Press Release

Contact:

Joseph Macnow
Work(212) 894-7000
April 30, 2018

Vornado Announces First Quarter 2018 Financial Results

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

Quarter Ended March 31, 2018 Financial Results

NET LOSS attributable to common shareholders for the quarter ended March 31, 2018 was $17.8 million, or $0.09 per diluted share compared to net income attributable to common shareholders of $47.8 million, or $0.25 per diluted share, for the prior year's quarter. Adjusting net (loss) income attributable to common shareholders for the items listed in the table below, net income attributable to common shareholders, as adjusted (non-GAAP) for the quarters ended March 31, 2018 and 2017 was $56.4 million and $46.9 million, or $0.30 and $0.25 per diluted share, respectively.

The following table reconciles our net (loss) 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 March 31,
 
2018
 
2017
Net (loss) income attributable to common shareholders
$
(17,841
)
 
$
47,752

Per diluted share
$
(0.09
)
 
$
0.25

 
 
 
 
Certain expense (income) items that impact net (loss) income attributable to common shareholders:
 
 
 
Decrease in fair value of marketable securities resulting from a new GAAP accounting standard effective January 1, 2018
$
34,660

 
$

Our share of potential additional New York City transfer taxes based on a Tax Tribunal interpretation which Vornado is appealing
23,503

 

Preferred share issuance costs
14,486

 

666 Fifth Avenue Office Condominium (49.5% interest)
3,492

 
10,197

Our share of real estate fund investments (excluding our $4,252 share of One Park Avenue potential additional transfer taxes and reduction in carried interest)
(814
)
 
3,235

Loss (income) from discontinued operations (primarily related to JBG SMITH Properties operating results and transaction costs through July 17, 2017 spin-off)
363

 
(15,318
)
Other
3,420

 
949

 
79,110

 
(937
)
Noncontrolling interests' share of above adjustments
(4,881
)
 
58

Total of certain expense (income) items that impact net (loss) income attributable to common shareholders
$
74,229

 
$
(879
)
 
 
 
 
Net income attributable to common shareholders, as adjusted (non-GAAP)
$
56,388

 
$
46,873

Per diluted share (non-GAAP)
$
0.30

 
$
0.25



 

 

1

 
FUNDS FROM OPERATIONS ("FFO") attributable to common shareholders plus assumed conversions (non-GAAP) for the quarter ended March 31, 2018 was $102.5 million, or $0.54 per diluted share, compared to $205.7 million, or $1.08 per diluted share, for the prior year's quarter.  Adjusting FFO attributable to common shareholders plus assumed conversions for the items listed in the table below, FFO attributable to common shareholders plus assumed conversions, as adjusted (non-GAAP) for the quarters ended March 31, 2018 and 2017 was $173.8 million and $160.1 million, or $0.91 and $0.84 per diluted share, respectively.

The following table reconciles our FFO attributable to common shareholders plus assumed conversions (non-GAAP) to FFO, as adjusted attributable to common shareholders plus assumed conversions (non-GAAP):
               
(Amounts in thousands, except per share amounts)
For the Three Months Ended March 31,
 
2018
 
2017
FFO attributable to common shareholders plus assumed conversions (non-GAAP)(1)
$
102,479

 
$
205,729

Per diluted share (non-GAAP)
$
0.54

 
$
1.08

 
 
 
 
Certain expense (income) items that impact FFO attributable to common shareholders plus assumed conversions:
 
 
 
Decrease in fair value of marketable securities resulting from a new GAAP accounting standard effective January 1, 2018
$
34,660

 
$

Our share of potential additional New York City transfer taxes based on a Tax Tribunal interpretation which Vornado is appealing
23,503

 

Preferred share issuance costs
14,486

 

Our share of real estate fund investments (excluding our $4,252 share of One Park Avenue potential additional transfer taxes and reduction in carried interest)
(814
)
 
3,235

FFO from discontinued operations (primarily related to JBG SMITH Properties operating results and transaction costs through July 17, 2017 spin-off)
363

 
(48,093
)
666 Fifth Avenue Office Condominium (49.5% interest)
137

 
(3,553
)
Other
3,721

 
(249
)
 
76,056

 
(48,660
)
Noncontrolling interests' share of above adjustments
(4,693
)
 
3,036

Total of certain expense (income) items that impact FFO attributable to common shareholders plus assumed conversions
$
71,363

 
$
(45,624
)
 
 
 
 
FFO attributable to common shareholders plus assumed conversions, as adjusted (non-GAAP)
$
173,842

 
$
160,105

Per diluted share (non-GAAP)
$
0.91

 
$
0.84

____________________________________________________________
   
(1)
See page 9 for a reconciliation of our net (loss) income attributable to common shareholders to FFO attributable to common shareholders plus assumed conversions (non-GAAP) for the three months ended March 31, 2018 and 2017.

 

2


 
Acquisition Activity

On February 9, 2018, we acquired 537 West 26th Street, a 14,000 square foot commercial property adjacent to our 260 Eleventh Avenue office property and 55,000 square feet of additional zoning air rights, for $44,000,000.


Disposition Activity

On January 17, 2018, Vornado Capital Partners Real Estate Fund (the "Fund") completed the sale of the retail condominium at 11 East 68th Street, a property located on Madison Avenue and 68th Street, for $82,000,000. From the inception of this investment through its disposition, the Fund realized a $46,259,000 net gain.


Financing Activities

On January 4 and 11, 2018, we redeemed all of the outstanding 6.625% Series G and Series I cumulative redeemable preferred shares at their redemption price of $25.00 per share, or $470,000,000 in the aggregate, plus accrued and unpaid dividends through the date of redemption, and expensed $14,486,000 of previously capitalized issuance costs.

On January 5, 2018, we completed a $100,000,000 refinancing of 33-00 Northern Boulevard (Center Building), a 471,000 square foot office building in Long Island City, New York. The seven-year loan is at LIBOR plus 1.80%, which was swapped to a fixed rate of 4.14%. We realized net proceeds of approximately $37,200,000 after repayment of the existing 4.43% $59,800,000 mortgage and closing costs.

 

First Quarter Leasing Activity:

424,000 square feet of New York Office space (359,000 square feet at share) at an initial rent of $82.07 per square foot and a weighted average term of 10.5 years.  The GAAP and cash mark-to-markets on the 285,000 square feet of second generation space were positive 62.5% and 50.3%, respectively. Excluding a 77,000 square foot lease at 770 Broadway, the GAAP and cash mark-to-markets were positive 20.2% and 12.5%, respectively. Tenant improvements and leasing commissions were $9.33 per square foot per annum, or 11.4% of initial rent.
   
77,000 square feet of New York Retail space (all at share and all second generation) at an initial rent of $212.03 per square foot and a weighted average term of 4.5 years.  The GAAP and cash mark-to-markets were negative 12.3% and 20.1%, respectively. Excluding a 43,000 square foot lease at 435 Seventh Avenue, the GAAP and cash mark-to-markets were positive 19.2% and 4.9%, respectively. Tenant improvements and leasing commissions were $14.06 per square foot per annum, or 6.6% of initial rent.
   
119,000 square feet at theMART (all at share) at an initial rent of $50.39 per square foot and a weighted average term of 5.7 years.  The GAAP and cash mark-to-markets on the 113,000 square feet of second generation space were positive 36.6% and 28.0%, respectively. Tenant improvements and leasing commissions were $4.19 per square foot per annum, or 8.3% of initial rent.
   
89,000 square feet at 555 California Street (62,000 square feet at share) at an initial rent of $85.89 per square foot and a weighted average term of 7.1 years.  The GAAP and cash mark-to-markets on the 30,000 square feet of second generation space were positive 39.3% and 17.0%, respectively. Tenant improvements and leasing commissions were $11.64 per square foot per annum, or 13.6% of initial rent.

3

Same Store Net Operating Income ("NOI"):

The percentage increase (decrease) in same store NOI and same store NOI - cash basis of our New York segment, theMART and 555 California Street are summarized below.
                   
 
 
New York
 
theMART
 
555 California Street
Same store NOI at share % increase (decrease):
 
 
 
 
 
 
Three months ended March 31, 2018 compared to March 31, 2017
4.0
 % (1)
  
3.4
%
 
12.3
%
 
Three months ended March 31, 2018 compared to December 31, 2017
(5.6
)% (1)
  
10.7
% (2)
  
12.6
%
 
 
 
 
 
 
 
Same store NOI at share - cash basis % increase (decrease):
 
 
 
 
 
 
Three months ended March 31, 2018 compared to March 31, 2017
5.6
 % (1)
  
10.0
%
 
13.3
%
 
Three months ended March 31, 2018 compared to December 31, 2017
(4.5
)% (1)
  
10.9
% (2)
  
7.6
%
____________________
       
 
 
Increase (Decrease)
(1)
 Excluding Hotel Pennsylvania - same store NOI at share % increase (decrease):
 
 
 Three months ended March 31, 2018 compared to March 31, 2017
3.7
 %
 
 Three months ended March 31, 2018 compared to December 31, 2017
(2.2
)%
 
 
 
 
 Excluding Hotel Pennsylvania - same store NOI at share - cash basis % increase (decrease):
 
 
 Three months ended March 31, 2018 compared to March 31, 2017
5.3
 %
 
 Three months ended March 31, 2018 compared to December 31, 2017
(0.8
)%
(2)
Excluding tradeshows seasonality, same store NOI at share and same store NOI at share - cash basis decreased by 0.7% and 0.5%, respectively.

 

4


NOI:

The elements of our New York and Other NOI for the three months ended March 31, 2018, March 31, 2017 and December 31, 2017 are summarized below.

                       
 
For the Three Months Ended
(Amounts in thousands)
March 31,
 
December 31, 2017
 
2018
 
2017
 
New York:
 
 
 
 
 
Office
$
187,156

 
$
174,724

 
$
189,481

Retail
87,909

 
89,048

 
90,853

Residential
6,141

 
6,278

 
5,920

Alexander's
11,575

 
11,743

 
11,656

Hotel Pennsylvania
(4,185
)
 
(4,638
)
 
6,318

Total New York
288,596

 
277,155

 
304,228

 
 
 
 
 
 
Other:
 
 
 
 
 
theMART
26,875

 
25,889

 
24,249

555 California Street
13,511

 
12,034

 
12,003

Other investments
20,054

 
22,080

 
23,377

Total Other
60,440

 
60,003

 
59,629

 
 
 
 
 
 
NOI at share
$
349,036

 
$
337,158

 
$
363,857



NOI - Cash Basis:

The elements of our New York and Other NOI - cash basis for the three months ended March 31, 2018, March 31, 2017 and December 31, 2017 are summarized below.

                       
 
For the Three Months Ended
(Amounts in thousands)
March 31,
 
December 31, 2017
 
2018
 
2017
 
New York:
 
 
 
 
 
Office
$
178,199

 
$
166,339

 
$
175,787

Retail
79,589

 
79,419

 
83,320

Residential
5,599

 
5,542

 
5,325

Alexander's
12,039

 
12,088

 
12,004

Hotel Pennsylvania
(4,153
)
 
(4,605
)
 
6,351

Total New York
271,273

 
258,783

 
282,787

 
 
 
 
 
 
Other:
 
 
 
 
 
theMART
27,079

 
24,532

 
24,396

555 California Street
12,826

 
11,325

 
11,916

Other investments
19,910

 
22,037

 
23,179

Total Other
59,815

 
57,894

 
59,491

 
 
 
 
 
 
NOI at share - cash basis
$
331,088

 
$
316,677

 
$
342,278

 

5

 
Development/Redevelopment as of March 31, 2018
                                               
(in thousands, except square feet)
 
 
 
 
 
 
(At Share)
 
 
 
 
 
 
 
 
 
Full
Quarter
Stabilized
Operations
 
 
 
 
Property
Rentable
Sq. Ft.
 
Excluding Land Costs
 
 
 
 
 
 
 
Initial
Occupancy
 
Current Projects:
 
Segment
 
 
Incremental
Budget
 
Amount
Expended
 
 
 
%
Complete
 
Start
 
 
220 Central Park South - residential condominiums
 
Other
 
397,000

 
$
1,400,000

 
$
970,000
 (1)
 
  
 
69.3%
 
Q3 2012
 
N/A
 
N/A
Moynihan Office Building - (50.1% interest) (2)
 
New York
 
850,000

 
400,000

 
30,375

 
 
 
7.6%
 
Q2 2017
 
Q3 2020
 
Q2 2022
One Penn Plaza - renovation (3)
 
New York
 
2,530,000

 
200,000

 
2,460

 
 
 
1.2%
 
Q4 2018
 
N/A
 
N/A
61 Ninth Avenue - office/retail (45.1% interest) (4)
 
New York
 
170,000

 
69,000

 
51,826

 
 
 
75.1%
 
Q1 2016
 
Q2 2018
 
Q2 2019
512 West 22nd Street - office/retail (55.0% interest)
 
New York
 
173,000

 
72,000

 
44,521
 (5)
 
  
 
61.8%
 
Q4 2015
 
Q3 2018
 
Q1 2020
345 Montgomery Street (555 California Street) (70.0% interest)
 
Other
 
64,000

 
32,000

 
3,157
 (6)
 
  
 
9.9%
 
Q1 2018
 
Q3 2019
 
Q3 2020
606 Broadway - office/retail (50.0% interest)
 
New York
 
34,000

 
30,000

 
19,195
 (7)
 
  
 
64.0%
 
Q2 2016
 
Q4 2018
 
Q2 2020
825 Seventh Avenue - office (50.0% interest)
 
New York
 
165,000

 
15,000

 
1,103

 
 
 
7.4%
 
Q2 2018
 
Q1 2020
 
Q1 2021
Total current projects
 
 
 
 
 
 

 
$
1,122,637

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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
 
300,000

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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, May 1, 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 46816083. A telephonic replay of the conference call will be available from 1:00 p.m. ET on May 1, 2018 through May 31, 2018. To access the replay, please dial 888-843-7419 and enter the passcode 46816083#. 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.

Certain statements contained herein may constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. For a discussion of factors that could materially affect the outcome of our forward-looking statements and our future results and financial condition, see “Risk Factors” in Part I, Item 1A, of our Annual Report on Form 10-K for the year ended December 31, 2017. Such factors include, among others, risks associated with the timing of and costs associated with property improvements, financing commitments and general competitive factors.

 

6

VORNADO REALTY TRUST
CONSOLIDATED BALANCE SHEETS
               
 
As of
(Amounts in thousands, except unit, share, and per share amounts)
March 31, 2018
 
December 31, 2017
ASSETS
 
 
 
Real estate, at cost:
 
 
 
Land
$
3,170,158

 
$
3,143,648

Buildings and improvements
9,946,225

 
9,898,605

Development costs and construction in progress
1,705,244

 
1,615,101

Leasehold improvements and equipment
104,710

 
98,941

Total
14,926,337

 
14,756,295

Less accumulated depreciation and amortization
(2,962,983
)
 
(2,885,283
)
Real estate, net
11,963,354

 
11,871,012

Cash and cash equivalents
1,327,384

 
1,817,655

Restricted cash
90,684

 
97,157

Marketable securities
149,766

 
182,752

Tenant and other receivables, net of allowance for doubtful accounts of $5,171 and $5,526
64,387

 
58,700

Investments in partially owned entities
1,033,228

 
1,056,829

Real estate fund investments
336,552

 
354,804

Receivable arising from the straight-lining of rents, net of allowance of $739 and $954
934,535

 
926,711

Deferred leasing costs, net of accumulated amortization of $194,078 and $191,827
405,209

 
403,492

Identified intangible assets, net of accumulated amortization of $157,062 and $150,837
152,834

 
159,260

Assets related to discontinued operations
275

 
1,357

Other assets
406,275

 
468,205

 
$
16,864,483

 
$
17,397,934

LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND EQUITY
 
 
 
Mortgages payable, net
$
8,102,238

 
$
8,137,139

Senior unsecured notes, net
843,125

 
843,614

Unsecured term loan, net
749,114

 
748,734

Unsecured revolving credit facilities
80,000

 

Accounts payable and accrued expenses
431,094

 
415,794

Deferred revenue
200,648

 
227,069

Deferred compensation plan
109,525

 
109,177

Liabilities related to discontinued operations
1,176

 
3,620

Preferred shares redeemed on January 4 and 11, 2018

 
455,514

Other liabilities
465,659

 
464,635

Total liabilities
10,982,579

 
11,405,296

Commitments and contingencies
 
 
 
Redeemable noncontrolling interests:
 
 
 
Class A units - 12,653,821 and 12,528,899 units outstanding
851,598

 
979,509

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

 
5,428

Total redeemable noncontrolling interests
857,026

 
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 190,169,168 and 189,983,858 shares
7,584

 
7,577

Additional capital
7,629,013

 
7,492,658

Earnings less than distributions
(4,198,088
)
 
(4,183,253
)
Accumulated other comprehensive income
30,258

 
128,682

Total Vornado shareholders' equity
4,360,092

 
4,337,652

Noncontrolling interests in consolidated subsidiaries
664,786

 
670,049

Total equity
5,024,878

 
5,007,701

 
$
16,864,483

 
$
17,397,934

 

7

 

 
VORNADO REALTY TRUST
OPERATING RESULTS

               
(Amounts in thousands, except per share amounts)
For the Three Months Ended March 31,
 
2018
 
2017
Revenues
$
536,437

 
$
508,058

 
 
 
 
Income from continuing operations
$
645

 
$
58,529

(Loss) income from discontinued operations
(363
)
 
15,318

Net income
282

 
73,847

Less net loss (income) attributable to noncontrolling interests in:
 
 
 
Consolidated subsidiaries
8,274

 
(6,737
)
Operating Partnership
1,124

 
(3,229
)
Net income attributable to Vornado
9,680

 
63,881

Preferred share dividends
(13,035
)
 
(16,129
)
Preferred share issuance costs
(14,486
)
 

Net (loss) income attributable to common shareholders
$
(17,841
)
 
$
47,752

 
 
 
 
(Loss) income per common share - Basic:
 
 
 
(Loss) income from continuing operations, net
$
(0.09
)
 
$
0.18

Income from discontinued operations, net

 
0.07

Net (loss) income per common share
$
(0.09
)
 
$
0.25

Weighted average shares outstanding
190,081

 
189,210

 
 
 
 
(Loss) income per common share - Diluted:
 
 
 
(Loss) income from continuing operations, net
$
(0.09
)
 
$
0.18

Income from discontinued operations, net

 
0.07

Net (loss) income per common share
$
(0.09
)
 
$
0.25

Weighted average shares outstanding
190,081

 
190,372

 
 
 
 
FFO attributable to common shareholders plus assumed conversions (non-GAAP)
$
102,479

 
$
205,729

Per diluted share (non-GAAP)
$
0.54

 
$
1.08

 
 
 
 
FFO attributable to common shareholders plus assumed conversions, as adjusted (non-GAAP)
$
173,842

 
$
160,105

Per diluted share (non-GAAP)
$
0.91

 
$
0.84

 
 
 
 
Weighted average shares used in determining FFO per diluted share
191,057

 
190,412


####

8

 

 
VORNADO REALTY TRUST
NON-GAAP RECONCILIATIONS

The following table reconciles net (loss) 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 March 31,
 
2018
 
2017
Net (loss) income attributable to common shareholders
$
(17,841
)
 
$
47,752

Per diluted share
$
(0.09
)
 
$
0.25

 
 
 
 
FFO adjustments:
 

 
 

Depreciation and amortization of real property
$
100,410

 
$
130,469

Net gains on sale of real estate

 
(2,267
)
Proportionate share of adjustments to equity in net (loss) income of partially owned entities to arrive at FFO:
 
 
 
Depreciation and amortization of real property
28,106

 
39,074

Net gains on sale of real estate
(305
)
 
(1,853
)
Real estate impairment losses
4

 
3,051

 
128,215

 
168,474

Noncontrolling interests' share of above adjustments
(7,911
)
 
(10,517
)
FFO adjustments, net
$
120,304

 
$
157,957

 
 
 
 
FFO attributable to common shareholders (non-GAAP)
$
102,463

 
$
205,709

Convertible preferred share dividends
16

 
20

FFO attributable to common shareholders plus assumed conversions (non-GAAP)
$
102,479

 
$
205,729

Per diluted share (non-GAAP)
$
0.54

 
$
1.08

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 (loss) 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 2 of this press release.

 

9

 

 
VORNADO REALTY TRUST
NON-GAAP RECONCILIATIONS - CONTINUED

Below is a reconciliation of net income to NOI by segment for the three months ended March 31, 2018, March 31, 2017 and December 31, 2017.

                       
 
For the Three Months Ended
(Amounts in thousands)
March 31,
 
December 31, 2017
 
2018
 
2017
 
Net income
$
282

 
$
73,847

 
$
53,551

 
 
 
 
 
 
Deduct:
 
 
 
 
 
Loss (income) from partially owned entities
9,904

 
(1,358
)
 
(9,622
)
Loss (income) from real estate fund investments
8,807

 
(268
)
 
(4,889
)
Interest and other investment loss (income), net
24,384

 
(6,695
)
 
(8,294
)
Net gains on disposition of wholly owned and partially owned assets

 
(501
)
 

Loss (income) from discontinued operations
363

 
(15,318
)
 
(1,273
)
NOI attributable to noncontrolling interests in consolidated subsidiaries
(17,312
)
 
(16,338
)
 
(16,533
)
 
 
 
 
 
 
Add:
 
 
 
 
 
Depreciation and amortization expense
108,686

 
105,128

 
114,166

General and administrative expense
43,633

 
47,237

 
35,139

Transaction related costs and other
13,156

 
752

 
703

NOI from partially owned entities
67,513

 
66,097

 
69,175

Interest and debt expense
88,166

 
82,724

 
93,073

Income tax expense
1,454

 
1,851

 
38,661

NOI at share
349,036

 
337,158

 
363,857

Non cash adjustments for straight-line rents, amortization of acquired below-market leases, net and other
(17,948
)
 
(20,481
)
 
(21,579
)
NOI at share - cash basis
$
331,088

 
$
316,677

 
$
342,278


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.

 

10

 

 
VORNADO REALTY TRUST
NON-GAAP RECONCILIATIONS - CONTINUED

Below are reconciliations of NOI to same store NOI for our New York segment, theMART and 555 California Street for the three months ended March 31, 2018 compared to March 31, 2017.

                         
(Amounts in thousands)
New York
 
theMART
 
555 California Street
NOI at share for the three months ended March 31, 2018
$
288,596

 
$
26,875

 
$
13,511

 
Less NOI at share from:
 
 
 
 
 
 
Acquisitions
(350
)
 
(85
)
 

 
Dispositions
40

 

 

 
Development properties placed into and out of service
(412
)
 

 

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

 

 
Other non-operating income, net
(579
)
 

 

Same store NOI at share for the three months ended March 31, 2018
$
286,168

 
$
26,790

 
$
13,511

 
 
 
 
 
 
NOI at share for the three months ended March 31, 2017
$
277,155

 
$
25,889

 
$
12,034

 
Less NOI at share from:
 
 
 
 
 
 
Acquisitions

 
31

 

 
Dispositions
(228
)
 

 

 
Development properties placed into and out of service
16

 

 

 
Lease termination income, net of straight-line and FAS 141 adjustments
(638
)
 
(20
)
 

 
Other non-operating income, net
(1,084
)
 

 

Same store NOI at share for the three months ended March 31, 2017
$
275,221

 
$
25,900

 
$
12,034

 
 
 
 
 
 
Increase in same store NOI at share for the three months ended March 31, 2018 compared to March 31, 2017
$
10,947

 
$
890

 
$
1,477

 
 
 
 
 
 
 
% increase in same store NOI at share
4.0
%
(1)
3.4
%
 
12.3
%
____________________
(1)
Excluding Hotel Pennsylvania, same store NOI at share increased by 3.7%.


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.


11

 

 
VORNADO REALTY TRUST
NON-GAAP RECONCILIATIONS - CONTINUED

Below are reconciliations of NOI - cash basis to same store NOI - cash basis for our New York segment, theMART and 555 California Street for the three months ended March 31, 2018 compared to March 31, 2017.

                         
(Amounts in thousands)
New York
 
theMART
 
555 California
Street
NOI at share - cash basis for the three months ended March 31, 2018
$
271,273

 
$
27,079

 
$
12,826

 
Less NOI at share - cash basis from:
 
 
 
 
 
 
Acquisitions
(200
)
 
(85
)
 

 
Dispositions
40

 

 

 
Development properties placed into and out of service
(603
)
 

 

 
Lease termination income
(1,061
)
 

 

 
Other non-operating income, net
(579
)
 

 

Same store NOI at share - cash basis for the three months ended March 31, 2018
$
268,870

 
$
26,994

 
$
12,826

 
 
 
 
 
 
 
NOI at share - cash basis for the three months ended March 31, 2017
$
258,783

 
$
24,532

 
$
11,325

 
Less NOI at share - cash basis from:
 
 
 
 
 
 
Acquisitions

 
31

 

 
Dispositions
(228
)
 

 

 
Development properties placed into and out of service
106

 

 

 
Lease termination income
(3,030
)
 
(31
)
 

 
Other non-operating income, net
(1,029
)
 

 

Same store NOI at share - cash basis for the three months ended March 31, 2017
$
254,602

 
$
24,532

 
$
11,325

 
 
 
 
 
 
Increase in same store NOI at share - cash basis for the three months ended March 31, 2018 compared to March 31, 2017
$
14,268

 
$
2,462

 
$
1,501

 
 
 
 
 
 
% increase in same store NOI at share - cash basis
5.6
%
(1)
10.0
%
 
13.3
%
____________________
(1)
Excluding Hotel Pennsylvania, same store NOI at share - cash basis increased by 5.3%.


12

 

 
VORNADO REALTY TRUST
NON-GAAP RECONCILIATIONS - CONTINUED

Below are reconciliations of NOI to same store NOI for our New York segment, theMART and 555 California Street for the three months ended March 31, 2018 compared to December 31, 2017.

                         
(Amounts in thousands)
New York
 
theMART
 
555 California
Street
NOI at share for the three months ended March 31, 2018
$
288,596

 
$
26,875

 
$
13,511

 
Less NOI at share from:
 
 
 
 
 
 
Acquisitions
(109
)
 
(85
)
 

 
Dispositions
40

 

 

 
Development properties placed into and out of service
(412
)
 

 

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

 

 
Other non-operating income, net
(579
)
 

 

Same store NOI at share for the three months ended March 31, 2018
$
286,409

 
$
26,790

 
$
13,511

 
 
 
 
 
 
NOI at share for the three months ended December 31, 2017
$
304,228

 
$
24,249

 
$
12,003

 
Less NOI at share from:
 
 
 
 
 
 
Acquisitions
2

 
(46
)
 

 
Dispositions
(8
)
 

 

 
Development properties placed into and out of service
309

 

 

 
Lease termination income, net of straight-line and FAS 141 adjustments
(984
)
 

 

 
Other non-operating income, net
(16
)
 

 

Same store NOI at share for the three months ended December 31, 2017
$
303,531

 
$
24,203

 
$
12,003

 
 
 
 
 
 
(Decrease) increase in same store NOI at share for the three months ended March 31, 2018 compared to December 31, 2017
$
(17,122
)
 
$
2,587

 
$
1,508

 
 
 
 
 
 
 
% (decrease) increase in same store NOI at share
(5.6
)%
(1)
10.7
%
(2)
12.6
%
____________________
(1)
Excluding Hotel Pennsylvania, same store NOI at share decreased by 2.2%.
(2)
Excluding tradeshows seasonality, same store NOI at share decreased by 0.7%.



13

 

 
VORNADO REALTY TRUST
NON-GAAP RECONCILIATIONS - CONTINUED

Below are reconciliations of NOI - cash basis to same store NOI - cash basis for our New York segment, theMART and 555 California Street for the three months ended March 31, 2018 compared to December 31, 2017.
                         
(Amounts in thousands)
New York
 
theMART
 
555 California Street
NOI at share - cash basis for the three months ended March 31, 2018
$
271,273

 
$
27,079

 
$
12,826

 
Less NOI at share - cash basis from:
 
 
 
 
 
 
Acquisitions
(109
)
 
(85
)
 

 
Dispositions
40

 

 

 
Development properties placed into and out of service
(603
)
 

 

 
Lease termination income
(1,061
)
 

 

 
Other non-operating income, net
(579
)
 

 

Same store NOI at share - cash basis for the three months ended March 31, 2018
$
268,961

 
$
26,994

 
$
12,826

 
 
 
 
 
 
 
NOI at share - cash basis for the three months ended December 31, 2017
$
282,787

 
$
24,396

 
$
11,916

 
Less NOI at share - cash basis from:
 
 
 
 
 
 
Acquisitions
2

 
(46
)
 

 
Dispositions
(8
)
 

 

 
Development properties placed into and out of service
253

 

 

 
Lease termination income
(1,393
)
 

 

 
Other non-operating income, net
(16
)
 

 

Same store NOI at share - cash basis for the three months ended December 31, 2017
$
281,625

 
$
24,350

 
$
11,916

 
 
 
 
 
 
(Decrease) increase in same store NOI at share - cash basis for the three months ended March 31, 2018 compared to December 31, 2017
$
(12,664
)
 
$
2,644

 
$
910

 
 
 
 
 
 
% (decrease) increase in same store NOI at share - cash basis
(4.5
)%
(1)
10.9
%
(2)
7.6
%
____________________
(1)
Excluding Hotel Pennsylvania, same store NOI at share - cash basis decreased by 0.8%.
(2)
Excluding tradeshows seasonality, same store NOI at share - cash basis decreased by 0.5%.

 

14