<PAGE> 1
EXHIBIT INDEX ON PAGE 109
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the Fiscal Year Ended: DECEMBER 31, 1999
-----------------------------------------------------
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ___________________ to _________________________
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 (I.R.S. Employer
incorporation or organization) Identification Number)
PARK 80 WEST, PLAZA II, SADDLE BROOK, NEW JERSEY 07663
- --------------------------------------------------- ------------------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number including area code: (201) 587-1000
------------------------------
Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to Section 12(g) of the Act: NONE
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. YES X NO
-- --
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
Documents Incorporated by Reference
PART III: Proxy Statement for Annual Meeting of Shareholders to be held on May
31, 2000.
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
ITEM PAGE
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<S> <C> <C>
PART I. 1. Business......................................................................................... 3
2. Properties....................................................................................... 12
3. Legal Proceedings................................................................................ 46
4. Submission of Matters to a Vote of Security Holders.............................................. 46
Executive Officers of the Registrant............................................................. 46
PART II. 5. Market for the Registrant's Common Equity and Related Stockholder Matters........................ 47
6. Selected Consolidated Financial Data............................................................. 47
7. Management's Discussion and Analysis of Financial Condition and Results of
Operations...................................................................................... 48
7A. Quantitative and Qualitative Disclosures about Market Risk....................................... 62
8. Financial Statements and Supplementary Data...................................................... 63
9. Changes In and Disagreements With Independent Auditors on Accounting and Financial Disclosure.... 63
PART III. 10. Directors and Executive Officers of the Registrant............................................... (1)
11. Executive Compensation........................................................................... (1)
12. Security Ownership of Certain Beneficial Owners and Management................................... (1)
13. Certain Relationships and Related Transactions................................................... (1)
PART IV. 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K................................. 100
SIGNATURES.............................................................................................................. 101
</TABLE>
(1) These items are omitted because Vornado Realty Trust (see Item 1.) will
file a definitive Proxy Statement pursuant to Regulation 14A involving
the election of directors with the Securities and Exchange Commission not
later than 120 days after December 31, 1999, which is incorporated by
reference herein. Information relating to Executive Officers of the
Registrant appears on page 46 of this Annual Report on Form 10-K.
Certain statements contained herein constitute forward-looking statements
as such term is defined in Section 27A of the Securities Act of 1933, as amended
(the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934,
as amended (the "Exchange Act"). Certain factors could cause actual results to
differ materially from those in the forward-looking statements. Factors that
might cause such a material difference include, but are not limited to, (a)
changes in the general economic climate, (b) local conditions such as an
oversupply of space or a reduction in demand for real estate in the area, (c)
conditions of tenants, (d) competition from other available space, (e) increased
operating costs and interest expense, (f) the timing of and costs associated
with property improvements, (g) changes in taxation or zoning laws, (h)
government regulations, (i) failure of Vornado Realty Trust to continue to
qualify as a REIT, (j) availability of financing on acceptable terms, (k)
potential liability under environmental or other laws or regulations, and (l)
general competitive factors.
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PART I
ITEM 1. BUSINESS
THE COMPANY
Vornado Realty L.P. (the "Operating Partnership," including the
operations of Vornado Realty Trust prior to the conversion described below) is a
Delaware limited partnership. Operations commenced on April 15, 1997, when
Vornado Realty Trust ("Vornado"), a fully-integrated real estate investment
trust ("REIT"), converted to an Umbrella Partnership REIT ("UPREIT") by
transferring substantially all of its assets to the Operating Partnership. As a
result, Vornado now conducts its business through the Operating Partnership.
Vornado is the sole general partner of, and owned approximately 86% of the
limited partnership common interest in, the Operating Partnership at March 1,
2000. All references to the "Company" refer to Vornado and its consolidated
subsidiaries, including the Operating Partnership.
The Company currently owns directly or indirectly:
Office Building Properties ("Office"):
(i) all or portions of 22 office building properties in the New
York City metropolitan area (primarily Manhattan) aggregating approximately
14.0 million square feet;
(ii) a 34% limited partnership interest in Charles E. Smith
Commercial Realty L.P. ("CESCR"), a limited partnership which owns and
manages approximately 10.7 million square feet of office properties in
Northern Virginia and Washington, D.C., and manages an additional 7.9
million square feet of office and other commercial properties in the
Washington, D.C. area;
Retail Properties ("Retail"):
(iii) 56 shopping center properties in six states and Puerto Rico
aggregating approximately 12.0 million square feet, including 1.4 million
square feet built by tenants on land leased from the Company;
Merchandise Mart Properties:
(iv) the Merchandise Mart Properties portfolio containing
approximately 6.8 million square feet, including the 3.4 million square
foot Merchandise Mart in Chicago;
Temperature Controlled Logistics:
(v) a 60% interest in partnerships that own 89 warehouse
facilities nationwide with an aggregate of approximately 428 million cubic
feet of refrigerated space (excludes 15 additional warehouses containing
approximately 91 million cubic feet managed by AmeriCold Logistics).
AmeriCold Logistics leases all of the partnerships' facilities;
Other Real Estate Investments:
(vi) approximately 32% of the outstanding common stock of
Alexander's, Inc. ("Alexander's"), which has eight properties in the New
York City metropolitan area;
(vii) the Hotel Pennsylvania in New York City contains
approximately 800,000 square feet of space with 1,700 rooms and
approximately 400,000 square feet of retail and office space;
(viii) approximately 30% interest in the Newkirk joint ventures
which own various equity and debt interests relating to 120 limited
partnerships which own real estate, primarily office and retail, net leased
to credit rated tenants;
(ix) eight dry warehouse/industrial properties in New Jersey
containing approximately 2.0 million square feet; and
(x) other real estate investments.
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Objectives and Strategy
The Company's business objective is to maximize shareholder value. The
Company intends to achieve its business objective by continuing to pursue its
investment philosophy, making opportunistic investments and executing its
operating strategies through:
- Maintaining a superior team of operating and investment
professionals and an opportunistic entrepreneurial spirit;
- Investing in properties in the New York City metropolitan
area and other selected markets where the Company believes
there is high likelihood of capital appreciation;
- Acquiring high quality properties at a discount to
replacement cost and where there is a significant potential
for higher rents;
- Investing in retail properties in selected understored
locations such as the New York City metropolitan area;
- Investing in fully integrated operating companies that have
a significant real estate component with qualified,
experienced operating management and strong growth
potential which can benefit from the Company's access to
efficient capital; and
- Developing and redeveloping the Company's existing
properties to increase returns and maximize value.
The Company expects to finance its growth, acquisitions and investments
using internally generated funds, proceeds from possible asset sales and by
accessing the public and private capital markets.
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ACQUISITIONS AND INVESTMENTS
Since January 1, 1999, the Company completed approximately $807 million
of real estate acquisitions and investments. The following table lists the
acquisitions and investments by business segment:
<TABLE>
<CAPTION>
TOTAL
CONSIDERATION
LOCATION (IN MILLIONS)
----------------------------------- --------------
<S> <C> <C>
OFFICE:
-------
888 Seventh Avenue.............................................. New York City $ 117
Charles E. Smith Commercial Realty, L.P.:
Increase in investment to 34%.............................. Northern Virginia and Washington, D.C. 242
Crystal City hotel land.................................... Crystal City, Virginia 8
909 Third Avenue................................................ New York City 123
595 Madison Avenue (the Fuller Building)........................ New York City 125
GreenPoint leasehold interest................................... New York City 37
RETAIL:
-------
Vornado-Ceruzzi Joint Venture
(80% interest)............................................. Northeast and Mid-Atlantic states 12
OTHER REAL ESTATE INVESTMENTS:
------------------------------
Newkirk Joint Ventures - additional investments................. Various 68
Hotel Pennsylvania - increase in investment from
80% to 100%................................................ New York City 42
Alexander's Inc. - increase in investment from
29.3% to 32%............................................... New York City 9
Student Housing Joint Ventures
(90% interest)............................................. Florida 24
-----------
Total Acquisitions and Investments................ $ 807
===========
</TABLE>
OFFICE:
888 Seventh Avenue
On January 12, 1999, the Company completed the acquisition of 888 Seventh
Avenue, a 46 story Manhattan office building, for approximately $117,000,000, of
which $55,000,000 was indebtedness.
Charles E. Smith Commercial Realty L.P.
On March 4, 1999, the Company made an additional $242,000,000 investment
in CESCR by contributing to CESCR the land under certain CESCR office properties
in Crystal City, Arlington, Virginia, and partnership interests in certain CESCR
subsidiaries. The Company acquired these assets from Commonwealth Atlantic
Properties, Inc. ("CAPI"), an affiliate of Lazard Freres Real Estate Investors
L.L.C., immediately prior to the contribution to CESCR. Together with the
Company's investment in CESCR made in 1997 and the units it reacquired in March
1999 from Vornado Operating Company, the Company owns approximately 34% of
CESCR's limited partnership units. In addition, the Company acquired from CAPI
for $8,000,000 the land under a Marriott Hotel located in Crystal City.
The purchase price was paid to CAPI by the Company issuing $250,000,000
of 6% Convertible Preferred Units. The Preferred Units are convertible at $44
per unit and the coupon increases to 6.50% over the next three years and then
fixes at 6.75% in year eight. The Company has the right to appoint one of three
members to CESCR's Board of Managers, increasing under certain circumstances to
two of four members in March 2002.
In connection with these transactions, the Company made a five-year
$41,200,000 loan to CAPI with interest at 8%, increasing to 9% ratably over the
term. The loan is secured by approximately $55,000,000 of the units issued to
CAPI as well as certain real estate assets.
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909 Third Avenue
On July 21, 1999, the Company acquired 909 Third Avenue, a 33 story
Manhattan office building, for approximately $123,000,000, of which $109,000,000
was indebtedness.
595 Madison Avenue
On September 15, 1999, the Company acquired 595 Madison Avenue (the
"Fuller Building"), a 40 story Manhattan office building, for approximately
$125,000,000.
GreenPoint Leasehold Interest
On December 16, 1999, the Company acquired GreenPoint Financial
Corporation's 99-year leasehold interest in approximately 56,000 square feet,
adjacent to One Penn Plaza, as part of its redevelopment plan for the Penn Plaza
district for approximately $37,300,000.
RETAIL:
Vornado-Ceruzzi Joint Ventures
On January 4, 2000 and January 25, 2000, the Company and its joint
venture partner acquired fee and/or leasehold interests in six properties
located in Pennsylvania, Virginia and Maryland formerly occupied by Hechinger,
Inc., a home improvement retailer, which was liquidated. The purchase price for
the 500,000 square feet acquired was $15,000,000. The Company's share of this
investment is 80% or $12,000,000.
OTHER REAL ESTATE INVESTMENTS:
Newkirk Joint Ventures
On March 9, 1999, the Company and its joint venture partner completed the
acquisition of additional equity interests in certain limited partnerships. The
Company's additional investment of $52,435,000 consisted of $47,790,000 in
Operating Partnership Units and $4,645,000 in cash.
On October 15, 1999, the Company completed the acquisition of $15,600,000
of securitized debt of the Newkirk Joint Ventures which has an average yield of
14.28%.
Hotel Pennsylvania
On August 5, 1999, the Company increased its interest in the Hotel by
acquiring Planet Hollywood International, Inc.'s ("Planet Hollywood") 20%
interest in the hotel for approximately $18,000,000 and assumed $24,000,000 of
existing debt. In connection with the transaction, the Company terminated the
licensing agreement with Planet Hollywood for an Official All-Star Hotel. The
Hotel Pennsylvania is located in New York City on Seventh Avenue opposite
Madison Square Garden. After the acquisition, the Company owned 100% of the
commercial portion of the building (retail and office space) and 98% of the
hotel portion through a preferred stock affiliate (in which the Company owns all
of the preferred equity and none of the common equity).
Alexander's
On October 21, 1999, the Company increased its ownership interest in
Alexander's from 29.3% to 32% by acquiring an additional 135,600 shares of
Alexander's common stock for approximately $8,956,000.
Student Housing Joint Venture
On January 28, 2000, the Company and its joint venture partner, acquired
a 252-unit student housing complex in Gainesville, Florida, for approximately
$27,000,000, of which $19,600,000 was indebtedness. The Company's share of this
investment is 90%.
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DISPOSITIONS
On March 3, 2000, the Company sold three shopping centers located in
Texas for approximately $25,750,000 resulting in a gain of $4,400,000.
DEVELOPMENT AND REDEVELOPMENT PROJECTS
During 1999, the Company expended approximately $93,444,000 in connection
with development and redevelopment projects which included (i) $27,544,000 to
buyout the tenant's lease on 28,000 square feet of office space at 640 Fifth
Avenue, thereby permitting re-leasing for retail use, (ii) $11,000,000 to buyout
the Bradlees lease at 14th Street and Union Square (effective March 15, 2002),
and (iii) $54,900,000 for the multi-year projects described below.
The following table sets forth certain information for multi-year
projects currently in development or redevelopment as of December 31, 1999:
<TABLE>
<CAPTION>
(dollars in millions) The Company's Share of
---------------------------------------------------------------
Anticipated Estimated Total Costs Expended through Estimated Costs to
Project Completion Date Project Cost December 31, 1999 Complete
------- --------------- ---------------- ---------------------- ------------------
<S> <C> <C> <C> <C>
YMCA Development (80% interest) -
construction and sale of 119,000
square foot residential condominium
tower in Manhattan (46 of the 53 units
(87%) have been presold as of March 1,
2000) Spring 2001 $ 99.5 $ 22.9 $ 76.6
Fort Lee, New Jersey (75% interest) -
construction of an 800,000 square
foot high rise rental apartment
complex Winter 2002 125.4 17.8 107.6
Temperature Controlled Logistics
(60% interest) - acquisition,
development and expansion of
distribution and production
warehouses 2000-2001 75.7 -- 75.7
770 Broadway - refurbishment of
1,016,000 square foot office property Spring 2000 36.0 24.9 11.1
Market Square Complex in High Point,
North Carolina - 335,000 square foot
expansion project Spring 2000 23.0 15.3 7.7
-------------- ------------ ------------
$ 359.6 $ 80.9 $ 278.7
============== ============ ============
</TABLE>
The above table does not include the capital requirements of Alexander's
which are described in Item II: Properties.
In addition to the projects noted above, the Company has identified the
following opportunities for future development or redevelopment: (i) the site at
14th Street and Union (currently leased to Bradlees), which may include razing
the existing building and developing a large multi-use building, (ii) the
refurbishment of the Hotel Pennsylvania, (iii) the redevelopment of the
Company's Penn Station properties which may include creating new retail space,
(iv) the construction of a large office tower at 7 Times Square (50% interest),
(v) the construction of 435,000 square feet of new showrooms in High Point,
North Carolina, (vi) the redevelopment of office space at 595 Madison Avenue,
and (vii) the 45,000 square foot expansion of 640 Fifth Avenue.
There can be no assurance that the above projects will be commenced or
will be successful.
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OPERATIONS OF VORNADO OPERATING COMPANY
In October 1998, Vornado Operating Company ("Vornado Operating") was spun
off from the Company in order to own assets that the Company could not itself
own and conduct activities that Company could not itself conduct.
The Company and Vornado Operating are parties to certain agreements
described below.
Revolving Credit Agreement
Vornado Operating was granted a $75,000,000 unsecured revolving credit
facility from the Company (the "Revolving Credit Agreement") which expires on
December 31, 2004. Borrowings under the Revolving Credit Agreement bear interest
at LIBOR plus 3%. The Company receives a commitment fee equal to 1% per annum on
the average daily unused portion of the facility. No amortization is required to
be paid under the Revolving Credit Agreement during its term. The Revolving
Credit Agreement prohibits Vornado Operating from incurring indebtedness to
third parties (other than certain purchase money debt and certain other
exceptions) and prohibits Vornado Operating from paying dividends. As of
December 31, 1999, $4,587,000 was outstanding under the Revolving Credit
Agreement.
Agreement with Vornado Operating
The Company and Vornado Operating are parties to an Agreement pursuant to
which, among other things, (a) the Company will under certain circumstances
offer Vornado Operating an opportunity to become the lessee of certain real
property owned now or in the future by the Company (under mutually satisfactory
lease terms) and (b) Vornado Operating will not make any real estate investment
or other REIT-Qualified Investment unless it first offers the Company the
opportunity to make such investment and the Company has rejected that
opportunity.
Under the Agreement, the Company provides Vornado Operating with certain
administrative, corporate, accounting, financial, insurance, legal, tax, data
processing, human resources and operational services. For these services,
Vornado Operating compensates the Company in an amount determined in good faith
by the Company as the amount an unaffiliated third party would charge Vornado
Operating for comparable services and reimburses the Company for certain costs
incurred and paid to third parties on behalf of Vornado Operating. Pursuant to
the Agreement, compensation for such services was $330,000 for the year ended
December 31, 1999 and $50,000 for the period from October 16, 1998 (commencement
date) through December 31, 1998.
Vornado Operating and the Company each have the right to terminate the
Agreement if the other party is in material default of the Agreement or upon 90
days written notice to the other party at any time after December 31, 2003. In
addition, the Company has the right to terminate the Agreement upon a change in
control of Vornado Operating.
Vornado Operating's Management
Messrs. Roth, Fascitelli, West and Wight are directors of Vornado
Operating. Mr. Roth is also Chairman of the Board and Chief Executive Officer of
Vornado Operating, Mr. Fascitelli is also President of Vornado Operating, and
certain other members of the Company's senior management hold a corresponding
position with Vornado Operating.
Temperature Controlled Logistics Business
On October 31, 1997, partnerships (the "Vornado/Crescent Partnerships") in which
affiliates of the Company have a 60% interest and affiliates of Crescent Real
Estate Equities Company have a 40% interest, acquired each of AmeriCold
Corporation ("AmeriCold") and URS Logistics, Inc. ("URS"). In June 1998, the
Vornado/Crescent Partnerships acquired the assets of Freezer Services, Inc. and
in July 1998 acquired the Carmar Group.
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<PAGE> 9
On March 12, 1999, the Vornado/Crescent Partnerships sold all of the
non-real estate assets of Temperature Controlled Logistics encompassing the
operations of the temperature controlled business for approximately $48,000,000
to a new partnership owned 60% by Vornado Operating Company and 40% by Crescent
Operating Inc. ("AmeriCold Logistics"). The new partnership leases the
underlying temperature controlled warehouses used in this business from the
Vornado/Crescent Partnerships which continue to own the real estate. The leases
generally have a 15 year term with two-five year renewal options and provide for
the payment of fixed base rent and percentage rent based on revenue AmeriCold
Logistics receives from its customers. The new partnership is required to pay
for all costs arising from the operation, maintenance and repair of the
properties as well as property capital expenditures in excess of $5,000,000
annually. The new partnership has the right to defer a portion of the rent for
up to three years beginning on March 12, 1999 to the extent that available cash,
as defined in the leases, is insufficient to pay such rent and pursuant thereto,
rent was deferred for the period ended December 31, 1999 of which the Company's
share was $3,240,000.
Disposition and Acquisition of Interest in CESCR
On December 31, 1998, the Company sold approximately 1.7% of the
outstanding partnership units of CESCR to Vornado Operating Company for an
aggregate purchase price of approximately $12,900,000, or $34 per unit (which is
the price at which CESCR issued partnership units in October 1998 in connection
with a significant "roll-up" transaction). The purchase price was funded out of
Vornado Operating's working capital. After giving effect to this purchase, the
Company owned approximately 9.6% of CESCR as of December 31, 1998. In connection
with this purchase, the Company granted to Vornado Operating an option to
require the Company to repurchase all of the CESCR units at the price at which
Vornado Operating purchased the CESCR units, plus a cumulative return on such
amount at a rate of 10% per annum. In March 1999, Vornado Operating exercised
such option and the Company reacquired the CESCR units from Vornado Operating
for $13,200,000.
FINANCING ACTIVITIES
During 1999, the Company sold an aggregate of $539,500,000 of Cumulative
Redeemable Preferred Units and $200,000,000 of Cumulative Redeemable Preferred
Shares, resulting in net proceeds of approximately $718,734 ,000.
In addition, during 1999 the Company completed $485,000,000 of property
level refinancings.
On March 1, 2000, the Company completed a $500,000,000 private placement
of 10-year, 7.93% mortgage notes, cross-collateralized by 42 shopping center
properties, resulting in net proceeds of approximately $490,000,000. In
connection therewith, the Company repaid $228,000,000 of existing mortgage debt
scheduled to mature on December 1, 2000 and $262,000,000 outstanding under its
revolving credit facility.
Further detail of the Company's financing activities are disclosed in
Management's Discussion and Analysis of Financial Condition and Results of
Operations in Part II of this document.
At December 31, 1999, the ratio of debt-to-enterprise value (market
equity value plus debt less cash) was 43% based on debt of $3.2 billion which
included the Company's proportionate share of debt of partially-owned entities.
In the future, in connection with its strategy for growth, this percentage may
change. The Company's policy concerning the incurrence of debt may be reviewed
and modified from time to time by the Company without the vote of shareholders.
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The Company may seek to obtain funds through equity offerings or debt
financings, although there is no express policy with respect thereto. The
Company may offer its shares or Operating Partnership units in exchange for
property and may repurchase or otherwise reacquire its shares or any other
securities in the future.
EBITDA BY SEGMENT AND REGION
The following table sets forth the percentage of the Company's EBITDA(1)
by segment and region for the years ended December 31, 1999, 1998 and 1997.
Prior to April 1997, the Company operated in one segment-retail real estate,
primarily in the Northeast section of the United States.
<TABLE>
<CAPTION>
PERCENTAGE OF EBITDA
--------------------------------------------------
Years Ended December 31,
--------------------------------------------------
SEGMENT 1999 1998 1997
------- --------- --------- ---------
<S> <C> <C> <C>
Office................................................ 42% 37% 38%
Retail................................................ 19% 26% 57%
Merchandise Mart Properties........................... 12% 9% --
Temperature Controlled Logistics...................... 16% 20% 8%
Other................................................. 11% 8% (3)%
------ ----- ------
100% 100% 100%
====== ===== =====
REGION
-------
New York City metropolitan area....................... 48% 54% 72%
Washington D.C./Northeast Virginia.................... 12% 7% 1%
Chicago............................................... 8% 6% --
New Jersey............................................ 4% 5% 14%
Puerto Rico........................................... 2% 2% 4%
Other (2)............................................. 26% 26% 9%
------ ----- -----
100% 100% 100%
====== ===== =====
</TABLE>
(1) EBITDA represents income before interest, taxes, depreciation and
amortization, extraordinary or non-recurring items, gains or
losses on sales of real estate and the effect of straight-lining
of property rentals for rent escalations. Management considers
EBITDA a supplemental measure for making decisions and assessing
the performance of its segments. EBITDA may not be comparable to
similarly titled measures employed by other companies.
(2) Other includes the Temperature Controlled Logistics segment which
has facilities in 31 states and Alberta, Canada. See page 34 for
details.
RELATIONSHIP WITH ALEXANDER'S
The Company owns 32.0% of the outstanding shares of common stock of
Alexander's. See "Interstate Properties" below for a description of Interstate's
ownership of the Company and Alexander's.
Alexander's has eight properties (see Item 2. Properties--Alexander's).
At December 31, 1999, the Company has loans receivable from Alexander's
aggregating $95,000,000, including $50,000,000 loaned to Alexander's on October
20, 1999. The loans, which were scheduled to mature on March 15, 2000, were
extended to March 15, 2001. The interest rate was reset from 14.18% to 15.72%,
reflecting an increase in the underlying Treasury rate. Management believes
there are no indications of impairment as discussed in Statement of Financial
Accounting Standards No. 114, "Accounting by Creditors for Impairment of a
Loan".
The Company manages, develops and leases the Alexander's properties under
a management and development agreement (the "Management Agreement") and a
leasing agreement (the "Leasing Agreement") pursuant to which the Company
receives annual fees from Alexander's. These agreements have a one-year term
expiring in March of each year and are automatically renewable. See Item 2.
Properties for a description of Alexander's Development and Redevelopment
projects.
Alexander's common stock is listed on the New York Stock Exchange under
the symbol "ALX".
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<PAGE> 11
INTERSTATE PROPERTIES
As of December 31, 1999, Interstate Properties and its partners owned
approximately 17.8% of the common shares of beneficial interest of the Company,
27.3% of Alexander's common stock and beneficial ownership of 17.8% of Vornado
Operating. Interstate Properties is a general partnership in which Steven Roth,
David Mandelbaum and Russell B. Wight, Jr. are partners. Mr. Roth is the
Chairman of the Board and Chief Executive Officer of the Company, the Managing
General Partner of Interstate Properties, and the Chief Executive Officer and a
director of both Alexander's and Vornado Operating. Mr. Wight is a trustee of
the Company and is also a director of both Alexander's and Vornado Operating.
Mr. Mandelbaum is a trustee of the Company and is also a director of
Alexander's.
COMPETITION
The Company's four business segments, Office, Retail, Merchandise Mart
Properties and Temperature Controlled Logistics, operate in highly competitive
environments. The Company's success depends upon, among other factors, the
trends of the national and local economies, the financial condition and
operating results of current and prospective tenants and customers, the
availability and cost of capital, construction and renovation costs, income tax
laws, governmental regulations, legislation and population trends. The Company
competes with a large number of real estate property owners. Principal factors
of competition are rent charged, attractiveness of property and the quality and
breadth of services provided. The Company has a large concentration of
properties in the New York City metropolitan area, a highly competitive market.
The economic condition of this market may be significantly influenced by supply
and demand for space and the financial performance and productivity of the
publishing, retail, pharmaceutical, insurance and finance industries.
ENVIRONMENTAL REGULATIONS
Under various Federal, state and local laws and regulations, a current or
previous owner or operator of real estate may be required to investigate and
clean up hazardous or toxic substances released at a property, and may be held
liable to a governmental entity or to third parties for property damage or
personal injuries and for investigation and clean-up costs incurred by the
parties in connection with the contamination. Such laws can impose liability
without regard to whether the owner or operator knew of, or caused, the release
of such substances. The presence of contamination or the failure to remediate
contamination may adversely affect the owner's ability to sell or lease real
estate or to borrow using the real estate as collateral. Other Federal, state
and local laws and regulations require abatement or removal of damaged
asbestos-containing materials or in the event of demolition or certain
renovations or remodeling and also govern emissions of and exposure to asbestos
fibers in the air. Air emissions and waste-water discharges and the operation
and subsequent removal of certain underground storage tanks are also regulated
by Federal and state laws. In connection with the ownership, operation and
management of its properties, the Company could be held liable for the costs of
remedial action with respect to such regulated substances or tanks or related
claims for personal injury, property damage or fines.
Each of the Company's properties has been subjected to varying degrees of
environmental assessment at various times. The environmental assessments did not
reveal any material environmental condition. However, there can be no assurance
that the identification of new compliance concerns or undiscovered areas of
contamination, changes in the extent or known scope of contamination, the
discovery of additional sites, or changes in cleanup requirements would not
result in significant costs to the Company.
CERTAIN ACTIVITIES
Acquisitions and investments are not necessarily required to be based on
specific allocation by type of property. The Company has historically held its
properties for long-term investment; however, it is possible that properties in
the portfolio may be sold in whole or in part, as circumstances warrant, from
time to time. Further, the Company has not adopted a policy that limits the
amount or percentage of assets which would be invested in a specific property.
While the Company may seek the vote of its shareholders in connection with any
particular material transaction, generally the Company's activities are reviewed
and may be modified from time to time by its Board of Trustees without the vote
of shareholders.
-11-
<PAGE> 12
EMPLOYEES
The Company has approximately 1,299 employees consisting of 95 in the
Office Properties segment, 53 in the Retail Properties segment, 588 in the
Merchandise Mart Properties segment, 470 at the Hotel Pennsylvania and 93
corporate staff. This does not include employees of partially-owned entities.
SEGMENT DATA
The Company operates in four business segments: Office Properties, Retail
Properties, Merchandise Mart Properties and Temperature Controlled Logistics.
The Company engages in no foreign operations other than one temperature
controlled warehouse in Canada.
The Company's principal executive offices are located at Park 80 West,
Plaza II, Saddle Brook, New Jersey 07663; telephone (201) 587-1000.
ITEM 2. PROPERTIES
The Company currently owns, directly or indirectly, Office properties,
Retail properties, Merchandise Mart Properties and Temperature Controlled
Logistics warehouses. The Company also owns or has investments in Alexander's,
Hotel Pennsylvania, Newkirk Joint Ventures, and dry warehouses and industrial
buildings.
-12-
<PAGE> 13
OFFICE
The New York City office properties consist of (i) all or a portion of 22 office
buildings in the New York City metropolitan area (primarily Manhattan)
aggregating approximately 14.0 million square feet (including 825,000 square
feet of retail space and five garages containing 334,000 square feet)
(collectively, the "New York City Office Properties") and (ii) a 34% interest in
Charles E. Smith Commercial Realty, L.P. which owns interests in and manages
approximately 10.7 million square feet of office properties in Northern Virginia
and Washington, D.C. (the "CESCR Office Properties").
The following data on pages 13 to 18 covers the New York City Office
Properties. The CESCR Office Properties are described on pages 19 to 21.
New York City Office Properties:
The following table sets forth the percentage of the New York City Office
Properties revenue by tenants' industry:
<TABLE>
<CAPTION>
Industry Percentage
-------- ----------
<S> <C>
Publishing............................ 13%
Retail................................ 10%
Finance............................... 9%
Legal................................. 8%
Technology............................ 7%
Insurance............................. 6%
Government............................ 5%
Pharmaceuticals....................... 5%
Media and Entertainment..... 5%
Apparel............................... 3%
Service Contractors.............. 3%
Engineering........................... 3%
Bank Branches...................... 5%
Other................................. 18%
</TABLE>
The Company's New York City Office property lease terms range from 5 to 7
years for smaller tenant spaces to as long as 20 years for major tenants. Leases
typically provide for step-ups in rent periodically over the term of the lease
and pass through to tenants the tenant's share of increases in real estate taxes
and operating expenses over a base year. Electricity is provided to tenants on a
submetered basis or included in rent based on surveys and adjusted for
subsequent utility rate increases. Leases also typically provide for tenant
improvement allowances for all or a portion of the tenant's initial construction
costs of its premises. No tenant in the office segment accounted for more than
10% of the Company's total revenue. Below is a listing of tenants which
accounted for 2% or more of the New York City Office Properties revenues in
1999:
<TABLE>
<CAPTION>
Percentage of the
(in thousands, except percentages) New York City
Office
Square Feet 1999 Properties
Tenant Leased Revenues Revenues
------ ----------- -------- ------------------
<S> <C> <C> <C>
Sterling Winthrop Inc........................ 429 $ 18,125 5%
Times Mirror Company......................... 520 15,424 4%
The McGraw Hill
Companies Inc........................... 486 14,199 4%
Mutual Life Insurance Co..................... 264 8,734 2%
Kmart Corporation............................ 287 7,649 2%
</TABLE>
-13-
<PAGE> 14
The following table sets forth lease expirations for each of the next 10
years, as of December 31, 1999, assuming that none of the tenants exercise their
renewal options.
<TABLE>
<CAPTION>
ANNUAL ESCALATED
RENT OF EXPIRING LEASES
NUMBER OF SQUARE FEET OF PERCENTAGE OF TOTAL LEASED ------------------------------------
YEAR EXPIRING LEASES EXPIRING LEASES SQUARE FEET TOTAL PER SQUARE FOOT
- ---- --------------- --------------- -------------------------- ----------------- ----------------
<S> <C> <C> <C> <C> <C>
2000.................. 211 914,000 6.6% $ 31,501,000 $ 34.45
2001.................. 127 767,000 5.5% 25,755,000 33.59
2002.................. 122 793,000 5.7% 24,235,000 30.55
2003.................. 98 1,294,000(1) 9.3% 29,065,000 22.47
2004.................. 117 973,000 7.0% 31,055,000 31.91
2005.................. 62 505,000 3.6% 15,650,000 30.98
2006.................. 69 869,000 6.3% 24,178,000 27.82
2007.................. 57 865,000 6.2% 28,496,000 32.93
2008.................. 63 1,228,000 8.8% 37,901,000 30.85
2009.................. 45 612,000 4.4% 19,998,000 32.66
</TABLE>
(1) Includes 492,000 square feet at 909 Third Avenue leased to the U.S. Post
Office. The annual escalated rent is $3,193,000 or $6.49 per square foot.
The U.S. Post Office has 7 five-year renewal options remaining.
As of March 1, 2000, the occupancy rate of the Company's New York City
Office properties was 95%. The following table sets forth the occupancy rate and
the average annual escalated rent per square foot for the New York City Office
properties at the end of each of the past three years.
<TABLE>
<CAPTION>
AVERAGE ANNUAL
AS OF RENTABLE ESCALATED RENT
DECEMBER 31, SQUARE FEET OCCUPANCY RATE PER SQUARE FOOT
------------------------------ --------------- ---------------- -----------------
<S> <C> <C> <C>
1999.......................... 14,028,000 95% $ 30.16
1998.......................... 12,437,000 91% $ 28.14
1997.......................... 8,353,000 95% $ 27.09
</TABLE>
-14-
<PAGE> 15
In 1999, 1,764,602 square feet of New York City office space was leased
at a weighted average initial rent per square foot of $37.34. The Company's
ownership interest in the leased square footage is 1,685,476 square feet at a
weighted average initial rent per square foot of $37.10. At December 31, 1998,
the weighted average escalated rent per square foot for the Company's interest
in such properties was $26.22. Following is the detail by building:
<TABLE>
<CAPTION>
1999 Leases Average Annual
---------------------------------------- Escalated Rent
Per Square Foot at
Average Initial Rent December 31,
Location Square Feet Per Square Foot(1) 1998
-------- -------------- --------------------- ------------------
<S> <C> <C> <C>
770 Broadway........................ 588,056 $31.86 $ 20.16
One Penn Plaza...................... 275,609 39.68 27.98
909 Third Avenue.................... 220,823 47.11 34.83
Two Penn Plaza...................... 88,379 38.06 27.80
Eleven Penn Plaza................... 66,870 31.37 26.75
888 Seventh Avenue.................. 62,211 42.27 30.08
330 Madison Avenue.................. 61,663 39.30 35.42
90 Park Avenue...................... 61,318 45.90 37.63
570 Lexington Avenue................ 58,896 46.73 31.69
150 East 58th Street................ 55,881 40.82 30.99
1740 Broadway....................... 53,800 42.00 34.42
866 United Nations Plaza............ 51,159 35.30 30.69
Two Park Avenue..................... 49,255 35.64 23.54
550/600 Mamaroneck Avenue........... 36,818 21.68 19.72
40 Fulton Street.................... 26,907 26.52 26.60
20 Broad Street..................... 6,957 17.25 27.51
-------------
Total............................... 1,764,602 37.34 27.02
=============
Vornado's ownership interest........ 1,685,476 37.10 26.22
=============
</TABLE>
(1) Most leases include periodic step-ups in rent, which are not
reflected in the initial rent per square foot leased.
In addition to the office space noted above, the Company leased 37,000
square feet of retail space (of which 28,000 square feet was previously leased
as office space) at 640 Fifth Avenue at an average initial rent per square foot
of $202.79.
During 1999, the Company granted non-exclusive rights to three companies
to install fiber-optic networks and to provide broadband data, video and voice
communications services in its office buildings in return for a share of
revenues and warrants to purchase common stock. Concurrently, the Company has
invested approximately $10.2 million in these entities, representing interests
in each entity of less than 3%.
-15-
<PAGE> 16
New York City Office Properties
The following table sets forth certain information for the New York City
Office Properties owned by the Company as of December 31, 1999.
<TABLE>
<CAPTION>
YEAR APPROXIMATE
ORIGINALLY LAND LEASABLE NUMBER ANNUALIZED
DEVELOPED AREA BUILDING SQUARE OF BASE RENT PER
LOCATION OR ACQUIRED (SQ. FT.) FEET TENANTS SQ. FT. (1)
- -------------------------------- ------------- ---------- ----------------- -------- -------------
<S> <C> <C> <C> <C> <C>
MANHATTAN
One Penn Plaza (3) 1998 128,000 2,418,000 220 $28.28
Two Penn Plaza 1997 117,000 1,497,000 62 27.97
909 Third Avenue (3) 1999 82,000 1,303,000 18 22.23
770 Broadway 1998 63,000 1,037,000 10 24.97
Eleven Penn Plaza 1997 56,000 975,000 75 27.00
</TABLE>
<TABLE>
<CAPTION>
LEASE
ANNUALIZED EXPIRATION/
ESCALATED RENT PERCENT PRINCIPAL TENANTS OPTION ENCUMBRANCES
LOCATION PER SQ. FT. (2) LEASED (1) (50,000 SQUARE FEET OR MORE) EXPIRATION (THOUSANDS)
- -------------------------------- --------------- ---------- ------------------------------ ----------- ------------
<S> <C> <C> <C> <C> <C>
MANHATTAN
One Penn Plaza (3) $29.28 97% BNY Financial Group 2004/2009 $ 275,000
Buck Consultants 2008
Cisco Systems 2005/2011
First Albany 2008/2013
Kmart Corporation 2016/2036
Metropolitan Life 2004
Miller Freeman Inc. 2011/2021
MWB Leasing 2006
Parsons Brinkerhoff 2008/2013
State of NY 2004/2014
Stone & Webster 2008
Two Penn Plaza 29.01 98% Compaq Computer 2003 163,147
Forest Electric 2006/2011
Information Builders, Inc. 2013/2023
Madison Square Garden 2007/2017
McGraw Hill Co., Inc. 2020/2030
Ogden Services 2008
UHC Management 2001/2006
909 Third Avenue (3) 24.04 88% Citibank 2008 108,754
Fischbein Badillo 2008
Forest Laboratories 2010/2020
Ogilvy Public Relations 2009/2014
Shearman & Sterling 2007/2012
U.S. Post Office (4) 2003/2033
770 Broadway 25.59 97% Chase Manhattan Bank 2005 --
J. Crew 2012/2017
Kmart 2016/2036
MTVN Online 2009/2014
V.N.U. U.S.A, Inc 2015/2020
Eleven Penn Plaza 29.35 97% Crowthers McCall 2010 53,129
Executive Office Network 2012
Faulkner & Gray 2006/2011
</TABLE>
-16-
<PAGE> 17
<TABLE>
<CAPTION>
YEAR APPROXIMATE
ORIGINALLY LAND LEASABLE NUMBER ANNUALIZED
DEVELOPED AREA BUILDING SQUARE OF BASE RENT PER
LOCATION OR ACQUIRED (SQ. FT.) FEET TENANTS SQ. FT. (1)
- -------------------------------- ------------- ---------- ----------------- -------- -------------
<S> <C> <C> <C> <C> <C>
Two Park Avenue 1997 44,000 952,000 48 23.72
90 Park Avenue 1997 38,000 882,000 29 32.92
888 Seventh Avenue 1999 32,000 861,000 47 28.62
330 West 34th Street (3) 1998 46,000 625,000 12 14.21
1740 Broadway 1997 30,000 552,000 17 31.21
150 East 58th Street 1998 21,000 548,000 127 32.16
866 United Nations Plaza 1997 90,000 386,000 85 31.11
595 Madison (Fuller Building) 1999 13,000 297,000 79 53.69
640 Fifth Avenue 1997 22,000 259,000 15 58.62
40 Fulton Street 1998 18,000 233,000 31 27.95
689 Fifth Avenue 1998 6,000 86,000 8 56.55
330 Madison Avenue
(25% Ownership) 1997 33,000 770,000 46 35.65
</TABLE>
<TABLE>
<CAPTION>
LEASE
ANNUALIZED EXPIRATION/
ESCALATED RENT PERCENT PRINCIPAL TENANTS OPTION ENCUMBRANCES
LOCATION PER SQ. FT. (2) LEASED (1) (50,000 SQUARE FEET OR MORE) EXPIRATION (THOUSANDS)
- -------------------------------- --------------- ---------- ------------------------------ ----------- ------------
<S> <C> <C> <C> <C> <C>
Federated Dept Stores 2016
Two Park Avenue 23.99 96% Herrick Feinstein 2010/2015 65,000
Medical Liability Mutual Ins 2009
Schiefflin & Somerset 2006/2010
Times Mirror Company 2010/2025
United Way 2013/2018
90 Park Avenue 38.35 99% Sterling Winthrop Inc. 2015/2035 --
Warnaco 2004
888 Seventh Avenue 31.12 93% Golden Books 2013 55,000
New Line Realty 2007
Soros Fund Management LLC 2004-2010
Stanley H. Kaplan 2006/2011
The Limited 2014
330 West 34th Street (3) 14.47 90% City of New York 2012/2017 --
Props for Today 2006/2016
1740 Broadway 33.87 100% Davis & Gilbert 2013 --
Mutual Life Insurance 2016/2026
William Douglas McAdams 2007
150 East 58th Street 33.74 94%
866 United Nations Plaza 36.08 94% Fross & Zelnick 2009 33,000
595 Madison (Fuller Building) 58.29 92%
640 Fifth Avenue 60.60 92% Bozell Jacobs Kenyon 2008/2013 --
Hennes & Mauritz, Inc. 2014
40 Fulton Street 28.56 94% Pencom Systems 2007 --
689 Fifth Avenue 56.93 66% Red Door Salons, Inc. 2007/2012 --
330 Madison Avenue
(25% Ownership) 35.88 93% Bank Julius Baer 2005 --
BDO Seidman 2010/2015 --
</TABLE>
-17-
<PAGE> 18
<TABLE>
<CAPTION>
YEAR APPROXIMATE
ORIGINALLY LAND LEASABLE NUMBER ANNUALIZED
DEVELOPED AREA BUILDING SQUARE OF BASE RENT PER
LOCATION OR ACQUIRED (SQ. FT.) FEET TENANTS SQ. FT. (1)
- -------------------------------- ------------- ---------- ----------------- -------- -------------
<S> <C> <C> <C> <C> <C>
20 Broad Street (3) 1998 20,000 462,000 18 27.12
(60% Ownership)
570 Lexington Avenue 1997 16,000 427,000 52 33.42
(49.9% Ownership)
825 Seventh Avenue 1996 18,000 165,000 3 27.26
(50% Ownership)
WESTCHESTER
550/600 Mamaroneck Avenue(3) 1998 666,000 234,000 48 19.89
NEW JERSEY
Paramus (3) 1987 148,000 118,000 26 16.82
------------- -------------- --------
TOTAL OFFICE BUILDINGS 1,707,000 15,087,000 1,076 $28.51
============= =============== ======
VORNADO' OWNERSHIP INTEREST 1,657,000 14,028,000
============= ===============
</TABLE>
<TABLE>
<CAPTION>
LEASE
ANNUALIZED EXPIRATION/
ESCALATED RENT PERCENT PRINCIPAL TENANTS OPTION ENCUMBRANCES
LOCATION PER SQ. FT. (2) LEASED (1) (50,000 SQUARE FEET OR MORE) EXPIRATION (THOUSANDS)
- -------------------------------- --------------- ---------- ------------------------------ ----------- ------------
<S> <C> <C> <C> <C> <C>
20 Broad Street (3) 30.62 96% N.Y. Stock Exchange 2003/2066 --
(60% Ownership)
570 Lexington Avenue 33.66 94% --
(49.9% Ownership)
825 Seventh Avenue 27.26 100% International Merchandising Corp 2013/2023 23,968
(50% Ownership) Young & Rubicom 2010/2015
WESTCHESTER
550/600 Mamaroneck Avenue(3) 20.81 92% --
NEW JERSEY
Paramus (3) 16.82 64% --
-----------
TOTAL OFFICE BUILDINGS $30.16 95% $ 776,998
===========
VORNADO' OWNERSHIP INTEREST 95% $ 765,014
===========
</TABLE>
(1) Represents annualized monthly base rent for tenants excluding rent for
leases which had not commenced as of December 31, 1999, which are
included in percent leased.
(2) Represents annualized monthly escalated rent for tenants including tenant
pass-throughs of operating expenses (exclusive of tenant electricity
costs) and real estate taxes.
(3) 100% ground leased property.
(4) The U.S. .Post Office leases approximately 492,000 square feet at this
location at annualized escalated rent per square foot of $6.49.
-18-
<PAGE> 19
CESCR Office Properties:
CESCR, owns 39 office buildings in the Northern Virginia and Washington
D.C. area containing 10.7 million square feet. The Company owns a 34% interest
in CESCR. As of December 31, 1999, 49 percent of CESCR's property portfolio is
leased to various agencies of the U.S. government (General Services
Administration "GSA" lessee); the largest U.S. government agencies include the
U.S. Patent Trade Office (1.97 million square feet in 17 properties), the U.S.
Navy Sea Systems Command (253,000 square feet in 7 properties), the Federal
Supply Service (167,400 square feet in 2 properties) and the Environmental
Protection Agency (203,000 square feet in one property). One additional tenant,
US Airways, Inc. occupied 317,000 square feet in one building. As of December
31, 1999, no other tenants occupied more than 2% of CESCR's office properties.
CESCR office leases are typically for 3 to 5 year terms, and may provide
for extension options at prenegotiated rates. Most leases provide for annual
rental escalations throughout the lease term, plus recovery of increases in real
estate taxes and certain property operating expenses. Annual rental escalations
are typically based upon either fixed percentage increases or the consumer price
index. Leases also typically provide for tenant improvement allowances for all
or a portion of the tenant's initial construction costs of its' premises.
Below is a listing of tenants which accounted for 2% or more of the CESCR
Office Properties revenues in 1999:
<TABLE>
<CAPTION>
Percentage of the
(in thousands, except percentages) CESCR Office
Square Feet 1999 Properties
Tenant Leased Revenues Revenues
------ ---------- ----------- -----------------
<S> <C> <C> <C>
U.S. Patent Trade Office 1,970 $ 53,081 18%
US Airways, Inc. 317 10,899 4%
U.S. Navy Sea Systems Command 253 6,105 2%
</TABLE>
-19-
<PAGE> 20
The following table sets forth as of December 31, 1999 CESCR lease
expirations for each of the next 10 years, assuming that none of the tenants
exercise their renewal options.
<TABLE>
<CAPTION>
ANNUAL ESCALATED
PERCENTAGE OF TOTAL RENT OF EXPIRING LEASES
NUMBER OF SQUARE FEET OF LEASED ---------------------------------------
YEAR EXPIRING LEASES EXPIRING LEASES SQUARE FEET TOTAL PER SQUARE FOOT
- ---- --------------- --------------- ------------------- ------------------ ----------------
<S> <C> <C> <C> <C> <C>
2000......... 230 1,245,000 11.9% $ 33,199,000 $ 26.66
2001......... 226 2,886,000 27.5% 70,126,000 24.30
2002......... 176 1,302,000 12.4% 34,637,000 26.61
2003......... 134 1,508,000 14.4% 41,043,000 27.22
2004......... 103 2,126,000 20.2% 59,118,000 27.81
2005......... 32 136,000 1.3% 3,765,000 27.68
2006......... 18 261,000 2.5% 6,660,000 25.50
2007......... 10 80,000 .8% 2,207,000 27.64
2008......... 11 447,000 4.3% 14,213,440 31.81
2009......... 17 407,000 3.9% 10,359,000 25.47
</TABLE>
The following table sets forth the occupancy rate and the average annual
escalated rent per square foot for the CESCR properties:
<TABLE>
<CAPTION>
AVERAGE ANNUAL
AS OF RENTABLE ESCALATED RENT
DECEMBER 31, SQUARE FEET OCCUPANCY RATE PER SQUARE FOOT
--------------------------------- ---------------- ---------------- ------------------
<S> <C> <C> <C>
1999.......................... 10,657,000 99% $ 26.46
1998.......................... 10,657,000 98% 25.22
</TABLE>
CESCR manages an additional 7.9 million square feet of office and other
commercial properties in the Washington, D.C. area for third parties.
-20-
<PAGE> 21
CESCR Office Properties
The following table sets forth certain information for the CESCR Office
Properties (in which the Company has a 34% interest), as of December 31, 1999.
<TABLE>
<CAPTION>
YEAR
ORIGINALLY NUMBER ANNUALIZED
DEVELOPED NUMBER OF APPROXIMATE LEASABLE OF BASE RENT PER
LOCATION OR ACQUIRED BUILDINGS BUILDING SQUARE FEET TENANTS SQ. FT. (1)
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Crystal Mall 1968 4 1,068,000 12 $ 24.20
Crystal Plaza 1964-1969 7 1,223,000 121 24.11
Crystal Square 1974-1980 4 1,388,000 181 27.77
Crystal Gateway 1983-1987 4 1,081,000 102 26.77
Crystal Park 1984-1989 5 2,154,000 104 28.29
Arlington Plaza 1985 1 174,000 20 24.08
1919 S Eads Street 1990 1 93,000 6 27.19
Skyline Place 1973-1984 6 1,595,000 188 21.69
One Skyline Tower 1988 1 477,000 5 21.21
Courthouse Plaza 1988-1989 2 609,000 59 24.49
1101 17th Street 1963 1 204,000 51 27.65
1730 M Street 1963 1 190,000 39 23.26
1140 Connecticut Ave 1966 1 175,000 38 28.08
1150 17th Street 1970 1 226,000 33 27.42
------ ----------------- ---------
TOTAL CESCR OFFICE PROPERTIES 39 10,657,000 959 $ 25.45
====== ================= =========
</TABLE>
<TABLE>
<CAPTION>
LEASE
ANNUALIZED EXPIRATION/
ESCALATED RENT PERCENT PRINCIPAL TENANTS OPTION ENCUMBRANCES
LOCATION PER SQ. FT. (2) LEASED (1) (50,000 SQUARE FEET OR MORE) EXPIRATION (THOUSANDS)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Crystal Mall $ 24.94 100% General Services Administration 2001/2011 $ 67,665
General Services Administration 2001/2006
Crystal Plaza 24.91 99% General Services Administration 2004/2014 74,572
Crystal Square 28.95 98% Boeing 2002/2007 247,458
General Services Administration 2003/2008
Lockheed Martin 2003/2008
Oblon Spivak 2004/2009
Crystal Gateway 27.52 97% Analytical Services, Inc. 2001/2006 61,539
General Services Administration 2004
Lockheed Martin 2002/2005
Science Applications Int'l Corp. 2002
Crystal Park 29.41 100% CE Smith Headquarters 2004/2009 301,358
General Services Administration 2001/2011
Techmatics 2002/2007
US Airways Headquarters 2008/2018
Vitro Corp 2002/2007
Arlington Plaza 28.07 100% Georgetown University 2002/2007 18,249
Science Research Analysis Corp. 2001/2011
1919 S Eads Street 27.71 100% Vitro Corp 2001/2004 13,687
Skyline Place 22.19 98% BDM Federal, Inc. 2000/2003 123,176
Electronic Data Services 2003
Science Application Int'l Corp. 2003/2008
Science Research Analysis Corp. 2001
One Skyline Tower 22.51 100% General Services Administration 2004 & 2009 68,164
Science Research Analysis Corp. 2003/2008
Courthouse Plaza 26.44 100% Arlington County 2003/2008 82,762
KPMG-Peat Marwick 2000/2003
1101 17th Street 30.14 99% American Iron & Steel Institute 2001/2006 22,261
Cosmetic & Toiletry Assn 2000/2005
1730 M Street 24.24 99% General Services Administration 2002/2005 9,581
General Services Administration 2009
League of Women Voters 2004/2009
1140 Connecticut Ave 29.07 98% Michaels & Wishner PC 2002/2007 18,542
The Investigative Group 2000/2005
1150 17th Street 28.36 99% American Enterprise Institute 2002/2012 22,310
Arthur Andersen LLP 2004
-------------
TOTAL CESCR OFFICE PROPERTIES $ 26.46 99% $ 1,131,324
=============
</TABLE>
(1) Represents annualized monthly base rent excluding rent for leases which
had not commenced as of December 31, 1999, which are included in percent
leased.
(2) Represents annualized monthly escalated rent for office properties
including tenant pass-throughs of operating expenses (exclusive of tenant
electricity costs) and real estate taxes.
-21-
<PAGE> 22
RETAIL
The Company owns 56 shopping center properties of which 53 are strip
shopping centers primarily located in the Northeast and Midatlantic states, two
are regional centers located in San Juan, Puerto Rico and one, the Green Acres
Mall, is a super-regional center located in Nassau County, Long Island, New
York. The Company's shopping centers are generally located on major regional
highways in mature, densely populated areas. The Company believes its shopping
centers attract consumers from a regional, rather than a neighborhood
marketplace because of their location on regional highways.
The following table sets forth the percentage of the Retail Portfolio
rentals by tenants' industry:
<TABLE>
<CAPTION>
Industry Percentage
------------------------------- ------------------------
<S> <C>
Discount Department Stores 24%
Supermarkets 11%
Women's Apparel 8%
Home Improvement 6%
Restaurants 4%
Membership Warehouse Clubs 4%
Drug Stores 4%
Electronic Stores 4%
Entertainment 3%
Office Supply Stores 3%
Financial/Insurance 3%
Other 26%
</TABLE>
As of March 1, 2000, the occupancy rate of the retail properties was 93%.
The following tables set forth the occupancy rate and the average annual base
rent per square foot (excluding the Green Acres Mall) for the properties at the
end of each of the past five years.
<TABLE>
<CAPTION>
RENTABLE AVERAGE ANNUAL BASE RENT
YEAR END SQUARE FEET OCCUPANCY RATE PER SQUARE FOOT
-------- ----------- -------------- ------------------------
<S> <C> <C> <C>
1999 10,505,000 92% $ 11.16
1998 10,625,000 92% 10.53
1997 10,550,000 91% 9.78
1996 10,019,000 90% 9.09
1995 9,913,000 91% 8.68
</TABLE>
The average annual base rent per square foot for the Green Acres Mall was
$13.46 and $12.92 in total, and $35.29 and $32.24 for mall tenants only, at
December 31, 1999 and 1998, respectively.
The Company's shopping center lease terms range from 5 years or less in
some instances, for smaller tenant spaces to as long as 25 years for major
tenants. Leases generally provide for additional rents based on a percentage of
tenants' sales and pass through to tenants the tenants' share of all common area
charges (including roof and structure in strip shopping centers, unless it is
the tenant's direct responsibility), real estate taxes and insurance costs and
certain capital expenditures. Percentage rent accounted for less than 2% of
total shopping center revenues in 1999. None of the tenants in the Retail
Segment accounted for more than 10% of the Company's total revenues.
-22-
<PAGE> 23
Below is a listing of tenants which accounted for 2% or more of the
Retail property rentals in 1999:
<TABLE>
<CAPTION>
(in thousands, except percentages) PERCENTAGE OF RETAIL
1999 PROPERTY PROPERTY RENTALS
TENANT SQUARE FEET LEASED RENTALS (EXCLUDING REIMBURSEMENTS)
------ ------------------ ------------- --------------------------
<S> <C> <C> <C>
Bradlees, Inc. ("Bradlees") 1,625 $ 17,320 13.6%
The Home Depot, Inc. 409 5,014 3.9%
Kmart Corporation 556 4,760 3.7%
The TJX Companies, Inc. 328 3,287 2.6%
Staples, Inc. 214 2,962 2.3%
Toys R Us/Kids R Us 330 2,575 2.0%
</TABLE>
In June 1995, Bradlees filed for protection under Chapter 11 of the U.S.
Bankruptcy Code. Bradlees emerged from bankruptcy in January 1999 when its plan
of reorganization was confirmed. The Company withdrew its objection to Bradlees'
proposed plan of reorganization after obtaining Bradlees' agreement that its
lease of the Company's 14th Street and Union Square property would terminate in
March 2000. The lease was scheduled to expire in October 2019, and contained an
option to renew for an additional ten years. The rent under the lease was
increased by $1,100,000 per annum to $3,400,000 per annum from January 1999 to
the March 2000 termination date. In connection with the foregoing, the Company
paid $11,000,000 to Bradlees. Subsequently, in January 2000, the lease was
extended to March 15, 2002 and in connection therewith, the rent under the lease
will increase to $4,600,000 in March, 2000 and to $4,900,000 in March 2001. The
Company is considering various alternatives for the redevelopment of this site.
The Company currently leases 15 other locations to Bradlees. Of these locations,
the leases for 14 are fully guaranteed by Stop & Shop Companies, Inc., a
wholly-owned subsidiary of Koninklijke Ahold NV (formerly Royal Ahold NV), a
leading international food retailer, and one is guaranteed as to 70% of the
rent.
The following table sets forth as of December 31, 1999 lease expirations
for each of the next 10 years assuming that none of the tenants exercise their
renewal options.
<TABLE>
<CAPTION>
ANNUAL BASE RENT OF
EXPIRING LEASES
NUMBER OF SQUARE FEET OF PERCENTAGE OF TOTAL ------------------------------------------
YEAR EXPIRING LEASES EXPIRING LEASES LEASED SQUARE FEET TOTAL PER SQUARE FOOT
- ---- --------------- --------------- ------------------- -------------------- -----------------
<S> <C> <C> <C> <C> <C>
2000............... 69 654,000 5.8% $ 8,973,000 $13.73
2001............... 78 367,000 3.3% 5,240,000 14.29
2002............... 79 1,195,000 10.6% 13,763,000 11.52
2003............... 57 551,000 4.9% 6,762,000 12.23
2004............... 93 993,000 8.8% 11,606,000 11.68
2005............... 84 477,000 4.2% 7,982,000 16.74
2006............... 45 803,000 7.1% 6,099,000 7.60
2007............... 42 641,000 5.7% 6,421,000 10.01
2008............... 22 393,000 3.5% 3,141,000 7.99
2009............... 45 579,000 5.2% 6,631,000 11.46
</TABLE>
-23-
<PAGE> 24
In 1999, 372,113 square feet of retail space was leased at a weighted
average base rent per square foot of $13.90. The Company's ownership interest in
the leased square footage is 364,187 square feet at a weighted average base rent
per square foot of $13.56. At December 31, 1998, the weighted average annual
rent per square foot for the Company's interest in such properties was $11.11.
Following is the detail by property:
<TABLE>
<CAPTION>
1999 Leases
------------------------------- Average Annual
Average Rent Per
Base Rent Square Foot at
Square Per Square December 31,
Location Feet Foot (1) 1998
-------- ------------ ------------ --------------
<S> <C> <C> <C>
Vineland................................... 115,514 $ 4.25 $ 4.16
Valley Stream (Green Acres)................ 41,803 32.16 32.24
Baltimore.................................. 32,629 4.00 5.95
Manalapan.................................. 25,597 14.25 9.13
Jersey City................................ 21,568 14.25 12.35
Bricktown.................................. 18,558 15.44 10.57
East Hanover II............................ 16,575 12.65 10.36
Las Catalinas.............................. 15,852 29.34 25.86
North Plainfield........................... 15,479 14.15 8.57
Mesquite................................... 13,148 22.70 12.28
Lewisville................................. 11,342 14.56 14.52
Montehiedra................................ 9,351 42.85 16.02
East Hanover I............................. 6,097 16.37 10.85
Dallas..................................... 6,072 8.48 10.13
Amherst.................................... 6,038 13.00 6.99
Cherry Hill................................ 4,920 12.17 9.25
Morris Plains.............................. 4,000 18.00 11.61
Hackensack................................. 3,870 18.81 15.53
Bensalem................................... 3,700 15.00 5.84
------------
Total 372,113 13.90 11.43
============
Vornado's ownership interest 364,187 13.56 11.11
============
</TABLE>
(1) Most leases include periodic step-ups in rent, which are not
reflected in the initial rent per square foot leased.
The Company's strip shopping centers are substantially leased to large
stores (over 20,000 square feet). Tenants include destination retailers such as
discount department stores, supermarkets, home improvements stores, discount
apparel stores, membership warehouse clubs and "category killers." Category
killers are large stores which offer a complete selection of a category of items
(e.g., toys, office supplies, etc.) at low prices, often in a warehouse format.
Tenants typically offer basic consumer necessities such as food, health and
beauty aids, moderately priced clothing, building materials and home improvement
supplies, and compete primarily on the basis of price.
The Company's two regional shopping centers located in Montehiedra and
Caguas, Puerto Rico, (both of which are in the San Juan area) contain 1,014,000
square feet of which the Company owns 727,000 square feet. The centers are
anchored by four major stores: Sears, Roebuck and Co., Kmart (one in each of the
centers) and a Builders Square Home Improvement store.
The Green Acres Mall is a 1.6 million square foot super-regional enclosed
shopping mall complex situated in Nassau County, Long Island, New York,
approximately one mile east of the borough of Queens, New York. The Green Acres
Mall is anchored by four major department stores: Sears, Roebuck and Co., J.C.
Penney Company, Inc. and Federated Department Stores, Inc. doing business as
Stern's and as Macy's. The complex also includes The Plaza at Green Acres, a
188,000 square foot strip shopping center which is anchored by Kmart and
Waldbaums.
-24-
<PAGE> 25
Retail Properties
The following table sets forth certain information for the Retail
Properties as of December 31, 1999 and excludes properties the Company has sold
thereafter.
<TABLE>
<CAPTION>
APPROXIMATE LEASABLE
BUILDING SQUARE FOOTAGE
-----------------------
YEAR OWNED BY
ORIGINALLY OWNED/ TENANT ON LAND
DEVELOPED OR LAND AREA LEASED BY LEASED FROM NUMBER
LOCATION ACQUIRED (ACRES) COMPANY COMPANY OF TENANTS
- ---------------------- ------------- --------- --------- -------------- ----------
<S> <C> <C> <C> <C> <C>
NEW JERSEY
Bordentown 1958 31.2 179,000 -- 4
Bricktown 1968 23.9 260,000 3,000 20
Cherry Hill 1964 37.6 231,000 64,000 15
Delran 1972 17.5 168,000 4,000 5
Dover 1964 19.6 173,000 -- 14
East Brunswick 1957 19.2 216,000 10,000 6
East Hanover I 1962 24.6 271,000 -- 20
East Hanover II 1979 8.1 91,000 -- 11
Hackensack 1963 21.3 208,000 59,000 24
Jersey City 1965 16.7 223,000 3,000 10
Kearny 1959 35.3 42,000 62,000 4
Lawnside 1969 16.4 145,000 -- 3
</TABLE>
<TABLE>
<CAPTION>
LEASE
ANNUALIZED EXPIRATION/
BASE RENT PER PERCENT PRINCIPAL TENANTS OPTION ENCUMBRANCES
LOCATION SQ. FT. (1) LEASED (1) (30,000 SQUARE FEET OR MORE) EXPIRATION (THOUSANDS)
- ---------------------- ------------- ---------- ----------------------------- ------------ -------------------
<S> <C> <C> <C> <C> <C>
NEW JERSEY
Bordentown $ 6.66 98% Bradlees (2) 2001/2021 $ 8,290 (7)
Shop-Rite 2011/2016
Bricktown 10.73 98% Kohl's 2008/2028 16,753 (7)
Shop-Rite 2002/2017
Cherry Hill 9.37 97% Bradlees (2) 2006/2026 15,408 (7)
Drug Emporium 2002
Shop & Bag 2007/2017
Toys "R" Us 2012/2042
Delran 5.70 94% Sam's Wholesale 2011/2021 6,604 (7)
Dover 6.32 100% Ames 2017/2037 7,551 (7)
Shop-Rite 2012/2022
East Brunswick 14.25 100% Bradlees (2) 2003/2023 23,393 (7)
Shoppers World 2007/2012
T.J. Maxx 2004/2009
Circuit City 2018/2038
East Hanover I 11.14 100% Home Depot 2009/2019 28,046 (7)
Marshalls 2004/2009
Pathmark 2001/2024
Today's Man 2009/2014
East Hanover II 10.11 99% --
Hackensack 15.95 100% Bradlees (2) 2012/2017 25,700 (7)
Pathmark 2014/2034
Staples 2003/2013
Jersey City 12.36 95% Bradlees (2) 2002/2022 19,675 (7)
Shop-Rite 2008/2028
Kearny 13.49 68% Pathmark 2013/2033 3,841 (7)
Lawnside 10.50 100% Home Depot 2012/2027 10,887 (7)
Drug Emporium 2007
</TABLE>
-25-
<PAGE> 26
<TABLE>
<CAPTION>
APPROXIMATE LEASABLE
BUILDING SQUARE FOOTAGE
-----------------------
YEAR OWNED BY
ORIGINALLY OWNED/ TENANT ON LAND
DEVELOPED OR LAND AREA LEASED BY LEASED FROM NUMBER
LOCATION ACQUIRED (ACRES) COMPANY COMPANY OF TENANTS
- ---------------------- ------------- --------- --------- -------------- ----------
<S> <C> <C> <C> <C> <C>
Lodi 1975 8.7 171,000 -- 1
Manalapan 1971 26.3 194,000 2,000 7
Marlton 1973 27.8 173,000 7,000 10
Middletown 1963 22.7 180,000 52,000 20
Morris Plains 1985 27.0 172,000 1,000 17
North Bergen 1959 4.6 7,000 55,000 3
North Plainfield (3) 1989 28.7 217,000 -- 15
Totowa 1957 40.5 178,000 139,000 8
Turnersville 1974 23.3 89,000 7,000 3
Union 1962 24.1 257,000 -- 11
Vineland 1966 28.0 143,000 -- 4
Watchung 1959 53.8 50,000 116,000 6
Woodbridge 1959 19.7 233,000 3,000 10
NEW YORK
14th Street and Union
Square, Manhattan 1993 0.8 232,000 -- 1
Albany (Menands) 1965 18.6 141,000 -- 3
</TABLE>
<TABLE>
<CAPTION>
LEASE
ANNUALIZED EXPIRATION/
BASE RENT PER PERCENT PRINCIPAL TENANTS OPTION ENCUMBRANCES
LOCATION SQ. FT. (1) LEASED (1) (30,000 SQUARE FEET OR MORE) EXPIRATION (THOUSANDS)
- ---------------------- ------------- ---------- ----------------------------- ------------ -------------------
<S> <C> <C> <C> <C> <C>
Lodi 7.27 100% National Wholesale 2013/2023 9,648 (7)
Liquidators
Manalapan 9.41 100% Bradlees (2) 2002/2022 12,876 (7)
Grand Union 2012/2022
Marlton 9.56 100% Kohl's (2) 2011/2031 12,520 (7)
Shop-Rite 2004/2009
Middletown 12.60 96% Bradlees (2) 2002/2022 16,901 (7)
Grand Union 2009/2029
Morris Plains 10.75 100% Kohl's 2023 12,372 (7)
Shop-Rite 2002
North Bergen 27.33 100% A&P 2012/2032 4,073 (7)
North Plainfield (3) 9.17 94% Kmart 2006/2016 14,008 (7)
Pathmark 2001/2011
Totowa 16.73 100% Bradlees (2) 2013/2028 30,351 (7)
Home Depot 2015/2025
Marshalls 2007/2012
Circuit City 2018/2038
Turnersville 5.98 100% Bradlees (2) 2011/2031 4,199 (7)
Union 18.66 100% Bradlees (2) 2002/2022 34,468 (7)
Toys "R" Us 2015
Cost Cutter Drug 2000
Vineland 4.16 98% PC Roomlink 2005 --
Watchung 18.31 97% B.J.'s Wholesale 2024 13,907 (7)
Woodbridge 14.22 91% Bradlees (2) 2002/2022 22,719 (7)
Foodtown 2007/2014
Syms 2000/2005
NEW YORK
14th Street and Union
Square, Manhattan 15.53 100% Bradlees 2019/2029 --
Albany (Menands) 7.08 100% Fleet Bank 2004/2014 6,389 (7)
Albany Public Mkts. (4) 2000
People of the State of NY 2004/2014
</TABLE>
-26-
<PAGE> 27
<TABLE>
<CAPTION>
APPROXIMATE LEASABLE
BUILDING SQUARE FOOTAGE
-----------------------
YEAR OWNED BY
ORIGINALLY OWNED/ TENANT ON LAND
DEVELOPED OR LAND AREA LEASED BY LEASED FROM NUMBER
LOCATION ACQUIRED (ACRES) COMPANY COMPANY OF TENANTS
- ---------------------- ------------- --------- --------- -------------- ----------
<S> <C> <C> <C> <C> <C>
Buffalo (Amherst) (3) 1968 22.7 185,000 112,000 10
Freeport 1981 12.5 167,000 -- 3
New Hyde Park (3) 1976 12.5 101,000 -- 1
North Syracuse (3) 1976 29.4 98,000 -- 1
Rochester 1971 15.0 148,000 -- --
(Henrietta) (3)
Rochester 1966 18.4 176,000 -- --
Valley Stream (Green Acres) (3) 1958 100.0 1,525,000 71,000 149
PENNSYLVANIA
Allentown 1957 86.8 263,000 354,000 20
Bensalem 1972 23.2 119,000 7,000 11
Bethlehem 1966 23.0 157,000 3,000 13
Broomall 1966 21.0 146,000 22,000 5
Glenolden 1975 10.0 101,000 -- 3
Lancaster 1966 28.0 180,000 -- 6
Levittown 1964 12.8 104,000 -- 1
</TABLE>
<TABLE>
<CAPTION>
LEASE
ANNUALIZED EXPIRATION/
BASE RENT PER PERCENT PRINCIPAL TENANTS OPTION ENCUMBRANCES
LOCATION SQ. FT. (1) LEASED (1) (30,000 SQUARE FEET OR MORE) EXPIRATION (THOUSANDS)
- ---------------------- ------------- ---------- ----------------------------- ------------ -------------------
<S> <C> <C> <C> <C> <C>
Buffalo (Amherst) (3) 9.61 81% Circuit City 2017 7,200 (7)
Media Play 2002/2017
Toys "R" Us 2013
T.J. Maxx 2004
Freeport 12.27 100% Home Depot 2011/2021 15,208 (7)
Cablevision 2004
New Hyde Park (3) 15.77 100% Mayfair Supermarkets 2019/2029 7,676 (7)
North Syracuse (3) 2.74 100% Reisman Properties 2014 --
Rochester -- -- --
(Henrietta) (3)
Rochester -- -- --
Valley Stream (Green Acres) (3) (5) 94% Macy's 2006/2036 163,785
Sterns 2007/2017
JC Penney 2012/2017
Sears 2002/2005
Kmart 2010/2038
Dime Savings Bank 2020
Greenpoint Bank 2009
Waldbaum (4) 2011/2039
PENNSYLVANIA
Allentown 10.55 100% Hechinger(4) 2011/2031 23,884 (7)
Shop-Rite 2011/2021
Burlington Coat 2017
Factory
Wal*Mart 2024/2094
Sam's Wholesale 2024/2094
T.J. Maxx 2003/2008
Bensalem 9.77 98% Kohl's (2) 2020/2040 6,600 (7)
Bethlehem 5.44 78% Pathmark 2008/2033 4,177 (7)
Super Petz 2005/2015
Broomall 9.41 100% Bradlees (2) 2006/2026 10,044 (7)
Glenolden 10.70 100% Bradlees (2) 2012/2022 7,533 (7)
Lancaster 4.54 49% Weis Markets 2008/2018 --
Levittown 5.98 100% (2) 2006/2026 --
</TABLE>
-27-
<PAGE> 28
<TABLE>
<CAPTION>
APPROXIMATE LEASABLE
BUILDING SQUARE FOOTAGE
-----------------------
YEAR OWNED BY
ORIGINALLY OWNED/ TENANT ON LAND
DEVELOPED OR LAND AREA LEASED BY LEASED FROM NUMBER
LOCATION ACQUIRED (ACRES) COMPANY COMPANY OF TENANTS
- ---------------------- ------------- --------- --------- -------------- ----------
<S> <C> <C> <C> <C> <C>
10th and Market
Streets, Philadelphia 1994 1.8 271,000 -- 5
Upper Moreland 1974 18.6 122,000 -- 1
York 1970 12.0 113,000 -- 3
MARYLAND
Baltimore (Belair Rd.) 1962 16.0 206,000 -- 3
Baltimore (Towson) 1968 14.6 146,000 7,000 7
Baltimore (Dundalk) 1966 16.1 183,000 -- 16
Glen Burnie 1958 21.2 65,000 57,000 5
Hagerstown 1966 13.9 133,000 15,000 6
CONNECTICUT
Newington 1965 19.2 134,000 45,000 4
Waterbury 1969 19.2 140,000 3,000 8
MASSACHUSETTS
Chicopee 1969 15.4 112,000 3,000 2
Milford (3) 1976 14.7 83,000 -- 1
Springfield 1966 17.4 8,000 117,000 2
</TABLE>
<TABLE>
<CAPTION>
LEASE
ANNUALIZED EXPIRATION/
BASE RENT PER PERCENT PRINCIPAL TENANTS OPTION ENCUMBRANCES
LOCATION SQ. FT. (1) LEASED (1) (30,000 SQUARE FEET OR MORE) EXPIRATION (THOUSANDS)
- ---------------------- ------------- ---------- ----------------------------- ------------ -------------------
<S> <C> <C> <C> <C> <C>
10th and Market
Streets, Philadelphia 9.39 77% Kmart 2010/2035 9,200 (7)
Rouse Co. 2012/2072
Upper Moreland 8.50 100% Sam's Wholesale 2010/2015 7,141 (7)
York 5.53 100% Builders Square 2009/2018 4,223 (7)
MARYLAND
Baltimore (Belair Rd.) 4.88 81% Disabled American Veterans 2009/2014 --
Food Depot 2003
TJ Maxx 2004/2024
Baltimore (Towson) 10.47 100% Staples 2004 11,704 (7)
Cost Saver Supermarket 2000/2020
Drug Emporium 2004/2009
Baltimore (Dundalk) 7.06 77% A & P 2002/2017 6,342 (7)
Ollie's 2003/2008
Glen Burnie 7.80 100% Weis Markets 2018/2053 6,023 (7)
Hagerstown 3.32 100% Big Lots 2002/2012 3,375 (7)
Pharmhouse 2008
Weis Markets 2004/2009
CONNECTICUT
Newington 6.89 100% (2) 2002/2022 6,727 (7)
Pathmark (4) 2007/2027
Waterbury 5.30 89% Toys "R" Us 2010 --
Shaws Supermarkets 2003/2018
MASSACHUSETTS
Chicopee 4.71 84% Bradlees (2) 2002/2022 --
Milford (3) 5.26 100% Bradlees (2) 2004/2009 --
Springfield 12.25 100% Wal*Mart 2018/2092 3,211 (7)
</TABLE>
-28-
<PAGE> 29
<TABLE>
<CAPTION>
APPROXIMATE LEASABLE
BUILDING SQUARE FOOTAGE
-----------------------
YEAR OWNED BY
ORIGINALLY OWNED/ TENANT ON LAND
DEVELOPED OR LAND AREA LEASED BY LEASED FROM NUMBER
LOCATION ACQUIRED (ACRES) COMPANY COMPANY OF TENANTS
- ---------------------- ------------- --------- --------- -------------- ----------
<S> <C> <C> <C> <C> <C>
PUERTO RICO
(SAN JUAN)
Montehiedra 1997 57.1 525,000 -- 96
Caguas (50% Ownership) 1998 35.0 343,000 -- 108
------- ------------ --------------- ---------
TOTAL SHOPPING CENTERS 1,333.5 10,698,000 1,403,000 745
======= ============ =============== =========
VORNADO'S OWNERSHIP INTEREST 1,317.9 10,557,000 1,403,000
======= ============ ===============
</TABLE>
<TABLE>
<CAPTION>
LEASE
ANNUALIZED EXPIRATION/
BASE RENT PER PERCENT PRINCIPAL TENANTS OPTION ENCUMBRANCES
LOCATION SQ. FT. (1) LEASED (1) (30,000 SQUARE FEET OR MORE) EXPIRATION (THOUSANDS)
- ---------------------- ------------- ---------- ----------------------------- ------------ -----------------
<S> <C> <C> <C> <C> <C>
PUERTO RICO
(SAN JUAN)
Montehiedra 16.85 100% Kmart 2022/2072 61,618
Builders Square 2022/2072
Marshalls 2010/2025
Caribbean Theatres 2021/2026
Caguas (50% Ownership) 25.56 96% Kmart 2064 70,212
-------------
TOTAL SHOPPING CENTERS $11.16 92% $ 796,462
=============
VORNADO'S OWNERSHIP INTEREST 92% $ 761,356
=============
</TABLE>
(1) Represents annualized monthly base rent excluding ground leases, storage
rent and rent for leases which had not commenced as of December 31, 1999,
which are included in percent leased.
(2) These leases are fully guaranteed by Stop & Shop, a wholly-owned
subsidiary of Koninklijke Ahold NV (formerly Royal Ahold NV), except in
the case of Totowa, guaranteed as to 70% of rent.
(3) 100% ground and/or building leasehold interest; other than Green Acres,
where approximately 10% of the ground is leased.
(4) The tenant has ceased operations at these locations but continues to pay
rent.
(5) Annualized rent per square foot is $13.46 in total and $35.29 for the
mall tenants only.
(6) Square footage excludes the anchor store which owns its land and
building.
(7) These encumbrances are part of a cross collateralized mortgage financing
in the amount of $500,000,000 completed on March 1, 2000.
-29-
<PAGE> 30
MERCHANDISE MART PROPERTIES
The Merchandise Mart Properties are a portfolio of seven properties
containing an aggregate of approximately 6.8 million square feet. The properties
are used for offices (36%), showrooms (61%) and retail stores (3%). The Company
acquired these assets in separate transactions in 1998. In April 1998, the
Company purchased four buildings containing approximately 5.4 million square
feet from the Kennedy Family, including the 3.4 million square foot Merchandise
Mart building in Chicago, the adjacent 350 North Orleans Street building, the
Washington, D.C. Office Center and the adjacent Washington, D.C. Design Center.
In December 1998, the Company purchased the 1.1 million square foot Market
Square Complex and in a separate transaction purchased the adjacent 244,000
square foot National Furniture Mart in High Point, North Carolina.
Office Space
The following table sets forth the percentage of the Merchandise Mart
Properties office revenues by tenants' industry:
<TABLE>
<CAPTION>
INDUSTRY PERCENTAGE
-------- ----------
<S> <C>
Government 38%
Service 24%
Telecommunications 16%
Insurance 12%
Pharmaceutical 5%
Other 5%
</TABLE>
The average lease term ranges from 1 to 5 years for smaller tenants to as
long as 15 years for major tenants. Leases typically provide for step-ups in
rent periodically over the term of the lease and pass through to tenants the
tenants' share of increases in real estate taxes and operating expenses for a
building over a base year. Electricity is provided to tenants on a submetered
basis or included in rent based on surveys and adjusted for subsequent utility
rate increases. Leases also typically provide for tenant improvement allowances
for all or a portion of the tenant's initial construction of its premises. None
of the tenants in the Merchandise Mart Properties segment accounted for more
than 10% of the Company's total revenue. Below is a listing of the Merchandise
Mart Properties office tenants which accounted for 2% or more of the Merchandise
Mart Properties' revenues in 1999:
<TABLE>
<CAPTION>
(in thousands, except percentages)
PERCENTAGE OF
SQUARE FEET 1999 MERCHANDISE MART
TENANT LEASED REVENUES PROPERTIES REVENUES
------ ----------- -------- -------------------
<S> <C> <C> <C>
General Services Administration 303 $ 8,609 7%
Bankers Life and Casualty 303 5,447 4%
Ameritech 234 5,230 4%
Chicago Transit Authority 244 4,143 3%
Bank of America 201 2,406 2%
</TABLE>
-30-
<PAGE> 31
As of March 1, 2000, the occupancy rate of the Merchandise Mart
Properties' office space was 93%. The following table sets forth the occupancy
rate and the average escalated rent per square foot for the Merchandise Mart
Properties' office space at the end of each of the past five years.
<TABLE>
<CAPTION>
AVERAGE ANNUAL ESCALATED
RENTABLE RENT
YEAR END SQUARE FEET OCCUPANCY RATE PER SQUARE FOOT
-------- ----------- --------------- -------------------------
<S> <C> <C> <C>
1999 2,414,000 93% $ 20.12
1998 2,274,000 95% 19.68
1997 2,160,000 91% 19.50
1996 2,026,000 88% 19.42
1995 2,028,000 85% 19.34
</TABLE>
The following table sets forth as of December 31, 1999 office lease
expirations for each of the next 10 years assuming that none of the tenants
exercise their renewal options.
<TABLE>
<CAPTION>
ANNUAL ESCALATED
RENT OF EXPIRING LEASES
NUMBER OF SQUARE FEET OF PERCENTAGE OF TOTAL LEASED ------------------------------------
YEAR EXPIRING LEASES EXPIRING LEASES SQUARE FEET TOTAL PER SQUARE FOOT
- ---- --------------- --------------- -------------------------- ------------------ ---------------
<S> <C> <C> <C> <C> <C>
2000................ 14 274,000(1) 12.2% $ 7,780,000 $28.39
2001................ 8 37,000 1.7% 868,000 23.15
2002................ 15 79,000 3.5% 1,785,000 22.61
2003................ 6 82,000 3.7% 1,347,000 16.37
2004................ 2 30,000 1.3% 734,000 24.47
2005................ 4 128,000 5.7% 2,628,000 20.55
2006................ 5 43,000 1.9% 1,264,000 29.12
2007................ 13 456,000 20.3% 8,092,000 17.74
2008................ 8 434,000 19.3% 9,339,000 21.52
2009................ 7 257,000 11.4% 5,032,000 19.59
</TABLE>
(1) 250,000 square feet is leased to the GSA and is expected to be renewed by
March 31, 2000 for 10 years at an initial rent per square foot of $34.89.
In 1999, 121,724 square feet of office space was leased at a weighted
average initial rent per square foot of $21.49. At December 31, 1998, the
weighted average escalated rent per square foot for such properties was $19.68.
Following is the detail by building.
<TABLE>
<CAPTION>
1999 Leases
----------------------------------------
Average Annual
Escalated Rent per
Average Initial Square Foot at
Square Feet Rent psf (1) December 31, 1998
----------- ---------------- --------------------
<S> <C> <C> <C>
350 North Orleans 102,752 $22.00 $ 17.62
Merchandise Mart 15,496 17.47 18.09
Washington Design Center 1,849 23.25 35.77
Washington Office Center 1,627 25.26 28.88
----------
Total 121,724 21.49 19.68
==========
</TABLE>
(1) Most leases include periodic step-ups in rent, which are not
reflected in the initial rent per square foot leased.
-31-
<PAGE> 32
Showroom Space
The Merchandise Mart Properties' showroom space aggregates 4,174,000
square feet of which 2,473,000 square feet is located in the Merchandise Mart
building and 350 North Orleans in Chicago, 1,359,000 square feet is located in
the Market Square Complex (including the National Furniture Mart) in High Point,
North Carolina and 342,000 square feet is located in the Design Center in
Washington, D.C. The showroom space consists of 2,732,000 square feet of
permanent mart space (leased to manufacturers and distributors whose clients are
retailers, specifiers and end users), 941,000 square feet of permanent design
center space (leased to wholesalers whose principal clientele is interior
designers), and 501,000 square feet of temporary market suite space (used for
trade shows).
The showrooms provide manufacturers and wholesalers with permanent and
temporary space in which to display products for buyers, specifiers and end
users. The showrooms are also used for hosting trade shows for the contract
furniture, casual furniture, giftware, carpet, residential furnishings, crafts,
and design industries. The Merchandise Mart Properties own and operate five of
the leading furniture/gift-ware trade shows including the contract furniture
industry's largest trade show, the NeoCon Show, which attracts over 50,000
attendees annually and is hosted at the Merchandise Mart building in Chicago.
The Market Square Complex co-hosts the home furniture industry's semi-annual
market weeks which occupy over 8,800,000 square feet in the High Point, North
Carolina region.
The following table sets forth the percentage of the Merchandise Mart
properties showroom revenues by tenants' industry:
<TABLE>
<CAPTION>
Industry Percentage
---------------------- --------------
<S> <C>
Residential Furnishings 28%
Residential Design 21%
Contract Furnishings 15%
Gift 11%
Apparel 7%
Casual Furniture 4%
Building Products 2%
Market Suites 12%
</TABLE>
As of March 1, 2000 the occupancy rate of the Merchandise Mart
Properties' showroom space was 98%. The following table sets forth the occupancy
rate and the average escalated rent per square foot for this space at the end of
each of the past five years.
<TABLE>
<CAPTION>
AVERAGE ANNUAL ESCALATED
YEAR END RENTABLE SQUARE FEET OCCUPANCY RATE RENT PER SQUARE FOOT
------------- ------------------------ ----------------- ---------------------------
<S> <C> <C> <C>
1999 4,174,000 98% $ 21.29(1)
1998 4,266,000 95% 18.45(1)
1997 2,817,000 94% 20.94
1996 2,942,000 84% 20.65
1995 2,953,000 75% 22.07
</TABLE>
(1) Average annual escalated rent per square foot excluding the Market
Square Complex is $25.72 and $22.13, respectively.
-32-
<PAGE> 33
The following table sets forth as of December 31, 1999 showroom lease
expirations for each of the next 10 years assuming that none of the tenants
exercise their renewal options.
<TABLE>
<CAPTION>
ANNUAL ESCALATED
PERCENTAGE OF TOTAL RENT OF EXPIRING LEASES
NUMBER OF SQUARE FEET OF LEASED -----------------------------------------
YEAR EXPIRING LEASES EXPIRING LEASES SQUARE FEET TOTAL PER SQUARE FOOT
---- --------------- --------------- ------------------- ------------------ --------------------
<S> <C> <C> <C> <C> <C>
2000............ 241 548,000 13.4% $ 10,720,000 $ 19.56
2001............ 239 568,000 13.9% 9,574,000 16.84
2002............ 210 428,000 10.5% 8,493,000 19.84
2003............ 131 443,000 10.8% 8,872,000 20.02
2004............ 136 498,000 12.2% 8,885,000 17.84
2005............ 33 163,000 4.0% 4,082,000 25.02
2006............ 41 190,000 4.6% 5,315,000 28.04
2007............ 29 186,000 4.5% 3,677,000 19.80
2008............ 28 148,000 3.6% 3,265,000 22.06
2009............ 33 126,000 3.1% 2,791,000 22.23
</TABLE>
Retail Stores
The Merchandise Mart Properties' portfolio also contains approximately
184,000 square feet of retail stores which were 62% occupied at March 1, 2000.
-33-
<PAGE> 34
Merchandise Mart in Chicago
The Merchandise Mart in Chicago is a 25-story industry building. Built in
1930, the Merchandise Mart is one of the largest buildings in the nation,
containing over 4,000,000 gross square feet of which approximately 3,440,000
square feet is rentable.
As of March 1, 2000, the occupancy rate of the Merchandise Mart in
Chicago was 95%. The following table sets forth the occupancy rate and the
average escalated rent per square foot at the end of each of the past five
years.
<TABLE>
<CAPTION>
Average Annual
Rentable Escalated Rent Per
Year End Square Feet Occupancy Rate Square Foot
----------- --------------- ---------------- --------------------
<S> <C> <C> <C>
1999 3,440,000 95% $ 23.54
1998 3,440,000 96% 21.18
1997 3,411,000 96% 19.82
1996 3,404,000 94% 19.09
1995 3,404,000 82% 20.44
</TABLE>
The following table sets forth as of December 31, 1999 lease expirations
at the Merchandise Mart in Chicago for each of the next 10 years assuming that
none of the tenants exercise renewal options.
<TABLE>
<CAPTION>
ANNUAL ESCALATED
RENT OF EXPIRING LEASES
NUMBER OF SQUARE FEET OF PERCENTAGE OF TOTAL --------------------------------------
YEAR EXPIRING LEASES EXPIRING LEASES SQUARE FEET TOTAL PER SQUARE FOOT
- ---- --------------- --------------- ------------------- ------------------ -----------------
<S> <C> <C> <C> <C> <C>
2000.............. 122 261,000 8.0% $ 6,183,000 $23.71
2001.............. 105 173,000 5.3% 5,190,000 30.03
2002.............. 115 260,000 7.9% 6,083,000 23.38
2003.............. 78 253,000 7.7% 6,064,000 23.96
2004.............. 102 289,000 8.8% 7,359,000 25.46
2005.............. 30 268,000 8.2% 6,438,000 24.05
2006.............. 44 205,000 6.2% 5,650,000 27.59
2007.............. 36 490,000 15.0% 9,557,000 19.49
2008.............. 25 501,000 15.3% 10,973,000 21.89
2009.............. 16 72,000 2.2% 1,614,000 22.48
</TABLE>
The aggregate undepreciated tax basis of depreciable real property at the
Merchandise Mart in Chicago for Federal income tax purposes was approximately
$128,000,000 as of December 31, 1999 and depreciation for such property is
computed for Federal income tax purposes on the straight-line method over
thirty-nine years.
For the 1999 tax year, the tax rate in Chicago for commercial real estate
is $8.872 for $100 assessed value which results in real estate taxes of
$9,774,474 for the Merchandise Mart.
-34-
<PAGE> 35
MERCHANDISE MART PROPERTIES:
The following table sets forth certain information for the Merchandise
Mart Properties owned by the Company as of December 31, 1999.
<TABLE>
<CAPTION>
YEAR
ORIGINALLY LAND NUMBER ANNUALIZED
DEVELOPED AREA APPROXIMATE LEASABLE OF BASE RENT PER
LOCATION OR ACQUIRED (ACRES) BUILDING SQUARE FEET TENANTS SQ. FT. (1)
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
ILLINOIS
Merchandise Mart, Chicago 1930 6.7 3,440,000 754 $ 21.48
350 North Orleans, Chicago 1977 4.3 1,117,000 296 19.60
WASHINGTON, D.C.
Washington Office Center 1990 1.2 398,000 24 27.66
Washington Design Center 1919 1.2 388,000 84 25.52
Other 1.3 93,000 8 8.54
HIGH POINT, NORTH CAROLINA
Market Square Complex 1902 - 1989 13.1 1,115,000 228 10.94
National Furniture Mart 1964 0.7 244,000 33 12.49
------ ------------- --------
TOTAL MERCHANDISE MART PROPERTIES 28.5 6,795,000 1,427 $ 19.61
====== ============= ========
</TABLE>
<TABLE>
<CAPTION>
LEASE
ANNUALIZED EXPIRATION/
ESCALATED RENT PERCENT PRINCIPAL TENANTS OPTION ENCUMBRANCES
LOCATION PER SQ. FT. (2) LEASED (1) (30,000 SQUARE FEET OR MORE) EXPIRATION (THOUSANDS)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
ILLINOIS
Merchandise Mart, Chicago $ 23.54 95% Baker, Knapp & Tubbs 2007/2013 $ 250,000
Bankers Life & Casualty 2008/2018
CCC Information Services 2008/2018
Chicago Teachers Union 2005
Chicago Transit Authority 2007/2027
Holly Hunt 2003
Monsanto 2007
Office of the Special Deputy 2005
Steelcase 2007
350 North Orleans, Chicago 21.03 91% 21st Century Telecom 2012/2022 40,000
Ameritech 2011/2021
Art Institute of Illinois 2009/2019
Bank of America 2009/2019
Chicago Transit Authority 2007/2017
Fox Sports 2007/2017
Fiserv Solutions 2010/2020
WASHINGTON, D.C.
Washington Office Center 31.83 94% General Services Administration 2000/2010 49,537
Washington Design Center 26.19 95% 23,932
Other 10.51 87% --
HIGH POINT, NORTH CAROLINA
Market Square Complex 12.18 99% Century Furniture Company 2004 42,758
La-Z-Boy 2004
National Furniture Mart 12.51 100% 13,695
------------
TOTAL MERCHANDISE MART PROPERTIES $ 21.52 95% $ 419,922
============
</TABLE>
(1) Represents annualized monthly base rent excluding rent for leases which
had not commenced as of December 31, 1999, which are included in percent
leased.
(2) Represents annualized monthly base rent including tenant pass-throughs of
operating expenses (exclusive of tenant electricity costs) and real
estate taxes.
-35-
<PAGE> 36
TEMPERATURE CONTROLLED LOGISTICS
The Company has a 60% interest in the Vornado/Crescent Partnerships that
own 89 refrigerated warehouses with an aggregate of approximately 428 million
cubic feet (excludes 15 additional warehouses containing approximately 91
million cubic feet managed by AmeriCold Logistics). AmeriCold Logistics leases
all of the partnerships' facilities. The Temperature Controlled Logistics
segment is headquartered in Atlanta, Georgia.
On March 12, 1999, the Vornado/Crescent Partnerships sold all of the
non-real estate assets of AmeriCold Logistics encompassing the operations of the
cold storage business for approximately $48,000,000 to a new partnership owned
60% by Vornado Operating Company and 40% by Crescent Operating Inc. ("AmeriCold
Logistics") The new partnership leases the underlying cold storage warehouses
used in this business from the Vornado/Crescent Partnerships which continue to
own the real estate. The leases generally have a 15 year term with two-five year
renewal options and provide for the payment of fixed base rent and percentage
rent based on revenue AmeriCold Logistics receives from its customers. The new
partnership is required to pay for all costs arising from the operation,
maintenance and repair of the properties as well as property capital
expenditures in excess of $5,000,000 annually. Fixed base rent and percentage
rent was approximately $134,000,000 for the period from March 12, 1999 through
December 31, 1999. The new partnership has the right to defer a portion of the
rent for up to three years beginning on March 12, 1999 to the extent that
available cash, as defined in the lease, is insufficient to pay such rent, and
pursuant thereto, rent was deferred as of December 31, 1999, of which the
Company's share is $3,240,000.
AmeriCold Logistics provides the frozen food industry with refrigerated
warehousing and transportation management services. Refrigerated warehouses are
comprised of production and distribution facilities. Production facilities
typically serve one or a small number of customers, generally food processors,
located nearby. These customers store large quantities of processed or partially
processed products in the facility until they are shipped to the next stage of
production or distribution. Distribution facilities primarily warehouse a wide
variety of customers' finished products until future shipment to end-users. Each
distribution facility generally services the surrounding regional market.
AmeriCold Logistics' transportation management services include freight routing,
dispatching, freight rate negotiation, backhaul coordination, freight bill
auditing, network flow management, order consolidation and distribution channel
assessment. AmeriCold Logistics' temperature-controlled logistics expertise and
access to both frozen food warehouses and distribution channels enable its
customers to respond quickly and efficiently to time-sensitive orders from
distributors and retailers.
AmeriCold Logistics' customers consist primarily of national, regional
and local frozen food manufacturers, distributors, retailers and food service
organizations. A breakdown of AmeriCold Logistics' largest customers include:
<TABLE>
<CAPTION>
% of Warehouse 1999
Revenue
-------------------
<S> <C>
Con-Agra 9%
Tyson 8%
Heinz 8%
McCain Foods 7%
Kraft 7%
Pilsbury 6%
Sara Lee 5%
J.R. Simplot 3%
Daymark Foods (Sam's Club) 2%
Other 45%
</TABLE>
-36-
<PAGE> 37
Facilities
The following table shows the location, size and type of facility for
each of the Temperature Controlled Logistics properties as of December 31, 1999:
<TABLE>
<CAPTION>
SQUARE
OWNED/ CUBIC FEET FEET
PROPERTY LOCATION LEASED (IN MILLIONS) (IN THOUSANDS)
------------------------------ ----------------------- ---------------- --------------- ----------------
FACILITIES OWNED/LEASED BY THE VORNADO/CRESCENT
PARTNERSHIPS:
<S> <C> <C> <C> <C>
ALABAMA
-------
Birmingham West 25th Avenue Owned 2.0 85.6
Montgomery Newcomb Avenue Owned 1.2 68.1
Gadsden East Air Depot Road Leased 4.0 119.0
Albertville Railroad Avenue Owned 2.2 64.5
--------------- ----------------
TOTAL ALABAMA 9.4 337.2
--------------- ----------------
ARIZONA
-------
Phoenix 455 South 75th Avenue Owned 2.9 111.5
--------------- ----------------
ARKANSAS
--------
Fort Smith Midland Boulevard Owned 1.4 78.2
West Memphis South Airport Road Owned 5.3 166.4
Texarkana Genoa Road Owned 4.7 137.3
Russellville 300 El Mira Owned 5.6 164.7
Russellville 203 Industrial Boulevard Owned 9.5 279.4
Springdale 1200 N. Old Missouri Road Owned 6.6 194.1
--------------- ----------------
TOTAL ARKANSAS 33.1 1,020.1
--------------- ----------------
CALIFORNIA
----------
Ontario Malaga Place Owned 24% 8.1 279.6
Leased 76%
Burbank West Magnolia Boulevard Owned 0.8 33.3
Fullerton South Raymond Avenue Leased 2.8 107.7
Pajaro Salinas Road Leased 1.4 53.8
Los Angeles Jesse Street Owned 2.7 141.6
Turlock 5th Street Owned 2.5 108.4
Watsonville West Riverside Drive Owned 5.4 186.0
Turlock South Kilroy Road Owned 3.0 138.9
Ontario Santa Ana Leased 1.9 55.9
--------------- ----------------
TOTAL CALIFORNIA 28.6 1,105.2
--------------- ----------------
COLORADO
--------
Denver East 50th Street Owned 52% 2.8 116.3
Leased 48%
Denver North Washington Street Leased 0.6 25.0
--------------- ----------------
TOTAL COLORADO 3.4 141.3
--------------- ----------------
</TABLE>
-37-
<PAGE> 38
<TABLE>
<CAPTION>
SQUARE
OWNED/ CUBIC FEET FEET
PROPERTY LOCATION LEASED (IN MILLIONS) (IN THOUSANDS)
------------------------------ ----------------------- ---------------- --------------- ----------------
<S> <C> <C> <C> <C>
FLORIDA
-------
Tampa South Lois Avenue Owned 0.4 22.2
Plant City South Alexander Street Owned 0.8 30.8
Bartow U.S. Highway 17 Owned 1.4 56.8
Tampa 50th Street Owned 80% 3.9 150.0
Leased 20%
Tampa Port of Tampa Owned 1.0 38.5
--------------- ----------------
TOTAL FLORIDA 7.5 298.3
--------------- ----------------
GEORGIA
-------
Atlanta Xavier Drive, SW Owned 11.1 476.7
Atlanta Lakewood Avenue, SW Owned 2.9 157.1
Augusta Laney-Walker Road Owned 1.1 48.3
Atlanta Westgate Parkway Owned 11.4 334.7
Montezuma South Airport Drive Owned 4.2 175.8
Atlanta Westgate Parkway Owned 6.9 201.6
Thomasville 121 Roseway Drive Owned 6.9 202.9
--------------- ----------------
TOTAL GEORGIA 44.5 1,597.1
--------------- ----------------
IDAHO
------
Burley U.S. Highway 30 Owned 10.7 407.2
Nampa 4th Street North Owned 8.0 364.0
--------------- ----------------
TOTAL IDAHO 18.7 771.2
--------------- ----------------
ILLINOIS
--------
Rochelle AmeriCold Drive Owned 6.0 179.7
East Dubuque 18531 U.S. Route 20 West Owned 5.6 215.4
--------------- ----------------
TOTAL ILLINOIS 11.6 395.1
--------------- ----------------
INDIANA
-------
Indianapolis Arlington Avenue Owned 9.1 311.7
--------------- ----------------
IOWA
----
Fort Dodge Maple Drive Owned 3.7 155.8
Bettendorf State Street Owned 8.8 336.0
--------------- ----------------
TOTAL IOWA 12.5 491.8
--------------- ----------------
KANSAS
------
Wichita North Mead Owned 2.8 126.3
Garden City 2007 West Mary Street Owned 2.2 84.6
--------------- ----------------
TOTAL KANSAS 5.0 210.9
--------------- ----------------
KENTUCKY
--------
Sebree 1541 U.S. Highway 41 North Owned 2.7 79.4
--------------- ----------------
MAINE
-----
Portland Read Street Owned 1.8 151.6
--------------- ----------------
MASSACHUSETTS
-------------
Gloucester East Main Street Owned 1.9 95.5
Gloucester Railroad Avenue Owned 0.3 13.6
Gloucester Rogers Street Owned 2.8 95.2
Gloucester Rowe Square Owned 2.4 126.4
</TABLE>
-38-
<PAGE> 39
<TABLE>
<CAPTION>
SQUARE
OWNED/ CUBIC FEET FEET
PROPERTY LOCATION LEASED (IN MILLIONS) (IN THOUSANDS)
------------------------------ ----------------------- ---------------- --------------- ----------------
<S> <C> <C> <C> <C>
Boston Wildett Circle Owned 3.1 218.0
Watertown Pleasant Street Owned 4.7 180.8
--------------- ----------------
TOTAL MASSACHUSETTS 15.2 729.5
--------------- ----------------
MISSOURI
--------
Marshall West Highway 20 Owned 4.8 160.8
Carthage No. 1 Civil War Road Owned 33.1 2,068.8
--------------- ----------------
TOTAL MISSOURI 37.9 2,229.6
--------------- ----------------
MISSISSIPPI
-----------
West Point 751 West Churchill Road Owned 4.7 180.8
--------------- -------------
NEBRASKA
--------
Fremont 950 South Schneider Street Owned 2.2 84.6
Grand Island East Roberts Street Owned 2.2 105.0
--------------- ----------------
TOTAL NEBRASKA 4.4 189.6
--------------- ----------------
NEW YORK
--------
Syracuse Farrell Road Owned 11.8 447.2
--------------- ----------------
NORTH CAROLINA
--------------
Charlotte West 9th Street Owned 1.0 58.9
Charlotte Exchange Street Owned 4.1 164.8
Tarboro Sara Lee Road Owned 3.4 104.0
--------------- ----------------
TOTAL NORTH CAROLINA 8.5 327.7
--------------- ----------------
OKLAHOMA
--------
Oklahoma City South Hudson Owned 0.7 64.1
Oklahoma City Exchange Street Owned 1.4 74.1
--------------- ----------------
TOTAL OKLAHOMA 2.1 138.2
--------------- ----------------
OREGON
------
Hermiston Westland Avenue Owned 4.0 283.2
Milwaukie S.E. McLoughlin Blvd. Owned 4.7 196.6
Salem Portland Road N.E. Owned 12.5 498.4
Woodburn Silverton Road Owned 6.3 277.4
Brooks Brooklake Road Owned 4.8 184.6
Ontario N.E. First Street Owned 8.1 238.2
--------------- ----------------
TOTAL OREGON 40.4 1,678.4
--------------- ----------------
PENNSYLVANIA
------------
Leesport RD2, Orchard Lane Owned 5.8 168.9
Fogelsville Mill Road Owned 21.6 683.9
--------------- ----------------
TOTAL PENNSYLVANIA 27.4 852.8
--------------- ----------------
SOUTH CAROLINA
--------------
Columbia Shop Road Owned 1.6 83.7
--------------- ----------------
SOUTH DAKOTA
------------
Sioux Falls 2300 East Rice Street Owned 2.9 111.5
--------------- ----------------
</TABLE>
-39-
<PAGE> 40
<TABLE>
<CAPTION>
SQUARE
OWNED/ CUBIC FEET FEET
PROPERTY LOCATION LEASED (IN MILLIONS) (IN THOUSANDS)
------------------------------ ----------------------- ---------------- --------------- ----------------
<S> <C> <C> <C> <C>
TENNESSEE
---------
Memphis East Parkway South Owned 5.6 246.2
Memphis Spottswood Avenue Owned 0.5 36.8
Murfreesboro Stephenson Drive Owned 4.5 106.4
--------------- ----------------
TOTAL TENNESSEE 10.6 389.4
--------------- ----------------
TEXAS
------
Amarillo 10300 South East Third Street Owned 3.2 123.1
Ft. Worth 200 Railhead Drive Owned 3.4 102.0
--------------- ----------------
TOTAL TEXAS 6.6 225.1
--------------- ----------------
UTAH
----
Clearfield South Street Owned 8.6 358.4
--------------- ----------------
VIRGINIA
--------
Norfolk East Princess Anne Road Owned 1.9 83.0
Strasburg* 545 Radio Station Rd Owned 6.8 200.0
--------------- ----------------
TOTAL VIRGINIA 8.7 283.0
--------------- ----------------
WASHINGTON
----------
Burlington South Walnut Owned 4.7 194.0
Moses Lake Wheeler Road Owned 7.3 302.4
Walla Walla 14th Avenue South Owned 3.1 140.0
Connell West Juniper Street Owned 5.7 235.2
Wallula Dodd Road Owned 1.2 40.0
Pasco Industrial Way Owned 6.7 209.0
--------------- ----------------
TOTAL WASHINGTON 28.7 1,120.6
--------------- ----------------
WISCONSIN
---------
Tomah Route 2 Owned 4.6 161.0
Babcock* Owned 3.4 111.1
Plover 110th Street Owned 9.4 358.4
--------------- ----------------
TOTAL WISCONSIN 17.4 630.5
--------------- ----------------
TOTAL - OWNED/LEASED 428.3 16,998.4
=============== ================
</TABLE>
-40-
<PAGE> 41
<TABLE>
<CAPTION>
SQUARE
OWNED/ CUBIC FEET FEET
PROPERTY LOCATION LEASED (IN MILLIONS) (IN THOUSANDS)
------------------------------ ----------------------- ---------------- --------------- ----------------
<S> <C> <C> <C> <C>
FACILITIES MANAGED BY
AMERICOLD LOGISTICS:
ALABAMA
-------
Batesville * Highway 35 North Managed 2.8 102.7
Birmingham 4th Street, West Managed 0.1 0.1
--------------- ----------------
TOTAL ALABAMA 2.9 102.8
--------------- ----------------
CALIFORNIA
----------
Ontario Wanamaker Avenue Managed 3.2 122.0
Ontario Airport Drive Managed 13.5 450.0
Ontario Vintage Avenue Managed 3.6 130.0
Wilmington Coil Avenue Managed 4.5 173.1
--------------- ----------------
TOTAL CALIFORNIA 24.8 875.1
--------------- ----------------
MINNESOTA
---------
Park Rapids U.S. Highway 71 South Managed 5.9 173.5
--------------- ----------------
NEW JERSEY
----------
Vineland N. Mill Road Managed 2.7 103.8
--------------- ----------------
PENNSYLVANIA
------------
Bethlehem 2600 Brodhead Road Managed 16.1 473.5
Bethlehem 4000 Miller Circle North Managed 7.3 214.7
--------------- ----------------
TOTAL PENNSYLVANIA 23.4 688.2
--------------- ----------------
SOUTH DAKOTA
------------
Sioux Falls 802 East Rice Street Managed 3.4 130.8
--------------- ----------------
TENNESSEE
---------
Newbern Biffle Road Managed 2.4 92.3
--------------- ----------------
TEXAS
-----
Ft. Worth 1006 Railhead Drive Managed 13.0 382.4
Ft. Worth 1005 Railhead Drive Managed 7.6 223.5
--------------- ----------------
TOTAL TEXAS 20.6 605.9
--------------- ----------------
CANADA
-------
ALBERTA
-------
Taber Managed 4.8 141.0
--------------- ----------------
TOTAL-MANAGED 90.9 2,913.4
=============== ================
GRAND TOTAL-OWNED/LEASED AND MANAGED 519.2 19,911.8
=============== ================
</TABLE>
* New facility in 1999
-41-
<PAGE> 42
The above table is summarized as follows:
<TABLE>
<CAPTION>
CUBIC SQUARE
NUMBER OF FEET FEET
TYPE FACILITIES (IN MILLIONS) (IN THOUSANDS)
---------------------------------- -------------- ------------- ----------------
<S> <C> <C> <C>
Owned/leased by Vornado/Crescent
partnerships:
Owned 84 409.3 16,338.7
Leased 5 19.0 659.7
-------------- ------------- ----------------
89 428.3 16,998.4
Managed by AmeriCold Logistics 15 90.9 2,913.4
-------------- ------------- ----------------
Total 104 519.2 19,911.8
============== ============= ================
</TABLE>
-42-
<PAGE> 43
ALEXANDER'S PROPERTIES
The following table shows as of December 31, 1999 the location,
approximate size and leasing status of each of the properties owned by
Alexander's, in which the Company has a 32.0% interest.
<TABLE>
<CAPTION>
APPROXIMATE APPROXIMATE
AREA IN LEASABLE SQUARE AVERAGE LEASE
SQUARE FOOTAGE/ ANNUALIZED SIGNIFICANT EXPIRATION/
FEET/OR NUMBER BASE RENT PERCENT TENANTS (30,000 OPTION
LOCATION ACREAGE OF FLOORS PER SQ. FOOT LEASED SQUARE FEET OR MORE) EXPIRATION
- -------- ----------- ---------------- ------------ ------- -------------------- -----------
<S> <C> <C> <C> <C> <C> <C>
OPERATING PROPERTIES
NEW YORK:
Kings Plaza Regional Shopping
Center--Brooklyn............ 24.3 acres 766,000/4(1)(2) $ 29.40 91% Sears 2023/2033
Bed Bath &
Rego Park--Queens.............. 4.8 acres 351,000/3(1) 28.76 100% Beyond 2013
Circuit City 2021
Marshalls 2008/2021
Sears 2021
Fordham Road--Bronx............ 92,211 SF 303,000/5 -- -- -- --
Flushing--Queens (3)........... 44,975 SF 177,000/4(1) -- -- -- --
An affiliate
Third Avenue--Bronx............ 60,451 SF 173,000/4 5.00 100% of Conway 2023
-----------
1,770,000
===========
DEVELOPMENT PROPERTIES
NEW YORK:
Lexington Avenue--Manhattan.... 84,420 SF --
Rego Park II--Queens........... 6.6 acres --
NEW JERSEY:
Paramus--New Jersey............ 30.3 acres --
</TABLE>
- --------------------------------
(1) Excludes parking garages.
(2) Excludes 339,000 square foot Macy's store, owned and operated by
Federated Department Stores, Inc. ("Federated").
(3) Leased by the Company through January 2027.
-43-
<PAGE> 44
Kings Plaza Regional Shopping Center:
In June 1998, Alexander's increased its interest in the Mall to 100% by
acquiring Federated Department Stores's 50% interest. The purchase price was
approximately $28,000,000, which was paid in cash, plus Alexander's agreed to
pay Federated $15,000,000 to renovate its Macy's store in the Mall and Federated
agreed to certain modifications to the Kings Plaza Operating Agreement.
Alexander's is currently renovating the Mall in connection with the overall
renovation of the Center at an estimated cost of $33,000,000 of which $9,045,000
has been expended as of January 31, 2000. The renovation is expected to be
completed in 2000.
Paramus:
Alexander's intends to develop a shopping center of approximately 550,000
square feet on this site. The estimated cost of such redevelopment is
approximately $100,000,000. Alexander's has received municipal approvals on
tentative plans to develop the site. No redevelopment plans have been finalized.
Lexington Avenue:
Alexander's is currently undertaking the excavation and laying the
foundation for its Lexington Avenue property as part of the proposed development
of a large multi-use building. The proposed building is expected to be comprised
of a commercial portion, which may include retail stores, offices, hotel space,
extended-stay residences, residential rentals and parking; and a residential
portion, consisting of condominium units to be sold to the public. In connection
therewith, Alexander's paid $14,500,000 for 140,000 square feet of air rights of
which $12,200,000 was paid to the Company (Vornado's cost plus $243,000 in
interest and closing costs). The air rights were contracted for and paid for in
1999, with closings to take place when the developments which give rise to the
air rights are completed in 2000. The capital required for the proposed building
will be in excess of $400,000,000.
Because a REIT is subject to 100% excise tax on income derived from the
sales of "dealer property" (i.e. condominiums), the air rights representing the
residential portion of the property are being transferred to a preferred stock
affiliate, a corporation in which Alexander's owns all of the preferred equity
and none of the common equity. The transfer value will be adjusted once the
final size of the residential portion is determined.
While Alexander's anticipates that financing will be available after
tenants have been obtained for these projects, there can be no assurance that
such financing will be obtained, or if obtained, that such financings will be on
terms that are acceptable. In addition, it is uncertain as to when these
projects will commence.
HOTEL PENNSYLVANIA
On August 5, 1999, the Company increased its interest in the Hotel
Pennsylvania to 100% by acquiring Planet Hollywood International, Inc.'s
("Planet Hollywood") 20% interest in the hotel for approximately $18,000,000 and
assumed $24,000,000 of existing debt. In connection with the transaction, the
Company terminated the licensing agreement with Planet Hollywood for an Official
All-Star Hotel. The Hotel Pennsylvania is located in New York City on Seventh
Avenue opposite Madison Square Garden. The Company intends to refurbish the
Hotel. Under the terms of the mortgage on this property, in connection with the
refurbishment, the Company has escrowed $15,000,000 in cash and provided
$29,000,000 through letters of credit. The Hotel Pennsylvania contains
approximately 800,000 square feet of hotel space with 1,700 rooms and
approximately 400,000 square feet of retail and office space. The Company
manages the property's retail and office space, and a preferred stock affiliate
of the Company co-manages the hotel.
The following table presents rental information for the hotel:
<TABLE>
<CAPTION> YEAR ENDED DECEMBER 31,
--------------------------------
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Average occupancy rate ...... 80% 79% 78%
Average daily rate .......... $105 $ 99 $ 93
</TABLE>
As of December 31, 1999, the property's retail and office space was 85%
and 55% occupied. Twenty-five tenants occupy the retail and commercial space.
Annual rent per square foot of retail and office space in 1999 were $44 and $16.
-44-
<PAGE> 45
NEWKIRK JOINT VENTURES
The Newkirk Joint Ventures ("Newkirk") own various equity and debt
interests relating to 120 limited partnerships which own real estate primarily
net leased to credit rated tenants. The Company owns a 30% interest in Newkirk
with the balance owned by affiliates of Apollo Real Estate Investment Fund III,
L.P.
The following table sets forth the real estate owned by the limited
partnerships and the Company's interest therein:
<TABLE>
<CAPTION>
Square Feet (in 000's)
---------------------------------
Newkirk Vornado's
Number of Ownership Ownership
Properties Total Interest Interest
---------- ----- ----------- ---------
<S> <C> <C> <C> <C>
Office 30 8,871 4,302 1,291
Retail 166 6,995 3,315 995
Other 14 5,146 2,518 755
------ ------ ------ ------
210 21,012 10,135 3,041
====== ====== ====== ======
</TABLE>
These properties are located throughout the United States.
DRY WAREHOUSE/INDUSTRIAL PROPERTIES
The Company's dry warehouse/industrial properties consist of eight
buildings in New Jersey containing approximately 2.0 million square feet. At
December 31, 1999, the occupancy rate of the properties was 92%. The average
term of a tenant's lease is three to five years. Average annual rent per square
foot at December 31, 1999 was $3.37.
INSURANCE
The Company carries comprehensive liability, fire, flood, extended
coverage and rental loss insurance with respect to its properties with policy
specifications and insured limits customarily carried for similar properties.
Management of the Company believes that the Company's insurance coverage
conforms to industry norms.
-45-
<PAGE> 46
ITEM 3. LEGAL PROCEEDINGS
The Company is from time to time involved in legal actions arising in the
ordinary course of its business. In the opinion of management, after
consultation with legal counsel, the outcome of such matters will not have a
material adverse effect on the Company's financial condition or results of
operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the fourth
quarter of the year ended December 31, 1999.
EXECUTIVE OFFICERS OF THE REGISTRANT
The Operating Partnership is managed by Vornado, its general partner. The
following is a list of the names, ages, principal occupations and positions with
Vornado of the executive officers of Vornado and the positions held by such
officers during the past five years. All executive officers of Vornado have
terms of office which run until the next succeeding meeting of the Board of
Trustees of Vornado following the Annual Meeting of Shareholders unless they are
removed sooner by the Board.
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION, POSITION AND OFFICE (CURRENT AND
NAME AGE DURING PAST FIVE YEARS WITH VORNADO UNLESS OTHERWISE STATED)
- ---- ---- -----------------------------------------------------------------
<S> <C> <C>
Steven Roth......................... 58 Chairman of the Board, Chief Executive Officer and Chairman
of the Executive Committee of the Board; the Managing
General Partner of Interstate Properties, an owner of
shopping centers and an investor in securities and
partnerships; Chief Executive Officer of Alexander's, Inc.
since March 2, 1995 and a Director since 1989; Chairman
and CEO of Vornado Operating since 1998.
Michael D. Fascitelli............... 43 President and a Trustee since December 2, 1996; Director of
Alexander's, Inc. since December 2, 1996; Director of
Vornado Operating since 1998; Partner at Goldman, Sachs &
Co. in charge of its real estate practice from December
1992 to December 1996; and Vice President at Goldman, Sachs &
Co., prior to December 1992.
Melvyn H. Blum...................... 53 Executive Vice President--Development since January 2000;
Senior Managing Director at Tishman Speyer Properties in
charge of its development activities in the United States
from July 1998 to January 2000; and Managing Director of
Development and Acquisitions prior to July 1998.
Joseph Macnow....................... 54 Executive Vice President--Finance and Administration since
January 1998; Executive Vice President - Finance and
Administration of Vornado Operating since 1998; Vice
President-Chief Financial Officer from 1985 to January
1998; Vice President--Chief Financial Officer of Alexander's,
Inc. since August 1995.
Irwin Goldberg...................... 55 Vice President--Chief Financial Officer since January 1998;
Vice President--Chief Financial Officer of Vornado
Operating since 1998; Secretary and Treasurer of
Alexander's Inc. since June 1999; Partner at Deloitte &
Touche LLP from September 1978 to January 1998.
David R. Greenbaum.................. 48 Chief Executive Officer of the New York Office Division
since April 15, 1997 (date of the Company's acquisition);
President of Mendik Realty (the predecessor to the Mendik Division)
from 1990 until April 15, 1997.
Joseph Hakim........................ 51 Chief Executive Officer of the Merchandise Mart Division
since April 1, 1998 (date of the Company's acquisition);
President and Chief Executive Officer of Merchandise Mart
Properties, Inc., the main operating subsidiary of Joseph
P. Kennedy Enterprises, Inc. (the predecessor to the Merchandise
Mart Division) from 1992 to April 1, 1998.
Daniel F. McNamara(1)............... 53 Chief Executive Officer of the Temperature Controlled
Logistics (AmeriCold Logistics) since October 1997 (the
date of the Company's acquisition); Chief Executive Officer
of URS Logistics, Inc. (one of the predecessors to
Temperature Controlled Logistics) from March 1996 to
October 1997; and Executive Vice President and Chief
Operating Officer of Value Rent-A-Car, a wholly owned
subsidiary of Mitsubishi Motors, prior to March 1996.
Richard T. Rowan.................... 53 Vice President-Retail Real Estate Division since January 1982.
</TABLE>
- ------------------------------------
(1) As of March 17, 1999, Mr. McNamara is an employee of the partnership which
purchased the non-real estate assets of AmeriCold Logistics.
-46-
<PAGE> 47
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
There is no established public trading market for the units for the
Operating Partnership. At December 31, 1999, there were 1,019 unitholders of
record.
ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------------------------
1999 1998 1997 1996 1995
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
(in thousands, except unit and per unit amounts)
OPERATING DATA
Revenues:
Property rentals ................................. $ 590,814 $ 425,496 $ 168,321 $ 87,424 $ 80,429
Expense reimbursements ........................... 90,246 74,737 36,652 26,644 24,091
Other income ..................................... 15,898 9,627 4,158 2,819 4,198
--------- --------- --------- --------- ---------
Total Revenues ......................................... 696,958 509,860 209,131 116,887 108,718
--------- --------- --------- --------- ---------
Expenses:
Operating ........................................ 282,118 207,171 74,745 36,412 32,282
Depreciation and amortization .................... 83,585 59,227 22,983 11,589 10,790
General and administrative ....................... 40,151 28,610 13,580 5,167 6,687
Amortization of officer's deferred
compensation expense .......................... -- -- 22,917 2,083 --
--------- --------- --------- --------- ---------
Total Expenses ......................................... 405,854 295,008 134,225 55,251 49,759
--------- --------- --------- --------- ---------
Operating Income ....................................... 291,104 214,852 74,906 61,636 58,959
Income applicable to Alexander's ....................... 7,427 3,123 7,873 7,956 3,954
Income from partially-owned entities ................... 82,310 32,025 4,658 1,855 788
Interest and other investment income ................... 18,359 24,074 23,767 6,643 5,733
Interest and debt expense .............................. (141,683) (114,686) (42,888) (16,726) (16,426)
Net gain from insurance settlement
and condemnation proceedings ........................ -- 9,649 -- -- --
Minority interest ...................................... (1,840) (651) -- -- --
--------- --------- --------- --------- ---------
Net Income ............................................. 255,677 168,386 68,316 61,364 53,008
Preferred unit distributions ........................... (33,438) (21,690) (15,549) -- --
Preferential allocations ............................... (44,812) (13,543) (7,293) -- --
--------- --------- --------- --------- ---------
Net income applicable to Class A units ................. $ 177,427 $ 133,153 $ 45,474 $ 61,364 $ 53,008
========= ========= ========= ========= =========
Net income per Class A Unit--basic(1) ............... $ 1.97 $ 1.62 $ .83 $ 1.26 $ 1.13
Net income per Class A Unit--diluted(1) ............. $ 1.94 $ 1.59 $ .79 $ 1.25 $ 1.12
Cash dividends declared for Class A Units ........... $ 1.80 $ 1.64 $ 1.36 $ 1.22 $ 1.12
BALANCE SHEET DATA
Total assets ........................................ $ 5,479,218 $ 4,425,779 $ 2,524,089 $ 565,204 $ 491,496
Real estate, at cost ................................ 3,921,507 3,315,891 1,564,093 397,298 382,476
Accumulated depreciation 308,542 226,816 173,434 151,049 139,495
Debt ................................................ 2,048,804 2,051,000 956,654 232,387 233,353
Partners' capital ................................... 3,262,630 2,203,054 1,492,329 276,257 194,274
</TABLE>
- --------------------------
(1) The earnings per unit amounts prior to 1997 have been restated to comply
with Statement of Financial Accounting Standards No. 128, "Earnings Per
Share" (SFAS 128). For further discussion of earnings per unit and the
impact of SFAS 128, see the notes to the consolidated financial statements.
All unit and per unit information has also been adjusted for a 2-for-1 unit
split in October 1997.
-47-
<PAGE> 48
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
(All of the amounts presented are in thousands, except unit amounts)
OVERVIEW
Below is a summary of net income and EBITDA(1) by segment for the years
ended December 31, 1999, 1998 and 1997:
<TABLE>
<CAPTION>
December 31, 1999
-----------------------------------------------------------------------------------
Temperature
Merchandise Controlled
Total Office Retail Mart Logistics Other(2)
------- ------- ------ --------- --------- -----
<S> <C> <C> <C> <C> <C> <C>
Total revenues.......................... $696,958 $379,795 $170,538 $ 135,921 $ -- $10,704
Total expenses.......................... 405,854 227,680 74,062 74,624 -- 29,488
------- ------- ------ --------- --------- -----
Operating income........................ 291,104 152,115 96,476 61,297 -- (18,784)
Income applicable to Alexander's ....... 7,427 -- -- -- -- 7,427
Income from partially-owned entities.... 82,310 19,055 938 -- 36,722 25,595
Interest and other investment income.... 18,359 1,786 -- 737 -- 15,836
Interest and debt expense............... (141,683) (49,624) (27,635) (29,509) -- (34,915)
Minority interest....................... (1,840) (1,840) -- -- -- --
------- ------- ------ --------- --------- -----
Net income.............................. 255,677 121,492 69,779 32,525 36,722 (4,841)
Minority interest....................... 1,840 1,840 -- -- -- --
Interest and debt expense (4)........... 226,253 82,460 30,249 29,509 27,520 56,515
Depreciation and amortization (4)....... 143,499 64,702 16,900 17,702 31,044 13,151
Straight-lining of rents (4)............ (25,359) (16,386) (2,120) (4,740) (1,698) (415)
Other................................... 7,451 365 -- -- 2,054 (3) 5,032
-------- -------- ------- --------- --------- -----
EBITDA(1)............................... $609,361 $254,473 114,808 $ 74,996 $ 95,642 $69,442
======== ======== ======= ========= ========= =======
</TABLE>
<TABLE>
<CAPTION>
December 31, 1998
-----------------------------------------------------------------------------------
Temperature
Merchandise Controlled
Total Office Retail Mart Logistics Other(2)
------- ------- ------ --------- --------- -----
<S> <C> <C> <C> <C> <C> <C>
Total revenues.......................... $509,860 $247,499 $167,155 $ 86,521 $ -- $,8685
Total expenses.......................... 295,008 151,573 70,334 50,761 -- 22,34
------- ------- ------ -------- -------- -----
Operating income........................ 214,852 95,926 96,821 35,760 -- (13,655)
Income applicable to Alexander's ....... 3,123 -- -- -- -- 3,123
Income from partially-owned entities.... 32,025 10,854 258 (1,969) 15,191 7,691
Interest and other investment income.... 24,074 4,467 2,159 639 -- 16,809
Interest and debt expense............... (114,686) (25,175) (32,249) (18,711) -- (38,551)
Net gain from insurance settlement
and condemnation proceeding........ 9,649 -- -- -- -- 9,649
Minority interest....................... (651) (651) -- -- -- --
---- ---- ------- -------- -------- -------
Net income.............................. 168,386 85,421 66,989 15,191 15,719 (14,934)
Minority interest....................... 651 651 -- -- -- --
Interest and debt expense (4)........... 164,478 40,245 32,709 18,711 26,541 46,272
Depreciation and amortization (4)....... 104,299 39,246 15,520 9,899 33,117 6,517
Net gain from insurance Settlement
and condemnation proceeding........ (9,649) -- -- -- -- (9,649)
Straight-lining of rents (4)............ (16,132) (6,845) (3,203) (4,882) -- (1,202)
Other................................... 15,055 (79) -- -- 8,872(3) 6,262(5)
-------- -------- -------- -------- -------- -------
EBITDA(1)............................... $427,088 $158,639 $112,015 $ 39,447 $ 83,721 $33,266
======== ======== ======== ======== ======== =======
</TABLE>
Footnotes 1-5 are explained on the following page.
-48-
<PAGE> 49
<TABLE>
<CAPTION>
December 31, 1997
-----------------------------------------------------------------------------------
Temperature
Merchandise Controlled
Total Office Retail Mart Logistics Other(2)
------- ------- ------ --------- --------- -----
<S> <C> <C> <C> <C> <C> <C>
Total revenues.......................... $209,131 $80,846 $120,299 $ -- $ -- $ 7,986
Total expenses.......................... 134,225 50,186 46,204 -- -- 37,835
-------- ------- -------- -------- -------- --------
Operating income........................ 74,906 30,660 74,095 -- -- (29,849)
Income applicable to Alexander's ....... 7,873 -- -- -- -- 7,873
Income from partially-owned entities.... 4,658 1,015 -- -- $ 1,720 1,923
Interest and other investment income.... 23,767 6,834 2,296 -- -- 14,637
Interest and debt expense............... (42,888) (9,009) (19,893) -- -- (13,986)
-------- ------- -------- -------- -------- --------
Net income.............................. 68,316 29,500 56,498 -- 1,720 (19,402)
Interest and debt expense (4)........... 54,395 13,707 19,893 -- 5,839 14,956
Depreciation and amortization (4)....... 31,972 12,813 11,706 -- 4,182 3,271
Straight-lining of rents (4)............ (3,932) (645) (2,558) -- -- (729)
Other................................... (325) 1,303 970 -- 17 (2,615)
-------- ------- -------- -------- -------- --------
EBITDA(1)............................... $150,426 $56,678 $ 86,509 $ -- $ 11,758 $ (4,519)
======== ======= ======== ======== ======== ========
</TABLE>
(1) EBITDA represents income before interest, taxes, depreciation and
amortization, extraordinary or non-recurring items, gains or
losses on sales of real estate and the effect of straight-lining
of property rentals for rent escalations. Management considers
EBITDA a supplemental measure for making decisions and assessing
the performance of its segments. EBITDA may not be comparable to
similarly titled measures employed by other companies.
(2) Other includes (i) the operations of the Company's warehouse and
industrial properties, (ii) investments in the Hotel Pennsylvania,
Alexander's, Newkirk Joint Ventures, (iii) corporate general and
administrative expenses and (iv) unallocated investment income and
interest and debt expense.
(3) Includes (i) the reversal of income taxes (benefit for the year
ended December 31, 1999) which are considered non-recurring
because of the expected conversion of the Temperature Controlled
Logistics Companies to REIT's and (ii) the add back of
non-recurring unification costs.
(4) Interest and debt expense, depreciation and amortization and
straight-lining of rents included in the reconciliation of net
income to EBITDA reflects amounts which are netted in income from
partially-owned entities.
(5) Primarily represents the Company's equity in Alexander's loss for
the write-off resulting from the razing of Alexander's building
formerly located at its Lexington Avenue site.
-49-
<PAGE> 50
RESULTS OF OPERATIONS
Years Ended December 31, 1999 and December 31, 1998
Below are the details of the changes by segment in EBITDA.
<TABLE>
<CAPTION>
Temperature
Merchandise Controlled
Total Office Retail Mart Logistics Other
--------- --------- ---------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Year ended December 31, 1998 $ 427,088 $ 158,639 $ 112,015 $ 39,447 $ 83,721 $ 33,266
1999 Operations:
Same store operations(1) 27,410 18,074 3,797 6,556 N/A (1,017)
Acquisitions and other 154,863 77,760 (1,004) 28,993 11,921 37,193
--------- --------- --------- --------- --------- ---------
Year ended December 31, 1999 $ 609,361 $ 254,473 $ 114,808 $ 74,996 $ 95,642 $ 69,442
========= ========= ========= ========= ========= =========
% increase in same
store operations 8.0% 11.4% 3.4% 16.6% N/A(2) (3.1)%
</TABLE>
(1) Represents operations which were owned for the same period in each year.
(2) Not comparable because prior to March 12, 1999 (date the operations of
the Temperature Controlled Logistics Companies were sold), the Company
reflected its equity in the operations of the Temperature Controlled
Logistics Companies. Subsequent thereto, the Company reflects its equity
in the rent it receives from the Temperature Controlled Logistics
Companies.
Revenues
The Company's revenues, which consist of property rentals, tenant expense
reimbursements and other income were $696,958 in the year ended December 31,
1999 compared to $509,860 in the prior year, an increase of $187,098. These
increases by segment resulted from:
<TABLE>
<CAPTION>
Merchandise
Date of Acquisition Total Office Retail Mart Other
------------------- ------- --------- -------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C>
Property Rentals:
Acquisitions:
595 Madison Avenue ................. September 1999 $ 4,202 $ 4,202 $ -- $ -- $ --
Hotel Pennsylvania (20%) ........... August 1999 2,670 -- -- -- 2,670
909 Third Avenue ................... July 1999 11,626 11,626 -- -- --
888 Seventh Avenue ................. January 1999 22,683 22,683 -- -- --
Market Square Complex .............. December 1998 13,303 -- -- 13,303 --
Mendik RELP Properties ............. December 1998 26,410 26,410 -- -- --
20 Broad Street .................... August 1998 8,112 8,112 -- -- --
689 Fifth Avenue ................... August 1998 2,152 2,152 -- -- --
770 Broadway ....................... July 1998 5,747 5,747 -- -- --
40 Fulton Street ................... June 1998 2,605 2,605 -- -- --
Merchandise Mart
Properties ...................... April 1998 27,227 -- -- 27,227 --
150 East 58th Street ............... March 1998 2,403 2,403 -- -- --
One Penn Plaza ..................... February 1998 5,478 5,478 -- -- --
Westport ........................... January 1998 274 274 -- -- --
-------- -------- -------- -------- --------
134,892 91,692 -- 40,530 2,670
Leasing activity ........................ 30,426 25,090 2,935 2,806 (405)
-------- -------- -------- -------- --------
Total increase in property rentals ...... 165,318 116,782 2,935 43,336 2,265
-------- -------- -------- -------- --------
Tenant expense reimbursements:
Increase in tenant expense
reimbursements due to acquisitions.. 12,754 8,462 -- 3,922 370
Other ................................... 2,755 887 448 1,668 (248)
-------- -------- -------- -------- --------
Total increase in tenant
expense reimbursements ............. 15,509 9,349 448 5,590 122
-------- -------- -------- -------- --------
Other income ............................ 6,271 6,165 -- 474 (368)
-------- -------- -------- -------- --------
Total increase in revenues .............. $ 187,098 $132,296 $ 3,383 $ 49,400 $ 2,019
======== ======== ======== ======== ========
</TABLE>
-50-
<PAGE> 51
Expenses
The Company's expenses were $405,854 in the year ended December 31, 1999,
compared to $295,008 in the prior year, an increase of $110,846. These increases
by segment resulted from:
<TABLE>
<CAPTION>
Merchandise
Total Office Retail Mart Other
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Operating:
Acquisitions ..................... $ 68,828 $ 51,291 $ -- $ 15,946 $ 1,591
Same store operations ............ 6,119 6,234 3,332 (3,316) (131)
-------- -------- -------- -------- --------
74,947 57,525 3,332 12,630 1,460
-------- -------- -------- -------- --------
Depreciation and amortization:
Acquisitions ..................... 17,498 11,180 -- 5,756 562
Same store operations ............ 6,860 4,654 334 2,047 (175)
-------- -------- -------- -------- --------
24,358 15,834 334 7,803 387
-------- -------- -------- -------- --------
General and Administrative:
Corporate expenses(2) ............ 11,593 2,748 62(1) 3,430 5,353
Reduction in value of
Vornado shares and other
securities held in officer's
deferred compensation
trust ............................ (52) -- -- -- (52)
-------- -------- -------- -------- --------
11,541 2,748 62 3,430 5,301
-------- -------- -------- -------- --------
$110,846 $ 76,107 $ 3,728 $ 23,863 $ 7,148
======== ======== ======== ======== ========
</TABLE>
- ------------------------
(1) Retail general and administrative expenses are included in corporate
expenses, which are not allocated.
(2) Of this increase: (i) $2,546 is attributable to acquisitions, (ii) $5,654
resulted from payroll, primarily for additional employees, and corporate
office expenses, and (iii) $3,393 resulted from professional fees.
Income applicable to Alexander's (loan interest income, equity in income
(loss) and depreciation) was $7,427 in the year ended December 31, 1999,
compared to $3,123 in the prior year, an increase of $4,304. This increase
resulted from equity in Alexander's loss in the prior year due primarily to the
write-off resulting from the razing of its building formerly located at its
Lexington Avenue site.
Income from partially-owned entities was $82,310 in the year ended
December 31, 1999, compared to $32,025 in the prior year, an increase of
$50,285. This increase by segment resulted from:
<TABLE>
<CAPTION>
Temperature
Date of Merchandise Controlled
Acquisition Total Office Retail Mart Logistics Other
---------------- -------- -------- -------- -------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Acquisitions:
CESCR ....................... March 1999 $ 14,063 $ 14,063 $ - $ -- $ -- $ --
Newkirk Joint Ventures ...... July 98/Mar. 99 16,510 -- - -- -- 16,510
Las Catalinas ............... November 1998 680 -- 680 -- -- --
Temperature Controlled
Logistics ................ June/July 1998 8,423 -- - -- 8,423 --
Merchandise Mart
Management Company ....... April 1998 (207) -- - (207) -- --
-------- -------- -------- -------- -------- ---------
39,469 14,063 680 (207) 8,423 16,510
Increase (decrease) in equity
in income:
Temperature Controlled
Logistics .............. 12,528 -- - -- 12,528(1) --
Hotel Pennsylvania ........ 1,417 -- - -- -- 1,417(2)
Partially-owned ........... -
office buildings ....... (1,533) (1,533)(3) - -- -- --
Other ..................... (1,596) (4,329) - 2,176 580 (23)
-------- -------- -------- -------- -------- ---------
$ 50,285 8,201 680 $ 1,969 21,531 $ 17,904
======== ======== ======== ======== ======== =========
</TABLE>
- -----------------------
(1) Primarily reflects equity interest in lease payments (March 12,
1999-December 31, 1999) and equity interest in the operations (January 1,
1999-March 12, 1999) for 1999 in excess of equity in the operations of
such companies in 1998.
(2) Reflects the elimination of the Company's equity in income of the
commercial portion of the Hotel Pennsylvania which was wholly-owned as of
August 5, 1999, and accordingly consolidated.
(3) Reflects the elimination of the Company's equity in income of Two Park
Avenue which was wholly-owned as of November 17, 1998 and accordingly
consolidated.
-51-
<PAGE> 52
Interest and other investment income (interest income on mortgage loans
receivable, other interest income, dividend income and net gains on marketable
securities) was $18,359 for the year ended December 31, 1999, compared to
$24,074 in the prior year, a decrease of $5,715. This decrease resulted
primarily from lower average investments.
Interest and debt expense was $141,683 for the year ended December 31,
1999, compared to $114,686 in the prior year, an increase of $26,997. This
increase resulted primarily from debt in connection with acquisitions.
Minority interest was $1,840 for the year ended December 31, 1999,
compared to $651 for the prior year, an increase of $1,189. This increase is
primarily due to higher income.
Preferential allocations to unitholders were $44,812 for the year ended
December 31, 1999, compared to $13,543 in the prior year, an increase of
$31,269. This increase resulted primarily from the issuance of Series D-2, D-3,
D-4 and D-5 Cumulative Redeemable Preferred Units to institutional investors.
Preferred unit distributions were $33,438 for the year ended December 31,
1999, compared to $21,690 in the prior year, an increase of $11,748. The
increase resulted from the issuance of the Company's Series B Cumulative
Redeemable Preferred Units in March 1999 and Series C Cumulative Redeemable
Preferred Units in May 1999.
The Company operates in a manner intended to enable it to continue to
qualify as a REIT under Sections 856-860 of the Internal Revenue Code of 1986 as
amended. Under those sections, a REIT which distributes at least 95% of its REIT
taxable income as a dividend to its shareholders each year and which meets
certain other conditions will not be taxed on that portion of its taxable income
which is distributed to its shareholders. The Company has distributed to its
shareholders an amount greater than its taxable income. Therefore, no provision
for Federal income taxes is required.
Years Ended December 31, 1998 and December 31, 1997
Below are the details of the changes by segment in EBITDA.
<TABLE>
<CAPTION>
Temperature
Merchandise Controlled
Total Office Retail Mart Logistics Other
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Year ended December 31, 1997 $150,426 $ 56,678 $ 86,509 $ -- $ 11,758 $ (4,519)(1)
1998 Operations:
Same store operations(2) 32,502 4,279 4,382 -- 411 23,430(1)
Acquisitions 244,160 97,682 21,124 39,447 71,552 14,355
-------- -------- -------- -------- -------- --------
Year ended December 31, 1998 $427,088 $158,639 $112,015 $ 39,447 $ 83,721 $ 33,266
======== ======== ======== ======== ======== ========
% increase in same
store operations 5.5% 7.5% 5.1% * 3.5% 2.8%(1)
* not applicable
</TABLE>
- --------------------
(1) EBITDA for "Other" and in "Total" for the year ended December 31, 1997
reflects the amortization of a deferred payment due to an officer of
$22,917; the percentage increases in same store operations have been
adjusted to exclude the increase in EBITDA in 1998 resulting therefrom.
(2) Represents operations which were owned for the same period in each year.
-52-
<PAGE> 53
Revenues
The Company's revenues, which consist of property rentals, tenant expense
reimbursements and other income were $509,860 in the year ended December 31,
1998, compared to $209,131 in the prior year, an increase of $300,729. These
increases by segment resulted from:
<TABLE>
<CAPTION>
Date of Merchandise
Acquisition Total Office Retail Mart Other
-------------- -------- -------- -------- -------- -----------
<S> <C> <C> <C> <C> <C> <C>
Property Rentals:
Acquisitions:
Mendik RELP December 1998 $ 4,126 $ 4,126 $ -- $ -- $ --
20 Broad Street August 1998 4,399 4,399 -- -- --
689 Fifth Avenue August 1998 1,333 1,333 -- -- --
770 Broadway July 1998 5,713 5,713 -- -- --
40 Fulton Street June 1998 3,561 3,561 -- -- --
Merchandise Mart
Properties April 1998 82,509 -- -- 82,509 --
150 E. 58th Street March 1998 13,021 13,021 -- -- --
One Penn Plaza February 1998 53,991 53,991 -- -- --
Westport January 1998 2,355 2,355 -- -- --
Green Acres Mall December 1997 22,449 -- 22,449 -- --
640 Fifth Avenue December 1997 5,312 5,312 -- -- --
90 Park Avenue May 1997 9,251 9,251 -- -- --
Mendik April 1997 25,313 25,313 -- -- --
Montehiedra Shopping Center April 1997 2,935 -- 2,935 -- --
-------- -------- -------- -------- -----------
236,268 128,375 25,384 82,509 --
Leasing activity 20,907 16,508 4,106 -- 293
-------- -------- -------- -------- -----------
Total increase in property rentals 257,175 144,883 29,490 82,509 293
-------- -------- -------- -------- -----------
Tenant expense reimbursements:
Increase in tenant expense
reimbursements due to
acquisitions 34,526 16,112 15,759 2,655 --
Other 3,559 2,292 1,373 -- (106)
-------- -------- -------- -------- -----------
Total increase in tenant expense
reimbursements 38,085 18,404 17,132 2,655 (106)
-------- -------- -------- -------- -----------
Other income 5,469 3,366 234 1,357 512
-------- -------- -------- -------- -----------
Total increase in revenues $300,729 $166,653 $ 46,856 $ 86,521 $ 699
======== ======== ======== ======== ===========
</TABLE>
-53-
<PAGE> 54
Expenses
The Company's expenses were $295,008 in the year ended December 31, 1998,
compared to $134,225 in the prior year, an increase of $160,783. These increases
by segment resulted from:
<TABLE>
<CAPTION>
Merchandise
Total Office Retail Mart Other
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Operating:
Acquisitions $ 121,297 $ 67,545 $ 15,339 $ 38,413 --
Same store operations 11,129 5,751 5,185 -- 193
--------- --------- --------- --------- ---------
132,426 73,296 20,524 38,413 193
--------- --------- --------- --------- ---------
Depreciation and
amortization:
Acquisitions 35,586 22,630 3,057 9,899 --
Same store operations 658 47 549 -- 62
--------- --------- --------- --------- ---------
36,244 22,677 3,606 9,899 62
--------- --------- --------- --------- ---------
General and administrative: 15,030(2) 5,414 --(1) 2,449 7,167(1)
--------- --------- --------- --------- ---------
Amortization of
officer's deferred
compensation expense (22,917) -- -- -- (22,917)(3)
--------- --------- --------- --------- ---------
$ 160,783 $ 101,387 $ 24,130 $ 50,761 $ (15,495)
========= ========= ========= ========= =========
</TABLE>
- ---------------------------
(1) Retail general and administrative expenses are included in corporate
expenses which are not allocated.
(2) Of this increase: (i) $6,631 is attributable to acquisitions, (ii) $4,641
resulted from payroll, primarily for additional employees and corporate
office expenses, and (iii) $3,758 resulted from professional fees.
(3) The Company recognized an expense of $22,917 in the prior year
representing the amortization of the deferred payment due to the
Company's President, which was fully amortized at December 31, 1997.
Income applicable to Alexander's (loan interest income, equity in income
(loss) and depreciation) was $3,123 in the year ended December 31, 1998,
compared to $7,873 in the prior year, a decrease of $4,750. This decrease
resulted primarily from (i) the Company's equity in the 1998 write-off of the
carrying value of Alexander's Lexington Avenue building of $4,423, partially
offset by (ii) income from the commencement of leases at Alexander's Rego Park
and Kings Plaza store properties and (iii) income from Alexander's acquisition
of the remaining 50% interest in the Kings Plaza Mall.
Income from partially-owned entities was $32,025 in the year ended
December 31, 1998, compared to $4,658 in the prior year, an increase of $27,367.
This increase by segment resulted from:
<TABLE>
<CAPTION>
Date of Merchandise Temperature
Acquisition Total Office Retail Mart Controlled
Logistics Other
Acquisitions: ------------- ---------- -------- ------- ------------ ------------ ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Temperature Controlled
Logistics:
AmeriCold and URS October 1997 $ 7,137 $ -- $ -- $ -- $ 7,137 $ --
Freezer Services June 1998 3,218 -- -- -- 3,218 --
Carmar Group July 1998 2,960 -- -- -- 2,960 --
Charles E. Smith
Commercial Realty L.P. October 1997 4,669 4,669 -- -- -- --
Hotel Pennsylvania September 1997 2,623 -- -- -- -- 2,623
Newkirk Joint Ventures July 1998 3,412 -- -- -- -- 3,412
Partially-owned
office buildings April 1997 2,852 2,852 -- -- -- --
Merchandise Mart
Management Company April 1998 (1,969) -- -- (1,969) -- --
Las Catalinas November 1998 258 -- 258 -- -- --
Other 2,207 2,318 -- -- 156 (267)
----- --------- ------- --------- --------- ---------
$27,367 $ 9,839 $ 258 $ (1,969) $ 13,471 $ 5,768
======= ========= ======= ========= ========= =========
</TABLE>
-54-
<PAGE> 55
Interest and other investment income (interest income on mortgage loans
receivable, other interest income, dividend income and net gains on marketable
securities) was $24,074 for the year ended December 31, 1998, compared to
$23,767 in the prior year, an increase of $307. This increase resulted
primarily from gains on the sale of marketable securities of $2,395, partially
offset by a decrease in interest income due to lower average investments this
year.
Interest and debt expense was $114,686 for the year ended December 31,
1998, compared to $42,888 in the prior year, an increase of $71,798. This
increase resulted primarily from debt in connection with acquisitions.
In the third quarter of 1998, the Company recorded a net gain of $9,649,
in connection with an insurance settlement and condemnation proceeding (see
Note 11 to the Consolidated Financial Statements).
The minority interest is comprised of a 40% interest in 20 Broad Street
of $651 for the year ended December 31, 1998.
Preferential allocations to unit holders were $13,543 for the year ended
December 31, 1998, compared to $7,293 in the prior year, an increase of $6,250.
This increase resulted primarily from the issuance of certain Series B-1, B-2
and C-1 Convertible Preferred Units in connection with acquisitions and the
issuance of Series D-1 Cumulative Redeemable Preferred units to an
institutional investor.
The preferred unit distributions of $21,690 for the year ended December
31, 1998 and $15,549 for the period from April 15, 1997 to December 31, 1997
apply to the Company's $3.25 Series A Convertible Preferred Units issued in
April and December 1997 and include accretion of expenses of issuing them.
LIQUIDITY AND CAPITAL RESOURCES
Cash Flows for the Years Ended December 31, 1999, 1998 and 1997
Year Ended December 31, 1999
Cash flows provided by operating activities of $176,895 were comprised
of (i) net income of $255,677 and (ii) adjustments for non-cash items of
$27,875, offset by (iii) the net change in operating assets and liabilities of
$50,907 (primarily prepaid expenses). The adjustments for non-cash items are
primarily comprised of (i) depreciation and amortization of $83,585, partially
offset by (ii) the effect of straight-lining of rental income of $29,587 and
(iii) equity in income of partially-owned entities of $82,310.
Net cash used in investing activities of $494,204 was primarily
comprised of (i) capital expenditures of $153,591 (see detail below), (ii)
investment in mortgage loans receivable of $59,787 (including $41,200 loan to
CAPI and $18,587 loan to Vornado Operating Company), (iii) acquisitions of real
estate of $224,654 (see detail below) and (iv) investments in partially-owned
entities of $118,409 (see detail below), partially offset by (v) the use of
cash restricted for tenant improvements of $13,624, (vi) proceeds from the sale
of Temperature Controlled Logistics assets of $22,769 and (vii) proceeds from
the repayment of mortgage loans receivable of $14,000 (Vornado Operating
Company).
-55-
<PAGE> 56
Acquisitions of real estate and investments in partially-owned entities
are comprised of:
<TABLE>
<CAPTION>
(in 000's)
Debt Value of Units Assets
Cash Assumed Issued Acquired
------------- ----------- ------------- --------------
<S> <C> <C> <C> <C>
Real Estate:
595 Madison Avenue Office Building.............. $ 125,000 $ -- $ -- $ 125,000
909 Third Avenue Office Building................ 12,400 109,000 1,600 123,000
888 Seventh Avenue Office Building.............. 45,000 55,000 -- 100,000(1)
GreenPoint leasehold interest................... 37,300 -- -- 37,300
Other........................................... 4,954 -- -- 4,954
------------- ----------- ------------- --------------
$ 224,654 $ 164,000 $ 1,600 $ 390,254
============= =========== ============= ==============
Investments in Partially Owned Entities:
Charles E. Smith Commercial Realty L.P.:
Increase in investment to 34%................ $ -- $ -- $ 242,000 $ 242,000
Reacquired units from Vornado Operating
Company................................... 13,200 -- -- 13,200
Crystal City hotel land...................... -- -- 8,000 8,000
Additional investment in Newkirk Joint Ventures. 16,420 -- 50,500 66,920
Hotel Pennsylvania - increase in investment
to 100%...................................... 18,000 24,000 -- 42,000
Alexander's - increase in investment to 32%..... 8,956 -- -- 8,956
Loan to Alexander's ............................ 50,000 -- -- 50,000
Loan to Temperature Controlled Logistics........ 9,000 -- -- 9,000
Other........................................... 2,833 -- -- 2,833
------------- ----------- ------------- --------------
$ 118,409 $ 24,000 $ 300,500 $ 442,909
============= =========== ============= ==============
</TABLE>
- ------------------------
(1) Total consideration for 888 Seventh Avenue was $117,000 of which $17,000
was expended in 1998.
Capital expenditures were comprised of:
<TABLE>
<CAPTION>
New York City Merchandise
Total Office Retail Mart Other
----------- ------------- --------- ------------ ----------
<S> <C> <C> <C> <C> <C>
Expenditures to maintain the assets............. $ 27,251 $ 13,176 $1,945 $ 8,221 $ 3,909
Tenant allowances............................... 40,242 20,890 927 18,384 41
Acquisition and Redevelopment...................
expenditures.............................. 86,098 52,288 (1) 19,281 14,529 --
----------- ------------ ------- ------------ ---------
$ 153,591 $ 86,354 $22,153 $ 41,134 $ 3,950
=========== ============ ======= ============ =========
</TABLE>
- ------------------------
(1) Includes $27,544 to buyout the tenant's lease on 28,000 square feet of
office space at 640 Fifth Avenue, thereby permitting re-leasing for
retail use and $24,744 for the refurbishment of 770 Broadway.
Net cash provided by financing activities of $262,131 was primarily
comprised of (i) proceeds from issuance of preferred units of $192,953, (ii)
proceeds from issuance of limited partnership units of $525,013 and (iii)
proceeds from borrowings of $455,000 partially offset by, (iv) repayments of
borrowings of $668,957, (v) distributions paid on Class A units of $161,569,
(vi) distributions paid on preferred units of $30,563 , and (vii) preferential
allocations of $44,145.
-56-
<PAGE> 57
Years Ended December 31, 1998
Cash flows provided by operating activities of $189,406 were primarily
comprised of (i) income of $158,737 (net income of $168,386 less net gain from
insurance settlement and condemnation proceeding of $9,649), (ii) adjustments
for non-cash items of $11,474, and (iii) the net change in operating assets and
liabilities of $18,544. The adjustments for non-cash items are primarily
comprised of (i) depreciation and amortization of $59,227 and (ii) the effect
of straight-lining of rental income of $17,561 and (iii) equity in net income
of partially-owned entities of $32,025.
Net cash used in investing activities of $1,257,367 was primarily
comprised of (i) acquisitions of real estate of $896,800 (see detail below),
(ii) investments in partially-owned entities of $308,000 (see detail below),
(iii) capital expenditures of $68,085 (see detail below) and investments in
securities of $73,513 (including purchase of Capital Trust Preferred Stock of
$48,700), partially offset by (v) proceeds from the repayment of mortgage loans
receivable of $57,600.
Acquisitions of real estate and investments in partially-owned entities
were comprised of:
<TABLE>
<CAPTION>
Value of
shares or Assets
Cash Debt Units Issued Acquired
------------- -------------- ------------ -------------
<S> <C> <C> <C> <C>
Real Estate:
Merchandise Mart Properties $ 187,000 $ 327,000 $ 116,000 $ 630,000
One Penn Plaza Office Building 317,000 93,000 -- 410,000
770 Broadway Office Building 131,000 -- 18,000 149,000
150 East 58th Street Office Building 118,000 -- -- 118,000
40 Fulton Street Office Building 38,000 -- -- 38,000
888 Seventh Avenue Office Building 17,000 -- -- 17,000(1)
689 Fifth Avenue Office Building 33,000 -- -- 33,000
Mendik RELP Properties 31,000 46,000 29,000 106,000
Market Square Complex 11,000 60,000 44,000 115,000
Other 13,800 -- -- 13,800
------------- -------------- ----------- -------------
$ 896,800 $ 526,000 $ 207,000 $ 1,629,800
============= ============== =========== =============
Investments in Partially-Owned Entities:
Hotel Pennsylvania (acquisition of additional
40% interest increasing ownership to 80%) $ 22,000 $ 48,000 $ -- $ 70,000
570 Lexington Avenue Office Building
(increased interest from 5.6% to
approximately 50%) 32,300 4,900 -- 37,200
Acquisition of Freezer Services, Inc. (60%
interest) 58,000 16,000 6,000 80,000
Reduction in Temperature Controlled Logistics
Companies debt (60% interest) 44,000 -- -- 44,000
Acquisition of Carmar Group (60% interest) 86,400 8,400 -- 94,800
Investment in Newkirk Joint Ventures 56,000 -- -- 56,000
Las Catalinas Mall (50% interest) -- 38,000 -- 38,000
Other 9,300 -- -- 9,300
------------- -------------- ----------- -------------
$ 308,000 $ 115,300 $ 6,000 $ 429,300
============= ============== =========== =============
</TABLE>
- -------------------------------------
(1) Acquisition was completed in 1999 for a total of $117,000.
Capital expenditures were comprised of:
<TABLE>
<CAPTION>
New
York City Merchandise
Total Office Retail Mart Other
------------- -------------- ---------- ------------- ------------
<S> <C> <C> <C> <C> <C>
Expenditures to maintain the
assets.................. $ 14,460 $ 4,975 $ 3,138 $ 5,273 $ 1,074
Tenant allowances and leasing
commissions............ 53,625 46,187 2,397 5,041 --
------------- -------------- --------- ------------- -----------
$ 68,085 $ 51,162 $ 5,535 $ 10,314 $ 1,074
============= ============== ========= ============= ===========
</TABLE>
-57-
<PAGE> 58
Net cash provided by financing activities of $879,815 was primarily
comprised of (i) proceeds from borrowings of $1,427,821, (ii) proceeds from the
issuance of Class A units of $445,247 and (iii) proceeds from the issuance of
preferred units of $85,313, partially offset by (iv) repayment of borrowings of
$883,475, (v) distributions paid on Class A units of $156,429 and (vi)
distributions paid on preferred units of $18,816.
Year Ended December 31, 1997
Cash flows provided by operating activities of $115,473 were comprised of
(i) net income of $68,316, (ii) adjustments for non-cash items of $32,430 and
(iii) the net change in operating assets and liabilities of $14,727. The
adjustments for non-cash items are primarily comprised of (i) amortization of
deferred officer's compensation expense of $22,917 and (ii) depreciation and
amortization of $24,460.
Net cash used in investing activities of $1,064,484 was primarily
comprised of (i) acquisitions of real estate of $887,423 (see detail below),
(ii) investments in mortgage loans receivable of $71,663 (see detail below),
(iii) capital expenditures of $23,789, (iv) restricted cash for tenant
improvements of $27,079 and (v) real estate deposits of $46,152.
Acquisitions of real estate and investments in mortgage loans receivable
are comprised of:
<TABLE>
<CAPTION>
Value of
Shares
or
Debt Units Assets
Cash Assumed Issued Acquired
------------ ------------ ------------ ---------------
<S> <C> <C> <C> <C>
Real Estate:
- ------------
Mendik Transaction................................. $ 263,790 $ 215,279 $ 177,000 $ 656,069
60% interest in Temperature Controlled Logistics
Companies....................................... 243,846 376,800 -- 620,646
Green Acres Mall................................... -- 125,000 102,015 227,015
90 Park Avenue office building..................... 185,000 -- -- 185,000
Montehiedra shopping center........................ 11,000 63,000 -- 74,000
40% interest in Hotel Pennsylvania................. 17,487 48,000 -- 65,487
640 Fifth Ave. office building..................... 64,000 -- -- 64,000
15% interest in Charles E. Smith Commercial
Realty L.P...................................... 60,000 -- -- 60,000
Riese properties................................... 26,000 -- -- 26,000
1135 Third Avenue and other........................ 16,300 -- -- 16,300
------------ ------------ ------------ ---------------
887,423 828,079 279,015 1,994,517
------------ ------------ ------------ ---------------
<CAPTION>
Mortgage loans receivable:
- --------------------------
<S> <C> <C> <C> <C>
Riese properties................................... 41,649 -- -- 41,649
20 Broad Street.................................... 27,000 -- -- 27,000
909 Third Ave. and other, net...................... 3,014 -- -- 3,014
------------ ------------ ------------ ---------------
71,663 -- -- 71,663
------------ ------------ ------------ ---------------
Total Acquisitions...................................... $ 959,086 $ 828,079 $ 279,015 $ 2,066,180
============ ============ ============ ===============
</TABLE>
Net cash provided by financing activities of $1,215,269 was primarily
comprised of proceeds from (i) borrowings of $770,000 (ii) issuance of Class A
units of $688,672, and (iii) issuance of preferred units of $276,000, partially
offset by (iv) repayment of borrowings of $409,633, (v) distributions paid on
Class A units of $77,461, (vi) distributions paid on preferred units of $15,549
and (vii) the repayment of borrowings on U.S. Treasury obligations of $9,636.
-58-
<PAGE> 59
Certain Cash Requirements
In January 2000, the Company completed approximately $36,000 of real
estate acquisitions, of which $17,640 was indebtedness.
The Company has budgeted approximately $91,000 for capital expenditures
(excluding acquisitions) over the next year as follows:
<TABLE>
<CAPTION> Temperature
Merchandise Controlled
Total Office Retail Mart Logistics Other
------------ ------------- ------- ------------ ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Expenditures to maintain the assets $ 42,000 $ 16,400 $2,800 $ 11,700 $ 3,000(1) $ 8,100
Tenant allowances 49,000 40,500 900 7,600 -- --
------------ ------------- ------ ------------ ---------- ----------
$ 91,000 $ 56,900 $3,700 $ 19,300 $ 3,000 $ 8,100
============ ============= ====== ============ ========== ==========
</TABLE>
- ----------------------------
(1) Represents the Company's 60% share of the Vornado/Crescent Partnership's
obligation to fund up to $5,000 of capital expenditures per annum.
In addition to the above, the Company has budgeted approximately $18,000
of leasing commissions.
Tenant allowances and leasing commissions for the New York City Office
properties approximate $18.00 per square foot for renewal space and $50.00 per
square foot for vacant space. Historically, approximately two-thirds of
existing tenants renew their leases.
In addition to the capital expenditures reflected above, the Company is
currently engaged in or considering certain multi-year development and
redevelopment projects for which it has budgeted approximately $278.7 million
to be expended as outlined in the "Development and Redevelopment Projects"
section of Item 1--Business. The $278.7 million does not include amounts for
other projects which are also included in the "Development and Redevelopment
Projects" section of Item 1 -Business, as no budgets for them have been
finalized. There can be no assurance that any of the above projects will be
ultimately completed, completed on time or completed for the budgeted amount.
No cash requirements have been budgeted for the capital expenditures and
amortization of debt of CESCR, Newkirk or Alexander's, which are partially
owned by the Company. These investees are expected to fund their own cash
requirements. Alexander's is not expected to distribute any cash to the Company
in 2000. In 2000, the Company expects to receive at a minimum, preferred
distributions from CESCR of approximately $14.4 million (7,679,365 preferred
units at $1.87 per unit) and common distributions of approximately $3.85
million (2,500,000 common units at $1.54 per unit - current dividend rate). The
minimum preferred distribution rate increases by .25% each year for the next
three years.
On March 12, 1999 the Vornado/Crescent Partnerships sold all of the
non-real estate assets of the Temperature Controlled Logistics Companies
encompassing the operations of the Temperature Controlled Logistics business
for approximately $48,000 to a new partnership owned 60% by Vornado Operating
Company and 40% by Crescent Operating Inc.
On March 1, 2000, the Company sold three shopping centers located in Texas
for approximately $25,750 resulting in a gain of $4,400.
Financing Activities
CORPORATE
On March 17, 1999, Vornado completed the sale of 3 million 8.5% Series B
Cumulative Redeemable Preferred Shares, at a price $25.00 per share, pursuant
to an effective registration statement with net proceeds to Vornado of
approximately $72,200. Further on March 22, 1999, 400,000 shares were sold when
the underwriters exercised their over-allotment option resulting in additional
net proceeds to Vornado of $9,700. The perpetual preferred shares may be called
without penalty at the option of Vornado commencing on March 17, 2004.
-59-
<PAGE> 60
On May 17, 1999, Vornado completed the sale of 4 million 8.5% Series C
Cumulative Redeemable Preferred Shares, at a price of $25.00 per share,
pursuant to an effective registration statement with net proceeds to Vornado of
approximately $96,900. Additionally on May 19, 1999, 600,000 shares were sold
when the underwriters exercised their over-allotment option resulting in
additional net proceeds to Vornado of $14,500. The perpetual preferred shares
may be called without penalty at the option of Vornado commencing on May 17,
2004.
On May 27, 1999, the Company sold an aggregate of $27,500 of 8.375%
Series D-2 Cumulative Redeemable Preferred Units in the Operating Partnership
to an institutional investor in a private placement, resulting in net proceeds
of approximately $26,780. The perpetual Preferred Units may be called without
penalty at the option of the Operating Partnership commencing on May 27, 2004.
On September 3, 1999, the Company sold an aggregate of $325,000 of 8.25%
Series D-3 and D-4 Cumulative Redeemable Preferred Units in the Operating
Partnership to institutional investors in private placements, resulting in net
proceeds of approximately $316,400. The Perpetual Preferred Units may be called
without penalty at the option of the Operating Partnership commencing on
September 7, 2004.
On November 24, 1999, the Company sold an aggregate of $187,000 of 8.25%
Series D-5 Cumulative Redeemable Preferred Units in the Operating Partnership
to institutional investors in a private placement, resulting in net proceeds of
approximately $181,900. The Perpetual Preferred Units may be called without
penalty at the option of the Operating Partnership commencing on November 24,
2004.
On March 1, 2000 the Company completed a $500,000 private placement of
10-year, 7.93% mortgage notes, cross-collateralized by 42 shopping center
properties, resulting in net proceeds of approximately $490,000. In connection
therewith, the Company repaid $228,000 of existing mortgage debt scheduled to
mature on December 1, 2000 and $262,000 outstanding under its revolving credit
facility.
OFFICE
On February 16, 1999, the Company completed a $165,000 refinancing of
its Two Penn Plaza office building and prepaid the then existing $80,000 debt
on the property. The new 5-year debt matures in February 2004 and bears
interest at 7.08%.
On March 1, 2000, the Company completed a $90,000 refinancing of its Two
Park Avenue office building. The Company received proceeds of $65,000 and
repaid the then existing debt in the same amount on the property. The Company
expects to receive the remaining $25,000 prior to June 30, 2000 upon satisfying
certain closing conditions. The new 3-year debt matures on February 28, 2003
and bears interest at Libor + 1.45% (7.39% at March 1, 2000).
MERCHANDISE MART
On July 8, 1999, the Company completed a $70,000 mortgage financing of
its 350 North Orleans property in Chicago. The Company received proceeds of
$40,000 and is expected to receive the remaining $30,000 during the next year
upon meeting certain debt service coverage requirements. The new 3-year debt
matures in June 2002 and bears interest at LIBOR + 1.65% (8.13% at December 31,
1999).
On September 21, 1999, the Company completed a $250,000 mortgage
refinancing of its Merchandise Mart property in Chicago of which $50,000 is
further secured by a letter of credit. The new 5-year debt matures in September
2004 and bears interest at LIBOR +1.50% (7.97% at December 31, 1999). The
letter of credit will be reduced over the term of the loan as cash flow
increases. The Company bought an interest rate cap, capping the interest rate
in the event that LIBOR increases above 9.25% through the termination date of
the agreement in September 2002. Simultaneously with this transaction, the
Company sold an interest rate cap to a third party on the same terms as the cap
the Company purchased.
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<PAGE> 61
The Company has an effective shelf registration under which it can offer
an aggregate of approximately $1.4 billion of equity securities and an
aggregate of $1.0 billion of debt securities.
The Company anticipates that cash from continuing operations will be
adequate to fund business operations and the payment of dividends and
distributions on an on-going basis for more than the next twelve months;
however, capital outlays for significant acquisitions will require funding from
borrowings or equity offerings.
ACQUISITION ACTIVITY
As a result of acquisitions, the book value of the Company's assets have
grown from $4,425,779 at December 31, 1998 to $5,479,218 at December 31, 1999.
The Company's future success will be affected by its ability to
integrate the assets and businesses it acquires and to effectively manage those
assets and businesses. The Company currently expects to continue to grow at a
relatively fast pace. However, its ability to do so will be dependent on a
number of factors, including, among others, (a) the availability of reasonably
priced assets that meet the Company's acquisition criteria and (b) the price of
the Company's common stock, the rates at which the Company is able to borrow
money and, more generally, the availability of financing on terms that, in the
Company's view, make such acquisitions financially attractive.
YEAR 2000 ISSUES
To date, there have been no material adverse effects to the Company's
financial condition or results of operations as a result of Year 2000.
RECENTLY ISSUED ACCOUNTING STANDARDS
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities". This statement establishes accounting and reporting
standards for derivative instruments, including certain derivative instruments
embedded in other contracts, and for hedging activities. It is effective for
all fiscal quarters of fiscal years beginning after June 15, 2000. Because the
Company does not currently utilize derivatives or engage in significant hedging
activities, management does not anticipate that implementation of this
statement will have a material effect on the Company's financial statements.
In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin No. 101 (SAB 101). SAB 101 provides clarification in
applying generally accepted accounting principles to revenue recognition in
financial statements including contingent rentals under leases. The Company
does not anticipate that implementation of this statement will have a material
effect on the Company's financial statements.
ECONOMIC CONDITIONS
Substantially all of the Company's office, retail and permanent showroom
leases contain step-ups in rent. Such rental increases are not designed to, and
in many instances do not, approximate the cost of inflation, but do have the
effect of mitigating the adverse impact of inflation. In addition,
substantially all of the Company's leases contain provisions that require the
tenant to reimburse the Company for the tenant's share of common area charges
(including roof and structure in strip shopping centers, unless it is the
tenant's direct responsibility) and real estate taxes or for increases of such
expenses over a base amount, thus offsetting, in part, the effects of inflation
on such expenses.
Inflation did not have a material effect on the Company's results for
the periods presented.
-61-
<PAGE> 62
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
At December 31, 1999, the Company's exposure to a change in interest
rates on its wholly-owned and partially-owned debt is as follows:
<TABLE>
<CAPTION>
(amounts in thousands except per unit amounts)
Weighted Effect of 1%
Average Increase In
Balance Interest Rate Base Rates
-------------- ------------------- ----------------
<S> <C> <C> <C>
Wholly-owned debt:
Variable rate.............................. $ 1,227,407 7.59% $ 12,274
Fixed rate................................. 821,397 7.02% --
--------- ---------
$ 2,048,804 12,274
========= ---------
Partially-owned debt:
Variable rate.............................. $ 85,380 8.02% 854
Fixed rate................................. 1,109,185 7.72% --
--------- ---------
$ 1,194,565 854
========= ---------
Preferential Allocations............................ (1,838)
---------
Total decrease in the
Company's annual net income...................... $ 11,290
=========
Per Class A unit -
diluted....................................... $ .13
=========
</TABLE>
After giving effect to the Company's $500,000,000 financing completed on
March 1, 2000, and the use of a portion of the proceeds to repay approximately
$262,000,000 of the amount outstanding under its revolving credit facility, the
Company's total variable rate debt is $1,050,477,000. The effect of a 1%
increase on base rates would result in a total decrease in the Company's annual
net income of $9,034,000 or $.10 per Class A unit diluted.
The fair value of the Company's debt at December 31, 1999, based on
discounted cash flows at the current rate at which similar loans would be made
to borrowers with similar credit ratings for the remaining term of such debt
approximates its carrying value.
In July 1998, the Company entered into an interest rate cap agreement to
reduce the impact of changes in interest rates on its $275,000,000 One Penn
Plaza loan. The agreement caps the Company's interest rate in the event that
LIBOR increases above 8.5% through January 20, 2000 and 9% thereafter, until
the termination date of the cap agreement on July 30, 2001 (the debt matures in
June 2002). The Company is exposed to credit loss in the event of
nonperformance by the other parties to the interest rate cap agreement.
However, the Company does not anticipate nonperformance by the counterparty.
The fair value of the interest rate cap agreement at December 31, 1999
approximates its cost.
On September 21, 1999, the Company bought an interest rate cap, capping
the interest rate on its 250,000,000 Merchandise Mart loan in the event that
LIBOR increases above 9.25% through the termination date of the agreement in
September 2002. Simultaneously with this transaction, the Company sold an
interest rate cap to a third party on the same terms as the cap the Company
purchased.
-62-
<PAGE> 63
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Independent Auditors' Report.......................................................................... 64
Consolidated Balance Sheets at December 31, 1999 and 1998............................................. 65
Consolidated Statements of Income for the years ended December 31, 1999, 1998 and 1997................ 66
Consolidated Statements of Partners' Capital for the years ended December 31, 1999, 1998 and 1997..... 67
Consolidated Statements of Cash Flows for the years ended December 31, 1999, 1998 and 1997............ 69
Notes to Consolidated Financial Statements............................................................ 70
</TABLE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH INDEPENDENT AUDITORS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
Not applicable.
-63-
<PAGE> 64
INDEPENDENT AUDITORS' REPORT
Partners
Vornado Realty L.P.
Saddle Brook, New Jersey
We have audited the accompanying consolidated balance sheets of Vornado
Realty L.P. as of December 31, 1999 and 1998, and the related consolidated
statements of income, partners' capital and cash flows for each of the three
years in the period ended December 31, 1999. Our audits also included the
financial statement schedules listed in the Index at Item 14. These financial
statements and financial statement schedules are the responsibility of the
Company's management. Our responsibility is to express an opinion on the
financial statements and financial statement schedules based on our audits.
We conducted our audits 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 statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. 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 audits provide a reasonable basis
for our opinion.
In our opinion, such consolidated financial statements present fairly,
in all material respects, the financial position of Vornado Realty L.P. at
December 31, 1999 and 1998, and the results of their operations and their cash
flows for each of the three years in the period ended December 31, 1999 in
conformity with generally accepted accounting principles. Also, in our opinion,
such financial statement schedules, when considered in relation to the basic
consolidated financial statements taken as a whole, present fairly in all
material respects the information set forth therein.
DELOITTE & TOUCHE LLP
Parsippany, New Jersey
March 7, 2000
-64-
<PAGE> 65
VORNADO REALTY L.P.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
(amounts in thousands except unit amounts)
DECEMBER 31,
------------------------------------
1999 1998
-------------- ---------------
ASSETS
<S> <C> <C>
Real estate, at cost:
Land ............................................................................... $ 826,477 $ 743,324
Buildings and improvements............................................................. 3,080,174 2,561,383
Leasehold improvements and equipment................................................... 14,856 11,184
--------------- ---------------
Total.......................................................................... 3,921,507 3,315,891
Less accumulated depreciation and amortization......................................... (308,542) (226,816)
--------------- ---------------
Real estate, net............................................................... 3,612,965 3,089,075
Cash and cash equivalents, including U.S. government obligations under
repurchase agreements of $43,675 and $56,500........................................... 112,630 167,808
Escrow deposits and restricted cash....................................................... 30,571 44,195
Marketable securities..................................................................... 106,503 77,156
Investments and advances to partially-owned entities, including
Alexander's of $159,148 and $104,038................................................... 1,315,387 827,840
Due from officers......................................................................... 16,190 17,165
Accounts receivable, net of allowance for doubtful accounts
of $7,292 and $3,044................................................................... 36,408 35,517
Notes and mortgage loans receivable....................................................... 49,719 10,683
Receivable arising from the straight-lining of rents...................................... 79,298 49,711
Deposits in connection with real estate acquisitions...................................... 8,128 22,947
Other assets.............................................................................. 111,419 83,682
--------------- ---------------
$ 5,479,218 $ 4,425,779
=============== ===============
LIABILITIES AND PARTNERS' CAPITAL
Notes and mortgages payable............................................................... $ 1,681,804 $ 1,363,750
Revolving credit facility................................................................. 367,000 687,250
Accounts payable and accrued expenses..................................................... 107,036 109,925
Officer's compensation payable............................................................ 34,996 35,628
Deferred leasing fee income............................................................... 8,349 10,051
Other liabilities......................................................................... 2,634 3,196
--------------- ---------------
Total liabilities...................................................................... 2,201,819 2,209,800
--------------- ---------------
Minority interest......................................................................... 14,769 12,925
--------------- ---------------
Commitments and contingencies
Partners' capital:
Equity................................................................................. 3,385,857 2,359,745
Accumulated deficit.................................................................... (116,979) (132,837)
--------------- ---------------
3,268,878 2,226,908
Accumulated other comprehensive loss................................................... (1,448) (18,957)
Due from officers for purchase of general partner's units of beneficial interest....... (4,800) (4,897)
--------------- ---------------
Total partners's capital....................................................... 3,262,630 2,203,054
--------------- ---------------
$ 5,479,218 $ 4,425,779
=============== ===============
</TABLE>
See notes to consolidated financial statements.
-65-
<PAGE> 66
VORNADO REALTY L.P.
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------------
1999 1998 1997
(amounts in thousands except per unit amounts) ------------- ------------- -------------
<S> <C> <C> <C>
Revenues:
Property rentals.................................................. $ 590,814 $ 425,496 $ 168,321
Expense reimbursements............................................ 90,246 74,737 36,652
Other income (including fee income from
related parties of $1,857, $2,327 and $1,752................ 15,898 9,627 4,158
------------- ------------- -------------
Total revenues......................................................... 696,958 509,860 209,131
------------- ------------- -------------
Expenses:
Operating......................................................... 282,118 207,171 74,745
Depreciation and amortization..................................... 83,585 59,227 22,983
General and administrative........................................ 40,151 28,610 13,580
Amortization of officer's deferred compensation expense........... -- -- 22,917
------------- ------------- -------------
Total expenses......................................................... 405,854 295,008 134,225
------------- ------------- -------------
Operating income....................................................... 291,104 214,852 74,906
Income applicable to Alexander's....................................... 7,427 3,123 7,873
Income from partially-owned entities................................... 82,310 32,025 4,658
Interest and other investment income................................... 18,359 24,074 23,767
Interest and debt expense.............................................. (141,683) (114,686) (42,888)
Net gain from insurance settlement and
condemnation proceeding........................................... -- 9,649 --
Minority interest...................................................... (1,840) (651) --
------------- ------------- -------------
Net income............................................................. 255,677 168,386 68,316
Preferred unit distributions (including accretion of issuance
expenses of $2,874 in 1999 and 1998 and $1,918 in 1997) (33,438) (21,690) (15,549)
Preferential allocations............................................... (44,812) (13,543) (7,293)
-------------- -------------- --------------
NET INCOME applicable to Class A units................................. $ 177,427 $ 133,153 $ 45,474
============= ============= =============
NET INCOME PER CLASS A UNIT-BASIC...................................... $ 1.97 $ 1.62 $ .83
============= ============= =============
NET INCOME PER CLASS A UNIT-DILUTED.................................... $ 1.94 $ 1.59 $ .79
============= ============= =============
</TABLE>
See notes to consolidated financial statements.
-66-
<PAGE> 67
VORNADO REALTY L.P.
CONSOLIDATED STATEMENTS OF PARTNERS' CAPITAL
<TABLE>
<CAPTION>
LIMITED GENERAL ACCUMULATED OTHER
PREFERRED PARTNERSHIP PARTNER'S COMPREHENSIVE
UNITS UNITS UNITS DEFICIT LOSS
--------- ----------- ----------- -------- -----------------
(amounts in thousands except unit amounts)
<S> <C> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1997.................. $ -- $ -- $ 359,918 $ (77,574) $ (998)
Net income................................ -- -- -- 68,316 --
Distributions to preferred unitholders
($2.37 per unit)....................... -- -- -- (15,549) --
Net proceeds from issuance of
preferred units (including
accretion of $1,918)................... 277,918 -- -- -- --
Preferential allocations to unitholders... -- -- -- (7,293) --
Units issued in connection with the
Mendik acquisition..................... -- 178,567 -- -- --
Net proceeds from issuance of General
Class A units.......................... -- -- 688,672 -- --
Units issued in connection with
Arbor acquisition...................... 1,966 -- 100,049 -- --
Distributions to Class A
unitholders ($1.36 per unit)........... -- -- -- (77,461) --
Class A units issued in
connection with an employment
agreement and employees' share plans... -- -- 633 -- --
Change in unrealized gains
on securities available for sale....... -- -- -- -- 158
Forgiveness of amount due from officers... -- -- -- --
--------- --------- ---------- ------------- ------------
BALANCE, DECEMBER 31, 1997................ 279,884 178,567 1,149,272 (109,561) (840)
Net Income................................ -- -- -- 168,386 --
Distributions to preferred unitholders
($2.37 per unit)....................... -- -- -- (21,690) --
Distributions to Class A
unitholders ($1.64 per unit)........... -- -- -- (133,099) --
Net proceeds from issuance
of Class A units....................... -- -- 444,563 -- --
Preferential allocations to unitholders... -- -- -- (13,543) --
Limited partnership units issued in
connection with acquisitions........... -- 190,962 -- -- --
Net proceeds from issuance of
limited partnership units.............. -- 85,312 -- -- --
Class A units issued in
connection with Mendik RELP
properties acquisition................. -- -- 29,063 -- --
Class A units issued under
employees' share plan.................. -- -- 909 -- --
Conversion of limited partnership units to
Class A units.......................... -- (32,780) 32,780 -- --
Capital contribution to
Vornado Operating Company............ -- (1,685) -- (23,330) --
Accretion of issuance expenses on
preferred units........................ 2,874 -- -- -- --
Class A units issued in
connection with dividend reinvestment plan -- -- 24 -- --
Change in unrealized (losses)
on securities available for sale....... -- -- -- -- (5,047)
Appreciation of securities held
in officer's deferred compensation
trust.................................. -- -- -- -- (10,464)
Pension obligations....................... -- -- -- -- (2,606)
Forgiveness of amount due
from Officers.......................... -- -- -- -- --
--------- --------- ------------ ------------- ------------
BALANCE, DECEMBER 31, 1998 $ 282,758 $ 420,376 $1,656,611 $ (132,837) $ (18,957)
========= ========= ========== ============== =============
</TABLE>
<TABLE>
<CAPTION>
(DUE (TO) TOTAL
FROM PARTNERS' COMPREHENSIVE
OFFICERS CAPITAL INCOME
------------- ------------ ---------------
(amounts in thousands except unit amounts)
<S> <C> <C> <C>
BALANCE, JANUARY 1, 1997.................. $ (5,089) $ 276,257 $ 61,728
============
Net income................................ -- 68,316 $ 68,316
Distributions to preferred unitholders --
($2.37 per unit)....................... -- (15,549) --
Net proceeds from issuance of --
preferred units (including
accretion of $1,918)................... -- 277,918 --
Preferential allocations to unitholders... -- (7,293) --
Units issued in connection with the --
Mendik acquisition..................... -- 178,567 --
Net proceeds from issuance of --
Class A units.......................... -- 688,672 --
Units issued in connection with --
Arbor acquisition...................... -- 102,015 --
Distributions to Class A --
unitholders ($1.36 per unit)........... -- (77,461) --
Class A units issued in --
connection with an employment
agreement and employees' share plans... -- 633 --
Change in unrealized gains --
on securities available for sale....... -- 158 158
Forgiveness of amount due from officers... 96 96 --
--- ------------ ------------
BALANCE, DECEMBER 31, 1997................ (4,993) 1,492,329 $ 68,474
----------- ------------ ============
Net Income................................ -- 168,386 $ 168,386
Distributions to preferred unitholders --
($2.37 per unit)....................... -- (21,690) --
Distributions to Class A --
unitholders ($1.64 per unit)........... -- (133,088) --
Net proceeds from issuance --
of Class A units....................... -- 444,563 --
Preferential allocations to unitholders... -- (13,543) --
Limited partnership units issued in --
connection with acquisitions........... -- 190,962 --
Net proceeds from issuance of --
limited partnership units.............. -- 85,312 --
Class A units issued in --
connection with Mendik RELP
properties acquisition................. -- 29,063 --
Class A units issued under --
employees' share plan.................. -- 909 --
Conversion of limited partnership units to --
Class A units.......................... -- -- --
Capital contribution to --
Vornado Operating Company............ -- (25,015) --
Accretion of issuance expenses on --
preferred units........................ -- 2,874 --
Class A units issued in --
connection with dividend reinvestment plan -- 24 --
Change in unrealized (losses) --
on securities available for sale....... -- (5,047) (5,047)
Appreciation of securities held --
in officer's deferred compensation
trust.................................. -- (10,464) (10,464)
Pension obligations....................... -- (2,606) (2,606)
Forgiveness of amount due
from Officers.......................... 96 96 --
----------- ------------ ------------
BALANCE, DECEMBER 31, 1998 $ (4,897) $ 2,203,054 $ 150,269
=========== ============ ============
</TABLE>
See notes to consolidated financial statements.
-67-
<PAGE> 68
VORNADO REALTY L.P.
CONSOLIDATED STATEMENTS OF PARTNERS' CAPITAL
<TABLE>
<CAPTION> ACCUMULATED
LIMITED GENERAL OTHER
PREFERRED PARTNERSHIP PARTNER'S ACCUMULATED COMPREHENSIVE
UNITS UNITS UNITS DEFICIT LOSS
---------- ------------- ----------- -------------- ----------------
(amounts in thousands except share amounts)
<S> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1998..................... $ 282,758 $420,376 $1,656,611 $ (132,837) $ (18,957)
Net Income..................................... -- -- -- 255,677 --
Distributions paid on Preferred units
Series A Preferred units
($3.25 per unit).......................... -- -- -- (21,690) --
Series B Preferred units
($1.68 per unit).......................... -- -- -- (5,720) --
Series C Preferred units
($1.31 per share)......................... -- -- -- (6,028) --
Net proceeds from issuance of preferred
units....................................... 192,953 -- -- -- --
Net proceeds from issuance of limited
partnership units........................... -- 525,456 -- -- --
Class A units ($1.80 per unit)................. -- -- -- (161,569) --
Class A units issued under employees'
share plan.................................. -- -- 2,463 -- --
Preferential allocations to unitholders........ (44,812)
Limited partnership units issued in
connection with acquisitions................ -- 301,688 -- -- --
Conversion of limited partnership with
units to Class A units...................... -- (40,258) 40,258 -- --
Accretion of issuance expenses on
preferred units............................. 2,874 -- -- -- --
Class A units issued in connection with
dividend reinvestment plan.................. -- -- 678 -- --
Change in unrealized net loss
on securities available for sale............ -- -- -- -- 15,603
Depreciation of securities held
in officer's deferred compensation trust.... -- -- -- -- 579
Pension obligations........................... -- -- -- -- 1,327
Forgiveness of amount due
from officers............................... -- -- -- -- --
--------- ---------- ---------- ------------- ------------
BALANCE, DECEMBER 31, 1999.................... $ 478,585 $1,207,262 $1,700,010 $ (116,979) $ (1,448)
========= ========== ========== ============= ============
</TABLE>
<TABLE>
<CAPTION>
DUE
FROM TOTAL PARTNERS' COMPREHENSIVE
OFFICERS CAPITAL INCOME
(amounts in thousands except share amounts) ------------ --------------- --------------
<S> <C> <C> <C>
BALANCE, DECEMBER 31, 1998.................... $ (4,897) $ 2,203,054 $ 150,269
============
Net Income.................................... -- 255,677 $ 255,677
Distributions paid on Preferred units
Series A Preferred units
($3.25 per unit).......................... -- (21,690) --
Series B Preferred units
($1.68 per unit).......................... -- (5,720) --
Series C Preferred units
($1.31 per share)......................... -- (6,028) --
Net proceeds from issuance of preferred
units....................................... -- 192,953 --
Net proceeds from issuance of limited
partnership units........................... -- 525,456
Distributions paid on Class A
units ($1.80 per unit)...................... -- (161,569) --
Class A units issued under employees'
share plan.................................. -- 2,463 --
Preferential allocations to unitholders........ (44,812)
Limited partnership units issued in
connection with acquisitions................ -- 301,688 --
Conversion of limited partnership with
units to Class A units...................... -- -- --
Accretion of issuance expenses on
preferred units............................. -- 2,874 --
Class A units issued in connection with
dividend reinvestment plan.................. -- 678 --
Change in unrealized net loss
on securities available for sale............ -- 15,603 15,603
Depreciation of securities held
in officer's deferred compensation trust.... -- 579 579
Pension obligations............................ -- 1,327 1,327
Forgiveness of amount due
from officers............................... 97 97 --
--------- ------------ ------------
BALANCE, DECEMBER 31, 1999..................... $ (4,800) $ 3,262,630 $ 273,186
========== ============ ============
</TABLE>
See notes to consolidated financial statements.
-68-
<PAGE> 69
VORNADO REALTY L.P.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------------------
1999 1998 1997
--------------- --------------- ---------------
(amounts in thousands)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income.......................................................... $ 255,677 $ 168,386 $ 68,316
Adjustments to reconcile net income to net cash provided
by operations:
Depreciation and amortization (including debt issuance
costs).................................................... 83,585 59,227 24,460
Amortization of officer's deferred compensation expense....... -- -- 22,917
Straight-lining of rental income.............................. (29,587) (17,561) (7,075)
Minority interest............................................. 1,840 651 --
Equity in (income) loss of Alexander's....................... (1,021) 3,363 (2,188)
Equity in income of partially-owned entities.................. (82,310) (32,025) (4,658)
Gain on marketable securities................................. (382) (1,530) (1,026)
Gain from insurance settlement and condemnation............... -- (9,649) --
Changes in operating assets and liabilities................... (50,907) 18,544 14,727
--------------- --------------- -------------
Net cash provided by operating activities................................ 176,895 189,406 115,473
--------------- --------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisitions of real estate and other............................... (224,654) (896,800) (887,423)
Additions to real estate............................................ (153,591) (68,085) (23,789)
Development costs................................................... (17,548) -- --
Investments in partially-owned entities............................. (118,409) (308,000) --
Proceeds from sale of Temperature Controlled Logistics assets....... 22,769 -- --
Investments in mortgage loans receivable............................ (59,787) (6,620) (71,663)
Repayment of mortgage loans receivable.............................. 20,751 57,600 --
Cash restricted for tenant improvements............................. 13,624 (14,716) (27,079)
Distributions from partially-owned entities......................... 16,938 3,200 --
Real estate deposits and other...................................... 14,819 23,788 (46,152)
Purchases of securities available for sale.......................... (21,614) (73,513) (8,378)
Proceeds from sale or maturity of securities available for sale..... 12,498 25,779 --
--------------- --------------- -------------
Net cash used in investing activities.................................... (494,204) (1,257,367) ( 1,064,484)
--------------- --------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from borrowings............................................ 455,000 1,427,821 770,000
Repayments of borrowings............................................ (668,957) (883,475) (419,269)
Costs of refinancing debt........................................... (8,059) (11,418) (3,038)
Proceeds from issuance of preferred units........................... 192,953 -- 276,000
Proceeds from issuance of limited partnership units................. 525,013 85,313 --
Proceeds from issuance of Class A units............................. -- 445,247 688,672
Distributions to Class A unitholders................................ (161,569) (156,429) (77,461)
Distributions to preferred unitholders.............................. (30,563) (18,816) (15,549)
Preferential allocations............................................ (44,145) (9,240) (4,719)
Exercise of share options........................................... 2,458 812 633
--------------- --------------- -------------
Net cash provided by financing activities................................ 262,131 879,815 1,215,269
--------------- --------------- -------------
Net (decrease) increase in cash and cash equivalents..................... (55,178) (188,146) 266,258
Cash and cash equivalents at beginning of year........................... 167,808 355,954 89,696
--------------- --------------- -------------
Cash and cash equivalents at end of year................................. $ 112,630 $ 167,808 $ 355,954
=============== =============== =============
Supplemental Disclosure of Cash Flow Information:
Cash payments for interest.......................................... $ 143,665 $ 111,089 $ 38,968
=============== =============== =============
NON-CASH TRANSACTIONS:
Financing in connection with acquisitions........................... $ 188,000 $ 526,000 $ 403,279
Class A units issued in connection with acquisitions................ -- 29,000 102,015
Units issued in connection with acquisitions........................ 302,100 184,000 177,000
Unrealized gain (loss) on securities available for sale............. 15,603 (5,047) 158
Depreciation of securities held in officer's deferred
compensation trust............................................... 579 10,464 --
</TABLE>
See notes to consolidated financial statements.
-69-
<PAGE> 70
VORNADO REALTY L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION AND BUSINESS
Vornado Realty L.P. (the "Operating Partnership," including the
operations of Vornado Realty Trust prior to the conversion described below) is
a Delaware limited partnership. Operations commenced on April 15, 1997, when
Vornado Realty Trust ("Vornado") a fully-integrated real estate investment
trust ("REIT") converted to an Umbrella Partnership REIT ("UPREIT") by
transferring substantially all of its assets to the Operating Partnership. As a
result, Vornado now conducts its business through the Operating Partnership.
Vornado is the sole general partner of, and owned approximately 86% of the
limited partnership common interest in, the Operating Partnership at March 1,
2000. All references to the "Company" refer to Vornado and its consolidated
subsidiaries, including the Operating Partnership.
The Company currently owns directly or indirectly:
Office Building Properties ("Office"):
(i) all or portions of 22 office building properties in the
New York City metropolitan area (primarily Manhattan) aggregating
approximately 14.0 million square feet;
(ii) a 34% limited partnership interest in Charles E. Smith
Commercial Realty L.P. ("CESCR"), a limited partnership which owns and
manages approximately 10.7 million square feet of office properties in
Northern Virginia and Washington, D.C., and manages an additional 7.9
million square feet of office and other commercial properties in the
Washington, D.C. area;
Retail Properties ("Retail"):
(iii) 56 shopping center properties in six states and Puerto
Rico aggregating approximately 12.0 million square feet, including 1.4
million square feet built by tenants on land leased from the Company;
Merchandise Mart Properties:
(iv) the Merchandise Mart properties containing
approximately 6.8 million square feet, including the 3.4 million square
foot Merchandise Mart in Chicago;
Temperature Controlled Logistics:
(v) a 60% interest in partnerships that own 89 warehouse
facilities nationwide with an aggregate of approximately 428 million cubic
feet of refrigerated space (excludes 15 additional warehouses containing
approximately 91 million cubic feet managed by AmeriCold Logistics).
AmeriCold Logistics leases all of the partnerships' facilities;
Other Real Estate Investments:
(vi) approximately 32% of the outstanding common stock of
Alexander's, Inc. ("Alexander's"), which has eight properties in the New
York City metropolitan area;
(vii) the Hotel Pennsylvania in New York City contains
approximately 800,000 square feet of space with 1,700 rooms and
approximately 400,000 square feet of retail and office space;
(viii) approximately 30% interest in the Newkirk joint ventures
which own various equity and debt interests relating to 120 limited
partnerships which own real estate, primarily office and retail, net
leased to credit rated tenants;
(ix) eight dry warehouse/industrial properties in New Jersey
containing approximately 2.0 million square feet; and
(x) other real estate and investments.
-70-
<PAGE> 71
VORNADO REALTY L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
OPERATIONS OF VORNADO OPERATING COMPANY
In October 1998, Vornado Operating Company ("Vornado Operating") was
spun off from the Company in order to own assets that the Company could not
itself own and conduct activities that the Company could not itself conduct.
The Company and Vornado Operating are parties to certain agreements
described below.
Revolving Credit Agreement
Vornado Operating was granted a $75,000,000 unsecured revolving credit
facility from the Company (the "Revolving Credit Agreement") which expires on
December 31, 2004. Borrowings under the Revolving Credit Agreement bear
interest at LIBOR plus 3% (9.09% at December 31, 1999). The Company receives a
commitment fee equal to 1% per annum on the average daily unused portion of the
facility. No amortization is required to be paid under the Revolving Credit
agreement during its term. The Revolving Credit Agreement prohibits Vornado
Operating from incurring indebtedness to third parties (other than certain
purchase money debt and certain other exceptions) and prohibits Vornado
Operating from paying dividends. As of December 31, 1999, $4,587,000 was
outstanding under the Revolving Credit Agreement.
Agreement with Vornado Operating
The Company and Vornado Operating are parties to an Agreement pursuant
to which, among other things, (a) the Company will under certain circumstances
offer Vornado Operating an opportunity to become the lessee of certain real
property owned now or in the future by the Company (under mutually satisfactory
lease terms) and (b) Vornado Operating will not make any real estate investment
or other REIT-Qualified Investment unless it first offers the Company the
opportunity to make such investment and the Company has rejected that
opportunity.
Under the Agreement, the Company provides Vornado Operating with
certain administrative, corporate, accounting, financial, insurance, legal,
tax, data processing, human resources and operational services. For these
services, Vornado Operating compensates the Company in an amount determined in
good faith by the Company as the amount an unaffiliated third party would
charge Vornado Operating for comparable services and reimburses the Company for
certain costs incurred and paid to third parties on behalf of Vornado Operating.
Pursuant to the Agreement compensation for such services was $330,000 for the
year ended December 31, 1999 and $50,000 for the period from October 16, 1998
(commencement date) through December 31, 1998.
Vornado Operating and the Company each have the right to terminate the
Agreement if the other party is in material default of the Agreement or upon
90 days written notice to the other party at any time after December 31, 2003.
In addition, the Company has the right to terminate the Agreement upon a change
in control of Vornado Operating.
Vornado Operating's Management
Messrs. Roth, Fascitelli, West and Wight are directors of Vornado
Operating. Mr. Roth is also Chairman of the Board and Chief Executive Officer
of Vornado Operating, Mr. Fascitelli is also President of Vornado Operating,
and certain other members of the Company's senior management hold a
corresponding position with Vornado Operating.
Temperature Controlled Logistics Business
On October 31, 1997, partnerships (the "Vornado/Crescent Partnerships")
in which affiliates of the Company have a 60% interest and affiliates of
Crescent Real Estate Equities Company have a 40% interest acquired each of
AmeriCold Corporation ("AmeriCold") and URS Logistics, Inc. ("URS"). In June
1998, the Vornado/Crescent Partnerships acquired the assets of Freezer Services,
Inc. and in July 1998 acquired the Carmar Group.
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VORNADO REALTY L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
On March 12, 1999, the Vornado/Crescent Partnerships sold all of the
non-real estate assets of the Cold Storage Companies encompassing the
operations of the cold storage business for approximately $48,000,000 to a new
partnership owned 60% by Vornado Operating Company and 40% by Crescent
Operating Inc. ("AmeriCold Logistics") The new partnership leases the
underlying cold storage warehouses used in this business from the
Vornado/Crescent Partnerships which continue to own the real estate. The leases
generally have a 15 year term with two-five year renewal options and provide
for the payment of fixed base rent and percentage rent based on revenues
AmeriCold Logistics receives from its customers. The new partnership is
required to pay for all costs arising from the operation, maintenance and
repair of the properties, as well as property capital expenditures in excess of
$5,000,000 annually. Fixed base rent and percentage rent was approximately
$134,000,000 for the period from March 12, 1999 through December 31, 1999. The
new partnership has the right to defer a portion of the rent for up to three
years beginning on March 12, 1999 to the extent that available cash, as defined
in the leases, is insufficient to pay such rent and pursuant thereto, rent was
deferred as of December 31, 1999, of which the Company's share is $3,240,000.
Disposition and Acquisition of Interest in CESCR
On December 31, 1998, the Company sold approximately 1.7% of the
outstanding partnership units of CESCR to Vornado Operating Company for an
aggregate purchase price of approximately $12,900,000 or $34 per unit (which is
the price at which CESCR issued partnership units in October 1998 in connection
with a significant "roll-up" transaction). The purchase price was funded out of
Vornado Operating's working capital. After giving effect to this purchase, the
Company owned approximately 9.6% of CESCR as of December 31, 1998. In
connection with this purchase, the Company granted to Vornado Operating an
option to require the Company to repurchase all of the CESCR units at the
price at which Vornado Operating purchased the CESCR units, plus a cumulative
return on such amount at a rate of 10% per annum. In March 1999, Vornado
Operating exercised such option and the Company reacquired the CESCR units
from Vornado Operating for $13,200,000.
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VORNADO REALTY L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION: The accompanying consolidated financial
statements include the accounts of Vornado Realty L.P. as well as interests
acquired that individually (or in the aggregate with prior interests) exceed a
50% interest and the Company exercises unilateral control. All significant
intercompany amounts have been eliminated. Equity interests in partially-owned
entities include partnerships, joint ventures and preferred stock affiliates
(corporations in which the Company owns all of the preferred stock and none of
the common equity) and are accounted for under the equity method of accounting
as the Company exercises significant influence. These investments are recorded
initially at cost and subsequently adjusted for net equity in income (loss) and
cash contributions and distributions. Ownership of the preferred stock entitles
the Company to substantially all of the economic benefits in the preferred
stock affiliates. The common stock of the preferred stock affiliates is owned
by Officers and Trustees of Vornado.
Management has made estimates and assumptions that affect the reported
amounts of assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting periods.
Actual results could differ from those estimates.
RECLASSIFICATIONS: Certain prior year balances have been reclassified
in order to conform to current year presentation.
REAL ESTATE: Real estate is carried at cost, net of accumulated
depreciation and amortization. Betterments, major renewals and certain costs
directly related to the acquisition, improvement and leasing of real estate are
capitalized. Maintenance and repairs are charged to operations as incurred.
Depreciation is provided on a straight-line basis over the assets estimated
useful lives which range from 7 to 40 years. Tenant allowances are amortized on
a straight-line basis over the lives of the related leases. Additions to real
estate include interest expense capitalized during construction of $7,012,000
and $1,410,000 for the years ended December 31, 1999 and 1998.
The Company's properties are reviewed for impairment if events or changes
in circumstances indicate that the carrying amount of the property may not be
recoverable. In such an event, a comparison is made of the current and
projected operating cash flows of each such property into the foreseeable
future on an undiscounted basis to the carrying amount of such property. Such
carrying amount would be adjusted, if necessary, to estimate fair value to
reflect an impairment in the value of the asset.
CASH AND CASH EQUIVALENTS: Cash and cash equivalents consist of highly
liquid investments purchased with original maturities of three months or less.
Cash and cash equivalents does not include cash escrowed under loan agreements
and cash restricted in connection with an officer's deferred compensation
payable.
MARKETABLE SECURITIES: The Company has classified debt and equity
securities which it intends to hold for an indefinite period of time as
securities available for sale, equity securities it intends to buy and sell on
a short term basis as trading securities and its preferred stock investment in
Capital Trust as securities held to maturity. Unrealized gains and losses are
included in earnings for trading securities and as a component of shareholders'
equity and other comprehensive income for securities available for sale.
Realized gains or losses on the sale of securities are recorded based on
average cost.
At December 31, 1999 and 1998, marketable securities had an aggregate cost of
$96,787,000 and $83,043,000 and an aggregate market value of $106,503,000 and
$77,156,000 (of which $9,826,000 and $6,826,000 represents trading securities
and $48,606,000 and $48,531,000 represent securities held to maturity and
reported at amortized cost). Gross unrealized gains and losses were $19,374,000
and $9,658,000 at December 31, 1999, and $513,000 and $6,400,000 at
December 31, 1998. Included in marketable securities available for sale at
December 31, 1999 are warrants to acquire 550,941 common shares with a market
value of $11,397,000.
NOTES AND MORTGAGE LOANS RECEIVABLE: The Company evaluates the
collectibility of both interest and principal of each of its loans, if
circumstances warrant, to determine whether it is impaired. A loan is
considered to be impaired, when based on current information and events, it is
probable that the Company will be unable to collect all amounts due according
to the existing contractual terms. When a loan is considered to be impaired,
the amount of the loss accrual is calculated by comparing the recorded
investment to the value determined by discounting the expected future cash
flows at the loan's effective interest rate. Interest on impaired loans is
recognized on a cash basis.
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VORNADO REALTY L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
DEFERRED CHARGES: Direct financing costs are deferred and amortized over
the terms of the related agreements as a component of interest expense. Direct
costs related to leasing activities are capitalized and amortized on a
straight-line basis over the lives of the related leases. All other deferred
charges are amortized on a straight-line basis, which approximates the
effective interest rate method, in accordance with the terms of the agreements
to which they relate.
OFFICERS COMPENSATION PAYABLE: In July 1998, the Emerging Issues Task
Force (EITF) of the Financial Accounting Standards Board issued EITF 97-14
"Accounting for Deferred Compensation Arrangements Where Amounts Earned are
Held in a Rabbi Trust and Invested" (EITF 97-14). EITF 97-14 applies to the
Company's accounting treatment of the Officers Compensation Payable as
reflected in the balance sheet. The transition guidance of EITF 97-14 required
the Company to record a charge to equity of $10,464,000 which represents the
appreciation in the value of the stock from the date the trust was established
(at which time the price of the stock was $21.75 per share) to September 30,
1998 (at which time the price of the stock was $33.13 per share). In subsequent
periods, appreciation in the stock's price above $33.13 will be recognized as
compensation expense and, if the price fluctuates between $33.13 and $21.75,
equity would be adjusted. For the year ended December 31, 1998, approximately
$340,000 was recognized as compensation expense as the share price was $33.50
on December 31, 1998. For the year ended December 31, 1999, approximately
$340,000 was recognized as a reduction of compensation expense and
approximately $579,000 was recorded as a reduction of partners' capital as the
share price was $32.50 on December 31, 1999.
FAIR VALUE OF FINANCIAL INSTRUMENTS: All financial instruments of the
Company are reflected in the accompanying consolidated balance sheets at amounts
which, in management's estimation, based upon an interpretation of available
market information and valuation methodologies (including discounted cash flow
analyses with regard to fixed rate debt) are considered appropriate, and
reasonably approximate their fair values. Such fair value estimates are not
necessarily indicative of the amounts that would be realized upon disposition
of the Company's financial instruments.
REVENUE RECOGNITION: Base rents, additional rents based on tenants' sales
volume and reimbursement of the tenants' share of certain operating expenses
are generally recognized when due from tenants. The straight-line basis is used
to recognize base rents under leases entered into after November 14, 1985,
which provide for varying rents over the lease terms.
INCOME TAXES: No provision has been made for income taxes in the
accompanying consolidated financial statements of the Operating Partnership
since such taxes, if any, are the responsibility of the individual partners.
Vornado operates in a manner intended to enable it to continue to qualify as a
REIT under Sections 856-860 of the Internal Revenue Code of 1986 as amended.
Under those sections, a REIT which distributes at least 95% of its REIT taxable
income as a dividend to its shareholders each year and which meets certain
other conditions will not be taxed on that portion of its taxable income which
is distributed to its shareholders. Vornado has distributed to shareholders an
amount greater than its taxable income. Therefore, no provision for Federal
income taxes is required. Dividend distributions for the years ended December
31, 1999 and 1997, were characterized for Federal income tax purposes as
ordinary income. Dividend distributions for the tax year ended December 31,
1998 were characterized as ordinary income (81%), return of capital (17%) and
capital gain (2%).
The net basis of the Company's assets and liabilities for tax purposes
is approximately $1,617,000,000 lower than the amount reported for financial
statement purposes.
AMOUNTS PER UNIT: Basic earnings per unit is computed based on average
units outstanding. Diluted earnings per unit considers the effect of options,
warrants and convertible securities. All unit and per unit information has
also been adjusted for a 2-for-1 unit split in October 1997.
STOCK OPTIONS: The Company accounts for stock-based compensation using
the intrinsic value method. Under the intrinsic value method compensation cost
is measured as the excess, if any, of the quoted market price of the Company's
stock at the date of grant over the exercise price of the option granted.
Compensation cost for stock options, if any, is recognized ratably over the
vesting period. The Company's policy is to grant options with an exercise
price equal to the quoted market price of the Company's stock on the grant date.
Accordingly, no compensation cost has been recognized for the Company's stock
option plans. An equivalent number of units are issued when options are
exercised.
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<PAGE> 75
VORNADO REALTY L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
RECENTLY ISSUED ACCOUNTING STANDARDS
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities". This statement establishes accounting and reporting
standards for derivative instruments, including certain derivative instruments
embedded in other contracts, and for hedging activities. It is effective for
all fiscal quarters of fiscal years beginning after June 15, 2000. Because the
Company does not currently utilize derivatives or engage in significant hedging
activities, management does not anticipate that implementation of this
statement will have a material effect on the Company's financial statements.
In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin No. 101 (SAB 101). SAB 101 provides clarification in
applying generally accepted accounting principles to revenue recognition in
financial statements including contingent rentals under leases. The Company
does not anticipate that implementation of this statement will have a material
effect on the Company's financial statements.
3. ACQUISITIONS
The Company completed approximately $807 million of real estate
acquisitions or investments from January 1, 1999 through March 2000 and $2.4
billion in 1998. These acquisitions were consummated through subsidiaries or
preferred stock affiliates of the Company and were recorded under the purchase
method of accounting. Related net assets and results of operations have been
included in these financial statements since their respective dates of
acquisition. The respective purchase costs were allocated to acquired assets
and assumed liabilities using their relative fair values as of the closing
dates, based on valuations and other studies certain of which are not yet
complete. Accordingly, the initial valuations are subject to change as such
information is finalized. The Company believes that any such change will not
be significant since the allocations were principally to real estate. The
following are the details of the acquisitions or investments by segment:
Office:
CHARLES E. SMITH COMMERCIAL REALTY INVESTMENT ("CESCR")
In October 1997, the Company acquired a 15% limited partnership
interest in CESCR for $60,000,000. CESCR owns interests in and manages
approximately 10.7 million square feet of office properties in Northern
Virginia and Washington, D.C. and manages an additional 7.9 million square feet
of office and other commercial properties in the Washington, D.C. area. In
October 1998, CESCR issued partnership units in connection with a significant
roll-up transaction reducing the Company's limited partnership interest to
11.3%.
In December 1998, the Company sold approximately 1.7% of the outstanding
partnership units of CESCR to Vornado Operating for an aggregate price of
approximately $12,900,000. In connection with this purchase, the Company
granted Vornado Operating an option to require the Company to repurchase the
units. The option was exercised on March 4, 1999. Accordingly, the Company
reacquired the CESCR units from Vornado Operating for $13,200,000.
On March 4, 1999 the Company made an additional $242,000,000 investment
in CESCR by contributing to CESCR the land under certain CESCR office
properties in Crystal City, Arlington, Virginia and partnership interests in
certain CESCR subsidiaries. The Company acquired these assets from Commonwealth
Atlantic Properties, Inc, ("CAPI"), an affiliate of Lazard Freres Real Estate
Investors L.L.C., immediately prior to the contribution to CESCR. Together with
the Company's investment in CESCR made in 1997 and the units it reacquired from
Vornado Operating Company, Vornado now owns approximately 34% of CESCR's
limited partnership units. In addition, the Company acquired from CAPI for
$8,000,000 the land under a Marriott Hotel located in Crystal City.
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VORNADO REALTY L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
The purchase price was paid to CAPI by Vornado issuing $250,000,000 of
6% Convertible Preferred Units. The Preferred Units are convertible at $44 per
unit and the coupon increases to 6.50% over the next three years and then fixes
at 6.75% in year eight. The Company will appoint one of three members to
CESCR's Board of Managers, increasing under certain circumstances to two of
four members in March 2002.
In connection with these transactions, the Company agreed to make a five-
year $41,200,000 loan to CAPI with interest at 8%, increasing to 9% ratably
over the term. The loan is secured by approximately $55,000,000 of the
Partnership units issued to CAPI as well as certain real estate assets.
WESTPORT CORPORATE OFFICE PARK
In January 1998, the Company acquired the Westport Corporate Office Park
from a limited partnership that included members of the Mendik Group (Messrs.
Mendik and Greenbaum and certain entities controlled by them are referred to
herein as the "Mendik Group"). The purchase price was approximately $14,000,000
consisting of $6,000,000 of cash and an $8,000,000 mortgage loan for the two
buildings.
Subsequent to year end the Company entered into an agreement to sell
this property for approximately $24,000,000.
ONE PENN PLAZA
In February 1998, the Company acquired a long-term leasehold interest in
One Penn Plaza, a Manhattan office building for approximately $410,000,000.
150 EAST 58TH STREET
In March 1998, the Company acquired 150 East 58th Street (the "Architects
and Design Center"), a Manhattan office building, for approximately
$118,000,000.
570 LEXINGTON AVENUE - ADDITIONAL INVESTMENT
In April 1998, the Company increased its interest from 5.6% to
approximately 50% in 570 Lexington Avenue, an office building located in
midtown Manhattan. The Company purchased the additional interest for
approximately $37,200,000, including $4,900,000 of existing debt.
888 SEVENTH AVENUE AND 40 FULTON STREET
In June, 1998, the Company entered into an agreement to acquire the
leasehold interest in 888 Seventh Avenue, a 46 story office building located in
midtown Manhattan, and simultaneously acquired 40 Fulton Street, a 29 story
office building located in downtown Manhattan. The aggregate consideration for
both buildings was approximately $154,500,000.
On January 12, 1999, the Company completed the acquisition of 888
Seventh Avenue, a 46 story Manhattan office building, for approximately
$117,000,000, of which $55,000,000 was indebtedness.
770 BROADWAY
In July 1998, the Company acquired 770 Broadway, a Manhattan office
building, for approximately $149,000,000, including $18,000,000 of Operating
Partnership Units.
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VORNADO REALTY L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
689 FIFTH AVENUE
In August 1998, the Company acquired 689 Fifth Avenue, a 84,000 square
foot Manhattan specialty building for approximately $33,000,000 from a
partnership that included Bernard H. Mendik, a former trustee of the Company.
MENDIK REAL ESTATE LIMITED PARTNERSHIP PROPERTIES
In November 1998, the Company completed the acquisition of certain
properties from the Mendik Real Estate Limited Partnership ("Mendik RELP"). The
acquired real estate assets include (i) a leasehold interest in the Saxon Woods
Corporate Center located at 550/600 Mamaroneck Avenue, in Harrison, New York,
(ii) the remaining 60% interest in an office building located at Two Park
Avenue, in Manhattan (the Company already owned 40%) and (iii) a leasehold
interest in an office building located at 330 West 34th Street, also in
Manhattan. The aggregate purchase price of approximately $106,000,000,
consists of $31,000,000 of cash, $29,000,000 of the Company's common shares and
$46,000,000 of debt.
909 THIRD AVENUE
On July 21, 1999, the Company acquired 909 Third Avenue, a 33 story
Manhattan office building, for approximately $123,000,000, of which
$109,000,000 was indebtedness.
595 MADISON AVENUE
On September 15, 1999, the Company acquired 595 Madison Avenue (the
"Fuller Building"), a 40 story Manhattan office building, for approximately
$125,000,000 in cash.
GREENPOINT LEASEHOLD INTEREST
On December 16, 1999, the Company acquired GreenPoint Financial
Corporation's 99-year leasehold interest in approximately 56,000 square feet,
adjacent to One Penn Plaza, as part of its redevelopment plan for the Penn
Plaza district for approximately $37,300,000.
Retail:
LAS CATALINAS MALL
In October 1998, the Company completed the acquisition of Kmart
Corporation's ("Kmart") 50% interest in the Las Catalinas Mall located in
Caguas, Puerto Rico (adjacent to San Juan). In addition, the Company acquired
75% and the Company's partner in the Mall acquired 25% of Kmart's anchor store.
The Company's purchase price of $38,000,000 was fully financed with 15 year
debt.
VORNADO-CERUZZI JOINT VENTURES
On January 4, 2000 and January 25, 2000, the Company and its joint
venture partner acquired fee and/or leasehold interests in six properties
located in Pennsylvania, Virginia and Maryland formerly occupied by Hechinger,
Inc., a home improvement retailer which was liquidated. The purchase price for
the 500,000 square feet acquired was $15,000,000. The Company's share of this
investment is 80% or $12,000,000.
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VORNADO REALTY L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
Merchandise Mart Properties:
THE MERCHANDISE MART PROPERTIES
In April 1998, the Company acquired a real estate portfolio from the
Kennedy Family for approximately $630,000,000, consisting of $187,000,000 in
cash, $116,000,000 in Operating Partnership Units, $77,000,000 in existing debt
and $250,000,000 of newly issued debt. The acquired real estate assets consist
of a portfolio of properties used for office, retail and trade showroom space
which aggregate approximately 5.4 million square feet and include the
Merchandise Mart in Chicago. The transaction also included the acquisition of
Merchandise Mart Properties, Inc., which manages the properties and owns and
operates trade shows.
MARKET SQUARE COMPLEX
In December 1998, Vornado completed the acquisition of the 1.07 million
square foot Market Square Complex of showrooms in High Point, North Carolina.
The consideration was approximately $97,000,000 consisting of $46,000,000 in
debt, $44,000,000 in Operating Partnership Units and 6.5% Preferred Operating
Partnership Units convertible at $43.74 per unit and $7,000,000 of cash. The
acquired real estate assets include the Market Square, Hamilton Market and
Furniture Plaza showroom buildings and the High Point Holiday Inn hotel.
In a second transaction, the Company acquired the 243,000 square foot
National Furniture Mart, which is adjacent to the forementioned properties, in
High Point. The price was approximately $17,700,000 consisting of
$3,800,000 in cash and $13,900,000 in debt.
Temperature Controlled Logistics Business:
In June 1998, a partnership in which Vornado owns a 60% interest through
a preferred stock affiliate acquired the assets of Freezer Services, Inc.,
consisting of nine cold storage warehouses in the central United States for
approximately $133,000,000, including $107,000,000 in cash and $26,000,000 in
indebtedness. The Company's share of this investment was $80,000,000.
Additionally, in July 1998, the Carmar Group cold storage warehouse business
was acquired for approximately $158,000,000, including $144,000,000 in cash and
$14,000,000 in indebtedness. The Company's share of this investment was
$95,000,000. Carmar owns and operates five cold storage distribution warehouses
in the midwest and southeast United States.
Other Real Estate Investments:
HOTEL PENNSYLVANIA
In May 1998, the Company acquired an additional 40% interest in the
Hotel Pennsylvania increasing its ownership to 80%. The Company purchased the
additional 40% interest from Hotel Properties Limited (one of its joint
venture partners) for approximately $70,000,000, including $48,000,000 of
existing debt. The Company manages the property's retail and office space, and
manages the hotel with Hotel Properties Limited.
On August 5, 1999, the Company increased its interest in the Hotel
Pennsylvania by acquiring Planet Hollywood International, Inc.'s ("Planet
Hollywood") 20% interest in the hotel for approximately $18,000,000 and assumed
$24,000,000 of existing debt. In connection with the transaction, the Company
terminated the licensing agreement with Planet Hollywood for an Official
All-Star Hotel. The Hotel Pennsylvania is located in New York City on Seventh
Avenue opposite Madison Square Garden.
After the acquisitions noted above, the Company owns 100% of the commercial
portion of the building (retail and office space) and 98% of the hotel portion
which is owned through a preferred stock affiliate in which the Company owns all
of the preferred equity and none of the common equity.
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VORNADO REALTY L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
NEWKIRK JOINT VENTURES
In July and September 1998, the Company invested an aggregate of
$56,000,000 for a 30% share in joint ventures with affiliates of Apollo Real
Estate Investment Fund III, L.P., collectively Newkirk Joint Ventures
("Newkirk"). Newkirk owns various equity and debt interests relating to 120
limited partnerships which own real estate primarily net leased to credit rated
tenants. The Company has issued letters of credit of $15,600,000 in connection
with these joint ventures.
On March 9, 1999, the Company and its joint venture partner completed an
acquisition of additional equity interests in certain limited partnerships.
The Company's additional investment of $52,435,000 consisted of
$47,790,000 in Operating Partnership Units and $4,645,000 in cash.
On October 15, 1999, the Company completed the acquisition of
$15,600,000 of securitized debt of the Newkirk Joint Ventures which has an
average yield of 14.28%.
STUDENT HOUSING JOINT VENTURE
On January 28, 2000, the Company and its joint venture partner, acquired
a 252-unit student housing complex in Gainesville, Florida, for approximately
$27,000,000, of which $19,600,000 was indebtedness. The Company's
share of this investment is 90%.
PRO FORMA INFORMATION
The unaudited pro forma information set forth below presents (i) the
condensed consolidated operating results for the Company for the years ended
December 31, 1999 and 1998 as if (a) the acquisitions described above and the
financings attributable thereto had occurred on January 1, 1998. No condensed
consolidated pro forma balance sheet data is presented as there have been no
material acquisitions subsequent to December 31, 1999.
CONDENSED PRO FORMA CONSOLIDATED OPERATING RESULTS (UNAUDITED)
<TABLE>
<CAPTION>
PRO FORMA YEAR ENDED DECEMBER 31,
------------------------------------------------------
1999 1998
-------------- --------------
<S> <C> <C>
(amounts in thousands except per unit amounts)
Revenues.......................................................... $ 719,600 $ 685,000
============= =============
Net income........................................................ $ 201,600 $ 191,700
Preferred unit distributions...................................... (33,400) (21,700)
------------- -------------
Net income applicable to Class A units............................ $ 168,200 $ 170,000
============= =============
Net income per Class A unit-basic................................. $ 1.96 $ 1.97
============= =========
Net income per Class A unit-diluted............................... $ 1.93 $ 1.93
============= =========
</TABLE>
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VORNADO REALTY L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
4. INVESTMENTS IN PARTIALLY-OWNED ENTITIES
The Company's investments in partially-owned entities and income
recognized from such investments is disclosed below. Summarized financial data
is provided for (i) investments in entities which exceed 10% of the Company's
total assets and (ii) investments in which the Company's share of
partially-owned entities pre-tax income exceeds 10% of the Company's net income.
BALANCE SHEET DATA:
<TABLE>
<CAPTION>
100% OF THESE ENTITIES
-----------------------------------------------------------------
COMPANY'S INVESTMENT TOTAL ASSETS TOTAL DEBT TOTAL EQUITY
------------------------ -------------------------- --------------------- ------------------------
1999 1998 1999 1998 1999 1998 1999 1998
---------- ---------- ---------- ---------- ---------- -------- --------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
(amounts in thousands)
INVESTMENTS:
Temperature Controlled
Logistics ....
(60% interest) $ 481,808 $ 459,172 $ 1,524,385 $ 1,743,212 $ 630,540 $ 642,714 $ 756,808 $ 737,344
=========== =========== ========= ========= ========= ==========
Alexander's
(32% interest)...... 159,148 104,038 $ 366,496 $ 317,043 $ 329,161 $ 277,113 $ 12,498 $ 6,974
=========== =========== ========= ========= ========= ==========
Charles E. Smith
Commercial
Realty L.P.
(34% interest)..... 317,812 49,151 $ 951,414 $ 1,152,164 $(241,399)
=========== ============ ==========
Newkirk Joint
Ventures........... 142,670 58,665
Hotel Pennsylvania..... 59,176 47,813
Partially - Owned
Office Buildings.... 59,510 59,902
Management
Companies, and
other............... 95,263 49,099
---------- ---------
$1,315,387 $ 827,840
========== =========
</TABLE>
-80-
<PAGE> 81
VORNADO REALTY L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
Below is a summary of the debt of partially owned entities as of December
31, 1999 and 1998, none of which is guaranteed by the Company.
<TABLE>
<CAPTION>
AMOUNT OF PARTIALLY-OWNED
ENTITIES DEBT
--------------------------
(amounts in thousands)
1999 1998
--------- -------
<S> <C> <C>
Alexander's (32% interest):
Term loan secured by all of Alexander's assets except for the Kings
Plaza Regional Shopping Center, due on March 15, 2000 with
interest at a blended rate of 12.95%. The portion financed by
the Company ($95,000) bears interest at 14.18%
(prepayable without penalty) (the loan has been extended to March 15, 2001 - see below)...... $ 115,000 $ 65,000
Kings Plaza Regional Shopping Center mortgage payable, due in 2001, with interest at
LIBOR plus 1.25% (7.75% at December 31, 1999) (prepayable without penalty)................... 95,676 90,000
Rego Park mortgage payable, due in 2009, with interest at 7.25% (prepayable after
June 2004 without penalty)................................................................... 82,000 75,000
Other notes and mortgages payable................................................................ 36,485 47,113
Temperature Controlled Logistics (60% interest):
Mortgage notes payable collateralized by 58 temperature controlled
warehouses, due in 2008, requires amortization based on a 25
year term with interest at 6.89% (prepayable
after May 2000 with yield maintenance)....................................................... 536,502 545,273
Other notes and mortgages payable................................................................ 94,038 97,441
Hotel Pennsylvania - Hotel (98% interest):
Mortgage payable, due in 2002, requires amortization based on a 25
year term, with interest at LIBOR + 1.60% (at December 31, 1999
the interest rate is fixed at 7.00% through a swap agreement
which expires on March 31, 2000)
(prepayable without penalty).................................................................. 71,641* 120,000
Newkirk Joint Ventures (30% interest):
Portion of first mortgages and contract rights held by 120 Limited
Partnerships, collateralized by the partnerships' real estate,
due from 2000 to 2040, with a
weighted average interest rate of 9.40% at December 31, 1999.................................. 800,060 --
Other debt....................................................................................... 28,000 --
Charles E. Smith Commercial Realty L.P. (34% interest):
20 mortgages payable due from 2000 through 2025, with interest from 2.25%
to 9.89% at December 31, 1999 (prepayable with yield maintenance)....................... 850,806 786,413
6 mortgages payable (partially owned properties) due from 2006
through 2013, with interest from 6.51% to 10.33% at December 31,
1999 (prepayable with yield maintenance)................................................. 301,358 156,463
Unsecured line of credit due in October 2000, with interest
at 8.25% at December 31, 1999 (prepayable without penalty).............................. -- 26,000
Partially Owned Office Buildings:
330 Madison Avenue (25% interest) mortgage note payable, due in 2008,
with interest at 6.52% (prepayable with yield maintenance)............................. 60,000 60,000
Other notes and mortgages payable (50% owned by Vornado).................................... 43,968 34,425
Las Catalinas Mall (50% interest):
Mortgage notes payable, due in 2013 with interest at 6.97% (prepayable after
December 2002 with yield maintenance)................................................... 70,212 70,941
Other mortgages payable.......................................................................... 13,000 --
</TABLE>
- ------------------------------------
* The balance of the mortgage of $47,761 applicable to the commercial portion of
the building is reflected in the Company's wholly-owned debt in 1999, see Note
5.
-81-
<PAGE> 82
VORNADO REALTY L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
INCOME STATEMENT DATA:
<TABLE>
<CAPTION>
COMPANY'S INCOME
FROM PARTIALLY OWNED 100% OF THESE ENTITIES
-----------------------------------------------------------
ENTITIES TOTAL REVENUES NET INCOME (LOSS)
----------------------- -------------------------- ----------------------------
1999 1998 1997 1999 1998 1997 1999 1998 1997
------- ---- ----- ------ ------ ------ ----- ------ -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
(amounts in thousands)
Income Applicable to
Alexander's:(1)......................
32% share of equity in income .......
(loss) (29.3% prior to
October 1999)..................... $1,021 $(2,272) $ 1,580 $ 64,390 $51,663 $25,364 $5,524(2) $(6,055)(2) $7,466(2)
======== ======= ======= ========= =========== =========
Interest income...................... 6,406 5,395 6,293
------ ------ ---------
$7,427 $3,123 $ 7,873
====== ====== =========
Temperature Controlled Logistics........:
60% share of equity in net
income(3)........................ $31,468 $10,249 $ 1,000 $264,266 $567,867 $78,699 $54,198 $16,988 $ 90
======== ======== ======= ======= ======= =====
Management Fee (40% of 1%
per annum of the Total
Combined Assets,
as defined)....................... 5,254 4,942 720
----- ----- ---------
36,722 15,191 1,720
Charles E. Smith Commercial
Realty L.P.(4).................... 18,817 4,754 85 $310,038 $ 61,102
======== =========
Newkirk Joint Ventures................. 19,922 2,712 --
Hotel Pennsylvania...................... 5,095 3,678 1,055
Partially-Owned Office
Buildings(5)....................... 1,743 3,276 424
Management Companies
and other.......................... 11 2,414 1,374
------- ------- --------
$82,310 $32,025 $ 4,658
======= ======= =========
</TABLE>
- ---------------------
(1) Fee income is included in equity in income of Management Companies.
(2) 1999 is net of $4,877 resulting from the write-off of the asset arising
from the straight-lining of rents; 1998 includes the write-off of the
carrying value of the Lexington Avenue buildings of $15,096; and 1997
includes income from the condemnation of a portion of a property of $8,914.
(3) Revenues and net income reflect lease payments from AmeriCold Logistics
from March 12, 1999 through December 31, 1999 and business operations for
the periods prior.
(4) 15% interest from October 1997 to December 1998, 9.6% interest from
January 1999 to March 1999 and 34% interest thereafter.
(5) Represents the Company's interests in 330 Madison Avenue (24.8%), and 570
Lexington Avenue (50%). In 1998 and 1997 the Company had a 40% interest
in Two Park Avenue which is now wholly-owned.
ALEXANDER'S
The investment in and loans and advances to Alexander's are comprised of:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------------
1999 1998
------------ -----------
<S> <C> <C>
(amounts in thousands)
Common stock, net of $2,796,000 and $2,196,000 of accumulated
depreciation of buildings................................ $ 59,912 $ 53,157
Loan receivable............................................... 95,000 45,000
Leasing fees and other receivables............................ 2,393 5,441
Equity in income.............................................. 1,843 222
Deferred expenses............................................. -- 218
------------- ------------
$ 159,148 $ 104,038
============ ============
</TABLE>
-82-
<PAGE> 83
VORNADO REALTY L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
On October 20, 1999, the Company lent Alexander's $50,000,000 on the
same terms and conditions as the Company's existing $45,000,000 loan to
Alexander's, including the interest rate of 14.18%. Both loans, which were
scheduled to mature in March 15, 2000, have been extended for one year to March
15, 2001. The interest rate has been reset from 14.18% to 15.72%, reflecting
an increase in the underlying Treasury rate.
Alexander's is currently undertaking the excavation and laying
foundation for its Lexington Avenue property as part of the proposed
development of a large multi-use building. The proposed building is expected to
be comprised of a commercial portion, which may include retail stores, offices,
hotel space, extended-stay residences, residential rentals and parking; and a
residential portion, consisting of condominium units to be sold to the public.
In connection therewith, Alexander's paid $14,500,000 for 140,000 square feet
of air rights of which $12,200,000 was paid to the Company (Vornado's cost plus
$243,000 in interest and closing costs). The air rights were contracted for and
paid for in 1999, with closings to take place when the developments which give
rise to the air rights are completed in 2000. The capital required for the
proposed building will be in excess of $400,000,000.
Because a REIT is subject to 100% excise tax on income derived from the
sale of "dealer property" (i.e. condominiums), the air rights representing the
residential portion of the property are being transferred to a preferred stock
affiliate, a corporation in which Alexander's owns all of the preferred equity
and none of the common equity. The transfer value will be adjusted once the
final size of the residential portion is determined.
On October 21, 1999, the Company increased its ownership in Alexander's
from 29.3% to 32% by acquiring an additional 135,600 shares of Alexander's
common stock for approximately $8,956,000.
Alexander's is managed by and its properties are leased by the Company,
pursuant to agreements with a one-year term expiring in March of each year
which are automatically renewable. The annual management fee payable to the
Company by Alexander's is equal to the sum of (i) $3,000,000, (ii) 3% of the
gross income from the Kings Plaza Mall, plus (iii) 6% of development costs with
minimum guaranteed fees of $750,000 per annum.
The leasing agreement provides for the Company to generally receive a
fee of (i) 3% of sales proceeds and (ii) 3% of lease rent for the first ten
years of a lease term, 2% of lease rent for the eleventh through the twentieth
years of a lease term and 1% of lease rent for the twenty-first through
thirtieth year of a lease term. Subject to the payment of rents by Alexander's
tenants, the Company is due $1,756,000 at December 31, 1999. Such amount is
receivable annually in an amount not to exceed $2,500,000 until the present
value of such installments (calculated at a discount rate of 9% per annum)
equals the amount that would have been paid had it been paid on September 21,
1993, or at the time the transactions which gave rise to the commissions
occurred, if later.
As of December 31, 1999, Interstate Properties and its partners owned
approximately 17.8% of the common shares of beneficial interest of the Company
and 27.3% of Alexander's common stock. Interstate Properties is a general
partnership in which Steven Roth, David Mandelbaum and Russell B. Wight, Jr.
are partners. Mr. Roth is the Chairman of the Board and Chief Executive Officer
of the Company, the Managing General Partner of Interstate Properties, and the
Chief Executive Officer and a director of Alexander's, Messrs. Mandelbaum and
Wight are trustees of the Company and are also directors of Alexander's.
-83-
<PAGE> 84
VORNADO REALTY L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
5. DEBT
Following is a summary of the Company's debt:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------
(amounts in thousands) 1999 1998
------------ ----------
<S> <C> <C>
Notes and Mortgage Payable:
Fixed Interest:
Mortgage payable cross collateralized by an aggregate of 44 shopping
centers and warehouse/industrial properties, due on December 1, 2000 with
interest at 6.36% (prepayable with yield maintenance) (1)............................. $ 224,865 $ 227,000
Eleven Penn Plaza mortgage payable, due in 2007, requires amortization
based on a 25 year term with interest at 8.39% (prepayable after 2003
with yield maintenance)............................................................... 53,129 53,901
866 UN Plaza mortgage payable, due in 2004, with interest at 7.79%
(prepayable without penalty).......................................................... 33,000 33,000
Monteheidra Town Center mortgage pass-through certificates, due in
2007 ($51,543) and 2009 ($10,075), requires amortization based on 30 year
term with interest at 8.23% (prepayable after August 1999 with
yield maintenance).................................................................... 61,618 62,181
Two Penn Plaza mortgage payable, due in 2004, requires amortization
based on a 25 year term with interest at 7.08% (prepayable after
March 2000 with penalty fee) (4)...................................................... 163,147 80,000
Washington Office Center mortgage payable, due in 2004, requires
amortization based on a 25 year term with interest at 6.80%
(prepayable with yield maintenance)................................................... 49,537 50,878
Green Acres Mall and Plaza mortgage payable, due in 2008, requires
amortization based on a 30 year term with interest at 6.75%
(prepayable after May 2000 with yield maintenance).................................... 156,798 158,575
Other mortgages payable................................................................. 31,542 38,688
----------- -----------
773,636 704,223
Variable Interest:
Washington Design Center mortgage payable, due on November 27, 2000,
requires amortization based on a 25 year term with interest at LIBOR plus
1.35% (6.83% at December 31, 1999) (prepayable without penalty) ...................... 23,932 24,225
Two Park Avenue mortgage payable, due on March 1, 2000, interest at LIBOR plus
1.50% (8.00% at December 31, 1999) (prepayable without penalty) (2)................... 65,000 65,000
Merchandise Mart mortgage payable, due in September 2002, interest at
LIBOR plus 1.50% (7.97% at December 31, 1999) (prepayable
after August 2000 with penalty fee) (6)............................................... 250,000 250,000
One Penn Plaza mortgage payable, due in 2002, interest at LIBOR plus
1.25% (7.73% at December 31, 1999) (prepayable after June 1999 without
penalty) (3).......................................................................... 275,000 275,000
Hotel Pennsylvania - (commercial) mortgage payable, due in 2002, requires
amortization based on a 25 year term, with interest at LIBOR + 1.60% (at
December 31, 1999, the interest rate is fixed at 7.00% through a
swap agreement which expires on March 31, 2000) (prepayable without penalty).......... 47,761 --
350 North Orleans mortgage payable, due in 2002, interest at LIBOR + 1.65%
(8.13% at December 31, 1999) (prepayable with yield maintenance) (5).................. 40,000 --
909 Third Avenue mortgage payable, due in 2002, interest at LIBOR + .60%
(7.08% at December 31, 1999) (prepayable with penalty fee)............................ 108,754 --
888 Seventh Avenue mortgage payable, due in 2002, interest at LIBOR + 1.75%
(6.81% at December 31, 1999) (prepayable with yield maintenance)...................... 55,000 --
Seven individual notes or mortgages payable collateralized by the Market Square
Complex with maturity dates ranging from 2000 through 2013 and interest
rates ranging from 7.40% to 8.83% at
December 31, 1999..................................................................... 42,721 45,302
----------- -----------
Total notes and mortgages payable..................................................... 1,681,804 1,363,750
Unsecured revolving credit facility, interest at LIBOR plus .90% (7.39% at
December 31, 1999) (prepayable without penalty)........................................... 367,000 687,250
----------- -----------
Total Debt............................................................................ $ 2,048,804 $ 2,051,000
=========== ===========
</TABLE>
-84-
<PAGE> 85
VORNADO REALTY L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(1) On March 1, 2000 the Company completed a $500,000,000 private placement of
10-year, 7.83% mortgage notes, cross-collateralized by 42 shopping center
properties, resulting in net proceeds of approximately $490,000,000. In
connection therewith, the Company repaid $228,000,000 of existing mortgage
debt scheduled to mature on December 1, 2000 and $262,000,000 outstanding
under its revolving credit facility.
(2) On March 1, 2000, the Company completed a $90,000,000 refinancing of its
Two Park Avenue office building. The Company received proceeds of
$65,000,000 and repaid the then existing debt in the same amount on the
property. The Company expects to receive the remaining $25,000,000 prior to
June 30, 2000 upon satisfying certain closing conditions. The new 3-year
debt matures on February 28, 2003 and bears interest at Libor + 1.45%
(7.39% at March 1, 2000).
(3) In June 1998, the Company completed a $275,000,000 refinancing of its One
Penn Plaza office building and borrowed $170,000,000 pursuant thereto. In
the third quarter of 1998, the Company borrowed the remaining $105,000,000.
The debt matures in June 2002, is prepayable at anytime, and bears interest
at LIBOR + 1.25% (7.73% at December 31, 1999). This debt replaced the
$93,192,000 bridge-mortgage loan financing put in place when the property
was acquired. The Company entered into an interest rate cap agreement
($275,000,000 notional amount) to reduce the impact of changes in interest
rates on this loan. The agreement caps the Company's interest rate in the
event that LIBOR increases above 8.5% through January 20, 2000 and 9%
thereafter, until the termination date of the cap agreement on July 30,
2001. The Company is exposed to credit loss in the event of nonperformance
by the other parties to the interest rate cap agreement. However, the
Company does not anticipate nonperformance by the counterparty. The fair
value of the interest rate cap agreement at December 31, 1999 approximates
its cost.
(4) On February 18, 1999, the Company completed a $165,000,000 refinancing of
its Two Penn Plaza office building and prepaid the then existing
$80,000,000 debt on the property.
(5) On July 18, 1999, the Company completed a $70,000,000 mortgage financing of
its 350 North Orleans property in Chicago. The Company received proceeds of
$40,000,000 and is expected to receive the remaining $30,000,000 during the
next year upon meeting certain debt service coverage requirements.
(6) On September 21, 1999, the Company completed a $250,000,000 mortgage
refinancing of its Merchandise Mart property in Chicago of which
$50,000,000 is further secured by a letter of credit. The letter of credit
will be reduced over the term of the loan as cash flow increases. The
Company bought an interest rate cap with a notional amount of $250,000,000,
capping the interest rate in the event that LIBOR increases above 9.25%
through the termination date of the agreement in September 2002.
Simultaneously with this transaction, the Company sold an interest rate cap
with a notional amount of $250,000,000 to a third party on the same terms
as the cap the Company purchased.
The net carrying value of properties collateralizing the notes and
mortgages amounted to $2,501,882,000 at December 31, 1999. As at December 31,
1999, the maturities for the next five years and thereafter are as follows:
<TABLE>
<CAPTION>
(in thousands)
YEAR ENDING DECEMBER 31, AMOUNT
------------------------ -------------
<S> <C>
2000........................................... $ 328,135
2001........................................... 21,423
2002........................................... 528,687
2003........................................... 406,272
2004........................................... 483,541
Thereafter..................................... 280,746
</TABLE>
-85-
<PAGE> 86
VORNADO REALTY L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
6. PARTNERS' CAPITAL
The following table sets forth the details of partners' capital at
December 31, 1999 and 1998.
<TABLE>
<CAPTION>
Outstanding Units at Preferred
------------------------------ Per Unit or Annual Conversion
December 31, December 31, Liquidation Distribution Rate Into
1999 1998 Preference Rate Class A Units
-------------- ------------- ------------ -------------- ---------------
<S> <C> <C> <C> <C> <C>
Preferred Units:
Series A............................. 5,789,239 5,789,239 $ 50.00 $ 3.25 --
Series B............................. 3,400,000 -- $ 25.00 $ 2.125 --
Series C............................. 4,600,000 -- $ 25.00 $ 2.125 --
5.0% B-1 Convertible Preferred....... 899,566 899,566 $ 50.00 $ 2.50 .914
8.0% B-2 Convertible Preferred....... 449,783 449,783 $ 50.00 $ 4.00 .914
6.5% C-1 Convertible Preferred....... 747,912 747,912 $ 50.00 $ 3.25 1.1431
8.5% D-1 Cumulative Redeemable
Preferred ......................... 3,500,000 3,500,000 $ 25.00 $ 2.125 (a)
8.375% D-2 Cumulative Redeemable
Preferred.......................... 549,336 -- $ 50.00 $ 4.1875 (a)
8.25% D-3 Cumulative Redeemable
Preferred.......................... 8,000,000 -- $ 25.00 $ 2.0625 (a)
8.25% D-4 Cumulative Redeemable
Preferred.......................... 5,000,000 -- $ 25.00 $ 2.0625 (a)
8.25% D-5 Cumulative Redeemable
Preferred.......................... 7,480,000 -- $ 25.00 $ 2.0625 (a)
6.0% E-1 Convertible Preferred....... 4,998,000 -- $ 50.00 $ 3.00(b) 1.1364
---------- ----------
45,413,836 11,386,500
========== ==========
General Partnership Interest(g)
Limited Partnership Units:
Class A.............................. 92,583,570(c) 86,964,323(c) -- $ 1.80 (d)
Class C.............................. -- 3,534,098 -- $ 1.69(e) 1.0(e)
Class D.............................. 876,543 1,332,596 -- $ 2.015 1.0(f)
---------- ----------
93,460,113 91,831,017
========== ==========
</TABLE>
-------------
(a) Redeemable for an equivalent of the Company's preferred shares.
(b) Increases to $3.25 over the next three years and fixes at $3.38 in
March 2007.
(c) Included in Class A units are 86,335,741 and 85,076,542 units owned
by the general partner at December 31, 1999 and 1998, respectively.
(d) Class A units are redeemable at the option of the holder for cash or,
at the Company's option, one common share of beneficial interest in
Vornado.
(e) Class C units automatically converted to Class A units in the third
quarter of 1999. Prior to conversion, the Class C unit holders had
participated in distributions at an annual rate of $1.69, then pari
passu with the Class A units.
(f) Mandatory conversion of Class D units into Class A units will occur
after four consecutive quarters of distributions of at least $.50375
per Class A unit ($2.015 annually).
(g) Vornado is the sole general partner.
During the three years ended December 31, 1999, Vornado sold $1,133,672,000 of
Common Shares, $276,000,000 of Convertible Preferred Shares and $193,300,000 of
Cumulative Redeemable Preferred Shares. The following are the details of the
sales.
Sale of Common Shares
In October 1997, Vornado sold 14,000,000 common shares and an additional
2,100,000 common shares in November 1997 when the underwriters exercised in full
their over-allotment option. The shares were sold at a price of $45.00 per share
which, net of expenses, yielded approximately $688,672,000. An equivalent number
of units were issued to Vornado for the share sold.
-86-
<PAGE> 87
VORNADO REALTY L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
In April 1998, Vornado completed the sale of 10,000,000 common shares of
beneficial interest, par value $.04 per share pursuant to an effective
registration statement with net proceeds to the Company of approximately
$401,000,000. On April 29, 1998, Vornado sold 1,132,420 common shares to a unit
investment trust, which were valued for the purpose of the trust at $41.06 per
share, resulting in net proceeds of approximately $44,000,000. An equivalent
number of units were issued to Vornado for the shares sold.
Sale of Convertible Preferred Shares
In April 1997, Vornado completed its public offering of 5,750,000 Series A
Convertible Preferred Shares of Beneficial Interest, liquidation preference
$50.00 per share. The preferred shares bear a coupon of 6 1/2% and are
convertible into common shares at $36.11 per share. The offering, net of
expenses, generated approximately $276,000,000 which was used to fund the cash
portion of the Mendik Transaction. In connection with the acquisition of Arbor
in December 1997, the Company issued approximately 2,936,000 common shares and
39,400 Series A Convertible Preferred Shares of Beneficial Interest. The
approximate value of the shares issued at the time of the acquisition was
$102,000,000. An equivalent number of units were issued to Vornado for the
shares sold.
Sale of Cumulative Redeemable Preferred Shares
On March 17, 1999, Vornado completed the sale of 3 million 8.5% Series B
Cumulative Redeemable Preferred Shares, at a price $25.00 per share, pursuant to
an effective registration statement with net proceeds to the Company of
approximately $72,200,000. Further on March 22, 1999, 400,000 shares were sold
when the underwriters exercised their over-allotment option resulting in
additional net proceeds to the Company of $9,700,000. The perpetual preferred
shares may be called without penalty at the option of the Company commencing on
March 17, 2004. An equivalent number of units were issued to Vornado for the
shares sold.
On May 17, 1999, Vornado completed the sale of 4 million 8.5% Series C
Cumulative Redeemable Preferred Shares, at a price of $25.00 per share, pursuant
to an effective registration statement with net proceeds to the Company of
approximately $96,900,000. Additionally, on May 19, 1999, 600,000 shares were
sold when the underwriters exercised their over-allotment option resulting in
additional net proceeds to the Company of $14,500,000. The perpetual preferred
shares may be called without penalty at the option of the Company commencing on
May 17, 2004. An equivalent number of units were issued to Vornado for the
shares sold.
On October 20, 1997, the Company paid a 100% unit distribution to
unitholders. All unit and per unit information has been adjusted to reflect this
two-for-one unit split.
-87-
<PAGE> 88
VORNADO REALTY L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
7. EMPLOYEES' SHARE OPTION PLAN
Under the Omnibus Share Plan (the "Plan"), various officers and employees
have been granted incentive share options and non-qualified options to purchase
common shares of Vornado. Options granted are at prices equal to 100% of the
market price of the Company's shares at the date of grant. 921,697 shares vest
on a graduated basis, becoming fully vested 27 months after grant, 3,500,000
shares (granted in connection with Mr. Fascitelli's employment agreement) vest
on a graduated basis becoming fully vested 60 months after grant, and 7,050,655
shares vest on a graduated basis, becoming fully vested 36 months after grant.
All options expire ten years after grant. An equivalent number of units are
issued when options are exercised.
The Plan also provides for the award of Stock Appreciation Rights,
Performance Shares and Restricted Stock, as defined, none of which have been
awarded as of December 31, 1999.
If compensation cost for Plan awards had been determined based on fair
value at the grant dates, net income and income per unit would have been reduced
to the pro-forma amounts below, for the years ended December 31, 1999, 1998 and
1997:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------------------------
1999 1998 1997
-------------- ---------- -------------
(amounts in thousands, except unit amounts)
<S> <C> <C> <C>
Net income applicable to Class A units:
As reported................................................... $ 177,427 $ 133,153 $ 45,474
Pro-forma..................................................... 151,836 117,938 38,416
Net income per unit applicable to Class A units:
Basic:
As reported................................................. $ 1.97 $ 1.62 $ .83
Pro-forma................................................... 1.77 1.46 .70
Diluted:
As reported................................................. 1.94 1.59 .79
Pro forma................................................... 1.74 1.43 .67
</TABLE>
-88-
<PAGE> 89
VORNADO REALTY L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
The fair value of each option grant is estimated on the date of grant
using an option-pricing model with the following weighted-average assumptions
used for grants in the periods ending December 31, 1999, 1998 and 1997.
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------------
1999 1998 1997
-------- --------- --------
<S> <C> <C> <C>
Expected volatility................................................... 19% 19% 25%
Expected life......................................................... 5 years 5 years 5 years
Risk-free interest rate............................................... 6.4% 4.6% 6.4%
Expected dividend yield............................................... 5.9% 5.3% 3.4%
</TABLE>
A summary of the Plan's status, and changes during the years then ended,
is presented below:
<TABLE>
<CAPTION>
DECEMBER 31, 1999 DECEMBER 31, 1998 DECEMBER 31, 1997
----------------------------- -------------------------- --------------------------
WEIGHTED- WEIGHTED- WEIGHTED-
AVERAGE AVERAGE AVERAGE
SHARES/ EXERCISE SHARES/ EXERCISE SHARES/ EXERCISE
UNITS PRICE UNITS PRICE UNITS PRICE
------------- ------------- ------------ ------------ ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at January 1................. 8,724,316 $ 32.35 5,529,917 $ 24.43 4,139,386 $ 22.51
Granted.................................. 3,301,550 33.53 3,436,250 44.99 1,521,500 29.99
Exercised................................ (132,119) 18.64 (41,851) 21.95 (33,969) 18.69
Cancelled................................ (421,395) 37.71 (200,000) 32.93 (97,000) 31.25
---------- ---------- ---------
Outstanding at December 31............... 11,472,352 $ 32.65 8,724,316 $ 32.35 5,529,917 $ 24.43
========== ========== =========
Options exercisable at December 31....... 4,546,429 2,703,407 1,327,418
========== ========== =========
Weighted-average fair value of options
granted during the year ended
December 31 (per option)............. $ 4.43 $ 5.33 $ 7.87
========== ========== =========
</TABLE>
-89-
<PAGE> 90
VORNADO REALTY L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
The following table summarizes information about options outstanding under
the Plan at December 31, 1999:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
------------------------------------------------------------ ----------------------------------------
NUMBER WEIGHTED-AVERAGE NUMBER
RANGE OF OUTSTANDING AT REMAINING WEIGHTED-AVERAGE EXERCISABLE AT WEIGHTED-AVERAGE
EXERCISE PRICE DECEMBER 31, 1999 CONTRACTUAL LIFE EXERCISE PRICE DECEMBER 31, 1999 EXERCISE PRICE
-------------- ------------------- ------------------ ---------------- ------------------- ----------------
<S> <C> <C> <C> <C> <C>
$6 to $12 45,368 3.0 Years $11 45,368 $11
$17 to $19 430,579 5.1 Years 18 430,579 18
$23 3,500,000 6.9 Years 23 2,100,000 23
$26 to $27 275,250 7.1 Years 26 275,250 26
$30 680,000 7.4 Years 30 422,100 30
$31 to $36 3,318,300 9.0 Years 34 176,620 34
$37 to $40 265,510 8.4 Years 39 80,410 39
$41 to $44 117,795 8.2 Years 43 42,093 43
$45 2,574,550 8.1 Years 45 883,909 45
$48 265,000 8.1 Years 48 90,100 48
----------- ----------
$6 to $48 11,472,352 7.8 Years $33 4,546,429 $29
=========== ==========
</TABLE>
Vornado shares available for future grant under the Plan at December 31, 1999
were 8,223,227.
In connection with the acquisition of Arbor in December 1997, the Company
issued 60,000 options to a third party outside of the Plan parameters. These
options were granted at $43.75 per share and immediately vested. No expense was
incurred related to this issuance as it was accounted for as component of the
acquisition price.
8. RETIREMENT PLAN
In December 1997, benefits under the Plan were frozen. Prior to December
31, 1997, the Company's qualified retirement plan covered all full-time
employees. The Plan provided annual pension benefits that were equal to 1% of
the employee's annual compensation for each year of participation. The funding
policy is in accordance with the minimum funding requirements of ERISA.
Pension expense includes the following components:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------
1999 1998 1997
----------- ------------ -------------
<S> <C> <C> <C>
(amounts in thousands, except percentages)
Service cost--benefits earned during the period............... $ -- $ -- $ 115
Interest cost on projected benefit obligation................. 559 594 607
Actual return on assets....................................... (387) (334) (494)
Net amortization and deferral................................. 53 51 347
------- ------- -------
Net pension expense........................................... $ 225 $ 311 $ 575
======= ======= =======
Assumptions used in determining the net
pension expense were:
Discount rate................................................. 7 3/4% 6 3/4% 7 1/4%
Rate of increase in compensation levels....................... --* --* 5 1/2%
Expected rate of return on assets............................. 7% 7% 7%
</TABLE>
* Not applicable, as benefits under the Plan were frozen in December
1997.
-90-
<PAGE> 91
VORNADO REALTY L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
The following table sets forth the Plan's funded status and the amount
recognized in the Company's balance sheet:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------------------------
1999 1998 1997
------------ ------------ -------------
<S> <C> <C> <C>
(amounts in thousands)
Actuarial present value of benefit obligations:
Vested benefit obligation...................................... $ 7,492 $ 8,853 $ 8,245
========= ========= =========
Accumulated benefit obligation................................. $ 7,558 $ 8,952 $ 8,337
========= ========= =========
Projected benefit obligation................................... $ 7,558 $ 8,952 $ 8,337
Plan assets at fair value...................................... 5,284 5,551 4,901
--------- --------- ---------
Projected benefit obligation in excess of plan assets.............. 2,274 3,401 3,436
Unrecognized net obligations....................................... (1,279) (2,269) (1,086)
Adjustment required to recognize minimum liability................. 1,279 2,269 1,086
--------- --------- ---------
Accrued pension costs.............................................. $ 2,274 $ 3,401 $ 3,436
========= ========= =========
</TABLE>
Plan assets are invested in U.S. government obligations and securities
backed by U.S. government guaranteed mortgages.
9. LEASES
As lessor:
The Company leases space to tenants in shopping centers and office
buildings under operating leases. Most of the leases provide for the payment of
fixed base rentals payable monthly in advance. Shopping center leases provide
for the pass-through to tenants of real estate taxes, insurance and maintenance.
Office building leases generally require the tenants to reimburse the Company
for operating costs and real estate taxes above their base year costs. Shopping
center leases also provide for the payment by the lessee of additional rent
based on a percentage of the tenants' sales. As of December 31, 1999, future
base rental revenue under noncancellable operating leases, excluding rents for
leases with an original term of less than one year and rents resulting from the
exercise of renewal options, is as follows:
<TABLE>
<CAPTION>
(in thousands)
YEAR ENDING DECEMBER 31: AMOUNT
----------------------- -----------
<S> <C>
2000................................................................ $ 572,893
2001................................................................ 545,003
2002................................................................ 514,915
2003................................................................ 474,823
2004................................................................ 440,655
Thereafter.......................................................... 2,678,987
</TABLE>
These amounts do not include rentals based on tenants' sales. These
percentage rents approximated $2,213,000, $2,493,000 and $1,786,000 for the
years ended December 31, 1999, 1998 and 1997.
None of the Company's tenants represented more than 10% of the Company's
total revenues for the year ended December 31, 1999.
-91-
<PAGE> 92
VORNADO REALTY L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
As lessee:
The Company is a tenant under operating leases for certain properties.
These leases will expire principally during the next thirty years. Future
minimum lease payments under operating leases at December 31, 1999, are as
follows:
<TABLE>
<CAPTION>
(in thousands)
YEAR ENDING DECEMBER 31: AMOUNT
------------------------ ----------
<S> <C>
2000..................................................................... $ 14,917
2001..................................................................... 14,837
2002..................................................................... 14,415
2003..................................................................... 13,688
2004..................................................................... 12,770
Thereafter............................................................... 402,652
</TABLE>
Rent expense was $14,269,000, $5,937,000 and $2,001,000 for the years
ended December 31, 1999, 1998 and 1997.
10. COMMITTMENTS AND CONTINGENCIES
At December 31, 1999, in addition to the $367 million balance outstanding
under the Company's revolving credit facility, the Company had utilized $117
million of availability under the facility for letters of credit and guarantees
primarily related to pending acquisitions.
Each of the Company's properties has been subjected to varying degrees of
environmental assessment at various times. The environmental assessments did not
reveal any material environmental contamination. However, there can be no
assurance that the identification of new areas of contamination, change in the
extent or known scope of contamination, the discovery of additional sites, or
changes in cleanup requirements would not result in significant costs to the
Company.
From time-to-time, the Company has disposed of substantial amounts of real
estate to third parties for which, as to certain properties, it remains
contingently liable for rent payments or mortgage indebtedness.
There are various legal actions against the Company in the ordinary course
of business. In the opinion of management, after consultation with legal
counsel, the outcome of such matters will not have a material effect on the
Company's financial condition, results of operations or cash flow.
11. NET GAIN FROM INSURANCE SETTLEMENT AND CONDEMNATION PROCEEDINGS
In April 1997, the Company's Lodi shopping center was destroyed by a fire.
In the third quarter of 1998, the Company and its insurer agreed that the
estimated cost to reconstruct the shopping center is approximately $9,012,000
and the Company recorded a gain of $7,955,000 (the agreed upon amount, net of
the carrying value of the shopping center of $1,057,000). The insurance carrier
had previously advanced $5,550,000 to the Company. The reconstruction of the
shopping center was completed in 1999.
In September 1998, Atlantic City condemned the Company's vacant property.
In the third quarter of 1998, the Company recorded a gain of $1,694,000, (which
reflects the condemnation award of $3,100,000, net of the carrying value of the
property of $1,406,000). The Company is appealing the amount of the award.
-92-
<PAGE> 93
VORNADO REALTY L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
12. REPURCHASE AGREEMENTS
The Company enters into agreements for the purchase and resale of U.S.
government obligations for periods of up to one week. The obligations purchased
under these agreements are held in safekeeping in the name of the Company by
various money center banks. The Company has the right to demand additional
collateral or return of these invested funds at any time the collateral value is
less than 102% of the invested funds plus any accrued earnings thereon.
13. OTHER RELATED PARTY TRANSACTIONS
At December 31, 1999, the loan due from Mr. Roth, in accordance with his
employment arrangement, was $13,122,500 ($4,705,000 of which is shown as a
reduction in shareholders' equity). During 1999, the Company amended Mr. Roth's
loan to, (i) reset the interest rate to 4.49% per annum (based on the applicable
Federal rate) from a floating rate equal to the broker call rate and (ii) extend
the maturity to January 2006 from December 2002. The Company also provided Mr.
Roth with the right to draw up to $15,000,000 of additional loans on a revolving
basis. Each additional loan will bear interest, payable quarterly, at the
applicable Federal rate on the date the loan is made and will mature on the
sixth anniversary of the loan.
At December 31, 1999, loans due from Mr. Fascitelli, in accordance with
his employment agreement, aggregated $7,600,000. The loans mature in 2003 and
bear interest, payable quarterly at a weighted average interest rate of 5.16%
(based on the applicable Federal rate). In addition, in accordance with his
employment agreement, in December 1996 Mr. Fascitelli received a deferred
payment consisting of $5,000,000 in cash and a $20,000,000 convertible
obligation payable at the Company's option in 919,540 of Vornado common shares
or the cash equivalent of their appreciated value but not less than $20,000,000.
Accordingly, the cash and Vornado common shares are being held in an irrevocable
trust (the fair value of this obligation was $34,996,620 at December 31, 1999).
Various other executive officers of the Company have loans outstanding
pursuant to employment agreements of $1,146,000 at December 31, 1999. The loans
bear interest at either the applicable Federal rate provided or the broker call
rate (7.25% at December 31, 1999).
The Company currently manages and leases the real estate assets of
Interstate Properties pursuant to a management agreement for which the Company
receives a quarterly fee equal to 4% of base rent and percentage rent and
certain other commissions. The management agreement has a term of one year and
is automatically renewable unless terminated by either of the parties on sixty
days' notice at the end of the term. Although the management agreement was not
negotiated at arms length, the Company believes based upon comparable fees
charged by other real estate companies, that its terms are fair to the Company.
For the years ended December 31, 1999, 1998 and 1997, $1,262,000, $1,365,000 and
$1,184,000 of management fees were earned by the Company pursuant to the
management agreement.
The Mendik Group owns an entity which provides cleaning and related
services and security services to office properties, including the Company's
Manhattan office properties. Although the terms and conditions of the contracts
pursuant to which these services are provided were not negotiated at arms
length, the Company believes based upon comparable fees charged to other real
estate companies, that the terms and conditions of such contracts are fair to
the Company. The Company was charged fees in connection with these contracts of
$40,974,000 and $25,686,000 for the years ended December 31, 1999 and 1998 and
$9,965,000 for the period from April 15, 1997 (date of acquisition of the Mendik
portfolio) to December 31, 1997.
The common stock of the preferred stock affiliates which own interests in
the Temperature Controlled Logistics Companies, Hotel Pennsylvania and related
management companies are owned by Officers and Trustees of Vornado.
-93-
<PAGE> 94
VORNADO REALTY L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
14. EARNINGS PER CLASS A UNIT
The following table sets forth the computation of basic and diluted
earnings per Class A unit:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------
1999 1998 1997
-------------------------------------------
(amounts in thousands, except per unit amounts)
<S> <C> <C> <C>
Numerator:
Net income.................................................... $ 255,677 $ 168,386 $ 68,316
Preferred unit distributions.................................. (33,438) (21,690) (15,549)
Preferential allocations...................................... (44,812) (13,543) (7,293)
----------- ----------- -----------
Numerator for basic and diluted earnings per Class A
unit--income applicable to Class A units.......................... $ 177,427 $ 133,153 $ 45,474
=========== =========== ===========
Denominator:
Denominator for basic earnings per Class A
unit--weighted average units................................ 89,895,628 81,950,394 55,097,656
Effect of dilutive securities:
Employee stock options...................................... 1,621,386 1,931,818 2,119,553
----------- ----------- -----------
Denominator for diluted earnings per Class A
unit--adjusted weighted average units and assumed
conversions................................................. 91,517,014 83,882,212 57,217,209
=========== =========== ===========
Net income per Class A unit--basic............................... $ 1.97 $ 1.62 $ 0.83
Net income per Class A unit--diluited............................ $ 1.94 $ 1.59 $ 0.79
</TABLE>
15. SUMMARY OF QUARTERLY RESULTS (UNAUDITED)
The following summary represents the results of operations for each
quarter in 1999, 1998 and 1997:
<TABLE>
<CAPTION>
NET INCOME PER
CLASS A
NET INCOME UNIT (1)
APPLICABLE TO -----------------------
REVENUE CLASS A UNITS BASIC DILUTED
(amounts in thousands, except unit amounts) ---------- ------------ --------- ----------
<S> <C> <C> <C> <C>
1999
March 31.............................................. $ 163,564 $ 44,180(2) $.50 $.49
June 30............................................... 166,188 43,930(2) .50 .49
September 30.......................................... 183,555 47,236(2) .52 .51
December 31........................................... 183,651 42,081 .45 .45
1998
March 31.............................................. $ 90,211 $ 26,064 $.36 $.35
June 30............................................... 128,523 31,378 .38 .37
September 30.......................................... 140,672 40,333 .47 .46
December 31........................................... 150,454 35,378 .41 .40
1997
March 31.............................................. $ 29,297 $ 9,690 $.19 $.18
June 30............................................... 50,662 8,933 .17 .17
September 30.......................................... 61,868 10,385 .20 .19
December 31........................................... 67,304 16,466 .26 .25
(1) The total for the year may differ from the sum of the quarters as a result of weighting.
(2) Net income for each of the first three quarters of 1999 has been restated to reflect a correction
for depreciation expense of a partially-owned entity. The effect of such restatement for each of
the first three quarters on net income and net income per Class A unit is as follows:
$462,000 ($.01 per unit), $887,000 ($.01 per unit), and $887,000 ($.01 per unit), respectively.
</TABLE>
-94-
<PAGE> 95
VORNADO REALTY L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
16. SEGMENT INFORMATION
The Company has four business segments: Office, Retail, Merchandise Mart
Properties and Temperature Controlled Logistics. Prior to April 1997, the
Company operated in one segment-retail real estate, primarily in the Northeast
section of the United States.
<TABLE>
<CAPTION>
(Amounts in thousands)
December 31, 1999
-------------------------------------------------------------------------------
Temperature
Merchandise Controlled
Total Office Retail Mart Logistics Other(2)
---------- ---------- ----------- ----------- ---------- --------
<S> <C> <C> <C> <C> <C> <C>
Total revenues................................ $ 696,958 $ 379,795 $ 170,538 $ 135,921 $ -- $ 10,704
Total expenses................................ 405,854 227,680 74,062 74,624 -- 29,488
---------- ---------- ----------- ----------- ---------- --------
Operating income.............................. 291,104 152,115 96,476 61,297 -- (18,784)
Income applicable to Alexander's ............. 7,427 -- -- -- -- 7,427
Income from partially-owned entities.......... 82,310 19,055 938 -- 36,722 25,595
Interest and other investment income.......... 18,359 1,786 -- 737 -- 15,836
Interest and debt expense..................... (141,683) (49,624) (27,635) (29,509) -- (34,915)
Minority interest............................. (1,840) (1,840) -- -- -- --
---------- ---------- ----------- ----------- ----------- --------
Net income.................................... 255,677 121,492 69,779 32,525 36,722 (4,841)
Minority interest............................. 1,840 1,840 -- -- -- --
Interest and debt expense (4)................. 226,253 82,460 30,249 29,509 27,520 56,515
Depreciation and amortization (4)............. 143,499 64,702 16,900 17,702 31,044 13,151
Straight-lining of rents (4).................. (25,359) (16,386) (2,120) (4,740) (1,698) (415)
Other......................................... 7,451 365 -- -- 2,054(3) 5,032
---------- ---------- ----------- ---------- ----------- --------
EBITDA(1)..................................... $ 609,361 $ 254,473 $ 114,808 $ 74,996 $ 95,642 $ 69,442
========== ========== =========== =========== =========== ========
Balance sheet data:
Real estate, net.......................... $ 3,612,965 $2,208,510 $ 575,633 $ 753,416 $ -- $ 75,406
Investments and advances to
partially-owned entities................ 1,315,387 382,417 3,057 32,524 481,808 415,581
Capital expenditures:
Acquisitions............................ 394,006 388,436 -- -- -- 5,570
Other................................... 204,591 85,833 22,859 41,134 51,000 3,765
</TABLE>
-----------------------
Footnotes 1-5 are explained on page 98.
<TABLE>
<CAPTION>
(amounts in thousands)
December 31, 1998
-------------------------------------------------------------------------
Temperature
Merchandise Controlled
Total Office Retail Mart Logistics Other(2)
---------- --------- -------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
Total revenues................................ $ 509,860 $ 247,499 $167,155 $ 86,521 $ -- $ 8,685
Total expenses................................ 295,008 151,573 70,334 50,761 -- 22,340
---------- --------- -------- ---------- ---------- ---------
Operating income.............................. 214,852 95,926 96,821 35,760 -- (13,655)
Income applicable to Alexander's ............. 3,123 -- -- -- -- 3,123
Income from partially-owned entities.......... 32,025 10,854 258 (1,969) 15,191 7,691
Interest and other investment income.......... 24,074 4,467 2,159 639 -- 16,809
Interest and debt expense..................... (114,686) (25,175) (32,249) (18,711) -- (38,551)
Net gain from insurance settlement and
condemnation proceeding................... 9,649 -- -- -- -- 9,649
Minority Interest............................. (651) (651) -- -- -- --
---------- --------- -------- ---------- ---------- ---------
Net income.................................... 168,386 85,421 66,989 15,719 15,191 (14,934)
Minority interest............................. 651 651 -- -- -- --
Interest and debt expense (4)................. 164,478 40,245 32,709 18,711 26,541 46,272
Depreciation and amortization (4)............. 104,299 39,246 15,520 9,899 33,117 6,517
Net gain from insurance settlement and
condemnation proceeding................... (9,649) -- -- -- -- (9,649)
Straight-lining of rents (4).................. (16,132) (6,845) (3,203) (4,882) -- (1,202)
Other......................................... 15,055 (79) -- -- 8,872(3) 6,262(5)
------ --- -------- ---------- -------- ---------
EBITDA(1)..................................... $ 427,088 $ 158,639 $112,015 $ 39,447 $ 83,721 $ 33,266
========== ========= ======== ========== ========== =========
Balance sheet data:
Real estate, net.......................... $3,089,075 $ 1,777,919 $565,723 $ 729,485 $ -- $ 15,948
Investments and advances to
partially-owned entities................ 827,840 118,337 2,946 26,638 459,172 220,747
Capital expenditures:
Acquisitions............................ 2,059,000 923,000 38,000 745,000 175,000 178,000
Other................................... 80,548 51,162 5,535 10,314 12,463 1,074
</TABLE>
-----------------
Footnotes 1-5 are explained on page 98.
-95-
<PAGE> 96
VORNADO REALTY L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
<TABLE>
<CAPTION>
(amounts in thousands)
December 31, 1997
---------------------------------------------------------------------
Temperature
Merchandise Controlled
Total Office Retail Mart Logistics Other(2)
--------- -------- -------- --------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
Total revenues................................ $ 209,131 $ 80,846 $120,299 $ -- $ -- $ 7,986
Total expenses................................ 134,225 50,186 46,204 -- -- 37,835
--------- -------- -------- --------- --------- --------
Operating income.............................. 74,906 30,660 74,095 -- -- (29,849)
Income applicable to Alexander's ............. 7,873 -- -- -- -- 7,873
Income from partially-owned entities.......... 4,658 1,015 -- -- 1,720 1,923
Interest and other investment income.......... 23,767 6,834 2,296 -- -- 14,637
Interest and debt expense..................... (42,888) (9,009) (19,893) -- -- (13,986)
--------- -------- -------- --------- --------- --------
Net income.................................... 68,316 29,500 56,498 -- 1,720 (19,402)
Interest and debt expense (4)................. 54,395 13,707 19,893 -- 5,839 14,956
Depreciation and amortization (4)............. 31,972 12,813 11,706 -- 4,182 3,271
Straight-lining of rents (4).................. (3,932) (645) (2,558) -- -- (729)
Other......................................... (325) 1,303 970 -- 17 (2,615)
--------- -------- -------- --------- --------- --------
EBITDA(1)..................................... $ 150,426 $ 56,678 $ 86,509 $ -- $ 11,758 $ (4,519)
========= ======== ======== ========= ========= ========
Balance sheet data:
Real estate, net.......................... $1,390,659 $803,324 $564,214 $ -- $ -- $23,120
Investments and advances to
partially-owned entities................ 482,787 105,586 4,451 -- 243,846 128,904
Capital expenditures:
Acquisitions............................ 1,995,000 965,000 366,000 -- 600,000 64,000
Other................................... 29,891 12,992 8,445 -- 6,102 2,352
</TABLE>
- ------------------
See footnotes 1-5 on the next page.
-96-
<PAGE> 97
VORNADO REALTY L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
Notes to segment information:
(1) EBITDA represents income before interest, taxes, depreciation and
amortization, extraordinary or non-recurring items, gains or losses on
sales of real estate and the effect of straight-lining of property
rentals for rent escalations. Management considers EBITDA a supplemental
measure for making decisions and assessing the performance of its
segments. EBITDA may not be comparable to similarly titled measures
employed by other companies.
(2) Other includes (i) the operations of the Company's warehouse and
industrial properties, (ii) investments in the Hotel Pennsylvania,
Alexander's, and Newkirk Joint Ventures, (iii) corporate general and
administrative expenses and (iv) unallocated investment income and
interest and debt expense.
(3) Includes (i) the reversal of income taxes (benefit for the year ended
December 31, 1999) which are considered non-recurring because of the
expected conversion of the Temperature Controlled Logistics Companies to
REIT's and (ii) the add back of non-recurring unification costs.
(4) Interest and debt expense, depreciation and amortization and
straight-lining of rents included in the reconciliation of net income to
EBITDA reflects amounts which are netted in income from partially-owned
entities.
(5) Primarily represents the Company's equity in Alexander's loss for the
write-off resulting from the razing of Alexander's building formerly
located at its Lexington Avenue site.
17. EVENT SUBSEQUENT TO DATE OF INDEPENDENT AUDITORS' REPORT
On March 22, 2000, the Company renewed its $1,000,000,000 revolving credit
facility for an additional three years. The covenants of the facility include,
among others, maximum loan to value ratio, minimum debt service coverage and
minimum capitalization requirements. Interest is at LIBOR plus .90%.
-97-
<PAGE> 98
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The Operating Partnership is managed by Vornado, its general partner.
Information relating to trustees of Vornado will be contained in a definitive
Proxy Statement involving the election of trustees which Vornado will file with
the Securities and Exchange Commission pursuant to Regulation 14A under the
Securities Exchange Act of 1934 not later than 120 days after December 31, 1999,
and such information is incorporated herein by reference. Information relating
to Executive Officers of Vornado appears at page 46 of this Annual Report on
Form 10-K.
ITEM 11. EXECUTIVE COMPENSATION
Information relating to Vornado's executive compensation will be contained
in Vornado's Proxy Statement referred to above in Item 10, "Directors and
Executive Officers of the Registrant", and such information is incorporated
herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information relating to security ownership of certain beneficial owners
and management will be contained in Vornado's Proxy Statement referred to in
Item 10, "Directors and Executive Officers of the Registrant", and such
information is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information relating to certain relationships and related transactions
will be contained in Vornado's Proxy Statement referred to in Item 10,
"Directors and Executive Officers of the Registrant", and such information is
incorporated herein by reference.
-98-
<PAGE> 99
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) The following documents are filed as part of this report:
1. The consolidated financial statements are set
forth in Item 8 of this Annual Report on Form 10-K.
2. Financial Statement Schedules.
The following financial statement schedules should be read in conjunction
with the financial statements included in Item 8 of this Annual Report on Form
10-K.
<TABLE>
<CAPTION>
PAGES IN THIS
ANNUAL REPORT
ON FORM 10-K
--------------
<S> <C>
Independent Auditors' Report
II--Valuation and Qualifying Accounts--years ended December 31, 1999,
1998 and 1997............................................................... 102
III--Real Estate and Accumulated Depreciation as of December 31, 1999........... 103
</TABLE>
Schedules other than those listed above are omitted because they are not
applicable or the information required is included in the consolidated financial
statements or the notes thereto.
3. The following exhibits listed on the Exhibit Index
are filed with this Annual Report on Form 10-K.
<TABLE>
<CAPTION>
EXHIBIT NO.
- -----------
<S> <C>
3.12 Amended and Restated Bylaws of Vornado, dated March 2, 2000.
10.47 Consolidated and Restated Mortgage, Security Agreement, Assignment of
Leases and Rents and Fixture Filing, dated as of March 1, 2000,
between Entities named therein (as Mortgagors) and Vornado (as
Mortgagee)
10.48 Indenture and Servicing Agreement, dated as of March 1, 2000, among
Vornado, Lasalle Bank National Association, ABN Amro Bank N.V. and
Midland Loan Services, Inc
10.49 Employment Agreement, dated January 22, 2000, between Vornado Realty
Trust and Melvyn Blum
10.50 First Amended and Restated Promissory Note of Steven Roth, dated
November 16, 1999
10.51 Letter agreement, dated November 16, 1999, between Steven Roth and
Vornado Realty Trust
12 Consolidated Ratios of Earnings to Fixed Charges and Combined Fixed
Charges and Preferred Share Dividend Requirements.
21 Subsidiaries of the Registrant.
23 Consent of Independent Auditors to Incorporation by Reference.
27 Financial Data Schedule.
</TABLE>
(b) Reports on Form 8-K and Form 8-K/A
During the last quarter of the period covered by this Annual Report on
Form 10-K the reports on Form 8-K and Form 8-K/A described below were filed.
<TABLE>
<CAPTION>
PERIOD COVERED:
(DATE OF EARLIEST
EVENT REPORTED) ITEMS REPORTED DATE FILED
- --------------- -------------- ----------
<S> <C> <C>
October 19, 1999 Additional $50 million loan to Alexander's, Inc. October 22, 1999
September 3, 1999 Issuance of Series D-3 Preferred Units and Series D-4
Preferred Units of Vornado Realty L.P. October 25, 1999
November 24, 1999 Issuance of Series D-5 Preferred Units of Vornado Realty L.P. December 23, 1999
</TABLE>
-99-
<PAGE> 100
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
VORNADO REALTY L.P.
By: Vornado Realty Trust, as general partner
By: /s/ Irwin Goldberg
-------------------------------------------
Irwin Goldberg, Vice President,
Chief Financial Officer
Date: March 29, 2000
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ------ ----
<S> <C> <C>
By: /s/ Steven Roth Chairman of the Board of March 29, 2000
-------------------------------------- Trustees (Principal Executive
(Steven Roth) Officer)
By: /s/ Michael D. Fascitelli President and Trustee March 29, 2000
--------------------------------------
(Michael D. Fascitelli)
By: /s/ Irwin Goldberg Vice President-- March 29, 2000
-------------------------------------- Chief Financial Officer
(Irwin Goldberg)
By: /s/ David Mandelbaum Trustee March 29, 2000
--------------------------------------
(David Mandelbaum)
By: /s/ Stanley Simon Trustee March 29, 2000
--------------------------------------
(Stanley Simon)
By: /s/ Ronald G. Targan Trustee March 29, 2000
--------------------------------------
(Ronald G. Targan)
By: /s/ Richard R. West Trustee March 29, 2000
--------------------------------------
(Richard R. West)
By: /s/ Russell B. Wight, Jr. Trustee March 29, 2000
--------------------------------------
(Russell B. Wight, Jr.)
</TABLE>
-100-
<PAGE> 101
VORNADO REALTY L.P.
AND SUBSIDIARIES
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
- -----------------------------------------------------------------------------------------------------------------------------
BALANCE ADDITIONS DEDUCTIONS BALANCE
AT BEGINNING CHARGED AGAINST ---------------------------------- AT END
DESCRIPTION OF YEAR OPERATIONS DESCRIPTION AMOUNT OF YEAR
- ----------- ------------ -------------- -------------------- ---------- ----------
(AMOUNTS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1999:
Deducted from accounts receivable Uncollectible accounts
allowance for doubtful accounts..... $ 3,044 $5,131 written-off $883 $ 7,292
======= ====== ==== =======
YEAR ENDED DECEMBER 31, 1998:
Deducted from accounts receivable, Uncollectible accounts
allowance for doubtful accounts..... $ 658 $2,547 written-off $161 $ 3,044
======= ====== ==== =======
YEAR ENDED DECEMBER 31, 1997:
Deducted from accounts receivable, Uncollectible accounts
allowance for doubtful accounts..... $ 575 $ 305 written-off $222 $ 658
======= ====== ==== =======
</TABLE>
-101-
<PAGE> 102
VORNADO REALTY L.P.
AND SUBSIDIARIES
SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1999
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
- -----------------------------------------------------------------------------------------------------------------------------
GROSS AMOUNT AT WHICH
INITIAL COST TO COMPANY(1) COSTS CARRIED AT CLOSE OF PERIOD
-------------------------- CAPITALIZED -----------------------------------
SUBSEQUENT BUILDINGS
BUILDINGS AND TO AND
DESCRIPTION ENCUMBRANCES LAND IMPROVEMENTS ACQUISITION LAND IMPROVEMENTS TOTAL(2)
- ---------------------- ------------ --------- --------------- ------------ ------- -------------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
OFFICE BUILDINGS
NEW YORK
MANHATTAN
One Penn Plaza $ 275,000 $ -- $ 412,169 $ 47,008 $ -- $ 459,177 $ 459,177
Two Penn Plaza 163,146 53,615 164,903 39,727 53,615 204,630 258,245
909 Third Avenue 108,754 -- 120,723 3,643 -- 124,366 124,366
770 Broadway -- 52,898 95,686 31,744 52,898 127,430 180,328
Eleven Penn Plaza 53,129 40,333 85,259 6,835 40,333 92,094 132,427
Two Park Avenue 65,000 43,609 69,715 414 43,609 70,129 113,738
90 Park Avenue -- 8,000 175,890 10,407 8,000 186,297 194,297
888 Seventh Avenue 55,000 -- 117,269 3,479 -- 120,748 120,748
330 West 34th Street -- -- 8,599 115 -- 8,714 8,714
1740 Broadway -- 26,971 102,890 6,293 26,971 109,183 136,154
150 East 58th Street -- 39,303 80,216 3,234 39,303 83,450 122,753
866 United Nations Plaza 33,000 32,196 37,534 4,261 32,196 41,795 73,991
595 Madison (Fuller
Building) -- 62,731 62,888 4 62,731 62,892 125,623
640 Fifth Avenue -- 38,224 25,992 27,113 38,224 53,105 91,329
40 Fulton Street -- 15,732 26,388 1,816 15,732 28,204 43,936
689 Fifth Avenue -- 19,721 13,446 68 19,721 13,514 33,235
20 Broad Street -- -- 28,760 1,010 -- 29,770 29,770
WESTCHESTER
550/600 Mamaroneck Avenue -- -- 21,770 687 -- 22,457 22,457
------------ ------------- --------------- ---------- --------- -------------- ----------
Total New York 753,029 433,333 1,650,097 187,858 433,333 1,837,955 2,271,288
------------ ------------- --------------- ---------- --------- -------------- ----------
CONNECTICUT
Westport 8,000 4,544 9,753 730 4,544 10,483 15,027
------------ ------------- --------------- ---------- --------- -------------- ----------
Total Connecticut 8,000 4,544 9,753 730 4,544 10,483 15,027
------------ ------------- --------------- ---------- --------- -------------- ----------
NEW JERSEY
Paramus -- -- 8,345 4,303 -- 12,648 12,648
------------ ------------- --------------- ---------- --------- -------------- ----------
Total New Jersey -- -- 8,345 4,303 -- 12,648 12,648
------------ ------------- --------------- ---------- --------- -------------- ----------
TOTAL OFFICE BUILDINGS 761,029 437,877 1,668,195 192,891 437,877 1,861,086 2,298,963
------------ ------------- --------------- ---------- --------- -------------- ----------
<CAPTION>
--------------------------------------------------------
COLUMN F COLUMN G COLUMN H COLUMN I
--------------------------------------------------------
LIFE ON
WHICH
DEPRECIATION
ACCUMULATED IN LATEST
DEPRECIATION INCOME
AND DATE OF DATE STATEMENT
DESCRIPTION AMORTIZATION CONSTRUCTION(3) ACQUIRED IS COMPUTED
- ---------------------- ------------- --------------- ---------- ------------
<S> <C> <C> <C> <C>
OFFICE BUILDINGS
NEW YORK
MANHATTAN
One Penn Plaza $ 20,806 1972 1998 39 Years
Two Penn Plaza 14,791 1968 1997 39 Years
909 Third Avenue 1,407 1969 1999 39 Years
770 Broadway 3,685 1907 1998 39 Years
Eleven Penn Plaza 6,492 1923 1997 39 Years
Two Park Avenue 5,671 1928 1998 39 Years
90 Park Avenue 10,934 1964 1997 39 Years
888 Seventh Avenue 3,038 1980 1999 39 Years
330 West 34th Street 248 1925 1998 39 Years
1740 Broadway 7,761 1950 1997 39 Years
150 East 58th Street 3,746 1969 1998 39 Years
866 United Nations Plaza 3,063 1966 1997 39 Years
595 Madison (Fuller
Building) 475 1968 1999 39 Years
640 Fifth Avenue 1,369 1950 1997 39 Years
40 Fulton Street 1,301 1987 1998 39 Years
689 Fifth Avenue 474 1925 1998 39 Years
20 Broad Street 1,058 1956 1998 39 Years
WESTCHESTER
550/600 Mamaroneck Avenue 663 1971/1969 1998 39 Years
------------
Total New York 86,982
------------
CONNECTICUT
Westport 497 1980 1998 39 Years
------------
Total Connecticut 497
------------
NEW JERSEY
Paramus 3,223 1967 1987 26 - 40 Years
------------
Total New Jersey 3,223
------------
TOTAL OFFICE BUILDINGS 90,702
------------
</TABLE>
-102-
<PAGE> 103
VORNADO REALTY L.P.
AND SUBSIDIARIES
SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1999
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
- -----------------------------------------------------------------------------------------------------------------------------
GROSS AMOUNT AT WHICH
INITIAL COST TO COMPANY(1) COSTS CARRIED AT CLOSE OF PERIOD
-------------------------- CAPITALIZED -----------------------------------
SUBSEQUENT BUILDINGS
BUILDINGS AND TO AND
DESCRIPTION ENCUMBRANCES LAND IMPROVEMENTS ACQUISITION LAND IMPROVEMENTS TOTAL(2)
- ---------------------- ------------ --------- --------------- ------------ ------- -------------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Delran 2,848 * 756 3,184 2,213 756 5,397 6,153
Dover 3,635 * 224 2,330 2,497 204 4,847 5,051
East Brunswick 8,205 * 319 3,236 6,569 319 9,805 10,124
East Hanover I 11,066 * 376 3,063 3,585 477 6,547 7,024
East Hanover II -- 1,756 8,706 -- 1,756 8,706 10,462
Hackensack -- 536 3,293 7,264 536 10,557 11,093
Jersey City 10,381 * 652 2,962 1,797 652 4,759 5,411
Kearny (4) -- 279 4,429 (1,208) 290 3,210 3,500
Lawnside 5,708 * 851 2,222 1,390 851 3,612 4,463
Lodi 2,420 * 245 9,339 -- 245 9,339 9,584
Manalapan 6,397 * 725 2,447 4,935 725 7,382 8,107
Marlton 5,398 * 1,514 4,671 552 1,611 5,126 6,737
Middletown 7,761 * 283 1,508 3,942 283 5,450 5,733
Morris Plains 6,600 * 1,254 3,140 3,312 1,104 6,602 7,706
North Bergen (4) -- 510 3,390 (955) 2,309 636 2,945
North Plainfield 2,824 500 13,340 354 500 13,694 14,194
Totowa 15,646 * 1,097 5,359 10,941 1,163 16,234 17,397
Turnersville 2,116 * 900 2,132 597 900 2,729 3,629
Union 15,975 * 1,014 4,527 2,802 1,014 7,329 8,343
Vineland 2,358 * 290 1,594 1,253 290 2,847 3,137
Watchung (4) -- 451 2,347 6,855 4,178 5,475 9,653
Woodbridge 8,792 * 190 3,047 709 220 3,726 3,946
------------ ------------- --------------- ---------- --------- -------------- ----------
Total New Jersey 141,031 17,064 99,543 72,989 22,940 166,656 189,596
------------ ------------- --------------- ---------- --------- -------------- ----------
NEW YORK
14th Street and Union
Square, Manhattan -- 12,566 4,044 15,023 24,079 7,554 31,633
Albany (Menands) -- 460 1,677 2,703 460 4,380 4,840
Buffalo (Amherst) 4,863 * 402 2,019 2,175 636 3,960 4,596
Freeport 8,021 * 1,231 3,273 2,848 1,231 6,121 7,352
New Hyde Park 2,043 * -- -- 126 -- 126 126
North Syracuse -- -- -- 23 -- 23 23
Rochester (Henrietta) 2,203 * -- 2,124 1,151 -- 3,275 3,275
Rochester 2,832 * 443 2,870 594 443 3,464 3,907
Valley Stream (Green
Acres) 163,785 140,069 99,586 1,286 140,069 100,872 240,941
------------ ------------- -------------- ---------- ---------- ---------------- --------
Total New York 183,747 155,171 115,593 25,929 166,918 129,775 296,693
------------ ------------- -------------- ---------- ---------- ---------------- --------
SHOPPING CENTERS
NEW JERSEY
Bordentown 3,276 * 498 3,176 1,105 713 4,066 4,779
Bricktown 9,919 * 929 2,175 9,180 929 11,355 12,284
Cherry Hill 9,706 * 915 3,926 3,300 915 7,226 8,141
<CAPTION>
--------------------------------------------------------
COLUMN F COLUMN G COLUMN H COLUMN I
--------------------------------------------------------
LIFE ON
WHICH
DEPRECIATION
ACCUMULATED IN LATEST
DEPRECIATION INCOME
AND DATE OF DATE STATEMENT
DESCRIPTION AMORTIZATION CONSTRUCTION(3) ACQUIRED IS COMPUTED
- ---------------------- ------------- --------------- ---------- ------------
<S> <C> <C> <C> <C>
Delran 3,064 1972 1972 16 - 40 Years
Dover 3,012 1964 1964 16 - 40 Years
East Brunswick 5,602 1957 1957 8 - 33 Years
East Hanover I 4,714 1962 1962 9 - 40 Years
East Hanover II 272 1979 1998 40 Years
Hackensack 4,963 1963 1963 15 - 40 Years
Jersey City 3,767 1965 1965 11 - 40 Years
Kearny (4) 1,181 1938 1959 23 - 29 Years
Lawnside 2,245 1969 1969 17 - 40 Years
Lodi 58 1999 1975 40 Years
Manalapan 4,019 1971 1971 14 - 40 Years
Marlton 3,816 1973 1973 16 - 40 Years
Middletown 2,881 1963 1963 19 - 40 Years
Morris Plains 4,842 1961 1985 7 - 19 Years
North Bergen (4) 121 1993 1959 30 Years
North Plainfield 4,845 1955 1989 21 - 30 Years
Totowa 6,122 1957/1999 1957 19 - 40 Years
Turnersville 1,705 1974 1974 23 - 40 Years
Union 5,218 1962 1962 6 - 40 Years
Vineland 1,880 1966 1966 18 - 40 Years
Watchung (4) 927 1994 1959 27 - 30 Years
Woodbridge 2,996 1959 1959 11 - 40 Years
------------
Total New Jersey 82,443
------------
NEW YORK
14th Street and Union
Square, Manhattan 994 1965 1993 36 - 39 Years
Albany (Menands) 2,099 1965 1965 22 - 40 Years
Buffalo (Amherst) 2,672 1968 1968 13 - 40 Years
Freeport 2,966 1981 1981 15 - 40 Years
New Hyde Park 123 1970 1976 6 - 10 Years
North Syracuse 23 1967 1976 11 - 12 Years
Rochester (Henrietta) 2,151 1971 1971 15 - 40 Years
Rochester 2,522 1966 1966 10 - 40 Years
Valley Stream (Green
Acres) 5,228 1956 1997 39 - 40 Years
--------------
Total New York 18,778
--------------
SHOPPING CENTERS
NEW JERSEY
Bordentown 3,775 1958 1958 7 - 40 Years
Bricktown 5,033 1968 1968 22 - 40 Years
Cherry Hill 5,385 1964 1964 12 - 40 Years
</TABLE>
-103-
<PAGE> 104
VORNADO REALTY L.P.
AND SUBSIDIARIES
SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1999
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
- -----------------------------------------------------------------------------------------------------------------------------
GROSS AMOUNT AT WHICH
INITIAL COST TO COMPANY(1) COSTS CARRIED AT CLOSE OF PERIOD
-------------------------- CAPITALIZED ----------------------------------
SUBSEQUENT BUILDINGS
BUILDINGS AND TO AND
DESCRIPTION ENCUMBRANCES LAND IMPROVEMENTS ACQUISITION LAND IMPROVEMENTS TOTAL(2)
- ---------------------- ------------ --------- --------------- ------------ ------- -------------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
PENNSYLVANIA
Allentown 7,696 * 70 3,446 10,226 334 13,408 13,742
Bensalem (4) 3,967 * 1,198 3,717 1,453 2,727 3,641 6,368
Bethlehem -- 278 1,806 3,904 278 5,710 5,988
Broomall 3,260 * 734 1,675 1,538 850 3,097 3,947
Glenolden 4,245 * 850 1,295 736 850 2,031 2,881
Lancaster 2,312 * 606 2,312 2,642 606 4,954 5,560
Levittown 2,283 * 193 1,231 88 193 1,319 1,512
10th and Market
Streets, Philadelphia -- 933 3,230 5,670 933 8,900 9,833
Upper Moreland 3,517 * 683 2,497 564 683 3,061 3,744
York 1,463 * 421 1,700 1,204 409 2,916 3,325
------------ ------------- -------------- ---------- ---------- ---------------- --------
Total Pennsylvania 28,743 5,966 22,909 28,025 7,863 49,037 56,900
------------ ------------- -------------- ---------- ---------- ---------------- --------
MARYLAND
Baltimore (Belair Rd.) -- 785 1,333 3,419 785 4,752 5,537
Baltimore (Towson) 5,779 * 581 2,756 690 581 3,446 4,027
Baltimore (Dundalk) 4,084 * 667 1,710 3,190 667 4,900 5,567
Glen Burnie 2,299 * 462 1,741 1,486 462 3,227 3,689
Hagerstown -- 168 1,453 867 168 2,320 2,488
------------ ------------- -------------- ---------- ---------- ---------------- --------
Total Maryland 12,162 2,663 8,993 9,652 2,663 18,645 21,308
------------ ------------- -------------- ---------- ---------- ---------------- --------
CONNECTICUT
Newington 3,042 * 502 1,581 760 502 2,341 2,843
Waterbury 3,889 * -- 2,103 1,441 667 2,877 3,544
------------ ------------- -------------- ---------- ---------- ---------------- --------
Total Connecticut 6,931 502 3,684 2,201 1,169 5,218 6,387
------------ ------------- -------------- ---------- ---------- ---------------- --------
MASSACHUSETTS
Chicopee 1,999 * 510 2,031 358 510 2,389 2,899
Springfield (4) -- 505 1,657 817 2,586 393 2,979
------------ ------------- -------------- ---------- ---------- ---------------- --------
Total Massachusetts 1,999 1,015 3,688 1,175 3,096 2,782 5,878
------------ ------------- -------------- ---------- ---------- ---------------- --------
TEXAS
Dallas
Lewisville (5) 764 * 2,433 2,271 676 2,469 2,911 5,380
Mesquite (5) 3,445 * 3,414 4,704 1,331 3,395 6,054 9,449
Skillman (5) 1,987 * 3,714 6,891 1,161 3,714 8,052 11,766
------------ ------------- -------------- ---------- ---------- ---------------- --------
Total Texas 6,196 9,561 13,866 3,168 9,578 17,017 26,595
------------ ------------- -------------- ---------- ---------- ---------------- --------
<CAPTION>
--------------------------------------------------------
COLUMN F COLUMN G COLUMN H COLUMN I
--------------------------------------------------------
LIFE ON
WHICH
DEPRECIATION
ACCUMULATED IN LATEST
DEPRECIATION INCOME
AND DATE OF DATE STATEMENT
DESCRIPTION AMORTIZATION CONSTRUCTION(3) ACQUIRED IS COMPUTED
- ---------------------- ------------- --------------- ---------- ------------
<S> <C> <C> <C> <C>
PENNSYLVANIA
Allentown 5,422 1957 1957 20 - 42 Years
Bensalem (4) 1,265 1972/1999 1972 40 Years
Bethlehem 3,592 1966 1966 9 - 40 Years
Broomall 2,100 1966 1966 9 - 40 Years
Glenolden 1,111 1975 1975 18 - 40 Years
Lancaster 3,222 1966 1966 12 - 40 Years
Levittown 1,172 1964 1964 7 - 40 Years
10th and Market
Streets, Philadelphia 1,175 1977 1994 27 - 30 Years
Upper Moreland 1,994 1974 1974 15 - 40 Years
York 1,797 1970 1970 15 - 40 Years
--------------
Total Pennsylvania 22,850
--------------
MARYLAND
Baltimore (Belair Rd.) 3,096 1962 1962 10 - 33 Years
Baltimore (Towson) 2,251 1968 1968 13 - 40 Years
Baltimore (Dundalk) 2,940 1966 1966 12 - 40 Years
Glen Burnie 1,863 1958 1958 16 - 33 Years
Hagerstown 1,459 1966 1966 9 - 40 Years
--------------
Total Maryland 11,609
--------------
CONNECTICUT
Newington 1,620 1965 1965 9 - 40 Years
Waterbury 1,882 1969 1969 21 - 40 Years
--------------
Total Connecticut 3,502
--------------
MASSACHUSETTS
Chicopee 1,848 1969 1969 13 - 40 Years
Springfield (4) 86 1993 1966 28 - 30 Years
--------------
Total Massachusetts 1,934
--------------
TEXAS
Dallas
Lewisville (5) 934 1989 1990 25 - 30 Years
Mesquite (5) 1,870 1988 1990 24 - 30 Years
Skillman (5) 2,455 1988 1990 26 - 30 Years
--------------
Total Texas 5,259
--------------
</TABLE>
-104-
<PAGE> 105
VORNADO REALTY L.P.
AND SUBSIDIARIES
SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1999
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
- -----------------------------------------------------------------------------------------------------------------------------
GROSS AMOUNT AT WHICH
INITIAL COST TO COMPANY(1) COSTS CARRIED AT CLOSE OF PERIOD
-------------------------- CAPITALIZED ----------------------------------
SUBSEQUENT BUILDINGS
BUILDINGS AND TO AND
DESCRIPTION ENCUMBRANCES LAND IMPROVEMENTS ACQUISITION LAND IMPROVEMENTS TOTAL(2)
- ---------------------- ------------ --------- --------------- ------------ ------- -------------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
PUERTO RICO (SAN JUAN)
Montehiedra 61,618 9,182 66,701 231 9,182 66,932 76,114
------------ ------------- ------------ ------------ --------- ---------------- ----------
TOTAL SHOPPING CENTERS 442,427 201,124 334,977 143,370 223,409 456,062 679,471
------------ ------------- ------------ ------------ --------- ---------------- ----------
MERCHANDISE MART PROPERTIES
ILLINOIS
Merchandise Mart,
Chicago 250,000 64,528 319,146 12,472 64,528 331,618 396,146
Apparel Center,
Chicago 40,000 14,238 67,008 19,417 14,238 86,425 100,663
WASHINGTON D.C.
Washington Office Center 49,537 10,719 69,658 154 10,719 69,812 80,531
Washington Design Center 23,932 12,274 40,662 3,150 12,274 43,812 56,086
Other -- 9,174 6,273 61 9,174 6,334 15,508
NORTH CAROLINA
Market Square Complex,
High Point 42,758 11,969 85,478 15,882 11,969 101,360 113,329
National Furniture Mart,
High Point 13,695 1,069 16,761 52 1,069 16,813 17,882
------------ ------------- ------------ ------------ --------- ---------------- ----------
TOTAL MERCHANDISE MART 419,922 123,971 604,986 51,188 123,971 656,174 780,145
------------ ------------- ------------ ------------ --------- ---------------- ----------
WAREHOUSE/INDUSTRIAL
NEW JERSEY
East Brunswick -- -- 4,772 2,867 -- 7,639 7,639
East Hanover 8,210 * 576 7,752 7,226 691 14,863 15,554
Edison 2,455 * 705 2,839 1,350 705 4,189 4,894
Garfield -- 96 8,068 4,872 96 12,940 13,036
------------ ------------- ------------ ------------ --------- ---------------- ----------
TOTAL WAREHOUSE/INDUSTRIAL 10,665 1,377 23,431 16,315 1,492 39,631 41,123
------------ ------------- ------------ ------------ --------- ---------------- ----------
OTHER PROPERTIES
NEW JERSEY
Montclair -- 66 470 330 66 800 866
Rahway -- -- 25 -- 25 25
------------ ------------- ------------ ------------ --------- ---------------- ----------
Total New Jersey -- 66 470 355 66 825 891
------------ ------------- ------------ ------------ --------- ---------------- ----------
<CAPTION>
--------------------------------------------------------
COLUMN F COLUMN G COLUMN H COLUMN I
--------------------------------------------------------
LIFE ON
WHICH
DEPRECIATION
ACCUMULATED IN LATEST
DEPRECIATION INCOME
AND DATE OF DATE STATEMENT
DESCRIPTION AMORTIZATION CONSTRUCTION(3) ACQUIRED IS COMPUTED
- ---------------------- ------------- --------------- ---------- ------------
<S> <C> <C> <C> <C>
PUERTO RICO (SAN JUAN)
Montehiedra 4,569 1996 1997 40 Years
------------
TOTAL SHOPPING CENTERS 150,944
------------
MERCHANDISE MART PROPERTIES
ILLINOIS
Merchandise Mart,
Chicago 14,839 1930 1998 40 Years
Apparel Center,
Chicago 3,989 1977 1998 40 Years
WASHINGTON D.C.
Washington Office Center 3,100 1990 1998 40 Years
Washington Design Center 2,066 1919 1998 40 Years
Other 276 1998 40 Years
NORTH CAROLINA
Market Square Complex,
High Point 2,285 1902-1989 1998 40 Years
National Furniture Mart,
High Point 454 1964 1998 40 Years
------------
TOTAL MERCHANDISE MART 27,009
------------
WAREHOUSE/INDUSTRIAL
NEW JERSEY
East Brunswick 4,367 1972 1972 18 - 40 Years
East Hanover 10,204 1963-1967 1963 7 - 40 Years
Edison 2,324 1954 1982 12 - 25 Years
Garfield 9,546 1942 1959 11 - 33 Years
------------
TOTAL WAREHOUSE/INDUSTRIAL 26,441
------------
OTHER PROPERTIES
NEW JERSEY
Montclair 539 1972 1972 4 -15 Years
Rahway 25 1972 1972 14 Years
------------
Total New Jersey 564
------------
</TABLE>
-105-
<PAGE> 106
VORNADO REALTY L.P.
AND SUBSIDIARIES
SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1999
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
- -----------------------------------------------------------------------------------------------------------------------------
GROSS AMOUNT AT WHICH
INITIAL COST TO COMPANY(1) COSTS CARRIED AT CLOSE OF PERIOD
-------------------------- CAPITALIZED ----------------------------------
SUBSEQUENT BUILDINGS
BUILDINGS AND TO AND
DESCRIPTION ENCUMBRANCES LAND IMPROVEMENTS ACQUISITION LAND IMPROVEMENTS TOTAL(2)
- ---------------------- ------------ --------- --------------- ------------ ------- -------------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
NEW YORK
Hotel Pennsylvania
(Commercial) 47,761 12,542 51,047 -- 12,542 51,047 63,589
1135 Third Avenue -- 7,844 7,844 -- 7,844 7,844 15,688
Riese -- 19,276 7,348 21 19,276 7,369 26,645
------------ ------------- ------------ ------------ --------- ---------------- ----------
Total New York 47,761 39,662 66,239 21 39,662 66,260 105,922
------------ ------------- ------------ ------------ --------- ---------------- ----------
TOTAL OTHER PROPERTIES 47,761 39,728 66,709 376 39,728 67,085 106,813
------------ ------------- ------------ ------------ --------- ---------------- ----------
LEASEHOLD IMPROVEMENTS
AND EQUIPMENT 14,992 14,992 14,992
------------ ---------------- ----------
TOTAL --
DECEMBER 31, 1999 $ 1,681,804 $ 804,077 $ 2,698,298 $ 419,132 $ 826,477 $ 3,095,030 $3,921,507
=========== ========== =========== ============ ========== ============= ==========
<CAPTION>
--------------------------------------------------------
COLUMN F COLUMN G COLUMN H COLUMN I
--------------------------------------------------------
LIFE ON
WHICH
DEPRECIATION
ACCUMULATED IN LATEST
DEPRECIATION INCOME
AND DATE OF DATE STATEMENT
DESCRIPTION AMORTIZATION CONSTRUCTION(3) ACQUIRED IS COMPUTED
- ---------------------- ------------- --------------- ---------- ------------
<S> <C> <C> <C> <C>
NEW YORK
Hotel Pennsylvania
(Commercial) 2,889 1919 1997 40 Years
1135 Third Avenue 392 1997 40 Years
Riese 472 1911-1987 1997 39 Years
------------
Total New York 3,753
------------
TOTAL OTHER PROPERTIES 4,317
------------
LEASEHOLD IMPROVEMENTS
AND EQUIPMENT 9,129 3 - 20 Years
------------
TOTAL --
DECEMBER 31, 1999 $ 308,542
===========
</TABLE>
* These encumbrances are cross collateralized under a blanket mortgage in the
amount of $224,865 at December 31, 1999 which was repaid as part of a $500,000
financing completed on March 1, 2000.
Notes:
1) Initial cost is cost as of January 30, 1982 (the date on which Vornado
commenced real estate operations) unless acquired subsequent to that
date -- see Column H.
2) The net basis of the company's assets and liabilities for tax purposes
is approximately $1,617,000 lower than the amount reported for
financial statement purposes.
3) Date of original construction -- many properties have had substantial
renovation or additional construction -- see Column D.
4) Buildings on these properties were demolished. As a result, the cost of
the buildings and improvements, net of accumulated depreciation, were
transferred to land.
In addition, the cost of the land in Kearny is net of a $1,615
insurance recovery.
5) Properties were sold subsequent to December 31, 1999.
-106-
<PAGE> 107
VORNADO REALTY L.P.
AND SUBSIDIARIES
SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
(AMOUNTS IN THOUSANDS)
The following is a reconciliation of real estate assets and accumulated
depreciation:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------
1999 1998 1997
-------------- ------------- -------------
<S> <C> <C> <C>
Real Estate
Balance at beginning of period.................. $ 3,315,891 $ 1,564,093 $ 397,298
Additions during the period:
Land.......................................... 83,153 308,261 374,996
Buildings & improvements...................... 522,463 1,464,595 792,397
------------ ------------ -----------
3,921,507 3,336,949 1,564,691
Less: Cost of assets written-off................ -- 21,058 598
------------ ------------ -----------
Balance at end of period........................ $ 3,921,507 $ 3,315,891 $ 1,564,093
============ ============ ===========
ACCUMULATED DEPRECIATION
Balance at beginning of period $ 226,816 $ 173,434 $ 151,049
Additions charged to operating expenses......... 81,726 59,227 22,983
------------ ------------ -----------
308,542 232,661 174,032
Less: Accumulated depreciation on assets
written-off................................... -- 5,845 598
------------ ------------ -----------
Balance at end of period........................ $ 308,542 $ 226,816 $ 173,434
============ ============ ===========
</TABLE>
-107-
<PAGE> 108
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO.
- -----------
<S> <C> <C> <C>
3.1 -- Amended and Restated Declaration of Trust of Vornado,
amended April 3, 1997--Incorporated by reference to Exhibit
3.1 of Vornado's Registration Statement on Form S-8 (File
No. 333-29011), filed on June 12, 1997................................ *
3.2 -- Articles of Amendment of Declaration of Trust of Vornado, as
filed with the State Department of Assessments and Taxation
of Maryland on April 22, 1998 - Incorporated by reference to
Exhibit 3.1 of Vornado's Current Report on Form 8-K, dated
April 22, 1998 (File No. 001-11954), filed on April 28, 1998.......... *
3.3 -- Articles Supplementary Classifying Vornado's $3.25 Series A
Preferred Shares of Beneficial Interest, liquidation
preference $50.00 per share - Incorporated by reference to
Exhibit 4.1 of Vornado's Current Report on Form 8-K, dated
April 3, 1997 (File No. 001-11954), filed on April 8, 1997............ *
3.4 -- Articles Supplementary Classifying Vornado's Series D-1 8.5%
Cumulative Redeemable Preferred Shares of Beneficial
Interest, no par value (the "Series D-1 Preferred Shares") -
Incorporated by reference to Exhibit 3.1 of Vornado's
Current Report on Form 8-K, dated November 12, 1998 (File
No. 001-11954), filed on November 30, 1998............................ *
3.5 -- Articles Supplementary Classifying Additional Series D-1
Preferred Shares - Incorporated by reference to Exhibit 3.2
of Vornado's Current Report on Form 8-K/A, dated November
12, 1998 (File No. 001-11954), filed on February 9, 1999.............. *
3.6 -- Articles Supplementary Classifying 8.5% Series B Cumulative
Redeemable Preferred Shares of Beneficial Interest,
liquidation preference $25.00 per share, no par value -
Incorporated by reference to Exhibit 3.3 of Vornado's
Current Report on Form 8-K, dated March 3, 1999 (File No.
001-11954), filed on March 17, 1999................................... *
3.7 -- Articles Supplementary Classifying Vornado's Series C
Preferred Shares - Incorporated by reference to Exhibit 3.7
of Vornado's Registration Statement on Form 8-A (File No.
001-11954), filed on May 19, 1999..................................... *
3.8 -- Articles Supplementary Classifying Vornado Realty Trust's
Series D-2 Preferred Shares, dated as of May 27, 1999, as
filed with the State Department of Assessments and Taxation
of Maryland on May 27, 1999 - Incorporated by reference to
Exhibit 3.1 of Vornado's Current Report on Form 8-K, dated
May 27, 1999 (File No. 001-11954), filed on July 7, 1999.............. *
3.9 -- Articles Supplementary Classifying Vornado's Series D-3
Preferred Shares, dated September 3, 1999, as filed with the
State Department of Assessments and Taxation of Maryland on
September 3, 1999 - Incorporated by reference to Exhibit 3.1
of Vornado's Current Report on Form 8-K, dated September 3,
1999 (File No. 001-11954), filed on October 25, 1999.................. *
3.10 -- Articles Supplementary Classifying Vornado's Series D-4
Preferred Shares, dated September 3, 1999, as filed with the
State Department of Assessments and Taxation of Maryland on
September 3, 1999 - Incorporated by reference to Exhibit 3.2
of Vornado's Current Report on Form 8-K, dated September 3,
1999 (File No. 001-11954), filed on October 25, 1999.................. *
</TABLE>
- -----------
* Incorporated by reference
-108-
<PAGE> 109
<TABLE>
<CAPTION>
EXHIBIT
NO.
- -----------
<S> <C> <C> <C>
3.11 -- Articles Supplementary Classifying Vornado's Series D-5
Preferred Shares - Incorporated by reference to Exhibit 3.1
of Vornado's Current Report on Form 8-K, dated November 24,
1999 (File No. 001-11954), filed on December 23, 1999.................. *
3.12 -- Amended and Restated Bylaws of Vornado, as amended on March
2, 2000 - Incorporated by reference to Exhibit 3.12 of
Vornado's Annual Report on Form 10-K, dated March 7, 2000
(File No. 001-11954), filed on March 9, 2000........................... *
3.13 -- Second Amended and Restated Agreement of Limited Partnership
of the Operating Partnership, dated as of October 20, 1997 -
Incorporated by reference to Exhibit 3.4 of Vornado's Annual
Report on Form 10-K for the year ended December 31, 1997
filed on March 31, 1998 (the "1997 10-K").............................. *
3.14 -- Amendment to Second Amended and Restated Agreement of
Limited Partnership of Vornado Realty L.P., dated as of
December 16, 1997--Incorporated by reference to Exhibit 3.5
of the 1997 10-K....................................................... *
3.15 -- Second Amendment to Second Amendment and Restated Agreement
of Limited Partnership of the Operating Partnership of the
Operating Partnership, dated as of April 1, 1998 -
Incorporated by reference to Exhibit 3.5 of Vornado's
Registration Statement on Form S-3 (File No. 333-50095),
filed on April 14, 1998................................................ *
3.16 -- Third Amendment to Second Amended and Restated Agreement of
Limited Partnership of the Operating Partnership, dated as
of November 12, 1998 - Incorporated by reference to Exhibit
3.2 of Vornado's Current Report on Form 8-K, dated November
12, 1998 (File No. 001-11954), filed on November 30, 1998.............. *
3.17 -- Fourth Amendment to Second Amended and Restated Agreement of
Limited Partnership of the Operating Partnership, dated as
of November 30, 1998 - Incorporated by reference to Exhibit
3.1 of Vornado's Current Report on Form 8-K, dated December
1, 1998 (File No. 001-11954), filed on February 9, 1999................ *
3.18 -- Exhibit A, dated as of December 22, 1998, to Second Amended
and Restated Agreement of Limited Partnership of the
Operating Partnership - Incorporated by reference to Exhibit
3.4 of Vornado's Current Report on Form 8-K/A, dated
November 12, 1998 (File No. 001-11954), filed on February 9, 1999...... *
3.19 -- Fifth Amendment to Second Amended and Restated Agreement of
Limited Partnership of the Operating Partnership, dated as
of March 3, 1999 - Incorporated by reference to Exhibit 3.1
of Vornado's Current Report on Form 8-K, dated March 3, 1999
(File No. 001-11954), filed on March 17, 1999.......................... *
3.20 -- Exhibit A to Second Amended and Restated Agreement of
Limited Partnership of the Operating Partnership, dated as
of March 11, 1999 - Incorporated by reference to Exhibit 3.2
of Vornado's Current Report on Form 8-K, dated March 3, 1999
(File No. 001-11954), filed on March 17, 1999.......................... *
3.21 -- Sixth Amendment to Second Amended and Restated Agreement of
Limited Partnership of Vornado Realty L.P., dated as of
March 17, 1999 - Incorporated by reference to Exhibit 3.2 of
Vornado's Current Report on Form 8-K, dated May 27, 1999
(File No. 001-11954), filed on July 7, 1999............................ *
</TABLE>
- -----------
* Incorporated by reference
-109-
<PAGE> 110
<TABLE>
<CAPTION>
EXHIBIT
NO.
- -----------
<S> <C> <C> <C>
3.22 -- Seventh Amendment to Second Amended and Restated Agreement
of Limited Partnership of Vornado Realty L.P., dated as of
May 20, 1999 - Incorporated by reference to Exhibit 3.3 of
Vornado's Current Report on Form 8-K, dated May 27, 1999
(File No. 001-11954), filed on July 7, 1999...................... *
3.23 -- Eighth Amendment to Second Amended and Restated Agreement of
Limited Partnership of Vornado Realty L.P., dated as of May
20, 1999 - Incorporated by reference to Exhibit 3.4 of
Vornado's Current Report on Form 8-K, dated May 27, 1999
(File No. 001-11954), filed on July 7, 1999...................... *
3.24 -- Ninth Amendment to Second Amended and Restated Agreement of
Limited Partnership of Vornado Realty L.P., dated as of May
20, 1999 - Incorporated by reference to Exhibit 3.3 of
Vornado's Current Report on Form 8-K, dated September 3,
1999 (File No. 001-11954), filed on October 25, 1999............. *
3.25 -- Tenth Amendment to Second Amended and Restated Agreement of
Limited Partnership of Vornado Realty L.P., dated as of May
20, 1999 - Incorporated by reference to Exhibit 3.4 of
Vornado's Current Report on Form 8-K, dated September 3,
1999 (File No. 001-11954), filed on October 25, 1999............. *
3.26 -- Eleventh Amendment to Second Amended and Restated Agreement
of Limited Partnership of Vornado Realty L.P., dated as of
November 24, 1999 - Incorporated by reference to Exhibit 3.2
of Vornado's Current Report on Form 8-K, dated November 24,
1999 (File No. 001-11954), filed on December 23, 1999............ *
4.1 -- Instruments defining the rights of security holders (see
Exhibits 3.1 through 3.15 of this Annual Report on Form
10-K)............................................................
4.2 -- Indenture dated as of November 24, 1993 between Vornado
Finance Corp. and Bankers Trust Company, as Trustee -
Incorporated by reference to Vornado's current Report on
Form 8-K dated November 24, 1993 (File No. 001-11954), filed
December 1, 1993................................................. *
4.3 -- Specimen certificate representing Vornado's Common Shares of
Beneficial Interest, par value $0.04 per share -
Incorporated by reference to Exhibit 4.1 of Amendment No. 1
to Registration Statement on Form S-3 (File No. 33-62395),
filed on October 26, 1995........................................ *
4.4 -- Specimen certificate representing Vornado's $3.25 Series A
Preferred Shares of Beneficial Interest, liquidation
preference $50.00 per share - Incorporated by reference to
Exhibit 4.2 of Vornado's Current Report on Form 8-K, dated
April 3, 1997 (File No. 001-11954), filed on April 8, 1997....... *
4.5 -- Specimen certificate evidencing Vornado's Series B 8.5%
Cumulative Redeemable Preferred Shares of Beneficial
Interest - Incorporated by reference to Exhibit 4.2 of
Vornado's Registration Statement on Form 8-A (File No.
001-11954), filed on March 15, 1999.............................. *
4.6 -- Specimen certificate evidencing Vornado's 8.5% Series C
Cumulative Redeemable Preferred Shares of Beneficial
Interest, liquidation preferences $25.00 per share, no par
value - Incorporated by reference to Exhibit 4.2 of
Vornado's Registration Statement on Form 8-A (File No.
001-11954), filed May 19, 1999................................... *
10.1 -- Second Amendment, dated as of June 12, 1997, to Vornado's
1993 Omnibus Share Plan, as amended Incorporated by
reference to Vornado's Registration Statement on Form S-8
(File No. 333-29011) filed on June 12, 1997...................... *
</TABLE>
- -----------
* Incorporated by reference
-110-
<PAGE> 111
<TABLE>
<CAPTION>
EXHIBIT
NO.
- -----------
<S> <C> <C> <C>
10.2 -- Master Agreement and Guaranty, between Vornado, Inc. and
Bradlees New Jersey, Inc. dated as of May 1, 1992 -
Incorporated by reference to Vornado's Quarterly Report on
Form 10-Q for quarter ended March 31, 1992 (File No.
001-11954), filed May 8, 1992........................................ *
10.3** -- Mortgage, Security Agreement, Assignment of Leases and Rents
and Fixture Filing dated as of November 24, 1993 made by
each of the entities listed therein, as mortgagors to
Vornado Finance Corp., as mortgagee - Incorporated by
reference to Vornado's Current Report on Form 8-K dated
November 24, 1993 (File No. 001-11954), filed December 1, 1993....... *
10.4** -- 1985 Stock Option Plan as amended - Incorporated by
reference to Vornado's Quarterly Report on Form 10-Q for
quarter ended May 2, 1987 (File No. 001-11954), filed June 9, 1987... *
10.5** -- Form of Stock Option Agreement for use in connection with
incentive stock options issued pursuant to Vornado, Inc.
1985 Stock Option Plan - Incorporated by reference to
Vornado's Quarterly Report on Form 10-Q for quarter ended
October 26, 1985 (File No. 001-11954), filed December 9, 1985........ *
10.6** -- Form of Stock Option Agreement for use in connection with
incentive stock options issued pursuant to Vornado, Inc.
1985 Stock Option Plan--Incorporated by reference to
Vornado's Quarterly Report on Form 10-Q for quarter ended
May 2, 1987 (File No. 001-11954), filed June 9, 1987................. *
10.7** -- Form of Stock Option Agreement for use in connection with
incentive stock options issued pursuant to Vornado, Inc.
1985 Stock Option Plan--Incorporated by reference to
Vornado's Quarterly Report on Form 10-Q for quarter ended
October 26, 1985 (File No. 001-11954), filed December 9, 1985........ *
10.8** -- Employment Agreement between Vornado Realty Trust and Joseph
Macnow dated January 1, 1998 Incorporated by reference to
Exhibit 10.7 of Vornado's Quarterly Report on Form 10-Q for
the quarter ended September 30, 1998 (File No. 001-11954),
filed November 12, 1998.............................................. *
10.9** -- Employment Agreement between Vornado Realty Trust and
Richard Rowan dated January 1, 1998 Incorporated by
reference to Exhibit 10.8 of Vornado's Quarterly Report on
Form 10-Q for the quarter ended September 30, 1998 (File No.
001-11954), filed November 12, 1998.................................. *
10.10** -- Employment Agreement between Vornado Realty Trust and Irwin
Goldberg, dated December 11, 1997 Incorporated by reference
to Exhibit 10.10 of Vornado's Annual Report on Form 10-K/A
for the year ended December 31, 1997 (File No. 001-11954),
filed on April 14, 1998.............................................. *
10.11** -- Employment Agreement between Vornado Realty Trust and
Michael D. Fascitelli dated December 2, 1996 - Incorporated
by reference to Vornado's Annual Report on Form 10-K for the
year ended December 31, 1996 (File No. 001-11954), filed
March 13, 1997....................................................... *
10.12 -- Promissory Notes from Steven Roth to Vornado, Inc. dated
December 29, 1992 and January 15, 1993 - Incorporated by
reference to Vornado's Annual Report on Form 10-K for the
year ended December 31, 1992 (File No. 001-11954), filed
February 16, 1993.................................................... *
10.13 -- Registration Rights Agreement between Vornado, Inc. and
Steven Roth Dated December 29, 1992 - Incorporated by
reference to Vornado's Annual Report on Form 10-K for the
year ended December 31, 1992 (File No. 001-11954), filed
February 16, 1993.................................................... *
</TABLE>
- -----------
* Incorporated by reference
** Management contract or compensatory plan
-111-
<PAGE> 112
<TABLE>
<CAPTION>
EXHIBIT
NO.
- -----------
<S> <C> <C> <C>
10.14 -- Stock Pledge Agreement between Vornado, Inc. and Steven Roth
dated December 29, 1992 - Incorporated by reference to
Vornado's Annual Report on Form 10-K for the year ended
December 31, 1992 (File No. 001-11954), filed February 16, 1993............ *
10.15 -- Promissory Note from Steven Roth to Vornado Realty Trust
dated April 15, 1993 and June 17, 1993 - Incorporated by
reference to Vornado's Annual Report on Form 10-K for the
year ended December 31, 1993 (File No. 001-11954), filed March 24, 1994.... *
10.16 -- Promissory Note from Richard Rowan to Vornado Realty Trust -
Incorporated by reference to Vornado's Annual Report on Form
10-K for the year ended December 31, 1993 (File No.
001-11954), filed March 24, 1994........................................... *
10.17 -- Promissory Note from Joseph Macnow to Vornado Realty Trust -
Incorporated by reference to Vornado's Annual Report on Form
10-K for the year ended December 31, 1993 (File No.
001-11954), filed March 24, 1994........................................... *
10.18 -- Management Agreement between Interstate Properties and
Vornado, Inc. dated July 13, 1992 -Incorporated by reference
to Vornado's Annual Report on Form 10-K for the year ended
December 31, 1992 (File No. 001-11954), filed February 16, 1993............ *
10.19 -- Real Estate Retention Agreement between Vornado, Inc., Keen
Realty Consultants, Inc. and Alexander's, Inc., dated as of
July 20, 1992 - Incorporated by reference to Vornado's
Annual Report on Form 10-K for the year ended December 31,
1992 (File No. 001-11954), filed February 16, 1993......................... *
10.20 -- Amendment to Real Estate Retention Agreement dated February
6, 1995 - Incorporated by reference to Vornado's Annual
Report on Form 10-K for the year ended December 31, 1994
(File No. 001-11954), filed March 23, 1995................................. *
10.21 -- Stipulation between Keen Realty Consultants Inc. and Vornado
Realty Trust re: Alexander's Retention Agreement -
Incorporated by reference to Vornado's annual Report on Form
10-K for the year ended December 31, 1993 (File No. 001-11954), filed
March 24, 1994............................................................. *
10.22 -- Stock Purchase Agreement, dated February 6, 1995, among
Vornado Realty Trust and Citibank, N.A. Incorporated by
reference to Vornado's Current Report on Form 8-K dated
February 6, 1995 (File No. 001-11954), filed February 21, 1995............. *
10.23 -- Management and Development Agreement, dated as of February
6, 1995 - Incorporated by reference to Vornado's Current
Report on Form 8-K dated February 6, 1995 (File No.
001-11954), filed February 21, 1995........................................ *
10.24 -- Standstill and Corporate Governance Agreement, dated as of
February 6, 1995 - Incorporated by reference to Vornado's
Current Report on Form 8-K dated February 6, 1995 (File No.
001-11954), filed February 21, 1995........................................ *
10.25 -- Credit Agreement, dated as of March 15, 1995, among
Alexander's Inc., as borrower, and Vornado Lending Corp., as
lender - Incorporated by reference from Annual Report on
Form 10-K for the year ended December 31, 1994 (File No. 001
- 11954), filed March 23, 1995............................................. *
10.26 -- Subordination and Intercreditor Agreement, dated as of March
15, 1995 among Vornado Lending Corp., Vornado Realty Trust
and First Fidelity Bank, National Association - Incorporated
by reference to Vornado's Annual Report on Form 10-K for the
year ended December 31, 1994 (File No. 001-11954), filed
March 23, 1995............................................................. *
</TABLE>
- -----------
* Incorporated by reference
-112-
<PAGE> 113
<TABLE>
<CAPTION>
EXHIBIT
NO.
- -----------
<S> <C> <C> <C>
10.27 -- Revolving Credit Agreement dated as of February 27, 1995
among Vornado Realty Trust, as borrower, and Union Bank of
Switzerland, as Bank and Administrative Agent - Incorporated
by reference to Exhibit 10(F)9 of Vornado's Annual Report on
Form 10-K for the year ended December 31, 1994 (File No.
001-11954), filed March 23, 1995........................................... *
10.28 -- Form of Intercompany Agreement between Vornado Realty L.P.
and Vornado Operating, Inc. -Incorporated by reference to
Exhibit 10.1 of Amendment No. 1 to Vornado Operating, Inc.'s
Registration Statement on Form S-11 (File No. 333-40701),
filed on January 23, 1998.................................................. *
10.29 -- Form of Revolving Credit Agreement between Vornado Realty
L.P. and Vornado Operating, Inc., together with related form
of Note - Incorporated by reference to Exhibit 10.2 of
Amendment No. 1 to Vornado Operating, Inc.'s Registration
Statement on Form S-11 (File No.333-40701)................................. *
10.30 -- Amended and Restated Revolving Credit Agreement, dated as of
February 23, 1998, between Vornado Realty L.P., as Borrower,
Vornado Realty Trust, as General Partner and Union Bank of
Switzerland (New York Branch), as Bank, the other banks
signatory hereto, each as a bank, Union Bank of Switzerland
(New York Branch), as Administrative Agent and Citicorp Real
Estate, Inc., The Chase Manhattan Bank and Nationsbank, as
Syndication Agents - Incorporated by reference to Exhibit
10.29 of the 1997 10-K..................................................... *
10.31 -- Registration Rights Agreement, dated as of April 15, 1997,
between Vornado Realty Trust and the holders of Units listed
on Schedule A thereto - Incorporated by reference to Exhibit
10.2 of Vornado's Current Report on Form 8-K (File No.
001-11954), filed on April 30, 1997........................................ *
10.32 -- Noncompetition Agreement, dated as of April 15, 1997, by and
among Vornado Realty Trust, the Mendik Company, L.P., and
Bernard H. Mendik - Incorporated by reference to Exhibit
10.3 of Vornado's Current Report on Form 8-K (File No.
001-11954), filed on April 30, 1997........................................ *
10.33 -- Employment Agreement, dated as of April 15, 1997, by and
among Vornado Realty Trust, The Mendik Company, L.P. and
David R. Greenbaum - Incorporated by reference to Exhibit
10.4 of Vornado's Current Report on Form 8-K (File No.
001-11954), filed on April 30, 1997........................................ *
10.34 -- Agreement, dated September 28, 1997, between Atlanta Parent
Incorporated, Portland Parent Incorporated and Crescent Real
Estate Equities, Limited Partnership - Incorporated by
reference to Exhibit 99.6 of Vornado's Current Report on
Form 8-K (File No. 001-11954), filed on October 8, 1997.................... *
10.35 -- Contribution Agreement between Vornado Realty Trust, Vornado
Realty L.P. and The Contributors Signatory - thereto -
Merchandise Mart Properties, Inc. (DE) and Merchandise Mart
Enterprises, Inc. Incorporated by reference to Exhibit 10.34
of Vornado's Annual Report on Form 10-K/A for the year ended
December 31, 1997 (File No. 001-11954), filed on April 8, 1998............. *
10.36 -- Sale Agreement executed November 18, 1997, and effective
December 19, 1997, between MidCity Associates, a New York
partnership, as Seller, and One Penn Plaza LLC, a New York
Limited liability company; as purchaser. Incorporated by
reference to Exhibit 10.35 of Vornado's Annual Report on
Form 10-K/A for the year ended December 31, 1997 (File No.
001-11954), filed on April 8, 1998......................................... *
10.37 -- Promissory Notes from Michael D. Fascitelli to Vornado
Realty Trust dated March 2, 1998 and April 30, 1998.
Incorporated by reference to Exhibit 10.37 of Vornado's
Quarterly Report on Form 10-Q for the quarter ended March
31, 1998 (File No. 001-11954), filed May 13, 1998.......................... *
</TABLE>
- -----------
* Incorporated by reference
-113-
<PAGE> 114
<TABLE>
<CAPTION>
EXHIBIT
NO.
- -----------
<S> <C> <C> <C>
10.38 -- Credit Agreement dated as of June 22, 1998 among One Penn
Plaza, LLC, as Borrower, The Lenders Party Hereto, The Chase
Manhattan Bank, as Administrative Agent Incorporated by
reference to Exhibit 10 of Vornado's Quarterly Report on
Form 10-Q for the quarter ended June 30, 1998 (File No.
001-11954), filed August 13, 1998.......................................... *
10.39 -- Registration Rights Agreement, dated as of April 1, 1998
between Vornado and the Unit Holders named herein -
Incorporated by reference to Exhibit 10.2 of Amendment No. 1
to Vornado's Registration Statement on Form S-3 (File No.
333-50095), filed on May 6, 1998........................................... *
10.40 -- Underwriting Agreement, dated April 9, 1998, among Vornado,
Vornado Realty L.P. and Goldman, Sachs & Co. - Incorporated
by reference to Exhibit 1.1 of Vornado's Current Report on
Form 8-K, dated April 9, 1998 (File No. 001-11954), filed on
April 16, 1998............................................................. *
10.41 -- Pricing Agreement, dated April 9, 1998, between Vornado and
Goldman, Sachs & Co. - Incorporated by reference to Exhibit
1.2 of Vornado's Current Report on Form 8-K, dated April 9,
1998 (File No. 001-11954), filed on April 16, 1998......................... *
10.42 -- Underwriting Agreement, dated April 23, 1998, among Vornado,
Vornado Realty L.P. and Merrill Lynch, Pierce, Fenner &
Smith Incorporated - Incorporated by reference to Exhibit
1.1 of Vornado's Current Report on Form 8-K, dated April 22,
1998 (File No. 001-11954), filed on April 28, 1998......................... *
10.43 -- Registration Rights Agreement, dated as of August 5, 1998
between Vornado and the Unit Holders named therein -
Incorporated by reference to Exhibit 10.1 of Vornado's
Registration Statement on Form S-3 (File No. 333-89667),
filed on October 25, 1999.................................................. *
10.44 -- Registration Rights Agreement, dated as of July 23, 1998
between Vornado and the Unit Holders named therein -
Incorporated by reference to Exhibit 10.2 of Vornado's
Registration Statement on Form S-3 (File No. 333-89667),
filed on October 25, 1999.................................................. *
10.45 -- Underwriting Agreement, dated March 12, 1999, among Vornado,
Vornado Realty L.P., Merrill Lynch, Pierce, Fenner & Smith
Incorporated - Incorporated by reference to Exhibit 1.1 of
Vornado's Current Report on Form 8-K, dated March 3, 1999
(File No. 001-11954), filed on March 17, 1999.............................. *
10.46 -- Underwriting Agreement, dated May 17, 1999, among Vornado
Realty Trust, Vornado Realty L.P., Salomon Smith Barney Inc.
and the other underwriters named therein - Incorporated by
reference to Exhibit 1.1 of Vornado's Current Report on Form
8-K, dated May 17, 1999 (File No. 001-11954), filed on May 26, 1999........ *
10.47 -- Consolidated and Restated Mortgage, Security Agreement,
Assignment of Leases and Rents and Fixture Filing, dated as
of March 1, 2000, between Entities named therein (as
Mortgagors) and Vornado (as Mortgagee) - Incorporated by
reference to Exhibit 10.47 of Vornado's Annual Report on
Form 10-K, dated March 7, 2000 (File No. 001-11954), filed
on March 9, 2000........................................................... *
10.48 -- Indenture and Servicing Agreement, dated as of March 1,
2000, among Vornado, Lasalle Bank National Association, ABN
Amro Bank N.V. and Midland Loan Services, Inc. -
Incorporated by reference to Exhibit 10.48 of Vornado's
Annual Report on Form 10-K, dated March 7, 2000 (File No.
001-11954), filed on March 9, 2000......................................... *
10.49 -- Employment Agreement, dated January 22, 2000, between
Vornado Realty Trust and Melvyn Blum- Incorporated by
reference to Exhibit 10.49 of Vornado's Annual Report on
Form 10-K, dated March 7, 2000 (File No. 001-11954), filed
on March 9, 2000........................................................... *
</TABLE>
- -----------
* Incorporated by reference
-114-
<PAGE> 115
<TABLE>
<CAPTION>
EXHIBIT
NO.
- -----------
<S> <C> <C> <C>
10.50 -- First Amended and Restated Promissory Note of Steven Roth,
dated November 16, 1999- Incorporated by reference to
Exhibit 10.50 of Vornado's Annual Report on Form 10-K, dated
March 7, 2000 (File No. 001-11954), filed on March 9, 2000................. *
10.51 -- Letter agreement, dated November 16, 1999, between Steven
Roth and Vornado Realty Trust- Incorporated by reference to
Exhibit 10.51 of Vornado's Annual Report on Form 10-K, dated
March 7, 2000 (File No. 001-11954), filed on March 9, 2000................. *
12 -- Consolidated Ratios of Earnings to Fixed Charges and
Combined Fixed Charges and Preferred Share Dividend
Requirements
13 -- Not applicable
16 -- Not applicable
18 -- Not applicable
19 -- Not applicable
21 -- Subsidiaries of the Registrant
22 -- Not applicable
23 -- Consent of independent auditors
25 -- Not applicable
27 -- Financial Data Schedule
29 -- Not applicable
</TABLE>
-115-
<PAGE> 1
EXHIBIT 12
VORNADO REALTY L.P.
CONSOLIDATED RATIOS OF EARNINGS TO FIXED CHARGES AND COMBINED FIXED CHARGES AND
PREFERRED UNIT DISTRIBUTION
REQUIREMENTS
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------------------------------------------------------
1999 1998* 1997* 1996* 1995*
--------- ---------- ----------- ------------ -----------
<S> <C> <C> <C> <C> <C>
EARNINGS:
Net income applicable to Class A
unitholders $ 177,427 $133,153 $ 45,474 $ 61,364 $ 53,008
Preferential allocations not reflected in
fixed charges below 6,082 1,743 -- -- --
Equity in income from certain
partially owned entities in excess of
distributions (16,391) (983) (1,325) (1,108) 2,389
Fixed Charges 227,459 152,217 66,397 17,214 17,333
--------- -------- -------- --------- ---------
Earnings $ 394,577 $286,130 $110,546 $ 77,470 $ 72,730
========= ======== ======== ========= =========
FIXED CHARGES:
Interest and debt expense $ 141,683 $114,686 $ 42,888 $ 16,726 $ 16,426
Capitalized interest 7,012 1,410 -- -- 442
Preferred unit distributions 33,438 21,690 15,549 -- --
Preferential allocations 40,570 12,452 7,293 -- --
1/3 of rent expense--interest factor 4,756 1,979 667 488 465
--------- -------- -------- --------- ---------
Total Fixed Charges $ 227,459 $152,217 $ 66,397 $ 17,214 $ 17,333
========= ======== ======== ========= =========
Ratio of Earnings to Fixed Charges 1.73 1.88 1.66 4.50 4.20
========= ======== ======== ========= =========
Rent Expense $ 14,268 $ 5,937 $ 2,001 $ 1,465 $ 1,395
========== ========= ========= ========= =========
</TABLE>
- -------------
* Restated to reflect equity in income from certain partially owned
entities in excess of distributions and preferred unit distributions.
<PAGE> 1
EXHIBIT 21
VORNADO REALTY L.P.
SUBSIDIARIES OF THE REGISTRANT
STATE OF
NAME OF SUBSIDIARY ORGANIZATION
14 West 64th Street Corp. New York
150 East 58th Street L.L.C. New York
1740 Broadway Associates L.P. Delaware
20 Broad Lender L.L.C. New York
201 East 66th Street Corp. New York
201 East 66th Street L.L.C. New York
314 West 40th Street L.L.C. New York
330 Madison Company L.L.C. New York
350 North Orleans L.L.C. Delaware
40 East 14 Realty Associates L.L.C. New York
40 Fulton Street L.L.C. New York
401 Commercial Son, L.L.C. Delaware
401 Commercial, L.P. Delaware
401 General Partner, L.L.C. Delaware
401 Hotel General Partner, L.L.C. Delaware
401 Hotel, L.P. Delaware
527 West Kinzie L.L.C. Delaware
570 Lexington Associates, L.P. New York
570 Lexington Company, L.P. New York
689 5th Avenue L.L.C. Delaware
715 Lexington Avenue LLC New York
770 Broadway Company L.L.C. New York
825 Seventh Avenue Holding L.L.C. New York
866 U.N. Plaza Associates L.L.C. New York
888 Seventh Avenue L.L.C. New York
909 Third Avenue Assignee L.L.C. New York
909 Third GP LLC Delaware
909 Third Mortgage Holder LLC Delaware
AmeriCold Corporation Oregon
AmeriCold Logistics II L.L.C. Delaware
AmeriCold Logistics L.L.C Delaware
AmeriCold Real Estate, L.P. Delaware
AmeriCold Realty, Inc. Delaware
AmeriCold Services Corporation Delaware
Amherst Holding L.L.C. New York
Amherst Industries L.L.C. New York
Arbor Property, L.P. Delaware
Atlanta Parent, Inc. Delaware
Atlantic City Holding L.L.C. New Jersey
B&B Park Avenue L.P. Delaware
BBE GP Corporation Delaware
Bensalem Holding Company L.L.C. Pennsylvania
Bensalem Holding Company L.P. Pennsylvania
Bethlehem Holding Company L.L.C. Pennsylvania
Bethlehem Holding Company L.P. Pennsylvania
<PAGE> 2
STATE OF
NAME OF SUBSIDIARY ORGANIZATION
Bethlehem Properties Holding Company L.L.C. Pennsylvania
Bethlehem Properties Holding Company L.P. Pennsylvania
Bordentown Holding L.L.C. New Jersey
Brentwood Development L.L.C. New York
Bridgeland Warehouses L.L.C. New Jersey
Camden Holding L.L.C. New Jersey
Carmar Freezers Russellville, L.L.C. Missouri
Carmar Group, Inc. Missouri
Carmar Industries, L.L.C. Missouri
Charles E. Smith Commercial Realty L.P. Delaware
Chicopee Holding L.L.C. Massachusetts
Clementon Holding L.L.C. New Jersey
Cross Avenue Broadway Corporation New York
Cumberland Holding L.L.C. New Jersey
Darby Development Corp. Florida
Delran Holding L.L.C. New Jersey
Design Center Owner (D.C.) L.L.C. Delaware
Dover Holding L.L.C. New Jersey
DSAC L.L.C. Texas
DUN L.L.C. Maryland
Durham Leasing L.L.C. New Jersey
EH L.L.C. Maryland
Eleven Penn Plaza L.L.C. New York
Evesham Holding L.L.C. New Jersey
Fuller Madison LLC New York
Gallery Market Holding Company L.L.C. Pennsylvania
Gallery Market Holding Company L.P. Pennsylvania
Gallery Market Properties Holding Company L.L.C. Pennsylvania
Gallery Market Properties Holding Company L.P. Pennsylvania
GBSPI L.L.C. Maryland
Graybar Building L.L.C. New York
Green Acres Mall, L.L.C. Delaware
Greenwich Holding Corporation New York
Hackbridge L.L.C. New Jersey
Hanover Conran's Plaza L.L.C. New Jersey
Hanover Holding L.L.C. New Jersey
Hanover Industries L.L.C. New Jersey
Hanover Leasing L.L.C. New Jersey
Hanover Public Warehousing L.L.C. New Jersey
Henrietta Holding L.L.C. New York
HHC L.L.C. Maryland
Jersey City Leasing L.L.C. New Jersey
Kearny Holding L.L.C. New Jersey
Kearny Leasing L.L.C. New Jersey
Lancaster Leasing Company L.L.C. Pennsylvania
Lancaster Leasing Company L.P. Pennsylvania
Landthorp Enterprises L.L.C. Delaware
Lawnside Holding L.L.C. New Jersey
Lawnwhite Holding L.L.C. New Jersey
Lewisville Centre L.P. Texas
Lewisville TC L.L.C. Texas
Littleton Holding L.L.C. New Jersey
Lodi Industries L.L.C. New Jersey
Lodi Leasing L.L.C. New Jersey
M 330 Associates, L.P. New York
M 393 Associates L.L.C. New York
<PAGE> 3
STATE OF
NAME OF SUBSIDIARY ORGANIZATION
M/H Two Park Associates New York
Manalapan Industries L.L.C. New Jersey
Market Square Condominium LLC Delaware
Market Square Furniture Plaza LLC Delaware
Market Square Hamilton Center Delaware
Market Square Hotel LLC Delaware
Market Square L.L.C. Illinois
Market Square Main Street LLC Delaware
Marple Holding Company L.L.C. Pennsylvania
Marple Holding Company L.P. Pennsylvania
Mart Franchise Center, Inc. Delaware
Mart Franchise Venture, L.L.C. Delaware
Menands Holding L.L.C. New York
Mendik Management Company Inc. New York
Merchandise Mart Enterprises, Inc. Delaware
Merchandise Mart L.L.C. Delaware
Merchandise Mart Properties, Inc. Delaware
Merchandise Mart Properties, Inc. Illinois
Merchandise Mart Properties, Inc. (DE) Delaware
Mesquite - Texas Crossing L.P. Texas
Mesquite TC L.L.C. Texas
Middletown Holding L.L.C. New Jersey
Montclair Holding L.L.C. New Jersey
Morris Plains Leasing L.L.C. New Jersey
MRC Management L.L.C. New York
National Furniture Mart (NC) LLC Delaware
National Hydrant L.L.C. New York
New Hanover L.L.C. New Jersey
New Woodbridge L.L.C. New Jersey
Newington Connecticut Holding L.L.C. Connecticut
NFM Corp. Delaware
NFM Partners LP Delaware
Ninety Park Lender LLC New York
Ninety Park Lender QRS, Inc. Delaware
Ninety Park Manager LLC New York
Ninety Park Option LLC New York
Ninety Park Property LLC New York
North Bergen Stores L.L.C. New Jersey
North Plainfield Holding L.L.C. New Jersey
Office Center Owner (D.C.) L.L.C. Delaware
One Penn Plaza LLC New York
Philadelphia Holding Company L.L.C. Pennsylvania
Philadelphia Holding Company L.P. Pennsylvania
Phillipsburg Holding L.L.C. New Jersey
Pike Holding Company L.L.C. Pennsylvania
Pike Holding Company L.P. Pennsylvania
Portland Parent, Inc. Delaware
Rahway Leasing L.L.C. New Jersey
RF Operations LLC
Rochester Holding L.L.C. New York
Russia Fund, L.L.C. Delaware
Skillman Abrams Crossing L.P. Texas
South Capital L.L.C. Delaware
Springfield Holding L.L.C. Massachusetts
Star Universal L.L.C. New Jersey
Stardial GP Corporation Delaware
<PAGE> 4
STATE OF
NAME OF SUBSIDIARY ORGANIZATION
T.G. Hanover L.L.C. New Jersey
T53 Condominium L.L.C. New York
TGSI L.L.C. Maryland
The Second Lawnside L.L.C. New Jersey
The Second Rochester Holding L.L.C. New York
Trees Acquisition Subsidiary, Inc. Delaware
Turnersville Holding L.L.C. New Jersey
Two Guys From Harrison Holding Co. L.P. Pennsylvania
Two Guys From Harrison Holding Co. LLC Pennsylvania
Two Guys From Harrison L.L.C. New Jersey
Two Guys From Harrison N.Y. L.L.C. New York
Two Guys From Harrison NY Inc. New York
Two Guys Mass. L.L.C. Massachusetts
Two Guys-Connecticut Holding L.L.C. Connecticut
Two Park Company New York
Two Penn Plaza REIT, Inc. New York
Unado L.L.C. New Jersey
Unifreeze Services Partnership Delaware
Upper Moreland Holding Company L.L.C. Pennsylvania
Upper Moreland Holding Company L.P. Pennsylvania
URS Logistics, Inc. Delaware
URS Real Estate, L.P. Delaware
URS Realty, Inc. Delaware
VC Carthage, L.L.C. Delaware
VC Freezer Amarillo, L.P. Delaware
VC Freezer Fremont. L.L.C. Delaware
VC Freezer Garden City, L.L.C. Delaware
VC Freezer Omaha Amarillo, L.L.C. Delaware
VC Freezer Phoenix, L.L.C. Delaware
VC Freezer Russelville, L.L.C. Delaware
VC Freezer Sioux Falls, L.L.C. Delaware
VC Freezer Springdale, L.L.C. Delaware
VC Logistics, L.L.C. Delaware
VC Missouri Holdings, L.L.C. Delaware
VC Missouri Real Estate Holding, L.L.C. Delaware
VC Omaha Holdings, L.L.C. Delaware
VC Omaha Real Estate Holdings, L.L.C. Delaware
VC Omaha Texas, L.L.C. Delaware
VC Superior, L.L.C. Delaware
VC Texas, L.P. Delaware
VFC Connecticut Holding L.L.C. Delaware
VFC Massachusetts Holding L.L.C. Delaware
VFC New Jersey Holding L.L.C. Delaware
VNK Corp Massachusetts
VNO 63rd Street LLC New York
Vornado - Westport L.L.C. Connecticut
Vornado 1740 Broadway L.L.C. New York
Vornado 330 West 34th Street L.L.C. Delaware
Vornado 401 Commercial L.L.C. New York
Vornado 401 Hotel II, Inc. New York
Vornado 401 Hotel, Inc. New York
Vornado 550/600 Mamoroneck L.P. Delaware
Vornado 570 Lexington L.L.C. New York
Vornado 63rd Street, Inc. New York
Vornado 640 Fifth Avenue L.L.C. New York
Vornado 90 Park Avenue L.L.C. New York
<PAGE> 5
STATE OF
NAME OF SUBSIDIARY ORGANIZATION
Vornado 90 Park QRS, Inc. New York
Vornado B&B L.L.C. New York
Vornado Ballantrae Holdings, Inc. Delaware
Vornado Caguas GP Inc. Delaware
Vornado Caguas LLC Delaware
Vornado Caguas LP Delaware
Vornado CAPI L.L.C. Delaware
Vornado Catalinas GP Inc. Delaware
Vornado Catalinas LLC Delaware
Vornado Catalinas LP Delaware
Vornado CCA Gainesville, LLC Delaware
Vornado Center Building L.L.C. New York
Vornado CESCR Holdings L.L.C. Delaware
Vornado CESCR II L.L.C. Delaware
Vornado CESCR L.L.C. Delaware
Vornado Crescent Atlanta Partnership Delaware
Vornado Crescent Holding L.P. Delaware
Vornado Crescent Logistics Operating Partnership Delaware
Vornado Crescent Omaha Partnership Delaware
Vornado Crescent Portland Partnership Delaware
Vornado Communications L.L.C. Delaware
Vornado Deer Park L.L.C. New York
Vornado Finance Corporation Delaware
Vornado Finance GP L.L.C. Delaware
Vornado Finance L.P. Delaware
Vornado Finance SPE, Inc. Delaware
Vornado Fort Lee LLC New Jersey
Vornado Green Acres Acquisition L.L.C. Delaware
Vornado Green Acres Delaware L.L.C. Delaware
Vornado Green Acres Funding L.L.C. Delaware
Vornado Green Acres Holdings L.L.C. Delaware
Vornado Green Acres SPE Managing Member, Inc. Delaware
Vornado Investment Corporation New York
Vornado Investments L.L.C. Delaware
Vornado Lending L.L.C. New Jersey
Vornado M 330 L.L.C. New York
Vornado M 393 L.L.C. New York
Vornado M 393 QRS, Inc. New York
Vornado M/H L.L.C. Delaware
Vornado Mamaroneck L.L.C. Delaware
Vornado Management Corp. New Jersey
Vornado Montehiedra Acquisition L.L.C. Delaware
Vornado Montehiedra Acquisition L.P. Delaware
Vornado Montehiedra Holding II L.P. Delaware
Vornado Montehiedra Holding L.L.C. Delaware
Vornado Montehiedra Holding L.P. Delaware
Vornado Montehiedra Inc. Delaware
Vornado Montehiedra OP L.L.C. Delaware
Vornado Montehiedra OP L.P. Delaware
Vornado New York RR One L.L.C. New York
Vornado Newkirk L.L.C. Massachusetts
Vornado NK Loan L.L.C. Massachusetts
Vornado Omaha Holdings, Inc. Delaware
Vornado Realty L.L.C. Delaware
Vornado Realty L.P. Delaware
Vornado RR Inc. Delaware
<PAGE> 6
STATE OF
NAME OF SUBSIDIARY ORGANIZATION
Vornado RR Midtown L.L.C. New York
Vornado RTR, Inc. Delaware
Vornado SC Properties LLC Delaware
Vornado Two Park Holdings L.L.C. Delaware
Vornado Two Penn Plaza L.L.C. New York
Vornado/Team Room L.L.C. New York
VR LLC Delaware
VR Retail Holdings LLC New York
VRT Development Rights LLC New York
VRT Massachusetts Holding L.L.C. Delaware
VRT New Jersey Holding L.L.C. Delaware
Washington Design Center L.L.C. Delaware
Washington Office Center L.L.C. Delaware
Watchung Holding L.L.C. New Jersey
West Windsor Holding L.L.C. New Jersey
Whitehorse Lawnside L.L.C. New Jersey
York Holding Company L.L.C. Pennsylvania
York Holding Company L.P. Pennsylvania
<PAGE> 1
EXHIBIT 23
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in the following Registration
Statements of our report dated March 7, 2000 appearing in this Annual Report on
Form 10-K of Vornado Realty L.P. for the year ended December 31, 1999:
Vornado Realty Trust:
Registration Statement No. 333-64015 on Form S-3
Amendment No. 1 to Registration Statement No. 333-50095 on Form S-3
Registration Statement No. 333-52573 on Form S-8
Registration Statement No. 333-29011 on Form S-8
Registration Statement No. 333-09159 on Form S-8
Registration Statement No. 333-76327 on Form S-3
Amendment No. 1 to Registration Statement No. 333-89667 on Form S-3
Registration Statement No. 333-81497 on Form S-8
Vornado Realty Trust and Vornado Realty L.P. (Joint Registration Statements):
Amendment No. 4 to Registration Statement No. 333-40787 on Form S-3
Amendment No. 4 to Registration Statement No. 333-29013 on Form S-3
DELOITTE & TOUCHE LLP
Parsippany, New Jersey
March 7, 2000
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
EXHIBIT 27
VORNADO REALTY L.P.
FINANCIAL DATA SCHEDULE
(AMOUNTS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
This schedule contains summary financial information extracted from the
Company's audited financial statements for the year ended December 31, 1999 and
is qualified in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> DEC-31-1999
<CASH> 143,201
<SECURITIES> 106,503
<RECEIVABLES> 49,719
<ALLOWANCES> 36,408
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 3,921,507
<DEPRECIATION> 308,542
<TOTAL-ASSETS> 5,479,218
<CURRENT-LIABILITIES> 0
<BONDS> 2,048,804
1,700,000
478,585
<COMMON> 0
<OTHER-SE> 1,084,035
<TOTAL-LIABILITY-AND-EQUITY> 5,479,218
<SALES> 0
<TOTAL-REVENUES> 696,958
<CGS> 0
<TOTAL-COSTS> 282,118
<OTHER-EXPENSES> 123,736
<LOSS-PROVISION> 5,131
<INTEREST-EXPENSE> 141,683
<INCOME-PRETAX> 255,677
<INCOME-TAX> 0
<INCOME-CONTINUING> 255,677
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 177,427
<EPS-BASIC> 1.97
<EPS-DILUTED> 1.94
</TABLE>
