Vornado Capital Partners Real Estate Fund (the "Fund")

9 Months Ended

Sep. 30, 2013

Vornado Capital Partners Real Estate Fund (the "Fund")

4. Vornado Capital Partners Real Estate Fund (the “Fund”)

We are the general partner and investment manager of our $800,000,000 Fund, to which we committed $200,000,000. The Fund has an eight-year term and a three-year investment period which ended in July 2013. During the investment period, the Fund was our exclusive investment vehicle for all investments that fit within its investment parameters, as defined. The Fund is accounted for under the AICPA Investment Company Guide and its investments are reported on its balance sheet at fair value, with changes in value each period recognized in earnings. We consolidate the accounts of the Fund into our consolidated financial statements, retaining the fair value basis of accounting.

At September 30, 2013, the Fund had nine investments with an aggregate fair value of $635,990,000, or $127,118,000 in excess of cost, and had remaining unfunded commitments of $239,186,000, of which our share was $59,796,000. Below is a summary of income from the Fund for the three and nine months ended September 30, 2013 and 2012.

		For the Three Months				For the Nine Months
(Amounts in thousands)		Ended September 30,				Ended September 30,
		2013		2012		2013		2012
Net investment income (loss)		$	2,362	$	(49)	$	6,287	$	4,035
Net realized gain			8,184		-		8,184		-
Net unrealized gains			12,367		5,558		59,476		33,537
Income from Real Estate Fund			22,913		5,509		73,947		37,572
Less (income) attributable to noncontrolling interests			(15,422)		(4,787)		(39,321)		(25,026)
Income from Real Estate Fund attributable to Vornado ⁽¹⁾		$	7,491	$	722	$	34,626	$	12,546
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(1)	Excludes management, leasing and development fees of $770 and $954 for the three months ended September 30, 2013 and 2012, respectively, and $2,446 and $2,374 for the nine months ended September 30, 2013 and 2012, respectively, which are included as a component of "fee and other income" on our consolidated statements of income.