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

FFO increased to $230.9 million, or $1.22 per diluted share, a 4.3% gain from the Q3 ’09 level of $221.4 million, or $1.18 per diluted share. According to the Wall Street Journal, analysts polled by Thomson Reuters had predicted Vornado’s quarterly FFO would be $1.21 per share.

Quarterly revenues were buoyed by stronger leasing activity, and finished Q3 at $707 million, up from the $671.2 million of a year earlier. Year to date revenues stand at $2.1 billion, with income from continuing operations nearly double the $222.6 million in the first nine months of ’09.

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

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

In other news, Gramercy Capital Corp. reported an even sharper rise in FFO during Q3: up $198.7 million to $20.5 million from negative $178.2 million the year prior. Gramercy said Tuesday the rise in FFO for the most recent quarter came primarily from a decline of approximately $199.6 million in impairments and provisions for loan losses.