Edgar Filing: VORNADO REALTY TRUST

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark one)

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

For the quarterly period ended:

March 31, 2009

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

For the transition period from:

Commission File Number:

001-11954

VORNADO REALTY TRUST

(Exact name of registrant as specified in its charter)

Maryland		22-1657560
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification Number)

888 Seventh Avenue, New York, New York		10019
(Address of principal executive offices)		(Zip Code)

(212) 894-7000

(Registrant’s telephone number, including area code)

N/A

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o No o

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

x Large Accelerated Filer		o Accelerated Filer
o Non-Accelerated Filer (Do not check if smaller reporting company)		o Smaller Reporting Company

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x

As of March 31, 2009, 158,278,305 of the registrant’s common shares of beneficial interest are outstanding.

PART I.		Financial Information:	Page Number

	Item 1.	Financial Statements:

		Consolidated Balance Sheets (Unaudited) as of March 31, 2009 and December 31, 2008	3

		Consolidated Statements of Income (Unaudited) for the Three Months Ended March 31, 2009 and 2008	4

		Consolidated Statement of Changes in Equity (Unaudited) for the Three Months Ended March 31, 2009 and 2008	5

		Consolidated Statements of Cash Flows (Unaudited) for the Three Months Ended March 31, 2009 and 2008	6

		Notes to Consolidated Financial Statements (Unaudited)	8

		Report of Independent Registered Public Accounting Firm	30

	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	31

	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	55

	Item 4.	Controls and Procedures	56



PART II.		Other Information:

	Item 1.	Legal Proceedings	57

	Item 1A.	Risk Factors	58

	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	58

	Item 3.	Defaults Upon Senior Securities	58

	Item 4.	Submission of Matters to a Vote of Security Holders	58

	Item 5.	Other Information	58

	Item 6.	Exhibits	58

Signatures			59

Exhibit Index			60

PART I. FINANCIAL INFORMATION
Item 1. Financial Statements

VORNADO REALTY TRUST

CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

(Amounts in thousands, except share and per share amounts) ASSETS	March 31, 2009			December 31, 2008
Real estate, at cost:
Land	$	4,569,734		$	4,517,558
Buildings and improvements		12,467,651			12,154,857
Development costs and construction in progress		846,790			1,088,356
Leasehold improvements and equipment		120,175			118,603
Total		18,004,350			17,879,374
Less accumulated depreciation and amortization		(2,253,005	)		(2,168,997	)
Real estate, net		15,751,345			15,710,377
Cash and cash equivalents		1,625,450			1,526,853
Restricted cash		400,147			375,888
Marketable securities		298,352			334,322
Accounts receivable, net of allowance for doubtful accounts of $38,900 and $32,834		175,645			201,566
Investments in partially owned entities, including Alexander’s of $151,901 and $137,305		792,724			790,154
Investment in Toys “R” Us		388,405			293,096
Mezzanine loans receivable, net of allowance of $46,700		471,982			472,539
Receivable arising from the straight-lining of rents, net of allowance of $6,067 and $5,773		619,706			592,903
Deferred leasing and financing costs, net of accumulated amortization of $179,700 and $168,714		304,381			306,847
Assets related to discontinued operations		108,295			108,292
Due from officers		13,153			13,185
Other assets		699,342			692,026
	$	21,648,927		$	21,418,048
LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS’ AND SHAREHOLDERS’ EQUITY
Notes and mortgages payable	$	8,824,247		$	8,835,387
Convertible senior debentures		2,232,874			2,221,743
Senior unsecured notes		536,468			617,816
Exchangeable senior debentures		479,773			478,256
Revolving credit facility debt		658,468			358,468
Accounts payable and accrued expenses		497,930			515,607
Deferred credit		741,465			764,774
Deferred compensation plan		63,523			69,945
Deferred tax liabilities		19,884			19,895
Other liabilities		126,207			143,527
Total liabilities		14,180,839			14,025,418
Commitments and contingencies
Redeemable noncontrolling interests:
Class A units – 14,999,038 and 14,627,005 units outstanding		612,071			882,740
Series D cumulative redeemable preferred units – 11,200,000 units outstanding		280,000			280,000
Series B convertible preferred units – 444,559 units outstanding		15,238			15,238
Total redeemable noncontrolling interests		907,309			1,177,978
Shareholders’ equity:
Preferred shares of beneficial interest: no par value per share; authorized 110,000,000 shares; issued and outstanding 33,952,324 and 33,954,124 shares		823,717			823,807
Common shares of beneficial interest: $.04 par value per share; authorized, 250,000,000 shares; issued and outstanding 158,278,305 and 155,285,903 shares		6,301			6,195
Additional capital		6,434,715			6,025,976
Earnings less than distributions		(1,069,607	)		(1,047,340	)
Accumulated other comprehensive loss		(46,797	)		(6,899	)
Total Vornado shareholders’ equity		6,148,329			5,801,739
Noncontrolling interests in consolidated subsidiaries		412,450			412,913
Total equity		6,560,779			6,214,652
	$	21,648,927		$	21,418,048

See notes to consolidated financial statements.
3

VORNADO REALTY TRUST

CONSOLIDATED STATEMENTS OF INCOME

(UNAUDITED)

(Amounts in thousands, except per share amounts)	For The Three Months Ended March 31,
	2009			2008

REVENUES:
Property rentals	$	553,130		$	533,434
Tenant expense reimbursements		98,134			87,160
Fee and other income		30,750			28,688
Total revenues		682,014			649,282
EXPENSES:
Operating		279,376			261,251
Depreciation and amortization		132,119			130,610
General and administrative		79,069			49,385
Costs of acquisitions not consummated		—			2,283
Total expenses		490,564			443,529
Operating income		191,450			205,753
Income applicable to Alexander’s		18,133			7,929
Income applicable to Toys “R” Us		97,147			80,362
Loss from partially owned entities		(7,543	)		(30,353	)
Interest and other investment income, net		14,059			14,104
Interest and debt expense (including amortization of deferred financing costs of $4,059 and $4,243)		(151,766	)		(157,457	)
Income before income taxes		161,480			120,338
Income tax (expense) benefit		(5,049	)		217,329
Income from continuing operations		156,431			337,667
Income from discontinued operations, net (including $112,690 net gain on sale of Americold Realty Trust)		—			112,081
Net income		156,431			449,748
Less: Net income attributable to noncontrolling interests, including unit distributions		16,321			45,910
Net income attributable to Vornado		140,110			403,838
Preferred share dividends		(14,269	)		(14,275	)
NET INCOME attributable to common shareholders	$	125,841		$	389,563

INCOME PER COMMON SHARE – BASIC:
Income from continuing operations	$	0.80		$	1.87
Income from discontinued operations		—			0.63
Net income per common share	$	0.80		$	2.50

INCOME PER COMMON SHARE – DILUTED:
Income from continuing operations	$	0.79		$	1.79
Income from discontinued operations		—			0.59
Net income per common share	$	0.79		$	2.38

DIVIDENDS PER COMMON SHARE	$	0.95		$	0.90

See notes to consolidated financial statements.

VORNADO REALTY TRUST

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(UNAUDITED)

(Amounts in thousands, except per share amounts)	Preferred Shares				Common Shares			Additional Capital			Earnings in Excess of (Less Than) Distributions		Accumulated Other Comprehensive Income (Loss)			Non- controlling Interests			Total Equity

Balance, December 31, 2007	$	825,095		$	6,140		$	5,278,717		$	(721,625	)	$	29,772		$	416,298		$	5,834,397
Cumulative effect of change in accounting principle		—			—			212,395			(35,552	)		—			—			176,843
Balance, January 1, 2008		825,095			6,140			5,491,112			(757,177	)		29,772			416,298			6,011,240
Net income (loss)		—			—			—			403,838			—			(2,420	)		401,418
Dividends paid on common shares		—			—			—			(138,030	)		—			—			(138,030	)
Dividends paid on Preferred Shares		—			—			—			(14,277	)		—			—			(14,277	)
Conversion of Series A Preferred shares to common shares		(1,025	)		1			1,024			—			—			—			—
Deferred compensation shares and options		—			(1	)		2,688			—			—			—			2,687
Common shares issued:
Under employees’ share option plan		—			11			10,461			—			—			—			10,472
Upon redemption of Class A Operating Partnership Units, at redemption value		—			9			18,762			—			—			—			18,771
In connection with dividend reinvestment plan		—			—			584			—			—			—			584
Change in unrealized net loss on securities available for sale		—			—			—			—			(10,537	)		—			(10,537	)
Adjustments to redeemable Class A Operating Partnership Units		—			—			51,060			—			—			—			51,060
Other		—			—			(919	)		—			(9,714	)		—			(10,633	)
Balance, March 31, 2008	$	824,070		$	6,160		$	5,574,772		$	(505,646	)	$	9,521		$	413,878		$	6,322,755


Balance, December 31, 2008	$	823,807		$	6,195		$	6,025,976		$	(1,047,340	)	$	(6,899	)	$	412,913		$	6,214,652
Net income (loss)		—			—			—			140,110			—			(463	)		139,647
Dividends paid on common shares		—			110			88,453			(147,678	)		—			—			(59,115	)
Dividends paid on Preferred Shares		—			—			—			(14,269	)		—			—			(14,269	)
Conversion of Series A Preferred shares to common shares		(90	)		—			90			—			—			—			—
Deferred compensation shares and options		—			2			23,288			—			—			—			23,290
Common shares issued:
Under employees’ share option plan		—			(14	)		505			(435	)		—			—			56
Upon redemption of Class A Operating Partnership Units, at redemption value		—			8			10,938			—			—			—			10,946
Change in unrealized net loss on securities available for sale		—			—			—			—			(39,305	)		—			(39,305	)
Surrender of 2008 equity awards on March 31, 2009		—			—			13,722			—			—			—			13,722
Adjustments to redeemable Class A Operating Partnership Units		—			—			271,856			—			—			—			271,856
Other		—			—			(113	)		5			(593	)		—			(701	)
Balance, March 31, 2009	$	823,717		$	6,301		$	6,434,715		$	(1,069,607	)	$	(46,797	)	$	412,450		$	6,560,779

See notes to consolidated financial statements.

VORNADO REALTY TRUST

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

	For The Three Months Ended March 31,
(Amounts in thousands)	2009			2008
Cash Flows from Operating Activities:
Net income	$	156,431		$	449,748
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization (including amortization of deferred financing costs)		136,178			156,955
Equity in income of partially owned entities, including Alexander’s and Toys		(107,737	)		(92,529	)
Write-off of unamortized costs from the voluntary surrender of equity awards		32,588			—
Amortization of below market leases, net		(17,982	)		(23,264	)
Straight-lining of rental income		(27,138	)		(22,050	)
Distributions of income from partially owned entities		8,381			9,978
Other non-cash adjustments		19,522			2,401
Net gain on early extinguishment of debt		(5,905	)		—
Reversal of H Street of deferred tax liability		—			(222,174	)
Net gain on sale of Americold		—			(112,690	)
Write-off of real estate joint ventures’ development costs		—			34,200
Net loss on derivative positions		—			18,362
Impairment loss – marketable securities		—			9,073
Costs of acquisitions not consummated		—			2,283
Net gains on sale of real estate		—			(580	)
Changes in operating assets and liabilities:
Accounts receivable, net		7,469			3,686
Accounts payable and accrued expenses		14,887			46,443
Other assets		(40,320	)		(50,270	)
Other liabilities		(6,562	)		12,003
Net cash provided by operating activities		169,812			221,575
Cash Flows from Investing Activities:
Development costs and construction in progress		(132,529	)		(106,688	)
Additions to real estate		(38,916	)		(50,838	)
Restricted cash		(27,298	)		866
Proceeds from sales of real estate and real estate related investments		20,858			199,331
Purchases of marketable securities		(9,882	)		(830	)
Investments in partially owned entities		(9,582	)		(74,552	)
Proceeds from sales of, and return of investment in, marketable securities		7,835			174
Distributions of capital from partially owned entities		7,504			22,163
Proceeds received from repayment of notes and mortgage loans receivable		3,593			19,099
Deposits in connection with real estate acquisitions		(9	)		(1,623	)
Acquisitions of real estate and other		—			(4,874	)
Investments in notes and mortgage loans receivable		—			(4,632	)
Net cash used in investing activities		(178,426	)		(2,404	)

See notes to consolidated financial statements.

VORNADO REALTY TRUST

CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED

(UNAUDITED)

(Amounts in thousands)	For The Three Months Ended March 31,
(Amounts in thousands)	2009			2008
Cash Flows from Financing Activities:
Proceeds from borrowings		353,856			956,499
Repayments of borrowings		(138,291	)		(605,342	)
Dividends paid on common shares		(59,115	)		(138,030	)
Purchase of outstanding Series G Preferred Units		(24,330	)		—
Dividends paid on preferred shares		(14,269	)		(14,292	)
Distributions to noncontrolling interests		(10,514	)		(28,308	)
Debt issuance costs		(94	)		(13,526	)
Proceeds from exercise of share options and other		(32	)		10,307
Net cash provided by financing activities		107,211			167,308
Net increase in cash and cash equivalents		98,597			386,479
Cash and cash equivalents at beginning of period		1,526,853			1,154,595
Cash and cash equivalents at end of period	$	1,625,450		$	1,541,074

Supplemental Disclosure of Cash Flow Information:
Cash payments for interest (including capitalized interest of $4,716 and $16,219)	$	132,208		$	135,872
Cash payments for income taxes	$	1,150		$	1,800

Non-Cash Transactions:
Adjustments to redeemable Class A Operating Partnerships units	$	271,856		$	51,060
Conversion of Class A Operating Partnership units to common shares, at redemption value		10,946			18,771
Dividends paid in common shares		88,563			—
Unit distributions paid in Class A units		8,213			—
Unrealized net loss on securities available for sale		39,305			10,537

See notes to consolidated financial statements.

VORNADO REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

1.	Organization

Vornado Realty Trust (“Vornado”) is a fully-integrated real estate investment trust (“REIT”) and conducts its business through Vornado Realty L.P., a Delaware limited partnership (the “Operating Partnership”). Vornado is the sole general partner of, and owned approximately 90.4% of the common limited partnership interest in, the Operating Partnership at March 31, 2009. All references to “we,” “us,” “our,” the “Company” and “Vornado” refer to Vornado Realty Trust and its consolidated subsidiaries, including the Operating Partnership.

Substantially all of Vornado’s assets are held through subsidiaries of the Operating Partnership. Accordingly, Vornado’s cash flow and ability to pay dividends to its shareholders is dependent upon the cash flow of the Operating Partnership and the ability of its direct and indirect subsidiaries to first satisfy their obligations to creditors.

2.	Basis of Presentation

The accompanying consolidated financial statements are unaudited. In our opinion, all adjustments (which include only normal recurring adjustments) necessary to present fairly the financial position, results of operations and changes in cash flows have been made. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) have been condensed or omitted. These condensed consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q of the Securities and Exchange Commission (the “SEC”) and should be read in conjunction with the consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2008, as filed with the SEC. The results of operations for the three months ended March 31, 2009 are not necessarily indicative of the operating results for the full year.

The accompanying consolidated financial statements include the accounts of Vornado and the Operating Partnership, as well as certain partially owned entities in which we own more than 50%, unless a partner has shared board and management representation and substantive participation rights on all significant business decisions, or 50% or less when (i) we are the primary beneficiary and the entity qualifies as a variable interest entity under Financial Accounting Standards Board (“FASB”) Interpretation No. 46 (Revised), Consolidation of Variable Interest Entities (“FIN 46R”), or (ii) when we are a general partner that meets the criteria under Emerging Issues Task Force (“EITF”) Issue No. 04-5. All significant inter-company amounts have been eliminated. Equity interests in partially owned entities are accounted for under the equity method of accounting if they do not meet the criteria for consolidation and we have the ability to exercise significant influence over the operating and financial policies of the company. Generally an ownership interest of 20% or more is sufficient to demonstrate the ability to exercise significant influence. When partially owned investments are in partnership form, the 20% threshold for equity method accounting is generally reduced to 3% to 5%, based on our ability to influence the operating and financial policies of the partnership. Investments accounted for under the equity method are initially recorded at cost and subsequently adjusted for our share of the net income or loss and cash contributions and distributions to or from these entities. Investments in partially owned entities that do not meet the criteria for consolidation or for equity method accounting are accounted for on the cost method.

We have made estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates.

On January 1, 2009, we adopted FASB Staff Position APB 14-1, Accounting for Convertible Debt Instruments that may be Settled in Cash upon Conversion (Including Partial Cash Settlement) (“FSP 14-1”). FSP 14-1 was required to be applied retrospectively. Accordingly, net income for the quarter ended March 31, 2008 has been adjusted to include $8,400,000 of additional interest expense, net of amounts attributable to noncontrolling interests. In addition, in accordance with FASB Statement No. 128, Earnings Per Share (“SFAS 128”), we have included 2,762,000 additional common shares resulting from the March 12, 2009 common share dividend in the computation of income per share retroactively to the quarter ended March 31, 2008. Furthermore, certain prior year balances have been reclassified in order to conform to current year presentation as a result of the adoption of FASB Statement No. 160, Noncontrolling Interests in Consolidated Financial Statements - An Amendment of ARB No. 51 (“SFAS 160”).

VORNADO REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

3.	Recently Issued Accounting Literature

On January 1, 2009, we adopted FSP 14-1, which was required to be applied retrospectively. The adoption of FSP 14-1 affected the accounting for our convertible and exchangeable senior debentures by requiring the initial proceeds from their sale to be allocated between a liability component and an equity component in a manner that results in interest expense on the debt component at our nonconvertible debt borrowing rate on the date of issue. The initial debt components of our $1.4 billion Convertible Senior Debentures, $1 billion Convertible Senior Debentures and $500 million Exchangeable Senior Debentures were $1,241,286,000, $926,361,000 and $457,699,000, respectively, based on the fair value of similar nonconvertible instruments issued. The aggregate initial debt discount of $212,395,000 after original issuance costs allocated to the equity component was recorded in “additional capital” as a cumulative effect of change in accounting principle in our consolidated statement of shareholders’ equity. We are amortizing the discount using the effective interest method over the period the debt is expected to remain outstanding (i.e., the earliest date the holders may require us to repurchase the debentures), as additional interest expense. Accordingly, interest expense for the quarter ended March 31, 2008 has been adjusted to include $9,300,000 of amortization in the aggregate, or $8,400,000, net of amounts attributable to noncontrolling interests. Amortization for periods prior to December 31, 2007 (not presented herein) aggregating $35,552,000 have been reflected as a cumulative effect of change in accounting principle in “earnings in excess of (less than) distributions” on our consolidated statement of changes in equity. Below is a summary of the financial statement effects of implementing FSP 14-1 and related disclosures.

		$1.4 Billion Convertible Senior Debentures				$1 Billion Convertible Senior Debentures				$500 Million Exchangeable Senior Debentures
(Amounts in thousands, except per share amounts) Balance Sheet:		March 31, 2009		December 31, 2008		March 31, 2009		December 31, 2008		March 31, 2009		December 31, 2008
Principal amount of liability component	$	1,382,700	$	1,382,700	$	989,800	$	989,800	$	499,982	$	499,982
Unamortized discount		(98,878	)	(106,415	)	(40,748	)	(44,342	)	(20,209	)	(21,726	)
Carrying amount of liability component	$	1,283,822	$	1,276,285	$	949,052	$	945,458	$	479,773	$	478,256

Carrying amount of equity component	$	130,714	$	130,714	$	53,640	$	53,640	$	32,301	$	32,301

		March 31,				March 31,				March 31,
Income Statement:		2009		2008		2009		2008		2009		2008
Coupon interest	$	9,852	$	9,975	$	8,970	$	9,063	$	4,844	$	4,844
Discount amortization – original issue		1,351		1,400		981		1,012		359		411
Discount amortization – FSP 14-1 implementation		6,180		5,823		2,609		2,427		1,159		1,028
	$	17,383	$	17,198	$	12,560	$	12,502	$	6,362	$	6,283

Effective interest rate		5.45	%	5.45	%	5.32	%	5.32	%	5.32	%	5.32	%

Maturity date (period through which discount is being amortized)		4/1/12				11/15/11				4/15/12

Conversion price per share, as adjusted	$	159.04			$	150.22			$	88.20

Number of shares on which the aggregate consideration to be delivered upon conversion is determined		—	⁽¹⁾			—	⁽¹⁾			5,669

__________________

(1)

In accordance with FSP 14-1, we are required to disclose the conversion price and the number of shares on which the aggregate consideration to be delivered upon conversion is determined (principal plus excess value.) Our convertible senior debentures require the entire principal amount to be settled in cash, and at our option, any excess value above the principal amount may be settled in cash or common shares. Based on the March 31, 2009 closing share price of our common shares and the conversion prices in the table above, there was no excess value; accordingly, no common shares would be issued if these securities were settled on this date. The number of common shares on which the aggregate consideration to be delivered upon conversion is 8,694 and 6,589 common shares, respectively.

VORNADO REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

3.	Recently Issued Accounting Literature - continued

In December 2007, the FASB issued Statement No. 141R, Business Combinations (“SFAS 141R”). SFAS 141R broadens the guidance of SFAS 141, extending its applicability to all transactions and other events in which one entity obtains control over one or more other businesses. It also broadens the fair value measurement and recognition of assets acquired, liabilities assumed, and interests transferred as a result of business combinations; and acquisition related costs will generally be expensed rather than included as part of the basis of the acquisition. SFAS 141R expands required disclosures to improve the ability to evaluate the nature and financial effects of business combinations. SFAS 141R became effective for all transactions entered into on or after January 1, 2009. The adoption of SFAS 141R on January 1, 2009 did not have any effect on our consolidated financial statements.

In December 2007, the FASB issued SFAS 160. SFAS 160 requires a noncontrolling interest in a subsidiary to be reported as equity and the amount of consolidated net income specifically attributable to the noncontrolling interest to be identified in the consolidated financial statements. SFAS 160 also calls for consistency in the manner of reporting changes in the parent’s ownership interest and requires fair value measurement of any noncontrolling equity investment retained in a deconsolidation. SFAS 160 became effective on January 1, 2009. The adoption of SFAS 160 on January 1, 2009, resulted in (i) the reclassification of minority interests in consolidated subsidiaries to noncontrolling interests in consolidated subsidiaries, a component of permanent equity on our consolidated balance sheets, (ii) the reclassification of minority interest expense to net income attributable to noncontrolling interests, on our consolidated statements of income, and (iii) additional disclosures, including a consolidated statement of changes in equity in quarterly reporting periods.

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

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

In June 2008, the FASB issued FSP EITF 03-6-1, Determining Whether Investments Granted in Share-Based Payment Transactions are Participating Securities (“FSP 03-6-1”). FSP 03-6-1 requires companies to treat unvested share-based payment awards that contain non-forfeitable rights to dividends or dividend equivalents as “participating securities” and include such securities in the computation of earnings per share pursuant to the two-class method as described in FASB Statement No. 128, Earnings Per Share (“SFAS 128”). FSP 03-6-1 became effective on January 1, 2009 and required all prior period earnings per share data presented, to be adjusted retroactively. The adoption of FSP 03-6-1 on January 1, 2009 did not have a material effect on our computation of income per share.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

4.	Fair Value Measurements

FASB Statement No. 157, Fair Value Measurements (“SFAS 157”) defines fair value and establishes a framework for measuring fair value. The objective of fair value is to determine the price that would be received upon the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (the exit price). SFAS 157 establishes a fair value hierarchy that prioritizes observable and unobservable inputs used to measure fair value into three levels: Level 1 – quoted prices (unadjusted) in active markets that are accessible at the measurement date for assets or liabilities; Level 2 – observable prices that are based on inputs not quoted in active markets, but corroborated by market data; and Level 3 – unobservable inputs that are used when little or no market data is available. The fair value hierarchy gives the highest priority to Level 1 inputs and the lowest priority to Level 3 inputs. In determining fair value, we utilize valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible as well as consider counterparty credit risk in our assessment of fair value. Financial assets and liabilities measured at fair value in our consolidated financial statements consist primarily of (i) marketable securities and (ii) the assets of our deferred compensation plan (primarily marketable securities and equity investments in limited partnerships), for which there is a corresponding liability on our consolidated balance sheets. Financial assets and liabilities measured at fair value as of March 31, 2009 are presented in the table below based on their level in the fair value hierarchy.

				Fair Value Hierarchy
(Amounts in thousands)		Total		Level 1	Level 2		Level 3
Marketable securities	$	79,175	$	79,175	$	—	$	—
Deferred compensation plan assets		63,523		31,097		—		32,426
Interest rate caps (included in other assets)		48		—		48		—
Total assets	$	142,746	$	110,272	$	48	$	32,426

Deferred compensation plan liabilities	$	63,523	$	31,097	$	—	$	32,426

The fair value of Level 3 “deferred compensation plan assets” represents equity investments in certain limited partnerships, for which there is a corresponding Level 3 liability to the plan’s participants. The following is a summary of changes in Level 3 deferred compensation plan assets and liabilities, for the three months ended March 31, 2009.

(Amounts in thousands)		Beginning Balance		Total Realized/ Unrealized Losses			Purchases, Sales, Other Settlements and Issuances, net		Ending Balance
For the three months ended March 31, 2009	$	34,176	$	(1,496	)	$	(254	)	$	32,426

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

5.	Investments in Partially Owned Entities

Toys “R” Us (“Toys”)

As of March 31, 2009, we own 32.7% of Toys. We account for our investment in Toys under the equity method and record our 32.7% share of Toys income of loss on a one-quarter lag basis because Toys’ fiscal year ends on the Saturday nearest January 31, and our fiscal year ends on December 31. The business of Toys is highly seasonal. Historically, Toys’ fourth quarter net income accounts for more than 80% of its fiscal year net income. As of March 31, 2009, the carrying amount of our investment in Toys does not differ materially from our share of the equity in the net assets of the parent company.

Below is a summary of Toys’ latest available financial information on a “purchase accounting” basis.

(Amounts in millions)	Balance as of
Balance Sheet:	January 31, 2009		November 1, 2008
Total Assets	$	11,500	$	12,410
Total Liabilities	$	10,285	$	11,481
Total Equity	$	1,215	$	929

	For the Quarterly Period Ended
Income Statement:	January 31, 2009		February 2, 2008
Total Revenues	$	5,461	$	5,827
Net Income	$	291	$	240

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

As of March 31, 2009, we own 32.4% of the outstanding common stock of Alexander’s. We manage, lease and develop Alexander’s properties pursuant to agreements, which expire in March of each year and are automatically renewable. As of March 31, 2009, Alexander’s owed us $44,130,000 in fees under these agreements.

Based on Alexander’s March 31, 2009 closing share price of $170.38, the market value (“fair value” pursuant to SFAS 157) of our investment in Alexander’s is $281,820,000, or $129,919,000 in excess of the carrying amount on our consolidated balance sheet.

As of March 31, 2009, the carrying amount of our investment in Alexander’s exceeds our share of the equity in the net assets of Alexander’s by approximately $35,874,000. The majority of this basis difference resulted from the excess of our purchase price for the Alexander’s common shares acquired over the book value of Alexander’s net assets. Substantially all of this basis difference was allocated, based on our estimates of the fair values of Alexander’s assets and liabilities, to their real estate (land and building). We are writing-off the basis difference related to the buildings into earnings as additional depreciation expense over their estimated useful lives. This depreciation is not material to our share of equity in Alexander’s net income or loss. The basis difference related to the land is not being written-off and will be recognized upon disposition of our investment.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

5.	Investments in Partially Owned Entities - continued

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

As of March 31, 2009, we own 16,149,592 Lexington common shares, or approximately 16.1% of Lexington common equity. Pursuant to the guidance in APB Opinion No. 18, The Equity Method of Accounting for Investments in Common Stock, we account for our investment in Lexington under the equity method because we believe we have the ability to exercise significant influence over Lexington’s operating and financial policies, based on, among other factors, our representation on Lexington’s Board of Trustees and the level of our ownership in Lexington as compared to that of other shareholders. We record our pro rata share of Lexington’s net income or loss on a one-quarter lag basis because we file our consolidated financial statements on Form 10-K and 10-Q prior to the time that Lexington files its financial statements.

As of March 31, 2009, the carrying amount of our investment in Lexington was less than our share of the equity in the net assets of Lexington by approximately $148,000,000. This basis difference resulted primarily from $107,882,000 of non-cash impairment charges we recognized in 2008 based on our conclusion that the decline in the value of Lexington’s common shares was “other-than-temporary.” The remainder of the basis difference related to purchase accounting for our acquisition of an additional 8,000,000 common shares of Lexington in October 2008, of which the majority relates to our estimate of the fair values of Lexington’s real estate (land and building) as compared to their carrying amounts in Lexington’s consolidated financial statements. We are writing-off the basis difference related to the buildings into earnings as additional depreciation expense over their estimated useful lives. This depreciation is not material to our share of equity in Lexington’s net income or loss. The basis difference attributable to the land is not written-off and will be recognized upon disposition of our investment.

Based on Lexington’s March 31, 2009 closing share price of $2.38, the market value (“fair value” pursuant to SFAS 157) of our investment in Lexington was $38,436,000, or $39,274,000 below the carrying amount of $77,710,000, or $4.81 per share, on our consolidated balance sheet. We have concluded that, as of March 31, 2009, the decline in the value of our investment in Lexington is not “other-than-temporary.”

The following is a summary of Lexington’s financial information as of December 31, 2008 and September 30, 2008 and for the three months ended December 31, 2008 and 2007.

(Amounts in millions)
Balance Sheet:	December 31, 2008		September 30, 2008
Total assets	$	4,106	$	4,294
Total liabilities	$	2,707	$	3,370
Total equity	$	1,399	$	924

	For the Three Months Ended
Income Statement:	December 31, 2008			December 31, 2007
Total revenue	$	105		$	119
(Loss) income from continuing operations	$	(4	)	$	2
Net (loss) income	$	(18	)	$	24

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

5.	Investments in Partially Owned Entities - continued

The carrying amount of our investments in partially owned entities and income (loss) recognized from such investments are as follows:

Investments: (Amounts in thousands)	Balance as of
	March 31, 2009		December 31, 2008
Toys	$	388,405	$	293,096
Partially Owned Office Buildings	$	155,677	$	157,468
Alexander’s		151,901		137,305
India Real Estate Ventures		88,432		88,858
Lexington		77,710		80,748
Other Equity Method Investments		319,004		325,775
	$	792,724	$	790,154

Our Share of Net Income (Loss): (Amounts in thousands)	For the Three Months Ended March 31,
Toys:	2009			2008
32.7% share of equity in net income	$	95,294		$	78,355
Interest and other income		1,853			2,007
	$	97,147		$	80,362
Alexander’s:
32.4% share in 2009 and 32.7% in 2008:
Equity in net income before reversal (accrual) of stock appreciation rights compensation expense	$	3,855		$	5,127
Reversal (accrual) of stock appreciation rights compensation expense		11,105			(205	)
Equity in net income		14,960			4,922
Management and leasing fees		1,893			2,127
Development fees		1,280			880
	$	18,133		$	7,929

Lexington – 16.1% in 2009 and 7.5% in 2008 share of equity in net (loss) income (see page 13)	$	(3,039	)	$	1,827

India Real Estate Ventures – 4% to 36.5% share of equity in net loss		(137	)		(414)

Other⁽¹⁾		(4,367	)		(31,766	)⁽²⁾
	$	(7,543	)	$	(30,353	)

__________________

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

(2)	Includes $34,200 of non-cash charges for the write-off of our share of certain partially owned entities’ development costs.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

5.	Investments in Partially Owned Entities - continued

Below is a summary of the debt of our partially owned entities as of March 31, 2009 and December 31, 2008, none of which is recourse to us.

	100% of Partially Owned Entities’ Debt
(Amounts in thousands)	March 31, 2009		December 31, 2008
Toys (32.7% interest) (as of January 31, 2009 and November 1, 2008, respectively):
$1.3 billion senior credit facility, due 2010, (6.14% at March 31, 2009)	$	1,300,000	$	1,300,000
$2.0 billion credit facility, due 2010, LIBOR plus 1.00% – 3.75% ($103,000 reserved for outstanding letters of credit)		—		367,000
Mortgage loan, due 2010, LIBOR plus 1.30% (1.86% at March 31, 2009)		800,000		800,000
$804 million secured term loan facility, due 2012, LIBOR plus 4.25% (4.80% at March 31, 2009)		797,000		797,000
Senior U.K. real estate facility, due 2013, with interest at 5.02%		514,000		568,000
7.625% bonds, due 2011 (Face value – $500,000)		486,900		486,000
7.875% senior notes, due 2013 (Face value – $400,000)		377,900		377,000
7.375% senior notes, due 2018 (Face value – $400,000)		335,900		335,000
4.51% Spanish real estate facility, due 2013		168,000		167,000
$181 million unsecured term loan facility, due 2013, LIBOR plus 5.00% (5.55% at March 31, 2009)		180,000		180,000
Japan bank loans, due 2011 – 2014, 1.20% – 2.80%		172,000		158,000
Japan borrowings, due 2011 (weighted average rate of 1.05% at March 31, 2009)		18,000		289,000
6.84% Junior U.K. real estate facility, due 2013		91,000		101,000
4.51% French real estate facility, due 2013		81,000		81,000
8.750% debentures, due 2021 (Face value – $22,000)		21,000		21,000
Other		92,000		73,000
		5,434,700		6,100,000
Alexander’s (32.4% interest):
731 Lexington Avenue mortgage note payable collateralized by the office space, due in February 2014, with interest at 5.33% (prepayable without penalty after December 2013)		370,960		373,637
731 Lexington Avenue mortgage note payable, collateralized by the retail space, due in July 2015, with interest at 4.93% (prepayable without penalty after December 2013)		320,000		320,000
Kings Plaza Regional Shopping Center mortgage note payable, due in June 2011, with interest at 7.46% (prepayable without penalty after December 2013)		198,449		199,537
Rego Park mortgage note payable, due in March 2012, (prepayable without penalty after June 2009) ⁽¹⁾		78,246		78,386
Rego Park construction loan payable, due in December 2010, LIBOR plus 1.20% (1.70% at March 31, 2009)		195,082		181,695
Paramus mortgage note payable, due in October 2011, with interest at 5.92% (prepayable without penalty)		68,000		68,000
		1,230,737		1,221,255
Lexington (16.1% interest) (as of December 31, 2008 and September 30, 2008, respectively) Mortgage loans collateralized by the trust’s real estate, due from 2009 to 2037, with a weighted average interest rate of 5.58% at December 31, 2008 (various prepayment terms)		2,383,407		2,486,370

_____________________________

(1)

On March 10, 2009, the $78,246 outstanding balance of the Rego Park I mortgage loan, which was scheduled to mature in June 2009, was repaid and simultaneously refinanced in the same amount. The loan bears interest at 75 basis points and is secured by the property and is 100% cash collateralized. The proceeds of the new loan were placed in a non-interest bearing restricted mortgage escrow account.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

5.	Investments in Partially Owned Entities - continued

(Amounts in thousands)	100% of Partially Owned Entities’ Debt at
Partially owned office buildings:	March 31, 2009		December 31, 2008
Kaempfer Properties (2.5% and 5.0% interests in two partnerships) mortgage notes payable, collateralized by the partnerships’ real estate, due from 2011 to 2031, with a weighted average interest rate of 5.63% at March 31, 2009 (various prepayment terms)	$	142,600	$	143,000
100 Van Ness, San Francisco office complex (9% interest) up to $132 million construction loan payable, due in July 2013, LIBOR plus 2.75% with an interest rate floor of 6.50% and interest rate cap of 7.00%		85,249		85,249
330 Madison Avenue (25% interest) up to $150,000 mortgage note payable, due in June 2015, LIBOR plus 1.50% with interest at 2.03%		70,000		70,000
Fairfax Square (20% interest) mortgage note payable, due in August 2009, with interest at 7.50%		62,490		62,815
Rosslyn Plaza (46% interest) mortgage note payable, due in December 2011, LIBOR plus 1.0% (1.50% at March 31, 2009)		56,680		56,680
West 57^th Street (50% interest) mortgage note payable, due in October 2009, with interest at 4.94% (prepayable without penalty after July 2009)		29,000		29,000
825 Seventh Avenue (50% interest) mortgage note payable, due in October 2014, with interest at 8.07% (prepayable without penalty after April 2014)		21,326		21,426
India Real Estate Ventures:
TCG Urban Infrastructure Holdings (25% interest) mortgage notes payable, collateralized by the entity’s real estate, due from 2009 to 2022, with a weighted average interest rate of 14.72% at March 31, 2009 (various prepayment terms)		149,227		148,792
India Property Fund L.P. (36.5% interest) $120 million secured revolving credit facility, due in December 2009, LIBOR plus 2.75% (3.23% at March 31, 2009)		93,000		90,500
Waterfront Associates, LLC (2.5% interest) construction and land loan up to $250 million payable, due in September 2011 with a six month extension option, LIBOR plus 2.00%-3.00% (3.02% at March 31, 2009)		90,880		57,600
Verde Realty Master Limited Partnership (8.5% interest) mortgage notes payable, collateralized by the partnerships’ real estate, due from 2009 to 2037, with a weighted average interest rate of 5.96% at March 31, 2009 (various prepayment terms)		575,213		559,840
Green Courte Real Estate Partners, LLC (8.3% interest) mortgage notes payable, collateralized by the partnerships’ real estate, due from 2009 to 2015, with a weighted average interest rate of 4.96% at March 31, 2009 (various prepayment terms)		307,098		307,098
Monmouth Mall (50% interest) mortgage note payable, due in September 2015, with interest at 5.44% (prepayable without penalty after July 2015)		165,000		165,000
San Jose, California Ground-up Development (45% interest) construction loan, due in March 2010, LIBOR plus 1.75% (2.25% at March 31, 2009)		132,810		132,128
Wells/Kinzie Garage (50% interest) mortgage note payable, due in December 2013, with interest at 6.87%		14,767		14,800
Orleans Hubbard Garage (50% interest) mortgage note payable, due in December 2013, with interest at 6.87%		10,178		10,200
Other		433,412		468,559

Based on our ownership interest in the partially owned entities above, our pro rata share of the debt of these partially owned entities was $2,999,693,000 and $3,196,585,000 as of March 31, 2009 and December 31, 2008, respectively.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

6.	Mezzanine Loans Receivable

The following is a summary of our investments in mezzanine loans as of March 31, 2009 and December 31, 2008.

(Amounts in thousands)		Interest Rate as of	Carrying Amount as of
Mezzanine Loans Receivable:	Maturity	March 31, 2009	March 31, 2009		December 31, 2008
Equinox	02/13	14.00%	$	88,829	$	85,796
Tharaldson Lodging Companies	04/10 ⁽¹⁾	4.74%		76,341		76,341
Riley HoldCo Corp	02/15	10.00%		74,409		74,381
280 Park Avenue	06/16	10.25%		73,750		73,750
Charles Square Hotel, Cambridge	09/09	7.56%		41,634		41,796
MPH, net of a valuation allowance of $46,700	—	—		19,300		19,300
Other	08/14-12/18	4.75%-12.00%		97,719		101,175
			$	471,982	$	472,539

__________________

(1)

The borrower has a one-year extension option.

7.	Discontinued Operations

In accordance with the provisions of FASB Statement No. 144, Accounting for the Impairment and Disposal of Long- Lived Assets, we have classified the revenues and expenses of properties and businesses sold or to be sold to “income from discontinued operations, net” and the related assets and liabilities to “assets related to discontinued operations” and “liabilities related to discontinued operations” for all periods presented in the accompanying consolidated financial statements.

The following table sets forth the assets and liabilities related to discontinued operations at March 31, 2009 and December 31, 2008, which consist primarily of the net book value of real estate.

(Amounts in thousands)	Assets related to Discontinued Operations as of				Liabilities related to Discontinued Operations as of
	March 31, 2009		December 31, 2008		March 31, 2009		December 31, 2008
H Street – land under sales contract	$	108,295	$	108,292	$	—	$	—

The following table sets forth the combined results of operations related to discontinued operations for the three months ended March 31, 2009 and 2008.

(Amounts in thousands)	For the Three Months Ended March 31,
	2009		2008
Revenues	$	—	$	219,421
Expenses		—		220,610
Net loss		—		(1,189	)
Net gain on sale of Americold		—		112,690
Net gain on sale of other real estate		—		580
Income from discontinued operations, net	$	—	$	112,081

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

8.	Identified Intangible Assets and Intangible Liabilities

The following summarizes our identified intangible assets (primarily acquired above-market leases) and intangible liabilities (primarily acquired below-market leases) as of March 31, 2009 and December 31, 2008.

	Balance as of
(Amounts in thousands)	March 31, 2009			December 31, 2008

Identified intangible assets (included in other assets):
Gross amount	$	781,350		$	784,192
Accumulated amortization		(273,479	)		(258,242	)
Net	$	507,871		$	525,950
Identified intangible liabilities (included in deferred credit):
Gross amount	$	996,537		$	998,179
Accumulated amortization		(297,598	)		(278,357	)
Net	$	698,939		$	719,822

Amortization of acquired below-market leases, net of acquired above-market leases resulted in an increase to rental income of $17,982,000 and $23,271,000 for the three months ended March 31, 2009 and 2008, respectively. Estimated annual amortization of acquired below-market leases, net of acquired above-market leases for each of the five succeeding years commencing January 1, 2010 is as follows:

(Amounts in thousands)
2010	$	62,283
2011		59,224
2012		55,508
2013		47,543
2014		41,718

Amortization of all other identified intangible assets (a component of depreciation and amortization expense) was $15,786,000 and $24,572,000 for the three months ended March 31, 2009 and 2008, respectively. Estimated annual amortization of all other identified intangible assets including acquired in-place leases, customer relationships, and third party contracts for each of the five succeeding years commencing January 1, 2010 is as follows:

(Amounts in thousands)
2010	$	56,294
2011		53,889
2012		49,304
2013		42,116
2014		23,750

We are a tenant under ground leases for certain properties. Amortization of these acquired below-market leases resulted in an increase to rent expense of $533,000 and $533,000 for the three months ended March 31, 2009 and 2008, respectively. Estimated annual amortization of these below-market leases for each of the five succeeding years commencing January 1, 2010 is as follows:

(Amounts in thousands)
2010	$	2,133
2011		2,133
2012		2,133
2013		2,133
2014		2,133

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

Debt

The following is a summary of our notes and mortgages payable:

(Amounts in thousands)		Interest Rate at	Balance at
Notes and Mortgages Payable: Fixed Rate:	Maturity (1)	March 31, 2009	March 31, 2009		December 31, 2008
New York Office:
1290 Avenue of the Americas	01/13	5.97%	$	442,116	$	444,667
350 Park Avenue	01/12	5.48%		430,000		430,000
770 Broadway	03/16	5.65%		353,000		353,000
888 Seventh Avenue	01/16	5.71%		318,554		318,554
Two Penn Plaza	02/11	4.97%		286,137		287,386
909 Third Avenue	04/15	5.64%		213,198		214,074
Eleven Penn Plaza	12/11	5.20%		205,938		206,877

Washington, DC Office:
Skyline Place	02/17	5.74%		678,000		678,000
Warner Building	05/16	6.26%		292,700		292,700
River House Apartment Complex	04/15	5.43%		195,546		195,546
1215 Clark Street, 200 12^th Street and 251 18^th Street	01/25	7.09%		115,071		115,440
Bowen Building	06/16	6.14%		115,022		115,022
Reston Executive I, II and III	01/13	5.57%		93,000		93,000
1101 17^th, 1140 Connecticut, 1730 M and 1150 17^thStreet	08/10	6.74%		87,326		87,721
1550 and 1750 Crystal Drive	11/14	7.08%		83,524		83,912
Universal Buildings	04/14	4.88%		59,051		59,728
1235 Clark Street	07/12	6.75%		53,902		54,128
2231 Crystal Drive	08/13	7.08%		50,067		50,394
241 18^th Street	10/10	6.82%		46,331		46,532
1750 Pennsylvania Avenue	06/12	7.26%		46,390		46,570
2011 Crystal Drive	10/09	6.88%		38,208		38,338
1225 Clark Street	08/13	7.08%		29,948		30,145
1800, 1851 and 1901 South Bell Street	12/11	6.91%		25,754		27,801

Retail:
Cross-collateralized mortgages on 42 shopping centers (2)	03/10	7.86%		399,074		448,115
Springfield Mall (including present value of purchase option)	10/12-04/13	5.45%		251,729		252,803
Montehiedra Town Center	07/16	6.04%		120,000		120,000
Broadway Mall	07/13	5.40%		94,298		94,879
828-850 Madison Avenue Condominium	06/18	5.29%		80,000		80,000
Las Catalinas Mall	11/13	6.97%		60,410		60,766
Other	05/09-11/34	4.00%-7.33%		158,650		159,597

Merchandise Mart:
Merchandise Mart	12/16	5.57%		550,000		550,000
High Point Complex	08/16	6.34%		219,690		220,361
Boston Design Center	09/15	5.02%		70,465		70,740
Washington Design Center	11/11	6.95%		44,800		44,992

Other:
555 California Street	05/10-09/11	5.97%		721,001		720,671
Industrial Warehouses	10/11	6.95%		25,159		25,268
Total Fixed Interest Notes and Mortgages Payable		5.95%		7,054,059		7,117,727

__________________

See notes on page 21.

VORNADO REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

9.	Debt - continued

(Amounts in thousands)			Interest Rate at	Balance at
Notes and Mortgages Payable:	Maturity (1)	Spread over LIBOR	March 31, 2009	March 31, 2009		December 31, 2008
Variable Rate:
New York Office:
Manhattan Mall	02/12	L+55	1.11%	$	232,000	$	232,000
866 UN Plaza	05/11	L+40	.90%		44,978		44,978
Washington, DC Office:
2101 L Street	02/13	L+120	1.73%		150,000		150,000
1999 K Street (construction loan)	12/10	L+130	1.80%		81,165		73,747
Courthouse Plaza One and Two	01/15	L+75	1.30%		69,446		70,774
River House Apartment Complex	04/18	(3)	1.78%		64,000		64,000
Commerce Executive III, IV and V	07/09	L+55	1.05%		50,223		50,223
220 20^th Street (construction loan)	01/11	L+115	1.71%		49,894		40,701
West End 25 (construction loan)	02/11	L+130	1.81%		35,356		24,620
Retail:
Green Acres Mall	02/13	L+140	1.90%		335,000		335,000
Bergen Town Center (construction loan)	03/13	L+150	2.00%		248,177		228,731
Beverly Connection	07/09	L+245	3.01%		100,000		100,000
Other:
220 Central Park South	11/10	L+235 – L+245	2.87%		130,000		130,000
Other	07/09 – 11/11	Various	3.03%		179,949		172,886
Total Variable Interest Notes and Mortgages Payable			1.96%		1,770,188		1,717,660
Total Notes and Mortgages Payable			5.15%	$	8,824,247	$	8,835,387

Convertible Senior Debentures: (see page 9)
2.85% Due 2027	04/12		5.45%	$	1,283,822	$	1,276,285
3.63% Due 2026	11/11		5.32%		949,052		945,458
Total Convertible Senior Debentures			5.39%	$	2,232,874	$	2,221,743

Senior Unsecured Notes:
Senior unsecured notes due 2009	08/09		4.50%	$	154,812	$	168,289
Senior unsecured notes due 2010	12/10		4.75%		176,915		199,625
Senior unsecured notes due 2011	02/11		5.60%		204,741		249,902
Total Senior Unsecured Notes (4)			5.00%	$	536,468	$	617,816

3.88% Exchangeable Senior Debentures due 2025 (see page 9)	04/12		5.32%	$	479,773	$	478,256

Unsecured Revolving Credit Facilities:
$1.595 billion unsecured revolving credit facility	09/12	L+55	1.02%	$	600,000	$	300,000
$.965 billion unsecured revolving credit facility ($44,565 reserved for outstanding letters of credit)	06/11	L+55	.99%		58,468		58,468
Total Unsecured Revolving Credit Facilities			1.02%	$	658,468	$	358,468

_______________________

See notes on following page.

VORNADO REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

9.	Debt - continued

Notes to preceding tabular information (Amounts in thousands):

(1)

Represents the extended maturity for certain loans in which we have the un