UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark one)
☑
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended: 
June 30, 20182019
 
Or
☐
TRANSITION REPORT PURSUANT TOSECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from: to 
Commission File Number:001-11954 (Vornado(Vornado Realty Trust)
Commission File Number:001-34482 (Vornado(Vornado Realty L.P.)

Vornado Realty Trust
Vornado Realty L.P.
 
Vornado Realty Trust
Vornado Realty L.P.
 
(Exact name of registrants as specified in its charter)
Vornado Realty Trust Maryland 22-1657560
  (State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification Number)
     
Vornado Realty L.P. Delaware 13-3925979
  (State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification Number)
888 Seventh Avenue,New York,New York10019
(Address of principal executive offices) (Zip Code)
(212)894-7000
(Registrants’ telephone number, including area code)
N/A
(Former name, former address and former fiscal year, if changed since last report)
.
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Vornado Realty Trust: Yes☑ No ☐    Vornado Realty L.P.: Yes☑ No ☐ 
 
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  
Vornado Realty Trust: Yes☑ No ☐    Vornado Realty L.P.: Yes☑ No ☐ 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” "non-accelerated filer," “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Vornado Realty Trust:  
☑Large Accelerated Filer 
☐
Accelerated Filer
☐Non-Accelerated Filer (Do not check if smaller reporting company) 
☐
Smaller Reporting Company
  
☐Emerging Growth Company
Vornado Realty L.P.:  
☐Large Accelerated Filer 
☐
Accelerated Filer
☑Non-Accelerated Filer (Do not check if smaller reporting company) 
☐
Smaller Reporting Company
  
☐Emerging Growth Company

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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  
Vornado Realty Trust: Yes☐  No ☑    Vornado Realty L.P.: Yes☐  No ☑ 

Securities registered pursuant to Section 12(b) of the Act:
RegistrantTitle of each classTrading Symbol(s)Name of each exchange on which registered
Vornado Realty TrustCommon Shares of beneficial interest, $.04 par value per shareVNONew York Stock Exchange
Cumulative Redeemable Preferred Shares of beneficial interest, liquidation preference $25.00 per share
Vornado Realty Trust5.70% Series KVNO/PKNew York Stock Exchange
Vornado Realty Trust5.40% Series LVNO/PLNew York Stock Exchange
Vornado Realty Trust5.25% Series MVNO/PMNew York Stock Exchange
As of June 30, 2018, 190,237,9572019, 190,813,470 of Vornado Realty Trust’s common shares of beneficial interest are outstanding.



EXPLANATORY NOTE


This report combines the quarterly reports on Form 10-Q for the period ended June 30, 20182019 of Vornado Realty Trust and Vornado Realty L.P. Unless stated otherwise or the context otherwise requires, references to “Vornado” refer to Vornado Realty Trust, a Maryland real estate investment trust (“REIT”), and references to the “Operating Partnership” refer to Vornado Realty L.P., a Delaware limited partnership. References to the “Company,” “we,” “us” and “our” mean collectively Vornado, the Operating Partnership and those subsidiaries consolidated by Vornado.

The Operating Partnership is the entity through which we conduct substantially all of our business and own, either directly or through subsidiaries, substantially all of our assets. Vornado is the sole general partner and also a 93.5%93.1%limited partner of the Operating Partnership. As the sole general partner of the Operating Partnership, Vornado has exclusive control of the Operating Partnership’s day-to-day management.

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

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

enhances investors’ understanding of Vornado and the Operating Partnership by enabling investors to view the business as a whole in the same manner as management views and operates the business;
eliminates duplicative disclosure and provides a more streamlined and readable presentation because a substantial portion of the disclosure applies to both Vornado and the Operating Partnership; and
creates time and cost efficiencies in the preparation of one combined report instead of two separate reports.

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




2

To help investors better understand the key differences between Vornado and the Operating Partnership, certain information for Vornado and the Operating Partnership in this report has been separated, as set forth below:
Item 1. Financial Statements (unaudited), which includes the following specific disclosures for Vornado Realty Trust and Vornado Realty L.P.:
Note 12. Redeemable Noncontrolling Interests/Redeemable Partnership Units
Note 13. Shareholders' Equity/Partners' Capital
Note 20. Income Per Share/Income Per Class A Unit
•
Note 11. Redeemable Noncontrolling Interests/Redeemable Partnership Units
•
Note 12. Shareholders' Equity/Partners' Capital
•
Note 19. Income Per Share/Income Per Class A Unit
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations includes information specific to each entity, where applicable.

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


3


PART I.Financial Information: Page Number
     
 
Item 1.
Financial Statements of Vornado Realty Trust:
  
     
  Consolidated Balance Sheets (Unaudited) as of June 30, 20182019 and December 31, 20172018 
56
     
  Consolidated Statements of Income (Unaudited) for the Three and Six Months Ended June 30, 20182019 and 20172018 
67
     
  Consolidated Statements of Comprehensive Income (Unaudited) for the Three and Six Months Ended June 30, 20182019 and 20172018 
78
     
  Consolidated Statements of Changes in Equity (Unaudited) for the Three and Six Months Ended June 30, 20182019 and 20172018 
89
     
  Consolidated Statements of Cash Flows (Unaudited) for the Six Months Ended June 30, 20182019 and 20172018 
1013
     
  Financial Statements of Vornado Realty L.P.:  
     
  Consolidated Balance Sheets (Unaudited) as of June 30, 20182019 and December 31, 20172018 
1215
     
  Consolidated Statements of Income (Unaudited) for the Three and Six Months Ended June 30, 20182019 and 20172018 
1316
     
  Consolidated Statements of Comprehensive Income (Unaudited) for the Three and Six Months Ended June 30, 20182019 and 20172018 
1417
     
  Consolidated Statements of Changes in Equity (Unaudited) for the Three and Six Months Ended June 30, 20182019 and 20172018 
1518
     
  Consolidated Statements of Cash Flows (Unaudited) for the Six Months Ended June 30, 20182019 and 20172018 
1722
     
  Vornado Realty Trust and Vornado Realty L.P.:  
     
  
Notes to Consolidated Financial Statements (Unaudited)
 
1924
     
  
Reports of Independent Registered Public Accounting Firm
 
4653
     
 
Item 2.
Management's Discussion and Analysis of Financial Condition and Results of Operations
 
4855
     
 
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
 
8895
     
 
Item 4.
Controls and Procedures
 
8996
     
PART II.Other Information:  
     
 
Item 1.
Legal Proceedings
 
9097
     
 
Item 1A.
Risk Factors
 
9097
     
 
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
 
9097
     
 
Item 3.
Defaults Upon Senior Securities
 
9097
     
 
Item 4.
Mine Safety Disclosures
 
9097
     
 
Item 5.
Other Information
 
9097
     
 
Item 6.
Exhibits
 
9097
     
EXHIBIT INDEX
 
9198
     
SIGNATURES 
9299
 
 
 


4

PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
VORNADO REALTY TRUST
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)



(Amounts in thousands, except unit, share, and per share amounts)June 30, 2018 December 31, 2017June 30, 2019 December 31, 2018
ASSETS      
Real estate, at cost:      
Land$3,175,830
 $3,143,648
$2,609,869
 $3,306,280
Buildings and improvements9,969,190
 9,898,605
7,813,812
 10,110,992
Development costs and construction in progress1,797,301
 1,615,101
1,835,054
 2,266,491
Moynihan Train Hall development expenditures665,226
 445,693
Leasehold improvements and equipment105,625
 98,941
118,428
 108,427
Total15,047,946
 14,756,295
13,042,389
 16,237,883
Less accumulated depreciation and amortization(3,035,523) (2,885,283)(2,894,202) (3,180,175)
Real estate, net12,012,423
 11,871,012
10,148,187
 13,057,708
Right-of-use assets380,214
 —
Cash and cash equivalents1,090,791
 1,817,655
922,604
 570,916
Restricted cash121,168
 97,157
154,306
 145,989
Marketable securities165,650
 182,752
41,081
 152,198
Tenant and other receivables, net of allowance for doubtful accounts of $3,891 and $5,52665,773
 58,700
Tenant and other receivables, net of allowance for doubtful accounts of $4,154 as of December 31, 201885,153
 73,322
Investments in partially owned entities959,801
 1,056,829
4,025,534
 858,113
Real estate fund investments373,039
 354,804
306,596
 318,758
Receivable arising from the straight-lining of rents, net of allowance of $1,798 and $954936,614
 926,711
Deferred leasing costs, net of accumulated amortization of $198,100 and $191,827443,859
 403,492
Identified intangible assets, net of accumulated amortization of $163,406 and $150,837146,370
 159,260
Assets related to discontinued operations52
 1,357
220 Central Park South condominium units ready for sale328,786
 99,627
Receivable arising from the straight-lining of rents, net of allowance of $1,644 as of December 31, 2018749,198
 935,131
Deferred leasing costs, net of accumulated amortization of $187,478 and $207,529357,511
 400,313
Identified intangible assets, net of accumulated amortization of $98,187 and $172,11432,478
 136,781
Other assets550,543
 468,205
382,209
 431,938
$16,866,083
 $17,397,934
$17,913,857
 $17,180,794
LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND EQUITY      
Mortgages payable, net$8,108,618
 $8,137,139
$6,256,808
 $8,167,798
Senior unsecured notes, net843,417
 843,614
445,465
 844,002
Unsecured term loan, net749,494
 748,734
745,331
 744,821
Unsecured revolving credit facilities80,000
 —
80,000
 80,000
Lease liabilities483,011
 —
Moynihan Train Hall obligation665,226
 445,693
Accounts payable and accrued expenses394,079
 415,794
392,581
 430,976
Deferred revenue187,934
 227,069
66,835
 167,730
Deferred compensation plan100,368
 109,177
99,879
 96,523
Liabilities related to discontinued operations214
 3,620
Preferred shares redeemed on January 4 and 11, 2018—
 455,514
Other liabilities520,331
 464,635
320,515
 311,806
Total liabilities10,984,455
 11,405,296
9,555,651
 11,289,349
Commitments and contingencies
 

 

Redeemable noncontrolling interests:      
Class A units - 12,616,515 and 12,528,899 units outstanding932,613
 979,509
Series D cumulative redeemable preferred units - 177,101 units outstanding5,428
 5,428
Class A units - 13,377,956 and 12,544,477 units outstanding857,527
 778,134
Series D cumulative redeemable preferred units - 141,401 and 177,101 units outstanding4,535
 5,428
Total redeemable noncontrolling interests938,041
 984,937
862,062
 783,562
Vornado's shareholders' equity:   
Preferred shares of beneficial interest: no par value per share; authorized 110,000,000 shares; issued and outstanding 36,799,573 shares891,325
 891,988
Common shares of beneficial interest: $0.04 par value per share; authorized 250,000,000 shares; issued and outstanding 190,237,957 and 189,983,858 shares7,587
 7,577
Shareholders' equity:   
Preferred shares of beneficial interest: no par value per share; authorized 110,000,000 shares; issued and outstanding 36,797,280 and 36,798,580 shares891,256
 891,294
Common shares of beneficial interest: $0.04 par value per share; authorized 250,000,000 shares; issued and outstanding 190,813,470 and 190,535,499 shares7,611
 7,600
Additional capital7,555,993
 7,492,658
7,845,748
 7,725,857
Earnings less than distributions(4,206,381) (4,183,253)(1,845,995) (4,167,184)
Accumulated other comprehensive income33,351
 128,682
Total Vornado shareholders' equity4,281,875
 4,337,652
Accumulated other comprehensive (loss) income(38,066) 7,664
Total shareholders' equity6,860,554
 4,465,231
Noncontrolling interests in consolidated subsidiaries661,712
 670,049
635,590
 642,652
Total equity4,943,587
 5,007,701
7,496,144
 5,107,883
$16,866,083
 $17,397,934
$17,913,857
 $17,180,794
See notes to consolidated financial statements (unaudited).

VORNADO REALTY TRUST
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)


(Amounts in thousands, except per share amounts)For the Three Months Ended
June 30,		 For the Six Months Ended
June 30,		For the Three Months Ended June 30, For the Six Months Ended June 30,
2018 2017 2018 20172019 2018 2019 2018
REVENUES:              
Property rentals$444,595
 $428,643
 $884,705
 $843,535
Tenant expense reimbursements58,312
 51,657
 118,622
 110,690
Rental revenues$421,299
 $502,907
 $921,176
 $1,003,327
Fee and other income38,911
 30,787
 74,928
 64,920
41,804
 38,911
 76,595
 74,928
Total revenues541,818
 511,087
 1,078,255
 1,019,145
463,103
 541,818
 997,771
 1,078,255
EXPENSES:              
Operating235,981
 215,700
 473,583
 436,359
(220,752) (235,981) (467,647) (473,583)
Depreciation and amortization111,846
 105,123
 220,532
 210,251
(113,035) (111,846) (229,744) (220,532)
General and administrative34,427
 35,405
 76,960
 81,580
(38,872) (34,427) (96,892) (76,960)
Expense from deferred compensation plan liability2,077
 789
 1,673
 3,258
(1,315) (2,077) (6,748) (1,673)
Transaction related costs and other1,017
 260
 14,173
 1,012
Transaction related costs, impairment losses and other(101,590) (1,017) (101,739) (14,173)
Total expenses385,348
 357,277
 786,921
 732,460
(475,564) (385,348) (902,770) (786,921)
Operating income156,470
 153,810
 291,334
 286,685
       
Income (loss) from partially owned entities8,757
 46,021
 (1,147) 47,379
22,873
 8,757
 30,193
 (1,147)
(Loss) income from real estate fund investments(28,976) 4,391
 (37,783) 4,659
Loss from real estate fund investments(15,803) (28,976) (15,970) (37,783)
Interest and other investment income, net30,892
 8,541
 6,508
 15,236
7,840
 30,892
 12,885
 6,508
Income from deferred compensation plan assets2,077
 789
 1,673
 3,258
1,315
 2,077
 6,748
 1,673
Interest and debt expense(87,657) (84,789) (175,823) (167,513)(63,029) (87,657) (165,492) (175,823)
Net gain on transfer to Fifth Avenue and Times Square JV2,571,099
 —
 2,571,099
 —
Net gains on disposition of wholly owned and partially owned assets23,559
 —
 23,559
 501
111,713
 23,559
 332,007
 23,559
Income before income taxes105,122
 128,763
 108,321
 190,205
2,623,547
 105,122
 2,866,471
 108,321
Income tax (expense) benefit(467) 610
 (3,021) (2,303)
Income tax expense(26,914) (467) (56,657) (3,021)
Income from continuing operations104,655
 129,373
 105,300
 187,902
2,596,633
 104,655
 2,809,814
 105,300
Income from discontinued operations683
 18,111
 320
 33,429
Income (loss) from discontinued operations60
 683
 (77) 320
Net income105,338
 147,484
 105,620
 221,331
2,596,693
 105,338
 2,809,737
 105,620
Less net loss (income) attributable to noncontrolling interests in:       
Less net (income) loss attributable to noncontrolling interests in:       
Consolidated subsidiaries26,175
 (7,677) 34,449
 (14,414)(21,451) 26,175
 (28,271) 34,449
Operating Partnership(7,445) (7,706) (6,321) (10,935)(162,515) (7,445) (174,717) (6,321)
Net income attributable to Vornado124,068
 132,101
 133,748
 195,982
2,412,727
 124,068
 2,606,749
 133,748
Preferred share dividends(12,534) (16,129) (25,569) (32,258)(12,532) (12,534) (25,066) (25,569)
Preferred share issuance costs—
 —
 (14,486) —
—
 —
 —
 (14,486)
NET INCOME attributable to common shareholders$111,534
 $115,972
 $93,693
 $163,724
$2,400,195
 $111,534
 $2,581,683
 $93,693
              
INCOME PER COMMON SHARE – BASIC:              
Income from continuing operations, net$0.59
 $0.52
 $0.49
 $0.70
Income from discontinued operations, net—
 0.09
 —
 0.16
Net income per common share$0.59
 $0.61
 $0.49
 $0.86
$12.58
 $0.59
 $13.53
 $0.49
Weighted average shares outstanding190,200
 189,395
 190,141
 189,304
190,781
 190,200
 190,735
 190,141
              
INCOME PER COMMON SHARE – DILUTED:              
Income from continuing operations, net$0.58
 $0.52
 $0.49
 $0.70
Income from discontinued operations, net—
 0.09
 —
 0.16
Net income per common share$0.58
 $0.61
 $0.49
 $0.86
$12.56
 $0.58
 $13.51
 $0.49
Weighted average shares outstanding191,168
 190,444
 191,190
 190,674
191,058
 191,168
 191,030
 191,190
       
DIVIDENDS PER COMMON SHARE$0.63
 $0.71
 $1.26
 $1.42
See notes to consolidated financial statements (unaudited).


VORNADO REALTY TRUST
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(UNAUDITED)


(Amounts in thousands)For the Three Months Ended June 30, For the Six Months Ended June 30,For the Three Months Ended June 30, For the Six Months Ended June 30,
2018 2017 2018 20172019 2018 2019 2018
Net income$105,338
 $147,484
 $105,620
 $221,331
$2,596,693
 $105,338
 $2,809,737
 $105,620
Other comprehensive income (loss):              
Increase (reduction) in value of interest rate swaps and other2,908
 (1,204) 13,166
 4,638
Pro rata share of other comprehensive income (loss) of nonconsolidated subsidiaries390
 (980) 736
 (1,031)
Reduction in unrealized net gain on available-for-sale securities—
 (1,206) —
 (16,215)
Pro rata share of amounts reclassified from accumulated other comprehensive income of a nonconsolidated subsidiary—
 —
 —
 9,268
Other comprehensive income (loss) of nonconsolidated subsidiaries25
 390
 (960) 736
(Reduction) increase in value of interest rate swaps and other(28,512) 2,908
 (45,541) 13,166
Amount reclassified from accumulated other comprehensive loss relating to a nonconsolidated subsidiary—
 —
 (2,311) —
Comprehensive income108,636
 144,094
 119,522
 217,991
2,568,206
 108,636
 2,760,925
 119,522
Less comprehensive loss (income) attributable to noncontrolling interests18,525
 (15,173) 27,269
 (25,142)
Less comprehensive (income) loss attributable to noncontrolling interests(182,160) 18,525
 (199,906) 27,269
Comprehensive income attributable to Vornado$127,161
 $128,921
 $146,791
 $192,849
$2,386,046
 $127,161
 $2,561,019
 $146,791
See notes to consolidated financial statements (unaudited).


VORNADO REALTY TRUST
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(UNAUDITED)


(Amounts in thousands) Preferred Shares Common Shares Additional Capital Earnings Less Than Distributions Accumulated Other Comprehensive Income Non-controlling Interests in Consolidated Subsidiaries Total Equity
  Shares Amount Shares Amount     
Balance, December 31, 2017 36,800
 $891,988
 189,984
 $7,577
 $7,492,658
 $(4,183,253) $128,682
 $670,049
 $5,007,701
Cumulative effect of accounting change (see Note 3) —
 —
 —
 —
 —
 122,893
 (108,374) —
 14,519
Net income attributable to Vornado —
 —
 —
 —
 —
 133,748
 —
 —
 133,748
Net loss attributable to noncontrolling interests in consolidated subsidiaries —
 —
 —
 —
 —
 —
 —
 (34,449) (34,449)
Dividends on common shares —
 —
 —
 —
 —
 (239,594) —
 —
 (239,594)
Dividends on preferred shares —
 —
 —
 —
 —
 (25,569) —
 —
 (25,569)
Preferred share issuance costs —
 —
 —
 —
 —
 (14,486) —
 —
 (14,486)
Common shares issued:                 
Upon redemption of Class A units, at redemption value —
 —
 176
 7
 12,239
 —
 —
 —
 12,246
Under employees' share option plan —
 —
 61
 3
 3,783
 —
 —
 —
 3,786
Under dividend reinvestment plan —
 —
 10
 —
 685
 —
 —
 —
 685
Contributions:               

 

Real estate fund investments —
 —
 —
 —
 —
 —
 —
 45,347
 45,347
Other —
 —
 —
 —
 —
 —
 —
 14,211
 14,211
Distributions:                 
Real estate fund investments —
 —
 —
 —
 —
 —
 —
 (10,246) (10,246)
Other —
 —
 —
 —
 —
 —
 —
 (23,201) (23,201)
Preferred share issuance —
 (663) —
 —
 —
 —
 —
 —
 (663)
Deferred compensation shares and options —
 —
 7
 —
 585
 (121) —
 —
 464
Pro rata share of other comprehensive income of nonconsolidated subsidiaries —
 —
 —
 —
 —
 —
 736
 —
 736
Increase in value of interest rate swaps —
 —
 —
 —
 —
 —
 13,166
 —
 13,166
Unearned 2015 Out-Performance Plan awards acceleration —
 —
 —
 —
 9,046
 —
 —
 —
 9,046
Adjustments to carry redeemable Class A units at redemption value —
 —
 —
 —
 36,450
 —
 —
 —
 36,450
Redeemable noncontrolling interests' share of above adjustments —
 —
 —
 —
 —
 —
 (859) —
 (859)
Other —
 —
 —
 —
 547
 1
 —
 1
 549
Balance, June 30, 2018 36,800
 $891,325
 190,238
 $7,587
 $7,555,993
 $(4,206,381) $33,351
 $661,712
 $4,943,587
(Amounts in thousands) Preferred Shares Common Shares Additional Capital Earnings Less Than Distributions Accumulated Other Comprehensive Loss Non-controlling Interests in Consolidated Subsidiaries Total Equity
  Shares Amount Shares Amount     
For the Three Months Ended
June 30, 2019:		                  
Balance, March 31, 2019 36,798
 $891,263
 190,761
 $7,609
 $7,676,770
 $(4,120,265) $(11,385) $646,900
 $5,090,892
Net income attributable to Vornado —
 —
 —
 —
 —
 2,412,727
 —
 —
 2,412,727
Net income attributable to noncontrolling interests in consolidated subsidiaries —
 —
 —
 —
 —
 —
 —
 21,451
 21,451
Dividends on common shares ($0.66 per share) —
 —
 —
 —
 —
 (125,927) —
 —
 (125,927)
Dividends on preferred shares (see Note 12 for dividends per share amounts) —
 —
 —
 —
 —
 (12,532) —
 —
 (12,532)
Common shares issued:                 
Upon redemption of Class A units, at redemption value —
 —
 44
 2
 2,946
 —
 —
 —
 2,948
Under employees' share option plan —
 —
 3
 —
 174
 —
 —
 —
 174
Under dividend reinvestment plan —
 —
 5
 —
 361
 —
 —
 —
 361
Contributions —
 —
 —
 —
 —
 —
 —
 3,121
 3,121
Distributions —
 —
 —
 —
 —
 —
 —
 (24,440) (24,440)
Conversion of Series A preferred shares to common shares (1) (7) 1
 —
 7
 —
 —
 —
 —
Deferred compensation shares and options —
 —
 (1) —
 266
 —
 —
 —
 266
Other comprehensive income of nonconsolidated subsidiaries —
 —
 —
 —
 —
 —
 25
 —
 25
Reduction in value of interest rate swaps —
 —
 —
 —
 —
 —
 (28,515) —
 (28,515)
Adjustments to carry redeemable Class A units at redemption value —
 —
 —
 —
 165,225
 —
 —
 —
 165,225
Redeemable noncontrolling interests' share of above adjustments —
 —
 —
 —
 —
 —
 1,806
 —
 1,806
Deconsolidation of partially owned entity —
 —
 —
 —
 —
 —
 —
 (11,441) (11,441)
Other —
 —
 —
 —
 (1) 2
 3
 (1) 3
Balance, June 30, 2019 36,797
 $891,256
 190,813
 $7,611
 $7,845,748
 $(1,845,995) $(38,066) $635,590
 $7,496,144

See notes to consolidated financial statements (unaudited).













VORNADO REALTY TRUST
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY - CONTINUED
(UNAUDITED)


(Amounts in thousands) Preferred Shares Common Shares Additional
Capital		 Earnings
Less Than
Distributions		 Accumulated
Other
Comprehensive
Income		 Non-
controlling
Interests in
Consolidated
Subsidiaries		 Total
Equity		 Preferred Shares Common Shares Additional Capital Earnings Less Than Distributions Accumulated Other Comprehensive Income Non-controlling Interests in Consolidated Subsidiaries Total Equity
 Shares Amount Shares Amount  Shares Amount Shares Amount 
Balance, December 31, 2016 42,825
 $1,038,055
 189,101
 $7,542
 $7,153,332
 $(1,419,382) $118,972
 $719,977
 $7,618,496
For the Three Months Ended June 30, 2018:                  
Balance, March 31, 2018 36,800
 $891,325
 190,169
 $7,584
 $7,629,013
 $(4,198,088) $30,258
 $664,786
 $5,024,878
Net income attributable to Vornado —
 —
 —
 —
 —
 195,982
 —
 —
 195,982
 —
 —
 —
 —
 —
 124,068
 —
 —
 124,068
Net income attributable to noncontrolling interests in consolidated subsidiaries —
 —
 —
 —
 —
 —
 —
 14,414
 14,414
Dividends on common shares —
 —
 —
 —
 —
 (268,817) —
 —
 (268,817)
Dividends on preferred shares —
 —
 —
 —
 —
 (32,258) —
 —
 (32,258)
Net loss attributable to noncontrolling interests in consolidated subsidiaries —
 —
 —
 —
 —
 —
 —
 (26,175) (26,175)
Dividends on common shares ($0.63 per share) —
 —
 —
 —
 —
 (119,830) —
 —
 (119,830)
Dividends on preferred shares (see Note 12 for dividends per share amounts) —
 —
 —
 —
 —
 (12,534) —
 —
 (12,534)
Common shares issued:                                    
Upon redemption of Class A units, at redemption value —
 —
 249
 10
 25,552
 —
 —
 —
 25,562
 —
 —
 58
 2
 3,852
 —
 —
 —
 3,854
Under employees' share option plan —
 —
 103
 4
 8,842
 —
 —
 —
 8,846
 —
 —
 6
 1
 351
 —
 —
 —
 352
Under dividend reinvestment plan —
 —
 8
 —
 780
 —
 —
 —
 780
 —
 —
 5
 —
 350
 —
 —
 —
 350
Contributions —
 —
 —
 —
 —
 —
 —
 991
 991
Contributions:                  
Real estate fund investments —
 —
 —
 —
 —
 —
 —
 43,653
 43,653
Other —
 —
 —
 —
 —
 —
 —
 7,535
 7,535
Distributions:                                    
Real estate fund investments —
 —
 —
 —
 —
 —
 —
 (6,200) (6,200) —
 —
 —
 —
 —
 —
 —
 (8,336) (8,336)
Other —
 —
 —
 —
 —
 —
 —
 (1,339) (1,339) —
 —
 —
 —
 —
 —
 —
 (19,751) (19,751)
Conversion of Series A preferred shares to common shares (2) (44) 2
 —
 44
 —
 —
 —
 —
Deferred compensation shares and options —
 —
 2
 —
 1,076
 (285) —
 —
 791
 —
 —
 —
 —
 287
 —
 —
 —
 287
Reduction in unrealized net gain on available-for-sale securities —
 —
 —
 —
 —
 —
 (16,215) —
 (16,215)
Pro rata share of amounts reclassified related to a nonconsolidated subsidiary —
 —
 —
 —
 —
 —
 9,268
 —
 9,268
Pro rata share of other comprehensive loss of nonconsolidated subsidiaries —
 —
 —
 —
 —
 —
 (1,031) —
 (1,031)
Other comprehensive income of nonconsolidated subsidiaries —
 —
 —
 —
 —
 —
 390
 —
 390
Increase in value of interest rate swaps —
 —
 —
 —
 —
 —
 4,636
 —
 4,636
 —
 —
 —
 —
 —
 —
 2,908
 —
 2,908
Adjustments to carry redeemable Class A units at redemption value —
 —
 —
 —
 90,208
 —
 —
 —
 90,208
 —
 —
 —
 —
 (78,406) —
 —
 —
 (78,406)
Redeemable noncontrolling interests' share of above adjustments —
 —
 —
 —
 —
 —
 207
 —
 207
 —
 —
 —
 —
 —
 —
 (205) —
 (205)
Other —
 —
 —
 —
 —
 (46) 2
 (47) (91) —
 —
 —
 —
 546
 3
 —
 —
 549
Balance, June 30, 2017 42,823
 $1,038,011
 189,465
 $7,556
 $7,279,834
 $(1,524,806) $115,839
 $727,796
 $7,644,230
Balance, June 30, 2018 36,800
 $891,325
 190,238
 $7,587
 $7,555,993
 $(4,206,381) $33,351
 $661,712
 $4,943,587
See notes to consolidated financial statements (unaudited).

















VORNADO REALTY TRUST
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY - CONTINUED
(UNAUDITED)


(Amounts in thousands) Preferred Shares Common Shares Additional
Capital		 Earnings
Less Than
Distributions		 Accumulated
Other
Comprehensive
Income (Loss)		 Non-
controlling
Interests in
Consolidated
Subsidiaries		 Total
Equity
  Shares Amount Shares Amount     
For the Six Months Ended
June 30, 2019:		                  
Balance, December 31, 2018 36,800
 $891,294
 190,535
 $7,600
 $7,725,857
 $(4,167,184) $7,664
 $642,652
 $5,107,883
Net income attributable to Vornado —
 —
 —
 —
 —
 2,606,749
 —
 —
 2,606,749
Net income attributable to noncontrolling interests in consolidated subsidiaries —
 —
 —
 —
 —
 —
 —
 28,271
 28,271
Dividends on common shares ($1.32 per share) —
 —
 —
 —
 —
 (251,803) —
 —
 (251,803)
Dividends on preferred shares (see Note 12 for dividends per share amounts) —
 —
 —
 —
 —
 (25,066) —
 —
 (25,066)
Common shares issued:                  
Upon redemption of Class A units, at redemption value —
 —
 92
 4
 6,125
 —
 —
 —
 6,129
Under employees' share option plan —
 —
 165
 7
 1,338
 (8,692) —
 —
 (7,347)
Under dividend reinvestment plan —
 —
 10
 —
 701
 —
 —
 —
 701
Contributions:               

 

Real estate fund investments —
 —
 —
 —
 —
 —
 —
 3,384
 3,384
Other —
 —
 —
 —
 —
 —
 —
 4,931
 4,931
Distributions —
 —
 —
 —
 —
 —
 —
 (32,204) (32,204)
Conversion of Series A preferred shares to common shares (2) (38) 3
 —
 38
 —
 —
 —
 —
Deferred compensation shares and options —
 —
 8
 —
 563
 —
 —
 —
 563
Amount reclassified related to a nonconsolidated subsidiary —
 —
 —
 —
 —
 —
 (2,311) —
 (2,311)
Other comprehensive loss of nonconsolidated subsidiaries —
 —
 —
 —
 —
 —
 (960) —
 (960)
Reduction in value of interest rate swaps —
 —
 —
 —
 —
 —
 (45,544) —
 (45,544)
Unearned 2016 Out-Performance Plan awards acceleration —
 —
 —
 —
 11,720
 —
 —
 —
 11,720
Adjustments to carry redeemable Class A units at redemption value —
 —
 —
 —
 99,407
 —
 —
 —
 99,407
Redeemable noncontrolling interests' share of above adjustments —
 —
 —
 —
 —
 —
 3,082
 —
 3,082
Deconsolidation of partially owned entity —
 —
 —
 —
 —
 —
 —
 (11,441) (11,441)
Other (1) —
 —
 —
 (1) 1
 3
 (3) —
Balance, June 30, 2019 36,797
 $891,256
 190,813
 $7,611
 $7,845,748
 $(1,845,995) $(38,066) $635,590
 $7,496,144
See notes to consolidated financial statements (unaudited).


VORNADO REALTY TRUST
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY - CONTINUED
(UNAUDITED)

(Amounts in thousands) Preferred Shares Common Shares Additional Capital Earnings Less Than Distributions Accumulated Other Comprehensive Income Non-controlling Interests in Consolidated Subsidiaries Total Equity
  Shares Amount Shares Amount     
For the Six Months Ended
June 30, 2018:		                  
Balance, December 31, 2017 36,800
 $891,988
 189,984
 $7,577
 $7,492,658
 $(4,183,253) $128,682
 $670,049
 $5,007,701
Cumulative effect of accounting change —
 —
 —
 —
 —
 122,893
 (108,374) —
 14,519
Net income attributable to Vornado —
 —
 —
 —
 —
 133,748
 —
 —
 133,748
Net loss attributable to noncontrolling interests in consolidated subsidiaries —
 —
 —
 —
 —
 —
 —
 (34,449) (34,449)
Dividends on common shares ($1.26 per share) —
 —
 —
 —
 —
 (239,594) —
 —
 (239,594)
Dividends on preferred shares (see Note 12 for dividends per share amounts) —
 —
 —
 —
 —
 (25,569) —
 —
 (25,569)
Preferred share issuance costs —
 —
 —
 —
 —
 (14,486) —
 —
 (14,486)
Common shares issued:                  
Upon redemption of Class A units, at redemption value —
 —
 176
 7
 12,239
 —
 —
 —
 12,246
Under employees' share option plan —
 —
 61
 3
 3,783
 —
 —
 —
 3,786
Under dividend reinvestment plan —
 —
 10
 —
 685
 —
 —
 —
 685
Contributions:                  
Real estate fund investments —
 —
 —
 —
 —
 —
 —
 45,347
 45,347
Other —
 —
 —
 —
 —
 —
 —
 14,211
 14,211
Distributions:                  
Real estate fund investments —
 —
 —
 —
 —
 —
 —
 (10,246) (10,246)
Other —
 —
 —
 —
 —
 —
 —
 (23,201) (23,201)
Preferred share issuance —
 (663) —
 —
 —
 —
 —
 —
 (663)
Deferred compensation shares and options —
 —
 7
 —
 585
 (121) —
 —
 464
Other comprehensive income of nonconsolidated subsidiaries —
 —
 —
 —
 —
 —
 736
 —
 736
Increase in value of interest rate swaps —
 —
 —
 —
 —
 —
 13,166
 —
 13,166
Unearned 2015 Out-Performance Plan awards acceleration —
 —
 —
 —
 9,046
 —
 —
 —
 9,046
Adjustments to carry redeemable Class A units at redemption value —
 —
 —
 —
 36,450
 —
 —
 —
 36,450
Redeemable noncontrolling interests' share of above adjustments —
 —
 —
 —
 —
 —
 (859) —
 (859)
Other —
 —
 —
 —
 547
 1
 —
 1
 549
Balance, June 30, 2018 36,800
 $891,325
 190,238
 $7,587
 $7,555,993
 $(4,206,381) $33,351
 $661,712
 $4,943,587
See notes to consolidated financial statements (unaudited).




VORNADO REALTY TRUST
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)


(Amounts in thousands)For the Six Months Ended June 30,For the Six Months Ended June 30,
2018 20172019 2018
Cash Flows from Operating Activities:      
Net income$105,620
 $221,331
$2,809,737
 $105,620
Adjustments to reconcile net income to net cash provided by operating activities:      
Net gain on transfer to Fifth Avenue and Times Square JV(2,571,099) —
Net gains on disposition of wholly owned and partially owned assets(332,007) (23,559)
Depreciation and amortization (including amortization of deferred financing costs)233,748
 289,898
240,866
 233,748
Non-cash impairment loss on 608 Fifth Avenue right-of-use asset75,220
 —
Stock-based compensation expense42,174
 20,645
Distributions of income from partially owned entities45,999
 44,778
31,820
 45,999
Net realized and unrealized losses on real estate fund investments30,426
 6,201
Equity in net (income) loss of partially owned entities(30,193) 1,147
Real estate impairment losses26,140
 —
Prepayment penalty on redemption of senior unsecured notes due 202222,058
 —
Net realized and unrealized loss on real estate fund investments16,162
 30,426
Amortization of below-market leases, net(11,168) (21,107)
Straight-lining of rents3,733
 (10,122)
(Increase) decrease in fair value of marketable securities(1,773) 17,102
Return of capital from real estate fund investments—
 20,291
Other non-cash adjustments24,320
 30,070
18,588
 3,675
Net gains on disposition of wholly owned and partially owned assets(23,559) (501)
Amortization of below-market leases, net(21,107) (24,391)
Return of capital from real estate fund investments20,291
 —
Decrease in fair value of marketable securities17,102
 —
Straight-lining of rents(10,122) (28,581)
Equity in net loss (income) of partially owned entities1,147
 (47,721)
Net gains on sale of real estate and other—
 (2,267)
Changes in operating assets and liabilities:      
Real estate fund investments(68,950) —
(4,000) (68,950)
Tenant and other receivables, net(7,511) 3,974
(12,759) (7,511)
Prepaid assets(19,092) (146,770)(5,702) (19,092)
Other assets(114,881) (5,606)(8,498) (114,881)
Accounts payable and accrued expenses(11,036) (6,029)(11,482) (11,036)
Other liabilities38,865
 (18,169)(4,965) 38,865
Net cash provided by operating activities241,260
 316,217
292,852
 241,260
      
Cash Flows from Investing Activities:      
Proceeds from transfer of interest in Fifth Avenue and Times Square JV (net of $35,562 of transaction costs and $10,899 of deconsolidated cash and restricted cash)1,255,756
 —
Proceeds from sale of condominium units at 220 Central Park South690,734
 —
Proceeds from redemption of 640 Fifth Avenue preferred equity500,000
 —
Development costs and construction in progress(185,039) (191,073)(289,532) (185,039)
Moynihan Train Hall expenditures(205,783) —
Proceeds from sales of marketable securities167,852
 —
Additions to real estate(113,300) (139,611)(120,060) (113,300)
Proceeds from sale of real estate and related investments108,512
 44,599
Distributions of capital from partially owned entities81,997
 113,507
24,880
 81,997
Investments in partially owned entities(15,588) (26,663)
Acquisitions of real estate and other(56,500) (11,841)(3,260) (56,500)
Proceeds from sales of real estate and related investments44,599
 5,180
Investments in partially owned entities(26,663) (27,720)
Proceeds from repayments of mortgage loans receivable—
 29
Net cash used in investing activities(254,906) (251,529)
Net cash provided by (used in) investing activities2,113,511
 (254,906)

See notes to consolidated financial statements (unaudited).



VORNADO REALTY TRUST
CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED
(UNAUDITED)




(Amounts in thousands)For the Six Months Ended June 30,For the Six Months Ended June 30,
2018 20172019 2018
Cash Flows from Financing Activities:      
Redemption of preferred shares$(470,000) $—
Repayments of borrowings$(1,943,157) $(148,408)
Proceeds from borrowings458,955
 189,042
Purchase of marketable securities in connection with defeasance of mortgage payable(407,126) —
Dividends paid on common shares(239,594) (268,817)(251,803) (239,594)
Proceeds from borrowings189,042
 226,929
Repayments of borrowings(148,408) (13,971)
Contributions from noncontrolling interests59,558
 991
Moynihan Train Hall reimbursement from Empire State Development205,783
 —
Distributions to noncontrolling interests(49,338) (25,617)(49,140) (49,338)
Dividends paid on preferred shares(30,047) (32,258)(25,066) (30,047)
Prepayment penalty on redemption of senior unsecured notes due 2022(22,058) —
Debt issuance costs(13,522) (3,289)
Repurchase of shares related to stock compensation agreements and related tax withholdings and other(8,692) (784)
Contributions from noncontrolling interests8,315
 59,558
Proceeds received from exercise of employee share options and other4,471
 9,626
2,046
 4,471
Debt issuance costs(3,289) (2,919)
Redemption of preferred shares(893) (470,000)
Debt prepayment and extinguishment costs(818) —
—
 (818)
Repurchase of shares related to stock compensation agreements and related tax withholdings and other(784) (285)
Net cash used in financing activities(689,207) (106,321)(2,046,358) (689,207)
Net decrease in cash and cash equivalents and restricted cash(702,853) (41,633)
Net increase (decrease) in cash and cash equivalents and restricted cash360,005
 (702,853)
Cash and cash equivalents and restricted cash at beginning of period1,914,812
 1,599,322
716,905
 1,914,812
Cash and cash equivalents and restricted cash at end of period$1,211,959
 $1,557,689
$1,076,910
 $1,211,959
      
Reconciliation of Cash and Cash Equivalents and Restricted Cash:      
Cash and cash equivalents at beginning of period$1,817,655
 $1,501,027
$570,916
 $1,817,655
Restricted cash at beginning of period97,157
 95,032
145,989
 97,157
Restricted cash included in discontinued operations at beginning of period—
 3,263
Cash and cash equivalents and restricted cash at beginning of period$1,914,812
 $1,599,322
$716,905
 $1,914,812
      
Cash and cash equivalents at end of period$1,090,791
 $1,471,303
$922,604
 $1,090,791
Restricted cash at end of period121,168
 82,651
154,306
 121,168
Restricted cash included in discontinued operations at end of period—
 3,735
Cash and cash equivalents and restricted cash at end of period$1,211,959
 $1,557,689
$1,076,910
 $1,211,959
      
Supplemental Disclosure of Cash Flow Information:      
Cash payments for interest, excluding capitalized interest of $28,558 and $20,050$155,875
 $175,718
Cash payments for interest, excluding capitalized interest of $39,643 and $28,558$165,022
 $155,875
Cash payments for income taxes$4,365
 $3,151
$28,697
 $4,365
      
Non-Cash Investing and Financing Activities:      
Investments received in exchange for transfer to Fifth Avenue and Times Square JV:   
Preferred equity$2,327,750
 $—
Common equity1,449,495
 —
Reclassification of condominium units from "development costs and construction in progress" to "220 Central Park South condominium units ready for sale"647,683
 —
Lease liabilities arising from the recognition of right-of-use assets526,866
 —
Marketable securities transferred in connection with the defeasance of mortgage payable(407,126) —
Defeasance of mortgage payable390,000
 —
Adjustments to carry redeemable Class A units at redemption value99,407
 36,450
Write-off of fully depreciated assets(93,390) (38,117)
Accrued capital expenditures included in accounts payable and accrued expenses$54,176
 $59,733
68,900
 54,176
Write-off of fully depreciated assets(38,117) (35,727)
Adjustments to carry redeemable Class A units at redemption value36,450
 90,208
Reduction in unrealized net gain on available-for-sale securities—
 (16,215)
Amounts related to our investment in Pennsylvania Real Estate Investment Trust reclassified from "investments in partially owned entities" and "accumulated other comprehensive (loss) income" to "marketable securities" upon conversion of operating partnership units to common shares54,962
 —

See notes to consolidated financial statements (unaudited).

VORNADO REALTY L.P.
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)




(Amounts in thousands, except unit amounts)June 30, 2018 December 31, 2017June 30, 2019 December 31, 2018
ASSETS      
Real estate, at cost:      
Land$3,175,830
 $3,143,648
$2,609,869
 $3,306,280
Buildings and improvements9,969,190
 9,898,605
7,813,812
 10,110,992
Development costs and construction in progress1,797,301
 1,615,101
1,835,054
 2,266,491
Moynihan Train Hall development expenditures665,226
 445,693
Leasehold improvements and equipment105,625
 98,941
118,428
 108,427
Total15,047,946
 14,756,295
13,042,389
 16,237,883
Less accumulated depreciation and amortization(3,035,523) (2,885,283)(2,894,202) (3,180,175)
Real estate, net12,012,423
 11,871,012
10,148,187
 13,057,708
Right-of-use assets380,214
 —
Cash and cash equivalents1,090,791
 1,817,655
922,604
 570,916
Restricted cash121,168
 97,157
154,306
 145,989
Marketable securities165,650
 182,752
41,081
 152,198
Tenant and other receivables, net of allowance for doubtful accounts of $3,891 and $5,52665,773
 58,700
Tenant and other receivables, net of allowance for doubtful accounts of $4,154 as of December 31, 201885,153
 73,322
Investments in partially owned entities959,801
 1,056,829
4,025,534
 858,113
Real estate fund investments373,039
 354,804
306,596
 318,758
Receivable arising from the straight-lining of rents, net of allowance of $1,798 and $954936,614
 926,711
Deferred leasing costs, net of accumulated amortization of $198,100 and $191,827443,859
 403,492
Identified intangible assets, net of accumulated amortization of $163,406 and $150,837146,370
 159,260
Assets related to discontinued operations52
 1,357
220 Central Park South condominium units ready for sale328,786
 99,627
Receivable arising from the straight-lining of rents, net of allowance of $1,644 as of December 31, 2018749,198
 935,131
Deferred leasing costs, net of accumulated amortization of $187,478 and $207,529357,511
 400,313
Identified intangible assets, net of accumulated amortization of $98,187 and $172,11432,478
 136,781
Other assets550,543
 468,205
382,209
 431,938
$16,866,083
 $17,397,934
$17,913,857
 $17,180,794
LIABILITIES, REDEEMABLE PARTNERSHIP UNITS AND EQUITY      
Mortgages payable, net$8,108,618
 $8,137,139
$6,256,808
 $8,167,798
Senior unsecured notes, net843,417
 843,614
445,465
 844,002
Unsecured term loan, net749,494
 748,734
745,331
 744,821
Unsecured revolving credit facilities80,000
 —
80,000
 80,000
Lease liabilities483,011
 —
Moynihan Train Hall obligation665,226
 445,693
Accounts payable and accrued expenses394,079
 415,794
392,581
 430,976
Deferred revenue187,934
 227,069
66,835
 167,730
Deferred compensation plan100,368
 109,177
99,879
 96,523
Liabilities related to discontinued operations214
 3,620
Preferred units redeemed on January 4 and 11, 2018—
 455,514
Other liabilities520,331
 464,635
320,515
 311,806
Total liabilities10,984,455
 11,405,296
9,555,651
 11,289,349
Commitments and contingencies
 


 


Redeemable partnership units:      
Class A units - 12,616,515 and 12,528,899 units outstanding932,613
 979,509
Series D cumulative redeemable preferred units - 177,101 units outstanding5,428
 5,428
Class A units - 13,377,956 and 12,544,477 units outstanding857,527
 778,134
Series D cumulative redeemable preferred units - 141,401 and 177,101 units outstanding4,535
 5,428
Total redeemable partnership units938,041
 984,937
862,062
 783,562
Equity:   
Partners' equity:   
Partners' capital8,454,905
 8,392,223
8,744,615
 8,624,751
Earnings less than distributions(4,206,381) (4,183,253)(1,845,995) (4,167,184)
Accumulated other comprehensive income33,351
 128,682
Total Vornado Realty L.P. equity4,281,875
 4,337,652
Accumulated other comprehensive (loss) income(38,066) 7,664
Total partners' equity6,860,554
 4,465,231
Noncontrolling interests in consolidated subsidiaries661,712
 670,049
635,590
 642,652
Total equity4,943,587
 5,007,701
7,496,144
 5,107,883
$16,866,083
 $17,397,934
$17,913,857
 $17,180,794
See notes to consolidated financial statements (unaudited).

VORNADO REALTY L.P.
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)


(Amounts in thousands, except per unit amounts)For the Three Months Ended
June 30,		 For the Six Months Ended
June 30,		For the Three Months Ended June 30, For the Six Months Ended June 30,
2018 2017 2018 20172019 2018 2019 2018
REVENUES:              
Property rentals$444,595
 $428,643
 $884,705
 $843,535
Tenant expense reimbursements58,312
 51,657
 118,622
 110,690
Rental revenues$421,299
 $502,907
 $921,176
 $1,003,327
Fee and other income38,911
 30,787
 74,928
 64,920
41,804
 38,911
 76,595
 74,928
Total revenues541,818
 511,087
 1,078,255
 1,019,145
463,103
 541,818
 997,771
 1,078,255
EXPENSES:              
Operating235,981
 215,700
 473,583
 436,359
(220,752) (235,981) (467,647) (473,583)
Depreciation and amortization111,846
 105,123
 220,532
 210,251
(113,035) (111,846) (229,744) (220,532)
General and administrative34,427
 35,405
 76,960
 81,580
(38,872) (34,427) (96,892) (76,960)
Expense from deferred compensation plan liability2,077
 789
 1,673
 3,258
(1,315) (2,077) (6,748) (1,673)
Transaction related costs and other1,017
 260
 14,173
 1,012
Transaction related costs, impairment losses and other(101,590) (1,017) (101,739) (14,173)
Total expenses385,348
 357,277
 786,921
 732,460
(475,564) (385,348) (902,770) (786,921)
Operating income156,470
 153,810
 291,334
 286,685
       
Income (loss) from partially owned entities8,757
 46,021
 (1,147) 47,379
22,873
 8,757
 30,193
 (1,147)
(Loss) income from real estate fund investments(28,976) 4,391
 (37,783) 4,659
Loss from real estate fund investments(15,803) (28,976) (15,970) (37,783)
Interest and other investment income, net30,892
 8,541
 6,508
 15,236
7,840
 30,892
 12,885
 6,508
Income from deferred compensation plan assets2,077
 789
 1,673
 3,258
1,315
 2,077
 6,748
 1,673
Interest and debt expense(87,657) (84,789) (175,823) (167,513)(63,029) (87,657) (165,492) (175,823)
Net gain on transfer to Fifth Avenue and Times Square JV2,571,099
 —
 2,571,099
 —
Net gains on disposition of wholly owned and partially owned assets23,559
 —
 23,559
 501
111,713
 23,559
 332,007
 23,559
Income before income taxes105,122
 128,763
 108,321
 190,205
2,623,547
 105,122
 2,866,471
 108,321
Income tax (expense) benefit(467) 610
 (3,021) (2,303)
Income tax expense(26,914) (467) (56,657) (3,021)
Income from continuing operations104,655
 129,373
 105,300
 187,902
2,596,633
 104,655
 2,809,814
 105,300
Income from discontinued operations683
 18,111
 320
 33,429
Income (loss) from discontinued operations60
 683
 (77) 320
Net income105,338
 147,484
 105,620
 221,331
2,596,693
 105,338
 2,809,737
 105,620
Less net loss (income) attributable to noncontrolling interests in consolidated subsidiaries26,175
 (7,677) 34,449
 (14,414)
Less net (income) loss attributable to noncontrolling interests in consolidated subsidiaries(21,451) 26,175
 (28,271) 34,449
Net income attributable to Vornado Realty L.P.131,513
 139,807
 140,069
 206,917
2,575,242
 131,513
 2,781,466
 140,069
Preferred unit distributions(12,582) (16,177) (25,666) (32,355)(12,573) (12,582) (25,148) (25,666)
Preferred unit issuance costs—
 —
 (14,486) —
—
 —
 —
 (14,486)
NET INCOME attributable to Class A unitholders$118,931
 $123,630
 $99,917
 $174,562
$2,562,669
 $118,931
 $2,756,318
 $99,917
              
INCOME PER CLASS A UNIT – BASIC:              
Income from continuing operations, net$0.58
 $0.52
 $0.49
 $0.69
Income from discontinued operations, net—
 0.09
 —
 0.17
Net income per Class A unit$0.58
 $0.61
 $0.49
 $0.86
$12.58
 $0.58
 $13.53
 $0.49
Weighted average units outstanding202,064
 201,127
 201,997
 200,987
202,924
 202,064
 202,848
 201,997
              
INCOME PER CLASS A UNIT – DILUTED:              
Income from continuing operations, net$0.58
 $0.52
 $0.48
 $0.69
Income from discontinued operations, net—
 0.09
 —
 0.16
Net income per Class A unit$0.58
 $0.61
 $0.48
 $0.85
$12.54
 $0.58
 $13.50
 $0.48
Weighted average units outstanding203,354
 202,623
 203,266
 202,617
203,480
 203,354
 203,391
 203,266
       
DISTRIBUTIONS PER CLASS A UNIT$0.63
 $0.71
 $1.26
 $1.42
See notes to consolidated financial statements (unaudited).


VORNADO REALTY L.P.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(UNAUDITED)


(Amounts in thousands)For the Three Months Ended June 30, For the Six Months Ended June 30,For the Three Months Ended June 30, For the Six Months Ended June 30,
2018 2017 2018 20172019 2018 2019 2018
Net income$105,338
 $147,484
 $105,620
 $221,331
$2,596,693
 $105,338
 $2,809,737
 $105,620
Other comprehensive income (loss):              
Increase (reduction) in value of interest rate swaps and other2,908
 (1,204) 13,166
 4,638
Pro rata share of other comprehensive income (loss) of nonconsolidated subsidiaries390
 (980) 736
 (1,031)
Reduction in unrealized net gain on available-for-sale securities—
 (1,206) —
 (16,215)
Pro rata share of amounts reclassified from accumulated other comprehensive income of a nonconsolidated subsidiary—
 —
 —
 9,268
Other comprehensive income (loss) of nonconsolidated subsidiaries25
 390
 (960) 736
(Reduction) increase in value of interest rate swaps and other(28,512) 2,908
 (45,541) 13,166
Amount reclassified from accumulated other comprehensive loss relating to a nonconsolidated subsidiary—
 —
 (2,311) —
Comprehensive income108,636
 144,094
 119,522
 217,991
2,568,206
 108,636
 2,760,925
 119,522
Less comprehensive loss (income) attributable to noncontrolling interests in consolidated subsidiaries26,175
 (7,677) 34,449
 (14,414)
Less comprehensive (income) loss attributable to noncontrolling interests in consolidated subsidiaries(21,451) 26,175
 (28,271) 34,449
Comprehensive income attributable to Vornado Realty L.P.$134,811
 $136,417
 $153,971
 $203,577
$2,546,755
 $134,811
 $2,732,654
 $153,971
See notes to consolidated financial statements (unaudited).


VORNADO REALTY L.P.
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(UNAUDITED)



(Amounts in thousands) Preferred Units 
Class A Units
Owned by Vornado
 
Earnings
Less Than
Distributions
 
Accumulated
Other
Comprehensive
Income
 
Non-
controlling
Interests in
Consolidated
Subsidiaries
 Total Equity
  Units Amount Units Amount    
Balance, December 31, 2017 36,800
 $891,988
 189,984
 $7,500,235
 $(4,183,253) $128,682
 $670,049
 $5,007,701
Cumulative effect of accounting change (see Note 3) —
 —
 —
 —
 122,893
 (108,374) —
 14,519
Net income attributable to Vornado Realty L.P. —
 —
 —
 —
 140,069
 —
 —
 140,069
Net income attributable to redeemable partnership units —
 —
 —
 —
 (6,321) —
 —
 (6,321)
Net loss attributable to noncontrolling interests in consolidated subsidiaries —
 —
 —
 —
 —
 —
 (34,449) (34,449)
Distributions to Vornado —
 —
 —
 —
 (239,594) —
 —
 (239,594)
Distributions to preferred unitholders —
 —
 —
 —
 (25,569) —
 —
 (25,569)
Preferred unit issuance costs —
 —
 —
 —
 (14,486) —
 —
 (14,486)
Class A Units issued to Vornado:               
Upon redemption of redeemable Class A units, at redemption value —
 —
 176
 12,246
 —
 —
 —
 12,246
Under Vornado's employees' share option plan —
 —
 61
 3,786
 —
 —
 —
 3,786
Under Vornado's dividend reinvestment plan —
 —
 10
 685
 —
 —
 —
 685
Contributions:               

Real estate fund investments —
 —
 —
 —
 —
 —
 45,347
 45,347
Other —
 —
 —
 —
 —
 —
 14,211
 14,211
Distributions:               
Real estate fund investments —
 —
 —
 —
 —
 —
 (10,246) (10,246)
Other —
 —
 —
 —
 —
 —
 (23,201) (23,201)
Preferred unit issuance —
 (663) —
 —
 —
 —
 —
 (663)
Deferred compensation units and options —
 —
 7
 585
 (121) —
 —
 464
Pro rata share of other comprehensive income of nonconsolidated subsidiaries —
 —
 —
 —
 —
 736
 —
 736
Increase in value of interest rate swaps —
 —
 —
 —
 —
 13,166
 —
 13,166
Unearned 2015 Out-Performance Plan awards acceleration —
 —
 —
 9,046
 —
 —
 —
 9,046
Adjustments to carry redeemable Class A units at redemption value —
 —
 —
 36,450
 —
 —
 —
 36,450
Redeemable partnership units' share of above adjustments —
 —
 —
 —
 —
 (859) —
 (859)
Other —
 —
 —
 547
 1
 —
 1
 549
Balance, June 30, 2018 36,800
 $891,325
 190,238
 $7,563,580
 $(4,206,381)
$33,351

$661,712
 $4,943,587
(Amounts in thousands) Preferred Units 
Class A Units
Owned by Vornado
 
Earnings
Less Than
Distributions
 
Accumulated
Other
Comprehensive
Loss
 
Non-
controlling
Interests in
Consolidated
Subsidiaries
 Total Equity
  Units Amount Units Amount    
For the Three Months Ended June 30, 2019:                
Balance, March 31, 2019 36,798
 $891,263
 190,761
 $7,684,379
 $(4,120,265) $(11,385) $646,900
 $5,090,892
Net income attributable to Vornado Realty L.P. —
 —
 —
 —
 2,575,242
 —
 —
 2,575,242
Net income attributable to redeemable partnership units —
 —
 —
 —
 (162,515) —
 —
 (162,515)
Net income attributable to noncontrolling interests in consolidated subsidiaries —
 —
 —
 —
 —
 —
 21,451
 21,451
Distributions to Vornado
($0.66 per unit)
 —
 —
 —
 —
 (125,927) —
 —
 (125,927)
Distributions to preferred unitholders (see Note 12 for distributions per unit amounts) —
 —
 —
 —
 (12,532) —
 —
 (12,532)
Class A Units issued to Vornado:                
Upon redemption of redeemable Class A units, at redemption value —
 —
 44
 2,948
 —
 —
 —
 2,948
Under Vornado's employees' share option plan —
 —
 3
 174
 —
 —
 —
 174
Under Vornado's dividend reinvestment plan —
 —
 5
 361
 —
 —
 —
 361
Contributions —
 —
 —
 —
 —
 —
 3,121
 3,121
Distributions —
 —
 —
 —
 —
 —
 (24,440) (24,440)
Conversion of Series A preferred units to Class A units (1) (7) 1
 7
 —
 —
 —
 —
Deferred compensation units and options —
 —
 (1) 266
 —
 —
 —
 266
Other comprehensive income of nonconsolidated subsidiaries —
 —
 —
 —
 —
 25
 —
 25
Reduction in value of interest rate swaps —
 —
 —
 —
 —
 (28,515) —
 (28,515)
Adjustments to carry redeemable Class A units at redemption value —
 —
 —
 165,225
 —
 —
 —
 165,225
Redeemable partnership units' share of above adjustments —
 —
 —
 —
 —
 1,806
 —
 1,806
Deconsolidation of partially owned entity —
 —
 —
 —
 —
 —
 (11,441) (11,441)
Other —
 —
 —
 (1) 2
 3
 (1) 3
Balance, June 30, 2019 36,797
 $891,256
 190,813
 $7,853,359
 $(1,845,995) $(38,066) $635,590
 $7,496,144

See notes to consolidated financial statements (unaudited).
















VORNADO REALTY L.P.
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY - CONTINUED
(UNAUDITED)




(Amounts in thousands) Preferred Units 
Class A Units
Owned by Vornado
 
Earnings
Less Than
Distributions
 
Accumulated
Other
Comprehensive
Income
 
Non-
controlling
Interests in
Consolidated
Subsidiaries
 
Total
Equity
 Preferred Units 
Class A Units
Owned by Vornado
 
Earnings
Less Than
Distributions
 
Accumulated
Other
Comprehensive
Income
 
Non-
controlling
Interests in
Consolidated
Subsidiaries
 Total Equity
 Units Amount Units Amount  Units Amount Units Amount 
Balance, December 31, 2016 42,825
 $1,038,055
 189,101
 $7,160,874
 $(1,419,382) $118,972
 $719,977
 $7,618,496
For the Three Months Ended
June 30, 2018:		                
Balance, March 31, 2018 36,800
 $891,325
 190,169
 $7,636,597
 $(4,198,088) $30,258
 $664,786
 $5,024,878
Net income attributable to Vornado Realty L.P. —
 —
 —
 —
 206,917
 —
 —
 206,917
 —
 —
 —
 —
 131,513
 —
 —
 131,513
Net income attributable to redeemable partnership units —
 —
 —
 —
 (10,935) —
 —
 (10,935) —
 —
 —
 —
 (7,445) —
 —
 (7,445)
Net income attributable to noncontrolling interests in consolidated subsidiaries —
 —
 —
 —
 —
 —
 14,414
 14,414
Distributions to Vornado —
 —
 —
 —
 (268,817) —
 —
 (268,817)
Distributions to preferred unitholders —
 —
 —
 —
 (32,258) —
 —
 (32,258)
Net loss attributable to noncontrolling interests in consolidated subsidiaries —
 —
 —
 —
 —
 —
 (26,175) (26,175)
Distributions to Vornado
($0.63 per unit)
 —
 —
 —
 —
 (119,830) —
 —
 (119,830)
Distributions to preferred unitholders (see Note 12 for distributions per unit amounts) —
 —
 —
 —
 (12,534) —
 —
 (12,534)
Class A Units issued to Vornado:               

                
Upon redemption of redeemable Class A units, at redemption value —
 —
 249
 25,562
 —
 —
 —
 25,562
 —
 —
 58
 3,854
 —
 —
 —
 3,854
Under Vornado's employees' share option plan —
 —
 103
 8,846
 —
 —
 —
 8,846
 —
 —
 6
 352
 —
 —
 —
 352
Under Vornado's dividend reinvestment plan —
 —
 8
 780
 —
 —
 —
 780
 —
 —
 5
 350
 —
 —
 —
 350
Contributions —
 —
 —
 —
 —
 —
 991
 991
Contributions:                
Real estate fund investments —
 —
 —
 —
 —
 —
 43,653
 43,653
Other —
 —
 —
 —
 —
 —
 7,535
 7,535
Distributions:               

                
Real estate fund investments —
 —
 —
 —
 —
 —
 (6,200) (6,200) —
 —
 —
 —
 —
 —
 (8,336) (8,336)
Other —
 —
 —
 —
 —
 —
 (1,339) (1,339) —
 —
 —
 —
 —
 —
 (19,751) (19,751)
Conversion of Series A preferred units to Class A units (2) (44) 2
 44
 —
 —
 —
 —
Deferred compensation units and options —
 —
 2
 1,076
 (285) —
 —
 791
 —
 —
 —
 287
 —
 —
 —
 287
Reduction in unrealized net gain on available-for-sale securities —
 —
 —
 —
 —
 (16,215) —
 (16,215)
Pro rata share of amounts reclassified related to a nonconsolidated subsidiary —
 —
 —
 —
 —
 9,268
 —
 9,268
Pro rata share of other comprehensive loss of nonconsolidated subsidiaries —
 —
 —
 —
 —
 (1,031) —
 (1,031)
Other comprehensive income of nonconsolidated subsidiaries —
 —
 —
 —
 —
 390
 —
 390
Increase in value of interest rate swaps —
 —
 —
 —
 —
 4,636
 —
 4,636
 —
 —
 —
 —
 —
 2,908
 —
 2,908
Adjustments to carry redeemable Class A units at redemption value —
 —
 —
 90,208
 —
 —
 —
 90,208
 —
 —
 —
 (78,406) —
 —
 —
 (78,406)
Redeemable partnership units' share of above adjustments —
 —
 —
 —
 —
 207
 —
 207
 —
 —
 —
 —
 —
 (205) —
 (205)
Other —
 —
 —
 —
 (46) 2
 (47) (91) —
 —
 —
 546
 3
 —
 —
 549
Balance, June 30, 2017 42,823
 $1,038,011
 189,465
 $7,287,390
 $(1,524,806) $115,839
 $727,796
 $7,644,230
Balance, June 30, 2018 36,800
 $891,325
 190,238
 $7,563,580
 $(4,206,381) $33,351
 $661,712
 $4,943,587
See notes to consolidated financial statements (unaudited).
















VORNADO REALTY L.P.
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY - CONTINUED
(UNAUDITED)


(Amounts in thousands) Preferred Units 
Class A Units
Owned by Vornado
 
Earnings
Less Than
Distributions
 
Accumulated
Other
Comprehensive
Income (Loss)
 
Non-
controlling
Interests in
Consolidated
Subsidiaries
 
Total
Equity
  Units Amount Units Amount    
For the Six Months Ended
June 30, 2019:		                
Balance, December 31, 2018 36,800
 $891,294
 190,535
 $7,733,457
 $(4,167,184) $7,664
 $642,652
 $5,107,883
Net income attributable to Vornado Realty L.P. —
 —
 —
 —
 2,781,466
 —
 —
 2,781,466
Net income attributable to redeemable partnership units —
 —
 —
 —
 (174,717) —
 —
 (174,717)
Net income attributable to noncontrolling interests in consolidated subsidiaries —
 —
 —
 —
 —
 —
 28,271
 28,271
Distributions to Vornado
($1.32 per unit)
 —
 —
 —
 —
 (251,803) —
 —
 (251,803)
Distributions to preferred unitholders (see Note 12 for distributions per unit amounts) —
 —
 —
 —
 (25,066) —
 —
 (25,066)
Upon redemption of redeemable Class A units, at redemption value —
 —
 92
 6,129
 —
 —
 —
 6,129
Under Vornado's employees' share option plan —
 —
 165
 1,345
 (8,692) —
 —
 (7,347)
Under Vornado's dividend reinvestment plan —
 —
 10
 701
 —
 —
 —
 701
Contributions:     

 

       

Real estate fund investments —
 —
 —
 —
 —
 —
 3,384
 3,384
Other —
 —
 —
 —
 —
 —
 4,931
 4,931
Distributions —
 —
 —
 —
 —
 —
 (32,204) (32,204)
Preferred unit issuance (2) (38) 3
 38
 —
 —
 —
 —
Deferred compensation units and options —
 —
 8
 563
 —
 —
 —
 563
Amount reclassified related to a nonconsolidated subsidiary —
 —
 —
 —
 —
 (2,311) —
 (2,311)
Other comprehensive loss of nonconsolidated subsidiaries —
 —
 —
 —
 —
 (960) —
 (960)
Reduction in value of interest rate swaps —
 —
 —
 —
 —
 (45,544) —
 (45,544)
Unearned 2016 Out-Performance Plan awards acceleration —
 —
 —
 11,720
 —
 —
 —
 11,720
Adjustments to carry redeemable Class A units at redemption value —
 —
 —
 99,407
 —
 —
 —
 99,407
Redeemable partnership units' share of above adjustments —
 —
 —
 —
 —
 3,082
 —
 3,082
Deconsolidation of partially owned entity             (11,441) (11,441)
Other (1) —
 —
 (1) 1
 3
 (3) —
Balance, June 30, 2019 36,797
 $891,256
 190,813
 $7,853,359
 $(1,845,995) $(38,066) $635,590
 $7,496,144
See notes to consolidated financial statements (unaudited).


VORNADO REALTY L.P.
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY - CONTINUED
(UNAUDITED)


(Amounts in thousands) Preferred Units 
Class A Units
Owned by Vornado
 
Earnings
Less Than
Distributions
 
Accumulated
Other
Comprehensive
Income
 
Non-
controlling
Interests in
Consolidated
Subsidiaries
 Total Equity
  Units Amount Units Amount    
For the Six Months Ended
June 30, 2018:		                
Balance, December 31, 2017 36,800
 $891,988
 189,984
 $7,500,235
 $(4,183,253) $128,682
 $670,049
 $5,007,701
Cumulative effect of accounting change —
 —
 —
 —
 122,893
 (108,374) —
 14,519
Net income attributable to Vornado Realty L.P. —
 —
 —
 —
 140,069
 —
 —
 140,069
Net income attributable to redeemable partnership units —
 —
 —
 —
 (6,321) —
 —
 (6,321)
Net loss attributable to noncontrolling interests in consolidated subsidiaries —
 —
 —
 —
 —
 —
 (34,449) (34,449)
Distributions to Vornado
($1.26 per unit)
 —
 —
 —
 —
 (239,594) —
 —
 (239,594)
Distributions to preferred unitholders (see Note 12 for distributions per unit amounts) —
 —
 —
 —
 (25,569) —
 —
 (25,569)
Preferred unit issuance costs —
 —
 —
 —
 (14,486) —
 —
 (14,486)
Class A Units issued to Vornado:                
Upon redemption of redeemable Class A units, at redemption value —
 —
 176
 12,246
 —
 —
 —
 12,246
Under Vornado's employees' share option plan —
 —
 61
 3,786
 —
 —
 —
 3,786
Under Vornado's dividend reinvestment plan —
 —
 10
 685
 —
 —
 —
 685
Contributions:                
Real estate fund investments —
 —
 —
 —
 —
 —
 45,347
 45,347
Other —
 —
 —
 —
 —
 —
 14,211
 14,211
Distributions:                
Real estate fund investments —
 —
 —
 —
 —
 —
 (10,246) (10,246)
Other —
 —
 —
 —
 —
 —
 (23,201) (23,201)
Preferred unit issuance —
 (663) —
 —
 —
 —
 —
 (663)
Deferred compensation units and options —
 —
 7
 585
 (121) —
 —
 464
Other comprehensive income of nonconsolidated subsidiaries —
 —
 —
 —
 —
 736
 —
 736
Increase in value of interest rate swaps —
 —
 —
 —
 —
 13,166
 —
 13,166
Unearned 2015 Out-Performance Plan awards acceleration —
 —
 —
 9,046
 —
 —
 —
 9,046
Adjustments to carry redeemable Class A units at redemption value —
 —
 —
 36,450
 —
 —
 —
 36,450
Redeemable partnership units' share of above adjustments —
 —
 —
 —
 —
 (859) —
 (859)
Other —
 —
 —
 547
 1
 —
 1
 549
Balance, June 30, 2018 36,800
 $891,325
 190,238
 $7,563,580
 $(4,206,381) $33,351
 $661,712
 $4,943,587
See notes to consolidated financial statements (unaudited).




VORNADO REALTY L.P.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)


(Amounts in thousands)For the Six Months Ended June 30,For the Six Months Ended June 30,
2018 20172019 2018
Cash Flows from Operating Activities:      
Net income$105,620
 $221,331
$2,809,737
 $105,620
Adjustments to reconcile net income to net cash provided by operating activities:      
Net gain on transfer to Fifth Avenue and Times Square JV(2,571,099) —
Net gains on disposition of wholly owned and partially owned assets(332,007) (23,559)
Depreciation and amortization (including amortization of deferred financing costs)233,748
 289,898
240,866
 233,748
Non-cash impairment loss on 608 Fifth Avenue right-of-use asset75,220
 —
Stock-based compensation expense42,174
 20,645
Distributions of income from partially owned entities45,999
 44,778
31,820
 45,999
Net realized and unrealized losses on real estate fund investments30,426
 6,201
Equity in net (income) loss of partially owned entities(30,193) 1,147
Real estate impairment losses26,140
 —
Prepayment penalty on redemption of senior unsecured notes due 202222,058
 —
Net realized and unrealized loss on real estate fund investments16,162
 30,426
Amortization of below-market leases, net(11,168) (21,107)
Straight-lining of rents3,733
 (10,122)
(Increase) decrease in fair value of marketable securities(1,773) 17,102
Return of capital from real estate fund investments—
 20,291
Other non-cash adjustments24,320
 30,070
18,588
 3,675
Net gains on disposition of wholly owned and partially owned assets(23,559) (501)
Amortization of below-market leases, net(21,107) (24,391)
Return of capital from real estate fund investments20,291
 —
Decrease in fair value of marketable securities17,102
 —
Straight-lining of rents(10,122) (28,581)
Equity in net loss (income) of partially owned entities1,147
 (47,721)
Net gains on sale of real estate and other—
 (2,267)
Changes in operating assets and liabilities:      
Real estate fund investments(68,950) —
(4,000) (68,950)
Tenant and other receivables, net(7,511) 3,974
(12,759) (7,511)
Prepaid assets(19,092) (146,770)(5,702) (19,092)
Other assets(114,881) (5,606)(8,498) (114,881)
Accounts payable and accrued expenses(11,036) (6,029)(11,482) (11,036)
Other liabilities38,865
 (18,169)(4,965) 38,865
Net cash provided by operating activities241,260
 316,217
292,852
 241,260
      
Cash Flows from Investing Activities:      
Proceeds from transfer of interest in Fifth Avenue and Times Square JV (net of $35,562 of transaction costs and $10,899 of deconsolidated cash and restricted cash)1,255,756
 —
Proceeds from sale of condominium units at 220 Central Park South690,734
 —
Proceeds from redemption of 640 Fifth Avenue preferred equity500,000
 —
Development costs and construction in progress(185,039) (191,073)(289,532) (185,039)
Moynihan Train Hall expenditures(205,783) —
Proceeds from sales of marketable securities167,852
 —
Additions to real estate(113,300) (139,611)(120,060) (113,300)
Proceeds from sale of real estate and related investments108,512
 44,599
Distributions of capital from partially owned entities81,997
 113,507
24,880
 81,997
Investments in partially owned entities(15,588) (26,663)
Acquisitions of real estate and other(56,500) (11,841)(3,260) (56,500)
Proceeds from sales of real estate and related investments44,599
 5,180
Investments in partially owned entities(26,663) (27,720)
Proceeds from repayments of mortgage loans receivable—
 29
Net cash used in investing activities(254,906) (251,529)
Net cash provided by (used in) investing activities2,113,511
 (254,906)


See notes to consolidated financial statements (unaudited).



VORNADO REALTY L.P.
CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED
(UNAUDITED)


(Amounts in thousands)For the Six Months Ended June 30,For the Six Months Ended June 30,
2018 20172019 2018
Cash Flows from Financing Activities:      
Redemption of preferred units$(470,000) $—
Repayments of borrowings$(1,943,157) $(148,408)
Proceeds from borrowings458,955
 189,042
Purchase of marketable securities in connection with defeasance of mortgage payable(407,126) —
Distributions to Vornado(239,594) (268,817)(251,803) (239,594)
Proceeds from borrowings189,042
 226,929
Repayments of borrowings(148,408) (13,971)
Contributions from noncontrolling interests in consolidated subsidiaries59,558
 991
Moynihan Train Hall reimbursement from Empire State Development205,783
 —
Distributions to redeemable security holders and noncontrolling interests in consolidated subsidiaries(49,338) (25,617)(49,140) (49,338)
Distributions to preferred unitholders(30,047) (32,258)(25,066) (30,047)
Prepayment penalty on redemption of senior unsecured notes due 2022(22,058) —
Debt issuance costs(13,522) (3,289)
Repurchase of Class A units related to stock compensation agreements and related tax withholdings and other(8,692) (784)
Contributions from noncontrolling interests in consolidated subsidiaries8,315
 59,558
Proceeds received from exercise of Vornado stock options and other4,471
 9,626
2,046
 4,471
Debt issuance costs(3,289) (2,919)
Redemption of preferred units(893) (470,000)
Debt prepayment and extinguishment costs(818) —
—
 (818)
Repurchase of Class A units related to stock compensation agreements and related tax withholdings and other(784) (285)
Net cash used in financing activities(689,207) (106,321)(2,046,358) (689,207)
Net decrease in cash and cash equivalents and restricted cash(702,853) (41,633)
Net increase (decrease) in cash and cash equivalents and restricted cash360,005
 (702,853)
Cash and cash equivalents and restricted cash at beginning of period1,914,812
 1,599,322
716,905
 1,914,812
Cash and cash equivalents and restricted cash at end of period$1,211,959
 $1,557,689
$1,076,910
 $1,211,959
      
Reconciliation of Cash and Cash Equivalents and Restricted Cash:      
Cash and cash equivalents at beginning of period$1,817,655
 $1,501,027
$570,916
 $1,817,655
Restricted cash at beginning of period97,157
 95,032
145,989
 97,157
Restricted cash included in discontinued operations at beginning of period—
 3,263
Cash and cash equivalents and restricted cash at beginning of period$1,914,812
 $1,599,322
$716,905
 $1,914,812
      
Cash and cash equivalents at end of period$1,090,791
 $1,471,303
$922,604
 $1,090,791
Restricted cash at end of period121,168
 82,651
154,306
 121,168
Restricted cash included in discontinued operations at end of period—
 3,735
Cash and cash equivalents and restricted cash at end of period$1,211,959
 $1,557,689
$1,076,910
 $1,211,959
      
Supplemental Disclosure of Cash Flow Information:      
Cash payments for interest, excluding capitalized interest of $28,558 and $20,050$155,875
 $175,718
Cash payments for interest, excluding capitalized interest of $39,643 and $28,558$165,022
 $155,875
Cash payments for income taxes$4,365
 $3,151
$28,697
 $4,365
      
Non-Cash Investing and Financing Activities:      
Investments received in exchange for transfer to Fifth Avenue and Times Square JV:   
Preferred equity$2,327,750
 $—
Common equity1,449,495
 —
Reclassification of condominium units from "development costs and construction in progress" to "220 Central Park South condominium units ready for sale"647,683
 —
Lease liabilities arising from the recognition of right-of-use assets526,866
 —
Marketable securities transferred in connection with the defeasance of mortgage payable(407,126) —
Defeasance of mortgage payable390,000
 —
Adjustments to carry redeemable Class A units at redemption value99,407
 36,450
Write-off of fully depreciated assets(93,390) (38,117)
Accrued capital expenditures included in accounts payable and accrued expenses$54,176
 $59,733
68,900
 54,176
Write-off of fully depreciated assets(38,117) (35,727)
Adjustments to carry redeemable Class A units at redemption value36,450
 90,208
Reduction in unrealized net gain on available-for-sale securities—
 (16,215)
Amounts related to our investment in Pennsylvania Real Estate Investment Trust reclassified from "investments in partially owned entities" and "accumulated other comprehensive (loss) income" to "marketable securities" upon conversion of operating partnership units to common shares54,962
 —

See notes to consolidated financial statements (unaudited).

VORNADO REALTY TRUST AND VORNADO REALTY L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)






1.
Organization

Vornado Realty Trust (“Vornado”) is a fully integratedfully-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., a Delaware limited partnership (the “Operating Partnership”). Vornado is the sole general partner of, and owned approximately93.5%93.1% of the common limited partnership interest in the Operating Partnership as of June 30, 2018.2019. All references to the “Company,” “we,” “us,”“us” and “our” mean, collectively, Vornado, the Operating Partnership and those entities/subsidiaries consolidated by Vornado.


2.
Basis of Presentation

The accompanying consolidated financial statements are unaudited and include the accounts of Vornado and the Operating Partnership and their consolidated subsidiaries. All inter-company amounts have been eliminated. In our opinion,eliminated and all adjustments (which include only normal recurring adjustments) necessary to present fairly the financial position, results of operations and changes in cash flows have been made. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) have been condensed or omitted. These condensed consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q of the Securities and Exchange Commission (“SEC”) and should be read in conjunction with the consolidated financial statements and notes thereto included in our Annual Report on Form  10-K for the year ended December 31, 2017,2018, as filed with the SEC.

We have made estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates. The results of operations for the three and six months ended June 30, 20182019 are not necessarily indicative of the operating results for the full year.

Certain prior year balances have been reclassified in order to conform to the current period presentation. For the three and six months ended June 30, 2017, an2018, "property rentals" of $444,595,000 and $884,705,000, respectively, and "tenant expense reimbursements" of $789,000$58,312,000 and $3,258,000,$118,622,000, respectively,related to the mark-to-market of our deferred compensation plan liability was reclassified from "general and administrative expenses" to "expense from deferred compensation plan liability" and income of $789,000 and $3,258,000, respectively, related to the mark-to-market of our deferred compensation plan assets was reclassified from "interest and other investment income, net" to "income from deferred compensation plan assets" were grouped into "rental revenues" on our consolidated statements of income. In addition, for the six months ended June 30, 2017, an expenseincome in accordance with Accounting Standards Codification ("ASC") Topic 205, Presentation of $1,062,000related to New York City Unincorporated Business Tax was reclassified from "general and administrative expenses" to "income tax (expense) benefit" on our consolidated statements of income.Financial Statements.


3.
Recently Issued Accounting Literature

In May 2014,February 2016, the Financial Accounting Standards Board (“FASB”("FASB") issued an update (“ASU 2014-09”) establishing Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers (“ASC 606”). ASU 2014-09, as amended by subsequent ASUs on the topic, establishes a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most of the existing revenue recognition guidance. This standard, which is effective for interim and annual reporting periods in fiscal years that begin after December 15, 2017, requires an entity to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services and also requires certain additional disclosures. We adopted this standard effective January 1, 2018 using the modified retrospective method applied to all existing contracts not yet completed as of January 1, 2018 and recorded a $14,519,000 cumulative-effect adjustment to beginning accumulated deficit. The adoption of ASC 606 did not have a material impact on our financial statements (see Note 4 - Revenue Recognition).


19
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(UNAUDITED)

3.Recently Issued Accounting Literature - continued

In January 2016, the FASB issued an update (“ASU 2016-01”) Recognition and Measurement of Financial Assets and Financial Liabilities to ASCTopic 825, Financial Instruments.  ASU 2016-01 amends certain aspects of recognition, measurement, presentation and disclosure of financial instruments. ASU 2016-01 is effective for interim and annual reporting periods in fiscal years beginning after December 15, 2017. We adopted this update effective January 1, 2018 using the modified retrospective approach. While the adoption of this update requires us to continue to measure "marketable securities" at fair value on each reporting date, the changes in fair value will be recognized in current period earnings as opposed to "other comprehensive income (loss)." As a result, on January 1, 2018 we recorded a decrease to beginning accumulated deficit of $111,225,000 to recognize the unrealized gains previously recorded in "accumulated other comprehensive income" on our consolidated balance sheets. Subsequent changes in the fair value of our marketable securities will be recorded to "interest and other investment income, net" on our consolidated statements of income. For the three and six months ended June 30, 2018, we recorded a $15,884,000 increase and $17,102,000 decrease, respectively, in the fair value of our marketable securities which is included in "interest and other investment income, net" on our consolidated statements of income.

In February 2016, the FASB issued an update ("ASU 2016-02"2016-02”) establishing ASC Topic 842,Leases ("ASC 842"), as amended by subsequent ASUs on the topic, which sets out the principles for the recognition, measurement, presentation and disclosure of leases for both lessees and lessors. ASU 2016-02 requires lessees to apply a dualtwo-method approach, classifying leases as either finance or operating leases based on the principle of whether or not the lease is effectively a financed purchase. Lessees are required to record a right-of-use ("ROU") asset and a lease liability for all leases with a term of greater than 12 months. Lease liabilities equal the present value of future lease payments. Right-of-use assets equal the lease liabilities adjusted for accrued rent expense, initial direct costs, lease incentives and prepaid lease payments. Leases with a term of 12 months or less will be accounted for similar to the previously existing lease guidance for operating leases. Lessees will recognizeunder ASC Topic 840, Leases ("ASC 840"). Lease expense is recognized based on the effective interest method for finance leases or on a straight-line basis for operating leases. The accounting applied by the lessor is largely unchanged from that applied under the existing lease standard.ASC 840. We are currently evaluatingadopted this standard effective January 1, 2019. We have completed our evaluation of the overall impact of the adoption of ASU 2016-02 on our consolidated financial statements and believe thataccounting policies. In transitioning to ASC 842, we elected to use the standard will more significantly impact the accounting forpractical expedient package available to us and did not elect to use hindsight. As of January 1, 2019, we had 12 ground leases in which we are a lessee. We have a number of groundclassified as operating leases, for which we will bewere required to record a right-of-use asset and a lease liability equal to the present value of the remaining minimumfuture lease payments, andpayments. We will continue to recognize expense on a straight-line basis uponfor these leases. We recorded an aggregate of $526,866,000 of ROU assets and a corresponding $526,866,000 of lease liabilities as a result of the adoption of this standard. standard (see Note 20 - Leases).



VORNADO REALTY TRUST AND VORNADO REALTY L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(UNAUDITED)


3.Recently Issued Accounting Literature - continued
Under ASU 2016-02, initial direct costs for both lessees and lessors would include only those costs that are incremental to the arrangement and would not have been incurred if the lease had not been obtained. As a result, beginning January 1, 2019, we will no longer be able to capitalize internal leasing costs and instead will be required to expense these costs as incurred. Duringincurred, as a component of "general and administrative" expense on our consolidated statements of income. For the three and six months ended June 30, 2018, and 2017, we capitalized internal leasing costs of $1,358,000 and $2,706,000, respectively, of internal leasing costs. In addition, we have made changes to our provision policy for lease receivables. Under ASC 842, we must assess on an individual lease basis whether it is probable that we will collect the future lease payments. We consider the tenant's payment history and $1,241,000current credit status when assessing collectability. When collectability is not deemed probable we write-off the tenant's receivables, including straight-line rent receivable, and $2,214,000 respectively, excludinglimit lease income to cash received. Changes to the collectability of our former Washington, DC segmentoperating leases are recorded as adjustments to "rental revenues" on our consolidated statements of income which was spun-off on July 17, 2017. ASU 2016-02 is effectiveresulted in a $14,492,000 and $15,382,000 decrease in income for reporting periods beginning after December 15, 2018, with early adoption permitted. We will adopt this standard effective January 1,the three and six months ended June 30, 2019, using the modified retrospective approach and will elect to use the practical expedients provided by this standard.respectively.

In February 2017,2016, the FASB issued an update (“ASU 2017-05”2016-13”) ClarifyingMeasurement of Credit Losses on Financial Instruments establishing ASC Topic 326, Financial Instruments - Credit Losses, as amended by subsequent ASUs on the Scopetopic. ASU 2016-13 changes how entities will account for credit losses for most financial assets and certain other instruments that are not measured at fair value through net income. The guidance replaces the current “incurred loss” model with an “expected loss” model that requires consideration of Asset Derecognition Guidance and Accounting for Partial Salesa broader range of Nonfinancial Assetsinformation to ASC Subtopic 610-20, Other Income-Gains and Losses fromestimate expected credit losses over the Derecognitionlifetime of Nonfinancial Assets.the financial asset. ASU 2017-05 clarifies the scope of recently established guidance on nonfinancial asset derecognition, as well as the accounting for partial sales of nonfinancial assets. This update conforms the derecognition guidance on nonfinancial assets with the model for transactions in ASC 606. ASU 2017-052016-13 is effective for interim and annual reporting periods in fiscal years beginning after December 15, 2017.2019. We adoptedare currently evaluating the impact of the adoption of ASU 2016-13 on our consolidated financial statements, but do not believe the adoption of this standard will have a material impact on our consolidated financial statements.
In August 2018, the FASB issued an update on(“ASU 2018-13”) Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement to ASC Topic 820, Fair Value Measurement (“ASC 820”). ASU 2018-13 modifies the disclosure requirements for fair value measurements by removing, modifying, and/or adding certain disclosures. ASU 2018-13 is effective for interim and annual reporting periods in fiscal years beginning after December 15, 2019. We elected to early adopt ASU 2018-13 effective January 1, 2018 using the modified retrospective approach applied to all contracts not yet completed.2019. The adoption of this update did not have a material impact on our consolidated financial statements.statements and disclosures.

In May 2017,October 2018, the FASB issued an update (“("ASU 2017-09”2018-16")Scope Inclusion of Modificationthe Secured Overnight Financing Rate (SOFR) Overnight Index Swap (OIS) Rate as a Benchmark Interest Rate for Hedge Accounting Purposes to ASC Topic 718, Compensation - Stock Compensation ("ASC 718")815, Derivatives and Hedging. ASU 2017-09 provides guidance about which changes to2018-16 expands the terms and conditionslist of a share-based payment award requireU.S. benchmark interest rates permitted in the application of hedge accounting by adding the OIS rate based on SOFR as an entity to apply modification accounting in ASC 718.eligible benchmark interest rate. ASU 2017-092018-16 is effective for interim and annual reporting periods in fiscal years beginning after December 15, 2017. The adoption of2018. We adopted this update oneffective January 1, 2018 did not have a material impact on our consolidated financial statements.

In August 2017, the FASB issued an update (“ASU 2017-12”) Targeted Improvements to Accounting for Hedging Activities to ASC Topic 815, Derivatives and Hedging ("ASC 815"). ASU 2017-12 amends the hedge accounting recognition and presentation requirements in ASC 815. The update is intended to more closely align hedge accounting with companies’ risk management strategies, simplify the application of hedge accounting and increase transparency as to the scope and results of hedge programs. ASU 2017-12 requires subsequent changes in fair value of a hedging instrument that has been designated and qualifies as a cash flow hedge to be recognized as a component of "other comprehensive income (loss)." ASU 2017-12 is effective for interim and annual reporting periods in fiscal years beginning after December 15, 2018, with early adoption permitted. We early adopted ASU 2017-12 on January 1, 2018 using the modified retrospective approach.2019. The adoption of this update did not have a materialan impact on our consolidated financial statements.



20

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(UNAUDITED)


4.
Revenue Recognition

On January 1, 2018, we adopted ASC 606 which establishes a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most of the existing revenue recognition guidance. This standard requires us to recognize for certain of our revenue sources the transfer of promised goods or services to customers in an amount that reflects the consideration we are entitled to in exchange for those goods or services. We adopted this standard effective January 1, 2018 using the modified retrospective method applied to all existing contracts not yet completed as of January 1, 2018 and recorded a $14,519,000 cumulative-effect adjustment to beginning accumulated deficit. The adoption of ASC 606 did not have a material impact on our consolidated financial statements.

Our revenues primarily consist of property rentals, tenant expense reimbursements,rental revenues and fee and other income. We operate in two reportable segments: New York and Other, with a significant portion of our revenues included in the "New York"New York segment. We have the following revenue sources and revenue recognition policies:

Base rent is revenue arising from tenant leases. These rents are recognized over the non-cancelable term of the related leases on a straight-line basis which includes the effects of rent steps and rent abatements. We commence rental revenue recognition when the tenant takes possession of the leased space and the leased space is substantially ready for its intended use. In addition, in circumstances where we provide a tenant improvement allowance for improvements that are owned by the tenant, we recognize the allowance as a reduction of rental revenue on a straight-line basis over the term of the lease.

Hotel revenue arisingRental revenues include revenues from the operationleasing of space at our properties to tenants and revenues from the Hotel Pennsylvania, consists of rooms revenue, food and beverage revenue, and banquet revenue. Room revenue is recognized when rooms are occupied. Food and beverage and banquet revenue are recognized when the services have been transferred.

Trade shows revenue arising from the operation of trade shows, is primarily booth rentals. This revenue is recognized upon the occurrence of the trade shows.

Operating expense reimbursements is revenue arising from tenant leases which provide for the recovery of all or a portion of the operating expensesservices and real estate taxes of the common areas of our properties. Revenue is recognized in the same period as the related expenses are incurred.lease termination income.

Tenant services is revenue arising from sub-metered electric, elevator, trash removal and other services provided to tenants at their request. This revenue is recognized as the services are transferred.

◦Revenues from the leasing of space at our properties to tenants includes (i) lease components, including fixed and variable lease payments, and nonlease components which include reimbursement of common area maintenance expenses, and (ii) reimbursement of real estate taxes and insurance expenses. As lessor, we have elected to combine the lease and nonlease components of our operating lease agreements and account for the components as a single lease component in accordance with ASC 842. Lease revenues and reimbursement of common area maintenance, real estate taxes and insurance are presented on the following page as "property rentals." Revenues derived from fixed lease payments are recognized on a straight-line basis over the non-cancelable period of the lease, together with renewal options that are reasonably certain of being exercised. We commence rental revenue recognition when the underlying asset is available for use by the lessee. Revenue derived from the reimbursement of real estate taxes, insurance expenses and common area maintenance expenses are generally recognized in the same period as the related expenses are incurred.
◦Lease termination income is recognized immediately if a tenant vacates or is recognized on a straight-line basis over the shortened remaining lease term in accordance with ASC 842.
◦Hotel revenue arising from the operation of Hotel Pennsylvania consists of room revenue, food and beverage revenue, and banquet revenue. Room revenue is recognized when the rooms are made available for the guest, in accordance with ASC 842.
◦Trade shows revenue arising from the operation of trade shows is primarily booth rentals. This revenue is recognized upon the occurrence of the trade shows when the trade show booths are made available for use by the exhibitors, in accordance with ASC 842.
◦
Tenant services revenue arises from sub-metered electric, elevator, trash removal and other services provided to tenants at their request. This revenue is recognized as the services are transferred in accordance with ASC Topic 606, Revenue from Contracts with Customers ("ASC 606").
Fee and other income includes management, leasing and other revenue arising from contractual agreements with third parties or with partially owned entities and includes Building Maintenance Service ("BMS"(“BMS”) cleaning, engineering and security services. This revenue is recognized as the services are transferred. Fee and other income also includes lease termination fee income which is recognized immediately if a tenant vacates or is recognized on a straight-line basis over the shortened remaining lease term.








transferred in accordance with ASC 606.


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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(UNAUDITED)


4.Revenue Recognition - continued

Below is a summary of our revenues by segment. Base rent, operating expense reimbursements and lease terminations represent revenues from leases and are recognized in accordance with ASC Topic 840, Leases. Revenues from Hotel Pennsylvania, trade shows, tenant services, BMS cleaning fees, management and leasing fees and other income represent revenues recognized in accordance with ASC 606. Additional financial information related to these reportable segments for the three and six months ended June 30, 20182019 and 20172018 is set forth in Note 22 - Segment Information.
(Amounts in thousands)For the Three Months Ended June 30, 2018 For the Three Months Ended June 30, 2017For the Three Months Ended June 30, 2019 For the Three Months Ended June 30, 2018 
Total New York Other Total New York OtherTotal New York Other Total New York Other 
Base rent$405,927
 $343,084
 $62,843
 $393,116
 $334,476
 $58,640
Property rentals(1)(2)
$372,160
 $300,925
 $71,235
 $450,711
 $383,440
 $67,271
 
Hotel Pennsylvania27,082
 27,082
 —
 24,986
 24,986
 —
25,525
 25,525
 —
 27,082
 27,082
 —
 
Trade shows11,586
 —
 11,586
 10,541
 —
 10,541
11,547
 —
 11,547
 11,586
 —
 11,586
 
Property rentals444,595
 370,166
 74,429
 428,643
 359,462
 69,181
Operating expense reimbursements44,784
 40,356
 4,428
 39,014
 35,510
 3,504
Lease revenues409,232
 326,450
 82,782
 489,379
 410,522
 78,857
 
Tenant services13,528
 10,394
 3,134
 12,643
 10,031
 2,612
12,067
 9,337
 2,730
 13,528
 10,394
 3,134
 
Tenant expense reimbursements58,312
 50,750
 7,562
 51,657
 45,541
 6,116
Rental revenues421,299
 335,787
 85,512
 502,907
 420,916
 81,991
 
BMS cleaning fees30,867
 33,407
 (2,540) 24,425
 26,617
 (2,192)32,570
 34,944
 (2,374)
(3) 
30,867
 33,407
 (2,540)
(3) 
Management and leasing fees2,707
 2,464
 243
 2,777
 2,465
 312
4,500
 4,472
 28
 2,707
 2,464
 243
 
Lease termination fees804
 400
 404
 1,106
 1,062
 44
Other income4,533
 1,365
 3,168
 2,479
 1,715
 764
4,734
 1,178
 3,556
 5,337
 1,765
 3,572
 
Fee and other income38,911
 37,636
 1,275
 30,787
 31,859
 (1,072)41,804
 40,594
 1,210
 38,911
 37,636
 1,275
 
Total consolidated revenues$541,818
 $458,552
 $83,266
 $511,087
 $436,862
 $74,225
Total revenues$463,103
 $376,381
 $86,722
 $541,818
 $458,552
 $83,266
 

____________________

(1)Includes $14,492 for the write-off of operating lease receivables deemed uncollectible for the three months ended June 30, 2019. For periods prior to the adoption of ASC 842 on January 1, 2019, changes to the collectability of our operating leases is included in "operating expenses" on our consolidated statements of income.
(2)Includes $2,499 of lease termination income for the three months ended June 30, 2019. For periods prior to the adoption of ASC 842 on January 1, 2019, $804 of lease termination income is included in other income.
(3)Represents the elimination of theMART and 555 California Street BMS cleaning fees which are included as income in the New York segment.
(Amounts in thousands)For the Six Months Ended June 30, 2018 For the Six Months Ended June 30, 2017For the Six Months Ended June 30, 2019 For the Six Months Ended June 30, 2018 
Total New York Other Total New York OtherTotal New York Other Total New York Other 
Base rent$812,490
 $687,758
 $124,732
 $776,956
 $660,157
 $116,799
Property rentals(1)(2)
$829,901
 $686,728
 $143,173
 $905,142
 $772,840
 $132,302
 
Hotel Pennsylvania41,754
 41,754
 —
 37,627
 37,627
 —
38,134
 38,134
 —
 41,754
 41,754
 —
 
Trade shows30,461
 —
 30,461
 28,952
 —
 28,952
28,503
 —
 28,503
 30,461
 —
 30,461
 
Property rentals884,705
 729,512
 155,193
 843,535
 697,784
 145,751
Operating expense reimbursements92,652
 85,082
 7,570
 85,389
 78,466
 6,923
Lease revenues896,538
 724,862
 171,676
 977,357
 814,594
 162,763
 
Tenant services25,970
 20,158
 5,812
 25,301
 20,614
 4,687
24,638
 18,562
 6,076
 25,970
 20,158
 5,812
 
Tenant expense reimbursements118,622
 105,240
 13,382
 110,690
 99,080
 11,610
Rental revenues921,176
 743,424
 177,752
 1,003,327
 834,752
 168,575
 
BMS cleaning fees59,222
 63,560
 (4,338) 49,496
 52,740
 (3,244)62,355
 66,701
 (4,346)
(3) 
59,222
 63,560
 (4,338)
(3) 
Management and leasing fees5,471
 4,945
 526
 5,052
 4,492
 560
6,737
 6,723
 14
 5,471
 4,945
 526
 
Lease termination fees1,149
 708
 441
 4,956
 4,789
 167
Other income9,086
 3,071
 6,015
 5,416
 4,216
 1,200
7,503
 2,818
 4,685
 10,235
 3,779
 6,456
 
Fee and other income74,928
 72,284
 2,644
 64,920
 66,237
 (1,317)76,595
 76,242
 353
 74,928
 72,284
 2,644
 
Total consolidated revenues$1,078,255
 $907,036
 $171,219
 $1,019,145
 $863,101
 $156,044
Total revenues$997,771
 $819,666
 $178,105
 $1,078,255
 $907,036
 $171,219
 

____________________
(1)Includes $15,382 for the write-off of operating lease receivables deemed uncollectible for the six months ended June 30, 2019. For periods prior to the adoption of ASC 842 on January 1, 2019, changes to the collectability of our operating leases is included in "operating expenses" on our consolidated statements of income.
(2)Includes $2,499 of lease termination income for the six months ended June 30, 2019. For periods prior to the adoption of ASC 842 on January 1, 2019, $1,149 of lease termination income is included in other income.
(3)Represents the elimination of theMART and 555 California Street BMS cleaning fees which are included as income in the New York segment.




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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(UNAUDITED)


5.Acquisition

On February 9, 2018, we acquired 537 West 26th Street, a 14,000 square foot commercial property adjacent to our 260 Eleventh Avenue office property and 55,000 square feet of additional zoning air rights, for $44,000,000.

6.
Real Estate Fund Investments
.
We are the general partner and investment manager of Vornado Capital Partners Real Estate Fund (the “Fund”) and own a 25.0% interest in the Fund, which had an initial eight-year term ending February 2019. On January 29, 2018, the Fund's term was extended to February 2023. The Fund's three-year investment period ended in July 2013. The Fund is accounted for under ASC Topic 946, Financial Services – Investment Companies (“ASC 946”) and its investments are reported on its balance sheet at fair value, with changes in value each period recognized in earnings. We consolidate the accounts of the Fund into our consolidated financial statements, retaining the fair value basis of accounting.

We are also the general partner and investment manager of the Crowne Plaza Times Square Hotel Joint Venture (the “Crowne Plaza Joint Venture”) and own a 57.1% interest in the joint venture which owns the 24.7% interest in the Crowne Plaza Times Square Hotel not owned by the Fund. The Crowne Plaza Joint Venture is also accounted for under ASC 946 and we consolidate the accounts of the joint venture into our consolidated financial statements, retaining the fair value basis of accounting.

On January 17, 2018, the Fund completed the sale of the retail condominium at 11 East 68th Street, a property located on Madison Avenue and 68th Street, for $82,000,000. From the inception of this investment through its disposition, the Fund realized a $46,259,000 net gain.

In March 2011, a joint venture (the "Joint Venture") owned 64.7% by the Fund, 30.3% by Vornado and 5.0% by a third party, acquired One Park Avenue for $394,000,000. In connection with the acquisition, the Joint Venture paid $3,000,000 of New York City real property transfer tax (the "Transfer Tax") and filed a Real Property Tax Return ("RPTR") with the New York City Department of Finance (the "Department of Finance"). The RPTR was audited by the Department of Finance in 2014 and an increased Transfer Tax was assessed. The Joint Venture appealed the increased Transfer Tax assessment and the Joint Venture's appeal was upheld by a New York City Administrative Law Judge ("ALJ") in January 2017. The Department of Finance appealed the ALJ's decision and on February 16, 2018 the New York City Tax Appeals Tribunal (the "Tax Tribunal") reversed the ALJ's decision and assessed $9,491,000 of additional Transfer Tax and $6,764,000 of interest. As a result of the Tax Tribunal's decision, we recorded an expense of $15,608,000, before noncontrolling interests, during the first quarter of 2018, which was subsequently paid on April 5, 2018, in order to permit us to appeal the Tax Tribunal's decision and stop the accrual of interest, of which $10,630,000 is included in "(loss) income from real estate fund investments" and $4,978,000 is included in "income (loss) from partially owned entities" (see Note 8 - Investments in Partially Owned Entities) on our consolidated statements of income. We are appealing the Tax Tribunal's decision.

On April 19, 2018, the joint venture between the Fund and the Crowne Plaza Joint Venture completed a $255,000,000 refinancing of the Crowne Plaza Times Square Hotel. The interest-only loan is at LIBOR plus 3.51% (5.56% at June 30, 2018) and matures in May 2020 with three one-year extension options. In connection therewith, the joint venture purchased an interest rate cap that caps LIBOR at a rate of 4.00%. The Crowne Plaza Times Square Hotel was previously encumbered by a $310,000,000 interest-only mortgage at LIBOR plus 2.80%, which was scheduled to mature in December 2018.

As of June 30, 2018,2019, we hadhave four real estate fund investments through the Fund and the Crowne Plaza Joint Venture with an aggregate fair value of $373,039,000,$306,596,000, or $47,475,000 in excess of$22,968,000 below our cost, and had remaining unfunded commitments of $50,494,000,$44,194,000, of which our share was $16,119,000. At$13,969,000. As of December 31, 2017,2018, we had fivefour real estate fund investments with an aggregate fair value of $354,804,000.


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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(UNAUDITED)

6.Real Estate Fund Investments - continued

$318,758,000.
Below is a summary of (loss) income (loss) from the Fund and the Crowne Plaza Joint Venture for the three and six months ended June 30, 20182019 and 2017.2018.
(Amounts in thousands)For the Three Months Ended
June 30,		 For the Six Months Ended
June 30,
 2018 2017 2018 2017
Net investment income$539
 $3,646
 $3,273
 $10,860
Net unrealized (loss) gain on held investments(29,513) 745
 (29,513) (6,442)
Net realized (loss) gain on exited investments(2) —
 (913) 241
Transfer Tax—
 —
 (10,630) —
(Loss) income from real estate fund investments(28,976) 4,391
 (37,783) 4,659
Less loss (income) attributable to noncontrolling interests in consolidated subsidiaries29,527
 (4,695) 34,896
 (8,198)
Income (loss) from real estate fund investments attributable to the Operating Partnership (six months ended June 30, 2018 includes $4,252 of loss related to One Park Avenue potential additional transfer taxes and reduction in carried interest) (1)
551
 (304) (2,887) (3,539)
Less (income) loss attributable to noncontrolling interests in the Operating Partnership(34) 19
 178
 221
Income (loss) from real estate fund investments attributable to Vornado$517
 $(285) $(2,709) $(3,318)
(Amounts in thousands)For the Three Months Ended June 30, For the Six Months Ended June 30, 
 2019 2018 2019 2018 
Net investment income$459
 $539
 $192
 $3,273
 
Net unrealized loss on held investments(16,262) (29,513) (16,162) (29,513) 
Net realized loss on exited investments—
 (2) —
 (913) 
New York City real property transfer tax (the "Transfer Tax")—
 —
 —
 (10,630)
(1) 
Loss from real estate fund investments(15,803) (28,976) (15,970) (37,783) 
Less (income) loss attributable to noncontrolling interests in consolidated subsidiaries(4,955) 29,527
 (7,692) 34,896
 
(Loss) income from real estate fund investments attributable to the Operating Partnership(20,758) 551
 (23,662) (2,887) 
Less loss (income) attributable to noncontrolling interests in the Operating Partnership1,316
 (34) 1,498
 178
 
(Loss) income from real estate fund investments attributable to Vornado$(19,442) $517
 $(22,164) $(2,709) 
____________________
(1)Excludes management and leasing feesDue to the disputed additional Transfer Tax related to the March 2011 acquisition of $1,104 and $1,381 for the three months ended June 30, 2018 and 2017, respectively, and $1,906 and $2,381 for the six months ended June 30, 2018 and 2017, respectively,One Park Avenue which are includedwas recorded as a componentresult of "feethe New York City Tax Appeals Tribunal (the "Tax Tribunal") decision in the first quarter of 2018. We appealed the Tax Tribunal's decision to the New York State Supreme Court, Appellate Division, First Department ("Appellate Division"). Our appeal was heard on April 2, 2019, and other income" on April 25, 2019 the Appellate Division entered a unanimous decision and order that confirmed the decision of the Tax Tribunal and dismissed our consolidated statements of income.appeal. On June 20, 2019, we filed a motion to reargue the Appellate Division's decision with the appellate court.

7.
Marketable Securities

Our portfolio of marketable securities is comprised of equity securities that are presented on our consolidated balance sheets at fair value.  On January 1, 2018, we adopted ASU 2016-01, which requires changes in the fair value of our marketable securities to be recorded in current period earnings. Previously, changes in the fair value of marketable securities were recognized in "accumulated other comprehensive income" on our consolidated balance sheets. As a result, on January 1, 2018 we recorded a decrease to beginning accumulated deficit of $111,225,000 to recognize the unrealized gains previously recorded in “accumulated other comprehensive income” on our consolidated balance sheets. Subsequent changes in the fair value of our marketable securities will be recorded to “interest and other investment income, net” on our consolidated statements of income.

Below is a summary of our marketable securities portfolio as of June 30, 2018 and December 31, 2017.
(Amounts in thousands)Fair Value at Decrease in
 June 30, 2018 December 31, 2017 
Fair Value (1)
Equity securities:     
Lexington Realty Trust$161,234
 $178,226
 $(16,992)
Other4,416
 4,526
 (110)
 $165,650
 $182,752
 $(17,102)
      
____________________
(1)
The decrease in fair value of our marketable securities for the six months ended June 30, 2018 is included in "interest and other investment income, net" on our consolidated statements of income (see Note 18 - Interest and Other Investment Income, Net).





24

VORNADO REALTY TRUST AND VORNADO REALTY L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(UNAUDITED)


6.    Marketable Securities
Lexington Realty Trust ("Lexington") (NYSE: LXP)
On March 1, 2019, we sold all of our 18,468,969 common shares of Lexington, realizing net proceeds of $167,698,000. We recorded a $16,068,000 mark-to-market increase in the fair value of our common shares for the period from January 1, 2019 through the date of sale, which is included in "interest and other investment income, net" on our consolidated statements of income for the six months ended June 30, 2019.
Pennsylvania Real Estate Investment Trust (“PREIT”) (NYSE: PEI)
On March 12, 2019 (the "Conversion Date"), we converted all of our 6,250,000 PREIT operating partnership units into common shares and began accounting for our investment as a marketable security in accordance with ASC Topic 321, Investments - Equity Securities ("ASC 321"). Prior to the Conversion Date, we accounted for our investment under the equity method. For the three and six months ended June 30, 2019, we recorded a $1,313,000 increase and $14,336,000 decrease, respectively, in the value of our investment based on PREIT's June 28, 2019 quarter ended closing share price, which is included in "interest and other investment income, net" on our consolidated statements of income.
The table below summarizes the changes to our marketable securities portfolio for the six months ended June 30, 2019.
(Amounts in thousands) For the Six Months Ended June 30, 2019
  Total Lexington Realty Trust PREIT Other
Beginning balance, December 31, 2018 $152,198
 $151,630
 $—
 $568
Sale of marketable securities (167,852) (167,698) —
 (154)
Transfer of PREIT investment balance at Conversion Date 54,962
 —
 54,962
 —
Increase (decrease) in fair value of marketable securities(1)
 1,773
 16,068
 (14,336) 41
Ending balance, June 30, 2019 $41,081
 $—
 $40,626
 $455
____________________
8.(1)
Included in “interest and other investment income, net” on our consolidated statements of income (see Note 17 - Interest and Other Investment Income, Net).

VORNADO REALTY TRUST AND VORNADO REALTY L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(UNAUDITED)

7.
Investments in Partially Owned Entities
Fifth Avenue and Times Square JV
On April 18, 2019 (the “Closing Date”), we entered into a transaction agreement (the “Transaction Agreement”) with a group of institutional investors (the “Investors”). The Transaction Agreement provides for a series of transactions (collectively, the “Transaction”) pursuant to which (i) prior to the Closing Date, we contributed our interests in properties located at 640 Fifth Avenue, 655 Fifth Avenue, 666 Fifth Avenue, 689 Fifth Avenue, 697-703 Fifth Avenue, 1535 Broadway and 1540 Broadway (collectively, the “Properties”) to subsidiaries of a newly formed joint venture (“Fifth Avenue and Times Square JV”) and (ii) on the Closing Date, transferred a 48.5% common interest in Fifth Avenue and Times Square JV to the Investors. The 48.5% common interest in the joint venture represents an effective 47.2% interest in the Properties (of which 45.4% was transferred from Vornado). The Properties include approximately 489,000 square feet of retail space, 327,000 square feet of office space, signage associated with 1535 and 1540 Broadway, the parking garage at 1540 Broadway and the theatre at 1535 Broadway.
We retained the remaining 51.5% common interest in Fifth Avenue and Times Square JV which represents an effective 51.0% interest in the Properties and an aggregate $1.828 billion of preferred equity interests in certain of the properties. We also provided $500,000,000 of temporary preferred equity on 640 Fifth Avenue until May 23, 2019 when mortgage financing was completed. All of the preferred equity has an annual coupon of 4.25% for the first five years, increasing to 4.75% for the next five years and thereafter at a formulaic rate. It can be redeemed under certain conditions on a tax deferred basis.
Net cash proceeds from the Transaction were $1.186 billion, after (i) deductions for the defeasance of a $390,000,000 mortgage loan on 666 Fifth Avenue and the repayment of a $140,000,000 mortgage loan on 655 Fifth Avenue, (ii) proceeds from a $500,000,000 mortgage loan on 640 Fifth Avenue, described below, (iii) approximately $23,000,000 used to purchase noncontrolling investors' interests and (iv) approximately $53,000,000 of transaction costs (including $17,000,000 of costs related to the defeasance of the 666 Fifth Avenue mortgage loan).
We continue to manage and lease the Properties. We share control with the Investors over major decisions of the joint venture, including decisions regarding leasing, operating and capital budgets, and refinancings. Accordingly, we no longer hold a controlling financial interest in the Properties which has been transferred to the joint venture. As a result, our investment in Fifth Avenue and Times Square JV is accounted for under the equity method from the date of transfer. The Transaction valued the Properties at $5,556,000,000 resulting in a financial statement net gain of $2,571,099,000, before noncontrolling interest of $11,945,000, including the related step-up in our basis of the retained portion of the assets to fair value. The net gain is included in "net gain on transfer to Fifth Avenue and Times Square JV" on our consolidated statements of income for the three and six months ended June 30, 2019. The gain for tax purposes was approximately $735,000,000.
On May 23, 2019, we received $500,000,000 from the redemption of our preferred equity in 640 Fifth Avenue. The preferred equity was redeemed from the proceeds of a $500,000,000 mortgage financing that was completed on the property. The five year loan, which is guaranteed by us, is interest only at LIBOR plus 1.01%. The interest rate was swapped for four years to a fixed rate of 3.07%.
Related Party Transactions
We provide various services to Fifth Avenue and Times Square JV in accordance with management, development, leasing and other agreements, as described below.
We receive an annual fee for managing the Properties equal to 2% of the gross revenues from the Properties. In addition, we are entitled to a development fee of 5% of development costs, plus reimbursement of certain costs, for development projects performed by us. We are entitled to 1.5% of development costs, plus reimbursement of certain costs, as a supervisory fee for development projects not performed by us. We provide leasing services for fees calculated based on a percentage of rents, less any commissions paid to third-party real estate brokers, if applicable. We jointly provide leasing services for the retail space with Crown Acquisitions Inc. ("Crown"), and exclusively provide leasing services for the office space. During the three and six months ended June 30, 2019, we recognized $830,000 of property management fee income.
BMS, our wholly-owned subsidiary, supervises cleaning, security and engineering services at certain of the Properties. During the three and six months ended June 30, 2019, we recognized $791,000 of income for these services.
We believe, based on comparable fees charged by other real estate companies, that the fees described above are at fair market value.
Haim Chera, Executive Vice President - Head of Retail, has an investment in Crown, a company controlled by Mr. Chera's family. Crown has a nominal minority interest in Fifth Avenue and Times Square JV. Additionally, we have other investments with Crown.


VORNADO REALTY TRUST AND VORNADO REALTY L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(UNAUDITED)

7.Investments in Partially Owned Entities - continued

Alexander’s, Inc. (“Alexander’s”) (NYSE: ALX)

As of June 30, 2018,2019, we own 1,654,068 Alexander’s common shares, or approximately 32.4% of Alexander’s common equity. We manage, lease and develop Alexander’s properties pursuant to agreements which expire in March of each year and are automatically renewable.

As of June 30, 2018,2019, the market value (“("fair value”value" pursuant to ASC Topic 820, Fair Value Measurements (“ASC 820”))820) of our investment in Alexander’s, based on Alexander’s June 29, 201828, 2019 quarter ended closing share price of $382.63,$370.30, was $632,896,000,$612,501,000, or $518,128,000$509,496,000 in excess of the carrying amount on our consolidated balance sheet. As of June 30, 2018,2019, the carrying amount of our investment in Alexander’s, excluding amounts owed to us, exceeds our share of the equity in the net assets of Alexander’s by approximately $39,140,000.$38,928,000. The majority of this basis difference resulted from the excess of our purchase price for the Alexander’s common stock acquired over the book value of Alexander’s net assets. Substantially all of this basis difference was allocated, based on our estimates of the fair values of Alexander’s assets and liabilities, to real estate (land and buildings). We are amortizing the basis difference related to the buildings into earnings as additional depreciation expense over their estimated useful lives. This depreciation is not material to our share of equity in Alexander’s net income. The basis difference related to the land will be recognized upon disposition of our investment.

512 West 22nd Street
Alexander's paid $3,971,000On June 28, 2019, a joint venture, in which we have a 55% interest, completed a $145,700,000 refinancing of Transfer Tax upon512 West 22nd Street, a 173,000 square foot office building in the November 2012 saleWest Chelsea submarket of its Kings Plaza Regional Shopping Center locatedManhattan. The four-year interest only loan carries a rate of LIBOR plus 2.00% (4.40% as of June 30, 2019) and matures in Brooklyn, New York. Alexander's accrued $23,797,000 of potential additional Transfer TaxJune 2023 with a one-year extension option. The loan replaces the previous $126,000,000 construction loan that bore interest at LIBOR plus 2.65% and related interest based on the precedent established by the Tax Tribunal's decision regarding One Park Avenue (see Note 6 - Real Estate Fund Investments for details) during the first quarter of 2018 which was subsequently paid on April 5, 2018scheduled to mature in order to preserve Alexander's rights to continue litigation and stop accrual of interest, of which our 32.4% share is $7,708,000 and is included in "income (loss) from partially owned entities" on our consolidated statements of income.

2019.
Urban Edge Properties (“UE”) (NYSE: UE)

AsOn March 4, 2019, we converted to common shares and sold all of June 30, 2018, we ownour 5,717,184 UE operating partnership units representing a 4.5% ownership interest in UE. We account for our investment inof UE, under the equity method and record our sharerealizing net proceeds of UE’s net income or loss on a one-quarter lag basis. In 2018 and 2017, we provided UE with information technology support. UE is providing us with leasing and property management services for (i) certain small retail properties that we plan to sell, and (ii) our affiliate, Alexander’s, Rego Park retail assets. As of June 30, 2018, the fair value of our investment in UE, based on UE’s June 29, 2018 quarter ended closing share price of $22.87, was $130,752,000, or $86,792,000 in excess of the carrying amount on our consolidated balance sheet.

Pennsylvania Real Estate Investment Trust (“PREIT”) (NYSE: PEI)

As of June 30, 2018, we own 6,250,000 PREIT operating partnership units, representing an 8.0% interest in PREIT. We account for our investment in PREIT under the equity method and record our share of PREIT’s net income or loss on a one-quarter lag basis.

As of June 30, 2018, the fair value of our investment in PREIT, based on PREIT’s June 29, 2018 quarter ended closing share price of $10.99, was $68,688,000 or $5,448,000 in excess of the carrying amount on our consolidated balance sheet. As of June 30, 2018, the carrying amount of our investment in PREIT exceeds our share of the equity in the net assets of PREIT by approximately $33,782,000.$108,512,000. The majority of this basis differencesale resulted from the excess of the fair value of the PREIT operating units received over our share of the book value of PREIT’s net assets. Substantially all of this basis difference was allocated, based on our estimates of the fair values of PREIT’s assets and liabilities, to real estate (land and buildings). We are amortizing the basis difference related to the buildings into earnings as additional depreciation expense over their estimated useful lives. This depreciation is not material to our share of equity in PREIT’s net loss. The basis difference related to the land will be recognized upon disposition of our investment.


25
VORNADO REALTY TRUST AND VORNADO REALTY L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(UNAUDITED)

8.Investments in Partially Owned Entities - continued

Independence Plaza

We have a 50.1% economic interest in a joint venture that owns Independence Plaza, a three-building 1,327 unit residential complex in the Tribeca submarketnet gain of Manhattan. The joint venture paid $1,730,000 of Transfer Tax upon its acquisition of the property in December 2012. The joint venture accrued $13,103,000 of potential additional Transfer Tax and related interest based on the precedent established by the Tax Tribunal's decision regarding One Park Avenue (see Note 6 - Real Estate Fund Investments for details) during the first quarter of 2018,$62,395,000 which was subsequently paid on April 5, 2018, in order to preserve the joint venture's rights to continue litigation and stop accrual of interest. Because we consolidate the entity that incurred the potential additional Transfer Tax, $13,103,000 of expense is included in "transaction related costs"net gains on disposition of wholly owned and other" and $6,538,000 is allocated to "noncontrolling interests in consolidated subsidiaries"partially owned assets" on our consolidated statements of income.income for the six months ended June 30, 2019.


61 Ninth Avenue
On June 11, 2018, theJanuary 28, 2019, a joint venture, in which we have a 45.1% interest, completed a $675,000,000$167,500,000 refinancing of Independence Plaza.61 Ninth Avenue,
a 166,000 square foot office and retail property in the Meatpacking district of Manhattan which is fully leased to Aetna and Starbucks. The seven-year interest-onlyinterest only loan carries a rate of LIBOR plus 1.35% (3.77% as of June 30, 2019) and matures in July 2025 and has a fixed rate of 4.25%. Our share ofJanuary 2026. We realized net proceeds of approximately $31,000,000. The loan replaces the previous $90,000,000 construction loan that bore interest at LIBOR plus 3.05% and was scheduled to mature in 2021.

330 Madison Avenue
On July 11, 2019, we sold our 25% interest in 330 Madison Avenue to our joint venture partner. We received net proceeds of approximately $100,000,000 after repaymentdeducting our share of the existing 3.48% $550,000,000$500,000,000 mortgage and closing costs, was $55,618,000.

loan. The third quarter financial statement gain will be approximately $159,000,000. The tax gain will be approximately $138,000,000.
Toys "R" Us, Inc. ("Toys")

We own 32.5% of Toys. On September 18, 2017, Toys filed a voluntary petition under Chapter 11 of the United States Bankruptcy Code. In the second quarter of 2018, Toys liquidatedceased U.S. operations. On February 1, 2019, the inventoryplan of its U.S. storesreorganization for Toys, in which we owned a 32.5% interest, was declared effective and ceased operations. We carryour stock in Toys was canceled. As of December 31, 2018, we carried our Toys investment at zero. Further, we do not hold any debtThe canceling of our stock in Toys and do not guarantee any of Toys’ obligations. For incomeresulted in a $420,000,000 capital loss deduction for tax purposes we carry our investment in Toys as of June 30, 2018 at approximately $420,000,000, which could2019 (which if not offset by capital gains will result in a tax deduction in future periods.capital loss carry over available for five years).

666 Fifth Avenue Office Condominium

On May 29, 2018, we entered into an agreement to sell our 49.5% interest in the 666 Fifth Avenue Office Condominium to our joint venture partner, the Kushner Companies. We will receive net proceeds of approximately $120,000,000 and the financial statement gain is estimated to be $134,000,000. The net tax gain will be approximately $244,000,000. We will continue to own all of 666 Fifth Avenue Retail Condominium encompassing the Uniqlo, Tissot and Hollister stores with 125 linear feet of frontage on Fifth Avenue between 52nd and 53rd Street.

Concurrently with the sale of our 49.5% interest, the existing $1.4 billion mortgage loan on the property will be repaid and we will receive net proceeds of approximately $58,000,000 for the participation we hold in the mortgage loan.

The contract of sale is conditional, is subject to customary closing conditions and is scheduled to close in the third quarter of 2018. There can be no assurance that this transaction will be completed.






26
VORNADO REALTY TRUST AND VORNADO REALTY L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(UNAUDITED)


8.7.Investments in Partially Owned Entities - continued

Below is a schedule summarizing our investments in partially owned entities.
(Amounts in thousands)(Amounts in thousands)Percentage Ownership at
June 30, 2018		 Balance as ofPercentage Ownership at
June 30, 2019		 Balance as of
 June 30, 2018 December 31, 2017 June 30, 2019 December 31, 2018
Investments:Investments:          
Fifth Avenue and Times Square JV (see page 30 for details)51.5% $3,306,389
 $—
Partially owned office buildings/land(1)
Various 469,264
 499,005
Alexander’s32.4% 103,005
 107,983
PREIT(2)
N/A —
 59,491
UE(3)
N/A —
 45,344
Other investments(4)
Various 146,876
 146,290
Partially owned office buildings/land(1)
Various $503,240
 $504,393
 $4,025,534
 $858,113
Alexander’s32.4% 114,768
 126,400
    
Investments in partially owned entities included in other liabilities(5):
    
330 Madison Avenue(6)
25.0% $(60,097) $(58,117)
7 West 34th Street53.0% (53,143) (51,579)
85 Tenth Avenue49.9% (5,098) —
PREIT8.0% 63,240
 66,572
 $(118,338) $(109,696)
UE4.5% 43,960
 46,152
Other investments(2)
Various 234,593
 313,312
 $959,801
 $1,056,829
    
330 Madison Avenue(3)
25.0% $(56,463) $(53,999)
7 West 34th Street (4)
53.0% (49,363) (47,369)
 $(105,826) $(101,368)
____________________
(1)Includes interests in 280 Park Avenue, 650 Madison Avenue, One Park Avenue, 512 West 22nd Street, 85 Tenth Avenue, 61 Ninth Avenue and others.
(2)Includes interests
On March 12, 2019, we converted all of our PREIT operating partnership units into common shares and began accounting for our investment as a marketable security in Independence Plaza, Fashion Centre Mall/Washington Tower, Rosslyn Plaza, 50-70 West 93rd Street, Moynihan Office Building, 666 Fifth Avenue Office Condominium and others.
(3)Our negative basis resulted from a refinancing distribution and is included in "other liabilities" on our consolidated balance sheets.
(4)Our negative basis resulted from a deferred gain from the sale of a 47.0% ownership interest in the property on May 27, 2016 and is included in "other liabilities" on our consolidated balance sheets.

Below is a schedule of net income (loss) from partially owned entities.
(Amounts in thousands)Percentage
Ownership at
June 30, 2018		 For the Three Months Ended
June 30,		 For the Six Months Ended
June 30,
   2018 2017 2018 2017
Our share of net income (loss):         
 Alexander's (see page 25 for details):         
 
Equity in net income(1)
32.4% $6,146
 $6,690
 $2,937
 $13,582
 Management, leasing and development fees  1,021
 1,507
 2,229
 3,016
    7,167
 8,197
 5,166
 16,598
           
 
Partially owned office buildings(2)
Various 2,002
 236
 (2,281) 1,046
           
 UE (see page 25 for details):         
 
Equity in net income(3)
4.5% 1,038
 18,794
 321
 19,885
 Management, leasing and development fees  74
 209
 150
 418
    1,112
 19,003
 471
 20,303
           
 PREIT (see page 25 for details):8.0% (1,068) (902) (1,497) (3,732)
           
 
Other investments(4)
Various (456) 19,487
 (3,006) 13,164
           
    $8,757
 $46,021
 $(1,147) $47,379
____________________
(1)
The six month period ended June 30, 2018 includes our $7,708 share of Alexander's potential additional Transfer Tax.
(2)
Includes interests in 280 Park Avenue, 650 Madison Avenue, One Park Avenue, 7 West 34th Street, 330 Madison Avenue, 512 West 22nd Street, 85 Tenth Avenue and others. The six month period ended June 30, 2018 includes our $4,978 share of potential additional Transfer Tax related to the March 2011 acquisition of One Park Avenueaccordance with ASC 321 (see Note 6 - Real Estate Fund InvestmentsMarketable Securities).
(3)2017 includes a $15,900 net gain resulting from UE operating partnership unit issuances.
Sold on March 4, 2019 (see page 31 for details).
(4)Includes interests in Independence Plaza, Fashion Centre Mall/Washington Tower, Rosslyn Plaza, 50-70 West 93rd Street and others.
(5)Our negative basis results from distributions in excess of our investment.
(6)Sold on July 11, 2019 (see page 31 for details).
Below is a schedule of income (loss) from partially owned entities.
(Amounts in thousands)Percentage
Ownership at
June 30, 2019		 For the Three Months Ended June 30, For the Six Months Ended June 30,
  2019 2018 2019 2018
 Our share of net income (loss):         
Fifth Avenue and Times Square JV (see page 30 for details):         
Equity in net income51.5% $11,217
 $—
 $11,217
 $—
Return on preferred equity, net of our share of the expense  8,586
 —
 8,586
 —
   19,803
 —
 19,803
 —
Alexander's (see page 31 for details):         
Equity in net income(1)
32.4% 3,597
 6,146
 9,314
 2,937
Management, leasing and development fees  1,122
 1,021
 2,179
 2,229
   4,719
 7,167
 11,493
 5,166
          
Partially owned office buildings(2)
Various (1,451) 2,002
 (1,345) (2,281)
          
Other investments(3)
Various (198) (412) 242
 (4,032)
          
   $22,873
 $8,757
 $30,193
 $(1,147)
____________________
(1)
The six months ended June 30, 2018 includes our $7,708 share of Alexander's disputed additional Transfer Tax related to the November 2012 sale of Kings Plaza Regional Shopping Center. Alexander's recorded this expense based on the precedent established by the Tax Tribunal's decision regarding One Park Avenue (see Note 5 - Real Estate Fund Investments).
(2)
Includes interests in 280 Park Avenue, 650 Madison Avenue, One Park Avenue, 7 West 34th Street, 330 Madison Avenue (sold on July 11, 2019), 512 West 22nd Street, 85 Tenth Avenue and others. The three and six months ended June 30, 2019 includes a $1,079 reduction in income from the non-cash write-off of straight-line rent receivable related to The Four Seasons Restaurant at 280 Park Avenue. The six months ended June 30, 2018 includes our $4,978 share of disputed additional Transfer Tax related to the March 2011 acquisition of One Park Avenue (see Note 5 - Real Estate Fund Investments).
(3)Includes interests in Independence Plaza, Fashion Centre Mall/Washington Tower, Rosslyn Plaza, 50-70 West 93rd Street, 666 Fifth Avenue Office Condominium (sold on August 3, 2018), UE (sold on March 4, 2019), PREIT (accounted as a marketable security from March 12, 2019) and others. In the second quarter of 2017, we recognized $26,687 of net gains, comprised of $15,314 representing our share of a net gain on the sale of Suffolk Downs and $11,373 representing the net gain on repayment of our debt investments in Suffolk Downs JV.



27

VORNADO REALTY TRUST AND VORNADO REALTY L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(UNAUDITED)


9.8.
Dispositions
220 Central Park South ("220 CPS")

We are constructing a residential condominium tower containing 397,000 salable square feet at 220 CPS. The development cost of this project (exclusive of land cost) is estimated to be approximately $1.4 billion, of which $1.3 billion has been expended as of June 30, 2019.
New York

OnDuring the three months ended June 21, 2018,30, 2019, we completedclosed on the $45,000,000 sale of 27 Washington Square North, which resulted11 condominium units at 220 CPS for net proceeds aggregating $265,250,000 resulting in a financial statement net gain of $23,559,000$111,713,000 which is included in "net gains on disposition of wholly owned and partially owned assets" on our consolidated statements of income. We acquiredIn connection with these sales, $22,792,000 of income tax expense was recognized in our consolidated statements of income. During the property in December 2015 for $20,000,000.

Discontinued Operations

We have reclassified the revenues and expenses of our former Washington, DC segment which was spun off on July 17, 2017 and other related retail assets that were sold or are currently held for sale to "income from discontinued operations" and the related assets and liabilities to "assets related to discontinued operations" and "liabilities related to discontinued operations" for all periods presented in the accompanying financial statements. The tables below set forth the assets and liabilities related to discontinued operations as of June 30, 2018 and December 31, 2017, and their combined results of operations and cash flows for the three and six months ended June 30, 2018 and 2017.2019, we closed on the sale of 23 condominium units at 220 CPS for net proceeds of $690,734,000 resulting in a financial statement net gain of $269,612,000. In connection with these sales, $49,737,000 of income tax expense was recognized in our consolidated statements of income. From inception to June 30, 2019, we closed on the sale of 34 units for aggregate net proceeds of $905,510,000 which was used to pay $901,117,000 of the $950,000,000 220 CPS loan.

(Amounts in thousands)Balance as of
 June 30, 2018 December 31, 2017
Assets related to discontinued operations:   
Other assets$52
 $1,357
    
Liabilities related to discontinued operations:   
Other liabilities$214
 $3,620

(Amounts in thousands)For the Three Months Ended June 30, For the Six Months Ended June 30,
 2018 2017 2018 2017
Income from discontinued operations:       
Total revenues$339
 $118,939
 $693
 $235,222
Total expenses274
 94,510
 991
 190,222
 65
 24,429
 (298) 45,000
Additional net gains on sale of real estate618
 —
 618
 2,267
JBG SMITH Properties spin-off transaction costs—
 (6,211) —
 (13,464)
Income from partially-owned entities—
 255
 —
 342
Pretax income from discontinued operations683
 18,473
 320
 34,145
Income tax expense—
 (362) —
 (716)
Income from discontinued operations$683
 $18,111
 $320
 $33,429

(Amounts in thousands)For the Six Months Ended June 30,
 2018 2017
Cash flows related to discontinued operations:   
Cash flows from operating activities$(1,781) $83,705
Cash flows from investing activities—
 (52,740)



28
VORNADO REALTY TRUST AND VORNADO REALTY L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(UNAUDITED)

10.9.
Identified Intangible Assets and Liabilities

The following summarizes our identified intangible assets (primarily above-market leases) and liabilities (primarily acquired below-market leases) as of June 30, 20182019 and December 31, 2017.2018.
(Amounts in thousands)Balance as of
 June 30, 2019 December 31, 2018
Identified intangible assets:   
Gross amount$130,665
 $308,895
Accumulated amortization(98,187) (172,114)
Total, net$32,478
 $136,781
Identified intangible liabilities (included in deferred revenue):   
Gross amount$325,449
 $503,373
Accumulated amortization(264,493) (341,779)
Total, net$60,956
 $161,594
(Amounts in thousands)Balance as of
 June 30, 2018 December 31, 2017
Identified intangible assets:   
Gross amount$309,776
 $310,097
Accumulated amortization(163,406) (150,837)
Total, net$146,370
 $159,260
Identified intangible liabilities (included in deferred revenue):   
Gross amount$527,766
 $530,497
Accumulated amortization(346,474) (324,897)
Total, net$181,292
 $205,600


Amortization of acquired below-market leases, net of acquired above-market leases, resulted in an increase to rental incomerevenues of $10,526,000$4,643,000 and $12,588,000$10,526,000 for the three months ended June 30, 20182019 and 2017,2018, respectively, and $21,107,000$11,168,000 and $23,704,000$21,107,000 for the six months ended June 30, 20182019 and 2017,2018, respectively. Estimated annual amortization of acquired below-market leases, net of acquired above-market leases, for each of the five succeeding years commencing January 1, 20192020 is as follows:
(Amounts in thousands) 
2020$16,643
202111,934
20228,792
20236,261
20242,518
 (Amounts in thousands)  
 2019$29,871
 
 202022,213
 
 202117,478
 
 202214,339
 
 202311,661
 


Amortization of all other identified intangible assets (a component of depreciation and amortization expense) was $4,876,000$1,935,000 and $6,846,000$4,876,000 for the three months ended June 30, 20182019 and 2017,2018, respectively, and $9,735,000$5,480,000 and $13,827,000$9,735,000 for the six months ended June 30, 20182019 and 2017,2018, respectively. Estimated annual amortization of all other identified intangible assets including acquired in-place leases customer relationships, and third party contracts for each of the five succeeding years commencing January 1, 20192020 is as follows:
(Amounts in thousands) 
2020$6,308
20214,779
20223,049
20232,962
20242,350

 (Amounts in thousands)  
 2019$14,994
 
 202012,008
 
 202111,030
 
 20229,477
 
 20239,349
 


We are a tenant under ground leases for certain properties.  Amortization of these acquired below-market leases, net of above-market leases, resulted in an increase to rent expense (a component of operating expense) of $437,000 and $437,000 for the three months ended June 30, 2018, and 2017, respectively, and $874,000 and $874,000 for the six months ended June 30, 2018 and 2017, respectively.  Estimated annual amortization of these below-market leases, net of above-market leases, for each of the five succeeding years commencing January 1, 2019 is as follows:
 (Amounts in thousands)  
 2019$1,747
 
 20201,747
 
 20211,747
 
 20221,747
 
 20231,747
 



29

VORNADO REALTY TRUST AND VORNADO REALTY L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(UNAUDITED)


11.10.
Debt

On January 5, 2018,February 4, 2019, we completed a $100,000,000$95,700,000 refinancing of 33-00 Northern Boulevard (Center Building),435 Seventh Avenue, a 471,00043,000 square foot office buildingManhattan retail property. The interest-only loan carries a rate of LIBOR plus 1.30% (3.73% as of June 30, 2019) and matures in Long Island City, New York.2024. The seven-yearrecourse loan isreplaces the previous $95,700,000 loan that bore interest at LIBOR plus 1.80%, which2.25% and was scheduled to mature in August 2019.
On February 12, 2019, we completed a $580,000,000 refinancing of 100 West 33rd Street, a 1.1 million square foot Manhattan property comprised of 859,000 square feet of office space and the 256,000 square foot Manhattan Mall. The interest-only loan carries a rate of LIBOR plus 1.55% (3.98% as of June 30, 2019) and matures in April 2024, with two one-year extension options. The loan replaces the previous $580,000,000 loan that bore interest at LIBOR plus 1.65% and was scheduled to mature in July 2020.
On May 24, 2019, we extended our $375,000,000 mortgage loan on 888 Seventh Avenue, a 886,000 square foot Manhattan office building, from December 2020 to December 2025. The interest rate on the extended mortgage loan is LIBOR plus 1.70% (4.11% as of June 30, 2019). Pursuant to an existing swap agreement, the interest rate on the $375,000,000 mortgage loan has been swapped to 3.25% through December 2020.
Senior Unsecured Notes
On March 1, 2019, we called for redemption all of our $400,000,000 5.00% senior unsecured notes. The notes, which were scheduled to mature in January 2022, were redeemed on April 1, 2019 at a fixed rateredemption price of 4.14%. We realized net proceeds of approximately $37,200,000 after repayment105.51% of the existing 4.43% $59,800,000 mortgageprincipal amount plus accrued interest. In connection therewith, we expensed $22,540,000 relating to debt prepayment costs which is included in "interest and closing costs.debt expense" on our consolidated statements of income for the six months ended June 30, 2019.

Unsecured Revolving Credit Facility
On March 26, 2019, we increased to $1.5 billion (from $1.25 billion) and extended to March 2024 (as fully extended) from February 2022 one of our two unsecured revolving credit facilities. The interest rate on the extended facility was lowered from LIBOR plus 1.00% to LIBOR plus 0.90%. Thefacility fee remains unchanged at 20 basis points.
The following is a summary of our debt:
(Amounts in thousands)Weighted Average Interest Rate at
June 30, 2019		 Balance as of
  June 30, 2019 December 31, 2018
Mortgages Payable:     
Fixed rate3.52% $4,608,463
 $5,003,465
Variable rate4.09% 1,683,182
 3,212,382
Total3.68% 6,291,645
 8,215,847
Deferred financing costs, net and other  (34,837) (48,049)
Total, net  $6,256,808
 $8,167,798
      
Unsecured Debt:     
Senior unsecured notes3.50% $450,000
 $850,000
Deferred financing costs, net and other  (4,535) (5,998)
Senior unsecured notes, net  445,465
 844,002
      
Unsecured term loan3.87% 750,000
 750,000
Deferred financing costs, net and other  (4,669) (5,179)
Unsecured term loan, net  745,331
 744,821
      
Unsecured revolving credit facilities3.40% 80,000
 80,000
      
Total, net  $1,270,796
 $1,668,823

(Amounts in thousands)Interest Rate at
June 30, 2018		 Balance as of
  June 30, 2018 December 31, 2017
Mortgages Payable:     
Fixed rate3.53% $5,009,211
 $5,461,706
Variable rate3.89% 3,155,262
 2,742,133
Total3.67% 8,164,473
 8,203,839
Deferred financing costs, net and other  (55,855) (66,700)
Total, net  $8,108,618
 $8,137,139
      
Unsecured Debt:     
Senior unsecured notes4.21% $850,000
 $850,000
Deferred financing costs, net and other  (6,583) (6,386)
Senior unsecured notes, net  843,417
 843,614
      
Unsecured term loan3.24% 750,000
 750,000
Deferred financing costs, net and other  (506) (1,266)
Unsecured term loan, net  749,494
 748,734
      
Unsecured revolving credit facilities3.05% 80,000
 —
      
Total, net  $1,672,911
 $1,592,348





30

VORNADO REALTY TRUST AND VORNADO REALTY L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(UNAUDITED)


12.11.
Redeemable Noncontrolling Interests/Redeemable Partnership Units

Redeemable noncontrolling interests on Vornado’s consolidated balance sheets and redeemable partnership units on the consolidated balance sheets of the Operating Partnership are primarily comprised of Class A Operating Partnership units held by third parties and are recorded at the greater of their carrying amount or redemption value at the end of each reporting period. Changes in the value from period to period are charged to “additional capital” in Vornado’s consolidated statements of changes in equity and to “partners’ capital” on the consolidated balance sheets of the Operating Partnership.
(Amounts in thousands)For the Three Months Ended June 30, For the Six Months Ended June 30,
 2019 2018 2019 2018
Beginning balance$867,085
 $857,026
 $783,562
 $984,937
Net income162,515
 7,445
 174,717
 6,321
Other comprehensive (loss) income(1,806) 205
 (3,082) 859
Distributions(8,448) (7,985) (16,936) (15,891)
Redemption of Class A units for Vornado common shares, at redemption value(2,948) (3,854) (6,129) (12,246)
Adjustments to carry redeemable Class A units at redemption value(165,225) 78,406
 (99,407) (36,450)
Other, net10,889
 6,798
 29,337
 10,511
Ending balance$862,062
 $938,041
 $862,062
 $938,041
(Amounts in thousands) 
Balance, December 31, 2016$1,278,446
Net income10,935
Other comprehensive loss(207)
Distributions(18,078)
Redemption of Class A units for Vornado common shares, at redemption value(25,562)
Adjustments to carry redeemable Class A units at redemption value(90,208)
Other, net21,758
Balance, June 30, 2017$1,177,084
  
Balance, December 31, 2017$984,937
Net income6,321
Other comprehensive income859
Distributions(15,891)
Redemption of Class A units for Vornado common shares, at redemption value(12,246)
Adjustments to carry redeemable Class A units at redemption value(36,450)
Other, net10,511
Balance, June 30, 2018$938,041


As of June 30, 20182019 and December 31, 2017,2018, the aggregate redemption value of redeemable Class A units of the Operating Partnership, which are those units held by third parties, was $932,613,000$857,527,000 and $979,509,000,$778,134,000, respectively.

Redeemable noncontrolling interests/redeemable partnership units exclude our Series G-1 through G-4 convertible preferred units and Series D-13 cumulative redeemable preferred units, as they are accounted for as liabilities in accordance with ASC Topic 480, Distinguishing Liabilities and Equity, because of their possible settlement by issuing a variable number of Vornado common shares. Accordingly, the fair value of these units is included as a component of “other liabilities” on our consolidated balance sheets and aggregated $50,561,000 as of June 30, 20182019 and December 31, 2017.2018. Changes in the value from period to period, if any, are charged to “interest and debt expense” on our consolidated statements of income.


13.Shareholders' Equity/Partners' Capital

On January 4 and 11, 2018, we redeemed all of the outstanding 6.625% Series G and Series I cumulative redeemable preferred shares/units at their redemption price of $25.00 per share/unit, or $470,000,000 in the aggregate, plus accrued and unpaid dividends/distributions through the date of redemption, and expensed $14,486,000 of previously capitalized issuance costs.



31
VORNADO REALTY TRUST AND VORNADO REALTY L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(UNAUDITED)


14.12.
Accumulated Other Comprehensive Income ("AOCI")Shareholders' Equity/Partners' Capital
The following table sets forth the details of our dividends/distributions per common share/Class A unit and dividends/distributions per share/unit for each class of preferred shares/units of beneficial interest for the three and six months ended June 30, 2019 and 2018.
(Per share/unit)For the Three Months Ended June 30, For the Six Months Ended June 30,
 2019 2018 2019 2018
Shares/Units:       
Common shares/Class A units held by Vornado: authorized 250,000,000 shares/units$0.66
 $0.63
 $1.32
 $1.26
Convertible Preferred(1):
       
6.5% Series A: authorized 83,977 shares/units(2)
0.8125
 0.8125
 1.6250
 1.6250
Cumulative Redeemable Preferred(1):
       
5.70% Series K: authorized 12,000,000 shares/units(3)
0.3563
 0.3563
 0.7126
 0.7126
5.40% Series L: authorized 12,000,000 shares/units(3)
0.3375
 0.3375
 0.6750
 0.6750
5.25% Series M: authorized 12,780,000 shares/units(3)
0.3281
 0.3281
 0.6562
 0.6562
____________________
(1)Dividends on preferred shares and distributions on preferred units are cumulative and are payable quarterly in arrears.
(2)Redeemable at the option of Vornado under certain circumstances, at a redemption price of 1.9531 common shares/Class A units per Series A preferred share/unit plus accrued and unpaid dividends/distributions through the date of redemption, or convertible at any time at the option of the holder for 1.9531 common shares/ Class A units per Series A preferred share/unit.
(3)Redeemable at Vornado's option at a redemption price of $25.00 per share/unit, plus accrued and unpaid dividends/distributions through the date of redemption.
Accumulated Other Comprehensive (Loss) Income
The following tables set forth the changes in accumulated other comprehensive (loss) income by component.
(Amounts in thousands)Total Marketable securities 
Pro rata share of
nonconsolidated
subsidiaries' OCI
 
Interest
rate
swaps
 Other
For the Three Months Ended June 30, 2018         
Balance as of March 31, 2018$30,258
 $—
 $2,444
 $36,651
 $(8,837)
Net current period OCI:         
OCI before reclassifications3,093
 —
 390
 2,908
 (205)
Amounts reclassified from AOCI—
 —
 —
 —
 —
 3,093
 —
 390
 2,908
 (205)
Balance as of June 30, 2018$33,351
 $—
 $2,834
 $39,559
 $(9,042)
          
For the Three Months Ended June 30, 2017         
Balance as of March 31, 2017$119,019
 $115,496
 $(2,841) $13,908
 $(7,544)
Net current period OCI:         
OCI before reclassifications(3,180) (1,206) (980) (1,206) 212
Amounts reclassified from AOCI—
 —
 —
 —
 —
 (3,180) (1,206) (980) (1,206) 212
Balance as of June 30, 2017$115,839
 $114,290
 $(3,821) $12,702
 $(7,332)
          
For the Six Months Ended June 30, 2018         
Balance as of December 31, 2017$128,682
 $109,554
 $3,769
 $23,542
 $(8,183)
          
Cumulative effect of accounting change (see Note 3)(108,374) (109,554) (1,671) 2,851
 —
Net current period OCI:         
OCI before reclassifications13,043
 —
 736
 13,166
 (859)
Amounts reclassified from AOCI—
 —
 —
 —
 —
 13,043
 —
 736
 13,166
 (859)
Balance as of June 30, 2018$33,351
 $—
 $2,834
 $39,559
 $(9,042)
          
For the Six Months Ended June 30, 2017         
Balance as of December 31, 2016$118,972
 $130,505
 $(12,058) $8,066
 $(7,541)
Net current period OCI:         
OCI before reclassifications(12,401) (16,215) (1,031) 4,636
 209
Amounts reclassified from AOCI9,268
 —
 9,268
(1) 
—
 —
 (3,133) (16,215) 8,237
 4,636
 209
Balance as of June 30, 2017$115,839
 $114,290
 $(3,821) $12,702
 $(7,332)
(Amounts in thousands)Total Marketable securities 
Pro rata share of
nonconsolidated
subsidiaries' OCI
 
Interest
rate
swaps
 Other
For the three months ended June 30, 2019:         
Balance, March 31, 2019$(11,385) $—
 $(43) $(5,270) $(6,072)
Net current period other comprehensive (loss) income(26,681) —
 25
 (28,515) 1,809
Balance, June 30, 2019$(38,066) $—
 $(18) $(33,785) $(4,263)
          
For the three months ended June 30, 2018:         
Balance, March 31, 2018$30,258
 $—
 $2,444
 $36,651
 $(8,837)
Net current period other comprehensive income (loss)3,093
 —
 390
 2,908
 (205)
Balance, June 30, 2018$33,351
 $—
 $2,834
 $39,559
 $(9,042)
          
For the six months ended June 30, 2019:         
Balance, December 31, 2018$7,664
 $—
 $3,253
 $11,759
 $(7,348)
Net current period other comprehensive (loss) income(43,419) —
 (960) (45,544) 3,085
Amount reclassified from AOCI (1)
(2,311) —
 (2,311) —
 —
Balance, June 30, 2019$(38,066) $—
 $(18) $(33,785) $(4,263)
          
For the six months ended June 30, 2018:         
Balance, December 31, 2017$128,682
 $109,554
 $3,769
 $23,542
 $(8,183)
Cumulative effect of accounting change(108,374) (109,554) (1,671) 2,851
 —
Net current period other comprehensive income (loss)13,043
 —
 736
 13,166
 (859)
Balance, June 30, 2018$33,351
 $—
 $2,834
 $39,559
 $(9,042)
____________________
(1)Reclassified upon receipt of proceedsAmount reclassified related to the saleconversion of an investment by a nonconsolidated subsidiary.our PREIT operating partnership units into common shares.



32

VORNADO REALTY TRUST AND VORNADO REALTY L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(UNAUDITED)


15.13.
Variable Interest Entities ("VIEs")

Unconsolidated VIEs

As of June 30, 20182019 and December 31, 2017,2018, we have several unconsolidated VIEs. We do not consolidate these entities because we are not the primary beneficiary and the nature of our involvement in the activities of these entities does not give us power over decisions that significantly affect these entities’ economic performance. We account for our investment in these entities under the equity method (see Note 8 – Investments in Partially Owned Entities).method. As of June 30, 20182019 and December 31, 2017,2018, the net carrying amount of our investments in these entities was $304,859,000$214,623,000 and $352,925,000, respectively, and our$257,882,000, respectively. Our maximum exposure to loss in these entities is limited to the carrying amount of our investments.

Consolidated VIEs

Our most significant consolidated VIEs are the Operating Partnership (for Vornado), real estate fund investments,the Fund and the Crowne Plaza Joint Venture, the Farley joint venture and certain properties that have noncontrollingnon-controlling interests. These entities are VIEs because the noncontrollingnon-controlling interests do not have substantive kick-out or participating rights. We consolidate these entities because we control all of their significant business activities.

As of June 30, 2019, the total assets and liabilities of our consolidated VIEs, excluding the Operating Partnership, were $4,633,391,000 and $2,421,708,000, respectively. As of December 31, 2018, the total assets and liabilities of our consolidated VIEs, excluding the Operating Partnership, were $3,578,768,000$4,445,436,000 and $1,811,269,000, respectively. As of December 31, 2017, the total assets and liabilities of our consolidated VIEs, excluding the Operating Partnership, were $3,561,062,000 and $1,753,798,000,$2,533,753,000, respectively.




33

VORNADO REALTY TRUST AND VORNADO REALTY L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(UNAUDITED)


16. Fair Value Measurements
14.
Fair Value Measurements
ASC 820 defines fair value and establishes a framework for measuring fair value. The objective of fair value is to determine the price that would be received upon the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (the exit price). ASC 820 establishes a fair value hierarchy that prioritizes observable and unobservable inputs used to measure fair value into three levels: Level 1 – quoted prices (unadjusted) in active markets that are accessible at the measurement date for assets or liabilities; Level 2 – observable prices that are based on inputs not quoted in active markets, but corroborated by market data; and Level 3 – unobservable inputs that are used when little or no market data is available. The fair value hierarchy gives the highest priority to Level 1 inputs and the lowest priority to Level 3 inputs. In determining fair value, we utilize valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible, as well as consider counterparty credit risk in our assessment of fair value. Considerable judgment is necessary to interpret Level 2 and 3 inputs in determining the fair value of our financial and non-financial assets and liabilities. Accordingly, our fair value estimates, which are made at the end of each reporting period, may be different than the amounts that may ultimately be realized upon sale or disposition of these assets.

Financial Assets and Liabilities Measured at Fair Value on a Recurring Basis

Financial assets and liabilities that are measured at fair value on our consolidated balance sheets consist of (i) marketable securities, (ii) real estate fund investments, (iii) the assets in our deferred compensation plan (for which there is a corresponding liability on our consolidated balance sheets), (iv) interest rate swaps and (v) mandatorily redeemable instruments (Series G-1 through G-4 convertible preferred units and Series D-13 cumulative redeemable preferred units, and 6.625% Series G and Series I cumulative redeemable preferred shares/units which were redeemed on January 4 and 11, 2018 (see Note 13 - Shareholders' Equity/Partners' Capital))units). The tables below aggregate the fair values of these financial assets and liabilities by their levels in the fair value hierarchy as of June 30, 20182019 and December 31, 2017,2018, respectively.

(Amounts in thousands)As of June 30, 2019
 Total Level 1 Level 2 Level 3
Marketable securities$41,081
 $41,081
 $—
 $—
Real estate fund investments306,596
 —
 —
 306,596
Deferred compensation plan assets ($25,133 included in restricted cash and $74,746 in other assets)99,879
 77,888
 —
 21,991
Interest rate swaps (included in other assets)9,295
 —
 9,295
 —
Total assets$456,851
 $118,969
 $9,295
 $328,587
        
Mandatorily redeemable instruments (included in other liabilities)$50,561
 $50,561
 $—
 $—
Interest rate swaps (included in other liabilities)43,047
 —
 43,047
 —
Total liabilities$93,608
 $50,561
 $43,047
 $—
        
(Amounts in thousands)As of December 31, 2018
 Total Level 1 Level 2 Level 3
Marketable securities$152,198
 $152,198
 $—
 $—
Real estate fund investments318,758
 —
 —
 318,758
Deferred compensation plan assets ($8,402 included in restricted cash and $88,122 in other assets)96,524
 58,716
 —
 37,808
Interest rate swaps (included in other assets)27,033
 —
 27,033
 —
Total assets$594,513
 $210,914
 $27,033
 $356,566
        
Mandatorily redeemable instruments (included in other liabilities)$50,561
 $50,561
 $—
 $—
Interest rate swaps (included in other liabilities)15,236
 —
 15,236
 —
Total liabilities$65,797
 $50,561
 $15,236
 $—

(Amounts in thousands)As of June 30, 2018
 Total Level 1 Level 2 Level 3
Marketable securities$165,650
 $165,650
 $—
 $—
Real estate fund investments373,039
 —
 —
 373,039
Deferred compensation plan assets ($4,375 included in restricted cash and $95,993 in other assets)100,368
 60,498
 —
 39,870
Interest rate swaps (included in other assets)39,584
 —
 39,584
 —
Total assets$678,641
 $226,148
 $39,584
 $412,909
        
Mandatorily redeemable instruments (included in other liabilities)$50,561
 $50,561
 $—
 $—
        
(Amounts in thousands)As of December 31, 2017
 Total Level 1 Level 2 Level 3
Marketable securities$182,752
 $182,752
 $—
 $—
Real estate fund investments354,804
 —
 —
 354,804
Deferred compensation plan assets ($11,545 included in restricted cash and $97,632 in other assets)109,177
 69,049
 —
 40,128
Interest rate swaps (included in other assets)27,472
 —
 27,472
 —
Total assets$674,205
 $251,801
 $27,472
 $394,932
        
Mandatorily redeemable instruments (included in other liabilities)$520,561
 $520,561
 $—
 $—
Interest rate swaps (included in other liabilities)1,052
 —
 1,052
 —
Total liabilities$521,613
 $520,561
 $1,052
 $—





34
VORNADO REALTY TRUST AND VORNADO REALTY L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(UNAUDITED)


16.14.Fair Value Measurements - continued
Financial Assets and Liabilities Measured at Fair Value on a Recurring Basis - continued


Real Estate Fund Investments


As of June 30, 2018,2019, we hadhave four real estate fund investments with an aggregate fair value of $373,039,000,$306,596,000, or $47,475,000 in excess of$22,968,000 below our cost. These investments are classified as Level 3. We use a discounted cash flow valuation technique to estimate the fair value of each of these investments, which is updated quarterly by personnel responsible for the management of each investment and reviewed by senior management at each reporting period. The discounted cash flow valuation technique requires us to estimate cash flows for each investment over the anticipated holding period, which currently ranges from 0.5 to 4.5 years. Cash flows are derived from property rental revenue (base rents plus reimbursements) less operating expenses, real estate taxes and capital and other costs, plus projected sales proceeds in the year of exit. Property rental revenue is based on leases currently in place and our estimates for future leasing activity, which are based on current market rents for similar space plus a projected growth factor. Similarly, estimated operating expenses and real estate taxes are based on amounts incurred in the current period plus a projected growth factor for future periods. Anticipated sales proceeds at the end of an investment’s expected holding period are determined based on the net cash flow of the investment in the year of exit, divided by a terminal capitalization rate, less estimated selling costs.


The fair value of each property is calculated by discounting the future cash flows (including the projected sales proceeds), using an appropriate discount rate and then reduced by the property’s outstanding debt, if any, to determine the fair value of the equity in each investment. Significant unobservable quantitative inputs used in determining the fair value of each investment include capitalization rates and discount rates. These rates are based on the location, type and nature of each property, current and anticipated market conditions, industry publications and from the experience of our Acquisitions and Capital Markets departments. Significant unobservable quantitative inputs in the table below were utilized in determining the fair value of these real estate fund investments as of June 30, 20182019 and December 31, 2017.2018.
 Range 
Weighted Average
(based on fair value of investments)
Unobservable Quantitative InputJune 30, 2019 December 31, 2018 June 30, 2019 December 31, 2018
Discount rates10.0% to 15.0% 10.0% to 15.0% 13.5% 13.4%
Terminal capitalization rates5.1% to 7.6% 5.4% to 7.7% 5.5% 5.7%

 Range 
Weighted Average
(based on fair value of investments)
Unobservable Quantitative InputJune 30, 2018 December 31, 2017 June 30, 2018 December 31, 2017
Discount rates10.0% to 15.0% 2.0% to 14.9% 13.1% 11.9%
Terminal capitalization rates5.1% to 6.4% 4.7% to 6.7% 5.7% 5.5%


The above inputs are subject to change based on changes in economic and market conditions and/or changes in use or timing of exit. Changes in discount rates and terminal capitalization rates result in increases or decreases in the fair values of these investments. The discount rates encompass, among other things, uncertainties in the valuation models with respect to terminal capitalization rates and the amount and timing of cash flows. Therefore, a change in the fair value of these investments resulting from a change in the terminal capitalization rate may be partially offset by a change in the discount rate. It is not possible for us to predict the effect of future economic or market conditions on our estimated fair values. 


The table below summarizes the changes in the fair value of real estate fund investments that are classified as Level 3, for the three and six months ended June 30, 20182019 and 2017.2018.
(Amounts in thousands)For the Three Months Ended June 30, For the Six Months Ended June 30,
 2019 2018 2019 2018
Beginning balance$322,858
 $336,552
 $318,758
 $354,804
Purchases/additional fundings—
 66,000
 4,000
 68,950
Net unrealized loss on held investments(16,262) (29,513) (16,162) (29,513)
Dispositions—
 —
 —
 (20,291)
Net realized loss on exited investments—
 (2) —
 (913)
Other, net—
 2
 —
 2
Ending balance$306,596
 $373,039
 $306,596
 $373,039

(Amounts in thousands)For the Three Months Ended
June 30,		 For the Six Months Ended
June 30,
 2018 2017 2018 2017
Beginning balance$336,552
 $454,946
 $354,804
 $462,132
Purchases66,000
 —
 68,950
 —
Net unrealized (loss) gain on held investments(29,513) 745
 (29,513) (6,442)
Dispositions—
 —
 (20,291) —
Net realized (loss) gain on exited investments(2) —
 (913) 241
Other, net2
 1
 2
 (239)
Ending balance$373,039
 $455,692
 $373,039
 $455,692





35
VORNADO REALTY TRUST AND VORNADO REALTY L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(UNAUDITED)


16.14.Fair Value Measurements - continued
Financial Assets and Liabilities Measured at Fair Value on a Recurring Basis - continued


Deferred Compensation Plan Assets


Deferred compensation plan assets that are classified as Level 3 consist of investments in limited partnerships and investment funds, which are managed by third parties. We receive quarterly financial reports from a third-party administrator, which are compiled from the quarterly reports provided to them from each limited partnership and investment fund. The quarterly reports provide net asset values on a fair value basis which are audited by independent public accounting firms on an annual basis. The period of time over which these underlying assets are expected to be liquidated is unknown. The third party administrator does not adjust these values in determining our share of the net assets and we do not adjust these values when reported in our consolidated financial statements.


The table below summarizes the changes in the fair value of deferred compensation plan assets that are classified as Level 3, for the three and six months ended June 30, 20182019 and 2017.2018.
(Amounts in thousands)For the Three Months Ended June 30, For the Six Months Ended June 30,
 2019 2018 2019 2018
Beginning balance$37,562
 $39,485
 $37,808
 $40,128
Sales(18,041) (1,874) (20,155) (3,509)
Purchases1,969
 1,619
 2,877
 1,633
Realized and unrealized gains215
 34
 738
 712
Other, net286
 606
 723
 906
Ending balance$21,991
 $39,870
 $21,991
 $39,870

(Amounts in thousands)For the Three Months Ended
June 30,		 For the Six Months Ended
June 30,
 2018 2017 2018 2017
Beginning balance$39,485
 $56,910
 $40,128
 $57,444
Sales(1,874) (9,375) (3,509) (12,112)
Purchases1,619
 1,350
 1,633
 1,813
Realized and unrealized gains34
 830
 712
 1,905
Other, net606
 134
 906
 799
Ending balance$39,870
 $49,849
 $39,870
 $49,849


Fair Value Measurements on a Nonrecurring Basis


There were no assetsAssets measured at fair value on a nonrecurring basis on our consolidated balance sheets consist primarily of real estate and right-of-use assets required to be measured for impairment as of June 30, 20182019 and December 31, 2017.2018. As of June 30, 2019, our estimate of the fair value of the 608 Fifth Avenue assets was measured using a discounted cash flow analysis based upon market conditions and expectations of growth, resulting in a write-down to zero (see Note 16 - Transaction Related Costs, Impairment Losses and Other). For real estate assets to be sold, the sales price per the executed purchase and sale agreement, net of closing costs, was utilized to determine the fair value. As of December 31, 2018, the fair value of real estate assets required to be measured for impairment were determined using comparable sales activity.

(Amounts in thousands)As of June 30, 2019
 Total Level 1 Level 2 Level 3
Real estate assets$67,102
 $—
 $67,102
 $—
Right-of-use assets$—
 $—
 $—
 $—
 As of December 31, 2018
 Total Level 1 Level 2 Level 3
Real estate assets$14,971
 $—
 $—
 $14,971


VORNADO REALTY TRUST AND VORNADO REALTY L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(UNAUDITED)

14.Fair Value Measurements - continued
Financial Assets and Liabilities not Measured at Fair Value


Financial assets and liabilities that are not measured at fair value on our consolidated balance sheets include cash equivalents (primarily money market funds, which invest in obligations of the United States government), and our secured and unsecured debt. Estimates of the fair value of these instruments are determined by the standard practice of modeling the contractual cash flows required under the instrument and discounting them back to their present value at the appropriate current risk adjusted interest rate, which is provided by a third-party specialist. For floating rate debt, we use forward rates derived from observable market yield curves to project the expected cash flows we would be required to make under the instrument. The fair values of cash equivalents and borrowings under our unsecured revolving credit facilities and unsecured term loan are classified as Level 1. The fair values of our secured and unsecured debt are classified as Level 2. The table below summarizes the carrying amounts and fair value of these financial instruments as of June 30, 20182019 and December 31, 2017.2018.
(Amounts in thousands)As of June 30, 2019 As of December 31, 2018
  
Carrying
Amount
 
Fair
Value
 
Carrying
Amount
 
Fair
Value
Cash equivalents$749,035
 $749,000
 $261,981
 $262,000
Debt:       
 Mortgages payable$6,291,645
 $6,336,000
 $8,215,847
 $8,179,000
 Senior unsecured notes450,000
 459,000
 850,000
 847,000
 Unsecured term loan750,000
 750,000
 750,000
 750,000
 Unsecured revolving credit facilities80,000
 80,000
 80,000
 80,000
 Total$7,571,645
(1) 
$7,625,000
 $9,895,847
(1) 
$9,856,000
(Amounts in thousands)As of June 30, 2018 As of December 31, 2017
  
Carrying
Amount
 
Fair
Value
 
Carrying
Amount
 
Fair
Value
Cash equivalents$851,306
 $851,000
 $1,500,227
 $1,500,000
Debt:       
 Mortgages payable$8,164,473
 $8,112,000
 $8,203,839
 $8,194,000
 Senior unsecured notes850,000
 847,000
 850,000
 878,000
 Unsecured term loan750,000
 750,000
 750,000
 750,000
 Unsecured revolving credit facilities80,000
 80,000
 —
 —
 Total$9,844,473
(1) 
$9,789,000
 $9,803,839
(1) 
$9,822,000

____________________
(1)Excludes $62,944$44,041 and $74,352$59,226 of deferred financing costs, net and other as of June 30, 20182019 and December 31, 2017,2018, respectively.






36

VORNADO REALTY TRUST AND VORNADO REALTY L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(UNAUDITED)


17.15.
Stock-based Compensation

Vornado’s 2010 Omnibus Share Plan (the "Plan") providesOn January 14, 2019, the Compensation Committee approved the issuance of our Board of Trustees (the "Committee") the ability to grant incentive and non-qualified Vornado stock options, restricted stock, restricted Operating Partnership units, out-performance plan awards andperformance conditioned appreciation-only long-term incentive plan units ("Performance Conditioned AO LTIP Units") to certain of our employees and officers. We account for all equity-based compensation in accordance with ASC 718. Equity-based compensation expense, a component of "general and administrative" expenses on our consolidated statements of income, was $6,976,000 and $6,724,000 for the three months ended June 30, 2018 and 2017, respectively, and $20,645,000 and $20,283,000 for the six months ended June 30, 2018 and 2017, respectively.

AO LTIP Units

On January 12, 2018, the Committee approved the issuance of AO LTIP Units pursuant to the Plan to certain of our named executive officers and employees.  In connection with the approval of AO LTIP Units, Vornado, in its capacity as sole general partner of the Operating Partnership, amended the Second Amended and Restated Agreement of Limited Partnership of the Operating Partnership (the “Partnership Agreement”("NEOs") in order to establish the terms of the new class of partnership interests known as AO LTIP Units.

our 2019 proxy statement. Performance Conditioned AO LTIP Units are a class of partnership interests in the Operating Partnership that are intended to qualify as “profits interests” for federal income tax purposes and generally only allow the recipient to realize value to the extent the fair market value of a Vornado common share exceeds the threshold level set at the time the AO LTIP Units that require the achievement of certain performance conditions by a specified date or they are granted, subject to any vesting conditions applicable to the award.forfeited. The threshold levelperformance-based condition is intended to be equal to 100%met if Vornado common shares trade at or above 110% of the then fair market value$64.48 grant price per share for any 20 consecutive days on or before the fourth anniversary following the date of a Vornado common share ongrant. If the performance conditions are not met, the awards are forfeited. If the performance conditions are met, once vested, the awards may be converted into Class A Operating Partnership units in the same manner as AO LTIP Units until ten years from the date of grant. The value of vested AO LTIP Units is realized through conversion of the AO LTIP Units into Class A Operating Partnership units.  The number of Class A Units into which vested AO LTIP Units may be converted is determined based on the quotient of (i) the excess of the conversion value on the conversion date over the threshold value designated at the time the AO LTIP Unit was granted, divided by (ii) the conversion value on the conversion date.  The “conversion value” is the value of a Vornado common share on the conversion date multiplied by the Conversion Factor as defined in the Partnership Agreement, which is currently one.  AO LTIP Units vest ratably over four years and have a term of ten years from the grant date. The fair value of the Performance Conditioned AO LTIP Units on the date of grant was $3,484,000,$8,983,000, of which $622,000$7,481,000 was immediately expensed due to the acceleration of vesting for employees who are retirement eligible (have reached age 65 or age 60 with at least 20 years of service).eligible. The remaining $2,862,000$1,502,000 is being amortized into expense over a four-year period from the date of grant using a graded vesting attribution model.

Each holder will generally receive special income allocations in respectOn May 16, 2019, our shareholders approved the 2019 Omnibus Share Plan (the “Plan"), which replaces the 2010 Omnibus Share Plan. Under the Plan, the Compensation Committee of an the Board (the “Committee”) may grant incentive and non-qualified Vornado stock options, restricted stock, restricted Operating Partnership units ("OP units"), out-performance plan awards ("OPPs"), appreciation-only long-term incentive plan units (“AO LTIP Unit equal to 10% (or such other percentage specified in the applicable award agreement) of the income allocated in respect of a Class A Unit.  Upon conversion ofUnits”) and Performance Conditioned AO LTIP Units to Class A Units, holderscertain of our employees and officers. Awards may be granted up to a maximum 5,500,000 shares, if all awards granted are Full Value awards, as defined, and up to 11,000,000 shares, if all of the awards granted are Not Full Value Awards, as defined in the Plan. Full Value Awards are awards of securities, such as restricted shares, that, if all vesting requirements are met, do not require the payment of an exercise price or strike price to acquire the securities. Not Full Value Awards are awards of securities, such as options, that do require the payment of an exercise price or strike price.
We account for all equity-based compensation in accordance with ASC Topic 718, Compensation - Stock Compensation. Stock-based compensation expense, a component of "general and administrative" expense on our consolidated statements of income, was $10,520,000 and $6,976,000 for the three months ended June 30, 2019 and 2018, respectively, and $42,174,000 and$20,645,000 for the six months ended June 30, 2019 and 2018, respectively.
Stock-based compensation expense for the three months ended March 31, 2019 included $16,211,000 from the accelerated vesting of previously issued OP units and Vornado restricted stock due to the removal of the time-based vesting requirement to participants who have reached 65 years of age. The right to sell such awards remains subject to original terms of grant. The increase in expense in the first quarter of 2019 was partially offset by lower stock-based compensation expense of $2,578,000 in the three months ended June 30, 2019; and will be entitled to receivecompletely offset by lower stock-based compensation expense of $2,578,000 in respect of each such AO LTIP Unit, on a per unit basis, a special distribution equal to 10% (or such other percentage specified in the applicable award agreement) of the distributions received bythird and fourth quarters of 2019 and $8,477,000 thereafter.
Stock-based compensation expense for the three and six months ended June 30, 2019 also includes $5,316,000 for OP units granted outside of the Plan to an executive officer in connection with his employment in reliance on the employment inducement exception to shareholder approval provided under the New York Stock Exchange Listing Rule 303A.08, and $329,000 for OP units granted under the Plan to certain executive officers as a holderresult of an equivalent numberpromotions. The award granted outside of Class A Units during the period fromPlan has a grant date fair value of $25,500,000 and vests 20% on the grant date, of40% on the AO LTIP Units throughthree-year anniversary of the date of conversion.grant, and 40% on the four-year anniversary of the date of grant. The awards granted under the Plan have an aggregate grant date fair value of $15,000,000 and cliff vest after four years. Compensation expense related to OP unit grants are recognized ratably over the vesting period. Additional non-cash expense associated with these awards will be $2,401,000 in each of the next two quarters, $9,603,000 in each of 2020 and 2021, $7,718,000 in 2022 and $2,655,000 in 2023.




37
VORNADO REALTY TRUST AND VORNADO REALTY L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(UNAUDITED)


16. Transaction Related Costs, Impairment Losses and Other
The following table sets forth the details of transaction related costs, impairment losses and other:
(Amounts in thousands)For the Three Months Ended June 30, For the Six Months Ended June 30,
 2019 2018 2019 2018
Non-cash impairment losses, substantially 608 Fifth Avenue (see below)$101,360
 $—
 $101,360
 $—
Transaction related costs230
 1,017
 379
 1,070
Transfer tax(1)
—
 —
 —
 13,103
 $101,590
 $1,017
 $101,739
 $14,173
____________________
(1)
Disputed additional Transfer Tax recorded in the first quarter 2018 related to the December 2012 acquisition of Independence Plaza. The joint venture, in which we have a 50.1% economic interest, that owns Independence Plaza recorded this expense based on the precedent established by the Tax Tribunal's decision regarding One Park Avenue (see Note 5 - Real Estate Fund Investments).
608 Fifth Avenue
During the second quarter of 2019, Arcadia Group US Ltd ("Arcadia Group"), the operator of Topshop, our retail tenant at 608 Fifth Avenue, filed for Chapter 15 bankruptcy protection in the United States. On June 28, 2019, Arcadia Group closed all of its stores in the United States. 608 Fifth Avenue is subject to a land and building lease which expires in 2033. The non-recourse lease calls for fixed lease payments through the term, plus payments for real estate taxes, insurance and operating expenses. Based on current market rental rates, the cash flows of the property would not be sufficient to cover the operating expenses, including the fixed lease payments. Consequently, we concluded that the carrying amount of the property, which includes our right-of-use asset, was not recoverable. Our estimate of fair value of the property was derived from a discounted cash flow model based upon market conditions and expectations of growth. We recognized a $93,860,000 non-cash impairment loss on our consolidated statements of income, of which $75,220,000 resulted from the impairment of our right-of-use asset. A corresponding $72,588,000 lease liability remains, which will be recognized as income if and when the non-recourse lease is terminated.
17.Stock-based Compensation - continued
Interest and Other Investment Income, Net

2018 Outperformance Plan (“2018 OPP”)

On March 15, 2018,The following table sets forth the Committee approved the 2018 OPP, a multi-year, $35,000,000 performance-based equity compensation plandetails of which $27,354,000 was granted to senior executives.  The fair value of the 2018 OPP granted was $10,283,000, of which $8,040,000 was immediately expensed due to the acceleration of vesting for employees who are retirement eligible (have reached age 65 or age 60 with at least 20 years of service). The remaining $2,243,000 is being amortized into expense over a five-year period from the date of grant using a graded vesting attribution model.

Under the 2018 OPP, participants have the opportunity to earn compensation payable in the form of equity awards if Vornado outperforms a predetermined total shareholder return (“TSR”) and/or outperforms the market with respect to relative total TSR during the three-year performance period (the “Performance Period”) from March 15, 2018 to March 15, 2021 (the “Measurement Date”).  Specifically, awards under the 2018 OPP may potentially be earned if Vornado (i) achieves a TSR above a benchmark weighted index (the “Index”) comprised 70% of the SNL US Office REIT Indexinterest and 30% of the SNL US Retail Index over the Performance Period (the “Relative Component”), and/or (ii) achieves a TSR greater than 21% over the Performance Period (the “Absolute Component”).  The value of awards under the Relative Component and Absolute Component will be calculated separately and will each be subject to an aggregate $35,000,000 maximum award cap for all participants. The two components will be added together to determine the aggregate award size, which shall also be subject to the aggregate $35,000,000 maximum award cap for all participants.  In the event awards are earned under the Absolute Component, but Vornado underperforms the Index by more than 200 basis points per annum over the Performance Period (600 basis points over the three years), the amount earned under the Absolute Component will be reduced (and potentially fully negated) based on the degree by which the Index exceeds Vornado’s TSR. In the event awards are earned under the Relative Component, but Vornado fails to achieve a TSR of at least 3% per annum, awards earned under the Relative Component will be reduced on a ratable sliding scale based on Vornado’s absolute TSR performance, with awards earned under the Relative Component being reduced by a maximum of 50% in the event Vornado’s TSR during the Measurement Period is 0% or negative.  If the designated performance objectives are achieved, awards under the 2018 OPP will vest ratably on the Measurement Date and the first and second anniversary of the Measurement Date.  In addition, all of Vornado’s Named Executive Officers (as defined in Vornado’s Proxy Statement filed on Schedule 14A with the Securities and Exchange Commission on April 6, 2018) are required to hold any earned and vested awards for one year following each such vesting date. Dividends on awards granted under the 2018 OPP accrue during the Performance Period and are paid to participants if awards are ultimately earned based on the achievement of the designated performance objectives.

other investment income, net:

(Amounts in thousands)For the Three Months Ended June 30, For the Six Months Ended June 30,
 2019 2018 2019 2018
Increase (decrease) in fair value of marketable securities:       
PREIT (see page 29 for details)$1,313
 $—
 $(14,336) $—
Lexington (see page 29 for details)
—
 15,883
 16,068
 (16,992)
Other(1) 1
 41
 (110)
 1,312
 15,884
 1,773
 (17,102)
Interest on cash and cash equivalents and restricted cash2,626
 4,487
 4,693
 8,044
Interest on loans receivable(1)
1,635
 6,205
 3,241
 6,948
Dividends on marketable securities1,313
 3,353
 1,313
 6,706
Other, net954
 963
 1,865
 1,912
 $7,840
 $30,892
 $12,885
 $6,508
____________________
(1)2018 includes $5,457 of income from profit participation on the April 2018 sale of 701 Seventh Avenue. We received this income in connection with our 25% participation in an October 2012, $137,500 mezzanine loan, which was repaid in January 2014.

38
18.
Interest and Debt Expense
The following table sets forth the details of interest and debt expense:
(Amounts in thousands)For the Three Months Ended June 30, For the Six Months Ended June 30,
 2019 2018 2019 2018
Interest expense(1)
$76,605
 $96,377
 $194,252
 $191,165
Capitalized interest and debt expense(19,812) (16,754) (43,137) (31,480)
Amortization of deferred financing costs6,236
 8,034
 14,377
 16,138
 $63,029
 $87,657
 $165,492
 $175,823

____________________
(1)The six months ended June 30, 2019 includes $22,540 debt prepayment costs in connection with the redemption of $400,000 5.00% senior unsecured notes which were scheduled to mature in January 2022.

VORNADO REALTY TRUST AND VORNADO REALTY L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(UNAUDITED)


18.19.
Interest and Other Investment Income, Net

The following table sets forth the details of interest and other investment income, net:
(Amounts in thousands)For the Three Months Ended
June 30,		 For the Six Months Ended
June 30,
 2018 2017 2018 2017
Increase (decrease) in fair value of marketable securities:       
Lexington Realty Trust$15,883
 $—
 $(16,992) $—
Other1
 —
 (110) —
 15,884
 —
 (17,102) —
Interest on loans receivable (1)
6,205
 2,102
 6,948
 2,845
Dividends on marketable securities3,353
 3,307
 6,706
 6,614
Other, net5,450
 3,132
 9,956
 5,777
 $30,892
 $8,541
 $6,508
 $15,236
____________________
(1)
2018 includes $5,457 of income from a profit participation on the April 2018 sale of 701 Seventh Avenue. We received this kicker in connection with our 25% participation in an October 2012, $137,500 mezzanine loan, which was repaid in January 2014.

19. Interest and Debt Expense

The following table sets forth the details of interest and debt expense:
(Amounts in thousands)For the Three Months Ended
June 30,		 For the Six Months Ended
June 30,
 2018 2017 2018 2017
Interest expense$96,377
 $88,392
 $191,165
 $173,362
Amortization of deferred financing costs8,034
 7,977
 16,138
 16,546
Capitalized interest and debt expense(16,754) (11,580) (31,480) (22,395)
 $87,657
 $84,789
 $175,823
 $167,513


39
VORNADO REALTY TRUST AND VORNADO REALTY L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(UNAUDITED)

20.
Income Per Share/Income Per Class A Unit

Vornado Realty Trust

The following table provides a reconciliation of both net income andpresents the number of common shares used in the computationcalculations of (i) basic income per common share - which includes the weighted average number of common shares outstanding without regard to dilutive potential common shares and (ii) diluted income per common share - which includes the weighted average common shares and dilutive share equivalents. DilutiveUnvested share-based payment awards that contain non-forfeitable rights to dividends, whether paid or unpaid, are accounted for as participating securities. Earnings are allocated to participating securities, which include restricted stock awards, based on the two-class method. Other potential dilutive share equivalents may includesuch as our employee stock options, OP Units, OPPs, AO LTIP Units and Performance Conditioned AO LTIP Units are included in the computation of diluted Earnings Per Share ("EPS") using the treasury stock method, while the dilutive effect of our Series A convertible preferred shares employee stock options, restricted stock awards and Out-Performance Plan awards.is reflected in diluted EPS by application of the if-converted method.
(Amounts in thousands, except per share amounts)For the Three Months Ended
June 30,		 For the Six Months Ended
June 30,		For the Three Months Ended June 30, For the Six Months Ended June 30,
2018 2017 2018 20172019 2018 2019 2018
Numerator:              
Income from continuing operations, net of income attributable to noncontrolling interests$123,427
 $115,112
 $133,448
 $164,631
$2,412,671
 $123,427
 $2,606,821
 $133,448
Income from discontinued operations, net of income attributable to noncontrolling interests641
 16,989
 300
 31,351
Income (loss) from discontinued operations, net of income attributable to noncontrolling interests56
 641
 (72) 300
Net income attributable to Vornado124,068
 132,101
 133,748
 195,982
2,412,727
 124,068
 2,606,749
 133,748
Preferred share dividends(12,534) (16,129) (25,569) (32,258)(12,532) (12,534) (25,066) (25,569)
Preferred share issuance costs—
 —
 (14,486) —
—
 —
 —
 (14,486)
Net income attributable to common shareholders111,534
 115,972
 93,693
 163,724
2,400,195
 111,534
 2,581,683
 93,693
Earnings allocated to unvested participating securities(11) (13) (22) (27)(239) (11) (258) (22)
Numerator for basic income per share111,523
 115,959
 93,671
 163,697
2,399,956
 111,523
 2,581,425
 93,671
Impact of assumed conversions:              
Convertible preferred share dividends16
 20
 —
 —
14
 16
 29
 —
Earnings allocated to Out-Performance Plan units—
 —
 37
 233
—
 —
 9
 37
Numerator for diluted income per share$111,539
 $115,979
 $93,708
 $163,930
$2,399,970
 $111,539
 $2,581,463
 $93,708
              
Denominator:              
Denominator for basic income per share – weighted average shares190,200
 189,395
 190,141
 189,304
190,781
 190,200
 190,735
 190,141
Effect of dilutive securities(1):
              
Employee stock options and restricted share awards930
 1,011
 934
 1,089
Employee stock options and restricted stock awards243
 930
 256
 934
Convertible preferred shares38
 38
 —
 —
34
 38
 35
 —
Out-Performance Plan units—
 —
 115
 281
—
 —
 4
 115
Denominator for diluted income per share – weighted average shares and assumed conversions191,168
 190,444
 191,190
 190,674
191,058
 191,168
 191,030
 191,190
              
INCOME PER COMMON SHARE – BASIC:              
Income from continuing operations, net$0.59
 $0.52
 $0.49
 $0.70
$12.58
 $0.59
 $13.53
 $0.49
Income from discontinued operations, net—
 0.09
 —
 0.16
Net income per common share$0.59
 $0.61
 $0.49
 $0.86
$12.58
 $0.59
 $13.53
 $0.49
              
INCOME PER COMMON SHARE – DILUTED:              
Income from continuing operations, net$0.58
 $0.52
 $0.49
 $0.70
$12.56
 $0.58
 $13.51
 $0.49
Income from discontinued operations, net—
 0.09
 —
 0.16
Net income per common share$0.58
 $0.61
 $0.49
 $0.86
$12.56
 $0.58
 $13.51
 $0.49
____________________
(1)
The effect of dilutive securities excludes an aggregate of12,609and 12,299 weighted average common share equivalents, for the three months ended June 30, 20182019 and 2017 excludes an aggregate of 12,299 and 12,268 weighted average common share equivalents,2018, respectively, and12,521 and 12,252 and 12,125 weighted average common share equivalents for the six months ended June 30, 20182019 and 2017,2018, respectively, as their effect was anti-dilutive.



40
VORNADO REALTY TRUST AND VORNADO REALTY L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(UNAUDITED)


20.19.Income Per Share/Income Per Class A Unit - continued


Vornado Realty L.P.


The following table provides a reconciliation of both net income andpresents the number of Class A units used in the computationcalculations of (i) basic income per Class A unit - which includes the weighted average number of Class A units outstanding without regard to dilutive potential Class A units and (ii) diluted income per Class A unit - which includes the weighted average Class A unitsunit and dilutive Class A unit equivalents. Dilutive unitUnvested share-based payment awards that contain non-forfeitable rights to dividends, whether paid or unpaid, are accounted for as participating securities. Earnings are allocated to participating securities, which include Vornado restricted stock awards, OP Units and OPPs, based on the two-class method. Other potential dilutive share equivalents may includesuch as Vornado stock options, AO LTIP Units and Performance Conditioned AO LTIP Units are included in the computation of diluted income per share using the treasury stock method, while the dilutive effect of our Series A convertible preferred units, Vornado stock options, restricted unit awards and Out-Performance Plan awards.shares is reflected in diluted EPS by application of the if-converted method.

(Amounts in thousands, except per unit amounts)For the Three Months Ended
June 30,		 For the Six Months Ended
June 30,		For the Three Months Ended June 30, For the Six Months Ended June 30,
2018 2017 2018 20172019 2018 2019 2018
Numerator:              
Income from continuing operations, net of income attributable to noncontrolling interests in consolidated subsidiaries$130,830
 $121,696
 $139,749
 $173,488
$2,575,182
 $130,830
 $2,781,543
 $139,749
Income from discontinued operations683
 18,111
 320
 33,429
Income (loss) from discontinued operations60
 683
 (77) 320
Net income attributable to Vornado Realty L.P.131,513
 139,807
 140,069
 206,917
2,575,242
 131,513
 2,781,466
 140,069
Preferred unit distributions(12,582) (16,177) (25,666) (32,355)(12,573) (12,582) (25,148) (25,666)
Preferred unit issuance costs—
 —
 (14,486) —
—
 —
 —
 (14,486)
Net income attributable to Class A unitholders118,931
 123,630
 99,917
 174,562
2,562,669
 118,931
 2,756,318
 99,917
Earnings allocated to unvested participating securities(772) (742) (1,544) (1,759)(10,162) (772) (10,860) (1,544)
Numerator for basic income per Class A unit118,159
 122,888
 98,373
 172,803
2,552,507
 118,159
 2,745,458
 98,373
Impact of assumed conversions:              
Convertible preferred unit distributions16
 20
 —
 —
14
 16
 29
 —
Numerator for diluted income per Class A unit$118,175
 $122,908
 $98,373
 $172,803
$2,552,521
 $118,175
 $2,745,487
 $98,373
              
Denominator:              
Denominator for basic income per Class A unit – weighted average units202,064
 201,127
 201,997
 200,987
202,924
 202,064
 202,848
 201,997
Effect of dilutive securities(1):
              
Vornado stock options and restricted unit awards1,252
 1,458
 1,269
 1,630
Vornado stock options, Vornado restricted stock awards, OP Units and OPPs522
 1,252
 508
 1,269
Convertible preferred units38
 38
 —
 —
34
 38
 35
 —
Denominator for diluted income per Class A unit – weighted average units and assumed conversions203,354
 202,623
 203,266
 202,617
203,480
 203,354
 203,391
 203,266
              
INCOME PER CLASS A UNIT – BASIC:              
Income from continuing operations, net$0.58
 $0.52
 $0.49
 $0.69
$12.58
 $0.58
 $13.53
 $0.49
Income from discontinued operations, net—
 0.09
 —
 0.17
Net income per Class A unit$0.58
 $0.61
 $0.49
 $0.86
$12.58
 $0.58
 $13.53
 $0.49
              
INCOME PER CLASS A UNIT – DILUTED:              
Income from continuing operations, net$0.58
 $0.52
 $0.48
 $0.69
$12.54
 $0.58
 $13.50
 $0.48
Income from discontinued operations, net—
 0.09
 —
 0.16
Net income per Class A unit$0.58
 $0.61
 $0.48
 $0.85
$12.54
 $0.58
 $13.50
 $0.48
____________________
(1)The effect of dilutive securities excludes an aggregate of 187 and 112 weighted average Class A unit equivalents, for the three months ended June 30, 20182019 and 2017 excludes an aggregate of 112 and 89 weighted average Class A unit equivalents,2018 respectively, and 175160 and 182175 weighted average Class A unit equivalents for the six months ended June 30, 20182019 and 2017,2018, respectively, as their effect was anti-dilutive.




41

VORNADO REALTY TRUST AND VORNADO REALTY L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(UNAUDITED)


20.
Leases
As lessor
We lease space to tenants under operating leases. Most of the leases provide for the payment of fixed base rent payable monthly in advance. Office building leases generally require tenants to reimburse us for operating costs and real estate taxes above their base year costs. Certain leases provide for pass-through to tenants for their share of real estate taxes, insurance and common area maintenance. Certain leases also require additional variable rent payments based on a percentage of the tenants’ sales. None of our tenants accounted for more than 10% of total revenues for the three and six months ended June 30, 2019 and 2018. We have elected to account for lease revenues (including base and variable rent) and the reimbursement of common area maintenance expenses as a single lease component recorded as "rental revenues" on our consolidated statements of income. As of June 30, 2019, under ASC 842, future undiscounted cash flows under non-cancelable operating leases were as follows:
(Amounts in thousands)As of June 30, 2019
For the remainder of 2019$664,483
For the year ended December 31, 
20201,278,724
20211,250,716
20221,182,435
20231,056,135
2024876,527
Thereafter4,239,951
As of December 31, 2018, under ASC 840, future undiscounted cash flows under non-cancelable operating leases were as follows:
(Amounts in thousands)As of December 31, 2018
For the year ended December 31, 
2019$1,547,162
20201,510,097
20211,465,024
20221,407,615
20231,269,141
Thereafter5,832,467

The components of lease revenues for the three and six months ended June 30, 2019 were as follows:
(Amounts in thousands)For the Three Months Ended June 30, 2019 For the Six Months Ended June 30, 2019
  Fixed lease revenues$377,524
 $807,611
  Variable lease revenues31,708
 88,927
Lease revenues$409,232
 $896,538


VORNADO REALTY TRUST AND VORNADO REALTY L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(UNAUDITED)

20.    Leases - continued
As lessee
We have a number of ground leases which are classified as operating leases. On January 1, 2019, we recorded $526,866,000 of ROU assets and lease liabilities. Our ROU assets were reduced by $37,269,000 of accrued rent expense reclassified from “other liabilities” and $4,267,000 of acquired above-market lease liabilities, net, reclassified from “deferred revenue” and increased by $23,665,000 of acquired below-market lease assets, net, reclassified from “identified intangible assets, net of accumulated amortization” and $1,584,000 of prepaid lease payments reclassified from "other assets." As of June 30, 2019, our ROU assets and lease liabilities were $380,214,000 and $483,011,000, respectively.
The discount rate applied to measure each ROU asset and lease liability is based on our incremental borrowing rate ("IBR"). We consider the general economic environment and our credit rating and factor in various financing and asset specific adjustments to ensure the IBR is appropriate to the intended use of the underlying lease. As we did not elect to apply hindsight, lease term assumptions determined under ASC 840 were carried forward and applied in calculating the lease liabilities recorded under ASC 842. Certain of our ground leases offer renewal options which we assess against relevant economic factors to determine whether we are reasonably certain of exercising or not exercising the option. Lease payments associated with renewal periods that we are reasonably certain will be exercised are included in the measurement of the corresponding lease liability and ROU asset.
The following table sets forth information related to the measurement of our lease liabilities as of June 30, 2019:
(Amounts in thousands)As of June 30, 2019
Weighted average remaining lease term (in years)41.33
Weighted average discount rate4.89%
Cash paid for operating leases$13,158

We recognize rent expense as a component of "operating" expenses on our consolidated statements of income. Rent expense is comprised of fixed and variable lease payments. Variable lease payments include percentage rent and rent resets based on an index or rate. The following table sets forth the details of rent expense for the three and six months ended June 30, 2019:
(Amounts in thousands)For the Three Months Ended June 30, 2019 For the Six Months Ended June 30, 2019
Fixed rent expense$8,689
 $19,315
Variable rent expense534
 1,154
Rent expense$9,223
 $20,469

As of June 30, 2019, future lease payments under operating ground leases were as follows:
(Amounts in thousands)As of June 30, 2019
For the remainder of 2019$13,369
For the year ended December 31, 
202028,352
202128,745
202229,646
202330,061
202430,495
Thereafter1,037,252
Total undiscounted cash flows1,197,920
Present value discount(714,909)
Lease liabilities$483,011


VORNADO REALTY TRUST AND VORNADO REALTY L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(UNAUDITED)

20.    Leases - continued
As lessee - continued
As of December 31, 2018, under ASC 840, future lease payments under operating ground leases were as follows:
(Amounts in thousands)As of December 31, 2018
For the year ended December 31, 
2019$46,147
202045,258
202142,600
202243,840
202344,747
Thereafter1,612,627

Certain of our ground leases are subject to fair market rent resets based on a percentage of the appraised value of the underlying assets at specified future dates. Fair market rent resets do not give rise to remeasurement of the related right-of-use assets and lease liabilities. Fair market rent resets, which may be material, will be recognized in the periods in which they are incurred.
Farley Office and Retail Building
The future lease payments detailed previously exclude the ground and building lease at the Farley Office and Retail Building (the "Project"). We have a 95.0% ownership interest in a joint venture with the Related Companies ("Related") which was designated by Empire State Development ("ESD"), an entity of New York State, to develop the Project. The Project will include a new Moynihan Train Hall and approximately 845,000 rentable square feet of commercial space, comprised of approximately 725,000 square feet of office space and approximately 120,000 square feet of retail space. The joint venture has a 99-year triple-net lease with ESD for the commercial space at the Project. The lease has not yet commenced since construction of the Project is ongoing.
The joint venture has entered into a development agreement with ESD to build the adjacent Moynihan Train Hall, with Vornado and Related each guaranteeing the joint venture's obligations. The joint venture has entered into a design-build contract with Skanska Moynihan Train Hall Builders pursuant to which they will build the Moynihan Train Hall, thereby fulfilling all of the joint venture's obligations to ESD. The obligations of Skanska Moynihan Train Hall Builders have been bonded by Skanska USA and bear a full guaranty from Skanska AB. As a result of our involvement in the construction of the asset, we have been deemed the accounting owner of the property in accordance with ASC 842-40-55. Future undiscounted cash flows for the lease, including fixed payments in lieu of real estate taxes, as of June 30, 2019 were as follows:
(Amounts in thousands)As of June 30, 2019
For the remainder of 2019$3,411
For the year ended December 31, 
202010,402
20217,229
20227,444
20237,809
20248,330
Thereafter519,048


VORNADO REALTY TRUST AND VORNADO REALTY L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(UNAUDITED)

21.
Commitments and Contingencies

Insurance

We maintain general liability insurance with limits of $300,000,000 per occurrence and per property, and 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. Our California properties have earthquake insurance with coverage of $260,000,000$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 terrorism acts with limits of $4.0 billion per occurrence and in the aggregate, and $2.0 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 Program Reauthorization Act of 2015, which expires in December 2020.

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 $1,601,000$1,453,000 and 18%19% 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.

We continue to monitor the state of the insurance market and the scope and cost of coverage for acts of terrorism. However, we cannot anticipate what coverage will be available on commercially reasonable terms in the future. We are responsible for deductibles and losses in excess of our insurance coverage, which could be material.

material.
Our debt instruments, consisting of mortgage loans secured by our properties, which are generally non-recourse to us, senior unsecured notes and revolving credit agreements, 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 a reasonable cost in the future. Further, if lenders insist on greater coverage than we are able to obtain, it could adversely affect our ability to finance or refinance our properties and expand our portfolio.






42
VORNADO REALTY TRUST AND VORNADO REALTY L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(UNAUDITED)


21.Commitments and Contingencies - continued

Other Commitments and Contingencies

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 currently expected to have a material adverse effect on our financial position, results of operations or cash flows.

Each of our properties has been subjected to varying degrees of environmental assessment at various times. The environmental assessments did not reveal any material environmental contamination. However, there can be no assurance that the identification of new areas of contamination, changes in the extent or known scope of contamination, the discovery of additional sites or changes in cleanup requirements would not result in significant cost to us.

Generally, ourOur mortgage loans are non-recourse to us. However, inus, except for the mortgage loans secured by 640 Fifth Avenue, 7 West 34th Street and 435 Seventh Avenue, which we guaranteed and therefore are part of our tax basis. In certain cases, we have provided guarantees or master leased tenant space. These guarantees and master leases terminate either upon the satisfaction of specified circumstances or repayment of the underlying loans. As of June 30, 2018,2019, the aggregate dollar amount of these guarantees and master leases is approximately $667,000,000.$1,031,000,000.

As of June 30, 2018, $13,337,0002019, $15,880,000 of letters of credit was outstanding under one of our unsecured revolving credit facilities. Our unsecured revolving credit facilities contain financial covenants that require us to maintain minimum interest rate coverage and maximum debt to market capitalization ratios and provide for higher interest rates in the event of a decline in our ratings below Baa3/BBB. Our unsecured revolving credit facilities also contain customary conditions precedent to borrowing, including representations and warranties, and also contain customary events of default that could give rise to accelerated repayment, including such items as failure to pay interest or principal.

In September 2016, our 50.1%A joint venture with Related Companies ("Related")in which we own a 95.0% ownership interest was designated by Empire State Development ("ESD"),ESD, an entity of New York State, to redevelopdevelop the historic Farley Post Office and Retail Building. The joint venture entered into a development agreement with ESD and a design-build contract with Skanska Moynihan Train Hall Builders. Under the development agreement with ESD, the joint venture is obligated to build the Moynihan Train Hall, with Vornado and Related each guaranteeing the joint venture’s obligations. Under the design-build agreement, Skanska Moynihan Train Hall Builders is obligated to fulfill all of the joint venture’s obligations. The obligations of Skanska Moynihan Train Hall Builders have been bonded by Skanska USA and bear a full guaranty from Skanska AB.

As of June 30, 2018,2019, we expect to fund additional capital to certain of our partially owned entities aggregating approximately $34,000,000.$15,400,000.

As of June 30, 2018,2019, we have construction commitments aggregating approximately $342,000,000.$730,000,000.

Income Taxes - 220 Central Park South

We are constructing a residential condominium tower at 220 Central Park South ("220 CPS"). For income tax purposes, we recognize revenue associated with our 220 CPS project using the percentage of completion method. On May 25, 2018, the 220 CPS condominium offering plan was declared effective by the Attorney General of the State of New York. Accordingly, during the quarter ended June 30, 2018, we recorded a liability (a component of “other liabilities”) and a corresponding asset (a component of “other assets”) of $52,000,000 for estimated Federal, state and local income taxes due September 17, 2018. GAAP revenue associated with our 220 CPS project is recognized under the completed contract method upon closing of the condominium unit sales.


43

VORNADO REALTY TRUST AND VORNADO REALTY L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(UNAUDITED)


22.
Segment Information
We operate in the following reportable segments, New York and Other, which is based on how we manage our business.
Net Operating Income ("NOI"(“NOI”) represents total revenues less operating expenses. We consider NOI to be the primary non-GAAP financial measure for making decisions and assessing the unlevered performance of our segments as it relates to the total return on assets as opposed to the levered return on equity. As properties are bought and sold based on NOI, we utilize this measure to make investment decisions as well as to compare the performance of our assets to that of our peers. NOI should not be considered a substitute for net income. NOI may not be comparable to similarly titled measures employed by other companies.

Below is a reconciliationsummary of net income to NOI at share and NOI at share - cash basisby segment for the three and six months ended June 30, 20182019 and 2017.2018.
(Amounts in thousands)For the Three Months Ended
June 30,		 For the Six Months Ended
June 30,
 2018 2017 2018 2017
Net income$105,338
 $147,484
 $105,620
 $221,331
        
Deduct:       
(Income) loss from partially owned entities(8,757) (46,021) 1,147
 (47,379)
Loss (income) from real estate fund investments28,976
 (4,391) 37,783
 (4,659)
Interest and other investment income, net(30,892) (8,541) (6,508) (15,236)
Net gains on disposition of wholly owned and partially owned assets(23,559) —
 (23,559) (501)
Income from discontinued operations(683) (18,111) (320) (33,429)
NOI attributable to noncontrolling interests in consolidated subsidiaries(17,160) (16,269) (34,472) (32,607)
        
Add:       
Depreciation and amortization expense111,846
 105,123
 220,532
 210,251
General and administrative expense34,427
 35,405
 76,960
 81,580
Transaction related costs and other1,017
 260
 14,173
 1,012
NOI from partially owned entities65,752
 67,016
 133,265
 133,113
Interest and debt expense87,657
 84,789
 175,823
 167,513
Income tax expense (benefit)467
 (610) 3,021
 2,303
NOI at share354,429
 346,134
 703,465
 683,292
Non-cash adjustments for straight-line rents, amortization of acquired below-market leases, net and other(12,481) (22,475) (30,429) (42,956)
NOI at share - cash basis$341,948
 $323,659
 $673,036
 $640,336













(Amounts in thousands)For the Three Months Ended June 30, 2019
 Total New York Other
Total revenues$463,103
 $376,381
 $86,722
Operating expenses220,752
 187,819
 32,933
NOI - consolidated242,351
 188,562
 53,789
Deduct: NOI attributable to noncontrolling interests in consolidated subsidiaries(16,416) (10,030) (6,386)
Add: NOI from partially owned entities82,974
 79,170
 3,804
NOI at share308,909
 257,702
 51,207
Non-cash adjustments for straight-line rents, amortization of acquired below-market leases, net, and other9,748
 8,437
 1,311
NOI at share - cash basis$318,657
 $266,139
 $52,518

44
(Amounts in thousands)For the Three Months Ended June 30, 2018
 Total New York Other
Total revenues$541,818
 $458,552
 $83,266
Operating expenses235,981
 200,903
 35,078
NOI - consolidated305,837
 257,649
 48,188
Deduct: NOI attributable to noncontrolling interests in consolidated subsidiaries(17,160) (11,560) (5,600)
Add: NOI from partially owned entities65,752
 49,778
 15,974
NOI at share354,429
 295,867
 58,562
Non-cash adjustments for straight-line rents, amortization of acquired below-market leases, net, and other(12,481) (12,713) 232
NOI at share - cash basis$341,948
 $283,154
 $58,794
(Amounts in thousands)For the Six Months Ended June 30, 2019
 Total New York Other
Total revenues$997,771
 $819,666
 $178,105
Operating expenses467,647
 385,914
 81,733
NOI - consolidated530,124
 433,752
 96,372
Deduct: NOI attributable to noncontrolling interests in consolidated subsidiaries(33,819) (21,437) (12,382)
Add: NOI from partially owned entities150,376
 128,745
 21,631
NOI at share646,681
 541,060
 105,621
Non-cash adjustments for straight-line rents, amortization of acquired below-market leases, net and other4,567
 1,819
 2,748
NOI at share - cash basis$651,248
 $542,879
 $108,369
(Amounts in thousands)For the Six Months Ended June 30, 2018
 Total New York Other
Total revenues$1,078,255
 $907,036
 $171,219
Operating expenses473,583
 398,819
 74,764
NOI - consolidated604,672
 508,217
 96,455
Deduct: NOI attributable to noncontrolling interests in consolidated subsidiaries(34,472) (23,305) (11,167)
Add: NOI from partially owned entities133,265
 99,551
 33,714
NOI at share703,465
 584,463
 119,002
Non-cash adjustments for straight-line rents, amortization of acquired below-market leases, net and other(30,429) (30,036) (393)
NOI at share - cash basis$673,036
 $554,427
 $118,609

VORNADO REALTY TRUST AND VORNADO REALTY L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(UNAUDITED)


22.Segment Information - continued
Below is a summaryreconciliation of net income, the most directly comparable GAAP financial measure, to NOI at share and NOI at share - cash basisby segment for the three and six months ended June 30, 20182019 and 2017.

2018.
(Amounts in thousands)For the Three Months Ended
June 30,		 For the Six Months Ended
June 30,
 2019 2018 2019 2018
Net income$2,596,693
 $105,338
 $2,809,737
 $105,620
        
Deduct:       
Net gain on transfer to Fifth Avenue and Times Square JV(2,571,099) —
 (2,571,099) —
(Income) loss from partially owned entities(22,873) (8,757) (30,193) 1,147
Interest and other investment income, net(7,840) (30,892) (12,885) (6,508)
Net gains on disposition of wholly owned and partially owned assets(111,713) (23,559) (332,007) (23,559)
NOI attributable to noncontrolling interests in consolidated subsidiaries(16,416) (17,160) (33,819) (34,472)
(Income) loss from discontinued operations(60) (683) 77
 (320)
        
Add:       
Loss from real estate fund investments15,803
 28,976
 15,970
 37,783
Depreciation and amortization expense113,035
 111,846
 229,744
 220,532
General and administrative expense38,872
 34,427
 96,892
 76,960
Transaction related costs, impairment losses and other101,590
 1,017
 101,739
 14,173
NOI from partially owned entities82,974
 65,752
 150,376
 133,265
Interest and debt expense63,029
 87,657
 165,492
 175,823
Income tax expense26,914
 467
 56,657
 3,021
NOI at share308,909
 354,429
 646,681
 703,465
Non-cash adjustments for straight-line rents, amortization of acquired below-market leases, net, and other9,748
 (12,481) 4,567
 (30,429)
NOI at share - cash basis$318,657
 $341,948
 $651,248
 $673,036

(Amounts in thousands)For the Three Months Ended June 30, 2018
 Total New York Other
Total revenues$541,818
 $458,552
 $83,266
Operating expenses235,981
 200,903
 35,078
NOI - consolidated305,837
 257,649
 48,188
Deduct: NOI attributable to noncontrolling interests in consolidated subsidiaries(17,160) (11,560) (5,600)
Add: Our share of NOI from partially owned entities65,752
 49,778
 15,974
NOI at share354,429
 295,867
 58,562
Non-cash adjustments for straight-line rents, amortization of acquired below-market leases, net and other(12,481) (12,713) 232
NOI at share - cash basis$341,948
 $283,154
 $58,794




(Amounts in thousands)For the Three Months Ended June 30, 2017
 Total New York Other
Total revenues$511,087
 $436,862
 $74,225
Operating expenses215,700
 185,712
 29,988
NOI - consolidated295,387
 251,150
 44,237
Deduct: NOI attributable to noncontrolling interests in consolidated subsidiaries(16,269) (11,348) (4,921)
Add: Our share of NOI from partially owned entities67,016
 46,386
 20,630
NOI at share346,134
 286,188
 59,946
Non-cash adjustments for straight-line rents, amortization of acquired below-market leases, net and other(22,475) (18,297) (4,178)
NOI at share - cash basis$323,659
 $267,891
 $55,768




(Amounts in thousands)For the Six Months Ended June 30, 2018
 Total New York Other
Total revenues$1,078,255
 $907,036
 $171,219
Operating expenses473,583
 398,819
 74,764
NOI - consolidated604,672
 508,217
 96,455
Deduct: NOI attributable to noncontrolling interests in consolidated subsidiaries(34,472) (23,305) (11,167)
Add: Our share of NOI from partially owned entities133,265
 99,551
 33,714
NOI at share703,465
 584,463
 119,002
Non-cash adjustments for straight-line rents, amortization of acquired below-market leases, net and other(30,429) (30,036) (393)
NOI at share - cash basis$673,036
 $554,427
 $118,609




(Amounts in thousands)For the Six Months Ended June 30, 2017
 Total New York Other
Total revenues$1,019,145
 $863,101
 $156,044
Operating expenses436,359
 368,819
 67,540
NOI - consolidated582,786
 494,282
 88,504
Deduct: NOI attributable to noncontrolling interests in consolidated subsidiaries(32,607) (22,787) (9,820)
Add: Our share of NOI from partially owned entities133,113
 91,848
 41,265
NOI at share683,292
 563,343
 119,949
Non-cash adjustments for straight-line rents, amortization of acquired below-market leases, net and other(42,956) (36,669) (6,287)
NOI at share - cash basis$640,336
 $526,674
 $113,662







45


REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM




To the Shareholders and the Board of Trustees of Vornado Realty Trust

Results of Review of Interim Financial Information

We have reviewed the accompanying consolidated balance sheet of Vornado Realty Trust and subsidiaries (the "Company") as of June 30, 2018,2019, the related consolidated statements of income, and comprehensive income, and changes in equity for the three-month and six-month periods ended June 30, 20182019 and 2017, and of changes in equity,2018, and cash flows, for the six-month periods ended June 30, 20182019 and 2017,2018, and the related notes (collectively referred to as the "interim financial information"). Based on our reviews, we are not aware of any material modifications that should be made to the accompanying interim financial information for it to be in conformity with accounting principles generally accepted in the United States of America.

We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheet of the Company as of December 31, 2017,2018, and the related consolidated statements of income, comprehensive income, changes in equity, and cash flows for the year then ended; and in our report dated February 12, 2018,11, 2019, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying consolidated balance sheet as of December 31, 2017,2018, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.

Basis for Review Results

This interim financial information is the responsibility of the Company's management. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our reviewsreview in accordance with standards of the PCAOB. A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the PCAOB, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.
/s/ DELOITTE & TOUCHE LLP

Parsippany, New Jersey
July 30, 201829, 2019























46

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM




To the Partners of Vornado Realty L.P.

Results of Review of Interim Financial Information

We have reviewed the accompanying consolidated balance sheet of Vornado Realty L.P. and subsidiaries (the "Partnership") as of June 30, 2018,2019, the related consolidated statements of income, and comprehensive income, and changes in equity for the three-month and six-month periods ended June 30, 20182019 and 2017, and of changes in equity,2018, and cash flows, for the six-month periods ended June 30, 20182019 and 2017,2018, and the related notes (collectively referred to as the "interim financial information"). Based on our reviews, we are not aware of any material modifications that should be made to the accompanying interim financial information for it to be in conformity with accounting principles generally accepted in the United States of America.

We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheet of the Partnership as of December 31, 2017,2018, and the related consolidated statements of income, comprehensive income, changes in equity, and cash flows for the year then ended; and in our report dated February 12, 2018,11, 2019, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying consolidated balance sheet as of December 31, 2017,2018, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.

Basis for Review Results

This interim financial information is the responsibility of the Company's management. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Partnership in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our reviewsreview in accordance with standards of the PCAOB. A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the PCAOB, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

/s/ DELOITTE & TOUCHE LLP

Parsippany, New Jersey
July 30, 201829, 2019











47


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

Certain statements contained in this Quarterly Report 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 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 Quarterly Report on Form 10‑Q. 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; and estimates of future capital expenditures, dividends to common and preferred shareholders and operating partnership distributions. 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 Part I of our Annual Report on Form 10-K for the year ended December 31, 2017.2018. 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 Quarterly Report on Form 10-Q 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 Quarterly Report on Form 10-Q.

Management’s Discussion and Analysis of Financial Condition and Results of Operations includes a discussion of our consolidated financial statements for the three and six months ended June 30, 2018.2019. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates. The results of operations for the three and six months ended June 30, 20182019 are not necessarily indicative of the operating results for the full year. Certain prior year balances have been reclassified in order to conform to the current year presentation.




48



Overview


Vornado Realty Trust (“Vornado”) is a fully integratedfully-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., a Delaware limited partnership (the “Operating Partnership”). Vornado is the sole general partner of, and owned approximately 93.5%93.1% of the common limited partnership interest in the Operating Partnership as of June 30, 2018.2019. All references to the “Company,” “we,” “us,”“us” and “our” mean, collectively, Vornado, the Operating Partnership and those entities/subsidiaries consolidated by Vornado.

We compete with a large number of real estate property owners and developers, some of which may be willing to accept lower returns on their investments. Principal factors of competition are rents charged, sales prices, 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 Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2018 for additional information regarding these factors.

Vornado Realty Trust

Quarter Ended June 30, 20182019 Financial Results Summary

Net income attributable to common shareholders for the quarter ended June 30, 20182019 was $111,534,000,$2,400,195,000, or $0.58$12.56 per diluted share, compared to $115,972,000,$111,534,000, or $0.61$0.58 per diluted share, for the prior year’s quarter. The quarters ended June 30, 2019 and 2018 include certain items that impact the comparability of period to period net income attributable to common shareholders, which are listed in the table on page 58. The aggregate of these items, net of amounts attributable to noncontrolling interests, increased net income attributable to common shareholders for the quarter ended June 30, 2019 by $2,357,643,000, or $12.34 per diluted share, and 2017increased net income attributable to common shareholders by $42,775,000, or $0.22 per diluted share, for the quarter ended June 30, 2018.
The increase in net income attributable to common shareholders was partially offset by $8,387,000, or $0.04 per diluted share, of our share of the non-cash write-off of straight-line rent receivables and $5,645,000, or $0.03 per diluted share, of non-cash expense for the time-based equity compensation granted in connection with our previously announced new leadership group.
Funds From Operations (“FFO”) attributable to common shareholders plus assumed conversions for the quarter ended June 30, 2019 was $164,329,000, or $0.86 per diluted share, compared to $194,653,000, or $1.02 per diluted share, for the prior year’s quarter. FFO attributable to common shareholders plus assumed conversions for the quarters ended June 30, 2019 and 2018 include certain items that impact the comparability of period to period FFO, which are listed in the table on page 59. The aggregate of these items, net of amounts attributable to noncontrolling interests, decreasedFFO attributable to common shareholders plus assumed conversions for the quarter ended June 30, 2019 by $9,446,000, or $0.05 per diluted share, and increased FFO attributable to common shareholders plus assumed conversions by $8,248,000, or $0.04 per diluted share, for the quarter ended June 30, 2018.
The decrease in FFO attributable to common shareholders was partially due to $8,387,000, or $0.04 per diluted share, of our share of the non-cash write-off of straight-line rent receivables and $5,645,000, or $0.03 per diluted share, of non-cash expense for the time-based equity compensation granted in connection with our previously announced new leadership group.




Overview - continued

Six Months Ended June 30, 2019 Financial Results Summary
Net income attributable to common shareholders for the six months ended June 30, 2019 was $2,581,683,000, or $13.51 per diluted share, compared to $93,693,000, or $0.49 per diluted share, for the six months ended June 30, 2018. The six months ended June 30, 2019 and 2018 include certain items that impact the comparability of period to period 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, increased net income attributable to common shareholders for the quartersix months ended June 30, 2019 by $2,514,217,000, or $13.16 per diluted share, and decreased net income attributable to common shareholders for the six months ended June 30, 2018 by $41,881,000,$30,541,000, or $0.22$0.16 per diluted share, and $48,600,000, or $0.26 per diluted share, for the quarter ended June 30, 2017.share.

Funds From Operations ("FFO")The increase in net income attributable to common shareholders plus assumed conversions for the quarter ended June 30, 2018 was $209,680,000,partially offset by (i) $8,387,000, or $1.10$0.04 per diluted share, compared to $257,673,000,of our share of the non-cash write-off of straight-line rent receivables, (ii) $5,645,000, or $1.35$0.03 per diluted share, of non-cash expense for the prior year’s quarter.  time-based equity compensation granted in connection with our previously announced new leadership group and (iii) $13,633,000, or $0.07 per share, of non-cash expense for the accelerated vesting of previously issued OP Units and Vornado restricted stock due to the removal of the time-based vesting requirement to participants who have reached 65 years of age.
FFO attributable to common shareholders plus assumed conversions for the quarterssix months ended June 30, 20182019 was $412,013,000, or $2.16 per diluted share, compared to $329,653,000, or $1.72 per diluted share, for the six months ended June 30, 2018. FFO attributable to common shareholders plus assumed conversions for the six months ended June 30, 2019 and 20172018 include certain items that impact the comparability of period to period FFO, which are listed in the table on the following page.page 59. The aggregate of these items, net of amounts attributable to noncontrolling interests, increased FFO attributable to common shareholders plus assumed conversions for the quarter ended June 30, 2018 by $22,268,000, or $0.12 per diluted share, and $77,129,000, or $0.40 per diluted share, for the quarter ended June 30, 2017.

Six Months Ended June 30, 2018 Financial Results Summary

Net income attributable to common shareholders for the six months ended June 30, 2018 was $93,693,000,2019 by $88,223,000, or $0.49$0.46 per diluted share, compared to $163,724,000, or $0.86 per diluted share, for the six months ended June 30, 2017.  The six months ended June 30, 2018 and 2017 include certain items that impact the comparability of period to period 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 six months ended June 30, 2018 by $32,384,000, or $0.17 per diluted share, and increased net income attributable to common shareholders for the six months ended June 30, 2017 by $50,212,000, or $0.26 per diluted share.

FFO attributable to common shareholders plus assumed conversions for the six months ended June 30, 2018 was $312,339,000, or $1.63 per diluted share, compared to $463,422,000, or $2.43 per diluted share, for the six months ended June 30, 2017.  FFO attributable to common shareholders plus assumed conversions for the six months ended June 30, 2018 and 2017 include certain items that impact the comparability of period to period FFO, which are listed in the table on the following page.  The aggregate of these items, net of amounts attributable to noncontrolling interests, decreased FFO attributable to common shareholders plus assumed conversions for the six months ended June 30, 2018 by $49,038,000,$29,623,000, or $0.26$0.16 per diluted share, and increasedshare.
The decrease in FFO attributable to common shareholders plus assumed conversionswas partially due to (i) $8,387,000, or $0.04 per diluted share, of our share of the non-cash write-off of straight-line rent receivables, (ii) $5,645,000, or $0.03 per diluted share, of non-cash expense for the six months ended June 30, 2017 by $124,008,000,time-based equity compensation granted in connection with our previously announced new leadership group and (iii) $13,633,000, or $0.65$0.07 per diluted share.

share, of non-cash expense for the accelerated vesting of previously issued OP Units and Vornado restricted stock due to the removal of the time-based vesting requirement to participants who have reached 65 years of age.


49


Overview - continued


The following table reconciles the difference between our net income attributable to common shareholders and our net income attributable to common shareholders, as adjusted:
(Amounts in thousands)For the Three Months Ended
June 30,		 For the Six Months Ended
June 30,		For the Three Months Ended
June 30,		 For the Six Months Ended
June 30,
2018 2017 2018 20172019 2018 2019 2018
Certain (income) expense items that impact net income attributable to common shareholders:              
Net gain on transfer to Fifth Avenue and Times Square retail JV, net of $11,945 attributable to noncontrolling interests$(2,559,154) $—
 $(2,559,154) $—
Non-cash impairment losses and related write-offs, substantially 608 Fifth Avenue108,592
 —
 108,592
 —
After-tax net gain on sale of 220 Central Park South ("220 CPS") condominium units(88,921) —
 (219,875) —
Our share of loss (income) from real estate fund investments20,758
 (551) 23,662
 (1,365)
Mark-to-market (increase) decrease in Pennsylvania Real Estate Investment Trust ("PREIT") common shares (accounted for as a marketable security from March 12, 2019)(1,313) —
 14,336
 —
Net gains on sale of real estate$(24,449) $(15,339) $(24,767) $(19,459)—
 (24,449) —
 (24,436)
(Increase) decrease in fair value of marketable securities (including our share of partially owned entities)(16,024) —
 18,636
 —
Mark-to-market (increase) decrease in Lexington Realty Trust ("Lexington") common shares (sold on March 1, 2019)—
 (15,883) (16,068) 16,992
Profit participation on the April 2018 sale of 701 Seventh Avenue(5,457) —
 (5,457) —
—
 (5,457) —
 (5,457)
Previously capitalized internal leasing costs(1)
—
 (1,358) —
 (2,706)
Our share of loss from 666 Fifth Avenue Office Condominium (49.5% interest)1,269
 7,852
 4,761
 18,049
—
 1,269
 —
 4,761
Our share of (income) loss from real estate fund investments (excluding our $4,252 share of One Park Avenue potential additional transfer taxes and reduction in carried interest for the six months ended June 30, 2018)(551) 304
 (1,365) 3,539
(Income) loss from discontinued operations and sold properties (primarily related to JBG SMITH Properties operating results and transaction costs through July 17, 2017 spin-off)(286) (18,251) 83
 (31,246)
Net gain resulting from Urban Edge Properties ("UE") operating partnership unit issuances—
 (15,900) —
 (15,900)
Net gain on repayment of our Suffolk Downs JV debt investments—
 (11,373) —
 (11,373)
Our share of potential additional New York City transfer taxes based on a Tax Tribunal interpretation which Vornado is appealing—
 —
 23,503
 —
Net gain from sale of Urban Edge Properties ("UE") common shares (sold on March 4, 2019)—
 —
 (62,395) —
Prepayment penalty in connection with redemption of $400 million 5.00% senior unsecured notes due January 2022—
 —
 22,540
 —
Our share of disputed additional New York City transfer taxes—
 —
 —
 23,503
Preferred share issuance costs—
 —
 14,486
 —
—
 —
 —
 14,486
Other839
 900
 4,609
 2,864
2,802
 817
 3,954
 6,792
(44,659) (51,807) 34,489
 (53,526)(2,517,236) (45,612) (2,684,408) 32,570
Noncontrolling interests' share of above adjustments2,778
 3,207
 (2,105) 3,314
159,593
 2,837
 170,191
 (2,029)
Total of certain (income) expense items that impact net income attributable to common shareholders$(41,881) $(48,600) $32,384
 $(50,212)$(2,357,643) $(42,775) $(2,514,217) $30,541

(1)The three and six months ended June 30, 2018 have been reduced by $1,358 and $2,706, respectively, for previously capitalized internal leasing cost to present 2018 “as adjusted” financial results on a comparable basis with the current year as a result of the January 1, 2019 adoption of a new GAAP accounting standard under which internal leasing costs can no longer be capitalized.




Overview - continued

The following table reconciles the difference between our FFO attributable to common shareholders plus assumed conversions and our FFO attributable to common shareholders plus assumed conversions, as adjusted:
(Amounts in thousands)For the Three Months Ended
June 30,		 For the Six Months Ended
June 30,		For the Three Months Ended
June 30,		 For the Six Months Ended
June 30,
2018 2017 2018 20172019 2018 2019 2018
Certain (income) expense items that impact FFO attributable to common shareholders plus assumed conversions:              
(Increase) decrease in fair value of marketable securities (including our share of partially owned entities)$(16,024) $—
 $18,636
 $—
After-tax net gain on sale of 220 CPS condominium units$(88,921) $—
 $(219,875) $—
Non-cash impairment loss and related write-offs on 608 Fifth Avenue77,156
 —
 77,156
 —
Our share of loss (income) from real estate fund investments20,758
 (551) 23,662
 (1,365)
Profit participation on the April 2018 sale of 701 Seventh Avenue(5,457) —
 (5,457) —
—
 (5,457) —
 (5,457)
Our share of FFO from 666 Fifth Avenue Office Condominium (49.5% interest)(2,178) (4,160) (2,041) (7,713)—
 (2,178) —
 (2,041)
Our share of FFO from real estate fund investments (excluding our $4,252 share of One Park Avenue potential additional transfer taxes and reduction in carried interest for the six months ended June 30, 2018)(551) 304
 (1,365) 3,539
FFO from discontinued operations and sold properties (primarily related to JBG SMITH Properties operating results and transaction costs through July 17, 2017 spin-off)(374) (51,561) (104) (99,901)
Net gain resulting from UE operating partnership unit issuances—
 (15,900) —
 (15,900)
Net gain on repayment of our Suffolk Downs JV debt investments—
 (11,373) —
 (11,373)
Our share of potential additional New York City transfer taxes based on a Tax Tribunal interpretation which Vornado is appealing—
 —
 23,503
 —
Previously capitalized internal leasing costs(1)
—
 (1,358) —
 (2,706)
Prepayment penalty in connection with redemption of $400 million 5.00% senior unsecured notes due January 2022—
 —
 22,540
 —
Our share of disputed additional New York City transfer taxes—
 —
 —
 23,503
Preferred share issuance costs—
 —
 14,486
 —
—
 —
 —
 14,486
Other839
 379
 4,592
 (962)1,092
 749
 2,298
 5,033
(23,745) (82,311) 52,250
 (132,310)10,085
 (8,795) (94,219) 31,453
Noncontrolling interests' share of above adjustments1,477
 5,182
 (3,212) 8,302
(639) 547
 5,996
 (1,830)
Total of certain (income) expense items that impact FFO attributable to common shareholders plus assumed conversions, net$(22,268) $(77,129) $49,038
 $(124,008)
Total of certain expense (income) items that impact FFO attributable to common shareholders plus assumed conversions, net$9,446
 $(8,248) $(88,223) $29,623

(1)The three and six months ended June 30, 2018 have been reduced by $1,358 and $2,706, respectively, for previously capitalized internal leasing cost to present 2018 “as adjusted” financial results on a comparable basis with the current year as a result of the January 1, 2019 adoption of a new GAAP accounting standard under which internal leasing costs can no longer be capitalized.





50


Overview - continued

Vornado Realty L.P.

Quarter Ended June 30, 2018 Financial Results Summary

Net income attributable to Class A unitholders for the quarter ended June 30, 2018 was $118,931,000, or $0.58 per diluted Class A unit, compared to $123,630,000, or $0.61 per diluted Class A unit, for the prior year’s quarter.  The quarters ended June 30, 2018 and 2017 include certain items that impact net income attributable to Class A unitholders, which are listed in the table below.  The aggregate of these items increased net income attributable to Class A unitholders for the quarter ended June 30, 2018 by $44,659,000, or $0.22 per diluted Class A unit, and $51,807,000, or $0.26 per diluted Class A unit, for the quarter ended June 30, 2017.

Six Months Ended June 30, 2018 Financial Results Summary

Net income attributable to Class A unitholders for the six months ended June 30, 2018 was $99,917,000, or $0.48 per diluted Class A unit, compared to $174,562,000, or $0.85 per diluted Class A unit, for the six months ended June 30, 2017.  The six months ended June 30, 2018 and 2017 include certain items that impact net income attributable to Class A unitholders, which are listed in the table below.  The aggregate of these items decreased net income attributable to Class A unitholders for the six months ended June 30, 2018 by $34,489,000, or $0.17 per diluted Class A unit, and increased net income attributable to Class A unitholders for the six months ended June 30, 2017 by $53,526,000, or $0.26 per diluted Class A unit.

The following table reconciles the difference between our net income attributable to Class A unitholders and our net income attributable to Class A unitholders, as adjusted:
(Amounts in thousands)For the Three Months Ended
June 30,		 For the Six Months Ended
June 30,
 2018 2017 2018 2017
Certain (income) expense items that impact net income attributable to Class A unitholders:       
Net gains on sale of real estate$(24,449) $(15,339) $(24,767) $(19,459)
(Increase) decrease in fair value of marketable securities (including our share of partially owned entities)(16,024) —
 18,636
 —
Profit participation on the April 2018 sale of 701 Seventh Avenue(5,457) —
 (5,457) —
Our share of loss from 666 Fifth Avenue Office Condominium (49.5% interest)1,269
 7,852
 4,761
 18,049
Our share of (income) loss from real estate fund investments (excluding our $4,252 share of One Park Avenue potential additional transfer taxes and reduction in carried interest for the six months ended June 30, 2018)(551) 304
 (1,365) 3,539
(Income) loss from discontinued operations and sold properties (primarily related to JBG SMITH Properties operating results and transaction costs through July 17, 2017 spin-off)(286) (18,251) 83
 (31,246)
Net gain resulting from UE operating partnership unit issuances—
 (15,900) —
 (15,900)
Net gain on repayment of our Suffolk Downs JV debt investments—
 (11,373) —
 (11,373)
Our share of potential additional New York City transfer taxes based on a Tax Tribunal interpretation which Vornado is appealing—
 —
 23,503
 —
Preferred unit issuance costs—
 —
 14,486
 —
Other839
 900
 4,609
 2,864
Total of certain (income) expense items that impact net income attributable to Class A unitholders$(44,659) $(51,807) $34,489
 $(53,526)



51

Overview - continued


Vornado Realty Trust and Vornado Realty L.P.

Same Store Net Operating Income ("NOI"(“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, theMART and 555 California Street are summarized below.
  Total New York theMART 555 California Street
Same store NOI at share % increase(1):
       
 Three months ended June 30, 2018 compared to June 30, 20174.7% 4.2% 5.2% 13.5%
 Six months ended June 30, 2018 compared to June 30, 20174.5% 4.1% 4.3% 12.9%
 Three months ended June 30, 2018 compared to March 31, 20183.2% 3.3% 3.4% 1.1%
         
Same store NOI at share - cash basis % increase(1):
       
 Three months ended June 30, 2018 compared to June 30, 20177.0% 5.9% 10.8% 23.8%
 Six months ended June 30, 2018 compared to June 30, 20176.7% 5.8% 10.4% 18.5%
 Three months ended June 30, 2018 compared to March 31, 20184.6% 4.6% 2.9% 7.7%
  Total 
New York(1)
 theMART 555 California Street
Same store NOI at share % increase (decrease):       
 Three months ended June 30, 2019 compared to June 30, 20181.2% (0.7)% 12.1% 13.0%
 Six months ended June 30, 2019 compared to June 30, 20180.5% (0.4)% 4.7% 10.2%
 Three months ended June 30, 2019 compared to March 31, 20197.2% 4.1 % 42.3% 6.4%
         
Same store NOI at share - cash basis % increase:       
 Three months ended June 30, 2019 compared to June 30, 20184.3% 2.5 % 15.5% 12.9%
 Six months ended June 30, 2019 compared to June 30, 20183.7% 2.6 % 8.9% 13.9%
 Three months ended June 30, 2019 compared to March 31, 20198.3% 5.5 % 38.1% 5.8%
____________________
  Increase (Decrease)
(1)Excluding Hotel Pennsylvania, - New York same store NOI at share % increase (decrease):increase: 
 Three months ended June 30, 20182019 compared to June 30, 201720184.60.0% %
 Six months ended June 30, 20182019 compared to June 30, 201720184.20.3% %
 Three months ended June 30, 20182019 compared to March 31, 20182019(0.30.0)%
   
 Excluding Hotel Pennsylvania, - New York same store NOI at share - cash basis % increase: 
 Three months ended June 30, 20182019 compared to June 30, 201720186.33.3% %
 Six months ended June 30, 20182019 compared to June 30, 201720185.83.3% %
 Three months ended June 30, 20182019 compared to March 31, 201820190.71.2% %

Calculations of same store NOI at share, reconciliations of our net income 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.


52




Overview - continued

Acquisition

On February 9, 2018, we acquired 537 West 26th Street, a 14,000 square foot commercial property adjacent to our 260 Eleventh Avenue office property and 55,000 square feet of additional zoning air rights, for $44,000,000.


Dispositions

220 CPS
On January 17, 2018, Vornado Capital Partners Real Estate Fund (the "Fund") completedDuring the three months ended June 30, 2019, we closed on the sale of the retail11 condominium units at 11 East 68th Street, a property located on Madison Avenue and 68th Street,220 CPS for $82,000,000. From the inception of this investment through its disposition, the Fund realized a $46,259,000 net gain.

On June 21, 2018, we completed the $45,000,000 sale of 27 Washington Square North, which resultedproceeds aggregating $265,250,000 resulting in a financial statement net gain of $23,559,000$111,713,000 which is included in "net gains on disposition of wholly owned and partially owned assets" on our consolidated statements of income. We acquiredIn connection with these sales, $22,792,000 of income tax expense was recognized in our consolidated statements of income. During the propertysix months ended June 30, 2019, we closed on the sale of 23 condominium units at 220 CPS for net proceeds of $690,734,000 resulting in December 2015a financial statement net gain of $269,612,000. In connection with these sales, $49,737,000 of income tax expense was recognized in our consolidated statements of income. From inception to June 30, 2019, we closed on the sale of 34 units for $20,000,000.aggregate net proceeds of $905,510,000 which was used to pay $901,117,000 of the $950,000,000 220 CPS loan.

Lexington
Financings

On January 4 and 11, 2018,March 1, 2019, we redeemedsold all of the outstanding 6.625% Series G and Series I cumulative redeemable preferred shares/units at their redemption priceour 18,468,969 common shares of $25.00 per share/unit, or $470,000,000Lexington, realizing net proceeds of $167,698,000. We recorded a $16,068,000 mark-to-market increase in the aggregate, plus accrued and unpaid dividends/distributionsfair value of our common shares for the period from January 1, 2019 through the date of sale, which is included in "interest and other investment income, net" on our consolidated statements of income for the six months ended June 30, 2019.
UE
On March 4, 2019, we converted to common shares and sold all of our 5,717,184 partnership units of UE, realizing net proceeds of $108,512,000. The sale resulted in a net gain of $62,395,000 which is included in "net gains on disposition of wholly owned and partially owned assets" on our consolidated statements of income for the six months ended June 30, 2019.
.
Fifth Avenue and Times Square JV
On April 18, 2019 (the “Closing Date”), we entered into a transaction agreement (the “Transaction Agreement”) with a group of institutional investors (the “Investors”). The Transaction Agreement provides for a series of transactions (collectively, the “Transaction”) pursuant to which (i) prior to the Closing Date, we contributed our interests in properties located at 640 Fifth Avenue, 655 Fifth Avenue, 666 Fifth Avenue, 689 Fifth Avenue, 697-703 Fifth Avenue, 1535 Broadway and 1540 Broadway (collectively, the “Properties”) to subsidiaries of a newly formed joint venture (“Fifth Avenue and Times Square JV”) and (ii) on the Closing Date, transferred a 48.5% common interest in Fifth Avenue and Times Square JV to the Investors. The 48.5% common interest in the joint venture represents an effective 47.2% interest in the Properties (of which 45.4% was transferred from Vornado). The Properties include approximately 489,000 square feet of retail space, 327,000 square feet of office space, signage associated with 1535 and 1540 Broadway, the parking garage at 1540 Broadway and the theatre at 1535 Broadway.
We retained the remaining 51.5% common interest in Fifth Avenue and Times Square JV which represents an effective 51.0% interest in the Properties and an aggregate $1.828 billion of preferred equity interests in certain of the properties. We also provided $500,000,000 of temporary preferred equity on 640 Fifth Avenue until May 23, 2019 when mortgage financing was completed. All of the preferred equity has an annual coupon of 4.25% for the first five years, increasing to 4.75% for the next five years and thereafter at a formulaic rate. It can be redeemed under certain conditions on a tax deferred basis.
Net cash proceeds from the Transaction were $1.186 billion, after (i) deductions for the defeasance of a $390,000,000 mortgage loan on 666 Fifth Avenue and the repayment of a $140,000,000 mortgage loan on 655 Fifth Avenue, (ii) proceeds from a $500,000,000 mortgage loan on 640 Fifth Avenue, described below, (iii) approximately $23,000,000 used to purchase noncontrolling investors' interests and (iv) approximately $53,000,000 of transaction costs (including $17,000,000 of costs related to the defeasance of the 666 Fifth Avenue mortgage loan).
We continue to manage and lease the Properties. We share control with the Investors over major decisions of the joint venture, including decisions regarding leasing, operating and capital budgets, and refinancings. Accordingly, we no longer hold a controlling financial interest in the Properties which has been transferred to the joint venture. As a result, our investment in Fifth Avenue and Times Square JV is accounted for under the equity method from the date of transfer. The Transaction valued the Properties at $5,556,000,000 resulting in a financial statement net gain of $2,571,099,000, before noncontrolling interest of $11,945,000, including the related step-up in our basis of the retained portion of the assets to fair value. The net gain is included in "net gain on transfer to Fifth Avenue and Times Square JV" on our consolidated statements of income for the three and six months ended June 30, 2019. The gain for tax purposes was approximately $735,000,000.
On May 23, 2019, we received $500,000,000 from the redemption and expensed $14,486,000 of previously capitalized issuance costs.

On January 5, 2018, weour preferred equity in 640 Fifth Avenue. The preferred equity was redeemed from the proceeds of a $500,000,000 mortgage financing that was completed a $100,000,000 refinancing of 33-00 Northern Boulevard (Center Building), a 471,000 square foot office building in Long Island City, New York.on the property. The seven-yearfive year loan, which is guaranteed by us, is interest only at LIBOR plus 1.80%, which1.01%. The interest rate was swapped for four years to a fixed rate of 4.14%3.07%.



Overview - continued

Dispositions - continued
330 Madison Avenue
On July 11, 2019, we sold our 25% interest in 330 Madison Avenue to our joint venture partner. We received net proceeds of approximately $100,000,000 after deducting our share of the existing $500,000,000 mortgage loan. The third quarter financial statement gain will be approximately $159,000,000. The tax gain will be approximately $138,000,000.

Financings
On January 28, 2019, a joint venture, in which we have a 45.1% interest, completed a $167,500,000 refinancing of 61 Ninth Avenue, a 166,000 square foot office and retail property in the Meatpacking district of Manhattan which is fully leased to Aetna and Starbucks. The seven-year interest only loan carries a rate of LIBOR plus 1.35% (3.77% as of June 30, 2019) and matures in January 2026. We realized net proceeds of approximately $37,200,000 after repayment of$31,000,000. The loan replaces the existing 4.43% $59,800,000 mortgage and closing costs.

On April 19, 2018, the joint venture between the Fund and the Crowne Plaza Joint Venture completed a $255,000,000 refinancing of the Crowne Plaza Times Square Hotel. The interest-onlyprevious $90,000,000 construction loan isthat bore interest at LIBOR plus 3.51% (5.56% at June 30, 2018)3.05% and matures in May 2020 with three one-year extension options. In connection therewith, the joint venture purchased an interest rate cap that caps LIBOR at a rate of 4.00%. The Crowne Plaza Times Square Hotel was previously encumbered by a $310,000,000 interest-only mortgage at LIBOR plus 2.80%, which was scheduled to mature in 2021.

On February 4, 2019, we completed a $95,700,000 refinancing of 435 Seventh Avenue, a 43,000 square foot Manhattan retail property. The interest-only loan carries a rate of LIBOR plus 1.30% (3.73% as of June 30, 2019) and matures in 2024. The recourse loan replaces the previous $95,700,000 loan that bore interest at LIBOR plus 2.25% and was scheduled to mature in August 2019.
On February 12, 2019, we completed a $580,000,000 refinancing of 100 West 33rd Street, a 1.1 million square foot Manhattan property comprised of 859,000 square feet of office space and the 256,000 square foot Manhattan Mall. The interest-only loan carries a rate of LIBOR plus 1.55% (3.98% as of June 30, 2019) and matures in April 2024, with two one-year extension options. The loan replaces the previous $580,000,000 loan that bore interest at LIBOR plus 1.65% and was scheduled to mature in July 2020.
On March 1, 2019, we called for redemption all of our $400,000,000 5.00% senior unsecured notes. The notes, which were scheduled to mature in January 2022, were redeemed on April 1, 2019 at a redemption price of 105.51% of the principal amount plus accrued interest. In connection therewith, we expensed $22,540,000 relating to debt prepayment costs which is included in "interest and debt expense" on our consolidated statements of income for the six months ended June 30, 2019.
On March 26, 2019, we increased to $1.5 billion (from $1.25 billion) and extended to March 2024 (as fully extended) from February 2022 one of our two unsecured revolving credit facilities. The interest rate on the extended facility was lowered from LIBOR plus 1.00% to LIBOR plus 0.90%. Thefacility fee remains unchanged at 20 basis points.
On May 24, 2019, we extended our $375,000,000 mortgage loan on 888 Seventh Avenue, a 886,000 square foot Manhattan office building, from December 2018.2020 to December 2025. The interest rate on the extended mortgage loan is LIBOR plus 1.70% (4.11% as of June 30, 2019). Pursuant to an existing swap agreement, the interest rate on the $375,000,000 mortgage loan has been swapped to 3.25% through December 2020.

On June 11, 2018, the28, 2019, a joint venture, that owns Independence Plaza,in which we have a three-building 1,327 unit residential complex55% interest, completed a $145,700,000 refinancing of 512 West 22nd Street, a 173,000 square foot office building in the TribecaWest Chelsea submarket of Manhattan completedManhattan. The four-year interest only loan carries a $675,000,000 refinancingrate of Independence Plaza. The seven-year interest-only loanLIBOR plus 2.00% (4.40% as of June 30, 2019) and matures in July 2025June 2023 with a one-year extension option. The loan replaces the previous $126,000,000 construction loan that bore interest at LIBOR plus 2.65% and has a fixed rate of 4.25%. Our share of net proceeds, after repayment of the existing 3.48% $550,000,000 mortgage and closing costs, was $55,618,000.

scheduled to mature in 2019.



Overview - continued

Leasing Activity
The leasing activity and related statistics in the table below are based on leases signed during the period and are not intended to coincide with the commencement of rental revenue in accordance with accounting principles generally accepted in the United States of America (“GAAP”). Second generation relet space represents square footage that has not been vacant for more than nine months and tenant improvements and leasing commissions are based on our share of square feet leased during the period.
(Square feet in thousands)New York    
  Office Retail theMART 555 California Street
Three Months Ended June 30, 2019       
 Total square feet leased221
 70
 30
 30
 Our share of square feet leased:155
 67
 30
 21
 
Initial rent(1)
$83.54
 $162.44
 $63.83
 $86.00
 Weighted average lease term (years)7.2
 19.6
 4.1
 5.1
 Second generation relet space:       
 Square feet80
 64
 30
 21
 GAAP basis:       
 
Straight-line rent(2)
$73.75
 $173.54
 $65.58
 $87.22
 Prior straight-line rent$69.67
 $120.22
 $57.09
 $65.98
 Percentage increase5.9% 44.4%
14.9% 32.2%
 Cash basis:       
 
Initial rent(1)
$76.02
 $152.10
 $63.83
 $86.00
 Prior escalated rent$73.57
 $128.16
 $60.22
 $76.23
 Percentage increase3.3% 18.7% 6.0% 12.8%
         
 Tenant improvements and leasing commissions:       
 Per square foot$70.76
 $73.23
 $6.23
 $31.28
 Per square foot per annum$9.83
 $3.74
 $1.52
 $6.13
 Percentage of initial rent11.8% 2.3% 2.4% 7.1%
____________________
Seenotes on following page.



Overview - continued

Leasing Activity - continued

(Square feet in thousands)New York    
  Office Retail theMART 555 California Street
Six Months Ended June 30, 2019       
 Total square feet leased617
 118
 189
 92
 Our share of square feet leased:505
 110
 189
 64
 
Initial rent(1)
$78.25
 $143.18
 $49.41
 $82.69
 Weighted average lease term (years)8.4
 13.2
 6.5
 5.1
 Second generation relet space:       
 Square feet391
 102
 187
 64
 GAAP basis:       
 
Straight-line rent(2)
$73.37
 $152.41
 $48.62
 $85.29
 Prior straight-line rent$72.04
 $118.08
 $43.39
 $55.25
 Percentage increase1.8% 29.1% 12.1% 54.4%
 Cash basis:       
 
Initial rent(1)
$74.76
 $138.37
 $49.36
 $82.69
 Prior escalated rent$73.22
 $127.39
 $46.48
 $64.66
 Percentage increase2.1% 8.6% 6.2% 27.9%
         
 Tenant improvements and leasing commissions:       
 Per square foot$82.04
 $52.40
 $30.58
 $43.22
 Per square foot per annum$9.77
 $3.97
 $4.70
 $8.47
 Percentage of initial rent12.5% 2.8% 9.5% 10.2%
____________________
(1)
Represents the cash basis weighted average starting rent per square foot, which is generally indicative of market rents. Most leases include free rent and periodic step-ups in rent which are not included in the initial cash basis rent per square foot but are included in the GAAP basis straight-line rent per square foot.
(2)
Represents the GAAP basis weighted average rent per square foot that is recognized over the term of the respective leases and includes the effect of free rent and periodic step-ups in rent.




Overview - continued

Square Footage (in service) and Occupancy as of June 30, 2019
(Square feet in thousands)  Square Feet (in service)  
 
Number of
Properties
 
Total
Portfolio
 
Our
Share
 Occupancy %
New York:       
Office36
 19,948
 16,484
 96.7%
Retail (includes retail properties that are in the base of our office properties)71
 2,577
 2,104
 94.7%
Residential - 1,683 units10
 1,529
 796
 95.9%
Alexander's, Inc. ("Alexander's") including 312 residential units7
 2,254
 730
 97.3%
Hotel Pennsylvania1
 1,400
 1,400
  
   27,708
 21,514
 96.5%
Other:       
theMART3
 3,693
 3,684
 94.8%
555 California Street3
 1,741
 1,218
 99.5%
Other10
 2,527
 1,192
 93.0%
   7,961
 6,094
  
        
Total square feet as of June 30, 2019  35,669
 27,608
  

Square Footage (in service) and Occupancy as of December 31, 2018
(Square feet in thousands)  Square Feet (in service)  
 
Number of
properties
 
Total
Portfolio
 
Our
Share
 Occupancy %
New York:       
Office36
 19,858
 16,632
 97.2%
Retail (includes retail properties that are in the base of our office properties)71
 2,648
 2,419
 97.3%
Residential - 1,687 units10
 1,533
 800
 96.6%
Alexander's, including 312 residential units7
 2,437
 790
 91.4%
Hotel Pennsylvania1
 1,400
 1,400
  
   27,876
 22,041
 97.0%
Other:       
theMART3
 3,694
 3,685
 94.7%
555 California Street3
 1,743
 1,220
 99.4%
Other10
 2,522
 1,187
 92.8%
   7,959
 6,092
  
        
Total square feet as of December 31, 2018  35,835
 28,133
  

Critical Accounting Policies


A summary of our critical accounting policies is included in our Annual Report on Form 10-K for the year ended December 31, 2017 in Management’s Discussion and Analysis of Financial Condition and Results of Operations.2018. For the six months ended June 30, 2018,2019, there were no material changes to these policies, other than the adoption of the Accounting Standards Codification Topic 606, Revenue from Contracts with Customers842, Leases, described in Note 3 - Recently Issued Accounting Literature and Note20 - Leases to the unaudited consolidated financial statements in Part I, Item I of this Quarterly Reporton Form 10-Q.


Recently Issued Accounting Literature


Refer to Note 3 - Recently Issued Accounting Literature to the unaudited consolidated financial statements in Part I, Item I of this Quarterly Report on Form 10-Q for information regarding recent accounting pronouncements that may affect us.





53


Overview - continued

Leasing Activity

The leasing activity and related statistics in the table below are based on leases signed during the period and are not intended to coincide with the commencement of rental revenue in accordance with accounting principles generally accepted in the United States of America (“GAAP”).  Second generation relet space represents square footage that has not been vacant for more than nine months and tenant improvements and leasing commissions are based on our share of square feet leased during the period.
(Square feet in thousands)New York    
  Office Retail theMART 555 California Street
Three Months Ended June 30, 2018       
 Total square feet leased611
 49
 50
 —
 Our share of square feet leased:545
 44
 50
 —
 
Initial rent(1)
$88.28
 $165.98
 $51.66
 $—
 Weighted average lease term (years)10.5
 5.9
 5.4
 —
 Second generation relet space:       
 Square feet502
 38
 50
 —
 GAAP basis:       
 
Straight-line rent(2)
$94.89
 $153.04
 $51.26
 $—
 Prior straight-line rent$67.17
 $137.19
 $46.86
 $—
 Percentage increase41.3% 11.6%
9.4% —%
 Cash basis:       
 
Initial rent(1)
$89.59
 $145.58
 $51.66
 $—
 Prior escalated rent$69.80
 $133.90
 $50.83
 $—
 Percentage increase28.4% 8.7% 1.6% —%
 Tenant improvements and leasing commissions:       
 Per square foot$101.10
 $110.51
 $8.35
 $—
 Per square foot per annum$9.63
 $18.73
 $1.55
 $—
 Percentage of initial rent10.9% 11.3% 3.0% —%
____________________
See notes on the following page



54

Overview - continued

Leasing Activity - continued

(Square feet in thousands)New York    
  Office Retail theMART 555 California Street
Six Months Ended June 30, 2018       
 Total square feet leased1,036
 126
 169
 89
 Our share of square feet leased:903
 120
 169
 62
 
Initial rent(1)
$85.81
 $195.29
 $50.77
 $85.89
 Weighted average lease term (years)10.5
 5.0
 5.6
 7.1
 Second generation relet space:       
 Square feet787
 114
 163
 30
 GAAP basis:       
 
Straight-line rent(2)
$91.34
 $199.25
 $51.14
 $99.34
 Prior straight-line rent$61.81
 $214.76
 $40.30
 $71.29
 Percentage increase (decrease)47.8%
(3) 
(7.2)%
(4) 
26.9% 39.3%
 Cash basis:       
 
Initial rent(1)
$87.55
 $190.03
 $50.73
 $96.68
 Prior escalated rent$64.75
 $221.94
 $42.83
 $82.61
 Percentage increase (decrease)35.2%
(3) 
(14.4)%
(4) 
18.4% 17.0%
 Tenant improvements and leasing commissions:       
 Per square foot$99.87
 $80.44
 $19.29
 $82.65
 Per square foot per annum$9.51
 $16.09
 $3.44
 $11.64
 Percentage of initial rent11.1% 8.2 % 6.8% 13.6%
___________________
(1)
Represents the cash basis weighted average starting rent per square foot, which is generally indicative of market rents. Most leases include free rent and periodic step-ups in rent which are not included in the initial cash basis rent per square foot but are included in the GAAP basis straight-line rent per square foot.
(2)
Represents the GAAP basis weighted average rent per square foot that is recognized over the term of the respective leases, and includes the effect of free rent and periodic step-ups in rent.
(3)
Excluding a single lease at 770 Broadway for 77 square feet, the GAAP and cash basis mark-to-markets were 35.6% and 24.0%, respectively.
(4)
Excluding a single lease at 435 Seventh Avenue for 43 square feet, the GAAP and cash basis mark-to-markets were 16.0% and 6.4%, respectively.



55

Overview - continued

Square Footage (in service) and Occupancy as of June 30, 2018
(Square feet in thousands)  Square Feet (in service)  
 
Number of
Properties
 
Total
Portfolio
 
Our
Share
 Occupancy %
New York:       
Office36
 20,243
 16,966
 96.6%
Retail (includes retail properties that are in the base of our office properties)72
 2,672
 2,422
 96.3%
Residential - 1,682 units10
 1,533
 800
 98.3%
Alexander's, including 312 residential units7
 2,437
 790
 99.5%
Hotel Pennsylvania1
 1,400
 1,400
  
   28,285
 22,378
 96.6%
Other:       
theMART3
 3,694
 3,685
 99.3%
555 California Street3
 1,741
 1,219
 97.3%
Other11
 2,522
 1,187
 93.6%
   7,957
 6,091
  
        
Total square feet as of June 30, 2018  36,242
 28,469
  

Square Footage (in service) and Occupancy as of December 31, 2017
(Square feet in thousands)  Square Feet (in service)  
 
Number of
properties
 
Total
Portfolio
 
Our
Share
 Occupancy %
New York:       
Office36
 20,256
 16,982
 97.1%
Retail (includes retail properties that are in the base of our office properties)71
 2,720
 2,471
 96.9%
Residential - 1,671 units10
 1,533
 800
 97.3%
Alexander's, including 312 residential units7
 2,437
 790
 99.3%
Hotel Pennsylvania1
 1,400
 1,400
  
   28,346
 22,443
 97.2%
Other:       
theMART3
 3,689
 3,680
 98.6%
555 California Street3
 1,741
 1,219
 94.2%
Other11
 2,525
 1,188
 93.6%
   7,955
 6,087
  
        
Total square feet as of December 31, 2017  36,301
 28,530
  



56

Net Operating Income At Share by Segment for the Three Months Ended June 30, 20182019 and 20172018

NOI represents total revenues less operating expenses. We consider NOI to be the primary non-GAAP financial measure for making decisions and assessing the unlevered performance of our segments as it relates to the total return on assets as opposed to the levered return on equity. As properties are bought and sold based on NOI, we utilize this measure to make investment decisions as well as to compare the performance of our assets to that of our peers. NOI should not be considered a substitute for net income. NOI may not be comparable to similarly titled measures employed by other companies.

Below is a summary of NOI at share and NOI at share - cash basis by segment for the three months ended June 30, 20182019 and 2017.2018.

(Amounts in thousands)For the Three Months Ended June 30, 2019
 Total 
New York (1)
 Other
Total revenues$463,103
 $376,381
 $86,722
Operating expenses220,752
 187,819
 32,933
NOI - consolidated242,351
 188,562
 53,789
Deduct: NOI attributable to noncontrolling interests in consolidated subsidiaries(16,416) (10,030) (6,386)
Add: NOI from partially owned entities82,974
 79,170
 3,804
NOI at share308,909
 257,702
 51,207
Non-cash adjustments for straight-line rents, amortization of acquired below-market leases, net, and other9,748
 8,437
 1,311
NOI at share - cash basis$318,657
 $266,139
 $52,518
___________________
(1)Reflects the transfer of 45.4% of common equity in the properties contributed to the Fifth Avenue and Times Square JV on April 18, 2019.

(Amounts in thousands)For the Three Months Ended June 30, 2018For the Three Months Ended June 30, 2018
Total New York OtherTotal New York Other
Total revenues$541,818
 $458,552
 $83,266
$541,818
 $458,552
 $83,266
Operating expenses235,981
 200,903
 35,078
235,981
 200,903
 35,078
NOI - consolidated305,837
 257,649
 48,188
305,837
 257,649
 48,188
Deduct: NOI attributable to noncontrolling interests in consolidated subsidiaries(17,160) (11,560) (5,600)(17,160) (11,560) (5,600)
Add: Our share of NOI from partially owned entities65,752
 49,778
 15,974
Add: NOI from partially owned entities65,752
 49,778
 15,974
NOI at share354,429
 295,867
 58,562
354,429
 295,867
 58,562
Non-cash adjustments for straight-line rents, amortization of acquired below-market leases, net and other(12,481) (12,713) 232
Non-cash adjustments for straight-line rents, amortization of acquired below-market leases, net, and other(12,481) (12,713) 232
NOI at share - cash basis$341,948
 $283,154
 $58,794
$341,948
 $283,154
 $58,794


(Amounts in thousands)For the Three Months Ended June 30, 2017
 Total New York Other
Total revenues$511,087
 $436,862
 $74,225
Operating expenses215,700
 185,712
 29,988
NOI - consolidated295,387
 251,150
 44,237
Deduct: NOI attributable to noncontrolling interests in consolidated subsidiaries(16,269) (11,348) (4,921)
Add: Our share of NOI from partially owned entities67,016
 46,386
 20,630
NOI at share346,134
 286,188
 59,946
Non-cash adjustments for straight-line rents, amortization of acquired below-market leases, net and other(22,475) (18,297) (4,178)
NOI at share - cash basis$323,659
 $267,891
 $55,768


57

Net Operating Income At Share by Segment for the Three Months Ended June 30, 20182019 and 20172018- continued

The elements of our New York and Other NOI at share for the three months ended June 30, 20182019 and 20172018 are summarized below.

(Amounts in thousands)For the Three Months Ended June 30,For the Three Months Ended June 30,
2018 20172019 2018
New York:      
Office(1)$184,867
 $171,809
$179,592
 $184,867
Retail(1)87,109
 89,955
57,063
 87,109
Residential6,338
 6,191
5,908
 6,338
Alexander's11,909
 11,966
11,108
 11,909
Hotel Pennsylvania5,644
 6,267
4,031
 5,644
Total New York295,867
 286,188
257,702
 295,867
      
Other:      
theMART27,816
 26,182
30,974
 27,816
555 California Street13,660
 12,032
15,358
 13,660
Other investments(2)17,086
 21,732
4,875
 17,086
Total Other58,562
 59,946
51,207
 58,562
      
NOI at share$354,429
 $346,134
$308,909
 $354,429

___________________
(1)Reflects the transfer of 45.4% of common equity in the properties contributed to the Fifth Avenue and Times Square JV on April 18, 2019.
(2)The three months ended June 30, 2018 includes $5,135 from 666 Fifth Avenue Office Condominium (sold on August 3, 2018), $4,509 from PREIT (accounted for as a marketable security beginning March 12, 2019) and $2,893 from UE (sold on March 4, 2019).
The elements of our New York and Other NOI at share - cash basis for the three months ended June 30, 20182019 and 20172018 are summarized below.
(Amounts in thousands)For the Three Months Ended June 30,For the Three Months Ended June 30,
2018 20172019 2018
New York:      
Office(1)$180,710
 $163,972
$178,806
 $180,710
Retail(1)79,139
 79,967
66,726
 79,139
Residential5,463
 5,342
5,303
 5,463
Alexander's12,098
 12,311
11,322
 12,098
Hotel Pennsylvania5,744
 6,299
3,982
 5,744
Total New York283,154
 267,891
266,139
 283,154
      
Other:      
theMART27,999
 24,897
31,984
 27,999
555 California Street13,808
 11,151
15,595
 13,808
Other investments(2)16,987
 19,720
4,939
 16,987
Total Other58,794
 55,768
52,518
 58,794
      
NOI at share - cash basis$341,948
 $323,659
$318,657
 $341,948
___________________
(1)Reflects the transfer of 45.4% of common equity in the properties contributed to the Fifth Avenue and Times Square JV on April 18, 2019.
(2)The three months ended June 30, 2018 includes $5,141 from 666 Fifth Avenue Office Condominium (sold on August 3, 2018), $4,351 from PREIT (accounted for as a marketable security beginning March 12, 2019) and $2,789 from UE (sold on March 4, 2019).


58

Reconciliation of Net Income to Net Operating Income At Share for the Three Months Ended June 30, 20182019 and 2017

2018
Below is a reconciliation of net income to NOI at share and NOI at share - cash basis for the three months ended June 30, 20182019 and 2017.

2018.
(Amounts in thousands)For the Three Months Ended June 30,For the Three Months Ended June 30,
2018 20172019 2018
Net income$105,338
 $147,484
$2,596,693
 $105,338
      
Deduct:      
Net gain on transfer to Fifth Avenue and Times Square JV(2,571,099) —
Income from partially owned entities(8,757) (46,021)(22,873) (8,757)
Loss (income) from real estate fund investments28,976
 (4,391)
Interest and other investment income, net(30,892) (8,541)(7,840) (30,892)
Net gains on disposition of wholly owned and partially owned assets(23,559) —
(111,713) (23,559)
NOI attributable to noncontrolling interests in consolidated subsidiaries(16,416) (17,160)
Income from discontinued operations(683) (18,111)(60) (683)
NOI attributable to noncontrolling interests in consolidated subsidiaries(17,160) (16,269)
      
Add:      
Loss from real estate fund investments15,803
 28,976
Depreciation and amortization expense111,846
 105,123
113,035
 111,846
General and administrative expense34,427
 35,405
38,872
 34,427
Transaction related costs and other1,017
 260
Transaction related costs, impairment losses and other101,590
 1,017
NOI from partially owned entities65,752
 67,016
82,974
 65,752
Interest and debt expense87,657
 84,789
63,029
 87,657
Income tax expense (benefit)467
 (610)
Income tax expense26,914
 467
NOI at share354,429
 346,134
308,909
 354,429
Non-cash adjustments for straight-line rents, amortization of acquired below-market leases, net and other(12,481) (22,475)9,748
 (12,481)
NOI at share - cash basis$341,948
 $323,659
$318,657
 $341,948
NOI At Share by Region

Below is a summary of the percentages of NOI at share by geographic region for the three months ended June 30, 20182019 and 2017.

2018.
For the Three Months Ended June 30,For the Three Months Ended June 30,
2018 20172019 2018
Region:      
New York City metropolitan area88% 88%85% 88%
Chicago, IL8% 8%10% 8%
San Francisco, CA4% 4%5% 4%
100% 100%100% 100%


59


Results of Operations – Three Months Ended June 30, 20182019 Compared to June 30, 2017

2018
Revenues
Our revenues, which consist of property rentals, tenant expense reimbursements,rental revenues and fee and other income, were $541,818,000$463,103,000 for the three months ended June 30, 20182019 compared to $511,087,000$541,818,000 for the prior year’s quarter, an increasea decrease of $30,731,000.$78,715,000. Below are the details of the (decrease) increase by segment:
(Amounts in thousands)Total New York OtherTotal New York Other
Increase (decrease) due to:     
Property rentals:     
(Decrease) increase due to:     
Rental revenues:     
Acquisitions, dispositions and other$(1,287) $(1,287) $—
$(8,679) $(8,621)
(1) 
$(58)
Development and redevelopment(2,089) (2,192) 103
(2,978) (3,072) 94
Hotel Pennsylvania1,767
 1,767
 —
(1,493) (1,493) —
Trade shows999
 —
 999
355
 —
 355
Same store operations16,562
 12,416
 4,146
15,952
 10,704
 5,248
Tenant expense reimbursements:     
Acquisitions, dispositions and other12
 12
 —
Development and redevelopment282
 273
 9
Properties transferred to Fifth Avenue and Times Square JV(62,630) (62,630) —
Same store operations6,361
 4,924
 1,437
(6,183) (9,313)
(2) 
3,130
6,655
 5,209
 1,446
(81,608) (85,129) 3,521
Fee and other income:          
BMS cleaning fees6,442
 6,790
(1) 
(348)1,703
 1,537
 166
Management and leasing fees(70) (1) (69)1,393
 1,608
 (215)
Lease termination fees(302) (662) 360
Properties transferred to Fifth Avenue and Times Square JV(232) (232) —
Other income2,054
 (350) 2,404
29
 45
 (16)
8,124
 5,777
 2,347
2,893
 2,958
 (65)
          
Total increase in revenues$30,731
 $21,690
 $9,041
Total (decrease) increase in revenues$(78,715) $(82,171) $3,456
___________________
(1)Includes $1,935Primarily due to reduction in income from the non-cash write-off of straight-line rent receivables in the second quarter of 2019 of (i) $7,232 related to services providedTopshop at 608 Fifth Avenue and (ii) $1,834 related to JBG Smith Properties ("JBGS") and $1,451J. Crew at 770 Broadway for the space which has been re-leased to Facebook.
(2)Primarily due to a $5,967 reduction in income from the non-cash write-off of one-time tenant work.straight-line rent receivables related to Topshop at 478-486 Broadway in the second quarter of 2019.



60

Results of Operations – Three Months Ended June 30, 2018 Compared to June 30, 2017 - continued


Expenses

Our expenses, which consist of operating, depreciation and amortization, general and administrative, expense from deferred compensation plan liability, and transaction related costs, impairment loss and other, were $385,348,000$475,564,000 for the three months ended June 30, 2018,2019, compared to $357,277,000$385,348,000 for the prior year’s quarter, an increase of $28,071,000.$90,216,000. Below are the details of the increase (decrease) by segment:
(Amounts in thousands)(Amounts in thousands)Total New York Other (Amounts in thousands)Total New York Other
Increase (decrease) due to:Increase (decrease) due to:      Increase (decrease) due to:     
Operating:Operating:      Operating:     
Acquisitions, dispositions and other$550
 $550
 $—
Acquisitions, dispositions and other$239
 $239
 $—
 Development and redevelopment(59) (250) 191
Development and redevelopment(456) (1,045) 589
 Non-reimbursable expenses(4,181) (3,155) (1,026)
Non-reimbursable expenses, including bad debt reserves2,864
 2,662
 202
 Hotel Pennsylvania124
 124
 —
Hotel Pennsylvania2,373
 2,373
 —
 Trade shows353
 —
 353
Trade shows568
 —
 568
 BMS expenses933
 933
 —
BMS expenses4,908
 5,225
(1) 
(317) Properties transferred to Fifth Avenue and Times Square JV(15,718) (15,718) —
Same store operations9,785
 5,737
 4,048
 Same store operations2,769
 4,432
 (1,663)
 20,281
 15,191
 5,090
  (15,229) (13,084) (2,145)
Depreciation and amortization:Depreciation and amortization:      Depreciation and amortization:     
Acquisitions, dispositions and other148
 148
 —
 Acquisitions, dispositions and other1,864
 1,864
 —
Development and redevelopment1,740
 1,709
 31
 Development and redevelopment(2,908) (2,951) 43
Same store operations4,835
 3,538
 1,297
 Properties transferred to Fifth Avenue and Times Square JV(16,051) (16,051) —
 6,723
 5,395
 1,328
 Same store operations18,284
 17,007
 1,277
       1,189
 (131) 1,320
     
General and administrativeGeneral and administrative(978) 225
 (1,203) General and administrative4,445
(1) 
6,539
 (2,094)
 

 

 

       
Expense from deferred compensation plan liabilityExpense from deferred compensation plan liability1,288
 —
 1,288
(2) 
Expense from deferred compensation plan liability(762) —
 (762)
             
Transaction related costs and other757
 —
 757
 
Transaction related costs, impairment losses and otherTransaction related costs, impairment losses and other100,573
 101,360
(2) 
(787)
             
Total increase in expensesTotal increase in expenses$28,071
 $20,811
 $7,260
 Total increase in expenses$90,216
 $94,684
 $(4,468)
_______________________________________
(1)This increase is a resultPrimarily due to $5,645 of services providednon-cash stock-based compensation expense in the second quarter of 2019 for the time-based equity compensation granted in connection with the previously announced new leadership group (additional non-cash expense associated with these awards will be $2,401 in each of the next two quarters, $9,603 in each of 2020 and 2021, $7,718 in 2022 and $2,655 in 2023), partially offset by lower non-cash stock-based compensation expense of $2,578 for the accelerated vesting of previously issued OP Units and Vornado restricted stock in the first quarter of 2019 due to JBGS and one-time tenant work.the removal of the time-based vesting requirement to participants who have reached 65 years of age.
(2)This increase in expense is entirely offset by a corresponding increase in "income from deferred compensation plan assets" on our consolidated statements of income.Non-cash impairment losses, substantially 608 Fifth Avenue.

Results of Operations – Three Months Ended June 30, 2019 Compared to June 30, 2018 - continued
Income from Partially Owned Entities

Below are the components of income (loss) from partially owned entities for the three months ended June 30, 20182019 and 2017.2018.
(Amounts in thousands)(Amounts in thousands)Ownership
Percentage at
June 30, 2018		 For the Three Months Ended June 30,Ownership
Percentage at
June 30, 2019		 For the Three Months Ended June 30,
 2018 2017 2019 2018
Our share of net income (loss):Our share of net income (loss):          
Fifth Avenue and Times Square JV(1):
    
Equity in net income51.5% $11,217
 $—
Return on preferred equity, net of our share of the expense 8,586
 —
 19,803
 —
Alexander'sAlexander's32.4% $7,167
 $8,197
32.4% 4,719
 7,167
Partially owned office buildings(1)
Various 2,002
 236
UE(2)
4.5% 1,112
 19,003
Pennsylvania Real Estate Investment Trust ("PREIT")8.0% (1,068) (902)
Partially owned office buildings(2)
Various (1,451) 2,002
Other investments(3)
Other investments(3)
Various (456) 19,487
Various (198) (412)
 $8,757
 $46,021
 $22,873
 $8,757
____________________
(1)
The three months ended June 30, 2019 includes our 51.5% ownership in the Fifth Avenue and Times Square JV. See Note 7 - Investments in Partially Owned Entities to the unaudited consolidated financial statements in Part I, Item I of this Quarterly Report on Form 10-Q for additional information.
(2)Includes interests in 280 Park Avenue, 650 Madison Avenue, One Park Avenue, 7 West 34th Street, 330 Madison Avenue (sold on July 11, 2019), 512 West 22nd Street, 85 Tenth Avenue and others.
(2)2017 The three months ended June 30, 2019 includes a $15,900 net gain resulting$1,079 reduction in income from UE operating partnership unit issuances.the non-cash write-off of straight-line rent receivable related to The Four Seasons Restaurant at 280 Park Avenue.
(3)Includes interests in Independence Plaza, Fashion Centre Mall/Washington Tower, Rosslyn Plaza, 50-70 West 93rd Street, 666 Fifth Avenue Office Condominium (sold on August 3, 2018), UE (sold on March 4, 2019), PREIT (accounted as a marketable security from March 12, 2019) and others. In the second quarter of 2017, we recognized $26,687 of net gains comprised of $15,314 representing our share of a net gain on the sale of Suffolk Downs and $11,373 representing the net gain on repayment of our debt investments in Suffolk Downs JV.



61

Results of Operations – Three Months Ended June 30, 2018 Compared to June 30, 2017 - continued

(Loss) Income (Loss) from Real Estate Fund Investments
Below are the components of the (loss) income (loss) from our real estate fund investments for the three months ended June 30, 20182019 and 2017.2018.
(Amounts in thousands)For the Three Months Ended June 30,
 2018 2017
Net investment income$539
 $3,646
Net unrealized (loss) gain on held investments(29,513) 745
Net realized loss on exited investments(2) —
(Loss) income from real estate fund investments(28,976) 4,391
Less loss (income) attributable to noncontrolling interests in consolidated subsidiaries29,527
 (4,695)
Income (loss) from real estate fund investments attributable to the Operating Partnership (1)
551
 (304)
Less (income) loss attributable to noncontrolling interests in the Operating Partnership(34) 19
Income (loss) from real estate fund investments attributable to Vornado$517
 $(285)
____________________
(1)Excludes $1,104 and $1,381 of management and leasing fees for the three months ended June 30, 2018 and 2017, respectively, which are included as a component of "fee and other income" on our consolidated statements of income.

(Amounts in thousands)For the Three Months Ended June 30,
 2019 2018
Net investment income$459
 $539
Net unrealized loss on held investments(16,262) (29,513)
Net realized loss on exited investments—
 (2)
Loss from real estate fund investments(15,803) (28,976)
Less (income) loss attributable to noncontrolling interests in consolidated subsidiaries(4,955) 29,527
(Loss) income from real estate fund investments attributable to the Operating Partnership(20,758) 551
Less loss (income) attributable to noncontrolling interests in the Operating Partnership1,316
 (34)
(Loss) income from real estate fund investments attributable to Vornado$(19,442) $517
Interest and Other Investment Income, net

Below are the components of interest and other investment income, net for the three months ended June 30, 20182019 and 2017.2018.
(Amounts in thousands)For the Three Months Ended June 30,For the Three Months Ended June 30,
2018 20172019 2018
Increase in fair value of marketable securities(1)
$15,884
 $—
Interest on cash and cash equivalents and restricted cash$2,626
 $4,487
Interest on loans receivable(2)(1)
6,205
 2,102
1,635
 6,205
Dividends on marketable securities3,353
 3,307
1,313
 3,353
Increase in fair value of marketable securities1,312
 15,884
Other, net5,450
 3,132
954
 963
$30,892
 $8,541
$7,840
 $30,892
____________________
(1)
On January 1, 2018, we adopted ASU 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities, which requires changes in the fair value of our marketable securities to be recorded in current period earnings. Previously, changes in the fair value of marketable securities were recognized in "accumulated other comprehensive income" on our consolidated balance sheets.
(2)
2018 includes $5,457$5,457 of income from a profit participation on the April 2018 sale of 701 Seventh Avenue. We received this kickerincome in connection with our 25% participation in an October 2012, $137,500 mezzanine loan, which was repaid in January 2014.


Results of Operations – Three Months Ended June 30, 2019 Compared to June 30, 2018 - continued
Interest and Debt Expense

Interest and debt expense was $87,657,000 for the three months ended June 30, 2018,2019 was $63,029,000 compared to $84,789,000 in$87,657,000 for the prior year’s quarter, an increasea decrease of $2,868,000. This increase$24,628,000.This decrease was primarily due to (i) $6,047,000$9,386,000 of higherlower interest expense relatingresulting from the deconsolidation of mortgages payable of the properties contributed to our variable rate loans,Fifth Avenue and Times Square JV, (ii) $2,611,000$7,197,000 of higherlower interest expense on our $750,000,000 delayed draw termresulting from paydowns of the 220 CPS loan which was fully drawn in October 2017, partially offset by (iii) $5,174,000$4,265,000 lower capital lease interest and (iv) $3,058,000 higher capitalized interest and debt expense.expense, partially offset by (v) $2,728,000 of higher interest expense resulting from higher average interest rates on our variable rate loans.

Net Gain on Transfer to Fifth Avenue and Times Square JV
During the three months ended June 30, 2019, we recognized a $2,571,099,000 gain from the transfer of common equity in the properties contributed to Fifth Avenue and Times Square JV, including the related step-up in our basis of the retained portion of the assets to fair value.
Net Gains on Disposition of Wholly Owned and Partially Owned Assets

Net gains on disposition of wholly owned and partially owned assets for the three months ended June 30, 20182019 were $111,713,000 compared to $23,559,000 representingfor the prior year's quarter, an increase of $88,154,000. This increase was due to (i) $111,713,000 ofnet gains on sale of 220 CPS condominium units in 2019, partially offset by (ii) a $23,559,000 net gain on sale of 27 Washington Square North.

North in 2018.
Income Tax (Expense) BenefitExpense

Income tax expense for the three months ended June 30, 20182019 was $467,000$26,914,000 compared to a benefit of $610,000$467,000 for the prior year’s quarter, an increase in expense of $1,077,000.$26,447,000. This increase isresulted primarily due to higher New York City Unincorporated Business Tax ("UBT").



62

Results from$22,792,000of Operations – Three Months Endedincome tax expense on the sale of 220 CPS condominium units in the three months ended June 30, 2018 Compared to June 30, 2017 - continued2019.

Income from Discontinued OperationsTax Expense

We have reclassified the revenues and expenses of our former Washington, DC segment which was spun off on July 17, 2017 and other related retail assets that were sold or are currently held for sale to "income from discontinued operations" and the related assets and liabilities to "assets related to discontinued operations" and "liabilities related to discontinued operations" for all periods presented in the accompanying financial statements. The table below sets forth the combined results of operations of assets related to discontinued operationsIncome tax expense for the three months ended June 30, 2018 and 2017.
(Amounts in thousands)For the Three Months Ended June 30,
 2018 2017
Total revenues$339
 $118,939
Total expenses274
 94,510
 65
 24,429
Additional net gains on sale of real estate618
 —
JBGS spin-off transaction costs—
 (6,211)
Income from partially-owned entities—
 255
Pretax income from discontinued operations683
 18,473
Income tax expense—
 (362)
Income from discontinued operations$683
 $18,111

Net Loss (Income) Attributable2019 was $26,914,000 compared to Noncontrolling Interests$467,000 for the prior year’s quarter, an increase of $26,447,000. This increase resulted primarily from$22,792,000of income tax expense on the sale of 220 CPS condominium units in Consolidated Subsidiaries

Net loss attributable to noncontrolling interests in consolidated subsidiaries was $26,175,000 for the three months ended June 30, 2018, compared to income of $7,677,000 for the prior year’s quarter, a decrease in income of $33,852,000.  This decrease resulted primarily from the allocation of net loss to the noncontrolling interests of our real estate fund investments.2019.

Net Income Attributable to Noncontrolling Interests in the Operating Partnership (Vornado Realty Trust)

Net income attributable to noncontrolling interests in the Operating Partnership was $7,445,000 for the three months ended June 30, 2018, compared to $7,706,000 for the prior year’s quarter, a decrease of $261,000.  This decrease resulted primarily from lower net income subject to allocation to Class A unitholders.

Preferred Share Dividends of Vornado Realty Trust
Preferred share dividends were $12,534,000 for the three months ended June 30, 2018, compared to $16,129,000 for the prior year’s quarter, a decrease of $3,595,000.  The decrease is comprised of $7,789,000 of savings from the redemption of all of the outstanding 6.625% Series G and Series I cumulative redeemable preferred shares in January 2018, partially offset by a $4,194,000 increase due to the issuance of 5.25% Series M cumulative redeemable preferred shares in December 2017.

Preferred Unit Distributions of Vornado Realty L.P.

Preferred unit distributions were $12,582,000 for the three months ended June 30, 2018, compared to $16,177,000 for the prior year’s quarter, a decrease of $3,595,000.  The decrease is comprised of $7,789,000 of savings from the redemption of all the outstanding 6.625% Series G and Series I cumulative redeemable preferred units in January 2018, partially offset by a $4,194,000 increase due to the issuance of 5.25% Series M cumulative redeemable preferred units in December 2017.




63

Results of Operations – Three Months Ended June 30, 2018 Compared to June 30, 2017 - continued

Same Store Net Operating Income
Same store NOI represents NOI from operations which are owned by us and in service in both the current and prior year reporting periods. Same store NOI - cash basis is NOI from operations before straight-line rental income and expense, amortization of acquired below and above market leases, net and other non-cash adjustments which are owned by us and in service in both the current and prior year reporting periods.  We present these non-GAAP measures to (i) facilitate meaningful comparisons of the operational performance of our properties and segments, (ii) make decisions on whether to buy, sell or refinance properties, and (iii) compare the performance of our properties and segments to those of our peers.  Same store NOI and same store NOI - cash basis should not be considered as an alternative to net income or cash flow from operations and may not be comparable to similarly titled measures employed by other companies.

Below are reconciliations of NOI to same store NOI for our New York segment, theMART, 555 California Street and other investments for the three months ended June 30, 2018 compared to June 30, 2017.
(Amounts in thousands)Total New York theMART 555 California Street Other
NOI at share for the three months ended June 30, 2018$354,429
 $295,867
 $27,816
 $13,660
 $17,086
 Less NOI at share from:         
 Acquisitions(503) (439) (64) —
 —
 Dispositions(310) (310) —
 —
 —
 Development properties placed into and out of service(12,794) (12,794) —
 —
 —
 Lease termination income, net of straight-line and FAS 141 write-offs1,941
 1,984
 (43) —
 —
 Other non-operating income, net(17,583) (497) —
 —
 (17,086)
Same store NOI at share for the three months ended June 30, 2018$325,180
 $283,811
 $27,709
 $13,660
 $—
          
NOI at share for the three months ended June 30, 2017$346,134
 $286,188
 $26,182
 $12,032
 $21,732
 Less NOI at share from:         
 Acquisitions5
 (164) 169
 —
 —
 Dispositions(406) (406) —
 —
 —
 Development properties placed into and out of service(12,329) (12,329) —
 —
 —
 Lease termination income, net of straight-line and FAS 141 write-offs(166) (166) —
 —
 —
 Other non-operating income, net(22,573) (841) —
 —
 (21,732)
Same store NOI at share for the three months ended June 30, 2017$310,665
 $272,282
 $26,351
 $12,032
 $—
          
Increase in same store NOI at share for the three months ended June 30, 2018 compared to June 30, 2017$14,515
 $11,529
 $1,358
 $1,628
 $—
           
% increase in same store NOI at share4.7% 4.2%
(1) 
5.2% 13.5% —%
____________________
(1)Excluding Hotel Pennsylvania, same store NOI at share increased by 4.6%.





64

Results of Operations – Three Months Ended June 30, 2018 Compared to June 30, 2017 - continued

Same Store Net Operating Income - continued
Below are reconciliations of NOI - cash basis to same store NOI - cash basis for our New York segment, theMART, 555 California Street and other investments for the three months ended June 30, 2018 compared to June 30, 2017.
(Amounts in thousands)Total New York theMART 555 California Street Other
NOI at share - cash basis for the three months ended June 30, 2018$341,948
 $283,154
 $27,999
 $13,808
 $16,987
 Less NOI at share - cash basis from:         
 Acquisitions(355) (291) (64) —
 —
 Dispositions(242) (242) —
 —
 —
 Development properties placed into and out of service(13,686) (13,686) —
 —
 —
 Lease termination income(162) —
 (162) —
 —
 Other non-operating income, net(17,483) (496) —
 —
 (16,987)
Same store NOI at share - cash basis for the three months ended June 30, 2018$310,020
 $268,439
 $27,773
 $13,808
 $—
           
NOI at share - cash basis for the three months ended June 30, 2017$323,659
 $267,891
 $24,897
 $11,151
 $19,720
 Less NOI at share - cash basis from:         
 Acquisitions106
 (63) 169
 —
 —
 Dispositions(297) (297) —
 —
 —
 Development properties placed into and out of service(12,340) (12,340) —
 —
 —
 Lease termination income(218) (218) —
 —
 —
 Other non-operating income, net(21,287) (1,567) —
 —
 (19,720)
Same store NOI at share - cash basis for the three months ended June 30, 2017$289,623
 $253,406
 $25,066
 $11,151
 $—
          
Increase in same store NOI at share - cash basis for the three months ended June 30, 2018 compared to June 30, 2017$20,397
 $15,033
 $2,707
 $2,657
 $—
          
% increase in same store NOI at share - cash basis7.0% 5.9%
(1) 
10.8% 23.8% —%
____________________
(1)Excluding Hotel Pennsylvania, same store NOI at share - cash basis increased by 6.3%.



65

Net Operating Income by Segment for the Six Months Ended June 30, 2018 and 2017

NOI represents total revenues less operating expenses. We consider NOI to be the primary non-GAAP financial measure for making decisions and assessing the unlevered performance of our segments as it relates to the total return on assets as opposed to the levered return on equity. As properties are bought and sold based on NOI, we utilize this measure to make investment decisions as well as to compare the performance of our assets to that of our peers. NOI should not be considered a substitute for net income. NOI may not be comparable to similarly titled measures employed by other companies.

Below is a summary of NOI at share and NOI at share - cash basisby segment for the six months ended June 30, 2018 and 2017.

(Amounts in thousands)For the Six Months Ended June 30, 2018
 Total New York Other
Total revenues$1,078,255
 $907,036
 $171,219
Operating expenses473,583
 398,819
 74,764
NOI - consolidated604,672
 508,217
 96,455
Deduct: NOI attributable to noncontrolling interests in consolidated subsidiaries(34,472) (23,305) (11,167)
Add: Our share of NOI from partially owned entities133,265
 99,551
 33,714
NOI at share703,465
 584,463
 119,002
Non-cash adjustments for straight-line rents, amortization of acquired below-market leases, net and other(30,429) (30,036) (393)
NOI at share - cash basis$673,036
 $554,427
 $118,609

(Amounts in thousands)For the Six Months Ended June 30, 2017
 Total New York Other
Total revenues$1,019,145
 $863,101
 $156,044
Operating expenses436,359
 368,819
 67,540
NOI - consolidated582,786
 494,282
 88,504
Deduct: NOI attributable to noncontrolling interests in consolidated subsidiaries(32,607) (22,787) (9,820)
Add: Our share of NOI from partially owned entities133,113
 91,848
 41,265
NOI at share683,292
 563,343
 119,949
Non-cash adjustments for straight-line rents, amortization of acquired below-market leases, net and other(42,956) (36,669) (6,287)
NOI at share - cash basis$640,336
 $526,674
 $113,662


66

Net Operating Income by Segment for the Six Months Ended June 30, 2018 and 2017- continued

The elements of our New York and Other NOI at share for the six months ended June 30, 2018 and 2017 are summarized below.

(Amounts in thousands)For the Six Months Ended June 30,
 2018 2017
New York:   
Office$372,023
 $346,533
Retail175,018
 179,003
Residential12,479
 12,469
Alexander's23,484
 23,709
Hotel Pennsylvania1,459
 1,629
Total New York584,463
 563,343
    
Other:   
theMART54,691
 52,071
555 California Street27,171
 24,066
Other investments37,140
 43,812
Total Other119,002
 119,949
    
NOI at share$703,465
 $683,292

The elements of our New York and Other NOI at share - cash basis for the six months ended June 30, 2018 and 2017 are summarized below.
(Amounts in thousands)For the Six Months Ended June 30,
 2018 2017
New York:   
Office$358,909
 $330,311
Retail158,728
 159,386
Residential11,062
 10,884
Alexander's24,137
 24,399
Hotel Pennsylvania1,591
 1,694
Total New York554,427
 526,674
    
Other:   
theMART55,078
 49,429
555 California Street26,634
 22,476
Other investments36,897
 41,757
Total Other118,609
 113,662
    
NOI at share - cash basis$673,036
 $640,336


67

Reconciliation of Net Income to Net Operating Income for the Six Months Ended June 30, 2018 and 2017

Below is a reconciliation of net income to NOI at share and NOI at share - cash basis for the six months ended June 30, 2018 and 2017.

(Amounts in thousands)For the Six Months Ended June 30,
 2018 2017
Net income$105,620
 $221,331
    
Deduct:   
Loss (income) from partially owned entities1,147
 (47,379)
Loss (income) from real estate fund investments37,783
 (4,659)
Interest and other investment income, net(6,508) (15,236)
Net gains on disposition of wholly owned and partially owned assets(23,559) (501)
Income from discontinued operations(320) (33,429)
NOI attributable to noncontrolling interests in consolidated subsidiaries(34,472) (32,607)
    
Add:   
Depreciation and amortization expense220,532
 210,251
General and administrative expense76,960
 81,580
Transaction related costs and other14,173
 1,012
NOI from partially owned entities133,265
 133,113
Interest and debt expense175,823
 167,513
Income tax expense3,021
 2,303
NOI at share703,465
 683,292
Non-cash adjustments for straight-line rents, amortization of acquired below-market leases, net and other(30,429) (42,956)
NOI at share - cash basis$673,036
 $640,336

NOI by Region

Below is a summary of the percentages of NOI at share by geographic region for the six months ended June 30, 2018 and 2017.
 For the Six Months Ended June 30,
 2018 2017
Region:   
New York City metropolitan area88% 88%
Chicago, IL8% 8%
San Francisco, CA4% 4%
 100% 100%


68

Results of Operations – Six Months Ended June 30, 2018 Compared to June 30, 2017

Revenues
Our revenues, which consist of property rentals, tenant expense reimbursements, and fee and other income, were $1,078,255,000 for the six months ended June 30, 2018, compared to $1,019,145,000 for the prior year’s six months, an increase of $59,110,000.  Below are the details of the increase by segment:
(Amounts in thousands)Total New York Other
Increase (decrease) due to:     
Property rentals:     
 Acquisitions, dispositions and other$1,410
 $1,410
 $—
 Development and redevelopment(2,216) (2,461) 245
 Hotel Pennsylvania3,524
 3,524
 —
 Trade shows1,390
 —
 1,390
 Same store operations37,062
 29,255
 7,807
  41,170
 31,728
 9,442
Tenant expense reimbursements:     
 Acquisitions, dispositions and other26
 26
 —
 Development and redevelopment423
 222
 201
 Same store operations7,483
 5,912
 1,571
  7,932
 6,160
 1,772
Fee and other income:     
 BMS cleaning fees9,726
 10,820
(1) 
(1,094)
 Management and leasing fees419
 453
 (34)
 Lease termination fees(3,807) (4,081) 274
 Other income3,670
 (1,145) 4,815
  10,008
 6,047
 3,961
       
Total increase in revenues$59,110
 $43,935
 $15,175

___________________
(1)Includes $3,877 related to services provided to JBGS and $1,451 of one-time tenant work.



69

Results of Operations – Six Months Ended June 30, 2018 Compared to June 30, 2017 - continued

Expenses
Our expenses, which consist of operating, depreciation and amortization, general and administrative, expense from deferred compensation plan liability, and transaction related costs and other, were $786,921,000 for the six months ended June 30, 2018, compared to $732,460,000 for the prior year’s six months, an increase of $54,461,000.  Below are the details of the increase by segment:

(Amounts in thousands)Total New York Other 
Increase(decrease) due to:      
Operating:      
 Acquisitions, dispositions and other$642
 $642
 $—
 
 Development and redevelopment(72) (1,323) 1,251
 
 Non-reimbursable expenses, including bad debt reserves4,721
 4,534
 187
 
 Hotel Pennsylvania3,677
 3,677
 —
 
 Trade shows680
 —
 680
 
 BMS expenses7,495
 8,528
(1) 
(1,033) 
 Same store operations20,081
 13,942
 6,139
 
  37,224
 30,000
 7,224
 
Depreciation and amortization:      
 Acquisitions, dispositions and other240
 240
 —
 
 Development and redevelopment4,925
 4,860
 65
 
 Same store operations5,116
 1,974
 3,142
 
  10,281
 7,074
 3,207
 
       
General and administrative(4,620) (902) (3,718) 
        
Expense from deferred compensation plan liability(1,585) —
 (1,585)
(2) 
        
Transaction related costs and other13,161
 13,103
(3) 
58
 
       
Total increase in expenses$54,461
 $49,275
 $5,186
 
____________________
(1)This increase is a result of services provided to JBGS and one-time tenant work.
(2)This decrease in expense is entirely offset by the corresponding decrease in "income from deferred compensation plan assets" on our consolidated statements of income.
(3)Potential additional New York City real property transfer tax ("Transfer Tax") related to the December 2012 acquisition of Independence Plaza.



70

Results of Operations – Six Months Ended June 30, 2018 Compared to June 30, 2017 - continued

(Loss) Income from Partially Owned Entities

Below are the components of (loss) income from partially owned entities for the six months ended June 30, 2018 and 2017.
(Amounts in thousands)Percentage
Ownership at
June 30, 2018		 For the Six Months Ended June 30,
  2018 2017
Our share of net (loss) income     
Alexander's(1)
32.4% $5,166
 $16,598
Partially owned office buildings/land(2)
Various (2,281) 1,046
PREIT8.0% (1,497) (3,732)
UE(3)
4.5% 471
 20,303
Other investments(4)
Various (3,006) 13,164
   $(1,147) $47,379
____________________
(1)
2018 includes our $7,708 share of Alexander's potential additional Transfer Tax.
(2)Includes interests in 280 Park Avenue, 650 Madison Avenue, One Park Avenue, 7 West 34th Street, 330 Madison Avenue, 512 West 22nd Street, 85 Tenth Avenue and others.
(3)2017 includes a $15,900 net gain resulting from UE operating partnership unit issuances.
(4)Includes interests in Independence Plaza, Fashion Centre Mall/Washington Tower, Rosslyn Plaza, 50-70 West 93rd Street, 666 Fifth Avenue (Office) and others. In the second quarter of 2017, we recognized $26,687 of net gains comprised of $15,314 representing our share of a net gain on the sale of Suffolk Downs and $11,373 representing the net gain on repayment of our debt investments in Suffolk Downs JV.

Loss from Real Estate Fund Investments

Below are the components of the loss from our real estate fund investments for the six months ended June 30, 2018 and 2017.
(Amounts in thousands)For the Six Months Ended June 30,
 2018 2017
Net investment income$3,273
 $10,860
Net unrealized loss on held investments(29,513) (6,442)
Transfer Tax(10,630) —
Net realized (loss) gain on exited investments(913) 241
(Loss) income from real estate fund investments(37,783) 4,659
Less loss (income) attributable to noncontrolling interests in consolidated subsidiaries34,896
 (8,198)
Loss from real estate fund investments attributable to the Operating Partnership (2018 includes $4,252 of loss related to One Park Avenue potential additional transfer taxes and reduction in carried interest) (1)
(2,887) (3,539)
Less loss attributable to noncontrolling interests in the Operating Partnership178
 221
Loss from real estate fund investments attributable to Vornado$(2,709) $(3,318)
____________________
(1)Excludes $1,906 and $2,381 of management and leasing fees for the six months ended June 30, 2018 and 2017, respectively, which are included as a component of "fee and other income" on our consolidated statements of income.


71

Results of Operations – Six Months Ended June 30, 2018 Compared to June 30, 2017 - continued

Interest and Other Investment Income, net

Below are the components of interest and other investment income, net for the six months ended June 30, 2018 and 2017.
(Amounts in thousands)For the Six Months Ended June 30,
 2018 2017
Decrease in fair value of marketable securities(1)
$(17,102) $—
Interest on loans receivable(2)
6,948
 2,845
Dividends on marketable securities6,706
 6,614
Other, net9,956
 5,777
 $6,508
 $15,236
____________________
(1)
On January 1, 2018, we adopted ASU 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities, which requires changes in the fair value of our marketable securities to be recorded in current period earnings. Previously, changes in the fair value of marketable securities were recognized in "accumulated other comprehensive income" on our consolidated balance sheets.
(2)
2018 includes $5,457 of income from a profit participation on the April 2018 sale of 701 Seventh Avenue. We received this kicker in connection with our 25% participation in an October 2012, $137,500 mezzanine loan, which was repaid in January 2014.

Interest and Debt Expense

Interest and debt expense was $175,823,000 for the six months ended June 30, 2018, compared to $167,513,000 for the prior year’s six months, an increase of $8,310,000.  This increase was primarily due to (i) $11,747,000 of higher interest expense relating to our variable rate loans, and (ii) $5,438,000 of higher interest expense on our $750,000,000 delayed draw term loan which was fully drawn in October 2017, partially offset by (iii) $9,085,000 higher capitalized interest and debt expense.

Net Gains on Disposition of Wholly Owned and Partially Owned Assets

Net gains on disposition of wholly owned and partially owned assets for the six months ended June 30, 2018 were $23,559,000 representing the net gain on sale of 27 Washington Square North.

Income Tax Expense

Income tax expense for the sixthree months ended June 30, 20182019 was $3,021,000$26,914,000 compared to $2,303,000$467,000 for the prior year’s six months,quarter, an increase of $718,000.$26,447,000. This increase isresulted primarily due to higher New York City UBT.

from$22,792,000of income tax expense on the sale of 220 CPS condominium units in the three months ended June 30, 2019.
Income from Discontinued Operations
We have reclassified the revenues and expenses of our former Washington, DC segment which was spun off on July 17, 2017 and other related retail assets that were sold or are currently held for sale to "incomeIncome from discontinued operations" and the related assets and liabilities to "assets related to discontinued operations" and "liabilities related to discontinued operations" for all periods presented in the accompanying financial statements. The table below sets forth the combined results of operations of assets related to discontinued operations for the sixthree months ended June 30, 2018 and 2017.
(Amounts in thousands)For the Six Months Ended June 30,
 2018 2017
Total revenues$693
 $235,222
Total expenses991
 190,222
 (298) 45,000
Additional net gains on sale of real estate618
 2,267
JBGS spin-off transaction costs—
 (13,464)
Income from partially-owned entities—
 342
Pretax income from discontinued operations320
 34,145
Income tax expense—
 (716)
Income from discontinued operations$320
 $33,429




72

Results2019 was $60,000 compared to $683,000 for the prior year’s quarter, a decrease of Operations – Six Months Ended June 30, 2018 Compared to June 30, 2017 - continued

$623,000.
Net (Income) Loss (Income) Attributable to Noncontrolling Interests in Consolidated Subsidiaries

Net loss incomeattributable to noncontrolling interests in consolidated subsidiaries was $34,449,000$21,451,000 for the sixthree months ended June 30, 2018,2019, compared to incomea loss of $14,414,000$26,175,000 for the prior year’s quarter, a decreasean increase in income of $48,863,000.$47,626,000. This decreaseincrease resulted primarily from (i) $34,482,000 increase from the allocation oflower net loss subject to allocation to the noncontrolling interestsinterest of our real estate fund, investments.

and (ii) $11,945,000 resulting from the net gain on transfer to Fifth Avenue and Times Square JV attributable to noncontrolling interests in the three months ended June 30, 2019.
Net Income Attributable to Noncontrolling Interests in the Operating Partnership (Vornado Realty Trust)

Net income attributable to noncontrolling interests in the Operating Partnership was $6,321,000$162,515,000 for the sixthree months ended June 30, 2018,2019, compared to $10,935,000$7,445,000 for the prior year’s six months, a decreasequarter, an increase of $4,614,000. The decrease $155,070,000.Thisincreaseresulted primarily from lowerhigher net income subject to allocation to Class A unitholders.

Preferred Share Dividends of Vornado Realty Trust

Preferred share dividends were $25,569,000$12,532,000 for the sixthree months ended June 30, 2018,2019, compared to $32,258,000$12,534,000 for the prior year’s six months,quarter, a decrease of $6,689,000. The decrease is comprised of $15,076,000 of savings from the redemption of all of the outstanding 6.625% Series G and Series I cumulative redeemable preferred shares in January 2018, partially offset by a $8,387,000 increase due to the issuance of 5.25% Series M cumulative redeemable preferred shares in December 2017.

$2,000.
Preferred Unit Distributions of Vornado Realty L.P.

Preferred unit distributions were $25,666,000$12,573,000 for the sixthree months ended June 30, 2018,2019, compared to $32,355,000$12,582,000 for the prior year’s six months,quarter, a decrease of $6,689,000. The decrease is comprised of $15,076,000 of savings from the redemption of all the outstanding 6.625% Series G and Series I cumulative redeemable preferred units in January 2018, partially offset by a $8,387,000 increase due to the issuance of 5.25% Series M cumulative redeemable preferred units in December 2017.$9,000. 



73


Results of Operations – SixThree Months Ended June 30, 20182019 Compared to June 30, 20172018 - continued

Same Store Net Operating Income At Share
Same store NOI at share represents NOI at share from property operations which are owned by us and in service in both the current and prior year reporting periods. Same store NOI at share - cash basis is NOI at share from operations before straight-line rental income and expense, amortization of acquired below and above market leases, net and other non-cash adjustments which are owned by us and in service in both the current and prior year reporting periods. We present these non-GAAP measures to (i) facilitate meaningful comparisons of the operational performance of our properties and segments, (ii) make decisions on whether to buy, sell or refinance properties, and (iii) compare the performance of our properties and segments to those of our peers. Same store NOI at share and same store NOI at share - cash basis should not be considered as an alternative to net income or cash flow from operations and may not be comparable to similarly titled measures employed by other companies.
Below are reconciliations of NOI at share to same store NOI at share for our New York segment, theMART, 555 California Street and other investments for the sixthree months ended June 30, 20182019 compared to June 30, 2017.2018.
(Amounts in thousands)Total New York theMART 555 California Street Other
NOI at share for the six months ended June 30, 2018$703,465
 $584,463
 $54,691
 $27,171
 $37,140
 Less NOI at share from:         
 Acquisitions(938) (789) (149) —
 —
 Dispositions(364) (364) —
 —
 —
 Development properties placed into and out of service(13,205) (13,205) —
 —
 —
 Lease termination income, net of straight-line and FAS 141 write-offs814
 857
 (43) —
 —
 Other non-operating income, net(38,217) (1,077) —
 —
 (37,140)
Same store NOI at share for the six months ended June 30, 2018$651,555
 $569,885
 $54,499
 $27,171
 $—
          
NOI at share for the six months ended June 30, 2017$683,292
 $563,343
 $52,071
 $24,066
 $43,812
 Less NOI at share from:         
 Acquisitions36
 (164) 200
 —
 —
 Dispositions(883) (883) —
 —
 —
 Development properties placed into and out of service(12,313) (12,313) —
 —
 —
 Lease termination income, net of straight-line and FAS 141 write-offs(825) (804) (21) —
 —
 Other non-operating income, net(45,738) (1,926) —
 —
 (43,812)
Same store NOI at share for the six months ended June 30, 2017$623,569
 $547,253
 $52,250
 $24,066
 $—
          
Increase in same store NOI at share for the six months ended June 30, 2018 compared to June 30, 2017$27,986
 $22,632
 $2,249
 $3,105
 $—
           
% increase in same store NOI at share4.5% 4.1%
(1) 
4.3% 12.9% —%
(Amounts in thousands)Total New York theMART 555 California Street Other
NOI at share for the three months ended June 30, 2019$308,909
 $257,702
 $30,974
 $15,358
 $4,875
 Less NOI at share from:         
 Acquisitions8
 8
 —
 —
 —
 Change in ownership interests in properties contributed to Fifth Avenue and Times Square JV(5,479) (5,479) —
 —
 —
 Dispositions(50) (50) —
 —
 —
 Development properties(11,392) (11,392) —
 —
 —
 Lease termination income, net of write-offs of straight-line receivables and acquired below-market leases, net2,979
 2,979
 —
 —
 —
 Other non-same store expense (income), net85
 4,984
 (98) 74
 (4,875)
Same store NOI at share for the three months ended June 30, 2019$295,060
 $248,752
 $30,876
 $15,432
 $—
          
NOI at share for the three months ended June 30, 2018$354,429
 $295,867
 $27,816
 $13,660
 $17,086
 Less NOI at share from:         
 Acquisitions(3) (3) —
 —
 —
 Change in ownership interests in properties contributed to Fifth Avenue and Times Square JV(26,365) (26,365) —
 —
 —
 Dispositions(309) (309) —
 —
 —
 Development properties(16,451) (16,451) —
 —
 —
 Lease termination income, net of write-offs of straight-line receivables and acquired below-market leases, net1,984
 1,984
 —
 —
 —
 Other non-same store income, net(21,689) (4,323) (280) —
 (17,086)
Same store NOI at share for the three months ended June 30, 2018$291,596
 $250,400
 $27,536
 $13,660
 $—
          
Increase (decrease) in same store NOI at share for the three months ended June 30, 2019 compared to June 30, 2018$3,464
 $(1,648) $3,340
 $1,772
 $—
           
% increase (decrease) in same store NOI at share1.2% (0.7)%
(1) 
12.1% 13.0% —%
____________________
(1)Excluding Hotel Pennsylvania, same store NOI at share was flat.




Results of Operations – Three Months Ended June 30, 2019 Compared to June 30, 2018 - continued
Same Store Net Operating Income At Share - continued
Below are reconciliations of NOI at share - cash basis to same store NOI at share - cash basis for our New York segment, theMART, 555 California Street and other investments for the three months ended June 30, 2019 compared to June 30, 2018.
(Amounts in thousands)Total New York theMART 555 California Street Other
NOI at share - cash basis for the three months ended June 30, 2019$318,657
 $266,139
 $31,984
 $15,595
 $4,939
 Less NOI at share - cash basis from:         
 Acquisitions8
 8
 —
 —
 —
 Change in ownership interests in properties contributed to Fifth Avenue and Times Square JV(5,183) (5,183) —
 —
 —
 Dispositions(50) (50) —
 —
 —
 Development properties(13,005) (13,005) —
 —
 —
 Lease termination income(1,606) (1,606) —
 —
 —
 Other non-same store income, net(9,740) (4,703) (98) —
 (4,939)
Same store NOI at share - cash basis for the three months ended June 30, 2019$289,081
 $241,600
 $31,886
 $15,595
 $—
           
NOI at share - cash basis for the three months ended June 30, 2018$341,948
 $283,154
 $27,999
 $13,808
 $16,987
 Less NOI at share - cash basis from:         
 Acquisitions(3) (3) —
 —
 —
 Change in ownership interests in properties contributed to Fifth Avenue and Times Square JV(24,732) (24,732) —
 —
 —
 Dispositions(240) (240) —
 —
 —
 Development properties(17,489) (17,489) —
 —
 —
 Lease termination income—
 —
 —
 —
 —
 Other non-same store income, net(22,345) (4,960) (398) —
 (16,987)
Same store NOI at share - cash basis for the three months ended June 30, 2018$277,139
 $235,730
 $27,601
 $13,808
 $—
          
Increase in same store NOI at share - cash basis for the three months ended June 30, 2019 compared to June 30, 2018$11,942
 $5,870
 $4,285
 $1,787
 $—
          
% increase in same store NOI at share - cash basis4.3% 2.5%
(1) 
15.5% 12.9% —%
____________________
(1)Excluding Hotel Pennsylvania, same store NOI at share - cash basis increased by 4.2%3.3%.


Net Operating Income At Share by Segment for the Six Months Ended June 30, 2019 and 2018
NOI represents total revenues less operating expenses. We consider NOI to be the primary non-GAAP financial measure for making decisions and assessing the unlevered performance of our segments as it relates to the total return on assets as opposed to the levered return on equity. As properties are bought and sold based on NOI, we utilize this measure to make investment decisions as well as to compare the performance of our assets to that of our peers. NOI should not be considered a substitute for net income. NOI may not be comparable to similarly titled measures employed by other companies.
Below is a summary of NOI at share and NOI at share - cash basisby segment for the six months ended June 30, 2019 and 2018.
(Amounts in thousands)For the Six Months Ended June 30, 2019
 Total 
New York(1)
 Other
Total revenues$997,771
 $819,666
 $178,105
Operating expenses467,647
 385,914
 81,733
NOI - consolidated530,124
 433,752
 96,372
Deduct: NOI attributable to noncontrolling interests in consolidated subsidiaries(33,819) (21,437) (12,382)
Add: NOI from partially owned entities150,376
 128,745
 21,631
NOI at share646,681
 541,060
 105,621
Non-cash adjustments for straight-line rents, amortization of acquired below-market leases, net and other4,567
 1,819
 2,748
NOI at share - cash basis$651,248
 $542,879
 $108,369
___________________
(1)Reflects the transfer of 45.4% of common equity in the properties contributed to the Fifth Avenue and Times Square JV on April 18, 2019.

(Amounts in thousands)For the Six Months Ended June 30, 2018
 Total New York Other
Total revenues$1,078,255
 $907,036
 $171,219
Operating expenses473,583
 398,819
 74,764
NOI - consolidated604,672
 508,217
 96,455
Deduct: NOI attributable to noncontrolling interests in consolidated subsidiaries(34,472) (23,305) (11,167)
Add: NOI from partially owned entities133,265
 99,551
 33,714
NOI at share703,465
 584,463
 119,002
Non-cash adjustments for straight-line rents, amortization of acquired below-market leases, net and other(30,429) (30,036) (393)
NOI at share - cash basis$673,036
 $554,427
 $118,609


Net Operating Income At Share by Segment for the Six Months Ended June 30, 2019 and 2018- continued
The elements of our New York and Other NOI at share for the six months ended June 30, 2019 and 2018 are summarized below.
(Amounts in thousands)For the Six Months Ended June 30,
 2019 2018
New York:   
Office(1)
$363,132
 $372,023
Retail (1)
145,330
 175,018
Residential11,953
 12,479
Alexander's22,430
 23,484
Hotel Pennsylvania(1,785) 1,459
Total New York541,060
 584,463
    
Other:   
theMART54,497
 54,691
555 California Street29,859
 27,171
Other investments(2)
21,265
 37,140
Total Other105,621
 119,002
    
NOI at share$646,681
 $703,465
___________________
(1)Reflects the transfer of 45.4% of common equity in the properties contributed to the Fifth Avenue and Times Square JV on April 18, 2019.
(2)The six months ended June 30, 2018 includes $10,408 from 666 Fifth Avenue Office Condominium (sold on August 3, 2018), $10,230 from PREIT (accounted for as a marketable security beginning March 12, 2019) and $5,765 from UE (sold on March 4, 2019).
The elements of our New York and Other NOI at share - cash basis for the six months ended June 30, 2019 and 2018 are summarized below.
(Amounts in thousands)For the Six Months Ended June 30,
 2019 2018
New York:   
Office(1)
$363,176
 $358,909
Retail(1)
147,662
 158,728
Residential11,074
 11,062
Alexander's22,849
 24,137
Hotel Pennsylvania(1,882) 1,591
Total New York542,879
 554,427
    
Other:   
theMART56,896
 55,078
555 California Street30,340
 26,634
Other investments(2)
21,133
 36,897
Total Other108,369
 118,609
    
NOI at share - cash basis$651,248
 $673,036
___________________
(1)Reflects the transfer of 45.4% of common equity in the properties contributed to the Fifth Avenue and Times Square JV on April 18, 2019.
(2)The six months ended June 30, 2018 includes $10,321 from 666 Fifth Avenue Office Condominium (sold on August 3, 2018), $9,998 from PREIT (accounted for as a marketable security beginning March 12, 2019) and $5,555 from UE (sold on March 4, 2019).


Reconciliation of Net Income to Net Operating Income At Share for the Six Months Ended June 30, 2019 and 2018
Below is a reconciliation of net income to NOI at share and NOI at share - cash basis for the six months ended June 30, 2019 and 2018.
(Amounts in thousands)For the Six Months Ended June 30,
 2019 2018
Net income$2,809,737
 $105,620
    
Deduct:   
Net gain on transfer to Fifth Avenue and Times Square JV(2,571,099) —
(Income) loss from partially owned entities(30,193) 1,147
Interest and other investment income, net(12,885) (6,508)
Net gains on disposition of wholly owned and partially owned assets(332,007) (23,559)
NOI attributable to noncontrolling interests in consolidated subsidiaries(33,819) (34,472)
Loss (income) from discontinued operations77
 (320)
    
Add:   
Loss from real estate fund investments15,970
 37,783
Depreciation and amortization expense229,744
 220,532
General and administrative expense96,892
 76,960
Transaction related costs, impairment losses and other101,739
 14,173
NOI from partially owned entities150,376
 133,265
Interest and debt expense165,492
 175,823
Income tax expense56,657
 3,021
NOI at share646,681
 703,465
Non-cash adjustments for straight-line rents, amortization of acquired below-market leases, net and other4,567
 (30,429)
NOI at share - cash basis$651,248
 $673,036
NOI At Share by Region
Below is a summary of the percentages of NOI at share by geographic region for the six months ended June 30, 2019 and 2018.
 For the Six Months Ended June 30,
 2019 2018
Region:   
New York City metropolitan area86% 88%
Chicago, IL9% 8%
San Francisco, CA5% 4%
 100% 100%

Results of Operations – Six Months Ended June 30, 2019 Compared to June 30, 2018
Revenues
Our revenues, which consist of rental revenues and fee and other income, were $997,771,000 for the six months ended June 30, 2019, compared to $1,078,255,000 for the prior year’s six months, a decrease of $80,484,000. Below are the details of the (decrease) increase by segment:
(Amounts in thousands)Total New York Other
(Decrease) increase due to:     
Rental revenues:     
 Acquisitions, dispositions and other$(10,631) $(10,585)
(1) 
$(46)
 Development and redevelopment(4,771) (4,931) 160
 Hotel Pennsylvania(3,362) (3,362) —
 Trade shows(1,720) —
 (1,720)
 Properties transferred to Fifth Avenue and Times Square JV(62,630) (62,630) —
 Same store operations963
 (9,820)
(2) 
10,783
  (82,151) (91,328) 9,177
Fee and other income:     
 BMS cleaning fees3,133
 3,141
 (8)
 Management and leasing fees1,266
 1,778
 (512)
 Properties transferred to Fifth Avenue and Times Square JV(232) (232) —
 Other income(2,500) (729) (1,771)
  1,667
 3,958
 (2,291)
       
Total (decrease) increase in revenues$(80,484) $(87,370) $6,886
___________________
(1)Primarily due to reduction in income from the non-cash write-off of straight-line rent receivables in the second quarter of 2019 of (i) $7,232 related to Topshop at 608 Fifth Avenue and (ii) $2,573 related to J. Crew at 770 Broadway for the space which has been re-leased to Facebook.
(2)Primarily due to a $5,967 reduction in income from the non-cash write-off of straight-line rent receivables related to Topshop at 478-486 Broadway in the second quarter of 2019.


74Results of Operations – Six Months Ended June 30, 2019 Compared to June 30, 2018- continued
Expenses
Our expenses, which consist of operating, depreciation and amortization, general and administrative, expense from deferred compensation plan liability, and transaction related costs, impairment loss and other, were $902,770,000 for the six months ended June 30, 2019, compared to $786,921,000 for the prior year’s six months, an increase of $115,849,000. Below are the details of the increase by segment:
(Amounts in thousands)Total New York Other
Increase (decrease) due to:     
Operating:     
 Acquisitions, dispositions and other$836
 $836
 $—
 Development and redevelopment(644) (1,012) 368
 Non-reimbursable expenses(7,773) (6,967) (806)
 Hotel Pennsylvania(108) (108) —
 Trade shows493
 —
 493
 BMS expenses2,629
 2,629
 —
 Properties transferred to Fifth Avenue and Times Square JV(15,718) (15,718) —
 Same store operations14,349
 7,435
 6,914
  (5,936) (12,905) 6,969
Depreciation and amortization:     
 Acquisitions, dispositions and other1,936
 1,936
 —
 Development and redevelopment(4,602) (4,662) 60
 Properties transferred to Fifth Avenue and Times Square JV(16,051) (16,051) —
 Same store operations27,929
 26,307
 1,622
  9,212
 7,530
 1,682
      
General and administrative19,932
(1) 
11,987
 7,945
       
Expense from deferred compensation plan liability5,075
 —
 5,075
       
Transaction related costs, impairment losses and other87,566
 88,257
(2) 
(691)
      
Total increase in expenses$115,849
 $94,869
 $20,980
___________________
(1)2019 includes (i) $13,633 of non-cash stock-based compensation expense for the accelerated vesting of previously issued OP Units and Vornado restricted stock due to the removal of the time-based vesting requirement to participants who have reached 65 years of age, and (ii) $5,645 of non-cash stock-based compensation expense for the time-based equity compensation granted in connection with the previously announced new leadership group (additional non-cash expense associated with these awards will be $2,401 in each of the next two quarters, $9,603 in each of 2020 and 2021, $7,718 in 2022 and $2,655 in 2023),
(2)
Non-cash impairment losses, substantially 608 Fifth Avenue, partially offset by $13,103 disputed additional New York City real property transfer tax ("Transfer Tax") recorded in the first quarter of 2018 related to the December 2012 acquisition of Independence Plaza. The joint venture, in which we have a 50.1% economic interest, that owns Independence Plaza recorded this expense based on the precedent established by the New York City Tax Appeals Tribunal (the "Tax Tribunal") decision regarding One Park Avenue. See Note 5 - Real Estate Fund Investments to the unaudited consolidated financial statements in Part I, Item I of this Quarterly Report on Form 10-Q for additional information regarding this matter.








Results of Operations – Six Months Ended June 30, 2019 Compared to June 30, 2018- continued
Income (Loss) from Partially Owned Entities
Below are the components of income (loss) from partially owned entities for the six months ended June 30, 2019 and 2018.
(Amounts in thousands)Percentage
Ownership at
June 30, 2019		 For the Six Months Ended June 30,
  2019 2018
Our share of net income (loss):     
Fifth Avenue and Times Square JV(1):
     
Equity in net income51.5% $11,217
 $—
Return on preferred equity, net of our share of the expense  8,586
 —
   19,803
 —
Alexander's(2)
32.4% 11,493
 5,166
Partially owned office buildings(3)
Various (1,345) (2,281)
Other investments(4)
Various 242
 (4,032)
   $30,193
 $(1,147)
____________________
(1)
The six months ended June 30, 2019 includes our 51.5% ownership in the Fifth Avenue and Times Square JV. See Note 7 - Investments in Partially Owned Entities to the unaudited consolidated financial statements in Part I, Item I of this Quarterly Report on Form 10-Q for additional information.
(2)
2018 includes our $7,708 share of Alexander’s disputed additional Transfer Tax related to the November 2012 sale of Kings Plaza Regional Shopping Center. Alexander's recorded this expense based on the precedent established by the Tax Tribunal decision regarding One Park Avenue. See Note 5 - Real Estate Fund Investments to the unaudited consolidated financial statements in Part I, Item I of this Quarterly Report on Form 10-Q for additional information regarding this matter.
(3)
Includes interests in 280 Park Avenue, 650 Madison Avenue, One Park Avenue, 7 West 34th Street, 330 Madison Avenue (sold on July 11, 2019), 512 West 22nd Street, 85 Tenth Avenue and others. 2019 includes a $1,079 reduction in income from the non-cash write-off of straight-line rent receivable related to The Four Seasons Restaurant at 280 Park Avenue. 2018 includes our $4,978 share of disputed additional Transfer Tax related to the March 2011 acquisition of One Park Avenue. See Note 5 - Real Estate Fund Investments to the unaudited consolidated financial statements in Part I, Item I of this Quarterly Report on Form 10-Q for additional information regarding this matter.
(4)Includes interests in Independence Plaza, Fashion Centre Mall/Washington Tower, Rosslyn Plaza, 50-70 West 93rd Street, 666 Fifth Avenue Office Condominium (sold on August 3, 2018), UE (sold on March 4, 2019), PREIT (accounted as a marketable security from March 12, 2019) and others.
Loss from Real Estate Fund Investments
Below are the components of the loss from our real estate fund investments for the six months ended June 30, 2019 and 2018.
(Amounts in thousands)For the Six Months Ended June 30,
 2019 2018
Net investment income$192
 $3,273
Net unrealized loss on held investments(16,162) (29,513)
Net realized loss on exited investments—
 (913)
Transfer Tax—
 (10,630)
Loss from real estate fund investments(15,970) (37,783)
Less (income) loss attributable to noncontrolling interests in consolidated subsidiaries(7,692) 34,896
Loss from real estate fund investments attributable to the Operating Partnership(23,662) (2,887)
Less loss attributable to noncontrolling interests in the Operating Partnership1,498
 178
Loss from real estate fund investments attributable to Vornado$(22,164) $(2,709)


Results of Operations – Six Months Ended June 30, 2019 Compared to June 30, 2018- continued
Interest and Other Investment Income, net
Below are the components of interest and other investment income, net for the six months ended June 30, 2019 and 2018.
(Amounts in thousands)For the Six Months Ended June 30,
 2019 2018
Interest on cash and cash equivalents and restricted cash$4,693
 $8,044
Interest on loans receivable(1)
3,241
 6,948
Increase (decrease) in fair value of marketable securities(2)
1,773
 (17,102)
Dividends on marketable securities1,313
 6,706
Other, net1,865
 1,912
 $12,885
 $6,508
____________________
(1)2018 includes $5,457 of income from profit participation on the April 2018 sale of 701 Seventh Avenue. We received this income in connection with our 25% participation in an October 2012, $137,500 mezzanine loan, which was repaid in January 2014.
(2)2019 includes a $16,068 mark-to-market increase in fair value of our Lexington common shares through March 1, 2019, the date of sale of our investment, partially offset by a $14,336 decrease in the value of our investment in PREIT.
Interest and Debt Expense
Interest and debt expense was $165,492,000 for the six months ended June 30, 2019, compared to $175,823,000 for the prior year’s six months, a decrease of $10,331,000. This decrease was primarily due to (i) $11,657,000 higher capitalized interest and debt expense, (ii) $11,050,000 of lower interest expense resulting from paydowns of the 220 CPS loan, (iii) $9,386,000 of lower interest expense resulting from the deconsolidation of mortgages payable of the properties contributed to Fifth Avenue and Times Square JV, and (iv) $8,905,000 lower capital lease interest, partially offset by (v) $22,540,000 of debt prepayment costs relating to redemption of our $400,000,000 5.00% senior unsecured notes, and (vi) $6,662,000 of higher interest expense resulting from higher average interest rates on our variable rate loans.
Net Gain on Transfer to Fifth Avenue and Times Square JV
During the six months ended June 30, 2019, we recognized a $2,571,099,000 gain from the transfer of common equity in the properties contributed to Fifth Avenue and Times Square JV, including the related step-up in our basis of the retained portion of the assets to fair value.
Net Gains on Disposition of Wholly Owned and Partially Owned Assets
Net gains on disposition of wholly owned and partially owned assets for the six months ended June 30, 2019 were $332,007,000 compared to $23,559,000 for the prior year's six months, an increase of $308,448,000. This increase was due to $269,612,000 ofnet gains on sale of 220 CPS condominium units in 2019, and (ii) a $62,395,000 net gain from the sale of all our UE partnership units in the first quarter of 2019, partially offset by (iii) a $23,559,000 net gain on sale of 27 Washington Square North in the second quarter of 2018.
Income Tax Expense
Income tax expense for the six months ended June 30, 2019 was $56,657,000 compared to $3,021,000 for the prior year’s six months, an increase of $53,636,000. This increase resulted primarily from$49,737,000 of income tax expense on the sale of 220 CPS condominium units.
Loss (Income) from Discontinued Operations
Loss from discontinued operations for the six months ended June 30, 2019 was $77,000 compared to income of $320,000 for the prior year’s six months, a decrease in income of $397,000.
Net (Income) Loss Attributable to Noncontrolling Interests in Consolidated Subsidiaries
Net income attributable to noncontrolling interests in consolidated subsidiaries was $28,271,000 for the six months ended June 30, 2019, compared to a loss of $34,449,000 for the prior year’s six months, an increase in income of $62,720,000. This increase resulted primarily from (i) $42,588,000 increase from the lower net loss subject to allocation to the noncontrolling interest of our real estate fund, (ii) $11,945,000 resulting from the net gain on transfer to Fifth Avenue and Times Square JV attributable to noncontrolling interests in the six months ended June 30, 2019 and (iii) $6,538,000 of disputed additional Transfer Tax allocated to noncontrolling interests related to the December 2012 acquisition of Independence Plaza in the six months ended June 30, 2018.

Results of Operations – Six Months Ended June 30, 20182019 Compared to June 30, 20172018 - continued

Net Income Attributable to Noncontrolling Interests in the Operating Partnership (Vornado Realty Trust)
Net income attributable to noncontrolling interests in the Operating Partnership was $174,717,000 for the six months ended June 30, 2019, compared to $6,321,000 for the prior year’s six months, an increase of $168,396,000.The increase resulted primarily fromhighernet income subject to allocation to Class A unitholders due to the net gain on transfer to Fifth Avenue and Times Square JV.
Preferred Share Dividends of Vornado Realty Trust
Preferred share dividends were $25,066,000 for the six months ended June 30, 2019, compared to $25,569,000 for the prior year’s six months, a decrease of $503,000. 
Preferred Unit Distributions of Vornado Realty L.P.
Preferred unit distributions were $25,148,000 for the six months ended June 30, 2019, compared to $25,666,000 for the prior year’s six months, a decrease of $518,000. 
Preferred Share/Unit Issuance Costs
Preferred share/unit issuance cost for the six months ended June 30, 2018 were $14,486,000 representing the write-off of issuance cost upon redemption of all the outstanding Series G and Series I cumulative redeemable preferred shares/units in January 2018.
Same Store Net Operating Income At Share
Below are reconciliations of NOI at share to same store NOI at share for our New York segment, theMART, 555 California Street and other investments for the six months ended June 30, 2019 compared to June 30, 2018.
(Amounts in thousands)Total New York theMART 555 California Street Other
NOI at share for the six months ended June 30, 2019$646,681
 $541,060
 $54,497
 $29,859
 $21,265
 Less NOI at share from:         
 Acquisitions(219) (219) —
 —
 —
 Change in ownership interests in properties contributed to Fifth Avenue and Times Square JV(5,479) (5,479) —
 —
 —
 Dispositions(47) (47) —
 —
 —
 Development properties(23,101) (23,101) —
 —
 —
 Lease termination income, net of write-offs of straight-line receivables and acquired below-market leases, net4,881
 4,881
 —
 —
 —
 Other non-same store (income) expense, net(18,697) 4,424
 (1,930) 74
 (21,265)
Same store NOI at share for the six months ended June 30, 2019$604,019
 $521,519
 $52,567
 $29,933
 $—
          
NOI at share for the six months ended June 30, 2018$703,465
 $584,463
 $54,691
 $27,171
 $37,140
 Less NOI at share from:         
 Acquisitions(124) (124) —
 —
 —
 Change in ownership interests in properties contributed to Fifth Avenue and Times Square JV(26,365) (26,365) —
 —
 —
 Dispositions(371) (371) —
 —
 —
 Development properties(30,138) (30,138) —
 —
 —
 Lease termination income, net of write-offs of straight-line receivables and acquired below-market leases, net857
 857
 —
 —
 —
 Other non-same store income, net(46,492) (4,873) (4,479) —
 (37,140)
Same store NOI at share for the six months ended June 30, 2018$600,832
 $523,449
 $50,212
 $27,171
 $—
          
Increase (decrease) in same store NOI at share for the six months ended June 30, 2019 compared to June 30, 2018$3,187
 $(1,930) $2,355
 $2,762
 $—
           
% increase (decrease) in same store NOI at share0.5% (0.4)%
(1) 
4.7% 10.2% —%
____________________
(1)Excluding Hotel Pennsylvania, same store NOI at share increased by 0.3%.


Results of Operations – Six Months Ended June 30, 2019 Compared to June 30, 2018 - continued
Same Store Net Operating Income At Share - continued
Below are reconciliations of NOI at share - cash basis to same store NOI at share - cash basis for our New York segment, theMART, 555 California Street and other investments for the six months ended June 30, 20182019 compared to June 30, 2017.2018.
(Amounts in thousands)(Amounts in thousands)Total New York theMART 555 California Street Other(Amounts in thousands)Total New York theMART 555 California Street Other
NOI at share - cash basis for the six months ended June 30, 2019NOI at share - cash basis for the six months ended June 30, 2019$651,248
 $542,879
 $56,896
 $30,340
 $21,133
Less NOI at share - cash basis from:         
Acquisitions(220) (220) —
 —
 —
Change in ownership interests in properties contributed to Fifth Avenue and Times Square JV(5,183) (5,183) —
 —
 —
Dispositions(47) (47) —
 —
 —
Development properties(27,291) (27,291) —
 —
 —
Lease termination income(2,035) (2,035) —
 —
 —
Other non-same store income, net(28,326) (5,264) (1,929) —
 (21,133)
Same store NOI at share - cash basis for the six months ended June 30, 2019Same store NOI at share - cash basis for the six months ended June 30, 2019$588,146
 $502,839
 $54,967
 $30,340
 $—
         
NOI at share - cash basis for the six months ended June 30, 2018NOI at share - cash basis for the six months ended June 30, 2018$673,036
 $554,427
 $55,078
 $26,634
 $36,897
NOI at share - cash basis for the six months ended June 30, 2018$673,036
 $554,427
 $55,078
 $26,634
 $36,897
Less NOI at share - cash basis from:         
Less NOI at share - cash basis from:         Acquisitions(124) (124) —
 —
 —
Acquisitions(639) (490) (149) —
 —
Change in ownership interests in properties contributed to Fifth Avenue and Times Square JV(24,732) (24,732) —
 —
 —
Dispositions(220) (220) —
 —
 —
Dispositions(306) (306) —
 —
 —
Development properties placed into and out of service(14,290) (14,290) —
 —
 —
Development properties(32,434) (32,434) —
 —
 —
Lease termination income(1,223) (1,061) (162) —
 —
Lease termination income(1,061) (1,061) —
 —
 —
Other non-operating income, net(37,972) (1,075) —
 —
 (36,897)Other non-same store income, net(47,004) (5,509) (4,598) —
 (36,897)
Same store NOI at share - cash basis for the six months ended June 30, 2018Same store NOI at share - cash basis for the six months ended June 30, 2018$618,692
 $537,291
 $54,767
 $26,634
 $—
Same store NOI at share - cash basis for the six months ended June 30, 2018$567,375
 $490,261
 $50,480
 $26,634
 $—
                   
NOI at share - cash basis for the six months ended June 30, 2017$640,336
 $526,674
 $49,429
 $22,476
 $41,757
Less NOI at share - cash basis from:         
Acquisitions137
 (63) 200
 —
 —
Dispositions(665) (665) —
 —
 —
Development properties placed into and out of service(12,234) (12,234) —
 —
 —
Lease termination income(3,279) (3,248) (31) —
 —
Other non-operating income, net(44,356) (2,599) —
 —
 (41,757)
Same store NOI at share - cash basis for the six months ended June 30, 2017$579,939
 $507,865
 $49,598
 $22,476
 $—
         
Increase in same store NOI at share - cash basis for the six months ended June 30, 2018 compared to June 30, 2017$38,753
 $29,426
 $5,169
 $4,158
 $—
Increase in same store NOI at share - cash basis for the six months ended June 30, 2019 compared to June 30, 2018Increase in same store NOI at share - cash basis for the six months ended June 30, 2019 compared to June 30, 2018$20,771
 $12,578
 $4,487
 $3,706
 $—
                    
% increase in same store NOI at share - cash basis% increase in same store NOI at share - cash basis6.7% 5.8%
(1) 
10.4% 18.5% —%% increase in same store NOI at share - cash basis3.7% 2.6%
(1) 
8.9% 13.9% —%
____________________
(1)Excluding Hotel Pennsylvania, same store NOI at share - cash basis increased by 5.8%3.3%.






75





SUPPLEMENTAL INFORMATION


Net Operating Income At Share by Segment for the Three Months Ended June 30, 20182019 and March 31, 2018

2019
NOI represents total revenues less operating expenses. We consider NOI to be the primary non-GAAP financial measure for making decisions and assessing the unlevered performance of our segments as it relates to the total return on assets as opposed to the levered return on equity. As properties are bought and sold based on NOI, we utilize this measure to make investment decisions as well as to compare the performance of our assets to that of our peers. NOI should not be considered a substitute for net income. NOI may not be comparable to similarly titled measures employed by other companies.

Below is a summary of NOI at share and NOI at share - cash basis by segment for the three months ended June 30, 20182019 and March 31, 2018.2019.

(Amounts in thousands)For the Three Months Ended June 30, 2019
 Total 
New York(1)
 Other
Total revenues$463,103
 $376,381
 $86,722
Operating expenses220,752
 187,819
 32,933
NOI - consolidated242,351
 188,562
 53,789
Deduct: NOI attributable to noncontrolling interests in consolidated subsidiaries(16,416) (10,030) (6,386)
Add: NOI from partially owned entities82,974
 79,170
 3,804
NOI at share308,909
 257,702
 51,207
Non-cash adjustments for straight-line rents, amortization of acquired below-market leases, net, and other9,748
 8,437
 1,311
NOI at share - cash basis$318,657
 $266,139
 $52,518
___________________
(1)Reflects the transfer of 45.4% of common equity in the properties contributed to the Fifth Avenue and Times Square JV on April 18, 2019.

(Amounts in thousands)For the Three Months Ended June 30, 2018For the Three Months Ended March 31, 2019
Total New York OtherTotal New York Other
Total revenues$541,818
 $458,552
 $83,266
$534,668
 $443,285
 $91,383
Operating expenses235,981
 200,903
 35,078
246,895
 198,095
 48,800
NOI - consolidated305,837
 257,649
 48,188
287,773
 245,190
 42,583
Deduct: NOI attributable to noncontrolling interests in consolidated subsidiaries(17,160) (11,560) (5,600)(17,403) (11,407) (5,996)
Add: Our share of NOI from partially owned entities65,752
 49,778
 15,974
Add: NOI from partially owned entities67,402
 49,575
 17,827
NOI at share354,429
 295,867
 58,562
337,772
 283,358
 54,414
Non-cash adjustments for straight-line rents, amortization of acquired below-market leases, net and other(12,481) (12,713) 232
Non-cash adjustments for straight-line rents, amortization of acquired below-market leases, net, and other(5,181) (6,618) 1,437
NOI at share - cash basis$341,948
 $283,154
 $58,794
$332,591
 $276,740
 $55,851

(Amounts in thousands)For the Three Months Ended March 31, 2018
 Total New York Other
Total revenues$536,437
 $448,484
 $87,953
Operating expenses237,602
 197,916
 39,686
NOI - consolidated298,835
 250,568
 48,267
Deduct: NOI attributable to noncontrolling interests in consolidated subsidiaries(17,312) (11,745) (5,567)
Add: Our share of NOI from partially owned entities67,513
 49,773
 17,740
NOI at share349,036
 288,596
 60,440
Non-cash adjustments for straight-line rents, amortization of acquired below-market leases, net and other(17,948) (17,323) (625)
NOI at share - cash basis$331,088
 $271,273
 $59,815



76



SUPPLEMENTAL INFORMATION - CONTINUED


Net Operating Income At Share by Segment for the Three Months Ended June 30, 20182019 and March 31, 20182019 - continued

The elements of our New York and Other NOI at share for the three months ended June 30, 20182019 and March 31, 20182019 are summarized below.

(Amounts in thousands)For the Three Months EndedFor the Three Months Ended
June 30, 2018 March 31, 2018June 30, 2019 March 31, 2019
New York:      
Office(1)$184,867
 $187,156
$179,592
 $183,540
Retail(1)87,109
 87,909
57,063
 88,267
Residential6,338
 6,141
5,908
 6,045
Alexander's11,909
 11,575
11,108
 11,322
Hotel Pennsylvania5,644
 (4,185)4,031
 (5,816)
Total New York295,867
 288,596
257,702
 283,358
      
Other:      
theMART27,816
 26,875
30,974
 23,523
555 California Street13,660
 13,511
15,358
 14,501
Other investments(2)17,086
 20,054
4,875
 16,390
Total Other58,562
 60,440
51,207
 54,414
      
NOI at share$354,429
 $349,036
$308,909
 $337,772

___________________
(1)Reflects the transfer of 45.4% of common equity in the properties contributed to the Fifth Avenue and Times Square JV on April 18, 2019.
(2)The three months ended March 31, 2019 includes $9,824 from PREIT (accounted for as a marketable security beginning March 12, 2019) and $4,902 from UE (sold on March 4, 2019).

The elements of our New York and Other NOI at share - cash basis for the three months ended June 30, 20182019 and March 31, 20182019 are summarized below.

(Amounts in thousands)For the Three Months EndedFor the Three Months Ended
June 30, 2018 March 31, 2018June 30, 2019 March 31, 2019
New York:      
Office(1)$180,710
 $178,199
$178,806
 $184,370
Retail(1)79,139
 79,589
66,726
 80,936
Residential5,463
 5,599
5,303
 5,771
Alexander's12,098
 12,039
11,322
 11,527
Hotel Pennsylvania5,744
 (4,153)3,982
 (5,864)
Total New York283,154
 271,273
266,139
 276,740
      
Other:      
theMART27,999
 27,079
31,984
 24,912
555 California Street13,808
 12,826
15,595
 14,745
Other investments(2)16,987
 19,910
4,939
 16,194
Total Other58,794
 59,815
52,518
 55,851
      
NOI at share - cash basis$341,948
 $331,088
$318,657
 $332,591

___________________
(1)Reflects the transfer of 45.4% of common equity in the properties contributed to the Fifth Avenue and Times Square JV on April 18, 2019.
(2)The three months ended March 31, 2019 includes $9,774 from PREIT (accounted for as a marketable security beginning March 12, 2019) and $4,638 from UE (sold on March 4, 2019).





77




SUPPLEMENTAL INFORMATION - CONTINUED


Reconciliation of Net Income to Net Operating Income At Share for the Three Months Ended June 30, 20182019 and March 31, 2018

2019
(Amounts in thousands)For the Three Months EndedFor the Three Months Ended
June 30, 2018 March 31, 2018June 30, 2019 March 31, 2019
Net income$105,338
 $282
$2,596,693
 $213,044
      
Deduct:      
(Income) loss from partially owned entities(8,757) 9,904
Loss from real estate fund investments28,976
 8,807
Interest and other investment (income) loss, net(30,892) 24,384
Net gain on transfer to Fifth Avenue and Times Square JV(2,571,099) —
Income from partially owned entities(22,873) (7,320)
Interest and other investment income, net(7,840) (5,045)
Net gains on disposition of wholly owned and partially owned assets(23,559) —
(111,713) (220,294)
NOI attributable to noncontrolling interests in consolidated subsidiaries(16,416) (17,403)
(Income) loss from discontinued operations(683) 363
(60) 137
NOI attributable to noncontrolling interests in consolidated subsidiaries(17,160) (17,312)
      
Add:      
Loss from real estate fund investments15,803
 167
Depreciation and amortization expense111,846
 108,686
113,035
 116,709
General and administrative expense34,427
 42,533
38,872
 58,020
Transaction related costs and other1,017
 13,156
Transaction related costs, impairment losses and other101,590
 149
NOI from partially owned entities65,752
 67,513
82,974
 67,402
Interest and debt expense87,657
 88,166
63,029
 102,463
Income tax expense467
 2,554
26,914
 29,743
NOI at share354,429
 349,036
308,909
 337,772
Non-cash adjustments for straight-line rents, amortization of acquired below-market leases, net and other(12,481) (17,948)
Non-cash adjustments for straight-line rents, amortization of acquired below-market leases, net, and other9,748
 (5,181)
NOI at share - cash basis$341,948
 $331,088
$318,657
 $332,591


78




SUPPLEMENTAL INFORMATION - CONTINUED


Three Months Ended June 30, 20182019 Compared to March 31, 2018

2019
Same Store Net Operating Income

At Share
Below are reconciliations of NOI at share to same store NOI at share for our New York segment, theMART, 555 California Street and other investments for the three months ended June 30, 20182019 compared to March 31, 2018.2019.
(Amounts in thousands)Total New York theMART 555 California Street Other
NOI at share for the three months ended June 30, 2018$354,429
 $295,867
 $27,816
 $13,660
 $17,086
 Less NOI at share from:         
 Acquisitions(288) (224) (64) —
 —
 Dispositions(310) (310) —
 —
 —
 Development properties placed into and out of service(12,794) (12,794) —
 —
 —
 Lease termination income, net of straight-line and FAS 141 write-offs1,941
 1,984
 (43) —
 —
 Other non-operating income, net(17,583) (497) —
 —
 (17,086)
Same store NOI at share for the three months ended June 30, 2018$325,395
 $284,026
 $27,709
 $13,660
 $—
          
NOI at share for the three months ended March 31, 2018$349,036
 $288,596
 $26,875
 $13,511
 $20,054
 Less NOI at share from:         
 Acquisitions(206) (121) (85) —
 —
 Dispositions(54) (54) —
 —
 —
 Development properties placed into and out of service(11,654) (11,654) —
 —
 —
 Lease termination income, net of straight-line and FAS 141 write-offs(1,127) (1,127) —
 —
 —
 Other non-operating income, net(20,633) (579) —
 —
 (20,054)
Same store NOI at share for the three months ended March 31, 2018$315,362
 $275,061
 $26,790
 $13,511
 $—
          
Increase in same store NOI at share for the three months ended June 30, 2018 compared to March 31, 2018$10,033
 $8,965
 $919
 $149
 $—
           
% increase in same store NOI at share3.2% 3.3%
(1) 
3.4% 1.1% —%
(Amounts in thousands)Total New York theMART 555 California Street Other
NOI at share for the three months ended June 30, 2019$308,909
 $257,702
 $30,974
 $15,358
 $4,875
 Less NOI at share from:         
 Acquisitions(5) (5) —
 —
 —
 Change in ownership interests in properties contributed to Fifth Avenue and Times Square JV(5,479) (5,479) —
 —
 —
 Dispositions(50) (50) —
 —
 —
 Development properties(11,392) (11,392) —
 —
 —
 Lease termination income, net of write-offs of straight-line receivables and acquired below-market leases, net2,979
 2,979
 —
 —
 —
 Other non-same store expense (income), net85
 4,984
 (98) 74
 (4,875)
Same store NOI at share for the three months ended June 30, 2019$295,047
 $248,739
 $30,876
 $15,432
 $—
          
NOI at share for the three months ended March 31, 2019$337,772
 $283,358
 $23,523
 $14,501
 $16,390
 Less NOI at share from:         
 Change in ownership interests in properties contributed to Fifth Avenue and Times Square JV(30,292) (30,292) —
 —
 —
 Dispositions3
 3
 —
 —
 —
 Development properties(11,460) (11,460) —
 —
 —
 Lease termination income, net of write-offs of straight-line receivables and acquired below-market leases, net1,902
 1,902
 —
 —
 —
 Other non-same store income, net(22,743) (4,522) (1,831) —
 (16,390)
Same store NOI at share for the three months ended March 31, 2019$275,182
 $238,989
 $21,692
 $14,501
 $—
          
Increase in same store NOI at share for the three months ended June 30, 2019 compared to March 31, 2019$19,865
 $9,750
 $9,184
 $931
 $—
           
% increase in same store NOI at share7.2% 4.1%
(1) 
42.3% 6.4% —%
____________________
(1)
Excluding Hotel Pennsylvania, same store NOI at share decreased by0.3%.
was flat.








79




SUPPLEMENTAL INFORMATION - CONTINUED


Three Months Ended June 30, 20182019 Compared to March 31, 20182019 - continued

Same Store Net Operating Income At Share - continued
Below are reconciliations of NOI at share - cash basis to same store NOI at share - cash basis for our New York segment, theMART, 555 California Street and other investments for the three months ended June 30, 20182019 compared to March 31, 2018.2019.
(Amounts in thousands)Total New York theMART 555 California Street Other
NOI at share - cash basis for the three months ended June 30, 2018$341,948
 $283,154
 $27,999
 $13,808
 $16,987
 Less NOI at share - cash basis from:         
 Acquisitions(288) (224) (64) —
 —
 Dispositions(242) (242) —
 —
 —
 Development properties placed into and out of service(13,686) (13,686) —
 —
 —
 Lease termination income(162) —
 (162) —
 —
 Other non-operating income, net(17,484) (497) —
 —
 (16,987)
Same store NOI at share - cash basis for the three months ended June 30, 2018$310,086
 $268,505
 $27,773
 $13,808
 $—
           
NOI at share - cash basis for the three months ended March 31, 2018$331,088
 $271,273
 $27,079
 $12,826
 $19,910
 Less NOI at share - cash basis from:         
 Acquisitions(206) (121) (85) —
 —
 Dispositions22
 22
 —
 —
 —
 Development properties placed into and out of service(12,808) (12,808) —
 —
 —
 Lease termination income(1,061) (1,061) —
 —
 —
 Other non-operating income, net(20,488) (578) —
 —
 (19,910)
Same store NOI at share - cash basis for the three months ended March 31, 2018$296,547
 $256,727
 $26,994
 $12,826
 $—
          
Increase in same store NOI at share - cash basis for the three months ended June 30, 2018 compared to March 31, 2018$13,539
 $11,778
 $779
 $982
 $—
          
% increase in same store NOI at share - cash basis4.6% 4.6%
(1) 
2.9% 7.7% —%
(Amounts in thousands)Total New York theMART 555 California Street Other
NOI at share - cash basis for the three months ended June 30, 2019$318,657
 $266,139
 $31,984
 $15,595
 $4,939
 Less NOI at share - cash basis from:         
 Acquisitions(5) (5) —
 —
 —
 Change in ownership interests in properties contributed to Fifth Avenue and Times Square JV(5,183) (5,183) —
 —
 —
 Dispositions(50) (50) —
 —
 —
 Development properties(13,005) (13,005) —
 —
 —
 Lease termination income(1,606) (1,606) —
 —
 —
 Other non-same store income, net(9,740) (4,703) (98) —
 (4,939)
Same store NOI at share - cash basis for the three months ended June 30, 2019$289,068
 $241,587
 $31,886
 $15,595
 $—
           
NOI at share - cash basis for the three months ended March 31, 2019$332,591
 $276,740
 $24,912
 $14,745
 $16,194
 Less NOI at share - cash basis from:         
 Change in ownership interests in properties contributed to Fifth Avenue and Times Square JV(27,722) (27,722) —
 —
 —
 Dispositions2
 2
 —
 —
 —
 Development properties(14,184) (14,184) —
 —
 —
 Lease termination income(429) (429) —
 —
 —
��Other non-same store income, net(23,406) (5,381) (1,831) —
 (16,194)
Same store NOI at share - cash basis for the three months ended March 31, 2019$266,852
 $229,026
 $23,081
 $14,745
 $—
          
Increase in same store NOI at share - cash basis for the three months ended June 30, 2019 compared to March 31, 2019$22,216
 $12,561
 $8,805
 $850
 $—
          
% increase in same store NOI at share - cash basis8.3% 5.5%
(1) 
38.1% 5.8% —%
____________________
(1)
Excluding Hotel Pennsylvania, same store NOI at share - cash basis increased by 0.7%1.2%.


80



Liquidity and Capital Resources

Property rental incomeRental revenue is our primary source of cash flow and is dependent upon the occupancy and rental rates of our properties. Our cash requirements include property operating expenses, capital improvements, tenant improvements, debt service, leasing commissions, dividends to shareholders and distributions to unitholders of the Operating Partnership, as well as acquisition and development costs. Other sources of liquidity to fund cash requirements include proceeds from debt financings, including mortgage loans, senior unsecured borrowings, unsecured term loanloans and unsecured revolving credit facilities; proceeds from the issuance of common and preferred equity; and asset sales.

We anticipate that cash flow from continuing operations over the next twelve months will be adequate to fund our business operations, cash distributions to unitholders of the Operating Partnership, cash dividends to shareholders, debt amortization and recurring capital expenditures. Capital requirements for development expenditures and acquisitions may require funding from borrowings and/or equity offerings.

We expect to generate net cash of approximately $2 billion resulting from the sales of 100% of the 220 CPS condominium units, including $1 billion of after-tax net gain, of which $287,211,000 was recognized in our consolidated statements of income from inception to June 30, 2019.
We may from time to time purchase or retire outstanding debt securities or redeem our equity securities. Such purchases, if any, will depend on prevailing market conditions, liquidity requirements and other factors. The amounts involved in connection with these transactions could be material to our consolidated financial statements.

Cash Flows for the Six Months Ended June 30, 2019 and 2018

Our cash flow activities for the six months ended June 30, 2019 and 2018 are summarized as follows:
The total of our cash
(Amounts in thousands)For the Six Months Ended June 30, Increase (Decrease) in Cash Flow
 2019 2018 
Net cash provided by operating activities$292,852
 $241,260
 $51,592
Net cash provided by (used in) investing activities2,113,511
 (254,906) 2,368,417
Net cash used in financing activities(2,046,358) (689,207) (1,357,151)
Cash and cash equivalents and restricted cash was $1,211,959,000 as of$1,076,910,000 at June 30, 2018,2019, a $702,853,000 decrease from the balance at December 31, 2017.  Our consolidated outstanding debt, net was $9,781,529,000 as of June 30, 2018, a $52,042,000$360,005,000 increase from the balance at December 31, 2017.  As of June 30, 2018 and December 31, 2017, $80,000,000 and $0, respectively, was outstanding under our revolving credit facilities.  During the remainder of 2018 and 2019, $0 and $209,262,000, respectively, of our outstanding debt matures; we may refinance this maturing debt as it comes due or choose to repay it.

Net Cash Provided by Operating Activities

2018.
Net cash provided by operating activities of $241,260,000$292,852,000 for the six months ended June 30, 2019 was comprised of (i) net income$340,258,000 of $105,620,000, (ii) $251,955,000 of non-cash adjustments, which include depreciation and amortization expense, net realized and unrealized losses on real estate fund investments, net gains on disposition of wholly owned and partially owned assets, amortization of below-market leases, net, the decrease in the fair value of marketable securities, the effect of straight-lining of rents and equity in net losscash from partially owned entities, (iii)operations, including distributions of income from partially owned entities of $45,999,000$31,820,000, and (iv) returna net decrease of capital from real estate fund investments$47,406,000 in cash due to the timing of $20,291,000, partially offset by (v) the net changecash receipts and payments related to changes in operating assets and liabilities of $182,605,000.liabilities.

Net Cash Used in Investing Activities

NetThe following table details the cash used inprovided by (used in) investing activities of $254,906,000 was comprised of (i) $185,039,000 of development costs and construction in progress, (ii) $113,300,000 of additions to real estate, (iii) $56,500,000 of acquisitions of real estate and other and (iv) $26,663,000 of investments in partially owned entities, partially offset by (v) $81,997,000 of capital distributions from partially owned entities and (vi) $44,599,000 of proceeds from the sale of real estate and related investments.

Net Cash Used in Financing Activities

Net cash used in financing activities of Vornado Realty Trust of $689,207,000 was primarily comprised of (i) $470,000,000 for the redemption of preferred shares, (ii) $239,594,000 of dividends paid on common shares, (iii) $148,408,000 of repayments of borrowings, (iv) $49,338,000 of distributions to noncontrolling interests, (v) $30,047,000 of dividends paid on preferred shares, (vi) $3,289,000 of debt issuance costssix months ended June 30, 2019 and (vii) $818,000 of debt prepayment and extinguishment costs, partially offset by (viii) $189,042,000 of proceeds from borrowings, (ix) $59,558,000 of contributions from noncontrolling interests and (x) $4,471,000 of proceeds received from the exercise of employee share options and other.

Net cash used in financing activities of the Operating Partnership of $689,207,000 was primarily comprised of (i) $470,000,000 for the redemption of preferred units, (ii) $239,594,000 of distributions to Vornado, (iii) $148,408,000 of repayments of borrowings, (iv) $49,338,000 of distributions to redeemable security holders and noncontrolling interests in consolidated subsidiaries, (v) $30,047,000 of distributions to preferred unitholders, (vi) $3,289,000 of debt issuance costs and (vii) $818,000 of debt prepayment and extinguishment costs, partially offset by (viii) $189,042,000 of proceeds from borrowings, (ix) $59,558,000 of contributions from noncontrolling interests in consolidated subsidiaries and (x) $4,471,000 of proceeds received from the exercise of Vornado stock options and other.


2018:

81
(Amounts in thousands)For the Six Months Ended June 30, Increase (Decrease) in Cash Flow
 2019 2018 
Proceeds from transfer of interest in Fifth Avenue and Times Square JV (net of $35,562 of transaction costs and $10,899 of deconsolidated cash and restricted cash)$1,255,756
 $—
 $1,255,756
Proceeds from sale of condominium units at 220 Central Park South690,734
 —
 690,734
Proceeds from redemption of 640 Fifth Avenue preferred equity500,000
 —
 500,000
Development costs and construction in progress(289,532) (185,039) (104,493)
Moynihan Train Hall expenditures(205,783) —
 (205,783)
Proceeds from sales of marketable securities167,852
 —
 167,852
Additions to real estate(120,060) (113,300) (6,760)
Proceeds from sale of real estate and related investments108,512
 44,599
 63,913
Distributions of capital from partially owned entities24,880
 81,997
 (57,117)
Investments in partially owned entities(15,588) (26,663) 11,075
Acquisitions of real estate and other(3,260) (56,500) 53,240
Net cash provided by (used in) investing activities$2,113,511
 $(254,906) $2,368,417




Liquidity and Capital Resources - continued
Cash Flows for the Six Months Ended June 30, 2019 and 2018 - continued

The following table details the cash used in financing activities for the six months ended June 30, 2019 and 2018:
(Amounts in thousands)For the Six Months Ended June 30, (Decrease) Increase in Cash Flow
 2019 2018 
Repayments of borrowings$(1,943,157) $(148,408) $(1,794,749)
Proceeds from borrowings458,955
 189,042
 269,913
Purchase of marketable securities in connection with defeasance of mortgage payable(407,126) —
 (407,126)
Dividends paid on common shares/Distributions to Vornado(251,803) (239,594) (12,209)
Moynihan Train Hall reimbursement from Empire State Development205,783
 —
 205,783
Distributions to redeemable security holders and noncontrolling interests in consolidated subsidiaries(49,140) (49,338) 198
Dividends paid on preferred shares/Distributions to preferred unitholders(25,066) (30,047) 4,981
Prepayment penalty on redemption of senior unsecured notes due 2022(22,058) —
 (22,058)
Debt issuance costs(13,522) (3,289) (10,233)
Repurchase of shares/Class A units related to stock compensation agreements and related tax withholdings and other(8,692) (784) (7,908)
Contributions from noncontrolling interests in consolidated subsidiaries8,315
 59,558
 (51,243)
Proceeds received from exercise of Vornado stock options and other2,046
 4,471
 (2,425)
Redemption of preferred shares/units(893) (470,000) 469,107
Debt prepayment and extinguishment costs—
 (818) 818
Net cash used in financing activities$(2,046,358) $(689,207) $(1,357,151)

Capital Expenditures for the Six Months Ended June 30, 2018

2019
Capital expenditures consist of expenditures to maintain assets, tenant improvement allowances and leasing commissions. Recurring capital expenditures include expenditures to maintain a property’s competitive position within the market and tenant improvements and leasing commissions necessary to re-lease expiring leases or renew or extend existing leases. Non-recurring capital improvements include expenditures to lease space that has been vacant for more than nine months and expenditures completed in the year of acquisition and the following two years that were planned at the time of acquisition, as well as tenant improvements and leasing commissions for space that was vacant at the time of acquisition of a property.

Below is a summary of amounts paid for capital expenditures and leasing commissions and a reconciliation of total expenditures on an accrual basis to the cash expended for the six months ended June 30, 2018.2019.
(Amounts in thousands)Total New York theMART 
555 California
Street
Expenditures to maintain assets$43,896
 $31,603
 $7,752
 $4,541
Tenant improvements64,136
 60,410
 2,893
 833
Leasing commissions26,870
 26,120
 387
 363
Non-recurring capital expenditures17,679
 13,579
 156
 3,944
Total capital expenditures and leasing commissions (accrual basis)152,581
 131,712
 11,188
 9,681
Adjustments to reconcile to cash basis:       
Expenditures in the current period applicable to prior periods58,701
 49,179
 8,516
 1,006
Expenditures to be made in future periods for the current period(74,233) (77,279) (3,387) 6,433
Total capital expenditures and leasing commissions (cash basis)$137,049
 $103,612
 $16,317
 $17,120
Tenant improvements and leasing commissions:       
Per square foot per annum$9.44
 $9.90
 $3.44
 $11.64
Percentage of initial rent10.3% 10.0% 6.8% 13.6%
(Amounts in thousands)Total New York theMART 
555 California
Street
Expenditures to maintain assets$53,457
 $46,850
 $4,822
 $1,785
Tenant improvements36,080
 31,068
 1,806
 3,206
Leasing commissions13,009
 12,289
 376
 344
Recurring tenant improvements, leasing commissions and other capital expenditures102,546
 90,207
 7,004
 5,335
Non-recurring capital expenditures21,505
 19,780
 86
 1,639
Total capital expenditures and leasing commissions$124,051
 $109,987
 $7,090
 $6,974



Liquidity and Capital Resources - continued
Development and Redevelopment Expenditures for the Six Months Ended June 30, 20182019

Development and redevelopment expenditures consist of all hard and soft costs associated with the development or redevelopment of a property, including capitalized interest, debt and operating costs until the property is substantially completed and ready for its intended use. Our development project budgetsestimates below include initial leasing costs, which are reflected as non-recurring capital expenditures in the table above.on the previous page.

We are constructing a residential condominium tower containing 397,000 salable square feet at 220 Central Park South.CPS. The development cost of this project (exclusive of land cost of $515.4 million) is estimated to be approximately $1.4 billion, of which $1.1$1.3 billion has been expended as of June 30, 2018.2019.

We are developing a 173,000 square foot Class A office building, located along the western edge of the High Line at 512 West 22nd Street in the West Chelsea submarket of Manhattan (55.0% interest).  The development cost of this project is estimated to be approximately $130,000,000, of which our share is $72,000,000.  As of June 30, 2018, $86,762,000 has been expended, of which our share is $47,719,000.

We are developing a 170,000 square foot office and retail building at 61 Ninth Avenue, located on the southwest corner of Ninth Avenue 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 June 30, 2018, $122,249,000 has been expended, of which our share is $55,134,000.












82


Liquidity and Capital Resources - continued

Development and Redevelopment Expenditures for the Six Months Ended June 30, 2018 - continued

We are developing a 34,000 square foot office and retail building at 606 Broadway, located on the northeast corner of Broadway and Houston Street in Manhattan (50.0% interest). The development cost of this project is estimated to be approximately $60,000,000, of which our share is $30,000,000. As of June 30, 2018, $41,731,000 has been expended, of which our share is $20,866,000.

A joint venture with the Related Companies ("Related") in which we have a 50.1% ownership interest is redeveloping the historic Farley Post Office building which 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.  As of June 30, 2018, $314,837,000 has been expended, of which our share is $157,733,000. The joint venture has also entered into a development agreement with Empire State Development (“ESD”) and a design-build contract with Skanska Moynihan Train Hall Builders.  Under the development agreement with ESD, the joint venture is obligated to build the Moynihan Train Hall, with Vornado and Related each guaranteeing the joint venture’s obligations.  Under the design-build agreement, Skanska Moynihan Train Hall Builders is obligated to fulfill all of the joint venture’s obligations.  The obligations of Skanska Moynihan Train Hall Builders have been bonded by Skanska USA and bear a full guaranty from Skanska AB.
We are redeveloping a 64,00078,000 square foot Class A office building at 345 Montgomery Street, a part of our 555 California Street complex in San Francisco (70.0% interest) located at the corner of California and Pine Street. The development cost of this project is estimated to be approximately $46,000,000, of which our share is $32,000,000. As of June 30, 2018, $9,142,0002019, $31,235,000 has been expended, of which our share is $6,399,000.$21,865,000.

We are redeveloping a 165,000 square foot office building at 825 Seventh Avenue, located at the corner of 53rd Street and Seventh Avenue (50.0% interest). The redevelopment cost of this project is estimated to be approximately $30,000,000, of which our share is $15,000,000. As of June 30, 2018, $4,897,0002019, $19,051,000 has been expended, of which our share is $2,449,000.$9,526,000.

We are redeveloping One Penn Plaza,PENN1, a 2,535,0002,543,000 square foot office building located on 34th Street between Seventh and Eighth Avenue. The development cost of this project is estimated to be approximately $200,000,000,$325,000,000, of which $3,939,000$48,832,000 has been expended as of June 30, 2018.2019.

We are redeveloping PENN2, a 1,795,000 square foot office building located on the west side of 7th Avenue between 31st and 33rd Street. The development cost of this project is estimated to be $750,000,000, of which $26,713,000 has been expended as of June 30, 2019.
Farley Office and Retail Building and Moynihan Train Hall
Our 95.0% joint venture (the remaining 5.0% is owned by the Related Companies ("Related")) is developing the Farley Office and Retail Building (the "Project"), which will include approximately 845,000 rentable square feet of commercial space, comprised of approximately 725,000 square feet of office space and approximately 120,000 square feet of retail space. The total development cost of the Project is estimated to be approximately $1,030,000,000 (inclusive of $230,000,000 upfront contribution and net of anticipated historic tax credits). As of June 30, 2019, $438,581,000 has been expended.
The joint venture has entered into a development agreement with Empire State Development (“ESD”), an entity of New York State, to build the adjacent Moynihan Train Hall, with Vornado and Related each guaranteeing the joint venture's obligations. The joint venture has entered into a design-build contract with Skanska Moynihan Train Hall Builders pursuant to which they will build the Moynihan Train Hall, thereby fulfilling all of the joint venture's obligations to ESD. The obligations of Skanska Moynihan Train Hall Builders have been bonded by Skanska USA and bear a full guaranty from Skanska AB. The development expenditures for the Moynihan Train Hall are estimated to be approximately $1.6 billion, which will be funded by governmental agencies. Pursuant to Accounting Standards Codification 842-40-55, the joint venture, which we consolidate on our consolidated balance sheets, is required to recognize all development expenditures for the Moynihan Train Hall. Accordingly, the development expenditures paid for by governmental agencies through June 30, 2019 and December 31, 2018of $665,226,000 and $445,693,000, respectively, are shown as “Moynihan Train Hall development expenditures” with a corresponding obligation recorded in “Moynihan Train Hall obligation” on our consolidated balance sheets. Upon completion of the development, the "Moynihan Train Hall development expenditures" and the offsetting “Moynihan Train Hall obligation” will be removed from our consolidated balance sheets.


We are also evaluating other development and redevelopment opportunities at certain of our properties in Manhattan, including, in particular, the Penn Plaza 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.






Liquidity and Capital Resources - continued
Development and Redevelopment Expenditures for the Six Months Ended June 30, 2019 - continued
Below is a summary of amounts paid for development and redevelopment expenditures incurredfor the six months ended June 30, 2019. These expenditures include interest and debt expense of $43,138,000, payroll of $10,515,000 and other soft costs (primarily architectural and engineering fees, permits, real estate taxes and professional fees) aggregating $32,535,000, which were capitalized in connection with the development and redevelopment of these projects.
(Amounts in thousands)Total New York theMART 
555 California
Street
 Other
Farley Office and Retail Building$106,980
 $106,980
 $—
 $—
 $—
220 Central Park South102,926
 —
 —
 —
 102,926
PENN124,584
 24,584
 —
 —
 —
345 Montgomery Street9,736
 —
 —
 9,736
 —
606 Broadway7,464
 7,464
 —
 —
 —
1535 Broadway1,031
 1,031
 —
 —
 —
Other36,811
 32,387
 1,231
 3,193
 —
 $289,532
 $172,446
 $1,231
 $12,929
 $102,926

Capital Expenditures for the Six Months Ended June 30, 2018
Below is a summary of amounts paid for capital expenditures and leasing commissions for the six months ended June 30, 2018.
(Amounts in thousands)Total New York theMART 
555 California
Street
Expenditures to maintain assets$43,793
 $29,524
 $7,436
 $6,833
Tenant improvements47,985
 36,576
 8,489
 2,920
Leasing commissions24,832
 22,270
 392
 2,170
Recurring tenant improvements, leasing commissions and other capital expenditures116,610
 88,370
 16,317
 11,923
Non-recurring capital expenditures20,439
 15,242
 —
 5,197
Total capital expenditures and leasing commissions$137,049
 $103,612
 $16,317
 $17,120

Development and Redevelopment Expenditures for the Six Months Ended June 30, 2018
Below is a summary of amounts paid for development and redevelopment expenditures for the six months ended June 30, 2018. These expenditures include interest and debt expense of $31,481,000, payroll of $4,958,000, and other soft costs (primarily architectural and engineering fees, permits, real estate taxes and professional fees) aggregating $23,083,000, which were capitalized in connection with the development and redevelopment of these projects.
(Amounts in thousands)Total New York theMART 
555 California
Street
 Other
220 Central Park South$152,178
 $—
 $—
 $—
 $152,178
606 Broadway8,593
 8,593
 —
 —
 —
345 Montgomery Street7,575
 —
 —
 7,575
 —
Penn Plaza3,576
 3,576
 —
 —
 —
Marriott Marquis Times Square - retail and signage2,686
 2,686
 —
 —
 —
One Penn Plaza2,565
 2,565
 —
 —
 —
90 Park Avenue1,015
 1,015
 —
 —
 —
Other6,851
 3,389
 3,037
 190
 235
 $185,039
 $21,824
 $3,037
 $7,765
 $152,413



83

(Amounts in thousands)Total New York theMART 
555 California
Street
 Other
220 Central Park South$152,178
 $—
 $—
 $—
 $152,178
606 Broadway8,593
 8,593
 —
 —
 —
345 Montgomery Street7,575
 —
 —
 7,575
 —
PENN12,565
 2,565
 —
 —
 —
Other14,128
 10,666
 3,037
 190
 235
 $185,039
 $21,824
 $3,037
 $7,765
 $152,413

Liquidity and Capital Resources - continued

Cash Flows for the Six Months Ended June 30, 2017

The total of our cash and cash equivalents and restricted cash was $1,557,689,000 at June 30, 2017, a $41,633,000 decrease from the balance at December 31, 2016. The decrease is due to cash flows used in investing and financing activities, partially offset by cash flows provided by operating activities, as discussed below.

Net Cash Provided by Operating Activities

Net cash provided by operating activities of $316,217,000 was comprised of (i) net income of $221,331,000, (ii) $222,708,000 of non-cash adjustments, which include depreciation and amortization expense, equity in net income from partially owned entities, the effect of straight-lining of rents, amortization of below-market leases, net, net realized and unrealized losses on real estate fund investments, net gains on sale of real estate and other and net gains on disposition of wholly owned and partially owned assets and (iii) distributions of income from partially owned entities of $44,778,000, partially offset by (iv) the net change in operating assets and liabilities of $172,600,000.

Net Cash Used in Investing Activities

Net cash used in investing activities of $251,529,000 was primarily comprised of (i) $191,073,000 of development costs and construction in progress, (ii) $139,611,000 of additions to real estate, (iii) $27,720,000 of investments in partially owned entities and (iv) $11,841,000 of acquisitions of real estate and other, partially offset by (v) $113,507,000 of capital distributions from partially owned entities and (vi) $5,180,000 of proceeds from sales of real estate and related investments.

Net Cash Used in Financing Activities

Net cash used in financing activities of Vornado Realty Trust of $106,321,000 was primarily comprised of (i) $268,817,000 of dividends paid on common shares, (ii) $32,258,000 of dividends paid on preferred shares, (iii) $25,617,000 of distributions to noncontrolling interests and (iv) $13,971,000 for the repayments of borrowings, partially offset by (v) $226,929,000 of proceeds from borrowings and (vi) $9,626,000 of proceeds received from exercise of employee share options and other.

Net cash used in financing activities of the Operating Partnership of $106,321,000 was primarily comprised of (i) $268,817,000 of distributions to Vornado, (ii) $32,258,000 of distributions to preferred unitholders, (iii) $25,617,000 of distributions to redeemable security holders and noncontrolling interests in consolidated subsidiaries and (iv) $13,971,000 for the repayments of borrowings, partially offset by (v) $226,929,000 of proceeds from borrowings and (vi) $9,626,000 of proceeds received from exercise of Vornado stock options and other.






84


Liquidity and Capital Resources - continued

Capital Expenditures for the Six Months Ended June 30, 2017

Below is a summary of capital expenditures, leasing commissions and a reconciliation of total expenditures on an accrual basis to the cash expended for the six months ended June 30, 2017.
(Amounts in thousands)Total New York theMART 
555 California
Street
 Other 
Expenditures to maintain assets$54,674
 $39,972
 $4,361
 $3,148
 $7,193
 
Tenant improvements56,737
 14,828
 7,309
 3,454
 31,146
 
Leasing commissions15,264
 7,768
 1,083
 768
 5,645
 
Non-recurring capital expenditures37,725
 32,905
 110
 526
 4,184
 
Total capital expenditures and leasing commissions (accrual basis)164,400
 95,473
 12,863
 7,896
 48,168
 
Adjustments to reconcile to cash basis:          
Expenditures in the current period applicable to prior periods65,985
 26,238
 5,987
 8,439
 25,321
 
Expenditures to be made in future periods for the current period(68,784) (25,576) (7,704) 4,263
 (39,767) 
Total capital expenditures and leasing commissions (cash basis)$161,601
 $96,135
 $11,146
 $20,598
 $33,722
(1) 
Tenant improvements and leasing commissions:          
Per square foot per annum$7.60
 $9.16
 $6.18
 $8.80
 n/a
 
Percentage of initial rent4.9% 11.2% 13.1% 10.1% n/a
 
__________
(1) Effective July 17, 2017, the date of the spin-off of our Washington, DC segment, capital expenditures and leasing commissions by our former Washington, DC segment have been reclassified to the Other segment. We have reclassified the prior period capital expenditures and leasing commissions to conform to the current period presentation.

Development and Redevelopment Expenditures for the Six Months Ended June 30, 2017

Below is a summary of development and redevelopment expenditures incurred for the six months ended June 30, 2017.  These expenditures include interest and debt expense of $23,312,000, payroll of $4,581,000, and other soft costs (primarily architectural and engineering fees, permits, real estate taxes and professional fees) aggregating $15,089,000, which were capitalized in connection with the development and redevelopment of these projects.
(Amounts in thousands)Total New York theMART 
555 California
Street
 Other 
220 Central Park South$126,384
 $—
 $—
 $—
 $126,384
 
606 Broadway9,467
 9,467
 —
 —
 —
 
90 Park Avenue6,002
 6,002
 —
 —
 —
 
Penn Plaza3,724
 3,724
 —
 —
 —
 
304 Canal Street2,534
 2,534
 —
 —
 —
 
345 Montgomery Street2,424
 —
 —
 2,424
 —
 
Other40,538
 5,138
 3,957
 4,208
 27,235
(1) 
 $191,073
 $26,865
 $3,957
 $6,632
 $153,619
 
__________
(1) Effective July 17, 2017, the date of the spin-off of our Washington, DC segment, capital expenditures and leasing commissions by our former Washington, DC segment have been reclassified to the Other segment. We have reclassified the prior period capital expenditures and leasing commissions to conform to the current period presentation.




85


Liquidity and Capital Resources - continued

Other Commitments and Contingencies

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 currently expected to have a material adverse effect on our financial position, results of operations or cash flows.

Each of our properties has been subjected to varying degrees of environmental assessment at various times. The environmental assessments did not reveal any material environmental contamination. However, there can be no assurance that the identification of new areas of contamination, changes in the extent or known scope of contamination, the discovery of additional sites or changes in cleanup requirements would not result in significant cost to us.

Generally, ourOur mortgage loans are non-recourse to us. However, inus, except for the mortgage loans secured by 640 Fifth Avenue, 7 West 34th Street and 435 Seventh Avenue, which we guaranteed and therefore are part of our tax basis. In certain cases, we have provided guarantees or master leased tenant space. These guarantees and master leases terminate either upon the satisfaction of specified circumstances or repayment of the underlying loans. As of June 30, 2018,2019, the aggregate dollar amount of these guarantees and master leases is approximately $667,000,000.

$1,031,000,000.
As of June 30, 2018, $13,337,0002019, $15,880,000 of letters of credit was outstanding under one of our unsecured revolving credit facilities. Our unsecured revolving credit facilities contain financial covenants that require us to maintain minimum interest rate coverage and maximum debt to market capitalization ratios and provide for higher interest rates in the event of a decline in our ratings below Baa3/BBB. Our unsecured revolving credit facilities also contain customary conditions precedent to borrowing, including representations and warranties, and also contain customary events of default that could give rise to accelerated repayment, including such items as failure to pay interest or principal.

In September 2016, our 50.1%A joint venture with Relatedin which we own a 95.0% ownership interest was designated by ESD, an entity of New York State, to redevelopdevelop the historic Farley Post Office and Retail Building. The joint venture entered into a development agreement with ESD and a design-build contract with Skanska Moynihan Train Hall Builders. Under the development agreement with ESD, the joint venture is obligated to build the Moynihan Train Hall, with Vornado and Related each guaranteeing the joint venture’s obligations. Under the design-build agreement, Skanska Moynihan Train Hall Builders is obligated to fulfill all of the joint venture’s obligations. The obligations of Skanska Moynihan Train Hall Builders have been bonded by Skanska USA and bear a full guaranty from Skanska AB.

As of June 30, 2018,2019, we expect to fund additional capital to certain of our partially owned entities aggregating approximately $34,000,000.

$15,400,000.
As of June 30, 2018,2019, we have construction commitments aggregating approximately $342,000,000.$730,000,000.


Income Taxes - 220 Central Park South

We are constructing a residential condominium tower at 220 Central Park South ("220 CPS"). For income tax purposes, we recognize revenue associated with our 220 CPS project using the percentage of completion method. On May 25, 2018, the 220 CPS condominium offering plan was declared effective by the Attorney General of the State of New York. Accordingly, during the quarter ended June 30, 2018, we recorded a liability (a component of “other liabilities”) and a corresponding asset (a component of “other assets”) of $52,000,000 for estimated Federal, state and local income taxes due September 17, 2018. GAAP revenue associated with our 220 CPS project is recognized under the completed contract method upon closing of the condominium unit sales.


86





Funds From Operations (“FFO”)


Vornado Realty Trust

FFO is computed in accordance with the definition adopted by the Board of Governors of the National Association of Real Estate Investment Trusts (“NAREIT”). NAREIT defines FFO as GAAP net income or loss adjusted to exclude net gains from sales of depreciateddepreciable real estate assets, real estate impairment losses, depreciation and amortization expense from real estate assets and other specified non-cash items, including the pro rata share of such adjustments of unconsolidated subsidiaries. FFO and FFO per diluted share are non-GAAP financial measures used by management, investors and analysts to facilitate meaningful comparisons of operating performance between periods and among our peers because it excludes the effect of real estate depreciation and amortization and net gains on sales, which are based on historical costs and implicitly assume that the value of real estate diminishes predictably over time, rather than fluctuating based on existing market conditions. FFO does not represent cash generated from operating activities and is not necessarily indicative of cash available to fund cash requirements and should not be considered as an alternative to net income as a performance measure or cash flow as a liquidity measure. FFO may not be comparable to similarly titled measures employed by other companies. The calculations of both the numerator and denominator used in the computation of income per share are disclosed in Note 2019 – Income Per Share/Income Per Class A Unit, in our consolidated financial statements on page 4044 of this Quarterly Report on Form 10-Q.

In accordance with the NAREIT December 2018 restated definition of FFO, we have elected to exclude the mark-to-market adjustments of marketable equity securities from the calculation of FFO. FFO for the three months ended June 30, 2018 has been adjusted to exclude the $16,024,000, or $0.08 per share, increase in fair value of marketable equity securities previously reported. FFO for the six months ended June 30, 2018 has been adjusted to exclude the $18,636,000, or $0.09 per share, decrease in fair value of marketable equity securities previously reported.
FFO attributable to common shareholders plus assumed conversions was $209,680,000,$164,329,000, or $1.10$0.86 per diluted share for the three months ended June 30, 2018,2019, compared to $257,673,000,$194,653,000, or $1.35$1.02 per diluted share, for the prior year’s three months. FFO attributable to common shareholders plus assumed conversions was $312,339,000,$412,013,000, or $1.63$2.16 per diluted share for the six months ended June 30, 2018,2019, compared to $463,422,000,$329,653,000, or $2.43$1.72 per diluted share, for the prior year’s six months. Details of certain adjustments to FFO are discussed in the financial results summary of our “Overview”.




Funds From Operations (“FFO”) - continued

Below is a reconciliation of net income attributable to common shareholders to FFO attributable to common shareholders for the three and six months ended June 30, 2019 and 2018.
(Amounts in thousands, except per share amounts)For the Three Months Ended
June 30,		 For the Six Months Ended
June 30,		For the Three Months Ended June 30, For the Six Months Ended
June 30,
2018 2017 2018 20172019 2018 2019 2018
Reconciliation of our net income attributable to common shareholders to FFO attributable to common shareholders plus assumed conversions:              
Net income attributable to common shareholders$111,534
 $115,972
 $93,693
 $163,724
$2,400,195
 $111,534
 $2,581,683
 $93,693
Per diluted share$0.58
 $0.61
 $0.49
 $0.86
$12.56
 $0.58
 $13.51
 $0.49
              
FFO adjustments:              
Depreciation and amortization of real property$103,599
 $128,527
 $204,009
 $258,996
$105,453
 $103,599
 $213,936
 $204,009
Net gains on sale of real estate(24,177) —
 (24,177) (2,267)—
 (24,177) —
 (24,177)
Real estate impairment losses—
 —
 —
 —
31,436
 —
 31,436
 —
Net gain on transfer to Fifth Avenue and Times Square JV, net of $11,945 attributable to noncontrolling interests(2,559,154) —
 (2,559,154) —
Net gain from sale of UE common shares (sold on March 4, 2019)—
 —
 (62,395) —
(Increase) decrease in fair value of marketable securities:       
PREIT(1,313) —
 14,336
 —
Lexington (sold on March 1, 2019)—
 (15,883) (16,068) 16,992
Other1
 (1) (41) 110
Proportionate share of adjustments to equity in net income (loss) of partially owned entities to arrive at FFO:              
Depreciation and amortization of real property25,488
 37,682
 53,594
 76,756
34,631
 25,488
 59,621
 53,594
Net gains on sale of real estate(272) (15,339) (577) (17,192)—
 (272) —
 (577)
Real estate impairment losses—
 167
 4
 3,218
Decrease (increase) in fair value of marketable securities1,709
 (140) 1,697
 1,534
104,638
 151,037
 232,853
 319,511
(2,387,237) 88,614
 (2,316,632) 251,485
Noncontrolling interests' share of above adjustments(6,508) (9,356) (14,419) (19,873)151,357
 (5,511) 146,933
 (15,557)
FFO adjustments, net$98,130
 $141,681
 $218,434
 $299,638
$(2,235,880) $83,103
 $(2,169,699) $235,928
              
FFO attributable to common shareholders$209,664
 $257,653
 $312,127
 $463,362
$164,315
 $194,637
 $411,984
 $329,621
Convertible preferred share dividends16
 20
 32
 60
14
 16
 29
 32
Earnings allocated to Out-Performance Plan units—
 —
 180
 —
FFO attributable to common shareholders plus assumed conversions$209,680
 $257,673
 $312,339
 $463,422
$164,329
 $194,653
 $412,013
 $329,653
Per diluted share$1.10
 $1.35
 $1.63
 $2.43
$0.86
 $1.02
 $2.16
 $1.72
              
Reconciliation of Weighted Average Shares              
Weighted average common shares outstanding190,200
 189,395
 190,141
 189,304
190,781
 190,200
 190,735
 190,141
Effect of dilutive securities:              
Employee stock options and restricted share awards930
 1,011
 934
 1,089
243
 930
 256
 934
Convertible preferred shares38
 38
 38
 57
34
 38
 35
 38
Out-Performance Plan units—
 —
 115
 —
Denominator for FFO attributable to common shareholders plus assumed conversions per diluted share191,168
 190,444
 191,228
 190,450
Denominator for FFO per diluted share191,058
 191,168
 191,026
 191,113


87


Item 3. Quantitative and Qualitative Disclosures About Market Risk
We have exposure to fluctuations in market interest rates. Market interest rates are sensitive to many factors that are beyond our control. Our exposure to a change in interest rates on our consolidated and non-consolidated debt (all of which arises out of non-trading activity) is as follows:

(Amounts in thousands, except per share and per unit amounts)2018 20172019 2018
June 30,
Balance		 
Weighted
Average
Interest Rate
 
Effect of 1%
Change In
Base Rates
 
December 31,
Balance
 
Weighted
Average
Interest Rate
June 30,
Balance		 
Weighted
Average
Interest Rate
 
Effect of 1%
Change In
Base Rates
 
December 31,
Balance
 
Weighted
Average
Interest Rate
Consolidated debt:            
Variable rate$3,985,262
 3.75% $39,853
 $3,492,133
 3.19%$1,763,182
 4.06% $17,632
 $3,292,382
 4.31%
Fixed rate5,859,211
 3.63% —
 6,311,706
 3.72%5,808,463
 3.57% —
 6,603,465
 3.65%
$9,844,473
 3.68% 39,853
 $9,803,839
 3.53%$7,571,645
 3.68% 17,632
 $9,895,847
 3.87%
Pro rata share of debt of non-consolidated entities (non-recourse):(1)
      
Pro rata share of debt of non-consolidated entities(1)(2):
      
Variable rate$1,422,776
 3.86% 14,228
 $1,395,001
 3.24%$1,475,815
 4.04% 14,758
 $1,237,388
 4.06%
Fixed rate2,080,891
 4.90% —
 2,035,888
 4.89%1,452,471
 4.02% —
 1,382,068
 4.19%
$3,503,667
 4.48% 14,228
 $3,430,889
 4.22%$2,928,286
 4.03% 14,758
 $2,619,456
 4.13%
Noncontrolling interests' share of consolidated subsidiaries  (1,494)     (293)   
Total change in annual net income attributable to the Operating Partnership  52,587
     32,097
   
Noncontrolling interests’ share of the Operating Partnership  (3,271)     (2,035) 
 
Total change in annual net income attributable to Vornado  $49,316
     $30,062
   
Total change in annual net income attributable to the Operating Partnership per diluted Class A unit  $0.26
     $0.16
   
Total change in annual net income attributable to Vornado per diluted share  $0.26
     $0.17
   
______________________________
(1) As a result of Toys "R"“R” Us ("Toys"(“Toys”) filing a voluntary petition under chapter 11 of the United States Bankruptcy Code, we determined the Company no longer has the ability to exercise significant influence over Toys. Accordingly, we have excluded our share of Toys debt.debt in 2018. The voluntary petition was declared effective in 2019 and our stock was canceled. As a result, we no longer hold an investment in Toys.
(2)Our pro rata share of debt of non-consolidated entities as of June 30, 2019 and December 31, 2018 is net of our $63,409 share of Alexander's participation in its Rego Park II shopping center mortgage loan which is considered partially extinguished as the participation interest is a reacquisition of debt.


We may utilize various financial instruments to mitigate the impact of interest rate fluctuations on our cash flows and earnings, including hedging strategies, depending on our analysis of the interest rate environment and the costs and risks of such strategies. As of June 30, 2018,2019, we have an interest rate swap on a $375,000,000 mortgage loan on 888 Seventh Avenue that swapped the rate from LIBOR plus 1.60% (3.60%1.70% (4.11% as of June 30, 2018)2019) to a fixed rate of 3.15%3.25% through December 2020 and2020; an interest rate swap on a $700,000,000 mortgage loan on 770 Broadway that swapped the rate from LIBOR plus 1.75% (3.77%(4.17% as of June 30, 2018)2019) to a fixed rate of 2.56% through September 2020.

In connection with the $100,000,000 refinancing of 33-00 Northern Boulevard, we entered into2020; an interest rate swap on a $100,000,000 mortgage loan on 33-00 Northern Boulevard that swapped the rate from LIBOR plus 1.80% (3.85%(4.22% as of June 30, 2018)2019) to a fixed rate of 4.14% through January 2025.2025; and an interest rate swap on our $750,000,000 unsecured term loan that swapped the rate from LIBOR plus 1.00% (3.40% as of June 30, 2019) to a fixed rate of 3.87% through October 2023.

Fair Value of Debt
The estimated fair value of our consolidated debt is calculated based on current market prices and discounted cash flows at the current rate at which similar loans would be made to borrowers with similar credit ratings for the remaining term of such debt. As of June 30, 2018,2019, the estimated fair value of our consolidated debt was $9,789,000,000.$7,625,000,000.


88


Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures (Vornado Realty Trust)

Disclosure Controls and Procedures: Our management, with the participation of Vornado’s Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rule 13a‑15(e) under the Securities Exchange Act of 1934, as amended) as of the end of the period covered by this report. Based on such evaluation, Vornado’s Chief Executive Officer and Chief Financial Officer have concluded that, as of June 30, 2018,2019, such disclosure controls and procedures were effective.

Internal Control Over Financial Reporting: There have not been any changes in our internal control over financial reporting (as such term is defined in Rule 13a-15(f) under the Securities and Exchange Act of 1934, as amended) during the fiscal quarter to which this report relates that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Evaluation of Disclosure Controls and Procedures (Vornado Realty L.P.)

Disclosure Controls and Procedures: Vornado Realty L.P.’s management, with the participation of Vornado’s Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rule 13a‑15(e) under the Securities Exchange Act of 1934, as amended) as of the end of the period covered by this report. Based on such evaluation, Vornado’s Chief Executive Officer and Chief Financial Officer have concluded that, as of June 30, 2018,2019, such disclosure controls and procedures were effective.

Internal Control Over Financial Reporting: There have not been any changes in our internal control over financial reporting (as such term is defined in Rule 13a-15(f) under the Securities and Exchange Act of 1934, as amended) during the fiscal quarter to which this report relates that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.




89


PART II. OTHER INFORMATION


Item 1. 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 currently expected to have a material adverse effect on our financial position, results of operations or cash flows.

Item 1A. Risk Factors

There were no material changes to the Risk Factors disclosed in our Annual Report on Form 10-K for the year ended December 31, 2017.

2018.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Vornado Realty Trust

None.

Vornado Realty L.P.

During the quarter ended June 30, 2018,2019, we issued 35,062641,103 Class A units in connection with equity awards issued pursuant to Vornado’s omnibus share plan, including with respect to grants of restricted Vornado common 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 $672,364$534,872 in cash proceeds. Such units were issued in reliance on an exemption from registration under Section 4(2) of the Securities Act of 1933, as amended.

Item 3. Defaults Upon Senior Securities
None.

Item 4. Mine Safety Disclosures
Not applicable.

Item 5. Other Information
None.

Item 6. Exhibits
Exhibits required by Item 601 of Regulation S-K are filed herewith or incorporated herein by reference and are listed in the attached Exhibit Index.



90


EXHIBIT INDEX 
Exhibit No.    
3.5410.41
 —Articles
Form of AmendmentVornado Realty Trust's 2019 Omnibus Share Plan - Incorporated by reference to Declaration of Trust,Annex B to Vornado
     Realty Trust's Proxy Statement dated as June 13, 2018April 5, 2019 (File No. 001-11954) filed on April 5, 2019.
*
3.5510.42
 —Amended and Restated Bylaws ofTransaction Agreement between Vornado Realty Trust, as amended on July 25, 2018L.P. and Crown Jewel Partner LLC, dated April 18, 2019. 
15.1
 —Letter regarding Unaudited Interim Financial Information of Vornado Realty Trust 
15.2
 —Letter regarding Unaudited Interim Financial Information of Vornado Realty L.P. 
31.1
 —Rule 13a-14 (a) Certification of the Chief Executive Officer of Vornado Realty Trust 
31.2
 —Rule 13a-14 (a) Certification of the Chief Financial Officer of Vornado Realty Trust 
31.3
 —Rule 13a-14 (a) Certification of the Chief Executive Officer of Vornado Realty L.P. 
31.4
 —Rule 13a-14 (a) Certification of the Chief Financial Officer of Vornado Realty L.P. 
32.1
 —Section 1350 Certification of the Chief Executive Officer of Vornado Realty Trust 
32.2
 —Section 1350 Certification of the Chief Financial Officer of Vornado Realty Trust 
32.3
 —Section 1350 Certification of the Chief Executive Officer of Vornado Realty L.P. 
32.4
 —Section 1350 Certification of the Chief Financial Officer of Vornado Realty L.P. 
101.INS —
XBRL Instance Document of Vornado Realty Trust and Vornado Realty L.P. - the instance document does
    not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL
    document.
 
101.SCH —XBRL Taxonomy Extension Schema of Vornado Realty Trust and Vornado Realty L.P. 
101.CAL —XBRL Taxonomy Extension Calculation Linkbase of Vornado Realty Trust and Vornado Realty L.P. 
101.DEF —XBRL Taxonomy Extension Definition Linkbase of Vornado Realty Trust and Vornado Realty L.P. 
101.LAB —XBRL Taxonomy Extension Label Linkbase of Vornado Realty Trust and Vornado Realty L.P. 
101.PRE —XBRL Taxonomy Extension Presentation Linkbase of Vornado Realty Trust and Vornado Realty L.P. 
   _______________________________ 
 * Incorporated by reference 
     



91


SIGNATURES


Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


  VORNADO REALTY TRUST
  (Registrant)
   
   
Date: July 30, 201829, 2019By:/s/ Matthew Iocco
  
Matthew Iocco, Chief Accounting Officer (duly
authorized officer and principal accounting officer)


92

SIGNATURES


Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


  VORNADO REALTY L.P.
  (Registrant)
   
   
Date: July 30, 201829, 2019By:/s/ Matthew Iocco
  
Matthew Iocco, Chief Accounting Officer of Vornado
Realty Trust, sole General Partner of Vornado Realty
L.P. (duly authorized officer and principal accounting
officer)



93100