Investments in Partially Owned Entities

9 Months Ended

Sep. 30, 2014

Investments in Partially Owned Entities [Abstract]

8. Investments in Partially Owned Entities

Toys “R” Us (“Toys”)

As of September 30, 2014, we own 32.7% of Toys. We account for our investment in Toys under the equity method and record our share of Toys' net income or loss on a one-quarter lag basis because Toys' fiscal year ends on the Saturday nearest January 31, and our fiscal year ends on December 31. The business of Toys is highly seasonal and substantially all of Toys' net income is generated in its fourth quarter.

We have not guaranteed any of Toys' obligations and are not committed to provide any support to Toys. Pursuant to ASC 323-10-35-20, we discontinued applying the equity method of accounting for our Toys' investment when the carrying amount was reduced to zero. We will resume application of the equity method if our share of unrecognized net income exceeds our share of unrecognized net losses during the period the equity method was suspended.

Below is a summary of Toys' latest available financial information on a purchase accounting basis:

(Amounts in thousands)							Balance as of
Balance Sheet:							August 2, 2014		November 2, 2013
	Assets						$	10,213,000	$	11,756,000
	Liabilities							9,139,000		10,437,000
	Noncontrolling interests							83,000		75,000
	Toys “R” Us, Inc. equity⁽¹⁾							991,000		1,244,000

			For the Three Months Ended				For the Nine Months Ended
Income Statement:			August 2, 2014		August 3, 2013		August 2, 2014		August 3, 2013
	Total revenues		$	2,440,000	$	2,377,000	$	10,186,000	$	10,555,000
	Net (loss) income attributable to Toys			(133,000)		(111,000)		(244,000)		11,000


(1)		At September 30, 2014, the carrying amount of our investment in Toys is less than our share of Toys' equity by approximately $323,497. This basis difference results primarily from non-cash impairment losses aggregating $355,953 that we have recognized through September 30, 2014. We have allocated the basis difference primarily to Toys' real estate, which is being amortized over its remaining estimated useful life.

8. Investments in Partially Owned Entities – continued

Alexander's, Inc. (“Alexander's”) (NYSE: ALX)

As of September 30, 2014, we own 1,654,068 Alexander's common shares, or approximately 32.4% of Alexander's common equity. We manage, lease and develop Alexander's properties pursuant to agreements which expire in March of each year and are automatically renewable. As of September 30, 2014, we have a $44,179,000 receivable from Alexander's for fees under these agreements.

As of September 30, 2014, the market value (“fair value” pursuant to ASC 820) of our investment in Alexander's, based on Alexander's September 30, 2014 closing share price of $373.91, was $618,473,000, or $451,750,000 in excess of the carrying amount on our consolidated balance sheet. As of September 30, 2014, the carrying amount of our investment in Alexander's, excluding amounts owed to us, exceeds our share of the equity in the net assets of Alexander's by approximately $41,394,000. 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. The basis difference related to the land will be recognized upon disposition of our investment.

Below is a summary of Alexander's latest available financial information:

(Amounts in thousands)						Balance as of
Balance Sheet:						September 30, 2014		December 31, 2013
	Assets					$	1,465,400	$	1,457,700
	Liabilities						1,129,000		1,124,100
	Stockholders' equity						336,400		333,600

		For the Three Months Ended September 30,				For the Nine Months Ended September 30,
Income Statement:		2014		2013		2014		2013
	Total revenues	$	50,100	$	49,900	$	149,500	$	146,000
	Net income attributable to Alexander’s		17,700		13,800		49,800		41,100

LNR Property LLC (“LNR”)

In January 2013, we and the other equity holders of LNR entered into a definitive agreement to sell LNR for $1.053 billion, of which our share of the net proceeds was $240,474,000. The definitive agreement provided that LNR would not (i) make any cash distributions to the equity holders, including us, through the completion of the sale, which occurred on April 19, 2013, and (ii) take any of the following actions (among others) without the purchaser's approval, the lending or advancing of any money, the acquisition of assets in excess of specified amounts, or the issuance of equity interests. Notwithstanding the terms of the definitive agreement, in accordance with GAAP, we recorded our pro rata share of LNR's earnings on a one-quarter lag basis through the date of sale, which increased the carrying amount of our investment in LNR above our share of the net sales proceeds and resulted in us recognizing a $27,231,000 “other-than-temporary” impairment loss on our investment in the three months ended March 31, 2013.

One Park Avenue

On June 26, 2014, we invested an additional $22,700,000 to increase our ownership in One Park Avenue to 55.0% from 46.5% through a joint venture with an institutional investor, who increased his ownership interest to 45.0% (see Note 5 – Vornado Capital Partners Real Estate Fund). The transaction was based on a property value of $560,000,000. The property is encumbered by a $250,000,000 interest-only mortgage loan that bears interest at 4.995% and matures in March 2016. We account for our investment in the joint venture under the equity method because we share control over major decisions with our joint venture partner.

61 Ninth Avenue

On July 23, 2014, a joint venture in which we are a 50.1% partner entered into a 99-year ground lease for 61 Ninth Avenue located on the Southwest corner of Ninth Avenue and 15th Street in Manhattan. The venture's current plans are to construct an office building, with retail at the base, of approximately 130,000 square feet. Total development costs are currently estimated to be approximately $125,000,000. We account for our investment in the joint venture under the equity method because we share control over major decisions with our joint venture partner.

8. Investments in Partially Owned Entities – continued

Below are schedules summarizing our investments in, and (loss) income from, partially owned entities.

			Percentage
(Amounts in thousands)			Ownership at		Balance as of
Investments:			September 30, 2014		September 30, 2014		December 31, 2013
	Toys			32.7%	$	-	$	83,224

	Alexander’s			32.4%	$	166,723	$	167,785
	India real estate ventures			4.1%-36.5%		82,588		88,467
	Partially owned office buildings⁽¹⁾			Various		733,904		621,294
	Other investments⁽²⁾			Various		284,851		288,897
					$	1,268,066	$	1,166,443


(1)		Includes interests in 280 Park Avenue, 650 Madison Avenue, One Park Avenue, 666 Fifth Avenue (Office), 330 Madison Avenue and others.
(2)		Includes interests in Independence Plaza, Monmouth Mall, 85 10th Avenue, Fashion Center Mall, 50-70 West 93rd Street and others.

				Percentage		For the Three Months				For the Nine Months
(Amounts in thousands)				Ownership at		Ended September 30,				Ended September 30,
Our Share of Net (Loss) Income:				September 30, 2014		2014		2013		2014		2013
	Toys:				32.7%
		Equity in net (loss) earnings				$	(20,357)	$	(36,056)	$	(4,691)	$	3,778
		Non-cash impairment losses					-		-		(75,196)		(78,542)
		Management fees					1,939		1,847		5,725		5,453
						$	(18,418)	$	(34,209)	$	(74,162)	$	(69,311)

	Alexander's:				32.4%
		Equity in net income				$	5,552	$	4,299	$	15,583	$	12,785
		Management, leasing and development fees					1,640		1,676		4,888		5,017
							7,192		5,975		20,471		17,802

	India real estate ventures				4.1%-36.5%		(262)		(1,449)		(2,440)		(2,630)

	Partially owned office buildings⁽¹⁾				Various		18		38		(1,387)		(1,586)

	Other investments⁽²⁾				Various		(14,193)		(3,111)		(19,908)		(8,626)

	LNR (see page 14 for details):				n/a
		Equity in net income					-		-		-		45,962
		Impairment loss					-		-		-		(27,231)
							-		-		-		18,731

						$	(7,245)	$	1,453	$	(3,264)	$	23,691


(1)			Includes interests in 280 Park Avenue, 650 Madison Avenue, One Park Avenue, 666 Fifth Avenue (Office), 330 Madison Avenue and others.
(2)			Includes interests in Independence Plaza, Monmouth Mall, 85 10th Avenue, Fashion Center Mall, 50-70 West 93rd Street and others. In the third quarter of 2014, we recognized a $10,263 non-cash charge, comprised of a $5,959 impairment loss and a $4,304 loan loss reserve, on our equity and debt investments in Suffolk Downs.

8. Investments in Partially Owned Entities – continued

Below is a summary of the debt of our partially owned entities as of September 30, 2014 and December 31, 2013, none of which is recourse to us.

			Percentage		Interest	100% of
			Ownership at		Rate at	Partially Owned Entities’ Debt at
(Amounts in thousands)			September 30,		September 30,	September 30,		December 31,
			2014	Maturity	2014	2014		2013
Toys:
	Notes, loans and mortgages payable		32.7%	2014-2021	6.72%	$	5,385,461	$	5,702,247

Alexander's:
	Mortgages payable		32.4%	2015-2021	2.58%	$	1,033,541	$	1,049,959

India real estate ventures:
	TCG Urban Infrastructure Holdings mortgages
		payable	25.0%	2014-2026	13.24%	$	190,453	$	199,021

Partially owned office buildings⁽¹⁾			Various	2014-2023	5.71%	$	3,657,837	$	3,622,759

Other⁽²⁾			Various	2014-2025	4.56%	$	1,696,974	$	1,709,509


(1)		Includes 280 Park Avenue, 650 Madison Avenue, One Park Avenue, 666 Fifth Avenue (Office), 330 Madison Avenue and others.
(2)		Includes Independence Plaza, Monmouth Mall, Fashion Center Mall, 50-70 West 93rd Street and others.

Based on our ownership interest in the partially owned entities above, our pro rata share of the debt of these partially owned entities was $4,156,658,000 and $4,189,403,000 at September 30, 2014 and December 31, 2013, respectively.

- Definition

The entire disclosure for equity method investments and joint ventures. Equity method investments are investments that give the investor the ability to exercise significant influence over the operating and financial policies of an investee. Joint ventures are entities owned and operated by a small group of businesses as a separate and specific business or project for the mutual benefit of the members of the group.

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