<Page>
EXHIBIT INDEX ON PAGE 33
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q/A
(AMENDMENT NO. 1)
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended: SEPTEMBER 30, 2002
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: 001-11954
VORNADO REALTY TRUST
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
MARYLAND 22-1657560
- --------------------------------------------------- -----------------------
(State or other jurisdiction of incorporation (I.R.S. Employer
or organization) Identification Number)
888 SEVENTH AVENUE, NEW YORK, NEW YORK 10019
- --------------------------------------------------- -----------------------
(Address of principal executive offices) (Zip Code)
(212) 894-7000
- --------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
N/A
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
/X/ Yes / / No
As of October 28, 2002, 108,396,383 of the registrant's common shares of
beneficial interest are outstanding.
Page 1
<Page>
EXPLANATORY NOTE
This Form 10-Q/A amends Part I. Item 1. Financial Statements; Part I. Item
3. Quantitative and Qualitative Disclosures About Market Risk; and Part II. Item
6. Exhibit 15.1 of the Company's Quarterly Report on Form 10-Q for the quarterly
period ended September 30, 2002 to revise the accounting for the interest rate
swaps relating to its 5.625% Senior Unsecured Notes due 2007 (the "Notes"). The
Company appropriately designated the swaps as "fair value hedge transactions"
with "no ineffectiveness". The Company reported the $37,293,000 increase in the
fair value of the swap assets as an Other Asset on its September 30, 2002
unaudited consolidated balance sheet with a related increase in Accumulated
Other Comprehensive Income. Accounting principles generally accepted in the
United States of America require an increase in the carrying amount of the Notes
instead of the increase in Accumulated Other Comprehensive Income. This Form
10-Q/A restates the September 30, 2002 unaudited consolidated balance sheet to
increase the carrying amount of the Notes by $37,293,000 and decrease
Accumulated Other Comprehensive Income by a like amount. The change has no
effect on the Company's results of operations for the three and nine months
ended September 30, 2002, the related per share amounts, reported cash flows or
funds from operations.
The Company hereby amends Part I. Items 1 and 3 and Part II. Item 6 of
the Form 10-Q in their entirety and replaces such Items with the revised
items set forth below. Part I. Item 4 is included herein in support of the
accompanying certifications of both the Chief Executive Officer and the Chief
Financial Officer of the Company. No further changes have been made to the
Form 10-Q. Except with respect to Part I. Item 4 and the certifications of
the Company's Chief Executive Officer and Chief Financial Officer, this Form
10-Q/A continues to speak as of the date of the filing of the Form 10-Q that
it amends and it has not been updated for any events that have happened
subsequent to the date of such filing.
INDEX
<Table>
<Caption>
PART I. FINANCIAL INFORMATION:
Page Number
-----------
Item 1. Financial Statements:
Consolidated Balance Sheets as of
September 30, 2002 (as restated) and December 31, 2001.................. 3
Consolidated Statements of Income for the Three Months and Nine Months
Ended September 30, 2002 and September 30, 2001......................... 4
Consolidated Statements of Cash Flows for the Nine Months Ended
September 30, 2002 and September 30, 2001............................... 5
Notes to Consolidated Financial Statements (as restated for Note 12).... 6
Independent Accountants' Report......................................... 27
Item 3. Quantitative and Qualitative Disclosures About Market Risk (as
restated)............................................................... 28
Item 4. Controls and Procedures................................................. 28
PART II. OTHER INFORMATION:
Item 6. Exhibits and Reports on Form 8-K........................................ 29
Signatures.................................................................................... 30
Certifications................................................................................ 31
Exhibit Index................................................................................. 33
</Table>
Page 2
<Page>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
VORNADO REALTY TRUST
CONSOLIDATED BALANCE SHEETS
<Table>
<Caption>
(UNAUDITED)
(amounts in thousands, except share and per share amounts) SEPTEMBER 30, DECEMBER 31,
ASSETS 2002 2001
------------- ------------
(RESTATED -
SEE NOTE 12)
Real estate, at cost:
Land................................................................................ $ 1,535,501 $ 895,831
Buildings and improvements.......................................................... 5,845,682 3,480,249
Development costs and construction in progress...................................... 45,314 258,357
Leasehold improvements and equipment................................................ 69,177 55,774
------------- ------------
Total.......................................................................... 7,495,674 4,690,211
Less accumulated depreciation and amortization...................................... (692,126) (506,225)
------------- ------------
Real estate, net............................................................... 6,803,548 4,183,986
Cash and cash equivalents, including U.S. government obligations under
repurchase agreements of $38,900 and $15,235........................................ 314,363 265,584
Escrow deposits and restricted cash................................................... 240,950 204,463
Marketable securities................................................................. 59,515 126,774
Investments in and advances to partially-owned entities, including
Alexander's of $192,831 and $188,522................................................ 951,282 1,270,195
Due from officers..................................................................... 21,733 18,197
Accounts receivable, net of allowance for doubtful accounts
of $9,915 and $8,831................................................................ 67,828 47,406
Notes and mortgage loans receivable................................................... 95,237 258,555
Receivable arising from the straight-lining of rents.................................. 168,993 138,154
Other assets.......................................................................... 342,591 264,029
------------- ------------
$ 9,066,040 $ 6,777,343
============= ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Notes and mortgages payable........................................................... $ 3,575,196 $ 2,477,173
Senior unsecured notes due 2007, at fair value ($37,293 in excess of accreted
note balance)....................................................................... 536,612 --
Accounts payable and accrued expenses................................................. 204,290 179,597
Officers' compensation payable........................................................ 15,684 6,708
Deferred leasing fee income........................................................... 11,398 11,940
Other liabilities..................................................................... 1,548 51,895
------------- ------------
Total liabilities................................................................... 4,344,728 2,727,313
------------- ------------
Minority interest of unitholders in the Operating Partnership......................... 2,079,820 1,479,658
------------- ------------
Commitments and contingencies
Shareholders' equity:
Preferred shares of beneficial interest:
no par value per share; authorized 70,000,000 shares;
Series A: liquidation preference $50.00 per share; issued and outstanding
1,777,723 and 5,520,435 shares.................................................. 88,890 276,024
Series B: liquidation preference $25.00 per share; issued and outstanding
3,400,000 shares................................................................ 81,805 81,805
Series C: liquidation preference $25.00 per share; issued and outstanding
4,600,000 shares................................................................ 111,148 111,148
Common shares of beneficial interest: $.04 par value per share; authorized,
200,000,000 shares; issued and outstanding, 107,959,957 and 99,035,023 shares..... 4,319 3,961
Additional capital.................................................................. 2,486,218 2,162,512
Distributions in excess of net income............................................... (142,551) (95,647)
------------- ------------
2,629,829 2,539,803
Deferred compensation shares earned but not yet delivered........................... 38,253 38,253
Deferred compensation shares issued but not yet earned.............................. (9,036) --
Accumulated other comprehensive income (loss)....................................... (12,850) (2,980)
Due from officers for purchase of common shares of beneficial interest.............. (4,704) (4,704)
------------- ------------
Total shareholders' equity..................................................... 2,641,492 2,570,372
------------- ------------
$ 9,066,040 $ 6,777,343
============= ============
</Table>
See notes to consolidated financial statements.
Page 3
<Page>
VORNADO REALTY TRUST
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
(amounts in thousands except per share amounts)
<Table>
<Caption>
FOR THE THREE MONTHS FOR THE NINE MONTHS
ENDED SEPTEMBER 30, ENDED SEPTEMBER 30,
---------------------------- ----------------------------
2002 2001 2002 2001
------------ ------------ ------------ ------------
Revenues:
Rentals................................................ $ 310,515 $ 211,541 $ 922,144 $ 628,511
Expense reimbursements................................. 44,407 36,216 118,526 102,851
Other income (including fee income
from related parties of $439 and $250 in each
three month period and $1,023 and $1,134 in each
nine month period)................................... 6,286 2,508 20,109 7,588
------------ ------------ ------------ ------------
Total revenues........................................... 361,208 250,265 1,060,779 738,950
------------ ------------ ------------ ------------
Expenses:
Operating.............................................. 145,237 102,222 398,950 299,436
Depreciation and amortization.......................... 52,011 29,275 149,162 91,226
General and administrative............................. 27,352 15,043 74,578 51,706
Amortization of Officer's deferred compensation
expense.............................................. 6,875 -- 20,625 --
Costs of acquisitions not consummated.................. -- -- -- 5,000
------------ ------------ ------------ ------------
Total expenses........................................... 231,475 146,540 643,315 447,368
------------ ------------ ------------ ------------
Operating income......................................... 129,733 103,725 417,464 291,582
Income applicable to Alexander's......................... 12,554 4,442 22,609 21,422
Income from partially-owned entities..................... 6,692 18,856 30,304 62,074
Interest and other investment income..................... 6,407 14,584 25,984 43,931
Interest and debt expense................................ (61,354) (43,054) (179,491) (136,443)
Net gain on disposition of wholly-owned and
partially-owned assets................................. 4,503 6,495 1,053 3,706
Minority interest:
Perpetual preferred unit distributions................. (18,254) (17,594) (54,762) (52,245)
Minority limited partnership earnings.................. (17,073) (9,951) (50,167) (30,195)
Partially-owned entities............................... (403) (723) (1,946) (1,491)
------------ ------------ ------------ ------------
Income before cumulative effect of change in accounting
principle and extraordinary item....................... 62,805 76,780 211,048 202,341
Cumulative effect of change in accounting principle...... -- -- (30,129) (4,110)
Extraordinary item....................................... -- -- -- 1,170
------------ ------------ ------------ ------------
Net income............................................... 62,805 76,780 180,919 199,401
Preferred share dividends (including accretion of
issuance expenses of $958 in the nine months of 2001).. (5,695) (8,904) (17,722) (27,769)
------------ ------------ ------------ ------------
NET INCOME applicable to common shares................... $ 57,110 $ 67,876 $ 163,197 $ 171,632
============ ============ ============ ============
NET INCOME PER COMMON SHARE - BASIC...................... $ .53 $ .76 $ 1.55 $ 1.96
============ ============ ============ ============
NET INCOME PER COMMON SHARE - DILUTED.................... $ .52 $ .74 $ 1.49 $ 1.90
============ ============ ============ ============
DIVIDENDS PER COMMON SHARE............................... $ .66 $ .59 $ 1.98 $ 1.65
============ ============ ============ ============
</Table>
See notes to consolidated financial statements.
Page 4
<Page>
VORNADO REALTY TRUST
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(amounts in thousands)
<Table>
<Caption>
FOR THE NINE MONTHS ENDED SEPTEMBER 30,
---------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES: 2002 2001
---------------- ----------------
Net income............................................................... $ 180,919 $ 199,401
Adjustments to reconcile net income to net
cash provided by operating activities:
Cumulative effect of change in accounting principle.................. 30,129 4,110
Extraordinary item................................................... -- (1,170)
Minority interest.................................................... 106,875 83,931
Net gain on disposition of wholly-owned and
partially-owned assets............................................. (1,053) (3,706)
Depreciation and amortization........................................ 149,162 91,226
Amortization of Officer's deferred compensation expense.............. 20,625 --
Straight-lining of rental income..................................... (29,622) (23,987)
Equity in income of Alexander's...................................... (22,609) (21,422)
Equity in income of partially-owned entities......................... (30,304) (62,074)
Changes in operating assets and liabilities.......................... (56,621) (5,074)
----------- ----------
Net cash provided by operating activities................................ 347,501 261,235
----------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Development costs and construction in progress........................... (47,351) (68,152)
Investments in partially-owned entities.................................. (35,209) (68,145)
Distributions from partially-owned entities.............................. 100,326 102,404
Investment in notes and mortgage loans receivable........................ (56,091) (36,831)
Repayment of notes and mortgage loans receivable......................... 115,000 9,057
Cash restricted, primarily mortgage escrows.............................. 704 13,709
Additions to real estate................................................. (70,029) (63,687)
Purchases of marketable securities ...................................... (1,702) (9,657)
Acquisitions of real estate.............................................. (23,659) (11,574)
Proceeds from sale of marketable securities ............................. 73,685 1,640
Proceeds from sale of real estate........................................ -- 146,197
Real estate deposits and other........................................... -- 2,764
----------- ----------
Net cash provided by investing activities................................ 55,674 17,725
----------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from borrowings................................................. 654,373 347,853
Repayments of borrowings................................................. (719,761) (388,319)
Debt issuance costs...................................................... (3,970) --
Proceeds from issuance of common shares.................................. 56,508 --
Proceeds from issuance of preferred units................................ -- 52,673
Distributions to minority partners....................................... (108,477) (79,452)
Dividends paid on common shares.......................................... (240,802) (143,544)
Dividends paid on preferred shares....................................... (17,722) (26,811)
Exercise of stock options................................................ 25,455 9,529
----------- ----------
Net cash used in financing activities.................................... (354,396) (228,071)
----------- ----------
Net increase in cash and cash equivalents................................ 48,779 50,889
Cash and cash equivalents at beginning of period......................... 265,584 136,989
----------- ----------
Cash and cash equivalents at end of period............................... $ 314,363 $ 187,878
=========== ==========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash payments for interest (including capitalized interest of $5,450 in
2002 and $9,495 in 2001)............................................... $ 171,132 $ 133,051
=========== ==========
NON-CASH TRANSACTIONS:
Class A units issued in acquisitions..................................... $ 625,226 $ --
Financing assumed in acquisitions........................................ 1,082,480 --
Unrealized (loss) gain on securities available for sale.................. (112) 2,356
</Table>
See notes to consolidated financial statements.
Page 5
<Page>
VORNADO REALTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. ORGANIZATION
Vornado Realty Trust is a fully-integrated real estate investment trust
("REIT"). Vornado conducts its business through Vornado Realty L.P., a Delaware
limited partnership (the "Operating Partnership"). Vornado is the sole general
partner of, and owned approximately 79% of the common limited partnership
interest in, the Operating Partnership at September 30, 2002. All references to
the "Company" and "Vornado" refer to Vornado Realty Trust and its consolidated
subsidiaries, including the Operating Partnership.
2. BASIS OF PRESENTATION
The consolidated balance sheet as of September 30, 2002, the consolidated
statements of income for the three and nine months ended September 30, 2002 and
2001 and the consolidated statements of cash flows for the nine months ended
September 30, 2002 and 2001 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 accounting
principles generally accepted in the United States of America have been
condensed or omitted. These consolidated financial statements should be read in
conjunction with the consolidated financial statements and notes thereto
included in Vornado's Annual Report on Form 10-K for the year ended December 31,
2001 as filed with the Securities and Exchange Commission. The results of
operations for the nine months ended September 30, 2002 are not necessarily
indicative of the operating results for the full year.
The accompanying consolidated financial statements include the accounts of
Vornado Realty Trust and its majority-owned subsidiary, Vornado Realty L.P., as
well as entities in which the Company has a 50% or greater interest, provided
that the Company exercises control (where the Company does not exercise control,
such entities are accounted for under the equity method). All significant
intercompany amounts have been eliminated. Equity interests in partially-owned
corporate entities are accounted for under the equity method of accounting when
the Company's ownership interest is more than 20% but less than 50%. When
partially-owned investments are in partnership form, the 20% threshold may be
reduced. For all other investments, the Company uses the cost method. Equity
investments are recorded initially at cost and subsequently adjusted for the
Company's share of the net income or loss and cash contributions and
distributions to or from these entities.
Management has made estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the consolidated 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 period's financial statements have been
reclassified to conform to the current year presentation.
Page 6
<Page>
VORNADO REALTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(UNAUDITED)
3. RECENTLY ISSUED ACCOUNTING STANDARDS
In June 2001, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standard ("SFAS") No. 142, GOODWILL AND OTHER
INTANGIBLE ASSETS (effective January 1, 2002). SFAS No. 142 specifies that
goodwill and some intangible assets will no longer be amortized but instead be
subject to periodic impairment testing. SFAS No. 142 provides specific guidance
for impairment testing of these assets and removes them from the scope of SFAS
No. 121, ACCOUNTING FOR THE IMPAIRMENT OF LONG-LIVED ASSETS. At December 31,
2001, the Company determined that the carrying amounts of its goodwill were not
impaired under SFAS No. 121, as the expected undiscounted future cash flows from
the related investments including goodwill exceeded the carrying amounts of
those assets. At January 1, 2002, under the guidance of SFAS 142, the Company
determined that the carrying amounts of certain of its goodwill assets were in
excess of the fair values. Accordingly, in the first quarter of 2002, the
Company wrote-off goodwill of approximately $30,129,000 of which (i) $15,490,000
represents its share of the goodwill arising from the Company's investment in
Temperature Controlled Logistics and (ii) $14,639,000 represents goodwill
arising from the Company's acquisition of the Hotel Pennsylvania. The write-off
has been reflected as a cumulative effect of a change in accounting principle.
Earnings allocable to the minority interest has been reduced by their pro-rata
share of the write-off of goodwill. Previously reported Net Income Applicable to
Common Shares for the three and nine months ended September 30, 2001 would have
been approximately $300,000 and $900,000 higher if such goodwill was not
amortized in the prior year's quarter and nine months.
In August 2001, the FASB issued SFAS No. 143, ACCOUNTING FOR ASSET
RETIREMENT OBLIGATIONS (effective January 1, 2003) and SFAS No. 144, ACCOUNTING
FOR THE IMPAIRMENT OR DISPOSAL OF LONG-LIVED ASSETS (effective January 1, 2002).
SFAS No. 143 requires the recording of the fair value of a liability for an
asset retirement obligation in the period which it is incurred. SFAS No. 144
supersedes current accounting literature and now provides for a single
accounting model for long-lived assets to be disposed of by sale and requires
discontinued operations presentation for disposals of a "component" of an
entity. The adoption of these statements did not have a material effect on the
Company's financial statements; however under SFAS No. 144, if the Company were
to dispose of a material operating property, such property's results of
operations will have to be separately disclosed as discontinued operations in
the Company's financial statements.
In April 2002, the FASB issued SFAS No. 145, RESCISSION OF SFAS NO. 4, 44,
AND 64, AMENDMENT OF SFAS NO. 13, AND TECHNICAL CORRECTIONS. SFAS No. 145
rescinds SFAS No. 4, REPORTING GAINS AND LOSSES FROM EXTINGUISHMENT OF DEBT,
SFAS No. 44, ACCOUNTING FOR INTANGIBLE ASSETS OF MOTOR CARRIERS, and SFAS No.
64, EXTINGUISHMENTS OF DEBT MADE TO SATISFY SINKING-FUND REQUIREMENTS. SFAS No.
145 requires, among other things, (i) that the modification of a lease that
results in a change of the classification of the lease from capital to operating
under the provisions of SFAS No. 13 be accounted for as a sale-leaseback
transaction and (ii) the reporting of gains or losses from the early
extinguishment of debt as extraordinary items only if they met the criteria of
Accounting Principles Board Opinion No. 30, REPORTING THE RESULTS OF OPERATIONS.
The rescission of SFAS No. 4 is effective January 1, 2003. The amendment of SFAS
No. 13 is effective for transactions occurring on or after May 15, 2002. The
adoption of this statement will not have a material effect on the Company's
financial statements.
In July 2002, the FASB issued SFAS No. 146, ACCOUNTING FOR COSTS ASSOCIATED
WITH EXIT OR DISPOSAL ACTIVITIES (effective January 1, 2003). SFAS No. 146
replaces current accounting literature and requires the recognition of costs
associated with exit or disposal activities when they are incurred rather than
at the date of a commitment to an exit or disposal plan. The Company does not
anticipate that the adoption of this statement will have a material effect on
the Company's financial statements.
On August 7, 2002, the Company announced that beginning January 1, 2003, it
will expense the cost of employee stock options in accordance with the Statement
of Financial Accounting Standard ("SFAS") No. 123, ACCOUNTING FOR STOCK-BASED
COMPENSATION. On October 4, 2002, the FASB issued an exposure draft proposing to
amend the transition and disclosure provisions of SFAS No. 123. Specifically,
SFAS No. 123, as amended, would permit two additional transition methods for
entities that adopt the fair value method of accounting for stock based employee
compensation. Both of these methods avoid the ramp-up effect on earnings arising
from the prospective application of the fair value method. The Company is
currently in the process of evaluating each of the transition methods and the
impact to the Company's financial position and results of operations.
Page 7
<Page>
VORNADO REALTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(UNAUDITED)
4. ACQUISITIONS AND DISPOSITIONS
ACQUISITIONS
CHARLES E. SMITH COMMERCIAL REALTY L.P.
On January 1, 2002, the Company completed the combination of Charles E.
Smith Commercial Realty L.P. ("CESCR") with Vornado. Prior to the combination,
Vornado owned a 34% interest in CESCR. The consideration for the remaining 66%
of CESCR was approximately $1,600,000,000, consisting of 15.6 million newly
issued Vornado Operating Partnership units and $991,980,000 of debt (66% of
CESCR's total debt).
This acquisition was recorded under the purchase method of accounting. The
purchase price was allocated to acquired assets and assumed liabilities using
their relative fair values as of January 1, 2002 based on valuations and other
studies, certain of which are not yet complete. Accordingly, the initial
valuations are subject to change as such information is finalized. The Company
believes that any such change will not be significant because the allocations
were principally to real estate.
The unaudited pro forma information set forth below presents the condensed
consolidated statements of income for the Company for the three and nine months
ended September 30, 2001 as if the following transactions had occurred on
January 1, 2001, (i) the acquisition of CESCR described above and (ii) the
Company's November 21, 2001 sale of 9,775,000 common shares and the use of
proceeds to repay indebtedness.
<Table>
<Caption>
Condensed Consolidated Statements of Income For the Three Months Ended For the Nine Months Ended
(in thousands, except per share amounts) September 30, September 30,
-------------------------- -------------------------
Pro Forma Pro Forma
2002 2001 2002 2001
----------- ---------- ----------- -----------
Revenues............................................... $ 361,208 $ 344,972 $ 1,060,799 $ 1,024,514
=========== ========== =========== ===========
Income before cumulative effect of change in accounting
principle and extraordinary item..................... $ 62,805 $ 82,597 $ 211,048 $ 214,053
Cumulative effect of change in accounting
principle............................................ -- -- (30,129) (4,110)
Extraordinary item..................................... -- (88) -- 1,082
----------- ----------- ----------- -----------
Net income............................................. 62,805 82,509 180,919 211,025
Preferred share dividends.............................. (5,695) (8,904) (17,722) (27,769)
----------- ----------- ----------- -----------
Net income applicable to common shares................. $ 57,110 $ 73,605 $ 163,197 $ 183,256
=========== ========== =========== ===========
Net income per common share - basic.................... $ .53 $ .75 $ 1.55 $ 1.88
=========== ========== =========== ===========
Net income per common share - diluted.................. $ .52 $ .72 $ 1.49 $ 1.83
=========== ========== =========== ===========
</Table>
Page 8
<Page>
VORNADO REALTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(UNAUDITED)
4. ACQUISITIONS AND DISPOSITIONS - CONTINUED
INVESTMENT IN PRIMESTONE
On September 28, 2000, the Company made a $62,000,000 loan to Primestone
Investment Partners, L.P. ("Primestone"). The Company received a 1% up-front fee
and was entitled to receive certain other fees aggregating approximately 3% upon
repayment of the loan. The loan bore interest at 16% per annum. Primestone
defaulted on the repayment of this loan on October 25, 2001. The loan was
subordinate to $37,957,000 of other debt of the borrower. On October 31, 2001,
the Company purchased the other debt for its face amount. The loans were secured
by 7,944,893 partnership units in Prime Group Realty, L.P., the operating
partnership of Prime Group Realty Trust (NYSE:PGE) and the partnership units are
exchangeable for the same number of common shares of PGE. The loans are also
guaranteed by affiliates of Primestone.
On November 19, 2001, the Company sold, pursuant to a participation
agreement with a subsidiary of Cadim inc., a Canadian pension fund, a 50%
participation in both loans at par for approximately $50,000,000 reducing the
Company's net investment in the loans at December 31, 2001 to $56,768,000
including unpaid interest and fees of $6,790,000.
On April 30, 2002, the Company and Cadim acquired the 7,944,893 partnership
units at a foreclosure auction. The price paid for the units by application of a
portion of Primestone's indebtedness to the Company and Cadim was $8.35 per
unit, the April 30, 2002 closing price of shares of PGE on the New York Stock
Exchange. On June 28, 2002, pursuant to the terms of the participation
agreement, the Company transferred 3,972,447 of the partnership units to Cadim.
In the second quarter, in accordance with foreclosure accounting, the
Company recorded a loss on the Primestone foreclosure of $17,671,000 calculated
based on (i) the acquisition price of the units and (ii) its valuation of the
amounts realizable under the guarantees by affiliates of Primestone, as compared
with the net carrying amount of the investment at April 30, 2002.
At September 30, 2002, the Company's carrying amount of the investment was
$39,485,000, of which $33,170,000 represents the carrying amount of the
3,972,447 partnership units owned by the Company ($8.35 per unit), $7,100,000
represents the amount expected to be realized under the guarantees, offset by
$785,000 representing the Company's share of Prime Group Realty's net loss
through June 30, 2002 (see Note 5. Investments in and Advances to
Partially-Owned Entities). In the three months ended September 30, 2002, the
Company expensed legal fees of $2,229,000 in connection with the ongoing
Primestone litigation and the Company's effort to realize the guarantees.
At October 28, 2002, the closing price of PGE shares on the New York Stock
Exchange was $4.49 per share. The ultimate realization of the Company's
investment will depend upon the future performance of the Chicago real estate
market and the performance of PGE, as well as the ultimate realizable value of
the net assets supporting the guarantees and the Company's ability to collect
under the guarantees. In addition, the Company will continue to monitor this
investment to determine whether additional write-downs are required based on (i)
declines in value of the shares of PGE (for which the partnership units are
exchangeable) which are "other than temporary" as used in accounting literature
and (ii) the amount expected to be realized under the guarantees.
Page 9
<Page>
VORNADO REALTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(UNAUDITED)
4. ACQUISITIONS AND DISPOSITIONS - CONTINUED
CRYSTAL GATEWAY ONE
On July 1, 2002, the Company acquired a 360,000 square foot office building
from a limited partnership, which is approximately 50% owned by Mr. Robert
H. Smith and Mr. Robert P. Kogod and members of the Smith and Kogod families,
trustees of the Company, in exchange for approximately 325,700 newly issued
Vornado Operating Partnership units (valued at $13,679,000) and the assumption
of $58,500,000 of debt. The building is located in the Crystal City complex in
Arlington, Virginia where the Company already owns 24 office buildings
containing over 6.9 million square feet, which it acquired on January 1, 2002,
in connection with the Company's acquisition of CESCR. In March 2002, the
Company purchased the mortgage on this property for $55,000,000. On June 28,
2002, the limited partnership completed a $58,500,000 mortgage refinancing which
bears interest at 6.75% and matures in July 2012 and repaid the Company's
$55,000,000 mortgage.
LAS CATALINAS
On September 23, 2002, the Company increased its interest in the Las
Catalinas Mall located in Caguas, Puerto Rico (San Juan area) to 100% by
acquiring the 50% of the mall and the 25% of Kmart's anchor store it did not
already own. The purchase price was $48,000,000, including $32,000,000 of
indebtedness. The Las Catalinas Mall, which opened in 1997, contains 492,000
square feet, including a 123,000 square foot Kmart and a 138,000 square foot
Sears owned by a third party.
MONMOUTH MALL
On October 10, 2002, a joint venture in which the Company has a 50%
interest, acquired the Monmouth Mall, an enclosed regional shopping center
located in Eatontown, New Jersey containing approximately 1.5 million square
feet, including four department stores, two of which aggregating 485,000 square
feet are owned by the tenants. The purchase price was approximately
$164,700,000, including transaction costs of $4,400,000. The Company made a
$7,000,000 common equity investment in the venture and provided it with
$23,500,000 of preferred equity yielding 14%. The venture financed the purchase
of the Mall with $135,000,000 of floating debt at LIBOR plus 2.05%, with a LIBOR
floor of 2.50% on $35,000,000, a three year term and two one-year extension
options.
The acquisitions of Crystal Gateway One and Las Catalinas were recorded
under the purchase method of accounting. The purchase price for these
acquisitions was allocated to acquired assets and assumed liabilities using
their relative fair values as of the acquisition dates based on valuations and
other studies certain of which are not yet complete. Accordingly, the initial
valuations are subject to change as such information is finalized. The Company
believes that any such change will not be significant because the allocations
were principally to real estate. The Company's investment in the Monmouth Mall
was recorded under the purchase method and will be accounted for under the
equity method as the Company does not have unilateral control over the joint
venture.
Page 10
<Page>
VORNADO REALTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(UNAUDITED)
4. ACQUISITIONS AND DISPOSITIONS - CONTINUED
DISPOSITIONS
The following table sets forth the details of net gain on disposition of
wholly-owned and partially-owned assets for the three and nine months ended
September 30, 2002 and 2001:
<Table>
<Caption>
For the Three Months Ended For the Nine Months Ended
(dollars in thousands) September 30, September 30,
-------------------------- -------------------------
2002 2001 2002 2001
----------- ---------- ---------- ----------
Wholly-owned Assets:
Gain on transfer of mortgages........................... $ 2,096 $ -- $ 2,096 $ --
Net gain on sale of air rights -
175 Lexington Avenue(1).............................. 2,126 -- 2,126 --
Gain on sale of Kinzie Park condominiums units.......... 281 -- 2,156 --
Net gain on sale of marketable securities............... -- -- 12,346 --
Loss on Primestone foreclosure.......................... -- -- (17,671) --
Net gain from condemnation proceedings.................. -- -- -- 3,050
Write-off of investments in technology companies........ -- -- -- (18,284)
Partially-owned Assets:
After-tax net gain on sale of Park Laurel condominium
units................................................ -- 13,869 -- 13,869
Write-off of net investment in Russian Tea Room......... -- (7,374) -- (7,374)
Net gain on sale of 50% interest in 570 Lexington Avenue -- -- -- 12,445
----------- ---------- ---------- ----------
$ 4,503 $ 6,495 $ 1,053 $ 3,706
=========== ========== ========== ==========
</Table>
- ----------
(1) In June 2000, the 175 Lexington Avenue development commenced
construction of a 45,000 square foot building containing approximately
2,300 square feet of community facility space and 39,000 square feet
of low income residential housing to be exchanged upon completion for
air rights. The total cost of the project was $16,256. Upon completion
of the project in June 2002, the Company received 163,728 square feet
of air rights of which 138,681 square feet were sold, including 31,885
square feet to Alexander's. The Company's net gain was $2,126. The
balance of the air rights of 25,047 square feet was sold to
Alexander's in the fourth quarter of 2002 resulting in a net gain to
the Company of $403 (see Note 5 - Investment in partially-owned
entities - Alexander's).
CAPITAL TRUST
On September 30, 2002, the Company's investment in preferred securities of
Capital Trust ("CT") was partially redeemed for its $20,000,000 liquidation
amount. At September 30, 2002, the Company's remaining investment in CT
consisted of $30,000,000 of convertible preferred securities, convertible into
common shares of CT at any time after September 30, 2004 at $7.00 per share.
Page 11
<Page>
VORNADO REALTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(UNAUDITED)
5. INVESTMENTS IN AND ADVANCES TO PARTIALLY-OWNED ENTITIES
The Company's investments in and advances to partially-owned entities
are as follows:
INVESTMENTS AND ADVANCES:
<Table>
<Caption>
(dollars in thousands) September 30, 2002 December 31, 2001
------------------ -----------------
Temperature Controlled Logistics.......................... $ 451,399 $ 474,862
Charles E. Smith Commercial Realty L.P. ("CESCR")(1)...... -- 347,263
Alexander's............................................... 192,831 188,522
Newkirk Joint Ventures(2)................................. 168,624 191,534
Prime Group Realty, L.P. and other guarantees(3).......... 39,485 --
Partially-Owned Office Buildings(4)....................... 30,164 23,346
Starwood Ceruzzi Joint Ventures........................... 25,865 25,791
Park Laurel............................................... 4,789 (4,745)
Other..................................................... 38,125 23,622
----------- -----------
$ 951,282 $ 1,270,195
=========== ===========
</Table>
- ----------
(1) On January 1, 2002, the Company acquired the remaining 66% of
CESCR it did not previously own. Accordingly, CESCR is
consolidated as of January 1, 2002.
(2) The Company's investment in and advances to Newkirk Joint
Ventures is comprised of:
<Table>
<Caption>
September 30, 2002 December 31, 2001
------------------ -----------------
Investments in limited partnerships.. $ 120,359 $ 143,269
Mortgages and loans receivable....... 39,511 39,511
Other................................ 8,754 8,754
------------- -------------
Total................................ $ 168,624 $ 191,534
============= =============
</Table>
On January 2, 2002, the Newkirk Joint Ventures' partnership
interests were merged into a master limited partnership (the
"MLP") in which the Company has a 21% interest. In conjunction
with the merger, the MLP completed a $225,000 mortgage financing
collateralized by its properties, subject to the existing first
and certain second mortgages on those properties. The loan bears
interest at LIBOR plus 5.5% with a LIBOR floor of 3% (8.5% at
September 30, 2002) and matures on January 31, 2005, with two
one-year extension options. As a result of the financing on
February 6, 2002, the MLP repaid approximately $28,200 of
existing debt and distributed approximately $37,000 to the
Company.
(3) The Company's carrying amount of the investment, accounted for
under the equity method, consists of 3,972,447 partnership units
valued at $33,170 ($8.35 per unit) and guarantees valued at
$7,100, offset by $785 representing the Company's share of Prime
Group's net loss from May 1, 2002 through June 30, 2002. Prior to
April 30, 2002, this investment was in the form of a loan and was
included in Notes and Mortgage Loans Receivable on the balance
sheet.
(4) As at September 30, 2002, includes a 20% interest in a property
which was part of the CESCR acquisition in 2002.
Page 12
<Page>
VORNADO REALTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(UNAUDITED)
5. INVESTMENTS IN AND ADVANCES TO PARTIALLY-OWNED ENTITIES - CONTINUED
Below is a summary of all of the debt of partially owned entities, none of
which is guaranteed by the Company.
<Table>
<Caption>
(amounts in thousands) 100% OF
PARTIALLY-OWNED ENTITIES DEBT
--------------------------------
SEPTEMBER 30, DECEMBER 31,
2002 2001
--------------- --------------
Alexander's (33.1% interest) (see "Alexander's" on page 15 for further details):
Term loan secured by all of Alexander's assets except for the Kings Plaza
Regional
Shopping Center:
Portion financed by the Company due on January 3, 2006 with interest
at 12.48%...................................................................... $ 95,000 $ 95,000
Portion financed by a bank, due March 15, 2003, with interest at LIBOR +
1.85% (repaid on July 3, 2002)................................................. -- 10,000
Unsecured Line of Credit financed by the Company, due on January 3, 2006 with
interest at 12.48%.................................................................. 24,000 24,000
Lexington Avenue construction loan payable, due on December 31, 2005, plus two
one-year extensions, with interest at LIBOR plus 2.50% (4.32% at September 30,
2002)............................................................................... 55,500 --
Rego Park mortgage payable, due in June 2009, with interest at 7.25%................... 82,000 82,000
Kings Plaza Regional Shopping Center mortgage payable, due in June 2011,
with interest at 7.46% (prepayable with yield maintenance).......................... 219,968 221,831
Paramus mortgage payable, due in October 2011, with interest at 5.92%
(prepayable without penalty)........................................................ 68,000 68,000
Other notes and mortgages payable (repaid on July 3, 2002)............................. -- 15,000
Temperature Controlled Logistics (60% interest):
Mortgage notes payable collateralized by 58 temperature controlled
warehouses, due in May 2008, requires amortization based on a 25 year term with
interest at 6.94% (prepayable with yield maintenance)............................... 576,220 563,782
Other notes and mortgages payable...................................................... 15,324 38,748
Newkirk Joint Ventures (21.5% interest):
Portion of first mortgages and contract rights, collateralized by the
partnerships' real estate, due from 2002 to 2024, with a weighted average
interest rate of 11.31% at September 30, 2002 (various prepayment rights)........... 1,467,238 1,336,989
Charles E. Smith Commercial Realty L.P. (34% interest in 2001):
29 mortgages payable................................................................... -- 1,470,057
Prime Group Realty L.P. (14.9% interest)(1):
24 mortgages payable................................................................... 820,213 --
Partially Owned Office Buildings:
330 Madison Avenue (25% interest) mortgage note payable, due in April 2008,
with interest at 6.52 % (prepayable with yield maintenance)........................ 60,000 60,000
Fairfax Square (20% interest) mortgage note payable due in August 2009, with
interest at 7.50%................................................................... 69,170 --
825 Seventh Avenue (50% interest) mortgage payable, due in October 2014, with
interest at 8.07% (prepayable with yield maintenance)............................... 23,356 23,552
Las Catalinas Mall (50% interest):
Mortgage notes payable(2)........................................................... -- 68,591
Russian Tea Room (50% interest) mortgages payable, due in March 2012, with interest at
Prime plus 50 basis points (5.25% at September 30, 2002)(3)......................... 13,000 13,000
</Table>
Based on the Company's ownership interest in the partially-owned entities
above, the Company's share of the debt of these partially-owned entities was
$975,851,000 and $1,319,535,000 as of September 30, 2002 and December 31, 2001.
- ----------
(1) Balance as of June 30, 2002, as Prime Group's quarterly report on Form 10-Q
for the period ended September 30, 2002, has not been filed prior to the
filing of this quarterly report on Form 10-Q.
(2) The Company increased its interest in Las Catalinas to 100% on September
23, 2002. Accordingly, Las Catalinas is consolidated as of September 30,
2002.
(3) On July 28, 2002 the Russian Tea Room ceased operations which represented
an event of default under the loans.
Page 13
<Page>
VORNADO REALTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(UNAUDITED)
5. INVESTMENTS IN AND ADVANCES TO PARTIALLY-OWNED ENTITIES - CONTINUED
Below is a summary of the Company's share of income (loss) from
partially-owned entities for the three and nine months ended September 31, 2002
and 2001.
<Table>
<Caption>
For The Three Months For The Nine Months
(amounts in thousands) Ended September 30, Ended September 30,
------------------------------- -------------------------------
2002 2001 2002 2001
------------ ------------ ------------ ------------
Income applicable to Alexander's:
33.1% share of equity in net income (1)............... $ 5,603 $ 592 $ 6,097 $ 8,283
Interest income (2)................................... 2,531 2,659 7,818 9,021
Management fees....................................... 903 879 2,702 2,663
Development fees (2).................................. 2,022 188 3,997 563
Leasing and other fees (2)............................ 562 124 1,062 892
Guarantee fees (2).................................... 933 -- 933 --
------------ ------------ ------------ ------------
$ 12,554 $ 4,442 $ 22,609 $ 21,422
============ ============ ============ ============
Temperature Controlled Logistics:
60% share of equity in net (loss) income (3).......... $ (2,125) $ 1,353 $ 952 $ 7,324
Management fees....................................... 1,520 1,887 4,835 5,585
------------ ------------ ------------ ------------
(605) 3,240 5,787 12,909
------------ ------------ ------------ ------------
CESCR-34% share of equity in net income (4)............. -- 7,218 -- 21,413
------------ ------------ ------------ ------------
Newkirk Joint Ventures:
Equity in net income of limited partnerships.......... 6,987(5) 6,635 18,600(5) 19,738
Interest and other income............................. 913 1,273 5,300 4,098
------------ ------------ ------------ ------------
7,900 7,908 23,900 23,836
------------ ------------ ------------ ------------
Prime Group Realty, L.P. -
14.9% share of equity in net loss (6)................. (785) -- (785) --
Partially-Owned Office Buildings (7).................... 598 411 1,874 3,276
Other................................................... (416) 79 (472) 640(8)
------------ ------------ ------------ ------------
$ 6,692 $ 18,856 $ 30,304 $ 62,074
============ ============ ============ ============
</Table>
- ----------
(1) Equity in income for the three and nine months ended September 30, 2002
includes $3,431 representing the Company's share of Alexander's gain on
sale of its Third Avenue property. Equity in income for the three months
ended September 30, 2002, also includes $1,402 representing the Company's
share of the reversal of Alexander's stock appreciation rights compensation
expense recorded in the quarter ended June 30, 2002. Equity in income for
the nine months ended September 30, 2001 includes $6,298 representing the
Company's share of Alexander's gain on sale of its Fordham Road property
and excludes $1,170 representing the Company's share of Alexander's
extraordinary gain on the early extinguishment of debt on this property
which is reflected as an extraordinary item on the consolidated statements
of income.
(2) Alexander's capitalizes the fees and interest charged by the Company.
Because the Company owns 33.1% of Alexander's, the Company recognizes 66.9%
of such amounts as income and the remainder is reflected as a reduction of
the Company's carrying amount of the investment in Alexander's.
(3) Equity in net (loss) income for the three and nine months ended September
30, 2002, reflects a decrease in rental income of $3,568 and $4,919,
respectively. Equity in net income for the nine months ended September 30,
2002 includes a $1,923 loss on the disposition of an asset.
(4) On January 1, 2002, the Company acquired the remaining 66% of CESCR it did
not previously own. Accordingly, CESCR is consolidated as of January 1,
2002.
(5) Includes $1,200 for the Company's share of Newkirk's loss on the sale of a
property.
(6) Represents the Company's share of net loss for the period from April 30,
2002 (date of acquisition) to June 30, 2002, which includes (i) a loss of
$357 from discontinued operations and (ii) a loss of $147 from the sale of
real estate. The Company's share of equity in income or loss for the period
from July 1, 2002 to September 30, 2002 will be recognized in earnings in
the quarter ended December 31, 2002, as the investee has not released its
third quarter 2002 earnings prior to the filing of the Company's quarterly
report on Form 10-Q.
(7) 2002 includes a 20% interest in a property which was part of the
acquisition of CESCR. 2002 and the three months ended September 30, 2001 do
not include 570 Lexington Avenue which was sold in May 2001.
(8) Includes $1,300 for the Company's share of the Starwood Ceruzzi Joint
Venture's gain on the sale of a property.
Page 14
<Page>
VORNADO REALTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(UNAUDITED)
5. INVESTMENTS IN AND ADVANCES TO PARTIALLY-OWNED ENTITIES - CONTINUED
TEMPERATURE CONTROLLED LOGISTICS
The Company's joint venture does not recognize rental income unless earned
and collection is assured or cash is received. As a result, the Company did not
recognize its share of the rent the joint venture was due amounting to
$6,808,000 and $12,361,000 for the three and nine months ended September 30,
2002 and $5,311,000 and $7,651,000 for the three and nine months ended September
30, 2001. At September 30, 2002, the Company's share of the joint venture's
total deferred rent receivable from its tenant is $17,362,000.
ALEXANDER'S
Investment
The Company owns 1,655,000 common shares or 33.1% of the outstanding common
stock of Alexander's at September 30, 2002. Alexander's is managed by and its
properties are leased and developed by the Company pursuant to management,
leasing and development agreements with one-year terms expiring in March of each
year, which are automatically renewable. In conjunction with the closing of the
Alexander's Lexington Avenue construction loan on July 3, 2002, these agreements
were revised to cover the Alexander's Lexington Avenue property separately.
Further, the Lexington Avenue management and development agreements were amended
to provide for a term lasting until substantial completion of the development of
the property, with automatic renewals, and for the payment of the development
fee upon the earlier of January 3, 2006, or the payment in full of the
construction loan encumbering the property. The Company is entitled to a
development fee estimated to be approximately $26,300,000, based on 6% of
construction costs, as defined, of which $2,022,000 has been recognized as
income during the three months ended September 30, 2002.
Debt
At September 30, 2002, the Company has loans receivable from Alexander's of
$119,000,000, including $24,000,000 under the $50,000,000 secured line of credit
the Company granted to Alexander's. On March 15, 2002, the loan and the line of
credit were extended to April 15, 2003. The interest rates on the loan and line
of credit were reset on March 15, 2002, from 13.74% to 12.48%, using a Treasury
index (with a 3% floor) plus the same spread to treasuries as previously
existed. On July 3, 2002, in conjunction with the closing of Alexander's
Lexington Avenue construction loan, the maturity of the Company's loans was
extended to the earlier of January 3, 2006 or the date the Alexander's Lexington
Avenue construction loan is repaid in full and the debt was assigned to the
various subsidiaries of Alexander's (all guaranteed by Alexander's). In
addition, amounts which may be due under the Completion Guarantee described in
the next paragraph would be due at the same time.
On July 3, 2002, Alexander's finalized a $490,000,000 loan with HVB Real
Estate Capital (HYPO Vereinsbank) to finance the construction of its 1.3 million
square foot multi-use building at its 59th Street and Lexington Avenue location.
The estimated construction costs in excess of the construction loan of
approximately $140,000,000 will be provided by Alexander's. The loan has an
interest rate of LIBOR plus 2.5% and a term of forty-two months plus two
one-year extensions. Alexander's has received an initial funding of $55,500,000
under the loan of which $25,000,000 was used to repay existing loans and notes
payable. Pursuant to this loan, Vornado has agreed to guarantee, among other
things, the lien free, timely completion of the construction of the project and
funding of project costs in excess of a stated budget, as defined in the loan
agreement, if not funded by Alexander's (the "Completion Guarantee"). The
$6,300,000 estimated fee payable by Alexander's to the Company for the
Completion Guarantee is 1% of construction costs (as defined) and is payable at
the same time that the development fee is payable. In addition, if the Company
should advance any funds under the Completion Guarantee in excess of the
$26,000,000 currently available under the secured line of credit, interest on
those advances is at 15% per annum.
Other
The Company sold 56,932 square feet of air rights to Alexander's for an
average price of $114 per square foot in July and October 2002.
Page 15
<Page>
VORNADO REALTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(UNAUDITED)
6. DEBT AND EQUITY FINANCING
Following is a summary of the Company's debt, by segment, at September 30,
2002:
(amounts in thousands)
<Table>
<Caption>
INTEREST RATE BALANCE AS OF
AS AT -----------------------------
SEPTEMBER 30, SEPTEMBER 30, DECEMBER 31,
MATURITY 2002 2002 2001
----------- -------------- ------------- -------------
Notes and Mortgages Payable:
Fixed Interest:
Office:
NYC Office:
Two Penn Plaza.............................. 03/04 7.08% $ 155,446 $ 157,697
888 Seventh Avenue.......................... 02/06 6.63% 105,000 105,000
Eleven Penn Plaza........................... 05/07 8.39% 50,639 51,376
866 UN Plaza................................ 04/04 7.79% 33,000 33,000
CESCR Office (1):
Crystal Park 1-5............................ 07/06-08/13 6.66%-8.39% 265,692 (1)
Crystal Gateway Crystal Square 5............ 07/12-01/25 6.75%-7.09% 216,362 (1)
Crystal Square 2, 3 and 4................... 10/10-11/14 7.08%-7.14% 145,779 (1)
Skyline Place............................... 08/06-12/09 6.6%-6.75% 140,838 (1)
1101 17th, 1140 Connecticut, 1730 M &
1150 17th................................. 08/10 6.74% 97,662 (1)
Courthouse Plaza 1 and 2.................... 01/08 7.05% 80,462 (1)
Crystal Gateway N., Arlington Plaza and
1919 S. Eads.............................. 11/07 6.77% 73,013 (1)
Reston Executive I, II & III................ 01/06 6.75% 73,956 (1)
Crystal Plaza 1-6........................... 10/04 6.65% 70,893 (1)
One Skyline Tower........................... 06/08 7.12% 65,994 (1)
Crystal Malls 1-4........................... 12/11 6.91% 67,091 (1)
1750 Pennsylvania Avenue.................... 06/32 7.26% 49,903 (1)
One Democracy Plaza......................... 02/05 6.75% 27,852 (1)
Retail:
Cross collateralized mortgages payable on
42 shopping centers....................... 03/10 7.93% 488,523 492,156
Green Acres Mall............................ 02/08 6.75% 151,282 152,894
Montehiedra Town Center..................... 05/17 8.23% 59,827 60,359
Las Catalinas Mall (2)...................... 11/13 6.97% 67,923 --
Merchandise Mart:
Market Square Complex....................... 07/11 7.95% 48,651 49,702
Washington Design Center.................... 10/11 6.95% 48,622 48,959
Washington Office Center.................... 02/04 6.80% 45,345 46,572
Other....................................... 03/09-06/13 7.03%-7.71% 44,706 18,951
Other:
Industrial Warehouses....................... 10/11 6.95% 49,561 50,000
Student Housing Complex..................... 11/07 7.45% 19,078 19,243
Other....................................... 7.95% 6,944 8,659
------------- -------------
Total Fixed Interest Notes and Mortgages
Payable............................. 7.13% 2,750,044 1,294,568
------------- -------------
</Table>
- ----------
See footnotes on the following page.
Page 16
<Page>
VORNADO REALTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(UNAUDITED)
6. DEBT AND EQUITY FINANCING - CONTINUED
<Table>
<Caption>
INTEREST RATE BALANCE AS OF
(amounts in thousands) AS AT ------------------------------
SEPTEMBER 30, SEPTEMBER 30, DECEMBER 31,
MATURITY SPREAD(7) 2002 2002 2001
----------- ---------- -------------- -------------- -------------
Notes and Mortgages Payable:
Variable Interest:
Office:
NYC Office:
One Penn Plaza (3)............................ 06/03 L+125 3.23% $ 275,000 $ 275,000
770 Broadway/595 Madison Avenue
cross-collateralized mortgage (4)........... 04/03 L+40 2.22% 153,659 123,500
909 Third Avenue.............................. 07/03 L+165 3.47% 106,129 105,253
Two Park Avenue (5)........................... 03/03 L+145 -- -- 90,000
CESCR Office:
Tyson Dulles Plaza............................ 06/03 L+130 3.11% 69,788 (1)
Commerce Executive III, IV & V................ 07/03 L+150 3.31% 53,488 (1)
Seven Skyline (5)............................. 10/02 L+135 -- -- (1)
Merchandise Mart:
Merchandise Mart (5).......................... 10/02 L+150 -- -- 250,000
Furniture Plaza............................... 02/03 L+200 3.82% 48,290 43,524
33 North Dearborn Street...................... 09/03 L+175 3.57% 19,000 19,000
350 North Orleans (5)......................... 06/02 L+165 -- -- 70,000
Other......................................... 01/03 P-50 4.25% 60 294
Other:
Palisades construction loan................... 01/03 L+185 3.66% 99,738 90,526
Hotel Pennsylvania (6)........................ 10/02 L+160 -- -- 115,508
----------- -----------
Total Variable Interest Notes and
Mortgages Payable...................... 3.60% 825,152 1,182,605
----------- -----------
Total Notes and Mortgages Payable................ $ 3,575,196 $ 2,477,173
=========== ===========
Senior unsecured notes due 2007,
at fair value (5)............................. 06/07 L+77 2.59% $ 536,612 $ --
----------- -----------
Unsecured revolving credit facility.............. 03/03 L+90 -- $ -- $ --
=========== ===========
</Table>
- ----------
(1) On January 1, 2002, the Company acquired the remaining 66% of CESCR it
did not previously own. Prior to January 1, 2002, the Company's share of
CESCR's debt was included in Investments in and Advances to
Partially-Owned Entities. In connection with the acquisition, CESCR's
fixed rate debt of $1,289,837 was fair valued at $1,322,685 under
purchase accounting.
(2) On September 23, 2002, the Company acquired the 50% of the Mall and the
25% of Kmart's anchor store it did not already own. Prior to this date,
the Company accounted for its investment on the equity method and the
Company's share of the debt was included in Investments in and Advances
to Partially-Owned Entities.
(3) On June 21, 2002, one of the lenders purchased the other participant's
interest in the loan. At the same time, the loan was extended for one
year, with certain modifications including, (i) making the risk of a loss
due to terrorism (as defined) not covered by insurance recourse to the
Company and (ii) the granting of two 1-year renewal options to the
Company.
(4) On April 1, 2002, the Company increased its mortgage financing
cross-collateralized by its 770 Broadway/595 Madison Avenue properties by
$115,000. On July 15, 2002, the Company repaid $84,841 with proceeds
received from a third party which resulted in a gain on transfer of
mortgages of $2,096. The proceeds of the loan are in a restricted
mortgage escrow account which bears interest at the same rate as the
loan, and at September 30, 2002 totals $153,659.
(5) On June 24, 2002, the Company completed an offering of $500,000 aggregate
principal amount of 5.625% senior unsecured notes due June 15, 2007.
Interest on the notes is payable semi-annually on June 15th and December
15th, commencing December 15, 2002. The notes were priced at 99.856% of
their face amount to yield 5.659%. Of the net proceeds of approximately
$496,300, (i) $70,000 was used to repay the mortgage payable on 350 North
Orleans prior to June 30, 2002 and (ii) $393,000 was used to repay the
mortgages on Two Park Avenue, the Merchandise Mart and a portion of Seven
Skyline in July and August 2002. On June 27, 2002, the Company entered
into interest rate swaps that effectively converted the interest rate on
the $500,000 senior unsecured notes due 2007 from a fixed rate of 5.625%
to a floating rate of LIBOR plus .7725%, based upon the trailing 3 month
LIBOR rate (2.53% at October 28, 2002). In accordance with SFAS 133, as
amended, these swaps were designated and effective as fair value hedges.
Accounting for these swaps requires the Company to recognize changes in
the fair value of the debt during each reporting period. At September 30,
2002, the fair value adjustment was $37,293 based on the fair value of
the swaps and is included in the balance of the Senior Unsecured Notes
above.
(6) On April 1, 2002, the loan was prepaid in full.
(7) Indicates spread over LIBOR ("L") or Prime rate ("P").
Page 17
<Page>
VORNADO REALTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(UNAUDITED)
6. DEBT AND EQUITY FINANCING - CONTINUED
The scheduled contractual principal repayments for the next five years
and thereafter are as follows:
<Table>
<Caption>
(amounts in thousands)
AS AT
YEAR ENDING DECEMBER 31, SEPTEMBER 30, 2002
------------------------ ------------------
2002.............................................. $ --
2003.............................................. 825,152(1)
2004.............................................. 304,684
2005.............................................. 27,852
2006.............................................. 262,047
Thereafter........................................ 2,654,780
</Table>
- ----------
(1) Includes $153,659, which is offset by an equivalent amount
of cash held in a restricted mortgage escrow account.
The Company's debt instruments, consisting of mortgage loans secured by its
properties (which are generally non-recourse to the Company), its revolving
credit agreement and its senior unsecured notes due 2007, contain customary
covenants requiring the Company to maintain insurance. There can be no assurance
that the lenders under these instruments will not take the position that an
exclusion from all risk insurance coverage for losses due to terrorist acts is a
breach of these debt instruments that allows the lenders to declare an event of
default and accelerate repayment of debt. The Company has received
correspondence from four lenders regarding terrorism insurance coverage, to
which the Company has responded. If lenders insist on coverage for these risks,
it could adversely affect the Company's ability to finance and/or refinance its
properties and to expand its portfolio.
EQUITY
On February 25, 2002, the Company sold 1,398,743 common shares based on the
closing price of $42.96 on the NYSE. The net proceeds to the Company were
approximately $57,042,000.
On October 1, 2002, the Operating Partnership redeemed 1,000,000 of the
outstanding Series D-5 Perpetual Preferred Units for $25,000,000, the
liquidation value of the units.
7. 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 $439,000 and $250,000
for the three months ended September 30, 2002 and 2001 and $1,023,000 and
$1,134,000 for the nine months ended September 30, 2002 and 2001.
The estate of Bernard Mendik and certain other individuals including Mr.
Greenbaum, one of the Company's executive officers, own 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 $13,728,000 and $12,381,000 for the
three months ended September 30, 2002 and 2001, and $41,349,000 and $38,006,000
for the nine months ended September 30, 2002 and 2001.
On September 30, 2002, the Company issued 107,134 Class A Operating
Partnership units (valued at $4,400,000) to the estate of Bernard Mendik and the
Mendik Realty Company, Inc., of which Mr. Greenbaum, an executive officer of the
Company received 4,677 Class A units, in accordance with the earn-out provisions
of the Agreement for Contribution of Interests in 20 Broad Street LLC, dated
August 5, 1998.
Page 18
<Page>
VORNADO REALTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(UNAUDITED)
7. OTHER RELATED PARTY TRANSACTIONS - CONTINUED
Effective January 1, 2002, the Company extended its employment agreement
with Mr. Fascitelli for a five year period through December 31, 2006. Pursuant
to the extended employment agreement, he is entitled to receive a deferred
payment on December 31, 2006 of 626,566 Vornado common shares which are valued
for compensation purposes at $27,500,000 (the value of the shares on March 8,
2002, the date the extended employment agreement was signed). The number of
shares was set by the Company's Compensation Committee in December 2001 to
achieve a value of $25,000,000 and had appreciated $2,500,000 as of March 8,
2002. The shares are being held in an irrevocable trust for the benefit of Mr.
Fascitelli and will vest on December 31, 2002. Mr. Fascitelli will also receive
regular annual cash compensation as determined by the Company's Compensation
Committee and will continue as a member of Vornado's Board of Trustees. Mr.
Fascitelli may also borrow up to $20,000,000 from the Company during the term of
his 2002 employment agreement reduced by $8,600,000, the amount of his
outstanding loans under his 1996 employment agreement. Each loan will bear
interest, payable quarterly, at the applicable Federal Rate on the date the loan
is made and will mature on the fifth anniversary of the loan.
On May 29, 2002, Mr. Roth replaced common shares of the Company securing
the Company's outstanding loan to Mr. Roth with options to purchase common
shares of the Company with a value of not less than two times the loan amount.
Pursuant to the Company's annual compensation review in February 2002 with
Joseph Macnow, the Company's Chief Financial Officer, the Compensation Committee
approved a $2,000,000 loan to Mr. Macnow, bearing interest at the applicable
federal rate of 4.65% per annum and due January 1, 2006. The loan, which was
funded on July 23, 2002, was made in conjunction with Mr. Macnow's June 2002
exercise of options to purchase 225,000 shares of the Company's common stock.
The loan is collateralized by assets with a value of not less than two times the
loan amount.
VORNADO OPERATING COMPANY ("VORNADO OPERATING")
Pursuant to a revolving credit facility which expires December 31, 2004,
Vornado Operating owes the Company $32,836,000 at September 30, 2002. Vornado
Operating has disclosed that in the aggregate its investments do not, and for
the foreseeable future are not expected to, generate sufficient cash flow to pay
all of its debts and expenses. Further, Vornado Operating states that its only
investee, AmeriCold Logistics ("Tenant"), anticipates that its Landlord, a
partnership 60% owned by the Company and 40% owned by Crescent Real Estate
Equities, will need to restructure the leases between the Landlord and the
Tenant to provide additional cash flow to the Tenant (the Landlord has
previously restructured the leases to provide additional cash flow to the
Tenant). Management anticipates a further lease restructuring and the sale of
non-core assets by AmeriCold Logistics, and accordingly, Vornado Operating is
expected to have a source to repay the debt under this facility, which may be
extended. Since January 1, 2002, the Company has not recognized interest income
on the debt under this facility.
Page 19
<Page>
VORNADO REALTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(UNAUDITED)
8. INCOME PER SHARE
The following table sets forth the computation of basic and diluted income
per share:
<Table>
<Caption>
For The Three Months For The Nine Months
Ended September 30, Ended September 30,
---------------------------- ----------------------------
2002 2001 2002 2001
------------ ------------ ------------ ------------
(amounts in thousands except per share amounts)
Numerator:
Income before cumulative effect of change in
accounting principle and extraordinary item........... $ 62,805 $ 76,780 $ 211,048 202,341
Cumulative effect of change in accounting
principle............................................. -- -- (30,129) (4,110)
Extraordinary item...................................... -- -- -- 1,170
------------ ------------ ------------ ------------
Net income.............................................. 62,805 76,780 180,919 199,401
Preferred share dividends............................... (5,695) (8,904) (17,722) (27,769)
------------ ------------ ------------ ------------
Numerator for basic and diluted income per
share - net income applicable to common shares.......... $ 57,110 $ 67,876 $ 163,197 $ 171,632
============ ============ ============ ============
Denominator:
Denominator for basic income per share - weighted
average shares........................................ 106,830 88,783 105,276 87,511
Effect of dilutive securities:
Employee stock options................................ 3,118 3,276 3,792 2,844
Deferred compensation shares issued but not yet
earned.............................................. 401 -- 254 --
------------ ------------ ------------ ------------
Denominator for diluted income per share -
adjusted weighted average shares and
assumed conversions................................... 110,349 92,059 109,322 90,355
============ ============ ============ ============
INCOME PER COMMON SHARE - BASIC:
Income before cumulative effect of change in
accounting principle and extraordinary item......... $ .53 $ .76 $ 1.84 $ 2.00
Cumulative effect of change in accounting
principle........................................... -- -- (.29) (.05)
Extraordinary item.................................... -- -- -- .01
------------ ------------ ------------ ------------
Net income per common share........................... $ .53 $ .76 $ 1.55 $ 1.96
============ ============ ============ ============
INCOME PER COMMON SHARE - DILUTED:
Income before cumulative effect of change in
accounting principle and extraordinary item ........ $ .52 $ .74 $ 1.77 $ 1.94
Cumulative effect of change in accounting
principle.......................................... -- -- (.28) (.05)
Extraordinary item.................................... -- -- -- .01
------------ ------------ ------------ ------------
Net income per common share........................... $ .52 $ .74 $ 1.49 $ 1.90
============ ============ ============ ============
</Table>
Page 20
<Page>
VORNADO REALTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(UNAUDITED)
9. COMPREHENSIVE INCOME
The following table sets forth the Company's comprehensive income:
<Table>
<Caption>
(amounts in thousands) For The Three Months For The Nine Months
Ended September 30, Ended September 30,
---------------------------- ----------------------------
2002 2001 2002 2001
------------ ------------ ------------ ------------
Net income applicable to common shares............ $ 57,110 $ 67,876 $ 163,197 $ 171,632
Adjustment to record cumulative effect of change
in accounting principle....................... -- -- -- 4,110
Other comprehensive income (loss)................. (169) (6,694) (9,870) 2,356
------------ ------------ ------------ ------------
Comprehensive income.............................. $ 56,941 $ 61,182 $ 153,327 $ 178,098
============ ============ ============ ============
</Table>
10. COMMITMENTS AND CONTINGENCIES
At September 30, 2002, the Company's $1,000,000,000 revolving credit
facility had a zero balance, and the Company utilized $9,112,000 of availability
under the facility for letters of credit and guarantees, in addition to
$7,500,000 of other letters of credit outstanding.
In conjunction with the closing of Alexander's Lexington Avenue
construction loan on July 3, 2002, the Company agreed to guarantee, among other
things, the lien free, timely completion of the construction of the project and
funding of all project costs in excess of a stated budget, as defined in the
loan agreement, if not funded by Alexander's (see note 5 - Investments in and
Advances to Partially-Owned Entities).
Each of the Company's properties has been subjected to varying degrees of
environmental assessment at various times. The environmental assessments did not
reveal any material environmental contamination. However, there can be no
assurance that the identification of new areas of contamination, changes in the
extent or known scope of contamination, the discovery of additional sites, or
changes in cleanup requirements would not result in significant costs to the
Company.
The Company carries comprehensive liability and all risk property insurance
(fire, flood, extended coverage and rental loss insurance) with respect to its
assets. The Company's all risk insurance policies in effect before September 11,
2001 do not expressly exclude coverage for hostile acts, except for acts of war.
Since September 11, 2001, insurance companies have for the most part excluded
terrorist acts from coverage in all risk policies. The Company has generally
been unable to obtain all risk insurance which includes coverage for terrorist
acts for policies it has renewed since September 11, 2001, for each of its
businesses. In 2002, the Company obtained $200,000,000 of separate coverage for
terrorist acts for each of its New York City Office, Washington, D.C. Office,
Retail and Merchandise Mart businesses and $60,000,000 for its Temperature
Controlled Logistics business. Therefore, the Company is at risk for financial
loss in excess of these limits for terrorist acts (as defined), which loss could
be material.
Page 21
<Page>
VORNADO REALTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(UNAUDITED)
10. COMMITMENTS AND CONTINGENCIES - CONTINUED
The Company's debt instruments, consisting of mortgage loans secured by
its properties (which are generally non-recourse to the Company), its senior
unsecured notes due 2007 and its revolving credit agreement, contain customary
covenants requiring the Company to maintain insurance. There can be no assurance
that the lenders under these instruments will not take the position that an
exclusion from all risk insurance coverage for losses due to terrorist acts is a
breach of these debt instruments that allows the lenders to declare an event of
default and accelerate repayment of debt. The Company has received
correspondence from four lenders regarding terrorism insurance coverage, which
the Company has responded to. If lenders insist on coverage for these risks, it
could adversely affect the Company's ability to finance and/or refinance its
properties and to expand its portfolio.
From time to time, the Company has disposed of substantial amounts of real
estate to third parties for which, as to certain properties, it remains
contingently liable for rent payments or mortgage indebtedness.
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 flow.
Page 22
<Page>
VORNADO REALTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(UNAUDITED)
11. SEGMENT INFORMATION
The Company has four business segments: Office, Retail, Merchandise Mart
and Temperature Controlled Logistics, whose operating results are as follows.
<Table>
<Caption>
For The Three Months Ended September 30,
-----------------------------------------------------------------------------------------------
(amounts in thousands) 2002
-----------------------------------------------------------------------------------------------
Temperature
Merchandise Controlled
Total Office Retail Mart Logistics Other(2)
------------ ------------ ------------ ------------- ------------- ------------
Rentals ........................ $ 310,515 $ 217,915 $ 29,827 $ 48,509 $ -- $ 14,264
Expense reimbursements ......... 44,407 27,160 13,246 2,742 -- 1,259
Other income ................... 6,286 4,548 450 1,496 -- (208)
------------ ------------ ------------ ------------- ------------- ------------
Total revenues ................. 361,208 249,623 43,523 52,747 -- 15,315
------------ ------------ ------------ ------------- ------------- ------------
Operating expenses ............. 145,237 92,824 16,822 23,400 -- 12,191
Depreciation and amortization .. 52,011 37,514 3,384 6,920 -- 4,193
General and administrative ..... 27,352 8,899 814 5,593 -- 12,046
Amortization of officer's
deferred compensation
expense ...................... 6,875 -- -- -- -- 6,875
------------ ------------ ------------ ------------- ------------- ------------
Total expenses ................. 231,475 139,237 21,020 35,913 -- 35,305
------------ ------------ ------------ ------------- ------------- ------------
Operating income ............... 129,733 110,386 22,503 16,834 -- (19,990)
Income applicable to
Alexander's .................. 12,554 -- -- -- -- 12,554
Income from partially-
owned entities ............... 6,692 598 (734) (75) 605(5) 7,508
Interest and other investment
income ....................... 6,407 1,202 88 147 -- 4,970
Interest and debt expense ...... (61,354) (35,501) (14,082) (4,516) -- (7,255)
Net gain on disposition of
wholly-owned and partially-
owned assets ................. 4,503 -- -- 281 -- 4,222
Minority interest .............. (35,730) (27,849) (2,730) (4,163) 184 (1,172)
------------ ------------ ------------ ------------- ------------- ------------
Income before cumulative effect
of change in accounting
principle and extraordinary
item ......................... 62,805 48,836 5,045 8,508 (421) 837
Cumulative effect of change in
accounting principle ......... -- -- -- -- -- --
Extraordinary item ............. -- -- -- -- -- --
------------ ------------ ------------ ------------- ------------- ------------
Net income ..................... 62,805 48,836 5,045 8,508 (421) 837
Cumulative effect of change in
accounting principle ......... -- -- -- -- -- --
Extraordinary item ............. -- -- -- -- -- --
Minority interest .............. 35,730 27,849 2,730 4,163 (184) 1,172
Net gain on disposition of
wholly-owned and partially-
owned assets ................. -- -- -- -- -- --
Interest and debt expense(3) ... 78,042 36,010 14,578 4,516 6,533 16,405
Depreciation and amortization(3) 64,151 37,945 4,126 6,920 8,389 6,771
Straight-lining of rents(3) .... (8,226) (6,802) 216 (1,046) -- (594)
Other .......................... (4,403) (973) -- -- -- (3,430)(4)
------------ ------------ ------------ ------------- ------------- ------------
EBITDA(1) ...................... $ 228,099 $ 142,865 $ 26,695 $ 23,061 $ 14,317 $ 21,161
============ ============ ============ ============= ============= ============
<Caption>
For The Three Months Ended September 30,
-----------------------------------------------------------------------------------------------
(amounts in thousands) 2001
-----------------------------------------------------------------------------------------------
Temperature
Merchandise Controlled
Total Office Retail Mart Logistics Other(2)
------------ ------------ ------------ ------------- ------------- ------------
Rentals ........................ $ 211,541 $ 117,455 $ 30,501 $ 48,394 $ -- $ 15,191
Expense reimbursements ......... 36,216 21,548 11,417 2,335 -- 916
Other income ................... 2,508 977 562 905 -- 64
------------ ------------ ------------ ------------- ------------- ------------
Total revenues ................. 250,265 139,980 42,480 51,634 -- 16,171
------------ ------------ ------------ ------------- ------------- ------------
Operating expenses ............. 102,222 57,410 13,674 19,633 -- 11,505
Depreciation and amortization .. 29,275 16,851 3,357 5,750 -- 3,317
General and administrative ..... 15,043 2,857 1,003 4,041 -- 7,142
Amortization of officer's
deferred compensation
expense ...................... -- -- -- -- -- --
------------ ------------ ------------ ------------- ------------- ------------
Total expenses ................. 146,540 77,118 18,034 29,424 -- 21,964
------------ ------------ ------------ ------------- ------------- ------------
Operating income ............... 103,725 62,862 24,446 22,210 -- (5,793)
Income applicable to
Alexander's .................. 4,442 -- -- -- -- 4,442
Income from partially-
owned entities ............... 18,856 7,629 617 110 3,240(5) 7,260
Interest and other investment
income ....................... 14,584 1,571 104 400 -- 12,509
Interest and debt expense ...... (43,054) (13,049) (13,016) (7,880) -- (9,109)
Net gain on disposition of
wholly-owned and partially-
owned assets ................. 6,495 -- -- -- -- 6,495
Minority interest .............. (28,268) (13,613) (3,910) (3,641) (2,469) (4,635)
------------ ------------ ------------ ------------- ------------- ------------
Income before cumulative effect
of change in accounting
principle and extraordinary
item ......................... 76,780 45,400 8,241 11,199 771 11,169
Cumulative effect of change in
accounting principle ......... -- -- -- -- -- --
Extraordinary item ............. -- -- -- -- -- --
------------ ------------ ------------ ------------- ------------- ------------
Net income 76,780 45,400 8,241 11,199 771 11,169
Cumulative effect of change in
accounting principle ......... -- -- -- -- -- --
Extraordinary item ............. -- -- -- -- -- --
Minority interest .............. 28,268 13,613 3,910 3,641 2,469 4,635
Net gain on disposition of
wholly-owned and partially-
owned assets ................. -- -- -- -- -- --
Interest and debt expense(3) ... 65,772 22,960 13,680 7,880 6,712 14,540
Depreciation and amortization(3) 42,637 21,466 4,523 5,750 8,400 2,498
Straight-lining of rents(3) .... (8,600) (6,242) (449) (1,483) -- (426)
Other .......................... (1,329) (1,571) (1,002) -- 41 1,203
------------ ------------ ------------ ------------- ------------- ------------
EBITDA(1) ...................... $ 203,528 $ 95,626 $ 28,903 $ 26,987 $ 18,393 $ 33,619
============ ============ ============ ============= ============= ============
</Table>
- ----------
See footnotes on page 25.
Page 23
<Page>
VORNADO REALTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(UNAUDITED)
11. SEGMENT INFORMATION- CONTINUED
<Table>
<Caption>
For The Nine Months Ended September 30,
-----------------------------------------------------------------------------------------------
(amounts in thousands) 2002
-----------------------------------------------------------------------------------------------
Temperature
Merchandise Controlled
Total Office Retail Mart Logistics Other(2)
------------ ------------ ------------ ------------- ------------- ------------
Rentals ........................ $ 922,144 $ 645,489 $ 87,819 $ 148,387 $ -- $ 40,449
Expense reimbursements ......... 118,526 68,516 37,063 9,957 -- 2,990
Other income ................... 20,109 14,621 1,055 4,133 -- 300
------------ ------------ ------------ ------------- ------------- ------------
Total revenues ................. 1,060,779 728,626 125,937 162,477 -- 43,739
------------ ------------ ------------ ------------- ------------- ------------
Operating expenses ............. 398,950 255,452 44,490 65,980 -- 33,028
Depreciation and amortization .. 149,162 105,765 10,310 20,688 -- 12,399
General and administrative ..... 74,578 27,409 3,180 15,298 -- 28,691
Costs of acquisitions not
consummated .................. -- -- -- -- -- --
Amortization of officer's
deferred compensation expense. 20,625 -- -- -- -- 20,625
------------ ------------ ------------ ------------- ------------- ------------
Total expenses ................. 643,315 388,626 57,980 101,966 -- 94,743
------------ ------------ ------------ ------------- ------------- ------------
Operating income ............... 417,464 340,000 67,957 60,511 -- (51,004)
Income applicable to
Alexander's .................. 22,609 -- -- -- -- 22,609
Income from partially-
owned entities ............... 30,304 1,874 (803) (62) 5,787(5) 23,508
Interest and other investment
income ....................... 25,984 5,071 245 425 -- 20,243
Interest and debt expense ...... (179,491) (105,011) (41,793) (18,386) -- (14,301)
Net gain on disposition of
wholly-owned and partially-
owned assets ................. 1,053 -- -- 2,156 -- (1,103)
Minority interest .............. (106,875) (89,530) (9,203) (16,542) 3,488 4,912
------------ ------------ ------------ ------------- ------------- ------------
Income before cumulative effect
of change in accounting
principle and extraordinary
item ......................... 211,048 152,404 16,403 28,102 9,275 4,864
Cumulative effect of change in
accounting principle ......... (30,129) -- -- -- (15,490) (14,639)
Extraordinary item ............. -- -- -- -- -- --
------------ ------------ ------------ ------------- ------------- ------------
Net income ..................... 180,919 152,404 16,403 28,102 (6,215) (9,775)
Cumulative effect of change in
accounting principle ........ 30,129 -- -- -- 15,490 14,639
Extraordinary item ............. -- -- -- -- -- --
Minority interest .............. 106,875 89,530 9,203 16,542 (3,488) (4,912)
Net gain on disposition of
wholly-owned and partially-
owned assets ................. -- -- -- -- -- --
Interest and debt expense(3) ... 228,534 106,529 43,559 18,386 19,394 40,666
Depreciation and amortization(3) 187,086 107,116 11,873 20,688 25,642 21,767
Straight-lining of rents(3) .... (26,489) (21,504) (639) (2,837) -- (1,509)
Other .......................... (4,328) (3,400) 860 (123) 1,376 (3,041)(4)
------------ ------------ ------------ ------------- ------------- ------------
EBITDA(1) ...................... $ 702,726 $ 430,675 $ 81,259 $ 80,758 $ 52,199 $ 57,835
============ ============ ============ ============= ============= ============
<Caption>
For The Nine Months Ended September 30,
-----------------------------------------------------------------------------------------------
(amounts in thousands) 2001
-----------------------------------------------------------------------------------------------
Temperature
Merchandise Controlled
Total Office Retail Mart Logistics Other(2)
------------ ------------ ------------ ------------- ------------- ------------
Rentals ........................ $ 628,511 $ 345,575 $ 87,402 $ 145,517 $ -- $ 50,017
Expense reimbursements ......... 102,851 56,509 34,923 10,166 -- 1,253
Other income ................... 7,588 2,362 1,467 2,442 -- 1,317
------------ ------------ ------------ ------------- ------------- ------------
Total revenues ................. 738,950 404,446 123,792 158,125 -- 52,587
------------ ------------ ------------ ------------- ------------- ------------
Operating expenses ............. 299,436 164,855 41,528 62,427 -- 30,626
Depreciation and amortization .. 91,226 52,795 10,364 18,256 -- 9,811
General and administrative ..... 51,706 8,864 2,405 13,286 -- 27,151
Costs of acquisitions not
consummated .................. 5,000 -- -- -- -- 5,000
Amortization of officer's
deferred compensation expense -- -- -- -- -- --
------------ ------------ ------------ ------------- ------------- ------------
Total expenses ................. 447,368 226,514 54,297 93,969 -- 72,588
------------ ------------ ------------ ------------- ------------- ------------
Operating income ............... 291,582 177,932 69,495 64,156 -- (20,001)
Income applicable to
Alexander's .................. 21,422 -- -- -- -- 21,422
Income from partially-
owned entities ............... 62,074 24,689 3,009 219 12,909(5) 21,248
Interest and other investment
income ....................... 43,931 5,766 520 1,777 -- 35,868
Interest and debt expense ...... (136,443) (44,063) (41,429) (25,866) -- (25,085)
Net gain on disposition of
wholly-owned and partially-
owned assets ................. 3,706 12,445 3,050 -- -- (11,789)
Minority interest .............. (83,931) (41,935) (12,386) (11,410) (8,294) (9,906)
------------ ------------ ------------ ------------- ------------- ------------
Income before cumulative effect
of change in accounting
principle and extraordinary
item ......................... 202,341 134,834 22,259 28,876 4,615 11,757
Cumulative effect of change in
accounting principle ......... (4,110) -- -- -- -- (4,110)
Extraordinary item ............. 1,170 -- -- -- -- 1,170
------------ ------------ ------------ ------------- ------------- ------------
Net income 199,401 134,834 22,259 28,876 4,615 8,817
Cumulative effect of change in
accounting principle ........ 4,110 -- -- -- -- 4,110
Extraordinary item ............. (1,170) -- -- -- -- (1,170)
Minority interest .............. 83,931 41,935 12,386 11,410 8,294 9,906
Net gain on disposition of
wholly-owned and partially-
owned assets ................. (15,495) (12,445) (3,050) -- -- --
Interest and debt expense(3) ... 206,177 75,266 43,377 25,866 20,198 41,470
Depreciation and amortization(3) 136,473 67,102 13,862 18,256 25,211 12,042
Straight-lining of rents(3) .... (22,676) (16,247) (1,144) (3,871) -- (1,414)
Other .......................... (8,889) (3,791) (2,337) -- 222 (2,983)(4)
------------ ------------ ------------ ------------- ------------- ------------
EBITDA(1) ...................... $ 581,862 $ 286,654 $ 85,353 $ 80,537 $ 58,540 $ 70,778
============ ============ ============ ============= ============= ============
</Table>
- ----------
See footnotes on page 25.
Page 24
<Page>
VORNADO REALTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(UNAUDITED)
11. SEGMENT INFORMATION- CONTINUED
Notes to EBITDA by segment information:
(1) EBITDA represents income before interest, taxes, depreciation and
amortization, extraordinary or non-recurring items, gains or losses on
sales of depreciable real estate, the effect of straight-lining of
property rentals for rent escalations and minority interest. Management
considers EBITDA a supplemental measure for making decisions and
assessing the performance of its segments. EBITDA should not be
considered a substitute for net income as a measure of operating
performance or a substitute for cash flow as a measure of liquidity.
EBITDA may not be comparable to similarly titled measures employed by
other companies.
(2) Other EBITDA is comprised of:
<Table>
<Caption>
For the Three Months For the Nine Months
Ended September 30, Ended September 30,
-------------------------- --------------------------
2002 2001 2002 2001
---------- --------- ---------- ----------
Hotel Pennsylvania (A)........................... $ 1,715 $ 2,886 $ 4,621 $ 14,307
Newkirk Joint Ventures:
Equity in income of limited partnerships....... 15,400 13,749 45,929 40,457
Interest and other income...................... 2,200 1,343 6,671 4,545
Alexander's...................................... 11,783 6,892 26,549 21,430
Investment income and other (B).................. 4,077 8,934 21,963 32,046
Unallocated general and administrative
expenses....................................... (10,436)(C) (6,680) (24,985)(C) (25,218)
Amortization of Officer's deferred compensation
expense........................................ (6,875) -- (20,625) --
Gain on transfer of mortgages.................... 2,096 -- 2,096 --
Net gain on sale of air rights................... 2,126 -- 2,126 --
Palisades (D).................................... (925) -- (1,185) --
Loss on Primestone foreclosure................... -- -- (17,671) --
Net gain on sale of marketable equity securities -- -- 12,346 --
After-tax net gain on sale of Park Laurel
condominium units.............................. -- 13,869 -- 13,869
Costs of acquisitions not consummated............ -- -- -- (5,000)
Write-off of net investment in Russian Tea Room
("RTR")........................................ -- (7,374) -- (7,374)
Write-off of investments in technology
companies...................................... -- -- -- (18,284)
---------- --------- ---------- ----------
Total...................................... $ 21,161 $ 33,619 $ 57,835 $ 70,778
========== ========= ========== ==========
</Table>
- ----------
(A) Average occupancy and REVPAR for the Hotel Pennsylvania were
69.4% and $56.07 for the three months ended September 30, 2002
compared to 65.5% and $71.69 for the prior year's quarter.
Average occupancy and REVPAR for the Hotel Pennsylvania were
61.7% and $53.50 for the nine months ended September 30, 2002
compared to 66.6% and $74.61 for the prior year's nine months.
(B) No income was recognized on the Company's loans to Primestone
and Vornado Operating Company for the three and nine months
ended September 30, 2002.
(C) Includes $2,229 for Primestone litigation costs.
(D) The development of the Palisades residential complex was
substantially complete as of March 1, 2002. Accordingly, the
Company placed the property into service on March 1, 2002 and
discontinued the capitalization of interest and other property
specific costs. Operating results for the three months ended
September 30, 2002, include a charge of $533 based on a
retroactive increase in the real estate tax assessment of the
complex to January 1, 2002. As of September 30, 2002, the
property, which is now in the lease-up phase, is 45% occupied
(244 of the 538 total apartments have been leased).
(3) 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.
(4) Includes $3,430 and $6,298 representing the Company's share of
Alexander's gain on sale of its Third Avenue property on August 30, 2002
and its Fordham Road property on January 12, 2001.
(5) Excludes rent not recognized of $6,808 and $12,361 for the three and nine
months ended September 30, 2002 and $5,311 and $7,651 for the three and
nine months ended September 30, 2001.
Page 25
<Page>
VORNADO REALTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(UNAUDITED)
12. RESTATEMENT
Subsequent to the issuance of the unaudited interim financial statements
for the quarterly period ended September 30, 2002, management determined to
revise the accounting for the interest rate swaps relating to its 5.625%
Senior Unsecured Notes due 2007 (the "Notes"). The Company appropriately
designated the swaps as "fair value hedge transactions" with "no
ineffectiveness". The Company reported the $37,293,000 increase in the fair
value of the swaps as an Other Asset on its September 30, 2002 unaudited
consolidated balance sheet with a related increase in Accumulated Other
Comprehensive Income. Accounting principles generally accepted in the United
States of America require an increase in the carrying amount of the Notes
instead of an increase in Accumulated Other Comprehensive Income. The Company
has restated the September 30, 2002 unaudited consolidated balance sheet to
increase the carrying amount of the Notes by $37,293,000 and decrease
Accumulated Other Comprehensive Income by a like amount. The change has no
effect on the Company's results of operations for the three and nine months
ended September 30, 2002, the related per share amounts or reported cash
flows.
Page 26
<Page>
INDEPENDENT ACCOUNTANTS' REPORT
Shareholders and Board of Trustees
Vornado Realty Trust
New York, New York
We have reviewed the accompanying condensed consolidated balance sheet of
Vornado Realty Trust as of September 30, 2002 (as restated), and the related
condensed consolidated statements of income for the three-month and nine-month
periods ended September 30, 2002 and 2001 and the condensed consolidated
statements of cash flows for the nine-month periods ended September 30, 2002 and
2001. These financial statements are the responsibility of the Company's
management.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and of making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in accordance
with auditing standards generally accepted in the United States of America, the
objective of which is the expression of an opinion regarding the financial
statements taken as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to such condensed consolidated financial statements for them to be in
conformity with accounting principles generally accepted in the United States of
America.
As discussed in Note 12, the accompanying condensed consolidated balance sheet
as of September 30, 2002 has been restated.
We have previously audited, in accordance with auditing standards generally
accepted in the United States of America, the consolidated balance sheet of
Vornado Realty Trust as of December 31, 2001, and the related consolidated
statements of income, shareholders' equity, and cash flows for the year then
ended (not presented herein); and in our report dated March 11, 2002, we
expressed an unqualified opinion on those consolidated financial statements. In
our opinion, the information set forth in the accompanying condensed
consolidated balance sheet as of December 31, 2001 is fairly stated, in all
material respects, in relation to the consolidated balance sheet from which it
has been derived.
DELOITTE & TOUCHE LLP
Parsippany, New Jersey
October 30, 2002
(December 24, 2002, as to the effects
of the restatement discussed in Note 12)
Page 27
<Page>
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS
The Company's exposure to a change in interest rates on its wholly-owned
and partially-owned debt (all of which arises out of non-trading activity) is as
follows:
<Table>
<Caption>
(amounts in thousands
except per share amounts)
September 30, 2002 December 31, 2001
---------------------------------------------- ---------------------------
Weighted Effect of 1% Weighted
Average Change In Average
Balance Interest Rate Base Rates Balance Interest Rate
-------------- ------------- ------------ ------------ -------------
Wholly-owned debt:
Variable rate............. $ 1,361,764(1) 3.19% $ 12,081(2) $ 1,182,605 3.39%
Fixed rate................ 2,750,044 7.13% -- 1,294,568 7.53%
-------------- ------------ ------------
$ 4,111,808 12,081 $ 2,477,173
============== ------------ ============
Partially-owned debt:
Variable rate............. $ 43,841 7.12% 438(3) $ 85,516 5.63%
Fixed rate................ 932,010 8.57% -- 1,234,019 8.29%
-------------- ------------ ------------
$ 975,851 438 $ 1,319,535
============== ------------ ============
Minority interest.............. (2,629)
------------
Total decrease in the
Company's annual
net income................... $ 9,890
============
Per share-diluted.......... $ .09
============
</Table>
- ----------
(1) Includes $536,612 for the Company's senior unsecured notes due 2007, as the
Company entered into interest rate swap agreements that effectively
converted the interest rate from a fixed rate of 5.625% to a floating rate
of LIBOR plus .7725%, based upon the trailing 3 month LIBOR rate (2.53% if
set on October 28, 2002). In accordance with SFAS 133, as amended,
accounting for these swaps requires the Company to fair value the debt at
each reporting period. At September 30, 2002, the fair value adjustment was
$37,293, and is included in the balance of the senior unsecured notes
above.
(2) The effect of a 1% change in wholly-owned debt base rates shown above
excludes $153,659 of variable rate mortgage financing, cross-collateralized
by the Company's 770 Broadway and 595 Madison Avenue office properties as
the proceeds are held in a restricted mortgage escrow account which bear
interest at the same rate as the loans.
(3) The effect of a 1% change in partially-owned debt base rates shown above is
calculated after including $37,341, representing the Company's 14.9% share
of Prime Group Realty L.P.'s ("PGE") outstanding variable rate debt as at
June 30, 2002. PGE has not filed its quarterly report on Form 10-Q for the
quarter ended September 30, 2002, prior to the filing of this quarterly
report on Form 10-Q.
ITEM 4. CONTROLS AND PROCEDURES
Within the 90-day period prior to the filing of this Quarterly Report on
Form 10-Q/A, an evaluation was carried out under the supervision and with the
participation of Vornado Realty Trust's management, including our Chief
Executive Officer and Chief Financial Officer, of the effectiveness of the
design and operation of our disclosure controls and procedures (as defined in
Rule 13a-14(c) under the Securities Exchange Act of 1934). Based upon that
evaluation, the Chief Executive Officer and Chief Financial Officer concluded
that the design and operation of these disclosure controls and procedures were
effective. No significant changes were made in our internal controls or in other
factors that could significantly affect these controls subsequent to the date of
their evaluation.
Page 28
<Page>
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits required by Item 601 of Regulation S-K are filed herewith or
incorporated herein by reference and are listed in the attached Exhibit
Index.
(b) Reports on Form 8-K:
During the quarter ended September 30, 2002, the Company filed the
following reports on Form 8-K:
<Table>
<Caption>
Period Covered:
(Date of Earliest
Event Reported) Items Reported Date Filed
------------------ ------------------ ---------------
August 20, 2002 Joseph Hakim, Executive Vice President, COO retires August 22, 2002
</Table>
Page 29
<Page>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
VORNADO REALTY TRUST
--------------------------------------------
(Registrant)
Date: December 24, 2002 By: /s/ Joseph Macnow
--------------------------------------------
Joseph Macnow, Executive Vice President -
Finance and Administration and
Chief Financial Officer
Page 30
<Page>
CERTIFICATION
I, Steven Roth, certify that:
1. I have reviewed this quarterly report on Form 10-Q/A of Vornado Realty
Trust;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which
such statements were made, not misleading with respect to the period
covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
we have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this
quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date
of this quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the
audit committee of registrant's board of directors (or persons
performing the equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in
internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant deficiencies
and material weaknesses.
Date: December 24, 2002
/s/ Steven Roth
---------------
Steven Roth
Chief Executive Officer
Page 31
<Page>
CERTIFICATION
I, Joseph Macnow, certify that:
1. I have reviewed this quarterly report on Form 10-Q/A of Vornado Realty
Trust;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which
such statements were made, not misleading with respect to the period
covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
we have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this
quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date
of this quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the
audit committee of registrant's board of directors (or persons
performing the equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in
internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant deficiencies
and material weaknesses.
Date: December 24, 2002
/s/ Joseph Macnow
-----------------
Joseph Macnow
Chief Financial Officer
Page 32
<Page>
EXHIBIT INDEX
<Table>
<Caption>
EXHIBIT
NO.
- ---------
3.1 -- Amended and Restated Declaration of Trust of Vornado, as filed with the State Department of
Assessments and Taxation of Maryland on April 16, 1993 - Incorporated by reference to Exhibit
3(a) of Vornado's Registration Statement on Form S-4 (File No. 33-60286), filed on April 15,
1993............................................................................................. *
3.2 -- Articles of Amendment of Declaration of Trust of Vornado, as filed with the State Department of
Assessments and Taxation of Maryland on May 23, 1996 - Incorporated by reference to Exhibit 3.2
of Vornado's Annual Report on Form 10-K for the year ended December 31, 2001 (File No.
001-11954), filed on March 11, 2002.............................................................. *
3.3 -- Articles of Amendment of Declaration of Trust of Vornado, as filed with the State Department of
Assessments and Taxation of Maryland on April 3, 1997 - Incorporated by reference to Exhibit 3.3
of Vornado's Annual Report on Form 10-K for the year ended December 31, 2001 (File No. 1-11954),
filed on March 11, 2002.......................................................................... *
3.4 -- Articles of Amendment of Declaration of Trust of Vornado, as filed with the State Department of
Assessments and Taxation of Maryland on October 14, 1997 - Incorporated by reference to Exhibit
3.2 of Vornado's Registration Statement on Form S-3 (File No. 333-36080), filed on May 2, 2000... *
3.5 -- 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................................................................................... *
3.6 -- Articles of Amendment of Declaration of Trust of Vornado, as filed with the State Department of
Assessments and Taxation of Maryland on November 24, 1999 - Incorporated by reference to Exhibit
3.4 of Vornado's Registration Statement on Form S-3 (File No. 333-36080), filed on May 2, 2000... *
3.7 -- Articles of Amendment of Declaration of Trust of Vornado, as filed with the State Department of
Assessments and Taxation of Maryland on April 20, 2000 - Incorporated by reference to Exhibit
3.5 of Vornado's Registration Statement on Form S-3 (File No. 333-36080), filed on May 2, 2000... *
3.8 -- Articles of Amendment of Declaration of Trust of Vornado, as filed with the State Department of
Assessments and Taxation of Maryland on September 14, 2000 - Incorporated by reference to
Exhibit 4.6 of Vornado's Registration Statement on Form S-8 (File No. 333-68462), filed on
August 27, 2001.................................................................................. *
3.9 -- Articles of Amendment of Declaration of Trust of Vornado dated May 31, 2002, as filed with the
Department of Assessments and Taxation of the State of Maryland on June 13, 2002 - incorporated
by reference to Exhibit 3.9 to Vornado Realty Trust's Quarterly Report on Form 10-Q for the
quarter ended June 30, 2002 (File No. 001-11954)................................................. *
3.10 -- Articles of Amendment of Declaration of Trust of Vornado dated June 6, 2002, as filed with the
Department of Assessments and Taxation of the State of Maryland on June 13, 2002 - incorporated
by reference to Exhibit 3.10 to Vornado Realty Trust's Quarterly Report on Form 10-Q for the
quarter ended June 30, 2002 (File No. 001-11954)................................................. *
3.11 -- 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.................................................................................... *
</Table>
Page 33
<Page>
<Table>
<Caption>
EXHIBIT
NO.
- ---------
3.12 -- Articles Supplementary Classifying Vornado's $3.25 Series A Convertible Preferred Shares of
Beneficial Interest, as filed with the State Department of Assessments and Taxation of Maryland
on December 15, 1997 - Incorporated by reference to Exhibit 3.10 to Vornado's Annual Report on
Form 10-K for the year ended December 31, 2001 (File No. 001-11954), filed on March 31, 2002..... *
3.13 -- 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................................................. *
3.14 -- Articles Supplementary Classifying Additional Series D-1 8.5% Preferred Shares of Beneficial
Interest, liquidation preference $25.00 per share, no par value - 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............................................................ *
3.15 -- 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.............................................................. *
3.16 -- Articles Supplementary Classifying Vornado's Series C 8.5% Cumulative Redeemable Preferred Shares
of Beneficial Interest, liquidation preference $25.00 per share, no par value - 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............................................................................ *
3.17 -- Articles Supplementary Classifying Vornado Realty Trust's Series D-2 8.375% Cumulative Redeemable
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 on July 7, 1999....... *
3.18 -- Articles Supplementary Classifying Vornado's Series D-3 8.25% Cumulative Redeemable Preferred
Shares, dated September 3, 1999, as filed with the State Department of Assessments and Taxation
of Maryland on September 3, 1999 - Incorporated by reference to Exhibit 3.1 of Vornado's Current
Report on Form 8-K, dated September 3, 1999 (File No. 001-11954), filed on October 25, 1999...... *
3.19 -- Articles Supplementary Classifying Vornado's Series D-4 8.25% Cumulative Redeemable Preferred
Shares, dated September 3, 1999, as filed with the State Department of Assessments and Taxation
of Maryland on September 3, 1999 - Incorporated by reference to Exhibit 3.2 of Vornado's Current
Report on Form 8-K, dated September 3, 1999 (File No. 001-11954), filed on October 25, 1999...... *
3.20 -- Articles Supplementary Classifying Vornado's Series D-5 8.25% Cumulative Redeemable Preferred
Shares - Incorporated by reference to Exhibit 3.1 of Vornado's Current Report on Form 8-K, dated
November 24, 1999 (File No. 001-11954), filed on December 23, 1999............................... *
3.21 -- Articles Supplementary Classifying Vornado's Series D-6 8.25% Cumulative Redeemable Preferred
Shares, dated May 1, 2000, as filed with the State Department of Assessments and Taxation of
Maryland on May 1, 2000 - Incorporated by reference to Exhibit 3.1 of Vornado's Current Report
on Form 8-K, dated May 1, 2000 (File No. 001-11954), filed May 19, 2000.......................... *
</Table>
- ----------
* Incorporated by reference
Page 34
<Page>
<Table>
<Caption>
EXHIBIT
NO.
- ---------
3.22 -- Articles Supplementary Classifying Vornado's Series D-7 8.25% Cumulative Redeemable Preferred
Shares, dated May 25, 2000, as filed with the State Department of Assessments and Taxation of
Maryland on June 1, 2000 - Incorporated by reference to Exhibit 3.1 of Vornado's Current Report
on Form 8-K, dated May 25, 2000 (File No. 001-11954), filed on June 16, 2000.................... *
3.23 -- Articles Supplementary Classifying Vornado's Series D-8 8.25% Cumulative Redeemable Preferred
Shares - Incorporated by reference to Exhibit 3.1 of Vornado's Current Report on Form 8-K, dated
December 8, 2000 (File No. 001-11954), filed on December 28, 2000............................... *
3.24 -- Articles Supplementary Classifying Vornado's Series D-9 8.75% Preferred Shares, dated September
21, 2001, as filed with the State Department of Assessments and Taxation of Maryland on
September 25, 2001 - Incorporated by reference to Exhibit 3.1 of Vornado's Current Report on
Form 8-K (File No. 001-11954), filed on October 12, 2001........................................ *
3.25 -- Amended and Restated Bylaws of Vornado, as amended on March 2, 2000 - Incorporated by reference
to Exhibit 3.12 of Vornado's Annual Report on Form 10-K for the year ended December 31, 1999
(File No. 001-11954), filed on March 9, 2000.................................................... *
3.26 -- Second Amended and Restated Agreement of Limited Partnership of the Operating Partnership, dated
as of October 20, 1997 (the "Partnership Agreement") - 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............................................................................................ *
3.27 -- Amendment to the Partnership Agreement, dated as of December 16, 1997-Incorporated by reference
to Exhibit 3.5 of Vornado's Annual Report on Form 10-K for the year ended December 31, 1997
(File No. 001-11954) filed on March 31, 1998.................................................... *
3.28 -- Second Amendment to the Partnership Agreement, 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......................................................................... *
3.29 -- Third Amendment to the Partnership Agreement, 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...................................................... *
3.30 -- Fourth Amendment to the Partnership Agreement, 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....................................................... *
3.31 -- Exhibit A to the Partnership Agreement, dated as of December 22, 1998 - 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........................................................... *
3.32 -- Fifth Amendment to the Partnership Agreement, 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............................................................. *
3.33 -- Exhibit A to the Partnership Agreement, 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......................................................................... *
</Table>
- ----------
* Incorporated by reference
Page 35
<Page>
<Table>
<Caption>
EXHIBIT
NO.
- ---------
3.34 -- Sixth Amendment to the Partnership Agreement, 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............................................................... *
3.35 -- Seventh Amendment to the Partnership Agreement, 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............................................................... *
3.36 -- Eighth Amendment to the Partnership Agreement, 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............................................................... *
3.37 -- Ninth Amendment to the Partnership Agreement, dated as of September 3, 1999 - Incorporated by
reference to Exhibit 3.3 of Vornado's Current Report on Form 8-K (File No. 001-11954), filed on
October 25, 1999................................................................................ *
3.38 -- Tenth Amendment to the Partnership Agreement, dated as of September 3, 1999 - Incorporated by
reference to Exhibit 3.4 of Vornado's Current Report on Form 8-K, dated September 3, 1999 (File
No. 001-11954), filed on October 25, 1999....................................................... *
3.39 -- Eleventh Amendment to the Partnership Agreement, dated as of November 24, 1999 - Incorporated by
reference to Exhibit 3.2 of Vornado's Current Report on Form 8-K, dated November 24, 1999 (File
No. 001-11954), filed on December 23, 1999...................................................... *
3.40 -- Twelfth Amendment to the Partnership Agreement, dated as of May 1, 2000 - Incorporated by
reference to Exhibit 3.2 of Vornado's Current Report on Form 8-K, dated May 1, 2000 (File No.
001-11954), filed on May 19, 2000............................................................... *
3.41 -- Thirteenth Amendment to the Partnership Agreement, dated as of May 25, 2000 - Incorporated by
reference to Exhibit 3.2 of Vornado's Current Report on Form 8-K, dated May 25, 2000 (File No.
001-11954), filed on June 16, 2000.............................................................. *
3.42 -- Fourteenth Amendment to the Partnership Agreement, dated as of December 8, 2000 - Incorporated by
reference to Exhibit 3.2 of Vornado's Current Report on Form 8-K, dated December 8, 2000 (File
No. 001-11954), filed on December 28, 2000...................................................... *
3.43 -- Fifteenth Amendment to the Partnership Agreement, dated as of December 15, 2000 - Incorporated by
reference to Exhibit 4.35 of Vornado Realty Trust's Registration Statement on Form S-8 (File No.
333-68462), filed on August 27, 2001............................................................ *
3.44 -- Sixteenth Amendment to the Partnership Agreement, dated as of July 25, 2001 - Incorporated by
reference to Exhibit 3.3 of Vornado Realty Trust's Current Report on Form 8-K (File No.
001-11954), filed on October 12, 2001........................................................... *
3.45 -- Seventeenth Amendment to the Partnership Agreement, dated as of September 21, 2001 - Incorporated
by reference to Exhibit 3.4 of Vornado Realty Trust's Current Report on Form 8-K (File No.
001-11954), filed on October 12, 2001........................................................... *
3.46 -- Eighteenth Amendment to the Partnership Agreement, dated as of January 1, 2002 - Incorporated by
reference to Exhibit 3.1 of Vornado's Current Report on Form 8-K (File No. 1-11954), filed on
March 18, 2002.................................................................................. *
3.47 -- Nineteenth Amendment to the Partnership Agreement, dated as of July 1, 2002 - Incorporated by
reference to Exhibit 3.47 to Vornado Realty Trust's Quarterly Report on Form 10-Q for the
quarter ended June 30, 2002 (File No. 001-11954) *
</Table>
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* Incorporated by reference
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<Page>
<Table>
<Caption>
EXHIBIT
NO.
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4.1 -- Indenture, dated as of June 24, 2002, between Vornado Realty L.P. and The Bank of New York, as
Trustee - Incorporated by reference to Exhibit 4.1 to Vornado Realty L.P.'s Current Report on
Form 8-K dated June 19, 2002 (File No. 000-22685), filed on June 24, 2002........................ *
4.2 -- Officer's Certificate pursuant to Sections 102 and 301 of the Indenture, dated June 24, 2002 -
Incorporated by reference to Exhibit 4.2 to Vornado Realty Trust's Quarterly Report on Form 10-Q
for the quarter ended June 30, 2002 (File No. 001-11954)......................................... *
10.1 -- Amended and Restated Credit Agreement dated July 3, 2002, between 59th Street Corporation and
Vornado Lending L.L.C. (evidencing $40,000,000 of debt) - Incorporated by reference to Exhibit
10(i)(B)(1) of Alexander's Inc.'s quarterly report for the period ended June 30, 2002 (File No.
001-06064), filed on August 7, 2002.............................................................. *
10.2 -- Credit Agreement, dated July 3, 2002, between Alexander's Inc. and Vornado Lending L.L.C.
(evidencing a $20,000,000 loan) - Incorporated by reference to Exhibit 10(i)(B)(2) of
Alexander's Inc.'s quarterly report for the period ended June 30, 2002 (File No. 001-06064),
filed on August 7, 2002.......................................................................... *
10.3 -- Amended and Restated Credit Agreement, dated July 3, 2002, between Alexander's Inc. and Vornado
Lending L.L.C. (evidencing a $50,000,000 line of credit facility) - Incorporated by reference to
Exhibit 10(i)(B)(3) of Alexander's Inc.'s quarterly report for the period ended June 30, 2002
(File No. 001-06064), filed on August 7, 2002.................................................... *
10.4 -- Credit Agreement, dated July 3, 2002, between Alexander's and Vornado Lending L.L.C. (evidencing
a $35,000,000 loan) - Incorporated by reference to Exhibit 10(i)(B)(4) of Alexander's Inc.'s
quarterly report for the period ended June 30, 2002 (File No. 001-06064), filed on August 7,
2002............................................................................................. *
10.5 -- Guaranty of Completion, dated as of July 3, 2002, executed by Vornado Realty L.P. for the benefit
of Bayerische Hypo- and Vereinsbank AG, New York Branch, as Agent for the Lenders - Incorporated
by reference to Exhibit 10(i)(C)(5) of Alexander's Inc.'s quarterly report for the period ended
June 30, 2002 (File No. 001-06064), filed on August 7, 2002...................................... *
10.6 -- Reimbursement Agreement, dated as of July 3, 2002, by and between Alexander's, Inc., 731
Commercial LLC, 731 Residential LLC and Vornado Realty L.P. - Incorporated by reference to
Exhibit 10(i)(C)(8) of Alexander's Inc.'s quarterly report for the period ended June 30, 2002
(File No. 001-06064), filed on August 7, 2002.................................................... *
10.7 -- Amendment to Real Estate Retention Agreement, dated as of July 3, 2002, by and between
Alexander's, Inc. and Vornado Realty L.P. - Incorporated by reference to Exhibit 10(i)(E)(3) of
Alexander's Inc.'s quarterly report for the period ended June 30, 2002 (File No. 001-06064),
filed on August 7, 2002.......................................................................... *
10.8 -- 59th Street Real Estate Retention Agreement, dated as of July 3, 2002, by and between Vornado
Realty L.P., 731 Residential LLC and 731 Commercial LLC - Incorporated by reference to Exhibit
10(i)(E)(4) of Alexander's Inc.'s quarterly report for the period ended June 30, 2002 (File No.
001-06064), filed on August 7, 2002.............................................................. *
</Table>
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<Page>
<Table>
<Caption>
EXHIBIT
NO.
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10.9 -- Amended and Restated Management and Development Agreement, dated as of July 3, 2002, by and
between Alexander's, Inc., the subsidiaries party thereto and Vornado Management Corp. -
Incorporated by reference to Exhibit 10(i)(F)(1) of Alexander's Inc.'s quarterly report for the
period ended June 30, 2002 (File No. 001-06064), filed on August 7, 2002......................... *
10.10 -- 59th Street Management and Development Agreement, dated as of July 3, 2002, by and between 731
Commercial LLC and Vornado Management Corp. - Incorporated by reference to Exhibit 10(i)(F)(2)
of Alexander's Inc.'s quarterly report for the period ended June 30, 2002 (File No. 001-06064),
filed on August 7, 2002.......................................................................... *
15.1 -- Letter regarding Unaudited Interim Financial Information
</Table>
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* Incorporated by reference
Page 38