Dispositions

New York

On June 21, 2018 we completed the $45,000,000 sale of 27 Washington Square North, which resulted in a net gain of $23,559,000 which is included in "net gains on disposition of wholly owned and partially owned assets" on our consolidated statements of income.

Discontinued Operations

Washington, DC

On June 20, 2017, we completed a $220,000,000 financing of The Bartlett residential building. The five-year interest-only loan is at LIBOR plus 1.70% and matures in June 2022. On July 17, 2017, the property, the loan and the $217,000,000 of net proceeds were transferred to JBG SMITH Properties ("JBGS") in connection with the tax-free spin-off of our Washington, DC segment.

On July 17, 2017, prior to completion of the tax-free spin-off of our Washington, DC segment, we repaid the $43,581,000 LIBOR plus 1.25% mortgage encumbering 1700 and 1730 M Street which was scheduled to mature in August 2017. The unencumbered property was then transferred to JBGS in connection with the tax-free spin-off of our Washington, DC segment.

On July 17, 2017, we completed the spin-off of our Washington, DC segment comprised of (i) 37 office properties totaling over 11.1 million square feet, five multifamily properties with 3,133 units and five other assets totaling approximately 406,000 square feet and (ii) 18 future development assets totaling over 10.4 million square feet of estimated potential development density, and (iii) $412.5 million of cash ($275.0 million plus The Bartlett financing proceeds less transaction costs and other mortgage items) to JBGS. On July 18, 2017, JBGS was combined with the management business and certain Washington, DC assets of The JBG Companies (“JBG”), a Washington, DC real estate company. Steven Roth, the Chairman of the Board of Trustees and Chief Executive Officer of Vornado, is the Chairman of the Board of Trustees of JBGS. Mitchell Schear, former President of our Washington, DC business, is a member of the Board of Trustees of JBGS. We are providing transition services to JBGS initially including information technology, financial reporting and payroll services. The spin-off was effected through a tax-free distribution by Vornado to the holders of Vornado common shares of all of the common shares of JBGS at the rate of one JBGS common share for every two common shares of Vornado and the distribution by the Operating Partnership to the holders of its common units of all of the outstanding common units of JBG SMITH Properties LP (“JBGSLP”) at the rate of one JBGSLP common unit for every two common units of VRLP held of record. See JBGS’ Amendment No. 3 on Form 10 (File No. 1-37994) filed with the Securities and Exchange Commission on June 9, 2017 for additional information. Beginning in the third quarter of 2017, the historical financial results of our Washington, DC segment are reflected in our consolidated financial statements as discontinued operations for all periods presented.

On March 15, 2016, we notified the servicer of the $678,000,000 non-recourse mortgage loan on the Skyline properties located in Fairfax, Virginia, that cash flow would be insufficient to service the debt and pay other property related costs and expenses and that we were not willing to fund additional cash shortfalls. Accordingly, at our request, the loan was transferred to the special servicer. Consequently, based on the shortened holding period for the underlying assets, we concluded that the excess of carrying amount over our estimate of fair value was not recoverable and recognized a $160,700,000 non-cash impairment loss in the first quarter of 2016. The Company’s estimate of fair value was derived from a discounted cash flow model based upon market conditions and expectations of growth and utilized unobservable quantitative inputs including a capitalization rate of 8.0% and a discount rate of 8.2%. In the second quarter of 2016, cash flow became insufficient to service the debt and we ceased making debt service payments. Pursuant to the loan agreement, the loan was in default, and was subject to incremental default interest which increased the weighted average interest rate from 2.97% to 4.51% while the outstanding balance remains unpaid. For the year ended December 31, 2016, we recognized $7,823,000 of default interest expense. On August 24, 2016, the Skyline properties were placed in receivership. On December 21, 2016, the disposition of the Skyline properties was completed by the receiver. In connection therewith, the Skyline properties’ assets (approximately $236,535,000) and liabilities (approximately aggregating $724,412,000), were removed from our consolidated balance sheet which resulted in a net gain of $487,877,000. There was no taxable income related to this transaction.


9.	Dispositions – continued

Discontinued Operations - continued

We have reclassified the revenues and expenses of our former Washington, DC segment, which was spun off on July 17, 2017, and other related retail assets that were sold to “income (loss) from discontinued operations” and the related assets and liabilities to “other assets” and “other liabilities” for all of the periods presented in the accompanying financial statements. The tables below set forth the assets and liabilities related to discontinued operations as of December 31, 2018 and 2017, and their combined results of operations and cash flows for the years ended December 31, 2018, 2017 and 2016.



(Amounts in thousands)	Balance as of December 31,
	2018		2017

Assets related to discontinued operations (included in other assets)	$	113	$	1,357

Liabilities related to discontinued operations (included in other liabilities)	$	55	$	3,620



(Amounts in thousands)	For the Year Ended December 31,
	2018			2017			2016
Income (loss) from discontinued operations:
Total revenues	$	1,114		$	261,290		$	521,084
Total expenses	1,094			212,169			442,032
	20			49,121			79,052
Net gains on sale of real estate, a lease position and other	618			6,605			20,376
JBGS spin-off transaction costs	—			(68,662		)	(16,586		)
Income (loss) from partially-owned entities	—			435			(3,559		)
Net gain on early extinguishment of debt	—			—			487,877
Impairment losses	—			—			(161,165		)
Pretax income (loss) from discontinued operations	638			(12,501		)	405,995
Income tax expense	—			(727		)	(1,083		)
Income (loss) from discontinued operations	$	638		$	(13,228	)	$	404,912

Cash flows related to discontinued operations:
Cash flows from operating activities	$	(1,683	)	$	42,578		$	157,484
Cash flows from investing activities	—			(48,377		)	(216,125		)