<PAGE> 1
As filed with the Securities and Exchange Commission on September 10, 1997
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
Amendment No. 1
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) AUGUST 21, 1997
Commission File Number: 000-22685
VORNADO REALTY L.P.
(Exact name of registrant as specified in its charter)
DELAWARE 13-3925979
(State or other jurisdiction of incorporation) (I.R.S. Employer
Identification Number)
PARK 80 WEST, PLAZA II, SADDLE BROOK, NEW JERSEY 07663
(Address of principal executive offices) (Zip Code)
(201)587-1000
(Registrant's telephone number, including area code)
N/A
(Former Name or Former Address, if Changed Since Last Report)
Page 1
<PAGE> 2
This form 8-K/A amends Vornado Realty L.P.'s Form 8-K previously filed
on August 29, 1997 to include certain required financial statements and pro
forma financial information.
Item 1. Not Applicable.
Item 2. Acquisition or Disposition of Assets.
On August 21, 1997, Vornado Realty Trust, which owns 90.4%
and is the sole general partner of Vornado Realty L.P., entered into an
agreement with the owners of 90 Park Avenue, pursuant to which Vornado
restructured the mortgage, took title to the land and obtained a 43
year lease on the building under which Vornado will manage the building
and receive the building's cash flow. As part of the restructuring, the
amount of the debt was adjusted from the face value of $193,000,000 to
Vornado's May 1997 acquisition cost of $185,000,000, the maturity date
of the debt was extended to August 31, 2022 and the interest rate was
set at 7.5%. Vornado purchased the land from the borrower for
$8,000,000, which was further applied to reduce the debt to
$177,000,000. The remaining investment will be reclassified as real
estate.
90 Park Avenue is an 875,000 square foot office building in
Manhattan.
These transactions were arrived at through arms-length
negotiations and were consummated through a subsidiary of Vornado
Realty L.P.
Items 3-4. Not Applicable.
Item 5. Other Events.
On August 22, 1997, Vornado Realty Trust entered into an
Agreement and Plan of Merger (the "Merger Agreement") among Vornado,
Arbor Property Trust ("Arbor") and Trees Acquisition Subsidiary, Inc.,
("Merger Sub"), a wholly-owned subsidiary of Vornado, pursuant to which
Arbor is to be merged with and into Merger Sub. Holders of Arbor common
shares of beneficial interest ("Arbor Common Shares") are to receive
0.121905 common shares of beneficial interest of Vornado per Arbor
Common Share or, at the election of the holder of Arbor Common Shares,
0.153846 Series A Convertible Preferred Shares of Vornado per Arbor
Common Share. The Merger Agreement provides that simultaneously with
the consummation of the merger, Vornado Realty Trust will cause the
Green Acres Mall, which is currently indirectly wholly owned by Arbor,
to be owned directly or indirectly by Vornado Realty L.P.
Item 6. Not Applicable.
Page 2
<PAGE> 3
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
(a) - (b) There are filed herewith (a) the financial statements of Green
Acres Mall and the Plaza at Green Acres ("Arbor") and the financial
statements of 90 Park Avenue commencing on page 4 and (b) the Condensed
Consolidated Pro forma Balance Sheet of Vornado Realty L.P. (the
"Operating Partnership") as of June 30, 1997 and the Condensed
Consolidated Pro forma Statement of Income of the Operating Partnership
for the six months ended June 30, 1997 and the year ended December 31,
1996, commencing on page 14, prepared in connection with the
restructuring of the Operating Partnership's real estate investment in
90 Park Avenue and its merger with Arbor Property Trust. The
"Vornado/Mendik" column included in the pro forma statements of income
for the year ended December 31, 1996 and the six months ended June 30,
1997 reflects the April 1997 acquisition of interests in all or a
portion of seven Manhattan office buildings and a management company
(the "Mendik Transaction") as if it had occurred on January 1, 1996.
The pro forma financial information relating to this transaction was
previously filed with the Securities and Exchange Commission.
(c) Exhibits. - None
Item 8. Not Applicable.
Page 3
<PAGE> 4
<TABLE>
<CAPTION>
(a) Financial statements Page
Reference
---------
<S> <C> <C>
Green Acres Mall and the Plaza at Green Acres
Independent Auditors' Report 5
Statement of Revenues and Certain Expenses for the
year ended December 31, 1996 and the six
months ended June 30, 1997 and 1996 6
Notes to Financial Statements 7
90 Park Avenue
Independent Auditors' Report 10
Statements of Revenues and Certain Expenses
for the year ended December 31, 1996 and the
six months ended June 30, 1997 and 1996 11
Notes to Financial Statements 12
</TABLE>
Page 4
<PAGE> 5
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Arbor Property Trust:
We have audited the statement of revenue and certain expenses of Green Acres
Mall and The Plaza at Green Acres (the "Property"), described in Note 1, for the
year ended December 31, 1996. This financial statement is the responsibility of
the Property's management. Our responsibility is to express an opinion on this
financial statement based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statement is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statement. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
The statement of revenue and certain expenses was prepared for the purpose of
complying with the rules and regulations of the Securities and Exchange
Commission for inclusion in a Form 8-K to be filed by Vornado Realty Trust, as
described in Note 1, and is not intended to be a complete presentation of the
Property's revenue and expenses.
In our opinion, the financial statement referred to above presents fairly, in
all material respects, the revenue and certain expenses of the Property for the
year ended December 31, 1996, in conformity with generally accepted accounting
principles.
/s/Arthur Andersen LLP
Philadelphia, Pa.,
September 4, 1997
Page 5
<PAGE> 6
GREEN ACRES MALL AND THE PLAZA AT GREEN ACRES
STATEMENTS OF REVENUE AND CERTAIN EXPENSES
(in thousands)
<TABLE>
<CAPTION>
For the
Six Months
Ended For the
June 30, Year Ended
------------------- December 31,
1997 1996 1996
---- ---- ----
(unaudited)
<S> <C> <C> <C>
REVENUE:
Minimum and percentage rents $10,163 $ 9,988 $20,398
Operating expense reimbursements 7,619 7,098 15,294
Other income 984 605 1,924
------- ------- -------
Total revenue 18,766 17,691 37,616
------- ------- -------
CERTAIN EXPENSES:
Maintenance, payroll and other
operating expenses 2,758 3,286 6,647
Utilities 735 695 1,694
Real estate taxes 4,493 4,271 8,768
Provision for doubtful accounts 319 177 1,120
------- ------- -------
Total certain expenses 8,305 8,429 18,229
------- ------- -------
REVENUE IN EXCESS OF
CERTAIN EXPENSES $10,461 $ 9,262 $19,387
======= ======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
Page 6
<PAGE> 7
- 2 -
GREEN ACRES MALL AND THE PLAZA AT GREEN ACRES
NOTES TO STATEMENTS OF REVENUE AND CERTAIN EXPENSES
DECEMBER 31, 1996
1. BASIS OF PRESENTATION:
The statements of revenue and certain expenses reflect the operations of Green
Acres Mall and the Plaza at Green Acres (the "Property"), located in Nassau
County, New York. The Property is expected to be acquired by an affiliate of
Vornado Realty Trust (the "Company") from Arbor Property Trust in December,
1997. The Property has aggregate net rentable area of approximately 1.6 million
square feet. These statements of revenue and certain expenses are to be included
in a Form 8-K to be filed by the Company, as the above described transaction has
been deemed significant pursuant to the rules and regulations of the Securities
and Exchange Commission.
The accounting records of the Property are maintained in accordance with
generally accepted accounting principles. The accompanying financial statements
exclude certain expenses such as interest, depreciation and amortization,
professional fees, and other administrative costs not directly related to the
future operations of the Property.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of revenue and expenses during the reporting period.
The ultimate results could differ from those estimates.
The statements of revenue and certain expenses for the six month periods ended
June 30, 1997 and 1996 are unaudited; however, in the opinion of management, all
adjustments (consisting solely of normal recurring adjustments) necessary for
the fair presentation of these statements of revenue and certain expenses for
the interim periods have been included. The results for such interim periods are
not necessarily indicative of the results for an entire year.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Revenue Recognition
Minimum rental income is recognized from leases with scheduled rent increases on
a straight-line basis over the lease term. Percentage rents and payments for
taxes, insurance, utilities and maintenance by tenants are estimated and
accrued.
Page 7
<PAGE> 8
- 3 -
3. UNUSUAL ITEMS
In the six month period ended June 30, 1997, the Property reversed reserves
established in prior years of approximately $279,000 and increased operating
expense reimbursement revenue by this amount. The Property plans to reverse a
similar amount of reserves in each of the two remaining in 1997.
In the year ended December 31, 1996, the Property reduced accrued rent
receivables by $530,000 as a result of certain leases which terminated, and
recorded a corresponding charge to the provision for doubtful accounts. In the
six month period ended June 30, 1996, the Property changed an estimate related
to operating expense reimbursement revenue, resulting in a $480,000 decrease in
revenue for this period.
4. LEASING ARRANGEMENTS
The Property as Lessor
The Property is leased to approximately 200 tenants, generally under
non-cancelable operating leases. The leases generally provide for minimum
rentals, plus percentage rental based upon the retail stores' sales volume.
Percentage rentals were $1,803,000 for the year ended December 31, 1996 and were
$841,000 (unaudited) and $853,000 (unaudited) for the six month periods ended
June 30, 1997 and 1996 respectively. In addition, the tenants pay certain
utility charges, and for most leases, reimburse their proportionate share of
real estate taxes and common area expenses.
Future minimum rentals under existing leases at December 31, 1996 are as
follows:
<TABLE>
<CAPTION>
Years Ending December 31, Amount
------------------------- ------
<S> <C> <C>
1997 $ 17,211,000
1998 16,918,000
1999 16,727,000
2000 15,894,000
2001 14,498,000
Thereafter 82,009,000
------------
$163,257,000
============
</TABLE>
As of December 31, 1996, sublease agreements have been signed with certain
tenants of the Plaza at Green Acres, which generally provide for rentals based
on a percentage of sales in addition to base rental. Sublease income of
$35,752,000 will be received over the remaining terms of such subleases, and is
included in the future minimum rentals table presented above. Such sublease
income totaled $2,409,000 for the year ended December 31, 1996.
Page 8
<PAGE> 9
- 4 -
Property as Lessee
The Plaza at Green Acres (the "Plaza") is the lessee under a 30-year ground
lease (with three six-year renewal options) in favor of an unrelated third
party. In addition to specified rents, the Plaza lease requires the lessee to
pay property taxes, insurance, operating expenses and additional rentals based
on a percentage of revenues generated by the operations of the Plaza. No such
additional rentals were paid in 1996. In accordance with generally accepted
accounting principles, the portion of the lease related to the building is
accounted for as a capital lease while the portion related to the land is
accounted for as an operating lease.
The following is a schedule of future minimum lease payments under this lease as
of December 31, 1996:
<TABLE>
<CAPTION>
Capital Operating
Lease Lease
Component Component Total
--------- --------- -----
<S> <C> <C> <C>
1997 $ 702,000 $ 788,000 $ 1,490,000
1998 707,000 793,000 1,500,000
1999 707,000 793,000 1,500,000
2000 707,000 793,000 1,500,000
2001 707,000 793,000 1,500,000
Thereafter 26,610,000 29,890,000 56,500,000
----------- ----------- -----------
$30,140,000 $33,850,000 $63,990,000
=========== =========== ===========
</TABLE>
For the year ended December 31, 1996, total rental expense for the operating
lease portion of this lease was $724,000, and for the six month periods ended
June 30, 1997 and 1996 such rentals were $309,000 (unaudited) and $363,000
(unaudited), respectively.
Page 9
<PAGE> 10
INDEPENDENT AUDITORS' REPORT
To the Stockholders of Vornado Realty Trust
We have audited the statement of revenues and certain expenses of
Ninety Park Avenue, as described in Note 1 for the year ended December 31, 1996.
This financial statement is the responsibility of the Company's management. Our
responsibility is to express an opinion on this financial statement based on our
audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statement is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statement. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
The accompanying statement of revenues and certain expenses was
prepared in compliance with the rules and regulations of the Securities and
Exchange Commission, and as described in Note 1, is not intended to be a
complete presentation of Ninety Park Avenue's revenue and expenses.
In our opinion, the financial statement referred to above presents
fairly, in all material respects, the statements of revenues and certain
expenses of Ninety Park Avenue as described in Note 1 for the year ended
December 31, 1996 in conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Parsippany, New Jersey
September 11, 1997
Page 10
<PAGE> 11
NINETY PARK AVENUE
STATEMENTS OF REVENUES AND CERTAIN EXPENSES
(in thousands)
<TABLE>
<CAPTION>
For the
For the Six Months Ended Year
---------------------------------- Ended
June 30, 1997 June 30, 1996 December 31, 1996
------------- ------------- -----------------
(unaudited) (unaudited)
<S> <C> <C> <C>
REVENUES:
Base rent $12,418 $12,597 $25,173
Tenant recoveries 2,975 3,158 6,543
Other income 264 402 599
------- ------- -------
Total Revenues 15,657 16,157 32,315
------- ------- -------
CERTAIN EXPENSES:
Real estate taxes 3,261 3,128 6,256
Repairs & maintenance 398 335 671
Cleaning 864 854 1,708
Professional fees 279 184 368
Utilities 1,163 1,399 2,799
Insurance 83 136 272
Management fee 53 53 105
Payroll 294 364 728
Administrative 25 111 222
------- ------- -------
Total Certain Expenses 6,420 6,564 13,129
------- ------- -------
REVENUES IN EXCESS OF
CERTAIN EXPENSES $ 9,237 $ 9,593 $19,186
======= ======= =======
</TABLE>
See notes to Statements of Revenues and Certain Expenses.
Page 11
<PAGE> 12
NINETY PARK AVENUE
NOTES TO STATEMENTS OF REVENUES AND CERTAIN EXPENSES
Note 1 - ORGANIZATION AND BASIS OF PRESENTATION
Ninety Park Avenue is an office building located at 90 Park Avenue, New York,
N.Y. (the "Property"). The Property was owned and operated by Carol Management
Corporation ("CMC"), Howard Kaskel, Anita Kaskel, Roe and Carole Schragis as
tenants-in-common. As of August 19, 1996, the owners each transferred their
interests in the Property to wholly-owned Limited Liability Companies (LLCs).
The new owners are SBK Realty Holdings LLC, Pine Real Estate LLC, Dolphin Realty
LLC, and Tulip Holdings LLC.
The statements of revenues and certain expenses reflect the operations of the
Property. The Property has aggregate net rentable area of approximately 875,000
square feet (96% leased as of December 31, 1996).
The accounting records of the Property are maintained in accordance with
generally accepted accounting principles. The accompanying financial statements
exclude certain expenses such as interest, depreciation and amortization,
certain professional fees, and other costs not directly related to the future
operations of the Property.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of revenues and expenses during the reporting
period. The ultimate results could differ from those estimates.
The statements of revenues and certain expenses for the six month periods ended
June 30, 1997 and 1996 are unaudited; however, in the opinion of management, all
adjustments (consisting solely of normal recurring adjustments) necessary for
the fair presentation of these statements of revenue and certain expenses for
the interim periods have been included. The results for such interim periods are
not necessarily indicative of the results for an entire year.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Revenue Recognition
Rental income is recognized from leases with scheduled rent increases on a
straight-line basis over the lease term. Differences between the straight-line
rent and amounts currently due amounted to $234,000 for the year ended December
31, 1996, and $235,000 and $160,000 for the six month periods ended June 30,
1997 and 1996, respectively, and are included in base rent on the accompanying
statements of revenues and certain expenses. Escalation rents based upon
payments for taxes, insurance, utilities and maintenance by tenants are
estimated and accrued.
Page 12
<PAGE> 13
Note 3 - RELATED PARTY TRANSACTIONS
Doral Sports Training Center, an entity related to the Tenancy-In-Common,
occupies space at Ninety Park Avenue on a month-to-month basis. Rental income
from this affiliate for the year ended December 31, 1996 aggregated
approximately $132,300.
Note 4 - OPERATING LEASES
The Tenancy-In-Common leases office space to various tenants with lease terms
expiring in various years through 2015. Approximately 55% of total rental income
was earned from one tenant in the building. The following is a schedule, by
years, of the approximate minimum future rentals required under these operating
leases as of December 31, 1996:
<TABLE>
<CAPTION>
Year Ending
December 31, Amount
------------ ------
<S> <C> <C>
1997 $ 24,350,000
1998 24,559,000
1999 23,717,000
2000 22,405,000
2001 22,383,000
Thereafter 204,379,000
-----------
Total $321,793,000
============
</TABLE>
Page 13
<PAGE> 14
<TABLE>
<CAPTION>
Reference
Page
---------
<S> <C> <C>
(b) Pro forma financial information
Condensed Consolidated Pro forma Balance Sheet
as at June 30, 1997 15
Condensed Consolidated Pro forma Income Statement
for the six months ended June 30, 1997 16
Condensed Consolidated Pro forma Income Statement
for the year ended December 31, 1996 18
Notes to Condensed Consolidated Pro forma Financial
Statements 20
Mendik Transaction Only
Condensed Consolidated Pro forma Income Statement for
the six months ended June 30, 1997 21
Notes to Condensed Consolidated Pro forma Income
Statement for the six months ended June 30, 1997 23
Condensed Consolidated Pro forma Income Statement
for the year ended December 31, 1996 24
Notes to Condensed Consolidated Pro forma Income
Statement for the year ended December 31, 1996 26
</TABLE>
The unaudited condensed consolidated pro forma financial information
attached presents (i) the condensed consolidated pro forma statement of income
for the Operating Partnership for the year ended December 31, 1996 and the six
months ended June 30, 1997, as if the restructuring of the 90 Park Avenue
mortgage and the $185,000,000 purchase price therefor and the merger with Arbor
Property Trust had occurred on January 1, 1996 and (ii) the condensed
consolidated pro forma balance sheet of the Operating Partnership as of June 30,
1997, as if the 90 Park Avenue and Arbor Property Trust transactions had
occurred on June 30, 1997.
The "Vornado/Mendik" column included in the pro forma statements of
income for the year ended December 31, 1996 and the six months ended June 30,
1997 reflects the April 1997 acquisition of interests in all or a portion of
seven Manhattan office buildings and a management company (the "Mendik
Transaction") as if it had occurred on January 1, 1996. The pro forma financial
information relating to this transaction was previously filed with the
Securities and Exchange Commission.
The unaudited condensed consolidated pro forma financial information is
not necessarily indicative of what the Operating Partnership's actual results of
operations or financial position would have been had these transactions been
consummated on the dates indicated, nor does it purport to represent the
Operating Partnership's results of operations or financial position for any
future period. The results of operations for the period ended June 30, 1997 are
not necessarily indicative of the operating results for the full year.
The unaudited condensed consolidated pro forma financial information
should be read in conjunction with the Consolidated Financial Statements and
notes thereto included in Vornado's consolidated financial statements and notes
thereto included in Vornado's Annual Report on Form 10-K for the year ended
December 31, 1996, as amended, and the Quarterly Report on Form 10-Q for the
period ended June 30, 1997 and the financial statements of the significant
entities involved in the Mendik Transaction previously included in the Company's
Current Report on Form 8-K, dated March 12, 1997, as amended and the financial
statements of 90 Park Avenue and Green Acres Mall and the Plaza at Green Acres
included herein. In management's opinion, all adjustments necessary to reflect
the transactions have been made.
Page 14
<PAGE> 15
CONDENSED CONSOLIDATED PRO FORMA BALANCE SHEET
JUNE 30, 1997
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
HISTORICAL OPERATING
HISTORICAL ARBOR PROPERTY PRO FORMA PARTNERSHIP
VORNADO TRUST ADJUSTMENTS PRO FORMA
------- ----- ----------- ---------
<S> <C> <C> <C> <C>
ASSETS:
Real estate, net $ 877,427 $141,898 $ 185,000 (A) $1,290,150
102,100 (B)
(16,275)(B)
Cash and cash equivalents 260,485 260,485
Investment in and advances to
Alexander's, Inc. 108,100 108,100
Investment in partnerships 38,275 38,275
Investment in and advances to
management companies 13,008 13,008
Officer's deferred compensation
expense 10,419 10,419
Mortgage loans receivable 243,001 (185,000)(A) 58,001
Receivable arising from straight-
lining of rents 19,619 19,619
Other assets 72,362 13,180 85,542
---------- -------- --------- ----------
$1,642,696 $155,078 $ 85,825 $1,883,599
========== ======== ========= ==========
LIABILITIES:
Notes and mortgages payable $ 859,283 $124,873 $ 984,156
Deferred leasing fee income 10,550 10,550
Officer's deferred compensation
payable 25,000 25,000
Other liabilities 30,429 13,930 44,359
---------- -------- --------- ----------
925,262 138,803 - 1,064,065
---------- -------- --------- ----------
EQUITY 717,434 16,275 102,100 (B) 819,534
(16,275)(B)
---------- -------- --------- ----------
$1,642,696 $155,078 $ 85,825 $1,883,599
========== ======== ========= ==========
</TABLE>
Page 15
<PAGE> 16
CONDENSED CONSOLIDATED PRO FORMA INCOME STATEMENT
FOR THE SIX MONTHS ENDED JUNE 30, 1997
(AMOUNTS IN THOUSANDS, EXCEPT PER UNIT AMOUNTS)
<TABLE>
<CAPTION>
VORNADO/ HISTORICAL HISTORICAL
MENDIK ARBOR PROPERTY 90 PARK
PRO FORMA (1) TRUST AVENUE
------------- ----- ------
<S> <C> <C> <C>
REVENUES:
Property rentals $ 100,174 $11,147 $12,418
Expense reimbursements 18,069 7,619 2,975
Other income 1,892 264
---------- -------- --------
120,135 18,766 15,657
---------- -------- --------
EXPENSES:
Operating 39,463 8,305 6,420
Depreciation and amortization 13,479
General and administrative 5,825
Amortization of officer's deferred
compensation expense 12,498
---------- -------- --------
71,265 8,305 6,420
---------- -------- --------
Operating income 48,870 10,461 9,237
Income applicable to Alexander's 2,842
Equity in net income of management companies 1,484
Equity in net income of investees 920
Interest income on mortgage loans receivable 4,305
Interest and dividend income 7,673
Interest and debt expense (20,780)
Net gain on marketable securities 579
---------- -------- --------
Net income 45,893 10,461 9,237
Preferred unit distributions (9,992)
Preferred allocations (5,184)
---------- -------- --------
Net income applicable to Class A units $ 30,717 $10,461 $ 9,237
========== ======== ========
Net income per Class A unit, based on 26,718,841
and 28,217,382 units, respectively $ 1.14
==========
OTHER DATA:
Funds from Operations ("FFO") (2):
Net income applicable to Class A units $ 30,717 $10,461 $ 9,237
Depreciation and amortization of real property 10,438
Straight-lining of property rentals for rent escalations (938) (225) (235)
Leasing fees received in excess of income
recognized 2,383
Proportionate share of adjustments to income
from equity investments to arrive at FFO 1,719
Non-recurring lease cancellation income and write-off
of related costs (11,581)
---------- -------- --------
$ 32,738 $10,236 $ 9,002
========== ======== ========
CASH FLOW PROVIDED BY (USED) IN:
Operating activities $ 53,714 $ 9,424 $12,678
Investing activities $(964,103) $ - $ -
Financing activities $ 975,383 $ - $ -
</TABLE>
<TABLE>
<CAPTION>
OPERATING
PRO FORMA PARTNERSHIP
ADJUSTMENTS PRO FORMA
----------- ---------
<S> <C> <C>
REVENUES:
Property rentals $ 123,739
Expense reimbursements 28,663
Other income 2,156
----------
154,558
----------
EXPENSES:
Operating 54,188
Depreciation and amortization $ 3,129 (C) 16,608
General and administrative 5,825
Amortization of officer's deferred
compensation expense 12,498
--------- ----------
3,129 89,119
--------- ----------
Operating income (3,129) 65,439
Income applicable to Alexander's 2,842
Equity in net income of management companies 1,484
Equity in net income of investees 920
Interest income on mortgage loans receivable (3,045)(D) 1,260
Interest and dividend income 7,673
Interest and debt expense (4,410)(E) (29,745)
(4,555)(F)
Net gain on marketable securities 579
--------- ----------
Net income (15,139) 50,452
Preferred unit distributions (9,992)
Preferred allocations (5,184)
--------- ----------
Net income applicable to Class A units $(15,139) $ 35,276
========= ==========
Net income per Class A unit, based on 26,718,841
and 28,217,382 units, respectively $ 1.25
==========
OTHER DATA:
Funds from Operations ("FFO") (2):
Net income applicable to Class A units $(15,139) $ 35,276
Depreciation and amortization of real property 3,129 13,567
Straight-lining of property rentals for rent escalations (1,398)
Leasing fees received in excess of income
recognized 2,383
Proportionate share of adjustments to income
from equity investments to arrive at FFO 1,719
Non-recurring lease cancellation income and write-off
of related costs (11,581)
--------- ----------
$(12,010) $ 39,966
========= ==========
CASH FLOW PROVIDED BY (USED) IN:
Operating activities $(12,010) $ 63,806
Investing activities $ - $(964,103)
Financing activities $ - $ 975,383
</TABLE>
Page 16
<PAGE> 17
(1) See Condensed Consolidated Pro Forma Income Statement for the Six
Months Ended June 30, 1997 on page 21.
(2) Funds from operations does not represent cash generated from operating
activities in accordance with generally accepted accounting principles
and is not necessarily indicative of cash available to fund cash needs
which is disclosed in the Consolidated Statements of Cash Flows for the
applicable periods. There are no material legal or functional
restrictions on the use of funds from operations. Funds from operations
should not be considered as an alternative to net income as an
indicator of the Operating Partnership's operating performance or as an
alternative to cash flows as a measure of liquidity. Management
considers funds from operations a supplemental measure of Operating
performance and along with cash flow from operating activities,
financing activities, and investing activities, it provides investors
with an indication of the ability of the Company to incur and service
debt, to make capital expenditures and to fund other cash needs. Funds
from operations may not be comparable to similarly titled measures
employed by other REITs since a number of REITs, including the
Company's, method of calculating funds from operations is different
from that used by NAREIT. Funds from operations, as defined by NAREIT,
represents net income applicable to common shares before depreciation
and amortization, extraordinary items and gains or losses on sales of
real estate. Funds from operations as disclosed above has been modified
to adjust for the effect of straight-lining of property rentals for
rent escalations and leasing fee income.
Page 17
<PAGE> 18
CONDENSED CONSOLIDATED PRO FORMA INCOME STATEMENT
FOR THE YEAR ENDED DECEMBER 31, 1996
(AMOUNTS IN THOUSANDS, EXCEPT PER UNIT AMOUNTS)
<TABLE>
<CAPTION>
VORNADO/ HISTORICAL HISTORICAL
MENDIK ARBOR PROPERTY 90 PARK
PRO FORMA (1) TRUST AVENUE
------------- ----- ------
<S> <C> <C> <C>
REVENUES:
Property rentals $ 181,712 $22,322 $25,173
Expense reimbursements 40,195 15,294 6,543
Other income 2,819 599
---------- -------- --------
224,726 37,616 32,315
---------- -------- --------
EXPENSES:
Operating 83,180 18,229 13,129
Depreciation and amortization 35,559
General and administrative 8,162
Amortization of officer's deferred compensation
expense 2,083
---------- -------- --------
128,984 18,229 13,129
---------- -------- --------
Operating income 95,742 19,387 19,186
Income applicable to Alexander's 7,956
Equity in net income of management companies 3,326
Equity in net income of investees 3,418
Interest income on mortgage note receivable 2,579
Interest and dividend income 5,667
Interest and debt expense (31,708)
Net gain on marketable securities 913
---------- -------- --------
Net income 87,893 19,387 19,186
Preferred unit distributions (19,800)
Preferential allocations (10,372)
---------- -------- --------
Net income applicable to Class A units $ 57,721 $19,387 $19,186
========== ======== ========
Net income per Class A unit, based on
24,603,442 and 26,101,983 units, respectively $ 2.35
==========
OTHER DATA:
Funds from Operations (2):
Net income applicable to Class A units $ 57,721 $19,387 $19,186
Depreciation and amortization of real property 34,553
Straight-lining of property rent escalations (11,530) (396) (234)
Leasing fees received in excess of income
recognized 1,805
Proportionate share of adjustments to income
from equity investments to arrive at FFO 17
---------- -------- --------
$ 82,566 $18,991 $18,952
========== ======== ========
CASH FLOW PROVIDED BY (USED) IN:
Operating activities $ 109,377 $22,551 $18,952
Investing activities $(321,988) $ - $ -
Financing activities $ 243,457 $ - $ -
</TABLE>
<TABLE>
<CAPTION>
OPERATING
PRO FORMA PARTNERSHIP
ADJUSTMENTS PRO FORMA
----------- ---------
<S> <C> <C>
REVENUES:
Property rentals $ 229,207
Expense reimbursements 62,032
Other income 3,418
----------
294,657
----------
EXPENSES:
Operating 114,538
Depreciation and amortization $ 6,257 (C) 41,816
General and administrative 8,162
Amortization of officer's deferred compensation
expense 2,083
---------- ----------
6,257 166,599
---------- ----------
Operating income (6,257) 128,058
Income applicable to Alexander's 7,956
Equity in net income of management companies 3,326
Equity in net income of investees 3,418
Interest income on mortgage note receivable 2,579
Interest and dividend income 5,667
Interest and debt expense (12,775)(E) (53,940)
(9,457)(F)
Net gain on marketable securities 913
---------- ----------
Net income (28,489) 97,977
Preferred unit distributions (19,800)
Preferential allocations (10,372)
---------- ----------
Net income applicable to Class A units $ (28,489) $ 67,805
========== ==========
Net income per Class A unit, based on
24,603,442 and 26,101,983 units, respectively $ 2.60
==========
OTHER DATA:
Funds from Operations (2):
Net income applicable to Class A units $ (28,489) $ 67,805
Depreciation and amortization of real property 6,257 40,810
Straight-lining of property rent escalations (12,160)
Leasing fees received in excess of income
recognized 1,805
Proportionate share of adjustments to income
from equity investments to arrive at FFO 17
---------- ----------
$ (22,232) $ 98,277
========== ==========
CASH FLOW PROVIDED BY (USED) IN:
Operating activities $ (15,975) $ 134,905
Investing activities $(185,000) $(506,988)
Financing activities $ 185,000 $ 428,457
</TABLE>
Page 18
<PAGE> 19
(1) See Condensed Consolidated Pro Forma Income Statement for the Year
Ended December 31, 1996 on page 24.
(2) Funds from operations does not represent cash generated from operating
activities in accordance with generally accepted accounting principles
and is not necessarily indicative of cash available to fund cash needs
which is disclosed in the Consolidated Statements of Cash Flows for the
applicable periods. There are no material legal or functional
restrictions on the use of funds from operations. Funds from operations
should not be considered as an alternative to net income as an
indicator of the Operating Partnership's operating performance or as an
alternative to cash flows as a measure of liquidity. Management
considers funds from operations a supplemental measure of Operating
performance and along with cash flow from operating activities,
financing activities, and investing activities, it provides investors
with an indication of the ability of the Company to incur and service
debt, to make capital expenditures and to fund other cash needs. Funds
from operations may not be comparable to similarly titled measures
employed by other REITs since a number of REITs, including the
Company's, method of calculating funds from operations is different
from that used by NAREIT. Funds from operations, as defined by NAREIT,
represents net income applicable to common shares before depreciation
and amortization, extraordinary items and gains or losses on sales of
real estate. Funds from operations as disclosed above has been modified
to adjust for the effect of straight-lining of property rentals for
rent escalations and leasing fee income.
Page 19
<PAGE> 20
NOTES TO CONDENSED CONSOLIDATED PRO FORMA FINANCIAL STATEMENTS
(AMOUNTS IN THOUSANDS, EXCEPT PER UNIT AMOUNTS)
ARBOR ACQUISITION:
The Arbor acquisition will be recorded under "purchase accounting". The
total purchase price is comprised of:
<TABLE>
<CAPTION>
<S> <C> <C>
Issuance of Vornado Realty
Trust common shares $ 102,100
Debt 124,873
---------
$ 226,973
==========
</TABLE>
The purchase cost has been allocated in the pro forma financial statements to
real estate.
The pro forma financial statements assume that Arbor shareholders elect
to exchange their common shares entirely for common shares of Vornado Realty
Trust. For purposes of comparison, if 50% of Arbor shareholders elect to receive
Series A Convertible Preferred Shares of Vornado Realty Trust in lieu of common
shares of Vornado Realty Trust, the units of the Operating Partnership issued to
Vornado Realty Trust would be adjusted and income applicable to Class A units
would be $33,739 and $64,732 or $1.23 and $2.55 per unit for the six months
ended June 30, 1997 and the year ended December 31, 1996, respectively.
90 PARK AVENUE:
The restructuring of the 90 Park Avenue mortgage is reflected in the
pro forma financial statements by reclassifying such investment as real estate.
The Historical Vornado column in the Condensed Consolidated Pro Forma Balance
Sheet includes the $185,000 purchase price for such mortgage as part of mortgage
loans receivable.
FOOTNOTES:
(A) Reclassification of investment in 90 Park Avenue to real estate.
(B) Assumed issuance of 1,498,541 Operating Partnership Class A units to
Vornado Realty Trust, which is assumed to have issued its common
sharess, with a fair value of $102,100 (based on an average price of
$68.133 per share), in exchange for all of the common shares of Arbor.
(C) Depreciation based on allocation of the Arbor purchase price and the
reclassification of the 90 Park Avenue investment to real estate.
(D) Elimination of interest income earned on mortgage loan receivable from
90 Park Avenue for the period from May 7, 1997 (date of acquisition of
the mortgage loan) to June 30, 1997.
(E) Reflects interest expense of $4,410 and $12,775 for the six months
ended June 30, 1997 (January 1, 1997 to May 6, 1997) and for the year
ended December 31, 1996, respectively, on the 90 Park Avenue investment
of $185,000, based on an average interest rate of approximately 7.0%.
(F) Reflects interest expense of $4,555 and $9,457 for the six months ended
June 30, 1997 and for the year ended December 31, 1996, respectively,
on Arbor debt.
Page 20
<PAGE> 21
CONDENSED CONSOLIDATED PRO FORMA INCOME STATEMENT
FOR THE SIX MONTHS ENDED JUNE 30, 1997
(AMOUNTS IN THOUSANDS, EXCEPT PER UNIT AMOUNTS)
<TABLE>
<CAPTION>
HISTORICAL
MENDIK VORNADO/
HISTORICAL JANUARY 1, 1997 PRO FORMA MENDIK
VORNADO TO APRIL 14, 1997 ADJUSTMENTS PRO FORMA
------- ----------------- ----------- ---------
<S> <C> <C> <C> <C>
REVENUES:
Property rentals $ 63,471 $ 34,928 $ 1,775 (A) $ 100,174
Expense reimbursements 15,161 2,908 18,069
Other income 1,327 3,187 (2,622)(B) 1,892
---------- --------- ---------- ----------
79,959 41,023 (847) 120,135
---------- --------- ---------- ----------
EXPENSES:
Operating 26,658 12,805 39,463
Depreciation and amortization 8,429 4,682 368 (C) 13,479
General and administrative 4,748 2,684 (1,607)(B) 5,825
Amortization of officer's deferred
compensation expense 12,498 12,498
---------- --------- ---------- ----------
52,333 20,171 (1,239) 71,265
---------- --------- ---------- ----------
Operating income 27,626 20,852 392 48,870
Income applicable to Alexander's 2,842 2,842
Equity in net income of management
companies 520 964 (B) 1,484
Equity in net income of investees 282 362 276 (D) 920
Interest income on mortgage loans
receivable 4,305 4,305
Interest and dividend income 6,774 899 7,673
Interest and debt expense (17,350) (7,967) 4,537 (E) (20,780)
Net gain on marketable securities 579 579
---------- --------- ---------- ----------
Net income 25,578 14,146 6,169 45,893
Preferred unit distributions (4,855) (5,137)(F) (9,992)
Preferred allocations (2,100) (3,084)(G) (5,184)
---------- --------- ---------- ----------
Net income applicable to Class A units $ 18,623 $ 14,146 $ (2,052) $ 30,717
========== ========= ========== ==========
Net income per Class A unit, based on
26,718,841 units $ 0.70 $ 1.14
========== ==========
OTHER DATA:
Funds from Operations (1):
Net income applicable to Class A units $ 18,623 $ 14,146 $ (2,052) $ 30,717
Depreciation and amortization of real
property 7,857 2,581 368 10,438
Straight-lining of property rentals for
rent escalations (2,567) 1,629 (1,775) (938)
Leasing fees received in excess of income
recognized 2,383 2,383
Proportionate share of adjustments to net
income of investees to arrive at funds
from operations 887 832 1,719
Non-recurring lease cancellation income
and write-off of related costs (11,581) (11,581)
---------- --------- ---------- ----------
$ 27,183 $ 7,607 $ (3,459) $ 32,738
========== ========= ========== ==========
CASH FLOW PROVIDED BY (USED) IN:
Operating activities $ 50,989 $ (671) $ 3,396 $ 53,714
Investing activities $(629,813) $ (5,652) $(328,638) $(964,103)
Financing activities $ 688,954 $ (3,858) $ 290,287 $ 975,383
</TABLE>
Page 21
<PAGE> 22
(1) Funds from operations does not represent cash generated from operating
activities in accordance with generally accepted accounting principles
and is not necessarily indicative of cash available to fund cash needs
which is disclosed in the Consolidated Statements of Cash Flows for the
applicable periods. There are no material legal or functional
restrictions on the use of funds from operations. Funds from operations
should not be considered as an alternative to net income as an
indicator of the Operating Partnership's operating performance or as an
alternative to cash flows as a measure of liquidity. Management
considers funds from operations a supplemental measure of Operating
performance and along with cash flow from operating activities,
financing activities, and investing activities, it provides investors
with an indication of the ability of the Company to incur and service
debt, to make capital expenditures and to fund other cash needs. Funds
from operations may not be comparable to similarly titled measures
employed by other REITs since a number of REITs, including the
Company's, method of calculating funds from operations is different
from that used by NAREIT. Funds from operations, as defined by NAREIT,
represents net income applicable to common shares before depreciation
and amortization, extraordinary items and gains or losses on sales of
real estate. Funds from operations as disclosed above has been modified
to adjust for the effect of straight-lining of property rentals for
rent escalations and leasing fee income.
Page 22
<PAGE> 23
NOTES TO CONDENSED CONSOLIDATED PRO FORMA INCOME STATEMENT
FOR THE SIX MONTHS ENDED JUNE 30, 1997
(Amounts in thousands, except per unit amounts)
(A) To adjust rentals for the period from January 1, 1997 to April 14, 1997
arising from the straight-lining of property rentals for rent
escalations based on the remaining terms of the applicable leases.
(B) To reflect adjustments required to record the Operating Partnership's
investment in the Mendik management company for the period from January
1, 1997 to April 14, 1997 under the equity method of accounting.
(C) Increase in depreciation for the period from January 1, 1997 to April
14, 1997 due to allocation of purchase price.
(D) Increase in equity in investees for the period from January 1, 1997 to
April 14, 1997 due to net decrease in interest expense on refinanced
debt.
(E) Reflects decrease in interest expense and loan cost amortization for
the period from January 1, 1997 to April 14, 1997 resulting from the
reduction and refinancing of debt.
(F) To reflect unit distributions at a rate of 6.50% plus amortization of
the underwriting discount for the period from January 1, 1997 to April
14, 1997 on the proportionate number of Series A Preferred Shares used
to fund the acquisition.
(G) To reflect preferential allocations for the period from January 1, 1997
to April 14, 1997.
Page 23
<PAGE> 24
Condensed Consolidated Pro Forma Income Statement
For the Year Ended December 31, 1996
(Amounts in thousands, except per unit amounts)
<TABLE>
<CAPTION>
Vornado/
Historical Historical Pro Forma Mendik
Vornado Mendik Adjustments Pro Forma
------- ------ ----------- ---------
<S> <C> <C> <C> <C>
REVENUES:
Property rentals $ 87,424 $ 87,261 $ 7,071 (A) $ 181,712
(44)(B)
Expense reimbursements 26,644 13,551 40,195
Other income 2,819 5,378 (5,378)(B) 2,819
--------- --------- --------- ----------
116,887 106,190 1,649 224,726
--------- --------- --------- ----------
EXPENSES:
Operating 36,412 46,691 (39)(B) 83,180
116 (F)
Depreciation and amortization 11,589 14,133 (144)(B) 35,559
9,981 (D)
General and administrative 5,167 6,783 (3,788)(B) 8,162
Amortization of officer's deferred compensation
expense 2,083 2,083
--------- --------- --------- ----------
55,251 67,607 6,126 128,984
--------- --------- --------- ----------
Operating income 61,636 38,583 (4,477) 95,742
Income applicable to Alexander's 7,956 7,956
Equity in net income of management companies 1,855 1,471 (B) 3,326
Equity in net income of investees 1,663 1,755 (G) 3,418
Interest income on mortgage note receivable 2,579 2,579
Interest and dividend income 3,151 2,536 (20)(B) 5,667
Interest and debt expense (16,726) (23,998) 9,016 (C) (31,708)
Net gain on marketable securities 913 913
--------- --------- --------- ----------
Net income 61,364 18,784 7,745 87,893
Preferred unit distributions - - (19,800)(E) (19,800)
Preferential allocations - - (10,372)(H) (10,372)
--------- --------- --------- ----------
Net income applicable to Class A units $ 61,364 $ 18,784 $(22,427) $ 57,721
========= ========= ========= ==========
Net income per Class A unit, based on
24,603,442 units $ 2.49 $ 2.35
========= ==========
OTHER DATA:
Funds from Operations (1):
Net income applicable to Class A units $ 61,364 $ 18,784 $(22,427) $ 57,721
Depreciation and amortization of real property 10,583 14,133 9,837 34,553
Straight-lining of property rent escalations (2,676) (1,783) (7,071) (11,530)
Leasing fees received in excess of income
recognized 1,805 1,805
Proportionate share of adjustments to income
from equity investments to arrive at FFO (1,760) 2,747 (970) 17
--------- --------- --------- ----------
$ 69,316 $ 33,881 $(20,631) $ 82,566
========= ========= ========= ==========
CASH FLOW PROVIDED BY (USED) IN:
Operating activities $ 70,703 $ 29,267 $ 9,407 $ 109,377
Investing activities $ 14,912 $ (8,262) $(328,638) $(321,988)
Financing activities $(15,046) $(11,706) $270,209 $ 243,457
</TABLE>
Page 24
<PAGE> 25
(1) Funds from operations does not represent cash generated from operating
activities in accordance with generally accepted accounting principles
and is not necessarily indicative of cash available to fund cash needs
which is disclosed in the Consolidated Statements of Cash Flows for the
applicable periods. There are no material legal or functional
restrictions on the use of funds from operations. Funds from operations
should not be considered as an alternative to net income as an
indicator of the Operating Partnership's operating performance or as an
alternative to cash flows as a measure of liquidity. Management
considers funds from operations a supplemental measure of Operating
performance and along with cash flow from operating activities,
financing activities, and investing activities, it provides investors
with an indication of the ability of the Company to incur and service
debt, to make capital expenditures and to fund other cash needs. Funds
from operations may not be comparable to similarly titled measures
employed by other REITs since a number of REITs, including the
Company's, method of calculating funds from operations is different
from that used by NAREIT. Funds from operations, as defined by NAREIT,
represents net income applicable to common shares before depreciation
and amortization, extraordinary items and gains or losses on sales of
real estate. Funds from operations as disclosed above has been modified
to adjust for the effect of straight-lining of property rentals for
rent escalations and leasing fee income.
Page 25
<PAGE> 26
NOTES TO CONDENSED CONSOLIDATED PRO FORMA INCOME STATEMENT
FOR THE YEAR ENDED DECEMBER 31,1996
(Amounts in thousands, except per unit amounts)
(A) To adjust rentals arising from the straight-lining of property rentals
for rent escalations based on the remaining terms of the applicable
leases.
(B) To reflect adjustments required to record the Operating Partnership's
investment in the Mendik management company under the equity method of
accounting.
(C) Reflects decrease in interest expense and loan cost amortization
resulting from the reduction and refinancing of debt.
(D) Increase in depreciation due to preliminary allocation of purchase
price.
(E) To reflect unit distributions at a rate of 6.50% plus amortization of
the underwriting discount on the proportionate number of Series A
Preferred Shares used to fund the acquisition.
(F) Increase in operating expenses due to contract changes.
(G) Increase in equity in investees, due to net decrease in interest
expense on refinanced debt.
(H) To reflect preferential allocations.
Page 26
<PAGE> 27
VORNADO REALTY L.P.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
VORNADO REALTY L.P.
(Registrant)
By: Vornado Realty Trust,
General Partner
Date: September 10, 1997 /s/ Joseph Macnow
-------------------------
JOSEPH MACNOW
Vice President,
Chief Financial Officer
Page 27
