UPDATE 3-Vornado Realty third-quarter FFO rises

* FFO ex-items $1.18/shr; Street view $1.17

* Shares down 0.7 pct

* Exploring TALF CMBS (Recasts; Adds analyst comment, details, updates share price)

By Ilaina Jonas

NEW YORK, Nov 3 (Reuters) - Vornado Realty Trust (VNO.N), owner and operator of office and retail properties, reported third-quarter funds from operations rose 14.5 percent, boosted by solid performance from its Washington D.C. properties and better-than-expected results from New York.

FFO, excluding one-time items, totaled $221.4 million, or $1.18 per share, compared with $193.3 million, or $1.17 per share, a year earlier, the real estate investment trust said on Tuesday.

Results were 1 cent ahead of the $1.17 per share analysts had forecast on average, according to Thomson Reuters I/B/E/S.

"Overall, D.C. continues to deliver solid and consistent results for Vornado," JP Morgan analysts wrote in a research note.

Including items such as impairments for its investment in Lexington Realty Trust (LXP.N), a litigation benefit related to Toys R Us, of which Vornado owns a third, and gains for early extinguishment of debt, FFO was $234.2 million, or $1.25 per share, compared with $159.8 million, or 97 cents per share, a year earlier.

FFO, a REIT performance measure, removes the profit-reducing effect of depreciation, a noncash accounting item.

Third-quarter revenue was $671.2 million, better than Wall Street's forecast of $637.32 million.

For property the company has operated for at least a year, earnings before interest, taxes, depreciation and amortization (EBITDA) rose 8.7 percent on a cash basis. Rents for new leases were 14 percent higher than expiring ones.

In New York, comparable EBITDA rose 6.4 percent on a cash basis.

Vornado ended the quarter with $3 billion of cash and liquid securities. On Monday it said it would use its stockpile of cash to buy back about $2 billion of convertible debt.

The New Jersey-based REIT had $84.8 million remaining of debt maturing this year and $899.1 million in 2010. It also said it is exploring issuing commercial mortgage-backed securities (CMBS) that would be eligible for U.S. Federal Reserve's Term Asset-Backed Loan Facility (TALF) program, designed to jump-start the commercial real estate lending market.

Vornado shares were down 0.7 percent to $59.82 in early trading on the New York Stock Exchange, versus a 0.3 percent decline in the benchmark MSCI U.S. REIT Index .RMZ (Reporting by Ilaina Jonas, editing by Dave Zimmerman and Tim Dobbyn)