Vornado Realty Trust Earnings 2019-09-30

VNO 10Q Quarterly Report

Balance Sheet	Income Statement	Cash Flow

Comparables ($MM TTM)
Ticker	M Cap	Assets	Liab	Rev	G Profit	Net Inc	EBITDA	EV	G Margin	EV/EBITDA	ROA
WPC	13,963	14,192	7,201	1,086	1,051	412	1,034	19,878	97%	19.2	3%
MAA	13,556	11,275	4,990	407	0	64	235	13,498	0%	57.5	1%
NLY	13,310	131,801	116,093	0	0	-4,495	-2,005	11,832		-5.9	-3%
HST	13,227	12,525	4,910	5,624	0	1,160	2,457	11,917	0%	4.9	9%
UDR	12,621	8,197	4,229	1,086	0	183	445	16,484	0%	37.1	2%
VNO	12,535	17,914	9,556	1,541	0	3,142	3,719	12,729	0%	3.4	18%
DRE	12,133	8,014	3,312	1,005	0	235	648	14,979	0%	23.1	3%
REG	11,683	10,947	4,594	560	0	53	183	15,325	0%	83.5	0%
ELS	11,481	4,014	2,707	1,008	0	279	349	11,390	0%	32.6	7%
SUI	11,237	7,222	3,542	1,197	536	143	483	11,191	45%	23.2	2%

Document

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark one)



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



	For the quarterly period ended:	September 30, 2019



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



For the transition period from:		to



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

Vornado Realty Trust

Vornado Realty L.P.

(Exact name of registrants as specified in its charter)



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

Vornado Realty L.P.	Delaware	13-3925979
	(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification Number)



888 Seventh Avenue,	New York,	New York	10019
(Address of principal executive offices) (Zip Code)



(212)	894-7000
(Registrants’ telephone number, including area code)

N/A

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

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

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit 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	☐	Smaller Reporting Company
			☐	Emerging Growth Company



Vornado Realty L.P.:
	☐	Large Accelerated Filer	☐	Accelerated Filer
	☑	Non-Accelerated Filer	☐	Smaller Reporting Company
			☐	Emerging Growth Company

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

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:



Registrant	Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Vornado Realty Trust	Common Shares of beneficial interest, $.04 par value per share	VNO	New York Stock Exchange
	Cumulative Redeemable Preferred Shares of beneficial interest, liquidation preference $25.00 per share
Vornado Realty Trust	5.70% Series K	VNO/PK	New York Stock Exchange
Vornado Realty Trust	5.40% Series L	VNO/PL	New York Stock Exchange
Vornado Realty Trust	5.25% Series M	VNO/PM	New York Stock Exchange

As of September 30, 2019, 190,850,321 of Vornado Realty Trust’s common shares of beneficial interest are outstanding.

EXPLANATORY NOTE

This report combines the quarterly reports on Form 10-Q for the period ended September 30, 2019 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 93.1% 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 partnership in the Operating Partnership, and the net proceeds of debt offerings by Vornado, which are contributed to the Operating Partnership in exchange for debt securities of the Operating Partnership, as applicable, the Operating Partnership generates all remaining capital required by the Company’s business. These sources may include working capital, net cash provided by operating activities, borrowings under the revolving credit facility, the issuance of secured and unsecured debt and equity securities and proceeds received from the disposition of certain properties.

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


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


•	Note 12. Redeemable Noncontrolling Interests/Redeemable Partnership Units


•	Note 13. Shareholders' Equity/Partners' Capital


•	Note 20. Income Per Share/Income Per Class A Unit


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

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



PART I.		Financial Information:	Page Number

	Item 1.	Financial Statements of Vornado Realty Trust:

		Consolidated Balance Sheets (Unaudited) as of September 30, 2019 and December 31, 2018	6

		Consolidated Statements of Income (Unaudited) for the Three and Nine Months Ended September 30, 2019 and 2018	7

		Consolidated Statements of Comprehensive Income (Unaudited) for the Three and Nine Months Ended September 30, 2019 and 2018	8

		Consolidated Statements of Changes in Equity (Unaudited) for the Three and Nine Months Ended September 30, 2019 and 2018	9

		Consolidated Statements of Cash Flows (Unaudited) for the Nine Months Ended September 30, 2019 and 2018	13

		Financial Statements of Vornado Realty L.P.:

		Consolidated Balance Sheets (Unaudited) as of September 30, 2019 and December 31, 2018	15

		Consolidated Statements of Income (Unaudited) for the Three and Nine Months Ended September 30, 2019 and 2018	16

		Consolidated Statements of Comprehensive Income (Unaudited) for the Three and Nine Months Ended September 30, 2019 and 2018	17

		Consolidated Statements of Changes in Equity (Unaudited) for the Three and Nine Months Ended September 30, 2019 and 2018	18

		Consolidated Statements of Cash Flows (Unaudited) for the Nine Months Ended September 30, 2019 and 2018	22

		Vornado Realty Trust and Vornado Realty L.P.:

		Notes to Consolidated Financial Statements (Unaudited)	24

		Reports of Independent Registered Public Accounting Firm	54

	Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	56

	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	96

	Item 4.	Controls and Procedures	97

PART II.		Other Information:

	Item 1.	Legal Proceedings	98

	Item 1A.	Risk Factors	98

	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	98

	Item 3.	Defaults Upon Senior Securities	98

	Item 4.	Mine Safety Disclosures	98

	Item 5.	Other Information	98

	Item 6.	Exhibits	98

EXHIBIT INDEX			99

SIGNATURES			100

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

VORNADO REALTY TRUST

CONSOLIDATED BALANCE SHEETS

(UNAUDITED)



(Amounts in thousands, except unit, share, and per share amounts)	September 30, 2019			December 31, 2018
ASSETS
Real estate, at cost:
Land	$	2,602,039		$	3,306,280
Buildings and improvements	7,888,950			10,110,992
Development costs and construction in progress	1,805,846			2,266,491
Moynihan Train Hall development expenditures	791,703			445,693
Leasehold improvements and equipment	121,164			108,427
Total	13,209,702			16,237,883
Less accumulated depreciation and amortization	(2,945,107		)	(3,180,175		)
Real estate, net	10,264,595			13,057,708
Right-of-use assets	370,604			—
Cash and cash equivalents	1,132,491			570,916
Restricted cash	113,065			145,989
Marketable securities	35,751			152,198
Tenant and other receivables	99,499			73,322
Investments in partially owned entities	4,023,820			858,113
Real estate fund investments	306,596			318,758
220 Central Park South condominium units ready for sale	288,135			99,627
Receivable arising from the straight-lining of rents	743,646			935,131
Deferred leasing costs, net of accumulated amortization of $191,299 and $207,529	360,608			400,313
Identified intangible assets, net of accumulated amortization of $99,623 and $172,114	30,773			136,781
Other assets	446,516			431,938
	$	18,216,099		$	17,180,794
LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND EQUITY
Mortgages payable, net	$	5,640,895		$	8,167,798
Senior unsecured notes, net	445,668			844,002
Unsecured term loan, net	745,585			744,821
Unsecured revolving credit facilities	655,000			80,000
Lease liabilities	490,978			—
Moynihan Train Hall obligation	791,703			445,693
Accounts payable and accrued expenses	453,331			430,976
Deferred revenue	62,583			167,730
Deferred compensation plan	99,677			96,523
Other liabilities	266,090			311,806
Total liabilities	9,651,510			11,289,349
Commitments and contingencies
Redeemable noncontrolling interests:
Class A units - 13,346,927 and 12,544,477 units outstanding	849,798			778,134
Series D cumulative redeemable preferred units - 141,401 and 177,101 units outstanding	4,535			5,428
Total redeemable noncontrolling interests	854,333			783,562
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 shares	891,256			891,294
Common shares of beneficial interest: $0.04 par value per share; authorized 250,000,000 shares; issued and outstanding 190,850,321 and 190,535,499 shares	7,613			7,600
Additional capital	7,872,597			7,725,857
Earnings less than distributions	(1,649,035		)	(4,167,184		)
Accumulated other comprehensive (loss) income	(47,359		)	7,664
Total shareholders' equity	7,075,072			4,465,231
Noncontrolling interests in consolidated subsidiaries	635,184			642,652
Total equity	7,710,256			5,107,883
	$	18,216,099		$	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 September 30,						For the Nine Months Ended September 30,
	2019			2018			2019			2018
REVENUES:
Rental revenues	$	427,638		$	503,947		$	1,348,814		$	1,507,274
Fee and other income	38,323			38,101			114,918			113,029
Total revenues	465,961			542,048			1,463,732			1,620,303
EXPENSES:
Operating	(226,359		)	(235,575		)	(694,006		)	(709,158		)
Depreciation and amortization	(96,437		)	(113,169		)	(326,181		)	(333,701		)
General and administrative	(33,237		)	(31,977		)	(130,129		)	(108,937		)
Expense from deferred compensation plan liability	(974		)	(1,861		)	(7,722		)	(3,534		)
Transaction related costs, impairment losses and other	(1,576		)	(2,510		)	(103,315		)	(16,683		)
Total expenses	(358,583		)	(385,092		)	(1,261,353		)	(1,172,013		)

Income from partially owned entities	25,946			7,206			56,139			6,059
Income (loss) from real estate fund investments	2,190			(190		)	(13,780		)	(37,973		)
Interest and other investment income, net	3,045			2,893			15,930			9,401
Income from deferred compensation plan assets	974			1,861			7,722			3,534
Interest and debt expense	(61,448		)	(88,951		)	(226,940		)	(264,774		)
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	309,657			141,269			641,664			164,828
Income before income taxes	387,742			221,044			3,254,213			329,365
Income tax expense	(23,885		)	(1,943		)	(80,542		)	(4,964		)
Income from continuing operations	363,857			219,101			3,173,671			324,401
(Loss) income from discontinued operations	(8		)	61			(85		)	381
Net income	363,849			219,162			3,173,586			324,782
Less net (income) loss attributable to noncontrolling interests in:
Consolidated subsidiaries	(5,774		)	(3,312		)	(34,045		)	31,137
Operating Partnership	(22,637		)	(12,671		)	(197,354		)	(18,992		)
Net income attributable to Vornado	335,438			203,179			2,942,187			336,927
Preferred share dividends	(12,532		)	(12,534		)	(37,598		)	(38,103		)
Preferred share issuance costs	—			—			—			(14,486		)
NET INCOME attributable to common shareholders	$	322,906		$	190,645		$	2,904,589		$	284,338

INCOME PER COMMON SHARE – BASIC:
Net income per common share	$	1.69		$	1.00		$	15.22		$	1.50
Weighted average shares outstanding	190,814			190,245			190,762			190,176

INCOME PER COMMON SHARE – DILUTED:
Net income per common share	$	1.69		$	1.00		$	15.20		$	1.49
Weighted average shares outstanding	191,024			191,327			191,027			191,292

See notes to consolidated financial statements (unaudited).

VORNADO REALTY TRUST

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(UNAUDITED)



(Amounts in thousands)	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
	2019			2018			2019			2018
Net income	$	363,849		$	219,162		$	3,173,586		$	324,782
Other comprehensive income (loss):
Other comprehensive income (loss) of nonconsolidated subsidiaries	11			253			(949		)	989
(Reduction) increase in value of interest rate swaps and other	(9,954		)	623			(55,495		)	13,789
Amount reclassified from accumulated other comprehensive loss relating to a nonconsolidated subsidiary	—			—			(2,311		)	—
Comprehensive income	353,906			220,038			3,114,831			339,560
Less comprehensive (income) loss attributable to noncontrolling interests	(27,761		)	(16,037		)	(227,667		)	11,232
Comprehensive income attributable to Vornado	$	326,145		$	204,001		$	2,887,164		$	350,792

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 Loss			Non-controlling Interests in Consolidated Subsidiaries		Total Equity
	Shares	Amount		Shares	Amount		Additional Capital		Earnings Less Than Distributions			Accumulated Other Comprehensive Loss			Non-controlling Interests in Consolidated Subsidiaries		Total Equity
For the Three Months Ended September 30, 2019:
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
Net income attributable to Vornado	—	—		—	—		—		335,438			—			—		335,438
Net income attributable to noncontrolling interests in consolidated subsidiaries	—	—		—	—		—

Closing Price ($)	Shares Out (MM)	Market Cap ($MM)
$0.00	191	$12,535

10-Q	2019-10-28	Quarter: 2019-09-30
10-Q	2019-07-29	Quarter: 2019-06-30
10-Q	2019-04-29	Quarter: 2019-03-31
10-K	2019-02-11	Annual: 2018-12-31
10-Q	2018-10-29	Quarter: 2018-09-30
10-Q	2018-07-30	Quarter: 2018-06-30
10-Q	2018-04-30	Quarter: 2018-03-31
10-K	2018-02-12	Annual: 2017-12-31
10-Q	2017-10-30	Quarter: 2017-09-30
10-Q	2017-07-31	Quarter: 2017-06-30
10-Q	2017-05-01	Quarter: 2017-03-31
10-K	2017-02-13	Annual: 2016-12-31
10-Q	2016-10-31	Quarter: 2016-09-30
10-Q	2016-08-01	Quarter: 2016-06-30
10-Q	2016-05-02	Quarter: 2016-03-31
10-K	2016-02-16	Annual: 2015-12-31
10-Q	2015-11-02	Quarter: 2015-09-30
10-Q	2015-08-03	Quarter: 2015-06-30
10-Q	2015-05-04	Quarter: 2015-03-31
10-K	2015-02-17	Annual: 2014-12-31
10-Q	2014-11-03	Quarter: 2014-09-30
10-Q	2014-08-04	Quarter: 2014-06-30
10-Q	2014-05-05	Quarter: 2014-03-31
10-K	2014-02-24	Annual: 2013-12-31
10-Q	2013-11-04	Quarter: 2013-09-30
10-Q	2013-08-05	Quarter: 2013-06-30
10-Q	2013-05-06	Quarter: 2013-03-31
10-K	2013-02-26	Annual: 2012-12-31
10-Q	2012-11-01	Quarter: 2012-09-30
10-Q	2012-08-06	Quarter: 2012-06-30
10-Q	2012-05-07	Quarter: 2012-03-31
10-K	2012-02-27	Annual: 2011-12-31
10-Q	2011-11-03	Quarter: 2011-09-30
10-Q	2011-08-01	Quarter: 2011-06-30
10-Q	2011-05-03	Quarter: 2011-03-31
10-Q	2010-11-02	Quarter: 2010-09-30
10-Q	2010-08-03	Quarter: 2010-06-30
10-Q	2010-05-04	Quarter: 2010-03-31
10-K	2010-02-23	Annual: 2009-12-31

8-K	2019-10-28	Earnings, Exhibits
8-K	2019-10-14	Earnings, Regulation FD, Exhibits
8-K	2019-08-07	Enter Agreement, Amend Bylaw, Shareholder Vote, Exhibits
8-K	2019-07-29	Earnings, Exhibits
8-K	2019-07-15	Earnings, Regulation FD, Exhibits
8-K	2019-06-03	Regulation FD, Exhibits
8-K	2019-05-16	Shareholder Vote
8-K	2019-04-29	Earnings, Exhibits
8-K	2019-04-18	Enter Agreement, M&A, Regulation FD, Exhibits
8-K	2019-04-15	Earnings, Regulation FD, Exhibits
8-K	2019-04-08	Regulation FD, Exhibits
8-K	2019-04-03	Earnings, Officers, Regulation FD, Exhibits
8-K	2019-03-01	Regulation FD, Exhibits
8-K	2019-02-11	Earnings, Exhibits
8-K	2019-01-23	Earnings, Regulation FD, Exhibits
8-K	2018-11-02	Regulation FD, Exhibits
8-K	2018-10-29	Earnings, Exhibits
8-K	2018-10-10	Earnings, Regulation FD, Exhibits
8-K	2018-09-24
8-K	2018-07-30	Exhibits
8-K	2018-07-12	Earnings, Regulation FD, Exhibits
8-K	2018-06-01	Regulation FD, Exhibits
8-K	2018-05-17	Shareholder Vote
8-K	2018-04-30	Exhibits
8-K	2018-04-13	Earnings, Regulation FD, Exhibits
8-K	2018-04-06	Regulation FD, Exhibits
8-K	2018-03-15	Other Events
8-K	2018-03-02	Other Events
8-K	2018-03-01	Regulation FD, Exhibits
8-K	2018-02-12	Exhibits
8-K	2018-01-12	Officers, Amend Bylaw

EX-15.1	ex151-093019.htm
EX-15.2	ex152-093019.htm
EX-31.1	ex311-093019.htm
EX-31.2	ex312-093019.htm
EX-31.3	ex313-093019.htm
EX-31.4	ex314-093019.htm
EX-32.1	ex321-093019.htm
EX-32.2	ex322-093019.htm
EX-32.3	ex323-093019.htm
EX-32.4	ex324-093019.htm