Investments in Partially Owned Entities

3 Months Ended

Mar. 31, 2024

Equity Method Investments and Joint Ventures [Abstract]

Fifth Avenue and Times Square JV

As of March 31, 2024, we own a 51.5% common interest in a joint venture ("Fifth Avenue and Times Square JV") which owns interests in properties located at 640 Fifth Avenue, 655 Fifth Avenue, 666 Fifth Avenue, 689 Fifth Avenue, 697-703 Fifth Avenue, 1535 Broadway and 1540 Broadway (collectively, the "Properties"). The remaining 48.5% common interest in the joint venture is owned by a group of institutional investors (the "Investors"). Our 51.5% common interest in the joint venture represents an effective 51.0% interest in the Properties. The 48.5% common interest in the joint venture owned by the Investors represents an effective 47.2% interest in the Properties. We provide various services to Fifth Avenue and Times Square JV in accordance with management, development, leasing and other agreements.

We also own $1.828 billion aggregate liquidation preference of preferred equity interests in certain of the Properties. The preferred equity has an annual coupon of 4.25% through April 2024, increasing to 4.75% for the subsequent five years and thereafter at a formulaic rate. It can be redeemed under certain conditions on a tax deferred basis.

Fifth Avenue and Times Square JV operates pursuant to a limited partnership agreement (the “Partnership Agreement”) among VRLP, a wholly owned subsidiary of VRLP (“Vornado GP”) and the Investors. Vornado GP is the general partner of Fifth Avenue and Times Square JV. VRLP is jointly and severally liable with Vornado GP for Vornado GP’s obligations under the Partnership Agreement. Pursuant to the Partnership Agreement and the organizational documents of the entities owning the Properties, the Investors or directors of the entities owning the Properties appointed by the Investors, as the case may be, have the right to approve annual business plans and budgets for the Properties and certain other specified major decisions with respect to the Properties and Fifth Avenue and Times Square JV. The Partnership Agreement affords the Investors the right to remove and replace Vornado GP in the event Vornado GP or certain of its affiliates commit fraud or other bad acts in connection with Fifth Avenue and Times Square JV, become bankrupt or insolvent, or default on certain of their respective obligations under the Partnership Agreement (subject to notice and cure periods in certain circumstances). The Partnership Agreement includes (i) remedies for the failure of any partner to make a required capital contribution for necessary expenses and (ii) liquidity provisions, including transfer rights subject to mutual rights of first offer and a mutual buy-sell, customary for similar partnerships. Subject to certain limitations, either party may transfer more than 50% or control of its respective interests in Fifth Avenue and Times Square JV or exercise a buy-sell on a Property-by-Property basis (with only one property subject to a buy-sell at any time), and commencing April 18, 2029, either party may exercise a buy-sell on multiple properties concurrently. In the event the buy-sell is exercised with respect to any Property in which VRLP holds preferred equity and VRLP is the selling partner in the buy-sell, VRLP may elect whether or not to include its preferred equity in the buy-sell for the Property to be sold.

As of March 31, 2024, the carrying amount of our investment in the joint venture was less than our share of the equity in the net assets of the joint venture by approximately $838,278,000, the basis difference primarily resulting from non-cash impairment losses recognized in prior periods. Substantially all of this basis difference was allocated, based on our estimates of the fair values of Fifth Avenue and Times Square JV’s assets and liabilities, to real estate (land and buildings). We are amortizing the basis difference related to the buildings into earnings as a reduction to depreciation expense over their estimated useful lives.

Alexander's, Inc. ("Alexander's") (NYSE: ALX)

As of March 31, 2024, we own 1,654,068 Alexander’s common shares, or approximately 32.4% of Alexander’s common equity. We manage, develop and lease Alexander’s properties pursuant to agreements which expire in March of each year and are automatically renewable. In addition, wholly owned subsidiaries of Vornado provide cleaning, engineering, security, and garage management services to certain Alexander’s properties.

As of March 31, 2024, the market value ("fair value" pursuant to ASC Topic 820, Fair Value Measurements ("ASC 820")) of our investment in Alexander’s, based on Alexander’s March 31, 2024 closing share price of $217.14, was $359,164,000, or $273,904,000 in excess of the carrying amount on our consolidated balance sheets. As of March 31, 2024, the carrying amount of our investment in Alexander’s, excluding amounts owed to us, exceeded our share of the equity in the net assets of Alexander’s by approximately $29,494,000. The majority of this basis difference resulted from the excess of our purchase price for the Alexander’s common stock acquired over the book value of Alexander’s net assets. Substantially all of this basis difference was allocated, based on our estimates of the fair values of Alexander’s assets and liabilities, to real estate (land and buildings). We are amortizing the basis difference related to the buildings into earnings as additional depreciation expense over their estimated useful lives. This depreciation is not material to our share of equity in Alexander’s net income.

5. Investments in Partially Owned Entities - continued

Below is a schedule summarizing our investments in partially owned entities.


(Amounts in thousands)	Percentage Ownership as of March 31, 2024	Balance as of
		March 31, 2024		December 31, 2023
Investments:
Fifth Avenue and Times Square JV (see page 22 for details)	51.5%	$	2,241,278	$	2,242,972
Partially owned office buildings/land(1)	Various	110,224		118,558
Alexander's (see page 22 for details):	32.4%	85,260		87,510
Other investments(2)	Various	162,372		161,518
		$	2,599,134	$	2,610,558
Investments in partially owned entities included in other liabilities(3):
7 West 34th Street	53.0%	$	(70,207)	$	(69,899)
85 Tenth Avenue	49.9%	(13,852)		(11,330)
		$	(84,059)	$	(81,229)

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(1)Includes interests in 280 Park Avenue, 512 West 22nd Street, 61 Ninth Avenue and others.

(2)Includes interests in Independence Plaza, Sunset Pier 94 Joint Venture (“Pier 94 JV”), Rosslyn Plaza and others.

(3)Our negative basis results from distributions in excess of our investment.

Below is a schedule of income from partially owned entities.


(Amounts in thousands)	Percentage Ownership as of March 31, 2024	For the Three Months Ended March 31,
		2024		2023
Our share of net income (loss):
Fifth Avenue and Times Square JV (see page 22 for details):

Equity in net income	51.5%	$	9,291	$	10,199
Return on preferred equity, net of our share of the expense		9,328		9,226
		18,619		19,425
Alexander's (see page 22 for details):
Equity in net income	32.4%	5,154		3,571
Management, leasing and development fees		1,180		1,173

		6,334		4,744

Partially owned office buildings(1)	Various	(10,403)		(8,963)

Other investments(2)	Various	1,729		1,460

		$	16,279	$	16,666

____________________

(1)Includes interests in 280 Park Avenue, 7 West 34th Street, 512 West 22nd Street, 61 Ninth Avenue, 85 Tenth Avenue and others.

(2)Includes interests in Independence Plaza, Rosslyn Plaza and others.