1
EXHIBIT INDEX ON PAGE 28
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[XX] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED: JUNE 30, 1999
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from___________________ to _________________________
Commission File Number: 000-22635
VORNADO REALTY L.P.
(Exact name of registrant as specified in its charter)
DELAWARE 13-3925979
(State or other jurisdiction of incorporation (I.R.S. Employer
or organization) Identification Number)
PARK 80 WEST, PLAZA II, SADDLE BROOK, NEW JERSEY 07663
(Address of principal executive offices) (Zip Code)
(201) 587-1000
(Registrant's telephone number, including area code)
N/A
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
[X] Yes [ ] No
Page 1
2
INDEX
PART I. FINANCIAL INFORMATION:
Item 1. Financial Statements: Page Number
Consolidated Balance Sheets as of June 30, 1999 and
December 31, 1998......................................................... 3
Consolidated Statements of Income for the Three and Six Months
Ended June 30, 1999 and June 30, 1998..................................... 4
Consolidated Statements of Cash Flows for the Six Months
Ended June 30, 1999 and June 30, 1998..................................... 5
Notes to Consolidated Financial Statements................................ 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations................................................. 15
Item 3. Quantitative and Qualitative Disclosures About Market Risks............... 25
PART II. OTHER INFORMATION:
Item 1. Legal Proceedings......................................................... 26
Item 6. Exhibits and Reports on Form 8-K.......................................... 26
Signatures .......................................................................... 27
Exhibit Index ......................................................................... 28
Page 2
3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
VORNADO REALTY L.P.
CONSOLIDATED BALANCE SHEETS
(amounts in thousands except unit amounts)
JUNE 30, DECEMBER 31,
1999 1998
---- ----
ASSETS
Real estate, at cost:
Land .......................................... $ 754,822 $ 743,324
Buildings and improvements .................... 2,734,556 2,561,383
Leasehold improvements and
equipment ................................. 12,884 11,184
----------- -----------
Total ............................... 3,502,262 3,315,891
Less accumulated depreciation and
amortization .............................. (264,063) (226,816)
----------- -----------
Real estate, net .............................. 3,238,199 3,089,075
Cash and cash equivalents, including U.S. ..........
government obligations under repurchase
agreements of $27,750 and $56,500 ............. 61,514 167,808
Restricted cash .................................... 19,647 44,195
Marketable securities .............................. 77,983 77,156
Investments and advances to partially-owned
entities, including Alexander's of
$101,835 and $104,038 ......................... 1,166,034 827,840
Due from officers .................................. 17,797 17,165
Accounts receivable, net of allowance for
doubtful accounts of $4,936 and $3,044 ........ 32,714 35,517
Notes and mortgages receivable ..................... 57,281 10,683
Deposits in connection with real estate acquisitions 16,276 22,947
Receivable arising from the straight-lining of
rents ......................................... 65,104 49,711
Other assets ....................................... 113,883 83,682
----------- -----------
TOTAL ASSETS ....................................... $ 4,866,432 $ 4,425,779
=========== ===========
JUNE 30, DECEMBER 31,
1999 1998
---- ----
LIABILITIES AND PARTNERS' CAPITAL
Notes and mortgages payable ....................... $ 1,497,260 $ 1,363,750
Revolving credit facility ......................... 467,250 687,250
Accounts payable and accrued expenses ............. 92,151 109,925
Officer's deferred compensation payable ........... 36,395 35,628
Deferred leasing fee income ....................... 8,594 10,051
Other liabilities ................................. 3,855 3,196
----------- -----------
2,105,505 2,209,800
----------- -----------
Minority interest ................................. 13,943 12,925
----------- -----------
Commitments and contingencies
Partners' capital:
Preferred units:
no par value per unit; authorized,
20,000,000 units;
Series A: liquidation preference $50.00
per unit; issued 5,789,239 units ....... 284,195 282,758
Series B: liquidation preference $25.00
per unit; issued 3,400,000 units ....... 82,011 --
Series C: liquidation preference $25.00
per unit; issued 4,600,000 units ....... 111,271 --
General partner units:
Issued and outstanding 85,924,934
and 85,076,542 units ................... 1,686,433 1,656,611
Limited partnership units:
Issued and outstanding 18,655,216
and 12,351,736 units ................... 725,910 420,376
Accumulated deficit ......................... (120,408) (132,837)
----------- -----------
2,769,412 2,226,908
Accumulated other comprehensive loss ........ (17,604) (18,957)
Due from officers for purchase of units ..... (4,824) (4,897)
----------- -----------
Total partners' capital ........... 2,746,984 2,203,054
----------- -----------
TOTAL LIABILITIES AND
PARTNERS' CAPITAL ......................... $ 4,866,432 $ 4,425,779
=========== ===========
See notes to consolidated financial statements.
Page 3
4
VORNADO REALTY L.P.
CONSOLIDATED STATEMENTS OF INCOME
(amounts in thousands except per unit amounts)
FOR THE THREE MONTHS ENDED FOR THE SIX MONTHS ENDED
JUNE 30 JUNE 30
------- -------
1999 1998 1999 1998
---- ---- ---- ----
Revenues:
Property rentals ........................ $ 141,724 $ 109,362 $ 279,883 $ 181,727
Expense reimbursements .................. 21,143 17,094 41,871 32,790
Other income (including fee income
from related parties of $349 and $777
in each three month period and $814
and $1,185 in each six month period) .. 3,321 2,067 7,998 4,217
--------- --------- --------- ---------
Total revenues ............................. 166,188 128,523 329,752 218,734
--------- --------- --------- ---------
Expenses:
Operating ............................... 65,925 51,454 130,962 85,607
Depreciation and amortization ........... 19,585 15,029 38,877 25,395
General and administrative .............. 10,169 7,070 19,797 12,017
--------- --------- --------- ---------
Total expenses ............................. 95,679 73,553 189,636 123,019
--------- --------- --------- ---------
Operating income ........................... 70,509 54,970 140,116 95,715
Income applicable to Alexander's ........... 1,839 1,490 3,341 3,146
Income from partially owned entities ....... 21,925 5,756 41,018 9,676
Interest and other investment income ....... 4,900 5,271 8,358 12,837
Interest and debt expense .................. (35,284) (26,679) (70,901) (46,502)
Minority interest .......................... (529) -- (1,014) --
--------- --------- --------- ---------
Net income ................................. 63,360 40,808 120,918 74,872
Preferred unit distributions (including
accretion of issuance expenses of $719 and
$1,438 in each three and six month period).. (8,381) (5,422) (14,093) (10,845)
Preferential allocations ................... (11,334) (4,492) (19,964) (7,069)
--------- --------- --------- ---------
Net income applicable to general partner
units ................................... $ 43,645 $ 30,894 $ 86,861 $ 56,958
========= ========= ========= =========
See notes to consolidated financial statements.
Page 4
5
VORNADO REALTY L.P.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(amounts in thousands)
For The Six Months Ended June 30,
---------------------------------
1999 1998
---- ----
Cash Flows From Operating Activities:
Net income ....................................................... $ 120,918 $ 74,872
Adjustments to reconcile net income to net
cash provided by operations:
Depreciation and amortization (including debt issuance costs) 38,877 26,834
Straight-lining of rental income ............................ (15,393) (6,414)
Minority interest ........................................... 1,014 --
Equity in income of Alexander's,
including depreciation of $300 in each period ............. (816) (297)
Equity in net income of partially-owned entities ............ (41,018) (9,676)
Gain on marketable securities ............................... (382) (1,447)
Changes in operating assets and liabilities ...................... (16,404) (1,661)
----------- -----------
Net cash provided by operating activities ........................ 86,796 82,211
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisitions of real estate and other ............................ (45,000) (681,387)
Investments in partially-owned entities .......................... (13,200) (165,633)
Proceeds from sale of Cold Storage assets ........................ 22,769 --
Investment in notes and mortgages receivable ..................... (60,567) (2,875)
Repayment of mortgage loans receivable ........................... 19,367 57,663
Cash restricted for tenant improvements .......................... 24,548 590
Additions to real estate ......................................... (86,731) (47,450)
Purchases of securities available for sale ....................... (3,939) (22,420)
Proceeds from sale or maturity of securities available for sale .. 6,992 14,903
Real estate deposits and other ................................... (6,559) (133,072)
----------- -----------
Net cash used in investing activities ............................ (142,320) (979,681)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from borrowings ......................................... 165,000 1,295,855
Repayments of borrowings ......................................... (306,490) (863,258)
Debt issuance costs .............................................. (3,504) (6,533)
Proceeds from issuance of general partner units................... -- 445,282
Proceeds from issuance of preferred units ........................ 193,282 --
Preferential allocations ......................................... (12,226) (2,577)
General partner unit distributions................................ (74,432) (58,893)
Preferred unit distributions ..................................... (12,655) (10,845)
Exercise of options .............................................. 255 69
----------- -----------
Net cash (used in) provided by financing activities .............. (50,770) 799,100
----------- -----------
Net decrease in cash and cash equivalents ........................ (106,294) (98,370)
Cash and cash equivalents at beginning of period ................. 167,808 355,954
----------- -----------
Cash and cash equivalents at end of period ....................... $ 61,514 $ 257,584
=========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash payments for interest (including capitalized interest of
$1,410 in 1999) ............................................... $ 69,222 $ 43,370
NON-CASH TRANSACTIONS:
Financing assumed in acquisitions ................................ $ 55,000 $ 420,000
Limited partnership units issued in connection with acquisitions . 297,800 116,398
Unrealized gain on securities available for sale ................. 1,353 3,304
See notes to consolidated financial statements.
Page 5
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VORNADO REALTY L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION
Vornado Realty L.P. (the "Operating Partnership", including the operations
of Vornado Realty Trust prior to the conversion described below) is a Delaware
limited partnership. Operations commenced on April 15, 1997 when Vornado Realty
Trust ("Vornado"), a fully-integrated real estate investment trust ("REIT"),
converted to an Umbrella Partnership REIT ("UPREIT") by transferring
substantially all of its assets to the Operating Partnership. As a result,
Vornado conducts its business through the Operating Partnership. Vornado is the
sole general partner of, and owned approximately 86% of the common limited
partnership interest in, the Operating Partnership at July 16, 1999. All
references to the "Company" refer to Vornado and its consolidated subsidiaries,
including the Operating Partnership.
2. BASIS OF PRESENTATION
The consolidated balance sheet as of June 30, 1999, the consolidated
statements of income for the three and six months ended June 30, 1999 and 1998
and the consolidated statements of changes in cash flows for the six months
ended June 30, 1999 and 1998 are unaudited. In the opinion of management, all
adjustments (which include only normal recurring adjustments) necessary to
present fairly the financial position, results of operations and changes in cash
flows have been made. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted. These condensed
consolidated financial statements should be read in conjunction with the
financial statements and notes thereto included in the Operating Partnership's
consolidated Form 10-K for the year ended December 31, 1998 as filed with the
Securities and Exchange Commission. The results of operations for the six months
ended June 30, 1999 are not necessarily indicative of the operating results for
the full year.
The accompanying consolidated financial statements include the accounts of
Vornado Realty L.P., as well as equity interests acquired that individually (or
in the aggregate with prior interests) exceed a 50% interest and the Company
exercises unilateral control. All significant intercompany amounts have been
eliminated. Equity interests in partially-owned entities include partnerships,
joint ventures and preferred stock affiliates (corporations in which the Company
owns all of the preferred stock and none of the common equity) and are accounted
for under the equity method of accounting as the Company exercises significant
influence. These investments are recorded initially at cost and subsequently
adjusted for net equity in income (loss) and cash contributions and
distributions. Ownership of the preferred stock entitles the Company to
substantially all of the economic benefits in the preferred stock affiliates.
The common stock of the preferred stock affiliates is owned by Officers and
Trustees of Vornado.
Management has made estimates and assumptions that affect the reported
amounts of assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting periods.
Actual results could differ from those estimates.
Certain amounts in the prior year's financial statements have been
reclassified to conform to the current year presentation.
3. ACQUISITIONS AND FINANCINGS
ACQUISITIONS
888 Seventh Avenue
In January 1999, the Company completed the acquisition of 888 Seventh
Avenue, a 46 story Manhattan office building for approximately $100,000,000.
Newkirk Joint Ventures
In March 1999, the Company and its joint venture partner completed the
acquisition of additional equity interests in certain limited partnerships. The
Company's additional investment of $52,435,000 consisted of $47,790,000 in
Operating Partnership Units and $4,645,000 in cash.
Page 6
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VORNADO REALTY L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
Charles E. Smith Commercial Realty L.P. ("CESCR")
In March 1999, the Company made an additional $242,000,000 investment in
CESCR by contributing to CESCR the land under certain CESCR office properties in
Crystal City, Arlington, Virginia and partnership interests in certain CESCR
subsidiaries. The Company acquired these assets from Commonwealth Atlantic
Properties, Inc. ("CAPI"), an affiliate of Lazard Freres Real Estate Investors
L.L.C., immediately prior to the contribution to CESCR. Together with the
Company's investment in CESCR made in 1997 and the units it reacquired in March
1999 from Vornado Operating Company, the Company owns approximately 34% of
CESCR's limited partnership units. In addition, the Company acquired from CAPI
for $8,000,000 the land under a Marriott Hotel located in Crystal City.
The purchase price was paid to CAPI by the Company issuing $250,000,000 of
6% Convertible Preferred Units of the Operating Partnership. The Preferred Units
are convertible at $44 per unit and the coupon increases to 6.50% over the next
three years and then fixes at 6.75% in year eight. The Company has the right to
appoint one of three members to CESCR's Board of Managers, increasing under
certain circumstances to two of four members in March 2002.
In connection with these transactions, the Company made a five-year
$41,000,000 loan to CAPI with interest at 8%, increasing to 9% ratably over the
term. The loan is secured by approximately $55,000,000 of the Operating
Partnership's units issued to CAPI as well as certain real estate assets.
FINANCINGS
Two Penn Plaza Refinancing
In February 1999, the Company completed a $165,000,000 refinancing of its
Two Penn Plaza office building and prepaid the then existing $80,000,000 debt on
the property. The new 5-year debt matures in February 2004 and bears interest at
7.08%.
Offering of Preferred Shares
In March 1999, Vornado completed the sale of 3 million 8.5% Series B
Cumulative Redeemable Preferred Shares, at a price of $25.00 per share, pursuant
to an effective registration statement with net proceeds to the Company of
approximately $72,200,000. Additionally in March 1999, 400,000 shares were sold
when the underwriters exercised their over-allotment option resulting in
additional net proceeds to the Company of $9,700,000. The perpetual preferred
shares may be called without penalty at the option of the Company commencing on
March 17, 2004.
In May 1999, Vornado completed the sale of 4 million 8.5% Series C
Cumulative Redeemable Preferred Shares, at a price of $25.00 per share, pursuant
to an effective registration statement with net proceeds to the Company of
approximately $96,900,000. Additionally in May 1999, 600,000 shares were sold
when the underwriters exercised their over-allotment option resulting in
additional net proceeds to the Company of $14,500,000. The perpetual preferred
shares may be called without penalty at the option of the Company commencing on
May 17, 2004.
In May 1999, the Company sold an aggregate of $27,500,000 of 8.375% Series
D-2 Cumulative Redeemable Preferred Units in the Operating Partnership to an
institutional investor in a private placement, resulting in net proceeds of
approximately $27,467,000. The perpetual Preferred Units may be called without
penalty at the option of the Operating Partnership commencing on May 27, 2004.
Page 7
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VORNADO REALTY L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
PRO FORMA INFORMATION
The pro forma condensed consolidated operating results for the Company for
the six months ended June 30, 1999 and 1998 are presented as if the acquisitions
described above and those included in Investments and Advances to
Partially-Owned Entities and the financings attributable thereto had occurred on
January 1, 1998.
Condensed Consolidated Pro Forma Operating Results
Pro Forma
---------
Six Months Ended June 30,
-------------------------
1999 1998
---- ----
(amounts in thousands)
Revenues ..................................... $ 330,907 $ 314,444
========= =========
Net income ................................... $ 127,172 $ 95,820
Preferred unit distributions ................. (14,093) (10,845)
Preferential allocations ..................... (23,724) (18,014)
--------- ---------
Net income applicable to general partner units $ 89,355 $ 66,961
========= =========
4. INVESTMENTS AND ADVANCES TO PARTIALLY-OWNED ENTITIES
The Company's investments and advances to partially-owned entities and
income recognized from such investments are as follows:
Investments and Advances
June 30, 1999 December 31, 1998
------------- -----------------
(amounts in thousands)
Alexander's ........................... $ 101,835 $ 104,038
Cold Storage Companies ................ 457,296 459,172
CESCR ................................. 316,942 49,151
Hotel Pennsylvania .................... 50,933 47,813
Newkirk Joint Ventures ................ 114,971 58,665
Mendik Partially-Owned Office Buildings 59,051 59,902
Vornado Management Corp., Mendik
Management Company, Merchandise
Mart Properties, Inc. and other .. 65,006 49,099
---------- ----------
$1,166,034 $ 827,840
========== ==========
Page 8
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VORNADO REALTY L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
Income
Three Months Ended Six Months Ended
June 30, June 30,
-------- --------
1999 1998 1999 1998
---- ---- ---- ----
(amounts in thousands)
Income Applicable to Alexander's ...... $ 1,839 $ 1,490 $ 3,341 $ 3,146
======= ======= ======= =======
Other Partially-Owned Entities:
Cold Storage Companies .............. $ 8,506 $ 1,450 $20,496 $ 3,164
CESCR ............................... 6,072 1,352 9,201 2,351
Hotel Pennsylvania .................. 2,425 1,445 2,568 1,389
Newkirk Joint Ventures .............. 3,277 -- 5,309 --
Mendik Partially-Owned Office Buildings 433 409 750 1,322
Vornado Management Corp., Mendik
Management Company,
Merchandise Mart Properties
Inc. and other ................. 1,212 1,100 2,694 1,450
------- ------- ------- -------
$21,925 $ 5,756 $41,018 $ 9,676
======= ======= ======= =======
Alexander's
The Company owns 29.3% of the outstanding shares of common stock of
Alexander's. In March 1995, the Company lent Alexander's $45,000,000. The loan,
which was originally scheduled to mature in March 1998, has been renewed for two
additional one year periods and currently matures in March 2000. The interest
rate was reset in March 1999 from 13.87% per annum to 14.18% per annum.
Alexander's is managed by and its properties are leased by the Company,
pursuant to agreements with a one-year term expiring in March of each year which
are automatically renewable. Subject to the payments of rents by Alexander's
tenants, the Company is due $2,896,000 under its leasing agreement with
Alexander's which amount is included in Investments in and Advances to
Alexander's. Included in income from Vornado Management Corp. is management fee
income from Alexander's of $1,072,000 and $938,000 for the three months ended
June 30, 1999 and 1998 and $2,214,000 and $1,875,000 for the six months ended
June 30, 1999 and 1998.
Cold Storage Companies
In March 1999, the partnerships in which affiliates of the Company have a
60% interest and affiliates of Crescent Real Estate Equities Company have a 40%
interest ("Vornado/Crescent Partnerships") sold all of the non-real estate
assets of the Cold Storage Companies encompassing the operations of the cold
storage business for approximately $48,000,000 to a new partnership owned 60% by
Vornado Operating Company and 40% by Crescent Operating Inc. The new partnership
leases the underlying cold storage warehouses used in this business from the
Vornado/Crescent Partnerships which continue to own the real estate. The leases
have a 15-year term with two five-year renewal options and provide for the
payment of fixed base rent and percentage rent based on customer revenues. The
new partnership is required to pay for all costs arising from the operation,
maintenance and repair of the properties, as well as property capital
expenditures in excess of $5,000,000 annually. Fixed base rent and percentage
rent for the initial lease year is projected to be approximately $151,000,000.
The new partnership has the right to defer a portion of the rent for up to three
years beginning in March 1999 to the extent that available cash, as defined in
the leases, is insufficient to pay such rent.
Page 9
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VORNADO REALTY L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
In connection with the sale of the Cold Storage non-real estate assets,
the Company lent $18,587,000 to Vornado Operating pursuant to a $75,000,000
unsecured five-year revolving credit facility. The balance outstanding under the
facility is $4,587,000 at June 30, 1999. Borrowing under the facility bears
interest at LIBOR plus 3% (currently 8.06%).
5. OTHER RELATED PARTY TRANSACTIONS
The Company currently manages and leases the real estate assets of
Interstate Properties pursuant to a management agreement. Management fees earned
by the Company pursuant to the management agreement were $195,000 and $574,000
for the three months ended June 30, 1999 and 1998 and $465,000 and $772,000 for
the six months ended June 30, 1999 and 1998.
The Mendik Group owns an entity which provides cleaning and related
services and security services to office properties, including the Company's
Manhattan office properties. The Company was charged fees in connection with
these contracts of $8,286,000 and $5,957,000 for the three months ended June 30,
1999 and 1998 and $19,297,000 and $11,224,000 for the six months ended June 30,
1999 and 1998.
6. PREFERENTIAL ALLOCATIONS
The preferential allocations represent limited partners', other than
Vornado, interests in the Operating Partnership and are comprised of:
Unit Series Outstanding Units at Preferred
Per Unit or Annual Conversion
June 30, December 31, Liquidation Distribution Rate Into
1999 1998 Preference Rate Class A Units
---- ---- ---------- ---- -------------
Class A............................. 2,664,399 1,887,781 -- $ 1.76 (a)
Class C............................. 3,529,098 3,534,098 -- $ 1.69 (b) 1.0 (c)
Class D............................. 1,267,122 1,332,596 -- $ 2.015 1.0 (d)
5.0% B-1 Convertible Preferred...... 899,566 899,566 $ 50.00 $ 2.50 .914
8.0% B-2 Convertible Preferred...... 499,783 449,783 $ 50.00 $ 4.00 .914
6.5% C-1 Convertible Preferred...... 747,912 747,912 $ 50.00 $ 3.25 1.1431
8.5% D-1 Cumulative Redeemable Preferred 3,500,000 3,500,000 $ 25.00 $ 2.125 (e)
8.375% D-2 Cumulative Redeemable Preferred 549,336 -- $ 50.00 $ 4.1875 (e)
6.0% E-1 Convertible Preferred...... 4,998,000 -- $ 50.00 $ 3.00 1.1364
(a) Class A units are redeemable at the option of the holder for cash or, at
Vornado's option, one common share of beneficial interest in Vornado.
(b) Class C unit holders participate in distributions at an annual rate of
$1.69, then pari passu with Class A. Based on the current level of
dividends, Class C units will convert into Class A units in the third
quarter of 1999.
(c) Mandatory conversion of Class C units into Class A units occurs after four
consecutive quarters of distributions of at least $.4225 per Class A unit
($1.69 annually).
(d) Mandatory conversion of Class D units into Class A units occurs after four
consecutive quarters of distributions of at least $.50375 per Class A unit
($2.015 annually).
(e) Convertible into an equivalent Vornado preferred share.
Page 10
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VORNADO REALTY L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
7. CONTINGENCIES
At June 30, 1999, in addition to the $467,250,000 balance outstanding
under the Company's revolving credit facility, the Company had utilized
approximately $40,415,000 of availability under the facility for letters of
credit and guarantees primarily related to pending acquisitions.
There are various legal actions against the Company in the ordinary course
of business. In the opinion of management, after consultation with legal
counsel, the outcome of such matters will not have a material effect on the
Company's financial condition, results of operations or cash flows.
8. COMPREHENSIVE INCOME
The following table sets forth the Company's comprehensive income:
Three Months Ended June 30, Six Months Ended June 30,
--------------------------- -------------------------
1999 1998 1999 1998
---- ---- ---- ----
(amounts in thousands)
Net income applicable to general partner units. $ 43,645 $ 30,894 $ 86,861 $ 56,958
Other comprehensive income..................... 2,378 1,753 1,353 3,304
----------- ----------- ----------- -----------
Comprehensive income........................... $ 46,023 $ 32,647 $ 88,214 $ 60,262
=========== =========== =========== ===========
Page 11
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VORNADO REALTY L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
9. SEGMENT INFORMATION
The Company has four business segments: Office, Retail, Merchandise Mart
Properties and Cold Storage.
(amounts in thousands)
Three Months Ended June 30,
---------------------------
1999
----
Merchandise
Office Retail Mart Cold Storage Other(2) Total
------ ------ ---- ------------ -------- -----
Total revenues ..................... $ 87,876 $ 43,009 $ 33,367 $-- $ 1,936 $ 166,188
Total expenses ..................... 52,313 17,884 17,853 -- 7,629 95,679
--------- --------- --------- ---- --------- ---------
Operating income ................... 35,563 25,125 15,514 -- (5,693) 70,509
Income applicable to Alexander's ...
-- -- -- -- 1,839 1,839
Income from partially-owned
entities ........................... 6,617 223 728 8,506 5,851 21,925
Interest and other investment income
318 -- 69 -- 4,513 4,900
Interest and debt expense .......... (11,778) (8,085) (6,869) -- (8,552) (35,284)
Minority interest .................. (529) -- -- -- -- (529)
--------- --------- --------- --------- --------- ---------
Net income ......................... 30,191 17,263 9,442 8,506 (2,042) 63,360
Minority interest .................. 529 -- -- -- -- 529
Interest and debt expense(4) ...... 22,101 8,740 6,869 6,893 14,735 59,338
Depreciation and amortization(4)
14,693 4,252 4,105 7,615 2,027 32,692
Straight-lining of rents(4) ........ (4,902) (682) (1,172) (627) (273) (7,656)
Other .............................. -- -- -- 1,114(3) 1,641 2,755
--------- --------- --------- --------- --------- ---------
EBITDA(1) .......................... $ 62,612 $ 29,573 $ 19,244 $ 23,501 $ 16,088 $ 151,018
========= ========= ========= ========= ========= =========
Three Months Ended June 30,
---------------------------
1998
----
Merchandise Cold
Office Retail Mart Storage Other(2) Total
------ ------ ---- ------- -------- -----
Total revenues ..................... $ 56,870 $ 40,973 $ 28,310 $ -- $ 2,370 $ 128,523
Total expenses ..................... 35,045 16,679 16,452 -- 5,377 73,553
--------- --------- --------- --------- --------- ---------
Operating income ................... 21,825 24,294 11,858 -- (3,007) 54,970
Income applicable to Alexander's ... -- -- -- -- 1,490 1,490
Income from partially-owned entities 1,767 -- 948 1,450 1,591 5,756
Interest and other investment income 1,429 1,003 321 -- 2,518 5,271
Interest and debt expense .......... (4,689) (8,101) (6,412) -- (7,477) (26,679)
Minority interest .................. -- -- -- -- -- --
--------- --------- --------- --------- --------- ---------
Net income ......................... 20,332 17,196 6,715 1,450 (4,885) 40,808
Minority interest .................. -- -- -- -- -- --
Interest and debt expense(4) ...... 8,992 8,101 6,412 6,336 8,911 38,752
Depreciation and amortization(4) ... 9,778 3,802 3,226 8,303 1,455 26,564
Straight-lining of rents(4) ........ (2,056) (721) (1,283) -- (259) (4,319)
Other .............................. -- -- -- 1,786 625 2,411
--------- --------- --------- --------- --------- ---------
EBITDA(1) .......................... $ 37,046 $ 28,378 $ 15,070 $ 17,875 $ 5,847 $ 104,216
========= ========= ========= ========= ========= =========
See footnotes 1-4 on page 14.
Page 12
13
VORNADO REALTY L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(amounts in thousands)
Six Months Ended June 30,
-------------------------
1999
----
Merchandise
Office Retail Mart Cold Storage Other(2) Total
------ ------ ---- ------------ -------- -----
Total revenues ................. $ 175,152 $ 84,366 $ 66,355 $ -- $ 3,879 $ 329,752
Total expenses ................. 103,797 35,041 36,355 -- 14,443 189,636
--------- --------- --------- --------- --------- ---------
Operating income ............... 71,355 49,325 30,000 -- (10,564) 140,116
Income applicable to Alexander's -- -- -- -- 3,341 3,341
Income from partially-owned
entities ....................... 10,024 423 1,904 20,496 8,171 41,018
Interest and other investment
income ......................... 856 -- 367 -- 7,135 8,358
Interest and debt expense ...... (22,259) (16,117) (13,165) -- (19,360) (70,901)
Minority interest .............. (1,014) -- -- -- -- (1,014)
--------- --------- --------- --------- --------- ---------
Net income ..................... 58,962 33,631 19,106 20,496 (11,277) 120,918
Minority interest .............. 1,014 -- -- -- -- 1,014
Interest and debt expense(4) .. 36,706 17,429 13,165 13,558 28,179 109,037
Depreciation and amortization(4) 27,977 8,384 8,178 16,012 3,859 64,410
Straight-lining of rents(4) .... (8,615) (1,317) (2,280) (627) 306 (12,533)
Other .......................... -- -- -- (3,009)(3) 3,110 101
--------- --------- --------- --------- --------- ---------
EBITDA(1) ...................... $ 116,044 $ 58,127 $ 38,169 $ 46,430 $ 24,177 $ 282,947
========= ========= ========= ========= ========= =========
Six Months Ended June 30,
-------------------------
1998
----
Merchandise
Office Retail Mart Cold Storage Other(2) Total
------ ------ ---- ------------ -------- -----
Total revenues ................. $ 103,715 $ 82,439 $ 28,310 $ -- $ 4,270 $ 218,734
Total expenses ................. 62,160 34,307 16,452 -- 10,100 123,019
--------- --------- --------- --------- --------- ---------
Operating income ............... 41,555 48,132 11,858 -- (5,830) 95,715
Income applicable to Alexander's -- -- -- -- 3,146 3,146
Income from partially-owned
entities ....................... 3,872 -- 948 3,164 1,692 9,676
Interest and other investment
income ......................... 2,944 2,159 321 -- 7,413 12,837
Interest and debt expense ...... (8,707) (15,879) (6,412) -- (15,504) (46,502)
Minority interest .............. -- -- -- -- -- --
--------- --------- --------- --------- --------- ---------
Net income ..................... 39,664 34,412 6,715 3,164 (9,083) 74,872
Minority interest .............. -- -- -- -- -- --
Interest and debt expense(4) .. 16,547 15,879 6,412 13,610 17,802 70,250
Depreciation and amortization(4) 17,221 7,755 3,226 17,819 2,623 48,644
Straight-lining of rents(4) .... (3,497) (1,654) (1,283) -- (522) (6,956)
Other .......................... -- -- -- 1,786 849 2,635
--------- --------- --------- --------- --------- ---------
EBITDA(1) ...................... $ 69,935 $ 56,392 $ 15,070 $ 36,379 $ 11,669 $ 189,445
========= ========= ========= ========= ========= =========
June 30, 1999
-------------
Balance sheet data:
Real estate, net $1,892,885 $ 593,039 $ 736,649 $ -- $ 15,626 $3,238,199
Investments and
advances to
partially-owned
entities ...... 385,663 3,202 26,913 457,296 292,960 1,166,034
December 31, 1998
-----------------
Balance sheet data:
Real estate, net $1,777,919 $ 565,723 $ 729,485 $ -- $ 15,948 $3,089,075
Investments and
advances to
partially-owned
entities ...... 118,337 2,946 26,638 459,172 220,747 827,840
See footnotes 1-4 on the next page.
Page 13
14
VORNADO REALTY L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
Notes to segment information:
(1) EBITDA represents net income before interest, taxes, depreciation and
amortization, extraordinary or non-recurring items, gains or losses on
sales of real estate and the effect of straight-lining of property
rentals for rent escalations. Management considers EBITDA a supplemental
measure for making decisions and assessing the performance of its
segments. EBITDA may not be comparable to similarly titled measures
employed by other companies.
(2) Other includes (i) the operations of the Company's warehouse and
industrial properties, (ii) investments in the Hotel Pennsylvania,
Alexander's, and Newkirk Joint Ventures, (iii) corporate general and
administrative expenses and (iv) unallocated investment income and
interest and debt expense.
(3) Includes a charge of $1,114 for the three months ended June 30, 1999 and
a benefit of $3,210 for the six months ended June 30, 1999 for income
taxes, which are considered non-recurring because of the expected
conversion of the Cold Storage Companies to REITs.
(4) Interest and debt expense, depreciation and amortization and
straight-lining of rents included in the reconciliation of net income to
EBITDA reflects amounts which are netted in income from partially-owned
entities.
10. SUBSEQUENT EVENTS
350 North Orleans Financing
On July 8, 1999, the Company completed a $70,000,000 mortgage financing of
its 350 North Orleans property in Chicago. The Company received proceeds of
$40,000,000 and is expected to receive the remaining $30,000,000 during the next
year upon meeting certain debt service coverage requirements. The new 3-year
debt matures in June 2002 and bears interest at LIBOR + 1.65% (currently 6.83%).
Acquisition of 909 Third Avenue
On July 22, 1999, the Company acquired 909 Third Avenue, a 33 story
Manhattan office building for approximately $123,000,000, including $109,000,000
of indebtedness.
Hotel Pennsylvania
On August 5, 1999, the Company increased its interest in the Hotel
Pennsylvania to 100% by acquiring Planet Hollywood International, Inc.'s
("Planet Hollywood") 20% interest in the hotel. Under the agreement, the Company
will purchase the 20% interest for approximately $18,000,000 and will assume
$24,000,000 of existing debt. In connection with the transaction, Vornado also
terminated the licensing agreement with Planet Hollywood for an Official
All-Star Hotel. The Hotel Pennsylvania is located in New York City on Seventh
Avenue opposite Madison Square Garden. The acquisition is expected to close in
the third quarter of 1999.
Page 14
15
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
(All of the amounts presented are in thousands, except share amounts and
percentages)
Certain statements contained herein constitute forward-looking
statements as such term is defined in Section 27A of the Securities Act of
1933 and Section 21E of the Securities Exchange Act of 1934, as amended.
Certain factors could cause actual results to differ materially from those
in the forward-looking statements. Factors that might cause such a material
difference include, but are not limited to, (a) changes in the general
economic climate, (b) local conditions such as an oversupply of space or a
reduction in demand for real estate in the area, (c) conditions of tenants,
(d) competition from other available space, (e) increased operating costs
and interest expense, (f) the timing of and costs associated with property
improvements, (g) changes in taxation or zoning laws, (h) government
regulations, (i) failure of Vornado to continue to qualify as a REIT, (j)
availability of financing on acceptable terms, (k) potential liability under
environmental or other laws or regulations, (l) general competitive factors
and (m) failure by Vornado, or by other companies with which it does
business, to remediate possible Year 2000 problems in computer software or
embedded technology.
OVERVIEW
The Company's net income was $63,360 in the three months ended June 30,
1999, as compared to $40,808 in the prior year's quarter, an increase of
$22,552. The Company's net income was $120,918 in the six months ended June
30, 1999, as compared to $74,872 in the prior year's six months, an increase
of $46,046. EBITDA, as defined,(1) was $151,018 in the three months ended
June 30, 1999, as compared to $104,216 in the prior year's quarter, an
increase of $46,802. EBITDA was $282,947 in the six months ended June 30,
1999 as compared to $189,445 in the prior year's six months, an increase of
$93,502.
Below is a summary of net income and EBITDA by segment for the three and
six months ended June 30, 1999 and 1998:
For The Three Months Ended June 30, 1999
----------------------------------------
Merchandise Cold
Total Office Retail Mart Storage Other(2)
----- ------ ------ ---- ------- --------
Total revenues ....................... $ 166,188 $ 87,876 $ 43,009 $ 33,367 $ -- $ 1,936
Total expenses ....................... 95,679 52,313 17,884 17,853 -- 7,629
--------- --------- --------- --------- --------- ---------
Operating income ..................... 70,509 35,563 25,125 15,514 -- (5,693)
Income applicable to Alexander's ..... 1,839 -- -- -- -- 1,839
Income from partially-owned entities . 21,925 6,617 223 728 8,506 5,851
Interest and other investment income . 4,900 318 -- 69 -- 4,513
Interest and debt expense ............ (35,284) (11,778) (8,085) (6,869) -- (8,552)
Minority interest .................... (529) (529) -- -- -- --
--------- --------- --------- --------- --------- ---------
Net income ........................... 63,360 30,191 17,263 9,442 8,506 (2,042)
Minority interest .................... 529 529 -- -- -- --
Interest and debt expense (4) ........ 59,338 22,101 8,740 6,869 6,893 14,735
Depreciation and amortization (4) .... 32,692 14,693 4,252 4,105 7,615 2,027
Straight-lining of rents (4) ......... (7,656) (4,902) (682) (1,172) (627) (273)
Other ................................ 2,755 -- -- -- 1,114(3) 1,641
--------- --------- --------- --------- --------- ---------
EBITDA (1) ........................... $ 151,018 $ 62,612 $ 29,573 $ 19,244 $ 23,501 $ 16,088
========= ========= ========= ========= ========= =========
For The Three Months Ended June 30, 1998
----------------------------------------
Merchandise Cold
Total Office Retail Mart Storage Other(2)
----- ------ ------ ---- ------- --------
Total revenues ....................... $ 128,523 $ 56,870 $ 40,973 $ 28,310 $ -- $ 2,370
Total expenses ....................... 73,553 35,045 16,679 16,452 -- 5,377
--------- --------- --------- --------- ------- ---------
Operating income ..................... 54,970 21,825 24,294 11,858 -- (3,007)
Income applicable to Alexander's ..... 1,490 -- -- -- -- 1,490
Income from partially-owned entities . 5,756 1,767 -- 948 1,450 1,591
Interest and other investment income . 5,271 1,429 1,003 321 -- 2,518
Interest and debt expense ............ (26,679) (4,689) (8,101) (6,412) -- (7,477)
Minority interest .................... -- -- -- -- -- --
--------- --------- --------- --------- ------- ---------
Net income ........................... 40,808 20,332 17,196 6,715 1,450 (4,885)
Minority interest .................... -- -- -- -- -- --
Interest and debt expense (4) ........ 38,752 8,992 8,101 6,412 6,336 8,911
Depreciation and amortization (4) .... 26,564 9,778 3,802 3,226 8,303 1,455
Straight-lining of rents (4) ......... (4,319) (2,056) (721) (1,283) -- (259)
Other ................................ 2,411 -- -- -- 1,786 625
--------- --------- --------- --------- ------- ---------
EBITDA (1) ........................... $ 104,216 $ 37,046 $ 28,378 $ 15,070 $ 17,875 $ 5,847
========= ========= ========= ========= ========= =========
Footnotes 1-4 are explained on the following page.
Page 15
16
For the Six Months Ended June 30, 1998
--------------------------------------
Merchandise
Total Office Retail Mart Cold Storage Other(2)
----- ------ ------ ---- ------------ --------
Total revenues ....................... $ 329,752 $ 175,152 $ 84,366 $ 66,355 $ -- $ 3,879
Total expenses ....................... 189,636 103,797 35,041 36,355 -- 14,443
--------- --------- --------- --------- ------- ---------
Operating income ..................... 140,116 71,355 49,325 30,000 -- (10,564)
Income applicable to Alexander's ..... 3,341 -- -- -- -- 3,341
Income from partially-owned entities . 41,018 10,024 423 1,904 20,496 8,171
Interest and other investment income . 8,358 856 -- 367 -- 7,135
Interest and debt expense ............ (70,901) (22,259) (16,117) (13,165) -- (19,360)
Minority interest .................... (1,014) (1,014) -- -- -- --
--------- --------- --------- --------- ------- ---------
Net income ........................... 120,918 58,962 33,631 19,106 20,496 (11,277)
Minority interest .................... 1,014 1,014 -- -- -- --
Interest and debt expense (4) ........ 109,037 36,706 17,429 13,165 13,558 28,179
Depreciation and amortization (4) .... 64,410 27,977 8,384 8,178 16,012 3,859
Straight-lining of rents (4) ......... (12,533) (8,615) (1,317) (2,280) (627) 306
Other ................................ 101 -- -- -- (3,009)(3) 3,110
--------- --------- --------- --------- ------- ---------
EBITDA (1) ........................... $ 282,947 $ 116,044 $ 58,127 $ 38,169 $ 46,430 $ 24,177
========= ========= ========= ========= ========= =========
For The Six Months Ended June 30, 1998
--------------------------------------
Merchandise
Total Office Retail Mart Cold Storage Other(2)
----- ------ ------ ---- ------------ --------
Total revenues ....................... $ 218,734 103,715 $ 82,439 $ 28,310 $ -- $ 4,270
Total expenses ....................... 123,019 62,160 34,307 16,452 -- 10,100
--------- ------- --------- --------- ------- ---------
Operating income ..................... 95,715 41,555 48,132 11,858 -- (5,830)
Income applicable to Alexander's ..... 3,146 -- -- -- -- 3,146
Income from partially-owned entities . 9,676 3,872 -- 948 3,164 1,692
Interest and other investment income . 12,837 2,944 2,159 321 -- 7,413
Interest and debt expense ............ (46,502) (8,707) (15,879) (6,412) -- (15,504)
Minority interest .................... -- -- -- -- -- --
--------- ------- --------- --------- ------- ---------
Net income ........................... 74,872 39,664 34,412 6,715 3,164 (9,083)
Minority interest .................... -- -- -- -- -- --
Interest and debt expense (4) ........ 70,250 16,547 15,879 6,412 13,610 17,802
Depreciation and amortization (4) .... 48,644 17,221 7,755 3,226 17,819 2,623
Straight-lining of rents (4) ......... (6,956) (3,497) (1,654) (1,283) -- (522)
Other ................................ 2,635 -- -- -- 1,786 849
--------- ------- --------- --------- ------- ---------
EBITDA (1) ........................... $ 189,445 $ 69,935 $ 56,392 $ 15,070 $ 36,379 $ 11,669
========= ========= ========= ========= ========= =========
(1) EBITDA represents net income before interest, taxes, depreciation and
amortization, extraordinary or non-recurring items, gains or losses on
sales of real estate and the effect of straight-lining of property
rentals for rent escalations. Management considers EBITDA a supplemental
measure for making decisions and assessing the performance of its
segments. EBITDA may not be comparable to similarly titled measures
employed by other companies.
(2) Other includes (i) the operations of the Company's warehouse and
industrial properties, (ii) investments in the Hotel Pennsylvania,
Alexander's, and Newkirk Joint Ventures, (iii) corporate general and
administrative expenses and (iv) unallocated investment income and
interest and debt expense.
(3) Includes a charge of $1,114 for the three months ended June 30, 1999 and
a benefit of $3,210 for the six months ended June 30, 1999 for income
taxes which are considered non-recurring because of the expected
conversion of the Cold Storage Companies to REITs.
(4) Interest and debt expense, depreciation and amortization and
straight-lining of rents included in the reconciliation of net income to
EBITDA reflects amounts which are netted in income from partially-owned
entities.
Page 16
17
RESULTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 1999 AND JUNE 30, 1998
Below are the details of the changes by segment in EBITDA. The change in
the Cold Storage EBITDA is discussed in Income from partially-owned entities.
Merchandise Cold
Total Office Retail Mart Storage Other
-------- -------- -------- ----------- -------- --------
Three months ended
June 30, 1998 ............ $104,216 $ 37,046 $ 28,378 $ 15,070 $ 17,875 $ 5,847
1999 Operations:
Same store operations(1) . 6,187 4,537 688 756 397 (191)
Acquisitions and other ... 40,615 21,029 507 3,418 5,229 10,432
-------- -------- -------- -------- -------- --------
Three months ended
June 30, 1999 ............ $151,018 $ 62,612 $ 29,573 $ 19,244 $ 23,501 $ 16,088
======== ======== ======== ======== ======== ========
% increase in same
store operations ....... 5.9% 12.2% 2.4% 5.0% 2.2% (3.3%)
(1) Represents operations which were owned for the same period in each year.
Revenues
The Company's revenues, which consist of property rentals, tenant expense
reimbursements and other income were $166,188 in the three months ended June 30,
1999, compared to $128,523 in the prior year's quarter, an increase of $37,665.
This increase by segment resulted from:
Date of Merchandise
Acquisition Total Office Retail Mart Other
------------- -------- -------- -------- ----------- --------
Property Rentals:
Acquisitions:
888 Seventh Avenue ...... January 1999 $ 6,086 $ 6,086 $ -- $ -- $ --
Market Square Complex ... December 1998 3,932 -- -- 3,932 --
Mendik RELP Properties .. December 1998 7,338 7,338 -- -- --
20 Broad Street ......... August 1998 2,742 2,742 -- -- --
689 Fifth Avenue ........ August 1998 861 861 -- -- --
770 Broadway ............ July 1998 3,069 3,069 -- -- --
40 Fulton Street ........ June 1998 1,037 1,037 -- -- --
-------- -------- -------- -------- --------
25,065 21,133 -- 3,932 --
-------- -------- -------- -------- --------
Leasing activity, including
$312 of step-ups
in Retail ............... 7,297 6,758 258 366 (85)
-------- -------- -------- -------- --------
Total increase in property
rentals ................. 32,362 27,891 258 4,298 (85)
-------- -------- -------- -------- --------
Tenant expense reimbursements:
Increase in tenant expense
reimbursements due to
acquisitions ............ 1,942 1,308 -- 634 --
Other ........................ 2,107 338 1,802 (37) 4
-------- -------- -------- -------- --------
Total increase in tenant
expense reimbursements .. 4,049 1,646 1,802 597 4
-------- -------- -------- -------- --------
Other income ................. 1,254 1,469 (24) 162 (353)
-------- -------- -------- -------- --------
Total increase in revenues ... $ 37,665 $ 31,006 $ 2,036 $ 5,057 $ (434)
======== ======== ======== ======== ========
Page 17
18
Expenses
The Company's expenses were $95,679 in the three months ended June 30,
1999 compared to $73,553 in the prior year's quarter, an increase of $22,126.
This increase by segment resulted from:
Merchandise
Total Office Retail Mart Other
------- ------- ------- ----------- -------
Operating:
Acquisitions .......... $11,859 $10,691 $ -- $ 1,168 $ --
Same store operations . 2,612 2,441 1,044(3) (820) (53)
------- ------- ------- ------- -------
14,471 13,132 1,044 348 (53)
------- ------- ------- ------- -------
Depreciation and
amortization:
Acquisitions .......... 2,989 2,341 -- 648 --
Same store operations . 1,567 1,246 129 231 (39)
------- ------- ------- ------- -------
4,556 3,587 129 879 (39)
------- ------- ------- ------- -------
General and administrative: 3,099(2) 579 2 174 $ 2,344(1)
------- ------- ------- ------- -------
$22,126 $17,298 $ 1,175 $ 1,401 $ 2,252
======= ======= ======= ======= =======
(1) Retail general and administrative expenses are included in corporate
expenses which are not allocated.
(2) Of this increase: (i) $201 is attributable to acquisitions, (ii) $2,501
resulted from payroll, primarily for additional employees and corporate
office expenses, and (iii) $397 resulted from professional fees.
(3) Increase in common area maintenance expense of $2,047, partially offset by
a decrease in repairs and maintenance and bad debt expense.
Income applicable to Alexander's (loan interest income, equity in income
and depreciation) was $1,839 in the three months ended June 30, 1999, compared
to $1,490 in the prior year's quarter, an increase of $349.
Income from partially-owned entities was $21,925 in the three months ended
June 30, 1999, compared to $5,756 in the prior year's quarter, an increase of
$16,169. This increase by segment resulted from:
Date of Merchandise Cold
Acquisition Total Office Retail Mart Storage Other
-------------- ------- ------ ------ ----------- ------- -------
Acquisitions:
Cold Storage ......................... June/July 1998 $ 3,720 $ -- $ -- $ -- $ 3,720 $ --
Newkirk Joint Ventures ............... July 1998 3,277 -- -- -- -- 3,277
Caguas ............................... November 1998 223 -- 223 -- -- --
CESCR ................................ March 1999 4,720 4,720 -- -- -- --
------- ------ ------ ------ ------- -------
11,940 4,720 223 -- 3,720 3,277
Increase (decrease) in equity in income:
Cold Storage ....................... 3,168(1) -- -- -- 3,168(1) --
Hotel Pennsylvania ................. 980 -- -- -- -- 980
Mendik partially-owned
office buildings ................. (175)(2) (175)(2) -- -- -- --
Merchandise Mart
Management Company ............... (220) -- -- (220) -- --
Other ............................. 476 305 -- -- 168 3
------- ------ ------ ------ ------- -------
$16,169 $4,850 $ 223 $ (220) $ 7,056 $ 4,260
======= ====== ====== ====== ======= =======
(1) Includes a charge for income taxes of $1,114 resulting from the reversal
of income taxes because of the expected conversion of the Cold Storage
Companies to REITs.
(2) Reflects the elimination of the Company's equity in income of Two Park
Avenue which is wholly-owned as of November 17, 1998 and accordingly is
consolidated in 1999.
Page 18
19
Interest and other investment income (interest income on mortgage loans
receivable, other interest income, dividend income and net gains on marketable
securities) was $4,900 for the three months ended June 30, 1999, compared to
$5,271 in the prior year's quarter, a decrease of $371. This decrease resulted
primarily from lower average investments this year.
Interest and debt expense was $35,284 for the three months ended June 30,
1999, compared to $26,679 in the prior year's quarter, an increase of $8,605.
This increase resulted primarily from debt in connection with acquisitions.
The minority interest is comprised of a 40% interest in 20 Broad Street of
$529 for the three months ended June 30, 1999.
Preferred unit distributions were $8,381 for the three months ended June
30, 1999, compared to $5,422 in the prior year's quarter, an increase of $2,959.
This increase resulted from the issuance of Series B Cumulative Redeemable
Preferred Units in March 1999 and Series C Cumulative Redeemable Preferred Units
in May 1999.
Preferential allocations to unitholders were $11,334 for the three months
ended June 30, 1999 compared to $4,492 in the prior year's quarter, an increase
of $6,842. Of this increase $4,996 is due to acquisitions and $1,846 results
from higher income.
SIX MONTHS ENDED JUNE 30, 1999 AND JUNE 30, 1998
Below are the details of the changes by segment in EBITDA. The change in
the Cold Storage EBITDA is discussed in Income from partially-owned entities.
Merchandise Cold
Total Office Retail Mart Storage Other
-------- -------- -------- ----------- -------- --------
Six months ended
June 30, 1998 ............ $189,445 $ 69,935 $ 56,392 $ 15,070 $ 36,379 $ 11,669
1999 Operations:
Same store operations(1) . 10,778 8,196 2,067 756 582 (823)
Acquisitions and other ... 82,724 37,913 (332) 22,343 9,469 13,331
-------- -------- -------- -------- -------- --------
Six months ended
June 30, 1999 ............ $282,947 $116,044 $ 58,127 $ 38,169 $ 46,430 $ 24,177
======== ======== ======== ======== ======== ========
% increase in same
store operations ....... 5.7% 11.7% 3.7% 5.0% 1.6% (7.0%)
(1) Represents operations which were owned for the same period in each year.
Page 19
20
Revenues
The Company's revenues, which consist of property rentals, tenant expense
reimbursements and other income were $329,752 in the six months ended June 30,
1999, compared to $218,734 in the prior year's six months, an increase of
$111,018. This increase by segment resulted from:
Date of Merchandise
Acquisition Total Office Retail Mart Other
------------- -------- -------- -------- ----------- --------
Property Rentals:
Acquisitions:
888 Seventh Avenue ....... January 1999 $ 11,364 $ 11,364 $ -- $ -- $ --
Market Square Complex .... December 1998 7,390 -- -- 7,390 --
Mendik RELP Properties ... December 1998 14,164 14,164 -- -- --
20 Broad Street .......... August 1998 5,444 5,444 -- -- --
689 Fifth Avenue ......... August 1998 1,722 1,722 -- -- --
770 Broadway ............. July 1998 5,747 5,747 -- -- --
40 Fulton Street ......... June 1998 2,605 2,605 -- -- --
Merchandise Mart
Properties ............. April 1998 27,227 -- -- 27,227 --
150 East 58th Street ..... March 1998 2,403 2,403 -- -- --
One Penn Plaza ........... February 1998 5,478 5,478 -- -- --
Westport ................. January 1998 274 274 -- -- --
-------- -------- -------- -------- --------
83,818 49,201 -- 34,617 --
-------- -------- -------- -------- --------
Leasing activity, including
$624 of step-ups
in Retail ................ 14,338 13,737 672 366 (437)
-------- -------- -------- -------- --------
Total increase in property
rentals .................. 98,156 62,938 672 34,983 (437)
-------- -------- -------- -------- --------
Tenant expense reimbursements:
Increase in tenant expense
reimbursements due to
acquisitions ............. 6,327 3,741 -- 2,586 --
Other ........................ 2,754 1,169 1,685 (37) (63)
-------- -------- -------- -------- --------
Total increase in tenant
expense reimbursements ... 9,081 4,910 1,685 2,549 (63)
-------- -------- -------- -------- --------
Other income ................. 3,781 3,589 (430) 513 109
-------- -------- -------- -------- --------
Total increase in revenues ... $111,018 $ 71,437 $ 1,927 $ 38,045 $ (391)
======== ======== ======== ======== ========
Expenses
The Company's expenses were $189,636 in the six months ended June 30, 1999
compared to $123,019 in the prior year's six months, an increase of $66,617.
This increase by segment resulted from:
Merchandise
Total Office Retail Mart Other
-------- -------- -------- ----------- --------
Operating:
Acquisitions .......... $ 39,448 $ 25,459 $ -- $ 13,989 $ --
Same store operations . 5,907 5,883 696(3) (820) 148
-------- -------- -------- -------- --------
45,355 31,342 696 13,169 148
-------- -------- -------- -------- --------
Depreciation and
amortization:
Acquisitions .......... 10,600 5,879 -- 4,721 --
Same store operations . 2,882 2,689 36 231 (74)
-------- -------- -------- -------- --------
13,482 8,568 36 4,952 (74)
-------- -------- -------- -------- --------
General and administrative: 7,780(2) 1,727 2 1,782 4,269(1)
-------- -------- -------- -------- --------
$ 66,617 $ 41,637 $ 734 $ 19,903 $ 4,343
======== ======== ======== ======== ========
(1) Retail general and administrative expenses are included in corporate
expenses which are not allocated.
(2) Of this increase: (i) $2,382 is attributable to acquisitions, (ii) $3,745
resulted from payroll, primarily for additional employees and corporate
office expenses, and (iii) $1,653 resulted from professional fees.
(3) Increase in common area maintenance expense of $1,915, partially offset by
a decrease in repairs and maintenance and bad debt expense.
Page 20
21
Income applicable to Alexander's (loan interest income, equity in income
and depreciation) was $3,341 in the six months ended June 30, 1999, compared to
$3,146 in the prior year's six months, an increase of $195.
Income from partially-owned entities was $41,018 in the six months ended
June 30, 1999, compared to $9,676 in the prior year's six months, an increase of
$31,342. This increase by segment resulted from:
Date of Merchandise Cold
Acquisition Total Office Retail Mart Storage Other
-------------- -------- -------- ------- ----------- -------- ------
Acquisitions:
Cold Storage .......................... June/July 1998 $ 7,628 $ -- $ -- $ -- $ 7,628 $ --
Newkirk Joint Ventures ................ July 1998 5,309 -- -- -- -- 5,309
Merchandise Mart
Management Company ................. April 1998 956 -- -- 956 -- --
Caguas ................................ November 1998 423 -- 423 -- -- --
CESCR ................................. 6,850 6,850 -- -- -- --
-------- -------- ------- -------- -------- ------
21,166 6,850 423 956 7,628 5,309
Increase (decrease) in equity in income:
Cold Storage ........................ 9,369(1) -- -- -- 9,369(1) --
Hotel Pennsylvania .................. 1,179 -- -- -- -- 1,179
Mendik partially-owned
office buildings .................. (771)(2) (771)(2) -- -- -- --
Other ............................... 399 73 -- -- 335 (9)
-------- -------- ------- -------- -------- ------
$ 31,342 $ 6,152 $ 423 $ 956 $ 17,332 $6,479
======== ======== ======= ======== ======== ======
(1) Includes a benefit for income taxes of $3,210 resulting from the reversal
of income taxes because of the expected conversion of the Cold Storage
Companies to REITs.
(2) Reflects the elimination of the Company's equity in income of Two Park
Avenue which is wholly-owned as of November 17, 1998 and accordingly is
consolidated in 1999.
Interest and other investment income (interest income on mortgage loans
receivable, other interest income, dividend income and net gains on marketable
securities) was $8,358 for the six months ended June 30, 1999, compared to
$12,837 in the prior year's six months, a decrease of $4,479. This decrease
resulted primarily from lower average investments this year.
Interest and debt expense was $70,901 for the six months ended June 30,
1999, compared to $46,502 in the prior year's six months, an increase of
$24,399. This increase resulted primarily from debt in connection with
acquisitions.
The minority interest is comprised of a 40% interest in 20 Broad Street of
$1,014 for the six months ended June 30, 1999.
Preferred unit distributions were $14,093 for the six months ended June
30, 1999, compared to $10,845 in the prior year's six months, an increase of
$3,248. This increase resulted from the issuance of the Company's Series B
Cumulative Redeemable Preferred Units in March 1999 and Series C Cumulative
Redeemable Preferred Units in May 1999.
Preferential allocations to unitholders were $19,964 for the six months
ended June 30, 1999, compared to $7,069 in the prior year's six months, an
increase of $12,895. Of this increase $8,843 is due to acquisitions and $4,052
results from higher income.
Page 21
22
LIQUIDITY AND CAPITAL RESOURCES
Six Months Ended June 30, 1999
Cash flows provided by operating activities of $86,796 was primarily
comprised of (i) income of $120,918, offset by (ii) adjustments for non-cash
items of $17,718 and (iii) the net change in operating assets and liabilities of
$16,404. The adjustments for non-cash items are primarily comprised of (i)
depreciation and amortization of $38,877 and (ii) minority interest of $1,014,
partially offset by (iii) the effect of straight-lining of rental income of
$15,393 and (iv) equity in net income of partially-owned entities of $41,018.
The net change in operating assets and liabilities primarily reflects an
increase in prepaid expenses of $29,246.
Net cash used in investing activities of $142,320 was primarily comprised
of (i) capital expenditures of $86,731 (see detail below), (ii) investment in
notes and mortgages receivable of $60,567 (including $41,200 loan to CAPI and
$18,587 loan to Vornado Operating Company), (iii) acquisitions of real estate of
$45,000 (see detail below) and (iv) investments in partially-owned entities of
$13,200 (see detail below), partially offset by (v) the use of cash restricted
for tenant improvements of $24,548, (vi) proceeds from sale of Cold Storage
assets of $22,769 and (vii) proceeds from the repayment of mortgage loans
receivable of $19,367 (including $14,000 from Vornado Operating Company).
Acquisitions of real estate and investments in partially-owned entities
are comprised of:
Debt Value of Units
Cash Assumed Issued Assets Acquired
---------- ---------- -------------- ---------------
Real Estate:
888 Seventh Avenue Office Building.............. $ 45,000 $ 55,000 $ -- $ 100,000
========== ========== =========== =============
Investments in Partially Owned Entities:
Charles E. Smith Commercial Realty L.P.:
Additional investment......................... $ -- $ -- $ 242,000 $ 242,000
Reacquired units from Vornado Operating
Company..................................... 13,200 -- -- 13,200
Crystal City hotel land....................... -- -- 8,000 8,000
Additional investment in Newkirk Joint Ventures. -- -- 47,800 47,800
---------- ---------- ----------- -------------
$ 13,200 $ -- $ 297,800 $ 311,000
========== ========== =========== =============
Capital expenditures were comprised of:
New York Merchandise
City Office Retail Mart Other Total
----------- ----------- ----------- ----------- ----------
Expenditures to maintain the assets ..... $ 2,338 $ 411 $ 5,433 $ 1,479 $ 9,661
Tenant allowances and leasing commissions 12,360 771 9,791 -- 22,922
Redevelopment expenditures .............. 38,097 16,051 -- -- 54,148
----------- ----------- ----------- ----------- ----------
$ 52,795 $ 17,233 $ 15,224 $ 1,479 $ 86,731
=========== =========== =========== =========== ==========
Net cash used in financing activities of $50,770 was primarily comprised
of (i) repayments of borrowings of $306,490, (ii) general partner unit
distributions of $74,432, (iii) preferred unit distributions of $12,655, and
(iv) preferential allocations of $12,226, partially offset by, (v) proceeds from
issuance of preferred units of $193,282 and (vi) proceeds from borrowings of
$165,000.
Page 22
23
Six Months Ended June 30, 1998
Cash flows provided by operating activities of $82,211 was primarily
comprised of (i) net income of $74,872 and (ii) adjustments for non-cash items
of $9,000, offset by (iii) the net change in operating assets and liabilities of
$1,661. The adjustments for non-cash items are primarily comprised of (i)
depreciation and amortization of $26,834, partially offset by (ii) the effect of
straight-lining of rental income of $6,414 and (iii) equity in net income of
partially-owned entities of $9,676.
Net cash used in investing activities of $979,681 was primarily comprised
of (i) acquisitions of real estate of $681,387 (see detail below), (ii)
investments in partially-owned entities of $165,633 (see detail below), (iii)
deposits in connection with real estate acquisitions of $133,072 and (iv)
capital expenditures of $47,450, partially offset by (v) proceeds from the
repayment of mortgage loans receivable of $57,663 (Rickel and Riese mortgage
loans). Acquisitions of real estate and investments in partially-owned entities
comprised of:
Value of Units Total
Cash Debt Assumed Issued Consideration
---------- ------------ -------------- -------------
Real Estate:
Merchandise Mart Properties........................... $ 187,000* $ 327,000* $ 116,000 $ 630,000
One Penn Plaza Office Building........................ 317,000 93,000 -- 410,000
150 East 58th Street Office Building.................. 118,000 -- -- 118,000
40 Fulton Street Office Building...................... 54,000 -- -- 54,000
Other ................................................ 5,387 -- -- 5,387
---------- ---------- ---------- -----------
$ 681,387 $ 420,000 $ 116,000 $ 1,217,387
========== ========== ========== ===========
Investments in Partially Owned Entities:
Hotel Pennsylvania (acquisition of additional
40% interest increasing ownership to 80%) ........ $ 22,000 $ 48,000 -- $ 70,000
570 Lexington Avenue Office Building
(increased interest from 5.6% to
approximately 50%).................................... 32,300 4,900 -- 37,200
Acquisition of Freezer Services, Inc. (60% interest) 58,000 16,000 6,000 80,000
Reduction in Cold Storage Companies debt
(60% interest).................................... 44,000 -- -- 44,000
Other ................................................ 9,333 -- -- 9,333
---------- ---------- ---------- -----------
$ 165,633 $ 68,900 $ 6,000 $ 240,533
========== ========== ========== ===========
* Reflects July 1998 repayment of $26,000 of debt.
Net cash provided by financing activities of $799,100 was primarily
comprised of (i) proceeds from borrowings of $1,295,855 and (ii) proceeds from
the issuance of general partner units of $445,282, partially offset by (iii)
repayment of borrowings of $863,258, (iv) general partner unit distributions of
$58,893, (v) preferred unit distributions of $10,845 (includes accretion of
expenses of issuing the preferred units of $1,438) and (vi) preferential
allocations of $2,577.
Financings
In February 1999, the Company completed a $165,000 refinancing of its Two
Penn Plaza office building and prepaid the then existing $80,000 debt on the
property. The new 5-year debt matures in February 2004 and bears interest at
7.08%.
In February 1999, the Company also exercised its option to extend the
maturity date on the $250,000 loan on its Chicago Merchandise Mart building from
March 31, 1999 to September 30, 1999. In connection therewith, the Company paid
a fee of 1/8%.
Page 23
24
In March 1999, the Vornado/Crescent Partnerships sold all of the non-real
estate assets of the Cold Storage Companies encompassing the operations of the
cold storage business for approximately $48,000 to a new partnership owned 60%
by Vornado Operating Company and 40% by Crescent Operating Inc.
In March 1999, Vornado completed the sale of 3 million 8.5% Series B
Cumulative Redeemable Preferred Shares, at a price of $25.00 per share, pursuant
to an effective registration statement with net proceeds to the Company of
approximately $72,200. Further in March 1999, 400,000 shares were sold when the
underwriters exercised their over-allotment option resulting in additional net
proceeds to the Company of $9,700. The perpetual preferred shares may be called
without penalty at the option of the Company commencing on March 17, 2004.
In May 1999, Vornado completed the sale of 4 million 8.5% Series C
Cumulative Redeemable Preferred Shares, at a price of $25.00 per share, pursuant
to an effective registration statement with net proceeds to the Company of
approximately $96,900. Additionally in May 1999, 600,000 shares were sold when
the underwriters exercised their over-allotment option resulting in additional
net proceeds to the Company of $14,500. The perpetual preferred shares may be
called without penalty at the option of the Company commencing on May 17, 2004.
In May 1999, the Company sold an aggregate of $27,500 of 8.375% Series D-2
Cumulative Redeemable Preferred Units in the Operating Partnership to an
institutional investor in a private placement, resulting in net proceeds of
approximately $27,467. The perpetual Preferred Units may be called without
penalty at the option of the Operating Partnership commencing on May 27, 2004.
On July 8, 1999, the Company completed a $70,000 mortgage financing of its
350 North Orleans property in Chicago. The Company received proceeds of $40,000
and is expected to receive the remaining $30,000 during the next year upon
meeting certain debt service coverage requirements. The new 3-year debt matures
in June 2002 and bears interest at LIBOR + 1.65% (currently 6.83%).
The Company anticipates that cash from continuing operations will be
adequate to fund business operations and the payment of dividends and
distributions on an on-going basis for more than the next twelve months;
however, capital outlays for significant acquisitions will require funding from
borrowings or equity offerings.
Year 2000 Issues
Year 2000 compliance programs and information systems modification were
initiated by the Company in early 1998 to address the risk posed by the year
2000 issue. The Company developed a plan to address their affected informational
(accounting, billing, payroll) and operational (refrigeration, HVAC, security,
elevators, lighting, energy management) systems. The Company's plan also
considers statements from outside vendors as to their year 2000 readiness.
The Company and its partially-owned entities have completed their initial
assessment, inventory and planning phases of their plan and have determined that
the majority of their systems, including all mission critical systems are
already year 2000 compliant. The Company anticipates that any issues encountered
with informational or operational systems will be remediated. The Company
expects that where appropriate, all mission critical systems will be tested by
September 30, 1999. The cost of the Company's year 2000 plan is not expected to
be material to 1999 operations.
The Company believes that its exposure may be the failure of third parties
(i.e., energy providers) in meeting their commitments which may result in
temporary business interruption at the Company's buildings, retail centers, mart
properties, cold storage warehouses and other real estate related properties.
The Company has contingency plans for its own day to day informational and
operational systems that will be completed by October 31, 1999. Failure of third
parties with which the Company conducts business to successfully respond to
their year 2000 issues may have an adverse effect on the Company.
Page 24
25
Recently Issued Accounting Standards
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities". This statement establishes accounting and reporting
standards for derivative instruments, including certain derivative instruments
embedded in other contracts, and for hedging activities. It is effective for all
fiscal quarters of fiscal years beginning after June 15, 2000. Because the
Company does not currently utilize derivatives or engage in significant hedging
activities, management does not anticipate that implementation of this statement
will have a material effect on the Company's financial statements.
In April, 1998 the American Institute of Certified Public Accountants
issued Statement of Position 98-5, "Reporting on the Costs of Start-up
Activities" ("SOP 98-5"), which is effective for the Company in the first
quarter of 1999. The Company has no deferred organization costs or other
deferred start-up costs as defined in SOP 98-5, and therefore adoption of SOP
98-5 had no material impact in 1999.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS
At June 30, 1999, the Company had $1,180,431,000 of variable rate debt
bearing interest at a weighted average interest rate of 6.26% and $784,112,000
of fixed rate debt bearing interest at a weighted average interest rate of
7.02%. A one-percent increase in the base used to determine the interest rate of
the variable rate debt would result in a $11,804,000 increase in the Company's
annual interest expense. Additionally, the Company's share of partially-owned
entities (i) variable rate debt was $166,132,000 bearing interest at a weighted
average interest rate of 7.03% and (ii) fixed rate debt was $1,030,008,000
bearing interest at a weighted average interest rate of 7.51%. A one-percent
increase in the base used to determine the interest rate on the Company's share
of the variable rate debt from partially-owned entities would result in a
$1,661,000 decrease in the Company's annual income from partially-owned
entities. The total decrease in the Company's annual net income for a
one-percent increase in the base is $11,580,000, after the limited partnership
unitholder's share of such decrease.
Page 25
26
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is from time to time involved in legal actions arising in the
ordinary course of its business. In the opinion of management, after
consultation with legal counsel, the outcome of such matters will not have a
material adverse effect on the Company's financial condition, results of
operations or cash flows.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits required by Item 601 of Regulation S-K are filed herewith and are
listed in the attached Exhibit Index.
(b) Reports on Form 8-K
During the quarter ended June 30, 1999, Vornado Realty L.P. filed no
reports on Form 8-K.
Page 26
27
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
VORNADO REALTY L.P.
----------------------------------------
(Registrant)
Date: August 5, 1999 By: /s/ Irwin Goldberg
----------------------------------------
IRWIN GOLDBERG
Vice President, Chief Financial Officer
Page 27
28
EXHIBIT INDEX
EXHIBIT
NO.
3.1 -- Amended and Restated Declaration of Trust of Vornado, amended April 3, 1997--Incorporated by
reference to Exhibit 3.1 of Vornado's Registration Statement on Form S-8 (File No. 333-29011),
filed on June 12, 1997......................................................................... *
3.2 -- Articles of Amendment of Declaration of Trust of Vornado, as filed with the State Department of
Assessments and Taxation of Maryland on April 22, 1998 - Incorporated by reference to Exhibit
3.1 of Vornado's Current Report on Form 8-K, dated April 22, 1998 (File No. 001-11954), filed
on April 28, 1998.............................................................................. *
3.3 -- Articles Supplementary Classifying Vornado's $3.25 Series A Preferred Shares of Beneficial
Interest, liquidation preference $50.00 per share - Incorporated by reference to Exhibit 4.1
of Vornado's Current Report on Form 8-K, dated April 3, 1997 (File No. 001-11954), filed on
April 8, 1997.................................................................................. *
3.4 -- Articles Supplementary Classifying Vornado's Series D-1 8.5% Cumulative Redeemable Preferred
Shares of Beneficial Interest, no par value (the "Series D-1 Preferred Shares") - Incorporated
by reference to Exhibit 3.1 of Vornado's Current Report on Form 8-K, dated November 12, 1998
(File No. 001-11954), filed on November 30, 1998............................................... *
3.5 -- Articles Supplementary Classifying Additional Series D-1 Preferred Shares - Incorporated by
reference to Exhibit 3.2 of Vornado's Current Report on Form 8-K/A, dated November 12, 1998
(File No. 001-11954), filed on February 9, 1999................................................ *
3.6 -- Articles Supplementary Classifying 8.5% Series B Cumulative Redeemable Preferred Shares of
Beneficial Interest, liquidation preference $25.00 per share, no par value - Incorporated by
reference to Exhibit 3.3 of Vornado's Current Report on Form 8-K, dated March 3, 1999 (File
No. 001-11954), filed on March 17, 1999........................................................ *
3.7 -- Articles Supplementary to Declaration of Trust of Vornado Realty Trust with Respect to Series C
Preferred Shares - Incorporated by reference to Exhibit 3.7 of Vornado's Registration
Statement on Form 8-A (File No. 001-11954), filed on May 19, 1999.............................. *
3.8 -- Articles Supplementary to Declaration of Trust of Vornado Realty Trust with respect to the
Series D-2 Preferred Shares, dated as of May 27, 1999, as filed with the State Department of
Assessments and Taxation of Maryland on May 27, 1999 - Incorporated by reference to Exhibit
3.1 of Vornado's Current Report on Form 8-K, dated May 27, 1999 (File No. 001-11954), filed
July 7, 1999................................................................................... *
3.9 -- By-laws of Vornado, as amended on April 28, 1997 - Incorporated by reference to Exhibit 3(b) of
Vornado's Quarterly Report on Form 10-Q for the period ended March 31, 1997 (File No.
001-11954), filed on May 14, 1997.............................................................. *
3.10 -- Second Amended and Restated Agreement of Limited Partnership of the Operating Partnership, dated
as of October 20, 1997 - Incorporated by reference to Exhibit 3.4 of Vornado's Annual Report
on Form 10-K for the year ended December 31, 1997 filed on March 31, 1998 (the "1997 10-K").... *
3.11 -- Amendment to Second Amended and Restated Agreement of Limited Partnership of Vornado Realty
L.P., dated as of December 16, 1997- Incorporated by reference to Exhibit 3.5 of the
1997 10-K. .................................................................................... *
- ----------------
* Incorporated by reference
Page 28
29
EXHIBIT
NO.
3.12 -- Second Amendment to Second Amended and Restated Agreement of Limited Partnership of the
Operating Partnership, dated as of April 1, 1998 - Incorporated by reference to Exhibit 3.5 of
Vornado's Registration Statement on Form S-3 (File No. 333-50095), filed on April 14, 1998..... *
3.13 -- Third Amendment to Second Amended and Restated Agreement of Limited Partnership of the Operating
Partnership, dated as of November 12, 1998 - Incorporated by reference to Exhibit 3.2 of
Vornado's Current Report on Form 8-K, dated November 12, 1998 (File No. 001-11954), filed on
November 30, 1998.............................................................................. *
3.14 -- Fourth Amendment to Second Amended and Restated Agreement of Limited Partnership of the
Operating Partnership, dated as of November 30, 1998 - Incorporated by reference to Exhibit
3.1 of Vornado's Current Report on Form 8-K, dated December 1, 1998 (File No. 001-11954),
filed on February 9, 1999...................................................................... *
3.15 -- Exhibit A, dated as of December 22, 1998, to Second Amended and Restated Agreement of Limited
Partnership of the Operating Partnership - Incorporated by reference to Exhibit 3.4 of
Vornado's Current Report on Form 8-K/A, dated November 12, 1998 (File No. 001-11954), filed on
February 9, 1999............................................................................... *
3.16 -- Fifth Amendment to Second Amended and Restated Agreement of Limited Partnership of the Operating
Partnership, dated as of March 3, 1999 - Incorporated by reference to Exhibit 3.1 of Vornado's
Current Report on Form 8-K, dated March 3, 1999 (File No. 001-11954), filed on March 17, 1999... *
3.17 -- Exhibit A to Second Amended and Restated Agreement of Limited Partnership of the Operating
Partnership, dated as of March 11, 1999 - Incorporated by reference to Exhibit 3.2 of
Vornado's Current Report on Form 8-K, dated March 3, 1999 (File No. 001-11954), filed on March
17, 1999....................................................................................... *
3.18 -- Sixth Amendment to Second Amended and Restated Agreement of Limited Partnership of Vornado
Realty L.P., dated as of March 17, 1999 - Incorporated by reference to Exhibit 3.2 of
Vornado's Current Report on Form 8-K, dated May 27, 1999 (File No. 001-11954), filed on July
7, 1999........................................................................................ *
3.19 -- Seventh Amendment to Second Amended and Restated Agreement of Limited Partnership of Vornado
Realty L.P., dated as of May 20, 1999 - Incorporated by reference to Exhibit 3.3 of Vornado's
Current Report on Form 8-K, dated May 27, 1999 (File No. 001-11954), filed on July 7, 1999..... *
3.20 -- Eighth Amendment to Second Amended and Restated Agreement of Limited Partnership of Vornado
Realty L.P., dated as of May 27, 1999 - Incorporated by reference to Exhibit 3.4 of Vornado's
Current Report on Form 8-K, dated May 27, 1999 (File No. 001-11954), filed on July 7, 1999..... *
4.1 -- Instruments defining the rights of security holders (see Exhibits 3.1 through 3.20 of this
Quarterly Report on Form 10-Q).................................................................
4.2 -- Indenture dated as of November 24, 1993 between Vornado Finance Corp. and Bankers Trust Company,
as Trustee - Incorporated by reference to Vornado's current Report on Form 8-K dated November
24, 1993 (File No. 001-11954), filed December 1, 1993.......................................... *
- ----------------
* Incorporated by reference
Page 29
30
EXHIBIT
NO.
4.3 -- Specimen certificate representing Vornado's Common Shares of Beneficial Interest, par value
$0.04 per share - Incorporated by reference to Exhibit 4.1 of Amendment No. 1 to Registration
Statement on Form S-3 (File No. 33-62395), filed on October 26, 1995........................... *
4.4 -- Specimen certificate representing Vornado's $3.25 Series A Preferred Shares of Beneficial
Interest, liquidation preference $50.00 per share - Incorporated by reference to Exhibit 4.2
of Vornado's Current Report on Form 8-K, dated April 3, 1997 (File No. 001-11954), filed on
April 8, 1997.................................................................................. *
4.5 -- Specimen certificate evidencing Vornado's Series B 8.5% Cumulative Redeemable Preferred Shares
of Beneficial Interest - Incorporated by reference to Exhibit 4.2 of Vornado's Registration
Statement on Form 8-A (File No. 001-11954), filed on March 15, 1999............................ *
4.6 -- Specimen certificate evidencing Vornado's 8.5% Series C Cumulative Redeemable Preferred Shares
of Beneficial Interest, liquidation preference $25.00 per share, no par value - Incorporated
by reference to Exhibit 4.2 of Vornado's Registration Statement on Form 8-A (File No.
001-11954), filed on May 19, 1999.............................................................. *
10.1 -- Second Amendment, dated as of June 12, 1997, to Vornado's 1993 Omnibus Share Plan, as amended -
Incorporated by reference to Vornado's Registration Statement on Form S-8 (File No. 333-29011)
filed on June 12, 1997......................................................................... *
10.2 -- Master Agreement and Guaranty, between Vornado, Inc. and Bradlees New Jersey, Inc. dated as of
May 1, 1992 - Incorporated by reference to Vornado's Quarterly Report on Form 10-Q for quarter
ended March 31, 1992 (File No. 001-11954), filed May 8, 1992................................... *
10.3** -- Mortgage, Security Agreement, Assignment of Leases and Rents and Fixture Filing dated as of
November 24, 1993 made by each of the entities listed therein, as mortgagors to Vornado
Finance Corp., as mortgagee - Incorporated by reference to Vornado's Current Report on Form
8-K dated November 24, 1993 (File No. 001-11954), filed December 1, 1993....................... *
10.4** -- 1985 Stock Option Plan as amended - Incorporated by reference to Vornado's Quarterly Report on
Form 10-Q for quarter ended May 2, 1987 (File No. 001-11954), filed June 9, 1987............... *
10.5** -- Form of Stock Option Agreement for use in connection with incentive stock options issued
pursuant to Vornado, Inc. 1985 Stock Option Plan - Incorporated by reference to Vornado's
Quarterly Report on Form 10-Q for quarter ended October 26, 1985 (File No. 001-11954), filed
December 9, 1985............................................................................... *
10.6** -- Form of Stock Option Agreement for use in connection with incentive stock options issued
pursuant to Vornado, Inc. 1985 Stock Option Plan--Incorporated by reference to Vornado's
Quarterly Report on Form 10-Q for quarter ended May 2, 1987 (File No. 001-11954), filed June
9, 1987........................................................................................ *
10.7** -- Form of Stock Option Agreement for use in connection with incentive stock options issued
pursuant to Vornado, Inc. 1985 Stock Option Plan--Incorporated by reference to Vornado's
Quarterly Report on Form 10-Q for quarter ended October 26, 1985 (File No. 001-11954), filed
December 9, 1985............................................................................... *
- ----------------
* Incorporated by reference
** Management contract or compensatory plan
Page 30
31
EXHIBIT
NO.
10.8** -- Employment Agreement between Vornado Realty Trust and Joseph Macnow dated January 1, 1998 -
Incorporated by reference to Exhibit 10.7 of Vornado's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1998 (File No. 001-11954), filed November 12, 1998................. *
10.9** -- Employment Agreement between Vornado Realty Trust and Richard Rowan dated January 1, 1998 -
Incorporated by reference to Exhibit 10.8 of Vornado's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1998 (File No. 001-11954), filed November 12, 1998................. *
10.10** -- Employment Agreement between Vornado Realty Trust and Irwin Goldberg, dated December 11, 1997 -
Incorporated by reference to Exhibit 10.10 of Vornado's Annual Report on Form 10-K/A for the
year ended December 31, 1997 (File No. 001-11954), filed on April 14, 1998..................... *
10.11** -- Employment Agreement between Vornado Realty Trust and Michael D. Fascitelli dated December 2,
1996 - Incorporated by reference to Vornado's Annual Report on Form 10-K for the year ended
December 31, 1996 (File No. 001-11954), filed March 13, 1997.................................. *
10.12 -- Promissory Notes from Steven Roth to Vornado, Inc. dated December 29, 1992 and January 15, 1993
- Incorporated by reference to Vornado's Annual Report on Form 10-K for the year ended
December 31, 1992 (File No. 001-11954), filed February 16, 1993................................ *
10.13 -- Registration Rights Agreement between Vornado, Inc. and Steven Roth Dated December 29, 1992 -
Incorporated by reference to Vornado's Annual Report on Form 10-K for the year ended December
31, 1992 (File No. 001-11954), filed February 16, 1993......................................... *
10.14 -- Stock Pledge Agreement between Vornado, Inc. and Steven Roth dated December 29, 1992 -
Incorporated by reference to Vornado's Annual Report on Form 10-K for the year ended December
31, 1992 (File No. 001-11954), filed February 16, 1993......................................... *
10.15 -- Promissory Note from Steven Roth to Vornado Realty Trust dated April 15, 1993 and June 17, 1993
- Incorporated by reference to Vornado's Annual Report on Form 10-K for the year ended
December 31, 1993 (File No. 001-11954), filed March 24, 1994................................... *
10.16 -- Promissory Note from Richard Rowan to Vornado Realty Trust - Incorporated by reference to
Vornado's Annual Report on Form 10-K for the year ended December 31, 1993 (File No.
001-11954), filed March 24, 1994............................................................... *
10.17 -- Promissory Note from Joseph Macnow to Vornado Realty Trust - Incorporated by reference to
Vornado's Annual Report on Form 10-K for the year ended December 31, 1993 (File No.
001-11954), filed March 24, 1994............................................................... *
10.18 -- Management Agreement between Interstate Properties and Vornado, Inc. dated July 13, 1992
-Incorporated by reference to Vornado's Annual Report on Form 10-K for the year ended December
31, 1992 (File No. 001-11954), filed February 16, 1993......................................... *
10.19 -- Real Estate Retention Agreement between Vornado, Inc., Keen Realty Consultants, Inc. and
Alexander's, Inc., dated as of July 20, 1992 - Incorporated by reference to Vornado's Annual
Report on Form 10-K for the year ended December 31, 1992 (File No. 001-11954), filed February
16, 1993....................................................................................... *
- ----------------
* Incorporated by reference
** Management contract or compensatory plan
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EXHIBIT
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10.20 -- Amendment to Real Estate Retention Agreement dated February 6, 1995 - Incorporated by reference
to Vornado's Annual Report on Form 10-K for the year ended December 31, 1994 (File No.
001-11954), filed March 23, 1995............................................................... *
10.21 -- Stipulation between Keen Realty Consultants Inc. and Vornado Realty Trust re: Alexander's
Retention Agreement - Incorporated by reference to Vornado's annual Report on Form 10-K for
the year ended December 31, 1993 (File No. 001-11954), filed March 24, 1994.................... *
10.22 -- Stock Purchase Agreement, dated February 6, 1995, among Vornado Realty Trust and Citibank, N.A.
Incorporated by reference to Vornado's Current Report on Form 8-K dated February 6, 1995 (File
No. 001-11954), filed February 21, 1995........................................................ *
10.23 -- Management and Development Agreement, dated as of February 6, 1995 - Incorporated by reference
to Vornado's Current Report on Form 8-K dated February 6, 1995 (File No. 001-11954), filed
February 21, 1995............................................................................... *
10.24 -- Standstill and Corporate Governance Agreement, dated as of February 6, 1995 - Incorporated by
reference to Vornado's Current Report on Form 8-K dated February 6, 1995 (File No. 001-11954),
filed February 21, 1995........................................................................ *
10.25 -- Credit Agreement, dated as of March 15, 1995, among Alexander's Inc., as borrower, and Vornado
Lending Corp., as lender - Incorporated by reference from Annual Report on Form 10-K for the
year ended December 31, 1994 (File No. 001 - 11954), filed March 23, 1995...................... *
10.26 -- Subordination and Intercreditor Agreement, dated as of March 15, 1995 among Vornado Lending
Corp., Vornado Realty Trust and First Fidelity Bank, National Association - Incorporated by
reference to Vornado's Annual Report on Form 10-K for the year ended December 31, 1994 (File
No. 001-11954), filed March 23, 1995........................................................... *
10.27 -- Revolving Credit Agreement dated as of February 27, 1995 among Vornado Realty Trust, as
borrower, and Union Bank of Switzerland, as Bank and Administrative Agent - Incorporated by
reference to Exhibit 10(F)9 of Vornado's Annual Report on Form 10-K for the year ended
December 31, 1994 (File No. 001-11954), filed March 23, 1995................................... *
10.28 -- Form of Intercompany Agreement between Vornado Realty L.P. and Vornado Operating, Inc.
-Incorporated by reference to Exhibit 10.1 of Amendment No. 1 to Vornado Operating, Inc.'s
Registration Statement on Form S-11 (File No. 333-40701), filed on January 23, 1998............ *
10.29 -- Form of Revolving Credit Agreement between Vornado Realty L.P. and Vornado Operating, Inc.,
together with related form of Note - Incorporated by reference to Exhibit 10.2 of Amendment
No. 1 to Vornado Operating, Inc.'s Registration Statement on Form S-11 (File No.333-40701)..... *
10.30 -- Amended and Restated Revolving Credit Agreement, dated as of February 23, 1998, between Vornado
Realty L.P., as Borrower, Vornado Realty Trust, as General Partner and Union Bank of
Switzerland (New York Branch), as Bank, the other banks signatory hereto, each as a bank,
Union Bank of Switzerland (New York Branch), as Administrative Agent and Citicorp Real Estate,
Inc., The Chase Manhattan Bank and Nationsbank, as Syndication Agents - Incorporated by
reference to Exhibit 10.29 of the 1997 10-K.................................................... *
10.31 -- Registration Rights Agreement, dated as of April 15, 1997, between Vornado Realty Trust and the
holders of Units listed on Schedule A thereto - Incorporated by reference to Exhibit 10.2 of
Vornado's Current Report on Form 8-K (File No. 001-11954), filed on April 30, 1997............. *
- ----------------
* Incorporated by reference
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EXHIBIT
NO.
10.32 -- Noncompetition Agreement, dated as of April 15, 1997, by and among Vornado Realty Trust, the
Mendik Company, L.P., and Bernard H. Mendik - Incorporated by reference to Exhibit 10.3 of
Vornado's Current Report on Form 8-K (File No. 001-11954), filed on April 30, 1997............. *
10.33 -- Employment Agreement, dated as of April 15, 1997, by and among Vornado Realty Trust, The Mendik
Company, L.P. and David R. Greenbaum - Incorporated by reference to Exhibit 10.4 of Vornado's
Current Report on Form 8-K (File No. 001-11954), filed on April 30, 1997....................... *
10.34 -- Agreement, dated September 28, 1997, between Atlanta Parent Incorporated, Portland Parent
Incorporated and Crescent Real Estate Equities, Limited Partnership - Incorporated by
reference to Exhibit 99.6 of Vornado's Current Report on Form 8-K (File No. 001-11954), filed
on October 8, 1997............................................................................. *
10.35 -- Contribution Agreement between Vornado Realty Trust, Vornado Realty L.P. and The Contributors
Signatory - thereto - Merchandise Mart Properties, Inc. (DE) and Merchandise Mart Enterprises,
Inc. Incorporated by reference to Exhibit 10.34 of Vornado's Annual Report on Form 10-K/A for
the year ended December 31, 1997 (File No. 001-11954), filed on April 8, 1998.................. *
10.36 -- Sale Agreement executed November 18, 1997, and effective December 19, 1997, between MidCity
Associates, a New York partnership, as Seller, and One Penn Plaza LLC, a New York Limited
liability company; as purchaser. Incorporated by reference to Exhibit 10.35 of Vornado's
Annual Report on Form 10-K/A for the year ended December 31, 1997 (File No. 001-11954), filed
on April 8, 1998............................................................................... *
10.37 -- Promissory Notes from Michael D. Fascitelli to Vornado Realty Trust dated March 2, 1998 and
April 30, 1998. Incorporated by reference to Exhibit 10.37 of Vornado's Quarterly Report on
Form 10-Q for the quarter ended March 31, 1998 (File No. 001-11954), filed May 13, 1998........ *
10.38 -- Credit Agreement dated as of June 22, 1998 among One Penn Plaza, LLC, as Borrower, The Lenders
Party Hereto, The Chase Manhattan Bank, as Administrative Agent Incorporated by reference to
Exhibit 10 of Vornado's Quarterly Report on Form 10-Q for the quarter ended June 30, 1998
(File No. 001-11954), filed August 13, 1998.................................................... *
10.39 -- Registration Rights Agreement, dated as of April 1, 1998 between Vornado and the Unit Holders
named herein - Incorporated by reference to Exhibit 10.2 of Amendment No. 1 to Vornado's
Registration Statement on Form S-3 (File No. 333-50095), filed on May 6, 1998.................. *
10.40 -- Underwriting Agreement, dated April 9, 1998, among Vornado, Vornado Realty L.P. and Goldman,
Sachs & Co. - Incorporated by reference to Exhibit 1.1 of Vornado's Current Report on Form
8-K, dated April 9, 1998 (File No. 001-11954), filed on April 16, 1998......................... *
10.41 -- Pricing Agreement, dated April 9, 1998, between Vornado and Goldman, Sachs & Co. - Incorporated
by reference to Exhibit 1.2 of Vornado's Current Report on Form 8-K, dated April 9,1998 (File
No. 001-11954), filed on April 16, 1998........................................................ *
10.42 -- Underwriting Agreement, dated April 23, 1998, among Vornado, Vornado Realty L.P. and Merrill
Lynch, Pierce, Fenner & Smith Incorporated - Incorporated by reference to Exhibit 1.1 of
Vornado's Current Report on Form 8-K, dated April 22, 1998 (File No. 001-11954), filed on
April 28, 1998................................................................................. *
- ----------------
* Incorporated by reference
Page 33
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EXHIBIT
NO.
10.43 -- Underwriting Agreement, dated March 12, 1999, among Vornado, Vornado Realty L.P., Merrill
Lynch, Pierce, Fenner & Smith Incorporated - Incorporated by reference to Exhibit 1.1
of Vornado's Current Report on Form 8-K, dated March 3, 1999 (File No. 001-11954),
filed on March 17, 1999........................................................................ *
27 -- Financial Data Schedule.......................................................................... 35
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