Press Release

Contact:

Joseph Macnow
Work(212) 894-7000
October 29, 2018
Vornado Announces Third Quarter 2018 Financial Results

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

Quarter Ended September 30, 2018 Financial Results
 
NET INCOME attributable to common shareholders for the quarter ended September 30, 2018 was $190.6 million, or $1.00 per diluted share, compared to a loss of $29.0 million, or $0.15 per diluted share, for the prior year's quarter. Adjusting net income (loss) attributable to common shareholders for the items that impact the comparability of period to period net income (loss) listed in the table on page 2, net income attributable to common shareholders, as adjusted (non-GAAP) for the quarters ended September 30, 2018 and 2017 was $66.2 million and $73.0 million, or $0.35 and $0.38 per diluted share, respectively.

FUNDS FROM OPERATIONS ("FFO") attributable to common shareholders plus assumed conversions (non-GAAP) for the quarter ended September 30, 2018 was $182.5 million, or $0.95 per diluted share, compared to $100.2 million, or $0.52 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 September 30, 2018 and 2017 was $185.6 million and $185.1 million, or $0.97 and $0.97 per diluted share, respectively.

Nine Months Ended September 30, 2018 Financial Results

NET INCOME attributable to common shareholders for the nine months ended September 30, 2018 was $284.3 million, or $1.49 per diluted share, compared to $134.7 million, or $0.71 per diluted share, for the nine months ended September 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 page 2, net income attributable to common shareholders, as adjusted (non-GAAP) for the nine months ended September 30, 2018 and 2017 was $192.9 million and $187.3 million, or $1.01 and $0.98 per diluted share, respectively.

FFO attributable to common shareholders plus assumed conversions (non-GAAP) for the nine months ended September 30, 2018 was $494.9 million, or $2.59 per diluted share, compared to $564.4 million, or $2.95 per diluted share, for the nine months ended September 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 nine months ended September 30, 2018 and 2017 was $547.5 million and $525.5 million, or $2.86 and $2.75 per diluted share, respectively.
 
1
 
The following table reconciles our net income (loss) 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
September 30,
 
For the Nine Months Ended
September 30,
 
2018
 
2017
 
2018
 
2017
Net income (loss) attributable to common shareholders
$
190,645

 
$
(29,026
)
 
$
284,338

 
$
134,698

Per diluted share
$
1.00

 
$
(0.15
)
 
$
1.49

 
$
0.71

 
 
 
 
 
 
 
 
Certain (income) expense items that impact net income (loss) attributable to common shareholders:
 
 
 
 
 
 
 
Net gain on sale of our ownership interests in 666 Fifth Avenue Office Condominium
$
(134,032
)
 
$

 
$
(134,032
)
 
$

Net gain on the repayment of our loan investment in 666 Fifth Avenue Office Condominium
(7,308
)
 

 
(7,308
)
 

Decrease in fair value of marketable securities (including our share of partially owned entities)
7,966

 

 
26,602

 

Net gains on sale of real estate (including our share of partially owned entities)
(3,350
)
 
(1,522
)
 
(28,104
)
 
(20,981
)
Our share of loss (income) 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 nine months ended September 30, 2018)
748

 
7,794

 
(617
)
 
11,333

Loss from discontinued operations and sold properties (primarily related to JBG SMITH Properties operating results and transaction costs through July 17, 2017 spin-off)
42

 
53,739

 
4,886

 
40,542

Impairment loss on investment in Pennsylvania Real Estate Investment Trust ("PREIT")

 
44,465

 

 
44,465

Net gain resulting from Urban Edge Properties ("UE") operating partnership unit issuances

 
(5,200
)
 

 
(21,100
)
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

 

Net gain on repayment of our Suffolk Downs JV debt investments

 

 

 
(11,373
)
Other
3,207

 
9,515

 
3,133

 
13,333

 
(132,727
)
 
108,791

 
(97,451
)
 
56,219

Noncontrolling interests' share of above adjustments
8,242

 
(6,767
)
 
6,061

 
(3,624
)
Total of certain (income) expense items that impact net income (loss) attributable to common shareholders
$
(124,485
)
 
$
102,024

 
$
(91,390
)
 
$
52,595

 
 
 
 
 
 
 
 
Net income attributable to common shareholders, as adjusted (non-GAAP)
$
66,160

 
$
72,998

 
$
192,948

 
$
187,293

Per diluted share (non-GAAP)
$
0.35

 
$
0.38

 
$
1.01

 
$
0.98

 
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
September 30,
 
For the Nine Months Ended
September 30,
 
2018
 
2017
 
2018
 
2017
FFO attributable to common shareholders plus assumed conversions (non-GAAP)(1)
$
182,516

 
$
100,178

 
$
494,941

 
$
564,431

Per diluted share (non-GAAP)
$
0.95

 
$
0.52

 
$
2.59

 
$
2.95

 
 
 
 
 
 
 
 
Certain expense (income) items that impact FFO attributable to common shareholders plus assumed conversions:
 
 
 
 
 
 
 
Decrease in fair value of marketable securities (including our share of partially owned entities)
$
7,966

 
$

 
$
26,602

 
$

Net gain on the repayment of our loan investment in 666 Fifth Avenue Office Condominium
(7,308
)
 

 
(7,308
)
 

FFO from discontinued operations and sold properties (primarily related to JBG SMITH Properties operating results and transaction costs through July 17, 2017 spin-off)
(1,152
)
 
38,771

 
(3,297
)
 
(68,843
)
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 nine months ended September 30, 2018)
748

 
7,794

 
(617
)
 
11,333

Impairment loss on investment in PREIT

 
44,465

 

 
44,465

Net gain resulting from UE operating partnership unit issuances

 
(5,200
)
 

 
(21,100
)
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

 

Net gain on repayment of our Suffolk Downs JV debt investments

 

 

 
(11,373
)
Other
3,071

 
4,701

 
2,751

 
3,986

 
3,325

 
90,531

 
56,120

 
(41,532
)
Noncontrolling interests' share of above adjustments
(206
)
 
(5,583
)
 
(3,514
)
 
2,579

Total of certain expense (income) items that impact FFO attributable to common shareholders plus assumed conversions, net
$
3,119

 
$
84,948

 
$
52,606

 
$
(38,953
)
 
 
 
 
 
 
 
 
FFO attributable to common shareholders plus assumed conversions, as adjusted (non-GAAP)
$
185,635

 
$
185,126

 
$
547,547

 
$
525,478

Per diluted share (non-GAAP)
$
0.97

 
$
0.97

 
$
2.86

 
$
2.75

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

1535 Broadway

On July 30, 2012, we entered into a lease with Host Hotels & Resorts, Inc. (NYSE: HST) ("Host"), under which we redeveloped the retail and signage components of the Marriott Times Square Hotel. We accounted for this lease as a "capital lease" and recorded a $240,000,000 capital lease asset and liability. On September 21, 2018, we acquired the retail condominium from Host for $442,000,000 (inclusive of the $240,000,000 capital lease liability). The original lease transaction provided that we would become the 100% owner through a put/call arrangement, based on a pre-negotiated formula. This transaction satisfies the put/call arrangement. Our 100% fee interest includes 45,000 square feet of retail, the 1,611 seat Marquis Theater and the largest digital sign in New York with a 330 linear foot, 25,000 square foot display.

Disposition Activity

666 Fifth Avenue Office Condominium

On August 3, 2018, we completed the sale of our 49.5% interests in the 666 Fifth Avenue Office Condominium. We received net proceeds of $120,000,000 and recognized a financial statement gain of $134,032,000 which is included in "net gains on disposition of wholly owned and partially owned assets" on our consolidated statements of income for the three and nine months ended September 30, 2018. The gain for tax purposes was approximately $244,000,000. We continue to own all of the 666 Fifth Avenue Retail Condominium encompassing the Uniqlo, Tissot and Hollister stores with 125 linear feet of frontage on Fifth Avenue between 52nd and 53rd Street.

Concurrently with the sale of our interests, the existing mortgage loan on the property was repaid and we received net proceeds of $55,244,000 for the participation we held in the mortgage loan. We recognized a financial statement gain of $7,308,000, which is included in "net gains on disposition of wholly owned and partially owned assets" on our consolidated statements of income for the three and nine months ended September 30, 2018.

Financing Activities

On August 9, 2018, we completed a $120,000,000 refinancing of 4 Union Square South, a 206,000 square foot Manhattan retail property. The interest-only loan carries a rate of LIBOR plus 1.40% (3.50% as of September 30, 2018) and matures in 2025, as extended. The property was previously encumbered by a $113,000,000 mortgage at LIBOR plus 2.15%, which was scheduled to mature in 2019.

On October 26, 2018, we extended our $750,000,000 unsecured term loan from October 2020 to February 2024. The interest rate on the extended unsecured term loan was lowered from LIBOR plus 1.15% to LIBOR plus 1.00% (3.30% as of October 26, 2018).
 
4
 
Third Quarter Leasing Activity:

312,000 square feet of New York Office space (308,000 square feet at share) at an initial rent of $67.35 per square foot and a weighted average term of 9.5 years. The GAAP and cash mark-to-markets on the 203,000 square feet of second generation space were positive 26.5% and 11.8%, respectively. Tenant improvements and leasing commissions were $9.52 per square foot per annum, or 14.1% of initial rent.

104,000 square feet of New York Retail space (99,000 square feet at share) at an initial rent of $135.05 per square foot and a weighted average term of 5.7 years. The GAAP and cash mark-to-markets on the 95,000 square feet of second generation space were negative 40.0% (resulting from an accounting adjustment at acquisition of the property in 2015 under which we marked the rent up to market) and positive 36.3%, respectively. Tenant improvements and leasing commissions were $3.24 per square foot per annum, or 2.4% of initial rent.

28,000 square feet at theMART (all at share) at an initial rent of $57.92 per square foot and a weighted average term of 7.4 years. The GAAP and cash mark-to-markets on the 23,000 square feet of second generation space were positive 14.4% and 1.9%, respectively. Tenant improvements and leasing commissions were $2.91 per square foot per annum, or 5.0% of initial rent.

160,000 square feet at 555 California Street (112,000 square feet at share) at an initial rent of $91.16 per square foot and a weighted average term of 12.1 years. The GAAP and cash mark-to-markets on the 33,000 square feet of second generation space were positive 30.4% and 10.4%, respectively. Tenant improvements and leasing commissions were $8.41 per square foot per annum, or 9.2% of initial rent.
 
Same Store Net Operating Income ("NOI") At Share:

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 (decrease)(1):
 
 
 
 
 
 
 
 
Three months ended September 30, 2018 compared to September 30, 2017
0.9
 %
 
0.6
%
 
(3.8
)%
 
17.2
 %
 
Nine months ended September 30, 2018 compared to September 30, 2017
3.3
 %
 
3.0
%
 
1.6
 %
 
14.3
 %
 
Three months ended September 30, 2018 compared to June 30, 2018
(0.4
)%
 
0.6
%
 
(9.8
)%
(3)
(1.2
)%
 
 
 
 
 
 
 
 
 
Same store NOI at share - cash basis % increase (decrease):
 
 
 
 
 
 
 
 
Three months ended September 30, 2018 compared to September 30, 2017
4.3
 %
 
3.9
%
 
2.2
 %
 
19.9
 %
 
Nine months ended September 30, 2018 compared to September 30, 2017
5.9
 %
 
5.2
%
 
7.6
 %
 
19.0
 %
 
Three months ended September 30, 2018 compared to June 30, 2018
0.9
 %
 
2.0
%
 
(6.7
)%
(3)
(5.4
)%
____________________
         
(1)
See pages 12 through 17 for same store NOI at share and same store NOI at share - cash basis reconciliations.

 
 
 
Increase
 
(2)
Excluding Hotel Pennsylvania, same store NOI at share % increase:
 
 
 
Three months ended September 30, 2018 compared to September 30, 2017
1.0
%
 
 
Nine months ended September 30, 2018 compared to September 30, 2017
3.1
%
 
 
Three months ended September 30, 2018 compared to June 30, 2018
1.0
%
 
 
 
 
 
 
Excluding Hotel Pennsylvania, same store NOI at share - cash basis % increase:
 
 
 
Three months ended September 30, 2018 compared to September 30, 2017
4.3
%
 
 
Nine months ended September 30, 2018 compared to September 30, 2017
5.3
%
 
 
Three months ended September 30, 2018 compared to June 30, 2018
2.5
%
 
 
 
 
 
(3)
Excluding tradeshows which are seasonal, same store NOI at share decreased by 4.4% and same store NOI at share - cash basis decreased by 0.3%.

 
5
 
NOI At Share:

The elements of our New York and Other NOI at share for the three and nine months ended September 30, 2018 and 2017 and the three months ended June 30, 2018 are summarized below.
 
                                       
(Amounts in thousands)
For the Three Months Ended
 
For the Nine Months Ended
September 30,
 
September 30,
 
June 30, 2018
 
 
2018
 
2017
 
 
2018
 
2017
New York:
 
 
 
 
 
 
 
 
 
Office
$
184,146

 
$
185,169

 
$
184,867

 
$
556,169

 
$
531,702

Retail
92,858

 
90,088

 
87,109

 
267,876

 
269,091

Residential
5,202

 
5,981

 
6,338

 
17,681

 
18,450

Alexander's
10,626

 
11,937

 
11,909

 
34,110

 
35,646

Hotel Pennsylvania
4,496

 
5,319

 
5,644

 
5,955

 
6,948

Total New York
297,328

 
298,494

 
295,867

 
881,791

 
861,837

 
 
 
 
 
 
 
 
 
 
Other:
 
 
 
 
 
 
 
 
 
theMART
25,257

 
26,019

 
27,816

 
79,948

 
78,090

555 California Street
13,515

 
11,519

 
13,660

 
40,686

 
35,585

Other investments
13,524

 
18,202

 
17,086

 
50,664

 
62,014

Total Other
52,296

 
55,740

 
58,562

 
171,298

 
175,689

 
 
 
 
 
 
 
 
 
 
NOI at share
$
349,624

 
$
354,234

 
$
354,429

 
$
1,053,089

 
$
1,037,526



NOI At Share - Cash Basis:

The elements of our New York and Other NOI at share - cash basis for the three and nine months ended September 30, 2018 and 2017 and the three months ended June 30, 2018 are summarized below.
 
                                       
(Amounts in thousands)
For the Three Months Ended
 
For the Nine Months Ended
September 30,
 
September 30,
 
June 30, 2018
 
 
2018
 
2017
 
 
2018
 
2017
New York:
 
 
 
 
 
 
 
 
 
Office
$
181,575

 
$
172,741

 
$
180,710

 
$
540,484

 
$
503,052

Retail
84,976

 
81,612

 
79,139

 
243,704

 
240,998

Residential
5,358

 
5,417

 
5,463

 
16,420

 
16,301

Alexander's
11,774

 
12,280

 
12,098

 
35,911

 
36,679

Hotel Pennsylvania
4,520

 
5,352

 
5,744

 
6,111

 
7,046

Total New York
288,203

 
277,402

 
283,154

 
842,630

 
804,076

 
 
 
 
 
 
 
 
 
 
Other:
 
 
 
 
 
 
 
 
 
theMART
26,234

 
25,417

 
27,999

 
81,312

 
74,846

555 California Street
13,070

 
10,889

 
13,808

 
39,704

 
33,365

Other investments
13,374

 
18,219

 
16,987

 
50,271

 
59,976

Total Other
52,678

 
54,525

 
58,794

 
171,287

 
168,187

 
 
 
 
 
 
 
 
 
 
NOI at share - cash basis
$
340,881

 
$
331,927

 
$
341,948

 
$
1,013,917

 
$
972,263

 
6
 
Development/Redevelopment as of September 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

 
$
1,123,726

(1) 
 
80.3%
 
Q3 2012
 
N/A
 
N/A
Moynihan Office Building - (50.1% interest)(2)
 
New York
 
850,000

 
400,000

 
54,823

 
 
13.7%
 
Q2 2017
 
Q3 2020
 
Q2 2022
One Penn Plaza - renovation(3)
 
New York
 
2,535,000

 
200,000

 
6,253

 
 
3.1%
 
Q4 2018
 
N/A
 
N/A
512 West 22nd Street - office/retail (55.0% interest)
 
New York
 
173,000

 
72,000

 
50,065

(4) 
 
69.5%
 
Q4 2015
 
Q4 2018
 
Q1 2020
61 Ninth Avenue - office/retail (45.1% interest)(5)
 
New York
 
170,000

 
69,000

 
57,970

 
 
84.0%
 
Q1 2016
 
Q2 2018
 
Q2 2019
345 Montgomery Street (555 California Street) (70.0% interest)
 
Other
 
64,000

 
32,000

 
9,523

(6) 
 
29.8%
 
Q1 2018
 
Q3 2019
 
Q3 2020
606 Broadway - office/retail (50.0% interest)
 
New York
 
34,000

 
30,000

 
23,307

(7) 
 
77.7%
 
Q2 2016
 
Q4 2018
 
Q2 2020
825 Seventh Avenue - office (50.0% interest)
 
New York
 
165,000

 
15,000

 
3,086

 
 
20.6%
 
Q2 2018
 
Q1 2020
 
Q1 2021
Total current projects
 
 
 
 
 
$
2,218,000

 
$
1,328,753

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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

 
 
 
 
 
 
 
 
 
 
 
 
 
484, 486 Eighth Avenue and 265, 267 West 34th Street
 
New York
 
125,000

 
 
 
 
 
 
 
 
 
 
 
 
 
527 West Kinzie, Chicago
 
Other
 
330,000

 
 
 
 
 
 
 
 
 
 
 
 
 
Total undeveloped land
 
 
 
605,000

 
 
 
 
 
 
 
 
 
 
 
 
 
_______________________
(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)
Excludes land and acquisition costs of $57,000.
(5)
The building is subject to a ground lease which expires in 2115.
(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, October 30, 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 47604591. A telephonic replay of the conference call will be available from 1:30 p.m. ET on October 30, 2018 through November 29, 2018. To access the replay, please dial 888-843-7419 and enter the passcode 47604591#. 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 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

               
(Amounts in thousands, except unit, share, and per share amounts)
As of
 
September 30, 2018
 
December 31, 2017
ASSETS
 
 
 
Real estate, at cost:
 
 
 
Land
$
3,306,264

 
$
3,143,648

Buildings and improvements
10,083,313

 
9,898,605

Development costs and construction in progress
1,579,628

 
1,615,101

Leasehold improvements and equipment
106,945

 
98,941

Total
15,076,150

 
14,756,295

Less accumulated depreciation and amortization
(3,109,361
)
 
(2,885,283
)
Real estate, net
11,966,789

 
11,871,012

Cash and cash equivalents
772,524

 
1,817,655

Restricted cash
147,286

 
97,157

Marketable securities
157,951

 
182,752

Tenant and other receivables, net of allowance for doubtful accounts of $3,935 and $5,526
69,796

 
58,700

Investments in partially owned entities
909,440

 
1,056,829

Real estate fund investments
369,767

 
354,804

220 Central Park South condominium units ready for sale
307,552

 

Receivable arising from the straight-lining of rents, net of allowance of $1,705 and $954
937,294

 
926,711

Deferred leasing costs, net of accumulated amortization of $202,480 and $191,827
443,350

 
403,492

Identified intangible assets, net of accumulated amortization of $167,861 and $150,837
139,994

 
159,260

Assets related to discontinued operations
74

 
1,357

Other assets
456,203

 
468,205

 
$
16,678,020

 
$
17,397,934

LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND EQUITY
 
 
 
Mortgages payable, net
$
8,119,075

 
$
8,137,139

Senior unsecured notes, net
843,710

 
843,614

Unsecured term loan, net
749,874

 
748,734

Unsecured revolving credit facilities
80,000

 

Accounts payable and accrued expenses
415,531

 
415,794

Deferred revenue
176,211

 
227,069

Deferred compensation plan
102,281

 
109,177

Liabilities related to discontinued operations
205

 
3,620

Preferred shares redeemed on January 4 and 11, 2018

 
455,514

Other liabilities
229,042

 
464,635

Total liabilities
10,715,929

 
11,405,296

Commitments and contingencies
 
 
 
Redeemable noncontrolling interests:
 
 
 
Class A units - 12,591,157 and 12,528,899 units outstanding
919,154

 
979,509

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

 
5,428

Total redeemable noncontrolling interests
924,582

 
984,937

Vornado's shareholders' equity:
 
 
 
Preferred shares of beneficial interest: no par value per share; authorized 110,000,000 shares; issued and outstanding 36,798,580 and 36,799,573 shares
891,294

 
891,988

Common shares of beneficial interest: $0.04 par value per share; authorized 250,000,000 shares; issued and outstanding 190,285,799 and 189,983,858 shares
7,589

 
7,577

Additional capital
7,580,463

 
7,492,658

Earnings less than distributions
(4,135,602
)
 
(4,183,253
)
Accumulated other comprehensive income
34,173

 
128,682

Total Vornado shareholders' equity
4,377,917

 
4,337,652

Noncontrolling interests in consolidated subsidiaries
659,592

 
670,049

Total equity
5,037,509

 
5,007,701

 
$
16,678,020

 
$
17,397,934

8
 
VORNADO REALTY TRUST
OPERATING RESULTS
 
                               
(Amounts in thousands, except per share amounts)
For the Three Months Ended
September 30,
 
For the Nine Months Ended
September 30,
 
2018
 
2017
 
2018
 
2017
Revenues
$
542,048

 
$
528,755

 
$
1,620,303

 
$
1,547,900

 
 
 
 
 
 
 
 
Income from continuing operations
$
219,101

 
$
37,176

 
$
324,401

 
$
225,078

Income (loss) from discontinued operations
61

 
(47,930
)
 
381

 
(14,501
)
Net income (loss)
219,162

 
(10,754
)
 
324,782

 
210,577

Less net (income) loss attributable to noncontrolling interests in:
 
 
 
 
 
 
 
Consolidated subsidiaries
(3,312
)
 
(4,022
)
 
31,137

 
(18,436
)
Operating Partnership
(12,671
)
 
1,878

 
(18,992
)
 
(9,057
)
Net income (loss) attributable to Vornado
203,179

 
(12,898
)
 
336,927

 
183,084

Preferred share dividends
(12,534
)
 
(16,128
)
 
(38,103
)
 
(48,386
)
Preferred share issuance costs

 

 
(14,486
)
 

NET INCOME (LOSS) attributable to common shareholders
$
190,645

 
$
(29,026
)
 
$
284,338

 
$
134,698

 
 
 
 
 
 
 
 
INCOME (LOSS) PER COMMON SHARE – BASIC:
 
 
 
 
 
 
 
Income from continuing operations, net
$
1.00

 
$
0.09

 
$
1.50

 
$
0.78

Loss from discontinued operations, net

 
(0.24
)
 

 
(0.07
)
Net income (loss) per common share
$
1.00

 
$
(0.15
)
 
$
1.50

 
$
0.71

Weighted average shares outstanding
190,245

 
189,593

 
190,176

 
189,401

 
 
 
 
 
 
 
 
INCOME (LOSS) PER COMMON SHARE – DILUTED:
 
 
 
 
 
 
 
Income from continuing operations, net
$
1.00

 
$
0.09

 
$
1.49

 
$
0.78

Loss from discontinued operations, net

 
(0.24
)
 

 
(0.07
)
Net income (loss) per common share
$
1.00

 
$
(0.15
)
 
$
1.49

 
$
0.71

Weighted average shares outstanding
191,327

 
190,847

 
191,292

 
191,257

 
 
 
 
 
 
 
 
FFO attributable to common shareholders plus assumed conversions (non-GAAP)
$
182,516

 
$
100,178

 
$
494,941

 
$
564,431

Per diluted share (non-GAAP)
$
0.95

 
$
0.52

 
$
2.59

 
$
2.95

 
 
 
 
 
 
 
 
FFO attributable to common shareholders plus assumed conversions, as adjusted (non-GAAP)
$
185,635

 
$
185,126

 
$
547,547

 
$
525,478

Per diluted share (non-GAAP)
$
0.97

 
$
0.97

 
$
2.86

 
$
2.75

 
 
 
 
 
 
 
 
Weighted average shares used in determining FFO per diluted share
191,327

 
190,893

 
191,292

 
191,304

 
9
 
VORNADO REALTY TRUST
NON-GAAP RECONCILIATIONS

The following table reconciles net income (loss) 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
September 30,
 
For the Nine Months Ended
September 30,
 
2018
 
2017
 
2018
 
2017
Net income (loss) attributable to common shareholders
$
190,645

 
$
(29,026
)
 
$
284,338

 
$
134,698

Per diluted share
$
1.00

 
$
(0.15
)
 
$
1.49

 
$
0.71

 
 
 
 
 
 
 
 
FFO adjustments:
 
 
 
 
 
 
 
Depreciation and amortization of real property
$
105,015

 
$
102,953

 
$
309,024

 
$
361,949

Net gains on sale of real estate
(133,961
)
 
(1,530
)
 
(158,138
)
 
(3,797
)
Proportionate share of adjustments to equity in net income (loss) of partially owned entities to arrive at FFO:
 
 
 
 
 
 
 
Depreciation and amortization of real property
23,688

 
31,997

 
77,282

 
108,753

Net gains on sale of real estate
(3,421
)
 
8

 
(3,998
)
 
(17,184
)
Real estate impairment losses

 
4,329

 
4

 
7,547

 
(8,679
)
 
137,757

 
224,174

 
457,268

Noncontrolling interests' share of above adjustments
535

 
(8,572
)
 
(13,884
)
 
(28,444
)
FFO adjustments, net
$
(8,144
)
 
$
129,185

 
$
210,290

 
$
428,824

 
 
 
 
 
 
 
 
FFO attributable to common shareholders (non-GAAP)
$
182,501

 
$
100,159

 
$
494,628

 
$
563,522

Convertible preferred share dividends
15

 
19

 
47

 
59

Earnings allocated to Out-Performance Plan units

 

 
266

 
850

FFO attributable to common shareholders plus assumed conversions (non-GAAP)
$
182,516

 
$
100,178

 
$
494,941

 
$
564,431

Per diluted share (non-GAAP)
$
0.95

 
$
0.52

 
$
2.59

 
$
2.95

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 nine months ended September 30, 2018 and 2017 and the three months ended June 30, 2018.
 
                                       
 
For the Three Months Ended
 
For the Nine Months Ended
September 30,
(Amounts in thousands)
September 30,
 
June 30, 2018
 
 
2018
 
2017
 
 
2018
 
2017
Net income (loss)
$
219,162

 
$
(10,754
)
 
$
105,338

 
$
324,782

 
$
210,577

 
 
 
 
 
 
 
 
 
 
Deduct:
 
 
 
 
 
 
 
 
 
(Income) loss from partially owned entities
(7,206
)
 
41,801

 
(8,757
)
 
(6,059
)
 
(5,578
)
Loss from real estate fund investments
190

 
6,308

 
28,976

 
37,973

 
1,649

Interest and other investment income, net
(2,893
)
 
(7,331
)
 
(30,892
)
 
(9,401
)
 
(22,567
)
Net gains on disposition of wholly owned and partially owned assets
(141,269
)
 

 
(23,559
)
 
(164,828
)
 
(501
)
(Income) loss from discontinued operations
(61
)
 
47,930

 
(683
)
 
(381
)
 
14,501

NOI attributable to noncontrolling interests in consolidated subsidiaries
(16,943
)
 
(16,171
)
 
(17,160
)
 
(51,415
)
 
(48,778
)
 
 
 
 
 
 
 
 
 
 
Add:
 
 
 
 
 
 
 
 
 
Depreciation and amortization expense
113,169

 
104,972

 
111,846

 
333,701

 
315,223

General and administrative expense
31,977

 
34,286

 
34,427

 
108,937

 
115,866

Transaction related costs and other
2,510

 
61

 
1,017

 
16,683

 
1,073

Our share of NOI from partially owned entities
60,094

 
66,876

 
65,752

 
193,359

 
199,989

Interest and debt expense
88,951

 
85,068

 
87,657

 
264,774

 
252,581

Income tax expense
1,943

 
1,188

 
467

 
4,964

 
3,491

NOI at share
349,624

 
354,234

 
354,429

 
1,053,089

 
1,037,526

Non-cash adjustments for straight-line rents, amortization of acquired below-market leases, net and other
(8,743
)
 
(22,307
)
 
(12,481
)
 
(39,172
)
 
(65,263
)
NOI at share - cash basis
$
340,881

 
$
331,927

 
$
341,948

 
$
1,013,917

 
$
972,263


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 September 30, 2018 compared to September 30, 2017.
 
                                         
(Amounts in thousands)
Total
 
New York
 
theMART
 
555
California
Street
 
Other
NOI at share for the three months ended September 30, 2018
$
349,624

 
$
297,328

 
$
25,257

 
$
13,515

 
$
13,524

 
Less NOI at share from:
 
 
 
 
 
 
 
 
 
 
Acquisitions
(260
)
 
(260
)
 

 

 

 
Development properties
(12,655
)
 
(12,641
)
 

 
(14
)
 

 
Lease termination income, net of write-offs of straight-line receivables and acquired below-market leases, net
1,581

 
1,800

 
(219
)
 

 

 
Other non-operating income, net
(14,102
)
 
(578
)
 

 

 
(13,524
)
Same store NOI at share for the three months ended September 30, 2018
$
324,188

 
$
285,649

 
$
25,038

 
$
13,501

 
$

 
 
 
 
 
 
 
 
 
 
NOI at share for the three months ended September 30, 2017
$
354,234

 
$
298,494

 
$
26,019

 
$
11,519

 
$
18,202

 
Less NOI at share from:
 
 
 
 
 
 
 
 
 
 
Dispositions
(232
)
 
(232
)
 

 

 

 
Development properties
(12,598
)
 
(12,598
)
 

 

 

 
Lease termination income, net of write-offs of straight-line receivables and acquired below-market leases, net
(1,169
)
 
(1,169
)
 

 

 

 
Other non-operating income, net
(18,874
)
 
(672
)
 

 

 
(18,202
)
Same store NOI at share for the three months ended September 30, 2017
$
321,361

 
$
283,823

 
$
26,019

 
$
11,519

 
$

 
 
 
 
 
 
 
 
 
 
Increase (decrease) in same store NOI at share for the three months ended September 30, 2018 compared to September 30, 2017
$
2,827

 
$
1,826

 
$
(981
)
 
$
1,982

 
$

 
 
 
 
 
 
 
 
 
 
 
% increase (decrease) in same store NOI at share
0.9
%
 
0.6
%
(1) 
(3.8
)%
 
17.2
%
 
%
____________________
(1)
Excluding Hotel Pennsylvania, same store NOI at share increased by 1.0%.

Same store NOI at share represents NOI at share from property operations which are owned by us and in service in both the current and prior year reporting periods. Same store NOI at share - cash basis is NOI at share 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 at share and same store NOI at share - 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 September 30, 2018 compared to September 30, 2017.

 
                                         
(Amounts in thousands)
Total
 
New York
 
theMART
 
555
California
Street
 
Other
NOI at share - cash basis for the three months ended September 30, 2018
$
340,881

 
$
288,203

 
$
26,234

 
$
13,070

 
$
13,374

 
Less NOI at share - cash basis from:
 
 
 
 
 
 
 
 
 
 
Acquisitions
(259
)
 
(259
)
 

 

 

 
Development properties
(13,433
)
 
(13,419
)
 

 
(14
)
 

 
Lease termination income
(318
)
 
(58
)
 
(260
)
 

 

 
Other non-operating income, net
(13,954
)
 
(580
)
 

 

 
(13,374
)
Same store NOI at share - cash basis for the three months ended September 30, 2018
$
312,917

 
$
273,887

 
$
25,974

 
$
13,056

 
$

 
 
 
 
 
 
 
 
 
 
 
NOI at share - cash basis for the three months ended September 30, 2017
$
331,927

 
$
277,402

 
$
25,417

 
$
10,889

 
$
18,219

 
Less NOI at share - cash basis from:
 
 
 
 
 
 
 
 
 
 
Dispositions
(115
)
 
(115
)
 

 

 

 
Development properties
(12,674
)
 
(12,674
)
 

 

 

 
Lease termination income
(285
)
 
(285
)
 

 

 

 
Other non-operating income, net
(18,936
)
 
(717
)
 

 

 
(18,219
)
Same store NOI at share - cash basis for the three months ended September 30, 2017
$
299,917

 
$
263,611

 
$
25,417

 
$
10,889

 
$

 
 
 
 
 
 
 
 
 
 
Increase in same store NOI at share - cash basis for the three months ended September 30, 2018 compared to September 30, 2017
$
13,000

 
$
10,276

 
$
557

 
$
2,167

 
$

 
 
 
 
 
 
 
 
 
 
% increase in same store NOI at share - cash basis
4.3
%
 
3.9
%
(1) 
2.2
%
 
19.9
%
 
%
____________________
(1)
Excluding Hotel Pennsylvania, same store NOI at share - cash basis increased by 4.3%.
 
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 September 30, 2018 compared to June 30, 2018.
 
                                         
(Amounts in thousands)
Total
 
New York
 
theMART
 
555
California
Street
 
Other
NOI at share for the three months ended September 30, 2018
$
349,624

 
$
297,328

 
$
25,257

 
$
13,515

 
$
13,524

 
Less NOI at share from:
 
 
 
 
 
 
 
 
 
 
Acquisitions
(63
)
 
(63
)
 

 

 

 
Development properties
(12,655
)
 
(12,641
)
 

 
(14
)
 

 
Lease termination income, net of write-offs of straight-line receivables and acquired below-market leases, net
1,582

 
1,800

 
(218
)
 

 

 
Other non-operating income, net
(14,103
)
 
(579
)
 

 

 
(13,524
)
Same store NOI at share for the three months ended September 30, 2018
$
324,385

 
$
285,845

 
$
25,039

 
$
13,501

 
$

 
 
 
 
 
 
 
 
 
 
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
(3
)
 
(3
)
 

 

 

 
Dispositions
(309
)
 
(309
)
 

 

 

 
Development properties
(12,795
)
 
(12,795
)
 

 

 

 
Lease termination income, net of write-offs of straight-line receivables and acquired below-market leases, net
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
$
325,680

 
$
284,247

 
$
27,773

 
$
13,660

 
$

 
 
 
 
 
 
 
 
 
 
(Decrease) increase in same store NOI at share for the three months ended September 30, 2018 compared to June 30, 2018
$
(1,295
)
 
$
1,598

 
$
(2,734
)
 
$
(159
)
 
$

 
 
 
 
 
 
 
 
 
 
 
% (decrease) increase in same store NOI at share
(0.4
)%
 
0.6
%
(1) 
(9.8
)%
(2) 
(1.2
)%
 
%
____________________
(1)
Excluding Hotel Pennsylvania, same store NOI at share increased by 1.0%.
(2)
Excluding tradeshows which are seasonal, same store NOI at share decreased by 4.4%.
 
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 September 30, 2018 compared to June 30, 2018.

 
                                         
(Amounts in thousands)
Total
 
New York
 
theMART
 
555
California
Street
 
Other
NOI at share - cash basis for the three months ended September 30, 2018
$
340,881

 
$
288,203

 
$
26,234

 
$
13,070

 
$
13,374

 
Less NOI at share - cash basis from:
 
 
 
 
 
 
 
 
 
 
Acquisitions
(63
)
 
(63
)
 

 

 

 
Development properties
(13,433
)
 
(13,419
)
 

 
(14
)
 

 
Lease termination income
(318
)
 
(58
)
 
(260
)
 

 

 
Other non-operating income, net
(13,953
)
 
(579
)
 

 

 
(13,374
)
Same store NOI at share - cash basis for the three months ended September 30, 2018
$
313,114

 
$
274,084

 
$
25,974

 
$
13,056

 
$

 
 
 
 
 
 
 
 
 
 
 
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
(3
)
 
(3
)
 

 

 

 
Dispositions
(241
)
 
(241
)
 

 

 

 
Development properties
(13,688
)
 
(13,688
)
 

 

 

 
Lease termination income
(162
)
 

 
(162
)
 

 

 
Other non-operating income, net
(17,481
)
 
(494
)
 

 

 
(16,987
)
Same store NOI at share - cash basis for the three months ended June 30, 2018
$
310,373

 
$
268,728

 
$
27,837

 
$
13,808

 
$

 
 
 
 
 
 
 
 
 
 
Increase (decrease) in same store NOI at share - cash basis for the three months ended September 30, 2018 compared to June 30, 2018
$
2,741

 
$
5,356

 
$
(1,863
)
 
$
(752
)
 
$

 
 
 
 
 
 
 
 
 
 
% increase (decrease) in same store NOI at share - cash basis
0.9
%
 
2.0
%
(1) 
(6.7
)%
(2) 
(5.4
)%
 
%
____________________
(1)
Excluding Hotel Pennsylvania, same store NOI at share - cash basis increased by 2.5%.
(2)
Excluding tradeshows which are seasonal, same store NOI at share - cash basis decreased by 0.3%.
 
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 nine months ended September 30, 2018 compared to September 30, 2017.
 
                                         
(Amounts in thousands)
Total
 
New York
 
theMART
 
555
California
Street
 
Other