<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 13, 1998
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-8
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
VORNADO REALTY TRUST
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
MARYLAND 22-1657560
(STATE OR OTHER JURISDICTION OF (IRS EMPLOYER IDENTIFICATION NUMBER)
INCORPORATION OR ORGANIZATION)
PARK 80 WEST, PLAZA II, SADDLE BROOK, NEW JERSEY 07663
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
</TABLE>
1993 OMNIBUS SHARE PLAN
FASCITELLI EMPLOYMENT AGREEMENT
(FULL TITLE OF PLANS)
JOSEPH MACNOW
VORNADO REALTY TRUST
PARK 80 WEST, PLAZA II, SADDLE BROOK, NEW JERSEY 07663
(NAME AND ADDRESS OF AGENT FOR SERVICE)
(201) 587-1000
(TELEPHONE NUMBER, INCLUDING AREA CODE, OF AGENT FOR SERVICE)
Copies to:
PATRICIA A. CERUZZI, ESQ.
ALAN J. SINSHEIMER, ESQ.
SULLIVAN & CROMWELL
125 BROAD STREET
NEW YORK, NEW YORK 10004
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CALCULATION OF REGISTRATION FEE
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<TABLE>
<S> <C> <C> <C> <C>
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF SECURITIES TO BE AMOUNT TO BE OFFERING AGGREGATE AMOUNT OF
REGISTERED REGISTERED PRICE PER SHARE(1) OFFERING PRICE(1) REGISTRATION FEE(2)
- -------------------------------------------------------------------------------------------------------------------------------
Common Shares of Beneficial
Interest (par value $.04 per
share)........................... 4,419,540 shares $119,018,212.20 $26.93 $35,110.38
</TABLE>
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(1) Estimated solely for the purpose of calculating the registration fee. Such
estimate has been computed in accordance with Rule 457(h) and represents
the weighted average of the separate maximum offering prices calculated for
the Option Shares and the Outstanding Shares (each as defined in footnote
(2) below).
(2) This Registration Statement relates to (i) 3,500,000 Common Shares
underlying options granted by Vornado to its President, Michael D.
Fascitelli, under the Vornado 1993 Omnibus Share Plan (the "Option
Shares"), and (ii) 919,540 Common Shares previously issued by Vornado
pursuant to its Employment Agreement with Mr. Fascitelli to an irrevocable
grantor trust for the benefit of Mr. Fascitelli and his designated
beneficiaries (the "Outstanding Shares"). The exercise price for each
Option Share is $23.46875. In accordance with the third sentence of Rule
457(h)(1), the maximum offering price for each Option Share is deemed (for
purposes of the fee calculation) to equal such exercise price. In
accordance with the second sentence of Rule 457(h)(3) and Rule 457(c), the
maximum offering price for each Outstanding Share has been calculated as
$10.0625(the average of the high and low price of the Common Shares as
reported on the New York Stock Exchange on May 8, 1998).
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EXPLANATORY NOTE
UNDER COVER OF THIS FORM S-8 IS A REOFFER PROSPECTUS PREPARED IN ACCORDANCE
WITH PART I OF FORM S-3 UNDER THE ACT (THE "REOFFER PROSPECTUS"). THE REOFFER
PROSPECTUS MAY BE USED IN CONNECTION WITH RESALES OF THE REGISTERED COMMON
SHARES BY (I) MICHAEL D. FASCITELLI, THE REGISTRANT'S PRESIDENT, AND (II) AN
IRREVOCABLE GRANTOR TRUST ESTABLISHED BY THE REGISTRANT FOR THE BENEFIT OF MR.
FASCITELLI AND HIS DESIGNATED BENEFICIARIES. MR. FASCITELLI MAY BE CONSIDERED AN
AFFILIATE OF THE REGISTRANT, AS DEFINED IN RULE 405 UNDER THE SECURITIES ACT OF
1933, AS AMENDED.
<PAGE> 3
4,419,540 SHARES
VORNADO REALTY TRUST
COMMON SHARES OF BENEFICIAL INTEREST
------------------------------------
Certain Selling Shareholders (the "Selling Shareholders") of Vornado Realty
Trust ("Vornado") may offer from time to time up to 4,419,540 common shares of
beneficial interest, par value $0.04 per share ("Common Shares"), of Vornado, in
amounts, at prices and on terms to be determined at the time of sale. Vornado
will not receive any of the proceeds from the sale of the Common Shares being
sold by the Selling Shareholders. See "Selling Shareholders".
The Selling Shareholders may sell the Common Shares offered hereby directly
to purchasers or through underwriters, dealers, brokers or agents designated
from time to time. Sales of Common Shares in particular offerings may be made on
the New York Stock Exchange ("NYSE") or in the over-the-counter market or
otherwise at prices and on terms then prevailing, at prices related to the then
current market price, at fixed prices (which may be changed) or in negotiated
transactions. To the extent required for any offering, a supplement to this
Prospectus (a "Prospectus Supplement") will set forth the number of Common
Shares then being offered, the initial offering price, the names of any
underwriters, dealers, brokers or agents and the applicable sales commission or
discount. Any such Prospectus Supplement will also contain a discussion of the
material United States Federal income tax considerations relating to the Common
Shares to the extent not contained herein. See "Plan of Distribution" herein.
The Common Shares of Vornado are listed on the NYSE under the symbol "VNO".
------------------------------------
SEE "RISK FACTORS" BEGINNING ON PAGE 3 FOR CERTAIN FACTORS RELEVANT TO AN
INVESTMENT IN THE COMMON SHARES.
------------------------------------
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 DATE OF THIS PROSPECTUS IS MAY 13, 1998.
<PAGE> 4
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, ANY SELLING SHAREHOLDER 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 SINCE THE DATE HEREOF OR THE
INFORMATION CONTAINED HEREIN IS CORRECT AT ANY TIME SUBSEQUENT TO THE DATE
HEREOF.
All references to "Vornado" in this Prospectus shall be deemed to refer to
Vornado Realty Trust; all references to the "Operating Partnership" in this
Prospectus shall be deemed to refer to Vornado Realty L.P.; and all references
to the "Company" in this Prospectus shall be deemed to include Vornado and its
consolidated subsidiaries, including the Operating Partnership.
AVAILABLE INFORMATION
Concurrently herewith, Vornado is filing a Registration Statement on Form
S-8 (the "Registration Statement") with the Securities and Exchange Commission
(the "Commission") under the Securities Act of 1933, as amended (the "Securities
Act"), pertaining to the Common Shares covered by this Prospectus. This
Prospectus omits certain information and exhibits included in the Registration
Statement, copies of which may be obtained upon payment of a fee prescribed by
the Commission or may be examined free of charge at the principal office of the
Commission in Washington, D.C.
Vornado is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Commission. The reports, proxy statements and other information filed by Vornado
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 and from a web site maintained by
the Commission on the World Wide Web that contains reports, proxy and
information statements and other information on registrants, such as Vornado,
that must file such material with the Commission electronically. The
Commission's address on the World Wide Web is "http://www.sec.gov". Vornado's
Common Shares and $3.25 Series A Convertible Preferred Shares of Beneficial
Interest, liquidation preference $50.00 per share, 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.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by Vornado with the Commission pursuant to
the Exchange Act are hereby incorporated by reference into this Prospectus:
(1) Vornado's Annual Report on Form 10-K (File No. 001-11954) for the
fiscal year ended December 31, 1997, as amended by the Form 10-K/A
Amendment No. 1 and Form 10-K/A Amendment No. 2 for the fiscal year
ended December 31, 1997, filed with the Commission on April 8, 1998 and
April 14, 1998, respectively; and
(2) Vornado's Current Report on Form 8-K (File No. 001-11954), dated
December 16, 1997, as amended by Form 8-K/A, dated November 18, 1997 and
filed with the Commission on February 3, 1998, Vornado's Current Report
on Form 8-K (File No. 001-11954), dated January 26, 1998 and filed with
the Commission on January 29, 1998, as amended by Form 8-K/A, dated
January 26, 1998 and filed with the Commission on February 9, 1998,
Vornado's Current Report on Form 8-K (File No. 001-11954), dated January
29, 1998 and filed with the Commission on January 30, 1998,
2
<PAGE> 5
Vornado's Current Report on Form 8-K (File No. 001-11954), dated
November 18, 1997 and filed with the Commission on February 20, 1998,
Vornado's Current Report on Form 8-K (File No. 001-11954), dated April
1, 1998 and filed with the Commission on April 8, 1998, as amended by
Form 8-K/A, dated April 1, 1998 and filed with the Commission on April
9, 1998, Vornado's Current Report on Form 8-K (File No. 001-11954),
dated April 9, 1998 and filed with the Commission on April 16, 1998 and
Vornado's Current Report on Form 8-K (File No. 001-11954), dated April
22, 1998 and filed with the Commission on April 28, 1998.
All other documents and reports filed with the Commission by Vornado
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 Common
Shares 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.
Vornado 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 Vornado, Park 80 West, Plaza II,
Saddle Brook, New Jersey 07663, telephone number (201) 587-1000.
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS
Certain statements contained herein or incorporated by reference herein
constitute forward-looking statements as such term is defined Section 27A of the
Securities Act and Section 21E of the Exchange Act. Certain factors could cause
actual results to differ materially from those in the forward-looking
statements. Factors that might cause such a material difference include, but are
not limited to, (a) changes in the general economic climate, (b) local
conditions such as an oversupply of space or a reduction in demand for real
estate in the area, (c) conditions of tenants, (d) competition from other
available space, (e) increased operating costs and interest expense, (f) the
timing of and costs associated with property improvements, (g) changes in
taxation or zoning laws, (h) government regulations, (i) failure of Vornado to
continue to qualify as a REIT, (j) availability of financing on acceptable
terms, (k) potential liability under environmental or other laws or regulations
and (l) general competitive factors. See "Risk Factors".
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
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<PAGE> 6
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. Changes in
any of the foregoing factors could result in a decline in rents obtained and/or
occupancy levels at the Company's properties. A decline in rental revenues could
result in a lower level of funds available for distribution to Vornado's
shareholders.
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 from operations available for
distribution to Vornado's shareholders 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 10% of the Company's pro forma
revenues. Bradlees accounted for approximately 10.5% of total property rentals
(4.2% of total pro forma property rentals) for the year ended December 31, 1997.
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 and may make it substantially more
difficult to lease the remainder of the affected shopping center. The Company's
leases generally do not contain restrictions designed to ensure the
creditworthiness of the tenant. As a result, the bankruptcy or insolvency of a
major tenant could result in a lower level of funds from operations available
for distribution to Vornado's shareholders.
In June 1995, Bradlees filed for protection under Chapter 11 of the U.S.
Bankruptcy Code. The Company currently leases 16 locations to Bradlees. Of these
locations, the leases for 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. Each of the
three locations rejected by Bradlees is currently vacant. The balance of the
space in two of the affected shopping centers is substantially leased and
occupied. The remaining shopping center was previously 100% occupied by Bradlees
and such space remains vacant. The bankruptcy of Bradlees may have a negative
effect on the Company's ability to lease the shopping centers affected.
Montgomery Ward & Co., Inc. (a previous lessee currently operating under Chapter
11 of the U.S. Bankruptcy Code) remains liable on eight of the leases guaranteed
by Stop & Shop, including the rent it was obligated to pay -- approximately 70%
of current rent. The failure of Stop & Shop to perform its obligations with
respect to these leases could result in a decline in the level of the Company's
rental revenues and, as a result, in a lower level of funds from operations
being available for distribution to Vornado's shareholders.
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 also may increase the Operating Partnership's indebtedness as a
percentage of the Company's 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 Vornado and its shareholders. A significant increase in the
level of the Company's indebtedness could affect
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the Company's ability to make required principal and interest payments with
respect to indebtedness. See also "-- Leverage."
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 from operations available for
distribution to Vornado's shareholders 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. The foreclosure of a mortgage on a property or
inability to sell a property could affect the level of funds available for
distribution to Vornado shareholders. 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, as amended, for the fiscal year ended
December 31, 1997, incorporated in this Prospectus by reference for information
regarding the terms of the mortgages encumbering the Company's properties.
SUBSTANTIAL INFLUENCE OF CONTROLLING SHAREHOLDER; POSSIBLE CONFLICTS OF
INTEREST; RELATED PARTY TRANSACTIONS
As of December 31, 1997, Interstate Properties, a New Jersey general
partnership ("Interstate"), owned 16.6% 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 owned, in the
aggregate, 19.8% of the outstanding Common Shares of the Company and Units of
the Operating Partnership as of December 31, 1997.
As of December 31, 1997, the Company owned 29.3% of the outstanding common
stock of Alexander's Inc. ("Alexander's"), a Delaware corporation. Alexander's
is a real estate investment trust engaged in leasing, managing, developing and
redeveloping properties, focusing primarily on the locations where its
department stores (which ceased operations in 1992) formerly operated.
Alexander's has nine properties which are located in the New York City region.
Interstate owns an additional 27.1% of the outstanding common stock of
Alexander's as of such date. Mr. Roth, Vornado's Chief Executive Officer, and
Michael D. Fascitelli, Vornado's President, are directors of Alexander's.
Messrs. Mandelbaum, West and Wight, members of Vornado's Board of Trustees, are
also members of the Board of Directors of Alexander's.
The Company has formed Vornado Operating, Inc. ("Vornado Operating") to own
assets that Vornado could not itself own and conduct activities that Vornado
could not itself conduct. Vornado Operating will be able to do so because it
will be taxable as a regular corporation rather than as a REIT for taxable years
after 1998. Vornado Operating has filed a registration statement with the
Commission with respect to its proposed spin-off from the Company. If the
spin-off takes place, the Operating Partnership will distribute pro rata to its
partners, including Vornado, the shares of Vornado Operating, and Vornado will
distribute pro rata to holders of its Common Shares the shares it receives. If
the spin-off takes place, the Company and Vornado Operating intend to enter into
an Intercompany Agreement pursuant to which, among other things, (a) the Company
will agree under certain circumstances to offer Vornado Operating an opportunity
to become the lessee of certain real property owned now or in the future by
Vornado (under mutually satisfactory lease terms) and (b) Vornado Operating will
agree not to make any real estate investment or other REIT-qualified investment
unless it first offers the Company the opportunity to make such investment and
the Company has rejected that opportunity. The Company expects to capitalize
Vornado Operating with an equity contribution of $25 million of cash, and
intends to extend to Vornado Operating a $75 million unsecured five-year
revolving line of credit.
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The Intercompany Agreement and the Credit Agreement were not subject to
arms-length negotiation because Vornado Operating is currently a subsidiary of
the Company. Accordingly, there can be no assurance that the terms of these
agreements are comparable to those the Company could have negotiated with an
unaffiliated third party. The Company expects that four members of the Company's
Board of Trustees (including Messrs. Roth and Fascitelli) will be members of
Vornado Operating's Board of Directors, and each member of senior management of
Vornado Operating will hold a corresponding position with the Company. Members
of the Company's Board of Trustees and Vornado Operating's Board of Directors
and senior management may have different percentage equity interests in the
Company and Vornado Operating. A record date has not yet been set for the
spin-off. No assurance can be given concerning the timing of the spin-off, or
whether the spin-off will occur.
Because of the foregoing, Mr. Roth and Interstate may have substantial
influence on the Company, Alexander's and Vornado Operating and on the outcome
of any matters submitted to the Company's, Alexander's or Vornado Operating's
stockholders for approval. In addition, certain decisions concerning the
operations or financial structure of the Company may present conflicts of
interest among 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,
Alexander's or Vornado Operating, such as determination of which of such
entities or persons, if any, may take advantage of potential business
opportunities, decisions concerning the business focus of such entities
(including decisions concerning the types of properties and geographic locations
in which such entities make investments), 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, Interstate and Vornado Operating,
potential competition between business activities conducted, or sought to be
conducted, by the Company, Interstate, Alexander's and Vornado Operating
(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 certain office properties in which the Company owns a
100% interest. Although the terms and conditions of the contracts pursuant to
which these services are provided were not negotiated at arms' length, the
Company believes based upon comparable fees charged to other real estate
companies, that the terms and conditions of such contracts are fair to the
Company, although 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 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 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 of Mr. Roth, Interstate or the
Company
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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.
DEPENDENCE ON DIVIDENDS AND DISTRIBUTIONS OF SUBSIDIARIES
Vornado is a real estate investment trust formed under Title 8 of the
Corporations and Associations Article of the Annotated Code of Maryland.
Substantially all of Vornado's assets consist of its partnership interests in
the Operating Partnership, of which Vornado is the general partner.
Substantially all of the Operating Partnership's properties and assets are held
through subsidiaries. Any right of Vornado's shareholders to participate in any
distribution of the assets of any of the Company's indirect 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 the Operating Partnership and
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. See
also "-- Leverage" and "-- Potential Anti-takeover Effects of Charter Documents
and Applicable Law".
LEVERAGE
As of December 31, 1997, the Company had aggregate indebtedness outstanding
of approximately $956.7 million, approximately $586.7 million of which is
secured by Company properties. The Operating Partnership's ability to make
required principal and interest payments with respect to indebtedness
represented by its debt securities (the "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 Debt Securities are
obligations of the Operating Partnership only and its subsidiaries are not
obligated or required to pay any amounts due pursuant to the Debt Securities or
to make funds available therefor in the form of dividends or advances to the
Operating Partnership. Of the approximately $956.7 million of outstanding
indebtedness, Vornado Finance L.P., a Delaware limited partnership and
subsidiary of the Operating Partnership ("Vornado Finance"), has outstanding an
aggregate of $227,000,000 of 6.36% Collateralized Notes Due December 1, 2000
(the "Collateralized Notes"), secured by a mortgage note, mortgage and various
other instruments, documents and agreements executed in connection therewith by
other subsidiaries of the Operating Partnership owning, in the aggregate, the
interests in 44 of the Company's properties.
The indenture relating to the Collateralized Notes of Vornado Finance
provides that all cash flows from the 44 Company properties which are collateral
for the Collateralized Notes will be deposited in a segregated trust account. So
long as no event of default under the indenture has occurred and is continuing,
Vornado Finance may withdraw funds from such trust account to the extent that
the amounts in such account exceed a certain minimum reserve level. Such minimum
reserve level equals the sum of (i) the amount of current or past due operating
expenses of Vornado Finance and its subsidiaries, (ii) indebtedness of Vornado
Finance and its subsidiaries due prior to such withdrawal and (iii) accrued and
unpaid interest on the Collateralized Notes; provided that (a) if the debt
service coverage ratio (as defined in the indenture relating to the
Collateralized Notes) is less than 2.0 and greater than or equal to 1.8, the
amount in (iii) above is increased by an amount equal to six months interest on
the Collateralized Notes and (b) if the debt service coverage ratio is less than
1.8, the amount in (iii) above is increased by an amount equal to 18 months
interest on the
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<PAGE> 10
Collateralized Notes. As a result of these limitations on cash flows relating to
such properties, which cash flows represented approximately 57.2% of cash flows
from properties of the Operating Partnership and its consolidated subsidiaries
in 1997, the Operating Partnership's ability to pay interest and principal on
its Debt Securities may be adversely affected.
Vornado has historically maintained a relatively low level of debt to
market capitalization of between 15% and 35%. As of December 31, 1997, the level
of the Company's debt to market capitalization was 24%. In the future, in
connection with Vornado's strategy for growth, this percentage may increase.
This policy may be reviewed and modified from time to time by the Company
without the vote of shareholders.
GEOGRAPHIC CONCENTRATION
For the year ended December 31, 1997, 82% of the Company's revenues were
derived from properties located in New York City and New Jersey. In addition,
the Company may concentrate a significant portion of its future acquisitions in
New York City and New Jersey. Like other real estate markets, the real estate
market in New York City and New Jersey experienced economic downturns in the
past, including most recently in the late 1980s and 1990s. Future declines in
the economy or the real estate markets in New York City and New Jersey could
adversely affect the Company's financial performance. The Operating
Partnership's financial performance and its ability to make distributions to its
partners, including Vornado, are dependent on conditions in the economy and the
real estate markets in New York City and New Jersey, which may be affected by a
number of factors, including the economic climate in New York City and New
Jersey (which may be adversely affected by business layoffs or downsizing,
industry slowdowns, relocations of businesses, changing demographics, increased
telecommuting, infrastructure quality in New York City and New Jersey and other
factors) and conditions in the real estate markets in New York City and New
Jersey (such as oversupply of or reduced demand for real estate). There can be
no assurance as to the continued strength of the economy, or the continued
strength of the real estate markets, in New York City and New Jersey.
POTENTIAL COSTS OF COMPLIANCE WITH ENVIRONMENTAL LAWS
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 or toxic substances released at a
property, and may be held liable to a governmental entity or to third parties
for property damage or personal injuries and for investigation and clean-up
costs incurred by the parties in connection with the contamination. Such laws
often impose liability without regard to whether the owner or operator knew of,
or was responsible for, the release of such substances. The presence of
contamination or the failure to remediate contamination may adversely affect the
owner's ability to sell or lease real estate or to borrow using the real estate
as collateral. Other Federal, state and local laws, 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.
Each of the Company's properties has been subjected to varying degrees of
environmental assessment at various times. The environmental assessments did not
reveal any material environmental condition. However, there can be no assurance
that the identification of new 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 real estate industry is highly competitive. The Company's success
depends upon, among other factors, the trends of the national and local
economies, the financial condition and operating results of current and
prospective tenants, the availability and cost of capital, interest rates,
construction and renovation costs,
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<PAGE> 11
income tax laws, governmental regulations and legislation, population trends,
the market for real estate properties in the New York metropolitan area, zoning
laws and the ability of the Company to lease, sublease or sell its properties at
profitable levels. The Company competes with a large number of real estate
property owners. Principal means of competition are rents charged,
attractiveness of location and the quality of service. The Company's properties
are principally located in the New York metropolitan area, a highly competitive
market. The economic condition of this market may be significantly influenced by
supply and demand for space, and the financial performance and productivity of
the financial insurance and real estate industries. An economic downturn may
adversely affect the Company's performance.
DEPENDENCE ON KEY PERSONNEL
The Company is dependent on the efforts of Steven Roth, the Chairman and
Chief Executive Officer of Vornado, and Michael D. Fascitelli, the President of
Vornado. While the Company believes that it could find replacements for these
key personnel, the loss of their services could have an adverse effect on the
operations of the Company.
CONSEQUENCES OF THE FAILURE TO QUALIFY OR REMAIN QUALIFIED AS A REIT
Although Vornado's management believes that Vornado 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
Vornado 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. Vornado, 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 maintain its qualification as a REIT.
If, with respect to any taxable year, Vornado fails to maintain its
qualification 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, Vornado would also be
disqualified from treatment as a REIT for the four taxable years following the
year during which qualification was lost. Notwithstanding that Vornado 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 Vornado and its shareholders to revoke the
REIT election.
POTENTIAL ANTI-TAKEOVER EFFECTS OF CHARTER DOCUMENTS AND APPLICABLE LAW
Generally, for Vornado to maintain its qualification as a REIT under the
Code, not more than 50% in value of the outstanding shares of beneficial
interest of Vornado may be owned, directly or indirectly, by five or fewer
individuals (as defined in the Code to include certain entities) at any time
during the last half of Vornado's taxable year (other than the first taxable
year for which the election to be treated as a REIT has been made). Vornado's
Declaration of Trust, subject to certain exceptions, provides that no person may
own more than 6.7% of the outstanding Common Shares or 9.9% of Vornado's
outstanding preferred shares of beneficial interest, no par value per share
("Preferred Shares"). These restrictions on transferability and ownership may
delay, defer or prevent a transaction or a change in control of Vornado that
might involve a premium price or otherwise be in the best interest of the
shareholders. See "Description of Shares of Beneficial Interest -- Description
of Common Shares -- Restrictions on Ownership".
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<PAGE> 12
Vornado's Board of Trustees is divided into three classes of trustees.
Trustees of each class are chosen for three-year staggered terms. Staggered
terms of trustees may reduce the possibility of a tender offer or an attempt to
change control of Vornado, even though a tender offer or change in control might
be in the best interest of the shareholders. Vornado's Declaration of Trust
authorizes the Board of Trustees to cause Vornado to issue additional authorized
but unissued Common Shares or Preferred Shares and to classify or reclassify any
unissued Preferred Shares and to set the preferences, rights and other terms of
such classified or unclassified shares. Although the Board of Trustees has no
such intention at the present time, it could establish a series of Preferred
Shares that could, depending on the terms of such series, delay, defer or
prevent a transaction or a change in control of Vornado that might involve a
premium price or otherwise be in the best interest of the shareholders. The
Declaration of Trust and Vornado's Bylaws contain other provisions that may
delay, defer or prevent a change in control of Vornado or other transaction that
might involve a premium price or otherwise be in the best interest of the
shareholders.
Under the Maryland General Corporation Law, as amended ("MGCL"), as
applicable to real estate investment trusts, certain "business combinations"
(including certain mergers, consolidations, share exchanges and asset transfers
and certain issuances and reclassifications of equity securities) between a
Maryland real estate investment trust and any person who beneficially owns ten
percent or more of the voting power of the trust's shares or an affiliate of the
trust who, at any time within the two-year period prior to the date in question,
was the beneficial owner of ten percent or more of the voting power of the then
outstanding voting shares of beneficial interest of the trust (an "Interested
Shareholder") or an affiliate thereof are prohibited for five years after the
most recent date on which the Interested Shareholder becomes an Interested
Shareholder. Thereafter, any such business combination must be recommended by
the board of trustees of such trust and approved by the affirmative vote of at
least (a) 80% of the votes entitled to be cast by holders of outstanding shares
of beneficial interest of the trust and (b) two-thirds of the votes entitled to
be cast by holders of voting shares of the trust other than shares held by the
Interested Shareholder with whom (or with whose affiliate) the business
combination is to be effected, unless, among other conditions, the trust's
common shareholders receive a minimum price (as defined in the MGCL) for their
shares and the consideration is received in cash or in the same form as
previously paid by the Interested Shareholder for its common shares. The
provisions of the MGCL do not apply, however, to business combinations that are
approved or exempted by the board of trustees of the trust prior to the time
that the Interested Shareholder becomes an Interested Shareholder. The Board of
Trustees has adopted a resolution exempting any business combination between any
trustee or officer of Vornado (or their affiliates) and Vornado. As a result,
the trustees and officers of Vornado and their affiliates may be able to enter
business combinations with Vornado which may not be in the best interest of
shareholders and, with respect to business combinations with other persons, the
business combination provisions of the MGCL may have the effect of delaying,
deferring or preventing a transaction or a change in the control of Vornado that
might involve a premium price or otherwise be in the best interest of the
shareholders.
VORNADO AND THE OPERATING PARTNERSHIP
Vornado is a fully-integrated real estate investment trust organized under
the laws of the State of Maryland. In April 1997, Vornado transferred
substantially all of its assets to the Operating Partnership. As a result,
Vornado now conducts its business through, and substantially all of its
interests in properties are held by, the Operating Partnership. Vornado is the
sole general partner of, and owns an approximately 91.2% limited partnership
interest in, the Operating Partnership as of April 30, 1998. The Operating
Partnership currently owns: (i) 59 shopping properties in seven states and
Puerto Rico containing 12.4 million square feet, including 1.4 million square
feet built by tenants on land leased from the Company; (ii) all or portions of
14 office building properties in the New York City metropolitan area (primarily
Manhattan) containing 8.4 million square feet; (iii) eight warehouse/industrial
properties in New Jersey containing 2.0 million square feet; (iv) approximately
29.3% of the outstanding common stock of Alexander's Inc., which has nine
properties in the New York City metropolitan area; (v) a 60% interest in two
partnerships that own Americold Corporation and URS Logistics, Inc., which
collectively own and operate 80 warehouse facilities with an aggregate of
approximately 394 million cubic feet of refrigerated, frozen and dry storage
space; (vi) an
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80% interest in a hotel containing approximately 800,000 square feet of space
with 1,700 rooms and 400,000 square feet of retail and office space; (vii) a 15%
limited partnership interest in Charles E. Smith Commercial Realty L.P., which
owns interests in and manages approximately 7.2 million square feet of office
properties in Crystal City, Arlington, Virginia, a suburb of Washington, D.C.,
and manages an additional 14 million square feet of office and other commercial
properties in the Washington, D.C. area; (viii) the Merchandise Mart and the
Apparel Center in Chicago and the Washington Design Center and the Washington
Office Center in Washington, D.C., which contain approximately 5.3 million
square feet and a company that manages such properties and trade shows; and (ix)
other real estate and investments in mortgages collateralized by various office,
restaurant and other retail properties.
The executive offices of Vornado and the Operating Partnership are located
at Park 80 West, Plaza II, Saddle Brook, N.J. 07663; telephone (201) 587-1000.
USE OF PROCEEDS
All of the Common Shares are being offered by the Selling Shareholders. The
Company will not receive any proceeds from the sale of the Common Shares.
SELLING SHAREHOLDERS
The following table sets forth the name of each Selling Shareholder and the
total number of Common Shares beneficially owned by each Selling Shareholder as
of April 30, 1998 (assuming, in the case of Michael D. Fascitelli, that all
options issued by Vornado to Mr. Fascitelli under the Fascitelli Employment
Agreement (as hereinafter defined) are exercisable within 60 days of the date
hereof although such options actually vest over a five-year period). Since the
Selling Shareholders may sell all, none or some of their Common Shares, no
estimate can be made of the aggregate number of Common Shares that are to be
offered hereby or that will be beneficially owned by each Selling Shareholder
after completion of the offering to which this Prospectus relates.
<TABLE>
<CAPTION>
COMMON SHARES BENEFICIALLY OWNED
AS OF APRIL 30, 1998
--------------------------------
NAME OF SELLING SHAREHOLDER NUMBER PERCENTAGE(1)
--------------------------- ---------- --------------
<S> <C> <C>
Michael D. Fascitelli(2).................................... 3,500,000(3)(4) 3.8%
The Chase Manhattan Bank, as Trustee for the irrevocable
grantor trust between Vornado and The Chase Manhattan
Bank...................................................... 919,540 1.0%
</TABLE>
- ---------------
(1) Based on Common Shares outstanding as of April 30, 1998.
(2) Mr. Fascitelli is Vornado's President and a member of its Board of Trustees.
(3) Includes 3,500,000 Common Shares underlying options granted by Vornado to
Mr. Fascitelli pursuant to the Fascitelli Employment Agreement as if all
such options were currently vested and exercisable within 60 days of the
date hereof. See "-- Certain Related Transactions". Such options actually
vest in annual 20% increments over a five-year period commencing December
2, 1996.
(4) Does not include 919,540 Common Shares beneficially owned by The Chase
Manhattan Bank, as Trustee for the irrevocable grantor trust (the "Trust")
established under the Trust Agreement, dated as of December 2, 1996,
between Vornado and The Chase Manhattan Bank. See "-- Certain Related
Transactions". Also does not include 500,000 Common Shares underlying
options granted by the Company to Mr. Fascitelli in 1998. Such options are
not exercisable within 60 days of the date hereof.
CERTAIN RELATED TRANSACTIONS
On December 2, 1996, Michael D. Fascitelli became Vornado's President, was
elected to Vornado's Board of Trustees and was elected to the Board of Directors
of Alexander's. Mr. Fascitelli was formerly a partner of Goldman, Sachs & Co.
("Goldman Sachs") in charge of its real estate practice. Mr. Fascitelli has
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<PAGE> 14
entered into a five-year employment contract with Vornado (the "Fascitelli
Employment Agreement") under which he has been granted options to purchase
3,500,000 Common Shares. In addition, he will receive a deferred payment under
the Fascitelli Employment Agreement which is intended to compensate him for the
loss of his compensation at Goldman Sachs, consisting of $5 million in cash and
a $20 million convertible obligation, payable at Vornado's option in 919,540
Common Shares or the cash equivalent of their appreciated value. In connection
with this deferred payment obligation, Vornado established the Trust for the
benefit of Mr. Fascitelli and/or his designated beneficiaries and contributed $5
million in cash and 919,540 Common Shares into the Trust.
REGISTRATION RIGHTS
Vornado has filed the Registration Statement pursuant to its obligations
under the Fascitelli Employment Agreement. Vornado is obligated to maintain the
effectiveness of the Registration Statement until the date on which the Common
Shares registered thereunder owned by Mr. Fascitelli or the Trust have been sold
or otherwise transferred or the date on which the Common Shares have become
eligible for sale pursuant to Rule 144(k) (or any similar provision then in
force) under the Securities Act.
Pursuant to the Fascitelli Employment Agreement, Vornado has agreed to pay
all expenses of effecting the registration of the Common Shares owned by Mr.
Fascitelli and the Trust (other than agency fees and commissions, underwriting
discounts and commissions, and certain disbursements of counsel or other
advisors or experts retained by Mr. Fascitelli). Vornado also has agreed to
indemnify and hold harmless Mr. Fascitelli against any losses, claims, damages
or liabilities arising under the securities laws, except to the extent they
arise out of written information furnished to Vornado by Mr. Fascitelli for use
in the Registration Statement or this Prospectus. In addition, Vornado may
require an undertaking reasonably satisfactory to it from Mr. Fascitelli to
indemnify and hold harmless Vornado, its trustees, officers who sign the
Registration Statement, any person who controls Vornado, and any other holder of
Common Shares that are included in the Registration Statement against any
losses, claims, damages or liabilities arising under the securities laws with
respect to written information furnished to Vornado by Mr. Fascitelli for use in
the Registration Statement or the Prospectus.
DESCRIPTION OF COMMON SHARES
The following description of the material terms of the Common Shares does
not purport to be complete and is subject to, and qualified in its entirety by
reference to, the more complete descriptions thereof set forth in the following
documents: (i) Vornado's Amended and Restated Declaration of Trust (the
"Declaration of Trust"); and (ii) Vornado's Bylaws, copies of which are exhibits
to the Registration Statement.
For Vornado to maintain its qualification 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) at any time 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 290,000,000
shares, consisting of 125,000,000 Common Shares, 20,000,000 Preferred Shares and
145,000,000 excess shares of beneficial interest, $.04 par value per share
("Excess Shares"). See "-- Restrictions on Ownership" for a discussion of the
possible issuance of Excess Shares.
As of April 30, 1998, 83,323,425 Common Shares were issued and outstanding
and no Excess Shares were issued and outstanding. The Common Shares of Vornado
are listed on the NYSE under the symbol "VNO".
Subject to the provisions in the Declaration of Trust regarding the
restriction on the transfer of shares of beneficial interest, the holders of
Common Shares are entitled to receive dividends when, if and as declared by the
Board of Trustees of Vornado out of assets legally available therefor, provided
that if any Preferred Shares
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<PAGE> 15
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 shareholders, 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 Vornado, 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 duly authorized, fully paid and
non-assessable.
The transfer agent for the Common Shares is First Union National Bank,
Charlotte, North Carolina.
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 Vornado
against an inadvertent loss of its REIT status. 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 the Code, more than 6.7% of the
Common Shares immediately after the merger of Vornado, Inc. into Vornado 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 Vornado 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
Vornado, 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
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<PAGE> 16
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.
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 Vornado 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 Vornado. Any dividends or
distributions received by the purported transferee or other purported holder of
such Excess Shares prior to the discovery by Vornado of the automatic exchange
for Excess Shares shall be repaid to Vornado 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 Vornado.
The Declaration of Trust provides that Vornado, or its designee, 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 Vornado, or
its designee, 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
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<PAGE> 17
automatic exchange for Excess Shares and (ii) the market price of the Common
Shares exchanged for such Excess Shares on the date that Vornado accepts the
deemed offer to sell such Excess Shares. Vornado'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 Vornado 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 Vornado 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 Vornado'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 Vornado.
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 Vornado 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 Vornado 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
Vornado may request, in good faith, in order to determine Vornado'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 Vornado unless the Board of Trustees
determines that maintenance of REIT status is no longer in the best interests of
Vornado.
FEDERAL INCOME TAX CONSIDERATIONS
The following summary of the taxation of Vornado and the material federal
income tax consequences to holders of the Common Shares is for general
information only, and is not tax advice. The tax treatment of a holder of Common
Shares will vary depending upon the holder's particular situation, and this
discussion addresses only holders that hold Common Shares 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,
traders in securities that elect to mark-to-market, banks, tax-exempt
organizations, life insurance companies, persons that hold Common Shares that
are a hedge or that are hedged against currency risks or that are part of a
straddle or conversion transaction, or persons whose functional currency is not
the U.S. dollar) 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 COMMON SHARES,
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.
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TAXATION OF VORNADO AS A REIT
GENERAL
Vornado 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. Vornado 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. The material aspects thereof are summarized below.
As a REIT, Vornado 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, Vornado will be subject to federal income tax as follows.
First, Vornado 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, Vornado may be subject to the
"alternative minimum tax" on its items of tax preference. Third, if Vornado 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 Vornado
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 Vornado 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 gross income attributable to the greater of the amount by which
Vornado fails the 75% or 95% test, multiplied by (b) a fraction intended to
reflect Vornado's profitability. Sixth, if Vornado 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, Vornado 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 Vornado
qualified as a REIT, Vornado recognizes gain on the disposition of any asset
held by Vornado 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) Vornado'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 Vornado
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 Vornado's unrealized Built-in Gain as of the first day of the
Recognition Period. Eighth, if Vornado 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 Vornado is
determined by reference to the basis of the asset (or any other property) in the
hands of the C corporation, and Vornado recognizes gain on the disposition of
such asset during the Recognition Period beginning on the date on which such
asset was acquired by Vornado, 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
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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.
Vornado has satisfied conditions (1) through (5) and believes that it has
also satisfied condition (6). In addition, the Vornado Declaration of Trust
provides for restrictions regarding the ownership and transfer of Vornado's
shares of beneficial interest, which restrictions are intended to assist Vornado
in continuing to satisfy the share ownership requirements described in (5) and
(6) above. The ownership and transfer restrictions pertaining to the Common
Shares are described above under the heading "Description of Common Shares --
Restrictions on Ownership."
Vornado 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, Vornado'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 Vornado. Vornado believes
that all of its wholly-owned subsidiaries are "qualified REIT subsidiaries."
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, Vornado's proportionate share
of the assets, liabilities and items of income of any partnership in which
Vornado is a partner, including the Operating Partnership, will be treated as
assets, liabilities and items of income of Vornado for purposes of applying the
requirements described herein. Thus, actions taken by partnerships in which
Vornado owns an interest either directly or through one or more tiers of
partnerships or qualified REIT subsidiaries, can affect Vornado's ability to
satisfy the REIT income and assets tests and the determination of whether
Vornado has net income from "prohibited transactions."
INCOME TESTS. In order to maintain qualification as a REIT, Vornado
annually must satisfy three gross income requirements. First, at least 75% of
Vornado'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 Vornado that are
paid or reimbursed by tenants) or from certain types of temporary investments.
Second, at least 95% of Vornado'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, for
taxable years before 1998, 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 Vornado's gross income (including gross income from prohibited
transactions) for such taxable year.
Rents received by Vornado 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 term "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
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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 Vornado 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. Vornado does not derive significant rents from
Related Party Tenants, and Vornado 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). Vornado directly performs services
for certain of its tenants. Vornado 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." For taxable years of Vornado beginning
after August 5, 1997, if Vornado provides services to a tenant that are other
than those usually or customarily provided in connection with the rental of
space for occupancy only, amounts received or accrued by Vornado for any such
services will not be treated as "rents from real property" for purposes of the
REIT gross income tests but will not cause other amounts received with respect
to the property to fail to be treated as "rents from real property" unless the
amounts received in respect of such services, together with amounts received for
certain management services, exceeds 1% of all amounts received or accrued by
Vornado during the taxable year with respect to such property. Under the literal
wording of Section 856 of the Code, if the 1% threshold is exceeded, then all
amounts received or accrued by Vornado with respect to the property will not
qualify as "rents from real property," even if the impermissible services are
provided to some, but not all, of the tenants of the 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 Vornado 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 Vornado's failure to meet such tests
was due to reasonable cause and not due to willful neglect, Vornado attaches a
schedule of the sources 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 Vornado
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. Vornado, 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 Vornado's total assets must be represented by real
estate assets (including (i) real estate assets held by Vornado's qualified REIT
subsidiaries and Vornado's allocable share of real estate assets held by
partnerships in which Vornado owns an interest, (ii) for a period of one year
from the date of Vornado'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
Vornado'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 Vornado may not exceed 5% of the value of Vornado's total assets
and Vornado may not own more than 10% of any one issuer's outstanding voting
securities.
Since March 2, 1995, Vornado has owned more than 10% of the voting
securities of Alexander's. Since April of 1997, Vornado's ownership of
Alexander's has been through the Operating Partnership rather than direct.
Vornado's ownership interest in Alexander's will not cause Vornado to fail to
satisfy the asset tests for REIT status so long as Alexander's qualified as a
REIT for each of the taxable years beginning with its taxable year ending
December 31, 1995 and continues to so qualify. The Company believes that,
commencing with Alexander's taxable year ended December 31, 1995, Alexander's
has and will continue to so qualify.
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Since April of 1997 Vornado has also owned, through the Operating
Partnership, more than 10% of the voting securities of Two Penn Plaza REIT, Inc.
("Two Penn REIT"). Vornado's indirect ownership interest in Two Penn REIT will
not cause Vornado 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. Vornado believes that Two Penn REIT will also qualify as a
REIT.
In order to ensure compliance with the 95% gross income test described
above, Vornado 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. Vornado does not believe that its indirect
ownership of the Nonvoting Stock will adversely affect its ability to satisfy
the asset tests described above.
Vornado also owns, through the Operating Partnership, nonvoting shares in a
number of corporations. Vornado does not believe that the characteristics or
value of such shares will cause Vornado to fail to satisfy the REIT asset tests
described above.
ANNUAL DISTRIBUTION REQUIREMENTS. Vornado, 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 Vornado's
"real estate investment trust taxable income" (computed without regard to the
dividends paid deduction and Vornado'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 Vornado disposes of any asset
during its Recognition Period, Vornado 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 Vornado 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 Vornado 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 Vornado should fail to distribute 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, Vornado would be subject to a 4% excise tax on the
excess of such required distribution over the amounts actually distributed.
Vornado intends to satisfy the annual distribution requirements.
It is possible that Vornado, 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 Vornado. In the event that such
timing differences occur, in order to meet the 95% distribution requirement,
Vornado 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, Vornado 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 Vornado's deduction for
dividends paid for the earlier year. Thus, Vornado may be able to avoid being
taxed on amounts distributed as deficiency dividends; however, Vornado will be
required to pay interest based upon the amount of any deduction taken for
deficiency dividends.
FAILURE TO QUALIFY
If Vornado fails to qualify for taxation as a REIT in any taxable year, and
the relief provisions do not apply, Vornado 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 Vornado
fails to qualify will not be deductible by Vornado 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
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deduction. Unless entitled to relief under specific statutory provisions,
Vornado 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 Vornado would be entitled to such
statutory relief.
TAXATION OF HOLDERS OF COMMON SHARES
U.S. SHAREHOLDERS
As used herein, the term "U.S. Shareholder" means a holder of Common Shares
who (for United States federal income tax purposes) is (i) a citizen or resident
of the United States, (ii) a corporation organized under the laws of the United
States or any State, (iii) an estate the income of which is subject to United
States Federal income taxation regardless of its source or (iv) a trust if a
United States court is able to exercise primary supervision over administration
of the trust and one or more United States persons have authority to control all
substantial decisions of the trust.
As long as Vornado qualifies as a REIT, distributions made by Vornado out
of its current or accumulated earnings and profits (and not designated as
capital gain dividends) will constitute dividends taxable to its 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 Vornado that are properly designated by
Vornado as capital gain dividends will be taxable to U.S. Shareholders as gain
from the sale of a capital asset held for more than one year (to the extent that
they do not exceed Vornado's actual net capital gain for the taxable year)
without regard to the period for which a U.S. Shareholder has held his shares.
Thus, subject to certain limitations, capital gains dividends received by an
individual U.S. Shareholder may be eligible for 20%, 25%, or 28% capital gains
rates of taxation. 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 Vornado 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 Common 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 Common Shares have
been held as a capital asset). For purposes of determining the portion of
distributions on separate classes of Common 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 Vornado 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 Vornado and received by the shareholder on December 31
of such year, provided that the dividend is actually paid by Vornado 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
Vornado.
For taxable years of the Company beginning after August 5, 1997, U.S.
Shareholders holding Common Shares at the close of Vornado's taxable year will
be required to include, in computing their long-term capital gains for the
taxable year in which the last day of Vornado's taxable year falls, such amount
as Vornado may designate in a written notice mailed to its shareholders. Vornado
may not designate amounts in excess of Vornado's undistributed net capital gain
for the taxable year. Each U.S. Shareholder required to include such a
designated amount in determining such shareholder's long-term capital gains will
be deemed to have paid, in the taxable year of the inclusion, the tax paid by
Vornado in respect of such undistributed net capital gains. U.S. Shareholders
subject to these rules will be allowed a credit or a refund, as the case may be,
for the tax deemed to have paid by such shareholders. U.S. Shareholders will
increase their basis in their Common Shares by the difference between the amount
of such includible gains and the tax deemed paid by the shareholder in respect
of such gains.
Distributions made by Vornado 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.
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Upon any sale or other disposition of Common 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 Common Shares for tax purposes. Such gain or loss will be
capital gain or loss if the Common Shares have been held by the U.S. Shareholder
as a capital asset and will be long-term gain or loss if such Common Shares have
been held for more than one year. Long-term capital gain of an individual U.S.
Shareholder is generally subject to a maximum tax rate of 28% in respect of
property held for more than one year and a maximum tax rate of 20% in respect of
property held in excess of 18 months. In general, any loss recognized by a U.S.
Shareholder upon the sale or other disposition of Common Shares 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 Vornado which were required to be treated as
long-term capital gains.
BACKUP WITHHOLDING. Vornado will report to its U.S. Shareholders and 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 Vornado 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, Vornado may be required to
withhold a portion of capital gain distributions to any shareholders who fail to
certify their non-foreign status to Vornado.
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 Vornado'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
21
<PAGE> 24
(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. Vornado does not expect to be classified as a "pension-held REIT."
Tax-exempt entities will be subject to the rules described above, under the
heading "-- U.S. Shareholders" concerning the inclusion of Vornado's designated
undistributed net capital gains in the income of its shareholders. Thus, such
entities will be allowed a credit or refund of the tax deemed paid by such
entities in respect of such includible gains.
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 Vornado of U.S. real
property interests (discussed below) and other than distributions designated by
Vornado 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
Vornado. 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).
Vornado expects to withhold U.S. tax at the rate of 30% on the gross amount of
any dividends, other than dividends treated as 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 Vornado or the
appropriate withholding agent or (ii) the Non-U.S. Shareholder files an IRS Form
4224 (or a successor form) with Vornado or the appropriate withholding agent
claiming that the distributions are "effectively connected" income.
Distributions to a Non-U.S. Shareholder that are designated by Vornado at
the time of distribution as capital gain dividends which are not attributable to
or treated as attributable to the disposition by Vornado 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 Vornado, which are not treated as attributable to the
gain from disposition by Vornado 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 accumulated earnings and profits of Vornado.
CAPITAL GAIN DIVIDENDS. For any year in which Vornado qualifies as a REIT,
distributions that are attributable to gain from sales or exchanges by Vornado
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
22
<PAGE> 25
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). Vornado is required
by applicable Treasury Regulations under FIRPTA to withhold 35% of any
distribution that could be designated by Vornado as a capital gain dividend.
However, if Vornado designates as a capital gain dividend a distribution made
prior to the day Vornado 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, Vornado 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 Vornado 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 Vornado 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 Vornado were not a domestically-controlled REIT, a Non-U.S.
Shareholder's sale of Common Shares would be subject to tax under FIRPTA only if
the selling Non-U.S. Shareholder owned more than 5% of the 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.
TREATY BENEFITS. 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. Shareholders that are partnerships or entities that are similarly
fiscally transparent for federal income tax purposes, and persons holding Shares
through such entities, may be subject to restrictions on their ability to claim
benefits under U.S. tax treaties and should consult a tax advisor.
Under Treasury Regulations effective for payments made after December 31,
1999 (the "Withholding 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 Withholding
Regulations, in the case of Common 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
Withholding Regulations provide look-through rules in the case of tiered
partnerships.
OTHER TAX CONSEQUENCES
Vornado 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 Vornado and
its shareholders may not conform to the federal income tax consequences
discussed above.
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<PAGE> 26
Consequently, prospective shareholders are urged to consult their own tax
advisors regarding the effect of state and local tax laws on an investment in
Vornado.
PLAN OF DISTRIBUTION
The Common Shares offered hereby may be sold from time to time to
purchasers directly by the Selling Shareholders acting as principals for their
own account. Alternatively, the Selling Shareholders may offer the Common Shares
through underwriters, dealers, brokers or agents designated from time to time
who may receive compensation in the form of underwriting discounts, commissions
or concessions from the Selling Shareholders or the purchasers of the Common
Shares for whom they act. Sales of the Common Shares in particular offerings may
be made on the NYSE or in the over-the-counter market or otherwise at prices and
on terms then prevailing, at prices related to the then current market price, at
fixed prices (which may be changed) or in negotiated transactions.
A Prospectus Supplement will be delivered in particular offerings of Common
Shares to the extent required. Any such Prospectus Supplement will describe, to
the extent required, any material arrangements for the distribution of the
Common Shares, including the number of Common Shares then being offered, the
initial offering price, the names of any underwriters, dealers, brokers or
agents, any discounts, commissions or concessions and other items constituting
compensation from the Selling Shareholders and any discounts, commissions or
concessions allowed or paid to dealers, and the net proceeds to the Selling
Shareholders.
Any underwriters, dealers, brokers or agents that participate in
distributing the Common Shares may be deemed to be underwriters and any
discounts, commissions or concessions received by them in connection with the
sale of the Common Shares may be deemed to be underwriting discounts and
commissions under the Securities Act. Any such underwriters, dealers, brokers or
agents may be entitled, under agreements entered into with the Company and the
Selling Shareholders, to indemnification against and contribution towards
certain civil liabilities, including any liabilities under the Securities Act.
Certain of the underwriters, brokers, dealers or agents and their
associates may engage in transactions with, and perform services for, the
Company and certain of its 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
Vornado's Annual Report on Form 10-K for the year ended December 31, 1997, as
amended, and the statement of revenues and certain expenses of One Penn Plaza
for the year ended December 31, 1996, the statement of revenues and certain
expenses of 150 East 58th Street for the year ended December 31, 1996, and the
statement of revenues and certain expenses of 640 Fifth Avenue for the year
ended December 31, 1996, all incorporated by reference in this Prospectus from
Vornado Realty Trust's Current Report on Form 8-K/A, dated November 18, 1997 and
filed with the Commission on February 3, 1998 have been audited by Deloitte &
Touche LLP, independent auditors, as stated in their reports which are
incorporated herein by reference, and have been so incorporated in reliance upon
the reports of such firm given upon their authority as experts in accounting and
auditing.
The combined statement of revenue and certain operating expenses of The
Merchandise Mart Group of Properties for the year ended December 31, 1996
incorporated by reference in this Prospectus from Vornado Realty Trust's Current
Report on Form 8-K/A, dated January 26, 1998 and filed with the Commission on
February 9, 1998, and the combined statement of revenue and certain operating
expenses of The Merchandise Mart Group of Properties for the year ended December
31, 1997 incorporated by reference in this Prospectus from Vornado Realty
Trust's Current Report on Form 8-K/A, dated April 1, 1998 and filed with the
Commission on April 9, 1998, have been audited by Arthur Andersen LLP,
independent public accountants, as indicated in their reports with respect
thereto, and are included herein in reliance upon the authority of said firm as
experts in giving said reports.
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<PAGE> 27
VALIDITY OF THE SECURITIES
The validity of the Common Shares offered hereby will be passed upon for
Vornado by Ballard Spahr Andrews & Ingersoll, LLP, Baltimore, Maryland, Maryland
counsel to Vornado. The validity of the Common Shares offered hereby will be
passed upon for any underwriters by the counsel named in the applicable
Prospectus Supplement.
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<PAGE> 28
PART I
INFORMATION REQUIRED IN THE PROSPECTUS
ITEM 1. PLAN INFORMATION.
Omitted pursuant to the instructions and provisions of Form S-8.
ITEM 2. REGISTRANT INFORMATION AND EMPLOYEE PLAN ANNUAL INFORMATION.
Omitted pursuant to the instructions and provisions of Form S-8.
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<PAGE> 29
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
ITEM 3. INCORPORATION OF DOCUMENTS BY REFERENCE.
The following documents filed by Vornado Realty Trust ("Vornado") with the
Securities and Exchange Commission (the "SEC") are incorporated herein by
reference:
(1) Vornado's Annual Report on Form 10-K (File No. 001-11954) for the
fiscal year ended December 31, 1997, as amended by the Form 10-K/A
Amendment No. 1 and Form 10-K/A Amendment No. 2 for the fiscal year
ended December 31, 1997, filed with the Commission on April 8, 1998 and
April 14, 1998, respectively; and
(2) Vornado's Current Report on Form 8-K (File No. 001-11954), dated
December 16, 1997, as amended by Form 8-K/A, dated November 18, 1997 and
filed with Commission on February 3, 1998, Vornado's Current Report on
Form 8-K (File No. 001-11954), dated January 26, 1998 and filed with the
Commission on January 29, 1998, as amended by Form 8-K/A, dated January
26, 1998 and filed with the Commission on February 9, 1998,Vornado's
Current Report on Form 8-K (File No. 001-11954), dated January 29, 1998
and filed with the Commission on January 30, 1998, Vornado's Current
Report on Form 8-K (File No. 001-11954), dated November 18, 1997 and
filed with the Commission on February 20, 1998,Vornado's Current Report
on Form 8-K (File No. 001-11954), dated April 1, 1998 and filed with the
Commission on April 8, 1998, as amended by Form 8-K/A, dated April 1,
1998 and filed with the Commission on April 9, 1998, Vornado's Current
Report on Form 8-K (File No. 001-11954), dated April 9, 1998 and filed
with the Commission on April 16, 1998 and Vornado's Current Report on
Form 8-K (File No. 001-11954), dated April 22, 1998 and filed with the
Commission on April 28, 1998.
All documents filed by Vornado pursuant to Sections 13(a), 13(c), 14 and
15(d) of the Securities Exchange Act of 1934 (the "Exchange Act"), prior to the
filing of a post-effective amendment which indicates that all securities offered
have been sold or which deregisters all securities then remaining unsold, shall
be deemed to be incorporated herein by reference and to be part hereof from the
date of filing of such documents. 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 Registration Statement 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 statement so modified or superseded shall not be
deemed, except as so modified or superseded, to constitute a part of this
Registration Statement.
ITEM 4. DESCRIPTION OF SECURITIES.
Not applicable.
ITEM 5. INTERESTS OF NAMED EXPERTS AND COUNSEL.
None.
ITEM 6. INDEMNIFICATION OF TRUSTEES AND OFFICERS.
Title 8 of the Corporations and Associations Article of the Annotated Code
of Maryland, as amended ("Title 8"), permits a Maryland real estate investment
trust to include in its declaration of trust a provision limiting 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.
Vornado's Declaration of Trust includes such a provision eliminating such
liability to the maximum extent permitted by Title 8.
II-1
<PAGE> 30
Under Vornado's Declaration of Trust, Vornado has the power to indemnify,
and to pay or reimburse reasonable expenses to, as such expenses are incurred
by, each trustee, officer, employee or agent (including any person who, while a
trustee of Vornado, is or was serving at the request of Vornado as a director,
officer, partner, trustee, employee or agent of another foreign or domestic
corporation, partnership, joint venture, trust, other enterprise or employee
benefit plan) from all claims and liabilities to which such person may become
subject by reason of his being or having been a shareholder, trustee, officer,
employee or agent.
Vornado's Bylaws require it, without requiring a preliminary determination
of ultimate entitlement to indemnification, to indemnify (a) any trustee or
officer or any former trustee or officer (including and without limitation, any
individual who, while a trustee or officer and at the request of Vornado, serves
or has served another corporation, partnership, joint venture, trust, employee
benefit plan or any other enterprise as a director, officer, partner or trustee
of such corporation, partnership, joint venture, trust, employee benefit plan or
other enterprise) 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
and (b) 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, Vornado'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 upon
Vornado's receipt of (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 Vornado and (ii) a written undertaking by or on his
behalf to repay the amount paid or reimbursed by Vornado if it shall ultimately
be determined that the applicable standard of conduct was not met. Vornado's
Bylaws also (i) permit Vornado to provide indemnification and payment or
reimbursement of expenses to a present or former trustee or officer who served a
predecessor of Vornado in such capacity and to any employee or agent of Vornado
or a predecessor of Vornado, (ii) provide that any indemnification or payment or
reimbursement of the expenses permitted by the Bylaws shall be 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 Vornado 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.
Title 8 permits a Maryland real estate investment trust to indemnify and
advance expenses to its trustees, officers, employees and agents to the same
extent as permitted by the MGCL for directors and officers of Maryland
corporations. The MGCL permits a corporation to indemnify its present and former
directors and officers, among others, against judgments, penalties, fines,
settlements and reasonable expenses actually incurred by them in connection with
any proceeding to which they may be made a party by reason of their service in
those or other capacities unless it is established that (a) the act or omission
of the director or officer was material to the matter giving rise to the
proceeding and (i) was committed in bad faith or (ii) was the result of active
and deliberate dishonesty, (b) the director or officer actually received an
improper personal benefit in money, property or services or (c) in the case of
any criminal proceeding, the director or officer had reasonable cause to believe
that the act or omission was unlawful. However, under the MGCL, a Maryland
corporation may not indemnify for an adverse judgment in a suit by or in the
right of the corporation or for a judgment of liability on the basis that
personal benefit was improperly received, unless in either case a court orders
indemnification and then only for expenses. In addition, the MGCL permits a
corporation to advance reasonable expenses to a director or officer upon the
corporation's receipt of (a) a written affirmation by the director or officer of
his good faith belief that he has met the standard or conduct necessary for
indemnification by the corporation and (b) a written undertaking by or on his
behalf to repay the amount paid or reimbursed by the corporation if it shall
ultimately be determined that the standard of conduct was not met.
II-2
<PAGE> 31
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to trustees and officers of Vornado pursuant to the foregoing
provisions or otherwise, Vornado 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.
ITEM 7. EXEMPTION FROM REGISTRATION CLAIMED.
The Common Shares registered hereunder include 919,540 Common Shares (the
"Relevant Shares") issued by Vornado on December 2, 1996 to an irrevocable
grantor trust (the "Trust") established by Vornado for the benefit of its
President, Michael D. Fascitelli, and his designated beneficiaries. Vornado
issued the Relevant Shares to the Trust pursuant to Vornado's employment
agreement with Mr. Fascitelli and the Relevant Shares may be deemed to be
"restricted securities" as defined in General Instruction C(1)(b) of Form S-8.
Vornado issued the Relevant Shares in reliance upon the exemption provided by
Section 4(2) of the Securities Act. Vornado did not offer the Relevant Shares to
anyone other than Mr. Fascitelli (or the Trust on his behalf) and placed an
appropriate restrictive legend on the share certificate evidencing the Relevant
Shares.
ITEM 8. EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT NUMBER DESCRIPTION
-------------- -----------
<C> <S>
4.1 Amended and Restated Declaration of Trust of Vornado,
amended April 3, 1997 (incorporated by reference to Exhibit
3.1 of Vornado's Registration Statement on Form S-8 (File
No. 333-29011), filed on June 12, 1997).
4.2 Articles of Amendment to the Amended and Restated
Declaration of Trust of Vornado as filed with the Maryland
State Department of Assessments and Taxation on October 14,
1997 (incorporated by reference to Exhibit 3.1 of Vornado's
Current Report on Form 8-K (File No. 001-11954), dated
October 14, 1997 and filed on October 24, 1997).
4.3 Articles of Amendment to the Amended and Restated
Declaration of Trust of Vornado as filed with the Maryland
State Department of Assessments and Taxation on April 22,
1998 (incorporated by reference to Exhibit 3.1 of Vornado's
Current Report on Form 8-K (File No. 001-11954), dated April
22, 1998 and filed on April 28, 1998).
4.4 By-laws of Vornado, as amended on April 28, 1997
(incorporated by reference to Exhibit 3(b) of Vornado's
Quarterly Report on Form 10-Q for the period ended March 31,
1997 (File No. 001-11954) filed on May 14, 1997).
4.5 Vornado Realty Trust 1993 Omnibus Share Plan, as amended
(incorporated by reference to Exhibit 4.1 of Vornado's
Registration Statement on Form S-8 (File No. 333-29011),
filed on June 12, 1997).
4.6 Employment Agreement between Vornado and Michael D.
Fascitelli dated December 2, 1996 (incorporated by reference
to Exhibit 10(c)(3) of Vornado's Annual Report on Form 10-K
(File No. 001-11954) for the fiscal year ended December 31,
1996).
4.7 Specimen certificate representing Vornado's Common Shares of
Beneficial Interest, par value $0.04 per share (incorporated
by reference to Exhibit 4.1 of Amendment No. 1 to Vornado's
Registration Statement on Form S-3 (File No. 33-62395),
filed on October 26, 1995).
5.1 Opinion of Ballard Spahr Andrews & Ingersoll, LLP
23.1 Consents of Deloitte & Touche LLP
23.2 Consents of Arthur Andersen LLP
23.3 Consent of Ballard Spahr Andrews & Ingersoll, LLP (included
in its opinion filed as Exhibit 5.1)
24.1 Powers of Attorney (included on signature page)
</TABLE>
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<PAGE> 32
ITEM 9. UNDERTAKINGS.
(a) The undersigned registrant hereby undertakes:
(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 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 registrant hereby undertakes 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 registrant has 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 registrant 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.
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<PAGE> 33
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-8 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Saddle Brook, State of New Jersey, on this 13th day
of May 1998.
VORNADO REALTY TRUST,
a Maryland real estate investment
trust
/s/ STEVEN ROTH
By:
--------------------------------------
Steven Roth
Chairman of the Board of Trustees
(Principal Executive Officer)
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Steven Roth, Joseph Macnow and Irwin Goldberg,
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 and 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 dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ STEVEN ROTH Chairman of the Board of Trustees May 13, 1998
- --------------------------------------------- (Principal Executive Officer)
Steven Roth
/s/ MICHAEL D. FASCITELLI President and Trustee May 13, 1998
- ---------------------------------------------
Michael D. Fascitelli
/s/ BERNARD H. MENDIK Co-Chairman of the Board of May 13, 1998
- --------------------------------------------- Trustees and Chief Executive
Bernard H. Mendik Officer of the Mendik Division
/s/ IRWIN GOLDBERG Vice President -- Chief Financial May 13, 1998
- --------------------------------------------- Officer (Principal Financial and
Irwin Goldberg Accounting Officer)
</TABLE>
II-5
<PAGE> 34
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ DAVID MANDELBAUM Trustee May 13, 1998
- ---------------------------------------------
David Mandelbaum
Trustee
- ---------------------------------------------
Stanley Simon
/s/ RONALD G. TARGAN Trustee May 13, 1998
- ---------------------------------------------
Ronald G. Targan
Trustee
- ---------------------------------------------
Richard R. West
Trustee
- ---------------------------------------------
Russell B. Wight, Jr.
</TABLE>
II-6
<PAGE> 35
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. EXHIBIT
----------- -------
<C> <S>
4.1 Amended and Restated Declaration of Trust of Vornado,
amended April 3, 1997 (incorporated by reference to Exhibit
3.1 of Vornado's Registration Statement on Form S-8 (File
No. 333-29011), filed on June 12, 1997).
4.2 Articles of Amendment to the Amended and Restated
Declaration of Trust of Vornado as filed with the Maryland
State Department of Assessments and Taxation on October 14,
1997 (incorporated by reference to Exhibit 3.1 of Vornado's
Current Report on Form 8-K (File No. 001-11954), dated
October 14, 1997 and filed on October 24, 1997).
4.3 Articles of Amendment to the Amended and Restated
Declaration of Trust of Vornado as filed with the Maryland
State Department of Assessments and Taxation on April 22,
1998 (incorporated by reference to Exhibit 3.1 of Vornado's
Current Report on Form 8-K (File No. 001-11954), dated April
22, 1998 and filed on April 28, 1998).
4.4 By-laws of Vornado, as amended on April 28, 1997
(incorporated by reference to Exhibit 3(b) of Vornado's
Quarterly Report on Form 10-Q for the period ended March 31,
1997 (File No. 001-11954) filed on May 14, 1997).
4.5 Vornado Realty Trust 1993 Omnibus Share Plan, as amended
(incorporated by reference to Exhibit 4.1 of Vornado's
Registration Statement on Form S-8 (File No. 333-29011),
filed on June 12, 1997).
4.6 Employment Agreement between Vornado and Michael D.
Fascitelli dated December 2, 1996 (incorporated by reference
to Exhibit 10(c)(3) of Vornado's Annual Report on Form 10-K
(File No. 001-11954) for the fiscal year ended December 31,
1996).
4.7 Specimen certificate representing Vornado's Common Shares of
Beneficial Interest, par value $0.04 per share (incorporated
by reference to Exhibit 4.1 of Amendment No. 1 to Vornado's
Registration Statement on Form S-3 (File No. 33-62395),
filed on October 26, 1995).
5.1 Opinion of Ballard Spahr Andrews & Ingersoll, LLP
23.1 Consents of Deloitte & Touche LLP
23.2 Consents of Arthur Andersen LLP
23.3 Consent of Ballard Spahr Andrews & Ingersoll, LLP (included
in its opinion filed as Exhibit 5.1)
24.1 Powers of Attorney (included on signature page)
</TABLE>
<PAGE> 1
EXHIBIT 5.1
[LETTERHEAD OF BALLARD SPAHR ANDREWS & INGERSOLL, LLP]
May 13, 1998
Vornado Realty Trust
Park 80 West, Plaza II
Saddle Brook, New Jersey 07663
Re: Registration Statement on Form S-8
dated May 13, 1998
Ladies and Gentlemen:
We have served as Maryland counsel to Vornado Realty Trust, a Maryland real
estate investment trust (the "Company"), in connection with certain matters of
Maryland law arising out of the registration of 4,419,540 common shares of
beneficial interest, $.04 par value per share, of the Company (the "Shares")
covered by the above-referenced Registration Statement (the "Registration
Statement"), under the Securities Act of 1933, as amended (the "1933 Act").
919,540 of the Shares (the "Trust Shares") were issued to The Chase Manhattan
Bank, as Trustee for the irrevocable grantor trust (the "Trust") established
under the Trust Agreement, dated as of December 2, 1996 (the "Trust Agreement"),
between the Company and The Chase Manhattan Bank and 3,500,000 of the Shares
(the "Option Shares") may be issued to Michael D. Fascitelli upon exercise of
options granted by the Company to him pursuant to the Employment Agreement,
dated December 2, 1996 (the "Employment Agreement"), between the Company and Mr.
Fascitelli. Capitalized terms used but not defined herein shall have the
meanings given to them in the Registration Statement.
In connection with our representation of the Company, and as a basis for
the opinion hereinafter set forth, we have examined originals, or copies
certified or otherwise identified to our satisfaction, of the following
documents (hereinafter collectively referred to as the "Documents"):
1. The Registration Statement, filed with the Securities and Exchange
Commission (the "Commission"), pursuant to the Securities Act of 1933,
as amended (the "1933 Act"), and the related form of prospectus in the
form in which it will be sent or given to employees of the Company in
accordance with Rule 428(b)(1) under the 1933 Act;
2. The Amended and Restated Declaration of Trust of the Company, as
amended (the "Declaration of Trust"), certified as of a recent date by
the State Department of Assessments and Taxation of Maryland (the
"SDAT");
3. The Bylaws of the Company, certified as of a recent date by an
Executive Vice President of the Company;
4. Resolutions adopted by the Board of Trustees of the Company relating
to the issuance and registration of the Shares, certified as of a recent
date by an Executive Vice President of the Company;
5. A specimen of the certificate evidencing a common share of beneficial
interest of the Company, certified as of a recent date by an Executive
Vice President of the Company;
6. A certificate of the SDAT as to the good standing of the Company,
dated as of a recent date;
7. A certificate executed by Joseph Macnow, an Executive Vice President
of the Company, dated the date hereof;
8. The Employment Agreement;
9. The Trust Agreement; and
10. Such other documents and matters as we have deemed necessary or
appropriate to express the opinion set forth in this letter, subject to
the assumptions, limitations and qualifications stated herein.
<PAGE> 2
In expressing the opinion set forth below, we have assumed, and so far as
is known to us there are no facts inconsistent with, the following:
1. Each of the parties (other than the Company) executing any of the
Documents has duly and validly executed and delivered each of the
Documents to which such party is a signatory, and such party's
obligations set forth therein are legal, valid and binding and are
enforceable in accordance with all stated terms.
2. Each individual executing any of the Documents on behalf of a party
(other than the Company) is duly authorized to do so.
3. Each individual executing any of the Documents, whether on behalf of
such individual or another person, is legally competent to do so.
4. All Documents submitted to us as originals are authentic. All
Documents submitted to us as certified or photostatic copies conform to
the original documents. All signatures on all such Documents are
genuine. All public records reviewed or relied upon by us or on our
behalf are true and complete. All statements and information contained
in the Documents are true and complete. There are no oral or written
modifications or amendments to the Documents, or waiver of any of the
provisions of the Documents, by action or omission of the parties or
otherwise.
5. The Shares will not be issued in violation of any restriction or
limitation contained in Section 6.6 of the Declaration of Trust.
The phrase "known to us" is limited to the actual knowledge, without
independent inquiry, of the lawyers at our firm who have performed legal
services in connection with the issuance of this opinion.
Based upon the foregoing, and subject to the assumptions, limitations and
qualifications stated herein, it is our opinion that:
1. The Company is a real estate investment trust duly formed and
existing under and by virtue of the laws of the State of Maryland and is
in good standing with the SDAT.
2. The Option Shares have been duly authorized for issuance pursuant to
the Employment Agreement and, when and if issued and delivered against
payment therefor in the manner described in the Employment Agreement,
the Registration Statement and the resolutions of the Board of Trustees
of the Company authorizing their issuance, will be (assuming that the
sum of (i) all shares of beneficial interest issued as of the date
hereof, (ii) any shares of beneficial interest issued between the date
hereof and any date on which the Option Shares are actually issued (not
including the Option Shares) and (iii) the Option Shares will not exceed
the total number of shares of beneficial interest that the Company is
authorized to issue) validly issued, fully paid and nonassessable.
The foregoing opinion is limited to the substantive laws of the State of
Maryland and we do not express any opinion herein concerning any other law. We
express no opinion as to compliance with the securities (or "blue sky") laws or
the real estate syndication laws of the State of Maryland.
We assume no obligation to supplement this opinion if any applicable law
changes after the date hereof or if we become aware of any fact that might
change the opinion expressed herein after the date hereof.
This opinion is being furnished to you for submission to the Securities and
Exchange Commission as an exhibit to the Registration Statement and,
accordingly, may not be relied upon by, quoted in any manner to, or delivered to
any other person or entity (other than Sullivan & Cromwell, counsel to the
Company) without, in each instance, our prior written consent.
<PAGE> 3
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the use of the name of our firm therein. In giving
this consent, we do not admit that we are within the category of persons whose
consent is required by Section 7 of the 1933 Act.
Very truly yours,
/s/ BALLARD SPAHR ANDREWS & INGERSOLL LLP
--------------------------------------------
<PAGE> 1
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Registration Statement
of Vornado Realty Trust on Form S-8 of our report dated March 25, 1998,
appearing in the Annual Report on Form 10-K of Vornado Realty Trust for the year
ended December 31, 1997, as amended, and to the reference to us under the
heading "Experts" in the Prospectus, which is part of this Registration
Statement.
Parsippany, New Jersey DELOITTE & TOUCHE LLP
May 13, 1998
<PAGE> 2
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Registration Statement
of Vornado Realty Trust on Form S-8 of our report dated March 17, 1997 on the
statement of revenues and certain expenses of One Penn Plaza for the year ended
December 31, 1996, which report appears in the Form 8-K/A of Vornado Realty
Trust dated November 18, 1997, and to the reference to us under the heading
"Experts" in the Prospectus, which is part of this Registration Statement.
New York, New York DELOITTE & TOUCHE LLP
May 13, 1998
<PAGE> 3
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Registration Statement
of Vornado Realty Trust on Form S-8 of our report dated January 16, 1998 on the
statement of revenues and certain expenses of 150 East 58th Street for the year
ended December 31, 1996, which report appears in the Form 8-K/A of Vornado
Realty Trust dated November 18, 1997, and to the reference to us under the
heading "Experts" in the Prospectus, which is part of this Registration
Statement.
Parsippany, New Jersey DELOITTE & TOUCHE LLP
May 13, 1998
<PAGE> 4
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Registration Statement
of Vornado Realty Trust on Form S-8 of our report dated February 12, 1997 on the
statement of revenues and certain expenses of 640 Fifth Avenue for the year
ended December 31, 1996, which report appears in the Form 8-K/A of Vornado
Realty Trust dated November 18, 1997, and to the reference to us under the
heading "Experts" in the Prospectus, which is part of this Registration
Statement.
New York, New York DELOITTE & TOUCHE LLP
May 13, 1998
<PAGE> 1
EXHIBIT 23.2
As independent public accountants, we hereby consent to the incorporation
by reference into this S-8 Registration Statement of Vornado Realty Trust of our
report dated April 8, 1998, on the combined statement of revenues and certain
operating expenses of The Merchandise Mart Group of Properties for the year
ended December 31, 1997 and to all references to our Firm included in this
registration statement.
/s/ ARTHUR ANDERSEN LLP
------------------------------------
Arthur Andersen LLP
Chicago, Illinois
May 13, 1998
<PAGE> 2
As independent public accountants, we hereby consent to the incorporation
by reference into this S-8 Registration Statement of Vornado Realty Trust of our
report dated February 5, 1998, on the combined statement of revenues and certain
operating expenses of The Merchandise Mart Group of Properties for the year
ended December 31, 1996 and to all references to our Firm included in this
registration statement.
/s/ ARTHUR ANDERSEN LLP
------------------------------------
Arthur Andersen LLP
Chicago, Illinois
May 13, 1998
