<PAGE> 1
Exhibit Index on Page 16
As filed with the Securities and Exchange Commission on April 9, 1998
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) APRIL 1, 1998
Commission File Number: 1-11954
VORNADO REALTY TRUST
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
MARYLAND 22-1657560
- --------------------------------------------------------------------------------
(State or other jurisdiction (I.R.S. Employer
of incorporation) Identification Number)
PARK 80 WEST, PLAZA II, SADDLE BROOK, NEW JERSEY 07663
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(201)587-1000
- --------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
N/A
- --------------------------------------------------------------------------------
(Former Name or Former Address, if Changed Since Last Report)
Page 1
<PAGE> 2
This Form 8-K/A amends ITEM 7 of Vornado Realty Trust's Current Report on Form
8-K previously filed with the Securities and Exchange Commission on April 8,
1998 to include page 13 which was omitted.
ITEM 1. NOT APPLICABLE.
ITEM 2. On April 1, 1998, Vornado Realty Trust ("Vornado") closed its
previously announced acquisition of a real estate portfolio from the
Kennedy Family for approximately $630 million, consisting of $187
million in cash, $116 million in Operating Partnership Units, $77
million in existing debt and $250 million of newly issued debt. The
transaction was financed with borrowings under the Company's
revolving credit facility.
The acquired real estate assets consist of a portfolio of properties
used for office, retail and trade showroom space which aggregate
approximately 5.3 million square feet and include the Merchandise
Mart in Chicago. The transaction also includes the acquisition of
Merchandise Mart Properties, Inc. which manages the properties and
trade shows.
This transaction was arrived at through an arms-length negotiation
and was consummated through a subsidiary of Vornado Realty L.P., a
limited partnership of which Vornado owns 92.7% and is the sole
general partner.
ITEMS 3-6. NOT APPLICABLE
Page 2
<PAGE> 3
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(a)-(b) There are filed herewith:
(a) the historical Combined Statements of Revenues and Certain Operating
Expenses of The Merchandise Mart Group of Properties and
(b) the Condensed Consolidated Pro Forma Balance Sheet of Vornado Realty
Trust as of December 31, 1997 and the Condensed Consolidated Pro
Forma Income Statement of Vornado Realty Trust for the year ended
December 31, 1997 commencing on page 11, prepared to give Pro Forma
effect to the acquisition of The Merchandise Mart Group of
Properties and the previously completed acquisitions and investments
(Mendik Company, 90 Park Avenue, Arbor Property Trust, Americold
Corporation and URS Logistics, Inc., The Montehiedra Town Center,
The Riese Transaction, Charles E. Smith Commercial Realty L.P.,
The Hotel Pennsylvania, 640 Fifth Avenue, One Penn Plaza and
150 East 58th Street). The Pro Forma data also includes information
updated through December 31, 1997 for certain previously completed
acquisitions which were disclosed in Form 8-K's previously filed
with the Securities and Exchange Commission.
<TABLE>
<CAPTION>
PAGE
REFERENCE
---------
<S> <C>
The Merchandise Mart Group of Properties
Independent Auditors' Report .................................. 4
Audited Combined Statements of Revenues and Certain Operating
Expenses for the Year Ended December 31, 1997 ................ 5
Notes to Statements of Revenues and Certain Operating Expenses
for the Year Ended December 31, 1997 ......................... 6
Pro Forma financial information
Condensed Consolidated Pro Forma Balance Sheet at
December 31, 1997 ........................................... 11
Condensed Consolidated Pro Forma Income Statement
for the Year Ended December 31, 1997 ........................ 12
Notes to Condensed Consolidated Pro Forma Financial Statements 14
</TABLE>
<TABLE>
<CAPTION>
EXHIBIT NO. EXHIBIT
----------- -------
<S> <C>
23 Consent of independent auditors to incorporation
by reference.
99.1 Press release dated April 2, 1998, of Vornado Realty
Trust, announcing the completion of its acquisition of
The Merchandise Mart and other properties from the
Kennedy Family.
</TABLE>
ITEM 7A. NOT APPLICABLE.
ITEM 8-9. NOT APPLICABLE.
Page 3
<PAGE> 4
ARTHUR ANDERSEN LLP
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Partners of the Partnerships and Members of the LLC's:
We have audited the accompanying combined statement of revenue and certain
operating expenses (described in Note 2) of THE MERCHANDISE MART GROUP OF
PROPERTIES ("Properties")(See Note 1) for the year ended December 31, 1997.
This financial statement is the responsibility of the Properties' management.
Our responsibility is to express an opinion on this financial statement based
on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statement is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statement. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
The accompanying combined statement of revenue and certain expenses was prepared
for the purpose of complying with Rule 3-14 of Regulation S-X of the Securities
and Exchange Commission for inclusion in the Form 8-K of Vornado Realty Trust
and is not intended to be a complete presentation of the Properties' revenue and
certain expenses.
In our opinion, the combined financial statement referred to above presents
fairly, in all material respects, the revenue and certain operating expenses
of The Merchandise Mart Group of Properties (See Note 1) for the year ended
December 31, 1997, in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Chicago, Illinois
April 8, 1998
Page 4
<PAGE> 5
THE MERCHANDISE MART GROUP OF PROPERTIES
(SEE NOTE 1)
COMBINED STATEMENTS OF REVENUES AND
CERTAIN OPERATING EXPENSES
FOR THE YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
1997
------------
<S> <C>
REVENUES:
Rentals, net $96,451,473
Parking revenues 1,124,720
Interest income 897,384
Other income 602,528
-----------
Total operating revenues 99,076,105
-----------
CERTAIN OPERATING EXPENSES:
Operating 14,414,929
Real estate taxes 14,186,862
Marketing 8,572,659
Utilities 7,048,119
Administrative 3,703,852
Management fees (Note 5) 2,095,183
-----------
Total certain expenses 50,021,604
-----------
REVENUE IN EXCESS OF CERTAIN
OPERATING EXPENSES $49,054,501
===========
</TABLE>
Page 5
<PAGE> 6
THE MERCHANDISE MART GROUP OF PROPERTIES
NOTES TO STATEMENTS OF REVENUE AND CERTAIN OPERATING EXPENSES
FOR THE YEAR ENDED DECEMBER 31, 1997
1. ORGANIZATION
The accompanying statement includes the accounts of the properties known as
"The Merchandise Mart" owned by Merchandise Mart Owners, Ltd. ("MMOL"),
"The Apparel Center" owned by World Trade Center Chicago, L.L.C. ("WTCC"),
"The Washington Office Center" of which the building is owned by WDC
Associates Limited Partnerships ("WDCLP"), and the land is owned by Fourth
and D Street Partners Limited Partnership ("FDS"), and "The Washington
Design Center", of which the building is owned by Washington Design Center
Limited Liability Company ("WDCLLC") and the land is owned by FDS (80.7514%
interest) and Virginia Avenue Limited Partnership ("VALP")(19.4286%
interest)(collectively referred to as the "Properties"). All of these
properties are owned by the various interests of the Joseph P. Kennedy
family, and all of these properties were sold to Vornado Realty Trust on
April 1, 1998.
A breakdown of the occupied space of the Properties as of December 31, 1997
is as follows:
<TABLE>
<CAPTION>
PERCENT SQUARE FOOTAGE 1997
-----------------------------------
Apparel
MMOL Center WDCLP WDCLLC
---- -------- ----- ------
<S> <C> <C> <C> <C>
Office/Retail 39% 59% 100% 6%
Home furnishing 21 -- -- 82
Contract furnishings 17 -- -- 12
Gift 13 -- -- --
Apparel -- 41 -- --
Expo Center 8 -- -- --
Building products 2 -- -- --
--- --- --- ---
100% 100% 100% 100%
</TABLE>
2. BASIS OF PRESENTATION
The combined statement of revenue and certain operating expenses for the
year ended December 31, 1997 relates to the operations of the Properties.
The accompanying financial statement excludes certain expenses, such as
interest, depreciation and amortization, professional fees, revenue and
expenses related to land held for development which is not being sold to
Vornado Realty Trust, and other costs not directly related to the
operations of the Properties, in accordance with Rule 3-14 of Regulation
S-X of the Securities and Exchange Commission. Management is not aware of
any material factors relating to the Properties which would cause the
reported financial information not to be necessarily indicative of future
operating results.
Page 6
<PAGE> 7
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a. BASIS OF REPORTING -- The financial statement is presented on the
accrual basis of accounting.
b. RENTAL REVENUE -- Rentals from tenants with scheduled rent increases
and rent abatements are recognized as revenue on a straight-line basis
over the respective lease term.
c. USE OF ESTIMATES -- The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported
amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
4. HOTEL LEASE
WTCC is a party to a lease with a hotel operator whereby the operator, at
its own expense, constructed a hotel atop The Apparel Center. The lease,
which has a term of 65 years commencing January, 1977, provides for an
annual base rental of $159,600, additional rent payable based on hotel
revenue, as defined, and an allocation of certain real estate taxes,
rehabilitation and maintenance costs.
5. TRANSACTIONS WITH AFFILIATES
Merchandise Mart Properties, Inc. (Delaware)("MMPI-(Del.)"), which is owned
by certain of the owners of the Properties, owns Merchandise Mart
Properties, Inc. ("MMPI"). As a convenience, certain amounts are disbursed
or collected by one entity on behalf of another.
a. The Properties reimburse MMPI for certain payroll-related expenses
incurred on behalf of The Properties.
b. The Properties paid MMPI management fees of $1,992,255 during 1997.
Fees are calculated using various percentages of gross revenues as
adjusted for uncollectible accounts and as summarized below:
<TABLE>
<CAPTION>
APPLICABLE
TYPE OF REVENUE PERCENTAGE
--------------------------------- -------------
<S> <C>
Showroom (Chicago) 3.0%
Showroom (Washington, D.C.) 2.0%
Office, retail, exposition, hotel
parking and tenant services 1.5%
</TABLE>
Beginning 1996, MMPI became a tenant of MMOL. MMPI is master leasing the
entire 8th floor for the development and operations of the new market suite
showrooms. The space consists of 163,133 rentable square feet. The lease
period commenced June 1, 1996 through December 31, 2006, a term of 10
years, 7 months. In 1997, the market suite showrooms added an additional
102,366 square feet on the 8th and 12th floors. The area was added by lease
amendment and is coterminous with the original lease. MMPI shall pay to
MMOL a monthly amount equal to the base rent, as defined. MMPI paid MMOL
$4,070,112 during 1997.
Mart Franchise Center, Inc., a subsidiary of MMPI, doing business as
Franchising and Licensing World Center ("FLWC"), Inc., is currently master
leasing 35,498
Page 7
<PAGE> 8
rentable square feet located on the 2nd floor of MMOL. The FLWC is a
permanent exhibition/sales facility for the franchising and licensing
industries as well as provides related support services. The lease period
commenced January 1, 1996, and continues through March 31, 2016, a term of
20 years, 3 months. FLWC's monthly base rent is equal to $32,000 as
required by the lease.
6. FUTURE MINIMUM RENTALS UNDER TENANT LEASES:
The Properties lease showroom, office and retail space under noncancellable
operating leases with terms ranging from 1 to 15 years. Future minimum
rentals to be received as of December 31, 1997, are summarized as follows:
<TABLE>
<CAPTION>
Year ending December 31 --
<S> <C>
1998 $ 80,145,725
1999 76,239,847
2000 70,328,042
2001 62,426,073
2002 56,035,641
Future years 256,707,314
------------
Total future minimum rentals $601,882,642
============
</TABLE>
7. PROPERTY DAMAGE INSURANCE
Property damage insurance for The Apparel Center and The Merchandise Mart
is written on a combined, agreed amount basis. The combined, agreed amount
exceeds the replacement value of The Apparel Center. However, based on
management's evaluation, the combined replacement of The Apparel Center
and The Merchandise Mart structures and other personal property exceeds
the insured coverage.
8. SALE OF EQUIPMENT
On December 31, 1996, pursuant to the Asset Purchase Agreement, MMOL sold
and transferred to Unicom Thermal Technologies, Inc. ("UTT") certain
fixtures and equipment to be used by UTT in the production of chilled
water.
The purchase price for the fixtures and equipment was, in the aggregate,
$7,680,000. Payment of the purchase price is divided into three equal
installments of $2,560,000. The first installment was received by MMOL on
December 31, 1996. The second installment was received on December 30, 1997
and the third installment is due on December 31, 1998.
Contemporaneously with the sale of fixtures and equipment, MMOL and UTT
entered into a lease, pursuant to which MMOL will lease certain space to
UTT in The Merchandise Mart and a chilled water service agreement by which
UTT will provide The Merchandise Mart with chilled water.
Page 8
<PAGE> 9
Pursuant to the chilled water service agreement UTT agreed to meet MMOL's
cooling needs in the building up to the contract capacity on the terms and
subject to the conditions set forth within the chilled water service agreement.
MMOL is obligated to pay UTT the contract capacity charge equal to $90,735
usage charge or any other charges every month with respect to service during
the term of this agreement.
The commencement date was January 1, 1997. The term of this agreement is for
twenty (20) years subject to early termination or extension as provided for
within the agreement, as defined. The lease term is the same as specifically
provided in the chilled water service agreement. Commencing on January 1, 2002
(the rent commencement date) UTT shall pay to MMOL an annual base rent equal to
$155,000, payable in equal monthly installments. The base rent shall be
adjusted on an annual basis in accordance with the escalation provision, as
defined.
UTT is obligated to pay all costs of the operation of UTT's business in the
building, including utility charges. Following the expiration or termination of
the chilled water service agreement, certain fixtures and equipment purchased
by UTT pursuant to the asset purchase agreement are required to be returned to
MMOL.
Page 9
<PAGE> 10
PRO FORMA FINANCIAL INFORMATION:
The unaudited condensed consolidated pro forma financial information
attached presents: (A) the condensed consolidated pro forma income statements of
Vornado Realty Trust ("Vornado") for the year ended December 31, 1997, as if (i)
the acquisition of The Merchandise Mart Group of Properties ("Merchandise Mart")
and (ii) the previously completed acquisitions and investments (Mendik Company,
90 Park Avenue, Arbor Property Trust, Americold Corportion and URS Logistics,
Inc., The Montehiedra Town Center, The Riese Transaction, Charles E. Smith
Commercial Realty L.P., The Hotel Pennsylvania, 640 Fifth Avenue, One Penn
Plaza and 150 East 58th Street) and the financings attributable thereto, had
occurred on January 1, 1997 and (B) the condensed consolidated pro forma
balance sheet of Vornado as of December 31, 1997, as if the above acquisitions
had occurred on December 31, 1997. The Pro Forma data also includes information
updated through December 31, 1997 for certain previously completed acquisitions
which were disclosed in Form 8-K's previously filed with the Securities and
Exchange Commission.
The unaudited condensed consolidated pro forma financial information is
not necessarily indicative of what Vornado's actual results of operations or
financial position would have been had these transactions been consummated on
the dates indicated, nor does it purport to represent Vornado's results of
operations or financial position for any future period.
The unaudited condensed consolidated pro forma financial information
should be read in conjunction with the Consolidated Financial Statements and
notes thereto included in Vornado's Annual Report on Form 10-K for the year
ended December 31, 1997 and the Combined Statements of Revenues and Certain
Operating Expenses of The Merchandise Mart Group of Properties included herein.
In management's opinion, all adjustments necessary to reflect these transactions
have been made.
Page 10
<PAGE> 11
CONDENSED CONSOLIDATED PRO FORMA BALANCE SHEET
DECEMBER 31, 1997
(UNAUDITED)
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
HISTORICAL
---------------------------- PRO FORMA
PREVIOUSLY ADJUSTMENTS
COMPLETED COMPANY FOR MERCHANDISE TOTAL
VORNADO ACQUISITIONS PRO FORMA MART ACQUISITION PRO FORMA
------------ ------------ ---------- ----------------- ---------
ASSETS:
<S> <C> <C> <C> <C> <C>
Real estate, net $1,390,659 $ 410,000 $1,918,659 $ 600,000 (A) $2,518,659
118,000
Cash and cash equivalents 417,502 (118,000) 299,502 (187,000)(A) 112,502
Investment in partially-owned
entities, including investment in
and advances to Alexander's 482,787 482,787 30,000 (A) 512,787
Mortgage loans receivable 88,663 88,663 88,663
Receivable arising from straight-
lining of rents 24,127 24,127 24,127
Other assets 120,351 120,351 120,351
---------- --------- ---------- --------- ----------
$2,524,089 $ 410,000 $2,934,089 $ 443,000 $3,377,089
========== ========= ========== ========= ==========
LIABILITIES:
Notes and mortgages payable $ 956,654 $ 410,000 $1,366,654 $ 327,000 (A) $1,693,654
Deferred leasing fee income 9,927 9,927 9,927
Officer's deferred compensation
payable 25,000 25,000 25,000
Other liabilities 40,179 40,179 40,179
---------- --------- ---------- --------- ----------
1,031,760 410,000 1,441,760 327,000 1,768,760
---------- --------- ---------- --------- ----------
Minority interest of unitholders in the
Operating Partnership 178,567 178,567 116,000 (A) 294,567
---------- --------- ---------- --------- ----------
EQUITY:
Total equity 1,313,762 1,313,762 1,313,762
---------- --------- ---------- --------- ----------
$2,524,089 $ 410,000 $2,934,089 $ 443,000 $3,377,089
========== ========= ========== ========= ==========
</TABLE>
Page 11
<PAGE> 12
CONDENSED CONSOLIDATED PRO FORMA INCOME STATEMENT
FOR THE YEAR ENDED DECEMBER 31, 1997
(UNAUDITED)
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
PREVIOUSLY MERCHANDISE ADJUSTMENTS
HISTORICAL COMPLETED COMPANY MART FOR MERCHANDISE TOTAL
VORNADO ACQUISITIONS (1) PRO FORMA ACQUISITION MART ACQUISITION PRO FORMA
---------- ---------------- --------- ------------ ---------------- ---------
<S> <C> <C> <C> <C> <C> <C>
REVENUES:
Property rentals $168,321 $145,182 $313,503 $ 96,451 $ 1,922 (B) $ 411,876
Expense reimbursements 36,652 31,622 68,274 - 68,274
Other income 4,158 9,538 13,696 2,625 16,321
-------- -------- -------- -------- -------- ---------
209,131 186,342 395,473 99,076 1,922 496,471
-------- -------- -------- -------- -------- ---------
EXPENSES:
Operating 74,745 88,215 162,960 50,022 (1,993)(C) 210,989
Depreciation and amortization 22,983 26,703 49,686 - 11,392 (D) 61,078
General and administrative 13,580 4,026 17,606 - 17,606
Amortization of officer's deferred
compensation expense 22,917 22,917 - 22,917
-------- -------- -------- -------- -------- ---------
134,225 118,944 253,169 50,022 9,399 312,590
-------- -------- -------- -------- -------- ---------
Operating income (loss) 74,906 67,398 142,304 49,054 (7,477) 183,881
Income applicable to Alexander's 7,873 7,873 7,873
Income from partially owned entities 4,658 8,468 13,126 13,126
Interest and other investment
income 23,767 (1,688) 22,079 22,079
Interest and debt expense (42,888) (33,114) (76,002) (36,398)(E) (112,400)
Minority interest of unitholders in
the Operating Partnership (7,293) (3,077) (10,370) (4,048)(F) (14,418)
-------- -------- -------- -------- -------- ---------
Net income (loss) 61,023 37,987 99,010 49,054 (47,923) 100,141
Preferred stock dividends (15,549) (5,137) (20,686) (20,686)
-------- -------- -------- -------- -------- ---------
Net income (loss) applicable to
common shares $ 45,474 $ 32,850 $ 78,324 $ 49,054 $(47,923) $ 79,455
======== ======== ======== ======== ======== =========
Net income per common share - basic
(based on 55,098 shares and 80,874
shares) $ 0.83 $ .98
======== =========
Net income per common share - diluted
(based on 57,217 shares and 82,993
shares) $ 0.79 $ .96
======== =========
</TABLE>
Page 12
<PAGE> 13
CONDENSED CONSOLIDATED PRO FORMA INCOME STATEMENT
FOR THE YEAR ENDED DECEMBER 31, 1997
(UNAUDITED)
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
PREVIOUSLY MERCHANDISE ADJUSTMENTS
HISTORICAL COMPLETED COMPANY MART FOR MERCHANDISE TOTAL
VORNADO ACQUISITIONS(1) PRO FORMA ACQUISITION MART ACQUISITION PRO FORMA
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
OTHER DATA:
Funds from Operations (2):
Net income (loss) applicable to
common shares $ 45,474 $ 32,850 $ 78,324 $ 49,054 $ (47,923) $ 79,455
Depreciation and amortization
of real property 22,413 24,602 47,015 -- 11,867 58,882
Straight-lining of property rent
escalations (3,359) (7,134) (10,493) (3,807) (1,922) (16,222)
Leasing fees received in excess
of income recognized 1,733 -- 1,733 -- -- 1,733
Proportionate share of adjustments
to income from equity
investments to arrive at FFO 6,358 30,964 37,322 -- -- 37,322
Non-recurring lease cancellation
income and write-off of related
costs -- (11,581) (11,581) -- -- (11,581)
=========== =========== =========== =========== =========== ===========
$ 72,619 $ 69,701 $ 142,320 $ 45,247 $ (37,978) $ 149,588
=========== =========== =========== =========== =========== ===========
CASH FLOW PROVIDED BY (USED IN):
Operating activities $ 110,754 $ 55,251 $ 166,005 $ 45,247 $ (37,978) $ 173,274
Investing activities $(1,064,484) $ (285,384) $(1,349,868) $ -- $(1,217,000) $(2,566,868)
Financing activities $ 1,219,988 $ 283,384 $ 1,503,372 $ -- $ 1,125,000 $ 2,628,372
</TABLE>
- -----------
(1) Certain revenue and expense items have been reclassified to conform to
Vornado's presentation.
(2) Funds from operations does not represent cash generated from operating
activities in accordance with generally accepted accounting principles
and is not necessarily indicative of cash available to fund cash needs
which is disclosed in the Consolidated Statements of Cash Flows for the
applicable periods. There are no material legal or functional
restrictions on the use of funds from operations. Funds from operations
should not be considered as an alternative to net income as an
indicator of Vornado's operating performance or as an alternative to
cash flows as a measure of liquidity. Management considers funds from
operations a supplemental measure of operating performance and along
with cash flow from operating activities, financing activities, and
investing activities, it provides investors with an indication of the
ability of Vornado to incur and service debt, to make capital
expenditures and to fund other cash needs. Funds from operations may
not be comparable to similarly titled measures employed by other REITs
since a number of REITs, including Vornado's, method of calculating
funds from operations is different from that used by NAREIT. Funds from
operations, as defined by NAREIT, represents net income applicable to
common shares before depreciation and amortization, extraordinary items
and gains or losses on sales of real estate. Funds from operations as
disclosed above has been modified to adjust for the effect of
straight-lining of property rentals for rent escalations and leasing
fee income.
Page 13
<PAGE> 14
NOTES TO CONDENSED CONSOLIDATED PRO FORMA FINANCIAL STATEMENTS
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Basis of Pro Forma:
The unaudited Condensed Consolidated Pro Forma Financial Statements
were prepared to give Pro Forma effect to the acquisition of The Merchandise
Mart Group of Properties ("Merchandise Mart"). The previously completed
acquisitions and investments (Mendik Company, 90 Park Avenue, Arbor Property
Trust, Americold Corporation and URS Logistics, Inc., The Montehiedra Town
Center, The Riese Transaction, Charles E. Smith Commercial Realty L.P., The
Hotel Pennsylvania, 640 Fifth Avenue, One Penn Plaza and 150 East 58th Street)
are included in "Historical Vornado" from their respective dates of
acquisition. The column headed "Previously Completed Acquisitions" includes the
results of operations of those entities for the period of time during 1997
prior to their acquisition. The Pro Forma data also includes information
updated through December 31, 1997 for certain previously completed acquisitions
which were disclosed in Form 8-K's previously filed with the Securities and
Exchange Commission.
Acquisitions were consummated through subsidiaries or preferred stock
affiliates of Vornado and were recorded under the purchase method of accounting.
Net assets and have been included in these financial statements since their
respective dates of acquisition. The respective purchase costs were allocated
to acquired assets and assumed liabilities using their relative fair values as
of the closing dates, based on valuations and other studies which are not yet
complete. Accordingly, the initial valuations are subject to change as such
information is finalized. Vornado believes that any such change will not be
significant since the allocations were principally to real estate.
The following adjustments were required to give pro forma effect to the
Merchandise Mart acquisition:
Pro Forma December 31, 1997 Balance Sheet:
(A) Reflects the acquisition of a real estate portfolio from the
Kennedy Family for approximately $630 million (including $30
million for the acquisition of Merchandise Mart Properties,
Inc. which manages the properties and trade shows), consisting
of $187 million in cash, $116 million in Operating Partnership
Units, $77 million in existing debt and $250 million of newly
issued debt.
Pro Forma December 31, 1997 Income Statement:
(B) To adjust rentals for the year ended December 31, 1997 arising
from the straight-lining of tenant leases that contain
escalations over the lease term.
(C) To record equity in Management Company equal to management
fees charged to properties.
(D) Adjustment to depreciation expense for the year ended December
31, 1997 for the acquisition of The Merchandise Mart Group of
Properties.
(E) To reflect (i) interest for newly issued debt of approximately
$250,000 at LIBOR plus 1.35% (6.85% at January 1, 1997) (ii)
historical interest for existing debt of approximately
$77,000 and (iii) interest on the revolving credit facility
at LIBOR plus .83% (6.8% at December 31, 1997).
(F) To reflect preferred dividend at a blended rate of 6.0% on
$67,467 of preferred units.
Page 14
<PAGE> 15
VORNADO REALTY TRUST
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
VORNADO REALTY TRUST
--------------------
(Registrant)
Date: April 9, 1998 /s/ Irwin Goldberg
-----------------------
IRWIN GOLDBERG
Vice President,
Chief Financial Officer
Page 15
<PAGE> 16
INDEX TO EXHIBITS
PAGE
EXHIBIT NO. EXHIBIT REFERENCE
----------- ------- ---------
23. Consent of independent auditors to
incorporation by reference...........................17
99.1 Press release dated April 2, 1998, of
Vornado Realty Trust, announcing the
completion of its acquisition of The
Merchandise Mart and other properties
from the Kennedy Family..............................18
Page 16
<PAGE> 1
Exhibit 23
As independent public accountants, we hereby consent to the incorporation by
reference into the S-3 Registration Statements No. 333-40787 and No. 333-29013
of Vornado Realty Trust and Vornado Realty L.P. of our report dated April 8,
1998, on the combined statement of revenues and certain operating expenses of
The Merchandise Mart Group of Properties for the year ended December 31, 1997
which report appears in this Form 8-K/A and to all references to our Firm
included in those registration statements.
Arthur Andersen LLP
Chicago, Illinois
April 8, 1998
<PAGE> 1
EXHIBIT 99.1
CONTACT: JOSEPH MACNOW
(201) 587-1000
Park 80 West, Plaza II
Saddle Brook, NJ 07663
FOR IMMEDIATE RELEASE - APRIL 2, 1998
VORNADO REALTY TRUST COMPLETES THE ACQUISITION OF
THE MERCHANDISE MART AND OTHER PROPERTIES
FROM THE KENNEDY FAMILY
SADDLE BROOK, NEW JERSEY.....VORNADO REALTY TRUST (NYSE:VNO) today
announced that it has closed its previously announced acquisition of a real
estate portfolio from the Kennedy Family for approximately $630 million,
consisting of $187 million in cash, $116 million in Operating Partnership Units,
$77 million in existing debt and $250 million of newly issued debt.
The acquired real estate assets consist of a portfolio of properties used
for office, retail and trade showroom space which aggregate approximately 5.3
million square feet and include the famed Merchandise Mart in Chicago. The
transaction also includes the acquisition of Merchandise Mart Properties, Inc.
which manages the properties and trade shows.
Vornado is a fully-integrated equity real estate investment trust.
Certain statements contained herein may constitute "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995. Such forward-looking statements involve known and unknown risks,
uncertainties and other factors which may cause the actual results, performance
or achievements of the Company to be materially different from any future
results, performance or achievements expressed or implied by such
forward-looking statements. Such factors include, among others, risks associated
with the timing of and costs associated with property improvements, financing
commitments and general competitive factors.
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