PART I
| ITEM 1. BUSINESS |
Vornado is a fully‑integrated REIT and conducts its business through, and substantially all of its interests in properties are held by, the Operating Partnership, a Delaware limited partnership. Accordingly, Vornado’s cash flow and ability to pay dividends to its shareholders isare dependent upon the cash flow of the Operating Partnership and the ability of its direct and indirect subsidiaries to first satisfy their obligations to creditors. Vornado is the sole general partner of and owned approximately 93.5%91.0% of the common limited partnership interest in the Operating Partnership atas of December 31, 2017.
2023.
We currently own all or portions of:
New York:
•57 Manhattan operating properties consisting of:
•A 32.4% interest in Alexander’s, Inc. (“Alexander’s”) (NYSE: ALX), which owns sevenfive properties in the greater New York metropolitan area, including 731 Lexington Avenue, the 1.31.1 million square foot Bloomberg, L.P. headquarters building;building, and The Alexander, a 312-unit apartment tower in Queens;
•Signage throughout the Penn District and Times Square; and
•Building Maintenance Services LLC ("BMS"), a wholly owned subsidiary, which provides cleaning and security services for our buildings and third parties.
Other Real Estate and Related Investments:
•The 3.7 million square foot theMARTTHE MART in Chicago;
•A 70% controlling interest in 555 California Street, a three-building office complex in San Francisco’s financial district aggregating 1.8 million square feet, known as the Bank of America Center;feet; and
•Other real estate and other investments.
OBJECTIVES AND STRATEGY
Our business objective is to maximize Vornado shareholder value. We intend to achieve this objective by continuing to pursue our investment philosophy and to execute our operating strategies through:
•maintaining a superior team of operating and investment professionals and an entrepreneurial spirit;
•investing in properties in select markets, such as New York City, where we believe there is a high likelihood of capital appreciation;
•acquiring quality properties at a discount to replacement cost and where there is a significant potential for higher rents;
•developing and redeveloping our existing properties to increase returns and maximize value; and
•investing in operating companies that have a significant real estate component.
We expect to finance our growth, acquisitions and investments using internally generated funds and proceeds from asset sales and by accessing the public and private capital markets. We may also offer Vornado common or preferred shares or Operating Partnership units in exchange for property and may repurchase or otherwise reacquire these securities in the future.
DISPOSITIONS
We completed the following sale transactions during 2017:2023:
•$6.0 billion spin-off of our Washington, DC segment on July 17, 2017;
•$71 million sale by Alexander’s (32.4% interest); of its Rego Park III land parcel;
•$148.024 million sale of 800 Corporate PointeThe Armory Show located in Culver City, CA (25% interest);New York; and
•$23.924 million net proceeds from the sale of investments by India Property Fund (36.5% interest);
two condominium units at 220 Central Park South (“220 CPS”).
FINANCINGS
We completed the following financing transactions during 2017:2023:
•$1.251.2 billion revolving credit facility extended to January 2022 with two six-month extension options, lowering theof interest rate from LIBOR plus 105 basis points to LIBOR plus 100 basis points.swap arrangements;
•$1.2 billion refinancing950 million 1.00% SOFR interest rate cap arrangement for the 1290 Avenue of 280 Parkthe Americas mortgage loan (70.0% ownership);
•$355 million restructuring of 697-703 Fifth Avenue (50% interest)(44.8% ownership);
•$500183 million construction loan for Sunset Pier 94 Studios (49.9% ownership);
•$129 million refinancing of the office portion of 731 Lexington (32.4% interest);
•$75 million refinancing of 150 West Chelsea submarket34th Street; and
•$54 million refinancing of Manhattan (55.0% interest)825 Seventh Avenue office condominium (50% ownership). The development cost of this project is estimated to be approximately $130,000,000, of which our share is $72,000,000. As of December 31, 2017, $73,890,000 has been expended, of which our share is $40,640,000.
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DEVELOPMENT / REDEVELOPMENT PROJECTS AND OPPORTUNITIES
PENN District
PENN 2
We are developingredeveloping PENN 2, a 170,0001,795,000 square foot (as expanded) office and retail building, at 61 Ninth Avenue, located on the southwest cornerwest side of NinthSeventh Avenue between 31st and 15th Street in the West Chelsea submarket of Manhattan (45.1% interest). The development cost of this project is estimated to be approximately $152,000,000, of which our share is $69,000,000. As of December 31, 2017, $105,281,000 has been expended, of which our share is $47,482,000.
Hotel Pennsylvania Site
Demolition of the existing building was completed in the third quarter of 2023.
We are also making districtwide improvements within the PENN District. The development cost of these improvements is estimated to be $100,000,000, of which $47,424,000 has been expended as of December 31, 2023.
Sunset Pier 94 Studios
On August 28, 2023, we, together with Hudson Pacific Properties and Blackstone Inc. (“HPP/BX”), formed a joint venture to develop Sunset Pier 94 Studios, a 266,000 square foot purpose-built studio campus in Manhattan. We own a 49.9% equity interest in the joint venture. The development cost of the project is estimated to be $350,000,000, which will be funded with $183,200,000 of construction financing and $166,800,000 of equity contributions. Our share of equity contributions will be funded by (i) our $40,000,000 Pier 94 leasehold interest contribution and (ii) $34,000,000 of cash contributions, which are net of an estimated $9,000,000 for our share of development fees and reimbursement for overhead costs incurred by us. HPP/BX will fund 100% of cash contributions until such time that its capital account is $1,904,000.equal to Vornado’s, after which equity will be funded in accordance with each partner’s respective ownership interest. We have funded $7,994,000 of cash contributions as of December 31, 2023. For further information about this transaction, see page 38, Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations - Overview, in this Annual Report on Form 10-K.
350 Park Avenue
On January 24, 2023, we and the Rudin family (“Rudin”) completed agreements with Citadel Enterprise Americas LLC (“Citadel”) and with an affiliate of Kenneth C. Griffin, Citadel’s Founder and CEO (“KG”), for a series of transactions relating to 350 Park Avenue and 40 East 52nd Street. In connection therewith, we entered into a joint venture with Rudin (the “Vornado/Rudin JV”) that purchased 39 East 51st Street for $40,000,000, funded on a 50/50 basis by Vornado and Rudin. 39 East 51st Street will be combined with 350 Park Avenue and 40 East 52nd Street to create a premier development site (the “Site”). From October 2024 to June 2030, KG will have the option to either (i) acquire a 60% interest in a joint venture with the Vornado/Rudin JV (with Vornado having an effective 36% interest in the entity) to build a new 1,700,000 square foot office tower, valuing the Site at $1.2 billion or (ii) purchase the Site for $1.4 billion ($1.085 billion to Vornado). From October 2024 to September 2030, the Vornado/Rudin JV will have the option to put the Site to KG for $1.2 billion ($900,000,000 to Vornado). For further information about this transaction and the options available to each of the parties, see page 37, Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations - Overview, in this Annual Report on Form 10-K.
We are also evaluating other development and redevelopment opportunities at certain of our properties in Manhattan including, in particular, the Penn PlazaPENN District.
There can be no assurance that any of our development or redevelopmentthe above projects will commence, or if commenced, be completed, or completed on schedule or within budget.
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ENVIRONMENTAL SUSTAINABILITY INITIATIVES
We have long believed a focus on environmental sustainability is responsible management of our business and important to our tenants, investors, employees and communities that we serve. It has been central to Vornado's business strategy for over 15 years. The Corporate Governance and Nominating Committee of Vornado's Board of Trustees is assigned with oversight of Environmental, Social and Governance (“ESG”) matters, which includes climate change risk. Environmental sustainability initiatives are carried out by a dedicated team of professionals that work directly with our business units.
Vornado is an industry leader in sustainability, owning and operating more than 25 million square feet of LEED (Leadership in Energy and Environmental Design) certified buildings, representing 95% of our in-service office portfolio, with over 24 million square feet at LEED Gold or Platinum. In 2023, we (i) ranked #1 in the US Diversified Office/Retail REIT peer group by GRESB, and received the “Green Star” distinction for the eleventh consecutive year and GRESB's five star rating, (ii) received the Leader in the Light Award by the National Association for Real Estate Investment Trusts (NAREIT) for diversified REITs for the thirteenth time, and (iii) were recognized as an EPA ENERGY STAR Partner of the Year with the distinction of having demonstrated eight years of sustained excellence.
We prioritize addressing climate change and in 2019 adopted a 10-year plan to make our buildings carbon neutral by 2030 (“Vision 2030”). Vision 2030 is a multi-faceted approach that prioritizes energy reduction, recovery, and renewable power. We rely on technology, as well as meaningful stakeholder collaboration with our tenants, our employees, and our communities, to achieve this plan. Our commitment to carbon neutrality and associated emissions reduction targets have been approved by the Science Based Targets Initiative as consistent with a 1.5°C climate scenario, the most ambitious goal of the Paris Agreement.
We consider sustainability in all aspects of our business, including the design, construction, retrofitting and ongoing maintenance and operations of our portfolio of buildings. We operate our buildings sustainably and efficiently by seeking to establish best practices in energy and water consumption, carbon reduction, resource and waste management and ecologically sensitive procurement. Our policies, from 100% green cleaning to procuring 100% renewable electricity certificates to energy efficiency, are implemented across our entire portfolio. We undertake significant outreach with our tenants, employees and investors regarding Vornado’s sustainability programs and strategies.
We gather data to measure progress against our goals, align our goals with our tenants, plan for our longer-term projects and engage with our stakeholders in meaningful ways. We use carbon accounting software, energy audits and models and building automation software to measure and track our portfolio-wide waste, water and energy reduction strategies, create roadmaps for each building to understand how to achieve carbon neutrality and provide accurate and actionable data for our measurement, verification and reporting requirements.
Our 2022 and 2023 long-term performance plan awards specifically tie a portion of senior management’s compensation to the achievement of certain ESG targets, including reductions in greenhouse emissions, achieving a specified GRESB score and targeting a specified percentage of LEED Gold or Platinum certified square footage in our office portfolio.
We are committed to transparent reporting of sustainability performance indicators and publish an annual ESG Report in accordance with the Global Reporting Initiative and aligned with the metrics codified by the Sustainability Accounting Standards Board and in 2023 published a report in accordance with the Task Force on Climate-related Financial Disclosures. We also submit public reports to CDP, CSA (the S&P Global Corporate Sustainability Assessment) and EP100 (global initiative led by Climate Group). Further details on our environmental sustainability initiatives and strategy, including our Vision 2030 Roadmap, can be found in our 2022 ESG Report at (vno.com/sustainability). There can be no assurance that our Vision 2030 commitment will be achieved in the planned time frame. The ESG Report is not incorporated by reference and should not be considered part of this Annual Report on Form 10-K.
HUMAN CAPITAL MANAGEMENT
As of December 31, 2023, we had 2,935 employees, consisting of (i) 2,437 employees of Building Maintenance Services LLC, a wholly owned subsidiary, which provides cleaning, security, engineering and parking services primarily to our New York properties, (ii) 394 employees in our corporate office, leasing, and property management, and (iii) 104 employees of THE MART. The foregoing does not include employees of partially owned entities.
Human capital management is critical to our success and our employees are the foundation of our human capital.
Compensation, Benefits and Employee Wellbeing
To attract and retain the best-qualified talent and to help our employees stay healthy, balance their work and personal lives, and meet their financial and retirement goals, we offer competitive benefits including, but not limited to, market-competitive compensation, healthcare (medical, dental and vision coverage), a health savings account, 401(k) and employer match, dependent care flexible spending account, parental leave, adoption/surrogacy benefits, short-term and long-term disability insurance, life insurance, time off/paid holidays, tuition reimbursement, subsidized gym memberships, employee wellness programs and incentives, in-workplace vaccinations, commuter benefits, an employee assistance program and workplace flexibility.
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HUMAN CAPITAL MANAGEMENT - CONTINUED
Talent Development
To foster talent and growth, we provide training and continuing education, promote career and personal development, and encourage innovation and engagement. To achieve our talent development goals, we provide tuition reimbursement for our employees’ continuing education and professional development, and the opportunity to participate in a variety of training and networking engagements.
Culture and Engagement
Our employees are critical to our success, and we believe creating a positive and inclusive culture is essential to attracting and retaining engaged employees. We seek to retain our employees by actively engaging with our workforce and we solicit their feedback through our divisional leaders and employee surveys. We use their feedback to create and continually enhance programs that support their needs.
Through our volunteer program, Vornado Volunteers, employees are granted one day of paid time off per calendar year to volunteer for a cause of their choice.
Diversity and Inclusion
Vornado is a diverse and inclusive environment that empowers the individual and enriches the employment experience. We have published Equal Employment Opportunity (EEO) data since 2017 and have a broadly diverse workforce across both our corporate base as well as our BMS division. Our employee demographics data can be found in our 2022 ESG report (vno.com/sustainability), which is not incorporated by reference and should not be considered part of this Annual Report on Form 10-K.
Health and Wellness
As a building owner and landlord to thousands of business tenants, we focus on maintaining and improving the health of our indoor environments, as well as communicating the value of our health and wellness programs with consistency and clarity to our stakeholders. We believe that consistent health programming and communications protocols not only mitigate health risks within our buildings, but they also create a responsible behavior framework for our employees, our tenants, and our visitors.
Labor Relations
BMS employs and manages janitorial and security staff who are members of 32BJ SEIU and engineering staff who are members of Local 94 of the International Union of Operating Engineers AFL-CIO. Through our active participation in the Realty Advisory Board on Labor Relations, we work collaboratively with both unions and consider our relations with our union employees to be very positive.
For additional information on human capital matters, please see our most recent ESG report, available for download on our website at www.vno.com and in digital format at vno.com/sustainability. This report and other information on our website are not incorporated by reference into and do not form any part of this Annual Report on Form 10-K.
COMPETITION
We compete with a large number of real estate investors, property owners and developers, some of whom may be willing to accept lower returns on their investments. Principal factors of competition are rents charged, tenant concessions offered, attractiveness of location, the quality of the property and the breadth and the quality of services provided. Our success depends upon, among other factors, trends of the global, national, regional and local economies, the financial condition and operating results of current and prospective tenants and customers, availability and cost of capital, construction and renovation costs, taxes, governmental regulations, legislation, population and employment trends. See "Risk Factors" in Item 1A for additional information regarding these factors.
SEGMENT DATA
We operate in the following reportable segments: New York and Other. Financial information related to these reportable segments for the years ended December 31, 2017, 20162023, 2022 and 20152021 is set forth in Note 23 – Segment Information to our consolidated financial statements in this Annual Report on Form 10-K.
TENANTS ACCOUNTING FOR OVER 10% OF REVENUES
None of our tenants accounted for more than 10% of total revenues in any of the years ended December 31, 2017, 20162023, 2022 and 2015.2021.
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CERTAIN ACTIVITIES
We do not base our acquisitions and investments on specific allocations by type of property. We have historically held our properties for long‑term investment; however, it is possible that properties in our portfolio may be sold or otherwise disposed of when circumstances warrant. Further, we have not adopted a policy that limits the amount or percentage of assets which could be invested in a specific property or property type. Generally our activities are reviewed and may be modified from time to time by Vornado’s Board of Trustees without the vote of our shareholders or Operating Partnership unitholders.
PRINCIPAL EXECUTIVE OFFICES
Our principal executive offices are located at 888 Seventh Avenue, New York, New York 10019; telephone (212) 894‑7000.
MATERIALS AVAILABLE ON OUR WEBSITE
Copies of our Annual Report on Form 10‑K, Quarterly Reports on Form 10‑Q, Current Reports on Form 8‑K and amendments to those reports, as well as Reports on Forms 3, 4 and 5 regarding officers, trustees orand 10% beneficial owners, filed or furnished pursuant to Section 13(a), 15(d) or 16(a) of the Securities Exchange Act of 1934 are available free of charge through our website (www.vno.com) as soon as reasonably practicable after they are electronically filed with, or furnished to, the Securities and Exchange Commission. Also available on our website are copies of our Audit Committee Charter, Compensation Committee Charter, Corporate Governance and Nominating Committee Charter, Code of Business Conduct and Ethics, and Corporate Governance Guidelines. In the event of any changes to these charters or the code or guidelines, changedrevised copies will also be made available on our website. Copies of these documents are also available directly from us free of charge. Our website also includes other financial and non-financial information, including certain non-GAAP financial measures, none of which is a part of this Annual Report on Form 10-K. Copies of our filings under the Securities Exchange Act of 1934 are also available free of charge from us, upon request.
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ITEM 1A. RISK FACTORS
Material factors that may adversely affect our business, operations and financial condition are summarized below. We refer to the equity and debt securities of both Vornado and the Operating Partnership as our “securities” and the investors who own shares of Vornado or units of the Operating Partnership, or both, as our “equity holders.” The risks and uncertainties described herein may not be the only ones we face. Additional risks and uncertainties not presently known to us or that we currently believe to be immaterial may also adversely affect our business, operations and financial condition. See “Forward-Looking Statements” contained herein on page 6.6.
RISKS RELATED TO OUR INVESTMENTS ARE CONCENTRATED CURRENTLY IN THE NEW YORK CITY METROPOLITAN AREABUSINESS AND CIRCUMSTANCES AFFECTING THIS AREA GENERALLY COULD MATERIALLY AND ADVERSELY AFFECT OUR BUSINESS. OPERATIONS
We may be adversely affected by trends in office real estate, including work from home trends.
In 2023, approximately 78% of our net operating income (“NOI” a non-GAAP measure) is from our office properties. Work from home, flexible or hybrid work schedules, open workplaces, videoconferencing, and teleconferencing remain prevalent in certain situations following the COVID-19 pandemic. Changes in tenant space utilization, including from the continuation of work from home and flexible work arrangement policies, may continue to cause office tenants to reassess their long-term physical space needs, which could have an adverse effect on our business.
Further, as office tenants reevaluate their physical space needs and focus on attracting and retaining talent, many tenants have become more selective and are focused on leasing space in high-quality, modern and well-amenitized buildings near transit hubs. These factors have resulted in increased competition among landlords to attract tenants, significant landlord capital expenditures for a building to maintain Class A status and may negatively impact the value of older and less desirable office space. This could have an adverse effect on our financial condition and results of operations.
A significant portion of our properties areis located currently in the New York City/New Jersey metropolitan area and areis affected by the economic cycles and risks inherent to this area.
In 2017,2023, approximately 89%88% of our net operating income ("NOI", a non-GAAP measure) cameNOI is from properties located in the New York City metropolitan area. We may continue to concentrate a significant portion of our future acquisitions, development and developmentredevelopment in this area. Real estate markets are subject toaffected by economic downturns and we cannot predict how economic conditions will impact this market in either the short or long term. Declines in the economy orand declines in real estate markets in the New York City metropolitan area real estate market have impacted and could hurtcontinue to impact our financial performance and the value of our properties. In addition to the factors affecting the national economic condition generally, the factors affecting economic conditions in this regionarea include:
• financial performance and productivity of the media, advertising, professional services, financial, technology, retail, insurance and real estate industries;
• business layoffs or downsizing;
• any oversupply of, or reduced demand for, real estate;
• industry slowdowns;
• the effects of inflation;
• increased interest rates;
• relocations of businesses;
• changing demographics;
• increased telecommutingwork from home and use of alternative work places;
• changes in the number of domestic and international tourists to our markets (including as a result of changes in the relative strengths of world currencies);
• the fiscal health of New York State and New York City governments and local transit authorities;
• quality of life conditions;
• infrastructure quality;
• increased government regulation and costs of complying with such regulations; and
• changes in rates or the treatment of the deductibility of state and local taxes; and
taxes.
It is impossible for us to assesspredict the future effectseffect of trends in the economic and investment climates of the geographic areas in which we concentrate, and more generally of the United States, or the real estate markets in these areas. Local, national or global economic downturns wouldcould negatively affect the value of our properties, our businesses and profitability.
We are subject to risks that affect the general and New York City retail environments.
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real estate industry.
The value of our real estate and the value of an investment in us fluctuates depending on conditions in the general economy and the real estate business. These conditions may also adversely impact our revenues and cash flows.
The factors that affect the value of our real estate investments include, among other things:
• global, national, regional and local economic conditions;conditions and geopolitical events;
• competition from other available space;space, including co-working space and sub-leases;
• local conditions such as an oversupply of space or a reduction in demand for real estate in the area;
• how well we manage our properties;
• the development and/or redevelopment of our properties;
• changes in market rental rates;
• trends in office real estate, including many tenants’ preferences for space in modern amenitized buildings which may require the landlord to incur significant capital expenditures;
• increased competition from online shopping and its impact on retail tenants and their demand for retail space;
• the timing and costs associated with property improvements and rentals;
• whether we are able to pass all or portions of any increases in operating costs through to tenants;
• changes in real estate taxes and other expenses;
• fluctuations in interest rates;
• the ability of state and local governments to operate within their budgets;
• whether tenants and users such as customers and shoppers consider a property attractive;
• changes in consumer preferences adversely affecting retailers and retail store values;
• changes in tenant space utilization by our tenants due to technology, economic conditions and business environment;utilization;
• the financial condition of our tenants, including the extent of tenant bankruptcies or defaults;
• consequences of any armed conflict involving, or terrorist attacks against, the United States or individual acts of violence in public spacesspaces;
• availability of financing on acceptable terms or at all;
• inflation or deflation;
• our ability to obtain adequate insurance;
• government regulation, including retail centers;changes in fiscal policies, taxation, and zoning laws;
• potential liability underand compliance costs associated with environmental or other laws or regulations;
• natural disasters;
• general competitive factors;
• climate change; and
• the impact of pandemics or outbreaks of other infectious diseases.
The rents or sales proceeds we receive and the occupancy levels at our properties may decline as a result of adverse changes in any of these factors. If rental revenues, sales proceeds and/or occupancy levels decline, we generally would expect to have less cash available for operating costs, to pay indebtedness and for distribution to equity holders. In addition, some of our major expenses, including mortgage payments, real estate taxes and maintenance costs generally do not decline when the related rents decline.
material.
Real estate is a competitive business.
business and that competition may adversely impact us.
We compete with a large number of real estate investors, property owners and developers, some of whichwhom may be willing to accept lower returns on their investments. Principal factors of competition are rents charged, sales prices,tenant concessions offered, attractiveness of location, the quality of the property and the breadth and the quality of services provided. Our success depends upon, among other factors, trendsSubstantially all of the global, national, regional and local economies, the financial condition and operating results of current and prospective tenants and customers, availability and cost of capital, construction and renovation costs, taxes, governmental regulations, legislation, population and employment trends.
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We may be unable to renew leases, lease vacant space or relet space as leases expire.
expire on favorable terms.
When our tenants decide not to renew their leases upon their expiration, we may not be able to relet the space. Even if tenants do renew or we can relet the space, the terms of renewal or reletting, taking into accountconsidering among other things, rent and concessions, the cost of improvements to the property and leasing commissions, may be on less economically favorable than the terms in the expired leases.terms. In addition, changes in space utilization by our tenants may impact our ability to renew or relet space without the need to incur substantial costs in renovating or redesigning the internal configuration of the relevant property.property and/or space. If we are unable to promptly renew the leases or relet the space at similar rates or if we
Bankruptcy or insolvency of tenants may decrease our revenue,revenues, net income and available cash.
From time to time, some of our tenants have declared bankruptcy, and other tenants may declare bankruptcy, or become insolvent or experience a material business downturn adversely affecting their ability to make timely rental payments in the future. If a tenant does not pay its rent, we may face delays enforcing our rights as landlord and may incur substantial legal and other costs. Even if we are able to enforce our rights, a tenant may not have recoverable assets. The bankruptcy or insolvency of a major tenant may delay our efforts to collect past-due balances under the relevant leases and could ultimately preclude collection of these amounts altogether. As a result, the bankruptcy or insolvency of, or nonpayment by, a major tenant could cause us to suffer lower revenues and operational difficulties, including leasing the remainder of the property. As a result, the bankruptcy or insolvency of a major tenantproperty, which could in turn result in decreased revenue, net income and funds available to pay our indebtedness or make distributions to equity holders.
Our business, financial condition, results of operations and properties are subject to various federal, statecash flows have been and local laws and regulations concerning the protection of the environment, including air and water quality, hazardous or toxic substances and health and safety. Under some environmental laws, a current or previous owner or operator of real estate may be required to investigate and clean up hazardous or toxic substances released at a property. The owner or operator may also be held liable to a governmental entity or to third parties for property damage or personal injuries and for investigation and clean-up costs incurred by those parties because of the contamination. These laws often impose liability without regard to whether the owner or operator knew of the release of the substances or caused the release. The presence of contamination or the failure to remediate contamination may also impair our ability to sell or lease real estate or to borrow using the real estate as collateral. Other laws and regulations govern indoor and outdoor air quality including those that can require the abatement or removal of asbestos-containing materials in the event of damage, demolition, renovation or remodeling and also govern emissions of and exposure to asbestos fibers in the air. The maintenance and removal of lead paint and certain electrical equipment containing polychlorinated biphenyls (PCBs) are also regulated by federal and state laws. We are also subject to risks associated with human exposure to chemical or biological contaminants such as molds, pollens, viruses and bacteria which, above certain levels, can be allegedcontinue to be connected to allergicadversely affected by outbreaks of highly infectious or other health effects and symptoms in susceptible individuals. Our predecessor companies may be subject to similar liabilities for activities of those companies in the past. We could incur fines for environmental compliance and be held liable for the costs of remedial action with respect to the foregoing regulated substances or related claims arising out of environmental contamination or human exposure to contamination at or from our properties.
contagious diseases.
Our business has been, and operations would suffer inmay continue to be, adversely affected by the eventeconomic and industry challenges created by highly infectious or contagious diseases, including the COVID-19 pandemic. The impact of system failures.
may have the effect of heightening other risks described under this heading “Risk Factors.”
Some of our potential losses may not be covered by insurance.
2027.
Penn Plaza Insurance Company, LLC (“PPIC”), our wholly owned consolidated subsidiary, acts as a re-insurer with respect to a portion of all risk property and rental value insurance and a portion of our earthquake insurance coverage, and as a direct insurer for coverage for acts of terrorism including NBCR acts. Coverage for acts of terrorism (excluding NBCR acts) is fully reinsured by third party insurance companies and the Federal government with no exposure to PPIC. For NBCR acts, PPIC is responsible for a deductible of $1,976,000 ($1,601,000 for 2018)$2,112,753 and 17% (18% for 2018)20% of the balance of a covered loss and the Federal government is responsible for the remaining portion of a covered loss. We are ultimately responsible for any loss incurred by PPIC.
Certain condominiums in which we own an interest (including the Farley Condominiums) maintain insurance policies with different per occurrence and aggregate limits than our policies described above.
We continue to monitor the state of the insurance market and the scope and costs of coverage for acts of terrorism.terrorism and other events. However, we cannot anticipate what coverage will be available on commercially reasonable terms in the future. We are responsible for uninsured losses and for deductibles and losses in excess of our insurance coverage, which could adversely affect our business, results of operations and financial condition, the impact of which could be material.
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Actual or threatened terrorist attacks or other criminal acts may adversely affect the value of our properties and our ability to generate cash flow.
We have significant investments in the New York City, Chicago and San Francisco metropolitan areas. In response to a terrorist attack, the perceived threat of terrorism, or other criminal acts, tenants in these areas may choose to relocate their businesses to less populated, lower-profile areas of the United States that may be perceived to be less likely targets of future terrorist activity or have lower rates of crime and fewer customers may choose to patronize businesses in these areas. This, in turn, would trigger a decrease in the demand for space in these areas, which could increase vacancies in our properties and force us to lease space on less favorable terms. Furthermore, we may experience increased costs in security, equipment and personnel. As a result, the value of our properties and the level of our revenues and cash flows could decline materially.
The effects of climate change could have a concentrated impact on the areas where we operate and could adversely impact our results.
Our debt instruments, consisting of mortgage loans secured byinvestments are concentrated in the New York City, Chicago and San Francisco metropolitan areas. Physical climate change, and natural disasters, including earthquakes, storms, storm surges, tornados, floods and hurricanes, could cause significant damage to our properties and the surrounding environment or area. Potentially adverse consequences of climate change, including rising sea levels and increased temperature fluctuations, could similarly have an impact on our properties and the economies of the metropolitan areas in which are non-recoursewe operate. Government efforts to combat climate change may impact the cost of operating our properties. Over time, these conditions could result in declining demand for office and retail space in our buildings or the inability of us senior unsecured notesto operate the buildings at all. Climate change may also have indirect effects on our business by increasing the cost of (or making unavailable) property insurance on terms we find acceptable, increasing the cost of energy at our properties and revolving credit agreements contain customary covenants requiring us to maintain insurance. Althoughexpend funds as we believe that we have adequate insurance coverage for purposesseek to repair and protect our properties against such risks. The incurrence of these agreements, welosses, costs or business interruptions may notadversely affect our operating and financial results.
Our properties are located in urban areas, which means the vitality of our properties is reliant on sound transportation and utility infrastructure. If that infrastructure is compromised in any way by an extreme weather event, such a compromise could have an adverse impact on our local economies and populations, as well as on our tenants’ ability to do business in our buildings.
Our properties are subject to transitional risks related to climate-related policy change.
De-carbonization of grid-supplied energy could lead to increased energy costs and operating expenses for our buildings. Retrofitting our building systems to consume less energy could lead to increased capital costs. Buildings which consume fossil fuel onsite may be ablesubject to obtain an equivalent amount of coverage at reasonable costspenalties in the future. Further, if lenders insistIn addition, the full transition of grid-supplied energy to renewable sources (as has been mandated by the Climate Leadership and Community Protection Act in New York State) could lead to increased energy costs and operating expenses for our buildings. Although these laws and regulations have not had any material adverse effects on greater coverage than we are ableour business to obtain it could adversely affect our ability to finance our properties and expand our portfolio.
We may become subject to costs, taxes or penalties, or increases therein, associated with natural resource or energy usage, such as a “carbon tax” and by local legislation such as New York City’s Local Law 97, which sets limits on carbon emissions in our buildings and imposes penalties if we exceed those limits, and New York City’s Intro 2317, or the “gas ban” bill, which limits any onsite fossil fuel combustion in new construction and major renovations. These costs, taxes or penalties could increase our operating costs and decrease the cash available to pay our obligations or distribute to our equity owners.
Changes to tax laws could affect REITs generally, the trading of our shares and our results of operations, both positively and negatively, in ways that are difficult to anticipate.
The Americansrules dealing with Disabilities Act (“ADA”) generally requires that public buildings, including our properties, meet certainU.S. federal, requirements relatedstate and local income taxation are constantly under review by persons involved in the legislative process and by the IRS and the Treasury Department. Changes to accesstax laws (which changes may have retroactive application) could adversely affect the taxation of REITs and use by disabled persons. Noncompliancetheir shareholders. We cannot predict whether, when, in what form, or with what effective dates, tax laws, regulations and rulings may be enacted, promulgated or decided, or technical corrections made, which could result in an increase in our, or our shareholders’, tax liability or require changes in the imposition of fines by the federal governmentmanner in which we operate in order to minimize increases in our tax liability. If such changes occur, we may be required to pay additional taxes on our assets or the award of damages to private litigantsincome and/or legal feesbe subject to their counsel. From time to time persons have asserted claims against us with respect to some ofadditional restrictions. These increased tax costs could, among other things, adversely affect the trading price for our properties under the ADA, but to date such claims have not resulted in any material expense or liability. If, under the ADA, we are required to make substantial alterations and capital expenditures in one or more of our properties, including the removal of access barriers, it could adversely affectcommon shares, our financial condition, andour results of operations as well asand the amount of cash available for distribution to equity holders.the payment of dividends.
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Recent substantial increases in the rate of inflation and potential future elevated rates of inflation, both real and anticipated, may impact our business and results of operations.
We face risks associated with property acquisitions.
We have acquired in the timepast and intend to continue to pursue the acquisition of acquisition.
•we may be unable to complete an acquisition of a property or portfolio even after entering into an acquisition agreement, making a non-refundable deposit and incurring certain other acquisition-related costs;
•we may be unable to obtain or assume financing for acquisitions on favorable terms or at all;
•increased interest rates will increase the cost of acquiring properties through financing, reducing the opportunities for attractive acquisitions;
•acquired properties may fail to perform as expected;
•the actual costs of repositioning, redeveloping or maintaining acquired properties may be greater than our estimates and may require significantly greater time and attention of management than anticipated;
•the acquisition agreement will likely contain conditions to closing, including completion of due diligence investigations to our satisfaction or other conditions that are not within our control, which may not be satisfied;
•acquired properties may be located in new markets where we may face risks associated with a lack of market knowledge or understanding of the local economy, lack of business relationships in the area, costs associated with opening a new regional office and unfamiliarity with local governmental and permitting procedures;
•we may acquire real estate through the acquisition of the ownership entity subjecting us to the risks of that entity and we may be exposed to the liabilities of properties or companies acquired, some of which we may not be aware of at the time of acquisition;
•we may face competition for acquisition opportunities from other well-capitalized investors, including publicly traded and privately held REITs, private real estate funds, domestic and foreign financial institutions, life insurance companies, sovereign wealth funds, pension trusts, partnerships and individual investors, which may cause an increase in the purchase price for a desired acquisition property or result in a competitor acquiring the desired property instead of us; and
•we may be unable to quickly and efficiently integrate new acquisitions, particularly acquisitions of portfolios of properties, into our existing operations, and this could have an adverse effect on our results of operations and financial condition.
Any delay or failure on our part to identify, negotiate, finance and consummate such acquisitions in a timely manner and on favorable terms, or operate acquired properties to meet our financial expectations, could impede our growth and have an adverse effect on us, including our financial condition, results of operations, cash flow and the market value of our securities. If we are unable to successfully acquire additional properties, our ability to grow our business could be adversely affected.
We are exposed to risks associated with property development, redevelopment and repositioning that could adversely affect us, including our financial condition and results of operations.
We are the owner of numerous development sites and continue to engage in redevelopment and repositioning activities with respect to our properties, and, accordingly, we are subject to certain risks, which could adversely affect us, including our financial condition and results of operations. These risks include, without limitation, (i) the availability and pricing of financing on favorable terms or at all; (ii) the availability and timely receipt of zoning and other regulatory approvals; (iii) cost overruns, especially in an inflationary environment, and untimely completion of construction (including risks beyond our control, such as weather or labor conditions, material shortages or supply chain delays); (iv) the potential for the fluctuation of occupancy rates and rents at redeveloped properties, which may result in our investment not being profitable; (v) start up, repositioning and redevelopment costs may be higher than anticipated; (vi) the potential that we may fail to recover expenses already incurred if we abandon development or redevelopment opportunities after we begin to explore them; (vii) the potential that we may expend funds on and devote management time to projects which we do not complete; (viii) the inability to complete leasing of a property on schedule or at all, resulting in an increase in carrying or redevelopment costs; (ix) the possibility that properties will be leased at below expected rental rates and (x) to the extent
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the redevelopment activities are conducted in partnership with third parties, the possibility of disputes with our joint venture development partners and the potential that we miss certain project milestone deadlines. These risks could result in substantial unanticipated delays or expenses, prevent the initiation or the completion of redevelopment activities or reduce the ultimate rents achieved on new developments. These outcomes could have an adverse effect on our financial condition, results of operations, cash flow, the market value of our common shares and ability to satisfy our principal and interest obligations and to make distributions to our shareholders.
It may be difficult to buy and sell real estate quickly,on a timely basis, which may limit our flexibility.
Real estate investments are relatively difficult to buy and sell quickly.illiquid. Consequently, we may have limited ability to varydispose of assets in our portfolio promptly in response to changes in economic or other conditions.
conditions which could have an adverse effect on our sources of working capital and our ability to satisfy our debt obligations.
We may not be permitted to dispose of certain properties or pay down the debt associated with those properties when we might otherwise desire to do so without incurring additional costs. In addition, when we dispose of or sell assets, we may not be able to reinvest the sales proceeds and earn similar returns.
As part of an acquisition of a property, or a portfolio of properties, we may agree, and in the past have agreed, not to dispose of the acquired properties or reduce the mortgage indebtedness for a long-term period, unless we pay certain of the resulting tax costs of the seller. These agreements could result in us holding on to properties that we would otherwise sell and not pay down or refinance. In addition, when we dispose of or sell assets, we may not be able to reinvest the sales proceeds and earn returns similar to those generated by the assets that were sold.
From time to time we have made, and in the future we may seek to make investments in companies over which we do not have sole control. Some of these companies operate in industries with different risks than investing and operating real estate.
From time to time we have made, and in the future we may seek to make, investments in companies that we may not control, including, but not limited to, Alexander’s, Inc. (“Alexander’s”), Toys “R” Us, Inc. (“Toys”), Urban Edge Properties (“UE”), Pennsylvania Real Estate Investment Trust (“PREIT”),our Fifth Avenue and Times Square JV, and other equity and loan investments. Although these businesses generally have a significant real estate component, some of them operate in businesses that are different from investing and operating real estate, including operating or managing toy stores.estate. Consequently, we are subject to operating and financial risks of those industries and to the risks associated with lack of control, such as having differing objectives than our partners or the entities in which we invest, or becoming involved in disputes, or competing directly or indirectly with these partners or entities. In addition, we rely on the internal controls and financial reporting controls of these entities and their failure to maintain effectiveness or comply with applicable standards may adversely affect us.
We are subject to risks involved in real estate activity through joint ventures and private equity real estate funds.
We are exposed to risks related to our properties that are subject to ground leases arrangements which could resultadversely affect our results of operations.
We are the lessee under long-term ground lease arrangements at certain of our properties. Unless we purchase a fee interest in material impairment losses andthe underlying land or extend the terms of these leases prior to expiration, we will no longer operate these properties upon expiration of the leases, which could adversely affect our financial results.
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RISKS RELATED TO OUR INDEBTEDNESS AND ACCESS TO CAPITAL
Significantly tighter capital markets and economic conditions have affected and may continue to materially affect our liquidity, financial condition and results of operations as well as the value of an investment in our debt and equity securities.
There are many factors that can affect the value of our debt and equity securities, including the state of the capital markets and the economy. Demand for office and retail space typically declines nationwide due to an economic downturn, bankruptcies, downsizing, layoffs and cost cutting. Government action or inaction may adversely affect the state of the capital markets. The cost and availability of credit may be material toadversely affected by illiquid credit markets and wider credit spreads, which may adversely affect our liquidity and financial condition, including our results of operations, and the liquidity and financial condition of our tenants. Recently, domestic and international financial markets have experienced unusual volatility, significant interest rate increases and continuing uncertainty. Liquidity has significantly tightened in overall financial markets. Consequently, there is greater uncertainty regarding our ability to access the period that it is recognized.
credit markets in order to attract financing on reasonable terms. Additionally, the recent inflation environment has led to an increase in interest rates, which has had a direct and material increase on the interest expense of our borrowings. Our inability or the inability of our tenants to timely refinance maturing liabilities and access the capital markets to meet liquidity needs may materially affect our financial condition and results of operations and the value of our securities.
We invest in marketable equity securities. The value of these investmentshave outstanding debt, and its cost may decline as a result of operating performance or economic or market conditions. continue to increase and refinancing may not be available on acceptable terms and could affect our future operations.
If we are unable to obtain debt financing or refinance existing indebtedness upon maturity, our financial condition and results of operations would likely be adversely affected. In addition, the current interest rate environment has led to an increase in interest rates on our variable rate debt, including on new hedging instruments, and an increase in the cost of refinancing our existing debt and entering into new debt, all of which have an aggregate carryingreduced, and could continue to reduce, our operating cash flows. While certain of our debt is fixed by interest rate swap arrangements, the arrangements typically expire earlier than the mortgage loan maturity, resulting in future exposure to rising interest rates, which could further reduce our available cash. If the cost or amount of $182,752,000,our indebtedness continues to increase or we cannot refinance our debt in sufficient amounts or on acceptable terms, we are at market. Significant declines in the valuerisk of these
operations.
We may not be able to obtain capital to make investments.
We depend primarily on external financing to fund the growth of our business. This is because one of the requirements of the Internal Revenue Code of 1986, as amended, for a REIT is that it distributes 90% of its taxable income, excluding net capital gains, to its shareholders. This, in turn, requires the Operating Partnership to make distributions to its unitholders. There is a separate requirement to distribute net capital gains or pay a corporate level tax in lieu thereof. Our access to debt or equity financing depends on the willingness of third parties to lend or make equity investments and on conditions in the capital markets generally. Although we believe that we will be able to finance any investments we may wish to make in the foreseeable future, there can be no assurance that new financing will be available or available on acceptable terms. For information about our available sources of funds, see “Management’s“Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources” and the notes to the consolidated financial statements in this Annual Report on Form 10-K.
The hedge instruments we may use to manage our exposure to interest rate volatility involve risks.
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Covenants in our debt instruments could adversely affect our financial condition and our acquisitions and development activities.
The mortgages on our properties contain customary covenants such as those that limit our ability, without the prior consent of the applicable lender, to further mortgage the applicable property or to discontinuereduce or change insurance coverage. Our unsecured indebtedness and debt that we may obtain in the future may contain customary restrictions, requirements and other limitations on our ability to incur indebtedness, including covenants that limit our ability to incur debt based upon the levellevels of our ratio ofcertain ratios including total debt to total assets, our ratio of secured debt to total assets, our ratio of EBITDA to interest expense, and fixed charges, and that require us to maintain a certain levelratio of unencumbered assets to unsecured debt. Our ability to borrow is subject to compliance with these and other covenants. In addition, failure to comply with our covenants could cause a default under the applicable debt instrument, and we may then be required to repay such debt with capital from such other sources or give possession of a secured property to the lender. Under those circumstances, other sources of capital may not be available to us or may be available only on unattractive terms. Further, depending on market conditions at the time of any refinancing, the covenants included as part of the terms of such refinancing may be more restrictive than the existing indebtedness.
In addition, our debt instruments contain customary covenants requiring us to maintain insurance. Although we believe that we have adequate insurance coverage for purposes of these agreements, we may not be able to obtain an equivalent amount of coverage at reasonable costs in the future. Further, if lenders insist on greater coverage than we are able to obtain it could result in acceleration of repayment of such debt instruments and adversely affect our ability to finance or refinance our properties and expand our portfolio.
A further downgrade in our credit ratings could materially and adversely affect our business and financial condition.
Our credit rating and the credit ratings assigned to our debt securities and our preferred shares have been recently downgraded and could change in the future based upon, among other things, our results of operations and financial condition. TheseOur ratings are subject to ongoing evaluation by credit rating agencies, and any rating could be changed or withdrawn by a rating agency in the future if, in its judgment, circumstances warrant such action. Moreover, these credit ratings are not recommendations to buy, sell or hold our common shares or any other securities. If any of the credit rating agencies that have rated our securities downgrades or lowers its credit rating, or if any credit rating agency indicates that it has placed any such rating on a “watch list” for a possible downgrading or lowering, or otherwise indicates that its outlook for that rating is negative, such action could have a material adverse effect on our costs and availability of funding, whichfunding. For instance, if we fail to maintain the credit ratings currently assigned to our senior debt, the interest rates payable on outstanding debt under our unsecured term loan and revolving credit facilities would increase and we may be required to post additional collateral under certain of our existing loan agreements. Furthermore, any future lowering of our credit ratings or outlook would likely make it more difficult and/or more expensive for us to obtain additional debt financing. Our failure to maintain or improve our credit ratings could in turn have a material adverse effect on our financial condition, results of operations, cash flows, the trading/redemption price of our securities, and our ability to satisfy our debt service obligations and to pay dividends and distributions to our equity holders.
RISKS RELATED TO OUR ORGANIZATION AND STRUCTURE
We depend on dividends and distributions from our direct and indirect subsidiaries. The creditors and preferred equity holders of these subsidiaries are entitled to amounts payable to them by the subsidiaries before the subsidiaries may pay any dividends or distributions to us.
Substantially all of Vornado’s assets are held through the Operating Partnership which holds substantially all of its properties and assets through subsidiaries. The Operating Partnership’s cash flow is dependent on cash distributions to it by its subsidiaries, and in turn, substantially all of Vornado’s cash flow is dependent on cash distributions to it by the Operating Partnership. The creditors of each of Vornado’s direct and indirect subsidiaries are entitled to payment of that subsidiary’s obligations to them, when due and payable, before distributions may be made by that subsidiary to its equity holders. Thus, the Operating Partnership’s ability to make distributions to its equity holders depends on its subsidiaries’ ability first to satisfy their obligations to their creditors and then to make distributions to the Operating Partnership. Consequently, Vornado’s ability to pay dividends to its holders of common and preferred shares depends on the Operating Partnership’s ability first to satisfy its obligations to its creditors and make distributions to holders of its preferred units and then to make distributions to Vornado.
Furthermore, the holders of preferred units of the Operating Partnership are entitled to receive preferred distributions before payment of distributions to the Operating Partnership’s equity holders, including Vornado. Thus, Vornado’s ability to pay cash dividends to its equity holders and satisfy its debt obligations depends on the Operating Partnership’s ability first to satisfy its obligations to its creditors and make distributions to holders of its preferred units and then to its equity holders, including Vornado. As of December 31, 2023, there were six series of preferred units of the Operating Partnership not held by Vornado with a total liquidation value of $52,921,000.
In addition, Vornado’s participation in any distribution of the assets of any of its direct or indirect subsidiaries upon the liquidation, reorganization or insolvency is only after the claims of the creditors, including trade creditors and preferred equity holders, are satisfied.
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Vornado’s Amended and Restated Declaration of Trust (the “declaration of trust”) sets limits on the ownership of its shares.
Generally, for Vornado to maintain its qualification as a REIT under the Internal Revenue Code, not more than 50% in value of the outstanding shares of beneficial interest of Vornado may be owned, directly or indirectly, by five or fewer individuals at any time during the last half of Vornado’s taxable year. The Internal Revenue Code defines “individuals” for purposes of the requirement described in the preceding sentence to include some types of entities. Under Vornado’s declaration of trust, as amended, no person may own more than 6.7% of the outstanding common shares of any class, or 9.9% of the outstanding preferred shares of any class, with some exceptions for persons who held common shares in excess of the 6.7% limit before Vornado adopted the limit and other persons approved by Vornado’s Board of Trustees. In addition, our declaration of trust includes restrictions on ownership of our common shares and preferred shares to preserve our status as a "domestically controlled qualified investment entity" within the meaning of Section 897 (h)(4)(B) of the Internal Revenue Code of 1986, as amended. These restrictions on transferability and ownership may delay, deter or prevent a change in control of Vornado or other transaction that might involve a premium price or otherwise be in the best interest of equity holders.
The Maryland General Corporation Law (the “MGCL”) contains provisions that may reduce the likelihood of certain takeover transactions.
The MGCL imposes conditions and restrictions on certain “business combinations” (including, among other transactions, a merger, consolidation, share exchange, or, in certain circumstances, an asset transfer or issuance of equity securities) between a Maryland REIT and certain persons who beneficially own at least 10% of the corporation’s stock (an “interested shareholder”). Unless approved in advance by the board of trustees of the trust, or otherwise exempted by the statute, such a business combination is prohibited for a period of five years after the most recent date on which the interested shareholder became an interested shareholder. After such five-year period, a business combination with an interested shareholder must be: (a) recommended by the board of trustees of the trust, and (b) approved by the affirmative vote of at least (i) 80% of the trust’s outstanding shares entitled to vote and (ii) two-thirds of the trust’s outstanding shares entitled to vote which are not held by the interested shareholder with whom the business combination is to be effected, unless, among other things, the trust’s common shareholders receive a “fair price” (as defined by the statute) for their shares and the consideration is received in cash or in the same form as previously paid by the interested shareholder for his or her shares.
In approving a transaction, Vornado’s Board of Trustees may provide that its approval is subject to compliance, at or after the time of approval, with any terms and conditions determined by the Board of Trustees. Vornado’s Board of Trustees has adopted a resolution exempting any business combination between Vornado and any trustee or officer of Vornado or its affiliates. As a result, any trustee or officer of Vornado or its affiliates may be able to enter into business combinations with Vornado that may not be in the best interest of our equity holders. With respect to business combinations with other persons, the business combination provisions of the MGCL may have the effect of delaying, deferring or preventing a change in control of Vornado or other transaction that might involve a premium price or otherwise be in the best interest of our equity holders. The business combination statute may discourage others from trying to acquire control of Vornado and increase the difficulty of consummating any offer.
Title 3, Subtitle 8 of the MGCL permits our Board of Trustees, without shareholder approval and regardless of what is currently provided in our declaration of trust or bylaws, to implement certain takeover defenses, including adopting a classified board or increasing the vote required to remove a trustee. Such takeover defenses may have the effect of inhibiting a third party from making an acquisition proposal for us or of delaying, deferring or preventing a change in control of us under the circumstances that otherwise could provide our common shareholders with the opportunity to realize a premium over the then current market price.
Vornado may issue additional shares in a manner that could adversely affect the likelihood of certain takeover transactions.
Vornado’s declaration of trust authorizes the Board of Trustees to:
•cause Vornado to issue additional authorized but unissued common shares or preferred shares;
•classify or reclassify, in one or more series, any unissued preferred shares;
•set the preferences, rights and other terms of any classified or reclassified shares that Vornado issues; and
•increase, without shareholder approval, the number of shares of beneficial interest that Vornado may issue.
Vornado’s Board of Trustees could establish a series of preferred shares whose terms could delay, deter or prevent a change in control of Vornado, and therefore of the Operating Partnership, or other transaction that might involve a premium price or otherwise be in the best interest of our equity holders, although Vornado’s Board of Trustees does not now intend to establish a series of preferred shares of this kind. Vornado’s declaration of trust and bylaws contain other provisions that may delay, deter or prevent a change in control of Vornado or other transaction that might involve a premium price or otherwise be in the best interest of our equity holders.
We may change our policies without obtaining the approval of our equity holders.
Our operating and financial policies, including our policies with respect to acquisitions of real estate or other companies, growth, operations, indebtedness, capitalization, dividends and distributions, are exclusively determined by Vornado’s Board of Trustees. Accordingly, our equity holders do not control these policies.
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Steven Roth and Interstate Properties may exercise substantial influence over us. They and some of Vornado’s other trustees and officers have interests or positions in other entities that may compete with us.
As of December 31, 2023, Interstate Properties, a New Jersey general partnership, and its partners beneficially owned an aggregate of approximately 7.0% of the common shares of beneficial interest of Vornado and 26.0% of the common stock of Alexander’s, which is described below. Steven Roth, David Mandelbaum and Russell B. Wight, Jr. are the three partners of Interstate Properties. Mr. Roth is the Chairman of the Board of Trustees and Chief Executive Officer of Vornado, the managing general partner of Interstate Properties, and the Chairman of the Board of Directors and Chief Executive Officer of Alexander’s. Messrs. Mandelbaum and Wight are Trustees of Vornado and Directors of Alexander’s.
Because of these overlapping interests, Mr. Roth and Interstate Properties and its partners may have substantial influence over Vornado, and therefore over the Operating Partnership. In addition, certain decisions concerning our operations or financial structure may present conflicts of interest among Messrs. Roth, Mandelbaum and Wight and Interstate Properties and our other equity holders. In addition, Mr. Roth, Interstate Properties and its partners, and Alexander’s currently and may in the future engage in a wide variety of activities in the real estate business which may result in conflicts of interest with respect to matters affecting us, such as which of these entities or persons, if any, may take advantage of potential business opportunities, the business focus of these entities, the types of properties and geographic locations in which these entities make investments, potential competition between business activities conducted, or sought to be conducted, competition for properties and tenants, possible corporate transactions such as acquisitions and other strategic decisions affecting the future of these entities.
We manage and lease the real estate assets of Interstate Properties pursuant to a management agreement for which we receive an annual fee equal to 4% of annual base rent and percentage rent. See Note 22 – Related Party Transactions to our consolidated financial statements in this Annual Report on Form 10-K for additional information.
There may be conflicts of interest between Alexander’s and us.
As of December 31, 2023, we owned 32.4% of the outstanding common stock of Alexander’s. Alexander’s is a REIT that has five properties, which are located in the greater New York metropolitan area. In addition to the 2.3% that they indirectly own through Vornado, Interstate Properties, which is described above, and its partners owned 26.0% of the outstanding common stock of Alexander’s as of December 31, 2023. Mr. Roth is the Chairman of the Board of Trustees and Chief Executive Officer of Vornado, the managing general partner of Interstate Properties, and the Chairman of the Board of Directors and Chief Executive Officer of Alexander’s. Messrs. Mandelbaum and Wight are Trustees of Vornado and Directors of Alexander’s and general partners of Interstate Properties. Ms. Mandakini Puri is a Trustee of Vornado and Director of Alexander’s.
We manage, develop and lease Alexander’s properties under management, development and leasing agreements under which we receive annual fees from Alexander’s. These agreements are described in Note 5 – Investments in Partially Owned Entities to our consolidated financial statements in this Annual Report on Form 10-K.
RISKS RELATED TO OUR COMMON SHARES AND OPERATING PARTNERSHIP CLASS A UNITS
The trading price of Vornado’s common shares has been volatile and may continue to fluctuate.
The trading price of Vornado’s common shares has been volatile and may continue to fluctuate widely as a result of several factors, many of which are outside our control. In addition, the stock market is subject to fluctuations in the share prices and trading volumes that affect the market prices of the shares of many companies. These broad market fluctuations have in the past and may in the future adversely affect the market price of Vornado’s common shares and the redemption price of the Operating Partnership’s Class A units. These factors include:
•our financial condition and performance;
•the financial condition of our tenants, including the extent of tenant bankruptcies or defaults;
•actual or anticipated quarterly fluctuations in our operating results and financial condition;
•our dividend policy;
•the reputation of REITs and real estate investments generally and the attractiveness of REIT equity securities in comparison to other equity securities, including securities issued by other real estate companies, and fixed income securities;
•uncertainty and volatility in the equity and credit markets;
•interest rates increases;
•changes in revenue or earnings estimates or publication of research reports and recommendations by financial analysts or actions taken by rating agencies with respect to our securities or those of other REITs;
•failure to meet analysts’ revenue or earnings estimates;
•speculation in the press or investment community;
•strategic actions by us or our competitors, such as acquisitions or restructurings;
•the extent of institutional investor interest in us;
•the extent of short-selling of Vornado common shares and the shares of our competitors;
•fluctuations in the stock price and operating results of our competitors;
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•share repurchase plans;
•general financial and economic market conditions and, in particular, developments related to market conditions for office REITs and other real estate related companies and the New York City real estate market;
•inflation;
•local, domestic and international economic factors unrelated to our performance (including the macro-economic impact of geopolitical conflicts);
•fiscal policies or inaction at the U.S. federal government level that may lead to federal government shutdowns or negative impacts on the U.S. economy;
•changes in tax laws and rules; and
•all other risk factors addressed elsewhere in this Annual Report on Form 10-K.
A significant decline in Vornado’s stock price could result in substantial losses for our equity holders.
Vornado has many shares available for future sale, which could hurt the market price of its shares and the redemption price of the Operating Partnership’s units.
The interests of equity holders could be diluted if we issue additional equity securities. As of December 31, 2023, Vornado had authorized but unissued 59,609,297 common shares of beneficial interest, $0.04 par value, and 58,387,098 preferred shares of beneficial interest, no par value; of which 22,186,690 common shares are reserved for issuance upon redemption of Class A Operating Partnership units, convertible securities and employee stock options and 11,200,000 preferred shares are reserved for issuance upon redemption of preferred Operating Partnership units. Any shares not reserved may be issued from time to time in public or private offerings or in connection with acquisitions. In addition, common and preferred shares reserved may be sold upon issuance in the public market after registration under the Securities Act or under Rule 144 under the Securities Act or other available exemptions from registration. We cannot predict the effect that future sales of Vornado’s common and preferred shares or Operating Partnership Class A and preferred units will have on the market prices of our securities.
In addition, under Maryland law, Vornado’s Board of Trustees has the authority to increase the number of authorized shares without shareholder approval.
Loss of our key personnel could harm our operations and adversely affect the value of our common shares and Operating Partnership Class A units.
We are dependent on the efforts of Steven Roth, the Chairman of the Board of Trustees and Chief Executive Officer of Vornado. While we believe that we could find a replacement for him and other key personnel, the loss of their services could harm our operations and adversely affect the value of our securities.
RISKS RELATED TO REGULATORY COMPLIANCE
Vornado may fail to qualify or remain qualified as a REIT and may be required to pay federal income taxes at corporate rates.
rates, which could adversely impact the value of our common shares.
Although we believe that Vornado will remain organized and will continue to operate so as to qualify as a REIT for federal income tax purposes, Vornado may fail to remain so qualified. Qualifications are governed by highly technical and complex provisions of the Internal Revenue Code for which there are only limited judicial or administrative interpretations and depend on various facts and circumstances that are not entirely within our control. In addition, legislation, new regulations, administrative interpretations or court decisions may significantly change the relevant tax laws and/or the federal income tax consequences of qualifying as a REIT. If, with respect to any taxable year, Vornado fails to maintain its qualification as a REIT and does not qualify under statutory relief provisions, Vornado could not deduct distributions to shareholders in computing our taxable income and would have to pay federal income tax on its taxable income at regular corporate rates. The federal income tax payable would include any applicable alternative minimum tax. If Vornado had to pay federal income tax, the amount of money available to distribute to equity holders and pay its indebtedness would be reduced for the year or years involved, and Vornado would not be required to make distributions to shareholders in that taxable year and in future years until it was able to qualify as a REIT and did so. In addition, Vornado would also be disqualified from treatment as a REIT for the four taxable years following the year during which qualification was lost, unless Vornado were entitled to relief under the relevant statutory provisions.
Our failure to qualify as a REIT could impact our ability to expand our business and raise capital and adversely affect the value of our common shares.
We may face possible adverse federal tax audits and changes in federal tax laws, which may result in an increase in our tax liability.
In the normal course of business, certain entities through which we own real estate either have undergone or may undergo tax audits. Although we believe that we have substantial arguments in favor of our positions, in some instances there is no controlling precedent or interpretive guidance. There can be no assurance that audits will not occur with increased frequency or that the ultimate result of such audits will not have a material adverse effect on our results of operations.
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At any time, the U.S. federal income tax laws governing REITs or the administrative interpretations of those laws may be amended. We cannot predict if or when any new U.S. federal income tax law, regulation, or administrative interpretation, or any amendment to any existing U.S. federal income tax law, Treasury regulation or administrative interpretation, will be adopted, promulgated or become effective and any such law, regulation, or interpretation may take effect retroactively. Vornado, its taxable REIT subsidiaries, and our security holders could be adversely affected by any such change in, or any new, U.S. federal income tax law, Treasury regulation or administrative interpretation.
We may face possible adverse state and local tax audits and changes in state and local tax law.
Because Vornado is organized and qualifies as a REIT, it is generally not subject to federal income taxes, but we are subject to certain state and local taxes. In the normal course of business, certain entities through which we own real estate either have undergone, or are currently undergoing, tax audits. Although we believe that we have substantial arguments in favor of our positions in the ongoing audits, in some instances there is no controlling precedent or interpretive guidance on the specific point at issue. There can be no assurance that audits will not occur with increased frequency or that the ultimate result of such audits will not have a material adverse effect on our results of operations.
From time to time changes in state and local tax laws or regulations are enacted, which may result in an increase in our tax liability. TheA shortfall in tax revenues for states and municipalities in recent yearswhich we operate may lead to an increase in the frequency and size of such changes.changes including changes in laws, regulations and administration of property and transfer taxes. If such changes occur, we may be required to pay additional taxes on our assets or income. These increased tax costs could adversely affect our financial condition and results of operations and the amount of cash available for the payment of dividends and distributions.distributions to our security holders.
Compliance or failure to comply with the Americans with Disabilities Act (the "ADA") or other safety regulations and requirements could result in substantial costs.
our financial condition and performance;results of operations, as well as the amount of cash available for distribution to equity holders.
Our properties are subject to various federal, state and local regulatory requirements, such as state and local fire and life safety requirements. If we fail to comply with these requirements, we could incur fines or private damage awards. We do not know whether existing requirements will change or whether compliance with future requirements will require significant unanticipated expenditures that will affect our cash flow and results of operations.
We may incur significant costs to comply with environmental laws and environmental contamination may impair our ability to lease and/or sell real estate.
Our operations and properties are subject to various federal, state and local laws and regulations concerning the financial conditionprotection of our tenants,the environment, including the extentair and water quality, hazardous or toxic substances and health and safety. Under some environmental laws, a current or previous owner or operator of tenant bankruptcies or defaults;
Each of our properties has been subject to varying degrees of environmental assessment. To date, these environmental assessments have not revealed any environmental condition material to our business. However, identification of new compliance concerns or undiscovered areas of contamination, changes in the extent or known scope of contamination, human exposure to contamination or changes in clean-up or compliance requirements could result in significant costs to us.
23
RISKS RELATED TO TECHNOLOGY, CYBERSECURITY AND DATA PROTECTION
The occurrence of cyber incidents, or a deficiency in our cyber security, as well as other disruptions to our IT networks and related systems, could negatively impact our business by causing a disruption to our operations, a compromise or corruption of our confidential information, and/or damage to our business relationships or reputation, all of which could negatively impact our financial results.
Our IT networks and related systems are essential to the operation of our business and our ability to perform day-to-day operations (including managing our building systems) and, in some cases, may be critical to the operations of certain of our tenants. We face risks associated with security breaches, whether through cyber-attacks, malware, ransomware, computer viruses, phishing, attachments to e-mails, persons who access our systems from inside or outside our organization, and other significant disruptions of our IT networks and related systems. Our suppliers, subcontractors, and joint venture partners face similar threats and an incident at one of these entities could adversely impact our business. These entities are typically outside our control and may have access to certain of our information with varying levels of security and cybersecurity resources. The risk of a security breach or disruption, particularly through cyber attack, including by computer hackers, foreign governments and cyber terrorists, has generally increased as the number, intensity and sophistication of attempted attacks from around the world have increased, including through the use of artificial intelligence. Although we have not experienced cyber incidents that are individually, or in the aggregate, material, the incidents we have experienced thus far have been mitigated by preventative, detective, and responsive measures that we have put in place. Although we make efforts to maintain the security and integrity of these types of IT networks and related systems, and we have implemented various measures to manage the risk of a security breach or disruption, there can be no assurance that our security efforts and measures will be effective or that attempted security breaches or disruptions would not be successful or damaging. Unauthorized parties, whether within or outside our company, may disrupt or gain access to our systems, or those of third parties with whom we do business, through human error, misfeasance, fraud, trickery, or other REITs;forms of deceit, including break-ins, use of stolen credentials, social engineering, phishing, computer viruses or other malicious codes, and similar means of unauthorized and destructive tampering. Even the most well protected information, networks, systems and facilities remain potentially vulnerable because the techniques used in such attempted security breaches evolve and generally are not recognized until launched against a target, and in some cases are designed to not be detected and, in fact, may not be detected. Accordingly, we may be unable to anticipate these techniques or to implement adequate security barriers or other preventative measures, and thus it is impossible for us to entirely mitigate this risk.
A cyber attack or systems failure could interfere with our ability to comply with financial reporting requirements, which could adversely affect us. A cyber attack could also compromise the extent of institutional investor interest in us;
For additional information on our cybersecurity risk management process, see Item 1C. Cybersecurity.
ITEM 1B. UNRESOLVED STAFF COMMENTS
There are no unresolved comments from the staff of the Securities and Exchange Commission as of the date of this Annual Report on Form 10-K.
24
ITEM 1C. CYBERSECURITY
Risk Management and Strategy
We employ a comprehensive risk management strategy for the assessment, identification and management of material risks stemming from cybersecurity threats. Our methodologies involve a systematic evaluation of potential threats, vulnerabilities, and their potential impacts on our organization’s operations, data, and systems.
Our cybersecurity risk management program is integrated into our overall enterprise risk management program, and shares common methodologies, reporting channels and governance processes that apply across the enterprise risk management program, including legal, compliance, strategic, operational, and financial risk areas.
Our cybersecurity risk management program includes:
•Risk assessments designed to help identify material cybersecurity risks to our critical systems, information, and our broader enterprise IT environment;
•A team principally responsible for managing (i) our cybersecurity risk assessment processes, (ii) our security controls and (iii) our response to cybersecurity incidents;
•The use of external service providers, where appropriate, to assess, test or otherwise assist with aspects of our security controls;
•Cybersecurity awareness training of our employees, incident response personnel and senior management, including through the use of third-party providers for regular mandatory trainings;
•A cybersecurity incident response plan that includes procedures for responding to cybersecurity incidents; and
•A risk management process for third-party service providers, suppliers, and vendors. We employ rigorous vetting processes and ongoing monitoring mechanisms designed to ensure their compliance with cybersecurity standards.
As of the date of this Annual Report on Form 10-K, we are not aware of any risks from cybersecurity threats, including as a result of any previous cybersecurity incidents, that have materially affected or are reasonably likely to materially affect us, including our operations, business strategy, results of operations, or financial condition.
Governance
Our Board of Trustee’s considers cybersecurity risk as part of its risk oversight function and has delegated to the Audit Committee (the “Committee”) oversight of cybersecurity and other information technology risks. The Committee oversees management’s implementation of our cybersecurity risk management program.
The Committee receives periodic reports from management on our potential cybersecurity risks and threats and receives presentations on cybersecurity topics from our Chief Information Officer. The Committee reports to the full Board of Trustees regarding its activities, including those related to cybersecurity. The full Board of Trustees also receives briefings from management on cybersecurity matters as needed.
Our management team, including our Chief Information Officer, is responsible for assessing and managing our material risks from cybersecurity threats. The team has primary responsibility for our overall cybersecurity risk management program and supervises both our internal cybersecurity personnel and our retained external cybersecurity consultants. Our Chief Information Officer has many years of experience leading cybersecurity oversight and overall has broad, extensive experience with information technology, including security, auditing, compliance, systems and programming.
Our management team supervises efforts to prevent, detect, mitigate, and remediate cybersecurity risks and incidents through various means, which may include briefings from internal security personnel; threat intelligence and other information obtained from governmental, public or private sources, including external consultants engaged by us; and alerts and reports produced by security tools deployed in the IT environment. Our cybersecurity incident response plan governs our assessment and response upon the occurrence of a material cybersecurity incident, including the process for informing senior management and our Board of Trustees.
25
ITEM 2. PROPERTIES
PROPERTY LISTING
We operate in two reportable segments: New York and Other. The following pages provide details of our real estate properties as of December 31, 2017.2023.
| Square Feet | |||||||||||||||||
NEW YORK SEGMENT Property | % Ownership | Type | % Occupancy | In Service | Under Development or Not Available for Lease | Total Property | |||||||||||
| One Penn Plaza (ground leased through 2098) | 100.0 | % | Office/Retail | 92.5 | % | 2,530,000 | — | 2,530,000 | |||||||||
| 1290 Avenue of the Americas | 70.0 | % | Office/Retail | 100.0 | % | 2,114,000 | — | 2,114,000 | |||||||||
| Two Penn Plaza | 100.0 | % | Office/Retail | 98.7 | % | 1,634,000 | — | 1,634,000 | |||||||||
| 909 Third Avenue (ground leased through 2063) | 100.0 | % | Office | 97.6 | % | 1,347,000 | — | 1,347,000 | |||||||||
Independence Plaza, Tribeca (1,327 units)(1) | 50.1 | % | Retail/Residential | 97.7 | % | (2) | 1,245,000 | 12,000 | 1,257,000 | ||||||||
280 Park Avenue(1) | 50.0 | % | Office/Retail | 97.4 | % | 1,254,000 | — | 1,254,000 | |||||||||
| 770 Broadway | 100.0 | % | Office/Retail | 100.0 | % | 1,160,000 | — | 1,160,000 | |||||||||
| Eleven Penn Plaza | 100.0 | % | Office/Retail | 99.2 | % | 1,152,000 | — | 1,152,000 | |||||||||
| 90 Park Avenue | 100.0 | % | Office/Retail | 98.3 | % | 961,000 | — | 961,000 | |||||||||
One Park Avenue(1) | 55.0 | % | Office/Retail | 99.1 | % | 939,000 | — | 939,000 | |||||||||
| 888 Seventh Avenue (ground leased through 2067) | 100.0 | % | Office/Retail | 97.3 | % | 889,000 | — | 889,000 | |||||||||
| 100 West 33rd Street | 100.0 | % | Office | 98.2 | % | 855,000 | — | 855,000 | |||||||||
Moynihan Train Hall/Farley Building(1) | 50.1 | % | Office/Retail | n/a | — | 850,000 | 850,000 | ||||||||||
330 Madison Avenue(1) | 25.0 | % | Office/Retail | 98.1 | % | 846,000 | — | 846,000 | |||||||||
330 West 34th Street (ground leased through 2149) | 100.0 | % | Office/Retail | 92.6 | % | 709,000 | — | 709,000 | |||||||||
85 Tenth Avenue(1) | 49.9 | % | Office/Retail | 100.0 | % | 627,000 | — | 627,000 | |||||||||
650 Madison Avenue(1) | 20.1 | % | Office/Retail | 91.1 | % | 593,000 | — | 593,000 | |||||||||
| 350 Park Avenue | 100.0 | % | Office/Retail | 100.0 | % | 571,000 | — | 571,000 | |||||||||
| 150 East 58th Street (ground leased through 2098) | 100.0 | % | Office/Retail | 94.3 | % | 542,000 | — | 542,000 | |||||||||
7 West 34th Street (1) | 53.0 | % | Office/Retail | 98.8 | % | 479,000 | — | 479,000 | |||||||||
| 33-00 Northern Boulevard (Center Building) | 100.0 | % | Office | 99.6 | % | 471,000 | — | 471,000 | |||||||||
| 595 Madison Avenue | 100.0 | % | Office/Retail | 91.5 | % | 325,000 | — | 325,000 | |||||||||
| 640 Fifth Avenue | 100.0 | % | Office/Retail | 91.8 | % | 314,000 | — | 314,000 | |||||||||
50-70 W 93rd Street (326 units)(1) | 49.9 | % | Residential | 95.1 | % | 283,000 | — | 283,000 | |||||||||
| Manhattan Mall | 100.0 | % | Retail | 97.4 | % | 256,000 | — | 256,000 | |||||||||
| 40 Fulton Street | 100.0 | % | Office/Retail | 88.1 | % | 251,000 | — | 251,000 | |||||||||
| 4 Union Square South | 100.0 | % | Retail | 100.0 | % | 206,000 | — | 206,000 | |||||||||
| 260 Eleventh Avenue (ground leased through 2114) | 100.0 | % | Office | 100.0 | % | 184,000 | — | 184,000 | |||||||||
512 W 22nd Street(1) | 55.0 | % | Office | n/a | — | 173,000 | 173,000 | ||||||||||
61 Ninth Avenue (ground leased through 2115)(1) | 45.1 | % | Office/Retail | 100.0 | % | 23,000 | 147,000 | 170,000 | |||||||||
| 825 Seventh Avenue | 51.2 | % | Office (1) /Retail | 100.0 | % | 169,000 | — | 169,000 | |||||||||
| 1540 Broadway | 100.0 | % | Retail | 100.0 | % | 160,000 | — | 160,000 | |||||||||
| 608 Fifth Avenue (ground leased through 2033) | 100.0 | % | Office/Retail | 99.9 | % | 137,000 | — | 137,000 | |||||||||
| Paramus | 100.0 | % | Office | 94.7 | % | 129,000 | — | 129,000 | |||||||||
| 666 Fifth Avenue Retail Condominium | 100.0 | % | Retail | 100.0 | % | 114,000 | — | 114,000 | |||||||||
1535 Broadway (Marriott Marquis - retail and signage) (ground and building leased through 2032) | 100.0 | % | Retail/Theatre | 98.1 | % | 106,000 | — | 106,000 | |||||||||
57th Street (2 buildings)(1) | 50.0 | % | Office/Retail | 87.9 | % | 103,000 | — | 103,000 | |||||||||
| 689 Fifth Avenue | 100.0 | % | Office/Retail | 91.7 | % | 98,000 | — | 98,000 | |||||||||
| 478-486 Broadway (2 buildings) (10 units) | 100.0 | % | Retail/Residential | 100.0 | % | (2) | 85,000 | — | 85,000 | ||||||||
| 150 West 34th Street | 100.0 | % | Retail | 100.0 | % | 78,000 | — | 78,000 | |||||||||
| 510 Fifth Avenue | 100.0 | % | Retail | 100.0 | % | 66,000 | — | 66,000 | |||||||||
| 655 Fifth Avenue | 92.5 | % | Retail | 100.0 | % | 57,000 | — | 57,000 | |||||||||
| 155 Spring Street | 100.0 | % | Retail | 93.6 | % | 50,000 | — | 50,000 | |||||||||
| 3040 M Street | 100.0 | % | Retail | 100.0 | % | 44,000 | — | 44,000 | |||||||||
| 435 Seventh Avenue | 100.0 | % | Retail | 100.0 | % | 43,000 | — | 43,000 | |||||||||
| 692 Broadway | 100.0 | % | Retail | 100.0 | % | 36,000 | — | 36,000 | |||||||||
| 606 Broadway | 50.0 | % | Office/Retail | n/a | — | 34,000 | 34,000 | ||||||||||
| 697-703 Fifth Avenue (St. Regis - retail) | 74.3 | % | Retail | 100.0 | % | 26,000 | — | 26,000 | |||||||||
| 715 Lexington Avenue | 100.0 | % | Retail | 35.9 | % | 23,000 | — | 23,000 | |||||||||
| Square Feet | ||||||||||||||||||||||||||||||||||||||
NEW YORK SEGMENT Property | % Ownership | Type | % Occupancy | In Service | Under Development or Not Available for Lease | Total Property | ||||||||||||||||||||||||||||||||
PENN 1 (ground leased through 2098)(1) | 100.0 | % | Office / Retail | 82.4 | % | 2,329,000 | 228,000 | 2,557,000 | ||||||||||||||||||||||||||||||
| 1290 Avenue of the Americas | 70.0 | % | Office / Retail | 99.8 | % | 2,120,000 | — | 2,120,000 | ||||||||||||||||||||||||||||||
| PENN 2 | 100.0 | % | Office / Retail | 100.0 | % | 338,000 | 1,457,000 | 1,795,000 | ||||||||||||||||||||||||||||||
909 Third Avenue (ground leased through 2063)(1) | 100.0 | % | Office | 95.0 | % | 1,351,000 | — | 1,351,000 | ||||||||||||||||||||||||||||||
280 Park Avenue(2) | 50.0 | % | Office / Retail | 95.3 | % | 1,265,000 | — | 1,265,000 | ||||||||||||||||||||||||||||||
Independence Plaza, Tribeca (1,327 units)(2) | 50.1 | % | Retail / Residential | 57.6 | % | (3) | 1,258,000 | — | 1,258,000 | |||||||||||||||||||||||||||||
| 770 Broadway | 100.0 | % | Office / Retail | 79.7 | % | 1,183,000 | — | 1,183,000 | ||||||||||||||||||||||||||||||
| PENN 11 | 100.0 | % | Office / Retail | 99.3 | % | 1,149,000 | — | 1,149,000 | ||||||||||||||||||||||||||||||
| 100 West 33rd Street | 100.0 | % | Office / Retail | 70.6 | % | 1,114,000 | — | 1,114,000 | ||||||||||||||||||||||||||||||
| 90 Park Avenue | 100.0 | % | Office / Retail | 95.2 | % | 956,000 | — | 956,000 | ||||||||||||||||||||||||||||||
| One Park Avenue | 100.0 | % | Office / Retail | 95.0 | % | 945,000 | — | 945,000 | ||||||||||||||||||||||||||||||
888 Seventh Avenue (ground leased through 2067)(1) | 100.0 | % | Office / Retail | 86.5 | % | 887,000 | — | 887,000 | ||||||||||||||||||||||||||||||
The Farley Building (ground and building leased through 2116)(1) | 95.0 | % | Office / Retail | 91.4 | % | 847,000 | — | 847,000 | ||||||||||||||||||||||||||||||
330 West 34th Street (65.2% ground leased through 2149)(1) | 100.0 | % | Office / Retail | 75.7 | % | 724,000 | — | 724,000 | ||||||||||||||||||||||||||||||
85 Tenth Avenue(2) | 49.9 | % | Office / Retail | 84.5 | % | 638,000 | — | 638,000 | ||||||||||||||||||||||||||||||
650 Madison Avenue(2) | 20.1 | % | Office / Retail | 86.1 | % | 601,000 | — | 601,000 | ||||||||||||||||||||||||||||||
| 350 Park Avenue | 100.0 | % | Office | 100.0 | % | 585,000 | — | 585,000 | ||||||||||||||||||||||||||||||
150 East 58th Street(4) | 100.0 | % | Office / Retail | 83.2 | % | 544,000 | — | 544,000 | ||||||||||||||||||||||||||||||
7 West 34th Street(2) | 53.0 | % | Office / Retail | 100.0 | % | 477,000 | — | 477,000 | ||||||||||||||||||||||||||||||
| 595 Madison Avenue | 100.0 | % | Office / Retail | 89.5 | % | 330,000 | — | 330,000 | ||||||||||||||||||||||||||||||
640 Fifth Avenue(2) | 52.0 | % | Office / Retail | 92.3 | % | 315,000 | — | 315,000 | ||||||||||||||||||||||||||||||
50-70 West 93rd Street (324 units)(2) | 49.9 | % | Residential | 99.7 | % | 283,000 | — | 283,000 | ||||||||||||||||||||||||||||||
Sunset Pier 94 Studios (ground and building leased through 2110)(1)(2) | 49.9 | % | Studio | (5) | — | 266,000 | 266,000 | |||||||||||||||||||||||||||||||
260 Eleventh Avenue (ground leased through 2114)(1) | 100.0 | % | Office | 100.0 | % | 209,000 | — | 209,000 | ||||||||||||||||||||||||||||||
| 4 Union Square South | 100.0 | % | Retail | 100.0 | % | 204,000 | — | 204,000 | ||||||||||||||||||||||||||||||
61 Ninth Avenue (2 buildings) (ground leased through 2115)(1)(2) | 45.1 | % | Office / Retail | 100.0 | % | 194,000 | — | 194,000 | ||||||||||||||||||||||||||||||
512 West 22nd Street(2) | 55.0 | % | Office / Retail | 85.2 | % | 173,000 | — | 173,000 | ||||||||||||||||||||||||||||||
| 825 Seventh Avenue | 51.2 | % | Office(2) / Retail | 80.1 | % | 173,000 | — | 173,000 | ||||||||||||||||||||||||||||||
1540 Broadway(2) | 52.0 | % | Retail | 78.5 | % | 161,000 | — | 161,000 | ||||||||||||||||||||||||||||||
| Paramus | 100.0 | % | Office | 81.2 | % | 129,000 | — | 129,000 | ||||||||||||||||||||||||||||||
666 Fifth Avenue (2)(6) | 52.0 | % | Retail | 100.0 | % | 114,000 | — | 114,000 | ||||||||||||||||||||||||||||||
1535 Broadway(2) | 52.0 | % | Retail / Theatre | 100.0 | % | 107,000 | — | 107,000 | ||||||||||||||||||||||||||||||
57th Street (2 buildings)(2) | 50.0 | % | Office / Retail | 78.3 | % | 103,000 | — | 103,000 | ||||||||||||||||||||||||||||||
689 Fifth Avenue(2) | 52.0 | % | Office / Retail | 100.0 | % | 98,000 | — | 98,000 | ||||||||||||||||||||||||||||||
| 150 West 34th Street | 100.0 | % | Retail | 100.0 | % | 78,000 | — | 78,000 | ||||||||||||||||||||||||||||||
655 Fifth Avenue(2) | 50.0 | % | Retail | 100.0 | % | 57,000 | — | 57,000 | ||||||||||||||||||||||||||||||
| 435 Seventh Avenue | 100.0 | % | Retail | 100.0 | % | 43,000 | — | 43,000 | ||||||||||||||||||||||||||||||
| 606 Broadway | 50.0 | % | Office / Retail | 81.8 | % | 36,000 | — | 36,000 | ||||||||||||||||||||||||||||||
697-703 Fifth Avenue(2) | 44.8 | % | Retail | 100.0 | % | 26,000 | — | 26,000 | ||||||||||||||||||||||||||||||
| 1131 Third Avenue | 100.0 | % | Retail | 100.0 | % | 23,000 | — | 23,000 | ||||||||||||||||||||||||||||||
| 131-135 West 33rd Street | 100.0 | % | Retail | 100.0 | % | 23,000 | — | 23,000 | ||||||||||||||||||||||||||||||
See notes on page 25.
28.
26
| Square Feet | |||||||||||||||||
NEW YORK SEGMENT – CONTINUED Property | % Ownership | Type | % Occupancy | In Service | Under Development or Not Available for Lease | Total Property | |||||||||||
| 1131 Third Avenue | 100.0 | % | Retail | 100.0 | % | 23,000 | — | 23,000 | |||||||||
| 40 East 66th Street (5 units) | 100.0 | % | Retail/Residential | 84.1 | % | (2) | 23,000 | — | 23,000 | ||||||||
| 131-135 West 33rd Street | 100.0 | % | Retail | 100.0 | % | 23,000 | — | 23,000 | |||||||||
| 828-850 Madison Avenue | 100.0 | % | Retail | 100.0 | % | 18,000 | — | 18,000 | |||||||||
| 443 Broadway | 100.0 | % | Retail | 100.0 | % | 16,000 | — | 16,000 | |||||||||
| 484 Eighth Avenue | 100.0 | % | Retail | n/a | — | 16,000 | 16,000 | ||||||||||
| 334 Canal Street (4 units) | 100.0 | % | Retail/Residential | 73.3 | % | (2) | 15,000 | — | 15,000 | ||||||||
| 304 Canal Street (4 units) | 100.0 | % | Retail/Residential | n/a | 9,000 | 4,000 | 13,000 | ||||||||||
| 677-679 Madison Avenue (8 units) | 100.0 | % | Retail/Residential | 90.4 | % | (2) | 13,000 | — | 13,000 | ||||||||
| 431 Seventh Avenue | 100.0 | % | Retail | 100.0 | % | 10,000 | — | 10,000 | |||||||||
| 138-142 West 32nd Street | 100.0 | % | Retail | 35.3 | % | 8,000 | — | 8,000 | |||||||||
| 148 Spring Street | 100.0 | % | Retail | 100.0 | % | 8,000 | — | 8,000 | |||||||||
| 150 Spring Street (1 unit) | 100.0 | % | Retail/Residential | 100.0 | % | (2) | 7,000 | — | 7,000 | ||||||||
| 966 Third Avenue | 100.0 | % | Retail | 100.0 | % | 7,000 | — | 7,000 | |||||||||
| 488 Eighth Avenue | 100.0 | % | Retail | 100.0 | % | 6,000 | — | 6,000 | |||||||||
| 267 West 34th Street | 100.0 | % | Retail | n/a | — | 6,000 | 6,000 | ||||||||||
968 Third Avenue (1) | 50.0 | % | Retail | n/a | 6,000 | — | 6,000 | ||||||||||
| 265 West 34th Street | 100.0 | % | Retail | n/a | — | 3,000 | 3,000 | ||||||||||
| 486 Eighth Avenue | 100.0 | % | Retail | n/a | — | 3,000 | 3,000 | ||||||||||
| 137 West 33rd Street | 100.0 | % | Retail | 100.0 | % | 3,000 | — | 3,000 | |||||||||
| 339 Greenwich | 100.0 | % | Retail | 100.0 | % | 8,000 | — | 8,000 | |||||||||
| Other (34 units) | 80.6 | % | Retail/Residential | 85.8 | % | (2) | 57,000 | 36,000 | 93,000 | ||||||||
| Hotel Pennsylvania | 100.0 | % | Hotel | n/a | 1,400,000 | — | 1,400,000 | ||||||||||
| Alexander's, Inc.: | |||||||||||||||||
731 Lexington Avenue(1) | 32.4 | % | Office/Retail | 99.9 | % | 1,063,000 | — | 1,063,000 | |||||||||
Rego Park II, Queens(1) | 32.4 | % | Retail | 99.9 | % | 609,000 | — | 609,000 | |||||||||
Rego Park I, Queens(1) | 32.4 | % | Retail | 100.0 | % | 343,000 | — | 343,000 | |||||||||
The Alexander Apartment Tower, Queens (312 units)(1) | 32.4 | % | Residential | 94.6 | % | 255,000 | 255,000 | ||||||||||
Flushing, Queens(1) | 32.4 | % | Retail | 100.0 | % | 167,000 | — | 167,000 | |||||||||
Paramus, New Jersey (30.3 acres ground leased through 2041)(1) | 32.4 | % | Retail | 100.0 | % | — | — | — | |||||||||
Rego Park III, Queens (3.2 acres)(1) | 32.4 | % | n/a | n/a | — | — | — | ||||||||||
| Total New York Segment | 97.4 | % | 28,381,000 | 1,284,000 | 29,665,000 | ||||||||||||
| Our Ownership Interest | 97.2 | % | 22,478,000 | 661,000 | 23,139,000 | ||||||||||||
| Square Feet | ||||||||||||||||||||||||||||||||||||||
NEW YORK SEGMENT – CONTINUED Property | % Ownership | Type | % Occupancy | In Service | Under Development or Not Available for Lease | Total Property | ||||||||||||||||||||||||||||||||
| 715 Lexington Avenue | 100.0 | % | Retail | 100.0 | % | 22,000 | — | 22,000 | ||||||||||||||||||||||||||||||
| 537 West 26th Street | 100.0 | % | Retail | 100.0 | % | 17,000 | — | 17,000 | ||||||||||||||||||||||||||||||
| 334 Canal Street (4 units) | 100.0 | % | Retail / Residential | — | % | (3) | — | 14,000 | 14,000 | |||||||||||||||||||||||||||||
| 304-306 Canal Street (4 units) | 100.0 | % | Retail / Residential | 100.0 | % | (3) | 4,000 | 9,000 | 13,000 | |||||||||||||||||||||||||||||
| 40 East 66th Street (3 units) | 100.0 | % | Residential | 100.0 | % | 10,000 | — | 10,000 | ||||||||||||||||||||||||||||||
| 431 Seventh Avenue | 100.0 | % | Retail | 100.0 | % | 9,000 | — | 9,000 | ||||||||||||||||||||||||||||||
| 138-142 West 32nd Street | 100.0 | % | Retail | 80.3 | % | 8,000 | — | 8,000 | ||||||||||||||||||||||||||||||
| 339 Greenwich Street | 100.0 | % | Retail | 100.0 | % | 8,000 | — | 8,000 | ||||||||||||||||||||||||||||||
| 966 Third Avenue | 100.0 | % | Retail | 100.0 | % | 7,000 | — | 7,000 | ||||||||||||||||||||||||||||||
968 Third Avenue(2) | 50.0 | % | Retail | 100.0 | % | 7,000 | — | 7,000 | ||||||||||||||||||||||||||||||
| 137 West 33rd Street | 100.0 | % | Retail | 100.0 | % | 3,000 | — | 3,000 | ||||||||||||||||||||||||||||||
57th Street(2) | 50.0 | % | Land | (5) | — | — | — | |||||||||||||||||||||||||||||||
| Eighth Avenue and 34th Street | 100.0 | % | Land | (5) | — | — | — | |||||||||||||||||||||||||||||||
Hotel Pennsylvania Site(7) | 100.0 | % | Land | (5) | — | — | — | |||||||||||||||||||||||||||||||
| Other (3 buildings) | 100.0 | % | Retail | 65.4 | % | 16,000 | — | 16,000 | ||||||||||||||||||||||||||||||
| Alexander's, Inc.: | ||||||||||||||||||||||||||||||||||||||
731 Lexington Avenue(2) | 32.4 | % | Office / Retail | 98.9 | % | 1,079,000 | — | 1,079,000 | ||||||||||||||||||||||||||||||
Rego Park II, Queens (6.6 acres)(2) | 32.4 | % | Retail | 76.9 | % | 616,000 | — | 616,000 | ||||||||||||||||||||||||||||||
Rego Park I, Queens (4.8 acres)(2) | 32.4 | % | Retail | 100.0 | % | 214,000 | 124,000 | 338,000 | ||||||||||||||||||||||||||||||
The Alexander Apartment Tower, Queens (312 units)(2) | 32.4 | % | Residential | 95.2 | % | 255,000 | — | 255,000 | ||||||||||||||||||||||||||||||
Flushing, Queens (1.0 acre ground leased through 2037)(1)(2) | 32.4 | % | Retail | 100.0 | % | 167,000 | — | 167,000 | ||||||||||||||||||||||||||||||
| Total New York Segment | 90.0 | % | 24,632,000 | 2,098,000 | 26,730,000 | |||||||||||||||||||||||||||||||||
| Our Ownership Interest | 89.4 | % | 19,185,000 | 1,881,000 | 21,066,000 | |||||||||||||||||||||||||||||||||
See notes on page 25.
28.
27
| Square Feet | ||||||||||||||||||||||||||||||||||||||
OTHER SEGMENT Property | % Ownership | Type | % Occupancy | In Service | Under Development or Not Available for Lease | Total Property | ||||||||||||||||||||||||||||||||
| THE MART: | ||||||||||||||||||||||||||||||||||||||
| THE MART, Chicago | 100.0 | % | Office / Retail / Trade show / Showroom | 79.1 | % | 3,669,000 | — | 3,669,000 | ||||||||||||||||||||||||||||||
| 527 West Kinzie, Chicago | 100.0 | % | Land | (5) | — | — | — | |||||||||||||||||||||||||||||||
Other (2 properties)(2), Chicago | 50.0 | % | Retail | 100.0 | % | 19,000 | — | 19,000 | ||||||||||||||||||||||||||||||
| Total THE MART | 79.2 | % | 3,688,000 | — | 3,688,000 | |||||||||||||||||||||||||||||||||
| Our Ownership Interest | 79.2 | % | 3,679,000 | — | 3,679,000 | |||||||||||||||||||||||||||||||||
| 555 California Street: | ||||||||||||||||||||||||||||||||||||||
| 555 California Street | 70.0 | % | Office / Retail | 98.7 | % | 1,506,000 | — | 1,506,000 | ||||||||||||||||||||||||||||||
| 315 Montgomery Street | 70.0 | % | Office / Retail | 99.7 | % | 235,000 | — | 235,000 | ||||||||||||||||||||||||||||||
| 345 Montgomery Street | 70.0 | % | Office / Retail | — | % | 78,000 | — | 78,000 | ||||||||||||||||||||||||||||||
| Total 555 California Street | 94.5 | % | 1,819,000 | — | 1,819,000 | |||||||||||||||||||||||||||||||||
| Our Ownership Interest | 94.5 | % | 1,274,000 | — | 1,274,000 | |||||||||||||||||||||||||||||||||
| Other: | ||||||||||||||||||||||||||||||||||||||
Rosslyn Plaza, VA (197 units)(2) | 45.6 | % | Office / Residential | 58.4 | % | (3) | 685,000 | 304,000 | 989,000 | |||||||||||||||||||||||||||||
Fashion Centre Mall / Washington Tower, VA(2) | 7.5 | % | Office / Retail | 93.5 | % | 1,038,000 | — | 1,038,000 | ||||||||||||||||||||||||||||||
Wayne Towne Center, Wayne, NJ (ground leased through 2064)(1) | 100.0 | % | Retail | 100.0 | % | 686,000 | 4,000 | 690,000 | ||||||||||||||||||||||||||||||
Annapolis, MD (ground leased through 2042)(1) | 100.0 | % | Retail | 100.0 | % | 128,000 | — | 128,000 | ||||||||||||||||||||||||||||||
| Atlantic City, NJ (11.3 acres ground leased through 2070 to VICI Properties for a portion of the Borgata Hotel and Casino complex) | 100.0 | % | Land | 100.0 | % | — | — | — | ||||||||||||||||||||||||||||||
| Total Other | 89.2 | % | 2,537,000 | 308,000 | 2,845,000 | |||||||||||||||||||||||||||||||||
| Our Ownership Interest | 91.9 | % | 1,202,000 | 144,000 | 1,346,000 | |||||||||||||||||||||||||||||||||
________________________________________
(1)Term assumes all renewal options exercised, if applicable.
(2)Denotes property not consolidated in the accompanying consolidated financial statements and related financial data included in the Annual Report on Form 10-K.
(3)Excludes residential occupancy statistics.
(4)Includes 962 Third Avenue (the Annex building to 150 East 58th Street) 50.0% ground leased through 2118 (assuming all renewal options are exercised).
(5)Properties under development or to be developed.
(6)75,000 square feet is leased from 666 Fifth Avenue office condominium.
(7)Demolition of the existing building was completed in the third quarter of 2023.
| Square Feet | |||||||||||||||||
OTHER SEGMENT Property | % Ownership | Type | % Occupancy | In Service | Under Development or Not Available for Lease | Total Property | |||||||||||
| theMART: | |||||||||||||||||
| theMART, Chicago | 100.0 | % | Office/Retail/Showroom | 98.6 | % | 3,670,000 | — | 3,670,000 | |||||||||
Other (2 properties)(1) | 50.0 | % | Retail | 100.0 | % | 19,000 | — | 19,000 | |||||||||
| Total theMART | 98.6 | % | 3,689,000 | — | 3,689,000 | ||||||||||||
| Our Ownership Interest | 98.6 | % | 3,680,000 | — | 3,680,000 | ||||||||||||
| 555 California Street: | |||||||||||||||||
| 555 California Street | 70.0 | % | Office | 96.2 | % | 1,506,000 | — | 1,506,000 | |||||||||
| 315 Montgomery Street | 70.0 | % | Office/Retail | 81.7 | % | 235,000 | — | 235,000 | |||||||||
| 345 Montgomery Street | 70.0 | % | Office/Retail | n/a | — | 64,000 | 64,000 | ||||||||||
| Total 555 California Street | 94.2 | % | 1,741,000 | 64,000 | 1,805,000 | ||||||||||||
| Our Ownership Interest | 94.2 | % | 1,219,000 | 45,000 | 1,264,000 | ||||||||||||
28
Vornado Capital Partners Real Estate Fund ("Fund")(3) : | ||||||||||||||||||
| Crowne Plaza Times Square, NY | 75.3 | % | Office/Retail/Hotel | 68.9 | % | 241,000 | — | 241,000 | ||||||||||
Lucida, 86th Street and Lexington Avenue, NY (ground leased through 2082) | 100 | % | Retail/Residential | 100.0 | % | (2) | 155,000 | — | 155,000 | |||||||||
| 11 East 68th Street Retail, NY | 100 | % | Retail | 100.0 | % | 11,000 | — | 11,000 | ||||||||||
| 501 Broadway, NY | 100 | % | Retail | 100.0 | % | 9,000 | — | 9,000 | ||||||||||
| 1100 Lincoln Road, Miami, FL | 100 | % | Retail/Theatre | 90.2 | % | 128,000 | 2,000 | 130,000 | ||||||||||
| Total Real Estate Fund | 83.8 | % | 544,000 | 2,000 | 546,000 | |||||||||||||
| Our Ownership Interest | 80.2 | % | 155,000 | 1,000 | 156,000 | |||||||||||||
| Other: | ||||||||||||||||||
666 Fifth Avenue Office Condominium(1) | 49.5 | % | Office/Retail | n/a | — | 1,448,000 | 1,448,000 | |||||||||||
Rosslyn Plaza(1) | 46.2 | % | Office/Residential | 65.9 | % | (2) | 688,000 | 301,000 | 989,000 | |||||||||
Wayne Towne Center, Wayne (ground leased through 2064) | 100 | % | Retail | 100.0 | % | 671,000 | 6,000 | 677,000 | ||||||||||
Annapolis (ground leased through 2042) | 100 | % | Retail | 100.0 | % | 128,000 | — | 128,000 | ||||||||||
Fashion Centre Mall(1) | 7.5 | % | Retail | 99.4 | % | 868,000 | — | 868,000 | ||||||||||
Washington Tower(1) | 7.5 | % | Office | 100.0 | % | 170,000 | — | 170,000 | ||||||||||
| Total Other | 93.2 | % | 2,525,000 | 1,755,000 | — | 4,280,000 | ||||||||||||
| Our Ownership Interest | 93.6 | % | 1,188,000 | 862,000 | 2,050,000 | |||||||||||||
TOP 10 TENANTS BASED ON ANNUALIZED ESCALATED RENTS(1) (AT SHARE):
| Tenant | Square Footage At Share | Annualized Escalated Rents At Share | % of Total Annualized Escalated Rents At Share | |||||||||||||||||
| Meta Platforms, Inc. | 1,451,153 | $ | 167,180 | 9.3 | % | |||||||||||||||
| IPG and affiliates | 1,044,715 | 69,186 | 3.9 | % | ||||||||||||||||
| Citadel | 585,460 | 62,498 | 3.5 | % | ||||||||||||||||
| New York University | 685,290 | 48,886 | 2.7 | % | ||||||||||||||||
| Google/Motorola Mobility (guaranteed by Google) | 759,446 | 41,765 | 2.3 | % | ||||||||||||||||
| Bloomberg L.P. | 306,768 | 41,279 | 2.3 | % | ||||||||||||||||
| Amazon (including its Whole Foods subsidiary) | 312,694 | 30,699 | 1.7 | % | ||||||||||||||||
| Neuberger Berman Group LLC | 306,612 | 28,184 | 1.6 | % | ||||||||||||||||
| Swatch Group USA | 11,957 | 27,333 | 1.5 | % | ||||||||||||||||
| Madison Square Garden & Affiliates | 408,031 | 27,326 | 1.5 | % | ||||||||||||||||
See note below.
ANNUALIZED ESCALATED RENTS(1) (AT SHARE) BY TENANT INDUSTRY:
| Industry | Percentage | |||||||
| Financial Services | 22 | % | ||||||
| 16 | % | |||||||
| 7 | % | |||||||
| Advertising/Marketing | 5 | % | ||||||
| Entertainment and Electronics | 4 | % | ||||||
| Real Estate | 3 | % | ||||||
| Insurance | 3 | % | ||||||
| Education | 3 | % | ||||||
| Apparel | 2 | % | ||||||
| Engineering, Architect & Surveying | 2 | % | ||||||
| Health Services | 2 | % | ||||||
| Communications | 1 | % | ||||||
| Government | 1 | % | ||||||
| Other | 6 | % | ||||||
| 77 | % | |||||||
| Retail: | ||||||||
| Apparel | 5 | % | ||||||
| Luxury Retail | 4 | % | ||||||
| Banking | 2 | % | ||||||
| Restaurants | 2 | % | ||||||
| Grocery | 1 | % | ||||||
| Other | 4 | % | ||||||
| 18 | % | |||||||
| Showroom | 5 | % | ||||||
| Total | 100 | % | ||||||
(1)Represents monthly contractual base rent before free rent plus tenant reimbursements multiplied by 12. Annualized escalated rents at share include leases signed but not yet commenced in place of current tenants or vacancy in the same space.
29
As of December 31, 2017,2023, our New York segment consisted of 28.426.7 million square feet in 8860 properties. The 28.426.7 million square feet is comprised of 20.320.4 million square feet of Manhattan office in 3630 of the properties, 2.72.4 million square feet of Manhattan street retail in 7150 of the properties, 2,0181,662 units in twelvefive residential properties, the 1.4 million square foot Hotel Pennsylvania, and our 32.4% interest in Alexander’s, which owns sevenfive properties in the greater New York metropolitan area.area, including 731 Lexington Avenue, the 1.1 million square foot Bloomberg, L.P. headquarters building, and The Alexander, a 312-unit apartment tower in Queens. The New York segment also includes 11nine garages totaling 1.71.6 million square feet (4,970(4,685 spaces) which are managed by, or leased to, third parties.
.
As of December 31, 2017,2023, the occupancy rate for our New York segment was 97.2%89.4%.
Occupancy and weighted average annual rent per square foot (in service):foot:
Office:
| Office: | ||||||||||||||
| Vornado's Ownership Interest | ||||||||||||||
| As of December 31, | Total Property Square Feet | Square Feet | Occupancy Rate | Weighted Average Annual Rent Per Square Foot | ||||||||||
| 2017 | 20,256,000 | 16,982,000 | 97.1 | % | $ | 71.09 | ||||||||
| 2016 | 20,227,000 | 16,962,000 | 96.3 | % | 68.90 | |||||||||
| 2015 | 19,918,000 | 16,734,000 | 97.1 | % | 66.42 | |||||||||
| 2014 | 18,785,000 | 15,730,925 | 97.7 | % | 65.31 | |||||||||
| 2013 | 17,373,000 | 14,625,000 | 96.9 | % | 61.71 | |||||||||
| Retail: | ||||||||||||||
| Vornado's Ownership Interest | ||||||||||||||
| As of December 31, | Total Property Square Feet | Square Feet | Occupancy Rate | Weighted Average Annual Rent Per Square Foot | ||||||||||
| 2017 | 2,720,000 | 2,471,000 | 96.9 | % | $ | 217.17 | ||||||||
| 2016 | 2,672,000 | 2,464,000 | 97.1 | % | 213.85 | |||||||||
| 2015 | 2,596,000 | 2,396,000 | 96.1 | % | 202.72 | |||||||||
| 2014 | 2,436,000 | 2,176,000 | 96.4 | % | 173.55 | |||||||||
| 2013 | 2,303,000 | 2,103,225 | 97.5 | % | 162.27 | |||||||||
| Vornado's Ownership Interest | ||||||||||||||||||||||||||||||||
| As of December 31, | Total Square Feet | In Service Square Feet | In Service Square Feet At Share | Occupancy Rate | Weighted Average Annual Escalated Rent Per Square Foot | |||||||||||||||||||||||||||
| 2023 | 20,383,000 | 18,699,000 | 16,001,000 | 90.7 | % | $ | 86.30 | |||||||||||||||||||||||||
| 2022 | 19,902,000 | 18,724,000 | 16,028,000 | 91.9 | % | 83.98 | ||||||||||||||||||||||||||
| 2021 | 20,630,000 | 19,442,000 | 16,757,000 | 92.2 | % | 80.01 | ||||||||||||||||||||||||||
| 2020 | 20,586,000 | 18,361,000 | 15,413,000 | 93.4 | % | 79.05 | ||||||||||||||||||||||||||
| 2019 | 20,666,000 | 19,070,000 | 16,195,000 | 96.9 | % | 76.26 | ||||||||||||||||||||||||||
Retail:
| Vornado's Ownership Interest | ||||||||||||||||||||||||||||||||
| As of December 31, | Total Square Feet | In Service Square Feet | In Service Square Feet At Share | Occupancy Rate | Weighted Average Annual Escalated Rent Per Square Foot | |||||||||||||||||||||||||||
| 2023 | 2,394,000 | 2,123,000 | 1,684,000 | 74.9 | % | $ | 224.88 | |||||||||||||||||||||||||
| 2022 | 2,556,000 | 2,289,000 | 1,851,000 | 74.4 | % | 215.72 | ||||||||||||||||||||||||||
| 2021 | 2,693,000 | 2,267,000 | 1,825,000 | 80.7 | % | 214.22 | ||||||||||||||||||||||||||
| 2020 | 2,690,000 | 2,275,000 | 1,805,000 | 78.8 | % | 226.38 | ||||||||||||||||||||||||||
| 2019 | 2,712,000 | 2,300,000 | 1,842,000 | 94.5 | % | 209.86 | ||||||||||||||||||||||||||
Occupancy and average monthly rent per unit (in service):unit:
Residential:
| Vornado's Ownership Interest | |||||||||||||||||||||||||||||
| As of December 31, | Total Number of Units | Total Number of Units | Occupancy Rate | Average Monthly Rent Per Unit | |||||||||||||||||||||||||
| 2023 | 1,974 | 939 | 96.8 | % | $ | 4,115 | |||||||||||||||||||||||
| 2022 | 1,976 | 941 | 96.7 | % | 3,882 | ||||||||||||||||||||||||
| 2021 | 1,986 | 951 | 97.0 | % | 3,776 | ||||||||||||||||||||||||
| 2020 | 1,995 | 960 | 84.9 | % | 3,714 | ||||||||||||||||||||||||
| 2019 | 1,996 | 960 | 97.5 | % | 3,902 | ||||||||||||||||||||||||
30
| Residential: | |||||||||||||||
| Vornado's Ownership Interest | |||||||||||||||
| As of December 31, | Number of Units | Number of Units | Occupancy Rate | Average Monthly Rent Per Unit | |||||||||||
| 2017 | 2,009 | 981 | 96.7 | % | $ | 3,722 | |||||||||
| 2016 | (1) | 2,004 | 977 | 95.7 | % | 3,576 | |||||||||
| 2015 | 1,711 | 886 | 95.0 | % | 3,495 | ||||||||||
| 2014 | 1,678 | 855 | 95.2 | % | 3,146 | ||||||||||
| 2013 | 1,672 | 847 | 94.8 | % | 2,920 | ||||||||||
NEW YORK – CONTINUED
| Tenant | Square Feet Leased | 2017 Revenues | Percentage of New York Total Revenues | Percentage of Total Revenues | |||||||||
| IPG and affiliates | 924,000 | $ | 58,826,000 | 3.3 | % | 2.8 | % | ||||||
| Swatch Group USA | 32,000 | 56,140,000 | 3.2 | % | 2.7 | % | |||||||
| AXA Equitable Life Insurance | 481,000 | 41,180,000 | 2.3 | % | 2.0 | % | |||||||
| Macy's | 646,000 | 41,142,000 | 2.3 | % | 2.0 | % | |||||||
| Victoria's Secret | 64,000 | 34,734,000 | 2.0 | % | 1.7 | % | |||||||
Lease expirations as of December 31, 2017, assuming none2023 (at share):
| Number of Expiring Leases | Square Feet of Expiring Leases(1) | Percentage of New York Square Feet | Annualized Escalated Rents of Expiring Leases | ||||||||||||||||||||||||||||||||
| Year | Total | Per Square Foot | |||||||||||||||||||||||||||||||||
| Office: | |||||||||||||||||||||||||||||||||||
Fourth Quarter 2023(2) | 12 | 223,000 | 1.6% | $ | 23,965,000 | $ | 107.47 | ||||||||||||||||||||||||||||
| 2024 | 76 | 713,000 | 5.0% | 63,535,000 | 89.11 | (3) | |||||||||||||||||||||||||||||
| 2025 | 67 | 586,000 | 4.1% | 45,758,000 | 78.09 | ||||||||||||||||||||||||||||||
| 2026 | 79 | 1,163,000 | 8.1% | 94,536,000 | 81.29 | ||||||||||||||||||||||||||||||
| 2027 | 95 | 1,301,000 | 9.1% | 102,958,000 | 79.14 | ||||||||||||||||||||||||||||||
2028(4) | 65 | 1,044,000 | 7.3% | 84,045,000 | 80.50 | ||||||||||||||||||||||||||||||
| 2029 | 59 | 1,241,000 | 8.7% | 100,418,000 | 80.92 | ||||||||||||||||||||||||||||||
| 2030 | 50 | 643,000 | 4.5% | 54,540,000 | 84.82 | ||||||||||||||||||||||||||||||
| 2031 | 31 | 891,000 | 6.2% | 80,847,000 | 90.74 | ||||||||||||||||||||||||||||||
| 2032 | 22 | 958,000 | 6.7% | 94,504,000 | 98.65 | ||||||||||||||||||||||||||||||
| 2033 | 21 | 502,000 | 4.0% | 42,938,000 | 85.53 | ||||||||||||||||||||||||||||||
| Retail: | |||||||||||||||||||||||||||||||||||
Fourth Quarter 2023(2) | 3 | 11,000 | 1.0% | $ | 1,122,000 | $ | 102.00 | ||||||||||||||||||||||||||||
| 2024 | 11 | 197,000 | 17.7% | 20,532,000 | 104.22 | (5) | |||||||||||||||||||||||||||||
| 2025 | 12 | 50,000 | 4.5% | 13,076,000 | 261.52 | ||||||||||||||||||||||||||||||
| 2026 | 10 | 82,000 | 7.3% | 26,414,000 | 322.12 | ||||||||||||||||||||||||||||||
| 2027 | 10 | 32,000 | 2.9% | 20,509,000 | 640.91 | ||||||||||||||||||||||||||||||
| 2028 | 9 | 32,000 | 2.9% | 14,731,000 | 460.34 | ||||||||||||||||||||||||||||||
| 2029 | 14 | 53,000 | 4.7% | 27,460,000 | 518.11 | ||||||||||||||||||||||||||||||
| 2030 | 21 | 153,000 | 13.7% | 23,416,000 | 153.05 | ||||||||||||||||||||||||||||||
| 2031 | 24 | 68,000 | 6.1% | 30,383,000 | 446.81 | ||||||||||||||||||||||||||||||
| 2032 | 21 | 57,000 | 5.1% | 29,537,000 | 518.19 | ||||||||||||||||||||||||||||||
| 2033 | 7 | 17,000 | 1.5% | 6,022,000 | 354.24 | ||||||||||||||||||||||||||||||
(1)Excludes storage, vacancy and other.
(2)Includes month-to-month leases, holdover tenants, and leases expiring on the last day of the tenantscurrent quarter.
(3)Based on current market conditions, we expect to re-lease this space at rents between $85 to $95 per square foot.
(4)Excludes the expiration of 492,000 square feet at 909 Third Avenue for U.S. Post Office as we assume the exercise of all renewal options:options through 2038 given the below-market rent on their options.
(5)Based on current market conditions, we expect to re-lease this space at rents between $125 to $150 per square foot.
| Number of Expiring Leases | Square Feet of Expiring Leases | Percentage of New York Square Feet | Weighted Average Annual Rent of Expiring Leases | |||||||||||||
| Year | Total | Per Square Foot | ||||||||||||||
| Office: | ||||||||||||||||
| Month to month | 13 | 73,000 | 0.4% | $ | 3,086,000 | $ | 42.27 | |||||||||
| 2018 | 89 | 896,000 | 5.5% | 66,949,000 | 74.72 | (1) | ||||||||||
| 2019 | 89 | 750,000 | 4.6% | 51,029,000 | 68.04 | |||||||||||
| 2020 | 117 | 1,394,000 | 8.6% | 96,261,000 | 69.05 | |||||||||||
| 2021 | 122 | 1,160,000 | 7.1% | 85,881,000 | 74.04 | |||||||||||
| 2022 | 86 | 792,000 | 4.9% | 48,215,000 | 60.88 | |||||||||||
| 2023 | 81 | 2,001,000 | (2) | 12.3% | 152,874,000 | 76.40 | ||||||||||
| 2024 | 82 | 1,292,000 | 7.9% | 101,263,000 | 78.38 | |||||||||||
| 2025 | 51 | 800,000 | 4.9% | 58,916,000 | 73.65 | |||||||||||
| 2026 | 72 | 1,376,000 | 8.4% | 101,555,000 | 73.80 | |||||||||||
| 2027 | 57 | 996,000 | 6.1% | 68,674,000 | 68.95 | |||||||||||
| Retail: | ||||||||||||||||
| Month to month | 19 | 97,000 | 5.1% | $ | 3,461,000 | $ | 35.68 | |||||||||
| 2018 | 25 | 96,000 | 5.0% | 28,157,000 | 293.30 | (3) | ||||||||||
| 2019 | 27 | 204,000 | 10.6% | 35,085,000 | 171.99 | |||||||||||
| 2020 | 19 | 69,000 | 3.6% | 10,388,000 | 150.55 | |||||||||||
| 2021 | 18 | 67,000 | 3.5% | 11,613,000 | 173.33 | |||||||||||
| 2022 | 9 | 19,000 | 1.0% | 4,913,000 | 258.58 | |||||||||||
| 2023 | 16 | 90,000 | 4.7% | 38,199,000 | 424.43 | |||||||||||
| 2024 | 20 | 155,000 | 8.1% | 63,852,000 | 411.95 | |||||||||||
| 2025 | 11 | 41,000 | 2.1% | 17,777,000 | 433.59 | |||||||||||
| 2026 | 18 | 135,000 | 7.0% | 42,626,000 | 315.75 | |||||||||||
| 2027 | 10 | 31,000 | 1.6% | 21,204,000 | 684.00 | |||||||||||
Alexander’s
As of December 31, 2017,2023, we own 32.4% of the outstanding common stock of Alexander’s, which owns sevenfive properties in the greater New York metropolitan areaCity aggregating 2.42.5 million square feet, including 731 Lexington Avenue, the 1.31.1 million square foot Bloomberg L.P. headquarters building. Alexander’s had $1.24 billion of outstanding debt, net, at December 31, 2017, of which our pro rata share was $401.8 million, none of which is recourse to us.
| Year Ended December 31, | |||||||||||||||||||
| 2017 | 2016 | 2015 | 2014 | 2013 | |||||||||||||||
| Hotel Pennsylvania: | |||||||||||||||||||
| Average occupancy rate | 87.3 | % | 84.7 | % | 90.7 | % | 92.0 | % | 93.4 | % | |||||||||
| Average daily rate | $ | 139.09 | $ | 134.38 | $ | 147.46 | $ | 162.01 | $ | 158.01 | |||||||||
| Revenue per available room | $ | 121.46 | $ | 113.84 | $ | 133.69 | $ | 149.04 | $ | 147.63 | |||||||||
As of December 31, 2017, we2023, Alexander's had an occupancy rate of 92.6% and a weighted average annual rent per square foot of $107.78.
OTHER REAL ESTATE AND INVESTMENTS
THE MART
We own the 3.7 million square foot theMARTTHE MART in Chicago, whose largest tenant is Motorola Mobility at 609,000 square feet, the lease of which is guaranteed by Google. theMART is encumbered by a $675,000,000 mortgage loan that bears interest at a fixed rate of 2.70% and matures in September 2021. As of December 31, 2017, theMART2023, THE MART had an occupancy rate of 98.6%79.2% and a weighted average annual rent per square foot of $42.15.$52.06.
555 California Street
31
ITEM 3. LEGAL PROCEEDINGS
We are from time to time involved in legal actions arising in the ordinary course of business. In our opinion, after consultation with legal counsel, the outcome of such matters is not expected to have a material adverse effect on our financial position, results of operations or cash flows.
| ITEM 4. | MINE SAFETY DISCLOSURES |
Not applicable.
PART II
| ITEM 5. | MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES |
Vornado Realty Trust
Vornado’s common shares are traded on the New York Stock Exchange under the symbol “VNO.”
| Year Ended December 31, 2017 | Year Ended December 31, 2016 | |||||||||||||||||||||||
| Quarter | High | Low | Dividends | High | Low | Dividends | ||||||||||||||||||
| 1st | $ | 111.72 | $ | 98.51 | $ | 0.71 | $ | 99.97 | $ | 78.91 | $ | 0.63 | ||||||||||||
| 2nd | 103.35 | 91.18 | 0.71 | 100.13 | 90.13 | 0.63 | ||||||||||||||||||
| 3rd | 97.25 | 72.77 | (1) | 0.60 | (1) | 108.69 | 97.18 | 0.63 | ||||||||||||||||
| 4th | 80.30 | (1) | 71.90 | (1) | 0.60 | (1) | 105.91 | 86.35 | 0.63 | |||||||||||||||
As of February 1, 2018,2024, there were 993758 holders of record of Vornado common shares.
Vornado Realty L.P.
There is no established trading market for the Operating Partnership's Class A units. Class A units or preferred units. The following table sets forth,that are not held by Vornado may be tendered for the periods indicated, the distributions declared onredemption to the Operating Partnership'sPartnership 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: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 distribution to a Class A unit holder is equal to the dividend paid to a Vornado common shareholder.
| Declared Distributions | ||||||||
| Year ended December 31, | ||||||||
| Quarter | 2017 | 2016 | ||||||
| 1st | $ | 0.71 | $ | 0.63 | ||||
| 2nd | 0.71 | 0.63 | ||||||
| 3rd | 0.60 | (1) | 0.63 | |||||
| 4th | 0.60 | (1) | 0.63 | |||||
As of February 1, 2018,2024, there were 984806 Class A unitholders of record.
Recent Sales of Unregistered Securities
Vornado Realty Trust
During 2017, the Operating Partnershipfourth quarter of 2023, Vornado issued 1,213,23764,056 of its common shares for the redemption of Class A units in connection with equity awards issued pursuant to Vornado’s omnibus share plan, including with respect to grantsby certain limited partners of restricted Vornado commonRealty L.P. Such shares and restricted units of the Operating Partnership and upon conversion, surrender or exchange of the Operating Partnership’s units or Vornado stock options, and consideration received included $29,720,215 in cash proceeds. Such units were issued in reliance on an exemption from registration under Section 4(2)4(a)(2) of the Securities Act of 1933, as amended. There were no cash proceeds associated with these issuances.
Vornado Realty L.P.
During the fourth quarter of 2023, Vornado Realty L.P. issued 375,369 Class A units to satisfy conversions of restricted Operating Partnership units (“LTIP Units”) and 20,731 pursuant to Vornado’s 2023 Omnibus Share Plan. There were no cash proceeds associated with the issuances.
On November 1, 2023, the Operating Partnership granted 116,612 LTIP Units at a market price of $19.30 per unit to Vornado consultants that are not executives of the Company as part of their annual consulting fees. The units were issued outside of Vornado’s 2023 Omnibus Share Plan.
All of the securities referred to above were issued in reliance on an exemption from registration under Section 4(a)(2) of the Securities Act of 1933, as amended. There were no cash proceeds associated with these issuances.
From time to time, in connection with equity awards granted under our Omnibus Share Plan, we may withhold common shares for tax purposes or acquire common shares as part of the payment of the exercise price. Although we treat these as repurchases for certain financial statement purposes, these withheld or acquired shares are not considered by us as repurchases for this purpose.
Information relating to compensation plans under which Vornado’s equity securities are authorized for issuance is set forth under Part III, Item 12 of this Annual Report on Form 10-K and such information is incorporated by reference herein.
32
Recent Purchases of EquityUnregistered Securities
Vornado Realty Trust
On April 26, 2023, the Company’s Board of Trustees authorized the repurchase of up to $200,000,000 of its outstanding common shares under a newly established share repurchase program. There were no common share repurchases during the three months ended December 31, 2023. As of December 31, 2023, $170,857,000 remained available and authorized for common share repurchases.
Share repurchases may be made from time to time in the open market, through privately negotiated transactions or through other means as permitted by federal securities laws, including through block trades, accelerated share repurchase transactions and/or trading plans intended to qualify under Rule 10b5-1. The timing, manner, price and amount of any repurchases will be determined in Vornado’s discretion depending on business, economic and market conditions, corporate and regulatory requirements, prevailing prices for Vornado’s common shares, alternative uses for capital and other considerations. The program does not have an expiration date and may be suspended or discontinued at any time and does not obligate Vornado to make any repurchases of its common shares.
Vornado Realty L.P.
None.
| 2012 | 2013 | 2014 | 2015 | 2016 | 2017 | ||||||||||||||||||
| Vornado Realty Trust | $ | 100 | $ | 115 | $ | 156 | $ | 150 | $ | 161 | $ | 154 | |||||||||||
| S&P 500 Index | 100 | 132 | 151 | 153 | 171 | 208 | |||||||||||||||||
| The NAREIT All Equity Index | 100 | 103 | 132 | 135 | 147 | 160 | |||||||||||||||||
Vornado Realty Trust
| (Amounts in thousands, except per share amounts) | Year Ended December 31, | ||||||||||||||||||
| 2017 | 2016 | 2015 | 2014 | 2013 | |||||||||||||||
| Operating Data: | |||||||||||||||||||
| Revenues: | |||||||||||||||||||
| Property rentals | $ | 1,714,952 | $ | 1,662,093 | $ | 1,626,866 | $ | 1,460,391 | $ | 1,422,828 | |||||||||
| Tenant expense reimbursements | 233,424 | 221,563 | 218,739 | 203,120 | 184,161 | ||||||||||||||
| Cleveland Medical Mart development project | — | — | — | — | 36,369 | ||||||||||||||
| Fee and other income | 135,750 | 120,086 | 139,890 | 128,657 | 132,340 | ||||||||||||||
| Total revenues | 2,084,126 | 2,003,742 | 1,985,495 | 1,792,168 | 1,775,698 | ||||||||||||||
| Expenses: | |||||||||||||||||||
| Operating | 886,596 | 844,566 | 824,511 | 768,341 | 748,010 | ||||||||||||||
| Depreciation and amortization | 429,389 | 421,023 | 379,803 | 351,583 | 337,139 | ||||||||||||||
| General and administrative | 158,999 | 149,550 | 149,256 | 141,931 | 150,306 | ||||||||||||||
| Cleveland Medical Mart development project | — | — | — | — | 32,210 | ||||||||||||||
| Acquisition and transaction related costs | 1,776 | 9,451 | 12,511 | 18,435 | 24,857 | ||||||||||||||
| Total expenses | 1,476,760 | 1,424,590 | 1,366,081 | 1,280,290 | 1,292,522 | ||||||||||||||
| Operating income | 607,366 | 579,152 | 619,414 | 511,878 | 483,176 | ||||||||||||||
| Income (loss) from partially owned entities | 15,200 | 168,948 | (9,947 | ) | (58,484 | ) | (336,292 | ) | |||||||||||
| Income (loss) from real estate fund investments | 3,240 | (23,602 | ) | 74,081 | 163,034 | 102,898 | |||||||||||||
| Interest and other investment income (loss), net | 37,793 | 29,548 | 27,240 | 38,569 | (25,016 | ) | |||||||||||||
| Interest and debt expense | (345,654 | ) | (330,240 | ) | (309,298 | ) | (337,360 | ) | (323,505 | ) | |||||||||
Net gains on disposition of wholly owned and partially owned assets | 501 | 160,433 | 149,417 | 13,568 | 2,030 | ||||||||||||||
| Income (loss) before income taxes | 318,446 | 584,239 | 550,907 | 331,205 | (96,709 | ) | |||||||||||||
| Income tax (expense) benefit | (41,090 | ) | (7,229 | ) | 85,012 | (9,039 | ) | (5,314 | ) | ||||||||||
| Income (loss) from continuing operations | 277,356 | 577,010 | 635,919 | 322,166 | (102,023 | ) | |||||||||||||
| (Loss) income from discontinued operations | (13,228 | ) | 404,912 | 223,511 | 686,860 | 666,763 | |||||||||||||
| Net income | 264,128 | 981,922 | 859,430 | 1,009,026 | 564,740 | ||||||||||||||
| Less net income attributable to noncontrolling interests in: | |||||||||||||||||||
| Consolidated subsidiaries | (25,802 | ) | (21,351 | ) | (55,765 | ) | (96,561 | ) | (63,952 | ) | |||||||||
| Operating Partnership | (10,910 | ) | (53,654 | ) | (43,231 | ) | (47,613 | ) | (24,817 | ) | |||||||||
| Net income attributable to Vornado | 227,416 | 906,917 | 760,434 | 864,852 | 475,971 | ||||||||||||||
| Preferred share dividends | (65,399 | ) | (75,903 | ) | (80,578 | ) | (81,464 | ) | (82,807 | ) | |||||||||
| Preferred unit and share redemptions | — | (7,408 | ) | — | — | (1,130 | ) | ||||||||||||
| Net income attributable to common shareholders | $ | 162,017 | $ | 823,606 | $ | 679,856 | $ | 783,388 | $ | 392,034 | |||||||||
| Per Share Data: | |||||||||||||||||||
| Income (loss) from continuing operations, net - basic | $ | 0.92 | $ | 2.35 | $ | 2.49 | $ | 0.73 | $ | (1.25 | ) | ||||||||
| Income (loss) from continuing operations, net - diluted | 0.91 | 2.34 | 2.48 | 0.72 | (1.25 | ) | |||||||||||||
| Net income per common share - basic | 0.85 | 4.36 | 3.61 | 4.18 | 2.10 | ||||||||||||||
| Net income per common share - diluted | 0.85 | 4.34 | 3.59 | 4.15 | 2.09 | ||||||||||||||
| Dividends per common share | 2.62 | (1) | 2.52 | 2.52 | (2) | 2.92 | 2.92 | ||||||||||||
| Balance Sheet Data: | |||||||||||||||||||
| Total assets | $ | 17,397,934 | $ | 20,814,847 | $ | 21,143,293 | $ | 21,157,980 | $ | 20,018,210 | |||||||||
| Real estate, at cost | 14,756,295 | 14,187,820 | 13,545,295 | 12,438,940 | 11,149,920 | ||||||||||||||
| Accumulated depreciation and amortization | (2,885,283 | ) | (2,581,514 | ) | (2,356,728 | ) | (2,209,778 | ) | (1,958,132 | ) | |||||||||
| Debt, net | 9,729,487 | 9,446,670 | 9,095,670 | 7,557,877 | 6,830,994 | ||||||||||||||
| Total equity | 5,007,701 | 7,618,496 | 7,476,078 | 7,489,382 | 7,594,744 | ||||||||||||||
| (Amounts in thousands) | Year Ended December 31, | ||||||||||||||||||
| 2017 | 2016 | 2015 | 2014 | 2013 | |||||||||||||||
| Other Data: | |||||||||||||||||||
Funds From Operations ("FFO")(1): | |||||||||||||||||||
| Net income attributable to common shareholders | $ | 162,017 | $ | 823,606 | $ | 679,856 | $ | 783,388 | $ | 392,034 | |||||||||
| FFO adjustments: | |||||||||||||||||||
| Depreciation and amortization of real property | 467,966 | 531,620 | 514,085 | 517,493 | 501,753 | ||||||||||||||
| Net gains on sale of real estate | (3,489 | ) | (177,023 | ) | (289,117 | ) | (507,192 | ) | (411,593 | ) | |||||||||
| Real estate impairment losses | — | 160,700 | 256 | 26,518 | 37,170 | ||||||||||||||
Proportionate share of adjustments to equity in net income (loss) of partially owned entities to arrive at FFO: | |||||||||||||||||||
| Depreciation and amortization of real property | 137,000 | 154,795 | 143,960 | 117,766 | 157,270 | ||||||||||||||
| Net gains on sale of real estate | (17,777 | ) | (2,853 | ) | (4,513 | ) | (11,580 | ) | (465 | ) | |||||||||
| Real estate impairment losses | 7,692 | 6,328 | 16,758 | — | 6,552 | ||||||||||||||
| Income tax effect of above adjustments | — | — | — | (7,287 | ) | (26,703 | ) | ||||||||||||
| 591,392 | 673,567 | 381,429 | 135,718 | 263,984 | |||||||||||||||
| Noncontrolling interests' share of above adjustments | (36,728 | ) | (41,267 | ) | (22,342 | ) | (8,073 | ) | (15,089 | ) | |||||||||
| FFO adjustments, net | 554,664 | 632,300 | 359,087 | 127,645 | 248,895 | ||||||||||||||
| FFO attributable to common shareholders | 716,681 | 1,455,906 | 1,038,943 | 911,033 | �� | 640,929 | |||||||||||||
| Convertible preferred share dividends | 77 | 86 | 92 | 97 | 108 | ||||||||||||||
| Earnings allocated to Out-Performance Plan units | 1,047 | 1,591 | — | — | — | ||||||||||||||
FFO attributable to common shareholders plus assumed conversions(1) | $ | 717,805 | $ | 1,457,583 | $ | 1,039,035 | $ | 911,130 | $ | 641,037 | |||||||||
Vornado Realty L.P.
| (Amounts in thousands) | Year Ended December 31, | ||||||||||||||||||
| 2017 | 2016 | 2015 | 2014 | 2013 | |||||||||||||||
| Operating Data: | |||||||||||||||||||
| Revenues: | |||||||||||||||||||
| Property rentals | $ | 1,714,952 | $ | 1,662,093 | $ | 1,626,866 | $ | 1,460,391 | $ | 1,422,828 | |||||||||
| Tenant expense reimbursements | 233,424 | 221,563 | 218,739 | 203,120 | 184,161 | ||||||||||||||
| Cleveland Medical Mart development project | — | — | — | — | 36,369 | ||||||||||||||
| Fee and other income | 135,750 | 120,086 | 139,890 | 128,657 | 132,340 | ||||||||||||||
| Total revenues | 2,084,126 | 2,003,742 | 1,985,495 | 1,792,168 | 1,775,698 | ||||||||||||||
| Expenses: | |||||||||||||||||||
| Operating | 886,596 | 844,566 | 824,511 | 768,341 | 748,010 | ||||||||||||||
| Depreciation and amortization | 429,389 | 421,023 | 379,803 | 351,583 | 337,139 | ||||||||||||||
| General and administrative | 158,999 | 149,550 | 149,256 | 141,931 | 150,306 | ||||||||||||||
| Cleveland Medical Mart development project | — | — | — | — | 32,210 | ||||||||||||||
| Acquisition and transaction related costs | 1,776 | 9,451 | 12,511 | 18,435 | 24,857 | ||||||||||||||
| Total expenses | 1,476,760 | 1,424,590 | 1,366,081 | 1,280,290 | 1,292,522 | ||||||||||||||
| Operating income | 607,366 | 579,152 | 619,414 | 511,878 | 483,176 | ||||||||||||||
| Income (loss) from partially owned entities | 15,200 | 168,948 | (9,947 | ) | (58,484 | ) | (336,292 | ) | |||||||||||
| Income (loss) from real estate fund investments | 3,240 | (23,602 | ) | 74,081 | 163,034 | 102,898 | |||||||||||||
| Interest and other investment income (loss), net | 37,793 | 29,548 | 27,240 | 38,569 | (25,016 | ) | |||||||||||||
| Interest and debt expense | (345,654 | ) | (330,240 | ) | (309,298 | ) | (337,360 | ) | (323,505 | ) | |||||||||
Net gains on disposition of wholly owned and partially owned assets | 501 | 160,433 | 149,417 | 13,568 | 2,030 | ||||||||||||||
| Income (loss) before income taxes | 318,446 | 584,239 | 550,907 | 331,205 | (96,709 | ) | |||||||||||||
| Income tax (expense) benefit | (41,090 | ) | (7,229 | ) | 85,012 | (9,039 | ) | (5,314 | ) | ||||||||||
| Income (loss) from continuing operations | 277,356 | 577,010 | 635,919 | 322,166 | (102,023 | ) | |||||||||||||
| (Loss) income from discontinued operations | (13,228 | ) | 404,912 | 223,511 | 686,860 | 666,763 | |||||||||||||
| Net income | 264,128 | 981,922 | 859,430 | 1,009,026 | 564,740 | ||||||||||||||
Less net income attributable to noncontrolling interests in consolidated subsidiaries | (25,802 | ) | (21,351 | ) | (55,765 | ) | (96,561 | ) | (63,952 | ) | |||||||||
| Net income attributable to Vornado Realty L.P. | 238,326 | 960,571 | 803,665 | 912,465 | 500,788 | ||||||||||||||
| Preferred unit distributions | (65,593 | ) | (76,097 | ) | (80,736 | ) | (81,514 | ) | (83,965 | ) | |||||||||
| Preferred unit redemptions | — | (7,408 | ) | — | — | (1,130 | ) | ||||||||||||
| Net income attributable to Class A unitholders | $ | 172,733 | $ | 877,066 | $ | 722,929 | $ | 830,951 | $ | 415,693 | |||||||||
| Per Unit Data: | |||||||||||||||||||
| Income (loss) from continuing operations, net - basic | $ | 0.91 | $ | 2.34 | $ | 2.49 | $ | 0.71 | $ | (1.27 | ) | ||||||||
| Income (loss) from continuing operations, net - diluted | 0.90 | 2.32 | 2.46 | 0.70 | (1.26 | ) | |||||||||||||
| Net income per Class A unit - basic | 0.84 | 4.36 | 3.61 | 4.17 | 2.09 | ||||||||||||||
| Net income per Class A unit - diluted | 0.83 | 4.32 | 3.57 | 4.14 | 2.08 | ||||||||||||||
| Distributions per Class A unit | 2.62 | (1) | 2.52 | 2.52 | (2) | 2.92 | 2.92 | ||||||||||||
| Balance Sheet Data: | |||||||||||||||||||
| Total assets | $ | 17,397,934 | $ | 20,814,847 | $ | 21,143,293 | $ | 21,157,980 | $ | 20,018,210 | |||||||||
| Real estate, at cost | 14,756,295 | 14,187,820 | 13,545,295 | 12,438,940 | 11,149,920 | ||||||||||||||
| Accumulated depreciation and amortization | (2,885,283 | ) | (2,581,514 | ) | (2,356,728 | ) | (2,209,778 | ) | (1,958,132 | ) | |||||||||
| Debt, net | 9,729,487 | 9,446,670 | 9,095,670 | 7,557,877 | 6,830,994 | ||||||||||||||
| Total equity | 5,007,701 | 7,618,496 | 7,476,078 | 7,489,382 | 7,594,744 | ||||||||||||||
| 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) | ||||||||||||||
| 888 Seventh Avenue, | New York, | New York | 10019 | ||||||||||||||
| (Address of principal executive offices) (Zip Code) | |||||||||||||||||
| (212) | 894-7000 | ||||
| (Registrants’ telephone number, including area code) | |||||
Securities registered pursuant to Section 12(b) of the Act:
| Registrant | Title of Each Class | Trading Symbol(s) | Name of Exchange on Which Registered | |||||||||||||||||
| Vornado Realty Trust | Common Shares of beneficial interest, $.04 par value per share | VNO | New York Stock Exchange | |||||||||||||||||
| Cumulative Redeemable Preferred Shares of beneficial interest, liquidation preference $25.00 per share: | ||||||||||||||||||||
| Vornado Realty Trust | 5.40% Series L | VNO/PL | New York Stock Exchange | |||||||||||||||||
| Vornado Realty Trust | 5.25% Series M | VNO/PM | New York Stock Exchange | |||||||||||||||||
| Vornado Realty Trust | 5.25% Series N | VNO/PN | New York Stock Exchange | |||||||||||||||||
| Vornado Realty Trust | 4.45% Series O | VNO/PO | New York Stock Exchange | |||||||||||||||||
Securities registered pursuant to Section 12(g) of the Act:
| Registrant | Title of Each Class | |||||||
| Vornado Realty Trust | Series A Convertible Preferred Shares of beneficial interest, liquidation preference $50.00 per share | |||||||
| Vornado Realty L.P. | Class A Units of Limited Partnership Interest | |||||||
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Vornado Realty Trust: Yes ☑ No ☐ Vornado Realty L.P.: Yes ☐ No ☑
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
Vornado Realty Trust: Yes ☐ No ☑ Vornado Realty L.P.: Yes ☐ No ☑
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 every Interactive Data File required to be submitted 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 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 | ☐ | Smaller Reporting Company | |||||||||||
| ☐ | Emerging Growth Company | |||||||||||||
Vornado Realty L.P.:
| ☐ | Large Accelerated Filer | ☐ | Accelerated Filer | |||||||||||
| ☑ | Non-Accelerated Filer | ☐ | 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.
Vornado Realty Trust: ☐ Vornado Realty L.P.: ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management's assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.
Vornado Realty Trust: ☑ Vornado Realty L.P.: ☑
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements.
Vornado Realty Trust: ☐ Vornado Realty L.P.: ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b).
Vornado Realty Trust: ☐ Vornado Realty L.P.: ☐
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 ☑
The aggregate market value of the voting and non-voting common shares held by non-affiliates of Vornado Realty Trust, (“Vornado”)i.e. by persons other than officers and trustees of Vornado Realty Trust, was $3,196,914,000 at June 30, 2023.
As of December 31, 2023, there were 190,390,703 common shares of beneficial interest outstanding of Vornado Realty Trust.
There is no public market for the Class A units of limited partnership interest of Vornado Realty L.P. Based on the June 30, 2023 closing share price of Vornado Realty Trust’s common shares, which are issuable upon redemption of the Class A units, the aggregate market value of the Class A units held by non-affiliates of Vornado Realty L.P., i.e. by persons other than Vornado Realty Trust and its officers and trustees, was $217,739,000 as of June 30, 2023.
Documents Incorporated by Reference
Part III: Portions of Proxy Statement for Annual Meeting of Vornado Realty Trust’s Shareholders to be held on May 23, 2024.
EXPLANATORY NOTE
This report combines the Annual Reports on Form 10-K for the fiscal year ended December 31, 2023 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 fully‑integratedMaryland real estate investment trust (“REIT”), and references to the “Operating Partnership” and “VRLP” 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 91.0% 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 distribution to a Class A unitholder is equal to the 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 Annual Reports on Form 10-K 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 Class A units of partnership in the Operating Partnership, and the net proceeds of debt offerings by Vornado, which are contributed to the Operating Partnership in exchange for debt securities of 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 facilities, 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 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities;
•Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations includes information specific to each entity, where applicable; and
•Item 8. Financial Statements and Supplementary Data which includes the following specific disclosures for Vornado Realty Trust and Vornado Realty L.P.:
•Note 10. Redeemable Noncontrolling Interests
•Note 11. Shareholders' Equity/Partners' Capital
•Note 12. Stock-based Compensation
•Note 13. Income (Loss) Per Share/Income (Loss) Per Class A Unit
This report also includes separate Part II, Item 9A. 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.
INDEX
| Item | Financial Information: | Page Number | |||||||||||||||
(1)These items are omitted in whole or in part because Vornado, the Operating Partnership’s sole general partner, will file a definitive Proxy Statement pursuant to Regulation 14A under the Securities Exchange Act of 1934 with the Securities and Exchange Commission no later than 120 days after December 31, 2023, portions of which are incorporated by reference herein.
5
FORWARD-LOOKING STATEMENTS
Certain statements contained herein constitute forward‑looking statements as such term is defined in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements are not guarantees of future performance. They represent our intentions, plans, expectations and beliefs and are subject to numerous assumptions, risks and uncertainties. Our future results, financial condition and business may differ materially from those expressed in these forward-looking statements. You can find many of these statements by looking for words such as “approximates,” “believes,” “expects,” “anticipates,” “estimates,” “intends,” “plans,” “would,” “may” or other similar expressions in this Annual Report on Form 10‑K. We also note the following forward-looking statements: in the case of our development and redevelopment projects, the estimated completion date, estimated project cost and cost to complete; estimates of future capital expenditures, and the timing and form of dividends to common and preferred shareholders and operating partnership distributions, and the amount and form of potential share repurchases and/or asset sales. Many of the factors that will determine the outcome of these and our other forward-looking statements are beyond our ability to control or predict. For further discussion of factors that could materially affect the outcome of our forward-looking statements, see “Item 1A. Risk Factors” in this Annual Report on Form 10-K.
For these statements, we claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. You are cautioned not to place undue reliance on our forward-looking statements, which speak only as of the date of this Annual Report on Form 10-K or the date of any document incorporated by reference. All subsequent written and oral forward-looking statements attributable to us or any person acting on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this section. We do not undertake any obligation to release publicly any revisions to our forward-looking statements to reflect events or circumstances occurring after the date of this Annual Report on Form 10-K.
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PART I
ITEM 1. BUSINESS
Vornado is a fully‑integrated REIT and conducts its business through, and substantially all of its interests in properties are held by, Vornado Realty L.P.,the Operating Partnership, a Delaware limited partnership (the “Operating Partnership”).partnership. Accordingly, Vornado’s cash flow and ability to pay dividends to its shareholders isare dependent upon the cash flow of the Operating Partnership and the ability of its direct and indirect subsidiaries to first satisfy their obligations to creditors. Vornado is the sole general partner of and owned approximately 93.5%91.0% of the common limited partnership interest in the Operating Partnership as of December 31, 2017. All references to the “Company,” “we,” “us” and “our” mean collectively Vornado, the Operating Partnership and those entities/subsidiaries consolidated by Vornado.2023.
We currently own all or portions of:
•57 Manhattan operating properties totaling over 11.1 million square feet, five multifamily properties with 3,133 units and five other assets totaling approximately 406,000 square feet and (ii) 18 future development assets totaling over 10.4consisting of:
•20.4 million square feet of estimated potential development density, and (iii) $412.5 million of cash ($275.0 million plus The Bartlett financing proceeds less transaction costs and other mortgage items) to JBG SMITH Properties (“JBGS”). On July 18, 2017, JBGS was combined with the management business and certain Washington, DC assets of The JBG Companies (“JBG”), a Washington, DC real estate company. Steven Roth, the Chairmanoffice space in 30 of the Boardproperties;
•2.4 million square feet of Trustees and Chief Executive Officer of Vornado, is the Chairmanstreet retail space in 50 of the Board of Trustees of JBGS. Mitchell Schear, former President of our Washington, DC business, is a member of the Board of Trustees of JBGS. We are providing transition services to JBGS initiallyproperties;
•1,662 units in five residential properties;
•Multiple development sites, including information technology, financial reporting and payroll services. The spin-off was effected through a tax-free distribution by Vornado to the holders of Vornado common shares of all of the common shares of JBGS at the rate of one JBGS common share for every two common shares of Vornado350 Park Avenue, Sunset Pier 94 Studios and the distribution by the Operating Partnership to the holders of its common units of all of the outstanding common units of JBG SMITH Properties LP (“JBGSLP”) at the rate of one JBGSLP common unit for every two common units of VRLP held of record. See JBGS’ Amendment No. 3 on Form 10 (File No. 1-37994) filed with the Securities and Exchange Commission on June 9, 2017 for additional information. Beginning in the third quarter of 2017, the historical financial results of our Washington, DC segment are reflected in our consolidated financial statements as discontinued operations for all periods presented.Hotel Pennsylvania site;
•Signage throughout the Penn District and Times Square; and
•Building Maintenance Services LLC ("BMS"), a wholly owned subsidiary, which provides cleaning and security services for our buildings and third parties.
Other Real Estate and Investments:
•The 3.7 million square foot THE MART in Chicago;
•A 70% controlling interest in Toys “R” Us, Inc. (“Toys”) as well as interests555 California Street, a three-building office complex in otherSan Francisco’s financial district aggregating 1.8 million square feet; and
•Other real estate and related investments.
OBJECTIVES AND STRATEGY
Our business objective is to maximize Vornado shareholder value, which we measure by the total return provided to our shareholders. Below is a table comparing Vornado’s performance to the FTSE NAREIT Office Index (“Office REIT”) and the MSCI US REIT Index (“MSCI”) for the following periods ended December 31, 2017:
Total Return(1) | ||||||||||
| Vornado | Office REIT | MSCI | ||||||||
| Three-month | 2.5 | % | 4.3 | % | 1.4 | % | ||||
| One-year | (4.3 | )% | 5.3 | % | 5.1 | % | ||||
| Three-year | (1.4 | )% | 19.5 | % | 17.0 | % | ||||
| Five-year | 54.3 | % | 58.7 | % | 56.3 | % | ||||
| Ten-year | 75.7 | % | 70.1 | % | 105.1 | % | ||||
value. We intend to achieve this objective by continuing to pursue our investment philosophy and to execute our operating strategies through:
•maintaining a superior team of operating and investment professionals and an entrepreneurial spirit;
•investing in properties in select markets, such as New York City, where we believe there is a high likelihood of capital appreciation;
•acquiring quality properties at a discount to replacement cost and where there is a significant potential for higher rents;
•developing and redeveloping our existing properties to increase returns and maximize value; and
•investing in operating companies that have a significant real estate component.
We expect to finance our growth, acquisitions and investments using internally generated funds and proceeds from asset sales and by accessing the public and private capital markets. We may also offer Vornado common or preferred shares or Operating Partnership units in exchange for property and may repurchase or otherwise reacquire these securities in the future.
DISPOSITIONS
We completed the following sale transactions during 2023:
•$100 million sale of four Manhattan retail properties located at 510 Fifth Avenue, 148–150 Spring Street, 443 Broadway and 692 Broadway;
•$71 million sale by Alexander’s (32.4% interest) of its Rego Park III land parcel;
•$24 million sale of The Armory Show located in New York; and
•$24 million net proceeds from the sale of two condominium units at 220 Central Park South (“220 CPS”).
FINANCINGS
We completed the following financing transactions during 2023:
•$1.2 billion of interest rate swap arrangements;
•$950 million 1.00% SOFR interest rate cap arrangement for the 1290 Avenue of the Americas mortgage loan (70.0% ownership);
•$355 million restructuring of 697-703 Fifth Avenue (44.8% ownership);
•$183 million construction loan for Sunset Pier 94 Studios (49.9% ownership);
•$129 million refinancing of 512 West 22nd Street (55% ownership);
•$75 million refinancing of 150 West 34th Street; and
•$54 million refinancing of 825 Seventh Avenue office condominium (50% ownership).
7
DEVELOPMENT / REDEVELOPMENT PROJECTS AND OPPORTUNITIES
PENN District
PENN 2
We are redeveloping PENN 2, a 1,795,000 square foot (as expanded) office building, located on the west side of Seventh Avenue between 31st and 33rd Street. The development cost of this project is estimated to be $750,000,000, of which $638,959,000 has been expended as of December 31, 2023.
Hotel Pennsylvania Site
Demolition of the existing building was completed in the third quarter of 2023.
We are also making districtwide improvements within the PENN District. The development cost of these improvements is estimated to be $100,000,000, of which $47,424,000 has been expended as of December 31, 2023.
Sunset Pier 94 Studios
On August 28, 2023, we, together with Hudson Pacific Properties and Blackstone Inc. (“HPP/BX”), formed a joint venture to develop Sunset Pier 94 Studios, a 266,000 square foot purpose-built studio campus in Manhattan. We own a 49.9% equity interest in the joint venture. The development cost of the project is estimated to be $350,000,000, which will be funded with $183,200,000 of construction financing and $166,800,000 of equity contributions. Our share of equity contributions will be funded by (i) our $40,000,000 Pier 94 leasehold interest contribution and (ii) $34,000,000 of cash contributions, which are net of an estimated $9,000,000 for our share of development fees and reimbursement for overhead costs incurred by us. HPP/BX will fund 100% of cash contributions until such time that its capital account is equal to Vornado’s, after which equity will be funded in accordance with each partner’s respective ownership interest. We have funded $7,994,000 of cash contributions as of December 31, 2023. For further information about this transaction, see page 38, Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations - Overview, in this Annual Report on Form 10-K.
350 Park Avenue
On January 24, 2023, we and the Rudin family (“Rudin”) completed agreements with Citadel Enterprise Americas LLC (“Citadel”) and with an affiliate of Kenneth C. Griffin, Citadel’s Founder and CEO (“KG”), for a series of transactions relating to 350 Park Avenue and 40 East 52nd Street. In connection therewith, we entered into a joint venture with Rudin (the “Vornado/Rudin JV”) that purchased 39 East 51st Street for $40,000,000, funded on a 50/50 basis by Vornado and Rudin. 39 East 51st Street will be combined with 350 Park Avenue and 40 East 52nd Street to create a premier development site (the “Site”). From October 2024 to June 2030, KG will have the option to either (i) acquire a 60% interest in a joint venture with the Vornado/Rudin JV (with Vornado having an effective 36% interest in the entity) to build a new 1,700,000 square foot office tower, valuing the Site at $1.2 billion or (ii) purchase the Site for $1.4 billion ($1.085 billion to Vornado). From October 2024 to September 2030, the Vornado/Rudin JV will have the option to put the Site to KG for $1.2 billion ($900,000,000 to Vornado). For further information about this transaction and the options available to each of the parties, see page 37, Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations - Overview, in this Annual Report on Form 10-K.
We are also evaluating other development and redevelopment opportunities at certain of our properties in Manhattan including, in particular, the PENN District.
There can be no assurance that the above projects will be completed, completed on schedule or within budget.
8
ENVIRONMENTAL SUSTAINABILITY INITIATIVES
We have long believed a focus on environmental sustainability is responsible management of our business and important to our tenants, investors, employees and communities that we serve. It has been central to Vornado's business strategy for over 15 years. The Corporate Governance and Nominating Committee of Vornado's Board of Trustees is assigned with oversight of Environmental, Social and Governance (“ESG”) matters, which includes climate change risk. Environmental sustainability initiatives are carried out by a dedicated team of professionals that work directly with our business units.
Vornado is an industry leader in sustainability, owning and operating more than 25 million square feet of LEED (Leadership in Energy and Environmental Design) certified buildings, representing 95% of our in-service office portfolio, with over 24 million square feet at LEED Gold or Platinum. In 2023, we (i) ranked #1 in the US Diversified Office/Retail REIT peer group by GRESB, and received the “Green Star” distinction for the eleventh consecutive year and GRESB's five star rating, (ii) received the Leader in the Light Award by the National Association for Real Estate Investment Trusts (NAREIT) for diversified REITs for the thirteenth time, and (iii) were recognized as an EPA ENERGY STAR Partner of the Year with the distinction of having demonstrated eight years of sustained excellence.
We prioritize addressing climate change and in 2019 adopted a 10-year plan to make our buildings carbon neutral by 2030 (“Vision 2030”). Vision 2030 is a multi-faceted approach that prioritizes energy reduction, recovery, and renewable power. We rely on technology, as well as meaningful stakeholder collaboration with our tenants, our employees, and our communities, to achieve this plan. Our commitment to carbon neutrality and associated emissions reduction targets have been approved by the Science Based Targets Initiative as consistent with a 1.5°C climate scenario, the most ambitious goal of the Paris Agreement.
We consider sustainability in all aspects of our business, including the design, construction, retrofitting and ongoing maintenance and operations of our portfolio of buildings. We operate our buildings sustainably and efficiently by seeking to establish best practices in energy and water consumption, carbon reduction, resource and waste management and ecologically sensitive procurement. Our policies, from 100% green cleaning to procuring 100% renewable electricity certificates to energy efficiency, are implemented across our entire portfolio. We undertake significant outreach with our tenants, employees and investors regarding Vornado’s sustainability programs and strategies.
We gather data to measure progress against our goals, align our goals with our tenants, plan for our longer-term projects and engage with our stakeholders in meaningful ways. We use carbon accounting software, energy audits and models and building automation software to measure and track our portfolio-wide waste, water and energy reduction strategies, create roadmaps for each building to understand how to achieve carbon neutrality and provide accurate and actionable data for our measurement, verification and reporting requirements.
Our 2022 and 2023 long-term performance plan awards specifically tie a portion of senior management’s compensation to the achievement of certain ESG targets, including reductions in greenhouse emissions, achieving a specified GRESB score and targeting a specified percentage of LEED Gold or Platinum certified square footage in our office portfolio.
We are committed to transparent reporting of sustainability performance indicators and publish an annual ESG Report in accordance with the Global Reporting Initiative and aligned with the metrics codified by the Sustainability Accounting Standards Board and in 2023 published a report in accordance with the Task Force on Climate-related Financial Disclosures. We also submit public reports to CDP, CSA (the S&P Global Corporate Sustainability Assessment) and EP100 (global initiative led by Climate Group). Further details on our environmental sustainability initiatives and strategy, including our Vision 2030 Roadmap, can be found in our 2022 ESG Report at (vno.com/sustainability). There can be no assurance that our Vision 2030 commitment will be achieved in the planned time frame. The ESG Report is not incorporated by reference and should not be considered part of this Annual Report on Form 10-K.
HUMAN CAPITAL MANAGEMENT
As of December 31, 2023, we had 2,935 employees, consisting of (i) 2,437 employees of Building Maintenance Services LLC, a wholly owned subsidiary, which provides cleaning, security, engineering and parking services primarily to our New York properties, (ii) 394 employees in our corporate office, leasing, and property management, and (iii) 104 employees of THE MART. The foregoing does not include employees of partially owned entities.
Human capital management is critical to our success and our employees are the foundation of our human capital.
Compensation, Benefits and Employee Wellbeing
To attract and retain the best-qualified talent and to help our employees stay healthy, balance their work and personal lives, and meet their financial and retirement goals, we offer competitive benefits including, but not limited to, market-competitive compensation, healthcare (medical, dental and vision coverage), a health savings account, 401(k) and employer match, dependent care flexible spending account, parental leave, adoption/surrogacy benefits, short-term and long-term disability insurance, life insurance, time off/paid holidays, tuition reimbursement, subsidized gym memberships, employee wellness programs and incentives, in-workplace vaccinations, commuter benefits, an employee assistance program and workplace flexibility.
9
HUMAN CAPITAL MANAGEMENT - CONTINUED
Talent Development
To foster talent and growth, we provide training and continuing education, promote career and personal development, and encourage innovation and engagement. To achieve our talent development goals, we provide tuition reimbursement for our employees’ continuing education and professional development, and the opportunity to participate in a variety of training and networking engagements.
Culture and Engagement
Our employees are critical to our success, and we believe creating a positive and inclusive culture is essential to attracting and retaining engaged employees. We seek to retain our employees by actively engaging with our workforce and we solicit their feedback through our divisional leaders and employee surveys. We use their feedback to create and continually enhance programs that support their needs.
Through our volunteer program, Vornado Volunteers, employees are granted one day of paid time off per calendar year to volunteer for a cause of their choice.
Diversity and Inclusion
Vornado is a diverse and inclusive environment that empowers the individual and enriches the employment experience. We have published Equal Employment Opportunity (EEO) data since 2017 and have a broadly diverse workforce across both our corporate base as well as our BMS division. Our employee demographics data can be found in our 2022 ESG report (vno.com/sustainability), which is not incorporated by reference and should not be considered part of this Annual Report on Form 10-K.
Health and Wellness
As a building owner and landlord to thousands of business tenants, we focus on maintaining and improving the health of our indoor environments, as well as communicating the value of our health and wellness programs with consistency and clarity to our stakeholders. We believe that consistent health programming and communications protocols not only mitigate health risks within our buildings, but they also create a responsible behavior framework for our employees, our tenants, and our visitors.
Labor Relations
BMS employs and manages janitorial and security staff who are members of 32BJ SEIU and engineering staff who are members of Local 94 of the International Union of Operating Engineers AFL-CIO. Through our active participation in the Realty Advisory Board on Labor Relations, we work collaboratively with both unions and consider our relations with our union employees to be very positive.
For additional information on human capital matters, please see our most recent ESG report, available for download on our website at www.vno.com and in digital format at vno.com/sustainability. This report and other information on our website are not incorporated by reference into and do not form any part of this Annual Report on Form 10-K.
COMPETITION
We compete with a large number of real estate investors, property owners and developers, some of whichwhom may be willing to accept lower returns on their investments. Principal factors of competition are rents charged, sales prices,tenant concessions offered, attractiveness of location, the quality of the property and the breadth and the quality of services provided. Our success depends upon, among other factors, trends of the global, national, regional and local economies, the financial condition and operating results of current and prospective tenants and customers, availability and cost of capital, construction and renovation costs, taxes, governmental regulations, legislation, population and employment trends. See “Risk Factors”"Risk Factors" in Item 1A for additional information regarding these factors.
SEGMENT DATA
We operate in the following reportable segments: New York and Other. Financial information related to these reportable segments for the years ended December 31, 2023, 2022 and 2021 is set forth in Note 23 – Segment Information to our consolidated financial statements in this Annual Report on Form 10-K.
TENANTS ACCOUNTING FOR OVER 10% OF REVENUES
None of our tenants accounted for more than 10% of total revenues in any of the years ended December 31, 2023, 2022 and 2021.
10
CERTAIN ACTIVITIES
We do not base our acquisitions and investments on specific allocations by type of property. We have historically held our properties for long‑term investment; however, it is possible that properties in our portfolio may be sold or otherwise disposed of when circumstances warrant. Further, we have not adopted a policy that limits the amount or percentage of assets which could be invested in a specific property or property type. Generally our activities are reviewed and may be modified from time to time by Vornado’s Board of Trustees without the vote of our shareholders or Operating Partnership unitholders.
PRINCIPAL EXECUTIVE OFFICES
Our principal executive offices are located at 888 Seventh Avenue, New York, New York 10019; telephone (212) 894‑7000.
MATERIALS AVAILABLE ON OUR WEBSITE
Copies of our Annual Report on Form 10‑K, Quarterly Reports on Form 10‑Q, Current Reports on Form 8‑K and amendments to those reports, as well as Reports on Forms 3, 4 and 5 regarding officers, trustees and 10% beneficial owners, filed or furnished pursuant to Section 13(a), 15(d) or 16(a) of the Securities Exchange Act of 1934 are available free of charge through our website (www.vno.com) as soon as reasonably practicable after they are electronically filed with, or furnished to, the Securities and Exchange Commission. Also available on our website are copies of our Audit Committee Charter, Compensation Committee Charter, Corporate Governance and Nominating Committee Charter, Code of Business Conduct and Ethics, and Corporate Governance Guidelines. In the event of any changes to these charters or the code or guidelines, revised copies will also be made available on our website. Copies of these documents are also available directly from us free of charge. Our website also includes other financial and non-financial information, including certain non-GAAP financial measures, none of which is a part of this Annual Report on Form 10-K. Copies of our filings under the Securities Exchange Act of 1934 are also available free of charge from us, upon request.
11
ITEM 1A. RISK FACTORS
Material factors that may adversely affect our business, operations and financial condition are summarized below. We refer to the equity and debt securities of both Vornado and the Operating Partnership as our “securities” and the investors who own shares of Vornado or units of the Operating Partnership, or both, as our “equity holders.” The risks and uncertainties described herein may not be the only ones we face. Additional risks and uncertainties not presently known to us or that we currently believe to be immaterial may also adversely affect our business, operations and financial condition. See “Forward-Looking Statements” contained herein on page 6.
RISKS RELATED TO OUR BUSINESS AND OPERATIONS
We may be adversely affected by trends in office real estate, including work from home trends.
In 2023, approximately 78% of our net operating income (“NOI” a non-GAAP measure) is from our office properties. Work from home, flexible or hybrid work schedules, open workplaces, videoconferencing, and teleconferencing remain prevalent in certain situations following the COVID-19 pandemic. Changes in tenant space utilization, including from the continuation of work from home and flexible work arrangement policies, may continue to cause office tenants to reassess their long-term physical space needs, which could have an adverse effect on our business.
Further, as office tenants reevaluate their physical space needs and focus on attracting and retaining talent, many tenants have become more selective and are focused on leasing space in high-quality, modern and well-amenitized buildings near transit hubs. These factors have resulted in increased competition among landlords to attract tenants, significant landlord capital expenditures for a building to maintain Class A status and may negatively impact the value of older and less desirable office space. This could have an adverse effect on our financial condition and results of operations.
A significant portion of our properties is located in the New York metropolitan area and is affected by the economic cycles and risks inherent to this area.
In 2023, approximately 88% of our NOI is from properties located in the New York metropolitan area. We may continue to concentrate a significant portion of our future acquisitions, development and redevelopment in this area. Real estate markets are affected by economic downturns and we cannot predict how economic conditions will impact this market in either the short or long term. Declines in the economy and declines in the New York metropolitan area real estate market have impacted and could continue to impact our financial performance and the value of our properties. In addition to the factors affecting the national economic condition generally, the factors affecting economic conditions in this area include:
• financial performance and productivity of the media, advertising, professional services, financial, technology, retail, insurance and real estate industries;
• business layoffs or downsizing;
• any oversupply of, or reduced demand for, real estate;
• industry slowdowns;
• the effects of inflation;
• increased interest rates;
• relocations of businesses;
• changing demographics;
• increased work from home and use of alternative work places;
• changes in the number of domestic and international tourists to our markets (including as a result of changes in the relative strengths of world currencies);
• the fiscal health of New York State and New York City governments and local transit authorities;
• quality of life conditions;
• infrastructure quality;
• increased government regulation and costs of complying with such regulations; and
• changes in rates or the treatment of the deductibility of state and local taxes.
It is impossible for us to predict the future effect of trends in the economic and investment climates of the geographic areas in which we concentrate, and more generally of the United States, or the real estate markets in these areas. Local, national or global economic downturns could negatively affect the value of our properties, our businesses and profitability.
We are subject to risks that affect the general and New York City retail environments.
In 2023, approximately 17% of our NOI is from Manhattan retail properties. These properties are affected by the general and New York City retail environments, including the level of consumer spending and consumer confidence, Manhattan tourism, office and residential occupancy rates, employer remote-working policies, the threat of terrorism or other criminal acts, increasing competition from online retailers and other retail centers, and the impact of technological change upon the retail environment generally. These factors could adversely affect the financial condition of our retail tenants, or result in the bankruptcy of such tenants, and the willingness of retailers to lease space in our retail locations, which could have an adverse effect on the value of our properties, our business and profitability.
12
Our performance and the value of an investment in us are subject to risks associated with our real estate assets and with the real estate industry.
The value of our real estate and the value of an investment in us fluctuates depending on conditions in the general economy and the real estate business. These conditions may also adversely impact our revenues and cash flows.
The factors that affect the value of our real estate investments include, among other things:
• global, national, regional and local economic conditions and geopolitical events;
• competition from other available space, including co-working space and sub-leases;
• local conditions such as an oversupply of space or a reduction in demand for real estate in the area;
• how well we manage our properties;
• the development and/or redevelopment of our properties;
• changes in market rental rates;
• trends in office real estate, including many tenants’ preferences for space in modern amenitized buildings which may require the landlord to incur significant capital expenditures;
• increased competition from online shopping and its impact on retail tenants and their demand for retail space;
• the timing and costs associated with property improvements and rentals;
• whether we are able to pass all or portions of any increases in operating costs through to tenants;
• changes in real estate taxes and other expenses;
• fluctuations in interest rates;
• the ability of state and local governments to operate within their budgets;
• whether tenants and users such as customers and shoppers consider a property attractive;
• changes in consumer preferences adversely affecting retailers and retail store values;
• changes in tenant space utilization;
• the financial condition of our tenants, including the extent of tenant bankruptcies or defaults;
• consequences of any armed conflict involving, or terrorist attacks against, the United States or individual acts of violence in public spaces;
• availability of financing on acceptable terms or at all;
• inflation or deflation;
• our ability to obtain adequate insurance;
• government regulation, including changes in fiscal policies, taxation, and zoning laws;
• potential liability and compliance costs associated with environmental or other laws or regulations;
• natural disasters;
• general competitive factors;
• climate change; and
• the impact of pandemics or outbreaks of other infectious diseases.
The rents or sales proceeds we receive and the occupancy levels at our properties may decline as a result of adverse changes in any of these factors. If rental revenues, sales proceeds and/or occupancy levels decline, we generally would expect to have less cash available for operating costs, to pay indebtedness and for distribution to equity holders. In addition, some of our major expenses, including mortgage payments, real estate taxes and maintenance costs generally do not decline when the related rents decline and maintenance costs can increase substantially in an inflationary environment. These factors may cause the value of our real estate assets to decline, which may result in non-cash impairment charges and the impact could be material.
Real estate is a competitive business and that competition may adversely impact us.
We compete with a large number of real estate investors, property owners and developers, some of whom may be willing to accept lower returns on their investments. Principal factors of competition are rents charged, tenant concessions offered, attractiveness of location, the quality of the property and the breadth and the quality of services provided. Substantially all of our properties face competition from similar properties in the same market, which may adversely impact the rents we can charge at those properties and our results of operations.
Our commercial office properties are located primarily in highly developed areas of the New York metropolitan area. Manhattan is the largest office market in the United States. The number of competitive office properties in the New York metropolitan area, which may be newer, more amenitized or better located than our properties, could have a material adverse effect on our ability to lease office space at our properties and on the effective rents we are able to charge.
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We may be unable to renew leases, lease vacant space or relet space as leases expire on favorable terms.
When our tenants decide not to renew their leases upon their expiration, we may not be able to relet the space. Even if tenants do renew or we can relet the space, the terms of renewal or reletting, considering among other things, rent and concessions, the cost of improvements to the property and leasing commissions, may be on less economically favorable terms. In addition, changes in space utilization by our tenants may impact our ability to renew or relet space without the need to incur substantial costs in renovating or redesigning the internal configuration of the relevant property and/or space. If we are unable to promptly renew leases or relet the space on economically favorable terms, our cash flow and ability to service debt obligations and pay dividends and distributions to equity holders could be adversely affected.
Bankruptcy or insolvency of tenants may decrease our revenues, net income and available cash.
From time to time, some of our tenants have declared bankruptcy, and other tenants may declare bankruptcy, become insolvent or experience a material business downturn adversely affecting their ability to make timely rental payments in the future. If a tenant does not pay its rent, we may face delays enforcing our rights as landlord and may incur substantial legal and other costs. Even if we are able to enforce our rights, a tenant may not have recoverable assets. The bankruptcy or insolvency of a major tenant may delay our efforts to collect past-due balances under the relevant leases and could ultimately preclude collection of these amounts altogether. As a result, the bankruptcy or insolvency of, or nonpayment by, a major tenant could cause us to suffer lower revenues and operational difficulties, including leasing the remainder of the property, which could in turn result in decreased net income and funds available to pay our indebtedness or make distributions to equity holders.
Our business, financial condition, results of operations and cash flows have been and may continue to be adversely affected by outbreaks of highly infectious or contagious diseases.
Our business has been, and may continue to be, adversely affected by the economic and industry challenges created by highly infectious or contagious diseases, including the COVID-19 pandemic. The impact of the COVID-19 pandemic caused retailers to reduce the number and size of their physical locations and increase reliance on e-commerce, and future infectious or contagious diseases could have a similar impact. Additionally, many office tenants have adopted work from home, hybrid and flexible work arrangements which may lead our office tenants to reassess their long-term physical space needs. Any future outbreak of a highly infectious or contagious disease could impact how people live, work and travel in ways that have affected and may in the future affect our properties. Over time, these factors could decrease the demand for office and retail space and ultimately decrease occupancy and/or rent levels across our portfolio, which may have a negative impact on our financial condition and/or access to capital and may have the effect of heightening other risks described under this heading “Risk Factors.”
Some of our potential losses may not be covered by insurance.
For our properties, we maintain general liability insurance with limits of $300,000,000 per occurrence and per property, of which $275,000,000, increased from $250,000,000 effective June 20, 2023, includes communicable disease coverage, and we maintain all risk property and rental value insurance with limits of $2.0 billion per occurrence, with sub-limits for certain perils such as flood and earthquake, excluding communicable disease coverage. Our California properties have earthquake insurance with coverage of $350,000,000 per occurrence and in the aggregate, subject to a deductible in the amount of 5% of the value of the affected property. We maintain coverage for certified terrorism acts with limits of $6.0 billion per occurrence and in the aggregate (as listed below), $1.2 billion for non-certified acts of terrorism, and $5.0 billion per occurrence and in the aggregate for terrorism involving nuclear, biological, chemical and radiological (“NBCR”) terrorism events, as defined by the Terrorism Risk Insurance Act of 2002, as amended to date and which has been extended through December 2027.
Penn Plaza Insurance Company, LLC (“PPIC”), our wholly owned consolidated subsidiary, acts as a re-insurer with respect to a portion of all risk property and rental value insurance and a portion of our earthquake insurance coverage, and as a direct insurer for coverage for acts of terrorism including NBCR acts. Coverage for acts of terrorism (excluding NBCR acts) is fully reinsured by third party insurance companies and the Federal government with no exposure to PPIC. For NBCR acts, PPIC is responsible for a deductible of $2,112,753 and 20% of the balance of a covered loss and the Federal government is responsible for the remaining portion of a covered loss. We are ultimately responsible for any loss incurred by PPIC.
Certain condominiums in which we own an interest (including the Farley Condominiums) maintain insurance policies with different per occurrence and aggregate limits than our policies described above.
We continue to monitor the state of the insurance market and the scope and costs of coverage for acts of terrorism and other events. However, we cannot anticipate what coverage will be available on commercially reasonable terms in the future. We are responsible for uninsured losses and for deductibles and losses in excess of our insurance coverage, which could adversely affect our business, results of operations and financial condition, the impact of which could be material.
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Actual or threatened terrorist attacks or other criminal acts may adversely affect the value of our properties and our ability to generate cash flow.
We have significant investments in the New York City, Chicago and San Francisco metropolitan areas. In response to a terrorist attack, the perceived threat of terrorism, or other criminal acts, tenants in these areas may choose to relocate their businesses to less populated, lower-profile areas of the United States that may be perceived to be less likely targets of future terrorist activity or have lower rates of crime and fewer customers may choose to patronize businesses in these areas. This, in turn, would trigger a decrease in the demand for space in these areas, which could increase vacancies in our properties and force us to lease space on less favorable terms. Furthermore, we may experience increased costs in security, equipment and personnel. As a result, the value of our properties and the level of our revenues and cash flows could decline materially.
The effects of climate change could have a concentrated impact on the areas where we operate and could adversely impact our results.
Our investments are concentrated in the New York City, Chicago and San Francisco metropolitan areas. Physical climate change, and natural disasters, including earthquakes, storms, storm surges, tornados, floods and hurricanes, could cause significant damage to our properties and the surrounding environment or area. Potentially adverse consequences of climate change, including rising sea levels and increased temperature fluctuations, could similarly have an impact on our properties and the economies of the metropolitan areas in which we operate. Government efforts to combat climate change may impact the cost of operating our properties. Over time, these conditions could result in declining demand for office and retail space in our buildings or the inability of us to operate the buildings at all. Climate change may also have indirect effects on our business by increasing the cost of (or making unavailable) property insurance on terms we find acceptable, increasing the cost of energy at our properties and requiring us to expend funds as we seek to repair and protect our properties against such risks. The incurrence of these losses, costs or business interruptions may adversely affect our operating and financial results.
Our properties are located in urban areas, which means the vitality of our properties is reliant on sound transportation and utility infrastructure. If that infrastructure is compromised in any way by an extreme weather event, such a compromise could have an adverse impact on our local economies and populations, as well as on our tenants’ ability to do business in our buildings.
Our properties are subject to transitional risks related to climate-related policy change.
De-carbonization of grid-supplied energy could lead to increased energy costs and operating expenses for our buildings. Retrofitting our building systems to consume less energy could lead to increased capital costs. Buildings which consume fossil fuel onsite may be subject to penalties in the future. In addition, the full transition of grid-supplied energy to renewable sources (as has been mandated by the Climate Leadership and Community Protection Act in New York State) could lead to increased energy costs and operating expenses for our buildings. Although these laws and regulations have not had any material adverse effects on our business to date, they could result in substantial costs, including compliance costs, increased energy costs, retrofit costs and construction costs. We cannot predict how future laws and regulations, or future interpretations of current laws and regulations, related to climate change will affect our business, results of operations and financial condition.
We may become subject to costs, taxes or penalties, or increases therein, associated with natural resource or energy usage, such as a “carbon tax” and by local legislation such as New York City’s Local Law 97, which sets limits on carbon emissions in our buildings and imposes penalties if we exceed those limits, and New York City’s Intro 2317, or the “gas ban” bill, which limits any onsite fossil fuel combustion in new construction and major renovations. These costs, taxes or penalties could increase our operating costs and decrease the cash available to pay our obligations or distribute to our equity owners.
Changes to tax laws could affect REITs generally, the trading of our shares and our results of operations, both positively and negatively, in ways that are difficult to anticipate.
The rules dealing with U.S. federal, state and local income taxation are constantly under review by persons involved in the legislative process and by the IRS and the Treasury Department. Changes to tax laws (which changes may have retroactive application) could adversely affect the taxation of REITs and their shareholders. We cannot predict whether, when, in what form, or with what effective dates, tax laws, regulations and rulings may be enacted, promulgated or decided, or technical corrections made, which could result in an increase in our, or our shareholders’, tax liability or require changes in the manner in which we operate in order to minimize increases in our tax liability. If such changes occur, we may be required to pay additional taxes on our assets or income and/or be subject to additional restrictions. These increased tax costs could, among other things, adversely affect the trading price for our common shares, our financial condition, our results of operations and the amount of cash available for the payment of dividends.
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Significant inflation and future increases in the inflation rate could adversely affect our business and financial results.
Recent substantial increases in the rate of inflation and potential future elevated rates of inflation, both real and anticipated, may impact our business and results of operations. In a highly inflationary environment, we may be unable to raise rental rates at or above the rate of inflation, which could reduce our profit margins. In addition, our cost of labor and materials could increase, which could have an adverse impact on our business and financial results. Increased inflation could also adversely affect us by increasing costs of construction and renovation. While increases in most operating expenses at our properties can be passed on to our office and retail tenants, some tenants have fixed reimbursement charges and expenses at our residential properties may not be able to be passed on to residential tenants. Unreimbursed increased operating expenses may reduce cash flow available for payment of mortgage debt and interest and for distributions to shareholders.
We face risks associated with property acquisitions.
We have acquired in the past and intend to continue to pursue the acquisition of properties and portfolios of properties, including, but not limited to, large portfolios that would increase our size and could result in alterations to our capital structure. Furthermore, from time to time we have made, and in the future we may seek to make one or more, material acquisitions that we believe will maximize shareholder value. However, an announcement by us of one or more significant acquisitions could result in a quick and significant decline in the price of our securities. Our acquisition activities and their success are subject to the following risks:
•we may be unable to complete an acquisition of a property or portfolio even after entering into an acquisition agreement, making a non-refundable deposit and incurring certain other acquisition-related costs;
•we may be unable to obtain or assume financing for acquisitions on favorable terms or at all;
•increased interest rates will increase the cost of acquiring properties through financing, reducing the opportunities for attractive acquisitions;
•acquired properties may fail to perform as expected;
•the actual costs of repositioning, redeveloping or maintaining acquired properties may be greater than our estimates and may require significantly greater time and attention of management than anticipated;
•the acquisition agreement will likely contain conditions to closing, including completion of due diligence investigations to our satisfaction or other conditions that are not within our control, which may not be satisfied;
•acquired properties may be located in new markets where we may face risks associated with a lack of market knowledge or understanding of the local economy, lack of business relationships in the area, costs associated with opening a new regional office and unfamiliarity with local governmental and permitting procedures;
•we may acquire real estate through the acquisition of the ownership entity subjecting us to the risks of that entity and we may be exposed to the liabilities of properties or companies acquired, some of which we may not be aware of at the time of acquisition;
•we may face competition for acquisition opportunities from other well-capitalized investors, including publicly traded and privately held REITs, private real estate funds, domestic and foreign financial institutions, life insurance companies, sovereign wealth funds, pension trusts, partnerships and individual investors, which may cause an increase in the purchase price for a desired acquisition property or result in a competitor acquiring the desired property instead of us; and
•we may be unable to quickly and efficiently integrate new acquisitions, particularly acquisitions of portfolios of properties, into our existing operations, and this could have an adverse effect on our results of operations and financial condition.
Any delay or failure on our part to identify, negotiate, finance and consummate such acquisitions in a timely manner and on favorable terms, or operate acquired properties to meet our financial expectations, could impede our growth and have an adverse effect on us, including our financial condition, results of operations, cash flow and the market value of our securities. If we are unable to successfully acquire additional properties, our ability to grow our business could be adversely affected.
We are exposed to risks associated with property development, redevelopment and repositioning that could adversely affect us, including our financial condition and results of operations.
We are the owner of numerous development sites and continue to engage in redevelopment and repositioning activities with respect to our properties, and, accordingly, we are subject to certain risks, which could adversely affect us, including our financial condition and results of operations. These risks include, without limitation, (i) the availability and pricing of financing on favorable terms or at all; (ii) the availability and timely receipt of zoning and other regulatory approvals; (iii) cost overruns, especially in an inflationary environment, and untimely completion of construction (including risks beyond our control, such as weather or labor conditions, material shortages or supply chain delays); (iv) the potential for the fluctuation of occupancy rates and rents at redeveloped properties, which may result in our investment not being profitable; (v) start up, repositioning and redevelopment costs may be higher than anticipated; (vi) the potential that we may fail to recover expenses already incurred if we abandon development or redevelopment opportunities after we begin to explore them; (vii) the potential that we may expend funds on and devote management time to projects which we do not complete; (viii) the inability to complete leasing of a property on schedule or at all, resulting in an increase in carrying or redevelopment costs; (ix) the possibility that properties will be leased at below expected rental rates and (x) to the extent
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the redevelopment activities are conducted in partnership with third parties, the possibility of disputes with our joint venture development partners and the potential that we miss certain project milestone deadlines. These risks could result in substantial unanticipated delays or expenses, prevent the initiation or the completion of redevelopment activities or reduce the ultimate rents achieved on new developments. These outcomes could have an adverse effect on our financial condition, results of operations, cash flow, the market value of our common shares and ability to satisfy our principal and interest obligations and to make distributions to our shareholders.
It may be difficult to sell real estate on a timely basis, which may limit our flexibility.
Real estate investments are relatively illiquid. Consequently, we may have limited ability to dispose of assets in our portfolio promptly in response to changes in economic or other conditions which could have an adverse effect on our sources of working capital and our ability to satisfy our debt obligations.
We may not be permitted to dispose of certain properties or pay down the debt associated with those properties when we might otherwise desire to do so without incurring additional costs. In addition, when we dispose of or sell assets, we may not be able to reinvest the sales proceeds and earn similar returns.
As part of an acquisition of a property, or a portfolio of properties, we may agree, and in the past have agreed, not to dispose of the acquired properties or reduce the mortgage indebtedness for a long-term period, unless we pay certain of the resulting tax costs of the seller. These agreements could result in us holding on to properties that we would otherwise sell and not pay down or refinance. In addition, when we dispose of or sell assets, we may not be able to reinvest the sales proceeds and earn returns similar to those generated by the assets that were sold.
From time to time we have made, and in the future we may seek to make investments in companies over which we do not have sole control. Some of these companies operate in industries with different risks than investing and operating real estate.
From time to time we have made, and in the future we may seek to make, investments in companies that we may not control, including, but not limited to, Alexander’s, our Fifth Avenue and Times Square JV, and other equity and loan investments. Although these businesses generally have a significant real estate component, some of them operate in businesses that are different from investing and operating real estate. Consequently, we are subject to operating and financial risks of those industries and to the risks associated with lack of control, such as having differing objectives than our partners or the entities in which we invest, or becoming involved in disputes, or competing directly or indirectly with these partners or entities. In addition, we rely on the internal controls and financial reporting controls of these entities and their failure to maintain effectiveness or comply with applicable standards may adversely affect us.
We are subject to risks involved in real estate activity through joint ventures and private equity real estate funds.
We currently own properties through joint ventures and private equity real estate funds with other persons and entities and may in the future acquire or own properties through joint ventures and funds when we believe circumstances warrant the use of such structures. Joint venture and fund investments involve risk, including: the possibility that our partners might refuse to make capital contributions when due and therefore we may be forced to make contributions to maintain the value of the property; that we may be responsible to our partners for indemnifiable losses; that our partners might at any time have business or economic goals that are inconsistent with ours; that third parties may be hesitant or refuse to transact with the joint venture or fund due to the identity of our partners; and that our partners may be in a position to take action or withhold consent contrary to our recommendations, instructions or requests. For certain of our joint venture arrangements, we and our respective joint venture partners have rights including the ability to trigger a buy-sell, put right or forced sale arrangement, which could cause us to sell our interest, or acquire our partner’s interest, or to sell the underlying asset, at a time when we otherwise would not have initiated such a transaction, without our consent or on unfavorable terms. In some instances, joint venture and fund partners may have competing interests in our markets that could create conflicts of interest. These conflicts may include compliance with the REIT requirements, and our REIT status could be jeopardized if any of our joint ventures or funds do not operate in compliance with REIT requirements. To the extent our partners do not meet their obligations to us or our joint ventures or funds, or they take action inconsistent with the interests of the joint venture or fund, we may be adversely affected.
We are exposed to risks related to our properties that are subject to ground leases arrangements which could adversely affect our results of operations.
We are the lessee under long-term ground lease arrangements at certain of our properties. Unless we purchase a fee interest in the underlying land or extend the terms of these leases prior to expiration, we will no longer operate these properties upon expiration of the leases, which could adversely affect our financial condition and results of operations. Furthermore, rent payments under such leasehold interests are periodically adjusted pursuant to the respective contractual arrangements, including the currently ongoing PENN 1 June 2023 rent reset process. These rent resets may result in materially higher rents that could adversely affect our financial condition and results of operation. Additionally, due to the greater risk in a loan secured by a leasehold interest than a loan secured by a fee interest, we face risks related to the availability and pricing of financing on favorable terms or at all for such ground leasehold interests.
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RISKS RELATED TO OUR INDEBTEDNESS AND ACCESS TO CAPITAL
Significantly tighter capital markets and economic conditions have affected and may continue to materially affect our liquidity, financial condition and results of operations as well as the value of an investment in our debt and equity securities.
There are many factors that can affect the value of our debt and equity securities, including the state of the capital markets and the economy. Demand for office and retail space typically declines nationwide due to an economic downturn, bankruptcies, downsizing, layoffs and cost cutting. Government action or inaction may adversely affect the state of the capital markets. The cost and availability of credit may be adversely affected by illiquid credit markets and wider credit spreads, which may adversely affect our liquidity and financial condition, including our results of operations, and the liquidity and financial condition of our tenants. Recently, domestic and international financial markets have experienced unusual volatility, significant interest rate increases and continuing uncertainty. Liquidity has significantly tightened in overall financial markets. Consequently, there is greater uncertainty regarding our ability to access the credit markets in order to attract financing on reasonable terms. Additionally, the recent inflation environment has led to an increase in interest rates, which has had a direct and material increase on the interest expense of our borrowings. Our inability or the inability of our tenants to timely refinance maturing liabilities and access the capital markets to meet liquidity needs may materially affect our financial condition and results of operations and the value of our securities.
We have outstanding debt, and its cost may continue to increase and refinancing may not be available on acceptable terms and could affect our future operations.
As of December 31, 2023, our consolidated mortgages and unsecured indebtedness, excluding related premium, discount and deferred financing costs, totaled $8.3 billion. We rely on both secured and unsecured, variable rate and fixed rate debt to finance acquisitions and development activities and for working capital. We are subject to the risks normally associated with debt financing, including the risk that our cash flow from operations will be insufficient to meet our required debt service. Our debt service costs generally will not be reduced if conditions in the market or at our properties, such as the entry of new competitors or the loss of major tenants, cause a reduction in the income from our properties. Should such events occur, our operations may be adversely affected. If a property is mortgaged to secure payment of indebtedness and income from such property is insufficient to pay that indebtedness, the property could be foreclosed upon by the mortgagee resulting in our loss of the property.
If we are unable to obtain debt financing or refinance existing indebtedness upon maturity, our financial condition and results of operations would likely be adversely affected. In addition, the current interest rate environment has led to an increase in interest rates on our variable rate debt, including on new hedging instruments, and an increase in the cost of refinancing our existing debt and entering into new debt, all of which have reduced, and could continue to reduce, our operating cash flows. While certain of our debt is fixed by interest rate swap arrangements, the arrangements typically expire earlier than the mortgage loan maturity, resulting in future exposure to rising interest rates, which could further reduce our available cash. If the cost or amount of our indebtedness continues to increase or we cannot refinance our debt in sufficient amounts or on acceptable terms, we are at risk of credit rating downgrades and default on our obligations that could adversely affect our financial condition and results of operations.
We may not be able to obtain capital to make investments.
We depend primarily on external financing to fund the growth of our business. This is because one of the requirements of the Internal Revenue Code of 1986, as amended, for a REIT is that it distributes 90% of its taxable income, excluding net capital gains, to its shareholders. This, in turn, requires the Operating Partnership to make distributions to its unitholders. There is a separate requirement to distribute net capital gains or pay a corporate level tax in lieu thereof. Our access to debt or equity financing depends on the willingness of third parties to lend or make equity investments and on conditions in the capital markets generally. Although we believe that we will be able to finance any investments we may wish to make in the foreseeable future, there can be no assurance that new financing will be available or available on acceptable terms. For information about our available sources of funds, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources” and the notes to the consolidated financial statements in this Annual Report on Form 10-K.
The hedge instruments we may use to manage our exposure to interest rate volatility involve risks.
The interest rate hedge instruments we may use to manage some of our exposure to interest rate volatility involve risks, including the risk that counterparties may fail to perform under these arrangements. If interest rates were to fall, these arrangements may cause us to pay higher interest on our debt obligations than would otherwise be the case. In addition, the use of such instruments may generate income that may not be treated as qualifying REIT income for purposes of the 75% gross income test or 95% gross income test. Furthermore, there can be no assurance that our hedging arrangements will qualify as “highly effective” cash flow hedges under applicable accounting standards. If our hedges do not qualify as “highly effective,” the changes in the fair value of these instruments would be reflected in our results of operations and could adversely impact our earnings.
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Covenants in our debt instruments could adversely affect our financial condition and our acquisitions and development activities.
The mortgages on our properties contain customary covenants such as those that limit our ability, without the prior consent of the applicable lender, to further mortgage the applicable property or to reduce or change insurance coverage. Our unsecured indebtedness and debt that we may obtain in the future may contain customary restrictions, requirements and other limitations on our ability to incur indebtedness, including covenants that limit our ability to incur debt based upon the levels of certain ratios including total debt to total assets, secured debt to total assets, EBITDA to interest expense, and fixed charges, and that require us to maintain a certain ratio of unencumbered assets to unsecured debt. Our ability to borrow is subject to compliance with these and other covenants. In addition, failure to comply with our covenants could cause a default under the applicable debt instrument, and we may then be required to repay such debt with capital from such other sources or give possession of a secured property to the lender. Under those circumstances, other sources of capital may not be available to us or may be available only on unattractive terms. Further, depending on market conditions at the time of any refinancing, the covenants included as part of the terms of such refinancing may be more restrictive than the existing indebtedness.
In addition, our debt instruments contain customary covenants requiring us to maintain insurance. Although we believe that we have adequate insurance coverage for purposes of these agreements, we may not be able to obtain an equivalent amount of coverage at reasonable costs in the future. Further, if lenders insist on greater coverage than we are able to obtain it could result in acceleration of repayment of such debt instruments and adversely affect our ability to finance or refinance our properties and expand our portfolio.
A further downgrade in our credit ratings could materially and adversely affect our business and financial condition.
Our credit rating and the credit ratings assigned to our debt securities and our preferred shares have been recently downgraded and could change in the future based upon, among other things, our results of operations and financial condition. Our ratings are subject to ongoing evaluation by credit rating agencies, and any rating could be changed or withdrawn by a rating agency in the future if, in its judgment, circumstances warrant such action. Moreover, these credit ratings are not recommendations to buy, sell or hold our common shares or any other securities. If any of the credit rating agencies that have rated our securities downgrades or lowers its credit rating, or if any credit rating agency indicates that it has placed any such rating on a “watch list” for a possible downgrading or lowering, or otherwise indicates that its outlook for that rating is negative, such action could have a material adverse effect on our costs and availability of funding. For instance, if we fail to maintain the credit ratings currently assigned to our senior debt, the interest rates payable on outstanding debt under our unsecured term loan and revolving credit facilities would increase and we may be required to post additional collateral under certain of our existing loan agreements. Furthermore, any future lowering of our credit ratings or outlook would likely make it more difficult and/or more expensive for us to obtain additional debt financing. Our failure to maintain or improve our credit ratings could in turn have a material adverse effect on our financial condition, results of operations, cash flows, the trading/redemption price of our securities, and our ability to satisfy our debt service obligations and to pay dividends and distributions to our equity holders.
RISKS RELATED TO OUR ORGANIZATION AND STRUCTURE
We depend on dividends and distributions from our direct and indirect subsidiaries. The creditors and preferred equity holders of these subsidiaries are entitled to amounts payable to them by the subsidiaries before the subsidiaries may pay any dividends or distributions to us.
Substantially all of Vornado’s assets are held through the Operating Partnership which holds substantially all of its properties and assets through subsidiaries. The Operating Partnership’s cash flow is dependent on cash distributions to it by its subsidiaries, and in turn, substantially all of Vornado’s cash flow is dependent on cash distributions to it by the Operating Partnership. The creditors of each of Vornado’s direct and indirect subsidiaries are entitled to payment of that subsidiary’s obligations to them, when due and payable, before distributions may be made by that subsidiary to its equity holders. Thus, the Operating Partnership’s ability to make distributions to its equity holders depends on its subsidiaries’ ability first to satisfy their obligations to their creditors and then to make distributions to the Operating Partnership. Consequently, Vornado’s ability to pay dividends to its holders of common and preferred shares depends on the Operating Partnership’s ability first to satisfy its obligations to its creditors and make distributions to holders of its preferred units and then to make distributions to Vornado.
Furthermore, the holders of preferred units of the Operating Partnership are entitled to receive preferred distributions before payment of distributions to the Operating Partnership’s equity holders, including Vornado. Thus, Vornado’s ability to pay cash dividends to its equity holders and satisfy its debt obligations depends on the Operating Partnership’s ability first to satisfy its obligations to its creditors and make distributions to holders of its preferred units and then to its equity holders, including Vornado. As of December 31, 2023, there were six series of preferred units of the Operating Partnership not held by Vornado with a total liquidation value of $52,921,000.
In addition, Vornado’s participation in any distribution of the assets of any of its direct or indirect subsidiaries upon the liquidation, reorganization or insolvency is only after the claims of the creditors, including trade creditors and preferred equity holders, are satisfied.
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Vornado’s Amended and Restated Declaration of Trust (the “declaration of trust”) sets limits on the ownership of its shares.
Generally, for Vornado to maintain its qualification as a REIT under the Internal Revenue Code, not more than 50% in value of the outstanding shares of beneficial interest of Vornado may be owned, directly or indirectly, by five or fewer individuals at any time during the last half of Vornado’s taxable year. The Internal Revenue Code defines “individuals” for purposes of the requirement described in the preceding sentence to include some types of entities. Under Vornado’s declaration of trust, as amended, no person may own more than 6.7% of the outstanding common shares of any class, or 9.9% of the outstanding preferred shares of any class, with some exceptions for persons who held common shares in excess of the 6.7% limit before Vornado adopted the limit and other persons approved by Vornado’s Board of Trustees. In addition, our declaration of trust includes restrictions on ownership of our common shares and preferred shares to preserve our status as a "domestically controlled qualified investment entity" within the meaning of Section 897 (h)(4)(B) of the Internal Revenue Code of 1986, as amended. These restrictions on transferability and ownership may delay, deter or prevent a change in control of Vornado or other transaction that might involve a premium price or otherwise be in the best interest of equity holders.
The Maryland General Corporation Law (the “MGCL”) contains provisions that may reduce the likelihood of certain takeover transactions.
The MGCL imposes conditions and restrictions on certain “business combinations” (including, among other transactions, a merger, consolidation, share exchange, or, in certain circumstances, an asset transfer or issuance of equity securities) between a Maryland REIT and certain persons who beneficially own at least 10% of the corporation’s stock (an “interested shareholder”). Unless approved in advance by the board of trustees of the trust, or otherwise exempted by the statute, such a business combination is prohibited for a period of five years after the most recent date on which the interested shareholder became an interested shareholder. After such five-year period, a business combination with an interested shareholder must be: (a) recommended by the board of trustees of the trust, and (b) approved by the affirmative vote of at least (i) 80% of the trust’s outstanding shares entitled to vote and (ii) two-thirds of the trust’s outstanding shares entitled to vote which are not held by the interested shareholder with whom the business combination is to be effected, unless, among other things, the trust’s common shareholders receive a “fair price” (as defined by the statute) for their shares and the consideration is received in cash or in the same form as previously paid by the interested shareholder for his or her shares.
In approving a transaction, Vornado’s Board of Trustees may provide that its approval is subject to compliance, at or after the time of approval, with any terms and conditions determined by the Board of Trustees. Vornado’s Board of Trustees has adopted a resolution exempting any business combination between Vornado and any trustee or officer of Vornado or its affiliates. As a result, any trustee or officer of Vornado or its affiliates may be able to enter into business combinations with Vornado that may not be in the best interest of our equity holders. With respect to business combinations with other persons, the business combination provisions of the MGCL may have the effect of delaying, deferring or preventing a change in control of Vornado or other transaction that might involve a premium price or otherwise be in the best interest of our equity holders. The business combination statute may discourage others from trying to acquire control of Vornado and increase the difficulty of consummating any offer.
Title 3, Subtitle 8 of the MGCL permits our Board of Trustees, without shareholder approval and regardless of what is currently provided in our declaration of trust or bylaws, to implement certain takeover defenses, including adopting a classified board or increasing the vote required to remove a trustee. Such takeover defenses may have the effect of inhibiting a third party from making an acquisition proposal for us or of delaying, deferring or preventing a change in control of us under the circumstances that otherwise could provide our common shareholders with the opportunity to realize a premium over the then current market price.
Vornado may issue additional shares in a manner that could adversely affect the likelihood of certain takeover transactions.
Vornado’s declaration of trust authorizes the Board of Trustees to:
•cause Vornado to issue additional authorized but unissued common shares or preferred shares;
•classify or reclassify, in one or more series, any unissued preferred shares;
•set the preferences, rights and other terms of any classified or reclassified shares that Vornado issues; and
•increase, without shareholder approval, the number of shares of beneficial interest that Vornado may issue.
Vornado’s Board of Trustees could establish a series of preferred shares whose terms could delay, deter or prevent a change in control of Vornado, and therefore of the Operating Partnership, or other transaction that might involve a premium price or otherwise be in the best interest of our equity holders, although Vornado’s Board of Trustees does not now intend to establish a series of preferred shares of this kind. Vornado’s declaration of trust and bylaws contain other provisions that may delay, deter or prevent a change in control of Vornado or other transaction that might involve a premium price or otherwise be in the best interest of our equity holders.
We may change our policies without obtaining the approval of our equity holders.
Our operating and financial policies, including our policies with respect to acquisitions of real estate or other companies, growth, operations, indebtedness, capitalization, dividends and distributions, are exclusively determined by Vornado’s Board of Trustees. Accordingly, our equity holders do not control these policies.
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Steven Roth and Interstate Properties may exercise substantial influence over us. They and some of Vornado’s other trustees and officers have interests or positions in other entities that may compete with us.
As of December 31, 2023, Interstate Properties, a New Jersey general partnership, and its partners beneficially owned an aggregate of approximately 7.0% of the common shares of beneficial interest of Vornado and 26.0% of the common stock of Alexander’s, which is described below. Steven Roth, David Mandelbaum and Russell B. Wight, Jr. are the three partners of Interstate Properties. Mr. Roth is the Chairman of the Board of Trustees and Chief Executive Officer of Vornado, the managing general partner of Interstate Properties, and the Chairman of the Board of Directors and Chief Executive Officer of Alexander’s. Messrs. Mandelbaum and Wight are Trustees of Vornado and Directors of Alexander’s.
Because of these overlapping interests, Mr. Roth and Interstate Properties and its partners may have substantial influence over Vornado, and therefore over the Operating Partnership. In addition, certain decisions concerning our operations or financial structure may present conflicts of interest among Messrs. Roth, Mandelbaum and Wight and Interstate Properties and our other equity holders. In addition, Mr. Roth, Interstate Properties and its partners, and Alexander’s currently and may in the future engage in a wide variety of activities in the real estate business which may result in conflicts of interest with respect to matters affecting us, such as which of these entities or persons, if any, may take advantage of potential business opportunities, the business focus of these entities, the types of properties and geographic locations in which these entities make investments, potential competition between business activities conducted, or sought to be conducted, competition for properties and tenants, possible corporate transactions such as acquisitions and other strategic decisions affecting the future of these entities.
We manage and lease the real estate assets of Interstate Properties pursuant to a management agreement for which we receive an annual fee equal to 4% of annual base rent and percentage rent. See Note 22 – Related Party Transactions to our consolidated financial statements in this Annual Report on Form 10-K for additional information.
There may be conflicts of interest between Alexander’s and us.
As of December 31, 2023, we owned 32.4% of the outstanding common stock of Alexander’s. Alexander’s is a REIT that has five properties, which are located in the greater New York metropolitan area. In addition to the 2.3% that they indirectly own through Vornado, Interstate Properties, which is described above, and its partners owned 26.0% of the outstanding common stock of Alexander’s as of December 31, 2023. Mr. Roth is the Chairman of the Board of Trustees and Chief Executive Officer of Vornado, the managing general partner of Interstate Properties, and the Chairman of the Board of Directors and Chief Executive Officer of Alexander’s. Messrs. Mandelbaum and Wight are Trustees of Vornado and Directors of Alexander’s and general partners of Interstate Properties. Ms. Mandakini Puri is a Trustee of Vornado and Director of Alexander’s.
We manage, develop and lease Alexander’s properties under management, development and leasing agreements under which we receive annual fees from Alexander’s. These agreements are described in Note 5 – Investments in Partially Owned Entities to our consolidated financial statements in this Annual Report on Form 10-K.
RISKS RELATED TO OUR COMMON SHARES AND OPERATING PARTNERSHIP CLASS A UNITS
The trading price of Vornado’s common shares has been volatile and may continue to fluctuate.
The trading price of Vornado’s common shares has been volatile and may continue to fluctuate widely as a result of several factors, many of which are outside our control. In addition, the stock market is subject to fluctuations in the share prices and trading volumes that affect the market prices of the shares of many companies. These broad market fluctuations have in the past and may in the future adversely affect the market price of Vornado’s common shares and the redemption price of the Operating Partnership’s Class A units. These factors include:
•our financial condition and performance;
•the financial condition of our tenants, including the extent of tenant bankruptcies or defaults;
•actual or anticipated quarterly fluctuations in our operating results and financial condition;
•our dividend policy;
•the reputation of REITs and real estate investments generally and the attractiveness of REIT equity securities in comparison to other equity securities, including securities issued by other real estate companies, and fixed income securities;
•uncertainty and volatility in the equity and credit markets;
•interest rates increases;
•changes in revenue or earnings estimates or publication of research reports and recommendations by financial analysts or actions taken by rating agencies with respect to our securities or those of other REITs;
•failure to meet analysts’ revenue or earnings estimates;
•speculation in the press or investment community;
•strategic actions by us or our competitors, such as acquisitions or restructurings;
•the extent of institutional investor interest in us;
•the extent of short-selling of Vornado common shares and the shares of our competitors;
•fluctuations in the stock price and operating results of our competitors;
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•share repurchase plans;
•general financial and economic market conditions and, in particular, developments related to market conditions for office REITs and other real estate related companies and the New York City real estate market;
•inflation;
•local, domestic and international economic factors unrelated to our performance (including the macro-economic impact of geopolitical conflicts);
•fiscal policies or inaction at the U.S. federal government level that may lead to federal government shutdowns or negative impacts on the U.S. economy;
•changes in tax laws and rules; and
•all other risk factors addressed elsewhere in this Annual Report on Form 10-K.
A significant decline in Vornado’s stock price could result in substantial losses for our equity holders.
Vornado has many shares available for future sale, which could hurt the market price of its shares and the redemption price of the Operating Partnership’s units.
The interests of equity holders could be diluted if we issue additional equity securities. As of December 31, 2023, Vornado had authorized but unissued 59,609,297 common shares of beneficial interest, $0.04 par value, and 58,387,098 preferred shares of beneficial interest, no par value; of which 22,186,690 common shares are reserved for issuance upon redemption of Class A Operating Partnership units, convertible securities and employee stock options and 11,200,000 preferred shares are reserved for issuance upon redemption of preferred Operating Partnership units. Any shares not reserved may be issued from time to time in public or private offerings or in connection with acquisitions. In addition, common and preferred shares reserved may be sold upon issuance in the public market after registration under the Securities Act or under Rule 144 under the Securities Act or other available exemptions from registration. We cannot predict the effect that future sales of Vornado’s common and preferred shares or Operating Partnership Class A and preferred units will have on the market prices of our securities.
In addition, under Maryland law, Vornado’s Board of Trustees has the authority to increase the number of authorized shares without shareholder approval.
Loss of our key personnel could harm our operations and adversely affect the value of our common shares and Operating Partnership Class A units.
We are dependent on the efforts of Steven Roth, the Chairman of the Board of Trustees and Chief Executive Officer of Vornado. While we believe that we could find a replacement for him and other key personnel, the loss of their services could harm our operations and adversely affect the value of our securities.
RISKS RELATED TO REGULATORY COMPLIANCE
Vornado may fail to qualify or remain qualified as a REIT and may be required to pay federal income taxes at corporate rates, which could adversely impact the value of our common shares.
Although we believe that Vornado will remain organized and will continue to operate so as to qualify as a REIT for federal income tax purposes, Vornado may fail to remain so qualified. Qualifications are governed by highly technical and complex provisions of the Internal Revenue Code for which there are only limited judicial or administrative interpretations and depend on various facts and circumstances that are not entirely within our control. In addition, legislation, new regulations, administrative interpretations or court decisions may significantly change the relevant tax laws and/or the federal income tax consequences of qualifying as a REIT. If, with respect to any taxable year, Vornado fails to maintain its qualification as a REIT and does not qualify under statutory relief provisions, Vornado could not deduct distributions to shareholders in computing our taxable income and would have to pay federal income tax on its taxable income at regular corporate rates. The federal income tax payable would include any applicable alternative minimum tax. If Vornado had to pay federal income tax, the amount of money available to distribute to equity holders and pay its indebtedness would be reduced for the year or years involved, and Vornado would not be required to make distributions to shareholders in that taxable year and in future years until it was able to qualify as a REIT and did so. In addition, Vornado would also be disqualified from treatment as a REIT for the four taxable years following the year during which qualification was lost, unless Vornado were entitled to relief under the relevant statutory provisions. Our failure to qualify as a REIT could impact our ability to expand our business and raise capital and adversely affect the value of our common shares.
We may face possible adverse federal tax audits and changes in federal tax laws, which may result in an increase in our tax liability.
In the normal course of business, certain entities through which we own real estate either have undergone or may undergo tax audits. Although we believe that we have substantial arguments in favor of our positions, in some instances there is no controlling precedent or interpretive guidance. There can be no assurance that audits will not occur with increased frequency or that the ultimate result of such audits will not have a material adverse effect on our results of operations.
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At any time, the U.S. federal income tax laws governing REITs or the administrative interpretations of those laws may be amended. We cannot predict if or when any new U.S. federal income tax law, regulation, or administrative interpretation, or any amendment to any existing U.S. federal income tax law, Treasury regulation or administrative interpretation, will be adopted, promulgated or become effective and any such law, regulation, or interpretation may take effect retroactively. Vornado, its taxable REIT subsidiaries, and our security holders could be adversely affected by any such change in, or any new, U.S. federal income tax law, Treasury regulation or administrative interpretation.
We may face possible adverse state and local tax audits and changes in state and local tax law.
Because Vornado is organized and qualifies as a REIT, it is generally not subject to federal income taxes, but we are subject to certain state and local taxes. In the normal course of business, certain entities through which we own real estate either have undergone, or are currently undergoing, tax audits. Although we believe that we have substantial arguments in favor of our positions in the ongoing audits, in some instances there is no controlling precedent or interpretive guidance on the specific point at issue. There can be no assurance that audits will not occur with increased frequency or that the ultimate result of such audits will not have a material adverse effect on our results of operations.
From time to time changes in state and local tax laws or regulations are enacted, which may result in an increase in our tax liability. A shortfall in tax revenues for states and municipalities in which we operate may lead to an increase in the frequency and size of such changes including changes in laws, regulations and administration of property and transfer taxes. If such changes occur, we may be required to pay additional taxes on our assets or income. These increased tax costs could adversely affect our financial condition and results of operations and the amount of cash available for the payment of dividends and distributions to our security holders.
Compliance or failure to comply with the Americans with Disabilities Act (the "ADA") or other safety regulations and requirements could result in substantial costs.
The ADA generally requires that public buildings, including our properties, meet certain Federal requirements related to access and use by disabled persons. Noncompliance could result in the imposition of fines by the Federal government or the award of damages to private litigants and/or legal fees to their counsel. From time to time persons have asserted claims against us with respect to some of our properties under the ADA, but to date such claims have not resulted in any material expense or liability. If, under the ADA, we are required to make substantial alterations and capital expenditures in one or more of our properties, including the removal of access barriers, it could adversely affect our financial condition and results of operations, as well as the amount of cash available for distribution to equity holders.
Our properties are subject to various federal, state and local regulatory requirements, such as state and local fire and life safety requirements. If we fail to comply with these requirements, we could incur fines or private damage awards. We do not know whether existing requirements will change or whether compliance with future requirements will require significant unanticipated expenditures that will affect our cash flow and results of operations.
We may incur significant costs to comply with environmental laws and environmental contamination may impair our ability to lease and/or sell real estate.
Our operations and properties are subject to various federal, state and local laws and regulations concerning the protection of the environment, including air and water quality, hazardous or toxic substances and health and safety. Under some environmental laws, a current or previous owner or operator of real estate may be required to investigate and clean up hazardous or toxic substances released at a property. The owner or operator may also be held liable to a governmental entity or to third parties for property damage or personal injuries and for investigation and clean-up costs incurred by those parties because of the contamination. These laws often impose liability without regard to whether the owner or operator knew of the release of the substances or caused the release. The presence of contamination or the failure to remediate contamination may also impair our ability to sell or lease real estate or to borrow using the real estate as collateral. Other laws and regulations govern indoor and outdoor air quality including those that can require the abatement or removal of asbestos-containing materials in the event of damage, demolition, renovation or remodeling and govern emissions of and exposure to asbestos fibers in the air. The maintenance and removal of lead paint and certain electrical equipment containing polychlorinated biphenyls (PCBs) are also regulated by federal and state laws. We are also subject to risks associated with human exposure to chemical or biological contaminants such as molds, pollens, viruses and bacteria which, above certain levels, can be alleged to be connected to allergic or other health effects and symptoms in susceptible individuals. Our predecessor companies may be subject to similar liabilities for activities of those companies in the past. We could incur fines for environmental compliance and be held liable for the costs of remedial action with respect to the foregoing regulated substances or related claims arising out of environmental contamination or human exposure to contamination at or from our properties.
Each of our properties has been subject to varying degrees of environmental assessment. To date, these environmental assessments have not revealed any environmental condition material to our business. However, identification of new compliance concerns or undiscovered areas of contamination, changes in the extent or known scope of contamination, human exposure to contamination or changes in clean-up or compliance requirements could result in significant costs to us.
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RISKS RELATED TO TECHNOLOGY, CYBERSECURITY AND DATA PROTECTION
The occurrence of cyber incidents, or a deficiency in our cyber security, as well as other disruptions to our IT networks and related systems, could negatively impact our business by causing a disruption to our operations, a compromise or corruption of our confidential information, and/or damage to our business relationships or reputation, all of which could negatively impact our financial results.
Our IT networks and related systems are essential to the operation of our business and our ability to perform day-to-day operations (including managing our building systems) and, in some cases, may be critical to the operations of certain of our tenants. We face risks associated with security breaches, whether through cyber-attacks, malware, ransomware, computer viruses, phishing, attachments to e-mails, persons who access our systems from inside or outside our organization, and other significant disruptions of our IT networks and related systems. Our suppliers, subcontractors, and joint venture partners face similar threats and an incident at one of these entities could adversely impact our business. These entities are typically outside our control and may have access to certain of our information with varying levels of security and cybersecurity resources. The risk of a security breach or disruption, particularly through cyber attack, including by computer hackers, foreign governments and cyber terrorists, has generally increased as the number, intensity and sophistication of attempted attacks from around the world have increased, including through the use of artificial intelligence. Although we have not experienced cyber incidents that are individually, or in the aggregate, material, the incidents we have experienced thus far have been mitigated by preventative, detective, and responsive measures that we have put in place. Although we make efforts to maintain the security and integrity of these types of IT networks and related systems, and we have implemented various measures to manage the risk of a security breach or disruption, there can be no assurance that our security efforts and measures will be effective or that attempted security breaches or disruptions would not be successful or damaging. Unauthorized parties, whether within or outside our company, may disrupt or gain access to our systems, or those of third parties with whom we do business, through human error, misfeasance, fraud, trickery, or other forms of deceit, including break-ins, use of stolen credentials, social engineering, phishing, computer viruses or other malicious codes, and similar means of unauthorized and destructive tampering. Even the most well protected information, networks, systems and facilities remain potentially vulnerable because the techniques used in such attempted security breaches evolve and generally are not recognized until launched against a target, and in some cases are designed to not be detected and, in fact, may not be detected. Accordingly, we may be unable to anticipate these techniques or to implement adequate security barriers or other preventative measures, and thus it is impossible for us to entirely mitigate this risk.
A security breach or other significant disruption involving our IT networks and related systems could disrupt the proper functioning of our networks and systems and therefore our operations and/or those of certain of our tenants; result in the unauthorized access to, and destruction, loss, theft, misappropriation or release of, proprietary, confidential, sensitive or otherwise valuable information of ours or others, which others could use to compete against us or which could expose us to damage claims by third-parties for disruptive, destructive or otherwise harmful purposes and outcomes; result in our inability to maintain the building systems relied upon by our tenants for the efficient use of their leased space; require significant management attention and resources to remedy any damages that result; may require payments to the attackers; subject us to litigation claims for breach of contract, damages, credits, fines, penalties, governmental investigations and enforcement actions or termination of leases or other agreements; or damage our reputation among our tenants and investors generally. Any or all of the foregoing could have a material adverse effect on our results of operations, financial condition and cash flows.
A cyber attack or systems failure could interfere with our ability to comply with financial reporting requirements, which could adversely affect us. A cyber attack could also compromise the confidential information of our employees, tenants, customers and vendors. A successful attack could disrupt and materially affect our business operations, including damaging relationships with tenants, customers and vendors. Any compromise of our information security systems could also result in a violation of applicable privacy and other laws, significant legal and financial exposure, damage to our reputation, loss or misuse of the information (which may be confidential, proprietary and/or commercially sensitive in nature) and a loss of confidence in our security measures, which could harm our business.
For additional information on our cybersecurity risk management process, see Item 1C. Cybersecurity.
ITEM 1B. UNRESOLVED STAFF COMMENTS
There are no unresolved comments from the staff of the Securities and Exchange Commission as of the date of this Annual Report on Form 10-K.
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ITEM 1C. CYBERSECURITY
Risk Management and Strategy
We employ a comprehensive risk management strategy for the assessment, identification and management of material risks stemming from cybersecurity threats. Our methodologies involve a systematic evaluation of potential threats, vulnerabilities, and their potential impacts on our organization’s operations, data, and systems.
Our cybersecurity risk management program is integrated into our overall enterprise risk management program, and shares common methodologies, reporting channels and governance processes that apply across the enterprise risk management program, including legal, compliance, strategic, operational, and financial risk areas.
Our cybersecurity risk management program includes:
•Risk assessments designed to help identify material cybersecurity risks to our critical systems, information, and our broader enterprise IT environment;
•A team principally responsible for managing (i) our cybersecurity risk assessment processes, (ii) our security controls and (iii) our response to cybersecurity incidents;
•The use of external service providers, where appropriate, to assess, test or otherwise assist with aspects of our security controls;
•Cybersecurity awareness training of our employees, incident response personnel and senior management, including through the use of third-party providers for regular mandatory trainings;
•A cybersecurity incident response plan that includes procedures for responding to cybersecurity incidents; and
•A risk management process for third-party service providers, suppliers, and vendors. We employ rigorous vetting processes and ongoing monitoring mechanisms designed to ensure their compliance with cybersecurity standards.
As of the date of this Annual Report on Form 10-K, we are not aware of any risks from cybersecurity threats, including as a result of any previous cybersecurity incidents, that have materially affected or are reasonably likely to materially affect us, including our operations, business strategy, results of operations, or financial condition.
Governance
Our Board of Trustee’s considers cybersecurity risk as part of its risk oversight function and has delegated to the Audit Committee (the “Committee”) oversight of cybersecurity and other information technology risks. The Committee oversees management’s implementation of our cybersecurity risk management program.
The Committee receives periodic reports from management on our potential cybersecurity risks and threats and receives presentations on cybersecurity topics from our Chief Information Officer. The Committee reports to the full Board of Trustees regarding its activities, including those related to cybersecurity. The full Board of Trustees also receives briefings from management on cybersecurity matters as needed.
Our management team, including our Chief Information Officer, is responsible for assessing and managing our material risks from cybersecurity threats. The team has primary responsibility for our overall cybersecurity risk management program and supervises both our internal cybersecurity personnel and our retained external cybersecurity consultants. Our Chief Information Officer has many years of experience leading cybersecurity oversight and overall has broad, extensive experience with information technology, including security, auditing, compliance, systems and programming.
Our management team supervises efforts to prevent, detect, mitigate, and remediate cybersecurity risks and incidents through various means, which may include briefings from internal security personnel; threat intelligence and other information obtained from governmental, public or private sources, including external consultants engaged by us; and alerts and reports produced by security tools deployed in the IT environment. Our cybersecurity incident response plan governs our assessment and response upon the occurrence of a material cybersecurity incident, including the process for informing senior management and our Board of Trustees.
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ITEM 2. PROPERTIES
PROPERTY LISTING
We operate in two reportable segments: New York and Other. The following pages provide details of our real estate properties as of December 31, 2023.
| Square Feet | ||||||||||||||||||||||||||||||||||||||
NEW YORK SEGMENT Property | % Ownership | Type | % Occupancy | In Service | Under Development or Not Available for Lease | Total Property | ||||||||||||||||||||||||||||||||
PENN 1 (ground leased through 2098)(1) | 100.0 | % | Office / Retail | 82.4 | % | 2,329,000 | 228,000 | 2,557,000 | ||||||||||||||||||||||||||||||
| 1290 Avenue of the Americas | 70.0 | % | Office / Retail | 99.8 | % | 2,120,000 | — | 2,120,000 | ||||||||||||||||||||||||||||||
| PENN 2 | 100.0 | % | Office / Retail | 100.0 | % | 338,000 | 1,457,000 | 1,795,000 | ||||||||||||||||||||||||||||||
909 Third Avenue (ground leased through 2063)(1) | 100.0 | % | Office | 95.0 | % | 1,351,000 | — | 1,351,000 | ||||||||||||||||||||||||||||||
280 Park Avenue(2) | 50.0 | % | Office / Retail | 95.3 | % | 1,265,000 | — | 1,265,000 | ||||||||||||||||||||||||||||||
Independence Plaza, Tribeca (1,327 units)(2) | 50.1 | % | Retail / Residential | 57.6 | % | (3) | 1,258,000 | — | 1,258,000 | |||||||||||||||||||||||||||||
| 770 Broadway | 100.0 | % | Office / Retail | 79.7 | % | 1,183,000 | — | 1,183,000 | ||||||||||||||||||||||||||||||
| PENN 11 | 100.0 | % | Office / Retail | 99.3 | % | 1,149,000 | — | 1,149,000 | ||||||||||||||||||||||||||||||
| 100 West 33rd Street | 100.0 | % | Office / Retail | 70.6 | % | 1,114,000 | — | 1,114,000 | ||||||||||||||||||||||||||||||
| 90 Park Avenue | 100.0 | % | Office / Retail | 95.2 | % | 956,000 | — | 956,000 | ||||||||||||||||||||||||||||||
| One Park Avenue | 100.0 | % | Office / Retail | 95.0 | % | 945,000 | — | 945,000 | ||||||||||||||||||||||||||||||
888 Seventh Avenue (ground leased through 2067)(1) | 100.0 | % | Office / Retail | 86.5 | % | 887,000 | — | 887,000 | ||||||||||||||||||||||||||||||
The Farley Building (ground and building leased through 2116)(1) | 95.0 | % | Office / Retail | 91.4 | % | 847,000 | — | 847,000 | ||||||||||||||||||||||||||||||
330 West 34th Street (65.2% ground leased through 2149)(1) | 100.0 | % | Office / Retail | 75.7 | % | 724,000 | — | 724,000 | ||||||||||||||||||||||||||||||
85 Tenth Avenue(2) | 49.9 | % | Office / Retail | 84.5 | % | 638,000 | — | 638,000 | ||||||||||||||||||||||||||||||
650 Madison Avenue(2) | 20.1 | % | Office / Retail | 86.1 | % | 601,000 | — | 601,000 | ||||||||||||||||||||||||||||||
| 350 Park Avenue | 100.0 | % | Office | 100.0 | % | 585,000 | — | 585,000 | ||||||||||||||||||||||||||||||
150 East 58th Street(4) | 100.0 | % | Office / Retail | 83.2 | % | 544,000 | — | 544,000 | ||||||||||||||||||||||||||||||
7 West 34th Street(2) | 53.0 | % | Office / Retail | 100.0 | % | 477,000 | — | 477,000 | ||||||||||||||||||||||||||||||
| 595 Madison Avenue | 100.0 | % | Office / Retail | 89.5 | % | 330,000 | — | 330,000 | ||||||||||||||||||||||||||||||
640 Fifth Avenue(2) | 52.0 | % | Office / Retail | 92.3 | % | 315,000 | — | 315,000 | ||||||||||||||||||||||||||||||
50-70 West 93rd Street (324 units)(2) | 49.9 | % | Residential | 99.7 | % | 283,000 | — | 283,000 | ||||||||||||||||||||||||||||||
Sunset Pier 94 Studios (ground and building leased through 2110)(1)(2) | 49.9 | % | Studio | (5) | — | 266,000 | 266,000 | |||||||||||||||||||||||||||||||
260 Eleventh Avenue (ground leased through 2114)(1) | 100.0 | % | Office | 100.0 | % | 209,000 | — | 209,000 | ||||||||||||||||||||||||||||||
| 4 Union Square South | 100.0 | % | Retail | 100.0 | % | 204,000 | — | 204,000 | ||||||||||||||||||||||||||||||
61 Ninth Avenue (2 buildings) (ground leased through 2115)(1)(2) | 45.1 | % | Office / Retail | 100.0 | % | 194,000 | — | 194,000 | ||||||||||||||||||||||||||||||
512 West 22nd Street(2) | 55.0 | % | Office / Retail | 85.2 | % | 173,000 | — | 173,000 | ||||||||||||||||||||||||||||||
| 825 Seventh Avenue | 51.2 | % | Office(2) / Retail | 80.1 | % | 173,000 | — | 173,000 | ||||||||||||||||||||||||||||||
1540 Broadway(2) | 52.0 | % | Retail | 78.5 | % | 161,000 | — | 161,000 | ||||||||||||||||||||||||||||||
| Paramus | 100.0 | % | Office | 81.2 | % | 129,000 | — | 129,000 | ||||||||||||||||||||||||||||||
666 Fifth Avenue (2)(6) | 52.0 | % | Retail | 100.0 | % | 114,000 | — | 114,000 | ||||||||||||||||||||||||||||||
1535 Broadway(2) | 52.0 | % | Retail / Theatre | 100.0 | % | 107,000 | — | 107,000 | ||||||||||||||||||||||||||||||
57th Street (2 buildings)(2) | 50.0 | % | Office / Retail | 78.3 | % | 103,000 | — | 103,000 | ||||||||||||||||||||||||||||||
689 Fifth Avenue(2) | 52.0 | % | Office / Retail | 100.0 | % | 98,000 | — | 98,000 | ||||||||||||||||||||||||||||||
| 150 West 34th Street | 100.0 | % | Retail | 100.0 | % | 78,000 | — | 78,000 | ||||||||||||||||||||||||||||||
655 Fifth Avenue(2) | 50.0 | % | Retail | 100.0 | % | 57,000 | — | 57,000 | ||||||||||||||||||||||||||||||
| 435 Seventh Avenue | 100.0 | % | Retail | 100.0 | % | 43,000 | — | 43,000 | ||||||||||||||||||||||||||||||
| 606 Broadway | 50.0 | % | Office / Retail | 81.8 | % | 36,000 | — | 36,000 | ||||||||||||||||||||||||||||||
697-703 Fifth Avenue(2) | 44.8 | % | Retail | 100.0 | % | 26,000 | — | 26,000 | ||||||||||||||||||||||||||||||
| 1131 Third Avenue | 100.0 | % | Retail | 100.0 | % | 23,000 | — | 23,000 | ||||||||||||||||||||||||||||||
| 131-135 West 33rd Street | 100.0 | % | Retail | 100.0 | % | 23,000 | — | 23,000 | ||||||||||||||||||||||||||||||
See notes on page 28.
26
PROPERTY LISTING – CONTINUED
| Square Feet | ||||||||||||||||||||||||||||||||||||||
NEW YORK SEGMENT – CONTINUED Property | % Ownership | Type | % Occupancy | In Service | Under Development or Not Available for Lease | Total Property | ||||||||||||||||||||||||||||||||
| 715 Lexington Avenue | 100.0 | % | Retail | 100.0 | % | 22,000 | — | 22,000 | ||||||||||||||||||||||||||||||
| 537 West 26th Street | 100.0 | % | Retail | 100.0 | % | 17,000 | — | 17,000 | ||||||||||||||||||||||||||||||
| 334 Canal Street (4 units) | 100.0 | % | Retail / Residential | — | % | (3) | — | 14,000 | 14,000 | |||||||||||||||||||||||||||||
| 304-306 Canal Street (4 units) | 100.0 | % | Retail / Residential | 100.0 | % | (3) | 4,000 | 9,000 | 13,000 | |||||||||||||||||||||||||||||
| 40 East 66th Street (3 units) | 100.0 | % | Residential | 100.0 | % | 10,000 | — | 10,000 | ||||||||||||||||||||||||||||||
| 431 Seventh Avenue | 100.0 | % | Retail | 100.0 | % | 9,000 | — | 9,000 | ||||||||||||||||||||||||||||||
| 138-142 West 32nd Street | 100.0 | % | Retail | 80.3 | % | 8,000 | — | 8,000 | ||||||||||||||||||||||||||||||
| 339 Greenwich Street | 100.0 | % | Retail | 100.0 | % | 8,000 | — | 8,000 | ||||||||||||||||||||||||||||||
| 966 Third Avenue | 100.0 | % | Retail | 100.0 | % | 7,000 | — | 7,000 | ||||||||||||||||||||||||||||||
968 Third Avenue(2) | 50.0 | % | Retail | 100.0 | % | 7,000 | — | 7,000 | ||||||||||||||||||||||||||||||
| 137 West 33rd Street | 100.0 | % | Retail | 100.0 | % | 3,000 | — | 3,000 | ||||||||||||||||||||||||||||||
57th Street(2) | 50.0 | % | Land | (5) | — | — | — | |||||||||||||||||||||||||||||||
| Eighth Avenue and 34th Street | 100.0 | % | Land | (5) | — | — | — | |||||||||||||||||||||||||||||||
Hotel Pennsylvania Site(7) | 100.0 | % | Land | (5) | — | — | — | |||||||||||||||||||||||||||||||
| Other (3 buildings) | 100.0 | % | Retail | 65.4 | % | 16,000 | — | 16,000 | ||||||||||||||||||||||||||||||
| Alexander's, Inc.: | ||||||||||||||||||||||||||||||||||||||
731 Lexington Avenue(2) | 32.4 | % | Office / Retail | 98.9 | % | 1,079,000 | — | 1,079,000 | ||||||||||||||||||||||||||||||
Rego Park II, Queens (6.6 acres)(2) | 32.4 | % | Retail | 76.9 | % | 616,000 | — | 616,000 | ||||||||||||||||||||||||||||||
Rego Park I, Queens (4.8 acres)(2) | 32.4 | % | Retail | 100.0 | % | 214,000 | 124,000 | 338,000 | ||||||||||||||||||||||||||||||
The Alexander Apartment Tower, Queens (312 units)(2) | 32.4 | % | Residential | 95.2 | % | 255,000 | — | 255,000 | ||||||||||||||||||||||||||||||
Flushing, Queens (1.0 acre ground leased through 2037)(1)(2) | 32.4 | % | Retail | 100.0 | % | 167,000 | — | 167,000 | ||||||||||||||||||||||||||||||
| Total New York Segment | 90.0 | % | 24,632,000 | 2,098,000 | 26,730,000 | |||||||||||||||||||||||||||||||||
| Our Ownership Interest | 89.4 | % | 19,185,000 | 1,881,000 | 21,066,000 | |||||||||||||||||||||||||||||||||
See notes on page 28.
27
PROPERTY LISTING – CONTINUED
| Square Feet | ||||||||||||||||||||||||||||||||||||||
OTHER SEGMENT Property | % Ownership | Type | % Occupancy | In Service | Under Development or Not Available for Lease | Total Property | ||||||||||||||||||||||||||||||||
| THE MART: | ||||||||||||||||||||||||||||||||||||||
| THE MART, Chicago | 100.0 | % | Office / Retail / Trade show / Showroom | 79.1 | % | 3,669,000 | — | 3,669,000 | ||||||||||||||||||||||||||||||
| 527 West Kinzie, Chicago | 100.0 | % | Land | (5) | — | — | — | |||||||||||||||||||||||||||||||
Other (2 properties)(2), Chicago | 50.0 | % | Retail | 100.0 | % | 19,000 | — | 19,000 | ||||||||||||||||||||||||||||||
| Total THE MART | 79.2 | % | 3,688,000 | — | 3,688,000 | |||||||||||||||||||||||||||||||||
| Our Ownership Interest | 79.2 | % | 3,679,000 | — | 3,679,000 | |||||||||||||||||||||||||||||||||
| 555 California Street: | ||||||||||||||||||||||||||||||||||||||
| 555 California Street | 70.0 | % | Office / Retail | 98.7 | % | 1,506,000 | — | 1,506,000 | ||||||||||||||||||||||||||||||
| 315 Montgomery Street | 70.0 | % | Office / Retail | 99.7 | % | 235,000 | — | 235,000 | ||||||||||||||||||||||||||||||
| 345 Montgomery Street | 70.0 | % | Office / Retail | — | % | 78,000 | — | 78,000 | ||||||||||||||||||||||||||||||
| Total 555 California Street | 94.5 | % | 1,819,000 | — | 1,819,000 | |||||||||||||||||||||||||||||||||
| Our Ownership Interest | 94.5 | % | 1,274,000 | — | 1,274,000 | |||||||||||||||||||||||||||||||||
| Other: | ||||||||||||||||||||||||||||||||||||||
Rosslyn Plaza, VA (197 units)(2) | 45.6 | % | Office / Residential | 58.4 | % | (3) | 685,000 | 304,000 | 989,000 | |||||||||||||||||||||||||||||
Fashion Centre Mall / Washington Tower, VA(2) | 7.5 | % | Office / Retail | 93.5 | % | 1,038,000 | — | 1,038,000 | ||||||||||||||||||||||||||||||
Wayne Towne Center, Wayne, NJ (ground leased through 2064)(1) | 100.0 | % | Retail | 100.0 | % | 686,000 | 4,000 | 690,000 | ||||||||||||||||||||||||||||||
Annapolis, MD (ground leased through 2042)(1) | 100.0 | % | Retail | 100.0 | % | 128,000 | — | 128,000 | ||||||||||||||||||||||||||||||
| Atlantic City, NJ (11.3 acres ground leased through 2070 to VICI Properties for a portion of the Borgata Hotel and Casino complex) | 100.0 | % | Land | 100.0 | % | — | — | — | ||||||||||||||||||||||||||||||
| Total Other | 89.2 | % | 2,537,000 | 308,000 | 2,845,000 | |||||||||||||||||||||||||||||||||
| Our Ownership Interest | 91.9 | % | 1,202,000 | 144,000 | 1,346,000 | |||||||||||||||||||||||||||||||||
________________________________________
(1)Term assumes all renewal options exercised, if applicable.
(2)Denotes property not consolidated in the accompanying consolidated financial statements and related financial data included in the Annual Report on Form 10-K.
(3)Excludes residential occupancy statistics.
(4)Includes 962 Third Avenue (the Annex building to 150 East 58th Street) 50.0% ground leased through 2118 (assuming all renewal options are exercised).
(5)Properties under development or to be developed.
(6)75,000 square feet is leased from 666 Fifth Avenue office condominium.
(7)Demolition of the existing building was completed in the third quarter of 2023.
28
TOP 10 TENANTS BASED ON ANNUALIZED ESCALATED RENTS(1) (AT SHARE):
| Tenant | Square Footage At Share | Annualized Escalated Rents At Share | % of Total Annualized Escalated Rents At Share | |||||||||||||||||
| Meta Platforms, Inc. | 1,451,153 | $ | 167,180 | 9.3 | % | |||||||||||||||
| IPG and affiliates | 1,044,715 | 69,186 | 3.9 | % | ||||||||||||||||
| Citadel | 585,460 | 62,498 | 3.5 | % | ||||||||||||||||
| New York University | 685,290 | 48,886 | 2.7 | % | ||||||||||||||||
| Google/Motorola Mobility (guaranteed by Google) | 759,446 | 41,765 | 2.3 | % | ||||||||||||||||
| Bloomberg L.P. | 306,768 | 41,279 | 2.3 | % | ||||||||||||||||
| Amazon (including its Whole Foods subsidiary) | 312,694 | 30,699 | 1.7 | % | ||||||||||||||||
| Neuberger Berman Group LLC | 306,612 | 28,184 | 1.6 | % | ||||||||||||||||
| Swatch Group USA | 11,957 | 27,333 | 1.5 | % | ||||||||||||||||
| Madison Square Garden & Affiliates | 408,031 | 27,326 | 1.5 | % | ||||||||||||||||
See note below.
ANNUALIZED ESCALATED RENTS(1) (AT SHARE) BY TENANT INDUSTRY:
| Industry | Percentage | |||||||
| Office: | ||||||||
| Financial Services | 22 | % | ||||||
| Technology | 16 | % | ||||||
| Professional Services | 7 | % | ||||||
| Advertising/Marketing | 5 | % | ||||||
| Entertainment and Electronics | 4 | % | ||||||
| Real Estate | 3 | % | ||||||
| Insurance | 3 | % | ||||||
| Education | 3 | % | ||||||
| Apparel | 2 | % | ||||||
| Engineering, Architect & Surveying | 2 | % | ||||||
| Health Services | 2 | % | ||||||
| Communications | 1 | % | ||||||
| Government | 1 | % | ||||||
| Other | 6 | % | ||||||
| 77 | % | |||||||
| Retail: | ||||||||
| Apparel | 5 | % | ||||||
| Luxury Retail | 4 | % | ||||||
| Banking | 2 | % | ||||||
| Restaurants | 2 | % | ||||||
| Grocery | 1 | % | ||||||
| Other | 4 | % | ||||||
| 18 | % | |||||||
| Showroom | 5 | % | ||||||
| Total | 100 | % | ||||||
(1)Represents monthly contractual base rent before free rent plus tenant reimbursements multiplied by 12. Annualized escalated rents at share include leases signed but not yet commenced in place of current tenants or vacancy in the same space.
29
NEW YORK
As of December 31, 2023, our New York segment consisted of 26.7 million square feet in 60 properties. The 26.7 million square feet is comprised of 20.4 million square feet of Manhattan office in 30 of the properties, 2.4 million square feet of Manhattan street retail in 50 of the properties, 1,662 units in five residential properties, and our 32.4% interest in Alexander’s, which owns five properties in the greater New York metropolitan area, including 731 Lexington Avenue, the 1.1 million square foot Bloomberg, L.P. headquarters building, and The Alexander, a 312-unit apartment tower in Queens. The New York segment also includes nine garages totaling 1.6 million square feet (4,685 spaces).
As of December 31, 2023, the occupancy rate for our New York segment was 89.4%.
Occupancy and weighted average annual rent per square foot:
Office:
| Vornado's Ownership Interest | ||||||||||||||||||||||||||||||||
| As of December 31, | Total Square Feet | In Service Square Feet | In Service Square Feet At Share | Occupancy Rate | Weighted Average Annual Escalated Rent Per Square Foot | |||||||||||||||||||||||||||
| 2023 | 20,383,000 | 18,699,000 | 16,001,000 | 90.7 | % | $ | 86.30 | |||||||||||||||||||||||||
| 2022 | 19,902,000 | 18,724,000 | 16,028,000 | 91.9 | % | 83.98 | ||||||||||||||||||||||||||
| 2021 | 20,630,000 | 19,442,000 | 16,757,000 | 92.2 | % | 80.01 | ||||||||||||||||||||||||||
| 2020 | 20,586,000 | 18,361,000 | 15,413,000 | 93.4 | % | 79.05 | ||||||||||||||||||||||||||
| 2019 | 20,666,000 | 19,070,000 | 16,195,000 | 96.9 | % | 76.26 | ||||||||||||||||||||||||||
Retail:
| Vornado's Ownership Interest | ||||||||||||||||||||||||||||||||
| As of December 31, | Total Square Feet | In Service Square Feet | In Service Square Feet At Share | Occupancy Rate | Weighted Average Annual Escalated Rent Per Square Foot | |||||||||||||||||||||||||||
| 2023 | 2,394,000 | 2,123,000 | 1,684,000 | 74.9 | % | $ | 224.88 | |||||||||||||||||||||||||
| 2022 | 2,556,000 | 2,289,000 | 1,851,000 | 74.4 | % | 215.72 | ||||||||||||||||||||||||||
| 2021 | 2,693,000 | 2,267,000 | 1,825,000 | 80.7 | % | 214.22 | ||||||||||||||||||||||||||
| 2020 | 2,690,000 | 2,275,000 | 1,805,000 | 78.8 | % | 226.38 | ||||||||||||||||||||||||||
| 2019 | 2,712,000 | 2,300,000 | 1,842,000 | 94.5 | % | 209.86 | ||||||||||||||||||||||||||
Occupancy and average monthly rent per unit:
Residential:
| Vornado's Ownership Interest | |||||||||||||||||||||||||||||
| As of December 31, | Total Number of Units | Total Number of Units | Occupancy Rate | Average Monthly Rent Per Unit | |||||||||||||||||||||||||
| 2023 | 1,974 | 939 | 96.8 | % | $ | 4,115 | |||||||||||||||||||||||
| 2022 | 1,976 | 941 | 96.7 | % | 3,882 | ||||||||||||||||||||||||
| 2021 | 1,986 | 951 | 97.0 | % | 3,776 | ||||||||||||||||||||||||
| 2020 | 1,995 | 960 | 84.9 | % | 3,714 | ||||||||||||||||||||||||
| 2019 | 1,996 | 960 | 97.5 | % | 3,902 | ||||||||||||||||||||||||
30
NEW YORK – CONTINUED
Lease expirations as of December 31, 2023 (at share):
| Number of Expiring Leases | Square Feet of Expiring Leases(1) | Percentage of New York Square Feet | Annualized Escalated Rents of Expiring Leases | ||||||||||||||||||||||||||||||||
| Year | Total | Per Square Foot | |||||||||||||||||||||||||||||||||
| Office: | |||||||||||||||||||||||||||||||||||
Fourth Quarter 2023(2) | 12 | 223,000 | 1.6% | $ | 23,965,000 | $ | 107.47 | ||||||||||||||||||||||||||||
| 2024 | 76 | 713,000 | 5.0% | 63,535,000 | 89.11 | (3) | |||||||||||||||||||||||||||||
| 2025 | 67 | 586,000 | 4.1% | 45,758,000 | 78.09 | ||||||||||||||||||||||||||||||
| 2026 | 79 | 1,163,000 | 8.1% | 94,536,000 | 81.29 | ||||||||||||||||||||||||||||||
| 2027 | 95 | 1,301,000 | 9.1% | 102,958,000 | 79.14 | ||||||||||||||||||||||||||||||
2028(4) | 65 | 1,044,000 | 7.3% | 84,045,000 | 80.50 | ||||||||||||||||||||||||||||||
| 2029 | 59 | 1,241,000 | 8.7% | 100,418,000 | 80.92 | ||||||||||||||||||||||||||||||
| 2030 | 50 | 643,000 | 4.5% | 54,540,000 | 84.82 | ||||||||||||||||||||||||||||||
| 2031 | 31 | 891,000 | 6.2% | 80,847,000 | 90.74 | ||||||||||||||||||||||||||||||
| 2032 | 22 | 958,000 | 6.7% | 94,504,000 | 98.65 | ||||||||||||||||||||||||||||||
| 2033 | 21 | 502,000 | 4.0% | 42,938,000 | 85.53 | ||||||||||||||||||||||||||||||
| Retail: | |||||||||||||||||||||||||||||||||||
Fourth Quarter 2023(2) | 3 | 11,000 | 1.0% | $ | 1,122,000 | $ | 102.00 | ||||||||||||||||||||||||||||
| 2024 | 11 | 197,000 | 17.7% | 20,532,000 | 104.22 | (5) | |||||||||||||||||||||||||||||
| 2025 | 12 | 50,000 | 4.5% | 13,076,000 | 261.52 | ||||||||||||||||||||||||||||||
| 2026 | 10 | 82,000 | 7.3% | 26,414,000 | 322.12 | ||||||||||||||||||||||||||||||
| 2027 | 10 | 32,000 | 2.9% | 20,509,000 | 640.91 | ||||||||||||||||||||||||||||||
| 2028 | 9 | 32,000 | 2.9% | 14,731,000 | 460.34 | ||||||||||||||||||||||||||||||
| 2029 | 14 | 53,000 | 4.7% | 27,460,000 | 518.11 | ||||||||||||||||||||||||||||||
| 2030 | 21 | 153,000 | 13.7% | 23,416,000 | 153.05 | ||||||||||||||||||||||||||||||
| 2031 | 24 | 68,000 | 6.1% | 30,383,000 | 446.81 | ||||||||||||||||||||||||||||||
| 2032 | 21 | 57,000 | 5.1% | 29,537,000 | 518.19 | ||||||||||||||||||||||||||||||
| 2033 | 7 | 17,000 | 1.5% | 6,022,000 | 354.24 | ||||||||||||||||||||||||||||||
(1)Excludes storage, vacancy and other.
(2)Includes month-to-month leases, holdover tenants, and leases expiring on the last day of the current quarter.
(3)Based on current market conditions, we expect to re-lease this space at rents between $85 to $95 per square foot.
(4)Excludes the expiration of 492,000 square feet at 909 Third Avenue for U.S. Post Office as we assume the exercise of all renewal options through 2038 given the below-market rent on their options.
(5)Based on current market conditions, we expect to re-lease this space at rents between $125 to $150 per square foot.
Alexander’s
As of December 31, 2023, we own 32.4% of the outstanding common stock of Alexander’s, which owns five properties in the greater New York City aggregating 2.5 million square feet, including 731 Lexington Avenue, the 1.1 million square foot Bloomberg L.P. headquarters building. As of December 31, 2023, Alexander's had an occupancy rate of 92.6% and a weighted average annual rent per square foot of $107.78.
OTHER REAL ESTATE AND INVESTMENTS
THE MART
We own the 3.7 million square foot THE MART in Chicago, whose largest tenant is Motorola Mobility at 609,000 square feet, the lease of which is guaranteed by Google. As of December 31, 2023, THE MART had an occupancy rate of 79.2% and a weighted average annual rent per square foot of $52.06.
555 California Street
We own a 70% controlling interest in a three-building office complex aggregating 1.8 million square feet, located at California and Montgomery Streets in San Francisco’s financial district (“555 California Street”). As of December 31, 2023, 555 California Street had an occupancy rate of 94.5% and a weighted average annual rent per square foot of $94.93.
31
ITEM 3. LEGAL PROCEEDINGS
We are from time to time involved in legal actions arising in the ordinary course of business. In our opinion, after consultation with legal counsel, the outcome of such matters is not expected to have a material adverse effect on our financial position, results of operations or cash flows.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
PART II
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Vornado Realty Trust
Vornado’s common shares are traded on the New York Stock Exchange under the symbol “VNO.”
As of February 1, 2024, there were758 holders of record of Vornado common shares.
Vornado Realty L.P.
There is no established trading market for the Operating Partnership's Class A units. Class A units that are not held by Vornado 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 distribution to a Class A unit holder is equal to the dividend paid to a Vornado common shareholder.
As of February 1, 2024, there were806 Class A unitholders of record.
Recent Sales of Unregistered Securities
Vornado Realty Trust
During the fourth quarter of 2023, Vornado issued 64,056 of its common shares for the redemption of Class A units by certain limited partners of Vornado Realty L.P. Such shares were issued in reliance on an exemption from registration under Section 4(a)(2) of the Securities Act of 1933, as amended. There were no cash proceeds associated with these issuances.
Vornado Realty L.P.
During the fourth quarter of 2023, Vornado Realty L.P. issued 375,369 Class A units to satisfy conversions of restricted Operating Partnership units (“LTIP Units”) and 20,731 pursuant to Vornado’s 2023 Omnibus Share Plan. There were no cash proceeds associated with the issuances.
On November 1, 2023, the Operating Partnership granted 116,612 LTIP Units at a market price of $19.30 per unit to Vornado consultants that are not executives of the Company as part of their annual consulting fees. The units were issued outside of Vornado’s 2023 Omnibus Share Plan.
All of the securities referred to above were issued in reliance on an exemption from registration under Section 4(a)(2) of the Securities Act of 1933, as amended. There were no cash proceeds associated with these issuances.
From time to time, in connection with equity awards granted under our Omnibus Share Plan, we may withhold common shares for tax purposes or acquire common shares as part of the payment of the exercise price. Although we treat these as repurchases for certain financial statement purposes, these withheld or acquired shares are not considered by us as repurchases for this purpose.
Information relating to compensation plans under which Vornado’s equity securities are authorized for issuance is set forth under Part III, Item 12 of this Annual Report on Form 10-K and such information is incorporated by reference herein.
32
Recent Purchases of Unregistered Securities
Vornado Realty Trust
On April 26, 2023, the Company’s Board of Trustees authorized the repurchase of up to $200,000,000 of its outstanding common shares under a newly established share repurchase program. There were no common share repurchases during the three months ended December 31, 2023. As of December 31, 2023, $170,857,000 remained available and authorized for common share repurchases.
Share repurchases may be made from time to time in the open market, through privately negotiated transactions or through other means as permitted by federal securities laws, including through block trades, accelerated share repurchase transactions and/or trading plans intended to qualify under Rule 10b5-1. The timing, manner, price and amount of any repurchases will be determined in Vornado’s discretion depending on business, economic and market conditions, corporate and regulatory requirements, prevailing prices for Vornado’s common shares, alternative uses for capital and other considerations. The program does not have an expiration date and may be suspended or discontinued at any time and does not obligate Vornado to make any repurchases of its common shares.
Vornado Realty L.P.
None.
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) | |||||
Securities registered pursuant to Section 12(b) of the Act:
| Registrant | Title of Each Class | Trading Symbol(s) | Name of Exchange on Which Registered | |||||||||||||||||
| Vornado Realty Trust | Common Shares of beneficial interest, $.04 par value per share | VNO | New York Stock Exchange | |||||||||||||||||
| Cumulative Redeemable Preferred Shares of beneficial interest, liquidation preference $25.00 per share: | ||||||||||||||||||||
| Vornado Realty Trust | 5.40% Series L | VNO/PL | New York Stock Exchange | |||||||||||||||||
| Vornado Realty Trust | 5.25% Series M | VNO/PM | New York Stock Exchange | |||||||||||||||||
| Vornado Realty Trust | 5.25% Series N | VNO/PN | New York Stock Exchange | |||||||||||||||||
| Vornado Realty Trust | 4.45% Series O | VNO/PO | New York Stock Exchange | |||||||||||||||||
Securities registered pursuant to Section 12(g) of the Act:
| Registrant | Title of Each Class | |||||||
| Vornado Realty Trust | Series A Convertible Preferred Shares of beneficial interest, liquidation preference $50.00 per share | |||||||
| Vornado Realty L.P. | Class A Units of Limited Partnership Interest | |||||||
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Vornado Realty Trust: Yes ☑ No ☐ Vornado Realty L.P.: Yes ☐ No ☑
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
Vornado Realty Trust: Yes ☐ No ☑ Vornado Realty L.P.: Yes ☐ No ☑
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 every Interactive Data File required to be submitted 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 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 | ☐ | Smaller Reporting Company | |||||||||||
| ☐ | Emerging Growth Company | |||||||||||||
Vornado Realty L.P.:
| ☐ | Large Accelerated Filer | ☐ | Accelerated Filer | |||||||||||
| ☑ | Non-Accelerated Filer | ☐ | 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.
Vornado Realty Trust: ☐ Vornado Realty L.P.: ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management's assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.
Vornado Realty Trust: ☑ Vornado Realty L.P.: ☑
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements.
Vornado Realty Trust: ☐ Vornado Realty L.P.: ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b).
Vornado Realty Trust: ☐ Vornado Realty L.P.: ☐
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 ☑
The aggregate market value of the voting and non-voting common shares held by non-affiliates of Vornado Realty Trust, i.e. by persons other than officers and trustees of Vornado Realty Trust, was $3,196,914,000 at June 30, 2023.
As of December 31, 2023, there were 190,390,703 common shares of beneficial interest outstanding of Vornado Realty Trust.
There is no public market for the Class A units of limited partnership interest of Vornado Realty L.P. Based on the June 30, 2023 closing share price of Vornado Realty Trust’s common shares, which are issuable upon redemption of the Class A units, the aggregate market value of the Class A units held by non-affiliates of Vornado Realty L.P., i.e. by persons other than Vornado Realty Trust and its officers and trustees, was $217,739,000 as of June 30, 2023.
Documents Incorporated by Reference
Part III: Portions of Proxy Statement for Annual Meeting of Vornado Realty Trust’s Shareholders to be held on May 23, 2024.
EXPLANATORY NOTE
This report combines the Annual Reports on Form 10-K for the fiscal year ended December 31, 2023 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” and “VRLP” 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 91.0% 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 distribution to a Class A unitholder is equal to the 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 Annual Reports on Form 10-K 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 Class A units of partnership in the Operating Partnership, and the net proceeds of debt offerings by Vornado, which are contributed to the Operating Partnership in exchange for debt securities of 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 facilities, 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 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities;
•Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations includes information specific to each entity, where applicable; and
•Item 8. Financial Statements and Supplementary Data which includes the following specific disclosures for Vornado Realty Trust and Vornado Realty L.P.:
•Note 10. Redeemable Noncontrolling Interests
•Note 11. Shareholders' Equity/Partners' Capital
•Note 12. Stock-based Compensation
•Note 13. Income (Loss) Per Share/Income (Loss) Per Class A Unit
This report also includes separate Part II, Item 9A. 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.
INDEX
| Item | Financial Information: | Page Number | |||||||||||||||
(1)These items are omitted in whole or in part because Vornado, the Operating Partnership’s sole general partner, will file a definitive Proxy Statement pursuant to Regulation 14A under the Securities Exchange Act of 1934 with the Securities and Exchange Commission no later than 120 days after December 31, 2023, portions of which are incorporated by reference herein.
5
FORWARD-LOOKING STATEMENTS
Certain statements contained herein constitute forward‑looking statements as such term is defined in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements are not guarantees of future performance. They represent our intentions, plans, expectations and beliefs and are subject to numerous assumptions, risks and uncertainties. Our future results, financial condition and business may differ materially from those expressed in these forward-looking statements. You can find many of these statements by looking for words such as “approximates,” “believes,” “expects,” “anticipates,” “estimates,” “intends,” “plans,” “would,” “may” or other similar expressions in this Annual Report on Form 10‑K. We also note the following forward-looking statements: in the case of our development and redevelopment projects, the estimated completion date, estimated project cost and cost to complete; estimates of future capital expenditures, and the timing and form of dividends to common and preferred shareholders and operating partnership distributions, and the amount and form of potential share repurchases and/or asset sales. Many of the factors that will determine the outcome of these and our other forward-looking statements are beyond our ability to control or predict. For further discussion of factors that could materially affect the outcome of our forward-looking statements, see “Item 1A. Risk Factors” in this Annual Report on Form 10-K.
For these statements, we claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. You are cautioned not to place undue reliance on our forward-looking statements, which speak only as of the date of this Annual Report on Form 10-K or the date of any document incorporated by reference. All subsequent written and oral forward-looking statements attributable to us or any person acting on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this section. We do not undertake any obligation to release publicly any revisions to our forward-looking statements to reflect events or circumstances occurring after the date of this Annual Report on Form 10-K.
6
PART I
ITEM 1. BUSINESS
Vornado is a fully‑integrated REIT and conducts its business through, and substantially all of its interests in properties are held by, the Operating Partnership, a Delaware limited partnership. Accordingly, Vornado’s cash flow and ability to pay dividends to its shareholders are dependent upon the cash flow of the Operating Partnership and the ability of its direct and indirect subsidiaries to first satisfy their obligations to creditors. Vornado is the sole general partner of and owned approximately 91.0% of the common limited partnership interest in the Operating Partnership as of December 31, 2023.
We currently own all or portions of:
New York:
•57 Manhattan operating properties consisting of:
•20.4 million square feet of office space in 30 of the properties;
•2.4 million square feet of street retail space in 50 of the properties;
•1,662 units in five residential properties;
•Multiple development sites, including 350 Park Avenue, Sunset Pier 94 Studios and the Hotel Pennsylvania site;
•A 32.4% interest in Alexander’s, Inc. (“Alexander’s”) (NYSE: ALX), which owns five properties in the greater New York metropolitan area, including 731 Lexington Avenue, the 1.1 million square foot Bloomberg, L.P. headquarters building, and The Alexander, a 312-unit apartment tower in Queens;
•Signage throughout the Penn District and Times Square; and
•Building Maintenance Services LLC ("BMS"), a wholly owned subsidiary, which provides cleaning and security services for our buildings and third parties.
Other Real Estate and Investments:
•The 3.7 million square foot THE MART in Chicago;
•A 70% controlling interest in 555 California Street, a three-building office complex in San Francisco’s financial district aggregating 1.8 million square feet; and
•Other real estate and investments.
OBJECTIVES AND STRATEGY
Our business objective is to maximize Vornado shareholder value. We intend to achieve this objective by continuing to pursue our investment philosophy and to execute our operating strategies through:
•maintaining a superior team of operating and investment professionals and an entrepreneurial spirit;
•investing in properties in select markets, such as New York City, where we believe there is a high likelihood of capital appreciation;
•acquiring quality properties at a discount to replacement cost and where there is a significant potential for higher rents;
•developing and redeveloping properties to increase returns and maximize value; and
•investing in operating companies that have a significant real estate component.
We expect to finance our growth, acquisitions and investments using internally generated funds and proceeds from asset sales and by accessing the public and private capital markets. We may also offer Vornado common or preferred shares or Operating Partnership units in exchange for property and may repurchase or otherwise reacquire these securities in the future.
DISPOSITIONS
We completed the following sale transactions during 2023:
•$100 million sale of four Manhattan retail properties located at 510 Fifth Avenue, 148–150 Spring Street, 443 Broadway and 692 Broadway;
•$71 million sale by Alexander’s (32.4% interest) of its Rego Park III land parcel;
•$24 million sale of The Armory Show located in New York; and
•$24 million net proceeds from the sale of two condominium units at 220 Central Park South (“220 CPS”).
FINANCINGS
We completed the following financing transactions during 2023:
•$1.2 billion of interest rate swap arrangements;
•$950 million 1.00% SOFR interest rate cap arrangement for the 1290 Avenue of the Americas mortgage loan (70.0% ownership);
•$355 million restructuring of 697-703 Fifth Avenue (44.8% ownership);
•$183 million construction loan for Sunset Pier 94 Studios (49.9% ownership);
•$129 million refinancing of 512 West 22nd Street (55% ownership);
•$75 million refinancing of 150 West 34th Street; and
•$54 million refinancing of 825 Seventh Avenue office condominium (50% ownership).
7
DEVELOPMENT / REDEVELOPMENT PROJECTS AND OPPORTUNITIES
PENN District
PENN 2
We are redeveloping PENN 2, a 1,795,000 square foot (as expanded) office building, located on the west side of Seventh Avenue between 31st and 33rd Street. The development cost of this project is estimated to be $750,000,000, of which $638,959,000 has been expended as of December 31, 2023.
Hotel Pennsylvania Site
Demolition of the existing building was completed in the third quarter of 2023.
We are also making districtwide improvements within the PENN District. The development cost of these improvements is estimated to be $100,000,000, of which $47,424,000 has been expended as of December 31, 2023.
Sunset Pier 94 Studios
On August 28, 2023, we, together with Hudson Pacific Properties and Blackstone Inc. (“HPP/BX”), formed a joint venture to develop Sunset Pier 94 Studios, a 266,000 square foot purpose-built studio campus in Manhattan. We own a 49.9% equity interest in the joint venture. The development cost of the project is estimated to be $350,000,000, which will be funded with $183,200,000 of construction financing and $166,800,000 of equity contributions. Our share of equity contributions will be funded by (i) our $40,000,000 Pier 94 leasehold interest contribution and (ii) $34,000,000 of cash contributions, which are net of an estimated $9,000,000 for our share of development fees and reimbursement for overhead costs incurred by us. HPP/BX will fund 100% of cash contributions until such time that its capital account is equal to Vornado’s, after which equity will be funded in accordance with each partner’s respective ownership interest. We have funded $7,994,000 of cash contributions as of December 31, 2023. For further information about this transaction, see page 38, Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations - Overview, in this Annual Report on Form 10-K.
350 Park Avenue
On January 24, 2023, we and the Rudin family (“Rudin”) completed agreements with Citadel Enterprise Americas LLC (“Citadel”) and with an affiliate of Kenneth C. Griffin, Citadel’s Founder and CEO (“KG”), for a series of transactions relating to 350 Park Avenue and 40 East 52nd Street. In connection therewith, we entered into a joint venture with Rudin (the “Vornado/Rudin JV”) that purchased 39 East 51st Street for $40,000,000, funded on a 50/50 basis by Vornado and Rudin. 39 East 51st Street will be combined with 350 Park Avenue and 40 East 52nd Street to create a premier development site (the “Site”). From October 2024 to June 2030, KG will have the option to either (i) acquire a 60% interest in a joint venture with the Vornado/Rudin JV (with Vornado having an effective 36% interest in the entity) to build a new 1,700,000 square foot office tower, valuing the Site at $1.2 billion or (ii) purchase the Site for $1.4 billion ($1.085 billion to Vornado). From October 2024 to September 2030, the Vornado/Rudin JV will have the option to put the Site to KG for $1.2 billion ($900,000,000 to Vornado). For further information about this transaction and the options available to each of the parties, see page 37, Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations - Overview, in this Annual Report on Form 10-K.
We are also evaluating other development and redevelopment opportunities at certain of our properties in Manhattan including, in particular, the PENN District.
There can be no assurance that the above projects will be completed, completed on schedule or within budget.
8
ENVIRONMENTAL SUSTAINABILITY INITIATIVES
We have long believed a focus on environmental sustainability is responsible management of our business and important to our tenants, investors, employees and communities that we serve. It has been central to Vornado's business strategy for over 15 years. The Corporate Governance and Nominating Committee of Vornado's Board of Trustees is assigned with oversight of Environmental, Social and Governance (“ESG”) matters, which includes climate change risk. Environmental sustainability initiatives are carried out by a dedicated team of professionals that work directly with our business units.
Vornado is an industry leader in sustainability, owning and operating more than 25 million square feet of LEED (Leadership in Energy and Environmental Design) certified buildings, representing 95% of our in-service office portfolio, with over 24 million square feet at LEED Gold or Platinum. In 2023, we (i) ranked #1 in the US Diversified Office/Retail REIT peer group by GRESB, and received the “Green Star” distinction for the eleventh consecutive year and GRESB's five star rating, (ii) received the Leader in the Light Award by the National Association for Real Estate Investment Trusts (NAREIT) for diversified REITs for the thirteenth time, and (iii) were recognized as an EPA ENERGY STAR Partner of the Year with the distinction of having demonstrated eight years of sustained excellence.
We prioritize addressing climate change and in 2019 adopted a 10-year plan to make our buildings carbon neutral by 2030 (“Vision 2030”). Vision 2030 is a multi-faceted approach that prioritizes energy reduction, recovery, and renewable power. We rely on technology, as well as meaningful stakeholder collaboration with our tenants, our employees, and our communities, to achieve this plan. Our commitment to carbon neutrality and associated emissions reduction targets have been approved by the Science Based Targets Initiative as consistent with a 1.5°C climate scenario, the most ambitious goal of the Paris Agreement.
We consider sustainability in all aspects of our business, including the design, construction, retrofitting and ongoing maintenance and operations of our portfolio of buildings. We operate our buildings sustainably and efficiently by seeking to establish best practices in energy and water consumption, carbon reduction, resource and waste management and ecologically sensitive procurement. Our policies, from 100% green cleaning to procuring 100% renewable electricity certificates to energy efficiency, are implemented across our entire portfolio. We undertake significant outreach with our tenants, employees and investors regarding Vornado’s sustainability programs and strategies.
We gather data to measure progress against our goals, align our goals with our tenants, plan for our longer-term projects and engage with our stakeholders in meaningful ways. We use carbon accounting software, energy audits and models and building automation software to measure and track our portfolio-wide waste, water and energy reduction strategies, create roadmaps for each building to understand how to achieve carbon neutrality and provide accurate and actionable data for our measurement, verification and reporting requirements.
Our 2022 and 2023 long-term performance plan awards specifically tie a portion of senior management’s compensation to the achievement of certain ESG targets, including reductions in greenhouse emissions, achieving a specified GRESB score and targeting a specified percentage of LEED Gold or Platinum certified square footage in our office portfolio.
We are committed to transparent reporting of sustainability performance indicators and publish an annual ESG Report in accordance with the Global Reporting Initiative and aligned with the metrics codified by the Sustainability Accounting Standards Board and in 2023 published a report in accordance with the Task Force on Climate-related Financial Disclosures. We also submit public reports to CDP, CSA (the S&P Global Corporate Sustainability Assessment) and EP100 (global initiative led by Climate Group). Further details on our environmental sustainability initiatives and strategy, including our Vision 2030 Roadmap, can be found in our 2022 ESG Report at (vno.com/sustainability). There can be no assurance that our Vision 2030 commitment will be achieved in the planned time frame. The ESG Report is not incorporated by reference and should not be considered part of this Annual Report on Form 10-K.
HUMAN CAPITAL MANAGEMENT
As of December 31, 2023, we had 2,935 employees, consisting of (i) 2,437 employees of Building Maintenance Services LLC, a wholly owned subsidiary, which provides cleaning, security, engineering and parking services primarily to our New York properties, (ii) 394 employees in our corporate office, leasing, and property management, and (iii) 104 employees of THE MART. The foregoing does not include employees of partially owned entities.
Human capital management is critical to our success and our employees are the foundation of our human capital.
Compensation, Benefits and Employee Wellbeing
To attract and retain the best-qualified talent and to help our employees stay healthy, balance their work and personal lives, and meet their financial and retirement goals, we offer competitive benefits including, but not limited to, market-competitive compensation, healthcare (medical, dental and vision coverage), a health savings account, 401(k) and employer match, dependent care flexible spending account, parental leave, adoption/surrogacy benefits, short-term and long-term disability insurance, life insurance, time off/paid holidays, tuition reimbursement, subsidized gym memberships, employee wellness programs and incentives, in-workplace vaccinations, commuter benefits, an employee assistance program and workplace flexibility.
9
HUMAN CAPITAL MANAGEMENT - CONTINUED
Talent Development
To foster talent and growth, we provide training and continuing education, promote career and personal development, and encourage innovation and engagement. To achieve our talent development goals, we provide tuition reimbursement for our employees’ continuing education and professional development, and the opportunity to participate in a variety of training and networking engagements.
Culture and Engagement
Our employees are critical to our success, and we believe creating a positive and inclusive culture is essential to attracting and retaining engaged employees. We seek to retain our employees by actively engaging with our workforce and we solicit their feedback through our divisional leaders and employee surveys. We use their feedback to create and continually enhance programs that support their needs.
Through our volunteer program, Vornado Volunteers, employees are granted one day of paid time off per calendar year to volunteer for a cause of their choice.
Diversity and Inclusion
Vornado is a diverse and inclusive environment that empowers the individual and enriches the employment experience. We have published Equal Employment Opportunity (EEO) data since 2017 and have a broadly diverse workforce across both our corporate base as well as our BMS division. Our employee demographics data can be found in our 2022 ESG report (vno.com/sustainability), which is not incorporated by reference and should not be considered part of this Annual Report on Form 10-K.
Health and Wellness
As a building owner and landlord to thousands of business tenants, we focus on maintaining and improving the health of our indoor environments, as well as communicating the value of our health and wellness programs with consistency and clarity to our stakeholders. We believe that consistent health programming and communications protocols not only mitigate health risks within our buildings, but they also create a responsible behavior framework for our employees, our tenants, and our visitors.
Labor Relations
BMS employs and manages janitorial and security staff who are members of 32BJ SEIU and engineering staff who are members of Local 94 of the International Union of Operating Engineers AFL-CIO. Through our active participation in the Realty Advisory Board on Labor Relations, we work collaboratively with both unions and consider our relations with our union employees to be very positive.
For additional information on human capital matters, please see our most recent ESG report, available for download on our website at www.vno.com and in digital format at vno.com/sustainability. This report and other information on our website are not incorporated by reference into and do not form any part of this Annual Report on Form 10-K.
COMPETITION
We compete with a large number of real estate investors, property owners and developers, some of whom may be willing to accept lower returns on their investments. Principal factors of competition are rents charged, tenant concessions offered, attractiveness of location, the quality of the property and the breadth and the quality of services provided. Our success depends upon, among other factors, trends of the global, national, regional and local economies, the financial condition and operating results of current and prospective tenants and customers, availability and cost of capital, construction and renovation costs, taxes, governmental regulations, legislation, population and employment trends. See "Risk Factors" in Item 1A for additional information regarding these factors.
SEGMENT DATA
We operate in the following reportable segments: New York and Other. Financial information related to these reportable segments for the years ended December 31, 2023, 2022 and 2021 is set forth in Note 23 – Segment Information to our consolidated financial statements in this Annual Report on Form 10-K.
TENANTS ACCOUNTING FOR OVER 10% OF REVENUES
None of our tenants accounted for more than 10% of total revenues in any of the years ended December 31, 2023, 2022 and 2021.
10
CERTAIN ACTIVITIES
We do not base our acquisitions and investments on specific allocations by type of property. We have historically held our properties for long‑term investment; however, it is possible that properties in our portfolio may be sold or otherwise disposed of when circumstances warrant. Further, we have not adopted a policy that limits the amount or percentage of assets which could be invested in a specific property or property type. Generally our activities are reviewed and may be modified from time to time by Vornado’s Board of Trustees without the vote of our shareholders or Operating Partnership unitholders.
PRINCIPAL EXECUTIVE OFFICES
Our principal executive offices are located at 888 Seventh Avenue, New York, New York 10019; telephone (212) 894‑7000.
MATERIALS AVAILABLE ON OUR WEBSITE
Copies of our Annual Report on Form 10‑K, Quarterly Reports on Form 10‑Q, Current Reports on Form 8‑K and amendments to those reports, as well as Reports on Forms 3, 4 and 5 regarding officers, trustees and 10% beneficial owners, filed or furnished pursuant to Section 13(a), 15(d) or 16(a) of the Securities Exchange Act of 1934 are available free of charge through our website (www.vno.com) as soon as reasonably practicable after they are electronically filed with, or furnished to, the Securities and Exchange Commission. Also available on our website are copies of our Audit Committee Charter, Compensation Committee Charter, Corporate Governance and Nominating Committee Charter, Code of Business Conduct and Ethics, and Corporate Governance Guidelines. In the event of any changes to these charters or the code or guidelines, revised copies will also be made available on our website. Copies of these documents are also available directly from us free of charge. Our website also includes other financial and non-financial information, including certain non-GAAP financial measures, none of which is a part of this Annual Report on Form 10-K. Copies of our filings under the Securities Exchange Act of 1934 are also available free of charge from us, upon request.
11
ITEM 1A. RISK FACTORS
Material factors that may adversely affect our business, operations and financial condition are summarized below. We refer to the equity and debt securities of both Vornado and the Operating Partnership as our “securities” and the investors who own shares of Vornado or units of the Operating Partnership, or both, as our “equity holders.” The risks and uncertainties described herein may not be the only ones we face. Additional risks and uncertainties not presently known to us or that we currently believe to be immaterial may also adversely affect our business, operations and financial condition. See “Forward-Looking Statements” contained herein on page 6.
RISKS RELATED TO OUR BUSINESS AND OPERATIONS
We may be adversely affected by trends in office real estate, including work from home trends.
In 2023, approximately 78% of our net operating income (“NOI” a non-GAAP measure) is from our office properties. Work from home, flexible or hybrid work schedules, open workplaces, videoconferencing, and teleconferencing remain prevalent in certain situations following the COVID-19 pandemic. Changes in tenant space utilization, including from the continuation of work from home and flexible work arrangement policies, may continue to cause office tenants to reassess their long-term physical space needs, which could have an adverse effect on our business.
Further, as office tenants reevaluate their physical space needs and focus on attracting and retaining talent, many tenants have become more selective and are focused on leasing space in high-quality, modern and well-amenitized buildings near transit hubs. These factors have resulted in increased competition among landlords to attract tenants, significant landlord capital expenditures for a building to maintain Class A status and may negatively impact the value of older and less desirable office space. This could have an adverse effect on our financial condition and results of operations.
A significant portion of our properties is located in the New York metropolitan area and is affected by the economic cycles and risks inherent to this area.
In 2023, approximately 88% of our NOI is from properties located in the New York metropolitan area. We may continue to concentrate a significant portion of our future acquisitions, development and redevelopment in this area. Real estate markets are affected by economic downturns and we cannot predict how economic conditions will impact this market in either the short or long term. Declines in the economy and declines in the New York metropolitan area real estate market have impacted and could continue to impact our financial performance and the value of our properties. In addition to the factors affecting the national economic condition generally, the factors affecting economic conditions in this area include:
• financial performance and productivity of the media, advertising, professional services, financial, technology, retail, insurance and real estate industries;
• business layoffs or downsizing;
• any oversupply of, or reduced demand for, real estate;
• industry slowdowns;
• the effects of inflation;
• increased interest rates;
• relocations of businesses;
• changing demographics;
• increased work from home and use of alternative work places;
• changes in the number of domestic and international tourists to our markets (including as a result of changes in the relative strengths of world currencies);
• the fiscal health of New York State and New York City governments and local transit authorities;
• quality of life conditions;
• infrastructure quality;
• increased government regulation and costs of complying with such regulations; and
• changes in rates or the treatment of the deductibility of state and local taxes.
It is impossible for us to predict the future effect of trends in the economic and investment climates of the geographic areas in which we concentrate, and more generally of the United States, or the real estate markets in these areas. Local, national or global economic downturns could negatively affect the value of our properties, our businesses and profitability.
We are subject to risks that affect the general and New York City retail environments.
In 2023, approximately 17% of our NOI is from Manhattan retail properties. These properties are affected by the general and New York City retail environments, including the level of consumer spending and consumer confidence, Manhattan tourism, office and residential occupancy rates, employer remote-working policies, the threat of terrorism or other criminal acts, increasing competition from online retailers and other retail centers, and the impact of technological change upon the retail environment generally. These factors could adversely affect the financial condition of our retail tenants, or result in the bankruptcy of such tenants, and the willingness of retailers to lease space in our retail locations, which could have an adverse effect on the value of our properties, our business and profitability.
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Our performance and the value of an investment in us are subject to risks associated with our real estate assets and with the real estate industry.
The value of our real estate and the value of an investment in us fluctuates depending on conditions in the general economy and the real estate business. These conditions may also adversely impact our revenues and cash flows.
The factors that affect the value of our real estate investments include, among other things:
• global, national, regional and local economic conditions and geopolitical events;
• competition from other available space, including co-working space and sub-leases;
• local conditions such as an oversupply of space or a reduction in demand for real estate in the area;
• how well we manage our properties;
• the development and/or redevelopment of our properties;
• changes in market rental rates;
• trends in office real estate, including many tenants’ preferences for space in modern amenitized buildings which may require the landlord to incur significant capital expenditures;
• increased competition from online shopping and its impact on retail tenants and their demand for retail space;
• the timing and costs associated with property improvements and rentals;
• whether we are able to pass all or portions of any increases in operating costs through to tenants;
• changes in real estate taxes and other expenses;
• fluctuations in interest rates;
• the ability of state and local governments to operate within their budgets;
• whether tenants and users such as customers and shoppers consider a property attractive;
• changes in consumer preferences adversely affecting retailers and retail store values;
• changes in tenant space utilization;
• the financial condition of our tenants, including the extent of tenant bankruptcies or defaults;
• consequences of any armed conflict involving, or terrorist attacks against, the United States or individual acts of violence in public spaces;
• availability of financing on acceptable terms or at all;
• inflation or deflation;
• our ability to obtain adequate insurance;
• government regulation, including changes in fiscal policies, taxation, and zoning laws;
• potential liability and compliance costs associated with environmental or other laws or regulations;
• natural disasters;
• general competitive factors;
• climate change; and
• the impact of pandemics or outbreaks of other infectious diseases.
The rents or sales proceeds we receive and the occupancy levels at our properties may decline as a result of adverse changes in any of these factors. If rental revenues, sales proceeds and/or occupancy levels decline, we generally would expect to have less cash available for operating costs, to pay indebtedness and for distribution to equity holders. In addition, some of our major expenses, including mortgage payments, real estate taxes and maintenance costs generally do not decline when the related rents decline and maintenance costs can increase substantially in an inflationary environment. These factors may cause the value of our real estate assets to decline, which may result in non-cash impairment charges and the impact could be material.
Real estate is a competitive business and that competition may adversely impact us.
We compete with a large number of real estate investors, property owners and developers, some of whom may be willing to accept lower returns on their investments. Principal factors of competition are rents charged, tenant concessions offered, attractiveness of location, the quality of the property and the breadth and the quality of services provided. Substantially all of our properties face competition from similar properties in the same market, which may adversely impact the rents we can charge at those properties and our results of operations.
Our commercial office properties are located primarily in highly developed areas of the New York metropolitan area. Manhattan is the largest office market in the United States. The number of competitive office properties in the New York metropolitan area, which may be newer, more amenitized or better located than our properties, could have a material adverse effect on our ability to lease office space at our properties and on the effective rents we are able to charge.
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We may be unable to renew leases, lease vacant space or relet space as leases expire on favorable terms.
When our tenants decide not to renew their leases upon their expiration, we may not be able to relet the space. Even if tenants do renew or we can relet the space, the terms of renewal or reletting, considering among other things, rent and concessions, the cost of improvements to the property and leasing commissions, may be on less economically favorable terms. In addition, changes in space utilization by our tenants may impact our ability to renew or relet space without the need to incur substantial costs in renovating or redesigning the internal configuration of the relevant property and/or space. If we are unable to promptly renew leases or relet the space on economically favorable terms, our cash flow and ability to service debt obligations and pay dividends and distributions to equity holders could be adversely affected.
Bankruptcy or insolvency of tenants may decrease our revenues, net income and available cash.
From time to time, some of our tenants have declared bankruptcy, and other tenants may declare bankruptcy, become insolvent or experience a material business downturn adversely affecting their ability to make timely rental payments in the future. If a tenant does not pay its rent, we may face delays enforcing our rights as landlord and may incur substantial legal and other costs. Even if we are able to enforce our rights, a tenant may not have recoverable assets. The bankruptcy or insolvency of a major tenant may delay our efforts to collect past-due balances under the relevant leases and could ultimately preclude collection of these amounts altogether. As a result, the bankruptcy or insolvency of, or nonpayment by, a major tenant could cause us to suffer lower revenues and operational difficulties, including leasing the remainder of the property, which could in turn result in decreased net income and funds available to pay our indebtedness or make distributions to equity holders.
Our business, financial condition, results of operations and cash flows have been and may continue to be adversely affected by outbreaks of highly infectious or contagious diseases.
Our business has been, and may continue to be, adversely affected by the economic and industry challenges created by highly infectious or contagious diseases, including the COVID-19 pandemic. The impact of the COVID-19 pandemic caused retailers to reduce the number and size of their physical locations and increase reliance on e-commerce, and future infectious or contagious diseases could have a similar impact. Additionally, many office tenants have adopted work from home, hybrid and flexible work arrangements which may lead our office tenants to reassess their long-term physical space needs. Any future outbreak of a highly infectious or contagious disease could impact how people live, work and travel in ways that have affected and may in the future affect our properties. Over time, these factors could decrease the demand for office and retail space and ultimately decrease occupancy and/or rent levels across our portfolio, which may have a negative impact on our financial condition and/or access to capital and may have the effect of heightening other risks described under this heading “Risk Factors.”
Some of our potential losses may not be covered by insurance.
For our properties, we maintain general liability insurance with limits of $300,000,000 per occurrence and per property, of which $275,000,000, increased from $250,000,000 effective June 20, 2023, includes communicable disease coverage, and we maintain all risk property and rental value insurance with limits of $2.0 billion per occurrence, with sub-limits for certain perils such as flood and earthquake, excluding communicable disease coverage. Our California properties have earthquake insurance with coverage of $350,000,000 per occurrence and in the aggregate, subject to a deductible in the amount of 5% of the value of the affected property. We maintain coverage for certified terrorism acts with limits of $6.0 billion per occurrence and in the aggregate (as listed below), $1.2 billion for non-certified acts of terrorism, and $5.0 billion per occurrence and in the aggregate for terrorism involving nuclear, biological, chemical and radiological (“NBCR”) terrorism events, as defined by the Terrorism Risk Insurance Act of 2002, as amended to date and which has been extended through December 2027.
Penn Plaza Insurance Company, LLC (“PPIC”), our wholly owned consolidated subsidiary, acts as a re-insurer with respect to a portion of all risk property and rental value insurance and a portion of our earthquake insurance coverage, and as a direct insurer for coverage for acts of terrorism including NBCR acts. Coverage for acts of terrorism (excluding NBCR acts) is fully reinsured by third party insurance companies and the Federal government with no exposure to PPIC. For NBCR acts, PPIC is responsible for a deductible of $2,112,753 and 20% of the balance of a covered loss and the Federal government is responsible for the remaining portion of a covered loss. We are ultimately responsible for any loss incurred by PPIC.
Certain condominiums in which we own an interest (including the Farley Condominiums) maintain insurance policies with different per occurrence and aggregate limits than our policies described above.
We continue to monitor the state of the insurance market and the scope and costs of coverage for acts of terrorism and other events. However, we cannot anticipate what coverage will be available on commercially reasonable terms in the future. We are responsible for uninsured losses and for deductibles and losses in excess of our insurance coverage, which could adversely affect our business, results of operations and financial condition, the impact of which could be material.
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Actual or threatened terrorist attacks or other criminal acts may adversely affect the value of our properties and our ability to generate cash flow.
We have significant investments in the New York City, Chicago and San Francisco metropolitan areas. In response to a terrorist attack, the perceived threat of terrorism, or other criminal acts, tenants in these areas may choose to relocate their businesses to less populated, lower-profile areas of the United States that may be perceived to be less likely targets of future terrorist activity or have lower rates of crime and fewer customers may choose to patronize businesses in these areas. This, in turn, would trigger a decrease in the demand for space in these areas, which could increase vacancies in our properties and force us to lease space on less favorable terms. Furthermore, we may experience increased costs in security, equipment and personnel. As a result, the value of our properties and the level of our revenues and cash flows could decline materially.
The effects of climate change could have a concentrated impact on the areas where we operate and could adversely impact our results.
Our investments are concentrated in the New York City, Chicago and San Francisco metropolitan areas. Physical climate change, and natural disasters, including earthquakes, storms, storm surges, tornados, floods and hurricanes, could cause significant damage to our properties and the surrounding environment or area. Potentially adverse consequences of climate change, including rising sea levels and increased temperature fluctuations, could similarly have an impact on our properties and the economies of the metropolitan areas in which we operate. Government efforts to combat climate change may impact the cost of operating our properties. Over time, these conditions could result in declining demand for office and retail space in our buildings or the inability of us to operate the buildings at all. Climate change may also have indirect effects on our business by increasing the cost of (or making unavailable) property insurance on terms we find acceptable, increasing the cost of energy at our properties and requiring us to expend funds as we seek to repair and protect our properties against such risks. The incurrence of these losses, costs or business interruptions may adversely affect our operating and financial results.
Our properties are located in urban areas, which means the vitality of our properties is reliant on sound transportation and utility infrastructure. If that infrastructure is compromised in any way by an extreme weather event, such a compromise could have an adverse impact on our local economies and populations, as well as on our tenants’ ability to do business in our buildings.
Our properties are subject to transitional risks related to climate-related policy change.
De-carbonization of grid-supplied energy could lead to increased energy costs and operating expenses for our buildings. Retrofitting our building systems to consume less energy could lead to increased capital costs. Buildings which consume fossil fuel onsite may be subject to penalties in the future. In addition, the full transition of grid-supplied energy to renewable sources (as has been mandated by the Climate Leadership and Community Protection Act in New York State) could lead to increased energy costs and operating expenses for our buildings. Although these laws and regulations have not had any material adverse effects on our business to date, they could result in substantial costs, including compliance costs, increased energy costs, retrofit costs and construction costs. We cannot predict how future laws and regulations, or future interpretations of current laws and regulations, related to climate change will affect our business, results of operations and financial condition.
We may become subject to costs, taxes or penalties, or increases therein, associated with natural resource or energy usage, such as a “carbon tax” and by local legislation such as New York City’s Local Law 97, which sets limits on carbon emissions in our buildings and imposes penalties if we exceed those limits, and New York City’s Intro 2317, or the “gas ban” bill, which limits any onsite fossil fuel combustion in new construction and major renovations. These costs, taxes or penalties could increase our operating costs and decrease the cash available to pay our obligations or distribute to our equity owners.
Changes to tax laws could affect REITs generally, the trading of our shares and our results of operations, both positively and negatively, in ways that are difficult to anticipate.
The rules dealing with U.S. federal, state and local income taxation are constantly under review by persons involved in the legislative process and by the IRS and the Treasury Department. Changes to tax laws (which changes may have retroactive application) could adversely affect the taxation of REITs and their shareholders. We cannot predict whether, when, in what form, or with what effective dates, tax laws, regulations and rulings may be enacted, promulgated or decided, or technical corrections made, which could result in an increase in our, or our shareholders’, tax liability or require changes in the manner in which we operate in order to minimize increases in our tax liability. If such changes occur, we may be required to pay additional taxes on our assets or income and/or be subject to additional restrictions. These increased tax costs could, among other things, adversely affect the trading price for our common shares, our financial condition, our results of operations and the amount of cash available for the payment of dividends.
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Significant inflation and future increases in the inflation rate could adversely affect our business and financial results.
Recent substantial increases in the rate of inflation and potential future elevated rates of inflation, both real and anticipated, may impact our business and results of operations. In a highly inflationary environment, we may be unable to raise rental rates at or above the rate of inflation, which could reduce our profit margins. In addition, our cost of labor and materials could increase, which could have an adverse impact on our business and financial results. Increased inflation could also adversely affect us by increasing costs of construction and renovation. While increases in most operating expenses at our properties can be passed on to our office and retail tenants, some tenants have fixed reimbursement charges and expenses at our residential properties may not be able to be passed on to residential tenants. Unreimbursed increased operating expenses may reduce cash flow available for payment of mortgage debt and interest and for distributions to shareholders.
We face risks associated with property acquisitions.
We have acquired in the past and intend to continue to pursue the acquisition of properties and portfolios of properties, including, but not limited to, large portfolios that would increase our size and could result in alterations to our capital structure. Furthermore, from time to time we have made, and in the future we may seek to make one or more, material acquisitions that we believe will maximize shareholder value. However, an announcement by us of one or more significant acquisitions could result in a quick and significant decline in the price of our securities. Our acquisition activities and their success are subject to the following risks:
•we may be unable to complete an acquisition of a property or portfolio even after entering into an acquisition agreement, making a non-refundable deposit and incurring certain other acquisition-related costs;
•we may be unable to obtain or assume financing for acquisitions on favorable terms or at all;
•increased interest rates will increase the cost of acquiring properties through financing, reducing the opportunities for attractive acquisitions;
•acquired properties may fail to perform as expected;
•the actual costs of repositioning, redeveloping or maintaining acquired properties may be greater than our estimates and may require significantly greater time and attention of management than anticipated;
•the acquisition agreement will likely contain conditions to closing, including completion of due diligence investigations to our satisfaction or other conditions that are not within our control, which may not be satisfied;
•acquired properties may be located in new markets where we may face risks associated with a lack of market knowledge or understanding of the local economy, lack of business relationships in the area, costs associated with opening a new regional office and unfamiliarity with local governmental and permitting procedures;
•we may acquire real estate through the acquisition of the ownership entity subjecting us to the risks of that entity and we may be exposed to the liabilities of properties or companies acquired, some of which we may not be aware of at the time of acquisition;
•we may face competition for acquisition opportunities from other well-capitalized investors, including publicly traded and privately held REITs, private real estate funds, domestic and foreign financial institutions, life insurance companies, sovereign wealth funds, pension trusts, partnerships and individual investors, which may cause an increase in the purchase price for a desired acquisition property or result in a competitor acquiring the desired property instead of us; and
•we may be unable to quickly and efficiently integrate new acquisitions, particularly acquisitions of portfolios of properties, into our existing operations, and this could have an adverse effect on our results of operations and financial condition.
Any delay or failure on our part to identify, negotiate, finance and consummate such acquisitions in a timely manner and on favorable terms, or operate acquired properties to meet our financial expectations, could impede our growth and have an adverse effect on us, including our financial condition, results of operations, cash flow and the market value of our securities. If we are unable to successfully acquire additional properties, our ability to grow our business could be adversely affected.
We are exposed to risks associated with property development, redevelopment and repositioning that could adversely affect us, including our financial condition and results of operations.
We are the owner of numerous development sites and continue to engage in redevelopment and repositioning activities with respect to our properties, and, accordingly, we are subject to certain risks, which could adversely affect us, including our financial condition and results of operations. These risks include, without limitation, (i) the availability and pricing of financing on favorable terms or at all; (ii) the availability and timely receipt of zoning and other regulatory approvals; (iii) cost overruns, especially in an inflationary environment, and untimely completion of construction (including risks beyond our control, such as weather or labor conditions, material shortages or supply chain delays); (iv) the potential for the fluctuation of occupancy rates and rents at redeveloped properties, which may result in our investment not being profitable; (v) start up, repositioning and redevelopment costs may be higher than anticipated; (vi) the potential that we may fail to recover expenses already incurred if we abandon development or redevelopment opportunities after we begin to explore them; (vii) the potential that we may expend funds on and devote management time to projects which we do not complete; (viii) the inability to complete leasing of a property on schedule or at all, resulting in an increase in carrying or redevelopment costs; (ix) the possibility that properties will be leased at below expected rental rates and (x) to the extent
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the redevelopment activities are conducted in partnership with third parties, the possibility of disputes with our joint venture development partners and the potential that we miss certain project milestone deadlines. These risks could result in substantial unanticipated delays or expenses, prevent the initiation or the completion of redevelopment activities or reduce the ultimate rents achieved on new developments. These outcomes could have an adverse effect on our financial condition, results of operations, cash flow, the market value of our common shares and ability to satisfy our principal and interest obligations and to make distributions to our shareholders.
It may be difficult to sell real estate on a timely basis, which may limit our flexibility.
Real estate investments are relatively illiquid. Consequently, we may have limited ability to dispose of assets in our portfolio promptly in response to changes in economic or other conditions which could have an adverse effect on our sources of working capital and our ability to satisfy our debt obligations.
We may not be permitted to dispose of certain properties or pay down the debt associated with those properties when we might otherwise desire to do so without incurring additional costs. In addition, when we dispose of or sell assets, we may not be able to reinvest the sales proceeds and earn similar returns.
As part of an acquisition of a property, or a portfolio of properties, we may agree, and in the past have agreed, not to dispose of the acquired properties or reduce the mortgage indebtedness for a long-term period, unless we pay certain of the resulting tax costs of the seller. These agreements could result in us holding on to properties that we would otherwise sell and not pay down or refinance. In addition, when we dispose of or sell assets, we may not be able to reinvest the sales proceeds and earn returns similar to those generated by the assets that were sold.
From time to time we have made, and in the future we may seek to make investments in companies over which we do not have sole control. Some of these companies operate in industries with different risks than investing and operating real estate.
From time to time we have made, and in the future we may seek to make, investments in companies that we may not control, including, but not limited to, Alexander’s, our Fifth Avenue and Times Square JV, and other equity and loan investments. Although these businesses generally have a significant real estate component, some of them operate in businesses that are different from investing and operating real estate. Consequently, we are subject to operating and financial risks of those industries and to the risks associated with lack of control, such as having differing objectives than our partners or the entities in which we invest, or becoming involved in disputes, or competing directly or indirectly with these partners or entities. In addition, we rely on the internal controls and financial reporting controls of these entities and their failure to maintain effectiveness or comply with applicable standards may adversely affect us.
We are subject to risks involved in real estate activity through joint ventures and private equity real estate funds.
We currently own properties through joint ventures and private equity real estate funds with other persons and entities and may in the future acquire or own properties through joint ventures and funds when we believe circumstances warrant the use of such structures. Joint venture and fund investments involve risk, including: the possibility that our partners might refuse to make capital contributions when due and therefore we may be forced to make contributions to maintain the value of the property; that we may be responsible to our partners for indemnifiable losses; that our partners might at any time have business or economic goals that are inconsistent with ours; that third parties may be hesitant or refuse to transact with the joint venture or fund due to the identity of our partners; and that our partners may be in a position to take action or withhold consent contrary to our recommendations, instructions or requests. For certain of our joint venture arrangements, we and our respective joint venture partners have rights including the ability to trigger a buy-sell, put right or forced sale arrangement, which could cause us to sell our interest, or acquire our partner’s interest, or to sell the underlying asset, at a time when we otherwise would not have initiated such a transaction, without our consent or on unfavorable terms. In some instances, joint venture and fund partners may have competing interests in our markets that could create conflicts of interest. These conflicts may include compliance with the REIT requirements, and our REIT status could be jeopardized if any of our joint ventures or funds do not operate in compliance with REIT requirements. To the extent our partners do not meet their obligations to us or our joint ventures or funds, or they take action inconsistent with the interests of the joint venture or fund, we may be adversely affected.
We are exposed to risks related to our properties that are subject to ground leases arrangements which could adversely affect our results of operations.
We are the lessee under long-term ground lease arrangements at certain of our properties. Unless we purchase a fee interest in the underlying land or extend the terms of these leases prior to expiration, we will no longer operate these properties upon expiration of the leases, which could adversely affect our financial condition and results of operations. Furthermore, rent payments under such leasehold interests are periodically adjusted pursuant to the respective contractual arrangements, including the currently ongoing PENN 1 June 2023 rent reset process. These rent resets may result in materially higher rents that could adversely affect our financial condition and results of operation. Additionally, due to the greater risk in a loan secured by a leasehold interest than a loan secured by a fee interest, we face risks related to the availability and pricing of financing on favorable terms or at all for such ground leasehold interests.
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RISKS RELATED TO OUR INDEBTEDNESS AND ACCESS TO CAPITAL
Significantly tighter capital markets and economic conditions have affected and may continue to materially affect our liquidity, financial condition and results of operations as well as the value of an investment in our debt and equity securities.
There are many factors that can affect the value of our debt and equity securities, including the state of the capital markets and the economy. Demand for office and retail space typically declines nationwide due to an economic downturn, bankruptcies, downsizing, layoffs and cost cutting. Government action or inaction may adversely affect the state of the capital markets. The cost and availability of credit may be adversely affected by illiquid credit markets and wider credit spreads, which may adversely affect our liquidity and financial condition, including our results of operations, and the liquidity and financial condition of our tenants. Recently, domestic and international financial markets have experienced unusual volatility, significant interest rate increases and continuing uncertainty. Liquidity has significantly tightened in overall financial markets. Consequently, there is greater uncertainty regarding our ability to access the credit markets in order to attract financing on reasonable terms. Additionally, the recent inflation environment has led to an increase in interest rates, which has had a direct and material increase on the interest expense of our borrowings. Our inability or the inability of our tenants to timely refinance maturing liabilities and access the capital markets to meet liquidity needs may materially affect our financial condition and results of operations and the value of our securities.
We have outstanding debt, and its cost may continue to increase and refinancing may not be available on acceptable terms and could affect our future operations.
As of December 31, 2023, our consolidated mortgages and unsecured indebtedness, excluding related premium, discount and deferred financing costs, totaled $8.3 billion. We rely on both secured and unsecured, variable rate and fixed rate debt to finance acquisitions and development activities and for working capital. We are subject to the risks normally associated with debt financing, including the risk that our cash flow from operations will be insufficient to meet our required debt service. Our debt service costs generally will not be reduced if conditions in the market or at our properties, such as the entry of new competitors or the loss of major tenants, cause a reduction in the income from our properties. Should such events occur, our operations may be adversely affected. If a property is mortgaged to secure payment of indebtedness and income from such property is insufficient to pay that indebtedness, the property could be foreclosed upon by the mortgagee resulting in our loss of the property.
If we are unable to obtain debt financing or refinance existing indebtedness upon maturity, our financial condition and results of operations would likely be adversely affected. In addition, the current interest rate environment has led to an increase in interest rates on our variable rate debt, including on new hedging instruments, and an increase in the cost of refinancing our existing debt and entering into new debt, all of which have reduced, and could continue to reduce, our operating cash flows. While certain of our debt is fixed by interest rate swap arrangements, the arrangements typically expire earlier than the mortgage loan maturity, resulting in future exposure to rising interest rates, which could further reduce our available cash. If the cost or amount of our indebtedness continues to increase or we cannot refinance our debt in sufficient amounts or on acceptable terms, we are at risk of credit rating downgrades and default on our obligations that could adversely affect our financial condition and results of operations.
We may not be able to obtain capital to make investments.
We depend primarily on external financing to fund the growth of our business. This is because one of the requirements of the Internal Revenue Code of 1986, as amended, for a REIT is that it distributes 90% of its taxable income, excluding net capital gains, to its shareholders. This, in turn, requires the Operating Partnership to make distributions to its unitholders. There is a separate requirement to distribute net capital gains or pay a corporate level tax in lieu thereof. Our access to debt or equity financing depends on the willingness of third parties to lend or make equity investments and on conditions in the capital markets generally. Although we believe that we will be able to finance any investments we may wish to make in the foreseeable future, there can be no assurance that new financing will be available or available on acceptable terms. For information about our available sources of funds, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources” and the notes to the consolidated financial statements in this Annual Report on Form 10-K.
The hedge instruments we may use to manage our exposure to interest rate volatility involve risks.
The interest rate hedge instruments we may use to manage some of our exposure to interest rate volatility involve risks, including the risk that counterparties may fail to perform under these arrangements. If interest rates were to fall, these arrangements may cause us to pay higher interest on our debt obligations than would otherwise be the case. In addition, the use of such instruments may generate income that may not be treated as qualifying REIT income for purposes of the 75% gross income test or 95% gross income test. Furthermore, there can be no assurance that our hedging arrangements will qualify as “highly effective” cash flow hedges under applicable accounting standards. If our hedges do not qualify as “highly effective,” the changes in the fair value of these instruments would be reflected in our results of operations and could adversely impact our earnings.
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Covenants in our debt instruments could adversely affect our financial condition and our acquisitions and development activities.
The mortgages on our properties contain customary covenants such as those that limit our ability, without the prior consent of the applicable lender, to further mortgage the applicable property or to reduce or change insurance coverage. Our unsecured indebtedness and debt that we may obtain in the future may contain customary restrictions, requirements and other limitations on our ability to incur indebtedness, including covenants that limit our ability to incur debt based upon the levels of certain ratios including total debt to total assets, secured debt to total assets, EBITDA to interest expense, and fixed charges, and that require us to maintain a certain ratio of unencumbered assets to unsecured debt. Our ability to borrow is subject to compliance with these and other covenants. In addition, failure to comply with our covenants could cause a default under the applicable debt instrument, and we may then be required to repay such debt with capital from such other sources or give possession of a secured property to the lender. Under those circumstances, other sources of capital may not be available to us or may be available only on unattractive terms. Further, depending on market conditions at the time of any refinancing, the covenants included as part of the terms of such refinancing may be more restrictive than the existing indebtedness.
In addition, our debt instruments contain customary covenants requiring us to maintain insurance. Although we believe that we have adequate insurance coverage for purposes of these agreements, we may not be able to obtain an equivalent amount of coverage at reasonable costs in the future. Further, if lenders insist on greater coverage than we are able to obtain it could result in acceleration of repayment of such debt instruments and adversely affect our ability to finance or refinance our properties and expand our portfolio.
A further downgrade in our credit ratings could materially and adversely affect our business and financial condition.
Our credit rating and the credit ratings assigned to our debt securities and our preferred shares have been recently downgraded and could change in the future based upon, among other things, our results of operations and financial condition. Our ratings are subject to ongoing evaluation by credit rating agencies, and any rating could be changed or withdrawn by a rating agency in the future if, in its judgment, circumstances warrant such action. Moreover, these credit ratings are not recommendations to buy, sell or hold our common shares or any other securities. If any of the credit rating agencies that have rated our securities downgrades or lowers its credit rating, or if any credit rating agency indicates that it has placed any such rating on a “watch list” for a possible downgrading or lowering, or otherwise indicates that its outlook for that rating is negative, such action could have a material adverse effect on our costs and availability of funding. For instance, if we fail to maintain the credit ratings currently assigned to our senior debt, the interest rates payable on outstanding debt under our unsecured term loan and revolving credit facilities would increase and we may be required to post additional collateral under certain of our existing loan agreements. Furthermore, any future lowering of our credit ratings or outlook would likely make it more difficult and/or more expensive for us to obtain additional debt financing. Our failure to maintain or improve our credit ratings could in turn have a material adverse effect on our financial condition, results of operations, cash flows, the trading/redemption price of our securities, and our ability to satisfy our debt service obligations and to pay dividends and distributions to our equity holders.
RISKS RELATED TO OUR ORGANIZATION AND STRUCTURE
We depend on dividends and distributions from our direct and indirect subsidiaries. The creditors and preferred equity holders of these subsidiaries are entitled to amounts payable to them by the subsidiaries before the subsidiaries may pay any dividends or distributions to us.
Substantially all of Vornado’s assets are held through the Operating Partnership which holds substantially all of its properties and assets through subsidiaries. The Operating Partnership’s cash flow is dependent on cash distributions to it by its subsidiaries, and in turn, substantially all of Vornado’s cash flow is dependent on cash distributions to it by the Operating Partnership. The creditors of each of Vornado’s direct and indirect subsidiaries are entitled to payment of that subsidiary’s obligations to them, when due and payable, before distributions may be made by that subsidiary to its equity holders. Thus, the Operating Partnership’s ability to make distributions to its equity holders depends on its subsidiaries’ ability first to satisfy their obligations to their creditors and then to make distributions to the Operating Partnership. Consequently, Vornado’s ability to pay dividends to its holders of common and preferred shares depends on the Operating Partnership’s ability first to satisfy its obligations to its creditors and make distributions to holders of its preferred units and then to make distributions to Vornado.
Furthermore, the holders of preferred units of the Operating Partnership are entitled to receive preferred distributions before payment of distributions to the Operating Partnership’s equity holders, including Vornado. Thus, Vornado’s ability to pay cash dividends to its equity holders and satisfy its debt obligations depends on the Operating Partnership’s ability first to satisfy its obligations to its creditors and make distributions to holders of its preferred units and then to its equity holders, including Vornado. As of December 31, 2023, there were six series of preferred units of the Operating Partnership not held by Vornado with a total liquidation value of $52,921,000.
In addition, Vornado’s participation in any distribution of the assets of any of its direct or indirect subsidiaries upon the liquidation, reorganization or insolvency is only after the claims of the creditors, including trade creditors and preferred equity holders, are satisfied.
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Vornado’s Amended and Restated Declaration of Trust (the “declaration of trust”) sets limits on the ownership of its shares.
Generally, for Vornado to maintain its qualification as a REIT under the Internal Revenue Code, not more than 50% in value of the outstanding shares of beneficial interest of Vornado may be owned, directly or indirectly, by five or fewer individuals at any time during the last half of Vornado’s taxable year. The Internal Revenue Code defines “individuals” for purposes of the requirement described in the preceding sentence to include some types of entities. Under Vornado’s declaration of trust, as amended, no person may own more than 6.7% of the outstanding common shares of any class, or 9.9% of the outstanding preferred shares of any class, with some exceptions for persons who held common shares in excess of the 6.7% limit before Vornado adopted the limit and other persons approved by Vornado’s Board of Trustees. In addition, our declaration of trust includes restrictions on ownership of our common shares and preferred shares to preserve our status as a "domestically controlled qualified investment entity" within the meaning of Section 897 (h)(4)(B) of the Internal Revenue Code of 1986, as amended. These restrictions on transferability and ownership may delay, deter or prevent a change in control of Vornado or other transaction that might involve a premium price or otherwise be in the best interest of equity holders.
The Maryland General Corporation Law (the “MGCL”) contains provisions that may reduce the likelihood of certain takeover transactions.
The MGCL imposes conditions and restrictions on certain “business combinations” (including, among other transactions, a merger, consolidation, share exchange, or, in certain circumstances, an asset transfer or issuance of equity securities) between a Maryland REIT and certain persons who beneficially own at least 10% of the corporation’s stock (an “interested shareholder”). Unless approved in advance by the board of trustees of the trust, or otherwise exempted by the statute, such a business combination is prohibited for a period of five years after the most recent date on which the interested shareholder became an interested shareholder. After such five-year period, a business combination with an interested shareholder must be: (a) recommended by the board of trustees of the trust, and (b) approved by the affirmative vote of at least (i) 80% of the trust’s outstanding shares entitled to vote and (ii) two-thirds of the trust’s outstanding shares entitled to vote which are not held by the interested shareholder with whom the business combination is to be effected, unless, among other things, the trust’s common shareholders receive a “fair price” (as defined by the statute) for their shares and the consideration is received in cash or in the same form as previously paid by the interested shareholder for his or her shares.
In approving a transaction, Vornado’s Board of Trustees may provide that its approval is subject to compliance, at or after the time of approval, with any terms and conditions determined by the Board of Trustees. Vornado’s Board of Trustees has adopted a resolution exempting any business combination between Vornado and any trustee or officer of Vornado or its affiliates. As a result, any trustee or officer of Vornado or its affiliates may be able to enter into business combinations with Vornado that may not be in the best interest of our equity holders. With respect to business combinations with other persons, the business combination provisions of the MGCL may have the effect of delaying, deferring or preventing a change in control of Vornado or other transaction that might involve a premium price or otherwise be in the best interest of our equity holders. The business combination statute may discourage others from trying to acquire control of Vornado and increase the difficulty of consummating any offer.
Title 3, Subtitle 8 of the MGCL permits our Board of Trustees, without shareholder approval and regardless of what is currently provided in our declaration of trust or bylaws, to implement certain takeover defenses, including adopting a classified board or increasing the vote required to remove a trustee. Such takeover defenses may have the effect of inhibiting a third party from making an acquisition proposal for us or of delaying, deferring or preventing a change in control of us under the circumstances that otherwise could provide our common shareholders with the opportunity to realize a premium over the then current market price.
Vornado may issue additional shares in a manner that could adversely affect the likelihood of certain takeover transactions.
Vornado’s declaration of trust authorizes the Board of Trustees to:
•cause Vornado to issue additional authorized but unissued common shares or preferred shares;
•classify or reclassify, in one or more series, any unissued preferred shares;
•set the preferences, rights and other terms of any classified or reclassified shares that Vornado issues; and
•increase, without shareholder approval, the number of shares of beneficial interest that Vornado may issue.
Vornado’s Board of Trustees could establish a series of preferred shares whose terms could delay, deter or prevent a change in control of Vornado, and therefore of the Operating Partnership, or other transaction that might involve a premium price or otherwise be in the best interest of our equity holders, although Vornado’s Board of Trustees does not now intend to establish a series of preferred shares of this kind. Vornado’s declaration of trust and bylaws contain other provisions that may delay, deter or prevent a change in control of Vornado or other transaction that might involve a premium price or otherwise be in the best interest of our equity holders.
We may change our policies without obtaining the approval of our equity holders.
Our operating and financial policies, including our policies with respect to acquisitions of real estate or other companies, growth, operations, indebtedness, capitalization, dividends and distributions, are exclusively determined by Vornado’s Board of Trustees. Accordingly, our equity holders do not control these policies.
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Steven Roth and Interstate Properties may exercise substantial influence over us. They and some of Vornado’s other trustees and officers have interests or positions in other entities that may compete with us.
As of December 31, 2023, Interstate Properties, a New Jersey general partnership, and its partners beneficially owned an aggregate of approximately 7.0% of the common shares of beneficial interest of Vornado and 26.0% of the common stock of Alexander’s, which is described below. Steven Roth, David Mandelbaum and Russell B. Wight, Jr. are the three partners of Interstate Properties. Mr. Roth is the Chairman of the Board of Trustees and Chief Executive Officer of Vornado, the managing general partner of Interstate Properties, and the Chairman of the Board of Directors and Chief Executive Officer of Alexander’s. Messrs. Mandelbaum and Wight are Trustees of Vornado and Directors of Alexander’s.
Because of these overlapping interests, Mr. Roth and Interstate Properties and its partners may have substantial influence over Vornado, and therefore over the Operating Partnership. In addition, certain decisions concerning our operations or financial structure may present conflicts of interest among Messrs. Roth, Mandelbaum and Wight and Interstate Properties and our other equity holders. In addition, Mr. Roth, Interstate Properties and its partners, and Alexander’s currently and may in the future engage in a wide variety of activities in the real estate business which may result in conflicts of interest with respect to matters affecting us, such as which of these entities or persons, if any, may take advantage of potential business opportunities, the business focus of these entities, the types of properties and geographic locations in which these entities make investments, potential competition between business activities conducted, or sought to be conducted, competition for properties and tenants, possible corporate transactions such as acquisitions and other strategic decisions affecting the future of these entities.
We manage and lease the real estate assets of Interstate Properties pursuant to a management agreement for which we receive an annual fee equal to 4% of annual base rent and percentage rent. See Note 22 – Related Party Transactions to our consolidated financial statements in this Annual Report on Form 10-K for additional information.
There may be conflicts of interest between Alexander’s and us.
As of December 31, 2023, we owned 32.4% of the outstanding common stock of Alexander’s. Alexander’s is a REIT that has five properties, which are located in the greater New York metropolitan area. In addition to the 2.3% that they indirectly own through Vornado, Interstate Properties, which is described above, and its partners owned 26.0% of the outstanding common stock of Alexander’s as of December 31, 2023. Mr. Roth is the Chairman of the Board of Trustees and Chief Executive Officer of Vornado, the managing general partner of Interstate Properties, and the Chairman of the Board of Directors and Chief Executive Officer of Alexander’s. Messrs. Mandelbaum and Wight are Trustees of Vornado and Directors of Alexander’s and general partners of Interstate Properties. Ms. Mandakini Puri is a Trustee of Vornado and Director of Alexander’s.
We manage, develop and lease Alexander’s properties under management, development and leasing agreements under which we receive annual fees from Alexander’s. These agreements are described in Note 5 – Investments in Partially Owned Entities to our consolidated financial statements in this Annual Report on Form 10-K.
RISKS RELATED TO OUR COMMON SHARES AND OPERATING PARTNERSHIP CLASS A UNITS
The trading price of Vornado’s common shares has been volatile and may continue to fluctuate.
The trading price of Vornado’s common shares has been volatile and may continue to fluctuate widely as a result of several factors, many of which are outside our control. In addition, the stock market is subject to fluctuations in the share prices and trading volumes that affect the market prices of the shares of many companies. These broad market fluctuations have in the past and may in the future adversely affect the market price of Vornado’s common shares and the redemption price of the Operating Partnership’s Class A units. These factors include:
•our financial condition and performance;
•the financial condition of our tenants, including the extent of tenant bankruptcies or defaults;
•actual or anticipated quarterly fluctuations in our operating results and financial condition;
•our dividend policy;
•the reputation of REITs and real estate investments generally and the attractiveness of REIT equity securities in comparison to other equity securities, including securities issued by other real estate companies, and fixed income securities;
•uncertainty and volatility in the equity and credit markets;
•interest rates increases;
•changes in revenue or earnings estimates or publication of research reports and recommendations by financial analysts or actions taken by rating agencies with respect to our securities or those of other REITs;
•failure to meet analysts’ revenue or earnings estimates;
•speculation in the press or investment community;
•strategic actions by us or our competitors, such as acquisitions or restructurings;
•the extent of institutional investor interest in us;
•the extent of short-selling of Vornado common shares and the shares of our competitors;
•fluctuations in the stock price and operating results of our competitors;
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•share repurchase plans;
•general financial and economic market conditions and, in particular, developments related to market conditions for office REITs and other real estate related companies and the New York City real estate market;
•inflation;
•local, domestic and international economic factors unrelated to our performance (including the macro-economic impact of geopolitical conflicts);
•fiscal policies or inaction at the U.S. federal government level that may lead to federal government shutdowns or negative impacts on the U.S. economy;
•changes in tax laws and rules; and
•all other risk factors addressed elsewhere in this Annual Report on Form 10-K.
A significant decline in Vornado’s stock price could result in substantial losses for our equity holders.
Vornado has many shares available for future sale, which could hurt the market price of its shares and the redemption price of the Operating Partnership’s units.
The interests of equity holders could be diluted if we issue additional equity securities. As of December 31, 2023, Vornado had authorized but unissued 59,609,297 common shares of beneficial interest, $0.04 par value, and 58,387,098 preferred shares of beneficial interest, no par value; of which 22,186,690 common shares are reserved for issuance upon redemption of Class A Operating Partnership units, convertible securities and employee stock options and 11,200,000 preferred shares are reserved for issuance upon redemption of preferred Operating Partnership units. Any shares not reserved may be issued from time to time in public or private offerings or in connection with acquisitions. In addition, common and preferred shares reserved may be sold upon issuance in the public market after registration under the Securities Act or under Rule 144 under the Securities Act or other available exemptions from registration. We cannot predict the effect that future sales of Vornado’s common and preferred shares or Operating Partnership Class A and preferred units will have on the market prices of our securities.
In addition, under Maryland law, Vornado’s Board of Trustees has the authority to increase the number of authorized shares without shareholder approval.
Loss of our key personnel could harm our operations and adversely affect the value of our common shares and Operating Partnership Class A units.
We are dependent on the efforts of Steven Roth, the Chairman of the Board of Trustees and Chief Executive Officer of Vornado. While we believe that we could find a replacement for him and other key personnel, the loss of their services could harm our operations and adversely affect the value of our securities.
RISKS RELATED TO REGULATORY COMPLIANCE
Vornado may fail to qualify or remain qualified as a REIT and may be required to pay federal income taxes at corporate rates, which could adversely impact the value of our common shares.
Although we believe that Vornado will remain organized and will continue to operate so as to qualify as a REIT for federal income tax purposes, Vornado may fail to remain so qualified. Qualifications are governed by highly technical and complex provisions of the Internal Revenue Code for which there are only limited judicial or administrative interpretations and depend on various facts and circumstances that are not entirely within our control. In addition, legislation, new regulations, administrative interpretations or court decisions may significantly change the relevant tax laws and/or the federal income tax consequences of qualifying as a REIT. If, with respect to any taxable year, Vornado fails to maintain its qualification as a REIT and does not qualify under statutory relief provisions, Vornado could not deduct distributions to shareholders in computing our taxable income and would have to pay federal income tax on its taxable income at regular corporate rates. The federal income tax payable would include any applicable alternative minimum tax. If Vornado had to pay federal income tax, the amount of money available to distribute to equity holders and pay its indebtedness would be reduced for the year or years involved, and Vornado would not be required to make distributions to shareholders in that taxable year and in future years until it was able to qualify as a REIT and did so. In addition, Vornado would also be disqualified from treatment as a REIT for the four taxable years following the year during which qualification was lost, unless Vornado were entitled to relief under the relevant statutory provisions. Our failure to qualify as a REIT could impact our ability to expand our business and raise capital and adversely affect the value of our common shares.
We may face possible adverse federal tax audits and changes in federal tax laws, which may result in an increase in our tax liability.
In the normal course of business, certain entities through which we own real estate either have undergone or may undergo tax audits. Although we believe that we have substantial arguments in favor of our positions, in some instances there is no controlling precedent or interpretive guidance. There can be no assurance that audits will not occur with increased frequency or that the ultimate result of such audits will not have a material adverse effect on our results of operations.
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At any time, the U.S. federal income tax laws governing REITs or the administrative interpretations of those laws may be amended. We cannot predict if or when any new U.S. federal income tax law, regulation, or administrative interpretation, or any amendment to any existing U.S. federal income tax law, Treasury regulation or administrative interpretation, will be adopted, promulgated or become effective and any such law, regulation, or interpretation may take effect retroactively. Vornado, its taxable REIT subsidiaries, and our security holders could be adversely affected by any such change in, or any new, U.S. federal income tax law, Treasury regulation or administrative interpretation.
We may face possible adverse state and local tax audits and changes in state and local tax law.
Because Vornado is organized and qualifies as a REIT, it is generally not subject to federal income taxes, but we are subject to certain state and local taxes. In the normal course of business, certain entities through which we own real estate either have undergone, or are currently undergoing, tax audits. Although we believe that we have substantial arguments in favor of our positions in the ongoing audits, in some instances there is no controlling precedent or interpretive guidance on the specific point at issue. There can be no assurance that audits will not occur with increased frequency or that the ultimate result of such audits will not have a material adverse effect on our results of operations.
From time to time changes in state and local tax laws or regulations are enacted, which may result in an increase in our tax liability. A shortfall in tax revenues for states and municipalities in which we operate may lead to an increase in the frequency and size of such changes including changes in laws, regulations and administration of property and transfer taxes. If such changes occur, we may be required to pay additional taxes on our assets or income. These increased tax costs could adversely affect our financial condition and results of operations and the amount of cash available for the payment of dividends and distributions to our security holders.
Compliance or failure to comply with the Americans with Disabilities Act (the "ADA") or other safety regulations and requirements could result in substantial costs.
The ADA generally requires that public buildings, including our properties, meet certain Federal requirements related to access and use by disabled persons. Noncompliance could result in the imposition of fines by the Federal government or the award of damages to private litigants and/or legal fees to their counsel. From time to time persons have asserted claims against us with respect to some of our properties under the ADA, but to date such claims have not resulted in any material expense or liability. If, under the ADA, we are required to make substantial alterations and capital expenditures in one or more of our properties, including the removal of access barriers, it could adversely affect our financial condition and results of operations, as well as the amount of cash available for distribution to equity holders.
Our properties are subject to various federal, state and local regulatory requirements, such as state and local fire and life safety requirements. If we fail to comply with these requirements, we could incur fines or private damage awards. We do not know whether existing requirements will change or whether compliance with future requirements will require significant unanticipated expenditures that will affect our cash flow and results of operations.
We may incur significant costs to comply with environmental laws and environmental contamination may impair our ability to lease and/or sell real estate.
Our operations and properties are subject to various federal, state and local laws and regulations concerning the protection of the environment, including air and water quality, hazardous or toxic substances and health and safety. Under some environmental laws, a current or previous owner or operator of real estate may be required to investigate and clean up hazardous or toxic substances released at a property. The owner or operator may also be held liable to a governmental entity or to third parties for property damage or personal injuries and for investigation and clean-up costs incurred by those parties because of the contamination. These laws often impose liability without regard to whether the owner or operator knew of the release of the substances or caused the release. The presence of contamination or the failure to remediate contamination may also impair our ability to sell or lease real estate or to borrow using the real estate as collateral. Other laws and regulations govern indoor and outdoor air quality including those that can require the abatement or removal of asbestos-containing materials in the event of damage, demolition, renovation or remodeling and govern emissions of and exposure to asbestos fibers in the air. The maintenance and removal of lead paint and certain electrical equipment containing polychlorinated biphenyls (PCBs) are also regulated by federal and state laws. We are also subject to risks associated with human exposure to chemical or biological contaminants such as molds, pollens, viruses and bacteria which, above certain levels, can be alleged to be connected to allergic or other health effects and symptoms in susceptible individuals. Our predecessor companies may be subject to similar liabilities for activities of those companies in the past. We could incur fines for environmental compliance and be held liable for the costs of remedial action with respect to the foregoing regulated substances or related claims arising out of environmental contamination or human exposure to contamination at or from our properties.
Each of our properties has been subject to varying degrees of environmental assessment. To date, these environmental assessments have not revealed any environmental condition material to our business. However, identification of new compliance concerns or undiscovered areas of contamination, changes in the extent or known scope of contamination, human exposure to contamination or changes in clean-up or compliance requirements could result in significant costs to us.
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RISKS RELATED TO TECHNOLOGY, CYBERSECURITY AND DATA PROTECTION
The occurrence of cyber incidents, or a deficiency in our cyber security, as well as other disruptions to our IT networks and related systems, could negatively impact our business by causing a disruption to our operations, a compromise or corruption of our confidential information, and/or damage to our business relationships or reputation, all of which could negatively impact our financial results.
Our IT networks and related systems are essential to the operation of our business and our ability to perform day-to-day operations (including managing our building systems) and, in some cases, may be critical to the operations of certain of our tenants. We face risks associated with security breaches, whether through cyber-attacks, malware, ransomware, computer viruses, phishing, attachments to e-mails, persons who access our systems from inside or outside our organization, and other significant disruptions of our IT networks and related systems. Our suppliers, subcontractors, and joint venture partners face similar threats and an incident at one of these entities could adversely impact our business. These entities are typically outside our control and may have access to certain of our information with varying levels of security and cybersecurity resources. The risk of a security breach or disruption, particularly through cyber attack, including by computer hackers, foreign governments and cyber terrorists, has generally increased as the number, intensity and sophistication of attempted attacks from around the world have increased, including through the use of artificial intelligence. Although we have not experienced cyber incidents that are individually, or in the aggregate, material, the incidents we have experienced thus far have been mitigated by preventative, detective, and responsive measures that we have put in place. Although we make efforts to maintain the security and integrity of these types of IT networks and related systems, and we have implemented various measures to manage the risk of a security breach or disruption, there can be no assurance that our security efforts and measures will be effective or that attempted security breaches or disruptions would not be successful or damaging. Unauthorized parties, whether within or outside our company, may disrupt or gain access to our systems, or those of third parties with whom we do business, through human error, misfeasance, fraud, trickery, or other forms of deceit, including break-ins, use of stolen credentials, social engineering, phishing, computer viruses or other malicious codes, and similar means of unauthorized and destructive tampering. Even the most well protected information, networks, systems and facilities remain potentially vulnerable because the techniques used in such attempted security breaches evolve and generally are not recognized until launched against a target, and in some cases are designed to not be detected and, in fact, may not be detected. Accordingly, we may be unable to anticipate these techniques or to implement adequate security barriers or other preventative measures, and thus it is impossible for us to entirely mitigate this risk.
A security breach or other significant disruption involving our IT networks and related systems could disrupt the proper functioning of our networks and systems and therefore our operations and/or those of certain of our tenants; result in the unauthorized access to, and destruction, loss, theft, misappropriation or release of, proprietary, confidential, sensitive or otherwise valuable information of ours or others, which others could use to compete against us or which could expose us to damage claims by third-parties for disruptive, destructive or otherwise harmful purposes and outcomes; result in our inability to maintain the building systems relied upon by our tenants for the efficient use of their leased space; require significant management attention and resources to remedy any damages that result; may require payments to the attackers; subject us to litigation claims for breach of contract, damages, credits, fines, penalties, governmental investigations and enforcement actions or termination of leases or other agreements; or damage our reputation among our tenants and investors generally. Any or all of the foregoing could have a material adverse effect on our results of operations, financial condition and cash flows.
A cyber attack or systems failure could interfere with our ability to comply with financial reporting requirements, which could adversely affect us. A cyber attack could also compromise the confidential information of our employees, tenants, customers and vendors. A successful attack could disrupt and materially affect our business operations, including damaging relationships with tenants, customers and vendors. Any compromise of our information security systems could also result in a violation of applicable privacy and other laws, significant legal and financial exposure, damage to our reputation, loss or misuse of the information (which may be confidential, proprietary and/or commercially sensitive in nature) and a loss of confidence in our security measures, which could harm our business.
For additional information on our cybersecurity risk management process, see Item 1C. Cybersecurity.
ITEM 1B. UNRESOLVED STAFF COMMENTS
There are no unresolved comments from the staff of the Securities and Exchange Commission as of the date of this Annual Report on Form 10-K.
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ITEM 1C. CYBERSECURITY
Risk Management and Strategy
We employ a comprehensive risk management strategy for the assessment, identification and management of material risks stemming from cybersecurity threats. Our methodologies involve a systematic evaluation of potential threats, vulnerabilities, and their potential impacts on our organization’s operations, data, and systems.
Our cybersecurity risk management program is integrated into our overall enterprise risk management program, and shares common methodologies, reporting channels and governance processes that apply across the enterprise risk management program, including legal, compliance, strategic, operational, and financial risk areas.
Our cybersecurity risk management program includes:
•Risk assessments designed to help identify material cybersecurity risks to our critical systems, information, and our broader enterprise IT environment;
•A team principally responsible for managing (i) our cybersecurity risk assessment processes, (ii) our security controls and (iii) our response to cybersecurity incidents;
•The use of external service providers, where appropriate, to assess, test or otherwise assist with aspects of our security controls;
•Cybersecurity awareness training of our employees, incident response personnel and senior management, including through the use of third-party providers for regular mandatory trainings;
•A cybersecurity incident response plan that includes procedures for responding to cybersecurity incidents; and
•A risk management process for third-party service providers, suppliers, and vendors. We employ rigorous vetting processes and ongoing monitoring mechanisms designed to ensure their compliance with cybersecurity standards.
As of the date of this Annual Report on Form 10-K, we are not aware of any risks from cybersecurity threats, including as a result of any previous cybersecurity incidents, that have materially affected or are reasonably likely to materially affect us, including our operations, business strategy, results of operations, or financial condition.
Governance
Our Board of Trustee’s considers cybersecurity risk as part of its risk oversight function and has delegated to the Audit Committee (the “Committee”) oversight of cybersecurity and other information technology risks. The Committee oversees management’s implementation of our cybersecurity risk management program.
The Committee receives periodic reports from management on our potential cybersecurity risks and threats and receives presentations on cybersecurity topics from our Chief Information Officer. The Committee reports to the full Board of Trustees regarding its activities, including those related to cybersecurity. The full Board of Trustees also receives briefings from management on cybersecurity matters as needed.
Our management team, including our Chief Information Officer, is responsible for assessing and managing our material risks from cybersecurity threats. The team has primary responsibility for our overall cybersecurity risk management program and supervises both our internal cybersecurity personnel and our retained external cybersecurity consultants. Our Chief Information Officer has many years of experience leading cybersecurity oversight and overall has broad, extensive experience with information technology, including security, auditing, compliance, systems and programming.
Our management team supervises efforts to prevent, detect, mitigate, and remediate cybersecurity risks and incidents through various means, which may include briefings from internal security personnel; threat intelligence and other information obtained from governmental, public or private sources, including external consultants engaged by us; and alerts and reports produced by security tools deployed in the IT environment. Our cybersecurity incident response plan governs our assessment and response upon the occurrence of a material cybersecurity incident, including the process for informing senior management and our Board of Trustees.
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ITEM 2. PROPERTIES
PROPERTY LISTING
We operate in two reportable segments: New York and Other. The following pages provide details of our real estate properties as of December 31, 2023.
| Square Feet | ||||||||||||||||||||||||||||||||||||||
NEW YORK SEGMENT Property | % Ownership | Type | % Occupancy | In Service | Under Development or Not Available for Lease | Total Property | ||||||||||||||||||||||||||||||||
PENN 1 (ground leased through 2098)(1) | 100.0 | % | Office / Retail | 82.4 | % | 2,329,000 | 228,000 | 2,557,000 | ||||||||||||||||||||||||||||||
| 1290 Avenue of the Americas | 70.0 | % | Office / Retail | 99.8 | % | 2,120,000 | — | 2,120,000 | ||||||||||||||||||||||||||||||
| PENN 2 | 100.0 | % | Office / Retail | 100.0 | % | 338,000 | 1,457,000 | 1,795,000 | ||||||||||||||||||||||||||||||
909 Third Avenue (ground leased through 2063)(1) | 100.0 | % | Office | 95.0 | % | 1,351,000 | — | 1,351,000 | ||||||||||||||||||||||||||||||
280 Park Avenue(2) | 50.0 | % | Office / Retail | 95.3 | % | 1,265,000 | — | 1,265,000 | ||||||||||||||||||||||||||||||
Independence Plaza, Tribeca (1,327 units)(2) | 50.1 | % | Retail / Residential | 57.6 | % | (3) | 1,258,000 | — | 1,258,000 | |||||||||||||||||||||||||||||
| 770 Broadway | 100.0 | % | Office / Retail | 79.7 | % | 1,183,000 | — | 1,183,000 | ||||||||||||||||||||||||||||||
| PENN 11 | 100.0 | % | Office / Retail | 99.3 | % | 1,149,000 | — | 1,149,000 | ||||||||||||||||||||||||||||||
| 100 West 33rd Street | 100.0 | % | Office / Retail | 70.6 | % | 1,114,000 | — | 1,114,000 | ||||||||||||||||||||||||||||||
| 90 Park Avenue | 100.0 | % | Office / Retail | 95.2 | % | 956,000 | — | 956,000 | ||||||||||||||||||||||||||||||
| One Park Avenue | 100.0 | % | Office / Retail | 95.0 | % | 945,000 | — | 945,000 | ||||||||||||||||||||||||||||||
888 Seventh Avenue (ground leased through 2067)(1) | 100.0 | % | Office / Retail | 86.5 | % | 887,000 | — | 887,000 | ||||||||||||||||||||||||||||||
The Farley Building (ground and building leased through 2116)(1) | 95.0 | % | Office / Retail | 91.4 | % | 847,000 | — | 847,000 | ||||||||||||||||||||||||||||||
330 West 34th Street (65.2% ground leased through 2149)(1) | 100.0 | % | Office / Retail | 75.7 | % | 724,000 | — | 724,000 | ||||||||||||||||||||||||||||||
85 Tenth Avenue(2) | 49.9 | % | Office / Retail | 84.5 | % | 638,000 | — | 638,000 | ||||||||||||||||||||||||||||||
650 Madison Avenue(2) | 20.1 | % | Office / Retail | 86.1 | % | 601,000 | — | 601,000 | ||||||||||||||||||||||||||||||
| 350 Park Avenue | 100.0 | % | Office | 100.0 | % | 585,000 | — | 585,000 | ||||||||||||||||||||||||||||||
150 East 58th Street(4) | 100.0 | % | Office / Retail | 83.2 | % | 544,000 | — | 544,000 | ||||||||||||||||||||||||||||||
7 West 34th Street(2) | 53.0 | % | Office / Retail | 100.0 | % | 477,000 | — | 477,000 | ||||||||||||||||||||||||||||||
| 595 Madison Avenue | 100.0 | % | Office / Retail | 89.5 | % | 330,000 | — | 330,000 | ||||||||||||||||||||||||||||||
640 Fifth Avenue(2) | 52.0 | % | Office / Retail | 92.3 | % | 315,000 | — | 315,000 | ||||||||||||||||||||||||||||||
50-70 West 93rd Street (324 units)(2) | 49.9 | % | Residential | 99.7 | % | 283,000 | — | 283,000 | ||||||||||||||||||||||||||||||
Sunset Pier 94 Studios (ground and building leased through 2110)(1)(2) | 49.9 | % | Studio | (5) | — | 266,000 | 266,000 | |||||||||||||||||||||||||||||||
260 Eleventh Avenue (ground leased through 2114)(1) | 100.0 | % | Office | 100.0 | % | 209,000 | — | 209,000 | ||||||||||||||||||||||||||||||
| 4 Union Square South | 100.0 | % | Retail | 100.0 | % | 204,000 | — | 204,000 | ||||||||||||||||||||||||||||||
61 Ninth Avenue (2 buildings) (ground leased through 2115)(1)(2) | 45.1 | % | Office / Retail | 100.0 | % | 194,000 | — | 194,000 | ||||||||||||||||||||||||||||||
512 West 22nd Street(2) | 55.0 | % | Office / Retail | 85.2 | % | 173,000 | — | 173,000 | ||||||||||||||||||||||||||||||
| 825 Seventh Avenue | 51.2 | % | Office(2) / Retail | 80.1 | % | 173,000 | — | 173,000 | ||||||||||||||||||||||||||||||
1540 Broadway(2) | 52.0 | % | Retail | 78.5 | % | 161,000 | — | 161,000 | ||||||||||||||||||||||||||||||
| Paramus | 100.0 | % | Office | 81.2 | % | 129,000 | — | 129,000 | ||||||||||||||||||||||||||||||
666 Fifth Avenue (2)(6) | 52.0 | % | Retail | 100.0 | % | 114,000 | — | 114,000 | ||||||||||||||||||||||||||||||
1535 Broadway(2) | 52.0 | % | Retail / Theatre | 100.0 | % | 107,000 | — | 107,000 | ||||||||||||||||||||||||||||||
57th Street (2 buildings)(2) | 50.0 | % | Office / Retail | 78.3 | % | 103,000 | — | 103,000 | ||||||||||||||||||||||||||||||
689 Fifth Avenue(2) | 52.0 | % | Office / Retail | 100.0 | % | 98,000 | — | 98,000 | ||||||||||||||||||||||||||||||
| 150 West 34th Street | 100.0 | % | Retail | 100.0 | % | 78,000 | — | 78,000 | ||||||||||||||||||||||||||||||
655 Fifth Avenue(2) | 50.0 | % | Retail | 100.0 | % | 57,000 | — | 57,000 | ||||||||||||||||||||||||||||||
| 435 Seventh Avenue | 100.0 | % | Retail | 100.0 | % | 43,000 | — | 43,000 | ||||||||||||||||||||||||||||||
| 606 Broadway | 50.0 | % | Office / Retail | 81.8 | % | 36,000 | — | 36,000 | ||||||||||||||||||||||||||||||
697-703 Fifth Avenue(2) | 44.8 | % | Retail | 100.0 | % | 26,000 | — | 26,000 | ||||||||||||||||||||||||||||||
| 1131 Third Avenue | 100.0 | % | Retail | 100.0 | % | 23,000 | — | 23,000 | ||||||||||||||||||||||||||||||
| 131-135 West 33rd Street | 100.0 | % | Retail | 100.0 | % | 23,000 | — | 23,000 | ||||||||||||||||||||||||||||||
See notes on page 28.
26
PROPERTY LISTING – CONTINUED
| Square Feet | ||||||||||||||||||||||||||||||||||||||
NEW YORK SEGMENT – CONTINUED Property | % Ownership | Type | % Occupancy | In Service | Under Development or Not Available for Lease | Total Property | ||||||||||||||||||||||||||||||||
| 715 Lexington Avenue | 100.0 | % | Retail | 100.0 | % | 22,000 | — | 22,000 | ||||||||||||||||||||||||||||||
| 537 West 26th Street | 100.0 | % | Retail | 100.0 | % | 17,000 | — | 17,000 | ||||||||||||||||||||||||||||||
| 334 Canal Street (4 units) | 100.0 | % | Retail / Residential | — | % | (3) | — | 14,000 | 14,000 | |||||||||||||||||||||||||||||
| 304-306 Canal Street (4 units) | 100.0 | % | Retail / Residential | 100.0 | % | (3) | 4,000 | 9,000 | 13,000 | |||||||||||||||||||||||||||||
| 40 East 66th Street (3 units) | 100.0 | % | Residential | 100.0 | % | 10,000 | — | 10,000 | ||||||||||||||||||||||||||||||
| 431 Seventh Avenue | 100.0 | % | Retail | 100.0 | % | 9,000 | — | 9,000 | ||||||||||||||||||||||||||||||
| 138-142 West 32nd Street | 100.0 | % | Retail | 80.3 | % | 8,000 | — | 8,000 | ||||||||||||||||||||||||||||||
| 339 Greenwich Street | 100.0 | % | Retail | 100.0 | % | 8,000 | — | 8,000 | ||||||||||||||||||||||||||||||
| 966 Third Avenue | 100.0 | % | Retail | 100.0 | % | 7,000 | — | 7,000 | ||||||||||||||||||||||||||||||
968 Third Avenue(2) | 50.0 | % | Retail | 100.0 | % | 7,000 | — | 7,000 | ||||||||||||||||||||||||||||||
| 137 West 33rd Street | 100.0 | % | Retail | 100.0 | % | 3,000 | — | 3,000 | ||||||||||||||||||||||||||||||
57th Street(2) | 50.0 | % | Land | (5) | — | — | — | |||||||||||||||||||||||||||||||
| Eighth Avenue and 34th Street | 100.0 | % | Land | (5) | — | — | — | |||||||||||||||||||||||||||||||
Hotel Pennsylvania Site(7) | 100.0 | % | Land | (5) | — | — | — | |||||||||||||||||||||||||||||||
| Other (3 buildings) | 100.0 | % | Retail | 65.4 | % | 16,000 | — | 16,000 | ||||||||||||||||||||||||||||||
| Alexander's, Inc.: | ||||||||||||||||||||||||||||||||||||||
731 Lexington Avenue(2) | 32.4 | % | Office / Retail | 98.9 | % | 1,079,000 | — | 1,079,000 | ||||||||||||||||||||||||||||||
Rego Park II, Queens (6.6 acres)(2) | 32.4 | % | Retail | 76.9 | % | 616,000 | — | 616,000 | ||||||||||||||||||||||||||||||
Rego Park I, Queens (4.8 acres)(2) | 32.4 | % | Retail | 100.0 | % | 214,000 | 124,000 | 338,000 | ||||||||||||||||||||||||||||||
The Alexander Apartment Tower, Queens (312 units)(2) | 32.4 | % | Residential | 95.2 | % | 255,000 | — | 255,000 | ||||||||||||||||||||||||||||||
Flushing, Queens (1.0 acre ground leased through 2037)(1)(2) | 32.4 | % | Retail | 100.0 | % | 167,000 | — | 167,000 | ||||||||||||||||||||||||||||||
| Total New York Segment | 90.0 | % | 24,632,000 | 2,098,000 | 26,730,000 | |||||||||||||||||||||||||||||||||
| Our Ownership Interest | 89.4 | % | 19,185,000 | 1,881,000 | 21,066,000 | |||||||||||||||||||||||||||||||||
See notes on page 28.
27
PROPERTY LISTING – CONTINUED
| Square Feet | ||||||||||||||||||||||||||||||||||||||
OTHER SEGMENT Property | % Ownership | Type | % Occupancy | In Service | Under Development or Not Available for Lease | Total Property | ||||||||||||||||||||||||||||||||
| THE MART: | ||||||||||||||||||||||||||||||||||||||
| THE MART, Chicago | 100.0 | % | Office / Retail / Trade show / Showroom | 79.1 | % | 3,669,000 | — | 3,669,000 | ||||||||||||||||||||||||||||||
| 527 West Kinzie, Chicago | 100.0 | % | Land | (5) | — | — | — | |||||||||||||||||||||||||||||||
Other (2 properties)(2), Chicago | 50.0 | % | Retail | 100.0 | % | 19,000 | — | 19,000 | ||||||||||||||||||||||||||||||
| Total THE MART | 79.2 | % | 3,688,000 | — | 3,688,000 | |||||||||||||||||||||||||||||||||
| Our Ownership Interest | 79.2 | % | 3,679,000 | — | 3,679,000 | |||||||||||||||||||||||||||||||||
| 555 California Street: | ||||||||||||||||||||||||||||||||||||||
| 555 California Street | 70.0 | % | Office / Retail | 98.7 | % | 1,506,000 | — | 1,506,000 | ||||||||||||||||||||||||||||||
| 315 Montgomery Street | 70.0 | % | Office / Retail | 99.7 | % | 235,000 | — | 235,000 | ||||||||||||||||||||||||||||||
| 345 Montgomery Street | 70.0 | % | Office / Retail | — | % | 78,000 | — | 78,000 | ||||||||||||||||||||||||||||||
| Total 555 California Street | 94.5 | % | 1,819,000 | — | 1,819,000 | |||||||||||||||||||||||||||||||||
| Our Ownership Interest | 94.5 | % | 1,274,000 | — | 1,274,000 | |||||||||||||||||||||||||||||||||
| Other: | ||||||||||||||||||||||||||||||||||||||
Rosslyn Plaza, VA (197 units)(2) | 45.6 | % | Office / Residential | 58.4 | % | (3) | 685,000 | 304,000 | 989,000 | |||||||||||||||||||||||||||||
Fashion Centre Mall / Washington Tower, VA(2) | 7.5 | % | Office / Retail | 93.5 | % | 1,038,000 | — | 1,038,000 | ||||||||||||||||||||||||||||||
Wayne Towne Center, Wayne, NJ (ground leased through 2064)(1) | 100.0 | % | Retail | 100.0 | % | 686,000 | 4,000 | 690,000 | ||||||||||||||||||||||||||||||
Annapolis, MD (ground leased through 2042)(1) | 100.0 | % | Retail | 100.0 | % | 128,000 | — | 128,000 | ||||||||||||||||||||||||||||||
| Atlantic City, NJ (11.3 acres ground leased through 2070 to VICI Properties for a portion of the Borgata Hotel and Casino complex) | 100.0 | % | Land | 100.0 | % | — | — | — | ||||||||||||||||||||||||||||||
| Total Other | 89.2 | % | 2,537,000 | 308,000 | 2,845,000 | |||||||||||||||||||||||||||||||||
| Our Ownership Interest | 91.9 | % | 1,202,000 | 144,000 | 1,346,000 | |||||||||||||||||||||||||||||||||
________________________________________
(1)Term assumes all renewal options exercised, if applicable.
(2)Denotes property not consolidated in the accompanying consolidated financial statements and related financial data included in the Annual Report on Form 10-K.
(3)Excludes residential occupancy statistics.
(4)Includes 962 Third Avenue (the Annex building to 150 East 58th Street) 50.0% ground leased through 2118 (assuming all renewal options are exercised).
(5)Properties under development or to be developed.
(6)75,000 square feet is leased from 666 Fifth Avenue office condominium.
(7)Demolition of the existing building was completed in the third quarter of 2023.
28
TOP 10 TENANTS BASED ON ANNUALIZED ESCALATED RENTS(1) (AT SHARE):
| Tenant | Square Footage At Share | Annualized Escalated Rents At Share | % of Total Annualized Escalated Rents At Share | |||||||||||||||||
| Meta Platforms, Inc. | 1,451,153 | $ | 167,180 | 9.3 | % | |||||||||||||||
| IPG and affiliates | 1,044,715 | 69,186 | 3.9 | % | ||||||||||||||||
| Citadel | 585,460 | 62,498 | 3.5 | % | ||||||||||||||||
| New York University | 685,290 | 48,886 | 2.7 | % | ||||||||||||||||
| Google/Motorola Mobility (guaranteed by Google) | 759,446 | 41,765 | 2.3 | % | ||||||||||||||||
| Bloomberg L.P. | 306,768 | 41,279 | 2.3 | % | ||||||||||||||||
| Amazon (including its Whole Foods subsidiary) | 312,694 | 30,699 | 1.7 | % | ||||||||||||||||
| Neuberger Berman Group LLC | 306,612 | 28,184 | 1.6 | % | ||||||||||||||||
| Swatch Group USA | 11,957 | 27,333 | 1.5 | % | ||||||||||||||||
| Madison Square Garden & Affiliates | 408,031 | 27,326 | 1.5 | % | ||||||||||||||||
See note below.
ANNUALIZED ESCALATED RENTS(1) (AT SHARE) BY TENANT INDUSTRY:
| Industry | Percentage | |||||||
| Office: | ||||||||
| Financial Services | 22 | % | ||||||
| Technology | 16 | % | ||||||
| Professional Services | 7 | % | ||||||
| Advertising/Marketing | 5 | % | ||||||
| Entertainment and Electronics | 4 | % | ||||||
| Real Estate | 3 | % | ||||||
| Insurance | 3 | % | ||||||
| Education | 3 | % | ||||||
| Apparel | 2 | % | ||||||
| Engineering, Architect & Surveying | 2 | % | ||||||
| Health Services | 2 | % | ||||||
| Communications | 1 | % | ||||||
| Government | 1 | % | ||||||
| Other | 6 | % | ||||||
| 77 | % | |||||||
| Retail: | ||||||||
| Apparel | 5 | % | ||||||
| Luxury Retail | 4 | % | ||||||
| Banking | 2 | % | ||||||
| Restaurants | 2 | % | ||||||
| Grocery | 1 | % | ||||||
| Other | 4 | % | ||||||
| 18 | % | |||||||
| Showroom | 5 | % | ||||||
| Total | 100 | % | ||||||
(1)Represents monthly contractual base rent before free rent plus tenant reimbursements multiplied by 12. Annualized escalated rents at share include leases signed but not yet commenced in place of current tenants or vacancy in the same space.
29
NEW YORK
As of December 31, 2023, our New York segment consisted of 26.7 million square feet in 60 properties. The 26.7 million square feet is comprised of 20.4 million square feet of Manhattan office in 30 of the properties, 2.4 million square feet of Manhattan street retail in 50 of the properties, 1,662 units in five residential properties, and our 32.4% interest in Alexander’s, which owns five properties in the greater New York metropolitan area, including 731 Lexington Avenue, the 1.1 million square foot Bloomberg, L.P. headquarters building, and The Alexander, a 312-unit apartment tower in Queens. The New York segment also includes nine garages totaling 1.6 million square feet (4,685 spaces).
As of December 31, 2023, the occupancy rate for our New York segment was 89.4%.
Occupancy and weighted average annual rent per square foot:
Office:
| Vornado's Ownership Interest | ||||||||||||||||||||||||||||||||
| As of December 31, | Total Square Feet | In Service Square Feet | In Service Square Feet At Share | Occupancy Rate | Weighted Average Annual Escalated Rent Per Square Foot | |||||||||||||||||||||||||||
| 2023 | 20,383,000 | 18,699,000 | 16,001,000 | 90.7 | % | $ | 86.30 | |||||||||||||||||||||||||
| 2022 | 19,902,000 | 18,724,000 | 16,028,000 | 91.9 | % | 83.98 | ||||||||||||||||||||||||||
| 2021 | 20,630,000 | 19,442,000 | 16,757,000 | 92.2 | % | 80.01 | ||||||||||||||||||||||||||
| 2020 | 20,586,000 | 18,361,000 | 15,413,000 | 93.4 | % | 79.05 | ||||||||||||||||||||||||||
| 2019 | 20,666,000 | 19,070,000 | 16,195,000 | 96.9 | % | 76.26 | ||||||||||||||||||||||||||
Retail:
| Vornado's Ownership Interest | ||||||||||||||||||||||||||||||||
| As of December 31, | Total Square Feet | In Service Square Feet | In Service Square Feet At Share | Occupancy Rate | Weighted Average Annual Escalated Rent Per Square Foot | |||||||||||||||||||||||||||
| 2023 | 2,394,000 | 2,123,000 | 1,684,000 | 74.9 | % | $ | 224.88 | |||||||||||||||||||||||||
| 2022 | 2,556,000 | 2,289,000 | 1,851,000 | 74.4 | % | 215.72 | ||||||||||||||||||||||||||
| 2021 | 2,693,000 | 2,267,000 | 1,825,000 | 80.7 | % | 214.22 | ||||||||||||||||||||||||||
| 2020 | 2,690,000 | 2,275,000 | 1,805,000 | 78.8 | % | 226.38 | ||||||||||||||||||||||||||
| 2019 | 2,712,000 | 2,300,000 | 1,842,000 | 94.5 | % | 209.86 | ||||||||||||||||||||||||||
Occupancy and average monthly rent per unit:
Residential:
| Vornado's Ownership Interest | |||||||||||||||||||||||||||||
| As of December 31, | Total Number of Units | Total Number of Units | Occupancy Rate | Average Monthly Rent Per Unit | |||||||||||||||||||||||||
| 2023 | 1,974 | 939 | 96.8 | % | $ | 4,115 | |||||||||||||||||||||||
| 2022 | 1,976 | 941 | 96.7 | % | 3,882 | ||||||||||||||||||||||||
| 2021 | 1,986 | 951 | 97.0 | % | 3,776 | ||||||||||||||||||||||||
| 2020 | 1,995 | 960 | 84.9 | % | 3,714 | ||||||||||||||||||||||||
| 2019 | 1,996 | 960 | 97.5 | % | 3,902 | ||||||||||||||||||||||||
30
NEW YORK – CONTINUED
Lease expirations as of December 31, 2023 (at share):
| Number of Expiring Leases | Square Feet of Expiring Leases(1) | Percentage of New York Square Feet | Annualized Escalated Rents of Expiring Leases | ||||||||||||||||||||||||||||||||
| Year | Total | Per Square Foot | |||||||||||||||||||||||||||||||||
| Office: | |||||||||||||||||||||||||||||||||||
Fourth Quarter 2023(2) | 12 | 223,000 | 1.6% | $ | 23,965,000 | $ | 107.47 | ||||||||||||||||||||||||||||
| 2024 | 76 | 713,000 | 5.0% | 63,535,000 | 89.11 | (3) | |||||||||||||||||||||||||||||
| 2025 | 67 | 586,000 | 4.1% | 45,758,000 | 78.09 | ||||||||||||||||||||||||||||||
| 2026 | 79 | 1,163,000 | 8.1% | 94,536,000 | 81.29 | ||||||||||||||||||||||||||||||
| 2027 | 95 | 1,301,000 | 9.1% | 102,958,000 | 79.14 | ||||||||||||||||||||||||||||||
2028(4) | 65 | 1,044,000 | 7.3% | 84,045,000 | 80.50 | ||||||||||||||||||||||||||||||
| 2029 | 59 | 1,241,000 | 8.7% | 100,418,000 | 80.92 | ||||||||||||||||||||||||||||||
| 2030 | 50 | 643,000 | 4.5% | 54,540,000 | 84.82 | ||||||||||||||||||||||||||||||
| 2031 | 31 | 891,000 | 6.2% | 80,847,000 | 90.74 | ||||||||||||||||||||||||||||||
| 2032 | 22 | 958,000 | 6.7% | 94,504,000 | 98.65 | ||||||||||||||||||||||||||||||
| 2033 | 21 | 502,000 | 4.0% | 42,938,000 | 85.53 | ||||||||||||||||||||||||||||||
| Retail: | |||||||||||||||||||||||||||||||||||
Fourth Quarter 2023(2) | 3 | 11,000 | 1.0% | $ | 1,122,000 | $ | 102.00 | ||||||||||||||||||||||||||||
| 2024 | 11 | 197,000 | 17.7% | 20,532,000 | 104.22 | (5) | |||||||||||||||||||||||||||||
| 2025 | 12 | 50,000 | 4.5% | 13,076,000 | 261.52 | ||||||||||||||||||||||||||||||
| 2026 | 10 | 82,000 | 7.3% | 26,414,000 | 322.12 | ||||||||||||||||||||||||||||||
| 2027 | 10 | 32,000 | 2.9% | 20,509,000 | 640.91 | ||||||||||||||||||||||||||||||
| 2028 | 9 | 32,000 | 2.9% | 14,731,000 | 460.34 | ||||||||||||||||||||||||||||||
| 2029 | 14 | 53,000 | 4.7% | 27,460,000 | 518.11 | ||||||||||||||||||||||||||||||
| 2030 | 21 | 153,000 | 13.7% | 23,416,000 | 153.05 | ||||||||||||||||||||||||||||||
| 2031 | 24 | 68,000 | 6.1% | 30,383,000 | 446.81 | ||||||||||||||||||||||||||||||
| 2032 | 21 | 57,000 | 5.1% | 29,537,000 | 518.19 | ||||||||||||||||||||||||||||||
| 2033 | 7 | 17,000 | 1.5% | 6,022,000 | 354.24 | ||||||||||||||||||||||||||||||
(1)Excludes storage, vacancy and other.
(2)Includes month-to-month leases, holdover tenants, and leases expiring on the last day of the current quarter.
(3)Based on current market conditions, we expect to re-lease this space at rents between $85 to $95 per square foot.
(4)Excludes the expiration of 492,000 square feet at 909 Third Avenue for U.S. Post Office as we assume the exercise of all renewal options through 2038 given the below-market rent on their options.
(5)Based on current market conditions, we expect to re-lease this space at rents between $125 to $150 per square foot.
Alexander’s
As of December 31, 2023, we own 32.4% of the outstanding common stock of Alexander’s, which owns five properties in the greater New York City aggregating 2.5 million square feet, including 731 Lexington Avenue, the 1.1 million square foot Bloomberg L.P. headquarters building. As of December 31, 2023, Alexander's had an occupancy rate of 92.6% and a weighted average annual rent per square foot of $107.78.
OTHER REAL ESTATE AND INVESTMENTS
THE MART
We own the 3.7 million square foot THE MART in Chicago, whose largest tenant is Motorola Mobility at 609,000 square feet, the lease of which is guaranteed by Google. As of December 31, 2023, THE MART had an occupancy rate of 79.2% and a weighted average annual rent per square foot of $52.06.
555 California Street
We own a 70% controlling interest in a three-building office complex aggregating 1.8 million square feet, located at California and Montgomery Streets in San Francisco’s financial district (“555 California Street”). As of December 31, 2023, 555 California Street had an occupancy rate of 94.5% and a weighted average annual rent per square foot of $94.93.
31
ITEM 3. LEGAL PROCEEDINGS
We are from time to time involved in legal actions arising in the ordinary course of business. In our opinion, after consultation with legal counsel, the outcome of such matters is not expected to have a material adverse effect on our financial position, results of operations or cash flows.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
PART II
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Vornado Realty Trust
Vornado’s common shares are traded on the New York Stock Exchange under the symbol “VNO.”
As of February 1, 2024, there were758 holders of record of Vornado common shares.
Vornado Realty L.P.
There is no established trading market for the Operating Partnership's Class A units. Class A units that are not held by Vornado 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 distribution to a Class A unit holder is equal to the dividend paid to a Vornado common shareholder.
As of February 1, 2024, there were806 Class A unitholders of record.
Recent Sales of Unregistered Securities
Vornado Realty Trust
During the fourth quarter of 2023, Vornado issued 64,056 of its common shares for the redemption of Class A units by certain limited partners of Vornado Realty L.P. Such shares were issued in reliance on an exemption from registration under Section 4(a)(2) of the Securities Act of 1933, as amended. There were no cash proceeds associated with these issuances.
Vornado Realty L.P.
During the fourth quarter of 2023, Vornado Realty L.P. issued 375,369 Class A units to satisfy conversions of restricted Operating Partnership units (“LTIP Units”) and 20,731 pursuant to Vornado’s 2023 Omnibus Share Plan. There were no cash proceeds associated with the issuances.
On November 1, 2023, the Operating Partnership granted 116,612 LTIP Units at a market price of $19.30 per unit to Vornado consultants that are not executives of the Company as part of their annual consulting fees. The units were issued outside of Vornado’s 2023 Omnibus Share Plan.
All of the securities referred to above were issued in reliance on an exemption from registration under Section 4(a)(2) of the Securities Act of 1933, as amended. There were no cash proceeds associated with these issuances.
From time to time, in connection with equity awards granted under our Omnibus Share Plan, we may withhold common shares for tax purposes or acquire common shares as part of the payment of the exercise price. Although we treat these as repurchases for certain financial statement purposes, these withheld or acquired shares are not considered by us as repurchases for this purpose.
Information relating to compensation plans under which Vornado’s equity securities are authorized for issuance is set forth under Part III, Item 12 of this Annual Report on Form 10-K and such information is incorporated by reference herein.
32
Recent Purchases of Unregistered Securities
Vornado Realty Trust
On April 26, 2023, the Company’s Board of Trustees authorized the repurchase of up to $200,000,000 of its outstanding common shares under a newly established share repurchase program. There were no common share repurchases during the three months ended December 31, 2023. As of December 31, 2023, $170,857,000 remained available and authorized for common share repurchases.
Share repurchases may be made from time to time in the open market, through privately negotiated transactions or through other means as permitted by federal securities laws, including through block trades, accelerated share repurchase transactions and/or trading plans intended to qualify under Rule 10b5-1. The timing, manner, price and amount of any repurchases will be determined in Vornado’s discretion depending on business, economic and market conditions, corporate and regulatory requirements, prevailing prices for Vornado’s common shares, alternative uses for capital and other considerations. The program does not have an expiration date and may be suspended or discontinued at any time and does not obligate Vornado to make any repurchases of its common shares.
Vornado Realty L.P.
None.
Performance Graph
The following graph is a comparison of the five-year cumulative return of Vornado’s common shares, the Standard & Poor’s 400 MidCap Index (the “S&P 400 MidCap Index”), Standard & Poor’s 500 Index (the “S&P 500 Index”), and the National Association of Real Estate Investment Trusts’ (“NAREIT”) All Equity Index, a peer group index. The graph assumes that $100 was invested on December 31, 2018 in our common shares, the S&P 400 MidCap Index, the S&P 500 Index, and the NAREIT All Equity Index and that all dividends were reinvested without the payment of any commissions. There can be no assurance that the performance of our shares will continue in line with the same or similar trends depicted in the graph below.
| 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | ||||||||||||||||||||||||||||||
| Vornado Realty Trust | $ | 100 | $ | 115 | $ | 68 | $ | 81 | $ | 43 | $ | 60 | |||||||||||||||||||||||
S&P 400 MidCap Index(1) | 100 | 126 | 143 | 179 | 156 | 181 | |||||||||||||||||||||||||||||
S&P 500 Index(2) | 100 | 131 | 156 | 200 | 164 | 207 | |||||||||||||||||||||||||||||
| The NAREIT All Equity Index | 100 | 129 | 122 | 172 | 129 | 144 | |||||||||||||||||||||||||||||
(1)In 2023, Vornado was added as a constituent of the S&P 400 MidCap Index.
(2)To facilitate comparison to the performance graph presented in our Annual Report for the prior year, the S&P 500 Index is presented above.
ITEM 6. RESERVED
33
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
| Page Number | |||||
| Overview | |||||
| Critical Accounting Estimates | |||||
| Net Operating Income At Share by Segment for the Years Ended December 31, 2023 and 2022 | |||||
| Results of Operations for the Year Ended December 31, 2023 Compared to December 31, 2022 | |||||
| Related Party Transactions | |||||
| Liquidity and Capital Resources | |||||
| Funds From Operations for the Years Ended December 31, 2023 and 2022 | |||||
34
Introduction
The following discussion should be read in conjunction with the financial statements and related notes included under Part II, Item 8 of this Annual Report on Form 10-K.
Our Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") within this section is focused on the years ended December 31, 2023 and 2022, including year-to-year comparisons between these years. Our MD&A for the year ended December 31, 2021, including year-to-year comparisons between 2022 and 2021, can be found in Part II, Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations in the Company's Annual Report on Form 10-K for the year ended December 31, 2022.
Overview
Vornado Realty Trust (“Vornado”) is a fully‑integrated real estate investment trust (“REIT”) and conducts its business through, and substantially all of its interests in properties are held by, Vornado Realty L.P., (the “Operating Partnership”) a Delaware limited partnership. Accordingly, Vornado’s cash flow and ability to pay dividends to its shareholders are dependent upon the cash flow of the Operating Partnership and the ability of its direct and indirect subsidiaries to first satisfy their obligations to creditors. Vornado is the sole general partner of and owned approximately 91.0% of the common limited partnership interest in the Operating Partnership as of December 31, 2023. All references to the “Company,” “we,” “us” and “our” mean collectively Vornado, the Operating Partnership and those subsidiaries consolidated by Vornado.
We own and operate office and retail properties with a concentration in the New York metropolitan area. In addition, we have a 32.4% interest in Alexander’s, Inc. (“Alexander’s”) (NYSE: ALX), which owns five properties in the greater New York metropolitan area, as well as interests in other real estate and investments.
Our business objective is to maximize Vornado shareholder value, which we measure by the total return provided to our shareholders. Below is a table comparing Vornado’s performance to the FTSE NAREIT Office Index (“Office REIT”) and the MSCI US REIT Index (“MSCI”) for the following periods ended December 31, 2023:
Total Return(1) | |||||||||||||||||
| Vornado | Office REIT | MSCI | |||||||||||||||
| Three-month | 25.8 | % | 23.5 | % | 16.0 | % | |||||||||||
| One-year | 39.2 | % | 2.0 | % | 13.7 | % | |||||||||||
| Three-year | (12.7 | %) | (22.3 | %) | 22.8 | % | |||||||||||
| Five-year | (40.3 | %) | (16.8 | %) | 42.9 | % | |||||||||||
| Ten-year | (33.9 | %) | 7.0 | % | 108.0 | % | |||||||||||
(1)Past performance is not necessarily indicative of future performance.
We intend to achieve this objective by continuing to pursue our investment philosophy and to execute our operating strategies through:
•maintaining a superior team of operating and investment professionals and an entrepreneurial spirit;
•investing in properties in select markets, such as New York City, where we believe there is a high likelihood of capital appreciation;
•acquiring quality properties at a discount to replacement cost and where there is a significant potential for higher rents;
•developing and redeveloping properties to increase returns and maximize value; and
•investing in operating companies that have a significant real estate component.
We expect to finance our growth, acquisitions and investments using internally generated funds and proceeds from asset sales and by accessing the public and private capital markets. We may also offer Vornado common or preferred shares or Operating Partnership units in exchange for property and may repurchase or otherwise reacquire these securities in the future.
We compete with a large number of real estate investors, property owners and developers, some of whom may be willing to accept lower returns on their investments. Principal factors of competition are rents charged, tenant concessions offered, attractiveness of location, the quality of the property and the breadth and the quality of services provided. Our success depends upon, among other factors, trends of the global, national, regional and local economies, the financial condition and operating results of current and prospective tenants and customers, availability and cost of capital, construction and renovation costs, taxes, governmental regulations, legislation, population and employment trends. See “Risk Factors” in Item 1A for additional information regarding these factors.
Our business has been, and may continue to be, affected by increased interest rates, the effects of inflation and other uncertainties including the potential for an economic downturn. These factors could have a material impact on our business, financial condition, results of operations and cash flows.
35
Overview - continued
Vornado Realty Trust
Year Ended December 31, 20172023 Financial Results Summary
Net income attributable to common shareholders for the year ended December 31, 20172023 was $162,017,000,$43,378,000, or $0.85$0.23 per diluted share, compared to $823,606,000,net loss attributable to common shareholders of $408,615,000, or $4.34$2.13 per diluted share, for the year ended December 31, 2016.2022. The years ended December 31, 20172023 and 20162022 include certain items that impact net income attributable to common shareholders, which are listed in the table on the following page. The aggregate of these items, net of amounts attributable to noncontrolling interests, decreased net income attributable to common shareholders for the year ended December 31, 2017 by $88,934,000, or $0.46 per diluted share, and increased net income attributable to common shareholders for the year ended December 31, 2016 by $594,447,000, or $3.13 per diluted share.
| (Amounts in thousands) | For the Year Ended December 31, | For the Three Months Ended December 31, | |||||||||||||
| 2017 | 2016 | 2017 | 2016 | ||||||||||||
| Certain items that impact net income attributable to common shareholders: | |||||||||||||||
| JBG SMITH Properties which is treated as a discontinued operation: | |||||||||||||||
| Transaction costs | $ | (68,662 | ) | $ | (16,586 | ) | $ | (1,617 | ) | $ | (11,989 | ) | |||
| Operating results through July 17, 2017 spin-off | 47,752 | 87,237 | — | 20,523 | |||||||||||
| (20,910 | ) | 70,651 | (1,617 | ) | 8,534 | ||||||||||
| Impairment loss on our investment in Pennsylvania REIT | (44,465 | ) | — | — | — | ||||||||||
| Tax expense related to the reduction of our taxable REIT subsidiaries deferred tax assets | (34,800 | ) | — | (34,800 | ) | — | |||||||||
666 Fifth Avenue Office Condominium (49.5% interest)(1) | (25,414 | ) | (41,532 | ) | (3,042 | ) | (7,869 | ) | |||||||
| Net gain resulting from Urban Edge Properties operating partnership unit issuances | 21,100 | — | — | — | |||||||||||
| Our share of net gain on sale of property of Suffolk Downs JV | 15,314 | — | — | — | |||||||||||
| Net gain on repayment of Suffolk Downs JV debt investments | 11,373 | — | — | — | |||||||||||
| (Loss) income from real estate fund investments, net | (10,804 | ) | (21,042 | ) | 529 | (34,704 | ) | ||||||||
| Expense related to the prepayment of our 2.50% senior unsecured notes due 2019 | (4,836 | ) | — | (4,836 | ) | — | |||||||||
| Our share of write-off of deferred financing costs | (3,819 | ) | — | — | — | ||||||||||
| Net gain on extinguishment of Skyline properties debt | — | 487,877 | — | 487,877 | |||||||||||
| Income from the repayment of our investments in 85 Tenth Avenue loans and preferred equity | — | 160,843 | — | 160,843 | |||||||||||
| Skyline properties impairment loss | — | (160,700 | ) | — | — | ||||||||||
| Net gain on sale of 47% ownership interest in 7 West 34th Street | — | 159,511 | — | — | |||||||||||
| Gain on sale of our 20% interest in Fairfax Square | — | 15,302 | — | 15,302 | |||||||||||
| Our share of impairment on India non-depreciable real estate | — | (13,962 | ) | — | (13,962 | ) | |||||||||
| Default interest on Skyline properties mortgage loan | — | (7,823 | ) | — | (2,480 | ) | |||||||||
| Preferred share issuance costs (Series J redemption) | — | (7,408 | ) | — | — | ||||||||||
| Other | 2,060 | (8,298 | ) | 3,084 | (2,942 | ) | |||||||||
| (95,201 | ) | 633,419 | (40,682 | ) | 610,599 | ||||||||||
| Noncontrolling interests' share of above adjustments | 6,267 | (38,972 | ) | 2,522 | (37,185 | ) | |||||||||
| Total of certain items that impact net (loss) income attributable to common shareholders, net | $ | (88,934 | ) | $ | 594,447 | $ | (38,160 | ) | $ | 573,414 | |||||
| (Amounts in thousands) | For the Year Ended December 31, | For the Three Months Ended December 31, | |||||||||||||
| 2017 | 2016 | 2017 | 2016 | ||||||||||||
| Certain items that impact FFO: | |||||||||||||||
| JBG SMITH Properties which is treated as a discontinued operation: | |||||||||||||||
| Transaction costs | $ | (68,662 | ) | $ | (16,586 | ) | $ | (1,617 | ) | $ | (11,989 | ) | |||
| Operating results through July 17, 2017 spin-off | 122,201 | 226,288 | — | 57,147 | |||||||||||
| 53,539 | 209,702 | (1,617 | ) | 45,158 | |||||||||||
| Impairment loss on our investment in Pennsylvania REIT | (44,465 | ) | — | — | — | ||||||||||
| Tax expense related to the reduction of our taxable REIT subsidiaries deferred tax assets | (34,800 | ) | — | (34,800 | ) | — | |||||||||
| Net gain resulting from Urban Edge Properties operating partnership unit issuances | 21,100 | — | — | — | |||||||||||
666 Fifth Avenue Office Condominium (49.5% interest)(1) | 13,164 | 10,925 | 1,103 | 808 | |||||||||||
| Net gain on repayment of our Suffolk Downs JV debt investments | 11,373 | — | — | — | |||||||||||
| (Loss) income from real estate fund investments, net | (10,804 | ) | (21,042 | ) | 529 | (34,704 | ) | ||||||||
| Expense related to the prepayment of our 2.50% senior unsecured notes due 2019 | (4,836 | ) | — | (4,836 | ) | — | |||||||||
| Our share of write-off of deferred financing costs | (3,819 | ) | — | — | — | ||||||||||
| Net gain on extinguishment of Skyline properties debt | — | 487,877 | — | 487,877 | |||||||||||
| Income from the repayment of our investments in 85 Tenth Avenue loans and preferred equity | — | 160,843 | — | 160,843 | |||||||||||
| Our share of impairment on India non-depreciable real estate | — | (13,962 | ) | — | (13,962 | ) | |||||||||
| Preferred share issuance costs (Series J redemption) | — | (7,408 | ) | — | — | ||||||||||
| Other | 3,801 | (2,454 | ) | 2,945 | (2,324 | ) | |||||||||
| 4,253 | 824,481 | (36,676 | ) | 643,696 | |||||||||||
| Noncontrolling interests' share of above adjustments | (264 | ) | (50,293 | ) | 2,274 | (39,201 | ) | ||||||||
| Total certain items that impact FFO, net | $ | 3,989 | $ | 774,188 | $ | (34,402 | ) | $ | 604,495 | ||||||
The year ended December 31, 2017following table reconciles the difference between our net income (loss) attributable to common shareholders and 2016 include certain items that impactour net income attributable to Class A unitholders which are listed incommon shareholders, as adjusted:
| (Amounts in thousands) | For the Year Ended December 31, | ||||||||||
| 2023 | 2022 | ||||||||||
| Certain expense (income) items that impact net income (loss) attributable to common shareholders: | |||||||||||
| Real estate impairment losses on wholly owned and partially owned assets | $ | 73,289 | $ | 595,488 | |||||||
| Net gain on contribution of Pier 94 leasehold interest to joint venture | (35,968) | — | |||||||||
| After-tax net gain on sale of The Armory Show | (17,076) | — | |||||||||
| Our share of Alexander's gain on sale of Rego Park III land parcel | (16,396) | — | |||||||||
| Our share of income from real estate fund investments | (14,379) | (1,671) | |||||||||
| After-tax net gain on sale of 220 Central Park South ("220 CPS") condominium units and ancillary amenities | (11,959) | (35,858) | |||||||||
| Deferred tax liability on our investment in the Farley Building (held through a taxable REIT subsidiary) | 11,722 | 13,665 | |||||||||
| Credit losses on investments | 8,269 | — | |||||||||
| Other | 10,342 | 3,749 | |||||||||
| 7,844 | 575,373 | ||||||||||
| Noncontrolling interests' share of above adjustments and assumed conversion of dilutive potential common shares | 64 | (40,290) | |||||||||
| Total of certain expense (income) items that impact net income (loss) attributable to common shareholders | $ | 7,908 | $ | 535,083 | |||||||
The following table reconciles the table on the following page. The aggregate of these items decreased net incomedifference between our FFO attributable to Class A unitholders by $95,201,000, or $0.47 per diluted Class A unit, for the year ended December 31, 2017common shareholders plus assumed conversions and increased net incomeour FFO attributable to Class A unitholders by $633,419,000, or $3.14 per diluted Class A unit, for the year ended December 31, 2016.common shareholders plus assumed conversions, as adjusted:
| (Amounts in thousands) | For the Year Ended December 31, | ||||||||||
| 2023 | 2022 | ||||||||||
| Certain (income) expense items that impact FFO attributable to common shareholders plus assumed conversions: | |||||||||||
| Our share of income from real estate fund investments | $ | (14,379) | $ | (1,671) | |||||||
| After-tax net gain on sale of 220 CPS condominium units and ancillary amenities | (11,959) | (35,858) | |||||||||
| Deferred tax liability on our investment in the Farley Building (held through a taxable REIT subsidiary) | 11,722 | 13,665 | |||||||||
| Credit losses on investments | 8,269 | — | |||||||||
| Other | 11,043 | (8,412) | |||||||||
| 4,696 | (32,276) | ||||||||||
| Noncontrolling interests' share of above adjustments | (337) | 2,240 | |||||||||
| Total of certain (income) expense items that impact FFO attributable to common shareholders plus assumed conversions, net | $ | 4,359 | $ | (30,036) | |||||||
36
Overview - continued
| (Amounts in thousands) | For the Year Ended December 31, | For the Three Months Ended December 31, | |||||||||||||
| 2017 | 2016 | 2017 | 2016 | ||||||||||||
| Certain items that impact net income attributable to Class A unitholders: | |||||||||||||||
| JBG SMITH Properties which is treated as a discontinued operation: | |||||||||||||||
| Transaction costs | $ | (68,662 | ) | $ | (16,586 | ) | $ | (1,617 | ) | $ | (11,989 | ) | |||
| Operating results through July 17, 2017 spin-off | 47,752 | 87,237 | — | 20,523 | |||||||||||
| (20,910 | ) | 70,651 | (1,617 | ) | 8,534 | ||||||||||
| Impairment loss on our investment in Pennsylvania REIT | (44,465 | ) | — | — | — | ||||||||||
| Tax expense related to the reduction of our taxable REIT subsidiaries deferred tax assets | (34,800 | ) | — | (34,800 | ) | — | |||||||||
666 Fifth Avenue Office Condominium (49.5% interest)(1) | (25,414 | ) | (41,532 | ) | (3,042 | ) | (7,869 | ) | |||||||
| Net gain resulting from Urban Edge Properties operating partnership unit issuances | 21,100 | — | — | — | |||||||||||
| Our share of net gain on sale of property of Suffolk Downs JV | 15,314 | — | — | — | |||||||||||
| Net gain on repayment of Suffolk Downs JV debt investments | 11,373 | — | — | — | |||||||||||
| (Loss) income from real estate fund investments, net | (10,804 | ) | (21,042 | ) | 529 | (34,704 | ) | ||||||||
| Expense related to the prepayment of our 2.50% senior unsecured notes due 2019 | (4,836 | ) | — | (4,836 | ) | — | |||||||||
| Our share of write-off of deferred financing costs | (3,819 | ) | — | — | — | ||||||||||
| Net gain on extinguishment of Skyline properties debt | — | 487,877 | — | 487,877 | |||||||||||
| Income from the repayment of our investments in 85 Tenth Avenue loans and preferred equity | — | 160,843 | — | 160,843 | |||||||||||
| Skyline properties impairment loss | — | (160,700 | ) | — | — | ||||||||||
| Net gain on sale of 47% ownership interest in 7 West 34th Street | — | 159,511 | — | — | |||||||||||
| Gain on sale of our 20% interest in Fairfax Square | — | 15,302 | — | 15,302 | |||||||||||
| Our share of impairment on India non-depreciable real estate | — | (13,962 | ) | — | (13,962 | ) | |||||||||
| Default interest on Skyline properties mortgage loan | — | (7,823 | ) | — | (2,480 | ) | |||||||||
| Preferred unit issuance costs (Series J redemption) | — | (7,408 | ) | — | — | ||||||||||
| Other | 2,060 | (8,298 | ) | 3,084 | (2,942 | ) | |||||||||
| $ | (95,201 | ) | $ | 633,419 | $ | (40,682 | ) | $ | 610,599 | ||||||
Same Store Net Operating Income ("NOI")
At Share
The percentage increase (decrease) in same store NOI at share and same store NOI at share - cash basis of our New York segment, theMARTTHE MART and 555 California Street are summarized below.
| New York | theMART | 555 California Street | ||||||
| Same store NOI at share % increase (decrease): | ||||||||
| Year ended December 31, 2017 compared to December 31, 2016 | 2.7 | % | 4.2 | % | (1) | 1.9 | % | |
| Year ended December 31, 2016 compared to December 31, 2015 | 6.4 | % | 14.0 | % | (2) | (9.3 | )% | |
| Three months ended December 31, 2017 compared to December 31, 2016 | 2.8 | % | 7.1 | % | 10.4 | % | ||
| Three months ended December 31, 2017 compared to September 30, 2017 | 1.8 | % | (7.1 | )% | (3) | 4.2 | % | |
| Same store NOI at share - cash basis % increase (decrease): | ||||||||
| Year ended December 31, 2017 compared to December 31, 2016 | 11.3 | % | 7.6 | % | (1) | 36.0 | % | |
| Year ended December 31, 2016 compared to December 31, 2015 | 8.5 | % | 12.4 | % | (2) | (12.2 | )% | |
| Three months ended December 31, 2017 compared to December 31, 2016 | 7.0 | % | 13.7 | % | 32.4 | % | ||
| Three months ended December 31, 2017 compared to September 30, 2017 | 1.7 | % | (4.4 | )% | (3) | 9.4 | % | |
| Year Ended December 31, 2023 compared to December 31, 2022: | Total | New York | THE MART(1) | 555 California Street(2) | ||||||||||||||||||||||
| Same store NOI at share % increase (decrease) | 0.4 | % | 2.2 | % | (34.8) | % | 26.3 | % | ||||||||||||||||||
| Same store NOI at share - cash basis % increase (decrease) | 0.6 | % | 2.8 | % | (37.2) | % | 26.6 | % | ||||||||||||||||||
(1)2022 includes prior period accrual adjustment related to changes in the tax-assessed value of THE MART.
(2) 2023 includes our $14,103,000 share of the receipt of a tenant settlement, net of legal expenses.
Calculations of same store NOI at share, reconciliations of our net income (loss) to NOI at share, NOI at share - cash basis and FFO and the reasons we consider these non-GAAP financial measures useful are provided in the following pages of Management’s Discussion and Analysis of the Financial Condition and Results of Operations.
Dividends/Share Repurchase Program
On December 5, 2023, Vornado’s Board of Trustees declared a dividend of $0.30 per common share. Together with the $0.375 per share common dividend already paid in the first quarter of 2023, this resulted in an aggregate 2023 common dividend of $0.675 per common share. We anticipate that our common share dividend policy for 2024 will be to pay one common share dividend in the fourth quarter.
On April 26, 2023, our Board of Trustees authorized the repurchase of up to $200,000,000 of our outstanding common shares under a newly established share repurchase program.
During the year ended December 31, 2023, we repurchased 2,024,495 common shares for $29,143,000 at an average price per share of $14.40. As of December 31, 2023, $170,857,000 remained available and authorized for repurchases.
350 Park Avenue
On January 24, 2023, we and the Rudin family (“Rudin”) completed agreements with Citadel Enterprise Americas LLC (“Citadel”) and with an affiliate of Kenneth C. Griffin, Citadel’s Founder and CEO (“KG”), for a series of transactions relating to 350 Park Avenue and 40 East 52nd Street.
Pursuant to the agreements, Citadel master leases 350 Park Avenue, a 585,000 square foot Manhattan office building, on an “as is” basis for ten years, with an initial annual net rent of $36,000,000. Per the terms of the lease, no tenant allowance or free rent was provided. Citadel has also master leased Rudin’s adjacent property at 40 East 52nd Street (390,000 square feet).
In addition, we entered into a joint venture with Rudin (the “Vornado/Rudin JV”) which was formed to purchase 39 East 51st Street. Upon formation of the KG joint venture described below, 39 East 51st Street will be combined with 350 Park Avenue and 40 East 52nd Street to create a premier development site (collectively, the “Site”). On June 20, 2023, the Vornado/Rudin JV completed the purchase of 39 East 51st Street for $40,000,000, which was funded on a 50/50 basis by Vornado and Rudin.
From October 2024 to June 2030, KG will have the option to either:
•acquire a 60% interest in a joint venture with the Vornado/Rudin JV that would value the Site at $1.2 billion ($900,000,000 to Vornado and $300,000,000 to Rudin) and build a new 1,700,000 square foot office tower (the “Project”) pursuant to East Midtown Subdistrict zoning with the Vornado/Rudin JV as developer. KG would own 60% of the joint venture and the Vornado/Rudin JV would own 40% (with Vornado owning 36% and Rudin owning 4% of the joint venture along with a $250,000,000 preferred equity interest in the Vornado/Rudin JV).
◦at the joint venture formation, Citadel or its affiliates will execute a pre-negotiated 15-year anchor lease with renewal options for approximately 850,000 square feet (with expansion and contraction rights) at the Project for its primary office in New York City;
◦the rent for Citadel’s space will be determined by a formula based on a percentage return (that adjusts based on the actual cost of capital) on the total Project cost;
◦the master leases will terminate at the scheduled commencement of demolition;
•or, exercise an option to purchase the Site for $1.4 billion ($1.085 billion to Vornado and $315,000,000 to Rudin), in which case the Vornado/Rudin JV would not participate in the new development.
Further, the Vornado/Rudin JV will have the option from October 2024 to September 2030 to put the Site to KG for $1.2 billion ($900,000,000 to Vornado and $300,000,000 to Rudin). For ten years following any put option closing, unless the put option is exercised in response to KG’s request to form the joint venture or KG makes a $200,000,000 termination payment, the Vornado/Rudin JV will have the right to invest in a joint venture with KG on the terms described above if KG proceeds with development of the Site.
37
Overview - continued
Sunset Pier 94 Studios Joint Venture
•We contributed our Pier 94 leasehold interest to the joint venture in exchange for a 49.9% common equity interest and an initial capital account of $47,944,000, comprised of (i) the $40,000,000 value of our Pier 94 leasehold interest contribution and (ii) a $7,994,000 credit for pre-development costs incurred. Hudson Pacific Properties (“HPP”) and Blackstone Inc. (together, “HPP/BX”) received an aggregate 50.1% common equity interest in Pier 94 JV and an initial capital account of $22,976,000 in exchange for (i) a $15,000,000 cash contribution upon the joint venture’s formation and (ii) a $7,976,000 credit for pre-development costs incurred. HPP/BX will fund 100% of cash contributions until such time that its capital account is equal to Vornado’s, after which equity will be funded in accordance with each partner’s respective ownership interest.
•The lease of Pier 94 with the Related Companies (“Related”) was designated by Empire State Development (“ESD”), an entityCity of New York State,was amended and restated to redevelop the historic Farley Post Office building. The building will include a new Moynihan Train Hall and approximately 850,000 rentable square feet of commercial space, comprised of approximately 730,000 square feet of office space and approximately 120,000 square feet of retail space. On June 15, 2017, the joint venture closed a 99-year, triple-net lease with ESDallow for the commercial spacecontribution to Pier 94 JV and to remove Pier 92 from the lease’s demised premises. The amended and restated lease expires in 2060 with five 10-year renewal options.
•Pier 94 JV closed on a $183,200,000 construction loan facility ($100,000 outstanding as of December 31, 2023) which bears interest at SOFR plus 4.75% and matures in September 2025, with one one-year as-of-right extension option and two one-year extension options subject to certain conditions. VRLP and the Moynihan Office Buildingother partners provided a joint and made a $230,000,000 upfrontseveral completion guarantee.
The development cost of the project is estimated to be $350,000,000, which will be funded with $183,200,000 of construction financing (described above) and $166,800,000 of equity contributions. Our share of equity contributions will be funded by (i) our $40,000,000 Pier 94 leasehold interest contribution and (ii) $34,000,000 of cash contributions, which are net of an estimated $9,000,000 for our share of development fees and reimbursement for overhead costs incurred by us.
Upon contribution of whichthe Pier 94 leasehold, we recognized a $35,968,000 net gain primarily due to the step-up of our share is $115,230,000, towardsretained investment in the constructionleasehold interest to fair value. The net gain was included in “net gains on disposition of wholly owned and partially owned assets” on our consolidated statements of income for the year ended December 31, 2023.
Dispositions
Alexander's
On May 19, 2023, Alexander's completed the sale of the train hall. Rego Park III land parcel, located in Queens, New York, for $71,060,000, inclusive of consideration for Brownfield tax benefits and reimbursement of costs for plans, specifications and improvements to date. As a result of the sale, we recognized our $16,396,000 share of the net gain and received a $711,000 sales commission from Alexander’s, of which $250,000 was paid to a third-party broker.
The lease callsArmory Show
On July3, 2023, we completed the sale of The Armory Show, located in New York, for annual rent payments$24,410,000, subject to certain post-closing adjustments, and realized net proceeds of $5,000,000 plus payments$22,489,000. In connection with the sale, we recognized a net gain of $20,181,000 which is included in lieu“net gains on disposition of real estate taxes. Simultaneously,wholly owned and partially owned assets” on our consolidated statements of income.
Manhattan Retail Properties Sale
On August 10, 2023, we completed the joint venturesale of four Manhattan retail properties located at 510 Fifth Avenue, 148–150 Spring Street, 443 Broadway and 692 Broadway for $100,000,000 and realized net proceeds of $95,450,000. In connection with the sale, we recognized an impairment loss of $625,000 which is included in “impairment losses, transaction related costs and other” on our consolidated statements of income.
220 Central Park South
During the year ended December 31, 2023, we closed on the sale of two condominium units at 220 CPS for net proceeds of $24,484,000 resulting in a financial statement net gain of $14,127,000 which is included in "net gains on disposition of wholly owned and partially owned assets" on our consolidated statements of income. In connection with these sales, $2,168,000 of income tax expense was recognized on our consolidated statements of income.
38
Overview - continued
Financings
150 West 34th Street Loan Participation
On January 9, 2023, our $105,000,000 participation in the $205,000,000 mortgage loan on 150 West 34th Street was repaid, which reduced “other assets” and “mortgages payable, net” on our consolidated balance sheets by $105,000,000.
On October 4, 2023, we completed a $271,000,000 loan facility,$75,000,000 refinancing of 150 West 34th Street, of which $210,269,000$25,000,000 is outstanding at December 31, 2017.recourse to the Operating Partnership. The interest-only loan is at LIBORbears a rate of SOFR plus 3.25% (4.64% at December 31, 2017)2.15% and matures in February 2025, with three one-year as-of-right extension options and an additional one-year extension option available subject to satisfying a loan-to-value test. The interest rate on the loan is subject to an interest rate cap arrangement with a SOFR strike rate of 5.00%, which matures in February 2026. The loan replaces the previous $100,000,000 loan, which bore interest at SOFR plus 1.86%.
697-703 Fifth Avenue (Fifth Avenue and Times Square JV)
On June 201914, 2023, the Fifth Avenue and Times Square JV completed a restructuring of the 697-703 Fifth Avenue $421,000,000 non-recourse mortgage loan, which matured in December 2022. The restructured $355,000,000 loan, which had its principal reduced through an application of property-level reserves and funds from the partners, was split into (i) a $325,000,000 senior note, which bears interest at SOFR plus 2.00%, and (ii) a $30,000,000 junior note, which accrues interest at a fixed rate of 4.00%. The restructured loan matures in June 2025, with two one-year and one nine-month as-of-right extension options.
512 West 22nd Street
On May 26, 2017, Sterling Suffolk Racecourse, LLC ("Suffolk Downs JV"),June 28, 2023, a joint venture, in which we have a 21.2% equity interest, sold the property comprising the Suffolk Downs racetrack in East Boston, Massachusetts (“Suffolk Downs”) for $155,000,000, which resulted in net proceeds and a net gain to us of $15,314,000. In addition, we were repaid $29,318,000 of principal and $6,129,000 of accrued interest on our debt investments in Suffolk Downs JV, resulting in a net gain of $11,373,000.
825 Seventh Avenue
On July 24, 2023, a notional amount of $500,000,000 that caps LIBOR at a rate of 6.00%. The property was previously encumbered by a $300,000,000 interest-only mortgage at LIBOR plus 0.95% which was scheduled to mature in March 2021.
2023.
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Overview - continued