May 6--Vornado Realty Trust's earnings fell by nearly half in the first quarter, compared with the same period a year ago, as commercial real estate endures greater distress and the industry prepares for properties to change hands at discounted prices.

Vornado, a New York-based real estate investment trust with offices in Paramus, said Tuesday it earned $269 million in funds from operations, or $1.63 a share, in the first quarter, compared with $528 million, or $3.17, in the first quarter 2008.

Funds from operations is a widely used metric for REITs, which must pay out most of their taxable income to shareholders to keep federal tax breaks.

Vornado's year-over-year drop in quarterly FFO is because of non-recurring gains in the first quarter of 2008. Those gains include $222 million related to deferred taxes recorded in the acquisition of the "H Street" property in Arlington County, Va., known as "Pentagon Row," and a $113 million gain on the sale of Vornado's stake in AmeriCold Realty Trust.

The company's revenue increased in the first quarter. Vornado's reported $682 million in revenue, up 5.1 percent from the $649 million in revenue in the first quarter of 2008.

In recent months, Vornado has worked to conserve money by issuing dividends in the form of stock as well as cash. In late April, the company announced an offering of 12.5 million shares and said it would use the equity financing for "general corporate purposes" as well as debt repayment and acquisitions.

In April, company Chairman and Chief Executive Officer Steven Roth said the time to buy properties was "on the horizon."

"But first, we must batten down the hatches and make sure our house is in order and is strong -- we've already done that," Roth wrote in a letter to shareholders. "Then, we must determine when systemic risk has passed -- not quite yet."

Shares of Vornado dropped $1.93, or 3.7 percent, to $50.53 in New York Stock Exchange trading.

E-mail: tangel@northjersey.com

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