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

6 Months Ended

Jun. 30, 2014

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 the Fund. 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.

On June 26, 2014, the Fund sold its 64.7% interest in One Park Avenue to a newly formed joint venture that we and an institutional investor own 55% and 45%, respectively (see Note 7 - Investments in Partially Owned Entities - One Park Avenue). This transaction was based on a property value of $560,000,000. From the inception of this investment through its disposition, the Fund realized a $75,069,000 net gain.

On June 24, 2014, the Fund and its 50% joint venture partner entered into an agreement to sell Georgetown Park, a 305,000 square foot retail property, for $272,500,000.

At June 30, 2014, the Fund had eight investments with an aggregate fair value of $549,091,000, or $189,571,000 in excess of cost, and had remaining unfunded commitments of $142,118,000, of which our share was $35,529,000. Below is a summary of income from the Fund for the three and six months ended June 30, 2014 and 2013.

		For the Three Months				For the Six Months
(Amounts in thousands)		Ended June 30,				Ended June 30,
		2014		2013		2014		2013
Net investment income		$	3,052	$	877	$	7,031	$	3,925
Net realized gains on exited investments			75,069		-		75,069		-
Previously recorded unrealized gains on exited investments			(35,365)		-		(22,388)		-
Net unrealized gains on held investments			57,354		33,593		58,546		47,109
Income from Real Estate Fund			100,110		34,470		118,258		51,034
Less (income) attributable to noncontrolling interests			(61,780)		(14,359)		(72,629)		(23,899)
Income from Real Estate Fund attributable to Vornado ⁽¹⁾		$	38,330	$	20,111	$	45,629	$	27,135
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(1)	Excludes management, leasing and development fees of $745 and $827 for the three months ended June 30, 2014 and 2013, respectively, and $1,449 and $1,676 for the six months ended June 30, 2014 and 2013, respectively, which are included as a component of "fee and other income" on our consolidated statements of income.