Edgar Filing: VORNADO REALTY TRUST

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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, 2011

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 x 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 the definitions 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, 2011, 184,239,623 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, 2011 and December 31, 2010	3

		Consolidated Statements of Income (Unaudited) for the
		Three Months Ended March 31, 2011 and 2010	4

		Consolidated Statements of Changes in Equity (Unaudited) for the
		Three Months Ended March 31, 2011 and 2010	5

		Consolidated Statements of Cash Flows (Unaudited) for the
		Three Months Ended March 31, 2011 and 2010	6

		Notes to the Consolidated Financial Statements (Unaudited)	8

		Report of the Independent Registered Public Accounting Firm	32

	Item 2.	Management's Discussion and Analysis of Financial
		Condition and Results of Operations	33

	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 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)			March 31,		December 31,
ASSETS			2011		2010
Real estate, at cost:
	Land		$	4,594,154	$	4,598,303
	Buildings and improvements			12,723,892		12,733,487
	Development costs and construction in progress			220,356		218,156
	Leasehold improvements and equipment			125,859		124,976
		Total		17,664,261		17,674,922
	Less accumulated depreciation and amortization			(2,841,824)		(2,763,997)
Real estate, net				14,822,437		14,910,925
Cash and cash equivalents				618,361		690,789
Restricted cash				234,273		200,822
Marketable securities				821,920		766,116
Accounts receivable, net of allowance for doubtful accounts of $67,589 and $62,979				167,621		157,146
Investments in partially owned entities				1,116,294		927,672
Investment in Toys "R" Us				556,189		447,334
Real Estate Fund investments				230,657		144,423
Mezzanine loans receivable, net				140,567		202,412
Receivable arising from the straight-lining of rents, net of allowance of $7,972 and $7,323				732,384		720,806
Deferred leasing and financing costs, net of accumulated amortization of $233,987 and $223,131				359,677		368,314
Identified intangible assets, net of accumulated amortization of $350,104 and $338,508				333,270		348,745
Assets related to discontinued operations				-		234,464
Due from officers				13,181		13,187
Other assets				345,569		384,316
			$	20,492,400	$	20,517,471

LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND EQUITY
Notes and mortgages payable			$	8,594,920	$	8,259,298
Senior unsecured notes				982,588		1,082,928
Exchangeable senior debentures				492,690		491,000
Convertible senior debentures				187,198		186,413
Revolving credit facility debt				374,000		874,000
Accounts payable and accrued expenses				469,443		438,479
Deferred credit				578,629		583,369
Deferred compensation plan				97,951		91,549
Deferred tax liabilities				13,279		13,278
Liabilities related to discontinued operations				-		255,922
Other liabilities				90,338		82,856
	Total liabilities			11,881,036		12,359,092
Commitments and contingencies
Redeemable noncontrolling interests:
	Class A units - 12,634,510 and 12,804,202 units outstanding			1,105,520		1,066,974
	Series D cumulative redeemable preferred units - 10,400,001 units outstanding			261,000		261,000
		Total redeemable noncontrolling interests		1,366,520		1,327,974
Vornado shareholders' equity:
	Preferred shares of beneficial interest: no par value per share; authorized 110,000,000
		shares; issued and outstanding 32,339,009 and 32,340,009 shares		782,933		783,088
	Common shares of beneficial interest: $.04 par value per share; authorized
		250,000,000 shares; issued and outstanding 184,239,623 and 183,661,875 shares		7,340		7,317
	Additional capital			6,935,735		6,932,728
	Earnings less than distributions			(1,208,993)		(1,480,876)
	Accumulated other comprehensive income			130,614		73,453
		Total Vornado shareholders' equity		6,647,629		6,315,710
Noncontrolling interests in consolidated subsidiaries				597,215		514,695
	Total equity			7,244,844		6,830,405
			$	20,492,400	$	20,517,471

See notes to the consolidated financial statements (unaudited).

VORNADO REALTY TRUST CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)


		For the Three Months Ended March 31,
(Amounts in thousands, except per share amounts)		2011		2010

REVENUES:
	Property rentals	$	571,160	$	552,457
	Tenant expense reimbursements		90,959		91,930
	Cleveland Medical Mart development project		40,699		-
	Fee and other income		34,293		40,927
Total revenues			737,111		685,314
EXPENSES:
	Operating		290,773		274,693
	Depreciation and amortization		132,227		133,793
	General and administrative		59,003		48,630
	Cleveland Medical Mart development project		38,278		-
	Acquisition and other costs		18,270		-
Total expenses			538,551		457,116
Operating income			198,560		228,198
Income applicable to Toys "R" Us			112,944		125,870
Income from partially owned entities			16,284		11,344
Income from Real Estate Fund			1,080		-
Interest and other investment income, net			117,108		14,704
Interest and debt expense (including amortization of deferred
	financing costs of $4,633 and $4,426 respectively)		(134,765)		(135,727)
Net gain on disposition of wholly owned and partially owned assets			6,677		3,305
Income before income taxes			317,888		247,694
Income tax expense			(6,382)		(5,580)
Income from continuing operations			311,506		242,114
Income (loss) from discontinued operations			134,315		(9,570)
Net income			445,821		232,544
Net (income) attributable to noncontrolling interests in consolidated subsidiaries			(1,350)		(213)
Net (income) attributable to noncontrolling interests in the Operating Partnership,
	including unit distributions		(31,808)		(17,779)
Net income attributable to Vornado			412,663		214,552
Preferred share dividends			(13,448)		(14,267)
NET INCOME attributable to common shareholders		$	399,215	$	200,285


INCOME PER COMMON SHARE - BASIC:
	Income from continuing operations, net	$	1.49	$	1.15
	Income (loss) from discontinued operations, net		0.68		(0.05)
	Net income per common share	$	2.17	$	1.10
	Weighted average shares		183,988		181,542

INCOME PER COMMON SHARE - DILUTED:
	Income from continuing operations, net	$	1.46	$	1.14
	Income (loss) from discontinued operations, net		0.66		(0.05)
	Net income per common share	$	2.12	$	1.09
	Weighted average shares		191,529		183,445

DIVIDENDS PER COMMON SHARE		$	0.69	$	0.65

See notes to consolidated financial statements (unaudited).

VORNADO REALTY TRUST CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(UNAUDITED)
															Accumulated
(Amounts in thousands)													Earnings		Other		Non-
			Preferred Shares				Common Shares				Additional		Less Than		Comprehensive		controlling		Total
			Shares		Amount		Shares		Amount		Capital		Distributions		Income (Loss)		Interests		Equity
Balance, December 31, 2009				33,952	$	823,686		181,214	$	7,218	$	6,961,007	$	(1,577,591)	$	28,449	$	406,637	$	6,649,406
Net income				-		-		-		-		-		214,552		-		213		214,765
Dividends paid on common
	shares			-		-		-		-		-		(117,958)		-		-		(117,958)
Dividends paid on preferred
	shares			-		-		-		-		-		(14,267)		-		-		(14,267)
Common shares issued:
	Upon redemption of Class A
		units, at redemption value		-		-		268		11		18,117		-		-		-		18,128
	Under employees' share
		option plan		-		-		405		16		541		(25,428)		-		-		(24,871)
	Under dividend reinvestment
		plan		-		-		6		-		390		-		-		-		390
Conversion of Series A
	preferred shares to common
	shares			(2)		(137)		4		-		137		-		-		-		-
Deferred compensation shares
	and options			-		-		17		2		1,644		-		-		-		1,646
Change in unrealized net gain
	on securities available-for-sale			-		-		-		-		-		-		17,588		-		17,588
Our share of partially owned
	entities' OCI adjustments			-		-		-		-		-		-		(15,688)		-		(15,688)
Adjustments to carry redeemable
	Class A units at redemption value			-		-		-		-		(104,247)		-		-		-		(104,247)
Other				-		-		-		-		(60)		2		(396)		(59)		(513)
Balance, March 31, 2010				33,950	$	823,549		181,914	$	7,247	$	6,877,529	$	(1,520,690)	$	29,953	$	406,791	$	6,624,379

															Accumulated
(Amounts in thousands)													Earnings		Other		Non-
			Preferred Shares				Common Shares				Additional		Less Than		Comprehensive		controlling		Total
			Shares		Amount		Shares		Amount		Capital		Distributions		Income (Loss)		Interests		Equity
Balance, December 31, 2010				32,340	$	783,088		183,662	$	7,317	$	6,932,728	$	(1,480,876)	$	73,453	$	514,695	$	6,830,405
Net income				-		-		-		-		-		412,663		-		1,350		414,013
Dividends paid on common
	shares			-		-		-		-		-		(126,936)		-		-		(126,936)
Dividends paid on preferred
	shares			-		-		-		-		-		(13,559)		-		-		(13,559)
Common shares issued:
	Upon redemption of Class A
		units, at redemption value		-		-		320		13		27,526		-		-		-		27,539
	Under employees' share
		option plan		-		-		240		10		15,027		(398)		-		-		14,639
	Under dividend reinvestment
		plan		-		-		5		-		434		-		-		-		434
Limited partners' contribution:
	Real Estate Fund			-		-		-		-		-		-		-		92,068		92,068
	Other			-		-		-		-		-		-		-		170		170
Conversion of Series A
	preferred shares to common
	shares			(1)		(50)		2		-		50		-		-		-		-
Deferred compensation shares
	and options			-		-		11		-		2,370		-		-		-		2,370
Change in unrealized net gain
	or loss on securities
	available-for-sale			-		-		-		-		-		-		68,039		-		68,039
Our share of partially owned
	entities' OCI adjustments			-		-		-		-		-		-		(3,791)		-		(3,791)
Adjustments to carry redeemable
	Class A units at redemption value			-		-		-		-		(42,227)		-		-		-		(42,227)
Distributions to limited partners				-		-		-		-		-		-		-		(11,027)		(11,027)
Other				-		(105)		-		-		(173)		113		(7,087)		(41)		(7,293)
Balance, March 31, 2011				32,339	$	782,933		184,240	$	7,340	$	6,935,735	$	(1,208,993)	$	130,614	$	597,215	$	7,244,844

See notes to consolidated financial statements (unaudited).

VORNADO REALTY TRUST

CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)

			For the Three Months Ended
			March 31,
			2011		2010
(Amounts in thousands)
Cash Flows from Operating Activities:
Net income			$	445,821	$	232,544
Adjustments to reconcile net income to net cash provided by operating activities:
	Depreciation and amortization (including amortization of deferred financing costs)			136,860		140,250
	Equity in net income of partially owned entities, including Toys “R” Us			(129,228)		(137,214)
	Net gain on early extinguishment of debt			(83,907)		-
	Mezzanine loans loss reversal and net gain on disposition			(82,744)		-
	Net gain on sales of real estate			(51,165)		-
	Distributions of income from partially owned entities			25,921		7,123
	Income from the mark-to-market of J.C. Penney derivative position			(17,163)		-
	Amortization of below-market leases, net			(16,892)		(15,907)
	Straight-lining of rental income			(13,942)		(20,922)
	Other non-cash adjustments			8,211		2,252
	Net gain on disposition of wholly owned and partially owned assets			(6,677)		(3,305)
	Litigation loss accrual			-		10,056
	Changes in operating assets and liabilities:
		Real Estate Fund investments		(85,536)		-
		Prepaid assets		34,761		44,855
		Other assets		2,947		(7,464)
		Accounts payable and accrued expenses		30,906		26,137
		Accounts receivable, net		(10,475)		(2,480)
		Other liabilities		8,404		12,123
Net cash provided by operating activities				196,102		288,048
Cash Flows from Investing Activities:
	Investments in partially owned entities			(316,129)		(36,741)
	Distributions of capital from partially owned entities			192,523		7,617
	Proceeds from sales of real estate and related investments			127,199		38,879
	Proceeds from sales and repayments of mezzanine loans			73,608