<PAGE> 1
EXHIBIT INDEX ON PAGE 29
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[XX] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended: JUNE 30, 1999
-------------------------------------------------
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
------------------------ -----------------------
Commission File Number: 1-11954
---------------------------------------------------------
VORNADO REALTY TRUST
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
MARYLAND 22-1657560
- --------------------------------------------- ------------------------
(State or other jurisdiction of incorporation (I.R.S. Employer
or organization) Identification Number)
PARK 80 WEST, PLAZA II, SADDLE BROOK, NEW JERSEY 07663
- ------------------------------------------------ ------------------------
(Address of principal executive offices) (Zip Code)
</TABLE>
(201) 587-1000
- --------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
N/A
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
[X] Yes [ ] No
As of July 16, 1999 there were 85,924,934 common shares of the
registrant's shares of beneficial interest outstanding.
Page 1
<PAGE> 2
INDEX
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION:
---------------------
Item 1. Financial Statements: Page Number
-----------
<S> <C>
Consolidated Balance Sheets as of June 30, 1999 and
December 31, 1998......................................................................... 3
Consolidated Statements of Income for the Three and Six Months
Ended June 30, 1999 and June 30, 1998..................................................... 4
Consolidated Statements of Cash Flows for the Six Months
Ended June 30, 1999 and June 30, 1998..................................................... 5
Notes to Consolidated Financial Statements................................................ 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations................................................................. 15
Item 3. Quantitative and Qualitative Disclosures About Market Risks............................... 26
PART II. OTHER INFORMATION:
-----------------
Item 1. Legal Proceedings......................................................................... 27
Item 4. Submission of Matters to a Vote of Security Holders....................................... 27
Item 6. Exhibits and Reports on Form 8-K.......................................................... 27
Signatures .......................................................................................... 28
Exhibit Index .......................................................................................... 29
</TABLE>
Page 2
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
VORNADO REALTY TRUST
CONSOLIDATED BALANCE SHEETS
(amounts in thousands except share amounts)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1999 1998
----------------- ---------------
<S> <C> <C>
ASSETS
Real estate, at cost:
Land..................................................... $ 754,822 $ 743,324
Buildings and improvements............................... 2,734,556 2,561,383
Leasehold improvements and
equipment.......................................... 12,884 11,184
----------------- ---------------
Total...................................... 3,502,262 3,315,891
Less accumulated depreciation and
amortization....................................... (264,063) (226,816)
----------------- ---------------
Real estate, net......................................... 3,238,199 3,089,075
Cash and cash equivalents, including U.S.
government obligations under repurchase
agreements of $27,750 and $56,500........................ 61,514 167,808
Restricted cash............................................. 19,647 44,195
Marketable securities....................................... 77,983 77,156
Investments and advances to partially-owned
entities, including Alexander's of
$101,835 and $104,038.................................... 1,166,034 827,840
Due from officers........................................... 17,797 17,165
Accounts receivable, net of allowance for
doubtful accounts of $4,936 and $3,044................... 32,714 35,517
Notes and mortgages receivable.............................. 57,281 10,683
Deposits in connection with real estate
acquisitions............................................. 16,276 22,947
Receivable arising from the straight-lining of
rents.................................................... 65,104 49,711
Other assets................................................ 113,883 83,682
----------------- ---------------
TOTAL ASSETS $ 4,866,432 $ 4,425,779
================= ===============
</TABLE>
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1999 1998
------------------ ---------------
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
Notes and mortgages payable............................................. $ 1,497,260 $ 1,363,750
Revolving credit facility............................................... 467,250 687,250
Accounts payable and accrued expenses................................... 92,151 109,925
Officer's deferred compensation payable................................. 36,395 35,628
Deferred leasing fee income............................................. 8,594 10,051
Other liabilities....................................................... 3,855 3,196
------------------ ---------------
2,105,505 2,209,800
------------------ ---------------
Minority interest....................................................... 739,853 433,301
------------------ ---------------
Commitments and contingencies
Shareholders' equity:
Preferred shares of beneficial interest:
no par value per share; authorized,
20,000,000 shares;
Series A: liquidation preference $50.00
per share; issued 5,789,239 shares....................... 284,195 282,758
Series B: liquidation preference $25.00
per share; issued 3,400,000 shares....................... 82,011 --
Series C: liquidation preferrence $25.00
per share; issued 4,600,000 shares....................... 111,271 --
Common shares of beneficial interest:
$.04 par value per share; authorized,
150,000,000 shares; issued 85,924,934
and 85,076,542 shares.................................... 3,437 3,403
Additional capital.............................................. 1,682,996 1,653,208
Accumulated deficit............................................. (120,408) (132,837)
------------------ ---------------
2,043,502 1,806,532
Accumulated other comprehensive loss............................ (17,604) (18,957)
Due from officers for purchase of common
shares................................................... (4,824) (4,897)
------------------ ---------------
Total shareholders' equity......................... 2,021,074 1,782,678
------------------ ---------------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY............................................ $ 4,866,432 $ 4,425,779
================== ===============
</TABLE>
See notes to consolidated financial statements.
Page 3
<PAGE> 4
VORNADO REALTY TRUST
CONSOLIDATED STATEMENTS OF INCOME
(amounts in thousands except per share amounts)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED FOR THE SIX MONTHS ENDED
JUNE 30 JUNE 30
------------------------------ ------------------------------
1999 1998 1999 1998
------------ ------------- -------------- -----------
<S> <C> <C> <C> <C>
Revenues:
Property rentals......................................... $ 141,724 $ 109,362 $ 279,883 $ 181,727
Expense reimbursements................................... 21,143 17,094 41,871 32,790
Other income (including fee income
from related parties of $349 and $777
in each three month period and $814
and $1,185 in each six month period).................. 3,321 2,067 7,998 4,217
------------ ------------- -------------- -----------
Total revenues.............................................. 166,188 128,523 329,752 218,734
------------ ------------- -------------- -----------
Expenses:
Operating................................................ 65,925 51,454 130,962 85,607
Depreciation and amortization............................ 19,585 15,029 38,877 25,395
General and administrative............................... 10,169 7,070 19,797 12,017
------------ ------------- -------------- -----------
Total expenses.............................................. 95,679 73,553 189,636 123,019
------------ ------------- -------------- -----------
Operating income............................................ 70,509 54,970 140,116 95,715
Income applicable to Alexander's............................ 1,839 1,490 3,341 3,146
Income from partially owned entities........................ 21,925 5,756 41,018 9,676
Interest and other investment income........................ 4,900 5,271 8,358 12,837
Interest and debt expense................................... (35,284) (26,679) (70,901) (46,502)
Minority interest........................................... (11,863) (4,492) (20,978) (7,069)
------------ ------------- -------------- -----------
Net income.................................................. 52,026 36,316 100,954 67,803
Preferred stock dividends (including accretion of
issuance expenses of $719 and $1,438 in
each three and six month period)......................... (8,381) (5,422) (14,093) (10,845)
------------ ------------- -------------- -----------
Net income applicable to common shares...................... $ 43,645 $ 30,894 $ 86,861 $ 56,958
============ ============= ============== ===========
Net income per common share - basic......................... $ .51 $ .38 $ 1.02 $ .74
============ ============= ============== ===========
Net income per common share - diluted....................... $ .50 $ .37 $ 1.00 $ .72
============ ============= ============== ===========
Dividends per common share.................................. $ .44 $ .40 $ .88 $ .80
============ ============= ============== ===========
</TABLE>
See notes to consolidated financial statements.
Page 4
<PAGE> 5
VORNADO REALTY TRUST
CONSOLIDATED STATEMENTS OF CASH FLOWS
(amounts in thousands)
<TABLE>
<CAPTION>
For The Six Months Ended June 30,
---------------------------------
1999 1998
------------ -------------
<S> <C> <C>
Cash Flows From Operating Activities:
Net income.............................................................................. $ 100,954 $ 67,803
Adjustments to reconcile net income to net cash provided by operations:
Depreciation and amortization (including debt issuance costs).................... 38,877 26,834
Straight-lining of rental income................................................. (15,393) (6,414)
Minority interest................................................................ 20,978 7,069
Equity in income of Alexander's,
including depreciation of $300 in each period................................. (816) (297)
Equity in net income of partially-owned entities................................. (41,018) (9,676)
Gain on marketable securities.................................................... (382) (1,447)
Changes in operating assets and liabilities............................................. (16,404) (1,661)
------------ ------------
Net cash provided by operating activities............................................... 86,796 82,211
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisitions of real estate and other................................................... (45,000) (681,387)
Investments in partially-owned entities................................................. (13,200) (165,633)
Proceeds from sale of Cold Storage assets............................................... 22,769 --
Investment in notes and mortgages receivable............................................ (60,567) (2,875)
Repayment of mortgage loans receivable.................................................. 19,367 57,663
Cash restricted for tenant improvements................................................. 24,548 590
Additions to real estate................................................................ (86,731) (47,450)
Purchases of securities available for sale.............................................. (3,939) (22,420)
Proceeds from sale or maturity of securities available for sale......................... 6,992 14,903
Real estate deposits and other.......................................................... (6,559) (133,072)
------------ ------------
Net cash used in investing activities................................................... (142,320) (979,681)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from borrowings................................................................ 165,000 1,295,855
Repayments of borrowings................................................................ (306,490) (863,258)
Debt issuance costs..................................................................... (3,504) (6,533)
Proceeds from issuance of common shares................................................. -- 445,282
Proceeds from issuance of preferred stock............................................... 193,282 --
Distributions to minority partners...................................................... (12,226) (2,577)
Dividends paid on common shares......................................................... (74,432) (58,893)
Dividends paid on preferred shares...................................................... (12,655) (10,845)
Exercise of stock options............................................................... 255 69
------------ ------------
Net cash (used in) provided by financing activities..................................... (50,770) 799,100
------------ ------------
Net decrease in cash and cash equivalents............................................... (106,294) (98,370)
Cash and cash equivalents at beginning of period........................................ 167,808 355,954
------------ ------------
Cash and cash equivalents at end of period.............................................. $ 61,514 $ 257,584
============ ============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash payments for interest (including capitalized interest of
$1,410 in 1999)..................................................................... $ 69,222 $ 43,370
NON-CASH TRANSACTIONS:
Financing assumed in acquisitions....................................................... $ 55,000 $ 420,000
Minority interest in connection with acquisitions....................................... 297,800 116,398
Unrealized gain on securities available for sale........................................ 1,353 3,304
</TABLE>
See notes to consolidated financial statements.
Page 5
<PAGE> 6
VORNADO REALTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION
Vornado Realty Trust is a fully-integrated real estate investment trust
("REIT"). In April 1997, Vornado transferred substantially all of its assets to
Vornado Realty L.P., a Delaware limited partnership (the "Operating
Partnership"). As a result, Vornado conducts its business through the Operating
Partnership. Vornado is the sole general partner of, and owned approximately 86%
of the common limited partnership interest in, the Operating Partnership at July
16, 1999. All references to the "Company" and "Vornado" refer to Vornado Realty
Trust and its consolidated subsidiaries, including the Operating Partnership.
2. BASIS OF PRESENTATION
The consolidated balance sheet as of June 30, 1999, the consolidated
statements of income for the three and six months ended June 30, 1999 and 1998
and the consolidated statements of changes in cash flows for the six months
ended June 30, 1999 and 1998 are unaudited. In the opinion of management, all
adjustments (which include only normal recurring adjustments) necessary to
present fairly the financial position, results of operations and changes in cash
flows have been made. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted. These condensed
consolidated financial statements should be read in conjunction with the
financial statements and notes thereto included in Vornado's consolidated Form
10-K for the year ended December 31, 1998 as filed with the Securities and
Exchange Commission. The results of operations for the six months ended June 30,
1999 are not necessarily indicative of the operating results for the full year.
The accompanying consolidated financial statements include the accounts
of Vornado Realty Trust and its majority-owned subsidiary, Vornado Realty L.P.,
as well as equity interests acquired that individually (or in the aggregate with
prior interests) exceed a 50% interest and the Company exercises unilateral
control. All significant intercompany amounts have been eliminated. Equity
interests in partially-owned entities include partnerships, joint ventures and
preferred stock affiliates (corporations in which the Company owns all of the
preferred stock and none of the common equity) and are accounted for under the
equity method of accounting as the Company exercises significant influence.
These investments are recorded initially at cost and subsequently adjusted for
net equity in income (loss) and cash contributions and distributions. Ownership
of the preferred stock entitles the Company 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 Trustees of Vornado.
Management has made estimates and assumptions that affect the reported
amounts of assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting periods.
Actual results could differ from those estimates.
Certain amounts in the prior year's financial statements have been
reclassified to conform to the current year presentation.
3. ACQUISITIONS AND FINANCINGS
ACQUISITIONS
888 Seventh Avenue
In January 1999, the Company completed the acquisition of 888 Seventh
Avenue, a 46 story Manhattan office building for approximately $100,000,000.
Newkirk Joint Ventures
In March 1999, the Company and its joint venture partner completed the
acquisition of additional equity interests in certain limited partnerships.
The Company's additional investment of $52,435,000 consisted of $47,790,000 in
Operating Partnership Units and $4,645,000 in cash.
Page 6
<PAGE> 7
VORNADO REALTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
Charles E. Smith Commercial Realty L.P. ("CESCR")
In March 1999, the Company made an additional $242,000,000 investment in
CESCR by contributing to CESCR the land under certain CESCR office properties in
Crystal City, Arlington, Virginia and partnership interests in certain CESCR
subsidiaries. The Company acquired these assets from Commonwealth Atlantic
Properties, Inc. ("CAPI"), an affiliate of Lazard Freres Real Estate Investors
L.L.C., immediately prior to the contribution to CESCR. Together with the
Company's investment in CESCR made in 1997 and the units it reacquired in March
1999 from Vornado Operating Company, the Company owns approximately 34% of
CESCR's limited partnership units. In addition, the Company acquired from CAPI
for $8,000,000 the land under a Marriott Hotel located in Crystal City.
The purchase price was paid to CAPI by the Company issuing $250,000,000
of 6% Convertible Preferred Units of the Company's Operating Partnership. The
Preferred Units are convertible at $44 per unit and the coupon increases to
6.50% over the next three years and then fixes at 6.75% in year eight. The
Company has the right to appoint one of three members to CESCR's Board of
Managers, increasing under certain circumstances to two of four members in March
2002.
In connection with these transactions, the Company made a five-year
$41,000,000 loan to CAPI with interest at 8%, increasing to 9% ratably over the
term. The loan is secured by approximately $55,000,000 of the Operating
Partnership's units issued to CAPI as well as certain real estate assets.
FINANCINGS
Two Penn Plaza Refinancing
In February 1999, the Company completed a $165,000,000 refinancing of
its Two Penn Plaza office building and prepaid the then existing $80,000,000
debt on the property. The new 5-year debt matures in February 2004 and bears
interest at 7.08%.
Offering of Preferred Shares
In March 1999, the Company completed the sale of 3 million 8.5% Series B
Cumulative Redeemable Preferred Shares, at a price of $25.00 per share, pursuant
to an effective registration statement with net proceeds to the Company of
approximately $72,200,000. Additionally in March 1999, 400,000 shares were sold
when the underwriters exercised their over-allotment option resulting in
additional net proceeds to the Company of $9,700,000. The perpetual preferred
shares may be called without penalty at the option of the Company commencing on
March 17, 2004.
In May 1999, the Company completed the sale of 4 million 8.5% Series C
Cumulative Redeemable Preferred Shares, at a price of $25.00 per share, pursuant
to an effective registration statement with net proceeds to the Company of
approximately $96,900,000. Additionally in May 1999, 600,000 shares were sold
when the underwriters exercised their over-allotment option resulting in
additional net proceeds to the Company of $14,500,000. The perpetual preferred
shares may be called without penalty at the option of the Company commencing on
May 17, 2004.
In May 1999, the Company sold an aggregate of $27,500,000 of 8.375%
Series D-2 Cumulative Redeemable Preferred Units in the Operating Partnership to
an institutional investor in a private placement, resulting in net proceeds of
approximately $27,467,000. The perpetual Preferred Units may be called without
penalty at the option of the Operating Partnership commencing on May 27, 2004.
Page 7
<PAGE> 8
VORNADO REALTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
PRO FORMA INFORMATION
The pro forma condensed consolidated operating results for Vornado for
the six months ended June 30, 1999 and 1998 are presented as if the acquisitions
described above and those included in Investments and Advances to
Partially-Owned Entities and the financings attributable thereto had occurred on
January 1, 1998.
Condensed Consolidated Pro Forma Operating Results
<TABLE>
<CAPTION>
Pro Forma
--------------------------------------------
Six Months Ended June 30,
--------------------------------------------
1999 1998
------------------- -----------------
<S> <C> <C>
(amounts in thousands, except per share amounts)
Revenues................................................................. $ 330,907 $ 314,444
================ ================
Net income............................................................... $ 103,448 $ 77,806
Preferred stock dividends................................................ (14,093) (10,845)
---------------- ----------------
Net income applicable to common shares................................... $ 89,355 $ 66,961
================ ================
Net income per common share - basic...................................... $ 1.04 $ .78
========== ==========
Net income per common share - diluted.................................... $ 1.02 $ .76
========== ==========
</TABLE>
4. INVESTMENTS AND ADVANCES TO PARTIALLY-OWNED ENTITIES
The Company's investments and advances to partially-owned entities and
income recognized from such investments are as follows:
Investments and Advances
<TABLE>
<CAPTION>
June 30, 1999 December 31, 1998
-------------------- ----------------------
<S> <C> <C>
(amounts in thousands)
Alexander's......................................... $ 101,835 $ 104,038
Cold Storage Companies.............................. 457,296 459,172
CESCR............................................... 316,942 49,151
Hotel Pennsylvania.................................. 50,933 47,813
Newkirk Joint Ventures.............................. 114,971 58,665
Mendik Partially-Owned Office Buildings............. 59,051 59,902
Vornado Management Corp., Mendik
Management Company, Merchandise
Mart Properties, Inc. and other............... 65,006 49,099
--------------- ---------------
$ 1,166,034 $ 827,840
=============== ===============
</TABLE>
Page 8
<PAGE> 9
VORNADO REALTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
Income
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
------------------------------------ ----------------------------------
1999 1998 1999 1998
-------------- ---------------- ------------- -------------
<S> <C> <C> <C> <C>
(amounts in thousands)
Income Applicable to Alexander's................ $ 1,839 $ 1,490 $ 3,341 $ 3,146
============= ============= ============= =============
Other Partially-Owned Entities:
Cold Storage Companies....................... $ 8,506 $ 1,450 $ 20,496 $ 3,164
CESCR........................................ 6,072 1,352 9,201 2,351
Hotel Pennsylvania........................... 2,425 1,445 2,568 1,389
Newkirk Joint Ventures....................... 3,277 -- 5,309 --
Mendik Partially-Owned Office Buildings......... 433 409 750 1,322
Vornado Management Corp., Mendik
Management Company,
Merchandise Mart Properties
Inc. and other......................... 1,212 1,100 2,694 1,450
------------- ------------- ------------- -------------
$ 21,925 $ 5,756 $ 41,018 $ 9,676
============= ============= ============= =============
</TABLE>
Alexander's
The Company owns 29.3% of the outstanding shares of common stock of
Alexander's. In March 1995, the Company lent Alexander's $45,000,000. The loan,
which was originally scheduled to mature in March 1998, has been renewed for two
additional one year periods and currently matures in March 2000. The interest
rate was reset in March 1999 from 13.87% per annum to 14.18% per annum.
Alexander's is managed by and its properties are leased by the Company,
pursuant to agreements with a one-year term expiring in March of each year which
are automatically renewable. Subject to the payments of rents by Alexander's
tenants, the Company is due $2,896,000 under its leasing agreement with
Alexander's which amount is included in Investments in and Advances to
Alexander's. Included in income from Vornado Management Corp. is management fee
income from Alexander's of $1,072,000 and $938,000 for the three months ended
June 30, 1999 and 1998 and $2,214,000 and $1,875,000 for the six months ended
June 30, 1999 and 1998.
Cold Storage Companies
In March 1999, the partnerships in which affiliates of the Company have a
60% interest and affiliates of Crescent Real Estate Equities Company have a 40%
interest ("Vornado/Crescent Partnerships") sold all of the non-real estate
assets of the Cold Storage Companies encompassing the operations of the cold
storage business for approximately $48,000,000 to a new partnership owned 60% by
Vornado Operating Company and 40% by Crescent Operating Inc. The new partnership
leases the underlying cold storage warehouses used in this business from the
Vornado/Crescent Partnerships which continue to own the real estate. The leases
have a 15 year term with two-five year renewal options and provide for the
payment of fixed base rent and percentage rent based on customer revenues. The
new partnership is required to pay for all costs arising from the operation,
maintenance and repair of the properties, as well as property capital
expenditures in excess of $5,000,000 annually. Fixed base rent and percentage
rent for the initial lease year is projected to be approximately $151,000,000.
The new partnership has the right to defer a portion of the rent for up to three
years beginning in March 1999 to the extent that available cash, as defined in
the leases, is insufficient to pay such rent.
Page 9
<PAGE> 10
VORNADO REALTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
In connection with the sale of the Cold Storage non-real estate assets,
the Company lent $18,587,000 to Vornado Operating pursuant to a $75,000,000
unsecured five-year revolving credit facility. The balance outstanding under the
facility is $4,587,000 at June 30, 1999. Borrowing under the facility bears
interest at LIBOR plus 3% (currently 8.06%).
5. OTHER RELATED PARTY TRANSACTIONS
The Company currently manages and leases the real estate assets of
Interstate Properties pursuant to a management agreement. Management fees earned
by the Company pursuant to the management agreement were $195,000 and $574,000
for the three months ended June 30, 1999 and 1998 and $465,000 and $772,000 for
the six months ended June 30, 1999 and 1998.
The Mendik Group owns an entity which provides cleaning and related
services and security services to office properties, including the Company's
Manhattan office properties. The Company was charged fees in connection with
these contracts of $8,286,000 and $5,957,000 for the three months ended June 30,
1999 and 1998 and $19,297,000 and $11,224,000 for the six months ended June 30,
1999 and 1998.
6. MINORITY INTEREST
The minority interest represents limited partners', other than Vornado,
interests in the Operating Partnership and are comprised of:
<TABLE>
<CAPTION>
Outstanding Units at Preferred or
--------------------------------- Per Unit Annual Conversion
June 30, December 31, Liquidation Distribution Rate Into
Unit Series 1999 1998 Preference Rate Class A Units
- ----------- --------------- --------------- ------------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
Class A.................................. 2,664,399 1,887,781 -- $ 1.76 (a)
Class C.................................. 3,529,098 3,534,098 -- $ 1.69 (b) 1.0 (c)
Class D.................................. 1,267,122 1,332,596 -- $ 2.015 1.0 (d)
5.0% B-1 Convertible Preferred........... 899,566 899,566 $ 50.00 $ 2.50 .914
8.0% B-2 Convertible Preferred........... 499,783 449,783 $ 50.00 $ 4.00 .914
6.5% C-1 Convertible Preferred........... 747,912 747,912 $ 50.00 $ 3.25 1.1431
8.5% D-1 Cumulative Redeemable
Preferred........................ 3,500,000 3,500,000 $ 25.00 $ 2.125 (e)
8.375% D-2 Cumulative Redeemable
Preferred........................ 549,336 -- $ 50.00 $4.1875 (e)
6.0% E-1 Convertible Preferred........... 4,998,000 -- $ 50.00 $ 3.00 1.1364
</TABLE>
- --------------
(a) Class A units are redeemable at the option of the holder for cash or, at
Vornado's option, one common share of beneficial interest in Vornado.
(b) Class C unit holders participate in distributions at an annual rate of
$1.69, then pari passu with Class A. Based on the current level of
dividends, Class C units will convert into Class A units in the third
quarter of 1999.
(c) Mandatory conversion of Class C units into Class A units occurs after four
consecutive quarters of distributions of at least $.4225 per Class A unit
($1.69 annually).
(d) Mandatory conversion of Class D units into Class A units occurs after four
consecutive quarters of distributions of at least $.50375 per Class A unit
($2.015 annually).
(e) Convertible into an equivalent Vornado preferred share.
Page 10
<PAGE> 11
VORNADO REALTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
7. CONTINGENCIES
At June 30, 1999, in addition to the $467,250,000 balance outstanding
under the Company's revolving credit facility, the Company had utilized
approximately $40,415,000 of availability under the facility for letters of
credit and guarantees primarily related to pending acquisitions.
There are various legal actions against the Company in the ordinary
course of business. In the opinion of management, after consultation with
legal counsel, the outcome of such matters will not have a material effect on
the Company's financial condition, results of operations or cash flows.
8. EARNINGS PER SHARE
The following table sets forth the computation of basic and diluted
earnings per share:
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
----------------------------- -------------------------------
1999 1998 1999 1998
----------- ------------- ------------ ------------
<S> <C> <C> <C> <C>
(amounts in thousands except per share amounts)
Numerator:
Net income........................................... $ 52,026 $ 36,316 $ 100,954 $ 67,803
Preferred stock dividends............................ (8,381) (5,422) (14,093) (10,845)
----------- ------------- ------------ -------------
Numerator for basic and diluted earnings per
share - net income applicable to common
shares............................................... $ 43,645 $ 30,894 $ 86,861 $ 56,958
=========== ============ ============ ============
Denominator:
Denominator for basic earnings per share -
weighted average shares.............................. 85,634 82,159 85,362 77,197
Effect of dilutive securities:
Employee stock options............................ 2,189 2,085 1,883 2,286
----------- ------------ ------------ ------------
Denominator for diluted earnings per share -
adjusted weighted average shares and
assumed conversions............................... 87,823 84,244 87,245 79,483
=========== ============ ============ ============
Net income per common share - basic.................. $ .51 $ .38 $ 1.02 $ .74
========== ============ ============ ============
Net income per common share - diluted................ $ .50 $ .37 $ 1.00 $ .72
========== ============ ============ ============
</TABLE>
9. COMPREHENSIVE INCOME
The following table sets forth the Company's comprehensive income:
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
---------------------------------- ------------------------------------
1999 1998 1999 1998
--------------- --------------- ----------------- ---------------
<S> <C> <C> <C> <C>
(amounts in thousands)
Net income applicable to common shares...... $ 43,645 $ 30,894 $ 86,861 $ 56,958
Other comprehensive income.................. 2,378 1,753 1,353 3,304
--------------- --------------- --------------- ---------------
Comprehensive income........................ $ 46,023 $ 32,647 $ 88,214 $ 60,262
=============== =============== =============== ===============
</TABLE>
Page 11
<PAGE> 12
VORNADO REALTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
10. SEGMENT INFORMATION
The Company has four business segments: Office, Retail, Merchandise Mart
Properties and Cold Storage.
(amounts in thousands)
<TABLE>
<CAPTION>
Three Months Ended June 30,
---------------------------------------------------------------------------------
1999
---------------------------------------------------------------------------------
Merchandise
Office Retail Mart Cold Storage Other(2) Total
--------- --------- ---------------- ------------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
Total revenues......................... $ 87,876 $ 43,009 $ 33,367 $ -- $ 1,936 $ 166,188
Total expenses......................... 52,313 17,884 17,853 -- 7,629 95,679
-------- -------- ------------- --------- -------- ---------
Operating income....................... 35,563 25,125 15,514 -- (5,693) 70,509
Income applicable to
Alexander's........................ -- -- -- -- 1,839 1,839
Income from partially-owned
entities........................... 6,617 223 728 8,506 5,851 21,925
Interest and other investment
income............................. 318 -- 69 -- 4,513 4,900
Interest and debt expense.............. (11,778) (8,085) (6,869) -- (8,552) (35,284)
Minority interest...................... (5,480) (3,081) (1,697) (1,605) -- (11,863)
-------- -------- ------------- --------- -------- ---------
Net income............................. 25,240 14,182 7,745 6,901 (2,042) 52,026
Minority interest...................... 5,480 3,081 1,697 1,605 -- 11,863
Interest and debt expense(4)........... 22,101 8,740 6,869 6,893 14,735 59,338
Depreciation and amortization(4)....... 14,693 4,252 4,105 7,615 2,027 32,692
Straight-lining of rents(4)............ (4,902) (682) (1,172) (627) (273) (7,656)
Other.................................. -- -- -- 1,114(3) 1,641 2,755
-------- -------- ------------- --------- -------- ---------
EBITDA(1).............................. $ 62,612 $ 29,573 $ 19,244 $ 23,501 $ 16,088 $ 151,018
======== ======== ============= ========= ======== =========
<CAPTION>
Three Months Ended June 30,
----------------------------------------------------------------------------------
1998
----------------------------------------------------------------------------------
Merchandise
Office Retail Mart Cold Storage Other(2) Total
----------- -------- ----------- ------------ -------- ---------
<S> <C> <C> <C> <C> <C> <C>
Total revenues......................... $ 56,870 $ 40,973 $ 28,310 $ -- $ 2,370 $ 128,523
Total expenses......................... 35,045 16,679 16,452 -- 5,377 73,553
----------- -------- --------- ---------- -------- ---------
Operating income....................... 21,825 24,294 11,858 -- (3,007) 54,970
Income applicable to
Alexander's......................... -- -- -- -- 1,490 1,490
Income from partially-owned
entities............................ 1,767 -- 948 1,450 1,591 5,756
Interest and other investment
income.............................. 1,429 1,003 321 -- 2,518 5,271
Interest and debt expense.............. (4,689) (8,101) (6,412) -- (7,477) (26,679)
Minority interest...................... (2,039) (1,737) (566) (150) -- (4,492)
----------- -------- --------- ---------- -------- ---------
Net income............................. 18,293 15,459 6,149 1,300 (4,885) 36,316
Minority interest...................... 2,039 1,737 566 150 -- 4,492
Interest and debt expense(4)........... 8,992 8,101 6,412 6,336 8,911 38,752
Depreciation and
amortization(4)..................... 9,778 3,802 3,226 8,303 1,455 26,564
Straight-lining of rents(4)............ (2,056) (721) (1,283) -- (259) (4,319)
Other.................................. -- -- -- 1,786 625 2,411
----------- -------- --------- ---------- -------- ---------
EBITDA(1).............................. $ 37,046 $ 28,378 $ 15,070 $ 17,875 $ 5,847 $ 104,216
=========== ======== ========= ========== ======== =========
</TABLE>
- -------------------
See footnotes 1-4 on page 14.
Page 12
<PAGE> 13
VORNADO REALTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(amounts in thousands)
<TABLE>
<CAPTION>
Six Months Ended June 30,
--------------------------------------------------------------------------------------
1999
--------------------------------------------------------------------------------------
Merchandise
Office Retail Mart Cold Storage Other(2) Total
--------- -------- ------------- ------------ -------- --------
<S> <C> <C> <C> <C> <C> <C>
Total revenues......................... $ 175,152 $ 84,366 $ 66,355 $ -- $ 3,879 $ 329,752
Total expenses......................... 103,797 35,041 36,355 -- 14,443 189,636
--------- -------- ------------- --------- -------- ---------
Operating income....................... 71,355 49,325 30,000 -- (10,564) 140,116
Income applicable to
Alexander's......................... -- -- -- -- 3,341 3,341
Income from partially-owned
entities............................ 10,024 423 1,904 20,496 8,171 41,018
Interest and other investment
income.............................. 856 -- 367 -- 7,135 8,358
Interest and debt expense.............. (22,259) (16,117) (13,165) -- (19,360) (70,901)
Minority interest...................... (9,445) (5,296) (3,010) (3,227) -- (20,978)
--------- -------- ------------- --------- -------- ---------
Net income............................. 50,531 28,335 16,096 17,269 (11,277) 100,954
Minority interest...................... 9,445 5,296 3,010 3,227 -- 20,978
Interest and debt expense(4)........... 36,706 17,429 13,165 13,558 28,179 109,037
Depreciation and
amortization(4)..................... 27,977 8,384 8,178 16,012 3,859 64,410
Straight-lining of rents(4)............ (8,615) (1,317) (2,280) (627) 306 (12,533)
Other.................................. -- -- -- (3,009)(3) 3,110 101
--------- -------- ------------- --------- -------- ---------
EBITDA(1).............................. $ 116,044 $ 58,127 $ 38,169 $ 46,430 $ 24,177 $ 282,947
========= ======== ============= ========= ======== =========
</TABLE>
<TABLE>
<CAPTION>
June 30, 1999
-------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance sheet data:
Real estate, net.................. $ 1,892,885 $ 593,039 $ 736,649 $ -- $ 15,626 $ 3,238,199
Investments and
advances to
partially-owned
entities....................... 385,663 3,202 26,913 457,296 292,960 1,166,034
</TABLE>
<TABLE>
<CAPTION>
Six Months Ended June 30,
----------------------------------------------------------------------------------
1999
----------------------------------------------------------------------------------
Merchandise
Office Retail Mart Cold Storage Other(2) Total
---------- -------- --------------- ------------ ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
Total revenues......................... $ 103,715 $ 82,439 $ 28,310 $ -- $ 4,270 $ 218,734
Total expenses......................... 62,160 34,307 16,452 -- 10,100 123,019
--------- -------- ------------- --------- --------- ---------
Operating income....................... 41,555 48,132 11,858 -- (5,830) 95,715
Income applicable to
Alexander's......................... -- -- -- -- 3,146 3,146
Income from partially-owned
entities............................ 3,872 -- 948 3,164 1,692 9,676
Interest and other investment
income.............................. 2,944 2,159 321 -- 7,413 12,837
Interest and debt expense.............. (8,707) (15,879) (6,412) -- (15,504) (46,502)
Minority interest...................... (3,340) (2,897) (566) (266) -- (7,069)
--------- -------- ------------- --------- --------- ---------
Net income............................. 36,324 31,515 6,149 2,898 (9,083) 67,803
Minority interest...................... 3,340 2,897 566 266 -- 7,069
Interest and debt expense(4)........... 16,547 15,879 6,412 13,610 17,802 70,250
Depreciation and
amortization(4)..................... 17,221 7,755 3,226 17,819 2,623 48,644
Straight-lining of rents(4)............ (3,497) (1,654) (1,283) -- (522) (6,956)
Other.................................. -- -- -- 1,786 849 2,635
--------- -------- ------------- --------- --------- ---------
EBITDA(1).............................. $ 69,935 $ 56,392 $ 15,070 $ 36,379 $ 11,669 $ 189,445
========= ======== ============= ========= ========= =========
</TABLE>
<TABLE>
<CAPTION>
December 31, 1998
-------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance sheet data:
Real estate, net.................. $ 1,777,919 $ 565,723 $ 729,485 $ -- $ 15,948 $ 3,089,075
Investments and
advances to
partially-owned
entities....................... 118,337 2,946 26,638 459,172 220,747 827,840
</TABLE>
- --------------------------
See footnotes 1-4 on the next page.
Page 13
<PAGE> 14
VORNADO REALTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
Notes to segment information:
(1) EBITDA represents net income before interest, taxes, depreciation and
amortization, extraordinary or non-recurring items, gains or losses on
sales of real estate and the effect of straight-lining of property
rentals for rent escalations. Management considers EBITDA a
supplemental measure for making decisions and assessing the
performance of its segments. EBITDA may not be comparable to similarly
titled measures employed by other companies.
(2) Other includes (i) the operations of the Company's warehouse and
industrial properties, (ii) investments in the Hotel Pennsylvania,
Alexander's, and Newkirk Joint Ventures, (iii) corporate general and
administrative expenses and (iv) unallocated investment income and
interest and debt expense.
(3) Includes a charge of $1,114 for the three months ended June 30, 1999
and a benefit of $3,210 for the six months ended June 30, 1999 for
income taxes, which are considered non-recurring because of the
expected conversion of the Cold Storage Companies to REITs.
(4) Interest and debt expense, depreciation and amortization and
straight-lining of rents included in the reconciliation of net income
to EBITDA reflects amounts which are netted in income from
partially-owned entities.
11. SUBSEQUENT EVENTS
350 North Orleans Financing
On July 8, 1999, the Company completed a $70,000,000 mortgage financing
of its 350 North Orleans property in Chicago. The Company received proceeds of
$40,000,000 and is expected to receive the remaining $30,000,000 during the next
year upon meeting certain debt service coverage requirements. The new 3-year
debt matures in June 2002 and bears interest at LIBOR + 1.65% (currently 6.83%).
Acquisition of 909 Third Avenue
On July 22, 1999, the Company acquired 909 Third Avenue, a 33 story
Manhattan office building for approximately $123,000,000, including $109,000,000
of indebtedness.
Hotel Pennsylvania
On August 5, 1999, the Company increased its interest in the Hotel
Pennsylvania to 100% by acquiring Planet Hollywood International, Inc.'s
("Planet Hollywood") 20% interest in the hotel. Under the agreement, the Company
will purchase the 20% interest for approximately $18,000,000 and will assume
$24,000,000 of existing debt. In connection with the transaction, Vornado also
terminated the licensing agreement with Planet Hollywood for an Official
All-Star Hotel. The Hotel Pennsylvania is located in New York City on Seventh
Avenue opposite Madison Square Garden. The acquisition is expected to close in
the third quarter of 1999.
Page 14
<PAGE> 15
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
(All of the amounts presented are in thousands, except share
amounts and percentages)
Certain statements contained herein constitute forward-looking
statements as such term is defined in Section 27A of the Securities Act of
1933 and Section 21E of the Securities Exchange Act of 1934, as amended.
Certain factors could cause actual results to differ materially from those
in the forward-looking statements. Factors that might cause such a material
difference include, but are not limited to, (a) changes in the general
economic climate, (b) local conditions such as an oversupply of space or a
reduction in demand for real estate in the area, (c) conditions of tenants,
(d) competition from other available space, (e) increased operating costs
and interest expense, (f) the timing of and costs associated with property
improvements, (g) changes in taxation or zoning laws, (h) government
regulations, (i) failure of Vornado to continue to qualify as a REIT, (j)
availability of financing on acceptable terms, (k) potential liability
under environmental or other laws or regulations, (l) general competitive
factors and (m) failure by Vornado, or by other companies with which it
does business, to remediate possible Year 2000 problems in computer
software or embedded technology.
OVERVIEW
The Company's net income was $52,026 in the three months ended June
30, 1999, as compared to $36,316 in the prior year's quarter, an increase
of $15,710. The Company's net income was $100,954 in the six months ended
June 30, 1999, as compared to $67,803 in the prior year's six months, an
increase of $33,151. EBITDA, as defined,(1) was $151,018 in the three
months ended June 30, 1999, as compared to $104,216 in the prior year's
quarter, an increase of $46,802. EBITDA was $282,947 in the six months
ended June 30, 1999 as compared to $189,445 in the prior year's six months,
an increase of $93,502.
Below is a summary of net income and EBITDA by segment for the
three and six months ended June 30, 1999 and 1998:
<TABLE>
<CAPTION>
For The Three Months Ended June 30, 1999
---------------------------------------------------------------------------
Merchandise
Total Office Retail Mart Cold Storage Other(2)
---------- -------- ------- ----------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Total revenues.......................... $166,188 $ 87,876 $ 43,009 $ 33,367 $ -- $ 1,936
Total expenses.......................... 95,679 52,313 17,884 17,853 -- 7,629
-------- -------- -------- --------- --------- ---------
Operating income........................ 70,509 35,563 25,125 15,514 -- (5,693)
Income applicable to Alexander's ....... 1,839 -- -- -- -- 1,839
Income from partially-owned entities.... 21,925 6,617 223 728 8,506 5,851
Interest and other investment income.... 4,900 318 -- 69 -- 4,513
Interest and debt expense............... (35,284) (11,778) (8,085) (6,869) -- (8,552)
Minority interest....................... (11,863) (5,480) (3,081) (1,697) (1,605) --
-------- -------- -------- --------- --------- ---------
Net income.............................. 52,026 25,240 14,182 7,745 6,901 (2,042)
Minority interest....................... 11,863 5,480 3,081 1,697 1,605 --
Interest and debt expense (4)........... 59,338 22,101 8,740 6,869 6,893 14,735
Depreciation and amortization (4)....... 32,692 14,693 4,252 4,105 7,615 2,027
Straight-lining of rents (4)............ (7,656) (4,902) (682) (1,172) (627) (273)
Other................................... 2,755 -- -- -- 1,114(3) 1,641
-------- -------- -------- --------- --------- ---------
EBITDA (1).............................. $151,018 $ 62,612 $ 29,573 $ 19,244 $ 23,501 $ 16,088
======== ======== ======== ========= ========= =========
</TABLE>
<TABLE>
<CAPTION>
For The Three Months Ended June 30, 1998
-----------------------------------------------------------------------------
Merchandise
Total Office Retail Mart Cold Storage Other(2)
---------- -------- --------- ----------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C>
Total revenues.......................... $ 128,523 $ 56,870 $ 40,973 $ 28,310 $ -- $ 2,370
Total expenses.......................... 73,553 35,045 16,679 16,452 -- 5,377
--------- -------- -------- ---------- ---------- --------
Operating income........................ 54,970 21,825 24,294 11,858 -- (3,007)
Income applicable to Alexander's ....... 1,490 -- -- -- -- 1,490
Income from partially-owned entities.... 5,756 1,767 -- 948 1,450 1,591
Interest and other investment income.... 5,271 1,429 1,003 321 -- 2,518
Interest and debt expense............... (26,679) (4,689) (8,101) (6,412) -- (7,477)
Minority interest....................... (4,492) (2,039) (1,737) (566) (150) --
--------- -------- -------- ---------- ---------- --------
Net income.............................. 36,316 18,293 15,459 6,149 1,300 (4,885)
Minority interest....................... 4,492 2,039 1,737 566 150 --
Interest and debt expense (4)........... 38,752 8,992 8,101 6,412 6,336 8,911
Depreciation and amortization (4)....... 26,564 9,778 3,802 3,226 8,303 1,455
Straight-lining of rents (4)............ (4,319) (2,056) (721) (1,283) -- (259)
Other................................... 2,411 -- -- -- 1,786 625
--------- -------- -------- ---------- ---------- --------
EBITDA (1).............................. $ 104,216 $ 37,046 $ 28,378 $ 15,070 $ 17,875 $ 5,847
========= ======== ======== ========== ========== ========
</TABLE>
Footnotes 1-4 are explained on the following page.
Page 15
<PAGE> 16
<TABLE>
<CAPTION>
For The Six Months Ended June 30, 1999
-------------------------------------------------------------------------------------
Merchandise
Total Office Retail Mart Cold Storage Other(2)
----------- --------- --------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Total revenues........................... $ 329,752 $ 175,152 $ 84,366 $ 66,355 $ -- $ 3,879
Total expenses........................... 189,636 103,797 35,041 36,355 -- 14,44
------- ------- ------ ----------- ------- -----
Operating income......................... 140,116 71,355 49,325 30,000 -- (10,564)
Income applicable to Alexander's ........ 3,341 -- -- -- -- 3,341
Income from partially-owned entities..... 41,018 10,024 423 1,904 20,496 8,171
Interest and other investment income..... 8,358 856 -- 367 -- 7,135
Interest and debt expense................ (70,901) (22,259) (16,117) (13,165) -- (19,360)
Minority interest........................ (20,978) (9,445) (5,296) (3,010) (3,227) --
------- ------ ------ ----------- ------ ---------
Net income............................... 100,954 50,531 28,335 16,096 17,269 (11,277)
Minority interest........................ 20,978 9,445 5,296 3,010 3,227 --
Interest and debt expense (4)............ 109,037 36,706 17,429 13,165 13,558 28,17
Depreciation and amortization (4)........ 64,410 27,977 8,384 8,178 16,012 3,859
Straight-lining of rents (4)............. (12,533) (8,615) (1,317) (2,280) (627) 306
Other.................................... 101 -- -- -- (3,009)(3) 3,110
-------- ------- ------- ----------- ------ ------
EBITDA (1)............................... $ 282,947 $ 116,044 $ 58,127 $ 38,169 $ 46,430 $ 24,177
======== ======= ======= =========== ====== ======
</TABLE>
<TABLE>
<CAPTION>
For The Six Months Ended June 30, 1999
-------------------------------------------------------------------------------------
Merchandise
Total Office Retail Mart Cold Storage Other(2)
----------- --------- --------- ------------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Total revenues............................ $218,734 $ 103,715 $ 82,439 $ 28,310 $ -- $ 4,270
Total expenses............................ 123,019 62,160 34,307 16,452 -- 10,100
------- ------ ------ --------- -------- ------
Operating income.......................... 95,715 41,555 48,132 11,858 -- (5,830)
Income applicable to Alexander's ......... 3,146 -- -- -- -- 3,146
Income from partially-owned entities...... 9,676 3,872 -- 948 3,164 1,692
Interest and other investment income...... 12,837 2,944 2,159 321 -- 7,413
Interest and debt expense................. (46,502) (8,707) (15,879) (6,412) -- (15,504)
Minority interest ........................ (7,069) (3.340) (2,897) (566) (266) --
------ ------ --------- -------- ------ --------
Net income................................ 67,803 36,324 31,515 6,149 2,898 (9,083)
Minority interest......................... 7,069 3,340 2,897 566 266 --
Interest and debt expense (4)............. 70,250 16,547 15,879 6,412 13,610 17,802
Depreciation and amortization (4)......... 48,644 17,221 7,755 3,226 17,819 2,623
Straight-lining of rents (4).............. (6,956) (3,497) (1,654) (1,283) -- (522)
Other..................................... 2,635 -- -- -- 1,786 849
-------- -------- --------- --------- --------- --------
EBITDA (1)................................ $189,445 $ 69,935 $ 56,392 $ 15,070 $ 36,379 $ 11,669
======== ====== ======= ======= ======== ========
</TABLE>
(1) EBITDA represents net income before interest, taxes, depreciation and
amortization, extraordinary or non-recurring items, gains or losses on
sales of real estate and the effect of straight-lining of property
rentals for rent escalations. Management considers EBITDA a supplemental
measure for making decisions and assessing the performance of its
segments. EBITDA may not be comparable to similarly titled measures
employed by other companies.
(2) Other includes (i) the operations of the Company's warehouse and
industrial properties, (ii) investments in the Hotel Pennsylvania,
Alexander's, and Newkirk Joint Ventures, (iii) corporate general and
administrative expenses and (iv) unallocated investment income and
interest and debt expense.
(3) Includes a charge of $1,114 for the three months ended June 30, 1999 and
a benefit of $3,210 for the six months ended June 30, 1999 for income
taxes which are considered non-recurring because of the expected
conversion of the Cold Storage Companies to REITs.
(4) Interest and debt expense, depreciation and amortization and
straight-lining of rents included in the reconciliation of net income to
EBITDA reflects amounts which are netted in income from partially-owned
entities.
Page 16
<PAGE> 17
RESULTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 1999 AND JUNE 30, 1998
Below are the details of the changes by segment in EBITDA. The change in
the Cold Storage EBITDA is discussed in Income from partially-owned entities.
<TABLE>
<CAPTION>
Merchandise Cold
Total Office Retail Mart Storage Other
----------- ------------ ------------ ------------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Three months ended
June 30, 1998....................... $ 104,216 $ 37,046 $ 28,378 $ 15,070 $ 17,875 $ 5,847
1999 Operations:
Same store operations(1)............ 6,187 4,537 688 756 397 (191)
Acquisitions and other.............. 40,615 21,029 507 3,418 5,229 10,432
--------- ------------- ----------- ----------- ---------- -----------
Three months ended
June 30, 1999....................... $ 151,018 $ 62,612 $ 29,573 $ 19,244 $ 23,501 $ 16,088
========= ============ =========== =========== ========== ===========
% increase in same
store operations................. 5.9% 12.2% 2.4% 5.0% 2.2% (3.3%)
</TABLE>
(1) Represents operations which were owned for the same period in each year.
Revenues
The Company's revenues, which consist of property rentals, tenant expense
reimbursements and other income were $166,188 in the three months ended June 30,
1999, compared to $128,523 in the prior year's quarter, an increase of $37,665.
This increase by segment resulted from:
<TABLE>
<CAPTION>
Date of Merchandise
Acquisition Total Office Retail Mart Other
----------- ---------- ------------ ----------- --------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Property Rentals:
Acquisitions:
888 Seventh Avenue............ January 1999 $ 6,086 $ 6,086 $ -- $ -- $ --
Market Square Complex......... December 1998 3,932 -- -- 3,932 --
Mendik RELP Properties........ December 1998 7,338 7,338 -- -- --
20 Broad Street............... August 1998 2,742 2,742 -- -- --
689 Fifth Avenue.............. August 1998 861 861 -- -- --
770 Broadway.................. July 1998 3,069 3,069 -- -- --
40 Fulton Street.............. June 1998 1,037 1,037 -- -- --
-------- ------------ ---------- ------------ ----------
25,065 21,133 -- 3,932 --
--------- ------------ ---------- ------------ ----------
Leasing activity, including
$312 of step-ups
in Retail..................... 7,297 6,758 258 366 (85)
-------- ------------ ---------- ------------ ----------
Total increase in property
rentals....................... 32,362 27,891 258 4,298 (85)
-------- ------------ ---------- ------------ ----------
Tenant expense reimbursements:
Increase in tenant expense
reimbursements due to
acquisitions.................. 1,942 1,308 -- 634 --
Other .............................. 2,107 338 1,802 (37) 4
-------- ------------ ---------- ------------ ----------
Total increase in tenant
expense reimbursements........ 4,049 1,646 1,802 597 4
-------- ------------ ---------- ------------ ----------
Other income........................ 1,254 1,469 (24) 162 (353)
-------- ------------ ---------- ------------ ----------
Total increase in revenues.......... $ 37,665 $ 31,006 $ 2,036 $ 5,057 $ (434)
======== ============ ========== ============ ==========
</TABLE>
Page 17
<PAGE> 18
Expenses
The Company's expenses were $95,679 in the three months ended June 30,
1999 compared to $73,553 in the prior year's quarter, an increase of $22,126.
This increase by segment resulted from:
<TABLE>
<CAPTION>
Merchandise
Total Office Retail Mart Other
-------- --------- -------- ------------- ------------
<S> <C> <C> <C> <C> <C>
Operating:
Acquisitions...................... $ 11,859 $ 10,691 $ -- $ 1,168 $ --
Same store operations............. 2,612 2,441 1,044(3) (820) (53)
------ ----- ----- ---------- ------------
14,471 13,132 1,044 348 (53)
------ ------ ----- ---------- ------------
Depreciation and
amortization:
Acquisitions...................... 2,989 2,341 -- 648 --
Same store operations............. 1,567 1,246 129 231 (39)
----- ------ ----- ---------- ------------
4,556 3,587 129 879 (39)
----- ------ ----- ---------- ------------
General and administrative: 3,099(2) 579 2 174 $ 2,344(1)
------ ------ ----- ---------- ------------
$ 22,126 $ 17,298 $ 1,175 $ 1,401 $ 2,252
====== ====== ===== ========== ============
</TABLE>
(1) Retail general and administrative expenses are included in corporate
expenses which are not allocated.
(2) Of this increase: (i) $201 is attributable to acquisitions, (ii) $2,501
resulted from payroll, primarily for additional employees and corporate
office expenses, and (iii) $397 resulted from professional fees.
(3) Increase in common area maintenance expense of $2,047, partially offset by
a decrease in repairs and maintenance and bad debt expense.
Income applicable to Alexander's (loan interest income, equity in income
and depreciation) was $1,839 in the three months ended June 30, 1999, compared
to $1,490 in the prior year's quarter, an increase of $349.
Income from partially-owned entities was $21,925 in the three months
ended June 30, 1999, compared to $5,756 in the prior year's quarter, an
increase of $16,169. This increase by segment resulted from:
<TABLE>
<CAPTION>
Date of Merchandise Cold
Acquisition Total Office Retail Mart Storage Other
--------------- -------- --------- --------- ----------- ---------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Acquisitions:
Cold Storage.......................... June/July 1998 $ 3,720 $ -- $ -- $ -- $ 3,720 $ --
Newkirk Joint Ventures................ July 1998 3,277 -- -- -- -- 3,277
Caguas................................ November 1998 223 -- 223 -- -- --
CESCR................................. March 1999 4,720 4,720 -- -- -- --
------ ------ ----- ------- ----- ------
11,940 4,720 223 -- 3,720 3,277
Increase (decrease) in equity in income:
Cold Storage........................ 3,168(1) -- -- -- 3,168(1) --
Hotel Pennsylvania.................. 980 -- -- -- -- 980
Mendik partially-owned
office buildings................. (175)(2) (175)(2) -- -- -- --
Merchandise Mart
Management Company............... (220) -- -- (220) -- --
Other............................... 476 305 -- -- 168 3
----- ------ ---- ------- ----- -----
$16,169 $ 4,850 $ 223 $ (220) $ 7,056 $ 4,260
====== ====== === ======= ===== ======
</TABLE>
(1) Includes a charge for income taxes of $1,114 resulting from the
reversal of income taxes because of the expected conversion of the
Cold Storage Companies to REITs.
(2) Reflects the elimination of the Company's equity in income of Two Park
Avenue which is wholly-owned as of November 17, 1998 and accordingly
is consolidated in 1999.
Page 18
<PAGE> 19
Interest and other investment income (interest income on mortgage loans
receivable, other interest income, dividend income and net gains on marketable
securities) was $4,900 for the three months ended June 30, 1999, compared to
$5,271 in the prior year's quarter, a decrease of $371. This decrease resulted
primarily from lower average investments this year.
Interest and debt expense was $35,284 for the three months ended June
30, 1999, compared to $26,679 in the prior year's quarter, an increase of
$8,605. This increase resulted primarily from debt in connection with
acquisitions.
Minority interest was $11,863 for the three months ended June 30, 1999,
compared to $4,492 in the prior year's quarter, an increase of $7,371. Of this
increase $5,525 is due to acquisitions and $1,846 results from higher income.
Preferred stock dividends were $8,381 for the three months ended June
30, 1999, compared to $5,422 in the prior year's quarter, an increase of
$2,959. This increase resulted from the issuance of the Company's Series B
Cumulative Redeemable Preferred shares in March 1999 and Series C Cumulative
Redeemable Preferred Shares in May 1999.
SIX MONTHS ENDED JUNE 30, 1999 AND JUNE 30, 1998
Below are the details of the changes by segment in EBITDA. The change in
the Cold Storage EBITDA is discussed in Income from partially-owned entities.
<TABLE>
<CAPTION>
Merchandise Cold
Total Office Retail Mart Storage Other
---------- ----------- -------------- ------------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Six months ended
June 30, 1998....................... $ 189,445 $ 69,935 $ 56,392 $ 15,070 $ 36,379 $ 11,669
1999 Operations:
Same store operations(1)............ 10,778 8,196 2,067 756 582 (823)
Acquisitions and other.............. 82,724 37,913 (332) 22,343 9,469 13,331
------ ------- ---------- -------- ----- ------
Six months ended
June 30, 1999....................... $ 282,947 $ 116,044 $ 58,127 $ 38,169 $ 46,430 $ 24,177
======= ======== ========== ======== ====== ======
% increase in same
store operations................. 5.7% 11.7% 3.7% 5.0% 1.6% (7.0%)
</TABLE>
(1) Represents operations which were owned for the same period in each year.
Page 19
<PAGE> 20
Revenues
The Company's revenues, which consist of property rentals, tenant expense
reimbursements and other income were $329,752 in the six months ended June 30,
1999, compared to $218,734 in the prior year's six months, an increase of
$111,018. This increase by segment resulted from:
<TABLE>
<CAPTION>
Date of Merchandise
Acquisition Total Office Retail Mart Other
------------- --------- -------- --------- ------------ -------
<S> <C> <C> <C> <C> <C> <C>
Property Rentals:
Acquisitions:
888 Seventh Avenue.... January 1999 $ 11,364 $ 11,364 $ -- $ -- $ --
Market Square Complex. December 1998 7,390 -- -- 7,390 --
Mendik RELP Properties December 1998 14,164 14,164 -- -- --
20 Broad Street....... August 1998 5,444 5,444 -- -- --
689 Fifth Avenue...... August 1998 1,722 1,722 -- -- --
770 Broadway.......... July 1998 5,747 5,747 -- -- --
40 Fulton Street..... June 1998 2,605 2,605 -- -- --
Merchandise Mart
Properties.......... April 1998 27,227 -- -- 27,227 --
150 East 58th Street.. March 1998 2,403 2,403 -- -- --
One Penn Plaza........ February 1998 5,478 5,478 -- -- --
Westport.............. January 1998 274 274 -- -- --
------ -------- ------- --------- -------
83,818 49,201 -- 34,617 --
------ -------- ------- --------- -------
Leasing activity, including
$624 of step-ups
in Retail............. 14,338 13,737 672 366 (437)
------ -------- ------- --------- -------
Total increase in property
rentals............... 98,156 62,938 672 34,983 (437)
------ -------- ------- --------- -------
Tenant expense
reimbursements:
Increase in tenant expense
reimbursements due to
acquisitions.......... 6,327 3,741 -- 2,586 --
Other.................... 2,754 1,169 1,685 (37) (63)
----- -------- ------- --------- -------
Total increase in tenant
expense reimbursements 9,081 4,910 1,685 2,549 (63)
----- -------- ------- --------- -------
Other income............. 3,781 3,589 (430) 513 109
----- -------- ------- --------- -------
Total increase in revenues $ 111,018 $ 71,437 $ 1,927 $ 38,045 $ (391)
======= ======== ======= ========= =======
</TABLE>
Expenses
The Company's expenses were $189,636 in the six months ended June 30, 1999
compared to $123,019 in the prior year's six months, an increase of $66,617.
This increase by segment resulted from:
<TABLE>
<CAPTION>
Merchandise
Total Office Retail Mart Other
---------- ---------- --------- --------------- -----------
<S> <C> <C> <C> <C> <C>
Operating:
Acquisitions......... $ 39,448 $ 25,459 $ -- $ 13,989 $ --
Same store operations 5,907 5,883 696(3) (820) 148
----- ----- ---- ----------- -------
45,355 31,342 696 13,169 148
------ ------ ---- ----------- -------
Depreciation and
amortization:
Acquisitions......... 10,600 5,879 ---- 4,721 --
Same store operations 2,882 2,689 36 231 (74)
----- ----- ---- ----------- -------
13,482 8,568 36 4,952 (74)
------ ----- ---- ----------- -------
General and
administrative: 7,780(2) 1,727 2 1,782 4,269(1)
------ ----- ---- ----------- -------
$ 66,617 $ 41,637 $ 734 $ 19,903 $ 4,343
====== ====== ==== =========== =======
</TABLE>
(1) Retail general and administrative expenses are included in corporate
expenses which are not allocated.
(2) Of this increase: (i) $2,382 is attributable to acquisitions, (ii)
$3,745 resulted from payroll, primarily for additional employees and
corporate office expenses, and (iii) $1,653 resulted from professional
fees.
(3) Increase in common area maintenance expense of $1,915, partially offset
by a decrease in repairs and maintenance and bad debt expense.
Page 20
<PAGE> 21
Income applicable to Alexander's (loan interest income, equity in income
and depreciation) was $3,341 in the six months ended June 30, 1999, compared to
$3,146 in the prior year's six months, an increase of $195.
Income from partially-owned entities was $41,018 in the six months ended
June 30, 1999, compared to $9,676 in the prior year's six months, an increase of
$31,342. This increase by segment resulted from:
<TABLE>
<CAPTION>
Date of Merchandise Cold
Acquisition Total Office Retail Mart Storage Other
---------------- -------- --------- --------- ------------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Acquisitions:
Cold Storage........... June/July 1998 $7,628 $ -- $ -- $ -- $ 7,628 $ --
Newkirk Joint Ventures. July 1998 5,309 -- -- -- -- 5,309
Merchandise Mart
Management Company... April 1998 956 -- -- 956 -- --
Caguas................. November 1998 423 -- 423 -- -- --
CESCR.................. 6,850 6,850 -- -- -- --
------ ----- ---- ------- ------ -----
21,166 6,850 423 956 7,628 5,309
Increase (decrease) in
equity in income:
Cold Storage.......... 9,369(1) -- -- -- 9,369(1) --
Hotel Pennsylvania.... 1,179 -- -- -- -- 1,179
Mendik partially-owned
office buildings.... (771)(2) (771)(2) -- -- -- --
Other................. 399 73 -- -- 335 (9)
------- ----- -- ------- ------ -----
$31,342 $6,152 $ 423 $ 956 $ 17,332 $ 6,479
======= ===== === ======= ====== =====
</TABLE>
(1) Includes a benefit for income taxes of $3,210 resulting from the reversal
of income taxes because of the expected conversion of the Cold Storage
Companies to REITs.
(2) Reflects the elimination of the Company's equity in income of Two Park
Avenue which is wholly-owned as of November 17, 1998 and accordingly is
consolidated in 1999.
Interest and other investment income (interest income on mortgage loans
receivable, other interest income, dividend income and net gains on marketable
securities) was $8,358 for the six months ended June 30, 1999, compared to
$12,837 in the prior year's six months, a decrease of $4,479. This decrease
resulted primarily from lower average investments this year.
Interest and debt expense was $70,901 for the six months ended June 30,
1999, compared to $46,502 in the prior year's six months, an increase of
$24,399. This increase resulted primarily from debt in connection with
acquisitions.
Minority interest was $20,978 for the six months ended June 30, 1999,
compared to $7,069 in the prior year's six months, an increase of $13,909. Of
this increase $9,857 is due to acquisitions and $4,052 results from higher
income.
Preferred stock dividends were $14,093 for the six months ended June 30,
1999, compared to $10,845 in the prior year's six months, an increase of $3,248.
This increase resulted from the issuance of the Company's Series B Cumulative
Redeemable Preferred shares in March 1999 and Series C Cumulative Redeemable
Preferred Shares in May 1999.
LIQUIDITY AND CAPITAL RESOURCES
Six Months Ended June 30, 1999
Cash flows provided by operating activities of $86,796 was primarily
comprised of (i) income of $100,954 and (ii) adjustments for non-cash items of
$2,246, offset by (iii) the net change in operating assets and liabilities of
$16,404. The adjustments for non-cash items are primarily comprised of (i)
depreciation and amortization of $38,877 and (ii) minority interest of $20,978,
partially offset by (iii) the effect of straight-lining of rental income of
Page 21
<PAGE> 22
$15,393 and (iv) equity in net income of partially-owned entities of $41,018.
The net change in operating assets and liabilities primarily reflects an
increase in prepaid expenses of $29,246.
Net cash used in investing activities of $142,320 was primarily comprised
of (i) capital expenditures of $86,731 (see detail below), (ii) investment in
notes and mortgages receivable of $60,567 (including $41,200 loan to CAPI and
$18,587 loan to Vornado Operating Company), (iii) acquisitions of real estate of
$45,000 (see detail below) and (iv) investments in partially-owned entities of
$13,200 (see detail below), partially offset by (vii) the use of cash restricted
for tenant improvements of $24,548, (viii) proceeds from sale of Cold Storage
assets of $22,769 and (ix) proceeds from the repayment of mortgage loans
receivable of $19,367 (including $14,000 from Vornado Operating Company).
Acquisitions of real estate and investments in partially-owned entities are
comprised of:
<TABLE>
<CAPTION>
Debt Value of Assets
Cash Assumed Units Issued Acquired
---------- --------- ------------- ------------
<S> <C> <C> <C> <C>
Real Estate:
888 Seventh Avenue Office Building...... $ 45,000 $ 55,000 $ -- $ 100,000
======== ======== ========= ==========
Investments in Partially Owned Entities:
Charles E. Smith Commercial Realty L.P.:
Additional investment................. $ -- $ -- $ 242,000 $ 242,000
Reacquired units from Vornado Operating
Company............................. 13,200 -- -- 13,200
Crystal City hotel land............... -- -- 8,000 8,000
Additional investment in Newkirk Joint
Ventures............................ -- -- 47,800 47,800
-------- -------- --------- ----------
$ 13,200 $ -- $ 297,800 $ 311,000
======== ======== ========= ==========
</TABLE>
Capital expenditures were comprised of:
<TABLE>
<CAPTION>
New York Merchandise
City Office Retail Mart Other Total
------------- -------- ----------- -------- ---------
<S> <C> <C> <C> <C> <C>
Expenditures to maintain the assets.. $ 2,338 $ 411 $ 5,433 $1,479 $ 9,661
Tenant allowances and leasing
commissions.......................... 12,360 711 9,791 -- 22,922
Redevelopment expenditures........... 38,097 16,051 -- -- 54,148
------- ------ --------- ------ -------
$52,795 $ 17,233 $ 15,224 $1,479 $86,731
======= ====== ========= ====== =======
</TABLE>
Net cash used in financing activities of $50,770 was primarily comprised of
(i) repayments of borrowings of $306,490, (ii) dividends paid on common shares
$74,432 and (iii) dividends paid on preferred shares of $12,655, and (iv)
distributions to minority partners of $12,226 partially offset by, (v) proceeds
from issuance of preferred shares of $193,282 and (vi) proceeds from borrowings
of $165,000.
Six Months Ended June 30, 1998
Cash flows provided by operating activities of $82,211 was primarily
comprised of (i) net income of $67,803 and (ii) adjustments for non-cash items
of $16,069, offset by (iii) the net change in operating assets and liabilities
of $1,661. The adjustments for non-cash items are primarily comprised of (i)
depreciation and amortization of $26,834 and (ii) minority interest of $7,069,
partially offset by (iii) the effect of straight-lining of rental income of
$6,414 and (iv) equity in net income of partially-owned entities of $9,676.
Net cash used in investing activities of $979,681 was primarily comprised
of (i) acquisitions of real estate of $681,387 (see detail below), (ii)
investments in partially-owned entities of $165,633 (see detail below), (iii)
deposits in connection with real estate acquisitions of $133,072 and (iv)
capital expenditures of $47,450, partially offset by
Page 22
<PAGE> 23
(v) proceeds from the repayment of mortgage loans receivable of $57,663 (Rickel
and Riese mortgage loans). Acquisitions of real estate and investments in
partially-owned entities comprised of:
<TABLE>
<CAPTION>
Value of Total
Cash Debt Assumed Units Issued Consideration
---------- ------------- ------------- --------------
<S> <C> <C> <C> <C>
Real Estate:
Merchandise Mart Properties............ $187,000* $327,000* $116,000 $ 630,000
One Penn Plaza Office Building......... 317,000 93,000 -- 410,000
150 East 58th Street Office Building... 118,000 -- -- 118,000
40 Fulton Street Office Building....... 54,000 -- -- 54,000
Other.................................. 5,387 -- -- 5,387
-------- -------- -------- ----------
$681,387 $420,000 $116,000 $1,217,387
======== ======== ======== ==========
Investments in Partially Owned Entities:
Hotel Pennsylvania (acquisition of additional $ 22,000 $ 48,000 $ -- $ 70,000
40% interest increasing ownership to 80%)
570 Lexington Avenue Office Building (increased
interest from 5.6% to approximately 50%) 32,300 4,900 -- 37,200
Acquisition of Freezer Services, Inc. (60%
interest)......................... 58,000 16,000 6,000 80,000
Reduction in Cold Storage Companies debt
(60% interest)...................... 44,000 -- -- 44,000
Other.................................. 9,333 -- -- 9,333
-------- -------- -------- ---------
$165,633 $ 68,900 $ 6,000 $ 240,533
======== ======== ======== =========
</TABLE>
* Reflects July 1998 repayment of $26,000 of debt.
Net cash provided by financing activities of $799,100 was primarily
comprised of (i) proceeds from borrowings of $1,295,855 and (ii) proceeds from
the issuance of common shares of $445,282, partially offset by (iii) repayment
of borrowings of $863,258, (iv) dividends paid on common shares of $58,893, (v)
dividend paid on preferred shares of $10,845 (includes accretion of expenses of
issuing the preferred shares of $1,438) and (vi) distributions to minority
partners of $2,577.
Page 23
<PAGE> 24
Funds from Operations for the Three and Six Months Ended June 30, 1999 and
1998
Funds from operations was $74,987 in the three months ended June 30, 1999,
compared to $54,752 in the prior year's quarter, an increase of $20,235. Funds
from operations was $140,414 in the six months ended June 30, 1999, compared to
$99,181 in the prior year's six months, an increase of $41,233. The following
table reconciles funds from operations and net income:
<TABLE>
<CAPTION>
For the Three Months Ended For the Six Months Ended
June 30, June 30,
----------------------------- --------------------------
1999 1998 1999 1998
------------ ------------ ------------ ----------
<S> <C> <C> <C> <C>
Net income applicable to common shares $43,645 $30,894 $86,861 $56,958
Depreciation and amortization of real
property.......................... 18,945 14,839 37,697 25,033
Straight-lining of property rentals for
rent escalations.................. (6,555) (4,122) (11,850) (6,414)
Leasing fees received in excess of
income recognized................. 421 369 801 737
Proportionate share of adjustments to
equity in net income of partially-owned
entities to arrive at funds from
operations........................ 13,603 13,429 22,505 24,376
Appreciation of securities held in
officer's deferred compensation trust. 747 -- 1,667 --
Gain on sale of securities available
for sale.......................... (89) -- (383) --
Minority interest in excess of
preferential distributions........ (1,153) (657) (2,307) (1,509)
------- ------- ------- -------
69,564 54,752 134,991 99,181
Dilutive effect of Series A preferred
shares............................ 5,423 -- 5,423 --
------- ------- ------- -------
Funds from Operations - diluted...... $74,987 $54,752 $140,414 $99,181
======= ======= ======== =======
</TABLE>
The number of shares that should be used for determining funds from
operations per share is as follows:
<TABLE>
<CAPTION>
For the Three Months Ended For the Six Months Ended
June 30, June 30,
----------------------------- ---------------------------
1999 1998 1999 1998
------------ ------------ ---------- -----------
<S> <C> <C> <C> <C>
Weighted average shares.............. 85,634 82,159 85,362 77,197
Effect of dilutive securities:
Employee stock options............ 2,189 2,085 1,883 2,286
Series A preferred shares......... 8,018 -- 4,009 --
------- ------- ------- -------
Denominator for diluted funds from
operations per share - adjusted
weighted average shares and assumed
conversions ..................... 95,841 84,244 91,254 79,483
======= ======= ======= =======
</TABLE>
Page 24
<PAGE> 25
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 the Company'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
the Company 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 reported by other REITs since a number of REITs, including the
Company, calculate funds from operations in a manner different from that used by
the National Association of Real Estate Investment Trusts ("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. Below are the cash flows provided
by (used in) operating, investing and financing activities:
<TABLE>
<CAPTION>
For the Three Months Ended June 30, For the Six Months Ended June 30,
-------------------------------------- -----------------------------------
1999 1998 1999 1998
--------------- ------------ --------------- ---------------
<S> <C> <C> <C> <C>
Operating activities........... $ 66,456 $ 46,780 $ 86,796 $ 82,211
=========== =========== =========== ===========
Investing activities........... $ (1,228) $ (435,816) $ (142,320) $ (979,681)
=========== =========== =========== ===========
Financing activities........... $ (83,853) $ 409,963 $ (50,770) $ 799,100
=========== =========== =========== ===========
</TABLE>
Financings
In February 1999, the Company completed a $165,000 refinancing of its Two
Penn Plaza office building and prepaid the then existing $80,000 debt on the
property. The new 5-year debt matures in February 2004 and bears interest at
7.08%.
In February 1999, the Company also exercised its option to extend the
maturity date on the $250,000 loan on its Chicago Merchandise Mart building from
March 31, 1999 to September 30, 1999. In connection therewith, the Company paid
a fee of 1/8%.
In March 1999, the Vornado/Crescent Partnerships sold all of the non-real
estate assets of the Cold Storage Companies encompassing the operations of the
cold storage business for approximately $48,000 to a new partnership owned 60%
by Vornado Operating Company and 40% by Crescent Operating Inc.
In March 1999, the Company completed the sale of 3 million 8.5% Series B
Cumulative Redeemable Preferred Shares, at a price of $25.00 per share, pursuant
to an effective registration statement with net proceeds to the Company of
approximately $72,200. Further in March 1999, 400,000 shares were sold when the
underwriters exercised their over-allotment option resulting in additional net
proceeds to the Company of $9,700. The perpetual preferred shares may be called
without penalty at the option of the Company commencing on March 17, 2004.
In May 1999, the Company completed the sale of 4 million 8.5% Series C
Cumulative Redeemable Preferred Shares, at a price of $25.00 per share, pursuant
to an effective registration statement with net proceeds to the Company of
approximately $96,900. Additionally in May 1999, 600,000 shares were sold when
the underwriters exercised their over-allotment option resulting in additional
net proceeds to the Company of $14,500. The perpetual preferred shares may be
called without penalty at the option of the Company commencing on May 17, 2004.
In May 1999, the Company sold an aggregate of $27,500 of 8.375% Series D-2
Cumulative Redeemable Preferred Units in the Operating Partnership to an
institutional investor in a private placement, resulting in net proceeds of
approximately $27,467. The perpetual Preferred Units may be called without
penalty at the option of the Operating Partnership commencing on May 27, 2004.
Page 25
<PAGE> 26
On July 8, 1999, the Company completed a $70,000 mortgage financing of its
350 North Orleans property in Chicago. The Company received proceeds of $40,000
and is expected to receive the remaining $30,000 during the next year upon
meeting certain debt service coverage requirements. The new 3-year debt matures
in June 2002 and bears interest at LIBOR + 1.65% (currently 6.83%).
The Company anticipates that cash from continuing operations will be
adequate to fund business operations and the payment of dividends and
distributions on an on-going basis for more than the next twelve months;
however, capital outlays for significant acquisitions will require funding from
borrowings or equity offerings.
Year 2000 Issues
Year 2000 compliance programs and information systems modification were
initiated by the Company in early 1998 to address the risk posed by the year
2000 issue. The Company developed a plan to address their affected informational
(accounting, billing, payroll) and operational (refrigeration, HVAC, security,
elevators, lighting, energy management) systems. The Company's plan also
considers statements from outside vendors as to their year 2000 readiness.
The Company and its partially-owned entities have completed their initial
assessment, inventory and planning phases of their plan and have determined that
the majority of their systems, including all mission critical systems are
already year 2000 compliant. The Company anticipates that any issues encountered
with informational or operational systems will be remediated. The Company
expects that where appropriate, all mission critical systems will be tested by
September 30, 1999. The cost of the Company's year 2000 plan is not expected to
be material to 1999 operations.
The Company believes that its exposure may be the failure of third parties
(i.e., energy providers) in meeting their commitments which may result in
temporary business interruption at the Company's buildings, retail centers, mart
properties, cold storage warehouses and other real estate related properties.
The Company has contingency plans for its own day to day informational and
operational systems that will be completed by October 31, 1999. Failure of third
parties with which the Company conducts business to successfully respond to
their year 2000 issues may have an adverse effect on the Company.
Recently Issued Accounting Standards
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities". This statement establishes accounting and reporting
standards for derivative instruments, including certain derivative instruments
embedded in other contracts, and for hedging activities. It is effective for all
fiscal quarters of fiscal years beginning after June 15, 2000. Because the
Company does not currently utilize derivatives or engage in significant hedging
activities, management does not anticipate that implementation of this statement
will have a material effect on the Company's financial statements.
In April, 1998 the American Institute of Certified Public Accountants
issued Statement of Position 98-5, "Reporting on the Costs of Start-up
Activities" ("SOP 98-5"), which is effective for the Company in the first
quarter of 1999. The Company has no deferred organization costs or other
deferred start-up costs as defined in SOP 98-5, and therefore adoption of SOP
98-5 had no material impact in 1999.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS
At June 30, 1999, the Company had $1,180,431,000 of variable rate debt
bearing interest at a weighted average interest rate of 6.26% and $784,112,000
of fixed rate debt bearing interest at a weighted average interest rate of
7.02%. A one-percent increase in the base used to determine the interest rate of
the variable rate debt would result in a $11,804,000 increase in the Company's
annual interest expense. Additionally, the Company's share of partially-owned
entities (i) variable rate debt was $166,132,000 bearing interest at a weighted
average interest rate of 7.03% and (ii) fixed rate debt was $1,030,008,000
bearing interest at a weighted average interest rate of 7.51%. A one-percent
increase in the base used to determine the interest rate on the Company's share
of the variable rate debt from partially-owned entities would result in a
$1,661,000 decrease in the Company's annual income from partially-owned
entities. The total decrease in the Company's annual net income for a
one-percent increase in the base is $11,580,000 or $.13 per diluted share, after
the minority interest's share of such decrease.
Page 26
<PAGE> 27
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is from time to time involved in legal actions arising in the
ordinary course of its business. In the opinion of management, after
consultation with legal counsel, the outcome of such matters will not have a
material adverse effect on the Company's financial condition, results of
operations or cash flows.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On June 2, 1999 the Company held its annual meeting of shareholders. The
matters on which the shareholders voted, in person or by proxy, were (i) for the
election of two nominees to serve on the Board of Trustees for a term of three
years or until their respective successors are duly elected and qualify and (ii)
an amendment to Vornado's Omnibus Share Plan (the "Plan") to authorize the
allocation of an additional 7,000,000 common shares of beneficial interest to be
reserved for sale and issuance under the Plan. The two nominees were elected and
the amendment to the Plan was approved. The results of the voting are shown
below:
<TABLE>
<CAPTION>
Election of Trustees:
Votes Cast
Against or
Trustee Votes Cast For Withheld
-------------- -------------- -----------
<S> <C> <C>
Stanley Simon 71,657,536 1,253,655
Ronald Targan 72,029,875 881,316
<CAPTION>
Amendment to Omnibus Share Plan:
Votes Cast
Against or
Votes Cast For Withheld
-------------- -----------
52,010,826 10,943,025
</TABLE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits required by Item 601 of Regulation S-K are filed herewith and
are listed in the attached Exhibit Index.
(b) Reports on Form 8-K
During the quarter ended June 30, 1999, Vornado Realty Trust filed the
reports on Form 8-K described below:
<TABLE>
<CAPTION>
Date of Report
(Date of Earliest
Event Reported) Item Reported Date Filed
--------------------- ------------- ----------
<S> <C> <C>
May 17, 1999 Agreement to sell Series C Preferred Shares in public May 26, 1999
offering
</TABLE>
Page 27
<PAGE> 28
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 thereunto duly authorized.
VORNADO REALTY TRUST
------------------------------------------
(Registrant)
Date: August 5, 1999 By: /s/ Irwin Goldberg
------------------------------------------
IRWIN GOLDBERG
Vice President, Chief Financial Officer
Page 28
<PAGE> 29
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO.
- ----------
<S> <C> <C>
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 -- Articles of Amendment of Declaration of Trust of Vornado, as
filed with the State Department of Assessments and Taxation
of Maryland on April 22, 1998 Incorporated by reference to
Exhibit 3.1 of Vornado's Current Report on Form 8-K, dated
April 22, 1998 (File No. 001-11954), filed on April 28,
1998....................................................... *
3.3 -- 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. *
3.4 -- Articles Supplementary Classifying Vornado's Series D-1 8.5%
Cumulative Redeemable Preferred Shares of Beneficial
Interest, no par value (the "Series D-1 Preferred Shares")
- Incorporated by reference to Exhibit 3.1 of Vornado's
Current Report on Form 8-K, dated November 12, 1998 (File
No. 001-11954), filed on November 30, 1998................. *
3.5 -- Articles Supplementary Classifying Additional Series D-1
Preferred Shares Incorporated by reference to Exhibit 3.2
of Vornado's Current Report on Form 8-K/A, dated November
12, 1998 (File No. 001-11954), filed on February 9, 1999... *
3.6 -- Articles Supplementary Classifying 8.5% Series B Cumulative
Redeemable Preferred Shares of Beneficial Interest,
liquidation preference $25.00 per share, no par value -
Incorporated by reference to Exhibit 3.3 of Vornado's
Current Report on Form 8-K, dated March 3, 1999 (File No.
001-11954), filed on March 17, 1999........................ *
3.7 -- Articles Supplementary to Declaration of Trust of Vornado Realty
Trust with Respect to Series C Preferred Shares -
Incorporated by reference to Exhibit 3.7 of Vornado's
Registration Statement on Form 8-A (File No. 001-11954),
filed on May 19, 1999...................................... *
3.8 -- Articles Supplementary to Declaration of Trust of Vornado Realty
Trust with respect to the Series D-2 Preferred Shares,
dated as of May 27, 1999, as filed with the State
Department of Assessments and Taxation of Maryland on May
27, 1999 - Incorporated by reference to Exhibit 3.1 of
Vornado's Current Report on Form 8-K, dated May 27, 1999
(File No. 001-11954), filed July 7, 1999................... *
3.9 -- 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.......................... *
3.10 -- Second Amended and Restated Agreement of Limited Partnership of
the Operating Partnership, dated as of October 20, 1997 -
Incorporated by reference to Exhibit 3.4 of Vornado's
Annual Report on Form 10-K for the year ended December 31,
1997 filed on March 31, 1998 (the "1997 10-K")............. *
3.11 -- Amendment to Second Amended and Restated Agreement of Limited
Partnership of Vornado Realty L.P., dated as of December
16, 1997- Incorporated by reference to Exhibit 3.5 of the
1997 10-K.................................................. *
</TABLE>
- ---------------------------
* Incorporated by reference
Page 29
<PAGE> 30
<TABLE>
<CAPTION>
EXHIBIT
NO.
- ----------
<S> <C> <C>
3.12 -- Second Amendment to Second Amended and Restated Agreement of
Limited Partnership of the Operating Partnership, dated as
of April 1, 1998 - Incorporated by reference to Exhibit 3.5
of Vornado's Registration Statement on Form S-3 (File No.
333-50095), filed on April 14, 1998.......................... *
3.13 -- Third Amendment to Second Amended and Restated Agreement of
Limited Partnership of the Operating Partnership, dated as
of November 12, 1998 Incorporated by reference to Exhibit
3.2 of Vornado's Current Report on Form 8-K, dated November
12, 1998 (File No. 001-11954), filed on November 30, 1998.... *
3.14 -- Fourth Amendment to Second Amended and Restated Agreement of
Limited Partnership of the Operating Partnership, dated as
of November 30, 1998 Incorporated by reference to Exhibit
3.1 of Vornado's Current Report on Form 8-K, dated December
1, 1998 (File No. 001-11954), filed on February 9, 1999...... *
3.15 -- Exhibit A, dated as of December 22, 1998, to Second Amended and
Restated Agreement of Limited Partnership of the Operating
Partnership - Incorporated by reference to Exhibit 3.4 of
Vornado's Current Report on Form 8-K/A, dated November 12,
1998 (File No. 001-11954), filed on February 9, 1999........ *
3.16 -- Fifth Amendment to Second Amended and Restated Agreement of
Limited Partnership of the Operating Partnership, dated as
of March 3, 1999 Incorporated by reference to Exhibit 3.1 of
Vornado's Current Report on Form 8-K, dated March 3, 1999
(File No. 001-11954), filed on March 17, 1999............... *
3.17 -- Exhibit A to Second Amended and Restated Agreement of Limited
Partnership of the Operating Partnership, dated as of March
11, 1999 - Incorporated by reference to Exhibit 3.2 of
Vornado's Current Report on Form 8-K, dated March 3, 1999
(File No. 001-11954), filed on March 17, 1999............... *
3.18 -- Sixth Amendment to Second Amended and Restated Agreement of
Limited Partnership of Vornado Realty L.P., dated as of
March 17, 1999 Incorporated by reference to Exhibit 3.2 of
Vornado's Current Report on Form 8-K, dated May 27, 1999
(File No. 001-11954), filed on July 7, 1999................. *
3.19 -- Seventh Amendment to Second Amended and Restated Agreement of
Limited Partnership of Vornado Realty L.P., dated as of May
20, 1999 - Incorporated by reference to Exhibit 3.3 of
Vornado's Current Report on Form 8-K, dated May 27, 1999
(File No. 001-11954), filed on July 7, 1999................. *
3.20 -- Eighth Amendment to Second Amended and Restated Agreement of
Limited Partnership of Vornado Realty L.P., dated as of May
27, 1999 - Incorporated by reference to Exhibit 3.4 of
Vornado's Current Report on Form 8-K, dated May 27, 1999
(File No. 001-11954), filed on July 7, 1999................. *
4.1 -- Instruments defining the rights of security holders (see
Exhibits 3.1 through 3.20 of this Quarterly Report on Form
10-Q).......................................................
4.2 -- Indenture dated as of November 24, 1993 between Vornado Finance
Corp. and Bankers Trust Company, as Trustee - Incorporated
by reference to Vornado's current Report on Form 8-K dated
November 24, 1993 (File No. 001-11954), filed December 1,
1993....................................................... *
</TABLE>
- ---------------------------
* Incorporated by reference
Page 30
<PAGE> 31
<TABLE>
<CAPTION>
EXHIBIT
NO.
- ----------
<S> <C> <C>
4.3 -- 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 Registration Statement on Form S-3 (File No. 33-62395),
filed on October 26, 1995.................................. *
4.4 -- 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...................................................... *
4.5 -- Specimen certificate evidencing Vornado's Series B 8.5%
Cumulative Redeemable Preferred Shares of Beneficial
Interest - Incorporated by reference to Exhibit 4.2 of
Vornado's Registration Statement on Form 8-A (File No.
001-11954), filed on March 15, 1999...................... *
4.6 -- Specimen certificate evidencing Vornado's 8.5% Series C
Cumulative Redeemable Preferred Shares of Beneficial Interest,
liquidation preference $25.00 per share, no par value -
Incorporated by reference to Exhibit 4.2 of Vornado's
Registration Statement on Form 8-A (File No. 001-11954), filed
on May 19, 1999............................................... *
10.1 -- Second Amendment, dated as of June 12, 1997, to Vornado's 1993
Omnibus Share Plan, as amended - Incorporated by reference
to Vornado's Registration Statement on Form S-8 (File No.
333-29011) filed on June 12, 1997............................. *
10.2 -- Master Agreement and Guaranty, between Vornado, Inc. and Bradlees
New Jersey, Inc. dated as of May 1, 1992 - Incorporated by
reference to Vornado's Quarterly Report on Form 10-Q for
quarter ended March 31, 1992 (File No. 001-11954), filed
May 8, 1992................................................... *
10.3** -- Mortgage, Security Agreement, Assignment of Leases and Rents and
Fixture Filing dated as of November 24, 1993 made by each
of the entities listed therein, as mortgagors to Vornado
Finance Corp., as mortgagee - Incorporated by reference to
Vornado's Current Report on Form 8-K dated November 24,
1993 (File No. 001-11954), filed December 1, 1993.............. *
10.4** -- 1985 Stock Option Plan as amended - Incorporated by reference to
Vornado's Quarterly Report on Form 10-Q for quarter ended
May 2, 1987 (File No. 001-11954), filed June 9, 1987........... *
10.5** -- Form of Stock Option Agreement for use in connection with
incentive stock options issued pursuant to Vornado, Inc.
1985 Stock Option Plan Incorporated by reference to
Vornado's Quarterly Report on Form 10-Q for quarter ended
October 26, 1985 (File No. 001-11954), filed December 9,
1985........................................................... *
10.6** -- Form of Stock Option Agreement for use in connection with incentive
stock options issued pursuant to Vornado, Inc. 1985 Stock
Option Plan--Incorporated by reference to Vornado's
Quarterly Report on Form 10-Q for quarter ended May 2, 1987
(File No. 001-11954), filed June 9, 1987....................... *
10.7** -- Form of Stock Option Agreement for use in connection with
incentive stock options issued pursuant to Vornado, Inc.
1985 Stock Option Plan--Incorporated by reference to
Vornado's Quarterly Report on Form 10-Q for quarter ended
October 26, 1985 (File No. 001-11954), filed December 9, 1985.. *
</TABLE>
- ---------------------------
* Incorporated by reference
** Management contract or compemsatory plan
Page 31
<PAGE> 32
<TABLE>
<CAPTION>
EXHIBIT
NO.
- ----------
<S> <C> <C>
10.8** -- Employment Agreement between Vornado Realty Trust and Joseph
Macnow dated January 1, 1998 - Incorporated by reference to
Exhibit 10.7 of Vornado's Quarterly Report on Form 10-Q for
the quarter ended September 30, 1998 (File No. 001-11954),
filed November 12, 1998...................................... *
10.9** -- Employment Agreement between Vornado Realty Trust and Richard
Rowan dated January 1, 1998 - Incorporated by reference to
Exhibit 10.8 of Vornado's Quarterly Report on Form 10-Q for
the quarter ended September 30, 1998 (File No. 001-11954),
filed November 12, 1998...................................... *
10.10** -- Employment Agreement between Vornado Realty Trust and Irwin
Goldberg, dated December 11, 1997 - Incorporated by reference
to Exhibit 10.10 of Vornado's Annual Report on Form 10-K/A for
the year ended December 31, 1997 (File No.
001-11954), filed on April 14, 1998........................... *
10.11** -- Employment Agreement between Vornado Realty Trust and Michael D.
Fascitelli dated December 2, 1996 - Incorporated by
reference to Vornado's Annual Report on Form 10-K for the
year ended December 31, 1996 (File No. 001-11954), filed
March 13, 1997................................................ *
10.12 -- Promissory Notes from Steven Roth to Vornado, Inc. dated
December 29, 1992 and January 15, 1993 - Incorporated by
reference to Vornado's Annual Report on Form 10-K for the
year ended December 31, 1992 (File No. 001-11954), filed
February 16, 1993............................................. *
10.13 -- Registration Rights Agreement between Vornado, Inc. and Steven
Roth Dated December 29, 1992 - Incorporated by reference to
Vornado's Annual Report on Form 10-K for the year ended
December 31, 1992 (File No. 001-11954), filed February 16, 1993. *
10.14 -- Stock Pledge Agreement between Vornado, Inc. and Steven Roth
dated December 29, 1992 - Incorporated by reference to
Vornado's Annual Report on Form 10-K for the year ended
December 31, 1992 (File No. 001-11954), filed February 16, 1993. *
10.15 -- Promissory Note from Steven Roth to Vornado Realty Trust dated
April 15, 1993 and June 17, 1993 - Incorporated by
reference to Vornado's Annual Report on Form 10-K for the
year ended December 31, 1993 (File No. 001-11954), filed
March 24, 1994................................................ *
10.16 -- Promissory Note from Richard Rowan to Vornado Realty Trust -
Incorporated by reference to Vornado's Annual Report on Form
10-K for the year ended December 31, 1993 (File No.
001-11954), filed March 24, 1994............................... *
10.17 -- Promissory Note from Joseph Macnow to Vornado Realty Trust -
Incorporated by reference to Vornado's Annual Report on Form
10-K for the year ended December 31, 1993 (File No.
001-11954), filed March 24, 1994............................... *
10.18 -- Management Agreement between Interstate Properties and Vornado,
Inc. dated July 13, 1992 -Incorporated by reference to
Vornado's Annual Report on Form 10-K for the year ended
December 31, 1992 (File No. 001-11954), filed February 16, 1993. *
10.19 -- Real Estate Retention Agreement between Vornado, Inc., Keen Realty
Consultants, Inc. and Alexander's, Inc., dated as of July
20, 1992 - Incorporated by reference to Vornado's Annual
Report on Form 10-K for the year ended December 31, 1992
(File No. 001-11954), filed February 16, 1993................... *
</TABLE>
- ---------------------------
* Incorporated by reference
** Management contract or compemsatory plan
Page 32
<PAGE> 33
<TABLE>
<CAPTION>
EXHIBIT
NO.
- ----------
<S> <C> <C>
10.20 -- Amendment to Real Estate Retention Agreement dated February 6,
1995 Incorporated by reference to Vornado's Annual Report
on Form 10-K for the year ended December 31, 1994 (File No.
001-11954), filed March 23, 1995.............................. *
10.21 -- Stipulation between Keen Realty Consultants Inc. and Vornado
Realty Trust re: Alexander's Retention Agreement -
Incorporated by reference to Vornado's annual Report on
Form 10-K for the year ended December 31, 1993 (File No.
001-11954), filed March 24, 1994.............................. *
10.22 -- Stock Purchase Agreement, dated February 6, 1995, among Vornado
Realty Trust and Citibank, N.A. Incorporated by reference
to Vornado's Current Report on Form 8-K dated February 6,
1995 (File No. 001-11954), filed February 21, 1995............ *
10.23 -- Management and Development Agreement, dated as of February 6,
1995 Incorporated by reference to Vornado's Current Report
on Form 8-K dated February 6, 1995 (File No. 001-11954),
filed February 21, 1995....................................... *
10.24 -- Standstill and Corporate Governance Agreement, dated as of
February 6, 1995 Incorporated by reference to Vornado's
Current Report on Form 8-K dated February 6, 1995 (File No.
001-11954), filed February 21, 1995........................... *
10.25 -- Credit Agreement, dated as of March 15, 1995, among Alexander's
Inc., as borrower, and Vornado Lending Corp., as lender -
Incorporated by reference from Annual Report on Form 10-K
for the year ended December 31, 1994 (File No. 001 -
11954), filed March 23, 1995.................................. *
10.26 -- Subordination and Intercreditor Agreement, dated as of March 15,
1995 among Vornado Lending Corp., Vornado Realty Trust and
First Fidelity Bank, National Association - Incorporated by
reference to Vornado's Annual Report on Form 10-K for the
year ended December 31, 1994 (File No. 001-11954), filed
March 23, 1995................................................ *
10.27 -- Revolving Credit Agreement dated as of February 27, 1995 among
Vornado Realty Trust, as borrower, and Union Bank of
Switzerland, as Bank and Administrative Agent -
Incorporated by reference to Exhibit 10(F)9 of Vornado's
Annual Report on Form 10-K for the year ended December 31,
1994 (File No. 001-11954), filed March 23, 1995............... *
10.28 -- 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......................... *
10.29 -- Form of Revolving Credit Agreement between Vornado Realty L.P.
and Vornado Operating, Inc., together with related form of
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).................... *
10.30 -- Amended and Restated Revolving Credit Agreement, dated as of
February 23, 1998, between Vornado Realty L.P., as
Borrower, Vornado Realty Trust, as General Partner and
Union Bank of Switzerland (New York Branch), as Bank, the
other banks signatory hereto, each as a bank, Union Bank of
Switzerland (New York Branch), as Administrative Agent and
Citicorp Real Estate, Inc., The Chase Manhattan Bank and
Nationsbank, as Syndication Agents - Incorporated by
reference to Exhibit 10.29 of the 1997 10-K................... *
10.31 -- Registration Rights Agreement, dated as of April 15, 1997,
between Vornado Realty Trust and the holders of Units
listed on Schedule A thereto Incorporated by reference to
Exhibit 10.2 of Vornado's Current Report on Form 8-K (File
No. 001-11954), filed on April 30, 1997....................... *
</TABLE>
- ---------------------------
* Incorporated by reference
Page 33
<PAGE> 34
<TABLE>
<CAPTION>
EXHIBIT
NO.
- ----------
<S> <C> <C>
10.32 -- Noncompetition Agreement, dated as of April 15, 1997, by and
among Vornado Realty Trust, the Mendik Company, L.P., and
Bernard H. Mendik - Incorporated by reference to Exhibit
10.3 of Vornado's Current Report on Form 8-K (File No.
001-11954), filed on April 30, 1997........................ *
10.33 -- Employment Agreement, dated as of April 15, 1997, by and among
Vornado Realty Trust, The Mendik Company, L.P. and David R.
Greenbaum - Incorporated by reference to Exhibit 10.4 of
Vornado's Current Report on Form 8-K (File No.
001-11954), filed on April 30, 1997........................ *
10.34 -- Agreement, dated September 28, 1997, between Atlanta Parent
Incorporated, Portland Parent Incorporated and Crescent Real
Estate Equities, Limited Partnership - Incorporated by
reference to Exhibit 99.6 of Vornado's Current
Report on Form 8-K (File No. 001-11954), filed on
October 8, 1997............................................. *
10.35 -- Contribution Agreement between Vornado Realty Trust, Vornado
Realty L.P. and The Contributors Signatory - thereto -
Merchandise Mart Properties, Inc. (DE) and Merchandise Mart
Enterprises, Inc. Incorporated by reference to Exhibit
10.34 of Vornado's Annual Report on Form 10-K/A for the
year ended December 31, 1997 (File No. 001-11954), filed on
April 8, 1998............................................... *
10.36 -- Sale Agreement executed November 18, 1997, and effective
December 19, 1997, between MidCity Associates, a New York
partnership, as Seller, and One Penn Plaza LLC, a New York
Limited liability company; as purchaser. Incorporated by
reference to Exhibit 10.35 of Vornado's Annual Report on
Form 10-K/A for the year ended December 31, 1997 (File No.
001-11954), filed on April 8, 1998........................... *
10.37 -- Promissory Notes from Michael D. Fascitelli to Vornado Realty
Trust dated March 2, 1998 and April 30, 1998. Incorporated
by reference to Exhibit 10.37 of Vornado's Quarterly Report
on Form 10-Q for the quarter ended March 31, 1998 (File No.
001-11954), filed May 13, 1998............................ *
10.38 -- Credit Agreement dated as of June 22, 1998 among One Penn Plaza,
LLC, as Borrower, The Lenders Party Hereto, The Chase
Manhattan Bank, as Administrative Agent Incorporated by
reference to Exhibit 10 of Vornado's Quarterly Report on
Form 10-Q for the quarter ended June 30, 1998 (File No.
001-11954), filed August 13, 1998............................ *
10.39 -- Registration Rights Agreement, dated as of April 1, 1998 between
Vornado and the Unit Holders named herein - Incorporated by
reference to Exhibit 10.2 of Amendment No. 1 to Vornado's
Registration Statement on Form S-3 (File No.
333-50095), filed on May 6, 1998............................. *
10.40 -- Underwriting Agreement, dated April 9, 1998, among Vornado,
Vornado Realty L.P. and Goldman, Sachs & Co. - Incorporated
by reference to Exhibit 1.1 of Vornado's Current Report on
Form 8-K, dated April 9, 1998 (File No. 001-11954), filed
on April 16, 1998.......................................... *
10.41 -- Pricing Agreement, dated April 9, 1998, between Vornado and
Goldman, Sachs & Co. - Incorporated by reference to Exhibit
1.2 of Vornado's Current Report on Form 8-K, dated April 9,
1998 (File No. 001-11954), filed on April 16, 1998............ *
10.42 -- Underwriting Agreement, dated April 23, 1998, among Vornado,
Vornado Realty L.P. and Merrill Lynch, Pierce, Fenner &
Smith Incorporated - Incorporated by reference to Exhibit
1.1 of Vornado's Current Report on Form 8-K, dated
April 22, 1998 (File No. 001-11954), filed on April 28,
1998........................................................... *
</TABLE>
- ---------------------------
* Incorporated by reference
Page 34
<PAGE> 35
<TABLE>
<CAPTION>
EXHIBIT
NO.
- ----------
<S> <C> <C>
10.43 -- Underwriting Agreement, dated March 12, 1999, among Vornado,
Vornado Realty L.P., Merrill Lynch, Pierce, Fenner & Smith
Incorporated - Incorporated by reference to Exhibit 1.1 of
Vornado's Current Report on Form 8-K, dated March 3, 1999
(File No. 001-11954), filed on March 17, 1999.................. *
27 -- Financial Data Schedule.......................................... 36
</TABLE>
Page 35
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Company's unaudited financial statements for the six months ended June 30, 1999
and is qualified in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> JUN-30-1999
<CASH> 61,514
<SECURITIES> 77,983
<RECEIVABLES> 37,650
<ALLOWANCES> 4,936
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 3,502,262
<DEPRECIATION> (264,063)
<TOTAL-ASSETS> 4,866,432
<CURRENT-LIABILITIES> 0
<BONDS> 1,964,510
0
477,477
<COMMON> 3,437
<OTHER-SE> 1,540,160
<TOTAL-LIABILITY-AND-EQUITY> 4,866,432
<SALES> 0
<TOTAL-REVENUES> 329,752
<CGS> 0
<TOTAL-COSTS> 130,962
<OTHER-EXPENSES> 58,674
<LOSS-PROVISION> 1,954
<INTEREST-EXPENSE> 70,901
<INCOME-PRETAX> 100,954
<INCOME-TAX> 0
<INCOME-CONTINUING> 100,954
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 86,861
<EPS-BASIC> 1.02
<EPS-DILUTED> 1.00
</TABLE>
