As part of its plan to recycle capital, Vornado will continue to “harvest, divest and sell” all non-core assets, including Toys “R” Us anchored-centers, which amounted to 17.1% of the company’s EBITDA in 2011. In addition, Vornado also plans to reduce its exposure to the enclosed mall business, though it plans to continue to redevelop the Springfield Mall in Springfield, VA, which Roth described as “under-malled” though the local population is “large and affluent.”

Another exception to the rule is JCPenney. Fresh off its Apple-esque company transformation under new CEO Ron Johnson and president Michael Francis, earlier this year on Jan. 25, Vornado is planning to hold onto its non-core 23.4 million shares of JCP in order to “reap the benefits” of the department store’s new strategy, Roth said.

On the acquisition front, the company has also been an active player in the Midtown office market. During 2011 alone, Vornado acquired a 49.5% interest in 280 Park Ave., a 49.5% interest in 666 Fifth Ave., and a 30.3% interest in One Park Ave., as well as a 97.5% interest in 1399 New York Ave. in downtown Washington, DC.

Later in the year, the REIT participated in the recapitalization of the Crowne Plaza Times Square Hotel in a joint venture deal with property owner City Investment Fund. Under the deal, Vornado now holds a 38% stake in the property, and Vornado’s fund investment is subordinate to the property’s $259 million of senior debt, which matures in December 2013 with a one-year extension option.

On the disposition front, Vornado ditched $694 million of assets, including the 1.2 million-square-foot former Apparel Center at Chicago’s Merchandise Mart to San Francisco-based Shorenstein Properties LLC for approximately $228 million. On the New York side, it sold four small mixed-use properties in Manhattan for $78 million to investor Steven Elghanayan.

In total, Vornado’s funds from operations for the year ended December 31, 2011 was $1,231.0 million, or $6.42 per diluted share, compared to $1,251.5 million. Overall, Roth says the market is in a “recovery,” but at the same time, finds investing “difficult.”

“Nobody expected building prices to bounce back as strongly or as quickly as they did, but they did,” he wrote. “Assets are not cheap, either historically or in relation to current rents,” noting that cap rates are now 5% or lower for buildings in New York and Washington. “Having said all that capital wants to invest in our home markets of New York and Washington more than anywhere in the United States – and that’s a good thing. And assets like ours have along history of doubling in value every ten years – also a good thing.”