VORNADO REALTY TRUST (VNO) FY 2021 MD&A

ITEM 7.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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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 ended December 31, 2021 and 2020, including year-to-year comparisons between these years. Our MD&A for the year ended December 31, 2019, including year-to-year comparisons between 2020 and 2019, 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 ended December 31, 2020.

Overview

Vornado Realty Trust (“Vornado”) is a fully‑integrated real estate investment trust (“REIT”) and conducts its business through, and substantially all of its interests in properties are held by, Vornado Realty L.P., a Delaware limited partnership (the “Operating Partnership”). Accordingly, Vornado’s cash flow and ability to pay dividends to its shareholders are dependent upon the cash flow of the Operating 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 92.6% of the common limited partnership interest in the Operating Partnership as of December 31, 2021. All references to the “Company,” “we,” “us” and “our” mean collectively Vornado, the Operating Partnership and those subsidiaries consolidated by Vornado.

We own and operate office and retail properties with a concentration in the New York City metropolitan area. In addition, we have a 32.4% interest in Alexander’s, Inc. (“Alexander’s”) (NYSE: ALX), which owns six properties in the greater New 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 ended December 31, 2021:

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(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 as New York City, where we believe there is a high likelihood of capital appreciation;

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

•developing and redeveloping properties to increase returns and maximize value; and

•investing in operating companies that have a significant real estate component.

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 or Operating Partnership units in exchange for property and may repurchase or otherwise reacquire these securities in the future.

We compete with a large number of real estate 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.

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Overview - continued

Our business has been adversely affected by the ongoing COVID-19 pandemic and the preventive measures taken to curb the spread of the virus. The pandemic has resulted in governments and other authorities implementing numerous measures to try to contain the virus, such as travel bans and restrictions, quarantines, shelter in place orders, and business closures. Some of the effects on us include the following:

•While many of the limitations and restrictions imposed on our retail tenants during the onset of the pandemic have been lifted and/or eased, economic conditions and other factors, including a decline in Manhattan tourism since the onset of the virus, continue to adversely affect the financial health of our retail tenants.

•While our buildings are open, many of our office tenants are working remotely.

•We temporarily closed the Hotel Pennsylvania on April 1, 2020 and on April 5, 2021, we permanently closed the hotel and plan to develop an office tower on the site.

•Trade shows at theMART were cancelled beginning March of 2020 and resumed in the third quarter of 2021 with generally lower attendance than pre-pandemic levels.

The extent of the COVID-19 pandemic’s effect on our operational and financial performance will depend on future developments, including vaccination rates among the population, the efficacy and durability of vaccines against emerging variants and governmental and tenant responses thereto, all of which are uncertain at this time. Given the dynamic nature of the circumstances, it is difficult to predict the ongoing impact of the COVID-19 pandemic on our business, financial condition, results of operations and cash flows but the impact could be material.

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Overview - continued

Year Ended December 31, 2021 Financial Results Summary

Net income attributable to common shareholders for the year ended December 31, 2021 was $101,086,000, or $0.53 per diluted share, compared to net loss attributable to common shareholders of $348,744,000, or $1.83 per diluted share, for the year ended December 31, 2020. The years ended December 31, 2021 and 2020 include certain items that impact net income (loss) 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 income attributable to common shareholders by $12,933,000, or $0.07 per diluted share, for the year ended December 31, 2021 and increased net loss attributable to common shareholders by $372,637,000, or $1.95 per diluted share, for the year ended December 31, 2020.

Funds from operations ("FFO") attributable to common shareholders plus assumed conversions for the year ended December 31, 2021 was $571,074,000, or $2.97 per diluted share, compared to $750,522,000, or $3.93 per diluted share, for the year ended December 31, 2020. The years ended December 31, 2021 and 2020 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 $21,211,000, or $0.11 per diluted share, for the year ended December 31, 2021 and by $249,507,000, or $1.31 per diluted share, for the year ended December 31, 2020.

The following table reconciles the difference between our net income (loss) attributable to common shareholders and our net income attributable to common shareholders, as adjusted:

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Overview - continued

Year Ended December 31, 2021 Financial Results Summary - 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:

Same Store Net Operating Income ("NOI") At Share

The percentage increase (decrease) in same store NOI at share and same store NOI at share - cash basis of our New York segment, theMART and 555 California Street are summarized below.

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(1)2021 includes an increase in real estate tax expense of $18,285 primarily due to a recent increase in the triennial tax-assessed value of theMART.

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.

Acquisition

One Park Avenue

On August 5, 2021, pursuant to a right of first offer, we increased our ownership interest in One Park Avenue, a 944,000 square foot Manhattan office building, to 100.0% by acquiring our joint venture partner's 45.0% ownership interest in the property. The purchase price values the property at $875,000,000. We paid approximately $158,000,000 in cash and assumed our joint venture partner's share of the $525,000,000 mortgage loan. We previously accounted for our investment under the equity method and have consolidated the accounts of the property from the date of acquisition of the additional 45.0% ownership interest.

Dispositions

220 CPS

During the year ended December 31, 2021, we closed on the sale of six condominium units at 220 CPS for net proceeds of $137,404,000 resulting in a financial statement net gain of $50,318,000 which is included in "net gains on disposition of wholly owned and partially owned assets" on our consolidated statements of income. In connection with these sales, $5,711,000 of income tax expense was recognized on our consolidated statements of income. From inception to December 31, 2021, we have closed on the sale of 106 units for net proceeds of $3,006,896,000 resulting in financial statement net gains of $1,117,255,000.

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Overview - continued

Dispositions - continued

Alexander's, Inc. ("Alexander's")

On June 4, 2021, Alexander's completed the sale of a parcel of land in the Bronx, New York for $10,000,000. As a result of the sale, we recognized our $2,956,000 share of the net gain and also received a $300,000 sales commission paid by Alexander's.

On October 4, 2021, Alexander's sold its Paramus, New Jersey property to IKEA Property, Inc. ("IKEA"), the tenant at the property, for $75,000,000 pursuant to IKEA's purchase option contained in the lease. The property was encumbered by a $68,000,000 mortgage loan which was repaid at closing of the sale. As a result of the sale, we recognized our $11,620,000 share of the net gain and also received a $750,000 sales commission paid by Alexander's.

Madison Avenue

On September 24, 2021, we sold three Manhattan retail properties located at 677-679, 759-771 and 828-850 Madison Avenue in two separate sale transactions for an aggregate sales price of $100,000,000. Net proceeds from the sales were $96,503,000. In connection with the sales, we recorded $7,880,000 of non-cash impairment losses which are included in "impairment losses, transaction related costs and other" on our consolidated statements of income.

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

On December 7, 2021, the Fund completed the sale of the retail condominium located at 501 Broadway for $27,500,000. From the inception of this investment through its disposition, the Fund realized a $6,346,000 net loss.

SoHo Properties

On May 10, 2021, we entered into an agreement to sell two Manhattan retail properties located at 478-482 Broadway and 155 Spring Street for a sales price of $84,500,000. On January 13, 2022, we completed the sale transaction and realized net proceeds of $81,399,000. In connection with the sale, we will recognize a net gain of approximately $850,000 in the first quarter of 2022.

Financings

Secured Debt

On February 26, 2021, the joint venture completed a $525,000,000 refinancing of One Park Avenue. The interest-only loan bears a rate of LIBOR plus 1.11% (1.22% as of December 31, 2021) and matures in March 2023, with three one-year extension options (March 2026, as fully extended). We realized our $105,000,000 share of net proceeds. The loan replaced the previous $300,000,000 loan that bore interest at LIBOR plus 1.75% and was scheduled to mature in March 2021.

On March 7, 2021, we entered into an interest rate swap agreement for our $500,000,000 PENN 11 mortgage loan to swap the interest rate on the mortgage loan from LIBOR plus 2.75% to a fixed rate of 3.03% through March 2024. On December 1, 2021, we completed a loan modification which reduced the interest rate on the mortgage loan to LIBOR plus 1.95% (2.05% as of December 31, 2021) from LIBOR plus 2.75%, resulting in a fixed rate of 2.23% pursuant to the interest rate swap agreement.

On March 26, 2021, we completed a $350,000,000 refinancing of 909 Third Avenue, a 1.4 million square foot Manhattan office building. The interest-only loan bears a fixed rate of 3.23% and matures in April 2031. The loan replaced the previous $350,000,000 loan that bore interest at a fixed rate of 3.91% and was scheduled to mature in May 2021.

On May 10, 2021, we completed a $1.2 billion refinancing of 555 California Street, a three-building 1.8 million square foot office campus in San Francisco, in which we own a 70.0% controlling interest. The interest-only loan bears a rate of LIBOR plus 1.93% in years one through five (2.04% as of December 31, 2021), LIBOR plus 2.18% in year six and LIBOR plus 2.43% in year seven. The loan matures in May 2023, with five one-year extension options (May 2028 as fully extended). We swapped the interest rate on our $840,000,000 share of the loan to a fixed rate of 2.26% through May 2024. The loan replaced the previous $533,000,000 loan that bore interest at a fixed rate of 5.10% and was scheduled to mature in September 2021.

On May 28, 2021, we repaid the $675,000,000 mortgage loan on theMART, a 3.7 million square foot commercial building in Chicago, with proceeds from our senior unsecured notes offering. The loan bore interest at 2.70% and was scheduled to mature in September 2021.

On November 16, 2021, we completed a $950,000,000 refinancing of 1290 Avenue of the Americas, a 2.1 million square foot Class A Manhattan office building, in which we own a 70.0% controlling interest. The interest-only loan bears a rate of LIBOR plus 1.51% (1.62% as of December 31, 2021) in years one to five, increasing 0.25% in both years six and seven. The loan matures in November 2023 with five one-year extension options (November 2028 as fully extended). We defeased the existing $950,000,000 loan that bore interest at a fixed rate of 3.34% and was scheduled to mature in November 2022. As a result, we incurred $23,729,000 of defeasance costs, which are included in "interest and debt expense" on our consolidated statements of income, of which $7,119,000 is attributable to noncontrolling interest.

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Overview - continued

Financings - continued

Unsecured Revolving Credit Facility

On April 15, 2021, we extended our $1.25 billion unsecured revolving credit facility from January 2023 (as fully extended) to April 2026 (as fully extended). The interest rate on the extended facility was lowered to LIBOR plus 0.90% from LIBOR plus 1.00%. We subsequently qualified for a sustainability margin adjustment by achieving certain key performance indicator (KPI) metrics, which reduced our interest rate by 0.01% to LIBOR plus 0.89%. The facility fee remains at 20 basis points. Our separate $1.50 billion unsecured revolving credit facility matures in March 2024 (as fully extended) and has an interest rate of LIBOR plus 0.90% and a facility fee of 20 basis points.

Senior Unsecured Notes

On May 24, 2021, we completed a green bond public offering of $400,000,000 2.15% senior unsecured notes due June 1, 2026 ("2026 Notes") and $350,000,000 3.40% senior unsecured notes due June 1, 2031 ("2031 Notes"). Interest on the senior unsecured notes is payable semi-annually on June 1 and December 1, commencing December 1, 2021. The 2026 Notes were sold at 99.86% of their face amount to yield 2.18% and the 2031 Notes were sold at 99.59% of their face amount to yield 3.45%.

Preferred Shares/Units

On September 22, 2021, Vornado sold 12,000,000 4.45% Series O cumulative redeemable preferred shares at a price of $25.00 per share, pursuant to an effective registration statement. Vornado received aggregate net proceeds of $291,153,000, after underwriters' discount and issuance costs, and contributed the net proceeds to the Operating Partnership in exchange for 12,000,000 4.45% Series O preferred units (with economic terms that mirror those of the Series O preferred shares). Dividends on the Series O preferred shares/units are cumulative and payable quarterly in arrears. The Series O 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 O preferred shares/units at a redemption price of $25.00 per share/unit, plus accrued and unpaid dividends/distributions through the date of redemption. The Series O preferred shares/units have no maturity date and will remain outstanding indefinitely unless redeemed by Vornado. Vornado used the net proceeds for the redemption of its 5.70% Series K cumulative redeemable preferred shares/units.

On October 13, 2021, we redeemed all of the outstanding 5.70% Series K preferred shares/units at their redemption price of $25.00 per share/unit, or $300,000,000 in the aggregate, plus accrued and unpaid dividends/distributions through the date of redemption. We recognized $9,033,000 of previously capitalized issuance costs in "Series K preferred share/unit issuance costs" on our consolidated statements of income during the third quarter of 2021, when the preferred shares/units were called for redemption.

Leasing Activity for the Year Ended December 31, 2021

The leasing activity and related statistics below are based on leases signed during the period and are not intended to coincide with the commencement of rental revenue in accordance with accounting principles generally accepted in the United States of America (“GAAP”). Second generation relet space represents square footage that has not been vacant for more than nine months and tenant improvements and leasing commissions are based on our share of square feet leased during the period.

•2,252,000 square feet of New York Office space (1,973,000 square feet at share) at an initial rent of $83.26 per square foot and a weighted average lease term of 11.1 years. The changes in the GAAP and cash mark-to-market rent on the 1,591,000 square feet of second generation space were positive 15.9% and positive 10.8%, respectively. Tenant improvements and leasing commissions were $10.31 per square foot per annum, or 12.4% of initial rent.

•229,000 square feet of New York Retail space (208,000 square feet at share) at an initial rent of $145.44 per square foot and a weighted average lease term of 17.1 years. The changes in the GAAP and cash mark-to-market rent on the 109,000 square feet of second generation space were positive 37.1% and positive 13.2%, respectively. Tenant improvements and leasing commissions were $4.26 per square foot per annum, or 2.9% of initial rent.

•330,000 square feet at theMART (all at share) at an initial rent of $51.18 per square foot and a weighted average lease term of 5.8 years. The changes in the GAAP and cash mark-to-market rent on the 273,000 square feet of second generation space were negative 0.5% and 0.0%, respectively. Tenant improvements and leasing commissions were $7.63 per square foot per annum, or 14.9% of initial rent.

•74,000 square feet at 555 California Street (52,000 square feet at share) at an initial rent of $114.70 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 48,000 square feet of second generation space were positive 29.5% and positive 25.4%, respectively. Tenant improvements and leasing commissions were $3.94 per square foot per annum, or 3.4% of initial rent.

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Overview - continued

Square footage (in service) and Occupancy as of December 31, 2021:

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See notes below.

Square footage (in service) and Occupancy as of December 31, 2020:

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(1)Reflects the Office, Retail and Residential space within our 77 and 79 total New York properties as of December 31, 2021 and 2020, respectively.

(2)The Alexander Apartment Tower (312 units) is reflected in Residential unit count and occupancy.

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Critical Accounting Estimates

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. Accounting estimates are deemed critical if they involve a significant level of estimation uncertainty and have had or are reasonably likely to have a material impact on our financial condition or results of operations. Below is a summary of the critical accounting estimates used in the preparation of our consolidated financial statements. A discussion of our accounting policies is included in Note 2 - Basis of Presentation and Significant Accounting Policies to our consolidated financial statements in this Annual Report on Form 10-K.

Acquisitions of Real Estate

Upon the acquisition of real estate, we assess whether the transaction should be accounted for as an asset acquisition or as a business combination. Acquisitions of integrated sets of assets and activities that do not meet the definition of a business are accounted for as asset acquisitions. Our acquisitions of real estate generally will not meet the definition of a business because substantially all of the fair value is concentrated in a single identifiable asset or group of similar identifiable assets (i.e. land, buildings, and related identified intangible assets).

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 on a relative fair value basis. We assess fair value based on estimated cash flow projections based on a number of factors such as historical operating results, known trends, and market/economic conditions and make key assumptions regarding the discount and capitalization rates used in our analyses. The use of different assumptions to value the acquired properties and allocate value between land and building could affect the revenues recognized over the terms of the leases at our properties and the expenses recognized over the property's estimated remaining useful life on our consolidated statements of income.

Impairment Analyses for Investments in Real Estate and Unconsolidated Partially Owned Entities

Our investments in consolidated properties, including any related right-of-use assets and intangible assets, and unconsolidated partially owned entities are individually reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Impairment analyses are based on current plans, intended holding periods, ability to hold, and available information at the time the analyses are prepared. Assessing impairment can be complex and involves a high degree of subjectivity in determining if impairment indicators are present and in estimating the future undiscounted cash flows or the fair value of an asset. In particular, these estimates are sensitive to significant assumptions, including the estimation of future rental revenues, operating expenses, discount and capitalization rates and our intent and ability to hold the related asset, all of which could be affected by our expectations about future market or economic conditions. These estimates can have a significant impact on the undiscounted cash flows or estimated fair value of an asset and could thereby affect the value of our real estate investments on our consolidated balance sheets as well as any potential impairment losses recognized on our consolidated statements of income.

Collectability Assessments for Revenue Recognition

We evaluate on an individual lease basis whether it is probable that we will collect substantially all amounts due from our tenants and recognize changes in the collectability assessment of our operating leases as adjustments to rental revenue. Management exercises judgment in assessing collectability of tenant receivables and considers payment history, current credit status, publicly available information about the financial condition of the tenant, the impact of COVID-19 on tenants' businesses, and other factors. Our assessment of the collectability of tenant receivables can have a significant impact on the rental revenue recognized in our consolidated statements of income.

Recent Accounting Pronouncements

See Note 2 – 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.

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NOI At Share by Segment for the Years Ended December 31, 2021 and 2020

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.

Below is a summary of NOI at share and NOI at share - cash basis by segment for the years ended December 31, 2021 and 2020.

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NOI At Share by Segment for the Years Ended December 31, 2021 and 2020 - continued

The elements of our New York and Other NOI at share for the years ended December 31, 2021 and 2020 are summarized below.

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(1)2020 includes $18,173 of non-cash write-offs of receivables arising from the straight-lining of rents and $6,702 of write-offs of tenant receivables deemed uncollectible.

(2)2020 includes $25,876 of non-cash write-offs of receivables arising from the straight-lining of rents and $12,017 of write-offs of tenant receivables deemed uncollectible.

(3)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.

(4)On April 5, 2021, we permanently closed the Hotel Pennsylvania. Beginning in the third quarter of 2021, we commenced capitalization of carrying costs in connection with our development of the future PENN 15 (formerly Hotel Pennsylvania) site.

(5)2021 includes an increase in real estate tax expense of $18,285 primarily due to a recent increase in the triennial tax-assessed value of theMART. 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.

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NOI At Share by Segment for the Years Ended December 31, 2021 and 2020 - continued

The elements of our New York and Other NOI at share - cash basis for the years ended December 31, 2021 and 2020 are summarized below.

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(1)2020 includes $6,702 of write-offs of tenant receivables deemed uncollectible.

(2)2020 includes $12,017 of write-offs of tenant receivables deemed uncollectible.

(3)2020 includes $1,335 of write-offs of tenant receivables deemed uncollectible.

(4)On April 5, 2021, we permanently closed the Hotel Pennsylvania. Beginning in the third quarter of 2021, we commenced capitalization of carrying costs in connection with our development of the future PENN 15 (formerly Hotel Pennsylvania) site.

(5)2021 includes an increase in real estate tax expense of $18,285 primarily due to a recent increase in the triennial tax-assessed value of theMART. 2020 includes $1,742 of write-offs of tenant receivables deemed uncollectible.

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Reconciliation of Net Income (Loss) to NOI At Share and NOI At Share - Cash Basis for the Years Ended December 31, 2021 and 2020

Below is a reconciliation of net income (loss) to NOI at share and NOI at share - cash basis for the years ended December 31, 2021 and 2020.

NOI At Share by Region

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Results of Operations – Year Ended December 31, 2021 Compared to December 31, 2020

Revenues

Our revenues were $1,589,210,000 for the year ended December 31, 2021 compared to $1,527,951,000 in the prior year, an increase of $61,259,000. Below are the details of the increase by segment:

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See notes on the following page.

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Results of Operations – Year Ended December 31, 2021 Compared to December 31, 2020 - continued

Expenses

Our expenses were $1,367,869,000 for the year ended December 31, 2021 compared to $1,550,740,000 in the prior year, a decrease of $182,871,000. Below are the details of the decrease by segment:

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(1)On April 5, 2021, we permanently closed the Hotel Pennsylvania. Beginning in the third quarter of 2021, we commenced capitalization of carrying costs in connection with our development of the future PENN 15 (formerly Hotel Pennsylvania) site. Operating expense for 2020 includes a $9,246 severance accrual for furloughed union employees.

(2)We cancelled trade shows at theMART beginning late March of 2020 due to the COVID-19 pandemic and resumed in the third quarter of 2021.

(3)2020 includes $63,204 for the write-off of lease receivables deemed uncollectible (primarily write-offs of receivables arising from the straight-lining of rents).

(4)2021 includes an increase in real estate tax expense of $18,285 primarily due to a recent increase in the triennial tax-assessed value of theMART.

(5)Primarily due to the overhead reduction program, including $22,132 of severance and other reduction-in-force related expenses in 2020.

(6)Primarily due to $236,286 of non-cash impairment losses related to wholly owned street retail assets in 2020, partially offset by $70,260 of lease liability extinguishment gain related to 608 Fifth Avenue recognized in 2020 and $7,880 of non-cash impairment losses for the three Manhattan retail properties sold in 2021.

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Results of Operations – Year Ended December 31, 2021 Compared to December 31, 2020 - continued

Income (Loss) from Partially Owned Entities

Below are the components of income (loss) from partially owned entities.

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(1)2021 includes decreases in our share of depreciation and amortization expense compared to the prior year of $17,448, primarily resulting from non-cash impairment losses recognized during 2020. 2020 includes $3,125 of write-offs of lease receivables deemed uncollectible.

(2)2021 includes our $11,620 share of net gain on the sale of the Paramus, New Jersey property to IKEA Property, Inc., and our $2,956 share of net gain on the sale of a parcel of land in the Bronx, New York. We also recognized $750 and $300, respectively, of sales commissions paid by Alexander's in connection with these sales. 2020 includes our $4,846 share of write-offs of lease receivables deemed uncollectible.

(3)Includes interests in 280 Park Avenue, 650 Madison Avenue, One Park Avenue (consolidated from August 5, 2021), 7 West 34th Street, 512 West 22nd Street, 61 Ninth Avenue, 85 Tenth Avenue and others.

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

Income (Loss) from Real Estate Fund Investments

Below is a summary of income (loss) from the Fund and the Crowne Plaza joint venture.

Interest and Other Investment Income (Loss), net

The following table sets forth the details of interest and other investment income (loss), net.

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Results of Operations – Year Ended December 31, 2021 Compared to December 31, 2020 - continued

Interest and Debt Expense

Interest and debt expense was $231,096,000 for the year ended December 31, 2021, compared to $229,251,000 in the prior year, an increase of $1,845,000. This increase was primarily due to (i) $23,729,000 of defeasance costs, of which $7,119,000 is attributable to noncontrolling interest, in connection with the refinancing of 1290 Avenue of the Americas partially offset by, (ii) $10,941,000 of lower interest expense due to variable rates on certain mortgage loans that were previously swapped to higher fixed rates under interest rate swap arrangements that expired in 2020, and (iii) $9,387,000 of lower interest expense resulting from lower average interest rates on our variable rate loans.

Net Gains on Disposition of Wholly Owned and Partially Owned Assets

Net gains on disposition of wholly owned and partially owned assets for the year ended December 31, 2021 was $50,770,000 compared to $381,320,000 in the prior year, a decrease of $330,550,000. This resulted primarily from lower net gains on sale of 220 CPS condominium units.

Income Tax Benefit (Expense)

Income tax benefit was $10,496,000 for the year ended December 31, 2021, compared to an expense of $36,630,000 in the prior year, a decrease in expense of $47,126,000. This was primarily due to a higher tax benefit recognized by our taxable REIT subsidiaries in 2021 and lower income tax expense from the sale of 220 CPS condominium units partially offset by an increase in the deferred tax liability on our investment in Farley Office and Retail.

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

Net income attributable to noncontrolling interests in consolidated subsidiaries was $24,014,000 for the year ended December 31, 2021, compared to net loss of $139,894,000 in the prior year, an increase in income of $163,908,000. This resulted primarily from a decrease in net loss allocated to the noncontrolling interests of our real estate fund investments.

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

Net income attributable to noncontrolling interests in the Operating Partnership was $7,540,000 for the year ended December 31, 2021, compared to net loss of $24,946,000 in the prior year, an increase in income of $32,486,000. This resulted primarily from higher net income subject to allocation to Class A unitholders.

Preferred Share Dividends of Vornado Realty Trust

Preferred share dividends were $65,880,000 for the year ended December 31, 2021, compared to $51,739,000 in the prior year, an increase of $14,141,000. This was primarily due to the issuance of the 5.25% Series N cumulative redeemable preferred shares in November 2020 and the 4.45% Series O cumulative redeemable preferred shares in September 2021, partially offset by the redemption of the 5.70% Series K cumulative redeemable preferred shares in October 2021.

Preferred Unit Distributions of Vornado Realty L.P.

Preferred unit distributions were $66,035,000 for the year ended December 31, 2021, compared to $51,904,000 in the prior year, an increase of $14,131,000. This was primarily due to the issuance of the 5.25% Series N cumulative redeemable preferred units in November 2020 and the 4.45% Series O cumulative redeemable preferred units in September 2021, partially offset by the redemption of the 5.70% Series K cumulative redeemable preferred units in October 2021.

Preferred Share/Unit Issuance Costs

Preferred share/unit issuance costs for the year ended December 31, 2021 were $9,033,000 representing the previously capitalized issuance costs which were expensed upon calling for redemption of all the outstanding Series K cumulative redeemable preferred shares/units in September 2021.

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Results of Operations – Year Ended December 31, 2021 Compared to December 31, 2020 - 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 our New York segment, theMART, 555 California Street and other investments for the year ended December 31, 2021 compared to December 31, 2020.

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(1)2021 includes an increase in real estate tax expense of $18,285 primarily due to a recent increase in the triennial tax-assessed value of theMART.

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Results of Operations – Year Ended December 31, 2021 Compared to December 31, 2020 - 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 our New York segment, theMART, 555 California Street and other investments for the year ended December 31, 2021 compared to December 31, 2020.

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(1)2021 includes an increase in real estate tax expense of $18,285 primarily due to a recent increase in the triennial tax-assessed value of theMART.

Related Party Transactions

See Note 22 - Related Party Transactions to our consolidated financial statements in this Annual Report on Form 10-K for a discussion concerning related party transactions.

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Liquidity and Capital Resources

Our cash requirements include property operating expenses, capital improvements, tenant improvements, debt service, leasing commissions, dividends to our shareholders and distributions to unitholders of the Operating Partnership, as well as acquisition and development and redevelopment costs. The sources of liquidity to fund these cash requirements include rental revenue, which is our primary source of cash flow and is dependent upon the occupancy and rental rates of our properties; 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 of December 31, 2021, we have $4.1 billion of liquidity comprised of $1.9 billion of cash and cash equivalents and restricted cash and $2.2 billion available on our $2.75 billion revolving credit facilities. The on-going challenges posed by the COVID-19 pandemic 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 the Operating Partnership, cash dividends to our shareholders, debt amortization and recurring capital expenditures. Capital requirements for development and redevelopment expenditures and acquisitions may require funding from borrowings, equity offerings and/or asset sales.

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.

Summary of Cash Flows

Cash and cash equivalents and restricted cash was $1,930,351,000 at December 31, 2021, a $199,982,000 increase from the balance at December 31, 2020.

Our cash flow activities for the years ended December 31, 2021 and 2020 are summarized as follows:

Operating Activities

Net cash provided by operating activities primarily consists of cash inflows from rental revenues and operating distributions from our non-consolidated partially owned entities less cash outflows for property expenses, general and administrative expenses and interest expense. For the year ended December 31, 2021, net cash provided by operating activities of $761,806,000 was comprised of $758,260,000 of cash from operations, including distributions of income from partially owned entities of $214,521,000 and return of capital from real estate fund investments of $5,104,000, and a net increase of $3,546,000 in cash due to the timing of cash receipts and payments related to changes in operating assets and liabilities.

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Liquidity and Capital Resources - continued

Summary of Cash Flows - continued

Investing Activities

Net cash flow used in investing activities is impacted by the timing and extent of our development, capital improvement, acquisition and disposition activities during the year.

The following table details the net cash used in investing activities for the years ended December 31, 2021 and 2020:

Financing Activities

Net cash flow used in financing activities is impacted by the timing and extent of issuances of debt and equity securities, distributions paid to common shareholders and unitholders of the Operating Partnership as well as principal and other repayments associated with our outstanding debt.

The following table details the net cash used in financing activities for the years ended December 31, 2021 and 2020:

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Liquidity and Capital Resources - continued

Dividends

On January 19, 2022, 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 the Board of Trustees for all of 2022, would require Vornado to pay out approximately $406,000,000 of cash for common share dividends. In addition, during 2022, Vornado expects to pay approximately $62,000,000 of cash dividends on outstanding preferred shares and approximately $30,000,000 of cash distributions to unitholders of the Operating Partnership.

Debt

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 of December 31, 2021, we are in compliance with all of the financial covenants required by our senior unsecured notes and our unsecured revolving credit facilities.

A summary of our consolidated debt as of December 31, 2021 and 2020 is presented below.

During 2022 and 2023, $700,000,000 and $0, respectively, of our outstanding consolidated debt matures (based on the extended maturity for certain loans in which we have the unilateral right to extend); 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.

Details of 2021 financing activities are provided in the “Overview” of Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The contractual principal and interest repayments schedule of our consolidated debt as of December 31, 2021 is as follows:

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(1)Based on the contractual maturity of our loans, including the extended maturity date of certain loans for which the unilateral right to extend has been exercised as of December 31, 2021.

(2)Estimated interest for variable-rate debt based on the 1-month LIBOR curve available as of December 31, 2021.

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Liquidity and Capital Resources - continued

Capital Expenditures

Capital expenditures consist of expenditures to maintain and improve assets, tenant improvement allowances and leasing commissions. During 2022, we expect to incur $275,000,000 of capital expenditures for our consolidated properties. We plan to fund these capital expenditures from operating cash flow, existing liquidity, and/or borrowings. Our partially owned non-consolidated subsidiaries typically fund their capital expenditures without any additional equity contribution from us.

Development and Redevelopment Expenditures

Development and redevelopment expenditures consist of all hard and soft costs associated with the development and redevelopment of a property. We plan to fund these development and redevelopment expenditures from operating cash flow, existing liquidity, and/or borrowings. See detailed discussion below for our current development and redevelopment projects.

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 845,000 rentable square feet of commercial space, comprised of approximately 730,000 square feet of office space and approximately 115,000 square feet of restaurant and retail space. The total development cost of this project is estimated to be approximately $1,120,000,000 at our 95% share, of which $896,186,000 of cash has been expended as of December 31, 2021.

PENN 1

We are redeveloping PENN 1, a 2,547,000 square foot office building located on 34th Street between Seventh and Eighth Avenue. In December 2020, we entered into an agreement with the Metropolitan Transportation Authority (the “MTA”) to oversee the redevelopment of the Long Island Rail Road Concourse at Penn Station (the "Concourse"), within the footprint of PENN 1. Skanska USA Civil Northeast, Inc. will perform the redevelopment under a fixed price contract for $380,000,000 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. Vornado's total development cost for the PENN 1 project is estimated to be $450,000,000. As of December 31, 2021, $309,437,000 of cash has been expended.

PENN 2

We are redeveloping PENN 2, a 1,795,000 square foot (as expanded) office building, located on the west side of Seventh Avenue between 31st and 33rd Street. The development cost of this project is estimated to be $750,000,000, of which $161,066,000 of cash has been expended as of December 31, 2021.

PENN 15 (Hotel Pennsylvania Site)

We have permanently closed the Hotel Pennsylvania and plan to develop an office tower on the site. Demolition of the existing building structure commenced in the fourth quarter of 2021.

We are also making districtwide improvements within the PENN District. The development cost of these improvements is estimated to be $100,000,000, of which $31,481,000 of cash has been expended as of December 31, 2021.

We are also evaluating other development and redevelopment opportunities at certain of our properties in Manhattan including, in particular, the PENN District.

There can be no assurance that the above projects will be completed, completed on schedule or within budget.

Other Obligations

We have contractual cash obligations for certain properties that are subject to long-term ground and building leases. During 2022, $36,044,000 of lease payments are due, including fair market rent resets accounted for as variable rent, under our operating leases. For 2023 and thereafter, we have $1,303,520,000 of future lease payments. We believe that our operating cash flow will be adequate to fund these lease payments.

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Liquidity and Capital Resources - continued

Insurance

For our properties, we maintain general liability insurance with limits of $300,000,000 per occurrence and per property, of which $250,000,000 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, excluding communicable disease coverage. 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 through December 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 $1,785,910 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.

Certain condominiums in which we own an interest (including our leasehold interest in the Farley Condominiums) own insurance policies with different per occurrence and aggregate limits than our policies described above.

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.

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.

In July 2018, we leased 78,000 square feet at 345 Montgomery Street in San Francisco, CA, to a subsidiary of Regus PLC, for an initial term of 15 years. The obligations under the lease were guaranteed by Regus 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 on October 23, 2019 seeking to enforce the lease and the guaranty. On May 11, 2021, the court issued a final statement of decision in our favor and on July 7, 2021, the Regus subsidiary appealed the decision. On October 9, 2020, the successor to Regus PLC filed for bankruptcy in Luxembourg. We are actively pursuing claims relating to the guaranty against the successor to Regus PLC and its parent in Luxembourg and other jurisdictions.

In November 2011, we entered into an agreement with the New York City Economic Development Corporation ("EDC") to lease Piers 92 and 94 (the "Piers"). In February 2019, EDC issued an order for us to vacate Pier 92 due to structural problems. Beginning March 2020 through August 2021, we did not pay EDC the monthly rent due under the non-recourse lease due to the loss of our right to use or occupy Pier 92. On August 31, 2021, both parties entered into a mutual release with respect to claims by EDC for unpaid rent owed and claims by the Company for costs and damages as a result of our inability to use or occupy Pier 92.

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Liquidity and Capital Resources - continued

Other Commitments and Contingencies - continued

Our mortgage loans are non-recourse to us, except for the mortgage loans secured by 640 Fifth Avenue, 7 West 34th Street and 435 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 of New York State, for Farley Office and Retail. As of December 31, 2021, the aggregate dollar amount of these guarantees and master leases is approximately $1,648,000,000.

As of December 31, 2021, $15,273,000 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 admitted a historic tax credit investor partner (the "Tax Credit Investor"). 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 of December 31, 2021, 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 the December 31, 2021 fair value of the Fund assets, at liquidation we would be required to make a $27,100,000 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 of December 31, 2021, we expect to fund additional capital to certain of our partially owned entities aggregating approximately $10,300,000.

As of December 31, 2021, we have construction commitments aggregating approximately $494,000,000.

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Funds From Operations

Vornado Realty Trust

FFO is computed in accordance with the definition adopted by the Board of Governors of the National Association of Real Estate Investment Trusts (“NAREIT”). NAREIT defines FFO as GAAP net income or loss adjusted to exclude net gains from sales of certain 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 18 – Income (Loss) Per Share/Income (Loss) Per Class A Unit, in our consolidated financial statements in Part II, Item 8 of this Annual Report on Form 10-K.

FFO attributable to common shareholders plus assumed conversions was $571,074,000, or $2.97 per diluted share, for the year ended December 31, 2021, compared to $750,522,000, or $3.93 per diluted share, for the prior year. Details of certain items that impact FFO are discussed in the financial results summary of our “Overview.”

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