<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 12, 1997
Registration No. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------------------------
FORM S-3
REGISTRATION STATEMENT
AND
POST-EFFECTIVE AMENDMENT TO
REGISTRATION STATEMENT NO. 33-62395
UNDER
THE SECURITIES ACT OF 1933
--------------
VORNADO REALTY TRUST
AND
VORNADO REALTY L.P.
(Exact name of registrants as specified in their charters)
<TABLE>
<S> <C>
MARYLAND 22-1657560
DELAWARE 22-3506990
(State or other jurisdiction of incorporation or organization) (IRS employer identification number)
</TABLE>
<TABLE>
<S> <C> <C>
PARK 80 WEST, PLAZA II, JOSEPH MACNOW Copies to:
SADDLE BROOK, NEW JERSEY 07663 PARK 80 WEST, PLAZA II, PATRICIA A. CERUZZI, ESQ.
(201) 587-1000 SADDLE BROOK, NEW JERSEY 07663 JANET T. GELDZAHLER, ESQ.
(Address, including zip code, and telephone (201) 587-1000 SULLIVAN & CROMWELL
number, including area code, of registrants' (Name, address, including zip code, and telephone 125 BROAD STREET
principal executive offices) number, including area code, of agent for service) NEW YORK, NEW YORK 10004
</TABLE>
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From
time to time after the effective date of this Registration Statement as
determined by market conditions.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. / /
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, other than securities offered only in connection with
dividend or interest reinvestment plans, check the following box. /X/
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. / / ______________
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. / / ______________
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. / /
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CALCULATION OF REGISTRATION FEE
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PROPOSED MAXIMUM PROPOSED
TITLE OF EACH CLASS OF AMOUNT TO BE AGGREGATE PRICE MAXIMUM AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED(1) PER UNIT OFFERING PRICE(1)(2) REGISTRATION FEE
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Shares (par value $.04 per share)(3)
Preferred Shares (no par value per share)(4)
Depositary Shares representing Preferred Shares(5) $1,614,000,000(6) (7) $1,614,000,000(6)(8) $489,090.91(9)
Debt Securities(10)
Debt Warrants(11)
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</TABLE>
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(1) In U.S. Dollars or the equivalent thereof denominated in one or more
foreign currencies or units or two or more foreign currencies or
composite currencies (such as European Currency Units).
(2) Estimated for the sole purpose of computing the registration fee.
(3) There are being registered hereunder an indeterminate number of Common
Shares of Beneficial Interest of Vornado Realty Trust as may be sold,
from time to time, by Vornado Realty Trust. There are also being
registered hereunder an indeterminate number of Common Shares of
Beneficial Interest of Vornado Realty Trust as shall be issuable upon
conversion of Preferred Shares of Beneficial Interest of Vornado Realty
Trust registered hereby.
(4) There are being registered hereunder an indeterminate number of
Preferred Shares of Beneficial Interest of Vornado Realty Trust as may
be sold, from time to time, by Vornado Realty Trust.
(5) There are being registered hereunder an indeterminate number of
Depositary Shares to be evidenced by Depositary Receipts issued
pursuant to a Deposit Agreement. In the event Vornado Realty Trust
elects to offer to the public fractional interests in Preferred Shares
of Beneficial Interest registered hereunder, Depositary Receipts will
be distributed to those persons purchasing such fractional interests
and Preferred Shares of Beneficial Interest will be issued to the
Depositary under the Deposit Agreement. No separate consideration will
be received for the Depositary Shares.
(6) Such amount represents the principal amount of any Debt Securities
issued at their principal amount, the issue price rather than the
principal amount of any Debt Securities issued at an original issue
discount, the liquidation preference of any Preferred Shares, the
amount computed pursuant to Rule 457(c) for any Common Shares, the
issue price of any Debt Warrants and the exercise price of any Debt
Securities issuable upon the exercise of Debt Warrants.
(7) Omitted pursuant to General Instruction II.D. of Form S-3 under the
Securities Act of 1933, as amended (the "Securities Act").
(8) No separate consideration will be received for Common Shares as may
from time to time be issued upon conversion of Preferred Shares.
(9) Calculated pursuant to Rule 457(o) of the rules and regulations under
the Securities Act, in respect of the $1,614,000,000 of previously
unregistered securities registered hereby. An additional filing fee of
$46,896.55 was previously paid for $136,000,000 aggregate principal
amount of unsold securities registered under Registration Statement No.
33-62395.
(10) There are being registered hereunder an indeterminate amount of Debt
Securities of Vornado Realty L.P.
(11) Debt Warrants may be sold separately or with Debt Securities.
------------------------------------
PURSUANT TO RULE 429 UNDER THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT INCLUDES A PROSPECTUS WHICH MAY RELATE TO SECURITIES
REGISTERED BY THE COMPANY ON FORM S-3 (REGISTRATION STATEMENT NO. 33-62395).
THIS REGISTRATION STATEMENT, WHICH IS A NEW REGISTRATION STATEMENT, ALSO
CONSTITUTES A POST-EFFECTIVE AMENDMENT TO REGISTRATION STATEMENT NO. 33-62395.
SUCH POST-EFFECTIVE AMENDMENT SHALL HEREAFTER BECOME EFFECTIVE CONCURRENTLY WITH
THE EFFECTIVENESS OF THIS REGISTRATION STATEMENT IN ACCORDANCE WITH SECTION 8(c)
OF THE SECURITIES ACT OF 1933.
THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT AND
POST-EFFECTIVE AMENDMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS
EFFECTIVE DATE UNTIL THE REGISTRANTS SHALL FILE A FURTHER AMENDMENT WHICH
SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT AND POST-EFFECTIVE
AMENDMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT AND
POST-EFFECTIVE AMENDMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION,
ACTING PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.
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Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED JUNE 12, 1997
Prospectus $750,000,000
VORNADO REALTY TRUST
PREFERRED SHARES, DEPOSITARY SHARES AND
COMMON SHARES
$1,000,000,000
VORNADO REALTY L.P.
DEBT SECURITIES AND DEBT WARRANTS
------------------------------------
Vornado Realty Trust (the "Company") may offer from time to time,
together or separately, in one or more series (i) preferred shares of beneficial
interest of the Company, no par value ("Preferred Shares"), (ii) depositary
shares representing entitlement to all rights and preferences of a fraction of a
Preferred Share of a specified series and represented by depositary receipts
("Depositary Shares") and (iii) common shares of beneficial interest of the
Company, par value $0.04 per share ("Common Shares"), having an aggregate
initial offering price not to exceed U.S. $750,000,000. Vornado Realty L.P. (the
"Operating Partnership") may offer from time to time, together or separately, in
one or more series (i) debt securities ("Debt Securities"), which may be either
senior debt securities (the "Senior Debt Securities") or subordinated debt
securities (the "Subordinated Debt Securities") and (ii) warrants to purchase
debt securities of the Operating Partnership as shall be designated by the
Operating Partnership at the time of the offering (the "Debt Warrants"), having
an aggregate initial offering price not to exceed U.S. $1,000,000,000. The
Preferred Shares, Depositary Shares, Common Shares, Debt Securities and Debt
Warrants offered hereby (collectively, the "Securities") may be offered
separately or together, in separate series, in amounts, at prices and on terms
to be set forth in a supplement to this Prospectus (a "Prospectus Supplement").
The accompanying Prospectus Supplement will set forth with regard to
the particular Securities in respect of which this Prospectus is being delivered
(i) in the case of Debt Securities, the title, aggregate principal amount,
denominations (which may be in United States dollars, or in any other currency,
currencies or currency unit, including the European Currency Unit), maturity,
rate, if any (which may be fixed or variable), or method of calculation thereof,
time of payment of any interest, any terms for redemption at the option of the
Operating Partnership or the holder, any terms for sinking fund payments, rank,
any exchange rights, any listing on a securities exchange, and the initial
public offering price and any other terms in connection with the offering and
sale of such Debt Securities, (ii) in the case of Preferred Shares, the specific
title, the aggregate amount and the stated value, any dividend (including the
method of calculating the payment of dividend), liquidation, redemption,
conversion, voting or other rights and the initial offering price, (iii) in the
case of Common Shares, the number of Common Shares, the initial offering price
and the terms of the offering thereof and (iv) in the case of Debt Warrants, the
duration, purchase price, exercise price and detachability of such Debt
Warrants. The Prospectus Supplement will also contain, as applicable, a
discussion of the material United States Federal income tax considerations
relating to the Securities in respect of which this Prospectus is being
delivered to the extent not contained herein.
The Company's Common Shares are listed on the New York Stock Exchange
("NYSE") under the symbol "VNO". The Company's $3.25 Series A Convertible
Preferred Shares of Beneficial Interest, liquidation preference $50.00 per share
(the "Series A Preferred Shares"), are listed on the NYSE under the symbol "VNO
Pr A". The Prospectus Supplement will also contain information, where
applicable, as to any listing on a securities exchange of the Securities covered
by such Prospectus Supplement.
------------------------------------
SEE "RISK FACTORS" BEGINNING ON PAGE 3 FOR CERTAIN FACTORS RELEVANT TO AN
INVESTMENT IN THE SECURITIES.
------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
------------------------------------
The Company and the Operating Partnership may sell Securities to or
through underwriters, and also may sell Securities directly to other purchasers
or through agents. The accompanying Prospectus Supplement will set forth the
names of any underwriters or agents involved in the sale of the Securities in
respect of which this Prospectus is being delivered, the amounts of Securities,
if any, to be purchased by underwriters and the compensation, if any, of such
underwriters or agents. See "Plan of Distribution" herein.
The date of this Prospectus is , 1997.
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NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED OR INCORPORATED BY REFERENCE IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFER CONTAINED IN THIS PROSPECTUS AND, IF
GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE COMPANY, THE OPERATING PARTNERSHIP OR ANY
UNDERWRITERS, AGENTS OR DEALERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO
SELL OR SOLICITATION OF AN OFFER TO BUY SECURITIES IN ANY JURISDICTION TO ANY
PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE
DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE COMPANY AND ITS SUBSIDIARIES OR THE OPERATING PARTNERSHIP SINCE
THE DATE HEREOF OR THE INFORMATION CONTAINED HEREIN IS CORRECT AT ANY TIME
SUBSEQUENT TO THE DATE HEREOF.
All references to the "Company" and "Vornado" in this prospectus shall
be deemed to include Vornado Realty Trust and its subsidiaries, including the
Operating Partnership, unless the context requires otherwise.
AVAILABLE INFORMATION
The Company is and the Operating Partnership will be subject to the
informational requirements of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), and in accordance therewith the Company files and the
Operating Partnership will file reports, proxy statements and other information
with the Securities and Exchange Commission (the "Commission"). Such reports,
proxy statements and other information filed by the Company and the Operating
Partnership with the Commission can be inspected and copied at the Commission at
Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and
at the following regional offices of the Commission: 7 World Trade Center, 13th
Floor, New York, New York 10048 and Citicorp Center, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661-2511. Copies of such information can be
obtained from the Public Reference Section of the Commission, 450 Fifth Street,
N.W., Washington, D.C. 20549, at prescribed rates. The Commission maintains a
web site on the World Wide Web that contains reports, proxy and information
statements and other information on registrants, such as the Company and the
Operating Partnership, that must file such material with the Commission
electronically. The Commission's address on the world wide web is
"http://www.sec.gov". The Company's Common Shares and Series A Preferred Shares
are listed on the NYSE and similar information can be inspected and copied at
the NYSE, 20 Broad Street, 17th Floor, New York, New York 10005.
This Prospectus constitutes a part of a registration statement on Form
S-3 (the "Registration Statement") filed by the Company and the Operating
Partnership with the Commission under the Securities Act of 1933, as amended
(the "Securities Act"). As permitted by the rules and regulations of the
Commission, this Prospectus omits certain of the information contained in the
Registration Statement and reference is hereby made to the Registration
Statement and related exhibits for further information with respect to the
Company, the Operating Partnership and the Securities offered hereby. Statements
contained herein concerning the provisions of any documents filed as an exhibit
to the Registration Statement or otherwise filed with the Commission are not
necessarily complete, and in each instance reference is made to the copy of such
document so filed. Each such statement is qualified in its entirety by such
reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company and the Operating
Partnership with the Commission pursuant to the Exchange Act are hereby
incorporated by reference into this Prospectus:
(1) the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1996;
(2) the Company's Quarterly Report on Form 10-Q for the period
ended March 31, 1997;
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(3) the Company's Current Report on Form 8-K, dated March 12,
1997, as amended by Form 8-K/A, dated March 12, 1997 and filed
with the Commission on April 1, 1997, and the Company's
Current Reports on Form 8-K, dated April 3, 1997, April 15,
1997 and May 7, 1997;
(4) the description of the Company's Series A Preferred Shares
contained in the Company's Registration Statement on Form 8-A,
filed with the Commission on April 3, 1997; and
(5) the Operating Partnership's Registration Statement on Form 10,
filed with the Commission on June 11, 1997.
All other documents and reports filed with the Commission by the
Company or the Operating Partnership pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act from the date of this Prospectus and prior to the
termination of the offering of the Securities shall be deemed to be incorporated
by reference herein and shall be deemed to be a part hereof from the date of the
filing of such reports and documents (provided, however, that the information
referred to in item 402(a)(8) of Regulation S-K of the Commission shall not be
deemed specifically incorporated by reference herein).
Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein
or in any subsequently filed document which also is or is deemed to be
incorporated by reference herein modifies or supersedes such statement. Any such
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this Prospectus.
The Company and the Operating Partnership will provide without charge
to each person to whom a copy of this Prospectus is delivered, on written or
oral request of such person, a copy of any or all documents which are
incorporated herein by reference (not including the exhibits to such documents,
unless such exhibits are specifically incorporated by reference in the document
which this Prospectus incorporates). Requests should be directed to the
Secretary of the Company, Park 80 West, Plaza II, Saddle Brook, New Jersey
07663, telephone number (201) 587-1000.
RISK FACTORS
Prospective investors should carefully consider, among other factors,
the matters described below.
REAL ESTATE INVESTMENT CONSIDERATIONS
General
Real property investments are subject to varying degrees of risk. Real
estate values are affected by changes in the general economic climate, local
conditions such as an oversupply of or a reduction in demand for real estate in
the area, the attractiveness of the Company's properties to tenants, the
quality, philosophy and performance of management, competition from comparable
properties, inability to collect rent from tenants, the effects of any
bankruptcies of major tenants, changes in market rental rates, the need to
periodically repair, renovate and rent space and to pay the costs thereof
(including, without limitation, substantial tenant improvement and leasing costs
of re-leasing office space), and increases in operating costs due to inflation
and other factors (including increased real estate taxes), which increases may
not necessarily be passed through fully to tenants. Real estate values are also
affected by such factors as government regulations and changes in zoning or tax
laws, interest rate levels, the availability of financing and potential
liability under environmental and other laws.
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Dependence on Tenants
The Company's results of operations will depend on its ability to
continue to lease space in its real estate properties on economically favorable
terms. In addition, as substantially all of the Company's income is derived from
rentals of real property, the Company's income and funds available for
distribution would be adversely affected if a significant number of the
Company's lessees were unable to meet their obligations to the Company. In the
event of default by a lessee, the Company may experience delays in enforcing its
rights as lessor and may incur substantial costs in protecting its investment.
Currently only one of the Company's tenants, Bradlees, Inc. ("Bradlees"),
represents more than 3% of the Company's pro forma revenues. Bradlees accounted
for approximately 10.5% of pro forma property rentals for the year ended
December 31, 1996.
Bankruptcy of Tenants
There have been a number of recent bankruptcies in the retail industry,
including certain tenants of the Company. The bankruptcy or insolvency of a
major tenant may have a material adverse effect on the shopping centers affected
and the income produced by such properties. The Company's leases generally do
not contain restrictions designed to ensure the creditworthiness of the tenant.
In June 1995, Bradlees filed for protection under Chapter 11 of the U.S.
Bankruptcy Code. The Company currently leases 17 locations to Bradlees. Of these
locations, 14 are fully guaranteed by Stop & Shop Companies, Inc. ("Stop &
Shop"), a wholly-owned subsidiary of Royal Ahold NV, a leading international
food retailer, and one is guaranteed as to 70% of the rent. During 1996,
Bradlees rejected three leases and assigned one lease to Kohl's Department
Stores, Inc. These four leases are fully guaranteed by Stop & Shop. In January
1997, Bradlees received bankruptcy court approval to close one of the two stores
in which leases are not guaranteed by Stop & Shop. Montgomery Ward & Co., Inc.
(a previous lessee) remains liable on eight of the leases guaranteed by Stop &
Shop, including the rent it was obligated to pay -- approximately 70% of current
rent.
Acquisition and Development Risks
The Company may acquire or develop properties or acquire other real
estate companies when it believes that an acquisition or development is
consistent with its business strategies. In addition, the Company anticipates
that, in certain circumstances, it may use Operating Partnership units ("Units")
as consideration for acquisitions from tax-sensitive sellers and, in connection
with such acquisitions, it may agree to certain restrictions on the Company's
ability to sell, or reduce the mortgage indebtedness on, such acquired assets,
including agreeing not to sell properties for significant periods of time. These
transactions may increase the Company's indebtedness as a percentage of asset
value or market capitalization, which may impair the ability of the Company to
take actions that would otherwise be in the best interests of limited partners
or shareholders.
Illiquidity of Assets; Restrictions on Dispositions of Mortgaged
Properties
Equity real estate investments are relatively illiquid and therefore
tend to limit the ability of the Company to vary its portfolio promptly in
response to changes in economic or other conditions. In addition, certain
significant expenditures associated with each equity investment (such as
mortgage payments, real estate taxes and maintenance costs) are generally not
reduced when circumstances cause a reduction in income from the investment.
Should such events occur, the Company's income and funds for distribution would
be adversely affected. A portion of the Company's properties are mortgaged to
secure payment of indebtedness, and if the Company were unable to meet its
mortgage payments, a loss could be sustained as a result of foreclosure on the
properties by the mortgagee. In addition, if it becomes necessary or desirable
for the Company to dispose of one or more of the mortgaged properties, the
Company might not be able to obtain release of the lien on such mortgaged
property. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Liquidity and Capital Resources" and the Notes to the
Consolidated Financial Statements contained in the Company's Annual Report on
Form 10-K for the Fiscal Year Ended December 31, 1996, incorporated in this
Prospectus by reference for information regarding the terms of the mortgages
encumbering the Company's properties.
4
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POSSIBLE CONFLICTS OF INTEREST; RELATED PARTY TRANSACTIONS
Interstate Properties, a New Jersey general partnership ("Interstate"),
owns 21.9% of the outstanding Common Shares of the Company (assuming conversion
of all Operating Partnership Units) and Units of the Operating Partnership.
Steven Roth, Chairman of the Board and Chief Executive Officer of the Company,
is the managing general partner of Interstate. Mr. Roth, David Mandelbaum and
Russell B. Wight, Jr. are the three partners of Interstate. Messrs. Roth,
Mandelbaum and Wight and Interstate own, in the aggregate, 26.2% of the
outstanding Common Shares of the Company and Units of the Operating Partnership.
As of December 31, 1996, the Company owned 29.3% of the outstanding
common stock of Alexander's Inc. ("Alexander's"), a New York corporation.
Interstate owns an additional 27.1% of the outstanding common stock of
Alexander's as of such date. Mr. Roth, the Company's Chief Executive Officer,
and Mr. Fascitelli, the Company's President, are directors of Alexander's.
Messrs. Mandelbaum, West and Wight, members of the Company's Board of Trustees,
are also members of the Board of Directors of Alexander's.
Because of the foregoing, Mr. Roth and Interstate may have substantial
influence on the Company and on the outcome of any matters submitted to the
Company's stockholders for approval. In addition, certain decisions concerning
the operations or financial structure of the Company may present conflicts of
interest between Messrs. Roth, Mandelbaum and Wight and Interstate and the
Company's other shareholders. In addition, Mr. Roth and Interstate engage in a
wide variety of activities in the real estate business which may result in
conflicts of interest with respect to certain matters affecting the Company or
Alexander's, such as potential business opportunities, business dealings,
demands on the time of Mr. Roth and certain of the executive officers of the
Company and changes of existing arrangements between Mr. Roth, the Company and
Interstate, potential competition between business activities conducted, or
sought to be conducted, by the Company, Interstate and Alexander's (including
competition for properties and tenants), possible corporate transactions and
other strategic decisions affecting the future of such parties.
Bernard Mendik, the Company's co-chairman, owns direct and indirect
managing general partner interests in two properties (Two Park Avenue and 330
Madison Avenue) in which the Company owns a partial interest, direct and
indirect interests in numerous additional office properties and other real
estate assets, and interests in certain property services businesses, including
in businesses which provide cleaning and related services, security services and
facilities management services, which interests may give rise to certain
conflicts of interest concerning the fulfillment of Mr. Mendik's responsibility
as a trustee of the Company.
The Mendik Group (the "Mendik Group", as used herein, Bernard H.
Mendik, David R. Greenbaum and certain entities controlled by them) owns an
entity which provides cleaning and related services and security services to
office properties. The Company has entered into contracts with the Mendik Group
to provide such services to the certain office properties in which the Company
owns a 100% interest. Although the Company believes that the terms and
conditions of the contracts pursuant to which these services will be provided,
taken as a whole, will not be less favorable to the Company than those which
could have been obtained from a third party providing comparable services, there
can be no assurance to this effect.
Alexander's Management and Development Agreement
Pursuant to a Management and Development Agreement (the "Management
Agreement") between the Company and Alexander's, the Company has agreed to
manage Alexander's business affairs and manage and develop Alexander's
properties for an annual fee. The Management Agreement was assigned by the
Company to Vornado Management Corp. ("VMC"), a New Jersey corporation. The
Company owns 100% of the outstanding shares of preferred stock of VMC (which
entitles the Company to 95% of the economic benefits of VMC through
distributions), and Messrs. Roth and West own 100% of the outstanding shares of
common stock of VMC. The Company also acts as a leasing agent for Alexander's
properties on a fee basis under a leasing agreement. In addition, 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. None
5
<PAGE> 8
of Mr. Roth, Interstate or Vornado is obligated to present to Alexander's any
particular investment opportunity which comes to his or its attention, even if
such opportunity is of a character which might be suitable for investment by
Alexander's.
Leasing Services Provided to Other Properties
The Mendik Management Company Inc. (the "Management Corporation")
(which is controlled by Messrs. Mendik, Greenbaum and Fascitelli and not by the
Company) provides management and leasing services to properties in which the
Company owns less than a 100% interest as well as to other office properties
(including several properties in which the Mendik Group has an interest).
Certain conflicts of interest may result from the Management Corporation
providing leasing services both to properties in which the Company has an
interest and other properties in which the Mendik Group has an interest.
CORPORATE STRUCTURE; LEVERAGE
The Company is a real estate investment trust formed under Title 8 of
the Corporations and Associations Article of the Annotated Code of Maryland
("Title 8"). Substantially all of the Company's properties are owned by
subsidiaries and, accordingly, securities issued by the Company will be
effectively subordinated to all existing and future liabilities of the Company's
subsidiaries, including indebtedness of or guaranteed by such subsidiaries. As
of June 11, 1997, the Company and its consolidated subsidiaries had aggregate
indebtedness outstanding of approximately $863 million, of which $ 463 million
is secured by Company properties. Any right of the Company to participate in any
distribution of the assets of any of the Company's subsidiaries upon the
liquidation, reorganization or insolvency of such subsidiary (and any consequent
right of the Company's securityholders to participate in those assets) will be
subject to the claims of the creditors (including trade creditors) and preferred
stockholders, if any, of such subsidiary, except to the extent the Company has a
claim against such subsidiary as a creditor of such subsidiary. In addition, in
the event that claims of the Company as a creditor of a subsidiary are
recognized, such claims would be subordinate to any security interest in the
assets of such subsidiary and any indebtedness of such subsidiary senior to that
held by the Company.
The Company's ability to make required principal and interest payments
with respect to indebtedness, including any Debt Securities, depends on the
earnings of its subsidiaries and on its ability to receive funds from such
subsidiaries through dividends or other payments. Since the Securities are
obligations of the Company only, the Company's subsidiaries are not obligated or
required to pay any amounts due pursuant to the Securities or to make funds
available therefor in the form of dividends or advances to the Company.
ENVIRONMENTAL MATTERS
Under various Federal, state and local laws, ordinances and
regulations, a current or previous owner or operator of real estate may be
required to investigate and clean up certain hazardous substances released at a
property, and may be held liable to a governmental entity or to third parties
for property damage or personal injuries and for investigation and clean-up
costs incurred by the parties in connection with the contamination. Such laws
often impose liability without regard to whether the owner or operator knew of,
or was responsible for, the release of such hazardous substances. The presence
of contamination or the failure to remediate contamination may adversely affect
the owner's ability to sell or lease real estate or to borrow using the real
estate as collateral. Other Federal, state and local laws, ordinances and
regulations require abatement or removal of certain asbestos-containing
materials in the event of demolition or certain renovations or remodeling and
also govern emissions of and exposure to asbestos fibers in the air. The
operation and subsequent removal of certain underground storage tanks are also
regulated by Federal and state laws. In connection with the ownership, operation
and management of its properties, the Company could be held liable for the costs
of remedial action with respect to such regulated substances or tanks or related
claims.
6
<PAGE> 9
Each of the Company's properties has been subjected to varying degrees
of environmental assessment, which generally did not include soil sampling or
subsurface investigations, at various times. The environmental assessments did
not reveal any environmental condition or liability that the Company believes
will 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.
COMPETITION
The leasing of real estate is highly competitive. The principal means
of competition are rent charged, location, services provided 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. 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 and retain tenants.
DEPENDENCE ON KEY PERSONNEL
The Company is dependent on the efforts of certain of its executive
officers. While the Company believes that it could find replacements for these
key personnel, the loss of their services could have a temporary adverse effect
on the operations of the Company.
CONSEQUENCES OF THE FAILURE TO QUALIFY OR REMAIN QUALIFIED AS A REIT
Although the Company's management believes that the Company will remain
organized and will continue to operate so as to qualify as a real estate
investment trust ("REIT") for Federal income tax purposes, no assurance can be
given that it will remain so qualified. Qualification as a REIT for Federal
income tax purposes involves the application of highly technical and complex
provisions of the Internal Revenue Code of 1986, as amended (the "Code") for
which there are only limited judicial or administrative interpretations, and the
determination of various factual matters and circumstances not entirely within
the control of the Company may impact its ability to qualify as a REIT. In
addition, no assurance can be given that legislation, new regulations,
administrative interpretations or court decisions will not significantly change
the tax laws with respect to the requirements for qualification as a REIT or the
Federal income tax consequences of such qualification. The Company, however, is
not aware of any proposal to amend the tax laws that would significantly and
adversely affect its ability to operate in such a manner as to qualify as a
REIT.
If, with respect to any taxable year, the Company fails to qualify as a
REIT, it would not be allowed a deduction for distributions to shareholders in
computing its taxable income and would be subject to Federal income tax
(including any applicable alterative minimum tax) on its taxable income at
regular corporate rates. As a result, the amount available for distribution to
shareholders would be reduced for the year or years involved, and distributions
would no longer be required to be made. In addition, unless entitled to relief
under certain statutory provisions, the Company would also be disqualified from
treatment as a REIT for the four taxable years following the year during which
qualification was lost. Notwithstanding that the Company currently intends to
operate in a manner designed to allow it to qualify as a REIT, future economic,
market, legal, tax or other considerations may cause it to determine that it is
in the best interest of the Company and its shareholders to revoke the REIT
election.
THE COMPANY AND THE OPERATING PARTNERSHIP
The Company is a fully-integrated real estate investment trust
organized under the laws of the state of Maryland. In April 1997, the Company
organized an Operating Partnership as a limited partnership under the laws of
the State of Delaware and transferred substantially all of its assets to the
Operating Partnership.
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<PAGE> 10
As a result, the Company now conducts its business through, and substantially
all of its interests in properties are held by, the Operating Partnership, in
which it is the sole general partner and in which it owns an approximately 90%
limited partnership interest as of June 11, 1997. The Operating Partnership
currently owns: (i) 58 shopping center properties in seven states and Puerto
Rico containing 10.5 million square feet, including 1.2 million square feet
built by tenants on land leased from the Company; (ii) all or portions of nine
office building properties in the New York City metropolitan area (primarily
Manhattan) containing 4.2 million square feet; (iii) eight warehouse/industrial
properties in New Jersey containing 2.0 million square feet; and (iv)
approximately 29.3% of the outstanding common stock of Alexander's, Inc., which
has nine properties in the New York City metropolitan area.
As of June 11, 1997, the Company's and the Operating Partnership's
total consolidated outstanding debt were approximately $863 million, of which
$463 million is secured by Company properties, and their total consolidated debt
plus their proportionate share of total unconsolidated debt were approximately
$975 million, of which $575 million is secured by Company properties.
The executive offices of the Company and the Operating Partnership are
located at Park 80 West, Plaza II, Saddle Brook, N.J. 07663; telephone (201)
587-1000.
USE OF PROCEEDS
The Company is required by the terms of the partnership agreement of
the Operating Partnership to invest the net proceeds of any sale of Common
Shares, Preferred Shares or Depositary Shares in the Operating Partnership in
exchange for additional Units or preferred Units, as the case may be. As will be
more fully described in the applicable Prospectus Supplement, the Company and
the Operating Partnership intend to use the net proceeds from the sale of
Securities for general corporate purposes or such other uses as may be set forth
in a Prospectus Supplement.
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<PAGE> 11
CONSOLIDATED RATIOS OF EARNINGS TO FIXED CHARGES
AND COMBINED FIXED CHARGES AND PREFERRED SHARE DIVIDEND REQUIREMENTS
For purposes of calculating the following ratios, (i) earnings
represent income from continuing operations before income taxes, plus fixed
charges, and (ii) fixed charges represent 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). There were no preferred
shares outstanding during any of the periods indicated below and therefore the
ratio of earnings to fixed charges would have been the same as the ratio of
earnings to combined fixed charges and preferred share dividend requirements for
each period indicated. The historical ratios of earnings to combined fixed
charges and preferred share dividend requirements set forth below are the same
for both the Company and the Operating Partnership.
<TABLE>
<CAPTION>
THREE
MONTHS
ENDED
MARCH 31, YEAR ENDED DECEMBER 31,
--------- ----------------------------------------------
1997 1996 1995 1994 1993 1992
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Ratio of Earnings to Combined Fixed
Charges and Preferred Share Dividend
Requirements.............................. 3.29 4.56 4.06 3.54 1.80 1.07
</TABLE>
DESCRIPTION OF DEBT SECURITIES
The Debt Securities may be issued from time to time in one or more
series. The particular terms of each series of Debt Securities offered by any
Prospectus Supplement or Prospectus Supplements will be described therein. The
Senior Debt Securities are to be issued under an Indenture (the "Senior
Indenture") between the Operating Partnership and The Bank of New York, as
trustee (the "Senior Trustee"), a copy of the form of which Senior Indenture is
filed as an exhibit to the Registration Statement. The Subordinated Debt
Securities are to be issued under a separate Indenture (the "Subordinated
Indenture") between the Operating Partnership and The Bank of New York, as
trustee (the "Subordinated Trustee"), a copy of the form of which Subordinated
Indenture is filed as an exhibit to the Registration Statement. The Senior
Indenture and the Subordinated Indenture are sometimes referred to collectively
as the "Indentures" and the Senior Trustee and Subordinated Trustee are
sometimes referred to collectively as the "Trustees."
The following summaries of certain provisions of the Senior Debt
Securities, the Subordinated Debt Securities, the Senior Indenture and the
Subordinated Indenture, as modified or superseded by any applicable Prospectus
Supplement, are brief summaries of certain provisions thereof, do not purport to
be complete and are subject to, and are qualified in their entirety by reference
to all the provisions of the Indenture applicable to a particular series of Debt
Securities. Wherever particular Sections, Articles or defined terms of the
Indentures are referred to herein or in a Prospectus Supplement, such Sections,
Articles or defined terms are incorporated herein or therein by reference.
GENERAL
Unless otherwise specified in the applicable Prospectus Supplement, the
Debt Securities will be general unsecured obligations of the Operating
Partnership. The Indentures do not limit the aggregate amount of Debt Securities
which may be issued thereunder, and Debt Securities may be issued thereunder
from time to time in separate series up to the aggregate amount from time to
time authorized by the Operating Partnership for each series. Unless otherwise
specified in the Prospectus Supplement, the Senior Debt Securities when issued
will be unsubordinated obligations of the Operating Partnership and will rank
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<PAGE> 12
equally and ratably with all other unsecured and unsubordinated indebtedness of
the Operating Partnership. The Subordinated Debt Securities when issued will be
subordinated in right of payment to the prior payment in full of all Senior Debt
(as defined in the Subordinated Indenture) of the Operating Partnership as
described below under "--Subordination of Subordinated Debt Securities" and in
the Prospectus Supplement applicable to an offering of Subordinated Debt
Securities.
The applicable Prospectus Supplement or Prospectus Supplements will
describe the following terms of the series of Debt Securities in respect of
which this Prospectus is being delivered: (1) the title of such Debt Securities;
(2) any limit on the aggregate principal amount of such Debt Securities; (3) the
person to whom any interest on any Debt Security of the series shall be payable
if other than the person in whose name the Debt Security is registered on the
regular record date; (4) the date or dates on which such Debt Securities will
mature; (5) the rate or rates of interest, if any, or the method of calculation
thereof, which such Debt Securities will bear, the date or dates from which any
such interest will accrue, the interest payment dates on which any such interest
on such Debt Securities will be payable and the regular record date for any
interest payable on any interest payment date; (6) the place or places where the
principal of, premium, if any, and interest on such Debt Securities will be
payable; (7) the period or periods within which, the events upon the occurrence
of which, and the price or prices at which, such Debt Securities may, pursuant
to any optional or mandatory provisions, be redeemed or purchased, in whole or
in part, by the Operating Partnership and any terms and conditions relevant
thereto; (8) the obligations of the Operating Partnership, if any, to redeem or
repurchase such Debt Securities at the option of the Holders; (9) the
denominations in which any such Debt Securities will be issuable, if other than
denominations of $1,000 and any integral multiple thereof; (10) any index or
formula used to determine the amount of payments of principal of and any premium
and interest on such Debt Securities; (11) the currency, currencies or currency
unit or units of payment of principal of and any premium and interest on such
Debt Securities if other than U.S. dollars; (12) if the principal of, or
premium, if any, or interest, if any, on such Debt Securities is to be payable,
at the election of the Operating Partnership or a holder thereof, in one or more
currencies or currency units other than that or those in which such Debt
Securities are stated to be payable, the currency, currencies or currency units
in which payment of the principal of and any premium and interest on Debt
Securities of such series as to which such election is made shall be payable,
and the periods within which and the terms and conditions upon which such
election is to be made; (13) if other than the principal amount thereof, the
portion of the principal amount of such Debt Securities of the series which will
be payable upon acceleration of the maturity thereof; (14) if the principal
amount of any Debt Securities which will be payable at the maturity thereof will
not be determinable as of any date prior to such maturity, the amount which will
be deemed to be the outstanding principal amount of such Debt Securities; (15)
the applicability of any provisions described under "Defeasance"; (16) whether
any of such Debt Securities are to be issuable in permanent global form ("Global
Security") and, if so, the terms and conditions, if any, upon which interests in
such Debt Securities in global form may be exchanged, in whole or in part, for
the individual Debt Securities represented thereby; (17) the applicability of
any provisions described under "Event of Default" and any additional Event of
Default applicable thereto; (18) any covenants applicable to such Debt
Securities; (19) the terms and conditions, if any, pursuant to which the Debt
Securities are exchangeable into Common Shares of the Company; and (20) any
other terms of such Debt Securities not inconsistent with the provisions of the
Indentures. (Section 301) Debt Securities may also be issued under the
Indentures upon the exercise of Debt Warrants. See "Description of Debt
Warrants."
Debt Securities may be issued at a discount from their principal
amount. United States Federal income tax considerations and other special
considerations applicable to any such original issue discount Securities will be
described in the applicable Prospectus Supplement.
If the purchase price of any of the Debt Securities is denominated in a
foreign currency or currencies or a foreign currency unit or units or if the
principal of and any premium and interest on any series of Debt Securities is
payable in a foreign currency or currencies or a foreign currency unit or units,
the restrictions, elections, general Federal income tax considerations, specific
terms and other information with respect to such issue of Debt Securities will
be set forth in the applicable Prospectus Supplement.
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<PAGE> 13
The Indentures do not contain any provisions that limit the Operating
Partnership's ability to incur indebtedness. Except as may be indicated in the
applicable Prospectus Supplement with respect to a particular series of Debt
Securities, Holders of Debt Securities will not have the benefit of any specific
covenants or provisions in the applicable Indenture or Debt Securities that
would protect them in the event the Operating Partnership engages in or becomes
the subject of a highly leveraged transaction and the limitations on mergers,
consolidations and transfers of substantially all of the Operating Partnership's
properties and assets as an entirety to any person as described below under
"--Consolidation, Merger and Sale of Assets." Such covenants may not be waived
or modified by the Operating Partnership, although Holders of Debt Securities
could waive or modify such covenants as more fully described below under
"--Modification and Waiver."
The applicable Prospectus Supplement with respect to any particular
series of Debt Securities that provide for the optional redemption or prepayment
of such Debt Securities upon the occurrence of certain events (i.e., a change of
control) will describe the following: (1) the effects that such provisions may
have in deterring certain mergers, tender offers or other takeover attempts, as
well as that there may be possible adverse effects on the market price of the
Operating Partnership's securities or ability to obtain financing; (2) that the
Operating Partnership will comply with the requirements of applicable securities
laws, including Rules 14e-1 and 13e-4 under the Exchange Act, in connection with
such provisions and any related offers by the Operating Partnership; (3) whether
the occurrence of the specified events may give rise to cross-defaults on other
indebtedness such that payment on the offered Debt Securities may be effectively
subordinated; (4) limitations on the Operating Partnership's financial or legal
ability to repurchase the offered Debt Securities upon the triggering of an
event risk provision requiring such a repurchase or offer to repurchase; (5) the
impact, if any, under the governing instrument of the failure to repurchase,
including whether such failure to make any required repurchases in the event of
a change of control will create an event of default with respect to the offered
Debt Securities or will become an event of default only after the continuation
of such failure for a specified period of time after written notice is given to
the Operating partnership by the Trustee or to the Operating Partnership and the
Trustee by the holders of a specified percentage in aggregate principal amount
of the debt outstanding; (6) that there can be no assurance that sufficient
funds will be available at the time of the triggering of an event risk provision
to make any required repurchases; (7) if such offered Debt Securities are to be
subordinated to other obligations of the Operating Partnership or its
subsidiaries that would be accelerated upon the triggering of a change in
control or similar event, the material effect thereof on such acceleration
provision and such offered Debt Securities; and (8) to the extent that there is
a definition of "change of control" in a supplemental indenture relating to such
offered Debt Securities that includes the concept of "all or substantially all,"
the established meaning of such phrase under New York law.
EXCHANGE OF DEBT SECURITIES
If so indicated in the applicable Prospectus Supplement with respect to
a particular series of Debt Securities, such series will be exchangeable into
Common Shares of the Company on the terms and conditions set forth therein. Such
terms may include provisions pursuant to which the number of Common Shares of
the Company to be received by the holders of Debt Securities would be calculated
according to the market price of Common Shares of the Company as of a time
stated in the Prospectus Supplement. The applicable Prospectus Supplement will
indicate certain restrictions on ownership which may apply in the event of an
exchange. See "Description of Preferred Shares -- Restrictions on Ownership" and
"Description of Common Shares -- Restrictions on Ownership."
FORM, REGISTRATION, TRANSFER AND PAYMENT
Unless otherwise indicated in the applicable Prospectus Supplement, the
Debt Securities will be issued only in fully registered form in denominations of
$1,000 or integral multiples thereof. (Section 302) Unless otherwise indicated
in the applicable Prospectus Supplement, payment of principal, premium, if any,
and interest on the Debt Securities will be payable, and the exchange and
transfer of Debt Securities will be registerable, at the office or agency of the
Operating Partnership maintained for such purposes and at any other office or
agency maintained for such purpose. (Sections 301, 305 and 1002) No service
charge
11
<PAGE> 14
will be made for any registration of transfer or exchange of the Debt
Securities, but the Operating Partnership may require payment of a sum
sufficient to cover any tax or other governmental charge imposed in connection
therewith. (Section 305)
All monies paid by the Operating Partnership to a Paying Agent for the
payment of principal of and any premium or interest on any Debt Security which
remain unclaimed for two years after such principal, premium or interest has
become due and payable may be repaid to the Operating Partnership and thereafter
the Holder of such Debt Security may look only to the Operating Partnership for
payment thereof. (Section 1003)
BOOK-ENTRY DEBT SECURITIES
The Debt Securities of a series may be issued in whole or in part in
the form of one or more Global Securities that will be deposited with, or on
behalf of, a depositary (the "Global Depositary") or its nominee identified in
the applicable Prospectus Supplement. In such a case, one or more Global
Securities will be issued in a denomination or aggregate denomination equal to
the portion of the aggregate principal amount of Outstanding Debt Securities of
the series to be represented by such Global Security or Securities. Unless and
until it is exchanged in whole or in part for Debt Securities in registered
form, a Global Security may not be registered for transfer except as a whole by
the Global Depositary for such Global Security to a nominee of such Global
Depositary or by a nominee of such Global Depositary to such Global Depositary
or another nominee of such Global Depositary or by such Global Depositary or any
nominee to a successor Global Depositary or a nominee of such successor Global
Depositary and except in the circumstances described in the applicable
Prospectus Supplement. (Sections 204 and 305)
The specific terms of the depositary arrangement with respect to any
portion of a series of Debt Securities to be represented by a Global Security
will be described in the applicable Prospectus Supplement. The Operating
Partnership expects that the following provisions will apply to depositary
arrangements although no assurance can be given that such will be the case.
Unless otherwise specified in the applicable Prospectus Supplement,
Debt Securities which are to be represented by a Global Security to be deposited
with or on behalf of a Global Depositary will be represented by a Global
Security registered in the name of such Global Depositary or its nominee. Upon
the issuance of such Global Security, and the deposit of such Global Security
with or on behalf of the Global Depositary for such Global Security, the Global
Depositary will credit, on its book-entry registration and transfer system, the
respective principal amounts of the Debt Securities represented by such Global
Security to the accounts of institutions that have accounts with such Global
Depositary or its nominee ("participants"). The accounts to be credited will be
designated by the underwriters or agents of such Debt Securities or by the
Operating Partnership, if such Debt Securities are offered and sold directly by
the Operating Partnership. Ownership of beneficial interest in such Global
Security will be limited to participants or Persons that may hold interests
through participants. Ownership of beneficial interests by participants in such
Global Security will be shown on, and the transfer of that ownership interest
will be effected only through, records maintained by the Global Depositary or
its nominee for such Global Security. Ownership of beneficial interests in such
Global Security by Persons that hold through participants will be shown on, and
the transfer of such ownership interests within such participant will be
effected only through, records maintained by such participant. The laws of some
jurisdictions require that certain purchasers of securities take physical
delivery of such securities in certificated form. The foregoing limitations and
such laws may impair the ability to transfer beneficial interests in such Global
Securities.
So long as the Global Depositary for a Global Security, or its nominee,
is the registered owner of such Global Security, such Global Depositary or such
nominee, as the case may be, will be considered the sole owner or holder of the
Securities represented by such Global Security for all purposes under the
applicable Indenture. Except as set forth below, unless otherwise specified in
the applicable Prospectus Supplement, owners of beneficial interests in such
Global Security will not be entitled to have Debt Securities of the series
represented by such Global Security registered in their names, will not receive
or be entitled to receive physical delivery of Debt Securities of such series in
certificated form and will not be
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<PAGE> 15
considered the holders thereof for any purposes under the applicable Indenture.
(Sections 204 and 305) Accordingly, each Person owning a beneficial interest in
such Global Security must rely on the procedures of the Global Depositary and,
if such Person is not a participant, on the procedures of the participant
through which such Person owns its interest, to exercise any rights of a holder
under the applicable Indenture. The Operating Partnership understands that under
existing industry practices, if the Operating Partnership requests any action of
holders or an owner of a beneficial interest in such Global Security desires to
give any notice or take any action a holder is entitled to give or take under
the applicable Indenture, the Global Depositary would authorize the participants
to give such notice or take such action, and participants would authorize
beneficial owners owning through such participants to give such notice or take
such action or would otherwise act upon the instructions of beneficial owners
owning through them.
If the Global Depositary for Debt Securities of a series is at any time
unwilling, unable or ineligible to continue as Global Depositary and a successor
Global Depositary is not appointed by the Operating Partnership within 90 days
or an Event of Default under the applicable Indenture has occurred and is
continuing, the Operating Partnership will issue Debt Securities of such series
in definitive form in exchange for the Global Security or Securities
representing the Debt Securities of such series. In addition, the Operating
Partnership may at any time and in its sole discretion, subject to any
limitations described in the applicable Prospectus Supplement, determine not to
have any Debt Securities of a series represented by one or more Global
Securities and, in such event, will issue Debt Securities of such series in
definitive form in exchange for the Global Security or Securities representing
such Debt Securities. Further, if the Operating Partnership so specifies with
respect to the Debt Securities of a series, an owner of a beneficial interest in
a Global Security representing Debt Securities of such series may, on terms
acceptable to the Operating Partnership and the Global Depositary for such
Global Security, receive Debt Securities of such series in definitive form in
exchange for such beneficial interests, subject to any limitations described in
the applicable Prospectus Supplement relating to such Debt Securities. In any
such instance, an owner of a beneficial interest in a Global Security will be
entitled to physical delivery in definitive form of Debt Securities of the
series represented by such Global Security equal in principal amount to such
beneficial interest and to have such Debt Securities registered in its name (if
the Debt Securities of such series are issuable as registered securities).
Principal of and any premium and interest on a Global Security will be
payable in the manner described in the applicable Prospectus Supplement.
CERTAIN COVENANTS OF THE OPERATING PARTNERSHIP
If so indicated in the applicable Prospectus Supplement with respect to
a particular series of Debt Securities, the Operating Partnership will be
subject to the covenants described therein.
EVENTS OF DEFAULT
The following are Events of Default under the Indentures with respect
to Debt Securities of any series: (a) failure to pay principal of or premium, if
any, on any Debt Security of that series when due; (b) failure to pay any
interest on any Debt Security of that series when due, continued for 30 days;
(c) failure in the deposit of any sinking fund payment in respect of any Debt
Security of that series; (d) failure to perform any other covenant of the
Operating Partnership in the Indentures (other than a covenant included in the
applicable Indenture solely for the benefit of a series of Debt Securities other
than that series), continued for 60 days after written notice to the Operating
Partnership as provided in the applicable Indenture; (e) the acceleration of, or
failure to pay at maturity (including any applicable grace period), any
indebtedness for money borrowed by the Operating Partnership with at least
[$50,000,000] in principal amount outstanding, which acceleration or failure to
pay is not rescinded or annulled or such indebtedness paid, in each case within
10 days after the date on which written notice thereof shall have first been
given to the Operating Partnership as provided in the applicable Indenture; (f)
certain events of bankruptcy, insolvency or reorganization; and (g) any other
Event of Default provided with respect to Debt Securities of that series.
(Section 501)
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<PAGE> 16
If an Event of Default with respect to Outstanding Debt Securities of
any series shall occur and be continuing, either the applicable Trustee or the
Holders of not less than 25% in principal amount of the Outstanding Debt
Securities of that series by notice as provided in the Indentures may declare
the principal amount (or, if the Debt Securities of that series are Original
Issue Discount Securities, such portion of the principal amount as may be
specified in the terms of that series) of all Debt Securities of that series to
be due and payable immediately. However, at any time after a declaration of
acceleration with respect to Debt Securities of any series has been made, but
before a judgment or decree based on such acceleration has been obtained, the
Holders of a majority in principal amount of the Outstanding Debt Securities of
that series may, under certain circumstances, rescind and annul such
acceleration. (Section 502) For information as to waiver or defaults, see
"--Modification and Waiver" below.
The Indentures provide that, subject to the duty of the Trustees
thereunder during an Event of Default to act with the required standard of care,
such Trustees will be under no obligation to exercise any of its rights or
powers under the Indentures at the request or direction of any of the Holders,
unless such Holders shall have offered to such Trustees reasonable security or
indemnity. (Sections 601 and 603) Subject to certain provisions, including those
requiring security or indemnification of the Trustees, the Holders of a majority
in principal amount of the Outstanding Debt Securities of any series will have
the right to direct the time, method and place of conducting any proceeding for
any remedy available to the Trustees, or exercising any trust or power conferred
on such Trustees, with respect to the Debt Securities of that series. (Section
512)
No Holder of a Debt Security of any series will have any right to
institute any proceeding with respect to the Indentures or for any remedy
thereunder, unless (i) such Holder shall have previously given to the applicable
Trustee written notice of a continuing Event of Default (as defined) with
respect to Debt Securities of that series; (ii) the Holders of not less than 25%
in aggregate principal amount of the Outstanding Debt Securities of the same
series shall have made written request, and offered reasonable indemnity, to the
applicable Trustee to institute proceedings in respect of such Event of Default
in its own name as trustee under the Indenture; (iii) the Trustee shall have
failed to institute such proceedings within 60 days; and (iv) the Trustee shall
not have received from the Holders of a majority in aggregate principal amount
of the outstanding Debt Securities of the same series a direction inconsistent
with such request (Section 507); provided, however, that such limitations do not
apply to a suit instituted by a Holder of a Debt Security for enforcement of
payment of the principal of and any premium and interest on such Debt Security
on or after the respective due dates expressed in such Debt Security. (Section
508)
The Operating partnership will be required to furnish to the Trustees
annually a statement as to the performance by the Operating Partnership of its
obligations under the Indentures and as to any default in such performance.
(Section 1004)
MODIFICATION AND WAIVER
Without the consent of any Holder of Outstanding Debt Securities, the
Operating Partnership and the applicable Trustee may amend or supplement the
applicable Indenture or the Debt Securities to cure any ambiguity, defect or
inconsistency, or to make any change that does not materially adversely affect
the rights of any Holder of Debt Securities. (Section 901) Other modifications
and amendments of the Indentures may be made by the Operating Partnership and
the applicable Trustee only with the consent of the Holders of not less than a
majority in aggregate principal amount of the Outstanding Debt Securities of
each series affected thereby; provided, however, that no such modification or
amendment may, without the consent of the Holder of each Outstanding Debt
Security affected thereby: (a) change the Stated Maturity of the principal of,
or any installment of principal of, or interest on, any Debt Security; (b)
reduce the principal amount of, the rate of interest on, or the premium, if any,
payable upon the redemption of, any Debt Security; (c) reduce the amount of
principal of an Original Issue Discount Security payable upon acceleration of
the Maturity thereof; (d) change the place or currency of payment of principal
of, or premium, if any, or interest on any Debt Security; (e) impair the right
to institute suit for the enforcement of any payment on or with respect to any
Debt Security on or after the Stated Maturity or Redemption Date thereof; (f)
modify the subordination provisions applicable to any series of Debt Securities
in a manner adverse to the holders
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<PAGE> 17
thereof; or (g) reduce the percentage in principal amount of Outstanding Debt
Securities of any series, the consent of the Holders of which is required for
modification or amendment of the Indentures or for waiver of compliance with
certain provisions of the applicable Indenture or for waiver of certain
defaults. (Section 902)
The Holders of at least a majority in aggregate principal amount of the
Outstanding Debt Securities of any series may on behalf of the Holders of all
Debt Securities of that series waive, insofar as that series is concerned,
compliance by the Operating Partnership with certain covenants of the
Indentures. (Section 1008) The Holders of not less than a majority in principal
amount of the Outstanding Debt Securities of any series may, on behalf of the
Holders of all Debt Securities of that series, waive any past default under the
applicable Indenture with respect to that series, except a default in the
payment of the principal of, or premium, if any, or interest on, any Debt
Security of that series or in respect of a provision which under such applicable
Indenture cannot be modified or amended without the consent of the Holder of
each Outstanding Debt Security of that series affected. (Section 513)
CONSOLIDATION, MERGER AND SALE OF ASSETS
The Operating Partnership, without the consent of any Holders of
outstanding Debt Securities, may consolidate with or merge into, or transfer or
lease its assets substantially as an entirety to, any Person, and any other
Person may consolidate with or merge into, or transfer or lease its assets
substantially as an entirety to, the Operating Partnership, provided that (a)
the Person (if other than the Operating Partnership) formed by such
consolidation or into which the Operating Partnership is merged or which
acquires or leases the assets of the Operating Partnership substantially as an
entirety assumes the Operating Partnership's obligations on the Debt Securities
and under the Indenture relating thereto and (b) after giving effect to such
transaction no Event of Default, and no event which, after notice or lapse of
time or both, would become an Event of Default, shall have happened and be
continuing. (Article Eight) A Prospectus Supplement may set forth any additional
provisions regarding a consolidation with, merger into, or transfer or lease of
its assets substantially as an entirety to, any Person (or of such Person with,
into or to the Operating Partnership).
DEFEASANCE
If so indicated in the applicable Prospectus Supplement with respect to
the Debt Securities of a series, the Operating Partnership, at its option (i)
will be discharged from any and all obligations in respect of the Debt
Securities of such series (except for certain obligations to register the
transfer or exchange of Debt Securities of such series, to replace destroyed,
stolen, lost or mutilated Debt Securities of such series, and to maintain an
office or agency in respect of the Debt Securities and hold monies for payment
in trust) or (ii) will be released from its obligations to comply with any
covenants that may be specified in the applicable Prospectus Supplement with
respect to the Debt Securities of such series, and the occurrence of an event
described in clause (d) under "Events of Default" above with respect to any
defeased covenants shall no longer be an Event of Default, if in either case the
Operating Partnership irrevocably deposits with the applicable Trustee, in
trust, money or U.S. Government Obligations that through the payment of interest
thereon and principal thereof in accordance with their terms will provide money
in an amount sufficient to pay all of the principal of and premium, if any, and
any interest on the Debt Securities of such series on the dates such payments
are due (which may include one or more redemption dates designated by the
Operating Partnership) in accordance with the terms of such Debt Securities.
Such a trust may only be established if, among other things, (a) no Event of
Default or event which with the giving of notice or lapse of time, or both,
would become an Event of Default under the applicable Indenture shall have
occurred and be continuing on the date of such deposit, (b) no Event of Default
described under clause (e) under "Events of Default" above or event which with
the giving of notice or lapse of time, or both, would become an Event of Default
described under such clause (e) shall have occurred and be continuing at any
time during the period ending on the 91st day following such date of deposit,
and (c) the Operating Partnership shall have delivered an Opinion of Counsel to
the effect that the Holders of the Debt Securities will not recognize gain or
loss for United States Federal income tax purposes as a result of such deposit
or defeasance and will be subject to United States Federal income tax in the
same manner as if such deposit and defeasance had not occurred, which Opinion of
Counsel, in the case of a deposit and defeasance of such Indenture with respect
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to the Debt Securities of any series as described under clause (i) above, shall
be based on either (A) a ruling to such effect that the Operating Partnership
has received from, or that has been published by, the Internal Revenue Service
or (B) a change in the applicable Federal income tax law, occurring after the
date of the applicable Indenture, to such effect. In the event the Operating
Partnership omits to comply with its remaining obligations under such Indenture
after a defeasance of such Indenture with respect to the Debt Securities of any
series as described under clause (ii) above and the Debt Securities of such
series are declared due and payable because of the occurrence of any undefeased
Event of Default, the amount of money and U.S. Government Obligations on deposit
with the applicable Trustee may be insufficient to pay amounts due on the Debt
Securities of such series at the time of the acceleration resulting from such
Event of Default. However, the Operating Partnership will remain liable in
respect to such payments. (Article Thirteen)
SUBORDINATION OF SUBORDINATED DEBT SECURITIES
Unless otherwise indicated in the Prospectus Supplement, the following
provisions will apply to the Subordinated Debt Securities.
The Subordinated Debt Securities will, to the extent set forth in the
Subordinated Indenture, be subordinate in right of payment to the prior payment
in full of all Senior Debt, including the Senior Debt Securities. Upon any
payment or distribution of assets to creditors upon any liquidation,
dissolution, winding up, reorganization, assignment for the benefit of
creditors, marshalling of assets or any bankruptcy, insolvency, debt
restructuring or similar proceedings in connection with any insolvency or
bankruptcy proceeding of the Operating Partnership, the holders of Senior Debt
will first be entitled to receive payment in full of principal of (and premium,
if any) and interest, if any, on such Senior Debt before the holders of the
Subordinated Debt Securities will be entitled to receive or retain any payment
in respect of the principal of (and premium, if any) or interest, if any, on the
Subordinated Debt Securities. (Article Fifteen of the Subordinated Indenture)
By reason of such subordination, in the event of liquidation or
insolvency, creditors of the Operating Partnership who are not holders of Senior
Debt or Subordinated Debt Securities may recover less, ratably, than holders of
Senior Debt and may recover more, ratably, than the holders of the Subordinated
Debt Securities.
In the event of the acceleration of the maturity of any Subordinated
Debt Securities, the holders of all Senior Debt outstanding at the time of such
acceleration will first be entitled to receive payment in full of all amounts
due thereon before the Holders of the Subordinated Debt Securities will be
entitled to receive any payment upon the principal of (or premium, if any) or
interest, if any, on the Subordinated Debt Securities.
No payments on account of principal (or premium, if any) or interest,
if any, in respect of the Subordinated Debt Securities may be made if there
shall have occurred and be continuing a default in any payment with respect to
Senior Debt, or an event of default with respect to any Senior Debt resulting in
the acceleration of the maturity thereof, or if any judicial proceeding shall be
pending with respect to any such default.
"Senior Debt" is defined to mean the principal of (and premium, if any)
and interest (including interest accruing on or after the filing of any petition
in bankruptcy or for reorganization relating to the Operating Partnership to the
extent such claim for post-petition interest is allowed in such proceeding) on
all indebtedness of the Operating Partnership (including indebtedness of others
guaranteed by the Operating Partnership), other than the Subordinated Debt
Securities whether outstanding on the date of the Subordinated Indenture or
thereafter created, incurred or assumed, which is: (i) for money borrowed, (ii)
evidenced by a note or similar instrument given in connection with the
acquisition of any businesses, properties or assets of any kind or (iii)
obligations of the Operating Partnership as lessee under leases required to be
capitalized on the balance sheet of the lessee under generally accepted
accounting principles or leases of property or assets made as part of any sale
and lease-back transaction to which the Operating
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Partnership is a party, including amendments, renewals, extensions,
modifications and refundings of any such indebtedness or obligation, unless in
any case in the instrument creating or evidencing any such indebtedness or
obligation or pursuant to which the same is outstanding it is provided that such
indebtedness or obligation is not superior in right of payment to the
Subordinated Debt Securities.
The Subordinated Indenture does not limit or prohibit the incurrence of
additional Senior Debt, which may include indebtedness that is senior to the
Subordinated Debt Securities, but subordinate to other obligations of the
Operating Partnership. The Senior Debt Securities, when issued, will constitute
Senior Debt.
The Prospectus Supplement will set forth the aggregate amount of
outstanding indebtedness as of the most recent practicable date that by the
terms of such indebtedness and the terms of the offered Subordinated Debt
Securities would rank senior to or pari passu with such Subordinated Debt
Securities and any limitation on the issuance of additional senior or pari passu
indebtedness. The Prospectus Supplement may further describe the provisions, if
any, applicable to the subordination of the Subordinated Debt Securities of a
particular series.
GOVERNING LAW
The Indentures and the Debt Securities will be governed by, and
construed in accordance with, the laws of the State of New York. (Section 112)
REGARDING THE TRUSTEES
The Operating Partnership and certain of its subsidiaries in the
ordinary course of business maintain general banking relations with The Bank of
New York. Pursuant to the provisions of the Trust Indenture Act of 1939, upon a
default under either the Senior Indenture or the Subordinated Indenture, The
Bank of New York may be deemed to have a conflicting interest by virtue of its
acting as both the Senior Trustee and the Subordinated Trustee requiring it to
resign and be replaced by a successor trustee in one of such positions.
DESCRIPTION OF DEBT WARRANTS
The Operating Partnership may issue Debt Warrants to purchase Debt
Securities ("Debt Warrants"). Debt Warrants may be issued independently or
together with any Debt Securities and may be attached to or separate from such
Debt Securities. The Debt Warrants are to be issued under warrant agreements
(each a "Warrant Agreement") to be entered into between the Operating
Partnership and a bank or trust company, as warrant agent (the "Warrant Agent"),
all as shall be set forth in the Prospectus Supplement relating to Debt Warrants
being offered pursuant thereto. If so indicated in a Prospectus Supplement, the
terms of any Debt Warrants may differ from the terms set forth below.
The applicable Prospectus Supplement will describe the terms of Debt
Warrants offered thereby, the Warrant Agreement relating to such Debt Warrants
and the debt warrant certificates representing such Debt Warrants, including the
following: (1) the title of such Debt Warrants; (2) the aggregate number of such
Debt Warrants; (3) the price or prices at which such Debt Warrants will be
issued; (4) the currency or currencies, including composite currencies or
currency units, in which the price of such Debt Warrants may be payable; (5) the
designation, aggregate principal amount and terms of the Debt Securities
purchasable upon exercise of such Debt Warrants, and the procedures and
conditions relating to the exercise of such Debt Warrants; (6) the designation
and terms of any related Debt Securities with which such Debt Warrants are
issued, and the number of such Debt Warrants issued with each such Debt
Security; (7) the currency or currencies, including composite currencies or
currency units, in which the principal of (or premium, if any), or interest, if
any, on the Debt Securities purchasable upon exercise of such Debt Warrants will
be payable; (8) the date, if any, on and after which such Debt Warrants and the
related Debt Securities will be separately transferable; (9) the principal
amount of Debt Securities purchasable upon exercise of each Debt Warrant, and
the price at which and the currency, including composite currency or currency
unit, in which such
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principal amount of Debt Securities may be purchased upon such exercise; (10)
the date on which the right to exercise such Debt Warrants shall commence, and
the date on which such right shall expire; (11) the maximum or minimum number of
such Debt Warrants which may be exercised at any time; (12) a discussion of
material Federal income tax considerations, if any; and (13) any other terms of
such Debt Warrants and terms, procedures and limitations relating to the
exercise of such Debt Warrants.
Debt warrant certificates will be exchangeable for new debt warrant
certificates of different denominations and Debt Warrants may be exercised at
the corporate trust office of the Warrant Agent or any other office indicated in
the Prospectus Supplement. Prior to the exercise of their Debt Warrants, holders
of Debt Warrants will not have any of the rights of holders of the Debt
Securities purchasable upon such exercise and will not be entitled to payments
of principal of (or premium, if any) or interest, if any, on the Debt Securities
purchasable upon such exercise.
EXERCISE OF DEBT WARRANTS
Each Debt Warrant will entitle the holder of such Debt Warrant to
purchase for cash such principal amount of Debt Securities at such exercise
price as shall in each case be set forth in, or be determinable as set forth in,
the Prospectus Supplement relating to the Debt Warrants offered thereby. Debt
Warrants may be exercised at any time up to the close of business on the
expiration date set forth in the Prospectus Supplement relating to the Debt
Warrants offered thereby. After the close of business on the expiration date,
unexercised Debt Warrants will become void.
Debt Warrants may be exercised as set forth in the Prospectus
Supplement relating to the Debt Warrants offered thereby. Upon receipt of
payment and the warrant certificate properly completed and duly executed at the
corporate trust office of the Warrant Agent or any other office indicated in the
Prospectus Supplement, the Operating Partnership will, as soon as practicable,
forward the Debt Securities purchasable upon such exercise. If less than all of
the Debt Warrants represented by such warrant certificate are exercised, a new
warrant certificate will be issued for the remaining Debt Warrants.
DESCRIPTION OF SHARES OF BENEFICIAL INTEREST
The following descriptions of the shares of beneficial interest of the
Company do not purport to be complete and are subject to, and qualified in their
entirety by reference to, the more complete descriptions thereof set forth in
the following documents: (i) the Company's Amended and Restated Declaration of
Trust, including the articles supplementary for the Series A Preferred Shares
(the "Declaration of Trust"), and (ii) its Bylaws, which documents are exhibits
to this Registration Statement.
For the Company to qualify as a REIT under the Code, not more than 50%
of the value of its outstanding shares of beneficial interest may be owned,
directly or indirectly, by five or fewer individuals (as defined in the Code to
include certain entities) during the last half of a taxable year and the shares
must be beneficially owned by 100 or more persons during at least 335 days of a
taxable year of 12 months (or during a proportionate part of a shorter taxable
year). Accordingly, the Declaration of Trust contains provisions that restrict
the ownership and transfer of shares of beneficial interest.
The Declaration of Trust authorizes the issuance of up to 180,000,000
shares, consisting of 70,000,000 Common Shares, 20,000,000 preferred shares of
beneficial interest, no par value per share ("Preferred Shares"), and 90,000,000
excess shares of beneficial interest, $.04 par value per share ("Excess
Shares").
DESCRIPTION OF PREFERRED SHARES
The following is a description of certain general terms and provisions
of the Preferred Shares. The particular terms of any series of Preferred Shares
will be described in the applicable Prospectus
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Supplement. If so indicated in a Prospectus Supplement, the terms of any such
series may differ from the terms set forth below.
The summary of terms of the Company's Preferred Shares contained in
this Prospectus does not purport to be complete and is subject to, and qualified
in its entirety by, the provisions of the Declaration of Trust and the articles
supplementary relating to each series of the Preferred Shares (the "Articles
Supplementary"), which will be filed as an exhibit to or incorporated by
reference in the Registration Statement of which this Prospectus is a part at or
prior to the time of issuance of such series of the Preferred Shares.
The Declaration of Trust authorizes the issuance of 20,000,000
Preferred Shares. As of June 11, 1997, 5,750,000 Series A Preferred Shares are
outstanding. The Series A Preferred Shares are listed on the NYSE under the
symbol "VNO Pr A". A description of the Company's Series A Preferred Shares is
set forth in the Company's Registration Statement on Form 8-A, filed with the
Commission on April 3, 1997, and incorporated herein by reference. The Preferred
Shares authorized by the Declaration of Trust may be issued from time to time in
one or more series in such amounts and with such designations, preferences,
conversion or other rights, voting powers, restrictions, limitations as to
dividends, qualifications and terms and conditions of redemption as may be fixed
by the Board of Trustees. Under certain circumstances, the issuance of Preferred
Shares could have the effect of delaying, deferring or preventing a change of
control of the Company and may adversely affect the voting and other rights of
the holders of Common Shares. The Declaration of Trust authorizes the Board of
Trustees to classify or reclassify any unissued Preferred Shares by setting or
changing the designations, preferences, conversion or other rights, voting
powers, restrictions, limitations as to distributions, qualifications and terms
and conditions of redemption of such Preferred Shares.
The Preferred Shares shall have the dividend, liquidation, redemption
and voting rights set forth below unless otherwise described in a Prospectus
Supplement relating to a particular series of the Preferred Shares. The
applicable Prospectus Supplement will describe the following terms of the series
of Preferred Shares in respect of which this Prospectus is being delivered: (1)
the title of such Preferred Shares and the number of shares offered; (2) the
amount of liquidation preference per share; (3) the initial public offering
price at which such Preferred Shares will be issued; (4) the dividend rate (or
method of calculation), the dates on which dividends shall be payable and the
dates from which dividends shall commence to cumulate, if any; (5) any
redemption or sinking fund provisions; (6) any conversion or exchange rights;
(7) any additional voting, dividend, liquidation, redemption, sinking fund and
other rights, preferences, limitations and restrictions; (8) any listing of such
Preferred Shares on any securities exchange; (9) the relative ranking and
preferences of such Preferred Shares as to dividend rights and rights upon
liquidation, dissolution or winding up of the affairs of the Company; (10) any
limitations on issuance of any series of Preferred Shares ranking senior to or
on a parity with such series of Preferred Shares as to dividend rights and
rights upon liquidation, dissolution or winding up of the affairs of the
Company; and (11) any limitations on direct, beneficial or constructive
ownership and restrictions on transfer, in each case as may be appropriate to
preserve the status of the Company as a REIT. The applicable Prospectus
Supplement will also include a discussion of Federal income tax considerations
applicable to such Preferred Shares.
General
The Preferred Shares offered hereby will be issued in one or more
series. The Preferred Shares, upon issuance against full payment of the purchase
price therefor, will be fully paid and nonassessable. The liquidation preference
is not indicative of the price at which the Preferred Shares will actually trade
on or after the date of issuance.
Rank
The Preferred Shares shall, with respect to dividend rights and rights
upon liquidation, dissolution and winding up of the Company, rank prior to the
Common Shares and Excess Shares (other than certain Excess Shares resulting from
the conversion of Preferred Shares) and to all other classes and series of
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equity securities of the Company now or hereafter authorized, issued or
outstanding (the Common Shares and such other classes and series of equity
securities collectively may be referred to herein as the "Junior Stock"), other
than any classes or series of equity securities of the Company which by their
terms specifically provide for a ranking on a parity with (the "Parity Stock")
or senior to (the "Senior Stock") the Preferred Shares as to dividend rights and
rights upon liquidation, dissolution or winding up of the Company. The Preferred
Shares shall be junior to all outstanding debt of the Company. The Preferred
Shares shall be subject to creation of Senior Stock, Parity Stock and Junior
Stock to the extent not expressly prohibited by the Declaration of Trust.
Dividends
Holders of Preferred Shares shall be entitled to receive, when, as and
if authorized by the Board of Trustees out of assets of the Company legally
available for payment, dividends, or distributions in cash, property or other
assets of the Company or in Securities of the Company or from any other source
as the Board of Trustees in its discretion shall determine and at such dates and
at such rates per share per annum as described in the applicable Prospectus
Supplement. Such rate may be fixed or variable or both. Each authorized dividend
shall be payable to holders of record as they appear at the close of business on
the books of the Company on such record dates, not more than 90 calendar days
preceding the payment dates therefor, as are determined by the Board of Trustees
(each of such dates, a "Record Date").
Such dividends may be cumulative or noncumulative, as described in the
applicable Prospectus Supplement. If dividends on a series of Preferred Shares
are noncumulative and if the Board of Trustees fails to authorize a dividend in
respect of a dividend period with respect to such series, then holders of such
Preferred Shares will have no right to receive a dividend in respect of such
dividend period, and the Company will have no obligation to pay the dividend for
such period, whether or not dividends are authorized payable on any future
dividend payment dates. If dividends of a series of Preferred Shares are
cumulative, the dividends on such shares will accrue from and after the date set
forth in the applicable Prospectus Supplement.
No full dividends shall be authorized or paid or set apart for payment
on Preferred Shares of any series ranking, as to dividends, on a parity with or
junior to the series of Preferred Shares offered by the applicable Prospectus
Supplement for any period unless full dividends for the immediately preceding
dividend period on such Preferred Shares (including any accumulation in respect
of unpaid dividends for prior dividend periods, if dividends on such Preferred
Shares are cumulative) have been or contemporaneously are authorized and paid or
authorized and a sum sufficient for the payment thereof is set apart for such
payment. When dividends are not so paid in full (or a sum sufficient for such
full payment is not so set apart) upon such Preferred Shares and any other
Preferred Shares of the Company ranking on a parity as to dividends with the
Preferred Shares, dividends upon such Preferred Shares and dividends on such
other Preferred Shares ranking on a parity with the Preferred Shares shall be
authorized pro rata so that the amount of dividends authorized per share on such
Preferred Shares and such other Preferred Shares ranking on a parity with the
Preferred Shares shall in all cases bear to each other the same ratio that
accrued dividends for the then-current dividend period per share on such
Preferred Shares (including any accumulation in respect of unpaid dividends for
prior dividend periods, if dividends on such Preferred Shares are cumulative)
and accrued dividends, including required or permitted accumulations, if any, on
shares of such other Preferred Shares, bear to each other. No interest, or sum
of money in lieu of interest, shall be payable in respect of any dividend
payment(s) on Preferred Shares which may be in arrears. Unless full dividends on
the series of Preferred Shares offered by the applicable Prospectus Supplement
have been authorized and paid or set apart for payment for the immediately
preceding dividend period (including any accumulation in respect of unpaid
dividends for prior dividend periods, if dividends on such Preferred Shares are
cumulative), (a) no cash dividend or distribution (other than in shares of
Junior Stock) may be authorized, set aside or paid on the Junior Stock, (b) the
Company may not, directly or indirectly, repurchase, redeem or otherwise acquire
any shares of its Junior Stock (or pay any monies into a sinking fund for the
redemption of any shares) except by conversion into or exchange for Junior
Stock, and (c) the Company may not, directly or indirectly, repurchase, redeem
or otherwise acquire any Preferred Shares or Parity Stock (or pay any monies
into a sinking fund for the redemption of any shares of any such stock)
otherwise than
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pursuant to pro rata offers to purchase or a concurrent redemption of all, or a
pro rata portion, of the outstanding Preferred Shares and shares of Parity Stock
(except by conversion into or exchange for Junior Stock).
Any dividend payment made on a series of Preferred Shares shall first
be credited against the earliest accrued but unpaid dividend due with respect to
shares of such series.
Redemption
The terms, if any, on which Preferred Shares of any series may be
redeemed will be set forth in the applicable Prospectus Supplement.
Liquidation
In the event of a voluntary or involuntary liquidation, dissolution or
winding up of the affairs of the Company, the holders of a series of Preferred
Shares will be entitled, subject to the rights of creditors, but before any
distribution or payment to the holders of Common Shares, Excess Shares (other
than certain Excess Shares resulting from the conversion of Preferred Shares) or
any Junior Stock on liquidation, dissolution or winding up of the Company, to
receive a liquidating distribution in the amount of the liquidation preference
per share as set forth in the applicable Prospectus Supplement plus accrued and
unpaid dividends for the then-current dividend period (including any
accumulation in respect of unpaid dividends for prior dividend periods, if
dividends on such series of Preferred Shares are cumulative). If the amounts
available for distribution with respect to the Preferred Shares and all other
outstanding Parity Stock are not sufficient to satisfy the full liquidation
rights of all the outstanding Preferred Shares and Parity Stock, then the
holders of each series of such stock will share ratably in any such distribution
of assets in proportion to the full respective preferential amount (which in the
case of Preferred Shares may include accumulated dividends) to which they are
entitled. After payment of the full amount of the liquidation distribution, the
holders of Preferred Shares will not be entitled to any further participation in
any distribution of assets by the Company.
Title 8 does not contain any sections on the power of a Maryland real
estate investment trust, such as the Company, to make distributions, including
dividends, to its shareholders. It is possible that a Maryland court may look to
Maryland general corporate law ("MGCL") for guidance on matters, such as the
making of distributions to shareholders, not covered by Title 8. The MGCL
requires that, after giving effect to a distribution, (1) the corporation must
be able to pay its debts as they become due in the usual course of business and
(2) the corporation's assets must at least equal the sum of its liabilities and
the preferential rights on dissolution of stockholders whose rights on
dissolution are superior to those stockholders receiving the distribution.
However, the MGCL also provides that the charter of the corporation may provide
that senior dissolution preferences shall not be included with liabilities for
purposes of determining amounts available for distribution. The applicable
articles supplementary may include such a provision.
Voting
The Preferred Shares of a series will not be entitled to vote, except
as described below or in the applicable Prospectus Supplement. Without the
affirmative vote of a majority of the Preferred Shares then outstanding (voting
separately as a class together with any Parity Stock), the Company may not (i)
increase or decrease the aggregate number of authorized shares of such class or
any security ranking prior to the Preferred Shares, (ii) increase or decrease
the par value of the shares of holders of such class, or (iii) alter or change
the voting or other powers, preferences or special rights of such class so as to
affect them adversely. An amendment which increases the number of authorized
shares of or authorizes the creation or issuance of other classes or series of
Junior Stock or Parity Stock, or substitutes the surviving entity in a merger,
consolidation, reorganization or other business combination for the Company,
shall not be considered to be such an adverse change.
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No Other Rights
The shares of a series of Preferred Shares will not have any
preferences, conversion or other rights, voting powers, restrictions,
limitations as to dividends and other distributions, qualifications, and terms
and conditions of redemption except as set forth above or in the applicable
Prospectus Supplement, the Declaration of Trust and in the applicable Articles
Supplementary or as otherwise required by law.
Transfer Agent and Registrar
The transfer agent for each series of Preferred Shares will be
described in the related Prospectus Supplement.
Restrictions on Ownership
As discussed below, for the Company to qualify as a REIT under the
Code, not more than 50% in value of its outstanding shares of beneficial
interest may be owned, directly or constructively, by five or fewer individuals
(as defined in the Code to include certain entities) during the last half of a
taxable year, and the shares of beneficial interest must be beneficially owned
by 100 or more persons during at least 335 days of a taxable year of 12 months
(or during a proportionate part of a shorter taxable year). Therefore, the
Declaration of Trust contains, and the Articles Supplementary for each series of
Preferred Shares may contain, provisions restricting the ownership and transfer
of the Preferred Shares.
The Declaration of Trust contains a limitation that restricts
shareholders from owning, under the applicable attribution rules of the Code,
more than 9.9% of the outstanding Preferred Shares of any series (the "Preferred
Shares Beneficial Ownership Limit"). The attribution rules which apply for
purposes of the Common Shares Beneficial Ownership Limit (as defined below) also
apply for purposes of the Preferred Shares Beneficial Ownership Limit. See
"Description of Common Shares -- Restrictions on Ownership". Shareholders should
be aware that events other than a purchase or other transfer of Preferred Shares
may result in ownership, under the applicable attribution rules of the Code, of
Preferred Shares in excess of the Preferred Shares Beneficial Ownership Limit.
Shareholders are urged to consult their own tax advisors concerning the
application of the attribution rules of the Code in their particular
circumstances.
Holders of Preferred Shares are also subject to the Constructive
Ownership Limit (as defined below in "Description of Common Shares --
Restrictions on Ownership"), which restricts them from owning, under the
applicable attribution rules of the Code, more than 9.9% of the outstanding
Preferred Shares of any series. The attribution rules which apply for purposes
of the Constructive Ownership Limit differ from those that apply for purposes of
the Preferred Shares Beneficial Ownership Limit. See "Description of Common
Shares -- Restrictions on Ownership". Shareholders should be aware that events
other than a purchase or other transfer of Preferred Shares may result in
ownership, under the applicable attribution rules of the Code, of Preferred
Shares in excess of the Constructive Ownership Limit. Shareholders are urged to
consult their own tax advisors concerning the application of the attribution
rules of the Code in their particular circumstances.
The Declaration of Trust provides that a transfer of Preferred Shares
that would otherwise result in ownership, under the applicable attribution rules
of the Code, of Preferred Shares in excess of the Preferred Shares Beneficial
Ownership Limit or the Constructive Ownership Limit, or which would cause the
shares of beneficial interest of the Company to be beneficially owned by fewer
than 100 persons, will be null and void and the Declaration of Trust provides
that the purported transferee will acquire no rights or economic interest in
such Preferred Shares. In addition, Preferred Shares that would otherwise be
owned, under the applicable attribution rules of the Code, in excess of the
Preferred Shares Beneficial Ownership Limit or the Constructive Ownership Limit
will be automatically exchanged for Excess Shares that will be transferred, by
operation of law, to the Company as trustee of a trust for the exclusive benefit
of a beneficiary designated by the purported transferee or purported holder.
While so held in trust, Excess Shares are not entitled to vote and are not
entitled to participate in any dividends or distributions made by the Company.
Any dividends or distributions received by the purported transferee or other
purported holder of such Excess Shares prior to
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the discovery by the Company of the automatic exchange for Excess Shares shall
be repaid to the Company upon demand.
If the purported transferee or purported holder elects to designate a
beneficiary of an interest in the trust with respect to such Excess Shares, only
a person whose ownership of the shares will not violate the Preferred Shares
Beneficial Ownership Limit or the Constructive Ownership Limit may be
designated, at which time the Excess Shares will be automatically exchanged for
Preferred Shares of the same class as the Preferred Shares which were originally
exchanged for such Excess Shares. The Declaration of Trust contains provisions
designed to ensure that the purported transferee or other purported holder of
the Excess Shares may not receive in return for such a transfer an amount that
reflects any appreciation in the Preferred Shares for which such Excess Shares
were exchanged during the period that such Excess Shares were outstanding but
will bear the burden of any decline in value during such period. Any amount
received by a purported transferee or other purported holder for designating a
beneficiary in excess of the amount permitted to be received must be turned over
to the Company. The Declaration of Trust provides that the Company may purchase
any Excess Shares that have been automatically exchanged for Preferred Shares as
a result of a purported transfer or other event. The price at which the Company
may purchase such Excess Shares shall be equal to the lesser of (i) in the case
of Excess Shares resulting from a purported transfer for value, the price per
share in the purported transfer that resulted in the automatic exchange for
Excess Shares or, in the case of Excess Shares resulting from some other event,
the market price of the Preferred Shares exchanged on the date of the automatic
exchange for Excess Shares and (ii) the market price of the Preferred Shares
exchanged for such Excess Shares on the date that the Company accepts the deemed
offer to sell such Excess Shares. The Company's purchase right with respect to
Excess Shares shall exist for 90 days, beginning on the date that the automatic
exchange for Excess Shares occurred or, if the Company did not receive a notice
concerning the purported transfer that resulted in the automatic exchange for
Excess Shares, the date that the Board of Trustees determines in good faith that
an exchange for Excess Shares has occurred.
The Board of Trustees may exempt certain persons from the Preferred
Shares Beneficial Ownership Limit or the Constructive Ownership Limit if
evidence satisfactory to the trustees is presented showing that such exemption
will not jeopardize the Company's status as a REIT under the Code. As a
condition of such exemption, the Board of Trustees may require a ruling from the
Internal Revenue Service and/or an opinion of counsel satisfactory to it and/or
representations and undertakings from the applicant with respect to preserving
the REIT status of the Company.
The foregoing restrictions on transferability and ownership will not
apply if the Board of Trustees determines that it is no longer in the best
interests of the Company to attempt to qualify, or to continue to qualify, as a
REIT.
All certificates evidencing Preferred Shares will bear a legend
referring to the restrictions described above.
All persons who own, directly or by virtue of the applicable
attribution rules of the Code, more than 2% of the outstanding Preferred Shares
of any series must give a written notice to the Company containing the
information specified in the Declaration of Trust by January 31 of each year. In
addition, each shareholder shall upon demand be required to disclose to the
Company such information as the Company may request, in good faith, in order to
determine the Company's status as a REIT or to comply with Treasury Regulations
promulgated under the REIT provisions of the Code.
DEPOSITARY SHARES
The description set forth below and in any Prospectus Supplement of
certain provisions of the Deposit Agreement and of the Depositary Shares and
Depositary Receipts (each as defined below) does not purport to be complete and
is subject to and qualified in its entirety by reference to the forms of Deposit
Agreement and Depositary Receipts relating to each series of the Preferred
Shares which have been or will be filed with the Commission at or prior to the
time of the offering of such series of the Preferred Shares.
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If so indicated in a Prospectus Supplement, the terms of any series of
Depositary Shares may differ from the terms set forth herein.
General
The Company may, at its option, elect to offer receipts for fractional
interests ("Depositary Shares") in Preferred Shares, rather than full Preferred
Shares. In such event, receipts ("Depositary Receipts") for Depositary Shares,
each of which will represent a fraction (to be set forth in the Prospectus
Supplement relating to a particular series of Preferred Shares) of a share of a
particular series of Preferred Shares, will be issued as described below.
The shares of any series of Preferred Shares represented by Depositary
Shares will be deposited under a Deposit Agreement (the "Deposit Agreement")
between the Company and the depositary (the "Depositary"). Subject to the terms
of the Deposit Agreement, each owner of a Depositary Share will be entitled, in
proportion to the applicable fraction of a Preferred Share represented by such
Depositary Share, to all the preferences, conversion or other rights, voting
powers, restrictions, limitations as to dividends and other distributions,
qualifications, and terms and conditions of redemption of the Preferred Shares
represented thereby.
Dividends and Other Distributions
The Depositary will distribute all cash dividends or other cash
distributions received in respect of the Preferred Shares to the record holders
of Depositary Shares relating to such Preferred Shares in proportion to the
numbers of such Depositary Shares owned by such holders.
In the event of a distribution other than in cash, the Depositary will
distribute property received by it to the record holders of Depositary Shares in
an equitable manner, unless the Depositary determines that it is not feasible to
make such distribution, in which case the Depositary may sell such property and
distribute the net proceeds from such sale to such holders.
Withdrawal of Preferred Shares
Upon surrender of Depositary Receipts at the corporate trust office of
the Depositary (unless the related Depositary Shares have previously been called
for redemption or converted into Excess Shares or otherwise), the holders
thereof will be entitled to delivery at such office, to or upon such holder's
order, of the number of whole or fractional shares of the class or series of
Preferred Shares and any money or other property represented by the Depositary
Shares evidenced by such Depositary Receipts. Holders of Depositary Receipts
will be entitled to receive whole or fractional shares of the related class or
series of Preferred Shares on the basis of the proportion of Preferred Shares
represented by each Depositary Share as specified in the applicable Prospectus
Supplement, but holders of such Preferred Shares will not thereafter be entitled
to receive Depositary Shares thereof. If the Depositary Receipts delivered by
the holder evidence a number of Depositary Shares in excess of the number of
Depositary Shares representing the number of shares of Preferred Shares to be
withdrawn, the Depositary will deliver to such holder at the same time a new
Depositary Receipt evidencing such excess number of Depositary Shares.
Redemption of Depositary Shares
If a series of Preferred Shares represented by Depositary Shares is
subject to redemption, the Depositary Shares will be redeemed from the proceeds
received by the Depositary resulting from the redemption, in whole or in part,
of such series of Preferred Shares held by the Depositary. The redemption price
per Depositary Share will be equal to the applicable fraction of the redemption
price per share payable with respect to such series of the Preferred Shares.
Whenever the Company redeems Preferred Shares held by the Depositary, the
Depositary will redeem as of the same redemption date the number of Depositary
Shares representing Preferred Shares so redeemed. If fewer than all the
Depositary Shares are to be
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redeemed, the Depositary Shares to be redeemed will be selected by lot, pro rata
or by any other equitable method as may be determined by the Depositary.
Voting the Preferred Shares
Upon receipt of notice of any meeting at which the holders of the
Preferred Shares are entitled to vote, the Depositary will mail the information
contained in such notices of meeting to the record holders of the Depositary
Shares relating to such Preferred Shares. Each record holder of such Depositary
Shares on the record date (which will be the same date as the record date for
the Preferred Shares) will be entitled to instruct the Depositary as to the
exercise of the voting rights pertaining to the amount of the Preferred Shares
represented by such holder's Depositary Shares. The Depositary will endeavor,
insofar as practicable, to vote the amount of the Preferred Shares represented
by such Depositary Shares in accordance with such instructions, and the Company
will agree to take all reasonable action which may be deemed necessary by the
Depositary in order to enable the Depositary to do so. The Depositary will
abstain from voting the Preferred Shares to the extent it does not receive
specific instructions from the holder of Depositary Shares representing such
Preferred Shares.
Amendment and Termination of the Deposit Agreement
The form of Depositary Receipt evidencing the Depositary Shares and any
provision of the Deposit Agreement may at any time be amended by agreement
between the Company and the Depositary. However, any amendment which materially
and adversely alters the rights of the holders of Depositary Shares will not be
effective unless such amendment has been approved by the holders of at least a
majority of the Depositary Shares then outstanding. The Deposit Agreement will
only terminate if (i) all outstanding Depositary Shares have been redeemed or
(ii) there has been a final distribution in respect of the Preferred Shares in
connection with any liquidation, dissolution or winding up of the Company and
such distribution has been distributed to the holders of the related Depositary
Shares.
Charges of Depositary
The Company will pay all transfer and other taxes and governmental
charges arising solely from the existence of the depositary arrangements. The
Company will pay charges of the Depositary in connection with the initial
deposit of the Preferred Shares and issuance of Depositary Receipts, all
withdrawals of Preferred Shares by owners of Depositary Shares and any
redemption of the Preferred Shares. Holders of Depositary Receipts will pay
other transfer and other taxes and governmental charges and such other charges
as are expressly provided in the Deposit Agreement to be for their accounts.
Resignation and Removal of Depositary
The Depositary may resign at any time by delivering to the Company
notice of its election to do so, and the Company may at any time remove the
Depositary, any such resignation or removal to take effect upon the appointment
of a successor Depositary and its acceptance of such appointment. Such successor
Depositary must be appointed within 60 days after delivery of the notice of
resignation or removal and must be a bank or trust company having its principal
office in the United States and having a combined capital and surplus of at
least $50,000,000.
Restrictions on Ownership
In order to safeguard the Company against an inadvertent loss of REIT
status, the Deposit Agreement or the Declaration of Trust will contain
provisions restricting the ownership and transfer of Depositary Shares. Such
restrictions will be described in the applicable Prospectus Supplement.
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Miscellaneous
The Depositary will forward all reports and communications from the
Company which are delivered to the Depositary and which the Company is required
or otherwise determines to furnish to the holders of the Preferred Shares.
Neither the Depositary nor the Company will be liable if it is
prevented or delayed by law or any circumstance beyond its control in performing
its obligations under the Deposit Agreement. The obligations of the Company and
the Depositary under the Deposit Agreement will be limited to performance in
good faith of their duties thereunder and they will not be obligated to
prosecute or defend any legal proceeding in respect of any Depositary Shares or
Preferred Shares unless satisfactory indemnity is furnished. They may rely upon
written advice of counsel or accountants, or information provided by persons
presenting Preferred Shares for deposit, holders of Depositary Shares or other
persons believed to be competent and on documents believed to be genuine.
DESCRIPTION OF COMMON SHARES
As of June 11, 1997, 26,553,161 Common Shares were issued and
outstanding and no Excess Shares were issued and outstanding. The Common Shares
of the Company are listed on the NYSE under the symbol "VNO".
The holders of Common Shares are entitled to receive dividends when, if
and as authorized by the Board of Trustees of the Company out of assets legally
available therefor, provided that if any Preferred Shares are at the time
outstanding, the payment of dividends on Common Shares or other distributions
(including purchases of Common Shares) may be subject to the declaration and
payment of full cumulative dividends, and the absence of arrearages in any
mandatory sinking fund, on outstanding Preferred Shares.
The holders of Common Shares are entitled to one vote for each share on
all matters voted on by stockholders, including elections of trustees. There is
no cumulative voting in the election of trustees, which means that the holders
of a majority of the outstanding Common Shares can elect all of the trustees
then standing for election. The holders of Common Shares do not have any
conversion, redemption or preemptive rights to subscribe to any securities of
the Company. In the event of the dissolution, liquidation or winding up of the
Company, holders of Common Shares are entitled to share ratably in any assets
remaining after the satisfaction in full of the prior rights of creditors,
including holders of the Company's indebtedness, and the aggregate liquidation
preference of any Preferred Shares then outstanding.
The Common Shares have equal dividend, distribution, liquidation and
other rights, and shall have no preference, appraisal or exchange rights. All
outstanding shares of Common Shares are, and any Common Shares offered by a
Prospectus Supplement, upon issuance, will be, fully paid and non-assessable.
The transfer agent for the Common Shares is First Fidelity Bank, N.A.,
New Jersey.
Restrictions on Ownership
The Declaration of Trust contains a number of provisions which restrict
the ownership and transfer of shares and which are designed to safeguard the
Company against an inadvertent loss of its REIT status. In order to prevent any
Company shareholder from owning shares in an amount which would cause more than
50% in value of the outstanding shares of the Company to be owned by five or
fewer individuals, the Declaration of Trust contains a limitation that
restricts, with certain exceptions, shareholders from owning, under the
applicable attribution rules of the Code, more than a specified percentage of
the outstanding Common Shares (the "Common Shares Beneficial Ownership Limit").
The Common Shares Beneficial Ownership Limit was initially set at 2.0% of the
outstanding Common Shares. The Board of Trustees subsequently adopted a
resolution raising the Common Shares Beneficial Ownership Limit from 2.0% to
6.7% of the outstanding Common Shares. The shareholders who owned, under the
applicable attribution rules of
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the Code, more than 6.7% of the Common Shares immediately after the merger of
Vornado, Inc. into the Company in May 1993 (the "Merger") may continue to do so
and may acquire additional Common Shares through stock option and similar plans
or from other shareholders who owned, under the applicable attribution rules of
the Code, more than 6.7% of the Common Shares immediately after the Merger,
subject to the restriction that Common Shares cannot be transferred if, as a
result, more than 50% in value of the outstanding shares of the Company would be
owned by five or fewer individuals. While such shareholders are not generally
permitted to acquire additional Common Shares from any other source, such
shareholders may acquire additional Common Shares from any source in the event
that additional Common Shares are issued by the Company, up to the percentage
held by them immediately prior to such issuance.
Shareholders should be aware that events other than a purchase or other
transfer of Common Shares can result in ownership, under the applicable
attribution rules of the Code, of Common Shares in excess of the Common Shares
Beneficial Ownership Limit. For instance, if two shareholders, each of whom
owns, under the applicable attribution rules of the Code, 3.5% of the
outstanding Common Shares, were to marry, then after their marriage both
shareholders would own, under the applicable attribution rules of the Code, 7.0%
of the outstanding Common Shares, which is in excess of the Common Shares
Beneficial Ownership Limit. Similarly, if a shareholder who owns, under the
applicable attribution rules of the Code, 4.9% of the outstanding Common Shares
were to purchase a 50% interest in a corporation which owns 4.8% of the
outstanding Common Shares, then the shareholder would own, under the applicable
attribution rules of the Code, 7.3% of the outstanding Common Shares.
Shareholders are urged to consult their own tax advisers concerning the
application of the attribution rules of the Code in their particular
circumstances.
Under the Code, rental income received by a REIT from persons in which
the REIT is treated, under the applicable attribution rules of the Code, as
owning a 10% or greater interest does not constitute qualifying income for
purposes of the income requirements that REITs must satisfy. For these purposes,
a REIT is treated as owning any stock owned, under the applicable attribution
rules of the Code, by a person that owns 10% or more of the value of the
outstanding shares of the REIT. Therefore, in order to ensure that rental income
of the Company will not be treated as nonqualifying income under the rule
described above, and thus to ensure that there will not be an inadvertent loss
of REIT status as a result of the ownership of shares of a tenant, or a person
that holds an interest in a tenant, the Declaration of Trust also contains an
ownership limit that restricts, with certain exceptions, shareholders from
owning, under the applicable attribution rules of the Code (which are different
from those applicable with respect to the Common Shares Beneficial Ownership
Limit), more than 9.9% of the outstanding shares of any class (the "Constructive
Ownership Limit"). The shareholders who owned, under the applicable attribution
rules of the Code, shares in excess of the Constructive Ownership Limit
immediately after the Merger generally are not subject to the Constructive
Ownership Limit. Subject to an exception for tenants and subtenants from whom
the REIT receives, directly or indirectly, rental income that is not in excess
of a specified threshold, the Declaration of Trust also contains restrictions
that are designed to ensure that the shareholders who owned, under the
applicable attribution rules of the Code, shares in excess of the Constructive
Ownership Limit immediately after the Merger will not, in the aggregate, own an
interest in a tenant or subtenant of the REIT of sufficient magnitude to cause
rental income received, directly or indirectly, by the REIT from such tenant or
subtenant to be treated as nonqualifying income for purposes of the income
requirements that REITs must satisfy.
Shareholders should be aware that events other than a purchase or other
transfer of shares can result in ownership, under the applicable attribution
rules of the Code, of shares in excess of the Constructive Ownership Limit. As
the attribution rules that apply with respect to the Constructive Ownership
Limit differ from those that apply with respect to the Common Shares Beneficial
Ownership Limit, the events other than a purchase or other transfer of shares
which can result in share ownership in excess of the Constructive Ownership
Limit can differ from those which can result in share ownership in excess of the
Common Shares Beneficial Ownership Limit. Shareholders are urged to consult
their own tax advisers concerning the application of the attribution rules of
the Code in their particular circumstances.
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The Declaration of Trust provides that a transfer of Common Shares that
would otherwise result in ownership, under the applicable attribution rules of
the Code, of Common Shares in excess of the Common Shares Beneficial Ownership
Limit or the Constructive Ownership Limit, or which would cause the shares of
beneficial interest of the Company to be beneficially owned by fewer than 100
persons, will be null and void and the purported transferee will acquire no
rights or economic interest in such Common Shares. In addition, the Declaration
of Trust provides that Common Shares that would otherwise be owned, under the
applicable attribution rules of the Code, in excess of the Common Shares
Beneficial Ownership Limit or the Constructive Ownership Limit will be
automatically exchanged for Excess Shares that will be transferred, by operation
of law, to the Company as trustee of a trust for the exclusive benefit of a
beneficiary designated by the purported transferee or purported holder. While so
held in trust, Excess Shares are not entitled to vote and are not entitled to
participate in any dividends or distributions made by the Company. Any dividends
or distributions received by the purported transferee or other purported holder
of such Excess Shares prior to the discovery by the Company of the automatic
exchange for Excess Shares shall be repaid to the Company upon demand.
If the purported transferee or purported holder elects to designate a
beneficiary of an interest in the trust with respect to such Excess Shares, only
a person whose ownership of the shares will not violate the Common Shares
Beneficial Ownership Limit or the Constructive Ownership Limit may be
designated, at which time the Excess Shares will be automatically exchanged for
Common Shares. The Declaration of Trust contains provisions designed to ensure
that the purported transferee or other purported holder of the Excess Shares may
not receive in return for such a transfer an amount that reflects any
appreciation in the Common Shares for which such Excess Shares were exchanged
during the period that such Excess Shares were outstanding but will bear the
burden of any decline in value during such period. Any amount received by a
purported transferee or other purported holder for designating a beneficiary in
excess of the amount permitted to be received must be turned over to the
Company. The Declaration of Trust provides that the Company may purchase any
Excess Shares that have been automatically exchanged for Common Shares as a
result of a purported transfer or other event. The price at which the Company
may purchase such Excess Shares shall be equal to the lesser of (i) in the case
of Excess Shares resulting from a purported transfer for value, the price per
share in the purported transfer that resulted in the automatic exchange for
Excess Shares or, in the case of Excess Shares resulting from some other event,
the market price of the Common Shares exchanged on the date of the automatic
exchange for Excess Shares and (ii) the market price of the Common Shares
exchanged for such Excess Shares on the date that the Company accepts the deemed
offer to sell such Excess Shares. The Company's purchase right with respect to
Excess Shares shall exist for 90 days, beginning on the date that the automatic
exchange for Excess Shares occurred or, if the Company did not receive a notice
concerning the purported transfer that resulted in the automatic exchange for
Excess Shares, the date that the Board of Trustees determines in good faith that
an exchange for Excess Shares has occurred.
The Board of Trustees of the Company may exempt certain persons from
the Common Shares Beneficial Ownership Limit or the Constructive Ownership
Limit, including the limitations applicable to holders who owned in excess of
6.7% of the Common Shares immediately after the Merger, if evidence satisfactory
to the Board of Trustees is presented showing that such exemption will not
jeopardize the Company's status as a REIT under the Code. As a condition of such
exemption, the Board of Trustees may require a ruling from the Internal Revenue
Service and/or an opinion of counsel satisfactory to it and/or representations
and undertakings from the applicant with respect to preserving the REIT status
of the Company.
The foregoing restrictions on transferability and ownership will not
apply if the Board of Trustees determines that it is no longer in the best
interests of the Company to attempt to qualify, or to continue to qualify, as a
REIT.
All persons who own, directly or by virtue of the applicable
attribution rules of the Code, more than 2.0% of the outstanding Common Shares
must give a written notice to the Company containing the information specified
in the Declaration of Trust by January 31 of each year. In addition, each
shareholder shall upon demand be required to disclose to the Company such
information as the Company may request, in good faith,
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in order to determine the Company's status as a REIT or to comply with Treasury
Regulations promulgated under the REIT provisions of the Code.
The ownership restrictions described above may have the effect of
precluding acquisition of control of the Company unless the Board of Trustees
determines that maintenance of REIT status is no longer in the best interests of
the Company.
FEDERAL INCOME TAX CONSIDERATIONS
The following summary of the taxation of the Company and the material
Federal income tax consequences to holders of the Securities is for general
information only, and is not tax advice. The tax treatment of a holder of
Securities will vary depending upon the holder's particular situation, and this
discussion addresses only holders that hold Securities as capital assets and
does not purport to deal with all aspects of taxation that may be relevant to
particular holders in light of their personal investment or tax circumstances,
or to certain types of holders (including dealers in securities or currencies,
banks, tax-exempt organizations, life insurance companies, persons that hold
Securities that are a hedge or that are hedged against currency risks or that
are part of a straddle or conversion transaction) subject to special treatment
under the Federal income tax laws. This summary is based on the Code, its
legislative history, existing and proposed regulations thereunder, published
rulings and court decisions, all as currently in effect and all subject to
change at any time, perhaps with retroactive effect.
INVESTORS ARE URGED TO CONSULT WITH THEIR OWN TAX ADVISORS REGARDING THE TAX
CONSEQUENCES TO THEM OF THE ACQUISITION, OWNERSHIP AND SALE OF SECURITIES,
INCLUDING THE FEDERAL, STATE, LOCAL AND FOREIGN TAX CONSEQUENCES OF SUCH
ACQUISITION, OWNERSHIP AND SALE IN THEIR PARTICULAR CIRCUMSTANCES AND POTENTIAL
CHANGES IN APPLICABLE LAWS.
TAXATION OF THE COMPANY AS A REIT
General
The Company believes that, commencing with its taxable year ending
December 31, 1993, it has been organized and has operated in such a manner as to
qualify for taxation as a REIT under Sections 856 through 860 of the Code. The
Company intends to continue to qualify to be taxed as a REIT, but no assurance
of continued qualification can be given.
The sections of the Code applicable to REITs are highly technical and
complex. Certain aspects thereof are summarized below.
As a REIT, the Company generally will not be subject to Federal
corporate income taxes on its net income that is currently distributed to
shareholders. This treatment substantially eliminates the "double taxation" (at
the corporate and shareholder levels) that generally results from investment in
a regular corporation. However, the Company will be subject to federal income
tax as follows. First, the Company will be taxed at regular corporate rates on
any undistributed real estate investment trust taxable income, including
undistributed net capital gains. Second, under certain circumstances, the
Company may be subject to the "alternative minimum tax" on its items of tax
preference. Third, if the Company has (i) net income from the sale or other
disposition of "foreclosure property" which is held primarily for sale to
customers in the ordinary course of business or (ii) other non-qualifying income
from foreclosure property, it will be subject to tax at the highest corporate
rate on such income. Fourth, if the Company has net income from "prohibited
transactions" (which are, in general, certain sales or other dispositions of
property, other than foreclosure property, held primarily for sale to customers
in the ordinary course of business), such income will be subject to a 100% tax.
Fifth, if the Company should fail to satisfy the 75% gross income test or the
95% gross income test (as discussed below), but has nonetheless maintained its
qualification as a REIT because certain other requirements have been met, it
will be subject to a 100% tax on an amount equal to (a) the
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gross income attributable to the greater of the amount by which the Company
fails the 75% or 95% test, multiplied by (b) a fraction intended to reflect the
Company's profitability. Sixth, if the Company should fail to distribute during
each calendar year at least the sum of (i) 85% of its real estate investment
trust ordinary income for such year, (ii) 95% of its real estate investment
trust capital gain net income for such year, and (iii) any undistributed taxable
income from prior periods, the Company would be subject to a 4% excise tax on
the excess of such required distribution over the amounts actually distributed.
Seventh, if during the 10- year period (the "Recognition Period") beginning on
the first day of the first taxable year for which the Company qualified as a
REIT, the Company recognizes gain on the disposition of any asset held by the
Company as of the beginning of the Recognition Period, then, to the extent of
the excess of (a) fair market value of such asset as of the beginning of the
Recognition Period over (b) the Company's adjusted basis in such asset as of the
beginning of the Recognition Period (the "Built-in Gain"), such gain will be
subject to tax at the highest regular corporate rate pursuant to Treasury
regulations that have not been promulgated; provided, however, that the Company
shall not be subject to tax on recognized Built-in Gain with respect to assets
held as of the first day of the Recognition Period to the extent that the
aggregate amount of such recognized Built-in Gain exceeds the net aggregate
amount of the Company's unrealized Built-in Gain as of the first day of the
Recognition Period. Eighth, if the Company acquires any asset from a C
corporation (i.e., generally a corporation subject to full corporate-level tax)
in certain transactions in which the basis of the asset in the hands of the
Company is determined by reference to the basis of the asset (or any other
property) in the hands of the C corporation, and the Company recognizes gain on
the disposition of such asset during the Recognition Period beginning on the
date on which such asset was acquired by the Company, then, pursuant to the
Treasury regulations that have not yet been issued and to the extent of the
Built-in Gain, such gain will be subject to tax at the highest regular corporate
rate.
Requirements for Qualification
The Code defines a REIT as a corporation, trust or association (1)
which is managed by one or more trustees or directors, (2) the beneficial
ownership of which is evidenced by transferable shares, or by transferable
certificates of beneficial interest, (3) which would otherwise be taxable as a
domestic corporation, but for Sections 856 through 859 of the Code, (4) which is
neither a financial institution nor an insurance company subject to certain
provisions of the Code, (5) the beneficial ownership of which is held by 100 or
more persons, (6) during the last half of each taxable year, not more than 50%
in value of the outstanding stock of which is owned, directly or constructively,
by five or fewer individuals (as defined in the Code to include certain
entities) and (7) which meets certain other tests, described below, regarding
the nature of its income and assets. The Code provides that conditions (1) to
(4) must be met during the entire taxable year and that condition (5) must be
met during at least 335 days of a taxable year of 12 months, or during a
proportionate part of a taxable year of less than 12 months.
The Company has satisfied condition (5) and believes that it has also
satisfied condition (6). In addition, the Company's Declaration of Trust
provides for restrictions regarding the ownership and transfer of the Company's
shares of beneficial interest, which restrictions are intended to assist the
Company in continuing to satisfy the share ownership requirements described in
(5) and (6) above. The ownership and transfer restrictions pertaining to the
Preferred Shares and the Common Shares are described above under the headings
"Description of Shares of Beneficial Interest--Description of Preferred
Shares--Restrictions on Ownership" and "Description of Shares of Beneficial
Interest--Description of Common Shares-Restrictions on Ownership."
The Company owns a number of wholly-owned subsidiaries. Code Section
856(i) provides that a corporation which is a "qualified REIT subsidiary" shall
not be treated as a separate corporation, and all assets, liabilities, and items
of income, deduction, and credit of a "qualified REIT subsidiary" shall be
treated as assets, liabilities and such items (as the case may be) of the REIT.
Thus, in applying the requirements described herein, the Company's "qualified
REIT subsidiaries" will be ignored, and all assets, liabilities and items of
income, deduction, and credit of such subsidiaries will be treated as assets,
liabilities and such items (as the case may be) of the Company. The Company
believes that all of its wholly-owned subsidiaries are "qualified REIT
subsidiaries."
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In the case of a REIT that is a partner in a partnership, Treasury
regulations provide that the REIT will be deemed to own its proportionate share
of the assets of the partnership and will be deemed to be entitled to the income
of the partnership attributable to such share. In addition, the character of the
assets and gross income of the partnership will retain the same character in the
hands of the REIT for purposes of Section 856 of the Code, including satisfying
the gross income tests and the asset tests. Thus, the Company's proportionate
share of the assets, liabilities and items of income of any partnership in which
the Company is a partner, including the Operating Partnership, will be treated
as assets, liabilities and items of income of the Company for purposes of
applying the requirements described herein. Thus, actions taken by partnerships
in which the Company owns an interest either directly or through one or more
tiers of partnerships or qualified REIT subsidiaries, can affect the Company's
ability to satisfy the REIT income and assets tests and the determination of
whether the Company has net income from "prohibited transactions".
Income Tests. In order to maintain qualification as a REIT, the Company
annually must satisfy three gross income requirements. First, at least 75% of
the Company's gross income (excluding gross income from prohibited transactions)
for each taxable year must be derived directly or indirectly from investments
relating to real property or mortgages on real property (including "rents from
real property"--which term generally includes expenses of the Company that are
paid or reimbursed by tenants) or from certain types of temporary investments.
Second, at least 95% of the Company's gross income (excluding gross income from
prohibited transactions) for each taxable year must be derived from such real
property investments, dividends, interest and gain from the sale or disposition
of stock or securities (or from any combination of the foregoing). Third,
short-term gain from the sale or other disposition of stock or securities, gain
from prohibited transactions and gain on the sale or other disposition of real
property held for less than four years (apart from involuntary conversions and
sales of foreclosure property) must represent less than 30% of the Company's
gross income (including gross income from prohibited transactions) for each
taxable year.
Rents received by the Company will qualify as "rents from real
property" in satisfying the gross income requirements for a REIT described above
only if several conditions are met. First, the amount of rent must not be based
in whole or in part on the income or profits of any person. However, an amount
received or accrued generally will not be excluded from the terms "rents from
real property" solely by reason of being based on a fixed percentage or
percentages of receipts or sales. Second, the Code provides that rents received
from a tenant will not qualify as "rents from real property" in satisfying the
gross income tests if the REIT, directly or under the applicable attribution
rules, owns a 10% or greater interest in such tenant (a "Related Party Tenant").
Third, if rent attributable to personal property leased in connection with a
lease of real property is greater than 15% of the total rent received under the
lease, then the portion of rent attributable to such personal property will not
qualify as "rents from real property". Finally, for rents received to qualify as
"rents from real property," the REIT generally must not operate or manage the
property or furnish or render services to the tenants of such property, other
than through an independent contractor from whom the REIT derives no revenue;
provided, however, that the Company may directly perform certain services that
are "usually or customarily rendered" in connection with the rental of space for
occupancy only or are not considered "rendered to the occupant" of the property.
The Company does not derive significant rents from Related Party Tenants, and
the Company does not and will not derive rental income attributable to personal
property (other than personal property leased in connection with the lease of
real property, the amount of which is less than 15% of the total rent received
under the lease). The Company directly performs services for certain of its
tenants. The Company does not believe that the provision of such services will
cause its gross income attributable to such tenants to fail to be treated as
"rents from real property."
The term "interest" generally does not include any amount received or
accrued (directly or indirectly) if the determination of such amount depends in
whole or in part on the income or profits of any person. However, an amount
received or accrued generally will not be excluded from the term "interest"
solely by reason of being based on a fixed percentage or percentages of receipts
or sales.
If the Company fails to satisfy one or both of the 75% or 95% gross
income tests for any taxable year, it may nevertheless qualify as a REIT for
such year if it is entitled to relief under certain provisions of the Code.
These relief provisions will generally be available if the Company's failure to
meet such tests was due to reasonable cause and not due to willful neglect, the
Company attaches a schedule of the sources
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of its income to its Federal income tax return, and any incorrect information on
the schedule was not due to fraud with intent to evade tax. It is not possible,
however, to state whether in all circumstances the Company would be entitled to
the benefit of these relief provisions. As discussed above under "-- General,"
even if these relief provisions apply, a tax would be imposed with respect to
the excess income.
Asset Tests. The Company, at the close of each quarter of its taxable
year, must also satisfy three tests relating to the nature of its assets. First,
at least 75% of the value of the Company's total assets must be represented by
real estate assets (including (i) real estate assets held by the Company's
qualified REIT subsidiaries and the Company's allocable share of real estate
assets held by partnerships in which the Company owns an interest, (ii) for a
period of one year from the date of the Company's receipt of proceeds of an
offering of its shares of beneficial interest or long-term (at least five years)
debt, stock or debt instruments purchased with such proceeds and (iii) stock
issued by another REIT), cash, cash items and government securities. Second, not
more than 25% of the Company's total assets may be represented by securities
other than those in the 75% asset class. Third, of the investments included in
the 25% asset class, the value of any one issuer's securities (other than
securities issued by another REIT) owned by the Company may not exceed 5% of the
value of the Company's total assets and the Company may not own more than 10% of
any one issuer's outstanding voting securities.
Since March 2, 1995, the Company has owned more than 10% of the voting
securities of Alexander's. Since April of 1997, the Company's ownership of
Alexander's has been through the Operating Partnership rather than direct. The
Company's ownership interest in Alexander's will not cause the Company to fail
to satisfy the asset tests for REIT status so long as Alexander's qualified as a
REIT for each of taxable years beginning with its taxable year ending December
31, 1995 and continues to so qualify. The Company believes that Alexander's has
so qualified and will continue to so qualify.
Since April of 1997 the Company has also owned, through the Operating
Partnership, more than 10% of the voting securities of Two Penn Plaza REIT, Inc.
("Two Penn REIT"). The Company's indirect ownership interest in Two Penn REIT
will not cause the Company to fail to satisfy the asset tests for REIT status so
long as Two Penn REIT qualifies as a REIT for its first taxable year and each
taxable year thereafter. The Company believes that Two Penn REIT will also
qualify.
In order to ensure compliance with the 95% gross income test described
above, the Company transferred certain contract rights and obligations to VMC, a
New Jersey corporation, in return for all of VMC's nonvoting preferred stock
(the "Nonvoting Stock"). Since April of 1997, the Nonvoting Stock has been held
by the Operating Partnership. The Nonvoting Stock entitles the holder thereof to
95% of the dividends paid by VMC. The Company does not believe that its indirect
ownership of the Nonvoting Stock will adversely affect its ability to satisfy
the asset tests described above.
Since April of 1997 and June of 1997, respectively, the Company has
also owned, through the Operating Partnership, nonvoting shares in the
Management Corporation and Vornado RR, Inc. The Company does not believe that
the characteristics or value of such shares will cause the Company to fail to
satisfy the REIT asset tests described above.
Annual Distribution Requirements. The Company, in order to qualify as a
REIT, is required to distribute dividends (other than capital gain dividends) to
its shareholders in an amount at least equal to (A) the sum of (i) 95% of the
Company's "real estate investment trust taxable income" (computed without regard
to the dividends paid deduction and the Company's net capital gain) and (ii) 95%
of the net income (after tax), if any, from foreclosure property minus (B) the
sum of certain items of non-cash income. In addition, if the Company disposes of
any asset during its Recognition Period, the Company will be required, pursuant
to Treasury regulations which have not yet been promulgated, to distribute at
least 95% of the Built-in Gain (after tax), if any, recognized on the
disposition of such asset. Such distributions must be paid in the taxable year
to which they relate, or in the following taxable year if declared before the
Company timely files its tax return for such year and if paid on or before the
first regular dividend payment after such declaration. To the extent that the
Company does not distribute all of its net capital gain or distributes at least
95%, but less than 100%, of its "real estate investment trust taxable income,"
as adjusted, it will be subject to tax thereon at regular ordinary and capital
gain corporate tax rates. Furthermore, if the Company should fail to distribute
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during each calendar year at least the sum of (i) 85% of its ordinary income for
such year, (ii) 95% of its capital gain net income for such year, and (iii) any
undistributed taxable income from prior periods, the Company would be subject to
a 4% excise tax on the excess of such required distribution over the amounts
actually distributed. The Company intends to satisfy the annual distribution
requirements.
It is possible that the Company, from time to time, may not have
sufficient cash or other liquid assets to meet the 95% distribution requirement
due to timing differences between (i) the actual receipt of income and actual
payment of deductible expenses and (ii) the inclusion of such income and
deduction of such expenses in arriving at taxable income of the Company. In the
event that such timing differences occur, in order to meet the 95% distribution
requirement, the Company may find it necessary to arrange for short-term, or
possibly long-term, borrowings or to pay dividends in the form of taxable stock
dividends.
Under certain circumstances, the Company may be able to rectify a
failure to meet the distribution requirement for a year by paying "deficiency
dividends" to shareholders in a later year, which may be included in the
Company's deduction for dividends paid for the earlier year. Thus, the Company
may be able to avoid being taxed on amounts distributed as deficiency dividends;
however, the Company will be required to pay interest based upon the amount of
any deduction taken for deficiency dividends.
Failure to Qualify
If the Company fails to qualify for taxation as a REIT in any taxable
year, and the relief provisions do not apply, the Company will be subject to tax
(including any applicable alternative minimum tax) on its taxable income at
regular corporate rates. Distributions to shareholders in any year in which the
Company fails to qualify will not be deductible by the Company nor will they be
required to be made. In such event, to the extent of current and accumulated
earnings and profits, all distributions to shareholders will be taxable as
ordinary income and, subject to certain limitations of the Code, corporate
distributees may be eligible for the dividends received deduction. Unless
entitled to relief under specific statutory provisions, the Company will also be
disqualified from taxation as a REIT for the four taxable years following the
year during which qualification was lost. It is not possible to state whether in
all circumstances the Company would be entitled to such statutory relief.
TAXATION OF HOLDERS OF DEBT SECURITIES
As used herein, the term "U.S. Holder" means a holder of a Debt
Security who (for United States Federal income tax purposes) is (i) a citizen or
resident of the United States, (ii) a domestic corporation or (iii) otherwise
subject to United States Federal income taxation on a net income basis in
respect of the Debt Security and "U.S. Alien Holder" means a holder of a Debt
Security who (for United States Federal income tax purposes) is (i) a
nonresident alien individual or (ii) a foreign corporation, partnership or
estate or trust, in either case not subject to United States Federal income tax
on a net income basis in respect of income or gain from the Debt Security.
U.S. Holders
Payments of Interest. Interest on a Debt Security will be taxable to a
U.S. Holder as ordinary income at the time it is received or accrued, depending
on the U.S. Holder's method of accounting for tax purposes.
Purchase, Sale and Retirement of the Debt Securities. A U.S. Holder's
tax basis in a Debt Security will generally be its U.S. dollar cost (including,
in the case of a Debt Security acquired through the exercise of a Debt Warrant,
both the cost of the Debt Warrant and the amount paid on exercise of the Debt
Warrant).
A U.S. Holder will generally recognize gain or loss on the sale or
retirement of a Debt Security equal to the difference between the amount
realized on the sale or retirement and the U.S. Holder's tax basis in the Debt
Security. Except to the extent attributable to accrued but unpaid interest, gain
or loss recognized on the sale or retirement of a Debt Security will be capital
gain or loss and will be long-term capital gain or loss if the Debt Security was
held for more than one year.
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U.S. Alien Holders
This discussion assumes that the Debt Security is not subject to the
rules of Section 871(h)(4)(A) of the Code (relating to interest payments that
are determined by reference to the income, profits, changes in the value of
property or other attributes of the debtor or a related party).
Under present United States Federal income and estate tax law, and
subject to the discussion of backup withholding below:
(i) payments of principal, premium (if any) and interest by the Company
or any of its paying agents to any holder of a Debt Security that is a U.S.
Alien Holder will not be subject to United States Federal withholding tax if, in
the case of interest (a) the beneficial owner of the Debt Security does not
actually or constructively own 10% or more of the capital or profits interest in
the Operating Partnership, (b) the beneficial owner of the Debt Security is not
a controlled foreign corporation that is related to the Operating Partnership
through stock ownership, and (c) either (A) the beneficial owner of the Debt
Security certifies to the Operating Partnership or its agent, under penalties of
perjury, that it is not a U.S. person and provides its name and address or (B) a
securities clearing organization, bank or other financial institution that holds
customers' securities in the ordinary course of its trade or business (a
"financial institution") and holds the Debt Security certifies to the Operating
Partnership or its agent under penalties of perjury that such statement has been
received from the beneficial owner by it or by a financial institution between
it and the beneficial owner and furnishes the payor with a copy thereof;
(ii) a U.S. Alien Holder of a Debt Security will not be subject to
United States Federal withholding tax on any gain realized on the sale or
exchange of a Debt Security; and
(iii) a Debt Security held by an individual who at death is not a
citizen or resident of the United States will not be includible in the
individual's gross estate for purposes of the United States Federal estate tax
as a result of the individual's death if (a) the individual did not actually or
constructively own 10% or more of the capital or profits interest in the
Operating Partnerships and (b) the income on the Debt Security would not have
been effectively connected with a United States trade or business of the
individual at the time of the individual's death.
Proposed Internal Revenue Service regulations (the "Proposed
Regulations") would provide alternative methods for satisfying the certification
requirement described in clause (i)(c) above. The Proposed Regulations also
would require, in the case of Debt Securities held by a foreign partnership,
that (x) the certification described in clause (i)(c) above be provided by the
partners rather than the partnership and (y) the partnership provide certain
information, including a United States taxpayer identification number. A
look-through rule would apply in the case of tiered partnerships. The Proposed
Regulations are proposed to be effective for payments made after December 31,
1997. There can be no assurance that the Proposed Regulations will be adopted or
as to the provisions they will include if and when adopted in temporary or final
form.
Information Reporting and Backup Withholding
U.S. Holders. In general, information reporting requirements will apply
to payments of principal, any premium and interest on a Debt Security and the
proceeds of the sale of a Debt Security before maturity within the United States
to non-corporate U.S. Holders, and "backup withholding" at a rate of 31% will
apply to such payments if the U.S. Holder fails to provide an accurate taxpayer
identification number or is notified by the Internal Revenue Service that it has
failed to report all interest and dividends required to be shown on its federal
income tax returns.
U.S. Alien Holders. Information reporting and backup withholding will
not apply to payments of principal, premium (if any) and interest made by the
Operating Partnership or a paying agent to a U.S. Alien Holder on a Debt
Security if the certification described in clause (i)(c) under "U.S. Alien
Holders" above is received, provided that the payor does not have actual
knowledge that the holder is a U.S. person. The
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Operating Partnership or a paying agent, however, may report (on Internal
Revenue Form 1042-S) payments of interest on the Debt Securities.
Payments of the proceeds from the sale by a U.S. Alien Holder of a Debt
Security made to or through a foreign office of a broker will not be subject to
information reporting or backup withholding, except that if the broker is a U.S.
person, a controlled foreign corporation for United States Federal income tax
purposes or a foreign person 50% or more of whose gross income is effectively
connected with a United States trade or business for a specified three-year
period, information reporting may apply to such payments. Payments of the
proceeds from the sale of a Debt Security to or through the United States office
of a broker is subject to information reporting and backup withholding unless
the holder or beneficial owner certifies as to its non-United States status or
otherwise establishes an exemption from information reporting and backup
withholding.
The applicable Prospectus Supplement will contain a discussion of any
special United States Federal income tax rules with respect to Debt Securities
that are issued at a discount or premium or as a unit with other Securities,
have a maturity of one year or less, provide for conversion rights, contingent
payments, early redemption or payments that are denominated in or determined by
reference to a currency other than the U.S. dollar or otherwise subject to
special United States Federal income tax rules.
TAXATION OF HOLDERS OF DEBT WARRANTS
Sale or Expiration
Generally, a holder of a Debt Warrant will recognize gain or loss upon
the sale or other disposition of a Debt Warrant in an amount equal to the
difference between the amount realized on such sale or other disposition and the
holder's tax basis in the Debt Warrant. A holder of a Debt Warrant that expires
unexercised will generally recognize loss in an amount equal to such holder's
tax basis in the Debt Warrant. Gain or loss resulting from the sale, other
disposition or expiration of a Debt Warrant will generally be capital gain or
loss and will be long-term if the Debt Warrant was held for more than one year.
Exercise
The exercise of a Debt Warrant with cash will not be a taxable event
for the exercising holder. Such holder's basis in the Debt Securities received
on exercise of the Debt Warrant will equal the sum of such holder's tax basis in
the exercised Debt Warrant and the exercise price of the Debt Warrant. The
holding period in a Debt Security received on exercise of a Debt Warrant will
not include the period during which the Debt Warrant was held.
The applicable Prospectus Supplement will contain a discussion of any
special United States Federal income tax rules with respect to Debt Warrants
that are issued as a unit with other Securities.
TAXATION OF HOLDERS OF COMMON SHARES OR PREFERRED SHARES
U.S. Shareholders
As used herein, the term "U.S. Shareholder" means a holder of Common
Shares or Preferred Shares ("Shares") who (for United States Federal income tax
purposes) is (i) a citizen or resident of the United States, (ii) a corporation,
partnership or other entity created or organized in or under the laws of the
United States or of any political subdivision thereof, or (iii) an estate or
trust the income of which is subject to United States Federal income taxation
regardless of its source.
As long as the Company qualifies as a REIT, distributions made by the
Company out of its current or accumulated earnings and profits (and not
designated as capital gain dividends) will constitute dividends taxable to its
taxable U.S. Shareholders as ordinary income. Such distributions will not be
eligible for the dividends-received deduction in the case of U.S. Shareholders
that are corporations. Distributions made by
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the Company that are properly designated by the Company as capital gain
dividends will be taxable to U.S. Shareholders as long-term capital gains (to
the extent that they do not exceed the Company's actual net capital gain for the
taxable year) without regard to the period for which a U.S. Shareholder has held
his shares. U.S. Shareholders that are corporations may, however, be required to
treat up to 20% of certain capital gain dividends as ordinary income.
To the extent that the Company makes distributions (not designated as
capital gain dividends) in excess of its current and accumulated earnings and
profits, such distributions will be treated first as a tax-free return of
capital to each U.S. Shareholder, reducing the adjusted basis which such U.S.
Shareholder has in his Shares for tax purposes by the amount of such
distribution (but not below zero), with distributions in excess of a U.S.
Shareholder's adjusted basis in his shares taxable as capital gains (provided
that the Shares have been held as a capital asset). For purposes of determining
the portion of distributions on separate classes of Shares that will be treated
as dividends for Federal income tax purposes, current and accumulated earnings
and profits will be allocated to distributions resulting from priority rights of
Preferred Shares before being allocated to other distributions. Dividends
authorized by the Company in October, November, or December of any year and
payable to a shareholder of record on a specified date in any such month shall
be treated as both paid by the Company and received by the shareholder on
December 31 of such year, provided that the dividend is actually paid by the
Company on or before January 31 of the following calendar year. Shareholders may
not include in their own income tax returns any net operating losses or capital
losses of the Company.
Distributions made by the Company and gain arising from the sale or
exchange by a U.S. Shareholder of Shares will not be treated as passive activity
income, and, as a result, U.S. Shareholders generally will not be able to apply
any "passive losses" against such income or gain. Distributions made by the
Company (to the extent they do not constitute a return of capital or capital
gain dividends) generally will be treated as investment income for purposes of
computing the investment interest deduction limitation. Gain arising from the
sale or other disposition of Shares, however, will not be treated as investment
income unless the U.S. Shareholder elects to reduce the amount of his total net
capital gain eligible for the 28% maximum capital gains rate applicable to
individuals by the amount of such gain with respect to the Shares.
Upon any sale or other disposition of Shares, a U.S. Shareholder will
recognize gain or loss for Federal income tax purposes in an amount equal to the
difference between (i) the amount of cash and the fair market value of any
property received on such sale or other disposition, and (ii) the holder's
adjusted basis in the Shares for tax purposes. Such gain or loss will be capital
gain or loss if the Shares have been held by the U.S. Shareholder as a capital
asset, and will be long-term gain or loss if such Shares have been held for more
than one year. In general, any loss recognized by a U.S. Shareholder upon the
sale or other disposition of shares of the Company that have been held for six
months or less (after applying certain holding period rules) will be treated as
a long-term capital loss, to the extent of distributions received by such U.S.
Shareholder from the Company which were required to be treated as long-term
capital gains.
Backup Withholding. The Company will report to its U.S. Shareholders
and the Internal Revenue Service (the "IRS") the amount of dividends paid during
each calendar year, and the amount of tax withheld, if any. Under the backup
withholding rules, a shareholder may be subject to backup withholding at the
rate of 31% with respect to dividends paid unless such holder (a) is a
corporation or comes within certain other exempt categories and, when required,
demonstrates this fact, or (b) provides a taxpayer identification number,
certifies as to no loss of exemption from backup withholding, and otherwise
complies with applicable requirements of the backup withholding rules. A U.S.
Shareholder that does not provide the Company with his correct taxpayer
identification number may also be subject to penalties imposed by the IRS. Any
amount paid as backup withholding will be creditable against the shareholder's
income tax liability. In addition, the Company may be required to withhold a
portion of capital gain distributions to any shareholders who fail to certify
their non-foreign status to the Company.
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Taxation of Tax-Exempt Shareholders. The IRS has ruled that amounts
distributed as dividends by a REIT generally do not constitute unrelated
business taxable income ("UBTI") when received by a tax-exempt entity. Based on
that ruling, provided that a tax-exempt shareholder (except certain tax-exempt
shareholders described below) has not held its Shares as "debt financed
property" within the meaning of the Code and such Shares are not otherwise used
in a trade or business, the dividend income from Shares will not be UBTI to a
tax-exempt shareholder. Similarly, income from the sale of Shares will not
constitute UBTI unless such tax-exempt shareholder has held such Shares as "debt
financed property" within the meaning of the Code or has used the Shares in a
trade or business.
For tax-exempt shareholders that are social clubs, voluntary employee
benefit associations, supplemental unemployment benefit trusts, and qualified
group legal services plans exempt from Federal income taxation under Sections
501(c)(7), (c)(9), (c)(17), and (c)(20) of the Code, respectively, income from
an investment in the Company's Shares will constitute UBTI unless the
organization is able to properly deduct amounts set aside or placed in reserve
for certain purposes so as to offset the income generated by its Shares. Such
prospective investors should consult their own tax advisors concerning these
"set aside" and reserve requirements.
Notwithstanding the foregoing, however, a portion of the dividends paid
by a "pension-held REIT" will be treated as UBTI to any trust which (i) is
described in Section 401(a) of the Code, (ii) is tax exempt under Section 501(a)
of the Code, and (iii) holds more than 10% (by value) of the equity interests in
the REIT. Tax-exempt pension, profit-sharing and stock bonus funds that are
described in Section 401(a) of the Code are referred to below as "qualified
trusts".
A REIT is a "pension-held REIT" if (i) it would not have qualified as a
REIT but for the fact that Section 856(h)(3) of the Code provides that stock
owned by qualified trusts shall be treated, for purposes of the "not closely
held" requirement, as owned by the beneficiaries of the trust (rather than by
the trust itself) and (ii) either (A) at least one qualified trust holds more
than 25% (by value) of the interests in the REIT or (B) one or more qualified
trusts, each of which owns more than 10% (by value) of the interests in the
REIT, hold in the aggregate more than 50% (by value) of the interests in the
REIT. The percentage of any REIT dividend treated as UBTI is equal to the ratio
of (i) the gross income (less direct expenses related thereto) of the REIT from
unrelated trades or businesses (determined as though the REIT were a qualified
trust) to (ii) the total gross income (less direct expenses related thereto) of
the REIT. A de minimis exception applies where this percentage is less than 5%
for any year. The Company does not expect to be classified as a "pension-held
REIT".
Non-U.S. Shareholders
The rules governing U.S. Federal income taxation of nonresident alien
individuals, foreign corporations, foreign partnerships and other foreign
shareholders (collectively, "Non-U.S. Shareholders") are complex and no attempt
will be made herein to provide more than a limited summary of such rules.
Prospective Non-U.S. Shareholders should consult with their own tax advisors to
determine the impact of U.S. Federal, state and local income tax laws with
regard to an investment in Shares, including any reporting requirements.
Ordinary Dividends. Distributions, other than distributions that are
treated as attributable to gain from sales or exchanges by the Company of U.S.
real property interests (discussed below) and other than distributions
designated by the Company as capital gain dividends, will be treated as ordinary
income to the extent that they are made out of current or accumulated earnings
and profits of the Company. Such distributions to Non-U.S. Shareholders will
ordinarily be subject to a withholding tax equal to 30% of the gross amount of
the distribution, unless an applicable tax treaty reduces that tax. However, if
income from the investment in the Shares is treated as effectively connected
with the Non-U.S. Shareholder's conduct of a U.S. trade or business, the
Non-U.S. Shareholder generally will be subject to tax at graduated rates in the
same manner as U.S. shareholders are taxed with respect to such dividends (and
may also be subject to the 30% branch profits tax if the shareholder is a
foreign corporation). The Company expects to withhold U.S. tax at the rate of
30% on the gross amount of any dividends, other than dividends treated as
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attributable to gain from sales or exchanges of U.S. real property interests and
capital gain dividends, paid to a Non-U.S. Shareholder, unless (i) a lower
treaty rate applies and the required form evidencing eligibility for that
reduced rate is filed with the Company or the appropriate withholding agent or
(ii) the Non-U.S. Shareholder files an IRS Form 4224 (or a successor form) with
the Company or the appropriate withholding agent claiming that the distributions
are "effectively connected" income.
Distributions to a Non-U.S. Shareholder that are designated by the
Company at the time of distribution as capital gain dividends which are not
attributable to or treated as attributable to the disposition by the Company of
a U.S. real property interest generally will not be subject to U.S. Federal
income taxation, except as described below.
Return of Capital. Distributions in excess of current and accumulated
earnings and profits of the Company, which are not treated as attributable to
the gain from disposition by the Company of a U.S. real property interest, will
not be taxable to a Non-U.S. Shareholder to the extent that they do not exceed
the adjusted basis of the Non-U.S. Shareholder's Shares, but rather will reduce
the adjusted basis of such Shares. To the extent that such distributions exceed
the adjusted basis of a Non-U.S. Shareholder's Shares, they will give rise to
tax liability if the Non-U.S. Shareholder otherwise would be subject to tax on
any gain from the sale or disposition of its Shares, as described below. If it
cannot be determined at the time a distribution is made whether such
distribution will be in excess of current and accumulated earnings and profits,
the distribution will be subject to withholding at the rate applicable to
dividends. However, the Non-U.S. Shareholder may seek a refund of such amounts
from the IRS if it is subsequently determined that such distribution was, in
fact, in excess of current and accumulated earnings and profits of the Company.
Capital Gain Dividends. For any year in which the Company qualifies as
a REIT, distributions that are attributable to gain from sales or exchanges by
the Company of U.S. real property interests will be taxed to a Non-U.S.
Shareholder under the provisions of the Foreign Investment in Real Property Tax
Act of 1980, as amended ("FIRPTA"). Under FIRPTA, these distributions are taxed
to a Non-U.S. Shareholder as if such gain were effectively connected with a U.S.
business. Thus, Non-U.S. Shareholders will be taxed on such distributions at the
normal capital gain rates applicable to U.S. Shareholders (subject to any
applicable alternative minimum tax and special alternative minimum tax in the
case of nonresident alien individuals). The Company is required by applicable
Treasury Regulations under FIRPTA to withhold 35% of any distribution that could
be designated by the Company as a capital gain dividend. However, if the Company
designates as a capital gain dividend a distribution made prior to the day the
Company actually effects such designation, then (although such distribution may
be taxable to a Non-U.S. Shareholder) such distribution is not subject to
withholding under FIRPTA; rather, the Company must effect the 35% FIRPTA
withholding from distributions made on and after the date of such designation,
until the distributions so withheld equal the amount of the prior distribution
designated as a capital gain dividend. The amount withheld is creditable against
the Non-U.S. Shareholder's U.S. tax liability.
Sales of Shares. Gain recognized by a Non-U.S. Shareholder upon a sale
or exchange of Common Shares generally will not be taxed under FIRPTA if the
Company is a "domestically controlled REIT," defined generally as a REIT in
respect of which at all times during a specified testing period less than 50% in
value of the stock is and was held directly or indirectly by foreign persons. It
is currently anticipated that the Company will continue to be a "domestically
controlled REIT," and, therefore, that the sale of Shares will not be subject to
taxation under FIRPTA. However, gain not subject to FIRPTA will be taxable to a
Non-U.S. Shareholder if (i) investment in the Shares is treated as "effectively
connected" with the Non-U.S. Shareholder's U.S. trade or business, in which case
the Non-U.S. Shareholder will be subject to the same treatment as U.S.
Shareholders with respect to such gain, or (ii) the Non-U.S. Shareholder is a
nonresident alien individual who was present in the United States for 183 days
or more during the taxable year and has a "tax home" in the United States, or
maintains an office or a fixed place of business in the United States to which
the gain is attributable, in which case the nonresident alien individual will be
subject to a 30% tax on the individual's capital gains. A similar rule will
apply to capital gain dividends not subject to FIRPTA.
If the Company were not a domestically-controlled REIT, a Non-U.S.
Shareholder's sale of Shares would be subject to tax under FIRPTA only if the
selling Non-U.S. Shareholder owned more than 5% of the
38
<PAGE> 41
class of Shares sold at any time during a specified period (generally the
shorter of the period that the Non-U.S. Shareholder owned the Shares sold or the
five-year period ending on the date of disposition). If the gain on the sale of
Shares were to be subject to tax under FIRPTA, the Non-U.S. Shareholder would be
subject to the same treatment as U.S. Shareholders with respect to such gain
(subject to any applicable alternative minimum tax and a special alternative
minimum tax in the case of nonresident alien individuals) and the purchaser of
such Shares would be required to withhold 10% of the gross purchase price.
Proposed Regulations. Pursuant to current Treasury Regulations,
dividends paid to an address in a country outside the United States are
generally presumed to be paid to a resident of such country for purposes of
determining the applicability of withholding discussed above and the
applicability of a tax treaty rate.
Under the Proposed Regulations, however, a Non-U.S. Shareholder who
wishes to claim the benefit of an applicable treaty rate would be required to
satisfy applicable certification requirements. In addition, under the Proposed
Regulations, in the case of Shares held by a foreign partnership, (x) the
certification requirement would generally be applied to the partners in the
partnership and (y) the partnership would be required to provide certain
information, including a United States taxpayer identification number. The
Proposed Regulations provide look-through rules in the case of tiered
partnerships. It is not certain whether, or in what form, the Proposed
Regulations will be adopted.
OTHER TAX CONSEQUENCES
The Company and its shareholders may be subject to state or local
taxation in various state or local jurisdictions, including those in which it or
they transact business or reside. The state and local tax treatment of the
Company and its shareholders may not conform to the Federal income tax
consequences discussed above. Consequently, prospective shareholders are urged
to consult their own tax advisors regarding the effect of state and local tax
laws on an investment in the Company.
PLAN OF DISTRIBUTION
The Company and the Operating Partnership may sell the Securities to
one or more underwriters for public offering and sale by them or may sell the
Securities to investors directly or through agents. The Company's Common Shares
being registered hereby may be issued in connection with the exchange of the
Debt Securities of the Operating Partnership. Any such underwriter or agent
involved in the offer and sale of the Securities will be named in the related
Prospectus Supplement. The Company and the Operating Partnership have reserved
the right to sell the Securities directly to investors on their own behalf in
those jurisdictions where it is authorized to do so.
Underwriters may offer and sell the Securities at a fixed price or
prices that may be changed or at negotiated prices. The Company and the
Operating Partnership also may, from time to time, authorize dealers, acting as
the Company's or the Operating Partnership's agents, to offer and sell the
Securities upon such terms and conditions as set forth in the related Prospectus
Supplement. In connection with the sale of the Securities, underwriters may
receive compensation from the Company or the Operating Partnership in the form
of underwriting discounts or commissions and may also receive commissions from
purchasers of the Securities for whom they may act as agent. Underwriters may
sell the Securities to or through dealers, and such dealers may receive
compensation in the form of discounts, concessions or commissions from the
underwriters and/or commissions (which may be changed from time to time) from
the purchasers for whom they may act as agents.
Any underwriting compensation paid by the Company or the Operating
Partnership to underwriters or agents in connection with the offering of the
Securities, and any discounts, concessions or commissions allowed by
underwriters to participating dealers, will be set forth in the related
Prospectus Supplement. Dealers and agents participating in the distribution of
the Securities may be deemed to be underwriters, and any discounts and
commissions received by them and any profit realized by them on resale of the
Securities
39
<PAGE> 42
may be deemed to be underwriting discounts and commissions under the Securities
Act. Underwriters, dealers and agents may be entitled, under agreements entered
into with the Company or the Operating Partnership, to indemnification against
and contribution towards certain civil liabilities, including any liabilities
under the Securities Act.
If so indicated in the related Prospectus Supplement, the Company or
the Operating Partnership will authorize dealers acting as the Company's or the
Operating Partnership's agents to solicit agreements by certain institutions to
purchase the Securities from the Company or the Operating Partnership at the
public offering price set forth in the related Prospectus Supplement pursuant to
delayed delivery contracts ("Contracts") providing for payment and delivery on
the date or dates stated in a Prospectus Supplement. Each Contract will be for
an amount specified in the applicable Prospectus Supplement. Institutions, with
whom Contracts, when authorized, may be made include commercial and savings
banks, insurance companies, pension funds, investment companies, educational and
charitable institutions and other institutions, but will in all cases be subject
to the approval of the Company or the Operating Partnership, as applicable.
Contracts will not be subject to any conditions except that (i) the purchase by
an institution of the Securities covered by Contracts will not at the time of
delivery be prohibited under the laws of any jurisdiction in the United States
to which such institution is subject and (ii) if the Securities are being sold
to Underwriters, the Company or the Operating Partnership shall have sold to
such Underwriters such amount specified in the applicable Prospectus Supplement.
Any Securities issued hereunder (other than Common Shares and Series A
Preferred Shares) will be new issues of securities with no established trading
market. Any underwriters or agents to or through whom such Securities are sold
by the Company or the Operating Partnership for public offering and sale may
make a market in such Securities, but such underwriters or agents will not be
obligated to do so and may discontinue any market making at any time without
notice. No assurance can be given as to the liquidity of the trading market
for any such Securities.
Certain of the underwriters, dealers or agents and their associates may
engage in transactions with, and perform services for, the Company, the
Operating Partnership and certain of their affiliates in the ordinary course of
business.
EXPERTS
The consolidated financial statements and the related consolidated
financial statement schedules incorporated in this Prospectus by reference from
the Company's Annual Report on Form 10-K for the year ended December 31, 1996
have been audited by Deloitte & Touche LLP, independent auditors, as stated in
their report which is incorporated herein by reference, and have been so
incorporated in reliance upon the report of such firm given upon their authority
as experts in accounting and auditing.
The financial statements of 866 U.N. Plaza Associates LLC; the combined
financial statements of M Eleven Associates, M393 Associates and Eleven Penn
Plaza Company; the financial statements of Two Penn Plaza Associates L.P.; the
financial statements of 1740 Broadway Associates, L.P.; and the financial
statements of B&B Park Avenue L.P., all incorporated herein by reference from
the Company's Current Report on Form 8-K, dated March 12, 1997, as amended by
the Company's Current Report on Form 8-K/A, dated March 12, 1997, have been
audited by Friedman Alpren & Green LLP, independent auditors, as stated in their
reports which are incorporated herein by reference, and have been so
incorporated in reliance upon the report of such firm given upon their authority
as experts in accounting and auditing.
The financial statements of Two Park Company, a New York general
partnership, incorporated herein by reference from the Company's Current Report
on Form 8-K, dated March 12, 1997, as amended by the Company's Current Report on
Form 8-K/A, dated March 12, 1997, have been audited by KPMG Peat Marwick LLP,
independent auditors, as stated in their report which is incorporated herein by
reference, and have been so incorporated in reliance upon the report of such
firm given upon their authority as experts in accounting and auditing.
40
<PAGE> 43
VALIDITY OF THE SECURITIES
The validity of any Debt Securities or Debt Warrants issued hereunder
will be passed upon for the Operating Partnership by Sullivan & Cromwell, New
York, New York, counsel to the Company and the Operating Partnership, and the
validity of any Preferred Shares, Depositary Shares or Common Shares issued
hereunder will be passed upon for the Company by Ballard Spahr Andrews &
Ingersoll, Baltimore, Maryland, counsel to the Company. The validity of any
Securities issued hereunder will be passed upon for any underwriters by the
counsel named in the applicable Prospectus Supplement.
41
<PAGE> 44
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The estimated expenses in connection with the issuance and distribution
of the securities being registered, other than Underwriting Compensation, are as
follows:
<TABLE>
<S> <C>
SEC registration fee............................................. $489,090.91
Printing and engraving expenses.................................. $ *
Legal fees and disbursements..................................... $ *
Accounting fees and disbursements................................ $ *
Transfer Agent's, Depositary's and Trustee's fees
and disbursements............................................. $ *
Blue Sky fees and expenses....................................... $ *
Miscellaneous (including listing and
rating agency fees)........................................... $ *
Total............................................................ $ *
============
</TABLE>
- --------------------------
* Estimated.
ITEM 15. INDEMNIFICATION OF TRUSTEES AND OFFICERS.
Under Maryland law, a real estate investment trust formed in Maryland
is permitted to eliminate, by provision in its declaration of trust, the
liability of its trustees and officers to the trust and its shareholders for
money damages except for liability resulting from (i) actual receipt of an
improper benefit or profit in money, property or services or (ii) active and
deliberate dishonesty established by a final judgment as being material to the
cause of action. The Company's Declaration of Trust includes such a provision
eliminating such liability to the maximum extent permitted by Maryland law.
The Company's Bylaws require it to indemnify (a) any present or former
trustee or officer who has been successful, on the merits or otherwise, in the
defense of a proceeding to which he was made a party by reason of such status,
against reasonable expenses incurred by him in connection with the proceeding,
(b) any trustee or officer who, at the request of the Company, serves or has
served another trust, corporation or other entity as a director, officer,
partner, or trustee and (c) any present or former trustee or officer against any
claim or liability to which he may become subject by reason of such status
unless it is established that (i) his act or omission was material to the matter
giving rise to the proceeding and was committed in bad faith or was the result
of active and deliberate dishonesty, (ii) he actually received an improper
personal benefit in money, property or services or (iii) in the case of a
criminal proceeding, he had reasonable cause to believe that his act or omission
was unlawful. In addition, the Company's Bylaws require it to pay or reimburse,
in advance of final disposition of a proceeding, reasonable expenses incurred by
a present or former trustee or officer made a party to a proceeding by reason of
such status provided that the Company shall have received (i) a written
affirmation by the trustee or officer of his good faith belief that he has met
the applicable standard of conduct necessary for indemnification by the Company
as authorized by the Bylaws and (ii) a written undertaking by or on his behalf
to repay the amount paid or reimbursed by the Company if it shall ultimately be
determined that the applicable standard of conduct was not met. The Company's
Bylaws also (i) permit the Company to provide indemnification and payment or
reimbursement of expenses to a present or former trustee or officer who served a
predecessor of the Company in such capacity and to any employee or agent of the
Company or a predecessor of the Company, (ii) provide that any indemnification
or payment or reimbursement of the expenses permitted by the Bylaws shall be
II-1
<PAGE> 45
furnished in accordance with the procedures provided for indemnification or
payment or reimbursement of expenses, as the case may be, under Section 2-418 of
the Maryland General Corporation Law (the "MGCL") for directors of Maryland
corporations and (iii) permit the Company to provide such other and further
indemnification or payment or reimbursement of expenses as may be permitted by
the MGCL, as in effect from time to time, for directors of Maryland
corporations. Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to trustees and officers of the Company pursuant
to the foregoing provisions or otherwise, the Company has been advised that,
although the validity and scope of the governing statute has not been tested in
court, in the opinion of the SEC, such indemnification is against public policy
as expressed in the Securities Act and is, therefore, unenforceable. In
addition, indemnification may be limited by state securities laws.
The First Amended and Restated Agreement of Limited Partnership, dated
as of April 15, 1997 (the "Partnership Agreement"), of the Operating Partnership
provides, generally, for the indemnification of an "indemnitee" against losses,
claims, damages, liabilities, expenses (including, without limitation,
attorneys' fees and other legal fees and expenses), judgments, fines,
settlements and other amounts that relate to the operations of the Operating
Partnership unless it is established that (i) the act or omission of the
Indemnitee was material and either was committed in bad faith or pursuant to
active and deliberate dishonesty, (ii) the Indemnitee actually received an
improper personal benefit in money, property or services or (iii) in the case of
any criminal proceeding, the Indemnitee had reasonable cause to believe that the
act or omission was unlawful. For this purpose, the term "Indemnitee" includes
(i) any person made a party to a proceeding by reason of its status as (A) the
general partner of the Operating Partnership, (B) a limited partner of the
Operating Partnership or (C) an officer of the Operating Partnership or a
trustee, officer or shareholder of the Company and (ii) such other persons
(including affiliates of the Company or the Operating Partnership) as the
Company may designate from time to time in its discretion. Any such
indemnification will be made only out of assets of the Operating Partnership,
and in no event may an Indemnitee subject the limited partners of the Operating
Partnership to personal liability by reason of the indemnification provisions in
the Partnership Agreement. Insofar as indemnification for liabilities arising
under the Securities Act of 1933 may be permitted pursuant to the foregoing
provisions or otherwise, the Operating Partnership has been advised that, in the
opinion of the Securities and Exchange Commission, such indemnification is
against public policy and, therefore, unenforceable. The Operating Partnership
has purchased liability insurance for the purpose of providing a source of funds
to pay the indemnification described above.
II-2
<PAGE> 46
ITEM 16. EXHIBITS.
EXHIBIT NO. EXHIBIT
----------- -------
1.1* Form of Underwriting Agreement (for Common Shares)
1.2* Form of Underwriting Agreement (for Preferred Shares)
1.3* Form of Underwriting Agreement (for Debt Securities)
3.1 Amended and Restated Declaration of Trust of the Company,
amended April 3, 1997 (incorporated by reference to Exhibit
3.1 of the Company's Registration Statement on Form S-8 (File
No. 333- ), filed on June 12, 1997)
3.2 By-laws of the Company, as amended on April 28, 1997
(incorporated by reference to Exhibit 3(b) of the Company's
Quarterly Report on Form 10-Q for the period ended March 31,
1997 (File No. 001-11954) filed on May 14, 1997)
3.3 First Amended and Restated Agreement of Limited Partnership of
the Operating Partnership, dated as of April 15, 1997
(incorporated by reference to Exhibit 3.1 of the Company's
Report on Form 10, filed on June 12, 1997)
4.1 Specimen certificate representing the Company's Common Shares
of Beneficial Interest, par value $0.04 per share
(incorporated by reference to Exhibit 4.1 of Amendment No. 1
to the Company's Registration Statement on Form S-3 (File No.
33-62395), filed on October 26, 1995)
4.2 Specimen certificate representing the Company's $3.25 Series A
Preferred Shares of Beneficial Interest, liquidation
preference $50.00 per share (incorporated by reference to
Exhibit 4.2 of the Company's Current Report on Form 8-K, dated
April 3, 1997 (File No. 001-11954), filed on April 8, 1997)
4.3 Articles Supplementary Classifying the Company's $3.25 Series
A Preferred Shares of Beneficial Interest, liquidation
preference $50.00 per share (incorporated by reference to
Exhibit 4.1 of the Company's Current Report on Form 8-K, dated
April 3, 1997 (File No. 001-11954), filed on April 8, 1997)
4.4* Form of Indenture for Senior Debt Securities
4.5* Form of Senior Debt Security (included in Exhibit 4.4)
4.6* Form of Indenture for Subordinated Debt Securities
4.7* Form of Subordinated Debt Security (included in Exhibit 4.6)
4.8 Form of Deposit Agreement (incorporated by reference to
Exhibit 4.6 of Amendment No. 1 to the Company's Registration
Statement on Form S-3 (File No. 33-52441), filed on May 12,
1994)
4.9 Form of Depositary Receipt (included in Exhibit 4.8)
5.1* Opinion of Ballard Spahr Andrews & Ingersoll
5.2* Opinion of Sullivan & Cromwell
8.1* Tax Opinion of Sullivan & Cromwell
- --------------------------
* To be filed by amendment or 8-K.
II-3
<PAGE> 47
12* Statement Regarding Computation of Consolidated Ratios of
Earnings to Fixed Charges and Combined Fixed Charges and
Preferred Share Dividend Requirements
23.1 Consent of Deloitte & Touche LLP
23.2 Consents of Friedman Alpren & Green LLP
23.3 Consent of KPMG Peat Marwick LLP
23.4* Consent of Ballard Spahr Andrews & Ingersoll (included in its
opinion filed as Exhibit 5.1)
23.5* Consent of Sullivan & Cromwell (included in its opinion filed
as Exhibit 5.2)
24.1 Powers of Attorney (included on signature page)
25.1* Statement of Eligibility of Senior Trustee on Form T-1
25.2* Statement of Eligibility of Subordinated Trustee on Form T-1
- ---------------------------
* To be filed by amendment or 8-K.
ITEM 17. UNDERTAKINGS.
(a) The undersigned registrants hereby undertake:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration
statement;
(i) To include any prospectus required by Section
10(a)(3) of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events
arising after the effective date of the registration
statement (or the most recent post-effective
amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the
information set forth in the registration statement.
Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the
total dollar value of securities offered would not
exceed that which was registered) and any deviation
from the low or high end of the estimated maximum
offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule
424(b) if, in the aggregate, the changes in volume
and price represent no more than a 20 percent change
in the maximum aggregate offering price set forth in
the "Calculation of Registration Fee" table in the
effective registration statement.
(iii) To include any material information with respect to
the plan of distribution not previously disclosed in
the registration statement or any material change to
such information in the registration statement;
provided, however, that paragraphs (1)(i) and (1)(ii) do not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed by the registrant pursuant to
Section 13 or Section 15(d) of the Securities Exchange Act of 1934 that are
incorporated by reference in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment
shall be deemed to be a new registration statement relating to
II-4
<PAGE> 48
the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain
unsold at the termination of the offering.
(b) The undersigned registrants hereby undertake that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or otherwise
(other than insurance), the registrants have been advised that in the opinion of
the Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than insurance
payments and the payment by the registrant of expenses incurred or paid by a
director, officer or controlling person of the registrant in the successful
defense of any action, suit or proceeding) is asserted by such director, officer
or controlling person in connection with the securities being registered, the
registrants will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question of whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.
OTHER
The Operating Partnership hereby states that it reasonably believes
that the Debt Securities being registered hereunder will be "investment grade
securities" (as defined in General Instruction I.B.2. of Form S-3) by the time
of sale of such securities.
II-5
<PAGE> 49
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrants certify that they have reasonable grounds to believe that they meet
all of the requirements for filing on Form S-3 and have duly caused this
Registration Statement on Form S-3 to be signed on their behalf by the
undersigned, thereunto duly authorized, in the City of Saddle Brook and State of
New Jersey, on June 11, 1997.
VORNADO REALTY TRUST,
a Maryland real estate investment trust
By: /s/ Steven Roth
---------------------------------
Steven Roth
Chairman of the Board of Trustees
(Principal Executive Officer)
VORNADO REALTY L.P.,
a Delaware limited partnership
By: Vornado Realty Trust
Its: General Partner
By: /s/ Steven Roth
---------------------------------
Steven Roth
Chairman of the Board of Trustees
(Principal Executive Officer)
<PAGE> 50
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Steven Roth, Michael D. Fascitelli and
Joseph Macnow, and each of them, his true and lawful attorney-in-fact and agent,
with full power of substitution and resubstitution, for him and in his name,
place and stead, in any and all capacities, to sign any and all amendments
(including post-effective amendments) to this Registration Statement and to file
the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission or any other regulatory
authority, granting unto said attorney-in-fact and agent, full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in and about the premises, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that said
attorney-in-fact and agent, or his substitute, may lawfully do or cause to be
done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the date indicated. Each person listed below has signed this
Registration Statement (i) in their capacity as an officer or trustee of Vornado
Realty Trust (the "Company"), on behalf of the Company and (ii) as an officer or
trustee of the Company, in its capacity as general partner of Vornado Realty
L.P.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Steven Roth
- ---------------------------- Chairman of the Board of Trustees June 11, 1997
Steven Roth (Principal Executive Officer)
/s/ Michael D. Fascitelli
- ---------------------------- President and Trustee June 11, 1997
Michael D. Fascitelli
/s/ Bernard H. Mendik Co-Chairman of the Board of
- ---------------------------- Trustees and Chief Executive June 11, 1997
Bernard H. Mendik Officer of the Mendik Division
/s/ Joseph Macnow Vice President - Chief Financial
- ---------------------------- Officer and Controller (Principal June 11, 1997
Joseph Macnow Financial and Accounting Officer)
/s/ David Mandelbaum
- ----------------------------
David Mandelbaum Trustee June 11, 1997
/s/ Stanley Simon
- ----------------------------
Stanley Simon Trustee June 11, 1997
/s/ Richard R. West
- ----------------------------
Richard R. West Trustee June 11, 1997
/s/ Ronald G. Targan
- ----------------------------
Ronald G. Targan Trustee June 11, 1997
/s/ Russell B. Wight, Jr.
- ----------------------------
Russell B. Wight, Jr. Trustee June 11, 1997
</TABLE>
<PAGE> 51
EXHIBIT INDEX
EXHIBIT NO. EXHIBIT
----------- -------
1.1* Form of Underwriting Agreement (for Common Shares)
1.2* Form of Underwriting Agreement (for Preferred Shares)
1.3* Form of Underwriting Agreement (for Debt Securities)
3.1 Amended and Restated Declaration of Trust of the Company,
amended April 3, 1997 (incorporated by reference to Exhibit
3.1 of the Company's Registration Statement on Form S-8 (File
No. 333- ), filed on June 12, 1997)
3.2 By-laws of the Company, as amended on April 28, 1997
(incorporated by reference to Exhibit 3(b) of the Company's
Quarterly Report on Form 10-Q for the period ended March 31,
1997 (File No. 001-11954) filed on May 14, 1997)
3.3 First Amended and Restated Agreement of Limited Partnership of
the Operating Partnership, dated as of April 15, 1997
(incorporated by reference to Exhibit 3.1 of the Company's
Report on Form 10, filed on June 12, 1997)
4.1 Specimen certificate representing the Company's Common Shares
of Beneficial Interest, par value $0.04 per share
(incorporated by reference to Exhibit 4.1 of Amendment No. 1
to the Company's Registration Statement on Form S-3 (File No.
33-62395), filed on October 26, 1995)
4.2 Specimen certificate representing the Company's $3.25 Series A
Preferred Shares of Beneficial Interest, liquidation
preference $50.00 per share (incorporated by reference to
Exhibit 4.2 of the Company's Current Report on Form 8-K, dated
April 3, 1997 (File No. 001-11954), filed on April 8, 1997)
4.3 Articles Supplementary Classifying the Company's $3.25 Series
A Preferred Shares of Beneficial Interest, liquidation
preference $50.00 per share (incorporated by reference to
Exhibit 4.1 of the Company's Current Report on Form 8-K, dated
April 3, 1997 (File No. 001-11954), filed on April 8, 1997)
4.4* Form of Indenture for Senior Debt Securities
4.5* Form of Senior Debt Security (included in Exhibit 4.4)
4.6* Form of Indenture for Subordinated Debt Securities
4.7* Form of Subordinated Debt Security (included in Exhibit 4.6)
4.8 Form of Deposit Agreement (incorporated by reference to
Exhibit 4.6 of Amendment No. 1 to the Company's Registration
Statement on Form S-3 (File No. 33-52441), filed on May 12,
1994)
4.9 Form of Depositary Receipt (included in Exhibit 4.8)
5.1* Opinion of Ballard Spahr Andrews & Ingersoll
5.2* Opinion of Sullivan & Cromwell
8.1* Tax Opinion of Sullivan & Cromwell
12* Statement Regarding Computation of Consolidated Ratios of
Earnings to Fixed Charges and Combined Fixed Charges and
Preferred Share Dividend Requirements
23.1 Consent of Deloitte & Touche LLP
- -------------------------
* To be filed by amendment or 8-K.
<PAGE> 52
23.2 Consents of Friedman Alpren & Green LLP
23.3 Consent of KPMG Peat Marwick LLP
23.4* Consent of Ballard Spahr Andrews & Ingersoll (included in its
opinion filed as Exhibit 5.1)
23.5* Consent of Sullivan & Cromwell (included in its opinion
filed as Exhibit 5.2)
24.1 Powers of Attorney (included on signature page)
25.1* Statement of Eligibility of Senior Trustee on Form T-1
25.2* Statement of Eligibility of Subordinated Trustee on Form T-1
- ---------------------------
* To be filed by amendment or 8-K.
<PAGE> 1
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Registration
Statement of Vornado Realty Trust and Vornado Realty L.P. and the
Post-Effective Amendment to the Registration Statement No. 33-62395 of Vornado
Realty Trust, both on Form S-3, of our report dated March 12, 1997, appearing
in the Annual Report on Form 10-K of Vornado Realty Trust for the year ended
December 31, 1996 and to the reference to us under the heading "Experts" in the
Prospectus which is part of this Registration Statement.
DELOITTE & TOUCHE LLP
Parsippany, New Jersey
June 11, 1997
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT AUDITORS
TO THE MEMBERS OF
866 U.N. PLAZA ASSOCIATES LLC
We consent to the incorporation by reference in this Registration
Statement on Form S-3 of Vornado Realty Trust and Vornado Realty L.P. of our
report dated January 15, 1997, except for Note 2, as to which the date is March
12, 1997, on the balance sheet of 866 U.N. Plaza Associates LLC (formerly
866 U.N. Plaza Associates), as of December 31, 1996 and 1995, and the related
statements of operations, changes in partners' capital and cash flows for each
of the years in the three-year period ended December 31, 1996, which report
appears in the Form 8-K of Vornado Realty Trust, dated March 12, 1997, as
amended by the Form 8-K/A, dated March 12, 1997, and to the reference to our
firm under the heading "Experts" in the Prospectus which is part of this
Registration Statement.
Friedman Alpren & Green LLP
New York, New York
June 11, 1997
<PAGE> 2
EXHIBIT 23.2
CONSENT OF INDEPENDENT AUDITORS
TO THE PARTNERS OF
TWO PENN PLAZA ASSOCIATES L.P.
We consent to the incorporation by reference in this Registration
Statement on Form S-3 of Vornado Realty Trust and Vornado Realty L.P. of our
report dated January 15, 1997, except for Note 2, as to which the date is March
12, 1997, on the balance sheet of Two Penn Plaza Associates L.P., as of
December 31, 1996 and 1995, and the related statements of operations, changes in
partners' capital and cash flows for each of the years in the three-year period
ended December 31, 1996, which report appears in the Form 8-K of Vornado Realty
Trust, dated March 12, 1997, as amended by the Form 8-K/A of Vornado Realty
Trust, dated March 12, 1997, and to the reference to our firm under the heading
"Experts" in the Prospectus which is part of this Registration Statement.
Friedman Alpren & Green LLP
New York, New York
June 11, 1997
<PAGE> 3
EXHIBIT 23.2
CONSENT OF INDEPENDENT AUDITORS
TO THE PARTNERS OF
B&B PARK AVENUE L.P.
We consent to the incorporation by reference in this Registration
Statement on Form S-3 of Vornado Realty Trust and Vornado Realty L.P. of our
report dated January 15, 1997, except for Note 2, as to which the date is March
12, 1997, on the balance sheet of B&B Park Avenue L.P., as of December 31, 1996
and 1995, and the related statements of operations, changes in partners' capital
and cash flows for each of the years in the three-year period ended December 31,
1996, which report appears in the Form 8-K of Vornado Realty Trust, dated March
12, 1997, as amended by the Form 8-K/A of Vornado Realty Trust, dated March 12,
1997, and to the reference to our firm under the heading "Experts" in the
Prospectus which is part of this Registration Statement.
Friedman Alpren & Green LLP
New York, New York
June 11, 1997
<PAGE> 4
EXHIBIT 23.2
CONSENT OF INDEPENDENT AUDITORS
TO THE PARTNERS OF
M ELEVEN ASSOCIATES, M 393 ASSOCIATES AND ELEVEN PENN PLAZA COMPANY
We consent to the incorporation by reference in this Registration
Statement on Form S-3 of Vornado Realty Trust and Vornado Realty L.P. of our
report dated January 14, 1997, except for Note 2, as to which the date is March
12, 1997, on the balance sheet of M Eleven Associates, M 393 Associates and
Eleven Penn Plaza Company, as of December 31, 1996 and 1995, and the related
statements of operations, changes in partners' capital and cash flows for each
of the years in the three-year period ended December 31, 1996, which report
appears in the Form 8-K of Vornado Realty Trust, dated March 12, 1997, as
amended by the Form 8-K/A of Vornado Realty Trust, dated March 12, 1997, and to
the reference to our firm under the heading "Experts" in the Prospectus which is
part of this Registration Statement.
Friedman Alpren & Green LLP
New York, New York
June 11, 1997
<PAGE> 5
EXHIBIT 23.2
CONSENT OF INDEPENDENT AUDITORS
TO THE PARTNERS OF
1740 BROADWAY ASSOCIATES, L.P.
We consent to the incorporation by reference in this Registration
Statement on Form S-3 of Vornado Realty Trust and Vornado Realty L.P. of our
report dated January 16, 1997, except for Note 2, as to which the date is March
12, 1997, on the balance sheet of 1740 Broadway Associates, L.P., as of December
31, 1996 and 1995, and the related statements of operations, changes in
partners' capital and cash flows for each of the years in the three-year period
ended December 31, 1996, which report appears in the Form 8-K of Vornado Realty
Trust, dated March 12, 1997, as amended by the Form 8-K/A of Vornado Realty
Trust, dated March 12, 1997, and to the reference to our firm under the heading
"Experts" in the Prospectus which is part of this Registration Statement.
Friedman Alpren & Green LLP
New York, New York
June 11, 1997
<PAGE> 1
EXHIBIT 23.3
CONSENT OF INDEPENDENT AUDITORS
The Partners
Two Park Company:
We consent to incorporation by reference in the registration statement on Form
S-3 of Vornado Realty Trust and Vornado Realty L.P. of our report dated March
14, 1997, with respect to the balance sheets of Two Park Company, a New York
general partnership, as of December 31, 1996 and 1995, and the related
statements of operations, changes in partners' capital and cash flows for each
of the years in the three-year period ended December 31, 1996, which report
appears in the Form 8-K of Vornado Realty Trust dated March 12, 1997 as amended
by Form 8-K/A dated March 12, 1997, and to the reference to our firm under the
heading "Experts" in the prospectus.
KPMG Peat Marwick LLP
Boston, Massachusetts
June 11, 1997
