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~~June 30, ~~2017~~2018



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



For the transition period from:		to



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



	Vornado Realty Trust Vornado Realty L.P.

(Exact name of registrants as specified in its charter)



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

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

888 Seventh Avenue, New York, New York 10019

(Address of principal executive offices) (Zip Code)

(212) 894-7000

(Registrants’ telephone number, including area code)

N/A

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

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding

12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

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

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” "non-accelerated filer," “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.



Vornado Realty Trust:
☑ Large Accelerated Filer		☐ Accelerated Filer
☐ Non-Accelerated Filer (Do not check if smaller reporting company)		☐ Smaller Reporting Company
		☐ Emerging Growth Company



Vornado Realty L.P.:
☐ Large Accelerated Filer		☐ Accelerated Filer
☑ Non-Accelerated Filer (Do not check if smaller reporting company)		☐ Smaller Reporting Company
		☐ Emerging Growth Company

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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

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

As of ~~September~~June 30, ~~2017, 189,877,859~~2018, 190,237,957 of Vornado Realty Trust’s common shares of beneficial interest are outstanding.

EXPLANATORY NOTE

This report combines the quarterly reports on Form 10-Q for the period ended ~~September~~June 30, ~~2017~~2018 of Vornado Realty Trust and Vornado Realty L.P. Unless stated otherwise or the context otherwise requires, references to “Vornado” refer to Vornado Realty Trust, a Maryland real estate investment trust (“REIT”), and references to the “Operating Partnership” refer to Vornado Realty L.P., a Delaware limited partnership. References to the “Company,” “we,” “us” and “our” mean collectively Vornado, the Operating Partnership and those subsidiaries consolidated by Vornado.

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

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

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

enhances investors’ understanding of Vornado and the Operating Partnership by enabling investors to view the business as a whole in the same manner as management views and operates the business;

eliminates duplicative disclosure and provides a more streamlined and readable presentation because a substantial portion of the disclosure applies to both Vornado and the Operating Partnership; and

creates time and cost efficiencies in the preparation of one combined report instead of two separate reports.

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

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 ~~10.~~12. Redeemable Noncontrolling Interests/Redeemable Partnership Units

Note ~~18. (Loss)~~13. Shareholders' Equity/Partners' Capital

Note 20. Income Per Share/~~(Loss)~~ Income Per Class A Unit

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

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



PART I.		Financial Information:	Page Number

	Item 1.	Financial Statements of Vornado Realty Trust:

		Consolidated Balance Sheets (Unaudited) as of ~~September~~June 30, ~~2017~~2018 and December 31, ~~2016~~2017	5

		Consolidated Statements of Income (Unaudited) for the Three and ~~Nine~~Six Months Ended ~~September~~June 30, ~~2017~~2018 and ~~2016~~2017	6

		Consolidated Statements of Comprehensive Income (Unaudited) for the Three and ~~Nine~~Six Months Ended ~~September~~June 30, ~~2017~~2018 and ~~2016~~2017	7

		Consolidated Statements of Changes in Equity (Unaudited) for the ~~Nine~~Six Months Ended ~~September~~June 30, ~~2017~~2018 and ~~2016~~2017	8

		Consolidated Statements of Cash Flows (Unaudited) for the ~~Nine~~Six Months Ended ~~September~~June 30, ~~2017~~2018 and ~~2016~~2017	10

		Financial Statements of Vornado Realty L.P.:

		Consolidated Balance Sheets (Unaudited) as of ~~September~~June 30, ~~2017~~2018 and December 31, ~~2016~~2017	12

		Consolidated Statements of Income (Unaudited) for the Three and ~~Nine~~Six Months Ended ~~September~~June 30, ~~2017~~2018 and ~~2016~~2017	13

		Consolidated Statements of Comprehensive Income (Unaudited) for the Three and ~~Nine~~Six Months Ended ~~September~~June 30, ~~2017~~2018 and ~~2016~~2017	14

		Consolidated Statements of Changes in Equity (Unaudited) for the ~~Nine~~Six Months Ended ~~September~~June 30, ~~2017~~2018 and ~~2016~~2017	15

		Consolidated Statements of Cash Flows (Unaudited) for the ~~Nine~~Six Months Ended ~~September~~June 30, ~~2017~~2018 and ~~2016~~2017	17

		Vornado Realty Trust and Vornado Realty L.P.:

		Notes to Consolidated Financial Statements (Unaudited)	19

		Reports of Independent Registered Public Accounting Firm	5046

	Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	5248

	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	9288

	Item 4.	Controls and Procedures	9389

PART II.		Other Information:

	Item 1.	Legal Proceedings	9490

	Item 1A.	Risk Factors	9490

	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	9490

	Item 3.	Defaults Upon Senior Securities	9490

	Item 4.	Mine Safety Disclosures	9490

	Item 5.	Other Information	9490

	Item 6.	Exhibits	94

~~SIGNATURES~~			9690

EXHIBIT INDEX			9591

SIGNATURES			92

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, 2017			December 31, 2016			June 30, 2018			December 31, 2017
ASSETS
Real estate, at cost:
Land	$	3,124,971		$	3,130,825		$	3,175,830		$	3,143,648
Buildings and improvements	9,824,618			9,684,144			9,969,190			9,898,605
Development costs and construction in progress	1,536,290			1,278,941			1,797,301			1,615,101
Leasehold improvements and equipment	96,820			93,910			105,625			98,941
Total	14,582,699			14,187,820			15,047,946			14,756,295
Less accumulated depreciation and amortization	(2,805,160		)	(2,581,514		)	(3,035,523		)	(2,885,283		)
Real estate, net	11,777,539			11,606,306			12,012,423			11,871,012
Cash and cash equivalents	1,282,230			1,501,027			1,090,791			1,817,655
Restricted cash	103,553			95,032			121,168			97,157
Marketable securities	193,145			203,704			165,650			182,752
Tenant and other receivables, net of allowance for doubtful accounts of $5,539 and $6,708	54,769			61,069
Tenant and other receivables, net of allowance for doubtful accounts of $3,891 and $5,526							65,773			58,700
Investments in partially owned entities	1,064,982			1,378,254			959,801			1,056,829
Real estate fund investments	351,750			462,132			373,039			354,804
Receivable arising from the straight-lining of rents, net of allowance of $1,215 and $2,227	917,827			885,167
Deferred leasing costs, net of accumulated amortization of $186,041 and $170,952	354,573			354,997
Identified intangible assets, net of accumulated amortization $144,683 and $194,422	166,198			189,668
Receivable arising from the straight-lining of rents, net of allowance of $1,798 and $954							936,614			926,711
Deferred leasing costs, net of accumulated amortization of $198,100 and $191,827							443,859			403,492
Identified intangible assets, net of accumulated amortization of $163,406 and $150,837							146,370			159,260
Assets related to discontinued operations	1,774			3,568,613			52			1,357
Other assets	573,780			508,878			550,543			468,205
	$	16,842,120		$	20,814,847		$	16,866,083		$	17,397,934
LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND EQUITY
Mortgages payable, net	$	8,131,606		$	8,113,248		$	8,108,618		$	8,137,139
Senior unsecured notes, net	846,641			845,577			843,417			843,614
Unsecured term loan, net	373,354			372,215			749,494			748,734
Unsecured revolving credit facilities	—			115,630			80,000			—
Accounts payable and accrued expenses	412,100			397,134			394,079			415,794
Deferred revenue	240,377			276,276			187,934			227,069
Deferred compensation plan	106,244			121,183			100,368			109,177
Liabilities related to discontinued operations	3,602			1,259,443			214			3,620
Preferred shares redeemed on January 4 and 11, 2018							—			455,514
Other liabilities	469,919			417,199			520,331			464,635
Total liabilities	10,583,843			11,917,905			10,984,455			11,405,296
Commitments and contingencies
Redeemable noncontrolling interests:
Class A units - 12,555,623 and 12,197,162 units outstanding	965,276			1,273,018
Class A units - 12,616,515 and 12,528,899 units outstanding							932,613			979,509
Series D cumulative redeemable preferred units - 177,101 units outstanding	5,428			5,428			5,428			5,428
Total redeemable noncontrolling interests	970,704			1,278,446			938,041			984,937
Vornado's shareholders' equity:
Preferred shares of beneficial interest: no par value per share; authorized 110,000,000 shares; issued and outstanding 42,823,428 and 42,824,829 shares	1,038,011			1,038,055
Common shares of beneficial interest: $0.04 par value per share; authorized 250,000,000 shares; issued and outstanding 189,877,859 and 189,100,876 shares	7,571			7,542
Preferred shares of beneficial interest: no par value per share; authorized 110,000,000 shares; issued and outstanding 36,799,573 shares							891,325			891,988
Common shares of beneficial interest: $0.04 par value per share; authorized 250,000,000 shares; issued and outstanding 190,237,957 and 189,983,858 shares							7,587			7,577
Additional capital	7,501,823			7,153,332			7,555,993			7,492,658
Earnings less than distributions	(4,098,127		)	(1,419,382		)	(4,206,381		)	(4,183,253		)
Accumulated other comprehensive income	121,801			118,972			33,351			128,682
Total Vornado shareholders' equity	4,571,079			6,898,519			4,281,875			4,337,652
Noncontrolling interests in consolidated subsidiaries	716,494			719,977			661,712			670,049
Total equity	5,287,573			7,618,496			4,943,587			5,007,701
	$	16,842,120		$	20,814,847		$	16,866,083		$	17,397,934

VORNADO REALTY TRUST

CONSOLIDATED STATEMENTS OF INCOME

(UNAUDITED)


(Amounts in thousands, except per share amounts)	Three Months Ended September 30,						Nine Months Ended September 30,						For the Three Months Ended June 30,						For the Six Months Ended June 30,
	2017			2016			2017			2016			2018			2017			2018			2017
REVENUES:
Property rentals	$	432,062		$	411,153		$	1,275,597		$	1,238,903		$	444,595		$	428,643		$	884,705		$	843,535
Tenant expense reimbursements	63,401			60,957			174,091			162,831			58,312			51,657			118,622			110,690
Fee and other income	33,292			30,643			98,212			88,034			38,911			30,787			74,928			64,920
Total revenues	528,755			502,753			1,547,900			1,489,768			541,818			511,087			1,078,255			1,019,145
EXPENSES:
Operating	225,226			213,762			661,585			626,546			235,981			215,700			473,583			436,359
Depreciation and amortization	104,972			105,877			315,223			316,383			111,846			105,123			220,532			210,251
General and administrative	36,261			33,584			122,161			112,593			34,427			35,405			76,960			81,580
Acquisition and transaction related costs	61			1,069			1,073			6,697
Expense from deferred compensation plan liability													2,077			789			1,673			3,258
Transaction related costs and other													1,017			260			14,173			1,012
Total expenses	366,520			354,292			1,100,042			1,062,219			385,348			357,277			786,921			732,460
Operating income	162,235			148,461			447,858			427,549			156,470			153,810			291,334			286,685
(Loss) income from partially owned entities	(41,801		)	3,811			5,578			3,892
Income (loss) from partially owned entities													8,757			46,021			(1,147		)	47,379
(Loss) income from real estate fund investments	(6,308		)	1,077			(1,649		)	28,750			(28,976		)	4,391			(37,783		)	4,659
Interest and other investment income, net	9,306			6,459			27,800			20,121			30,892			8,541			6,508			15,236
Income from deferred compensation plan assets													2,077			789			1,673			3,258
Interest and debt expense	(85,068		)	(79,721		)	(252,581		)	(250,034		)	(87,657		)	(84,789		)	(175,823		)	(167,513		)
Net gains on disposition of wholly owned and partially owned assets	—			—			501			160,225			23,559			—			23,559			501
Income before income taxes	38,364			80,087			227,507			390,503			105,122			128,763			108,321			190,205
Income tax expense	(1,188		)	(4,563		)	(2,429		)	(8,921		)
Income tax (expense) benefit													(467		)	610			(3,021		)	(2,303		)
Income from continuing operations	37,176			75,524			225,078			381,582			104,655			129,373			105,300			187,902
(Loss) income from discontinued operations	(47,930		)	25,080			(14,501		)	(104,204		)
Net (loss) income	(10,754		)	100,604			210,577			277,378
Less net (income) loss attributable to noncontrolling interests in:
Income from discontinued operations													683			18,111			320			33,429
Net income													105,338			147,484			105,620			221,331
Less net loss (income) attributable to noncontrolling interests in:
Consolidated subsidiaries	(4,022		)	(3,658		)	(18,436		)	(26,361		)	26,175			(7,677		)	34,449			(14,414		)
Operating Partnership	1,878			(4,366		)	(9,057		)	(11,410		)	(7,445		)	(7,706		)	(6,321		)	(10,935		)
Net (loss) income attributable to Vornado	(12,898		)	92,580			183,084			239,607
Net income attributable to Vornado													124,068			132,101			133,748			195,982
Preferred share dividends	(16,128		)	(19,047		)	(48,386		)	(59,774		)	(12,534		)	(16,129		)	(25,569		)	(32,258		)
Preferred share issuance costs (Series J redemption)	—			(7,408		)	—			(7,408		)
NET (LOSS) INCOME attributable to common shareholders	$	(29,026	)	$	66,125		$	134,698		$	172,425
Preferred share issuance costs													—			—			(14,486		)	—
NET INCOME attributable to common shareholders													$	111,534		$	115,972		$	93,693		$	163,724

(LOSS) INCOME PER COMMON SHARE – BASIC:
INCOME PER COMMON SHARE – BASIC:
Income from continuing operations, net	$	0.09		$	0.23		$	0.78		$	1.43		$	0.59		$	0.52		$	0.49		$	0.70
(Loss) income from discontinued operations, net	(0.24		)	0.12			(0.07		)	(0.52		)
Net (loss) income per common share	$	(0.15	)	$	0.35		$	0.71		$	0.91
Income from discontinued operations, net													—			0.09			—			0.16
Net income per common share													$	0.59		$	0.61		$	0.49		$	0.86
Weighted average shares outstanding	189,593			188,901			189,401			188,778			190,200			189,395			190,141			189,304

(LOSS) INCOME PER COMMON SHARE – DILUTED:
INCOME PER COMMON SHARE – DILUTED:
Income from continuing operations, net	$	0.09		$	0.23		$	0.78		$	1.42		$	0.58		$	0.52		$	0.49		$	0.70
(Loss) income from discontinued operations, net	(0.24		)	0.12			(0.07		)	(0.51		)
Net (loss) income per common share	$	(0.15	)	$	0.35		$	0.71		$	0.91
Income from discontinued operations, net													—			0.09			—			0.16
Net income per common share													$	0.58		$	0.61		$	0.49		$	0.86
Weighted average shares outstanding	190,847			190,048			191,257			190,086			191,168			190,444			191,190			190,674

DIVIDENDS PER COMMON SHARE	$	0.60		$	0.63		$	2.02		$	1.89		$	0.63		$	0.71		$	1.26		$	1.42

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,
2017 2016 2017 2016
Net (loss) income $ (10,754 ) $ 100,604
$ 210,577
$ 277,378
Other comprehensive income (loss):
Increase (reduction) in unrealized net gain on available-for-sale securities 5,656
3,685
(10,559 ) 42,798
Pro rata share of amounts reclassified from accumulated other comprehensive income of a nonconsolidated subsidiary (646 ) —
8,622
—
Pro rata share of other comprehensive loss of nonconsolidated subsidiaries (626 ) (915 ) (1,657 ) (1,537 )
Increase (reduction) in value of interest rate swaps and other 1,973
7,689
6,611
(3,482 )
Comprehensive (loss) income (4,397 ) 111,063
213,594
315,157
Less comprehensive income attributable to noncontrolling interests (2,539 ) (8,665 ) (27,681 ) (40,097 )
Comprehensive (loss) income attributable to Vornado $ (6,936 ) $ 102,398
$ 185,913
$ 275,060



(Amounts in thousands)	For the Three Months Ended June 30,					For the Six Months Ended June 30,
	2018		2017			2018		2017
Net income	$	105,338	$	147,484		$	105,620	$	221,331
Other comprehensive income (loss):
Increase (reduction) in value of interest rate swaps and other	2,908		(1,204		)	13,166		4,638
Pro rata share of other comprehensive income (loss) of nonconsolidated subsidiaries	390		(980		)	736		(1,031		)
Reduction in unrealized net gain on available-for-sale securities	—		(1,206		)	—		(16,215		)
Pro rata share of amounts reclassified from accumulated other comprehensive income of a nonconsolidated subsidiary	—		—			—		9,268
Comprehensive income	108,636		144,094			119,522		217,991
Less comprehensive loss (income) attributable to noncontrolling interests	18,525		(15,173		)	27,269		(25,142		)
Comprehensive income attributable to Vornado	$	127,161	$	128,921		$	146,791	$	192,849

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
	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					Earnings Less Than Distributions				Accumulated Other Comprehensive Income				Non-controlling Interests in Consolidated Subsidiaries				Total Equity
	Shares		Amount			Shares	Amount						Earnings Less Than Distributions
Balance, December 31, 2016	42,825		$	1,038,055		189,101	$	7,542	Additional Capital			$	7,153,332			$	Accumulated Other Comprehensive Income			(1,419,382	Non-controlling Interests in Consolidated Subsidiaries			)	Total Equity			$	118,972		$	719,977		$	7,618,496
Balance, December 31, 2017																												36,800		$	891,988		189,984			$	7,577	Additional Capital		$	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	—		—			—	—		—				183,084				—				—				183,084			—		—			—			—		—			133,748				—				—				133,748
Net income attributable to noncontrolling interests in consolidated subsidiaries	—		—			—	—		—				—				—				18,436				18,436
Net loss attributable to noncontrolling interests in consolidated subsidiaries																												—		—			—			—		—			—				—				(34,449		)		(34,449		)
Dividends on common shares	—		—			—	—		—				(382,552		)		—				—				(382,552		)	—		—			—			—		—			(239,594		)		—				—				(239,594		)
Dividends on preferred shares	—		—			—	—		—				(48,386		)		—				—				(48,386		)	—		—			—			—		—			(25,569		)		—				—				(25,569		)
Preferred share issuance costs																												—		—			—			—		—			(14,486		)		—				—				(14,486		)
Common shares issued:
Upon redemption of Class A units, at redemption value	—		—			349	14		34,550				—				—				—				34,564			—		—			176			7		12,239			—				—				—				12,246
Under employees' share option plan	—		—			409	15		23,877				—				—				—				23,892			—		—			61			3		3,783			—				—				—				3,786
Under dividend reinvestment plan	—		—			12	—		1,119				—				—				—				1,119			—		—			10			—		685			—				—				—				685
Contributions	—		—			—	—		—				—				—				1,044				1,044
Distributions:
JBG SMITH Properties	—		—			—	—		—				(2,430,427		)		—				—				(2,430,427		)
Contributions:
Real estate fund investments	—		—			—	—		—				—				—				(20,851		)		(20,851		)	—		—			—			—		—			—				—				45,347				45,347
Other	—		—			—	—		—				—				—				(1,815		)		(1,815		)	—		—			—			—		—			—				—				14,211				14,211
Conversion of Series A preferred shares to common shares	(2	)	(44		)	2	—		44				—				—				—				—
Distributions:
Real estate fund investments																												—		—			—			—		—			—				—				(10,246		)		(10,246		)
Other																												—		—			—			—		—			—				—				(23,201		)		(23,201		)
Preferred share issuance																												—		(663		)	—			—		—			—				—				—				(663		)
Deferred compensation shares and options	—		—			1	—		1,975				(418		)		—				—				1,557			—		—			7			—		585			(121		)		—				—				464
Reduction in unrealized net gain on available-for-sale securities	—		—			—	—		—				—				(10,559		)		—				(10,559		)
Pro rata share of amounts reclassified related to a nonconsolidated subsidiary	—		—			—	—		—				—				8,622				—				8,622
Pro rata share of other comprehensive loss of nonconsolidated subsidiaries	—		—			—	—		—				—				(1,657		)		—				(1,657		)
Pro rata share of other comprehensive income of nonconsolidated subsidiaries																												—		—			—			—		—			—				736				—				736
Increase in value of interest rate swaps	—		—			—	—		—				—				6,611				—				6,611			—		—			—			—		—			—				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	—		—			—	—		286,928				—				—				—				286,928			—		—			—			—		36,450			—				—				—				36,450
Redeemable noncontrolling interests' share of above adjustments	—		—			��	—		—				—				(188		)		—				(188		)	—		—			—			—		—			—				(859		)		—				(859		)
Other	—		—			4	—		(2		)		(46		)		—				(297		)		(345		)	—		—			—			—		547			1				—				1				549
Balance, September 30, 2017	42,823		$	1,038,011		189,878	$	7,571	$	7,501,823			$	(4,098,127	)		$	121,801			$	716,494			$	5,287,573
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

VORNADO REALTY TRUST

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY - CONTINUED

(UNAUDITED)


(Amounts in thousands)											Additional Capital				Earnings Less Than Distributions				Accumulated Other Comprehensive Income				Non- controlling Interests in Consolidated Subsidiaries				Total Equity				Preferred Shares						Common Shares						Additional Capital			Earnings Less Than Distributions				Accumulated Other Comprehensive Income				Non- controlling Interests in Consolidated Subsidiaries				Total Equity
	Preferred Shares					Common Shares																Shares								Amount			Shares			Amount							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, 2015	52,677		$	1,276,954		188,577		$	7,521					$	7,132,979			$				(1,766,780				)					$	46,921		$	778,483			$	7,476,078
Balance, December 31, 2016																															42,825		$	1,038,055			189,101			$	7,542		$	7,153,332		$	(1,419,382	)		$	118,972			$	719,977			$	7,618,496
Net income attributable to Vornado	—		—			—		—						—				239,607				—				—				239,607			—			—				—		—			—				195,982				—				—				195,982
Net income attributable to noncontrolling interests in consolidated subsidiaries	—		—			—		—			—				—				—					26,361				26,361				—		—				—			—			—			—				—				14,414				14,414
Dividends on common shares	—		—			—		—			—				(356,863		)		—				—				(356,863		)		—		—				—			—			—			(268,817		)		—				—				(268,817		)
Dividends on preferred shares	—		—			—		—			—				(59,774		)		—				—				(59,774		)		—		—				—			—			—			(32,258		)		—				—				(32,258		)
Redemption of Series J preferred shares	(9,850	)	(238,842		)	—		—			—				(7,408		)		—				—				(246,250		)
Common shares issued:
Upon redemption of Class A units, at redemption value	—		—			293		12			28,114				—				—				—				28,126				—		—				249			10			25,552			—				—				—				25,562
Under employees' share option plan	—		—			106		4			5,936				—				—				—				5,940				—		—				103			4			8,842			—				—				—				8,846
Under dividend reinvestment plan	—		—			12		—			1,080				—				—				—				1,080				—		—				8			—			780			—				—				—				780
Contributions	—		—			—		—			—				—				—				19,699				19,699				—		—				—			—			—			—				—				991				991
Distributions:
Real estate fund investments	—		—			—		—			—				—				—				(59,843		)		(59,843		)		—		—				—			—			—			—				—				(6,200		)		(6,200		)
Other	—		—			—		—			—				—				—				(11,631		)		(11,631		)		—		—				—			—			—			—				—				(1,339		)		(1,339		)
Conversion of Series A preferred shares to common shares																															(2	)	(44		)		2			—			44			—				—				—				—
Deferred compensation shares and options	—		—			7		1			1,370				(186		)		—				—				1,185				—		—				2			—			1,076			(285		)		—				—				791
Increase in unrealized net gain on available-for-sale securities	—		—			—		—			—				—				42,798				—				42,798
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	—		—			—		—			—				—				(1,537		)		—				(1,537		)		—		—				—			—			—			—				(1,031		)		—				(1,031		)
Reduction in value of interest rate swaps	—		—			—		—			—				—				(3,482		)		—				(3,482		)
Increase in value of interest rate swaps																															—		—				—			—			—			—				4,636				—				4,636
Adjustments to carry redeemable Class A units at redemption value	—		—			—		—			(30,260		)		—				—				—				(30,260		)		—		—				—			—			90,208			—				—				—				90,208
Redeemable noncontrolling interests' share of above adjustments	—		—			—		—			—				—				(2,326		)		—				(2,326		)		—		—				—			—			—			—				207				—				207
Other	—		(1		)	(1	)	(1		)	1				(7		)		—				86				78				—		—				—			—			—			(46		)		2				(47		)		(91		)
Balance, September 30, 2016	42,827		$	1,038,111		188,994		$	7,537		$	7,139,220			$	(1,951,411	)		$	82,374			$	753,155			$	7,068,986
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

VORNADO REALTY TRUST

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)


(Amounts in thousands)	For the Nine Months Ended September 30,						For the Six Months Ended June 30,
	2017			2016			2018			2017
Cash Flows from Operating Activities:
Net income	$	210,577		$	277,378		$	105,620		$	221,331
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization (including amortization of deferred financing costs)	407,539			446,040			233,748			289,898
Distributions of income from partially owned entities							45,999			44,778
Net realized and unrealized losses on real estate fund investments							30,426			6,201
Other non-cash adjustments							24,320			30,070
Net gains on disposition of wholly owned and partially owned assets							(23,559		)	(501		)
Amortization of below-market leases, net							(21,107		)	(24,391		)
Return of capital from real estate fund investments	80,294			71,888			20,291			—
Distributions of income from partially owned entities	65,097			56,853
Other non-cash adjustments	43,921			33,971
Decrease in fair value of marketable securities							17,102			—
Straight-lining of rents	(37,752		)	(118,798		)	(10,122		)	(28,581		)
Amortization of below-market leases, net	(35,446		)	(41,676		)
Net realized and unrealized losses (gains) on real estate fund investments	18,537			(16,513		)
Equity in net income of partially owned entities	(6,013		)	(529		)
Equity in net loss (income) of partially owned entities							1,147			(47,721		)
Net gains on sale of real estate and other	(3,797		)	(5,074		)	—			(2,267		)
Net gains on disposition of wholly owned and partially owned assets	(501		)	(160,225		)
Real estate impairment losses	—			161,165
Changes in operating assets and liabilities:
Real estate fund investments							(68,950		)	—
Tenant and other receivables, net	5,485			613			(7,511		)	3,974
Prepaid assets	(70,949		)	(58,998		)	(19,092		)	(146,770		)
Other assets	(27,065		)	(64,200		)	(114,881		)	(5,606		)
Accounts payable and accrued expenses	27,609			4,793			(11,036		)	(6,029		)
Other liabilities	(15,911		)	(14,274		)	38,865			(18,169		)
Net cash provided by operating activities	661,625			572,414			241,260			316,217

Cash Flows from Investing Activities:
Distributions of capital from partially owned entities	347,776			102,836
Development costs and construction in progress	(274,716		)	(426,641		)	(185,039		)	(191,073		)
Additions to real estate	(207,759		)	(261,971		)	(113,300		)	(139,611		)
Repayment of JBG SMITH Properties loan receivable	115,630			—
Investments in partially owned entities	(33,578		)	(112,797		)
Distributions of capital from partially owned entities							81,997			113,507
Acquisitions of real estate and other	(11,841		)	(91,100		)	(56,500		)	(11,841		)
Proceeds from sales of real estate and related investments	9,543			167,673			44,599			5,180
Investments in partially owned entities							(26,663		)	(27,720		)
Proceeds from repayments of mortgage loans receivable	650			33			—			29
Net deconsolidation of 7 West 34th Street	—			(48,000		)
Investments in loans receivable and other	—			(11,700		)
Purchases of marketable securities	—			(4,379		)
Net cash used in investing activities	(54,295		)	(686,046		)	(254,906		)	(251,529		)

VORNADO REALTY TRUST

CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED

(UNAUDITED)


(Amounts in thousands)	For the Nine Months Ended September 30,						For the Six Months Ended June 30,
	2017			2016			2018			2017
Cash Flows from Financing Activities:
Cash and cash equivalents and restricted cash included in the spin-off of JBG SMITH Properties ($275,000 plus The Bartlett financing proceeds less transaction costs and other mortgage items)	$	(416,237	)	$	—
Redemption of preferred shares							$	(470,000	)	$	—
Dividends paid on common shares	(382,552		)	(356,863		)	(239,594		)	(268,817		)
Proceeds from borrowings	229,042			2,000,604			189,042			226,929
Repayments of borrowings	(177,109		)	(1,591,554		)	(148,408		)	(13,971		)
Contributions from noncontrolling interests							59,558			991
Distributions to noncontrolling interests							(49,338		)	(25,617		)
Dividends paid on preferred shares	(48,386		)	(64,006		)	(30,047		)	(32,258		)
Distributions to noncontrolling interests	(48,329		)	(95,055		)
Proceeds received from exercise of employee share options	25,011			7,020
Debt issuance and other costs	(2,944		)	(30,846		)
Contributions from noncontrolling interests	1,044			11,900
Proceeds received from exercise of employee share options and other							4,471			9,626
Debt issuance costs							(3,289		)	(2,919		)
Debt prepayment and extinguishment costs							(818		)	—
Repurchase of shares related to stock compensation agreements and related tax withholdings and other	(418		)	(186		)	(784		)	(285		)
Redemption of preferred shares	—			(246,250		)
Net cash used in financing activities	(820,878		)	(365,236		)	(689,207		)	(106,321		)
Net decrease in cash and cash equivalents and restricted cash	(213,548		)	(478,868		)	(702,853		)	(41,633		)
Cash and cash equivalents and restricted cash at beginning of period	1,599,331			1,943,515			1,914,812			1,599,322
Cash and cash equivalents and restricted cash at end of period	$	1,385,783		$	1,464,647		$	1,211,959		$	1,557,689

Reconciliation of Cash and Cash Equivalents and Restricted Cash:
Cash and cash equivalents at beginning of period	$	1,501,027		$	1,835,707		$	1,817,655		$	1,501,027
Restricted cash at beginning of period	95,032			99,943			97,157			95,032
Restricted cash included in discontinued operations at beginning of period	3,272			7,865			—			3,263
Cash and cash equivalents and restricted cash at beginning of period	$	1,599,331		$	1,943,515		$	1,914,812		$	1,599,322

Cash and cash equivalents at end of period	$	1,282,230		$	1,352,697		$	1,090,791		$	1,471,303
Restricted cash at end of period	103,553			108,976			121,168			82,651
Restricted cash included in discontinued operations at end of period	—			2,974			—			3,735
Cash and cash equivalents and restricted cash at end of period	$	1,385,783		$	1,464,647		$	1,211,959		$	1,557,689

Supplemental Disclosure of Cash Flow Information:
Cash payments for interest, excluding capitalized interest of $31,243 and $21,297	$	257,173		$	275,979
Cash payments for interest, excluding capitalized interest of $28,558 and $20,050							$	155,875		$	175,718
Cash payments for income taxes	$	5,292		$	7,602		$	4,365		$	3,151

Non-Cash Investing and Financing Activities:
Non-cash distribution to JBG SMITH Properties:
Assets	$	3,432,738		$	—
Liabilities	(1,414,186		)	—
Equity	(2,018,552		)	—
Adjustments to carry redeemable Class A units at redemption value	286,928			(30,260		)
Loan receivable established upon the spin-off of JBG SMITH Properties	115,630			—
Accrued capital expenditures included in accounts payable and accrued expenses	69,033			129,704			$	54,176		$	59,733
Write-off of fully depreciated assets	(41,458		)	(283,496		)	(38,117		)	(35,727		)
(Reduction) increase in unrealized net gain on available-for-sale securities	(10,559		)	42,798
Decrease in assets and liabilities resulting from the deconsolidation of investments that were previously consolidated:
Real estate, net	—			(122,047		)
Mortgage payable, net	—			(290,418		)
Adjustments to carry redeemable Class A units at redemption value							36,450			90,208
Reduction in unrealized net gain on available-for-sale securities							—			(16,215		)

VORNADO REALTY L.P.

CONSOLIDATED BALANCE SHEETS

(UNAUDITED)


(Amounts in thousands, except unit amounts)	September 30, 2017			December 31, 2016			June 30, 2018			December 31, 2017
ASSETS
Real estate, at cost:
Land	$	3,124,971		$	3,130,825		$	3,175,830		$	3,143,648
Buildings and improvements	9,824,618			9,684,144			9,969,190			9,898,605
Development costs and construction in progress	1,536,290			1,278,941			1,797,301			1,615,101
Leasehold improvements and equipment	96,820			93,910			105,625			98,941
Total	14,582,699			14,187,820			15,047,946			14,756,295
Less accumulated depreciation and amortization	(2,805,160		)	(2,581,514		)	(3,035,523		)	(2,885,283		)
Real estate, net	11,777,539			11,606,306			12,012,423			11,871,012
Cash and cash equivalents	1,282,230			1,501,027			1,090,791			1,817,655
Restricted cash	103,553			95,032			121,168			97,157
Marketable securities	193,145			203,704			165,650			182,752
Tenant and other receivables, net of allowance for doubtful accounts of $5,539 and $6,708	54,769			61,069
Tenant and other receivables, net of allowance for doubtful accounts of $3,891 and $5,526							65,773			58,700
Investments in partially owned entities	1,064,982			1,378,254			959,801			1,056,829
Real estate fund investments	351,750			462,132			373,039			354,804
Receivable arising from the straight-lining of rents, net of allowance of $1,215 and $2,227	917,827			885,167
Deferred leasing costs, net of accumulated amortization of $186,041 and $170,952	354,573			354,997
Identified intangible assets, net of accumulated amortization $144,683 and $194,422	166,198			189,668
Receivable arising from the straight-lining of rents, net of allowance of $1,798 and $954							936,614			926,711
Deferred leasing costs, net of accumulated amortization of $198,100 and $191,827							443,859			403,492
Identified intangible assets, net of accumulated amortization of $163,406 and $150,837							146,370			159,260
Assets related to discontinued operations	1,774			3,568,613			52			1,357
Other assets	573,780			508,878			550,543			468,205
	$	16,842,120		$	20,814,847		$	16,866,083		$	17,397,934
LIABILITIES, REDEEMABLE PARTNERSHIP UNITS AND EQUITY
Mortgages payable, net	$	8,131,606		$	8,113,248		$	8,108,618		$	8,137,139
Senior unsecured notes, net	846,641			845,577			843,417			843,614
Unsecured term loan, net	373,354			372,215			749,494			748,734
Unsecured revolving credit facilities	—			115,630			80,000			—
Accounts payable and accrued expenses	412,100			397,134			394,079			415,794
Deferred revenue	240,377			276,276			187,934			227,069
Deferred compensation plan	106,244			121,183			100,368			109,177
Liabilities related to discontinued operations	3,602			1,259,443			214			3,620
Preferred units redeemed on January 4 and 11, 2018							—			455,514
Other liabilities	469,919			417,199			520,331			464,635
Total liabilities	10,583,843			11,917,905			10,984,455			11,405,296
Commitments and contingencies
Redeemable partnership units:
Class A units - 12,555,623 and 12,197,162 units outstanding	965,276			1,273,018
Class A units - 12,616,515 and 12,528,899 units outstanding							932,613			979,509
Series D cumulative redeemable preferred units - 177,101 units outstanding	5,428			5,428			5,428			5,428
Total redeemable partnership units	970,704			1,278,446			938,041			984,937
Equity:
Partners' capital	8,547,405			8,198,929			8,454,905			8,392,223
Earnings less than distributions	(4,098,127		)	(1,419,382		)	(4,206,381		)	(4,183,253		)
Accumulated other comprehensive income	121,801			118,972			33,351			128,682
Total Vornado Realty L.P. equity	4,571,079			6,898,519			4,281,875			4,337,652
Noncontrolling interests in consolidated subsidiaries	716,494			719,977			661,712			670,049
Total equity	5,287,573			7,618,496			4,943,587			5,007,701
	$	16,842,120		$	20,814,847		$	16,866,083		$	17,397,934

VORNADO REALTY L.P.

CONSOLIDATED STATEMENTS OF INCOME

(UNAUDITED)


(Amounts in thousands, except per unit amounts)	For the Three Months Ended September 30,						For the Nine Months Ended September 30,						For the Three Months Ended June 30,						For the Six Months Ended June 30,
	2017			2016			2017			2016			2018			2017			2018			2017
REVENUES:
Property rentals	$	432,062		$	411,153		$	1,275,597		$	1,238,903		$	444,595		$	428,643		$	884,705		$	843,535
Tenant expense reimbursements	63,401			60,957			174,091			162,831			58,312			51,657			118,622			110,690
Fee and other income	33,292			30,643			98,212			88,034			38,911			30,787			74,928			64,920
Total revenues	528,755			502,753			1,547,900			1,489,768			541,818			511,087			1,078,255			1,019,145
EXPENSES:
Operating	225,226			213,762			661,585			626,546			235,981			215,700			473,583			436,359
Depreciation and amortization	104,972			105,877			315,223			316,383			111,846			105,123			220,532			210,251
General and administrative	36,261			33,584			122,161			112,593			34,427			35,405			76,960			81,580
Acquisition and transaction related costs	61			1,069			1,073			6,697
Expense from deferred compensation plan liability													2,077			789			1,673			3,258
Transaction related costs and other													1,017			260			14,173			1,012
Total expenses	366,520			354,292			1,100,042			1,062,219			385,348			357,277			786,921			732,460
Operating income	162,235			148,461			447,858			427,549			156,470			153,810			291,334			286,685
(Loss) income from partially owned entities	(41,801		)	3,811			5,578			3,892
Income (loss) from partially owned entities													8,757			46,021			(1,147		)	47,379
(Loss) income from real estate fund investments	(6,308		)	1,077			(1,649		)	28,750			(28,976		)	4,391			(37,783		)	4,659
Interest and other investment income, net	9,306			6,459			27,800			20,121			30,892			8,541			6,508			15,236
Income from deferred compensation plan assets													2,077			789			1,673			3,258
Interest and debt expense	(85,068		)	(79,721		)	(252,581		)	(250,034		)	(87,657		)	(84,789		)	(175,823		)	(167,513		)
Net gains on disposition of wholly owned and partially owned assets	—			—			501			160,225			23,559			—			23,559			501
Income before income taxes	38,364			80,087			227,507			390,503			105,122			128,763			108,321			190,205
Income tax expense	(1,188		)	(4,563		)	(2,429		)	(8,921		)
Income tax (expense) benefit													(467		)	610			(3,021		)	(2,303		)
Income from continuing operations	37,176			75,524			225,078			381,582			104,655			129,373			105,300			187,902
(Loss) income from discontinued operations	(47,930		)	25,080			(14,501		)	(104,204		)
Net (loss) income	(10,754		)	100,604			210,577			277,378
Less net income attributable to noncontrolling interests in consolidated subsidiaries	(4,022		)	(3,658		)	(18,436		)	(26,361		)
Net (loss) income attributable to Vornado Realty L.P.	(14,776		)	96,946			192,141			251,017
Income from discontinued operations													683			18,111			320			33,429
Net income													105,338			147,484			105,620			221,331
Less net loss (income) attributable to noncontrolling interests in consolidated subsidiaries													26,175			(7,677		)	34,449			(14,414		)
Net income attributable to Vornado Realty L.P.													131,513			139,807			140,069			206,917
Preferred unit distributions	(16,176		)	(19,096		)	(48,531		)	(59,920		)	(12,582		)	(16,177		)	(25,666		)	(32,355		)
Preferred unit issuance costs (Series J redemption)	—			(7,408		)	—			(7,408		)
NET (LOSS) INCOME attributable to Class A unitholders	$	(30,952	)	$	70,442		$	143,610		$	183,689
Preferred unit issuance costs													—			—			(14,486		)	—
NET INCOME attributable to Class A unitholders													$	118,931		$	123,630		$	99,917		$	174,562

(LOSS) INCOME PER CLASS A UNIT – BASIC:
INCOME PER CLASS A UNIT – BASIC:
Income from continuing operations, net	$	0.08		$	0.22		$	0.77		$	1.43		$	0.58		$	0.52		$	0.49		$	0.69
(Loss) income from discontinued operations, net	(0.24		)	0.13			(0.07		)	(0.52		)
Net (loss) income per Class A unit	$	(0.16	)	$	0.35		$	0.70		$	0.91
Income from discontinued operations, net													—			0.09			—			0.17
Net income per Class A unit													$	0.58		$	0.61		$	0.49		$	0.86
Weighted average units outstanding	201,300			200,458			201,093			200,300			202,064			201,127			201,997			200,987

(LOSS) INCOME PER CLASS A UNIT – DILUTED:
INCOME PER CLASS A UNIT – DILUTED:
Income from continuing operations, net	$	0.08		$	0.22		$	0.76		$	1.42		$	0.58		$	0.52		$	0.48		$	0.69
(Loss) income from discontinued operations, net	(0.24		)	0.13			(0.07		)	(0.52		)
Net (loss) income per Class A unit	$	(0.16	)	$	0.35		$	0.69		$	0.90
Income from discontinued operations, net													—			0.09			—			0.16
Net income per Class A unit													$	0.58		$	0.61		$	0.48		$	0.85
Weighted average units outstanding	203,113			202,141			203,311			201,932			203,354			202,623			203,266			202,617

DISTRIBUTIONS PER CLASS A UNIT	$	0.60		$	0.63		$	2.02		$	1.89		$	0.63		$	0.71		$	1.26		$	1.42

VORNADO REALTY L.P.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(UNAUDITED)

(Amounts in thousands) For the Three Months Ended
September 30, For the Nine Months Ended
September 30,
2017 2016 2017 2016
Net (loss) income $ (10,754 ) $ 100,604
$ 210,577
$ 277,378
Other comprehensive income (loss):
Increase (reduction) in unrealized net gain on available-for-sale securities 5,656
3,685
(10,559 ) 42,798
Pro rata share of amounts reclassified from accumulated other comprehensive income of a nonconsolidated subsidiary (646 ) —
8,622
—
Pro rata share of other comprehensive loss of nonconsolidated subsidiaries (626 ) (915 ) (1,657 ) (1,537 )
Increase (reduction) in value of interest rate swaps and other 1,973
7,689
6,611
(3,482 )
Comprehensive (loss) income (4,397 ) 111,063
213,594
315,157
Less comprehensive income attributable to noncontrolling interests in consolidated subsidiaries (4,022 ) (3,658 ) (18,436 ) (26,361 )
Comprehensive (loss) income attributable to Vornado L.P. $ (8,419 ) $ 107,405
$ 195,158
$ 288,796



(Amounts in thousands)	For the Three Months Ended June 30,					For the Six Months Ended June 30,
	2018		2017			2018		2017
Net income	$	105,338	$	147,484		$	105,620	$	221,331
Other comprehensive income (loss):
Increase (reduction) in value of interest rate swaps and other	2,908		(1,204		)	13,166		4,638
Pro rata share of other comprehensive income (loss) of nonconsolidated subsidiaries	390		(980		)	736		(1,031		)
Reduction in unrealized net gain on available-for-sale securities	—		(1,206		)	—		(16,215		)
Pro rata share of amounts reclassified from accumulated other comprehensive income of a nonconsolidated subsidiary	—		—			—		9,268
Comprehensive income	108,636		144,094			119,522		217,991
Less comprehensive loss (income) attributable to noncontrolling interests in consolidated subsidiaries	26,175		(7,677		)	34,449		(14,414		)
Comprehensive income attributable to Vornado Realty L.P.	$	134,811	$	136,417		$	153,971	$	203,577

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
	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						Accumulated Other Comprehensive Income				Non- controlling Interests in Consolidated Subsidiaries				Total Equity
	Units		Amount			Units	Amount
Balance, December 31, 2016	42,825		$	1,038,055		189,101	$	7,160,874		Earnings Less Than Distributions			$	Accumulated Other Comprehensive Income			(1,419,382	Non- controlling Interests in Consolidated Subsidiaries			)	Total Equity			$	118,972		$	719,977		$	7,618,496
Balance, December 31, 2017																									36,800		$	891,988		189,984			$	7,500,235	Earnings Less Than Distributions			$	(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.	—		—			—	—			192,141				—				—				192,141			—		—			—			—		140,069				—				—				140,069
Net income attributable to redeemable partnership units	—		—			—	—			(9,057		)		—				—				(9,057		)	—		—			—			—		(6,321		)		—				—				(6,321		)
Net income attributable to noncontrolling interests in consolidated subsidiaries	—		—			—	—			—				—				18,436				18,436
Net loss attributable to noncontrolling interests in consolidated subsidiaries																									—		—			—			—		—				—				(34,449		)		(34,449		)
Distributions to Vornado	—		—			—	—			(382,552		)		—				—				(382,552		)	—		—			—			—		(239,594		)		—				—				(239,594		)
Distributions to preferred unitholders	—		—			—	—			(48,386		)		—				—				(48,386		)	—		—			—			—		(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	—		—			349	34,564			—				—				—				34,564			—		—			176			12,246		—				—				—				12,246
Under Vornado's employees' share option plan	—		—			409	23,892			—				—				—				23,892			—		—			61			3,786		—				—				—				3,786
Under Vornado's dividend reinvestment plan	—		—			12	1,119			—				—				—				1,119			—		—			10			685		—				—				—				685
Contributions	—		—			—	—			—				—				1,044				1,044
Distributions:
JBG SMITH Properties	—		—			—	—			(2,430,427		)		—				—				(2,430,427		)
Contributions:
Real estate fund investments	—		—			—	—			—				—				(20,851		)		(20,851		)	—		—			—			—		—				—				45,347				45,347
Other	—		—			—	—			—				—				(1,815		)		(1,815		)	—		—			—			—		—				—				14,211				14,211
Conversion of Series A preferred units to Class A units	(2	)	(44		)	2	44			—				—				—				—
Distributions:
Real estate fund investments																									—		—			—			—		—				—				(10,246		)		(10,246		)
Other																									—		—			—			—		—				—				(23,201		)		(23,201		)
Preferred unit issuance																									—		(663		)	—			—		—				—				—				(663		)
Deferred compensation units and options	—		—			1	1,975			(418		)		—				—				1,557			—		—			7			585		(121		)		—				—				464
Reduction in unrealized net gain on available-for-sale securities	—		—			—	—			—				(10,559		)		—				(10,559		)
Pro rata share of amounts reclassified related to a nonconsolidated subsidiary	—		—			—	—			—				8,622				—				8,622
Pro rata share of other comprehensive loss of nonconsolidated subsidiaries	—		—			—	—			—				(1,657		)		—				(1,657		)
Pro rata share of other comprehensive income of nonconsolidated subsidiaries																									—		—			—			—		—				736				—				736
Increase in value of interest rate swaps	—		—			—	—			—				6,611				—				6,611			—		—			—			—		—				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	—		—			—	286,928			—				—				—				286,928			—		—			—			36,450		—				—				—				36,450
Redeemable partnership units' share of above adjustments	—		—			—	—			—				(188		)		—				(188		)	—		—			—			—		—				(859		)		—				(859		)
Other	—		—			4	(2		)	(46		)		—				(297		)		(345		)	—		—			—			547		1				—				1				549
Balance, September 30, 2017	42,823		$	1,038,011		189,878	$	7,509,394		$	(4,098,127	)		$	121,801			$	716,494			$	5,287,573
Balance, June 30, 2018																									36,800		$	891,325		190,238			$	7,563,580	$	(4,206,381	)		$	33,351			$	661,712			$	4,943,587

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						Accumulated Other Comprehensive Income				Non- controlling Interests in Consolidated Subsidiaries				Total Equity
	Units		Amount			Units		Amount
Balance, December 31, 2015	52,677		$	1,276,954		188,577		$	7,140,500		Earnings Less Than Distributions			$	Accumulated Other Comprehensive Income			(1,766,780	Non- controlling Interests in Consolidated Subsidiaries			)	Total Equity			$	46,921		$	778,483		$	7,476,078
Balance, December 31, 2016																										42,825		$	1,038,055		189,101			$	7,160,874	Earnings Less Than Distributions			$	(1,419,382	)		$	118,972			$	719,977			$	7,618,496
Net income attributable to Vornado Realty L.P.	—		—			—		—			251,017				—				—				251,017			—		—			—			—		206,917				—				—				206,917
Net income attributable to redeemable partnership units	—		—			—		—			(11,410		)		—				—				(11,410		)	—		—			—			—		(10,935		)		—				—				(10,935		)
Net income attributable to noncontrolling interests in consolidated subsidiaries	—		—			—		—			—				—				26,361				26,361			—		—			—			—		—				—				14,414				14,414
Distributions to Vornado	—		—			—		—			(356,863		)		—				—				(356,863		)	—		—			—			—		(268,817		)		—				—				(268,817		)
Distributions to preferred unitholders	—		—			—		—			(59,774		)		—				—				(59,774		)	—		—			—			—		(32,258		)		—				—				(32,258		)
Redemption of Series J preferred units	(9,850	)	(238,842		)	—		—			(7,408		)		—				—				(246,250		)
Class A Units issued to Vornado:
Upon redemption of redeemable Class A units, at redemption value	—		—			293		28,126			—				—				—				28,126			—		—			249			25,562		—				—				—				25,562
Under Vornado's employees' share option plan	—		—			106		5,940			—				—				—				5,940			—		—			103			8,846		—				—				—				8,846
Under Vornado's dividend reinvestment plan	—		—			12		1,080			—				—				—				1,080			—		—			8			780		—				—				—				780
Contributions	—		—			—		—			—				—				19,699				19,699			—		—			—			—		—				—				991				991
Distributions:
Real estate fund investments	—		—			—		—			—				—				(59,843		)		(59,843		)	—		—			—			—		—				—				(6,200		)		(6,200		)
Other	—		—			—		—			—				—				(11,631		)		(11,631		)	—		—			—			—		—				—				(1,339		)		(1,339		)
Conversion of Series A preferred units to Class A units																										(2	)	(44		)	2			44		—				—				—				—
Deferred compensation units and options	—		—			7		1,371			(186		)		—				—				1,185			—		—			2			1,076		(285		)		—				—				791
Increase in unrealized net gain on available-for-sale securities	—		—			—		—			—				42,798				—				42,798
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	—		—			—		—			—				(1,537		)		—				(1,537		)	—		—			—			—		—				(1,031		)		—				(1,031		)
Reduction in value of interest rate swaps	—		—			—		—			—				(3,482		)		—				(3,482		)
Increase in value of interest rate swaps																										—		—			—			—		—				4,636				—				4,636
Adjustments to carry redeemable Class A units at redemption value	—		—			—		(30,260		)	—				—				—				(30,260		)	—		—			—			90,208		—				—				—				90,208
Redeemable partnership units' share of above adjustments	—		—			—		—			—				(2,326		)		—				(2,326		)	—		—			—			—		—				207				—				207
Other	—		(1		)	(1	)	—			(7		)		—				86				78			—		—			—			—		(46		)		2				(47		)		(91		)
Balance, September 30, 2016	42,827		$	1,038,111		188,994		$	7,146,757		$	(1,951,411	)		$	82,374			$	753,155			$	7,068,986
Balance, June 30, 2017																										42,823		$	1,038,011		189,465			$	7,287,390	$	(1,524,806	)		$	115,839			$	727,796			$	7,644,230

VORNADO REALTY L.P.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)


(Amounts in thousands)	For the Nine Months Ended September 30,						For the Six Months Ended June 30,
	2017			2016			2018			2017
Cash Flows from Operating Activities:
Net income	$	210,577		$	277,378		$	105,620		$	221,331
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization (including amortization of deferred financing costs)	407,539			446,040			233,748			289,898
Distributions of income from partially owned entities							45,999			44,778
Net realized and unrealized losses on real estate fund investments							30,426			6,201
Other non-cash adjustments							24,320			30,070
Net gains on disposition of wholly owned and partially owned assets							(23,559		)	(501		)
Amortization of below-market leases, net							(21,107		)	(24,391		)
Return of capital from real estate fund investments	80,294			71,888			20,291			—
Distributions of income from partially owned entities	65,097			56,853
Other non-cash adjustments	43,921			33,971
Decrease in fair value of marketable securities							17,102			—
Straight-lining of rents	(37,752		)	(118,798		)	(10,122		)	(28,581		)
Amortization of below-market leases, net	(35,446		)	(41,676		)
Net realized and unrealized losses (gains) on real estate fund investments	18,537			(16,513		)
Equity in net income of partially owned entities	(6,013		)	(529		)
Equity in net loss (income) of partially owned entities							1,147			(47,721		)
Net gains on sale of real estate and other	(3,797		)	(5,074		)	—			(2,267		)
Net gains on disposition of wholly owned and partially owned assets	(501		)	(160,225		)
Real estate impairment losses	—			161,165
Changes in operating assets and liabilities:
Real estate fund investments							(68,950		)	—
Tenant and other receivables, net	5,485			613			(7,511		)	3,974
Prepaid assets	(70,949		)	(58,998		)	(19,092		)	(146,770		)
Other assets	(27,065		)	(64,200		)	(114,881		)	(5,606		)
Accounts payable and accrued expenses	27,609			4,793			(11,036		)	(6,029		)
Other liabilities	(15,911		)	(14,274		)	38,865			(18,169		)
Net cash provided by operating activities	661,625			572,414			241,260			316,217

Cash Flows from Investing Activities:
Distributions of capital from partially owned entities	347,776			102,836
Development costs and construction in progress	(274,716		)	(426,641		)	(185,039		)	(191,073		)
Additions to real estate	(207,759		)	(261,971		)	(113,300		)	(139,611		)
Repayment of JBG SMITH Properties loan receivable	115,630			—
Investments in partially owned entities	(33,578		)	(112,797		)
Distributions of capital from partially owned entities							81,997			113,507
Acquisitions of real estate and other	(11,841		)	(91,100		)	(56,500		)	(11,841		)
Proceeds from sales of real estate and related investments	9,543			167,673			44,599			5,180
Investments in partially owned entities							(26,663		)	(27,720		)
Proceeds from repayments of mortgage loans receivable	650			33			—			29
Net deconsolidation of 7 West 34th Street	—			(48,000		)
Investments in loans receivable and other	—			(11,700		)
Purchases of marketable securities	—			(4,379		)
Net cash used in investing activities	(54,295		)	(686,046		)	(254,906		)	(251,529		)

VORNADO REALTY L.P.

CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED

(UNAUDITED)


(Amounts in thousands)	For the Nine Months Ended September 30,						For the Six Months Ended June 30,
	2017			2016			2018			2017
Cash Flows from Financing Activities:
Cash and cash equivalents and restricted cash included in the spin-off of JBG SMITH Properties ($275,000 plus The Bartlett financing proceeds less transaction costs and other mortgage items)	$	(416,237	)	$	—
Redemption of preferred units							$	(470,000	)	$	—
Distributions to Vornado	(382,552		)	(356,863		)	(239,594		)	(268,817		)
Proceeds from borrowings	229,042			2,000,604			189,042			226,929
Repayments of borrowings	(177,109		)	(1,591,554		)	(148,408		)	(13,971		)
Contributions from noncontrolling interests in consolidated subsidiaries							59,558			991
Distributions to redeemable security holders and noncontrolling interests in consolidated subsidiaries							(49,338		)	(25,617		)
Distributions to preferred unitholders	(48,386		)	(64,006		)	(30,047		)	(32,258		)
Distributions to redeemable security holders and noncontrolling interests in consolidated subsidiaries	(48,329		)	(95,055		)
Proceeds received from exercise of Vornado stock options	25,011			7,020
Debt issuance and other costs	(2,944		)	(30,846		)
Contributions from noncontrolling interests in consolidated subsidiaries	1,044			11,900
Proceeds received from exercise of Vornado stock options and other							4,471			9,626
Debt issuance costs							(3,289		)	(2,919		)
Debt prepayment and extinguishment costs							(818		)	—
Repurchase of Class A units related to stock compensation agreements and related tax withholdings and other	(418		)	(186		)	(784		)	(285		)
Redemption of preferred units	—			(246,250		)
Net cash used in financing activities	(820,878		)	(365,236		)	(689,207		)	(106,321		)
Net decrease in cash and cash equivalents and restricted cash	(213,548		)	(478,868		)	(702,853		)	(41,633		)
Cash and cash equivalents and restricted cash at beginning of period	1,599,331			1,943,515			1,914,812			1,599,322
Cash and cash equivalents and restricted cash at end of period	$	1,385,783		$	1,464,647		$	1,211,959		$	1,557,689

Reconciliation of Cash and Cash Equivalents and Restricted Cash:
Cash and cash equivalents at beginning of period	$	1,501,027		$	1,835,707		$	1,817,655		$	1,501,027
Restricted cash at beginning of period	95,032			99,943			97,157			95,032
Restricted cash included in discontinued operations at beginning of period	3,272			7,865			—			3,263
Cash and cash equivalents and restricted cash at beginning of period	$	1,599,331		$	1,943,515		$	1,914,812		$	1,599,322

Cash and cash equivalents at end of period	$	1,282,230		$	1,352,697		$	1,090,791		$	1,471,303
Restricted cash at end of period	103,553			108,976			121,168			82,651
Restricted cash included in discontinued operations at end of period	—			2,974			—			3,735
Cash and cash equivalents and restricted cash at end of period	$	1,385,783		$	1,464,647		$	1,211,959		$	1,557,689

Supplemental Disclosure of Cash Flow Information:
Cash payments for interest, excluding capitalized interest of $31,243 and $21,297	$	257,173		$	275,979
Cash payments for interest, excluding capitalized interest of $28,558 and $20,050							$	155,875		$	175,718
Cash payments for income taxes	$	5,292		$	7,602		$	4,365		$	3,151

Non-Cash Investing and Financing Activities:
Non-cash distribution to JBG SMITH Properties:
Assets	$	3,432,738		$	—
Liabilities	(1,414,186		)	—
Equity	(2,018,552		)	—
Adjustments to carry redeemable Class A units at redemption value	286,928			(30,260		)
Loan receivable established upon the spin-off of JBG SMITH Properties	115,630			—
Accrued capital expenditures included in accounts payable and accrued expenses	69,033			129,704			$	54,176		$	59,733
Write-off of fully depreciated assets	(41,458		)	(283,496		)	(38,117		)	(35,727		)
(Reduction) increase in unrealized net gain on available-for-sale securities	(10,559		)	42,798
Decrease in assets and liabilities resulting from the deconsolidation of investments that were previously consolidated:
Real estate, net	—			(122,047		)
Mortgage payable, net	—			(290,418		)
Adjustments to carry redeemable Class A units at redemption value							36,450			90,208
Reduction in unrealized net gain on available-for-sale securities							—			(16,215		)

VORNADO REALTY TRUST AND VORNADO REALTY L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)


1.	Organization

Vornado Realty Trust (“Vornado”) is a fully integrated real estate investment trust (“REIT”) and conducts its business through, and substantially all of its interests in properties are held by, Vornado Realty L.P., a Delaware limited partnership (the “Operating Partnership”). Vornado is the sole general partner of, and owned approximately93.5% of the common limited partnership interest in, the Operating Partnership as of ~~September~~June 30, ~~2017.~~2018. All references to the “Company,” “we,” “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, 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 ~~as amended,~~ for the year ended December 31, ~~2016,~~2017, as filed with the SEC.

As a result of the spin-off of our Washington, DC segment, effective July 1, 2017, the historical results of our Washington, DC segment are reflected in our consolidated financial statements as discontinued operations for all periods presented.

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 ~~nine~~six months ended ~~September~~June 30, ~~2017~~2018 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, an expense of $789,000 and $3,258,000, 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" on our consolidated statements of income. In addition, for the six months ended June 30, 2017, an expense 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.

~~VORNADO REALTY TRUST AND VORNADO REALTY L.P.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED~~

~~(UNAUDITED)~~


3.	Recently Issued Accounting Literature

In May 2014, the Financial Accounting Standards Board (“FASB”) issued an update ("(“ASU ~~2014-09"~~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 ~~will adopt~~adopted this standard effective January 1, 2018 ~~with the exception of the components of revenue from leases, which has been deferred until the adoption of the update ASU 2016-02 to ASC Topic 842,~~ ~~Leases,~~ ~~on January 1, 2019. We will utilize~~using the modified retrospective method ~~when adopting ASU 2014-09, which requires~~applied to all existing contracts not yet completed as of January 1, 2018 and recorded a $14,519,000 cumulative-effect adjustment to ~~retained earnings as of the~~ beginning ~~of the fiscal year of adoption. We have analyzed our revenue streams and identified the areas that we expect to be impacted by the~~accumulated deficit. The adoption of ~~this standard. We expect this standard will~~ASC 606 did not have an impact on the classification of reimbursements of real estate taxes and insurance expenses and certain non-lease components of revenue (e.g., reimbursements of common area maintenance expenses) from leases with noa material impact on ~~"total revenues", for new leases executed on or after January 1, 2019. We are in the process of completing the evaluation of the overall impact of this standard on~~ our ~~consolidated~~ financial statements ~~including required informational disclosures for our revenue streams beginning with the first reporting period after adoption.~~(see Note 4 - Revenue Recognition).

VORNADO REALTY TRUST AND VORNADO REALTY L.P.

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 ASC Topic 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 ~~will adopt~~adopted this ~~standard~~update effective January 1, ~~2018.~~2018 using the modified retrospective approach. While the adoption of this ~~standard~~update requires us to continue to measure ~~“marketable securities”~~"marketable securities" at fair value aton each reporting date, the changes in fair value will be recognized in current period earnings as opposed to ~~“other~~"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, 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 dual 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 asset and a lease liability for all leases with a term of greater than 12 months. Leases with a term of 12 months or less will be accounted for similar to existing guidance for operating leases. Lessees will recognize expense 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.We are currently evaluating the overall impact of the adoption of ASU 2016-02 on our consolidated financial statements and believe that the standard will more significantly impact the accounting for leases in which we are a lessee. We have a number of ground leases for which we will be required to record a right-of-use asset and lease liability equal to the present value of the remaining minimum lease payments, and will continue to recognize expense on a straight-line basis upon adoption of this standard. We also expect that this standard will require us to allocate total consideration from leases between lease and non-lease components based on the estimated stand-alone selling prices of the components. The lease components (e.g., base rent) will continue to be recognized on a straight-line basis over the term of the lease and certain non-lease components (e.g., reimbursements of common area maintenance expenses) will be accounted for under the new revenue recognition guidance of ASU 2014-09. As a result, we expect that this standard will have an impact on the classification of reimbursements of real estate taxes, insurance expenses and common area maintenance expenses on our consolidated statements of income, with no impact on "total revenue", for new leases executed on or after January 1, 2019. 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, we ~~may~~will no longer be able to capitalize internal leasing costs and instead ~~may~~will be required to expense these costs as incurred. During the three and six months ended June 30, 2018 and 2017, we capitalized internal leasing costs of $1,358,000 and $2,706,000, and $1,241,000 and $2,214,000 respectively, excluding our former Washington, DC segment which was spun-off on July 17, 2017. ASU 2016-02 is effective for reporting periods beginning after December 15, 2018, with early adoption permitted. We will adopt this standard effective January 1, 2019 using the modified retrospective approach and will elect to use the practical expedients provided by this standard.

~~In March 2016, the FASB issued an update (“ASU 2016-09”)~~ ~~Improvements to Employee Share-Based Payment Accounting~~ ~~to ASC Topic 718,~~ ~~Compensation - Stock Compensation~~ (“ASC 718”). ASU 2016-09 amends several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. ASU 2016-09 was effective for interim and annual reporting periods in fiscal years beginning after December 15, 2016. The adoption of this update as of January 1, 2017 did not have a material impact on our consolidated financial statements.

~~VORNADO REALTY TRUST AND VORNADO REALTY L.P.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED~~

~~(UNAUDITED)~~


3.	~~Recently Issued Accounting Literature - continued~~

~~In August 2016, the FASB issued an update (“ASU 2016-15”)~~ ~~Classification of Certain Cash Receipts and Cash Payments~~ ~~to ASC Topic 230,~~ ~~Statement of Cash Flows~~. ASU 2016-15 clarifies guidance on the classification of certain cash receipts and payments in the statement of cash flows to reduce diversity in practice with respect to (i) debt prepayment or debt extinguishment costs, (ii) settlement of zero-coupon debt instruments or other debt instruments with coupon interest rates that are insignificant in relation to the effective interest rate of the borrowing, (iii) contingent consideration payments made after a business combination, (iv) proceeds from the settlement of insurance claims, (v) proceeds from the settlement of corporate-owned life insurance policies, including bank-owned life insurance policies, (vi) distributions received from equity method investees, (vii) beneficial interests in securitization transactions, and (viii) separately identifiable cash flows and application of the predominance principle. ASU 2016-15 is effective for interim and annual reporting periods in fiscal years beginning after December 15, 2017, with early adoption permitted. We elected to early adopt ASU 2016-15 effective January 1, 2017, with retrospective application to our consolidated statements of cash flows. The adoption of ASU 2016-15 impacted our classification of distributions received from equity method investees. We selected the nature of earnings approach for classifying distributions. Under this approach, the distributions from equity method investees are classified on the basis of the nature of the activity of the investee that generated the distribution. The retrospective application of ASU 2016-15 resulted in the reclassification of certain distributions of income from partially owned entities to distributions of capital from partially owned entities, which reduced net cash provided by operating activities and net cash used in investing activities by $1,839,000 for the nine months ended September 30, 2016.

~~In November 2016, the FASB issued an update (“ASU 2016-18”)~~ ~~Restricted Cash~~ ~~to ASC Topic 230,~~ ~~Statement of Cash Flows~~. ASU 2016-18 requires that a statement of cash flows explain the change during the period in the total of cash, cash equivalents and amounts generally described as restricted cash or restricted cash equivalents. Restricted cash and restricted cash equivalents will be included with cash and cash equivalents when reconciling the beginning of period and end of period balances on the statement of cash flows upon adoption of this standard. ASU 2016-18 is effective for interim and annual reporting periods in fiscal years beginning after December 15, 2017, with early adoption permitted. We elected to early adopt ASU 2016-18 effective January 1, 2017, with retrospective application to our consolidated statements of cash flows. Accordingly, the consolidated statements of cash flows present a reconciliation of the changes in cash and cash equivalents and restricted cash. Restricted cash primarily consists of security deposits, cash restricted for the purposes of facilitating a Section 1031 Like-Kind Exchange, cash restricted in connection with our deferred compensation plan and cash escrowed under loan agreements for debt service, real estate taxes, property insurance and capital improvements.

In February 2017, the FASB issued an update (“ASU 2017-05”) Clarifying the Scope of Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial Assets to ASC Subtopic 610-20, Other Income-Gains and Losses from the Derecognition of Nonfinancial Assets. 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 2017-05 is effective for interim and annual reporting periods in fiscal years beginning after December 15, 2017. We adopted this update on January 1, 2018 using the modified retrospective approach applied to all contracts not yet completed. The adoption of this ~~standard on January 1, 2018 is~~update did not ~~expected to~~ have ana material impact on our consolidated financial statements.

In May 2017, the FASB issued an update (“ASU 2017-09”) Scope of Modification Accounting to ASC ~~718.~~Topic 718, Compensation - Stock Compensation ("ASC 718"). ASU 2017-09 provides guidance about which changes to the terms and conditions of a share-based payment award require an entity to apply modification accounting in ASC 718. ASU 2017-09 is effective for interim and annual reporting periods in fiscal years beginning after December 15, 2017. The adoption of this ~~standard~~update on January 1, 2018 isdid not ~~expected to~~ have ana 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”~~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 ~~are currently evaluating the impact of the adoption of~~early adopted ASU 2017-12 on ~~our consolidated financial statements, but do not believe~~January 1, 2018 using the modified retrospective approach. The adoption of this ~~standard will~~update did not have a material impact on our consolidated financial statements.

2120

VORNADO REALTY TRUST AND VORNADO REALTY L.P.

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, 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" 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 arising from the operation of 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 expenses and real estate taxes of the common areas of our properties. Revenue is recognized in the same period as the related expenses are incurred.

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.

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") 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.

VORNADO REALTY TRUST AND VORNADO REALTY L.P.

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, 2018 and 2017 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, 2017
	Total		New York		Other			Total		New York		Other
Base rent	$	405,927	$	343,084	$	62,843		$	393,116	$	334,476	$	58,640
Hotel Pennsylvania	27,082		27,082		—			24,986		24,986		—
Trade shows	11,586		—		11,586			10,541		—		10,541
Property rentals	444,595		370,166		74,429			428,643		359,462		69,181
Operating expense reimbursements	44,784		40,356		4,428			39,014		35,510		3,504
Tenant services	13,528		10,394		3,134			12,643		10,031		2,612
Tenant expense reimbursements	58,312		50,750		7,562			51,657		45,541		6,116
BMS cleaning fees	30,867		33,407		(2,540		)	24,425		26,617		(2,192		)
Management and leasing fees	2,707		2,464		243			2,777		2,465		312
Lease termination fees	804		400		404			1,106		1,062		44
Other income	4,533		1,365		3,168			2,479		1,715		764
Fee and other income	38,911		37,636		1,275			30,787		31,859		(1,072		)
Total consolidated revenues	$	541,818	$	458,552	$	83,266		$	511,087	$	436,862	$	74,225



(Amounts in thousands)	For the Six Months Ended June 30, 2018							For the Six Months Ended June 30, 2017
	Total		New York		Other			Total		New York		Other
Base rent	$	812,490	$	687,758	$	124,732		$	776,956	$	660,157	$	116,799
Hotel Pennsylvania	41,754		41,754		—			37,627		37,627		—
Trade shows	30,461		—		30,461			28,952		—		28,952
Property rentals	884,705		729,512		155,193			843,535		697,784		145,751
Operating expense reimbursements	92,652		85,082		7,570			85,389		78,466		6,923
Tenant services	25,970		20,158		5,812			25,301		20,614		4,687
Tenant expense reimbursements	118,622		105,240		13,382			110,690		99,080		11,610
BMS cleaning fees	59,222		63,560		(4,338		)	49,496		52,740		(3,244		)
Management and leasing fees	5,471		4,945		526			5,052		4,492		560
Lease termination fees	1,149		708		441			4,956		4,789		167
Other income	9,086		3,071		6,015			5,416		4,216		1,200
Fee and other income	74,928		72,284		2,644			64,920		66,237		(1,317		)
Total consolidated revenues	$	1,078,255	$	907,036	$	171,219		$	1,019,145	$	863,101	$	156,044

VORNADO REALTY TRUST AND VORNADO REALTY L.P.

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 ~~has~~had an initial eight-year term ~~and a~~ending February 2019. On January 29, 2018, the Fund's term was extended to February 2023. The Fund's three-year investment period ~~that~~ 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 ~~September 29, 2017,~~January 17, 2018, the Fund completed the sale of ~~800 Corporate Pointe in Culver City, CA~~the retail condominium at 11 East 68th Street, a property located on Madison Avenue and 68th Street, for ~~$148,000,000.~~$82,000,000. From the inception of this investment through its disposition, the Fund realized a ~~$35,620,000~~$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.

As of ~~September~~June 30, ~~2017,~~2018, we had ~~five~~four real estate fund investments through the Fund and the Crowne Plaza Joint Venture with an aggregate fair value of ~~$351,750,000,~~$373,039,000, or ~~$95,136,000~~$47,475,000 in excess of cost, and had remaining unfunded commitments of ~~$117,872,000,~~$50,494,000, of which our share was ~~$34,502,000.~~ $16,119,000. At December 31, 2017, we had five real estate fund investments with an aggregate fair value of $354,804,000.

VORNADO REALTY TRUST AND VORNADO REALTY L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(UNAUDITED)


6.	Real Estate Fund Investments - continued

Below is a summary of income (loss) from the Fund and the Crowne Plaza Joint Venture for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2018 and ~~2016.~~2017.

(Amounts in thousands) For the Three Months Ended
September 30, For the Nine Months Ended
September 30,
2017 2016 2017 2016
Net investment income $ 6,028
$ 5,841
$ 16,888
$ 12,237
Net realized gains on exited investments 35,620
—
35,861
14,676
Previously recorded unrealized gains on exited investment (36,736 ) —
(25,538 ) (14,254 )
Net unrealized (loss) gain on held investments (11,220 ) (4,764 ) (28,860 ) 16,091
(Loss) income from real estate fund investments (6,308 ) 1,077
(1,649 ) 28,750
Less income attributable to noncontrolling interests in consolidated subsidiaries (1,486 ) (270 ) (9,684 ) (15,088 )
(Loss) income from real estate fund investments attributable to the Operating Partnership ⁽¹⁾
(7,794 ) 807
(11,333 ) 13,662
Less loss (income) attributable to noncontrolling interests in the Operating Partnership 485
(49 ) 706
(843 )
(Loss) income from real estate fund investments attributable to Vornado $ (7,309 ) $ 758
$ (10,627 ) $ 12,819



(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 subsidiaries	29,527			(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	)

____________________

(1)

Excludes ~~$744 and $804 of~~ management and leasing fees of $1,104 and $1,381 for the three months ended ~~September~~June 30, ~~2017~~2018 and ~~2016,~~2017, respectively, and ~~$3,125~~$1,906 and ~~$2,499~~$2,381 for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2018 and ~~2016,~~2017, respectively, which are included as a component of "fee and other income" on our consolidated statements of income.


5.7.	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 ~~September~~June 30, ~~2017~~2018 and December 31, ~~2016.~~2017.


(Amounts in thousands)	As of September 30, 2017						As of December 31, 2016						Fair Value at				Decrease in
	Fair Value		GAAP Cost		Unrealized Gain		Fair Value		GAAP Cost		Unrealized Gain		June 30, 2018		December 31, 2017		Fair Value ⁽¹⁾
Equity securities:
Lexington Realty Trust	$	188,753	$	72,549	$	116,204	$	199,465	$	72,549	$	126,916	$	161,234	$	178,226	$	(16,992	)
Other	4,392		650		3,742		4,239		650		3,589		4,416		4,526		(110		)
	$	193,145	$	73,199	$	119,946	$	203,704	$	73,199	$	130,505	$	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).

2224

VORNADO REALTY TRUST AND VORNADO REALTY L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(UNAUDITED)


6.8.	Investments in Partially Owned Entities

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

As of ~~September~~June 30, ~~2017,~~2018, we own 1,654,068 Alexander’s common shares, ~~representing a~~or approximately 32.4% ~~interest in Alexander’s. We account for our investment in~~of Alexander’s ~~under the equity method.~~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 ~~September~~June 30, ~~2017,~~2018, the market value (“fair value” pursuant to ASC Topic 820, Fair Value Measurements (“ASC 820”)) of our investment in Alexander’s, based on Alexander’s ~~September~~June 29, ~~2017~~2018 quarter ended closing share price of ~~$424.09,~~$382.63, was ~~$701,474,000,~~$632,896,000, or ~~$575,842,000~~$518,128,000 in excess of the carrying amount on our consolidated balance sheet. As of ~~September~~June 30, ~~2017,~~2018, 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 ~~$39,418,000.~~$39,140,000. 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.

~~On June 1, 2017, Alexander’s completed a $500,000,000 refinancing~~Alexander's paid $3,971,000 of Transfer Tax upon the ~~office portion~~November 2012 sale of ~~731 Lexington Avenue. The interest-only loan is at LIBOR plus 0.90% (2.14% at September 30, 2017)~~its Kings Plaza Regional Shopping Center located in Brooklyn, New York. Alexander's accrued $23,797,000 of potential additional Transfer Tax and ~~matures in June 2020 with four one-year extension options. In connection therewith, Alexander’s purchased an~~related interest ~~rate cap with a notional amount~~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 ~~$500,000,000 that caps LIBOR at a rate of 6.00%. The property was previously encumbered by a $300,000,000 interest-only mortgage at LIBOR plus 0.95%~~2018 which was ~~scheduled~~subsequently paid on April 5, 2018 in order to ~~mature~~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 ~~March 2021.~~"income (loss) from partially owned entities" on our consolidated statements of income.

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

As of ~~September~~June 30, ~~2017,~~2018, we own 5,717,184 UE operating partnership units, representing a 4.5% ownership interest in UE. We account for our investment in UE under the equity method and record our share of UE’s net income or loss on a one-quarter lag basis. In ~~2017~~2018 and ~~2016,~~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 ~~September~~June 30, ~~2017,~~2018, the fair value of our investment in UE, based on UE’s ~~September~~June 29, ~~2017~~2018 quarter ended closing share price of ~~$24.12,~~$22.87, was ~~$137,898,000,~~$130,752,000, or ~~$91,356,000~~$86,792,000 in excess of the carrying amount on our consolidated balance sheet.

During the three and nine months ended September 30, 2017, UE issued approximately 6,250,000 and 20,250,000 operating partnership units related to property acquisitions and public offerings of its common stock. As a result, our ownership interest in UE decreased to 4.5% from 5.4%. In accordance with ASC 323-10-40-1, we account for a unit issuance by an equity method investee as if we had sold a proportionate share of our investment. Accordingly, during the three and nine months ended September 30, 2017, we recorded $5,200,000 and $21,100,000, respectively, of net gains in connection with these issuances which are included in “(loss) income from partially owned entities” on our consolidated statements of income.

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

As of ~~September~~June 30, ~~2017,~~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.

~~Based~~As of June 30, 2018, the fair value of our investment in PREIT, based on PREIT’s ~~September~~June 29, ~~2017~~2018 quarter ended closing share price of ~~$10.49, the market value (“fair value” pursuant to ASC Topic 323,~~ ~~Investments - Equity Method and Joint Ventures~~)$10.99, was $68,688,000 or $5,448,000 in excess of ~~our investment in PREIT was $65,563,000 or $44,465,000 below~~ the carrying amount on our consolidated balance sheet. We have concluded that our investment in PREIT is “other-than-temporarily” impaired and recorded a $44,465,000 non-cash impairment loss on our consolidated statements of income. Our conclusion was based on a sustained trading value of PREIT stock below our carrying amount and our inability to forecast a recovery in the near-term.

~~VORNADO REALTY TRUST AND VORNADO REALTY L.P.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED~~

~~(UNAUDITED)~~


6.	~~Investments in Partially Owned Entities - continued~~

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

As of ~~September~~June 30, ~~2017,~~2018, the carrying amount of our investment in PREIT exceeds our share of the equity in the net assets of PREIT by approximately ~~$33,399,000.~~$33,782,000. The majority of this basis difference 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.

~~Moynihan Office Building~~

In September 2016, our 50.1% joint venture with the Related Companies (“Related”) was designated by Empire State Development (“ESD”), an entity of New York State to redevelop the historic Farley Post Office building. The building will include a new Moynihan Train Hall and approximately 850,000 rentable square feet of commercial space, comprised of approximately 730,000 square feet of office space and approximately 120,000 square feet of retail space. On June 15, 2017, the joint venture closed a 99-year, triple-net lease with ESD for the commercial space at the Moynihan Office Building and made a $230,000,000 upfront contribution, of which our share is $115,230,000, towards the construction of the train hall. The lease calls for annual rent payments of $5,000,000 plus payments in lieu of real estate taxes. Simultaneously, the joint venture completed a $271,000,000 loan facility, with an initial advance of $202,299,000. The interest-only loan is at LIBOR plus 3.25% (4.48% at September 30, 2017) and matures in June 2019 with two one-year extension options.

The joint venture has also 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 bears a full guaranty from Skanska AB.

~~Mezzanine Loan – New York~~

On May 9, 2017, a $150,000,000 mezzanine loan owned by a joint venture in which we have a 33.3% ownership interest was repaid at its maturity and we received our $50,000,000 share. The mezzanine loan earned interest at LIBOR plus 9.42%.

~~Sterling Suffolk Racecourse, LLC (“Suffolk Downs JV”)~~

On May 26, 2017, Suffolk Downs JV, a joint venture in which we have a 21.2% equity interest, sold the property comprising the Suffolk Downs racetrack in East Boston, Massachusetts (“Suffolk Downs”) for $155,000,000, which resulted in net proceeds and a net gain to us of $15,314,000. In addition, we were repaid $29,318,000 of principal and $6,129,000 of accrued interest on our debt investments in Suffolk Downs JV, resulting in a net gain of $11,373,000.

~~330 Madison Avenue~~

On July 19, 2017, the joint venture, in which we have a 25.0% interest, completed a $500,000,000 refinancing of 330 Madison Avenue, an 845,000 square foot Manhattan office building. The seven-year interest-only loan matures in August 2024 and has a fixed rate of 3.43%. Our share of net proceeds, after repayment of the existing $150,000,000 LIBOR plus 1.30% mortgage and closing costs, was approximately $85,000,000.

~~280 Park Avenue~~

On August 23, 2017, the joint venture, in which we have a 50.0% interest, completed a $1.2 billion refinancing of 280 Park Avenue, a 1,250,000 square foot Manhattan office building. The loan is interest-only at LIBOR plus 1.73% (2.97% at September 30, 2017) and matures in September 2019 with five one-year extension options. Our share of net proceeds, after repayment of the existing $900,000,000 LIBOR plus 2.00% mortgage and closing costs, was approximately $140,000,000.

2425

VORNADO REALTY TRUST AND VORNADO REALTY L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(UNAUDITED)


6.8.	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 submarket 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, 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 and other" and $6,538,000 is allocated to "noncontrolling interests in consolidated subsidiaries" on our consolidated statements of income.

On June 11, 2018, the joint venture completed a $675,000,000 refinancing of Independence Plaza. The seven-year interest-only loan matures in July 2025 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.

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 liquidated the inventory of its U.S. stores and ceased operations. We carry our Toys investment at zero. Further, we do not hold any debt of Toys and do not guarantee any of Toys’ obligations. For income tax purposes, we carry our investment in Toys as of June 30, 2018 at approximately $420,000,000, which could result in a tax deduction in future periods.

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.

VORNADO REALTY TRUST AND VORNADO REALTY L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(UNAUDITED)


8.	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	Balance as of						(Amounts in thousands)	Percentage Ownership at June 30, 2018		Balance as of
		September 30, 2017	September 30, 2017			December 31, 2016					June 30, 2018				December 31, 2017
Investments:	Investments:								Investments:	Percentage Ownership at June 30, 2018
	Partially owned office buildings/land ⁽¹⁾	Various	$	542,778		$	734,536		Partially owned office buildings/land⁽¹⁾	Various		$	503,240			$	504,393
	Alexander’s	32.4%	125,632			129,324			Alexander’s	32.4%		114,768				126,400
	PREIT	8.0%	66,477			122,883			PREIT	8.0%		63,240				66,572
	UE	4.5%	46,542			24,523			UE	4.5%		43,960				46,152
	Other investments ⁽²⁾	Various	283,553			366,988			Other investments⁽²⁾	Various		234,593				313,312
			$	1,064,982		$	1,378,254					$	959,801			$	1,056,829

	330 Madison Avenue⁽³⁾	25.0%	$	(53,237	)	$	—		330 Madison Avenue⁽³⁾	25.0%		$	(56,463	)		$	(53,999	)
	7 West 34th Street ⁽⁴⁾	53.0%	(46,013		)	(43,022		)	7 West 34th Street ⁽⁴⁾	53.0%		(49,363		)		(47,369		)
			$	(99,250	)	$	(43,022	)				$	(105,826	)		$	(101,368	)

____________________


(1)	Includes interests in 280 Park Avenue, 650 Madison Avenue, One Park Avenue, ~~666 Fifth Avenue (Office), 330 Madison Avenue (2016 only - see (3) below),~~ 512 West 22nd Street, 85 Tenth Avenue, 61 Ninth Avenue and others.


(2)	Includes interests in Independence Plaza, Fashion Centre Mall/Washington Tower, Rosslyn Plaza, 50-70 West 93rd Street, Moynihan Office Building, ~~Toys (which has a carrying amount of zero),~~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 as of September 30, 2017.~~sheets.


(4)	Our negative basis ~~results~~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.

~~VORNADO REALTY TRUST AND VORNADO REALTY L.P.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED~~

~~(UNAUDITED)~~


6.	~~Investments in Partially Owned Entities - continued~~

Below is a schedule of net income (loss) ~~income~~ from partially owned entities.


(Amounts in thousands)	(Amounts in thousands)	Percentage Ownership at September 30, 2017		For the Three Months Ended September 30,								For the Nine Months Ended September 30,							(Amounts in thousands)	Percentage Ownership at June 30, 2018		For the Three Months Ended June 30,								For the Six Months Ended June 30,
			2017				2016				2017				2016						2018				2017				2018				2017
Our share of net (loss) income:
Our share of net income (loss):																			Our share of net income (loss):
	PREIT (see page 23 for details):																		Alexander's (see page 25 for details):
	Non-cash impairment loss	8.0%		$	(44,465	)		$	—			$	(44,465	)		$	—		Equity in net income⁽¹⁾	32.4%		$	6,146			$	6,690			$	2,937			$	13,582
	Equity in net earnings			(5,283		)		52				(9,015		)		(4,763		)	Management, leasing and development fees			1,021				1,507				2,229				3,016
				(49,748		)		52				(53,480		)		(4,763		)				7,167				8,197				5,166				16,598
	Alexander's (see page 23 for details):
	Equity in net earnings	32.4%		6,510				6,891				20,092				20,640			Partially owned office buildings⁽²⁾	Various		2,002				236				(2,281		)		1,046
	Management, leasing and development fees			1,335				1,894				4,351				5,307
				7,845				8,785				24,443				25,947			UE (see page 25 for details):
	UE (see page 23 for details):																		Equity in net income⁽³⁾	4.5%		1,038				18,794				321				19,885
	Net gain resulting from UE operating partnership unit issuances	4.5%		5,200				—				21,100				—			Management, leasing and development fees			74				209				150				418
	Equity in net earnings			708				1,949				4,693				3,896						1,112				19,003				471				20,303
	Management fees			100				209				518				627
				6,008				2,158				26,311				4,523			PREIT (see page 25 for details):	8.0%		(1,068		)		(902		)		(1,497		)		(3,732		)

	Partially owned office buildings/land⁽¹⁾	Various		(5,551		)		(8,642		)		(23,508		)		(29,882		)	Other investments⁽⁴⁾	Various		(456		)		19,487				(3,006		)		13,164

	Other investments⁽²⁾	Various		(355		)		1,458				31,812				8,067						$	8,757			$	46,021			$	(1,147	)		$	47,379

				$	(41,801	)		$	3,811			$	5,578			$	3,892

____________________


(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, ~~666 Fifth Avenue (Office),~~ 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 Avenue (see Note 6 - Real Estate Fund Investments).


~~(2)~~(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, ~~Toys,~~666 Fifth Avenue Office Condominium 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. ~~See page 24 for details.~~

2627

VORNADO REALTY TRUST AND VORNADO REALTY L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(UNAUDITED)


7.9.	Dispositions

~~Discontinued Operations~~

On July 17, 2017, we completed the spin-off of our Washington, DC segment comprised of (i) 37 office properties totaling over 11.1 million square feet, five multifamily properties with 3,133 units and five other assets totaling approximately 406,000 square feet and (ii) 18 future development assets totaling over 10.4 million square feet of estimated potential development density, and (iii) $412.5 million of cash ($275.0 million plus The Bartlett financing proceeds less transaction costs and other mortgage items) to JBG SMITH Properties (“JBGS”). On July 18, 2017, JBGS was combined with the management business and certain Washington, DC assets of The JBG Companies (“JBG”), a Washington, DC real estate company. Steven Roth, the Chairman of the Board of Trustees and Chief Executive Officer of Vornado, is the Chairman of the Board of Trustees of JBGS. Mitchell Schear, former President of our Washington, DC business, is a member of the Board of Trustees of JBGS. We are providing transition services to JBGS initially including information technology, financial reporting and payroll services. The spin-off was effected through a tax-free distribution by Vornado to the holders of Vornado common shares of all of the common shares of JBGS at the rate of one JBGS common share for every two common shares of Vornado and the distribution by the Operating Partnership to the holders of its common units of all of the outstanding common units of JBG SMITH Properties LP (“JBGSLP”) at the rate of one JBGSLP common unit for every two common units of VRLP held of record. See JBGS’ Amendment No. 3 on Form 10 (File No. 1-37994) filed with the Securities and Exchange Commission on June 9, 2017 for additional information. Beginning in the third quarter of 2017, the historical financial results of our Washington, DC segment are reflected in our consolidated financial statements as discontinued operations for all periods presented. New York

On June ~~20, 2017,~~21, 2018, we completed the $45,000,000 sale of 27 Washington Square North, which resulted in a ~~$220,000,000 financing~~net gain of ~~The Bartlett residential building. The five-year interest-only loan~~$23,559,000 which is ~~at LIBOR plus 1.70% (2.90% at September 30, 2017),~~included in "net gains on disposition of wholly owned and ~~matures~~partially owned assets" on our consolidated statements of income. We acquired the property in ~~June 2022. On~~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 ~~the property, the loan~~and other related retail assets that were sold or are currently held for sale to "income from discontinued operations" and the ~~$217,000,000 of net proceeds were transferred~~related assets and liabilities to ~~JBGS~~"assets related to discontinued operations" and "liabilities related to discontinued operations" for all periods presented in ~~connection with~~ the ~~tax-free spin-off of our Washington, DC segment.~~

On July 17, 2017, prior to completion of the tax-free spin-off of our Washington, DC segment, we repaid the $43,581,000 LIBOR plus 1.25% mortgage encumbering 1700 and 1730 M Street which was scheduled to mature in August 2017. The unencumbered property was then transferred to JBGS in connection with the tax-free spin-off of our Washington, DC segment.

~~VORNADO REALTY TRUST AND VORNADO REALTY L.P.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED~~

~~(UNAUDITED)~~


7.	~~Dispositions - continued~~

~~Discontinued Operations - continued~~

accompanying financial statements. The tables below set forth the assets and liabilities related to discontinued operations as of ~~September~~June 30, ~~2017~~2018 and December 31, ~~2016~~2017, and their combined results of operations and cash flows for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2018 and ~~2016~~.

(Amounts in thousands) Balance as of
September 30, 2017 December 31, 2016
Assets related to discontinued operations:
Real estate, net $ —
$ 3,222,720
Other assets 1,774
345,893
$ 1,774
$ 3,568,613
Liabilities related to discontinued operations:
Mortgages payable, net $ —
$ 1,165,015
Other liabilities 3,602
94,428
$ 3,602
$ 1,259,443
2017.

(Amounts in thousands) For the Three Months Ended September 30, For the Nine Months Ended September 30,
2017 2016 2017 2016
(Loss) income from discontinued operations:
Total revenues $ 25,747
$ 134,912
$ 260,969
$ 392,108
Total expenses 21,708
109,506
211,930
331,377
4,039
25,406
49,039
60,731
JBG SMITH Properties spin-off transaction costs (53,581 ) (2,739 ) (67,045 ) (4,597 )
Net gains on sale of real estate and a lease position 1,530
2,864
3,797
5,074
Income (loss) from partially owned assets 93
316
435
(3,363 )
Impairment losses —
(465 ) —
(161,165 )
Pretax (loss) income from discontinued operations (47,919 ) 25,382
(13,774 ) (103,320 )
Income tax expense (11 ) (302 ) (727 ) (884 )
(Loss) income from discontinued operations $ (47,930 ) $ 25,080
$ (14,501 ) $ (104,204 )



(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 Nine Months Ended September 30,
2017 2016
Cash flows related to discontinued operations:
Cash flows from operating activities $ 39,581
$ 107,797
Cash flows from investing activities (48,377 ) (176,374 )



(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 expenses	274		94,510			991			190,222
	65		24,429			(298		)	45,000
Additional net gains on sale of real estate	618		—			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 operations	683		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		)

VORNADO REALTY TRUST AND VORNADO REALTY L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(UNAUDITED)


8.10.	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 ~~September~~June 30, ~~2017~~2018 and December 31, ~~2016.~~2017.


(Amounts in thousands)	Balance as of						Balance as of
	September 30, 2017			December 31, 2016			June 30, 2018			December 31, 2017
Identified intangible assets:
Gross amount	$	310,881		$	384,090		$	309,776		$	310,097
Accumulated amortization	(144,683		)	(194,422		)	(163,406		)	(150,837		)
Total, net	$	166,198		$	189,668		$	146,370		$	159,260
Identified intangible liabilities (included in deferred revenue):
Gross amount	$	544,956		$	550,454		$	527,766		$	530,497
Accumulated amortization	(326,661		)	(298,238		)	(346,474		)	(324,897		)
Total, net	$	218,295		$	252,216		$	181,292		$	205,600

Amortization of acquired below-market leases, net of acquired above-market leases, resulted in an increase to rental income of ~~$11,054,000~~$10,526,000 and ~~$11,529,000~~$12,588,000 for the three months ended ~~September~~June 30, ~~2017~~2018 and ~~2016,~~2017, respectively, and ~~$34,758,000~~$21,107,000 and ~~$40,664,000~~$23,704,000 for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2018 and ~~2016,~~2017, 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, ~~2018~~2019 is as follows:

(Amounts in thousands)
2018 $ 42,556

2019 30,820

2020 22,185

2021 17,370

2022 14,271



(Amounts in thousands)
2019	$	29,871
2020	22,213
2021	17,478
2022	14,339
2023	11,661

Amortization of all other identified intangible assets (a component of depreciation and amortization expense) was ~~$6,069,000~~$4,876,000 and ~~$6,646,000~~$6,846,000 for the three months ended ~~September~~June 30, ~~2017~~2018 and ~~2016,~~2017, respectively, and ~~$19,896,000~~$9,735,000 and ~~$22,319,000~~$13,827,000 for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2018 and ~~2016,~~2017, 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, ~~2018~~2019 is as follows:

(Amounts in thousands)
2018 $ 19,510

2019 15,229

2020 12,020

2021 11,041

2022 9,433



(Amounts in thousands)
2019	$	14,994
2020	12,008
2021	11,030
2022	9,477
2023	9,349

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 ~~September~~June 30, ~~2017~~2018, and ~~2016,~~2017, respectively, and ~~$1,310,000~~$874,000 and ~~$1,310,000~~$874,000 for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2018 and ~~2016,~~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, ~~2018~~2019 is as follows:

(Amounts in thousands)
2018 $ 1,747

2019 1,747

2020 1,747

2021 1,747

2022 1,747



(Amounts in thousands)
2019	$	1,747
2020	1,747
2021	1,747
2022	1,747
2023	1,747

VORNADO REALTY TRUST AND VORNADO REALTY L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(UNAUDITED)


9.11.	Debt

On January 5, 2018, we 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. The seven-year loan is at LIBOR plus 1.80%, which was swapped to a fixed rate of 4.14%. We realized net proceeds of approximately $37,200,000 after repayment of the existing 4.43% $59,800,000 mortgage and closing costs.

The following is a summary of our debt:


(Amounts in thousands)		Balance as of						Interest Rate at June 30, 2018	Balance as of
	Interest Rate at September 30, 2017	September 30, 2017			December 31, 2016				June 30, 2018			December 31, 2017
Mortgages Payable:
Fixed rate	3.65%	$	5,466,886		$	5,479,547		3.53%	$	5,009,211		$	5,461,706
Variable rate	3.12%	2,737,877			2,727,133			3.89%	3,155,262			2,742,133
Total	3.47%	8,204,763			8,206,680			3.67%	8,164,473			8,203,839
Deferred financing costs, net and other		(73,157		)	(93,432		)		(55,855		)	(66,700		)
Total, net		$	8,131,606		$	8,113,248			$	8,108,618		$	8,137,139

Unsecured Debt:
Senior unsecured notes	3.68%	$	850,000		$	850,000		4.21%	$	850,000		$	850,000
Deferred financing costs, net and other		(3,359		)	(4,423		)		(6,583		)	(6,386		)
Senior unsecured notes, net		846,641			845,577				843,417			843,614

Unsecured term loan	2.39%	375,000			375,000			3.24%	750,000			750,000
Deferred financing costs, net and other		(1,646		)	(2,785		)		(506		)	(1,266		)
Unsecured term loan, net		373,354			372,215				749,494			748,734

Unsecured revolving credit facilities	—%	—			115,630			3.05%	80,000			—

Total, net		$	1,219,995		$	1,333,422			$	1,672,911		$	1,592,348

VORNADO REALTY TRUST AND VORNADO REALTY L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(UNAUDITED)


~~10.~~12.	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)
Balance as of December 31, 2015 $ 1,229,221

Net income 11,410

Other comprehensive income 2,326

Distributions (23,582 )
Redemption of Class A units for common shares/units, at redemption value (28,126 )
Adjustments to carry redeemable Class A units at redemption value 30,260

Other, net 26,814

Balance as of September 30, 2016 $ 1,248,323

Balance as of December 31, 2016 $ 1,278,446

Net income 9,057

Other comprehensive income 188

Distributions (25,663 )
Redemption of Class A units for common shares/units, at redemption value (34,564 )
Adjustments to carry redeemable Class A units at redemption value (including $224,069 attributable to the spin-off of JBGS) (286,928 )
Other, net 30,168

Balance as of September 30, 2017 $ 970,704



(Amounts in thousands)
Balance, December 31, 2016	$	1,278,446
Net income	10,935
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, net	21,758
Balance, June 30, 2017	$	1,177,084

Balance, December 31, 2017	$	984,937
Net income	6,321
Other comprehensive income	859
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, net	10,511
Balance, June 30, 2018	$	938,041

As of ~~September~~June 30, ~~2017~~2018 and December 31, ~~2016,~~2017, the aggregate redemption value of redeemable Class A units of the Operating Partnership, which are those units held by third parties, was ~~$965,276,000~~$932,613,000 and ~~$1,273,018,000,~~$979,509,000, 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 ~~September~~June 30, ~~2017~~2018 and December 31, ~~2016.~~2017. 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.

VORNADO REALTY TRUST AND VORNADO REALTY L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(UNAUDITED)


~~11.~~14.	Accumulated Other Comprehensive Income ("AOCI")

The following tables set forth the changes in accumulated other comprehensive income by component.

(Amounts in thousands) Total
Securities
available-
for-sale

Pro rata share of
nonconsolidated
subsidiaries' OCI

Interest
rate
swaps
Other
For the Three Months Ended September 30, 2017
Balance as of June 30, 2017 $ 115,839
$ 114,290
$ (3,821 ) $ 12,702
$ (7,332 )
OCI before reclassifications 6,608
5,656
(626 ) 1,976
(398 )
Amounts reclassified from AOCI (646 ) —
(646 )
⁽¹⁾
—
—
Net current period OCI 5,962
5,656
(1,272 ) 1,976
(398 )
Balance as of September 30, 2017 $ 121,801
$ 119,946
$ (5,093 ) $ 14,678
$ (7,730 )

For the Three Months Ended September 30, 2016
Balance as of June 30, 2016 $ 72,556
$ 117,561
$ (9,941 ) $ (30,538 ) $ (4,526 )
OCI before reclassifications 9,818
3,685
(915 ) 7,688
(640 )
Amounts reclassified from AOCI —
—
—
—
—
Net current period OCI 9,818
3,685
(915 ) 7,688
(640 )
Balance as of September 30, 2016 $ 82,374
$ 121,246
$ (10,856 ) $ (22,850 ) $ (5,166 )

For the Nine Months Ended September 30, 2017
Balance as of December 31, 2016 $ 118,972
$ 130,505
$ (12,058 ) $ 8,066
$ (7,541 )
OCI before reclassifications (5,793 ) (10,559 ) (1,657 ) 6,612
(189 )
Amounts reclassified from AOCI 8,622
—
8,622
⁽¹⁾
—
—
Net current period OCI 2,829
(10,559 ) 6,965
6,612
(189 )
Balance as of September 30, 2017 $ 121,801
$ 119,946
$ (5,093 ) $ 14,678
$ (7,730 )

For the Nine Months Ended September 30, 2016
Balance as of December 31, 2015 $ 46,921
$ 78,448
$ (9,319 ) $ (19,368 ) $ (2,840 )
OCI before reclassifications 35,453
42,798
(1,537 ) (3,482 ) (2,326 )
Amounts reclassified from AOCI —
—
—
—
—
Net current period OCI 35,453
42,798
(1,537 ) (3,482 ) (2,326 )
Balance as of September 30, 2016 $ 82,374
$ 121,246
$ (10,856 ) $ (22,850 ) $ (5,166 )



(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 reclassifications	3,093			—			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 reclassifications	13,043			—			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 AOCI	9,268			—			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	)

____________________


(1)	Reclassified upon receipt of proceeds related to the sale of an investment by a nonconsolidated subsidiary.

VORNADO REALTY TRUST AND VORNADO REALTY L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(UNAUDITED)


~~12.~~15.	Variable Interest Entities ("VIEs")

Unconsolidated VIEs

As of ~~September~~June 30, ~~2017~~2018 and December 31, ~~2016,~~2017, 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 68 – Investments in Partially Owned Entities). As of ~~September~~June 30, ~~2017~~2018 and December 31, ~~2016,~~2017, the net carrying amount of our investments in these entities was ~~$350,920,000~~$304,859,000 and ~~$392,150,000,~~$352,925,000, respectively, and our maximum exposure to loss in these entities is limited to our investments.

Consolidated VIEs

Our most significant consolidated VIEs are the Operating Partnership (for Vornado), real estate fund investments, and certain properties that have noncontrolling interests. These entities are VIEs because the noncontrolling 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 ~~September~~June 30, 2018, the total assets and liabilities of our consolidated VIEs, excluding the Operating Partnership, were $3,578,768,000 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 ~~$3,632,567,000~~$3,561,062,000 and ~~$1,763,223,000, respectively. As of December 31, 2016, the total assets and liabilities of our consolidated VIEs, excluding the Operating Partnership, were $3,638,483,000 and $1,762,322,000,~~$1,753,798,000, respectively.

VORNADO REALTY TRUST AND VORNADO REALTY L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(UNAUDITED)

~~13.~~16. 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 ~~sheet)~~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)~~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)). The tables below aggregate the fair values of these financial assets and liabilities by their levels in the fair value hierarchy as of ~~September~~June 30, ~~2017~~2018 and December 31, ~~2016,~~2017, respectively.


(Amounts in thousands)	As of September 30, 2017								As of June 30, 2018
	Total		Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3
Marketable securities	$	193,145	$	193,145	$	—	$	—	$	165,650	$	165,650	$	—	$	—
Real estate fund investments	351,750		—		—		351,750		373,039		—		—		373,039
Deferred compensation plan assets ($2,501 included in restricted cash and $103,743 in other assets)	106,244		56,960		—		49,284
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)	20,880		—		20,880		—		39,584		—		39,584		—
Total assets	$	672,019	$	250,105	$	20,880	$	401,034	$	678,641	$	226,148	$	39,584	$	412,909

Mandatorily redeemable instruments (included in other liabilities)	$	50,561	$	50,561	$	—	$	—	$	50,561	$	50,561	$	—	$	—
Interest rate swap (included in other liabilities)	3,090		—		3,090		—
Total liabilities	$	53,651	$	50,561	$	3,090	$	—

	As of December 31, 2016
(Amounts in thousands)									As of December 31, 2017
	Total		Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3
Marketable securities	$	203,704	$	203,704	$	—	$	—	$	182,752	$	182,752	$	—	$	—
Real estate fund investments	462,132		—		—		462,132		354,804		—		—		354,804
Deferred compensation plan assets ($4,187 included in restricted cash and $116,996 in other assets)	121,183		63,739		—		57,444
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)	21,816		—		21,816		—		27,472		—		27,472		—
Total assets	$	808,835	$	267,443	$	21,816	$	519,576	$	674,205	$	251,801	$	27,472	$	394,932

Mandatorily redeemable instruments (included in other liabilities)	$	50,561	$	50,561	$	—	$	—	$	520,561	$	520,561	$	—	$	—
Interest rate swap (included in other liabilities)	10,122		—		10,122		—
Interest rate swaps (included in other liabilities)									1,052		—		1,052		—
Total liabilities	$	60,683	$	50,561	$	10,122	$	—	$	521,613	$	520,561	$	1,052	$	—

VORNADO REALTY TRUST AND VORNADO REALTY L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(UNAUDITED)


~~13.~~16.	Fair Value Measurements - continued

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

Real Estate Fund Investments

As of ~~September~~June 30, ~~2017,~~2018, we had ~~five~~four real estate fund investments with an aggregate fair value of ~~$351,750,000,~~$373,039,000, or ~~$95,136,000~~$47,475,000 in excess of 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 ~~0.8~~0.5 to ~~3.3~~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 ~~at September~~as of June 30, ~~2017~~2018 and December 31, ~~2016.~~2017.

Range

Weighted Average

(based on fair value of investments)

Range

Weighted Average

(based on fair value of investments)

Unobservable Quantitative Input

September 30, 2017

December 31, 2016

September 30, 2017

December 31, 2016

June 30, 2018

December 31, 2017

June 30, 2018

December 31, 2017

Discount rates

10.0% to 14.9%

12.5%

12.6%

10.0% to 15.0%

2.0% to 14.9%

13.1%

11.9%

Terminal capitalization rates

4.7% to 5.8%

4.3% to 5.8%

5.4%

5.3%

5.1% 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 ~~nine~~six months ended ~~September~~June 30, ~~2017~~2018 and ~~2016.~~2017.


(Amounts in thousands)	For the Three Months Ended September 30,						For the Nine Months Ended September 30,						For the Three Months Ended June 30,					For the Six Months Ended June 30,
	2017			2016			2017			2016			2018			2017		2018			2017
Beginning balance	$	455,692		$	524,150		$	462,132		$	574,761		$	336,552		$	454,946	$	354,804		$	462,132
Dispositions/distributions	(91,606		)	—			(91,606		)	(71,888		)
Purchases													66,000			—		68,950			—
Net unrealized (loss) gain on held investments	(11,220		)	(4,764		)	(28,860		)	16,091			(29,513		)	745		(29,513		)	(6,442		)
Net realized gains on exited investments	35,620			—			35,861			14,676
Previously recorded unrealized gains on exited investment	(36,736		)	—			(25,538		)	(14,254		)
Dispositions													—			—		(20,291		)	—
Net realized (loss) gain on exited investments													(2		)	—		(913		)	241
Other, net	—			—			(239		)	—			2			1		2			(239		)
Ending balance	$	351,750		$	519,386		$	351,750		$	519,386		$	373,039		$	455,692	$	373,039		$	455,692

VORNADO REALTY TRUST AND VORNADO REALTY L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(UNAUDITED)


~~13.~~16.	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~~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 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 ~~nine~~six months ended ~~September~~June 30, ~~2017~~2018 and ~~2016.~~2017.


(Amounts in thousands)	For the Three Months Ended September 30,						For the Nine Months Ended September 30,						For the Three Months Ended June 30,						For the Six Months Ended June 30,
	2017			2016			2017			2016			2018			2017			2018			2017
Beginning balance	$	49,849		$	60,140		$	57,444		$	59,186		$	39,485		$	56,910		$	40,128		$	57,444
Sales													(1,874		)	(9,375		)	(3,509		)	(12,112		)
Purchases	2,176			1,251			3,989			3,523			1,619			1,350			1,633			1,813
Sales	(3,810		)	(3,737		)	(15,922		)	(5,888		)
Realized and unrealized gains (losses)	246			(1,055		)	2,151			(743		)
Realized and unrealized gains													34			830			712			1,905
Other, net	823			316			1,622			837			606			134			906			799
Ending balance	$	49,284		$	56,915		$	49,284		$	56,915		$	39,870		$	49,849		$	39,870		$	49,849

Fair Value Measurements on a Nonrecurring Basis

~~Assets~~There were no assets measured at fair value on a nonrecurring basis on our consolidated balance sheets ~~consist~~as of ~~our investment in PREIT that was written-down to its estimated fair value at September~~June 30, ~~2017. See Note 6~~ ~~- Investments in Partially Owned Entities~~ ~~for details of the impairment loss related to PREIT recognized during 2017. There are no assets measured at fair value on a nonrecurring basis at~~2018 and December 31, ~~2016. The table below presents the fair value of this asset by its level in the fair value hierarchy.~~

(Amounts in thousands) As of September 30, 2017
Total Level 1 Level 2 Level 3
Investment in PREIT $ 65,563
$ 65,563
$ —
$ —
2017.

~~VORNADO REALTY TRUST AND VORNADO REALTY L.P.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED~~

~~(UNAUDITED)~~


~~13.~~	~~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 ~~September~~June 30, ~~2017~~2018 and December 31, ~~2016.~~2017.


(Amounts in thousands)	(Amounts in thousands)	As of September 30, 2017					As of December 31, 2016					(Amounts in thousands)	As of June 30, 2018					As of December 31, 2017
		Carrying Amount			Fair Value		Carrying Amount			Fair Value			Carrying Amount			Fair Value		Carrying Amount			Fair Value
Cash equivalents	Cash equivalents	$	1,013,282		$	1,013,282	$	1,307,105		$	1,307,105	Cash equivalents	$	851,306		$	851,000	$	1,500,227		$	1,500,000
Debt:	Debt:											Debt:
	Mortgages payable	$	8,204,763		$	8,223,000	$	8,206,680		$	8,163,000	Mortgages payable	$	8,164,473		$	8,112,000	$	8,203,839		$	8,194,000
	Senior unsecured notes	850,000			885,000		850,000			899,000		Senior unsecured notes	850,000			847,000		850,000			878,000
	Unsecured term loan	375,000			375,000		375,000			375,000		Unsecured term loan	750,000			750,000		750,000			750,000
	Unsecured revolving credit facilities	—			—		115,630			116,000		Unsecured revolving credit facilities	80,000			80,000		—			—
	Total	$	9,429,763	⁽¹⁾	$	9,483,000	$	9,547,310	⁽¹⁾	$	9,553,000	Total	$	9,844,473	⁽¹⁾	$	9,789,000	$	9,803,839	⁽¹⁾	$	9,822,000

____________________

~~(1)~~ ~~Excludes $78,162 and $100,640 of deferred financing costs, net and other as of September 30, 2017 and December 31, 2016, respectively.~~


~~14.~~(1)	~~Stock-based Compensation~~ Excludes $62,944 and $74,352 of deferred financing costs, net and other as of June 30, 2018 and December 31, 2017, respectively.

Vornado’s 2010 Omnibus Share Plan provides for grants of incentive and non-qualified Vornado stock options, restricted stock, restricted Operating Partnership units and Out-Performance Plan awards to certain of our employees and officers. We account for all equity-based compensation in accordance with ASC 718. Equity-based compensation expense was $5,693,000 and $6,117,000 for the three months ended September 30, 2017 and 2016, respectively, and $27,319,000 and $27,903,000 for the nine months ended September 30, 2017 and 2016, respectively.


~~15.~~	~~Fee and Other Income~~

~~The following table sets forth the details of fee and other income:~~

(Amounts in thousands) For the Three Months Ended September 30, For the Nine Months Ended September 30,
2017 2016 2017 2016
BMS cleaning fees $ 26,429
$ 24,532
$ 75,925
$ 68,656
Management and leasing fees 2,330
1,935
7,382
5,694
Lease termination fees 991
1,819
5,947
7,123
Other income 3,542
2,357
8,958
6,561
$ 33,292
$ 30,643
$ 98,212
$ 88,034

Management and leasing fees include management fees from Interstate Properties, a related party, of $125,000 and $128,000 for the three months ended September 30, 2017 and 2016, respectively, and $377,000 and $390,000 for the nine months ended September 30, 2017 and 2016, respectively. The above table excludes fee income from partially owned entities, which is included in “(loss) income from partially owned entities” (see Note 6 – ~~Investments in Partially Owned Entities~~).

3736

VORNADO REALTY TRUST AND VORNADO REALTY L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(UNAUDITED)


~~16.~~17.	~~Interest and Other Investment Income, Net~~Stock-based Compensation

~~The following table sets forth~~Vornado’s 2010 Omnibus Share Plan (the "Plan") provides the ~~details~~Compensation Committee of ~~interest~~our Board of Trustees (the "Committee") the ability to grant incentive and ~~other investment~~non-qualified Vornado stock options, restricted stock, restricted Operating Partnership units, out-performance plan awards and appreciation-only long-term incentive plan units ("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, ~~net:~~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.

(Amounts in thousands) For the Three Months Ended September 30, For the Nine Months Ended September 30,
2017 2016 2017 2016
Dividends on marketable securities $ 3,309
$ 3,354
$ 9,923
$ 9,799
Mark-to-market income of investments in our deferred compensation plan ⁽¹⁾
1,975
204
5,233
2,625
Interest on loans receivable 754
754
3,599
2,250
Other, net 3,268
2,147
9,045
5,447
$ 9,306
$ 6,459
$ 27,800
$ 20,121

~~____________________~~


~~(1)~~	~~This income is entirely offset by the expense resulting from the mark-to-market of the deferred compensation plan liability, which is included in "general and administrative" expense.~~

AO LTIP Units

On January 12, 2018, the Committee approved the issuance of AO LTIP Units pursuant to the Plan to certain of our 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”) in order to establish the terms of the new class of partnership interests known as AO LTIP Units.

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 are granted, subject to any vesting conditions applicable to the award. The threshold level is intended to be equal to 100% of the then fair market value of a Vornado common share on 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 AO LTIP Units on the date of grant was $3,484,000, of which $622,000 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 $2,862,000 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 respect of an 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 of AO LTIP Units to Class A Units, holders will be entitled to receive 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 by a holder of an equivalent number of Class A Units during the period from the grant date of the AO LTIP Units through the date of conversion.

VORNADO REALTY TRUST AND VORNADO REALTY L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(UNAUDITED)


17.	~~Interest and Debt Expense~~ Stock-based Compensation - continued

~~The following table sets forth the details of interest and debt expense:~~

(Amounts in thousands) For the Three Months Ended September 30, For the Nine Months Ended September 30,
2017 2016 2017 2016
Interest expense $ 89,675
$ 79,648
$ 263,037
$ 247,172
Amortization of deferred financing costs 7,977
7,906
24,523
24,372
Capitalized interest and debt expense (12,584 ) (7,833 ) (34,979 ) (21,510 )
$ 85,068
$ 79,721
$ 252,581
$ 250,034
2018 Outperformance Plan (“2018 OPP”)

On March 15, 2018, the Committee approved the 2018 OPP, a multi-year, $35,000,000 performance-based equity compensation plan 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 Index 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.

VORNADO REALTY TRUST AND VORNADO REALTY L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(UNAUDITED)


18.	~~(Loss)~~ 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	)	$	—
Other	1		—		(110		)	—
	15,884		—		(17,102		)	—
Interest on loans receivable ⁽¹⁾	6,205		2,102		6,948			2,845
Dividends on marketable securities	3,353		3,307		6,706			6,614
Other, net	5,450		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 costs	8,034			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

VORNADO REALTY TRUST AND VORNADO REALTY L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(UNAUDITED)


20.	Income Per Share/~~(Loss)~~ Income Per Class A Unit

Vornado Realty Trust

The following table provides a reconciliation of both net ~~(loss)~~ income and the number of common shares used in the computation of (i) basic ~~(loss)~~ income per common share - which includes the weighted average number of common shares outstanding without regard to dilutive potential common shares, and (ii) diluted ~~(loss)~~ income per common share - which includes the weighted average common shares and dilutive share equivalents. Dilutive share equivalents may include our Series A convertible preferred shares, employee stock options, restricted stock awards and Out-Performance Plan awards.


(Amounts in thousands, except per share amounts)	(Amounts in thousands, except per share amounts)	For the Three Months Ended September 30,						For the Nine Months Ended September 30,						For the Three Months Ended June 30,						For the Six Months Ended June 30,
		2017			2016			2017			2016			2018			2017			2018			2017
Numerator:	Numerator:
	Income from continuing operations, net of income attributable to noncontrolling interests	$	32,050		$	69,037		$	196,684		$	337,339
	(Loss) income from discontinued operations, net of income attributable to noncontrolling interests	(44,948		)	23,543			(13,600		)	(97,732		)
	Net (loss) income attributable to Vornado	(12,898		)	92,580			183,084			239,607
	Preferred share dividends	(16,128		)	(19,047		)	(48,386		)	(59,774		)
	Preferred share issuance costs (Series J redemption)	—			(7,408		)	—			(7,408		)
	Net (loss) income attributable to common shareholders	(29,026		)	66,125			134,698			172,425
	Earnings allocated to unvested participating securities	(9		)	(13		)	(37		)	(43		)
	Numerator for basic (loss) income per share	(29,035		)	66,112			134,661			172,382
	Impact of assumed conversions:
	Earnings allocated to Out-Performance Plan units	—			—			195			96
	Numerator for diluted (loss) income per share	$	(29,035	)	$	66,112		$	134,856		$	172,478
Income from continuing operations, net of income attributable to noncontrolling interests														$	123,427		$	115,112		$	133,448		$	164,631
Income from discontinued operations, net of income attributable to noncontrolling interests														641			16,989			300			31,351
Net income attributable to Vornado														124,068			132,101			133,748			195,982
Preferred share dividends														(12,534		)	(16,129		)	(25,569		)	(32,258		)
Preferred share issuance costs														—			—			(14,486		)	—
Net income attributable to common shareholders														111,534			115,972			93,693			163,724
Earnings allocated to unvested participating securities														(11		)	(13		)	(22		)	(27		)
Numerator for basic income per share														111,523			115,959			93,671			163,697
Impact of assumed conversions:
Convertible preferred share dividends														16			20			—			—
Earnings allocated to Out-Performance Plan units														—			—			37			233
Numerator for diluted income per share														$	111,539		$	115,979		$	93,708		$	163,930

Denominator:	Denominator:
Denominator for basic income per share – weighted average shares														190,200			189,395			190,141			189,304
Effect of dilutive securities⁽¹⁾:
Employee stock options and restricted share awards														930			1,011			934			1,089
Convertible preferred shares														38			38			—			—
Out-Performance Plan units														—			—			115			281
Denominator for diluted income per share – weighted average shares and assumed conversions														191,168			190,444			191,190			190,674
	Denominator for basic (loss) income per share – weighted average shares	189,593			188,901			189,401			188,778
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
	Effect of dilutive securities⁽¹⁾:
	Employee stock options and restricted share awards	1,254			1,147			1,553			1,067
	Out-Performance Plan units	—			—			303			241
	Denominator for diluted (loss) income per share – weighted average shares and assumed conversions	190,847			190,048			191,257			190,086

(LOSS) INCOME PER COMMON SHARE – BASIC:
	Income from continuing operations, net	$	0.09		$	0.23		$	0.78		$	1.43
	(Loss) income from discontinued operations, net	(0.24		)	0.12			(0.07		)	(0.52		)
	Net (loss) income per common share	$	(0.15	)	$	0.35		$	0.71		$	0.91

(LOSS) INCOME PER COMMON SHARE – DILUTED:
	Income from continuing operations, net	$	0.09		$	0.23		$	0.78		$	1.42
	(Loss) income from discontinued operations, net	(0.24		)	0.12			(0.07		)	(0.51		)
	Net (loss) income per common share	$	(0.15	)	$	0.35		$	0.71		$	0.91
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

____________________

(1)

The effect of dilutive securities for the three months ended ~~September~~June 30, ~~2017~~2018 and ~~2016~~2017 excludes an aggregate of ~~12,413~~12,299 and ~~12,315~~12,268 weighted average common share equivalents, respectively, and ~~12,173~~12,252 and ~~12,072~~12,125 weighted average common share equivalents for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2018 and ~~2016~~2017, respectively, as their effect was anti-dilutive.

3940

VORNADO REALTY TRUST AND VORNADO REALTY L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(UNAUDITED)


~~18.~~20.	~~(Loss)~~ Income Per Share/~~(Loss)~~ Income Per Class A Unit - continued

Vornado Realty L.P.

The following table provides a reconciliation of both net ~~(loss)~~ income and the number of Class A units used in the computation of (i) basic ~~(loss)~~ 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 ~~(loss)~~ income per Class A unit - which includes the weighted average Class A units and dilutive unit equivalents. Dilutive unit equivalents may include our Series A convertible preferred units, Vornado stock options, restricted unit awards and Out-Performance Plan awards.


(Amounts in thousands, except per unit amounts)	(Amounts in thousands, except per unit amounts)	For the Three Months Ended September 30,						For the Nine Months Ended September 30,						For the Three Months Ended June 30,						For the Six Months Ended June 30,
		2017			2016			2017			2016			2018			2017			2018			2017
Numerator:	Numerator:
	Income from continuing operations, net of income attributable to noncontrolling interests	$	33,154		$	71,866		$	206,642		$	355,221
	(Loss) income from discontinued operations	(47,930		)	25,080			(14,501		)	(104,204		)
	Net (loss) income attributable to Vornado Realty L.P.	(14,776		)	96,946			192,141			251,017
	Preferred unit distributions	(16,176		)	(19,096		)	(48,531		)	(59,920		)
	Preferred unit issuance costs (Series J redemption)	—			(7,408		)	—			(7,408		)
	Net (loss) income attributable to Class A unitholders	(30,952		)	70,442			143,610			183,689
	Earnings allocated to unvested participating securities	(740		)	(589		)	(2,499		)	(2,001		)
	Numerator for basic and diluted (loss) income per Class A unit	$	(31,692	)	$	69,853		$	141,111		$	181,688
Income from continuing operations, net of income attributable to noncontrolling interests in consolidated subsidiaries														$	130,830		$	121,696		$	139,749		$	173,488
Income from discontinued operations														683			18,111			320			33,429
Net income attributable to Vornado Realty L.P.														131,513			139,807			140,069			206,917
Preferred unit distributions														(12,582		)	(16,177		)	(25,666		)	(32,355		)
Preferred unit issuance costs														—			—			(14,486		)	—
Net income attributable to Class A unitholders														118,931			123,630			99,917			174,562
Earnings allocated to unvested participating securities														(772		)	(742		)	(1,544		)	(1,759		)
Numerator for basic income per Class A unit														118,159			122,888			98,373			172,803
Impact of assumed conversions:
Convertible preferred unit distributions														16			20			—			—
Numerator for diluted income per Class A unit														$	118,175		$	122,908		$	98,373		$	172,803

Denominator:	Denominator:
Denominator for basic income per Class A unit – weighted average units														202,064			201,127			201,997			200,987
Effect of dilutive securities⁽¹⁾:
Vornado stock options and restricted unit awards														1,252			1,458			1,269			1,630
Convertible preferred units														38			38			—			—
Denominator for diluted income per Class A unit – weighted average units and assumed conversions														203,354			202,623			203,266			202,617
	Denominator for basic (loss) income per Class A unit – weighted average units	201,300			200,458			201,093			200,300
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
	Effect of dilutive securities⁽¹⁾:
	Vornado stock options and restricted unit awards	1,813			1,683			2,218			1,632
	Denominator for diluted (loss) income per Class A unit – weighted average units and assumed conversions	203,113			202,141			203,311			201,932

(LOSS) INCOME PER CLASS A UNIT – BASIC:
	Income from continuing operations, net	$	0.08		$	0.22		$	0.77		$	1.43
	(Loss) income from discontinued operations, net	(0.24		)	0.13			(0.07		)	(0.52		)
	Net (loss) income per Class A unit	$	(0.16	)	$	0.35		$	0.70		$	0.91

(LOSS) INCOME PER CLASS A UNIT – DILUTED:
	Income from continuing operations, net	$	0.08		$	0.22		$	0.76		$	1.42
	(Loss) income from discontinued operations, net	(0.24		)	0.13			(0.07		)	(0.52		)
	Net (loss) income per Class A unit	$	(0.16	)	$	0.35		$	0.69		$	0.90
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

____________________

(1)

The effect of dilutive securities for the three months ended ~~September~~June 30, ~~2017~~2018 and ~~2016~~2017 excludes an aggregate of ~~147~~112 and ~~222~~89 weighted average Class A unit equivalents, respectively, and ~~118~~175 and ~~226~~182 weighted average Class A unit equivalents for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2018 and ~~2016~~2017, respectively, as their effect was anti-dilutive.

VORNADO REALTY TRUST AND VORNADO REALTY L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(UNAUDITED)


~~19.~~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 ~~$180,000,000~~$260,000,000 per occurrence and in the ~~annual~~ 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.

~~VORNADO REALTY TRUST AND VORNADO REALTY L.P.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED~~

~~(UNAUDITED)~~


~~19.~~	~~Commitments and Contingencies - continued~~

~~Insurance - continued~~

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~~third-party insurance companies and the Federal government with no exposure to PPIC. For NBCR acts, PPIC is responsible for a deductible of ~~$1,976,000~~$1,601,000 and ~~17%~~18% 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.

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 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 our properties and expand our portfolio.

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, our mortgage loans are non-recourse to us. However, 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 ~~September~~June 30, ~~2017,~~2018, the aggregate dollar amount of these guarantees and master leases is approximately ~~$676,000,000.~~ $667,000,000.

As of ~~September~~June 30, ~~2017, $10,501,000~~2018, $13,337,000 of letters of credit ~~were~~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% joint venture with Related Companies ("Related") was designated by ~~ESD,~~Empire State Development ("ESD"), an entity of New York State, to redevelop the historic Farley Post Office ~~Building (see page 24).~~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 ~~bears~~bear a full guaranty from Skanska AB.

As of ~~September~~June 30, ~~2017,~~2018, we expect to fund additional capital to certain of our partially owned entities aggregating approximately ~~$45,000,000.~~$34,000,000.

As of ~~September~~June 30, ~~2017,~~2018, we have construction commitments aggregating approximately ~~$489,000,000.~~$342,000,000.

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.

4143

VORNADO REALTY TRUST AND VORNADO REALTY L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(UNAUDITED)


~~20.~~22.	Segment Information

~~As a result of~~Net Operating Income ("NOI") represents total revenues less operating expenses. We consider NOI to be the ~~spin-off~~primary non-GAAP financial measure for making decisions and assessing the unlevered performance of our ~~Washington, DC segment (see Note 7 -~~ ~~Dispositions), effective July 1, 2017, the Washington, DC segment has been reclassified~~segments as it relates to the ~~Other segment. We have also reclassified the prior period segment financial results to conform~~total return on assets as opposed to the ~~current period presentation.~~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 net (loss) income and a reconciliation of net (loss) income to EBITDA~~⁽¹⁾~~and NOI~~⁽¹⁾ ~~by segment for the three months ended September 30, 2017.~~

(Amounts in thousands) For the Three Months Ended September 30, 2017
Total New York Other
Total revenues $ 528,755
$ 453,609
$ 75,146

Total expenses 366,520
284,976
81,544

Operating income (loss) 162,235
168,633
(6,398 )
(Loss) income from partially owned entities (41,801 ) 1,411
(43,212 )
Loss from real estate fund investments (6,308 ) —
(6,308 )
Interest and other investment income, net 9,306
1,413
7,893

Interest and debt expense (85,068 ) (61,529 ) (23,539 )
Income (loss) before income taxes 38,364
109,928
(71,564 )
Income tax expense (1,188 ) (1,087 ) (101 )
Income (loss) from continuing operations 37,176
108,841
(71,665 )
Loss from discontinued operations (47,930 ) —
(47,930 )
Net (loss) income (10,754 ) 108,841
(119,595 )
Less net income attributable to noncontrolling interests in consolidated subsidiaries (4,022 ) (2,552 ) (1,470 )
Net (loss) income attributable to the Operating Partnership (14,776 ) 106,289
(121,065 )
Interest and debt expense⁽²⁾
113,438
84,907
28,531

Depreciation and amortization⁽²⁾
136,621
104,799
31,822

Income tax expense ⁽²⁾
1,462
1,182
280

EBITDA⁽¹⁾
236,745
297,177
⁽³⁾
(60,432 )
⁽⁴⁾
Acquisition and transaction related costs, including $53,581 for the spin-off of JBGS 53,642
—
53,642

Impairment loss on investment in PREIT 44,465
—
44,465

General and administrative expenses less $1,975 mark-to-market of our deferred compensation plan 35,495
9,479
26,016

Non-cash adjustments for straight-line rental income and expense and amortization of acquired below and above market leases, net⁽²⁾
(23,304 ) (21,435 ) (1,869 )
Our share of net realized/unrealized losses from our real estate fund investments 10,394
—
10,394

Net gain resulting from UE operating partnership unit issuances (5,200 ) —
(5,200 )
Real estate impairment losses⁽²⁾
4,354
—
4,354

Net gains on sale of real estate and other⁽²⁾
(1,547 ) —
(1,547 )
Our share of Alexander's EBITDA (excluding management, leasing and development fees) (12,207 ) (12,207 ) —

Dividends received from Alexander's 7,030
7,030
—

Our share of PREIT EBITDA (3,731 ) —
(3,731 )
Distributions received from PREIT 1,361
—
1,361

Our share of UE EBITDA (excluding management fees) (2,513 ) —
(2,513 )
Distributions received from UE 1,257
—
1,257

NOI⁽¹⁾
$ 346,241
$ 280,044
⁽³⁾
$ 66,197
⁽⁴⁾

~~____________________~~

~~See notes on pages 46 through 48.~~

~~VORNADO REALTY TRUST AND VORNADO REALTY L.P.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED~~

~~(UNAUDITED)~~


~~20.~~	~~Segment Information - continued~~

~~Below is a summary of net income and~~ a reconciliation of net income to ~~EBITDA~~⁽¹⁾NOI at share and NOI⁽¹⁾ ~~by segment~~ at share - cash basis for ~~the~~ three and six months ended ~~September~~June 30, ~~2016.~~2018 and 2017.

(Amounts in thousands) For the Three Months Ended September 30, 2016
Total New York Other
Total revenues $ 502,753
$ 432,869
$ 69,884

Total expenses 354,292
280,689
73,603

Operating income (loss) 148,461
152,180
(3,719 )
Income (loss) from partially owned entities 3,811
(579 ) 4,390

Income from real estate fund investments 1,077
—
1,077

Interest and other investment income, net 6,459
1,355
5,104

Interest and debt expense (79,721 ) (51,212 ) (28,509 )
Income (loss) before income taxes 80,087
101,744
(21,657 )
Income tax expense (4,563 ) (2,356 ) (2,207 )
Income (loss) from continuing operations 75,524
99,388
(23,864 )
Income from discontinued operations 25,080
—
25,080

Net income 100,604
99,388
1,216

Less net income attributable to noncontrolling interests in consolidated subsidiaries (3,658 ) (2,985 ) (673 )
Net income attributable to the Operating Partnership 96,946
96,403
543

Interest and debt expense⁽²⁾
122,979
66,314
56,665

Depreciation and amortization⁽²⁾
172,980
111,731
61,249

Income tax expense⁽²⁾
5,102
2,445
2,657

EBITDA⁽¹⁾
398,007
276,893
⁽³⁾
121,114
⁽⁴⁾
Non-cash adjustments for straight-line rental income and expense and amortization of acquired below and above market leases, net⁽²⁾
(46,500 ) (35,199 ) (11,301 )
General and administrative expenses less $204 mark-to-market of our deferred compensation plan 40,238
9,783
30,455

Net gains on sale of real estate and other⁽²⁾
(5,386 ) —
(5,386 )
Acquisition and transaction related costs, including $2,739 for the spin-off of JBGS 3,808
—
3,808

Real estate impairment losses⁽²⁾
1,599
—
1,599

Our share of net realized/unrealized losses from our real estate fund investments 99
—
99

Our share of Alexander's EBITDA (excluding management, leasing and development fees) (11,506 ) (11,506 ) —

Dividends received from Alexander's 6,617
6,617
—

Our share of PREIT EBITDA (3,070 ) —
(3,070 )
Distributions received from PREIT 1,342
—
1,342

Our share of UE EBITDA (excluding management fees) (2,514 ) —
(2,514 )
Distributions received from UE 1,143
—
1,143

NOI⁽¹⁾
$ 383,877
$ 246,588
⁽³⁾
$ 137,289
⁽⁴⁾

~~____________________~~

~~See notes on pages 46 through 48.~~



(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 investments	28,976			(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 expense	111,846			105,123			220,532			210,251
General and administrative expense	34,427			35,405			76,960			81,580
Transaction related costs and other	1,017			260			14,173			1,012
NOI from partially owned entities	65,752			67,016			133,265			133,113
Interest and debt expense	87,657			84,789			175,823			167,513
Income tax expense (benefit)	467			(610		)	3,021			2,303
NOI at share	354,429			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

~~VORNADO REALTY TRUST AND VORNADO REALTY L.P.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED~~

~~(UNAUDITED)~~


~~20.~~	~~Segment Information - continued~~

~~Below is a summary of net income (loss) and a reconciliation of net income (loss) to EBITDA~~⁽¹⁾~~and NOI~~⁽¹⁾ ~~by segment for the nine months ended September 30, 2017.~~

(Amounts in thousands) For the Nine Months Ended September 30, 2017
Total New York Other
Total revenues $ 1,547,900
$ 1,316,710
$ 231,190

Total expenses 1,100,042
845,632
254,410

Operating income (loss) 447,858
471,078
(23,220 )
Income (loss) from partially owned entities 5,578
(954 ) 6,532

Loss from real estate fund investments (1,649 ) —
(1,649 )
Interest and other investment income, net 27,800
4,384
23,416

Interest and debt expense (252,581 ) (179,851 ) (72,730 )
Net gain on disposition of wholly owned and partially owned assets 501
—
501

Income (loss) before income taxes 227,507
294,657
(67,150 )
Income tax expense (2,429 ) (324 ) (2,105 )
Income (loss) from continuing operations 225,078
294,333
(69,255 )
Loss from discontinued operations (14,501 ) —
(14,501 )
Net income (loss) 210,577
294,333
(83,756 )
Less net income attributable to noncontrolling interests in consolidated subsidiaries (18,436 ) (8,041 ) (10,395 )
Net income (loss) attributable to the Operating Partnership 192,141
286,292
(94,151 )
Interest and debt expense⁽²⁾
348,350
239,032
109,318

Depreciation and amortization⁽²⁾
476,406
328,058
148,348

Income tax expense⁽²⁾
4,180
540
3,640

EBITDA⁽¹⁾
1,021,077
853,922
⁽³⁾
167,155
⁽⁴⁾
General and administrative expenses less $5,233 mark-to-market of our deferred compensation plan 131,365
31,630
99,735

Non-cash adjustments for straight-line rental income and expense and amortization of acquired below and above market leases, net⁽²⁾
(73,125 ) (58,797 ) (14,328 )
Acquisition and transaction related costs, including $67,045 for the spin-off of JBGS 68,118
—
68,118

Impairment loss on investment in PREIT 44,465
—
44,465

Net gains on sale of real estate and other⁽²⁾
(21,507 ) —
(21,507 )
Net gains resulting from UE operating partnership unit issuances (21,100 ) —
(21,100 )
Our share of net realized/unrealized losses from our real estate fund investments 18,802
—
18,802

Net gain on repayment of our Suffolk Downs JV debt investments (11,373 ) —
(11,373 )
Real estate impairment losses⁽²⁾
7,572
—
7,572

Our share of Alexander's EBITDA (excluding management, leasing and development fees) (35,511 ) (35,511 ) —

Dividends received from Alexander's 21,090
21,090
—

Our share of PREIT EBITDA (15,439 ) —
(15,439 )
Distributions received from PREIT 3,929
—
3,929

Our share of UE EBITDA (excluding management fees) (9,694 ) —
(9,694 )
Distributions received from UE 3,773
—
3,773

NOI⁽¹⁾
$ 1,132,442
$ 812,334
⁽³⁾
$ 320,108
⁽⁴⁾

~~____________________~~

~~See notes on pages 46 through 48.~~

VORNADO REALTY TRUST AND VORNADO REALTY L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(UNAUDITED)


~~20.~~22.	Segment Information - continued

Below is a summary of ~~net income (loss)~~NOI at share and ~~a reconciliation of net income (loss) to EBITDA~~NOI at share - cash basis⁽¹⁾~~and NOI~~⁽¹⁾by segment for the ~~nine~~three and six months ended ~~September~~June 30, ~~2016.~~2018 and 2017.

(Amounts in thousands) For the Nine Months Ended September 30, 2016
Total New York Other
Total revenues $ 1,489,768
$ 1,269,464
$ 220,304

Total expenses 1,062,219
818,419
243,800

Operating income (loss) 427,549
451,045
(23,496 )
Income (loss) from partially owned entities 3,892
(5,143 ) 9,035

Income from real estate fund investments 28,750
—
28,750

Interest and other investment income, net 20,121
3,684
16,437

Interest and debt expense (250,034 ) (162,193 ) (87,841 )
Net gains on disposition of wholly owned and partially owned assets 160,225
159,511
714

Income (loss) before income taxes 390,503
446,904
(56,401 )
Income tax expense (8,921 ) (4,131 ) (4,790 )
Income (loss) from continuing operations 381,582
442,773
(61,191 )
Loss from discontinued operations (104,204 ) —
(104,204 )
Net income (loss) 277,378
442,773
(165,395 )
Less net income attributable to noncontrolling interests in consolidated subsidiaries (26,361 ) (9,811 ) (16,550 )
Net income (loss) attributable to the Operating Partnership 251,017
432,962
(181,945 )
Interest and debt expense⁽²⁾
376,898
208,683
168,215

Depreciation and amortization⁽²⁾
521,143
331,448
189,695

Income tax expense⁽²⁾
13,067
4,424
8,643

EBITDA⁽¹⁾
1,162,125
977,517
⁽³⁾
184,608
⁽⁴⁾
Net gains on sale of real estate and other⁽²⁾
(168,140 ) (159,511 ) (8,629 )
Real estate impairment losses⁽²⁾
166,701
—
166,701

Non-cash adjustments for straight-line rental income and expense and amortization of acquired below and above market leases, net⁽²⁾
(152,023 ) (114,217 ) (37,806 )
General and administrative expenses less $2,625 mark-to-market of our deferred compensation plan 132,085
27,557
104,528

Acquisition and transaction related costs, including $4,597 for the spin-off of JBGS 11,319
—
11,319

Our share of net realized/unrealized gains from our real estate fund investments (8,741 ) —
(8,741 )
Our share of Alexander's EBITDA (excluding management, leasing and development fees) (34,880 ) (34,880 ) —

Dividends received from Alexander's 19,849
19,849
—

Our share of PREIT EBITDA (8,537 ) —
(8,537 )
Distributions received from PREIT 3,906
—
3,906

Our share of UE EBITDA (excluding management fees) (7,539 ) —
(7,539 )
Distributions received from UE 3,430
—
3,430

NOI⁽¹⁾
$ 1,119,555
$ 716,315
⁽³⁾
$ 403,240
⁽⁴⁾

~~____________________~~

~~See notes on the following pages.~~



(Amounts in thousands)	For the Three Months Ended June 30, 2018
	Total			New York			Other
Total revenues	$	541,818		$	458,552		$	83,266
Operating expenses	235,981			200,903			35,078
NOI - consolidated	305,837			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 entities	65,752			49,778			15,974
NOI at share	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
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 expenses	215,700			185,712			29,988
NOI - consolidated	295,387			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 entities	67,016			46,386			20,630
NOI at share	346,134			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 expenses	473,583			398,819			74,764
NOI - consolidated	604,672			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 entities	133,265			99,551			33,714
NOI at share	703,465			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 expenses	436,359			368,819			67,540
NOI - consolidated	582,786			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 entities	133,113			91,848			41,265
NOI at share	683,292			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

~~VORNADO REALTY TRUST AND VORNADO REALTY L.P.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED~~

~~(UNAUDITED)~~


~~20.~~	~~Segment Information - continued~~

~~Notes to preceding tabular information:~~

~~(1)~~

EBITDA represents "Earnings Before Interest, Taxes, Depreciation and Amortization." NOI represents "Net Operating Income" on a cash basis. We calculate EBITDA and NOI on an Operating Partnership basis which is before allocation to the noncontrolling interest of the Operating Partnership. We consider EBITDA 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. We also consider NOI a key non-GAAP financial measure. NOI is before general and administrative expenses, straight-line rental income and expense, amortization of acquired below and above market leases, net, acquisition and transaction related costs, our share of net realized and unrealized gains or losses from our real estate fund investments, impairment losses and gains on disposal of assets. As properties are bought and sold based on a multiple of NOI, we utilize this measure to make investment decisions as well as to compare the performance of our assets to those of our peers. EBITDA and NOI should not be considered substitutes for net income. EBITDA and NOI may not be comparable to similarly titled measures employed by other companies.

Our 7.5% interest in Fashion Centre Mall/Washington Tower and our interest in Rosslyn Plaza (ranging from 43.7% to 50.4%) were not included in the spin-off of our Washington, DC segment and have been reclassified to Other. The prior year's presentation has been conformed to the current year. In addition, on January 1, 2017, we reclassified our investment in 85 Tenth Avenue from Other to the New York segment as a result of the December 1, 2016 repayment of our loans receivable and the receipt of a 49.9% ownership interest in the property.


~~(2)~~	~~Adjustments include our proportionate share of partially owned entities and give effect to noncontrolling interest's share of consolidated subsidiaries.~~

~~VORNADO REALTY TRUST AND VORNADO REALTY L.P.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED~~

~~(UNAUDITED)~~


~~20.~~	~~Segment Information - continued~~

~~Notes to preceding tabular information - continued:~~


~~(3)~~	~~The elements of "New York" EBITDA are summarized below.~~

(Amounts in thousands) For the Three Months Ended September 30, For the Nine Months Ended September 30,
2017 2016 2017 2016
Office $ 183,162
$ 164,150
^(a)
$ 522,566
$ 484,735
^(a)
Retail 90,316
91,061
^(a)
269,762
272,083
^(a)
Residential 5,981
6,214
18,450
18,901

Alexander's 12,207
11,506
35,511
34,880

Hotel Pennsylvania 5,511
3,962
7,633
4,287

Total New York EBITDA, as adjusted 297,177
276,893
853,922
814,886

Certain items that impact EBITDA:
Net gain on sale of 47% ownership interest in 7 West 34th Street —
—
—
159,511

EBITDA from sold properties —
—
—
3,120

Total of certain items that impact EBITDA —
—
—
162,631

Total New York EBITDA $ 297,177
$ 276,893
$ 853,922
$ 977,517

~~The elements of "New York" NOI are summarized below.~~

(Amounts in thousands) For the Three Months Ended September 30, For the Nine Months Ended September 30,
2017 2016 2017 2016
Office $ 179,505
$ 157,643
^(a)
$ 523,531
$ 459,509
^(a)
Retail 81,839
72,178
^(a)
241,667
211,611
^(a)
Residential 5,418
5,525
16,300
16,724

Alexander's 7,030
6,617
21,090
19,849

Hotel Pennsylvania 6,252
4,625
9,746
6,390

Total New York NOI, as adjusted 280,044
246,588
812,334
714,083

NOI from sold properties —
—
—
2,232

Total New York NOI $ 280,044
$ 246,588
$ 812,334
$ 716,315

~~_____________________~~


~~(a)~~	Beginning in January 2017 for office buildings with retail at the base, we have adjusted the allocation of real estate taxes between the retail and office elements above. This has no effect on our consolidated financial statements but resulted in a reallocation of $4,213 and $12,058 of income from retail to office for the three and nine months ended September 30, 2016, respectively.

~~VORNADO REALTY TRUST AND VORNADO REALTY L.P.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED~~

~~(UNAUDITED)~~


~~20.~~	~~Segment Information - continued~~

~~Notes to preceding tabular information - continued:~~


~~(4)~~	~~The elements of "Other" EBITDA are summarized below.~~

(Amounts in thousands) For the Three Months Ended September 30, For the Nine Months Ended September 30,
2017 2016 2017 2016
theMART (including trade shows) $ 24,165
$ 21,696
$ 72,471
$ 70,689
555 California Street 11,643
11,405
35,870
35,137
Other investments 11,379
20,388
36,318
57,092

Corporate general and administrative expenses^(a)
(22,730 ) (21,519 ) (78,952 ) (76,364 )

Investment income and other, net^(a)
5,910
6,871
24,079
19,317
Other EBITDA, as adjusted 30,367
38,841
89,786
105,871
Certain items that impact EBITDA:
JBGS which is treated as a discontinued operation:
Transaction costs (53,581 ) (2,739 ) (67,045 ) (4,597 )
Operating results through July 17, 2017 spin-off 13,038
75,307
153,449
214,604
(40,543 ) 72,568
86,404
210,007
Impairment loss on investment in PREIT (44,465 ) —
(44,465 ) —
(Loss) income from real estate fund investments, net (7,794 ) 807
(11,333 ) 13,662
Net gain resulting from UE operating partnership unit issuances 5,200
—
21,100
—
Our share of net gain on sale of Suffolk Downs —
—
15,314
—
Net gain on repayment of Suffolk Downs JV debt investments —
—
11,373
—
Skyline properties impairment loss —
—
—
(160,700 )
Other (3,197 ) 8,898
(1,024 ) 15,768
Total of certain items that impact EBITDA (90,799 ) 82,273
77,369
78,737
Other EBITDA $ (60,432 ) $ 121,114
$ 167,155
$ 184,608

~~The elements of "Other" NOI are summarized below.~~

(Amounts in thousands) For the Three Months Ended September 30, For the Nine Months Ended September 30,
2017 2016 2017 2016
theMART (including trade shows) $ 25,422
$ 21,758
$ 74,859
$ 70,914
555 California Street 11,013
9,899
33,647
24,010
Other investments 7,589
21,381
15,138
44,482

Investment income and other, net^(a)
5,910
6,871
24,079
19,317
Other NOI, as adjusted 49,934
59,909
147,723
158,723
Certain items that impact NOI:
JBGS operating results through July 17, 2017 spin-off 12,971
72,919
160,634
233,310
Our share of real estate fund investments 2,600
2,555
7,469
6,313
Other 692
1,906
4,282
4,894
Total of certain items that impact NOI 16,263
77,380
172,385
244,517
Other NOI $ 66,197
$ 137,289
$ 320,108
$ 403,240

~~_____________________~~


~~(a)~~	The amounts in these captions (for this table only) exclude the results of the mark-to-market of our deferred compensation plan of $1,975 and $204 of income for the three months ended September 30, 2017 and 2016, respectively, and $5,233 and $2,625 of income for the nine months ended September 30, 2017 and 2016, respectively.

~~VORNADO REALTY TRUST AND VORNADO REALTY L.P.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED~~

~~(UNAUDITED)~~


~~21.~~	~~Subsequent Event~~

On October 17, 2017, we extended one of our two $1.25 billion unsecured revolving credit facilities from November 2019 to January 2022 with two six-month extension options. The interest rate on the extended facility was lowered from LIBOR plus 1.05% to LIBOR plus 1.00%. The facility fee remains at 20 basis points. The interest rate and facility fees are the same as our other $1.25 billion unsecured revolving credit facility, which matures in February 2021 with two six-month extension options.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Shareholders and the Board of Trustees

of Vornado Realty Trust

~~New York, New York~~

Results of Review of Interim Financial Information

We have reviewed the accompanying consolidated balance sheet of Vornado Realty Trust and subsidiaries (the ~~“Company”~~"Company") as of ~~September~~June 30, ~~2017, and~~2018, the related consolidated statements of income and comprehensive income for the three-month and ~~nine-month~~six-month periods ended ~~September~~June 30, 2018 and 2017, and ~~2016 and~~of changes in equity, and cash flows, for the ~~nine-month~~six-month periods ended ~~September~~June 30, 2018 and 2017, and ~~2016. These~~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 ~~statements are~~information for it to be in conformity with accounting principles generally accepted in the ~~responsibility~~United States of ~~the Company’s management.~~America.

We ~~conducted our reviews~~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, 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, 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, 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 reviews 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 ~~Public Company Accounting Oversight Board (United States),~~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, 2018

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, the related consolidated statements of income and comprehensive income for the three-month and six-month periods ended June 30, 2018 and 2017, and of changes in equity, and cash flows, for the six-month periods ended June 30, 2018 and 2017, 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 ~~such consolidated~~the accompanying interim financial ~~statements~~information for ~~them~~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 ~~Vornado Realty Trust~~the Partnership as of December 31, ~~2016,~~2017, and the related consolidated statements of income, comprehensive income, changes in equity, and cash flows for the year then ~~ended prior to the reclassification for the discontinued operations described in Note 7 to the accompanying financial statements (not presented herein);~~ended; and in our report dated February ~~13, 2017,~~12, 2018, we expressed an unqualified opinion on those consolidated financial ~~statements~~. We also audited the adjustments described in Note 7 that were applied to reclassify the December 31, 2016 consolidated balance sheet of Vornado Realty Trust (not presented herein) for discontinued operations.statements. In our opinion, ~~such adjustments are appropriate and have been properly applied to~~ the ~~previously issued consolidated balance sheet~~information set forth in ~~deriving~~ the accompanying ~~retrospectively adjusted~~ consolidated balance sheet as of December 31, ~~2016.~~

~~/s/ DELOITTE & TOUCHE LLP~~

~~Parsippany, New Jersey~~

~~October 30,~~ 2017,

~~REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM~~

~~Partners~~

~~Vornado Realty L.P.~~

~~New York, New York~~

~~We have reviewed~~ is fairly stated, in all material respects, in relation to the ~~accompanying~~ consolidated balance sheet ~~of Vornado Realty L.P. and consolidated subsidiaries (the “Partnership”) as of September 30, 2017, and the related consolidated statements of income and comprehensive income~~from which it has been derived.

Basis for ~~the three-month and nine-month periods ended September 30, 2017 and 2016 and changes in equity, and cash flows for the nine-month periods ended September 30, 2017 and 2016. These~~Review Results

This interim financial ~~statements are~~information is the responsibility of the ~~Partnership’s~~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 reviews in accordance with ~~the~~ standards of the ~~Public Company Accounting Oversight Board (United States).~~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 ~~Public Company Accounting Oversight Board (United States),~~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.

Based on our reviews, we are not aware of any material modifications that should be made to such consolidated interim financial statements for them 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), the consolidated balance sheet of Vornado Realty L.P. as of December 31, 2016, and the related consolidated statements of income, comprehensive income, changes in equity, and cash flows for the year then ended prior to the reclassification for the discontinued operations described in Note 7 to the accompanying financial statements (not presented herein); and in our report dated February 13, 2017, we expressed an unqualified opinion on those consolidated financial statements. We also audited the adjustments described in Note 7 that were applied to reclassify the December 31, 2016 consolidated balance sheet of Vornado Realty L.P. and subsidiaries (not presented herein) for discontinued operations. In our opinion, such adjustments are appropriate and have been properly applied to the previously issued consolidated balance sheet in deriving the accompanying retrospectively adjusted consolidated balance sheet as of December 31, 2016.

/s/ DELOITTE & TOUCHE LLP

Parsippany, New Jersey

~~October~~July 30, ~~2017~~2018

5147

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 our Annual Report on Form 10-K ~~as amended,~~ for the year ended December 31, ~~2016.~~2017. 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 ~~nine~~six months ended ~~September~~June 30, ~~2017.~~2018. 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 ~~nine~~six months ended ~~September~~June 30, ~~2017~~2018 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.

5248

Overview

Vornado Realty Trust (“Vornado”) is a fully integrated real estate investment trust (“REIT”) and conducts its business through, and substantially all of its interests in properties are held by, Vornado Realty L.P., a Delaware limited partnership (the “Operating Partnership”). Vornado is the sole general partner of, and owned approximately 93.5% of the common limited partnership interest in, the Operating Partnership as of ~~September~~June 30, ~~2017.~~2018. All references to the “Company,” “we,” “us,” and “our” mean collectively Vornado, the Operating Partnership and those entities/subsidiaries consolidated by Vornado.

~~Business Objective and Operating Strategy~~

Our business objective is to maximize Vornado shareholder value, which we measure by the total return provided to Vornado’s shareholders. Below is a table comparing Vornado’s performance to the FTSE NAREIT Office Index (“Office REIT”) and the MSCI US REIT Index (“MSCI”) for the following periods ended September 30, 2017:

Total Return⁽¹⁾

Vornado Office REIT MSCI
Three-month 2.3 % (0.7 )% 0.9 %
Nine-month (6.7 )% 1.9 % 3.6 %
One-year (3.1 )% 2.5 % 0.5 %
Three-year 14.0 % 30.3 % 31.9 %
Five-year 52.0 % 53.7 % 58.0 %
Ten-year 38.9 % 47.0 % 75.6 %

~~____________________~~


~~(1)~~	~~Past performance is not necessarily indicative of future performance.~~

~~Overview - continued~~

~~We intend to achieve our business objective by continuing to pursue our investment philosophy and executing our operating strategies through:~~

~~maintaining a superior team of operating and investment professionals and an entrepreneurial spirit~~

~~investing in properties in select markets, such as New York City, where we believe there is a high likelihood of capital appreciation~~

~~acquiring quality properties at a discount to replacement cost and where there is a significant potential for higher rents~~

~~investing in retail properties in select under-stored locations such as the New York City metropolitan area~~

~~developing and redeveloping existing properties to increase returns and maximize value~~

~~investing in operating companies that have a significant real estate component~~

We expect to finance our growth, acquisitions and investments using internally generated funds, proceeds from asset sales and by accessing the public and private capital markets. We may also offer Vornado common or preferred shares or Operating Partnership units in exchange for property and may repurchase or otherwise reacquire these securities in the future.

We compete with a large number of real estate 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 ~~“Item 1A. Risk Factors”~~"Risk Factors" in ~~our Annual Report on Form 10-K, as amended, for the year ended December 31, 2016,~~Item 1A for additional information regarding these factors.

Vornado Realty Trust

Quarter Ended ~~September~~June 30, ~~2017~~2018 Financial Results Summary

Net ~~loss~~income attributable to common shareholders for the quarter ended ~~September~~June 30, ~~2017~~2018 was ~~$29,026,000,~~$111,534,000, or ~~$0.15~~$0.58 per diluted share, compared to ~~net income attributable to common shareholders of $66,125,000,~~$115,972,000, or ~~$0.35~~$0.61 per diluted share, for the prior year’s quarter. The quarters ended ~~September~~June 30, ~~2017~~2018 and ~~2016~~2017 include certain items that impact the comparability of period to period net ~~(loss)~~ 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 ~~loss attributable to common shareholders for the quarter ended September 30, 2017 by $97,255,000, or $0.51 per diluted share, and increased net~~ income attributable to common shareholders for the quarter ended ~~September~~June 30, ~~2016~~2018 by ~~$18,115,000,~~$41,881,000, or ~~$0.10~~$0.22 per diluted ~~share.~~share, and $48,600,000, or $0.26 per diluted share, for the quarter ended June 30, 2017.

Funds From Operations ("FFO") attributable to common shareholders plus assumed conversions ~~(“FFO”)~~ for the quarter ended ~~September~~June 30, ~~2017~~2018 was ~~$100,178,000,~~$209,680,000, or ~~$0.52~~$1.10 per diluted share, compared to ~~$225,529,000,~~$257,673,000, or ~~$1.19~~$1.35 per diluted share, for the prior year’s quarter. FFO attributable to common shareholders plus assumed conversions for the quarters ended ~~September~~June 30, ~~2017~~2018 and ~~2016~~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~~increased FFO attributable to common shareholders plus assumed conversions for the quarter ended ~~September~~June 30, ~~2017~~2018 by ~~$88,811,000,~~$22,268,000, or ~~$0.47~~$0.12 per diluted share, and ~~increased FFO~~$77,129,000, or $0.40 per diluted share, for the quarter ended ~~September~~June 30, ~~2016 by $49,310,000, or $0.26 per diluted share.~~2017.

~~Nine~~Six Months Ended ~~September~~June 30, ~~2017~~2018 Financial Results Summary

Net income attributable to common shareholders for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2018 was ~~$134,698,000,~~$93,693,000, or ~~$0.71~~$0.49 per diluted share, compared to ~~$172,425,000,~~$163,724,000, or ~~$0.91~~$0.86 per diluted share, for the ~~nine~~six months ended ~~September~~June 30, ~~2016.~~2017. The ~~nine~~six months ended ~~September~~June 30, ~~2017~~2018 and ~~2016~~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 ~~nine~~six months ended ~~September~~June 30, ~~2017~~2018 by ~~$30,740,000,~~$32,384,000, or ~~$0.16~~$0.17 per diluted share, and increased net income attributable to common shareholders for the ~~nine~~six months ended ~~September~~June 30, ~~2016~~2017 by ~~$53,053,000,~~$50,212,000, or ~~$0.28~~$0.26 per diluted share.

FFO attributable to common shareholders plus assumed conversions for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2018 was ~~$564,431,000,~~$312,339,000, or ~~$2.95~~$1.63 per diluted share, compared to ~~$658,880,000,~~$463,422,000, or ~~$3.47~~$2.43 per diluted share, for the ~~nine~~six months ended ~~September~~June 30, ~~2016.~~2017. FFO attributable to common shareholders plus assumed conversions for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2018 and ~~2016~~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, ~~increased~~decreased FFO attributable to common shareholders plus assumed conversions for the ~~nine~~six months ended ~~September~~June 30, ~~2017 and 2016~~2018 by ~~$27,086,000,~~$49,038,000, or ~~$0.14~~$0.26 per diluted share, and ~~$159,791,000,~~increased FFO attributable to common shareholders plus assumed conversions for the six months ended June 30, 2017 by $124,008,000, or ~~$0.84~~$0.65 per diluted ~~share, respectively.~~share.

5449

Overview - continued

(Amounts in thousands) For the Three Months Ended September 30, For the Nine Months Ended September 30,
2017 2016 2017 2016
Certain items that impact net (loss) income attributable to common shareholders:
JBG SMITH Properties which is treated as a discontinued operation:
Transaction costs $ (53,581 ) $ (2,739 ) $ (67,045 ) $ (4,597 )
Operating results through July 17, 2017 spin-off 3,950

29,489
47,752
66,714
(49,631 ) 26,750
(19,293 ) 62,117

Impairment loss on investment in Pennsylvania REIT (44,465 ) —
(44,465 ) —
(Loss) income from real estate fund investments, net (7,794 ) 807
(11,333 ) 13,662
Net gain resulting from Urban Edge Properties operating partnership unit issuances 5,200
—
21,100
—
Our share of write-off of deferred financing costs (3,819 ) —
(3,819 ) —
Preferred share issuance costs (Series J redemption) —
(7,408 ) —
(7,408 )
Our share of net gain on sale of Suffolk Downs —
—
15,314
—
Net gain on repayment of Suffolk Downs JV debt investments —
—
11,373
—
Skyline properties impairment loss —
—
—
(160,700 )
Net gain on sale of 47% ownership interest in 7 West 34th Street —
—
—
159,511
Other (3,197 ) (851 ) (1,024 ) (10,699 )
(103,706 ) 19,298
(32,147 ) 56,483
Noncontrolling interests' share of above adjustments 6,451
(1,183 ) 1,407
(3,430 )
Total of certain items that impact net (loss) income attributable to common shareholders, net $ (97,255 ) $ 18,115
$ (30,740 ) $ 53,053
The following table reconciles the difference between our net income attributable to common shareholders and our net income attributable to common shareholders, as adjusted:

Certain items that impact FFO:
JBG SMITH Properties which is treated as a discontinued operation:
Transaction costs $ (53,581 ) $ (2,739 ) $ (67,045 ) $ (4,597 )
Operating results through July 17, 2017 spin-off 10,148
61,699
122,201
169,141
(43,433 ) 58,960
55,156
164,544

Impairment loss on investment in Pennsylvania REIT (44,465 ) —
(44,465 ) —
(Loss) income from real estate fund investments, net (7,794 ) 807
(11,333 ) 13,662
Net gain resulting from Urban Edge Properties operating partnership unit issuances 5,200
—
21,100
—
Our share of write-off of deferred financing costs (3,819 ) —
(3,819 ) —
Preferred share issuance costs (Series J redemption) —
(7,408 ) —
(7,408 )
Net gain on repayment of our Suffolk Downs JV debt investments —
—
11,373
—
Other (390 ) 171
856
(130 )
(94,701 ) 52,530
28,868
170,668
Noncontrolling interests' share of above adjustments 5,890
(3,220 ) (1,782 ) (10,877 )
Total of certain items that impact FFO, net $ (88,811 ) $ 49,310
$ 27,086
$ 159,791



(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 common shareholders:
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 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			—
Preferred share issuance costs	—			—			14,486			—
Other	839			900			4,609			2,864
	(44,659		)	(51,807		)	34,489			(53,526		)
Noncontrolling interests' share of above adjustments	2,778			3,207			(2,105		)	3,314
Total of certain (income) expense items that impact net income attributable to common shareholders	$	(41,881	)	$	(48,600	)	$	32,384		$	(50,212	)

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,
	2018			2017			2018			2017
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		$	—
Profit participation on the April 2018 sale of 701 Seventh Avenue	(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		)
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			—
Preferred share issuance costs	—			—			14,486			—
Other	839			379			4,592			(962		)
	(23,745		)	(82,311		)	52,250			(132,310		)
Noncontrolling interests' share of above adjustments	1,477			5,182			(3,212		)	8,302
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	)

5550

Overview - continued

Vornado Realty L.P.

Quarter Ended ~~September~~June 30, ~~2017~~2018 Financial Results Summary

Net ~~loss~~income attributable to Class A unitholders for the quarter ended ~~September~~June 30, ~~2017~~2018 was ~~$30,952,000,~~$118,931,000, or ~~$0.16~~$0.58 per diluted Class A unit, compared to ~~net income attributable to Class A unitholders of $70,442,000,~~$123,630,000, or ~~$0.35~~$0.61 per diluted Class A unit, for the prior year’s quarter. The quarters ended ~~September~~June 30, ~~2017~~2018 and ~~2016~~2017 include certain items that impact net ~~(loss)~~ income attributable to Class A unitholders, which are listed in the table below. The aggregate of these items increased net ~~loss attributable to Class A unitholders for the quarter ended September 30, 2017 by $103,706,000, or $0.51 per diluted Class A unit, and increased net~~ income attributable to Class A unitholders for the quarter ended ~~September~~June 30, ~~2016~~2018 by ~~$19,298,000,~~$44,659,000, or ~~$0.10~~$0.22 per diluted Class A ~~unit.~~unit, and $51,807,000, or $0.26 per diluted Class A unit, for the quarter ended June 30, 2017.

~~Nine~~Six Months Ended ~~September~~June 30, ~~2017~~2018 Financial Results Summary

Net income attributable to Class A unitholders for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2018 was ~~$143,610,000,~~$99,917,000, or ~~$0.69~~$0.48 per diluted Class A unit, compared to ~~$183,689,000,~~$174,562,000, or ~~$0.90~~$0.85 per diluted Class A unit, for the ~~nine~~six months ended ~~September~~June 30, ~~2016.~~2017. The ~~nine~~six months ended ~~September~~June 30, ~~2017~~2018 and ~~2016~~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 ~~nine~~six months ended ~~September~~June 30, ~~2017~~2018 by ~~$32,147,000,~~$34,489,000, or ~~$0.16~~$0.17 per diluted Class A unit, and increased net income attributable to Class A unitholders for the ~~nine~~six months ended ~~September~~June 30, ~~2016~~2017 by ~~$56,483,000,~~$53,526,000, or ~~$0.28~~$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 September 30, For the Nine Months Ended September 30,
2017 2016 2017 2016
Certain items that impact net (loss) income attributable to Class A unitholders:
JBG SMITH Properties which is treated as a discontinued operation:
Transaction costs $ (53,581 ) $ (2,739 ) $ (67,045 ) $ (4,597 )
Operating results through July 17, 2017 spin-off 3,950
29,489
47,752
66,714
(49,631 ) 26,750
(19,293 ) 62,117

Impairment loss on investment in Pennsylvania REIT (44,465 ) —
(44,465 ) —
(Loss) income from real estate fund investments, net (7,794 ) 807
(11,333 ) 13,662
Net gain resulting from Urban Edge Properties operating partnership unit issuances 5,200
—
21,100
—
Our share of write-off of deferred financing costs (3,819 ) —
(3,819 ) —
Preferred unit issuance costs (Series J redemption) —
(7,408 ) —
(7,408 )
Our share of net gain on sale of Suffolk Downs —
—
15,314
—
Net gain on repayment of Suffolk Downs JV debt investments —
—
11,373
—
Skyline properties impairment loss —
—
—
(160,700 )
Net gain on sale of 47% ownership interest in 7 West 34th Street —
—
—
159,511
Other (3,197 ) (851 ) (1,024 ) (10,699 )
Total of certain items that impact net (loss) income attributable to Class A unitholders $ (103,706 ) $ 19,298
$ (32,147 ) $ 56,483



(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			—
Other	839			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	)

5651

Overview - continued

Vornado Realty Trust and Vornado Realty L.P.

Same Store ~~EBITDA and Same Store NOI~~Net Operating Income ("NOI")

The percentage increase (decrease) in same store ~~Earnings Before Interest, Taxes, Depreciation and Amortization (“EBITDA”)~~NOI and same store ~~Net Operating Income (“NOI”) on a~~NOI - cash basis of our New York segment, ~~and~~ theMART and 555 California Street ~~which are included in Other,~~ are summarized below.

New York theMART 555 California Street
Same store EBITDA % increase (decrease) :
Three months ended September 30, 2017 compared to September 30, 2016 5.0 %
⁽¹⁾
11.3 % 1.7 %
Nine months ended September 30, 2017 compared to September 30, 2016 2.7 %
⁽¹⁾
3.4 %
⁽²⁾
(0.2 )%
Three months ended September 30, 2017 compared to June 30, 2017 4.8 %
⁽¹⁾
(1.1 )% (4.1 )%
Same store NOI % increase (decrease):
Three months ended September 30, 2017 compared to September 30, 2016 13.8 %
⁽¹⁾
17.0 % 13.2 %
Nine months ended September 30, 2017 compared to September 30, 2016 13.2 %
⁽¹⁾
5.8 %
⁽²⁾
37.9 %
Three months ended September 30, 2017 compared to June 30, 2017 3.9 %
⁽¹⁾
1.6 % (2.2 )%



		Total		New York		theMART		555 California Street
Same store NOI at share % increase⁽¹⁾:
	Three months ended June 30, 2018 compared to June 30, 2017	4.7	%	4.2	%	5.2	%	13.5	%
	Six months ended June 30, 2018 compared to June 30, 2017	4.5	%	4.1	%	4.3	%	12.9	%
	Three months ended June 30, 2018 compared to March 31, 2018	3.2	%	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, 2017	7.0	%	5.9	%	10.8	%	23.8	%
	Six months ended June 30, 2018 compared to June 30, 2017	6.7	%	5.8	%	10.4	%	18.5	%
	Three months ended June 30, 2018 compared to March 31, 2018	4.6	%	4.6	%	2.9	%	7.7	%

____________________

EBITDA NOI
(1) Excluding Hotel Pennsylvania - same store % increase:
Three months ended September 30, 2017 compared to September 30, 2016 4.5 % 13.4 %
Nine months ended September 30, 2017 compared to September 30, 2016 2.3 % 12.8 %
Three months ended September 30, 2017 compared to June 30, 2017 5.3 % 4.4 %

(2) The nine months ended September 30, 2017 includes a $2,000,000 reversal of an expense accrued in 2015. Excluding this amount, same store EBITDA increased by 6.2% and same store NOI increased by 8.9%.



		Increase (Decrease)
(1)	Excluding Hotel Pennsylvania - New York same store NOI at share % increase (decrease):
	Three months ended June 30, 2018 compared to June 30, 2017	4.6	%
	Six months ended June 30, 2018 compared to June 30, 2017	4.2	%
	Three months ended June 30, 2018 compared to March 31, 2018	(0.3	)%

	Excluding Hotel Pennsylvania - New York same store NOI at share - cash basis % increase:
	Three months ended June 30, 2018 compared to June 30, 2017	6.3	%
	Six months ended June 30, 2018 compared to June 30, 2017	5.8	%
	Three months ended June 30, 2018 compared to March 31, 2018	0.7	%

Calculations of ~~same store EBITDA,~~ same store NOI, reconciliations of our net income to ~~EBITDA~~NOI, NOI - 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.

5752

Overview - continued

~~Financings~~Acquisition

On ~~June 1, 2017, Alexander’s, Inc. (NYSE: ALX), in which~~February 9, 2018, we ~~have~~acquired 537 West 26th Street, a ~~32.4% ownership interest, completed a $500,000,000 refinancing~~14,000 square foot commercial property adjacent to our 260 Eleventh Avenue office property and 55,000 square feet of the office portion of 731 Lexington Avenue. The interest-only loan is at LIBOR plus 0.90% (2.14% at September 30, 2017) and matures in June 2020 with four one-year extension options. In connection therewith, Alexander’s purchased an interest rate cap with a notional amount of $500,000,000 that caps LIBOR at a rate of 6.00%. The property was previously encumbered by a $300,000,000 interest-only mortgage at LIBOR plus 0.95% which was scheduled to mature in March 2021.additional zoning air rights, for $44,000,000.

On June 15, 2017, the joint venture, in which we have a 50.1% interest, completed a $271,000,000 loan facility, with an initial advance of $202,299,000 for the Moynihan Office Building. The interest-only loan is at LIBOR plus a 3.25% (4.48% at September 30, 2017) and matures in June 2019 with two one-year extension options.

On June 20, 2017, we completed a $220,000,000 financing of The Bartlett residential building. The five-year interest-only loan is at LIBOR plus 1.70% (2.90% at September 30, 2017), and matures in June 2022. On July 17, 2017, the property, the loan and the $217,000,000 of net proceeds were transferred to JBGS in connection with the tax-free spin-off of our Washington, DC segment.Dispositions

On ~~July~~January 17, 2017, prior to completion of the tax-free spin-off of our Washington, DC segment, we repaid the $43,581,000 LIBOR plus 1.25% mortgage encumbering 1700 and 1730 M Street which was scheduled to mature in August 2017. The unencumbered property was then transferred to JBGS in connection with the tax-free spin-off of our Washington, DC segment.

~~Other Activities~~

On May 26, 2017, Sterling Suffolk Racecourse, LLC ("Suffolk Downs JV"), a joint venture in which we have a 21.2% equity interest, sold the property comprising the Suffolk Downs racetrack in East Boston, Massachusetts (“Suffolk Downs”) for $155,000,000, which resulted in net proceeds and a net gain to us of $15,314,000. In addition, we were repaid $29,318,000 of principal and $6,129,000 of accrued interest on our debt investments in Suffolk Downs JV, resulting in a net gain of $11,373,000.

~~On September 29, 2017,~~2018, Vornado Capital Partners Real Estate Fund (the "Fund") completed the sale of ~~800 Corporate Pointe in Culver City, CA~~the retail condominium at 11 East 68th Street, a property located on Madison Avenue and 68th Street, for ~~$148,000,000.~~$82,000,000. From the inception of this investment through its disposition, the Fund realized a ~~$35,620,000~~$46,259,000 net gain.

~~Overview - continued~~

~~Recently Issued Accounting Literature~~

~~In May 2014,~~On June 21, 2018, we completed the ~~Financial Accounting Standards Board (“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~~$45,000,000 sale of 27 Washington Square North, which resulted in a ~~single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most~~net gain of ~~the existing revenue recognition guidance. This standard,~~$23,559,000 which is ~~effective for interim~~included in "net gains on disposition of wholly owned 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 will adopt this standard effective January 1, 2018, with the exception of the components of revenue from leases, which has been deferred until the adoption of the update ASU 2016-02 to ASC Topic 842, ~~Leases,~~ on January 1, 2019. We will utilize the modified retrospective method when adopting ASU 2014-09, which requires a cumulative-effect adjustment to retained earnings as of the beginning of the fiscal year of adoption. We have analyzed our revenue streams and identified the areas that we expect to be impacted by the adoption of this standard. We expect this standard will have an impact on the classification of reimbursements of real estate taxes and insurance expenses and certain non-lease components of revenue (e.g., reimbursements of common area maintenance expenses) from leases with no material impact on "total revenues", for new leases executed on or after January 1, 2019. We are in the process of completing the evaluation of the overall impact of this standard on our consolidated financial statements, including required informational disclosures for our revenue streams beginning with the first reporting period after adoption.

~~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 will adopt this standard effective January 1, 2018. While the adoption of this standard requires us to continue to measure “marketable securities” at fair value at each reporting date, the changes in fair value will be recognized in current period earnings as opposed to “other comprehensive income (loss).”

~~In February 2016, the FASB issued an update ASU 2016-02 establishing ASC Topic 842,~~ ~~Leases~~, 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 dual 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 asset and a lease liability for all leases with a term of greater than 12 months. Leases with a term of 12 months or less will be accounted for similar to existing guidance for operating leases. Lessees will recognize expense based on the effective interest method for finance leases or on a straight-line basis for operating leases. We are currently evaluating the overall impact of the adoption of ASU 2016-02 on our consolidated financial statements and believe that the standard will more significantly impact the accounting for leases in which we are a lessee. We have a number of ground leases for which we will be required to record a right-of-use asset and lease liability equal to the present value of the remaining minimum lease payments upon adoption of this standard. We also expect that this standard will require us to allocate total consideration from leases between lease and non-lease components based on the estimated stand-alone selling prices of the components. The lease components (e.g., base rent) will continue to be recognized on a straight-line basis over the term of the lease and certain non-lease components (e.g., reimbursements of common area maintenance expenses) will be accounted for under the new revenue recognition guidance of ASU 2014-09. As a result, we expect that this standard will have an impact on the classification of reimbursements of real estate taxes, insurance expenses and common area maintenance expensespartially owned assets" on our consolidated statements of ~~income,~~income. We acquired the property in December 2015 for $20,000,000.

Financings

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 ~~no impact on "total revenue"~~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%, ~~for new leases executed on or after January 1, 2019. Under ASU 2016-02, initial direct costs for both lessees and lessors would include only those costs that are incremental~~which was scheduled to the arrangement and would not have been incurred if the lease had not been obtained. As a result, we may no longer be able to capitalize internal leasing costs and instead may be required to expense these costs as incurred. ASU 2016-02 is effective for reporting periods beginning aftermature in December 15, 2018, with early adoption permitted. We will adopt this standard effective January 1, 2019 using the modified retrospective approach and will elect to use the practical expedients provided by this standard.2018.

~~In March 2016,~~On June 11, 2018, the ~~FASB issued an update (“ASU 2016-09”)~~ ~~Improvements to Employee Share-Based Payment Accounting~~ ~~to ASC Topic 718,~~ ~~Compensation - Stock Compensation~~ ~~(“ASC 718”)~~joint venture that owns Independence Plaza, a three-building 1,327 unit residential complex in the Tribeca submarket of Manhattan completed a $675,000,000 refinancing of Independence Plaza. The seven-year interest-only loan matures in July 2025 and has a fixed rate of 4.25%. ~~ASU 2016-09 amends several aspects~~Our share of net proceeds, after repayment of the ~~accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities,~~existing 3.48% $550,000,000 mortgage and ~~classification on the statement of cash flows. ASU 2016-09~~closing costs, was effective for interim and annual reporting periods in fiscal years beginning after December 15, 2016. The adoption of this update as of January 1, 2017 did not have a material impact on our consolidated financial statements.

~~Overview - continued~~

~~Recently Issued Accounting Literature - continued~~

~~In February 2017, the FASB issued an update (“ASU 2017-05”)~~ ~~Clarifying the Scope of Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial Assets~~ ~~to ASC Subtopic 610-20,~~ ~~Other Income-Gains and Losses from the Derecognition of Nonfinancial Assets~~. 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 2017-05 is effective for interim and annual reporting periods in fiscal years beginning after December 15, 2017. The adoption of this standard on January 1, 2018 is not expected to have an impact on our consolidated financial statements.

~~In May 2017, the FASB issued an update (“ASU 2017-09”)~~ ~~Scope of Modification Accounting~~ to ASC 718. ASU 2017-09 provides guidance about which changes to the terms and conditions of a share-based payment award require an entity to apply modification accounting in ASC 718. ASU 2017-09 is effective for interim and annual reporting periods in fiscal years beginning after December 15, 2017. The adoption of this standard on January 1, 2018 is not expected to have an 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 is effective for interim and annual reporting periods in fiscal years beginning after December 15, 2018, with early adoption permitted. We are currently evaluating the impact of the adoption of ASU 2017-12 on our consolidated financial statements, but do not believe the adoption of this standard will have a material impact on our consolidated financial statements.$55,618,000.

Critical Accounting Policies

A summary of our critical accounting policies is included in our Annual Report on Form 10-K ~~as amended,~~ for the year ended December 31, ~~2016~~2017 in Management’s Discussion and Analysis of Financial Condition and Results of Operations. ~~There have been~~For the six months ended June 30, 2018, there were no ~~significant~~material changes to ~~our~~these policies, ~~during 2017.~~other than the adoption of the Accounting Standards Codification Topic 606, Revenue from Contracts with Customers, described in Note 3 to the unaudited consolidated financial statements in Part I, Item I of this Quarterly Report on 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.

6053

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)	(Square feet in thousands)	New York													(Square feet in thousands)	New York
		Office			Retail				theMART			555 California Street				Office			Retail			theMART			555 California Street
Three Months Ended September 30, 2017
Three Months Ended June 30, 2018															Three Months Ended June 30, 2018
	Total square feet leased	452			51				36			61			Total square feet leased	611			49			50			—
	Our share of square feet leased:	405			38				36			43			Our share of square feet leased:	545			44			50			—
	Initial rent⁽¹⁾	$	83.09		$	346.34			$	54.11		$	71.77		Initial rent⁽¹⁾	$	88.28		$	165.98		$	51.66		$	—
	Weighted average lease term (years)	9.9			6.1				5.4			7.8			Weighted average lease term (years)	10.5			5.9			5.4			—
	Second generation relet space:														Second generation relet space:
	Square feet	322			22				22			—			Square feet	502			38			50			—
	GAAP basis:														GAAP basis:
	Straight-line rent⁽²⁾	$	81.46		$	89.13			$	62.79		$	—		Straight-line rent⁽²⁾	$	94.89		$	153.04		$	51.26		$	—
	Prior straight-line rent	$	72.79		$	112.10			$	46.03		$	—		Prior straight-line rent	$	67.17		$	137.19		$	46.86		$	—
	Percentage increase (decrease)	11.9		%	(20.5		)%	⁽³⁾	36.4		%	—		%	Percentage increase	41.3		%	11.6		%	9.4		%	—		%
	Cash basis:														Cash basis:
	Initial rent⁽¹⁾	$	83.64		$	87.36			$	61.02		$	—		Initial rent⁽¹⁾	$	89.59		$	145.58		$	51.66		$	—
	Prior escalated rent	$	75.21		$	85.19			$	49.56		$	—		Prior escalated rent	$	69.80		$	133.90		$	50.83		$	—
	Percentage increase	11.2		%	2.5		%		23.1		%	—		%	Percentage increase	28.4		%	8.7		%	1.6		%	—		%
	Tenant improvements and leasing commissions:														Tenant improvements and leasing commissions:
	Per square foot	$	84.69		$	232.54			$	30.18		$	131.32		Per square foot	$	101.10		$	110.51		$	8.35		$	—
	Per square foot per annum	$	8.55		$	38.12			$	5.59		$	16.83		Per square foot per annum	$	9.63		$	18.73		$	1.55		$	—
	Percentage of initial rent	10.2		%	11.0		%		10.3		%	23.5		%	Percentage of initial rent	10.9		%	11.3		%	3.0		%	—		%

____________________

See notes on the following page

Overview - continued

Leasing Activity - continued

Nine Months Ended September 30, 2017
Total square feet leased 1,548
87
227
132
Our share of square feet leased: 1,188
68
227
93

Initial rent⁽¹⁾
$ 79.35
$ 278.05
$ 48.37
$ 79.98
Weighted average lease term (years) 8.4
6.0
6.9
9.4
Second generation relet space:
Square feet 813
44
207
46
GAAP basis:

Straight-line rent⁽²⁾
$ 73.89
$ 158.51
$ 48.53
$ 95.09
Prior straight-line rent $ 64.62
$ 140.76
$ 37.45
$ 80.30
Percentage increase 14.3 % 12.6 % 29.6 % 18.4 %
Cash basis:

Initial rent⁽¹⁾
$ 75.52
$ 150.88
$ 48.27
$ 86.49
Prior escalated rent $ 68.23
$ 131.03
$ 39.83
$ 78.67
Percentage increase 10.7 % 15.1 % 21.2 % 9.9 %
Tenant improvements and leasing commissions:
Per square foot $ 74.59
$ 156.88
$ 42.22
$ 111.81
Per square foot per annum $ 8.88
$ 26.15
$ 6.12
$ 11.89
Percentage of initial rent 11.1 % 9.4 % 12.7 % 14.9 %



(Square feet in thousands)		New York
		Office				Retail				theMART			555 California Street
Six Months Ended June 30, 2018
	Total square feet leased	1,036				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 feet	787				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 rent	11.1		%		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)	~~Attributable to~~ Excluding a single lease at 770 Broadway for ~~20,800~~77 square feet, ~~at share at 1290 Avenue of the Americas that was the subject of a FAS 141 below market lease upward adjustment when we acquired the property in 2007. Excluding the FAS 141 adjustment~~ the GAAP and cash basis ~~increase in rent would have been 8.0%.~~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.

6155

Overview - continued

Square Footage (in service) and Occupancy as of ~~September~~June 30, ~~2017~~2018


(Square feet in thousands)		Square Feet (in service)					Square Feet (in service)
	Number of Properties	Total Portfolio	Our Share	Occupancy %		Number of Properties	Total Portfolio	Our Share	Occupancy %
New York:
Office	37	20,242	16,968	97.0	%	36	20,243	16,966	96.6	%
Retail	72	2,709	2,473	95.7	%
Residential - 1,696 units	11	1,568	835	94.4	%
Retail (includes retail properties that are in the base of our office properties)						72	2,672	2,422	96.3	%
Residential - 1,682 units						10	1,533	800	98.3	%
Alexander's, including 312 residential units	7	2,437	790	99.3	%	7	2,437	790	99.5	%
Hotel Pennsylvania	1	1,400	1,400			1	1,400	1,400
		28,356	22,466	96.9	%		28,285	22,378	96.6	%
Other:
theMART	3	3,689	3,680	98.7	%	3	3,694	3,685	99.3	%
555 California Street	3	1,740	1,218	94.2	%	3	1,741	1,219	97.3	%
Rosslyn Plaza Office and Residential - 197 units	6	690	313	65.9	%
Other	4	1,836	877	99.8	%	11	2,522	1,187	93.6	%
		7,955	6,088				7,957	6,091

Total square feet as of September 30, 2017		36,311	28,554
Total square feet as of June 30, 2018							36,242	28,469

Square Footage (in service) and Occupancy as of December 31, ~~2016~~2017


(Square feet in thousands)		Square Feet (in service)					Square Feet (in service)
	Number of properties	Total Portfolio	Our Share	Occupancy %		Number of properties	Total Portfolio	Our Share	Occupancy %
New York:
Office	36	20,227	16,962	96.3	%	36	20,256	16,982	97.1	%
Retail	70	2,672	2,464	97.1	%
Residential - 1,692 units	11	1,559	826	95.7	%
Retail (includes retail properties that are in the base of our office properties)						71	2,720	2,471	96.9	%
Residential - 1,671 units						10	1,533	800	97.3	%
Alexander's, including 312 residential units	7	2,437	790	99.8	%	7	2,437	790	99.3	%
Hotel Pennsylvania	1	1,400	1,400			1	1,400	1,400
		28,295	22,442	96.5	%		28,346	22,443	97.2	%
Other:
theMART	3	3,671	3,662	98.9	%	3	3,689	3,680	98.6	%
555 California Street	3	1,738	1,217	92.4	%	3	1,741	1,219	94.2	%
Rosslyn Plaza Office and Residential - 196 units	6	746	339	64.0	%
Other	4	1,811	850	99.8	%	11	2,525	1,188	93.6	%
		7,966	6,068				7,955	6,087

Total square feet as of December 31, 2016		36,261	28,510
Total square feet as of December 31, 2017							36,301	28,530

6256

Net Operating Income ~~EBITDA and NOI~~ by Segment for the Three Months Ended ~~September~~June 30, ~~2017~~2018 and ~~2016~~

2017

~~As a result of~~NOI represents total revenues less operating expenses. We consider NOI to be the ~~spin-off~~primary non-GAAP financial measure for making decisions and assessing the unlevered performance of our ~~Washington, DC segment, effective July 1, 2017, the Washington, DC segment has been reclassified~~segments as it relates to the ~~Other segment. We have also reclassified the prior period segment financial results to conform~~total return on assets as opposed to the ~~current period presentation.~~

~~Below is~~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 ~~summary of~~substitute for net ~~income and a reconciliation of net income~~income. NOI may not be comparable to ~~EBITDA~~⁽¹⁾~~and NOI~~⁽¹⁾similarly titled measures employed by ~~segment for the three months ended September 30, 2017.~~other companies.

~~____________________~~

~~See notes on pages 65 through 66.~~

~~Net Income, EBITDA and NOI by Segment for the Three Months Ended September 30, 2017 and 2016 - continued~~

Below is a summary of ~~net income~~NOI at share and ~~a reconciliation of net income to EBITDA~~NOI at share - cash basis⁽¹⁾~~and NOI~~⁽¹⁾by segment for the three months ended ~~September~~June 30, ~~2016.~~2018 and 2017.



(Amounts in thousands)	For the Three Months Ended June 30, 2018
	Total			New York			Other
Total revenues	$	541,818		$	458,552		$	83,266
Operating expenses	235,981			200,903			35,078
NOI - consolidated	305,837			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 entities	65,752			49,778			15,974
NOI at share	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
NOI at share - cash basis	$	341,948		$	283,154		$	58,794

~~____________________~~

~~See notes on the following pages.~~



(Amounts in thousands)	For the Three Months Ended June 30, 2017
	Total			New York			Other
Total revenues	$	511,087		$	436,862		$	74,225
Operating expenses	215,700			185,712			29,988
NOI - consolidated	295,387			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 entities	67,016			46,386			20,630
NOI at share	346,134			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

6457

Net Operating Income ~~EBITDA and NOI~~ by Segment for the Three Months Ended ~~September~~June 30, ~~2017~~2018 and ~~2016~~ 2017- continued

~~Notes to preceding tabular information:~~

~~(1)~~


~~(2)~~	~~Adjustments include our proportionate share of partially owned entities and give effect to noncontrolling interest's share of consolidated subsidiaries.~~


~~(3)~~	~~The elements of "New York" EBITDA are summarized below.~~

(Amounts in thousands) For the Three Months Ended September 30,
2017 2016
Office $ 183,162
$ 164,150
^(a)
Retail 90,316
91,061
^(a)
Residential 5,981
6,214

Alexander's 12,207
11,506

Hotel Pennsylvania 5,511
3,962

Total New York EBITDA $ 297,177
$ 276,893

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



(Amounts in thousands)	For the Three Months Ended June 30,
	2018		2017
New York:
Office	$	184,867	$	171,809
Retail	87,109		89,955
Residential	6,338		6,191
Alexander's	11,909		11,966
Hotel Pennsylvania	5,644		6,267
Total New York	295,867		286,188

Other:
theMART	27,816		26,182
555 California Street	13,660		12,032
Other investments	17,086		21,732
Total Other	58,562		59,946

NOI at share	$	354,429	$	346,134

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

(Amounts in thousands) For the Three Months Ended September 30,
2017 2016
Office $ 179,505
$ 157,643
^(a)
Retail 81,839
72,178
^(a)
Residential 5,418
5,525

Alexander's 7,030
6,617

Hotel Pennsylvania 6,252
4,625

Total New York NOI, as adjusted $ 280,044
$ 246,588

~~_____________________~~


~~(a)~~	Beginning in January 2017 for office buildings with retail at the base, we have adjusted the allocation of real estate taxes between the retail and office elements above. This has no effect on our consolidated financial statements but resulted in a reallocation of $4,213 of income from retail to office for the three months ended September 30, 2016.



(Amounts in thousands)	For the Three Months Ended June 30,
	2018		2017
New York:
Office	$	180,710	$	163,972
Retail	79,139		79,967
Residential	5,463		5,342
Alexander's	12,098		12,311
Hotel Pennsylvania	5,744		6,299
Total New York	283,154		267,891

Other:
theMART	27,999		24,897
555 California Street	13,808		11,151
Other investments	16,987		19,720
Total Other	58,794		55,768

NOI at share - cash basis	$	341,948	$	323,659

6558

Reconciliation of Net Income ~~EBITDA and NOI by Segment~~to Net Operating Income for the Three Months Ended ~~September~~June 30, ~~2017~~2018 and ~~2016 - continued~~2017

~~Notes~~Below is a reconciliation of net income to ~~preceding tabular information~~NOI at share and NOI at share - ~~continued:~~

cash basis for the three months ended June 30, 2018 and 2017.


~~(4)~~	~~The elements of "Other" EBITDA are summarized below.~~

(Amounts in thousands) For the Three Months Ended September 30,
2017 2016
theMART (including trade shows) $ 24,165
$ 21,696
555 California Street 11,643
11,405
Other investments 11,379
20,388

Corporate general and administrative expenses^(a)
(22,730 ) (21,519 )

Investment income and other, net^(a)
5,910
6,871
Other EBITDA, as adjusted 30,367
38,841
Certain items that impact EBITDA:
JBG SMITH Properties which is treated as a discontinued operation:
Transaction costs (53,581 ) (2,739 )
Operating results through July 17, 2017 spin-off 13,038
75,307
(40,543 ) 72,568
Impairment loss on investment in Pennsylvania REIT (44,465 ) —
(Loss) income from real estate fund investments, net (7,794 ) 807
Net gain resulting from UE Properties operating partnership unit issuances 5,200
—
Other (3,197 ) 8,898
Total of certain items that impact EBITDA (90,799 ) 82,273
Other EBITDA $ (60,432 ) $ 121,114

~~The elements of "Other" NOI are summarized below.~~

(Amounts in thousands) For the Three Months Ended September 30,
2017 2016
theMART (including trade shows) $ 25,422
$ 21,758
555 California Street 11,013
9,899
Other investments 7,589
21,381

Investment income and other, net^(a)
5,910
6,871
Other NOI, as adjusted 49,934
59,909
Certain items that impact NOI:
JBG SMITH Properties operating results through July 17, 2017 spin-off 12,971
72,919
Our share of real estate fund investments 2,600
2,555
Other 692
1,906
Total of certain items that impact NOI 16,263
77,380
Other NOI $ 66,197
$ 137,289



(Amounts in thousands)	For the Three Months Ended June 30,
	2018			2017
Net income	$	105,338		$	147,484

Deduct:
Income from partially owned entities	(8,757		)	(46,021		)
Loss (income) from real estate fund investments	28,976			(4,391		)
Interest and other investment income, net	(30,892		)	(8,541		)
Net gains on disposition of wholly owned and partially owned assets	(23,559		)	—
Income from discontinued operations	(683		)	(18,111		)
NOI attributable to noncontrolling interests in consolidated subsidiaries	(17,160		)	(16,269		)

Add:
Depreciation and amortization expense	111,846			105,123
General and administrative expense	34,427			35,405
Transaction related costs and other	1,017			260
NOI from partially owned entities	65,752			67,016
Interest and debt expense	87,657			84,789
Income tax expense (benefit)	467			(610		)
NOI at share	354,429			346,134
Non-cash adjustments for straight-line rents, amortization of acquired below-market leases, net and other	(12,481		)	(22,475		)
NOI at share - cash basis	$	341,948		$	323,659


~~(a)~~	The amounts in these captions (for this table only) exclude the results of the mark-to-market of our deferred compensation plan of $1,975 and $204 of income for the three months ended September 30, 2017 and 2016, respectively.

~~EBITDA~~NOI by Region

Below is a summary of the percentages of ~~EBITDA~~NOI at share by geographic region ~~excluding gains on sale of real estate, non-cash impairment losses~~for the three months ended June 30, 2018 and ~~operations of sold properties.~~2017.


	For the Three Months Ended September 30,				For the Three Months Ended June 30,
	2017		2016		2018		2017
Region:
New York City metropolitan area	89	%	89	%	88	%	88	%
Chicago, IL	7	%	7	%	8	%	8	%
San Francisco, CA	4	%	4	%	4	%	4	%
	100	%	100	%	100	%	100	%

6659

Results of Operations – Three Months Ended ~~September~~June 30, ~~2017~~2018 Compared to ~~September~~June 30, ~~2016~~

2017

Revenues

Our revenues, which consist of property rentals, tenant expense reimbursements, and fee and other income, were ~~$528,755,000~~$541,818,000 for the three months ended ~~September~~June 30, ~~2017~~2018 compared to ~~$502,753,000~~$511,087,000 for the prior year’s quarter, an increase of ~~$26,002,000.~~$30,731,000. Below are the details of the increase by segment:


(Amounts in thousands)	Total			New York			Other			Total			New York				Other
Increase (decrease) due to:
Property rentals:
Acquisitions, dispositions and other	$	3,228		$	3,002		$	226		$	(1,287	)	$	(1,287	)		$	—
Development and redevelopment	89			(93		)	182			(2,089		)	(2,192		)		103
Hotel Pennsylvania	3,215			3,215			—			1,767			1,767				—
Trade shows	497			—			497			999			—				999
Same store operations	13,880			10,901			2,979			16,562			12,416				4,146
	20,909			17,025			3,884			15,952			10,704				5,248
Tenant expense reimbursements:
Acquisitions, dispositions and other	(680		)	(680		)	—			12			12				—
Development and redevelopment	309			(37		)	346			282			273				9
Same store operations	2,815			1,737			1,078			6,361			4,924				1,437
	2,444			1,020			1,424			6,655			5,209				1,446
Fee and other income:
BMS cleaning fees	1,896			2,904			(1,008		)	6,442			6,790			⁽¹⁾	(348		)
Management and leasing fees	396			354			42			(70		)	(1		)		(69		)
Lease termination fees	(830		)	(239		)	(591		)	(302		)	(662		)		360
Other income	1,187			(324		)	1,511			2,054			(350		)		2,404
	2,649			2,695			(46		)	8,124			5,777				2,347

Total increase in revenues	$	26,002		$	20,740		$	5,262		$	30,731		$	21,690			$	9,041

___________________


(1)	Includes $1,935 related to services provided to JBG Smith Properties ("JBGS") and $1,451 of one-time tenant work.

6760

Results of Operations – Three Months Ended ~~September~~June 30, 2018 Compared to June 30, 2017 ~~Compared to September 30, 2016~~ - continued

Expenses

Our expenses, which consist of operating, depreciation and amortization, general and administrative, ~~expenses, and acquisition~~expense from deferred compensation plan liability, and transaction related costs and other, were ~~$366,520,000~~$385,348,000 for the three months ended ~~September~~June 30, ~~2017,~~2018, compared to ~~$354,292,000~~$357,277,000 for the prior year’s quarter, an increase of ~~$12,228,000.~~$28,071,000. Below are the details of the increase by segment:


(Amounts in thousands)	(Amounts in thousands)	Total			New York			Other				(Amounts in thousands)	Total			New York				Other
(Decrease) increase due to:
Increase (decrease) due to:												Increase (decrease) due to:
Operating:	Operating:											Operating:
	Acquisitions, dispositions and other	$	(786	)	$	(786	)	$	—			Acquisitions, dispositions and other	$	239		$	239			$	—
	Development and redevelopment	453			75			378				Development and redevelopment	(456		)	(1,045		)		589
	Non-reimbursable expenses, including bad debt reserves	(1,459		)	(2,040		)	581				Non-reimbursable expenses, including bad debt reserves	2,864			2,662				202
	Hotel Pennsylvania	1,607			1,607			—				Hotel Pennsylvania	2,373			2,373				—
	Trade shows	270			—			270				Trade shows	568			—				568
	BMS expenses	1,586			2,502			(916		)		BMS expenses	4,908			5,225			⁽¹⁾	(317		)
	Same store operations	9,793			6,729			3,064				Same store operations	9,785			5,737				4,048
		11,464			8,087			3,377					20,281			15,191				5,090
Depreciation and amortization:	Depreciation and amortization:											Depreciation and amortization:
	Acquisitions, dispositions and other	117			117			—				Acquisitions, dispositions and other	148			148				—
	Development and redevelopment	(159		)	(24		)	(135		)		Development and redevelopment	1,740			1,709				31
	Same store operations	(863		)	(3,589		)	2,726				Same store operations	4,835			3,538				1,297
		(905		)	(3,496		)	2,591					6,723			5,395				1,328
General and administrative:
	Mark-to-market of deferred compensation plan liability	1,771			—			1,771			⁽¹⁾
General and administrative												General and administrative	(978		)	225				(1,203		)
	Same store operations	906			(304		)	1,210
Expense from deferred compensation plan liability												Expense from deferred compensation plan liability	1,288			—				1,288			⁽²⁾
		2,677			(304		)	2,981

Acquisition and transaction related costs		(1,008		)	—			(1,008		)
Transaction related costs and other												Transaction related costs and other	757			—				757

Total increase in expenses	Total increase in expenses	$	12,228		$	4,287		$	7,941			Total increase in expenses	$	28,071		$	20,811			$	7,260

____________________


(1)	This increase is a result of services provided to JBGS and one-time tenant work.


(2)	This increase in expense is entirely offset by a corresponding increase in ~~income~~"income from ~~the mark-to-market of the~~ deferred compensation plan ~~assets, a component of “interest and other investment income, net”~~assets" on our consolidated statements of income.

~~Results of Operations – Three Months Ended September 30, 2017 Compared to September 30, 2016 - continued~~

~~(Loss)~~ Income from Partially Owned Entities

~~Summarized below~~

Below are the components of ~~(loss)~~ income from partially owned entities for the three months ended ~~September~~June 30, ~~2017~~2018 and ~~2016.~~2017.

(Amounts in thousands, except per share amounts)
Percentage
Ownership at
For the Three Months Ended September 30,
September 30, 2017 2017 2016
Our Share of Net (Loss) Income:
Pennsylvania Real Estate Investment Trust ("PREIT")⁽¹⁾
8.0% $ (49,748 ) $ 52
Alexander's 32.4% 7,845
8,785
Urban Edge Properties ("UE")⁽²⁾
4.5% 6,008
2,158
Partially owned office buildings/land ⁽³⁾
Various (5,551 ) (8,642 )
Other investments⁽⁴⁾
Various (355 ) 1,458
$ (41,801 ) $ 3,811



(Amounts in thousands)	Ownership Percentage at June 30, 2018	For the Three Months Ended June 30,
		2018			2017
Our share of net income (loss):
Alexander's	32.4%	$	7,167		$	8,197
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		)
Other investments⁽³⁾	Various	(456		)	19,487
		$	8,757		$	46,021

____________________

(1)

~~Based on PREIT’s September 29, 2017 quarter ended closing share price of $10.49, the market value (“fair value” pursuant to ASC Topic 323,~~ ~~Investments - Equity Method and Joint Ventures) of our investment in PREIT was~~ $65,563 or $44,465 below the carrying amount on our consolidated balance sheet. We have concluded that our investment in PREIT is “other-than-temporarily” impaired and recorded a $44,465 non-cash impairment loss on our consolidated statements of income. Our conclusion was based on a sustained trading value of PREIT stock below our carrying amount and our inability to forecast a recovery in the near-term.


~~(2)~~	~~2017 includes a $5,200 net gain resulting from UE operating partnership unit issuances.~~


~~(3)~~	Includes interests in 280 Park Avenue, 650 Madison Avenue, One Park Avenue, ~~666 Fifth Avenue (Office),~~ 7 West 34th Street, 330 Madison Avenue, 512 West 22nd Street, 85 Tenth Avenue and others.


~~(4)~~(2)	2017 includes a $15,900 net gain resulting from UE operating partnership unit issuances.

(3)

Includes interests in Independence Plaza, Fashion Centre Mall/Washington Tower, Rosslyn Plaza, 50-70 West 93rd Street, ~~Toys "R" Us, Inc.,~~666 Fifth Avenue Condominium 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.

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

Income (Loss) ~~Income~~ from Real Estate Fund Investments

Below are the components of the income (loss) ~~income~~ from our real estate fund investments for the three months ended ~~September~~June 30, ~~2017~~2018 and ~~2016.~~2017.

(Amounts in thousands) For the Three Months Ended September 30,
2017 2016
Net investment income $ 6,028
$ 5,841
Net realized gains on exited investments 35,620
—
Previously recorded unrealized gains on exited investment (36,736 ) —
Net unrealized loss on held investments (11,220 ) (4,764 )
(Loss) income from real estate fund investments (6,308 ) 1,077
Less income attributable to noncontrolling interests in consolidated subsidiaries (1,486 ) (270 )
(Loss) income from real estate fund investments attributable to the Operating Partnership ⁽¹⁾
(7,794 ) 807
Less loss (income) attributable to noncontrolling interests in the Operating Partnership 485
(49 )
(Loss) income from real estate fund investments attributable to Vornado $ (7,309 ) $ 758



(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 subsidiaries	29,527			(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 ~~$744~~$1,104 and ~~$804~~$1,381 of management and leasing fees for the three months ended ~~September~~June 30, ~~2017~~2018 and ~~2016,~~2017, respectively, which are included as a component of "fee and other income" on our consolidated statements of income.

Interest and Other Investment Income, net

~~Interest~~Below are the components of interest and other investment income, net ~~was $9,306,000~~ for the three months ended ~~September~~June 30, 2017, compared to $6,459,000 in the prior year’s quarter, an increase of $2,847,000. This increase resulted primarily from an increase in the value of investments in our deferred compensation plan (offset by a corresponding decrease in the liability for plan assets in general2018 and ~~administrative expenses).~~2017.



(Amounts in thousands)	For the Three Months Ended June 30,
	2018		2017
Increase in fair value of marketable securities⁽¹⁾	$	15,884	$	—
Interest on loans receivable⁽²⁾	6,205		2,102
Dividends on marketable securities	3,353		3,307
Other, net	5,450		3,132
	$	30,892	$	8,541

____________________


(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 ~~$85,068,000~~$87,657,000 for the three months ended ~~September~~June 30, ~~2017,~~2018, compared to ~~$79,721,000~~$84,789,000 in the prior year’s quarter, an increase of ~~$5,347,000.~~$2,868,000. This increase was primarily due to (i) ~~$8,533,000~~$6,047,000 of higher interest expense relating to our variable rate loans, and (ii) ~~$2,093,000~~$2,611,000 of higher interest expense ~~from the refinancing of 350 Park Avenue and the $375,000,000 drawn~~ on our $750,000,000 delayed draw term loan ~~(iii) $1,351,000 of higher interest expense from the 1535 Broadway capital lease obligation,~~which was fully drawn in October 2017, partially offset by ~~(iv) $4,751,000~~(iii) $5,174,000 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 three months ended June 30, 2018 were $23,559,000 representing the net gain on sale of 27 Washington Square North.

Income Tax (Expense) Benefit

Income tax expense ~~and (v) $2,137,000~~for the three months ended June 30, 2018 was $467,000 compared to a benefit of ~~interest savings from~~$610,000 for the ~~refinancing~~prior year’s quarter, an increase in expense of ~~theMART.~~$1,077,000. This increase is primarily due to higher New York City Unincorporated Business Tax ("UBT").

6962

Results of Operations – Three Months Ended ~~September~~June 30, 2018 Compared to June 30, 2017 ~~Compared to September 30, 2016~~ - continued

~~Income Tax Expense~~

For the three months ended September 30, 2017, income tax expense was $1,188,000, compared to $4,563,000 for the prior year’s quarter, a decrease of $3,375,000. This decrease was primarily due to our right this year to offset certain tax losses against certain taxable income of our taxable REIT subsidiaries.

~~(Loss)~~ 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 "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 operations for the three months ended ~~September~~June 30, ~~2017~~2018 and ~~2016, substantially all of which is related to our former Washington, DC business which was spun-off on July 17,~~ 2017.

(Amounts in thousands) For the Three Months Ended September 30,
2017 2016
Total revenues $ 25,747
$ 134,912
Total expenses 21,708
109,506
4,039
25,406
JBG SMITH Properties spin-off transaction costs (53,581 ) (2,739 )
Net gains on sale of real estate and a lease position 1,530
2,864
Income from partially owned assets 93
316
Impairment losses —
(465 )
Pretax (loss) income from discontinued operations (47,919 ) 25,382
Income tax expense (11 ) (302 )
(Loss) income from discontinued operations $ (47,930 ) $ 25,080



(Amounts in thousands)	For the Three Months Ended June 30,
	2018		2017
Total revenues	$	339	$	118,939
Total expenses	274		94,510
	65		24,429
Additional net gains on sale of real estate	618		—
JBGS spin-off transaction costs	—		(6,211		)
Income from partially-owned entities	—		255
Pretax income from discontinued operations	683		18,473
Income tax expense	—		(362		)
Income from discontinued operations	$	683	$	18,111

Net ~~Income~~Loss (Income) Attributable to Noncontrolling Interests in Consolidated Subsidiaries

Net ~~income~~loss attributable to noncontrolling interests in consolidated subsidiaries was ~~$4,022,000~~$26,175,000 for the three months ended ~~September~~June 30, ~~2017,~~2018, compared to ~~$3,658,000~~income of $7,677,000 for the prior year’s quarter, ~~an increase~~a decrease in income of ~~$364,000.~~$33,852,000. This ~~increase~~decrease resulted primarily from ~~higher~~the allocation of net ~~income allocated~~loss to the ~~noncontrolling interests, including~~ noncontrolling interests of our real estate fund investments.

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

Net ~~loss~~income attributable to noncontrolling interests in the Operating Partnership was ~~$1,878,000~~$7,445,000 for the three months ended ~~September~~June 30, ~~2017,~~2018, compared to ~~net income attributable to noncontrolling interests of $4,366,000~~$7,706,000 for the prior year’s quarter, a decrease ~~in income~~ of ~~$6,244,000.~~$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 ~~$16,128,000~~$12,534,000 for the three months ended ~~September~~June 30, ~~2017,~~2018, compared to ~~$19,047,000~~$16,129,000 for the prior year’s quarter, a decrease of ~~$2,919,000.~~$3,595,000. The decrease is ~~primarily due to~~comprised of $7,789,000 of savings from the redemption of all of the ~~6.875%~~outstanding 6.625% Series JG and Series I cumulative redeemable preferred shares ~~on September 1, 2016.~~

~~Results~~in January 2018, partially offset by a $4,194,000 increase due to the issuance of ~~Operations – Three Months Ended September 30, 2017 Compared to September 30, 2016 - continued~~

5.25% Series M cumulative redeemable preferred shares in December 2017.

Preferred Unit Distributions of Vornado Realty L.P.

Preferred unit distributions were ~~$16,176,000~~$12,582,000 for the three months ended ~~September~~June 30, ~~2017,~~2018, compared to ~~$19,096,000~~$16,177,000 for the prior year’s quarter, a decrease of ~~$2,920,000.~~$3,595,000. The decrease is ~~primarily due to~~comprised of $7,789,000 of savings from the redemption of all the ~~6.875%~~outstanding 6.625% Series JG and Series I cumulative redeemable preferred units ~~on September 1, 2016.~~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.

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

Same Store ~~EBITDA and Same Store NOI~~Net Operating Income

Same store ~~EBITDA and same store~~ NOI represents ~~EBITDA and~~ NOI from ~~property-level~~ operations which are owned by us and in service in both the current and prior year reporting periods. Same store ~~EBITDA excludes segment-level overhead expenses,~~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 ~~expenses that we do not consider to be property-level expenses.~~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 ~~EBITDA~~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 ~~EBITDA to same store EBITDA for our New York segment and theMART and 555 California Street, which are included in Other, for the three months ended September 30, 2017 compared to September 30, 2016.~~

(Amounts in thousands) New York theMART
555 California
Street
EBITDA for the three months ended September 30, 2017 $ 297,177
$ 24,165
$ 11,643
Add-back:
Non-property level overhead expenses included above 9,479
1,859
—
Less EBITDA from:
Acquisitions (5,454 ) 42
—
Dispositions (15 ) —
—
Development properties placed into and out of service (6,228 ) —
—
Other non-operating income, net (1,076 ) —
—
Same store EBITDA for the three months ended September 30, 2017 $ 293,883
$ 26,066
$ 11,643

EBITDA for the three months ended September 30, 2016 $ 276,893
$ 21,696
$ 11,405
Add-back:
Non-property level overhead expenses included above 9,783
1,720
55
Less EBITDA from:
Acquisitions (205 ) —
—
Dispositions 19
—
—
Development properties placed into and out of service (7,967 ) —
226
Other non-operating loss (income), net 1,285
—
(239 )
Same store EBITDA for the three months ended September 30, 2016 $ 279,808
$ 23,416
$ 11,447

Increase in same store EBITDA for the three months ended September 30, 2017 compared to September 30, 2016 $ 14,075
$ 2,650
$ 196

% increase in same store EBITDA 5.0 %
⁽¹⁾
11.3 % 1.7 %

~~____________________~~


~~(1)~~	~~Excluding Hotel Pennsylvania, same store EBITDA increased by 4.5%.~~

~~Results of Operations – Three Months Ended September 30, 2017 Compared to September 30, 2016 - continued~~

~~Below are reconciliations of~~ NOI to same store NOI for our New York segment, ~~and~~ theMART, ~~and~~ 555 California Street ~~which are included in Other,~~and other investments for the three months ended ~~September~~June 30, ~~2017~~2018 compared to ~~September~~June 30, ~~2016.~~

2017.

(Amounts in thousands) New York theMART
555 California
Street
NOI for the three months ended September 30, 2017 $ 280,044
$ 25,422
$ 11,013
Less NOI from:
Acquisitions (3,682 ) 42
—
Dispositions (15 ) —
—
Development properties placed into and out of service (1,779 ) —
—
Other non-operating income, net (6,022 ) —
—
Same store NOI for the three months ended September 30, 2017 $ 268,546
$ 25,464
$ 11,013

NOI for the three months ended September 30, 2016 $ 246,588
$ 21,758
$ 9,899
Less NOI from:
Dispositions 19
—
—
Development properties placed into and out of service (1,950 ) —
226
Other non-operating income, net (8,769 ) —
(397 )
Same store NOI for the three months ended September 30, 2016 $ 235,888
$ 21,758
$ 9,728

Increase in same store NOI for the three months ended September 30, 2017 compared to September 30, 2016 $ 32,658
$ 3,706
$ 1,285

% increase in same store NOI 13.8 %
⁽¹⁾
17.0 % 13.2 %



(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-offs	1,941			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:
	Acquisitions	5			(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 share		4.7		%	4.2		%	⁽¹⁾	5.2		%	13.5		%	—		%

____________________


(1)	Excluding Hotel Pennsylvania, same store NOI at share increased by ~~13.4%~~4.6%.

~~Net Income, EBITDA and NOI by Segment for the Nine Months Ended September 30, 2017 and 2016~~

As a result of the spin-off of our Washington, DC segment, effective July 1, 2017, the Washington, DC segment has been reclassified to the Other segment. We have also reclassified the prior period segment financial results to conform to the current period presentation.

~~Below is a summary of net income (loss) and a reconciliation of net income (loss) to EBITDA~~⁽¹⁾~~and NOI~~⁽¹⁾ ~~by segment for the nine months ended September 30, 2017.~~

~~____________________~~

~~See notes on pages 75 through 76.~~

7364

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:
	Acquisitions	106			(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 basis		7.0		%	5.9		%	⁽¹⁾	10.8		%	23.8		%	—		%

____________________


(1)	Excluding Hotel Pennsylvania, same store NOI at share - cash basis increased by 6.3%.

Net Operating Income ~~EBITDA and NOI~~ by Segment for the ~~Nine~~Six Months Ended ~~September~~June 30, ~~2017~~2018 and ~~2016 - continued~~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 ~~net income (loss)~~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 expenses	473,583			398,819			74,764
NOI - consolidated	604,672			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 entities	133,265			99,551			33,714
NOI at share	703,465			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 expenses	436,359			368,819			67,540
NOI - consolidated	582,786			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 entities	133,113			91,848			41,265
NOI at share	683,292			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

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
Retail	175,018		179,003
Residential	12,479		12,469
Alexander's	23,484		23,709
Hotel Pennsylvania	1,459		1,629
Total New York	584,463		563,343

Other:
theMART	54,691		52,071
555 California Street	27,171		24,066
Other investments	37,140		43,812
Total Other	119,002		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
Retail	158,728		159,386
Residential	11,062		10,884
Alexander's	24,137		24,399
Hotel Pennsylvania	1,591		1,694
Total New York	554,427		526,674

Other:
theMART	55,078		49,429
555 California Street	26,634		22,476
Other investments	36,897		41,757
Total Other	118,609		113,662

NOI at share - cash basis	$	673,036	$	640,336

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 ~~(loss)~~ to ~~EBITDA~~⁽¹⁾NOI at share and NOI⁽¹⁾ ~~by segment~~ at share - cash basis for the ~~nine~~six months ended ~~September~~June 30, ~~2016.~~2018 and 2017.

~~____________________~~

~~See notes on the following pages.~~



(Amounts in thousands)	For the Six Months Ended June 30,
	2018			2017
Net income	$	105,620		$	221,331

Deduct:
Loss (income) from partially owned entities	1,147			(47,379		)
Loss (income) from real estate fund investments	37,783			(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 expense	220,532			210,251
General and administrative expense	76,960			81,580
Transaction related costs and other	14,173			1,012
NOI from partially owned entities	133,265			133,113
Interest and debt expense	175,823			167,513
Income tax expense	3,021			2,303
NOI at share	703,465			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

~~Net Income, EBITDA and~~ NOI ~~by Segment for the Nine Months Ended September 30, 2017 and 2016 - continued~~

~~Notes to preceding tabular information:~~

~~(1)~~


~~(2)~~	~~Adjustments include our proportionate share of partially owned entities and give effect to noncontrolling interest's share of consolidated subsidiaries.~~


~~(3)~~	~~The elements of "New York" EBITDA are summarized below.~~

(Amounts in thousands) For the Nine Months Ended
September 30,
2017 2016
Office $ 522,566
$ 484,735
^(a)
Retail 269,762
272,083
^(a)
Residential 18,450
18,901

Alexander's 35,511
34,880

Hotel Pennsylvania 7,633
4,287

Total New York EBITDA, as adjusted 853,922
814,886

Certain items that impact EBITDA
Net gain on sale of 47% ownership interest in 7 West 34th Street —
159,511

EBITDA from sold properties —
3,120

Total of certain items that impact EBITDA —
162,631

Total of New York EBITDA $ 853,922
$ 977,517

~~The elements of "New York" NOI are summarized below.~~

(Amounts in thousands) For the Nine Months Ended September 30,
2017 2016
Office $ 523,531
$ 459,509
^(a)
Retail 241,667
211,611
^(a)
Residential 16,300
16,724

Alexander's 21,090
19,849

Hotel Pennsylvania 9,746
6,390

Total New York NOI, as adjusted 812,334
714,083

NOI from sold properties —
2,232

Total New York NOI $ 812,334
$ 716,315

~~_____________________~~


~~(a)~~	Beginning in January 2017 for office buildings with retail at the base, we have adjusted the allocation of real estate taxes between the retail and office elements above. This has no effect on our consolidated financial statements but resulted in a reallocation of $12,058 of income from retail to office for the nine months ended September 30, 2016.

~~Net Income, EBITDA and NOI by Segment for the Nine Months Ended September 30, 2017 and 2016 - continued~~

~~Notes to preceding tabular information - continued:~~


~~(4)~~	~~The elements of "Other" EBITDA are summarized below.~~

(Amounts in thousands) For the Nine Months Ended September 30,
2017 2016
theMART (including trade shows) $ 72,471
$ 70,689
555 California Street 35,870
35,137
Other investments 36,318
57,092

Corporate general and administrative expenses^(a)
(78,952 ) (76,364 )

Investment income and other, net^(a)
24,079
19,317
Other EBITDA, as adjusted 89,786
105,871
Certain items that impact EBITDA:
JBG SMITH Properties which is treated as a discontinued operation:
Transaction costs (67,045 ) (4,597 )
Operating results through July 17, 2017 spin-off 153,449
214,604
86,404
210,007
Impairment loss on investment in Pennsylvania REIT (44,465 ) —
(Loss) income from real estate fund investments, net (11,333 ) 13,662
Net gain resulting from Urban Edge Properties operating partnership unit issuances 21,100
—
Our share of net gain on sale of Suffolk Downs 15,314
—
Net gain on repayment of Suffolk Downs JV debt investments 11,373
—
Skyline properties impairment loss —
(160,700 )
Other (1,024 ) 15,768
Total of certain items that impact EBITDA 77,369
78,737
Other EBITDA $ 167,155
$ 184,608

~~The elements of "Other" NOI are summarized below.~~

(Amounts in thousands) For the Nine Months Ended September 30,
2017 2016
theMART (including trade shows) $ 74,859
$ 70,914
555 California Street 33,647
24,010
Other investments 15,138
44,482

Investment income and other, net^(a)
24,079
19,317
Other NOI, as adjusted 147,723
158,723
Certain items that impact NOI:
JBG SMITH Properties operating results through July 17, 2017 spin-off 160,634
233,310
Our share of real estate fund investments 7,469
6,313
Other 4,282
4,894
Total of certain items that impact EBITDA 172,385
244,517
Other NOI $ 320,108
$ 403,240


~~(a)~~	The amounts in these captions (for this table only) exclude the results of the mark-to-market of our deferred compensation plan of $5,233 and $2,625 of income for the nine months ended September 30, 2017 and 2016, respectively.

~~EBITDA~~ by Region

Below is a summary of the percentages of ~~EBITDA~~NOI at share by geographic region ~~excluding gains on sale of real estate, non-cash impairment losses~~for the six months ended June 30, 2018 and ~~operations of sold properties.~~2017.


	For the Nine Months Ended September 30,				For the Six Months Ended June 30,
	2017		2016		2018		2017
Region:
New York City metropolitan area	88	%	88	%	88	%	88	%
Chicago, IL	8	%	8	%	8	%	8	%
San Francisco, CA	4	%	4	%	4	%	4	%
	100	%	100	%	100	%	100	%

7668

Results of Operations – ~~Nine~~Six Months Ended ~~September~~June 30, ~~2017~~2018 Compared to ~~September~~June 30, ~~2016~~

2017

Revenues

Our revenues, which consist of property rentals, tenant expense reimbursements, and fee and other income, were ~~$1,547,900,000~~$1,078,255,000 for the ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2018, compared to ~~$1,489,768,000~~$1,019,145,000 for the prior year’s ~~nine~~six months, an increase of ~~$58,132,000.~~$59,110,000. Below are the details of the increase 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:
Property rentals:	Property rentals:										Property rentals:
	Acquisitions, dispositions and other	$	8,399		$	8,173		$	226		Acquisitions, dispositions and other	$	1,410		$	1,410			$	—
	Development and redevelopment	689			(64		)	753			Development and redevelopment	(2,216		)	(2,461		)		245
	Hotel Pennsylvania	6,218			6,218			—			Hotel Pennsylvania	3,524			3,524				—
	Trade shows	1,684			—			1,684			Trade shows	1,390			—				1,390
	Same store operations	19,704			13,628			6,076			Same store operations	37,062			29,255				7,807
		36,694			27,955			8,739				41,170			31,728				9,442
Tenant expense reimbursements:	Tenant expense reimbursements:										Tenant expense reimbursements:
	Acquisitions, dispositions and other	(2,673		)	(2,673		)	—			Acquisitions, dispositions and other	26			26				—
	Development and redevelopment	1,672			(37		)	1,709			Development and redevelopment	423			222				201
	Same store operations	12,261			10,916			1,345			Same store operations	7,483			5,912				1,571
		11,260			8,206			3,054				7,932			6,160				1,772
Fee and other income:	Fee and other income:										Fee and other income:
	BMS cleaning fees	7,267			9,577			(2,310		)	BMS cleaning fees	9,726			10,820			⁽¹⁾	(1,094		)
	Management and leasing fees	1,690			1,453			237			Management and leasing fees	419			453				(34		)
	Lease termination fees	(1,177		)	(615		)	(562		)	Lease termination fees	(3,807		)	(4,081		)		274
	Other income	2,398			670			1,728			Other income	3,670			(1,145		)		4,815
		10,178			11,085			(907		)		10,008			6,047				3,961

Total increase in revenues	Total increase in revenues	$	58,132		$	47,246		$	10,886		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.

7769

Results of Operations – ~~Nine~~Six Months Ended ~~September~~June 30, 2018 Compared to June 30, 2017 ~~Compared to September 30, 2016~~ - continued

Expenses

Our expenses, which consist of operating, depreciation and amortization, general and administrative, ~~expenses and acquisition~~expense from deferred compensation plan liability, and transaction related costs and other, were ~~$1,100,042,000~~$786,921,000 for the ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2018, compared to ~~$1,062,219,000~~$732,460,000 for the prior year’s ~~nine~~six months, an increase of ~~$37,823,000.~~$54,461,000. Below are the details of the increase by segment:


(Amounts in thousands)	(Amounts in thousands)	Total			New York			Other				(Amounts in thousands)	Total			New York				Other
(Decrease) increase due to:
Increase(decrease) due to:												Increase(decrease) due to:
Operating:	Operating:											Operating:
	Acquisitions, dispositions and other	$	(3,784	)	$	(3,784	)	$	—			Acquisitions, dispositions and other	$	642		$	642			$	—
	Development and redevelopment	843			72			771				Development and redevelopment	(72		)	(1,323		)		1,251
	Non-reimbursable expenses, including bad debt reserves	(3,463		)	(4,311		)	848				Non-reimbursable expenses, including bad debt reserves	4,721			4,534				187
	Hotel Pennsylvania	2,874			2,874			—				Hotel Pennsylvania	3,677			3,677				—
	Trade shows	361			—			361				Trade shows	680			—				680
	BMS expenses	6,900			9,118			(2,218		)		BMS expenses	7,495			8,528			⁽¹⁾	(1,033		)
	Same store operations	31,308			23,288			8,020				Same store operations	20,081			13,942				6,139
		35,039			27,257			7,782					37,224			30,000				7,224
Depreciation and amortization:	Depreciation and amortization:											Depreciation and amortization:
	Acquisitions, dispositions and other	(175		)	(175		)	—				Acquisitions, dispositions and other	240			240				—
	Development and redevelopment	(349		)	(24		)	(325		)		Development and redevelopment	4,925			4,860				65
	Same store operations	(636		)	(3,918		)	3,282				Same store operations	5,116			1,974				3,142
		(1,160		)	(4,117		)	2,957					10,281			7,074				3,207
General and administrative:
	Mark-to-market of deferred compensation plan liability	2,608			—			2,608			⁽¹⁾
General and administrative												General and administrative	(4,620		)	(902		)		(3,718		)
	Same store operations	6,960			4,073			2,887
Expense from deferred compensation plan liability												Expense from deferred compensation plan liability	(1,585		)	—				(1,585		)	⁽²⁾
		9,568			4,073			5,495

Acquisition and transaction related costs		(5,624		)	—			(5,624		)
Transaction related costs and other												Transaction related costs and other	13,161			13,103			⁽³⁾	58

Total increase in expenses	Total increase in expenses	$	37,823		$	27,213		$	10,610			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 athe corresponding ~~increase~~decrease in ~~income~~"income from ~~the mark-to-market of the~~ deferred compensation plan ~~assets, a component of “interest and other investment income, net”~~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.

7870

Results of Operations – ~~Nine~~Six Months Ended ~~September~~June 30, 2018 Compared to June 30, 2017 ~~Compared to September 30, 2016~~ - continued

(Loss) Income from Partially Owned Entities

~~Summarized below~~Below are the components of (loss) income from partially owned entities for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2018 and ~~2016.~~2017.

(Amounts in thousands, except per share amounts)
Percentage
Ownership at
For the Nine Months Ended September 30,
September 30, 2017 2017 2016
Our Share of Net (Loss) Income:
PREIT⁽¹⁾
8.0% $ (53,480 ) $ (4,763 )
UE⁽²⁾
4.5% 26,311
4,523
Alexander's 32.4% 24,443
25,947
Partially owned office buildings/land ⁽³⁾
Various (23,508 ) (29,882 )
Other investments⁽⁴⁾
Various 31,812
8,067
$ 5,578
$ 3,892



(Amounts in thousands)	Percentage Ownership at June 30, 2018	For the Six Months Ended June 30,
	Percentage Ownership at June 30, 2018	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
PREIT	8.0%	(1,497		)	(3,732		)
UE⁽³⁾	4.5%	471			20,303
Other investments⁽⁴⁾	Various	(3,006		)	13,164
		$	(1,147	)	$	47,379

____________________

(1)

~~Based on PREIT’s September 29, 2017 quarter ended closing~~2018 includes our $7,708 share ~~price~~ of ~~$10.49, the market value (“fair value” pursuant to ASC Topic 323,~~ ~~Investments - Equity Method and Joint Ventures) of our investment in PREIT was~~ $65,563 or $44,465 below the carrying amount on our consolidated balance sheet. We have concluded that our investment in PREIT is “other-than-temporarily” impaired and recorded a $44,465 non-cash impairment loss on our consolidated statements of income. Our conclusion was based on a sustained trading value of PREIT stock below our carrying amount and our inability to forecast a recovery in the near-term.Alexander's potential additional Transfer Tax.


(2)	~~2017 includes a $21,100 net gain resulting from UE operating partnership unit issuances.~~


~~(3)~~	Includes interests in 280 Park Avenue, 650 Madison Avenue, One Park Avenue, ~~666 Fifth Avenue (Office),~~ 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, ~~Toys "R" Us, Inc.,~~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. ~~See page 58 for details.~~

~~(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 ~~nine~~six months ended ~~September~~June 30, ~~2017~~2018 and ~~2016.~~2017.

(Amounts in thousands) For the Nine Months Ended September 30,
2017 2016
Net investment income $ 16,888
$ 12,237
Net realized gains on exited investments 35,861
14,676
Previously recorded unrealized gains on exited investment (25,538 ) (14,254 )
Net unrealized (loss) gain on held investments (28,860 ) 16,091
(Loss) income from real estate fund investments (1,649 ) 28,750
Less income attributable to noncontrolling interests in consolidated subsidiaries (9,684 ) (15,088 )
(Loss) income from real estate fund investments attributable to the Operating Partnership ⁽¹⁾
(11,333 ) 13,662
Less loss (income) attributable to noncontrolling interests in the Operating Partnership 706
(843 )
(Loss) income from real estate fund investments attributable to Vornado $ (10,627 ) $ 12,819



(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 subsidiaries	34,896			(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 Partnership	178			221
Loss from real estate fund investments attributable to Vornado	$	(2,709	)	$	(3,318	)

____________________


(1)	Excludes ~~$3,125~~$1,906 and ~~$2,499~~$2,381 of management and leasing fees for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2018 and ~~2016,~~2017, respectively, which are included as a component of "fee and other income" on our consolidated statements of income.

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

Interest and Other Investment Income, net

~~Interest~~Below are the components of interest and other investment income, net ~~was $27,800,000~~ for the ~~nine~~six months ended ~~September~~June 30, 2017, compared to $20,121,000 for the prior year’s nine months, an increase of $7,679,000. This increase resulted primarily from an increase in the value of investments in our deferred compensation plan (offset by a corresponding decrease in the liability for plan assets in general2018 and ~~administrative expenses).~~

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 securities	6,706			6,614
Other, net	9,956			5,777
	$	6,508		$	15,236

____________________

~~Results of Operations – Nine Months Ended September 30, 2017 Compared to September 30, 2016 - continued~~


(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 ~~$252,581,000~~$175,823,000 for the ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2018, compared to ~~$250,034,000~~$167,513,000 for the prior year’s ~~nine~~six months, an increase of ~~$2,547,000.~~$8,310,000. This increase was primarily due to (i) ~~$13,545,000~~$11,747,000 of higher interest expense relating to our variable rate loans, and (ii) ~~$6,056,000~~$5,438,000 of higher interest expense ~~from the refinancing of 350 Park Avenue and the $375,000,000 drawn~~ on our $750,000,000 delayed draw term loan ~~(iii) $4,488,000 of higher interest expense from the 1535 Broadway capital lease obligation,~~which was fully drawn in October 2017, partially offset by ~~(iv) $13,469,000~~(iii) $9,085,000 higher capitalized interest and debt ~~expense,~~expense.

Net Gains on Disposition of Wholly Owned and ~~(v) $8,626,000~~Partially Owned Assets

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

Income Tax Expense

~~For~~Income tax expense for the ~~nine~~six months ended ~~September~~June 30, ~~2017, income tax expense~~2018 was ~~$2,429,000,~~$3,021,000 compared to ~~$8,921,000~~$2,303,000 for the prior year’s ~~nine~~six months, ~~a decrease~~an increase of ~~$6,492,000.~~$718,000. This ~~decrease was~~increase is primarily due to ~~our right this year to offset certain tax losses against certain taxable income of our taxable REIT subsidiaries.~~higher New York City UBT.

~~Loss~~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 "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 operations for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2018 and ~~2016, substantially all of which is related to our former Washington, DC business which was spun-off on July 17,~~ 2017.

(Amounts in thousands) For the Nine Months Ended September 30,
2017 2016
Total revenues $ 260,969
$ 392,108
Total expenses 211,930
331,377
49,039
60,731
JBG SMITH Properties spin-off transaction costs (67,045 ) (4,597 )
Net gains on sale of real estate and a lease position 3,797
5,074
Income (loss) from partially owned assets 435
(3,363 )
Impairment losses —
(161,165 )
Pretax loss from discontinued operations (13,774 ) (103,320 )
Income tax expense (727 ) (884 )
Loss from discontinued operations $ (14,501 ) $ (104,204 )



(Amounts in thousands)	For the Six Months Ended June 30,
	2018			2017
Total revenues	$	693		$	235,222
Total expenses	991			190,222
	(298		)	45,000
Additional net gains on sale of real estate	618			2,267
JBGS spin-off transaction costs	—			(13,464		)
Income from partially-owned entities	—			342
Pretax income from discontinued operations	320			34,145
Income tax expense	—			(716		)
Income from discontinued operations	$	320		$	33,429

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

Net ~~Income~~Loss (Income) Attributable to Noncontrolling Interests in Consolidated Subsidiaries

Net ~~income~~loss attributable to noncontrolling interests in consolidated subsidiaries was ~~$18,436,000~~$34,449,000 for the ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2018, compared to ~~$26,361,000~~income of $14,414,000 for the prior year’s ~~nine months,~~quarter, a decrease in income of ~~$7,925,000.~~$48,863,000. This decrease resulted primarily from ~~lower~~the allocation of net ~~income allocated~~loss to the ~~noncontrolling interests, including~~ noncontrolling interests of our real estate fund investments.

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

Net income attributable to noncontrolling interests in the Operating Partnership was ~~$9,057,000~~$6,321,000 for the ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2018, compared to ~~$11,410,000~~$10,935,000 for the prior year’s ~~nine~~six months, a decrease of ~~$2,353,000. This~~$4,614,000. The 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 ~~$48,386,000~~$25,569,000 for the ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2018, compared to ~~$59,774,000~~$32,258,000 for the prior year’s ~~nine~~six months, a decrease of ~~$11,388,000. This~~$6,689,000. The decrease ~~resulted primarily~~is comprised of $15,076,000 of savings from the redemption of all of the ~~6.875%~~outstanding 6.625% Series JG and Series I cumulative redeemable preferred shares ~~on September 1, 2016.~~

~~Results~~in January 2018, partially offset by a $8,387,000 increase due to the issuance of ~~Operations – Nine Months Ended September 30, 2017 Compared to September 30, 2016 - continued~~

5.25% Series M cumulative redeemable preferred shares in December 2017.

Preferred Unit Distributions of Vornado Realty L.P.

Preferred unit distributions were ~~$48,531,000~~$25,666,000 for the ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2018, compared to ~~$59,920,000~~$32,355,000 for the prior year’s ~~nine~~six months, a decrease of ~~$11,389,000. This~~$6,689,000. The decrease ~~resulted primarily~~is comprised of $15,076,000 of savings from the redemption of all the ~~6.875%~~outstanding 6.625% Series JG and Series I cumulative redeemable preferred units ~~on September 1, 2016.~~

~~Same Store EBITDA and Same Store NOI~~

~~Same store EBITDA and same store NOI represents EBITDA and NOI from property-level operations which are owned~~in January 2018, partially offset by ~~us and~~a $8,387,000 increase due to the issuance of 5.25% Series M cumulative redeemable preferred units in service in both the current and prior year reporting periods. Same store EBITDA excludes segment-level overhead expenses, which are expenses that we do not consider to be property-level expenses. 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 EBITDA and same store NOI 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 EBITDA to same store EBITDA for our New York segment and theMART and 555 California Street, which are included in Other, for the nine months ended September 30, 2017 compared to September 30, 2016.

(Amounts in thousands) New York theMART
555 California
Street
EBITDA for the nine months ended September 30, 2017 $ 853,922
$ 72,471
$ 35,870
Add-back:
Non-property level overhead expenses included above 31,630
5,632
—
Less EBITDA from:
Acquisitions (15,211 ) 210
—
Dispositions (619 ) —
—
Development properties placed into and out of service (18,966 ) —
—
Other non-operating income, net (3,963 ) (19 ) —
Same store EBITDA for the nine months ended September 30, 2017 $ 846,793
$ 78,294
$ 35,870

EBITDA for the nine months ended September 30, 2016 $ 977,517
$ 70,689
$ 35,137
Add-back:
Non-property level overhead expenses included above 27,557
5,064
244
Less EBITDA from:
Acquisitions (60 ) —
—
Dispositions, including net gains on sale (162,512 ) —
—
Development properties placed into and out of service (24,343 ) —
782
Other non-operating loss (income), net 6,424
—
(238 )
Same store EBITDA for the nine months ended September 30, 2016 $ 824,583
$ 75,753
$ 35,925

Increase (decrease) in same store EBITDA for the nine months ended September 30, 2017 compared to September 30, 2016 $ 22,210
$ 2,541
$ (55 )

% increase (decrease) in same store EBITDA 2.7 %
⁽¹⁾
3.4 %
⁽²⁾
(0.2 )%

~~____________________~~


~~(1)~~	~~Excluding Hotel Pennsylvania, same store EBITDA increased by 2.3%.~~


~~(2)~~	~~The~~ ~~nine~~ ~~months ended~~ ~~September 30, 2017~~ ~~includes a $2,000 reversal of an expense accrued in 2015. Excluding this amount, same store EBITDA increased by 6.2%.~~

December 2017.

8173

Results of Operations – ~~Nine~~Six Months Ended ~~September~~June 30, 2018 Compared to June 30, 2017 ~~Compared to September 30, 2016~~ - continued

Same Store Net Operating Income

Below are reconciliations of NOI to same store NOI for our New York segment, ~~and~~ theMART, ~~and~~ 555 California Street ~~which are included in Other,~~and other investments for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2018 compared to ~~September~~June 30, ~~2016.~~

2017.

(Amounts in thousands) New York theMART
555 California
Street
NOI for the nine months ended September 30, 2017 $ 812,334
$ 74,859
$ 33,647
Less NOI from:
Acquisitions (13,230 ) 210
—
Dispositions (619 ) —
—
Development properties placed into and out of service (5,022 ) —
—
Other non-operating income, net (22,492 ) (31 ) —
Same store NOI for the nine months ended September 30, 2017 $ 770,971
$ 75,038
$ 33,647

NOI for the nine months ended September 30, 2016 $ 716,315
$ 70,914
$ 24,010
Less NOI from:
Acquisitions (13 ) —
—
Dispositions (2,113 ) —
—
Development properties placed into and out of service (5,947 ) —
782
Other non-operating income, net (27,428 ) —
(396 )
Same store NOI for the nine months ended September 30, 2016 $ 680,814
$ 70,914
$ 24,396

Increase in same store NOI for the nine months ended September 30, 2017 compared to September 30, 2016 $ 90,157
$ 4,124
$ 9,251

% increase in same store NOI 13.2 %
⁽¹⁾
5.8 %
⁽²⁾
37.9 %



(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-offs	814			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:
	Acquisitions	36			(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 share		4.5		%	4.1		%	⁽¹⁾	4.3		%	12.9		%	—		%

____________________


(1)	Excluding Hotel Pennsylvania, same store NOI at share - cash basis increased by ~~12.8%.~~


~~(2)~~	~~The~~ ~~nine~~ ~~months ended September 30, 2017 includes a $2,000 reversal of an expense accrued in 2015. Excluding this amount, same store NOI increased by 8.9%.~~

~~SUPPLEMENTAL INFORMATION~~

~~Reconciliation of Net Income Attributable to the Operating Partnership to EBITDA for the Three Months Ended June 30, 2017~~

(Amounts in thousands) New York
Net income attributable to the Operating Partnership for the three months ended June 30, 2017 $ 96,180
Interest and debt expense 78,202
Depreciation and amortization 110,449
Income tax expense (869 )
EBITDA for the three months ended June 30, 2017 $ 283,962

~~Reconciliation of EBITDA to Same Store EBITDA – Three Months Ended September 30, 2017 Compared to June 30, 2017~~

(Amounts in thousands) New York theMART
555 California
Street
EBITDA for the three months ended September 30, 2017 $ 297,177
$ 24,165
$ 11,643
Add-back:
Non-property level overhead expenses included above 9,479
1,859
—
Less EBITDA from:
Acquisitions (226 ) 42
—
Dispositions (15 ) —
—
Development properties placed into and out of service (6,228 ) —
—
Other non-operating income, net (1,308 ) —
—
Same store EBITDA for the three months ended September 30, 2017 $ 298,879
$ 26,066
$ 11,643

EBITDA for the three months ended June 30, 2017 $ 283,962
$ 24,122
$ 12,144
Add-back:
Non-property level overhead expenses included above 9,908
2,063
—
Less EBITDA from:
Acquisitions (164 ) 169
—
Dispositions (164 ) —
—
Development properties placed into and out of service (7,571 ) —
—
Other non-operating income, net (900 ) —
—
Same store EBITDA for the three months ended June 30, 2017 $ 285,071
$ 26,354
$ 12,144

Increase (decrease) in same store EBITDA for the three months ended September 30, 2017 compared to June 30, 2017 $ 13,808
$ (288 ) $ (501 )

% increase (decrease) in same store EBITDA 4.8 %
⁽¹⁾
(1.1 )% (4.1 )%

~~____________________~~


~~(1)~~	~~Excluding Hotel Pennsylvania, same store EBITDA increased by 5.3%~~4.2%.

8374

~~SUPPLEMENTAL INFORMATION - CONTINUED~~

~~Reconciliation~~Results of ~~NOI to Same Store NOI~~Operations – ~~Three~~Six Months Ended ~~September~~June 30, ~~2017~~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 six months ended June 30, 2018 compared to June 30, 2017.

New York theMART 555 California
Street
NOI for the three months ended September 30, 2017 $ 280,044
$ 25,422
$ 11,013
Less NOI from:
Acquisitions (76 ) 42
—
Dispositions (15 ) —
—
Development properties placed into and out of service (1,779 ) —
—
Other non-operating income, net (6,247 ) —
—
Same store NOI for the three months ended September 30, 2017 $ 271,927
$ 25,464
$ 11,013

NOI for the three months ended June 30, 2017 $ 270,515
$ 24,901
$ 11,259
Less NOI from:
Acquisitions (63 ) 170
—
Dispositions (164 ) —
—
Development properties placed into and out of service (1,774 ) —
—
Other non-operating income, net (6,773 ) —
—
Same store NOI for the three months ended June 30, 2017 $ 261,741
$ 25,071
$ 11,259

Increase (decrease) in same store NOI for the three months ended September 30, 2017 compared to June 30, 2017 $ 10,186
$ 393
$ (246 )

% increase (decrease) in same store NOI 3.9 %
⁽¹⁾
1.6 % (2.2 )%



(Amounts in thousands)		Total			New York				theMART			555 California Street			Other
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:
	Acquisitions	(639		)	(490		)		(149		)	—			—
	Dispositions	(220		)	(220		)		—			—			—
	Development properties placed into and out of service	(14,290		)	(14,290		)		—			—			—
	Lease termination income	(1,223		)	(1,061		)		(162		)	—			—
	Other non-operating income, net	(37,972		)	(1,075		)		—			—			(36,897		)
Same store NOI at share - cash basis for the six months ended June 30, 2018		$	618,692		$	537,291			$	54,767		$	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:
	Acquisitions	137			(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		6.7		%	5.8		%	⁽¹⁾	10.4		%	18.5		%	—		%

____________________


(1)	Excluding Hotel Pennsylvania, same store NOI at share - cash basis increased by ~~4.4%~~5.8%.

SUPPLEMENTAL INFORMATION

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

Below is a summary of NOIat share and NOI at share - cash basis by segment for the three months ended June 30, 2018 and March 31, 2018.



(Amounts in thousands)	For the Three Months Ended June 30, 2018
	Total			New York			Other
Total revenues	$	541,818		$	458,552		$	83,266
Operating expenses	235,981			200,903			35,078
NOI - consolidated	305,837			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 entities	65,752			49,778			15,974
NOI at share	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
NOI at share - cash basis	$	341,948		$	283,154		$	58,794



(Amounts in thousands)	For the Three Months Ended March 31, 2018
	Total			New York			Other
Total revenues	$	536,437		$	448,484		$	87,953
Operating expenses	237,602			197,916			39,686
NOI - consolidated	298,835			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 entities	67,513			49,773			17,740
NOI at share	349,036			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

SUPPLEMENTAL INFORMATION - CONTINUED

Net Operating Income by Segment for the Three Months Ended June 30, 2018 and March 31, 2018 - continued

The elements of our New York and Other NOI at share for the three months ended June 30, 2018 and March 31, 2018 are summarized below.



(Amounts in thousands)	For the Three Months Ended
	June 30, 2018		March 31, 2018
New York:
Office	$	184,867	$	187,156
Retail	87,109		87,909
Residential	6,338		6,141
Alexander's	11,909		11,575
Hotel Pennsylvania	5,644		(4,185		)
Total New York	295,867		288,596

Other:
theMART	27,816		26,875
555 California Street	13,660		13,511
Other investments	17,086		20,054
Total Other	58,562		60,440

NOI at share	$	354,429	$	349,036

The elements of our New York and Other NOI at share - cash basis for the three months ended June 30, 2018 and March 31, 2018 are summarized below.



(Amounts in thousands)	For the Three Months Ended
	June 30, 2018		March 31, 2018
New York:
Office	$	180,710	$	178,199
Retail	79,139		79,589
Residential	5,463		5,599
Alexander's	12,098		12,039
Hotel Pennsylvania	5,744		(4,153		)
Total New York	283,154		271,273

Other:
theMART	27,999		27,079
555 California Street	13,808		12,826
Other investments	16,987		19,910
Total Other	58,794		59,815

NOI at share - cash basis	$	341,948	$	331,088

SUPPLEMENTAL INFORMATION - CONTINUED

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



(Amounts in thousands)	For the Three Months Ended
	June 30, 2018			March 31, 2018
Net income	$	105,338		$	282

Deduct:
(Income) loss from partially owned entities	(8,757		)	9,904
Loss from real estate fund investments	28,976			8,807
Interest and other investment (income) loss, net	(30,892		)	24,384
Net gains on disposition of wholly owned and partially owned assets	(23,559		)	—
(Income) loss from discontinued operations	(683		)	363
NOI attributable to noncontrolling interests in consolidated subsidiaries	(17,160		)	(17,312		)

Add:
Depreciation and amortization expense	111,846			108,686
General and administrative expense	34,427			42,533
Transaction related costs and other	1,017			13,156
NOI from partially owned entities	65,752			67,513
Interest and debt expense	87,657			88,166
Income tax expense	467			2,554
NOI at share	354,429			349,036
Non-cash adjustments for straight-line rents, amortization of acquired below-market leases, net and other	(12,481		)	(17,948		)
NOI at share - cash basis	$	341,948		$	331,088

SUPPLEMENTAL INFORMATION - CONTINUED

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

Same Store Net Operating Income

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, 2018 compared to March 31, 2018.



(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-offs	1,941			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 share		3.2		%	3.3		%	⁽¹⁾	3.4		%	1.1		%	—		%

____________________


(1)	Excluding Hotel Pennsylvania, same store NOI at share decreased by0.3%.

SUPPLEMENTAL INFORMATION - CONTINUED

Three Months Ended June 30, 2018 Compared to March 31, 2018 - continued

Same Store Net Operating Income - 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, 2018 compared to March 31, 2018.



(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		)	—			—
	Dispositions	22			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 basis		4.6		%	4.6		%	⁽¹⁾	2.9		%	7.7		%	—		%

____________________


(1)	Excluding Hotel Pennsylvania, same store NOI at share - cash basis increased by 0.7%.

8480

Liquidity and Capital Resources

Property rental income 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 loan and ~~our~~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 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 ~~Nine~~Six Months Ended ~~September~~June 30, ~~2017~~2018

~~Our~~The total of our cash and cash equivalents and restricted cash ~~were $1,385,783,000~~was $1,211,959,000 as of ~~September~~June 30, ~~2017,~~2018, a ~~$213,548,000~~$702,853,000 decrease from the balance at December 31, ~~2016.~~2017. Our consolidated outstanding debt, net was ~~$9,351,601,000~~$9,781,529,000 as of ~~September~~June 30, ~~2017,~~2018, a ~~$95,069,000 decrease~~$52,042,000 increase from the balance at December 31, ~~2016.~~2017. As of ~~September~~June 30, ~~2017~~2018 and December 31, ~~2016,~~2017, $80,000,000 and $0, ~~and $115,630,000,~~ respectively, was outstanding under our revolving credit facilities. During the remainder of ~~2017~~2018 and ~~2018,~~2019, $0 and ~~$140,015,000,~~$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

Net cash provided by operating activities of ~~$661,625,000~~$241,260,000 was comprised of (i) net income of ~~$210,577,000,~~$105,620,000, (ii) ~~$386,488,000~~$251,955,000 of non-cash adjustments, which include depreciation and amortization expense, ~~the effect of straight-lining of rents, amortization of below-market leases, net,~~ net realized and unrealized losses on real estate fund investments, ~~equity in net income from partially owned entities, net gains on sale of real estate and other and~~ 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 loss from partially owned entities, (iii) distributions of income from partially owned entities of $45,999,000 and (iv) return of capital from real estate fund investments of ~~$80,294,000 and (iv) distributions of income from partially owned entities of $65,097,000,~~$20,291,000, partially offset by (v) the net change in operating assets and liabilities of ~~$80,831,000.~~$182,605,000.

Net Cash Used in Investing Activities

Net cash used in investing activities of ~~$54,295,000~~$254,906,000 was ~~primarily~~ comprised of (i) ~~$274,716,000~~$185,039,000 of development costs and construction in progress, (ii) ~~$207,759,000~~$113,300,000 of additions to real estate, (iii) ~~$33,578,000 of investments in partially owned entities and (iv) $11,841,000~~$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) ~~$347,776,000~~$81,997,000 of capital distributions from partially owned entities and (vi) ~~$115,630,000 repayment of loan receivable from JBGS and (vii) $9,543,000~~$44,599,000 of proceeds from ~~sales~~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 ~~$820,878,000~~$689,207,000 was primarily comprised of (i) ~~$416,237,000~~$470,000,000 for the redemption of ~~cash and cash equivalents and restricted cash included in the spin-off of JBGS,~~preferred shares, (ii) ~~$382,552,000~~$239,594,000 of dividends paid on common shares, (iii) ~~$177,109,000~~$148,408,000 of repayments of borrowings, (iv) ~~$48,386,000~~$49,338,000 of distributions to noncontrolling interests, (v) $30,047,000 of dividends paid on preferred shares, ~~(v) $48,329,000 of distributions to noncontrolling interests and~~ (vi) ~~$2,944,000~~$3,289,000 of debt issuance costs and ~~other~~(vii) $818,000 of debt prepayment and extinguishment costs, partially offset by ~~(vii) $229,042,000~~(viii) $189,042,000 of proceeds from borrowings, (ix) $59,558,000 of contributions from noncontrolling interests and ~~(viii) $25,011,000~~(x) $4,471,000 of proceeds received from the exercise of employee share ~~options.~~options and other.

Net cash used in financing activities of the Operating Partnership of ~~$820,878,000~~$689,207,000 was primarily comprised of (i) ~~$416,237,000~~$470,000,000 for the redemption of ~~cash and cash equivalents and restricted cash included in the spin-off of JBGS,~~preferred units, (ii) ~~$382,552,000~~$239,594,000 of distributions to Vornado, (iii) ~~$177,109,000~~$148,408,000 of repayments of borrowings, (iv) ~~$48,386,000 of distributions to preferred unitholders, (v) $48,329,000~~$49,338,000 of distributions to redeemable security holders and noncontrolling interests in consolidated subsidiaries, ~~and~~(v) $30,047,000 of distributions to preferred unitholders, (vi) ~~$2,944,000~~$3,289,000 of debt issuance costs and ~~other~~(vii) $818,000 of debt prepayment and extinguishment costs, partially offset by ~~(vii) $229,042,000~~(viii) $189,042,000 of proceeds from borrowings, (ix) $59,558,000 of contributions from noncontrolling interests in consolidated subsidiaries and ~~(viii) $25,011,000~~(x) $4,471,000 of proceeds received from the exercise of Vornado stock ~~options.~~options and other.

8581

Liquidity and Capital Resources - continued

Capital Expenditures for the ~~Nine~~Six Months Ended ~~September~~June 30, ~~2017~~2018

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 capital expenditures, leasing commissions and a reconciliation of total expenditures on an accrual basis to the cash expended for the ~~nine~~six months ended ~~September~~June 30, ~~2017.~~2018.


(Amounts in thousands)	Total			New York			theMART			555 California Street			Other				Total			New York			theMART			555 California Street
Expenditures to maintain assets	$	80,195		$	62,199		$	6,202		$	4,601		$	7,193			$	43,896		$	31,603		$	7,752		$	4,541
Tenant improvements	75,367			33,251			7,516			3,454			31,146				64,136			60,410			2,893			833
Leasing commissions	24,199			16,690			1,094			770			5,645				26,870			26,120			387			363
Non-recurring capital expenditures	62,292			50,717			988			6,403			4,184				17,679			13,579			156			3,944
Total capital expenditures and leasing commissions (accrual basis)	242,053			162,857			15,800			15,228			48,168				152,581			131,712			11,188			9,681
Adjustments to reconcile to cash basis:
Expenditures in the current period applicable to prior periods	106,038			62,948			7,992			9,777			25,321				58,701			49,179			8,516			1,006
Expenditures to be made in future periods for the current period	(113,704		)	(71,138		)	(7,172		)	4,373			(39,767		)		(74,233		)	(77,279		)	(3,387		)	6,433
Total capital expenditures and leasing commissions (cash basis)	$	234,387		$	154,667		$	16,620		$	29,378		$	33,722		⁽¹⁾	$	137,049		$	103,612		$	16,317		$	17,120
Tenant improvements and leasing commissions:
Per square foot per annum	$	9.30		$	9.56		$	6.12		$	11.89		n/a				$	9.44		$	9.90		$	3.44		$	11.64
Percentage of initial rent	11.1		%	10.6		%	12.7		%	14.9		%	n/a				10.3		%	10.0		%	6.8		%	13.6		%

~~____________________~~


~~(1)~~	Effective July 17, 2017, the date of the spin-off 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 ~~Nine~~Six Months Ended ~~September~~June 30, ~~2017~~2018

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 budgets below include initial leasing costs, which are reflected as non-recurring capital expenditures in the table above.

We are constructing a residential condominium tower containing 397,000 salable square feet ~~on our~~at 220 Central Park ~~South development site.~~South. The ~~incremental~~ development cost of this project (exclusive of land cost of $515.4 million) is estimated to be approximately ~~$1.3~~$1.4 billion, of which ~~$811,386,000~~$1.1 billion has been expended as of ~~September~~June 30, ~~2017.~~2018.

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% ~~owned)~~interest). The ~~incremental~~ development cost of this project is estimated to be approximately $130,000,000, of which our share is $72,000,000. As of ~~September~~June 30, ~~2017, $63,540,000~~2018, $86,762,000 has been expended, of which our share is ~~$34,947,000.~~$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% ~~owned)~~interest). The ~~incremental~~ development cost of this project is estimated to be approximately $152,000,000, of which our share is $69,000,000. As of ~~September~~June 30, ~~2017, $93,477,000~~2018, $122,249,000 has been expended, of which our share is ~~$42,158,000.~~$55,134,000.

8682

Liquidity and Capital Resources - continued

Development and Redevelopment Expenditures for the ~~Nine~~Six Months Ended ~~September~~June 30, ~~2017~~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% ~~owned)~~interest). The ~~venture’s incremental~~ development cost of this project is estimated to be approximately $60,000,000, of which our share is $30,000,000. As of ~~September~~June 30, ~~2017, $31,343,000~~2018, $41,731,000 has been expended, of which our share is ~~$15,672,000.~~$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 ~~September~~June 30, ~~2017, $259,856,000~~2018, $314,837,000 has been expended, of which our share is ~~$130,188,000.~~$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 ~~Companies ("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 ~~bears~~bear a full guaranty from Skanska AB.

We are redeveloping a 64,000 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, $9,142,000 has been expended, of which our share is $6,399,000.

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, $4,897,000 has been expended, of which our share is $2,449,000.

We are redeveloping One Penn Plaza, a 2,535,000 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, of which $3,939,000 has been expended as of June 30, 2018.

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 redevelopment projects will commence, or if commenced, be completed, or completed on schedule or within budget.

Below is a summary of development and redevelopment expenditures incurred for the ~~nine~~six months ended ~~September~~June 30, ~~2017.~~2018. These expenditures include interest and debt expense of ~~$34,979,000,~~$31,481,000, payroll of ~~$4,334,000~~$4,958,000 and other soft costs (primarily architectural and engineering fees, permits, real estate taxes and professional fees) aggregating ~~$20,906,000,~~$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			Total		New York		theMART		555 California Street		Other
220 Central Park South	$	196,063	$	—	$	—	$	—	$	196,063		$	152,178	$	—	$	—	$	—	$	152,178
606 Broadway	11,796		11,796		—		—		—			8,593		8,593		—		—		—
315/345 Montgomery Street	9,603		—		—		9,603		—
345 Montgomery Street												7,575		—		—		7,575		—
Penn Plaza												3,576		3,576		—		—		—
Marriott Marquis Times Square - retail and signage												2,686		2,686		—		—		—
One Penn Plaza												2,565		2,565		—		—		—
90 Park Avenue	6,831		6,831		—		—		—			1,015		1,015		—		—		—
Penn Plaza	6,303		6,303		—		—		—
theMART	6,163		—		6,163		—		—
304 Canal Street	3,627		3,627		—		—		—
Other	34,330		5,709		509		—		28,112		⁽¹⁾	6,851		3,389		3,037		190		235
	$	274,716	$	34,266	$	6,672	$	9,603	$	224,175		$	185,039	$	21,824	$	3,037	$	7,765	$	152,413

~~____________________~~


~~(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.

8783

Liquidity and Capital Resources - continued

Cash Flows for the ~~Nine~~Six Months Ended ~~September~~June 30, ~~2016~~2017

~~Our~~The total of our cash and cash equivalents and restricted cash ~~were $1,464,647,000~~was $1,557,689,000 at ~~September~~June 30, ~~2016,~~2017, a ~~$478,868,000~~$41,633,000 decrease from the balance at December 31, ~~2015.~~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 ~~$572,414,000~~$316,217,000 was comprised of (i) net income of ~~$277,378,000,~~$221,331,000, (ii) ~~$298,361,000~~$222,708,000 of non-cash adjustments, which include depreciation and amortization expense, ~~real estate impairment losses,~~equity in net ~~gains on the disposition of wholly owned and~~income from partially owned ~~assets,~~entities, the effect of straight-lining of rents, amortization of below-market leases, net, net realized and unrealized ~~gains~~losses on real estate fund investments, net gains on sale of real estate and other and ~~equity in~~ net ~~income~~gains on disposition of wholly owned and partially owned ~~entities,~~assets and (iii) ~~return of capital from real estate fund investments of $71,888,000, (iv)~~ distributions of income from partially owned entities of ~~$56,853,000,~~$44,778,000, partially offset by ~~(v)~~(iv) the net change in operating assets and liabilities of ~~$132,066,000.~~$172,600,000.

Net Cash Used in Investing Activities

Net cash used in investing activities of ~~$686,046,000~~$251,529,000 was primarily comprised of (i) ~~$426,641,000~~$191,073,000 of development costs and construction in progress, (ii) ~~$261,971,000~~$139,611,000 of additions to real estate, (iii) ~~$112,797,000~~$27,720,000 of investments in partially owned entities and (iv) ~~$91,100,000~~$11,841,000 of acquisitions of real estate and other, ~~(v) $48,000,000 due to the net deconsolidation of 7 West 34th Street, (vi) $11,700,000 of investments in loans receivable and other and (vii) $4,379,000 in purchases of marketable securities,~~ partially offset by ~~(viii) $167,673,000~~(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 and (ix) $102,836,000 of capital distributions from partially owned entities.~~investments.

Net Cash Used in Financing Activities

Net cash used in financing activities of Vornado Realty Trust of ~~$365,236,000~~$106,321,000 was primarily comprised of (i) ~~$1,591,554,000 for the repayments of borrowings, (ii) $356,863,000~~$268,817,000 of dividends paid on common shares, ~~(iii) $246,250,000 for the redemption of preferred shares, (iv) $95,055,000 of distributions to noncontrolling interests, (v) $64,006,000~~(ii) $32,258,000 of dividends paid on preferred shares, ~~(vi) $30,846,000~~(iii) $25,617,000 of ~~debt issuance~~distributions to noncontrolling interests and ~~other costs, and (vii) $186,000~~(iv) $13,971,000 for the ~~repurchase~~repayments of ~~shares related to stock compensation agreements and related tax withholdings and other,~~borrowings, partially offset by ~~(viii) $2,000,604,000~~(v) $226,929,000 of proceeds from borrowings ~~(ix) $11,900,000 of contributions from noncontrolling interests~~ and ~~(x) $7,020,000~~(vi) $9,626,000 of proceeds received from exercise of employee share ~~options.~~options and other.

Net cash used in financing activities of the Operating Partnership of ~~$365,236,000~~$106,321,000 was primarily comprised of (i) ~~$1,591,554,000 for the repayments of borrowings, (ii) $356,863,000~~$268,817,000 of distributions to Vornado, (ii) $32,258,000 of distributions to preferred unitholders, (iii) ~~$246,250,000 for the redemption of preferred units, (iv) $95,055,000~~$25,617,000 of distributions to redeemable security holders and noncontrolling interests in consolidated subsidiaries ~~(v) $64,006,000 of distributions to preferred unitholders, (vi) $30,846,000 of debt issuance~~ and ~~other costs, and (vii) $186,000~~(iv) $13,971,000 for the ~~repurchase~~repayments of ~~Class A units related to stock compensation agreements and related tax withholdings and other,~~borrowings, partially offset by ~~(viii) $2,000,604,000~~(v) $226,929,000 of proceeds from borrowings ~~(ix) $11,900,000 of contributions from noncontrolling interests in consolidated subsidiaries~~ and ~~(x) $7,020,000~~(vi) $9,626,000 of proceeds received from exercise of Vornado stock ~~options.~~options and other.

8884

Liquidity and Capital Resources - continued

Capital Expenditures for the ~~Nine~~Six Months Ended ~~September~~June 30, ~~2016~~2017


(Amounts in thousands)	Total			New York			theMART			555 California Street			Other				Total			New York			theMART			555 California Street			Other
Expenditures to maintain assets	$	68,381		$	39,001		$	10,092		$	5,208		$	14,080			$	54,674		$	39,972		$	4,361		$	3,148		$	7,193
Tenant improvements	62,556			48,175			2,542			3,201			8,638				56,737			14,828			7,309			3,454			31,146
Leasing commissions	30,462			26,214			354			951			2,943				15,264			7,768			1,083			768			5,645
Non-recurring capital expenditures	27,503			20,224			182			874			6,223				37,725			32,905			110			526			4,184
Total capital expenditures and leasing commissions (accrual basis)	188,902			133,614			13,170			10,234			31,884				164,400			95,473			12,863			7,896			48,168
Adjustments to reconcile to cash basis:
Expenditures in the current period applicable to prior periods	199,260			100,542			25,335			9,209			64,174				65,985			26,238			5,987			8,439			25,321
Expenditures to be made in future periods for the current period	(80,348		)	(63,919		)	2,139			(5,018		)	(13,550		)		(68,784		)	(25,576		)	(7,704		)	4,263			(39,767		)
Total capital expenditures and leasing commissions (cash basis)	$	307,814		$	170,237		$	40,644		$	14,425		$	82,508		⁽¹⁾	$	161,601		$	96,135		$	11,146		$	20,598		$	33,722		⁽¹⁾
Tenant improvements and leasing commissions:
Per square foot per annum	$	6.88		$	7.02		$	4.04		$	7.49		n/a				$	7.60		$	9.16		$	6.18		$	8.80		n/a
Percentage of initial rent	9.0		%	8.9		%	7.9		%	9.5		%	n/a				4.9		%	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 prior period presentation.

(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 ~~Nine~~Six Months Ended ~~September~~June 30, ~~2016~~2017

Below is a summary of development and redevelopment expenditures incurred for the ~~nine~~six months ended ~~September~~June 30, ~~2016.~~2017. These expenditures include interest and debt expense of ~~$24,822,000,~~$23,312,000, payroll of ~~$9,475,000,~~$4,581,000, and other soft costs (primarily architectural and engineering fees, permits, real estate taxes and professional fees) aggregating ~~$45,316,000,~~$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			Total		New York		theMART		555 California Street		Other
220 Central Park South	$	213,170	$	—	$	—	$	—	$	213,170		$	126,384	$	—	$	—	$	—	$	126,384
606 Broadway												9,467		9,467		—		—		—
90 Park Avenue	28,288		28,288		—		—		—			6,002		6,002		—		—		—
640 Fifth Avenue	23,415		23,415		—		—		—
theMart	21,613		—		21,613		—		—
Penn Plaza	10,195		10,195		—		—		—			3,724		3,724		—		—		—
Wayne Towne Center	7,910		—		—		—		7,910
330 West 34th Street	3,968		3,968		—		—		—
304 Canal Street												2,534		2,534		—		—		—
345 Montgomery Street												2,424		—		—		2,424		—
Other	118,082		8,165		769		879		108,269		⁽¹⁾	40,538		5,138		3,957		4,208		27,235		⁽¹⁾
	$	426,641	$	74,031	$	22,382	$	879	$	329,349		$	191,073	$	26,865	$	3,957	$	6,632	$	153,619

~~____________________~~__________


~~(1)~~	Effective July 17, 2017, the date of the spin-off 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 prior period presentation.

8985

Liquidity and Capital Resources - continued

Other Commitments and Contingencies

In September 2016, our 50.1% joint venture with Related was designated by ESD, an entity of New York State, to redevelop the historic Farley Post Office 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 ~~bears~~bear a full guaranty from Skanska AB.

As of ~~September~~June 30, ~~2017,~~2018, we expect to fund additional capital to certain of our partially owned entities aggregating approximately ~~$45,000,000.~~$34,000,000.

As of ~~September~~June 30, ~~2017,~~2018, we have construction commitments aggregating approximately ~~$489,000,000.~~$342,000,000.

Income Taxes - 220 Central Park South

9086

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 depreciated 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 1820 – ~~(Loss)~~ Income Per Share/~~(Loss)~~ Income Per Class A Unit, in our consolidated financial statements on page 3940 of this Quarterly Report on Form 10-Q.

~~FFO for the Three and Nine Months Ended September 30, 2017 and 2016~~

FFO attributable to common shareholders plus assumed conversions was ~~$100,178,000,~~$209,680,000, or ~~$0.52~~$1.10 per diluted share for the three months ended ~~September~~June 30, ~~2017,~~2018, compared to ~~$225,529,000,~~$257,673,000, or ~~$1.19~~$1.35 per diluted share, for the prior year’s three months. FFO attributable to common shareholders plus assumed conversions was ~~$564,431,000,~~$312,339,000, or ~~$2.95~~$1.63 per diluted share for the ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2018, compared to ~~$658,880,000,~~$463,422,000, or ~~$3.47~~$2.43 per diluted share, for the prior year’s ~~nine~~six months. Details of certain adjustments to FFO are discussed in the financial results summary of our “Overview”.


(Amounts in thousands, except per share amounts)	For the Three Months Ended September 30,						For the Nine Months Ended September 30,						For the Three Months Ended June 30,						For the Six Months Ended June 30,
	2017			2016			2017			2016			2018			2017			2018			2017
Reconciliation of our net (loss) income to FFO:
Net (loss) income attributable to common shareholders	$	(29,026	)	$	66,125		$	134,698		$	172,425
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
Per diluted share	$	(0.15	)	$	0.35		$	0.71		$	0.91		$	0.58		$	0.61		$	0.49		$	0.86

FFO adjustments:
Depreciation and amortization of real property	$	102,953		$	130,892		$	361,949		$	398,231		$	103,599		$	128,527		$	204,009		$	258,996
Net gains on sale of real estate	(1,530		)	—			(3,797		)	(161,721		)	(24,177		)	—			(24,177		)	(2,267		)
Real estate impairment losses	—			—			—			160,700			—			—			—			—
Proportionate share of adjustments to equity in net (loss) income of partially owned entities to arrive at FFO:
Proportionate share of adjustments to equity in net income (loss) of partially owned entities to arrive at FFO:
Depreciation and amortization of real property	31,997			40,281			108,753			117,635			25,488			37,682			53,594			76,756
Net gains on sale of real estate	8			(2,522		)	(17,184		)	(2,841		)	(272		)	(15,339		)	(577		)	(17,192		)
Real estate impairment losses	4,329			1,134			7,547			5,536			—			167			4			3,218
	137,757			169,785			457,268			517,540			104,638			151,037			232,853			319,511
Noncontrolling interests' share of above adjustments	(8,572		)	(10,403		)	(28,444		)	(31,872		)	(6,508		)	(9,356		)	(14,419		)	(19,873		)
FFO adjustments, net	$	129,185		$	159,382		$	428,824		$	485,668		$	98,130		$	141,681		$	218,434		$	299,638

FFO attributable to common shareholders	$	100,159		$	225,507		$	563,522		$	658,093		$	209,664		$	257,653		$	312,127		$	463,362
Convertible preferred share dividends	19			22			59			65			16			20			32			60
Earnings allocated to Out-Performance Plan units	—			—			850			722			—			—			180			—
FFO attributable to common shareholders plus assumed conversions	$	100,178		$	225,529		$	564,431		$	658,880		$	209,680		$	257,673		$	312,339		$	463,422
Per diluted share	$	0.52		$	1.19		$	2.95		$	3.47		$	1.10		$	1.35		$	1.63		$	2.43

Reconciliation of Weighted Average Shares
Weighted average common shares outstanding	189,593			188,901			189,401			188,778			190,200			189,395			190,141			189,304
Effect of dilutive securities:
Employee stock options and restricted share awards	1,254			1,147			1,553			1,067			930			1,011			934			1,089
Convertible preferred shares	46			42			47			42			38			38			38			57
Out-Performance Plan units	—			—			303			242			—			—			115			—
Denominator for FFO per diluted share	190,893			190,090			191,304			190,129
Denominator for FFO attributable to common shareholders plus assumed conversions per diluted share													191,168			190,444			191,228			190,450

9187

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)	2017						2016			2018						2017
	September 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	$	3,112,877	3.03%	$	31,129		$	3,217,763	2.45%	$	3,985,262	3.75%	$	39,853		$	3,492,133	3.19%
Fixed rate	6,316,886		3.65%	—			6,329,547		3.65%	5,859,211		3.63%	—			6,311,706		3.72%
	$	9,429,763	3.45%	31,129			$	9,547,310	3.25%	$	9,844,473	3.68%	39,853			$	9,803,839	3.53%
Pro rata share of debt of non-consolidated entities (non-recourse):(1)
Variable rate – excluding Toys "R" Us, Inc.	$	1,378,765	3.02%	13,788			$	1,092,326	2.50%
Variable rate – Toys "R" Us, Inc.	1,248,970		6.91%	12,490			1,162,072		6.05%
Fixed rate - excluding Toys "R" Us, Inc.	2,088,979		5.03%	—			1,969,918		5.15%
Fixed rate - Toys "R" Us, Inc.	466,313		10.45%	—			671,181		9.42%
Variable rate										$	1,422,776	3.86%	14,228			$	1,395,001	3.24%
Fixed rate										2,080,891		4.90%	—			2,035,888		4.89%
	$	5,183,027	5.44%	26,278			$	4,895,497	5.36%	$	3,503,667	4.48%	14,228			$	3,430,889	4.22%
Noncontrolling interests' share of consolidated subsidiaries				(1,438		)							(1,494		)
Total change in annual net income attributable to the Operating Partnership				55,969									52,587
Noncontrolling interests’ share of the Operating Partnership				(3,481		)							(3,271		)
Total change in annual net income attributable to Vornado				$	52,488								$	49,316
Total change in annual net income attributable to the Operating Partnership per diluted Class A unit				$	0.28								$	0.26
Total change in annual net income attributable to Vornado per diluted share				$	0.27								$	0.26

__________

(1) As a result of Toys "R" Us ("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.

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 ~~September~~June 30, ~~2017,~~2018, we have ~~an interest rate swap on a $408,000,000 mortgage loan on Two Penn Plaza that swapped the rate from LIBOR plus 1.65% (2.89% as of September 30, 2017) to a fixed rate of 4.78% through March 2018,~~ an interest rate swap on a $375,000,000 mortgage loan on 888 Seventh Avenue that swapped the rate from LIBOR plus 1.60% ~~(2.84%~~(3.60% as of ~~September~~June 30, ~~2017)~~2018) to a fixed rate of 3.15% through December 2020 and an interest rate swap on a $700,000,000 mortgage loan on 770 Broadway that swapped the rate from LIBOR plus 1.75% ~~(2.98%~~(3.77% as of ~~September~~June 30, ~~2017)~~2018) 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 into an interest rate swap from LIBOR plus 1.80% (3.85% as of June 30, 2018) to a fixed rate of 4.14% through January 2025.

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 ~~September~~June 30, ~~2017,~~2018, the estimated fair value of our consolidated debt was ~~$9,483,000,000.~~

$9,789,000,000.

9288

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 ~~September~~June 30, ~~2017,~~2018, 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 ~~September~~June 30, ~~2017,~~2018, such disclosure controls and procedures were effective.

9389

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

Item 1A. Risk Factors

There were no material changes to the Risk Factors disclosed in our Annual Report on Form 10-K ~~as amended,~~ for the year ended December 31, ~~2016.~~2017.

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

Vornado Realty Trust

None.

Vornado Realty L.P.

During the quarter ended ~~September~~June 30, ~~2017,~~2018, we issued ~~492,312~~35,062 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 ~~$17,195,623~~$672,364 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.

9490



EXHIBIT INDEX
Exhibit No.
~~15.1~~	3.54		—	Articles of Amendment to Declaration of Trust, dated as June 13, 2018
3.55		—	Amended and Restated Bylaws of Vornado Realty Trust, as amended on July 25, 2018
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.
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.

9591

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: ~~October~~July 30, ~~2017~~2018	By:	/s/ Matthew Iocco
		Matthew Iocco, Chief Accounting Officer (duly authorized officer and principal accounting officer)

9692

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: ~~October~~July 30, ~~2017~~2018	By:	/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)

9793



(Amounts in thousands)
2018	$	42,556
2019	30,820
2020	22,185
2021	17,370
2022	14,271



(Amounts in thousands)
2018	$	19,510
2019	15,229
2020	12,020
2021	11,041
2022	9,433



(Amounts in thousands)
Balance as of December 31, 2015	$	1,229,221
Net income	11,410
Other comprehensive income	2,326
Distributions	(23,582		)
Redemption of Class A units for common shares/units, at redemption value	(28,126		)
Adjustments to carry redeemable Class A units at redemption value	30,260
Other, net	26,814
Balance as of September 30, 2016	$	1,248,323

Balance as of December 31, 2016	$	1,278,446
Net income	9,057
Other comprehensive income	188
Distributions	(25,663		)
Redemption of Class A units for common shares/units, at redemption value	(34,564		)
Adjustments to carry redeemable Class A units at redemption value (including $224,069 attributable to the spin-off of JBGS)	(286,928		)
Other, net	30,168
Balance as of September 30, 2017	$	970,704



(Amounts in thousands)	Total			Securities available- for-sale			Pro rata share of nonconsolidated subsidiaries' OCI				Interest rate swaps			Other
For the Three Months Ended September 30, 2017
Balance as of June 30, 2017	$	115,839		$	114,290		$	(3,821	)		$	12,702		$	(7,332	)
OCI before reclassifications	6,608			5,656			(626		)		1,976			(398		)
Amounts reclassified from AOCI	(646		)	—			(646		)	⁽¹⁾	—			—
Net current period OCI	5,962			5,656			(1,272		)		1,976			(398		)
Balance as of September 30, 2017	$	121,801		$	119,946		$	(5,093	)		$	14,678		$	(7,730	)

For the Three Months Ended September 30, 2016
Balance as of June 30, 2016	$	72,556		$	117,561		$	(9,941	)		$	(30,538	)	$	(4,526	)
OCI before reclassifications	9,818			3,685			(915		)		7,688			(640		)
Amounts reclassified from AOCI	—			—			—				—			—
Net current period OCI	9,818			3,685			(915		)		7,688			(640		)
Balance as of September 30, 2016	$	82,374		$	121,246		$	(10,856	)		$	(22,850	)	$	(5,166	)

For the Nine Months Ended September 30, 2017
Balance as of December 31, 2016	$	118,972		$	130,505		$	(12,058	)		$	8,066		$	(7,541	)
OCI before reclassifications	(5,793		)	(10,559		)	(1,657		)		6,612			(189		)
Amounts reclassified from AOCI	8,622			—			8,622			⁽¹⁾	—			—
Net current period OCI	2,829			(10,559		)	6,965				6,612			(189		)
Balance as of September 30, 2017	$	121,801		$	119,946		$	(5,093	)		$	14,678		$	(7,730	)

For the Nine Months Ended September 30, 2016
Balance as of December 31, 2015	$	46,921		$	78,448		$	(9,319	)		$	(19,368	)	$	(2,840	)
OCI before reclassifications	35,453			42,798			(1,537		)		(3,482		)	(2,326		)
Amounts reclassified from AOCI	—			—			—				—			—
Net current period OCI	35,453			42,798			(1,537		)		(3,482		)	(2,326		)
Balance as of September 30, 2016	$	82,374		$	121,246		$	(10,856	)		$	(22,850	)	$	(5,166	)



	Total Return⁽¹⁾
	Vornado		Office REIT		MSCI
Three-month	2.3	%	(0.7	)%	0.9	%
Nine-month	(6.7	)%	1.9	%	3.6	%
One-year	(3.1	)%	2.5	%	0.5	%
Three-year	14.0	%	30.3	%	31.9	%
Five-year	52.0	%	53.7	%	58.0	%
Ten-year	38.9	%	47.0	%	75.6	%



Certain items that impact FFO:
JBG SMITH Properties which is treated as a discontinued operation:
Transaction costs	$	(53,581	)	$	(2,739	)	$	(67,045	)	$	(4,597	)
Operating results through July 17, 2017 spin-off	10,148			61,699			122,201			169,141
	(43,433		)	58,960			55,156			164,544

Impairment loss on investment in Pennsylvania REIT	(44,465		)	—			(44,465		)	—
(Loss) income from real estate fund investments, net	(7,794		)	807			(11,333		)	13,662
Net gain resulting from Urban Edge Properties operating partnership unit issuances	5,200			—			21,100			—
Our share of write-off of deferred financing costs	(3,819		)	—			(3,819		)	—
Preferred share issuance costs (Series J redemption)	—			(7,408		)	—			(7,408		)
Net gain on repayment of our Suffolk Downs JV debt investments	—			—			11,373			—
Other	(390		)	171			856			(130		)
	(94,701		)	52,530			28,868			170,668
Noncontrolling interests' share of above adjustments	5,890			(3,220		)	(1,782		)	(10,877		)
Total of certain items that impact FFO, net	$	(88,811	)	$	49,310		$	27,086		$	159,791



		EBITDA		NOI
(1)	Excluding Hotel Pennsylvania - same store % increase:
	Three months ended September 30, 2017 compared to September 30, 2016	4.5	%	13.4	%
	Nine months ended September 30, 2017 compared to September 30, 2016	2.3	%	12.8	%
	Three months ended September 30, 2017 compared to June 30, 2017	5.3	%	4.4	%

(2)	The nine months ended September 30, 2017 includes a $2,000,000 reversal of an expense accrued in 2015. Excluding this amount, same store EBITDA increased by 6.2% and same store NOI increased by 8.9%.



Nine Months Ended September 30, 2017
	Total square feet leased	1,548			87			227			132
	Our share of square feet leased:	1,188			68			227			93
	Initial rent⁽¹⁾	$	79.35		$	278.05		$	48.37		$	79.98
	Weighted average lease term (years)	8.4			6.0			6.9			9.4
	Second generation relet space:
	Square feet	813			44			207			46
	GAAP basis:
	Straight-line rent⁽²⁾	$	73.89		$	158.51		$	48.53		$	95.09
	Prior straight-line rent	$	64.62		$	140.76		$	37.45		$	80.30
	Percentage increase	14.3		%	12.6		%	29.6		%	18.4		%
	Cash basis:
	Initial rent⁽¹⁾	$	75.52		$	150.88		$	48.27		$	86.49
	Prior escalated rent	$	68.23		$	131.03		$	39.83		$	78.67
	Percentage increase	10.7		%	15.1		%	21.2		%	9.9		%
	Tenant improvements and leasing commissions:
	Per square foot	$	74.59		$	156.88		$	42.22		$	111.81
	Per square foot per annum	$	8.88		$	26.15		$	6.12		$	11.89
	Percentage of initial rent	11.1		%	9.4		%	12.7		%	14.9		%



(Amounts in thousands, except per share amounts)	Percentage Ownership at	For the Three Months Ended September 30,
	September 30, 2017	2017			2016
Our Share of Net (Loss) Income:
Pennsylvania Real Estate Investment Trust ("PREIT")⁽¹⁾	8.0%	$	(49,748	)	$	52
Alexander's	32.4%	7,845			8,785
Urban Edge Properties ("UE")⁽²⁾	4.5%	6,008			2,158
Partially owned office buildings/land ⁽³⁾	Various	(5,551		)	(8,642		)
Other investments⁽⁴⁾	Various	(355		)	1,458
		$	(41,801	)	$	3,811



(Amounts in thousands)	New York
Net income attributable to the Operating Partnership for the three months ended June 30, 2017	$	96,180
Interest and debt expense	78,202
Depreciation and amortization	110,449
Income tax expense	(869		)
EBITDA for the three months ended June 30, 2017	$	283,962