Press Release

Contact:

Joseph Macnow
Work(212) 894-7000
February 11, 2019
Vornado Announces Fourth Quarter 2018 Financial Results

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

Quarter Ended December 31, 2018 Financial Results

NET INCOME attributable to common shareholders for the quarter ended December 31, 2018 was $100.5 million, or $0.53 per diluted share, compared to $27.3 million, or $0.14 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 page 2, net income attributable to common shareholders, as adjusted (non-GAAP) for the quarters ended December 31, 2018 and 2017 was $51.0 million and $65.8 million, or $0.27 and $0.34 per diluted share, respectively.

FUNDS FROM OPERATIONS ("FFO") attributable to common shareholders plus assumed conversions (non-GAAP) for the quarter ended December 31, 2018 was $210.1 million, or $1.10 per diluted share, compared to $153.2 million, or $0.80 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 December 31, 2018 and 2017 was $171.4 million and $187.1 million, or $0.90 and $0.98 per diluted share, respectively.

Year Ended December 31, 2018 Financial Results

NET INCOME attributable to common shareholders for the year ended December 31, 2018 was $384.8 million, or $2.01 per diluted share, compared to $162.0 million, or $0.85 per diluted share, for the year ended December 31, 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 year ended December 31, 2018 and 2017 was $243.9 million and $252.9 million, or $1.27 and $1.32 per diluted share, respectively.

FFO attributable to common shareholders plus assumed conversions (non-GAAP) for the year ended December 31, 2018 was $729.7 million, or $3.82 per diluted share, compared to $717.8 million, or $3.75 per diluted share, for the year ended December 31, 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 years ended December 31, 2018 and 2017 was $718.8 million and $713.0 million, or $3.76 and $3.73 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
December 31,
 
For the Year Ended
December 31,
 
2018
 
2017
 
2018
 
2017
Net income attributable to common shareholders
$
100,494

 
$
27,319

 
$
384,832

 
$
162,017

Per diluted share
$
0.53

 
$
0.14

 
$
2.01

 
$
0.85

 
 
 
 
 
 
 
 
Certain (income) expense items that impact net income attributable to common shareholders:
 
 
 
 
 
 
 
After-tax net gain on sale of 220 Central Park South condominium units
$
(67,336
)
 
$

 
$
(67,336
)
 
$

After-tax purchase price fair value adjustment related to the increase in ownership of the Farley joint venture
(27,289
)
 

 
(27,289
)
 

Our share of loss (income) from real estate fund investments (excluding our $4,252 share of One Park Avenue potential additional transfer taxes)
24,366

 
(529
)
 
23,749

 
10,804

Real estate impairment losses (including our share of partially owned entities)
12,000

 
145

 
12,000

 
7,692

Decrease in fair value of marketable securities resulting from a new GAAP accounting standard effective January 1, 2018 (including our share of partially owned entities)
3,733

 

 
30,335

 

(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 and 666 Fifth Avenue Office Condominium operations through August 3, 2018 sale)
(242
)
 
1,664

 
5,727

 
43,615

Tax expense related to the reduction of our taxable REIT subsidiaries deferred tax assets

 
34,800

 

 
34,800

Net gains on sale of real estate (including our share of partially owned entities)

 
(585
)
 
(28,104
)
 
(21,574
)
Net gain on sale of our ownership interests in 666 Fifth Avenue Office Condominium

 

 
(134,032
)
 

Net gain on the repayment of our loan investment in 666 Fifth Avenue Office Condominium

 

 
(7,308
)
 

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

 

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

 

 

 
44,465

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

 

 

 
(21,100
)
Net gain on repayment of our Suffolk Downs JV debt investments

 

 

 
(11,373
)
Other
1,996

 
5,515

 
4,046

 
9,900

 
(52,772
)
 
41,010

 
(150,223
)
 
97,229

Noncontrolling interests' share of above adjustments
3,268

 
(2,539
)
 
9,285

 
(6,382
)
Total of certain (income) expense items that impact net income attributable to common shareholders
$
(49,504
)
 
$
38,471

 
$
(140,938
)
 
$
90,847

 
 
 
 
 
 
 
 
Net income attributable to common shareholders, as adjusted (non-GAAP)
$
50,990

 
$
65,790

 
$
243,894

 
$
252,864

Per diluted share (non-GAAP)
$
0.27

 
$
0.34

 
$
1.27

 
$
1.32

 
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
December 31,
 
For the Year Ended
December 31,
 
2018
 
2017
 
2018
 
2017
FFO attributable to common shareholders plus assumed conversions (non-GAAP)(1)
$
210,100

 
$
153,151

 
$
729,740

 
$
717,805

Per diluted share (non-GAAP)
$
1.10

 
$
0.80

 
$
3.82

 
$
3.75

 
 
 
 
 
 
 
 
Certain (income) expense items that impact FFO attributable to common shareholders plus assumed conversions:
 
 
 
 
 
 
 
After-tax net gain on sale of 220 Central Park South condominium units
$
(67,336
)
 
$

 
$
(67,336
)
 
$

Our share of FFO from real estate fund investments (excluding our $4,252 share of One Park Avenue potential additional transfer taxes)
24,366

 
(529
)
 
23,749

 
10,804

FFO from discontinued operations and sold properties (primarily related to JBG SMITH Properties operating results and transaction costs through July 17, 2017 spin-off and 666 Fifth Avenue Office Condominium operations through August 3, 2018 sale)
(242
)
 
(4,006
)
 
(2,834
)
 
(73,240
)
Tax expense related to the reduction of our taxable REIT subsidiaries deferred tax assets

 
34,800

 

 
34,800

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 the repayment of our loan investment in 666 Fifth Avenue Office Condominium

 

 
(7,308
)
 

Impairment loss on investment in PREIT

 

 

 
44,465

Net gain resulting from UE operating partnership unit issuances

 

 

 
(21,100
)
Net gain on repayment of our Suffolk Downs JV debt investments

 

 

 
(11,373
)
Other
1,987

 
5,951

 
4,033

 
10,328

 
(41,225
)
 
36,216

 
(11,707
)
 
(5,316
)
Noncontrolling interests' share of above adjustments
2,552

 
(2,242
)
 
727

 
534

Total of certain (income) expense items that impact FFO attributable to common shareholders plus assumed conversions, net
$
(38,673
)
 
$
33,974

 
$
(10,980
)
 
$
(4,782
)
 
 
 
 
 
 
 
 
FFO attributable to common shareholders plus assumed conversions, as adjusted (non-GAAP)
$
171,427

 
$
187,125

 
$
718,760

 
$
713,023

Per diluted share (non-GAAP)
$
0.90

 
$
0.98

 
$
3.76

 
$
3.73

____________________________________________________________
(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 months and year ended December 31, 2018 and 2017.
 
3
 
Fourth Quarter Activity:

Acquisition:

Farley Office and Retail Building

On October 30, 2018, we increased our ownership interest in the joint venture that is developing the Farley Office and Retail Building to 95.0% from 50.1% by acquiring a 44.9% additional ownership interest from the Related Companies ("Related"). The purchase price was $41,500,000 plus the reimbursement of $33,026,000 of costs funded by Related through October 30, 2018. We consolidate the accounts of the joint venture as of October 30, 2018. In connection therewith, we recorded a net gain of $44,060,000, which is included in "purchase price fair value adjustment" on our consolidated statements of income. As a result of this gain, because we hold our investment in the joint venture through a taxable REIT subsidiary, $16,771,000 of income tax expense was recognized on our consolidated statements of income.

Financing:

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% (3.52% as of December 31, 2018). In connection with the extension of our unsecured term loan, we entered into an interest rate swap from LIBOR plus 1.00% to a fixed rate of 3.87% through October 2023.

On November 16, 2018, we completed a $205,000,000 refinancing of 150 West 34th Street, a 78,000 square foot Manhattan retail property. The interest-only loan carries a rate of LIBOR plus 1.88% (4.26% as of December 31, 2018) and matures in 2024, as extended. Concurrently, we invested $105,000,000 in a participation in the refinanced mortgage loan, which earns interest at a rate of LIBOR plus 2.00% (4.38% as of December 31, 2018) and also matures in 2024, as extended, and is included in "other assets" on our consolidated balance sheets. The property was previously encumbered by a mortgage of the same amount at LIBOR plus 2.25%, which was scheduled to mature in 2020.

Other:

220 Central Park South ("220 CPS")

During the fourth quarter of 2018, we completed the sale of 11 condominium units at 220 CPS for net proceeds aggregating to $214,776,000 and resulting in a financial statement net gain of $81,224,000 which is included in "net gains on disposition of wholly owned and partially owned assets" on our consolidated statements of income. In connection with these sales, $13,888,000 of income tax expense was recognized in our consolidated statements of income and $213,000,000 of the $950,000,000 220 CPS loan was repaid.
 
4
 
Fourth Quarter Activity - continued:

Leasing:

479,000 square feet of New York Office space (415,000 square feet at share) at an initial rent of $72.97 per square foot and a weighted average term of 7.7 years. The GAAP and cash mark-to-market rent on the 357,000 square feet of second generation space were positive 6.9% and 1.2%, respectively. Tenant improvements and leasing commissions were $10.22 per square foot per annum, or 14.0% of initial rent.

26,000 square feet of New York Retail space (17,000 square feet at share) at an initial rent of $211.34 per square foot and a weighted average term of 8.2 years. The GAAP and cash mark-to-market rent on the 7,000 square feet of second generation space were positive 3.0% and 1.1%, respectively. Tenant improvements and leasing commissions were $17.62 per square foot per annum, or 8.3% of initial rent.

46,000 square feet at theMART (all at share) at an initial rent of $60.73 per square foot and a weighted average term of 5.6 years. The GAAP and cash mark-to-market rent on the 46,000 square feet of second generation space were positive 8.7% and 3.2%, respectively. Tenant improvements and leasing commissions were $1.61 per square foot per annum, or 2.7% of initial rent.

Same Store Net Operating Income ("NOI") At Share:

The percentage (decrease) increase 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(3)
 
555
California Street
Same store NOI at share % (decrease) increase(1):
 
 
 
 
 
 
 
 
Three months ended December 31, 2018 compared to December 31, 2017
(6.3
)%
 
(3.1
)%
 
(56.6
)%
 
16.8
%
 
Year ended December 31, 2018 compared to December 31, 2017
0.8
 %
 
1.4
 %
 
(12.2
)%
 
14.9
%
 
Three months ended December 31, 2018 compared to September 30, 2018
(5.3
)%
 
(1.1
)%
 
(58.0
)%
 
3.8
%
 
 
 
 
 
 
 
 
 
Same store NOI at share - cash basis % (decrease) increase:
 
 
 
 
 
 
 
 
Three months ended December 31, 2018 compared to December 31, 2017
(1.7
)%
 
1.9
 %
 
(49.8
)%
 
15.8
%
 
Year ended December 31, 2018 compared to December 31, 2017
3.9
 %
 
4.3
 %
 
(6.5
)%
 
18.1
%
 
Three months ended December 31, 2018 compared to September 30, 2018
(4.2
)%
 
 %
 
(52.9
)%
 
5.7
%
____________________
         
(1)
See pages 12 through 17 for same store NOI at share and same store NOI at share - cash basis reconciliations.
 
 
 
(Decrease)
Increase
 
(2)
Excluding Hotel Pennsylvania, same store NOI at share % (decrease) increase:
 
 
 
Three months ended December 31, 2018 compared to December 31, 2017
(3.0
)%
 
 
Year ended December 31, 2018 compared to December 31, 2017
1.5
 %
 
 
Three months ended December 31, 2018 compared to September 30, 2018
(1.7
)%
 
 
 
 
 
 
Excluding Hotel Pennsylvania, same store NOI at share - cash basis % increase (decrease):
 
 
 
Three months ended December 31, 2018 compared to December 31, 2017
2.1
 %
 
 
Year ended December 31, 2018 compared to December 31, 2017
4.5
 %
 
 
Three months ended December 31, 2018 compared to September 30, 2018
(0.6
)%
 
 
 
 
 
(3)
Includes additional real estate tax expense accruals of $12,124,000 and $15,148,000 for the three months and year ended December 31, 2018, respectively, due to an increase in the tax-assessed value of theMART.

 
5
 
NOI At Share:

The elements of our New York and Other NOI at share for the three months and year ended December 31, 2018 and 2017 and the three months ended September 30, 2018 are summarized below.
                                       
(Amounts in thousands)
For the Three Months Ended
 
For the Year Ended
December 31,
 
December 31,
 
September 30, 2018
 
 
2018
 
2017
 
 
2018
 
2017
New York:
 
 
 
 
 
 
 
 
 
Office
$
186,832

 
$
189,481

 
$
184,146

 
$
743,001

 
$
721,183

Retail
85,549

 
90,853

 
92,858

 
353,425

 
359,944

Residential
5,834

 
5,920

 
5,202

 
23,515

 
24,370

Alexander's
11,023

 
11,656

 
10,626

 
45,133

 
47,302

Hotel Pennsylvania
5,961

 
6,318

 
4,496

 
11,916

 
13,266

Total New York
295,199

 
304,228

 
297,328

 
1,176,990

 
1,166,065

 
 
 
 
 
 
 
 
 
 
Other:
 
 
 
 
 
 
 
 
 
theMART(1)
10,981

 
24,249

 
25,257

 
90,929

 
102,339

555 California Street
14,005

 
12,003

 
13,515

 
54,691

 
47,588

Other investments
9,346

 
23,377

 
13,524

 
60,010

 
85,391

Total Other
34,332

 
59,629

 
52,296

 
205,630

 
235,318

 
 
 
 
 
 
 
 
 
 
NOI at share
$
329,531

 
$
363,857

 
$
349,624

 
$
1,382,620

 
$
1,401,383

____________________
(1)
Includes additional real estate tax expense accruals of $12,124 and $15,148 for the three months and year ended December 31, 2018, respectively, due to an increase in the tax-assessed value of theMART.

NOI At Share - Cash Basis:

The elements of our New York and Other NOI at share - cash basis for the three months and year ended December 31, 2018 and 2017 and the three months ended September 30, 2018 are summarized below.
                                       
(Amounts in thousands)
For the Three Months Ended
 
For the Year Ended
December 31,
 
December 31,
 
September 30, 2018
 
 
2018
 
2017
 
 
2018
 
2017
New York:
 
 
 
 
 
 
 
 
 
Office
$
185,624

 
$
175,787

 
$
181,575

 
$
726,108

 
$
678,839

Retail
80,515

 
83,320

 
84,976

 
324,219

 
324,318

Residential
5,656

 
5,325

 
5,358

 
22,076

 
21,626

Alexander's
11,129

 
12,004

 
11,774

 
47,040

 
48,683

Hotel Pennsylvania
6,009

 
6,351

 
4,520

 
12,120

 
13,397

Total New York
288,933

 
282,787

 
288,203

 
1,131,563

 
1,086,863

 
 
 
 
 
 
 
 
 
 
Other:
 
 
 
 
 
 
 
 
 
theMART(1)
12,758

 
24,396

 
26,234

 
94,070

 
99,242

555 California Street
13,784

 
11,916

 
13,070

 
53,488

 
45,281

Other investments
8,524

 
23,179

 
13,374

 
58,795

 
83,155

Total Other
35,066

 
59,491

 
52,678

 
206,353

 
227,678

 
 
 
 
 
 
 
 
 
 
NOI at share - cash basis
$
323,999

 
$
342,278

 
$
340,881

 
$
1,337,916

 
$
1,314,541

____________________
(1)
Includes additional real estate tax expense accruals of $12,124 and $15,148 for the three months and year ended December 31, 2018, respectively, due to an increase in the tax-assessed value of theMART.
 
6
 
Development/Redevelopment as of December 31, 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

 
$
1,199,913

(1) 
 
85.7%
 
Q3 2012
 
N/A
 
N/A
Farley Office and Retail Building - (95.0% interest)
 
New York
 
850,000

 
760,000

 
137,267

(2) 
 
18.1%
 
Q2 2017
 
Q3 2020
 
Q2 2022
PENN1(3)
 
New York
 
2,545,000

 
200,000

(4) 
9,725

 
 
4.9%
 
Q4 2018
 
N/A
 
N/A
512 West 22nd Street - office (55.0% interest)
 
New York
 
173,000

 
72,000

 
52,505

(5) 
 
72.9%
 
Q4 2015
 
Q1 2019
 
Q3 2020
345 Montgomery Street (555 California Street) (70.0% interest)
 
Other
 
78,000

 
32,000

 
15,284

(6) 
 
47.8%
 
Q1 2018
 
Q3 2019
 
Q3 2020
606 Broadway - office/retail (50.0% interest)
 
New York
 
34,000

 
30,000

 
25,601

(7) 
 
85.3%
 
Q2 2016
 
Q4 2018
 
Q2 2020
825 Seventh Avenue - office (50.0% interest)
 
New York
 
165,000

 
15,000

 
4,484

 
 
29.9%
 
Q2 2018
 
Q1 2020
 
Q1 2021
Total current projects
 
 
 
 
 
$
2,509,000

 
$
1,444,779

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Future Opportunities
 
Segment
 
Property
Zoning
Sq. Ft.
 
 
 
 
 
 
 
 
 
 
 
 
 
Penn District - multiple opportunities - office/residential/retail
 
New York
 
TBD
 
 
 
 
 
 
 
 
 
 
 
 
 
PENN2 - office/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

 
 
 
 
 
 
 
 
 
 
 
 
 
Rego Park III (32.4% interest)
 
Other
 
TBD

 
 
 
 
 
 
 
 
 
 
 
 
 
Total undeveloped land
 
 
 
605,000

 
 
 
 
 
 
 
 
 
 
 
 
 
_______________________
(1)
Excludes land and acquisition costs of $515,426.
(2)
Excludes our share of the upfront contribution of $230,000 and net of anticipated historic tax credits. 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)
We expect the final budget will exceed $200,000 after anticipated scope changes.
(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, February 12, 2019 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 48102474. A telephonic replay of the conference call will be available from 1:30 p.m. ET on February 12, 2019 through March 14, 2019. To access the replay, please dial 888-843-7419 and enter the passcode 48102474#. 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 SHEET
               
(Amounts in thousands, except unit, share, and per share amounts)
As of
 
December 31, 2018
 
December 31, 2017
ASSETS
 
 
 
Real estate, at cost:
 
 
 
Land
$
3,306,280

 
$
3,143,648

Buildings and improvements
10,110,992

 
9,898,605

Development costs and construction in progress
2,266,491

 
1,615,101

Moynihan Train Hall development expenditures
445,693

 

Leasehold improvements and equipment
108,427

 
98,941

Total
16,237,883

 
14,756,295

Less accumulated depreciation and amortization
(3,180,175
)
 
(2,885,283
)
Real estate, net
13,057,708

 
11,871,012

Cash and cash equivalents
570,916

 
1,817,655

Restricted cash
145,989

 
97,157

Marketable securities
152,198

 
182,752

Tenant and other receivables, net of allowance for doubtful accounts of $4,154 and $5,526
73,322

 
58,700

Investments in partially owned entities
858,113

 
1,056,829

Real estate fund investments
318,758

 
354,804

220 Central Park South condominium units ready for sale
99,627

 

Receivable arising from the straight-lining of rents, net of allowance of $1,644 and $954
935,131

 
926,711

Deferred leasing costs, net of accumulated amortization of $207,529 and $191,827
400,313

 
403,492

Identified intangible assets, net of accumulated amortization of $172,114 and $150,837
136,781

 
159,260

Other assets
431,938

 
469,562

 
$
17,180,794

 
$
17,397,934

LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND EQUITY
 
 
 
Mortgages payable, net
$
8,167,798

 
$
8,137,139

Senior unsecured notes, net
844,002

 
843,614

Unsecured term loan, net
744,821

 
748,734

Unsecured revolving credit facilities
80,000

 

Moynihan Train Hall obligation
445,693

 

Accounts payable and accrued expenses
430,976

 
415,794

Deferred revenue
167,730

 
227,069

Deferred compensation plan
96,523

 
109,177

Preferred shares redeemed on January 4 and 11, 2018

 
455,514

Other liabilities
311,806

 
468,255

Total liabilities
11,289,349

 
11,405,296

Commitments and contingencies
 
 
 
Redeemable noncontrolling interests:
 
 
 
Class A units - 12,544,477 and 12,528,899 units outstanding
778,134

 
979,509

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

 
5,428

Total redeemable noncontrolling interests
783,562

 
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 190,535,499 and 189,983,858 shares
7,600

 
7,577

Additional capital
7,725,857

 
7,492,658

Earnings less than distributions
(4,167,184
)
 
(4,183,253
)
Accumulated other comprehensive income
7,664

 
128,682

Total Vornado shareholders' equity
4,465,231

 
4,337,652

Noncontrolling interests in consolidated subsidiaries
642,652

 
670,049

Total equity
5,107,883

 
5,007,701

 
$
17,180,794

 
$
17,397,934

8
 
VORNADO REALTY TRUST
OPERATING RESULTS

                               
(Amounts in thousands, except per share amounts)
For the Three Months Ended
December 31,
 
For the Year Ended
December 31,
 
2018
 
2017
 
2018
 
2017
Revenues
$
543,417

 
$
536,226

 
$
2,163,720

 
$
2,084,126

 
 
 
 
 
 
 
 
Income from continuing operations
$
97,564

 
$
52,278

 
$
421,965

 
$
277,356

Income (loss) from discontinued operations
257

 
1,273

 
638

 
(13,228
)
Net income
97,821

 
53,551

 
422,603

 
264,128

Less net loss (income) attributable to noncontrolling interests in:
 
 
 
 
 
 
 
Consolidated subsidiaries
21,886

 
(7,366
)
 
53,023

 
(25,802
)
Operating Partnership
(6,680
)
 
(1,853
)
 
(25,672
)
 
(10,910
)
Net income attributable to Vornado
113,027

 
44,332

 
449,954

 
227,416

Preferred share dividends
(12,533
)
 
(17,013
)
 
(50,636
)
 
(65,399
)
Preferred share issuance costs

 

 
(14,486
)
 

NET INCOME attributable to common shareholders
$
100,494

 
$
27,319

 
$
384,832

 
$
162,017

 
 
 
 
 
 
 
 
INCOME PER COMMON SHARE – BASIC:
 
 
 
 
 
 
 
Income from continuing operations, net
$
0.53

 
$
0.14

 
$
2.02

 
$
0.92

Loss from discontinued operations, net

 

 

 
(0.07
)
Net income per common share
$
0.53

 
$
0.14

 
$
2.02

 
$
0.85

Weighted average shares outstanding
190,348

 
189,898

 
190,219

 
189,526

 
 
 
 
 
 
 
 
INCOME PER COMMON SHARE – DILUTED:
 
 
 
 
 
 
 
Income from continuing operations, net
$
0.53

 
$
0.14

 
$
2.01

 
$
0.91

Loss from discontinued operations, net

 

 

 
(0.06
)
Net income per common share
$
0.53

 
$
0.14

 
$
2.01

 
$
0.85

Weighted average shares outstanding
191,199

 
191,020

 
191,290

 
191,258

 
 
 
 
 
 
 
 
FFO attributable to common shareholders plus assumed conversions (non-GAAP)
$
210,100

 
$
153,151

 
$
729,740

 
$
717,805

Per diluted share (non-GAAP)
$
1.10

 
$
0.80

 
$
3.82

 
$
3.75

 
 
 
 
 
 
 
 
FFO attributable to common shareholders plus assumed conversions, as adjusted (non-GAAP)
$
171,427

 
$
187,125

 
$
718,760

 
$
713,023

Per diluted share (non-GAAP)
$
0.90

 
$
0.98

 
$
3.76

 
$
3.73

 
 
 
 
 
 
 
 
Weighted average shares used in determining FFO per diluted share
191,199

 
191,063

 
191,189

 
191,304

 
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
December 31,
 
For the Year Ended
December 31,
 
2018
 
2017
 
2018
 
2017
Net income attributable to common shareholders
$
100,494

 
$
27,319

 
$
384,832

 
$
162,017

Per diluted share
$
0.53

 
$
0.14

 
$
2.01

 
$
0.85

 
 
 
 
 
 
 
 
FFO adjustments:
 
 
 
 
 
 
 
Depreciation and amortization of real property
$
104,067

 
$
106,017

 
$
413,091

 
$
467,966

Net gains on sale of real estate

 

 
(158,138
)
 
(3,797
)
Real estate impairment losses
12,000

 

 
12,000

 

Decrease in fair value of marketable securities
1,652

 

 
26,453

 

After-tax purchase price fair value adjustment on depreciable real estate
(27,289
)
 

 
(27,289
)
 

Proportionate share of adjustments to equity in net income of
partially owned entities to arrive at FFO:
 
 
 
 
 
 
 
Depreciation and amortization of real property
24,309

 
28,247

 
101,591

 
137,000

Net gains on sale of real estate

 
(585
)
 
(3,998
)
 
(17,777
)
Real estate impairment losses

 
145

 

 
7,692

Decrease in fair value of marketable securities
2,081

 

 
3,882

 

 
116,820

 
133,824

 
367,592

 
591,084

Noncontrolling interests' share of above adjustments
(7,229
)
 
(8,010
)
 
(22,746
)
 
(36,420
)
FFO adjustments, net
$
109,591

 
$
125,814

 
$
344,846

 
$
554,664

 
 
 
 
 
 
 
 
FFO attributable to common shareholders (non-GAAP)
$
210,085

 
$
153,133

 
$
729,678

 
$
716,681

Convertible preferred share dividends
15

 
18

 
62

 
77

Earnings allocated to Out-Performance Plan units

 

 

 
1,047

FFO attributable to common shareholders plus assumed conversions (non-GAAP)
$
210,100

 
$
153,151

 
$
729,740

 
$
717,805

Per diluted share (non-GAAP)
$
1.10

 
$
0.80

 
$
3.82

 
$
3.75

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.

In accordance with the NAREIT December 2018 restated definition of FFO, we have elected to exclude the mark-to-market adjustments of marketable equity securities from the calculation of FFO. Our FFO for the nine months ended September 30, 2018 has been adjusted to exclude the $26,602,000, or $0.13 per share, decrease in fair value of marketable equity securities previously reported.
 
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 months and year ended December 31, 2018 and 2017 and the three months ended September 30, 2018.

                                       
 
For the Three Months Ended
 
For the Year Ended
December 31,
(Amounts in thousands)
December 31,
 
September 30, 2018
 
 
2018
 
2017
 
 
2018
 
2017
Net income
$
97,821

 
$
53,551

 
$
219,162

 
$
422,603

 
$
264,128

 
 
 
 
 
 
 
 
 
 
Deduct:
 
 
 
 
 
 
 
 
 
Income from partially owned entities
(3,090
)
 
(9,622
)
 
(7,206
)
 
(9,149
)
 
(15,200
)
Loss (income) from real estate fund investments
51,258

 
(4,889
)
 
190

 
89,231

 
(3,240
)
Interest and other investment income, net
(7,656
)
 
(8,294
)
 
(2,893
)
 
(17,057
)
 
(30,861
)
Net gains on disposition of wholly owned and partially owned assets
(81,203
)
 

 
(141,269
)
 
(246,031
)
 
(501
)
Purchase price fair value adjustment
(44,060
)
 

 

 
(44,060
)
 

(Income) loss from discontinued operations
(257
)
 
(1,273
)
 
(61
)
 
(638
)
 
13,228

NOI attributable to noncontrolling interests in consolidated subsidiaries
(19,771
)
 
(16,533
)
 
(16,943
)
 
(71,186
)
 
(65,311
)
 
 
 
 
 
 
 
 
 
 
Add:
 
 
 
 
 
 
 
 
 
Depreciation and amortization expense
112,869

 
114,166

 
113,169

 
446,570

 
429,389

General and administrative expense
32,934

 
34,916

 
31,977

 
141,871

 
150,782

Transaction related costs, impairment loss and other
14,637

 
703

 
2,510

 
31,320

 
1,776

Our share of NOI from partially owned entities
60,205

 
69,175

 
60,094

 
253,564

 
269,164

Interest and debt expense
83,175

 
93,073

 
88,951

 
347,949

 
345,654

Income tax expense
32,669

 
38,884

 
1,943

 
37,633

 
42,375

NOI at share
329,531

 
363,857

 
349,624

 
1,382,620

 
1,401,383

Non-cash adjustments for straight-line rents, amortization of acquired below-market leases, net and other
(5,532
)
 
(21,579
)
 
(8,743
)
 
(44,704
)
 
(86,842
)
NOI at share - cash basis
$
323,999

 
$
342,278

 
$
340,881

 
$
1,337,916

 
$
1,314,541


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 December 31, 2018 compared to December 31, 2017.
                                         
(Amounts in thousands)
Total
 
New York
 
theMART
 
555
California
Street
 
Other
NOI at share for the three months ended December 31, 2018
$
329,531

 
$
295,199

 
$
10,981

 
$
14,005

 
$
9,346

Less NOI at share from:
 
 
 
 
 
 
 
 
 
 
Acquisitions
 
(337
)
 
(337
)
 

 

 

Dispositions
 
19

 
19

 

 

 

Development properties
 
(12,623
)
 
(12,637
)
 

 
14

 

Lease termination income, net of write-offs of straight-line receivables and acquired below-market leases, net
 
(96
)
 
368

 
(464
)
 

 

Other non-operating income, net
 
(10,412
)
 
(1,066
)
 

 

 
(9,346
)
Same store NOI at share for the three months ended December 31, 2018
$
306,082

 
$
281,546

 
$
10,517

 
$
14,019

 
$

 
 
 
 
 
 
 
 
 
 
NOI at share for the three months ended December 31, 2017
$
363,857

 
$
304,228

 
$
24,249

 
$
12,003

 
$
23,377

Less NOI at share from:
 
 
 
 
 
 
 
 
 
 
Acquisitions
 
2

 
2

 

 

 

Dispositions
 
(23
)
 
(23
)
 

 

 

Development properties
 
(12,789
)
 
(12,789
)
 

 

 

Lease termination income, net of write-offs of straight-line receivables and acquired below-market leases, net
 
(984
)
 
(984
)
 

 

 

Other non-operating income, net
 
(23,377
)
 

 

 

 
(23,377
)
Same store NOI at share for the three months ended December 31, 2017
$
326,686

 
$
290,434

 
$
24,249

 
$
12,003

 
$

 
 
 
 
 
 
 
 
 
 
(Decrease) increase in same store NOI at share for the three months ended December 31, 2018 compared to December 31, 2017
$
(20,604
)
 
$
(8,888
)
 
$
(13,732
)
 
$
2,016

 
$

 
 
 
 
 
 
 
 
 
 
 
% (decrease) increase in same store NOI at share
(6.3
)%
 
(3.1
)%
(1) 
(56.6
)%
(2) 
16.8
%
 
%
____________________
(1)
Excluding Hotel Pennsylvania, same store NOI at share decreased by 3.0%.
(2)
The three months ended December 31, 2018 includes an additional $12,814 real estate tax expense accrual due to an increase in the tax-assessed value of theMART.

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 December 31, 2018 compared to December 31, 2017.
                                         
(Amounts in thousands)
Total
 
New York
 
theMART
 
555
California
Street
 
Other
NOI at share - cash basis for the three months ended December 31, 2018
$
323,999

 
$
288,933

 
$
12,758

 
$
13,784

 
$
8,524

 
Less NOI at share - cash basis from:
 
 
 
 
 
 
 
 
 
 
Acquisitions
(336
)
 
(336
)
 

 

 

 
Dispositions
19

 
19

 

 

 

 
Development properties
(14,628
)
 
(14,642
)
 

 
14

 

 
Lease termination income
(563
)
 
(43
)
 
(520
)
 

 

 
Other non-operating income, net
(9,590
)
 
(1,066
)
 

 

 
(8,524
)
Same store NOI at share - cash basis for the three months ended December 31, 2018
$
298,901

 
$
272,865

 
$
12,238

 
$
13,798

 
$

 
 
 
 
 
 
 
 
 
 
 
NOI at share - cash basis for the three months ended December 31, 2017
$
342,278

 
$
282,787

 
$
24,396

 
$
11,916

 
$
23,179

 
Less NOI at share - cash basis from:
 
 
 
 
 
 
 
 
 
 
Acquisitions
2

 
2

 

 

 

 
Dispositions
76

 
76

 

 

 

 
Development properties
(13,677
)
 
(13,677
)
 

 

 

 
Lease termination income
(1,393
)
 
(1,393
)
 

 

 

 
Other non-operating income, net
(23,180
)
 
(1
)
 

 

 
(23,179
)
Same store NOI at share - cash basis for the three months ended December 31, 2017
$
304,106

 
$
267,794

 
$
24,396

 
$
11,916

 
$

 
 
 
 
 
 
 
 
 
 
(Decrease) increase in same store NOI at share - cash basis for the three months ended December 31, 2018 compared to December 31, 2017
$
(5,205
)
 
$
5,071

 
$
(12,158
)
 
$
1,882

 
$

 
 
 
 
 
 
 
 
 
 
% (decrease) increase in same store NOI at share - cash basis
(1.7
)%
 
1.9
%
(1) 
(49.8
)%
(2) 
15.8
%
 
%
____________________
(1)
Excluding Hotel Pennsylvania, same store NOI at share - cash basis increased by 2.1%.
(2)
The three months ended December 31, 2018 includes an additional $12,814 real estate tax expense accrual due to an increase in the tax-assessed value of theMART.
 
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 December 31, 2018 compared to September 30, 2018.
                                         
(Amounts in thousands)
Total
 
New York
 
theMART
 
555
California
Street
 
Other
NOI at share for the three months ended December 31, 2018
$
329,531

 
$
295,199

 
$
10,981

 
$
14,005

 
$
9,346

 
Less NOI at share from:
 
 
 
 
 
 
 
 
 
 
Dispositions
19

 
19

 

 

 

 
Development properties
(12,623
)
 
(12,637
)
 

 
14

 

 
Lease termination income, net of write-offs of straight-line receivables and acquired below-market leases, net
(96
)
 
368

 
(464
)
 

 

 
Other non-operating income, net
(10,412
)
 
(1,066
)
 

 

 
(9,346
)
Same store NOI at share for the three months ended December 31, 2018
$
306,419

 
$
281,883

 
$
10,517

 
$
14,019

 
$

 
 
 
 
 
 
 
 
 
 
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:
 
 
 
 
 
 
 
 
 
 
Development properties
(13,488
)
 
(13,474
)
 

 
(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
(14,103
)
 
(579
)
 

 

 
(13,524
)
Same store NOI at share for the three months ended September 30, 2018
$
323,614

 
$
285,075

 
$
25,038

 
$
13,501

 
$

 
 
 
 
 
 
 
 
 
 
(Decrease) increase in same store NOI at share for the three months ended December 31, 2018 compared to September 30, 2018
$
(17,195
)
 
$
(3,192
)
 
$
(14,521
)
 
$
518

 
$

 
 
 
 
 
 
 
 
 
 
 
% (decrease) increase in same store NOI at share
(5.3
)%
 
(1.1
)%
(1) 
(58.0
)%
(2) 
3.8
%
 
%
____________________
(1)
Excluding Hotel Pennsylvania, same store NOI at share decreased by 1.7%.
(2)
The three months ended December 31, 2018 includes an additional $12,124 real estate tax expense accrual due to an increase in the tax-assessed value of theMART.
 
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 December 31, 2018 compared to September 30, 2018.
                                         
(Amounts in thousands)
Total
 
New York
 
theMART
 
555
California
Street
 
Other
NOI at share - cash basis for the three months ended December 31, 2018
$
323,999

 
$
288,933

 
$
12,758

 
$
13,784

 
$
8,524

 
Less NOI at share - cash basis from:
 
 
 
 
 
 
 
 
 
 
Dispositions
19

 
19

 

 

 

 
Development properties
(14,628
)
 
(14,642
)
 

 
14

 

 
Lease termination income
(563
)
 
(43
)
 
(520
)
 

 

 
Other non-operating income, net
(9,590
)
 
(1,066
)
 

 

 
(8,524
)
Same store NOI at share - cash basis for the three months ended December 31, 2018
$
299,237

 
$
273,201

 
$
12,238