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:	March 31, 2018



☐	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, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” "non-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 March 31, 2018, 190,169,168 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 March 31, 2018 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 93.4% 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 12. Redeemable Noncontrolling Interests/Redeemable Partnership Units


•	Note 20. (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 March 31, 2018 and December 31, 2017	5

		Consolidated Statements of Income (Unaudited) for the Three Months Ended March 31, 2018 and 2017	6

		Consolidated Statements of Comprehensive Income (Unaudited) for the Three Months Ended March 31, 2018 and 2017	7

		Consolidated Statements of Changes in Equity (Unaudited) for the Three Months Ended March 31, 2018 and 2017	8

		Consolidated Statements of Cash Flows (Unaudited) for the Three Months Ended March 31, 2018 and 2017	10

		Financial Statements of Vornado Realty L.P.:

		Consolidated Balance Sheets (Unaudited) as of March 31, 2018 and December 31, 2017	12

		Consolidated Statements of Income (Unaudited) for the Three Months Ended March 31, 2018 and 2017	13

		Consolidated Statements of Comprehensive Income (Unaudited) for the Three Months Ended March 31, 2018 and 2017	14

		Consolidated Statements of Changes in Equity (Unaudited) for the Three Months Ended March 31, 2018 and 2017	15

		Consolidated Statements of Cash Flows (Unaudited) for the Three Months Ended March 31, 2018 and 2017	17

		Vornado Realty Trust and Vornado Realty L.P.:

		Notes to Consolidated Financial Statements (Unaudited)	19

		Reports of Independent Registered Public Accounting Firm	42

	Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	44

	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	72

	Item 4.	Controls and Procedures	73

PART II.		Other Information:

	Item 1.	Legal Proceedings	74

	Item 1A.	Risk Factors	74

	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	74

	Item 3.	Defaults Upon Senior Securities	74

	Item 4.	Mine Safety Disclosures	74

	Item 5.	Other Information	74

	Item 6.	Exhibits	74

EXHIBIT INDEX			75

SIGNATURES			76

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)	March 31, 2018			December 31, 2017
ASSETS
Real estate, at cost:
Land	$	3,170,158		$	3,143,648
Buildings and improvements	9,946,225			9,898,605
Development costs and construction in progress	1,705,244			1,615,101
Leasehold improvements and equipment	104,710			98,941
Total	14,926,337			14,756,295
Less accumulated depreciation and amortization	(2,962,983		)	(2,885,283		)
Real estate, net	11,963,354			11,871,012
Cash and cash equivalents	1,327,384			1,817,655
Restricted cash	90,684			97,157
Marketable securities	149,766			182,752
Tenant and other receivables, net of allowance for doubtful accounts of $5,171 and $5,526	64,387			58,700
Investments in partially owned entities	1,033,228			1,056,829
Real estate fund investments	336,552			354,804
Receivable arising from the straight-lining of rents, net of allowance of $739 and $954	934,535			926,711
Deferred leasing costs, net of accumulated amortization of $194,078 and $191,827	405,209			403,492
Identified intangible assets, net of accumulated amortization of $157,062 and $150,837	152,834			159,260
Assets related to discontinued operations	275			1,357
Other assets	406,275			468,205
	$	16,864,483		$	17,397,934
LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND EQUITY
Mortgages payable, net	$	8,102,238		$	8,137,139
Senior unsecured notes, net	843,125			843,614
Unsecured term loan, net	749,114			748,734
Unsecured revolving credit facilities	80,000			—
Accounts payable and accrued expenses	431,094			415,794
Deferred revenue	200,648			227,069
Deferred compensation plan	109,525			109,177
Liabilities related to discontinued operations	1,176			3,620
Preferred shares redeemed on January 4 and 11, 2018	—			455,514
Other liabilities	465,659			464,635
Total liabilities	10,982,579			11,405,296
Commitments and contingencies
Redeemable noncontrolling interests:
Class A units - 12,653,821 and 12,528,899 units outstanding	851,598			979,509
Series D cumulative redeemable preferred units - 177,101 units outstanding	5,428			5,428
Total redeemable noncontrolling interests	857,026			984,937
Vornado's shareholders' equity:
Preferred shares of beneficial interest: no par value per share; authorized 110,000,000 shares; issued and outstanding 36,799,573 shares	891,325			891,988
Common shares of beneficial interest: $0.04 par value per share; authorized 250,000,000 shares; issued and outstanding 190,169,168 and 189,983,858 shares	7,584			7,577
Additional capital	7,629,013			7,492,658
Earnings less than distributions	(4,198,088		)	(4,183,253		)
Accumulated other comprehensive income	30,258			128,682
Total Vornado shareholders' equity	4,360,092			4,337,652
Noncontrolling interests in consolidated subsidiaries	664,786			670,049
Total equity	5,024,878			5,007,701
	$	16,864,483		$	17,397,934

See notes to consolidated financial statements (unaudited).

VORNADO REALTY TRUST

CONSOLIDATED STATEMENTS OF INCOME

(UNAUDITED)



(Amounts in thousands, except per share amounts)	For the Three Months Ended March 31,
	2018			2017
REVENUES:
Property rentals	$	440,110		$	414,892
Tenant expense reimbursements	60,310			59,033
Fee and other income	36,017			34,133
Total revenues	536,437			508,058
EXPENSES:
Operating	237,602			220,659
Depreciation and amortization	108,686			105,128
General and administrative	43,633			47,237
(Income) expense from deferred compensation plan liability	(404		)	2,469
Transaction related costs and other	13,156			752
Total expenses	402,673			376,245
Operating income	133,764			131,813
(Loss) income from partially owned entities	(9,904		)	1,358
(Loss) income from real estate fund investments	(8,807		)	268
Interest and other investment (loss) income, net	(24,384		)	6,695
(Loss) income from deferred compensation plan assets	(404		)	2,469
Interest and debt expense	(88,166		)	(82,724		)
Net gains on disposition of wholly owned and partially owned assets	—			501
Income before income taxes	2,099			60,380
Income tax expense	(1,454		)	(1,851		)
Income from continuing operations	645			58,529
(Loss) income from discontinued operations	(363		)	15,318
Net income	282			73,847
Less net loss (income) attributable to noncontrolling interests in:
Consolidated subsidiaries	8,274			(6,737		)
Operating Partnership	1,124			(3,229		)
Net income attributable to Vornado	9,680			63,881
Preferred share dividends	(13,035		)	(16,129		)
Preferred share issuance costs	(14,486		)	—
NET (LOSS) INCOME attributable to common shareholders	$	(17,841	)	$	47,752

(LOSS) INCOME PER COMMON SHARE – BASIC:
(Loss) income from continuing operations, net	$	(0.09	)	$	0.18
Income from discontinued operations, net	—			0.07
Net (loss) income per common share	$	(0.09	)	$	0.25
Weighted average shares outstanding	190,081			189,210

(LOSS) INCOME PER COMMON SHARE – DILUTED:
(Loss) income from continuing operations, net	$	(0.09	)	$	0.18
Income from discontinued operations, net	—			0.07
Net (loss) income per common share	$	(0.09	)	$	0.25
Weighted average shares outstanding	190,081			190,372

DIVIDENDS PER COMMON SHARE	$	0.63		$	0.71

See notes to consolidated financial statements (unaudited).

VORNADO REALTY TRUST

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(UNAUDITED)



(Amounts in thousands)	For the Three Months Ended March 31,
	2018		2017
Net income	$	282	$	73,847
Other comprehensive income (loss):
Increase in value of interest rate swaps	10,258		5,842
Pro rata share of other comprehensive income (loss) of nonconsolidated subsidiaries	346		(51		)
Reduction in unrealized net gain on available-for-sale securities	—		(15,009		)
Pro rata share of amounts reclassified from accumulated other comprehensive income of a nonconsolidated subsidiary	—		9,268
Comprehensive income	10,886		73,897
Less comprehensive loss (income) attributable to noncontrolling interests	8,744		(9,969		)
Comprehensive income attributable to Vornado	$	19,630	$	63,928

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, 2017	36,800	$	891,988		189,984	$	7,577	$	7,492,658	$	(4,183,253	)	$	128,682		$	670,049		$	5,007,701
Cumulative effect of accounting change (see Note 3)	—	—			—	—		—		122,893			(108,374		)	—			14,519
Net income attributable to Vornado	—	—			—	—		—		9,680			—			—			9,680
Net loss attributable to noncontrolling interests in consolidated subsidiaries	—	—			—	—		—		—			—			(8,274		)	(8,274		)
Dividends on common shares	—	—			—	—		—		(119,764		)	—			—			(119,764		)
Dividends on preferred shares	—	—			—	—		—		(13,035		)	—			—			(13,035		)
Preferred share issuance costs	—	—			—	—		—		(14,486		)	—			—			(14,486		)
Common shares issued:
Upon redemption of Class A units, at redemption value	—	—			118	5		8,387		—			—			—			8,392
Under employees' share option plan	—	—			55	2		3,432		—			—			—			3,434
Under dividend reinvestment plan	—	—			5	—		335		—			—			—			335
Contributions	—	—			—	—		—		—			—			8,370			8,370
Distributions:
Real estate fund investments	—	—			—	—		—		—			—			(1,910		)	(1,910		)
Other	—	—			—	—		—		—			—			(3,450		)	(3,450		)
Preferred share issuance	—	(663		)	—	—		—		—			—			—			(663		)
Deferred compensation shares and options	—	—			7	—		298		(121		)	—			—			177
Pro rata share of other comprehensive income of nonconsolidated subsidiaries	—	—			—	—		—		—			346			—			346
Increase in value of interest rate swaps	—	—			—	—		—		—			10,258			—			10,258
Unearned 2015 Out-Performance Plan awards acceleration	—	—			—	—		9,046		—			—			—			9,046
Adjustments to carry redeemable Class A units at redemption value	—	—			—	—		114,856		—			—			—			114,856
Redeemable noncontrolling interests' share of above adjustments	—	—			—	—		—		—			(654		)	—			(654		)
Other	—	—			—	—		1		(2		)	—			1			—
Balance, March 31, 2018	36,800	$	891,325		190,169	$	7,584	$	7,629,013	$	(4,198,088	)	$	30,258		$	664,786		$	5,024,878

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, 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	—	—			—	—		—		63,881			—			—			63,881
Net income attributable to noncontrolling interests in consolidated subsidiaries	—	—			—	—		—		—			—			6,737			6,737
Dividends on common shares	—	—			—	—		—		(134,332		)	—			—			(134,332		)
Dividends on preferred shares	—	—			—	—		—		(16,129		)	—			—			(16,129		)
Common shares issued:
Upon redemption of Class A units, at redemption value	—	—			140	6		14,733		—			—			—			14,739
Under employees' share option plan	—	—			96	3		8,094		—			—			—			8,097
Under dividend reinvestment plan	—	—			3	—		387		—			—			—			387
Contributions	—	—			—	—		—		—			—			75			75
Distributions:
Real estate fund investments	—	—			—	—		—		—			—			(4,528		)	(4,528		)
Other	—	—			—	—		—		—			—			(590		)	(590		)
Conversion of Series A preferred shares to common shares	—	(6		)	—	—		6		—			—			—			—
Deferred compensation shares and options	—	—			3	—		575		(264		)	—			—			311
Reduction in unrealized net gain on available-for-sale securities	—	—			—	—		—		—			(15,009		)	—			(15,009		)
Pro rata share of amounts reclassified related to a nonconsolidated subsidiary	—	—			—	—		—		—			9,268			—			9,268
Pro rata share of other comprehensive loss of nonconsolidated subsidiaries	—	—			—	—		—		—			(51		)	—			(51		)
Increase in value of interest rate swaps	—	—			—	—		—		—			5,842			—			5,842
Adjustments to carry redeemable Class A units at redemption value	—	—			—	—		6,197		—			—			—			6,197
Redeemable noncontrolling interests' share of above adjustments	—	—			—	—		—		—			(3		)	—			(3		)
Other	—	—			—	—		—		(10		)	—			(51		)	(61		)
Balance, March 31, 2017	42,825	$	1,038,049		189,343	$	7,551	$	7,183,324	$	(1,506,236	)	$	119,019		$	721,620		$	7,563,327

See notes to consolidated financial statements (unaudited).

VORNADO REALTY TRUST

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)



(Amounts in thousands)	For the Three Months Ended March 31,
	2018			2017
Cash Flows from Operating Activities:
Net income	$	282		$	73,847
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization (including amortization of deferred financing costs)	115,337			145,886
Decrease in fair value of marketable securities	32,986			—
Distributions of income from partially owned entities	20,559			18,226
Return of capital from real estate fund investments	14,966			—
Amortization of below-market leases, net	(10,581		)	(11,459		)
Equity in net loss (income) of partially owned entities	9,904			(1,445		)
Straight-lining of rents	(7,430		)	(15,522		)
Net realized and unrealized losses on real estate fund investments	911			6,946
Net gains on sale of real estate and other	—			(2,267		)
Net gains on disposition of wholly owned and partially owned assets	—			(501		)
Other non-cash adjustments	14,736			17,535
Changes in operating assets and liabilities:
Real estate fund investments	(2,950		)	—
Tenant and other receivables, net	(5,702		)	2,027
Prepaid assets	77,053			72,051
Other assets	(15,151		)	(11,452		)
Accounts payable and accrued expenses	19,835			(670		)
Other liabilities	663			8,083
Net cash provided by operating activities	265,418			301,285

Cash Flows from Investing Activities:
Development costs and construction in progress	(86,808		)	(98,227		)
Additions to real estate	(54,284		)	(67,363		)
Acquisitions of real estate and other	(44,095		)	(1,171		)
Investments in partially owned entities	(7,519		)	(6,679		)
Distributions of capital from partially owned entities	2,086			11,592
Proceeds from sales of real estate and related investments	—			5,180
Proceeds from repayments of mortgage loans receivable	—			14
Net cash used in investing activities	(190,620		)	(156,654		)

See notes to consolidated financial statements (unaudited).

VORNADO REALTY TRUST

CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED

(UNAUDITED)



(Amounts in thousands)	For the Three Months Ended March 31,
	2018			2017
Cash Flows from Financing Activities:
Redemption of preferred shares	$	(470,000	)	$	—
Proceeds from borrowings	185,701			2,529
Repayments of borrowings	(144,822		)	(6,987		)
Dividends paid on common shares	(119,764		)	(134,332		)
Dividends paid on preferred shares	(16,628		)	(16,129		)
Distributions to noncontrolling interests	(13,266		)	(14,281		)
Contributions from noncontrolling interests	8,370			75
Proceeds received from exercise of employee share options and other	3,769			8,484
Debt issuance costs	(3,300		)	(43		)
Debt prepayment and extinguishment costs	(818		)	—
Repurchase of shares related to stock compensation agreements and related tax withholdings and other	(784		)	(264		)
Net cash used in financing activities	(571,542		)	(160,948		)
Net decrease in cash and cash equivalents and restricted cash	(496,744		)	(16,317		)
Cash and cash equivalents and restricted cash at beginning of period	1,914,812			1,599,322
Cash and cash equivalents and restricted cash at end of period	$	1,418,068		$	1,583,005

Reconciliation of Cash and Cash Equivalents and Restricted Cash:
Cash and cash equivalents at beginning of period	$	1,817,655		$	1,501,027
Restricted cash at beginning of period	97,157			95,032
Restricted cash included in discontinued operations at beginning of period	—			3,263
Cash and cash equivalents and restricted cash at beginning of period	$	1,914,812		$	1,599,322

Cash and cash equivalents at end of period	$	1,327,384		$	1,484,814
Restricted cash at end of period	90,684			93,463
Restricted cash included in discontinued operations at end of period	—			4,728
Cash and cash equivalents and restricted cash at end of period	$	1,418,068		$	1,583,005

Supplemental Disclosure of Cash Flow Information:
Cash payments for interest, excluding capitalized interest of $13,272 and $9,364	$	84,566		$	88,078
Cash payments for income taxes	$	1,646		$	1,512

Non-Cash Investing and Financing Activities:
Adjustments to carry redeemable Class A units at redemption value	$	114,856		$	6,197
Accrued capital expenditures included in accounts payable and accrued expenses	51,431			57,993
Write-off of fully depreciated assets	(15,707		)	(15,809		)
Reduction in unrealized net gain on available-for-sale securities	—			(15,009		)

See notes to consolidated financial statements (unaudited).

VORNADO REALTY L.P.

CONSOLIDATED BALANCE SHEETS

(UNAUDITED)



(Amounts in thousands, except unit amounts)	March 31, 2018			December 31, 2017
ASSETS
Real estate, at cost:
Land	$	3,170,158		$	3,143,648
Buildings and improvements	9,946,225			9,898,605
Development costs and construction in progress	1,705,244			1,615,101
Leasehold improvements and equipment	104,710			98,941
Total	14,926,337			14,756,295
Less accumulated depreciation and amortization	(2,962,983		)	(2,885,283		)
Real estate, net	11,963,354			11,871,012
Cash and cash equivalents	1,327,384			1,817,655
Restricted cash	90,684			97,157
Marketable securities	149,766			182,752
Tenant and other receivables, net of allowance for doubtful accounts of $5,171 and $5,526	64,387			58,700
Investments in partially owned entities	1,033,228			1,056,829
Real estate fund investments	336,552			354,804
Receivable arising from the straight-lining of rents, net of allowance of $739 and $954	934,535			926,711
Deferred leasing costs, net of accumulated amortization of $194,078 and $191,827	405,209			403,492
Identified intangible assets, net of accumulated amortization of $157,062 and $150,837	152,834			159,260
Assets related to discontinued operations	275			1,357
Other assets	406,275			468,205
	$	16,864,483		$	17,397,934
LIABILITIES, REDEEMABLE PARTNERSHIP UNITS AND EQUITY
Mortgages payable, net	$	8,102,238		$	8,137,139
Senior unsecured notes, net	843,125			843,614
Unsecured term loan, net	749,114			748,734
Unsecured revolving credit facilities	80,000			—
Accounts payable and accrued expenses	431,094			415,794
Deferred revenue	200,648			227,069
Deferred compensation plan	109,525			109,177
Liabilities related to discontinued operations	1,176			3,620
Preferred units redeemed on January 4 and 11, 2018	—			455,514
Other liabilities	465,659			464,635
Total liabilities	10,982,579			11,405,296
Commitments and contingencies
Redeemable partnership units:
Class A units - 12,653,821 and 12,528,899 units outstanding	851,598			979,509
Series D cumulative redeemable preferred units - 177,101 units outstanding	5,428			5,428
Total redeemable partnership units	857,026			984,937
Equity:
Partners' capital	8,527,922			8,392,223
Earnings less than distributions	(4,198,088		)	(4,183,253		)
Accumulated other comprehensive income	30,258			128,682
Total Vornado Realty L.P. equity	4,360,092			4,337,652
Noncontrolling interests in consolidated subsidiaries	664,786			670,049
Total equity	5,024,878			5,007,701
	$	16,864,483		$	17,397,934

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 March 31,
	2018			2017
REVENUES:
Property rentals	$	440,110		$	414,892
Tenant expense reimbursements	60,310			59,033
Fee and other income	36,017			34,133
Total revenues	536,437			508,058
EXPENSES:
Operating	237,602			220,659
Depreciation and amortization	108,686			105,128
General and administrative	43,633			47,237
(Income) expense from deferred compensation plan liability	(404		)	2,469
Transaction related costs and other	13,156			752
Total expenses	402,673			376,245
Operating income	133,764			131,813
(Loss) income from partially owned entities	(9,904		)	1,358
(Loss) income from real estate fund investments	(8,807		)	268
Interest and other investment (loss) income, net	(24,384		)	6,695
(Loss) income from deferred compensation plan assets	(404		)	2,469
Interest and debt expense	(88,166		)	(82,724		)
Net gains on disposition of wholly owned and partially owned assets	—			501
Income before income taxes	2,099			60,380
Income tax expense	(1,454		)	(1,851		)
Income from continuing operations	645			58,529
(Loss) income from discontinued operations	(363		)	15,318
Net income	282			73,847
Less net loss (income) attributable to noncontrolling interests in consolidated subsidiaries	8,274			(6,737		)
Net income attributable to Vornado Realty L.P.	8,556			67,110
Preferred unit distributions	(13,084		)	(16,178		)
Preferred unit issuance costs	(14,486		)	—
NET (LOSS) INCOME attributable to Class A unitholders	$	(19,014	)	$	50,932

(LOSS) INCOME PER CLASS A UNIT – BASIC:
(Loss) income from continuing operations, net	$	(0.10	)	$	0.17
Income from discontinued operations, net	—			0.08
Net (loss) income per Class A unit	$	(0.10	)	$	0.25
Weighted average units outstanding	201,929			200,845

(LOSS) INCOME PER CLASS A UNIT – DILUTED:
(Loss) income from continuing operations, net	$	(0.10	)	$	0.17
Income from discontinued operations, net	—			0.08
Net (loss) income per Class A unit	$	(0.10	)	$	0.25
Weighted average units outstanding	201,929			202,647

DISTRIBUTIONS PER CLASS A UNIT	$	0.63		$	0.71

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 March 31,
	2018		2017
Net income	$	282	$	73,847
Other comprehensive income (loss):
Increase in value of interest rate swaps	10,258		5,842
Pro rata share of other comprehensive income (loss) of nonconsolidated subsidiaries	346		(51		)
Reduction in unrealized net gain on available-for-sale securities	—		(15,009		)
Pro rata share of amounts reclassified from accumulated other comprehensive income of a nonconsolidated subsidiary	—		9,268
Comprehensive income	10,886		73,897
Less comprehensive loss (income) attributable to noncontrolling interests in consolidated subsidiaries	8,274		(6,737		)
Comprehensive income attributable to Vornado L.P.	$	19,160	$	67,160

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, 2017	36,800	$	891,988		189,984	$	7,500,235	$	(4,183,253	)	$	128,682		$	670,049		$	5,007,701
Cumulative effect of accounting change (see Note 3)	—	—			—	—		122,893			(108,374		)	—			14,519
Net income attributable to Vornado Realty L.P.	—	—			—	—		8,556			—			—			8,556
Net income attributable to redeemable partnership units	—	—			—	—		1,124			—			—			1,124
Net loss attributable to noncontrolling interests in consolidated subsidiaries	—	—			—	—		—			—			(8,274		)	(8,274		)
Distributions to Vornado	—	—			—	—		(119,764		)	—			—			(119,764		)
Distributions to preferred unitholders	—	—			—	—		(13,035		)	—			—			(13,035		)
Preferred unit issuance costs	—	—			—	—		(14,486		)	—			—			(14,486		)
Class A Units issued to Vornado:
Upon redemption of redeemable Class A units, at redemption value	—	—			118	8,392		—			—			—			8,392
Under Vornado's employees' share option plan	—	—			55	3,434		—			—			—			3,434
Under Vornado's dividend reinvestment plan	—	—			5	335		—			—			—			335
Contributions	—	—			—	—		—			—			8,370			8,370
Distributions:
Real estate fund investments	—	—			—	—		—			—			(1,910		)	(1,910		)
Other	—	—			—	—		—			—			(3,450		)	(3,450		)
Preferred unit issuance	—	(663		)	—	—		—			—			—			(663		)
Deferred compensation units and options	—	—			7	298		(121		)	—			—			177
Pro rata share of other comprehensive income of nonconsolidated subsidiaries	—	—			—	—		—			346			—			346
Increase in value of interest rate swaps	—	—			—	—		—			10,258			—			10,258
Unearned 2015 Out-Performance Plan awards acceleration	—	—			—	9,046		—			—			—			9,046
Adjustments to carry redeemable Class A units at redemption value	—	—			—	114,856		—			—			—			114,856
Redeemable partnership units' share of above adjustments	—	—			—	—		—			(654		)	—			(654		)
Other	—	—			—	1		(2		)	—			1			—
Balance, March 31, 2018	36,800	$	891,325		190,169	$	7,636,597	$	(4,198,088	)	$	30,258		$	664,786		$	5,024,878

See notes to consolidated financial statements (unaudited).

VORNADO REALTY L.P.

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY - CONTINUED

(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.	—	—		—	—		67,110			—		—		67,110
Net income attributable to redeemable partnership units	—	—		—	—		(3,229		)	—		—		(3,229		)
Net income attributable to noncontrolling interests in consolidated subsidiaries	—	—		—	—		—			—		6,737		6,737
Distributions to Vornado	—	—		—	—		(134,332		)	—		—		(134,332		)
Distributions to preferred unitholders	—	—		—	—		(16,129		)	—		—		(16,129		)
Class A Units issued to Vornado:
Upon redemption of redeemable Class A units, at redemption value	—	—		140	14,739		—			—		—		14,739