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: 
June 30, 2018
 
 Or
☐
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 June 30, 2018, 190,237,957 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 June 30, 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 93.5% 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.



2

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 13. Shareholders' Equity/Partners' Capital
•
Note 20. Income Per Share/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.


3

PART I.
Financial Information:
 
Page Number
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Consolidated Balance Sheets (Unaudited) as of June 30, 2018 and December 31, 2017
 
 
 
 
 
 
 
 
Consolidated Statements of Income (Unaudited) for the Three and Six Months Ended June 30, 2018 and 2017
 
 
 
 
 
 
 
 
Consolidated Statements of Comprehensive Income (Unaudited) for the Three and Six Months Ended June 30, 2018 and 2017
 
 
 
 
 
 
 
 
Consolidated Statements of Changes in Equity (Unaudited) for the Six Months Ended June 30, 2018 and 2017
 
 
 
 
 
 
 
 
Consolidated Statements of Cash Flows (Unaudited) for the Six Months Ended June 30, 2018 and 2017
 
 
 
 
 
 
 
 
Financial Statements of Vornado Realty L.P.:
 
 
 
 
 
 
 
 
 
Consolidated Balance Sheets (Unaudited) as of June 30, 2018 and December 31, 2017
 
 
 
 
 
 
 
 
Consolidated Statements of Income (Unaudited) for the Three and Six Months Ended June 30, 2018 and 2017
 
 
 
 
 
 
 
 
Consolidated Statements of Comprehensive Income (Unaudited) for the Three and Six Months Ended June 30, 2018 and 2017
 
 
 
 
 
 
 
 
Consolidated Statements of Changes in Equity (Unaudited) for the Six Months Ended June 30, 2018 and 2017
 
 
 
 
 
 
 
 
Consolidated Statements of Cash Flows (Unaudited) for the Six Months Ended June 30, 2018 and 2017
 
 
 
 
 
 
 
 
Vornado Realty Trust and Vornado Realty L.P.:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
PART II.
Other Information:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
SIGNATURES
 
 
 
 


4
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)
June 30, 2018
 
December 31, 2017
ASSETS
 
 
 
Real estate, at cost:
 
 
 
Land
$
3,175,830

 
$
3,143,648

Buildings and improvements
9,969,190

 
9,898,605

Development costs and construction in progress
1,797,301

 
1,615,101

Leasehold improvements and equipment
105,625

 
98,941

Total
15,047,946

 
14,756,295

Less accumulated depreciation and amortization
(3,035,523
)
 
(2,885,283
)
Real estate, net
12,012,423

 
11,871,012

Cash and cash equivalents
1,090,791

 
1,817,655

Restricted cash
121,168

 
97,157

Marketable securities
165,650

 
182,752

Tenant and other receivables, net of allowance for doubtful accounts of $3,891 and $5,526
65,773

 
58,700

Investments in partially owned entities
959,801

 
1,056,829

Real estate fund investments
373,039

 
354,804

Receivable arising from the straight-lining of rents, net of allowance of $1,798 and $954
936,614

 
926,711

Deferred leasing costs, net of accumulated amortization of $198,100 and $191,827
443,859

 
403,492

Identified intangible assets, net of accumulated amortization of $163,406 and $150,837
146,370

 
159,260

Assets related to discontinued operations
52

 
1,357

Other assets
550,543

 
468,205

 
$
16,866,083

 
$
17,397,934

LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND EQUITY
 
 
 
Mortgages payable, net
$
8,108,618

 
$
8,137,139

Senior unsecured notes, net
843,417

 
843,614

Unsecured term loan, net
749,494

 
748,734

Unsecured revolving credit facilities
80,000

 
—

Accounts payable and accrued expenses
394,079

 
415,794

Deferred revenue
187,934

 
227,069

Deferred compensation plan
100,368

 
109,177

Liabilities related to discontinued operations
214

 
3,620

Preferred shares redeemed on January 4 and 11, 2018
—

 
455,514

Other liabilities
520,331

 
464,635

Total liabilities
10,984,455

 
11,405,296

Commitments and contingencies

 

Redeemable noncontrolling interests:
 
 
 
Class A units - 12,616,515 and 12,528,899 units outstanding
932,613

 
979,509

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

 
5,428

Total redeemable noncontrolling interests
938,041

 
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 190,237,957 and 189,983,858 shares
7,587

 
7,577

Additional capital
7,555,993

 
7,492,658

Earnings less than distributions
(4,206,381
)
 
(4,183,253
)
Accumulated other comprehensive income
33,351

 
128,682

Total Vornado shareholders' equity
4,281,875

 
4,337,652

Noncontrolling interests in consolidated subsidiaries
661,712

 
670,049

Total equity
4,943,587

 
5,007,701

 
$
16,866,083

 
$
17,397,934


See notes to consolidated financial statements (unaudited).
5
VORNADO REALTY TRUST
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)

(Amounts in thousands, except per share amounts)
For the Three Months Ended
June 30,
 
For the Six Months Ended
June 30,
 
2018
 
2017
 
2018
 
2017
REVENUES:
 
 
 
 
 
 
 
Property rentals
$
444,595

 
$
428,643

 
$
884,705

 
$
843,535

Tenant expense reimbursements
58,312

 
51,657

 
118,622

 
110,690

Fee and other income
38,911

 
30,787

 
74,928

 
64,920

Total revenues
541,818

 
511,087

 
1,078,255

 
1,019,145

EXPENSES:
 
 
 
 
 
 
 
Operating
235,981

 
215,700

 
473,583

 
436,359

Depreciation and amortization
111,846

 
105,123

 
220,532

 
210,251

General and administrative
34,427

 
35,405

 
76,960

 
81,580

Expense from deferred compensation plan liability
2,077

 
789

 
1,673

 
3,258

Transaction related costs and other
1,017

 
260

 
14,173

 
1,012

Total expenses
385,348

 
357,277

 
786,921

 
732,460

Operating income
156,470

 
153,810

 
291,334

 
286,685

Income (loss) from partially owned entities
8,757

 
46,021

 
(1,147
)
 
47,379

(Loss) income from real estate fund investments
(28,976
)
 
4,391

 
(37,783
)
 
4,659

Interest and other investment income, net
30,892

 
8,541

 
6,508

 
15,236

Income from deferred compensation plan assets
2,077

 
789

 
1,673

 
3,258

Interest and debt expense
(87,657
)
 
(84,789
)
 
(175,823
)
 
(167,513
)
Net gains on disposition of wholly owned and partially owned assets
23,559

 
—

 
23,559

 
501

Income before income taxes
105,122

 
128,763

 
108,321

 
190,205

Income tax (expense) benefit
(467
)
 
610

 
(3,021
)
 
(2,303
)
Income from continuing operations
104,655

 
129,373

 
105,300

 
187,902

Income from discontinued operations
683

 
18,111

 
320

 
33,429

Net income
105,338

 
147,484

 
105,620

 
221,331

Less net loss (income) attributable to noncontrolling interests in:
 
 
 
 
 
 
 
Consolidated subsidiaries
26,175

 
(7,677
)
 
34,449

 
(14,414
)
Operating Partnership
(7,445
)
 
(7,706
)
 
(6,321
)
 
(10,935
)
Net income attributable to Vornado
124,068

 
132,101

 
133,748

 
195,982

Preferred share dividends
(12,534
)
 
(16,129
)
 
(25,569
)
 
(32,258
)
Preferred share issuance costs
—

 
—

 
(14,486
)
 
—

NET INCOME attributable to common shareholders
$
111,534

 
$
115,972

 
$
93,693

 
$
163,724

 
 
 
 
 
 
 
 
INCOME PER COMMON SHARE – BASIC:
 
 
 
 
 
 
 
Income from continuing operations, net
$
0.59

 
$
0.52

 
$
0.49

 
$
0.70

Income from discontinued operations, net
—

 
0.09

 
—

 
0.16

Net income per common share
$
0.59

 
$
0.61

 
$
0.49

 
$
0.86

Weighted average shares outstanding
190,200

 
189,395

 
190,141

 
189,304

 
 
 
 
 
 
 
 
INCOME PER COMMON SHARE – DILUTED:
 
 
 
 
 
 
 
Income from continuing operations, net
$
0.58

 
$
0.52

 
$
0.49

 
$
0.70

Income from discontinued operations, net
—

 
0.09

 
—

 
0.16

Net income per common share
$
0.58

 
$
0.61

 
$
0.49

 
$
0.86

Weighted average shares outstanding
191,168

 
190,444

 
191,190

 
190,674

 
 
 
 
 
 
 
 
DIVIDENDS PER COMMON SHARE
$
0.63

 
$
0.71

 
$
1.26

 
$
1.42


See notes to consolidated financial statements (unaudited).
6
VORNADO REALTY TRUST
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(UNAUDITED)

(Amounts in thousands)
For the Three Months Ended June 30,
 
For the Six Months Ended June 30,
 
2018
 
2017
 
2018
 
2017
Net income
$
105,338

 
$
147,484

 
$
105,620

 
$
221,331

Other comprehensive income (loss):
 
 
 
 
 
 
 
Increase (reduction) in value of interest rate swaps and other
2,908

 
(1,204
)
 
13,166

 
4,638

Pro rata share of other comprehensive income (loss) of nonconsolidated subsidiaries
390

 
(980
)
 
736

 
(1,031
)
Reduction in unrealized net gain on available-for-sale securities
—

 
(1,206
)
 
—

 
(16,215
)
Pro rata share of amounts reclassified from accumulated other comprehensive income of a nonconsolidated subsidiary
—

 
—

 
—

 
9,268

Comprehensive income
108,636

 
144,094

 
119,522

 
217,991

Less comprehensive loss (income) attributable to noncontrolling interests
18,525

 
(15,173
)
 
27,269

 
(25,142
)
Comprehensive income attributable to Vornado
$
127,161

 
$
128,921

 
$
146,791

 
$
192,849


See notes to consolidated financial statements (unaudited).
7
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
 
 
 
 
 
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
 
—

 
—

 
—

 
—

 
—

 
133,748

 
—

 
—

 
133,748

Net loss attributable to noncontrolling interests in consolidated subsidiaries
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
(34,449
)
 
(34,449
)
Dividends on common shares
 
—

 
—

 
—

 
—

 
—

 
(239,594
)
 
—

 
—

 
(239,594
)
Dividends on preferred shares
 
—

 
—

 
—

 
—

 
—

 
(25,569
)
 
—

 
—

 
(25,569
)
Preferred share issuance costs
 
—

 
—

 
—

 
—

 
—

 
(14,486
)
 
—

 
—

 
(14,486
)
Common shares issued:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

Upon redemption of Class A units, at redemption value
 
—

 
—

 
176

 
7

 
12,239

 
—

 
—

 
—

 
12,246

Under employees' share option plan
 
—

 
—

 
61

 
3

 
3,783

 
—

 
—

 
—

 
3,786

Under dividend reinvestment plan
 
—

 
—

 
10

 
—

 
685

 
—

 
—

 
—

 
685

Contributions:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


 


Real estate fund investments
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
45,347

 
45,347

Other
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
14,211

 
14,211

Distributions:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

Real estate fund investments
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
(10,246
)
 
(10,246
)
Other
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
(23,201
)
 
(23,201
)
Preferred share issuance
 
—

 
(663
)
 
—

 
—

 
—

 
—

 
—

 
—

 
(663
)
Deferred compensation shares and options
 
—

 
—

 
7

 
—

 
585

 
(121
)
 
—

 
—

 
464

Pro rata share of other comprehensive income of nonconsolidated subsidiaries
 
—

 
—

 
—

 
—

 
—

 
—

 
736

 
—

 
736

Increase in value of interest rate swaps
 
—

 
—

 
—

 
—

 
—

 
—

 
13,166

 
—

 
13,166

Unearned 2015 Out-Performance Plan awards acceleration
 
—

 
—

 
—

 
—

 
9,046

 
—

 
—

 
—

 
9,046

Adjustments to carry redeemable Class A units at redemption value
 
—

 
—

 
—

 
—

 
36,450

 
—

 
—

 
—

 
36,450

Redeemable noncontrolling interests' share of above adjustments
 
—

 
—

 
—

 
—

 
—

 
—

 
(859
)
 
—

 
(859
)
Other
 
—

 
—

 
—

 
—

 
547

 
1

 
—

 
1

 
549

Balance, June 30, 2018
 
36,800

 
$
891,325

 
190,238

 
$
7,587

 
$
7,555,993

 
$
(4,206,381
)
 
$
33,351

 
$
661,712

 
$
4,943,587



See notes to consolidated financial statements (unaudited).
8
VORNADO REALTY TRUST
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY - CONTINUED
(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
 
 
 
 
 
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
 
—

 
—

 
—

 
—

 
—

 
195,982

 
—

 
—

 
195,982

Net income attributable to noncontrolling interests in consolidated subsidiaries
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
14,414

 
14,414

Dividends on common shares
 
—

 
—

 
—

 
—

 
—

 
(268,817
)
 
—

 
—

 
(268,817
)
Dividends on preferred shares
 
—

 
—

 
—

 
—

 
—

 
(32,258
)
 
—

 
—

 
(32,258
)
Common shares issued:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Upon redemption of Class A units, at redemption value
 
—

 
—

 
249

 
10

 
25,552

 
—

 
—

 
—

 
25,562

Under employees' share option plan
 
—

 
—

 
103

 
4

 
8,842

 
—

 
—

 
—

 
8,846

Under dividend reinvestment plan
 
—

 
—

 
8

 
—

 
780

 
—

 
—

 
—

 
780

Contributions
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
991

 
991

Distributions:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Real estate fund investments
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
(6,200
)
 
(6,200
)
Other
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
(1,339
)
 
(1,339
)
Conversion of Series A preferred shares to common shares
 
(2
)
 
(44
)
 
2

 
—

 
44

 
—

 
—

 
—

 
—

Deferred compensation shares and options
 
—

 
—

 
2

 
—

 
1,076

 
(285
)
 
—

 
—

 
791

Reduction in unrealized net gain on available-for-sale securities
 
—

 
—

 
—

 
—

 
—

 
—

 
(16,215
)
 
—

 
(16,215
)
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
 
—

 
—

 
—

 
—

 
—

 
—

 
(1,031
)
 
—

 
(1,031
)
Increase in value of interest rate swaps
 
—

 
—

 
—

 
—

 
—

 
—

 
4,636

 
—

 
4,636

Adjustments to carry redeemable Class A units at redemption value
 
—

 
—

 
—

 
—

 
90,208

 
—

 
—

 
—

 
90,208

Redeemable noncontrolling interests' share of above adjustments
 
—

 
—

 
—

 
—

 
—

 
—

 
207

 
—

 
207

Other
 
—

 
—

 
—

 
—

 
—

 
(46
)
 
2

 
(47
)
 
(91
)
Balance, June 30, 2017
 
42,823

 
$
1,038,011

 
189,465

 
$
7,556

 
$
7,279,834

 
$
(1,524,806
)
 
$
115,839

 
$
727,796

 
$
7,644,230


See notes to consolidated financial statements (unaudited).
9
VORNADO REALTY TRUST
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)

(Amounts in thousands)
For the Six Months Ended June 30,
 
2018
 
2017
Cash Flows from Operating Activities:
 
 
 
Net income
$
105,620

 
$
221,331

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Depreciation and amortization (including amortization of deferred financing costs)
233,748

 
289,898

Distributions of income from partially owned entities
45,999

 
44,778

Net realized and unrealized losses on real estate fund investments
30,426

 
6,201

Other non-cash adjustments
24,320

 
30,070

Net gains on disposition of wholly owned and partially owned assets
(23,559
)
 
(501
)
Amortization of below-market leases, net
(21,107
)
 
(24,391
)
Return of capital from real estate fund investments
20,291

 
—

Decrease in fair value of marketable securities
17,102

 
—

Straight-lining of rents
(10,122
)
 
(28,581
)
Equity in net loss (income) of partially owned entities
1,147

 
(47,721
)
Net gains on sale of real estate and other
—

 
(2,267
)
Changes in operating assets and liabilities:
 
 
 
Real estate fund investments
(68,950
)
 
—

Tenant and other receivables, net
(7,511
)
 
3,974

Prepaid assets
(19,092
)
 
(146,770
)
Other assets
(114,881
)
 
(5,606
)
Accounts payable and accrued expenses
(11,036
)
 
(6,029
)
Other liabilities
38,865

 
(18,169
)
Net cash provided by operating activities
241,260

 
316,217

 
 
 
 
Cash Flows from Investing Activities:
 
 
 
Development costs and construction in progress
(185,039
)
 
(191,073
)
Additions to real estate
(113,300
)
 
(139,611
)
Distributions of capital from partially owned entities
81,997

 
113,507

Acquisitions of real estate and other
(56,500
)
 
(11,841
)
Proceeds from sales of real estate and related investments
44,599

 
5,180

Investments in partially owned entities
(26,663
)
 
(27,720
)
Proceeds from repayments of mortgage loans receivable
—

 
29

Net cash used in investing activities
(254,906
)
 
(251,529
)


See notes to consolidated financial statements (unaudited).
10
VORNADO REALTY TRUST
CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED
(UNAUDITED)


(Amounts in thousands)
For the Six Months Ended June 30,
 
2018
 
2017
Cash Flows from Financing Activities:
 
 
 
Redemption of preferred shares
$
(470,000
)
 
$
—

Dividends paid on common shares
(239,594
)
 
(268,817
)
Proceeds from borrowings
189,042

 
226,929

Repayments of borrowings
(148,408
)
 
(13,971
)
Contributions from noncontrolling interests
59,558

 
991

Distributions to noncontrolling interests
(49,338
)
 
(25,617
)
Dividends paid on preferred shares
(30,047
)
 
(32,258
)
Proceeds received from exercise of employee share options and other
4,471

 
9,626

Debt issuance costs
(3,289
)
 
(2,919
)
Debt prepayment and extinguishment costs
(818
)
 
—

Repurchase of shares related to stock compensation agreements and related tax withholdings and other
(784
)
 
(285
)
Net cash used in financing activities
(689,207
)
 
(106,321
)
Net decrease in cash and cash equivalents and restricted cash
(702,853
)
 
(41,633
)
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
$
1,211,959

 
$
1,557,689

 
 
 
 
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
$
1,090,791

 
$
1,471,303

Restricted cash at end of period
121,168

 
82,651

Restricted cash included in discontinued operations at end of period
—

 
3,735

Cash and cash equivalents and restricted cash at end of period
$
1,211,959

 
$
1,557,689

 
 
 
 
Supplemental Disclosure of Cash Flow Information:
 
 
 
Cash payments for interest, excluding capitalized interest of $28,558 and $20,050
$
155,875

 
$
175,718

Cash payments for income taxes
$
4,365

 
$
3,151

 
 
 
 
Non-Cash Investing and Financing Activities:
 
 
 
Accrued capital expenditures included in accounts payable and accrued expenses
$
54,176

 
$
59,733

Write-off of fully depreciated assets
(38,117
)
 
(35,727
)
Adjustments to carry redeemable Class A units at redemption value
36,450

 
90,208

Reduction in unrealized net gain on available-for-sale securities
—

 
(16,215
)


See notes to consolidated financial statements (unaudited).
11
VORNADO REALTY L.P.
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)


(Amounts in thousands, except unit amounts)
June 30, 2018
 
December 31, 2017
ASSETS
 
 
 
Real estate, at cost:
 
 
 
Land
$
3,175,830

 
$
3,143,648

Buildings and improvements
9,969,190

 
9,898,605

Development costs and construction in progress
1,797,301

 
1,615,101

Leasehold improvements and equipment
105,625

 
98,941

Total
15,047,946

 
14,756,295

Less accumulated depreciation and amortization
(3,035,523
)
 
(2,885,283
)
Real estate, net
12,012,423

 
11,871,012

Cash and cash equivalents
1,090,791

 
1,817,655

Restricted cash
121,168

 
97,157

Marketable securities
165,650

 
182,752

Tenant and other receivables, net of allowance for doubtful accounts of $3,891 and $5,526
65,773

 
58,700

Investments in partially owned entities
959,801

 
1,056,829

Real estate fund investments
373,039

 
354,804

Receivable arising from the straight-lining of rents, net of allowance of $1,798 and $954
936,614

 
926,711

Deferred leasing costs, net of accumulated amortization of $198,100 and $191,827
443,859

 
403,492

Identified intangible assets, net of accumulated amortization of $163,406 and $150,837
146,370

 
159,260

Assets related to discontinued operations
52

 
1,357

Other assets
550,543

 
468,205

 
$
16,866,083

 
$
17,397,934

LIABILITIES, REDEEMABLE PARTNERSHIP UNITS AND EQUITY
 
 
 
Mortgages payable, net
$
8,108,618

 
$
8,137,139

Senior unsecured notes, net
843,417

 
843,614

Unsecured term loan, net
749,494

 
748,734

Unsecured revolving credit facilities
80,000

 
—

Accounts payable and accrued expenses
394,079

 
415,794

Deferred revenue
187,934

 
227,069

Deferred compensation plan
100,368

 
109,177

Liabilities related to discontinued operations
214

 
3,620

Preferred units redeemed on January 4 and 11, 2018
—

 
455,514

Other liabilities
520,331

 
464,635

Total liabilities
10,984,455

 
11,405,296

Commitments and contingencies

 

Redeemable partnership units:
 
 
 
Class A units - 12,616,515 and 12,528,899 units outstanding
932,613

 
979,509

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

 
5,428

Total redeemable partnership units
938,041

 
984,937

Equity:
 
 
 
Partners' capital
8,454,905

 
8,392,223

Earnings less than distributions
(4,206,381
)
 
(4,183,253
)
Accumulated other comprehensive income
33,351

 
128,682

Total Vornado Realty L.P. equity
4,281,875

 
4,337,652

Noncontrolling interests in consolidated subsidiaries
661,712

 
670,049

Total equity
4,943,587

 
5,007,701

 
$
16,866,083

 
$
17,397,934


See notes to consolidated financial statements (unaudited).
12
VORNADO REALTY L.P.
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)

(Amounts in thousands, except per unit amounts)
For the Three Months Ended
June 30,
 
For the Six Months Ended
June 30,
 
2018
 
2017
 
2018
 
2017
REVENUES:
 
 
 
 
 
 
 
Property rentals
$
444,595

 
$
428,643

 
$
884,705

 
$
843,535

Tenant expense reimbursements
58,312

 
51,657

 
118,622

 
110,690

Fee and other income
38,911

 
30,787

 
74,928

 
64,920

Total revenues
541,818

 
511,087

 
1,078,255

 
1,019,145

EXPENSES:
 
 
 
 
 
 
 
Operating
235,981

 
215,700

 
473,583

 
436,359

Depreciation and amortization
111,846

 
105,123

 
220,532

 
210,251

General and administrative
34,427

 
35,405

 
76,960

 
81,580

Expense from deferred compensation plan liability
2,077

 
789

 
1,673

 
3,258

Transaction related costs and other
1,017

 
260

 
14,173

 
1,012

Total expenses
385,348

 
357,277

 
786,921

 
732,460

Operating income
156,470

 
153,810

 
291,334

 
286,685

Income (loss) from partially owned entities
8,757

 
46,021

 
(1,147
)
 
47,379

(Loss) income from real estate fund investments
(28,976
)
 
4,391

 
(37,783
)
 
4,659

Interest and other investment income, net
30,892

 
8,541

 
6,508

 
15,236

Income from deferred compensation plan assets
2,077

 
789

 
1,673

 
3,258

Interest and debt expense
(87,657
)
 
(84,789
)
 
(175,823
)
 
(167,513
)
Net gains on disposition of wholly owned and partially owned assets
23,559

 
—

 
23,559

 
501

Income before income taxes
105,122

 
128,763

 
108,321

 
190,205

Income tax (expense) benefit
(467
)
 
610

 
(3,021
)
 
(2,303
)
Income from continuing operations
104,655

 
129,373

 
105,300

 
187,902

Income from discontinued operations
683

 
18,111

 
320

 
33,429

Net income
105,338

 
147,484

 
105,620

 
221,331

Less net loss (income) attributable to noncontrolling interests in consolidated subsidiaries
26,175

 
(7,677
)
 
34,449

 
(14,414
)
Net income attributable to Vornado Realty L.P.
131,513

 
139,807

 
140,069

 
206,917

Preferred unit distributions
(12,582
)
 
(16,177
)
 
(25,666
)
 
(32,355
)
Preferred unit issuance costs
—

 
—

 
(14,486
)
 
—

NET INCOME attributable to Class A unitholders
$
118,931

 
$
123,630

 
$
99,917

 
$
174,562

 
 
 
 
 
 
 
 
INCOME PER CLASS A UNIT – BASIC:
 
 
 
 
 
 
 
Income from continuing operations, net
$
0.58

 
$
0.52

 
$
0.49

 
$
0.69

Income from discontinued operations, net
—

 
0.09

 
—

 
0.17

Net income per Class A unit
$
0.58

 
$
0.61

 
$
0.49

 
$
0.86

Weighted average units outstanding
202,064

 
201,127

 
201,997

 
200,987

 
 
 
 
 
 
 
 
INCOME PER CLASS A UNIT – DILUTED:
 
 
 
 
 
 
 
Income from continuing operations, net
$
0.58

 
$
0.52

 
$
0.48

 
$
0.69

Income from discontinued operations, net
—

 
0.09

 
—

 
0.16

Net income per Class A unit
$
0.58

 
$
0.61

 
$
0.48

 
$
0.85

Weighted average units outstanding
203,354

 
202,623

 
203,266

 
202,617

 
 
 
 
 
 
 
 
DISTRIBUTIONS PER CLASS A UNIT
$
0.63

 
$
0.71

 
$
1.26

 
$
1.42


See notes to consolidated financial statements (unaudited).
13
VORNADO REALTY L.P.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(UNAUDITED)

(Amounts in thousands)
For the Three Months Ended June 30,
 
For the Six Months Ended June 30,
 
2018
 
2017
 
2018
 
2017
Net income
$
105,338

 
$
147,484

 
$
105,620

 
$
221,331

Other comprehensive income (loss):
 
 
 
 
 
 
 
Increase (reduction) in value of interest rate swaps and other
2,908

 
(1,204
)
 
13,166

 
4,638

Pro rata share of other comprehensive income (loss) of nonconsolidated subsidiaries
390

 
(980
)
 
736

 
(1,031
)
Reduction in unrealized net gain on available-for-sale securities
—

 
(1,206
)
 
—

 
(16,215
)
Pro rata share of amounts reclassified from accumulated other comprehensive income of a nonconsolidated subsidiary
—

 
—

 
—

 
9,268

Comprehensive income
108,636

 
144,094

 
119,522

 
217,991

Less comprehensive loss (income) attributable to noncontrolling interests in consolidated subsidiaries
26,175

 
(7,677
)
 
34,449

 
(14,414
)
Comprehensive income attributable to Vornado Realty L.P.
$
134,811

 
$
136,417

 
$
153,971

 
$
203,577


See notes to consolidated financial statements (unaudited).
14
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
 
 
 
 
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.
 
—

 
—

 
—

 
—

 
140,069

 
—

 
—

 
140,069

Net income attributable to redeemable partnership units
 
—

 
—

 
—

 
—

 
(6,321
)
 
—

 
—

 
(6,321
)
Net loss attributable to noncontrolling interests in consolidated subsidiaries
 
—

 
—

 
—

 
—

 
—

 
—

 
(34,449
)
 
(34,449
)
Distributions to Vornado
 
—

 
—

 
—

 
—

 
(239,594
)
 
—

 
—

 
(239,594
)
Distributions to preferred unitholders
 
—

 
—

 
—

 
—

 
(25,569
)
 
—

 
—

 
(25,569
)
Preferred unit issuance costs
 
—

 
—

 
—

 
—

 
(14,486
)
 
—

 
—