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As filed with the Securities and Exchange Commission on January 29, 1998
Exhibit Index on Page 7
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) January 29, 1998
Commission File Number: 1-11954
VORNADO REALTY TRUST
(Exact name of registrant as specified in its charter)
<TABLE>
<CAPTION>
<S> <C>
MARYLAND 22-1657560
(State or other jurisdiction of incorporation) (I.R.S. employer
identification number)
PARK 80 WEST, PLAZA II, SADDLE BROOK, NEW JERSEY 07663
(Address of principal executive offices) (Zip Code)
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(201) 587-1000
(Registrant's telephone number, including area code)
N/A
(Former name or former address, if changed since last report)
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ITEMS 1 - 4. NOT APPLICABLE.
ITEM 5. OTHER EVENTS.
PROPOSED SPIN-OFF OF VORNADO OPERATING, INC.
Vornado Operating, Inc., a Delaware corporation and a wholly
owned subsidiary of Vornado ("Vornado Operating"), was incorporated on October
30, 1997 and has had no operations to date. Vornado Operating has been formed to
own assets that Vornado could not itself own and conduct activities that Vornado
could not itself conduct. Vornado Operating is intended to function principally
as an operating company, in contrast to Vornado's principal focus on investment
in real estate assets. Vornado Operating will be able to do so because it will
be taxable as a regular corporation rather than a REIT for taxable years after
1998.
Vornado has capitalized Vornado Operating with an equity
contribution of $25 million of cash. In addition, Vornado Realty L.P. (the
"Operating Partnership"), as lender, and Vornado Operating, as borrower, intend
to enter into a $75 million unsecured five-year revolving credit agreement
subsequent to the Distribution referred to below. Vornado Operating has not yet
identified specific operating assets or operations that it will acquire. Unless
Vornado waives Vornado Operating's obligation under the Intercompany Agreement
referred to below to seek to qualify as a REIT for federal income purposes for
its taxable year ending December 31, 1998, Vornado Operating does not expect to
lease or purchase operating assets until after December 31, 1998. In the
interim, Vornado Operating expects to invest its available funds primarily in
government securities.
THE DISTRIBUTION. The Operating Partnership expects to make a
distribution (the "Distribution") of all of the shares of common stock, par
value $.01 per share (the "Common Stock"), of Vornado Operating owned by the
Operating Partnership on the date of the Distribution to holders of its units of
limited partnership interest ("Units"), including Vornado, as soon as
practicable after the registration statement relating to the Common Stock has
been declared effective by the Securities and Exchange Commission, and Vornado
expects in turn to make a distribution of all of the shares of Common Stock
owned by Vornado on the date of the Distribution to holders of common shares of
beneficial interest of Vornado, par value $.04 per share ("Vornado Common
Shares"). No holder of Vornado Common Shares or Units will be required to make
any payment, exchange any Vornado Common Shares or Units or take any other
action in order to receive Common Stock in the Distribution. A record date has
not yet been set for the Distribution. Holders of Vornado's $3.25 Series A
Convertible Preferred Shares, no par value, liquidation preference $50.00 per
share (the "Vornado Convertible Preferred Shares"), will not receive Common
Stock in the Distribution. Pursuant to the Articles Supplementary designating
the terms of the Vornado Convertible Preferred Shares (the "Articles
Supplementary"), the Conversion Price for the Convertible Preferred Shares would
be adjusted as a result of the Distribution to equal (a) the Conversion Price
currently in effect times (b) a fraction, the numerator of which will equal (i)
the Fair Market Value (as defined in the
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Articles Supplementary) per Vornado Common Share on the record date for the
Distribution less (ii) the net stockholders' equity per share of Common Stock
issued in the Distribution multiplied by the Distribution ratio (i.e., the
fraction of a share of Common Stock issued in the Distribution in respect of
each Vornado Common Share) on such record date. No assurance can be given
concerning the timing of the Distribution, or whether the Distribution will
occur. A prospectus relating to the Common Stock may be obtained from Vornado,
Park 80 West, Plaza II, Saddle Brook, New Jersey 07663; attention: Secretary.
A registration statement relating to these securities has been
filed with the Securities and Exchange Commission but has not yet become
effective. These securities may not be sold nor may offers to buy be accepted
prior to the time the registration statement becomes effective. This report
shall not constitute an offer to sell or the solicitation of an offer to buy nor
shall there be any sale of these securities in any state in which such offer,
solicitation or sale would be unlawful prior to registration and qualification
under the securities laws of any such state.
THE INTERCOMPANY AGREEMENT. Vornado Operating and Vornado
intend to enter into an Intercompany Agreement (the "Intercompany Agreement"),
promptly after the Distribution, pursuant to which, among other things, (a)
Vornado will agree under certain circumstances to offer Vornado Operating an
opportunity to become the lessee of certain real property owned now or in the
future by Vornado (under mutually satisfactory lease terms) and (b) Vornado
Operating will agree not to make any real estate investment or other
REIT-Qualified Investment unless it first offers Vornado the opportunity to make
such investment and Vornado has rejected that opportunity.
More specifically, the Intercompany Agreement will require,
subject to certain terms, that Vornado provide Vornado Operating with an
opportunity (a "Tenant Opportunity") to become the lessee of any real property
owned now or in the future by Vornado if Vornado determines in its sole
discretion that, consistent with Vornado's status as a REIT, it is required to
enter into a "master" lease arrangement with respect to such property and that
Vornado Operating is qualified to act as lessee thereof. In general, a master
lease arrangement is an arrangement pursuant to which an entire property or
project (or a group of related properties or projects) are leased to a single
lessee. Under the Intercompany Agreement, Vornado Operating and Vornado will
negotiate with each other on an exclusive basis for 30 days regarding the terms
and conditions of the lease in respect of each Tenant Opportunity. If a mutually
satisfactory agreement cannot be reached within the 30-day period, Vornado may
for a period of one year thereafter enter into a binding agreement with respect
to such Tenant Opportunity with any third party on terms no more favorable to
the third party than the terms last offered to Vornado Operating. If Vornado
does not enter into a binding agreement with respect to such Tenant Opportunity
within such one-year period, Vornado must again offer the Tenant Opportunity to
Vornado Operating in accordance with the procedures specified above prior to
offering such Tenant Opportunity to any other party.
In addition, the Intercompany Agreement will prohibit Vornado
Operating from making (i) any investment in real estate (including the provision
of services related to real estate, real
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estate mortgages, real estate derivatives or entities that invest in the
foregoing) or (ii) any other REIT-Qualified Investment, unless it has provided
written notice to Vornado of the material terms and conditions of the investment
opportunity and Vornado has determined not to pursue such investment either by
providing written notice to Vornado Operating rejecting the opportunity within
10 days from the date of receipt of notice of the opportunity or by allowing
such 10-day period to lapse. As used herein, "REIT-Qualified Investment" means
an investment, at least 95% of the gross income from which would qualify under
the 95% gross income test set forth in section 856(c)(2) of the Code (or could
be structured to so qualify) and the ownership of which would not cause Vornado
to violate the asset limitations set forth in Section 856(c)(4) of the Code (or
could be structured not to cause Vornado to violate the section 856(c)(4)
limitations); provided, however, that "REIT-Qualified Investment" does not
include an investment in government securities, cash or cash items (as defined
for purposes of section 856(c)(4) of the Code), money market funds, certificates
of deposit, commercial paper having a maturity of not more than 90 days,
bankers' acceptance or the property transferred to Vornado Operating by Vornado.
The Intercompany Agreement will also require Vornado Operating to assist Vornado
in structuring and consummating any such investment which Vornado elects to
pursue, on terms determined by Vornado. In addition, Vornado Operating will
agree to notify Vornado of, and make available to, Vornado investment
opportunities developed by Vornado Operating or of which Vornado Operating
becomes aware but is unable or unwilling to pursue.
Under the Intercompany Agreement, Vornado will agree to
provide Vornado Operating with certain administrative, corporate, accounting,
financial, insurance, legal, tax, data processing, human resources and
operational services. For these services, Vornado Operating will compensate
Vornado in an amount determined in good faith by Vornado as the amount an
unaffiliated third party would charge Vornado Operating for comparable services
and will reimburse Vornado for certain costs incurred and paid to third parties
on behalf of Vornado Operating.
Under the Intercompany Agreement, Vornado Operating will agree
that it will seek to qualify as a REIT for its taxable year ending December 31,
1998. Vornado Operating's qualification as a REIT for its taxable year ending
December 31, 1998 may be necessary to ensure that Vornado's status as a REIT
will not be adversely affected by the Distribution. If Vornado concludes in its
sole discretion that such qualification is not necessary, Vornado may waive such
obligation.
Vornado and Vornado Operating will each have the right to
terminate the Intercompany Agreement if the other party is in material default
of the Intercompany Agreement or upon 90 days written notice to the other party
at any time after December 31, 2002. In addition, Vornado will have the right to
terminate the Intercompany Agreement upon a change in control of Vornado
Operating.
THE COLD STORAGE COMPANIES. On October 31, 1997, partnerships
(the "Vornado/Crescent Partnerships") in which affiliates of Vornado have a 60%
interest and affiliates of Crescent Real Estate Equities Limited ("Crescent")
have a 40% interest acquired each of Americold
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Corporation ("Americold") and URS Logistics, Inc. ("URS," and together with
Americold, the "Cold Storage Companies"). Vornado's investments in the
Vornado/Crescent Partnerships are currently held by corporations in which
Vornado owns all of the preferred stock and none of the common equity
("preferred stock affiliates"). Ownership of the preferred stock entitles
Vornado to substantially all of the economic benefits in the preferred stock
affiliates. The common stock of the preferred stock affiliates is owned by
officers and/or trustees of Vornado. Accordingly, Vornado is not able to elect
the boards of directors of the preferred stock affiliates, and does not have the
authority to control the management and operations of such affiliates.
Vornado is currently considering a number of alternatives in
respect of its investments in the Cold Storage Companies, and has not yet
finalized its plans in respect of such investments. One such alternative
involves Vornado offering Vornado Operating the opportunity to negotiate to
become lessee and operator of some or all of the real estate assets and to
purchase some or all of the non-real estate assets of the Cold Storage
Companies. However, significant tax and structuring considerations must be
resolved before Vornado finalizes its plans in respect of the Cold Storage
Companies, including determining whether to provide Vornado Operating with such
an opportunity. These tax and structuring considerations include, among others,
determining whether to seek one or more private letter rulings from the Internal
Revenue Service (which could take up to one year to obtain); identifying the
nature and value of individual assets currently owned by the Cold Storage
Companies; division of the assets that will be owned by the Vornado/Crescent
Partnerships and any assets that such partnerships may wish to sell; and
obtaining the necessary consent from Crescent for certain transactions involving
the Cold Storage Companies. In addition, because Vornado holds its investments
in the Vornado/Crescent Partnerships through preferred stock affiliates, Vornado
does not have the authority to control when or if Vornado Operating is offered
an opportunity to become a lessee and operator of some or all of the real estate
assets and to purchase some or all of the non-real estate assets of the Cold
Storage Companies. Moreover, unless Vornado waives Vornado Operating's
obligation under the Intercompany Agreement to seek to qualify as a REIT for
federal income purposes for its taxable year ending December 31, 1998, Vornado
Operating does not expect to lease or purchase operating assets until after
December 31, 1998. Accordingly, no assurance can be given that Vornado will
provide Vornado Operating with such an opportunity or that Vornado and Vornado
Operating will be able to agree on the terms and conditions of any lease or
purchase of assets.
ITEMS 6 - 9. NOT APPLICABLE.
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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)
By: /s/ Irwin Goldberg
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Name: Irwin Goldberg
Title: Vice President,
Chief Financial Officer
Date: January 29, 1998
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Index to Exhibits
Exhibit No. Description
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99.1 Form of Intercompany Agreement between
Vornado Realty L.P. and Vornado Operating,
Inc. (incorporated by reference to Exhibit
10.1 of Amendment No. 1 to Vornado Operating
, Inc.'s Registration Statement on Form S-11
(File No. 333-40701), filed on January 23,
1998)
99.2 Form of Revolving Credit Agreement between
Vornado Realty L.P. and Vornado Operating,
Inc., together with related form of line of
Credit Note (incorporated by reference to
Exhibit 10.2 of Amendment No. 1 to Vornado
Operating , Inc.'s Registration Statement on
Form S-11 (File No. 333-40701), filed on
January 23, 1998)
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