What changed in this filing

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Item 1A. Risk Factors

2025-02-10 compared with 2024-02-12 · 47 added, 57 removed, 331 unchanged (24% of the section changed)

5 unchanged sentences

We may be adversely affected by trends in office real estate, including work from home trends.

In 2023, approximate ly 54% of our rental revenue was from Bloomberg, the office tenant at our 731 Lexington Avenue office property.

In 2024, approximate ly 55% of our rental revenues was from Bloomberg, the office tenant at our 731 Lexington Avenue office property.

Work from home, flexible or hybrid work schedules, open workplaces, videoconferencing, and teleconferencing remain prevalent in certain situations, following the COVID-19 pandemic.

Changes in tenant space utilization, including from the continuation of work from home and flexible work arrangement policies, may cause office tenants to reassess their long-term physical space needs, which could have an adverse effect on our business.

Additionally, the increased use of artificial intelligence (“AI”) could result in changes in tenant space utilization, including the need to reduce or reconfigure space.

All of our properties are in New York City and are affected by the economic cycles and risks inherent to this area.

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Real estate markets are affected by economic downturns and we cannot predict how economic conditions will impact this market in either the short or long term.

Declines in the economy and declines in the real estate markets in New York City have affected and could affect our financial performance and the value of our properties.

Declines in the economy and declines in the New York City real estate market have affected and could affect our financial performance and the value of our properties.

In addition to the factors affecting the national economic condition generally, the factors affecting economic conditions in this area include:

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• the effects of inflation;

• rising interest rates;

• interest rate fluctuations;

• relocations of businesses;

• changing demographics;

• increased work from home and use of alternative work places;

• work from home and use of alternative work places;

• changes in the number of domestic and international tourists to our markets (including as a result of changes in the relative strengths of world currencies);

• changes in diplomatic and trade relationships, as well as potential tariffs;

• the fiscal health of New York State and New York City governments and local transit authorities;

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• increased government regulation and costs of complying with such regulations;

• changes in rates or the treatment of the deductibility of state and local taxes.

It is impossible for us to predict the future effects of trends in the economic and investment climates of the New York City metropolitan region, and more generally of the United States, on the real estate market in this area.

• changes in rates or limitations of the deductibility of state and local taxes.

Local, national or global economic downturns could negatively affect the value of our properties, our business and profitability.

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These conditions may also adversely affect our revenues and cash flows.

The factors that affect the value of our real estate include, among other things:

• global, national, regional and local economic conditions and geopolitical events;

The factors that affect the value of our real estate assets include, among other things:

• global, national and local economic conditions and geopolitical events;

• competition from other available space, including co-working space and subleases;

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• changes in market rental rates;

• trends in office real estate, including many tenants’ preferences for space in modern amenitized buildings which may require the landlord to incur significant capital expenditures;

• increased competition from online shopping and its impact on retail tenants and their demand for retail space;

• potential changes in trade relationships, new tariffs and other trade protection measures or barriers that may adversely affect retailers and retail store values;

• the timing and costs associated with property improvements and rentals;

1 unchanged sentence

• changes in real estate taxes and other expenses;

• fluctuations in interest rates;

• the ability of state and local governments to operate within their budgets;

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• consequences of any armed conflict involving, or terrorist attacks against, the United States or individual acts of violence in public spaces;

• trends in office real estate, including many tenants’ preferences for space in modern amenitized buildings which may require the landlord to incur significant capital expenditures;

• availability of financing on acceptable terms or at all;

• inflation or deflation;

• fluctuations in interest rates;

• our ability to obtain adequate insurance;

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In addition, changes in space utilization by our tenants may impact our ability to renew or relet space without the need to incur substantial costs in renovating or redesigning the internal configuration of the relevant property and/or space.

If we are unable to promptly renew the leases or relet the space at similar rates, lease vacant space, or if we are otherwise not able to maintain occupancy on favorable terms, our cash flow and ability to service debt obligations and pay dividends and distributions to stockholders could be adversely affected.

If we are unable to promptly renew the leases or relet the space at similar rates, lease vacant space, or if we are otherwise not able to maintain occupancy on economically favorable terms, our cash flow and ability to service debt obligations and pay dividends and distributions to stockholders could be adversely affected.

731 Lexington Avenue accounts for a majority of our revenues.

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If we were to lose Bloomberg as a tenant, or if Bloomberg were to be unable to fulfill its obligations under its lease, it would adversely affect our results of operations and financial condition.

We depend upon anchor tenants to attract shoppers at our Rego Park I and II retail properties and decisions made by these tenants, or adverse developments in the businesses of these tenants, could materially affect our financial condition and results of operations.

Our Rego Park I and II retail properties are anchored by well-known department stores and other tenants who generate shopping traffic.

We depend upon anchor tenants to attract shoppers at our Rego Park retail properties and decisions made by these tenants, or adverse developments in the businesses of these tenants, could materially affect our financial condition and results of operations.

Our Rego Park retail properties are anchored by well-known large format retailers and other tenants who generate shopping traffic.

The value of these properties would be adversely affected if our anchor tenants failed to meet their contractual obligations, sought concessions in order to continue operations or ceased their operations, including as a result of bankruptcy.

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As a result, the bankruptcy or insolvency of, or nonpayment by, a major tenant could cause us to suffer lower revenues and operational difficulties, including leasing the remainder of the property, which could in turn result in decreased net income and funds available to pay our indebtedness and make distributions to stockholders.

Our business, financial condition, results of operations and cash flows have been and may continue to be adversely affected by outbreaks of highly infectious or contagious diseases.

Our business has been, and may continue to be, adversely affected by the economic and industry challenges created by highly infectious or contagious diseases, including the COVID-19 pandemic.

The impact of the COVID-19 pandemic caused retailers to reduce the number and size of their physical locations and further increase reliance on e-commerce, and future infectious or contagious diseases could have a similar impact.

Additionally, our office tenant may adjust its employee work from home arrangements which may lead to a reassessment of its long-term physical space needs.

Any future outbreak of a highly infectious or contagious disease could impact how people live, work and travel in ways that have affected and may in the future affect our properties.

Over time, these factors could decrease the demand for office and retail space and ultimately decrease occupancy and/or rent levels across our portfolio, which may have a negative impact on our financial condition and/or access to capital.

Some of our potential losses may not be covered by insurance.

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Coverage for acts of terrorism (excluding NBCR acts) is fully reinsured by third party insurance companies and the Federal government with no exposure to FNSIC.

For NBCR acts, FNSIC is responsible for a $316,000 deductible and 20% of the balance of a covered loss, and the Federal government is responsible for the remaining 80% of a covered loss.

For NBCR acts, FNSIC is responsible for a deductible of $338,000 and 20% of the balance of a covered loss, and the Federal government is responsible for the remaining 80% of a covered loss.

We are ultimately responsible for any loss incurred by FNSIC.

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In response to a terrorist attack, the perceived threat of terrorism or other criminal acts, tenants in this area may choose to relocate their businesses to less populated, lower-profile areas of the United States that may be perceived to be less likely targets of future terrorist activity or have lower rates of crime and fewer customers may choose to patronize businesses in this area.

This, in turn, could trigger a decrease in the demand for space in this area, which could increase vacancies in our properties and force us to lease space at our properties on less favorable terms .

This, in turn, could trigger a decrease in the demand for space in this area, which could increase vacancies in our properties and force us to lease space on less favorable terms .

Furthermore, we may experience increased costs for security, equipment and personnel.

As a result, the value of our properties and the level of our revenues and cash flows could decline materially.

Natural disasters and the effects of climate change could have a concentrated impact on the area where we operate and could adversely affect our results.

The effects of climate change and natural disasters could have a concentrated impact on the area where we operate and could adversely affect our results.

Our properties are located in New York City.

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The incurrence of these losses, costs or business interruptions may adversely affect our operating and financial results.

Our properties are located in an urban area, which means the vitality of our properties is reliant on sound transportation and utility infrastructure.

If that infrastructure is compromised in any way by an extreme weather event, such a compromise could have an adverse effect on our local economies and populations, as well as on our tenants’ ability to do business in our buildings.

Our properties are located in an urban area, which means the vitality of our properties is reliant on sound transportation and utility infrastructure systems.

If one of those systems is compromised in any way by an extreme weather event, such a compromise could have an adverse effect on our local economies and populations, as well as on our tenants’ ability to do business in our buildings.

Our properties are subject to transitional risks related to climate-related policy change.

De-carbonization of grid-supplied energy could lead to increased energy costs and operating expenses for our buildings.

De-carbonization of grid-supplied energy (as has been mandated by the Climate Leadership and Community Protection Act in New York State) could lead to increased energy costs and operating expenses for our buildings.

Retrofitting our building systems to consume less energy could lead to increased capital costs.

Buildings which consume fossil fuels onsite may be subject to penalties in the future.

In addition, the full transition of grid-supplied energy to renewable sources (as has been mandated by the Climate Leadership and Community Protection Act in New York State) could lead to increased energy costs and operating expenses for our buildings.

In addition, buildings which consume fossil fuel onsite may be subject to penalties in the future.

Although these laws and regulations have not had any material adverse effects on our business to date, they could result in substantial costs, including compliance costs, increased energy costs, retrofit costs and construction costs.

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These increased tax costs could, among other things, adversely affect the trading price for our common shares, our financial condition, our results of operations and the amount of cash available to pay our indebtedness and make distributions to our stockholders.

Significant inflation and continuing increases in the inflation rate could adversely affect our business and financial results.

Recent substantial increases in the rate of inflation and potential future elevated rates of inflation, both real and anticipated, may impact our business and results of operations.

Significant inflation and increases in the inflation rate could adversely affect our business and financial results.

Elevated rates of inflation, both real and anticipated, may impact our business and results of operations.

In a highly inflationary environment, we may be unable to raise rental rates at or above the rate of inflation, which could reduce our profit margins.

In addition, our cost of labor and materials could increase, which could have an adverse effect on our business or financial results.

In addition, our cost of labor and materials could increase, which could have an adverse effect on our business and financial results.

Increased inflation could also adversely affect us by increasing costs of construction and renovation.

While increases in most operating expenses at our properties can be passed on to our office and retail tenants, some tenants have fixed reimbursement charges, and expenses at our residential property may not be able to be passed on to residential tenants.

Unreimbursed increased operating expenses may reduce cash flow available to pay our indebtedness and make distributions to our stockholders.

An increase in unreimbursed operating expenses may reduce cash flow available to pay our indebtedness and make distributions to our stockholders.

We may acquire, develop, or redevelop properties and this may create risks.

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We are exposed to risks associated with property development, redevelopment and repositioning that could adversely affect us, including our financial condition and results of operations.

We continue to engage in development, redevelopment and repositioning activities with respect to our properties.

We are subject to certain risks in connection with development and redevelopment activities, which could adversely affect us, including our financial condition and results of operations.

We continue to engage in development, redevelopment and repositioning activities with respect to our properties, and, accordingly are subject to certain risks in connection with development and redevelopment activities, which could adversely affect us, including our financial condition and results of operations.

These risks include, without limitation, (i) the availability and pricing of financing on favorable terms or at all;

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(vii) the potential that we may expend funds on and devote management’s time to projects which we do not complete;

(viii) the inability to complete leasing of a property on schedule or at all, resulting in an increase in carrying or redevelopment costs;

(ix) the possibility that properties will be leased at below expected rental rates.

(viii) the inability to complete leasing of a property on schedule or at all, resulting in an increase in carrying or redevelopment costs and (ix) the possibility that properties will be leased at below expected rental rates.

These risks could result in substantial unanticipated delays or expenses and could prevent the initiation or the completion of redevelopment activities or reduce the ultimate rents achieved on new developments.

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Significantly tighter capital markets and economic conditions can materially affect our liquidity, financial condition and results of operations as well as the value of an investment in our common stock.

There are many factors that can affect the value of our equity securities and any debt securities we may issue in the future, including the state of the capital markets and the economy.

There are many factors that can affect the value of our equity securities, including the state of the capital markets and the economy.

Demand for office and retail space typically declines nationwide due to an economic downturn, bankruptcies, downsizing, layoffs and cost cutting.

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The cost and availability of credit may be adversely affected by illiquid credit markets and wider credit spreads, which may adversely affect our liquidity and financial condition, including our results of operations, and the liquidity and financial condition of our tenants.

Recently, domestic and international financial markets have experienced unusual volatility, significant interest rate increases and continuing uncertainty.

Liquidity has significantly tightened in overall financial markets.

Consequently, there is greater uncertainty regarding our ability to access the credit markets in order to obtain financing on reasonable terms.

Additionally, the recent inflation environment has led to an increase in interest rates, which has had a direct and material increase on the interest expense of our borrowings.

Our inability or the inability of our tenants to timely refinance maturing liabilities and access the capital markets to meet liquidity needs may materially affect our financial condition and results of operations and the value of our common stock.

Our inability or the inability of our tenants to timely refinance maturing liabilities and access the capital markets and obtain reasonable pricing to meet liquidity needs may materially affect our financial condition and results of operations and the value of our common stock.

We have outstanding debt, and the amount of debt and its cost may continue to increase and refinancing may not be available on acceptable terms, which could affect our future operations.

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Should such events occur, our operations may be adversely affected.

If a property is mortgaged to secure payment of indebtedness and income from such property is insufficient to pay that indebtedness, the property could be foreclosed upon by the mortgagee resulting in a loss of the asset.

If we are unable to obtain additional debt financing or refinance existing indebtedness upon maturity, our financial condition and results of operations would likely be adversely affected.

In addition, the current rising interest rate environment has led to an increase in interest rates on our variable rate debt and an increase in the cost of refinancing our existing debt, entering into new debt and for interest rate hedge instruments, reducing our operating cash flows.

In addition, the volatility in the interest rate environment has led to an increase in interest rates on our variable rate debt, including on new hedging instruments, and an increase in the cost of refinancing our existing debt and entering into new debt, all which have reduced, and could continue to reduce our operating cash flows.

While certain of our debt is fixed by an interest rate swap arrangement, the arrangement expires earlier than the mortgage loan maturity, resulting in future exposure to rising interest rates, which could further reduce our available cash.

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The interest rate hedge instruments we may use to manage some of our exposure to interest rate volatility involve risks, including the risk that counterparties may fail to perform under these arrangements.

If interest rates were to fall, these arrangements may cause us to pay higher interest on our debt obligations than would otherwise be the case.

If interest rates continue to fall, these arrangements may cause us to pay higher interest on our debt obligations than would otherwise be the case.

In addition, the use of such instruments may generate income that may not be treated as qualifying REIT income for purposes of the 75% gross income test or 95% gross income test.

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They and some of our other directors and officers have interests or positions in other entities that may compete with us.

As of December 31, 2023, Inter state and its partners owned approximately 7.0% of the common shares of beneficial interest of Vornado and approximately 26.0% of our outstanding common stock.

As of December 31, 2024, Inter state and its partners beneficially owned an aggregate of approximately 7.1% of the common shares of beneficial interest of Vornado and approximately 26.0% of our outstanding common stock.

Steven Roth, David Mandelbaum and Russell B.

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Roth is the Chairman of our Board of Directors and our Chief Executive Officer, the Chairman of the Board of Trustees and Chief Executive Officer of Vornado and the Managing General Partner of Interstate.

Wight and Mr.

Mandelbaum are both trustees of Vornado and members of our Board of Directors.

Wight and Mandelbaum are both trustees of Vornado and members of our Board of Directors.

In addition, Vornado manages and leases the real estate assets of Interstate.

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Our IT networks and related systems are essential to the operation of our business and our ability to perform day-to-day operations (including managing our building systems) and, in some cases, may be critical to the operations of certain of our tenants.

We face risks associated with security breaches, whether through cyber attacks or cyber intrusions over the Internet, malware, ransomware, computer viruses, phishing, attachments to e-mails, persons who access our systems from inside or outside our organization, and other significant disruptions of our IT networks and related systems.

The risk of a security breach or disruption, particularly through a cyber attack or cyber intrusion, including by computer hackers, foreign governments and cyber terrorists, has generally increased as the number, intensity and sophistication of attempted attacks and intrusions from around the world have increased, including through the use of artificial intelligence.

Although we have not experienced cyber incidents that are individually, or in the aggregate, material, we have experienced cyber attacks in the past, which have thus far been mitigated by preventative, detective, and responsive measures that we have put in place.

We face risks associated with security breaches, whether through cyber attacks, malware, ransomware, computer viruses, phishing, attachments to e-mails, persons who access our systems from inside or outside our organization, and other significant disruptions of our IT networks and related systems.

Our suppliers and subcontractors face similar threats and an incident at one of these entities could adversely affect our business.

These entities are typically outside our control and may have access to certain of our information with varying levels of security and cybersecurity resources.

The risk of a security breach or disruption, particularly through a cyber attack, including by computer hackers, foreign governments and cyber terrorists, has generally increased as the number, intensity and sophistication of attempted attacks from around the world have increased, including through the use of artificial intelligence.

Although we have not experienced cyber incidents that are individually, or in the aggregate, material, the incidents we have experienced thus far have been mitigated by preventative, detective, and responsive measures that we have put in place.

Although we make efforts to maintain the security and integrity of these types of IT networks and related systems, and we have implemented various measures to manage the risk of a security breach or disruption, there can be no assurance that our security efforts and measures will be effective or that attempted security breaches or disruptions would not be successful or damaging.

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• general financial and economic market conditions and, in particular, developments related to market conditions for office REITs and other real estate related companies and the New York City real estate market;

• the impact of inflation;

• local, domestic and international economic factors unrelated to our performance (including the macro-economic impact of geopolitical conflict);

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We are dependent on the efforts of Steven Roth, the Chairman of our Board of Directors and our Chief Executive Officer.

Although we believe that we could find a replacement, the loss of his services could harm our operations and adversely affect the value of our common stock.

While we believe that we could find a replacement for him and other key personnel, the loss of their services could harm our operations and adversely affect the value of our common stock.

RISKS RELATED TO REGULATORY COMPLIANCE

We might fail to qualify or remain qualified as a REIT, and may be required to pay federal income taxes at corporate rates, which could adversely affect the value of our common stock.

Although we believe that we will remain organized and will continue to operate so as to qualify as a REIT for federal income tax purposes, we might fail to remain qualified.

Qualification are governed by highly technical and complex provisions of the Internal Revenue Code for which there are only limited judicial or administrative interpretations and depends on various facts and circumstances that are not entirely within our control.

We may fail to qualify or remain qualified as a REIT, and may be required to pay federal income taxes at corporate rates, which could adversely affect the value of our common stock.

Although we believe that we will remain organized and will continue to operate so as to qualify as a REIT for federal income tax purposes, we may fail to remain so qualified.

Qualifications are governed by highly technical and complex provisions of the Internal Revenue Code for which there are only limited judicial or administrative interpretations and depend on various facts and circumstances that are not entirely within our control.

In addition, legislation, new regulations, administrative interpretations or court decisions may significantly change the relevant tax laws and/or the federal income tax consequences of qualifying as a REIT.

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We may face possible adverse federal tax audits and changes in federal tax laws, which may result in an increase in our tax liability.

In the normal course of business, certain entities through which we own real estate either have undergone or may undergo tax audits.

In the normal course of business, certain entities through which we own real estate have either undergone or may undergo tax audits.

Although we believe that we have substantial arguments in favor of our positions, in some instances there is no controlling precedent or interpretive guidance.

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In the normal course of business, certain entities through which we own real estate have undergone, tax audits.

There can be no assurance that future audits will not occur with increased frequency or that the ultimate result of such audits will not have a material adverse effect on our results of operations.

There can be no assurance that audits will not occur with increased frequency or that the ultimate result of such audits will not have a material adverse effect on our results of operations.

From time-to-time changes in state and local tax laws or regulations are enacted, which may result in an increase in our tax liability.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1A. Risk Factors