Page Number Overview 32 Overview - Leasing Activity 36 Critical Accounting Policies 38
Net Operating Income At Share by Segment for the Years Ended
40 Results of Operations for the Year EndedDecember 31, 2020 Compared toDecember 31, 2019 44 Related Party Transactions 50 Liquidity and Capital Resources 50 Financing Activities and Contractual Obligations 50 Certain Future Cash Requirements 51
Cash Flows for the Year Ended
55 Capital Expenditures for the Year EndedDecember 31, 2020 56 Capital Expenditures for the Year EndedDecember 31, 2019 56
Funds From Operations for the Years Ended
57 31
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Introduction
The following discussion should be read in conjunction with the financial statements and related notes included under Part II, Item 8 of this Annual Report on Form 10-K. Our Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") within this section is focused on the years endedDecember 31, 2020 and 2019, including year-to-year comparisons between these years. Our MD&A for the year endedDecember 31, 2018 , including year-to-year comparisons between 2019 and 2018, can be found in Part II, Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations in the Company's Annual Report on Form 10-K for the year endedDecember 31, 2019 . InMay 2020 , theSEC issued Final Rule Release No. 33-10786, which amends the financial statement requirements for acquisitions and dispositions of businesses, including real estate operations, and related pro forma financial information required under SEC Regulation S-X, Rule 3-05, 3-14 and 11-01. The final rule changed the income and investment tests within SEC Regulation S-X, Rule 1-02(w) used to calculate significance and also raises the significance threshold for reporting acquisitions and dispositions of real estate operations, and dispositions of a business from 10% to 20%. The revised income test will also apply to the evaluation of equity method investments for significance in accordance with SEC Regulation S-X, Rules 3-09, 4-08(g) and 10-01(b)(1). The final rule is applicable for fiscal years beginning afterDecember 31, 2020 , however early adoption is permitted. The Company adopted the provisions of the final rule in the fourth quarter of 2020. InNovember 2020 , theSEC issued Final Rule Release No. 33-10890, Management's Discussion and Analysis, Selected Financial Data, and Supplementary Financial Information. This rule, which became effective onFebruary 10, 2021 , amended certainSEC disclosure requirements in order to modernize, simplify and enhance certain financial disclosure requirements in Regulation S-K. Specifically, the amendments eliminate the requirement for Selected Financial Data, streamline the requirement to disclose Supplementary Financial Information, and amend Management's Discussion and Analysis "MD&A". The final rule is applicable for fiscal years beginning afterDecember 31, 2020 , however, early adoption on an Item-by-Item basis is permitted afterFebruary 10, 2021 . We early adopted the amendments to two items resulting in the elimination of Item 301, Selected Financial Data, and the omission of Regulation S-K Item 302(a), Supplementary Financial Information. The amendments to Item 303 MD&A, will be adopted in our Form 10-K for the year endedDecember 31, 2021 . OverviewVornado Realty Trust ("Vornado") is a fullyintegrated 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. , aDelaware limited partnership (the "Operating Partnership"). Accordingly, Vornado's cash flow and ability to pay dividends to its shareholders are dependent upon the cash flow of theOperating Partnership and the ability of its direct and indirect subsidiaries to first satisfy their obligations to creditors. Vornado is the sole general partner of, and owned approximately 92.8% of the common limited partnership interest in theOperating Partnership as ofDecember 31, 2020 . All references to the "Company," "we," "us" and "our" mean collectively Vornado, theOperating Partnership and those subsidiaries consolidated by Vornado. We own and operate office and retail properties with a concentration in theNew York City metropolitan area. In addition, we have a 32.4% interest in Alexander's, Inc. ("Alexander's") (NYSE: ALX), which owns seven properties in the greaterNew York metropolitan area, as well as interests in other real estate and investments. Our business objective is to maximize Vornado shareholder value, which we measure by the total return provided to our shareholders. Below is a table comparing Vornado's performance to the FTSE NAREIT Office Index ("Office REIT") and the MSCI US REIT Index ("MSCI") for the following periods endedDecember 31, 2020 : Total Return(1) Vornado Office REIT MSCI Three-month 12.7 % 16.9 % 11.5 % One-year (40.5 %) (18.4 %) (7.6 %) Three-year (43.7 %) (8.4 %) 11.0 % Five-year (42.3 %) 9.2 % 26.7 % Ten-year (9.6 %) 64.8 % 122.0 %
____________________
(1)Past performance is not necessarily indicative of future performance. We intend to achieve this objective by continuing to pursue our investment philosophy and to execute our operating strategies through: •maintaining a superior team of operating and investment professionals and an entrepreneurial spirit; •investing in properties in select markets, such asNew York City , where we believe there is a high likelihood of capital appreciation; •acquiring quality properties at a discount to replacement cost and where there is a significant potential for higher rents; •developing and redeveloping properties to increase returns and maximize value; and •investing in operating companies that have a significant real estate component. 32 -------------------------------------------------------------------------------- Overview - continued We expect to finance our growth, acquisitions and investments using internally generated funds and proceeds from asset sales and by accessing the public and private capital markets. We may also offer Vornado common or preferred shares orOperating Partnership units in exchange for property and may repurchase or otherwise reacquire these securities in the future. We compete with a large number of real estate investors, property owners and developers, some of which may be willing to accept lower returns on their investments. Principal factors of competition are rents charged, sales prices, attractiveness of location, the quality of the property and the breadth and the quality of services provided. Our success depends upon, among other factors, trends of the global, national, regional and local economies, the financial condition and operating results of current and prospective tenants and customers, availability and cost of capital, construction and renovation costs, taxes, governmental regulations, legislation, population and employment trends. See "Risk Factors" in Item 1A for additional information regarding these factors. Our business has been adversely affected as a result of the COVID-19 pandemic and the preventive measures taken to curb the spread of the virus. Some of the effects on us include the following: •With the exception of grocery stores and other "essential" businesses, many of our retail tenants closed their stores inMarch 2020 and began reopening whenNew York City entered phase two of its reopening plan onJune 22, 2020 , however, there continue to be limitations on occupancy and other restrictions that affect their ability to resume full operations. •While our buildings remain open, many of our office tenants are working remotely. •We have closed theHotel Pennsylvania . In connection with the closure, we accrued$9,246,000 of severance for furloughedHotel Pennsylvania union employees and recognized a corresponding$3,145,000 income tax benefit for the year endedDecember 31, 2020 . •We cancelled trade shows at theMART from late March through the remainder of 2020 and expect to resume in 2021. •Because certain of our development projects were deemed "non-essential," they were temporarily paused inMarch 2020 due toNew York State executive orders and resumed onceNew York City entered phase one of its state mandated reopening plan onJune 8, 2020 . •As ofApril 30, 2020 , we placed 1,803 employees on furlough, which included 1,293 employees ofBuilding Maintenance Services LLC ("BMS"), 414 employees at theHotel Pennsylvania and 96 corporate staff employees. As ofFebruary 10, 2021 , 50% of furloughed employees have returned to work. The remaining employees still on furlough are from BMS and theHotel Pennsylvania . •EffectiveApril 1, 2020 , our executive officers waived portions of their annual base salary for the remainder of 2020. •EffectiveApril 1, 2020 , each non-management member of ourBoard of Trustees agreed to forgo their$75,000 annual cash retainer for the remainder of 2020. While we believe our tenants are required to pay rent under their leases and we have commenced legal proceedings against certain tenants that have failed to pay rent under their leases, in limited circumstances, we have agreed to and may continue to agree to rent deferrals and rent abatements for certain of our tenants. We have made a policy election in accordance with theFinancial Accounting Standards Board ("FASB") Staff Q&A which provides relief in accounting for leases during the COVID-19 pandemic, allowing us to continue recognizing rental revenue on a straight-line basis for rent deferrals, with no impact to revenue recognition, and to recognize rent abatements as a reduction to rental revenue in the period granted. For the quarter endedDecember 31, 2020 , we collected 95% (97% including rent deferrals) of rent due from our tenants, comprised of 97% (99% including rent deferrals) from our office tenants and 88% (89% including rent deferrals) from our retail tenants. Rent deferrals generally require repayment in monthly installments over a period not to exceed twelve months. Based on our assessment of the probability of rent collection of our lease receivables, we have written off$51,571,000 of receivables arising from the straight-lining of rents for the year endedDecember 31, 2020 , including the JCPenney retail lease atManhattan Mall and theNew York & Company, Inc. office lease at330 West 34th Street . Both tenants have filed for Chapter 11 bankruptcy and rejected their leases during 2020. In addition, we have written off$22,546,000 of tenant receivables deemed uncollectible for the year endedDecember 31, 2020 . These write-offs resulted in a reduction of lease revenues and our share of income from partially owned entities. Prospectively, revenue recognition for lease receivables deemed uncollectible will be based on actual amounts received. In light of the evolving health, social, economic, and business environment, governmental regulation or mandates, and business disruptions that have occurred and may continue to occur, the impact of the COVID-19 pandemic on our financial condition and operating results remains highly uncertain but has been and may continue to be material. The impact on us includes lower rental income and potentially lower occupancy levels at our properties which will result in less cash flow available for operating costs, to pay our indebtedness and for distribution to our shareholders. During 2020, we experienced a decrease in cash flow from operations due to the COVID-19 pandemic, including reduced collections of rents billed to certain of our tenants, the closure ofHotel Pennsylvania , the cancellation of trade shows at theMART, and lower revenues from BMS and signage. In addition, we recognized$409,060,000 of non-cash impairment losses, net of noncontrolling interests, related to our investment inFifth Avenue and Times Square JV which are included in "(loss) income from partially owned entities" and$236,286,000 of non-cash impairment losses primarily on wholly owned retail assets which are included in "impairment losses and transaction related costs, net" on our consolidated statements of income for the year endedDecember 31, 2020 . The value of our real estate assets may continue to decline, which may result in additional non-cash impairment charges in future periods and that impact could be material. 33 -------------------------------------------------------------------------------- Overview - continued Year EndedDecember 31, 2020 Financial Results Summary Net loss attributable to common shareholders for the year endedDecember 31, 2020 was$348,744,000 , or$1.83 per diluted share, compared to net income attributable to common shareholders of$3,097,806,000 , or$16.21 per diluted share, for the year endedDecember 31, 2019 . The years endedDecember 31, 2020 and 2019 include certain items that impact net (loss) income attributable to common shareholders, which are listed in the table below. The aggregate of these items, net of amounts attributable to noncontrolling interests, increased net loss attributable to common shareholders by$341,837,000 , or$1.79 per diluted share, for the year endedDecember 31, 2020 and increased net income attributable to common shareholders by$2,921,090,000 , or$15.29 per diluted share, for the year endedDecember 31, 2019 . Funds from operations ("FFO") attributable to common shareholders plus assumed conversions for the year endedDecember 31, 2020 was$750,522,000 , or$3.93 per diluted share, compared to$1,003,398,000 , or$5.25 per diluted share, for the year endedDecember 31, 2019 . The years endedDecember 31, 2020 and 2019 include certain items that impact FFO, which are listed in the table on the following page. The aggregate of these items, net of amounts attributable to noncontrolling interests, increased FFO by$267,478,000 , or$1.40 per diluted share, for the year endedDecember 31, 2020 and$337,191,000 , or$1.76 per diluted share, for the year endedDecember 31, 2019 . The following table reconciles the difference between our net (loss) income attributable to common shareholders and our net (loss) income attributable to common shareholders, as adjusted: (Amounts in thousands) For
the Year Ended
2020 2019
Certain expense (income) items that impact net (loss) income
attributable to common shareholders:
Non-cash impairment loss on our investment in
$
409,060 $ -
After-tax net gain on sale of
(332,099) (502,565)
Real estate impairment losses (primarily wholly owned retail assets in 2020)
236,286 8,065
(70,260) 101,092 Our share of loss from real estate fund investments 63,114 48,808 Severance and other reduction-in-force related expenses 23,368 -
Credit losses on loans receivable resulting from a new GAAP
accounting standard effective
13,369 - Transaction related costs 7,150 4,613
Severance accrual related to
6,101 -
Mark-to-market decrease in Pennsylvania Real Estate Investment
Trust ("PREIT") common shares (accounted for as a marketable
security from
4,938 21,649
Net gain on transfer to
- (2,559,154)
Net gains on sale of real estate (primarily our 25% interest in
- (178,769)
Net gain from sale of Urban Edge Properties ("UE") common shares
(sold on
- (62,395)
Prepayment penalty in connection with redemption of
- 22,540
Mark-to-market increase in Lexington Realty Trust ("Lexington")
common shares (sold on
- (16,068) Other 5,436 (7,505) 366,463 (3,119,689) Noncontrolling interests' share of above adjustments (24,626) 198,599
Total of certain expense (income) items that impact net (loss) income attributable to common shareholders
$ 341,837 $ (2,921,090) 34
-------------------------------------------------------------------------------- Overview - continued The following table reconciles the difference between our FFO attributable to common shareholders plus assumed conversions and our FFO attributable to common shareholders plus assumed conversions, as adjusted: (Amounts in thousands) For
the Year Ended
2020 2019 Certain (income) expense items that impact FFO attributable to common shareholders plus assumed conversions: After-tax net gain on sale of 220 CPS condominium units$ (332,099) $ (502,565) 608 Fifth Avenue lease liability extinguishment gain in 2020 and impairment loss and related write-offs in 2019 (70,260) 77,156 Our share of loss from real estate fund investments 63,114 48,808 Severance and other reduction-in-force related expenses 23,368 -
Credit losses on loans receivable resulting from a new GAAP
accounting standard effective
13,369 - Transaction related costs 7,150 4,613
Severance accrual related to
6,101 -
Prepayment penalty in connection with redemption of
- 22,540 Other 2,510 (10,732) (286,747) (360,180) Noncontrolling interests' share of above adjustments 19,269 22,989
Total of certain (income) expense items that impact FFO attributable to common shareholders plus assumed conversions, net
$
(267,478)
Same Store Net Operating Income ("NOI") At Share The percentage (decrease) increase in same store NOI at share and same store NOI at share - cash basis of ourNew York segment, theMART and555 California Street are summarized below. Year Ended December 31, 2020 compared to 555 December 31, 2019: Total New York theMART California Street Same store NOI at share % (decrease) increase (13.8) % (12.7) % (32.5) % 0.6 % Same store NOI at share - cash basis % (decrease) increase (8.3) % (6.3) % (29.5) % 0.9 % Calculations of same store NOI at share, reconciliations of our net income to NOI at share, NOI at share - cash basis and FFO and the reasons we consider these non-GAAP financial measures useful are provided in the following pages of Management's Discussion and Analysis of Financial Condition and Results of Operations. 220 CPS During the year endedDecember 31, 2020 , we closed on the sale of 35 condominium units at 220 CPS for net proceeds of$1,049,360,000 resulting in a financial statement net gain of$381,320,000 which is included in "net gains on disposition of wholly owned and partially owned assets" on our consolidated statements of income in Part II, Item 8 of this Annual Report on Form 10-K. In connection with these sales,$49,221,000 of income tax expense was recognized on our consolidated statements of income in Part II, Item 8 of this Annual Report on Form 10-K. From inception toDecember 31, 2020 , we have closed on the sale of 100 units for net proceeds of$2,869,492,000 resulting in financial statement net gains of$1,066,937,000 . Dispositions OnJanuary 23, 2020 , we sold all of our 6,250,000 common shares of PREIT, realizing net proceeds of$28,375,000 . We recorded a$4,938,000 loss (mark-to-market decrease) for the year endedDecember 31, 2020 . Financings Unsecured Term Loan OnFebruary 28, 2020 , we increased our unsecured term loan balance to$800,000,000 (from$750,000,000 ) by exercising an accordion feature. Pursuant to an existing swap agreement,$750,000,000 of the loan bears interest at a fixed rate of 3.87% throughOctober 2023 , and the balance of$50,000,000 floats at a rate of LIBOR plus 1.00% (1.15% as ofDecember 31, 2020 ). The entire$800,000,000 will float thereafter for the duration of the loan throughFebruary 2024 . Other Financings OnAugust 12, 2020 , we amended the$700,000,000 mortgage loan on770 Broadway , a 1.2 million square footManhattan office building, to extend the term one year throughMarch 2022 . 35 -------------------------------------------------------------------------------- Overview - continued Financings - continued Other Financings - continued OnSeptember 14, 2020 , Alexander's, Inc. (NYSE: ALX) ("Alexander's"), in which we have a 32.4% ownership interest, amended and extended the$350,000,000 mortgage loan on the retail condominium of731 Lexington Avenue . Under the terms of the amendment, Alexander's paid down the loan by$50,000,000 to$300,000,000 , extended the maturity date toAugust 2025 and guaranteed the interest payments and certain leasing costs. The principal of the loan is non-recourse to Alexander's. The interest-only loan is at LIBOR plus 1.40% (1.55% as ofDecember 31, 2020 ) which has been swapped to a fixed rate of 1.72%. OnOctober 15, 2020 , we completed a$500,000,000 refinancing of PENN11, a 1.2 million square footManhattan office building. The interest-only loan carries a rate of LIBOR plus 2.75% (2.90% as ofDecember 31, 2020 ) and matures inOctober 2023 , with two one-year extension options. The loan replaces the previous$450,000,000 loan that bore interest at a fixed rate of 3.95% and was scheduled to mature inDecember 2020 . OnOctober 23, 2020 , Alexander's completed a$94,000,000 financing of The Alexander, a 312-unit residential building that is part ofAlexander's residential and retail complex located inRego Park ,Queens, New York . The interest-only loan has a fixed rate of 2.63% and matures inNovember 2027 . OnNovember 2, 2020 , we repaid the$52,476,000 mortgage loan on our land under a portion of theBorgata Hotel and Casino complex. The 10-year fixed rate amortizing loan bore interest at 5.14% and was scheduled to mature inFebruary 2021 . Preferred Securities On November 24, 2020, Vornado sold 12,000,000 5.25% Series N cumulative redeemable preferred shares at a price of$25.00 per share, pursuant to an effective registration statement. Vornado received aggregate net proceeds of$291,182,000 , after underwriters' discount and issuance costs and contributed the net proceeds to the Operating Partnership in exchange for 12,000,000 5.25% Series N preferred units (with economic terms that mirror those of the Series N preferred shares). Dividends on the Series N preferred shares/units are cumulative and payable quarterly in arrears. The Series N preferred shares/units are not convertible into, or exchangeable for, any of our properties or securities. On or after five years from the date of issuance (or sooner under limited circumstances), Vornado may redeem the Series N preferred shares/units at a redemption price of$25.00 per share, plus accrued and unpaid dividends through the date of redemption. The Series N preferred shares/units have no maturity date and will remain outstanding indefinitely unless redeemed by Vornado. Leasing Activity For The Year EndedDecember 31, 2020 The leasing activity and related statistics in the tables 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 inthe 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. •2,231,000 square feet ofNew York Office space (1,853,000 square feet at share) at an initial rent of$89.33 per square foot and a weighted average lease term of 14.4 years. Includes 730,000 square feet (694,000 at our share) for the new Facebook lease at Farley Office and 633,000 square feet (348,000 at our share) for theNew York University long-term renewal atOne Park Avenue . The initial rent of$89.33 excludes the rent on 174,000 square feet (all at share) as the starting rent for this space will be determined later in 2021 based on fair market value. The changes in the GAAP and cash mark-to-market rent on the 899,000 square feet of second generation space were positive 11.0% and 4.6%, respectively. Tenant improvements and leasing commissions were$8.75 per square foot per annum, or 9.8% of initial rent. •238,000 square feet of New York Retail space (184,000 square feet at share) at an initial rent of$136.29 per square foot and a weighted average lease term of 4.0 years. The changes in the GAAP and cash mark-to-market rent on the 159,000 square feet of second generation space were positive 1.3% and negative 5.9%, respectively. Tenant improvements and leasing commissions were$16.80 per square foot per annum, or 12.3% of initial rent. •379,000 square feet at theMART (all at share) at an initial rent of$49.74 per square foot and a weighted average lease term of 8.5 years. The changes in the GAAP and cash mark-to-market rent on the 374,000 square feet of second generation space were positive 1.5% and negative 1.9%, respectively. Tenant improvements and leasing commissions were$3.89 per square foot per annum, or 7.8% of initial rent. •371,000 square feet at555 California Street (260,000 square feet at share) at an initial rent of$108.92 per square foot and a weighted average lease term of 8.0 years. The initial rent of$108.92 excludes the rent on a ten-year renewal option for 247,000 square feet (173,000 square feet at share) as the starting rent for this space will be determined in 2024 based on fair market value. The changes in the GAAP and cash mark-to-market rent on the 87,000 square feet of second generation space were positive 54.7% and 39.7%, respectively. Tenant improvements and leasing commissions were$6.94 per square foot per annum, or 6.4% of initial rent, excluding the ten-year renewal option for 247,000 square feet (173,000 square feet at share). 36 --------------------------------------------------------------------------------
Overview - continued
Square footage (in service) and Occupancy as of
Square Feet (in service)
Number of Total Our properties Portfolio Share Occupancy %New York : Office 33 18,361 15,413 93.4 % Retail (includes retail properties that are in the base of our office properties) 65 2,275 1,805 78.8 % Residential - 1,677 units 9 1,526 793 83.9 % Alexander's, including 312 residential units 7 2,366 766 96.7 %Hotel Pennsylvania (closed since April 1, 2020) 1 - - 24,528 18,777 92.1 % Other: theMART 4 3,692 3,683 89.5 % 555 California Street 3 1,741 1,218 98.4 % Other 11 2,489 1,154 92.8 % 7,922 6,055 Total square feet at December 31, 2020 32,450 24,832
Square footage (in service) and Occupancy as of
Square Feet (in service)
Number of Total Our properties Portfolio Share Occupancy %New York : Office 35 19,070 16,195 96.9 % Retail (includes retail properties that are in the base of our office properties) 70 2,300 1,842 94.5 % Residential - 1,679 units 9 1,526 793 97.0 % Alexander's, including 312 residential units 7 2,230 723 96.5 % Hotel Pennsylvania 1 1,400 1,400 26,526 20,953 96.7 % Other: theMART 4 3,826 3,817 94.6 % 555 California Street 3 1,741 1,218 99.8 % Other 11 2,533 1,198 92.7 % 8,100 6,233 Total square feet at December 31, 2019 34,626 27,186 37
-------------------------------------------------------------------------------- Critical Accounting Policies In preparing the consolidated financial statements we have made estimates and assumptions that affect the reported amounts of 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. We consider an accounting estimate to be critical if changes in the estimate could have a material impact on our consolidated results of operations or financial condition. Set forth below is a summary of the accounting policies that we believe are critical to the preparation of our consolidated financial statements. The summary should be read in conjunction with the more complete discussion of our accounting policies included in Note 3 - Basis of Presentation and Significant Accounting Policies to our consolidated financial statements in this Annual Report on Form 10-K. Real Estate Upon the acquisition of real estate, we assess the fair value of acquired assets (including land, buildings and improvements, identified intangibles, such as acquired above and below-market leases, acquired in-place leases and tenant relationships) and acquired liabilities and we allocate the purchase price based on these assessments which are on a relative fair value basis. We assess fair value based on estimated cash flow projections that utilize appropriate discount and capitalization rates and available market information. Estimates of future cash flows are based on a number of factors including historical operating results, known trends, and market/economic conditions, and could differ materially from actual results. Our properties, including any related right-of-use assets and intangible assets, are individually reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment exists when the carrying amount of an asset exceeds the aggregate projected future cash flows over the anticipated holding period on an undiscounted basis. An impairment loss is measured based on the excess of the property's carrying amount over its estimated fair value. Impairment analyses are based on our current plans, intended holding periods and available market information at the time the analyses are prepared. If our estimates of the future cash flows, anticipated holding periods, or market conditions change, our evaluation of impairment losses may be different and such differences could be material to our consolidated financial statements. Estimates of future cash flows are subjective and are based, in part, on assumptions regarding future occupancy, rental rates, capital requirements, capitalization rates and discount rates that could differ materially from actual results. Partially Owned Entities We consolidate entities in which we have a controlling financial interest. In determining whether we have a controlling financial interest in a partially owned entity and the requirement to consolidate the accounts of that entity, we consider (i) whether the entity is a variable interest entity ("VIE") in which we are the primary beneficiary or (ii) whether the entity is a voting interest entity in which we have a majority of the voting interests of the entity. We are deemed to be the primary beneficiary of a VIE when we have (i) the power to direct the activities of the VIE that most significantly impact the VIE's economic performance and (ii) the obligation to absorb losses or receive benefits that could potentially be significant to the VIE. Management uses its judgement when determining if we are the primary beneficiary of a VIE. We generally do not control a partially owned entity if the approval of all of the partners/members is contractually required with respect to decisions that most significantly impact the performance of the partially owned entity. This includes decisions regarding operating/capital budgets, and the placement of new or additional financing secured by the assets of the venture, among others. We account for investments under the equity method when the requirements for consolidation are not met, and we have significant influence over the operations of the investee. Investments in unconsolidated partially owned entities are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recorded when there is a decline in the fair value below the carrying value and we conclude such decline is other-than-temporary. An impairment loss is measured based on the excess of the carrying amount of an investment over its estimated fair value. Impairment analyses are based on current plans, intended holding periods, ability to hold, and available information at the time the analyses are prepared. The ultimate realization of our investments in partially owned entities is dependent on a number of factors, including the performance of each investment and market conditions. If our estimates of the projected future cash flows, the nature of development activities for properties for which such activities are planned and the estimated fair value of the investment change based on market conditions or otherwise, our evaluation of impairment losses may be different and such differences could be material to our consolidated financial statements. Estimates of future cash flows is subjective and is based, in part, on assumptions regarding future occupancy, rental rates, capital requirements, capitalization rates and discount rates that could differ materially from actual results. 38 -------------------------------------------------------------------------------- Critical Accounting Policies - continued Revenue Recognition We have the following revenue sources and revenue recognition policies: •Rental revenues include revenues from the leasing of space at our properties to tenants, lease termination income, revenues from theHotel Pennsylvania , trade shows and tenant services. •Revenues from the leasing of space at our properties to tenants includes (i) lease components, including fixed and variable lease payments, and nonlease components which include reimbursement of common area maintenance expenses, and (ii) reimbursement of real estate taxes and insurance expenses. As lessor, we have elected to combine the lease and nonlease components of our operating lease agreements and account for the components as a single lease component. •Revenues derived from fixed lease payments are recognized on a straight-line basis over the non-cancelable period of the lease, together with renewal options that are reasonably certain of being exercised. We commence rental revenue recognition when the underlying asset is available for use by the lessee. •Revenue derived from the reimbursement of real estate taxes, insurance expenses and common area maintenance expenses are generally recognized in the same period as the related expenses are incurred. •We have made a policy election in accordance with the FASB Staff Q&A allowing us to not account for COVID-19 related lease concessions as lease modifications. Accordingly, rent abatements are recognized as reductions to "rental revenues" during the period in which they were granted. Rent deferrals result in an increase to "tenant and other receivables" during the deferral period with no impact on revenue recognition. For any concessions that do not meet the guidance contained in the Q&A, the modification guidance in accordance with Accounting Standards Codification Topic 842, Leases will be applied. See Note 3 - Basis of Presentation and Significant Accounting Policies to the consolidated financial statements in Part II, Item 8 of this Annual Report on Form 10-K for additional information. •Lease termination income is recognized immediately if a tenant vacates or is recognized on a straight-line basis over the shortened remaining lease term. •Hotel revenue arising from the operation ofHotel Pennsylvania consists of room revenue, food and beverage revenue, and banquet revenue. Room revenue is recognized when the rooms are made available for the guest. •Trade shows revenue arising from the operation of trade shows is primarily booth rentals. This revenue is recognized upon the occurrence of the trade shows when the trade show booths are made available for use by the exhibitors. •Tenant services revenue arises from sub-metered electric, elevator, trash removal and other services provided to tenants at their request. This revenue is recognized as the services are transferred. •Fee and other income includes management, leasing and other revenue arising from contractual agreements with third parties or with partially owned entities and includes BMS cleaning, engineering and security services. This revenue is recognized as the services are transferred. We evaluate on an individual lease basis whether it is probable that we will collect substantially all amounts due from our tenants. We recognize changes in the collectability assessment of our operating leases as adjustments to rental revenue. Management exercises judgment in assessing collectability and considers payment history, current credit status and publicly available information about the financial condition of the tenant, including the impact of COVID-19 on tenants' businesses, among other factors. Tenant receivables, including receivables arising from the straight-lining of rents, are written off when management deems that the collectability of substantially all future lease payments from a specific lease is not probable of collection, at which point, the Company will limit future rental revenues to cash received. Income Taxes Vornado operates in a manner intended to enable it to continue to qualify as a REIT under Sections 856860 of the Internal Revenue Code of 1986, as amended. Under those sections, a REIT which distributes at least 90% of its REIT taxable income as a dividend to its shareholders each year and which meets certain other conditions will not be taxed on that portion of its taxable income which is distributed to its shareholders. Vornado distributes to its shareholders 100% of its REIT taxable income and therefore, no provision for Federal income taxes is required. If Vornado fails to distribute the required amount of income to its shareholders, or fails to meet other REIT requirements, it may fail to qualify as a REIT which may result in substantial adverse tax consequences. Recent Accounting Pronouncements See Note 3 - Basis of Presentation and Significant Accounting Policies to our consolidated financial statements in this Annual Report on Form 10-K for a discussion concerning recent accounting pronouncements. 39 -------------------------------------------------------------------------------- NOI At Share by Segment for the Years EndedDecember 31, 2020 and 2019 NOI at share represents total revenues less operating expenses including our share of partially owned entities. NOI at share - cash basis represents NOI at share adjusted to exclude straight-line rental income and expense, amortization of acquired below and above market leases, net and other non-cash adjustments. We consider NOI at share - cash basis 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 at share - cash basis, we utilize this measure to make investment decisions as well as to compare the performance of our assets to that of our peers. NOI at share and NOI at share - cash basis should not be considered alternatives to net income or cash flow from operations and may not be comparable to similarly titled measures employed by other companies. NOI at share - cash basis includes rent that has been deferred as a result of the COVID-19 pandemic. Rent deferrals generally require repayment in monthly installments over a period of time not to exceed twelve months. Below is a summary of NOI at share and NOI at share - cash basis by segment for the years endedDecember 31, 2020 and 2019. (Amounts in thousands) For the
Year Ended
Total New York Other Total revenues$ 1,527,951 $ 1,221,748 $ 306,203 Operating expenses (789,066) (640,531) (148,535) NOI - consolidated 738,885 581,217 157,668
Deduct: NOI attributable to noncontrolling interests in consolidated subsidiaries
(72,801) (43,773) (29,028) Add: NOI from partially owned entities 306,495 296,447 10,048 NOI at share 972,579 833,891 138,688 Non-cash adjustments for straight-line rents, amortization of acquired below-market leases, net and other 46,246 36,715 9,531 NOI at share - cash basis$ 1,018,825 $ 870,606 $ 148,219 (Amounts in thousands) For the
Year Ended
Total New York(1) Other Total revenues$ 1,924,700 $ 1,577,860 $ 346,840 Operating expenses (917,981) (758,304) (159,677) NOI - consolidated 1,006,719 819,556 187,163
Deduct: NOI attributable to noncontrolling interests in consolidated subsidiaries
(69,332) (40,896) (28,436) Add: NOI from partially owned entities 322,390 294,168 28,222 NOI at share 1,259,777 1,072,828 186,949 Non-cash adjustments for straight-line rents, amortization of acquired below-market leases, net and other (6,060) (12,318) 6,258 NOI at share - cash basis$ 1,253,717 $ 1,060,510 $ 193,207
________________________________________
(1)Reflects the transfer of 45.4% of common equity in the properties contributed
to the
40 -------------------------------------------------------------------------------- NOI At Share by Segment for the Years EndedDecember 31, 2020 and 2019 - continued The elements of ourNew York and Other NOI at share for the years endedDecember 31, 2020 and 2019 are summarized below. (Amounts in thousands) For the Year Ended December 31, 2020 2019 New York: Office(1)(2)$ 672,495 $ 724,526 Retail(1)(3) 147,299 273,217 Residential 20,687 23,363 Alexander's(4) 35,912 44,325 Hotel Pennsylvania(5) (42,502) 7,397 Total New York 833,891 1,072,828 Other: theMART(6) 69,178 102,071 555 California Street 60,324 59,657 Other investments(7) 9,186 25,221 Total Other 138,688 186,949 NOI at share$ 972,579 $ 1,259,777
________________________________________
(1)Reflects the transfer of 45.4% of common equity in the properties contributed to theFifth Avenue and Times Square JV onApril 18, 2019 . (2)2020 includes$18,173 of non-cash write-offs of receivables arising from the straight-lining of rents, including theNew York & Company, Inc. lease at330 West 34th Street , and$6,702 of write-offs of tenant receivables deemed uncollectible. (3)2020 includes$25,876 of non-cash write-offs of receivables arising from the straight-lining of rents, including the JCPenney lease atManhattan Mall , and$12,017 of write-offs of tenant receivables deemed uncollectible. 2019 includes$14,010 of non-cash write-offs of receivables arising from the straight-lining of rents. (4)2020 includes$3,511 of non-cash write-offs of receivables arising from the straight-lining of rents and$1,335 of write-offs of tenant receivables deemed uncollectible. (5)The decrease in NOI at share is primarily due to the effects of the COVID-19 pandemic.The Hotel Pennsylvania has been closed sinceApril 1, 2020 as a result of the pandemic. 2020 includes a$9,246 severance accrual for furloughed union employees. (6)The decrease in NOI at share is primarily due to the effects of the COVID-19 pandemic, causing trade shows to be cancelled from lateMarch 2020 through the remainder of the year. Additionally, 2020 includes$2,722 of non-cash write-offs of receivables arising from the straight-lining of rents and$1,742 of write-offs of tenant receivables deemed uncollectible. (7)2019 includes our share of PREIT (accounted for as a marketable security fromMarch 12, 2019 and sold onJanuary 23, 2020 ) and UE (sold onMarch 4, 2019 ). 41 -------------------------------------------------------------------------------- NOI At Share by Segment for the Years EndedDecember 31, 2020 and 2019 - continued The elements of ourNew York and Other NOI at share - cash basis for the years endedDecember 31, 2020 and 2019 are summarized below. (Amounts in thousands) For the Year Ended December 31, 2020 2019 New York: Office(1)(2) $ 691,755$ 718,734 Retail(1)(3) 158,686 267,655 Residential 19,369 21,894 Alexander's(4) 42,737 45,093 Hotel Pennsylvania(5) (41,941) 7,134 Total New York 870,606 1,060,510 Other: theMART(6) 76,251 108,130 555 California Street 60,917 60,156 Other investments(7) 11,051 24,921 Total Other 148,219 193,207 NOI at share - cash basis$ 1,018,825 $
1,253,717
________________________________________
(1)Reflects the transfer of 45.4% of common equity in the properties contributed to theFifth Avenue and Times Square JV onApril 18, 2019 . (2)2020 includes$6,702 of write-offs of tenant receivables deemed uncollectible. (3)2020 includes$12,017 of write-offs of tenant receivables deemed uncollectible. (4)2020 includes$1,335 of write-offs of tenant receivables deemed uncollectible. (5)The decrease in NOI at share - cash basis is primarily due to the effects of the COVID-19 pandemic.The Hotel Pennsylvania has been closed sinceApril 1, 2020 as a result of the pandemic. 2020 includes a$9,246 severance accrual for furloughed union employees. (6)The decrease in NOI at share - cash basis is primarily due to the effects of the COVID-19 pandemic, causing trade shows to be cancelled from lateMarch 2020 through the remainder of the year. Additionally, 2020 includes$1,742 of write-offs of tenant receivables deemed uncollectible. (7)2019 includes our share of PREIT (accounted for as a marketable security fromMarch 12, 2019 and sold onJanuary 23, 2020 ) and UE (sold onMarch 4, 2019 ). 42 --------------------------------------------------------------------------------
Reconciliation of Net (Loss) Income to NOI At Share and NOI At Share - Cash
Basis for the Years Ended
For
the Year Ended
2020 2019 Net (loss) income$ (461,845) $ 3,334,262 Depreciation and amortization expense 399,695 419,107 General and administrative expense 181,509 169,920 Impairment losses and transaction related costs, net 174,027 106,538 Loss (income) from partially owned entities 329,112 (78,865) Loss from real estate fund investments 226,327 104,082 Interest and other investment loss (income), net 5,499 (21,819) Interest and debt expense 229,251 286,623 Net gain on transfer to Fifth Avenue and Times Square JV - (2,571,099)
Net gains on disposition of wholly owned and partially owned assets
(381,320) (845,499) Income tax expense 36,630 103,439 Loss from discontinued operations - 30 NOI from partially owned entities 306,495 322,390
NOI attributable to noncontrolling interests in consolidated subsidiaries
(72,801) (69,332) NOI at share 972,579 1,259,777
Non cash adjustments for straight-line rents, amortization of acquired below-market leases, net and other
46,246 (6,060) NOI at share - cash basis $
1,018,825
NOI At Share by Region For the Year Ended December 31, 2020 2019 Region: New York City metropolitan area 87 % 87 % Chicago, IL 7 % 8 % San Francisco, CA 6 % 5 % 100 % 100 % 43
-------------------------------------------------------------------------------- Results of Operations - Year EndedDecember 31, 2020 Compared toDecember 31, 2019 Revenues Our revenues were$1,527,951,000 for the year endedDecember 31, 2020 compared to$1,924,700,000 in the prior year, a decrease of$396,749,000 . Below are the details of the decrease by segment: (Amounts in thousands) (Decrease) increase due to: Total New York Other Rental revenues: Acquisitions, dispositions and other$ (5,085) $ (3,505) $ (1,580) Development and redevelopment (73,297) (73,299) 2 Hotel Pennsylvania(1) (84,287) (84,287) - Trade shows(2) (27,925) - (27,925) Properties transferred toFifth Avenue andTimes Square JV (100,554) (100,554) - Same store operations (98,439) (3) (79,845) (18,594) (389,587) (341,490) (48,097) Fee and other income: BMS cleaning fees (19,138) (21,246) (4) 2,108 Management and leasing fees 5,874 5,814 60 Properties transferred toFifth Avenue andTimes Square JV (388) (388) - Other income 6,490 1,198 5,292 (7,162) (14,622) 7,460 Total decrease in revenues$ (396,749) $ (356,112) $ (40,637)
________________________________________
See notes on the following page.
44 -------------------------------------------------------------------------------- Results of Operations - Year EndedDecember 31, 2020 Compared toDecember 31, 2019 - continued Expenses Our expenses were$1,550,740,000 for the year endedDecember 31, 2020 compared to$1,625,155,000 in the prior year, a decrease of$74,415,000 . Below are the details of the decrease by segment: (Amounts in thousands) (Decrease) increase due to: Total New York Other
Operating:
Acquisitions, dispositions and other
(35,478) (35,478) - Non-reimbursable expenses 1,327 1,408 (81) Hotel Pennsylvania(1) (34,399) (34,399) - Trade shows(2) (9,613) - (9,613) BMS expenses (12,016) (14,124) (4) 2,108 Properties transferred toFifth Avenue and Times Square JV (21,615) (21,615) - Same store operations (7,066) (4,779) (2,287) (128,915) (117,773) (11,142) Depreciation and amortization: Acquisitions, dispositions and other (3,735) (3,744) 9 Development and redevelopment (214) (214) - Properties transferred toFifth Avenue and Times Square JV (25,119) (25,119) - Same store operations 9,656 8,599 1,057 (19,412) (20,478) 1,066 General and administrative 11,589 (5) 4,231 7,358 Benefit from deferred compensation plan liability (5,166) - (5,166) Impairment Losses and transaction related (6) costs, net 67,489 65,077 2,412 Total decrease in expenses$ (74,415) $
(68,943)
____________________
(1)Closed sinceApril 1, 2020 as a result of the COVID-19 pandemic. Operating expense for 2020 includes a$9,246 severance accrual for furloughed union employees. (2)Cancelled trade shows at theMART from lateMarch 2020 through the remainder of the year as a result of the pandemic. (3)2020 includes$46,463 for the non-cash write-off of receivables arising from the straight-lining of rent, including the JCPenney retail lease atManhattan Mall and theNew York & Company, Inc. office lease at330 West 34th Street , and$16,741 for the write-off of tenant receivables deemed uncollectible. (4)Primarily due to a decrease in third party cleaning services provided to retail and office tenants as a result of the pandemic. (5)Primarily due to$22,132 severance and other reduction-in-force related expenses in 2020, partially offset by (i)$8,444 non-cash stock-based compensation expense for the accelerated vesting of previously issuedOperating Partnership units and Vornado restricted stock in 2019 due to the removal of the time-based vesting requirements for participants who have reached 65 years of age and (ii)$844 of lower non-cash stock-based compensation expense in 2020 for the time-based compensation granted in connection with the new leadership group announced inApril 2019 . (6)Primarily due to$236,286 of non-cash impairment losses primarily related to wholly owned street retail assets in 2020, partially offset by (i)$101,360 of non-cash impairment losses, substantially608 Fifth Avenue , recognized in the second quarter of 2019 and (ii)$70,260 of lease liability extinguishment gain related to608 Fifth Avenue recognized in the second quarter of 2020. 45 -------------------------------------------------------------------------------- Results of Operations - Year EndedDecember 31, 2020 Compared toDecember 31, 2019 - continued (Loss) Income from Partially Owned Entities Below are the components of (loss) income from partially owned entities for the years endedDecember 31, 2020 and 2019. (Amounts in thousands) Percentage Ownership at
For the Year Ended
December 31, 2020 2020 2019 Our share of net (loss) income:Fifth Avenue and Times Square JV(1): Non-cash impairment loss(2)$ (413,349) $ - Return on preferred equity, net of our share of the expense 37,357 27,586 Equity in net income(3) 51.5% 21,063 31,130 (354,929) 58,716 Alexander's(4) 32.4% 18,635 23,779 Partially owned office buildings(5) Various 12,742 (3,443) Other investments(6) Various (5,560) (187)$ (329,112) $ 78,865 ____________________ (1)Entered into onApril 18, 2019 . (2)See Note 7 - Investments in Partially Owned Entities to the consolidated financial statements in Part II, Item 8 of this Annual Report on Form 10-K for additional information. (3)2020 includes a$13,971 reduction in income related to a Forever 21 lease modification at1540 Broadway and$3,125 of write-offs of lease receivables deemed uncollectible during 2020. (4)2020 includes our$4,846 share of write-offs of lease receivables deemed uncollectible. (5)Includes interests in280 Park Avenue ,650 Madison Avenue ,One Park Avenue ,7 West 34th Street ,330 Madison Avenue (sold onJuly 11, 2019 ),512 West 22nd Street ,61 Ninth Avenue ,85 Tenth Avenue and others. (6)Includes interests inIndependence Plaza ,Rosslyn Plaza , UE (sold onMarch 4, 2019 ), PREIT (accounted for as a marketable security fromMarch 12, 2019 and sold onJanuary 23, 2020 ) and others. Loss from Real Estate Fund Investments Below are the components of the loss from our real estate fund investments for the years endedDecember 31, 2020 and 2019. (Amounts in thousands) For the
Year Ended
2020 2019 Net unrealized loss on held investments$ (226,107) $ (106,109) Net investment (loss) income (220) 2,027 Loss from real estate fund investments (226,327) (104,082)
Less loss attributable to noncontrolling interests in consolidated subsidiaries
163,213 55,274
Loss from real estate fund investments net of noncontrolling interests in consolidated subsidiaries
$
(63,114)
Interest andOther Investment (Loss) Income, net Below are the components of interest and other investment (loss) income, net for the years endedDecember 31, 2020 and 2019. (Amounts in thousands) For the
Year Ended
2020 2019 Credit losses on loans receivable(1) $ (13,369) $ - Interest on cash and cash equivalents and restricted cash 5,793 13,380 Decrease in fair value of marketable securities(2) (4,938) (5,533) Interest on loans receivable 3,384 6,326 Dividends on marketable securities - 3,938 Other, net 3,631 3,708 $ (5,499)$ 21,819 ____________________ (1)See Note 3 - Basis of Presentation and Significant Accounting Policies and Note 14 - Fair Value Measurements to our consolidated financial statements in Part II, Item 8 of this Annual Report on Form 10-K for additional information. (2)2020 includes a$4,938 mark-to-market decrease in the fair value of our PREIT common shares (sold onJanuary 23, 2020 ). 2019 includes (i) a$21,649 decrease in the fair value of our investment in PREIT, partially offset by (ii) a$16,068 mark-to market increase in the fair value of our Lexington common shares (sold onMarch 1, 2019 ). 46
-------------------------------------------------------------------------------- Results of Operations - Year EndedDecember 31, 2020 Compared toDecember 31, 2019 - continued Interest and Debt Expense Interest and debt expense was$229,251,000 for the year endedDecember 31, 2020 , compared to$286,623,000 in the prior year, a decrease of$57,372,000 . This decrease was primarily due to (i)$24,458,000 of lower interest expense resulting from lower average interest rates on our variable rate loans, (ii)$22,540,000 of expense in 2019 from debt prepayment costs relating to redemption of our$400,000,000 5.00% senior unsecured notes, (iii)$17,459,000 of lower interest expense resulting from the repayment of the mortgage payable of PENN2, (iv)$12,530,000 of lower interest expense resulting from the deconsolidation of mortgages payable of the properties contributed toFifth Avenue andTimes Square JV inApril 2019 , (v)$7,680,000 of lower interest expense resulting from the payoff of the 220 CPS loan, and (vi)$5,045,000 of lower interest expense from the redemption of the$400,000,000 5.00% senior unsecured notes in 2019, partially offset by$31,144,000 of lower capitalized interest and debt expense.Net Gain on Transfer toFifth Avenue and Times Square JV During 2019, we recognized a$2,571,099,000 net gain from the transfer of common equity in the properties contributed toFifth Avenue and Times Square JV, including the related step-up in our basis of the retained portion of the assets to fair value.Net Gains on Disposition of Wholly Owned and Partially Owned Assets Net gains on disposition of wholly owned and partially owned assets of$381,320,000 for the year endedDecember 31, 2020 consists of net gains on sale of 220 CPS condominium units. Net gains of$845,499,000 for the year endedDecember 31, 2019 primarily consist of (i)$604,393,000 of net gains on sale of 220 CPS condominium units, (ii)$159,292,000 net gain on sale of our 25% interest in330 Madison Avenue , (iii)$62,395,000 net gain from the sale of all of our UE partnership units, and (iv)$19,477,000 net gain on sale of3040 M Street . Income Tax Expense For the year endedDecember 31, 2020 , we had income tax expense of$36,630,000 , compared to$103,439,000 in the prior year, a decrease of$66,809,000 . This decrease was primarily due to lower income tax expense from the sale of 220 CPS condominium units. Net Loss Attributable to Noncontrolling Interests in Consolidated Subsidiaries Net loss attributable to noncontrolling interests in consolidated subsidiaries was$139,894,000 for the year endedDecember 31, 2020 , compared to$24,547,000 in the prior year, an increase of$115,347,000 . This increase resulted primarily from the higher allocation of net loss to the noncontrolling interests in our real estate fund investments and$4,289,000 allocated to noncontrolling interests for the non-cash impairment loss recognized on our investment inFifth Avenue and Times Square JV in 2020. Net (Loss) Income Attributable to Noncontrolling Interests in theOperating Partnership (Vornado Realty Trust ) Net loss attributable to noncontrolling interests in theOperating Partnership was$24,946,000 for the year endedDecember 31, 2020 , compared to net income of$210,872,000 in the prior year, a decrease in income of$235,818,000 . This decrease resulted primarily from lower net income subject to allocation to Class A unitholders. Preferred Share Dividends ofVornado Realty Trust Preferred share dividends were$51,739,000 for the year endedDecember 31, 2020 , compared to$50,131,000 in the prior year, an increase of$1,608,000 . Preferred Unit Distributions ofVornado Realty L.P. Preferred unit distributions were$51,904,000 for the year endedDecember 31, 2020 , compared to$50,296,000 in the prior year, an increase of$1,608,000 . 47 -------------------------------------------------------------------------------- Results of Operations - Year EndedDecember 31, 2020 Compared toDecember 31, 2019 - continued Same Store Net Operating Income At Share Same store NOI at share represents NOI at share from operations which are in service in both the current and prior year reporting periods. Same store NOI at share - cash basis is same store NOI at share adjusted to exclude straight-line rental income and expense, amortization of acquired below and above market leases, net and other non-cash adjustments. We present these non-GAAP measures to (i) facilitate meaningful comparisons of the operational performance of our properties and segments, (ii) make decisions on whether to buy, sell or refinance properties, and (iii) compare the performance of our properties and segments to those of our peers. Same store NOI at share and same store NOI at share - cash basis should not be considered alternatives to net income or cash flow from operations and may not be comparable to similarly titled measures employed by other companies. Below are reconciliations of NOI at share to same store NOI at share for ourNew York segment, theMART,555 California Street and other investments for the year endedDecember 31, 2020 compared toDecember 31, 2019 . (Amounts in thousands) 555 California Total New York theMART Street Other NOI at share for the year ended December 31, 2020$ 972,579 $ 833,891 $ 69,178 $ 60,324 $ 9,186 Less NOI at share from: Development properties (30,946) (30,946) - - -Hotel Pennsylvania (closed beginning April 1, 2020) 33,146 33,146 - - - Other non-same store (income) expense, net (27,898) (18,361) (524) 173 (9,186)
Same store NOI at share for the year ended
$ 946,881
NOI at share for the year ended
Less NOI at share from: Change in ownership interests in properties contributed toFifth Avenue andTimes Square JV (35,770) (35,770) - - - Dispositions (7,420) (7,420) - - - Development properties (68,063) (68,063) - - -Hotel Pennsylvania (closed beginning April 1, 2020) (13,212) (13,212) - - - Other non-same store (income) expense, net (36,827) (11,722) (354) 470 (25,221)
Same store NOI at share for the year ended
$ 1,098,485
(Decrease) increase in same store NOI at share for the
year ended
$ (151,604)
% (decrease) increase in same store NOI at share (13.8) % (12.7) % (32.5) % 0.6 % - % 48
-------------------------------------------------------------------------------- Results of Operations - Year EndedDecember 31, 2020 Compared toDecember 31, 2019 - continued Same Store Net Operating Income At Share - continued Below are reconciliations of NOI at share - cash basis to same store NOI at share - cash basis for ourNew York segment, theMART,555 California Street and other investments for the year endedDecember 31, 2020 compared toDecember 31, 2019 . (Amounts in thousands) 555 California Total New York theMART Street Other NOI at share - cash basis for the year ended December 31, 2020$ 1,018,825 $
870,606
Less NOI at share - cash basis from:
Development properties (42,531) (42,531) - - -
April 1, 2020) 32,576 32,576 - - -
Other non-same store (income) expense,
net (39,271) (27,672) (553) 5 (11,051) Same store NOI at share - cash basis for the year ended December 31, 2020$ 969,599 $
832,979
NOI at share - cash basis for the year ended December 31, 2019$ 1,253,717 $
1,060,510
Less NOI at share - cash basis from: Change in ownership interests in properties contributed toFifth Avenue and Times Square JV (32,905) (32,905) - - - Dispositions (8,219) (8,219) - - - Development properties (87,856) (87,856) - - -
April 1, 2020) (12,997) (12,997) - - -
Other non-same store (income) expense,
net (54,571) (29,207) (692) 249 (24,921) Same store NOI at share - cash basis for the year ended December 31, 2019$ 1,057,169 $
889,326
(Decrease) increase in same store NOI at share - cash basis for the year endedDecember 31, 2020 compared to December 31, 2019$ (87,570) $
(56,347)
% (decrease) increase in same store NOI at share - cash basis (8.3) % (6.3) % (29.5) % 0.9 % - % 49
-------------------------------------------------------------------------------- Related Party Transactions See Note 23 - Related Party Transactions to our consolidated financial statements in this Annual Report on Form 10-K for a discussion concerning related party transactions. Liquidity and Capital Resources Rental revenue is our primary source of cash flow and is dependent upon the occupancy and rental rates of our properties. Our cash requirements include property operating expenses, capital improvements, tenant improvements, debt service, leasing commissions, dividends to shareholders and distributions to unitholders of theOperating Partnership , as well as acquisition and development costs. During 2020, we have experienced a decrease in cash flow from operations due to the COVID-19 pandemic, including reduced collections of rents billed to certain of our tenants, the closure ofHotel Pennsylvania , the cancellation of trade shows at theMART through 2020, and lower revenues from BMS and signage. For the quarter endedDecember 31, 2020 , we collected 95% (97% including rent deferrals) of rent due from our tenants, comprised of 97% (99% including rent deferrals) from our office tenants and 88% (89% including rent deferrals) from our retail tenants. Rent deferrals generally require repayment in monthly installments over a period not to exceed twelve months. While we believe that our tenants are required to pay rent under their leases, we have implemented and will continue to consider rent deferrals on a case-by-case basis. Other sources of liquidity to fund cash requirements include proceeds from debt financings, including mortgage loans, senior unsecured borrowings, unsecured term loans and unsecured revolving credit facilities; proceeds from the issuance of common and preferred equity; and asset sales. As ofDecember 31, 2020 , we have$3.9 billion of liquidity comprised of$1.7 billion of cash and cash equivalents and restricted cash and$2.2 billion available on our$2.75 billion revolving credit facilities. The challenges posed by COVID-19 could adversely impact our cash flow from continuing operations but we anticipate that cash flow from continuing operations over the next twelve months together with cash balances on hand will be adequate to fund our business operations, cash distributions to unitholders of theOperating Partnership , cash dividends to shareholders, debt amortization and recurring capital expenditures. Capital requirements for development expenditures and acquisitions may require funding from borrowings, equity offerings and/or asset sales. Consequently, the Company will continue to evaluate its liquidity and financial position on an ongoing basis. 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. Dividends OnJanuary 20, 2021 , Vornado declared a quarterly common dividend of$0.53 per share (an indicated annual rate of$2.12 per common share). This dividend, if declared by theBoard of Trustees for all of 2021, would require Vornado to pay out approximately$406,000,000 of cash for common share dividends. In addition, during 2021, Vornado expects to pay approximately$66,000,000 of cash dividends on outstanding preferred shares and approximately$29,000,000 of cash distributions to unitholders of theOperating Partnership . Financing Activities and Contractual Obligations We have an effective shelf registration for the offering of our equity and debt securities that is not limited in amount due to our status as a "well-known seasoned issuer." We have issued senior unsecured notes from a shelf registration statement that contain financial covenants that restrict our ability to incur debt, and that require us to maintain a level of unencumbered assets based on the level of our secured debt. Our unsecured revolving credit facilities contain financial covenants that require us to maintain minimum interest 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 contain customary events of default that could give rise to accelerated repayment, including such items as failure to pay interest or principal. As ofDecember 31, 2020 , we are in compliance with all of the financial covenants required by our senior unsecured notes and our unsecured revolving credit facilities. 50 -------------------------------------------------------------------------------- Liquidity and Capital Resources - continued Financing Activities and Contractual Obligations - continued As ofDecember 31, 2020 , we had$1,624,482,000 of cash and cash equivalents and$2,161,451,000 of borrowing capacity under our unsecured revolving credit facilities, net of letters of credit of$13,549,000 . A summary of our consolidated debt as ofDecember 31, 2020 and 2019 is presented below. (Amounts in thousands) As of December 31, 2020 As of December 31, 2019 Weighted Weighted Average Average Consolidated debt: Balance Interest Rate Balance Interest Rate Variable rate$ 3,220,815
1.83%$ 1,643,500 3.09% Fixed rate 4,212,643 3.70% 5,801,516 3.57% Total 7,433,458 2.89% 7,445,016 3.46% Deferred financing costs, net and other (34,462) (38,407) Total, net$ 7,398,996 $ 7,406,609 Our consolidated outstanding debt, net of deferred financing costs and other, was$7,398,996,000 atDecember 31, 2020 , a$7,613,000 decrease from the balance atDecember 31, 2019 . During 2021 and 2022,$1,562,643,000 and$1,650,000,000 , respectively, of our outstanding debt matures; we may refinance this maturing debt as it comes due or choose to repay it using cash and cash equivalents or our unsecured revolving credit facilities. We may also refinance or prepay other outstanding debt depending on prevailing market conditions, liquidity requirements and other factors. The amounts involved in connection with these transactions could be material to our consolidated financial statements. Below is a schedule of our contractual obligations atDecember 31, 2020 . (Amounts in thousands) Contractual cash obligations(1) Less than (principal and interest(2)): Total 1 Year 1 - 3 Years 3 - 5 Years Thereafter Notes and mortgages payable$ 5,940,860 $ 2,737,058 $ 1,627,598 $ 1,160,108 $ 416,096 Operating leases 1,044,896 22,010 47,671 49,076 926,139 Purchase obligations, primarily construction commitments 609,600 609,600 - - - Senior unsecured notes due 2025 513,656 15,750 31,500 466,406 - Unsecured term loan 886,965 29,603 56,210 801,152 - Revolving credit facilities 588,179 5,923 582,256 - - Other obligations(3) 549,861 7,230 15,252 18,396 508,983
Total contractual cash obligations
____________________
(1)Excludes committed tenant-related obligations as timing and amounts of payments are uncertain and may only be due upon satisfactory performance of certain conditions. (2)Interest on variable rate debt is computed using rates in effect atDecember 31, 2020 . (3)Represents rent and fixed payments in lieu of real estate taxes due toEmpire State Development ("ESD"), an entity ofNew York State , for Farley Office and Retail. Details of 2020 financing activities are provided in the "Overview" of Management's Discussion and Analysis of Financial Condition and Results of Operations. Certain Future Cash Requirements Capital Expenditures The following table summarizes anticipated 2021 capital expenditures. (Amounts in millions, except per square foot 555 California data) Total New York theMART Street Expenditures to maintain assets$ 100.0 $ 84.0 $ 6.0 $ 10.0 Tenant improvements 82.0 65.0 12.0 5.0 Leasing commissions 30.5 25.0 3.0 2.5 Total recurring tenant improvements, leasing commissions and other capital expenditures$ 212.5 $ 174.0
Square feet budgeted to be leased (in thousands) 1,000 250 150 Weighted average lease term (years) 10.0 7.5 5.0 Tenant improvements and leasing commissions: Per square foot$ 90.00 $ 60.00 $ 50.00 Per square foot per annum 9.00 8.00 10.00
The table above excludes anticipated capital expenditures of each of our partially owned non-consolidated subsidiaries, as these entities fund their capital expenditures without additional equity contributions from us.
51 -------------------------------------------------------------------------------- Liquidity and Capital Resources - continued Development and Redevelopment Expenditures 220 CPS We are completing construction of a residential condominium tower containing 397,000 salable square feet at 220 CPS. The development cost of this project (exclusive of land cost) is estimated to be approximately$1.480 billion , of which$1.455 billion has been expended as ofDecember 31, 2020 .Penn District Farley Our 95% joint venture (5% is owned by the Related Companies ("Related")) is developing Farley Office and Retail, which will include approximately 844,000 rentable square feet of commercial space, comprised of approximately 730,000 square feet of office space and approximately 114,000 square feet of restaurant and retail space. The total development cost of this project is estimated to be approximately$1,120,000,000 , an increase of$90,000,000 , which is primarily due to higher projected tenant improvement allowances for the office, restaurant and retail space. As ofDecember 31, 2020 ,$791,994,000 has been expended, which has been reduced by$88,000,000 of historic tax credit investor contributions (at our share). The joint venture entered into a development agreement with ESD, an entity ofNew York State , to build the adjacent Moynihan Train Hall, with Vornado and Related each guaranteeing the joint venture's obligations. The joint venture entered into a design-build contract withSkanska Moynihan Train Hall Builders ("Skanska") pursuant to which they built the Moynihan Train Hall on the joint venture's behalf. Skanska substantially completed construction as ofDecember 31, 2020 , thereby fulfilling this obligation to ESD. The joint venture, which we consolidate on our consolidated balance sheets, leased the entire property during the construction period and pursuant to ASC 842-40-55, was required to recognize all development expenditures for Moynihan Train Hall. Accordingly, the development expenditures funded by governmental agencies were presented as "Moynihan Train Hall development expenditures" with a corresponding obligation recorded to "Moynihan Train Hall Obligation" on our consolidated balance sheets. OnDecember 31, 2020 , upon substantial completion of Moynihan Train Hall, the portions of the property not pertaining to the joint venture's commercial space were severed from its lease with ESD and we removed the "Moynihan Train Hall development expenditures" and the offsetting "Moynihan Train Hall obligation" from our consolidated balance sheets. PENN1 We are redeveloping PENN1, a 2,545,000 square foot office building located on34th Street betweenSeventh and Eighth Avenue . InDecember 2020 , we entered into an agreement with theMetropolitan Transportation Authority (the "MTA") to oversee the redevelopment of the Long Island Rail Road Concourse atPenn Station (the "Concourse"), within the footprint of PENN1.Skanska USA Civil Northeast, Inc. will perform the redevelopment under a fixed price contract for$396,000,000 which is being funded by the MTA. In connection with the redevelopment, we entered into an agreement with the MTA which will result in the widening of the Concourse to relieve overcrowding and our trading of 15,000 square feet of back of house space for 22,000 square feet of retail frontage space. The total development cost of our PENN1 project is estimated to be$450,000,000 , an increase of$125,000,000 , which is primarily due to the addition of the Concourse retail redevelopment project and sustainability initiatives, including the installation of triple pane high energy performance windows and the implementation of an electrification program to allow PENN1 to access more clean renewable electricity. As ofDecember 31, 2020 ,$167,894,000 has been expended. PENN2 We are redeveloping PENN2, a 1,795,000 square foot (as expanded) office building, located on the west side ofSeventh Avenue between31st and 33rd Street . The development cost of this project is estimated to be$750,000,000 , of which$91,219,000 has been expended as ofDecember 31, 2020 . We are also making districtwide improvements within thePenn District . The development cost of these improvements is estimated to be$100,000,000 , of which$19,618,000 has been expended as ofDecember 31, 2020 . Other We are redeveloping a 78,000 square foot Class A office building at345 Montgomery Street , a part of our555 California Street complex inSan Francisco (70.0% interest) located at the corner of California andPine Street . The development cost of this project is estimated to be approximately$66,000,000 , of which our share is$46,000,000 . As ofDecember 31, 2020 ,$55,261,000 has been expended, of which our share is$38,683,000 . We are redeveloping a 165,000 square foot office building at825 Seventh Avenue , located at the corner of53rd Street andSeventh 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 ofDecember 31, 2020 ,$26,508,000 has been expended, of which our share is$13,254,000 . We are also evaluating other development and redevelopment opportunities at certain of our properties inManhattan including, in particular, thePenn District . There can be no assurance that the above projects will be completed, completed on schedule or within budget. 52 -------------------------------------------------------------------------------- Liquidity and Capital Resources - continued Insurance For our properties (except Farley), we maintain general liability insurance with limits of$300,000,000 per occurrence and per property, of which$235,000,000 includes communicable disease coverage, and we maintain all risk property and rental value insurance with limits of$2.0 billion per occurrence, with sub-limits for certain perils such as flood and earthquake and effectiveFebruary 15, 2021 , excluding communicable disease coverage. For the periodFebruary 15, 2020 throughFebruary 14, 2021 , we and the insurance carriers for our all risk property policy have disagreements as to the applicability of a$2,300,000 sub-limit for communicable disease coverage across our properties. Our California properties have earthquake insurance with coverage of$350,000,000 per occurrence and in the aggregate, subject to a deductible in the amount of 5% of the value of the affected property. We maintain coverage for certified terrorism acts with limits of$6.0 billion per occurrence and in the aggregate (as listed below),$1.2 billion for non-certified acts of terrorism, and$5.0 billion per occurrence and in the aggregate for terrorism involving nuclear, biological, chemical and radiological ("NBCR") terrorism events, as defined by the Terrorism Risk Insurance Act of 2002, as amended to date and which has been extended throughDecember 2027 .Penn Plaza Insurance Company, LLC ("PPIC"), our wholly owned consolidated subsidiary, acts as a re-insurer with respect to a portion of all risk property and rental value insurance and a portion of our earthquake insurance coverage, and as a direct insurer for coverage for acts of terrorism including NBCR acts. Coverage for acts of terrorism (excluding NBCR acts) is fully reinsured by third party insurance companies and the Federal government with no exposure to PPIC. For NBCR acts, PPIC is responsible for a deductible of$1,759,257 and 20% of the balance of a covered loss and the Federal government is responsible for the remaining portion of a covered loss. We are ultimately responsible for any loss incurred by PPIC. For Farley, we maintain general liability insurance with limits of$100,000,000 per occurrence, and builder's risk insurance including coverage for existing property and development activities of$2.8 billion per occurrence and in the aggregate. We maintain coverage for certified and non-certified terrorism acts with limits of$1.85 billion and$1.17 billion per occurrence, respectively, and in the aggregate. We continue to monitor the state of the insurance market and the scope and costs of coverage for acts of terrorism and other events. However, we cannot anticipate what coverage will be available on commercially reasonable terms in the future. We are responsible for uninsured losses and for deductibles and losses in excess of our insurance coverage, which could be material. Our debt instruments, consisting of mortgage loans secured by our properties, 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 costs in the future. Further, if lenders insist on greater coverage than we are able to obtain it could adversely affect our ability to finance or refinance our properties and expand our portfolio. 53 -------------------------------------------------------------------------------- Liquidity and Capital Resources - continued Other Commitments and Contingencies We are from time to time involved in legal actions arising in the ordinary course of business. In our opinion, after consultation with legal counsel, the outcome of such matters is not currently expected to have a material adverse effect on our financial position, results of operations or cash flows. Each of our properties has been subjected to varying degrees of environmental assessment at various times. The environmental assessments did not reveal any material environmental contamination. However, there can be no assurance that the identification of new areas of contamination, changes in the extent or known scope of contamination, the discovery of additional sites, or changes in cleanup requirements would not result in significant costs to us. InJuly 2018 , we leased 78,000 square feet at345 Montgomery Street inSan Francisco, CA , to a subsidiary ofRegus PLC , for an initial term of 15 years. The obligations under the lease were guaranteed byRegus PLC in an amount of up to$90,000,000 . The tenant purported to terminate the lease prior to space delivery. We commenced a suit onOctober 23, 2019 seeking to enforce the lease and the guaranty. InDecember 2020 , following a trial, the court issued a tentative ruling in our favor. A final hearing was held onFebruary 1, 2021 and we are awaiting a definitive ruling. OnOctober 9, 2020 , the successor toRegus PLC filed for bankruptcy in Luxembourg. We are actively pursuing claims relating to the guaranty against the successor toRegus PLC and its parent, in Luxembourg and other jurisdictions. InNovember 2011 , we entered into an agreement with theNew York City Economic Development Corporation ("EDC") to lease Piers 92 and 94 (the "Piers") for a 49-year term with five 10-year renewal options. The non-recourse lease with a single-purpose entity calls for current annual rent payments of$2,000,000 with fixed rent steps through the initial term. We operate trade shows and special events at the Piers (and sublease to others for the same uses). InFebruary 2019 , an inspection revealed that the piles supportingPier 92 were structurally unsound (an obligation of EDC to maintain) and we were issued an order by EDC to vacate the property. We continued to make the required lease payments throughFebruary 2020 , with no abatement provided by EDC for the loss of our right to usePier 92 or reimbursement for lost revenues. BeginningMarch 2020 , as no resolution had been reached with EDC, we have not paid the monthly rents due under the non-recourse lease. As ofDecember 31, 2020 , we have a$47,473,000 lease liability and a$34,482,000 right-of-use asset recorded for this lease. Our mortgage loans are non-recourse to us, except for the mortgage loans secured by640 Fifth Avenue ,7 West 34th Street and435 Seventh Avenue , which we guaranteed and therefore are part of our tax basis. In certain cases we have provided guarantees or master leased tenant space. These guarantees and master leases terminate either upon the satisfaction of specified circumstances or repayment of the underlying loans. In addition, we have guaranteed the rent and payments in lieu of real estate taxes due to ESD, an entity ofNew York State , for Farley Office and Retail. As ofDecember 31, 2020 , the aggregate dollar amount of these guarantees and master leases is approximately$1,769,000,000 . As ofDecember 31, 2020 ,$13,549,000 of letters of credit were outstanding under one of our unsecured revolving credit facilities. Our unsecured revolving credit facilities contain financial covenants that require us to maintain minimum interest 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. Our 95% consolidated joint venture (5% is owned by Related) is developing Farley Office and Retail. In connection with the development of the property, the joint venture took in a historic tax credit investor partner. Under the terms of the historic tax credit arrangement, the joint venture is required to comply with various laws, regulations, and contractual provisions. Non-compliance with applicable requirements could result in projected tax benefits not being realized and, therefore, may require a refund or reduction of the Tax Credit Investor's capital contributions. As ofDecember 31, 2020 , the Tax Credit Investor has made$92,400,000 in capital contributions. Vornado and Related have guaranteed certain of the joint venture's obligations to the Tax Credit Investor. As investment manager of the Fund we are entitled to an incentive allocation after the limited partners have received a preferred return on their invested capital. The incentive allocation is subject to catch-up and clawback provisions. Accordingly, based on theDecember 31, 2020 fair value of the Fund assets, at liquidation we would be required to make a$29,800,000 payment to the limited partners, net of amounts owed to us, representing a clawback of previously paid incentive allocations, which would have no income statement impact as it was previously accrued. As ofDecember 31, 2020 , we expect to fund additional capital to certain of our partially owned entities aggregating approximately$10,700,000 . As ofDecember 31, 2020 , we have construction commitments aggregating approximately$451,000,000 . 54 -------------------------------------------------------------------------------- Liquidity and Capital Resources - continued Cash Flows for the Year EndedDecember 31, 2020 Compared toDecember 31, 2019 Our cash flow activities for the years endedDecember 31, 2020 and 2019 are summarized as follows: (Amounts in thousands) For the Year Ended December 31, (Decrease) Increase in Cash 2020 2019 Flow
Net cash provided by operating activities
$ 662,539 $ (238,299) Net cash (used in) provided by investing activities (87,800) 2,463,276 (2,551,076) Net cash used in financing activities (213,202) (2,235,589) 2,022,387 Cash and cash equivalents and restricted cash was$1,730,369,000 atDecember 31, 2020 , a$123,238,000 increase from the balance atDecember 31, 2019 . Net cash provided by operating activities of$424,240,000 for the year endedDecember 31, 2020 was comprised of$615,721,000 of cash from operations, including distributions of income from partially owned entities of$175,246,000 , and a net decrease of$191,481,000 in cash due to the timing of cash receipts and payments related to changes in operating assets and liabilities. The following table details the net cash (used in) provided by investing activities for the years endedDecember 31, 2020 and 2019: (Amounts in thousands) For the Year Ended December 31, (Decrease) Increase in Cash 2020 2019 Flow Proceeds from sale of condominium units at 220 Central Park South$ 1,044,260 $ 1,605,356 $ (561,096) Development costs and construction in progress (601,920) (649,056) 47,136 Moynihan Train Hall expenditures (395,051) (438,935) 43,884 Additions to real estate (155,738) (233,666) 77,928 Proceeds from sales of marketable securities 28,375 168,314 (139,939) Investments in partially owned entities (8,959) (18,257) 9,298 Distributions of capital from partially owned entities 2,389 24,880 (22,491) Acquisitions of real estate and other (1,156) (69,699) 68,543
Proceeds from transfer of interest in
- 1,248,743 (1,248,743) Proceeds from redemption of640 Fifth Avenue preferred equity - 500,000 (500,000) Proceeds from sale of real estate and related investments - 324,201 (324,201) Proceeds from repayments of loans receivable - 1,395 (1,395)
Net cash (used in) provided by investing activities $ (87,800)
The following table details the net cash used in financing activities for the years endedDecember 31, 2020 and 2019: (Amounts in thousands) For the Year Ended December 31, Increase (Decrease) in 2020 2019 Cash Flow Repayments of borrowings$ (1,067,564) $ (2,718,987) $ 1,651,423 Proceeds from borrowings 1,056,315 1,108,156 (51,841)
Dividends paid on common shares/Distributions to Vornado (827,319)
(503,785) (323,534)
Moynihan Train Hall reimbursement from
395,051 438,935 (43,884) Proceeds from issuance of preferred shares/units 291,182 - 291,182 Contributions from noncontrolling interests in consolidated subsidiaries 100,094 17,871 82,223 Distributions to redeemable security holders and noncontrolling interests in consolidated subsidiaries (91,514) (80,194) (11,320)
Dividends paid on preferred shares/Distributions to preferred unitholders
(64,271) (50,131) (14,140) Debt issuance costs (10,901) (15,588) 4,687
Proceeds received from exercise of Vornado stock options and other
5,862 6,903 (1,041)
Repurchase of shares/Class A units related to stock compensation agreements and related tax withholdings and other
(137) (8,692) 8,555
Purchase of marketable securities in connection with defeasance of mortgage payable
- (407,126) 407,126
Prepayment penalty on redemption of senior unsecured notes due 2022
- (22,058) 22,058 Redemption of preferred shares/units - (893) 893 Net cash used in financing activities$ (213,202)
55 -------------------------------------------------------------------------------- Liquidity and Capital Resources - continued Capital Expenditures for the Year EndedDecember 31, 2020 Capital expenditures consist of expenditures to maintain assets, tenant improvement allowances and leasing commissions. Recurring capital expenditures include expenditures to maintain a property's competitive position within the market and tenant improvements and leasing commissions necessary to re-lease expiring leases or renew or extend existing leases. Non-recurring capital improvements include expenditures to lease space that has been vacant for more than nine months and expenditures completed in the year of acquisition and the following two years that were planned at the time of acquisition, as well as tenant improvements and leasing commissions for space that was vacant at the time of acquisition of a property. Below is a summary of amounts paid for capital expenditures and leasing commissions for the year endedDecember 31, 2020 . 555 California (Amounts in thousands) Total New York theMART Street Expenditures to maintain assets$ 65,173 $ 53,543 $ 7,627 $ 4,003 Tenant improvements 65,313 52,763 5,859 6,691 Leasing commissions 18,626 14,612 3,173 841
Recurring tenant improvements, leasing commissions and other capital expenditures
149,112 120,918 16,659 11,535 Non-recurring capital expenditures 64,624 64,414 210 -
Total capital expenditures and leasing commissions
Development and Redevelopment Expenditures for the Year EndedDecember 31, 2020 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 estimates below include initial leasing costs, which are reflected as non-recurring capital expenditures in the table above. Below is a summary of amounts paid for development and redevelopment expenditures in the year endedDecember 31, 2020 . These expenditures include interest and debt expense of$41,056,000 , payroll of$17,654,000 , and other soft costs (primarily architectural and engineering fees, permits, real estate taxes and professional fees) aggregating$129,097,000 , which were capitalized in connection with the development and redevelopment of these projects. 555 California (Amounts in thousands) Total New York theMART Street Other Farley Office and Retail$ 239,427 $ 239,427 $ - $ - $ - 220 CPS 119,763 - - - 119,763 PENN1 105,392 105,392 - - - PENN2 76,883 76,883 - - - 345 Montgomery Street 16,661 - - 16,661 - Other 43,794 39,746 4,011 - 37 601,920 461,448 4,011 16,661 119,800
Capital Expenditures for the Year Ended
555 California (Amounts in thousands) Total New York theMART Street Expenditures to maintain assets$ 93,226 $ 80,416 $ 9,566 $ 3,244 Tenant improvements 98,261 84,870 9,244 4,147 Leasing commissions 18,229 16,316 827 1,086 Recurring tenant improvements, leasing commissions and other capital expenditures 209,716 181,602 19,637 8,477 Non-recurring capital expenditures 30,374 28,269 332 1,773 Total capital expenditures and leasing commissions$ 240,090 $ 209,871 $ 19,969 $ 10,250 56
-------------------------------------------------------------------------------- Liquidity and Capital Resources - continued Development and Redevelopment Expenditures for the Year EndedDecember 31, 2019 Below is a summary of amounts paid for development and redevelopment expenditures in the year endedDecember 31, 2019 . These expenditures include interest and debt expense of$72,200,000 , payroll of$16,014,000 , and other soft costs (primarily architectural and engineering fees, permits, real estate taxes and professional fees) aggregating$83,463,000 , which were capitalized in connection with the development and redevelopment of these projects. 555 California (Amounts in thousands) Total New York theMART Street Other Farley Office and Retail$ 265,455 $ 265,455 $ - $ - $ - 220 CPS 181,177 - - - 181,177 PENN1 51,168 51,168 - - - 345 Montgomery Street 29,441 - - 29,441 - PENN2 28,719 28,719 - - - 606 Broadway 7,434 7,434 - - - 1535 Broadway 1,031 1,031 - - - Other 84,631 78,128 2,322 3,896 285$ 649,056 $ 431,935 $ 2,322 $ 33,337 $ 181,462 Funds From Operations Vornado Realty Trust FFO is computed in accordance with the definition adopted by theBoard of Governors of theNational Association of Real Estate Investment Trusts ("NAREIT"). NAREIT defines FFO as GAAP net income or loss adjusted to exclude net gains from sales of depreciable real estate assets, real estate impairment losses, depreciation and amortization expense from real estate assets and other specified 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 19 - (Loss) Income Per Share/(Loss) Income Per Class A Unit, in our consolidated financial statements in Part II, Item 8 of this Annual Report on Form 10-K. 57 -------------------------------------------------------------------------------- FFO - continuedVornado Realty Trust - continued FFO attributable to common shareholders plus assumed conversions was$750,522,000 , or$3.93 per diluted share, for the year endedDecember 31, 2020 , compared to$1,003,398,000 , or$5.25 per diluted share, for the prior year. Details of certain items that impact FFO are discussed in the financial results summary of our "Overview." (Amounts in thousands, except per share amounts) For the
Year Ended
2020 2019 Reconciliation of our net (loss) income attributable to common shareholders to FFO attributable to common shareholders plus assumed conversions: Net (loss) income attributable to common shareholders$ (348,744) $ 3,097,806 Per diluted share $ (1.83)$ 16.21 FFO adjustments: Depreciation and amortization of real property$ 368,556 $ 389,024 Real estate impairment losses 236,286 32,001
Net gain on transfer to
- (2,559,154) Net gains on sale of real estate - (178,711) Net gain from sale of UE common shares (sold on March 4, 2019) - (62,395)
Decrease (increase) in fair value of marketable securities:
PREIT (accounted for as a marketable security from
4,938 21,649 Lexington (sold on March 1, 2019) - (16,068) Other - (48)
Proportionate share of adjustments to equity in net income of
partially owned entities to arrive at FFO:
Non-cash impairment loss on our investment in
409,060 - Depreciation and amortization of real property 156,646 134,706 Decrease in fair value of marketable securities 2,801 2,852 1,178,287 (2,236,144) Noncontrolling interests' share of above adjustments (79,068) 141,679 FFO adjustments, net $
1,099,219
FFO attributable to common shareholders$ 750,475 $ 1,003,341 Convertible preferred share dividends 47 57 FFO attributable to common shareholders plus assumed conversions$ 750,522 $ 1,003,398 Per diluted share $ 3.93$ 5.25
Reconciliation of weighted average shares outstanding: Weighted average common shares outstanding
191,146 190,801 Effect of dilutive securities: Convertible preferred shares 28 34 Employee stock options and restricted share awards 19 216 Denominator for FFO per diluted share 191,193 191,051 58
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