<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 29, 1998
REGISTRATION NO. 333-40787
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 2
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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VORNADO REALTY TRUST
AND
VORNADO REALTY L.P.
(EXACT NAME OF REGISTRANTS AS SPECIFIED IN THEIR CHARTERS)
<TABLE>
<S> <C>
MARYLAND 22-1657560
DELAWARE 22-3506990
(STATE OR OTHER JURISDICTION OF INCORPORATION OR (IRS EMPLOYER IDENTIFICATION NUMBER)
ORGANIZATION)
PARK 80 WEST, PLAZA II, JOSEPH MACNOW
SADDLE BROOK, NEW JERSEY 07663 PARK 80 WEST, PLAZA II,
(201) 587-1000 SADDLE BROOK, NEW JERSEY 07663
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE (201) 587-1000
NUMBER, INCLUDING AREA CODE, OF REGISTRANTS' (NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE
PRINCIPAL EXECUTIVE OFFICES) NUMBER, INCLUDING AREA CODE, OF AGENT FOR SERVICE)
</TABLE>
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COPIES TO:
PATRICIA A. CERUZZI, ESQ.
ALAN SINSHEIMER, ESQ.
SULLIVAN & CROMWELL
125 BROAD STREET
NEW YORK, NEW YORK 10004
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From time
to time after the effective date of this Registration Statement as determined by
market conditions.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ] __________
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ] __________
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
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PURSUANT TO RULE 429 UNDER THE SECURITIES ACT OF 1933, THIS REGISTRATION
STATEMENT INCLUDES A PROSPECTUS WHICH MAY RELATE TO SECURITIES REGISTERED BY
VORNADO REALTY TRUST AND VORNADO REALTY L.P. ON FORM S-3 (REGISTRATION STATEMENT
NO. 333-29013).
THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
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<PAGE> 2
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT.
$2,000,000,000
VORNADO REALTY TRUST
PREFERRED SHARES, DEPOSITARY SHARES AND
COMMON SHARES
$1,000,000,000
VORNADO REALTY L.P.
DEBT SECURITIES
------------------------
Vornado Realty Trust ("Vornado") may offer from time to time, together or
separately, in one or more series (i) preferred shares of beneficial interest of
Vornado, no par value ("Preferred Shares"), (ii) depositary shares representing
entitlement to all rights and preferences of a fraction of a Preferred Share of
a specified series and represented by depositary receipts ("Depositary Shares")
and (iii) common shares of beneficial interest of Vornado, par value $0.04 per
share ("Common Shares"), having an aggregate initial offering price not to
exceed U.S. $2,000,000,000. Vornado Realty L.P. (the "Operating Partnership")
may offer from time to time, together or separately, in one or more series debt
securities ("Debt Securities"), which may be either (i) senior debt securities
(the "Senior Debt Securities") or (ii) subordinated debt securities (the
"Subordinated Debt Securities"), having an aggregate initial offering price not
to exceed U.S. $1,000,000,000. The Preferred Shares, Depositary Shares, Common
Shares and Debt Securities offered hereby (collectively, the "Securities") may
be offered separately or together, in separate series, in amounts, at prices and
on terms to be set forth in a supplement to this Prospectus (a "Prospectus
Supplement").
The accompanying Prospectus Supplement will set forth with regard to the
particular Securities in respect of which this Prospectus is being delivered (i)
in the case of Debt Securities, the title, aggregate principal amount,
denominations (which may be in United States dollars, or in any other currency,
currencies or currency unit, including the European Currency Unit), maturity,
rate, if any (which may be fixed or variable), or method of calculation thereof,
time of payment of any interest, any terms for redemption at the option of the
Operating Partnership or the holder, any terms for sinking fund payments, rank,
any exchange rights, any listing on a securities exchange, and the initial
public offering price and any other terms in connection with the offering and
sale of such Debt Securities, (ii) in the case of Preferred Shares, the specific
title, the aggregate amount and the stated value, any dividend (including the
method of calculating the payment of dividend), liquidation, redemption,
conversion, voting or other rights and the initial offering price and (iii) in
the case of Common Shares, the number of Common Shares, the initial offering
price and the terms of the offering thereof. The Prospectus Supplement will also
contain, as applicable, a discussion of the material United States Federal
income tax considerations relating to the Securities in respect of which this
Prospectus is being delivered to the extent not contained herein.
Vornado's Common Shares are listed on the New York Stock Exchange ("NYSE")
under the symbol "VNO". Vornado's $3.25 Series A Convertible Preferred Shares of
Beneficial Interest, liquidation preference $50.00 per share (the "Series A
Preferred Shares"), are listed on the NYSE under the symbol "VNO Pr A". The
Prospectus Supplement will also contain information, where applicable, as to any
listing on a securities exchange of the Securities covered by such Prospectus
Supplement.
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SEE "RISK FACTORS" BEGINNING ON PAGE 4 FOR CERTAIN FACTORS RELEVANT TO AN
INVESTMENT IN THE SECURITIES.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
------------------------
Vornado and the Operating Partnership may sell Securities to or through
underwriters, and also may sell Securities directly to other purchasers or
through agents. The accompanying Prospectus Supplement will set forth the names
of any underwriters or agents involved in the sale of the Securities in respect
of which this Prospectus is being delivered, the amounts of Securities, if any,
to be purchased by underwriters and the compensation, if any, of such
underwriters or agents. See "Plan of Distribution" herein.
The date of this Prospectus is , 1998.
<PAGE> 3
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED OR INCORPORATED BY REFERENCE IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFER CONTAINED IN THIS PROSPECTUS AND, IF
GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE COMPANY, THE OPERATING PARTNERSHIP OR ANY
UNDERWRITERS, AGENTS OR DEALERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO
SELL OR SOLICITATION OF AN OFFER TO BUY SECURITIES IN ANY JURISDICTION TO ANY
PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE
DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE COMPANY AND ITS SUBSIDIARIES OR THE OPERATING PARTNERSHIP SINCE
THE DATE HEREOF OR THE INFORMATION CONTAINED HEREIN IS CORRECT AT ANY TIME
SUBSEQUENT TO THE DATE HEREOF.
All references to "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
Vornado and the Operating Partnership are subject to the informational
requirements of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and in accordance therewith Vornado and the Operating Partnership file
reports, proxy statements and other information with the Securities and Exchange
Commission (the "Commission"). Such reports, proxy statements and other
information filed by Vornado and the Operating Partnership with the Commission
can be inspected and copied at the Commission at Room 1024, Judiciary Plaza, 450
Fifth Street, N.W., Washington, D.C. 20549, and at the following regional
offices of the Commission: 7 World Trade Center, 13th Floor, New York, New York
10048 and Citicorp Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661-2511. Copies of such information can be obtained from the Public
Reference Section of the Commission, 450 Fifth Street, N.W., Washington, D.C.
20549, at prescribed rates 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 and the Operating Partnership,
that must file such material with the Commission electronically. The
Commission's address on the world wide web is "http://www.sec.gov". Vornado's
Common Shares and Series A Preferred Shares are listed on the NYSE and similar
information can be inspected and copied at the NYSE, 20 Broad Street, 17th
Floor, New York, New York 10005.
This Prospectus constitutes a part of a registration statement on Form S-3
(the "Registration Statement") filed by Vornado and the Operating Partnership
with the Commission under the Securities Act of 1933, as amended (the
"Securities Act"). As permitted by the rules and regulations of the Commission,
this Prospectus omits certain of the information contained in the Registration
Statement and reference is hereby made to the Registration Statement and related
exhibits for further information with respect to Vornado, the Operating
Partnership and the Securities offered hereby. Statements contained herein
concerning the provisions of any documents filed as an exhibit to the
Registration Statement or otherwise filed with the Commission are not
necessarily complete, and in each instance reference is made to the copy of such
document so filed. Each such statement is qualified in its entirety by such
reference.
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INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company and the Operating Partnership
with the Commission pursuant to the Exchange Act are hereby incorporated by
reference into this Prospectus:
(1) Vornado's Annual Report on Form 10-K (File No. 001-11954) for the
fiscal year ended December 31, 1996, as amended by the Form 10-K/A
Amendment No. 1, Form 10-K/A Amendment No. 2 and Form 10K/A Amendment No. 3
for the fiscal year ended December 31, 1996 filed with the Commission on
July 18, 1997, August 7, 1997 and September 10, 1997, respectively;
(2) Vornado's Quarterly Reports on Form 10-Q (File No. 001-11954) for
the periods ended March 31, 1997, June 30, 1997 and September 30, 1997;
(3) Vornado's Current Report on Form 8-K (File No. 001-11954), dated
March 12, 1997, as amended by Form 8-K/A, dated March 12, 1997 and filed
with the Commission on April 1, 1997, Vornado's Current Reports on Form 8-K
(File No. 001-11954), dated April 3, 1997, April 15, 1997, May 7, 1997 and
June 27, 1997, Vornado's Current Report on Form 8-K (File No. 001-11954),
dated August 21, 1997, as amended by Form 8-K/A, dated August 21, 1997 and
filed with the Commission on September 11, 1997, Vornado's Current Report
on Form 8-K (File No. 001-11954), dated September 22, 1997 and filed with
the Commission on October 8, 1997, Vornado's Current Report on Form 8-K
(File No. 001-11954), dated October 14, 1997 and filed with the Commission
on October 24, 1997, Vornado's Current Report on Form 8-K (File No.
001-11954), dated October 21, 1997 and filed with the Commission on October
24, 1997, Vornado's Current Report on Form 8-K (File No. 001-11954), dated
November 18, 1997 and filed with the Commission on December 2, 1997 and
Vornado's Current Report on Form 8-K (File No. 001-11954), dated December
16, 1997 and filed with the Commission on December 29, 1997;
(4) the description of Vornado's Series A Preferred Shares contained
in Vornado's Registration Statement on Form 8-A (File No. 001-11954), filed
with the Commission on April 3, 1997;
(5) the Operating Partnership's Registration Statement on Form 10
(File No. 000-22685), filed with the Commission on June 12, 1997, as
amended by the Form 10/A Amendment No. 1, Form 10/A Amendment No. 2 and
Form 10/A Amendment No. 3 filed with the Commission on July 18, 1997,
August 7, 1997 and September 10, 1997, respectively;
(6) the Operating Partnership's Current Report on Form 8-K (File No.
000-22685), dated June 27, 1997, the Operating Partnership's Current Report
on Form 8-K (File No. 000-22685), dated August 21, 1997, as amended by Form
8-K/A, dated August 21, 1997 and filed with the Commission on September 11,
1997, the Operating Partnership's Current Report on Form 8-K (File No.
000-22685), dated September 22, 1997 and filed with the Commission on
October 8, 1997, the Operating Partnership's Current Report on Form 8-K
(File No. 000-22685), dated November 18, 1997 and filed with the Commission
on December 2, 1997 and the Operating Partnership's Current Report on Form
8-K (File No. 000-22685), dated December 16, 1997 and filed with the
Commission on December 29, 1997; and
(7) the Operating Partnership's Quarterly Report on Form 10-Q (File
No. 000-22685) for the periods ended June 30, 1997 and September 30, 1997.
All other documents and reports filed with the Commission by Vornado or the
Operating Partnership pursuant to Section 13(a), 13(c), 14 or 15(d) of the
Exchange Act from the date of this Prospectus and prior to the termination of
the offering of the Securities shall be deemed to be incorporated by reference
herein and shall be deemed to be a part hereof from the date of the filing of
such reports and documents (provided, however, that the information referred to
in item 402(a)(8) of Regulation S-K of the Commission shall not be deemed
specifically incorporated by reference herein).
Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein
or in any subsequently filed document which also is or is deemed to be
incorporated by reference herein modifies or supersedes such statement. Any such
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this Prospectus.
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Vornado and the Operating Partnership will provide without charge to each
person to whom a copy of this Prospectus is delivered, on written or oral
request of such person, a copy of any or all documents which are incorporated
herein by reference (not including the exhibits to such documents, unless such
exhibits are specifically incorporated by reference in the document which this
Prospectus incorporates). Requests should be directed to the Secretary of
Vornado, Park 80 West, Plaza II, Saddle Brook, New Jersey 07663, telephone
number (201) 587-1000.
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<PAGE> 6
RISK FACTORS
Prospective investors should carefully consider, among other factors, the
matters described below.
REAL ESTATE INVESTMENT CONSIDERATIONS
GENERAL
Real property investments are subject to varying degrees of risk. Real
estate values are affected by changes in the general economic climate, local
conditions such as an oversupply of or a reduction in demand for real estate in
the area, the attractiveness of the Company's properties to tenants, the
quality, philosophy and performance of management, competition from comparable
properties, inability to collect rent from tenants, the effects of any
bankruptcies of major tenants, changes in market rental rates, the need to
periodically repair, renovate and rent space and to pay the costs thereof
(including, without limitation, substantial tenant improvement and leasing costs
of re-leasing office space), and increases in operating costs due to inflation
and other factors (including increased real estate taxes), which increases may
not necessarily be passed through fully to tenants. Real estate values are also
affected by such factors as government regulations and changes in zoning or tax
laws, interest rate levels, the availability of financing and potential
liability under environmental and other laws. 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 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 3% of the Company's pro forma revenues.
Bradlees accounted for approximately 10.5% of pro forma property rentals for the
year ended December 31, 1996.
BANKRUPTCY OF TENANTS
There have been a number of recent bankruptcies in the retail industry,
including certain tenants of the Company. The bankruptcy or insolvency of a
major tenant may have a material adverse effect on the shopping centers affected
and the income produced by such properties 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 in shopping centers
to Bradlees. Of these locations, 14 are fully guaranteed by Stop & Shop
Companies, Inc. ("Stop & Shop"), a wholly-owned subsidiary of Royal Ahold NV, a
leading international food retailer, and one is guaranteed as to 70% of the
rent. During 1996, Bradlees rejected three leases and assigned one lease to
Kohl's Department Stores, Inc. These four leases are fully guaranteed by Stop &
Shop. Each of the three locations rejected by Bradlees are 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.
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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 the Operating Partnership's
ability to make required principal and interest payments with respect to
indebtedness, including the Debt Securities. 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 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, 1996, 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 November 15, 1997, Interstate Properties, a New Jersey general
partnership ("Interstate"), owns 17.3% 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, 20.6% of the outstanding Common Shares of the Company and Units of
the Operating Partnership as of November 15, 1997.
As of November 15, 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, the Company's Chief Executive Officer,
and Michael D. Fascitelli, the Company's President, are directors of
Alexander's. Messrs. Mandelbaum, Richard R. West and Wight, members of the
Company's Board of Trustees, are also members of the Board of Directors of
Alexander's.
The Company is contemplating the establishment of a new taxable operating
company to be known as Vornado Operating Company ("Vornado Operating") to
conduct certain activities that would not be permitted to be conducted by the
Company as a REIT and has filed a registration statement with the
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Commission with respect thereto. If such action takes place, the Operating
Partnership would spin off pro rata to its partners, including Vornado, the
shares of Vornado Operating, and Vornado would distribute pro rata to holders of
its Common Shares the shares it receives. In addition, the Company expects to
enter into an Intercompany Agreement with Vornado Operating 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 investments unless it first offers the
Company the opportunity to make such investment and the Company has rejected
that opportunity. 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. No assurance can be given concerning the timing of any
such transactions, or whether such transactions 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 (such as acquisitions) and other strategic decisions affecting the
future of such parties.
Bernard Mendik, the Company's co-chairman, owns direct and indirect
managing general partner interests in two properties (Two Park Avenue and 330
Madison Avenue) in which the Company owns a partial interest, direct and
indirect interests in numerous additional office properties and other real
estate assets, and interests in certain property services businesses, including
in businesses which provide cleaning and related services, security services and
facilities management services, which interests may give rise to certain
conflicts of interest concerning the fulfillment of Mr. Mendik's responsibility
as a trustee of the Company.
The Mendik Group (the "Mendik Group", as used herein, Bernard H. Mendik,
David R. Greenbaum and certain entities controlled by them) owns an entity which
provides cleaning and related services and security services to office
properties. The Company has entered into contracts with the Mendik Group to
provide such services to the certain office properties in which the Company owns
a 100% interest. Although the terms and conditions of the contracts pursuant to
which these services will be 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 shares of non-voting preferred stock of VMC
(which entitles the Company to 95% of the
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economic benefits of VMC through distributions), and Messrs. Roth and West own
100% of the outstanding shares of common stock of VMC. The Company also acts as
a leasing agent for Alexander's properties on a fee basis under a leasing
agreement. In addition, the Company lent Alexander's $45 million, the
subordinated tranche of a $75 million secured financing, the balance of which
was funded by a bank. None of Mr. Roth, Interstate or Vornado is obligated to
present to Alexander's any particular investment opportunity which comes to his
or its attention, even if such opportunity is of a character which might be
suitable for investment by Alexander's.
LEASING SERVICES PROVIDED TO OTHER PROPERTIES
The Mendik Management Company Inc. (the "Management Corporation") (which is
controlled by Messrs. Mendik, Greenbaum and Fascitelli and not by the Company)
provides management and leasing services to properties in which the Company owns
less than a 100% interest as well as to other office properties (including
several properties in which the Mendik Group has an interest). Certain conflicts
of interest may result from the Management Corporation providing leasing
services both to properties in which the Company has an interest and other
properties in which the Mendik Group has an interest.
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 ("Title
8"). 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 "-- Potential Anti-takeover Effects of Charter Documents and Applicable
Law" and "-- Leverage".
LEVERAGE
As of November 15, 1997, the Company had aggregate indebtedness outstanding
of approximately $463 million, all of which is secured by Company properties.
The Operating Partnership's ability to make required principal and interest
payments with respect to indebtedness, including any Debt Securities, depends on
the earnings of its subsidiaries and on its ability to receive funds from such
subsidiaries through dividends or other payments since the 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 $463 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
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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 Collateralized Notes. As a result of these limitations on cash
flows relating to such properties, which cash flows represented approximately
83% of cash flows from properties of the Operating Partnership and its
consolidated subsidiaries in 1996, the Operating Partnership's ability to pay
interest and principal on its Debt Securities may be adversely affected.
The Indentures do not contain provisions that limit the Operating
Partnership's ability to incur indebtedness. Vornado has historically maintained
a relatively low level of debt to market capitalization of between 15% and 35%.
As of November 15, 1997, the level of debt to market capitalization was 13%. In
the future, in connection with its 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, 1996, 78% 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 early 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 substances released at a property,
and may be held liable to a governmental entity or to third parties for property
damage or personal injuries and for investigation and clean-up costs incurred by
the parties in connection with the contamination. Such laws often impose
liability without regard to whether the owner or operator knew of, or was
responsible for, the release of such hazardous substances. The presence of
contamination or the failure to remediate contamination may adversely affect the
owner's ability to sell or lease real estate or to borrow using the real estate
as collateral. Other Federal, state and local laws, ordinances and regulations
require abatement or removal of certain asbestos-containing materials in the
event of demolition or certain renovations or remodeling and also govern
emissions of and exposure to asbestos fibers in the air. The operation and
subsequent removal of certain underground storage tanks are also regulated by
Federal and state laws. In connection with the ownership, operation and
management of its properties, the Company could be held liable for the costs of
remedial action with respect to such regulated substances or tanks or related
claims.
Each of the Company's properties has been subjected to varying degrees of
environmental assessment, which generally did not include soil sampling or
subsurface investigations, at various times. The environmental assessments did
not reveal any environmental condition or liability that the Company believes
will have a material adverse effect on the Company's business, assets or results
of operations. However, there can be no assurance that the identification of new
areas of contamination, change in the extent or known scope of
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contamination, the discovery of additional sites or changes in cleanup
requirements would not result in significant costs to the Company.
COMPETITION
The leasing of real estate is highly competitive. The principal means of
competition are rent charged, location, services provided and the nature and
condition of the facility to be leased. The Company directly competes with all
lessors and developers of similar space in the areas in which its properties are
located. Demand for retail space has been impacted by the recent bankruptcy of a
number of retail companies and a general trend toward consolidation in the
retail industry which could adversely affect the ability of the Company to
attract and retain tenants.
The Company's shopping center properties are generally located on major
regional highways in mature, densely populated areas. These shopping center
properties compete with, among others, free standing stores, neighborhood
centers and stores leased on the periphery of regional malls. Further, the
general economic climate (such as household disposable income) and the
conditions of shopping center markets (such as oversupply of or reduced demand
for retail space) in the places where the shopping center properties are located
could adversely affect the Company's financial condition.
The Company's office building properties are concentrated in highly
developed areas of midtown Manhattan. Manhattan is the largest office market in
the United States. The number of competitive office properties in Manhattan
could have a material adverse effect on the Company's ability to lease office
space at its properties, and on the effective rents the Company is able to
charge. These competing properties may be newer or better located. In addition,
the Company may compete with other property owners (including other REITs that
currently invest in markets other than Manhattan) that are willing to acquire
properties in transactions which are more highly leveraged than the Company is
willing to undertake.
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 maintain its qualification 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
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<PAGE> 12
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). The
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 the outstanding
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 Preferred Shares -- Restrictions on Ownership" and "Description of Shares of
Beneficial Interest -- Description of Common Shares -- Restrictions on
Ownership".
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 shares of Common Shares or Preferred Shares and to classify or
reclassify, in one or more series, 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, deter 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 of the Interested Shareholder 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
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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, a Delaware limited
partnership. As a result, Vornado now conducts its business through, and
substantially all of its interests in properties are held by, the Operating
Partnership, in which it is the sole general partner and in which it owns an
approximately 90% limited partnership interest as of November 15, 1997. The
Operating Partnership currently owns: (i) 58 shopping center properties in seven
states and Puerto Rico containing 10.5 million square feet, including 1.2
million square feet built by tenants on land leased from the Company; (ii) all
or portions of 10 office building properties in the New York City metropolitan
area (primarily Manhattan) containing 5.0 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
40% interest in a hotel containing 800,000 square feet of space with 1,700 rooms
and 400,000 square feet of retail and office space; (vi) mortgages on various
office, restaurant and other retail properties; (vii) a 60% interest in a
partnership that owns Americold Corporation and URS Logistics, Inc., which
collectively own and operate 80 warehouse facilities with an aggregate of
approximately 367 million cubic feet of refrigerated, frozen and dry storage
space; (viii) a 15% limited partnership interest in Charles E. Smith Commercial
Realty, 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; and (ix) other owned
retail properties.
As of November 15, 1997, the Company's total consolidated outstanding debt
was approximately $463 million all of which is secured by Company properties,
and its total consolidated debt plus its proportionate share of total
unconsolidated debt were approximately $992 million which is secured by Company
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
Vornado is required by the terms of the partnership agreement of the
Operating Partnership to invest the net proceeds of any sale of Common Shares,
Preferred Shares or Depositary Shares in the Operating Partnership in exchange
for additional Units or preferred Units, as the case may be. As will be more
fully described in the applicable Prospectus Supplement, Vornado and the
Operating Partnership intend to use the net proceeds from the sale of Securities
for general corporate purposes or such other uses as may be set forth in a
Prospectus Supplement.
CONSOLIDATED RATIOS OF EARNINGS TO
COMBINED FIXED CHARGES AND PREFERRED SHARE DIVIDEND REQUIREMENTS
For purposes of calculating the following ratios, (i) earnings represent
income from continuing operations before income taxes, plus fixed charges, and
(ii) fixed charges represent interest expense on all indebtedness (including
amortization of deferred debt issuance costs) and the portion of operating lease
rental expense that is representative of the interest factor (deemed to be
one-third of operating lease rentals).
<TABLE>
<CAPTION>
NINE MONTHS
ENDED YEAR ENDED DECEMBER 31,
SEPTEMBER 30, ------------------------------------
1997 1996 1995 1994 1993 1992
------------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Ratio of Earnings to Combined Fixed Charges and
Preferred Share Dividend Requirements........ 1.70 4.56 4.06 3.54 1.80 1.07
</TABLE>
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DESCRIPTION OF DEBT SECURITIES
The Debt Securities may be issued from time to time in one or more series.
The particular terms of each series of Debt Securities offered by any Prospectus
Supplement or Prospectus Supplements will be described therein. The Senior Debt
Securities are to be issued under an Indenture (the "Senior Indenture") between
the Operating Partnership and The Bank of New York, as trustee (the "Senior
Trustee"), a copy of the form of which Senior Indenture is filed as an exhibit
to the Registration Statement. The Subordinated Debt Securities are to be issued
under a separate Indenture (the "Subordinated Indenture") between the Operating
Partnership and The Bank of New York, as trustee (the "Subordinated Trustee"), a
copy of the form of which Subordinated Indenture is filed as an exhibit to the
Registration Statement. The Senior Indenture and the Subordinated Indenture are
sometimes referred to collectively as the "Indentures" and the Senior Trustee
and Subordinated Trustee are sometimes referred to collectively as the
"Trustees."
The following summaries of the material provisions of the Senior Debt
Securities, the Subordinated Debt Securities, the Senior Indenture and the
Subordinated Indenture are brief summaries thereof, do not purport to be
complete and are subject to, and are qualified in their entirety by reference
to, all the provisions of the Indenture applicable to a particular series of
Debt Securities. Wherever particular Sections, Articles or defined terms of the
Indentures are referred to herein or in a Prospectus Supplement, such Sections,
Articles or defined terms are incorporated herein or therein by reference.
GENERAL
Unless otherwise specified in the applicable Prospectus Supplement, the
Debt Securities will be general unsecured obligations of the Operating
Partnership. The Indentures do not limit the aggregate amount of Debt Securities
which may be issued thereunder, and Debt Securities may be issued thereunder
from time to time in separate series up to the aggregate amount from time to
time authorized by the Operating Partnership for each series. Unless otherwise
specified in the Prospectus Supplement, the Senior Debt Securities when issued
will be unsubordinated obligations of the Operating Partnership and will rank
equally and ratably with all other unsecured and unsubordinated indebtedness of
the Operating Partnership. The Subordinated Debt Securities when issued will be
subordinated in right of payment to the prior payment in full of all Senior Debt
(as defined in the Subordinated Indenture) of the Operating Partnership as
described below under "-- Subordination of Subordinated Debt Securities" and in
the Prospectus Supplement applicable to an offering of Subordinated Debt
Securities.
The applicable Prospectus Supplement or Prospectus Supplements will
describe the following terms of the series of Debt Securities in respect of
which this Prospectus is being delivered: (1) the title of such Debt Securities;
(2) any limit on the aggregate principal amount of such Debt Securities; (3) the
person to whom any interest on any Debt Security of the series shall be payable
if other than the person in whose name the Debt Security is registered on the
regular record date; (4) the date or dates on which such Debt Securities will
mature; (5) the rate or rates of interest, if any, or the method of calculation
thereof, which such Debt Securities will bear, the date or dates from which any
such interest will accrue, the interest payment dates on which any such interest
on such Debt Securities will be payable and the regular record date for any
interest payable on any interest payment date; (6) the place or places where the
principal of, premium, if any, and interest on such Debt Securities will be
payable; (7) the period or periods within which, the events upon the occurrence
of which, and the price or prices at which, such Debt Securities may, pursuant
to any optional or mandatory provisions, be redeemed or purchased, in whole or
in part, by the Operating Partnership and any terms and conditions relevant
thereto; (8) the obligations of the Operating Partnership, if any, to redeem or
repurchase such Debt Securities at the option of the Holders; (9) the
denominations in which any such Debt Securities will be issuable, if other than
denominations of $1,000 and any integral multiple thereof; (10) any index or
formula used to determine the amount of payments of principal of and any premium
and interest on such Debt Securities; (11) the currency, currencies or currency
unit or units of payment of principal of and any premium and interest on such
Debt Securities if other than U.S. dollars; (12) if the principal of, or
premium, if any, or interest, if any, on such Debt Securities is to be payable,
at the election of the Operating Partnership or a holder thereof, in one or more
currencies or currency units other than that or those in which such Debt
Securities are stated to be payable, the currency, currencies or currency units
in which payment of
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the principal of and any premium and interest on Debt Securities of such series
as to which such election is made shall be payable, and the periods within which
and the terms and conditions upon which such election is to be made; (13) if
other than the principal amount thereof, the portion of the principal amount of
such Debt Securities of the series which will be payable upon acceleration of
the maturity thereof; (14) if the principal amount of any Debt Securities which
will be payable at the maturity thereof will not be determinable as of any date
prior to such maturity, the amount which will be deemed to be the outstanding
principal amount of such Debt Securities; (15) the applicability of any
provisions described under "-- Defeasance"; (16) whether any of such Debt
Securities are to be issuable in permanent global form ("Global Security") and,
if so, the terms and conditions, if any, upon which interests in such Debt
Securities in global form may be exchanged, in whole or in part, for the
individual Debt Securities represented thereby; (17) the applicability of any
provisions described under "-- Events of Default" and any additional Event of
Default applicable thereto; (18) any covenants applicable to such Debt
Securities; (19) the terms and conditions, if any, pursuant to which the Debt
Securities are exchangeable into Common Shares of the Company; and (20) any
other terms of such Debt Securities not inconsistent with the provisions of the
Indentures. (Section 301)
Debt Securities may be issued at a discount from their principal amount.
United States Federal income tax considerations and other special considerations
applicable to any such original issue discount Securities will be described in
the applicable Prospectus Supplement.
If the purchase price of any of the Debt Securities is denominated in a
foreign currency or currencies or a foreign currency unit or units or if the
principal of and any premium and interest on any series of Debt Securities is
payable in a foreign currency or currencies or a foreign currency unit or units,
the restrictions, elections, general Federal income tax considerations, specific
terms and other information with respect to such issue of Debt Securities will
be set forth in the applicable Prospectus Supplement.
The Indentures do not contain any provisions that limit the Operating
Partnership's ability to incur indebtedness. Except as may be indicated in the
applicable Prospectus Supplement with respect to a particular series of Debt
Securities, Holders of Debt Securities will not have the benefit of any specific
covenants or provisions in the applicable Indenture or Debt Securities that
would protect them in the event the Operating Partnership engages in or becomes
the subject of a highly leveraged transaction and the limitations on mergers,
consolidations and transfers of substantially all of the Operating Partnership's
properties and assets as an entirety to any person as described below under
"-- Consolidation, Merger and Sale of Assets." Such covenants may not be waived
or modified by the Operating Partnership, although Holders of Debt Securities
could waive or modify such covenants as more fully described below under
"-- Modification and Waiver."
The applicable Prospectus Supplement with respect to any particular series
of Debt Securities that provide for the optional redemption or prepayment of
such Debt Securities upon the occurrence of certain events (i.e., a change of
control) will describe the following: (1) the effects that such provisions may
have in deterring certain mergers, tender offers or other takeover attempts, as
well as that there may be possible adverse effects on the market price of the
Operating Partnership's securities or ability to obtain financing; (2) that the
Operating Partnership will comply with the requirements of applicable securities
laws, including Rules 14e-1 and 13e-4 under the Exchange Act, in connection with
such provisions and any related offers by the Operating Partnership; (3) whether
the occurrence of the specified events may give rise to cross-defaults on other
indebtedness such that payment on the offered Debt Securities may be effectively
subordinated; (4) limitations on the Operating Partnership's financial or legal
ability to repurchase the offered Debt Securities upon the triggering of an
event risk provision requiring such a repurchase or offer to repurchase; (5) the
impact, if any, under the governing instrument of the failure to repurchase,
including whether such failure to make any required repurchases in the event of
a change of control will create an event of default with respect to the offered
Debt Securities or will become an event of default only after the continuation
of such failure for a specified period of time after written notice is given to
the Operating Partnership by the Trustee or to the Operating Partnership and the
Trustee by the holders of a specified percentage in aggregate principal amount
of the debt outstanding; (6) that there can be no assurance that sufficient
funds will be available at the time of the triggering of an event risk provision
to make any required repurchases; (7) if such offered Debt Securities are to be
subordinated to other obligations of the Operating Partnership or its
subsidiaries that would be accelerated upon the triggering of a change in
control or similar event, the material effect thereof on
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<PAGE> 16
such acceleration provision and such offered Debt Securities; and (8) to the
extent that there is a definition of "change of control" in a supplemental
indenture relating to such offered Debt Securities that includes the concept of
"all or substantially all," the established meaning of such phrase under New
York law.
EXCHANGE OF DEBT SECURITIES
If so indicated in the applicable Prospectus Supplement with respect to a
particular series of Debt Securities, such series will be exchangeable into
Common Shares of Vornado on the terms and conditions set forth therein. Such
terms may include provisions pursuant to which the number of Common Shares of
Vornado to be received by the holders of Debt Securities would be calculated
according to the market price of Common Shares of Vornado as of a time stated in
the Prospectus Supplement. The applicable Prospectus Supplement will indicate
certain restrictions on ownership which may apply in the event of an exchange.
See "Description of Preferred Shares -- Restrictions on Ownership" and
"Description of Common Shares -- Restrictions on Ownership."
FORM, REGISTRATION, TRANSFER AND PAYMENT
Unless otherwise indicated in the applicable Prospectus Supplement, the
Debt Securities will be issued only in fully registered form in denominations of
$1,000 or integral multiples thereof. (Section 302) Unless otherwise indicated
in the applicable Prospectus Supplement, payment of principal, premium, if any,
and interest on the Debt Securities will be payable, and the exchange and
transfer of Debt Securities will be registerable, at the office or agency of the
Operating Partnership maintained for such purposes and at any other office or
agency maintained for such purpose. (Sections 301, 305 and 1002) No service
charge will be made for any registration of transfer or exchange of the Debt
Securities, but the Operating Partnership may require payment of a sum
sufficient to cover any tax or other governmental charge imposed in connection
therewith. (Section 305)
All monies paid by the Operating Partnership to a Paying Agent for the
payment of principal of and any premium or interest on any Debt Security which
remain unclaimed for two years after such principal, premium or interest has
become due and payable may be repaid to the Operating Partnership and thereafter
the Holder of such Debt Security may look only to the Operating Partnership for
payment thereof. (Section 1003)
BOOK-ENTRY DEBT SECURITIES
The Debt Securities of a series may be issued in whole or in part in the
form of one or more Global Securities that will be deposited with, or on behalf
of, a depositary (the "Global Depositary") or its nominee identified in the
applicable Prospectus Supplement. In such a case, one or more Global Securities
will be issued in a denomination or aggregate denomination equal to the portion
of the aggregate principal amount of Outstanding Debt Securities of the series
to be represented by such Global Security or Securities. Unless and until it is
exchanged in whole or in part for Debt Securities in registered form, a Global
Security may not be registered for transfer except as a whole by the Global
Depositary for such Global Security to a nominee of such Global Depositary or by
a nominee of such Global Depositary to such Global Depositary or another nominee
of such Global Depositary or by such Global Depositary or any nominee to a
successor Global Depositary or a nominee of such successor Global Depositary and
except in the circumstances described in the applicable Prospectus Supplement.
(Sections 204 and 305)
The specific terms of the depositary arrangement with respect to any
portion of a series of Debt Securities to be represented by a Global Security
will be described in the applicable Prospectus Supplement. The Operating
Partnership expects that the following provisions will apply to depositary
arrangements although no assurance can be given that such will be the case.
Unless otherwise specified in the applicable Prospectus Supplement, Debt
Securities which are to be represented by a Global Security to be deposited with
or on behalf of a Global Depositary will be represented by a Global Security
registered in the name of such Global Depositary or its nominee. Upon the
issuance of such Global Security, and the deposit of such Global Security with
or on behalf of the Global Depositary for
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such Global Security, the Global Depositary will credit, on its book-entry
registration and transfer system, the respective principal amounts of the Debt
Securities represented by such Global Security to the accounts of institutions
that have accounts with such Global Depositary or its nominee ("participants").
The accounts to be credited will be designated by the underwriters or agents of
such Debt Securities or by the Operating Partnership, if such Debt Securities
are offered and sold directly by the Operating Partnership. Ownership of
beneficial interest in such Global Security will be limited to participants or
Persons that may hold interests through participants. Ownership of beneficial
interests by participants in such Global Security will be shown on, and the
transfer of that ownership interest will be effected only through, records
maintained by the Global Depositary or its nominee for such Global Security.
Ownership of beneficial interests in such Global Security by Persons that hold
through participants will be shown on, and the transfer of such ownership
interests within such participant will be effected only through, records
maintained by such participant. The laws of some jurisdictions require that
certain purchasers of securities take physical delivery of such securities in
certificated form. The foregoing limitations and such laws may impair the
ability to transfer beneficial interests in such Global Securities.
So long as the Global Depositary for a Global Security, or its nominee, is
the registered owner of such Global Security, such Global Depositary or such
nominee, as the case may be, will be considered the sole owner or holder of the
Securities represented by such Global Security for all purposes under the
applicable Indenture. Except as set forth below, unless otherwise specified in
the applicable Prospectus Supplement, owners of beneficial interests in such
Global Security will not be entitled to have Debt Securities of the series
represented by such Global Security registered in their names, will not receive
or be entitled to receive physical delivery of Debt Securities of such series in
certificated form and will not be considered the holders thereof for any
purposes under the applicable Indenture. (Sections 204 and 305) Accordingly,
each Person owning a beneficial interest in such Global Security must rely on
the procedures of the Global Depositary and, if such Person is not a
participant, on the procedures of the participant through which such Person owns
its interest, to exercise any rights of a holder under the applicable Indenture.
The Operating Partnership understands that under existing industry practices, if
the Operating Partnership requests any action of holders or an owner of a
beneficial interest in such Global Security desires to give any notice or take
any action a holder is entitled to give or take under the applicable Indenture,
the Global Depositary would authorize the participants to give such notice or
take such action, and participants would authorize beneficial owners owning
through such participants to give such notice or take such action or would
otherwise act upon the instructions of beneficial owners owning through them.
If the Global Depositary for Debt Securities of a series is at any time
unwilling, unable or ineligible to continue as Global Depositary and a successor
Global Depositary is not appointed by the Operating Partnership within 90 days
or an Event of Default under the applicable Indenture has occurred and is
continuing, the Operating Partnership will issue Debt Securities of such series
in definitive form in exchange for the Global Security or Securities
representing the Debt Securities of such series. In addition, the Operating
Partnership may at any time and in its sole discretion, subject to any
limitations described in the applicable Prospectus Supplement, determine not to
have any Debt Securities of a series represented by one or more Global
Securities and, in such event, will issue Debt Securities of such series in
definitive form in exchange for the Global Security or Securities representing
such Debt Securities. Further, if the Operating Partnership so specifies with
respect to the Debt Securities of a series, an owner of a beneficial interest in
a Global Security representing Debt Securities of such series may, on terms
acceptable to the Operating Partnership and the Global Depositary for such
Global Security, receive Debt Securities of such series in definitive form in
exchange for such beneficial interests, subject to any limitations described in
the applicable Prospectus Supplement relating to such Debt Securities. In any
such instance, an owner of a beneficial interest in a Global Security will be
entitled to physical delivery in definitive form of Debt Securities of the
series represented by such Global Security equal in principal amount to such
beneficial interest and to have such Debt Securities registered in its name (if
the Debt Securities of such series are issuable as registered securities).
Principal of and any premium and interest on a Global Security will be
payable in the manner described in the applicable Prospectus Supplement.
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CERTAIN COVENANTS OF THE OPERATING PARTNERSHIP
If so indicated in the applicable Prospectus Supplement with respect to a
particular series of Debt Securities, the Operating Partnership will be subject
to the covenants described therein. In addition, the Operating Partnership will
be subject to the following covenants.
EXISTENCE
Except as permitted under "-- Consolidation, Merger and Sale of Assets,"
the Operating Partnership will be required to do or cause to be done all things
necessary to preserve and keep in full force and effect its existence, rights
and franchises; provided, however, that the Operating Partnership shall not be
required to preserve any right or franchise if it determines that the
preservation thereof is no longer desirable in the conduct of its business and
that the loss thereof is not disadvantageous in any material respect to the
Holders of the Debt Securities. (Section 1005)
MAINTENANCE OF PROPERTIES
The Operating Partnership will be required to cause all properties used or
useful in the conduct of its business or the business of any subsidiary to be
maintained and kept in good condition, repair and working order and supplied
with all necessary equipment and to cause to be made all necessary repairs,
renewals, replacements, betterments and improvements thereof, all as in the
judgment of the Operating Partnership may be necessary so that the business
carried on in connection therewith may be properly and advantageously conducted
at all times; provided, however, that the Operating Partnership shall not be
prevented from discontinuing the operation or maintenance of any of its
properties if such discontinuance is, in the judgment of the Operating
Partnership, desirable in the conduct of its business or the business of any
subsidiary and not disadvantageous in any material respect to the Holders.
(Section 1006)
PAYMENT OF TAXES AND OTHER CLAIMS
The Operating Partnership will be required to pay or discharge or cause to
be paid or discharged, before the same shall become delinquent, (i) all taxes,
assessments and governmental charges levied or imposed upon the Operating
Partnership or any subsidiary or upon the income, profits or property of the
Operating Partnership or any subsidiary, and (ii) all lawful claims for labor,
materials and supplies which, if unpaid, might by law become a lien upon the
property of the Operating Partnership or any subsidiary; provided, however, that
the Operating Partnership shall not be required to pay or discharge or cause to
be paid or discharged any such tax, assessment, charge or claim whose amount,
applicability or validity is being contested in good faith by appropriate
proceedings. (Section 1007)
INSURANCE
The Operating Partnership will be required to, and to cause each of its
subsidiaries to, keep all of its insurable properties insured against loss or
damage with insurers of recognized responsibility in commercially reasonable
amounts and types. (Section 1008)
PROVISION OF FINANCIAL INFORMATION
Whether or not the Operating Partnership is subject to Section 13 or
Section 15(d) of the Exchange Act and for so long as any Debt Securities are
outstanding, the Operating Partnership will, to the extent permitted under the
Exchange Act, file with the Commission the annual reports, quarterly reports and
other documents which the Operating Partnership would have been required to file
with the Commission pursuant to Section 13 or Section 15(d) (the "Financial
Statements") if the Operating Partnership were so subject, such documents to be
filed with the Commission on or prior to the respective dates (the "Required
Filing Dates") by which the Operating Partnership would have been required so to
file such documents if the Operating Partnership were so subject.
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The Operating Partnership will also in any event (x) within 15 days of each
Required Filing Date (i) transmit by mail to all Holders of Debt Securities
whose names appear in the security register for such Debt Securities, as their
names and addresses appear in the security register for such Debt Securities,
without cost to such Holders, copies of the annual reports and quarterly reports
which the Operating Partnership would have been required to file with the
Commission pursuant to Section 13 or Section 15(d) of the Exchange Act if the
Operating Partnership were subject to such Sections and (ii) file with any
Trustee copies of the annual reports, quarterly reports and other documents
which the Operating Partnership would have been required to file with the
Commission pursuant to Section 13 or Section 15(d) of the Exchange Act if the
Operating Partnership were subject to such Sections and (y) if filing such
documents by the Operating Partnership with the Commission is not permitted
under the Exchange Act, promptly upon written request and payment of the
reasonable cost of duplication and delivery, supply copies of such documents to
any prospective Holder. (Section 1009)
EVENTS OF DEFAULT
The following are Events of Default under the Indentures with respect to
Debt Securities of any series: (a) failure to pay principal of or premium, if
any, on any Debt Security of that series when due; (b) failure to pay any
interest on any Debt Security of that series when due, continued for 30 days;
(c) failure in the deposit of any sinking fund payment in respect of any Debt
Security of that series; (d) failure to perform any other covenant of the
Operating Partnership in the Indentures (other than a covenant included in the
applicable Indenture solely for the benefit of a series of Debt Securities other
than that series), continued for 60 days after written notice to the Operating
Partnership as provided in the applicable Indenture; (e) the acceleration of, or
failure to pay at maturity (including any applicable grace period), any
indebtedness for money borrowed by the Operating Partnership with at least
$50,000,000 in principal amount outstanding, which acceleration or failure to
pay is not rescinded or annulled or such indebtedness paid, in each case within
10 days after the date on which written notice thereof shall have first been
given to the Operating Partnership as provided in the applicable Indenture; (f)
certain events of bankruptcy, insolvency or reorganization; and (g) any other
Event of Default provided with respect to Debt Securities of that series.
(Section 501)
If an Event of Default with respect to Outstanding Debt Securities of any
series shall occur and be continuing, either the applicable Trustee or the
Holders of not less than 25% in principal amount of the Outstanding Debt
Securities of that series by notice as provided in the Indentures may declare
the principal amount (or, if the Debt Securities of that series are Original
Issue Discount Securities, such portion of the principal amount as may be
specified in the terms of that series) of all Debt Securities of that series to
be due and payable immediately. However, at any time after a declaration of
acceleration with respect to Debt Securities of any series has been made, but
before a judgment or decree based on such acceleration has been obtained, the
Holders of a majority in principal amount of the Outstanding Debt Securities of
that series may, under certain circumstances, rescind and annul such
acceleration. (Section 502) For information as to waiver or defaults, see
"-- Modification and Waiver" below.
The Indentures provide that, subject to the duty of the Trustees thereunder
during an Event of Default to act with the required standard of care, such
Trustees will be under no obligation to exercise any of its rights or powers
under the Indentures at the request or direction of any of the Holders, unless
such Holders shall have offered to such Trustees reasonable security or
indemnity. (Sections 601 and 603) Subject to certain provisions, including those
requiring security or indemnification of the Trustees, the Holders of a majority
in principal amount of the Outstanding Debt Securities of any series will have
the right to direct the time, method and place of conducting any proceeding for
any remedy available to the Trustees, or exercising any trust or power conferred
on such Trustees, with respect to the Debt Securities of that series. (Section
512)
No Holder of a Debt Security of any series will have any right to institute
any proceeding with respect to the Indentures or for any remedy thereunder,
unless (i) such Holder shall have previously given to the applicable Trustee
written notice of a continuing Event of Default (as defined) with respect to
Debt Securities of that series; (ii) the Holders of not less than 25% in
aggregate principal amount of the Outstanding Debt Securities of the same series
shall have made written request, and offered reasonable indemnity, to the
applicable Trustee to institute proceedings in respect of such Event of Default
in its own name as trustee under
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the Indenture; (iii) the Trustee shall have failed to institute such proceedings
within 60 days; and (iv) the Trustee shall not have received from the Holders of
a majority in aggregate principal amount of the outstanding Debt Securities of
the same series a direction inconsistent with such request (Section 507);
provided, however, that such limitations do not apply to a suit instituted by a
Holder of a Debt Security for enforcement of payment of the principal of and any
premium and interest on such Debt Security on or after the respective due dates
expressed in such Debt Security. (Section 508)
The Operating Partnership will be required to furnish to the Trustees
annually a statement as to the performance by the Operating Partnership of its
obligations under the Indentures and as to any default in such performance.
(Section 1004)
MODIFICATION AND WAIVER
Without the consent of any Holder of Outstanding Debt Securities, the
Operating Partnership and the applicable Trustee may amend or supplement the
applicable Indenture or the Debt Securities to cure any ambiguity, defect or
inconsistency, or to make any change that does not materially adversely affect
the rights of any Holder of Debt Securities. (Section 901) Other modifications
and amendments of the Indentures may be made by the Operating Partnership and
the applicable Trustee only with the consent of the Holders of not less than a
majority in aggregate principal amount of the Outstanding Debt Securities of
each series affected thereby; provided, however, that no such modification or
amendment may, without the consent of the Holder of each Outstanding Debt
Security affected thereby: (a) change the Stated Maturity of the principal of,
or any installment of principal of, or interest on, any Debt Security; (b)
reduce the principal amount of, the rate of interest on, or the premium, if any,
payable upon the redemption of, any Debt Security; (c) reduce the amount of
principal of an Original Issue Discount Security payable upon acceleration of
the Maturity thereof; (d) change the place or currency of payment of principal
of, or premium, if any, or interest on any Debt Security; (e) impair the right
to institute suit for the enforcement of any payment on or with respect to any
Debt Security on or after the Stated Maturity or Redemption Date thereof; (f)
modify the subordination provisions applicable to any series of Debt Securities
in a manner adverse to the holders thereof; or (g) reduce the percentage in
principal amount of Outstanding Debt Securities of any series, the consent of
the Holders of which is required for modification or amendment of the Indentures
or for waiver of compliance with certain provisions of the applicable Indenture
or for waiver of certain defaults. (Section 902)
Unless otherwise indicated in the applicable Prospectus Supplement, the
Holders of at least a majority in aggregate principal amount of the Outstanding
Debt Securities of any series may on behalf of the Holders of all Debt
Securities of that series waive, insofar as that series is concerned, compliance
by the Operating Partnership with certain covenants of the Indentures. (Section
1008) Unless otherwise indicated in the applicable Prospectus Supplement, the
Holders of not less than a majority in principal amount of the Outstanding Debt
Securities of any series may, on behalf of the Holders of all Debt Securities of
that series, waive any past default under the applicable Indenture with respect
to that series, except a default in the payment of the principal of, or premium,
if any, or interest on, any Debt Security of that series or in respect of a
provision which under such applicable Indenture cannot be modified or amended
without the consent of the Holder of each Outstanding Debt Security of that
series affected. (Section 513)
CONSOLIDATION, MERGER AND SALE OF ASSETS
Unless otherwise indicated in the applicable Prospectus Supplement, the
Operating Partnership, without the consent of any Holders of outstanding Debt
Securities, may consolidate with or merge into, or transfer or lease its assets
substantially as an entirety to, any Person, and any other Person may
consolidate with or merge into, or transfer or lease its assets substantially as
an entirety to, the Operating Partnership, provided that (a) the Person (if
other than the Operating Partnership) formed by such consolidation or into which
the Operating Partnership is merged or which acquires or leases the assets of
the Operating Partnership substantially as an entirety assumes the Operating
Partnership's obligations on the Debt Securities and under the Indenture
relating thereto and (b) after giving effect to such transaction no Event of
Default, and no event which, after notice or lapse of time or both, would become
an Event of Default, shall have happened and be continuing. (Article Eight) A
Prospectus Supplement may set forth any additional provisions regarding a
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consolidation with, merger into, or transfer or lease of its assets
substantially as an entirety to, any Person (or of such Person with, into or to
the Operating Partnership).
DEFEASANCE
If so indicated in the applicable Prospectus Supplement with respect to the
Debt Securities of a series, the Operating Partnership, at its option (i) will
be discharged from any and all obligations in respect of the Debt Securities of
such series (except for certain obligations to register the transfer or exchange
of Debt Securities of such series, to replace destroyed, stolen, lost or
mutilated Debt Securities of such series, and to maintain an office or agency in
respect of the Debt Securities and hold monies for payment in trust) or (ii)
will be released from its obligations to comply with any covenants that may be
specified in the applicable Prospectus Supplement with respect to the Debt
Securities of such series, and the occurrence of an event described in clause
(d) under "-- Events of Default" above with respect to any defeased covenants
shall no longer be an Event of Default, if in either case the Operating
Partnership irrevocably deposits with the applicable Trustee, in trust, money or
U.S. Government Obligations that through the payment of interest thereon and
principal thereof in accordance with their terms will provide money in an amount
sufficient to pay all of the principal of and premium, if any, and any interest
on the Debt Securities of such series on the dates such payments are due (which
may include one or more redemption dates designated by the Operating
Partnership) in accordance with the terms of such Debt Securities. Such a trust
may only be established if, among other things, (a) no Event of Default or event
which with the giving of notice or lapse of time, or both, would become an Event
of Default under the applicable Indenture shall have occurred and be continuing
on the date of such deposit, (b) no Event of Default described under clause (e)
under "-- Events of Default" above or event which with the giving of notice or
lapse of time, or both, would become an Event of Default described under such
clause (e) shall have occurred and be continuing at any time during the period
ending on the 91st day following such date of deposit and (c) the Operating
Partnership shall have delivered an Opinion of Counsel to the effect that the
Holders of the Debt Securities will not recognize gain or loss for United States
Federal income tax purposes as a result of such deposit or defeasance and will
be subject to United States Federal income tax in the same manner as if such
deposit and defeasance had not occurred, which Opinion of Counsel, in the case
of a deposit and defeasance of such Indenture with respect to the Debt
Securities of any series as described under clause (i) above, shall be based on
either (A) a ruling to such effect that the Operating Partnership has received
from, or that has been published by, the Internal Revenue Service or (B) a
change in the applicable Federal income tax law, occurring after the date of the
applicable Indenture, to such effect. In the event the Operating Partnership
omits to comply with its remaining obligations under such Indenture after a
defeasance of such Indenture with respect to the Debt Securities of any series
as described under clause (ii) above and the Debt Securities of such series are
declared due and payable because of the occurrence of any undefeased Event of
Default, the amount of money and U.S. Government Obligations on deposit with the
applicable Trustee may be insufficient to pay amounts due on the Debt Securities
of such series at the time of the acceleration resulting from such Event of
Default. However, the Operating Partnership will remain liable in respect to
such payments. (Article Thirteen)
SUBORDINATION OF SUBORDINATED DEBT SECURITIES
Unless otherwise indicated in the Prospectus Supplement, the following
provisions will apply to the Subordinated Debt Securities.
The Subordinated Debt Securities will, to the extent set forth in the
Subordinated Indenture, be subordinate in right of payment to the prior payment
in full of all Senior Debt, including the Senior Debt Securities. Upon any
payment or distribution of assets to creditors upon any liquidation,
dissolution, winding up, reorganization, assignment for the benefit of
creditors, marshalling of assets or any bankruptcy, insolvency, debt
restructuring or similar proceedings in connection with any insolvency or
bankruptcy proceeding of the Operating Partnership, the holders of Senior Debt
will first be entitled to receive payment in full of principal of (and premium,
if any) and interest, if any, on such Senior Debt before the holders of the
Subordinated Debt Securities will be entitled to receive or retain any payment
in respect of the principal of (and premium, if any) or interest, if any, on the
Subordinated Debt Securities. (Article Fifteen of the Subordinated Indenture)
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By reason of such subordination, in the event of liquidation or insolvency,
creditors of the Operating Partnership who are not holders of Senior Debt or
Subordinated Debt Securities may recover less, ratably, than holders of Senior
Debt and may recover more, ratably, than the holders of the Subordinated Debt
Securities.
In the event of the acceleration of the maturity of any Subordinated Debt
Securities, the holders of all Senior Debt outstanding at the time of such
acceleration will first be entitled to receive payment in full of all amounts
due thereon before the Holders of the Subordinated Debt Securities will be
entitled to receive any payment upon the principal of (or premium, if any) or
interest, if any, on the Subordinated Debt Securities.
No payments on account of principal (or premium, if any) or interest, if
any, in respect of the Subordinated Debt Securities may be made if there shall
have occurred and be continuing a default in any payment with respect to Senior
Debt, or an event of default with respect to any Senior Debt resulting in the
acceleration of the maturity thereof, or if any judicial proceeding shall be
pending with respect to any such default.
Unless otherwise indicated in the applicable Prospectus Supplement, "Senior
Debt" means the principal of (and premium, if any) and interest (including
interest accruing on or after the filing of any petition in bankruptcy or for
reorganization relating to the Operating Partnership to the extent such claim
for post-petition interest is allowed in such proceeding) on all indebtedness of
the Operating Partnership (including indebtedness of others guaranteed by the
Operating Partnership), other than the Subordinated Debt Securities whether
outstanding on the date of the Subordinated Indenture or thereafter created,
incurred or assumed, which is: (i) for money borrowed, (ii) evidenced by a note
or similar instrument given in connection with the acquisition of any
businesses, properties or assets of any kind or (iii) obligations of the
Operating Partnership as lessee under leases required to be capitalized on the
balance sheet of the lessee under generally accepted accounting principles or
leases of property or assets made as part of any sale and lease-back transaction
to which the Operating Partnership is a party, including amendments, renewals,
extensions, modifications and refundings of any such indebtedness or obligation,
unless in any case in the instrument creating or evidencing any such
indebtedness or obligation or pursuant to which the same is outstanding it is
provided that such indebtedness or obligation is not superior in right of
payment to the Subordinated Debt Securities.
The Subordinated Indenture does not limit or prohibit the incurrence of
additional Senior Debt, which may include indebtedness that is senior to the
Subordinated Debt Securities, but subordinate to other obligations of the
Operating Partnership. The Senior Debt Securities, when issued, will constitute
Senior Debt.
The Prospectus Supplement will set forth the aggregate amount of
outstanding indebtedness as of the most recent practicable date that by the
terms of such indebtedness and the terms of the offered Subordinated Debt
Securities would rank senior to or pari passu with such Subordinated Debt
Securities and any limitation on the issuance of additional senior or pari passu
indebtedness. The Prospectus Supplement may further describe the provisions, if
any, applicable to the subordination of the Subordinated Debt Securities of a
particular series.
GOVERNING LAW
The Indentures and the Debt Securities will be governed by, and construed
in accordance with, the laws of the State of New York. (Section 112)
REGARDING THE TRUSTEES
The Operating Partnership and certain of its subsidiaries in the ordinary
course of business maintain general banking relations with The Bank of New York.
Pursuant to the provisions of the Trust Indenture Act of 1939, upon a default
under either the Senior Indenture or the Subordinated Indenture, The Bank of New
York may be deemed to have a conflicting interest by virtue of its acting as
both the Senior Trustee and the Subordinated Trustee requiring it to resign and
be replaced by a successor trustee in one of such positions.
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DESCRIPTION OF SHARES OF BENEFICIAL INTEREST
The following descriptions of the material terms of the shares of
beneficial interest of Vornado do not purport to be complete and are subject to,
and qualified in their entirety by reference to, the more complete descriptions
thereof set forth in the following documents: (i) Vornado's Amended and Restated
Declaration of Trust, as amended, including the articles supplementary for the
Series A Preferred Shares (the "Declaration of Trust"), and (ii) its Bylaws,
copies of which are exhibits to the Registration Statement of which this
Prospectus is a part.
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 of beneficial interest must be beneficially owned by
100 or more persons during at least 335 days of a taxable year of 12 months (or
during a proportionate part of a shorter taxable year). 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 240,000,000
shares, consisting of 100,000,000 Common Shares, 20,000,000 preferred shares of
beneficial interest, no par value per share ("Preferred Shares"), and
120,000,000 excess shares of beneficial interest, $.04 par value per share
("Excess Shares"). See "-- Description of Preferred Shares -- Restrictions on
Ownership" and "-- Description of Common Shares -- Restrictions on Ownership"
for a discussion of the possible issuance of Excess Shares.
DESCRIPTION OF PREFERRED SHARES
The following is a description of the material terms and provisions of the
Preferred Shares. The particular terms of any series of Preferred Shares will be
described in the applicable Prospectus Supplement, which will supplement the
information set forth below.
The summary of the material terms of Vornado's Preferred Shares contained
in this Prospectus does not purport to be complete and is subject to, and
qualified in its entirety by, the provisions of the Declaration of Trust, which
includes the articles supplementary relating to each series of the Preferred
Shares (the "Articles Supplementary"), which will be filed as an exhibit to or
incorporated by reference in the Registration Statement of which this Prospectus
is a part at or prior to the time of issuance of such series of the Preferred
Shares.
As of the date hereof, the Declaration of Trust authorizes the issuance of
20,000,000 Preferred Shares. As of November 15, 1997, 5,750,000 Series A
Preferred Shares were outstanding. The Series A Preferred Shares are listed on
the NYSE under the symbol "VNO Pr A". A description of Vornado's Series A
Preferred Shares is set forth in Vornado's Registration Statement on Form 8-A,
filed with the Commission on April 3, 1997, and incorporated herein by
reference. The Preferred Shares authorized by the Declaration of Trust may be
issued from time to time in one or more series in such amounts and with such
designations, preferences, conversion or other rights, voting powers,
restrictions, limitations as to dividends, qualifications and terms and
conditions of redemption as may be fixed by the Board of Trustees. Under certain
circumstances, the issuance of Preferred Shares could have the effect of
delaying, deferring or preventing a change of control of Vornado and may
adversely affect the voting and other rights of the holders of Common Shares.
The Declaration of Trust authorizes the Board of Trustees to classify or
reclassify, in one or more series, any unissued Preferred Shares and to
reclassify any unissued shares of any series of Preferred Shares of any series
by setting or changing the number of Preferred Shares constituting such series
and the designations, preferences, conversion or other rights, voting powers,
restrictions, limitations as to distributions, qualifications and terms and
conditions of redemption of such Preferred Shares.
The Preferred Shares shall have the dividend, liquidation, redemption and
voting rights described below as such description may be supplemented in a
Prospectus Supplement relating to a particular series of the Preferred Shares.
The applicable Prospectus Supplement will describe the following terms of the
series of Preferred Shares in respect of which this Prospectus is being
delivered: (1) the title of such Preferred Shares and the number of shares
offered; (2) the amount of liquidation preference per share; (3) the initial
public
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offering price at which such Preferred Shares will be issued; (4) the dividend
rate (or method of calculation), the dates on which dividends shall be payable
and the dates from which dividends shall commence to cumulate, if any; (5) any
redemption or sinking fund provisions; (6) any conversion or exchange rights;
(7) any additional voting, dividend, liquidation, redemption, sinking fund and
other rights, preferences, limitations and restrictions; (8) any listing of such
Preferred Shares on any securities exchange; (9) the relative ranking and
preferences of such Preferred Shares as to dividend rights and rights upon
liquidation, dissolution or winding up of the affairs of Vornado; (10) any
limitations on issuance of any series of Preferred Shares ranking senior to or
on a parity with such series of Preferred Shares as to dividend rights and
rights upon liquidation, dissolution or winding up of the affairs of Vornado;
and (11) any limitations on direct, beneficial or constructive ownership and
restrictions on transfer, in each case as may be appropriate to preserve the
status of Vornado as a REIT. The applicable Prospectus Supplement will also
include a discussion of Federal income tax considerations applicable to such
Preferred Shares.
GENERAL
The Preferred Shares offered hereby will be issued in one or more series.
The Preferred Shares, upon issuance against full payment of the purchase price
therefor, will be fully paid and nonassessable. The liquidation preference is
not indicative of the price at which the Preferred Shares will actually trade on
or after the date of issuance.
RANK
The Preferred Shares shall, with respect to dividend rights and rights upon
liquidation, dissolution and winding up of Vornado, rank prior to the Common
Shares and Excess Shares (other than certain Excess Shares resulting from the
conversion of Preferred Shares) and to all other classes and series of equity
securities of Vornado now or hereafter authorized, issued or outstanding (the
Common Shares and such other classes and series of equity securities
collectively may be referred to herein as the "Junior Stock"), other than any
classes or series of equity securities of Vornado which by their terms
specifically provide for a ranking on a parity with (the "Parity Stock") or
senior to (the "Senior Stock") the Preferred Shares as to dividend rights and
rights upon liquidation, dissolution or winding up of Vornado. The Preferred
Shares shall be junior to all outstanding debt of Vornado. The Preferred Shares
shall be subject to creation of Senior Stock, Parity Stock and Junior Stock to
the extent not expressly prohibited by the Declaration of Trust.
DIVIDENDS
Holders of Preferred Shares shall be entitled to receive, when, as and if
authorized by the Board of Trustees out of assets of Vornado legally available
for payment, dividends, or distributions in cash, property or other assets of
Vornado or in Securities of Vornado or from any other source as the Board of
Trustees in its discretion shall determine and at such dates and at such rates
per share per annum as described in the applicable Prospectus Supplement. Such
rate may be fixed or variable or both. Each authorized dividend shall be payable
to holders of record as they appear at the close of business on the books of
Vornado on such record dates, not more than 90 calendar days preceding the
payment dates therefor, as are determined by the Board of Trustees (each of such
dates, a "Record Date").
Such dividends may be cumulative or noncumulative, as described in the
applicable Prospectus Supplement. If dividends on a series of Preferred Shares
are noncumulative and if the Board of Trustees fails to authorize a dividend in
respect of a dividend period with respect to such series, then holders of such
Preferred Shares will have no right to receive a dividend in respect of such
dividend period, and Vornado will have no obligation to pay the dividend for
such period, whether or not dividends are authorized payable on any future
dividend payment dates. If dividends of a series of Preferred Shares are
cumulative, the dividends on such shares will accrue from and after the date set
forth in the applicable Prospectus Supplement.
No full dividends shall be authorized or paid or set apart for payment on
Preferred Shares of any series ranking, as to dividends, on a parity with or
junior to the series of Preferred Shares offered by the applicable Prospectus
Supplement for any period unless full dividends for the immediately preceding
dividend period on
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such Preferred Shares (including any accumulation in respect of unpaid dividends
for prior dividend periods, if dividends on such Preferred Shares are
cumulative) have been or contemporaneously are authorized and paid or authorized
and a sum sufficient for the payment thereof is set apart for such payment. When
dividends are not so paid in full (or a sum sufficient for such full payment is
not so set apart) upon such Preferred Shares and any other Preferred Shares of
Vornado ranking on a parity as to dividends with the Preferred Shares, dividends
upon such Preferred Shares and dividends on such other Preferred Shares ranking
on a parity with the Preferred Shares shall be authorized pro rata so that the
amount of dividends authorized per share on such Preferred Shares and such other
Preferred Shares ranking on a parity with the Preferred Shares shall in all
cases bear to each other the same ratio that accrued dividends for the
then-current dividend period per share on such Preferred Shares (including any
accumulation in respect of unpaid dividends for prior dividend periods, if
dividends on such Preferred Shares are cumulative) and accrued dividends,
including required or permitted accumulations, if any, on shares of such other
Preferred Shares, bear to each other. No interest, or sum of money in lieu of
interest, shall be payable in respect of any dividend payment(s) on Preferred
Shares which may be in arrears. Unless full dividends on the series of Preferred
Shares offered by the applicable Prospectus Supplement have been authorized and
paid or set apart for payment for the immediately preceding dividend period
(including any accumulation in respect of unpaid dividends for prior dividend
periods, if dividends on such Preferred Shares are cumulative), (a) no cash
dividend or distribution (other than in shares of Junior Stock) may be
authorized, set aside or paid on the Junior Stock, (b) Vornado may not, directly
or indirectly, repurchase, redeem or otherwise acquire any shares of its Junior
Stock (or pay any monies into a sinking fund for the redemption of any shares)
except by conversion into or exchange for Junior Stock, and (c) Vornado may not,
directly or indirectly, repurchase, redeem or otherwise acquire any Preferred
Shares or Parity Stock (or pay any monies into a sinking fund for the redemption
of any shares of any such stock) otherwise than pursuant to pro rata offers to
purchase or a concurrent redemption of all, or a pro rata portion, of the
outstanding Preferred Shares and shares of Parity Stock (except by conversion
into or exchange for Junior Stock).
Any dividend payment made on a series of Preferred Shares shall first be
credited against the earliest accrued but unpaid dividend due with respect to
shares of such series.
REDEMPTION
The terms, if any, on which Preferred Shares of any series may be redeemed
will be set forth in the applicable Prospectus Supplement.
LIQUIDATION
In the event of a voluntary or involuntary liquidation, dissolution or
winding up of the affairs of Vornado, the holders of a series of Preferred
Shares will be entitled, subject to the rights of creditors, but before any
distribution or payment to the holders of Common Shares, Excess Shares (other
than certain Excess Shares resulting from the conversion of Preferred Shares) or
any Junior Stock on liquidation, dissolution or winding up of Vornado, to
receive a liquidating distribution in the amount of the liquidation preference
per share as set forth in the applicable Prospectus Supplement plus accrued and
unpaid dividends for the then-current dividend period (including any
accumulation in respect of unpaid dividends for prior dividend periods, if
dividends on such series of Preferred Shares are cumulative). If the amounts
available for distribution with respect to the Preferred Shares and all other
outstanding Parity Stock are not sufficient to satisfy the full liquidation
rights of all the outstanding Preferred Shares and Parity Stock, then the
holders of each series of such stock will share ratably in any such distribution
of assets in proportion to the full respective preferential amount (which in the
case of Preferred Shares may include accumulated dividends) to which they are
entitled. After payment of the full amount of the liquidation distribution, the
holders of Preferred Shares will not be entitled to any further participation in
any distribution of assets by Vornado.
Title 8 does not contain any specific provisions on the power of a Maryland
real estate investment trust, such as the Company, to make distributions,
including dividends, to its shareholders. It is possible that a Maryland court
may look to the Maryland General Corporation Law ("MGCL") for guidance on
matters, such as the making of distributions to shareholders, not covered by
Title 8. The MGCL requires that, after
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giving effect to a distribution, (1) the corporation must be able to pay its
debts as they become due in the usual course of business and (2) the
corporation's total assets must at least equal the sum of its total liabilities
plus the preferential rights on dissolution of stockholders whose rights on
dissolution are superior to those stockholders receiving the distribution.
However, the MGCL also provides that the charter of the corporation may provide
that senior dissolution preferences shall not be included with liabilities for
purposes of determining amounts available for distribution. The applicable
articles supplementary may include such a provision.
VOTING
The Preferred Shares of a series will not be entitled to vote, except as
described below or in the applicable Prospectus Supplement. Without the
affirmative vote of a majority of the Preferred Shares then outstanding (voting
separately as a class together with any Parity Stock), Vornado may not (i)
increase or decrease the aggregate number of authorized shares of such class or
any security ranking prior to the Preferred Shares, (ii) increase or decrease
the par value of the shares of holders of such class or (iii) alter or change
the voting or other powers, preferences or special rights of such class so as to
affect them adversely. An amendment which increases the number of authorized
shares of or authorizes the creation or issuance of other classes or series of
Junior Stock or Parity Stock, or substitutes the surviving entity in a merger,
consolidation, reorganization or other business combination for Vornado, shall
not be considered to be such an adverse change.
NO OTHER RIGHTS
The shares of a series of Preferred Shares will not have any preferences,
conversion or other rights, voting powers, restrictions, limitations as to
dividends and other distributions, qualifications, and terms and conditions of
redemption except as set forth above or in the applicable Prospectus Supplement,
the Declaration of Trust and in the applicable Articles Supplementary or as
otherwise required by law.
TRANSFER AGENT AND REGISTRAR
The transfer agent for each series of Preferred Shares will be described in
the related Prospectus Supplement.
RESTRICTIONS ON OWNERSHIP
As discussed below, for Vornado to maintain its qualification as a REIT
under the Code, not more than 50% in value of its outstanding shares of
beneficial interest may be owned, directly or constructively, by five or fewer
individuals (as defined in the Code to include certain entities) at any time
during the last half of a taxable year, and the shares of beneficial interest
must be beneficially owned by 100 or more persons during at least 335 days of a
taxable year of 12 months (or during a proportionate part of a shorter taxable
year). Therefore, the Declaration of Trust contains, and the Articles
Supplementary for each series of Preferred Shares may contain, provisions
restricting the ownership and transfer of the Preferred Shares.
The Declaration of Trust contains a limitation that restricts shareholders
from owning, under the applicable attribution rules of the Code, more than 9.9%
of the outstanding Preferred Shares of any series (the "Preferred Shares
Beneficial Ownership Limit"). The attribution rules which apply for purposes of
the Common Shares Beneficial Ownership Limit (as defined below) also apply for
purposes of the Preferred Shares Beneficial Ownership Limit. See "-- Description
of Common Shares -- Restrictions on Ownership". Shareholders should be aware
that events other than a purchase or other transfer of Preferred Shares may
result in ownership, under the applicable attribution rules of the Code, of
Preferred Shares in excess of the Preferred Shares Beneficial Ownership Limit.
Shareholders are urged to consult their own tax advisors concerning the
application of the attribution rules of the Code in their particular
circumstances.
Holders of Preferred Shares are also subject to the Constructive Ownership
Limit (as defined below in "-- Description of Common Shares -- Restrictions on
Ownership"), which restricts them from owning, under the applicable attribution
rules of the Code, more than 9.9% of the outstanding Preferred Shares of any
series.
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The attribution rules which apply for purposes of the Constructive Ownership
Limit differ from those that apply for purposes of the Preferred Shares
Beneficial Ownership Limit. See "-- Description of Common Shares -- Restrictions
on Ownership". Shareholders should be aware that events other than a purchase or
other transfer of Preferred Shares may result in ownership, under the applicable
attribution rules of the Code, of Preferred Shares in excess of the Constructive
Ownership Limit. Shareholders are urged to consult their own tax advisors
concerning the application of the attribution rules of the Code in their
particular circumstances.
The Declaration of Trust provides that a transfer of Preferred Shares that
would otherwise result in ownership, under the applicable attribution rules of
the Code, of Preferred Shares in excess of the Preferred Shares Beneficial
Ownership Limit or the Constructive Ownership Limit, or which would cause the
shares of beneficial interest of Vornado 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 Preferred Shares. In addition, Preferred
Shares that would otherwise be owned, under the applicable attribution rules of
the Code, in excess of the Preferred Shares Beneficial Ownership Limit or the
Constructive Ownership Limit will be automatically exchanged for Excess Shares
that will be transferred, by operation of law, to 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 Preferred Shares
Beneficial Ownership Limit or the Constructive Ownership Limit may be
designated, at which time the Excess Shares will be automatically exchanged for
Preferred Shares of the same class as the Preferred Shares which were originally
exchanged for such Excess Shares. The Declaration of Trust contains provisions
designed to ensure that the purported transferee or other purported holder of
the Excess Shares may not receive in return for such a transfer an amount that
reflects any appreciation in the Preferred Shares for which such Excess Shares
were exchanged during the period that such Excess Shares were outstanding but
will bear the burden of any decline in value during such period. Any amount
received by a purported transferee or other purported holder for designating a
beneficiary in excess of the amount permitted to be received must be turned over
to Vornado. The Declaration of Trust provides that Vornado may purchase any
Excess Shares that have been automatically exchanged for Preferred Shares as a
result of a purported transfer or other event. The price at which Vornado may
purchase such Excess Shares shall be equal to the lesser of (i) in the case of
Excess Shares resulting from a purported transfer for value, the price per share
in the purported transfer that resulted in the automatic exchange for Excess
Shares or, in the case of Excess Shares resulting from some other event, the
market price of the Preferred Shares exchanged on the date of the automatic
exchange for Excess Shares and (ii) the market price of the Preferred Shares
exchanged for such Excess Shares on the date that the Company accepts the deemed
offer to sell such Excess Shares. 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 may exempt certain persons from the Preferred Shares
Beneficial Ownership Limit or the Constructive Ownership Limit if evidence
satisfactory to the trustees is presented showing that such exemption will not
jeopardize 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 (the "IRS") 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.
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All certificates evidencing Preferred Shares will bear a legend referring
to the restrictions described above.
All persons who own, directly or by virtue of the applicable attribution
rules of the Code, more than 2% of the outstanding Preferred Shares of any
series must give a written notice to 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 Vornado 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.
DEPOSITARY SHARES
Vornado may, at its option, elect to offer receipts for fractional
interests ("Depositary Shares") in Preferred Shares, rather than full Preferred
Shares. In such event, receipts ("Depositary Receipts") for Depositary Shares,
each of which will represent a fraction (to be set forth in the Prospectus
Supplement relating to a particular series of Preferred Shares) of a share of a
particular series of Preferred Shares, will be issued as described below.
The description set forth below of the material provisions of the Deposit
Agreement and of the Depositary Shares and Depositary Receipts (each as defined
below) does not purport to be complete and is subject to and qualified in its
entirety by reference to the forms of Deposit Agreement and Depositary Receipts
relating to each series of the Preferred Shares which have been or will be filed
with the Commission at or prior to the time of the offering of such series of
the Preferred Shares. The particular terms of Depositary Shares representing
fractional interests in any particular series of Preferred Shares will be
described in the applicable Prospectus Supplement, which will supplement the
information set forth herein.
GENERAL
The shares of any series of Preferred Shares represented by Depositary
Shares will be deposited under a Deposit Agreement (the "Deposit Agreement")
between Vornado and the depositary (the "Depositary"). Subject to the terms of
the Deposit Agreement, each owner of a Depositary Share will be entitled, in
proportion to the applicable fraction of a Preferred Share represented by such
Depositary Share, to all the preferences, conversion or other rights, voting
powers, restrictions, limitations as to dividends and other distributions,
qualifications and terms and conditions of redemption of the Preferred Shares
represented thereby.
DIVIDENDS AND OTHER DISTRIBUTIONS
The Depositary will distribute all cash dividends or other cash
distributions received in respect of the Preferred Shares to the record holders
of Depositary Shares relating to such Preferred Shares in proportion to the
numbers of such Depositary Shares owned by such holders.
In the event of a distribution other than in cash, the Depositary will
distribute property received by it to the record holders of Depositary Shares in
an equitable manner, unless the Depositary determines that it is not feasible to
make such distribution, in which case the Depositary may sell such property and
distribute the net proceeds from such sale to such holders.
WITHDRAWAL OF PREFERRED SHARES
Upon surrender of Depositary Receipts at the corporate trust office of the
Depositary (unless the related Depositary Shares have previously been called for
redemption or converted into Excess Shares or otherwise), the holders thereof
will be entitled to delivery at such office, to or upon such holder's order, of
the number of whole or fractional shares of the class or series of Preferred
Shares and any money or other property represented by the Depositary Shares
evidenced by such Depositary Receipts. Holders of Depositary Receipts will be
entitled to receive whole or fractional shares of the related class or series of
Preferred Shares on the basis of the proportion of Preferred Shares represented
by each Depositary Share as specified in the applicable
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Prospectus Supplement, but holders of such Preferred Shares will not thereafter
be entitled to receive Depositary Shares thereof. If the Depositary Receipts
delivered by the holder evidence a number of Depositary Shares in excess of the
number of Depositary Shares representing the number of shares of Preferred
Shares to be withdrawn, the Depositary will deliver to such holder at the same
time a new Depositary Receipt evidencing such excess number of Depositary
Shares.
REDEMPTION OF DEPOSITARY SHARES
If a series of Preferred Shares represented by Depositary Shares is subject
to redemption, the Depositary Shares will be redeemed from the proceeds received
by the Depositary resulting from the redemption, in whole or in part, of such
series of Preferred Shares held by the Depositary. The redemption price per
Depositary Share will be equal to the applicable fraction of the redemption
price per share payable with respect to such series of the Preferred Shares.
Whenever Vornado redeems Preferred Shares held by the Depositary, the Depositary
will redeem as of the same redemption date the number of Depositary Shares
representing Preferred Shares so redeemed. If fewer than all the Depositary
Shares are to be redeemed, the Depositary Shares to be redeemed will be selected
by lot, pro rata or by any other equitable method as may be determined by the
Depositary.
VOTING THE PREFERRED SHARES
Upon receipt of notice of any meeting at which the holders of the Preferred
Shares are entitled to vote, the Depositary will mail the information contained
in such notices of meeting to the record holders of the Depositary Shares
relating to such Preferred Shares. Each record holder of such Depositary Shares
on the record date (which will be the same date as the record date for the
Preferred Shares) will be entitled to instruct the Depositary as to the exercise
of the voting rights pertaining to the amount of the Preferred Shares
represented by such holder's Depositary Shares. The Depositary will endeavor,
insofar as practicable, to vote the amount of the Preferred Shares represented
by such Depositary Shares in accordance with such instructions, and Vornado will
agree to take all reasonable action which may be deemed necessary by the
Depositary in order to enable the Depositary to do so. The Depositary will
abstain from voting the Preferred Shares to the extent it does not receive
specific instructions from the holder of Depositary Shares representing such
Preferred Shares.
AMENDMENT AND TERMINATION OF THE DEPOSIT AGREEMENT
The form of Depositary Receipt evidencing the Depositary Shares and any
provision of the Deposit Agreement may at any time be amended by agreement
between Vornado and the Depositary. However, any amendment which materially and
adversely alters the rights of the holders of Depositary Shares will not be
effective unless such amendment has been approved by the holders of at least a
majority of the Depositary Shares then outstanding. The Deposit Agreement will
only terminate if (i) all outstanding Depositary Shares have been redeemed or
(ii) there has been a final distribution in respect of the Preferred Shares in
connection with any liquidation, dissolution or winding up of Vornado and such
distribution has been distributed to the holders of the related Depositary
Shares.
CHARGES OF DEPOSITARY
Vornado will pay all transfer and other taxes and governmental charges
arising solely from the existence of the depositary arrangements. Vornado will
pay charges of the Depositary in connection with the initial deposit of the
Preferred Shares and issuance of Depositary Receipts, all withdrawals of
Preferred Shares by owners of Depositary Shares and any redemption of the
Preferred Shares. Holders of Depositary Receipts will pay other transfer and
other taxes and governmental charges and such other charges as are expressly
provided in the Deposit Agreement to be for their accounts.
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RESIGNATION AND REMOVAL OF DEPOSITARY
The Depositary may resign at any time by delivering to Vornado notice of
its election to do so, and Vornado may at any time remove the Depositary, any
such resignation or removal to take effect upon the appointment of a successor
Depositary and its acceptance of such appointment. Such successor Depositary
must be appointed within 60 days after delivery of the notice of resignation or
removal and must be a bank or trust company having its principal office in the
United States and having a combined capital and surplus of at least $50,000,000.
RESTRICTIONS ON OWNERSHIP
In order to safeguard Vornado against an inadvertent loss of REIT status,
the Deposit Agreement or the Declaration of Trust will contain provisions
restricting the ownership and transfer of Depositary Shares. Such restrictions
will be described in the applicable Prospectus Supplement.
MISCELLANEOUS
The Depositary will forward all reports and communications from Vornado
which are delivered to the Depositary and which Vornado is required or otherwise
determines to furnish to the holders of the Preferred Shares.
Neither the Depositary nor Vornado will be liable if it is prevented or
delayed by law or any circumstance beyond its control in performing its
obligations under the Deposit Agreement. The obligations of Vornado and the
Depositary under the Deposit Agreement will be limited to performance in good
faith of their duties thereunder and they will not be obligated to prosecute or
defend any legal proceeding in respect of any Depositary Shares or Preferred
Shares unless satisfactory indemnity is furnished. They may rely upon written
advice of counsel or accountants, or information provided by persons presenting
Preferred Shares for deposit, holders of Depositary Shares or other persons
believed to be competent and on documents believed to be genuine.
DESCRIPTION OF COMMON SHARES
As of November 15, 1997, 69,229,079 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".
The holders of Common Shares are entitled to receive dividends when, if and
as authorized by the Board of Trustees of Vornado out of assets legally
available therefor, provided that if any Preferred Shares are at the time
outstanding, the payment of dividends on Common Shares or other distributions
(including purchases of Common Shares) may be subject to the declaration and
payment of full cumulative dividends, and the absence of arrearages in any
mandatory sinking fund, on outstanding Preferred Shares.
The holders of Common Shares are entitled to one vote for each share on all
matters voted on by 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, and any Common Shares offered by a
Prospectus Supplement, upon issuance, will be, fully paid and non-assessable.
The transfer agent for the Common Shares is First Union National Bank,
Charlotte, North Carolina.
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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 advisors concerning the
application of the attribution rules of the Code in their particular
circumstances.
Under the Code, rental income received by a REIT from persons in which the
REIT is treated, under the applicable attribution rules of the Code, as owning a
10% or greater interest does not constitute qualifying income for purposes of
the income requirements that REITs must satisfy. For these purposes, a REIT is
treated as owning any stock owned, under the applicable attribution rules of the
Code, by a person that owns 10% or more of the value of the outstanding shares
of the REIT. Therefore, in order to ensure that rental income of the Company
will not be treated as nonqualifying income under the rule described above, and
thus to ensure that there will not be an inadvertent loss of REIT status as a
result of the ownership of shares of a tenant, or a person that holds an
interest in a tenant, the Declaration of Trust also contains an ownership limit
that restricts, with certain exceptions, shareholders from owning, under the
applicable attribution rules of the Code (which are different from those
applicable with respect to the Common Shares Beneficial Ownership Limit), more
than 9.9% of the outstanding shares of any class (the "Constructive Ownership
Limit"). The shareholders who owned, under the applicable attribution rules of
the Code, shares in excess of the Constructive Ownership Limit immediately after
the Merger generally are not subject to the Constructive Ownership Limit.
Subject to an exception for tenants and subtenants from whom the REIT receives,
directly or indirectly, rental income that is not in excess of a specified
threshold, the Declaration of Trust also contains restrictions that are designed
to ensure that the shareholders who owned, under the applicable attribution
rules of the Code, shares in excess of the Constructive Ownership Limit
immediately after the Merger will not, in the aggregate, own an interest in a
tenant or subtenant of the REIT of sufficient magnitude to cause rental income
received, directly or indirectly, by the REIT from such tenant or subtenant to
be treated as nonqualifying income for purposes of the income requirements that
REITs must satisfy.
Shareholders should be aware that events other than a purchase or other
transfer of shares can result in ownership, under the applicable attribution
rules of the Code, of shares in excess of the Constructive
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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 advisors 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
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 IRS 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.
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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 Securities is for general information
only, and is not tax advice. The tax treatment of a holder of Securities will
vary depending upon the holder's particular situation, and this discussion
addresses only holders that hold Securities as capital assets and does not
purport to deal with all aspects of taxation that may be relevant to particular
holders in light of their personal investment or tax circumstances, or to
certain types of holders (including dealers in securities or currencies, traders
in securities that elect to mark-to-market, banks, tax-exempt organizations,
life insurance companies, persons that hold Securities that are a hedge or that
are hedged against currency risks or that are part of a straddle or conversion
transaction, 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 SECURITIES,
INCLUDING THE FEDERAL, STATE, LOCAL AND FOREIGN TAX CONSEQUENCES OF SUCH
ACQUISITION, OWNERSHIP AND SALE IN THEIR PARTICULAR CIRCUMSTANCES AND POTENTIAL
CHANGES IN APPLICABLE LAWS.
TAXATION OF THE COMPANY AS A REIT
GENERAL
In the opinion of Sullivan & Cromwell, commencing with its taxable year
ended December 31, 1993, Vornado has been organized and operated in conformity
with the requirements for qualification and taxation as a REIT under the Code,
and Vornado's proposed method of operation will enable it to continue to meet
the requirements for qualification and taxation as a REIT under the Code.
Investors should be aware, however, that opinions of counsel are not binding
upon the Internal Revenue Service or any court. In providing its opinion,
Sullivan & Cromwell is relying upon (i) representations received from Vornado
and (ii) an opinion of Shearman & Sterling as to the qualification of
Alexander's as a REIT. In providing its opinion to the effect that, commencing
with Alexander's taxable year ending December 31, 1995, Alexander's has been
organized and operated in conformity with the requirements for qualification and
taxation as a REIT under the Code, and Alexander's proposed method of operation
will enable it to continue to meet the requirements for qualification and
taxation as a REIT under the Code, Shearman & Sterling is in turn relying upon
representations received from Alexander's. The qualification and taxation of
Vornado and Alexander's as REITs depends upon their ability to meet, through
actual annual operating results, distribution levels, stock ownership
requirements and the various qualification tests imposed under the Code.
Accordingly, while Vornado intends to continue to qualify to be taxed as a REIT,
no assurance can be given that the actual results of Vornado's or Alexander's
operations for any particular year will satisfy such requirements. Neither
Sullivan & Cromwell nor Shearman & Sterling will monitor the compliance of the
Company or Alexander's with the requirements for REIT qualification on an
ongoing basis.
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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 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.
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Vornado has satisfied conditions (1) through (5) and believes that it has
also satisfied condition (6). In addition, Vornado's 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 Preferred
Shares and the Common Shares are described above under the headings "Description
of Shares of Beneficial Interest -- Description of Preferred
Shares -- Restrictions on Ownership" and "Description of Shares of Beneficial
Interest -- Description of Common Shares -- Restrictions on Ownership."
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 its 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
its 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 each 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 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
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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 taxable years beginning with its taxable year ending December
31, 1995 and continues to so qualify. In the opinion of Shearman & Sterling,
commencing with Alexander's taxable year ended December 31, 1995, Alexander's
has been organized and operated in conformity with the requirements for
qualification and taxation as a REIT under the Code, and its proposed method of
operation will enable it to continue to meet the requirements for qualification
and taxation as a REIT under the Code. In providing its opinion, Shearman &
Sterling is relying upon representations received from Alexander's.
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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.
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 DEBT SECURITIES
As used herein, the term "U.S. Holder" means a holder of a Debt Security
who (for United States Federal income tax purposes) is (i) a citizen or resident
of the United States, (ii) a domestic corporation, (iii) an estate, the income
of which is subject to United States federal income tax without regard to its
source or (iv) a Trust if a court within the United States is able to exercise
primary supervision over the administration of the Trust and one or more United
States persons have the authority to control all substantial decisions of the
Trust and "U.S. Alien Holder" means a holder of a Debt Security who (for United
States Federal income tax purposes) is (i) a nonresident alien individual or
(ii) a foreign corporation, partnership or estate or trust, in either case not
subject to United States Federal income tax on a net income basis in respect of
income or gain from the Debt Security.
U.S. HOLDERS
PAYMENTS OF INTEREST. Interest on a Debt Security will be taxable to a
U.S. Holder as ordinary income at the time it is received or accrued, depending
on the U.S. Holder's method of accounting for tax purposes.
PURCHASE, SALE AND RETIREMENT OF THE DEBT SECURITIES. A U.S. Holder's tax
basis in a Debt Security will generally be its U.S. dollar cost.
A U.S. Holder will generally recognize gain or loss on the sale or
retirement of a Debt Security equal to the difference between the amount
realized on the sale or retirement and the U.S. Holder's tax basis in the Debt
Security. Except to the extent attributable to accrued but unpaid interest, gain
or loss recognized on the sale or retirement of a Debt Security will be capital
gain or loss, will be long-term capital gain or loss if the Debt Security was
held for more than one year and may be eligible for a reduced rate of tax if the
Debt Security was held for more than 18 months and in certain other
circumstances.
U.S. ALIEN HOLDERS
This discussion assumes that the Debt Security is not subject to the rules
of Section 871(h)(4)(A) of the Code (relating to interest payments that are
determined by reference to the income, profits, changes in the value of property
or other attributes of the debtor or a related party).
Under present United States Federal income and estate tax law, and subject
to the discussion of backup withholding below:
(i) payments of principal, premium (if any) and interest by the
Operating Partnership or any of its paying agents to any holder of a Debt
Security that is a U.S. Alien Holder will not be subject to United States
Federal withholding tax if, in the case of interest (a) the beneficial
owner of the Debt Security does not actually or constructively own 10% or
more of the capital or profits interest in the Operating Partnership, (b)
the beneficial owner of the Debt Security is not a controlled foreign
corporation that is related to the Operating Partnership through stock
ownership, and (c) either (A) the beneficial owner of the Debt Security
certifies to the Operating Partnership or its agent, under penalties of
perjury, that it is not a U.S. person and provides its name and address or
(B) a securities clearing organization, bank or other financial institution
that holds customers' securities in the ordinary course of its trade or
business (a "financial institution") and holds the Debt Security certifies
to the Operating Partnership or its agent under penalties of perjury that
such statement has been received from the beneficial owner by it or by a
financial institution between it and the beneficial owner and furnishes the
payor with a copy thereof;
(ii) a U.S. Alien Holder of a Debt Security will not be subject to
United States Federal withholding tax on any gain realized on the sale or
exchange of a Debt Security; and
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<PAGE> 39
(iii) a Debt Security held by an individual who at death is not a
citizen or resident of the United States will not be includible in the
individual's gross estate for purposes of the United States Federal estate
tax as a result of the individual's death if (a) the individual did not
actually or constructively own 10% or more of the capital or profits
interest in the Operating Partnerships and (b) the income on the Debt
Security would not have been effectively connected with a United States
trade or business of the individual at the time of the individual's death.
The Internal Revenue Service has adopted regulations (the "Withholding
Regulations") that provide alternative methods for satisfying the certification
requirement described in clause (i)(c) above. The Withholding Regulations also
require, in the case of Debt Securities held by a foreign partnership, that (x)
the certification described in clause (i)(c) above be provided by the partners
rather than the partnership and (y) the partnership provide certain information,
including a United States taxpayer identification number. A look-through rule
applies in the case of tiered partnerships. The Withholding Regulations are
effective for payments made after December 31, 1998.
INFORMATION REPORTING AND BACKUP WITHHOLDING
U.S. HOLDERS. In general, information reporting requirements will apply to
payments of principal, any premium and interest on a Debt Security and the
proceeds of the sale of a Debt Security before maturity within the United States
to non-corporate U.S. Holders, and "backup withholding" at a rate of 31% will
apply to such payments if the U.S. Holder fails to provide an accurate taxpayer
identification number or is notified by the Internal Revenue Service that it has
failed to report all interest and dividends required to be shown on its federal
income tax returns.
U.S. ALIEN HOLDERS. Information reporting and backup withholding will not
apply to payments of principal, premium (if any) and interest made by the
Operating Partnership or a paying agent to a U.S. Alien Holder on a Debt
Security if the certification described in clause (i)(c) under "U.S. Alien
Holders" above is received, provided that the payor does not have actual
knowledge that the holder is a U.S. person. See the discussion of Withholding
Regulations under "U.S. Alien Holders" above. The Operating Partnership or a
paying agent, however, may report (on Internal Revenue Form 1042-S) payments of
interest on the Debt Securities.
Payments of the proceeds from the sale by a U.S. Alien Holder of a Debt
Security made to or through a foreign office of a broker will not be subject to
information reporting or backup withholding, except that if the broker is a U.S.
person, a controlled foreign corporation for United States Federal income tax
purposes or a foreign person 50% or more of whose gross income is effectively
connected with a United States trade or business for a specified three-year
period, information reporting may apply to such payments. Payments of the
proceeds from the sale of a Debt Security to or through the United States office
of a broker is subject to information reporting and backup withholding unless
the holder or beneficial owner certifies as to its non-United States status or
otherwise establishes an exemption from information reporting and backup
withholding.
The applicable Prospectus Supplement will contain a discussion of any
special United States Federal income tax rules with respect to Debt Securities
that are issued at a discount or premium or as a unit with other Securities,
have a maturity of one year or less, provide for conversion rights, contingent
payments, early redemption or payments that are denominated in or determined by
reference to a currency other than the U.S. dollar or otherwise subject to
special United States Federal income tax rules.
TAXATION OF HOLDERS OF COMMON SHARES OR PREFERRED SHARES
U.S. SHAREHOLDERS
As used herein, the term "U.S. Shareholder" means a holder of Common Shares
or Preferred Shares ("Shares") who (for United States Federal income tax
purposes) is (i) a citizen or resident of the United States, (ii) a corporation
organized under the laws of the United States or any State, or (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
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<PAGE> 40
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 taxable U.S.
Shareholders as ordinary income. Such distributions will not be eligible for the
dividends-received deduction in the case of U.S. Shareholders that are
corporations. Distributions made by 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 Shares for tax purposes by the amount of such distribution (but not below
zero), with distributions in excess of a U.S. Shareholder's adjusted basis in
his shares taxable as capital gains (provided that the Shares have been held as
a capital asset). For purposes of determining the portion of distributions on
separate classes of Shares that will be treated as dividends for Federal income
tax purposes, current and accumulated earnings and profits will be allocated to
distributions resulting from priority rights of Preferred Shares before being
allocated to other distributions. Dividends authorized by 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 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 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.
Upon any sale or other disposition of Shares, a U.S. Shareholder will
recognize gain or loss for Federal income tax purposes in an amount equal to the
difference between (i) the amount of cash and the fair market value of any
property received on such sale or other disposition, and (ii) the holder's
adjusted basis in the Shares for tax purposes. Such gain or loss will be capital
gain or loss if the Shares have been held by the U.S. Shareholder as a capital
asset, will be long-term gain or loss if such 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 shares of Vornado 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.
39
<PAGE> 41
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 (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.
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<PAGE> 42
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 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
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<PAGE> 43
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 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 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 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. The Withholding Regulations are effective for payments made after
December 31, 1998.
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. 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
Vornado and the Operating Partnership may sell the Securities to one or
more underwriters for public offering and sale by them or may sell the
Securities to investors directly or through agents. Vornado's Common Shares
being registered hereby may be issued in connection with the exchange of the
Debt Securities of the Operating Partnership. Any such underwriter or agent
involved in the offer and sale of the Securities will be named in the related
Prospectus Supplement. Such underwriters may include Goldman, Sachs & Co., or a
group of underwriters represented by firms including Goldman, Sachs & Co.
Goldman, Sachs & Co. may also act as agents. Vornado and the Operating
Partnership have reserved the right to sell the Securities directly to investors
on their own behalf in those jurisdictions where it is authorized to do so.
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<PAGE> 44
Underwriters may offer and sell the Securities at a fixed price or prices
that may be changed or at negotiated prices. Vornado and the Operating
Partnership also may, from time to time, authorize dealers, acting as Vornado's
or the Operating Partnership's agents, to offer and sell the Securities upon
such terms and conditions as set forth in the related Prospectus Supplement. In
connection with the sale of the Securities, underwriters may receive
compensation from Vornado or the Operating Partnership in the form of
underwriting discounts or commissions and may also receive commissions from
purchasers of the Securities for whom they may act as agent. Underwriters may
sell the Securities to or through dealers, and such dealers may receive
compensation in the form of discounts, concessions or commissions from the
underwriters and/or commissions (which may be changed from time to time) from
the purchasers for whom they may act as agents.
Any underwriting compensation paid by Vornado or the Operating Partnership
to underwriters or agents in connection with the offering of the Securities, and
any discounts, concessions or commissions allowed by underwriters to
participating dealers, will be set forth in the related Prospectus Supplement.
Dealers and agents participating in the distribution of the Securities may be
deemed to be underwriters, and any discounts and commissions received by them
and any profit realized by them on resale of the Securities may be deemed to be
underwriting discounts and commissions under the Securities Act. Underwriters,
dealers and agents may be entitled, under agreements entered into with Vornado
or the Operating Partnership, to indemnification against and contribution
towards certain civil liabilities, including any liabilities under the
Securities Act.
Any Securities issued hereunder (other than Common Shares and Series A
Preferred Shares) will be new issues of securities with no established trading
market. Any underwriters or agents to or through whom such Securities are sold
by Vornado or the Operating Partnership for public offering and sale may make a
market in such Securities, but such underwriters or agents will not be obligated
to do so and may discontinue any market making at any time without notice. No
assurance can be given as to the liquidity of the trading market for any such
Securities.
Certain of the underwriters, dealers or agents and their associates may
engage in transactions with, and perform services for, Vornado, the Operating
Partnership and certain of their affiliates in the ordinary course of business.
EXPERTS
The consolidated financial statements and the related consolidated
financial statement schedules incorporated in this Prospectus by reference from
Vornado's Annual Report on Form 10-K for the year ended December 31, 1996, as
amended, the Balance Sheet of Vornado Realty L.P. as at April 14, 1997
incorporated by reference in this Prospectus from Vornado Realty L.P.'s
Registration Statement on Form 10 filed with the Commission on June 12, 1997, as
amended, the combined statement of revenues and certain expenses of Ninety Park
Avenue incorporated by reference in this Prospectus from Vornado Realty Trust's
Current Report on Form 8K/A, dated August 21, 1997 and filed with the Commission
on September 11, 1997 and from Vornado Realty L.P.'s Current Report on Form
8K/A, dated August 21, 1997 and filed with the Commission on September 11, 1997,
and the consolidated financial statements of URS Logistics, Inc. for the year
ended December 31, 1996, the statement and revenues and certain expenses of the
Montehiedra Town Center for the year ended December 31, 1996, and the statement
of revenues and certain expenses of the Riese Properties for the year ended
April 30, 1997, all incorporated by reference in this Prospectus from Vornado
Realty Trust's Current Report on Form 8-K, dated September 22, 1997 and filed
with the Commission on October 8, 1997 and from Vornado Realty L.P.'s Current
Report on Form 8-K, dated September 22, 1997 and filed with the Commission on
October 8, 1997, 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 financial statements of 866 U.N. Plaza Associates LLC; the combined
financial statements of M Eleven Associates, M393 Associates and Eleven Penn
Plaza Company; the financial statements of Two Penn Plaza Associates L.P.; the
financial statements of 1740 Broadway Associates, L.P.; and the financial
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<PAGE> 45
statements of B&B Park Avenue L.P., all incorporated herein by reference from
Vornado's Current Report on Form 8-K, dated March 12, 1997, as amended by
Vornado's Current Report on Form 8-K/A, dated March 12, 1997, and the combined
financial statements of the Mendik Predecessors incorporated by reference herein
from the Vornado Realty L.P. Registration Statement on Form 10 filed with the
Commission on June 12, 1997, as amended, have been audited by Friedman Alpren &
Green LLP, independent auditors, as stated in their reports which are
incorporated herein by reference, and have been so incorporated in reliance upon
the report of such firm given upon their authority as experts in accounting and
auditing.
The financial statements of Two Park Company, a New York general
partnership, as of December 31, 1996 and 1995, and for each of the years in the
three year period ended December 31, 1996, incorporated herein by reference from
Vornado's Current Report on Form 8-K, dated March 12, 1997, as amended by
Vornado's Current Report on Form 8-K/A, dated March 12, 1997, and the
consolidated balance sheets of Americold Corporation as of the last day of
February 1996 and 1997, and the related consolidated statements of operations,
common stockholders' deficit and cash flows for each of the years in the
three-year period ended the last day of February 1997, incorporated by reference
in this Prospectus from Vornado Realty Trust's Current Report on Form 8-K, dated
September 22, 1997 and filed with the Commission on October 8, 1997, and from
Vornado Realty L.P.'s Current Report on Form 8-K, dated September 22, 1997 and
filed with the Commission on October 8, 1997, have been audited by KPMG Peat
Marwick 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 statement of Revenue and Certain Expenses of Green Acres Mall and the
Plaza at Green Acres for the year ended December 31, 1996 incorporated by
reference in this Prospectus and elsewhere in the Registration Statement from
Vornado Realty Trust's Current Report on Form 8K/A, dated August 21, 1997 and
filed with the Commission on September 11, 1997 and from Vornado Realty L.P.'s
Current Report on Form 8K/A, dated August 21, 1997 and filed with the Commission
on September 11, 1997, have been audited by Arthur Andersen LLP, independent
public accountants, as indicated in their report with respect thereto, and are
included herein in reliance upon the authority of said firm as experts in giving
said reports.
VALIDITY OF THE SECURITIES
The validity of any Debt Securities issued hereunder will be passed upon
for the Operating Partnership and the validity of any Depositary Shares issued
hereunder will be passed upon for Vornado by Sullivan & Cromwell, New York, New
York, counsel to Vornado and the Operating Partnership, and the validity of any
Preferred Shares or Common Shares issued hereunder will be passed upon for
Vornado by Ballard Spahr Andrews & Ingersoll, Baltimore, Maryland, counsel to
Vornado. The validity of any Securities issued hereunder will be passed upon for
any underwriters by the counsel named in the applicable Prospectus Supplement.
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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The estimated expenses in connection with the issuance and distribution of
the securities being registered, other than Underwriting Compensation, are as
follows:
<TABLE>
<S> <C>
SEC registration fee.................................................. $ 909,092.00
Printing and engraving expenses....................................... $ 500,000.00
Legal fees and disbursements.......................................... $1,000,000.00
Accounting fees and disbursements..................................... $ 300,000.00
Transfer Agent's, Depositary's and Trustee's fees and disbursements... $ 100,000.00
Blue Sky fees and expenses............................................ $ 100,000.00
Miscellaneous (including listing and rating agency fees).............. $1,000,000.00
-------------
Total....................................................... $3,909,092.00
=============
</TABLE>
ITEM 15. 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.
Vornado's Declaration of Trust authorizes it 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 trustee, officer, employee or agent.
Vornado's Bylaws require it 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
II-1
<PAGE> 47
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 of 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.
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 Commission, such indemnification is against public policy as expressed in
the Securities Act and is, therefore, unenforceable. In addition,
indemnification may be limited by state securities laws.
The First Amended and Restated Agreement of Limited Partnership, dated as
of April 15, 1997 (the "Partnership Agreement"), of the Operating Partnership
provides, generally, for the indemnification of an "indemnities" against losses,
claims, damages, liabilities, expenses (including, without limitation,
attorneys' fees and other legal fees and expenses), judgments, fines,
settlements and other amounts that relate to the operations of the Operating
Partnership unless it is established that (i) the act or omission of the
Indemnitee was material and either was committed in bad faith or pursuant to
active and deliberate dishonesty, (ii) the Indemnitee actually received an
improper personal benefit in money, property or services or (iii) in the case of
any criminal proceeding, the Indemnitee had reasonable cause to believe that the
act or omission was unlawful. For this purpose, the term "Indemnitee" includes
(i) any person made a party to a proceeding by reason of its status as (A) the
general partner of the Operating Partnership, (B) a limited partner of the
Operating Partnership or (C) an officer of the Operating Partnership or a
trustee, officer or shareholder of Vornado and (ii) such other persons
(including affiliates of Vornado or the Operating Partnership) as Vornado may
designate from time to time in its discretion. Any such indemnification will be
made only out of assets of the Operating Partnership, and in no event may an
Indemnitee subject the limited partners of the Operating Partnership to personal
liability by reason of the indemnification provisions in the Partnership
Agreement. Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted pursuant to the foregoing provisions or
otherwise, the Operating Partnership has been advised that, in the opinion of
the Securities and Exchange Commission, such indemnification is against public
policy and, therefore, unenforceable. The Operating Partnership has purchased
liability insurance for the purpose of providing a source of funds to pay the
indemnification described above.
II-2
<PAGE> 48
ITEM 16. EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT
NO. EXHIBIT
- ------- ------------------------------------------------------------------------------------
<C> <S>
1.1* Form of Underwriting Agreement (for Common Shares)
1.2* Form of Underwriting Agreement (for Preferred Shares)
1.3* Form of Underwriting Agreement (for Debt Securities)
3.1 Amended and Restated Declaration of Trust of Vornado, amended April 3, 1997
(incorporated by reference to Exhibit 3.1 of Vornado's Registration Statement on
Form S-8 (File No. 333-29011), filed on June 12, 1997)
3.2 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)
3.3 First Amended and Restated Agreement of Limited Partnership of the Operating
Partnership, dated as of April 15, 1997 (incorporated by reference to Exhibit 3.1 of
the Operating Partnership's Registration Statement on Form 10 (File No. 000-22685),
filed on June 12, 1997)
4.1 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)
4.2 Specimen certificate representing Vornado's $3.25 Series A Preferred Shares of
Beneficial Interest, liquidation preference $50.00 per share (incorporated by
reference to Exhibit 4.2 of Vornado's Current Report on Form 8-K; dated April 3,
1997 (File No. 001-11954), filed on April 8, 1997)
4.3 Articles Supplementary Classifying Vornado's $3.25 Series A Preferred Shares of
Beneficial Interest, liquidation preference $50.00 per share (incorporated by
reference to Exhibit 4.1 of Vornado's Current Report on Form 8-K, dated April 3,
1997 (File No. 001-11954), filed on April 8, 1997)
4.4 Form of Indenture for Senior Debt Securities (incorporated by reference to Exhibit
4.4 of Amendment No. 2 to Vornado's Registration Statement on Form S-3 (File No.
333-29013), filed on August 8, 1997)
4.5 Form of Senior Debt Security (included in Exhibit 4.4)
4.6 Form of Indenture for Subordinated Debt Securities (incorporated by reference to
Exhibit 4.6 of Amendment No. 2 to Vornado's Registration Statement on Form S-3 (File
No. 333-29013), filed on August 8, 1997)
4.7 Form of Subordinated Debt Security (included in Exhibit 4.6)
4.8 Form of Deposit Agreement (incorporated by reference to Exhibit 4.6 of Amendment No.
1 to Vornado's Registration Statement on Form S-3 (File No. 33-52441), filed on May
12, 1994)
4.9 Form of Depositary Receipt (included in Exhibit 4.8)
5.1** Opinion of Ballard Spahr Andrews & Ingersoll
5.2** Opinion of Sullivan & Cromwell
8.1** Tax opinion of Sullivan & Cromwell
8.2** Tax opinion of Shearman & Sterling
12** Statement Regarding Computation of Consolidated Ratios of Earnings to Fixed Charges
and Combined Fixed Charges and Preferred Share Dividend Requirements
23.1** Consents of Deloitte & Touche LLP
23.2** Consents of Friedman Alpren & Green LLP
23.3** Consents of KPMG Peat Marwick LLP
23.4** Consent of Ballard Spahr Andrews & Ingersoll (included in its opinion filed as
Exhibit 5.1)
23.5** Consent of Sullivan & Cromwell (included in its opinions filed as Exhibit 5.2 and
Exhibit 8.1)
23.6** Consent of Shearman & Sterling (included in its opinion filed as Exhibit 8.2)
23.7** Consent of Arthur Andersen LLP
24.1** Powers of Attorney (included on signature page)
25.1 Statement of Eligibility of Senior Trustee on Form T-1 (incorporated by reference to
Exhibit 25.1 of Amendment No. 1 to Vornado's Registration Statement on Form S-3
(File No. 333-29013), filed on July 21, 1997)
</TABLE>
II-3
<PAGE> 49
<TABLE>
<CAPTION>
EXHIBIT
NO. EXHIBIT
- ------- ------------------------------------------------------------------------------------
<C> <S>
25.2 Statement of Eligibility of Subordinated Trustee on Form T-1 (incorporated by
reference to Exhibit 25.2 of Amendment No. 1 to Vornado's Registration Statement on
Form S-3 (File No. 333-29013), filed on July 21, 1997)
</TABLE>
- ---------------
* To be filed on a Current Report on Form 8-K.
** Previously filed.
ITEM 17. UNDERTAKINGS.
(a) The undersigned registrants hereby undertake:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement;
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20 percent change
in the maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement.
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration statement
or any material change to such information in the registration
statement;
provided, however, that paragraphs (1) (i) and (1) (ii) do not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed with or furnished to the
Commission by the registrant pursuant to Section 13 or Section 5(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 posteffective 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 registrants hereby undertake that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrants pursuant to the foregoing provisions, or otherwise (other than
insurance), the registrants have been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public policy
as expressed in the Act and is, therefore,
II-4
<PAGE> 50
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
registrants in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in connection with the
securities being registered, the registrants will, unless in the opinion of
their counsel the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question of whether such indemnification
by them is against public policy as expressed in the Act and will be governed by
the final adjudication of such issue.
OTHER
The Operating Partnership hereby states that it reasonably believes that
the Debt Securities being registered hereunder will be "investment grade
securities" (as defined in General Instruction I.B.2. of Form S-3) by the time
of sale of such securities.
II-5
<PAGE> 51
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrants
certify that they have reasonable grounds to believe that they meet all of the
requirements for filing on Form S-3 and have duly caused this Amendment No. 1 to
their Registration Statement on Form S-3 to be signed on their behalf by the
undersigned, thereunto duly authorized, in the City of Saddle Brook and State of
New Jersey, on January 29, 1998.
VORNADO REALTY TRUST,
a Maryland real estate investment
trust
By: /s/ STEVEN ROTH
------------------------------------
Steven Roth
Chairman of the Board of Trustees
(Principal Executive Officer)
VORNADO REALTY L.P.,
a Delaware limited partnership
By: Vornado Realty Trust
Its: General Partner
By: /s/ STEVEN ROTH
------------------------------------
Steven Roth
Chairman of the Board of Trustees
(Principal Executive Officer)
II-6
<PAGE> 52
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 2 to the Registration Statement has been signed below by the following
persons in their capacities and on the date indicated. Each person listed below
has signed this Amendment No. 2 to the Registration Statement (i) in their
capacity as an officer or trustee of Vornado Realty Trust ("Vornado"), on behalf
of Vornado and (ii) as an officer or trustee of Vornado, in its capacity as
general partner of Vornado Realty L.P.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ----------------------------------- ------------------------------------ -----------------
<C> <S> <C>
/s/ STEVEN ROTH Chairman of the Board of Trustees January 29, 1998
- ----------------------------------- (Principal Executive Officer)
Steven Roth
/s/ MICHAEL D. FASCITELLI President and Trustee January 29, 1998
- -----------------------------------
Michael D. Fascitelli
* Co-Chairman of the Board of Trustees January 29, 1998
- ----------------------------------- and Chief Executive Officer of the
Bernard H. Mendik Mendik Division
/s/ IRWIN GOLDBERG Vice President -- Chief Financial January 29, 1998
- ----------------------------------- Officer (Principal Financial and
Irwin Goldberg Accounting Officer)
* Trustee January 29, 1998
- -----------------------------------
David Mandelbaum
* Trustee January 29, 1998
- -----------------------------------
Stanley Simon
* Trustee January 29, 1998
- -----------------------------------
Richard R. West
* Trustee January 29, 1998
- -----------------------------------
Ronald G. Targan
* Trustee January 29, 1998
- -----------------------------------
Russell B. Wight, Jr.
*By: /s/ JOSEPH MACNOW
- -----------------------------------
Joseph Macnow
Attorney-in-Fact
</TABLE>
II-7
<PAGE> 53
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO. EXHIBIT
- ------- ----------------------------------------------------------------------------------
<C> <C> <S>
1.1* -- Form of Underwriting Agreement (for Common Shares)
1.2* -- Form of Underwriting Agreement (for Preferred Shares)
1.3* -- Form of Underwriting Agreement (for Debt Securities)
3.1 -- Amended and Restated Declaration of Trust of Vornado, amended April 3, 1997
(incorporated by reference to Exhibit 3.1 of Vornado's Registration Statement on
Form S-8 (File No. 333-29011), filed on June 12, 1997)
3.2 -- 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)
3.3 -- First Amended and Restated Agreement of Limited Partnership of the Operating
Partnership, dated as of April 15, 1997 (incorporated by reference to Exhibit 3.1
of the Operating Partnership's Registration Statement on Form 10 (File No.
000-22685), filed on June 12, 1997)
4.1 -- 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)
4.2 -- Specimen certificate representing Vornado's $3.25 Series A Preferred Shares of
Beneficial Interest, liquidation preference $50.00 per share (incorporated by
reference to Exhibit 4.2 of Vornado's Current Report on Form 8-K; dated April 3,
1997 (File No. 001-11954), filed on April 8, 1997)
4.3 -- Articles Supplementary Classifying Vornado's $3.25 Series A Preferred Shares of
Beneficial Interest, liquidation preference $50.00 per share (incorporated by
reference to Exhibit 4.1 of Vornado's Current Report on Form 8-K, dated April 3,
1997 (File No. 001-11954), filed on April 8, 1997)
4.4 -- Form of Indenture for Senior Debt Securities (incorporated by reference to Exhibit
4.4 of Amendment No. 2 Vornado's Registration Statement on Form S-3 (File No.
333-29013), filed on August 8, 1997)
4.5 -- Form of Senior Debt Security (included in Exhibit 4.4)
4.6 -- Form of Indenture for Subordinated Debt Securities (incorporated by reference to
Exhibit 4.6 of Amendment No. 2 to Vornado's Registration Statement on Form S-3
(File No. 333-29013), filed on August 8, 1997)
4.7 -- Form of Subordinated Debt Security (included in Exhibit 4.6)
4.8 -- Form of Deposit Agreement (incorporated by reference to Exhibit 4.6 of Amendment
No. 1 to Vornado's Registration Statement on Form S-3 (File No. 33-52441), filed
on May 12, 1994)
4.9 -- Form of Depositary Receipt (included in Exhibit 4.8)
5.1** -- Opinion of Ballard Spahr Andrews & Ingersoll
5.2** -- Opinion of Sullivan & Cromwell
8.1** -- Tax opinion of Sullivan & Cromwell
8.2** -- Tax opinion of Shearman & Sterling
12** -- Statement Regarding Computation of Consolidated Ratios of Earnings to Fixed
Charges and Combined Fixed Charges and Preferred Share Dividend Requirements
23.1** -- Consents of Deloitte & Touche LLP
23.2** -- Consents of Friedman Alpren & Green LLP
23.3** -- Consents of KPMG Peat Marwick LLP
23.4** -- Consent of Ballard Spahr Andrews & Ingersoll (included in its opinion filed as
Exhibit 5.1)
23.5** -- Consent of Sullivan & Cromwell (included in its opinions filed as Exhibit 5.2 and
Exhibit 8.1)
23.6** -- Consent of Shearman & Sterling (included in its opinion filed as Exhibit 8.2)
23.7** -- Consent of Arthur Andersen LLP
</TABLE>
<PAGE> 54
<TABLE>
<CAPTION>
EXHIBIT
NO. EXHIBIT
- ------- ----------------------------------------------------------------------------------
<C> <C> <S>
24.1** -- Powers of Attorney (included on signature page)
25.1 -- Statement of Eligibility of Senior Trustee on Form T-1 (incorporated by reference
to Exhibit 25.1 of Amendment No. 1 to Vornado's Registration Statement on Form S-3
(File No. 333-29013), filed on July 21, 1997)
25.2 -- Statement of Eligibility of Subordinated Trustee on Form T-1 (incorporated by
reference to Exhibit 25.2 of Amendment No. 1 to Vornado's Registration Statement
on Form S-3 (File No. 333-29013), filed on July 21, 1997)
</TABLE>
- ---------------
* To be filed on a Current Report on Form 8-K.
** Previously filed.
