				EXHIBIT 99.2

ITEM 7.	MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
	OF OPERATIONS

				Page
				Number
	Overview			2
	Overview - Leasing activity			7
	Critical Accounting Policies			12
	Net Income and EBITDA by Segment for the Years Ended
		December 31, 2014, 2013 and 2012		15
	Results of Operations:
		Year Ended December 31, 2014 Compared to December 31, 2013		20
		Year Ended December 31, 2013 Compared to December 31, 2012		27
	Supplemental Information:
		Net Income and EBITDA by Segment for the Three Months Ended
			December 31, 2014 and 2013	35
		Three Months Ended December 31, 2014 Compared to December 31, 2013		40
		Three Months Ended December 31, 2014 Compared to September 30, 2014		42
	Related Party Transactions			44
	Liquidity and Capital Resources			45
		Financing Activities and Contractual Obligations		45
		Certain Future Cash Requirements		48
		Cash Flows for the Year Ended December 31, 2014		51
		Cash Flows for the Year Ended December 31, 2013		53
		Cash Flows for the Year Ended December 31, 2012		55

Overview

Vornado Realty L.P. (the “Operating Partnership” and/or the “Company”) is a Delaware limited partnership. Vornado Realty Trust (“Vornado”) is the sole general partner of, and owned approximately 94.1% of the common limited partnership interest in the Operating Partnership at December 31, 2014. All references to “we,” “us,” “our,” the “Company” and “Operating Partnership” refer to Vornado Realty L.P. and its consolidated subsidiaries.

On January 15, 2015, we completed the spin-off of substantially all of our retail segment comprised of 79 strip shopping centers, three malls, a warehouse park and $225 million of cash to Urban Edge Properties (“UE”) (NYSE: UE). As part of this transaction, we received 5,712,000 UE operating partnership units (5.4% ownership interest). We are providing transition services to UE for an initial period of up to two years, including information technology, human resources, tax and public reporting. UE is providing us with leasing and property management services for (i) the Monmouth Mall, (ii) certain small retail properties which did not fit UE’s strategy that we plan to sell, and (iii) our affiliate, Alexander’s, Inc. (NYSE: ALX), Rego Park retail assets. Steven Roth, Chairman of Vornado’s Board of Trustees and its Chief Executive Officer is a member of the Board of Trustees of UE. The spin-off distribution was effected by Vornado distributing one UE common share for every two Vornado common shares. The historical financial results of UE have been reflected in our consolidated financial statements as discontinued operations for all periods presented.

We own and operate office and retail properties (our “core” operations) with large concentrations in the New York City metropolitan area and in the Washington, DC / Northern Virginia area. In addition, we have a 32.4% interest in Alexander’s, Inc. (NYSE: ALX) (“Alexander’s”), which owns six properties in the greater New York metropolitan area, a 32.6% interest in Toys “R” Us, Inc. (“Toys”) as well as interests in other real estate and related investments.

Our business objective is to maximize Vornado shareholder value, which we measure by the total return provided to Vornado’s shareholders. Below is a table comparing Vornado’s performance to the FTSE NAREIT Office Index (“Office REIT”) and the Morgan Stanley REIT Index (“RMS”) for the following periods ended December 31, 2014:

		Total Return⁽¹⁾
		Vornado	Office REIT	RMS
	Three-months	18.5%	12.7%	14.3%
	One-year	36.4%	25.9%	30.4%
	Three-year	70.8%	51.7%	57.3%
	Five-year	100.6%	78.2%	119.7%
	Ten-year	131.1%	89.5%	122.2%


(1) Past performance is not necessarily indicative of future performance.

We intend to achieve our business objective by continuing to pursue our investment philosophy and execute our operating strategies through:

· Maintaining a superior team of operating and investment professionals and an entrepreneurial spirit

· Investing in properties in select markets, such as New York City and Washington, DC, where we believe there is a high likelihood of capital appreciation

· Acquiring quality properties at a discount to replacement cost and where there is a significant potential for higher rents

· Investing in retail properties in select under-stored locations such as the New York City metropolitan area

· Developing and redeveloping existing properties to increase returns and maximize value

· Investing in operating companies that have a significant real estate component

We expect to finance our growth, acquisitions and investments using internally generated funds, proceeds from possible asset sales and by accessing the public and private capital markets. We may also offer partnership units in exchange for property and may repurchase or otherwise reacquire these units or any other securities in the future.

We compete with a large number of property owners and developers, some of which may be willing to accept lower returns on their investments than we are. Principal factors of competition include rents charged, sales prices, attractiveness of location, the quality of the property and the breadth and the quality of services provided. See “Risk Factors” in Item 1A for additional information regarding these factors.

Overview - continued

Year Ended December 31, 2014 Financial Results Summary

Net income attributable to Class A unitholders for the year ended December 31, 2014 was $830,951,000, or $4.14 per diluted Class A unit, compared to $415,693,000, or $2.08 per diluted Class A unit for the year ended December 31, 2013. Net income for the years ended December 31, 2014 and 2013 includes $518,772,000 and $412,058,000, respectively, of net gains on sale of real estate, and $26,518,000 and $43,722,000, respectively, of real estate impairment losses. In addition, the years ended December 31, 2014 and 2013 include certain items that affect comparability which are listed in the table below. The aggregate of net gains on sale of real estate, real estate impairment losses and the items in the table below increased net income attributable to Class A unitholders for the year ended December 31, 2014 by $490,173,000, or $2.45 per diluted Class A unit and $105,091,000, or $0.53 per diluted Class A unit for the year ended December 31, 2013.

		For the Year Ended December 31,
(Amounts in thousands)		2014		2013
Items that affect comparability income (expense):
	Income from discontinued operations, including LNR in 2013	$	98,726	$	198,381
	Toys "R" Us net loss		(73,556)		(362,377)
	Write-off of deferred financing costs and defeasance costs in connection with refinancings		(22,660)		(8,814)
	Acquisition and transaction related costs		(16,392)		(24,857)
	Net gain on sale of residential condominiums and land parcels		13,568		1,620
	Impairment loss and loan reserve on investment in Suffolk Downs		(10,263)		-
	Losses from the disposition of investment in J.C. Penney		-		(127,888)
	Net gain on sale of marketable securities		-		31,741
	Net gain on sale of Harlem Park property under development		-		23,507
	Other, net		8,496		5,442
Items that affect comparability		$	(2,081)	$	(263,245)

The percentage increase (decrease) in same store Earnings Before Interest, Taxes, Depreciation and Amortization (“EBITDA”) and cash basis same store EBITDA of our operating segments for the year ended December 31, 2014 over the year ended December 31, 2013 is summarized below.


Same Store EBITDA:			New York	Washington, DC
	December 31, 2014 vs. December 31, 2013
		Same store EBITDA	4.7%	(2.4%)
		Cash basis same store EBITDA	7.6%	(2.3%)

Overview - continued

Quarter Ended December 31, 2014 Financial Results Summary

Net income attributable to Class A unitholders for the quarter ended December 31, 2014 was $544,287,000, or $2.71 per diluted Class A unit, compared to a net loss of $73,042,000, or $0.37 per diluted Class A unit for the quarter ended December 31, 2013. Net income for the quarter ended December 31, 2014 and net loss for the quarter ended December 31, 2013 include $460,216,000 and $127,512,000, respectively, of net gains on sale of real estate, and $5,676,000 and $32,899,000, respectively, of real estate impairment losses. In addition, the quarters ended December 31, 2014 and 2013 include certain other items that affect comparability which are listed in the table below. The aggregate of net gains on sale of real estate, real estate impairment losses and the items in the table below increased net income attributable to Class A unitholders for the quarter ended December 31, 2014 by $456,474,000, or $2.28 per diluted Class A unit and decreased net loss attributable to Class A unitholders for the quarter ended December 31, 2013 by $159,307,000, or $0.85 per diluted Class A unit.

		For the Three Months Ended December 31,
(Amounts in thousands)		2014		2013
Items that affect comparability income (expense):
	Income from discontinued operations	$	21,979	$	29,354
	Write-off of deferred financing costs and defeasance costs in connection with refinancings		(16,747)		(8,436)
	Acquisition and transaction related costs		(12,763)		(18,088)
	Toys "R" Us net income (loss)		606		(293,066)
	Net gain on sale of residential condominiums and land parcels		363		481
	Net gain on sale of Harlem Park property under development		-		23,507
	Deferred income tax reversal		-		16,055
	Other, net		8,496		(3,727)
Items that affect comparability		$	1,934	$	(253,920)

The percentage increase (decrease) in same store EBITDA and cash basis same store EBITDA of our operating segments for the quarter ended December 31, 2014 over the quarter ended December 31, 2013 and the trailing quarter ended September 30, 2014 are summarized below.


Same Store EBITDA:			New York	Washington, DC
	December 31, 2014 vs. December 31, 2013
		Same store EBITDA	3.3%	(2.3%)
		Cash basis same store EBITDA	8.2%	(3.8%)
	December 31, 2014 vs. September 30, 2014
		Same store EBITDA	1.8%	(3.0%)
		Cash basis same store EBITDA	4.7%	(3.4%)

Calculations of same store EBITDA, reconciliations of our net income to EBITDA and the reasons we consider these non-GAAP financial measures useful are provided in the following pages of Management’s Discussion and Analysis of the Financial Condition and Results of Operations.

Overview – continued

Acquisitions

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 its ownership interest to 45.0%. 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.

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 15^th 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.

On August 1, 2014, we acquired the land under our 715 Lexington Avenue retail property located on the Southeast corner of 58^th Street and Lexington Avenue in Manhattan, for $63,000,000.

On October 28, 2014, we completed the purchase of the retail condominium of the St. Regis Hotel for $700,000,000. We own a 74.3% controlling interest of the joint venture which owns the property. The acquisition was used in a like-kind exchange for income tax purposes for the sale of 1740 Broadway (see below). We consolidate the accounts of the venture into our consolidated financial statements from the date of acquisition.

On November 21, 2014, we entered into an agreement to acquire the Center Building, an eight story 437,000 square foot office building, located at 33-00 Northern Boulevard in Long Island City, New York. The building is 98% leased. The purchase price is approximately $142,000,000, including the assumption of an existing $62,000,000 4.43% mortgage maturing in October 2018. The purchase is expected to close in the first quarter of 2015, subject to customary closing conditions. As of December 31, 2014, our $14,200,000 non-refundable deposit was included in “other assets” on our consolidated balance sheet.

On January 20, 2015, we co-invested with our 25% owned Fund and one of the Fund’s limited partners to buy out the Fund’s joint venture partner’s 57% interest in the Crowne Plaza Times Square Hotel. The purchase price for the 57% interest was approximately $95,000,000 (our share $39,000,000) which valued the property at approximately $480,000,000. The property is encumbered by a newly placed $310,000,000 mortgage loan bearing interest at LIBOR plus 2.80% and maturing in December 2018 with a one-year extension option. Our aggregate ownership interest in the property increased to 33% from 11%.

Dispositions

New York

On December 18, 2014, we completed the sale of 1740 Broadway, a 601,000 square foot office building in Manhattan for $605,000,000. The sale resulted in net proceeds of approximately $580,000,000, after closing costs, and resulted in a financial statement gain of approximately $441,000,000. The tax gain of approximately $484,000,000, was deferred in like-kind exchanges, primarily for the acquisition of the St. Regis Fifth Avenue retail.

Retail Properties

On February 24, 2014, we completed the sale of Broadway Mall in Hicksville, Long Island, New York, for $94,000,000. The sale resulted in net proceeds of $92,174,000 after closing costs.

On March 2, 2014, we entered into an agreement to transfer upon completion, the redeveloped Springfield Town Center, a 1,350,000 square foot mall located in Springfield, Fairfax County, Virginia, to Pennsylvania Real Estate Investment Trust (NYSE: PEI) (“PREIT”) in exchange for $465,000,000 comprised of $340,000,000 of cash and $125,000,000 of PREIT operating partnership units. In connection therewith, we recorded a non-cash impairment loss of $20,000,000 in the first quarter of 2014, which is included in “income from discontinued operations” on our consolidated statements of income. The redevelopment was substantially completed in October 2014, at which time we reclassified the assets, liabilities and financial results to discontinued operations, and the transfer of the property to PREIT was completed on March 31, 2015.

On July 8, 2014, we completed the sale of Beverly Connection, a 335,000 square foot power shopping center in Los Angeles, California, for $260,000,000, of which $239,000,000 was cash and $21,000,000 was 10-year mezzanine seller financing. The sale resulted in a net gain of $44,155,000, which was recognized in the third quarter of 2014.

In addition to the above, during 2014, we sold six of the 22 strip shopping centers which did not fit UE’s strategy, in separate transactions, for an aggregate of $66,410,000 in cash, which resulted in a net gain aggregating $22,500,000.

Overview – continued

Financings

Secured Debt

On January 31, 2014, we completed a $600,000,000 loan secured by our 220 Central Park South development site. The loan bears interest at LIBOR plus 2.75% (2.92% at December 31, 2014) and matures in January 2016, with three one-year extension options.

On April 16,2014, we completed a $350,000,000 refinancing of 909 Third Avenue, a 1.3 million square foot Manhattan office building. The seven-year interest only loan bears interest at 3.91% and matures in May 2021. We realized net proceeds of approximately $145,000,000 after defeasing the existing 5.64%, $193,000,000 mortgage, defeasance cost and other closing costs.

On July 16, 2014, we completed a $130,000,000 financing of Las Catalinas, a 494,000 square foot mall located in the San Juan area of Puerto Rico. The 10-year fixed rate loan bears interest at 4.43% and matures in August 2024. The loan amortizes based on a 30-year schedule beginning in year six.

On August 12, 2014, we completed a $185,000,000 financing of the Universal buildings, a 690,000 square foot, two-building office complex located in Washington, DC. The loan bears interest at LIBOR plus 1.90% (2.06% at December 31, 2014) and matures in August 2019 with two one-year extension options. The loan amortizes based on a 30-year schedule beginning in the fourth year.

On August 26, 2014, we obtained a standby commitment for up to $500,000,000 of five-year mezzanine loan financing to fund a portion of the development expenditures at 220 Central Park South.

On October 27, 2014, we completed a $140,000,000 financing of 655 Fifth Avenue, a 57,500 square foot retail and office property. The loan is interest only at LIBOR plus 1.40% (1.56% at December 31, 2014) and matures in October 2019 with two one-year extension options.

On December 8, 2014, we completed a $575,000,000 refinancing of Two Penn Plaza, a 1.6 million square foot Manhattan office building. The loan is interest-only at LIBOR plus 1.65% (1.81% at December 31, 2014) and matures in 2019 with two one-year extension options. We realized net proceeds of approximately $143,000,000. Pursuant to an existing swap agreement, the $422,000,000 previous loan on the property was swapped to a fixed rate of 4.78% through March 2018. Therefore, $422,000,000 of the new loan bears interest at a fixed rate of 4.78% through March 2018 and the balance of $153,000,000 floats through March 2018. The entire $575,000,000 will float thereafter for the duration of the new loan.

On January 6, 2015, we completed the modification of the $120,000,000, 6.04% mortgage loan secured by our Montehiedra Town Center, in the San Juan area of Puerto Rico. The loan has been extended from July 2016 to July 2021 and separated into two tranches, a senior $90,000,000 position with interest at 5.33% to be paid currently, and a junior $30,000,000 position with interest accruing at 3%. Montehiedra Town Center and the loan were included in the spin-off to UE on January 15, 2015. As part of the planned redevelopment of the property, UE is committed to fund $20,000,000 through a loan for leasing and building capital expenditures of which $8,000,000 has been funded. This loan is senior to the $30,000,000 position noted above and accrues interest at 10%.

Senior Unsecured Notes

On June 16, 2014, we completed a green bond public offering of $450,000,000 2.50% senior unsecured notes due June 30, 2019. The notes were sold at 99.619% of their face amount to yield 2.581%.

On October 1, 2014, we redeemed all of the $445,000,000 principal amount of our outstanding 7.875% senior unsecured notes, which were scheduled to mature on October 1, 2039, at a redemption price of 100% of the principal amount plus accrued interest through the redemption date. In the fourth quarter of 2014, we wrote off $12,532,000 of unamortized deferred financing costs, which are included as a component of “interest and debt expense” on our consolidated statements of income.

On January 1, 2015, we redeemed all of the $500,000,000 principal amount of our outstanding 4.25% senior unsecured notes, which were scheduled to mature on April 1, 2015, at a redemption price of 100% of the principal amount plus accrued interest through December 31, 2014.

Unsecured Revolving Credit Facility

On September 30, 2014, we extended one of our two $1.25 billion unsecured revolving credit facilities from November 2015 to November 2018 with two six-month extension options. The interest rate on the extended facility was lowered to LIBOR plus 105 basis points from LIBOR plus 125 basis points and the facility fee was reduced to 20 basis points from 25 basis points.

Overview - continued

Leasing Activity

The leasing activity presented below is based on leases signed during the period and is not intended to coincide with the commencement of rental revenue in accordance with accounting principles generally accepted in the United States of America (“GAAP”). Tenant improvements and leasing commissions presented below are based on square feet leased during the period. Second generation relet space represents square footage that has not been vacant for more than nine months. The leasing activity for the New York segment excludes Alexander’s, the Hotel Pennsylvania and residential.

					New York				Washington, DC
(Square feet in thousands)					Office		Retail		Office

Quarter Ended December 31, 2014:
	Total square feet leased					1,248		51		658
	Our share of square feet leased					1,095		51		619
		Initial rent⁽¹⁾			$	66.79	$	410.63	$	36.86
		Weighted average lease term (years)				12.3		11.5		9.4
		Second generation relet space:
			Square feet			732		45		461
			Cash basis:
				Initial rent⁽¹⁾	$	68.25	$	260.31	$	36.64
				Prior escalated rent	$	60.63	$	175.49	$	39.68
				Percentage increase (decrease)		12.6%		48.3%		(7.7%)
			GAAP basis:
				Straight-line rent⁽²⁾	$	67.80	$	307.92	$	34.42
				Prior straight-line rent	$	55.87	$	173.75	$	36.89
				Percentage increase (decrease)		21.4%		77.2%		(6.7%)
		Tenant improvements and leasing commissions:
			Per square foot		$	78.45	$	177.43	$	61.48
			Per square foot per annum:		$	6.38	$	15.43	$	6.54
				Percentage of initial rent		9.5%		3.8%		17.7%

Year Ended December 31, 2014:
	Total square feet leased					3,973		119		1,817	⁽³⁾
	Our share of square feet leased					3,416		114		1,674	⁽³⁾
		Initial rent⁽¹⁾			$	66.78	$	327.38	$	38.57
		Weighted average lease term (years)				11.3		11.2		8.2
		Second generation relet space:
			Square feet			2,550		92		1,121
			Cash basis:
				Initial rent⁽¹⁾	$	68.18	$	289.74	$	38.57
				Prior escalated rent	$	60.50	$	206.62	$	41.37
				Percentage increase (decrease)		12.7%		40.2%		(6.8%)
			GAAP basis:
				Straight-line rent⁽²⁾	$	67.44	$	331.33	$	36.97
				Prior straight-line rent	$	56.76	$	204.15	$	38.25
				Percentage increase (decrease)		18.8%		62.3%		(3.3%)
		Tenant improvements and leasing commissions:
			Per square foot		$	75.89	$	110.60	$	46.77
			Per square foot per annum:		$	6.72	$	9.88	$	5.70
				Percentage of initial rent		10.1%		3.0%		14.8%


See notes on the following page.

Overview - continued


Leasing Activity - continued

					New York				Washington, DC
(Square feet in thousands)					Office		Retail		Office

Year Ended December 31, 2013:
	Total square feet leased					2,410		138		1,836
	Our share of square feet leased:					2,024		121		1,392
		Initial rent⁽¹⁾			$	60.78	$	268.52	$	39.91
		Weighted average lease term (years)				11.0		8.6		7.0
		Second generation relet space:
			Square feet			1,716		103		910
			Cash basis:
				Initial rent⁽¹⁾	$	60.04	$	262.67	$	40.91
				Prior escalated rent	$	56.84	$	117.45	$	41.16
				Percentage increase (decrease)		5.6%		123.7%		(0.6%)
			GAAP basis:
				Straight-line rent⁽²⁾	$	59.98	$	293.45	$	40.87
				Prior straight-line rent	$	52.61	$	152.34	$	39.36
				Percentage increase		14.0%		92.6%		3.8%
		Tenant improvements and leasing commissions:
			Per square foot		$	61.78	$	100.93	$	33.24
			Per square foot per annum:		$	5.61	$	11.64	$	4.75
				Percentage of initial rent		9.2%		4.3%		11.9%


(1)			Represents the cash basis weighted average starting rent per square foot, which is generally indicative of market rents. Most leases include free rent and periodic step-ups in rent which are not included in the initial cash basis rent per square foot but are included in the GAAP basis straight-line rent per square foot.

(2)			Represents the GAAP basis weighted average rent per square foot that is recognized over the term of the respective leases, and includes the effect of free rent and periodic step-ups in rent.

(3)			Excludes (i) 165 square feet leased to WeWork that will be redeveloped into rental residential apartments, and (ii) 82 square feet of retail space that was leased at an initial rent of $46.76 per square foot.

Overview - continued

	Square footage (in service) and Occupancy as of December 31, 2014:

					Square Feet (in service)
				Number of	Total	Our
	(Square feet in thousands)			properties	Portfolio	Share	Occupancy %
	New York:
		Office		31	20,052	16,808	96.9%
		Retail		56	2,450	2,179	96.4%
		Alexander's		6	2,178	706	99.7%
		Hotel Pennsylvania		1	1,400	1,400
		Residential - 1,654 units		2	1,524	763	95.2%
					27,604	21,856	96.9%

	Washington, DC:
		Office, excluding the Skyline Properties		51	13,461	11,083	87.5%
		Skyline Properties		8	2,648	2,648	53.5%
		Total Office		59	16,109	13,731	80.9%
		Residential - 2,414 units		7	2,597	2,455	97.4%
		Other		6	384	384	100.0%
					19,090	16,570	83.8%

	Other:
		The Mart		2	3,587	3,578	94.7%
		555 California Street		3	1,801	1,261	97.6%
		85 Tenth Avenue⁽¹⁾		1	613	306	100.0%
		Other Properties		3	2,135	1,174	96.8%
					8,136	6,319

	Total square feet at December 31, 2014				54,830	44,745


	(1)		As of December 31, 2014, we own junior and senior mezzanine loans of 85 Tenth Avenue with an accreted balance of $147.6 million. The junior and senior mezzanine loans bear paid-in-kind interest of 12% and 9%, respectively and mature in May 2017. We account for our investment in 85 Tenth Avenue using the equity method of accounting because we will receive a 49.9% interest in the property after repayment of the junior mezzanine loan. As a result of recording our share of the GAAP losses of the property, the net carrying amount of these loans is $28.2 million on our consolidated balance sheets.

Overview - continued

	Square footage (in service) and Occupancy as of December 31, 2013:

					Square Feet (in service)
				Number of	Total	Our
	(Square feet in thousands)			properties	Portfolio	Share	Occupancy %
	New York:
		Office		30	19,217	15,776	96.5%
		Retail		54	2,370	2,147	97.4%
		Alexander's		6	2,178	706	99.4%
		Hotel Pennsylvania		1	1,400	1,400
		Residential - 1,653 units		2	1,523	762	94.8%
					26,688	20,791	96.7%

	Washington, DC:
		Office, excluding the Skyline Properties		51	13,581	11,151	85.4%
		Skyline Properties		8	2,652	2,652	60.8%
		Total Office		59	16,233	13,803	80.7%
		Residential - 2,405 units		7	2,588	2,446	96.3%
		Other		5	379	379	100.0%
					19,200	16,628	83.4%

	Other:
		The Mart		3	3,703	3,694	96.3%
		555 California Street		3	1,795	1,257	94.5%
		85 Tenth Avenue⁽¹⁾		1	613	306	100.0%
		Other Properties		3	1,908	946	96.8%
					8,019	6,203

	Total square feet at December 31, 2013				53,907	43,622


	(1)		As of December 31, 2013, we own junior and senior mezzanine loans of 85 Tenth Avenue with an accreted balance of $124.1 million. The junior and senior mezzanine loans bear paid-in-kind interest of 12% and 9%, respectively and mature in May 2017. We account for our investment in 85 Tenth Avenue using the equity method of accounting because we will receive a 49.9% interest in the property after repayment of the junior mezzanine loan. As a result of recording our share of the GAAP losses of the property, the net carrying amount of these loans is $24.5 million on our consolidated balance sheets.

Overview - continued

Washington, DC Segment

Of the 2,395,000 square feet subject to the effects of the Base Realignment and Closure (“BRAC”) statute, 393,000 square feet has been taken out of service for redevelopment and 1,137,000 square feet has been leased or is pending. The table below summarizes the status of the BRAC space.

		Rent Per		Square Feet
		Square Foot		Total	Crystal City	Skyline	Rosslyn

Resolved:
	Relet	$	37.19	1,126,000	664,000	381,000	81,000
	Leases pending		34.29	11,000	11,000	-	-
	Taken out of service for redevelopment			393,000	393,000	-	-
				1,530,000	1,068,000	381,000	81,000

To Be Resolved:
	Vacated		35.92	771,000	281,000	425,000	65,000
	Expiring in 2015		43.79	94,000	88,000	6,000	-
				865,000	369,000	431,000	65,000

Total square feet subject to BRAC				2,395,000	1,437,000	812,000	146,000

Due to the effects of BRAC related move-outs and the sluggish leasing environment in the Washington, DC / Northern Virginia area, EBITDA from continuing operations for the year ended December 31, 2013 was lower than 2012 by $14,254,000 and EBITDA from continuing operations for the year ended December 31, 2014 was lower than 2013 by $5,633,000, which was offset by an interest expense reduction of $18,568,000 from the restructuring of the Skyline properties mortgage loan in October 2013. We expect 2015 EBITDA from continuing operations will be flat to 2014.

Critical Accounting Policies

In preparing the consolidated financial statements we have made estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates. Set forth below is a summary of the accounting policies that we believe are critical to the preparation of our consolidated financial statements. The summary should be read in conjunction with the more complete discussion of our accounting policies included in Note 2 to the consolidated financial statements in this Annual Report on Form 10-K.

Real Estate

Real estate is carried at cost, net of accumulated depreciation and amortization. Betterments, major renewals and certain costs directly related to the improvement and leasing of real estate are capitalized. Maintenance and repairs are expensed as incurred. For redevelopment of existing operating properties, the net book value of the existing property under redevelopment plus the cost for the construction and improvements incurred in connection with the redevelopment are capitalized to the extent the capitalized costs of the property do not exceed the estimated fair value of the redeveloped property when complete. If the cost of the redeveloped property, including the net book value of the existing property, exceeds the estimated fair value of redeveloped property, the excess is charged to expense. Depreciation is recognized on a straight-line basis over estimated useful lives which range from 7 to 40 years. Tenant allowances are amortized on a straight-line basis over the lives of the related leases, which approximate the useful lives of the assets.

Upon the acquisition of real estate, we assess the fair value of acquired assets (including land, buildings and improvements, identified intangibles, such as acquired above and below-market leases, acquired in-place leases and tenant relationships) and acquired liabilities and we allocate the purchase price based on these assessments. We assess fair value based on estimated cash flow projections that utilize appropriate discount and capitalization rates and available market information. Estimates of future cash flows are based on a number of factors including historical operating results, known trends, and market/economic conditions. We record acquired intangible assets (including acquired above-market leases, acquired in-place leases and tenant relationships) and acquired intangible liabilities (including below–market leases) at their estimated fair value separate and apart from goodwill. We amortize identified intangibles that have finite lives over the period they are expected to contribute directly or indirectly to the future cash flows of the property or business acquired.

As of December 31, 2014 and 2013, the carrying amounts of real estate, net of accumulated depreciation, were $13.7 billion and $12.6 billion, respectively. As of December 31, 2014 and 2013, the carrying amounts of identified intangible assets (including acquired above-market leases, tenant relationships and acquired in-place leases) were $225,155,000 and $253,082,000, respectively, and the carrying amounts of identified intangible liabilities, a component of “deferred revenue” on our consolidated balance sheets, were $328,201,000 and $326,917,000, respectively.

Our properties, including any related intangible assets, are individually reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment exists when the carrying amount of an asset exceeds the aggregate projected future cash flows over the anticipated holding period on an undiscounted basis. An impairment loss is measured based on the excess of the property’s carrying amount over its estimated fair value. Impairment analyses are based on our current plans, intended holding periods and available market information at the time the analyses are prepared. If our estimates of the projected future cash flows, anticipated holding periods, or market conditions change, our evaluation of impairment losses may be different and such differences could be material to our consolidated financial statements. The evaluation of anticipated cash flows is subjective and is based, in part, on assumptions regarding future occupancy, rental rates and capital requirements that could differ materially from actual results. Plans to hold properties over longer periods decrease the likelihood of recording impairment losses.

Critical Accounting Policies – continued

Partially Owned Entities

We consolidate entities in which we have a controlling financial interest. In determining whether we have a controlling financial interest in a partially owned entity and the requirement to consolidate the accounts of that entity, we consider factors such as ownership interest, board representation, management representation, authority to make decisions, and contractual and substantive participating rights of the partners/members as well as whether the entity is a variable interest entity (“VIE”) and we are the primary beneficiary. We are deemed to be the primary beneficiary of a VIE when we have (i) the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance and (ii) the obligation to absorb losses or receive benefits that could potentially be significant to the VIE. We generally do not control a partially owned entity if the entity is not considered a VIE and the approval of all of the partners/members is contractually required with respect to major decisions, such as operating and capital budgets, the sale, exchange or other disposition of real property, the hiring of a chief executive officer, the commencement, compromise or settlement of any lawsuit, legal proceeding or arbitration or the placement of new or additional financing secured by assets of the venture. We account for investments under the equity method when the requirements for consolidation are not met, and we have significant influence over the operations of the investee. Equity method investments are initially recorded at cost and subsequently adjusted for our share of net income or loss and cash contributions and distributions each period. Investments that do not qualify for consolidation or equity method accounting are accounted for on the cost method.

Investments in partially owned entities are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is measured based on the excess of the carrying amount of an investment over its estimated fair value. Impairment analyses are based on current plans, intended holding periods and available information at the time the analyses are prepared. The ultimate realization of our investments in partially owned entities is dependent on a number of factors, including the performance of each investment and market conditions. If our estimates of the projected future cash flows, the nature of development activities for properties for which such activities are planned and the estimated fair value of the investment change based on market conditions or otherwise, our evaluation of impairment losses may be different and such differences could be material to our consolidated financial statements. The evaluation of anticipated cash flows is subjective and is based, in part, on assumptions regarding future occupancy, rental rates and capital requirements that could differ materially from actual results.

As of December 31, 2014 and 2013, the carrying amounts of investments in partially owned entities, including Toys “R” Us, was $1.2 billion and $1.2 billion, respectively.

Mortgage and Mezzanine Loans Receivable

We invest in mortgage and mezzanine loans of entities that have significant real estate assets. These investments are either secured by the real property or by pledges of the equity interests of the entities owning the underlying real estate. We record these investments at the stated principal amount net of any unamortized discount or premium. We accrete or amortize any discount or premium over the life of the related receivable utilizing the effective interest method or straight-line method, if the result is not materially different. We evaluate the collectibility of both interest and principal of each of our loans whenever events or changes in circumstances indicate such amounts may not be recoverable. A loan is impaired when it is probable that we will be unable to collect all amounts due according to the existing contractual terms. When a loan is impaired, the amount of the loss accrual is calculated by comparing the carrying amount of the investment to the present value of expected future cash flows discounted at the loan’s effective interest rate, or as a practical expedient, to the value of the collateral if the loan is collateral dependent. Interest on impaired loans is recognized when received in cash. If our estimates of the collectability of both interest and principal or the fair value of our loans change based on market conditions or otherwise, our evaluation of impairment losses may be different and such differences could be material to our consolidated financial statements.

As of December 31, 2014 and 2013, the carrying amounts of mortgage and mezzanine loans receivable were $16,748,000 and $170,972,000, respectively, net of an allowance of $5,811,000 and $5,845,000, respectively, and are included in “other assets” on our consolidated balance sheets.

Critical Accounting Policies – continued

Allowance For Doubtful Accounts

We periodically evaluate the collectability of amounts due from tenants and maintain an allowance for doubtful accounts ($12,210,000 and $14,519,000 as of December 31, 2014 and 2013, respectively) for estimated losses resulting from the inability of tenants to make required payments under the lease agreements. We also maintain an allowance for receivables arising from the straight-lining of rents ($3,188,000 and $4,355,000 as of December 31, 2014 and 2013, respectively). This receivable arises from earnings recognized in excess of amounts currently due under the lease agreements. Management exercises judgment in establishing these allowances and considers payment history and current credit status in developing these estimates. These estimates may differ from actual results, which could be material to our consolidated financial statements.

Revenue Recognition

We have the following revenue sources and revenue recognition policies:

· Base Rent — income arising from tenant leases. These rents are recognized over the non-cancelable term of the related leases on a straight-line basis which includes the effects of rent steps and rent abatements under the leases. We commence rental revenue recognition when the tenant takes possession of the leased space and the leased space is substantially ready for its intended use. In addition, in circumstances where we provide a tenant improvement allowance for improvements that are owned by the tenant, we recognize the allowance as a reduction of rental revenue on a straight-line basis over the term of the lease.

· Percentage Rent — income arising from retail tenant leases that is contingent upon tenant sales exceeding defined thresholds. These rents are recognized only after the contingency has been removed (i.e., when tenant sales thresholds have been achieved).

· Hotel Revenue — income arising from the operation of the Hotel Pennsylvania which consists of rooms revenue, food and beverage revenue, and banquet revenue. Income is recognized when rooms are occupied. Food and beverage and banquet revenue are recognized when the services have been rendered.

· Trade Shows Revenue — income arising from the operation of trade shows, including rentals of booths. This revenue is recognized when the trade shows have occurred.

· Expense Reimbursements — revenue arising from tenant leases which provide for the recovery of all or a portion of the operating expenses and real estate taxes of the respective property. This revenue is accrued in the same periods as the expenses are incurred.

· Management, Leasing and Other Fees — income arising from contractual agreements with third parties or with partially owned entities. This revenue is recognized as the related services are performed under the respective agreements.

· Cleveland Medical Mart — revenue arising from the development of the Cleveland Medical Mart. This revenue was recognized as the related services were performed under the respective agreements using the criteria set forth in ASC 605-25, Multiple Element Arrangements.

Before we recognize revenue, we assess, among other things, its collectibility. If our assessment of the collectibility of revenue changes, the impact on our consolidated financial statements could be material.

Income Taxes

Vornado operates in a manner intended to enable it to continue to qualify as a Real Estate Investment Trust (“REIT”) under Sections 856-860 of the Internal Revenue Code of 1986, as amended. Under those sections, a REIT which distributes at least 90% of its REIT taxable income as a dividend to its shareholders each year and which meets certain other conditions will not be taxed on that portion of its taxable income which is distributed to its shareholders. Vornado distributes to its shareholders 100% of its taxable income and therefore, no provision for Federal income taxes is required. If Vornado fails to distribute the required amount of income to its shareholders, or fails to meet other REIT requirements, it may fail to qualify as a REIT which may result in substantial adverse tax consequences.

Net Income and EBITDA by Segment for the Years Ended December 31, 2014, 2013 and 2012

Below is a summary of net income and a reconciliation of net income to EBITDA⁽¹⁾ by segment for the years ended December 31, 2014, 2013 and 2012.


(Amounts in thousands)		For the Year Ended December 31, 2014
			Total		New York			Washington, DC			Other
Total revenues			$	2,312,512	$	1,520,845		$	537,151		$	254,516
Total expenses				1,622,619		946,466			358,019			318,134
Operating income (loss)				689,893		574,379			179,132			(63,618)
(Loss) income from partially owned entities, including Toys				(58,131)		20,701			(3,677)			(75,155)
Income from Real Estate Fund				163,034		-			-			163,034
Interest and other investment income, net				38,752		6,711			183			31,858
Interest and debt expense				(412,755)		(183,427)			(75,395)			(153,933)
Net gain on disposition of wholly owned and partially
	owned assets			13,568		-			-			13,568
Income (loss) before income taxes				434,361		418,364			100,243			(84,246)
Income tax expense				(9,281)		(4,305)			(242)			(4,734)
Income (loss) from continuing operations				425,080		414,059			100,001			(88,980)
Income from discontinued operations				583,946		463,163			-			120,783
Net income				1,009,026		877,222			100,001			31,803
Less net income attributable to noncontrolling interests in
	consolidated subsidiaries			(96,561)		(8,626)			-			(87,935)
Net income (loss) attributable to Vornado Realty L.P.				912,465		868,596			100,001			(56,132)
Interest and debt expense⁽²⁾				654,398		241,959			89,448			322,991
Depreciation and amortization⁽²⁾				685,973		324,239			145,853			215,881
Income tax expense⁽²⁾				24,248		4,395			288			19,565
EBITDA⁽¹⁾			$	2,277,084	$	1,439,189	⁽³⁾	$	335,590	⁽⁴⁾	$	502,305	⁽⁵⁾

____________________________

See notes on pages 17 and 18.

Net Income and EBITDA by Segment for the Years Ended December 31, 2014, 2013 and 2012 - continued


(Amounts in thousands)		For the Year Ended December 31, 2013
			Total		New York			Washington, DC			Other
Total revenues			$	2,299,176	$	1,470,907		$	541,161		$	287,108
Total expenses				1,624,625		910,498			347,686			366,441
Operating income (loss)				674,551		560,409			193,475			(79,333)
(Loss) income from partially owned entities, including Toys				(338,785)		15,527			(6,968)			(347,344)
Income from Real Estate Fund				102,898		-			-			102,898
Interest and other investment (loss) income, net				(24,887)		5,357			129			(30,373)
Interest and debt expense				(425,782)		(181,966)			(102,277)			(141,539)
Net gain on disposition of wholly owned and partially
	owned assets			2,030		-			-			2,030
(Loss) income before income taxes				(9,975)		399,327			84,359			(493,661)
Income tax benefit (expense)				8,717		(2,794)			14,031			(2,520)
(Loss) income from continuing operations				(1,258)		396,533			98,390			(496,181)
Income from discontinued operations				565,998		160,314			-			405,684
Net income (loss)				564,740		556,847			98,390			(90,497)
Less net income attributable to noncontrolling interests in
	consolidated subsidiaries			(63,952)		(10,786)			-			(53,166)
Net income (loss) attributable to Vornado Realty L.P.				500,788		546,061			98,390			(143,663)
Interest and debt expense⁽²⁾				758,781		236,645			116,131			406,005
Depreciation and amortization⁽²⁾				732,757		293,974			142,409			296,374
Income tax expense (benefit)⁽²⁾				26,371		3,002			(15,707)			39,076
EBITDA⁽¹⁾			$	2,018,697	$	1,079,682	⁽³⁾	$	341,223	⁽⁴⁾	$	597,792	⁽⁵⁾




(Amounts in thousands)		For the Year Ended December 31, 2012
			Total		New York			Washington, DC			Other
Total revenues			$	2,332,724	$	1,319,470		$	554,028		$	459,226
Total expenses				1,738,381		835,563			360,056			542,762
Operating income (loss)				594,343		483,907			193,972			(83,536)
Income (loss) from partially owned entities, including Toys				423,126		207,773			(5,612)			220,965
Income from Real Estate Fund				63,936		-			-			63,936
Interest and other investment (loss) income, net				(261,200)		4,002			126			(265,328)
Interest and debt expense				(431,235)		(146,350)			(115,574)			(169,311)
Net gain on disposition of wholly owned and partially
	owned assets			4,856		-			-			4,856
Income (loss) before income taxes				393,826		549,332			72,912			(228,418)
Income tax expense				(8,132)		(3,491)			(1,650)			(2,991)
Income (loss) from continuing operations				385,694		545,841			71,262			(231,409)
Income from discontinued operations				308,847		30,293			167,766			110,788
Net income (loss)				694,541		576,134			239,028			(120,621)
Less net income attributable to noncontrolling interests in
	consolidated subsidiaries			(32,018)		(2,138)			-			(29,880)
Net income (loss) attributable to Vornado Realty L.P.				662,523		573,996			239,028			(150,501)
Interest and debt expense⁽²⁾				760,523		187,855			133,625			439,043
Depreciation and amortization⁽²⁾				735,293		252,257			157,816			325,220
Income tax expense ⁽²⁾				7,026		3,751			1,943			1,332
EBITDA⁽¹⁾			$	2,165,365	$	1,017,859	⁽³⁾	$	532,412	⁽⁴⁾	$	615,094	⁽⁵⁾

____________________________

See notes on pages 17 and 18.

Net Income and EBITDA by Segment for the Years Ended December 31, 2014, 2013 and 2012 - continued

	Notes to preceding tabular information:



(1)	EBITDA represents "Earnings Before Interest, Taxes, Depreciation and Amortization." We consider EBITDA a supplemental measure for making decisions and assessing the unlevered performance of our segments as it relates to the total return on assets as opposed to the levered return on equity. As properties are bought and sold based on a multiple of EBITDA, we utilize this measure to make investment decisions as well as to compare the performance of our assets to that of our peers. EBITDA should not be considered a substitute for net income. EBITDA may not be comparable to similarly titled measures employed by other companies.


(2)	Interest and debt expense, depreciation and amortization and income tax expense (benefit) in the reconciliation of net income (loss) to EBITDA includes our share of these items from partially owned entities.



(3)	The elements of "New York" EBITDA are summarized below.
				For the Year Ended December 31,
	(Amounts in thousands)			2014		2013		2012
	Office^(a)			$	1,085,262	$	759,941	$	568,518
	Retail^(b)				281,428		246,808		189,484
	Alexander's ^(c)				41,746		42,210		231,402
	Hotel Pennsylvania				30,753		30,723		28,455
		Total New York		$	1,439,189	$	1,079,682	$	1,017,859


	(a)		2014, 2013 and 2012 includes EBITDA from discontinued operations, net gains on sale of real estate and other items that affect comparability, aggregating $462,239, $163,528 and $37,129, respectively. Excluding these items, EBITDA was $623,023, $596,413 and $531,389, respectively.

	(b)		2014, 2013 and 2012 includes EBITDA from discontinued operations, net gains on sale of real estate and other items that affect comparability, aggregating $1,751, $934 and $510, respectively. Excluding these items, EBITDA was $279,677, $245,874 and $188,974, respectively.

	(c)		2014, 2013 and 2012 includes EBITDA from discontinued operations, net gains on sale of real estate and other items that affect comparability, aggregating $171, $730 and $191,040, respectively. Excluding these items, EBITDA was $41,575, $41,480 and $40,362, respectively.




(4)	The elements of "Washington, DC" EBITDA are summarized below.

				For the Year Ended December 31,
	(Amounts in thousands)			2014		2013		2012
	Office, excluding the Skyline Properties ^(a)			$	266,859	$	268,373	$	449,448
	Skyline properties				27,150		29,499		40,037
		Total Office			294,009		297,872		489,485
	Residential				41,581		43,351		42,927
		Total Washington, DC		$	335,590	$	341,223	$	532,412


	(a)		2012 includes EBITDA from discontinued operations, net gains on sale of real estate and other items that affect comparability, aggregating $176,935. Excluding these items, EBITDA was $272,513.

Net Income and EBITDA by Segment for the Years Ended December 31, 2014, 2013 and 2012 - continued

Notes to preceding tabular information:

(5)

The elements of "other" EBITDA are summarized below.

(Amounts in thousands)

For the Year Ended December 31,

2014

2013

2012

Our share of Real Estate Fund:

Income before net realized/unrealized gains

8,056

7,752

VORNADO REALTY LP 8-K