NEW YORK CITY-Vornado Realty Trust on Tuesday said third-quarternet income was down about 25% year over year to $95.2 million, adifference the office and retail REIT attributed to income fromdiscontinued operations in Q3 2009. However, both funds fromoperations and total quarterly revenues were up compared to 12months earlier.

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FFO increased to $230.9 million, or $1.22 per diluted share, a4.3% gain from the Q3 ’09 level of $221.4 million, or $1.18 perdiluted share. According to the Wall Street Journal,analysts polled by Thomson Reuters had predicted Vornado’squarterly FFO would be $1.21 per share.

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Quarterly revenues were buoyed by stronger leasing activity, andfinished Q3 at $707 million, up from the $671.2 million of a yearearlier. Year to date revenues stand at $2.1 billion, with incomefrom continuing operations nearly double the $222.6 million in thefirst nine months of ’09.

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Last month, Vornado took a 9.9% stake in J.C. Penney, and whilethat deal occurred after the close of Q3, the WSJ reportedthat Standard & Poor’s put the REIT’s ratings on watch forpossible downgrade due to a lack of clarity over what theinvestment means strategically. In a statement announcing the J.C.Penney investment, Vornado cited the retailer’s ownership of 416 ofthe 11,108 department stores it operates nationally.

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REITS generally have had a banner year in 2010. The NationalAssociation of Real Estate Investment Trusts reported Tuesday thatthe FTSE NAREIT All REITs Index gained 4.56% during the month ofOctober, beating the 3.8% gain in the S&P 500 during theperiod. The REIT index has increased 23.9% YTD, compared to 7.84%for the S&P, NAREIT said.

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In other news, Gramercy Capital Corp. reported an even sharperrise in FFO during Q3: up $198.7 million to $20.5 million fromnegative $178.2 million the year prior. Gramercy said Tuesday therise in FFO for the most recent quarter came primarily from adecline of approximately $199.6 million in impairments andprovisions for loan losses.

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Paul Bubny

Paul Bubny is managing editor of Real Estate Forum and GlobeSt.com. He has been reporting on business since 1988 and on commercial real estate since 2007. He is based at ALM Real Estate Media Group's offices in New York City.