UPDATE 2-Vornado posts lower FFO on loan to Macklowe

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By Ilaina Jonas

NEW YORK, Feb 26 (Reuters) - Vornado Realty Trust (VNO.N: Quote, Profile, Research), owner of office and retail properties, reported lower funds from operations on Tuesday after a $57 million non-cash charge for its share of loans it made to New York real estate owner Harry Macklowe.

Vornado set aside the charge, about 32 cents per share, when it wrote down the value of its $66 million share of mezzanine loans it made in June to fund part of Macklowe's nearly $7 billion purchase of seven Manhattan office buildings. Macklowe has been negotiating with lenders of a more than $5.6 billion short-term loan due Feb. 8, which he has failed to refinance with longer-term financing.

Vornado, based in New Jersey, reported fourth-quarter funds from operation of $193.4 million, or $1.18 per diluted share, compared with $211.8 million, or $1.34 per diluted share in the year-earlier quarter.

Excluding the reserves for the Macklowe loan, Vornado reported FFO of $1.50 compared with the average analysts forecast of $1.44, according to Reuters Estimates.

Quarterly revenue rose 23 percent to $888.5 million.

Vornado focuses on developing and owning office and retail properties in densely populated areas such as New York City and Washington D.C.

It owns 28 office buildings in New York and 83 in Washington and Northern Virginia. It also has a controlling interest in a three-building office complex in San Francisco.