<PAGE> 1
EXHIBIT INDEX ON PAGE 48
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, 1995
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: 1-5098
VORNADO REALTY TRUST
(Exact name of Registrant as specified in its charter)
MARYLAND 22-1657560
(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:
<TABLE>
<CAPTION>
Title of Each Class Name of Each Exchange on Which Registered
<S> <C>
Common Shares of beneficial interest, $.04 par value per share New York Stock Exchange
</TABLE>
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]
The aggregate market value of the voting shares held by non-affiliates of the
registrant, i.e. by persons other than officers and trustees of Vornado Realty
Trust as reflected in the table in Item 12 of this Annual Report, at March 1,
1996 was $613,292,000.
As of March 1, 1996, there were 24,610,700 shares of the registrant's shares of
beneficial interest outstanding.
Documents Incorporated by Reference
Part III: Proxy Statement for Annual Meeting of Shareholders to be held May 22,
1996.
Page 1 of 56
<PAGE> 2
Table of Contents
NOTE: Vornado Realty Trust and its consolidated subsidiaries are sometimes
referred to in this Annual Report on Form 10-K as "Vornado",
"Registrant" or the "Company".
<TABLE>
<CAPTION>
Item Page
---- ----
<S> <C> <C>
PART I. 1. Business 3
2. Properties 6
3. Legal Proceedings 9
4. Submission of Matters to a Vote of Security Holders 9
Executive Officers of the Registrant 10
PART II. 5. Market for the Registrant's Common Equity and Related
Stockholder Matters 11
6. Selected Consolidated Financial Data 12
7. Management's Discussion and Analysis of Financial
Condition and Results of Operations 14
8. Financial Statements and Supplementary Data 20
9. Changes in and Disagreements with Independent Auditors'
on Accounting and Financial Disclosure 20
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 41
Reports on Form 8-K
SIGNATURES 42
</TABLE>
- ---------------------------
(1) These items are omitted because the Registrant 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, 1995, which is incorporated by reference
herein. Information relating to Executive Officers of the Registrant
appears on page 10 of this Annual Report on Form 10-K.
-2-
<PAGE> 3
PART I
ITEM 1. BUSINESS
GENERAL
The Company is a fully-integrated real estate investment trust
("REIT") which owns, leases, develops, redevelops and manages retail and
industrial properties primarily located in the Midatlantic and Northeast regions
of the United States.
The Company's primary focus is on shopping centers. 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 and the high percentage of square
feet dedicated to large stores. As of December 31, 1995, the Company owned 56
shopping centers in seven states containing 9.9 million square feet, including
1.2 million square feet built by tenants on land leased from the Company. The
Company's shopping centers accounted for 92% and 91%, respectively, of the
Company's rental revenue for the years ended December 31, 1995 and 1994. The
occupancy rate of the Company's shopping center properties was 91% and 94% as of
March 1, 1996 and 1995, respectively and has been over 90% in each of the past
five years.
Further, the Company owns eight warehouse/industrial
properties in New Jersey containing 2.0 million square feet and one office
building in New Jersey containing 100,000 square feet. In addition, the Company
owns 29.3% of the common stock of Alexander's, Inc. ("Alexander's") which has
nine properties in the greater New York metropolitan area.
As of December 31, 1995, approximately 80% of the square
footage of the Company's shopping centers was leased to large stores (over
20,000 square feet) and over 93% was leased to tenants whose businesses are
national or regional in scope. The Company's large 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. The Company's large store 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 believes that this tenant mix
mitigates the effects on its properties of adverse changes in general economic
conditions. Substantially all of the Company's large store leases are long-term
with fixed base rents and provide for step-ups in rent typically occurring every
five years.
In addition, the Company's leases generally provide for
additional rents based on a percentage of tenants' sales. Of the Company's
$80,429,000 of rental revenue in 1995, base rents accounted for approximately
98.8% and percentage rents accounted for approximately 1.2%. The Company's
leases generally pass through to tenants the tenant's share of all common area
charges (including roof and structure, unless it is the tenant's direct
responsibility), real estate taxes and insurance costs and certain capital
expenditures. As of December 31, 1995, the average annual base rent per square
foot for the Company's shopping centers was $8.68.
From 1991 through 1995, the Company's property rentals from
shopping centers (including the effects of straight-lining of rents) was
$54,700,000, $56,900,000, $61,900,000, $64,700,000 and $74,300,000 respectively.
Straight-lining of rents averages the rent increases provided for in leases such
that property rentals for financial statement purposes is constant throughout
the term of the lease. This convention applies to leases entered into after
November 14, 1985.
-3-
<PAGE> 4
ITEM 1. BUSINESS - continued
As of December 31, 1995, no single shopping center property
accounted for more than 6.3% of the Company's total leasable area for its
shopping center properties or more than 5.2% of property rentals for its
shopping center properties. Bradlees, Inc. ("Bradlees") accounted for 21%, 19%
and 18% of total property rentals for each of the three years ended December 31,
1995, respectively. In June 1995, Bradlees filed for protection under Chapter 11
of the U.S. Bankruptcy Code ("Chapter 11"). The Company leases 21 locations to
Bradlees of which 19 are fully guaranteed by Stop & Shop Companies, Inc.
Further, Montgomery Ward & Co., Inc. remains liable on eight of such leases
including the rent it was obligated to pay - approximately 70% of current rent.
Home Depot represented 5% and Sam's Wholesale/Wal*Mart, Shop Rite, Pathmark,
T.J. Maxx/Marshalls and Staples each accounted for approximately 3% of the total
property rentals for the year ended December 31, 1995. Several of the Company's
other tenants, whose rents aggregated less than 5% of the Company's total
property rentals for the year ended December 31, 1995, have also filed for
protection under Chapter 11.
Vornado, Inc., the immediate predecessor to the Company, was
merged with the Company on May 6, 1993 in connection with the Company's
conversion to a REIT.
The Company administers all operating functions, including
leasing, management, construction, finance, legal, accounting and data
processing, from its executive offices (other than the leasing of the Company's
three Texas properties, which is done by an employee locally).
The Company's principal executive offices are located at Park
80 West, Plaza II, Saddle Brook, New Jersey 07663; telephone (201) 587-1000.
RELATIONSHIP WITH ALEXANDER'S
In March 1995, the Company purchased all of the 1,353,468
shares of common stock of Alexander's then owned by Citibank, N.A. ("Citibank")
representing 27.1% of the outstanding shares of common stock of Alexander's, for
$40.50 per share in cash. As a result of the acquisition, the Company owns 29.3%
of the common stock of Alexander's. In addition, the Company lent Alexander's
$45,000,000 (see "Management's Discussion and Analysis of Financial Condition
and Results of Operations - Liquidity and Capital Resources" at page 18).
Alexander's has disclosed in its annual report on Form 10-K
for the year ended December 31, 1995, that it has nine properties (where its
department stores were formerly located) consisting of:
Operating properties:
(i) a recently redeveloped 359,000 square foot building,
two-thirds of which is leased to Sears and Marshalls, on Queens
Boulevard and 63rd Road in Rego Park, Queens, New York ("Rego Park I"),
(ii) a 50% interest in the 427,000 square feet of mall stores at the
Kings Plaza regional shopping center on Flatbush Avenue in Brooklyn,
New York, (iii) a 303,000 square foot building leased to Caldor on
Fordham Road in the Bronx, New York, (iv) a 177,000 square foot
building subleased to Caldor at Roosevelt Avenue and Main Street in
Flushing, New York and (v) a 173,000 square foot building leased to an
affiliate of Conway located at Third Avenue and 152nd Street in the
Bronx, New York, and
Non-operating properties to be redeveloped:
(i) the square block, including a 418,000 square foot
building, bounded by Lexington Avenue and Third Avenue and 58th and
59th Streets in Manhattan, New York, in which Alexander's has the
general partnership interest and a 92% limited partnership interest,
(ii) 39.3 acres at the intersection of Routes 4 and 17 in Paramus, New
Jersey, (iii) a 320,000 square foot anchor store which is one of the
two anchor stores at the Kings Plaza regional shopping center and (iv)
one and one-half blocks of vacant land adjacent to the Rego Park I
location ("Rego Park II").
-4-
<PAGE> 5
ITEM 1. BUSINESS - continued
In September 1995, Caldor filed for protection under Chapter
11. Caldor accounted for approximately 56% and 64% of Alexander's consolidated
revenues for the years ended December 31, 1995 and 1994, respectively.
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.
As of December 31, 1995, Interstate Properties owned 27.7% of
the common shares of beneficial interest of the Company and 27.1% 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. Effective March 2, 1995, for a
three year period, the Company and Interstate Properties are restricted from
owning in excess of two-thirds of Alexander's common stock or entering into
certain other transactions with Alexander's, without the consent of the
independent directors of Alexander's. Alexander's common stock is listed on the
New York Stock Exchange under the symbol "ALX".
COMPETITION
The leasing of real estate is highly competitive. Demand for
retail space has been impacted by the recent bankruptcy of a number of retail
companies and a general trend toward consolidation in the retail industry which
could adversely affect the ability of the Company to attract or retain tenants.
The principal means of competition are price, location and the nature and
condition of the facility to be leased. The Company directly competes with all
lessors and developers of similar space in the areas in which its properties are
located.
ENVIRONMENTAL REGULATIONS
See "Note 10 - Contingencies" to the Consolidated Financial
Statements at page 37.
EMPLOYEES
The Company employs 68 people.
SEGMENT DATA
The company operates in one business segment - real estate.
See "Note 9 - Leases" to the Consolidated Financial Statements at page 36 for
information on significant tenants. Vornado engages in no foreign operations.
-5-
<PAGE> 6
ITEM 2. PROPERTIES
The Company leases 27,000 square feet in Saddle Brook, New Jersey
for use as its executive offices.
The following table sets forth certain information as of December
31, 1995 relating to the properties owned by the Company.
<TABLE>
<CAPTION>
LEASABLE BUILDING
SQUARE FOOTAGE
--------------------------
YEAR OWNED BY NUMBER AVERAGE
ORIGINALLY LAND TENANT ON OF ANNUALIZED
DEVELOPED AREA OWNED BY LAND LEASED TENANTS BASE RENT
LOCATION OR ACQUIRED (ACRES) COMPANY FROM COMPANY 12/31/95 PER SQ.FT. (1)
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
SHOPPING
CENTERS
NEW Atlantic City 1965 17.7 135,774 - 2 $ 4.81
JERSEY
Bordentown 1958 31.2 178,678 - 4 6.37
Bricktown 1968 23.9 259,888 2,764 19 10.04
Cherry Hill 1964 37.6 231,142 63,511 12 8.34
Delran 1972 17.5 167,340 1,200 4 5.10
Dover 1964 19.6 172,673 - 12 7.03
East Brunswick 1957 19.2 219,056 10,400 7 9.41
East Hanover 1962 24.6 271,066 - 17 9.89
Hackensack 1963 21.3 207,548 59,249 21 14.20
Jersey City 1965 16.7 222,478 3,222 11 10.89
Kearny 1959 35.3 41,518 62,471 6 7.69
Lawnside 1969 16.4 142,136 - 2 9.07
Lodi 1975 8.7 130,000 - 1 8.43
Manalapan 1971 26.3 194,265 2,000 7 8.77
Marlton 1973 27.8 173,238 6,836 10 8.28
Middletown 1963 22.7 179,584 52,000 21 10.46
Morris Plains 1985 27.0 171,493 1,000 15 10.09
North Bergen 1959 4.6 6,515 55,597 3 25.78
North Plainfield (4) 1989 28.7 217,360 - 17 8.58
Totowa 1957 40.5 201,471 93,613 8 15.94
</TABLE>
<TABLE>
<CAPTION>
LEASE
PRINCIPAL EXPIRATION/
PERCENT TENANTS OPTION
LOCATION LEASED (1) (OVER 30,000 SQ. FT.) EXPIRATION
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SHOPPING
CENTERS
NEW Atlantic City 90% Sam's Wholesale 1999
JERSEY
Bordentown 100% Bradlees (2) (3) 2001/2021
Shop-Rite 2011/2016
Bricktown 99% Caldor 2008/2028
Shop-Rite 2002/2017
Cherry Hill 94% Bradlees (2) (3) 2006/2026
Shop & Bag 2007/2017
Toys "R" Us 2012/2042
Delran 92% Sam's Wholesale 2011/2021
Dover 62% Shop-Rite 2012/2022
East Brunswick 100% Bradlees (3) 2003/2023
Shoppers World 2007/2012
East Hanover 98% Home Depot 2009/2019
Pathmark 2001/2024
Todays Man 2009/2014
Hackensack 94% Bradlees (3) 2012/2017
Rickel Home Center 2003/2013
Pathmark 2014/2024
Jersey City 97% Bradlees (3) 2002/2022
Shop-Rite 2008/2028
Kearny 100% Pathmark 2013/2033
Rickel Home Center 2008
Lawnside 100% Home Depot 2012/2027
Lodi 100% National 2013/2023
Wholesale Liq.
Manalapan 100% Bradlees (3) 2002/2022
Grand Union 2012/2022
Marlton 100% Bradlees (2) (3) (5) 2011/2031
Shop-Rite 1999/2009
Middletown 96% Bradlees (3) 2002/2022
Grand Union 2009/2029
Morris Plains 92% Caldor 2002/2023
North Bergen 100% Waldbaum's 2012/2032
North Plainfield (4) 97% K Mart 2006/2016
Pathmark 2001/2011
Totowa 95% Bradlees (3) 2013/2028
Home Depot 2015/2025
</TABLE>
-6-
<PAGE> 7
<TABLE>
<CAPTION>
LEASABLE BUILDING
SQUARE FOOTAGE
--------------------------
YEAR OWNED BY NUMBER AVERAGE
ORIGINALLY LAND TENANT ON OF ANNUALIZED
DEVELOPED AREA OWNED BY LAND LEASED TENANTS BASE RENT
LOCATION OR ACQUIRED (ACRES) COMPANY FROM COMPANY 12/31/95 PER SQ.FT. (1)
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
SHOPPING Turnersville 1974 23.3 89,453 6,513 3 5.98
CENTERS
Union 1962 24.1 257,045 - 11 15.02
Vineland 1966 28.0 143,257 - 4 6.95
Watchung 1959 53.8 49,979 115,660 3 17.56
Woodbridge 1959 19.7 232,755 3,614 11 10.30
NEW YORK 14th Street and Union
Square, Manhattan 1993 0.8 231,770 - 1 9.92
Albany (Menands) 1965 18.6 140,529 - 2 5.80
Buffalo (Amherst) (4) 1968 22.7 184,832 111,717 9 5.87
Freeport 1981 12.5 166,587 - 3 10.83
New Hyde Park (4) 1976 12.5 101,454 - 1 13.55
North Syracuse (4) 1976 29.4 98,434 - 1 -
Rochester (Henrietta) (4) 1971 15.0 147,812 - 2 5.60
Rochester 1966 18.4 176,261 - 1 6.05
PENNSYLVANIA Allentown 1957 86.8 262,607 356,938 19 8.71
Bensalem 1972 23.2 208,174 6,714 11 7.23
Bethlehem 1966 23.0 157,212 2,654 10 4.81
Broomall 1966 21.0 145,776 22,355 5 8.31
Glenolden 1975 10.0 101,235 - 3 9.74
Lancaster 1966 28.0 179,982 - 8 4.29
Levittown 1964 12.8 104,448 - 1 5.98
10th and Market
Streets, Philadelphia 1994 1.8 271,300 - 2 8.00
Upper Moreland 1974 18.6 122,432 - 1 7.50
York 1970 12.0 113,294 - 3 4.46
MARYLAND Baltimore (Belair Rd.) 1962 16.0 205,723 - 2 5.95
</TABLE>
<TABLE>
<CAPTION>
LEASE
PRINCIPAL EXPIRATION/
PERCENT TENANTS OPTION
LOCATION LEASED (1) (OVER 30,000 SQ. FT.) EXPIRATION
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SHOPPING Turnersville 100% Bradlees (2) (3) 2011/2031
CENTERS
Union 98% Bradlees (3) 2002/2022
Toys "R" Us 2015
Vineland 51% Rickel Home Center 2005/2010
Watchung 88% B.J. Wholesale 2024
Woodbridge 99% Bradlees (3) 2002/2022
Foodtown 2007/2014
NEW YORK 14th Street and Union
Square, Manhattan 100% Bradlees 2019/2029
Albany (Menands) 100% Fleet Bank 2004/2014
Grand Union (5) 2000
Buffalo (Amherst) (4) 92% Circuit City 2017
Media Play 2002/2017
MJ Design 2006/2017
Toys "R" Us 2013
T.J. Maxx 1999
Freeport 100% Home Depot 2011/2021
New Hyde Park (4) 100% Bradlees 2019/2029
North Syracuse (4) 100% Reisman Properties 2014
Rochester (Henrietta) (4) 68% Hechinger (5) 2005/2025
Marshalls 1998/2003
Rochester 41% Hechinger (5) 2005/2025
PENNSYLVANIA Allentown 100% Hechinger 2011/2031
Shop-Rite 2011/2021
Burlington Coat
Factory 2017
Walmart 2024/2094
Sam's Wholesale 2024/2094
Bensalem 87% Bradlees (2) (3) (5) 2011/2031
Bethlehem 68% Pathmark 2000/2023
Super Petz 2005/2015
Broomall 100% Bradlees (2) (3) 2006/2026
Glenolden 100% Bradlees (2) (3) 2012/2022
Lancaster 52% Weis Markets 1998/2018
Levittown 100% Bradlees (2) (3) 2006/2026
10th and Market
Streets, Philadelphia 62% Clover 2010/2035
Upper Moreland 100% Sam's Wholesale (2) 2010/2015
York 100% Builders Square 2009/2018
MARYLAND Baltimore (Belair Rd.) 65% Big B Food 1999/2004
Warehouse
</TABLE>
-7-
<PAGE> 8
<TABLE>
<CAPTION>
LEASABLE BUILDING
SQUARE FOOTAGE
--------------------------
YEAR OWNED BY NUMBER AVERAGE
ORIGINALLY LAND TENANT ON OF ANNUALIZED
DEVELOPED AREA OWNED BY LAND LEASED TENANTS BASE RENT
LOCATION OR ACQUIRED (ACRES) COMPANY FROM COMPANY 12/31/95 PER SQ.FT. (1)
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
SHOPPING Baltimore (Towson) 1968 14.6 146,393 6,800 7 9.61
CENTERS
Baltimore (Dundalk) 1966 16.1 183,361 - 18 6.49
Glen Burnie 1958 21.2 117,369 3,100 5 6.03
Hagerstown 1966 13.9 133,343 14,965 6 3.04
CONNECTICUT Newington 1965 19.2 134,229 45,000 4 5.84
Waterbury 1969 19.2 139,717 2,645 10 7.88
MASSACHUSETTS Chicopee 1969 15.4 112,062 2,851 3 4.85
Milford (4) 1976 14.7 83,000 - 1 5.01
Springfield 1966 17.4 8,016 117,044 2 11.25
TEXAS Lewisville 1990 13.3 34,893 1,204 16 12.85
Mesquite 1990 5.5 71,246 - 13 15.48
Dallas 1990 9.9 99,733 - 9 9.48
------- --------- --------- --- -----
TOTAL SHOPPING CENTERS 1,179.7 8,678,936 1,233,637 410 8.68
------- ---------- --------- --- ------
WAREHOUSE/ E. Brunswick 1972 16.1 325,800 - 2 2.10
INDUSTRIAL
E. Hanover 1963-1967 45.5 941,429 - 12 3.67
Edison 1982 18.7 272,071 - 1 2.75
Garfield 1959 31.6 486,620 - 3 3.41
------- ---------- --------- --- ------
TOTAL WAREHOUSE/
INDUSTRIAL 111.9 2,025,920 - 18 3.18
------- ---------- --------- --- ------
OTHER Paramus (4) 1987 3.4 118,225 - 22 17.38
PROPERTIES
Montclair 1972 1.6 16,928 - 1 16.36
Rahway (4) 1972 - 32,000 - 1 4.88
------- --------- --------- --- -----
Total Other Properties 5.0 167,153 - 24 13.88
------- ---------- --------- --- ------
Grand Total 1,296.6 10,872,009 1,233,637 452 $ 7.80
======= ========== ========= === ======
</TABLE>
<TABLE>
<CAPTION>
LEASE
PRINCIPAL EXPIRATION/
PERCENT TENANTS OPTION
LOCATION LEASED (1) (OVER 30,000 SQ. FT.) EXPIRATION
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SHOPPING Baltimore (Towson) 100% Staples 2004
CENTERS
Baltimore (Dundalk) 97% Various Tenants
Glen Burnie 100% Rickel Home 2005
Center (5)
Hagerstown 100% Pharmhouse 2008/2012
Weis Markets 1999/2009
CONNECTICUT Newington 95% Bradlees (3) 2002/2022
Rickel Home 2007/2027
Center
Waterbury 100% Toys "R" Us 2010
Finast 2003/2018
Supermarkets
MASSACHUSETTS Chicopee 92% Bradlees (3) 2002/2022
Milford (4) 100% Bradlees (3) 2004/2009
Springfield 100% Wal*Mart 2018/2092
TEXAS Lewisville 95% Albertson's (6) 2055
Mesquite 93%
Dallas 78% Albertson's (6) 2055
---
TOTAL SHOPPING CENTERS 91%
---
WAREHOUSE/ E. Brunswick 97% Popsicle Playwear 2000/2005
INDUSTRIAL IFB Apparel, Inc. 2001/2006
E. Hanover 94% Various Tenants
Edison 100% White Cons. Ind.,Inc. 1998/2001
Garfield 38% Popular Services 1997
---
& Various Tenants
TOTAL WAREHOUSE/
INDUSTRIAL 82%
---
OTHER Paramus (4) 59%
PROPERTIES
Montclair 100%
Rahway (4) 100%
---
Total Other Properties 71%
---
Grand Total 89%
===
</TABLE>
(1) Average annualized base rent per square foot does not include ground leases
(which leases are included in percent leased) or rent for leases which had not
commenced as of December 31, 1995.
(2) The tenant at these locations has subleased or been assigned its space from
Montgomery Ward & Co., Inc. which remains liable on such lease including the
rent it was obligated to pay - approximately 70%.
(3) These leases are guaranteed by the Stop & Shop Companies, Inc.
(4) Ground and/or building leasehold interest
(5) The tenant has ceased operations at these locations but continues to pay
rent.
(6) Square footage excludes Albertson's which owns its land and building.
-8-
<PAGE> 9
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.
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 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, 1995.
-9-
<PAGE> 10
EXECUTIVE OFFICERS OF THE REGISTRANT
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 during past five years with Vornado unless
Name Age otherwise stated)
---- --- ----------------------------------------------------------
<S> <C> <C>
Steven Roth 54 Chairman of the Board, Chief Executive Officer and
Chairman of the Executive Committee of the Board; the
Managing General Partner of Interstate Properties, a
developer and operator 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; Director of Insituform Technologies, Inc.
Richard T. Rowan 49 Vice President - Real Estate
Joseph Macnow 50 Vice President - Chief Financial Officer; Vice President -
Chief Financial Officer of Alexander's, Inc. since August
1995
</TABLE>
-10-
<PAGE> 11
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
- -------------------------------------------------------------------------------
Vornado's common shares are traded on the New York Stock Exchange.
Quarterly price ranges of the common shares and dividends per share paid for the
years ended December 31, 1995 and 1994 were as follows:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------
YEAR ENDED YEAR ENDED
DECEMBER 31, 1995 DECEMBER 31, 1994
- -------------------------------------------------------------------------------------
Quarter High Low Dividends High Low Dividends
- -------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C>
1st $36.25 $33.88 $.56 $36.50 $31.50 $.50
2nd 36.00 32.63 .56 37.50 32.25 .50
3rd 39.00 34.75 .56 37.50 34.00 .50
4th 37.88 34.38 .56 35.88 30.50 .50
- ------------------------------------------------------------------------------------
</TABLE>
The approximate number of record holders of common shares of Vornado at
December 31, 1995, was 2,000.
-11-
<PAGE> 12
PART II
ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
Year Ended December 31,
----------------------------------------------------------------
1995 1994 1993 1992 1991
- ----------------------------------------------------------------------------------------------------------------------
(in thousands, except share and per share amounts)
<S> <C> <C> <C> <C> <C>
OPERATING DATA
Revenues:
Property rentals $ 80,429 $ 70,755 $ 67,213 $ 63,186 $ 61,371
Expense reimbursements 24,091 21,784 19,839 17,898 16,865
Other income 4,198 1,459 1,738 913 262
- ----------------------------------------------------------------------------------------------------------------------
Total Revenues 108,718 93,998 88,790 81,997 78,498
- ----------------------------------------------------------------------------------------------------------------------
Expenses:
Operating 32,282 30,223 27,994 27,587 25,848
Depreciation and amortization 10,790 9,963 9,392 9,309 9,115
General and administrative 6,687 6,495 5,890 4,612 4,770
Costs incurred in connection with the merger
Vornado, Inc. into Vornado Realty Trust -- -- 856 -- --
Cost incurred upon exercise of a stock option
by an officer and subsequent repurchase of
a portion of the shares -- -- -- 15,650 --
- ----------------------------------------------------------------------------------------------------------------------
Total Expenses 49,759 46,681 44,132 57,158 39,733
- ----------------------------------------------------------------------------------------------------------------------
Operating income 58,959 47,317 44,658 24,839 38,765
Income (loss) applicable to Alexander's:
Equity in loss (1,972) -- -- -- --
Depreciation (417) -- -- -- --
Interest income on loan 6,343 -- -- -- --
Income from investment in and advances to
Vornado Management Corp. 788 -- -- -- --
Interest and dividend income 5,439 7,489 11,620 8,555 9,303
Interest and debt expense (16,426) (14,209) (31,155) (33,910) (34,930)
Net gain on marketable securities 294 643 263 2,779 4,862
- ----------------------------------------------------------------------------------------------------------------------
Income from continuing operations before
income taxes 53,008 41,240 25,386 2,263 18,000
Provision (benefit) for income taxes -- -- (6,369) 1,080 7,527
- ----------------------------------------------------------------------------------------------------------------------
Income from continuing operations $ 53,008 $ 41,240 $ 31,755 $ 1,183 $ 10,473
- ----------------------------------------------------------------------------------------------------------------------
Weighted average number
of shares outstanding 23,579,669 21,853,720 19,790,448 16,559,330 16,324,895
Income per share from
continuing operations $2.25 $1.89 $1.60 $ .07 $ .64
Cash dividends declared 2.24 2.00 1.50 * 1.15 1.08
* Does not include special dividend of $3.36
per share of accumulated earnings
and profits paid in June 1993.
BALANCE SHEET DATA
As at:
Total assets $491,496 $393,538 $385,830 $420,616 $393,447
Real estate, at cost 382,476 365,832 340,415 314,651 305,123
Accumulated depreciation 139,495 128,705 118,742 111,142 103,520
Debt 233,353 234,160 235,037 341,701 345,608
Shareholders' equity (deficit) 194,274 116,688 115,737 (3,242) 8,125
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
-12-
<PAGE> 13
ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA - (continued)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
Year Ended December 31,
--------------------------------------------------------
1995 1994 1993 1992 1991
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
OTHER DATA
Funds from operations (1) (2):
Income from continuing operations before income
taxes $ 53,008 $ 41,240 $ 25,386 $ 2,263 $ 18,000
Depreciation and amortization of real property 10,019 9,192 8,842 8,778 8,604
Straight-lining of rental income (2,569) (2,181) (2,200) (2,200) (2,200)
Leasing fees received in excess of income recognized 1,052 -- -- -- --
Losses/(gains) on sale of securities available for sale 360 (51) (263) (846) (1,932)
Proportionate share of adjustments to Alexander's loss
to arrive at Alexander's funds from operations 539 -- -- -- --
Costs incurred in connection with
the merger/upon exercise of a stock option -- -- 856 15,650 --
- ----------------------------------------------------------------------------------------------------------------------------
Funds from operations $ 62,409 $ 48,200 $ 32,621 $23,645 $ 22,472
- ----------------------------------------------------------------------------------------------------------------------------
Cash flow provided by (used in):
Operating activities $ 62,882 $ 46,948 $ 27,725 $17,607 $ 36,244
Investing activities $(103,891) $(15,434) $ 1,350 $14,800 $(17,214)
Financing activities $ 36,577 $(32,074) $(56,433) $ 4,384 $ (9,815)
</TABLE>
(1) Funds from operations does not represent cash generated from operating
activities in accordance with generally accepted accounting principles and is
not necessarily indicative of cash available to fund cash needs. Funds from
operations should not be considered as an alternative to net income as an
indicator of the Company's operating performance or as an alternative to cash
flows as a measure of liquidity.
(2) Effective January 1, 1995, the Company changed its definition of funds from
operations to exclude amortization of debt issuance costs and depreciation of
personal property. Prior period amounts have been restated to conform to the
current year's presentation. The Company's definition of funds from operations
does not conform to the NAREIT definition because the Company deducts the effect
of straight-lining of property rentals.
Amounts included in revenues and expenses have been reclassified to conform with
the current year's presentation.
-13-
<PAGE> 14
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
- -------------------------------------------------------------------------------
RESULTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1995 AND DECEMBER 31, 1994
The Company's revenues, which consist of property rentals, tenant expense
reimbursements and other income were $108,718,000 in 1995, compared to
$93,998,000 in 1994, an increase of $14,720,000 or 15.7%.
Property rentals from shopping centers were $73,296,000 in 1995, compared to
$63,778,000 in 1994, an increase of $9,518,000 or 14.9%. Of this increase, (i)
$6,067,000 resulted from expansions of shopping centers and acquisitions of
retail properties, (ii) $2,823,000 resulted from rental step-ups in existing
tenant leases which are not subject to the straight-line method of revenue
recognition and (iii) $628,000 resulted from property rentals received from new
tenants exceeding property rentals lost from vacating tenants.
Property rentals from the remainder of the portfolio were $6,174,000 in 1995,
compared to $6,090,000 in 1994, an increase of $84,000 or 1.4%. Percentage rent
was $959,000 in 1995, compared to $887,000 in 1994.
Tenant expense reimbursements were $24,091,000 in 1995, compared to $21,784,000
in 1994, an increase of $2,307,000. This increase reflects a corresponding
increase in operating expenses passed through to tenants.
Other income was $4,198,000 in 1995, compared to $1,459,000 in 1994, an increase
of $2,739,000. This increase resulted primarily from the fee income recognized
in connection with the Management Agreement and Leasing Agreement with
Alexander's (including $915,000 applicable to 1993 and 1994 recognized in the
first quarter of 1995). No leasing fee income was recognized prior to 1995
because Alexander's had not repaid certain creditors, which was a condition
precedent to the commencement of the payment of leasing fees owed by Alexander's
to the Company. In addition to the Management Agreement fee income included in
other income in 1995, $2,250,000 of such fees was earned in 1995 by Vornado
Management Corp. ("VMC") and is included in the caption "Income from investment
in and advances to Vornado Management Corp." in the Consolidated Statements of
Income.
Operating expenses were $32,282,000 in 1995 as compared to $30,223,000
in 1994, an increase of $2,059,000. Of this increase (i) $1,484,000 resulted
from real estate taxes from expansions and acquisitions, which were passed
through to tenants, and (ii) $258,000 resulted from bad debt expenses primarily
due to tenant bankruptcies.
Depreciation and amortization expense increased in 1995, compared to 1994,
primarily as a result of property expansions.
General and administrative expenses were $6,687,000 in 1995 as compared to
$6,495,000 in 1994, an increase of $192,000. This increase is the net of
increases from (i) payroll expenses of $1,017,000, (due to additions to staff
and bonuses), and (ii) professional fees and other corporate office expenses of
$305,000, offset by (iii) the reduction in expenses of $1,130,000 resulting from
the assignment of the Company's Management Agreement with Alexander's to VMC in
the third quarter of this year.
In March 1995, the Company purchased all of the 1,353,468 shares of common stock
of Alexander's then owned by Citibank, representing 27.1% of the outstanding
shares. As a result of the acquisition, the Company owns 29.3% of the common
stock of Alexander's and has changed its accounting for its investment in
Alexander's to the equity method. For the period from March 2, 1995 through
December 31, 1995, Vornado's equity in Alexander's losses amounted to
$1,972,000. In addition, during the same period the Company recognized interest
income on its loan to Alexander's of $6,343,000 and fee income from its
Management Agreement and Leasing Agreement with Alexander's of $2,973,000
(excluding $2,250,000 earned by VMC - see paragraph below). The Company believes
that its share of Alexander's losses (which are non-cash) combined with its fee
income and interest income will not have a negative effect on its results of
operations, liquidity and financial condition.
-14-
<PAGE> 15
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS - (continued)
- -------------------------------------------------------------------------------
On July 6, 1995 the Company assigned its Management Agreement with Alexander's
to VMC, a newly formed New Jersey corporation. In exchange, the Company received
100% of the non-voting preferred stock of VMC which entitles it to 95% of the
distributions by VMC to its shareholders. In addition, the Company lent
$5,000,000 to VMC for working capital purposes under a three year term loan
bearing interest at the prime rate plus 2%. VMC is responsible for its pro-rata
share of compensation (including bonuses) and fringe benefits of common
employees and 30% of other common expenses. Income from investment in and
advances to VMC consists of dividend income of $565,000 and interest income of
$223,000.
Investment income (interest and dividend income and net gains/(losses) on
marketable securities) was $5,733,000 for 1995, compared to $8,132,000 in 1994,
a decrease of $2,399,000 or 29.5%. This decrease was caused by (i) lower
interest income resulting from the use of cash for the Alexander's investment
and (ii) net gains on marketable securities being $349,000 less than in the
prior year.
Interest and debt expense was $16,426,000 in 1995 as compared to $14,209,000 in
1994, an increase of $2,217,000 or 15.6%. Of this increase, $1,046,000 resulted
from borrowings under the revolving credit facility to temporarily fund the
investment in Alexander's and $1,134,000 resulted from a decrease in interest
capitalized during construction.
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
(the "Code"). 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. In 1993, as a result of the Company's
conversion to a REIT, the deferred tax balance of $6,369,000 at December 31,
1992 was reversed.
RESULTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1994 AND DECEMBER 31, 1993
The Company's revenues, which consist of property rentals, tenant expense
reimbursements and other income were $93,998,000 in 1994, compared to
$88,790,000 in 1993, an increase of $5,208,000 or 5.9%.
Property rentals from shopping centers were $63,778,000 in 1994, compared to
$60,919,000 in 1993, an increase of $2,859,000 or 4.7%. This increase resulted
from rental step-ups in leases which are not subject to the straight-line method
of revenue recognition of $1,700,000 and $1,300,000 of rents from tenants at
expansions of shopping centers. Property rentals from new tenants were
approximately the same as property rentals lost from vacating tenants. Property
rentals from the remainder of the portfolio were $6,090,000 in 1994 as compared
to $5,340,000 in 1993, an increase of $750,000 or 14.0%. This increase resulted
primarily from property rentals received from new tenants exceeding property
rentals lost from vacating tenants. Percentage rent was $887,000 in 1994 as
compared to $954,000 in 1993.
Tenant expense reimbursements were $21,784,000 in 1994, compared to $19,839,000
in 1993, an increase of $1,945,000. This increase reflects a corresponding
increase in operating expenses passed through to tenants.
Other income was greater in 1993 than in 1994 primarily as a result of
reimbursements recognized under the Company's leasing agreement with Alexander's
in 1993.
Operating expenses were $30,223,000 in 1994 as compared to $27,994,000 in 1993,
an increase of $2,229,000. This increase resulted primarily from an increase in
real estate taxes, snow removal costs and other common area maintenance charges.
Depreciation and amortization expense increased in 1994 primarily as a result of
the completion of property expansions.
-15-
<PAGE> 16
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
- -------------------------------------------------------------------------------
General and administrative expenses were $6,495,000 in 1994 as compared to
$5,890,000 in 1993, an increase of $605,000. This increase resulted from higher
professional fees and payroll.
Investment income was $8,132,000 in 1994 compared to $11,883,000 in 1993, a
decrease of $3,751,000 or 31.6%. The change in investment income resulted
primarily from a decrease in interest and dividend income of $4,131,000 as a
result of lower average investments due to the use of approximately $100,000,000
to reduce debt in November 1993, partially offset by an increase in net gains on
marketable securities.
Interest and debt expense was $14,209,000 in 1994 as compared to $31,155,000 in
1993, a decrease of $16,946,000 or 54.3%. Of this decrease, (i) $14,586,000
resulted from the refinancing of a blanket mortgage loan (see Note 6), and (ii)
$1,300,000 resulted from an increase in capitalized interest during
construction.
LIQUIDITY AND CAPITAL RESOURCES
CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
Year Ended December 31, 1995 Cash flows provided by operating activities of
$62,882,000 was comprised of: (i) net income of $53,008,000 and (ii) adjustments
for non-cash items of $11,305,000 less (iii) the net change in operating assets
and liabilities of $1,431,000. The adjustments for non-cash items are primarily
comprised of depreciation and amortization of $11,779,000, plus equity in loss
of Alexander's of $2,389,000, offset by the effect of straight-lining of rental
income of $2,569,000. Further, during this period in connection with the
Alexander's transaction, "Leasing fees and other receivables" increased by
$7,656,000 and "Deferred leasing fee income" correspondingly increased by
$8,888,000. These amounts have been included in "Changes in assets and
liabilities: other" in the Consolidated Statements of Cash Flows and are part of
the net change in operating assets and liabilities shown in item (iii) above.
Net cash used in investing activities of $103,891,000 was comprised of (i) the
Company's investment in and advances to Alexander's of $100,482,000, (ii)
capital expenditures of $16,644,000, (iii) a loan to VMC of $5,074,000 and (iv)
purchases of securities available for sale of $4,027,000, offset by (v) the net
proceeds from the sale of securities available for sale of $22,336,000.
Net cash provided by financing activities of $36,577,000 was primarily comprised
of (i) net proceeds from issuance of common shares of $79,831,000, and (ii)
borrowings on U.S. Treasury obligations of $9,600,000, offset by (iii) dividends
paid of $52,875,000.
Year Ended December 31, 1994 Cash flows provided by operating activities of
$46,948,000 was comprised of: (i) net income of $41,240,000, and (ii)
adjustments for non-cash items of $8,015,000, less (iii) the net change in
operating assets and liabilities of $2,307,000. The adjustments for non-cash
items are primarily comprised of depreciation and amortization of $10,839,000,
offset by the effect of straight-lining of rental income of $2,181,000.
Net cash used in investing activities of $15,434,000 was comprised of capital
expenditures of $25,417,000, offset by proceeds from the sale of securities
available for sale of $9,983,000.
Net cash used in financing activities of $32,074,000 was primarily comprised of
dividends paid of $43,236,000, offset by borrowings on U.S. Treasury obligations
of $11,428,000.
Year Ended December 31, 1993 Cash flows provided by operating activities of
$27,725,000 was primarily comprised of: (i) net income of $31,755,000, less (ii)
adjustments for non-cash items of $599,000 and the net change in operating
assets and liabilities of $2,831,000. The adjustments for non-cash items are
primarily comprised of depreciation and amortization of $11,435,000, offset by
(i) the effect of straight- lining of rental income of $2,200,000, (ii) the
reversal of deferred income taxes of $6,369,000, and (iii) the loss on the early
extinguishment of debt of $3,202,000.
-16-
<PAGE> 17
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS - (continued)
- -------------------------------------------------------------------------------
Net cash provided by investing activities of $1,350,000 was comprised of net
proceeds from the sale of securities available for sale of $28,336,000, offset
by capital expenditures of $26,986,000.
Net cash used in financing activities of $56,433,000 was primarily comprised of
(i) debt repayments of $333,664,000, net of proceeds from borrowings of
$227,000,000, less $5,247,000 of deferred debt expenses incurred therewith, (ii)
dividends paid to shareholders of $84,482,000 (including a special dividend of
$54,022,000 of accumulated earnings and profits, as determined for federal
income tax purposes), and (iii) repayment of borrowings on U.S. Treasury
obligations of $30,048,000, offset by (iv) net proceeds from issuance of common
shares of $172,051,000.
FUNDS FROM OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1994
Management considers funds from operations an appropriate supplemental measure
of the Company's operating performance. Funds from operations were $62,409,000
in 1995, compared to $48,200,000 in 1994, an increase of $14,209,000 or 29.5%.
The following table reconciles funds from operations and net income:
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------------------
1995 1994
------------ ------------
<S> <C> <C>
Net income $ 53,008,000 $ 41,240,000
Depreciation and
amortization of real
property 10,019,000 9,192,000
Straight-lining of
property rentals (2,569,000) (2,181,000)
Leasing fees
received in excess
of income
recognized 1,052,000 --
Loss/(gain) on sale
of securities available
for sale 360,000 (51,000)
Proportionate share
of adjustments
to Alexander's
loss to arrive at
Alexander's funds
from operations 539,000 --
------------ ------------
Funds from
operations * $ 62,409,000 $ 48,200,000
============ ============
</TABLE>
* Effective January 1, 1995, the Company changed its definition of funds from
operations to exclude amortization of debt issuance costs and depreciation of
personal property. Prior period amounts have been restated to conform to the
current year's presentation. The Company's definition of funds from operations
does not conform to the NAREIT definition because the Company deducts the effect
of the straight-lining of property rentals.
Funds from operations does not represent cash generated from operating
activities in accordance with generally accepted accounting principles and is
not necessarily indicative of cash available to fund cash needs. Funds from
operations should not be considered as an alternative to net income as an
indicator of the Company's operating performance or as an alternative to cash
flows as a measure of liquidity. Below are the cash flows provided by (used in)
operating, investing and financing activities:
<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------------
1995 1994
------------- ------------
<S> <C> <C>
Operating activities $ 62,882,000 $ 46,948,000
============= ============
Investing activities $(103,891,000) $(15,434,000)
============= ============
Financing activities $ 36,577,000 $(32,074,000)
============= ============
</TABLE>
-17-
<PAGE> 18
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS - (continued)
- -------------------------------------------------------------------------------
On June 23, 1995, Bradlees, which accounted for 21% of property rentals for the
year ended December 31, 1995, filed for protection under Chapter 11. The Company
leases 21 locations to Bradlees of which 19 are fully guaranteed by Stop & Shop
Companies, Inc. Furthermore, Montgomery Ward & Co., Inc., remains liable on
eight of such leases including the rent it was obligated to pay approximately
70% of current rent. Bradlees has not affirmed any of these leases.
The major items of capital expenditures for 1995 were $8,200,000 for expansions
of four shopping centers and $4,600,000 for improvements at five shopping
centers. The Company has budgeted approximately $3,000,000 for investment over
the next year. In addition, the Company will continue its program of upgrading
its shopping centers by refurbishing its parking lots (including resurfacing,
new lighting, updated landscaping, islands and curbing) and re-roofing of
buildings, the cost of which will be substantially reimbursed by tenants in
accordance with existing lease terms.
In March 1995, the Company purchased all of the 1,353,468 shares of common stock
of Alexander's then owned by Citibank, representing 27.1% of the outstanding
shares of common stock of Alexander's, for $40.50 per share in cash or
$56,615,000 (including $1,800,000 of costs incurred in the purchase). As a
result of the acquisition, the Company owns 29.3% of the common stock of
Alexander's.
On March 15, 1995, the Company lent Alexander's $45 million, the subordinated
tranche of a $75 million secured financing, the balance of which was funded by a
bank. The Company's loan has a three-year term and bears interest at 16.43% per
annum for the first two years and at a fixed rate for the third year of 992
basis points over the one-year Treasury bill rate. In addition, the Company
received a loan origination fee of $1,500,000 from Alexander's.
Alexander's has disclosed in its annual report on Form 10-K for the year ended
December 31, 1995, that its current operating properties (five of its nine
properties) do not generate sufficient cash flow to pay all of its expenses, and
that its four non-operating properties (Lexington Avenue, Paramus, the Kings
Plaza Store and Rego Park II) are in various stages of redevelopment, and as
rents commence from a portion of the redevelopment properties, it expects that
cash flow will become positive.
In addition to the disclosures above, Alexander's estimates that the fair market
values of its assets are substantially in excess of their historical cost and
that there is additional borrowing capacity. Alexander's continues to evaluate
its needs for capital, which may be raised through (a) property specific or
corporate borrowing, (b) the sale of securities and (c) asset sales. Further,
Alexander's may receive the proceeds from tax certiorari and/or condemnation
proceedings. Although there can be no assurance, Alexander's believes that these
cash sources will be adequate to fund cash requirements until its operations
generate adequate cash flow.
On February 27, 1995, the Company entered into a three-year unsecured revolving
credit facility with a bank providing for borrowings of up to $75,000,000.
Borrowings bear annual interest, at the Company's election, at LIBOR plus 1.50%
or the higher of the federal funds rate plus 1% or prime rate plus .50%. At
December 31, 1995 the Company had no borrowings outstanding under the facility.
On May 3, 1995, the Company completed the sale of 2,500,000 common shares in a
public offering at $34.00 per share, which net of expenses yielded approximately
$80,000,000 of which $60,000,000, was used to repay indebtedness incurred under
a revolving credit facility in connection with the Alexander's investment. On
December 26, 1995, a shelf registration statement relating to $500,000,000 of
securities became effective.
The Company anticipates that cash from continuing operations, net liquid assets,
borrowings under its revolving credit facility and/or proceeds from the issuance
of securities under the Company's shelf registration statement will be adequate
to fund its business operations, capital expenditures, continuing debt
obligations and the payment of dividends.
-18-
<PAGE> 19
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS - (continued)
- -------------------------------------------------------------------------------
ECONOMIC CONDITIONS
At December 31, 1995, approximately 80% of the square footage of the Company's
shopping centers was leased to large stores (over 20,000 square feet). The
Company's large store 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 believes that this tenant mix mitigates the effects on its properties
of adverse changes in general economic conditions. However, demand for retail
space has been impacted by the recent bankruptcy of a number of retail
companies (see page 18) and a general trend toward consolidation in the retail
industry which could adversely affect the ability of the Company to attract or
retain tenants.
Substantially all of the Company's 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, unless it is the
tenant's direct responsibility) and real estate taxes thus passing through to
the tenants the effects of inflation on such expenses.
Inflation did not have a material effect on the Company's results for the
periods presented.
RECENTLY ISSUED ACCOUNTING STANDARDS
In October 1995, the Financial Accounting Standards Board adopted Statement No.
123, "Accounting for Stock-Based Compensation". The statement is effective for
fiscal years beginning after December 15, 1995. Pursuant to the new standard,
companies are required to adopt the fair value method of accounting for employee
stock-based transactions. The new standard requires expanded disclosures of
stock-based compensation arrangements with employees and encourages, but does
not require, application of the "fair value" recognition provisions in the new
statement. Beginning with the first quarter of 1996, the Company will disclose
in a note to the financial statements pro forma net income and earnings per
share based on the new method of accounting.
-19-
<PAGE> 20
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Index to Financial Statements
<TABLE>
<CAPTION>
Page
----
<S> <C>
Independent Auditors' Report 21
Consolidated Balance Sheets as at December 31, 1995 and 1994 22
Consolidated Statements of Income for the years ended
December 31, 1995, 1994 and 1993 24
Consolidated Statements of Shareholders' Equity
for the years ended December 31, 1995, 1994 and 1993 25
Consolidated Statements of Cash Flows for the years ended
December 31, 1995, 1994 and 1993 26
Notes to Consolidated Financial Statements 28
</TABLE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH INDEPENDENT AUDITORS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
Not applicable.
-20-
<PAGE> 21
INDEPENDENT AUDITORS' REPORT
Shareholders and Board of Trustees
Vornado Realty Trust
Saddle Brook, New Jersey
We have audited the accompanying consolidated balance sheets of Vornado Realty
Trust and subsidiaries as of December 31, 1995 and 1994, and the related
consolidated statements of income, shareholders' equity (deficit) and cash flows
for each of the three years in the period ended December 31, 1995. 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 Trust and
subsidiaries at December 31, 1995 and 1994, and the results of their operations
and their cash flows for each of the three years in the period ended December
31, 1995 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, 1996
-21-
<PAGE> 22
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------
(amounts in thousands except share amounts) DECEMBER 31, 1995 December 31, 1994
- ------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS:
Real estate, at cost:
Land $ 61,278 $ 61,269
Buildings and improvements 314,265 298,277
Leasehold improvements and equipment 6,933 6,286
- ------------------------------------------------------------------------------------------------------
Total 382,476 365,832
- ------------------------------------------------------------------------------------------------------
Less accumulated depreciation and
amortization 139,495 128,705
- ------------------------------------------------------------------------------------------------------
Real estate, net 242,981 237,127
- ------------------------------------------------------------------------------------------------------
Cash and cash equivalents, including U.S.
government obligations under
repurchase agreements of $12,575 and $15,275 19,127 23,559
Marketable securities 70,997 87,206
Investment in and advances to Alexander's, Inc. 109,686 7,350
Investment in and advances to Vornado
Management Corp. 5,074 --
Due from officer 8,418 8,418
Accounts receivable, net of allowance for
doubtful accounts of $578 and $457 7,086 4,898
Receivable arising from the straight-lining of rents 14,376 11,807
Other assets 13,751 13,173
- ------------------------------------------------------------------------------------------------------
$491,496 $393,538
======================================================================================================
</TABLE>
-22-
<PAGE> 23
CONSOLIDATED BALANCE SHEETS (CONTINUED)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
(amounts in thousands except share amounts) DECEMBER 31, 1995 December 31, 1994
- -------------------------------------------------------------------------------------------------------
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY:
Notes and mortgages payable $233,353 $234,160
Due for U.S. Treasury Obligations 43,875 34,275
Accounts payable and accrued expenses 6,545 4,275
Deferred leasing fee income 8,888 --
Other liabilities 4,561 4,140
- -------------------------------------------------------------------------------------------------------
Total liabilities 297,222 276,850
- -------------------------------------------------------------------------------------------------------
Commitments and contingencies
Shareholders' equity:
Preferred shares of beneficial interest:
no par value per share; authorized,
1,000,000 shares; issued, none
Common shares of beneficial interest:
$.04 par value per share; authorized,
50,000,000 shares; issued, 24,246,913
and 21,654,285 shares 970 866
Additional capital 279,231 198,184
Accumulated deficit (79,380) (79,513)
- -------------------------------------------------------------------------------------------------------
200,821 119,537
Unrealized (loss)/gain on securities available
for sale (1,362) 2,336
Due from officer for purchase of common
shares of beneficial interest (5,185) (5,185)
- -------------------------------------------------------------------------------------------------------
Total shareholders' equity 194,274 116,688
- -------------------------------------------------------------------------------------------------------
$491,496 $393,538
=======================================================================================================
</TABLE>
See notes to consolidated financial statements.
-23-
<PAGE> 24
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
YEAR ENDED Year Ended Year Ended
(amounts in thousands DECEMBER 31, December 31, December 31,
except share amounts) 1995 1994 1993
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenues:
Property rentals $ 80,429 $70,755 $67,213
Expense reimbursements 24,091 21,784 19,839
Other income (including fee income
from related parties of $4,123,
$1,144 and $1,663) 4,198 1,459 1,738
- ----------------------------------------------------------------------------------------------------------
Total revenues 108,718 93,998 88,790
- ----------------------------------------------------------------------------------------------------------
Expenses:
Operating 32,282 30,223 27,994
Depreciation and amortization 10,790 9,963 9,392
General and administrative 6,687 6,495 5,890
Costs incurred in connection with the merger
of Vornado, Inc. into Vornado Realty Trust -- -- 856
- ----------------------------------------------------------------------------------------------------------
Total expenses 49,759 46,681 44,132
- ----------------------------------------------------------------------------------------------------------
Operating income 58,959 47,317 44,658
- ----------------------------------------------------------------------------------------------------------
Income/(loss) applicable to Alexander's:
Equity in loss (1,972) -- --
Depreciation (417) -- --
Interest income on loan 6,343 -- --
Income from investment in and advances to
Vornado Management Corp. 788 -- --
Interest and dividend income 5,439 7,489 11,620
Interest and debt expense (16,426) (14,209) (31,155)
Net gain on marketable securities 294 643 263
- ----------------------------------------------------------------------------------------------------------
Income from continuing operations before
income taxes 53,008 41,240 25,386
Provision (benefit) for income taxes -- -- (6,369)
- ----------------------------------------------------------------------------------------------------------
Income from continuing operations 53,008 41,240 31,755
- ----------------------------------------------------------------------------------------------------------
Loss from discontinued operation -- -- (600)
- ----------------------------------------------------------------------------------------------------------
Income before extraordinary item 53,008 41,240 31,155
Extraordinary item - loss on
early extinguishment of debt -- -- (3,202)
- ----------------------------------------------------------------------------------------------------------
NET INCOME $53,008 $41,240 $27,953
- ----------------------------------------------------------------------------------------------------------
NET INCOME (LOSS) PER SHARE based on 23,579,669,
21,853,720, and 19,790,448 shares outstanding:
Continuing operations $2.25 $1.89 $1.60
Discontinued operation -- -- (.03)
Extraordinary item -- -- (.16)
- ----------------------------------------------------------------------------------------------------------
NET INCOME $2.25 $1.89 $1.41
==========================================================================================================
</TABLE>
See notes to consolidated financial statements.
-24-
<PAGE> 25
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
Unrealized
Gains on Total
(amounts in thousands Retained Securities Due Share-
except share amounts) Common Additional Earnings Available from Treasury holders'
Shares Capital (Deficit) for Sale Officer Stock Equity
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE, December 31, 1992 $842 $ 75,726 $107,945 $ -- $(4,705) $(183,050) $ (3,242)
Net income -- -- 27,953 -- -- -- 27,953
Net proceeds from issuance
of common shares 208 171,843 -- -- -- -- 172,051
Distribution of accumulated
earnings and profits -- -- (54,022) -- -- -- (54,022)
Dividends paid -- -- (30,460) -- -- -- (30,460)
Retirement of common stock
held in treasury (200) (53,917) (128,933) -- -- 183,050 --
Common shares issued under
employees' share plans 14 3,923 -- -- -- -- 3,937
Due from officers for purchase
of common shares -- -- -- -- (480) -- (480)
- -------------------------------------------------------------------------------------------------------------------------------
BALANCE, December 31, 1993 864 197,575 (77,517) -- (5,185) -- 115,737
Unrealized gains on securities
available for sale at
January 1, 1994 -- -- -- 8,565 -- -- 8,565
Net income -- -- 41,240 -- -- -- 41,240
Dividends paid -- -- (43,236) -- -- -- (43,236)
Common shares issued under
employees' share plans 2 609 -- -- -- -- 611
Change in unrealized gains (losses)
on securities available for sale -- -- -- (6,229) -- -- (6,229)
- -------------------------------------------------------------------------------------------------------------------------------
BALANCE, December 31, 1994 866 198,184 (79,513) 2,336 * (5,185) -- 116,688
Net income -- -- 53,008 -- -- -- 53,008
Net proceeds from issuance of
common shares 100 79,731 -- -- -- -- 79,831
Dividends paid -- -- (52,875) -- -- -- (52,875)
Common stock issued under
employees' stock plans 4 1,316 -- -- -- -- 1,320
Change in unrealized gains (losses)
on securities available for sale -- -- -- (3,698) -- -- (3,698)
- -------------------------------------------------------------------------------------------------------------------------------
BALANCE, DECEMBER 31, 1995 $970 $279,231 $ (79,380) $(1,362) $(5,185) $ -- $194,274
===============================================================================================================================
</TABLE>
* Includes $3,435 in unrealized gains attributable to the Company's
investment in the common stock of Alexander's, Inc. (see Note 3).
See notes to consolidated financial statements.
-25-
<PAGE> 26
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
YEAR ENDED Year Ended Year Ended
---------- ---------- ----------
DECEMBER 31, December 31, December 31,
(amounts in thousands) 1995 1994 1993
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Income from continuing operations before
extraordinary item $ 53,008 $ 41,240 $ 31,755
Adjustments to reconcile income to net cash
provided by continuing operations:
Depreciation and amortization (including
debt issuance costs) 11,779 10,839 11,435
Straight-lining of rental income (2,569) (2,181) (2,200)
Equity in loss of Alexander's including
$417 of depreciation 2,389 -- --
Deferred income taxes -- (6,369)
Net (gain) on marketable securities (294) (643) (263)
Extraordinary item - loss on early
extinguishment of debt -- -- (3,202)
Changes in assets and liabilities:
Trading securities (2,069) 1,485 279
Accounts receivable (2,188) (699) (156)
Due to officer -- -- (12,753)
Accounts payable and accrued expenses 2,270 (3,920) 2,611
Other 556 827 7,188
- ---------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities of
continuing operations 62,882 46,948 28,325
- ---------------------------------------------------------------------------------------------------------------
Net cash used in operating
activities of discontinued operation -- -- (600)
- ---------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 62,882 46,948 27,725
- ---------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Investment in and advances to Alexander's (100,482) -- --
Investment in and advances to Vornado
Management Corp. (5,074) -- --
Additions to real estate (16,644) (25,417) (26,986)
Purchases of securities available for sale (4,027) -- (22,918)
Proceeds from sale of securities
available for sale 22,336 9,983 51,254
- ---------------------------------------------------------------------------------------------------------------
Net cash (used in) provided by investing activities (103,891) (15,434) 1,350
- ---------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from issuance of common shares 79,831 -- 172,051
Distribution of accumulated earnings and profits -- -- (54,022)
Proceeds from borrowings on U.S. Treasury obligations 40,000 11,428 --
Repayment of borrowings on U.S. Treasury obligations (30,400) -- (30,048)
Proceeds from borrowings 60,000 -- 227,000
Payments on borrowings (60,807) (877) (333,664)
Costs of refinancing debt (492) -- (5,247)
Dividends paid (52,875) (43,236) (30,460)
Exercise of share options 1,320 611 3,937
Net loans to officers -- -- (5,980)
- ---------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) financing activities 36,577 (32,074) (56,433)
- ---------------------------------------------------------------------------------------------------------------
Net decrease in cash and cash equivalents (4,432) (560) (27,358)
Cash and cash equivalents at beginning of year 23,559 24,119 51,477
- ---------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of year $ 19,127 $ 23,559 $ 24,119
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
-26-
<PAGE> 27
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
YEAR ENDED Year Ended Year Ended
---------- ---------- ----------
DECEMBER 31, December 31, December 31,
(amounts in thousands) 1995 1994 1993
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash payments for income taxes $ -- $ -- $ --
- --------------------------------------------------------------------------------------------------------
Cash payments for interest $ 15,881 $ 14,915 $ 29,382
- --------------------------------------------------------------------------------------------------------
</TABLE>
NON-CASH TRANSACTIONS:
During the year ended December 31, 1995, the unrealized gain on securities
available for sale included in shareholders' equity was adjusted to reflect (i)
a reduction of $3,435 to the Company's investment in Alexander's as a result of
the change from fair value to the equity method of accounting and (ii) a net
decrease of $263 in the market value of other securities available to sale.
During 1994, a credit to shareholders' equity of $2,336 was recorded to
reflect an unrealized gain on securities available for sale.
In May 1993, 5,007,024 shares of common stock held in treasury were
retired. The retirement of the shares was recorded by reducing the common stock
account ($200), additional capital ($53,917) and retained earnings ($128,933).
- -------------------------------------------------------------------------------
See notes to consolidated financial statements.
-27-
<PAGE> 28
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
1. ORGANIZATION AND BUSINESS
On May 6, 1993, Vornado, Inc. merged into Vornado Realty Trust, a Maryland real
estate investment trust ("REIT"). Vornado Realty Trust was formed on March 29,
1993, as a wholly-owned subsidiary of Vornado, Inc., specifically for the
purpose of the merger.
The Company is a fully-integrated REIT which owns, leases, develops, redevelops
and manages retail and industrial properties primarily located in the
Midatlantic and Northeast regions of the United States. In addition, the Company
owns 29.3% of the common stock of Alexander's, Inc. which has nine properties in
the greater New York metropolitan area.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION: The accompanying consolidated financial statements
include the accounts of Vornado Realty Trust and its subsidiaries, all of which
are wholly-owned. All significant intercompany balances and transactions have
been eliminated.
The consolidated financial statements are prepared in conformity with generally
accepted accounting principles. 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.
The financial statements for the applicable periods present the fleece apparel
wholesaling business as a discontinued operation.
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.
Additions to real estate include interest expense capitalized during
construction of $442,000 and $1,582,000 for the years ended December 31, 1995
and 1994.
The Company's policy is to assess any impairment in value by making a comparison
of the current and projected operating cash flows of each of its properties into
the foreseeable future on an undiscounted basis, to the carrying amount of such
property. Such carrying amount would be adjusted, if necessary, to reflect an
impairment in the value of the asset. This is in accordance with Financial
Accounting Standards Board Statement No. 121 -
Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed of (SFAS No. 121).
CASH AND CASH EQUIVALENTS: Cash and cash equivalents consist of highly liquid
investments purchased with original maturities of three months or less.
MARKETABLE SECURITIES: Marketable securities are carried at fair market value.
The Company has classified debt and equity securities which it intends to hold
for an indefinite period of time as securities available for sale and equity
securities it intends to buy and sell on a short term basis as trading
securities. Unrealized gains and losses are included in earnings for trading
securities and as a component of shareholder's equity for securities available
for sale. Realized gains or losses on the sale of securities are recorded based
on average cost.
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: 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
-28-
<PAGE> 29
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
- -------------------------------------------------------------------------------
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
shareholders an amount greater than its taxable income. Therefore, no provision
for Federal income taxes is required. As a result of the Company's conversion to
a REIT in 1993, the deferred tax balance at December 31, 1992 was reversed in
1993. The basis in the Company's assets and liabilities for both financial
reporting purposes and tax purposes is approximately the same.
AMOUNTS PER SHARE: Amounts per share are computed based upon the weighted
average number of shares outstanding during the year and the dilutive effect of
stock options.
3. INVESTMENT IN AND ADVANCES TO ALEXANDER'S
In March 1995, the Company purchased all of the 1,353,468 shares of common stock
of Alexander's then owned by Citibank, N.A. ("Citibank") representing 27.1% of
the outstanding shares of common stock of Alexander's for $40.50 per share in
cash or $56,615,000 (including $1,800,000 of costs incurred in the purchase). At
December 31, 1994, the Company owned 113,100 shares of Alexander's common stock.
The investment was carried at market value of $5,980,000 at December 31, 1994
(cost was $2,545,000). As a result of the acquisition, the Company owns 29.3% of
the common stock of Alexander's and has changed its accounting for its
investment in Alexander's to the equity method. This required a reduction of its
investment by the unrealized gain recorded in shareholders' equity at December
31, 1994, of $3,435,000. Prior years' financial statements were not restated as
a result of the change in accounting for the Company's investment in Alexander's
due to it not being material. In accordance with purchase accounting, Vornado's
investment in Alexander's in excess of carrying amounts has been allocated
two-thirds to land and one-third to building. The building allocation in excess
of Alexander's carrying amount is being depreciated over a 35 year period.
Also, in March 1995, the Company lent Alexander's $45 million, the subordinated
tranche of a $75 million secured financing, the balance of which was funded by a
bank. The Company's loan has a three-year term and bears interest at 16.43% per
annum for the first two years and at a fixed rate for the third year of 992
basis points over the one-year Treasury bill rate. In addition, the Company
received a loan origination fee of $1,500,000 from Alexander's to be amortized
over the term of the loan.
Investment in and advances to Alexander's consists of:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
December 31, 1995 December 31, 1994
- --------------------------------------------------------------------------------------------------------
<S> <C> <C>
Common stock, net of $417,000 of accumulated
depreciation of buildings (at fair value) in 1995 $ 58,693,000 $ 5,980,000
Loan receivable 45,000,000 -
Deferred loan origination income (1,083,000) -
Leasing fees and other receivables 8,182,000 526,000
Equity in loss since March 2, 1995 (1,972,000) -
Deferred expenses 866,000 844,000
------------ -----------
$109,686,000 $ 7,350,000
============ ===========
- --------------------------------------------------------------------------------------------------------
</TABLE>
-29-
<PAGE> 30
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
3. INVESTMENT IN AND ADVANCES TO ALEXANDER'S - CONTINUED
Below is a summarized Balance Sheet as at December 31, 1995 and Statement of
Operations of Alexander's for the period from March 2, 1995 to December 31,
1995:
<TABLE>
- -----------------------------------------------------------------------------------
<S> <C>
Balance Sheet:
Assets:
Real estate, net $ 150,435,000
Cash 8,471,000
Other assets 39,635,000
-------------
$ 198,541,000
=============
Liabilities and Deficiency in Net Assets:
Debt $ 182,883,000
Other liabilities 34,794,000
Deficiency in net assets (19,136,000)
-------------
$ 198,541,000
=============
- -----------------------------------------------------------------------------------
Statement of Operations:
Revenues $ 11,734,000
Expenses 9,255,000
-------------
Operating income 2,479,000
Interest and debt expense (11,330,000)
Interest and other income 1,651,000
-------------
Loss from continuing operations before income tax benefit (7,200,000)
Reversal of deferred taxes 469,000
-------------
Loss from continuing operations $ (6,731,000)
=============
Vornado's 29.3% equity in loss $ (1,972,000)
=============
</TABLE>
The unaudited proforma information set forth below presents the condensed
statement of income for Vornado for the years ended December 31, 1995 and 1994,
as if on January 1, 1994, the investment in Alexander's and related agreements
were consummated and 1,880,000 common shares of beneficial interest of Vornado
were issued to partially fund the investment.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
Proforma Year Ended
--------------------------------
December 31, December 31,
1995 1994
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Revenues $108,578,000 $ 99,041,000
Expenses 49,759,000 47,681,000
------------ ------------
Operating income 58,819,000 51,360,000
Income/(loss) applicable to Alexander's:
Equity in loss (2,483,000) (1,582,000)
Depreciation (521,000) (630,000)
Interest income on loan 7,894,000 7,894,000
Income from investment in and advances to Vornado Management Corp. 788,000
Interest and dividend income 4,818,000 4,480,000
Interest and debt expense (15,583,000) (14,209,000)
Net gain on marketable securities 294,000 643,000
------------ ------------
Net income $ 54,026,000 $ 47,956,000
============ ============
Net income per share $2.26 $2.02
===== =====
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
-30-
<PAGE> 31
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
3. INVESTMENT IN AND ADVANCES TO ALEXANDER'S - CONTINUED
In March 1995, the Company and Alexander's entered into a three-year management
and development agreement (the "Management Agreement"). The annual management
fee payable to the Company by Alexander's is $3,000,000, plus 6% of development
costs with a minimum guaranteed fee for the development portion of $1,650,000 in
the first year and $750,000 in each of the second and third years. On July 6,
1995, the Company assigned this Management Agreement to Vornado Management Corp.
Management fees subsequent to July 6, 1995 of $2,250,000 were received by
Vornado Management Corp. (see Note 12).
The fee pursuant to the Management Agreement is in addition to the leasing fee
the Company receives from Alexander's under the leasing agreement (the "Leasing
Agreement") which has been in effect since 1992 and has been extended to be
coterminous with the term of the Management Agreement. The Company recognized
$1,448,000 of leasing fee income in 1995. 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 $7,868,000 at December 31,
1995. 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. Two leases which the Company had previously
negotiated on behalf of Alexander's for its Paramus property terminated in the
second quarter of 1995 because governmental approvals to begin construction on a
timely basis could not be obtained as a result of a pending condemnation,
resulting in $2,424,000 of previously recorded leasing fees receivable and a
corresponding credit (deferred leasing fee income) being reversed.
As of December 31, 1995, Interstate Properties owned 27.7% of the common shares
of the Company and 27.1% of Alexander's common stock. Steven 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. Effective March 2, 1995, for a three-year period, the
Company and Interstate agreed not to own in excess of two-thirds of Alexander's
common stock or to enter into certain other transactions with Alexander's, other
than the transactions described above, without the consent of Alexander's
independent directors.
-31-
<PAGE> 32
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
4. MARKETABLE SECURITIES
The aggregate cost and market value of securities held at December 31,
1995 and 1994 were as follows:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------
December 31, 1995 December 31, 1994
----------------- -----------------
Cost Market Cost Market
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Securities available for sale:
U.S.treasury obligations $56,065,000 $56,621,000 $66,327,000 $66,285,000
Other equity and debt securities 10,802,000 8,884,000 19,215,000 18,158,000
- ------------------------------------------------------------------------------------------------------
66,867,000 65,505,000 85,542,000 84,443,000
Trading securities - equity 5,384,000 5,492,000 2,755,000 2,763,000
- ------------------------------------------------------------------------------------------------------
Total $72,251,000 $70,997,000 $88,297,000 $87,206,000
- ------------------------------------------------------------------------------------------------------
</TABLE>
Gross unrealized gains and losses at December 31, 1995 and 1994 were as follows:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
December 31, 1995 December 31, 1994
----------------- -----------------
Gains (Losses) Gains (Losses)
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Securities available for sale:
U.S.treasury obligations $ 556,000 -- $ 149,000 $ (191,000)
Other equity and debt securities 90,000 $(2,008,000) -- (1,057,000)
- ---------------------------------------------------------------------------------------------------------
646,000 (2,008,000) 149,000 (1,248,000)
Trading securities - equity 108,000 -- 8,000 --
- ---------------------------------------------------------------------------------------------------------
Total $ 754,000 $(2,008,000) $ 157,000 $(1,248,000)
- ---------------------------------------------------------------------------------------------------------
</TABLE>
Of the U.S. treasury obligations at December 31, 1995, $40,604,000 (market value
$40,781,000) matured in the first quarter of 1996, $4,993,000 (market value
$5,064,000) matures in the fourth quarter of 1996 and $10,468,000 (market value
$10,776,000) matures in the fourth quarter of 1997.
U.S. treasury obligations with a fair market value of $56,621,000 and
$35,205,000 were held as collateral for amounts due for U.S. treasury
obligations at December 31, 1995 and 1994. Amounts due for U.S. treasury
obligations bear variable interest rates which averaged 6.08% and 4.36% for
the years ended December 31, 1995 and 1994.
-32-
<PAGE> 33
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
5. FAIR VALUE OF FINANCIAL INSTRUMENTS
The estimated fair value of cash and cash equivalents, due from officer,
accounts receivable, amounts due for U.S. Treasury obligations, accounts
payable, and accrued expenses are reflected in the balance sheet. The fair value
of marketable securities is based on quoted market prices. At December 31, 1995
and 1994, the fair value of marketable securities was $70,997,000 and
$87,206,000 compared to carrying value of $72,251,000 and $88,297,000 at their
respective dates. The fair value of the loan receivable from Alexander's and the
notes and mortgages payable have been estimated by discounting cash flows at the
current rate at which similar loans would be made to borrowers with similar
credit ratings for the remaining term. At December 31, 1995, the fair value of
the loan receivable was estimated at $46,100,000 compared to a carrying value of
$45,000,000. At December 31, 1995 and 1994, the fair value of notes and
mortgages payable was estimated to be $233,900,000 and $205,496,000, compared to
carrying value of $233,353,000 and $234,160,000 at their respective dates. The
fair value estimates presented herein are based on pertinent information
available to management as of December 31, 1995 and 1994.
6. NOTES AND MORTGAGES PAYABLE
In November 1993, a private placement of $227,000,000 aggregate principal amount
of secured notes due December 1, 2000 was completed by Vornado Finance Corp., a
wholly-owned, special-purpose subsidiary of the Company. The 7-year notes bear a
fixed rate of interest of 6.36% per annum. The net proceeds from the offering,
together with working capital of Vornado Realty Trust, were used to prepay
$327,132,000 of debt, including $313,539,000 under a blanket mortgage loan which
bore interest at a rate of 9.36% per annum and was scheduled to mature in
January 1994. As a result of the early extinguishment of debt, a fourth quarter
extraordinary charge of $3,202,000, which primarily represented prepayment
penalties, was recorded in 1993.
Notes and mortgages are summarized by range of interest rates as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Interest rate Principal amount
- --------------------------------------------------------------------------------
<S> <C> <C>
5.35% $ 3,879,000
6.36% 227,000,000
8.00% 1,249,000
8.25% 1,225,000
- --------------------------------------------------------------------------------
</TABLE>
The net carrying value of property securing the notes and mortgages amounted to
$172,306,000 at December 31, 1995. As at December 31, 1995, the maturities for
the next five years are as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Year ending December 31: Amount
- --------------------------------------------------------------------------------
<S> <C> <C>
1996 $ 975,000
1997 1,046,000
1998 870,000
1999 535,000
2000 227,295,000
- --------------------------------------------------------------------------------
</TABLE>
On February 27, 1995, the Company entered into a three-year unsecured revolving
credit facility with a bank providing for borrowings of up to $75,000,000.
Borrowings bear annual interest, at the Company's election, at LIBOR plus 1.50%
or the higher of the federal funds rate plus 1% or prime rate plus .50%. At
December 31, 1995 the Company had no borrowings outstanding under the facility.
-33-
<PAGE> 34
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
7. EMPLOYEES' SHARE OPTION PLAN
Various officers and key employees have been granted incentive share options
and/or nonqualified options to purchase common shares. Options granted are at
prices equal to 100% of the market price of the Company's shares at date of
grant, become exercisable up to 27 months after grant, and expire ten years
after the date of grant.
The changes in number of shares under option for the three years ended December
31, 1995 were as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Number of
shares Option price
- --------------------------------------------------------------------------------
<S> <C> <C>
Outstanding, December 31, 1992 597,293 $9.87-$19.83
- --------------------------------------------------------------------------------
Outstanding, December 31, 1992, adjusted * 672,812 $8.72-$19.83
Granted * 281,379 $22.84-$37.94
Exercised * (334,923) $8.72-$22.84
- --------------------------------------------------------------------------------
Outstanding, December 31, 1993 619,268 $8.72-$37.94
Granted -- --
Exercised (51,019) $8.72-$22.84
Canceled (10,681) $22.84-$34.25
- --------------------------------------------------------------------------------
Outstanding, December 31, 1994 557,568 $8.72-$37.94
Granted 75,000 $35.50
Exercised (92,628) $8.72-$22.84
- --------------------------------------------------------------------------------
OUTSTANDING, DECEMBER 31, 1995 539,940 $11.71-$37.94
- --------------------------------------------------------------------------------
</TABLE>
* Option prices and number of shares have been adjusted, as applicable, to
reflect the impact of a $3.36 special dividend paid in June 1993, in
accordance with the terms of the Plan.
- --------------------------------------------------------------------------------
Shares available for future grant at December 31, 1995 were 1,252,816.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DECEMBER 31, December 31,
1995 1994
- --------------------------------------------------------------------------------
<S> <C> <C>
Options exercisable 442,506 420,200
Price range $11.71-$35.50 $8.72-$34.25
- --------------------------------------------------------------------------------
</TABLE>
In October 1995, the Financial Accounting Standards Board adopted Statement No.
123, "Accounting for Stock-Based Compensation". The statement is effective for
fiscal years beginning after December 15, 1995. Pursuant to the new standard,
companies are required to adopt the fair value method of accounting for employee
stock-based transactions. The new standard requires expanded disclosures of
stock-based compensation arrangements with employees and encourages, but does
not require, application of the "fair value" recognition provisions in the new
statement. Beginning with the first quarter of 1996, the Company will disclose
in a note to the financial statements pro forma net income and earnings per
share based on the new method of accounting.
-34-
<PAGE> 35
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
8. RETIREMENT PLAN
The Company's qualified retirement plan covers all full-time employees. The Plan
provides annual pension benefits that are 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 Year Year
ENDED Ended Ended
------------ ------------ ------------
DECEMBER 31, December 31, December 31,
1995 1994 1993
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Service cost -- benefits earned during the period $ 70,000 $ 81,000 $ 89,000
Interest cost on projected benefit obligation 573,000 558,000 577,000
Actual return on assets (307,000) 130,000 (656,000)
Net amortization and deferral 66,000 (359,000) 436,000
- ------------------------------------------------------------------------------------------------------------------
Net pension expense $ 402,000 $ 410,000 $ 446,000
- ------------------------------------------------------------------------------------------------------------------
Assumptions used in determining the net pension expense were:
- ------------------------------------------------------------------------------------------------------------------
Discount rate 7-1/4% 8-1/2% 7-1/2%
Rate of increase in compensation levels 6-1/2% 6-1/2% 6-1/2%
Expected rate of return on assets 8% 8% 8%
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
The following table sets forth the Plan's funded status and the amount
recognized in the Company's balance sheet:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------
DECEMBER 31, December 31,
1995 1994
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
Actuarial present value of benefit obligations:
Vested benefit obligation $ 7,652,000 $ 6,665,000
- ---------------------------------------------------------------------------------------------
Accumulated benefit obligation $ 7,717,000 $ 6,742,000
- ---------------------------------------------------------------------------------------------
Projected benefit obligation $ 8,066,000 $ 6,992,000
Plan assets at fair value 3,494,000 3,219,000
- ---------------------------------------------------------------------------------------------
Projected benefit obligation in excess of plan assets 4,572,000 3,773,000
Unrecognized net obligations (2,122,000) (1,173,000)
Adjustment required to recognize minimum liability 1,773,000 923,000
- ---------------------------------------------------------------------------------------------
Accrued pension costs $ 4,223,000 $ 3,523,000
- ---------------------------------------------------------------------------------------------
</TABLE>
Plan assets are invested in U.S. government obligations and securities backed by
U.S. government guaranteed mortgages.
- --------------------------------------------------------------------------------
-35-
<PAGE> 36
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
9. LEASES
As lessor:
The Company leases properties to tenants. The lease terms range from less than
five years for smaller tenant spaces to as much as thirty years for major
tenants. Most of the leases provide for the payment of fixed base rentals
payable monthly in advance, and for the payment by the lessee of additional
rents based on a percentage of the tenants' sales as well as reimbursements of
real estate taxes, insurance and maintenance. As of December 31, 1995, 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>
- --------------------------------------------------------------------------------
Year ending December 31: Amount
- --------------------------------------------------------------------------------
<S> <C>
1996 $ 81,994,000
1997 82,011,000
1998 80,011,000
1999 75,287,000
2000 69,943,000
Thereafter 563,754,000
- --------------------------------------------------------------------------------
</TABLE>
These amounts do not include rentals based on tenants' sales. These percentage
rents approximated $959,000, $887,000 and $954,000 for the years ended December
31, 1995, 1994 and 1993. Bradlees, Inc. accounted for 21%, 19% and 18% of total
property rentals for each of the three years ended December 31, 1995,
respectively. In June 1995, Bradlees filed for protection under Chapter 11 of
the U.S. Bankruptcy Code. The Company leases 21 locations to Bradlees of which
19 are fully guaranteed by Stop & Shop Companies, Inc. Further, Montgomery Ward
& Co., Inc. remains liable on eight of such leases including the rent it was
obligated to pay - approximately 70% of current rent. Bradlees has not affirmed
any of these leases.
As lessee:
The Company is a tenant under leases for certain properties. These leases will
expire principally during the next twenty years. Future minimum lease payments
under operating leases at December 31, 1995, are as follows:
<TABLE>
<CAPTION>
Year ending December 31: Amount
- --------------------------------------------------------------------------------
<S> <C>
1996 $ 1,473,000
1997 1,118,000
1998 940,000
1999 864,000
2000 699,000
Thereafter 26,519,000
- --------------------------------------------------------------------------------
</TABLE>
Rent expense was $1,395,000, $1,313,000, and $1,366,000 for the years ended
December 31, 1995, 1994 and 1993.
-36-
<PAGE> 37
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
10. CONTINGENCIES
In order to comply with environmental laws and with relevant health-based
standards, the Company has an active monitoring and maintenance program for
asbestos-containing materials ("ACMs") on its properties. The Company's program
to remove friable ACMs has been completed, except for one location. Pursuant to
the lease for this location, it is the tenant's responsibility to remove such
ACMs. The Company has received an estimate of $500,000 to remove such ACMs; if
the Company has to make such expenditure, it will not have a material adverse
effect on the Company's financial condition or results of operations.
The Company also has certain other existing and potential environmental
liabilities with respect to compliance costs relating to underground storage
tanks and cleanup costs relating to tanks at three Company sites at which
preexisting contamination was found.
The Company believes that known and potential environmental liabilities will not
have a material adverse effect on the Company's business, assets or results of
operation. 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.
At December 31, 1995, the Company had outstanding $900,000 of real estate
related standby letters of credit which were drawn under a $5,000,000 unsecured
line of credit with a bank bearing interest at prime.
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 or results of operations.
11. 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.
-37-
<PAGE> 38
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
12. VORNADO MANAGEMENT CORP.
On July 6, 1995, the Company assigned its Management Agreement with Alexander's
(see Note 3) to Vornado Management Corp. ("VMC"), a newly formed New Jersey
corporation. In exchange, the Company received 100% of the non-voting preferred
stock of VMC which entitles it to 95% of the distributions by VMC to its
shareholders. Steven Roth and Richard West, Trustees of the Company, own the
common stock of VMC. In addition, the Company lent $5,000,000 to VMC for working
capital purposes under a three year term loan bearing interest at the prime rate
plus 2%. VMC is responsible for its pro-rata share of compensation and fringe
benefits of common employees and 30% of other common expenses. This entity is
not consolidated and the Company accounts for its investment in VMC on the
equity method. Below is a summarized Statement of Operations of VMC for the
period from July 6, 1995 to December 31, 1995:
<TABLE>
<CAPTION>
Revenues:
<S> <C>
Management fees from
Alexander's $ 2,250,000
Expenses:
General and administrative (1,130,000)
Interest, net (115,000)
-----------
Income before income taxes 1,005,000
Income taxes 411,000
-----------
Net income 594,000
Preferred dividends (565,000)
-----------
Net income available to
common shareholders $ 29,000
===========
Vornado's 95% equity in
income $ 565,000
===========
</TABLE>
13. OTHER RELATED PARTY TRANSACTIONS
At December 31, 1995, the loans due from Mr. Roth ($13,122,500) Mr. Rowan
($253,000) and Mr. Macnow ($227,000) in connection with their stock option
exercises aggregated $13,602,500 ($5,185,000 of which is shown as a reduction in
shareholders' equity). The loans bear interest at a rate equal to the broker
call rate (7.50% at December 31, 1995) but not less than the minimum applicable
federal rate provided under the Internal Revenue Code. Interest on the loan to
Mr. Roth is payable quarterly. Mr. Roth's loan is due on December 29, 1997. The
loans to Messrs. Rowan and Macnow are due March 31, 1996.
The Company currently manages and leases the six shopping centers 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, 1995, 1994 and 1993, $1,150,000, $894,000 and
$913,000 of management fees were earned by the Company pursuant to the
Management Agreement.
-38-
<PAGE> 39
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
14. SUMMARY OF QUARTERLY RESULTS (UNAUDITED)
The following summary represents the results of operations for each quarter in
1995 and 1994:
<TABLE>
<CAPTION>
Net
Net Income
Revenue Income Per Share
----------- ----------- ---------
<S> <C> <C> <C>
1995
March 31 $26,216,000 $11,837,000 $ .54
June 30 27,056,000 13,185,000 .56
September 30 26,630,000 13,567,000 .56
December 31 28,816,000 14,419,000 .59
1994 *
March 31 $23,027,000 $10,104,000 $ .46
June 30 23,960,000 10,114,000 .46
September 30 22,856,000 10,530,000 .48
December 31 24,155,000 10,492,000 .48
</TABLE>
* The total for the year ended December 31, 1994 differs from the sum of the
quarters as a result of the weighting of the average number of shares
outstanding and the dilutive effect of stock options.
15. DIVIDEND DISTRIBUTIONS
Dividends are characterized for Federal income tax purposes as follows:
<TABLE>
<CAPTION>
1995 1994 1993*
----- ----- -----
<S> <C> <C> <C>
Ordinary income 100.0% 96.0% 83.7%
Return of capital
(generally non-
taxable) -- 4.0 16.3
----- ----- -----
Total 100,0% 100.0% 100.0%
===== ===== =====
</TABLE>
* For shareholders who received all dividends distributed during 1993.
16. SUBSEQUENT EVENT
On January 11, 1996, the Company provided $17 million of debtor-in-possession
financing to Rickel Home Centers, Inc. ("Rickel"), which is operating under
Chapter 11 of the Bankruptcy Code. The loan is secured by 29 of Rickel's
leasehold properties and has a term of one year plus two annual extensions, but
is due not later than the date on which Rickel's plan of reorganization is
confirmed. The loan earns interest at 13% per annum for the first year and at a
fixed rate of LIBOR plus 7.50% for the extension periods. In addition, the
Company received a loan origination fee of 2% or $340,000 and will receive an
additional fee of 2% of the outstanding principal amount on each extension.
-39-
<PAGE> 40
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information relating to trustees of the Registrant will be contained
in a definitive Proxy Statement involving the election of trustees which the
Registrant 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, 1995, and such information is incorporated herein by
reference. Information relating to Executive Officers of the Registrant appears
at page 10 of this Annual Report on Form 10-K.
ITEM 11. EXECUTIVE COMPENSATION
Information relating to executive compensation will be contained in
the 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 the 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 the Proxy Statement referred to in Item 10,
"Directors and Executive Officers of the Registrant", and such information is
incorporated herein by reference.
-40-
<PAGE> 41
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, 1995, 1994 and 1993 43
III - Real Estate and Accumulated Depreciation
as of December 31, 1995 44
</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.
The consolidated financial statements of Alexander's, Inc.
for the year ended December 31, 1995 are hereby incorporated by reference to
Item 14(a)1 of the Annual Report on Form 10-K of Alexander's, Inc.
3. Exhibits. See the Exhibit Index at page 48 of this Annual
Report on Form 10-K. The following exhibits listed on the
Exhibit Index are filed with this Annual Report on Form
10-K.
<TABLE>
<CAPTION>
Exhibit No.
- -----------
<S> <C>
11 Statement Re Computation of Per Share Earnings.
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.
(b) Reports on Form 8-K
None
</TABLE>
-41-
<PAGE> 42
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 TRUST
By: s/JOSEPH MACNOW
------------------------------
Joseph Macnow, Vice President,
Chief Financial Officer
Date: March 25, 1996
----------------------------
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 Trustees March 25, 1996
- --------------------------- (Principal Executive Officer)
(Steven Roth)
By: s/JOSEPH MACNOW Vice President-Chief Financial March 25, 1996
- --------------------------- Officer and Controller (Principal
(Joseph Macnow) Financial and Accounting Officer)
By: s/DAVID MANDELBAUM Trustee March 25, 1996
- ---------------------------
(David Mandelbaum)
By: s/STANLEY SIMON Trustee March 25, 1996
- ---------------------------
(Stanley Simon)
By: s/RONALD G. TARGAN Trustee March 25, 1996
- ---------------------------
(Ronald G. Targan)
By: s/RUSSELL B. WIGHT, JR. Trustee March 25, 1996
- ---------------------------
(Russell B. Wight, Jr.)
By: s/RICHARD R. WEST Trustee March 25, 1996
- ---------------------------
(Richard R. West)
</TABLE>
-42-
<PAGE> 43
VORNADO REALTY TRUST
AND SUBSIDIARIES
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
Column A Column B Column C Column D Column E
- ---------------------------------------------------------------------------------------------------------------------------
(amounts in thousands)
Balance Additions Deductions Balance
at beginning charged against ------------------------------------ at end
Description of year operations Description Amount of year
----------- ------------ --------------- ---------------------- ------- -------
<S> <C> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1995:
Deducted from accounts receivable, Uncollectible accounts
allowance for doubtful accounts $ 457 $ 613 written-off $ 492 $ 578
======= ======= ======= =======
YEAR ENDED DECEMBER 31, 1994:
Deducted from accounts receivable, Uncollectible accounts
allowance for doubtful accounts $ 402 $ 385 written-off $ 330 $ 457
======= ======= ======= =======
YEAR ENDED DECEMBER 31, 1993:
Deducted from accounts receivable Uncollectible accounts
allowance for doubtful accounts $ 337 $ 432 written-off $ 367 $ 402
======= ======= ======= =======
</TABLE>
-43-
<PAGE> 44
VORNADO REALTY TRUST
AND SUBSIDIARIES
SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1995
(amounts in thousands)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
COLUMN A COLUMN B COLUMN C COLUMN D
- ---------------------------------------------------------------------------------------------------
Initial cost to company (1) Costs
--------------------------- capitalized
Buildings and subsequent
Description Encumbrances Land improvements to acquisition
- ------------------------------- ------------ ------- ------------- --------------
<S> <C> <C> <C> <C>
Shopping Centers
New Jersey
Atlantic City $ 2,135 * $ 358 $ 2,143 $ 612
Bordentown 3,276 * 498 3,176 1,175
Bricktown 9,919 * 929 2,175 9,183
Cherry Hill 9,706 * 915 3,926 3,321
Delran 2,848 * 756 3,184 1,937
Dover 3,635 * 224 2,330 2,180
East Brunswick 8,205 * 172 3,236 3,232
East Hanover 11,066 * 376 3,063 3,272
Hackensack - 536 3,293 7,037
Jersey City 10,381 * 652 2,962 1,811
Kearny (4) - 279 4,429 (1,362)
Lawnside 5,708 * 851 2,222 1,181
Lodi 2,420 * 245 2,315 957
Manalapan 6,397 * 725 2,447 4,970
Marlton 5,398 * 1,514 4,671 808
Middletown 7,761 * 283 1,508 4,019
Morris Plains 6,600 * 1,254 3,140 3,402
North Bergen (4) - 510 3,390 (955)
North Plainfield 3,879 500 13,340 335
Totowa 15,646 * 1,097 5,359 11,457
Turnersville 2,116 * 900 2,132 75
Union 15,975 * 1,014 4,527 1,902
Vineland 2,358 * 290 1,594 1,258
Watchung (4) - 451 2,347 6,674
Woodbridge 8,792 * 190 3,047 552
------- ------ ------ ------
Total New Jersey 144,221 15,519 85,956 69,033
------- ------ ------ ------
New York
14th Street and Union
Square, Manhattan - 12,566 4,044 3,457
Albany (Menands) - 460 1,677 2,683
Buffalo (Amherst) 4,863 * 402 2,019 1,842
Freeport 8,021 * 1,231 3,273 2,827
New Hyde Park 2,043 * - - 122
North Syracuse - - - 23
Rochester (Henrietta) 2,203 * - 2,124 1,181
Rochester 2,832 * 443 2,870 655
------- ------ ------ ------
Total New York 19,962 15,102 16,007 12,790
------- ------ ------ ------
</TABLE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
COLUMN A COLUMN E COLUMN F COLUMN G
- ----------------------------------------------------------------------------------------------------------------------------
Gross amount at which carried at close of period
------------------------------------------------- Accumulated
Buildings and depreciation Date of
Description Land improvements Total (2) and amortization construction (3)
- ------------------------------- ------- ------------- --------- ---------------- ----------------
<S> <C> <C> <C> <C> <C>
Shopping Centers
New Jersey
Atlantic City $ 358 $ 2,755 $ 3,113 $ 1,746 1965
Bordentown 713 4,136 4,849 3,338 1958
Bricktown 929 11,358 12,287 3,591 1968
Cherry Hill 915 7,247 8,162 4,267 1964
Delran 756 5,121 5,877 2,418 1972
Dover 205 4,529 4,734 2,402 1964
East Brunswick 172 6,468 6,640 4,295 1957
East Hanover 477 6,234 6,711 3,623 1962
Hackensack 536 10,330 10,866 3,458 1963
Jersey City 652 4,773 5,425 3,122 1965
Kearny (4) 290 3,056 3,346 822 1938
Lawnside 741 3,513 4,254 1,783 1969
Lodi 245 3,272 3,517 2,014 1955
Manalapan 725 7,417 8,142 2,909 1971
Marlton 1,611 5,382 6,993 3,441 1973
Middletown 283 5,527 5,810 2,207 1963
Morris Plains 1,214 6,582 7,796 3,372 1961
North Bergen (4) 2,309 636 2,945 36 1993
North Plainfield 500 13,675 14,175 3,003 1955
Totowa 1,097 16,816 17,913 4,592 1957
Turnersville 900 2,207 3,107 1,563 1974
Union 1,014 6,429 7,443 4,371 1962
Vineland 290 2,852 3,142 1,514 1966
Watchung (4) 4,200 5,272 9,472 223 1994
Woodbridge 220 3,569 3,789 2,595 1959
------ ------- ------- ------
Total New Jersey 21,352 149,156 170,508 66,705
------ ------- ------- ------
New York
14th Street and Union
Square, Manhattan 12,581 7,486 20,067 221 1965
Albany (Menands) 460 4,360 4,820 1,619 1965
Buffalo (Amherst) 636 3,627 4,263 2,141 1968
Freeport 1,231 6,100 7,331 2,233 1981
New Hyde Park - 122 122 122 1970
North Syracuse - 23 23 22 1967
Rochester (Henrietta) - 3,305 3,305 1,806 1971
Rochester 443 3,525 3,968 2,140 1966
------ ------- ------- ------
Total New York 15,351 28,548 43,899 10,304
------ ------- ------- ------
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------
COLUMN A COLUMN H COLUMN I
- ------------------------------------------------------------------------
Life on which
depreciation in latest
Date income statement
Description acquired is computed
- ------------------------------- -------- ----------------------
<S> <C> <C>
Shopping Centers
New Jersey
Atlantic City 1965 14 - 40 Years
Bordentown 1958 10 - 40 Years
Bricktown 1968 27 - 40 Years
Cherry Hill 1964 15 - 40 Years
Delran 1972 20 - 40 Years
Dover 1964 16 - 40 Years
East Brunswick 1957 13 - 33 Years
East Hanover 1962 16 - 40 Years
Hackensack 1963 17 - 40 Years
Jersey City 1965 19 - 40 Years
Kearny (4) 1959 28 - 40 Years
Lawnside 1969 19 - 40 Years
Lodi 1975 11 - 27 Years
Manalapan 1971 18 - 40 Years
Marlton 1973 21 - 40 Years
Middletown 1963 27 - 40 Years
Morris Plains 1985 14 - 19 Years
North Bergen (4) 1959 30 Years
North Plainfield 1989 26 - 30 Years
Totowa 1957 22 - 40 Years
Turnersville 1974 23 - 40 Years
Union 1962 10 - 40 Years
Vineland 1966 22 - 40 Years
Watchung (4) 1959 30 Years
Woodbridge 1959 11 - 40 Years
Total New Jersey
New York
14th Street and Union
Square, Manhattan 1993 40 Years
Albany (Menands) 1965 27 - 40 Years
Buffalo (Amherst) 1968 14 - 40 Years
Freeport 1981 19 - 40 Years
New Hyde Park 1976 6 - 7 Years
North Syracuse 1976 11 - 12 Years
Rochester (Henrietta) 1971 22 - 40 Years
Rochester 1966 15 - 40 Years
Total New York
</TABLE>
----- CONTINUED -----
-44-
<PAGE> 45
VORNADO REALTY TRUST
AND SUBSIDIARIES
SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1995
(amounts in thousands)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
COLUMN A COLUMN B COLUMN C COLUMN D
- ---------------------------------------------------------------------------------------------------
Initial cost to company (1) Costs
--------------------------- capitalized
Buildings and subsequent
Description Encumbrances Land improvements to acquisition
- ------------------------------- ------------ ------- ------------- --------------
<S> <C> <C> <C> <C>
Pennsylvania
Allentown 7,696 * 70 3,446 9,138
Bensalem 3,967 * 1,198 3,717 1,582
Bethlehem - 278 1,806 3,318
Broomall 3,260 * 734 1,675 1,122
Glenolden 4,245 * 850 1,295 712
Lancaster 2,312 * 606 2,312 2,483
Levittown 2,283 * 193 1,231 155
10th and Market
Streets, Philadelphia - 933 3,230 3,688
Upper Moreland 3,517 * 683 2,497 128
York 1,463 * 421 1,700 1,239
------- ------ ------- -------
Total Pennsylvania 28,743 5,966 22,909 23,565
------- ------ ------- -------
Maryland
Baltimore (Belair Rd.) - 785 1,333 2,985
Baltimore (Towson) 5,779 * 581 2,756 501
Baltimore (Dundalk) 4,084 * 667 1,710 2,923
Glen Burnie 2,299 * 462 1,741 526
Hagerstown - 168 1,453 988
------- ------ ------- -------
Total Maryland 12,162 2,663 8,993 7,923
------- ------ ------- -------
Connecticut
Newington 3,042 * 502 1,581 547
Waterbury 3,889 * - 2,103 1,345
------- ------ ------- -------
Total Connecticut 6,931 502 3,684 1,892
------- ------ ------- -------
Massachusetts
Chicopee 1,999 * 510 2,031 373
Springfield (4) - 505 1,657 805
------- ------ ------- -------
Total Massachusetts 1,999 1,015 3,688 1,178
------- ------ ------- -------
Texas
Dallas
Lewisville 764 * 2,433 2,271 682
Mesquite 3,445 * 3,414 4,704 1,134
Skillman 1,987 * 3,714 6,891 991
------- ------ ------- -------
Total Texas 6,196 9,561 13,866 2,807
------- ------ ------- -------
Total Shopping Centers 220,214 50,328 155,103 119,188
------- ------ ------- -------
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
COLUMN A COLUMN E COLUMN F COLUMN G
- -------------------------------------------------------------------------------------------------------------------------------
Gross amount at which carried at close of period
------------------------------------------------- Accumulated
Buildings and depreciation Date of
Description Land improvements Total (2) and amortization construction (3)
- ------------------------------- ------- ------------- --------- ---------------- ----------------
<S> <C> <C> <C> <C> <C>
Pennsylvania
Allentown 334 12,320 12,654 3,625 1957
Bensalem 1,198 5,299 6,497 3,131 1972
Bethlehem 278 5,124 5,402 2,455 1966
Broomall 850 2,681 3,531 1,728 1966
Glenolden 850 2,007 2,857 897 1975
Lancaster 606 4,795 5,401 2,449 1966
Levittown 193 1,386 1,579 1,036 1964
10th and Market
Streets, Philadelphia 933 6,918 7,851 57 1977
Upper Moreland 683 2,625 3,308 1,788 1974
York 421 2,939 3,360 1,483 1970
------ ------- ------- -------
Total Pennsylvania 6,346 46,094 52,440 18,649
------ ------- ------- -------
Maryland
Baltimore (Belair Rd.) 785 4,318 5,103 2,608 1962
Baltimore (Towson) 581 3,257 3,838 1,844 1968
Baltimore (Dundalk) 667 4,633 5,300 2,106 1966
Glen Burnie 462 2,267 2,729 1,689 1958
Hagerstown 168 2,441 2,609 1,176 1966
------ ------- ------- -------
Total Maryland 2,663 16,916 19,579 9,423
------ ------- ------- -------
Connecticut
Newington 502 2,128 2,630 1,371 1965
Waterbury 667 2,781 3,448 1,610 1969
------ ------- ------- -------
Total Connecticut 1,169 4,909 6,078 2,981
------ ------- ------- -------
Massachusetts
Chicopee 510 2,404 2,914 1,647 1969
Springfield (4) 2,586 381 2,967 35 1993
------ ------- ------- -------
Total Massachusetts 3,096 2,785 5,881 1,682
------ ------- ------- -------
Texas
Dallas
Lewisville 2,469 2,917 5,386 522 1989
Mesquite 3,414 5,838 9,252 1,047 1988
Skillman 3,714 7,882 11,596 1,363 1988
------ ------- ------- -------
Total Texas 9,597 16,637 26,234 2,932
------ ------- ------- -------
Total Shopping Centers 59,574 265,045 324,619 112,676
------ ------- ------- -------
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------
COLUMN A COLUMN H COLUMN I
- -------------------------------------------------------------------------
Life on which
depreciation in latest
Date income statement
Description acquired is computed
- ------------------------------- -------- ----------------------
<S> <C> <C>
Pennsylvania
Allentown 1957 24 - 42 Years
Bensalem 1972 20 - 40 Years
Bethlehem 1966 13 - 40 Years
Broomall 1966 13 - 40 Years
Glenolden 1975 23 - 40 Years
Lancaster 1966 14 - 40 Years
Levittown 1964 14 - 40 Years
10th and Market
Streets, Philadelphia 1994
Upper Moreland 1974 22 - 40 Years
York 1970 19 - 40 Years
Total Pennsylvania
Maryland
Baltimore (Belair Rd.) 1962 26 - 33 Years
Baltimore (Towson) 1968 19 - 40 Years
Baltimore (Dundalk) 1966 16 - 40 Years
Glen Burnie 1958 22 - 33 Years
Hagerstown 1966 13 - 40 Years
Total Maryland
Connecticut
Newington 1965 15 - 40 Years
Waterbury 1969 23 - 40 Years
Total Connecticut
Massachusetts
Chicopee 1969 20 - 40 Years
Springfield (4) 1966 30 Years
Total Massachusetts
Texas
Dallas
Lewisville 1990 28 - 30 Years
Mesquite 1990 28 - 30 Years
Skillman 1990 27 - 30 Years
Total Texas
Total Shopping Centers
</TABLE>
--- CONTINUED ---
-45-
<PAGE> 46
VORNADO REALTY TRUST
AND SUBSIDIARIES
SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1995
(amounts in thousands)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
COLUMN A COLUMN B COLUMN C COLUMN D
- ---------------------------------------------------------------------------------------------------
Initial cost to company (1) Costs
--------------------------- capitalized
Buildings and subsequent
Description Encumbrances Land improvements to acquisition
- ------------------------------- ------------ ------- ------------- --------------
<S> <C> <C> <C> <C>
Warehouse/Industrial
New Jersey
East Brunswick 147 4,772 2,834
East Hanover 8,210 * 576 7,752 6,499
Edison 2,455 * 705 2,839 1,245
Garfield 1,249 96 8,068 3,658
-------- ------- -------- --------
Total Warehouse/
Industrial 11,914 1,524 23,431 14,236
-------- ------- -------- --------
Other Properties
New Jersey
Paramus 1,225 8,345 2,028
Montclair - 66 470 329
Rahway - 25
-------- ------- -------- --------
Total Other
Properties 1,225 66 8,815 2,382
-------- ------- -------- --------
Leasehold Improvements
and Equipment
TOTAL - DECEMBER 31, 1995 $233,353 $51,918 $187,349 $135,806
======== ======= ======== ========
</TABLE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
COLUMN A COLUMN E COLUMN F COLUMN G
- -----------------------------------------------------------------------------------------------------------------------------
Gross amount at which carried at close of period
------------------------------------------------- Accumulated
Buildings and depreciation Date of
Description Land improvements Total (2) and amortization construction (3)
- ------------------------------- ------- ------------- --------- ---------------- ----------------
<S> <C> <C> <C> <C> <C>
Warehouse/Industrial
New Jersey
East Brunswick 147 7,606 7,753 3,402 1972
East Hanover 691 14,136 14,827 7,483 1963 - 1967
Edison 704 4,085 4,789 1,655 1954
Garfield 96 11,726 11,822 7,619 1942
------- -------- -------- --------
Total Warehouse/
Industrial 1,638 37,553 39,191 20,159
------- -------- -------- --------
Other Properties
New Jersey
Paramus - 10,373 10,373 2,096 1967
Montclair 66 799 865 472 1972
Rahway - 25 25 21 1972
------- -------- -------- --------
Total Other
Properties 66 11,197 11,263 2,589
------- -------- -------- --------
Leasehold Improvements
and Equipment 7,403 7,403 4,071
-------- -------- --------
TOTAL - DECEMBER 31, 1995 $61,278 $321,198 $382,476 $139,495
======= ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------
COLUMN A COLUMN H COLUMN I
- -----------------------------------------------------------------------
Life on which
depreciation in latest
Date income statement
Description acquired is computed
- ------------------------------- -------- ----------------------
<S> <C> <C>
Warehouse/Industrial
New Jersey
East Brunswick 1972 19 - 40 Years
East Hanover 1963 5 - 40 Years
Edison 1982 17 - 25 Years
Garfield 1959 17 - 33 Years
Total Warehouse/
Industrial
Other Properties
New Jersey
Paramus 1987 33 - 40 Years
Montclair 1972 15 Years
Rahway 1972 14 Years
Total Other
Properties
Leasehold Improvements
and Equipment 3 - 20 Years
TOTAL - DECEMBER 31, 1995
</TABLE>
* These encumbrances are cross collateralized under a blanket mortgage in the
amount of $227,000,000 at December 31, 1995.
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) Aggregate cost is approximately the same for federal income tax 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 in 1993. 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 $1,615,000 insurance recovery.
-46-
<PAGE> 47
VORNADO REALTY TRUST
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 Year Ended Year Ended
December 31, 1995 December 31, 1994 December 31, 1993
----------------- ----------------- -----------------
<S> <C> <C> <C>
Real Estate
Balance at beginning of period $365,832 $340,415 $314,651
Additions during the period:
Land 161 989 15,191
Buildings & improvements 16,635 24,428 14,332
-------- -------- --------
382,628 365,832 344,174
Less: Cost of assets written-off 152 - 3,759
-------- -------- --------
Balance at end of period $382,476 $365,832 $340,415
======== ======== ========
Accumulated Depreciation
Balance at beginning of period $128,705 $118,742 $111,142
Additions charged to operating expenses 10,790 9,963 9,392
-------- -------- --------
139,495 128,705 120,534
Less: Accumulated depreciation on assets
written-off - - 1,792
-------- -------- --------
Balance at end of period $139,495 $128,705 $118,742
======== ======== ========
</TABLE>
-47-
<PAGE> 48
EXHIBIT INDEX
<TABLE>
<CAPTION>
Page Number in
Sequential
Exhibit No. Numbering
- ----------- --------------
<S> <C> <C>
3(a) Amended and Restated Declaration of Trust of the Registrant, *
dated March 29, 1993 - Incorporated by reference from Form
S-4, filed April 15, 1993.
(b) By-laws of Vornado dated March 10, 1994 - Incorporated by *
reference from Annual Report on Form 10-K for the year
ended December 31, 1993, filed March 24, 1994.
4 Indenture dated as of November 24, 1993 between Vornado Finance *
Corp. and Bankers Trust Company, as Trustee - Incorporated by
reference from Current Report on Form 8-K dated November 24,
1993, filed December 1, 1993.
10(a) 1 Master Agreement and Guaranty, between Vornado, Inc. and Bradlees *
New Jersey, Inc. dated as of May 1, 1992 - Incorporated by
reference from Quarterly Report on Form 10-Q for quarter ended
March 31, 1992, filed May 8, 1992.
(a) 2 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 from Current Report on Form
8-K dated November 24, 1993, filed December 1, 1993.
(b) 1 ** 1985 Stock Option Plan as amended - Incorporated by reference *
from Quarterly Report on Form 10-Q for quarter ended May 2, 1987,
filed June 9, 1987.
(b) 2 ** 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 from Quarterly
Report on Form 10-Q for quarter ended October 26, 1985,
filed December 9, 1985.
(b) 3 ** 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 from Quarterly Report on Form 10-Q
for quarter ended May 2, 1987, filed June 9, 1987.
(b) 4 ** Form of Stock Option Agreement for use in connection with non- *
qualified options issued pursuant to Vornado, Inc. 1985 Stock Option
Plan - Incorporated by reference from Quarterly Report on Form 10-Q
for quarter ended October 26, 1985, filed December 9, 1985.
</TABLE>
- --------------------
* Incorporated by reference
** Management contract or compensatory plan
-48-
<PAGE> 49
<TABLE>
<S> <C> <C>
10(c) 1 ** Employment Agreement between Vornado, Inc. and Joseph Macnow *
dated January 1, 1992 - Incorporated by reference from Annual Report on
Form 10-K for the year ended December 31, 1991, filed March 30, 1992.
(c) 2 ** Employment Agreement between Vornado, Inc. and Richard Rowan *
dated January 1, 1992 - Incorporated by reference from Annual Report on
Form 10-K for the year ended December 31, 1991, filed March 30, 1992.
(d) 1 Promissory Notes from Steven Roth to Vornado, Inc. dated *
December 29, 1992 and January 15, 1993 - Incorporated by reference
from Annual Report on Form 10-K for the year ended December 31, 1992,
filed February 16, 1993. *
(d) 2 Registration Rights Agreement between Vornado, Inc. and Steven *
Roth dated December 29, 1992 - Incorporated by reference
from Annual Report on Form 10-K for the year ended December 31, 1992,
filed February 16, 1993.
(d) 3 Stock Pledge Agreement between Vornado, Inc. and Steven Roth *
dated December 29, 1992 - Incorporated by reference from Annual
Report on Form 10-K for the year ended December 31, 1992, filed
February 16, 1993.
(d) 4 Promissory Notes from Steven Roth to Vornado Realty Trust *
dated April 15, 1993 and June 16, 1993 - Incorporated by reference
from Annual Report on Form 10-K for the year ended December 31, 1993,
filed March 24, 1994.
(d) 5 Promissory Note from Richard Rowan to Vornado Realty Trust - *
Incorporated by reference from Annual Report on Form 10-K for the
year ended December 31, 1993, filed March 24, 1994.
(d) 6 Promissory Note from Joseph Macnow to Vornado Realty Trust - *
Incorporated by reference from Annual Report on Form 10-K for the
year ended December 31, 1993, filed March 24, 1994.
(e) 1 Management Agreement between Interstate Properties and Vornado, *
Inc. dated July 13, 1992 - Incorporated by reference from Annual
Report on Form 10-K for the year ended December 31, 1992,
filed February 16, 1993.
(f) 1 Real Estate Retention Agreement between Vornado, Inc., Keen Realty *
Consultants, Inc. and Alexander's, Inc., dated as of July 20, 1992
- Incorporated by reference from Annual Report on Form 10-K for
the year ended December 31, 1992, filed February 16, 1993.
(f) 2 Amendment to Real Estate Retention Agreement dated *
February 6, 1995 - Incorporated by reference from Annual Report
on Form 10-K for the year ended December 31, 1994, filed
March 23, 1995.
(f) 3 Stipulation between Keen Realty Consultants Inc. and Vornado Realty *
Trust re: Alexander's Retention Agreement - Incorporated by
reference from Annual Report on Form 10-K for the year ended
December 31, 1993, filed March 24, 1994.
</TABLE>
- --------------------
* Incorporated by reference
** Management contract or compensatory plan
-49-
<PAGE> 50
<TABLE>
<S> <C> <C>
10(f) 4 Stock Purchase Agreement, dated February 6, 1995, among Vornado *
Realty Trust and Citibank, N.A. - Incorporated by reference from
Current Report on Form 8-K dated February 6, 1995, filed
February 21, 1995.
(f) 5 Management and Development Agreement, dated as of February 6, 1995 - *
Incorporated by reference from Current Report on Form 8-K dated
February 6, 1995, filed February 21, 1995.
(f) 6 Standstill and Corporate Governance Agreement, dated as of *
February 6, 1995 - Incorporated by reference from Current Report on
Form 8-K dated February 6, 1995, filed February 21, 1995.
(f) 7 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, filed March 23, 1995
(f) 8 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 from Annual
Report on Form 10-K for the year ended December 31 1994, filed
March 23, 1995.
(f) 9 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 from Annual
Report on Form 10-K for the year ended December 31, 1994, filed
March 23, 1995.
11 Statement Re Computation of Per Share Earnings. 51
12 Consolidated Ratios of Earnings to Fixed Charges and Combined Fixed
Charges and Preferred Share Dividend Requirements 52
13 Not applicable.
16 Not applicable.
18 Not applicable.
19 Not applicable.
21 Subsidiaries of the Registrant. 53
22 Not applicable.
23 Consent of independent auditors to incorporation by reference. 55
25 Not applicable.
27 Financial Data Schedule. 56
29 Not applicable.
</TABLE>
- --------------------
* Incorporated by reference
-50-
<PAGE> 1
EXHIBIT 11
VORNADO REALTY TRUST
STATEMENT RE COMPUTATION OF PER SHARE EARNINGS
<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended
December 31, December 31, December 31,
1995 1994 1993
------------ ------------ ------------
<S> <C> <C> <C>
Weighted average number of
shares outstanding 23,382,809 21,619,312 19,457,485
Common share equivalents for
options after applying treasury
stock method 196,860 234,408 332,963
----------- ----------- -----------
Weighted average number of shares
and common stock equivalents
outstanding 23,579,669 21,853,720 19,790,448
=========== =========== ===========
Income from continuing operation $53,008,000 $41,240,000 $31,755,000
Loss from discontinued operation - - (600,000)
Extraordinary item - loss on early
extinguishment of debt - - (3,202,000)
----------- ----------- -----------
Net income $53,008,000 $41,240,000 $27,953,000
=========== =========== ===========
Net income (loss) per share:
Continuing operations $2.25 $1.89 $1.60
Discontinued operation - - (.03)
Extraordinary item - - (.16)
----- ----- -----
$2.25 $1.89 $1.41
===== ===== =====
</TABLE>
-51-
<PAGE> 1
EXHIBIT 12
VORNADO REALTY TRUST
CONSOLIDATED RATIOS OF EARNINGS TO FIXED CHARGES AND
COMBINED FIXED CHARGES AND PREFERRED SHARE DIVIDEND REQUIREMENTS
<TABLE>
<CAPTION>
Year Ended
---------------------------------------------------------------------------------
December 31, December 31, December 31, December 31, December 31,
1995 1994 1993 1992 1991
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Income from continuing operations
before income taxes $53,008 $41,240 $25,386 $ 2,263 $18,000
Fixed charges 17,333 14,647 31,610 34,392 35,410
------- ------- ------- ------- -------
Income from continuing operations
before income taxes and
fixed charges $70,341 $55,887 $56,996 $36,655 $53,410
======= ======= ======= ======= =======
Fixed charges:
Interest and debt expense $16,426 $14,209 $31,155 $33,910 $34,930
1/3 of rent expense -
interest factor 465 438 455 482 480
------- ------- ------- ------- -------
16,891 14,647 31,610 34,392 35,410
Capitalized interest 442 1,582 282 - -
------- ------- ------- ------- -------
$17,333 $16,229 $31,892 $34,392 $35,410
======= ======= ======= ======= =======
Ratio of earnings to fixed charges 4.06 3.44 1.79 1.07 1.51
Note: For purposes of this calculation, earnings before fixed charges consist
of earnings before income taxes plus fixed charges. Fixed charges
consist of interest expense on all indebtedness (including amortization
of deferred debt issuance costs) and the portion of operating lease
rental expense that is representative of the interest factor (deemed to
be one third of operating lease rentals).
Rent Expense $ 1,395 $ 1,313 $ 1,366 $ 1,446 $ 1,441
======= ======= ======= ======= =======
</TABLE>
-52-
<PAGE> 1
EXHIBIT 21
<TABLE>
<CAPTION>
STATE OF PERCENTAGE
NAME OF SUBSIDIARY ORGANIZATION OF OWNERSHIP
- ------------------------------------------ ------------ ------------
<S> <C> <C>
14th Street Acquisition Corporation New York 100%
Amherst Holding Corporation New York 100%
Amherst Industries, Inc. New York 100%
Atlantic City Holding Corporation New Jersey 100%
Bensalem Holding Company Pennsylvania 100%
Bethlehem Holding Company Pennsylvania 100%
Bordentown Holding Corporation New Jersey 100%
Brentwood Development Corp. New York 100%
Bridgeland Warehouses, Inc. New Jersey 100%
Camden Holding Corporation New Jersey 100%
Chicopee Holding Corporation Massachusetts 100%
Clementon Holding Corporation New Jersey 100%
Cross Avenue Broadway Corporation New York 100%
Cumberland Holding Corporation New Jersey 100%
Dallas Skillman Abrams Crossing Corporation Texas 100%
Delran Holding Corporation New Jersey 100%
Dover Holding Corporation New Jersey 100%
Dundalk Stores Corporation Maryland 100%
Durham Leasing Corp. New Jersey 100%
Eudowood Holding Corporation Maryland 100%
Evesham Holding Corporation New Jersey 100%
Gallery Market Holding Company Pennsylvania 100%
Glen Burnie Shopping Plaza, Inc. Maryland 100%
Greenwich Holding Corporation New York 100%
Hackbridge Corporation New Jersey 100%
Hagerstown Holding Corporation Maryland 100%
Hanover Holding Corporation New Jersey 100%
Hanover Industries, Inc. New Jersey 100%
Hanover Leasing Corporation New Jersey 100%
Hanover Public Warehousing, Inc. New Jersey 100%
Henrietta Holding Corp. New York 100%
HEP Acquisition Corporation Delaware 100%
Jersey City Leasing Corporation New Jersey 100%
Kearny Holding Corp. New Jersey 100%
Kearny Leasing Corporation New Jersey 100%
Lancaster Holding Company Pennsylvania 100%
Landthorp Enterprises, Inc. Delaware 100%
Lawnside Holding Corporation New Jersey 100%
Lawnside Leasing Corporation New Jersey 100%
Lawnwhite Holding Corporation New Jersey 100%
Lewisville Town Centre Corporation Texas 100%
Littleton Holding Corporation New Jersey 100%
Lodi Industries Corp. New Jersey 100%
Lodi Leasing Corporation New Jersey 100%
Manalapan Industries, Inc. New Jersey 100%
Marple Holding Company Pennsylvania 100%
</TABLE>
-53-
<PAGE> 2
<TABLE>
<CAPTION>
STATE OF PERCENTAGE
NAME OF SUBSIDIARY ORGANIZATION OF OWNERSHIP
- ---------------------------------------- ------------ ------------
<S> <C> <C>
Menands Holding Corporation New York 100%
Mesquite Crossing Corporation Texas 100%
Middletown Holding Corporation New Jersey 100%
Montclair Holding Corporation New Jersey 100%
Morris Plains Leasing Corp. New Jersey 100%
National Hydrant Corporation New York 100%
New Hanover, Inc. New Jersey 100%
Newington Holding Corporation Connecticut 100%
New Woodbridge, Inc. New Jersey 100%
North Bergen Stores, Inc. New Jersey 100%
North Plainfield Holding Corporation New Jersey 100%
Oak Trading Company New Jersey 100%
Philadelphia Holding Company Pennsylvania 100%
Phillipsburg Holding Corporation New Jersey 100%
Pike Holding Company Pennsylvania 100%
Princeton Corridor Holding Corporation New Jersey 100%
Rahway Leasing Corporation New Jersey 100%
RMJ Company, Inc. New Jersey 100%
Rochester Holding Corporation New York 100%
Silver Lane Properties, Inc. Connecticut 100%
Springfield Holding Corporation Massachusetts 100%
Star Universal Corporation New Jersey 100%
T.G. Hanover, Inc. New Jersey 100%
T.G. Stores, Inc. Maryland 100%
Terrill Holding Corporation New Jersey 100%
The Second Lawnside Corporation New Jersey 100%
The Second Rochester Corporation New York 100%
Turnersville Holding Corporation New Jersey 100%
Two Guys - Conn., Inc. Connecticut 100%
Two Guys - Mass., Inc. Massachusetts 100%
Two Guys from Harrison, Inc. New Jersey 100%
Two Guys from Harrison Company Pennsylvania 100%
Two Guys from Harrison - N.Y., Inc. New York 100%
Unado Corp. New Jersey 100%
Upper Moreland Holding Company Pennsylvania 100%
Vornado, Inc. New York 100%
Vornado Acquisition Corporation Delaware 100%
Vornado Finance Corp. Delaware 100%
Vornado Holding Corporation Delaware 100%
Vornado Investments Corporation Delaware 100%
Vornado Lending Corp. New Jersey 100%
Watchung Holding Corporation New Jersey 100%
Watchung Mountain Corporation New Jersey 100%
White Horse Lawnside Corporation New Jersey 100%
West Windsor Holding Corporation New Jersey 100%
York Holding Company Pennsylvania 100%
</TABLE>
-54-
<PAGE> 1
EXHIBIT 23
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Amendment No. 5 to Registration
Statement No. 33-62395 on Form S-3 and Registration Statement No. 33-62344 on
Form S-8 of Vornado Realty Trust of our report dated March 7, 1996, appearing in
this Annual Report on Form 10-K of Vornado Realty Trust for the year ended
December 31, 1995.
Parsippany, New Jersey
March 22, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S AUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 1995 AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 19,127
<SECURITIES> 70,997
<RECEIVABLES> 7,086
<ALLOWANCES> 578
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 382,476
<DEPRECIATION> 139,495
<TOTAL-ASSETS> 491,496
<CURRENT-LIABILITIES> 0
<BONDS> 233,353
0
0
<COMMON> 970
<OTHER-SE> 193,304
<TOTAL-LIABILITY-AND-EQUITY> 491,496
<SALES> 0
<TOTAL-REVENUES> 108,718
<CGS> 0
<TOTAL-COSTS> 32,282
<OTHER-EXPENSES> 17,477
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 16,426
<INCOME-PRETAX> 53,008
<INCOME-TAX> 0
<INCOME-CONTINUING> 53,008
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 53,008
<EPS-PRIMARY> 2.25
<EPS-DILUTED> 2.25
</TABLE>
