Vornado Reports Fourth Quarter and Year-End Results

    Business Editors

    PARAMUS, N.J.--(BUSINESS WIRE)--Feb. 25, 2005--VORNADO REALTY TRUST (New York Stock Exchange: VNO) today reported:

    Year Ended December 31, 2004 Results

    NET INCOME applicable to common shares for the year ended December 31, 2004 was $571.0 million, or $4.35 per diluted share, versus $439.9 million, or $3.80 per diluted share, for the prior year. Net income for the years ended December 31, 2004 and 2003 includes the adjustments listed in the table below, as well as net gains on sales of real estate of $75.8 million and $161.8 million (primarily Palisades in 2004 and Two Park Avenue in 2003). These items, net of minority interest, increased net income by $177.5 million, or $1.33 per diluted share for the year ended December 31, 2004 and $117.9 million, or $1.01 per diluted share for the year ended December 31, 2003.
    FUNDS FROM OPERATIONS (FFO)(1) applicable to common shares plus assumed conversions for the year ended December 31, 2004 was $750.0 million, or $5.63 per diluted share, compared to $518.2 million, or $4.44 per diluted share, for the prior year. Adjusting for certain items that affect comparability, the year ended December 31, 2004 is 5.3% higher than the prior year on a per share basis, as detailed below:

FOR THE YEAR ENDED ------------------------------- (Amounts in thousands, except per share December 31, December 31, amounts) 2004 2003 ------------------------------- Amount Per Amount Per Share Share ------------------------------- FFO(1) applicable to common shares plus assumed conversions, as shown above $ 750,043 $5.63 $518,242 $4.44 --------- ===== -------- ===== Adjustments: Net gain on mark-to-market of Sears option shares (81,730) -- Net gains on investment in GMH Communities L.P. (61,451) -- Net gain on investment in Americold and income from Vornado Operating Company, net of litigation costs (19,044) -- Alexander's stock appreciation rights compensation expense 25,340 14,868 Impairment losses on partially-owned entities, write-off of perpetual preferred issuance costs and other 12,104 3,575 Bonuses to four executive vice presidents in connection with Alexander's 6,500 -- Gain on sale of Newkirk MLP option units (7,494) -- Gains on sales of land parcels and condominiums (2,050) (282) Loss (gain) on early extinguishment of debt of partially-owned entities 1,434 (1,600) Minority interest share of above adjustments 15,404 (3,115) --------- -------- Subtotal adjustments (110,987) 13,446 --------- -------- FFO, applicable to common shares plus assumed conversions, as adjusted for comparability $ 639,056 $4.80 $531,688 $4.56 ========= ===== ======== ===== (1) See page 4 for a reconciliation of net income to FFO for the years ended December 31, 2004 and 2003.

    Fourth Quarter 2004 Results

    Net income applicable to common shares for the quarter ended December 31, 2004 was $233.6 million, or $1.73 per diluted share, versus $200.3 million, or $1.66 per diluted share, for the quarter ended December 31, 2003. Net income for the quarters ended December 31, 2004 and 2003 includes the adjustments listed in the table below. In addition, the quarter ended December 31, 2003 includes net gains on sales of real estate of $158.4 million (Two Park Avenue). These items, net of minority interest, increased net income by $133.7 million or $0.99 per diluted share for the quarter ended December 31, 2004, and $123.6 million or $1.02 per share for the quarter ended December 31, 2003.
    FFO(1) applicable to common shares plus assumed conversions for the quarter ended December 31, 2004 was $299.4 million, or $2.22 per diluted share, compared to $130.7 million, or $1.08 per diluted share, for the prior year's quarter. Adjusting for certain items that affect comparability, the fourth quarter 2004 is 8.8% higher than the fourth quarter 2003 on a per share basis, as detailed below:

FOR THE THREE MONTHS ENDED ------------------------------- (Amounts in thousands, except per share December 31, December 31, amounts) 2004 2003 ------------------------------- Amount Per Amount Per Share Share ------------------------------- FFO(1) applicable to common shares plus assumed conversions, as shown above $ 299,441 $2.22 $130,729 $1.08 --------- ===== -------- ===== Adjustments: Net gain on mark-to-market of Sears option shares (81,730) -- Net gains on investment in GMH Communities L.P. (61,451) -- Net gain on investment in Americold and income from Vornado Operating Company, net of litigation costs (19,044) -- Bonuses to four executive vice presidents in connection with Alexander's 6,500 -- Alexander's stock appreciation rights compensation expense 4,460 5,391 Write-off of perpetual preferred issuance costs and other -- 2,187 Minority interest share of above adjustments 17,523 (1,369) --------- -------- Subtotal adjustments (133,742) 6,209 --------- -------- FFO, applicable to common shares plus assumed conversions, as adjusted for comparability $ 165,699 $1.23 $136,938 $1.13 ========= ===== ======== =====

(1) See page 4 for a reconciliation of net income to FFO for the quarters ended December 31, 2004 and 2003.

    Supplemental Financial Information

    Further details regarding the Company's results of operations, properties and tenants can be accessed at the Company's website www.vno.com.
    Vornado Realty Trust is a fully - integrated equity real estate investment trust.

    Certain statements contained herein may constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Such factors include, among others, risks associated with the timing of and costs associated with property improvements, financing commitments and general competitive factors. See the Company's annual report on Form 10-K for the year ended December 31, 2004 for further discussion of trends, risks, uncertainties and other factors.

VORNADO REALTY TRUST OPERATING RESULTS FOR THE QUARTER AND YEAR ENDED DECEMBER 31, 2004 AND 2003

FOR THE THREE FOR THE YEAR ENDED MONTHS ENDED DECEMBER 31, DECEMBER 31, ---------------------------------------- (Amounts in thousands, except per share amounts) 2004 2003 2004 2003 -------- -------- ---------- ----------

Revenues $504,714 $385,349 $1,707,262 $1,497,983 ======== ======== ========== ==========

Income from continuing operations $239,753 $ 46,603 $ 514,320 $ 284,315 Income from discontinued operations 201 158,541 78,597 176,388 -------- -------- ---------- ---------- Net income 239,954 205,144 592,917 460,703 Preferred stock dividends (6,351) (4,885) (21,920) (20,815) -------- -------- ---------- ---------- Net income applicable to common shares $233,603 $200,259 $ 570,997 $ 439,888 ======== ======== ========== ==========

Net income per common share: Basic $ 1.84 $ 1.73 $ 4.56 $ 3.92 ======== ======== ========== ========== Diluted $ 1.73 $ 1.66 $ 4.35 $ 3.80 ======== ======== ========== ========== Average number of common shares and share equivalents outstanding: Basic 127,071 115,685 125,241 112,343 ======== ======== ========== ========== Diluted 135,142 120,894 133,135 116,651 ======== ======== ========== ==========

FFO applicable to common shares plus assumed conversions $299,441 $130,729 $ 750,043 $ 518,242 ======== ======== ========== ==========

FFO per diluted share $ 2.22 $ 1.08 $ 5.63 $ 4.44 ======== ======== ========== ========== Average number of common shares and share equivalents outstanding used for determining funds from operations per diluted share 135,142 120,894 133,135 116,651 ======== ======== ========== ==========

    The following table reconciles FFO(1) and net income:

For the Three Months Ended For the Year Ended (Amounts in thousands) December 31, December 31, -------------------------------------- 2004 2003 2004 2003 -------- --------- -------- --------- Net income $239,954 $ 205,144 $592,917 $ 460,703 Depreciation and amortization of real property 63,367 58,125 228,298 208,624 Net (gains) losses on sale of real estate -- (158,378) (75,755) (161,789) Proportionate share of adjustments to equity in net income of partially-owned entities to arrive at FFO: Depreciation and amortization of real property 9,817 14,455 49,440 54,762 Net (gains) losses on sale of real estate (226) 219 (3,048) (6,733) Minority interest's share of above adjustments (9,159) 15,742 (27,991) (20,080) -------- --------- -------- --------- FFO(1) 303,753 135,307 763,861 535,487 Preferred dividends (6,351) (4,885) (21,920) (20,815) -------- --------- -------- --------- FFO applicable to common shares 297,402 130,422 741,941 514,672 Series B-1 and B-2 convertible preferred dividends 1,522 -- 4,710 -- Series A convertible preferred dividends 263 307 1,068 3,570 Series F-1 convertible preferred distributions 254 -- 743 -- Series E-1 convertible preferred distributions -- -- 1,581 -- -------- --------- -------- --------- FFO applicable to common shares plus assumed conversions $299,441 $ 130,729 $750,043 $ 518,242 ======== ========= ======== =========

(1) 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 net income or loss determined in accordance with GAAP, excluding extraordinary items as defined under GAAP and gains or losses from sales of previously depreciated operating real estate assets, plus specified non-cash items, such as real estate asset depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures. FFO and FFO per diluted share are used by management, investors and industry analysts as supplemental measures of operating performance of equity REITs. FFO and FFO per diluted share should be evaluated along with GAAP net income and income per diluted share (the most directly comparable GAAP measures), as well as cash flow from operating activities, investing activities and financing activities, in evaluating the operating performance of equity REITs. Management believes that FFO and FFO per diluted share are helpful to investors as supplemental performance measures because these measures exclude the effect of depreciation, amortization and gains or losses from sales of real estate, all of which are based on historical costs which implicitly assumes that the value of real estate diminishes predictably over time. Since real estate values instead have historically risen or fallen with market conditions, these non-GAAP measures can facilitate comparisons of operating performance between periods and among other equity REITs. FFO does not represent cash generated from operating activities in accordance with GAAP and is not necessarily indicative of cash available to fund cash needs as disclosed in the Company's Consolidated Statements of Cash Flows. FFO should not be considered as an alternative to net income as an indicator of the Company's operating performance or as an alternative to cash flows as a measure of liquidity. In addition to FFO, the Company also discloses FFO before certain items that affect comparability. Although this non-GAAP measure clearly differs from NAREIT's definition of FFO, the Company believes it provides a meaningful presentation of operating performance. A reconciliation of net income to FFO is provided above. In addition, a reconciliation of FFO to FFO before certain items that affect comparability is provided on pages 1 and 2 of this press release.

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CONTACT: Vornado Realty Trust, Paramus, NJ Joseph Macnow, 201/587-1000

KEYWORD: NEW JERSEY INDUSTRY KEYWORD: BANKING REAL ESTATE BUILDING/CONSTRUCTION EARNINGS SOURCE: VORNADO REALTY TRUST

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