Press Release

Contact:

Joseph Macnow
Work(212) 894-7000
July 30, 2018
Vornado Announces Second Quarter 2018 Financial Results

NEW YORK.......VORNADO REALTY TRUST (NYSE: VNO) reported today:

Quarter Ended June 30, 2018 Financial Results

NET INCOME attributable to common shareholders for the quarter ended June 30, 2018 was $111.5 million, or $0.58 per diluted share, compared to $116.0 million, or $0.61 per diluted share, for the prior year's quarter. Adjusting net income attributable to common shareholders for the items that impact the comparability of period to period net income listed in the table on the following page, net income attributable to common shareholders, as adjusted (non-GAAP) for the quarters ended June 30, 2018 and 2017 was $69.7 million and $67.4 million, or $0.36 and $0.35 per diluted share, respectively.

FUNDS FROM OPERATIONS ("FFO") attributable to common shareholders plus assumed conversions (non-GAAP) for the quarter ended June 30, 2018 was $209.7 million, or $1.10 per diluted share, compared to $257.7 million, or $1.35 per diluted share, for the prior year's quarter. Adjusting FFO attributable to common shareholders plus assumed conversions for the items that impact the comparability of period to period FFO listed in the table on page 3, FFO attributable to common shareholders plus assumed conversions, as adjusted (non-GAAP) for the quarters ended June 30, 2018 and 2017 was $187.4 million and $180.5 million, or $0.98 and $0.95 per diluted share, respectively.

Six Months Ended June 30, 2018 Financial Results

NET INCOME attributable to common shareholders for the six months ended June 30, 2018 was $93.7 million, or $0.49 per diluted share, compared to $163.7 million, or $0.86 per diluted share, for the six months ended June 30, 2017. Adjusting net income attributable to common shareholders for the items that impact the comparability of period to period net income listed in the table on the following page, net income attributable to common shareholders, as adjusted (non-GAAP) for the six months ended June 30, 2018 and 2017 was $126.1 million and $113.5 million, or $0.66 and $0.60 per diluted share, respectively.

FUNDS FROM OPERATIONS ("FFO") attributable to common shareholders plus assumed conversions (non-GAAP) for the six months ended June 30, 2018 was $312.3 million, or $1.63 per diluted share, compared to $463.4 million, or $2.43 per diluted share, for the six months ended June 30, 2017. Adjusting FFO attributable to common shareholders plus assumed conversions for the items that impact the comparability of period to period FFO listed in the table on page 3, FFO attributable to common shareholders plus assumed conversions, as adjusted (non-GAAP) for the six months ended June 30, 2018 and 2017 was $361.4 million and $339.4 million, or $1.89 and $1.78 per diluted share, respectively.
 
1
 
The following table reconciles our net income attributable to common shareholders to net income attributable to common shareholders, as adjusted (non-GAAP):
                               
(Amounts in thousands, except per share amounts)
For the Three Months Ended
June 30,
 
For the Six Months Ended
June 30,
 
2018
 
2017
 
2018
 
2017
Net income attributable to common shareholders
$
111,534

 
$
115,972

 
$
93,693

 
$
163,724

Per diluted share
$
0.58

 
$
0.61

 
$
0.49

 
$
0.86

               
Certain (income) expense items that impact net income attributable
to common shareholders:
             
Net gains on sale of real estate
$
(24,449
)
 
$
(15,339
)
 
$
(24,767
)
 
$
(19,459
)
(Increase) decrease in fair value of marketable securities
(including our share of partially owned entities)
(16,024
)
 

 
18,636

 

Profit participation on the April 2018 sale of 701 Seventh
Avenue
(5,457
)
 

 
(5,457
)
 

Our share of loss from 666 Fifth Avenue Office Condominium (49.5% interest)
1,269

 
7,852

 
4,761

 
18,049

Our share of (income) loss from real estate fund investments (excluding our $4,252 share of One Park Avenue potential additional transfer taxes and reduction in carried interest for the six months ended June 30, 2018)
(551
)
 
304

 
(1,365
)
 
3,539

(Income) loss from discontinued operations and sold properties (primarily related to JBG SMITH Properties operating results
and transaction costs through July 17, 2017 spin-off)
(286
)
 
(18,251
)
 
83

 
(31,246
)
Net gain resulting from Urban Edge Properties operating
partnership unit issuances

 
(15,900
)
 

 
(15,900
)
Net gain on repayment of our Suffolk Downs JV debt
investments

 
(11,373
)
 

 
(11,373
)
Our share of potential additional New York City transfer taxes
based on a Tax Tribunal interpretation which Vornado is
appealing

 

 
23,503

 

Preferred unit issuance costs

 

 
14,486

 

Other
839

 
900

 
4,609

 
2,864

 
(44,659
)
 
(51,807
)
 
34,489

 
(53,526
)
Noncontrolling interests' share of above adjustments
2,778

 
3,207

 
(2,105
)
 
3,314

Total of certain (income) expense items that impact net income attributable to common shareholders
$
(41,881
)
 
$
(48,600
)
 
$
32,384

 
$
(50,212
)
               
Net income attributable to common shareholders, as adjusted (non-GAAP)
$
69,653

 
$
67,372

 
$
126,077

 
$
113,512

Per diluted share (non-GAAP)
$
0.36

 
$
0.35

 
$
0.66

 
$
0.60

 
2
 
The following table reconciles our FFO attributable to common shareholders plus assumed conversions (non-GAAP) to FFO attributable to common shareholders plus assumed conversions, as adjusted (non-GAAP):
                               
(Amounts in thousands, except per share amounts)
For the Three Months Ended
June 30,
 
For the Six Months Ended
June 30,
 
2018
 
2017
 
2018
 
2017
FFO attributable to common shareholders plus assumed
conversions (non-GAAP)
(1)
$
209,680

 
$
257,673

 
$
312,339

 
$
463,422

Per diluted share (non-GAAP)
$
1.10

 
$
1.35

 
$
1.63

 
$
2.43

               
Certain (income) expense items that impact FFO attributable to common shareholders plus assumed conversions:
             
(Increase) decrease in fair value of marketable securities
(including our share of partially owned entities)
$
(16,024
)
 
$

 
$
18,636

 
$

Profit participation on the April 2018 sale of 701 Seventh
Avenue
(5,457
)
 

 
(5,457
)
 

Our share of FFO from 666 Fifth Avenue Office Condominium (49.5% interest)
(2,178
)
 
(4,160
)
 
(2,041
)
 
(7,713
)
Our share of FFO from real estate fund investments (excluding our $4,252 share of One Park Avenue potential additional transfer taxes and reduction in carried interest for the six months ended June 30, 2018)
(551
)
 
304

 
(1,365
)
 
3,539

FFO from discontinued operations and sold properties
(primarily related to JBG SMITH Properties operating results
and transaction costs through July 17, 2017 spin-off)
(374
)
 
(51,561
)
 
(104
)
 
(99,901
)
Net gain resulting from Urban Edge Properties operating partnership unit issuances

 
(15,900
)
 

 
(15,900
)
Net gain on repayment of our Suffolk Downs JV debt
investments

 
(11,373
)
 

 
(11,373
)
Our share of potential additional New York City transfer taxes based on a Tax Tribunal interpretation which Vornado is appealing

 

 
23,503

 

Preferred unit issuance costs

 

 
14,486

 

Other
839

 
379

 
4,592

 
(962
)
 
(23,745
)
 
(82,311
)
 
52,250

 
(132,310
)
Noncontrolling interests' share of above adjustments
1,477

 
5,182

 
(3,212
)
 
8,302

Total of certain (income) expense items that impact FFO
attributable to common shareholders plus assumed conversions,
net
$
(22,268
)
 
$
(77,129
)
 
$
49,038

 
$
(124,008
)
               
FFO attributable to common shareholders plus assumed conversions, as adjusted (non-GAAP)
$
187,412

 
$
180,544

 
$
361,377

 
$
339,414

Per diluted share (non-GAAP)
$
0.98

 
$
0.95

 
$
1.89

 
$
1.78

____________________________________________________________
(1)
See page 10 for a reconciliation of our net income attributable to common shareholders to FFO attributable to common shareholders plus assumed conversions (non-GAAP) for the three and six months ended June 30, 2018 and 2017.
 
3
 
Disposition Activity

On June 21, 2018, we completed the $45,000,000 sale of 27 Washington Square North, which resulted in a net gain of $23,559,000 which is included in "net gains on disposition of wholly owned and partially owned assets" on our consolidated statements of income. We acquired the property in December 2015 for $20,000,000.

Financing Activities

On April 19, 2018, the joint venture between our Fund (25% owned) and our Crowne Plaza Joint Venture (57.1% owned) completed a $255,000,000 refinancing of the Crowne Plaza Times Square Hotel. The interest-only loan is at LIBOR plus 3.51% (5.56% at June 30, 2018) and matures in May 2020 with three one-year extension options. In connection therewith, the joint venture purchased an interest rate cap that caps LIBOR at a rate of 4.00%. The Crowne Plaza Times Square Hotel was previously encumbered by a $310,000,000 interest-only mortgage at LIBOR plus 2.80% which was scheduled to mature in December 2018.
On June 11, 2018, the joint venture (50.1% owned) that owns Independence Plaza, a three-building 1,327 unit residential complex in the Tribeca submarket of Manhattan completed a $675,000,000 refinancing of Independence Plaza. The seven-year interest-only loan matures in July 2025 and has a fixed rate of 4.25%. Our share of net proceeds, after repayment of the existing 3.48% $550,000,000 mortgage and closing costs, was $55,618,000.
Second Quarter Leasing Activity:

611,000 square feet of New York Office space (545,000 square feet at share) at an initial rent of $88.28 per square foot and a weighted average term of 10.5 years. The GAAP and cash mark-to-markets on the 502,000 square feet of second generation space were 41.3% and 28.4%, respectively. Tenant improvements and leasing commissions were $9.63 per square foot per annum, or 10.9% of initial rent.

49,000 square feet of New York Retail space (44,000 square feet at share) at an initial rent of $165.98 per square foot and a weighted average term of 5.9 years. The GAAP and cash mark-to-markets on the 38,000 square feet of second generation space were 11.6% and 8.7%, respectively. Tenant improvements and leasing commissions were $18.73 per square foot per annum, or 11.3% of initial rent.

50,000 square feet at theMART (all at share and all second generation) at an initial rent of $51.66 per square foot and a weighted average term of 5.4 years. The GAAP and cash mark-to-markets were 9.4% and 1.6%, respectively. Tenant improvements and leasing commissions were $1.55 per square foot per annum, or 3.0% of initial rent.
 
4
 
Store Net Operating Income ("NOI"):

The percentage increase (decrease) in same store NOI at share and same store NOI at share - cash basis of our New York segment, theMART and 555 California Street are summarized below.
                         
   
Total
 
New York(2)
 
theMART
 
555 California Street
Same store NOI at share % increase(1):
             
 
Three months ended June 30, 2018 compared to June 30, 2017
4.7
%
 
4.2
%
 
5.2
%
 
13.5
%
 
Six months ended June 30, 2018 compared to June 30, 2017
4.5
%
 
4.1
%
 
4.3
%
 
12.9
%
 
Three months ended June 30, 2018 compared to March 31, 2018
3.2
%
 
3.3
%
 
3.4
%
 
1.1
%
                 
Same store NOI at share - cash basis % increase(1):
             
 
Three months ended June 30, 2018 compared to June 30, 2017
7.0
%
 
5.9
%
 
10.8
%
 
23.8
%
 
Six months ended June 30, 2018 compared to June 30, 2017
6.7
%
 
5.8
%
 
10.4
%
 
18.5
%
 
Three months ended June 30, 2018 compared to March 31, 2018
4.6
%
 
4.6
%
 
2.9
%
 
7.7
%
____________________
(1)
See pages 12 through 17 for same store NOI at share and same store NOI at share - cash basis reconciliations.

   
Increase
(Decrease)
(2)
Excluding Hotel Pennsylvania - New York same store NOI at share % increase (decrease):
 
 
Three months ended June 30, 2018 compared to June 30, 2017
4.6
%
 
Six months ended June 30, 2018 compared to June 30, 2017
4.2
%
 
Three months ended June 30, 2018 compared to March 31, 2018
(0.3
)%
     
 
Excluding Hotel Pennsylvania - New York same store NOI at share - cash basis % increase:
 
 
Three months ended June 30, 2018 compared to June 30, 2017
6.3
%
 
Six months ended June 30, 2018 compared to June 30, 2017
5.8
%
 
Three months ended June 30, 2018 compared to March 31, 2018
0.7
%
 
5
 
NOI:

The elements of our New York and Other NOI at share for the three and six months ended June 30, 2018 and 2017 and the three months ended March 31, 2018 are summarized below.
                                       
 
For the Three Months Ended
 
For the Six Months Ended
June 30,
(Amounts in thousands)
June 30,
 
March 31, 2018
 
 
2018
 
2017
   
2018
 
2017
New York:
                 
Office
$
184,867

 
$
171,809

 
$
187,156

 
$
372,023

 
$
346,533

Retail
87,109

 
89,955

 
87,909

 
175,018

 
179,003

Residential
6,338

 
6,191

 
6,141

 
12,479

 
12,469

Alexander's
11,909

 
11,966

 
11,575

 
23,484

 
23,709

Hotel Pennsylvania
5,644

 
6,267

 
(4,185
)
 
1,459

 
1,629

Total New York
295,867

 
286,188

 
288,596

 
584,463

 
563,343

                   
Other:
                 
theMART
27,816

 
26,182

 
26,875

 
54,691

 
52,071

555 California Street
13,660

 
12,032

 
13,511

 
27,171

 
24,066

Other investments
17,086

 
21,732

 
20,054

 
37,140

 
43,812

Total Other
58,562

 
59,946

 
60,440

 
119,002

 
119,949

                   
NOI at share
$
354,429

 
$
346,134

 
$
349,036

 
$
703,465

 
$
683,292


NOI - Cash Basis:

The elements of our New York and Other NOI at share - cash basis for the three and six months ended June 30, 2018 and 2017 and the three months ended March 31, 2018 are summarized below.
 
                                       
 
For the Three Months Ended
 
For the Six Months Ended
June 30,
(Amounts in thousands)
June 30,
 
March 31, 2018
 
 
2018
 
2017
   
2018
 
2017
New York:
                 
Office
$
180,710

 
$
163,972

 
$
178,199

 
$
358,909

 
$
330,311

Retail
79,139

 
79,967

 
79,589

 
158,728

 
159,386

Residential
5,463

 
5,342

 
5,599

 
11,062

 
10,884

Alexander's
12,098

 
12,311

 
12,039

 
24,137

 
24,399

Hotel Pennsylvania
5,744

 
6,299

 
(4,153
)
 
1,591

 
1,694

Total New York
283,154

 
267,891

 
271,273

 
554,427

 
526,674

                   
Other:
                 
theMART
27,999

 
24,897

 
27,079

 
55,078

 
49,429

555 California Street
13,808

 
11,151

 
12,826

 
26,634

 
22,476

Other investments
16,987

 
19,720

 
19,910

 
36,897

 
41,757

Total Other
58,794

 
55,768

 
59,815

 
118,609

 
113,662

                   
NOI at share - cash basis
$
341,948

 
$
323,659

 
$
331,088

 
$
673,036

 
$
640,336


 
6
 
Development/Redevelopment as of June 30, 2018
                                               
(Amounts in thousands, except square feet)
           
(At Share)
                 
Full
Quarter
Stabilized
Operations
       
Property
Rentable
Sq. Ft.
 
Excluding Land Costs
             
Available for Occupancy
 
Current Projects:
 
Segment
   
Incremental
Budget
 
Amount
Expended
     
%
Complete
 
Start
   
220 Central Park South - residential condominiums
 
Other
 
397,000

 
$
1,400,000

 
$
1,054,000

 
(1)
 
75.3%
 
Q3 2012
 
N/A
 
N/A
Moynihan Office Building - (50.1% interest)(2)
 
New York
 
850,000

 
400,000

 
42,503

     
10.6%
 
Q2 2017
 
Q3 2020
 
Q2 2022
One Penn Plaza - renovation(3)
 
New York
 
2,535,000

 
200,000

 
3,939

     
2.0%
 
Q4 2018
 
N/A
 
N/A
61 Ninth Avenue - office/retail (45.1% interest)(4)
 
New York
 
170,000

 
69,000

 
55,134

     
79.9%
 
Q1 2016
 
Q2 2018
 
Q2 2019
512 West 22nd Street - office/retail (55.0% interest)
 
New York
 
173,000

 
72,000

 
47,719

 
(5)
 
66.3%
 
Q4 2015
 
Q3 2018
 
Q1 2020
345 Montgomery Street (555 California Street) (70.0% interest)
 
Other
 
64,000

 
32,000

 
6,399

 
(6)
 
20.0%
 
Q1 2018
 
Q3 2019
 
Q3 2020
606 Broadway - office/retail (50.0% interest)
 
New York
 
34,000

 
30,000

 
20,866

 
(7)
 
69.6%
 
Q2 2016
 
Q4 2018
 
Q2 2020
825 Seventh Avenue - office (50.0% interest)
 
New York
 
165,000

 
15,000

 
2,449

     
16.3%
 
Q2 2018
 
Q1 2020
 
Q1 2021
Total current projects
           

 
$
1,233,009

                   
                                     
Future Opportunities:
 
Segment
 
Property
Zoning
Sq. Ft.
                           
Penn Plaza - multiple opportunities - office/residential/retail
 
New York
 
TBD
                           
Hotel Pennsylvania
 
New York
 
2,052,000

                           
260 Eleventh Avenue - office(8)
 
New York
 
280,000

                           
                                     
Undeveloped Land:
       

                           
29, 31, 33 West 57th Street (50.0% interest)
 
New York
 
150,000

                           
527 West Kinzie, Chicago
 
Other
 
330,000

                           
Total undeveloped land
     
480,000

                           
_______________________
(1)
Excludes land and acquisition costs of $515,426.
(2)
Excludes $115,230 for our share of the upfront contribution of $230,000. The building and land are subject to a lease which expires in 2116.
(3)
The building is subject to a ground lease which expires in 2098.
(4)
The building is subject to a ground lease which expires in 2115.
(5)
Excludes land and acquisition costs of $57,000.
(6)
Excludes land and building costs of $31,000.
(7)
Excludes land and acquisition costs of $22,703.
(8)
The building is subject to a ground lease which expires in 2114.

Conference Call and Audio Webcast

As previously announced, the Company will host a quarterly earnings conference call and an audio webcast on Tuesday, July 31, 2018 at 10:00 a.m. Eastern Time (ET). The conference call can be accessed by dialing 888-771-4371 (domestic) or 847-585-4405 (international) and indicating to the operator the passcode 47136894. A telephonic replay of the conference call will be available from 1:30 p.m. ET on July 31, 2018 through August 30, 2018. To access the replay, please dial 888-843-7419 and enter the passcode 47136894#. A live webcast of the conference call will be available on the Company’s website at www.vno.com and an online playback of the webcast will be available on the website for 90 days following the conference call.

Supplemental Financial Information

Further details regarding results of operations, properties and tenants can be accessed at the Company’s website www.vno.com. Vornado Realty Trust is a fully - integrated equity real estate investment trust.

 
7
 
VORNADO REALTY TRUST
CONSOLIDATED BALANCE SHEETS
               
 
As of
(Amounts in thousands, except unit, share, and per share amounts)
June 30, 2018
 
December 31, 2017
ASSETS
     
Real estate, at cost:
     
Land
$
3,175,830

 
$
3,143,648

Buildings and improvements
9,969,190

 
9,898,605

Development costs and construction in progress
1,797,301

 
1,615,101

Leasehold improvements and equipment
105,625

 
98,941

Total
15,047,946

 
14,756,295

Less accumulated depreciation and amortization
(3,035,523
)
 
(2,885,283
)
Real estate, net
12,012,423

 
11,871,012

Cash and cash equivalents
1,090,791

 
1,817,655

Restricted cash
121,168

 
97,157

Marketable securities
165,650

 
182,752

Tenant and other receivables, net of allowance for doubtful accounts of $3,891 and $5,526
65,773

 
58,700

Investments in partially owned entities
959,801

 
1,056,829

Real estate fund investments
373,039

 
354,804

Receivable arising from the straight-lining of rents, net of allowance of $1,798 and $954
936,614

 
926,711

Deferred leasing costs, net of accumulated amortization of $198,100 and $191,827
443,859

 
403,492

Identified intangible assets, net of accumulated amortization of $163,406 and $150,837
146,370

 
159,260

Assets related to discontinued operations
52

 
1,357

Other assets
550,543

 
468,205

 
$
16,866,083

 
$
17,397,934

LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND EQUITY
     
Mortgages payable, net
$
8,108,618

 
$
8,137,139

Senior unsecured notes, net
843,417

 
843,614

Unsecured term loan, net
749,494

 
748,734

Unsecured revolving credit facilities
80,000

 

Accounts payable and accrued expenses
394,079

 
415,794

Deferred revenue
187,934

 
227,069

Deferred compensation plan
100,368

 
109,177

Liabilities related to discontinued operations
214

 
3,620

Preferred shares redeemed on January 4 and 11, 2018

 
455,514

Other liabilities
520,331

 
464,635

Total liabilities
10,984,455

 
11,405,296

Commitments and contingencies
     
Redeemable noncontrolling interests:
     
Class A units - 12,616,515 and 12,528,899 units outstanding
932,613

 
979,509

Series D cumulative redeemable preferred units - 177,101 units outstanding
5,428

 
5,428

Total redeemable noncontrolling interests
938,041

 
984,937

Vornado's shareholders' equity:
     
Preferred shares of beneficial interest: no par value per share; authorized 110,000,000 shares;
issued and outstanding 36,799,573 shares
891,325

 
891,988

Common shares of beneficial interest: $0.04 par value per share; authorized 250,000,000 shares;
issued and outstanding 190,237,957 and 189,983,858 shares
7,587

 
7,577

Additional capital
7,555,993

 
7,492,658

Earnings less than distributions
(4,206,381
)
 
(4,183,253
)
Accumulated other comprehensive income
33,351

 
128,682

Total Vornado shareholders' equity
4,281,875

 
4,337,652

Noncontrolling interests in consolidated subsidiaries
661,712

 
670,049

Total equity
4,943,587

 
5,007,701

 
$
16,866,083

 
$
17,397,934

 
8
VORNADO REALTY TRUST
OPERATING RESULTS
                               
(Amounts in thousands, except per share amounts)
For the Three Months Ended
June 30,
 
For the Six Months Ended
June 30,
 
2018
 
2017
 
2018
 
2017
Revenues
$
541,818

 
$
511,087

 
$
1,078,255

 
$
1,019,145

               
Income from continuing operations
$
104,655

 
$
129,373

 
$
105,300

 
$
187,902

Income from discontinued operations
683

 
18,111

 
320

 
33,429

Net income
105,338

 
147,484

 
105,620

 
221,331

Less net loss (income) attributable to noncontrolling interests in:
             
Consolidated subsidiaries
26,175

 
(7,677
)
 
34,449

 
(14,414
)
Operating Partnership
(7,445
)
 
(7,706
)
 
(6,321
)
 
(10,935
)
Net income attributable to Vornado
124,068

 
132,101

 
133,748

 
195,982

Preferred share dividends
(12,534
)
 
(16,129
)
 
(25,569
)
 
(32,258
)
Preferred share issuance costs

 

 
(14,486
)
 

NET INCOME attributable to common shareholders
$
111,534

 
$
115,972

 
$
93,693

 
$
163,724

               
INCOME PER COMMON SHARE – BASIC:
             
Income from continuing operations, net
$
0.59

 
$
0.52

 
$
0.49

 
$
0.70

Income from discontinued operations, net

 
0.09

 

 
0.16

Net income per common share
$
0.59

 
$
0.61

 
$
0.49

 
$
0.86

Weighted average shares outstanding
190,200

 
189,395

 
190,141

 
189,304

               
INCOME PER COMMON SHARE – DILUTED:
             
Income from continuing operations, net
$
0.58

 
$
0.52

 
$
0.49

 
$
0.70

Income from discontinued operations, net

 
0.09

 

 
0.16

Net income per common share
$
0.58

 
$
0.61

 
$
0.49

 
$
0.86

Weighted average shares outstanding
191,168

 
190,444

 
191,190

 
190,674

               
FFO attributable to common shareholders plus assumed conversions (non-GAAP)
$
209,680

 
$
257,673

 
$
312,339

 
$
463,422

Per diluted share (non-GAAP)
$
1.10

 
$
1.35

 
$
1.63

 
$
2.43

               
FFO attributable to common shareholders plus assumed conversions, as adjusted (non-GAAP)
$
187,412

 
$
180,544

 
$
361,377

 
$
339,414

Per diluted share (non-GAAP)
$
0.98

 
$
0.95

 
$
1.89

 
$
1.78

               
Weighted average shares used in determining FFO per diluted share
191,168

 
190,444

 
191,228

 
190,450

 
9
 
VORNADO REALTY TRUST
NON-GAAP RECONCILIATIONS

The following table reconciles net income attributable to common shareholders to FFO attributable to common shareholders plus assumed conversions:
 
                               
(Amounts in thousands, except per share amounts)
For the Three Months Ended
June 30,
 
For the Six Months Ended
June 30,
 
2018
 
2017
 
2018
 
2017
Net income attributable to common shareholders
$
111,534

 
$
115,972

 
$
93,693

 
$
163,724

Per diluted share
$
0.58

 
$
0.61

 
$
0.49

 
$
0.86

               
FFO adjustments:
             
Depreciation and amortization of real property
$
103,599

 
$
128,527

 
$
204,009

 
$
258,996

Net gains on sale of real estate
(24,177
)
 

 
(24,177
)
 
(2,267
)
Proportionate share of adjustments to equity in net income (loss)
of partially owned entities to arrive at FFO:
             
Depreciation and amortization of real property
25,488

 
37,682

 
53,594

 
76,756

Net gains on sale of real estate
(272
)
 
(15,339
)
 
(577
)
 
(17,192
)
Real estate impairment losses

 
167

 
4

 
3,218

 
104,638

 
151,037

 
232,853

 
319,511

Noncontrolling interests' share of above adjustments
(6,508
)
 
(9,356
)
 
(14,419
)
 
(19,873
)
FFO adjustments, net
$
98,130

 
$
141,681

 
$
218,434

 
$
299,638

               
FFO attributable to common shareholders (non-GAAP)
$
209,664

 
$
257,653

 
$
312,127

 
$
463,362

Convertible preferred share dividends
16

 
20

 
32

 
60

Earnings allocated to Out-Performance Plan units

 

 
180

 

FFO attributable to common shareholders plus assumed conversions (non-GAAP)
$
209,680

 
$
257,673

 
$
312,339

 
$
463,422

Per diluted share (non-GAAP)
$
1.10

 
$
1.35

 
$
1.63

 
$
2.43

FFO is computed in accordance with the definition adopted by the Board of Governors of the National Association of Real Estate Investment Trusts (“NAREIT”). NAREIT defines FFO as GAAP net income or loss adjusted to exclude net gains from sales of depreciated real estate assets, real estate impairment losses, depreciation and amortization expense from real estate assets and other specified non-cash items, including the pro rata share of such adjustments of unconsolidated subsidiaries. FFO and FFO per diluted share are non-GAAP financial measures used by management, investors and analysts to facilitate meaningful comparisons of operating performance between periods and among our peers because it excludes the effect of real estate depreciation and amortization and net gains on sales, which are based on historical costs and implicitly assume that the value of real estate diminishes predictably over time, rather than fluctuating based on existing market conditions. FFO does not represent cash generated from operating activities and is not necessarily indicative of cash available to fund cash requirements and should not be considered as an alternative to net income as a performance measure or cash flow as a liquidity measure. FFO may not be comparable to similarly titled measures employed by other companies. A reconciliation of our net income attributable to common shareholders to FFO attributable to common shareholders plus assumed conversions is provided above. In addition to FFO attributable to common shareholders plus assumed conversions, we also disclose FFO attributable to common shareholders plus assumed conversions, as adjusted. Although this non-GAAP measure clearly differs from NAREIT’s definition of FFO, we believe it provides a meaningful presentation of operating performance. Reconciliations of FFO attributable to common shareholders plus assumed conversions to FFO attributable to common shareholders plus assumed conversions, as adjusted are provided on page 3 of this press release.
 
10
 
VORNADO REALTY TRUST
NON-GAAP RECONCILIATIONS - CONTINUED

Below is a reconciliation of net income to NOI at share and NOI at share - cash basis for the three and six months ended June 30, 2018 and 2017 and the three months ended March 31, 2018.
 
                                       
 
For the Three Months Ended
 
For the Six Months Ended
June 30,
(Amounts in thousands)
June 30,
 
March 31, 2018
 
 
2018
 
2017
   
2018
 
2017
Net income
$
105,338

 
$
147,484

 
$
282

 
$
105,620

 
$
221,331

                   
Deduct:
                 
(Income) loss from partially owned entities
(8,757
)
 
(46,021
)
 
9,904

 
1,147

 
(47,379
)
Loss (income) from real estate fund investments
28,976

 
(4,391
)
 
8,807

 
37,783

 
(4,659
)
Interest and other investment (income) loss, net
(30,892
)
 
(8,541
)
 
24,384

 
(6,508
)
 
(15,236
)
Net gains on disposition of wholly owned and partially owned assets
(23,559
)
 

 

 
(23,559
)
 
(501
)
(Income) loss from discontinued operations
(683
)
 
(18,111
)
 
363

 
(320
)
 
(33,429
)
NOI attributable to noncontrolling interests in consolidated subsidiaries
(17,160
)
 
(16,269
)
 
(17,312
)
 
(34,472
)
 
(32,607
)
                   
Add:
                 
Depreciation and amortization expense
111,846

 
105,123

 
108,686

 
220,532

 
210,251

General and administrative expense
34,427

 
35,405

 
42,533

 
76,960

 
81,580

Transaction related costs and other
1,017

 
260

 
13,156

 
14,173

 
1,012

NOI from partially owned entities
65,752

 
67,016

 
67,513

 
133,265

 
133,113

Interest and debt expense
87,657

 
84,789

 
88,166

 
175,823

 
167,513

Income tax expense (benefit)
467

 
(610
)
 
2,554

 
3,021

 
2,303

NOI at share
354,429

 
346,134

 
349,036

 
703,465

 
683,292

Non-cash adjustments for straight-line rents, amortization of acquired below-market leases, net and other
(12,481
)
 
(22,475
)
 
(17,948
)
 
(30,429
)
 
(42,956
)
NOI at share - cash basis
$
341,948

 
$
323,659

 
$
331,088

 
$
673,036

 
$
640,336


NOI represents total revenues less operating expenses. We consider NOI to be the primary non-GAAP financial measure for making decisions and assessing the unlevered performance of our segments as it relates to the total return on assets as opposed to the levered return on equity. As properties are bought and sold based on NOI, we utilize this measure to make investment decisions as well as to compare the performance of our assets to that of our peers. NOI should not be considered a substitute for net income. NOI may not be comparable to similarly titled measures employed by other companies.
 
11
 
VORNADO REALTY TRUST
NON-GAAP RECONCILIATIONS - CONTINUED

Below are reconciliations of NOI at share to same store NOI at share for our New York segment, theMART, 555 California Street and other investments for the three months ended June 30, 2018 compared to June 30, 2017.
 
                                         
(Amounts in thousands)
Total
 
New York
 
theMART
 
555 California Street
 
Other
NOI at share for the three months ended June 30, 2018
$
354,429

 
$
295,867

 
$
27,816

 
$
13,660

 
$
17,086

 
Less NOI at share from:
                 
 
Acquisitions
(503
)
 
(439
)
 
(64
)
 

 

 
Dispositions
(310
)
 
(310
)
 

 

 

 
Development properties placed into and out of service
(12,794
)
 
(12,794
)
 

 

 

 
Lease termination income, net of straight-line and FAS 141 write-offs
1,941

 
1,984

 
(43
)
 

 

 
Other non-operating income, net
(17,583
)
 
(497
)
 

 

 
(17,086
)
Same store NOI at share for the three months ended June 30, 2018
$
325,180

 
$
283,811

 
$
27,709

 
$
13,660

 
$

                   
NOI at share for the three months ended June 30, 2017
$
346,134

 
$
286,188

 
$
26,182

 
$
12,032

 
$
21,732

 
Less NOI at share from:
                 
 
Acquisitions
5

 
(164
)
 
169

 

 

 
Dispositions
(406
)
 
(406
)
 

 

 

 
Development properties placed into and out of service
(12,329
)
 
(12,329
)
 

 

 

 
Lease termination income, net of straight-line and FAS 141 write-offs
(166
)
 
(166
)
 

 

 

 
Other non-operating income, net
(22,573
)
 
(841
)
 

 

 
(21,732
)
Same store NOI at share for the three months ended June 30, 2017
$
310,665

 
$
272,282

 
$
26,351

 
$
12,032

 
$

                   
Increase in same store NOI at share for the three months ended June 30, 2018 compared to June 30, 2017
$
14,515

 
$
11,529

 
$
1,358

 
$
1,628

 
$

                     
% increase in same store NOI at share
4.7
%
 
4.2
%
(1)
5.2
%
 
13.5
%
 
%
____________________
(1)
Excluding Hotel Pennsylvania, same store NOI at share increased by 4.6%.

Same store NOI represents NOI from operations which are owned by us and in service in both the current and prior year reporting periods. Same store NOI - cash basis is NOI from operations before straight-line rental income and expense, amortization of acquired below and above market leases, net and other non-cash adjustments which are owned by us and in service in both the current and prior year reporting periods. We present these non-GAAP measures to (i) facilitate meaningful comparisons of the operational performance of our properties and segments, (ii) make decisions on whether to buy, sell or refinance properties, and (iii) compare the performance of our properties and segments to those of our peers. Same store NOI and same store NOI - cash basis should not be considered as an alternative to net income or cash flow from operations and may not be comparable to similarly titled measures employed by other companies.


 
12
 
VORNADO REALTY TRUST
NON-GAAP RECONCILIATIONS - CONTINUED

Below are reconciliations of NOI at share - cash basis to same store NOI at share - cash basis for our New York segment, theMART, 555 California Street and other investments for the three months ended June 30, 2018 compared to June 30, 2017.
 
                                         
(Amounts in thousands)
Total
 
New York
 
theMART
 
555 California Street
 
Other
NOI at share - cash basis for the three months ended June 30, 2018
$
341,948

 
$
283,154

 
$
27,999

 
$
13,808

 
$
16,987

 
Less NOI at share - cash basis from:
                 
 
Acquisitions
(355
)
 
(291
)
 
(64
)
 

 

 
Dispositions
(242
)
 
(242
)
 

 

 

 
Development properties placed into and out of service
(13,686
)
 
(13,686
)
 

 

 

 
Lease termination income
(162
)
 

 
(162
)
 

 

 
Other non-operating income, net
(17,483
)
 
(496
)
 

 

 
(16,987
)
Same store NOI at share - cash basis for the three months ended June 30, 2018
$
310,020

 
$
268,439

 
$
27,773

 
$
13,808

 
$

                     
NOI at share - cash basis for the three months ended June 30, 2017
$
323,659

 
$
267,891

 
$
24,897

 
$
11,151

 
$
19,720

 
Less NOI at share - cash basis from:
                 
 
Acquisitions
106

 
(63
)
 
169

 

 

 
Dispositions
(297
)
 
(297
)
 

 

 

 
Development properties placed into and out of service
(12,340
)
 
(12,340
)
 

 

 

 
Lease termination income
(218
)
 
(218
)
 

 

 

 
Other non-operating income, net
(21,287
)
 
(1,567
)
 

 

 
(19,720
)
Same store NOI at share - cash basis for the three months ended June 30, 2017
$
289,623

 
$
253,406

 
$
25,066

 
$
11,151

 
$

                   
Increase in same store NOI at share - cash basis for the three months ended June 30, 2018 compared to June 30, 2017
$
20,397

 
$
15,033

 
$
2,707

 
$
2,657

 
$

                   
% increase in same store NOI at share - cash basis
7.0
%
 
5.9
%
(1)
10.8
%
 
23.8
%
 
%
____________________
(1)
Excluding Hotel Pennsylvania, same store NOI at share - cash basis increased by 6.3%.
 
13
 
VORNADO REALTY TRUST
NON-GAAP RECONCILIATIONS - CONTINUED

Below are reconciliations of NOI at share to same store NOI at share for our New York segment, theMART, 555 California Street and other investments for the three months ended June 30, 2018 compared to March 31, 2018.
 
                                         
(Amounts in thousands)
Total
 
New York
 
theMART
 
555 California Street
 
Other
NOI at share for the three months ended June 30, 2018
$
354,429

 
$
295,867

 
$
27,816

 
$
13,660

 
$
17,086

 
Less NOI at share from:
                 
 
Acquisitions
(288
)
 
(224
)
 
(64
)
 

 

 
Dispositions
(310
)
 
(310
)
 

 

 

 
Development properties placed into and out of service
(12,794
)
 
(12,794
)
 

 

 

 
Lease termination income, net of straight-line and FAS 141 write-offs
1,941

 
1,984

 
(43
)
 

 

 
Other non-operating income, net
(17,583
)
 
(497
)
 

 

 
(17,086
)
Same store NOI at share for the three months ended June 30, 2018
$
325,395

 
$
284,026

 
$
27,709

 
$
13,660

 
$

                   
NOI at share for the three months ended March 31, 2018
$
349,036

 
$
288,596

 
$
26,875

 
$
13,511

 
$
20,054

 
Less NOI at share from:
                 
 
Acquisitions
(206
)
 
(121
)
 
(85
)
 

 

 
Dispositions
(54
)
 
(54
)
 

 

 

 
Development properties placed into and out of service
(11,654
)
 
(11,654
)
 

 

 

 
Lease termination income, net of straight-line and FAS 141 write-offs
(1,127
)
 
(1,127
)
 

 

 

 
Other non-operating income, net
(20,633
)
 
(579
)
 

 

 
(20,054
)
Same store NOI at share for the three months ended March 31, 2018
$
315,362

 
$
275,061

 
$
26,790

 
$
13,511

 
$

                   
Increase in same store NOI at share for the three months ended June 30, 2018 compared to March 31, 2018
$
10,033

 
$
8,965

 
$
919

 
$
149

 
$

                     
% increase in same store NOI at share
3.2
%
 
3.3
%
(1)
3.4
%
 
1.1
%
 
%
____________________
(1)
Excluding Hotel Pennsylvania, same store NOI at share decreased by 0.3%.
 
14
 
VORNADO REALTY TRUST
NON-GAAP RECONCILIATIONS - CONTINUED

Below are reconciliations of NOI at share - cash basis to same store NOI at share - cash basis for our New York segment, theMART, 555 California Street and other investments for the three months ended June 30, 2018 compared to March 31, 2018.
 
                                         
(Amounts in thousands)
Total
 
New York
 
theMART
 
555 California Street
 
Other
NOI at share - cash basis for the three months ended June 30, 2018
$
341,948

 
$
283,154

 
$
27,999

 
$
13,808

 
$
16,987

 
Less NOI at share - cash basis from:
                 
 
Acquisitions
(288
)
 
(224
)
 
(64
)
 

 

 
Dispositions
(242
)
 
(242
)
 

 

 

 
Development properties placed into and out of service
(13,686
)
 
(13,686
)
 

 

 

 
Lease termination income
(162
)
 

 
(162
)
 

 

 
Other non-operating income, net
(17,484
)
 
(497
)
 

 

 
(16,987
)
Same store NOI at share - cash basis for the three months ended June 30, 2018
$
310,086

 
$
268,505

 
$
27,773

 
$
13,808

 
$

                     
NOI at share - cash basis for the three months ended March 31, 2018
$
331,088

 
$
271,273

 
$
27,079

 
$
12,826

 
$
19,910

 
Less NOI at share - cash basis from:
                 
 
Acquisitions
(206
)
 
(121
)
 
(85
)
 

 

 
Dispositions
22

 
22

 

 

 

 
Development properties placed into and out of service
(12,808
)
 
(12,808
)
 

 

 

 
Lease termination income
(1,061
)
 
(1,061
)
 

 

 

 
Other non-operating income, net
(20,488
)
 
(578
)
 

 

 
(19,910
)
Same store NOI at share - cash basis for the three months ended March 31, 2018
$
296,547

 
$
256,727

 
$
26,994

 
$
12,826

 
$

                   
Increase in same store NOI at share - cash basis for the three months ended June 30, 2018 compared to March 31, 2018
$
13,539

 
$
11,778

 
$
779

 
$
982

 
$

                   
% increase in same store NOI at share - cash basis
4.6
%
 
4.6
%
(1)
2.9
%
 
7.7
%
 
%
____________________
(1)
Excluding Hotel Pennsylvania, same store NOI at share - cash basis increased by 0.7%.
 
15
 
VORNADO REALTY TRUST
NON-GAAP RECONCILIATIONS - CONTINUED

Below are reconciliations of NOI at share to same store NOI at share for our New York segment, theMART, 555 California Street and other investments for the six months ended June 30, 2018 compared to June 30, 2017.
 
                                         
(Amounts in thousands)
Total
 
New York
 
theMART
 
555 California Street
 
Other
NOI at share for the six months ended June 30, 2018
$
703,465

 
$
584,463

 
$
54,691

 
$
27,171

 
$
37,140

 
Less NOI at share from:
                 
 
Acquisitions
(938
)
 
(789
)
 
(149
)
 

 

 
Dispositions
(364
)
 
(364
)
 

 

 

 
Development properties placed into and out of service
(13,205
)
 
(13,205
)
 

 

 

 
Lease termination income, net of straight-line and FAS 141 write-offs
814

 
857

 
(43
)
 

 

 
Other non-operating income, net
(38,217
)
 
(1,077
)
 

 

 
(37,140
)
Same store NOI at share for the six months ended June 30, 2018
$
651,555

 
$
569,885

 
$
54,499

 
$
27,171

 
$

                   
NOI at share for the six months ended June 30, 2017
$
683,292

 
$
563,343

 
$
52,071

 
$
24,066

 
$
43,812

 
Less NOI at share from:
                 
 
Acquisitions
36

 
(164
)
 
200

 

 

 
Dispositions
(883
)
 
(883
)
 

 

 

 
Development properties placed into and out of service
(12,313
)
 
(12,313
)
 

 

 

 
Lease termination income, net of straight-line and FAS 141 write-offs
(825
)
 
(804
)
 
(21
)
 

 

 
Other non-operating income, net
(45,738
)
 
(1,926
)
 

 

 
(43,812
)
Same store NOI at share for the six months ended June 30, 2017
$
623,569

 
$
547,253

 
$
52,250

 
$
24,066

 
$

                   
Increase in same store NOI at share for the six months ended June 30, 2018 compared to June 30, 2017
$
27,986

 
$
22,632

 
$
2,249

 
$
3,105

 
$

                     
% increase in same store NOI at share
4.5
%
 
4.1
%
(1)
4.3
%
 
12.9
%
 
%
____________________
(1)
Excluding Hotel Pennsylvania, same store NOI at share increased by 4.2%.
 
16
 
VORNADO REALTY TRUST
NON-GAAP RECONCILIATIONS - CONTINUED

Below are reconciliations of NOI at share - cash basis to same store NOI at share - cash basis for our New York segment, theMART, 555 California Street and other investments for the six months ended June 30, 2018 compared to June 30, 2017.
 
                                         
(Amounts in thousands)
Total
 
New York
 
theMART
 
555 California Street
 
Other
NOI at share - cash basis for the six months ended June 30, 2018
$
673,036

 
$
554,427

 
$
55,078

 
$
26,634

 
$
36,897

 
Less NOI at share - cash basis from:
                 
 
Acquisitions
(639
)
 
(490
)
 
(149
)
 

 

 
Dispositions
(220
)
 
(220
)
 

 

 

 
Development properties placed into and out of service
(14,290
)
 
(14,290
)
 

 

 

 
Lease termination income
(1,223
)
 
(1,061
)
 
(162
)
 

 

 
Other non-operating income, net
(37,972
)
 
(1,075
)
 

 

 
(36,897
)
Same store NOI at share - cash basis for the six months ended June 30, 2018
$
618,692

 
$
537,291

 
$
54,767

 
$
26,634

 
$

                   
NOI at share - cash basis for the six months ended June 30, 2017
$
640,336

 
$
526,674

 
$
49,429

 
$
22,476

 
$
41,757

 
Less NOI at share - cash basis from:
                 
 
Acquisitions
137

 
(63
)
 
200

 

 

 
Dispositions
(665
)
 
(665
)
 

 

 

 
Development properties placed into and out of service
(12,234
)
 
(12,234
)
 

 

 

 
Lease termination income
(3,279
)
 
(3,248
)
 
(31
)
 

 

 
Other non-operating income, net
(44,356
)
 
(2,599
)
 

 

 
(41,757
)
Same store NOI at share - cash basis for the six months ended June 30, 2017
$
579,939

 
$
507,865

 
$
49,598

 
$
22,476

 
$

                   
Increase in same store NOI at share - cash basis for the six months ended June 30, 2018 compared to June 30, 2017
$
38,753

 
$
29,426

 
$
5,169

 
$
4,158

 
$

                     
% increase in same store NOI at share - cash basis
6.7
%
 
5.8
%
(1)
10.4
%
 
18.5
%
 
%
____________________
(1)
Excluding Hotel Pennsylvania, same store NOI at share increased by 5.8%.

 

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