1
As filed with the Securities and Exchange Commission on April 30, 1997
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K
CURRENT REPORT PURSUANT
TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported) April 15, 1997
VORNADO REALTY TRUST
(Exact Name of Registrant as Specified in Its Charter)
Maryland
(State or Other Jurisdiction of Incorporation)
1-11954 22-1657560
(Commission File Number) (IRS Employer Identification No.)
Park 80 West, Plaza II, Saddle Brook, New Jersey 07663
(Address of Principal Executive Offices) (Zip Code)
(201) 587-1000
(Registrant's Telephone Number, Including Area Code)
N/A
(Former Name or Former Address, if Changed Since Last Report)
Page 1
Exhibit Index on Page 13
2
Item 1. Not Applicable.
Item 2. Acquisition or Disposition of Assets.
Mendik Transaction.
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On April 15, 1997, Vornado Realty Trust (the "Company"), a
real estate investment trust ("REIT") organized under the laws of the state of
Maryland, consummated the acquisition, through an operating partnership, of
interests in all or a portion of seven Manhattan office buildings (the "Mendik
Properties") and certain management and leasing assets held by the Mendik Group
(which means, as used herein, individually or collectively as the context may
require, Bernard H. Mendik, David R. Greenbaum and the entities controlled by
them, including Mendik Realty Company, Inc. and the subsidiaries and affiliates
of such entities) and certain of its affiliates (the "Mendik Transaction").
Simultaneously with the closing of the Mendik Transaction, and in connection
therewith, the Company converted to an Umbrella Partnership REIT (UPREIT) by
transferring (by contribution, merger or otherwise) all or substantially all of
the interests in its properties and other assets to The Mendik Company, L.P., a
Delaware limited partnership which has been renamed Vornado Realty L.P. (the
"Operating Partnership"), of which the Company is the sole general partner. As a
result of such conversion, the Company's activities will be conducted through
the Operating Partnership.
The consideration for the Mendik Transaction was approximately
$656 million, including $264 million in cash, $177 million in the limited
partnership units of the Operating Partnership and $215 million in indebtedness.
The Company financed the cash portion of the Mendik
Transaction by means of a public offering of Series A Convertible Preferred
Shares of Beneficial Interest, liquidation preference $50.00 per share.
In connection with the Mendik Transaction, Bernard Mendik, the
Chairman of the Board of Directors of Mendik Realty, has become Co-Chairman of
the Board of Trustees and Chief Executive Officer of the Mendik Division of the
Company. David Greenbaum has become President of the Mendik Division of the
Company. Steven Roth continues as the Company's Chairman and Chief Executive
Officer.
At any time after a holding period of one year (or two years
in the case of certain holders) following the consummation of the Mendik
Transaction, holders of limited partnership 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 Common Share of the Company for each Unit redeemed or, at the option of
the Company, one Common Share of the Company for each Unit tendered, subject to
customary anti-dilution provisions (the "Unit Redemption Right"). In addition to
the foregoing, during the period from the 91st day after the Mendik Transaction
until the first anniversary of the Mendik Transaction, holders of Class E Units
will have the right to have redeemed their Class E Units for cash at a 6%
discount from the fair market value at the time of the redemption of one Common
Share of the Company for each Unit redeemed. Beginning one year following the
consummation of the Mendik Transaction, holders of Units
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may be able to sell Common Shares received upon the exercise of their Unit
Redemption Right in the public market pursuant to a registration rights
agreement with the Company (a copy of which is attached hereto as an exhibit and
is incorporated herein by reference) or available exemptions from registration.
No prediction can be made about the effect that future sales of such Common
Shares will have on the market price for Common Shares.
For a more detailed description of the Mendik Transaction, see
the Company's Current Report on Form 8-K dated March 12, 1997 filed with the
Securities and Exchange Commission on March 26, 1997.
Items 3-4. Not Applicable.
Item 5. Other Events.
Term Loan.
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On April 15, 1997, the Operating Partnership, as borrower, the
Company, as guarantor, and Union Bank of Switzerland, New York Branch ("UBS")
entered into a Credit Agreement pursuant to which the Company borrowed
$400,000,000. The loan bears interest at the rate of LIBOR plus .625% and
matures, assuming exercise of extension options, on April 14, 1998. A copy of
the Credit Agreement is attached as an exhibit hereto and is incorporated herein
by reference.
Puerto Rico Transactions.
- -------------------------
On April 18, 1997, the Company announced that it acquired The
Montehiedra Town Center located in San Juan, Puerto Rico, from Kmart Corporation
("Kmart") for approximately $74 million, of which $63 million is newly-issued
ten year indebtedness. The Montehiedra shopping center, which opened in 1994,
contains 525,000 square feet, including a 135,000 square foot Kmart. In
addition, the Company agreed to acquire Kmart's 50% interest in the Caguas
Centrum Shopping Center, which is currently under construction, located in
Caguas, Puerto Rico. This acquisition is expected to close in 1998. A copy of
the Company's Press Release relating to this transaction is attached hereto as
an exhibit and is incorporated herein by reference.
Agreement to Purchase Mortgage.
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On April 21, 1997, Tier-TMC Corp., a New York corporation (the
"Purchaser"), entered into a Purchase Agreement (the "Purchase Agreement") with
a bank pursuant to which the Purchaser agreed to acquire from such bank a
mortgage loan secured by a mortgage on the office building located at 90 Park
Avenue, New York, New York. The Purchaser executed the Purchase Agreement as
nominee for the Company. The purchase price of the mortgage loan is $185
million. The mortgage loan, which is in default, has a face value of $193
million. The purchase is subject to approval by the loan participants and is
expected to be completed during the second quarter of 1997. A copy of the
Company's Press Release relating thereto is attached as an exhibit hereto and is
incorporated herein by reference.
Item 6. Not Applicable.
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Item 7. Financial Statements, Pro Forma Financial Information and
Exhibits.
(a) Financial Statements of Businesses Acquired.
Not Applicable. (Financial Statements for the Mendik
Properties were previously filed with the Company's Current Report on Form 8-K
dated March 12, 1997 filed with the Securities and Exchange Commission on March
26, 1997.)
(b) Pro Forma Financial Information. The following pro
forma financial statements of the Company reflecting the Mendik Transaction are
attached as Annex A:
Annex Financial Statements
A Condensed consolidated pro forma financial statements for the
Company for the year ended December 31, 1996
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(c) Exhibits Required by Item 601 of Regulation S-K.
Exhibit No. Exhibit
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2.1 Agreement for Contribution of Interests in 1740
Broadway Investment Company, dated as of April 15,
1997, by and among, The Mendik Company, L.P.,
Mendik 1740 Corp. and Certain Partners of 1740
Broadway Investment Company
2.2 Agreement for Contribution of Interests in Eleven
Penn Plaza Company, dated as of April 15, 1997, by
and among, The Mendik Company, L.P., The
Partners in M/F Associates, M/F Eleven Associates
and M/S Associates and M/S Eleven Associates and
Bernard H. Mendik
2.3 Agreement for Contribution of Interests in 866 UN
Plaza Associates LLC, dated as of April 15, 1997, by
and among, The Mendik Company, L.P., The
Members of 866 UN Plaza Associates LLC and
Bernard H. Mendik
2.4 Agreement for Contribution of Interests in M330
Associates, dated as of April 15, 1997, by and among, The
Mendik Company, L.P., The Partners in M330 Associates and
The Mendik Partnership, L.P.
2.5 Agreement for Contribution of Interests in 570
Lexington Investors, dated as of April 15, 1997, by
and among, The Mendik Company, L.P., Mendik
Realty Company and The Partners of 570 Lexington
Investors
2.6 Agreement for Contribution of Interests in B&B Park Avenue
L.P., dated as of April 15, 1997, by and among, The Mendik
Company, L.P., Mendik RELP Corporation and The Partners of
B&B Park Avenue L.P.
2.7 Agreement for Contribution of Interests in Two Penn
Plaza Associates L.P., dated as of April 15, 1997, by
and among, The Mendik Company, L.P., The
Partners of Two Penn Plaza Associates L.P. and
Bernard H. Mendik
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2.8 Contribution Agreement (Transfer of 99% of REIT Management
Assets from Mendik/FW LLC to the Operating Partnership),
dated as of April 15, 1997, between FW/Mendik REIT, L.L.C.
and The Mendik Company, L.P.
2.9 Assignment and Assumption Agreement (Transfer of 1%
Interest in REIT Management Assets and Third- Party
Management Assets from Mendik/FW LLC to the Management
Corporation), dated as of April 15, 1997, between
FW/Mendik REIT, L.L.C. and Mendik Management Company, Inc.
4.1 First Amended and Restated Agreement of Limited
Partnership of Vornado Realty L.P., dated as of April 15,
1997
10.1 Credit Agreement, dated as of April 15, 1997, between
Vornado Realty L.P., as Borrower, Vornado Realty Trust, as
General Partner and Union Bank of Switzerland (New York
Branch), as Bank and Union Bank of Switzerland (New York
Branch), as Administrative Agent
10.2 Registration Rights Agreement, dated as of April 15, 1997,
between Vornado Realty Trust and the holders of Units
listed on Schedule A thereto
10.3 Noncompetition Agreement, dated as of April 15, 1997, by
and among Vornado Realty Trust, The Mendik Company, L.P.,
and Bernard H. Mendik
10.4 Employment Agreement, dated as of April 15, 1997, by and
among Vornado Realty Trust, The Mendik Company, L.P., and
David R. Greenbaum
99.1 Press release, dated April 15, 1997, of Vornado Realty
Trust announcing its completion of the previously
announced combination with the Mendik Company and certain
of its affiliates
99.2 Press release, dated April 18, 1997, of Vornado Realty
Trust, announcing its acquisition of The Montehiedra Town
Center and its agreement to acquire a 50% interest in the
Caguas Centrum Shopping Center
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99.3 Press release, dated April 21, 1997, of Vornado Realty
Trust announcing its execution of an agreement to acquire
a mortgage note secured by 90 Park Avenue
Items 8-9. Not applicable.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
VORNADO REALTY TRUST
Dated: April 30, 1997 By: /s/ Joseph Macnow
-------------------
Joseph Macnow
Vice President --
Chief Financial Officer
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INDEX TO ANNEXES
Annex Financial Statements
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A Condensed consolidated pro forma financial statements for the
Company for the year ended December 31, 1996
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Annex A
CONDENSED CONSOLIDATED PRO FORMA FINANCIAL INFORMATION
The unaudited condensed consolidated pro forma financial information set
forth below presents (i) the condensed consolidated pro forma statement of
income for the Company for the year ended December 31, 1996 as if the Mendik
Transaction and certain related transactions were consummated and the offering
of Series A Preferred Shares of Beneficial Interest, liquidation preference
$50.00 per share (the "Offering") and the use of proceeds therefrom had occurred
on January 1, 1996 and (ii) the condensed consolidated pro forma balance sheet
of the Company as of December 31, 1996 as if the Mendik Transaction and certain
related transactions were consummated and the Offering and the use of proceeds
therefrom had occurred on December 31, 1996.
The unaudited condensed consolidated pro forma financial information is
not necessarily indicative of what the Company's actual results of operations
or financial position would have been had the Mendik Transaction and related
transactions been consummated and had the Offering and the use of proceeds
therefrom occurred on the dates indicated, nor does it purport to represent the
Company's results of operations or financial position for any future period.
The unaudited condensed consolidated pro forma financial information
should be read in conjunction with the Consolidated Financial Statements and
notes thereto included in the Company's Annual Report on Form 10-K for the year
ended December 31, 1996 and the financial statements of the significant
entities involved in the Mendik Transaction previously included in the
Company's Current Report on Form 8-K filed with the Commission on March 26,
1997. In management's opinion, all adjustments necessary to reflect the Mendik
Transaction and the related transactions and the Offering and the use of
proceeds therefrom have been made.
CONDENSED CONSOLIDATED PRO FORMA BALANCE SHEET
DECEMBER 31, 1996
(AMOUNTS IN THOUSANDS)
HISTORICAL HISTORICAL PRO FORMA PRO FORMA
VORNADO MENDIK ADJUSTMENTS COMPANY
---------- ----------- -------------- ------------
ASSETS:
Real estate, net $ 246,249 $ 187,433 $ 390,950 (A) $ 824,632
Cash and cash equivalents 117,245 50,654 (263,721) (A) 129,270
(50,908) (A)
276,000 (B)
Investment in and advances to
Alexander's, Inc. 107,628 107,628
Investment in partnerships 19,863 19,863
Investment in Management
Company 7,425 (A) 7,425
Officer's deferred compensation
expense 22,917 22,917
Mortgage note receivable 17,000 17,000
Receivable arising from straight-
lining of rents 17,052 42,219 (42,219) (A) 17,052
Other assets 37,113 42,855 (6,908) (A) 52,673
(17,718) (A)
(2,669) (C)
========= ========= =========== =============
$ 565,204 $ 343,024 $ 290,232 $ 1,198,460
========= ========= =========== =============
LIABILITIES:
Notes and mortgages payable $ 232,387 $ 283,847 $ (5,000) (A) $ 399,222
(112,012) (A)
Due for US Treasury Obligations 9,636 9,636
Deferred leasing fee income 8,373 8,373
Officer's deferred compensation
payable 25,000 25,000
Negative investment in partnership 5,399 (5,399) (A) -
Other liabilities 13,551 13,806 (314) (C) 27,043
--------- --------- ----------- ------------
288,947 303,052 (122,725) 469,274
--------- --------- ----------- ------------
Minority interests -- -- 176,929 (A) 176,929
--------- --------- ----------- ------------
PREFERRED SHAREHOLDERS' EQUITY 276,000 (B) 276,000
COMMON SHAREHOLDERS' EQUITY 276,257 39,972 (39,972) (A) 276,257
--------- --------- ----------- ------------
276,257 39,972 236,028 552,257
--------- --------- ----------- ------------
$ 565,204 $ 343,024 $ 290,232 $ 1,198,460
========= ========= =========== ============
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CONDENSED CONSOLIDATED PRO FORMA INCOME STATEMENT
FOR THE YEAR ENDED DECEMBER 31, 1996
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
HISTORICAL HISTORICAL PRO FORMA COMPANY
VORNADO MENDIK ADJUSTMENTS PRO FORMA
---------- ---------- ----------- ---------
REVENUES:
Property rentals $87,424 $87,261 $7,071 (E) $181,712
(44)(C)
Expense reimbursements 26,644 13,551 40,195
Other income 2,819 5,378 (5,378)(C) 2,819
------- ------- -------- -------
116,887 106,190 1,649 224,726
------- ------- -------- -------
EXPENSES:
Operating 36,412 46,691 (39)(C) 83,180
116 (H)
Depreciation and amortization 11,589 14,133 (144)(C) 35,559
9,981 (F)
General and administrative 5,167 6,783 (3,788)(C) 8,162
Amortization of officer's deferred compensation
expense 2,083 2,083
------- ------- -------- -------
55,251 67,607 6,126 128,984
------- ------- -------- -------
Operating income 61,636 38,583 (4,477) 95,742
Income applicable to Alexander's 7,956 7,956
Equity in net income of management companies 1,855 1,471 (C) 3,326
Equity in net income of investees 1,663 1,755 (I) 3,418
Interest income on mortgage note receivable 2,579 2,579
Interest and dividend income 3,151 2,536 (20)(C) 5,667
Interest and debt expense (16,726) (23,998) 9,016 (D) (31,708)
Net gain on marketable securities 913 913
Minority interest (10,372)(J) (10,372)
------- ------- -------- -------
Net income 61,364 18,784 (2,627) 77,521
Preferred stock dividends -- -- (19,800)(G) (19,800)
------- ------- -------- -------
Net income applicable to common shareholders $61,364 $18,784 ($22,427) $57,721
======= ======= ======== =======
Net income per share, based on 24,603,442 shares $2.49 $2.35
======= =======
OTHER DATA:
Funds from Operations (1):
Net income applicable to common shareholders $61,364 $18,784 ($22,427) $57,721
Depreciation and amortization of real property 10,583 14,133 9,837 34,553
Straight-lining of property rent escalations (2,676) (1,783) (7,071) (11,530)
Leasing fees received in excess of income
recognized 1,805 1,805
Proportionate share of adjustments to income
from equity investments to arrive at FFO (1,760) 2,747 (970) 17
------- ------- -------- -------
$69,316 $33,881 ($20,631) $82,566
======= ======= ======== =======
CASH FLOW PROVIDED BY (USED) IN:
Operating activities 70,703 29,267 9,407 109,377
Investing activities 14,912 (8,262) (328,638) (321,988)
Financing activities (15,046) (11,706) 270,209 243,457
- -----------
(1) 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. 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. The Company's definition of funds from
operations does not conform to the NAREIT definition because the Company
deducts the effect of the straight-lining of property rentals for rent
escalations.
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NOTES TO CONDENSED CONSOLIDATED PRO FORMA FINANCIAL STATEMENTS
(A) The Mendik acquisition will be recorded under "purchase accounting" applying
the provisions of Accounting Principles Board Opinion No. 16. The respective
purchase costs will be allocated to acquired assets and assumed liabilities
using their relative fair values as of the closing dates, based on
valuations and other studies which are not yet complete. Accordingly, the
excess of the purchase cost over the net assets acquired has not yet been
allocated to individual assets and liabilities. However, the Company
believes that the excess purchase price will be allocated principally to
real estate.
The purchase costs and preliminary allocation of the excess of cost over net
assets acquired is as follows: (in thousands)
Issuance of units of operating partnership $176,929
Cash paid directly associated with the Mendik acquisition:
Acquisition of partnership interest $109,508
Cash used to reduce existing debt 112,012
Acquisition of Mendik management operations 7,425
Fees and expenses 26,607
Other 8,169 263,721
-------- --------
Purchase Price 440,650
--------
Pro forma net book value of assets acquired:
Net book value of assets acquired per historical
financial statements 39,972
Write-off of deferred assets:
Receivable arising from the straight-lining of rents (42,219)
Tenant acquisition costs (6,908)
Deferred lease fees and loan costs (17,718)
Cash not acquired (50,908)
Cash used to reduce existing debt 112,012
Debt forgiven 5,000
Negative investment in partnerships 5,399
--------
Pro forma net book value of assets acquired 44,630
--------
Pro forma excess of purchase cost over net assets
acquired $396,020
========
Preliminary allocation of excess:
Allocated to Mendik management operations $5,070
Allocated to real estate 390,950
--------
$396,020
========
The total purchase price of $440,650 above excludes
the following:
Debt - wholly owned properties $166,262
- partially owned properties 49,279 215,541
--------
Purchase price, as above 440,650
--------
Total purchase price, including debt $656,191
========
(B) Reflects proceeds from issuance of $3.25 Series A Convertible Preferred
Offering of $287,500, net of underwriting discount of $11,500.
(C) To reflect adjustments required to record the Company's investment in the
Mendik management operations under the equity method of accounting.
(D) Reflects decrease in interest expense and loan cost amortization resulting
from the reduction and refinancing of debt.
(E) To adjust rentals arising from the straight-lining of property rentals for
rent escalations.
(F) Increase in depreciation due to preliminary allocation of purchase price.
(G) To reflect dividends at a rate of 6.50% plus amortization of the
underwriting discount on the proportionate number of Series A Preferred
Shares used to fund the acquisition.
(H) Increase in operating expenses due to contract changes.
(I) Increase in equity in investees, due to net decrease in interest expense on
refinanced debt.
(J) To reflect minority interest of 9.6% in the Operating Partnership.
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EXHIBIT INDEX
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Exhibit No. Exhibit
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2.1 Agreement for Contribution of Interests in 1740
Broadway Investment Company, dated as of April 15,
1997, by and among, The Mendik Company, L.P.,
Mendik 1740 Corp. and Certain Partners of 1740
Broadway Investment Company
2.2 Agreement for Contribution of Interests in Eleven
Penn Plaza Company, dated as of April 15, 1997, by
and among, The Mendik Company, L.P., The
Partners in M/F Associates, M/F Eleven Associates
and M/S Associates and M/S Eleven Associates and
Bernard H. Mendik
2.3 Agreement for Contribution of Interests in 866 UN
Plaza Associates LLC, dated as of April 15, 1997, by
and among, The Mendik Company, L.P., The
Members of 866 UN Plaza Associates LLC and
Bernard H. Mendik
2.4 Agreement for Contribution of Interests in M330
Associates, dated as of April 15, 1997, by and among, The
Mendik Company, L.P., The Partners in M330 Associates and
The Mendik Partnership, L.P.
2.5 Agreement for Contribution of Interests in 570
Lexington Investors, dated as of April 15, 1997, by
and among, The Mendik Company, L.P., Mendik
Realty Company and The Partners of 570 Lexington
Investors
2.6 Agreement for Contribution of Interests in B&B Park Avenue
L.P., dated as of April 15, 1997, by and among, The Mendik
Company, L.P., Mendik RELP Corporation and The Partners of
B&B Park Avenue L.P.
2.7 Agreement for Contribution of Interests in Two Penn
Plaza Associates L.P., dated as of April 15, 1997, by
and among, The Mendik Company, L.P., The
Partners of Two Penn Plaza Associates L.P. and
Bernard H. Mendik
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2.8 Contribution Agreement (Transfer of 99% of REIT Management
Assets from Mendik/FW LLC to the Operating Partnership),
dated as of April 15, 1997, between FW/Mendik REIT, L.L.C.
and The Mendik Company, L.P.
2.9 Assignment and Assumption Agreement (Transfer of 1%
Interest in REIT Management Assets and Third- Party
Management Assets from Mendik/FW LLC to the Management
Corporation), dated as of April 15, 1997, between
FW/Mendik REIT, L.L.C. and Mendik Management Company, Inc.
4.1 First Amended and Restated Agreement of Limited
Partnership of Vornado Realty L.P., dated as of April 15,
1997
10.1 Credit Agreement, dated as of April 15, 1997, between
Vornado Realty L.P., as Borrower, Vornado Realty Trust, as
General Partner and Union Bank of Switzerland (New York
Branch), as Bank and Union Bank of Switzerland (New York
Branch), as Administrative Agent
10.2 Registration Rights Agreement, dated as of April 15, 1997,
between Vornado Realty Trust and the holders of Units
listed on Schedule A thereto
10.3 Noncompetition Agreement, dated as of April 15, 1997, by
and among Vornado Realty Trust, The Mendik Company, L.P.,
and Bernard H. Mendik
10.4 Employment Agreement, dated as of April 15, 1997, by and
among Vornado Realty Trust, The Mendik Company, L.P., and
David R. Greenbaum
99.1 Press release, dated April 15, 1997, of Vornado Realty
Trust announcing its completion of the previously
announced combination with the Mendik Company and certain
of its affiliates
99.2 Press release, dated April 18, 1997, of Vornado Realty
Trust, announcing its acquisition of The Montehiedra Town
Center and its agreement to acquire a 50% interest in the
Caguas Centrum Shopping Center
99.3 Press release, dated April 21, 1997, of Vornado Realty
Trust announcing its execution of an agreement to acquire
a mortgage note secured by 90 Park Avenue