Edgar Filing: VORNADO REALTY TRUST

Document

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark one)



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



	For the quarterly period ended:	September 30, 2017



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



For the transition period from:		to



Commission File Number:	001-11954 (Vornado Realty Trust)
Commission File Number:	001-34482 (Vornado Realty L.P.)



	Vornado Realty Trust Vornado Realty L.P.

(Exact name of registrants as specified in its charter)



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

Vornado Realty L.P.	Delaware	13-3925979
	(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

(Registrants’ 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.

Vornado Realty Trust: Yes ☑ No ☐ Vornado Realty L.P.: Yes ☑ No ☐

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).

Vornado Realty Trust: Yes ☑ No ☐ Vornado Realty L.P.: Yes ☑ No ☐

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,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.



Vornado Realty Trust:
☑ Large Accelerated Filer		☐ Accelerated Filer
☐ Non-Accelerated Filer (Do not check if smaller reporting company)		☐ Smaller Reporting Company
		☐ Emerging Growth Company



Vornado Realty L.P.:
☐ Large Accelerated Filer		☐ Accelerated Filer
☑ Non-Accelerated Filer (Do not check if smaller reporting company)		☐ Smaller Reporting Company
		☐ Emerging Growth Company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Vornado Realty Trust: Yes ☐ No ☑ Vornado Realty L.P.: Yes ☐ No ☑

As of September 30, 2017, 189,877,859 of Vornado Realty Trust’s common shares of beneficial interest are outstanding.

EXPLANATORY NOTE

This report combines the quarterly reports on Form 10-Q for the period ended September 30, 2017 of Vornado Realty Trust and Vornado Realty L.P. Unless stated otherwise or the context otherwise requires, references to “Vornado” refer to Vornado Realty Trust, a Maryland real estate investment trust (“REIT”), and references to the “Operating Partnership” refer to Vornado Realty L.P., a Delaware limited partnership. References to the “Company,” “we,” “us” and “our” mean collectively Vornado, the Operating Partnership and those subsidiaries consolidated by Vornado.

The Operating Partnership is the entity through which we conduct substantially all of our business and own, either directly or through subsidiaries, substantially all of our assets. Vornado is the sole general partner and also a 93.5% limited partner of the Operating Partnership. As the sole general partner of the Operating Partnership, Vornado has exclusive control of the Operating Partnership’s day-to-day management.

Under the limited partnership agreement of the Operating Partnership, unitholders may present their Class A units for redemption at any time (subject to restrictions agreed upon at the time of issuance of the units that may restrict such right for a period of time). Class A units may be tendered for redemption to the Operating Partnership for cash; Vornado, at its option, may assume that obligation and pay the holder either cash or Vornado common shares on a one-for-one basis. Because the number of Vornado common shares outstanding at all times equals the number of Class A units owned by Vornado, the redemption value of each Class A unit is equivalent to the market value of one Vornado common share, and the quarterly distribution to a Class A unitholder is equal to the quarterly dividend paid to a Vornado common shareholder. This one-for-one exchange ratio is subject to specified adjustments to prevent dilution. Vornado generally expects that it will elect to issue its common shares in connection with each such presentation for redemption rather than having the Operating Partnership pay cash. With each such exchange or redemption, Vornado’s percentage ownership in the Operating Partnership will increase. In addition, whenever Vornado issues common shares other than to acquire Class A units of the Operating Partnership, Vornado must contribute any net proceeds it receives to the Operating Partnership and the Operating Partnership must issue to Vornado an equivalent number of Class A units of the Operating Partnership. This structure is commonly referred to as an umbrella partnership REIT, or UPREIT.

The Company believes that combining the quarterly reports on Form 10-Q of Vornado and the Operating Partnership into this single report provides the following benefits:


•	enhances investors’ understanding of Vornado and the Operating Partnership by enabling investors to view the business as a whole in the same manner as management views and operates the business;


•	eliminates duplicative disclosure and provides a more streamlined and readable presentation because a substantial portion of the disclosure applies to both Vornado and the Operating Partnership; and


•	creates time and cost efficiencies in the preparation of one combined report instead of two separate reports.

The Company believes it is important to understand the few differences between Vornado and the Operating Partnership in the context of how Vornado and the Operating Partnership operate as a consolidated company. The financial results of the Operating Partnership are consolidated into the financial statements of Vornado. Vornado does not have any significant assets, liabilities or operations, other than its investment in the Operating Partnership. The Operating Partnership, not Vornado, generally executes all significant business relationships other than transactions involving the securities of Vornado. The Operating Partnership holds substantially all of the assets of Vornado. The Operating Partnership conducts the operations of the business and is structured as a partnership with no publicly traded equity. Except for the net proceeds from equity offerings by Vornado, which are contributed to the capital of the Operating Partnership in exchange for units of limited partnership in the Operating Partnership, as applicable, the Operating Partnership generates all remaining capital required by the Company’s business. These sources may include working capital, net cash provided by operating activities, borrowings under the revolving credit facility, the issuance of secured and unsecured debt and equity securities, and proceeds received from the disposition of certain properties.

To help investors better understand the key differences between Vornado and the Operating Partnership, certain information for Vornado and the Operating Partnership in this report has been separated, as set forth below:


•	Item 1. Financial Statements (unaudited), which includes the following specific disclosures for Vornado Realty Trust and Vornado Realty L.P.:


•	Note 10. Redeemable Noncontrolling Interests/Redeemable Partnership Units


•	Note 18. (Loss) Income Per Share/(Loss) Income Per Class A Unit


•	Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations includes information specific to each entity, where applicable.

This report also includes separate Part I, Item 4. Controls and Procedures sections and separate Exhibits 31 and 32 certifications for each of Vornado and the Operating Partnership in order to establish that the requisite certifications have been made and that Vornado and the Operating Partnership are compliant with Rule 13a-15 or Rule 15d-15 of the Securities Exchange Act of 1934 and 18 U.S.C. §1350.



PART I.		Financial Information:	Page Number

	Item 1.	Financial Statements of Vornado Realty Trust:

		Consolidated Balance Sheets (Unaudited) as of September 30, 2017 and December 31, 2016	5

		Consolidated Statements of Income (Unaudited) for the Three and Nine Months Ended September 30, 2017 and 2016	6

		Consolidated Statements of Comprehensive Income (Unaudited) for the Three and Nine Months Ended September 30, 2017 and 2016	7

		Consolidated Statements of Changes in Equity (Unaudited) for the Nine Months Ended September 30, 2017 and 2016	8

		Consolidated Statements of Cash Flows (Unaudited) for the Nine Months Ended September 30, 2017 and 2016	10

		Financial Statements of Vornado Realty L.P.:

		Consolidated Balance Sheets (Unaudited) as of September 30, 2017 and December 31, 2016	12

		Consolidated Statements of Income (Unaudited) for the Three and Nine Months Ended September 30, 2017 and 2016	13

		Consolidated Statements of Comprehensive Income (Unaudited) for the Three and Nine Months Ended September 30, 2017 and 2016	14

		Consolidated Statements of Changes in Equity (Unaudited) for the Nine Months Ended September 30, 2017 and 2016	15

		Consolidated Statements of Cash Flows (Unaudited) for the Nine Months Ended September 30, 2017 and 2016	17

		Vornado Realty Trust and Vornado Realty L.P.:

		Notes to Consolidated Financial Statements (Unaudited)	19

		Reports of Independent Registered Public Accounting Firm	50

	Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	52

	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	92

	Item 4.	Controls and Procedures	93

PART II.		Other Information:

	Item 1.	Legal Proceedings	94

	Item 1A.	Risk Factors	94

	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	94

	Item 3.	Defaults Upon Senior Securities	94

	Item 4.	Mine Safety Disclosures	94

	Item 5.	Other Information	94

	Item 6.	Exhibits	94

SIGNATURES			96

EXHIBIT INDEX			95

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

VORNADO REALTY TRUST

CONSOLIDATED BALANCE SHEETS

(UNAUDITED)



(Amounts in thousands, except unit, share, and per share amounts)	September 30, 2017			December 31, 2016
ASSETS
Real estate, at cost:
Land	$	3,124,971		$	3,130,825
Buildings and improvements	9,824,618			9,684,144
Development costs and construction in progress	1,536,290			1,278,941
Leasehold improvements and equipment	96,820			93,910
Total	14,582,699			14,187,820
Less accumulated depreciation and amortization	(2,805,160		)	(2,581,514		)
Real estate, net	11,777,539			11,606,306
Cash and cash equivalents	1,282,230			1,501,027
Restricted cash	103,553			95,032
Marketable securities	193,145			203,704
Tenant and other receivables, net of allowance for doubtful accounts of $5,539 and $6,708	54,769			61,069
Investments in partially owned entities	1,064,982			1,378,254
Real estate fund investments	351,750			462,132
Receivable arising from the straight-lining of rents, net of allowance of $1,215 and $2,227	917,827			885,167
Deferred leasing costs, net of accumulated amortization of $186,041 and $170,952	354,573			354,997
Identified intangible assets, net of accumulated amortization $144,683 and $194,422	166,198			189,668
Assets related to discontinued operations	1,774			3,568,613
Other assets	573,780			508,878
	$	16,842,120		$	20,814,847
LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND EQUITY
Mortgages payable, net	$	8,131,606		$	8,113,248
Senior unsecured notes, net	846,641			845,577
Unsecured term loan, net	373,354			372,215
Unsecured revolving credit facilities	—			115,630
Accounts payable and accrued expenses	412,100			397,134
Deferred revenue	240,377			276,276
Deferred compensation plan	106,244			121,183
Liabilities related to discontinued operations	3,602			1,259,443
Other liabilities	469,919			417,199
Total liabilities	10,583,843			11,917,905
Commitments and contingencies
Redeemable noncontrolling interests:
Class A units - 12,555,623 and 12,197,162 units outstanding	965,276			1,273,018
Series D cumulative redeemable preferred units - 177,101 units outstanding	5,428			5,428
Total redeemable noncontrolling interests	970,704			1,278,446
Vornado's shareholders' equity:
Preferred shares of beneficial interest: no par value per share; authorized 110,000,000 shares; issued and outstanding 42,823,428 and 42,824,829 shares	1,038,011			1,038,055
Common shares of beneficial interest: $0.04 par value per share; authorized 250,000,000 shares; issued and outstanding 189,877,859 and 189,100,876 shares	7,571			7,542
Additional capital	7,501,823			7,153,332
Earnings less than distributions	(4,098,127		)	(1,419,382		)
Accumulated other comprehensive income	121,801			118,972
Total Vornado shareholders' equity	4,571,079			6,898,519
Noncontrolling interests in consolidated subsidiaries	716,494			719,977
Total equity	5,287,573			7,618,496
	$	16,842,120		$	20,814,847

See notes to consolidated financial statements (unaudited).

VORNADO REALTY TRUST

CONSOLIDATED STATEMENTS OF INCOME

(UNAUDITED)



(Amounts in thousands, except per share amounts)	Three Months Ended September 30,						Nine Months Ended September 30,
	2017			2016			2017			2016
REVENUES:
Property rentals	$	432,062		$	411,153		$	1,275,597		$	1,238,903
Tenant expense reimbursements	63,401			60,957			174,091			162,831
Fee and other income	33,292			30,643			98,212			88,034
Total revenues	528,755			502,753			1,547,900			1,489,768
EXPENSES:
Operating	225,226			213,762			661,585			626,546
Depreciation and amortization	104,972			105,877			315,223			316,383
General and administrative	36,261			33,584			122,161			112,593
Acquisition and transaction related costs	61			1,069			1,073			6,697
Total expenses	366,520			354,292			1,100,042			1,062,219
Operating income	162,235			148,461			447,858			427,549
(Loss) income from partially owned entities	(41,801		)	3,811			5,578			3,892
(Loss) income from real estate fund investments	(6,308		)	1,077			(1,649		)	28,750
Interest and other investment income, net	9,306			6,459			27,800			20,121
Interest and debt expense	(85,068		)	(79,721		)	(252,581		)	(250,034		)
Net gains on disposition of wholly owned and partially owned assets	—			—			501			160,225
Income before income taxes	38,364			80,087			227,507			390,503
Income tax expense	(1,188		)	(4,563		)	(2,429		)	(8,921		)
Income from continuing operations	37,176			75,524			225,078			381,582
(Loss) income from discontinued operations	(47,930		)	25,080			(14,501		)	(104,204		)
Net (loss) income	(10,754		)	100,604			210,577			277,378
Less net (income) loss attributable to noncontrolling interests in:
Consolidated subsidiaries	(4,022		)	(3,658		)	(18,436		)	(26,361		)
Operating Partnership	1,878			(4,366		)	(9,057		)	(11,410		)
Net (loss) income attributable to Vornado	(12,898		)	92,580			183,084			239,607
Preferred share dividends	(16,128		)	(19,047		)	(48,386		)	(59,774		)
Preferred share issuance costs (Series J redemption)	—			(7,408		)	—			(7,408		)
NET (LOSS) INCOME attributable to common shareholders	$	(29,026	)	$	66,125		$	134,698		$	172,425

(LOSS) INCOME PER COMMON SHARE – BASIC:
Income from continuing operations, net	$	0.09		$	0.23		$	0.78		$	1.43
(Loss) income from discontinued operations, net	(0.24		)	0.12			(0.07		)	(0.52		)
Net (loss) income per common share	$	(0.15	)	$	0.35		$	0.71		$	0.91
Weighted average shares outstanding	189,593			188,901			189,401			188,778

(LOSS) INCOME PER COMMON SHARE – DILUTED:
Income from continuing operations, net	$	0.09		$	0.23		$	0.78		$	1.42
(Loss) income from discontinued operations, net	(0.24		)	0.12			(0.07		)	(0.51		)
Net (loss) income per common share	$	(0.15	)	$	0.35		$	0.71		$	0.91
Weighted average shares outstanding	190,847			190,048			191,257			190,086

DIVIDENDS PER COMMON SHARE	$	0.60		$	0.63		$	2.02		$	1.89

See notes to consolidated financial statements (unaudited).

VORNADO REALTY TRUST

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(UNAUDITED)



(Amounts in thousands)	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
	2017			2016			2017			2016
Net (loss) income	$	(10,754	)	$	100,604		$	210,577		$	277,378
Other comprehensive income (loss):
Increase (reduction) in unrealized net gain on available-for-sale securities	5,656			3,685			(10,559		)	42,798
Pro rata share of amounts reclassified from accumulated other comprehensive income of a nonconsolidated subsidiary	(646		)	—			8,622			—
Pro rata share of other comprehensive loss of nonconsolidated subsidiaries	(626		)	(915		)	(1,657		)	(1,537		)
Increase (reduction) in value of interest rate swaps and other	1,973			7,689			6,611			(3,482		)
Comprehensive (loss) income	(4,397		)	111,063			213,594			315,157
Less comprehensive income attributable to noncontrolling interests	(2,539		)	(8,665		)	(27,681		)	(40,097		)
Comprehensive (loss) income attributable to Vornado	$	(6,936	)	$	102,398		$	185,913		$	275,060

See notes to consolidated financial statements (unaudited).

VORNADO REALTY TRUST

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(UNAUDITED)



(Amounts in thousands)
	Preferred Shares					Common Shares			Additional Capital			Earnings Less Than Distributions			Accumulated Other Comprehensive Income			Non-controlling Interests in Consolidated Subsidiaries			Total Equity
	Shares		Amount			Shares	Amount		Additional Capital			Earnings Less Than Distributions			Accumulated Other Comprehensive Income			Non-controlling Interests in Consolidated Subsidiaries			Total Equity
Balance, December 31, 2016	42,825		$	1,038,055		189,101	$	7,542	$	7,153,332		$	(1,419,382	)	$	118,972		$	719,977		$	7,618,496
Net income attributable to Vornado	—		—			—	—		—			183,084			—			—			183,084
Net income attributable to noncontrolling interests in consolidated subsidiaries	—		—			—	—		—			—			—			18,436			18,436
Dividends on common shares	—		—			—	—		—			(382,552		)	—			—			(382,552		)
Dividends on preferred shares	—		—			—	—		—			(48,386		)	—			—			(48,386		)
Common shares issued:
Upon redemption of Class A units, at redemption value	—		—			349	14		34,550			—			—			—			34,564
Under employees' share option plan	—		—			409	15		23,877			—			—			—			23,892
Under dividend reinvestment plan	—		—			12	—		1,119			—			—			—			1,119
Contributions	—		—			—	—		—			—			—			1,044			1,044
Distributions:
JBG SMITH Properties	—		—			—	—		—			(2,430,427		)	—			—			(2,430,427		)
Real estate fund investments	—		—			—	—		—			—			—			(20,851		)	(20,851		)
Other	—		—			—	—		—			—			—			(1,815		)	(1,815		)
Conversion of Series A preferred shares to common shares	(2	)	(44		)	2	—		44			—			—			—			—
Deferred compensation shares and options	—		—			1	—		1,975			(418		)	—			—			1,557
Reduction in unrealized net gain on available-for-sale securities	—		—			—	—		—			—			(10,559		)	—			(10,559		)
Pro rata share of amounts reclassified related to a nonconsolidated subsidiary	—		—			—	—		—			—			8,622			—			8,622
Pro rata share of other comprehensive loss of nonconsolidated subsidiaries	—		—			—	—		—			—			(1,657		)	—			(1,657		)
Increase in value of interest rate swaps	—		—			—	—		—			—			6,611			—			6,611
Adjustments to carry redeemable Class A units at redemption value	—		—			—	—		286,928			—			—			—			286,928
Redeemable noncontrolling interests' share of above adjustments	—		—			—	—		—			—			(188		)	—			(188		)
Other	—		—			4	—		(2		)	(46		)	—			(297		)	(345		)
Balance, September 30, 2017	42,823		$	1,038,011		189,878	$	7,571	$	7,501,823		$	(4,098,127	)	$	121,801		$	716,494		$	5,287,573

See notes to consolidated financial statements (unaudited).

VORNADO REALTY TRUST

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY - CONTINUED

(UNAUDITED)



(Amounts in thousands)											Additional Capital			Earnings Less Than Distributions			Accumulated Other Comprehensive Income			Non- controlling Interests in Consolidated Subsidiaries			Total Equity
	Preferred Shares					Common Shares
	Shares		Amount			Shares		Amount
Balance, December 31, 2015	52,677		$	1,276,954		188,577		$	7,521		$	7,132,979		$	(1,766,780	)	$	46,921		$	778,483		$	7,476,078
Net income attributable to Vornado	—		—			—		—			—			239,607			—			—			239,607
Net income attributable to noncontrolling interests in consolidated subsidiaries	—		—			—		—			—			—			—			26,361			26,361
Dividends on common shares	—		—			—		—			—			(356,863		)	—			—			(356,863		)
Dividends on preferred shares	—		—			—		—			—			(59,774		)	—			—			(59,774		)
Redemption of Series J preferred shares	(9,850	)	(238,842		)	—		—			—			(7,408		)	—			—			(246,250		)
Common shares issued:
Upon redemption of Class A units, at redemption value	—		—			293		12			28,114			—			—			—			28,126
Under employees' share option plan	—		—			106		4			5,936			—			—			—			5,940
Under dividend reinvestment plan	—		—			12		—			1,080			—			—			—			1,080
Contributions	—		—			—		—			—			—			—			19,699			19,699
Distributions:
Real estate fund investments	—		—			—		—			—			—			—			(59,843		)	(59,843		)
Other	—		—			—		—			—			—			—			(11,631		)	(11,631		)
Deferred compensation shares and options	—		—			7		1			1,370			(186		)	—			—			1,185
Increase in unrealized net gain on available-for-sale securities	—		—			—		—			—			—			42,798			—			42,798
Pro rata share of other comprehensive loss of nonconsolidated subsidiaries	—		—			—		—			—			—			(1,537		)	—			(1,537		)
Reduction in value of interest rate swaps	—		—			—		—			—			—			(3,482		)	—			(3,482		)
Adjustments to carry redeemable Class A units at redemption value	—		—			—		—			(30,260		)	—			—			—			(30,260		)
Redeemable noncontrolling interests' share of above adjustments	—		—			—		—			—			—			(2,326		)	—			(2,326		)
Other	—		(1		)	(1	)	(1		)	1			(7		)	—			86			78
Balance, September 30, 2016	42,827		$	1,038,111		188,994		$	7,537		$	7,139,220		$	(1,951,411	)	$	82,374		$	753,155		$	7,068,986

See notes to consolidated financial statements (unaudited).

VORNADO REALTY TRUST

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)



(Amounts in thousands)	For the Nine Months Ended September 30,
	2017			2016
Cash Flows from Operating Activities:
Net income	$	210,577		$	277,378
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization (including amortization of deferred financing costs)	407,539			446,040
Return of capital from real estate fund investments	80,294			71,888
Distributions of income from partially owned entities	65,097			56,853
Other non-cash adjustments	43,921			33,971
Straight-lining of rents	(37,752		)	(118,798		)
Amortization of below-market leases, net	(35,446		)	(41,676		)
Net realized and unrealized losses (gains) on real estate fund investments	18,537			(16,513		)
Equity in net income of partially owned entities	(6,013		)	(529		)
Net gains on sale of real estate and other	(3,797		)	(5,074		)
Net gains on disposition of wholly owned and partially owned assets	(501		)	(160,225		)
Real estate impairment losses	—			161,165
Changes in operating assets and liabilities:
Tenant and other receivables, net	5,485			613
Prepaid assets	(70,949		)	(58,998		)
Other assets	(27,065		)	(64,200		)
Accounts payable and accrued expenses	27,609			4,793
Other liabilities	(15,911		)	(14,274		)
Net cash provided by operating activities	661,625			572,414

Cash Flows from Investing Activities:
Distributions of capital from partially owned entities	347,776			102,836
Development costs and construction in progress	(274,716		)	(426,641		)
Additions to real estate	(207,759		)	(261,971		)
Repayment of JBG SMITH Properties loan receivable	115,630			—
Investments in partially owned entities	(33,578		)	(112,797		)
Acquisitions of real estate and other	(11,841		)	(91,100		)
Proceeds from sales of real estate and related investments	9,543			167,673
Proceeds from repayments of mortgage loans receivable	650			33
Net deconsolidation of 7 West 34th Street	—			(48,000		)
Investments in loans receivable and other	—			(11,700		)
Purchases of marketable securities	—			(4,379		)
Net cash used in investing activities	(54,295		)	(686,046		)

See notes to consolidated financial statements (unaudited).

VORNADO REALTY TRUST

CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED

(UNAUDITED)



(Amounts in thousands)	For the Nine Months Ended September 30,
	2017			2016
Cash Flows from Financing Activities:
Cash and cash equivalents and restricted cash included in the spin-off of JBG SMITH Properties ($275,000 plus The Bartlett financing proceeds less transaction costs and other mortgage items)	$	(416,237	)	$	—
Dividends paid on common shares	(382,552		)	(356,863		)
Proceeds from borrowings	229,042			2,000,604
Repayments of borrowings	(177,109		)	(1,591,554		)
Dividends paid on preferred shares	(48,386		)	(64,006		)
Distributions to noncontrolling interests	(48,329		)	(95,055		)
Proceeds received from exercise of employee share options	25,011			7,020
Debt issuance and other costs	(2,944		)	(30,846		)
Contributions from noncontrolling interests	1,044			11,900
Repurchase of shares related to stock compensation agreements and related tax withholdings and other	(418		)	(186		)
Redemption of preferred shares	—			(246,250		)
Net cash used in financing activities	(820,878		)	(365,236		)
Net decrease in cash and cash equivalents and restricted cash	(213,548		)	(478,868		)
Cash and cash equivalents and restricted cash at beginning of period	1,599,331			1,943,515
Cash and cash equivalents and restricted cash at end of period	$	1,385,783		$	1,464,647

Reconciliation of Cash and Cash Equivalents and Restricted Cash:
Cash and cash equivalents at beginning of period	$	1,501,027		$	1,835,707
Restricted cash at beginning of period	95,032			99,943
Restricted cash included in discontinued operations at beginning of period	3,272			7,865
Cash and cash equivalents and restricted cash at beginning of period	$	1,599,331		$	1,943,515

Cash and cash equivalents at end of period	$	1,282,230		$	1,352,697
Restricted cash at end of period	103,553			108,976
Restricted cash included in discontinued operations at end of period	—			2,974
Cash and cash equivalents and restricted cash at end of period	$	1,385,783		$	1,464,647

Supplemental Disclosure of Cash Flow Information:
Cash payments for interest, excluding capitalized interest of $31,243 and $21,297	$	257,173		$	275,979
Cash payments for income taxes	$	5,292		$	7,602

Non-Cash Investing and Financing Activities:
Non-cash distribution to JBG SMITH Properties:
Assets	$	3,432,738		$	—
Liabilities	(1,414,186		)	—
Equity	(2,018,552		)	—
Adjustments to carry redeemable Class A units at redemption value	286,928			(30,260		)
Loan receivable established upon the spin-off of JBG SMITH Properties	115,630			—
Accrued capital expenditures included in accounts payable and accrued expenses	69,033			129,704
Write-off of fully depreciated assets	(41,458		)	(283,496		)
(Reduction) increase in unrealized net gain on available-for-sale securities	(10,559		)	42,798
Decrease in assets and liabilities resulting from the deconsolidation of investments that were previously consolidated:
Real estate, net	—			(122,047		)
Mortgage payable, net	—			(290,418		)

See notes to consolidated financial statements (unaudited).

VORNADO REALTY L.P.

CONSOLIDATED BALANCE SHEETS

(UNAUDITED)



(Amounts in thousands, except unit amounts)	September 30, 2017			December 31, 2016
ASSETS
Real estate, at cost:
Land	$	3,124,971		$	3,130,825
Buildings and improvements	9,824,618			9,684,144
Development costs and construction in progress	1,536,290			1,278,941
Leasehold improvements and equipment	96,820			93,910
Total	14,582,699			14,187,820
Less accumulated depreciation and amortization	(2,805,160		)	(2,581,514		)
Real estate, net	11,777,539			11,606,306
Cash and cash equivalents	1,282,230			1,501,027
Restricted cash	103,553			95,032
Marketable securities	193,145			203,704
Tenant and other receivables, net of allowance for doubtful accounts of $5,539 and $6,708	54,769			61,069
Investments in partially owned entities	1,064,982			1,378,254
Real estate fund investments	351,750			462,132
Receivable arising from the straight-lining of rents, net of allowance of $1,215 and $2,227	917,827			885,167
Deferred leasing costs, net of accumulated amortization of $186,041 and $170,952	354,573			354,997
Identified intangible assets, net of accumulated amortization $144,683 and $194,422	166,198			189,668
Assets related to discontinued operations	1,774			3,568,613
Other assets	573,780			508,878
	$	16,842,120		$	20,814,847
LIABILITIES, REDEEMABLE PARTNERSHIP UNITS AND EQUITY
Mortgages payable, net	$	8,131,606		$	8,113,248
Senior unsecured notes, net	846,641			845,577
Unsecured term loan, net	373,354			372,215
Unsecured revolving credit facilities	—			115,630
Accounts payable and accrued expenses	412,100			397,134
Deferred revenue	240,377			276,276
Deferred compensation plan	106,244			121,183
Liabilities related to discontinued operations	3,602			1,259,443
Other liabilities	469,919			417,199
Total liabilities	10,583,843			11,917,905
Commitments and contingencies
Redeemable partnership units:
Class A units - 12,555,623 and 12,197,162 units outstanding	965,276			1,273,018
Series D cumulative redeemable preferred units - 177,101 units outstanding	5,428			5,428
Total redeemable partnership units	970,704			1,278,446
Equity:
Partners' capital	8,547,405			8,198,929
Earnings less than distributions	(4,098,127		)	(1,419,382		)
Accumulated other comprehensive income	121,801			118,972
Total Vornado Realty L.P. equity	4,571,079			6,898,519
Noncontrolling interests in consolidated subsidiaries	716,494			719,977
Total equity	5,287,573			7,618,496
	$	16,842,120		$	20,814,847

See notes to consolidated financial statements (unaudited).

VORNADO REALTY L.P.

CONSOLIDATED STATEMENTS OF INCOME

(UNAUDITED)



(Amounts in thousands, except per unit amounts)	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
	2017			2016			2017			2016
REVENUES:
Property rentals	$	432,062		$	411,153		$	1,275,597		$	1,238,903
Tenant expense reimbursements	63,401			60,957			174,091			162,831
Fee and other income	33,292			30,643			98,212			88,034
Total revenues	528,755			502,753			1,547,900			1,489,768
EXPENSES:
Operating	225,226			213,762			661,585			626,546
Depreciation and amortization	104,972			105,877			315,223			316,383
General and administrative	36,261			33,584			122,161			112,593
Acquisition and transaction related costs	61			1,069			1,073			6,697
Total expenses	366,520			354,292			1,100,042			1,062,219
Operating income	162,235			148,461			447,858			427,549
(Loss) income from partially owned entities	(41,801		)	3,811			5,578			3,892
(Loss) income from real estate fund investments	(6,308		)	1,077			(1,649		)	28,750
Interest and other investment income, net	9,306			6,459			27,800			20,121
Interest and debt expense	(85,068		)	(79,721		)	(252,581		)	(250,034		)
Net gains on disposition of wholly owned and partially owned assets	—			—			501			160,225
Income before income taxes	38,364			80,087			227,507			390,503
Income tax expense	(1,188		)	(4,563		)	(2,429		)	(8,921		)
Income from continuing operations	37,176			75,524			225,078			381,582
(Loss) income from discontinued operations	(47,930		)	25,080			(14,501		)	(104,204		)
Net (loss) income	(10,754		)	100,604			210,577			277,378
Less net income attributable to noncontrolling interests in consolidated subsidiaries	(4,022		)	(3,658		)	(18,436		)	(26,361		)
Net (loss) income attributable to Vornado Realty L.P.	(14,776		)	96,946			192,141			251,017
Preferred unit distributions	(16,176		)	(19,096		)	(48,531		)	(59,920		)
Preferred unit issuance costs (Series J redemption)	—			(7,408		)	—			(7,408		)
NET (LOSS) INCOME attributable to Class A unitholders	$	(30,952	)	$	70,442		$	143,610		$	183,689

(LOSS) INCOME PER CLASS A UNIT – BASIC:
Income from continuing operations, net	$	0.08		$	0.22		$	0.77		$	1.43
(Loss) income from discontinued operations, net	(0.24		)	0.13			(0.07		)	(0.52		)
Net (loss) income per Class A unit	$	(0.16	)	$	0.35		$	0.70		$	0.91
Weighted average units outstanding	201,300			200,458			201,093			200,300

(LOSS) INCOME PER CLASS A UNIT – DILUTED:
Income from continuing operations, net	$	0.08		$	0.22		$	0.76		$	1.42
(Loss) income from discontinued operations, net	(0.24		)	0.13			(0.07		)	(0.52		)
Net (loss) income per Class A unit	$	(0.16	)	$	0.35		$	0.69		$	0.90
Weighted average units outstanding	203,113			202,141			203,311			201,932

DISTRIBUTIONS PER CLASS A UNIT	$	0.60		$	0.63		$	2.02		$	1.89

See notes to consolidated financial statements (unaudited).

VORNADO REALTY L.P.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(UNAUDITED)



(Amounts in thousands)	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
	2017			2016			2017			2016
Net (loss) income	$	(10,754	)	$	100,604		$	210,577		$	277,378
Other comprehensive income (loss):
Increase (reduction) in unrealized net gain on available-for-sale securities	5,656			3,685			(10,559		)	42,798
Pro rata share of amounts reclassified from accumulated other comprehensive income of a nonconsolidated subsidiary	(646		)	—			8,622			—
Pro rata share of other comprehensive loss of nonconsolidated subsidiaries	(626		)	(915		)	(1,657		)	(1,537		)
Increase (reduction) in value of interest rate swaps and other	1,973			7,689			6,611			(3,482		)
Comprehensive (loss) income	(4,397		)	111,063			213,594			315,157
Less comprehensive income attributable to noncontrolling interests in consolidated subsidiaries	(4,022		)	(3,658		)	(18,436		)	(26,361		)
Comprehensive (loss) income attributable to Vornado L.P.	$	(8,419	)	$	107,405		$	195,158		$	288,796

See notes to consolidated financial statements (unaudited).

VORNADO REALTY L.P.

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(UNAUDITED)



(Amounts in thousands)
	Preferred Units			Class A Units Owned by Vornado			Earnings Less Than Distributions			Accumulated Other Comprehensive Income		Non- controlling Interests in Consolidated Subsidiaries		Total Equity
	Units	Amount		Units	Amount		Earnings Less Than Distributions			Accumulated Other Comprehensive Income		Non- controlling Interests in Consolidated Subsidiaries		Total Equity
Balance, December 31, 2016	42,825	$	1,038,055	189,101	$	7,160,874	$	(1,419,382	)	$	118,972	$	719,977	$	7,618,496
Net income attributable to Vornado Realty L.P.	—	—		—	—		192,141			—		—		192,141
Net income attributable to redeemable partnership units	—	—		—	—		(9,057		)	—		—		(9,057		)
Net income attributable to noncontrolling interests in consolidated subsidiaries	—	—		—	—		—			—		18,436		18,436
Distributions to Vornado	—	—		—	—		(382,552		)	—		—		(382,552		)
Distributions to preferred unitholders	—	—		—	—		(48,386		)	—		—		(48,386		)
Class A Units issued to Vornado:
Upon redemption of redeemable Class A units, at redemption value	—	—		349	34,564		—			—		—		34,564
Under Vornado's employees' share option plan	—	—		409	23,892		—