan Mall, New York, NY

 

16,000

 

 

 

89.82

 

Lancaster, PA

 

15,000

 

 

 

9.00

 

Montehiedra Mall, Puerto Rico

 

15,000

 

 

 

37.19

 

Pasadena, CA

 

15,000

 

 

 

21.40

 

Manalapan, NJ

 

12,000

 

 

 

18.18

 

Towson, MD

 

12,000

 

 

 

27.52

 

Hackensack, NJ

 

11,000

 

 

 

32.14

 

East Brunswick, NJ

 

10,000

 

 

 

10.89

 

Other Properties

 

67,000

 

 

 

68.12

 

 

 

1,022,000

 

 

 

38.34

 

__________________________

 

(1)

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

 

50

 

 


MERCHANDISE MART PROPERTIES

 

As of December 31, 2008, we own 8 Merchandise Mart Properties containing an aggregate of 8.9 million square feet. The Merchandise Mart Properties segment also contains 7 garages totaling 1.0 million square feet (3,312 spaces). The garage space is excluded from the statistics provided in this section.

 

Square feet by location and use as of December 31, 2008:

 

(Amounts in thousands)

 

 

 

 

 

Showroom

 

 

 

 

 

Total

 

Office

 

Total

 

Permanent

 

Temporary
Trade Show

 

Retail

 

Chicago, Illinois

 

 

 

 

 

 

 

 

 

 

 

 

 

Merchandise Mart

 

3,493

 

1,043

 

2,385

 

1,803

 

582

 

65

 

350 West Mart Center

 

1,211

 

1,107

 

104

 

104

 

 

 

Other

 

10

 

 

 

 

 

10

 

Total Chicago, Illinois

 

4,714

 

2,150

 

2,489

 

1,907

 

582

 

75

 

High Point, North Carolina

 

 

 

 

 

 

 

 

 

 

 

 

 

Market Square Complex

 

1,753

 

31

 

1,694

 

1,228

 

466

 

28

 

National Furniture Mart

 

260

 

 

260

 

260

 

 

 

Total High Point, North Carolina

 

2,013

 

31

 

1,954

 

1,488

 

466

 

28

 

Los Angeles, California

 

 

 

 

 

 

 

 

 

 

 

 

 

L.A. Mart

 

781

 

33

 

739

 

685

 

54

 

9

 

Boston, Massachusetts

 

 

 

 

 

 

 

 

 

 

 

 

 

Boston Design Center

 

553

 

124

 

424

 

424

 

 

5

 

New York, New York

 

 

 

 

 

 

 

 

 

 

 

 

 

7 West 34 th Street

 

420

 

15

 

405

 

362

 

43

 

 

Washington, DC

 

 

 

 

 

 

 

 

 

 

 

 

 

Washington Design Center

 

392

 

71

 

321

 

321

 

 

 

Total Merchandise Mart Properties

 

8,873

 

2,424

 

6,332

 

5,187

 

1,145

 

117

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Occupancy rate

 

93.3%

 

96.5%

 

92.2%

 

 

 

 

 

90.7%

 

 

 

51

 

 


MERCHANDISE MART PROPERTIES – CONTINUED

 

Office Space

 

Occupancy and average annual escalated rent per square foot:

 

 

As of
December 31,

 

Rentable
Square Feet

 

Occupancy Rate

 

Average Annual
Escalated Rent
Per Square Foot

 

2008

 

2,424,000

 

96.5%

 

$

25.18

 

2007

 

2,358,000

 

96.7%

 

 

24.99

 

2006

 

2,316,000

 

97.2%

 

 

23.82

 

2005

 

2,703,000

 

96.7%

 

 

25.05

 

2004

 

2,864,000

 

96.2%

 

 

26.57

 

 

 

2008 Merchandise Mart Properties office rental revenues by tenants’ industry:

 

Industry

 

Percentage

 

Service

 

29%

 

Banking

 

19%

 

Telecommunications

 

14%

 

Education

 

11%

 

Other

 

9%

 

Government

 

7%

 

Publications

 

6%

 

Insurance

 

5%

 

 

 

100%

 

 

 

Office 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 the tenants’ 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.

 

 

Office tenants accounting for 2% or more of Merchandise Mart Properties’ 2008 total revenues:

 

Tenant

 

Square Feet
Leased

 

2008
Revenues

 

Percentage of
Merchandise Mart Properties
Revenues

 

Percentage
of Total
Company
Revenues

 

WPP Group

 

270,000

 

$

7,463,000

 

2.7%

 

0.3%

 

SBC Ameritech

 

193,000

 

 

6,679,000

 

2.4%

 

0.2%

 

 

 

52

 

 


MERCHANDISE MART PROPERTIES– CONTINUED

 

2008 leasing activity – Merchandise Mart Properties office space:

 

 

 

Square Feet

 

Average Initial
Rent Per
Square Foot (1)

 

350 West Mart Center

 

315, 000

 

$

27.85

 

Merchandise Mart

 

154, 000

 

 

25.03

 

Washington Design Center

 

15, 000

 

 

46.58

 

Boston Design Center

 

8, 000

 

 

29,82

 

L.A. Mart

 

1, 000

 

 

12.34

 

Total

 

493,000

 

 

27.50

 

___________________________________

 

(1)

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

 

 

Lease expirations for Merchandise Mart Properties office space as of December 31, 2008 assuming none of the tenants exercise renewal options:

 

 

 

 

 

 

 

Percentage of
Merchandise Mart

Annual Escalated
Rent of Expiring Leases

 

Year

 

Number of
Expiring Leases

 

Square Feet of
Expiring Leases

 

Properties Office
Square Feet

 

Total

 

 

Per Square Foot

 

Month to month

 

12

 

22, 000

 

1.0%

$

358, 000

 

$

16.27

 

2009

 

7

 

210, 000

 

9.4%

 

6,102, 000

 

 

29.04

 

2010

 

7

 

32, 000

 

1.5%

 

903, 000

 

 

27.82

 

2011

 

19

 

80, 000

 

3.6%

 

2,040, 000

 

 

25.61

 

2012

 

6

 

103, 000

 

4.6%

 

2,918, 000

 

 

28.31

 

2013

 

18

 

81, 000

 

3.6%

 

2,582, 000

 

 

31.98

 

2014

 

11

 

161, 000

 

7.2%

 

4,270, 000

 

 

26.59

 

2015

 

7

 

228, 000

 

10.2%

 

5,775, 000

 

 

25.34

 

2016

 

3

 

116, 000

 

5.2%

 

2,943, 000

 

 

25.42

 

2017

 

5

 

88, 000

 

4.0%

 

1,685, 000

 

 

19.14

 

2018

 

11

 

288, 000

 

13.0%

 

8,237, 000

 

 

28.56

 

 

 

53

 

 


MERCHANDISE MART PROPERTIES – CONTINUED

Showroom Space

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 hosting trade shows for the contract furniture, casual furniture, gift, carpet, crafts, apparel and design industries. Merchandise Mart Properties own and operate five of the leading furniture and gift trade shows, including the contract furniture industry’s largest trade show, NeoCon, which attracts over 50,000 attendees each June and is hosted at the Merchandise Mart building in Chicago. The Market Square Complex co-hosts the home furniture industry’s semi-annual (April and October) market weeks which occupy over 12 million square feet in the High Point, North Carolina region.

 

Occupancy and average escalated rent per square foot:

 

As of
December 31,

 

Rentable
Square Feet

 

Occupancy Rate

 

Average Annual
Escalated Rent
Per Square Foot

 

2008

 

6,332,000

 

92.2%

 

$

26.72

 

2007

 

6,139,000

 

93.7%

 

 

26.16

 

2006

 

6,370,000

 

93.6%

 

 

25.17

 

2005

 

6,290,000

 

94.7%

 

 

24.04

 

2004

 

5,589,000

 

97.6%

 

 

23.08

 

 

2008 Merchandise Mart Properties showroom rental revenues by tenants’ industry:

 

Industry

 

Percentage

 

Residential Design

 

27%

 

Gift

 

20%

 

Residential Furnishing

 

17%

 

Contract Furnishing

 

17%

 

Apparel

 

5%

 

Casual Furniture

 

5%

 

Art

 

4%

 

Building Products

 

3%

 

Market Square

 

2%

 

 

 

100%

 

 

2008 Leasing Activity – Merchandise Mart Properties showroom space:

 

 

 

Square Feet

 

Average Initial
Rent Per
Square Foot (1)

 

Market Square Complex

 

325,000

 

$

16.07

 

Merchandise Mart

 

203,000

 

 

42.07

 

L.A. Mart

 

108,000

 

 

19.71

 

Washington Design Center

 

90,000

 

 

36.12

 

7 West 34 th Street

 

66,000

 

 

40.76

 

Boston Design Center

 

60,000

 

 

35.28

 

350 West Mart Center

 

10,000

 

 

25.05

 

Total

 

862,000

 

 

28.07

 

 

___________________________

 

(1)

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

 

 

54

 

 


MERCHANDISE MART PROPERTIES – CONTINUED

Lease expirations for the Merchandise Mart Properties showroom space as of December 31, 2008 assuming none of the tenants exercise renewal options:

 

 

 

Number of

 

Square Feet of

 

Percentage of
Merchandise Mart
Properties’ Showroom

Annual Escalated
Rent of Expiring Leases

 

Year

 

Expiring Leases

 

Expiring Leases

 

Square Feet

 

Total

 

 

Per Square Foot

 

Month to month

 

36

 

147,000

 

3.1%

$

2,758,000

 

$

18.77

 

2009

 

223

 

651,000

 

13.8%

 

17,050,000

 

 

26.19

 

2010

 

221

 

624,000

 

13.2%

 

18,928,000

 

 

30.35

 

2011

 

183

 

709,000

 

15.0%

 

19,911,000

 

 

28.08

 

2012

 

104

 

607,000

 

12.9%

 

16,002,000

 

 

26.36

 

2013

 

118

 

659,000

 

14.0%

 

19,029,000

 

 

28.90

 

2014

 

35

 

250,000

 

5.3%

 

6,922,000

 

 

27.71

 

2015

 

54

 

290,000

 

6.1%

 

9,596,000

 

 

33.11

 

2016

 

29

 

172,000

 

3.6%

 

5,586,000

 

 

32.54

 

2017

 

36

 

364,000

 

7.7%

 

11,738,000

 

 

32.25

 

2018

 

36

 

203,000

 

4.3%

 

7,002,000

 

 

34.53

 

 

Retail Space

The Merchandise Mart Properties portfolio also contains approximately 117,000 square feet of retail space, which was 90.7% occupied at December 31, 2008.

 

 

TOYS “R” US, INC. (“TOYS”)

As of December 31, 2008 we own a 32.7% interest in Toys, a worldwide specialty retailer of toys and baby products, which has a significant real estate component. Toys had $6.1 billion of outstanding debt at December 31, 2008, of which our pro rata share was $2.0 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, 2008:

 

 

 

Total

 

Owned

 

Building
Owned on
Leased Ground

 

Leased

 

Domestic

 

847

 

301

 

242

 

304

 

International

 

506

 

79

 

26

 

401

 

Subtotal

 

1,353

 

380

 

268

 

705

 

Franchised stores

 

208

 

 

 

 

 

 

 

Total

 

1,561

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

55

 

 


OTHER INVESTMENTS

 

555 California Street Complex

As of December 31, 2008, we own a 70% controlling interest in a three-building complex containing 1,800,000 square feet, known as The Bank of America Center, located at California and Montgomery Streets in San Francisco’s financial district (“555 California Street”), which we acquired in 2007.

 

Occupancy and average annual rent per square foot as of December 31, 2008:

 

As of
December 31,

 

Rentable
Square Feet

 

Occupancy Rate

 

Average Annual
Escalated Rent
Per Square Foot

 

2008

 

1,789,000

 

94.0%

 

$

57.98

 

2007

 

1,789,000

 

95.0%

 

 

59.84

 

 

 

2008 rental revenue by tenants’ industry :

 

Industry

 

Percentage

 

Finance

 

43%

 

Banking

 

42%

 

Legal Services

 

11%

 

Real Estate

 

2%

 

Retail

 

1%

 

Others

 

1%

 

 

 

100%

 

 

 

Lease terms generally range from five to seven years for smaller tenant spaces 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, the tenant’s 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.

 

Tenants accounting for 2% or more of total revenues :

 

Tenant

 

Square
Feet Leased

 

2008
Revenues

 

Percentage of
555 California Street
Complex’s Revenues

 

Percentage of
Total Company
Revenues

 

Bank of America

 

 

659,000

 

$

36,403,000

 

33.2%

 

 

1.3%

 

UBS Financial Services

 

 

134,000

 

 

8,232,000

 

7.5%

 

 

0.3%

 

Goldman, Sachs & Co.

 

 

97,000

 

 

6,342,000

 

5.8%

 

 

0.2%

 

Morgan Stanley & Company, Inc.

 

 

89,000

 

 

6,291,000

5.7%

 

 

0.2%

 

Kirkland & Ellis LLP

 

 

125,000

 

 

5,773,000

 

5.3%

 

 

0.2%

 

Lehman Brothers Inc. (1)

 

 

61,000

 

 

5,212,000

 

4.7%

 

 

0.2%

 

McKinsey & Company Inc.

 

 

54,000

 

 

4,143,000

 

3.8%

 

 

0.2%

 

Dodge & Cox

 

 

62,000

 

 

3,736,000

 

3.4%

 

 

0.1%

 

___________________________

 

(1)

In September 2008, Lehman Brothers Inc. filed for Chapter 11 bankruptcy protection.

 

2008 leasing activity :

 

During 2008 we leased 23,000 square feet at a weighted average rent initial rent of $79.00 per square foot.

 

 

56

 

 


OTHER INVESTMENTS – CONTINUED

 

Alexander’s, Inc. (“Alexander’s”)

As of December 31, 2008, we own 32.5% of the outstanding common stock of Alexander’s, which has seven properties in the greater New York metropolitan area. Alexander’s had $1.2 billion of outstanding debt at December 31, 2008, of which our pro rata share was $397,000,000, 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.

 

 

 

Year Ended December 31,

 

Rental information:

 

2008

 

2007

 

2006

 

2005

 

2004

 

Hotel:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Average occupancy rate

 

 

84.1

%

 

84.4

%

 

82.1

%

 

83.7

%

 

78.9

%

Average daily rate

 

$

171.32

 

$

154.78

 

$

133.33

 

$

115.74

 

$

97.36

 

Revenue per available room

 

$

144.01

 

$

130.70

 

$

109.53

 

$

96.85

 

$

77.56

 

Commercial:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Office space:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Average occupancy rate

 

 

30.4

%

 

57.0

%

 

41.2

%

 

38.7

%

 

39.7

%

Annual rent per square feet

 

$

18.78

 

$

22.23

 

$

16.42

 

$

10.70

 

$

10.04

 

Retail space:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Average occupancy rate

 

 

69.5

%

 

73.3

%

 

79.9

%

 

79.8

%

 

90.7

%

Annual rent per square feet

 

$

41.75

 

$

33.63

 

$

27.54

 

$

26.02

 

$

29.67

 

 

 

Lexington Realty Trust (“Lexington”)

As of December 31, 2008, we own 17.2% of the outstanding common shares of Lexington, which has interests in 288 properties, encompassing approximately 48.8 million square feet across 44 states, generally net-leased to major corporations. Lexington had approximately $2.5 billion of outstanding debt at of December 31, 2008, of which our pro rata share was $361,771,000, none of which is recourse to us.

 

Warehouse/Industrial Properties

As of December 31, 2008, we own 6 warehouse/industrial properties in New Jersey containing approximately 1.2 million square feet. Average lease terms range from three to five years. The following table sets forth the occupancy rate and average annual rent per square foot at the end of each of the past five years.

 

As of December 31,

 

Occupancy Rate

 

Average Annual Rent

Per Square Foot

 

2008

 

100.0%

 

 

$

4.70

 

2007

 

100.0%

 

 

 

4.70

 

2006

 

96.9%

 

 

 

4.17

 

2005

 

100.0%

 

 

 

4.19

 

2004

 

88.0%

 

 

 

3.96

 

 

 

 

57

 

 


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

 

On January 8, 2003, Stop & Shop filed a complaint with the United States District Court for the District of New Jersey (“USDC-NJ”) claiming that we had no right to reallocate and therefore continue to collect the $5,000,000 of annual rent from Stop & Shop pursuant to the Master Agreement and Guaranty, because of the expiration of the East Brunswick, Jersey City, Middletown, Union and Woodbridge leases to which the $5,000,000 of additional rent was previously allocated. Stop & Shop asserted that a prior order of the Bankruptcy Court for the Southern District of New York dated February 6, 2001, as modified on appeal to the District Court for the Southern District of New York on February 13, 2001, froze our right to re-allocate which effectively terminated our right to collect the additional rent from Stop & Shop. On March 3, 2003, after we moved to dismiss for lack of jurisdiction, Stop & Shop voluntarily withdrew its complaint. On March 26, 2003, Stop & Shop filed a new complaint in New York Supreme Court, asserting substantially the same claims as in its USDC-NJ complaint. We removed the action to the United States District Court for the Southern District of New York. In January 2005 that court remanded the action to the New York Supreme Court. On February 14, 2005, we served an answer in which we asserted a counterclaim seeking a judgment for all the unpaid additional rent accruing through the date of the judgment and a declaration that Stop & Shop will continue to be liable for the additional rent as long as any of the leases subject to the Master Agreement and Guaranty remain in effect. On May 17, 2005, we filed a motion for summary judgment. On July 15, 2005, Stop & Shop opposed our motion and filed a cross-motion for summary judgment. On December 13, 2005, the Court issued its decision denying the motions for summary judgment. Both parties appealed the Court’s decision and on December 14, 2006, the Appellate Court division issued a decision affirming the Court’s decision. On January 16, 2007, we filed a motion for the reconsideration of one aspect of the Appellate Court’s decision which was denied on March 13, 2007. We are currently engaged in discovery and anticipate that a trial date will be set for some time in 2009. We intend to vigorously pursue our claims against Stop & Shop. In our opinion, after consultation with legal counsel, the outcome of such matters will not have a material effect on our financial condition, results of operations or cash flows.

 

On May 24, 2007, we acquired a 70% controlling interest in 1290 Avenue of the Americas and the 555 California Street complex. Our 70% interest was acquired through the purchase of all of the shares of a group of foreign companies that own, through U.S. entities, the 1% sole general partnership interest and a 69% limited partnership interest in the partnerships that own the two properties. The remaining 30% limited partnership interest is owned by Donald J. Trump. In August 2005, Mr. Trump brought a lawsuit in the New York State Supreme Court against, among others, the general partners of the partnerships referred to above.   Mr. Trump’s claims arose out of a dispute over the sale price of and use of proceeds from, the sale of properties located on the former Penn Central rail yards between West 59th and 72nd Streets in Manhattan which were formerly owned by the partnerships. In decisions dated September 14, 2005 and July 24, 2006, the Court denied several of Mr. Trump’s motions and ultimately dismissed all of Mr. Trump’s claims, except for his claim seeking access to books and records. In a decision dated October 1, 2007, the Court determined that Mr. Trump had already received access to the books and records to which he was entitled, with the exception of certain documents which were subsequently delivered to Mr. Trump. Mr. Trump sought re-argument and renewal on, and filed a notice of appeal in connection with, his dismissed claims.  In a decision dated January 6, 2009, the Court denied all of Mr. Trump’s motions. Mr. Trump has filed a notice appealing the 2007 and 2009 decisions. In connection with the acquisition, we agreed to indemnify the sellers for liabilities and expenses arising out of Mr. Trump’s claim that the general partners of the partnerships we acquired did not sell the rail yards at a fair price or could have sold the rail yards for a greater price and any other claims asserted in the legal action; provided however, that if Mr. Trump prevails on certain claims involving partnership matters, other than claims relating to sale price, the sellers will be required to reimburse us for certain costs related to those claims. We believe that the claims relating to the sale price are without merit. All other allegations are not asserted as a basis for damages and regardless of merit, in our opinion, after consultation with legal counsel, will not have a material effect on our financial condition, results of operation or cash flows.

 

In July 2005, we acquired H Street Building Corporation (“H Street”) which has a subsidiary that owns, among other things, a 50% tenancy in common interest in land located in Arlington County, Virginia, known as "Pentagon Row," leased to two tenants. In April 2007, H Street acquired the remaining 50% interest in that fee. In April 2007, we received letters from those tenants, Street Retail, Inc. and Post Apartment Homes, L.P., claiming they had a right of first offer triggered by each of those transactions. On September 25, 2008, both tenants filed suit against us and the former owners. The claim alleges the right to purchase the fee interest, damages in excess of $75,000,000 and punitive damages. We believe this claim is without merit and in our opinion, after consultation with legal counsel, will not have a material effect on our financial condition, results of operation or cash flow.

 

58

 

 


  ITEM 4.

SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matters were submitted to a vote of security holders during the fourth quarter of the year ended December 31, 2008.

 

EXECUTIVE OFFICERS OF THE REGISTRANT

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

       

Age

       

PRINCIPAL OCCUPATION, POSITION AND OFFICE
(Current and during past five years with Vornado unless otherwise stated)

 

 

 

 

 

Steven Roth

 

67

 

Chairman of the Board, Chief Executive Officer and Chairman of the Executive Committee of the Board; the 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.

 

 

 

 

 

Michael D. Fascitelli

 

52

 

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.

 

 

 

 

 

Michelle Felman

 

46

 

Executive Vice President—Acquisitions since September 2000; Independent Consultant to Vornado from October 1997 to September 2000; Managing Director—Global Acquisitions and Business Development of GE Capital from 1991 to July 1997.

 

 

 

 

 

David R. Greenbaum

 

57

 

President of the New York City Office 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.

 

 

 

 

 

Christopher Kennedy

 

45

 

President of the Merchandise Mart Division since September 2000; Executive Vice President of the Merchandise Mart Division from April 1998 to September 2000; Executive Vice President of Merchandise Mart Properties, Inc. from 1994 to April 1998.

 

 

 

 

 

Joseph Macnow

 

63

 

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.

 

 

 

 

 

Sandeep Mathrani

 

46

 

Executive Vice President—Retail Real Estate since March 2002; Executive Vice President, Forest City Ratner from 1994 to February 2002.

 

 

 

 

 

Mitchell N. Schear

 

50

 

President of Vornado/Charles E. Smith L.P. (our Washington, DC Office division) since April 2003; President of the Kaempfer Company from 1998 to April 2003 (date acquired by us).

 

 

 

 

 

Wendy Silverstein

 

48

 

Executive Vice President—Capital Markets since April 1998; Senior Credit Officer of Citicorp Real Estate and Citibank, N.A. from 1986 to 1998.

 

 

 

 

 

 

 

 

 

 

 

 

59


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 closing price ranges of the common shares and dividends paid per share for the years ended December 31, 2008 and 2007 were as follows:

 

Quarter

 

Year Ended
December 31, 2008

 

 

 

Year Ended
December 31, 2007

 

 

 

High

 

Low

 

Dividends

 

 

 

High

 

Low

 

Dividends

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1st

 

$

94.54

 

$

76.64

 

$

0.90

 

 

 

$

136.55

 

$

116.29

 

$

0.85

 

2nd

 

 

99.70

 

 

85.94

 

 

0.90

 

 

 

 

123.96

 

 

107.37

 

 

0.85

 

3rd

 

 

108.15

 

 

83.00

 

 

0.90

 

 

 

 

117.21

 

 

83.59

 

 

0.85

 

4th

 

 

90.65

 

 

36.66

 

 

0.95

 

 

 

 

117.42

 

 

82.82

 

 

0.90

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

On January 14, 2009, we declared a regular quarterly dividend of $0.95 per common share, payable on March 12, 2009 in a combination of cash, not to exceed 40% in the aggregate, and Vornado common shares. This dividend policy, continued for all of 2009, will require approximately $260,000,000 of cash for common share dividends during 2009, assuming shareholder elections to receive cash meet or exceed the aggregate cash limitations. On February 6, 2009, there were 1,454 holders of record of our common shares.

 

 

Recent Sales of Unregistered Securities

 

During 2008, we issued 6,984 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

 

We did not repurchase any of our equity securities during the fourth quarter of 2008, other than 1,320,968 common shares used by officers and employees of the Company to pay for the exercise price and related withholding taxes resulting from stock option exercises.

 

 

60

 

 


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 (excluding health care real estate investment trusts), a peer group index. The graph assumes that $100 was invested on December 31, 2003 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.

 


 

 

 

 

2003

 

2004

 

2005

 

2006

 

2007

 

2008

 

Vornado Realty Trust

 

100

 

146

 

168

 

254

 

190

 

98

 

S&P 500 Index

 

100

 

111

 

116

 

135

 

142

 

90

 

The NAREIT All Equity Index

 

100

 

132

 

148

 

199

 

168

 

105

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

61

 

 


ITEM 6.

SELECTED FINANCIAL DATA

 

 

 

Year Ended December 31,

 

 

 

2008

 

2007

 

2006

 

2005

 

2004

 

(in thousands, except per share amounts)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating Data:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Property rentals

 

$

2,211,311

 

$

1,977,023

 

$

1,544,741

 

$

1,358,521

 

$

1,310,945

 

Tenant expense reimbursements

 

 

358,437

 

 

323,544

 

 

260,772

 

 

206,386

 

 

188,211

 

Fee and other income

 

 

127,303

 

 

109,949

 

 

103,587

 

 

94,603

 

 

83,897

 

Total revenues

 

 

2,697,051

 

 

2,410,516

 

 

1,909,100

 

 

1,659,510

 

 

1,583,053

 

Expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating

 

 

1,070,118

 

 

951,582

 

 

737,452

 

 

627,980

 

 

599,313

 

Depreciation and amortization

 

 

537,427

 

 

441,209

 

 

319,066

 

 

252,086

 

 

228,983

 

General and administrative

 

 

194,027

 

 

189,041

 

 

180,167

 

 

139,470

 

 

139,486

 

Impairment losses on development projects and
costs of acquisitions not consummated

 

 

81,447

 

 

10,375

 

 

 

 

 

 

1,475

 

Total expenses

 

 

1,883,019

 

 

1,592,207

 

 

1,236,685

 

 

1,019,536

 

 

969,257

 

Operating income

 

 

814,032

 

 

818,309

 

 

672,415

 

 

639,974

 

 

613,796

 

Income (loss) applicable to Alexander’s

 

 

36,671

 

 

50,589

 

 

(14,530

)

 

59,022

 

 

8,580

 

Income (loss) applicable to Toys ‘R’ Us

 

 

2,380

 

 

(14,337

)

 

(47,520

)

 

(40,496

)

 

 

(Loss) income from partially owned entities

 

 

(195,878

)

 

31,891

 

 

60,355

 

 

34,917

 

 

37,740

 

Interest and other investment (loss) income, net

 

 

(2,682

)

 

226,425

 

 

255,391

 

 

164,941

 

 

203,775

 

Interest and debt expense

 

 

(586,358

)

 

(569,386

)

 

(394,571

)

 

(281,825

)

 

(233,750

)

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

 

 

7,757

 

 

39,493

 

 

76,073

 

 

39,042

 

 

19,775

 

Minority interest of partially owned entities

 

 

3,263

 

 

3,494

 

 

1,363

 

 

413

 

 

49

 

Income before income taxes

 

 

79,185

 

 

586,478

 

 

608,976

 

 

615,988

 

 

649,965

 

Income tax benefit (expense)

 

 

204,537

 

 

(9,179

)

 

(491

)

 

(2,315

)

 

(1,258

)

Income from continuing operations

 

 

283,722

 

 

577,299

 

 

608,485

 

 

613,673

 

 

648,707

 

Income from discontinued operations, net of
minority interest

 

 

154,442

 

 

58,389

 

 

32,215

 

 

59,805

 

 

101,409

 

Income before allocation to minority limited partners

 

 

438,164

 

 

635,688

 

 

640,700

 

 

673,478

 

 

750,116

 

Minority limited partners’ interest in the
Operating Partnership

 

 

(21,037

)

 

(47,508

)

 

(58,712

)

 

(66,755

)

 

(88,091

)

Perpetual preferred unit distributions of the
Operating Partnership

 

 

(22,084

)

 

(19,274

)

 

(21,848

)

 

(67,119

)

 

(69,108

)

Net income

 

 

395,043

 

 

568,906

 

 

560,140

 

 

539,604

 

 

592,917

 

Preferred share dividends

 

 

(57,091

)

 

(57,177

)

 

(57,511

)

 

(46,501

)

 

(21,920

)

Net income applicable to common shares

 

$

337,952

 

$

511,729

 

$

502,629

 

$

493,103

 

$

570,997

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income from continuing operations - basic

 

$

1.20

 

$

2.98

 

$

3.31

 

$

3.24

 

$

3.75

 

Income from continuing operations - diluted

 

 

1.16

 

 

2.86

 

 

3.13

 

 

3.08

 

 

3.59

 

Income per share – basic

 

 

2.20

 

 

3.37

 

 

3.54

 

 

3.69

 

 

4.56

 

Income per share – diluted

 

 

2.14

 

 

3.23

 

 

3.35

 

 

3.50

 

 

4.35

 

Dividends declared per common share

 

 

3.65

 

 

3.45

 

 

3.79

 

 

3.90

 

 

3.05

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance Sheet Data:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total assets

 

$

21,418,210

 

$

22,478,935

 

$

17,954,281

 

$

13,637,163

 

$

11,580,517

 

Real estate, at cost

 

 

17,869,658

 

 

17,028,507

 

 

11,607,070

 

 

9,584,512

 

 

7,938,195

 

Accumulated depreciation

 

 

2,161,093

 

 

1,802,055

 

 

1,440,656

 

 

1,200,865

 

 

1,014,517

 

Debt

 

 

12,649,086

 

 

11,896,038

 

 

8,499,086

 

 

5,518,939

 

 

4,193,619

 

Shareholders’ equity

 

 

5,664,485

 

 

5,418,099

 

 

4,910,720

 

 

4,264,063

 

 

4,012,741

 

 

62

 

 


 

 

 

Year Ended December 31,

 

(Amounts in thousands)

 

2008

 

2007

 

2006

 

2005

 

2004

 

Other Data:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Funds From Operations (“FFO”) (1):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$

395,043

 

$

568,906

 

$

560,140

 

$

539,604

 

$

592,917

 

Depreciation and amortization of real property

 

 

509,367

 

 

451,313

 

 

337,730

 

 

276,921

 

 

228,298

 

Net gains on sale of real estate

 

 

(57,523

)

 

(60,811

)

 

(33,769

)

 

(31,614

)

 

(75,755

)

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Depreciation and amortization of real property

 

 

66,435

 

 

85,244

 

 

60,445

 

 

12,192

 

 

 

Net gains on sale of real estate

 

 

(719

)

 

(3,012

)

 

(2,178

)

 

 

 

 

Income tax effect of Toys adjustments
included above

 

 

(23,223

)

 

(28,781

)

 

(21,038

)

 

(4,613

)

 

 

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Depreciation and amortization of real property

 

 

49,513

 

 

48,770

 

 

45,184

 

 

29,860

 

 

49,440

 

Net gains on sale of real estate

 

 

(8,759

)

 

(12,451

)

 

(10,988

)

 

(2,918

)

 

(3,048

)

Minority limited partners’ share of above adjustments

 

 

(49,683

)

 

(46,664

)

 

(39,809

)

 

(31,990

)

 

(27,991

)

FFO

 

 

880,451

 

 

1,002,514

 

 

895,717

 

 

787,442

 

 

763,861

 

Preferred share dividends

 

 

(57,091

)

 

(57,177

)

 

(57,511

)

 

(46,501

)

 

(21,920

)

FFO applicable to common shares

 

 

823,360

 

 

945,337

 

 

838,206

 

 

740,941

 

 

741,941

 

Interest on 3.875% exchangeable senior debentures

 

 

21,019

 

 

21,024

 

 

19,856

 

 

15,335

 

 

 

Series A convertible preferred dividends

 

 

189

 

 

277

 

 

631

 

 

943

 

 

1,068

 

Convertible preferred unit distributions

 

 

 

 

 

 

 

 

 

 

7,034

 

FFO applicable to common shares
plus assumed conversions (1)

 

$

844,568

 

$

966,638

 

$

858,693

 

$

757,219

 

$

750,043

 

________________________________

(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 net income or loss determined in accordance with Generally Accepted Accounting Principles (“GAAP”), excluding extraordinary items as defined under GAAP and gains or losses from sales of previously depreciated operating real estate assets, plus specified non-cash items, such as real estate asset depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures. FFO is used by management, investors and industry analysts as a supplemental measure of operating performance of equity REITs. FFO should be evaluated along with GAAP net income (the most directly comparable GAAP measure), as well as cash flow from operating activities, investing activities and financing activities, in evaluating the operating performance of equity REITs. Management believes that FFO is helpful to investors as a supplemental performance measure because this measure excludes the effect of depreciation, amortization and gains or losses from sales of real estate, all of which are based on historical costs which implicitly assumes that the value of real estate diminishes predictably over time. Since real estate values instead have historically risen or fallen with market conditions, this non-GAAP measure can facilitate comparisons of operating performance between periods and among other equity REITs. FFO does not represent cash generated from operating activities in accordance with GAAP and is not necessarily indicative of cash available to fund cash needs as disclosed in our Statements of Cash Flows. FFO should not be considered as an alternative to net income as an indicator of our operating performance or as an alternative to cash flows as a measure of liquidity.

 

63

 

 


ITEM 7.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 
     
 

 

Page

 

Overview

65

 

Overview – Leasing Activity

71

 

Critical Accounting Policies

73

 

Results of Operations:

 

 

Years Ended December 31, 2008 and 2007

83

 

Years Ended December 31, 2007 and 2006

89

 

Supplemental Information:

 

 

Summary of Net Income and EBITDA for the Three Months Ended
December 31, 2008 and 2007

97

 

Changes in EBITDA by segment for the Three Months Ended
December 31, 2008 as compared to December 31, 2007

100

 

Changes in EBITDA by segment for the Three Months Ended
December 31, 2008 as compared to September 30, 2008

100

 

Related Party Transactions

101

 

Liquidity and Capital Resources

102

 

Certain Future Cash Requirements

104

 

Financing Activities and Contractual Obligations

105

 

Cash Flows for the Year Ended December 31, 2008

109

 

Cash Flows for the Year Ended December 31, 2007

111

 

Cash Flows for the Year Ended December 31, 2006

113

 

Funds From Operations for the Years Ended December 31, 2008 and 2007

115

 

 

 

64

 

 


Overview

We own and operate office, retail and showroom properties (our “core” operations) with large concentrations of office and retail properties in the New York City metropolitan area and in the Washington, DC / Northern Virginia areas. In addition, we have a 32.7% interest in Toys “R” Us, Inc. (“Toys”) which has a significant real estate component, a 32.5% interest in Alexander’s, Inc., which has seven properties in the greater New York metropolitan area, as well as interests in other real estate and related investments.

 

Our ultimate business objective is to maximize shareholder value, which we measure by the total return provided to our shareholders. The table below compares our performance to the Morgan Stanley REIT Index (“RMS”) and the SNL REIT Index (“SNL”) for the following periods ending December 31, 2008 (past performance is not necessarily indicative of future performance):

 

 

 

Total Returns

 

 

 

Vornado

 

RMS

 

SNL

 

One-year

 

(28.4%)

 

(38.0%)

 

(36.6%)

 

Three-years

 

(19.3%)

 

(29.9%)

 

(27.8%)

 

Five-years

 

36.1%

 

3.4%

 

7.1%

 

Ten-years

 

202.8% 

 

100.2% 

 

107.3%  

 

 

We intend to achieve our ultimate 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 high likelihood of capital appreciation;

 

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

 

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

 

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

 

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

 

We expect to finance our growth, acquisitions and investments using internally generated funds, proceeds from possible asset sales and by accessing the public and private capital markets.

 

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

 

In the second half of 2007 the residential mortgage and capital markets began showing signs of stress, primarily in the form of escalating default rates on sub-prime mortgages, declining home values and increasing inventory nationwide. In 2008, the “credit crisis” spread to the broader commercial credit and financial markets resulting in illiquidity and volatility in the bond and equity markets. We are currently in an economic recession which has negatively affected all businesses, including ours. During the past year, real estate transactions have diminished significantly and capitalization rates have risen. Our real estate portfolio may be affected by declining demand for office and retail space and tenant bankruptcies, which may result in lower average occupancy rates and effective rents, and a corresponding decrease in net income, funds from operations and cash flow. In addition, the value of our assets, including investments in joint ventures, marketable securities, and mezzanine loans may also decline, and may result in impairment charges and/or valuation allowances and a corresponding decrease in net income and funds from operations.

 

 

 

65

 

 


Overview - continued

Year Ended December 31, 2008 Financial Results Summary

 

Net income applicable to common shares for the year ended December 31, 2008 was $337,952,000, or $2.14 per diluted share, versus $511,729,000, or $3.23 per diluted share, for the year ended December 31, 2007. Net income for the years ended December 31, 2008 and 2007 include $67,001,000 and $76,274,000, respectively, for our share of net gains on sale of real estate and certain other items that affect comparability, which are listed in the table below. The aggregate of these items and net gains on sale of real estate, net of minority interest, increased net income applicable to common shares for the years ended December 31, 2008 and 2007 by $17,621,000 and $131,023,000, or $0.11 and $0.83 per diluted share, respectively.

 

Funds from operations applicable to common shares plus assumed conversions (“FFO”) for the year ended December 31, 2008 was $844,568,000, or $5.16 per diluted share, compared to $966,638,000, or $5.89 per diluted share, for the prior year. FFO for the years ended December 31, 2008 and 2007 also include certain items that affect comparability, which are listed in the table below. The aggregate of these items, net of minority interest, decreased FFO for the year ended December 31, 2008 by $36,216,000, or $0.22 per diluted share and increased FFO for the year ended December 31, 2007 by $91,975,000, $0.56 per diluted share.

 

(Amounts in thousands)

 

For the Year Ended
December 31,

 

Items that affect comparability (income) expense:

 

2008

 

2007

 

Reversal of deferred income taxes initially recorded in connection with the H Street acquisition

 

$

(222,174

)

$

 

Net gain on sale of our 47.6% interest in Americold

 

 

(112,690

)

 

 

Non-cash asset write-downs:

 

 

 

 

 

 

 

Investment in Lexington Realty Trust

 

 

107,882

 

 

 

Marketable equity securities

 

 

76,352

 

 

 

Real estate development projects:

 

 

 

 

 

 

 

Partially owned entities

 

 

96,037

 

 

 

Wholly owned entities

 

 

81,447

 

 

10,375

 

MPH mezzanine loan loss (reversal) accrual

 

 

(10,300

)

 

57,000

 

Derivative positions in marketable equity securities

 

 

33,740

 

 

(136,593

)

Purchase price accounting adjustments:

 

 

 

 

 

 

 

Toys

 

 

14,900

 

 

 

Beverly Connection

 

 

(4,100

)

 

 

Net gain on extinguishment of debt and write-off of unamortized financing costs

 

 

(9,820

)

 

7,562

 

Alexander’s – reversal of stock appreciation rights compensation expense

 

 

(6,583

)

 

(14,280

)

After-tax net gain on sale of residential condominiums

 

 

(5,361

)

 

 

Net gain on disposition of our 13.8% interest in GMH

 

 

(2,038

)

 

 

Other, net

 

 

8,575

 

 

5,387

 

 

 

 

45,867

 

 

(70,549

)

47.6% share of Americold’s FFO (Net losses of $1,076 and $4,342, respectively) – sold in March 2008

 

 

(6,098

)

 

(24,693

)

13.8% share of GMH’s FFO (Equity in net income of $6,463 in 2007) – sold in June 2008

 

 

 

 

(5,754

)

 

 

 

39,769

 

 

(100,996

)

Minority limited partners’ share of above adjustments

 

 

(3,553

)

 

9,021

 

Total items that affect comparability

 

$

36,216

 

$

(91,975

)

 

 

66

 

 


Overview – continued

 

During the year ended December 31, 2008, we did not recognize income on certain assets with an aggregate carrying amount of approximately $1.6 billion at December 31, 2008, because they were out of service for redevelopment, although we capitalized approximately $63,000,000 of interest costs in connection with the development of these assets. Assets under development include all or portions of: the Bergen Town Center, the Manhattan Mall, 220 20 th Street, 1229-1231 25 th Street (“West End 25”), 1999 K Street, and certain investments in partially owned entities.

 

The percentage increase (decrease) in the same-store Earnings Before Interest, Taxes, Depreciation and Amortization (“EBITDA”) of our operating segments for the year ended December 31, 2008 over the year ended December 31, 2007 is summarized below.

 


Year Ended:

 

New York
Office

 

Washington, DC
Office

 

Retail

 

Merchandise
Mart

 

December 31, 2008 vs. December 31, 2007

 

6.2%

 

4.5%

 

4.8%

 

(0.2%)

 

 

 

Calculations of same-store EBITDA, reconciliations of net income to EBITDA and FFO and the reasons we consider these non-GAAP financial measures useful are provided in the following pages of Management’s Discussion and Analysis of the Financial Condition and Results of Operations.

 

67

 

 


Overview - continued

Quarter Ended December 31, 2008 Financial Results Summary  

 

Net loss applicable to common shares for the quarter ended December 31, 2008 was $216,786,000, or $1.40 per diluted share, versus net income of $90,923,000, or $0.57 per diluted share, for the quarter ended December 31, 2007. Net loss for the quarter ended December 31, 2008 and net income for the quarter ended December 31, 2007 include $1,083,000 and $43,859,000, respectively, of net gains on sale of real estate and certain other items that affect comparability, which are listed in the table below. The aggregate of these items, net of minority interest, increased net loss applicable to common shares for the quarter ended December 31, 2008 by $251,841,000, or $1.63 per diluted share and increased net income applicable to common shares for the quarter ended December 31, 2007 by $20,414,000, or $0.13 per diluted share.

 

FFO for the quarter ended December 31, 2008 was a negative $77,989,000, or $0.50 per diluted share, compared to a positive $193,412,000, or $1.18 per diluted share, for the prior year’s quarter. FFO for the quarters ended December 31, 2008 and 2007 include certain items that affect comparability, which are listed in the table below. The aggregate of these items, net of minority interest, increased negative FFO for the quarter ended December 31, 2008 by $253,506,000, or $1.64 per diluted share and decreased FFO for the quarter ended December 31, 2007 by $11,146,000, or $0.07 per diluted share.

 

(Amounts in thousands)

 

For the Three Months
Ended December 31,

 

Items that affect comparability (income) expense:

 

2008

 

2007

 

Non-cash asset write-downs:

 

 

 

 

 

 

 

Investment in Lexington Realty Trust

 

$

100,707

 

$

 

Marketable equity securities

 

 

55,471

 

 

 

Real estate development projects:

 

 

 

 

 

 

 

Partially owned entities

 

 

61,837

 

 

 

Wholly owned entities

 

 

73,438

 

 

1,568

 

MPH mezzanine loan loss accrual

 

 

 

 

57,000

 

Alexander’s – reversal of stock appreciation rights compensation expense

 

 

(14,188

)

 

(5,289

)

Net gain on extinguishment of debt

 

 

(9,820

)

 

 

Derivative positions in marketable equity securities

 

 

7,928

 

 

(36,533

)

Other, net

 

 

8,426

 

 

3,418

 

 

 

 

283,799

 

 

20,164

 

47.6% share of Americold’s FFO (Net loss of $1,494 in the three months ended December 31,
2007) – sold in March 2008

 

 

 

 

(6,869

)

13.8% share of GMH’s FFO (Equity in net income of $1,036 in the three months ended
December 31, 2007) – sold in June 2008

 

 

 

 

(1,036

)

 

 

 

283,799

 

 

12,259

 

Minority limited partners’ share of above adjustments

 

 

(30,293

)

 

(1,113

)

Total items that affect comparability

 

$

253,506

 

$

11,146

 

 

 

 

The percentage increase (decrease) in the same-store EBITDA of our operating segments for the quarter ended December 31, 2008 over the quarter ended December 31, 2007 and the trailing quarter ended September 30, 2008 are summarized below.

 


Quarter Ended:

 

New York
Office

 

Washington, DC
Office

 

Retail

 

Merchandise
Mart

 

December 31, 2008 vs. December 31, 2007

 

6.1%

 

5.8%

 

4.0%

 

(5.1%)

 

December 31, 2008 vs. September 30, 2008

 

5.8%

 

6.2%

 

0.6%

 

15.8% 

 

 

 

 

68

 

 


Overview - continued

Significant Activity during 2008

 

Reversal of Deferred Tax Liabilities

 

In connection with the purchase accounting for H Street, in July 2005 and April 2007 we recorded an aggregate of $222,174,000 of deferred tax liabilities representing the differences between the tax basis and the book basis of the acquired assets and liabilities multiplied by the effective tax rate. We were required to record these deferred tax liabilities because H Street and its partially owned entities were operated as C Corporations at the time they were acquired. As of January 16, 2008, we had completed all of the actions necessary to enable these entities to elect REIT status effective for the tax year beginning on January 1, 2008. Consequently, in the first quarter of 2008, we reversed the deferred tax liabilities and recognized an income tax benefit of $222,174,000 in our consolidated statement of income.

 

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

 

Prior to October 28, 2008, we owned 8,149,592 limited partnership units of the Lexington Master Limited Partnership (“Lexington MLP”) which were exchangeable on a one-for-one basis into Lexington common shares, or a 7.7% limited partnership interest. On October 28, 2008, we acquired 8,000,000 common shares of Lexington for $5.60 per share, or $44,800,000. The purchase price consisted of $22,400,000 in cash and a $22,400,000 margin loan recourse only to the 8,000,000 shares acquired. In addition, we exchanged our existing limited partnership units in Lexington MLP for 8,149,592 Lexington common shares. As of December 31, 2008, we own 16,149,592 Lexington common shares, or approximately 17.2% of Lexington’s common equity. We account for our investment in Lexington on the equity method and 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, 2008 closing share price of $5.00, the market value (“fair value” pursuant to SFAS 157) of our investment in Lexington was $80,748,000, or $100,707,000 below the carrying amount on our consolidated balance sheet. We have concluded that our investment in Lexington is “other-than-temporarily” impaired and recorded a $100,707,000 non-cash impairment loss in the fourth quarter of 2008. Together with the impairment charge recorded in the nine months ended September 30, 2008, we recognized an aggregate of $107,882,000 of non-cash charges on our investment in Lexington during 2008. Our conclusions were based on the recent deterioration in the capital and financial markets and our inability to forecast a recovery in the near-term. These charges are included as a component of “(loss) income from partially owned entities,” on our consolidated statement of income.

 

Marketable Securities

 

At December 31, 2008, we concluded that certain of our investments in marketable equity securities were “other-than-temporarily” impaired, based on the severity and duration of the declines in the market value (“fair value” pursuant to SFAS 157) of these securities and recognized non-cash impairment charges aggregating $55,471,000, based on December 31, 2008 closing share prices. Together with impairment charges recorded in the nine months ended September 30, 2008, we recognized an aggregate of $76,352,000 of non-cash impairment charges on these investments during 2008. Our conclusions were based on the recent deterioration in the capital and financial markets and our inability to forecast a recovery in the near-term. These charges are included as a component of “interest and other investment (loss) income, net,” on our consolidated statement of income.

Real Estate Development Projects

 

During 2008, we recognized non-cash charges aggregating $96,037,000, for the write-off of our share of certain partially owned entities’ development costs, as these projects were either deferred or abandoned. These charges include $37,000,000 in the fourth quarter of 2008, for our 50% share of costs in connection with the redevelopment of the Filene’s property in Boston, Massachusetts and $23,000,000 in the first quarter of 2008, for our 50% share of costs in connection with the abandonment of the “arena move”/Moynihan East portions of the Farley project. These charges are included as a component of “(loss) income from partially owned entities,” on our consolidated statement of income.

 

During 2008, we also recognized non-cash charges aggregating $81,447,000, of which $73,438,000 was recognized in the fourth quarter of 2008, primarily related to residential condominium projects under development.

 

69

 


Overview – continued

MPH Mezzanine Loan

 

On June 5, 2007, we acquired a 42% interest in two MPH mezzanine loans totaling $158,700,000, for $66,000,000 in cash. The loans, which were due on February 8, 2008 and have not been repaid, are subordinate to $2.9 billion of mortgage and other debt and secured by the equity interests in four New York City properties: Worldwide Plaza, 1540 Broadway office condominium, 527 Madison Avenue and Tower 56. At December 31, 2007, we reduced the net carrying amount of the loans to $9,000,000 by recognizing a $57,000,000 non-cash charge in our consolidated statement of income. On April 2, 2008, we sold a sub-participation interest in the loans for $19,300,000, which resulted in the reduction of our valuation allowance from $57,000,000 to $46,700,000 and the recognition of $10,300,000 of non-cash income in our consolidated statement of income.

 

Dispositions

 

On March 31, 2008, we sold our 47.6% interest in Americold, our Temperature Controlled Logistics segment, for $220,000,000, in cash, which resulted in a net gain of $112,690,000, which is included as a component of “income from discontinued operations, net of minority interest” on our consolidated statement of income.

 

On June 6, 2008, we sold our Tysons Dulles Plaza office building complex located in Tysons Corner, Virginia for approximately $152,800,000, in cash, which resulted in a net gain of $56,831,000, which is included as a component of “income from discontinued operations, net of minority interest” on our consolidated statement of income.

 

Pursuant to the sale of GMH Communities L.P. (“GMH”) military housing division and the merger of its student housing division with American Campus Communities, Inc (“ACC”) (NYSE: ACC), in June 2008 we received an aggregate of $105,180,000, consisting of $82,142,000 in cash and 753,126 shares of ACC common stock valued at $23,038,000 based on ACC’s then closing share price of $30.59, in exchange for our entire interest in GMH. We subsequently sold all of the ACC common shares. The above transactions resulted in a net gain of $2,038,000, which was recognized in the second quarter of 2008, and is included as a component of “net gains on disposition of wholly owned and partially owned assets other than depreciable real estate” on our consolidated statement of income. The aggregate net income realized from inception of this investment in 2004 through its disposition was $77,000,000.

 

Financings

 

During 2008 we completed approximately $1.3 billion of property level financings and repaid approximately $241,000,000 of existing debt with a portion of the proceeds. In addition, we purchased $81,540,000 (aggregate face amount) of our 4.50% senior unsecured notes due August 15, 2009, for $80,408,000 in cash, resulting in a net gain on extinguishment of debt of $783,000. We also purchased $10,200,000 and $17,300,000 (aggregate face amounts) of our 3.63% and 2.85% convertible senior debentures, respectively, for an aggregate of $18,080,000 in cash, resulting in a net gain on extinguishment of debt of $9,037,000. These gains are included as a reduction of “interest and debt expense” on our consolidated statement of income.

 

 

The net proceeds we received from the above dispositions and financings were used primarily for general corporate purposes. We may seek to obtain additional capital through equity offerings, debt financings or asset sales, although there is no express policy with respect to these capital markets transactions. We may also offer Vornado common or preferred shares or Operating Partnership units in exchange for property and may repurchase or otherwise reacquire our shares or any other securities in the future.

 

70

 

 


Overview – continued

Leasing Activity

 

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

 

(Square feet in thousands)

 

New York

Washington, DC

 

 

 

 

Merchandise Mart

 

As of December 31, 2008:

 

Office

 

Office

    

Retail

 

 

Office

 

Showroom

 

Square feet (in service)

 

 

16,108

 

 

17,666

 

 

 

21,861

 

 

 

2,424

 

 

6,332

 

Number of properties

 

 

28

 

 

84

 

 

 

176

 

 

 

8

 

 

8

 

Occupancy rate

 

 

96.7%

 

 

95.0%

 

 

 

92.1%

 

 

 

96.5%

 

 

92.2%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Leasing Activity:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Year ended December 31, 2008 :

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Square feet

 

 

1,246

(2)

 

2,152

 

 

 

1,022

 

 

 

493

 

 

862

 

Initial rent (1)

 

$

71.69

 

$

38.52

 

 

$

38.34

 

 

$

27.50

 

$

28.07

 

Weighted average lease term (years)

 

 

9.1

 

 

7.3

 

 

 

9.0

 

 

 

9.7

 

 

5.1

 

Rent per square foot – relet space:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Square feet

 

 

1,141

 

 

1,320

 

 

 

559

 

 

 

427

 

 

839

 

Initial Rent – cash basis (1)

 

$

73.50

 

$

36.04

 

 

$

42.59

 

 

$

28.02

 

$

27.87

 

Prior escalated rent – cash basis

 

$

48.69

 

$

30.89

 

 

$

28.46

 

 

$

32.13

 

$

28.33

 

Percentage increase (decrease):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash basis

 

 

51.0%

(3)

 

16.7%

 

 

 

49.6%

 

(3)

 

(12.8%)

 

 

(1.6%)

 

GAAP basis

 

 

48.4%

(3)

 

17.7%

 

 

 

18.1%

 

(3)

 

4.3%

 

 

10.2%

 

Rent per square foot – vacant space:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Square feet

 

 

105

 

 

832

 

 

 

463

 

 

 

66

 

 

23

 

Initial rent (1)

 

$

52.10

 

$

42.46

 

 

$

33.19

 

 

$

24.17

 

$

36.51

 

Tenant improvements and leasing commissions:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Per square foot

 

$

48.72

 

$

15.75

 

 

$

18.31

 

 

$

37.23

 

$

6.85

 

Per square foot per annum

 

$

5.35

 

$

2.16

 

 

$

2.03

 

 

$

3.84

 

$

1.33

 

Percentage of initial rent

 

 

7.5%

 

 

5.6%

 

 

 

5.3%

 

 

 

14.0%

 

 

4.7%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Quarter ended December 31, 2008 :

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Square feet

 

 

232

 

 

296

 

 

 

221

 

 

 

270

 

 

206

 

Initial rent (1)

 

$

70.39

 

$

39.13

 

 

$

61.77

 

 

$

30.09

 

$

27.06

 

Weighted average lease terms (years)

 

 

8.6

 

 

5.8

 

 

 

13.8

 

 

 

10.1

 

 

4.7

 

Rent per square foot – relet space:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Square feet

 

 

200

 

 

231

 

 

 

93

 

 

 

270

 

 

206

 

Initial Rent – cash basis (1)

 

$

72.26

 

$

38.92

 

 

$

97.73

 

 

$

30.09

 

$

27.06

 

Prior escalated rent – cash basis

 

$

48.67

 

$

35.13

 

 

$

34.87

 

 

$

35.20

 

$

27.67

 

Percentage increase (decrease):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash basis

 

 

48.5%

(3)

 

10.8%

 

 

 

180.3%

 

(3)

 

(14.5%)

 

 

(2.2%)

 

GAAP basis

 

 

18.4%

(3)

 

10.5%

 

 

 

10.5%

 

(3)

 

3.7%

 

 

8.2%

 

Rent per square foot – vacant space:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Square feet

 

 

33

 

 

65

 

 

 

128

 

 

 

 

 

 

Initial rent (1)

 

$

58.90

 

$

39.88

 

 

$

35.31

 

 

$

 

$

 

Tenant improvements and leasing commissions:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Per square foot

 

$

57.05

 

$

12.52

 

 

$

58.73

 

 

$

24.99

 

$

5.64

 

Per square foot per annum

 

$

6.60

 

$

2.16

 

 

$

4.26

 

 

$

2.48

 

$

1.19

 

Percentage of initial rent

 

 

9.4%

 

 

5.5%

 

 

 

6.9%

 

 

 

8.2%

 

 

4.4%

 

____________________

See notes on following page

71

 

 


 

Overview – continued

 

(Square feet in thousands)

 

New York

Washington, DC

 

 

 

Merchandise Mart

 

As of December 31, 2007:

 

Office

 

Office

     

Retail

 

Office

 

Showroom

 

Square feet (in service)

 

 

15,994

 

 

17,483

 

 

 

21,710

 

 

2,358

 

 

6,139

 

Number of properties

 

 

28

 

 

81

 

 

 

175

 

 

8

 

 

8

 

Occupancy rate

 

 

97.6

%

 

93.3

%

 

 

94.2

%

 

96.7

%

 

93.7

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Leasing Activity:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Year ended December 31, 2007 :

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Square feet

 

 

1,445

 

 

2,512

 

 

 

857

 

 

329

 

 

1,510

 

Initial rent (1)

 

$

73.74

 

$

38.97

 

 

$

39.38

 

$

26.70

 

$

26.70

 

Weighted average lease term (years)

 

 

9.5

 

 

6.6

 

 

 

8.9

 

 

10.3

 

 

5.6

 

Rent per square foot – relet space:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Square feet

 

 

1,347

 

 

1,764

 

 

 

361

 

 

327

 

 

1,381

 

Initial Rent (1)

 

$

75.05

 

$

33.89

 

 

$

41.50

 

$

26.75

 

$

26.73

 

Prior escalated rent

 

$

43.66

 

$

31.90

 

 

$

28.60

 

$

28.25

 

$

26.85

 

Percentage increase (decrease):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash basis

 

 

71.9

% (3)

 

6.2

%

 

 

45.1

% (3)

 

(5.3

%)

 

(0.4

%)

GAAP basis

 

 

67.5

% (3)

 

7.1

%

 

 

38.1

% (3)

 

13.2

%

 

9.9

%

Rent per square foot – vacant space:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Square feet

 

 

98

 

 

748

 

 

 

496

 

 

2

 

 

129

 

Initial rent (1)

 

$

55.73

 

$

50.96

 

 

$

37.74

 

$

19.50

 

$

26.38

 

Tenant improvements and leasing commissions:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Per square foot

 

$

48.90

 

$

11.34

 

 

$

9.86

 

$

52.39

 

$

13.33

 

Per square foot per annum

 

$

5.17

 

$

1.72

 

 

$

1.11

 

$

5.09

 

$

2.38

 

Percentage of initial rent

 

 

7.0

%

 

4.4

%

 

 

2.8

%

 

19.1

%

 

8.9

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

_______________________

 

(1)

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

 

 

(2)

In addition, the New York Office segment leased 13,468 square feet of retail space during the year ended December 31, 2008 at an initial rent of $205.39, a 268% increase over the prior escalated rent per square foot.

 

 

(3)

Pursuant to SFAS 141, acquired below-market leases are marked-to-market at the time of their acquisition. Accordingly, when the space is subsequently re-leased, the cash basis rent increase is greater than the GAAP basis rent increase.

 

72

 

 


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 the 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. As of December 31, 2008 and 2007, the carrying amounts of real estate, net of accumulated depreciation, were $15.709 billion and $15.226 billion, respectively. Maintenance and repairs are charged to operations 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.

 

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 customer relationships) and acquired liabilities in accordance with Statement of Financial Accounting Standards (“SFAS”) No. 141, Business Combinations and SFAS No. 142, Goodwill and Other Intangible Assets, 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 the historical operating results, known trends, and market/economic conditions.

 

Our properties, including any related intangible assets, are individually reviewed for impairment if events or circumstances change indicating that the carrying amount of the assets may not be recoverable. An impairment exists when the carrying amount of an asset exceeds the aggregate projected future cash flows over our 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, our anticipated holding period for properties, or the estimated fair value of properties change based on market conditions or otherwise, our evaluation of impairment charges 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.

 

Identified Intangible Assets

 

Upon an acquisition of a business we record intangible assets acquired at their estimated fair value separate and apart from goodwill. We amortize identified intangible assets that are determined to have finite lives which are based on the period over which the assets are expected to contribute directly or indirectly to the future cash flows of the business acquired. Intangible assets subject to amortization are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognized if the carrying amount of an intangible asset, including the related real estate when appropriate, is not recoverable and the carrying amount exceeds the estimated fair value.

 

As of December 31, 2008 and 2007, the carrying amounts of identified intangible assets, a component of “other assets” on our consolidated balance sheets, were $525,950,000 and $563,359,000, respectively. In addition, the carrying amounts of identified intangible liabilities, a component of “deferred credit” on our consolidated balance sheets, were $719,822,000 and $814,098,000, respectively. If the intangible assets are deemed to be impaired, or the estimated useful lives of finite-life intangibles assets or liabilities change, the impact to our consolidated financial statements could be material.

 

73

 

 


Critical Accounting Policies – continued

 

Mezzanine Loans Receivable

 

We invest in mezzanine loans to entities which have significant real estate assets. These investments, which are subordinate to the mortgage loans secured by the real property, are generally secured by pledges of the equity interests of the entities owning the underlying real estate. We record investments in mezzanine loans at the stated principal amount net of any unamortized discount or premium. As of December 31, 2008 and 2007, the carrying amounts of “mezzanine loans receivable” were $472,539,000 and $492,339,000, respectively. We accrete or amortize any discounts or premiums 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, if circumstances warrant, in determining whether they are impaired. A loan is impaired when, based on current information and events, 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 estimated fair value of the loan or, as a practical expedient, to the value of the collateral if the loan is collateral dependent. If our estimates of the collectibility of both interest and principal or the fair value of our loans change based on market conditions or otherwise, our evaluation of impairment charges may be different and such differences could be material to our consolidated financial statements.

 

Partially Owned Entities

 

As of December 31, 2008 and 2007, the carrying amounts of investments and advances to partially owned entities, including Alexander’s and Toys “R” Us, were $1.083 billion and $1.505 billion, respectively. In determining whether we have a controlling 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 in which we will absorb the majority of the entity’s expected losses, if they occur, or receive the majority of the expected residual returns, if they occur, or both. We account for investments on 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. Investments that do not qualify for consolidation or equity method accounting are accounted for on the cost method.

 

Our investments in partially owned entities are reviewed for impairment if events or circumstances change indicating that the carrying amount of our investments may not be recoverable. 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. We will record an impairment charge if we determine that a decline in the value of an investment is other than temporary. 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 charges 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.

 

Allowance For Doubtful Accounts

 

We periodically evaluate the collectibility of amounts due from tenants and maintain an allowance for doubtful accounts ($32,834,000 and $19,151,000 as of December 31, 2008 and 2007) for estimated losses resulting from the inability of tenants to make required payments under their lease agreements. We also maintain an allowance for receivables arising from the straight-lining of rents ($5,773,000 and $3,076,000 as of December 31, 2008 and 2007). 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.

 

74

 

 


Critical 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 the sales of the tenant exceeding a defined threshold. These rents are recognized in accordance with Staff Accounting Bulletin No. 104: Revenue Recognition , which states that this income is to be recognized only after the contingency has been removed (i.e., 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.

 

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.

 

75

 

 


Recently Issued Accounting Literature

 

In September 2006, the Financial Accounting Standards Board (“FASB”) issued Statement No. 157, Fair Value Measurements (“SFAS 157”). SFAS 157 defines fair value, establishes a framework for measuring fair value in accordance with accounting principles generally accepted in the United States of America and expands disclosures about fair value measurements. SFAS 157 was effective for our financial assets and liabilities on January 1, 2008.  The FASB has deferred the implementation of the provisions of SFAS 157 relating to certain non-financial assets and liabilities until January 1, 2009. This standard did not materially affect how we determine fair value, but resulted in certain additional disclosures. SFAS 157 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 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. Financial assets and liabilities measured at fair value in our consolidated financial statements primarily consist of (i) marketable securities, (ii) the assets of our deferred compensation plan (primarily marketable securities and equity investments in limited partnerships), for which there is a corresponding liability on our consolidated balance sheets and (iii) Class A units of the Operating Partnership, held by third-parties. Financial assets and liabilities measured at fair value as of December 31, 2008 are presented in the table below based on their level in the fair value hierarchy.

 

 

 

 

 

Fair Value Hierarchy (1)

 

(Amounts in thousands)

 

Total

 

Level 1

 

Level 2

 

Level 3

 

Marketable securities

$

118,438

$

118,438

 

$

 

$

 

Deferred compensation plan assets (included in other assets)

 

69,945

 

35,769

 

 

 

 

34,176

 

Interest rate caps (included in other assets)

 

25

 

 

 

25

 

 

 

Total Assets

$

188,408

$

154,207

 

$

25

 

$

34,176

 

 

 

 

 

 

 

 

 

 

 

 

 

Class A units (included in minority interest)

$

882,740

$

 

$

882,740

 

$

 

 

 

 

 

 

 

 

 

 

 

 

 

Deferred compensation plan liabilities

$

69,945

$

35,769

 

$

 

$

34,176

 

___________________

(1) We chose not to elect the fair value option prescribed by Statement No. 159, The Fair Value Option for Financial Assets and Financial Liabilities (“SFAS 159”), for our financial assets and liabilities that had not been previously measured at fair value. These financial assets and liabilities include our outstanding debt, accounts receivable, accounts payable and investments in partially owned entities.

 

The fair value of Level 3 “deferred compensation plan assets” represents equity investments in certain limited partnerships, for which there is a corresponding Level 3 liability to the plan’s participants. The following is a summary of changes in Level 3 deferred compensation plan assets and liabilities, for the year ended December 31, 2008.

 

(Amounts in thousands)

 

Beginning
Balance

 

Total Realized/
Unrealized Losses

 

Purchases,
Sales, Other
Settlements and
Issuances, net

 

Ending

Balance

 

For the year ended
December 31, 2008

$

50,578

$

(15,407

)

$

(995

)

$

34,176

 

 

 

 

76

 

 


Recently Issued Accounting Literature - continued

In February 2007, the FASB issued SFAS 159, which permits companies to measure many financial instruments and certain other items at fair value.  SFAS 159 was effective on January 1, 2008. We did not elect the fair value option for any of our existing financial instruments on the effective date and have not determined whether we will elect this option for any eligible financial instruments we acquire in the future.

 

In December 2007, the FASB issued Statement No. 141R, Business Combinations (“SFAS 141R”). SFAS 141R broadens the guidance of SFAS 141, extending its applicability to all transactions and other events in which one entity obtains control over one or more other businesses. SFAS 141R also broadens the fair value measurement and recognition of assets acquired, liabilities assumed, and interests transferred as a result of business combinations; and acquisition related costs will generally be expensed rather than included as part of the basis of the acquisition. SFAS 141R expands required disclosures to improve the ability to evaluate the nature and financial effects of business combinations. SFAS 141R is effective for all transactions entered into on or after January 1, 2009. The adoption of this standard on January 1, 2009 could materially impact our future financial results to the extent that we acquire significant amounts of real estate, in part because acquisition costs will be expensed as incurred compared to our current practice of capitalizing such costs and amortizing them over the estimated useful life of the assets acquired.

 

In December 2007, the FASB issued Statement No. 160, Noncontrolling Interests in Consolidated Financial Statements - An Amendment of ARB No. 51 (“SFAS 160”). SFAS 160 requires a noncontrolling interest in a subsidiary to be reported as equity and the amount of consolidated net income specifically attributable to the noncontrolling interest to be identified in the consolidated financial statements. SFAS 160 also calls for consistency in the manner of reporting changes in the parent’s ownership interest and requires fair value measurement of any noncontrolling equity investment retained in a deconsolidation. As of December 31, 2008, as part of our preparation for the adoption of SFAS 160, which is effective for us on January 1, 2009, we have retroactively adopted the measurement provisions of EITF Topic D-98, Classification and Measurement of Redeemable Securities . Upon adoption, we adjusted the carrying amounts of the Class A units held by third parties, a component of “minority interest” on our consolidated balance sheets, by recognizing a $639,447,000 increase to the January 1, 2006 balance of “minority interest” and a corresponding decrease in “earnings in excess of (less than) distributions” which ws accounted for a cumulative effect adjustment on January 1, 2006. Subsequent adjustments to the carrying amounts of the Class A units, to reflect their redemption value at the end of each reporting period, were recorded to “additional capital.” The adoption of SFAS 160 on January 1, 2009, will not result in the re-classification of the carrying amounts of the Class A units held by third parties to a component within “shareholders’ equity.”

 

In March 2008, the FASB issued Statement No. 161, Disclosures about Derivative Instruments and Hedging Activities – an Amendment of FASB Statement No. 133 (“SFAS 161”) . SFAS 161 requires enhanced disclosures related to derivative instruments and hedging activities, including disclosures regarding how an entity uses derivative instruments, how derivative instruments and related hedged items are accounted for under FASB Statement No. 133, Accounting for Derivative Instruments and Hedging Activities, and the impact of derivative instruments and related hedged items on an entity’s financial position, financial performance and cash flows. SFAS 161 is effective on January 1, 2009. We believe that the adoption of this standard on January 1, 2009 will not have a material effect on our consolidated financial statements.

 

77

 

 


Recently Issued Accounting Literature - continued

In May 2008, the FASB issued Staff Position No. APB 14-1, Accounting for Convertible Debt Instruments that may be Settled in Cash upon Conversion (Including Partial Cash Settlement) , (the “FSP”), which is effective for us on January 1, 2009 and requires retroactive application. The adoption of this FSP will affect the accounting for our convertible and exchangeable senior debentures and Series D-13 convertible preferred units. The FSP requires the initial proceeds from the sale of our convertible and exchangeable senior debentures and Series D-13 convertible preferred units to be allocated between a liability component and an equity component. The resulting discount will be amortized using the effective interest method over the period the debt is expected to remain outstanding as additional interest expense. The adoption of the FSP on January 1, 2009 will result in the recognition of an aggregate unamortized debt discount of $139,937,000 (as of December 31, 2008) in our consolidated balance sheets and additional interest expense in our consolidated statements of income. Our current estimate of the incremental interest expense, net of minority interest, for each reporting period is as follows:

 

(Amounts in thousands)

 

 

 

 

For the year ended December 31:

 

 

 

 

2005

 

$

3,401

 

2006

 

 

6,062

 

2007

 

 

28,191

 

2008

 

 

36,348

 

2009

 

 

37,379

 

2010

 

 

39,612

 

2011

 

 

40,587

 

2012

 

 

8,219

 

 

 

In May 2008, the FASB issued Statement No. 163, Accounting for Financial Guarantee Insurance Contracts (“SFAS 163”). SFAS 163 was issued to decrease inconsistencies within Statement No. 60, Accounting and Reporting by Insurance Enterprises , and clarify how it applies to financial guarantee insurance contracts issued by insurance enterprises, including the recognition of premium revenue and claim liabilities. SFAS 163 also requires expanded disclosures about financial guarantee insurance contracts. SFAS 163 is effective on January 1, 2009. We believe that the adoption of this standard on January 1, 2009 will not have a material effect on our consolidated financial statements.

 

In June 2008, the FASB ratified EITF Issue 07-5, Determining Whether an Instrument (or Embedded Feature) Is Indexed to an Entity’s Own Stock (“EITF 07-5”). Paragraph 11(a) of SFAS 133 specifies that a contract that would otherwise meet the definition of a derivative but is both (a) indexed to the Company’s own stock and (b) classified in stockholders’ equity in the statement of financial position would not be considered a derivative financial instrument. EITF 07-5 provides a new two-step model to be applied in determining whether a financial instrument or an embedded feature is indexed to an issuer’s own stock and thus able to qualify for the SFAS 133 paragraph 11(a) scope exception. EITF 07-5 is effective on January 1, 2009. We are currently evaluating the impact of the adoption of this standard on our consolidated financial statements.

 

 

78

 

 


Net income and EBITDA (1) by Segment for the Years Ended December 31, 2008, 2007 and 2006.

(Amounts in thousands)

 

For the Year Ended December 31, 2008

 

 

 

Total

 

New York
Office

 

Washington, DC
Office (2)

 

 

 

 

Retail

     

Merchandise
Mart (2)

     

Toys

     

Other (4)

     

Property rentals

 

$

2,024,075

 

$

722,445

 

$

509,377

 

$

349,763

 

$

245,400

 

$

 

$

197,090

 

Straight-line rents:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Contractual rent increases

 

 

58,159

 

 

28,023

 

 

6,764

 

 

16,622

 

 

5,954

 

 

 

 

796

 

Amortization of free rent

 

 

32,901

 

 

14,743

 

 

10,778

 

 

4,156

 

 

2,703

 

 

 

 

521

 

Amortization of acquired below- market
leases, net

 

 

96,176

 

 

60,355

 

 

4,423

 

 

26,765

 

 

161

 

 

 

 

4,472

 

Total rentals

 

 

2,211,311

 

 

825,566

 

 

531,342

 

 

397,306

 

 

254,218

 

 

 

 

202,879

 

Tenant expense reimbursements

 

 

358,437

 

 

135,788

 

 

61,523

 

 

128,496

 

 

18,567

 

 

 

 

14,063

 

Fee and other income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Tenant cleaning fees

 

 

56,416

 

 

71,833

 

 

 

 

 

 

 

 

 

 

(15,417

)

Management and leasing fees

 

 

13,397

 

 

6,411

 

 

8,940

 

 

1,673

 

 

349

 

 

 

 

(3,976

)

Lease termination fees

 

 

8,634

 

 

3,088

 

 

2,635

 

 

2,281

 

 

630

 

 

 

 

 

Other

 

 

48,856

 

 

15,699

 

 

22,360

 

 

2,603

 

 

7,059

 

 

 

 

1,135

 

Total revenues

 

 

2,697,051

 

 

1,058,385

 

 

626,800

 

 

532,359

 

 

280,823

 

 

 

 

198,684

 

Operating expenses

 

 

1,070,118

 

 

439,012

 

 

220,139

 

 

201,397

 

 

137,971

 

 

 

 

71,599

 

Depreciation and amortization

 

 

537,427

 

 

190,925

 

 

137,255

 

 

92,353

 

 

51,833

 

 

 

 

65,061

 

General and administrative

 

 

194,027

 

 

20,217

 

 

26,548

 

 

29,866

 

 

29,254

 

 

 

 

88,142

 

Impairment losses on development projects
and costs of acquisitions not
consummated

 

 

81,447

 

 

 

 

 

 

595

 

 

 

 

 

 

80,852

 

Total expenses

 

 

1,883,019

 

 

650,154

 

 

383,942

 

 

324,211

 

 

219,058

 

 

 

 

305,654

 

Operating income (loss)

 

 

814,032

 

 

408,231

 

 

242,858

 

 

208,148

 

 

61,765

 

 

 

 

(106,970

)

Income applicable to Alexander’s

 

 

36,671

 

 

763

 

 

 

 

650

 

 

 

 

 

 

35,258

 

Income applicable to Toys

 

 

2,380

 

 

 

 

 

 

 

 

 

 

2,380

 

 

 

(Loss) income from partially owned entities

 

 

(195,878

)

 

5,319

 

 

6,173

 

 

9,721

 

 

1,106

 

 

 

 

(218,197

)

Interest and other investment income, net

 

 

(2,682

)

 

2,288

 

 

2,116

 

 

494

 

 

356

 

 

 

 

(7,936

)

Interest and debt expense

 

 

(586,358

)

 

(139,146

)

 

(126,508

)

 

(86,787

)

 

(52,148

)

 

 

 

(181,769

)

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

 

 

7,757

 

 

 

 

 

 

 

 

 

 

 

 

7,757

 

Minority interest of partially owned entities

 

 

3,263

 

 

(4,762

)

 

 

 

157

 

 

(125

)

 

 

 

7,993

 

Income (loss) before income taxes

 

 

79,185

 

 

272,693

 

 

124,639

 

 

132,383

 

 

10,954

 

 

2,380

 

 

(463,864

)

Income tax benefit (expense)

 

 

204,537

 

 

 

 

220,973

 

 

(82

)

 

(1,206

)

 

 

 

(15,148

)

Income (loss) from continuing operations

 

 

283,722

 

 

272,693

 

 

345,612

 

 

132,301

 

 

9,748

 

 

2,380

 

 

(479,012

)

Income (loss) from discontinued
operations, net

 

 

154,442

 

 

 

 

59,068

 

 

(448

)

 

 

 

 

 

95,822

 

Income (loss) before allocation to
minority limited partners

 

 

438,164

 

 

272,693

 

 

404,680

 

 

131,853

 

 

9,748

 

 

2,380

 

 

(383,190

)

Minority limited partners’ interest
in the Operating Partnership

 

 

(21,037

)

 

 

 

 

 

 

 

 

 

 

 

(21,037

)

Perpetual preferred unit distributions of
the Operating Partnership

 

 

(22,084

)

 

 

 

 

 

 

 

 

 

 

 

(22,084

)

Net income (loss)

 

 

395,043

 

 

272,693

 

 

404,680

 

 

131,853

 

 

9,748

 

 

2,380

 

 

(426,311

)

Interest and debt expense (3)

 

 

782,394

 

 

132,406

 

 

130,310

 

 

102,600

 

 

53,072

 

 

147,812

 

 

216,194

 

Depreciation and amortization (3)

 

 

710,526

 

 

181,699

 

 

143,989

 

 

98,238

 

 

52,357

 

 

136,634

 

 

97,609

 

Income tax expense (benefit) (3)

 

 

(142,415

)

 

 

 

(220,965

)

 

82

 

 

1,260

 

 

59,652

 

 

17,556

 

EBITDA (1)

 

$

1,745,548

 

$

586,798

 

$

458,014

 

$

332,773

 

$

116,437

 

$

346,478

 

$

(94,952

)

Percentage of EBITDA by segment

 

 

100.0

%

 

33.6

%

 

26.2

%

 

19.1

%

 

6.7

%

 

19.8

%

 

(5.4

)%

 

Excluding items that affect comparability, which are described in the “Overview,” the percentages of EBITDA by segment are 30.3% for New York Office, 20.5% for Washington, DC Office, 17.2% for Retail, 6.0% for Merchandise Mart, 17.8% for Toys and 8.2% for Other.

_____________________

See notes on page 82.

79


Net income and EBITDA (1) by Segment for the Years Ended December 31, 2008, 2007 and 2006 – continued

 

(Amounts in thousands)

 

For the Year Ended December 31, 2007

 

 

 

Total

 

New York
Office

 

Washington, DC
Office (2)

 

 

Retail

     

Merchandise
Mart (2)

     

Toys

   

 
Other (4)

 

Property rentals

 

$

1,816,698

 

$

640,739

 

$

455,416

 

$

328,911

 

$

237,199

 

$

 

$

154,433

 

Straight-line rents:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Contractual rent increases

 

 

42,431

 

 

13,281

 

 

11,856

 

 

12,257

 

 

4,193

 

 

 

 

844

 

Amortization of free rent

 

 

34,602

 

 

15,935

 

 

14,115

 

 

1,138

 

 

1,836

 

 

 

 

1,578

 

Amortization of acquired below- market
leases, net

 

 

83,292

 

 

47,861

 

 

4,615

 

 

25,960

 

 

193

 

 

 

 

4,663

 

Total rentals

 

 

1,977,023

 

 

717,816

 

 

486,002

 

 

368,266

 

 

243,421

 

 

 

 

161,518

 

Tenant expense reimbursements

 

 

323,544

 

 

125,940

 

 

45,138

 

 

120,756

 

 

19,570

 

 

 

 

12,140

 

Fee and other income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Tenant cleaning fees

 

 

46,238

 

 

58,837

 

 

 

 

 

 

 

 

 

 

(12,599

)

Management and leasing fees

 

 

15,713

 

 

4,928

 

 

12,539

 

 

1,770

 

 

7

 

 

 

 

(3,531

)

Lease termination fees

 

 

7,453

 

 

3,500

 

 

453

 

 

2,823

 

 

677

 

 

 

 

 

Other

 

 

40,545

 

 

16,239

 

 

16,299

 

 

2,257

 

 

6,997

 

 

 

 

(1,247

)

Total revenues

 

 

2,410,516

 

 

927,260

 

 

560,431

 

 

495,872

 

 

270,672

 

 

 

 

156,281

 

Operating expenses

 

 

951,582

 

 

395,357

 

 

183,776

 

 

172,557

 

 

131,332

 

 

 

 

68,560

 

Depreciation and amortization

 

 

441,209

 

 

150,268

 

 

117,496

 

 

78,286

 

 

47,105

 

 

 

 

48,054

 

General and administrative

 

 

189,041

 

 

17,252

 

 

27,629

 

 

27,476

 

 

28,168

 

 

 

 

88,516

 

Costs of acquisitions not consummated

 

 

10,375

 

 

 

 

 

 

 

 

 

 

 

 

10,375

 

Total expenses

 

 

1,592,207

 

 

562,877

 

 

328,901

 

 

278,319

 

 

206,605

 

 

 

 

215,505

 

Operating income (loss)

 

 

818,309

 

 

364,383

 

 

231,530

 

 

217,553

 

 

64,067

 

 

 

 

(59,224

)

Income applicable to Alexander’s

 

 

50,589

 

 

757

 

 

 

 

812

 

 

 

 

 

 

49,020

 

Loss applicable to Toys “R” Us

 

 

(14,337

)

 

 

 

 

 

 

 

 

 

(14,337

)

 

 

Income from partially owned entities

 

 

31,891

 

 

4,799

 

 

8,728

 

 

9,041

 

 

1,053

 

 

 

 

8,270

 

Interest and other investment income, net

 

 

226,425

 

 

2,888

 

 

5,982

 

 

534

 

 

390

 

 

 

 

216,631

 

Interest and debt expense

 

 

(569,386

)

 

(133,804

)

 

(126,163

)

 

(78,234

)

 

(52,237

)

 

 

 

(178,948

)

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

 

 

39,493

 

 

 

 

 

 

 

 

 

 

 

 

39,493

 

Minority interest of partially owned entities

 

 

3,494

 

 

(3,583)

 

 

 

 

96

 

 

 

 

 

 

6,981

 

Income (loss) before income taxes

 

 

586,478

 

 

235,440

 

 

120,077

 

 

149,802

 

 

13,273

 

 

(14,337

)

 

82,223

 

Income tax expense

 

 

(9,179

)

 

 

 

(2,909

)

 

(185

)

 

(969

)

 

 

 

(5,116

)

Income (loss) from continuing operations

 

 

577,299

 

 

235,440

 

 

117,168

 

 

149,617

 

 

12,304

 

 

(14,337

)

 

77,107

 

Income (loss) from discontinued
operations, net

 

 

58,389

 

 

 

 

62,481

 

 

6,397

 

 

 

 

 

 

(10,489

)

Income (loss) before allocation to
minority limited partners

 

 

635,688

 

 

235,440

 

 

179,649

 

 

156,014

 

 

12,304

 

 

(14,337

)

 

66,618

 

Minority limited partners’ interest
in the Operating Partnership

 

 

(47,508

)

 

 

 

 

 

 

 

 

 

 

 

(47,508

)

Perpetual preferred unit distributions of
the Operating Partnership

 

 

(19,274

)

 

 

 

 

 

 

 

 

 

 

 

(19,274

)

Net income (loss)

 

 

568,906

 

 

235,440

 

 

179,649

 

 

156,014

 

 

12,304

 

 

(14,337

)

 

(164

)

Interest and debt expense (3)

 

 

823,030

 

 

131,418

 

 

131,013

 

 

89,537

 

 

53,098

 

 

174,401

 

 

243,563

 

Depreciation and amortization (3)

 

 

676,660

 

 

147,340

 

 

132,302

 

 

82,002

 

 

47,711

 

 

155,800

 

 

111,505

 

Income tax expense (benefit) (3)

 

 

4,234

 

 

 

 

6,738

 

 

185

 

 

969

 

 

(10,898

)

 

7,240

 

EBITDA (1)

 

$

2,072,830

 

$

514,198

 

$

449,702

 

$

327,738

 

$

114,082

 

$

304,966

 

$

362,144

 

Percentage of EBITDA by segment

 

 

100.0

%

 

24.8

%

 

21.7

%

 

15.8

%

 

5.5

%

 

14.7

%

 

17.5

%

 

Excluding items that affect comparability, which are described in the “Overview,” the percentages of EBITDA by segment are 28.0% for New York Office, 20.8% for Washington, DC Office, 17.5% for Retail, 6.2% for Merchandise Mart, 16.3% for Toys and 11.2% for Other.

___________________

See notes on page 82.

 

80

 

 


Net income and EBITDA (1) by Segment for the Years Ended December 31, 2008, 2007 and 2006 – continued

 

(Amounts in thousands)

 

For the Year Ended December 31, 2006

 

 

Total

 

New York
Office

 

Washington, DC
Office (2)

 

Retail

 

Merchandise
Mart (2)

 

Toys

 

Other (4)

 

Property rentals

 

$

1,458,201

 

$

487,421

 

$

394,997

 

$

264,727

 

$

224,341

 

$

 

$

86,715

 

Straight-line rents:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Contractual rent increases

 

 

31,947

 

 

4,431

 

 

13,632

 

 

7,908

 

 

6,142

 

 

 

 

(166

)

Amortization of free rent

 

 

31,103

 

 

7,245

 

 

16,155

 

 

5,080

 

 

2,623

 

 

 

 

 

Amortization of acquired below-
market leases, net

 

 

23,490

 

 

976

 

 

4,178

 

 

15,513

 

 

43

 

 

 

 

2,780

 

Total rentals

 

 

1,544,741

 

 

500,073

 

 

428,962

 

 

293,228

 

 

233,149

 

 

 

 

89,329

 

Tenant expense reimbursements

 

 

260,772

 

 

102,488

 

 

34,618

 

 

101,737

 

 

17,810

 

 

 

 

4,119

 

Fee and other income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Tenant cleaning fees

 

 

33,779

 

 

42,317

 

 

 

 

 

 

 

 

 

 

(8,538

)

Management and leasing fees

 

 

10,256

 

 

1,111

 

 

7,643

 

 

1,463

 

 

39

 

 

 

 

 

Lease termination fees

 

 

29,362

 

 

25,188

 

 

2,798

 

 

371

 

 

1,005

 

 

 

 

 

Other

 

 

30,190

 

 

12,307

 

 

11,247

 

 

1,588

 

 

4,963

 

 

 

 

85

 

Total revenues

 

 

1,909,100

 

 

683,484

 

 

485,268

 

 

398,387

 

 

256,966

 

 

 

 

84,995

 

Operating expenses

 

 

737,452

 

 

301,583

 

 

152,121

 

 

130,520

 

 

103,644

 

 

 

 

49,584

 

Depreciation and amortization

 

 

319,066

 

 

98,474

 

 

106,592

 

 

50,806

 

 

42,132

 

 

 

 

21,062

 

General and administrative

 

 

180,167

 

 

16,942

 

 

34,074

 

 

21,683

 

 

26,572

 

 

 

 

80,896

 

Total expenses

 

 

1,236,685

 

 

416,999

 

 

292,787

 

 

203,009

 

 

172,348

 

 

 

 

151,542

 

Operating income (loss)

 

 

672,415

 

 

266,485

 

 

192,481

 

 

195,378

 

 

84,618

 

 

 

 

(66,547

)

(Loss) income applicable to Alexander’s

 

 

(14,530

)

 

772

 

 

 

 

716

 

 

 

 

 

 

(16,018

)

Loss applicable to Toys “R” Us

 

 

(47,520

)

 

 

 

 

 

 

 

 

 

(47,520

)

 

 

Income from partially owned entities

 

 

60,355

 

 

3,844

 

 

13,302

 

 

5,950

 

 

1,076

 

 

 

 

36,183

 

Interest and other investment income, net

 

 

255,391

 

 

913

 

 

1,782

 

 

812

 

 

275

 

 

 

 

251,609

 

Interest and debt expense

 

 

(394,571

)

 

(84,134

)

 

(97,972

)

 

(79,202

)

 

(28,672

)

 

 

 

(104,591

)

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

 

 

76,073

 

 

 

 

 

 

 

 

 

 

 

 

76,073

 

Minority interest of partially owned entities

 

 

1,363

 

 

 

 

 

 

84

 

 

5

 

 

 

 

1,274

 

Income (loss) before income taxes

 

 

608,976

 

 

187,880

 

 

109,593

 

 

123,738

 

 

57,302

 

 

(47,520

)

 

177,983

 

Income tax (expense) benefit

 

 

(491

)

 

 

 

(1,066

)

 

 

 

575

 

 

 

 

 

Income (loss) from continuing operations

 

 

608,485

 

 

187,880

 

 

108,527

 

 

123,738

 

 

57,877

 

 

(47,520

)

 

177,983

 

Income (loss) from discontinued
operations, net

 

 

32,215

 

 

 

 

25,714

 

 

9,206

 

 

5,682

 

 

 

 

(8,387

)

Income (loss) before allocation to
minority limited partners

 

 

640,700

 

 

187,880

 

 

134,241

 

 

132,944

 

 

63,559

 

 

(47,520

)

 

169,596

 

Minority limited partners’ interest
in the Operating Partnership

 

 

(58,712

)

 

 

 

 

 

 

 

 

 

 

 

(58,712

)

Perpetual preferred unit distributions
of the Operating Partnership

 

 

(21,848

)

 

 

 

 

 

 

 

 

 

 

 

(21,848

)

Net income (loss)

 

 

560,140

 

 

187,880

 

 

134,241

 

 

132,944

 

 

63,559

 

 

(47,520

)

 

89,036

 

Interest and debt expense (3)

 

 

692,496

 

 

86,861

 

 

107,477

 

 

89,748

 

 

29,551

 

 

196,259

 

 

182,600

 

Depreciation and amortization (3)

 

 

542,515

 

 

101,976

 

 

125,674

 

 

56,168

 

 

42,717

 

 

137,176

 

 

78,804

 

Income tax (benefit) expense (3)

 

 

(11,848

)

 

 

 

8,976

 

 

 

 

(575

)

 

(22,628

)

 

2,379

 

EBITDA (1)

 

$

1,783,303

 

$

376,717

 

$

376,368

 

$

278,860

 

$

135,252

 

$

263,287

 

$

352,819

 

Percentage of EBITDA by segment

 

 

100.0

%

 

21.1

%

 

21.1

%

 

15.6

%

 

7.6

%

 

14.8

%

 

19.8

%

 

Excluding items that affect comparability, the percentages of EBITDA by segment are 25.2% for New York Office, 23.6% for Washington, DC Office, 18.0% for Retail, 8.7% for Merchandise Mart, 17.5% for Toys and 7.0% for Other.

_________________________

See notes on the following page.

81

 

 


 

Net income and EBITDA (1) by Segment for the Years Ended December 31, 2008, 2007 and 2006 – continued

 

Notes to the preceding tabular information:

(1)

EBITDA represents “Earnings Before Interest, Taxes, Depreciation and Amortization.” Management considers EBITDA a supplemental measure for making decisions and assessing the un-levered performance of its 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, management utilizes this measure to make investment decisions as well as to compare the performance of its assets to that of its 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)

As of January 1, 2008, we transferred the operations and financial results related to 409 3 rd Street, NW (Washington Office Center) from the Merchandise Mart segment to the Washington, DC Office segment for both the current and prior periods presented.

 

(3)

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

 

(4)

Other EBITDA is comprised of:

 

(Amounts in thousands)

 

For the Year Ended December 31,

 

 

 

2008

 

2007

 

2006

 

Alexander’s

 

$

64,683

 

$

78,375

 

$

14,130

 

555 California Street (acquired 70% interest in May 2007)

 

 

48,316

 

 

34,073

 

 

 

Hotel Pennsylvania

 

 

42,269

 

 

37,941

 

 

27,495

 

Lexington

 

 

35,150

 

 

24,539

 

 

51,737

 

GMH (sold in June 2008)

 

 

 

 

22,604

 

 

10,737

 

Industrial warehouses

 

 

5,264

 

 

4,881

 

 

5,582

 

Other investments

 

 

6,321

 

 

7,322

 

 

13,253

 

 

 

 

202,003

 

 

209,735

 

 

122,934

 

Non-cash asset write-downs:

 

 

 

 

 

 

 

 

 

 

Investment in Lexington

 

 

(107,882

)

 

 

 

 

Marketable equity securities

 

 

(76,352

)

 

 

 

 

Real estate development projects:

 

 

 

 

 

 

 

 

 

 

Partially owned entities

 

 

(96,037

)

 

 

 

 

Wholly owned entities (including costs of acquisitions not consummated)

 

 

(80,852

)

 

(10,375

)

 

 

MPH mezzanine loan loss reversal (accrual)

 

 

10,300

 

 

(57,000

)

 

 

Derivative positions in marketable equity securities

 

 

(33,740

)

 

113,503

 

 

111,107

 

Corporate general and administrative expenses

 

 

(77,763

)

 

(76,799

)

 

(76,071

)

Investment income and other, net

 

 

89,971

 

 

182,201

 

 

209,118

 

Minority limited partners’ interest in the Operating Partnership

 

 

(21,037

)

 

(47,508

)

 

(58,712

)

Perpetual preferred unit distributions of the Operating Partnership

 

 

(22,084

)

 

(19,274

)

 

(21,848

)

Discontinued operations of Americold (including a $112,690 net gain on
sale in 2008)

 

 

118,521

 

 

67,661

 

 

66,291

 

 

 

$

(94,952

)

$

362,144

 

$

352,819

 

 

 

82

 

 


Results of Operations - Year Ended December 31, 2008 Compared to December 31, 2007

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 $2,697,051,000 for the year ended December 31, 2008, compared to $2,410,516,000 in the prior year, an increase of $286,535,000. Below are the details of the increase by segment:

 

(Amounts in thousands)

 

 

 

 

 

 

 

 

 

 

 

Property rentals:

 

Total

 

New York
Office

 

Washington, DC
Office

 

Retail

 

Merchandise
Mart

 

Other

 

Increase (decrease) due to:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Acquisitions:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1290 Avenue of the Americas

 

$

46,780

 

$

46,780

 

$

 

$

 

$

 

$

 

555 California Street

 

 

37,301

 

 

 

 

 

 

 

 

 

 

37,301

 

H Street (effect of consolidating from
May 1, 2007, vs. equity method prior)

 

 

19,330

 

 

 

 

19,330

 

 

 

 

 

 

 

Other

 

 

25,788

 

 

 

 

780

 

 

16,838

 

 

8,170

 

 

 

Development/Redevelopment

 

 

(8,065

)

 

 

 

(2,703

)

 

(4,688

)

 

 

 

(674

)

Amortization of acquired below- market leases, net

 

 

12,884

 

 

12,494

 

 

(192

)

 

805

 

 

(32

)

 

(191

)

Leasing activity (see page 71)

 

 

91,016

 

 

48,476

 

 

28,125

 

 

16,085

 

 

549

 

 

(2,219

)

Hotel Pennsylvania

 

 

7,144

 

 

 

 

 

 

 

 

 

 

7,144

 

Trade shows

 

 

2,110

 

 

 

 

 

 

 

 

2,110

 

 

 

Total increase in property rentals

 

 

234,288

 

 

107,750

 

 

45,340

 

 

29,040

 

 

10,797

 

 

41,361

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Tenant expense reimbursements:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Increase (decrease) due to:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Acquisitions/development

 

 

12,613

 

 

6,041

 

 

2,558

 

 

2,165

 

 

 

 

1,849

 

Operations

 

 

22,280

 

 

3,807

(1)

 

13,827

 

 

5,575

 

 

(1,003

) (2)

 

74

 

Total increase (decrease) in tenant expense reimbursements

 

 

34,893

 

 

9,848

 

 

16,385

 

 

7,740

 

 

(1,003

)

 

1,923

 

Fee and other income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Increase (decrease) in:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Lease cancellation fee income

 

 

1,181

 

 

(412

)

 

2,182

 

 

(542

)

 

(47

)

 

 

Management and leasing fees

 

 

(2,316

)

 

1,483

 

 

(3,599

) (3)

 

(97

)

 

342

 

 

(445

)

BMS Cleaning fees

 

 

10,178

 

 

12,996

 

 

 

 

 

 

 

 

(2,818

) (4)

Other

 

 

8,311

 

 

(540

)

 

6,061

 

 

346

 

 

62

 

 

2,382

 

Total increase (decrease) in fee and other income

 

 

17,354

 

 

13,527

 

 

4,644

 

 

(293

)

 

357

 

 

(881

)

Total increase in revenues

 

$

286,535

 

$

131,125

 

$

66,369

 

$

36,487

 

$

10,151

 

$

42,403

 

____________________________

 

(1)

Primarily due to a decrease in real estate tax reimbursements resulting from lower tax assessments and new tenant base years.

 

(2)

Primarily from lower real estate tax reimbursements resulting from a reassessment of 2006 real estate taxes in 2007.

 

(3)

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

 

(4)

Results from the elimination of inter-company fees from operating segments upon consolidation. See note 4 on page 84.

 

 

83

 

 


Results of Operations - Year Ended December 31, 2008 Compared to December 31, 2007 – continued

 

Expenses

Our expenses, which consist of operating, depreciation and amortization, general and administrative expenses and costs of acquisitions and developments not consummated were $1,883,019,000 for the year ended December 31, 2008, compared to $1,592,207,000 in the prior year, an increase of $290,812,000. Below are the details of the increase (decrease) by segment:

 

(Amounts in thousands)

 

 

 

 

 

 

 

 

 

 

 

Operating:

 

Total

 

New York
Office

 

Washington, DC
Office

 

Retail

 

Merchandise
Mart

 

Other

 

Increase (decrease) due to:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Acquisitions:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1290 Avenue of the Americas

 

$

19,148

 

$

19,148

 

$

 

$

 

$

 

$

 

555 California Street

 

 

17,442

 

 

 

 

 

 

 

 

 

 

17,442

 

H Street (effect of consolidating from
May 1, 2007, vs. equity method prior)

 

 

8,300

 

 

 

 

8,300

 

 

 

 

 

 

 

Other

 

 

14,455

 

 

 

 

1,410

 

 

6,190

 

 

6,855

 

 

 

Development/Redevelopment

 

 

145

 

 

 

 

(731

)

 

2,186

 

 

 

 

(1,310

)

Operations

 

 

59,624

 

 

24,507

(1)

 

27,384

 

 

20,464

(2)

 

2,744

(3)

 

(15,475

) (4)

Hotel Pennsylvania

 

 

2,382

 

 

 

 

 

 

 

 

 

 

2,382

 

Trade shows activity

 

 

(2,960

)

 

 

 

 

 

 

 

(2,960

)

 

 

Total increase in operating expenses

 

 

118,536

 

 

43,655

 

 

36,363

 

 

28,840

 

 

6,639

 

 

3,039

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Depreciation and amortization:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Increase due to:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Acquisitions/Development

 

 

46,620

 

 

23,618

 

 

7,006

 

 

4,248

 

 

 

 

11,748

 

Operations (due to additions to buildings and
improvements)

 

 

49,598

 

 

17,039

 

 

12,753

 

 

9,819

 

 

4,728

 

 

5,259

 

Total increase in depreciation and amortization

 

 

96,218

 

 

40,657

 

 

19,759

 

 

14,067

 

 

4,728

 

 

17,007

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

General and administrative:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Increase (decrease) due to:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Acquisitions/Development and Other

 

 

7,349

 

 

 

 

(17

)

 

1,948

 

 

 

 

5,418

 

Operations

 

 

(2,363

)

 

2,965

 

 

(1,064

)

 

442

 

 

1,086

 

 

(5,792

) (5)

Total increase (decrease) in general and administrative

 

 

4,986

 

 

2,965

 

 

(1,081

)

 

2,390

 

 

1,086

 

 

(374

)

Impairment losses on development projects and cost
of acquisitions not consummated

 

 

71,072

 

 

 

 

 

 

595

 

 

 

 

70,477

 

Total increase in expenses

 

$

290,812

 

$

87,277

 

$

55,041

 

$

45,892

 

$

12,453

 

$

90,149

 

_________________________

 

(1)

Results from an $11,715 increase in BMS operating expenses and a $12,792 increase in property level operating expenses.

 

(2)

Includes $6,990 of write-offs for receivables arising from the straight-lining of rents and $2,492 of bad debt expense, all relating to tenants that filed for bankruptcy. Of these amounts, $3,931 and $1,203, respectively, relate to Circuit City.

 

(3)

Primarily due to higher bad debt expense, partially offset by lower real estate taxes.

 

(4)

Results primarily from an increase in the elimination of inter-company fees of our operating segments upon consolidation.

 

(5)

Primarily due to a $15,344 reduction from the mark-to-market of investments in our deferred compensation plan (for which there is a corresponding reduction in “interest and other investment (loss) income, net”), partially offset by a $4,600 pension termination cost, higher compensation expense and professional fees.

 

84

 

 


Results of Operations - Year Ended December 31, 2008 Compared to December 31, 2007 – continued

 

Income Applicable to Alexander’s

Our 32.5% share of income applicable to Alexander’s (comprised of our share of Alexander’s net income, management, leasing and development fees) was $36,671,000 for the year ended December 31, 2008, compared to $50,589,000 for the prior year, a decrease of $13,918,000. The decrease was primarily due to $6,583,000 of income for our share of the reversal of accrued stock appreciation rights compensation expense, compared to $14,280,000 in the prior year.

 

Income (loss) Applicable to Toys  

 

Our 32.7% share of Toys’ financial results (comprised of our share of Toys’ net income, interest income on loans receivable, and management fees) for the years ended December 31, 2008 and December 31, 2007 are for Toys fiscal periods from November 4, 2007 to November 1, 2008 and October 29, 2006 to November 3, 2007, respectively. In the year ended December 31, 2008, our income applicable to Toys was $2,380,000, or $62,032,000 before our share of Toys’ income tax expense, compared to a loss of $14,337,000 or $25,235,000 before our share of Toys’ income tax benefit in the prior year.

 

(Loss) Income from Partially Owned Entities

Summarized below are the components of (loss) income from partially owned entities for the years ended December 31, 2008 and 2007.

 

 

(Amount in thousands)

 

For The Year
Ended December 31,

 

Equity in Net (Loss) Income:

 

2008

 

2007

 

Lexington

 

$

(105,630

) (1)

$

2,211

 

Beverly Connection (2) :

 

 

 

 

 

 

 

50% share of equity in net loss

 

 

(8,706

) (3)

 

(7,031

)

Interest and fee income

 

 

14,450

 

 

12,141

 

 

 

5,744

 

5,110

India real estate ventures – 4% to 50% share of equity in net loss

 

 

(3,336

)

 

 

GMH Communities L.P. – 13.8% share of equity in net income

 

 

(4)

 

6,463

 

H Street partially owned entities – 50% share of equity in net income

 

 

(5)

 

5,923

(5)

Other

 

 

(92,656

) (6)

 

12,184

 

 

 

$

(195,878

)

$

31,891

 

________________________

 

 

(1)

Includes $107,882 of non-cash impairment charges. See “Overview” page 69 for details.

 

 

(2)

As of November 13, 2008, our joint venture partner’s failure to contribute its pro rata share of required capital resulted in our ability under the joint venture agreement to assert unilateral control over major business decisions and accordingly, we began to consolidate our investment pursuant to Accounting Research Bulletin 51, Consolidated Financial Statements.

 

 

(3)

Includes $4,100 for the reversal of a non-cash charge recorded by the joint venture in prior periods which, pursuant to paragraph 19(n) of Accounting Principles Board Opinion 18, The Equity Method of Accounting For Investments In Common Stock , should have been eliminated in the determination of our share of the earnings of the venture. In addition, in accordance with EITF 99-10, during the quarter ended September 30, 2008 our partner’s capital account was reduced to zero and, accordingly, we recognized $1,528 of additional net loss for the portion that related to our partner’s pro rata share of the venture’s net loss.

 

 

(4)

In June 2008, we sold our interest in GMH Communities L.P.

 

 

(5)

As of April 30, 2007, our H Street subsidiary, acquired the remaining 50% interest in these entities and began to consolidate this investment into our consolidated financial statements and no longer account for it under the equity method.

 

 

(6)

Includes non-cash asset write-downs aggregating $96,037,000. See “Overview” page 69 for details.

 

85

 

 


Results of Operations - Year Ended December 31, 2008 Compared to December 31, 2007 – continued

 

Interest and Other Investment (Loss) Income, net

Interest and other investment (loss) income, net (comprised of market-to-market of derivative positions, interest income on mezzanine loans receivable, other interest and dividend income and impairment charges on marketable securities) was ($2,682,000) for the year ended December 31, 2008, compared to $226,425,000 for the year ended December 31, 2007, a decrease of $229,107,000. This decrease resulted primarily from:

 

(Amounts in thousands)

 

 

 

 

Derivative positions in marketable equity securities – net loss of $33,740 in 2008
compared to a net gain of $113,503 in 2007

 

$

(147,243

)

Marketable equity securities - impairment losses

 

 

(76,352

)

MPH mezzanine loan – income of $10,300 from the reversal of a portion of the 2007
loan loss accrual in 2008, compared to a $57,000 loan loss accrual in 2007

 

 

67,300

 

Decrease in interest income as a result of lower average yields on investments
(2.3% in the current year compared to 5.0% in the prior year)

 

 

(28,250

)

Decrease in interest income on mezzanine loans as a result of lower average investments
($480,558 in the current year compared to $611,943 in the prior year)

 

 

(20,522

)

Decrease in income on investments in our deferred compensation plan

 

 

(15,344

)

Other, net

 

 

(8,696

)

 

 

$

(229,107

)

 

Interest and Debt Expense

Interest and debt expense was $586,358,000 for the year ended December 31, 2008, compared to $569,386,000 in the year ended December 31, 2007, an increase of $16,972,000. This increase was primarily due to an $812 million increase in average outstanding debt from property financings and refinancings, partially offset by a $9,820,000 net gain on early extinguishment of debt.

 

Net Gains on Disposition of Wholly Owned and Partially Owned Assets other than Depreciable Real Estate

Net gains on disposition of wholly owned and partially owned assets other than depreciable real estate was $7,757,000 in the year ended December 31, 2008, compared to $39,493,000 in the year ended December 31, 2007. The year ended December 31, 2008 includes a $3,691,000 pre-tax gain on sale of residential condominiums, a $2,038,000 net gain on disposition of our 13.8% interest in GMH and $2,028,000 for net gains on sale of marketable securities. The $39,493,000 net gain in the year ended December 31, 2007 represents net gains on sale of marketable securities, including $23,090,000 from the sale of McDonald’s common shares.

 

86

 

 


Results of Operations - Year Ended December 31, 2008 Compared to December 31, 2007 – continued

 

Minority Interest of Partially Owned Entities

 

Minority interest of partially owned entities was income of $3,263,000 for the year ended December 31, 2008, compared to income of $3,494,000 in the prior year, a change of $231,000. Minority interest of partially owned entities represents the minority partners’ pro rata share of the net income or loss of consolidated partially owned entities, including 1290 Avenue of the Americas, 555 California Street, 220 Central Park South, the Springfield Mall, and the Wasserman ventures.

 

Income Tax Expense

 

In the year ended December 31, 2008, we had an income tax benefit of $204,537,000, compared to an expense of $9,179,000 in the prior year, a decrease of $213,716,000. The decrease results primarily from a $222,174,000 reversal of deferred taxes recorded in connection with the acquisition of H Street. We were required to record these deferred tax liabilities because H Street and its partially owned entities were operated as C Corporations at the time they were acquired. As of January 16, 2008, we had completed all of the actions necessary to enable these entities to elect REIT status effective for the tax year beginning on January 1, 2008. Consequently, in the first quarter of 2008, we reversed the deferred tax liabilities and recognized an income tax benefit of $222,174,000 in our consolidated statement of income.

 

Discontinued Operations

The combined results of discontinued operations for the years ended December 31, 2008 and 2007 include the operating results of Americold, which was sold on March 31, 2008; Tysons Dulles Plaza, which was sold on June 10, 2008; 19.6 acres of land we acquired as part of our acquisition of H Street, of which 11 acres were sold in September 2007; Vineland, New Jersey, which was sold on July 16, 2007; Crystal Mall Two, which was sold on August 9, 2007; Arlington Plaza, which was sold on October 17, 2007.

 

(Amounts in thousands)

 

For the Year Ended December 31,

 

 

 

2008

 

2007

 

Total revenues

 

$

222,361

 

$

865,584

 

Total expenses

 

 

238,132

 

 

872,176

 

Net loss

 

 

(15,771

)

 

(6,592

)

Net gain on sale of Americold

 

 

112,690

 

 

 

Net gain on sale of Tysons Dulles Plaza

 

 

56,831

 

 

 

Net gain on sale of Arlington Plaza

 

 

 

 

33,890

 

Net gain on sale of Crystal Mall Two

 

 

 

 

19,893

 

Net gains on sale of other real estate

 

 

692

 

 

11,198

 

Income from discontinued operations, net of minority interest

 

$

154,442

 

$

58,389

 

 

Minority Limited Partners’ Interest in the Operating Partnership

Minority limited partners’ interest in the Operating Partnership was $21,037,000 for the year ended December 31, 2008, compared to $47,508,000 for the prior year, a decrease of $26,471,000. This decrease results primarily from lower net income subject to allocation to the minority partners.

 

Perpetual Preferred Unit Distributions of the Operating Partnership

Perpetual preferred unit distributions of the Operating Partnership were $22,084,000 for the year ended December 31, 2008, compared to $19,274,000 for the year ended December 31, 2007, an increase of $2,810,000. This increase was due to the amortization of unit issuance costs in connection with our adoption of the measurement provisions of EITF Topic D-98.

 

Preferred Share Dividends

Preferred share dividends were $57,091,000 for the year ended December 31, 2008, compared to $57,177,000 for the prior year.

 

87

 

 


 

Results of Operations - Year Ended December 31, 2008 Compared to December 31, 2007 – continued

 

EBITDA

Below are the details of the changes in EBITDA by segment.

 

(Amounts in thousands)

 

Total

 

New York
Office

 

Washington, DC
Office

 

Retail

 

Merchandise
Mart

 

Toys

        

Other

 

Year ended December 31, 2007

 

$

2,072,830

 

$

514,198

 

$

449,702

 

$

327,738

 

$

114,082

 

$

304,966

 

$

362,144

 

2008 Operations:
Same store
operations
(1)

 

 

 

 

 

32,652

 

 

17,287

 

 

14,158

 

 

(268

)

 

 

 

 

 

 

Acquisitions, dispositions
and
non-same store
income and expenses

 

 

 

 

 

39,948

 

 

(8,975

)

 

(9,123

)

 

2,623

 

 

 

 

 

 

 

Year ended December 31, 2008

 

$

1,745,548

 

$

586,798

 

$

458,014

 

$

332,773

 

$

116,437

 

$

346,478

 

$

(94,952)

 

% increase (decrease)
in same store
operations

 

 

 

 

 

6.2

%

 

4.5

%

 

4.8

%

 

(0.2

)%

 

 

 

 

 

 

 

__________________________

 

 

(1)

Represents the increase (decrease) in property-level operations which were owned for the same period in each year and excludes the effect of property acquisitions, dispositions and other non-operating items that affect comparability, including divisional general and administrative expenses. We utilize this measure to make decisions on whether to buy or sell properties as well as to compare the performance of our properties to that of our peers. Same store operations may not be comparable to similarly titled measures employed by other companies.

 

88

 

 


Results of Operations - Year Ended December 31, 2007 Compared to December 31, 2006

 

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 pursuant to SFAS No. 141 and 142, and fee income, were $2,410,516,000 for the year ended December 31, 2007, compared to $1,909,100,000 in the prior year, an increase of $501,416,000. Below are the details of the increase by segment:

 

(Amounts in thousands)

 

 

 

 

 

 

 

 

 

 

 

Property rentals:

 

Total

 

New York
Office

 

Washington, DC
Office

 

Retail

 

Merchandise
Mart

 

Other

 

Increase (decrease) due to:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Acquisitions:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1290 Avenue of the Americas

 

$

60,438

 

$

60,438

 

$

 

$

 

$

 

$

 

555 California Street

 

 

55,764

 

 

 

 

 

 

 

 

 

 

55,764

 

Manhattan Mall

 

 

51,492

 

 

34,716

 

 

 

 

16,776

 

 

 

 

 

H Street (effect of consolidating from
May 1, 2007, vs. equity method prior)

 

 

40,965

 

 

 

 

40,965

 

 

 

 

 

 

 

350 Park Avenue

 

 

30,382

 

 

30,382

 

 

 

 

 

 

 

 

 

Former Toys “R” Us stores

 

 

15,872

 

 

 

 

 

 

15,872

 

 

 

 

 

Bruckner Plaza

 

 

7,487

 

 

 

 

 

 

7,487

 

 

 

 

 

1540 Broadway

 

 

3,619

 

 

407

 

 

 

 

3,212

 

 

 

 

 

Other

 

 

27,482

 

 

 

 

2,554

 

 

14,184

 

 

10,744

 

 

 

Development/Redevelopment:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2101 L Street – out of service

 

 

(3,336

)

 

 

 

(3,336

)

 

 

 

 

 

 

Bergen Town Ctr – portion out of service

 

 

(190

)

 

 

 

 

 

(190

)

 

 

 

 

Springfield Mall – portion out of service

 

 

(301

)

 

 

 

 

 

(301

)

 

 

 

 

Other

 

 

(4,208

)

 

 

 

 

 

(619

)

 

 

 

(3,589

)

Amortization of acquired below market leases, net

 

 

59,802

 

 

46,885

 

 

437

 

 

10,447

 

 

150

 

 

1,883

 

Leasing activity (see page 71)

 

 

72,439

 

 

44,915

 

 

16,420

 

 

8,170

 

 

(1,159

)

 

4,093

 

Hotel Pennsylvania

 

 

14,038

 

 

 

 

 

 

 

 

 

 

14,038

 

Trade shows

 

 

537

 

 

 

 

 

 

 

 

537

 

 

 

Total increase in property rentals

 

 

432,282

 

 

217,743

 

 

57,040

 

 

75,038

 

 

10,272

 

 

72,189

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Tenant expense reimbursements:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Increase due to:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Acquisitions/development

 

 

44,406

 

 

22,745

 

 

3,314

 

 

10,626

 

 

 

 

7,721

 

Operations

 

 

18,366

 

 

707

 

 

7,206

 

 

8,393

 

 

1,760

 

 

300

 

Total increase in tenant expense reimbursements

 

 

62,772

 

 

23,452

 

 

10,520

 

 

19,019

 

 

1,760

 

 

8,021

 

Fee and other income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(Decrease) increase in:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Lease cancellation fee income

 

 

(21,909

)

 

(21,688

) (1)

 

(2,345

)

 

2,452

 

 

(328

)

 

 

Management and leasing fees

 

 

5,457

 

 

3,817

 

 

4,896

 

 

307

 

 

(32

)

 

(3,531

) (2)

BMS Cleaning fees

 

 

12,459

 

 

16,520

 

 

 

 

 

 

 

 

(4,061

) (2)

Other

 

 

10,355

 

 

3,932

 

 

5,052

 

 

669

 

 

2,034

 

 

(1,332

) (2)

Total increase (decrease) in fee and other income

 

 

6,362

 

 

2,581

 

 

7,603

 

 

3,428

 

 

1,674

 

 

(8,924

)

Total increase in revenues

 

$

501,416

 

$

243,776

 

$

75,163

 

$

97,485

 

$

13,706

 

$

71,286

 

____________________________

 

 

(1)

Primarily due to lease termination fee income received from MONY Life Insurance Company in 2006 in connection with the termination of their 289,000 square foot lease at 1740 Broadway.

 

 

(2)

Results from the elimination of inter-company fees from operating segments upon consolidation. See note 3 on page 91.

 

 

89

 

 


Results of Operations - Year Ended December 31, 2007 Compared to December 31, 2006 – continued

 

Expenses

Our expenses, which consist of operating, depreciation and amortization and general and administrative expenses, were $1,592,207,000 for the year ended December 31, 2007, compared to $1,236,685,000 in the prior year, an increase of $355,522,000. Below are the details of the increase (decrease) by segment:

 

(Amounts in thousands)

 

 

 

 

 

 

 

 

 

 

 

Operating:

 

Total

 

New York
Office

 

Washington, DC
Office

 

Retail

 

Merchandise
Mart

 

Other

 

Increase (decrease) due to:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Acquisitions:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1290 Avenue of the Americas

 

$

32,059

 

$

32,059

 

$

 

$

 

$

 

$

 

555 California Street

 

 

24,946

 

 

 

 

 

 

 

 

 

 

24,946

 

Manhattan Mall

 

 

23,279

 

 

13,108

 

 

 

 

10,171

 

 

 

 

 

H Street (effect of consolidating from
May 1, 2007, vs. equity method prior)

 

 

18,119

 

 

 

 

18,119

 

 

 

 

 

 

 

 

350 Park Avenue

 

 

15,618

 

 

15,618

 

 

 

 

 

 

 

 

 

Former Toys “R” Us stores

 

 

12,241

 

 

 

 

 

 

12,241

 

 

 

 

 

Bruckner Plaza

 

 

3,066

 

 

 

 

 

 

3,066

 

 

 

 

 

1540 Broadway

 

 

2,228

 

 

667

 

 

 

 

1,561

 

 

 

 

 

Other

 

 

21,980

 

 

 

 

1,635

 

 

7,429

 

 

12,916

 

 

 

Development/Redevelopment:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2101 L Street – out of service

 

 

(2,177

)

 

 

 

(2,177

)

 

 

 

 

 

 

Bergen Town Ctr – portion out of service

 

 

(917

)

 

 

 

 

 

(917

)

 

 

 

 

Springfield Mall – portion out of service

 

 

(782

)

 

 

 

 

 

(782

)

 

 

 

 

Other

 

 

(1,332

)

 

 

 

 

 

234

 

 

 

 

(1,566

)

Operations

 

 

60,163

 

 

32,322

(1)

 

14,078

 

 

9,034

 

 

12,990

(2)

 

(8,261

) (3)

Hotel Pennsylvania

 

 

3,857

 

 

 

 

 

 

 

 

 

 

3,857

 

Trade shows activity

 

 

1,782

 

 

 

 

 

 

 

 

1,782

 

 

 

Total increase in operating expenses

 

 

214,130

 

 

93,774

 

 

31,655

 

 

42,037

 

 

27,688

 

 

18,976

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Depreciation and amortization:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Increase due to:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Acquisitions/Development

 

 

103,366

 

 

50,483

 

 

8,032

 

 

22,629

 

 

 

 

22,222

 

Operations (due to additions to buildings and
improvements)

 

 

18,777

 

 

1,311

 

 

2,872

 

 

4,851

 

 

4,973

 

 

4,770

 

Total increase in depreciation and amortization

 

 

122,143

 

 

51,794

 

 

10,904

 

 

27,480

 

 

4,973

 

 

26,992

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

General and administrative:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Increase (decrease) due to:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Acquisitions/Development and Other

 

 

6,309

 

 

1,208

 

 

(7,757

) (4 )

 

4,512

 

 

 

 

8,346

(5)

Operations

 

 

2,565

 

 

(898

)

 

1,312

 

 

1,281

 

 

1,596

 

 

(726

) ( 6)

Total increase (decrease) in general and administrative

 

 

8,874

 

 

310

 

 

(6,445

)

 

5,793

 

 

1,596

 

 

7,620

 

Cost of acquisitions not consummated

 

 

10,375

 

 

 

 

 

 

 

 

 

 

10,375

 

Total increase in expenses

 

$

355,522

 

$

145,878

 

$

36,114

 

$

75,310

 

$

34,257

 

$

63,963

 

_________________________

See notes on following page.

 

90

 

 


Results of Operations - Year Ended December 31, 2007 Compared to December 31, 2006 – continued

 

Notes to preceding tabular information:

($ in thousands)

 

(1)

Primarily from a (i) $13,885 increase in operating expenses of Building Maintenance Services, Inc. (“BMS”), a wholly owned subsidiary, which provides cleaning, security and engineering services to New York Office properties (the corresponding increase in BMS revenues is included in “other income”), (ii) $8,992 increase in property level costs and (iii) $7,553 write-off of straight line rent receivable in connection with lease terminations.

 

(2)

Primarily from (i) a $6,940 increase in property level operating costs, (ii) $2,000 due to a reassessment of 2006 real estate taxes in 2007 and (iii) a $4,050 reversal of a reserve for bad debts in 2006.

 

(3)

Represents the elimination of inter-company fees from operating segments upon consolidation. See note 2 on page 89.

 

(4)

H Street litigation costs in 2006.

 

(5)

Primarily from (i) $4,835 of administrative and organization expenses of the India Property Fund, in which we were a 50.6% partner as of December 31, 2007 (because we consolidated the India Property Fund during 2007, the minority share of these expenses is included in minority interest on our consolidated statement of income), and (ii) $1,880 of general and administrative expenses of 555 California Street from the date of acquisition.

 

(6)

Primarily from a (i) $5,465 decrease in franchise taxes and donations, (ii) $4,420 decrease in medicare taxes resulting from stock option exercises and the termination of a rabbi trust, partially offset by, (iii) an $8,245 increase in stock-based compensation.

 

 

91

 

 


Results of Operations - Year Ended December 31, 2007 Compared to December 31, 2006 – continued

 

Income Applicable to Alexander’s

Income applicable to Alexander’s (loan interest income, management, leasing, development and commitment fees, and equity in income) was $50,589,000 for the year ended December 31, 2007, compared to a loss of $14,530,000 for the prior year, an increase of $65,119,000. The increase was primarily due to (i) our $14,280,000 share of income in 2007 for the reversal of accrued stock appreciation rights compensation expense as compared to $49,043,000 for our share of expense in the prior year, (ii) an increase of $3,504,000 in our equity in earnings of Alexander’s before stock appreciation rights and net gains on sales of condominiums, (iii) an increase of $3,758,000 in development fees in 2007, partially offset by (iv) our $4,580,000 share of Alexander’s net gain on sale of 731 Lexington Avenue condominiums in the prior year and (v) a $1,305,000 decrease in leasing fee income.

 

Loss Applicable to Toys  

 

Our 32.7% share of Toys’ financial results (comprised of our share of Toys’ net loss, interest income on loans receivable, and management fees) for the years ended December 31, 2007 and December 31, 2006 are for Toys fiscal periods from October 29, 2006 to November 3, 2007 and October 30, 2005 to October 28, 2006, respectively. In the year ended December 31, 2007, our loss applicable to Toys was $14,337,000, or $25,235,000 before our share of Toys’ income tax benefit, as compared to $47,520,000 or $70,147,000 before our share of Toys’ income tax benefit in the prior year. The decrease in our loss applicable to Toys’ before income tax benefit of $44,912,000 results primarily from (i) an increase in Toys’ net sales due to improvements in comparable store sales across all divisions and benefits in foreign currency translation, (ii) a net gain related to a lease termination, (iii) decreased interest expense primarily due to reduced borrowings and reduced amortization of deferred financing costs, partially offset by, (iv) an increase in selling, general and administrative expenses, which as a percentage of net sales were 27.7% and 26.4% for the twelve month periods ended November 3, 2007 and October 28, 2006, respectively, as a result of higher payroll, store occupancy, corporate and advertising expenses.

 

92

 

 


Results of Operations - Year Ended December 31, 2007 Compared to December 31, 2006 – continued

 

Income from Partially Owned Entities

Summarized below are the components of income from partially owned entities for the years ended December 31, 2007 and 2006.

 

Equity in Net Income (Loss):
(Amounts in thousands)

 

For The Year
Ended December 31,

 

 

 

2007

 

2006

 

H Street non-consolidated subsidiaries:

 

 

 

 

 

 

 

50% share of equity in income (1)

 

$

5,923

 

$

11,074

 

 

 

 

 

 

 

 

 

Beverly Connection:

 

 

 

 

 

 

 

50% share of equity in net loss

 

 

(7,031

)

 

(8,567

)

Interest and fee income

 

 

12,141

 

 

10,837

 

 

 

 

5,110

 

 

2,270

 

GMH Communities L.P: (2)

 

 

 

 

 

 

 

13.8% share in 2007 and 13.5% in 2006 of equity in net income (loss)

 

 

6,463

 

 

(1,013

)

 

 

 

 

 

 

 

 

Lexington MLP: (3)

 

 

 

 

 

 

 

7.5% in 2007 and 15.8% in 2006 share of equity in net income

 

 

2,211

 

 

34,459

 

 

 

 

 

 

 

 

 

Other (4)

 

 

12,184

 

 

13,565

 

 

 

$

31,891

 

$

60,355

 

 

 

 

 

 

 

 

 

__________________________

 

(1)

On April 30, 2007, we acquired the corporations that own the remaining 50% interest in these assets and began to consolidate the accounts of these entities into our consolidated financial statements and no longer account for them under the equity method. Prior to the quarter ended June 30, 2006 these corporations were contesting our acquisition of H Street and impeded our access to their financial information. Accordingly, we were unable to record our pro rata share of their earnings. 2006 includes $3,890 for our 50% share of their earnings for the period from July 20, 2005 (date of acquisition) to December 31, 2005.

 

 

(2)

We recorded our pro rata share of GMH’s net income or loss on a one-quarter lag basis because we filed our consolidated financial statements on Form 10-K and 10-Q prior to the time that GCT filed its financial statements. On July 31, 2006 GCT filed its annual report on Form 10-K for the year ended December 31, 2005, which restated the quarterly financial results of each of the first three quarters of 2005. On September 15, 2006 GCT filed its quarterly reports on Form 10-Q for the quarters ended March 31, 2006 and June 30, 2006. Accordingly, “equity in net income or loss from partially owned entities” for the year ended December 31, 2006 includes a net loss of $1,013, which consists of (i) a $94 net loss representing our share of GMH’s 2005 fourth quarter results, including adjustments to restate its first three quarters of 2005 and (ii) a net loss of $919 for our share of GMH’s earnings through September 30, 2006.

 

 

(3)

On January 1, 2007, we began recording our pro rata share of Lexington MLP’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. Prior to the January 1, 2007, we recorded our pro rata share of Newkirk MLP’s (Lexington MLP’s predecessor) quarterly earnings current in our same quarter. Accordingly, our “equity in net income or loss from partially owned entities” for the year ended December 31, 2007 includes our share of Lexington MLP’s net income or loss for the nine month period from January 1, 2007 through September 30, 2007.

 

 

 

The decrease in our share of earnings from the prior year is primarily due to (i) 2007 including our share of Lexington MLP’s first, second and third quarter results (lag basis) compared to 2006 including our share of Newkirk MLP’s full year results, (ii) higher depreciation expense and amortization of above market lease intangibles in the current year as a result of Lexington’s purchase price accounting adjustments in connection with the merger of Newkirk MLP on December 31, 2006, (iii) $10,842 for our share of net gains on sale of real estate in 2006 and (iv) a $10,362 net gain recognized in 2006 as a result of the acquisition of Newkirk by Lexington.

 

 

(4)

Includes our equity in net earnings of partially owned entities, including partially owned office buildings in New York and Washington, DC, the Monmouth Mall, Dune Capital LP, Verde Group LLC, and others.

 

93

 

 


Results of Operations - Year Ended December 31, 2007 Compared to December 31, 2006 – continued

 

Interest and Other Investment Income

Interest and other investment income (interest income on mezzanine loans receivable, other interest income and dividend income) was $226,425,000 for the year ended December 31, 2007, compared to $255,391,000 in the year ended December 31, 2006, a decrease of $28,966,000. This decrease resulted primarily from the following:

 

(Amounts in thousands)

 

 

 

 

Decrease (increase) due to:

 

 

 

 

Mezzanine loan loss accrual in 2007

 

$

57,000

 

Higher average cash balances and marketable securities ($1,210,000 in 2007 compared to $526,000 in 2006)

 

 

(51,939

)

McDonalds derivative – net gain of $108,866 in 2007 compared to $138,815 in 2006

 

 

29,949

 

Sears Holding derivative – net gain of $18,611 in 2006

 

 

18,611

 

GMH warrants derivative – net loss of $16,370 in 2006

 

 

(16,370

)

Higher average mezzanine loans receivable ($612,000 in 2007 compared to $488,500 in 2006)

 

 

(8,747

)

Other derivatives – net gain of $4,682 in 2007 compared to $12,153 in 2006

 

 

7,471

 

Other, net

 

 

(7,009

)

Total decrease in interest and other investment income

 

$

28,966

 

 

 

Interest and Debt Expense

Interest and debt expense was $569,386,000 for the year ended December 31, 2007, compared to $394,571,000 in the year ended December 31, 2006, an increase of $174,815,000. This increase was primarily due to (i) $80,255,000 from approximately $1.713 billion of mortgage financings and refinancings on our existing property portfolio during 2007 and 2006, (ii) $67,780,000 from a $1.754 billion of mortgage debt resulting from property acquisitions, (iii) $70,432,000 from senior unsecured financings, including $1.0 billion issued in November 2006 and $1.4 billion issued in March 2007, partially offset by, (iv) an increase of $28,240,000 in the amount of capitalized interest relating to a larger amount of assets under development in 2007, (v) $19,344,000 less interest in 2007 from the redemption of $500,000,000 of senior unsecured notes in May 2007, and (vi) $3,582,000 of expense in 2006 from early extinguishments of debt.

 

Net Gains on Disposition of Wholly Owned and Partially Owned Assets other than Depreciable Real Estate

Net gains on disposition of wholly owned and partially owned assets other than depreciable real estate was $39,493,000 and $76,073,000 for the years ended December 31, 2007 and 2006, respectively, and consists primarily of net gains from sales of marketable equity securities, including $23,090,000 from the sale of McDonalds common shares in 2007 and $55,438,000 from the sale of Sears Canada common shares in 2006.

 

Minority Interest of Partially Owned Entities

 

Minority interest of partially owned entities was income of $3,494,000 for the year ended December 31, 2007, compared to income of $1,363,000 in the prior year, a change of $2,131,000. Minority interest of partially owned entities represents the minority partners’ pro rata share of the net income or loss of consolidated partially owned entities, including 1290 Avenue of the Americas, 555 California Street, India Property Fund, 220 Central Park South, Wasserman and the Springfield Mall.

 

 

94

 

 


Results of Operations - Year Ended December 31, 2007 Compared to December 31, 2006 – continued

 

Income Tax Expense

 

Income tax expense was $9,179,000 for the year ended December 31, 2007, compared to $491,000 for the prior year, an increase of $8,688,000. This increase results primarily from (i) the consolidation of two H Street corporations beginning on April 30, 2007, the date we acquired the remaining 50% of these corporations we did not previously own (we previously accounted for our 50% investment on the equity method) and (ii) $4,622,000 of Federal withholding tax on dividends paid to foreign corporations in connection with 1290 Avenue of the Americas and 555 California Street, which we acquired in May 2007.

 

Discontinued Operations

The combined results of discontinued operations for the years ended December 31, 2007 and 2006 include the operating results of Americold; Tysons Dulles Plaza; 19.6 acres of land we acquired as part of our acquisition of H Street, of which 11 acres were sold in September 2007; Vineland, New Jersey, which was sold on July 16, 2007; Crystal Mall Two, which was sold on August 9, 2007; Arlington Plaza, which was sold on October 17, 2007; 33 North Dearborn Street in Chicago, Illinois, which was sold on March 14, 2006; 424 Sixth Avenue in New York City, which was sold on March 13, 2006 and 1919 South Eads Street in Arlington, Virginia, which was sold on June 22, 2006.

 

(Amounts in thousands)

 

December 31,

 

 

 

2007

 

2006

 

Total revenues

 

$

865,584

 

$

813,665

 

Total expenses

 

 

872,176

 

 

815,219

 

Net loss

 

 

(6,592

)

 

(1,554

)

Net gain on sale of Arlington Plaza

 

 

33,890

 

 

 

Net gain on sale of Crystal Mall Two

 

 

19,893

 

 

 

Net gain on sale of 1919 South Eads Street

 

 

 

 

17,609

 

Net gains on sale of other real estate

 

 

11,198

 

 

16,160

 

Income from discontinued operations, net of minority interest

 

$

58,389

 

$

32,215

 

 

Minority Limited Partners’ Interest in the Operating Partnership

Minority limited partners’ interest in the Operating Partnership was $47,508,000 for the year ended December 31, 2007 compared to $58,712,000 for the prior year, a decrease of $11,204,000. This decrease results primarily from a lower minority ownership in the Operating Partnership due to the conversion of Class A Operating Partnership units into our common shares during 2007 and 2006.

 

Perpetual Preferred Unit Distributions of the Operating Partnership

Perpetual preferred unit distributions of the Operating Partnership were $19,274,000 for the year ended December 31, 2007, compared to $21,848,000 for the prior year, a decrease of $2,574,000. This decrease resulted primarily from the redemption of $45,000,000 Series D-9 preferred units and the write-off of $1,125,000 of Series D-9 issuance costs in October 2006.

 

 

95

 

 


 

Results of Operations - Year Ended December 31, 2007 Compared to December 31, 2006 – continued

 

EBITDA

Below are the details of the changes in EBITDA by segment.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(Amounts in thousands)

 

Total

      

New York
Office

 

Washington, DC
Office

 

Retail

 

Merchandise
Mart

 

Toys

      

Other

Year ended December 31, 2006

 

$

1,783,303

 

$

376,717

 

$

376,368

 

$

278,860

 

$

135,252

 

$

263,287

 

$

352,819

2007 Operations:
Same store operations (1)

 

 

 

 

 

35,279

 

 

14,092

 

 

8,583

 

 

(3,956

)

 

 

 

 

 

Acquisitions, dispositions and
non-same store income and expenses

 

 

 

 

 

102,202

 

 

59,242

 

 

40,295

 

 

(17,214

)

 

 

 

 

 

Year ended December 31, 2007

 

$

2,072,830

 

$

514,198

 

$

449,702

 

$

327,738

 

$

114,082

 

$

304,966

 

$

362,144

% increase (decrease) in same store
operations

 

 

 

 

 

9.6

%

 

4.2

%

 

3.4

%

 

(2.5

)%

 

 

 

 

 

 

__________________________

 

(1) Represents the increase (decrease) in property-level operations which were owned for the same period in each year and excludes the effect of property acquisitions, dispositions and other non-operating items that affect comparability, including divisional general and administrative expenses. We utilize this measure to make decisions on whether to buy or sell properties as well as to compare the performance of our properties to that of our peers. Same store operations may not be comparable to similarly titled measures employed by other companies.

 

96

 

 


Supplemental Information

Net Income and EBITDA by Segment for the Three Months Ended December 31, 2008 and December 31, 2007

(Amounts in thousands)

 

For the Three Months Ended December 31, 2008

 

 

 

Total

 

New York
Office

 

Washington, DC
Office (2)

 

Retail

 

Merchandise
Mart (2)

 

Toys

 

Other (3)

 

Property rentals

 

$

520,150

 

$

183,191

 

$

131,510

 

$

89,484

 

$

65,794

 

$

 

$

50,171

 

Straight-line rents:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Contractual rent increases

 

 

12,435

 

 

7,163

 

 

(97

)

 

3,755

 

 

1,423

 

 

 

 

191

 

Amortization of free rent

 

 

15,441

 

 

6,637

 

 

5,019

 

 

3,837

 

 

41

 

 

 

 

(93

)

Amortization of acquired below-
market leases, net

 

 

22,521

 

 

14,807

 

 

1,118

 

 

6,749

 

 

77

 

 


 

 

(230

)

Total rentals

 

 

570,547

 

 

211,798

 

 

137,550

 

 

103,825

 

 

67,335

 

 

 

 

50,039

 

Tenant expense reimbursements

 

 

88,467

 

 

32,558

 

 

16,874

 

 

30,245

 

 

3,852

 

 

 

 

4,938

 

Fee and other income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Tenant cleaning fees

 

 

14,985

 

 

18,418

 

 

 

 

 

 

 

 

 

 

(3,433

)

Management and leasing fees

 

 

3,071

 

 

1,376

 

 

1,957

 

 

699

 

 

43

 

 

 

 

(1,004

)

Lease termination fees

 

 

4,165

 

 

1,038

 

 

1,598

 

 

1,254

 

 

275

 

 

 

 

 

Other

 

 

15,024

 

 

3,823

 

 

7,558

 

 

587

 

 

1,310

 

 

 

 

1,746

 

Total revenues

 

 

696,259

 

 

269,011

 

 

165,537

 

 

136,610

 

 

72,815

 

 

 

 

52,286

 

Operating expenses

 

 

276,207

 

 

105,167

 

 

58,919

 

 

56,749

 

 

35,224

 

 

 

 

20,148

 

Depreciation and amortization

 

 

139,164

 

 

47,376

 

 

32,356

 

 

28,757

 

 

13,509

 

 

 

 

17,166

 

General and administrative

 

 

44,862

 

 

5,311

 

 

7,724

 

 

6,761

 

 

7,333

 

 

 

 

17,733

 

Impairment losses on development projects
and costs of acquisitions not

consummated

 

 

73,438

 

 

 

 

 

 

595

 

 

 

 


 

 

72,843

 

Total expenses

 

 

533,671

 

 

157,854

 

 

98,999

 

 

92,862

 

 

56,066

 

 

 

 

127,890

 

Operating income (loss)

 

 

162,588

 

 

111,157

 

 

66,538

 

 

43,748

 

 

16,749

 

 

 

 

(75,604

)

Income applicable to Alexander’s

 

 

20,267

 

 

195

 

 

 

 

121

 

 

 

 

 

 

19,951

 

Loss applicable to Toys “R” Us

 

 

(39,130

)

 

 

 

 

 

 

 

 

 

(39,130

)

 

 

(Loss) income from partially owned
entities

 

 

(166,711

)

 

1,476

 

 

1,625

 

 

(168

)

 

128

 

 


 

 

(169,772

)

Interest and other investment (loss)
income, net

 

 

(50,217

)

 

323

 

 

379

 

 

72

 

 

135

 

 


 

 

(51,126

)

Interest and debt expense

 

 

(139,824

)

 

(35,114

)

 

(32,423

)

 

(22,806

)

 

(12,958

)

 

 

 

(36,523

)

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

 

 

(789

)

 

 

 

 

 

 

 

 

 



 

 

(789

)

Minority interest of partially owned
entities

 

 

554

 

 

(1,396

)

 

 

 

53

 

 

(125

)

 


 

 

2,022

 

(Loss) income before income taxes

 

 

(213,262

)

 

76,641

 

 

36,119

 

 

21,020

 

 

3,929

 

 

(39,130

)

 

(311,841

)

Income tax (expense) benefit

 

 

(2,633

)

 

 

 

57

 

 

(75

)

 

(1

)

 

 

 

(2,614

)

(Loss) income from
continuing operations

 

 

(215,895

)

 

76,641

 

 

36,176

 

 

20,945

 

 

3,928

 

 

(39,130

)

 

(314,455

)

(Loss) income from discontinued
operations, net

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(Loss) income before allocation to
minority limited partners

 

 

(215,895

)

 

76,641

 

 

36,176

 

 

20,945

 

 

3,928

 

 

(39,130

)

 

(314,455

)

Minority limited partners’ interest
in the Operating Partnership

 

 

21,009

 

 

 

 

 

 

 

 

 

 

 

 

21,009

 

Perpetual preferred unit distributions of
the Operating Partnership

 

 

(7,629

)

 

 

 

 

 

 

 

 

 

 

 

(7,629

)

Net (loss) income

 

 

(202,515

)

 

76,641

 

 

36,176

 

 

20,945

 

 

3,928

 

 

(39,130

)

 

(301,075

)

Interest and debt expense (1)

 

 

189,355

 

 

33,596

 

 

33,352

 

 

26,108

 

 

13,249

 

 

38,842

 

 

44,208

 

Depreciation and amortization (1)

 

 

179,274

 

 

44,961

 

 

33,655

 

 

30,782

 

 

13,646

 

 

33,343

 

 

22,887

 

Income tax (benefit) expense (1)

 

 

(20,571

)

 

 

 

(54

)

 

75

 

 

55

 

 

(23,126

)

 

2,479

 

EBITDA

 

$

145,543

 

$

155,198

 

$

103,129

 

$

77,910

 

$

30,878

 

$

9,929

 

$

(231,501

)

EBITDA above includes certain items that affect comparability, which are described in the “Overview.”

___________________

See notes on page 99.

97


Supplemental Information – continued

Net Income and EBITDA by Segment for the Three Months Ended December 31, 2008 and December 31, 2007 – continued

 

(Amounts in thousands)

 

For the Three Months Ended December 31, 2007

 

 

 

Total

 

New York
Office

 

Washington, DC
Office (2)

 

Retail

 

Merchandise
Mart (2)

 

Toys

 

Other (3)

 

Property rentals

 

$

500,836

 

$

177,061

 

$

119,112

 

$

87,936

 

$

64,768

 

$

 

$

51,959

 

Straight-line rents:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Contractual rent increases

 

 

13,860

 

 

2,278

 

 

5,782

 

 

3,463

 

 

1,876

 

 

 

 

461

 

Amortization of free rent

 

 

5,358

 

 

1,188

 

 

2,176

 

 

583

 

 

792

 

 

 

 

619

 

Amortization of acquired below-
market leases, net

 

 

24,450

 

 

14,966

 

 

1,405

 

 

6,841

 

 

63

 

 

 

 

1,175

 

Total rentals

 

 

544,504

 

 

195,493

 

 

128,475

 

 

98,823

 

 

67,499

 

 

 

 

54,214

 

Tenant expense reimbursements

 

 

84,561

 

 

31,889

 

 

12,479

 

 

32,834

 

 

3,231

 

 

 

 

4,128

 

Fee and other income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Tenant cleaning fees

 

 

12,840

 

 

18,017

 

 

 

 

 

 

 

 

 

 

(5,177

)

Management and leasing fees

 

 

2,819

 

 

1,605

 

 

1,828

 

 

536

 

 

(4

)

 

 

 

(1,146

)

Lease termination fees

 

 

1,158

 

 

276

 

 

243

 

 

365

 

 

274

 

 

 

 

 

Other

 

 

11,284

 

 

4,158

 

 

4,731

 

 

1,087

 

 

1,794

 

 

 

 

(486

)

Total revenues

 

 

657,166

 

 

251,438

 

 

147,756

 

 

133,645

 

 

72,794

 

 

 

 

51,533

 

Operating expenses

 

 

253,621

 

 

107,202

 

 

49,727

 

 

46,696

 

 

34,164

 

 

 

 

15,832

 

Depreciation and amortization

 

 

123,294

 

 

42,373

 

 

33,695

 

 

19,260

 

 

13,148

 

 

 

 

14,818

 

General and administrative

 

 

50,950

 

 

2,474

 

 

6,921

 

 

7,406

 

 

6,362

 

 

 

 

27,787

 

Costs of acquisitions not consummated

 

 

1,568

 

 

 

 

 

 

 

 

 

 

 

 

1,568

 

Total expenses

 

 

429,433

 

 

152,049

 

 

90,343

 

 

73,362

 

 

53,674

 

 

 

 

60,005

 

Operating income (loss)

 

 

227,733

 

 

99,389

 

 

57,413

 

 

60,283

 

 

19,120

 

 

 

 

(8,472

)

Income applicable to Alexander’s

 

 

15,475

 

 

190

 

 

 

 

252

 

 

 

 

 

 

15,033

 

Loss applicable to Toys “R” Us

 

 

(32,680

)

 

 

 

 

 

 

 

 

 

(32,680

)

 

 

Income (loss) from partially owned entities

 

 

1,440

 

 

1,111

 

 

550

 

 

1,681

 

 

316

 

 

 

 

(2,218

)

Interest and other investment (loss)
income, net

 

 

(3,349

)

 

1,078

 

 

1,373

 

 

147

 

 

98

 

 

 

 

(6,045

)

Interest and debt expense

 

 

(148,673

)

 

(36,037

)

 

(29,832

)

 

(19,028

)

 

(13,168

)

 

 

 

(50,608

)

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

 

 

21,794

 

 

 

 

 

 

 

 

 

 

 

 

21,794

 

Minority interest of partially owned
entities

 

 

2,080

 

 

(1,401

)

 

 

 

(16

)

 

 

 

 

 

3,497

 

Income (loss) before income taxes

 

 

83,820

 

 

64,330

 

 

29,504

 

 

43,319

 

 

6,366

 

 

(32,680

)

 

(27,019

)

Income tax (expense) benefit

 

 

(3,776

)

 

 

 

1,083

 

 

 

 

(304

)

 

 

 

(4,555

)

Income (loss) from
continuing operations

 

 

80,044

 

 

64,330

 

 

30,587

 

 

43,319

 

 

6,062

 

 

(32,680

)

 

(31,574

)

Income (loss) from discontinued
operations, net

 

 

33,227

 

 

 

 

34,641

 

 

3,397

 

 

 

 

 

 

(4,811

)

Income (loss) before allocation to
minority limited partners

 

 

113,271

 

 

64,330

 

 

65,228

 

 

46,716

 

 

6,062

 

 

(32,680

)

 

(36,385

)

Minority limited partners’ interest
in the Operating Partnership

 

 

(3,238

)

 

 

 

 

 

 

 

 

 

 

 

(3,238

)

Perpetual preferred unit distributions of
the Operating Partnership

 

 

(4,819

)

 

 

 

 

 

 

 

 

 

 

 

(4,819

)

Net income (loss)

 

 

105,214

 

 

64,330

 

 

65,228

 

 

46,716

 

 

6,062

 

 

(32,680

)

 

(44,442

)

Interest and debt expense (1)

 

 

213,482

 

 

34,596

 

 

31,011

 

 

22,315

 

 

13,382

 

 

45,908

 

 

66,270

 

Depreciation and amortization (1)

 

 

176,413

 

 

40,455

 

 

36,518

 

 

20,187

 

 

13,324

 

 

32,606

 

 

33,323

 

Income tax (benefit) expense (1)

 

 

(30,185

)

 

(2,052

)

 

(1,078

)

 

 

 

304

 

 

(31,148

)

 

3,789

 

EBITDA

 

$

464,924

 

$

137,329

 

$

131,679

 

$

89,218

 

$

33,072

 

$

14,686

 

$

58,940

 

 

EBITDA above includes certain items that affect comparability, which are described in the “Overview.”

__________________________

See notes on following page.

98


Supplemental Information – continued

 

Net Income and EBITDA by Segment for the Three Months Ended December 31, 2008 and December 31, 2007 – continued

 

Notes to preceding tabular information:

 

(1)

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

 

 

(2)

As of January 1, 2008, we transferred the operations and financial results related to 409 3 rd Street, NW (Washington Office Center) from Merchandise Mart segment to the Washington, DC Office segment for both the current and prior periods presented.

 

 

(3)

Other EBITDA is comprised of:

 

 

 

For the Three Months
Ended December 31,

 

(Amounts in thousands)

 

2008

 

2007

 

Alexander’s

 

$

27,503

 

$

21,864

 

555 California Street (70% interest acquired in May 2007)

 

 

12,762

 

 

15,560

 

Hotel Pennsylvania

 

 

12,497

 

 

13,187

 

Lexington

 

 

5,879

 

 

9,533

 

GMH (sold in June 2008)

 

 

 

 

4,732

 

Industrial warehouses

 

 

1,239

 

 

1,286

 

Other investments

 

 

110

 

 

(1,849

)

 

 

 

59,990

 

 

64,313

 

Non-cash assets write-downs:

 

 

 

 

 

 

 

Investment in Lexington

 

 

(100,707

)

 

 

Marketable equity securities

 

 

(55,471

)

 

 

Real estate development projects:

 

 

 

 

 

 

 

Partially owned entities

 

 

(61,837

)

 

 

Wholly owned entities

 

 

(72,843

)

 

(1,568

)

MPH mezzanine loan loss accrual

 

 

 

 

(57,000

)

Derivative positions in marketable equity securities

 

 

(7,928

)

 

36,533

 

Corporate general and administrative expenses

 

 

(15,662

)

 

(22,917

)

Investment income and other, net

 

 

9,577

 

 

29,786

 

Minority limited partners’ interest in the Operating Partnership

 

 

21,009

 

 

(3,238

)

Perpetual preferred unit distributions of the Operating Partnership

 

 

(7,629

)

 

(4,819

)

Discontinued operations of Americold (sold in March 2008)

 

 

 

 

17,850

 

 

 

$

(231,501

)

$

58,940

 

 

 

99

 


Supplemental Information – continued

Below are the details of the changes by segment in EBITDA for the three months ended December 31, 2008 compared to the three months ended December 31, 2007.

 

(Amounts in thousands)

 

Total

 

New York
Office

 

Washington, DC
Office

 

Retail

 

Merchandise
Mart

 

 

Toys

     

 

Other

 

 

For the three months ended
December 31, 2007

 

$

464,924

 

$

137,329

 

$

131,679

 

$

89,218

 

$

33,072

 

$

14,686

 

$

58,940

 

2008 Operations:
Same store operations (1)

 

 

 

 

 

8,998

 

 

5,926

 

 

3,227

 

 

(1,934

)

 

 

 

 

 

 

Acquisitions, dispositions
and non-same store
income and expenses

 

 

 

 

 

8,871

 

 

(34,476

)

 

(14,535

)

 

(260

)

 

 

 

 

 

 

For the three months ended
December 31, 2008

 

$

145,543

 

$

155,198

 

$

103,129

 

$

77,910

 

$

30,878

 

$

9,929

 

$

(231,501

)

% increase (decrease) in same store operations

 

 

 

 

 

6.1

%

 

5.8

%

 

4.0

%

 

(5.1

)%

 

 

 

 

 

 

____________________________

(1) Represents the increase (decrease) in property-level operations which were owned for the same period in each year and excludes the effect of property acquisitions, dispositions and other non-operating items that affect comparability, including divisional general and administrative expenses. We utilize this measure to make decisions on whether to buy or sell properties as well as to compare the performance of our properties to that of our peers. Same store operations may not be comparable to similarly titled measures employed by other companies.

 

 

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

 

Below are the details of the changes in EBITDA by segment for the three months ended December 31, 2008 compared to the three months ended September 30, 2008.

(Amounts in thousands)

 

Total

 

New York
Office

 

Washington, DC
Office

 

 

Retail

     

Merchandise
Mart

     

Toys

     

Other

 

 

For the three months ended
September 30, 2008

 

$

413,051

 

$

142,905

 

$

97,340

 

$

85,133

 

$

24,388

 

$

49,639

 

$

13,646

 

2008 Operations:
Same store operations

 

 

 

 

 

8,726

 

 

6,395

 

 

498

 

 

5,021

 

 

 

 

 

 

 

Acquisitions, dispositions
and non-same store
income and expenses

 

 

 

 

 

3,567

 

 

(606

)

 

(7,721

)

 

1,469

 

 

 

 

 

 

 

For the three months ended
December 31, 2008

 

$

145,543

 

$

155,198

 

$

103,129

 

$

77,910

 

$

30,878

 

$

9,929

 

$

(231,501

)

% increase in same store operations

 

 

 

 

 

5.8

%

 

6.2

%

 

0.6

%

 

15.8

%

 

 

 

 

 

 

 

 

Below is a reconciliation of net income to EBITDA for the three months ended September 30, 2008.

(Amounts in thousands)

Total

 

New York
Office

 

Washington, DC
Office

 

Retail

 

Merchandise
Mart

 

Toys

 

Other

 

Net income (loss) for the three months
ended September 30, 2008

$

45,701

 

$

63,813

 

$

27,173

 

$

34,907

 

$

(2,671

)

$

(8,141

)

$

(69,380

)

Interest and debt expense

 

192,839

 

 

32,979

 

 

32,244

 

 

26,733

 

 

13,360

 

 

33,569

 

 

53,954

 

Depreciation and amortization

 

179,574

 

 

46,113

 

 

37,222

 

 

23,488

 

 

12,885

 

 

35,155

 

 

24,711

 

Income tax (benefit) expense

 

(5,063

)

 

 

 

701

 

 

5

 

 

814

 

 

(10,944

)

 

4,361

 

EBITDA for the three months
ended September 30, 2008

$

413,051

 

$

142,905

 

$

97,340

 

$

85,133

 

$

24,388

 

$

49,639

 

$

13,646

 

 

 

100

 

 


Related Party Transactions

Loans and Compensation Agreements

 

On March 26, 2007, Joseph Macnow, Executive Vice President – Finance and Administration and Chief Financial Officer, repaid to the Company his $2,000,000 outstanding loan which was scheduled to mature June 2007.

 

Effective as of April 19, 2007, we entered into a new employment agreement with Mitchell Schear, the President of our Washington, DC Office segment. This agreement, which replaced his prior agreement, was approved by the Compensation Committee of our Board of Trustees and provides for a term of five years and is automatically renewable for one-year terms thereafter. The agreement also provides for a minimum salary of $1,000,000 per year and bonuses and other customary benefits. Pursuant to the terms of the agreement, on April 19, 2007, the Compensation Committee granted options to Mr. Schear to acquire 200,000 of our common shares at an exercise price of $119.94 per share. These options vest ratably over three years beginning in 2010 and accelerate on a change of control or if we terminate his employment without cause or by him for breach by us. The agreement also provides that if we terminate Mr. Schear’s employment without cause or by him for breach by us, he will receive a lump-sum payment equal to one year’s salary and bonus, up to a maximum of $2,000,000.

 

 

Transactions with Affiliates and Officers and Trustees

 

Alexander’s

 

We own 32.5% of Alexander’s. Steven Roth, the Chairman of our Board and Chief Executive Officer, and Michael D. Fascitelli, our President, 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.

 

On September 9, 2008, Alexander’s Board of Directors declared a special dividend of $7.00 per share, payable on October 30, 2008, to shareholders of record on October 14, 2008. The dividend was attributable to the liquidation of the wholly owned 731 Lexington Avenue taxable REIT subsidiary into Alexander’s. Accordingly, on October 30, we received $11,578,000, which was accounted for as a reduction of our investment in Alexander’s.

 

On September 15, 2008 and October 14, 2008, Steven Roth, the Chairman of our Board of Directors and Chief Executive Officer, who holds the same positions in Alexander’s, exercised an aggregate of 200,000 of his SARs, which were scheduled to expire on March 4, 2009, and received gross proceeds of $62,809,000.

 

On March 13, 2007, Michael Fascitelli, our President, who also holds the same position in Alexander’s, exercised 350,000 of his SARs, which were scheduled to expire on March 14, 2007, and he received gross proceeds of $50,465,000.

 

Interstate Properties (“Interstate”)

 

Interstate is a general partnership in which Steven Roth, the Chairman of our Board and Chief Executive Officer, 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, 2008, Interstate and its partners beneficially owned approximately 8.8% of the common shares of beneficial interest of Vornado and 27.0% 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 sixty 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 $803,000, $800,000 and $798,000 of management fees under the agreement for the years ended December 31, 2008, 2007 and 2006.

 

 

101

 

 


Liquidity and Capital Resources

We anticipate that cash flow from continuing operations over the next twelve months will be adequate to fund our business operations, cash distributions to unitholders of the Operating Partnership, cash dividends to shareholders, debt amortization and recurring capital expenditures. Capital requirements for significant acquisitions and development expenditures may require funding from borrowings and/or equity offerings.

 

Acquisitions and Investments

 

There were no material real estate acquisitions or investments in partially owned entities and mezzanine loans during 2008. During 2007, we completed approximately $4,045,400,000 of real estate acquisitions and $217,081,000 mezzanine loans. These acquisitions and investments were consummated through our subsidiaries and were financed with available cash, mortgage indebtedness, and/or the issuance of operating partnership equity. The related assets, liabilities and results of operations are included in our consolidated financial statements from their respective dates of acquisition. Excluding our acquisition of a 70% interest in 1290 Avenue of the Americas and 555 California Street in May 2007, none of the acquisitions, individually or in the aggregate, were material to our historical consolidated financial statements. Details of our 2007 acquisitions and investments are summarized below.

 

100 West 33 rd Street, New York City (the “Manhattan Mall”)

 

On January 10, 2007, we acquired the Manhattan Mall for approximately $689,000,000 in cash. This mixed-use property is located on the entire Sixth Avenue block-front between 32 nd and 33 rd Streets in Manhattan and contains approximately 1,000,000 square feet, including 845,000 square feet of office space and 164,000 square feet of retail space. Included as part of the acquisition were 250,000 square feet of additional air rights. The property is adjacent to our Hotel Pennsylvania.

 

Bruckner Plaza, Bronx, New York

 

On January 11, 2007, we acquired the Bruckner Plaza shopping center, containing 386,000 square feet, for approximately $165,000,000 in cash. Also included as part of the acquisition was an adjacent parcel which is ground leased to a third party. The property is located on Bruckner Boulevard in the Bronx, New York.

 

Filene’s, Boston, Massachusetts

 

On January 26, 2007, a joint venture in which we have a 50% interest, acquired the Filene’s property located in the Downtown Crossing district of Boston, Massachusetts for approximately $100,000,000 in cash, of which our share was $50,000,000.

 

H Street Building Corporation (“H Street”)

 

In July 2005, we acquired H Street, which owns a 50% interest in real estate assets located in Pentagon City, Virginia and Washington, DC. On April 30, 2007, we acquired the corporations that own the remaining 50% interest in these assets for approximately $383,000,000, consisting of $322,000,000 in cash and $61,000,000 of existing mortgages. These assets include twin office buildings located in Washington, DC, containing 577,000 square feet, and assets located in Pentagon City, Virginia, comprised of 34 acres of land leased to three residential and retail operators, a 1,680 unit high-rise apartment complex and 10 acres of vacant land.

 

Further, we agreed to sell approximately 19.6 of the 34 acres of land to one of the existing ground lessees in two closings over a two-year period for approximately $220,000,000. On May 11, 2007, we closed on the sale of 11 of the 19.6 acres for $104,000,000 and received $5,000,000 in cash and a $99,000,000 short-term note. On September 28, 2007, the buyer pre-paid the note in cash and we recognized a net gain of $4,803,000.

 

Our total purchase price for 100% of the assets we will own, after the anticipated proceeds from the land sales, is $409,000,000, consisting of $286,000,000 in cash and $123,000,000 of existing mortgages.

 

102

 

 


Liquidity and Capital Resources – continued

 

1290 Avenue of the Americas and 555 California Street

 

On May 24, 2007, we acquired a 70% controlling interest in 1290 Avenue of the Americas, a 2,000,000 square foot Manhattan office building located on the block-front between 51 st and 52 nd Street on Avenue of the Americas, and the three- building 555 California Street complex (“555 California Street”) containing 1,800,000 square feet, known as the Bank of America Center, located at California and Montgomery Streets in San Francisco’s financial district. The purchase price for our 70% interest in the real estate was approximately $1.8 billion, consisting of $1.0 billion of cash and $797,000,000 of existing debt. Our share of the debt was comprised of $308,000,000 secured by 1290 Avenue of the Americas and $489,000,000 secured by 555 California Street. Our 70% interest was acquired through the purchase of all of the shares of a group of foreign companies that own, through U.S. entities, the 1% sole general partnership interest and a 69% limited partnership interest in the partnerships that own the two properties. The remaining 30% limited partnership interest is owned by Donald J. Trump.

 

Shopping Center Portfolio Acquisition

 

On June 26, 2007, we entered into an agreement to acquire a portfolio of 15 shopping centers aggregating approximately 1.9 million square feet for an aggregate purchase price of $351,000,000. The properties are located primarily in Northern New Jersey and Long Island, New York. We have completed the acquisition of nine of these properties for an aggregate purchase price of $250,478,000, consisting of $109,279,000 in cash, $49,599,000 in Vornado Realty L.P. preferred units, $12,460,000 of Vornado Realty L.P. common units and $79,140,000 of existing mortgage debt. We determined not to complete the acquisition of the remaining six properties and expensed $2,700,000 for costs of acquisitions not consummated on our consolidated statement of income for the year ended December 31, 2007.

 

BNA Complex

 

On August 9, 2007, we acquired a three building complex from The Bureau of National Affairs, Inc. (“BNA”) for $111,000,000 in cash. The complex contains approximately 300,000 square feet and is located in Washington’s West End between Georgetown and the Central Business District. We plan to convert two of these buildings to rental apartments. Simultaneously with the acquisition, we sold Crystal Mall Two, a 277,000 square foot office building located at 1801 South Bell Street in Crystal City, to BNA for $103,600,000 in cash, which resulted in a net gain of $19,893,000.

 

 

103

 

 


Liquidity and Capital Resources – continued

 

Certain Future Cash Requirements

 

Development and Redevelopment Expenditures

 

We are currently engaged in various development and redevelopment projects for which we have budgeted approximately $1.2 billion, of which $804.9 million has been expended as of December 31, 2008 and substantially all of the remainder is anticipated to be expended in 2009. Details of our development and redevelopment activities are summarized in Item 1. Business, in this Annual Report on Form 10-K.

 

Other Capital Expenditures

 

The following table summarizes other anticipated 2009 capital expenditures.

 

(Amounts in millions except square foot date)

Total

 

New York

Office

 

Washington, DC

Office

   

Retail

   

Merchandise
Mart

 

Other (1)

 

Expenditures to maintain assets

$

78.0

 

$

31.0

     

$

31.0

 

$

2.0

 

 

$

5.0

 

$

9.0

 

Tenant improvements

 

72.0

 

 

24.0

 

 

24.0

 

 

7.0

 

 

 

16.0

 

 

1.0

 

Leasing commissions

 

39.0

 

 

12.0

 

 

9.0

 

 

11.0

 

 

 

7.0

 

 

 

Total Tenant Improvements and Leasing
Commissions

 

111.0

 

 

36.0

 

 

33.0

 

 

18.0

 

 

 

23.0

 

 

1.0

 

Per square foot

 

 

 

$

49.00

 

$

15.00

 

$

29.00

 

 

$

15.00

(2)

$

42.00

 

Per square foot per annum

 

 

 

$

5.00

 

$

3.00

 

$

4.00

 

 

$

2.00

(2)

$

6.00

 

Total Capital Expenditures and Leasing
Commissions

$

189.0

 

$

67.0

 

$

64.0

 

$

20.0

 

 

$

28.0

 

$

10.0

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Square feet budgeted to be leased
(in thousands)

 

 

 

 

740

 

 

2,200

 

 

630

 

 

 

1,500

 

 

 

 

Weighted average lease term

 

 

 

 

9.6

 

 

5.0

 

 

7.7

 

 

 

7.7

 

 

 

 

____________________________

(1)

Hotel Pennsylvania, Warehouses, 555 California Street and Wasserman.

(2)

Tenant improvements and leasing commissions per square foot budgeted for 2009 leasing activity are $38.74 ($2.58 per annum) and $6.72 ($1.34 per annum) for Merchandise Mart office and showroom space, respectively.

 

The table above excludes anticipated capital expenditures of non-consolidated entities, including Alexander’s and Toy’s, as these entities will fund their own capital expenditures without additional equity contributions from us.

 

Dividends and Distributions

 

On January 14, 2009, we declared a regular quarterly dividend of $0.95 per common share, payable on March 12, 2009 in a combination of cash, not to exceed 40% in the aggregate, and Vornado common shares. This dividend policy, continued for all of 2009, will require approximately $260,000,000 of cash for common share dividends during 2009, assuming shareholder elections to receive cash meet or exceed the aggregate cash limitations. In addition, we expect to pay cash dividends on outstanding preferred shares during 2009 aggregating approximately $57,000,000.

 

104

 

 


Liquidity and Capital Resources – continued

Financing Activities and Contractual Obligations

 

Below is a schedule of our contractual obligations and commitments at December 31, 2008.

 

(Amounts in thousands)
Contractual Cash Obligations (principal and interest (1) ):

 

Total

 

Less than
1 Year

 

1 – 3 Years

 

3 – 5 Years

 

Thereafter

 

Mortgages and Notes Payable

 

$

11,035,540

 

$

823,834

 

$

3,943,042

 

$

2,432,379

 

$

3,836,285

 

Convertible Senior Debentures due 2027

 

 

1,520,624

 

 

39,407

 

 

1,481,217

 

 

 

 

 

Convertible Senior Debentures due 2026

 

 

1,097,441

 

 

35,880

 

 

1,061,561

 

 

 

 

 

Exchangeable Senior Debentures due 2025

 

 

567,811

 

 

19,375

 

 

548,436

 

 

 

 

 

Revolving Credit Facilities

 

 

333,218

 

 

6,650

 

 

326,568

 

 

 

 

 

Senior Unsecured Notes due 2011

 

 

285,000

 

 

14,000

 

 

271,000

 

 

 

 

 

Purchase obligations, primarily construction commitments

 

 

237,830

 

 

237,830

 

 

 

 

 

 

 

Senior Unsecured Notes due 2010

 

 

219,000

 

 

9,500

 

 

209,500

 

 

 

 

 

Operating leases

 

 

202,957

 

 

13,304

 

 

23,509

 

 

23,408

 

 

142,736

 

Senior Unsecured Notes due 2009

 

 

176,041

 

 

176,041

 

 

 

 

 

 

 

Capital lease obligations

 

 

21,666

 

 

706

 

 

1,413

 

 

1,413

 

 

18,134

 

Total Contractual Cash Obligations

 

$

15,697,128

 

$

1,376,527

 

$

7,866,246

 

$

2,457,200

 

$

3,997,155

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commitments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Capital commitments to partially owned entities

 

$

213,352

 

$

213,352

 

$

 

$

 

$

 

Standby letters of credit

 

 

98

 

 

92

 

 

6

 

 

 

 

 

Total Commitments

 

$

213,450

 

$

213,444

 

$

6

 

$

 

$

 

________________________

 

(1)

Interest on variable rate debt is computed using rates in effect at December 31, 2008.

 

 

We may from time to time purchase or retire outstanding debt securities though cash purchases and/or exchanges for our equity securities, in open market purchases, privately negotiated transactions or otherwise. Such purchases and/or exchanges, if any, will depend on prevailing market conditions, liquidity requirements and other factors. The amounts involved in connection with these transactions could be material to our consolidated financial statements.

 

We believe that we have complied with the financial covenants required by our revolving credit facilities and our senior unsecured notes, and that as of December 31, 2008 we have the ability to incur a substantial amount of additional indebtedness. We have an effective shelf registration for the offering of our equity securities and debt securities that is not limited in amount due to our status as a “well-known seasoned issuer.”

 

Our 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.

 

 

105

 

 


Liquidity and Capital Resources – continued

Financing Activities and Contractual Obligations – continued

 

During 2008, we purchased an aggregate of $109,040,000 of our senior unsecured notes and convertible senior debentures, for $98,488,000 in cash. In addition, we completed approximately $1.3 billion of property level mortgage financings and repaid $241,000,000 of existing debt. During 2007, we completed approximately $1.4 billion of senior unsecured financings and $1.111 billion of property level mortgage financings and repaid $912,674,000 of existing debt. The net proceeds we received from 2008 and 2007 financings were used primarily for general corporate purposes and to fund acquisitions and investments unless otherwise noted. Details of our 2008 financing activities are summarized in the Overview of Management’s Discussion and Analysis of Financial Condition and Results of Operations. Details of our 2007 financing activities are summarized below.

 

2.85% Convertible Senior Debentures due 2027

 

On March 21, 2007, we sold $1.4 billion aggregate face amount of 2.85% convertible senior debentures due 2027, pursuant to an effective registration statement. The aggregate net proceeds from this offering, after underwriters’ discounts and expenses, were approximately $1.37 billion. The debentures are redeemable at our option beginning in 2012 for the principal amount plus accrued and unpaid interest. Holders of the debentures have the right to require us to repurchase their debentures in 2012, 2017, and 2022 and in certain other limited circumstances. The debentures are convertible, under certain circumstances, for cash and Vornado common shares at an initial conversion rate of 6.1553 common shares per $1,000 of principal amount of debentures. The initial conversion price was $162.46, which represented a premium of 30% over the March 21, 2007 closing price for our common shares. The principal amount of debentures will be settled for cash and the amount in excess of the principal defined as the conversion value will be settled in cash or, at our election, Vornado common shares.

 

The net proceeds of the offering were contributed to the Operating Partnership in the form of an inter-company loan and the Operating Partnership guaranteed the payment of the debentures.

 

Revolving Credit Facility

 

On September 28, 2007, the Operating Partnership entered into a new $1.510 billion unsecured revolving credit facility, which was increased by $85,000,000 on October 12, 2007 and can be increased to up to $2.0 billion during the initial term. The new facility has a three-year term with two one-year extension options, bears interest at LIBOR plus 55 basis points, based on our current credit ratings and requires the payment of an annual facility fee of 15 basis points. Together with the existing $0.965 billion credit facility, the Operating Partnership has an aggregate of $2.56 billion of unsecured revolving credit. Vornado is the guarantor of the Operating Partnership’s obligations under both revolving credit agreements. The existing $0.965 billion credit facility’s financial covenants were modified to conform to the financial covenants under the new agreement. Significant modifications included (i) changing the definition of Capitalization Value to exclude corporate unallocated general and administrative expenses and to reducing the capitalization rate to 6.5% from 7.5%, and (ii) changing the definition of Total Outstanding Indebtedness to exclude indebtedness of unconsolidated joint ventures. Under the new agreement, “Equity Value” may not be less than Three Billion Dollars; “Total Outstanding Indebtedness” may not exceed sixty percent (60%) of “Capitalization Value;” the ratio of “Combined EBITDA” to “Fixed Charges,” each measured as of the most recently ended calendar quarter, may not be less than 1.40 to 1.00; the ratio of “Unencumbered Combined EBITDA” to “Unsecured Interest Expense,” each measured as of the most recently ended calendar quarter, may not be less than 1.50 to 1.00; at any time, “Unsecured Indebtedness” may not exceed sixty percent (60%) of “Capitalization Value of Unencumbered Assets;” and the ratio of “Secured Indebtedness” to “Capitalization Value,” each measured as of the most recently ended calendar quarter, may not exceed fifty percent (50%). The new agreement also contains standard representations and warranties and other covenants. The terms in quotations in this paragraph are all defined in the new agreement, which was filed as an exhibit to our Current Report on Form 8-K dated September 28, 2007, filed on October 4, 2007.

 

 

 

 

106

 

 


Liquidity and Capital Resources – continued

Financing Activities and Contractual Obligations – continued

 

Insurance

 

We carry commercial liability and all risk property insurance ((i) fire, (ii) flood, (iii) extended coverage, (iv) “acts of terrorism” as defined in the Terrorism Risk Insurance Program Reauthorization Act of 2007 (“TRIPRA”) , which expires in December 2014, and (v) rental loss insurance) with respect to our assets. Our New York Office, Washington, DC Office, Retail and Merchandise Mart divisions have $2.0 billion of per occurrence all risk property insurance coverage, including terrorism coverage in effect through September 15, 2009. Our California properties have earthquake insurance with coverage of $150,000,000 per occurrence, subject to a deductible in the amount of 5% of the value of the affected property, and a $150,000,000 annual aggregate.

 

In June 2007 we formed Penn Plaza Insurance Company, LLC (“PPIC”), a wholly owned consolidated subsidiary, to act as a re-insurer with respect to a portion of our earthquake insurance coverage and as a direct insurer for coverage for “certified” acts of terrorism and for nuclear, biological, chemical and radiological (“NBCR”) acts, as defined by TRIPRA. Coverage for “certified” acts of terrorism is fully reinsured by third party insurance companies and the Federal government with no exposure to PPIC. Prior to the formation of PPIC, we were uninsured for NBCR losses. Subsequently, we have $2.0 billion of NBCR coverage under TRIPRA, for which PPIC is responsible for 15% of each NBCR loss and the insurance company deductible of $1,000,000. 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 generally non-recourse to us), senior unsecured notes, exchangeable senior debentures, convertible senior debentures and revolving credit agreements contain customary covenants requiring us to maintain insurance. Although we believe that we have adequate insurance coverage for purposes of these agreements, we may not be able to obtain an equivalent amount of coverage at reasonable costs in the future. Further, if lenders insist on greater coverage than we are able to obtain it could adversely affect our ability to finance and/or refinance our properties and expand our portfolio.

 

Other Commitments and Contingencies

 

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

 

We are committed to fund additional capital to certain of our partially owned entities aggregating approximately $213,352,000. Of this amount, $80,923,000 is committed to IPF and is pledged as collateral to IPF’s lender.

 

From time to time, we have disposed of substantial amounts of real estate to third parties for which, as to certain properties, we remain contingently liable for rent payments or mortgage indebtedness that we cannot quantify.

 

107

 

 


Liquidity and Capital Resources – continued

Litigation

 

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

 

On January 8, 2003, Stop & Shop filed a complaint with the United States District Court for the District of New Jersey (“USDC-NJ”) claiming that we had no right to reallocate and therefore continue to collect the $5,000,000 of annual rent from Stop & Shop pursuant to the Master Agreement and Guaranty, because of the expiration of the East Brunswick, Jersey City, Middletown, Union and Woodbridge leases to which the $5,000,000 of additional rent was previously allocated. Stop & Shop asserted that a prior order of the Bankruptcy Court for the Southern District of New York dated February 6, 2001, as modified on appeal to the District Court for the Southern District of New York on February 13, 2001, froze our right to re-allocate which effectively terminated our right to collect the additional rent from Stop & Shop. On March 3, 2003, after we moved to dismiss for lack of jurisdiction, Stop & Shop voluntarily withdrew its complaint. On March 26, 2003, Stop & Shop filed a new complaint in New York Supreme Court, asserting substantially the same claims as in its USDC-NJ complaint. We removed the action to the United States District Court for the Southern District of New York. In January 2005 that court remanded the action to the New York Supreme Court. On February 14, 2005, we served an answer in which we asserted a counterclaim seeking a judgment for all the unpaid additional rent accruing through the date of the judgment and a declaration that Stop & Shop will continue to be liable for the additional rent as long as any of the leases subject to the Master Agreement and Guaranty remain in effect. On May 17, 2005, we filed a motion for summary judgment. On July 15, 2005, Stop & Shop opposed our motion and filed a cross-motion for summary judgment. On December 13, 2005, the Court issued its decision denying the motions for summary judgment. Both parties appealed the Court’s decision and on December 14, 2006, the Appellate Court division issued a decision affirming the Court’s decision. On January 16, 2007, we filed a motion for the reconsideration of one aspect of the Appellate Court’s decision which was denied on March 13, 2007. We are currently engaged in discovery and anticipate that a trial date will be set for some time in 2009. We intend to vigorously pursue our claims against Stop & Shop. In our opinion, after consultation with legal counsel, the outcome of such matters will not have a material effect on our financial condition, results of operations or cash flows.

 

On May 24, 2007, we acquired a 70% controlling interest in 1290 Avenue of the Americas and the 555 California Street complex. Our 70% interest was acquired through the purchase of all of the shares of a group of foreign companies that own, through U.S. entities, the 1% sole general partnership interest and a 69% limited partnership interest in the partnerships that own the two properties. The remaining 30% limited partnership interest is owned by Donald J. Trump. In August 2005, Mr. Trump brought a lawsuit in the New York State Supreme Court against, among others, the general partners of the partnerships referred to above.   Mr. Trump’s claims arose out of a dispute over the sale price of and use of proceeds from, the sale of properties located on the former Penn Central rail yards between West 59th and 72nd Streets in Manhattan which were formerly owned by the partnerships. In decisions dated September 14, 2005 and July 24, 2006, the Court denied several of Mr. Trump’s motions and ultimately dismissed all of Mr. Trump’s claims, except for his claim seeking access to books and records. In a decision dated October 1, 2007, the Court determined that Mr. Trump had already received access to the books and records to which he was entitled, with the exception of certain documents which were subsequently delivered to Mr. Trump. Mr. Trump sought re-argument and renewal on, and filed a notice of appeal in connection with, his dismissed claims.  In a decision dated January 6, 2009, the Court denied all of Mr. Trump’s motions. Mr. Trump has filed a notice appealing the 2007 and 2009 decisions. In connection with the acquisition, we agreed to indemnify the sellers for liabilities and expenses arising out of Mr. Trump’s claim that the general partners of the partnerships we acquired did not sell the rail yards at a fair price or could have sold the rail yards for a greater price and any other claims asserted in the legal action; provided however, that if Mr. Trump prevails on certain claims involving partnership matters, other than claims relating to sale price, the sellers will be required to reimburse us for certain costs related to those claims. We believe that the claims relating to the sale price are without merit. All other allegations are not asserted as a basis for damages and regardless of merit, in our opinion, after consultation with legal counsel, will not have a material effect on our financial condition, results of operation or cash flows.

 

In July 2005, we acquired H Street Building Corporation (“H Street”) which has a subsidiary that owns, among other things, a 50% tenancy in common interest in land located in Arlington County, Virginia, known as "Pentagon Row," leased to two tenants. In April 2007, H Street acquired the remaining 50% interest in that fee. In April 2007, we received letters from those tenants, Street Retail, Inc. and Post Apartment Homes, L.P., claiming they had a right of first offer triggered by each of those transactions. On September 25, 2008, both tenants filed suit against us and the former owners. The claim alleges the right to purchase the fee interest, damages in excess of $75,000,000 and punitive damages. We believe this claim is without merit and in our opinion, after consultation with legal counsel, will not have a material effect on our financial condition, results of operation or cash flow.

 

108

 

 


Liquidity and Capital Resources – continued

Cash Flow for the Year Ended December 31, 2008

 

Property rental income is our primary source of cash flow and is dependent upon the occupancy and rental rates of our properties. Other sources of liquidity to fund cash requirements include proceeds from debt financings, including mortgage loans, senior unsecured borrowings, and our revolving credit facilities; proceeds from the issuance of common and preferred equity; and asset sales. Our cash requirements include property operating expenses, capital improvements, tenant improvements, leasing commissions, distributions to common and preferred shareholders, as well as acquisition and development costs. Our cash and cash equivalents were $1,526,853,000 at December 31, 2008, a $372,258,000 increase over the balance at December 31, 2007. This increase resulted from $817,812,000 of net cash provided by operating activities and $7,677,000 of net cash provided by financing activities, partially offset by $453,231,000 of net cash used in investing activities. Property rental income represents our primary source of net cash provided by operating activities.

 

Our consolidated outstanding debt was $12,649,086,000 at December 31, 2008, a $753,048,000 increase over the balance at December 31, 2007. This increase resulted primarily from debt associated with property refinancings. As of December 31, 2008 and December 31, 2007, $358,468,000 and $405,656,000, respectively, was outstanding under our revolving credit facilities. During 2009 and 2010, $453,530,000 and $1,096,941,000 of our outstanding debt matures, respectively. We may refinance such debt or choose to repay all or a portion, using existing cash balances or our revolving credit facilities.

 

Our share of debt of unconsolidated subsidiaries was $3,196,585,000 at December 31, 2008, a $93,288,000 decrease from the balance at December 31, 2007.

 

Cash flows provided by operating activities of $817,812,000 was primarily comprised of (i) net income of $395,043,000, (ii) $417,973,000 of non-cash adjustments, including depreciation and amortization expense, non-cash impairment losses, the effect of straight-lining of rental income, equity in net income of partially owned entities, minority interest expense, and (iii) distributions of income from partially owned entities of $44,690,000, partially offset by (iv) the net change in operating assets and liabilities of $39,894,000.

 

Net cash used in investing activities of $453,231,000 was primarily comprised of (i) development and redevelopment expenditures of $598,688,000, (ii) additions to real estate of $207,885,000, (iii) investments in partially owned entities of $156,227,000, (iv) purchases of marketable equity securities of $164,886,000, partially offset by, (v) proceeds from the sale of real estate (primarily Americold and Tysons Dulles Plaza) of $390,468,000, (vi) distributions of capital from partially owned entities of $218,367,000, (vii) proceeds received from repayments on mezzanine loans receivable of $52,470,000 and (viii) proceeds from the sale of marketable securities of $51,185,000.

 

Net cash provided by financing activities of $7,677,000 was primarily comprised of (i) proceeds from borrowings of $1,721,974,000 and (ii) proceeds received from exercises of employee stock options of $29,377,000, partially offset by, (iii) repayments of borrowings of $993,665,000, (iv) dividends paid on common shares of $561,981,000, (v) distributions to minority partners of $85,419,000 and (vi) dividends paid on preferred shares of $57,112,000.

 

Capital Expenditures

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

 

109

 

 

 


Liquidity and Capital Resources – continued

Cash Flow for the Year Ended December 31, 2008 – continued

 

Below are the details of capital expenditures, leasing commissions and development and redevelopment expenditures and a reconciliation of total expenditures on an accrual basis to the cash expended in the year ended December 31, 2008.

(Amounts in thousands)

 

Total

 

New York
Offic

 

Washington, DC
Offic

 

Retail

 

Merchandise
Mart

 

Other

   

Capital Expenditures (Accrual basis):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Expenditures to maintain the assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Recurring

 

$

50,137

 

$

23,380

 

$

10,341

 

$

4,024

 

$

10,730

 

$

1,662

 

 

Non-recurring

 

 

22,623

 

 

6,504

 

 

10,590

 

 

 

 

 

 

5,529

 

 

Total

 

 

72,760

 

 

29,884

 

 

20,931

 

 

4,024

 

 

10,730

 

 

7,191

 

 

Tenant improvements:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Recurring

 

 

57,573

 

 

23,433

 

 

17,223

 

 

7,881

 

 

9,036

 

 

 

 

Non-recurring

 

 

34,149

 

 

12,224

 

 

10,298

 

 

2,468

 

 

8,925

 

 

234

 

 

Total

 

 

91,722

 

 

35,657

 

 

27,521

 

 

10,349

 

 

17,961

 

 

234

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Leasing Commissions:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Recurring

 

 

29,642

 

 

16,037

 

 

6,385

 

 

3,145

 

 

4,075

 

 

 

 

Non-recurring

 

 

14,088

 

 

10,045

 

 

 

 

1,641

 

 

2,221

 

 

181

 

 

Total

 

 

43,730

 

 

26,082

 

 

6,385

 

 

4,786

 

 

6,296

 

 

181

 

 

Tenant improvements and leasing commissions:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Per square foot per annum

 

$

3.03

 

$

5.35

 

$

2.16

 

$

2.03

 

$

2.63

 

$

 

 

Percentage of initial rent

 

 

7.0%

 

 

7.5%

 

 

5.6%

 

 

5.3%

 

 

9.4%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Capital Expenditures and Leasing
Commissions (accrual basis)

 

$

208,212

 

$

91,623

 

$

54,837

 

$

19,159

 

$

34,987

 

$

7,606

 

 

Adjustments to reconcile accrual
basis to cash basis:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Expenditures in the current year
applicable to prior periods

 

 

114,778

 

 

57,001

 

 

15,539

 

 

9,590

 

 

28,576

 

 

4,072

 

 

Expenditures to be made in future
periods for the current period

 

 

(78,614

)

 

(33,571

)

 

(22,076

)

 

(15,135

)

 

(7,729

)

 

(103

)

 

Total Capital Expenditures and
Leasing Commissions (Cash basis)

 

$

244,376

 

$

115,053

 

$

48,300

 

$

13,614

 

$

55,834

 

$

11,575

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Development and Redevelopment
Expenditures (1):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Bergen Town Center

 

$

126,673

 

$

 

$

 

$

126,673

 

$

 

$

 

 

Wasserman Venture

 

 

61,867

 

 

 

 

 

 

 

 

 

 

61,867

 

 

Manhattan Mall

 

 

51,474

 

 

 

 

 

 

51,474

 

 

 

 

 

 

1999 K Street

 

 

45,742

 

 

 

 

45,742

 

 

 

 

 

 

 

 

40 East 66 th Street

 

 

41,827

 

 

 

 

 

 

 

 

 

 

41,827

 

 

220 20 th Street

 

 

36,014

 

 

 

 

36,014

 

 

 

 

 

 

 

 

220 Central Park South

 

 

30,533

 

 

 

 

 

 

 

 

 

 

30,533

 

 

West End 25

 

 

24,002

 

 

 

 

24,002

 

 

 

 

 

 

 

 

478-486 Broadway

 

 

17,182

 

 

 

 

 

 

17,182

 

 

 

 

 

 

Hotel Pennsylvania

 

 

15,591

 

 

 

 

 

 

 

 

 

 

15,591

 

 

2101 L Street

 

 

14,992

 

 

 

 

14,992

 

 

 

 

 

 

 

 

Springfield Mall

 

 

12,948

 

 

 

 

 

 

12,948

 

 

 

 

 

 

Garfield

 

 

12,775

 

 

 

 

 

 

12,775

 

 

 

 

 

 

North Bergen, New Jersey

 

 

10,749

 

 

 

 

 

 

10,749

 

 

 

 

 

 

South Hills Mall

 

 

10,404

 

 

 

 

 

 

10,404

 

 

 

 

 

 

Green Acres Mall

 

 

3,914

 

 

 

 

 

 

3,914

 

 

 

 

 

 

Other

 

 

82,001

 

 

25,959

 

 

27,106

 

 

20,226

 

 

8,710

 

 

 

 

 

 

$

598,688

 

$

25,959

 

$

147,856

 

$

266,345

 

$

8,710

 

$

149,818

 

 

 

110

 


Liquidity and Capital Resources – continued

Cash Flow for the Year Ended December 31, 2007

 

Cash and cash equivalents was $1,154,595,000 at December 31, 2007, a $1,078,722,000 decrease from the balance at December 31, 2006. This decrease resulted from $3,067,704,000 of net cash used in investing activities, primarily for real estate acquisitions, partially offset by $1,291,657,000 of net provided by financing activities and $697,325,000 of net cash provided by operating activities.

 

Consolidated outstanding debt was $11,896,038,000 at December 31, 2007, a $3,396,952 increase over the balance at December 31, 2006. This increase resulted primarily from debt associated with asset acquisitions, property financings and refinancings and from the issuance of $1.0 billion of senior unsecured convertible debentures during 2007. As of December 31, 2007 and 2006, $405,656,000 and $0, respectively, was outstanding under our revolving credit facilities.

 

Our share of debt of unconsolidated subsidiaries was $3,289,873,000 at December 31, 2007, a $33,134,000 decrease from the balance at December 31, 2006.

 

Cash flows provided by operating activities of $697,325,000 was primarily comprised of (i) net income of $568,906,000, (ii) adjustments for non-cash items of $250,001,000, and (iii) distributions of income from partially owned entities of $24,044,000 partially offset by, (iv) a net change in operating assets and liabilities of $145,626,000. The adjustments for non-cash items were primarily comprised of (i) depreciation and amortization of $545,885,000, (ii) a non-cash mezzanine loan loss accrual of $57,000,000, (iii) minority limited partners’ interest in the Operating Partnership of $53,565,000, (iv) perpetual preferred unit distributions of the Operating Partnership of $19,274,000, and (v) net loss on early extinguishment of debt and write-off of unamortized financing costs of $7,670,000, partially offset by (vi) net gains on derivatives of $113,503,000 (primarily McDonald’s), (vii) equity in net income of partially owned entities, including Alexander’s and Toys, of $69,656,000, (viii) the effect of straight-lining of rental income of $77,699,000, (ix) net gains on sale of real estate of $64,981,000, (x) net gains on dispositions of wholly-owned and partially owned assets other than real estate of $39,493,000 and (xi) amortization of below market leases, net of above market leases of $83,250,000.

 

Net cash used in investing activities of $3,067,704,000 was primarily comprised of (i) acquisitions of real estate and other of $2,811,285,000, (ii) development and redevelopment expenditures of $358,748,000, (iii) investments in partially owned entities of $271,423,000, (iv) investments in mezzanine loans receivable of $217,081,000, (v) purchases of marketable securities of $152,683,000, (vi) capital expenditures of $166,319,000, partially offset by, (vii) proceeds from settlement of derivative positions of $260,764,000, (viii) repayments received on mezzanine loans receivable of $241,289,000, (ix) proceeds from the sale of real estate of $297,234,000, (x) proceeds from the sale of marketable securities of $112,779,000 and (xi) distributions of capital from partially owned entities of $22,541,000.

 

Net cash provided by financing activities of $1,291,657,000 was primarily comprised of (i) proceeds from borrowings of $2,954,497,000, partially offset by, (ii) repayments of borrowings of $868,055,000, (iii) dividends paid on common shares of $524,719,000, (iv) purchases of marketable securities in connection with the legal defeasance or mortgage notes payable of $109,092,000, (v) distributions to minority partners of $81,065,000 and (vi) dividends paid on preferred shares of $57,236,000. 

 

111

 

 


Liquidity and Capital Resources – continued

Cash Flow for the Year Ended December 31, 2007 – continued

 

Below are the details of capital expenditures, leasing commissions and development and redevelopment expenditures and a reconciliation of total expenditures on an accrual basis to the cash expended in the year ended December 31, 2007.

 

(Amounts in thousands)

Total

 

New York
Office

   

Washington, DC
Office

 

Retail

   

Merchandise
Mart

   

Other

 

Capital Expenditures (Accrual basis):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Expenditures to maintain the assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Recurring

$

46,549

 

$

15,162

 

$

15,725

 

$

2,626

 

$

10,625

 

 

$

2,411

 

Non-recurring

 

8,325

 

 

 

 

6,717

 

 

 

 

 

 

 

1,608

 

Total

 

54,874

 

 

15,162

 

 

22,442

 

 

2,626

 

 

10,625

 

 

 

4,019

 

Tenant improvements:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Recurring

 

100,939

 

 

43,677

 

 

20,890

 

 

3,176

 

 

33,196

 

 

 

 

Non-recurring

 

1,794

 

 

 

 

 

 

741

 

 

 

 

 

1,053

 

Total

 

102,733

 

 

43,677

 

 

20,890

 

 

3,917

 

 

33,196

 

 

 

1,053

 

Leasing Commissions:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Recurring

 

43,163

 

 

28,626

 

 

7,591

 

 

2,773

 

 

4,173

 

 

 

 

Non-recurring

 

855

 

 

 

 

 

 

539

 

 

 

 

 

316

 

Total

 

44,018

 

 

28,626

 

 

7,591

 

 

3,312

 

 

4,173

 

 

 

316

 

Tenant improvements and leasing commissions:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Per square foot per annum

$

2.91

 

$

5.17

 

$

1.72

 

$

1.11

 

$

3.15

 

 

$

 

Percentage of initial rent

 

6.7

%

 

7.0

%

 

4.4

%

 

2.8

%

 

11.8

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Capital Expenditures and Leasing
Commissions (accrual basis)

$

201,625

 

$

87,465

 

$

50,923

 

$

9,855

 

$

47,994

 

 

$

5,388

 

Adjustments to reconcile accrual
basis to cash basis:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Expenditures in the current year
applicable to prior periods

 

76,117

 

 

17,416

 

 

40,019

 

 

8,263

 

 

8,982

 

 

 

1,437

 

Expenditures to be made in future
periods for the current period

 

(88,496

)

 

(46,845

)

 

(13,763

)

 

(5,542

)

 

(21,203

)

 

 

(1,143

)

Total Capital Expenditures and
Leasing Commissions
(Cash basis)

$

189,246

 

$

58,036

 

$

77,179

 

$

12,576

 

$

35,773

 

 

$

5,682

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Development and Redevelopment
Expenditures:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Bergen Town Center

$

52,664

 

$

 

$

 

$

52,664

 

$

 

 

$

 

2101 L Street

 

46,664

 

 

 

 

46,664

 

 

 

 

 

 

 

 

Wasserman Venture

 

43,260

 

 

 

 

 

 

 

 

 

 

 

43,260

 

Green Acres Mall

 

32,594

 

 

 

 

 

 

32,594

 

 

 

 

 

 

Crystal Mall Two

 

29,552

 

 

 

 

29,552

 

 

 

 

 

 

 

 

North Bergen, New Jersey

 

19,925

 

 

 

 

 

 

19,925

 

 

 

 

 

 

40 East 66 th Street

 

13,544

 

 

 

 

 

 

 

 

 

 

 

13,544

 

1999 K Street

 

11,245

 

 

 

 

11,245

 

 

 

 

 

 

 

 

Springfield Mall

 

6,055

 

 

 

 

 

 

6,055

 

 

 

 

 

 

Other

 

103,245

 

 

11,728

 

 

30,515

 

 

27,124

 

 

693

 

 

 

33,185

 

 

$

358,748

 

$

11,728

 

$

117,976

 

$

138,362

 

$

693

 

 

$

89,989

 

 

__________________

 

112

 

 


Liquidity and Capital Resources – continued

Cash Flow for the Year Ended December 31, 2006

Cash and cash equivalents was $2,233,317,000 at December 31, 2006, a $1,938,813,000 increase over the balance at December 31, 2005. This increase resulted from $824,668,000 of net cash provided by operating activities, $3,030,655,000 of net cash provided by financing activities, partially offset by $1,916,510,000 of net cash used in investing activities.

 

Consolidated outstanding debt was $9,554,798,000 at December 31, 2006, a $3,311,672,000 increase over the balance at December 31, 2005. This increase resulted primarily from debt associated with asset acquisitions, property financings and refinancings and from the issuance of $1.0 billion of senior unsecured convertible debentures during 2006. As of December 31, 2006 and 2005, our revolving credit facility had a zero outstanding balance. Our share of debt of unconsolidated subsidiaries was $3,323,007,000 at December 31, 2006, a $311,355,000 increase over the balance at December 31, 2005. This increase resulted primarily from our $89,630,000 share of an increase in Toys “R” Us outstanding debt and from debt associated with asset acquisitions and refinancings.

 

Cash flows provided by operating activities of $824,668,000 was primarily comprised of (i) net income of $560,140,000, (ii) adjustments for non-cash items of $159,858,000, (iii) distributions of income from partially owned entities of $35,911,000 and (iv) a net change in operating assets and liabilities of $68,759,000. The adjustments for non-cash items were primarily comprised of (i) depreciation and amortization of $413,162,000, (ii) minority limited partners’ interest in the Operating Partnership of $58,700,000, (iii) perpetual preferred unit distributions of the Operating Partnership of $21,848,000, which includes the write-off of perpetual preferred unit issuance costs upon their redemption of $1,125,000, (iv) net loss on early extinguishment of debt and write-off of unamortized financing costs of $33,488,000, partially offset by (v) net gains on mark-to-market of derivatives of $153,208,000 (Sears, McDonald’s and GMH warrants), (vi) equity in net income of partially owned entities, including Alexander’s and Toys, of $273,000, (vii) the effect of straight-lining of rental income of $62,655,000, (viii) net gains on sale of real estate of $33,769,000, (ix) net gains on dispositions of wholly-owned and partially owned assets other than real estate of $76,073,000 and (x) amortization of below market leases, net of above market leases of $23,814,000.

 

Net cash used in investing activities of $1,916,510,000 was primarily comprised of (i) acquisitions of real estate and other of $1,399,326,000, (ii) investments in partially owned entities of $233,651,000, (iii) investment in mezzanine loans receivable of $363,374,000, (iv) purchases of marketable securities of $153,914,000, (v) development and redevelopment expenditures of $233,492,000, (vi) capital expenditures of $198,215,000, (vii) deposits in connection with real estate acquisitions and pre-acquisition costs aggregating $82,753,000, partially offset by (viii) repayments received on mezzanine loans receivable of $172,445,000, (ix) distributions of capital from partially owned entities of $114,041,000, (x) proceeds from the sale of marketable securities of $173,027,000, (xi) proceeds from the sale of real estate of $110,388,000 and (xii) proceeds from settlement of derivative positions of $135,028,000.

 

Net cash provided by financing activities of $3,030,655,000 was primarily comprised of (i) proceeds from borrowings of $5,151,952,000, (ii) proceeds from the issuance of common shares of $1,004,394,000, (iii) proceeds from the issuance of preferred shares and units of $43,819,000, (iv) proceeds from the exercise of employee share options of $77,873,000, partially offset by, (v) repayments of borrowings of $1,544,076,000, (vi) purchases of marketable securities in connection with the legal defeasance or mortgage notes payable of $636,293,000, (vii) dividends paid on common shares of $537,298,000, (viii) repurchase of shares related to stock compensation arrangements and associated employee tax withholdings of $201,866,000, (ix) distributions to minority partners of $188,052,000, (x) dividends paid on preferred shares of $57,606,000, (xi) redemption of perpetual preferred shares and units of $45,000,000 and (xii) debt issuance costs of $37,192,000. 

 

113

 

 


Liquidity and Capital Resources – continued

Cash Flow for the Year Ended December 31, 2006 – continued

 

Below are the details of capital expenditures, leasing commissions and development and redevelopment expenditures and a reconciliation of total expenditures on an accrual basis to the cash expended in the year ended December 31, 2006.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(Amounts in thousands)

 

Total

 

New York
Office

 

Washington, DC
Office

 

Retail

 

Merchandise
Mart

 

Other

 

Capital Expenditures (Accrual basis):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Expenditures to maintain the assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Recurring

 

$

44,156

 

$

12,446

 

$

16,355

 

$

1,269

 

$

10,174

 

 

$

3,912

 

Non-recurring

 

 

2,708

 

 

 

 

2,259

 

 

449

 

 

 

 

 

 

Total

 

 

46,864

 

 

12,446

 

 

18,614

 

 

1,718

 

 

10,174

 

 

 

3,912

 

Tenant improvements:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Recurring

 

 

88,064

 

 

44,251

 

 

27,961

 

 

3,219

 

 

12,633

 

 

 

 

Non-recurring

 

 

1,824

 

 

 

 

89

 

 

1,735

 

 

 

 

 

 

Total

 

 

89,888

 

 

44,251

 

 

28,050

 

 

4,954

 

 

12,633

 

 

 

 

Leasing Commissions:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Recurring

 

 

32,181

 

 

22,178

 

 

6,744

 

 

2,024

 

 

1,235

 

 

 

 

Non-recurring

 

 

290

 

 

 

 

32

 

 

258

 

 

 

 

 

 

Total

 

 

32,471

 

 

22,178

 

 

6,776

 

 

2,282

 

 

1,235

 

 

 

 

Tenant improvements and leasing commissions:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Per square foot per annum

$

 

2.44

 

$

4.10

 

$

2.54

 

$

0.64

 

$

1.74

$

 

 

 

Property of initial rent

 

 

7.2%

 

 

7.9%

 

 

8.0%

 

 

2.8%

 

 

7.1%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Capital Expenditures and
Leasing Commissions (accrual basis)

 

$

169,223

 

$

78,875

 

$

53,440

 

$

8,954

 

$

24,042

 

 

$

3,912

 

Adjustments to reconcile accrual
basis to cash basis:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Expenditures in the current year
applicable to prior periods

 

 

51,830

 

 

22,377

 

 

20,949

 

 

3,638

 

 

4,866

 

 

 

 

Expenditures to be made in future
periods for the current period

 

 

(55,964

)

 

(33,195

)

 

(17,480

)

 

(4,916

)

 

(373

)

 

 

 

Total Capital Expenditures and
Leasing Commissions
(Cash basis)

 

$

165,089

 

$

68,057

 

$

56,909

 

$

7,676

 

$

28,535

 

 

$

3,912

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Development and Redevelopment
Expenditures:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Green Acres Mall

 

$

37,927

 

$

 

$

 

$

37,927

 

$

 

 

$

 

Wasserman Venture

 

 

32,572

 

 

 

 

 

 

 

 

 

 

 

32,572

 

North Bergen, New Jersey
(Ground-up development)

 

 

28,564

 

 

 

 

 

 

28,564

 

 

 

 

 

 

Crystal Park (PTO)

 

 

27,294

 

 

 

 

27,294

 

 

 

 

 

 

 

 

Bergen Town Center

 

 

22,179

 

 

 

 

 

 

22,179

 

 

 

 

 

 

Crystal Plazas (PTO)

 

 

12,229

 

 

 

 

12,229

 

 

 

 

 

 

 

 

220 Central Park South

 

 

12,055

 

 

 

 

 

 

 

 

 

 

 

12,055

 

1740 Broadway

 

 

9,921

 

 

9,921

 

 

 

 

 

 

 

 

 

 

7 W. 34 th Street

 

 

9,436

 

 

 

 

 

 

 

 

9,436

 

 

 

 

2101 L Street

 

 

10,447

 

 

 

 

10,447

 

 

 

 

 

 

 

 

Crystal Mall Two

 

 

6,497

 

 

 

 

6,497

 

 

 

 

 

 

 

 

640 Fifth Avenue

 

 

1,937

 

 

1,937

 

 

 

 

 

 

 

 

 

 

Other

 

 

22,434

 

 

1,330

 

 

4,217

 

 

12,126

 

 

 

 

 

4,761

 

 

 

$

233,492

 

$

13,188

 

$

60,684

 

$

100,796

 

$

9,436

 

 

$

49,388

 

 

 

114

 

 


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 net income or loss determined in accordance with Generally Accepted Accounting Principles (“GAAP”), excluding extraordinary items as defined under GAAP and gains or losses from sales of previously depreciated operating real estate assets, plus specified non-cash items, such as real estate asset depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures. FFO and FFO per diluted share are used by management, investors and industry analysts as supplemental measures of operating performance of equity REITs. FFO and FFO per diluted share should be evaluated along with GAAP net income and income per diluted share (the most directly comparable GAAP measures), as well as cash flow from operating activities, investing activities and financing activities, in evaluating the operating performance of equity REITs. Management believes that FFO and FFO per diluted share are helpful to investors as supplemental performance measures because these measures exclude the effect of depreciation, amortization and gains or losses from sales of real estate, all of which are based on historical costs which implicitly assumes that the value of real estate diminishes predictably over time. Since real estate values instead have historically risen or fallen with market conditions, these non-GAAP measures can facilitate comparisons of operating performance between periods and among other equity REITs. FFO does not represent cash generated from operating activities in accordance with GAAP and is not necessarily indicative of cash available to fund cash needs as disclosed in Our Statements of Cash Flows. FFO should not be considered as an alternative to net income as an indicator of our operating performance or as an alternative to cash flows as a measure of liquidity. The calculations of both the numerator and denominator used in the computation of income per share are disclosed in Note 17. Income per Share, in our notes to consolidated financial statements on page 171 of this annual report on Form 10-K.

 

FFO applicable to common shares plus assumed conversions was $844,568,000, or $5.16 per diluted share for the year ended December 31, 2008, compared to $966,638,000 or $5.89 per diluted share for the year ended December 31, 2007. FFO applicable to common shares plus assumed conversions was a negative $77,989,000 or $0.50 per diluted share for the three months ended December 31, 2008 compared to $193,412,000, or $1.18 per diluted share for the three months ended December 31, 2007.

 

(Amounts in thousands except per share amounts)

 

For The Year
Ended December 31,

 

For The Three Months
Ended December 31,

 

Reconciliation of Net Income to FFO:

 

2008

 

2007

    

2008

 

2007

 

Net income (loss)

 

$

395,043

 

$

568,906

 

$

(202,515

)

$

105,214

 

Depreciation and amortization of real property

 

 

509,367

 

 

451,313

 

 

129,305

 

 

125,989

 

Net gains on sale of real estate

 

 

(57,523

)

 

(60,811

)

 

 

 

(37,869

)

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

 

 

 

 

 

 

 

 

 

 

 

 

 

Depreciation and amortization of real property

 

 

66,435

 

 

85,244

 

 

15,533

 

 

16,260

 

Net gains on sale of real estate

 

 

(719

)

 

(3,012

)

 

(555

)

 

(2,519

)

Income tax effect of above adjustments

 

 

(23,223

)

 

(28,781

)

 

(5,242

)

 

(4,809

)

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

 

 

49,513

 

 

48,770

 

 

13,735

 

 

12,679

 

Net gains on sale of real estate

 

 

(8,759

)

 

(12,451

)

 

(528

)

 

(3,471

)

Minority limited partners’ share of above adjustments

 

 

(49,683

)

 

(46,664

)

 

(13,451

)

 

(9,094

)

FFO

 

 

880,451

 

 

1,002,514

 

 

(63,718

)

 

202,380

 

Preferred share dividends

 

 

(57,091

)

 

(57,177

)

 

(14,271

)

 

(14,291

)

FFO applicable to common shares

 

 

823,360

 

 

945,337

 

 

(77,989

)

 

188,089

 

Interest on 3.875% exchangeable senior debentures

 

 

21,019

 

 

21,024

 

 

 

 

5,256

 

Series A convertible preferred dividends

 

 

189

 

 

277

 

 

 

 

67

 

FFO applicable to common shares plus assumed conversions

 

$

844,568

 

$

966,638

 

$

(77,989

)

$

193,412

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Reconciliation of Weighted Average Shares:

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding

 

 

153,900

 

 

151,949

 

 

154,590

 

 

152,573

 

Effect of dilutive securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

Employee stock options and restricted share awards

 

 

4,219

 

 

6,491

 

 

 

 

5,728

 

3.875% exchangeable senior debentures

 

 

5,559

 

 

5,559

 

 

 

 

5,559

 

Series A convertible preferred shares

 

 

81

 

 

118

 

 

 

 

114

 

Denominator for diluted FFO per share

 

 

163,759

 

 

164,117

 

 

154,590

 

 

163,974

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

FFO applicable to common shares plus assumed conversions per diluted share

 

$

5.16

 

$

5.89

 

$

(0.50

)

$

1.18

 

 

115

 

 


ITEM 7A.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

We have exposure to fluctuations in market interest rates. Market interest rates are highly 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)

2008

 

2007

 

December 31,
Balance

 

Weighted
Average
Interest Rate

 

Effect of 1%
Change In
Base Rates

 

December 31,
Balance

 

Weighted
Average
Interest Rate

Consolidated debt:

 

 

 

 

 

 

 

 

 

 

 

 

Variable rate

$

2,076,128

 

2.70%

 

$

20,761

 

$

1,113,181

 

5.86%

Fixed rate

 

10,572,958

 

5.19%

 

 

 

 

10,782,857

 

5.22%

 

$

12,649,086

 

4.78%

 

 

20,761

 

$

11,896,038

 

5.28%

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

 

 

 

 

 

 

 

 

 

 

 

 

Variable rate – excluding Toys

$

282,752

 

3.63%

 

 

2,828

 

$

193,655

 

6.74%

Variable rate – Toys

 

819,512

 

3.68%

 

 

8,195

 

 

1,072,431

 

7.14%

Fixed rate (including $1,175,310
and $1,028,918 of Toys debt in
2008 and 2007)

 

2,094,321

 

6.51%

 

 

 

 

2,023,787

 

6.88%

 

$

3,196,585

 

5.53%

 

 

11,023

 

$

3,289,873

 

6.96%

Minority limited partners’ share of above

 

 

 

 

 

 

(3,862

)

 

 

 

 

Total change in annual net income

 

 

 

 

 

$

27,922

 

 

 

 

 

Per share-diluted

 

 

 

 

 

$

0.18

 

 

 

 

 

 

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, 2008, variable rate debt with an aggregate principal amount of $462,000,000 and a weighted average interest rate of 2.75% was subject to LIBOR caps. These caps are based on a notional amount of $462,000,000 and cap LIBOR at a weighted average rate of 5.93%.

 

As of December 31, 2008, we have investments in mezzanine loans with an aggregate carrying amount of $99,011,000 that are based on variable interest rates which partially mitigate our exposure to a change in interest rates on our variable rate debt.

 

Fair Value of Our Debt

 

The estimated fair value of our debt at December 31, 2008 was less than its aggregate carrying amount by approximately $1,177,806,000 based on current market prices and discounted cash flows at the current rate at which we believe similar loans would be made to borrowers with similar credit ratings for the remaining term of such debt.

 

Derivative Instruments

 

We have, and may in the future enter into, derivative positions that do not qualify for hedge accounting treatment. 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” 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 2008, we recognized a net loss of $33,740,000 and in 2007 and 2006 we recognized net gains aggregating approximately $113,503,000 and $153,208,000, respectively, from these positions.

 

 

116

 

 

 


ITEM 8.

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

 

 

INDEX TO FINANCIAL STATEMENTS

 

Page

Report of Independent Registered Public Accounting Firm

118

 

 

Consolidated Balance Sheets at December 31, 2008 and 2007

119

 

 

Consolidated Statements of Income for the years ended December 31, 2008, 2007, and 2006

120

 

 

Consolidated Statements of Shareholders’ Equity for the years ended December 31, 2008, 2007, and 2006

121

 

 

Consolidated Statements of Cash Flows for the years ended December 31, 2008, 2007, and 2006

124

 

 

Notes to Consolidated Financial Statements

126

 

 

 

 

 

 

 

117

 

 


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, 2008 and 2007, and the related consolidated statements of income, shareholders’ equity, and cash flows for each of the three years in the period ended December 31, 2008. Our audits also included the financial statement schedules listed in the Index in 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, 2008 and 2007, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2008, 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.

 

As discussed in Note 16 to the consolidated financial statements, effective December 31, 2008, the Company retrospectively adopted the measurement provisions of Emerging Issues Task Force Topic D-98, Classification and Measurement of Redeemable Securities.

 

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, 2008, 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 24, 2009 expressed an unqualified opinion on the Company’s internal control over financial reporting.

 

/s/ DELOITTE & TOUCHE LLP

 

Parsippany, New Jersey

February 24, 2009

 

118

 

 


VORNADO REALTY TRUST

CONSOLIDATED BALANCE SHEETS

 

 

(Amounts in thousands, except share and per share amounts)

 

December 31,

 

ASSETS

 

2008

 

2007

 

Real estate, at cost:

 

 

 

 

 

 

 

Land

 

$

4,516,141

 

$

4,576,479

 

Buildings and improvements

 

 

12,146,558

 

 

11,523,977

 

Development costs and construction in progress

 

 

1,088,356

 

 

821,991

 

Leasehold improvements and equipment

 

 

118,603

 

 

106,060

 

Total

 

 

17,869,658

 

 

17,028,507

 

Less accumulated depreciation and amortization

 

 

(2,161,093

)

 

(1,802,055

)

Real estate, net

 

 

15,708,565

 

 

15,226,452

 

Cash and cash equivalents

 

 

1,526,853

 

 

1,154,595

 

Escrow deposits and restricted cash

 

 

375,888

 

 

378,732

 

Marketable securities

 

 

334,322

 

 

322,992

 

Accounts receivable, net of allowance for doubtful accounts of $32,834 and $19,151

 

 

201,566

 

 

168,183

 

Investments in partially owned entities, including Alexander’s of $137,305 and $122,797

 

 

790,154

 

 

1,206,742

 

Investment in Toys “R” Us

 

 

293,096

 

 

298,089

 

Mezzanine loans receivable, net of allowance of $46,700 and $57,000

 

 

472,539

 

 

492,339

 

Receivable arising from the straight-lining of rents, net of allowance of $5,773 and $3,076

 

 

592,726

 

 

513,137

 

Deferred leasing and financing costs, net of accumulated amortization of $168,714 and $123,624

 

 

306,748

 

 

273,958

 

Assets related to discontinued operations

 

 

110,380

 

 

1,632,318

 

Due from officers

 

 

13,185

 

 

13,228

 

Other assets

 

 

692,188

 

 

798,170

 

 

 

$

21,418,210

 

$

22,478,935

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

 

 

 

 

 

 

Notes and mortgages payable

 

$

8,835,387

 

$

7,938,457

 

Convertible senior debentures

 

 

2,342,914

 

 

2,360,412

 

Senior unsecured notes

 

 

617,816

 

 

698,656

 

Exchangeable senior debentures

 

 

494,501

 

 

492,857

 

Revolving credit facility debt

 

 

358,468

 

 

405,656

 

Accounts payable and accrued expenses

 

 

515,607

 

 

480,123

 

Deferred credit

 

 

764,774

 

 

848,852

 

Deferred compensation plan

 

 

69,945

 

 

67,714

 

Deferred tax liabilities

 

 

19,895

 

 

241,895

 

Liabilities related to discontinued operations

 

 

750

 

 

1,332,630

 

Other liabilities

 

 

142,777

 

 

118,983

 

Total liabilities

 

 

14,162,834

 

 

14,986,235

 

Minority interest, including unitholders in the Operating Partnership

 

 

1,590,891

 

 

2,074,601

 

Commitments and contingencies

 

 

 

 

 

 

 

Shareholders’ equity:

 

 

 

 

 

 

 

Preferred shares of beneficial interest: no par value per share; authorized 110,000,000
shares; issued and outstanding 33,954,124 and 33,980,362 shares

 

 

823,807

 

 

825,095

 

Common shares of beneficial interest: $.04 par value per share; authorized
250,000,000 shares; issued and outstanding 155,285,903 and 153,076,606 shares

 

 

6,195

 

 

6,140

 

Additional capital

 

 

5,817,380

 

 

5,278,717

 

Earnings less than distributions

 

 

(975,998

)

 

(721,625

)

Accumulated other comprehensive (loss) income

 

 

(6,899

)

 

29,772

 

Total shareholders’ equity

 

 

5,664,485

 

 

5,418,099

 

 

 

$

21,418,210

 

$

22,478,935

 

See notes to consolidated financial statements.

 

119

 

 


VORNADO REALTY TRUST

CONSOLIDATED STATEMENTS OF INCOME

 

 

 

 

Year Ended December 31,

 

(Amounts in thousands, except per share amounts)

 

2008

 

2007

 

2006

 

 

 

 

 

 

 

 

 

 

 

 

REVENUES:

 

 

 

 

 

 

 

 

 

 

Property rentals

 

$

2,211,311

 

$

1,977,023

 

$

1,544,741

 

Tenant expense reimbursements

 

 

358,437

 

 

323,544

 

 

260,772

 

Fee and other income

 

 

127,303

 

 

109,949

 

 

103,587

 

Total revenues

 

 

2,697,051

 

 

2,410,516

 

 

1,909,100

 

EXPENSES:

 

 

 

 

 

 

 

 

 

 

Operating

 

 

1,070,118

 

 

951,582

 

 

737,452

 

Depreciation and amortization

 

 

537,427

 

 

441,209

 

 

319,066

 

General and administrative

 

 

194,027

 

 

189,041

 

 

180,167

 

Impairment losses on development projects and cost of acquisitions not
consummated

 

 

81,447

 

 

10,375

 

 

 

Total expenses

 

 

1,883,019

 

 

1,592,207

 

 

1,236,685

 

Operating income

 

 

814,032

 

 

818,309

 

 

672,415

 

Income (loss) applicable to Alexander’s

 

 

36,671

 

 

50,589

 

 

(14,530

)

Income (loss) applicable to Toys “R” Us

 

 

2,380

 

 

(14,337

)

 

(47,520

)

(Loss) income from partially owned entities

 

 

(195,878

)

 

31,891

 

 

60,355

 

Interest and other investment (loss) income, net

 

 

(2,682

)

 

226,425

 

 

255,391

 

Interest and debt expense (including amortization of deferred financing
costs of $17,507, $15,182 and $11,718)

 

 

(586,358

)

 

(569,386

)

 

(394,571

)

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

 

 

7,757

 

 

39,493

 

 

76,073

 

Minority interest of partially owned entities

 

 

3,263

 

 

3,494

 

 

1,363

 

Income before income taxes

 

 

79,185

 

 

586,478

 

 

608,976

 

Income tax benefit (expense)

 

 

204,537

 

 

(9,179

)

 

(491

)

Income from continuing operations

 

 

283,722

 

 

577,299

 

 

608,485

 

Income from discontinued operations, net of minority interest

 

 

154,442

 

 

58,389

 

 

32,215

 

Income before allocation to minority limited partners

 

 

438,164

 

 

635,688

 

 

640,700

 

Minority limited partners’ interest in the Operating Partnership

 

 

(21,037

)

 

(47,508

)

 

(58,712

)

Perpetual preferred unit distributions of the Operating Partnership

 

 

(22,084

)

 

(19,274

)

 

(21,848

)

Net income

 

 

395,043

 

 

568,906

 

 

560,140

 

Preferred share dividends

 

 

(57,091

)

 

(57,177

)

 

(57,511

)

NET INCOME applicable to common shares

 

$

337,952

 

$

511,729

 

$

502,629

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

INCOME PER COMMON SHARE – BASIC:

 

 

 

 

 

 

 

 

 

 

Income from continuing operations

 

$

1.20

 

$

2.98

 

$

3.31

 

Income from discontinued operations

 

 

1.00

 

 

0.39

 

 

0.23

 

Net income per common share

 

$

2.20

 

$

3.37

 

$

3.54

 

 

 

 

 

 

 

 

 

 

 

 

INCOME PER COMMON SHARE – DILUTED:

 

 

 

 

 

 

 

 

 

 

Income from continuing operations

 

$

1.16

 

$

2.86

 

$

3.13

 

Income from discontinued operations

 

 

0.98

 

 

0.37

 

 

0.22

 

Net income per common share

 

$

2.14

 

$

3.23

 

$

3.35

 

 

See notes to consolidated financial statements.

 

120

 

 


VORNADO REALTY TRUST

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

 

 

Preferred
Shares

 

Common
Shares

 

Additional
Capital

 

Earnings in
Excess of
(Less Than)
Distributions

 

Accumulated
Other
Comprehensive
Income (Loss)

 

 

Shareholders’
Equity

 

Comprehensive
Income (Loss)

 

(Amounts in thousands,
except per share amounts)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, December 31, 2005

 

$

834,527

 

$

5,675

 

$

4,236,841

 

$

103,061

 

$

83,406

 

 

$

5,263,510

 

 

 

 

Cumulative effect of change in
accounting principle

 

 

 

 

 

 

 

 

(639,447

)

 

 

 

 

(639,447

)

 

 

 

Balance, January 1, 2006

 

 

834,527

 

 

5,675

 

 

4,236,841

 

 

(536,386

)

 

83,406

 

 

 

4,624,063

 

 

 

 

Net Income

 

 

 

 

 

 

 

 

560,140

 

 

 

 

 

560,140

 

$

560,140

 

Dividends paid on common
shares ($3.79 per share,
including $.54 in special
cash dividends)

 

 

 

 

 

 

 

 

(537,298

)

 

 

 

 

(537,298

)

 

 

Dividends paid on Preferred
Shares:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Series A Preferred Shares
($3.25 per share)

 

 

 

 

 

 

 

 

(604

)

 

 

 

 

(604

)

 

 

Series D-10 preferred shares
($1.75 per share)

 

 

 

 

 

 

 

 

(2,800

)

 

 

 

 

(2,800

)

 

 

Series E Preferred Shares
($1.75 per share)

 

 

 

 

 

 

 

 

(5,250

)

 

 

 

 

(5,250

)

 

 

Series F Preferred Shares
($1.6875 per share)

 

 

 

 

 

 

 

 

(10,125

)

 

 

 

 

(10,125

)

 

 

Series G Preferred Shares
($1.65625 per share)

 

 

 

 

 

 

 

 

(13,250

)

 

 

 

 

(13,250

)

 

 

Series H Preferred Shares
($1.6875 per share)

 

 

 

 

 

 

 

 

(7,594

)

 

 

 

 

(7,594

)

 

 

Series I Preferred Shares
($1.65625 per share)

 

 

 

 

 

 

 

 

(17,888

)

 

 

 

 

(17,888

)

 

 

Proceeds from the issuance of
common shares

 

 

 

 

324

 

 

1,004,481

 

 

 

 

 

 

 

1,004,805

 

 

 

Conversion of Series A Preferred
shares to common shares

 

 

(5,897

)

 

7

 

 

5,890

 

 

 

 

 

 

 

 

 

 

Deferred compensation shares
and options

 

 

 

 

(57

)

 

(59,209

)

 

(137,580

)

 

 

 

 

(196,846

)

 

 

Common shares issued:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Under employees’ share
option plan

 

 

 

 

110

 

 

75,555

 

 

 

 

 

 

 

75,665

 

 

 

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

 

 

 

 

23

 

 

56,490

 

 

 

 

 

 

 

56,513

 

 

 

In connection with dividend
reinvestment plan

 

 

 

 

1

 

 

2,207

 

 

 

 

 

 

 

2,208

 

 

 

Change in unrealized net gain
on securities available for sale

 

 

 

 

 

 

 

 

 

 

70,416

 

 

 

70,416

 

 

70,416

 

Sale of securities available
for sale

 

 

 

 

 

 

 

 

 

 

(69,863

)

 

 

(69,863

)

 

 

Common share offering costs

 

 

 

 

 

 

(411

)

 

 

 

 

 

 

(411

)

 

 

 

Change in pension plans

 

 

 

 

 

 

 

 

 

 

2,269

 

 

 

2,269

 

 

2,269

 

Adjustments to reflect Class
A Operating Partnership Units at
redemption value

 

 

 

 

 

 

(630,732

)

 

 

 

 

 

 

(630,732

)

 

 

Other

 

 

30

 

 

 

 

536

 

 

1

 

 

6,735

 

 

 

7,302

 

 

6,735

 

Balance, December 31, 2006

 

$

828,660

 

$

6,083

 

$

4,691,648

 

$

(708,634

)

$

92,963

 

 

$

4,910,720

 

$

639,560

 

See notes to consolidated financial statements.

121

 


VORNADO REALTY TRUST

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY - CONTINUED

 

 

 

Preferred
Shares

 

Common
Shares

 

Additional
Capital

 

Earnings in
Excess of
(Less Than)
Distributions

 

Accumulated
Other
Comprehensive
Income (Loss)

 

 

Shareholders’
Equity

 

Comprehensive
Income (Loss)

 

(Amounts in thousands,
except per share amounts)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, December 31, 2006

 

$

828,660

 

$

6,083

 

$

4,691,648

 

$

(708,634

)

$

92,963

 

 

$

4,910,720

 

 

 

 

Net Income

 

 

 

 

 

 

 

 

568,906

 

 

 

 

 

568,906

 

$

568,906

 

Dividends paid on common
shares ($3.45 per share)

 

 

 

 

 

 

 

 

(524,719

)

 

 

 

 

(524,719

)

 

 

Dividends paid on Preferred
Shares:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Series A Preferred Shares
($3.25 per share)

 

 

 

 

 

 

 

 

(270

)

 

 

 

 

(270

)

 

 

Series D-10 preferred shares
($1.75 per share)

 

 

 

 

 

 

 

 

(2,800

)

 

 

 

 

(2,800

)

 

 

Series E Preferred Shares
($1.75 per share)

 

 

 

 

 

 

 

 

(5,250

)

 

 

 

 

(5,250

)

 

 

Series F Preferred Shares
($1.6875 per share)

 

 

 

 

 

 

 

 

(10,125

)

 

 

 

 

(10,125

)

 

 

Series G Preferred Shares
($1.65625 per share)

 

 

 

 

 

 

 

 

(13,250

)

 

 

 

 

(13,250

)

 

 

Series H Preferred Shares
($1.6875 per share)

 

 

 

 

 

 

 

 

(7,594

)

 

 

 

 

(7,594

)

 

 

Series I Preferred Shares
($1.65625 per share)

 

 

 

 

 

 

 

 

(17,888

)

 

 

 

 

(17,888

)

 

 

Conversion of Series A Preferred
shares to common shares

 

 

(3,565

)

 

4

 

 

3,561

 

 

 

 

 

 

 

 

 

 

Deferred compensation shares
and options

 

 

 

 

(17

)

 

(36,422

)

 

 

 

 

 

 

(36,439

)

 

 

Common shares issued:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Under employees’ share
option plan

 

 

 

 

30

 

 

34,617

 

 

 

 

 

 

 

34,647

 

 

 

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

 

 

 

 

39

 

 

116,046

 

 

 

 

 

 

 

116,085

 

 

 

In connection with dividend
reinvestment plan

 

 

 

 

1

 

 

2,030

 

 

 

 

 

 

 

2,031

 

 

 

Change in unrealized net loss
on securities available for sale

 

 

 

 

 

 

 

 

 

 

(38,842

)

 

 

(38,842

)

 

(38,842

)

Sale of securities available
for sale

 

 

 

 

 

 

 

 

 

 

(36,563

)

 

 

(36,563

)

 

 

Change in pension plans

 

 

 

 

 

 

 

 

 

 

895

 

 

 

895

 

 

895

 

Adjustments to reflect Class A
Operating Partnership Units at
redemption value

 

 

 

 

 

 

467,165

 

 

 

 

 

 

 

467,165

 

 

 

Other

 

 

 

 

 

 

72

 

 

(1

)

 

11,319

 

 

 

11,390

 

 

11,319

 

Balance, December 31, 2007

 

$

825,095

 

$

6,140

 

$

5,278,717

 

$

(721,625

)

$

29,772

 

 

$

5,418,099

 

$

542,278

 

 

See notes to consolidated financial statements.

 

122

 

 


VORNADO REALTY TRUST

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY - CONTINUED

 

 

 

Preferred
Shares

 

Common
Shares

 

Additional
Capital

 

Earnings in
Excess of
(Less Than)
Distributions

 

Accumulated
Other
Comprehensive
Income (Loss)

 

 

Shareholders’
Equity

 

Comprehensive
Income (Loss)

 

(Amounts in thousands,
except per share amounts)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, December 31, 2007

 

$

825,095

 

$

6,140

 

$

5,278,717

 

$

(721,625

)

$

29,772

 

 

$

5,418,099

 

$

 

Net Income

 

 

 

 

 

 

 

 

395,043

 

 

 

 

 

395,043

 

 

395,043

 

Dividends paid on common
shares ($3.65 per share)

 

 

 

 

 

 

 

 

(561,981

)

 

 

 

 

(561,981

)

 

 

Dividends paid on Preferred
Shares:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Series A Preferred Shares
($3.25 per share)

 

 

 

 

 

 

 

 

(184

)

 

 

 

 

(184

)

 

 

Series D-10 preferred shares
($1.75 per share)

 

 

 

 

 

 

 

 

(2,800

)

 

 

 

 

(2,800

)

 

 

Series E Preferred Shares
($1.75 per share)

 

 

 

 

 

 

 

 

(5,250

)

 

 

 

 

(5,250

)

 

 

Series F Preferred Shares
($1.6875 per share)

 

 

 

 

 

 

 

 

(10,125

)

 

 

 

 

(10,125

)

 

 

Series G Preferred Shares
($1.65625 per share)

 

 

 

 

 

 

 

 

(13,250

)

 

 

 

 

(13,250

)

 

 

Series H Preferred Shares
($1.6875 per share)

 

 

 

 

 

 

 

 

(7,594

)

 

 

 

 

(7,594

)

 

 

Series I Preferred Shares
($1.65625 per share)

 

 

 

 

 

 

 

 

(17,888

)

 

 

 

 

(17,888

)

 

 

Conversion of Series A Preferred
shares to common shares

 

 

(1,312

)

 

2

 

 

1,310

 

 

 

 

 

 

 

 

 

 

Deferred compensation shares
and options

 

 

 

 

1

 

 

11,410

 

 

 

 

 

 

 

11,411

 

 

 

Common shares issued:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Under employees’ share
option plan

 

 

 

 

7

 

 

26,897

 

 

(30,345

)

 

 

 

 

(3,441

)

 

 

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

 

 

 

 

40

 

 

82,290

 

 

 

 

 

 

 

82,330

 

 

 

In connection with dividend
reinvestment plan

 

 

 

 

1

 

 

2,373

 

 

 

 

 

 

 

2,374

 

 

 

Change in unrealized net loss
on securities available for sale

 

 

 

 

 

 

 

 

 

 

(20,150

)

 

 

(20,150

)

 

(20,150

)

Sale of securities available
for sale

 

 

 

 

 

 

 

 

 

 

6,128

 

 

 

6,128

 

 

6,128

 

Change in pension plans

 

 

 

 

 

 

 

 

 

 

3,251

 

 

 

3,251

 

 

3,251

 

Adjustments to reflect Class A
Operating Partnership Units at
redemption value

 

 

 

 

 

 

404,447

 

 

 

 

 

 

 

404,447

 

 

 

Conversion of Series F-1 preferred units

 

 

 

 

4

 

 

9,996

 

 

 

 

 

 

 

10,000

 

 

 

Other

 

 

24

 

 

 

 

(60

)

 

1

 

 

(25,900

)

 

 

(25,935

)

 

(25,960

)

Balance, December 31, 2008

 

$

823,807

 

$

6,195

 

$

5,817,380

 

$

(975,998

)

$

(6,899

)

 

$

5,664,485

 

$

358,312

 

See notes to consolidated financial statements.

 

123

 

 


VORNADO REALTY TRUST

CONSOLIDATED STATEMENTS OF CASH FLOWS

 

(Amounts in thousands)

 

Year Ended December 31,

 

 

2008

 

2007

 

2006

 

Cash Flows from Operating Activities:

 

 

 

 

 

 

 

 

 

 

Net income

 

$

395,043

 

$

568,906

 

$

560,140

 

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

 

 

 

 

 

 

 

 

 

 

Depreciation and amortization, including amortization of debt issuance costs

 

 

577,338

 

 

545,885

 

 

413,162

 

Reversal of H Street deferred tax liability

 

 

(222,174

)

 

 

 

 

Net gain on sale of Americold Realty Trust

 

 

(112,690

)

 

 

 

 

Impairment loss – Lexington Realty Trust

 

 

107,882

 

 

 

 

 

Amortization of below-market leases, net

 

 

(96,176

)

 

(83,250

)

 

(23,814

)

Write-off of real estate joint ventures’ development costs

 

 

96,037

 

 

 

 

 

Straight-lining of rental income

 

 

(91,060

)

 

(77,699

)

 

(62,655

)

Impairment loss – marketable equity securities

 

 

76,352

 

 

 

 

 

Net gains on sale of real estate

 

 

(57,523

)

 

(64,981

)

 

(33,769

)

Equity in income of partially owned entities, including Alexander’s and Toys

 

 

(47,460

)

 

(69,656

)

 

273

 

Minority limited partners’ interest in the Operating Partnership

 

 

37,127

 

 

53,565

 

 

58,700

 

Distributions of income from partially owned entities

 

 

44,690

 

 

24,044

 

 

35,911

 

Net loss (gain) from derivative positions, including McDonalds, Sears
Holdings and GMH

 

 

33,740

 

 

(113,503

)

 

(153,208

)

Perpetual preferred unit distributions of the Operating Partnership

 

 

22,084

 

 

19,274

 

 

21,848

 

Impairment losses on development projects and costs of acquisitions not
consummated

 

 

81,447

 

 

10,375

 

 

 

Mezzanine loan loss (reversal) accrual

 

 

(10,300

)

 

57,000

 

 

 

(Gain) loss on early extinguishment of debt and write-off of unamortized
financing costs

 

 

(9,820

)

 

7,670

 

 

33,488

 

Net gains on dispositions of wholly owned and partially owned assets
other than depreciable real estate

 

 

(7,757

)

 

(39,493

)

 

(76,073

)

Minority interest of partially owned entities

 

 

(6,838

)

 

(18,559

)

 

(20,173

)

Other non-cash adjustments, including amortization of stock-based
compensation

 

 

47,764

 

 

23,373

 

 

2,079

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

 

 

Accounts receivable, net

 

 

(1,646

)

 

(25,877

)

 

24,373

 

Accounts payable and accrued expenses

 

 

(5,207

)

 

(89,961

)

 

60,348

 

Other assets

 

 

(39,831

)

 

(52,478

)

 

(62,224

)

Other liabilities

 

 

6,790

 

 

22,690

 

 

46,262

 

Net cash provided by operating activities

 

 

817,812

 

 

697,325

 

 

824,668

 

Cash Flows from Investing Activities:

 

 

 

 

 

 

 

 

 

 

Development costs and construction in progress

 

 

(598,688

)

 

(358,748

)

 

(233,492

)

Proceeds from sales of real estate

 

 

390,468

 

 

297,234

 

 

110,388

 

Distributions of capital from partially owned entities

 

 

218,367

 

 

22,541

 

 

114,041

 

Additions to real estate

 

 

(207,885

)

 

(166,319

)

 

(198,215

)

Purchases of marketable securities

 

 

(164,886

)

 

(152,683

)

 

(153,914

)

Investments in partially owned entities

 

 

(156,227

)

 

(271,423

)

 

(233,651

)

Proceeds received from repayment of mezzanine loans receivable

 

 

52,470

 

 

241,289

 

 

172,445

 

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

 

 

51,185

 

 

112,779

 

 

173,027

 

Acquisitions of real estate and other

 

 

(26,318

)

 

(2,811,285

)

 

(1,399,326

)

Cash restricted, including mortgage escrows

 

 

12,004

 

 

11,652

 

 

52,268

 

Deposits in connection with real estate acquisitions, including pre-acquisition costs

 

 

(11,719

)

 

(27,702

)

 

(82,753

)

Investments in mezzanine loans receivable

 

 

(7,397

)

 

(217,081

)

 

(363,374

)

Acquisition of trade shows

 

 

(6,003

)

 

(10,722

)

 

(17,582

)

Cash received upon consolidation of investments in partially owned entities

 

 

1,398

 

 

 

 

 

Proceeds received on settlement of derivatives

 

 

 

 

260,764

 

 

135,028

 

Repayment of officers’ loans

 

 

 

 

2,000

 

 

8,600

 

Net cash used in investing activities

 

 

(453,231

)

 

(3,067,704

)

 

(1,916,510

)

See notes to consolidated financial statements.

124


VORNADO REALTY TRUST

CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED

 

 

 

 

Year Ended December 31,

 

(Amounts in thousands)

 

2008

    

2007

     

2006

 

Cash Flows from Financing Activities:

 

 

 

 

 

 

 

 

 

 

Proceeds from borrowings

 

 

1,721,974

 

 

2,954,497

 

 

5,151,952

 

Repayments of borrowings

 

 

(993,665

)

 

(868,055

)

 

(1,544,076

)

Dividends paid on common shares

 

 

(561,981

)

 

(524,719

)

 

(537,298

)

Distributions to minority limited partners

 

 

(85,419

)

 

(81,065

)

 

(188,052

)

Dividends paid on preferred shares

 

 

(57,112

)

 

(57,236

)

 

(57,606

)

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

 

 

(31,198

)

 

(43,396

)

 

(201,866

)

Proceeds received from exercise of employee share options

 

 

29,377

 

 

35,083

 

 

77,873

 

Debt issuance costs

 

 

(14,299

)

 

(14,360

)

 

(37,192

)

Purchase of marketable securities in connection with the legal defeasance
of mortgage notes payable

 

 

 

 

(109,092

)

 

(636,293

)

Proceeds from issuance of common shares

 

 

 

 

 

 

1,004,394

 

Redemption of perpetual preferred shares and units

 

 

 

 

 

 

(45,000

)

Proceeds from issuance of preferred shares and units

 

 

 

 

 

 

43,819

 

Net cash provided by financing activities

 

 

7,677

 

 

1,291,657

 

 

3,030,655

 

Net increase (decrease) in cash and cash equivalents

 

 

372,258

 

 

(1,078,722

)

 

1,938,813

 

Cash and cash equivalents at beginning of year

 

 

1,154,595

 

 

2,233,317

 

 

294,504

 

Cash and cash equivalents at end of year

 

$

1,526,853

 

$

1,154,595

 

$

2,233,317

 

 

 

 

 

 

 

 

 

 

 

 

Supplemental Disclosure of Cash Flow Information:

 

 

 

 

 

 

 

 

 

 

Cash payments for interest (including capitalized interest of
$63,063, $53,648, and $26,195)

 

$

658,376

 

$

653,811

 

$

454,391

 

Cash payments for taxes

 

$

22,005

 

$

36,489

 

$

8,766

 

 

 

 

 

 

 

 

 

 

 

 

Non-Cash Transactions:

 

 

 

 

 

 

 

 

 

 

Adjustments to reflect redeemable Class A operating partnership units at
redemption value

 

$

404,447

 

$

467,165

 

$

(630,732

)

Conversion of Class A operating partnership units to common shares,
at redemption value

 

 

82,230

 

 

116,085

 

 

56,513

 

Unrealized (loss) gain on securities available for sale

 

 

(20,150

)

 

38,842

 

 

70,416

 

Financing assumed in acquisitions

 

 

 

 

1,405,654

 

 

303,703

 

Marketable securities transferred in connection with the legal defeasance
of mortgage notes payable

 

 

 

 

109,092

 

 

636,293

 

Mortgage notes payable legally defeased

 

 

 

 

104,571

 

 

612,270

 

Operating Partnership units issued in connection with acquisitions

 

 

 

 

62,059

 

 

 

Increase in assets and liabilities resulting from the consolidation of
investments previously accounted for on the equity method (Beverly
Connection in November 2008 and H Street in April 2007) :

 

 

 

 

 

 

 

 

 

 

Real estate, net

 

 

197,600

 

 

342,764

 

 

 

Restricted cash

 

 

2,287

 

 

369

 

 

 

Other assets

 

 

3,393

 

 

11,648

 

 

 

Notes and mortgages payable

 

 

100,000

 

 

55,272

 

 

 

Accounts payable and accrued expenses

 

 

2,069

 

 

3,101

 

 

 

Deferred credit

 

 

 

 

2,407

 

 

 

Deferred tax liabilities

 

 

 

 

112,797

 

 

 

Other liabilities

 

 

 

 

71

 

 

 

 

See notes to consolidated financial statements.

 

125

 

 


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 Vornado Realty L.P., a Delaware limited partnership (the “Operating Partnership”). Vornado is the sole general partner of, and owned approximately 90.6% of the common limited partnership interest in, the Operating Partnership at December 31, 2008. 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, 2008, we own directly or indirectly:

 

Office Properties :

(i)        all or portions of 28 office properties aggregating approximately 16.1 million square feet in the New York City metropolitan area (primarily Manhattan);

 

(ii)      all or portions of 84 office properties aggregating 17.7 million square feet in the Washington, DC / Northern Virginia areas;

 

(iii)     a 70% controlling interest in 555 California Street, a three-building complex aggregating 1.8 million square feet in San Francisco’s financial district;

 

Retail Properties :

(iv)     176 retail properties in 21 states, Washington, DC and Puerto Rico aggregating approximately 21.9 million square feet, including 3.7 million square feet owned by tenants on land leased from us;

 

Merchandise Mart Properties :

(v)      8 properties in 5 states and Washington, DC aggregating approximately 8.9 million square feet of showroom and office space, including the 3.5 million square foot Merchandise Mart in Chicago;

 

Toys “R” Us, Inc.:

(vi)     a 32.7% interest in Toys “R” Us, Inc. which owns and/or operates 1,561 stores worldwide, including 847 stores in the United States and 714 toy stores internationally;

 

Other Real Estate Investments :

 

(vii)    32.5% of the common stock of Alexander’s, Inc. (NYSE: ALX), which has seven properties in the greater New York metropolitan area;

 

(viii)   the Hotel Pennsylvania in New York City, consisting of a hotel portion containing 1.0 million square feet with 1,700 rooms and a commercial portion containing 400,000 square feet of retail and office space;

 

 

(ix)

mezzanine loans to entities that have significant real estate assets; and

 

(x)      interests in other real estate, including interests in office, industrial and retail properties net leased to major corporations; 6 warehouse/industrial properties in New Jersey containing approximately 1.2 million square feet; and other investments and marketable securities.

 


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 Realty Trust and its majority-owned subsidiary, Vornado Realty L.P. All significant inter-company amounts have been eliminated. We account for unconsolidated partially owned entities on the equity method of accounting. Our consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America, which requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ materially from those estimates.

 

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 acquisition, improvement and leasing of real estate are capitalized. Maintenance and repairs are charged to operations 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 the assets’ 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 $63,063,000 and $53,648,000, for the years ended December 31, 2008 and 2007, respectively.

 

Upon the acquisition of real estate, we assess the fair value of acquired assets (including land, buildings and improvements, and identified intangibles such as above and below-market leases and acquired in-place leases and customer relationships) and acquired liabilities in accordance with Statement of Financial Accounting Standards (“SFAS”) 141, Business Combinations and SFAS 142, Goodwill and Other Intangible Assets , 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 the historical operating results, known trends, and market/economic conditions that may affect the property.

 

Our properties, including any related intangible assets, are individually reviewed for impairment if events or circumstances change indicating that the carrying amount of the assets may not be recoverable. An impairment exists when the carrying amount of an asset exceeds the aggregate projected future cash flows over our 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. Our impairment analysis is based on our plans for the asset and the market information available to our management at the time the analysis is prepared. If our estimates of the projected future cash flows, our anticipated holding period for properties, or the estimated fair value of properties change based on market conditions or otherwise, our evaluation of impairment charges 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. In the year ended December 31, 2008, we recognized an aggregate of $78,069,000 of non-cash impairment charges on our wholly owned real estate assets related to certain development projects. No impairment charges were recognized in the years ended December 31, 2007 and 2006.

 

 


VORNADO REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

 

2.

Basis of Presentation and Significant Accounting Policies – continued

 

Partially Owned Entities: In determining whether we have a controlling 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 in which we will absorb the majority of the entity’s expected losses, if they occur, or receive the majority of the expected residual returns, if they occur, or both. We have concluded that we do not control a partially owned entity, despite an ownership interest of 50% or greater, if the entity is not considered a variable interest entity 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. This is the case with respect to our 50% interests in Monmouth Mall, MartParc Wells, MartParc Orleans, 478-486 Broadway, 968 Third Avenue, West 57 th Street properties and 825 Seventh Avenue. We account for investments on 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 investees’ net income or loss and cash contributions and distributions made during the year. Investments that do not qualify for consolidation or equity method accounting are accounted for on the cost method.

 

Our investments in partially owned entities are reviewed for impairment, if events or circumstances change indicating that the carrying amount of our investments may not be recoverable. 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. We will record an impairment charge if we determine that a decline in the value of an investment is other than temporary. In the year ended December 31, 2008, we recognized $203,919,000 of non-cash impairment charges related to investments in partially owned entities, of which $107,882,000 represents our investment in Lexington Realty Trust and the remainder represents our share of certain ventures’ development costs. No impairment charges were recognized in the years ended December 31, 2007 and 2006.

 

Identified Intangibles: We record acquired intangible assets (including above-market leases, customer relationships and in-place leases) and acquired intangible liabilities (including below–market leases) at their estimated fair value separate and apart from goodwill. We amortize identified intangible assets and liabilities that are determined to have finite lives over the period the assets and liabilities are expected to contribute directly or indirectly to the future cash flows of the property or business acquired. Intangible assets subject to amortization are reviewed for impairment whenever events or changes in circumstances indicate that their carrying amount may not be recoverable. An impairment loss is recognized if the carrying amount of an intangible asset is not recoverable and its carrying amount exceeds its estimated fair value.

 

As of December 31, 2008 and 2007, the carrying amounts of identified intangible assets, a component of “other assets” on our consolidated balance sheets, were $525,950,000 and $563,359,000, respectively. In addition, the carrying amounts of identified intangible liabilities, a component of “deferred credit” on our consolidated balance sheets, were $719,822,000 and $814,098,000, respectively.

 

Mezzanine Loans Receivable: We invest in mezzanine loans to entities which have significant real estate assets. These investments, which are subordinate to the mortgage loans secured by the real property, are generally secured 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 discounts or premiums over the life of the related loan 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, if circumstances warrant, to determine whether they are impaired. A loan is impaired when, based on current information and events, 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 estimated fair value of the loan or, as a practical expedient, to the value of the collateral if the loan is collateral dependent. In the year ended December 31, 2007, we recognized a $57,000,000 non-cash impairment charge on one of our mezzanine loans. Upon sale of a sub-participation in that loan during 2008, we reversed $10,300,000 of the charge recognized in 2007.

 

 


VORNADO REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

 

2.

Basis of Presentation and Significant Accounting Policies – continued

Cash and Cash Equivalents: Cash and cash equivalents consist of highly liquid investments purchased with original maturities of three months or less. Cash and cash equivalents do not include cash escrowed under loan agreements and cash restricted in connection with an officer’s deferred compensation payable. The majority of our cash and cash equivalents are held at major commercial banks which may at times exceed the Federal Deposit Insurance Corporation limit. We have not experienced any losses to date on our invested cash.

 

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, 2008 and 2007, we had $32,834,000 and $19,151,000, respectively, in allowances for doubtful accounts. In addition, as of December 31, 2008 and 2007, we had $5,773,000 and $3,076,000, respectively, in allowances for receivables arising from the straight-lining of rents.

 

Marketable Securities: We classify debt and equity securities which we intend to hold for an indefinite period of time as securities available-for-sale; equity securities we intend to buy and sell on a short term basis as trading securities; and mandatorily redeemable preferred stock investments which we intend to hold to maturity as securities held–to–maturity. Unrealized gains and losses on trading securities are included in earnings. Unrealized gains and losses on securities available-for-sale are included as a component of shareholders’ equity and other comprehensive income. Realized gains or losses on the sale of securities are recorded based on the weighted average cost of such securities.

 

We evaluate our portfolio of marketable securities for impairment as of 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, 2008, we recognized an aggregate of $76,352,000 of non-cash impairment charges related to investments in marketable securities, which is included as a component of “interest and other investment (loss) income, net” on our Consolidated Statement of Income Our conclusions were based on the severity and duration of the decline in the market value (“fair value” pursuant to SFAS 157) of these securities and our inability to forecast a recovery in the near term. No impairment charges were recognized in the years ended December 31, 2007 and 2006.

 

At December 31, 2008 and 2007, our marketable equity securities had an aggregate carrying amount of $120,499,000 and $215,134,000, and an aggregate fair value of $118,438,000 and $226,682,000, respectively. Accordingly, net unrealized (losses) gains were ($2,061,000) and $11,548,000 as of December 31, 2008 and 2007, respectively. At December 31, 2008 and 2007, our held-to-maturity securities had an aggregate carrying amount of $215,884,000 and $96,310,000, and an aggregate fair value of $164,728,000 and $96,310,000, respectively.

 

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.

 

Fair Value of Financial Instruments: We have estimated the fair value of all financial instruments reflected in the accompanying consolidated balance sheets at amounts which are based upon an interpretation of available market information and valuation methodologies (including discounted cash flow analyses with regard to mezzanine loans and debt). While we chose not to elect the fair value option prescribed by Statement No.159, The Fair Value Option for Financial Assets and Liabilities (“SFAS 159”), for our financial assets and liabilities that had not been previously measured at fair value, the aggregate fair value of our mezzanine loans receivable was less than its aggregate carrying amount by approximately $55,452,000 as of December 31, 2008 and approximated its carrying amount at December 31, 2007. As of December 31, 2008, the estimated fair value of our consolidated debt was less than its carrying amount by approximately $1,177,806,000. As of December 31, 2007, the carrying amount of our consolidated debt exceeded its fair value by approximately $49,768,000. Such fair value estimates are not necessarily indicative of the amounts that would be realized upon disposition of our financial instruments.

 

 


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 in which 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 the sales of the tenant exceeding a defined threshold. These rents are recognized in accordance with Staff Accounting Bulletin No. 104: Revenue Recognition , which states that this income is to be recognized only after the contingency has been removed (i.e., 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.

 

Derivative Instruments and Hedging Activities: SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities (“SFAS 133”), as amended and interpreted, establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities. As required by SFAS 133, 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.

 

 


VORNADO REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

 

2.

Basis of Presentation and Significant Accounting Policies – continued

 

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. Dividend distributions for the year ended December 31, 2008 were characterized, for Federal income tax purposes, as 70.81% ordinary income and 29.19% return of capital. Dividend distributions for the year ended December 31, 2007 were characterized, for Federal income tax purposes, as 61.6% ordinary income and 38.4% long-term capital gain income. Dividend distributions for the year ended December 31, 2006 were characterized, for Federal income tax purposes, as 29.0% ordinary income, 14.8% long-term capital gain income and 56.2% 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 liability of approximately $21,357,000 and $15,361,000 for the years ended December 31, 2008 and 2007, respectively, and have immaterial differences between the financial reporting and tax basis of assets and liabilities.

 

In connection with purchase accounting for H Street, in July 2005 and April 2007 we recorded an aggregate of $222,174,000 of deferred tax liabilities representing the differences between the tax basis and the book basis of the acquired assets and liabilities multiplied by the effective tax rate. We were required to record these deferred tax liabilities because H Street and its partially owned entities were operated as C Corporations at the time they were acquired. As of January 16, 2008, we had completed all of the actions necessary to enable these entities to elect REIT status effective for the tax year beginning on January 1, 2008. Consequently, in the first quarter of 2008, we reversed the deferred tax liabilities and recognized an income tax benefit of $222,174,000 in our consolidated statement of income.

 

The following table reconciles net income to estimated taxable income for the years ended December 31, 2008, 2007 and 2006.

(Amounts in thousands)

 

2008

 

2007

 

2006

 

Net income applicable to common shares

 

$

337,952

 

$

511,729

 

$

502,629

 

Book to tax differences (unaudited):

 

 

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

233,426

 

 

145,131

 

 

118,364

 

Reversal of deferred tax liability

 

 

(202,267

)

 

 

 

 

Straight-line rent adjustments

 

 

(82,901

)

 

(70,450

)

 

(56,690

)

Stock options expense

 

 

(71,995

)

 

(88,752

)

 

(220,043

)

Derivatives

 

 

43,218

 

 

131,711

 

 

(25,726

)

Earnings of partially owned entities

 

 

(50,855

)

 

12,093

 

 

72,534

 

Net gains on sale of real estate

 

 

3,687

 

 

(57,386

)

 

(22,699

)

Compensation deduction for units held in Rabbi Trust

 

 

 

 

 

 

(171,356

)

Sears Canada dividend

 

 

 

 

 

 

(72,706

)

Other, net

 

 

84,124

 

 

37,571

 

 

(21,048

)

Estimated taxable income

 

$

294,389

 

$

621,647

 

$

103,259

 

 

The net basis of our assets and liabilities for tax reporting purposes is approximately $3.4 billion lower than the amount reported in our consolidated financial statements.

 

 


VORNADO REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

 

2.

Basis of Presentation and Significant Accounting Policies – continued

 

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, warrants and convertible or redeemable securities.

 

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. The terms of each of these awards are described in Note 11. Stock-Based Compensation. We account for all stock-based compensation in accordance with SFAS No. 123R, Share-Based Payment (“SFAS 123R”).

 

Stock option awards

 

We determine the value of stock option awards, using a binomial valuation model and appropriate market assumptions adjusted to include an estimated forfeiture factor which is based on our past history. Compensation expense for stock option awards is recognized on a straight-line basis over the vesting period, which is generally five years.

 

Restricted stock and Operating Partnership unit awards

 

Restricted stock awards are valued using the average of the high and low market price of our common shares on the NYSE on the date of grant, adjusted to include an estimated forfeiture factor which is based on our past history. Compensation expense is recognized on a straight-line basis over the vesting period, which is generally three to five years. Dividends paid on unvested shares are charged to retained earnings. Dividends on shares that are cancelled or terminated prior to vesting are charged to compensation expense in the period they are cancelled or terminated.

 

Restricted Operating Partnership unit awards are also valued using the average of the high and low market price of our common shares on the NYSE on the date of grant, adjusted to include an estimated forfeiture factor which is based on history. Compensation expense is recognized over the five year vesting period using a graded vesting attribution model as these awards are subject to the satisfaction of a performance condition. Dividends paid on unvested units are charged to minority interest expense on our consolidated statements of operations. Dividends on units that are cancelled or terminated prior to the satisfaction of the performance condition and vesting are charged to compensation expense in the period they are cancelled or terminated.

 

Out-performance plan awards

 

Out-performance plan awards are valued using a risk-free valuation model and appropriate market assumptions as of the date of grant, adjusted to include an estimated forfeiture factor which is based on our past history. Compensation expense is recognized over five years using a graded vesting attribution model as these awards are subject to the satisfaction of certain market and performance conditions, in addition to vesting.

 

 

 


VORNADO REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

 

2.

Basis of Presentation and Significant Accounting Policies – continued

 

Recently Issued Accounting Literature

 

In September 2006, the Financial Accounting Standards Board (“FASB”) issued Statement No. 157, Fair Value Measurements (“SFAS 157”). SFAS 157 defines fair value, establishes a framework for measuring fair value in accordance with accounting principles generally accepted in the United States of America and expands disclosures about fair value measurements. SFAS 157 was effective for our financial assets and liabilities on January 1, 2008.  The FASB has deferred the implementation of the provisions of SFAS 157 relating to certain non-financial assets and liabilities until January 1, 2009. This standard did not materially affect how we determine fair value, but resulted in certain additional disclosures. SFAS 157 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 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. Financial assets and liabilities measured at fair value in our consolidated financial statements primarily consist of (i) marketable securities, (ii) the assets of our deferred compensation plan (primarily marketable securities and equity investments in limited partnerships), for which there is a corresponding liability on our consolidated balance sheets and (iii) Class A units of the Operating Partnership, held by third-parties. Financial assets and liabilities measured at fair value as of December 31, 2008 are presented in the table below based on their level in the fair value hierarchy.

 

 

 

 

 

Fair Value Hierarchy (1)

 

(Amounts in thousands)

 

Total

 

Level 1

 

Level 2

 

Level 3

 

Marketable securities

$

118,438

$

118,438

 

$

 

$

 

Deferred compensation plan assets (included in other assets)

 

69,945

 

35,769

 

 

 

 

34,176

 

Interest rate caps (included in other assets)

 

25

 

 

 

25

 

 

 

Total Assets

$

188,408

$

154,207

 

$

25

 

$

34,176

 

 

 

 

 

 

 

 

 

 

 

 

 

Class A units (included in minority interest)

$

882,740

$

 

$

882,740

 

$

 

 

 

 

 

 

 

 

 

 

 

 

 

Deferred compensation plan liabilities

$

69,945

$

35,769

 

$

 

$

34,176

 

___________________

 

(1)

We chose not to elect the fair value option prescribed by SFAS 159, for our financial assets and liabilities that had not been previously measured at fair value. These financial assets and liabilities include our outstanding debt, accounts receivable, accounts payable and investments in partially owned entities.

 

The fair value of Level 3 “deferred compensation plan assets” represents equity investments in certain limited partnerships, for which there is a corresponding Level 3 liability to the plan’s participants. The following is a summary of changes in Level 3 deferred compensation plan assets and liabilities, for the year ended December 31, 2008.

 

(Amounts in thousands)

 

Beginning Balance

 

Total Realized/ Unrealized Losses

 

Purchases,
Sales, Other Settlements and Issuances, net

 

Ending

Balance

 

 

 

 

 

 

 

 

 

 

 

 

 

For the year ended
December 31, 2008

$

50,578

$

(15,407

)

$

(995

)

$

34,176

 

 

 

 


VORNADO REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

 

2.

Basis of Presentation and Significant Accounting Policies – continued

 

 

In February 2007, the FASB issued SFAS 159, which permits companies to measure many financial instruments and certain other items at fair value.  SFAS 159 was effective on January 1, 2008. We did not elect the fair value option for any of our existing financial instruments on the effective date and have not determined whether we will elect this option for any eligible financial instruments we acquire in the future.

 

In December 2007, the FASB issued Statement No. 141R, Business Combinations (“SFAS 141R”). SFAS 141R broadens the guidance of SFAS 141, extending its applicability to all transactions and other events in which one entity obtains control over one or more other businesses. SFAS 141R also broadens the fair value measurement and recognition of assets acquired, liabilities assumed, and interests transferred as a result of business combinations; and acquisition related costs will generally be expensed rather than included as part of the basis of the acquisition. SFAS 141R expands required disclosures to improve the ability to evaluate the nature and financial effects of business combinations. SFAS 141R is effective for all transactions entered into on or after January 1, 2009. The adoption of this standard on January 1, 2009 could materially impact future financial results to the extent that we acquire significant amounts of real estate, in part because acquisition costs will be expensed as incurred compared to our current practice of capitalizing such costs and amortizing them over the estimated useful life of the assets acquired.

 

In December 2007, the FASB issued Statement No. 160, Noncontrolling Interests in Consolidated Financial Statements - An Amendment of ARB No. 51 (“SFAS 160”). SFAS 160 requires a noncontrolling interest in a subsidiary to be reported as equity and the amount of consolidated net income specifically attributable to the noncontrolling interest to be identified in the consolidated financial statements. SFAS 160 also calls for consistency in the manner of reporting changes in the parent’s ownership interest and requires fair value measurement of any noncontrolling equity investment retained in a deconsolidation. As of December 31, 2008, as part of our preparation for the adoption of SFAS 160, which is effective for us on January 1, 2009, we have retroactively adopted the measurement provisions of EITF Topic D-98, Classification and Measurement of Redeemable Securities . Upon adoption, we adjusted the carrying amounts of the Class A units held by third parties, a component of “minority interest” on our consolidated balance sheets, by recognizing a $639,447,000 increase to the January 1, 2006 balance of “minority interest” and a corresponding decrease in the January 1, 2006 balance of “earnings in excess of (less than) distributions” which was accounted for as a cumulative effect  adjustment on January 1, 2006. Subsequent adjustments to the carrying amounts of the Class A units, to reflect the change in their redemption value at the end of each reporting period, were recorded to “additional capital.” The adoption of SFAS 160 on January 1, 2009, will not result in the re-classification of the Class A units held by third parties to a component within “shareholders’ equity.”

 

In March 2008, the FASB issued Statement No. 161, Disclosures about Derivative Instruments and Hedging Activities – an Amendment of FASB Statement No. 133 (“SFAS 161”) . SFAS 161 requires enhanced disclosures related to derivative instruments and hedging activities, including disclosures regarding how an entity uses derivative instruments, how derivative instruments and related hedged items are accounted for under SFAS 133 , and the impact of derivative instruments and related hedged items on an entity’s financial position, financial performance and cash flows. SFAS 161 is effective on January 1, 2009. We believe that the adoption of this standard on January 1, 2009 will not have a material effect on our consolidated financial statements.

 

 

 


VORNADO REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

 

2.

Basis of Presentation and Significant Accounting Policies – continued

 

In May 2008, the FASB issued Staff Position No. APB 14-1, Accounting for Convertible Debt Instruments that may be Settled in Cash upon Conversion (Including Partial Cash Settlement) , (the “FSP”), which is effective for us on January 1, 2009 and requires retroactive application. The adoption of this FSP will affect the accounting for our convertible and exchangeable senior debentures and Series D-13 convertible preferred units. The FSP requires the initial proceeds from the sale of our convertible and exchangeable senior debentures and Series D-13 convertible preferred units to be allocated between a liability component and an equity component. The resulting discount will be amortized using the effective interest method over the period the debt is expected to remain outstanding as additional interest expense. The adoption of the FSP on January 1, 2009 will result in the recognition of an aggregate unamortized debt discount of $139,937,000 (as of December 31, 2008) in our consolidated balance sheets and additional interest expense in our consolidated statements of income. Our current estimate of the incremental interest expense, net of minority interest, for each reporting period is as follows:

 

(Amounts in thousands)

 

 

 

 

For the year ended December 31:

 

 

 

 

2005

 

$

3,401

 

2006

 

 

6,062

 

2007

 

 

28,191

 

2008

 

 

36,348

 

2009

 

 

37,379

 

2010

 

 

39,612

 

2011

 

 

40,587

 

2012

 

 

8,219

 

 

 

In May 2008, the FASB issued Statement No. 163, Accounting for Financial Guarantee Insurance Contracts (“SFAS 163”). SFAS 163 was issued to decrease inconsistencies within Statement No. 60, Accounting and Reporting by Insurance Enterprises , and clarify how it applies to financial guarantee insurance contracts issued by insurance enterprises, including the recognition of premium revenue and claim liabilities. SFAS 163 also requires expanded disclosures about financial guarantee insurance contracts. SFAS 163 is effective on January 1, 2009. We believe that the adoption of this standard on January 1, 2009 will not have a material effect on our consolidated financial statements.

 

In June 2008, the FASB ratified EITF Issue 07-5, Determining Whether an Instrument (or Embedded Feature) Is Indexed to an Entity’s Own Stock (“EITF 07-5”). Paragraph 11(a) of SFAS 133 specifies that a contract that would otherwise meet the definition of a derivative but is both (a) indexed to the Company’s own stock and (b) classified in stockholders’ equity in the statement of financial position would not be considered a derivative financial instrument. EITF 07-5 provides a new two-step model to be applied in determining whether a financial instrument or an embedded feature is indexed to an issuer’s own stock and thus able to qualify for the SFAS 133 paragraph 11(a) scope exception. EITF 07-5 is effective on January 1, 2009. We are currently evaluating the impact of the adoption of this standard on our consolidated financial statements.

 

 

 


VORNADO REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

 

3.

Acquisitions and Investments

 

There were no material real estate acquisitions or investments during 2008. We completed approximately $4,045,400,000 of real estate acquisitions and investments in 2007. We record the assets (primarily land, building, in-place and above market leases) and liabilities (primarily mortgage debt and below market leases) acquired in real estate acquisitions at their estimated fair values. Below are the details of our 2007 acquisitions.

 

New York Office:

100 West 33 rd Street, New York City / Manhattan Mall

 

On January 10, 2007, we acquired the 100 West 33 rd Street, New York City / Manhattan Mall for approximately $689,000,000 in cash. This mixed-use property is located on the entire Sixth Avenue block-front between 32 nd and 33 rd Streets in Manhattan and contains approximately 1,000,000 square feet, including 845,000 square feet of office space and 164,000 square feet of retail space. Included as part of the acquisition were 250,000 square feet of additional air rights. The property is adjacent to our Hotel Pennsylvania. At closing, we completed a $232,000,000 financing secured by the property, which bears interest at LIBOR plus 0.55% and matures in two years with three one-year extension options. The operations of the office component of the property are included in the New York Office segment and the operations of the retail component are included in the Retail segment. We consolidate the accounts of this property into our consolidated financial statements from the date of acquisition.

 

1290 Avenue of the Americas and 555 California Street

 

On May 24, 2007, we acquired a 70% controlling interest in 1290 Avenue of the Americas, a 2,000,000 square foot Manhattan office building located on the block-front between 51 st and 52 nd Street on Avenue of the Americas, and the three-building 555 California Street complex (“555 California Street”) containing 1,800,000 square feet, known as the Bank of America Center, located at California and Montgomery Streets in San Francisco’s financial district. The purchase price for our 70% interest in the real estate was approximately $1.8 billion, consisting of $1.0 billion of cash and $797,000,000 of existing debt. Our share of the debt was comprised of $308,000,000 secured by 1290 Avenue of the Americas and $489,000,000 secured by 555 California Street. Our 70% interest was acquired through the purchase of all of the shares of a group of foreign companies that own, through U.S. entities, the 1% sole general partnership interest and a 69% limited partnership interest in the partnerships that own the two properties. The remaining 30% limited partnership interest is owned by Donald J. Trump. The operations of 1290 Avenue of the Americas are included in the New York Office segment and the operations of 555 California Street are included in the Other segment. We consolidate the accounts of these properties into our consolidated financial statements from the date of acquisition.

 


VORNADO REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

 

3.

Acquisitions and Investments - continued

 

Washington, DC Office:

 

H Street Building Corporation (“H Street”)

 

In July 2005, we acquired H Street, which owns a 50% interest in real estate assets located in Pentagon City, Virginia and Washington, DC. On April 30, 2007, we acquired the corporations that own the remaining 50% interest in these assets for approximately $383,000,000, consisting of $322,000,000 in cash and $61,000,000 of existing mortgages. These assets include twin office buildings located in Washington, DC, containing 577,000 square feet, and assets located in Pentagon City, Virginia, comprising 34 acres of land leased to three residential and retail operators, a 1,680 unit high-rise apartment complex and 10 acres of vacant land. Beginning on April 30, 2007, we consolidated the accounts of these entities into our consolidated financial statements and no longer account for them on the equity method.

 

Further, we agreed to sell approximately 19.6 of the 34 acres of land to one of the existing ground lessees in two closings over a two-year period for approximately $220,000,000. On May 11, 2007, we closed on the sale of 11 of the 19.6 acres for $104,000,000 and received $5,000,000 in cash and a $99,000,000 short-term note. On September 28, 2007, the buyer pre-paid the note in cash and we recognized a net gain on sale of $4,803,000.

 

BNA Complex

 

On August 9, 2007, we acquired a three building complex from The Bureau of National Affairs, Inc. (“BNA”) for $111,000,000 in cash. The complex contains approximately 300,000 square feet and is located in Washington’s West End between Georgetown and the Central Business District. We plan to convert two of these buildings into rental apartments. We consolidate the accounts of these properties into our consolidated financial statements from the date of acquisition.

 

 

 


VORNADO REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

 

 

3.

Acquisitions and Investments – continued

 

Retail:

 

Bruckner Plaza, Bronx, New York

 

On January 11, 2007, we acquired the Bruckner Plaza shopping center, containing 386,000 square feet, for $165,000,000 in cash. Also included as part of the acquisition was an adjacent parcel which is ground leased to a third party. The property is located on Bruckner Boulevard in the Bronx, New York. We consolidated the accounts of this property into our consolidated financial statements from the date of acquisition.

 

Shopping Center Portfolio Acquisition

 

On June 26, 2007, we entered into an agreement to acquire a portfolio of 15 shopping centers aggregating approximately 1.9 million square feet for an aggregate purchase price of $351,000,000. The properties are located primarily in Northern New Jersey and Long Island, New York. We have completed the acquisition of nine of these properties for an aggregate purchase price of $250,478,000, consisting of $109,279,000 in cash, $49,599,000 in Vornado Realty L.P. Series G-1 through G-4 convertible preferred units, $12,460,000 of Vornado Realty L.P. Class A units and $79,140,000 of existing mortgage debt. In December 2007, we determined not to complete the acquisition of the remaining six properties and expensed $2,700,000 which is included as a component of “impairment losses on development projects and costs of acquisitions not consummated” on our consolidated statement of income for the year ended December 31, 2007.

 

Other:

 

India Real Estate Ventures

 

In August 2008, we entered into a joint venture with Reliance Industries Limited (“Reliance”) (BSE: RIL), under which each partner has an equal ownership interest, to acquire, develop, and operate retail shopping centers across key cities in India. We are also a partner in four other joint ventures established to develop real estate in India’s major cities. During the year ended December 31, 2008, we funded an aggregate of $50,387,000 in cash to our India ventures, including $7,500,000 to the Reliance venture and $34,077,000 to the India Property Fund L.P. (“IPF”). As of December 31, 2008, our aggregate investment in all of these ventures was $89,295,000 and our remaining capital commitment is approximately $192,000,000. At December 31, 2008 and 2007, our ownership interest in IPF was 36.5% and 50.6%, respectively. Based on the reduction of our ownership interest in 2008, we no longer consolidate the accounts of IPF into our consolidated financial statements and beginning on January 1, 2008 we account for IPF under the equity method.

 

Filene’s, Boston, Massachusetts

 

On January 26, 2007, a joint venture in which we have a 50% interest, acquired the Filene’s property located in the Downtown Crossing district of Boston, Massachusetts for approximately $100,000,000 in cash, of which our share was $50,000,000. We account for our investment in the joint venture on the equity method. In the fourth quarter of 2008, the venture deferred the development of this project and accordingly, we wrote-off $37,000,000 for our 50% share of development costs, which is included as a component of “(loss) income from partially owned entities” on our consolidated statement of income.

 

 

 

 


VORNADO REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

 

4.

Discontinued Operations

In accordance with the provisions of SFAS 144, Accounting for the Impairment and Disposal of Long-Lived Assets , we have reclassified the revenues and expenses of properties and businesses sold or to be sold to “income from discontinued operations, net of minority interest” and the related assets and liabilities to “assets related to discontinued operations” and “liabilities related to discontinued operations” for all periods presented in the accompanying consolidated financial statements.

 

The net gains resulting from the disposition of the properties below are included in “income from discontinued operations, net of minority interest” on our consolidated statements of income.

 

424 Sixth Avenue

 

On March 13, 2006, we sold 424 Sixth Avenue, a 10,000 square foot retail property located in New York City, for $22,000,000, which resulted in a net gain of $9,218,000.

 

33 North Dearborn Street

 

On March 14, 2006, we sold 33 North Dearborn Street, a 336,000 square foot office building located in Chicago, Illinois, for $46,000,000, which resulted in a net gain of $4,835,000. All of the proceeds from the sale have been reinvested in tax-free “like-kind” exchange investments in accordance with Section 1031.

 

1919 South Eads Street

 

On June 22, 2006, we sold 1919 South Eads Street, a 96,000 square foot office building located in Arlington, Virginia, for $38,400,000, which resulted in a net gain of $17,609,000. All of the proceeds from the sale have been reinvested in tax-free “like-kind” exchange investments in accordance with Section 1031.

 

Vineland, New Jersey Shopping Center Property

 

On July 16, 2007, we sold our Vineland, New Jersey shopping center property for $2,774,000 in cash, which resulted in a net gain of $1,708,000.

 

Crystal Mall Two

 

On August 9, 2007, we sold Crystal Mall Two, a 277,000 square foot office building located at 1801 South Bell Street in Crystal City for $103,600,000, which resulted in a net gain of $19,893,000. All of the proceeds from the sale have been reinvested in tax-free “like-kind” exchange investments in accordance with Section 1031.

 

Arlington Plaza

 

On October 17, 2007, we sold Arlington Plaza, a 188,000 square foot office building located in Arlington, Virginia for $71,500,000, resulting in a net gain of $33,900,000.

 

Americold Realty Trust (“Americold”)

 

On March 31, 2008, we sold our 47.6% interest in Americold, our Temperature Controlled Logistics segment for $220,000,000 in cash, which resulted in a net gain of $112,690,000.

 

Tysons Dulles Plaza

 

On June 6, 2008, we sold our Tysons Dulles Plaza office building complex for $152,800,000 in cash, which resulted in a net gain of $56,831,000.

 

 

 

 


VORNADO REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

 

4.

Discontinued Operations – continued

 

The following table sets forth the assets (primarily the net book value of real estate) related to discontinued operations.

 

(Amounts in thousands)

 

December 31,

 

 

 

2008

 

2007

 

H Street – 8.6 acres of land subject
to ground leases (see page 137)

 

$

108,292

 

$

108,470

 

Retail Properties

 

 

2,088

 

 

4,030

 

Americold

 

 

 

 

1,424,770

 

Tysons Dulles Plaza

 

 

 

 

95,048

 

 

 

$

110,380

 

$

1,632,318

 

 

 

The following table sets forth the liabilities (primarily mortgage debt) related to discontinued operations as of December 31, 2008 and 2007.

 

(Amounts in thousands)

 

December 31,

 

 

 

2008

 

2007

 

Americold

 

$

750

 

$

1,332,627

 

Tysons Dulles Plaza

 

 

 

 

3

 

 

 

$

750

 

$

1,332,630

 

 

 

The following table sets forth the combined results of discontinued operations for the years ended December 31, 2008, 2007 and 2006.

 

(Amounts in thousands)

 

For the Year Ended December 31,

 

 

 

2008

 

2007

 

2006

 

Total revenues

 

$

222,361

 

$

865,584

 

$

813,665

 

Total expenses

 

 

238,132

 

 

872,176

 

 

815,219

 

Net loss

 

 

(15,771

)

 

(6,592

)

 

(1,554

)

Net gains on sale of real estate

 

 

170,213

 

 

64,981

 

 

33,769

 

Income from discontinued operations,
net of minority interest

 

$

154,442

 

$

58,389

 

$

32,215

 

 

 

 

 


VORNADO REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

 

5.

Derivative Instruments and Related Marketable Securities

Investment in McDonald’s Corporation (“McDonalds”) (NYSE: MCD)

 

We owned an economic interest in 14,565,500 McDonalds’ common shares through a series of privately negotiated transactions with a financial institution pursuant to which we purchased a call option and simultaneously sold a put option at the same strike price on McDonalds’ common shares. These call and put options had an initial weighted-average strike price of $32.66 per share, or an aggregate of $475,692,000 and provided for net cash settlement. Under these agreements, the strike price for each pair of options increased at an annual rate of LIBOR plus 45 basis points and was decreased for dividends received. The options provided us with the same economic gain or loss as if we had purchased the underlying common shares and borrowed the aggregate purchase price at an annual rate of LIBOR plus 45 basis points. Because these options were derivatives and did not qualify for hedge accounting treatment, the gains or losses resulting from the mark-to-market of the options at the end of each reporting period were recognized as “interest and other investment income, net” on our consolidated statements of income. During 2006, we sold 2,119,500 of these shares at a weighted average price of $35.49 per share, and acquired an additional 1,250,000 option shares at a weighted average price of $33.08 per share. During 2007, we settled the 13,695,500 remaining option shares and received an aggregate of $260,719,000 in cash. We recognized net gains of $108,821,000 and $138,815,000 in the years ended December 31, 2007 and 2006, respectively, representing income from the mark-to-market of these shares during the period of our ownership through their settlement, net of related LIBOR charges.

 

In addition to the above, in October 2007, we sold 858,000 McDonald’s common shares for aggregate proceeds of $48,434,000, or $56.45 per share, and recognized a net gain of $23,090,000, representing accumulated appreciation during the period of our ownership. The shares were acquired in 2005 at a weighted average price of $29.54 per share, and were classified as “available-for-sale” marketable equity securities on our consolidated balance sheet.

 

The aggregate net gain from inception of our investments in McDonalds in 2005 through final settlement in October 2007 was $289,414,000.

 

Investment in Sears, Roebuck and Co. (“Sears”)

 

We owned an economic interest in 7,916,900 Sears’ common shares through a series of privately negotiated transactions with a financial institution pursuant to which we purchased a call option and simultaneously sold a put option at the same strike price on Sears’ common shares. These call and put options had an initial weighted-average strike price of $39.82 per share, or an aggregate of $315,250,000. Under these agreements, the strike price for each pair of options increased at an annual rate of LIBOR plus 45 basis points and was decreased for dividends received. The options provided us with the same economic gain or loss as if we had purchased the underlying common shares and borrowed the aggregate strike price at an annual rate of LIBOR plus 45 basis points. Because these options were derivatives and did not qualify for hedge accounting treatment, the gains or losses resulting from the mark-to-market of the options at the end of each reporting period were recognized as “interest and other investment income, net” on our consolidated statements of income. On March 30, 2005, as a result of the merger between Sears and Kmart and pursuant to the terms of the contract, our derivative position representing 7,916,900 Sears common shares became a derivative position representing 2,491,819 common shares of Sears Holdings, Inc. (“Sears Holdings”) (Nasdaq: SHLD) valued at $323,936,000 based on the then closing share price of $130.00 and $146,663,000 of cash. During 2005 we sold 402,660 of the option shares at a weighted average price of $124.44 per share. During 2006, we settled the remaining 2,089,159 option shares at a weighted average price of $125.43 per share, resulting in a net gain of $18,611,000. The aggregate net gain realized from inception of this investment in 2004 through settlement was $142,877,000.

 

Investment in Sears Canada, Inc. (“Sears Canada”)

 

On April 3, 2006, we tendered the 7,500,000 Sears Canada shares we owned to Sears Holdings at the increased tender price of Cdn. $18.00 per share (the equivalent at that time of US $15.68 per share), which resulted in a net gain of $55,438,000, the difference between the tender price, and our carrying amount of $8.29 per share. Together with income recognized in the fourth quarter of 2005 that resulted from a Sears Canada special dividend, the aggregate net gain from inception in 2005 on our $143,737,000 investment was $78,323,000.

 

 

 


VORNADO REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

 

5.

Derivative Instruments and Related Marketable Securities - continued

 

 

GMH Communities L.P. Stock Purchase Warrants

 

We owned warrants to acquire GMH Communities L.P. (“GMH”) common equity. The warrants entitled us to acquire (i) 6,666,667 GMH limited partnership units at an exercise price of $7.50 per unit and (ii) 5,496,724 GMH limited partnership units at an exercise price of $8.22 per unit. The warrants were accounted for as derivative instruments that did not qualify for hedge accounting treatment. Accordingly, the gains or losses resulting form the mark-to-market of the warrants at the end of each reporting period were recognized as “interest and other investment income, net” on our consolidated statements of income.

 

On November 3, 2004, we exercised our first tranche of warrants to acquire 6,666,667 limited partnership units at a price of $7.50 per unit, or an aggregate of $50,000,000. On May 2, 2006, the date our remaining GMH warrants were to expire, we received 1,817,247 GMH Communities Trust (NYSE: GCT) (“GCT”) common shares through an automatic cashless exercise, which resulted in the recognition of a net loss of $16,370,000, the difference between the value of the GCT common shares received on May 2, 2006 and GCT’s closing share price of $15.51 on December 31,2005.

 

6.

Investments in Partially Owned Entities

 

Toys “R” Us (“Toys”)

As of December 31, 2008, we own 32.7% of Toys. The business of Toys is highly seasonal. Historically, Toys’ fourth quarter net income accounts for more than 80% of its fiscal year net income. Because Toys’ fiscal year ends on the Saturday nearest January 31, we record our 32.7% share of Toys’ net income or loss on a one-quarter lag basis.

 

In July 2008, in connection with an audit of Toys’ purchase accounting basis financial statements for its fiscal years 2006 and 2007, it was determined that the purchase accounting basis income tax expense was understated. Our share of this non-cash charge was $14,900,000, which we recognized as part of our equity in Toys’ net loss in the second quarter of 2008. This non-cash charge had no effect on cash actually paid for income taxes or Toys’ previously issued Recap basis consolidated financial statements.

 

In 2006, Toys closed 87 Toys “R” Us stores in the United States as a result of its store-closing program. Toys incurred restructuring and other charges aggregating approximately $127,000,000 before tax, which includes $44,000,000 for the cost of liquidating the inventory. Our share of the $127,000,000 charge was $42,000,000, of which $27,300,000 had no income statement effect as a result of purchase accounting and the remaining portion relating to the cost of liquidating inventory of approximately $9,100,000 after-tax, was recognized as an expense as part of our equity in Toys’ net income in 2006.

 

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

 

 

 

 

 

 

 

(Amounts in millions)

 

 

 

 

 

Balance Sheet:

 

As of November 1, 2008

 

As of November 3, 2007

 

Total Assets

 

$

12,410

 

$

12,636

 

Total Liabilities

 

 

11,481

 

 

11,645

 

Total Equity

 

 

929

 

 

991

 

 

 

 

 

For the Twelve Months Ended

 

Income Statement:

 

November 1, 2008

 

 

November 3, 2007

 

October 28, 2006

 

Total Revenue

 

$

14,090

 

 

$

13,646

 

$

12,205

 

Net Loss

 

 

(13

)

 

 

(65

)

 

(143

)

 

 

 


VORNADO REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

 

6.

Investments in Partially Owned Entities - continued

 

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

We owned 32.5% and 32.8% of the outstanding common shares of Alexander’s at December 31, 2008 and 2007, respectively. 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. At December 31, 2008 the fair value of our investment in Alexander’s, based on Alexander’s December 31, 2008 closing share price of $254.90, was $421,622,000.

 

Management and Development Agreements

 

We receive an annual fee for managing Alexander’s and all of its properties equal to the sum of (i) $3,000,000, (ii) 3% of the gross income from the Kings Plaza Regional Shopping Center, (iii) $0.50 per square foot of the tenant-occupied office and retail space at 731 Lexington Avenue and (iv) $234,000, 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, with minimum guaranteed payments of $750,000 per annum. During the years ended December 31, 2008, 2007 and 2006, we recognized $4,101,000, $4,482,000 and $725,000, respectively, of development fee income.

 

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% (5.19% at December 31, 2008).

 

Other Agreements

 

Building Maintenance Services (“BMS”), our wholly-owned subsidiary, supervises the cleaning, engineering and security services at Alexander’s 731 Lexington Avenue and Kings Plaza properties for an annual fee of the costs for such services plus 6%. During the years ended December 31, 2008, 2007 and 2006, we recognized $2,083,000, $3,016,000 and $2,828,000, respectively, of income under these agreements.

 

 

 


VORNADO REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

 

6.

Investments in Partially Owned Entities - continued

 

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

On December 31, 2006, Newkirk Realty Trust (NYSE: NKT) was acquired in a merger by Lexington, a real estate investment trust that invests in, owns and manages commercial properties net leased to major corporations throughout the United States. We owned 10,186,991 Newkirk Master Limited Partnership (“Newkirk MLP”) units (representing a 15.8% ownership interest), which was also acquired by Lexington as a subsidiary and was renamed Lexington Master Limited Partnership (“Lexington MLP”). The units in Newkirk MLP, which we accounted for on the equity method, were converted on a 0.80 for 1 basis into limited partnership units of Lexington MLP, which we also account for on the equity method. In addition, upon the merger, Newkirk terminated its advisory agreement with NKT Advisors, in which we had a 20.0% interest, for an aggregate payment of $12,500,000, of which our share was $2,300,000. On December 31, 2006, we recognized a net gain of $10,362,000, as a result of the merger transactions, which is included on a component of “(loss) income from partially owned entities” on our consolidated statement of income.

 

In connection with the above transactions, we owned 8,149,592 limited partnership units of Lexington MLP which were exchangeable on a one-for-one basis into Lexington common shares, or a 7.7% limited partnership interest. On October 28, 2008, we acquired 8,000,000 Lexington common shares for $5.60 per share, or $44,800,000. The purchase price consisted of $22,400,000 in cash and a $22,400,000 margin loan recourse only to the 8,000,000 shares acquired. In addition, we exchanged our existing limited partnership units in Lexington MLP for 8,149,592 Lexington common shares. As of December 31, 2008, we own 16,149,592 Lexington common shares, or approximately 17.2% of Lexington’s common equity. We account for our investment in Lexington on the equity method and 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, 2008 closing share price of $5.00, the market value (“fair value” pursuant to SFAS 157) of our investment in Lexington was $80,748,000, or $100,707,000 below the carrying amount on our consolidated balance sheet. We have concluded that our investment in Lexington is “other-than-temporarily” impaired and recorded a $100,707,000 non-cash impairment loss in the fourth quarter of 2008. Together with impairment changes recorded in the nine months ended September 30, 2008, we recognized an aggregate of $107,882,000 of non-cash charges on our investment in Lexington. Our conclusions were based on the recent deterioration in the capital and financial markets and our inability to forecast a recovery in the near-term. These charges are included as a component of “(loss) income from partially owned entities,” on our consolidated statement of income.

 

GMH

In June 2008, pursuant to the sale of GMH’s military housing division and the merger of its student housing division with American Campus Communities, Inc. (“ACC”) (NYSE: ACC), we received an aggregate of $105,180,000, consisting of $82,142,000 in cash and 753,126 shares of ACC common stock valued at $23,038,000 based on ACC’s then closing share price of $30.59, in exchange for our entire interest in GMH. We subsequently sold all of the ACC common shares. The above transactions resulted in a net gain of $2,038,000 which is included as a component of “net gains on disposition of wholly owned and partially owned assets other than depreciable real estate” in our consolidated statement of income. The aggregate net income realized from inception of this investment in 2004 through its disposition was $77,000,000.

 

Real Estate Joint Ventures’ Development Costs

 

During 2008, we recognized non-cash charges aggregating $96,037,000, for the write-off of our share of certain partially owned entities’ development costs, as these projects were either deferred or abandoned. These charges include $37,000,000 in the fourth quarter of 2008, for our 50% share of costs in connection with the redevelopment of the Filene’s property in Boston, Massachusetts and $23,000,000 in the first quarter of 2008, for our 50% share of costs in connection with the abandonment of the “arena move”/Moynihan East portions of the Farley project. Such charges are included as a component of “(loss) income from partially owned entities,” on our consolidated statement of income.

 

 


VORNADO REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

 

6.

Investments in Partially Owned Entities – continued

Investments in partially owned entities as of December 31, 2008 and 2007 and income recognized from such investments for the years ended December 31, 2008, 2007 and 2006 are as follows:

 

Investments:

(Amounts in thousands)

 

Percentage

 

 

 

 

 

Ownership as of

 

As of December 31,

 

 

December 31, 2008

 

2008

 

2007

 

 

 

 

 

 

 

 

 

 

 

Toys

 

32.7%

 

$

293,096

 

$

298,089

 

 

 

 

 

 

 

 

 

 

 

Partially owned office buildings (1)

 

(1)

 

$

157,468

 

$

161,411

 

Lexington (see page 144)

 

17.2%

 

 

80,748

 

 

160,868

 

India real estate ventures

 

4%-50%

 

 

88,858

 

 

123,997

 

Alexander’s

 

32.5%

 

 

137,305

 

 

122,797

 

GMH (sold in June 2008)

 

 

 

 

 

103,260

 

Beverly Connection (2)

 

50%

 

 

 

 

91,302

 

Other equity method investments (3)

 

(3)

 

 

325,775

 

 

443,107

 

 

 

 

 

$

790,154

 

$

1,206,742

 

____________________________

 

(1)

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

 

 

(2)

As of November 13, 2008, our joint venture partner’s failure to contribute its pro rata share of required capital resulted in our ability under the joint venture agreement to assert unilateral control over major business decisions and accordingly, we began to consolidate our investment pursuant to Accounting Research Bulletin (“ARB”) 51, Consolidated Financial Statements .

 

 

(3)

Includes interests in Monmouth Mall and redevelopment ventures including Boston Filene’s, Harlem Park and Farley Project.

 

 


VORNADO REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

 

 

6.

Investments in Partially Owned Entities – continued

 

Our Share of Net Income (Loss):

 

For the Years Ended December 31,

 

(Amounts in thousands)

 

2008

2007

2006

 

 

 

 

 

 

 

 

 

 

 

 

Toys:

 

 

 

 

 

 

 

 

 

 

32.7% share in 2008 and 2007 and 32.9% in 2006:
Equity in net loss

 

$

(5,785

)

$

(20,957

)

$

(56,218

)

Interest and other income

 

 

8,165

 

 

6,620

 

 

8,698

 

 

 

$

2,380

 

$

(14,337

)

$

(47,520

)

Alexander’s:

 

 

 

 

 

 

 

 

 

 

32.5% share in 2008, 32.8% in 2007 and 2006 of:

 

 

 

 

 

 

 

 

 

 

Equity in net income before reversal (accrual) of stock
appreciation rights compensation expense and net
gain on sale of condominiums

 

$

17,484

 

$

22,624

 

$

19,120

 

Reversal (accrual) of stock appreciation rights
compensation expense

 

 

6,583

 

 

14,280

 

 

(49,043

)

Net gain on sale of condominiums

 

 

 

 

420

 

 

4,580

 

Equity in net income (loss)

 

 

24,067

 

 

37,324

 

 

(25,343

)

Management and leasing fees

 

 

8,503

 

 

8,783

 

 

10,088

 

Development fees

 

 

4,101

 

 

4,482

 

 

725

 

 

 

$

36,671

 

$

50,589

 

$

(14,530

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Lexington (see page 144)

 

$

(105,630

) (1)

$

2,211

 

$

34,459

(2)

 

 

 

 

 

 

 

 

 

 

 

Beverly Connection (3) :

 

 

 

 

 

 

 

 

 

 

50% share of equity in net loss

 

 

(8,706

) (4)

 

(7,031

)

 

(8,567

)

Interest and other income

 

 

14,450

 

 

12,141

 

 

10,837

 

 

 

 

5,744

 

 

5,110

 

 

2,270

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

India Real Estate Ventures:

 

 

 

 

 

 

 

 

 

 

4% to 50% share of equity in net losses

 

 

(3,336

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GMH:

 

 

 

 

 

 

 

 

 

 

13.8% share in 2007 and 13.5% in 2006:
Equity in net income (loss)

 

 

 

 

6,463

 

 

(1,013

)

 

 

 

 

 

 

 

 

 

 

 

H Street non-consolidated entities:

 

 

 

 

 

 

 

 

 

 

50% share of equity in net income

 

 

 

 

5,923

(5)

 

11,074

(6)

 

 

 

 

 

 

 

 

 

 

 

Other (7)

 

 

(92,656

) (8)

 

12,184

 

 

13,565

 

 

 

$

(195,878

)

$

31,891

 

$

60,355

 

_________________________

See notes on following page.

 

 


VORNADO REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

 

6.

Investments in Partially Owned Entities – continued

Notes to preceding tabular information (in thousands):

 

 

(1)

Includes $107,882 for non-cash impairment charges.

 

 

(2)

Includes (i) a $10,362 net gain recognized as a result of the acquisition of Newkirk by Lexington and (ii) $10,842 for our share of Newkirk MLP’s net gains on sale of real estate.

 

 

(3)

As of November 13, 2008, our joint venture partner’s failure to contribute its pro rata share of required capital resulted in our ability under the joint venture agreement to assert unilateral control over major business decisions and accordingly, we began to consolidate our investment pursuant to ARB 51.

 

 

(4)

Includes $4,100 for the reversal of a non-cash charge recorded by the joint venture in prior periods which, pursuant to paragraph 19(n) of Accounting Principles Board Opinion 18, The Equity Method of Accounting For Investments In Common Stock, should have been eliminated in the determination of our share of the earnings of the venture. In addition, in accordance with EITF 99-10, during the quarter ended September 30, 2008 our partner’s capital account was reduced to zero and, accordingly, we recognized $1,528 of additional net loss for the portion that related to our partner’s pro rata share of the venture’s net loss.

 

 

(5)

Represents our 50% share of equity in net income from January 1, 2007 through April 29, 2007. On April 30, 2007, we acquired the remaining 50% interest of these entities and began to consolidate the accounts into our consolidated financial statements and no longer account for this investment under the equity method.

 

 

(6)

Prior to the quarter ended June 30, 2006, two 50% owned entities that were contesting our acquisition of H Street impeded our access to their financial information and accordingly, we were unable to record our pro rata share of their earnings. 2006 includes $3,890 for our 50% share of their earnings for the period from July 20, 2005 (date of acquisition) to December 31, 2005.

 

 

(7)

Includes our equity in net earnings of partially owned entities, including partially owned office buildings in New York and Washington, DC, the Monmouth Mall, Dune Capital LP, Verde Group LLC and other equity method investments.

 

 

(8)

Includes $96,037 for non-cash charges for the write-off of our share of certain partially owned entities’ development costs.

 

 

Condensed Combined Financial Information of Partially Owned Entities

 

The following is a summary of combined financial information for all of our partially owned entities, including Toys, Alexander’s, and Lexington, as of December 31, 2008 and 2007 and for the years ended December 31, 2008, 2007 and 2006.

 

(Amounts in millions)

 

December 31,

 

Balance Sheet:

 

2008

 

2007

 

Total Assets

 

$

23,705

 

$

24,832

 

Total Liabilities

 

 

19,526

 

 

20,611

 

Total Equity

 

 

4,179

 

 

4,221

 

 

 

 

 

For the Years Ended December 31,

 

 

Income Statement:

 

2008

 

2007

 

2006

 

Total Revenue

 

$

15,313

 

$

14,821

 

$

13,036

 

Net Loss

 

 

(43

)

 

(144

)

 

(19

)

 

 

 


VORNADO REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

 

6.

Investments in Partially Owned Entities - continued

Below is a summary of the debt of partially owned entities as of December 31, 2008 and 2007, none of which is recourse to us.

 

100% of
Partially Owned Entities Debt at


(Amounts in thousands)

 

December 31,
2008

 

December 31,
2007

Toys (32.7% interest) (as of November 1, 2008 and November 3, 2007, respectively):

 

 

 

 

 

 

$1.3 billion senior credit facility, due 2010, (6.14% at December 31, 2008)

 

$

1,300,000

 

$

1,300,000

$2.0 billion credit facility, due 2010, LIBOR plus 1.00% - 3.75% (3.57% at December 31,
2008) ($110,000 reserved for outstanding letters of credit)

 

 

367,000

 

 

489,000

Mortgage loan, due 2010, LIBOR plus 1.30% (2.50% at December 31, 2008)

 

 

800,000

 

 

800,000

$804 million secured term loan facility, due 2012, LIBOR plus 4.25%
(4.83% at December 31, 2008)

 

 

797,000

 

 

797,000

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

 

 

568,000

 

 

741,000

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

 

 

486,000

 

 

481,000

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

 

 

377,000

 

 

373,000

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

 

 

335,000

 

 

331,000

Japan borrowings, due 2009-2011
(weighted average rate of 1.29% at December 31, 2008)

 

 

289,000

 

 

243,000

4.51% Spanish real estate facility, due 2013

 

 

167,000

 

 

193,000

$181 million unsecured term loan facility, due 2013, LIBOR plus 5.00%

(5.96% at December 31, 2008)

 

 

180,000

 

 

180,000

Japan bank loans, due 2011-2014, 1.20%-2.80%

 

 

158,000

 

 

161,000

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

 

 

101,000

 

 

132,000

4.51% French real estate facility, due 2013

 

 

81,000

 

 

93,000

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

 

 

21,000

 

 

21,000

Multi-currency revolving credit facility, due 2010, LIBOR plus 1.50%-2.00%

 

 

 

 

28,000

Other

 

 

73,000

 

 

60,000

 

 

 

6,100,000

 

 

6,423,000

Alexander’s (32.5% interest):

 

 

 

 

 

 

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

 

 

373,637

 

 

383,670

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

 

 

320,000

 

 

320,000

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

 

 

199,537

 

 

203,456

Rego Park construction loan payable, due in December 2010, with a one-year extension,
LIBOR plus 1.20% (3.08% at December 31, 2008)

 

 

181,695

 

 

55,786

Rego Park mortgage note payable, due in June 2009, with interest at 7.25%
(prepayable without penalty after March 2009)

 

 

78,386

 

 

79,285

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

 

 

68,000

 

 

68,000

 

 

 

1,221,255

 

 

1,110,197

Lexington (7.7% interest) (as of September 30, 2008 and September 30, 2007, respectively):
Mortgage loans collateralized by the partnership’s real estate, due from 2008 to 2037, with a
weighted average interest rate of 5.65% at September 30, 2008 (various prepayment terms)

 

 

2,486,370

 

 

3,320,261

 

 

 

 

 

 

 

GMH – 13.8% interest in mortgage notes payable

 

 

 

 

995,818

 

 

 

 

 

 

 

148


VORNADO REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

 

6.

Investments in Partially Owned Entities – continued

 


(Amounts in thousands)

100% of
Partially Owned Entities Debt at


Partially owned office buildings:

December 31,
2008

 

December 31,
2007

Kaempfer Properties (2.5% and 5.0% interests in two partnerships) mortgage notes payable,
collateralized by the partnerships’ real estate, due from 2011 to 2031, with a weighted
average interest rate of 5.69% at December 31, 2008 (various prepayment terms)

$

143,000

   

$

144,340

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

 

85,249

 

 

330 Madison Avenue (25% interest) up to $150,000 mortgage note payable, due in June 2015, LIBOR plus 1.50% with interest at 3.38%

 

70,000

 

 

60,000

Fairfax Square (20% interest) mortgage note payable, due in August 2009, with interest at 7.50%

 

62,815

 

 

64,035

Rosslyn Plaza (46% interest) mortgage note payable, due in December 2011, LIBOR plus 1.0% (1.43% at December 31, 2008)

 

56,680

 

 

56,680

West 57 th Street (50% interest) mortgage note payable, due in October 2009, with interest at 4.94% (prepayable without penalty after July 2009)

 

29,000

 

 

29,000

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

 

21,426

 

 

21,808

India Real Estate Ventures:

 

 

 

 

 

TCG Urban Infrastructure Holdings (25% interest) mortgage notes payable, collateralized by the entity’s real estate, due from 2009 to 2022, with a weighted average interest rate of 13.38% at December 31, 2008 (various prepayment terms)

 

148,792

 

 

136,431

India Property Fund L.P. (36.5% interest) $120 million secured revolving credit facility, due in December 2009, LIBOR plus 2.75% (4.60% at December 31, 2008)

 

90,500

 

 

Waterfront associates, LLC (2.5% interest) construction and land loan up to $250 million payable, due in September 2011 with a six month extension option, LIBOR plus 2.00%-3.00%
(3.19% at December 31, 2008)

 

57,600

 

 

Verde Realty Master Limited Partnership (8.5% interest) mortgage notes payable, collateralized by the partnerships’ real estate, due from 2009 to 2037, with a weighted average interest rate of 6.03% at December 31, 2008 (various prepayment terms)

 

559,840

 

 

487,122

Green Courte Real Estate Partners, LLC (8.3% interest) mortgage notes payable, collateralized by the partnerships’ real estate, due from 2009 to 2015, with a weighted average interest rate of 4.96% at December 31, 2008 (various prepayment terms)

 

307,098

 

 

225,704

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

 

165,000

 

 

165,000

San Jose, California Ground-up Development (45% interest) construction loan, due in March 2009, with a one-year extension option; $114 million fixed at 4.62%, balance at LIBOR plus 1.75% (4.49% at December 31, 2008)

 

132,128

 

 

101,045

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

 

14,800

 

 

14,422

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

 

10,200

 

 

9,045

Other

 

468,559

 

 

452,320

 

Based on our ownership interest in the partially owned entities above, our pro rata share of the debt of these partially owned entities was $3,196,585,000 and $3,289,873,000 as of December 31, 2008 and 2007, respectively.


VORNADO REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

 

7.

Mezzanine Loans Receivable

The following is a summary of our investments in mezzanine loans as of December 31, 2008 and 2007.

 

(Amounts in thousands)

 

 

 

Interest Rate
as of

 

Carrying Amount as of

 

Mezzanine Loans Receivable:

 

Maturity

 

December 31,
2008

 

December 31,
2008

 

December 31,
2007

 

Equinox (1)

 

02/13

 

14.00%

 

$

85,796

 

$

73,162

 

Tharaldson Lodging Companies (2)

 

04/11

 

4.68%

 

 

76,341

 

 

76,219

 

Riley HoldCo Corp. (3)

 

02/15

 

10.00%

 

 

74,381

 

 

74,268

 

280 Park Avenue (4)

 

06/16

 

10.25%

 

 

73,750

 

 

73,750

 

MPH, net of valuation allowance of $46,700
and $57,000, respectively (5)

 

 

 

 

19,300

 

 

9,000

 

Other

 

04/09-07/17

 

4.75 – 12.0%

 

 

142,971

 

 

185,940

 

 

 

 

 

 

 

$

472,539

 

$

492,339

 

_____________________

 

 

(1)

On February 10, 2006, we acquired a 50% interest in a $115,000 note issued by Related Equinox Holdings II, LLC (the “Note”), for $57,500 in cash. The Note is secured by a pledge of the stock of Related Equinox Holdings II. Related Equinox Holdings II owns Equinox Holdings Inc., which in turn owns all of the assets and obligations, including the fitness clubs, operated under the Equinox brand. The Note is junior to a $50,000 revolving loan and $280,000 of senior unsecured obligations. The Note is senior to $125,000 of equity contributed by third parties for their acquisition of the Equinox fitness club business. The Note matures on February 15, 2013 and bears paid-in-kind interest at 14% through February 15, 2011, increasing by 3% per annum through maturity. The Note is prepayable at any time after February 15, 2009 .

 

 

(2)

On June 16, 2006, we acquired an 81.5% interest in a $95,968 mezzanine loan to Tharaldson Lodging Companies for $78,166 in cash. The loan is secured by a 107 hotel property portfolio with brands including Fairfield Inn, Residence Inn, Comfort Inn and Courtyard by Marriott. The loan is subordinate to $671,778 of debt and is senior to approximately $192,000 of other debt and equity. The loan matures in April 2009, with two one-year extensions, provides for a 0.75% placement fee and bears interest at LIBOR plus 4.25% (4.68% at December 31, 2008) .

 

 

(3)

In 2005, we made a $135,000 loan to Riley HoldCo Corp., consisting of a $60,000 mezzanine loan and a $75,000 fixed rate unsecured loan. During 2006, we were repaid the $60,000 balance of the mezzanine loan with a pre-payment premium of $972, which was recognized as “interest and other investment income” for the year ended December 31, 2006 .

 

 

(4)

On June 30, 2006, we made a $73,750 mezzanine loan secured by the equity interests in 280 Park Avenue, a 1.2 million square foot office building, located between 48th and 49th Streets in Manhattan. The loan bears interest at 10.25% and matures in June 2016. The loan is subordinate to $1.036 billion of other debt and is senior to approximately $260,000 of equity and interest reserves .

 

 

(5)

On June 5, 2007, we acquired a 42% interest in two MPH mezzanine loans totaling $158,700 for $66,000 in cash. The loans, which were due on February 8, 2008 and have not been repaid, are subordinate to $2.9 billion of mortgage and other debt and secured by the equity interests in four New York City properties: Worldwide Plaza, 1540 Broadway office condominium, 527 Madison Avenue and Tower 56. At December 31, 2007, we reduced the net carrying amount of the loans to $9,000 by recognizing a $57,000 non-cash charge in our consolidated statement of income. On April 2, 2008, we sold a sub-participation interest in the loans for $19,300 which resulted in the reduction of our valuation allowance from $57,000 to $46,700 and the recognition of $10,300 of non-cash income in our consolidated statement of income.

 

 


VORNADO REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

 

 

8.

Identified Intangible Assets

 

The following summarizes our identified intangible assets (primarily acquired above-market leases) and intangible liabilities (primarily acquired below-market leases) as of December 31, 2008 and December 31, 2007.

 

(Amounts in thousands)

 

December 31,
2008

 

December 31,
2007

 

 

 

 

 

 

 

 

 

Identified intangible assets (included in other assets):

 

 

 

 

 

 

 

Gross amount

 

$

784,192

 

$

726,204

 

Accumulated amortization

 

 

(258,242

)

 

(162,845

)

Net

 

$

525,950

 

$

563,359

 

 

 

 

 

 

 

 

 

Identified intangible liabilities (included in deferred credit):

 

 

 

 

 

 

 

Gross amount

 

$

998,179

 

$

977,455

 

Accumulated amortization

 

 

(278,357

)

 

(163,357

)

Net

 

$

719,822

 

$

814,098

 

 

Amortization of acquired below-market leases, net of acquired above-market leases resulted in an increase to rental income of $96,176,000, $83,292,000 and $23,490,000 for the years ended December 31, 2008, 2007 and 2006, respectively. The estimated annual amortization of acquired below-market leases net of acquired above-market leases for each of the five succeeding years is as follows:

(Amounts in thousands)

 

 

 

 

2009

 

$

69,110

 

2010

 

 

62,152

 

2011

 

 

59,187

 

2012

 

 

55,470

 

2013

 

 

47,504

 

 

Amortization of all other identified intangible assets (a component of depreciation and amortization expense) was $86,498,000, $45,764,000 and $21,156,000 for the years ended December 31, 2008, 2007 and 2006, respectively. The 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 is as follows:

 

(Amounts in thousands)

 

 

 

 

2009

 

$

58,973

 

2010

 

 

56,286

 

2011

 

 

53,879

 

2012

 

 

49,296

 

2013

 

 

42,068

 

 

We are a tenant under ground leases for certain properties. Amortization of these acquired below-market leases resulted in an increase to rent expense of $2,654,000, $1,565,000 and $320,000 for the years ended December 31, 2008, 2007 and 2006, respectively. The estimated annual amortization of these below market leases for each of the five succeeding years is as follows:

(Amounts in thousands)

 

 

 

 

2009

 

$

2,133

 

2010

 

 

2,133

 

2011

 

 

2,133

 

2012

 

 

2,133

 

2013

 

 

2,133

 

 

 

 


VORNADO REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

 

9.

Debt

The following is a summary of our debt:

(Amounts in thousands)

 

 

 

Interest Rate at

 

Balance at

 

Notes and Mortgages Payable:

 

Maturity (1)

 

December 31, 2008

 

December 31, 2008

 

December 31, 2007

 

Fixed Interest:

 

 

 

 

 

 

 

 

 

 

 

New York Office:

 

 

 

 

 

 

 

 

 

 

 

1290 Avenue of the Americas

 

01/13

 

5.97%

 

$

444,667

 

$

454,166

 

350 Park Avenue

 

01/12

 

5.48%

 

 

430,000

 

 

430,000

 

770 Broadway

 

03/16

 

5.65%

 

 

353,000

 

 

353,000

 

888 Seventh Avenue

 

01/16

 

5.71%

 

 

318,554

 

 

318,554

 

Two Penn Plaza

 

02/11

 

4.97%

 

 

287,386

 

 

292,000

 

909 Third Avenue

 

04/15

 

5.64%

 

 

214,074

 

 

217,266

 

Eleven Penn Plaza

 

12/11

 

5.20%

 

 

206,877

 

 

210,338

 

 

 

 

 

 

 

 

 

 

 

 

 

Washington, DC Office:

 

 

 

 

 

 

 

 

 

 

 

Skyline Place

 

02/17

 

5.74%

 

 

678,000

 

 

678,000

 

Warner Building

 

05/16

 

6.26%

 

 

292,700

 

 

292,700

 

River House Apartment Complex (2)

 

04/15

 

5.43%

 

 

195,546

 

 

46,339

 

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

 

01/25

 

7.09%

 

 

115,440

 

 

117,464

 

Bowen Building

 

06/16

 

6.14%

 

 

115,022

 

 

115,022

 

Reston Executive I, II and III

 

01/13

 

5.57%

 

 

93,000

 

 

93,000

 

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

 

08/10

 

6.74%

 

 

87,721

 

 

89,514

 

1550, 1750 Crystal Drive

 

11/14

 

7.08%

 

 

83,912

 

 

86,026

 

Universal Buildings

 

04/14

 

4.88%

 

 

59,728

 

 

62,613

 

2345 Crystal Drive

 

09/08

 

6.66%

 

 

 

 

58,656

 

1235 Clark Street

 

07/12

 

6.75%

 

 

54,128

 

 

54,936

 

2231 Crystal Drive

 

08/13

 

7.08%

 

 

50,394

 

 

52,293

 

241 18 th Street

 

10/10

 

6.82%

 

 

46,532

 

 

47,445

 

1750 Pennsylvania Avenue

 

06/12

 

7.26%

 

 

46,570

 

 

47,204

 

2011 Crystal Drive

 

10/09

 

6.88%

 

 

38,338

 

 

39,135

 

1225 Clark Street

 

08/13

 

7.08%

 

 

30,145

 

 

31,279

 

1800, 1851, 1901 South Bell Street

 

12/11

 

6.91%

 

 

27,801

 

 

35,558

 

 

 

 

 

 

 

 

 

 

 

 

 

Retail:

 

 

 

 

 

 

 

 

 

 

 

Cross collateralized mortgages on 42 shopping centers

 

03/10

 

7.93%

 

 

448,115

 

 

455,907

 

Springfield Mall (including present value of
purchase option)

 

10/12-04/13

 

5.45%

 

 

252,803

 

 

256,796

 

Green Acres Mall (3)

 

(3)

 

(3)

 

 

 

 

137,331

 

Montehiedra Town Center

 

07/16

 

6.04%

 

 

120,000

 

 

120,000

 

Broadway Mall

 

07/13

 

5.40%

 

 

94,879

 

 

97,050

 

828-850 Madison Avenue Condominium

 

06/18

 

5.29%

 

 

80,000

 

 

80,000

 

Las Catalinas Mall

 

11/13

 

6.97%

 

 

60,766

 

 

62,130

 

Other

 

05/09-11/34

 

4.00%-7.33%

 

 

159,597

 

 

165,299

 

 

 

 

 

 

 

 

 

 

 

 

 

Merchandise Mart:

 

 

 

 

 

 

 

 

 

 

 

Merchandise Mart

 

12/16

 

5.57%

 

 

550,000

 

 

550,000

 

High Point Complex

 

08/16

 

6.34%

 

 

220,361

 

 

221,258

 

Boston Design Center

 

09/15

 

5.02%

 

 

70,740

 

 

71,750

 

Washington Design Center

 

11/11

 

6.95%

 

 

44,992

 

 

45,679

 

 

 

 

 

 

 

 

 

 

 

 

 

Other:

 

 

 

 

 

 

 

 

 

 

 

555 California Street

 

05/10-09/11

 

5.97%

 

 

720,671

 

 

719,568

 

Industrial Warehouses

 

10/11

 

6.95%

 

 

25,268

 

 

25,656

 

Total Fixed Interest Notes and Mortgages Payable

 

 

 

5.96%

 

 

7,117,727

 

 

7,230,932

 

___________________

See notes on page 154.

152


VORNADO REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

 

9.

Debt - continued

 

(Amounts in thousands)

 

 

 

 

Interest Rate at

 

Balance at

 

Notes and Mortgages Payable:

Maturity (1)

 

Spread over
LIBOR

 

December 31,
2008

 

December 31,
2008

 

December 31,
2007

 

Variable Interest:

 

 

 

 

 

 

 

 

 

 

 

 

New York Office:

 

 

 

 

 

 

 

 

 

 

 

 

Manhattan Mall

02/12

 

L+55

 

1.75%

 

$

232,000

 

$

232,000

 

866 UN Plaza

05/11

 

L+40

 

1.84%

 

 

44,978

 

 

44,978

 

Washington, DC Office:

 

 

 

 

 

 

 

 

 

 

 

 

2101 L Street (4)

02/13

 

L+120

 

1.68%

 

 

150,000

 

 

 

Courthouse Plaza One and Two

01/15

 

L+75

 

2.58%

 

 

70,774

 

 

74,200

 

River House Apartments (2)

04/18

 

(2)

 

1.78%

 

 

64,000

 

 

 

Commerce Executive III, IV and V

07/09

 

L+55

 

1.98%

 

 

50,223

 

 

50,223

 

1999 K Street (5)

12/10

 

L+130

 

2.73%

 

 

73,747

 

 

 

220 20 th Street (6)

01/11

 

L+115

 

2.03%

 

 

40,701

 

 

 

West End 25 (7)

02/11

 

L+130

 

3.19%

 

 

24,620

 

 

 

Retail:

 

 

 

 

 

 

 

 

 

 

 

 

Green Acres Mall (3)

02/13

 

L+140

 

3.28%

 

 

335,000

 

 

 

Bergen Town Center (8)

03/13

 

L+150

 

3.41%

 

 

228,731

 

 

 

Beverly Connection (9)

07/09

 

L+245

 

3.70%

 

 

100,000

 

 

 

Other:

 

 

 

 

 

 

 

 

 

 

 

 

220 Central Park South

11/10

 

L+235 – L+245

 

3.82%

 

 

130,000

 

 

128,998

 

India Property Fund L.P. (10)

(10)

 

(10)

 

 

 

 

 

82,500

 

Other

07/09 – 11/11

 

Various

 

3.79%

 

 

172,886

 

 

94,626

 

Total Variable Interest Notes and Mortgages Payable

 

 

 

 

2.85%

 

 

1,717,660

 

 

707,525

 

Total Notes and Mortgages Payable

 

 

 

 

5.36%

 

$

8,835,387

 

$

7,938,457

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Convertible Senior Debentures:

 

 

 

 

 

 

 

 

 

 

 

 

Due 2027 (11)

04/12

 

 

 

2.85%

 

$

1,364,805

 

$

1,376,278

 

Due 2026 (12)

11/11

 

 

 

3.63%

 

 

978,109

 

 

984,134

 

Total Convertible Senior Debentures

 

 

 

 

3.18%

 

$

2,342,914

 

$

2,360,412

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Senior Unsecured Notes:

 

 

 

 

 

 

 

 

 

 

 

 

Senior unsecured notes due 2009 (13)

08/09

 

 

 

4.50%

 

$

168,289

 

$

249,365

 

Senior unsecured notes due 2010

12/10

 

 

 

4.75%

 

 

199,625

 

 

199,436

 

Senior unsecured notes due 2011

02/11

 

 

 

5.60%

 

 

249,902

 

 

249,855

 

Total Senior Unsecured Notes

 

 

 

 

5.03%

 

$

617,816

 

$

698,656

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Exchangeable Senior Debentures due 2025

04/12

 

 

 

3.88%

 

$

494,501

 

$

492,857

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unsecured Revolving Credit Facilities:

 

 

 

 

 

 

 

 

 

 

 

 

$1 . 595 billion unsecured revolving credit facility

09/12

 

L+55 (15)

 

1.97%

 

$

300,000

 

$

300,000

 

$ . 965 billion unsecured revolving credit facility (14)
($44,565 reserved for outstanding letters of credit)

06/11

 

L+55 (15)

 

2.18%

 

 

58,468

 

 

105,656

 

Total Unsecured Revolving Credit Facilities

 

 

 

 

2.00%

 

$

358,468

 

$

405,656

 

____________________________

See notes on the following page.

 

 


VORNADO REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

 

9.

Debt - continued

Notes to preceding tabular information:

 

(Amounts in thousands)

 

 

  (1)

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

 

 

  (2)

On March 12, 2008, we completed a $260,000 refinancing of the River House Apartment Complex. The financing is comprised of a $196,000 interest-only seven-year 5.43% fixed rate mortgage and a $64,000 interest-only ten-year floating rate mortgage at the Freddie Mac Reference Note Rate plus 1.53% (1.78% at December 31, 2008). We retained net proceeds of $205,000 after repaying the existing loan.

 

 

  (3)

On February 11, 2008, we completed a $335,000 refinancing of the Green Acres regional mall. This interest-only loan has a rate of LIBOR plus 1.40% (3.28% at December 31, 2008) and matures in February 2011, with two one-year extension options. We retained net proceeds of $193,000 after repaying the existing loan.

 

 

  (4)

On February 26, 2008, we completed a $150,000 financing of 2101 L Street. The loan bears interest at LIBOR plus 1.20% (1.68% at December 31, 2008) and matures in February 2011 with two one-year extension options. We retained net proceeds of $148,000.

 

 

  (5)

On March 27, 2008, we closed a construction loan providing up to $124,000 to finance the redevelopment of 1999 K Street. The interest-only loan has a rate of LIBOR plus 1.30% (2.73% at December 31, 2008) and matures in December 2010 with two six-month extension options.

 

 

  (6)

On January 18, 2008, we closed a construction loan providing up to $87,000 to finance the residential redevelopment project at 220 20th Street (formally Crystal Plaza Two). The construction loan bears interest at LIBOR plus 1.15% (2.03% at December 31, 2008) and matures in January 2011 with two six-month extension options.

 

 

 (7)

On February 20, 2008, we closed a construction loan providing up to $104,000 to finance the residential redevelopment project at 1229-1231 25th Street NW (“West End 25”). The construction loan bears interest at LIBOR plus 1.30% (3.19% at December 31, 2008) and matures in February 2011 with two six-month extension options.

 

 

  (8)

On March 24, 2008, we closed a construction loan providing up to $290,000 to finance the redevelopment of a portion of the Bergen Town Center. The interest-only loan has a rate of LIBOR plus 1.50% (3.41% at December 31, 2008) and matures in March 2011 with two one-year extension options.

 

 

  (9)

Beginning in November 2008, we consolidate our investment in Beverly Connection and no longer account for it under the equity method.

 

 

(10)

Beginning in the first quarter of 2008, we account for our investment in the India Property Fund on the equity method and no longer consolidate its accounts into our consolidated financial statements, based on the reduction in our ownership interest from 50.6% as of December 31, 2007 to 36.5% .

 

 


VORNADO REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

 

9.

Debt - continued

Notes to preceding tabular information:

 

(Amounts in thousands)

 

 

(11)

On March 21, 2007, Vornado Realty Trust sold $1.4 billion aggregate principal amount of 2.85% convertible senior debentures due 2027, pursuant to an effective registration statement. The aggregate net proceeds from this offering, after underwriters’ discounts and expenses, were approximately $1.37 billion. The debentures are redeemable at our option beginning in 2012 for the principal amount plus accrued and unpaid interest. Holders of the debentures have the right to require us to repurchase their debentures in 2012, 2017, and 2022 and in certain other limited circumstances. The debentures are convertible, under certain circumstances, for cash and Vornado common shares at an initial conversion rate of 6.1553 common shares per one-thousand dollars of principal amount of debentures. The initial conversion price of $162.46 represented a premium of 30% over the March 21, 2007 closing price for our common shares. The principal amount of debentures will be settled for cash and the amount in excess of the principal defined as the conversion value will be settled in cash or, at our election, Vornado common shares. The net proceeds of the offering were contributed to the Operating Partnership in the form of an inter-company loan and the Operating Partnership fully and unconditionally guaranteed the payment of the debentures. There are no restrictions which limit the Operating Partnership from making distributions to Vornado and Vornado has no independent assets or operations outside of the Operating Partnership.

 

We are amortizing the underwriters’ discount on a straight-line basis (which approximates the effective interest method) over the period from the date of issuance to the date of earliest redemption of April 1, 2012. Because the conversion option associated with the debentures, when analyzed as a freestanding instrument, meets the criteria to be classified as equity specified by paragraphs 12 to 32 of EITF 00-19 “Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, a Company’s own Common Stock,” separate accounting for the conversion option under SFAS No. 133 “Accounting for Derivative Instruments and Hedging Activities” is not appropriate.

 

In November 2008, we purchased $17,300 (aggregate face amounts) of our convertible senior debentures due 2027 for $11,094 in cash.

 

 

(12)

On November 20, 2006, we sold $1,000,000 aggregate principal amount of 3.625% convertible senior debentures due 2026, pursuant to an effective registration statement. The aggregate net proceeds from this offering, after underwriters’ discounts and expenses, were approximately $980,000. The debentures are convertible, under certain circumstances, for Vornado common shares at a current conversion rate of 6.5168 common shares per $1 of principal amount of debentures. The initial conversion price of $153.45 represented a premium of 30% over the November 14, 2006 closing price for our common shares. The debentures are redeemable at our option beginning in 2011 for the principal amount plus accrued and unpaid interest. Holders of the debentures have the right to require us to repurchase their debentures in 2011, 2016, and 2021 and in the event of a change in control. The net proceeds of the offering were contributed to the Operating Partnership in the form of an inter-company loan and the Operating Partnership fully and unconditionally guaranteed the payment of the debentures. There are no restrictions which limit the Operating Partnership from making distributions to Vornado and Vornado has no independent assets or operations outside of the Operating Partnership.

 

We are amortizing the underwriters’ discount on a straight-line basis (which approximates the effective interest method) over the period from the date of issuance to the date of earliest redemption of December 1, 2011. Because the conversion option associated with the debentures, when analyzed as a freestanding instrument, meets the criteria to be classified as equity specified by paragraphs 12 to 32 of EITF 00-19 “Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, a Company’s own Common Stock,” separate accounting for the conversion option under SFAS No. 133 “Accounting for Derivative Instruments and Hedging Activities” is not appropriate.

 

In November 2008, we purchased $10,200 (aggregate face amounts) of our convertible senior debentures due 2026 for $6,987 in cash.

 

 

(13)

During 2008, we purchased $81,540 (aggregate face amounts) of our senior unsecured notes due August 15, 2009 for $80,408.

 

 

(14)

Lehman Brothers is part of the syndicate of banks under this unsecured revolving credit facility with a total commitment of $35 million. On September 15, 2008, Lehman Brothers filed for Chapter 11 bankruptcy protection. All of the banks in the syndicate, except for Lehman Brothers, have funded their pro rata share of a draw we made subsequent to Lehman’s bankruptcy filing.

 

 

(15)

Requires the payment of an annual facility fee of 15 basis points.

 

 


VORNADO REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

 

9.

Debt - continued

 

Our revolving credit facility and senior unsecured notes contain financial covenants which require us to maintain minimum interest coverage ratios and limit our debt to market capitalization ratios. We believe that we have complied with all of our financial covenants as of December 31, 2008.

 

On May 9, 2006, we executed supplemental indentures with respect to our senior unsecured notes due 2007, 2009 and 2010 (collectively, the “Notes”), pursuant to our consent solicitation statement dated April 18, 2006, as amended. Holders of approximately 96.7% of the aggregate face amount of the Notes consented to the solicitation. The supplemental indentures contain modifications of certain covenants and related defined terms governing the terms of the Notes to make them consistent with corresponding provisions of the covenants and defined terms included in the senior unsecured notes due 2011 issued on February 16, 2006. The supplemental indentures also include a new covenant that provides for an increase in the interest rate of the Notes upon certain decreases in the ratings assigned by rating agencies to the Notes. In connection with the consent solicitation we paid an aggregate fee of $2,241,000 to the consenting note holders, which will be amortized into expense over the remaining term of the Notes. In addition, we incurred advisory and professional fees aggregating $1,415,000, which were expensed in 2006.

 

 

The net carrying amount of properties collateralizing the notes and mortgages payable amounted to $11.631 billion at December 31, 2008. As of December 31, 2008, the principal repayments required for the next five years and thereafter are as follows:

 

(Amounts in thousands)

 

 

 

 

 

Year Ending December 31,

 

Mortgages Payable

 

Senior Unsecured Debt

 

2009

 

$

349,249

$

168,460

 

2010

 

 

977,185

 

200,000

 

2011

 

 

1,978,996

 

1,298,268

 

2012

 

 

911,606

 

2,182,699

 

2013

 

 

1,109,516

 

 

Thereafter

 

 

3,464,965

 

 

 

 


VORNADO REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

 

10.

Shareholders’ Equity

 

Preferred Shares

 

The following table sets forth the details of our preferred shares of beneficial interest outstanding as of December 31, 2008 and 2007.

 

(Amounts in thousands, except share and per share amounts)

 

December 31,

 

 

 

2008

 

2007

 

6.5% Series A: liquidation preference $50.00 per share; authorized 5,750,000 shares; issued and
outstanding 54,124 and 80,362 shares

 

$

2,762

 

$

4,050

 

7.0% Series D-10: liquidation preference $25.00 per share; authorized 4,800,000 shares; issued and
outstanding 1,600,000 shares

 

 

39,982

 

 

39,982

 

7.0% Series E: liquidation preference $25.00 per share; authorized 3,450,000 shares; issued and
outstanding 3,000,000 shares

 

 

72,248

 

 

72,248

 

6.75% Series F: liquidation preference $25.00 per share; authorized 6,000,000 shares; issued and
outstanding 6,000,000 shares

 

 

144,720

 

 

144,720

 

6.625% Series G: liquidation preference $25.00 per share; authorized 9,200,000 shares; issued and
outstanding 8,000,000 shares

 

 

193,135

 

 

193,135

 

6.75% Series H: liquidation preference $25.00 per share; authorized 4,600,000 shares; issued and
outstanding 4,500,000 shares

 

 

108,559

 

 

108,559

 

6.625% Series I: liquidation preference $25.00 per share; authorized 12,050,000 shares; issued and
outstanding 10,800,000 shares

 

 

262,401

 

 

262,401

 

 

 

$

823,807

 

$

825,095

 

 

Series A Convertible Preferred Shares of Beneficial Interest

 

Holders of Series A Preferred Shares of beneficial interest are entitled to receive dividends in an amount equivalent to $3.25 per annum per share. These dividends are cumulative and payable quarterly in arrears. The Series A Preferred Shares are convertible at any time at the option of their respective holders at a conversion rate of 1.38504 common shares per Series A Preferred Share, subject to adjustment in certain circumstances. In addition, upon the satisfaction of certain conditions we, at our option, may redeem the $3.25 Series A Preferred Shares at a current conversion rate of 1.38504 common shares per Series A Preferred Share, subject to adjustment in certain circumstances. At no time will the Series A Preferred Shares be redeemable for cash.

 

Series D-10 Cumulative Redeemable Preferred Shares of Beneficial Interest

 

Holders of Series D-10 Preferred Shares of beneficial interest are entitled to receive dividends at an annual rate of 7.0% of the liquidation preference of $25.00 per share, or $1.75 per Series D-10 Preferred Share per annum. These dividends are cumulative and payable quarterly in arrears. The Series D-10 Preferred Shares are not convertible into, or exchangeable for, any other property or any other security of the Company. We, at our option, may redeem the Series D-10 Preferred Shares at a redemption price of $25.00 per share, plus any accrued and unpaid dividends through the date of redemption. The Series D-10 Preferred Shares have no maturity date and will remain outstanding indefinitely unless redeemed by us.

 

Series E Cumulative Redeemable Preferred Shares of Beneficial Interest

 

Holders of Series E Preferred Shares of beneficial interest are entitled to receive dividends at an annual rate of 7.0% of the liquidation preference of $25.00 per share, or $1.75 per Series E Preferred Share per annum. These dividends are cumulative and payable quarterly in arrears. The Series E Preferred Shares are not convertible into, or exchangeable for, any other property or any other security of the Company. On or after August 20, 2009 (or sooner under limited circumstances), we, at our option, may redeem Series E Preferred Shares at a redemption price of $25.00 per share, plus any accrued and unpaid dividends through the date of redemption. The Series E Preferred Shares have no maturity date and will remain outstanding indefinitely unless redeemed by us.

 

 

 


VORNADO REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

 

10.

Shareholders’ Equity - continued

 

Series F Cumulative Redeemable Preferred Shares of Beneficial Interest

 

Holders of Series F Preferred Shares of beneficial interest are entitled to receive dividends at an annual rate of 6.75% of the liquidation preference of $25.00 per share, or $1.6875 per Series F Preferred Share per annum. These dividends are cumulative and payable quarterly in arrears. The Series F Preferred Shares are not convertible into, or exchangeable for, any other property or any other security of the Company. On or after November 17, 2009 (or sooner under limited circumstances), we, at our option, may redeem Series F Preferred Shares at a redemption price of $25.00 per share, plus any accrued and unpaid dividends through the date of redemption. The Series F Preferred Shares have no maturity date and will remain outstanding indefinitely unless redeemed by us.

 

Series G Cumulative Redeemable Preferred Shares of Beneficial Interest

 

Holders of Series G Preferred Shares of beneficial interest are entitled to receive dividends at an annual rate of 6.625% of the liquidation preference of $25.00 per share, or $1.656 per Series G Preferred Share per annum. These dividends are cumulative and payable quarterly in arrears. The Series G Preferred Shares are not convertible into, or exchangeable for, any other property or any other security of the Company. On or after December 22, 2009 (or sooner under limited circumstances), we, at our option, may redeem Series G Preferred Shares at a redemption price of $25.00 per share, plus any accrued and unpaid dividends through the date of redemption. The Series G Preferred Shares have no maturity date and will remain outstanding indefinitely unless redeemed by us.

 

Series H Cumulative Redeemable Preferred Shares of Beneficial Interest

 

Holders of the Series H Preferred Shares of beneficial interest are entitled to receive dividends at an annual rate of 6.75% of the liquidation preference of $25.00 per share, or $1.6875 per Series H Preferred Share per annum. The dividends are cumulative and payable quarterly in arrears. The Series H Preferred Shares are not convertible into, or exchangeable for, any other property or any other security of the Company. On or after June 17, 2010 (or sooner under limited circumstances), we, at our option, may redeem Series H Preferred Shares at a redemption price of $25.00 per share, plus any accrued and unpaid dividends through the date of redemption. The Series H Preferred Shares have no maturity date and will remain outstanding indefinitely unless redeemed by us.

 

Series I Cumulative Redeemable Preferred Shares of Beneficial Interest

 

Holders of the Series I Preferred Shares of beneficial interest are entitled to receive dividends at an annual rate of 6.625% of the liquidation preference of $25.00 per share, or $1.656 per Series I Preferred Share per annum. The dividends are cumulative and payable quarterly in arrears. The Series I Preferred Shares are not convertible into, or exchangeable for, any other property or any other security of the Company. On or after August 31, 2010 (or sooner under limited circumstances), we, at our option, may redeem Series I Preferred Shares at a redemption price of $25.00 per share, plus any accrued and unpaid dividends through the date of redemption. The Series I Preferred Shares have no maturity date and will remain outstanding indefinitely unless redeemed by us.

 

Accumulated Other Comprehensive Income

 

Accumulated other comprehensive (loss) income was ($6,899,000) and $29,772,000 as of December 31, 2008 and 2007, respectively, and primarily consists of accumulated unrealized (loss) income from the mark-to-market of marketable equity securities classified as available-for-sale.

 

 


VORNADO REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

 

11.

Stock-based Compensation

 

Our Share Option Plan (the “Plan”) provides for grants of incentive and non-qualified stock options, restricted stock, stock appreciation rights and performance shares to certain employees and officers. We have approximately 2,400,000 shares available for future grant under the Plan at December 31, 2008.

 

In March 2006, our Board of Trustees (the “Board”) approved an amendment to the Plan to permit the Compensation Committee of the Board (the “Compensation Committee”) to grant awards in the form of limited partnership units (“OP Units”) of the Operating Partnership. OP Units can be granted either as free-standing awards or in tandem with other awards under the Plan. OP Units may be converted into the Operating Partnership’s Class A common units and, consequently, become convertible by the holder on a one-for-one basis for our common shares or the cash value of such shares at our election.

 

We account for all stock-based compensation in accordance with SFAS 123R: Stock based compensation expense for the year ended December 31, 2007 and 2006 consists of stock option awards, restricted stock and Operating Partnership unit awards and out-performance plan awards.

 

2006 Out-Performance Plan

 

In March 2006, the Board approved the terms of the Vornado Realty Trust 2006 Out-Performance Plan (the “2006 OPP”), a long-term “pay-for-performance” incentive compensation program. The purpose of the 2006 OPP was to further align the interests of our shareholders and management by encouraging our senior officers and employees to create shareholder value. On April 25, 2006, our Compensation Committee approved 2006 OPP awards to a total of 54 employees and officers of the Company, which aggregated 91% of the total 2006 OPP. The fair value of the awards on the date of grant, as adjusted for estimated forfeitures, was approximately $46,141,000 and is being amortized into expense over the five-year vesting period beginning on the date of grant, using a graded vesting attribution model.

 

Under the 2006 OPP, award recipients share in a performance pool when our total return to shareholders exceeds a cumulative 30% (for a period of 30 consecutive days), including both share appreciation and dividends paid, from a price per share of $89.17 (the average closing price per common share for the 30 trading days prior to March 15, 2006). The size of the pool is 10% of the amount in excess of the 30% benchmark, subject to a maximum cap of $100,000,000. Each award was designated as a specified percentage of the $100,000,000 maximum cap. Awards were issued in the form of a new class of Operating Partnership units (“OPP Units”) and are subject to achieving the performance threshold, time vesting and other conditions. OPP Units are convertible by the holder into an equivalent number of the Operating Partnership’s Class A units, which are redeemable by the holder for Vornado common shares on a one-for-one basis or the cash value of such shares, at our election. All awards earned vest 33.3% on each of March 15, 2009, 2010 and 2011 subject to continued employment. Once a performance pool has been established, each OPP Unit will receive a distribution equal to the distribution paid on a Class A unit, including an amount payable in OPP Units representing distributions paid on a Class A unit during the performance period. As of January 12, 2007, the maximum performance threshold under the Out-Performance Plan was achieved, concluding the performance period.  

 

 


VORNADO REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

 

11.

Stock-based Compensation - continued

 

 

2008 Out-Performance Plan

 

On March 31, 2008, our Compensation Committee approved a $75,000,000 out-performance plan (the “2008 OPP”) that requires the achievement of performance objectives against both absolute and relative thresholds. The 2008 OPP establishes a potential performance pool in which 78 members of senior management have the opportunity to share if the total return to our shareholders (the “Total Return”) resulting from both share appreciation and dividends for the four-year period from March 31, 2008 to March 31, 2012 exceeds both an absolute and a relative hurdle. The initial value from which to determine the Total Return is $86.20 per share, a 0.93% premium to the trailing 10-day average closing price on the New York Stock Exchange for our common shares on the date the plan was adopted.

 

The size of the out-performance pool for the 2008 OPP is 6% of the aggregate “out-performance return” subject to a maximum total award of $75,000,000 (the “Maximum Award”). The “out-performance return” is comprised of (i) 3% of the total dollar value of the Total Return in excess of 10% per annum (the “Absolute Component”), plus (ii) 3% of the total dollar value of the Total Return in excess of the Relative Threshold (the “Relative Component”), based on the SNL Equity REIT Index (the “Index”) over the four-year performance period. In the event that the Relative Component creates a negative award as a result of underperforming the Index, the value of any out-performance award potentially earned under the Absolute Component will be reduced dollar for dollar. In addition, awards potentially earned under the Relative Component will be reduced on a ratable sliding scale to the extent the Total Return is less than 10% per annum and to zero to the extent the Total Return is less than 7% per annum. The size of this out-performance pool, if any, will be determined based on the highest 30-trading day trailing average price of our common shares during the final 150 days of the four-year period. During the four-year performance period, participants are entitled to receive 10% of the common dividends paid on Vornado’s common shares for each OPP unit awarded, regardless of whether the OPP units are ultimately earned.

 

The 2008 OPP also provides participants an opportunity to earn partial awards during two interim measurement periods (the “Interim Periods”): (a) one for a period consisting of the first two years of the performance period and (b) one for a period consisting of the final two years of the performance period. For each Interim Period, participants may be entitled to share in 40% ($30,000,000) of the maximum $75,000,000 performance pool if the performance thresholds have been met for the applicable Interim Periods on a pro rated basis. The starting share price for the first Interim Period is $86.20 per share. The starting share price for the second Interim Period is equal to the greater of our common share price on March 31, 2010, or the initial starting share price of $86.20 per share less dividends paid during the first two years of the plan. If the maximum award is earned during the first Interim Period, participants lose the potential to earn the second Interim Period award, but not the potential to earn the remainder of the maximum award over the four-year period. The size of any out-performance pool for an Interim Period will be determined based on the highest 30-day trailing average price of our shares during the final 120 days of the applicable Interim Period. Awards earned under the program (including any awards earned for the Interim Periods), will vest 50% on March 31, 2012 and 50% on March 31, 2013. The fair value of the OPP awards on the date of grant, as adjusted for estimated forfeitures, was approximately $21,600,000, and is being amortized into expense over a five-year period beginning on the date of grant through the final vesting period, using a graded vesting attribution model.

 

 

For the years ended December 31, 2008, 2007 and 2006, we recognized $16,021,000, $12,734,000 and $8,293,000 of compensation expense, respectively, in connection with our 2006 and 2008 out-performance plans. The remaining unrecognized compensation expense of $29,551,000 will be recognized over a weighted-average period of 2.0 years. Distributions paid on unvested OPP Units are charged to “minority interest expense” on our consolidated statements of income and amounted to $2,918,000, $2,694,000 and $0 in 2008, 2007 and 2006, respectively.

 

 


VORNADO REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

 

11.

Stock-based Compensation - continued

 

Stock Options

 

Stock options are granted at an exercise price equal to 100% of the average of the high and low market price of our common shares on the NYSE on the date of grant, generally vest pro-rata over five years and expire 10 years from the date of grant. In 2008, our senior executives were granted options with an exercise price of 17.5% in excess of the average of the high and low market price of our common shares on the NYSE on the date of the grant.

 

Compensation expense is recognized on a straight-line basis over the vesting period. During the years ended December 31, 2008, 2007, and 2006, we recognized $9,051,000, $4,549,000 and $1,705,000, of compensation expense, respectively, for the portion of stock option awards that vested during each year.

 

Below is a summary of our stock option activity under the Plan for the year ended December 31, 2008.

 

 

 

Shares

 

Weighted-
Average
Exercise
Price

 

Weighted-
Average
Remaining
Contractual
Term

 

Aggregate
Intrinsic
Value

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Outstanding at January 1, 2008

 

 

9,725,311

 

$

49.41

 

 

 

 

 

 

 

Granted

 

 

2,806,615

 

 

101.23

 

 

 

 

 

 

 

Exercised

 

 

(2,420,749

)

 

35.56

 

 

 

 

 

 

 

Cancelled

 

 

(120,694

)

 

106.70

 

 

 

 

 

 

 

Outstanding at December 31, 2008

 

 

9,990,483

 

$

66.64

 

 

5.2

 

$

123,360,000

 

Options vested and expected to vest at
December 31, 2008

 

 

9,970,106

 

$

66.57

 

 

5.2

 

$

123,360,000

 

Options exercisable at December 31, 2008

 

 

5,595,718

 

$

39.68

 

 

2.4

 

$

123,356,000

 

 

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, 2008, 2007 and 2006.

 

 

 

December 31

 

 

 

2008

 

2007

 

2006

 

Expected volatility

 

19%

 

17%

 

17%

 

Expected life

 

7.7 years

 

5 years

 

5 years

 

Risk-free interest rate

 

3.2%

 

4.5%

 

4.4%

 

Expected dividend yield

 

4.8%

 

5.0%

 

5.0%

 

 

The weighted average grant date fair value of options granted during the years ended December 31, 2008, 2007 and 2006 was $6.80, $12.55 and $10.23, respectively. Cash received from option exercises for the years ended December 31, 2008, 2007 and 2006 was $27,587,000, $34,648,000 and $75,665,000, respectively. The total intrinsic value of options exercised during the years ended December 31, 2008, 2007 and 2006 was $79,997,000, $99,656,000 and $244,694,000, respectively.

 

 


VORNADO REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

 

11.

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 five years. Compensation expense is recognized on a straight-line basis over the vesting period. During the years ended December 31, 2008, 2007 and 2006, we recognized $3,201,000, $4,079,000 and $3,820,000 of compensation expense, respectively, for the portion of restricted stock awards that vested during each year. As of December 31, 2008, there was $3,772,000 of total unrecognized compensation cost related to nonvested shares granted under the Plan. This cost is expected to be recognized over a weighted-average period of 1.74 years. Dividends paid on unvested shares are charged directly to retained earnings and amounted to $308,000, $533,000 and $842,000 for the years ended December 31, 2008, 2007 and 2006, respectively. The total fair value of shares vested during the years ended December 31, 2008, 2007 and 2006 was $4,472,000, $8,907,000 and $6,170,000, respectively.

 

Below is a summary of restricted stock activity under the Plan for the year ended December 31, 2008.

 

Non-vested Shares

 

Shares

 

Weighted-Average
Grant-Date
Fair Value

 

Non-vested at January 1, 2008

 

 

159,388

 

$

70.07

 

Granted

 

 

6,987

 

 

85.20

 

Vested

 

 

(75,593

)

 

57.25

 

Forfeited

 

 

(2,922

)

 

99.81

 

Non-vested at December 31, 2008

 

 

87,860

 

 

81.31

 

 

 

Restricted Operating Partnership Units (“OP Units”)

 

Restricted 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 five years and are subject to a taxable book-up event, as defined. The fair value of these awards on the date of grant, as adjusted for estimated forfeitures, was approximately $7,167,000, $10,696,000, and $3,480,000 for the awards granted in 2008, 2007 and 2006, respectively, and is amortized into expense over the five-year vesting period using a graded vesting attribution model. During the years ended December 31, 2008, 2007 and 2006, we recognized $6,257,000, $5,493,000, and $1,053,000, of compensation expense, respectively, for the portion of Restricted OP Units that vested during last year. As of December 31, 2008, there was $8,150,000 of total remaining unrecognized compensation cost related to non-vested OP units granted under the Plan and the cost is expected to be recognized over a weighted-average period of 1.78 years. Distributions paid on unvested OP Units are charged to “minority interest expense” on our consolidated statements of income and amounted to $938,000, $444,000, and $147,000 in 2008, 2007 and 2006, respectively. The total fair value of units vested during the year ended December 31, 2008 was $1,952,000.

 

Below is a summary of restricted OP unit activity under the Plan for the year ended December 31, 2008.

 

 

Non-vested Units

 

Units

 

Weighted-Average
Grant-Date
Fair Value

 

Non-vested at January 1,2008

 

155,028

 

$

83.37

 

Granted

 

112,726

 

 

63.58

 

Vested

 

(32,993

)

 

82.55

 

Forfeited

 

(1,682

)

 

62.31

 

Non-vested at December 31, 2008

 

233,079

 

 

74.07

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


VORNADO REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

 

12.

Retirement Plans

Prior to December 2008, we had two defined benefit pension plans, a Vornado Realty Trust Retirement Plan (“Vornado Plan”) and a Merchandise Mart Properties Pension Plan (“Mart Plan”). The benefits under the Vornado Plan and the Mart Plan (collectively, the “Plans”) were frozen in December 1997 and June 1999, respectively. Benefits under the Plans are or were primarily based on years of service and compensation during employment or on years of credited service and established monthly benefits. Funding policy for the Plans was based on contributions at the minimum amounts required by law. In December 2008, we finalized the termination of the Vornado Plan which resulted in a $4,600,000 pension settlement expense which is included as a component of “general and administrative” expense on our consolidated statement of income. In addition, during the first quarter of 2009, we expect to finalize the termination of the Mart Plan, which will result in the recognition of a $2,800,000 pension settlement expense. The financial results of the Mart Plan, using a December 31, measurement date, are provided below.

 

Obligations and Funded Status

 

The following table sets forth the Mart Plan’s funded status and amounts recognized in our balance sheets:

 

 

 

 

 

 

 

 

 

 

 

2008

 

2007

 

(Amounts in thousands)

 

 

 

 

 

 

 

Fair value of plan assets at end of year

 

$

11,850

 

$

13,113

 

Benefit obligation at end of year

 

 

13,355

 

 

12,430

 

Funded status at end of year

 

$

(1,505

)

$

683

 

 

 

 

 

 

 

 

 

Amounts recorded in the consolidated balance sheet:

 

 

 

 

 

 

 

Other assets (prepaid benefit cost)

 

$

 

$

683

 

 

 

 

 

 

 

 

 

Other liabilities (accrued benefit cost)

 

$

(1,505

)

$

 

 

 

 

 

 

 

 

 

 

 

 

Pension Benefits

 

Year Ended December 31,

 

2008

 

2007

   

2006

Amounts recognized in accumulated other comprehensive (loss) income consist of:

 

 

    

 

 

 

 

 

Net loss

$

2,488

 

$

274

 

$

 

 

 

 


VORNADO REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

 

13.

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 the pass-through to tenants the tenants’ 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, 2008, 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, is as follows:

 

(Amounts in thousands)

 

 

 

Year Ending December 31:

 

 

 

2009

 

$

1,792,000

 

2010

 

 

1,732,000

 

2011

 

 

1,576,000

 

2012

 

 

1,417,000

 

2013

 

 

1,300,000

 

Thereafter

 

 

7,216,000

 

 

These amounts do not include rentals based on tenants’ sales. These percentage rents approximated $7,322,000, $9,379,000, and $7,593,000, for the years ended December 31, 2008, 2007, and 2006, respectively.

 

None of our tenants accounted for more than 10% of total revenues for the years ended December 31, 2008, 2007 and 2006.

 

Former Bradlees Locations

 

Pursuant to the Master Agreement and Guaranty, dated May 1, 1992, we are due $5,000,000 per annum of additional rent from Stop & Shop which was allocated to certain of 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 is contesting our right to reallocate and claims that we are no longer entitled to the additional rent. At December 31, 2008, we are due an aggregate of $30,400,000. We believe the additional rent provision of the guaranty expires at the earliest in 2012 and we are vigorously contesting Stop & Shop’s position.

 

 

 


VORNADO REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

 

13.

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, 2008, are as follows:

 

(Amounts in thousands)

 

 

 

Year Ending December 31:

 

 

 

2009

 

$

26,346

 

2010

 

 

25,066

 

2011

 

 

24,657

 

2012

 

 

24,865

 

2013

 

 

24,872

 

Thereafter

 

 

1,005,370

 

 

Rent expense was $29,320,000, $24,503,000, and $18,655,000 for the years ended December 31, 2008, 2007 and 2006, respectively.

 

We are also a lessee under capital leases for real estate. Lease terms generally range from 5-20 years with renewal or purchase options. 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, whichever is shorter. Amortization expense on capital leases is included in “depreciation and amortization” on our consolidated statements of income. As of December 31, 2008, future minimum lease payments under capital leases are as follows:

 

(Amounts in thousands)

 

 

 

Year Ending December 31:

 

 

 

2009

 

$

706

 

2010

 

 

707

 

2011

 

 

706

 

2012

 

 

707

 

2013

 

 

706

 

Thereafter

 

 

18,134

 

Total minimum obligations

 

 

21,666

 

Interest portion

 

 

(14,878

)

Present value of net minimum payments

 

$

6,788

 

 

At December 31, 2008 and 2007, $6,788,000 and $6,820,000, respectively, representing the present value of net minimum payments are included in “Other Liabilities” on our consolidated balance sheets. Property leased under capital leases had a total cost of $6,216,000, and related accumulated depreciation of $1,717,000 and $1,562,000, at December 31, 2008 and 2007, respectively.

 

 

 


VORNADO REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

 

14.

Commitments and Contingencies

Insurance

 

We carry commercial liability and all risk property insurance ((i) fire, (ii) flood, (iii) extended coverage, (iv) “acts of terrorism” as defined in the Terrorism Risk Insurance Program Reauthorization Act of 2007 (“TRIPRA”), which expires in December 2014, and (v) rental loss insurance) with respect to our assets. Our New York Office, Washington, DC Office, Retail and Merchandise Mart divisions have $2.0 billion of per occurrence all risk property insurance coverage, including terrorism coverage in effect through September 15, 2009. Our California properties have earthquake insurance with coverage of $150,000,000 per occurrence, subject to a deductible in the amount of 5% of the value of the affected property, and a $150,000,000 annual aggregate.

 

In June 2007 we formed Penn Plaza Insurance Company, LLC (“PPIC”), a wholly owned consolidated subsidiary, to act as a re-insurer with respect to a portion of our earthquake insurance coverage and as a direct insurer for coverage for “certified” acts of terrorism and for nuclear, biological, chemical and radiological (“NBCR”) acts, as defined by the Terrorism Risk Insurance Program Reauthorization Act of 2007 (“TRIPRA”). Coverage for “certified” acts of terrorism is fully reinsured by third party insurance companies and the Federal government with no exposure to PPIC. Prior to the formation of PPIC, we were uninsured for losses under NBCR coverage. Subsequently, we have $2.0 billion of NBCR coverage under TRIPRA, for which PPIC is responsible for 15% of each NBCR loss and the insurance company deductible of $1,000,000. 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 generally non-recourse to us), senior unsecured notes, exchangeable senior debentures, convertible senior debentures and revolving credit agreements contain customary covenants requiring us to maintain insurance. Although we believe that we have adequate insurance coverage for purposes of these agreements, we may not be able to obtain an equivalent amount of coverage at reasonable costs in the future. Further, if lenders insist on greater coverage than we are able to obtain it could adversely affect our ability to finance and/or refinance our properties and expand our portfolio.

 

Other Contractual Obligations

 

At December 31, 2008, there were $44,565,000 of outstanding letters of credit under our $0 . 965 billion revolving credit facility. Our credit facilities contain financial covenants, that require us to maintain minimum interest coverage and maximum debt to market capitalization ratios, and provide for higher interest rates in the event of a decline in our ratings below Baa3/BBB. Our credit facilities also contain customary conditions precedent to borrowing, including representations and warranties and also contain customary events of default that could give rise to accelerated repayment, including such items as failure to pay interest or principal.

 

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

 

We are committed to fund additional capital to certain of our partially owned entities aggregating approximately $213,352,000. Of this amount, $80,923,000 is committed to IPF and is pledged as collateral to IPF’s lender.

 

From time to time, we have disposed of substantial amounts of real estate to third parties for which, as to certain properties, we remain contingently liable for rent payments or mortgage indebtedness that we cannot quantify.

 


VORNADO REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

 

14.

Commitments and Contingencies – continued

Litigation

 

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

 

On January 8, 2003, Stop & Shop filed a complaint with the United States District Court for the District of New Jersey (“USDC-NJ”) claiming that we had no right to reallocate and therefore continue to collect the $5,000,000 of annual rent from Stop & Shop pursuant to the Master Agreement and Guaranty, because of the expiration of the East Brunswick, Jersey City, Middletown, Union and Woodbridge leases to which the $5,000,000 of additional rent was previously allocated. Stop & Shop asserted that a prior order of the Bankruptcy Court for the Southern District of New York dated February 6, 2001, as modified on appeal to the District Court for the Southern District of New York on February 13, 2001, froze our right to reallocate which effectively terminated our right to collect the additional rent from Stop & Shop. On March 3, 2003, after we moved to dismiss for lack of jurisdiction, Stop & Shop voluntarily withdrew its complaint. On March 26, 2003, Stop & Shop filed a new complaint in New York Supreme Court, asserting substantially the same claims as in its USDC-NJ complaint. We removed the action to the United States District Court for the Southern District of New York. In January 2005 that court remanded the action to the New York Supreme Court. On February 14, 2005, we served an answer in which we asserted a counterclaim seeking a judgment for all the unpaid additional rent accruing through the date of the judgment and a declaration that Stop & Shop will continue to be liable for the additional rent as long as any of the leases subject to the Master Agreement and Guaranty remain in effect. On May 17, 2005, we filed a motion for summary judgment. On July 15, 2005, Stop & Shop opposed our motion and filed a cross-motion for summary judgment. On December 13, 2005, the Court issued its decision denying the motions for summary judgment. Both parties appealed the Court’s decision and on December 14, 2006, the Appellate Court division issued a decision affirming the Court’s decision. On January 16, 2007, we filed a motion for the reconsideration of one aspect of the Appellate Court’s decision which was denied on March 13, 2007. We are currently engaged in discovery and anticipate that a trial date will be set for some time in 2009. We intend to vigorously pursue our claims against Stop & Shop. In our opinion, after consultation with legal counsel, the outcome of such matters will not have a material effect on our financial condition, results of operations or cash flows.

 

On May 24, 2007, we acquired a 70% controlling interest in 1290 Avenue of the Americas and the 555 California Street complex. Our 70% interest was acquired through the purchase of all of the shares of a group of foreign companies that own, through U.S. entities, the 1% sole general partnership interest and a 69% limited partnership interest in the partnerships that own the two properties. The remaining 30% limited partnership interest is owned by Donald J. Trump. In August 2005, Mr. Trump brought a lawsuit in the New York State Supreme Court against, among others, the general partners of the partnerships referred to above.   Mr. Trump’s claims arose out of a dispute over the sale price of and use of proceeds from, the sale of properties located on the former Penn Central rail yards between West 59th and 72nd Streets in Manhattan which were formerly owned by the partnerships. In decisions dated September 14, 2005 and July 24, 2006, the Court denied several of Mr. Trump’s motions and ultimately dismissed all of Mr. Trump’s claims, except for his claim seeking access to books and records. In a decision dated October 1, 2007, the Court determined that Mr. Trump had already received access to the books and records to which he was entitled, with the exception of certain documents which were subsequently delivered to Mr. Trump. Mr. Trump sought re-argument and renewal on, and filed a notice of appeal in connection with, his dismissed claims.  In a decision dated January 6, 2009, the Court denied all of Mr. Trump’s motions. Mr. Trump has filed a notice appealing the 2007 and 2009 decisions. In connection with the acquisition, we agreed to indemnify the sellers for liabilities and expenses arising out of Mr. Trump’s claim that the general partners of the partnerships we acquired did not sell the rail yards at a fair price or could have sold the rail yards for a greater price and any other claims asserted in the legal action; provided however, that if Mr. Trump prevails on certain claims involving partnership matters, other than claims relating to sale price, the sellers will be required to reimburse us for certain costs related to those claims. We believe that the claims relating to the sale price are without merit. All other allegations are not asserted as a basis for damages and regardless of merit, and in our opinion, after consultation with legal counsel, will not have a material effect on our financial condition, results of operations or cash flows .

 

In July 2005, we acquired H Street Building Corporation (“H Street”) which has a subsidiary that owns, among other things, a 50% tenancy in common interest in land located in Arlington County, Virginia, known as "Pentagon Row," leased to two tenants. In April 2007, H-Street acquired the remaining 50% interest in that fee. In April 2007, we received letters from those tenants, Street Retail, Inc. and Post Apartment Homes, L.P., claiming they had a right of first offer triggered by each of those transactions. On September 25, 2008, both tenants filed suit against us and the former owners. The claim alleges the right to purchase the fee interest, damages in excess of $75,000,000 and punitive damages. We believe this claim is without merit and in our opinion, after consultation with legal counsel, will not have a material effect on our financial condition, results of operations or cash flows .

 

 


VORNADO REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

 

15.

Related Party Transactions

Loan and Compensation Agreements

 

Pursuant to our annual compensation review in February 2002 with Joseph Macnow, our Chief Financial Officer, the Compensation Committee approved a $2,000,000 loan to Mr. Macnow, which bore interest at the applicable federal rate of 4.65% per annum and was scheduled to mature in June 2007. The loan was funded on July 23, 2002 and was collateralized by assets with a value of not less than two times the loan amount. On March 26, 2007, Mr. Macnow repaid to us his $2,000,000 outstanding loan.

 

Effective as of April 19, 2007, we entered into a new employment agreement with Mitchell Schear, the President of our Washington, DC Office Division. This agreement, which replaced his prior agreement, was approved by the Compensation Committee of our Board of Trustees and provides for a term of five years and is automatically renewable for one-year terms thereafter. The agreement also provides for a minimum salary of $1,000,000 per year and bonuses and other customary benefits. Pursuant to the terms of the agreement, on April 19, 2007, the Compensation Committee granted options to Mr. Schear to acquire 200,000 of our common shares at an exercise price of $119.94 per share. These options vest ratably over three years beginning in 2010 and accelerate on a change of control or if we terminate his employment without cause or by him for breach by us. The agreement also provides that if we terminate Mr. Schear’s employment without cause or by him for breach by us, he will receive a lump-sum payment equal to one year’s salary and bonus, up to a maximum of $2,000,000.

 

Transactions with Affiliates and Officers and Trustees of the Company

 

Alexander’s

We own 32.5% of Alexander’s. Steven Roth, the Chairman of our Board and Chief Executive Officer, and Michael D. Fascitelli, our President, 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.

 

On September 9, 2008, Alexander’s Board of Directors declared a special dividend of $7.00 per share, payable on October 30, 2008, to shareholders of record on October 14, 2008. The dividend was attributable to the liquidation of the wholly owned 731 Lexington Avenue taxable REIT subsidiary into Alexander’s. Accordingly, on October 30, we received $11,578,000, which was accounted for as a reduction of our investment in Alexander’s.

 

On September 15, 2008 and October 14, 2008, Steven Roth, the Chairman of our Board of Directors and Chief Executive Officer, who holds the same positions in Alexander’s, exercised an aggregate of 200,000 of his SARs, which were scheduled to expire on March 4, 2009, and received gross proceeds of $62,809,000.

 

On March 13, 2007, Michael Fascitelli, our President, who also holds the same position in Alexander’s, exercised 350,000 of his SARs, which were scheduled to expire on March 14, 2007, and he received gross proceeds of $50,465,000.

 

Interstate Properties (“Interstate”)

 

Interstate is a general partnership in which Steven Roth, the Chairman of our Board and Chief Executive Officer, 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, 2008, Interstate and its partners beneficially owned approximately 8.8% of the common shares of beneficial interest of Vornado and 27.0% 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 sixty 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 $803,000, $800,000 and $798,000 of management fees under the agreement for the years ended December 31, 2008, 2007 and 2006.

 

 


VORNADO REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

 

16.

Minority Interest

Minority interest on our consolidated balance sheets aggregated $1,590,891,000 and $2,074,601,000 as of December 31, 2008 and 2007, respectively. Of these balances, $1,177,977,000 and $1,658,303,000 respectively, represent third-party limited partners’ interests in the Operating Partnership; and $412,914,000 and $416,298,000, respectively, represent the minority ownership of consolidated partially owned entities.

 

Class A units of the Operating Partnership 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. As of December 31, 2008, as part of our preparation for the adoption of SFAS 160, which is effective for us on January 1, 2009, we have retroactively adopted the measurement provisions of EITF Topic D-98, Classification and Measurement of Redeemable Securities , and accordingly, have reduced the carrying amounts of these Class A units by $404,447,000 and $467,165,000, as of December 31, 2008 and 2007, respectively, to reflect the change in their redemption value at the end of each reporting period. The corresponding entry for these adjustments were recorded to “additional capital.” As of December 31, 2008 and 2007, the aggregate redemption value of the then outstanding Class A units of the Operating Partnership owned by third parties was approximately $882,740,000 and $1,365,874,000 respectively.

 

Details of Operating Partnership units owned by third-parties that are included in “minority interest” as of December 31, 2008 and 2007 are as follows:

 

 

 

Outstanding Units at

 

Per Unit

 

Preferred or
Annual

 

Conversion

 

Unit Series

 

December 31,
2008

 

December 31,
2007

 

Liquidation
Preference

 

Distribution
Rate

 

Rate Into Class
A Units

 

Common:

 

 

 

 

 

 

 

 

 

 

 

 

 

Class A

 

14,627,005

 

15,530,125

 

 

N/A

 

$

3.65

 

N/A

 

Convertible Preferred:

 

 

 

 

 

 

 

 

 

 

 

 

 

B-1 Convertible Preferred (1)

 

139,798

 

139,798

 

$

50.00

 

$

2.50

 

(1)

 

B-2 Convertible Preferred (1)

 

304,761

 

304,761

 

$

50.00

 

$

4.00

 

(1)

 

Perpetual Preferred: (2)

 

 

 

 

 

 

 

 

 

 

 

 

 

7.00% D-10 Cumulative Redeemable

 

3,200,000

 

3,200,000

 

$

25.00

 

$

1.75

 

N/A

 

7.20% D-11 Cumulative Redeemable

 

1,400,000

 

1,400,000

 

$

25.00

 

$

1.80

 

N/A

 

6.55% D-12 Cumulative Redeemable

 

800,000

 

800,000

 

$

25.00

 

$

1.637

 

N/A

 

6.75% D-14 Cumulative Redeemable

 

4,000,000

 

4,000,000

 

$

25.00

 

$

1.6875

 

N/A

 

6.875% D-15 Cumulative Redeemable

 

1,800,000

 

1,800,000

 

$

25.00

 

$

1.71875

 

N/A

 

__________________________________

 

 

(1)

Class B-1 and B-2 units are convertible into Class A units at a rate of 100 Class A units for each pairing of 100 Class B-1 units and 218 Class B-2 units. Class B-1 unitholders are entitled to receive, in liquidation, an amount equal to the positive difference, if any, between the amount paid in liquidation for a Class A unit and the amount paid in respect of a Class B-2 unit multiplied by 2.18. Class B-2 unitholders are entitled to receive in liquidation the lesser of $50 per unit or the amount paid in respect of a Class A unit on liquidation divided by 2.18. Class B-1 unitholders receive distributions only if, and to the extent that, we pay quarterly dividends on the Class A units in excess of $0.85 per unit. Class B-2 unitholders are expected to receive quarterly distributions of $0.39 per unit.

 

 

(2)

Holders may tender for redemption to the Operating Partnership for cash at their stated redemption amount; we, at our option, may assume that obligation and pay the hold either cash or Vornado preferred shares on a one-for-one basis. These units are redeemable at our option after the 5th anniversary of the date of issuance (ranging from November 2008 to December 2011).

 

 

 

 


VORNADO REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

 

17.

Income Per Share

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

 

(Amounts in thousands, except per share amounts)

 

Year Ended December 31,

 

 

 

2008

 

2007

 

2006

 

 

 

 

 

 

 

 

 

 

 

 

Numerator:

 

 

 

 

 

 

 

 

 

 

Income from continuing operations, net of minority interest in the
Operating Partnership

 

$

240,601

 

$

510,517

 

$

527,925

 

Income from discontinued operations, net of minority interest

 

 

154,442

 

 

58,389

 

 

32,215

 

Net income

 

 

395,043

 

 

568,906

 

 

560,140

 

Preferred share dividends

 

 

(57,091

)

 

(57,177

)

 

(57,511

)

Numerator for basic income per share – net income applicable to common shares

 

 

337,952

 

 

511,729

 

 

502,629

 

Impact of assumed conversions:

 

 

 

 

 

 

 

 

 

 

Series A convertible preferred share dividends

 

 

 

 

277

 

 

631

 

Convertible preferred unit distributions

 

 

 

 

 

 

485

 

Numerator for diluted income per share – net income applicable to common shares

 

$

337,952

 

$

512,006

 

$

503,745

 

Denominator:

 

 

 

 

 

 

 

 

 

 

Denominator for basic income per share – weighted average shares

 

 

153,900

 

 

151,949

 

 

142,145

 

Effect of dilutive securities (1) :

 

 

 

 

 

 

 

 

 

 

Employee stock options and restricted share awards

 

 

4,219

 

 

6,491

 

 

7,829

 

Series A convertible preferred shares

 

 

 

 

118

 

 

269

 

Convertible preferred units

 

 

 

 

 

 

168

 

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

 

 

158,119

 

 

158,558

 

 

150,411

 

INCOME PER COMMON SHARE – BASIC:

 

 

 

 

 

 

 

 

 

 

Income from continuing operations

 

$

1.20

 

$

2.98

 

$

3.31

 

Income from discontinued operations

 

 

1.00

 

 

0.39

 

 

0.23

 

Net income per common share

 

$

2.20

 

$

3.37

 

$

3.54

 

INCOME PER COMMON SHARE – DILUTED:

 

 

 

 

 

 

 

 

 

 

Income from continuing operations

 

$

1.16

 

$

2.86

 

$

3.13

 

Income from discontinued operations

 

 

0.98

 

 

0.37

 

 

0.22

 

Net income per common share

 

$

2.14

 

$

3.23

 

$

3.35

 

____________________

 

(1)

The effect of dilutive securities in the years ended December 31, 2008, 2007 and 2006 excludes an aggregate of 25,420, 22,272 and 21,900 weighted average common share equivalents, respectively, as their effect was anti-dilutive.

 


VORNADO REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

 

18.

Summary of Quarterly Results (Unaudited)

The following summary represents the results of operations for each quarter in 2008, 2007 and 2006:

 

 

 

 

 

Net Income
(loss) Applicable

 

Income (loss) Per
Common Share (2)

 

 

 

Revenues

 

to Common
Shares (1)

 

Basic

 

Diluted

 

(Amounts in thousands, except share amounts)

 

 

 

 

 

 

 

 

 

 

 

 

 

2008

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31

 

$

696,259

 

$

(216,786

)

$

(1.40

)

$

(1.40

)

September 30

 

 

677,145

 

 

31,430

 

 

0.20

 

 

0.20

 

June 30

 

 

674,365

 

 

125,386

 

 

0.82

 

 

0.79

 

March 31

 

 

649,282

 

 

397,922

 

 

2.60

 

 

2.47

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2007

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31

 

$

657,166

 

$

90,923

 

$

0.60

 

$

0.57

 

September 30

 

 

637,078

 

 

116,546

 

 

0.77

 

 

0.74

 

June 30

 

 

583,220

 

 

151,625

 

 

1.00

 

 

0.96

 

March 31

 

 

533,052

 

 

152,635

 

 

1.01

 

 

0.96

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2006

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31

 

$

513,441

 

$

105,427

 

$

0.73

 

$

0.69

 

September 30

 

 

482,429

 

 

113,632

 

 

0.80

 

 

0.76

 

June 30

 

 

465,594

 

 

148,765

 

 

1.05

 

 

0.99

 

March 31

 

 

447,636

 

 

134,805

 

 

0.96

 

 

0.91

 

______________________________

 

(1)

Fluctuations among quarters resulted primarily from the mark-to-market of derivative instruments, net gains on sale of real estate and wholly owned and partially owned assets other than depreciable 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.

 

 

19.

Impairment Losses on Development Projects and Costs of Acquisitions Not Consummated

Below is a summary of non-cash Impairment losses on development projects and costs of acquisitions not consummated.

 

 

 

For the Year Ended
December 31,

 

 

 

 

2008

 

 

2007

 

Impairment loss on residential condominium projects

 

$

50,625

 

$

 

Write-down of land held for development

 

 

12,500

 

 

 

Cost of acquisitions not consummated (1)

 

 

3,378

 

 

10,375

 

Other write-downs on development projects

 

 

14,944

 

 

 

 

 

$

81,447

 

$

10,375

 

 

 

 

 

 

 

 

 

______________________________

 

(1)

2008 primarily represents costs related to the Hudson Rail Yards acquisition not consummated. 2007 primarily represents costs related to the Equity Office Properties Trust acquisition not consummated .

 

 


VORNADO REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

20.

Segment Information

The financial information summarized below is presented by reportable operating segment, consistent with how we review and manage our businesses.

(Amounts in thousands)

 

For the Year Ended December 31, 2008

 

 

 

Total

 

New York
Office

 

Washington, DC
Office (2)

 

Retail

 

Merchandise
Mart (2)

 

Toys

 

Other (4)

 

Property rentals

 

$

2,024,075

 

$

722,445

 

$

509,377

 

$

349,763

 

$

245,400

 

$

 

$

197,090

 

Straight-line rents:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Contractual rent increases

 

 

58,159

 

 

28,023

 

 

6,764

 

 

16,622

 

 

5,954

 

 

 

 

796

 

Amortization of free rent

 

 

32,901

 

 

14,743

 

 

10,778

 

 

4,156

 

 

2,703

 

 

 

 

521

 

Amortization of acquired below- market
leases, net

 

 

96,176

 

 

60,355

 

 

4,423

 

 

26,765

 

 

161

 

 

 

 

4,472

 

Total rentals

 

 

2,211,311

 

 

825,566

 

 

531,342

 

 

397,306

 

 

254,218

 

 

 

 

202,879

 

Tenant expense reimbursements

 

 

358,437

 

 

135,788

 

 

61,523

 

 

128,496

 

 

18,567

 

 

 

 

14,063

 

Fee and other income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Tenant cleaning fees

 

 

56,416

 

 

71,833

 

 

 

 

 

 

 

 

 

 

(15,417

)

Management and leasing fees

 

 

13,397

 

 

6,411

 

 

8,940

 

 

1,673

 

 

349

 

 

 

 

(3,976

)

Lease termination fees

 

 

8,634

 

 

3,088

 

 

2,635

 

 

2,281

 

 

630

 

 

 

 

 

Other

 

 

48,856

 

 

15,699

 

 

22,360

 

 

2,603

 

 

7,059

 

 

 

 

1,135

 

Total revenues

 

 

2,697,051

 

 

1,058,385

 

 

626,800

 

 

532,359

 

 

280,823

 

 

 

 

198,684

 

Operating expenses

 

 

1,070,118

 

 

439,012

 

 

220,139

 

 

201,397

 

 

137,971

 

 

 

 

71,599

 

Depreciation and amortization

 

 

537,427

 

 

190,925

 

 

137,255

 

 

92,353

 

 

51,833

 

 

 

 

65,061

 

General and administrative

 

 

194,027

 

 

20,217

 

 

26,548

 

 

29,866

 

 

29,254

 

 

 

 

88,142

 

Impairment losses on development
projects and costs of acquisitions not
consummated

 

 

81,447

 

 

 

 

 

 

595

 

 

 

 

 

 

80,852

 

Total expenses

 

 

1,883,019

 

 

650,154

 

 

383,942

 

 

324,211

 

 

219,058

 

 

 

 

305,654

 

Operating income (loss)

 

 

814,032

 

 

408,231

 

 

242,858

 

 

208,148

 

 

61,765

 

 

 

 

(106,970

)

Income applicable to Alexander’s

 

 

36,671

 

 

763

 

 

 

 

650

 

 

 

 

 

 

35,258

 

Income applicable to Toys

 

 

2,380

 

 

 

 

 

 

 

 

 

 

2,380

 

 

 

(Loss) income from partially owned entities

 

 

(195,878

)

 

5,319

 

 

6,173

 

 

9,721

 

 

1,106

 

 

 

 

(218,197

)

Interest and other investment income, net

 

 

(2,682

)

 

2,288

 

 

2,116

 

 

494

 

 

356

 

 

 

 

(7,936

)

Interest and debt expense

 

 

(586,358

)

 

(139,146

)

 

(126,508

)

 

(86,787

)

 

(52,148

)

 

 

 

(181,769

)

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

 

 

7,757

 

 

 

 

 

 

 

 

 

 

 

 

7,757

 

Minority interest of partially owned entities

 

 

3,263

 

 

(4,762

)

 

 

 

157

 

 

(125

)

 

 

 

7,993

 

Income (loss) before income taxes

 

 

79,185

 

 

272,693

 

 

124,639

 

 

132,383

 

 

10,954

 

 

2,380

 

 

(463,864

)

Income tax benefit (expense)

 

 

204,537

 

 

 

 

220,973

 

 

(82

)

 

(1,206

)

 

 

 

(15,148

)

Income (loss) from continuing operations

 

 

283,722

 

 

272,693

 

 

345,612

 

 

132,301

 

 

9,748

 

 

2,380

 

 

(479,012

)

Income (loss) from discontinued
operations, net

 

 

154,442

 

 

 

 

59,068

 

 

(448

)

 

 

 

 

 

95,822

 

Income (loss) before allocation to
minority limited partners

 

 

438,164

 

 

272,693

 

 

404,680

 

 

131,853

 

 

9,748

 

 

2,380

 

 

(383,190

)

Minority limited partners’ interest
in the Operating Partnership

 

 

(21,037

)

 

 

 

 

 

 

 

 

 

 

 

(21,037

)

Perpetual preferred unit distributions of
the Operating Partnership

 

 

(22,084

)

 

 

 

 

 

 

 

 

 

 

 

(22,084

)

Net income (loss)

 

 

395,043

 

 

272,693

 

 

404,680

 

 

131,853

 

 

9,748

 

 

2,380

 

 

(426,311

)

Interest and debt expense (3)

 

 

782,394

 

 

132,406

 

 

130,310

 

 

102,600

 

 

53,072

 

 

147,812

 

 

216,194

 

Depreciation and amortization (3)

 

 

710,526

 

 

181,699

 

 

143,989

 

 

98,238

 

 

52,357

 

 

136,634

 

 

97,609

 

Income tax expense (benefit) (3)

 

 

(142,415

)

 

 

 

(220,965

)

 

82

 

 

1,260

 

 

59,652

 

 

17,556

 

EBITDA (1)

 

$

1,745,548

 

$

586,798

 

$

458,014

 

$

332,773

 

$

116,437

 

$

346,478

 

$

(94,952

)

Percentage of EBITDA by segment

 

 

100.0

%

 

33.6

%

 

26.2

%

 

19.1

%

 

6.7

%

 

19.8

%

 

(5.4

)%

Balance Sheet Data:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Real estate, at cost

 

$

17,869,658

 

$

5,362,129

 

$

4,583,519

 

$

4,576,729

 

$

1,344,093

 

$

 

$

2,003,188

 

Investments in partially owned entities

 

 

1,083,250

 

 

129,934

 

 

115,121

 

 

20,079

 

 

6,969

 

 

293,096

 

 

518,051

 

Tot al Assets                      

 

 

21,418,210

 

 

5,287,544

 

 

3,934,039

 

 

3,733,586

 

 

1,468,470

 

 

293,096

 

 

6,701,475

 

See notes on page 175.

         

172

                         

VORNADO REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

20.

Segment Information - continued

(Amounts in thousands)

 

For the Year Ended December 31, 2007

 

 

 

Total

 

New York
Office

 

Washington, DC
Office (2)

 

Retail

 

Merchandise
Mart (2)

 

Toys

 

Other (4)

 

Property rentals

 

$

1,816,698

 

$

640,739

 

$

455,416

 

$

328,911

 

$

237,199

 

$

 

$

154,433

 

Straight-line rents:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Contractual rent increases

 

 

42,431

 

 

13,281

 

 

11,856

 

 

12,257

 

 

4,193

 

 

 

 

844

 

Amortization of free rent

 

 

34,602

 

 

15,935

 

 

14,115

 

 

1,138

 

 

1,836

 

 

 

 

1,578

 

Amortization of acquired below-
market leases, net

 

 

83,292

 

 

47,861

 

 

4,615

 

 

25,960

 

 

193

 

 

 

 

4,663

 

Total rentals

 

 

1,977,023

 

 

717,816

 

 

486,002

 

 

368,266

 

 

243,421

 

 

 

 

161,518

 

Tenant expense reimbursements

 

 

323,544

 

 

125,940

 

 

45,138

 

 

120,756

 

 

19,570

 

 

 

 

12,140

 

Fee and other income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Tenant cleaning fees

 

 

46,238

 

 

58,837

 

 

 

 

 

 

 

 

 

 

(12,599

)

Management and leasing fees

 

 

15,713

 

 

4,928

 

 

12,539

 

 

1,770

 

 

7

 

 

 

 

(3,531

)

Lease termination fees

 

 

7,453

 

 

3,500

 

 

453

 

 

2,823

 

 

677

 

 

 

 

 

Other

 

 

40,545

 

 

16,239

 

 

16,299

 

 

2,257

 

 

6,997

 

 

 

 

(1,247

)

Total revenues

 

 

2,410,516

 

 

927,260

 

 

560,431

 

 

495,872

 

 

270,672

 

 

 

 

156,281

 

Operating expenses

 

 

951,582

 

 

395,357

 

 

183,776

 

 

172,557

 

 

131,332

 

 

 

 

68,560

 

Depreciation and amortization

 

 

441,209

 

 

150,268

 

 

117,496

 

 

78,286

 

 

47,105

 

 

 

 

48,054

 

General and administrative

 

 

189,041

 

 

17,252

 

 

27,629

 

 

27,476

 

 

28,168

 

 

 

 

88,516

 

Costs of acquisitions not consummated

 

 

10,375

 

 

 

 

 

 

 

 

 

 

 

 

10,375

 

Total expenses

 

 

1,592,207

 

 

562,877

 

 

328,901

 

 

278,319

 

 

206,605

 

 

 

 

215,505

 

Operating income (loss)

 

 

818,309

 

 

364,383

 

 

231,530

 

 

217,553

 

 

64,067

 

 

 

 

(59,224

)

Income applicable to Alexander’s

 

 

50,589

 

 

757

 

 

 

 

812

 

 

 

 

 

 

49,020

 

Loss applicable to Toys “R” Us

 

 

(14,337

)

 

 

 

 

 

 

 

 

 

(14,337

)

 

 

Income from partially owned entities

 

 

31,891

 

 

4,799

 

 

8,728

 

 

9,041

 

 

1,053

 

 

 

 

8,270

 

Interest and other investment income

 

 

226,425

 

 

2,888

 

 

5,982

 

 

534

 

 

390

 

 

 

 

216,631

 

Interest and debt expense

 

 

(569,386

)

 

(133,804

)

 

(126,163

)

 

(78,234

)

 

(52,237

)

 

 

 

(178,948

)

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

 

 

39,493

 

 

 

 

 

 

 

 

 

 

 

 

39,493

 

Minority interest of partially owned
entities

 

 

3,494

 

 

(3,583

)

 

 

 

96

 

 

 

 

 

 

6,981

 

Income (loss) before income taxes

 

 

586,478

 

 

235,440

 

 

120,077

 

 

149,802

 

 

13,273

 

 

(14,337

)

 

82,223

 

Income tax expense

 

 

(9,179

)

 

 

 

(2,909

)

 

(185

)

 

(969

)

 

 

 

(5,116

)

Income (loss) from continuing operations

 

 

577,299

 

 

235,440

 

 

117,168

 

 

149,617

 

 

12,304

 

 

(14,337

)

 

77,107

 

Income (loss) from discontinued
operations, net

 

 

58,389

 

 

 

 

62,481

 

 

6,397

 

 

 

 

 

 

(10,489

)

Income (loss) before allocation to
minority limited partners

 

 

635,688

 

 

235,440

 

 

179,649

 

 

156,014

 

 

12,304

 

 

(14,337

)

 

66,618

 

Minority limited partners’ interest
in the Operating Partnership

 

 

(47,508

)

 

 

 

 

 

 

 

 

 

 

 

(47,508

)

Perpetual preferred unit distributions of
the Operating Partnership

 

 

(19,274

)

 

 

 

 

 

 

 

 

 

 

 

(19,274

)

Net income (loss)

 

 

568,906

 

 

235,440

 

 

179,649

 

 

156,014

 

 

12,304

 

 

(14,337

)

 

(164

)

Interest and debt expense (3)

 

 

823,030

 

 

131,418

 

 

131,013

 

 

89,537

 

 

53,098

 

 

174,401

 

 

243,563

 

Depreciation and amortization (3)

 

 

676,660

 

 

147,340

 

 

132,302

 

 

82,002

 

 

47,711

 

 

155,800

 

 

111,505

 

Income tax expense (benefit) (3)

 

 

4,234

 

 

 

 

6,738

 

 

185

 

 

969

 

 

(10,898

)

 

7,240

 

EBITDA (1)

 

$

2,072,830

 

$

514,198

 

$

449,702

 

$

327,738

 

$

114,082

 

$

304,966

 

$

362,144

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance Sheet Data:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Real estate, at cost

 

$

17,028,507

 

$

5,279,314

 

$

4,408,459

 

$

4,079,292

 

$

1,301,532

 

$

––

 

$

1,959,910

 

Investments in partially owned entities

 

 

1,504,831

 

 

146,784

 

 

120,561

 

 

111,152

 

 

6,283

 

 

298,089

 

 

821,962

 

Total Assets

 

 

22,478,935

 

 

5,091,848

 

 

3,315,333

 

 

3,056,915

 

 

1,475,876

 

 

298,089

 

 

9,240,874

 

___________________

See notes on page 175.


VORNADO REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

20.

Segment Information - continued

(Amounts in thousands)

 

For the Year Ended December 31, 2006

 

 

Total

 

New York
Office

 

Washington, DC
Office (2)

 

Retail

 

Merchandise
Mart (2)

 

Toys

 

Other (4)

 

Property rentals

 

$

1,458,201

 

$

487,421

 

$

394,997

 

$

264,727

 

$

224,341

 

$

 

$

86,715

 

Straight-line rents:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Contractual rent increases

 

 

31,947

 

 

4,431

 

 

13,632

 

 

7,908

 

 

6,142

 

 

 

 

(166

)

Amortization of free rent

 

 

31,103

 

 

7,245

 

 

16,155

 

 

5,080

 

 

2,623

 

 

 

 

 

Amortization of acquired below-
market leases, net

 

 

23,490

 

 

976

 

 

4,178

 

 

15,513

 

 

43

 

 

 

 

2,780

 

Total rentals

 

 

1,544,741

 

 

500,073

 

 

428,962

 

 

293,228

 

 

233,149

 

 

 

 

89,329

 

Tenant expense reimbursements

 

 

260,772

 

 

102,488

 

 

34,618

 

 

101,737

 

 

17,810

 

 

 

 

4,119

 

Fee and other income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Tenant cleaning fees

 

 

33,779

 

 

42,317

 

 

 

 

 

 

 

 

 

 

(8,538

)

Management and leasing fees

 

 

10,256

 

 

1,111

 

 

7,643

 

 

1,463

 

 

39

 

 

 

 

 

Lease termination fees

 

 

29,362

 

 

25,188

 

 

2,798

 

 

371

 

 

1,005

 

 

 

 

 

Other

 

 

30,190

 

 

12,307

 

 

11,247

 

 

1,588

 

 

4,963

 

 

 

 

85

 

Total revenues

 

 

1,909,100

 

 

683,484

 

 

485,268

 

 

398,387

 

 

256,966

 

 

 

 

84,995

 

Operating expenses

 

 

737,452

 

 

301,583

 

 

152,121

 

 

130,520

 

 

103,644

 

 

 

 

49,584

 

Depreciation and amortization

 

 

319,066

 

 

98,474

 

 

106,592

 

 

50,806

 

 

42,132

 

 

 

 

21,062

 

General and administrative

 

 

180,167

 

 

16,942

 

 

34,074

 

 

21,683

 

 

26,572

 

 

 

 

80,896

 

Total expenses

 

 

1,236,685

 

 

416,999

 

 

292,787

 

 

203,009

 

 

172,348

 

 

 

 

151,542

 

Operating income (loss)

 

 

672,415

 

 

266,485

 

 

192,481

 

 

195,378

 

 

84,618

 

 

 

 

(66,547

)

(Loss) income applicable
to Alexander’s

 

 

(14,530

)

 

772

 

 

 

 

716

 

 

 

 

 

 

(16,018

)

Loss applicable to Toys “R” Us

 

 

(47,520

)

 

 

 

 

 

 

 

 

 

(47,520

)

 

 

Income from partially owned entities

 

 

60,355

 

 

3,844

 

 

13,302

 

 

5,950

 

 

1,076

 

 

 

 

36,183

 

Interest and other investment income

 

 

255,391

 

 

913

 

 

1,782

 

 

812

 

 

275

 

 

 

 

251,609

 

Interest and debt expense

 

 

(394,571

)

 

(84,134

)

 

(97,972

)

 

(79,202

)

 

(28,672

)

 

 

 

(104,591

)

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

 

 

76,073

 

 

 

 

 

 

 

 

 

 

 

 

76,073

 

Minority interest of partially owned
entities

 

 

1,363

 

 

 

 

 

 

84

 

 

5

 

 

 

 

1,274

 

Income (loss) before income taxes

 

 

608,976

 

 

187,880

 

 

109,593

 

 

123,738

 

 

57,302

 

 

(47,520

)

 

177,983

 

Income tax (expense) benefit

 

 

(491

)

 

 

 

(1,066

)

 

 

 

575

 

 

 

 

 

Income (loss) from continuing
operations

 

 

608,485

 

 

187,880

 

 

108,527

 

 

123,738

 

 

57,877

 

 

(47,520

)

 

177,983

 

Income (loss) from discontinued
operations, net

 

 

32,215

 

 

 

 

25,714

 

 

9,206

 

 

5,682

 

 

 

 

(8,387

)

Income (loss) before allocation to
minority limited partners

 

 

640,700

 

 

187,880

 

 

134,241

 

 

132,944

 

 

63,559

 

 

(47,520

)

 

169,596

 

Minority limited partners’ interest
in the Operating Partnership

 

 

(58,712

)

 

 

 

 

 

 

 

 

 

 

 

(58,712

)

Perpetual preferred unit distributions
of the Operating Partnership

 

 

(21,848

)

 

 

 

 

 

 

 

 

 

 

 

(21,848

)

Net income (loss)

 

 

560,140

 

 

187,880

 

 

134,241

 

 

132,944

 

 

63,559

 

 

(47,520

)

 

89,036

 

Interest and debt expense (3)

 

 

692,496

 

 

86,861

 

 

107,477

 

 

89,748

 

 

29,551

 

 

196,259

 

 

182,600

 

Depreciation and amortization (3)

 

 

542,515

 

 

101,976

 

 

125,674

 

 

56,168

 

 

42,717

 

 

137,176

 

 

78,804

 

Income tax (benefit) expense (3)

 

 

(11,848

)

 

 

 

8,976

 

 

 

 

(575

)

 

(22,628

)

 

2,379

 

EBITDA (1)

 

$

1,783,303

 

$

376,717

 

$

376,368

 

$

278,860

 

$

135,252

 

$

263,287

 

$

352,819

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance Sheet Data:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Real estate, at cost

 

$

11,607,078

 

$

3,283,405

 

$

3,501,927

 

$

2,825,156

 

$

1,272,883

 

$

––

 

$

723,707

 

Investments in partially owned entities

 

 

1,440,124

 

 

106,394

 

 

286,108

 

 

143,028

 

 

6,547

 

 

317,145

 

 

580,902

 

Total Assets

 

 

17,954,281

 

 

3,733,819

 

 

2,427,378

 

 

2,507,452

 

 

1,580,691

 

 

317,145

 

 

7,387,796

 

____________________

See notes on following page.


VORNADO REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

 

20.

Segment Information - continued

Notes to preceding tabular information:

 

(1)

EBITDA represents “Earnings Before Interest, Taxes, Depreciation and Amortization.” Management considers EBITDA a supplemental measure for making decisions and assessing the un-levered performance of its 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, management utilizes this measure to make investment decisions as well as to compare the performance of its assets to that of its 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)

As of January 1, 2008, we transferred the operations and financial results related to 409 3 rd Street, NW (Washington Office Center) from the Merchandise Mart segment to the Washington, DC Office segment for both the current and prior periods presented.

 

(3)

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

 

(4)

Other EBITDA is comprised of:

 

(Amounts in thousands)

 

For the Year Ended December 31,

 

 

 

2008

 

2007

 

2006

 

Alexander’s

 

$

64,683

 

$

78,375

 

$

14,130

 

555 California Street (acquired 70% interest in May 2007)

 

 

48,316

 

 

34,073

 

 

 

Hotel Pennsylvania

 

 

42,269

 

 

37,941

 

 

27,495

 

Lexington

 

 

35,150

 

 

24,539

 

 

51,737

 

GMH (sold in June 2008)

 

 

 

 

22,604

 

 

10,737

 

Industrial warehouses

 

 

5,264

 

 

4,881

 

 

5,582

 

Other investments

 

 

6,321

 

 

7,322

 

 

13,253

 

 

 

 

202,003

 

 

209,735

 

 

122,934

 

Non-cash asset write-downs:

 

 

 

 

 

 

 

 

 

 

Investment in Lexington

 

 

(107,882

)

 

 

 

 

Marketable equity securities

 

 

(76,352

)

 

 

 

 

Real estate development costs:

 

 

 

 

 

 

 

 

 

 

Partially owned entities

 

 

(96,037

)

 

 

 

 

Wholly owned entities (including costs of acquisitions not consummated)

 

 

(80,852

)

 

(10,375

)

 

 

MPH mezzanine loan loss reversal (accrual)

 

 

10,300

 

 

(57,000

)

 

 

Derivative positions in marketable equity securities

 

 

(33,740

)

 

113,503

 

 

111,107

 

Corporate general and administrative expenses

 

 

(77,763

)

 

(76,799

)

 

(76,071

)

Investment income and other, net

 

 

89,971

 

 

182,201

 

 

209,118

 

Minority limited partners’ interest in the Operating Partnership

 

 

(21,037

)

 

(47,508

)

 

(58,712

)

Perpetual preferred unit distributions of the Operating Partnership

 

 

(22,084

)

 

(19,274

)

 

(21,848

)

Discontinued operations of Americold (including a $112,690 net gain on
sale in 2008)

 

 

118,521

 

 

67,661

 

 

66,291

 

 

 

$

(94,952

)

$

362,144

 

$

352,819

 

 

 

 

 


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 U.S. generally accepted accounting principles.

 

As of December 31, 2008, 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 (COSO). Based on this assessment, management has determined that our internal control over financial reporting as of December 31, 2008 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 U.S. generally accepted accounting principles, and that receipts and expenditures are being made only in accordance with authorizations of management and the trustees of us; 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.

 

Our internal control over financial reporting as of December 31, 2008 has been audited by Deloitte & Touche LLP, an independent registered public accounting firm, as stated in their report appearing on page 177, which expresses an unqualified opinion on the effectiveness of our internal control over financial reporting as of December 31, 2008.

 

176

 


 

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, 2008, 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, 2008, 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, 2008 of the Company and our report dated February 24, 2009 expressed an unqualified opinion on those financial statements and financial statement schedules.

 

/s/ DELOITTE & TOUCHE LLP

 

Parsippany, New Jersey

February 24, 2009

 

177

 

 


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, 2008, and such information is incorporated herein by reference. Information relating to Executive Officers of the Registrant, appears on page 59 of this Annual Report on Form 10-K. Also incorporated herein by reference is the information under the caption “16(a) Beneficial Ownership Reporting Compliance” of the Proxy Statement.

 

The Registrant has adopted a Code of Business Conduct and Ethics that applies to, among others, Steven Roth, its principal executive officer, and Joseph Macnow, its principal financial and accounting officer. This Code is available on our website at www.vno.com .

 

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, 2008 regarding our equity compensation plans.

 

Plan Category

 

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)

 

Equity compensation plans approved
by security holders

 

11,091,091

(1)

$

66.64

 

2,407,095

(2)

Equity compensation awards not
approved by security holders

 

 

 

 

 

Total

 

11,091,091

 

$

66.64

 

2,407,095

 

___________________________

 

(1)

Includes 87,860 restricted common shares, 233,079 restricted Operating Partnership units and 779,669 Out-Performance Plan units which do not have an option exercise price.

 

(2)

All of the shares available for future issuance under plans approved by the security holders may be issued as restricted shares or performance shares.

 

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.

 

 

178

 

 


 

ITEM 14.

PRINCIPAL ACCOUNTANT FEES AND SERVICES

Information relating to Principal Accountant 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.

 

PART IV

 

ITEM 15.

EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

 

(a)

The following documents are filed as part of this report:

 

 

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.

 

 

 

Pages in this
Annual Report
on Form 10-K

 

II--Valuation and Qualifying Accounts--years ended December 31, 2008, 2007 and 2006

 

181

 

III--Real Estate and Accumulated Depreciation as of December 31, 2008

 

182

 

 

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 are filed with this Annual Report on Form 10-K.

 

Exhibit No.

 

 

 

10.47

 

 

Amendment to Employment Agreement between Vornado Realty Trust and Michael D. Fascitelli, dated December 29, 2008

10.48

 

 

Amendment to Employment Agreement between Vornado Realty Trust and Joseph Macnow, dated December 29, 2008

10.49

 

 

Amendment to Employment Agreement between Vornado Realty Trust and David R. Greenbaum, dated December 29, 2008

10.50

 

 

Amendment to Indemnification Agreement between Vornado Realty Trust and David R. Greenbaum, date December 29, 2008

10.51

 

 

Amendment to Employment Agreement between Vornado Realty Trust and Mitchell N. Schear, dated December 29, 2008

10.52

 

 

Amendment to Employment Agreement between Vornado Realty Trust and Sandeep Mathrani, dated December 29, 2008

10.53

 

 

Amendment to Employment Agreement between Vornado Realty Trust and Christopher G. Kennedy, dated December 29, 2008

12

 

 

Computation of Ratios

21

 

 

Subsidiaries of Registrant

23

 

 

Consent of Independent Registered Public Accounting Firm

31.1

 

 

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

31.2

 

 

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

32.1

 

 

Section 1350 Certification of the Chief Executive Officer

32.2

 

 

Section 1350 Certification of the Chief Financial Officer

 

 

179

 

 


SIGNATURES

 

Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

 

 

VORNADO REALTY TRUST

 

 

(Registrant)

 

 

 

 

 

 

      Date: February 24, 2009

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

 

Title

 

Date

 

 

 

 

 

 

By:

/s/Steven Roth

 

Chairman of the Board of Trustees

 

February 24, 2009

 

(Steven Roth)

 

(Principal Executive Officer)

 

 

 

 

 

 

 

 

By:

/s/Michael D. Fascitelli

 

President and Trustee

 

February 24, 2009

 

(Michael D. Fascitelli)

 

 

 

 

 

 

 

 

 

 

By:

/s/Candace L. Beinecke

 

Trustee

 

February 24, 2009

 

(Candace L. Beinecke)

 

 

 

 

 

 

 

 

 

 

By:

/s/Anthony W. Deering

 

Trustee

 

February 24, 2009

 

(Anthony W. Deering)

 

 

 

 

 

 

 

 

 

 

By:

/s/Robert P. Kogod

 

Trustee

 

February 24, 2009

 

(Robert P. Kogod)

 

 

 

 

 

 

 

 

 

 

By:

/s/Michael Lynne

 

Trustee

 

February 24, 2009

 

(Michael Lynne)

 

 

 

 

 

 

 

 

 

 

By:

/s/David Mandelbaum

 

Trustee

 

February 24, 2009

 

(David Mandelbaum)

 

 

 

 

 

 

 

 

 

 

By:

/s/Robert H. Smith

 

Trustee

 

February 24, 2009

 

(Robert H. Smith)

 

 

 

 

 

 

 

 

 

 

By:

/s/Ronald G. Targan

 

Trustee

 

February 24, 2009

 

(Ronald G. Targan)

 

 

 

 

 

 

 

 

 

 

By:

/s/Richard R. West

 

Trustee

 

February 24, 2009

 

(Richard R. West)

 

 

 

 

 

 

 

 

 

 

By:

/s/Russell B. Wight

 

Trustee

 

February 24, 2009

 

(Russell B. Wight, Jr.)

 

 

 

 

 

 

 

 

 

 

By:

/s/Joseph Macnow

 

Executive Vice President — Finance and

 

February 24, 2009

 

(Joseph Macnow)

 

Administration and Chief Financial Officer
     (Principal Financial and Accounting Officer)

 

 

 

 

180

 

 


VORNADO REALTY TRUST

AND SUBSIDIARIES

 

SCHEDULE II

VALUATION AND QUALIFYING ACCOUNTS

December 31, 2008

(Amounts in Thousands)

 

 

Column A

 

Column B

 

Column C

 

Column D

 

Column E

 

Description

 

Balance at
Beginning
of Year

 

Additions
Charged
Against
Operations

 

Uncollectible
Accounts
Written-off

 

Balance
at End
of Year

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Year Ended December 31, 2008:
Allowance for doubtful accounts

 

$

79,227

 

$

20,931

(1)

$

(14,851

)(2)

$

85,307

 

Year Ended December 31, 2007:
Allowance for doubtful accounts

 

$

18,199

 

$

65,680

(1)

$

(4,652

)

$

79,227

 

Year Ended December 31, 2006:
Allowance for doubtful accounts

 

$

21,202

 

$

2,844

 

$

(5,847

)

$

18,199

 

________________________

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1)

2007 includes a $57,000 allowance on one of our investments in a mezzanine loan, of which $10,300 was reversed in 2008 upon sale of a participation in that loan.

 

 

(2)

Includes $9,482 for tenants that filed for bankruptcy, of which $5,135 relates to Circuit City.

 

 

181


VORNADO REALTY TRUST

AND SUBSIDIARIES

SCHEDULE III

REAL ESTATE AND ACCUMULATED DEPRECIATION

 

 

COLUMN   A

COLUMN   B

COLUMN   C

COLUMN   D

COLUMN   E

COLUMN   F

COLUMN   G

COLUMN   H

COLUMN   I

 

 

Initial   cost   to   company   (1)

 

Gross   amount   at   which  
carried   at   close   of   period

 

 

 

Life   on   which
depreciation

Description

Encumbrances

Land

Buildings   and
improvements

Costs
capitalized
subsequent
to   acquisition

Land

Buildings
and
improvements

Total   (2)

Accumulated
depreciation
and
amortization

Date   of
construction   (3)

Date
acquired

in   latest  
income  
statement
is   computed

Office Buildings

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

New York

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Manhattan

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1290 Avenue of the Americas

$

444,666

 

$

515,539

 

932,629

$

6,964

 

515,539

$

939,593

$

1,455,132

$

48,061

1963

2007

(4)

350 Park

 

430,000

 

 

265,889

 

363,381

 

7,005

 

265,889

 

370,386

 

636,275

 

19,104

1960

2006

(4)

One Penn Plaza

 

-

 

 

-

 

412,169

 

141,215

 

-

 

553,384

 

553,384

 

147,616

1972

1998

(4)

100 W.33rd St (Manhattan Mall)

 

159,361

 

 

242,776

 

247,970

 

1,432

 

242,776

 

249,402

 

492,178

 

12,249

1911

2007

(4)

Two Penn Plaza

 

287,386

 

 

53,615

 

164,903

 

85,471

 

52,689

 

251,300

 

303,989

 

77,267

1968

1997

(4)

770 Broadway

 

353,000

 

 

52,898

 

95,686

 

72,857

 

52,898

 

168,543

 

221,441

 

50,263

1907

1998

(4)

90 Park Avenue

 

-

 

 

8,000

 

175,890

 

28,606

 

8,000

 

204,496

 

212,496

 

60,442

1964

1997

(4)

888 Seventh Avenue

 

318,554

 

 

-

 

117,269

 

91,163

 

-

 

208,432

 

208,432

 

53,571

1980

1998

(4)

640 Fifth Avenue

 

-

 

 

38,224

 

25,992

 

107,230

 

38,224

 

133,222

 

171,446

 

35,607

1950

1997

(4)

Eleven Penn Plaza

 

206,877

 

 

40,333

 

85,259

 

41,972

 

40,333

 

127,231

 

167,564

 

38,895

1923

1997

(4)

1740 Broadway

 

-

 

 

26,971

 

102,890

 

36,323

 

26,971

 

139,213

 

166,184

 

32,838

1950

1997

(4)

909 Third Avenue

 

214,075

 

 

-

 

120,723

 

27,814

 

-

 

148,537

 

148,537

 

39,545

1969

1999

(4)

150 East 58th Street

 

-

 

 

39,303

 

80,216

 

26,031

 

39,303

 

106,247

 

145,550

 

30,303

1969

1998

(4)

595 Madison Avenue

 

-

 

 

62,731

 

62,888

 

15,523

 

62,731

 

78,411

 

141,142

 

18,795

1968

1999

(4)

866 United Nations Plaza

 

44,978

 

 

32,196

 

37,534

 

12,313

 

32,196

 

49,847

 

82,043

 

18,348

1966

1997

(4)

20 Broad Street

 

-

 

 

-

 

28,760

 

21,876

 

-

 

50,636

 

50,636

 

11,359

1956

1998

(4)

40 Fulton Street

 

-

 

 

15,732

 

26,388

 

4,110

 

15,732

 

30,498

 

46,230

 

9,441

1987

1998

(4)

689 Fifth Avenue

 

-

 

 

19,721

 

13,446

 

10,437

 

19,721

 

23,883

 

43,604

 

7,129

1925

1998

(4)

330 West 34th Street

 

-

 

 

-

 

8,599

 

11,403

 

-

 

20,002

 

20,002

 

6,370

1925

1998

(4)

40-42 Thompson Street

 

-

 

 

6,503

 

10,057

 

375

 

6,503

 

10,432

 

16,935

 

865

1928

2005

(4)

1540 Broadway Garage

 

-

 

 

4,086

 

8,914

 

-

 

4,086

 

8,914

 

13,000

 

558

1990

2006

(4)

Other

 

-

 

 

-

 

5,548

 

18,880

 

-

 

24,428

 

24,428

 

2,300

 

 

 

Total New York

 

2,458,897

 

 

1,424,517

 

3,127,111

 

769,000

 

1,423,591

 

3,897,037

 

5,320,628

 

720,926

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Washington, DC

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2011-2451 Crystal Drive

 

88,732

 

 

100,935

 

409,920

 

86,464

 

100,228

 

497,091

 

597,319

 

100,531

1984-1989

2002

(4)

Warner Building

 

292,700

 

 

70,853

 

246,169

 

21,347

 

81,983

 

256,386

 

338,369

 

21,945

1992

2005

(4)

2001 Jefferson Davis Highway,
2100/2200 Crystal Drive,
223  23rd  Street,
2221 South Clark Street,
2100  Crystal Drive Retail

 

40,701

 

 

57,213

 

131,206

 

142,840

 

48,657

 

282,602

 

331,259

 

34,011

1964-1969

2002

(4)

1550-1750 Crystal Drive/
241-251 18th Street

 

130,444

 

 

64,817

 

218,330

 

38,033

 

64,652

 

256,528

 

321,180

 

55,995

1974-1980

2002

(4)

H Street Apartments

 

259,546

 

 

118,421

 

125,078

 

46,461

 

138,696

 

151,264

 

289,960

 

5,651

 

2007

(4)

Skyline Place (6 buildings)

 

442,500

 

 

41,986

 

221,869

 

20,637

 

41,862

 

242,630

 

284,492

 

49,329

1973-1984

2002

(4)

1215, 1225 S. Clark Street/ 200,
201 12th Street S.

 

145,594

 

 

47,594

 

177,373

 

21,371

 

47,465

 

198,873

 

246,338

 

42,742

1983-1987

2002

(4)

1800, 1851 and 1901 South Bell Street

 

27,801

 

 

37,551

 

118,806

 

16,114

 

37,551

 

134,920

 

172,471

 

26,028

1968

2002

(4)

2101 L Street

 

150,000

 

 

32,815

 

51,642

 

69,234

 

39,768

 

113,923

 

153,691

 

2,938

1975

2003

(4)

Bowen Building

 

115,022

 

 

30,077

 

98,962

 

1,631

 

30,176

 

100,494

 

130,670

 

9,313

2004

2005

(4)

2200-2300 Courthhouse Plaza

 

70,774

 

 

-

 

105,475

 

24,177

 

-

 

129,652

 

129,652

 

26,611

1988-1989

2002

(4)

 

 

182

 

 


VORNADO REALTY TRUST

AND SUBSIDIARIES

SCHEDULE III

REAL ESTATE AND ACCUMULATED DEPRECIATION

 

 

COLUMN   A

COLUMN   B

COLUMN   C

COLUMN   D

COLUMN   E

COLUMN   F

COLUMN   G

COLUMN   H

COLUMN   I

 

 

Initial   cost   to   company   (1)

 

Gross   amount   at   which  
carried   at   close   of   period

 

 

 

Life   on   which
depreciation

Description

Encumbrances

Land

Buildings   and
improvements

Costs
capitalized
subsequent
to   acquisition

Land

Buildings
and
improvements

Total   (2)

Accumulated
depreciation
and
amortization

Date   of
construction   (3)

Date
acquired

in   latest  
income  
statement
is   computed

1999 K Street

 

73,747

 

 

55,438

 

3,012

 

63,234

 

-

 

121,684

 

121,684

 

-

 

2006

(4)

1875 Connecticut Ave NW

 

30,770

 

 

36,303

 

82,004

 

832

 

35,886

 

83,253

 

119,139

 

7,589

1963

2007

(4)

1229-1231 25th Street

 

24,620

 

 

67,049

 

5,039

 

37,647

 

-

 

109,735

 

109,735

 

-

 

2007

(4)

Reston Executive

 

93,000

 

 

15,424

 

85,722

 

7,299

 

15,380

 

93,065

 

108,445

 

19,376

1987-1989

2002

(4)

One Skyline Tower

 

100,800

 

 

12,266

 

75,343

 

15,339

 

12,231

 

90,717

 

102,948

 

17,329

1988

2002

(4)

H Street - North 10-1D
Land Parcel

 

-

 

 

104,473

 

55

 

(9,971

)

90,522

 

4,035

 

94,557

 

1

 

2007

(4)

1825 Connecticut Ave NW

 

28,958

 

 

33,090

 

61,316

 

(769

)

32,726

 

60,911

 

93,637

 

11,395

1956

2007

(4)

409 3rd Street

 

-

 

 

10,719

 

69,658

 

7,258

 

10,719

 

76,916

 

87,635

 

21,187

1990

1998

(4)

Commerce Executive

 

50,213

 

 

13,401

 

58,705

 

12,711

 

13,363

 

71,454

 

84,817

 

15,865

1985-1989

2002

(4)

1235 S. Clark Street

 

54,128

 

 

15,826

 

53,894

 

10,884

 

15,826

 

64,778

 

80,604

 

10,238

1981

2002

(4)

Seven Skyline Place

 

134,700

 

 

10,292

 

58,351

 

(3,607

)

10,262

 

54,774

 

65,036

 

11,970

2001

2002

(4)

1150 17th Street

 

29,659

 

 

23,359

 

24,876

 

13,823

 

24,723

 

37,335

 

62,058

 

8,198

1970

2002

(4)

Crystal City Hotel

 

-

 

 

8,000

 

47,191

 

5,108

 

8,000

 

52,299

 

60,299

 

5,518

1968

2004

(4)

1750 Penn Avenue

 

46,570

 

 

20,020

 

30,032

 

1,244

 

21,170

 

30,126

 

51,296

 

6,306

1964

2002

(4)

1101 17th Street

 

24,561

 

 

20,666

 

20,112

 

8,151

 

21,818

 

27,111

 

48,929

 

6,312

1963

2002

(4)

H Street Ground Leases

 

-

 

 

71,893

 

-

 

(26,893

)

45,000

 

-

 

45,000

 

-

 

2007

(4)

1227 25th Street

 

-

 

 

16,293

 

24,620

 

1,194

 

17,047

 

25,060

 

42,107

 

875

 

2007

(4)

1140 Connecticut Avenue

 

18,166

 

 

19,017

 

13,184

 

6,899

 

19,801

 

19,299

 

39,100

 

5,033

1966

2002

(4)

1730 M. Street

 

15,336

 

 

10,095

 

17,541

 

8,704

 

10,687

 

25,653

 

36,340

 

6,350

1963

2002

(4)

Democracy Plaza I

 

-

 

 

-

 

33,628

 

(304)

 

-

 

33,324

 

33,324

 

10,130

1987

2002

(4)

1726 M Street

 

-

 

 

9,450

 

22,062

 

150

 

9,455

 

22,207

 

31,662

 

1,244

1964

2006

(4)

Crystal City Shop

 

-

 

 

-

 

20,465

 

5,779

 

-

 

26,244

 

26,244

 

4,682

2004

2004

(4)

1101 South Capitol Street

 

-

 

 

11,541

 

178

 

57

 

11,597

 

179

 

11,776

 

96

 

2007

(4)

South Capital

 

-

 

 

4,009

 

6,273

 

(5,074

)

-

 

5,208

 

5,208

 

-

 

2005

(4)

H Street

 

-

 

 

1,763

 

641

 

35

 

1,763

 

676

 

2,439

 

57

 

2005

(4)

Tysons Dulles

 

-

 

 

19,146

 

79,095

 

(98,241

)

-

 

-

 

-

 

-

1986-1990

2002

(4)

1707 H Street

 

-

 

 

27,058

 

1,002

 

(28,060

)

-

 

-

 

-

 

-

 

2007

(4)

Other

 

-

 

 

-

 

51,767

 

(41,063

)

-

 

10,704

 

10,704

 

-

 

 

 

Total Washington, DC

 

2,489,042

 

 

1,238,853

 

2,850,596

 

480,675

 

1,059,014

 

3,511,110

 

4,570,124

 

544,845

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

New Jersey

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Paramus

 

-

 

 

-

 

-

 

23,134

 

1,033

 

22,101

 

23,134

 

11,785

1967

1987

(4)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

California

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

555 California Street

 

720,671

 

 

221,903

 

899,839

 

10,747

 

221,903

 

910,586

 

1,132,489

 

48,086

1922/1969/1970

2007

(4)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Office Buildings

 

5,668,610

 

 

2,885,273

 

6,877,546

 

1,283,556

 

2,705,541

 

8,340,834

 

11,046,375

 

1,325,642

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shopping Centers

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

California

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Los Angeles
(Beverly Connection)

 

100,000

 

 

72,996

 

131,510

 

-

 

72,996

 

131,510

 

204,506

 

6,907

 

2005

(4)

Sacramento

 

-

 

 

3,897

 

31,370

 

-

 

3,897

 

31,370

 

35,267

 

2,405

 

2006

(4)

San Francisco
(The Cannery)

 

18,561

 

 

20,100

 

11,923

 

2,521

 

20,100

 

14,444

 

34,544

 

550

 

2007

(4)

Walnut Creek
(1149 S. Main St)

 

-

 

 

2,699

 

19,930

 

-

 

2,699

 

19,930

 

22,629

 

1,528

 

2006

(4)

 

183

 

 


VORNADO REALTY TRUST

AND SUBSIDIARIES

SCHEDULE III

REAL ESTATE AND ACCUMULATED DEPRECIATION

 

 

COLUMN   A

COLUMN   B

COLUMN   C

COLUMN   D

COLUMN   E

COLUMN   F

COLUMN   G

COLUMN   H

COLUMN   I

 

 

Initial   cost   to   company   (1)

 

Gross   amount   at   which  
carried   at   close   of   period

 

 

 

Life   on   which
depreciation

Description

Encumbrances

Land

Buildings   and
improvements

Costs
capitalized
subsequent
to   acquisition

Land

Buildings
and
improvements

Total   (2)

Accumulated
depreciation
and
amortization

Date   of
construction   (3)

Date
acquired

in   latest  
income  
statement
is   computed

Pasadena

 

-

 

 

-

 

18,337

 

152

 

-

 

18,489

 

18,489

 

849

 

2007

(4)

San Francisco
(3700 Geary Blvd)

 

-

 

 

11,857

 

4,444

 

27

 

11,857

 

4,471

 

16,328

 

345

 

2006

(4)

Signal Hill

 

-

 

 

10,218

 

3,118

 

-

 

10,218

 

3,118

 

13,336

 

172

 

2006

(4)

Redding

 

-

 

 

3,075

 

3,030

 

13

 

3,075

 

3,043

 

6,118

 

167

 

2006

(4)

Walnut Creek
(1556 Mount
Diablo Blvd)

 

-

 

 

5,909

 

-

 

53

 

5,909

 

53

 

5,962

 

-

 

2007

(4)

Merced

 

-

 

 

1,829

 

2,022

 

216

 

1,829

 

2,238

 

4,067

 

135

 

2006

(4)

San Bernadino
(1522 E. Highland Ave)

 

-

 

 

1,651

 

1,810

 

-

 

1,651

 

1,810

 

3,461

 

200

 

2004

(4)

Orange

 

-

 

 

1,487

 

1,746

 

-

 

1,487

 

1,746

 

3,233

 

193

 

2004

(4)

Vallejo

 

-

 

 

-

 

3,123

 

-

 

-

 

3,123

 

3,123

 

174

 

2006

(4)

Corona

 

-

 

 

-

 

3,073

 

-

 

-

 

3,073

 

3,073

 

339

 

2004

(4)

Westminster

 

-

 

 

1,673

 

1,192

 

-

 

1,673

 

1,192

 

2,865

 

132

 

2004

(4)

San Bernadino
(648 W. 4th St)

 

-

 

 

1,597

 

1,119

 

-

 

1,597

 

1,119

 

2,716

 

124

 

2004

(4)

Costa Mesa
(2180 Newport Blvd)

 

-

 

 

2,239

 

308

 

-

 

2,239

 

308

 

2,547

 

34

 

2004

(4)

Mojave

 

-

 

 

-

 

2,250

 

-

 

-

 

2,250

 

2,250

 

248

 

2004

(4)

Ontario

 

-

 

 

713

 

1,522

 

-

 

713

 

1,522

 

2,235

 

168

 

2004

(4)

Barstow

 

-

 

 

856

 

1,367

 

-

 

856

 

1,367

 

2,223

 

151

 

2004

(4)

Colton

 

-

 

 

1,239

 

954

 

-

 

1,239

 

954

 

2,193

 

105

 

2004

(4)

Anaheim

 

-

 

 

1,093

 

1,093

 

-

 

1,093

 

1,093

 

2,186

 

121

 

2004

(4)

Rancho Cucamonga

 

-

 

 

1,051

 

1,051

 

-

 

1,051

 

1,051

 

2,102

 

116

 

2004

(4)

Garden Grove

 

-

 

 

795

 

1,254

 

-

 

795

 

1,254

 

2,049

 

138

 

2004

(4)

Costa Mesa
(707 W. 19th St)

 

-

 

 

1,399

 

635

 

-

 

1,399

 

635

 

2,034

 

70

 

2004

(4)

Calimesa

 

-

 

 

504

 

1,463

 

-

 

504

 

1,463

 

1,967

 

162

 

2004

(4)

Santa Ana

 

-

 

 

1,565

 

377

 

-

 

1,565

 

377

 

1,942

 

42

 

2004

(4)

Moreno Valley

 

-

 

 

639

 

1,156

 

-

 

639

 

1,156

 

1,795

 

128

 

2004

(4)

Fontana

 

-

 

 

518

 

1,100

 

-

 

518

 

1,100

 

1,618

 

122

 

2004

(4)

Rialto

 

-

 

 

434

 

1,173

 

-

 

434

 

1,173

 

1,607

 

129

 

2004

(4)

Desert Hot Springs

 

-

 

 

197

 

1,355

 

-

 

197

 

1,355

 

1,552

 

150

 

2004

(4)

Beaumont

 

-

 

 

206

 

1,321

 

-

 

206

 

1,321

 

1,527

 

146

 

2004

(4)

Colton

 

-

 

 

1,157

 

332

 

-

 

1,157

 

332

 

1,489

 

37

 

2004

(4)

Yucaipa

 

-

 

 

663

 

426

 

-

 

663

 

426

 

1,089

 

47

2008

2004

(4)

Riverside
(9155 Jurupa Road)

 

-

 

 

251

 

783

 

-

 

251

 

783

 

1,034

 

86

 

2004

(4)

Riverside
(5571 Mission Blvd)

 

-

 

 

209

 

704

 

-

 

209

 

704

 

913

 

76

 

2004

(4)

Total California

 

118,561

 

 

154,716

 

258,371

 

2,982

 

154,716

 

261,353

 

416,069

 

16,496

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Colorado

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Littleton

 

-

 

 

5,867

 

2,557

 

-

 

5,867

 

2,557

 

8,424

 

141

 

2006

(4)

Grand Junction

 

-

 

 

2,321

 

2,071

 

-

 

2,321

 

2,071

 

4,392

 

115

 

2006

(4)

Total Colorado

 

-

 

 

8,188

 

4,628

 

-

 

8,188

 

4,628

 

12,816

 

256

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Connecticut

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Waterbury

 

5,683

*

 

667

 

4,504

 

4,876

 

667

 

9,380

 

10,047

 

4,476

1965

1965

(4)

Newington

 

6,030

*

 

2,421

 

1,200

 

475

 

2,421

 

1,675

 

4,096

 

514

1969

1969

(4)

Total Connecticut

 

11,713

 

 

3,088

 

5,704

 

5,351

 

3,088

 

11,055

 

14,143

 

4,990

 

 

 

 

184

 

 


VORNADO REALTY TRUST

AND SUBSIDIARIES

SCHEDULE III

REAL ESTATE AND ACCUMULATED DEPRECIATION

 

 

COLUMN   A

COLUMN   B

COLUMN   C

COLUMN   D

COLUMN   E

COLUMN   F

COLUMN   G

COLUMN   H

COLUMN   I

 

 

Initial   cost   to   company   (1)

 

Gross   amount   at   which  
carried   at   close   of   period

 

 

 

Life   on   which
depreciation

Description

Encumbrances

Land

Buildings   and
improvements

Costs
capitalized
subsequent
to   acquisition

Land

Buildings
and
improvements

Total   (2)

Accumulated
depreciation
and
amortization

Date   of
construction   (3)

Date
acquired

in   latest  
income  
statement
is   computed

Florida

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Coral Springs

 

-

 

 

3,942

 

2,326

 

160

 

3,942

 

2,486

 

6,428

 

128

 

2006

(4)

Tampa

 

-

 

 

3,871

 

2,532

 

-

 

3,871

 

2,532

 

6,403

 

140

 

2006

(4)

Vero Beach

 

-

 

 

2,194

 

1,908

 

-

 

2,194

 

1,908

 

4,102

 

106

 

2006

(4)

Total Florida

 

-

 

 

10,007

 

6,766

 

160

 

10,007

 

6,926

 

16,933

 

374

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Illinois

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Bourbonnais

 

-

 

 

2,379

 

3,792

 

-

 

2,379

 

3,792

 

6,171

 

209

 

2006

(4)

Lansing

 

-

 

 

2,264

 

1,128

 

-

 

2,264

 

1,128

 

3,392

 

62

 

2006

(4)

Total Illinois

 

-

 

 

4,643

 

4,920

 

-

 

4,643

 

4,920

 

9,563

 

271

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Iowa

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dubuque

 

-

 

 

-

 

1,568

 

-

 

-

 

1,568

 

1,568

 

87

 

2006

(4)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Maryland

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Rockville

 

14,344

 

 

3,470

 

20,599

 

208

 

3,470

 

20,807

 

24,277

 

1,969

 

2005

(4)

Baltimore (Towson)

 

10,489

*

 

581

 

3,227

 

7,794

 

581

 

11,021

 

11,602

 

3,404

1968

1968

(4)

Annapolis

 

-

 

 

-

 

9,652

 

-

 

-

 

9,652

 

9,652

 

1,551

 

2005

(4)

Wheaton

 

-

 

 

-

 

5,691

 

-

 

-

 

5,691

 

5,691

 

314

 

2006

(4)

Glen Burnie

 

5,398

*

 

462

 

2,571

 

523

 

462

 

3,094

 

3,556

 

2,468

1958

1958

(4)

Total Maryland

 

30,231

 

 

4,513

 

41,740

 

8,525

 

4,513

 

50,265

 

54,778

 

9,706

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Massachusetts

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dorchester

 

-

 

 

2,797

 

4,023

 

10,820

 

13,617

 

4,023

 

17,640

 

222

 

2006

(4)

Springfield

 

2,878

*

 

-

 

2,471

 

3,237

 

2,797

 

2,911

 

5,708

 

415

1993

1966

(4)

Chicopee

 

-

 

 

13,617

 

-

 

(12,722

)

895

 

-

 

895

 

-

1969

1969

(4)

Cambridge

 

-

 

 

895

 

-

 

(641

)

-

 

254

 

254

 

11

 

 

(4)

Total Massachusetts

 

2,878

 

 

17,309

 

6,494

 

694

 

17,309

 

7,188

 

24,497

 

648

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Michigan

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Roseville

 

-

 

 

30

 

6,128

 

1,373

 

30

 

7,501

 

7,531

 

1,136

 

2005

(4)

Battle Creek

 

-

 

 

1,340

 

2,273

 

-

 

1,340

 

2,273

 

3,613

 

126

 

2006

(4)

Midland

 

-

 

 

-

 

141

 

86

 

-

 

227

 

227

 

11

 

2006

(4)

Total Michigan

 

-

 

 

1,370

 

8,542

 

1,459

 

1,370

 

10,001

 

11,371

 

1,273

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

New Hampshire

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Salem

 

-

 

 

6,083

 

-

 

-

 

6,083

 

-

 

6,083

 

-

 

2006

(4)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

New Jersey

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Paramus (Bergen Town Center)

 

228,731

 

 

19,884

 

81,723

 

286,758

 

23,525

 

364,840

 

388,365

 

11,296

1957

2003

(4)

North Bergen (Tonnelle Ave)

 

 

 

 

24,493

 

-

 

41,507

 

16,012

 

49,988

 

66,000

 

51

2006

2006

(4)

Union (Springfield Avenue)

 

-

 

 

19,700

 

45,090

 

-

 

19,700

 

45,090

 

64,790

 

1,697

 

2007

(4)

East Rutherford

 

-

 

 

-

 

35,274

 

-

 

-

 

35,274

 

35,274

 

997

 

2007

(4)

Garfield

 

-

 

 

96

 

8,068

 

22,847

 

45

 

30,966

 

31,011

 

15,814

1979

1998

(4)

 

185

 

 


VORNADO REALTY TRUST

AND SUBSIDIARIES

SCHEDULE III

REAL ESTATE AND ACCUMULATED DEPRECIATION

 

 

COLUMN   A

COLUMN   B

COLUMN   C

COLUMN   D

COLUMN   E

COLUMN   F

COLUMN   G

COLUMN   H

COLUMN   I

 

 

Initial   cost   to   company   (1)

 

Gross   amount   at   which  
carried   at   close   of   period

 

 

 

Life   on   which
depreciation

Description

Encumbrances

Land

Buildings   and
improvements

Costs
capitalized
subsequent
to   acquisition

Land

Buildings
and
improvements

Total   (2)

Accumulated
depreciation
and
amortization

Date   of
construction   (3)

Date
acquired

in   latest  
income  
statement
is   computed

East Hanover I and II

 

25,136

*

 

2,232

 

18,241

 

7,602

 

2,671

 

25,404

 

28,075

 

10,820

1962

1962

(4)

Lodi (Washington Street)

 

10,738

 

 

7,606

 

13,125

 

227

 

7,606

 

13,352

 

20,958

 

1,353

 

2004

(4)

Englewood

 

12,380

 

 

2,300

 

17,245

 

1

 

2,300

 

17,246

 

19,546

 

651

 

2007

(4)

Bricktown

 

15,015

*

 

1,391

 

11,179

 

6,176

 

1,391

 

17,355

 

18,746

 

8,562

1968

1968

(4)

Totowa

 

27,201

*

 

1,102

 

11,994

 

4,479

 

1,099

 

16,476

 

17,575

 

10,250

1957/1999

1957

(4)

Hazlet

 

-

 

 

7,400

 

9,412

 

-

 

7,400

 

9,412

 

16,812

 

355

 

2007

(4)

Carlstadt

 

7,690

 

 

-

 

16,457

 

-

 

-

 

16,457

 

16,457

 

468

 

2007

(4)

North Plainfield

 

10,023

*

 

500

 

13,983

 

1,546

 

500

 

15,529

 

16,029

 

9,072

1955

1989

(4)

East Brunswick II
(339-341 Route 18 S.)

 

-

 

 

2,098

 

10,949

 

2,643

 

2,098

 

13,592

 

15,690

 

6,742

1972

1972

(4)

Manalapan

 

11,540

*

 

725

 

7,189

 

7,748

 

1,046

 

14,616

 

15,662

 

7,937

1971

1971

(4)

Marlton

 

11,221

*

 

1,611

 

3,464

 

8,287

 

1,611

 

11,751

 

13,362

 

4,820

1973

1973

(4)

Union
(Route 22 and Morris Ave)

 

30,892

*

 

3,025

 

7,470

 

2,006

 

3,025

 

9,476

 

12,501

 

3,978

1962

1962

(4)

Hackensack

 

23,033

*

 

692

 

10,219

 

963

 

692

 

11,182

 

11,874

 

7,931

1963

1963

(4)

Cherry Hill

 

13,809

*

 

5,864

 

2,694

 

2,114

 

5,864

 

4,808

 

10,672

 

3,558

1964

1964

(4)

Watchung

 

12,464

*

 

4,178

 

5,463

 

811

 

4,441

 

6,011

 

10,452

 

2,618

1994

1959

(4)

South Plainfield

 

-

 

 

-

 

10,044

 

24

 

-

 

10,068

 

10,068

 

378

 

2007

(4)

Eatontown

 

-

 

 

4,653

 

4,999

 

279

 

4,653

 

5,278

 

9,931

 

440

 

2005

(4)

Dover

 

6,767

*

 

559

 

6,363

 

2,867

 

559

 

9,230

 

9,789

 

4,871

1964

1964

(4)

Lodi (Route 17 N.)

 

8,647

*

 

238

 

9,446

 

-

 

238

 

9,446

 

9,684

 

2,183

1999

1975

(4)

East Brunswick I
(325-333 Route 18 S.)

 

20,965

*

 

319

 

6,220

 

2,792

 

319

 

9,012

 

9,331

 

7,916

1957

1957

(4)

Jersey City

 

17,633

*

 

652

 

7,495

 

329

 

652

 

7,824

 

8,476

 

1,773

1965

1965

(4)

Morris Plains

 

11,088

*

 

1,104

 

6,411

 

604

 

1,104

 

7,015

 

8,119

 

6,597

1961

1985

(4)

Middeltown

 

15,147

*

 

283

 

5,248

 

1,280

 

283

 

6,528

 

6,811

 

4,400

1963

1963

(4)

Woodbridge

 

20,362

*

 

1,509

 

2,675

 

1,774

 

1,539

 

4,419

 

5,958

 

2,001

1959

1959

(4)

Delran

 

5,919

*

 

756

 

4,468

 

587

 

756

 

5,055

 

5,811

 

4,538

1972

1972

(4)

Lawnside

 

9,757

*

 

851

 

3,164

 

1,426

 

851

 

4,590

 

5,441

 

3,402

1969

1969

(4)

Kearny

 

3,443

*

 

309

 

3,376

 

1,152

 

309

 

4,528

 

4,837

 

2,651

1938

1959

(4)

Turnersville

 

3,763

*

 

900

 

1,342

 

856

 

900

 

2,198

 

3,098

 

2,021

1974

1974

(4)

North Bergen (Kennedy Blvd)

 

3,651

*

 

2,308

 

636

 

34

 

2,308

 

670

 

2,978

 

329

1993

1959

(4)

Montclair

 

1,773

*

 

66

 

419

 

381

 

66

 

800

 

866

 

631

1972

1972

(4)

Bordentown

 

7,430

*

 

-

 

-

 

-

 

-

 

-

 

-

 

-

1958

1958

(4)

Total New Jersey

 

576,218

 

 

119,404

 

401,545

 

410,100

 

115,563

 

815,486

 

931,049

 

153,101

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

New York

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Bronx (Bruckner Blvd)

 

-

 

 

66,100

 

259,503

 

582

 

66,100

 

260,085

 

326,185

 

12,975

 

2007

(4)

Valley Stream
(Green Acres Mall)

 

335,000

 

 

147,172

 

134,980

 

41,422

 

146,969

 

176,605

 

323,574

 

34,275

1956

1997

(4)

Manhattan Mall

 

72,639

 

 

88,595

 

113,473

 

55,488

 

88,595

 

168,961

 

257,556

 

5,592

 

2007

(4)

Hicksville (Broadway Mall)

 

94,879

 

 

126,324

 

48,904

 

2,316

 

126,324

 

51,220

 

177,544

 

3,724

 

2005

(4)

Huntington

 

16,073

 

 

21,200

 

33,667

 

-

 

21,200

 

33,667

 

54,867

 

958

 

2007

(4)

Mount Kisco

 

29,992

 

 

22,700

 

26,700

 

-

 

22,700

 

26,700

 

49,400

 

546

 

2007

(4)

Poughkeepsie

 

-

 

 

12,733

 

12,026

 

20,976

 

7,632

 

38,103

 

45,735

 

638

 

2005

(4)

Staten Island

 

17,448

 

 

11,446

 

21,262

 

221

 

11,446

 

21,483

 

32,929

 

2,647

 

2004

(4)

Inwood

 

-

 

 

12,419

 

19,097

 

500

 

12,419

 

19,597

 

32,016

 

1,958

 

2004

(4)

Queens (99-01 Queens Blvd)

 

-

 

 

7,839

 

20,392

 

1,766

 

7,839

 

22,158

 

29,997

 

2,384

 

2004

(4)

Bronx (Gun Hill Road)

 

-

 

 

6,427

 

11,885

 

9,148

 

4,485

 

22,975

 

27,460

 

288

 

2005

(4)

 

186

 

 


VORNADO REALTY TRUST

AND SUBSIDIARIES

SCHEDULE III

REAL ESTATE AND ACCUMULATED DEPRECIATION

 

 

COLUMN   A

COLUMN   B

COLUMN   C

COLUMN   D

COLUMN   E

COLUMN   F

COLUMN   G

COLUMN   H

COLUMN   I

 

 

Initial   cost   to   company   (1)

 

Gross   amount   at   which  
carried   at   close   of   period

 

 

 

Life   on   which
depreciation

Description

Encumbrances

Land

Buildings   and
improvements

Costs
capitalized
subsequent
to   acquisition

Land

Buildings
and
improvements

Total   (2)

Accumulated
depreciation
and
amortization

Date   of
construction   (3)

Date
acquired

in   latest  
income  
statement
is   computed

West Babylon

 

6,687

 

 

6,720

 

13,786

 

97

 

6,720

 

13,883

 

20,603

 

618

 

2007

(4)

Dewitt

 

-

 

 

-

 

7,546

 

-

 

-

 

7,546

 

7,546

 

423

 

2006

(4)

Freeport (437 E. Sunrise Highway)

 

13,630

 

*

1,231

 

4,747

 

1,454

 

1,231

 

6,201

 

7,432

 

4,412

1981

1981

(4)

Oceanside

 

-

 

 

2,710

 

2,306

 

-

 

2,710

 

2,306

 

5,016

 

87

 

2007

(4)

Albany (Menands)

 

5,726

 

*

460

 

2,091

 

2,412

 

460

 

4,503

 

4,963

 

3,146

1965

1965

(4)

Buffalo (Amherst)

 

6,453

 

*

636

 

4,056

 

26

 

636

 

4,082

 

4,718

 

3,709

1968

1968

(4)

Rochester (Henrietta)

 

-

 

 

-

 

2,647

 

1,096

 

-

 

3,743

 

3,743

 

3,017

1971

1971

(4)

Rochester

 

-

 

 

2,172

 

-

 

-

 

2,172

 

-

 

2,172

 

-

1966

1966

(4)

Freeport (240 Sunrise Highway)

 

-

 

 

-

 

-

 

260

 

-

 

260

 

260

 

17

 

2005

(4)

Commack

 

-

 

 

-

 

43

 

-

 

-

 

43

 

43

 

1

 

2006

(4)

New Hyde Park

 

6,879

 

*

-

 

4

 

-

 

-

 

4

 

4

 

126

1970

1976

(4)

Manhattan

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1540 Broadway

 

-

 

 

105,914

 

214,208

 

-

 

105,914

 

214,208

 

320,122

 

13,238

 

2006

(4)

828-850 Madison Avenue

 

80,000

 

 

107,937

 

28,261

 

-

 

107,937

 

28,261

 

136,198

 

2,532

 

2005

(4)

4 Union Square South

 

-

 

 

24,079

 

55,220

 

343

 

24,079

 

55,563

 

79,642

 

6,301

1965/2004

1993

(4)

478-482 Broadway

 

 

 

 

20,000

 

13,375

 

20,577

 

20,000

 

33,952

 

53,952

 

509

 

2007

(4)

40 East 66th Street

 

-

 

 

13,616

 

34,635

 

-

 

13,616

 

34,635

 

48,251

 

2,482

 

2005

(4)

25 W. 14th Street

 

-

 

 

29,169

 

17,878

 

341

 

29,169

 

18,219

 

47,388

 

2,183

 

2004

(4)

155 Spring Street

 

-

 

 

13,700

 

30,544

 

441

 

13,700

 

30,985

 

44,685

 

1,295

 

2007

(4)

435 7th Avenue

 

-

 

 

19,893

 

19,091

 

37

 

19,893

 

19,128

 

39,021

 

3,057

 

1997

(4)

692 Broadway

 

-

 

 

6,053

 

22,908

 

779

 

6,053

 

23,687

 

29,740

 

1,983

 

2005

(4)

715 Lexington Avenue

 

-

 

 

-

 

26,903

 

-

 

-

 

26,903

 

26,903

 

2,876

1923

2001

(4)

211-217 Columbus Avenue

 

-

 

 

18,907

 

7,316

 

385

 

18,907

 

7,701

 

26,608

 

633

 

2005

(4)

677-679 Madison Avenue

 

-

 

 

13,070

 

9,640

 

319

 

13,070

 

9,959

 

23,029

 

605

 

2006

(4)

431 7th Avenue

 

-

 

 

16,700

 

2,751

 

-

 

16,700

 

2,751

 

19,451

 

115

 

2007

(4)

484-486 Broadway

 

-

 

 

10,000

 

6,688

 

1,845

 

6,916

 

11,617

 

18,533

 

202

 

2007

(4)

1135 Third Avenue

 

-

 

 

7,844

 

7,844

 

-

 

7,844

 

7,844

 

15,688

 

2,157

 

1997

(4)

387 West Broadway

 

-

 

 

5,858

 

7,662

 

364

 

5,858

 

8,026

 

13,884

 

920

 

2004

(4)

488 8th Avenue

 

-

 

 

10,650

 

1,767

 

133

 

10,650

 

1,900

 

12,550

 

49

 

2007

(4)

148 Spring Street

 

-

 

 

7,629

 

3,957

 

6

 

7,629

 

3,963

 

11,592

 

65

 

2008

(4)

150 Spring Street

 

-

 

 

5,295

 

4,763

 

84

 

5,295

 

4,847

 

10,142

 

79

 

2008

(4)

386 West Broadway

 

4,518

 

 

2,624

 

6,160

 

-

 

2,624

 

6,160

 

8,784

 

620

 

2004

(4)

484 8th Avenue

 

-

 

 

3,856

 

762

 

-

 

3,856

 

762

 

4,618

 

225

 

1997

(4)

825 7th Avenue

 

-

 

 

1,483

 

697

 

-

 

1,483

 

697

 

2,180

 

204

 

1997

(4)

Total New York

 

689,924

 

 

981,161

 

1,262,145

 

163,418

 

970,831

 

1,435,893

 

2,406,724

 

123,871

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pennsylvania

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Wilkes Barre

 

21,165

 

 

6,053

 

26,646

 

-

 

6,053

 

26,646

 

32,699

 

583

 

2007

(4)

Philadelphia

 

8,246

*

 

933

 

23,650

 

6,069

 

933

 

29,719

 

30,652

 

5,853

1977

1994

(4)

Allentown

 

21,403

*

 

334

 

15,580

 

289

 

334

 

15,869

 

16,203

 

10,158

1957

1957

(4)

Bensalem

 

5,915

*

 

2,727

 

6,698

 

1,806

 

2,727

 

8,504

 

11,231

 

2,123

1972/1999

1972

(4)

Bethlehem

 

3,744

*

 

827

 

5,200

 

568

 

839

 

5,756

 

6,595

 

5,669

1966

1966

(4)

Wyomissing

 

-

 

 

-

 

2,646

 

2,265

 

-

 

4,911

 

4,911

 

1,387

 

2005

(4)

York

 

3,785

*

 

409

 

2,568

 

1,811

 

409

 

4,379

 

4,788

 

3,016

1970

1970

(4)

Broomall

 

9,001

*

 

850

 

2,171

 

749

 

850

 

2,920

 

3,770

 

2,792

1966

1966

(4)

 

187

 

 


VORNADO REALTY TRUST

AND SUBSIDIARIES

SCHEDULE III

REAL ESTATE AND ACCUMULATED DEPRECIATION

 

 

COLUMN   A

COLUMN   B

COLUMN   C

COLUMN   D

COLUMN   E

COLUMN   F

COLUMN   G

COLUMN   H

COLUMN   I

 

 

Initial   cost   to   company   (1)

 

Gross   amount   at   which  
carried   at   close   of   period

 

 

 

Life   on   which
depreciation

Description

Encumbrances

Land

Buildings   and
improvements

Costs
capitalized
subsequent
to   acquisition

Land

Buildings
and
improvements

Total   (2)

Accumulated
depreciation
and
amortization

Date   of
construction   (3)

Date
acquired

in   latest  
income  
statement
is   computed

Lancaster

 

-

 

 

3,140

 

63

 

483

 

3,140

 

546

 

3,686

 

395

1966

1966

(4)

Upper Mooreland

 

6,400

*

 

683

 

1,868

 

900

 

683

 

2,768

 

3,451

 

2,494

1974

1974

(4)

Glenolden

 

6,752

*

 

850

 

1,820

 

471

 

850

 

2,291

 

3,141

 

1,660

1975

1975

(4)

Levittown

 

3,025

*

 

183

 

1,008

 

364

 

183

 

1,372

 

1,555

 

1,368

1964

1964

(4)

Springfield

 

-

 

 

-

 

254

 

-

 

-

 

254

 

254

 

-

 

2005

(4)

Total Pennsylvania

 

89,436

 

 

16,989

 

90,172

 

15,775

 

17,001

 

105,935

 

122,936

 

37,498

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

South Carolina

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Charleston

 

-

 

 

-

 

3,854

 

-

 

-

 

3,854

 

3,854

 

213

 

2006

(4)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Tennessee

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Antioch

 

-

 

 

1,613

 

2,530

 

-

 

1,613

 

2,530

 

4,143

 

140

 

2006

(4)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Texas

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Texarkana

 

-

 

 

-

 

485

 

28

 

-

 

513

 

513

 

27

 

2006

(4)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Utah

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ogden

 

-

 

 

1,818

 

2,578

 

-

 

1,818

 

2,578

 

4,396

 

102

 

2007

(4)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Virginia

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Springfield
(Springfield Mall)

 

180,642

 

 

35,168

 

265,964

 

21,481

 

35,173

 

287,440

 

322,613

 

19,751

 

2006

(4)

Norfolk

 

-

 

 

-

 

3,927

 

15

 

-

 

3,942

 

3,942

 

1,360

 

2005

(4)

Total Virginia

 

180,642

 

 

35,168

 

269,891

 

21,496

 

35,173

 

291,382

 

326,555

 

21,111

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Washington

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Bellingham

 

-

 

 

1,942

 

2,265

 

-

 

1,942

 

2,265

 

4,207

 

90

 

2005

(4)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Washington, DC

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3040 M Street

 

-

 

 

7,830

 

27,490

 

45

 

7,830

 

27,535

 

35,365

 

1,996

 

2006

(4)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Wisconsin

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fond Du Lac

 

-

 

 

-

 

186

 

100

 

-

 

286

 

286

 

22

 

2006

(4)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Puerto Rico

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Las Catalinas

 

60,766

 

 

15,280

 

64,370

 

7,523

 

15,280

 

71,893

 

87,173

 

18,371

1996

2002

(4)

Montehiedra

 

120,000

 

 

9,182

 

66,751

 

3,252

 

9,267

 

69,918

 

79,185

 

20,556

1996

1997

(4)

Total Puerto Rico

 

180,766

 

 

24,462

 

131,121

 

10,775

 

24,547

 

141,811

 

166,358

 

38,927

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Retail Properties

 

1,880,369

 

 

1,400,304

 

2,532,995

 

640,908

 

1,386,235

 

3,187,972

 

4,574,207

 

411,199

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

188

 

 


VORNADO REALTY TRUST

AND SUBSIDIARIES

SCHEDULE III

REAL ESTATE AND ACCUMULATED DEPRECIATION

 

 

COLUMN   A

COLUMN   B

COLUMN   C

COLUMN   D

COLUMN   E

COLUMN   F

COLUMN   G

COLUMN   H

COLUMN   I

 

 

Initial   cost   to   company   (1)

 

Gross   amount   at   which  
carried   at   close   of   period

 

 

 

Life   on   which
depreciation

Description

Encumbrances

Land

Buildings   and
improvements

Costs
capitalized
subsequent
to   acquisition

Land

Buildings
and
improvements

Total   (2)

Accumulated
depreciation
and
amortization

Date   of
construction   (3)

Date
acquired

in   latest  
income  
statement
is   computed

Merchandise Mart Properties

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Illinois

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Merchandise Mart, Chicago

 

550,000

 

 

64,528

 

319,146

 

165,368

 

64,535

 

484,507

 

549,042

 

116,281

1930

1998

(4)

350 North Orleans, Chicago

 

-

 

 

14,238

 

67,008

 

83,167

 

14,246

 

150,167

 

164,413

 

42,105

1977

1998

(4)

527 W. Kinzie, Chicago

 

-

 

 

5,166

 

-

 

-

 

5,166

 

-

 

5,166

 

-

 

 

 

Total Illinois

 

550,000

 

 

83,932

 

386,154

 

248,535

 

83,947

 

634,674

 

718,621

 

158,386

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Washington, DC

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Washington Design Center

 

44,992

 

 

12,274

 

40,662

 

13,558

 

12,274

 

54,220

 

66,494

 

14,377

1919

1998

(4)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

North Carolina

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Market Square Complex,

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

High Point

 

220,361

 

 

13,038

 

102,239

 

78,508

 

15,047

 

178,738

 

193,785

 

42,353

1902 - 1989

1998

(4)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

New York

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

7 West 34th Street

 

-

 

 

34,614

 

94,167

 

35,745

 

34,614

 

129,912

 

164,526

 

23,564

1901

2000

(4)

MMPI Piers

 

-

 

 

-

 

-

 

3,990

 

-

 

3,990

 

3,990

 

-

 

2008

(4)

Total New York

 

-

 

 

34,614

 

94,167

 

39,735

 

34,614

 

133,902

 

168,516

 

23,564

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Massachusetts

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Boston Design Center

 

70,740

 

 

-

 

93,915

 

5,946

 

-

 

99,861

 

99,861

 

7,808

1918

2005

(4)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

California

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gift and Furniture Mart,

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Los Angeles

 

-

 

 

10,141

 

43,422

 

23,277

 

10,141

 

66,699

 

76,840

 

14,080

1958

2000

(4)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Merchandise Mart

 

886,093

 

 

153,999

 

760,559

 

409,559

 

156,023

 

1,168,094

 

1,324,117

 

260,568

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Warehouse/Industrial

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

New Jersey

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

East Hanover

 

25,268

 

 

576

 

7,752

 

7,793

 

691

 

15,430

 

16,121

 

13,827

1972

1972

(4)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other Properties

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Wasserman

 

150,486

 

 

28,052

 

-

 

244,139

 

87,702

 

184,489

 

272,191

 

11,048

 

2005

(4)

Hotel Pennsylvania

 

-

 

 

29,903

 

121,712

 

57,341

 

29,903

 

179,053

 

208,956

 

49,879

1919

1997

(4)

220 Central Park South

 

130,000

 

 

115,720

 

16,420

 

63,262

 

115,720

 

79,682

 

195,402

 

13,413

 

2005

(4)

40 East 66th Residential

 

-

 

 

29,199

 

85,798

 

(5,124)

 

32,114

 

77,759

 

109,873

 

2,118

 

2005

(4)

677-679 Madison

 

-

 

 

1,462

 

1,058

 

1,293

 

2,212

 

1,601

 

3,813

 

87

 

2006

(4)

Total Other Properties

 

280,486

 

 

204,336

 

224,988

 

360,911

 

267,651

 

522,584

 

790,235

 

76,545

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Leasehold Improvements

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equipment and Other

 

-

 

 

-

 

-

 

118,603

 

-

 

118,603

 

118,603

 

73,312

 

 

 

TOTAL

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2008

 

8,740,826

 

 

4,644,488

 

10,403,840

 

2,821,330

 

4,516,141

 

13,353,517

 

17,869,658

 

2,161,093

 

 

 

 

189

 

 


VORNADO REALTY TRUST

AND SUBSIDIARIES

SCHEDULE III

REAL ESTATE AND ACCUMULATED DEPRECIATION

 

 

 

*These encumbrances are cross-collateralized under a blanket mortgage in the amount of 448,115,000 as of December 31, 2008.

 

Notes:

 

 

(1)

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.

 

(2)

The net basis of the Company’s assets and liabilities for tax purposes is approximately 3.4 billion lower than the amount reported for financial statement purposes.

 

(3)

Date of original construction –– many properties have had substantial renovation or additional construction –– see Column D.

 

(4)

Depreciation of the buildings and improvements are calculated over lives ranging from the life of the lease to forty years.

190

 

 


 

VORNADO REALTY TRUST

AND SUBSIDIARIES

  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,

 

 

 

2008

 

2007

 

2006

 

Real Estate

 

 

 

 

 

 

 

 

 

 

Balance at beginning of period

 

$

17,028,507

 

$

11,607,078

 

$

9,584,512

 

Additions during the period:

 

 

 

 

 

 

 

 

 

 

Land

 

 

95,980

 

 

1,956,602

 

 

552,381

 

Buildings & improvements

 

 

1,087,944

 

 

3,617,881

 

 

1,860,881

 

 

 

 

18,212,431

 

 

17,181,561

 

 

11,997,774

 

Less: Assets sold and written-off

 

 

342,773

 

 

153,054

 

 

390,696

 

Balance at end of period

 

$

17,869,658

 

$

17,028,507

 

$

11,607,078

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated Depreciation

 

 

 

 

 

 

 

 

 

 

Balance at beginning of period

 

$

1,802,055

 

$

1,440,656

 

$

1,200,865

 

Additions charged to operating expenses

 

 

407,753

 

 

445,150

 

 

353,473

 

Additions due to acquisitions

 

 

 

 

 

20,817

 

 

 

 

 

 

2,209,808

 

 

1,906,623

 

 

1,554,338

 

Less: Accumulated depreciation on assets sold and written-off

 

 

48,715

 

 

104,568

 

 

113,682

 

Balance at end of period

 

$

2,161,093

 

$

1,802,055

 

$

1,440,656

 

 

 

191

 

 


EXHIBIT INDEX

Exhibit No.

 

 

 

 

3.1

 

-

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

*

 

 

 

 

 

3.2

 

-

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

*

 

 

 

 

 

3.3

 

-

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

*

 

 

 

 

 

3.4

 

-

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

*

 

 

 

 

 

3.5

 

-

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

*

 

 

 

 

 

3.6

 

-

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

*

 

 

 

 

 

3.7

 

-

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

*

 

 

 

 

 

3.8

 

-

Fifth Amendment to the Partnership Agreement, dated as of March 3, 1999 - Incorporated by reference to Exhibit 3.1 to Vornado Realty Trust’s Current Report on Form 8-K (File No. 001-11954), filed on March 17, 1999

*

 

 

 

 

 

3.9

 

-

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

*

 

 

 

 

 

3.10

 

-

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

*

 

 

 

 

 

3.11

 

-

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

*

 

 

 

 

 

3.12

 

-

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

*

 

 

 

 

 

3.13

 

-

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

*

 

 

 

 

 

 


*

 

_______________________
Incorporated by reference.

 

 

192

 

 


 

3.14

 

-

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

*

 

 

 

 

 

3.15

 

-

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

*

 

 

 

 

 

3.16

 

-

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

*

 

 

 

 

 

3.17

 

-

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

*

 

 

 

 

 

3.18

 

-

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

*

 

 

 

 

 

3.19

 

-

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

*

 

 

 

 

 

3.20

 

-

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

*

 

 

 

 

 

3.21

 

-

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

*

 

 

 

 

 

3.22

 

-

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

*

 

 

 

 

 

3.23

 

-

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

*

 

 

 

 

 

3.24

 

-

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

*

 

 

 

 

 

3.25

 

-

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

*

 

 

 

 

 

3.26

 

-

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

*

 

 

 

 

 

3.27

 

-

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

*

 

 

 

 

 

 


*

 

_______________________
Incorporated by reference.

 

 

193

 

 


 

3.28

 

-

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

*

 

 

 

 

 

3.29

 

-

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

*

 

 

 

 

 

3.30

 

-

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

*

 

 

 

 

 

3.31

 

-

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

*

 

 

 

 

 

3.32

 

-

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

*

 

 

 

 

 

3.33

 

-

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

*

 

 

 

 

 

3.34

 

-

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

*

 

 

 

 

 

3.35

 

-

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

*

 

 

 

 

 

3.36

 

-

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

*

 

 

 

 

 

3.37

 

-

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

*

 

 

 

 

 

3.38

 

-

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

*

 

 

 

 

 

3.39

 

-

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

*

 

 

 

 

 

3.40

 

-

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

*

 

 

 

 

 

 


*

 

_______________________
Incorporated by reference.

 

 

194

 

 


 

3.41

 

-

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

*

 

 

 

 

 

3.42

 

-

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

*

 

 

 

 

 

3.43

 

-

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

*

 

 

 

 

 

3.44

 

-

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

*

 

 

 

 

 

4.1

 

-

Indenture and Servicing Agreement, dated as of March 1, 2000, among Vornado Finance LLC, LaSalle Bank National Association, ABN Amro Bank N.V. and Midland Loan Services, Inc. - Incorporated by reference to Exhibit 10.48 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

*

 

 

 

 

 

4.2

 

-

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

*

 

 

 

 

 

4.3

 

-

Indenture, dated as of November 25, 2003, between Vornado Realty L.P. and The Bank of New York, as Trustee - Incorporated by reference to Exhibit 4.10 to Vornado Realty Trust’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2005 (File No. 001-11954), filed on April 28, 2005

*

 

 

 

 

 

4.4

 

-

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

*

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

10.1

**

-

Vornado Realty Trust’s 1993 Omnibus Share Plan - Incorporated by reference to Exhibit 4.1 to Vornado Realty Trust’s Registration Statement on Form S-8 (File No. 331-09159), filed on July 30, 1996

*

 

 

 

 

 

10.2

**

-

Vornado Realty Trust’s 1993 Omnibus Share Plan, as amended - Incorporated by reference to Exhibit 4.1 to Vornado Realty Trust’s Registration Statement on Form S-8 (File No. 333-29011), filed on June 12, 1997

*

 

 

 

 

 

10.3

 

-

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

*

 

 

 

 

 

10.4

 

-

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

*

 


* **

 

_______________________
Incorporated by reference.
Management contract or compensatory agreement.

 

 

 

195

 

 


 

 

 

 

 

 

10.5

 

-

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

*

 

 

 

 

 

10.6

 

-

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

*

 

 

 

 

 

10.7

**

-

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

*

 

 

 

 

 

10.8

 

-

Consolidated and Restated Mortgage, Security Agreement, Assignment of Leases and Rents and Fixture Filing, dated as of March 1, 2000, between Entities named therein (as Mortgagors) and Vornado (as Mortgagee) - Incorporated by reference to Exhibit 10.47 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

*

 

 

 

 

 

10.9

**

-

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

*

 

 

 

 

 

10.10

**

-

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

*

 

 

 

 

 

10.11

 

-

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

*

 

 

 

 

 

10.12

 

-

Registration Rights Agreement, dated January 1, 2002, between Vornado Realty Trust and the holders of the Units listed on Schedule A thereto - Incorporated by reference to Exhibit 10.2 to Vornado Realty Trust’s Current Report on Form 8-K/A (File No. 1-11954), filed on March 18, 2002

*

 

 

 

 

 

10.13

 

-

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

*

 

 

 

 

 

10.14

**

-

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

*

 

 

 

 

 

10.15

**

-

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

*

 

 

 

 

 

 


* **

 

_______________________
Incorporated by reference.
Management contract or compensatory agreement.

 

 

196

 

 


 

10.16

 

-

Registration Rights Agreement, dated as of July 21, 1999, by and between Vornado Realty Trust and the holders of Units listed on Schedule A thereto - Incorporated by reference to Exhibit 10.2 to Vornado Realty Trust’s Registration Statement on Form S-3 (File No. 333-102217), filed on December 26, 2002

*

 

 

 

 

 

10.17

 

-

Form of Registration Rights Agreement between Vornado Realty Trust and the holders of Units listed on Schedule A thereto - Incorporated by reference to Exhibit 10.3 to Vornado Realty Trust’s Registration Statement on Form S-3 (File No. 333-102217), filed on December 26, 2002

*

 

 

 

 

 

10.18

 

-

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

*

 

 

 

 

 

10.19

 

-

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

*

 

 

 

 

 

10.20

 

-

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

*

 

 

 

 

 

10.21

 

-

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

*

 

 

 

 

 

10.22

 

-

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

*

 

 

 

 

 

10.23

**

-

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

*

 

 

 

 

 

10.24

 

-

Registration Rights Agreement by and between Vornado Realty Trust and Bel Holdings LLC dated as of November 17, 2003 – Incorporated by reference to Exhibit 10.68 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

*

 

 

 

 

 

10.25

 

-

Registration Rights Agreement, dated as of May 27, 2004, by and between Vornado Realty Trust and 2004 Realty Corp. – Incorporated by reference to Exhibit 10.75 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

*

 

 

 

 

 

10.26

 

-

Registration Rights Agreement, dated as of December 17, 2004, by and between Vornado Realty Trust and Montebello Realty Corp. 2002 – Incorporated by reference to Exhibit 10.76 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

*

 

 

 

 

 

 


* **

 

_______________________
Incorporated by reference.
Management contract or compensatory agreement.

 

 

197

 

 


 

10.27

**

-

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

*

 

 

 

 

 

10.28

**

-

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

*

 

 

 

 

 

10.29

**

-

Employment Agreement between Vornado Realty Trust and Sandeep Mathrani, dated February 22, 2005 and effective as of January 1, 2005 – Incorporated by reference to Exhibit 10.76 to Vornado Realty Trust’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2005 (File No. 001-11954), filed on April 28, 2005

*

 

 

 

 

 

10.30

 

-

Contribution Agreement, dated May 12, 2005, by and among Robert Kogod, Vornado Realty L.P. and certain Vornado Realty Trust’s affiliates – Incorporated by reference to Exhibit 10.49 to Vornado Realty Trust’s Annual Report on Form 10-K for the year ended December 31, 2005 (File No. 001-11954), filed on February 28, 2006

*

 

 

 

 

 

10.31

**

-

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

*

 

 

 

 

 

10.32

**

-

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

*

 

 

 

 

 

10.33

**

-

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

*

 

 

 

 

 

10.34

 

-

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

*

 

 

 

 

 

10.35

**

-

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

*

 

 

 

 

 

10.36

**

-

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

*

 

 

 

 

 

10.37

 

-

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

*

 

 

 

 

 

10.38

**

-

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

*

 


* **

 

_______________________
Incorporated by reference.
Management contract or compensatory agreement.

 

 

198

 

 


 

10.39

**

-

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

*

 

 

 

 

 

10.40

**

-

Amendment to 59 th 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

*

 

 

 

 

 

10.41

 

-

Stock Purchase Agreement between the Sellers identified and Vornado America LLC, as the Buyer, dated as of March 5, 2007 – Incorporated by reference to Exhibit 10.45 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

*

 

 

 

 

 

10.42

**

-

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

*

 

 

 

 

 

10.43

 

-

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

*

 

 

 

 

 

10.44

 

-

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

*

 

 

 

 

 

10.45

**

-

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

*

 

 

 

 

 

10.46

**

-

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

*

 

 

 

 

 

10.47

**

-

Amendment to Employment Agreement between Vornado Realty Trust and Michael D. Fascitelli, dated December 29, 2008

 

 

 

 

 

 

10.48

**

-

Amendment to Employment Agreement between Vornado Realty Trust and Joseph Macnow, dated December 29, 2008

 

 

 

 

 

 

10.49

**

-

Amendment to Employment Agreement between Vornado Realty Trust and David R. Greenbaum, dated December 29, 2008

 

 

 

 

 

 

10.50

**

-

Amendment to Indemnification Agreement between Vornado Realty Trust and David R. Greenbaum, dated December 29, 2008

 

 

 

 

 

 

 

 

 

 

 

 


* **

 

_______________________
Incorporated by reference.
Management contract or compensatory agreement.

 

 

199

 

 


 

10.51

**

-

Amendment to Employment Agreement between Vornado Realty Trust and Mitchell N. Schear, dated December 29, 2008

 

 

 

 

 

 

10.52

**

-

Amendment to Employment Agreement between Vornado Realty Trust and Sandeep Mathrani, dated December 29, 2008

 

 

 

 

 

 

10.53

**

-

Amendment to Employment Agreement between Vornado Realty Trust and Christopher G. Kennedy, dated December 29, 2008

 

 

 

 

 

 

 

 

 

 

 

12

 

-

Computation of Ratios

 

 

 

 

 

 

21

 

-

Subsidiaries of the Registrant

 

 

 

 

 

 

23

 

-

Consent of Independent Registered Public Accounting Firm

 

 

 

 

 

 

31.1

 

-

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

 

 

 

 

 

 

31.2

 

-

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

 

 

 

 

 

 

32.1

 

-

Section 1350 Certification of the Chief Executive Officer

 

 

 

 

 

 

32.2

 

-

Section 1350 Certification of the Chief Financial Officer

 

 


*
**

 

_______________________
Incorporated by reference.
Management contract or compensatory agreement.

 

 

 

 

200

 

 

 

 

EXHIBIT 12

 

COMPUTATION OF RATIOS

(UNAUDITED)

 

Our consolidated ratios of earnings to fixed charges and earnings to combined fixed charges and preference dividends for each of the fiscal years ended December 31, 2008, 2007, 2006, 2005 and 2004 are as follows:

 

 

 

Year Ended December 31,

 

($ in thousands)

 

2008

 

2007

 

2006

 

2005

 

2004

 

Net income from continuing operations

 

$

232,749

(1)

$

514,841

 

$

609,308

 

$

562,132

 

$

603,596

 

Fixed charges

 

 

678,937

 

 

651,034

 

 

449,991

 

 

353,561

 

 

322,847

 

Income distributions from partially owned entities

 

 

44,690

 

 

24,044

 

 

35,911

 

 

40,152

 

 

16,740

 

Capitalized interest

 

 

(63,063

)

 

(53,648

)

 

(26,195

)

 

(15,582

)

 

(8,718

)

Preferred unit distributions

 

 

(19,743

)

 

(19,832

)

 

(23,007

)

 

(50,731

)

 

(75,278

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings - Numerator

 

$

873,570

 

$

1,116,439

 

$

1,046,008

 

$

889,532

 

$

859,187

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest and debt expense

 

$

586,358

 

$

569,386

 

$

394,571

 

$

281,825

 

$

233,750

 

Capitalized interest

 

 

63,063

 

 

53,648

 

 

26,195

 

 

15,582

 

 

8,718

 

1/3 of rental expense – interest factor

 

 

9,773

 

 

8,168

 

 

6,218

 

 

5,423

 

 

5,101

 

Preferred unit distributions

 

 

19,743

 

 

19,832

 

 

23,007

 

 

50,731

 

 

75,278

 

Fixed charges - Denominator

 

 

678,937

 

 

651,034

 

 

449,991

 

 

353,561

 

 

322,847

 

Preferred share dividends

 

 

57,091

 

 

57,177

 

 

57,511

 

 

46,501

 

 

21,920

 

Combined fixed charges and preference dividends - Denominator

 

$

736,028

 

$

708,211

 

$

507,502

 

$

400,062

 

$

344,767

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ratio of earnings to fixed charges

 

 

1.29

 

 

1.71

 

 

2.32

 

 

2.52

 

 

2.66

 

Ratio of earnings to combined fixed charges and preference dividends

 

 

1.19

 

 

1.58

 

 

2.06

 

 

2.22

 

 

2.49

 

 

Earnings equals (i) income from continuing operations before income taxes and income from partially owned entities, plus, (ii) fixed charges, (iii) income distributions from partially owned entities, minus (iv) capitalized interest and (v) preferred unit distributions of the Operating Partnership. Fixed charges equals (i) interest and debt expense, plus (ii) capitalized interest, (iii) the portion of operating lease rental expense that is representative of the interest factor, which is one-third of operating lease rentals and (iv) preferred unit distributions of the Operating Partnership. Combined fixed charges and preference dividends equals fixed charges plus preferred share dividends.

 

_______________________

(1)

Includes an aggregate of $358,340 of non-cash impairment charges related to (i) our investment in Lexington Realty Trust, (ii) marketable equity securities and (iii) partially owned and wholly owned real estate development projects.

 

 

 

 EXHIBIT 10.48

 

AMENDMENT TO EMPLOYMENT AGREEMENT

 

AMENDATORY AGREEMENT , dated the 29th day of December, 2008 by and between VORNADO REALTY TRUST, a Maryland unincorporated business trust and VORNADO REALTY LP, a Delaware Operating Partnership, (“ Employer ”) and JOSEPH MACNOW (“ Employee ”).

 

WHEREAS , Employer and Employee entered into an Amended and Restated Employment Agreement effective as of July 27, 2006 (the “ Employment Agreement ”) to set forth the terms of Employee’s continuing employment by Employer; and

 

WHEREAS , Employer and Employee desire to amend the Employment Agreement to conform its terms with final regulations promulgated by the Internal Revenue Service under Section 409A of the Internal Revenue Code of 1986, as amended;

 

NOW, THEREFORE , in consideration of the mutual premises and covenants set forth herein and for other good and valuable consideration, the receipt, adequacy and legal sufficiency of which are hereby acknowledged, Employer and Employee mutually agree as follows:

 

1.         Section 6(d) of the Employment Agreement is hereby amended in its entirety, to read as follows:

 

“(d)      Employee Benefit Plans or Arrangements . In addition to the cash compensation provided for in Section 4 hereof and the stock options and other awards provided in Section 5 hereof, Employee, subject to meeting eligibility provisions and to the provisions of this Agreement, shall be entitled to participate in all employee benefit plans of Employer, as presently in effect or as they may be modified or added to by Employer from time to time, including, without limitation, plans providing retirement benefits, medical insurance, life insurance, disability insurance and accidental death or dismemberment insurance. Without limiting the foregoing, Employee shall be entitled to tax preparation and planning assistance of $15,000 per calendar year, payable in a lump sum no later than the end of the calendar year following the calendar year to which the payment relates, and upon approval by an insurance carrier, a $3 million five-year renewable term life insurance policy or at Employee’s election other life insurance with a comparable cost to Employer.”

 

2.         Section 7(f) of the Employment Agreement is hereby amended in its entirety, to read as follows:

 

“(f)       Death Benefit . Notwithstanding any other provision of this Agreement, the Period of Employment shall terminate on the date of

 

V8887/41

01/05/2009 2234412.6

 


Employee’s death. In such event, (i) Employee’s estate shall be paid the amount specified in Section 7(g)(i) below and one (1) times Employee’s annual rate of Base Salary, payable in a lump sum within 30 days after the date of Employee’s death (subject to the provisions of Section 7(i) hereof) and (ii) Employer shall provide employee’s spouse and dependents with health coverage as provided in Section 7(g)(ii) for one (1) year from the date of death."

 

3.         Section 7(g) of the Employment Agreement is hereby amended in its entirety, to read as follows:

 

“(g)      Termination Compensation . Upon the termination of the Period of Employment and Employee’s employment hereunder (including any nonextension of the Period of Employment), Employer shall provide Employee with the payments and benefits set forth below, subject to the provisions of Section 7(i) hereof. Employee acknowledges and agrees that the payments and benefits set forth in this Section and elsewhere herein and in other written grants and agreements constitute liquidated damages for termination of his employment hereunder (including any nonextension of the Period of Employment).

 

(i)        Upon a termination of the Period of Employment and Employee’s employment hereunder, Employee shall be entitled to receive in a lump sum within 30 days after the date of termination, subject to Section 7(i) hereof, (A) his Base Compensation through the effective date of termination (B) if such termination is other than pursuant to Section 7(b) hereof, any unpaid annual earned bonus for the most recently completed fiscal year, (C) if such termination is pursuant to Sections 7(a), 7(c) or 7(d) hereof, a pro rata share of Employee’s annual target bonus for the fiscal year of termination, (D) the benefits, fringes and perquisites, including without limitation accrued vacation (provided that if the termination is pursuant to Section 7(b) or 7(e) hereof, only such payment of accrued vacation as is required by law or Employer’s vacation policy), provided pursuant to Section 6 hereof up to the effective date of such termination and (E) any other amount due to Employee under any other program or plan of Employer.

 

(ii) In the event of a termination of the Period of Employment and Employee’s employment pursuant to Section 7(a) (such reference shall include, without limitation, a nonextension by Employer of this Agreement) or 7(d) hereof, Employee shall also be entitled to

(A) receive an amount (the “ Severance Amount ”) equal to the sum of (x) three times Employee’s annualized Base Compensation (as in effect on the date of such termination or, if greater, immediately prior to the Good Reason event, if any, based on which the termination of employment occurs) and (y) three times Employee’s Bonus Severance

 

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Amount (as defined herein). The “ Bonus Severance Amount ” shall mean an amount equal to the average of all annual bonuses earned by the Employee from Employer in the two (2) fiscal years ending immediately prior to Employee’s termination (the Severance Amount shall be payable in a lump sum within thirty (30) days of such termination, subject to Section 7(i) hereof) and

(B) Employee shall become fully vested in any stock options granted to Employee by the Board.

In the event of a termination pursuant to Section 7(a), 7(c) or 7(d) hereof, Employer shall maintain in full force and effect, for the continued benefit of Employee, his spouse and his dependants for a period of three (3) years following the date of termination of employment (“Date of Termination”), the medical, dental and hospitalization programs (the “Health Programs”) and the life insurance programs (including, without limitation, the life insurance policy set forth in Section 6(d), but for no longer than the five year term of such policy) (the “Life Insurance Programs”) in which Employee, his spouse and his dependants were participating immediately prior to the Date of Termination at the level in effect and upon substantially the same terms and conditions (including, without limitation, contributions required by Employee for such benefits) as existed immediately prior to the Date of Termination. If Employee, his spouse or his dependants cannot continue to participate in the Employer’s Health Programs, Employer shall: (a) in the event Employee is eligible to, and elects to continue receiving such benefits from Employer pursuant to the requirements of the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (“COBRA”), waive the premium cost of such benefits (to the extent such premiums exceed the premium costs charged to active employees of Employer from time to time) for the period during which Employee (and his spouse and dependents) is/are entitled to continuation coverage under COBRA (the “COBRA Period”) and (b) commencing with the month after the month in which the COBRA Period ends, pay to Employee an amount equal to the quotient determined by dividing (x) the cost to Employee of acquiring medical, dental and/or hospitalization coverage for Employee, his spouse and his dependants for such month (such coverage to be, on a benefit-by-benefit basis, at the same level of, but otherwise comparable to, the coverage in effect immediately prior to the Date of Termination), by (y) 0.55, with such payment to be made on the first business day of the month following the month to which such coverage relates. Subject to Section 7(i) hereof, in the event Employee, his spouse or his dependants cannot continue to participate in the Employer’s Life Insurance Programs, Employer shall pay to Employee an amount equal to the cost to Employee of acquiring life insurance coverage for Employee, his spouse and his dependants for such month (such coverage to be, on a benefit-by-benefit basis, at the same level of, but otherwise comparable to, the coverage in effect immediately prior to the Date of Termination), with such payment to be

 

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made on the first business day of the month following the month to which such coverage relates. Notwithstanding the forgoing, Employer’s obligation to provide the benefits and payments described above shall terminate on the earlier of (i) the date or dates Employee receives equivalent coverage and benefits, without waiting period or pre-existing conditions limitations, under the plans and programs of a subsequent employer (such coverage and benefits to be determined on a coverage-by-coverage or benefit-by-benefit, basis) or (ii) the third anniversary of the Date of Termination; PROVIDED that, Employer’s obligation with respect to the life insurance policy referred to in Section 6(d) shall terminate no later than the expiration of the five year term of such policy. Employee shall not be entitled to any compensation or benefits pursuant to this Section 7(g)(ii) of his employment hereunder is terminated pursuant to Section 7(b) or as a result of Employee’s voluntary termination pursuant to Section 7(e). Notwithstanding anything herein to the contrary no Severance Amount payable to Employee under this section shall exceed the aggregate sum of $3,300,000.”

 

4.         Section 7 of the Employment Agreement is hereby amended by adding the following paragraph at the end thereof:

 

“(i)       409A Compliance . Notwithstanding the foregoing, if necessary to comply with the restriction in Section 409A(a)(2)(B) of the Internal Revenue Code of 1986, as amended (the “ Code ”) concerning payments to “specified employees”, any payment on account of Employee’s separation from service that would otherwise be due hereunder within six months after such separation shall nonetheless be delayed until the first business day of the seventh month following Employee’s date of termination and the first such payment shall include the cumulative amount of any payments that would have been paid prior to such date if not for such restriction, together with interest on such cumulative amount during the period of such restriction at a rate, per annum, equal to the applicable federal short-term rate (compounded monthly) in effect under Section 1274(d) of the Code on the date of termination. For purposes of Section 7 hereof, Employee shall be a “specified employee” for the 12-month period beginning on the first day of the fourth month following each “Identification Date” if he is a “key employee” (as defined in Section 416(i) of the Code without regard to Section 416(i)(5) thereof) of Employer at any time during the 12-month period ending on the “Identification Date.” For purposes of the foregoing, the Identification Date shall be December 31. Notwithstanding anything contained herein to the contrary, Employee shall not be considered to have terminated employment with Employer for purposes of Section 7 hereof unless he would be considered to have incurred a “termination of

 

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employment” from Employer within the meaning of Treasury Regulation §1.409A-1(h)(1)(ii).”

 

5.         Section 10 of the Employment Agreement is hereby amended in its entirety, to read as follows:

 

“10.      Legal Fees and Expenses .      If any contest or dispute shall arise between Employer and Employee (or, following the death of Employee, his estate or heirs) regarding any provision of this Agreement or any equity grant or other agreement or compensation arrangement specifically set forth or provided for herein, Employer shall reimburse (i) Employee for all legal fees and expenses reasonably incurred by Employee during his lifetime and (ii) Employee’s estate and heirs for all legal fees and expenses reasonably incurred by Employee’s estate and heirs through the earlier of the 15 th anniversary of the date of Employee’s death or the final settlement of Employee’s estate, in any case, in connection with such contest or dispute, but only if Employee (or his estate or heirs, as the case may be) is successful in respect of substantially all of the Employee’s (or his estate’s or heirs’, as the case may be) claims brought and pursued in connection with such contest or dispute. The reimbursement provided for in this Section 10 shall be made as soon as practicable following the resolution of such contest or dispute (whether or not appealed) to the extent Employer received reasonable written evidence of such fees and expenses, but in any event no later than the end of the calendar year following the calendar year in which the expenses were incurred.”

 

6.         Section 14 of the Employment Agreement is hereby amended in its entirety, to read as follows:

 

 

“14.

Section 409A Compliance .

 

(a)       This Agreement is intended to comply with the requirements of Section 409A of the Code (“Section 409A”) and regulations promulgated thereunder. To the extent that any provision in this Agreement is ambiguous as to its compliance with Section 409A or to the extent any provision in this Agreement must be modified to comply with Section 409A (including, without limitation, Treasury Regulation 1.409A-3(c)), such provision shall be read, or shall be modified (with the mutual consent of the parties, which consent shall not be unreasonably withheld), as the case may be, in such a manner so that all payments due under this Agreement shall comply with Section 409A. For purposes of section 409A, each payment made under this Agreement shall be treated as a separate payment. In no event may Employee, directly or indirectly, designate the calendar year of payment.

 

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(b)       All reimbursements provided under this Agreement shall be made or provided in accordance with the requirements of section 409A, including, where applicable, the requirement that (i) any reimbursement is for expenses incurred during Employee’s lifetime (or during a shorter period of time specified in this Agreement), (ii) the amount of expenses eligible for reimbursement during a calendar year may not affect the expenses eligible for reimbursement in any other calendar year, (iii) the reimbursement of an eligible expense will be made on or before the last day of the calendar year following the year in which the expense is incurred, and (iv) the right to reimbursement is not subject to liquidation or exchange for another benefit.”

 

7.         Employee further acknowledges that, while the purpose of this Amendatory Agreement is to conform the Employment Agreement to the requirements of Section 409A of the Code and Treasury Regulations promulgated thereunder, any tax liability incurred by Employee under Section 409A of the Code is solely the responsibility of Employee.

 

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Except as amended herein, the Employment Agreement shall remain in full force and effect.

 

 

VORNADO REALTY TRUST and

 

VORNADO REALTY LP

 

 

 

By: /s/Alan J. Rice

 

Name: Alan J. Rice

 

Title: Senior Vice President

 

 

 

/s/ Joseph Macnow

 

Joseph Macnow

 

 

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 EXHIBIT 10.49

 

AMENDMENT TO EMPLOYMENT AGREEMENT

 

AMENDATORY AGREEMENT , dated the 29th day of December, 2008 by and between VORNADO REALTY TRUST, a Maryland real estate investment trust (the “ Company ”), Vornado Realty, L.P., a Delaware limited partnership (formerly known as The Mendick Company, L.P.) (the “ Operating Partnership ”) and DAVID R. GREENBAUM (the “ Executive ”).

 

WHEREAS , the Company, the Operating Partnership and Executive entered into an Employment Agreement dated as of April 15, 1997 (the “ Employment Agreement ”) to set forth the terms of the Executive’s employment by the Company; and

 

WHEREAS , the Company, the Operating Partnership and the Executive desire to amend the Employment Agreement to conform its terms with final regulations promulgated by the Internal Revenue Service under Section 409A of the Internal Revenue Code of 1986, as amended;

 

NOW, THEREFORE , in consideration of the mutual premises and covenants set forth herein and for other good and valuable consideration, the receipt, adequacy and legal sufficiency of which are hereby acknowledged, the Company and Executive mutually agree as follows:

 

1.         Section 2(c) of the Employment Agreement is hereby amended in its entirety, to read as follows:

 

“(c)      Executive Benefits . During the term of this Agreement, Executive shall have the right to participate in any retirement, pension, insurance, health or other benefit plan or program, fringe benefit or other perquisite that generally is provided by the Company for other senior executive officers of the Company (which shall not include plans, programs, benefits or perquisites provided specifically for the benefit of the Chief Executive Officer of the Company, the President of the Company, or any other officer of the Company on an individual basis because of special circumstances, any individual(s) who become employed by the Company pursuant to an acquisition (with regard to levels of programs or arrangements committed to at such time), or to any individual(s) pursuant to an agreement for a new hire (with regard to levels of programs or arrangements committed to at such time)). Without limiting the foregoing, Executive shall be entitled to tax preparation and financial planning assistance up to a maximum of $15,000 per calendar year, payable in a lump sum no later than the end of the calendar year following the calendar year to which the payment relates, upon approval by an insurance carrier, a $3 million five-year renewable term life insurance policy and long-term disability insurance coverage with benefits at a rate of 60% of Base Salary through age 65 and a criteria of comparable position and no longer than a 180-day waiting period, which disability benefits would be

 

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inclusive of any disability benefits paid under any group long-term disability plan of the Company and noncontributory wrap-around medical and dental coverage substantially similar to that which he now has.”

 

2.         Section 4(f) of the Employment Agreement is hereby amended in its entirety, to read as follows:

 

“4(f)     Death Benefit . Notwithstanding any other provision of this Agreement, the Employment Term shall terminate on the date of Executive’s death. In such event, (i) Executive’s estate shall be paid the amount specified in Section 4(g)(i) below and one (1) times Executive’s annual rate of Base Salary, payable in a lump sum within 30 days after the date of Executive’s death (subject to the provisions of Section 4(i) hereof) and (ii) the Company shall provide Executive’s spouse and dependents with health coverage as provided in Section 4(g)(ii) for one year from the date of death.”

 

3.         Section 4(g) of the Employment Agreement is hereby amended in its entirety, to read as follows:

 

“4(g)    Termination Compensation . Upon the termination of the Employment Term and Executive’s employment hereunder (including any nonextension of the Employment Term), the Company shall provide Executive with the payments and benefits set forth below, subject to the provisions of Section 4(i) hereof. Executive acknowledges and agrees that the payments and benefits set forth in this section and elsewhere herein and in other written grants and agreements constitute liquidated damages for termination of his employment hereunder (including any nonextension of the Employment Term).

 

(i) Upon a termination of the Employment Term and Executive’s employment hereunder, Executive shall be entitled to receive in a lump sum within 30 days after the date of termination, subject to Section 4(i) hereof , (A) his Base Compensation through the effective date of termination, (B) if such termination is other than pursuant to Section 4(b) hereof, any unpaid annual earned bonus for the most recently completed fiscal year, (C) if such termination is pursuant to Section 4(a), 4(c) or 4(d) hereof, a pro rata share of Executive’s annual target bonus for the fiscal year of termination, (D) the benefits, fringes and perquisites, including without limitation accrued vacation (provided that if the termination is pursuant to Section 4(b) or 4(e) hereof, only such payment of accrued vacation as is required by law or the Company’s vacation policy), provided pursuant to Section 2 hereof up to the effective date of such termination and (E) any other amount due to Executive under any other program or plan of the Company.

 

(ii) In the event of a termination of the Employment Term and Executive’s employment pursuant to Section 4(a) (such reference shall include, without limitation, a nonextension by the Company pursuant

 

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to the terms of Section 3 hereof) or 4(d) hereof, Executive shall also be entitled to receive an amount (the “ Severance Amount ”) equal to the sum of (x) three times Executive’s annualized Base Compensation (as in effect on the date of such termination or, if greater, immediately prior to the Good Reason event, if any, based on which the termination of employment occurs) and (y) three times Executive’s Bonus Severance Amount (as defined herein). The “ Bonus Severance Amount ” shall mean an amount equal to the average of all annual bonuses earned by the Executive from the Company in the two (2) fiscal years ending immediately prior to Executive’s termination. The Severance Amount shall be payable in a lump sum within thirty (30) days of such termination, subject to Section 4(i) hereof. In the event of a termination pursuant to Section 4(a), 4(c) or 4(d) hereof, the Company shall maintain in full force and effect, for the continued benefit of Executive, his spouse and his dependants for a period of three (3) years following the date of termination of Executive’s employment (the “Date of Termination”), the medical, dental and hospitalization programs (the “Health Programs”) and the life insurance programs (including, without limitation, the life insurance policy set forth in Section 2(c), but for no longer than the five year term of such policy) (the “Life Insurance Programs”) in which Executive, his spouse and his dependants were participating immediately prior to the Date of Termination at the level in effect and upon substantially the same terms and conditions (including, without limitation, contributions required by Executive for such benefits) as existed immediately prior to the Date of Termination. If Executive, his spouse or his dependants cannot continue to participate in the Company Health Programs, the Company shall: (a) in the event Executive is eligible to, and elects to continue receiving such benefits from the Company pursuant to the requirements of the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (“COBRA”), waive the premium cost of such benefits (to the extent such premiums exceed the premium costs charged to active employees of the Company from time to time) for the period during which Executive (and his spouse and dependents) is/are entitled to continuation coverage under COBRA (the “COBRA Period”) and (b) commencing with the month after the month in which the COBRA Period ends, pay to Executive an amount equal to the quotient determined by dividing (x) the cost to Executive of acquiring medical, dental and/or hospitalization coverage for Executive, his spouse and his dependants for such month (such coverage to be, on a benefit-by-benefit basis, at the same level of, but otherwise comparable to, the coverage in effect immediately prior to the Date of Termination), by (y) 0.55, with such payment to be made on the first business day of the month following the month to which such coverage relates. Subject to Section 4(i) hereof, in the event Executive, his spouse or his dependants cannot continue to participate in the Company Life Insurance Programs, the Company shall pay to Executive an amount equal to the cost to Executive of acquiring life insurance coverage for Executive, his spouse

 

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and his dependants for such month (such coverage to be, on a benefit-by-benefit basis, at the same level of, but otherwise comparable to, the coverage in effect immediately prior to the Date of Termination), with such payment to be made on the first business day of the month following the month to which such coverage relates. Notwithstanding the forgoing, the Company’s obligation to provide the benefits and payments described above shall terminate on the earlier of (i) the date or dates Executive receives equivalent coverage and benefits, without waiting period or pre-existing conditions limitations, under the plans and programs of a subsequent employer (such coverage and benefits to be determined on a coverage-by-coverage or benefit-by-benefit, basis) or (ii) the third anniversary of the Date of Termination; PROVIDED that, the Company’s obligation with respect to the life insurance policy referred to in Section 2(c) shall terminate no later than the expiration of the five year term of such policy. Executive shall not be entitled to any compensation or benefits pursuant to this Section 4(g)(ii) if his employment hereunder is terminated pursuant to Section 4(b) or as a result of Executive’s voluntary termination pursuant to Section 4(e).

 

(iii) Executive shall have such rights under the Company’s Omnibus Share Plan or any other benefit plan, and any agreements entered into in connection therewith, in accordance with the terms of such plans, grants thereunder and agreements.”

 

4.         Section 4 of the Employment Agreement is hereby amended by adding the following paragraph at the end thereof:

 

“(i)       409A Compliance . Notwithstanding the foregoing, if necessary to comply with the restriction in Section 409A(a)(2)(B) of the Internal Revenue Code of 1986, as amended (the “ Code ”) concerning payments to “specified employees”, any payment on account of Executive’s separation from service that would otherwise be due hereunder within six months after such separation shall nonetheless be delayed until the first business day of the seventh month following Executive’s date of termination and the first such payment shall include the cumulative amount of any payments that would have been paid prior to such date if not for such restriction, together with interest on such cumulative amount during the period of such restriction at a rate, per annum, equal to the applicable federal short-term rate (compounded monthly) in effect under Section 1274(d) of the Code on the date of termination. For purposes of Section 4 hereof, Executive shall be a “specified employee” for the 12-month period beginning on the first day of the fourth month following each “Identification Date” if he is a “key employee” (as defined in Section 416(i) of the Code without regard to Section 416(i)(5) thereof) of the Company at any time during the 12-month period ending on the “Identification Date.” For purposes of the

 

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foregoing, the Identification Date shall be December 31. Notwithstanding anything contained herein to the contrary, Executive shall not be considered to have terminated employment with the Company for purposes of Section 4 hereof unless he would be considered to have incurred a “termination of employment” from the Company within the meaning of Treasury Regulation §1.409A-1(h)(1)(ii).”

 

5.         Section 6(g) of the Employment Agreement is hereby amended in its entirety, to read as follows:

 

“6(g).   Legal Fees and Expenses .       If any contest or dispute shall arise between the Company and Executive (or, following the death of Executive, his estate or heirs) regarding any provision of this Agreement, the Indemnification Agreement or any equity grant or other agreement or compensation arrangement specifically set forth or provided for herein, the Company shall reimburse (i) Executive for all legal fees and expenses reasonably incurred by Executive during the lifetime of Executive and (ii) Executive’s estate and heirs for all legal fees and expenses reasonably incurred by Executive’s estate and heirs through the earlier of the 15 th anniversary of the date of Executive’s death or the final settlement of Executive’s estate, in any case, in connection with such contest or dispute, but only if Executive (or his estate or heirs, as the case may be) is successful in respect of substantially all of Executive’s (or his estate’s or heirs’, as the case may be) claims brought and pursued in connection with such contest or dispute. Such reimbursement shall be made as soon as practicable following the resolution of such contest or dispute (whether or not appealed) to the extent the Company received reasonable written evidence of such fees and expenses, but in any event no later than the end of the calendar year following the calendar year in which the expenses were incurred.”

 

6.         A new Section 6(l) of the Employment Agreement is hereby added, to read as follows:

 

 

“6(l).

Section 409A Compliance .

 

(i)        This Agreement is intended to comply with the requirements of Section 409A of the Code (“ Section 409A ”) and regulations promulgated thereunder. To the extent that any provision in this Agreement is ambiguous as to its compliance with Section 409A or to the extent any provision in this Agreement must be modified to comply with Section 409A (including, without limitation, Treasury Regulation 1.409A-3(c)), such provision shall be read, or shall be modified (with the mutual consent of the parties, which consent shall not be unreasonably withheld), as the case may be, in such a manner so that all payments due

 

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under this Agreement shall comply with Section 409A. For purposes of section 409A, each payment made under this Agreement shall be treated as a separate payment. In no event may Executive, directly or indirectly, designate the calendar year of payment.

 

(ii)       All reimbursements provided under this Agreement shall be made or provided in accordance with the requirements of section 409A, including, where applicable, the requirement that (i) any reimbursement is for expenses incurred during Executive’s lifetime (or during a shorter period of time specified in this Agreement), (ii) the amount of expenses eligible for reimbursement during a calendar year may not affect the expenses eligible for reimbursement in any other calendar year, (iii) the reimbursement of an eligible expense will be made on or before the last day of the calendar year following the year in which the expense is incurred, and (iv) the right to reimbursement is not subject to liquidation or exchange for another benefit.”

 

7.         Executive further acknowledges that, while the purpose of this Amendatory Agreement is to conform the Employment Agreement to the requirements of Section 409A of the Code and Treasury Regulations promulgated thereunder, any tax liability incurred by Executive under Section 409A of the Code is solely the responsibility of Executive.

 

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            Except as amended herein, the Employment Agreement shall remain in full force and effect.

 

 

VORNADO REALTY TRUST

 

 

 

By: /s/ Alan J. Rice

 

Name: Alan J. Rice

 

Title: Senior Vice President

 

 

Vornado Realty, L.P.

 

By: Vornado Realty Trust, a general partner

 

 

 

By: /s/ Alan J. Rice

 

Name: Alan J. Rice

 

Title: Senior Vice President

 

 

 

/s/ David R. Greenbaum

 

David R. Greenbaum

 

 

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 EXHIBIT 10.50

 

AMENDMENT TO INDEMNIFICATION AGREEMENT

 

AMENDATORY AGREEMENT , dated the day of December, 2008 by and between VORNADO REALTY TRUST, a Maryland real estate investment trust (the “ Company ”) and DAVID R. GREENBAUM (the “ Executive ”).

 

WHEREAS , the Company and Executive entered into an Indemnification Agreement dated as of April, 1997 (the “ Indemnification Agreement ”); and

 

WHEREAS , the Company and the Executive desire to amend the Indemnification Agreement to conform its terms with final regulations promulgated by the Internal Revenue Service under Section 409A of the Internal Revenue Code of 1986, as amended;

 

NOW, THEREFORE , in consideration of the mutual premises and covenants set forth herein and for other good and valuable consideration, the receipt, adequacy and legal sufficiency of which are hereby acknowledged, the Company and Executive mutually agree as follows:

 

1.         Section 3 of the Indemnification Agreement is hereby amended in its entirety, to read as follows:

 

“3.        Enforcement . If a claim or request under this Agreement is not paid by the Company or on its behalf, within thirty (30) days after a written claim or request has been received by the Company, (i) Executive may at any time thereafter during his lifetime and (ii) following the death of Executive, his estate or heirs may, bring suit against the Company to recover the unpaid amount of the claim or request and if successful in whole or in part, (x) Executive shall be entitled to be paid also the expenses of prosecuting such suit and (y) Executive’s estate and heirs shall be entitled to be paid also the expenses of prosecuting such suit to the extent incurred through the earlier of the 15 th anniversary of the date of Executive’s death or the final settlement of Executive’s estate, as the case may be. Such reimbursement shall be made as soon as practicable following the resolution of such contest or dispute (whether or not appealed) to the extent the Company received reasonable written evidence of such fees and expenses, but in any event no later than the end of the calendar year following the calendar year in which the expenses were incurred. All obligations for indemnification hereunder shall be subject to, and paid in accordance with, the laws of the State of Maryland.”

 

6.         A new Section 14 of the Indemnification Agreement is hereby added, to read as follows:

 

 

“14.

Section 409A Compliance .

 

 

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(a)       This Agreement is intended to comply with the requirements of Section 409A of the Code (“ Section 409A ”) and regulations promulgated thereunder. To the extent that any provision in this Agreement is ambiguous as to its compliance with Section 409A or to the extent any provision in this Agreement must be modified to comply with Section 409A (including, without limitation, Treasury Regulation 1.409A-3(c)), such provision shall be read, or shall be modified (with the mutual consent of the parties, which consent shall not be unreasonably withheld), as the case may be, in such a manner so that all payments due under this Agreement shall comply with Section 409A. For purposes of section 409A, each payment made under this Agreement shall be treated as a separate payment. In no event may Executive, directly or indirectly, designate the calendar year of payment.

 

(b)       All reimbursements provided under this Agreement shall be made or provided in accordance with the requirements of section 409A, including, where applicable, the requirement that (i) any reimbursement is for expenses incurred during Executive’s lifetime (or during a shorter period of time specified in this Agreement), (ii) the amount of expenses eligible for reimbursement during a calendar year may not affect the expenses eligible for reimbursement in any other calendar year, (iii) the reimbursement of an eligible expense will be made on or before the last day of the calendar year following the year in which the expense is incurred, and (iv) the right to reimbursement is not subject to liquidation or exchange for another benefit.”

 

3.         Executive further acknowledges that, while the purpose of this Amendatory Agreement is to conform the Indemnification Agreement to the requirements of Section 409A of the Code and Treasury Regulations promulgated thereunder, any tax liability incurred by Executive under Section 409A of the Code is solely the responsibility of Executive.

 

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            Except as amended herein, the Indemnification Agreement shall remain in full force and effect.

 

 

VORNADO REALTY TRUST

 

 

 

By: /s/ Alan J. Rice

 

Name: Alan J. Rice

 

Title: Senior Vice President

 

 

 

/s/ David R. Greenbaum

 

David R. Greenbaum

 

 

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 EXHIBIT 10.51

 

AMENDMENT TO EMPLOYMENT AGREEMENT

 

AMENDATORY AGREEMENT , dated the 29th day of December, 2008 by and between VORNADO REALTY TRUST (the “ Company ”) and MITCHELL N. SCHEAR (“ Employee ”).

 

WHEREAS , the Company and Employee entered into an Employment Agreement effective as of April 19, 2007 (the “ Employment Agreement ”) to set forth the terms of Employee’s employment by the Company; and

 

WHEREAS , the Company and Employee desire to amend the Employment Agreement to conform its terms with final regulations promulgated by the Internal Revenue Service under Section 409A of the Internal Revenue Code of 1986, as amended;

 

NOW, THEREFORE , in consideration of the mutual premises and covenants set forth herein and for other good and valuable consideration, the receipt, adequacy and legal sufficiency of which are hereby acknowledged, the Company and Employee mutually agree as follows:

 

1.         Section 8(b) of the Employment Agreement is hereby amended in its entirety, to read as follows:

 

“(b)     If Employee's employment is terminated pursuant to Sections 6(a), 6(b), 6(d) or 6(g) the Company shall pay Employee as soon as administratively feasible following the Date of Termination but in no event later than seventy (70) days after the Date of Termination (i) his accrued but unpaid Base Salary through the Date of Termination at the rate in effect at the time Notice of Termination is given, (ii) any annual earned but unpaid bonus for the most recently completed fiscal year (plus a pro rata share of Employee's target bonus for the fiscal year of termination), and (iii) the benefits, fringes and perquisites, including, without limitation, accrued vacation, up to the Date of Termination. Employee also shall be entitled to any other amount due Employee under any other program or plan of the Company in which the Employee participates in accordance with the terms of such program or plan.”

 

2.         Section 8(c) of the Employment Agreement is hereby amended in its entirety, to read as follows:

 

“(c)     If Employee's employment is terminated pursuant to Sections 6(e) or 6(f), the Company shall pay to Employee (A) his accrued and unpaid Base Salary through the Date of Termination and (B) a payment (the " Severance Payment ") equal to the sum of (i) Employee's then current Base Salary and (ii) the average of the Bonus earned by

 

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Employee, if any, in each of the two fiscal years immediately preceding the Date of Termination. The payment described in clause (A) shall be made as soon as administratively feasible following the Date of Termination but in no event later than seventy (70) days after the Date of Termination and the payment described in clause (B), subject to the provisions of Section 8(e), shall be paid ratably in accordance with the Company's customary payroll practices over the one year period following the Date of Termination. Notwithstanding anything herein to the contrary, upon a Reporting Termination the Severance Payment will be $1,000,000 and in no event will the Severance Payment exceed $2,000,000."

 

3.         Section 8 of the Employment Agreement is hereby amended by adding the following paragraph at the end thereof:

 

“(e)      409A Compliance . Notwithstanding the foregoing, if necessary to comply with the restriction in Section 409A(a)(2)(B) of the Internal Revenue Code of 1986, as amended (the “ Code ”) concerning payments to “specified employees”, any payment on account of Employee’s separation from service that would otherwise be due hereunder within six months after such separation shall nonetheless be delayed until the first business day of the seventh month following Employee’s date of termination and the first such payment shall include the cumulative amount of any payments that would have been paid prior to such date if not for such restriction, together with interest on such cumulative amount during the period of such restriction at a rate, per annum, equal to the applicable federal short-term rate (compounded monthly) in effect under Section 1274(d) of the Code on the date of termination. For purposes of Section 8 hereof, Employee shall be a “specified employee” for the 12-month period beginning on the first day of the fourth month following each “Identification Date” if he is a “key employee” (as defined in Section 416(i) of the Code without regard to Section 416(i)(5) thereof) of the Company at any time during the 12-month period ending on the “Identification Date.” For purposes of the foregoing, the Identification Date shall be December 31. Notwithstanding anything contained herein to the contrary, Employee shall not be considered to have terminated employment with the Company for purposes of Section 8 hereof unless he would be considered to have incurred a “termination of employment” from the Company within the meaning of Treasury Regulation §1.409A-1(h)(1)(ii).”

 

4.         Section 14 of the Employment Agreement is hereby amended in its entirety, to read as follows:

 

 

“14.

Resolution of Differences Over Breaches of Agreement .

The parties shall use good faith efforts to resolve any controversy or claim arising out of, or relating to this Agreement or the breach thereof,

 

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first in accordance with the Company's internal review procedures, except that this requirement shall not apply to any claim or dispute under or relating to Sections 9 or 10 of this Agreement. If despite their good faith efforts, the parties are unable to resolve such controversy or claim through the Company's internal review procedures, then such controversy or claim shall be resolved by arbitration in Manhattan, New York, in accordance with the rules then obtaining of the American Arbitration Association, and judgment upon the award rendered by the arbitrator(s) may be entered in any court having jurisdiction thereof. If any contest or dispute shall arise between the Company and Employee (or, following the death of Employee, his estate or heirs) regarding any provision of this Agreement, the Company shall reimburse (i) Employee for all legal fees and expenses reasonably incurred by Employee during his lifetime and (ii) Employee’s estate and heirs for all legal fees and expenses reasonably incurred by Employee’s estate and heirs through the earlier of the 15 th anniversary of the date of Employee’s death or the final settlement of Employee’s estate, in any case, in connection with such contest or dispute, but only if Employee (or his estate or heirs, as the case may be) is successful in respect of substantially all of Employee's (or his estate’s or heirs’, as the case may be) claims brought and pursued in connection with such contest or dispute. The reimbursement provided for in this Section 14 shall be made as soon as practicable following the resolution of such contest or dispute (whether or not appealed) to the extent the Company received reasonable written evidence of such fees and expenses, but in any event no later than the end of the calendar year following the calendar year in which the expenses were incurred.”

 

5.         A new Section 22 of the Employment Agreement is hereby added, to read as follows:

 

 

“22.

Section 409A Compliance .

 

(a)       This Agreement is intended to comply with the requirements of Section 409A of the Code (“Section 409A”) and regulations promulgated thereunder. To the extent that any provision in this Agreement is ambiguous as to its compliance with Section 409A or to the extent any provision in this Agreement must be modified to comply with Section 409A (including, without limitation, Treasury Regulation 1.409A-3(c)), such provision shall be read, or shall be modified (with the mutual consent of the parties, which consent shall not be unreasonably withheld), as the case may be, in such a manner so that all payments due under this Agreement shall comply with Section 409A. For purposes of section 409A, each payment made under this Agreement shall be treated as a separate payment. In no event may Employee, directly or indirectly, designate the calendar year of payment.

 

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(b)       All reimbursements provided under this Agreement shall be made or provided in accordance with the requirements of section 409A, including, where applicable, the requirement that (i) any reimbursement is for expenses incurred during Employee’s lifetime (or during a shorter period of time specified in this Agreement), (ii) the amount of expenses eligible for reimbursement during a calendar year may not affect the expenses eligible for reimbursement in any other calendar year, (iii) the reimbursement of an eligible expense will be made on or before the last day of the calendar year following the year in which the expense is incurred, and (iv) the right to reimbursement is not subject to liquidation or exchange for another benefit.”

 

6.         Employee further acknowledges that, while the purpose of this Amendatory Agreement is to conform the Employment Agreement to the requirements of Section 409A of the Code and Treasury Regulations promulgated thereunder, any tax liability incurred by Employee under Section 409A of the Code is solely the responsibility of Employee.

 

[ signature page follows ]

 

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Except as amended herein, the Employment Agreement shall remain in full force and effect.

 

 

VORNADO REALTY TRUST

 

 

 

By: /s/ Alan J. Rice

 

Name: Alan J. Rice

 

Title: Senior Vice President

 

 

 

/s/ Mitchell N. Schear

 

Mitchell N. Schear

 

 

-5-

 

 

 

 EXHIBIT 10.52

 

AMENDMENT TO EMPLOYMENT AGREEMENT

 

AMENDATORY AGREEMENT , dated the 29th day of December, 2008 by and between VORNADO REALTY TRUST (the “ Company ”) and SANDEEP MATHRANI (“ Employee ”).

 

WHEREAS , the Company and Employee entered into an Employment Agreement on February 22, 2005 but effective as of January 1, 2005 (the “ Employment Agreement ”) to set forth the terms of Employee’s employment by the Company; and

 

WHEREAS , the Company and Employee desire to amend the Employment Agreement to conform its terms with final regulations promulgated by the Internal Revenue Service under Section 409A of the Internal Revenue Code of 1986, as amended;

 

NOW, THEREFORE , in consideration of the mutual premises and covenants set forth herein and for other good and valuable consideration, the receipt, adequacy and legal sufficiency of which are hereby acknowledged, the Company and Employee mutually agree as follows:

 

1.         Section 8(b) of the Employment Agreement is hereby amended in its entirety, to read as follows:

 

“(b)     If Employee's employment is terminated pursuant to Sections 6(a), 6(d) or 6(g) the Company shall pay Employee as soon as administratively feasible following the Date of Termination but in no event later than seventy (70) days after the Date of Termination his accrued but unpaid Base Salary through the Date of Termination at the rate in effect at the time Notice of Termination is given, and the Company shall have no further obligations to Employee under this Agreement; provided , that , Employee shall be entitled to any other benefit or payment provided pursuant to any plan or policy of the Company in accordance with such plan's or policy's terms.”

 

2.         Section 8(c) of the Employment Agreement is hereby amended in its entirety, to read as follows:

 

“(c)     If Employee's employment is terminated pursuant to Sections 6(e) or 6(f), the Company shall pay to Employee (A) his accrued and unpaid Base Salary through the Date of Termination and (B) a payment (the " Severance Payment ") equal to the Severance Multiple (as defined below) times the sum of (i) Employee's then current Base Salary and (ii) the average of the Bonus earned by Employee, if any, in each of the two fiscal years immediately preceding the Date of Termination, or if Employee has been employed less than two fiscal years, such average

 

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shall be deemed to be $500,000. The payment described in clause (A) shall be made as soon as administratively feasible following the Date of Termination but in no event later than seventy (70) days after the Date of Termination and the payment described in clause (B), subject to the provisions of Section 8(e), shall be paid ratably in accordance with the Company's customary payroll practices over the one year period following the Date of Termination. In addition, if Employee's employment is terminated pursuant to Section 6(f), he shall be provided with an office and secretarial support for the 90-day period following such termination. During the period from the effective date of this Agreement until January 1, 2007, the "Severance Multiple" will equal two, thereafter the "Severance Multiple" will equal one."

 

3.         Section 8(d) of the Employment Agreement is hereby amended in its entirety, to read as follows:

 

“(d)     If Employee's employment is terminated pursuant to Section 6(b), the Company shall pay to Employee's estate as soon as administratively feasible following the Date of Termination but in no event later than seventy (70) days after the Date of Termination (i) his accrued but unpaid Base Salary through the Date of Termination at the rate then in effect; and (ii) a pro rata portion (based on the number of days elapsed in the Company's fiscal year through the Date of Termination) of Employee's Bonus for the fiscal year in which the Date of Termination occurs.”

 

4.         Section 8(e) of the Employment Agreement is hereby amended in its entirety, to read as follows:

 

“(e)      409A Compliance . Notwithstanding the foregoing, if necessary to comply with the restriction in Section 409A(a)(2)(B) of the Internal Revenue Code of 1986, as amended (the “ Code ”) concerning payments to “specified employees”, any payment on account of Employee’s separation from service that would otherwise be due hereunder within six months after such separation shall nonetheless be delayed until the first business day of the seventh month following Employee’s date of termination and the first such payment shall include the cumulative amount of any payments that would have been paid prior to such date if not for such restriction, together with interest on such cumulative amount during the period of such restriction at a rate, per annum, equal to the applicable federal short-term rate (compounded monthly) in effect under Section 1274(d) of the Code on the date of termination. For purposes of Section 8 hereof, Employee shall be a “specified employee” for the 12-month period beginning on the first day of the fourth month following each “Identification Date” if he is a “key employee” (as defined in Section 416(i) of the Code without regard to

 

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Section 416(i)(5) thereof) of the Company at any time during the 12-month period ending on the “Identification Date.” For purposes of the foregoing, the Identification Date shall be December 31. Notwithstanding anything contained herein to the contrary, Employee shall not be considered to have terminated employment with the Company for purposes of Section 8 hereof unless he would be considered to have incurred a “termination of employment” from the Company within the meaning of Treasury Regulation §1.409A-1(h)(1)(ii).”

 

5.         Section 14 of the Employment Agreement is hereby amended in its entirety, to read as follows:

 

 

“14.

Resolution of Differences Over Breaches of Agreement .

The parties shall use good faith efforts to resolve any controversy or claim arising out of, or relating to this Agreement or the breach thereof, first in accordance with the Company's internal review procedures, except that this requirement shall not apply to any claim or dispute under or relating to Sections 9 or 10 of this Agreement. If despite their good faith efforts, the parties are unable to resolve such controversy or claim through the Company's internal review procedures, then such controversy or claim shall be resolved by arbitration in Manhattan, New York, in accordance with the rules then obtaining of the American Arbitration Association, and judgment upon the award rendered by the arbitrator(s) may be entered in any court having jurisdiction thereof. If any contest or dispute shall arise between the Company and Employee (or, following the death of Employee, his estate and heirs) regarding any provision of this Agreement, the Company shall reimburse (i) Employee for all legal fees and expenses reasonably incurred by Employee during his lifetime and (ii) Employee’s estate and heirs for all legal fees and expenses reasonably incurred by Employee’s estate and heirs through the earlier of the 15 th anniversary of the date of Employee’s death or the final settlement of Employee’s estate, in any case, in connection with such contest or dispute, but only if Employee (or his estate or heirs, as the case may be) is successful in respect of substantially all of Employee's (or his estate’s or heirs’, as the case may be) claims brought and pursued in connection with such contest or dispute. The reimbursement provided for in this Section 14 shall be made as soon as practicable following the resolution of such contest or dispute (whether or not appealed) to the extent the Company received reasonable written evidence of such fees and expenses, but in any event no later than the end of the calendar year following the calendar year in which the expenses were incurred.”

 

-3-

 

 


            6.         A new Section 22 of the Employment Agreement is hereby added, to read as follows:

 

 

“22.

Section 409A Compliance .

 

(a)       This Agreement is intended to comply with the requirements of Section 409A of the Code (“Section 409A”) and regulations promulgated thereunder. To the extent that any provision in this Agreement is ambiguous as to its compliance with Section 409A or to the extent any provision in this Agreement must be modified to comply with Section 409A (including, without limitation, Treasury Regulation 1.409A-3(c)), such provision shall be read, or shall be modified (with the mutual consent of the parties, which consent shall not be unreasonably withheld), as the case may be, in such a manner so that all payments due under this Agreement shall comply with Section 409A. For purposes of section 409A, each payment made under this Agreement shall be treated as a separate payment. In no event may Employee, directly or indirectly, designate the calendar year of payment.

 

(b)       All reimbursements provided under this Agreement shall be made or provided in accordance with the requirements of section 409A, including, where applicable, the requirement that (i) any reimbursement is for expenses incurred during Employee’s lifetime (or during a shorter period of time specified in this Agreement), (ii) the amount of expenses eligible for reimbursement during a calendar year may not affect the expenses eligible for reimbursement in any other calendar year, (iii) the reimbursement of an eligible expense will be made on or before the last day of the calendar year following the year in which the expense is incurred, and (iv) the right to reimbursement is not subject to liquidation or exchange for another benefit.”

 

7.         Employee further acknowledges that, while the purpose of this Amendatory Agreement is to conform the Employment Agreement to the requirements of Section 409A of the Code and Treasury Regulations promulgated thereunder, any tax liability incurred by Employee under Section 409A of the Code is solely the responsibility of Employee.

 

[ signature page follows ]

 

-4-

 

 


Except as amended herein, the Employment Agreement shall remain in full force and effect.

 

 

VORNADO REALTY TRUST

 

 

 

By: /s/ Alan J. Rice

 

Name: Alan J. Rice

 

Title: Senior Vice President

 

 

 

/s/ Sandeep Mathrani

 

Sandeep Mathrani

 

 

-5-

 

 

 

 EXHIBIT 10.53

 

AMENDMENT TO EMPLOYMENT AGREEMENT

 

AMENDATORY AGREEMENT , dated the 29th day of December, 2008 by and between VORNADO REALTY TRUST (the “ Company ”) and CHRISTOPHER G. KENNEDY (“ Executive ”).

 

WHEREAS , the Company and Executive entered into an Employment Agreement dated as of August 1, 2003 (the “ Employment Agreement ”) to set forth the terms of Executive’s employment by the Company; and

 

WHEREAS , the Company and Executive desire to amend the Employment Agreement to conform its terms with final regulations promulgated by the Internal Revenue Service under Section 409A of the Internal Revenue Code of 1986, as amended;

 

NOW, THEREFORE , in consideration of the mutual premises and covenants set forth herein and for other good and valuable consideration, the receipt, adequacy and legal sufficiency of which are hereby acknowledged, the Company and Executive mutually agree as follows:

 

1.         Section 8(c) of the Employment Agreement is hereby amended in its entirety, to read as follows:

 

“(c)     If Executive’s employment is terminated pursuant to Sections 6(e) or 6(f), the Company shall pay to Executive his (A) accrued and unpaid Base Salary through the Date of Termination and his pro-rata Bonus through the Date of Termination and (B) a payment (the “Severance Payment”) equal to the sum of (i) Executive’s then current Base Salary and (ii) the average of the Bonus earned by Executive, if any, in each of the two fiscal years immediately preceding the Date of Termination. Subject to Section 8(e), the payment described in clause (A) shall be made as soon as administratively feasible following the Date of Termination but in no event later than seventy (70) days after the Date of Termination and the payment described in clause (B) shall be paid ratably in accordance with the Company’s customary payroll practices over the one year period following the Date of Termination. To the extent Executive is re-employed during the year following a termination pursuant to Section 6(f), Executive shall give notice to the Company of such re-employment and the Severance Payments made pursuant to this paragraph shall cease.”

 

2.         Section 8(d) of the Employment Agreement is hereby amended in its entirety, to read as follows:

 

“(d)     If Executive’s employment is terminated pursuant to Section 6(a), 6(b) or 6(c), the Company shall pay to Executive or Executive’s estate (i) his accrued but unpaid Base Salary through the Date

 

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of Termination at the rate then in effect; (ii) a pro rata portion (based on the number of days elapsed in the Company’s fiscal year through the Date of Termination) of Executive’s Bonus for the fiscal year in which the Date of Termination occurs; and (iii) if such termination is pursuant to Section 6(b) or (c), a pro rata portion (based on the number of days elapsed since April 1, 2003) of the Shortfall Payment. Subject to Section 8(e), the payment described in clause (i) shall be made as soon as administratively feasible following the Date of Termination but in no event later than seventy (70) days after the Date of Termination and the payments described in clauses (ii) and (iii) shall be paid ratably in accordance with the Company’s customary payroll practices over the one year period following the Date of Termination.”

 

3.         Section 8 of the Employment Agreement is hereby amended by adding the following paragraph at the end thereof:

 

“(e)      409A Compliance . Notwithstanding the foregoing, if necessary to comply with the restriction in Section 409A(a)(2)(B) of the Internal Revenue Code of 1986, as amended (the “ Code ”) concerning payments to “specified employees”, any payment on account of Executive’s separation from service that would otherwise be due hereunder within six months after such separation shall nonetheless be delayed until the first business day of the seventh month following Executive’s date of termination and the first such payment shall include the cumulative amount of any payments that would have been paid prior to such date if not for such restriction, together with interest on such cumulative amount during the period of such restriction at a rate, per annum, equal to the applicable federal short-term rate (compounded monthly) in effect under Section 1274(d) of the Code on the date of termination. For purposes of Section 8 hereof, Executive shall be a “specified employee” for the 12-month period beginning on the first day of the fourth month following each “Identification Date” if he is a “key employee” (as defined in Section 416(i) of the Code without regard to Section 416(i)(5) thereof) of the Company at any time during the 12-month period ending on the “Identification Date.” For purposes of the foregoing, the Identification Date shall be December 31. Notwithstanding anything contained herein to the contrary, Executive shall not be considered to have terminated employment with the Company for purposes of Sections 6, 7 or 8 hereof unless he would be considered to have incurred a “termination of employment” from the Company within the meaning of Treasury Regulation §1.409A-1(h)(1)(ii).”

 

4.         Section 14 of the Employment Agreement is hereby amended in its entirety, to read as follows:

 

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“14.

Resolution of Differences Over Breaches of Agreement .

The parties shall use good faith efforts to resolve any controversy or claim arising out of, or relating to this Agreement or the breach thereof, first in accordance with the Company’s internal review procedures, except that this requirement shall not apply to any claim or dispute under or relating to Sections 9 or 10 of this Agreement. If despite their good faith efforts, the parties are unable to resolve such controversy or claim through the Company’s internal review procedures, then such controversy or claim shall be resolved by arbitration in Manhattan, New York, in accordance with the rules then obtaining of the American Arbitration Association, and judgment upon the award rendered by the Arbitrators may be entered in any court having jurisdiction thereof. If any contest or dispute shall arise between the Company and Executive (or, following the death of Executive, his estate or heirs) regarding any provision of this Agreement, the Company shall reimburse (i) Executive for all legal fees and expenses reasonably incurred by Executive during the lifetime of Executive and (ii) Executive’s estate and heirs for all legal fees and expenses reasonably incurred by Executive’s estate and heirs through the earlier of the 15 th anniversary of the date of Executive’s death or the final settlement of Executive’s estate, in any case, in connection with such contest or dispute, but only if Executive (or his estate or heirs, as the case may be) is successful in respect of substantially all of Executive’s (or his estate’s or heirs’, as the case may be) claims brought and pursued in connection with such contest or dispute. Such reimbursement shall be made as soon as practicable following the resolution of such contest or dispute (whether or not appealed) to the extent the Company received reasonable written evidence of such fees and expenses, but in any event no later than the end of the calendar year following the calendar year in which the expenses were incurred.”

 

5.         A new Section 22 of the Employment Agreement is hereby added, to read as follows:

 

 

“22.

Section 409A Compliance .

 

(a)       This Agreement is intended to comply with the requirements of Section 409A of the Code (“ Section 409A ”) and regulations promulgated thereunder. To the extent that any provision in this Agreement is ambiguous as to its compliance with Section 409A or to the extent any provision in this Agreement must be modified to comply with Section 409A (including, without limitation, Treasury Regulation 1.409A-3(c)), such provision shall be read, or shall be modified (with the mutual consent of the parties, which consent shall not be unreasonably withheld), as the case may be, in such a manner so that all payments due under this Agreement shall comply with Section 409A. For purposes of

 

-3-

 

 


section 409A, each payment made under this Agreement shall be treated as a separate payment. In no event may Executive, directly or indirectly, designate the calendar year of payment.

 

(b)       All reimbursements provided under this Agreement shall be made or provided in accordance with the requirements of section 409A, including, where applicable, the requirement that (i) any reimbursement is for expenses incurred during Executive’s lifetime (or during a shorter period of time specified in this Agreement), (ii) the amount of expenses eligible for reimbursement during a calendar year may not affect the expenses eligible for reimbursement in any other calendar year, (iii) the reimbursement of an eligible expense will be made on or before the last day of the calendar year following the year in which the expense is incurred, and (iv) the right to reimbursement is not subject to liquidation or exchange for another benefit.”

 

6.         Executive further acknowledges that, while the purpose of this Amendatory Agreement is to conform the Employment Agreement to the requirements of Section 409A of the Code and Treasury Regulations promulgated thereunder, any tax liability incurred by Executive under Section 409A of the Code is solely the responsibility of Executive.

 

[ signature page follows ]

 

-4-

 

 


Except as amended herein, the Employment Agreement shall remain in full force and effect.

 

 

VORNADO REALTY TRUST

 

 

 

By: /s/ Alan. J. Rice

 

Name: Alan J. Rice

 

Title: Senior Vice President

 

 

 

/s/ Christopher G. Kennedy

 

Christopher G. Kennedy

 

 

-5-

 

 

 

 EXHIBIT 10.47

 

AMENDMENT TO EMPLOYMENT AGREEMENT

 

AMENDATORY AGREEMENT , dated the 29th day of December, 2008 by and between VORNADO REALTY TRUST, a Maryland real estate investment trust (the “ Company ”) and MICHAEL D. FASCITELLI (the “ Executive ”).

 

WHEREAS , the Company and Executive entered into an Employment Agreement dated as of March 8, 2002 (the “ Employment Agreement ”) to set forth the terms of the Executive’s employment by the Company (which amended and restated in its entirety a December 2, 1996 employment agreement between Executive and the Company); and

 

WHEREAS , the Company and the Executive desire to amend the Employment Agreement to conform its terms with final regulations promulgated by the Internal Revenue Service under Section 409A of the Internal Revenue Code of 1986, as amended;

 

NOW, THEREFORE , in consideration of the mutual premises and covenants set forth herein and for other good and valuable consideration, the receipt, adequacy and legal sufficiency of which are hereby acknowledged, the Company and Executive mutually agree as follows:

 

1.         Section 5(m)(iii) of the Employment Agreement is hereby amended in its entirety, to read as follows:

 

“(iii)    tax preparation and financial planning assistance up to a maximum value of $15,000 per calendar year, payable in a lump sum no later than the end of the calendar year following the calendar year to which the payment relates; and

 

2.         The first paragraph of Section 8 of the Employment Agreement is hereby amended in its entirety, to read as follows:

 

“8.        Compensation Upon Termination or During Disability . In the event Executive suffers or incurs a Disability as defined in Section 6(b) or his employment terminates during the Employment Period, the Company shall provide Executive with the payments and benefits set forth below, subject to the provisions of Section 8(f) hereof. Executive acknowledges and agrees that the payments and benefits set forth in this Section 8 constitute liquidated damages for termination of his employment during the Employment Period.”

 

3.         Section 8(a)(i) of the Employment Agreement is hereby amended in its entirety, to read as follows:

 

“(i)      the Company shall pay to Executive (A) his Base Salary and accrued vacation pay through the Date of Termination, as soon as practicable

 

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following the Date of Termination but in no event later than seventy (70) days after the Date of Termination and (B) subject to Section 8(f), over the three-year period following the Date of Termination, the Company shall pay to Executive an amount per annum equal to his Base Salary on the Date of Termination, which shall be paid ratably in accordance with the Company’s customary payroll practices. Notwithstanding the foregoing, during the second and third years following the Date of Termination the Company’s obligation to pay continued Base Salary shall be offset by the economic value of any compensation actually received (or deferred) for services rendered by Executive to any other entity;”

 

4.         Section 8(a)(iii) of the Employment Agreement is hereby amended in its entirety, to read as follows:

 

“(iii)    The Company shall maintain in full force and effect, for the continued benefit of Executive, his spouse and his dependants for a period of three (3) years following the Date of Termination, the medical, dental and hospitalization programs (the “Health Programs”) and the life insurance programs (including, without limitation, the life insurance policy set forth in Section 5(m), but for no longer than the five year term of such policy) (the “Life Insurance Programs”) in which Executive, his spouse and his dependants were participating immediately prior to the Date of Termination at the level in effect and upon substantially the same terms and conditions (including, without limitation, contributions required by Executive for such benefits) as existed immediately prior to the Date of Termination. If Executive, his spouse or his dependants cannot continue to participate in the Company Health Programs, the Company shall: (a) in the event Executive is eligible to, and elects to continue receiving such benefits from the Company pursuant to the requirements of the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (“COBRA”), waive the premium cost of such benefits (to the extent such premiums exceed the premium costs charged to active employees of the Company from time to time) for the period during which Executive (and his spouse and dependents) is/are entitled to continuation coverage under COBRA (the “COBRA Period”) and (b) commencing with the month after the month in which the COBRA Period ends, pay to Executive an amount equal to the quotient determined by dividing (x) the cost to Executive of acquiring medical, dental and/or hospitalization coverage for Executive, his spouse and his dependants for such month (such coverage to be, on a benefit-by-benefit basis, at the same level of, but otherwise comparable to, the coverage in effect immediately prior to the Date of Termination), by (y) 0.55, with such payment to be made on the first business day of the month following the month to which such coverage relates. Subject to Section 8(f) hereof, in the event Executive, his spouse or his dependants cannot continue to participate in the Company Life Insurance Programs, the Company shall pay to Executive an amount equal to the cost to Executive of acquiring life insurance coverage for Executive, his spouse and his dependants for such month (such coverage to be, on a benefit-by-benefit basis, at the same level of, but otherwise comparable to, the coverage in effect immediately prior to the Date of Termination), with such

 

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payment to be made on the first business day of the month following the month to which such coverage relates. Notwithstanding the forgoing, the Company’s obligation to provide the benefits and payments described above shall terminate on the earlier of (i) the date or dates Executive receives equivalent coverage and benefits, without waiting period or pre-existing conditions limitations, under the plans and programs of a subsequent employer (such coverage and benefits to be determined on a coverage-by-coverage or benefit-by-benefit, basis) or (ii) the third anniversary of the Date of Termination; PROVIDED that, the Company’s obligation with respect to the life insurance policy referred to in Section 5(m) shall terminate no later than the expiration of the five year term of such policy.”

 

5.         Section 8(a)(iv) of the Employment Agreement is hereby amended in its entirety, to read as follows:

 

“(iv)    As soon as practicable following the Date of Termination but in no event later than seventy (70) days after the Date of Termination the Company shall reimburse Executive pursuant to Section 5(h) for reasonable expenses incurred, but not paid prior to such termination of employment.”

 

6.         Section 8(b)(i) of the Employment Agreement is hereby amended in its entirety, to read as follows:

 

“(i)      the Company shall pay Executive his Base Salary and, to the extent required by law or the Company’s vacation policy, his accrued vacation pay through the Date of Termination, as soon as practicable following the Date of Termination but in no event later than seventy (70) days after the Date of Termination.”

 

7.         Section 8(b)(iii) of the Employment Agreement is hereby amended in its entirety, to read as follows:

 

“(iii)    As soon as practicable following the Date of Termination but in no event later than seventy (70) days after the Date of Termination the Company shall reimburse Executive pursuant to Section 5(h) for reasonable expenses incurred, but not paid prior to such termination of employment, unless such termination resulted from a misappropriation of Company funds; and”

 

8.         Section 8(c)(i) of the Employment Agreement is hereby amended in its entirety, to read as follows:

 

“(i)      the Company shall pay to Executive (A) his Base Salary and accrued vacation pay through the Date of Termination, as soon as practicable following the Date of Termination but in no event later than seventy (70) days after the Date of Termination and (B) subject to Section 8(f), following the Date of Termination, the Company shall pay to Executive an amount per annum equal to his Base Salary on the Date of Termination, which shall be paid ratably in

 

-3-

 

 


accordance with the Company’s customary payroll practices. The Company’s obligation to pay continued Base Salary shall cease on the later of (x) six (6) months after the Date of Termination or (y) the date on which Executive becomes entitled to long-term disability benefits under the applicable plan or program of the Company paying the benefits described in Section 5(m)(iv) (but no later than the three-year anniversary of the Date of Termination). The Company shall also provide Executive (and his spouse and dependants) with the medical, dental, hospitalization and life insurance benefits described in Section 8(a)(iii) in the manner set forth therein; PROVIDED that, the Company’s obligation to provide such benefits shall terminate on the later of (i) the six (6) month anniversary of the Date of Termination or (ii) the date Executive becomes entitled to long-term disability benefits under the applicable plan or program of the Company paying the benefits described in Section 5(m)(iv); PROVIDED further, that the Company’s obligation with respect to the life insurance policy referred to in Section 5(m) shall terminate no later than the expiration of the five year term of such policy.”

 

9.         Section 8(c)(iii) of the Employment Agreement is hereby amended in its entirety, to read as follows:

 

“(iii)    As soon as practicable following the Date of Termination but in no event later than seventy (70) days after the Date of Termination the Company shall reimburse Executive pursuant to Section 5(h) for reasonable expenses incurred, but not paid prior to such termination of employment; and”

 

10.       Section 8(d)(i) of the Employment Agreement is hereby amended in its entirety, to read as follows:

 

“(i)      the Company shall pay in a lump sum as soon as practicable following the Date of Termination but in no event later than seventy (70) days after the Date of Termination to Executive’s beneficiary, legal representatives or estate, as the case may be (A) Executive’s Base Salary through the Date of Termination, and (B) subject to Section 8(f), an amount equal to one (1) times Executive’s annual rate of Base Salary as in effect on the Date of Termination. In the event Executive’s spouse and dependents are eligible to, and elect to continue their medical, dental and hospitalization coverage pursuant to the requirements of COBRA, for the COBRA Period the Company shall waive the premium cost of such coverage (to the extent such premiums exceed the premium costs charged to active employees of the Company from time to time); and”

 

11.       Section 8(d)(iii) of the Employment Agreement is hereby amended in its entirety, to read as follows:

 

“(iii)    As soon as practicable following the Date of Termination but in no event later than seventy (70) days after the Date of Termination the Company shall reimburse Executive’s beneficiary, legal representatives or estate,

 

-4-

 

 


as the case may be, pursuant to Section 5(h) for reasonable expenses incurred, but not paid prior to such termination of employment; and”

 

12.       Section 8 of the Employment Agreement is hereby amended by adding the following paragraph at the end thereof:

 

“(f)       409A Compliance . Notwithstanding the foregoing, if necessary to comply with the restriction in Section 409A(a)(2)(B) of the Internal Revenue Code of 1986, as amended (the “ Code ”) concerning payments to “specified employees”, any payment on account of Executive’s separation from service that would otherwise be due hereunder within six months after such separation shall nonetheless be delayed until the first business day of the seventh month following Executive’s date of termination and the first such payment shall include the cumulative amount of any payments that would have been paid prior to such date if not for such restriction, together with interest on such cumulative amount during the period of such restriction at a rate, per annum, equal to the applicable federal short-term rate (compounded monthly) in effect under Section 1274(d) of the Code on the date of termination. For purposes of Section 8 hereof, Executive shall be a “specified employee” for the 12-month period beginning on the first day of the fourth month following each “Identification Date” if he is a “key employee” (as defined in Section 416(i) of the Code without regard to Section 416(i)(5) thereof) of the Company at any time during the 12-month period ending on the “Identification Date.” For purposes of the foregoing, the Identification Date shall be December 31. Notwithstanding anything contained herein to the contrary, Executive shall not be considered to have terminated employment with the Company for purposes of Section 8 hereof unless he would be considered to have incurred a “termination of employment” from the Company within the meaning of Treasury Regulation §1.409A-1(h)(1)(ii).”

 

13.       Section 12 of the Employment Agreement is hereby amended in its entirety, to read as follows:

 

“12.      Legal Fees and Expenses .      The Company shall reimburse Executive promptly following the Commencement Date for all legal fees and expenses reasonably incurred by Executive in connection with Executive and the Company entering into this Agreement and the 2002 Units Agreement, upon receipt of reasonable written evidence of such fees and expenses. If any contest or dispute shall arise between the Company or Alexander’s and Executive (or, following the death of Executive, his estate or heirs) regarding any provision of this Agreement, the Rabbi Trust Agreement, the Company Registration Statement, the Alexander’s Registration Statement, or the Alexander’s Stock Option Agreement, the Company shall reimburse (i) Executive for all legal fees

 

-5-

 

 


and expenses reasonably incurred by Executive during the lifetime of Executive and (ii) Executive’s estate and heirs for all legal fees and expenses reasonably incurred by Executive’s estate and heirs through the earlier of the 15 th anniversary of the date of Executive’s death or the final settlement of Executive’s estate, in any case, in connection with such contest or dispute, but only if Executive (or his estate or heirs, as the case may be) is successful in respect of substantially all of Executive’s (or his estate’s or heirs’, as the case may be) claims brought and pursued in connection with such contest or dispute. Such reimbursement shall be made as soon as practicable following the resolution of such contest or dispute (whether or not appealed) to the extent the Company receives reasonable written evidence of such fees and expenses, but in any event no later than the end of the calendar year following the calendar year in which the expenses were incurred.”

 

14.       A new Section 26 of the Employment Agreement is hereby added, to read as follows:

 

 

“26.

Section 409A Compliance .

 

(i)        This Agreement is intended to comply with the requirements of Section 409A of the Code (“ Section 409A ”) and regulations promulgated thereunder. To the extent that any provision in this Agreement is ambiguous as to its compliance with Section 409A or to the extent any provision in this Agreement must be modified to comply with Section 409A (including, without limitation, Treasury Regulation 1.409A-3(c)), such provision shall be read, or shall be modified (with the mutual consent of the parties, which consent shall not be unreasonably withheld), as the case may be, in such a manner so that all payments due under this Agreement shall comply with Section 409A. For purposes of section 409A, each payment made under this Agreement shall be treated as a separate payment. In no event may Executive, directly or indirectly, designate the calendar year of payment.

 

(ii)       All reimbursements provided under this Agreement shall be made or provided in accordance with the requirements of section 409A, including, where applicable, the requirement that (i) any reimbursement is for expenses incurred during Executive’s lifetime (or during a shorter period of time specified in this Agreement), (ii) the amount of expenses eligible for reimbursement during a calendar year may not affect the expenses eligible for reimbursement in any other calendar year, (iii) the reimbursement of an eligible expense will be made on or before the last day of the calendar year following the year in which the expense is incurred, and (iv) the right to reimbursement is not subject to liquidation or exchange for another benefit.”

 

-6-

 

 


 

15.       Executive further acknowledges that, while the purpose of this Amendatory Agreement is to conform the Employment Agreement to the requirements of Section 409A of the Code and Treasury Regulations promulgated thereunder, any tax liability incurred by Executive under Section 409A of the Code is solely the responsibility of Executive.

 

[ signature page follows ]

 

-7-

 

 


            Except as amended herein, the Employment Agreement shall remain in full force and effect.

 

 

VORNADO REALTY TRUST

 

 

 

By: /s/ Alan J. Rice

 

Name: Alan J. Rice

 

Title: Senior Vice President

 

 

 

/s/ Michael D. Fascitelli

 

Michael D. Fascitelli

 

 

-8-

 

 

 

EXHIBIT 21

VORNADO REALTY TRUST

SUBSIDIARIES OF REGISTRANT

 

 

 

 

 

State of

Name of Subsidiary

 

 

 

Organization

 

 

 

 

 

1227/1229 Management LLC

 

 

 

Delaware

1290 Management II, LLC

 

 

 

Delaware

148 Spring Street, LLC

 

 

 

Delaware

14th Street Acquisition LLC

 

 

 

Delaware

150 East 58th Street, L.L.C.

 

 

 

New York

150 Spring Street LLC

 

 

 

Delaware

1740 Broadway Associates L.P.

 

 

 

Delaware

175 Lexington LLC

 

 

 

New York

1925 K Street Developer, L.L.C.

 

 

 

Delaware

20 Broad Company LLC

 

 

 

New York

20 Broad Lender LLC

 

 

 

New York

201 East 66th Street LLC

 

 

 

New York

220 S 20th Street Developer LLC

 

 

 

Delaware

29 West 57th Street Owner LLC

 

 

 

Delaware

305 Bleecker Street LLC

 

 

 

Delaware

31 West 57th Street Owner LLC

 

 

 

Delaware

330 Madison Company LLC

 

 

 

New York

350 North Orleans, L.L.C.

 

 

 

Delaware

40 East 14 Realty Associates General Partnership

 

 

 

New York

40 East 14 Realty Associates, L.L.C.

 

 

 

New York

40 Fulton Street LLC

 

 

 

New York

401 Commercial Son II LLC

 

 

 

Delaware

401 Commercial Son, LLC

 

 

 

New York

401 Commercial, L.P.

 

 

 

New York

401 General Partner, L.L.C.

 

 

 

New York

401 Hotel General Partner, L.L.C.

 

 

 

New York

401 Hotel REIT, LLC

 

 

 

Delaware

401 Hotel TRS, Inc.

 

 

 

Delaware

401 Hotel, L.P.

 

 

 

New York

426 Washington Street Hotel Owner LLC

 

 

 

Delaware

426 Washington Street Office Owner LLC

 

 

 

Delaware

426 Washington Street Owner II LLC

 

 

 

Delaware

426 Washington Street Owner LLC

 

 

 

Delaware

426 Washington Street Parking Owner LLC

 

 

 

Delaware

426 Washington Street Residential Owner LLC

 

 

 

Delaware

426 Washington Street Retail Owner LLC

 

 

 

Delaware

480-486 Broadway, LLC

 

 

 

Delaware

480-486 JV, LLC

 

 

 

New York

488 Eighth Avenue Owner LLC

 

 

 

Delaware

49 West 57th Street Owner LLC

 

 

 

Delaware

51 E. 125th Street LLC

 

 

 

Delaware

527 West Kinzie LLC

 

 

 

Delaware

555 1290 Holdings LLC

 

 

 

Delaware

689 Fifth Avenue LLC

 

 

 

New York

 

 

7 West 34th Street LLC

 

 

 

New York

713-715 Sunrise LLC

 

 

 

Delaware

715 Lexington Avenue LLC

 

 

 

New York

770 Broadway Company LLC

 

 

 

New York

770 Broadway Mezzanine LLC

 

 

 

Delaware

770 Broadway Owner LLC

 

 

 

Delaware

825 Seventh Avenue Holding Corporation

 

 

 

New York

825 Seventh Avenue Holding L.L.C.

 

 

 

New York

85 Tenth Junior Mezz LLC

 

 

 

Delaware

85 Tenth Senior Mezz LLC

 

 

 

Delaware

866 U.N. Plaza Associates LLC

 

 

 

New York

888 Seventh Avenue LLC

 

 

 

Delaware

909 Third Avenue Assignee LLC

 

 

 

New York

909 Third Company, L.P.

 

 

 

New York

909 Third GP, LLC

 

 

 

Delaware

968 Third Avenue LLC

 

 

 

New York

968 Third, L.L.C.

 

 

 

New York

Ackerly Trading Corp.

 

 

 

Foreign

Alexander's, Inc.

 

 

 

New York

Allentown VF L.L.C.

 

 

 

Pennsylvania

Altius Management Advisors Pvt. Ltd.

 

 

 

Foreign

Amherst II VF L.L.C.

 

 

 

New York

Amherst VF L.L.C.

 

 

 

New York

Arbor Property, L.P.

 

 

 

Delaware

Arna-Eads, Inc.

 

 

 

Delaware

Arna-Fern, Inc.

 

 

 

Delaware

Atlantic City Holding L.L.C.

 

 

 

New Jersey

B & B Park Avenue L.P.

 

 

 

Delaware

BDC Special Member LLC

 

 

 

Delaware

Bengal Intelligent Parks Pvt. Ltd.

 

 

 

Foreign

Bensalem Holding Company, L.L.C.

 

 

 

Pennsylvania

Bensalem Holding Company, L.P.

 

 

 

Pennsylvania

Bensalem VF, L.L.C.

 

 

 

Pennsylvania

Bethlehem Holding Company, L.L.C.

 

 

 

Pennsylvania

Bethlehem Holding Company, L.P.

 

 

 

Pennsylvania

Bethlehem Properties Holding Company, L.L.C.

 

 

 

Pennsylvania

Bethlehem Properties Holding Company, L.P.

 

 

 

Pennsylvania

Bethlehem VF, L.L.C.

 

 

 

Pennsylvania

Bethlehem VF, L.P.

 

 

 

Pennsylvania

BIP Developers Pvt. Ltd.

 

 

 

Foreign

BIP Estates Pvt. Ltd.

 

 

 

Foreign

Blue Jay Way 11, L.L.C.

 

 

 

Delaware

BMS Facilities Group LLC

 

 

 

Delaware

Bordentown II VF, L.L.C.

 

 

 

New Jersey

Bordentown VF, L.L.C.

 

 

 

New Jersey

Boston Design Center LLC

 

 

 

Delaware

Boulevard Services Pvt. Ltd.

 

 

 

Foreign

Bowen Building, L.P.

 

 

 

Delaware

Bricktown VF L.L.C.

 

 

 

New Jersey

Bridgeland Warehouses L.L.C.

 

 

 

New Jersey

Brixton Holdings Limited

 

 

 

Foreign

Building Maintenance Service LLC

 

 

 

Delaware

Canadian Craft Show LTD.

 

 

 

Canada

 

 

CESC 1101 17th Street L.L.C.

 

 

 

Delaware

CESC 1101 17th Street Limited Partnership

 

 

 

Maryland

CESC 1101 17th Street Manager L.L.C.

 

 

 

Delaware

CESC 1140 Connecticut Avenue L.L.C.

 

 

 

Delaware

CESC 1140 Connecticut Avenue Limited Partnership

 

 

 

District of Columbia

CESC 1140 Connecticut Avenue Manager L.L.C.

 

 

 

Delaware

CESC 1150 17th Street L.L.C.

 

 

 

Delaware

CESC 1150 17th Street Limited Partnership

 

 

 

District of Columbia

CESC 1150 17th Street Manager L.L.C.

 

 

 

Delaware

CESC 1227 L.L.C.

 

 

 

Delaware

CESC 1229-1231 TRS Inc.

 

 

 

Delaware

CESC 1730 M Street L.L.C.

 

 

 

Delaware

CESC 1750 Pennsylvania Avenue L.L.C.

 

 

 

Delaware

CESC 2101 L Street L.L.C.

 

 

 

Delaware

CESC Commerce Executive Park L.L.C.

 

 

 

Delaware

CESC Crystal Square Four L.L.C.

 

 

 

Delaware

CESC Crystal/Rosslyn L.L.C.

 

 

 

Delaware

CESC District Holdings L.L.C.

 

 

 

Delaware

CESC Downtown Member L.L.C.

 

 

 

Delaware

CESC Engineering TRS Inc.

 

 

 

Delaware

CESC Fairfax Square Manager L.L.C.

 

 

 

Delaware

CESC Gateway Four L.L.C.

 

 

 

Virginia

CESC Gateway One L.L.C.

 

 

 

Delaware

CESC Gateway Two Limited Partnership

 

 

 

Virginia

CESC Gateway Two Manager L.L.C.

 

 

 

Virginia

CESC Gateway/Square L.L.C.

 

 

 

Delaware

CESC Gateway/Square Member L.L.C.

 

 

 

Delaware

CESC H Street L.L.C.

 

 

 

Delaware

CESC Mall L.L.C.

 

 

 

Virginia

CESC Mall Land, L.L.C.

 

 

 

Virginia

CESC One Courthouse Plaza Holdings, LLC

 

 

 

Delaware

CESC One Courthouse Plaza L.L.C.

 

 

 

Delaware

CESC One Democracy Plaza L.P.

 

 

 

Maryland

CESC One Democracy Plaza Manager LLC

 

 

 

Delaware

CESC Park Five Land L.L.C.

 

 

 

Delaware

CESC Park Five Manager L.L.C.

 

 

 

Virginia

CESC Park Four Land L.L.C.

 

 

 

Delaware

CESC Park Four Manager L.L.C.

 

 

 

Virginia

CESC Park One Land L.L.C.

 

 

 

Delaware

CESC Park One Manager L.L.C.

 

 

 

Delaware

CESC Park Three Land L.L.C.

 

 

 

Delaware

CESC Park Three Manager L.L.C.

 

 

 

Virginia

CESC Park Two L.L.C.

 

 

 

Delaware

CESC Park Two Land L.L.C.

 

 

 

Delaware

CESC Park Two Manager L.L.C.

 

 

 

Virginia

CESC Plaza Five Limited Partnership

 

 

 

Virginia

CESC Plaza Limited Partnership

 

 

 

Virginia

CESC Plaza Manager, L.L.C.

 

 

 

Virginia

CESC Plaza Parking L.L.C.

 

 

 

Delaware

CESC Realty Park Five L.L.C.

 

 

 

Virginia

CESC Realty Park Three L.L.C.

 

 

 

Virginia

CESC Reston Executive Center L.L.C.

 

 

 

Delaware

CESC Seven Skyline Place, L.L.C.

 

 

 

Delaware

 

 

CESC Six Skyline Place, L.L.C.

 

 

 

Delaware

CESC Skyline LLC

 

 

 

Delaware

CESC Square Four L.L.C.

 

 

 

Virginia

CESC Square Four Land L.L.C.

 

 

 

Delaware

CESC Square L.L.C.

 

 

 

Virginia

CESC Square Land L.L.C.

 

 

 

Delaware

CESC Three Skyline Place, L.L.C.

 

 

 

Delaware

CESC TRS, Inc.

 

 

 

Delaware

CESC Two Courthouse Plaza Limited Partnership

 

 

 

Virginia

CESC Two Courthouse Plaza Manager, L.L.C.

 

 

 

Delaware

CESC Two Skyline Place, L.L.C.

 

 

 

Delaware

CESC Tysons Dulles Plaza, L.L.C.

 

 

 

Delaware

CESC Water Park L.L.C.

 

 

 

Virginia

Charles E. Smith Commercial Realty, L.P.

 

 

 

Delaware

Cherry Hill VF L.L.C.

 

 

 

New Jersey

Chicopee Holding L.L.C.

 

 

 

Massachusetts

Cinderella Homes Pvt. Ltd.

 

 

 

Foreign

Commerce Executive Park Association of Co-Owners

 

 

 

Virginia

Conrans VF L.L.C.

 

 

 

New Jersey

Cumberland Holding L.L.C.

 

 

 

New Jersey

Darby Development LLC

 

 

 

Delaware

Delran VF L.L.C.

 

 

 

New Jersey

Design Center Owner (D.C.), L.L.C.

 

 

 

Delaware

Dover VF L.L.C.

 

 

 

New Jersey

DSAC L.L.C.

 

 

 

Texas

Dundalk VF L.L.C.

 

 

 

Maryland

Durham Leasing II L.L.C.

 

 

 

New Jersey

Durham Leasing L.L.C.

 

 

 

New Jersey

East Brunswick VF L.L.C.

 

 

 

New Jersey

Eatontown Monmouth Mall (Junior Mezz) LLC

 

 

 

Delaware

Eatontown Monmouth Mall (Senior Mezz) LLC

 

 

 

Delaware

Eatontown Monmouth Mall LLC

 

 

 

Delaware

Eleven Penn Plaza LLC

 

 

 

New York

Everest Infrastructure Development Mauritius Limited

 

 

Foreign

Fairfax Square Partners

 

 

 

Delaware

Fifth Crystal Park Associates Limited Partnership

 

 

 

Virginia

First Crystal Park Associates Limited Partnership

 

 

 

Virginia

Foley Enterprises Inc.

 

 

 

Foreign

Fourth Crystal Park Associates Limited Partnership

 

 

 

Virginia

Franconia GP, L.L.C.

 

 

 

Delaware

Freeport VF L.L.C.

 

 

 

New York

Fuller Madison LLC

 

 

 

New York

Gallery Market Holding Company, L.L.C.

 

 

 

Pennsylvania

Gallery Market Holding Company, L.P.

 

 

 

Pennsylvania

Gallery Market Properties Holding Company, L.L.C.

 

 

 

Pennsylvania

Gallery Market Properties Holding Company, L.P.

 

 

 

Pennsylvania

Garfield Parcel L.L.C.

 

 

 

New Jersey

Glen Bernie VF LLC

 

 

 

Maryland

Glenolden VF L.L.C.

 

 

 

Pennsylvania

Green Acres Mall, L.L.C.

 

 

 

Delaware

Guard Management Service Corp.

 

 

 

New York

Guilford Associates, L.L.C.

 

 

 

Delaware

H Street Building Corporation

 

 

 

Delaware

 

 

H Street Management, L.L.C.

 

 

 

Delaware

Hackensack VF L.L.C.

 

 

 

New Jersey

Hagerstown VF L.L.C.

 

 

 

Maryland

Hanover Holding L.L.C.

 

 

 

New Jersey

Hanover Industries L.L.C.

 

 

 

New Jersey

Hanover Leasing L.L.C.

 

 

 

New Jersey

Hanover Public Warehousing L.L.C.

 

 

 

New Jersey

Hanover VF L.L.C.

 

 

 

New Jersey

Harridge Trading Co., Inc.

 

 

 

Foreign

HBR Annapolis Properties, L.L.C.

 

 

 

Delaware

HBR Norfolk Properties, L.L.C.

 

 

 

Delaware

HBR Properties Pennsylvania LLC

 

 

 

Delaware

HBR Properties Roseville LLC

 

 

 

Delaware

HBR Properties, L.L.C.

 

 

 

Delaware

Henrietta Holding L.L.C.

 

 

 

New York

Hudson Center LLC

 

 

 

Delaware

HWA Holdings LLC

 

 

 

Delaware

Industry Research Collective LLC

 

 

 

Delaware

International Biotech Park Ltd.

 

 

 

Foreign

Jersey City VF L.L.C.

 

 

 

New Jersey

Juggernaut Homes Pvt. Ltd.

 

 

 

Foreign

Kaempfer 1399 LLC

 

 

 

Delaware

Kaempfer 1925, LLC

 

 

 

Delaware

Kaempfer Commonwealth L.L.C.

 

 

 

Delaware

Kaempfer Warner LLC

 

 

 

Delaware

Kanton Financial Corp.

 

 

 

Foreign

Kearny Holding VF L.L.C.

 

 

 

New Jersey

Kearny Leasing VF L.L.C.

 

 

 

New Jersey

Kilburn Holding Corp.

 

 

 

Foreign

Klayburn Investment Corp.

 

 

 

Foreign

L.A. Mart Properties L.L.C.

 

 

 

Delaware

Lancaster Leasing Company, L.L.C.

 

 

 

Pennsylvania

Lancaster Leasing Company, L.P.

 

 

 

Pennsylvania

Landthorp Enterprises L.L.C.

 

 

 

Delaware

LaSalle Hubbard L.L.C.

 

 

 

Delaware

Lawnside VF L.L.C.

 

 

 

New Jersey

Lewisville TC L.L.C.

 

 

 

Texas

Littleton Holding L.L.C.

 

 

 

New Jersey

Lodi II VF L.L.C.

 

 

 

New Jersey

Lodi VF L.L.C.

 

 

 

New Jersey

Lokeren Company Limited

 

 

 

Foreign

M 330 Associates L.P.

 

 

 

New York

M 393 Associates LLC

 

 

 

New York

M/H Two Park Associates

 

 

 

New York

Manalapan VF L.L.C.

 

 

 

New Jersey

Market Square - Furniture Plaza Inc.

 

 

 

Delaware

Market Square - Furniture Plaza L.P.

 

 

 

Delaware

Market Square - Hamilton Market LP

 

 

 

Delaware

Market Square - Main Street L.P.

 

 

 

Delaware

Market Square Group LP

 

 

 

Delaware

Market Square Group Mezz L.P.

 

 

 

Delaware

Market Square Group Mezz LLC

 

 

 

Delaware

Market Square Group, Inc.

 

 

 

Delaware

 

 

Market Square II LLC

 

 

 

Delaware

Market Square L.P.

 

 

 

Delaware

Marlton VF L.L.C.

 

 

 

New Jersey

Marple Holding Company, L.L.C.

 

 

 

Pennsylvania

Marple Holding Company, L.P.

 

 

 

Pennsylvania

Mart Franchise Center, Inc.

 

 

 

Illinois

Mart Franchise Venture, L.L.C.

 

 

 

Delaware

Mart Parking II, LLC

 

 

 

Delaware

Mart Parking LLC

 

 

 

Delaware

Mart REIT, L.L.C.

 

 

 

 

Mart Trade Show L.L.C.

 

 

 

Delaware

Menands VF L.L.C.

 

 

 

New York

Merchandise Mart Enterprises, Inc. (Canada)

 

 

 

Canada

Merchandise Mart First Mezzanine Borrower L.L.C.

 

 

 

Delaware

Merchandise Mart L.L.C.

 

 

 

Delaware

Merchandise Mart Properties, Inc.

 

 

 

Delaware

Merchandise Mart Second Mezzanine Borrower L.L.C.

 

 

Delaware

Merchandise Mart Third Mezzanine Borrower L.L.C.

 

 

 

Delaware

Mesquite TC L.L.C.

 

 

 

Texas

Middletown VF L.L.C.

 

 

 

New Jersey

MM 900 L.L.C.

 

 

 

Delaware

MMPI Piers LLC

 

 

 

Delaware

MMPI Volta LLC

 

 

 

Delaware

MMPI/Highpoint Lease LLC

 

 

 

Delaware

Monmouth Mall LLC

 

 

 

Delaware

Montclair VF L.L.C.

 

 

 

New Jersey

Morris Plains Holding VF L.L.C.

 

 

 

New Jersey

Morris Plains Leasing VF L.L.C.

 

 

 

New Jersey

MTS-HP L.P.

 

 

 

Delaware

MTS-MM L.L.C.

 

 

 

Delaware

National Furniture Mart (NC) L.P.

 

 

 

Delaware

National Hydrant L.L.C.

 

 

 

New York

New Bridgeland Warehouse LLC

 

 

 

Delaware

New Hanover Holding LLC

 

 

 

Delaware

New Hanover Industries LLC

 

 

 

Delaware

New Hanover Leasing LLC

 

 

 

Delaware

New Hanover LLC

 

 

 

Delaware

New Hanover Public Warehousing LLC

 

 

 

Delaware

New Hyde Park VF L.L.C.

 

 

 

New York

New Kaempfer 1501 LLC

 

 

 

Delaware

New Kaempfer 1925 LLC

 

 

 

Delaware

New Kaempfer Bowen LLC

 

 

 

Delaware

New Kaempfer IB LLC

 

 

 

Delaware

New Kaempfer Waterfront LLC

 

 

 

Delaware

New KMS LLC

 

 

 

Delaware

New Landthorp Enterprises LLC

 

 

 

Delaware

New TG Hanover LLC

 

 

 

Delaware

New Towmed LLC

 

 

 

Delaware

New Vornado/Saddle Brook LLC

 

 

 

Delaware

New Woodbridge II, LLC

 

 

 

New Jersey

Newington VF L.L.C.

 

 

 

Connecticut

NFM Corp.

 

 

 

Delaware

NFM Partners L.P.

 

 

 

Delaware

 

 

Ninety Park Lender LLC

 

 

 

New York

Ninety Park Lender QRS, Inc.

 

 

 

Delaware

Ninety Park Manager LLC

 

 

 

New York

Ninety Park Option LLC

 

 

 

New York

Ninety Park Property LLC

 

 

 

New York

North Bergen VF L.L.C.

 

 

 

New Jersey

North Dearborn L.L.C.

 

 

 

Delaware

North Plainfield VF L.L.C.

 

 

 

New Jersey

Office Acquisition Finance L.L.C.

 

 

 

Delaware

Office Center Owner (D.C.) L.L.C.

 

 

 

Delaware

One Penn Plaza LLC

 

 

 

New York

One Penn Plaza TRS, Inc.

 

 

 

Delaware

Orleans Hubbard LLC

 

 

 

Delaware

Palisades 14th Street L.L.C.

 

 

 

Delaware

Park Four Member LLC

 

 

 

Delaware

Park One Member L.L.C.

 

 

 

Delaware

Patson Vornado GP LLC

 

 

 

Delaware

Patson Vornado II LLC

 

 

 

Delaware

Patson Vornado LLC

 

 

 

Delaware

Penn Plaza Insurance Company, L.L.C.

 

 

 

Delaware

Philadelphia Holding Company, L.L.C.

 

 

 

Pennsylvania

Philadelphia Holding Company, L.P.

 

 

 

Pennsylvania

Philadelphia VF L.L.C.

 

 

 

Pennsylvania

Philadelphia VF L.P.

 

 

 

Pennsylvania

Pike Holding Company, L.L.C.

 

 

 

Pennsylvania

Pike Holding Company, L.P.

 

 

 

Pennsylvania

Pike VF L.L.C.

 

 

 

Pennsylvania

Pike VF L.P.

 

 

 

Pennsylvania

Powerspace & Services, Inc.

 

 

 

New York

Rahway Leasing L.L.C.

 

 

 

New Jersey

Realty Services Trustee Company Pvt. Ltd.

 

 

 

Foreign

RH 1227 25th Street LLC

 

 

 

Delaware

RH 1229-1231 25th Street LLC

 

 

 

Delaware

River House Corporation

 

 

 

Delaware

Rochester Holding L.L.C.

 

 

 

New York

Rockville Acquisition, LLC

 

 

 

Delaware

RTR 340 Pine LLC

 

 

 

Delaware

RTR VW LLC

 

 

 

Delaware

Shelborn Enterprises Inc.

 

 

 

Foreign

Shenandoah DC Holding, LLC

 

 

 

Delaware

SMB Administration LLC

 

 

 

Delaware

SMB Tenant Services LLC

 

 

 

Delaware

So Hudson 555 Management, Inc.

 

 

 

California

So Hudson Westside I Corp.

 

 

 

Delaware

South Capitol, L.L.C.

 

 

 

Delaware

Springfield Member VF L.L.C.

 

 

 

Delaware

Springfield VF L.L.C.

 

 

 

Massachusetts

Stockdale Enterprises Inc.

 

 

 

Foreign

Stonebay Enterprises Inc.

 

 

 

Foreign

T 53 Condominium, L.L.C.

 

 

 

New York

T.G. Hanover L.L.C.

 

 

 

New Jersey

TCG Developments India Pvt. Ltd.

 

 

 

Foreign

TCG Real Estate Investment Management Company Pvt. Ltd.

 

 

Foreign

 

 

TCG Software Parks Pvt. Ltd.

 

 

 

Foreign

TCG Urban Infrastructure Holdings Ltd.

 

 

 

Foreign

Techna Infrastructure Pvt. Ltd.

 

 

 

Foreign

TGSI L.L.C

 

 

 

Maryland

The Palisades A/V Company, L.L.C.

 

 

 

New Jersey

The Park Laurel Condominium

 

 

 

New York

The Second Rochester Holding L.L.C.

 

 

 

New York

Thebes I LLC

 

 

 

Delaware

Third Crystal Park Associates Limited Partnership

 

 

 

Virginia

Totowa VF L.L.C.

 

 

 

New Jersey

Towmed Housing L.L.C.

 

 

 

Delaware

Towmed Intermediate L.L.C.

 

 

 

Delaware

Towson VF L.L.C.

 

 

 

Maryland

Trees Acquisition Subsidiary, Inc.

 

 

 

Delaware

Turnersville VF L.L.C.

 

 

 

New Jersey

Two Guys From Harrison Holding Company L.L.C.

 

 

 

Pennsylvania

Two Guys From Harrison Holding Company L.P.

 

 

 

Pennsylvania

Two Guys from Harrison N.Y. (DE), L.L.C.

 

 

 

Delaware

Two Guys From Harrison N.Y. L.L.C.

 

 

 

New York

Two Guys Mass. LLC

 

 

 

Massachusetts

Two Guys-Connecticut Holding L.L.C.

 

 

 

Connecticut

Two Park Company

 

 

 

New York

Two Penn Plaza REIT, Inc.

 

 

 

New York

UBI Management, L.L.C.

 

 

 

Delaware

Union Square East, L.L.C.

 

 

 

New York

Union VF L.L.C.

 

 

 

New Jersey

Universal Building North, Inc.

 

 

 

Delaware

Universal Building, Inc.

 

 

 

Delaware

Upper Moreland Holding Company, L.L.C.

 

 

 

Pennsylvania

Upper Moreland Holding Company, L.P.

 

 

 

Pennsylvania

Upper Moreland VF, L.L.C.

 

 

 

Pennsylvania

VBL Company, L.L.C.

 

 

 

New York

VFC Connecticut Holding, L.L.C.

 

 

 

Delaware

VFC Massachusetts Holding, L.L.C.

 

 

 

Delaware

VFC New Jersey Holding, L.L.C.

 

 

 

Delaware

VFC Pennsylvania Holding, L.L.C.

 

 

 

Delaware

VFC Pennsylvania Holding, L.P.

 

 

 

Delaware

VNK L.L.C.

 

 

 

Delaware

VNO 100 West 33rd Street LLC

 

 

 

Delaware

VNO 1105 State Highway 36 LLC

 

 

 

Delaware

VNO 1227 25th Street LLC

 

 

 

Delaware

VNO 1229-1231 25th Street LLC

 

 

 

Delaware

VNO 155 Spring Street LLC

 

 

 

Delaware

VNO 1707 H Street, L.L.C.

 

 

 

Delaware

VNO 1920 L Street LLC

 

 

 

Delaware

VNO 195 North Bedford Road LLC

 

 

 

Delaware

VNO 211-217 Columbus Avenue LLC

 

 

 

Delaware

VNO 220 S. 20th Street LLC

 

 

 

Delaware

VNO 220 S. 20th Street Member LLC

 

 

 

Delaware

VNO 2445 Springfield Avenue LLC

 

 

 

Delaware

VNO 275 Sacramento Management, Inc.

 

 

 

California

VNO 3098 Long Beach Road LLC

 

 

 

Delaware

VNO 33 West 57th Street LLC

 

 

 

Delaware

 

 

VNO 350 Park LLC

 

 

 

Delaware

VNO 3500 US Highway 9 LLC

 

 

 

Delaware

VNO 375 Mezz LLC

 

 

 

Delaware

VNO 386 West Broadway LLC

 

 

 

Delaware

VNO 387 West Broadway LLC

 

 

 

Delaware

VNO 403 Commack Road LLC

 

 

 

Delaware

VNO 424 Sixth Avenue, LLC

 

 

 

Delaware

VNO 426 Washington Street Developer LLC

 

 

 

Delaware

VNO 426 Washington Street JV LLC

 

 

 

Delaware

VNO 426 West Broadway Member, LLC

 

 

 

Delaware

VNO 426 West Broadway, LLC

 

 

 

Delaware

VNO 431 Seventh Avenue LLC

 

 

 

Delaware

VNO 49 West 57th Street LLC

 

 

 

Delaware

VNO 51 E. 125th Street Member LLC

 

 

 

Delaware

VNO 63rd Street LLC

 

 

 

New York

VNO 6417 Loisdale Road LLC

 

 

 

Delaware

VNO 675 Paterson Avenue LLC

 

 

 

Delaware

VNO 7000 Hadley Road LLC

 

 

 

Delaware

VNO 828-850 Madison LLC

 

 

 

Delaware

VNO 839 New York Avenue LLC

 

 

 

Delaware

VNO 866 UN Plaza TRS L.L.C.

 

 

 

Delaware

VNO 99-01 Queens Boulevard LLC

 

 

 

Delaware

VNO America LLC

 

 

 

Delaware

VNO AP 195 N. Bedford Road LLC

 

 

 

Delaware

VNO Ashley House LLC

 

 

 

Delaware

VNO Ashley House Member LLC

 

 

 

Delaware

VNO Battery Wharf B Lender, L.L.C.

 

 

 

Delaware

VNO Bay Parkway LLC

 

 

 

Delaware

VNO Brick LLC

 

 

 

New Jersey

VNO Broad Street LLC

 

 

 

Delaware

VNO Broome Street LLC

 

 

 

Delaware

VNO Bruckner Plaza Lender LLC

 

 

 

Delaware

VNO Bruckner Plaza LLC

 

 

 

Delaware

VNO Courthouse I LLC

 

 

 

Delaware

VNO Courthouse II LLC

 

 

 

Delaware

VNO Crystal City Marriott, Inc.

 

 

 

Delaware

VNO Crystal City Restaurant L.L.C.

 

 

 

Delaware

VNO Crystal City TRS, Inc.

 

 

 

Delaware

VNO Douglaston Plaza, L.L.C.

 

 

 

Delaware

VNO Eatontown Seamans Plaza LLC

 

 

 

Delaware

VNO Filenes Property Manager LLC

 

 

 

Delaware

VNO Fulton Street Brooklyn LLC

 

 

 

Delaware

VNO GS/EOP Mezz L.L.C.

 

 

 

Delaware

VNO Harlem Park Developer LLC

 

 

 

Delaware

VNO HM Pool 1 LLC

 

 

 

Delaware

VNO HM Pool 2 LLC

 

 

 

Delaware

VNO Hotel L.L.C.

 

 

 

Delaware

VNO IF Delaware PI LLC

 

 

 

Delaware

VNO IF GP LLC

 

 

 

Delaware

VNO IF II, L.L.C.

 

 

 

Delaware

VNO IF LLC

 

 

 

Delaware

VNO IF PI LLC

 

 

 

Delaware

VNO Island Global LLC

 

 

 

Delaware

 

 

VNO James House Member LLC

 

 

 

Delaware

VNO James House, LLC

 

 

 

Delaware

VNO JCP LLC

 

 

 

Delaware

VNO LF 50 West 57th Street Holding LLC

 

 

 

Delaware

VNO LF 50 West 57th Street JV LLC

 

 

 

Delaware

VNO LF 50 West 57th Street LLC

 

 

 

Delaware

VNO LF 50 West 57th Street Management LLC

 

 

 

Delaware

VNO LNR Holdco, L.L.C.

 

 

 

Delaware

VNO LNR Mezzanine L.L.C.

 

 

 

Delaware

VNO Morris Avenue GL LLC

 

 

 

Delaware

VNO Mundy Street LLC

 

 

 

Delaware

VNO Paterson Plank Road LLC

 

 

 

Delaware

VNO Patson 255 California L.P.

 

 

 

Delaware

VNO Patson 340 Pine LLC

 

 

 

Delaware

VNO Patson Cannery GP LLC

 

 

 

Delaware

VNO Patson Cannery L.P.

 

 

 

Delaware

VNO Patson Geary, L.P.

 

 

 

Delaware

VNO Patson GP LLC

 

 

 

Delaware

VNO Patson Investor LLC

 

 

 

Delaware

VNO Patson LLC

 

 

 

Delaware

VNO Patson Mt. Diablo A L.P.

 

 

 

Delaware

VNO Patson Sacramento L.P.

 

 

 

Delaware

VNO Patson Van Ness Holdings LLC

 

 

 

Delaware

VNO Patson Walnut Creek L.P.

 

 

 

Delaware

VNO Pentagon City LLC

 

 

 

Delaware

VNO Pentagon Plaza LLC

 

 

 

Delaware

VNO Potomac House LLC

 

 

 

Delaware

VNO Potomac House Member LLC

 

 

 

Delaware

VNO Pune Township LLC

 

 

 

Delaware

VNO Rockville, LLC

 

 

 

Delaware

VNO RTR AP, LLC

 

 

 

Delaware

VNO RTR WA LLC

 

 

 

Delaware

VNO Shoppes on Dean LLC

 

 

 

Delaware

VNO Shops on Lake LLC

 

 

 

Delaware

VNO SMOH LLC

 

 

 

Delaware

VNO South Capitol LLC

 

 

 

Delaware

VNO Surplus 2006 LLC

 

 

 

Delaware

VNO T-Hotel Loan LLC

 

 

 

Delaware

VNO TRU 20th Street LLC

 

 

 

Delaware

VNO TRU 20th Street South LLC

 

 

 

Delaware

VNO TRU 25 1/2 Road LLC

 

 

 

Delaware

VNO TRU Alewife Brook Pkwy. LLC

 

 

 

Delaware

VNO TRU Allstate Road LLC

 

 

 

Delaware

VNO TRU Baltimore Park L.P.

 

 

 

Delaware

VNO TRU Beckley Road LLC

 

 

 

Delaware

VNO TRU Bellis Fair Pkwy, LLC

 

 

 

Delaware

VNO TRU Birch Street L.P.

 

 

 

Delaware

VNO TRU CA LLC

 

 

 

Delaware

VNO TRU Callahan Drive L.P.

 

 

 

Delaware

VNO TRU Cherry Avenue L.P.

 

 

 

Delaware

VNO TRU Coral Way LLC

 

 

 

Delaware

VNO TRU Dale Mabry LLC

 

 

 

Delaware

VNO TRU Eastman Avenue LLC

 

 

 

Delaware

 

 

VNO TRU Erie Blvd. LLC

 

 

 

Delaware

VNO TRU Frederica Street LLC

 

 

 

Delaware

VNO TRU Geary Street L.P.

 

 

 

Delaware

VNO TRU Georgia Avenue LLC

 

 

 

Delaware

VNO TRU Hickory Hollow L.P.

 

 

 

Delaware

VNO TRU Hilltop Drive L.P.

 

 

 

Delaware

VNO TRU Jericho Turnpike LLC

 

 

 

Delaware

VNO TRU Kennedy Road LLC

 

 

 

Delaware

VNO TRU Lafayette Street LLC

 

 

 

Delaware

VNO TRU Leesburg Pike LLC

 

 

 

Delaware

VNO TRU Mall Drive L.P.

 

 

 

Delaware

VNO TRU MICH L.P.

 

 

 

Delaware

VNO TRU Military Road L.P.

 

 

 

Delaware

VNO TRU Navarro L.P.

 

 

 

Delaware

VNO TRU Olive Avenue L.P.

 

 

 

Delaware

VNO TRU PA LLC

 

 

 

Delaware

VNO TRU Palm Desert L.P.

 

 

 

Delaware

VNO TRU Park Drive LLC

 

 

 

Delaware

VNO TRU Princeton Road LLC

 

 

 

Delaware

VNO TRU Rand Road LLC

 

 

 

Delaware

VNO TRU Ridgemont L.P.

 

 

 

Delaware

VNO TRU Riverdale Road LLC

 

 

 

Delaware

VNO TRU Rolling Meadows Drive LLC

 

 

 

Delaware

VNO TRU Route 46 LLC

 

 

 

Delaware

VNO TRU Route 50 LLC

 

 

 

Delaware

VNO TRU Sam Rittenburg Blvd. LLC

 

 

 

Delaware

VNO TRU South Wadsworth Avenue LLC

 

 

 

Delaware

VNO TRU Sunrise Blvd. L.P.

 

 

 

Delaware

VNO TRU Sunset Drive L.P.

 

 

 

Delaware

VNO TRU Torrence Avenue LLC

 

 

 

Delaware

VNO TRU TX LLC

 

 

 

Delaware

VNO TRU University Drive LLC

 

 

 

Delaware

VNO TRU Washington Blvd. LLC

 

 

 

Delaware

VNO TRU West Sunrise Hwy. LLC

 

 

 

Delaware

VNO VE LLC

 

 

 

Delaware

VNO-MM Mezzanine Lender LLC

 

 

 

Delaware

Vornado - KC License L.L.C.

 

 

 

Delaware

Vornado - Westport L.L.C.

 

 

 

Connecticut

Vornado / Charles E. Smith L.P.

 

 

 

Virginia

Vornado / Charles E. Smith Management L.L.C.

 

 

 

Virginia

Vornado 122-124 Spring Street, LLC

 

 

 

Delaware

Vornado 1399 LLC

 

 

 

Delaware

Vornado 1540 Broadway LLC

 

 

 

Delaware

Vornado 1726 M Street LLC

 

 

 

Delaware

Vornado 1740 Broadway LLC

 

 

 

New York

Vornado 1925 Acquisition II LLC

 

 

 

Delaware

Vornado 1925 Acquisition L.L.C.

 

 

 

Delaware

Vornado 1925 K LLC

 

 

 

Delaware

Vornado 20 Broad Acquisition LLC

 

 

 

Delaware

Vornado 220 Central Park South LLC

 

 

 

Delaware

Vornado 25W14 LLC

 

 

 

Delaware

Vornado 280 Park Mezz LLC

 

 

 

Delaware

Vornado 3040 M Street LLC

 

 

 

Delaware

 

 

Vornado 330 W 34 Mezz LLC

 

 

 

Delaware

Vornado 330 West 34th Street L.L.C.

 

 

 

New York

Vornado 40 East 66th Street LLC

 

 

 

Delaware

Vornado 40 East 66th Street Member LLC

 

 

 

Delaware

Vornado 40 East 66th Street TRS LLC

 

 

 

Delaware

Vornado 401 Commercial LLC

 

 

 

New York

Vornado 447 South Broadway LLC

 

 

 

Delaware

Vornado 550-600 Mamaroneck L.P.

 

 

 

New York

Vornado 601 Madison Avenue, L.L.C.

 

 

 

Delaware

Vornado 620 Sixth Avenue L.L.C.

 

 

 

Delaware

Vornado 640 Fifth Avenue L.L.C.

 

 

 

New York

Vornado 677 Madison LLC

 

 

 

Delaware

Vornado 692 Broadway, L.L.C.

 

 

 

Delaware

Vornado 800 17th Street, LLC

 

 

 

Delaware

Vornado 90 Park Avenue L.L.C.

 

 

 

New York

Vornado 90 Park Member L.L.C.

 

 

 

Delaware

Vornado 90 Park QRS, Inc.

 

 

 

New York

Vornado Acquisition Co. LLC

 

 

 

Delaware

Vornado Asset Protection Trust Grantee (TRS) L.L.C.

 

 

 

Delaware

Vornado Auto L.L.C.

 

 

 

Delaware

Vornado B&B L.L.C.

 

 

 

New York

Vornado Bergen East LLC

 

 

 

Delaware

Vornado Bergen Mall License II LLC

 

 

 

Delaware

Vornado Bergen Mall License LLC

 

 

 

Delaware

Vornado Bergen Mall LLC

 

 

 

New Jersey

Vornado Bevcon I LLC

 

 

 

Delaware

Vornado Beverly LLC

 

 

 

Delaware

Vornado Bowen GP LLC

 

 

 

Delaware

Vornado Bowen II LLC

 

 

 

Delaware

Vornado Bowen, LLC

 

 

 

Delaware

Vornado Broadway Mall LLC

 

 

 

Delaware

Vornado Burnside Plaza LLC

 

 

 

Delaware

Vornado Caguas GP, Inc.

 

 

 

Delaware

Vornado Caguas Holding, L.P.

 

 

 

Delaware

Vornado Caguas Holding, LLC

 

 

 

Delaware

Vornado Caguas L.L.C.

 

 

 

Delaware

Vornado Caguas L.P.

 

 

 

Delaware

Vornado CAPI L.L.C.

 

 

 

Delaware

Vornado Catalinas GP, Inc.

 

 

 

Delaware

Vornado Catalinas Holding, L.P.

 

 

 

Delaware

Vornado Catalinas Holding, LLC

 

 

 

Delaware

Vornado Catalinas L.L.C.

 

 

 

Delaware

Vornado Catalinas L.P.

 

 

 

Delaware

Vornado CCA Gainesville, L.L.C.

 

 

 

Delaware

Vornado CDG I LLC

 

 

 

Delaware

Vornado CDG II LLC

 

 

 

Delaware

Vornado CESCR Gen-Par, LLC

 

 

 

Delaware

Vornado CESCR Holdings LLC

 

 

 

Delaware

Vornado CESCR II L.L.C.

 

 

 

Delaware

Vornado CESCR L.L.C.

 

 

 

Delaware

Vornado Cogen Holdings LLC

 

 

 

Delaware

Vornado Commonwealth LLC

 

 

 

Delaware

Vornado Communications, LLC

 

 

 

Delaware

 

 

Vornado Condominium Management LLC

 

 

 

New York

Vornado Crystal City L.L.C.

 

 

 

Delaware

Vornado Crystal Park Loan, L.L.C.

 

 

 

Delaware

Vornado Dance Company LLC

 

 

 

Delaware

Vornado DC Holding LLC

 

 

 

Delaware

Vornado Drake Mezz LLC

 

 

 

Delaware

Vornado Dune LLC

 

 

 

Delaware

Vornado EF Borrower LLC

 

 

 

Delaware

Vornado Eleven Penn Plaza LLC

 

 

 

Delaware

Vornado Equinox Loan LLC

 

 

 

Delaware

Vornado Everest Lender, L.L.C.

 

 

 

Delaware

Vornado Everest, L.L.C.

 

 

 

Delaware

Vornado Farley LLC

 

 

 

Delaware

Vornado Finance GP II L.L.C.

 

 

 

Delaware

Vornado Finance GP L.L.C.

 

 

 

Delaware

Vornado Finance II L.P.

 

 

 

Delaware

Vornado Finance L.P.

 

 

 

Delaware

Vornado Finance SPE, Inc.

 

 

 

Delaware

Vornado Forest Plaza L.L.C.

 

 

 

Delaware

Vornado Forest Plaza Member L.L.C.

 

 

 

Delaware

Vornado Fort Lee L.L.C.

 

 

 

New Jersey

Vornado Fortress LLC

 

 

 

Delaware

Vornado Georgetown Park LLC

 

 

 

Delaware

Vornado GM Loan II, L.L.C.

 

 

 

Delaware

Vornado Green Acres Acquisition L.L.C.

 

 

 

Delaware

Vornado Green Acres Delaware L.L.C.

 

 

 

Delaware

Vornado Green Acres Funding L.L.C.

 

 

 

Delaware

Vornado Green Acres Holdings L.L.C.

 

 

 

Delaware

Vornado Green Acres SPE Managing Member, Inc.

 

 

 

Delaware

Vornado Gun Hill Road LLC

 

 

 

Delaware

Vornado Harlem Park LLC

 

 

 

Delaware

Vornado Hinjewadi Township Private Limited

 

 

 

Foreign

Vornado HP B Note Holder LLC

 

 

 

Delaware

Vornado IB Holdings LLC

 

 

 

Delaware

Vornado India Lender LLC

 

 

 

Delaware

Vornado India Retail Management LLC

 

 

 

Delaware

Vornado Investment Corp.

 

 

 

New York

Vornado Investments L.L.C.

 

 

 

Delaware

Vornado KMS Holdings LLC

 

 

 

Delaware

Vornado KPI LLC

 

 

 

Delaware

Vornado Lending Corp.

 

 

 

New Jersey

Vornado Lending L.L.C.

 

 

 

New Jersey

Vornado Lodi Delaware Member, LLC

 

 

 

Delaware

Vornado Lodi Delaware, LLC

 

 

 

Delaware

Vornado Lodi L.L.C.

 

 

 

New Jersey

Vornado LXP, L.L.C.

 

 

 

Delaware

Vornado M 330 L.L.C.

 

 

 

New York

Vornado M 393 L.L.C.

 

 

 

New York

Vornado Mamaroneck L.L.C.

 

 

 

New York

Vornado Management Corp.

 

 

 

New Jersey

Vornado Manhattan House Mortgage LLC

 

 

 

Delaware

Vornado Mauritius Advisors LLC

 

 

 

Delaware

Vornado Mauritius II LLC

 

 

 

Delaware

 

 

Vornado Maywood License LLC

 

 

 

Delaware

Vornado Mervyn Mezz I LLC

 

 

 

Delaware

Vornado Mervyn Mezz II LLC

 

 

 

Delaware

Vornado MH, L.L.C.

 

 

 

New York

Vornado MLP GP L.L.C.

 

 

 

Delaware

Vornado Monmouth Mall, L.L.C.

 

 

 

New Jersey

Vornado Montehiedra Acquisition L.P.

 

 

 

Delaware

Vornado Montehiedra Acquisition LLC

 

 

 

Delaware

Vornado Montehiedra Holding II L.P.

 

 

 

Delaware

Vornado Montehiedra Holding L.P.

 

 

 

Delaware

Vornado Montehiedra Holding LLC

 

 

 

Delaware

Vornado Montehiedra Inc.

 

 

 

Delaware

Vornado Montehiedra Lender LLC

 

 

 

Delaware

Vornado Montehiedra OP L.P.

 

 

 

Delaware

Vornado Montehiedra OP LLC

 

 

 

Delaware

Vornado Montehiedra Out Parcel LLC

 

 

 

Delaware

Vornado New York RR One L.L.C.

 

 

 

New York

Vornado Newkirk Advisory LLC

 

 

 

Delaware

Vornado Newkirk L.L.C.

 

 

 

Delaware

Vornado NK Loan L.L.C.

 

 

 

Massachusetts

Vornado North Bergen Tonelle Plaza LLC

 

 

 

Delaware

Vornado Office Inc.

 

 

 

New York

Vornado Office Management LLC

 

 

 

New York

Vornado One Penn Cogen LLC

 

 

 

Delaware

Vornado PS, L.L.C.

 

 

 

Delaware

Vornado Realty L.L.C.

 

 

 

Delaware

Vornado Records 2006, L.L.C.

 

 

 

Delaware

Vornado Retail Management LLC

 

 

 

Delaware

Vornado Rockaway L.L.C.

 

 

 

New Jersey

Vornado Rockville, LLC

 

 

 

Delaware

Vornado Roney Palace Loan LLC

 

 

 

Delaware

Vornado Rosslyn LLC

 

 

 

Delaware

Vornado RTR AP LLC

 

 

 

Delaware

Vornado RTR DC LLC

 

 

 

Delaware

Vornado RTR Urban Development LLC

 

 

 

Delaware

Vornado RTR Urban Development TMP LLC

 

 

 

Delaware

Vornado RTR, Inc.

 

 

 

Delaware

Vornado San Jose LLC

 

 

 

Delaware

Vornado Savanna LLC

 

 

 

Delaware

Vornado Savanna SM LLC

 

 

 

Delaware

Vornado SB 1 L.P.

 

 

 

Delaware

Vornado SB 10 L.P.

 

 

 

Delaware

Vornado SB 11 L.P.

 

 

 

Delaware

Vornado SB 12 L.P.

 

 

 

Delaware

Vornado SB 13 L.P.

 

 

 

Delaware

Vornado SB 14 L.P.

 

 

 

Delaware

Vornado SB 15 L.P.

 

 

 

Delaware

Vornado SB 16 L.P.

 

 

 

Delaware

Vornado SB 17 L.P.

 

 

 

Delaware

Vornado SB 18 L.P.

 

 

 

Delaware

Vornado SB 19 L.P.

 

 

 

Delaware

Vornado SB 2 L.P.

 

 

 

Delaware

Vornado SB 20 L.P.

 

 

 

Delaware

 

 

Vornado SB 21 L.P.

 

 

 

Delaware

Vornado SB 22 L.P.

 

 

 

Delaware

Vornado SB 23 L.P.

 

 

 

Delaware

Vornado SB 24 L.P.

 

 

 

Delaware

Vornado SB 25 L.P.

 

 

 

Delaware

Vornado SB 3 L.P.

 

 

 

Delaware

Vornado SB 4 L.P.

 

 

 

Delaware

Vornado SB 5 L.P.

 

 

 

Delaware

Vornado SB 6 L.P.

 

 

 

Delaware

Vornado SB 7 L.P.

 

 

 

Delaware

Vornado SB 8 L.P.

 

 

 

Delaware

Vornado SB 9 L.P.

 

 

 

Delaware

Vornado SB LLC

 

 

 

Delaware

Vornado SC Properties II LLC

 

 

 

Delaware

Vornado SC Properties LLC

 

 

 

Delaware

Vornado Sheffield Mezz Loan LLC

 

 

 

Delaware

Vornado Shenandoah Holdings LLC

 

 

 

Delaware

Vornado Sign LLC

 

 

 

Delaware

Vornado South Hills, LLC

 

 

 

Delaware

Vornado Springfield Mall LLC

 

 

 

Delaware

Vornado Springfield Mall Manager LLC

 

 

 

Delaware

Vornado Square Mile LLC

 

 

 

Delaware

Vornado Suffolk LLC

 

 

 

Delaware

Vornado Thompson LLC

 

 

 

Delaware

Vornado Title L.L.C.

 

 

 

Delaware

Vornado TOA-Baja II LLC

 

 

 

Delaware

Vornado TOA-Baja LLC

 

 

 

Delaware

Vornado Toys Bridge LLC

 

 

 

Delaware

Vornado Truck LLC

 

 

 

Delaware

Vornado TSQ LLC

 

 

 

Delaware

Vornado Two Penn Plaza L.L.C.

 

 

 

New York

Vornado Two Penn Property L.L.C.

 

 

 

Delaware

Vornado Vegas Blvd Debt LLC

 

 

 

Delaware

Vornado Vegas Blvd Equity LLC

 

 

 

Delaware

Vornado Warner Acquisition LLC

 

 

 

Delaware

Vornado Warner GP LLC

 

 

 

Delaware

Vornado Warner LLC

 

 

 

Delaware

Vornado Wasserman Fund Owner LLC

 

 

 

Delaware

Vornado Waterfront Holdings LLC

 

 

 

Delaware

Vornado West Babylon LLC

 

 

 

Delaware

Vornado Westbury Retail II LLC

 

 

 

Delaware

Vornado Westbury Retail LLC

 

 

 

Delaware

VRT Development Rights LLC

 

 

 

New York

VRT Massachusetts Holding L.L.C.

 

 

 

Delaware

VRT New Jersey Holding L.L.C.

 

 

 

Delaware

VSP G.P.

 

 

 

New York

VSPS I LLC

 

 

 

Delaware

VSPS LLC

 

 

 

Delaware

VW Old Park II LLC

 

 

 

Delaware

VW Old Park III LLC

 

 

 

Delaware

VW Old Park LLC

 

 

 

Delaware

Warner Investments, L.P.

 

 

 

Delaware

Washington CESC TRS, Inc.

 

 

 

Delaware

Washington Design Center L.L.C.

 

 

 

Delaware

Washington Design Center Subsidiary L.L.C.

 

 

 

Delaware

Washington Mart TRS, Inc.

 

 

 

Delaware

Washington Office Center L.L.C.

 

 

 

Delaware

Watchung VF L.L.C.

 

 

 

New Jersey

Waterbury VF L.L.C.

 

 

 

Connecticut

Wayne VF L.L.C.

 

 

 

New Jersey

Wells Kinzie L.L.C.

 

 

 

Delaware

West 57th Street Holding LLC

 

 

 

Delaware

West 57th Street JV LLC

 

 

 

Delaware

West 57th Street Management LLC

 

 

 

Delaware

West End 25 Developer LLC

 

 

 

Delaware

West Windsor Holding Corporation

 

 

 

New Jersey

West Windsor Holding L.L.C.

 

 

 

New Jersey

Woodbridge VF, L.L.C.

 

 

 

New Jersey

York Holding Company, L.L.C.

 

 

 

Pennsylvania

York Holding Company, L.P.

 

 

 

Pennsylvania

York VF L.L.C.

 

 

 

Pennsylvania

 

 

 

 

EXHIBIT 23

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the incorporation by reference in the following Registration Statements of our reports dated February 24, 2009, relating to the consolidated financial statements and financial statement schedules of Vornado Realty Trust, and the effectiveness of Vornado Realty Trust’s internal control over financial reporting, appearing in the Annual Report on Form 10-K of Vornado Realty Trust for the year ended December 31, 2008:

 

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

 

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

 

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

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

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

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

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

 

 

 

 

/s/ DELOITTE & TOUCHE LLP

 

Parsippany, New Jersey

February 24, 2009

 

 

 

 

EXHIBIT 31.1

CERTIFICATION

I, Steven Roth, certify that:

 

1.

I have reviewed this Annual Report on Form 10-K of Vornado Realty Trust;

 

2.

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

 

3.

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

 

4.

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

 

a)

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

 

b)

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

 

c)

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

 

d)

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

 

5.

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

 

a)

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

 

b)

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

 

 

February 24, 2009

 


/s/ Steven Roth

 

Steven Roth

 

Chief Executive Officer

 

 

 

EXHIBIT 31.2

CERTIFICATION

I, Joseph Macnow, certify that:

 

1.

I have reviewed this Annual Report on Form 10-K of Vornado Realty Trust;

 

2.

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

 

3.

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

 

4.

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

 

a)

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

 

b)

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

 

c)

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

 

d)

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

 

5.

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

 

a)

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

 

b)

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

 

 

February 24, 2009

 


/s/ Joseph Macnow

 

Joseph Macnow

 

Executive Vice President and Chief Financial Officer

 

 

 

EXHIBIT 32.1

CERTIFICATION

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

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

 

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

 

The Annual Report on Form 10-K for year ended December 31, 2008 (the “Report”) of the Company fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

 

 

 

 

 


February 24, 2009

 

 


/s/ Steven Roth

 

 

Name:

Steven Roth

 

 

Title:

Chief Executive Officer

 

 

 

 

EXHIBIT 32.2

CERTIFICATION

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

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

 

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

 

The Annual Report on Form 10-K for year ended December 31, 2008 (the “Report”) of the Company fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

 

 

 

 


February 24, 2009

 

 


/s/ Joseph Macnow

 

 

Name:

Joseph Macnow

 

 

Title:

Chief Financial Officer