<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material under Rule 14a-12
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
VORNADO REALTY TRUST
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials:
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
- --------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
- --------------------------------------------------------------------------------
(3) Filing Party:
- --------------------------------------------------------------------------------
(4) Date Filed:
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<PAGE> 2
[VORNADO LOGO]
NOTICE OF
ANNUAL MEETING
OF SHAREHOLDERS
AND
PROXY STATEMENT
------------ V
------------
2 0 0 0
<PAGE> 3
[VORNADO LOGO]
PARK 80 WEST, PLAZA II
SADDLE BROOK, NEW JERSEY 07663
------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 31, 2000
------------------------
To our Shareholders:
The Annual Meeting of Shareholders of Vornado Realty Trust, a Maryland real
estate investment trust (the "Company"), will be held at the Marriott Hotel,
Interstate 80 and the Garden State Parkway, Saddle Brook, New Jersey 07663, on
Wednesday, May 31, 2000, beginning at 12:00 p.m., local time, for the following
purposes:
(1) The election of three persons to the Board of Trustees of the Company,
each for a term of three years;
(2) The approval of an amendment to the Company's Omnibus Share Plan; and
(3) The transaction of such other business as may properly come before the
meeting or any adjournment or postponement thereof.
Pursuant to the Bylaws of the Company, the Board of Trustees of the Company
has fixed the close of business on April 20, 2000, as the record date for
determination of shareholders entitled to notice of and to vote at the meeting.
Your attention is called to the attached proxy statement. WHETHER OR NOT
YOU PLAN TO ATTEND THE MEETING, YOU ARE URGED TO COMPLETE AND SIGN THE ENCLOSED
PROXY AND RETURN IT IN THE ACCOMPANYING ENVELOPE TO WHICH NO POSTAGE NEED BE
AFFIXED IF MAILED IN THE UNITED STATES. IF YOU ATTEND THE MEETING IN PERSON, YOU
MAY REVOKE YOUR PROXY AND VOTE YOUR OWN SHARES.
By Order of the Board of Trustees,
Larry Portal
Assistant Secretary
<PAGE> 4
[VORNADO LOGO]
PARK 80 WEST, PLAZA II
SADDLE BROOK, NEW JERSEY 07663
------------------------
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 31, 2000
------------------------
The enclosed proxy is being solicited by the Board of Trustees (the
"Board") of Vornado Realty Trust, a Maryland real estate investment trust (the
"Company"), for use at the Annual Meeting of Shareholders of the Company to be
held on Wednesday, May 31, 2000 (the "Annual Meeting"). The proxy may be revoked
by the shareholder at any time prior to its exercise at the Annual Meeting by
executing and delivering to the Company at its principal office a written
revocation or later dated proxy or by attending the Annual Meeting and voting in
person. The cost of soliciting proxies will be borne by the Company. MacKenzie
Partners, Inc. has been engaged by the Company to solicit proxies, at a fee not
to exceed $5,000. In addition to solicitation by mail and by telephone calls,
arrangements may be made with brokerage houses and other custodians, nominees
and fiduciaries to send proxies and proxy material to their principals and the
Company may reimburse them for their expenses in so doing.
Only shareholders of record at the close of business on April 20, 2000 are
entitled to notice of and to vote at the Annual Meeting. There were on such date
86,541,288 common shares of beneficial interest, par value $.04 per share (the
"Shares"), of the Company outstanding, each entitled to one vote at the Annual
Meeting.
The principal executive office of the Company is located at Park 80 West,
Plaza II, Saddle Brook, New Jersey 07663. The accompanying notice of the annual
meeting of shareholders, this proxy statement and the enclosed proxy will be
mailed on or about May 8, 2000 to the Company's shareholders of record as of the
close of business on April 20, 2000.
<PAGE> 5
ELECTION OF TRUSTEES
The Amended and Restated Declaration of Trust of the Company, as amended
(the "Declaration of Trust"), provides that the Board shall be divided into
three classes, as nearly equal in number as possible. One class of trustees is
elected at each annual meeting of shareholders to hold office for a term of
three years and until their successors are duly elected and qualify.
Unless otherwise directed in the proxy, the person named in the enclosed
proxy, or his substitute, will vote such proxy for the election of the three
nominees listed below as trustees for a three year term and until their
respective successors are duly elected and qualify. If any nominee at the time
of election is unavailable to serve, a contingency not presently anticipated, it
is intended that the person named in the proxy, or his substitute, will vote for
an alternate nominee who will be designated by the Board. Proxies may be voted
only for the nominees named or such alternates.
Under the Company's Bylaws, the affirmative vote of a plurality of all the
votes cast at the Annual Meeting, assuming a quorum is present, is sufficient to
elect a trustee. Under Maryland law, proxies marked "withhold authority" will be
counted for the purpose of determining the presence of a quorum but will not be
counted as votes cast in the election of trustees and thus will have no effect
on the result of the vote.
The following table sets forth the nominees (all of whom are presently
members of the Board) and the other present members of the Board. With respect
to each such person, the table sets forth the age, principal occupation,
position presently held with the Company, and the year in which the person first
became a trustee of the Company or a director of its predecessor, Vornado, Inc.
2
<PAGE> 6
<TABLE>
<CAPTION>
YEAR
PRINCIPAL OCCUPATION TERM
AND PRESENT POSITION WILL INITIAL
NAME AGE WITH THE COMPANY EXPIRE ELECTION
---- --- -------------------- ------ --------
<S> <C> <C> <C> <C>
NOMINEES FOR ELECTION TO SERVE AS TRUSTEES UNTIL THE
ANNUAL MEETING IN 2003
- ------------------------------------------------------
Steven Roth(1) 58 Chairman of the Board and 2000 1979
Chief Executive Officer
of the Company; Managing
General Partner of
Interstate Properties
("Interstate")
Michael D.
Fascitelli(1) 43 President of the Company 2000 1996
Russell B. Wight,
Jr.(1) 60 A general partner of 2000 1979
Interstate
PRESENT TRUSTEES ELECTED TO SERVE UNTIL THE ANNUAL
MEETING IN 2002
- ------------------------------------------------------
Stanley
Simon(1)(2)(3) 82 Owner of Stanley Simon 2002 1960
and Associates,
management and financial
consultants
Ronald Targan(4) 73 A member of the law firm 2002 1980
of Schechner and Targan,
P.A.; President of Malt
Products Corporation of
New Jersey, a producer of
malt syrup
</TABLE>
3
<PAGE> 7
<TABLE>
<CAPTION>
YEAR
PRINCIPAL OCCUPATION TERM
AND PRESENT POSITION WILL INITIAL
NAME AGE WITH THE COMPANY EXPIRE ELECTION
---- --- -------------------- ------ --------
<S> <C> <C> <C> <C>
PRESENT TRUSTEES ELECTED TO SERVE UNTIL THE ANNUAL
MEETING IN 2001
- ------------------------------------------------------
David
Mandelbaum(2)(4) 64 A member of the law firm 2001 1979
of Mandelbaum &
Mandelbaum, P.C.; a
general partner of
Interstate
Richard West(2)(3) 62 Dean Emeritus, Leonard N. 2001 1982
Stern School of Business,
New York University
</TABLE>
- ---------------
(1) Member of the Executive Committee of the Board of the Company.
(2) Member of the Audit Committee of the Board of the Company.
(3) Member of the Compensation Committee of the Board of the Company.
(4) Effective May 31, 2000, Ronald Targan will replace David Mandelbaum on the
Audit Committee.
Mr. Roth has been Chairman of the Board and Chief Executive Officer of the
Company since May 1989 and Chairman of the Executive Committee of the Board of
the Company since April 1980. Since 1968, he has been a general partner of
Interstate and, more recently, he has been Managing General Partner. On March 2,
1995, he became Chief Executive Officer of Alexander's. Mr. Roth is also a
director of Alexander's, Inc. ("Alexander's") and Capital Trust, Inc. and
Chairman of the Board of Directors and Chief Executive Officer of Vornado
Operating Company ("Vornado Operating").
Mr. Fascitelli became the President and a Trustee of the Company on
December 2, 1996. From December 1992 to December 1996, Mr. Fascitelli was a
partner at Goldman, Sachs & Co., in charge of its real estate practice and was a
vice president there prior to 1992. He is also a director of
4
<PAGE> 8
Alexander's and a director and President of Vornado Operating.
Mr. Wight has been a general partner of Interstate since 1968. Mr. Wight is
also a director of Alexander's, Vornado Operating and Insituform Technologies,
Inc.
Mr. Simon has been the owner of Stanley Simon and Associates since 1958.
Mr. Targan has been President of Malt Products Corporation of New Jersey
since 1962. Since 1964, he has been a member of the law firm of Schechner and
Targan, P.A.
Mr. Mandelbaum has been a member of Mandelbaum & Mandelbaum, P.C. since
1967. Since 1968, he has been a general partner of Interstate. Mr. Mandelbaum is
also a director of Alexander's.
Mr. West is Dean Emeritus at the Leonard N. Stern School of Business, New
York University. He was a professor there from September 1984 until September
1995. He was also Dean from September 1984 until August 1993. Prior thereto, Mr.
West was Dean of the Amos Tuck School of Business Administration at Dartmouth
College. Mr. West is also a director or a trustee of Vornado Operating,
Alexander's, Bowne & Co., Inc. and various investment companies managed by
Merrill Lynch Asset Management, Inc. or Hotchkis & Wiley, both affiliates of
Merrill Lynch & Co.
Interstate is a New Jersey partnership formed in 1968. Messrs. Roth, Wight
and Mandelbaum have at all times been the general partners of Interstate.
Interstate is an owner of shopping centers and an investor in securities and
partnerships.
The Company is not aware of any family relationships among any trustees or
executive officers of the Company or person nominated or chosen by the Company
to become a trustee or executive officer. Messrs. Roth, Wight and Mandelbaum are
affiliated with each other as general partners of Interstate and in other
businesses. Messrs. Mandelbaum and Targan are affiliated with each other in
businesses and in the practice of law.
5
<PAGE> 9
COMMITTEES OF THE BOARD OF TRUSTEES
The Board has an Executive Committee, an Audit Committee and a Compensation
Committee.
The Board held six meetings during 1999. Each trustee of the Company
attended at least 80% of the combined total of meetings of the Board and all
committees on which he served during that period.
Executive Committee
The Executive Committee possesses and may exercise certain powers of the
Board in the management of the business affairs of the Company, except those
reserved to the Board under Maryland law. The Executive Committee consists of
Messrs. Roth, Fascitelli, Simon and Wight. Mr. Roth is Chairman of the Executive
Committee. The Executive Committee did not meet in 1999.
Audit Committee
The purposes of the Audit Committee are to assist the Board: (i) in its
oversight of the Company's accounting and financial reporting principles and
policies and internal controls and procedures; (ii) in its oversight of the
Company's financial statements and the independent audit thereof; (iii) in
selecting, evaluating and, where deemed appropriate, replacing the outside
auditors; and (iv) in evaluating the independence of the outside auditors. The
function of the Audit Committee is oversight. The management of the Company is
responsible for the preparation, presentation and integrity of the Company's
financial statements and for maintaining appropriate accounting and financial
reporting principles and policies and internal controls and procedures designed
to assure compliance with accounting standards and applicable laws and
regulations. The outside auditors are responsible for planning and carrying out
a proper audit and reviews and other procedures. The Audit Committee, which held
four meetings during 1999, consists of three members, Messrs. West, Mandelbaum
and Simon. Mr. West is the Chairman of the Audit Committee. Effective May 31,
6
<PAGE> 10
2000, Mr. Targan will replace Mr. Mandelbaum on the Audit Committee.
Compensation Committee
The Compensation Committee is responsible for establishing the terms of the
compensation of the executive officers and the granting of awards under the 1993
Omnibus Share Plan of Vornado Realty Trust (the "Omnibus Share Plan"). The
Committee, which held three meetings during 1999, consists of two members,
Messrs. Simon and West. Mr. Simon is the Chairman of the Compensation Committee.
7
<PAGE> 11
COMPENSATION COMMITTEE
OF THE BOARD OF TRUSTEES
REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee (the "Committee") of the Board is responsible
for establishing the terms of the compensation of the Company's executive
officers.
Each of the executive officers receives a base salary. The Committee
periodically reviews and adjusts Mr. Roth's base salary. Mr. Roth's current base
salary of $625,000 was established in November 1991. Mr. Fascitelli's base
salary is $600,000 in accordance with the employment agreement entered into on
December 2, 1996. The base salary of Mr. Greenbaum is $425,000 in accordance
with the employment agreement entered into on April 15, 1997. The base salary of
Mr. Macnow is $425,000 in accordance with the employment agreement entered into
as of January 1, 1998. The base salary of Mr. Hakim is $400,000 in accordance
with the employment agreement entered into as of April 1, 1998. The employment
agreement for Mr. Macnow provides for an annual adjustment of his base salary
equal to 125% of the percentage increase in the prior year's consumer price
index. See "Executive Compensation -- Employment Contracts".
The factors and criteria which the Committee utilizes in establishing the
compensation of the Company's executive officers (including Mr. Roth) include an
evaluation of the Company's overall financial and business performance, the
officer's overall leadership and management and contributions by the officer to
the Company's acquisitions or investments. The Committee also considers the
compensation provided in the prior year and estimates of compensation to be
provided by similar companies in the current year. The primary objective of the
Committee in establishing the terms of the executive officers' compensation has
been to provide strong financial incentives for the executive officers to
maximize shareholder value. The Committee believes that the best way to
accomplish this objective is to grant substantial share options on a fixed share
basis without adjusting the
8
<PAGE> 12
number of shares granted to offset changes in the Company's Share price.
In February 1999, Mr. Roth was granted options to purchase 1,000,000
Shares, exercisable at the current market price on the date the option was
granted. At December 31, 1999, a loan due from Mr. Roth in connection with his
stock option exercises was $13,122,500 bearing interest at 4.49% per annum
(based on the Applicable Federal Rate). During 1999, the Company amended Mr.
Roth's loan to (i) change the interest rate to the Applicable Federal Rate from
a floating rate equal to the broker call rate and (ii) extend the maturity to
January 2006 from December 2002. The Company also provided Mr. Roth with the
right to draw up to $15,000,000 of additional loans on a revolving basis. Each
additional loan will bear interest, payable quarterly, at the Applicable Federal
Rate on the date the loan is made and will mature on the sixth anniversary of
the loan. Mr. Roth's loan and any additional loans drawn under the arrangement
described above are secured by 1,500,000 Shares.
The employment agreement of Michael D. Fascitelli, President, provides in
addition to his annual salary, that he receive a deferred payment (the "Deferred
Payment") consisting of $5,000,000 in cash (which has been invested in
marketable securities at the direction of Mr. Fascitelli) and a $20,000,000
convertible obligation payable at the Company's option in 919,540 of its Shares
or the cash equivalent of their appreciated value but not less than $20,000,000.
Accordingly, the Deferred Payment is being held in an irrevocable trust for the
benefit of Mr. Fascitelli. The Deferred Payment obligation to Mr. Fascitelli
vested on December 2, 1997. In February 1999, Mr. Fascitelli was granted options
to purchase 750,000 Shares, exercisable at the current market price on the date
the option was granted. In addition, Mr. Fascitelli's employment agreement
provides that he may receive loans of up to $10 million from the Company during
the term of his employment. As of December 31, 1999, Mr. Fascitelli had borrowed
$7,600,000 from the Company.
9
<PAGE> 13
The employment agreement of David R. Greenbaum, Chief Executive Officer of
the New York Office Division, provides that Mr. Greenbaum may receive loans of
up to $10 million from the Company during the term of his employment agreement.
As of December 31, 1999, Mr. Greenbaum had borrowed $1,000,000 from the Company.
In February 1999, Mr. Greenbaum was granted options to purchase 150,000 Shares,
exercisable at the current market price on the date the option was granted. Mr.
Greenbaum's loan is secured by 75,000 Class A Units in Vornado Realty L.P.
The employment agreement of Joseph Macnow, Executive Vice
President -- Finance and Administration, provides an undertaking to use best
efforts annually to cause the Compensation Committee of the Board to grant Mr.
Macnow options to purchase 75,000 Shares at a purchase price equal to the fair
market value of the Shares on the dates the options are granted. In February
1999, Mr. Macnow was granted options to purchase 125,000 Shares, exercisable at
the current market price on the date the option was granted.
The employment agreement of Mr. Hakim, Chief Executive Officer of the
Merchandise Mart Division, provides an undertaking to use best efforts annually
to cause the Compensation Committee of the Board to grant Mr. Hakim options to
purchase 100,000 Shares at a purchase price equal to the fair market value of
the shares on the dates the options are granted. In February 1999, Mr. Hakim was
granted options to purchase 125,000 Shares, exercisable at the current market
price on the date the option was granted.
Section 162(m) of the Internal Revenue Code, which was adopted in 1993,
provides that, in general, publicly traded companies may not deduct, in any
taxable year, compensation in excess of $1,000,000 paid to any individual named
in the Summary Compensation Table which is not "performance based", as defined
in Section 162(m). Options granted under the Company's Omnibus Share Plan to
date satisfy the performance based requirements under the final regulations
issued with respect to Section 162(m). The deferred payment to Mr. Fascitelli
does not meet the re-
10
<PAGE> 14
quirements of Section 162(m) and will thus be subject to the $1,000,000
limitation when paid.
STANLEY SIMON
RICHARD WEST
11
<PAGE> 15
PERFORMANCE GRAPH
The following performance graph compares the Company's Share price
performance to the Standard & Poor's 500 Composite Stock Price Index (the "S&P
500 Index") and to the published National Association of Real Estate Investment
Trusts ("NAREIT") All Equity Index (excluding Health Care REITS). The graph
assumes that $100 was invested on December 31, 1994 in each of the Shares, the
S&P 500 Index and the NAREIT All Equity Index, and that all dividends were
reinvested. THERE CAN BE NO ASSURANCE THAT PERFORMANCE OF THE COMPANY'S SHARES
WILL CONTINUE WITH THE SAME OR SIMILAR TRENDS DEPICTED IN THE GRAPH BELOW.
[PERFORMANCE LINE GRAPH]
<TABLE>
<CAPTION>
NAREIT ALL EQUITY
VORNADO REALTY TRUST S&P 500 INDEX INDEX(1)
-------------------- ------------- -----------------
<S> <C> <C> <C>
1994 100.00 100.00 100.00
1995 110.00 137.00 115.00
1996 161.00 169.00 156.00
1997 295.00 225.00 188.00
1998 219.00 290.00 155.00
1999 222.00 351.00 148.00
</TABLE>
- ---------------
(1) Excluding Health Care REITs.
12
<PAGE> 16
PRINCIPAL SECURITY HOLDERS
The following table sets forth the beneficial ownership of Shares and Class
A Units and those units convertible into Class A Units of limited partnership
interest (collectively, "Units") in Vornado Realty L.P., a Delaware limited
partnership (the "Operating Partnership"), of (i) each person holding more than
a 5% interest in the Company or the Operating Partnership (other than the
Company), (ii) trustees of the Company, (iii) the executive officers of the
Company named in the Summary Compensation Table set forth below, and (iv) the
trustees and executive officers of the Company as a group. Unless otherwise
noted, the address of all such persons is c/o Vornado Realty Trust, Park 80
West, Plaza II, Saddle Brook, New Jersey 07663.
<TABLE>
<CAPTION>
NUMBER OF
SHARES PERCENT OF ALL
AND UNITS PERCENT OF ALL SHARES AND
BENEFICIALLY SHARES UNITS
NAME OF BENEFICIAL OWNER OWNED(1) (1)(2)(3) (1)(2)(4)
------------------------ ------------ -------------- --------------
<S> <C> <C> <C>
NAMED EXECUTIVE OFFICERS AND
TRUSTEES
Steven Roth(5)(6)(7)........ 15,870,900 18.1% 15.4%
Russell B. Wight,
Jr.(5)(8)................. 13,484,800 15.6% 13.3%
David Mandelbaum(5)......... 13,261,998 15.3% 13.1%
Michael D.
Fascitelli(7)(9).......... 3,609,540 4.0% 3.5%
David R.
Greenbaum(7)(10)(11)...... 3,571,798 4.1% 3.5%
Joseph Macnow(7)............ 484,500 * *
Joseph Hakim(14)............ 505,467 * *
Ronald Targan............... 750,000 * *
Stanley Simon............... 75,000 * *
Richard West(12)............ 21,000 * *
All trustees and executive
officers as a group (13
persons).................. 26,165,188 28.5% 24.5%
OTHER BENEFICIAL OWNERS
Interstate(5)............... 12,943,000 15.0% 12.8%
Cohen & Steers Capital
Management, Inc.(13)...... 9,317,200 10.2% 8.7%
</TABLE>
- ---------------
* Less than 1%.
(1) Unless otherwise indicated, each person is the direct owner of, and has
sole investment power with respect to, such Shares and Units. Numbers and
percentages
13
<PAGE> 17
in table are based on 86,541,288 Shares and 14,895,464 Units outstanding as
of April 20, 2000.
(2) In April 1997, the Company transferred substantially all of its assets to
the Operating Partnership. As a result, the Company now conducts its
business through, and substantially all of its interests in properties are
held by, the Operating Partnership. The Company is the sole general partner
of, and owned approximately 86% of the common limited partnership interest
in, the Operating Partnership as of April 20, 2000. At any time after one
year from the date of issuance (or two years in the case of certain
holders), holders of Units (other than the Company) will have the right to
have their Units redeemed in whole or in part by the Operating Partnership
for cash equal to the fair market value, at the time of redemption, of one
Share for each Unit redeemed or, at the option of the Company, one Share
for each Unit tendered, subject to customary antidilution provisions (the
"Unit Redemption Right"). Holders of Units may be able to sell Shares
received upon the exercise of their Unit Redemption Right in the public
market pursuant to registration rights agreements with the Company. The
Company has filed registration statements with the Securities and Exchange
Commission to register certain of the Shares issuable upon the exercise of
the Unit Redemption Right.
(3) Assumes that all Units held by the beneficial owner are redeemed for
Shares. The total number of Shares or Units outstanding used in calculating
this percentage assumes that all Shares or Units that each person has the
right to acquire within 60 days pursuant to the exercise of options or upon
the exchange of Units for Shares are deemed to be outstanding, but are not
deemed to be outstanding for the purpose of computing the ownership
percentage of any other person.
(4) Assumes that all Units with the right to convert within 60 days upon the
exchange of Units for Shares are redeemed for Shares.
14
<PAGE> 18
(5) Interstate, a partnership of which Messrs. Roth, Wight and Mandelbaum are
the three general partners, owns 12,943,000 Shares. These Shares are
included in the total Shares and the percentage of class for Interstate.
Messrs. Roth, Wight and Mandelbaum share voting power and investment power
with respect to these Shares.
(6) Includes 82,900 Shares owned by the Daryl and Steven Roth Foundation, over
which Mr. Roth holds sole voting power and investment power. Does not
include 36,000 Shares owned by Mr. Roth's wife, as to which Mr. Roth
disclaims any beneficial interest.
(7) The number of Shares beneficially owned by the following persons includes
the number of Shares indicated due to the vesting of options: Steven
Roth -- 1,345,000; Michael D. Fascitelli -- 2,690,000; David R.
Greenbaum -- 533,400; Joseph Macnow -- 409,500; Joseph Hakim -- 109,500;
and all trustees and executive officers as a group -- 5,332,656.
(8) Includes 64,800 Shares owned by the Wight Foundation, over which Mr. Wight
holds sole voting power and investment power.
(9) Includes 919,540 Shares held in a trust for the benefit of Mr. Fascitelli.
(10) The address for this beneficial owner is c/o Mendik Realty Company, Inc.,
330 Madison Avenue, New York, New York 10017.
(11) Includes (i) 765,183 Units which are held by The Mendik Partnership, L.P.
("TMP") in which Mr. Greenbaum is one of the limited partners and controls
the company which is the general partner of TMP, (ii) 486,540 Units which
are held by FW/Mendik REIT, L.L.C., which is comprised of two members
controlled by Mr. Greenbaum, (iii) 1,767,035 Units which are held by Mendik
Holdings LLC, of which TMP is a member, and (iv) 2,030 Units held by M
Westport Associates, a partnership of which Mr. Greenbaum is a partner. Mr.
Greenbaum disclaims beneficial ownership of all these Units except to the
extent of his
15
<PAGE> 19
pecuniary interest therein. Does not include 16,909 Units which are held by
Mr. Greenbaum's wife, as to which Mr. Greenbaum disclaims any beneficial
interest.
(12) Mr. West and his wife own 3,000 of these Shares jointly. Mr. West holds
18,000 of these Shares in self-directed Keogh accounts.
(13) Based on Schedule 13G filed on February 10, 2000, Cohen & Steers Capital
Management, Inc. has the sole power to vote or to direct the vote of
8,121,200 Shares and has the sole power to dispose or to direct the
disposition of 9,317,200 Shares. The address of this beneficial owner is
757 Third Avenue, New York, New York 10017.
(14) Includes 395,967 Units which are held by H2K LLC in which Mr. Hakim holds a
controlling interest. Mr. Hakim disclaims beneficial ownership of all these
Units except to the extent of his pecuniary interest therein.
16
<PAGE> 20
EXECUTIVE COMPENSATION
The following table summarizes the compensation during each of the past
three fiscal years for each of the five highest paid executive officers of the
Company whose total compensation aggregated $100,000 or more in 1999 ("Covered
Executives").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS ALL OTHER
NAME AND ---------------------------------- ------------ COMPENSATION
PRINCIPAL POSITION YEAR SALARY($) BONUS($) OTHER($)(1) OPTIONS ($)(2)
------------------ ---- --------- -------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Steven Roth 1999 625,000 400,000 0 1,000,000(3) 73,145
Chairman and Chief 1998 625,000 0 0 1,500,000(3) 64,583
Executive Officer 1997 625,000 0 0 0 61,397
Michael D. Fascitelli 1999 600,000 400,000 0 750,000(3) 5,629
President 1998 600,000 0 0 500,000(3) 4,215
1997 600,000 0 0 3,049
0
David R. Greenbaum 1999 450,000 100,000 0 150,000(3) 12,115
Chief Executive 1998 425,000 100,000 0 150,000(3) 7,500
Officer of the 1997 212,500(4) 100,000 0 570,000(3) 11,305
New York Office
Division
Joseph Macnow 1999 450,000 100,000 68,107 125,000(3) 84,870
Executive Vice 1998 425,000 100,000 64,895 100,000(3) 72,351
President -- Finance 1997 380,500 100,000 60,589 75,000(5) 22,666
and Administration
Joseph Hakim 1999 400,000 130,000 0 125,000(3) 5,295
Chief Executive 1998 262,000(6) 100,000 0 100,000(3) 1,440
Officer of
Merchandise Mart
Division
</TABLE>
- ---------------
(1) Represents the forgiveness by the Company of one-fifth of the loan amount
(together with interest) due from Mr. Macnow. The loan was issued in
connection with Mr. Macnow's option exercises in prior years. The Company
has agreed that on each January 1st (commencing January 1, 1997) it will
forgive one-fifth of the amount due from Mr. Macnow, provided he remains an
employee of the Company.
(2) Represents annual amounts of (i) employer paid contributions to the
Company's 401(k) retirement plan and (ii) Company paid whole life insurance
premiums. Employer contributions to the Company's 401(k) retirement plan
become vested 100% after the completion of
17
<PAGE> 21
five years of eligible service. The whole life insurance policies provide
coverage in an amount equal to the excess of the amount covered under the
Company's non-discriminatory group term life insurance benefit for all full
time employees (i.e., two times salary) over the benefit cap imposed by the
term insurance carrier.
(3) Options are exercisable 34% twelve months after grant, and 33% after each of
the following two twelve-month periods.
(4) Mr. Greenbaum's employment with the Company commenced on April 15, 1997.
(5) Options are exercisable 25% nine months after grant, and 25% after each of
the following three six-month periods.
(6) Mr. Hakim's employment with the Company commenced on April 1, 1998.
18
<PAGE> 22
The following table lists all grants of share options and share
appreciation rights to the Covered Executives made in 1999 and their potential
realizable values, assuming annualized rates of share price appreciation of 5%
and 10% over the term of the grant. All of such grants were made in 1999. The
Company has not, to date, granted any share appreciation rights.
OPTION GRANTS IN 1999
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
INDIVIDUAL GRANTS VALUE AT
---------------------- ASSUMED ANNUAL
% OF TOTAL RATES OF
NUMBER OF OPTIONS SHARE PRICE
SHARES GRANTED TO EXERCISE APPRECIATION FOR
UNDERLYING EMPLOYEES OR BASE OPTION TERM(2)
OPTIONS IN FISCAL PRICE PER EXPIRATION -------------------------
NAME GRANTED YEAR SHARE(1) DATE 5% 10%
- ---- ---------- ---------- --------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Steven Roth 1,000,000 31% $33.5625 2/16/09 $21,107,339 $53,490,141
Michael D. Fascitelli 750,000 23% $33.5625 2/16/09 $15,830,504 $40,117,606
David R. Greenbaum 150,000 5% $33.5625 2/16/09 $ 3,166,101 $ 8,023,521
Joseph Macnow 125,000 4% $33.5625 2/16/09 $ 2,638,417 $ 6,686,268
Joseph Hakim 125,000 4% $33.5625 2/16/09 $ 2,638,417 $ 6,686,268
</TABLE>
- ---------------
(1) The exercise or base price per Share is equal to the current market price on
the date the option was granted.
(2) Potential Realizable Value is based on the assumed annual growth rates for
the market value of the Shares shown over their ten-year term. For example,
a 5% growth rate, compounded annually, results in a price of $54.67 per
Share and a 10% growth rate, compounded annually, results in a price of
$87.05 per Share. These Potential Realizable Values are listed to comply
with the regulations of the Securities and Exchange Commission, and the
Company cannot predict whether these values will be achieved. Actual gains,
if any, on share option exercises are dependent on the future performance of
the Shares.
19
<PAGE> 23
The following table summarizes all exercises of options during 1999, and
the number and value of options held at December 31, 1999, by the Covered
Executives.
AGGREGATED OPTION EXERCISES IN 1999 AND YEAR END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF
UNEXERCISED VALUE OF UNEXERCISED
SHARES OPTIONS AT IN-THE-MONEY
ACQUIRED 12/31/99 OPTIONS AT 12/31/99
ON VALUE EXERCISABLE/ EXERCISABLE/
NAME EXERCISE REALIZED UNEXERCISABLE UNEXERCISABLE
---- -------- -------- ------------------- ----------------------
<S> <C> <C> <C> <C>
Steven Roth -- $-- 510,000/1,990,000 $ 0/0
Michael D. Fascitelli -- -- 2,270,000/2,480,000 18,963,000/12,642,000
David R. Greenbaum -- -- 432,900/437,100 824,904/406,296
Joseph Macnow -- -- 334,000/191,000 3,792,375/0
Joseph Hakim -- -- 34,000/191,000 0/0
</TABLE>
EMPLOYEE RETIREMENT PLAN
Effective December 31, 1997, the Company froze the employee retirement plan
which provided retirement benefits to full-time employees of the Company.
Benefits under the plan will continue to vest upon the completion of five years
of service for all eligible employees. However, employees will not earn any
additional benefits after December 31, 1997. In addition, no new participants
will be eligible to enter the frozen plan. Annual retirement benefits are equal
to 1% of the participant's base salary for each year of service. However, the
portion of retirement benefits payable for service prior to plan participation
is equal to 1% of the participant's base salary as of December 31 of the year
before the participant began to participate in the plan for each year of the
participant's past service.
The amounts shown below are the estimated annual benefits (payable in the
form of a life annuity) for each of the Covered Executives payable upon normal
retirement at age 65. The estimated annual benefit payable at age 65 to Mr. Roth
is $45,003; and to Mr. Macnow, $29,002.
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<PAGE> 24
EMPLOYMENT CONTRACTS
Michael D. Fascitelli
Mr. Fascitelli has a five-year employment contract which commenced on
December 2, 1996 and which provides for an annual salary of $600,000. In
addition to his annual salary, he received a deferred payment (the "Deferred
Payment") consisting of $5,000,000 in cash (which has been invested in
marketable securities at the direction of Mr. Fascitelli) and a $20,000,000
convertible obligation payable at the Company's option in 919,540 Shares or the
cash equivalent of their appreciated value but not less than $20,000,000.
Accordingly, the Deferred Payment is being held in an irrevocable trust for the
benefit of Mr. Fascitelli. The Deferred Payment obligation to Mr. Fascitelli
vested on December 2, 1997. In February 1999, Mr. Fascitelli was granted options
to purchase 750,000 Shares, exercisable at the current market price on the date
the option was granted. Mr. Fascitelli may also receive loans of up to $10
million from the Company during the term of the employment agreement. As of
December 31, 1999, Mr. Fascitelli had borrowed $7,600,000 from the Company. He
has also been given the use of a company automobile.
The agreement also provides that if his employment is terminated by the
Company without cause or by him for good reason (as defined in the agreement to
include a change in Mr. Fascitelli's responsibilities, change in control of the
Company, relocation of the Company or the failure of the Company to comply with
the terms of the agreement), payment of his base salary shall continue for three
years, offset in the second and third years for compensation received from
another employer, and benefits to him and his family shall continue for three
years. The agreement further provides that if his employment is terminated by
him without good reason or by the Company for cause (as defined in the agreement
to include conviction of, or plea of guilty or nolo contendere to, a felony,
failure to perform his duties or willful misconduct) payment of salary will
cease.
21
<PAGE> 25
David R. Greenbaum
Mr. Greenbaum has an employment agreement with a term through April 30,
2000 pursuant to which he serves as Chief Executive Officer of the New York
Office Division of the Company. The employment agreement provides for annual
base compensation in the amount of $425,000. In February 1999, Mr. Greenbaum was
granted options to purchase 150,000 Shares, exercisable at the current market
price on the date of grant. Mr. Greenbaum also may receive loans of up to $10
million from the Company during the term of the employment agreement. As of
December 31, 1999, Mr. Greenbaum had borrowed $1,000,000 from the Company. He
has also been given the use of a company automobile.
The agreement also provides that if his employment is terminated by the
Company without cause or by him for good reason (as defined in the agreement to
include, among other things, a change in Mr. Greenbaum's responsibilities,
change in control of the Company, relocation of the New York Office Division's
principal executive offices or the failure of the Company to comply with the
terms of the agreement), Mr. Greenbaum will receive (a) a lump sum payment of
three times the sum of (i) his annual base compensation plus (ii) the average of
the annual bonuses earned by him in the two fiscal years ending immediately
prior to his termination and (b) continued provision of benefits to him and his
family for three years. The agreement further provides that if his employment is
terminated by him without good reason or by the Company for cause (as defined in
the agreement to include conviction of, or plea of guilty or nolo contendere to,
a felony, failure to perform his duties or willful misconduct) payment of salary
will cease.
Joseph Macnow
Mr. Macnow has an employment agreement with a term through December 31,
2000 pursuant to which Mr. Macnow serves as Executive Vice President -- Finance
and Administration. The employment agreement provides for annual base
compensation in the amount of $425,000, subject to
22
<PAGE> 26
increases in the second and third years by a factor equal to 125% of the
percentage increase in the prior year's consumer price index; use of a company
automobile; and an undertaking by the Company to use best efforts to cause the
Compensation Committee of the Board to grant Mr. Macnow options to purchase
75,000 Shares during each of the three years at a purchase price equal to the
fair market value of the Shares on the dates the options are granted. In
February 1999, Mr. Macnow was granted options to purchase 125,000 Shares
exercisable at the current market price on the date the option was granted.
The agreement also provides that if Mr. Macnow's employment is terminated
by the Company without cause or by him for good reason (as defined in the
agreement to include, among other things, a change in his responsibilities,
change in control of the Company, relocation of Vornado's principal executive
offices or the failure of the Company to comply with the terms of the
agreement), he will receive: (a) a lump sum payment of three times the sum of
(i) his annual base compensation plus (ii) the average of the annual bonuses
earned by him in the two fiscal years ending immediately prior to his
termination; (b) immediate vesting in any stock options granted to him by the
Board; and (c) continued provision of benefits to him and his family for three
years. The agreement further provides that if Mr. Macnow's employment is
terminated by him without good reason or by the Company for cause (as defined in
the agreement to include conviction of, or plea of guilty or nolo contendere to,
a felony, failure to perform his duties or willful misconduct) payment of salary
will cease.
Joseph Hakim
Mr. Hakim has an employment agreement with an initial term through March
31, 2001 pursuant to which he serves as Chief Executive Officer of the
Merchandise Mart Division of the Company. The employment agreement provides for
annual base compensation in the amount of $400,000. In February 1999, Mr. Hakim
was granted options to purchase 125,000 Shares, exercisable at the current
market price on the date of grant.
23
<PAGE> 27
The agreement also provides that if his employment is terminated by the
Company without cause or by him for good reason (as defined in the agreement to
include, among other things, a change in Mr. Hakim's responsibilities, change in
control of the Company, relocation of the Merchandise Mart Division's principal
executive offices or the failure of the Company to comply with the terms of the
agreement), Mr. Hakim will receive (a) a lump sum payment of three times the sum
of (i) his annual base compensation plus (ii) the average of the annual bonuses
earned by him in the two fiscal years ending immediately prior to his
termination and (b) continued provision of benefits to him and his family for
three years. The agreement further provides that if his employment is terminated
by him without good reason or by the Company for cause (as defined in the
agreement to include conviction of, or plea of guilty or nolo contendere to, a
felony, failure to perform his duties or willful misconduct) payment of salary
will cease.
Melvyn Blum
Mr. Blum has an employment agreement with a term of January 24, 2000
through January 23, 2005 pursuant to which he serves as Executive
Vice-President -- Development of the Company. The employment agreement provides
for annual base compensation in the amount of $500,000. Mr. Blum also received
148,148 restricted Shares that vest over a five-year period. In March 2000, Mr.
Blum was granted options to purchase 225,000 Shares, exercisable at the current
market price on the date of grant. Mr. Blum also may receive loans of up to $2
million from the Company during the term of the employment agreement.
The agreement also provides that if his employment is terminated by the
Company without cause or by him for good reason (as defined in the agreement to
include, among other things, a change in Mr. Blum's responsibilities, change in
control of the Company, relocation of Vornado's principal executive offices or
the failure of the Company to comply with the terms of the agreement), Mr. Blum
will receive (a) a lump sum payment of three times the sum of (i) his annual
base compensation plus (ii) the average of the
24
<PAGE> 28
annual bonuses earned by him in the two fiscal years ending immediately prior to
his termination; (b) immediate vesting in any stock options and restricted stock
shares granted to him by the Board; and (c) continued provision of benefits to
him and his family for three years. The agreement further provides that if his
employment is terminated by him without good reason or by the Company for cause
(as defined in the agreement to include conviction of, or plea of guilty or nolo
contendere to, a felony, failure to perform his duties or willful misconduct)
payment of salary will cease.
COMPENSATION OF TRUSTEES
The Company compensated Messrs. Wight, Mandelbaum and Targan at a rate of
$25,000 per year for serving as trustees plus $750 for each meeting of the Board
or of any committee of the Board which the trustee attends. The Company
compensated Stanley Simon and Associates, of which Stanley Simon is the owner,
and Richard West at a rate of $50,000 per year in addition to $750 for each
meeting. Messrs. Roth and Fascitelli received no compensation for their serving
as trustees.
COMPENSATION INTERLOCKS AND INSIDER PARTICIPATION IN COMPENSATION DECISIONS
The Compensation Committee, consisting of Messrs. Simon and West, grants
awards under the Company's Omnibus Share Plan and makes all other executive
compensation determinations. Messrs. Roth and Fascitelli are the only officers
or employees of the Company or any of its subsidiaries who are members of the
Board. There are no interlocking relationships involving the Company's Board
which require disclosure under the executive compensation rules of the
Securities and Exchange Commission.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Formation of the Operating Partnership and Transactions Involving the Mendik
Group
In April 1997, the Company transferred substantially all of its assets to
the Operating Partnership. As a result, the
25
<PAGE> 29
Company conducts its business through, and substantially all of its interests in
properties are held by, the Operating Partnership. The Company is the sole
general partner of, and owned an approximate 86% common limited partnership
interest in, the Operating Partnership as of April 20, 2000.
Simultaneously with the formation of the Operating Partnership, the Company
consummated the acquisition of interests in all or a portion of seven Manhattan
office buildings (the "Mendik Properties") and the management company held by
Bernard H. Mendik, formerly Co-Chairman of the Board of the Company, and David
R. Greenbaum, Chief Executive Officer of the New York Office Division of the
Company, and certain entities controlled by them (the "Mendik Group") and
certain of its affiliates (the "Mendik Transaction").
Pursuant to the Mendik Transaction, Mendik Management Company Inc. ("MMC")
was formed. The Operating Partnership received 100% of MMC's nonvoting common
stock which entitles it to 95% of the net operating cash flow distributed by MMC
to its shareholders. Steven Roth, Chairman of the Board of the Company, Michael
Fascitelli, President and Trustee of the Company, and David Greenbaum own the
voting common stock of MMC. MMC will allocate expenses to the Operating
Partnership to the extent that MMC employees perform services on behalf of the
Operating Partnership.
The Mendik Group owns an entity which provides cleaning and related
services and security services to office properties. The Company has entered
into contracts with the Mendik Group to provide such services in the Company's
Manhattan office buildings. Although the terms and conditions of the contracts
pursuant to which these services are provided were not negotiated at arm's
length, the Company believes, based upon comparable fees charged to other real
estate companies, that the terms and conditions of such contracts are fair to
the Company. The Company was charged fees in connection with these contracts of
$40,974,000 for the year ended December 31, 1999, a por-
26
<PAGE> 30
tion of which is expected to be reimbursed to the Company by its tenants.
Transactions Involving Vornado Operating
General. Vornado Operating was incorporated on October 30, 1997, as a
wholly owned subsidiary of the Company. In order to maintain its status as a
REIT for federal income tax purposes, the Company is required to focus
principally on investment in real estate assets. Accordingly, the Company is
prevented from owning certain assets and conducting certain activities that
would be inconsistent with its status as a REIT. Vornado Operating was formed to
own assets that Vornado could not itself own and conduct activities that Vornado
could not itself conduct. Vornado Operating is intended to function principally
as an operating company, in contrast to the Company's principal focus on
investment in real estate assets. Vornado Operating is able to do so because it
is taxable as a regular "C" corporation rather than as a REIT.
Vornado Operating will seek to become the operator of businesses conducted
at properties it leases from the Company, as contemplated by the Agreement
between the Company and Vornado Operating (the "Vornado Agreement"), referred to
below.
The Distribution. On October 16, 1998, the Operating Partnership made a
distribution (the "Distribution") of one share of common stock, par value $.01
per share (the "Common Stock"), of Vornado Operating for 20 Units of the
Operating Partnership (including units owned by the Company) held of record as
of the close of business on October 9, 1998 and the Company in turn made a
distribution of the Common Stock it received to the holders of its Shares. While
no Common Stock was distributed in respect of the Company's $3.25 Series A
Convertible Preferred Shares, the Company adjusted the Conversion Price to take
into account the Distribution. Vornado Operating's Common Stock is listed on the
American Stock Exchange under the symbol "VOO".
27
<PAGE> 31
Capital Contribution and Revolving Credit Agreement. The Company initially
capitalized Vornado Operating with an equity contribution of $25,000,000 of
cash. As part of its formation, Vornado Operating was granted a $75,000,000
unsecured five-year revolving credit facility from Vornado (the "Revolving
Credit Agreement"). Borrowings under the Revolving Credit Agreement bear
interest at a floating rate per annum equal to LIBOR plus 3% (9.09% at December
31, 1999). Commencing January 1, 1999, Vornado Operating pays the Company a
commitment fee equal to 1% per annum on the average daily unused portion of the
facility. Amounts may be borrowed under the Revolving Credit Agreement, repaid
and reborrowed from time to time on a revolving basis (so long as the principal
amount outstanding at any time does not exceed $75,000,000). Only interest and
commitment fees are payable under the Revolving Credit Agreement until it
expires. The Revolving Credit Agreement prohibits Vornado Operating from
incurring indebtedness to third parties (other than certain purchase money debt
and certain other exceptions) and prohibits Vornado Operating from paying
dividends. Debt under the Revolving Credit Agreement is recourse to Vornado
Operating. At December 31, 1999, $4,587,000 was outstanding under the Revolving
Credit Agreement.
Agreement with Vornado Operating. The Company and Vornado Operating are
parties to an Agreement pursuant to which, among other things, (a) the Company
will under certain circumstances offer Vornado Operating an opportunity to
become the lessee of certain real property owned now or in the future by the
Company (under mutually satisfactory lease terms) and (b) Vornado Operating will
not make any real estate investment or other REIT-qualified investment unless it
first offers the Company the opportunity to make such investment and the Company
has rejected that opportunity.
Under the Vornado Agreement, the Company provides Vornado Operating with
certain administrative, corporate, accounting, financial, insurance, legal, tax,
data processing, human resources and operational services. For these services,
Vornado Operating compensates the Company in an
28
<PAGE> 32
amount determined in good faith by the Company as the amount an unaffiliated
third party would charge Vornado Operating for comparable services and will
reimburse the Company for certain costs incurred and paid to third parties on
behalf of Vornado Operating. For the year ended December 31, 1999, approximately
$330,000 of compensation for such services was charged pursuant to the
Agreement.
Vornado Operating and the Company each have the right to terminate the
Agreement if the other party is in material default of the Agreement or upon 90
days written notice to the other party at any time after December 31, 2003. In
addition, the Company has the right to terminate the Agreement upon a change in
control of Vornado Operating.
Vornado Operating's Management. Messrs. Roth, Fascitelli, West and Wight
are directors of Vornado Operating. Mr. Roth is also Chairman of the Board and
Chief Executive Officer of Vornado Operating, Mr. Fascitelli is also President
of Vornado Operating, and certain other members of the Company's senior
management hold corresponding positions with Vornado Operating.
The Temperature Controlled Logistics Companies. On October 31, 1997,
partnerships (the "Vornado/Crescent Partnerships") in which affiliates of the
Company have a 60% interest and affiliates of Crescent Real Estate Equities
Company have a 40% interest acquired each of AmeriCold Corporation ("Americold")
and URS Logistics, Inc. ("URS"). In June 1998, the Vornado/Crescent Partnerships
acquired the assets of Freezer Services, Inc. and in July 1998 acquired the
Carmar Group (Americold, URS, Freezer Services, Inc. and the Carmar Group,
collectively, the "Temperature Controlled Logistics Companies").
On March 11, 1999, the Vornado/Crescent Partnerships sold all of the
non-real estate assets of the Temperature Controlled Logistics Companies
encompassing the operations of the Temperature Controlled Logistics business for
approximately $48,700,000 to a new partnership owned 60% by Vornado Operating
and 40% by Crescent Operating Inc. (collectively "Americold Logistics"). The new
partnership leases the underlying Temperature Controlled Logistics
29
<PAGE> 33
warehouses used in this business from the Vornado/Crescent Partnerships which
continue to own the real estate. The leases generally 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 was approximately $134,000,000 for
the period from March 11, 1999 through December 31, 1999. The new partnership
has the right to defer a portion of the rent for up to three years beginning on
March 11, 1999 to the extent that available cash, as defined in the leases, is
insufficient to pay such rent and pursuant thereto, rent was deferred as of
December 31, 1999, of which the Company's share is $3,240,000.
Disposition and Acquisition of Interest in Charles E. Smith Commercial
Realty L.P. ("CESCR"). On December 31, 1998, the Company sold approximately
1.7% of the outstanding partnership units of CESCR (a Delaware limited
partnership) to Vornado Operating for an aggregate purchase price of
approximately $12,900,000, or $34 per unit. The purchase price was funded out of
Vornado Operating's working capital. After giving effect to this purchase, the
Company owned approximately 9.6% of CESCR as of December 31, 1998. In connection
with this purchase, the Company granted to Vornado Operating an option to
require the Company to repurchase all of the CESCR units at the price at which
Vornado Operating purchased the CESCR units, plus a cumulative return on such
amount at a rate of 10% per annum. The option was exercised on March 4, 1999.
Accordingly, the Company reacquired the CESCR units from Vornado Operating for
$13,200,000.
Transactions Involving Interstate and Alexander's
As of December 31, 1999, Interstate and its partners owned approximately
17.8% of the Shares of the Company and 27.3% of Alexander's common stock.
Interstate is a general partnership in which Steven Roth, David Mandel-
30
<PAGE> 34
baum and Russell B. Wight, Jr. are the three general partners. Mr. Roth is the
Chairman of the Board and Chief Executive Officer of the Company, the Managing
General Partner of Interstate, the Chairman of the Board and Chief Executive
Officer of Vornado Operating and the Chief Executive Officer and a director of
Alexander's. Mr. Mandelbaum and Mr. Wight are Trustees of the Company, and Mr.
Wight is a director of Vornado Operating.
The Company currently manages and leases the real estate assets of
Interstate pursuant to a management agreement for which the Company receives a
quarterly fee equal to 4% of base rent and percentage rent and certain other
commissions. The management agreement has a term of one year and is
automatically renewable unless terminated by either of the parties on sixty
days' notice at the end of the term. Although the management agreement was not
negotiated at arm's length, the Company believes, based upon comparable fees
charged by other real estate companies, that its terms are fair to the Company.
For the year ended December 31, 1999, $1,262,000 of management fees were earned
by the Company pursuant to the management agreement.
Between October 21, 1999 and April 5, 2000, the Company increased its
ownership in Alexander's from 29.3% to 33.1% by acquiring an additional 188,500
shares of Alexander's common stock. On October 20, 1999, the Company loaned
Alexander's an additional $50,000,000 on the same terms and conditions as the
Company's existing $45,000,000 loan to Alexander's. Both loans, which were
scheduled to mature on March 15, 2000, have been extended for one year to March
15, 2001. The interest rate has been reset from 14.18% to 15.72% per annum,
reflecting an increase in the underlying Treasury rate.
Alexander's is currently undertaking the excavation of, and laying the
foundation for, its Lexington Avenue property as part of the proposed
development of a large multi-use building. In connection therewith, Alexander's
purchased 140,000 square feet of development rights from the Company for
$12,200,000 (the Company's cost plus $243,000 in
31
<PAGE> 35
interest and closing costs). The development rights were contracted for and paid
for in 1999, with the closing scheduled to take place when the developments
which give rise to the development rights are completed in 2000.
Alexander's is managed by, and its properties are leased by, the Company,
pursuant to agreements with a one-year term which automatically renew.
The annual management fee payable to the Company by Alexander's is equal to
the sum of (i) $3,000,000, (ii) 3% of the gross income from the Kings Plaza Mall
($501,751 for the year ended December 31, 1999), plus (iii) 6% of development
costs with minimum guaranteed fees of $750,000 per annum.
The leasing agreement provides for the Company to generally receive a fee
of (i) 3% of sales proceeds and (ii) 3% of lease rent for the first ten years of
a lease term, 2% of lease rent for the eleventh through the twentieth years of a
lease term and 1% of lease rent for the twenty-first through thirtieth years of
a lease term. Subject to the payment of rents by Alexander's tenants, the
Company is due $1,756,000 at December 31, 1999. Such amount is receivable
annually in an amount not to exceed $2,500,000 until the present value of such
installments (calculated at a discount rate of 9% per annum) equals the amount
that would have been paid had it been paid on September 21, 1993, or at the time
the transactions which gave rise to the commissions occurred, if later.
On July 6, 1995, the Company assigned its management agreement with
Alexander's to Vornado Management Corp. ("VMC"), a New Jersey corporation. In
exchange, the Company received 100% of the nonvoting stock of VMC, which
entitles it to 95% of net operating cash flow distributed by VMC to its
shareholders. Steven Roth and Richard West, trustees of the Company, own all of
the voting stock of VMC. VMC is responsible for its pro rata share of
compensation and fringe benefits of common employees and 30% of other common
expenses.
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<PAGE> 36
Certain Other Transactions
In August 1999, the Company granted Allied Riser Communications Corporation
("Allied Riser") a non-exclusive right to install fiber-optic networks and to
provide broadband data, video and voice communications services in the Company's
office buildings in return for a share of revenues and warrants to purchase
Allied Riser common stock. Around the same time, the Company purchased six
shares of Allied Riser Series B Convertible Preferred Stock ("Allied Riser
Preferred Stock") for a price of $1 million per share and 712,865 shares of
Allied Riser common stock ("Allied Riser Common Stock") for a price of $.002 per
share and certain institutional investors unaffiliated with Allied Riser or the
Company purchased shares of Allied Riser Preferred Stock and Allied Riser Common
Stock at the same per share prices. Each share of Allied Riser Preferred Stock
was convertible into 55,556 shares of Allied Riser Common Stock. Concurrently
with the Company's purchase, the Company's disinterested Trustees concluded that
the Company should sell one-half of the shares of Allied Riser Preferred Stock
and Allied Riser Common Stock it had purchased to certain officers of the
Company for the same per share price. In reaching this conclusion, the
disinterested Trustees determined that the per share price to be paid by the
officers was appropriate based upon, among other factors, the fact that this
price was equal to the per share prices that the Company and certain
institutional investors had paid for shares at the same time, the illiquidity of
the shares and the significant risks inherent in the investment (offset to some
extent by the fact that Allied Riser was planning to go public in the fourth
quarter of 1999 and the possibility that the shares might be worth more than
their purchase price as a result thereof). Accordingly, within a few days of the
Company's purchase of the shares, the Company sold (i) one share of Allied Riser
Preferred Stock and 118,810 shares of Allied Riser Common Stock to each of
Steven Roth and Michael D. Fascitelli, (ii) 0.225 of one share of Allied Riser
Preferred Stock and 26,733 shares of Allied Riser Common Stock to each of Joseph
Macnow, David Greenbaum, Joseph Hakim and one other executive
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<PAGE> 37
officer or to trusts designated by them and (iii) 0.05 of one share of Allied
Riser Preferred Stock and 5,941 shares of Allied Riser Common Stock to each of
two non-executive officers of the Company.
During 1999, the Company paid $80,200 for legal services, in connection
with certiorari proceedings at its shopping centers, to the firm of Mandelbaum &
Mandelbaum, P.C., of which David Mandelbaum is a member. All or substantially
all of this amount is expected to be reimbursed to the Company by its tenants.
In addition, during 1999, the Company paid $100,828 for legal services to the
firm of Schechner and Targan, P.A., of which Ronald Targan is a member.
At December 31, 1999, the loan due from Mr. Roth in connection with his
stock option exercises was $13,122,500 ($4,705,000 of which is shown as a
reduction in shareholders' equity) bearing interest at 4.49% per annum (based on
the Applicable Federal Rate). During 1999, the Company amended Mr. Roth's loan
to (i) change the interest rate to the Applicable Federal Rate from a floating
rate equal to the broker call rate, and (ii) extend the maturity to January 2006
from December 2002. The Company also provided Mr. Roth with the right to draw up
to $15,000,000 of additional loans on a revolving basis. Each additional loan
will bear interest, payable quarterly, at the Applicable Federal Rate on the
date the loan is made and will mature on the sixth anniversary of the loan. Mr.
Roth's loan and any additional loans drawn under the arrangement described above
are secured by 1,500,000 Shares.
At December 31, 1999, a loan due from Mr. Macnow in connection with his
stock option exercises was $68,000. The loan bears interest at a rate equal to
the broker call rate (7.25% at December 31, 1999) but not less than the minimum
Applicable Federal Rate provided under the Internal Revenue Code.
At December 31, 1999, loans due from Mr. Fascitelli, in accordance with his
employment agreement, aggregated $7,600,000. The loans mature in 2003 and bear
interest,
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<PAGE> 38
payable quarterly, at a weighted average interest rate of 5.16% (based on the
Applicable Federal Rate).
During 1999, the Company made a loan to Mr. Greenbaum in the amount of
$1,000,000 in accordance with the terms of his employment contract. The loan has
a five-year term and bears interest, payable quarterly, at a weighted average
rate of 5.89% per annum (based on the mid-term Applicable Federal Rate provided
under the Internal Revenue Code). Mr. Greenbaum's loan is secured by 75,000
Class A Units of the Operating Partnership.
In connection with the Company's acquisition of (i) a 60% interest in three
partnerships which own the Temperature Controlled Logistics Companies, (ii) the
Hotel Pennsylvania, (iii) a 100% interest in a company that manages the trade
shows held at the Merchandise Mart and the Apparel Center in Chicago and the
Washington Design Center and the Washington Office Center in Washington, D.C.,
(iv) a retail cooperative, (v) the YMCA Development, (vi) a 30% interest in
various investments associated with the Newkirk investment, (vii) a 50% interest
in a healthcare management company, and (viii) a 50% interest in the Russian Tea
Room, preferred stock affiliates were formed. The Operating Partnership received
100% of the nonvoting stock of these preferred stock affiliates which entitles
it to 98% of the net operating cash flow distributed by the preferred stock
affiliates to their shareholders. Steven Roth, Chairman of the Board and Chief
Executive Officer of the Company, Michael D. Fascitelli, President and a Trustee
of the Company, and, in some cases, Joseph Macnow, Executive Vice
President -- Finance and Administration of the Company, purchased and own all of
the voting stock of these preferred stock affiliates which entitles them to the
remaining 2% of the net operating cash flow distributed by these preferred stock
affiliates.
35
<PAGE> 39
APPROVAL OF PROPOSAL TO AMEND
THE COMPANY'S OMNIBUS SHARE PLAN
The Board of Trustees is asking the shareholders to approve an amendment to
the 1993 Omnibus Share Plan of Vornado Realty Trust (the "Omnibus Share Plan" or
the "Plan") which would authorize the allocation of an additional 3,500,000
Shares to be reserved for issuance and sale under the Plan. The Omnibus Share
Plan was first approved by the shareholders of the Company on May 6, 1993 and
subsequently amended on June 2, 1999. Of the 21,500,000 Shares authorized under
the Plan, 8,203,227 Shares were available for issuance as of December 31, 1999
and 3,639,269 Shares were available for issuance as of April 5, 2000. The fair
market value of the Shares of the Company on April 20, 2000 was $34.5625 per
Share.
The purpose of the Omnibus Share Plan is to promote the financial interests
of the Company by encouraging its employees and the employees of its
subsidiaries to acquire an ownership position in the Company, enhancing its
ability to attract and retain employees of outstanding ability and providing
such employees with a way to acquire or increase their proprietary interest in
the Company's success. The Trustees and the Compensation Committee have
determined that it is in the best interest of the Company and the shareholders
to add an additional 3,500,000 Shares to the Plan to further promote the Plan's
objectives.
For additional information regarding options granted to executive officers,
see "Executive Compensation" above.
TERMS OF THE OMNIBUS SHARE PLAN
Under the Omnibus Share Plan, employees of the Company may be granted
awards of stock options, stock appreciation rights, performance shares and
restricted stock. The Omnibus Share Plan is administered by the Compensation
Committee which is authorized to select employees of the Company and its
subsidiaries to receive awards, determine the type of awards to be made,
determine the number of Shares or Share units subject to any award and the other
terms and conditions of such awards. All employees of the
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<PAGE> 40
Company and its subsidiaries who have demonstrated significant management
potential or who have the capacity for contributing in a substantial measure to
the successful performance of the Company, as determined by the Compensation
Committee, are eligible to receive awards under the Plan. As such criteria are
subjective in nature, the Company cannot accurately estimate the number of
persons who may be included in such class from time to time. Each officer of the
Company can be granted awards under the Omnibus Share Plan.
Except as determined by the Compensation Committee with respect to the
transferability of stock options by a participant to such participant's
immediate family members (or trusts, partnerships or limited liability companies
established for such immediate family members), the awards are not assignable or
transferable except by will or the laws of descent and distribution and no right
or interest of any participant may be subject to any lien, obligation or
liability of the holder.
Stock Options
Stock options entitle the holder to purchase the Company's Shares at a per
Share price determined by the Compensation Committee which in no event may be
less than the fair market value of the Shares on the date of grant. Options may
be either "incentive stock options" within the meaning of Section 422 of the
Internal Revenue Code or "nonqualified" stock options. Stock options are
exercisable for such period as is determined by the Compensation Committee, but
in no event may options be exercisable after 10 years from the date of grant.
The option price for Shares purchased upon the exercise of an option must be
paid in full at the time of exercise and may be paid in cash, by tender of
Shares, by such other consideration as the Compensation Committee deems
appropriate or by a combination of cash, Shares and such other consideration.
The Plan provides for the grant of "reload stock options", at the
discretion of the Committee, to a participant who uses Shares owned by the
participant to pay all or a
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part of the exercise price of a stock option (including a reload stock option).
A reload stock option will cover the number of Shares tendered in payment of the
exercise price and will have a per Share exercise price not less than the fair
market value of the Shares on the date of grant of the reload stock option.
Upon the grant or exercise of an incentive stock option, no income will be
recognized by the optionee for Federal income tax purposes, and the Company will
not be entitled to any deduction. If the Shares acquired upon exercise are not
disposed of within the one-year period beginning on the date of the transfer of
the Shares to the optionee, nor within the two-year period beginning on the date
of the grant of the option, any gain or loss realized by the optionee upon the
disposition of such shares will be taxed as long-term capital gain or loss. In
such event, no deduction will be allowed to the Company. If such Shares are
disposed of within the one-year or two-year periods referred to above, the
excess of the fair market value of the Shares on the date of exercise (or, if
less, the fair market value on the date of disposition) over the exercise price
will be taxable as ordinary income to the optionee at the time of disposition,
and the Company will be entitled to a corresponding deduction. The amount by
which the fair market value of the Shares at the time of exercise of an
incentive stock option exceeds the option price will constitute an item of tax
preference which could subject the optionee to the alternative minimum tax.
Whether the optionee will be subject to such tax depends on the facts and
circumstances applicable to the individual.
Upon the grant of a non-qualified option, no income will be realized by the
optionee, and the Company will not be entitled to any deduction. Upon the
exercise of such an option, the amount by which the fair market value of the
shares at the time of exercise exceeds the exercise price will be taxed as
ordinary income to the optionee and the Company will be entitled to a
corresponding deduction.
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Stock Appreciation Rights
Stock appreciation rights entitle the holder to receive from the Company an
amount equal to the amount by which the fair market value of a Share on the date
of exercise exceeds the grant price. Stock appreciation rights may be granted in
tandem with a stock option, in addition to a stock option or may be freestanding
and unrelated to a stock option and may not be exercised earlier than six months
after grant except in the event of the holder's death or disability. The
Compensation Committee is authorized to determine whether a stock appreciation
right will be settled in cash, Shares or a combination thereof.
Performance Shares
Performance share awards consist of a grant of actual Shares or Share units
having a value equal to an identical number of the Company's Shares in amounts
determined by the Compensation Committee at the time of grant. Performance share
awards consisting of actual Shares entitle the holder to receive Shares in an
amount based upon performance conditions of the Company over a performance
period as determined by the Compensation Committee at the time of grant. Such
performance share awards may provide the holder with dividends and voting rights
prior to vesting. Performance share awards consisting of Share units entitle the
holder to receive the value of such units in cash, shares or a combination
thereof based upon performance conditions and over a performance period as
determined by the Compensation Committee at the time of grant. Such performance
share awards may provide the holder with dividend equivalents prior to vesting.
Restricted Stock
Restricted stock awards consist of a grant of actual Shares or Share units
having a value equal to an identical number of Shares of the Company. Restricted
stock awards consisting of actual Shares entitle the holder to receive Shares of
the Company. Such restricted stock awards may provide the holder with dividends
and voting rights prior to
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vesting. Restricted stock awards consisting of Share units entitle the holder to
receive the value of such units in cash, Shares or a combination thereof as
determined by the Compensation Committee. Such restricted stock awards may
provide the holder with dividend equivalents prior to vesting. The employment
conditions and the length of the period for vesting of restricted stock awards
are established by the Compensation Committee at time of grant.
THE BOARD OF TRUSTEES UNANIMOUSLY RECOMMENDS A VOTE FOR THE PROPOSAL TO
AMEND THE COMPANY'S OMNIBUS SHARE PLAN. Proxies will be voted for the proposal
unless specified otherwise in the proxies. The affirmative vote of holders of
the majority of the outstanding Shares present, or represented by proxy, and
entitled to vote is required for approval of this proposal. Consequently,
abstentions will have the same effect as votes against the proposal and broker
non-votes will not be counted as Shares entitled to vote on the matter and will
have no effect on the result of the vote.
INFORMATION RESPECTING THE COMPANY'S
INDEPENDENT AUDITORS
The Board has retained Deloitte & Touche LLP to act as independent auditors
for the fiscal year ending December 31, 2000. The firm of Deloitte & Touche LLP
was engaged as independent auditors for the 1999 fiscal year, and
representatives of Deloitte & Touche LLP are expected to be present at the
Annual Meeting. They will have an opportunity to make a statement if they desire
to do so and will be available to respond to appropriate questions.
ADDITIONAL MATTERS TO COME BEFORE THE MEETING
The Board does not intend to present any other matter, nor does it have any
information that any other matter will be brought before the Annual Meeting.
However, if any other matter properly comes before the Annual Meeting, it is the
intention of the person named in the enclosed proxy to vote
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<PAGE> 44
said proxy in accordance with his discretion on such
matters.
ADVANCE NOTICE FOR SHAREHOLDER NOMINATIONS AND PROPOSALS OF NEW BUSINESS
In order for shareholder proposals otherwise satisfying the eligibility
requirements of Rule 14a-8 of the Securities Exchange Act of 1934 to be
considered for inclusion in the Company's Proxy Statement for the 2001 Annual
Meeting, the proposals must be received at the principal executive office of the
Company, Park 80 West, Plaza II, Saddle Brook, New Jersey 07663, Attention:
Secretary, on or before January 8, 2001.
In addition, if a shareholder desires to bring business (including trustee
nominations) before the 2001 Annual Meeting that is or is not the subject of a
proposal timely submitted for inclusion in the Company's Proxy Statement,
written notice of such business, as prescribed in the Bylaws, must be received
by the Company's Secretary between February 1, 2001 and March 3, 2001. For
additional requirements, a shareholder may refer to the Bylaws, a copy of which
may be obtained from the Company's Secretary. If the Company does not receive
timely notice pursuant to the Bylaws, the proposal may be excluded from
consideration at the meeting.
By Order of the Board of Trustees,
Larry Portal
Assistant Secretary
May 8, 2000
IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY. THEREFORE, SHAREHOLDERS ARE
URGED TO FILL IN, SIGN AND RETURN THE ACCOMPANYING PROXY IN THE ENCLOSED
ENVELOPE.
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[VORNADO LOGO]
Park 80 West, Plaza II, Saddle Brook, New Jersey 07663
<PAGE> 46
VORNADO REALTY TRUST
PROXY
The undersigned shareholder, revoking all prior proxies, hereby appoints
Steven Roth proxy, with full power of substitution, to attend, and to cast all
votes which the undersigned shareholder is entitled to cast at the Annual
Meeting of Shareholders of Vornado Realty Trust, a Maryland real estate
investment trust (the "Company"), to be held at the Marriott Hotel, Interstate
80 and the Garden State Parkway, Saddle Brook, New Jersey 07663 on Wednesday,
May 31, 2000 at 12:00 P.M., local time, upon any and all business as may
properly come before the meeting and all postponements or adjournments thereof.
Said proxy is authorized to vote as directed on the reverse side hereof upon the
proposals which are more fully set forth in the Proxy Statement and otherwise in
his discretion upon such other business as may properly come before the meeting
and all postponements or adjournments thereof, all as more fully set forth in
the Notice of Meeting and Proxy Statement, receipt of which is hereby
acknowledged.
THIS PROXY IS SOLICITED BY THE BOARD OF TRUSTEES OF THE COMPANY. WHEN
PROPERLY EXECUTED, THIS PROXY WILL BE VOTED IN THE MANNER DIRECTED BY THE
UNDERSIGNED SHAREHOLDER. IF THIS PROXY IS EXECUTED BUT NO DIRECTION IS MADE,
THIS PROXY WILL BE VOTED "FOR" THE ELECTION OF TRUSTEES, "FOR" THE AMENDMENT TO
THE COMPANY'S OMNIBUS SHARE PLAN AND OTHERWISE IN THE DISCRETION OF THE PROXY.
(Continued and to be Executed, on Reverse side)
<PAGE> 47
(Continued from other side)
<TABLE>
<S> <C>
1. ELECTION OF TRUSTEES:
The Board of Trustees recommends a Vote "FOR" Election of
the nominees for Trustees listed below.
[ ] FOR all nominees listed below
[ ] WITHHOLD AUTHORITY to vote for all nominees
Nominees: Steven Roth
Michael D. Fascitelli
Russell B. Wight, Jr.
(each for a term ending at the Annual Meeting of
Shareholders in 2003)
To withhold authority to vote for any individual nominee,
write that nominee's name in the space provided below.
------------------------------------------------------------
2. APPROVAL OF THE AMENDMENT TO THE COMPANY'S OMNIBUS SHARE
PLAN:
The Board of Trustees recommends a Vote "FOR" approval of
the Amendment to the Company's Omnibus Share Plan
FOR [ ] AGAINST [ ] ABSTAIN [ ]
</TABLE>
Address Change and/or Comments [
]
Please date and sign as your
name or names appear hereon.
Each joint owner must sign.
(Officers, Executors,
Administrators, Trustees, etc.,
will kindly so indicate when
signing.)
Dated
------------------------------------------------------------------------,
2000
--------------------------------
Signature(s) of Shareholder(s)
VOTES MUST BE INDICATED (X) IN
BLACK OR BLUE INK. [X]
PLEASE VOTE, DATE AND SIGN AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE.
