Vornado Realty Trust

1 EXHIBIT INDEX ON PAGE 48 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D. C. 20549 FORM 10-K [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Fiscal Year Ended: DECEMBER 31, 1995 or [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number: 1-5098 VORNADO REALTY TRUST (Exact name of Registrant as specified in its charter) MARYLAND 22-1657560 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification Number) PARK 80 WEST, PLAZA II, SADDLE BROOK, NEW JERSEY 07663 (Address of Principal Executive Offices) (Zip Code) Registrant's telephone number including area code: (201) 587-1000 Securities registered pursuant to Section 12(b) of the Act: Title of Each Class Name of Each Exchange on Which Registered Common Shares of beneficial interest, $.04 par value per share New York Stock Exchange Securities registered pursuant to Section 12(g) of the Act: NONE 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. YES X NO Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X] The aggregate market value of the voting shares held by non-affiliates of the registrant, i.e. by persons other than officers and trustees of Vornado Realty Trust as reflected in the table in Item 12 of this Annual Report, at March 1, 1996 was $613,292,000. As of March 1, 1996, there were 24,610,700 shares of the registrant's shares of beneficial interest outstanding. Documents Incorporated by Reference Part III: Proxy Statement for Annual Meeting of Shareholders to be held May 22, 1996. Page 1 of 56

2 Table of Contents NOTE: Vornado Realty Trust and its consolidated subsidiaries are sometimes referred to in this Annual Report on Form 10-K as "Vornado", "Registrant" or the "Company". Item Page ---- ---- PART I. 1. Business 3 2. Properties 6 3. Legal Proceedings 9 4. Submission of Matters to a Vote of Security Holders 9 Executive Officers of the Registrant 10 PART II. 5. Market for the Registrant's Common Equity and Related Stockholder Matters 11 6. Selected Consolidated Financial Data 12 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 14 8. Financial Statements and Supplementary Data 20 9. Changes in and Disagreements with Independent Auditors' on Accounting and Financial Disclosure 20 PART III. 10. Directors and Executive Officers of the Registrant (1) 11. Executive Compensation (1) 12. Security Ownership of Certain Beneficial Owners and Management (1) 13. Certain Relationships and Related Transactions (1) PART IV. 14. Exhibits, Financial Statement Schedules, and 41 Reports on Form 8-K SIGNATURES 42 - --------------------------- (1) These items are omitted because the Registrant will file a definitive Proxy Statement pursuant to Regulation 14A involving the election of directors with the Securities and Exchange Commission not later than 120 days after December 31, 1995, which is incorporated by reference herein. Information relating to Executive Officers of the Registrant appears on page 10 of this Annual Report on Form 10-K. -2-

3 PART I ITEM 1. BUSINESS GENERAL The Company is a fully-integrated real estate investment trust ("REIT") which owns, leases, develops, redevelops and manages retail and industrial properties primarily located in the Midatlantic and Northeast regions of the United States. The Company's primary focus is on shopping centers. The Company's shopping centers are generally located on major regional highways in mature densely populated areas. The Company believes its shopping centers attract consumers from a regional, rather than a neighborhood, marketplace because of their location on regional highways and the high percentage of square feet dedicated to large stores. As of December 31, 1995, the Company owned 56 shopping centers in seven states containing 9.9 million square feet, including 1.2 million square feet built by tenants on land leased from the Company. The Company's shopping centers accounted for 92% and 91%, respectively, of the Company's rental revenue for the years ended December 31, 1995 and 1994. The occupancy rate of the Company's shopping center properties was 91% and 94% as of March 1, 1996 and 1995, respectively and has been over 90% in each of the past five years. Further, the Company owns eight warehouse/industrial properties in New Jersey containing 2.0 million square feet and one office building in New Jersey containing 100,000 square feet. In addition, the Company owns 29.3% of the common stock of Alexander's, Inc. ("Alexander's") which has nine properties in the greater New York metropolitan area. As of December 31, 1995, approximately 80% of the square footage of the Company's shopping centers was leased to large stores (over 20,000 square feet) and over 93% was leased to tenants whose businesses are national or regional in scope. The Company's large tenants include destination retailers such as discount department stores, supermarkets, home improvements stores, discount apparel stores, membership warehouse clubs and "category killers." Category killers are large stores which offer a complete selection of a category of items (e.g., toys, office supplies, etc.) at low prices, often in a warehouse format. The Company's large store tenants typically offer basic consumer necessities such as food, health and beauty aids, moderately priced clothing, building materials and home improvement supplies, and compete primarily on the basis of price. The Company believes that this tenant mix mitigates the effects on its properties of adverse changes in general economic conditions. Substantially all of the Company's large store leases are long-term with fixed base rents and provide for step-ups in rent typically occurring every five years. In addition, the Company's leases generally provide for additional rents based on a percentage of tenants' sales. Of the Company's $80,429,000 of rental revenue in 1995, base rents accounted for approximately 98.8% and percentage rents accounted for approximately 1.2%. The Company's leases generally pass through to tenants the tenant's share of all common area charges (including roof and structure, unless it is the tenant's direct responsibility), real estate taxes and insurance costs and certain capital expenditures. As of December 31, 1995, the average annual base rent per square foot for the Company's shopping centers was $8.68. From 1991 through 1995, the Company's property rentals from shopping centers (including the effects of straight-lining of rents) was $54,700,000, $56,900,000, $61,900,000, $64,700,000 and $74,300,000 respectively. Straight-lining of rents averages the rent increases provided for in leases such that property rentals for financial statement purposes is constant throughout the term of the lease. This convention applies to leases entered into after November 14, 1985. -3-

4 ITEM 1. BUSINESS - continued As of December 31, 1995, no single shopping center property accounted for more than 6.3% of the Company's total leasable area for its shopping center properties or more than 5.2% of property rentals for its shopping center properties. Bradlees, Inc. ("Bradlees") accounted for 21%, 19% and 18% of total property rentals for each of the three years ended December 31, 1995, respectively. In June 1995, Bradlees filed for protection under Chapter 11 of the U.S. Bankruptcy Code ("Chapter 11"). The Company leases 21 locations to Bradlees of which 19 are fully guaranteed by Stop & Shop Companies, Inc. Further, Montgomery Ward & Co., Inc. remains liable on eight of such leases including the rent it was obligated to pay - approximately 70% of current rent. Home Depot represented 5% and Sam's Wholesale/Wal*Mart, Shop Rite, Pathmark, T.J. Maxx/Marshalls and Staples each accounted for approximately 3% of the total property rentals for the year ended December 31, 1995. Several of the Company's other tenants, whose rents aggregated less than 5% of the Company's total property rentals for the year ended December 31, 1995, have also filed for protection under Chapter 11. Vornado, Inc., the immediate predecessor to the Company, was merged with the Company on May 6, 1993 in connection with the Company's conversion to a REIT. The Company administers all operating functions, including leasing, management, construction, finance, legal, accounting and data processing, from its executive offices (other than the leasing of the Company's three Texas properties, which is done by an employee locally). The Company's principal executive offices are located at Park 80 West, Plaza II, Saddle Brook, New Jersey 07663; telephone (201) 587-1000. RELATIONSHIP WITH ALEXANDER'S In March 1995, the Company purchased all of the 1,353,468 shares of common stock of Alexander's then owned by Citibank, N.A. ("Citibank") representing 27.1% of the outstanding shares of common stock of Alexander's, for $40.50 per share in cash. As a result of the acquisition, the Company owns 29.3% of the common stock of Alexander's. In addition, the Company lent Alexander's $45,000,000 (see "Management's Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources" at page 18). Alexander's has disclosed in its annual report on Form 10-K for the year ended December 31, 1995, that it has nine properties (where its department stores were formerly located) consisting of: Operating properties: (i) a recently redeveloped 359,000 square foot building, two-thirds of which is leased to Sears and Marshalls, on Queens Boulevard and 63rd Road in Rego Park, Queens, New York ("Rego Park I"), (ii) a 50% interest in the 427,000 square feet of mall stores at the Kings Plaza regional shopping center on Flatbush Avenue in Brooklyn, New York, (iii) a 303,000 square foot building leased to Caldor on Fordham Road in the Bronx, New York, (iv) a 177,000 square foot building subleased to Caldor at Roosevelt Avenue and Main Street in Flushing, New York and (v) a 173,000 square foot building leased to an affiliate of Conway located at Third Avenue and 152nd Street in the Bronx, New York, and Non-operating properties to be redeveloped: (i) the square block, including a 418,000 square foot building, bounded by Lexington Avenue and Third Avenue and 58th and 59th Streets in Manhattan, New York, in which Alexander's has the general partnership interest and a 92% limited partnership interest, (ii) 39.3 acres at the intersection of Routes 4 and 17 in Paramus, New Jersey, (iii) a 320,000 square foot anchor store which is one of the two anchor stores at the Kings Plaza regional shopping center and (iv) one and one-half blocks of vacant land adjacent to the Rego Park I location ("Rego Park II"). -4-

5 ITEM 1. BUSINESS - continued In September 1995, Caldor filed for protection under Chapter 11. Caldor accounted for approximately 56% and 64% of Alexander's consolidated revenues for the years ended December 31, 1995 and 1994, respectively. The Company manages, develops and leases the Alexander's properties under a management and development agreement (the "Management Agreement") and a leasing agreement (the "Leasing Agreement") pursuant to which the Company receives annual fees from Alexander's. As of December 31, 1995, Interstate Properties owned 27.7% of the common shares of beneficial interest of the Company and 27.1% of Alexander's common stock. Interstate Properties is a general partnership in which Steven Roth, David Mandelbaum and Russell B. Wight, Jr. are partners. Mr. Roth is the Chairman of the Board and Chief Executive Officer of the Company, the Managing General Partner of Interstate Properties, and the Chief Executive Officer and a director of Alexander's. Messrs. Mandelbaum and Wight are trustees of the Company and are also directors of Alexander's. Effective March 2, 1995, for a three year period, the Company and Interstate Properties are restricted from owning in excess of two-thirds of Alexander's common stock or entering into certain other transactions with Alexander's, without the consent of the independent directors of Alexander's. Alexander's common stock is listed on the New York Stock Exchange under the symbol "ALX". COMPETITION The leasing of real estate is highly competitive. Demand for retail space has been impacted by the recent bankruptcy of a number of retail companies and a general trend toward consolidation in the retail industry which could adversely affect the ability of the Company to attract or retain tenants. The principal means of competition are price, location and the nature and condition of the facility to be leased. The Company directly competes with all lessors and developers of similar space in the areas in which its properties are located. ENVIRONMENTAL REGULATIONS See "Note 10 - Contingencies" to the Consolidated Financial Statements at page 37. EMPLOYEES The Company employs 68 people. SEGMENT DATA The company operates in one business segment - real estate. See "Note 9 - Leases" to the Consolidated Financial Statements at page 36 for information on significant tenants. Vornado engages in no foreign operations. -5-

6 ITEM 2. PROPERTIES The Company leases 27,000 square feet in Saddle Brook, New Jersey for use as its executive offices. The following table sets forth certain information as of December 31, 1995 relating to the properties owned by the Company. LEASABLE BUILDING SQUARE FOOTAGE -------------------------- YEAR OWNED BY NUMBER AVERAGE ORIGINALLY LAND TENANT ON OF ANNUALIZED DEVELOPED AREA OWNED BY LAND LEASED TENANTS BASE RENT LOCATION OR ACQUIRED (ACRES) COMPANY FROM COMPANY 12/31/95 PER SQ.FT. (1) - -------------------------------------------------------------------------------------------------------------------------------- SHOPPING CENTERS NEW Atlantic City 1965 17.7 135,774 - 2 $ 4.81 JERSEY Bordentown 1958 31.2 178,678 - 4 6.37 Bricktown 1968 23.9 259,888 2,764 19 10.04 Cherry Hill 1964 37.6 231,142 63,511 12 8.34 Delran 1972 17.5 167,340 1,200 4 5.10 Dover 1964 19.6 172,673 - 12 7.03 East Brunswick 1957 19.2 219,056 10,400 7 9.41 East Hanover 1962 24.6 271,066 - 17 9.89 Hackensack 1963 21.3 207,548 59,249 21 14.20 Jersey City 1965 16.7 222,478 3,222 11 10.89 Kearny 1959 35.3 41,518 62,471 6 7.69 Lawnside 1969 16.4 142,136 - 2 9.07 Lodi 1975 8.7 130,000 - 1 8.43 Manalapan 1971 26.3 194,265 2,000 7 8.77 Marlton 1973 27.8 173,238 6,836 10 8.28 Middletown 1963 22.7 179,584 52,000 21 10.46 Morris Plains 1985 27.0 171,493 1,000 15 10.09 North Bergen 1959 4.6 6,515 55,597 3 25.78 North Plainfield (4) 1989 28.7 217,360 - 17 8.58 Totowa 1957 40.5 201,471 93,613 8 15.94 LEASE PRINCIPAL EXPIRATION/ PERCENT TENANTS OPTION LOCATION LEASED (1) (OVER 30,000 SQ. FT.) EXPIRATION - ------------------------------------------------------------------------------------------------ SHOPPING CENTERS NEW Atlantic City 90% Sam's Wholesale 1999 JERSEY Bordentown 100% Bradlees (2) (3) 2001/2021 Shop-Rite 2011/2016 Bricktown 99% Caldor 2008/2028 Shop-Rite 2002/2017 Cherry Hill 94% Bradlees (2) (3) 2006/2026 Shop & Bag 2007/2017 Toys "R" Us 2012/2042 Delran 92% Sam's Wholesale 2011/2021 Dover 62% Shop-Rite 2012/2022 East Brunswick 100% Bradlees (3) 2003/2023 Shoppers World 2007/2012 East Hanover 98% Home Depot 2009/2019 Pathmark 2001/2024 Todays Man 2009/2014 Hackensack 94% Bradlees (3) 2012/2017 Rickel Home Center 2003/2013 Pathmark 2014/2024 Jersey City 97% Bradlees (3) 2002/2022 Shop-Rite 2008/2028 Kearny 100% Pathmark 2013/2033 Rickel Home Center 2008 Lawnside 100% Home Depot 2012/2027 Lodi 100% National 2013/2023 Wholesale Liq. Manalapan 100% Bradlees (3) 2002/2022 Grand Union 2012/2022 Marlton 100% Bradlees (2) (3) (5) 2011/2031 Shop-Rite 1999/2009 Middletown 96% Bradlees (3) 2002/2022 Grand Union 2009/2029 Morris Plains 92% Caldor 2002/2023 North Bergen 100% Waldbaum's 2012/2032 North Plainfield (4) 97% K Mart 2006/2016 Pathmark 2001/2011 Totowa 95% Bradlees (3) 2013/2028 Home Depot 2015/2025 -6-

7 LEASABLE BUILDING SQUARE FOOTAGE -------------------------- YEAR OWNED BY NUMBER AVERAGE ORIGINALLY LAND TENANT ON OF ANNUALIZED DEVELOPED AREA OWNED BY LAND LEASED TENANTS BASE RENT LOCATION OR ACQUIRED (ACRES) COMPANY FROM COMPANY 12/31/95 PER SQ.FT. (1) - -------------------------------------------------------------------------------------------------------------------------------- SHOPPING Turnersville 1974 23.3 89,453 6,513 3 5.98 CENTERS Union 1962 24.1 257,045 - 11 15.02 Vineland 1966 28.0 143,257 - 4 6.95 Watchung 1959 53.8 49,979 115,660 3 17.56 Woodbridge 1959 19.7 232,755 3,614 11 10.30 NEW YORK 14th Street and Union Square, Manhattan 1993 0.8 231,770 - 1 9.92 Albany (Menands) 1965 18.6 140,529 - 2 5.80 Buffalo (Amherst) (4) 1968 22.7 184,832 111,717 9 5.87 Freeport 1981 12.5 166,587 - 3 10.83 New Hyde Park (4) 1976 12.5 101,454 - 1 13.55 North Syracuse (4) 1976 29.4 98,434 - 1 - Rochester (Henrietta) (4) 1971 15.0 147,812 - 2 5.60 Rochester 1966 18.4 176,261 - 1 6.05 PENNSYLVANIA Allentown 1957 86.8 262,607 356,938 19 8.71 Bensalem 1972 23.2 208,174 6,714 11 7.23 Bethlehem 1966 23.0 157,212 2,654 10 4.81 Broomall 1966 21.0 145,776 22,355 5 8.31 Glenolden 1975 10.0 101,235 - 3 9.74 Lancaster 1966 28.0 179,982 - 8 4.29 Levittown 1964 12.8 104,448 - 1 5.98 10th and Market Streets, Philadelphia 1994 1.8 271,300 - 2 8.00 Upper Moreland 1974 18.6 122,432 - 1 7.50 York 1970 12.0 113,294 - 3 4.46 MARYLAND Baltimore (Belair Rd.) 1962 16.0 205,723 - 2 5.95 LEASE PRINCIPAL EXPIRATION/ PERCENT TENANTS OPTION LOCATION LEASED (1) (OVER 30,000 SQ. FT.) EXPIRATION - ----------------------------------------------------------------------------------------------- SHOPPING Turnersville 100% Bradlees (2) (3) 2011/2031 CENTERS Union 98% Bradlees (3) 2002/2022 Toys "R" Us 2015 Vineland 51% Rickel Home Center 2005/2010 Watchung 88% B.J. Wholesale 2024 Woodbridge 99% Bradlees (3) 2002/2022 Foodtown 2007/2014 NEW YORK 14th Street and Union Square, Manhattan 100% Bradlees 2019/2029 Albany (Menands) 100% Fleet Bank 2004/2014 Grand Union (5) 2000 Buffalo (Amherst) (4) 92% Circuit City 2017 Media Play 2002/2017 MJ Design 2006/2017 Toys "R" Us 2013 T.J. Maxx 1999 Freeport 100% Home Depot 2011/2021 New Hyde Park (4) 100% Bradlees 2019/2029 North Syracuse (4) 100% Reisman Properties 2014 Rochester (Henrietta) (4) 68% Hechinger (5) 2005/2025 Marshalls 1998/2003 Rochester 41% Hechinger (5) 2005/2025 PENNSYLVANIA Allentown 100% Hechinger 2011/2031 Shop-Rite 2011/2021 Burlington Coat Factory 2017 Walmart 2024/2094 Sam's Wholesale 2024/2094 Bensalem 87% Bradlees (2) (3) (5) 2011/2031 Bethlehem 68% Pathmark 2000/2023 Super Petz 2005/2015 Broomall 100% Bradlees (2) (3) 2006/2026 Glenolden 100% Bradlees (2) (3) 2012/2022 Lancaster 52% Weis Markets 1998/2018 Levittown 100% Bradlees (2) (3) 2006/2026 10th and Market Streets, Philadelphia 62% Clover 2010/2035 Upper Moreland 100% Sam's Wholesale (2) 2010/2015 York 100% Builders Square 2009/2018 MARYLAND Baltimore (Belair Rd.) 65% Big B Food 1999/2004 Warehouse -7-

8 LEASABLE BUILDING SQUARE FOOTAGE -------------------------- YEAR OWNED BY NUMBER AVERAGE ORIGINALLY LAND TENANT ON OF ANNUALIZED DEVELOPED AREA OWNED BY LAND LEASED TENANTS BASE RENT LOCATION OR ACQUIRED (ACRES) COMPANY FROM COMPANY 12/31/95 PER SQ.FT. (1) - -------------------------------------------------------------------------------------------------------------------------------- SHOPPING Baltimore (Towson) 1968 14.6 146,393 6,800 7 9.61 CENTERS Baltimore (Dundalk) 1966 16.1 183,361 - 18 6.49 Glen Burnie 1958 21.2 117,369 3,100 5 6.03 Hagerstown 1966 13.9 133,343 14,965 6 3.04 CONNECTICUT Newington 1965 19.2 134,229 45,000 4 5.84 Waterbury 1969 19.2 139,717 2,645 10 7.88 MASSACHUSETTS Chicopee 1969 15.4 112,062 2,851 3 4.85 Milford (4) 1976 14.7 83,000 - 1 5.01 Springfield 1966 17.4 8,016 117,044 2 11.25 TEXAS Lewisville 1990 13.3 34,893 1,204 16 12.85 Mesquite 1990 5.5 71,246 - 13 15.48 Dallas 1990 9.9 99,733 - 9 9.48 ------- --------- --------- --- ----- TOTAL SHOPPING CENTERS 1,179.7 8,678,936 1,233,637 410 8.68 ------- ---------- --------- --- ------ WAREHOUSE/ E. Brunswick 1972 16.1 325,800 - 2 2.10 INDUSTRIAL E. Hanover 1963-1967 45.5 941,429 - 12 3.67 Edison 1982 18.7 272,071 - 1 2.75 Garfield 1959 31.6 486,620 - 3 3.41 ------- ---------- --------- --- ------ TOTAL WAREHOUSE/ INDUSTRIAL 111.9 2,025,920 - 18 3.18 ------- ---------- --------- --- ------ OTHER Paramus (4) 1987 3.4 118,225 - 22 17.38 PROPERTIES Montclair 1972 1.6 16,928 - 1 16.36 Rahway (4) 1972 - 32,000 - 1 4.88 ------- --------- --------- --- ----- Total Other Properties 5.0 167,153 - 24 13.88 ------- ---------- --------- --- ------ Grand Total 1,296.6 10,872,009 1,233,637 452 $ 7.80 ======= ========== ========= === ====== LEASE PRINCIPAL EXPIRATION/ PERCENT TENANTS OPTION LOCATION LEASED (1) (OVER 30,000 SQ. FT.) EXPIRATION - ----------------------------------------------------------------------------------------------- SHOPPING Baltimore (Towson) 100% Staples 2004 CENTERS Baltimore (Dundalk) 97% Various Tenants Glen Burnie 100% Rickel Home 2005 Center (5) Hagerstown 100% Pharmhouse 2008/2012 Weis Markets 1999/2009 CONNECTICUT Newington 95% Bradlees (3) 2002/2022 Rickel Home 2007/2027 Center Waterbury 100% Toys "R" Us 2010 Finast 2003/2018 Supermarkets MASSACHUSETTS Chicopee 92% Bradlees (3) 2002/2022 Milford (4) 100% Bradlees (3) 2004/2009 Springfield 100% Wal*Mart 2018/2092 TEXAS Lewisville 95% Albertson's (6) 2055 Mesquite 93% Dallas 78% Albertson's (6) 2055 --- TOTAL SHOPPING CENTERS 91% --- WAREHOUSE/ E. Brunswick 97% Popsicle Playwear 2000/2005 INDUSTRIAL IFB Apparel, Inc. 2001/2006 E. Hanover 94% Various Tenants Edison 100% White Cons. Ind.,Inc. 1998/2001 Garfield 38% Popular Services 1997 --- & Various Tenants TOTAL WAREHOUSE/ INDUSTRIAL 82% --- OTHER Paramus (4) 59% PROPERTIES Montclair 100% Rahway (4) 100% --- Total Other Properties 71% --- Grand Total 89% === (1) Average annualized base rent per square foot does not include ground leases (which leases are included in percent leased) or rent for leases which had not commenced as of December 31, 1995. (2) The tenant at these locations has subleased or been assigned its space from Montgomery Ward & Co., Inc. which remains liable on such lease including the rent it was obligated to pay - approximately 70%. (3) These leases are guaranteed by the Stop & Shop Companies, Inc. (4) Ground and/or building leasehold interest (5) The tenant has ceased operations at these locations but continues to pay rent. (6) Square footage excludes Albertson's which owns its land and building. -8-

9 INSURANCE The Company carries comprehensive liability, fire, flood, extended coverage and rental loss insurance with respect to its properties with policy specifications and insured limits customarily carried for similar properties. Management of the Company believes that the Company's insurance coverage conforms to industry norms. ITEM 3. LEGAL PROCEEDINGS The Company is from time to time involved in legal actions arising in the ordinary course of its business. In the opinion of management, after consultation with legal counsel, the outcome of such matters will not have a material effect on the Company's financial condition or results of operations. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS No matters were submitted to a vote of security holders during the fourth quarter of the year ended December 31, 1995. -9-

10 EXECUTIVE OFFICERS OF THE REGISTRANT The following is a list of the names, ages, principal occupations and positions with Vornado of the executive officers of Vornado and the positions held by such officers during the past five years. All executive officers of Vornado have terms of office which run until the next succeeding meeting of the Board of Trustees of Vornado following the Annual Meeting of Shareholders unless they are removed sooner by the Board. Principal Occupation, Position and Office (current and during past five years with Vornado unless Name Age otherwise stated) ---- --- ---------------------------------------------------------- Steven Roth 54 Chairman of the Board, Chief Executive Officer and Chairman of the Executive Committee of the Board; the Managing General Partner of Interstate Properties, a developer and operator of shopping centers and an investor in securities and partnerships; Chief Executive Officer of Alexander's, Inc. since March 2, 1995 and a Director since 1989; Director of Insituform Technologies, Inc. Richard T. Rowan 49 Vice President - Real Estate Joseph Macnow 50 Vice President - Chief Financial Officer; Vice President - Chief Financial Officer of Alexander's, Inc. since August 1995 -10-

11 PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS - ------------------------------------------------------------------------------- Vornado's common shares are traded on the New York Stock Exchange. Quarterly price ranges of the common shares and dividends per share paid for the years ended December 31, 1995 and 1994 were as follows: - ------------------------------------------------------------------------------------- YEAR ENDED YEAR ENDED DECEMBER 31, 1995 DECEMBER 31, 1994 - ------------------------------------------------------------------------------------- Quarter High Low Dividends High Low Dividends - ------------------------------------------------------------------------------------- 1st $36.25 $33.88 $.56 $36.50 $31.50 $.50 2nd 36.00 32.63 .56 37.50 32.25 .50 3rd 39.00 34.75 .56 37.50 34.00 .50 4th 37.88 34.38 .56 35.88 30.50 .50 - ------------------------------------------------------------------------------------ The approximate number of record holders of common shares of Vornado at December 31, 1995, was 2,000. -11-

12 PART II ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA - ---------------------------------------------------------------------------------------------------------------------- Year Ended December 31, ---------------------------------------------------------------- 1995 1994 1993 1992 1991 - ---------------------------------------------------------------------------------------------------------------------- (in thousands, except share and per share amounts) OPERATING DATA Revenues: Property rentals $ 80,429 $ 70,755 $ 67,213 $ 63,186 $ 61,371 Expense reimbursements 24,091 21,784 19,839 17,898 16,865 Other income 4,198 1,459 1,738 913 262 - ---------------------------------------------------------------------------------------------------------------------- Total Revenues 108,718 93,998 88,790 81,997 78,498 - ---------------------------------------------------------------------------------------------------------------------- Expenses: Operating 32,282 30,223 27,994 27,587 25,848 Depreciation and amortization 10,790 9,963 9,392 9,309 9,115 General and administrative 6,687 6,495 5,890 4,612 4,770 Costs incurred in connection with the merger Vornado, Inc. into Vornado Realty Trust -- -- 856 -- -- Cost incurred upon exercise of a stock option by an officer and subsequent repurchase of a portion of the shares -- -- -- 15,650 -- - ---------------------------------------------------------------------------------------------------------------------- Total Expenses 49,759 46,681 44,132 57,158 39,733 - ---------------------------------------------------------------------------------------------------------------------- Operating income 58,959 47,317 44,658 24,839 38,765 Income (loss) applicable to Alexander's: Equity in loss (1,972) -- -- -- -- Depreciation (417) -- -- -- -- Interest income on loan 6,343 -- -- -- -- Income from investment in and advances to Vornado Management Corp. 788 -- -- -- -- Interest and dividend income 5,439 7,489 11,620 8,555 9,303 Interest and debt expense (16,426) (14,209) (31,155) (33,910) (34,930) Net gain on marketable securities 294 643 263 2,779 4,862 - ---------------------------------------------------------------------------------------------------------------------- Income from continuing operations before income taxes 53,008 41,240 25,386 2,263 18,000 Provision (benefit) for income taxes -- -- (6,369) 1,080 7,527 - ---------------------------------------------------------------------------------------------------------------------- Income from continuing operations $ 53,008 $ 41,240 $ 31,755 $ 1,183 $ 10,473 - ---------------------------------------------------------------------------------------------------------------------- Weighted average number of shares outstanding 23,579,669 21,853,720 19,790,448 16,559,330 16,324,895 Income per share from continuing operations $2.25 $1.89 $1.60 $ .07 $ .64 Cash dividends declared 2.24 2.00 1.50 * 1.15 1.08 * Does not include special dividend of $3.36 per share of accumulated earnings and profits paid in June 1993. BALANCE SHEET DATA As at: Total assets $491,496 $393,538 $385,830 $420,616 $393,447 Real estate, at cost 382,476 365,832 340,415 314,651 305,123 Accumulated depreciation 139,495 128,705 118,742 111,142 103,520 Debt 233,353 234,160 235,037 341,701 345,608 Shareholders' equity (deficit) 194,274 116,688 115,737 (3,242) 8,125 - ---------------------------------------------------------------------------------------------------------------------- -12-

13 ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA - (continued) - ---------------------------------------------------------------------------------------------------------------------------- Year Ended December 31, -------------------------------------------------------- 1995 1994 1993 1992 1991 - ---------------------------------------------------------------------------------------------------------------------------- OTHER DATA Funds from operations (1) (2): Income from continuing operations before income taxes $ 53,008 $ 41,240 $ 25,386 $ 2,263 $ 18,000 Depreciation and amortization of real property 10,019 9,192 8,842 8,778 8,604 Straight-lining of rental income (2,569) (2,181) (2,200) (2,200) (2,200) Leasing fees received in excess of income recognized 1,052 -- -- -- -- Losses/(gains) on sale of securities available for sale 360 (51) (263) (846) (1,932) Proportionate share of adjustments to Alexander's loss to arrive at Alexander's funds from operations 539 -- -- -- -- Costs incurred in connection with the merger/upon exercise of a stock option -- -- 856 15,650 -- - ---------------------------------------------------------------------------------------------------------------------------- Funds from operations $ 62,409 $ 48,200 $ 32,621 $23,645 $ 22,472 - ---------------------------------------------------------------------------------------------------------------------------- Cash flow provided by (used in): Operating activities $ 62,882 $ 46,948 $ 27,725 $17,607 $ 36,244 Investing activities $(103,891) $(15,434) $ 1,350 $14,800 $(17,214) Financing activities $ 36,577 $(32,074) $(56,433) $ 4,384 $ (9,815) (1) Funds from operations does not represent cash generated from operating activities in accordance with generally accepted accounting principles and is not necessarily indicative of cash available to fund cash needs. Funds from operations should not be considered as an alternative to net income as an indicator of the Company's operating performance or as an alternative to cash flows as a measure of liquidity. (2) Effective January 1, 1995, the Company changed its definition of funds from operations to exclude amortization of debt issuance costs and depreciation of personal property. Prior period amounts have been restated to conform to the current year's presentation. The Company's definition of funds from operations does not conform to the NAREIT definition because the Company deducts the effect of straight-lining of property rentals. Amounts included in revenues and expenses have been reclassified to conform with the current year's presentation. -13-

14 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - ------------------------------------------------------------------------------- RESULTS OF OPERATIONS YEARS ENDED DECEMBER 31, 1995 AND DECEMBER 31, 1994 The Company's revenues, which consist of property rentals, tenant expense reimbursements and other income were $108,718,000 in 1995, compared to $93,998,000 in 1994, an increase of $14,720,000 or 15.7%. Property rentals from shopping centers were $73,296,000 in 1995, compared to $63,778,000 in 1994, an increase of $9,518,000 or 14.9%. Of this increase, (i) $6,067,000 resulted from expansions of shopping centers and acquisitions of retail properties, (ii) $2,823,000 resulted from rental step-ups in existing tenant leases which are not subject to the straight-line method of revenue recognition and (iii) $628,000 resulted from property rentals received from new tenants exceeding property rentals lost from vacating tenants. Property rentals from the remainder of the portfolio were $6,174,000 in 1995, compared to $6,090,000 in 1994, an increase of $84,000 or 1.4%. Percentage rent was $959,000 in 1995, compared to $887,000 in 1994. Tenant expense reimbursements were $24,091,000 in 1995, compared to $21,784,000 in 1994, an increase of $2,307,000. This increase reflects a corresponding increase in operating expenses passed through to tenants. Other income was $4,198,000 in 1995, compared to $1,459,000 in 1994, an increase of $2,739,000. This increase resulted primarily from the fee income recognized in connection with the Management Agreement and Leasing Agreement with Alexander's (including $915,000 applicable to 1993 and 1994 recognized in the first quarter of 1995). No leasing fee income was recognized prior to 1995 because Alexander's had not repaid certain creditors, which was a condition precedent to the commencement of the payment of leasing fees owed by Alexander's to the Company. In addition to the Management Agreement fee income included in other income in 1995, $2,250,000 of such fees was earned in 1995 by Vornado Management Corp. ("VMC") and is included in the caption "Income from investment in and advances to Vornado Management Corp." in the Consolidated Statements of Income. Operating expenses were $32,282,000 in 1995 as compared to $30,223,000 in 1994, an increase of $2,059,000. Of this increase (i) $1,484,000 resulted from real estate taxes from expansions and acquisitions, which were passed through to tenants, and (ii) $258,000 resulted from bad debt expenses primarily due to tenant bankruptcies. Depreciation and amortization expense increased in 1995, compared to 1994, primarily as a result of property expansions. General and administrative expenses were $6,687,000 in 1995 as compared to $6,495,000 in 1994, an increase of $192,000. This increase is the net of increases from (i) payroll expenses of $1,017,000, (due to additions to staff and bonuses), and (ii) professional fees and other corporate office expenses of $305,000, offset by (iii) the reduction in expenses of $1,130,000 resulting from the assignment of the Company's Management Agreement with Alexander's to VMC in the third quarter of this year. In March 1995, the Company purchased all of the 1,353,468 shares of common stock of Alexander's then owned by Citibank, representing 27.1% of the outstanding shares. As a result of the acquisition, the Company owns 29.3% of the common stock of Alexander's and has changed its accounting for its investment in Alexander's to the equity method. For the period from March 2, 1995 through December 31, 1995, Vornado's equity in Alexander's losses amounted to $1,972,000. In addition, during the same period the Company recognized interest income on its loan to Alexander's of $6,343,000 and fee income from its Management Agreement and Leasing Agreement with Alexander's of $2,973,000 (excluding $2,250,000 earned by VMC - see paragraph below). The Company believes that its share of Alexander's losses (which are non-cash) combined with its fee income and interest income will not have a negative effect on its results of operations, liquidity and financial condition. -14-

15 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (continued) - ------------------------------------------------------------------------------- On July 6, 1995 the Company assigned its Management Agreement with Alexander's to VMC, a newly formed New Jersey corporation. In exchange, the Company received 100% of the non-voting preferred stock of VMC which entitles it to 95% of the distributions by VMC to its shareholders. In addition, the Company lent $5,000,000 to VMC for working capital purposes under a three year term loan bearing interest at the prime rate plus 2%. VMC is responsible for its pro-rata share of compensation (including bonuses) and fringe benefits of common employees and 30% of other common expenses. Income from investment in and advances to VMC consists of dividend income of $565,000 and interest income of $223,000. Investment income (interest and dividend income and net gains/(losses) on marketable securities) was $5,733,000 for 1995, compared to $8,132,000 in 1994, a decrease of $2,399,000 or 29.5%. This decrease was caused by (i) lower interest income resulting from the use of cash for the Alexander's investment and (ii) net gains on marketable securities being $349,000 less than in the prior year. Interest and debt expense was $16,426,000 in 1995 as compared to $14,209,000 in 1994, an increase of $2,217,000 or 15.6%. Of this increase, $1,046,000 resulted from borrowings under the revolving credit facility to temporarily fund the investment in Alexander's and $1,134,000 resulted from a decrease in interest capitalized during construction. The Company operates in a manner intended to enable it to continue to qualify as a REIT under Sections 856-860 of the Internal Revenue Code of 1986 as amended (the "Code"). Under those sections, a REIT which distributes at least 95% of its REIT taxable income as a dividend to its shareholders each year and which meets certain other conditions will not be taxed on that portion of its taxable income which is distributed to its shareholders. The Company has distributed to its shareholders an amount greater than its taxable income. Therefore, no provision for Federal income taxes is required. In 1993, as a result of the Company's conversion to a REIT, the deferred tax balance of $6,369,000 at December 31, 1992 was reversed. RESULTS OF OPERATIONS YEARS ENDED DECEMBER 31, 1994 AND DECEMBER 31, 1993 The Company's revenues, which consist of property rentals, tenant expense reimbursements and other income were $93,998,000 in 1994, compared to $88,790,000 in 1993, an increase of $5,208,000 or 5.9%. Property rentals from shopping centers were $63,778,000 in 1994, compared to $60,919,000 in 1993, an increase of $2,859,000 or 4.7%. This increase resulted from rental step-ups in leases which are not subject to the straight-line method of revenue recognition of $1,700,000 and $1,300,000 of rents from tenants at expansions of shopping centers. Property rentals from new tenants were approximately the same as property rentals lost from vacating tenants. Property rentals from the remainder of the portfolio were $6,090,000 in 1994 as compared to $5,340,000 in 1993, an increase of $750,000 or 14.0%. This increase resulted primarily from property rentals received from new tenants exceeding property rentals lost from vacating tenants. Percentage rent was $887,000 in 1994 as compared to $954,000 in 1993. Tenant expense reimbursements were $21,784,000 in 1994, compared to $19,839,000 in 1993, an increase of $1,945,000. This increase reflects a corresponding increase in operating expenses passed through to tenants. Other income was greater in 1993 than in 1994 primarily as a result of reimbursements recognized under the Company's leasing agreement with Alexander's in 1993. Operating expenses were $30,223,000 in 1994 as compared to $27,994,000 in 1993, an increase of $2,229,000. This increase resulted primarily from an increase in real estate taxes, snow removal costs and other common area maintenance charges. Depreciation and amortization expense increased in 1994 primarily as a result of the completion of property expansions. -15-

16 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - ------------------------------------------------------------------------------- General and administrative expenses were $6,495,000 in 1994 as compared to $5,890,000 in 1993, an increase of $605,000. This increase resulted from higher professional fees and payroll. Investment income was $8,132,000 in 1994 compared to $11,883,000 in 1993, a decrease of $3,751,000 or 31.6%. The change in investment income resulted primarily from a decrease in interest and dividend income of $4,131,000 as a result of lower average investments due to the use of approximately $100,000,000 to reduce debt in November 1993, partially offset by an increase in net gains on marketable securities. Interest and debt expense was $14,209,000 in 1994 as compared to $31,155,000 in 1993, a decrease of $16,946,000 or 54.3%. Of this decrease, (i) $14,586,000 resulted from the refinancing of a blanket mortgage loan (see Note 6), and (ii) $1,300,000 resulted from an increase in capitalized interest during construction. LIQUIDITY AND CAPITAL RESOURCES CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993 Year Ended December 31, 1995 Cash flows provided by operating activities of $62,882,000 was comprised of: (i) net income of $53,008,000 and (ii) adjustments for non-cash items of $11,305,000 less (iii) the net change in operating assets and liabilities of $1,431,000. The adjustments for non-cash items are primarily comprised of depreciation and amortization of $11,779,000, plus equity in loss of Alexander's of $2,389,000, offset by the effect of straight-lining of rental income of $2,569,000. Further, during this period in connection with the Alexander's transaction, "Leasing fees and other receivables" increased by $7,656,000 and "Deferred leasing fee income" correspondingly increased by $8,888,000. These amounts have been included in "Changes in assets and liabilities: other" in the Consolidated Statements of Cash Flows and are part of the net change in operating assets and liabilities shown in item (iii) above. Net cash used in investing activities of $103,891,000 was comprised of (i) the Company's investment in and advances to Alexander's of $100,482,000, (ii) capital expenditures of $16,644,000, (iii) a loan to VMC of $5,074,000 and (iv) purchases of securities available for sale of $4,027,000, offset by (v) the net proceeds from the sale of securities available for sale of $22,336,000. Net cash provided by financing activities of $36,577,000 was primarily comprised of (i) net proceeds from issuance of common shares of $79,831,000, and (ii) borrowings on U.S. Treasury obligations of $9,600,000, offset by (iii) dividends paid of $52,875,000. Year Ended December 31, 1994 Cash flows provided by operating activities of $46,948,000 was comprised of: (i) net income of $41,240,000, and (ii) adjustments for non-cash items of $8,015,000, less (iii) the net change in operating assets and liabilities of $2,307,000. The adjustments for non-cash items are primarily comprised of depreciation and amortization of $10,839,000, offset by the effect of straight-lining of rental income of $2,181,000. Net cash used in investing activities of $15,434,000 was comprised of capital expenditures of $25,417,000, offset by proceeds from the sale of securities available for sale of $9,983,000. Net cash used in financing activities of $32,074,000 was primarily comprised of dividends paid of $43,236,000, offset by borrowings on U.S. Treasury obligations of $11,428,000. Year Ended December 31, 1993 Cash flows provided by operating activities of $27,725,000 was primarily comprised of: (i) net income of $31,755,000, less (ii) adjustments for non-cash items of $599,000 and the net change in operating assets and liabilities of $2,831,000. The adjustments for non-cash items are primarily comprised of depreciation and amortization of $11,435,000, offset by (i) the effect of straight- lining of rental income of $2,200,000, (ii) the reversal of deferred income taxes of $6,369,000, and (iii) the loss on the early extinguishment of debt of $3,202,000. -16-

17 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (continued) - ------------------------------------------------------------------------------- Net cash provided by investing activities of $1,350,000 was comprised of net proceeds from the sale of securities available for sale of $28,336,000, offset by capital expenditures of $26,986,000. Net cash used in financing activities of $56,433,000 was primarily comprised of (i) debt repayments of $333,664,000, net of proceeds from borrowings of $227,000,000, less $5,247,000 of deferred debt expenses incurred therewith, (ii) dividends paid to shareholders of $84,482,000 (including a special dividend of $54,022,000 of accumulated earnings and profits, as determined for federal income tax purposes), and (iii) repayment of borrowings on U.S. Treasury obligations of $30,048,000, offset by (iv) net proceeds from issuance of common shares of $172,051,000. FUNDS FROM OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1994 Management considers funds from operations an appropriate supplemental measure of the Company's operating performance. Funds from operations were $62,409,000 in 1995, compared to $48,200,000 in 1994, an increase of $14,209,000 or 29.5%. The following table reconciles funds from operations and net income: Year Ended December 31, ----------------------------------- 1995 1994 ------------ ------------ Net income $ 53,008,000 $ 41,240,000 Depreciation and amortization of real property 10,019,000 9,192,000 Straight-lining of property rentals (2,569,000) (2,181,000) Leasing fees received in excess of income recognized 1,052,000 -- Loss/(gain) on sale of securities available for sale 360,000 (51,000) Proportionate share of adjustments to Alexander's loss to arrive at Alexander's funds from operations 539,000 -- ------------ ------------ Funds from operations * $ 62,409,000 $ 48,200,000 ============ ============ * Effective January 1, 1995, the Company changed its definition of funds from operations to exclude amortization of debt issuance costs and depreciation of personal property. Prior period amounts have been restated to conform to the current year's presentation. The Company's definition of funds from operations does not conform to the NAREIT definition because the Company deducts the effect of the straight-lining of property rentals. Funds from operations does not represent cash generated from operating activities in accordance with generally accepted accounting principles and is not necessarily indicative of cash available to fund cash needs. Funds from operations should not be considered as an alternative to net income as an indicator of the Company's operating performance or as an alternative to cash flows as a measure of liquidity. Below are the cash flows provided by (used in) operating, investing and financing activities: Year Ended December 31, --------------------------------- 1995 1994 ------------- ------------ Operating activities $ 62,882,000 $ 46,948,000 ============= ============ Investing activities $(103,891,000) $(15,434,000) ============= ============ Financing activities $ 36,577,000 $(32,074,000) ============= ============ -17-

18 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (continued) - ------------------------------------------------------------------------------- On June 23, 1995, Bradlees, which accounted for 21% of property rentals for the year ended December 31, 1995, filed for protection under Chapter 11. The Company leases 21 locations to Bradlees of which 19 are fully guaranteed by Stop & Shop Companies, Inc. Furthermore, Montgomery Ward & Co., Inc., remains liable on eight of such leases including the rent it was obligated to pay approximately 70% of current rent. Bradlees has not affirmed any of these leases. The major items of capital expenditures for 1995 were $8,200,000 for expansions of four shopping centers and $4,600,000 for improvements at five shopping centers. The Company has budgeted approximately $3,000,000 for investment over the next year. In addition, the Company will continue its program of upgrading its shopping centers by refurbishing its parking lots (including resurfacing, new lighting, updated landscaping, islands and curbing) and re-roofing of buildings, the cost of which will be substantially reimbursed by tenants in accordance with existing lease terms. In March 1995, the Company purchased all of the 1,353,468 shares of common stock of Alexander's then owned by Citibank, representing 27.1% of the outstanding shares of common stock of Alexander's, for $40.50 per share in cash or $56,615,000 (including $1,800,000 of costs incurred in the purchase). As a result of the acquisition, the Company owns 29.3% of the common stock of Alexander's. On March 15, 1995, the Company lent Alexander's $45 million, the subordinated tranche of a $75 million secured financing, the balance of which was funded by a bank. The Company's loan has a three-year term and bears interest at 16.43% per annum for the first two years and at a fixed rate for the third year of 992 basis points over the one-year Treasury bill rate. In addition, the Company received a loan origination fee of $1,500,000 from Alexander's. Alexander's has disclosed in its annual report on Form 10-K for the year ended December 31, 1995, that its current operating properties (five of its nine properties) do not generate sufficient cash flow to pay all of its expenses, and that its four non-operating properties (Lexington Avenue, Paramus, the Kings Plaza Store and Rego Park II) are in various stages of redevelopment, and as rents commence from a portion of the redevelopment properties, it expects that cash flow will become positive. In addition to the disclosures above, Alexander's estimates that the fair market values of its assets are substantially in excess of their historical cost and that there is additional borrowing capacity. Alexander's continues to evaluate its needs for capital, which may be raised through (a) property specific or corporate borrowing, (b) the sale of securities and (c) asset sales. Further, Alexander's may receive the proceeds from tax certiorari and/or condemnation proceedings. Although there can be no assurance, Alexander's believes that these cash sources will be adequate to fund cash requirements until its operations generate adequate cash flow. On February 27, 1995, the Company entered into a three-year unsecured revolving credit facility with a bank providing for borrowings of up to $75,000,000. Borrowings bear annual interest, at the Company's election, at LIBOR plus 1.50% or the higher of the federal funds rate plus 1% or prime rate plus .50%. At December 31, 1995 the Company had no borrowings outstanding under the facility. On May 3, 1995, the Company completed the sale of 2,500,000 common shares in a public offering at $34.00 per share, which net of expenses yielded approximately $80,000,000 of which $60,000,000, was used to repay indebtedness incurred under a revolving credit facility in connection with the Alexander's investment. On December 26, 1995, a shelf registration statement relating to $500,000,000 of securities became effective. The Company anticipates that cash from continuing operations, net liquid assets, borrowings under its revolving credit facility and/or proceeds from the issuance of securities under the Company's shelf registration statement will be adequate to fund its business operations, capital expenditures, continuing debt obligations and the payment of dividends. -18-

19 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (continued) - ------------------------------------------------------------------------------- ECONOMIC CONDITIONS At December 31, 1995, approximately 80% of the square footage of the Company's shopping centers was leased to large stores (over 20,000 square feet). The Company's large store tenants typically offer basic consumer necessities such as food, health and beauty aids, moderately priced clothing, building materials and home improvement supplies, and compete primarily on the basis of price. The Company believes that this tenant mix mitigates the effects on its properties of adverse changes in general economic conditions. However, demand for retail space has been impacted by the recent bankruptcy of a number of retail companies (see page 18) and a general trend toward consolidation in the retail industry which could adversely affect the ability of the Company to attract or retain tenants. Substantially all of the Company's leases contain step-ups in rent. Such rental increases are not designed to, and in many instances do not, approximate the cost of inflation, but do have the effect of mitigating the adverse impact of inflation. In addition, substantially all of the Company's leases contain provisions that require the tenant to reimburse the Company for the tenant's share of common area charges (including roof and structure, unless it is the tenant's direct responsibility) and real estate taxes thus passing through to the tenants the effects of inflation on such expenses. Inflation did not have a material effect on the Company's results for the periods presented. RECENTLY ISSUED ACCOUNTING STANDARDS In October 1995, the Financial Accounting Standards Board adopted Statement No. 123, "Accounting for Stock-Based Compensation". The statement is effective for fiscal years beginning after December 15, 1995. Pursuant to the new standard, companies are required to adopt the fair value method of accounting for employee stock-based transactions. The new standard requires expanded disclosures of stock-based compensation arrangements with employees and encourages, but does not require, application of the "fair value" recognition provisions in the new statement. Beginning with the first quarter of 1996, the Company will disclose in a note to the financial statements pro forma net income and earnings per share based on the new method of accounting. -19-

20 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Index to Financial Statements Page ---- Independent Auditors' Report 21 Consolidated Balance Sheets as at December 31, 1995 and 1994 22 Consolidated Statements of Income for the years ended December 31, 1995, 1994 and 1993 24 Consolidated Statements of Shareholders' Equity for the years ended December 31, 1995, 1994 and 1993 25 Consolidated Statements of Cash Flows for the years ended December 31, 1995, 1994 and 1993 26 Notes to Consolidated Financial Statements 28 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH INDEPENDENT AUDITORS ON ACCOUNTING AND FINANCIAL DISCLOSURE Not applicable. -20-

21 INDEPENDENT AUDITORS' REPORT Shareholders and Board of Trustees Vornado Realty Trust Saddle Brook, New Jersey We have audited the accompanying consolidated balance sheets of Vornado Realty Trust and subsidiaries as of December 31, 1995 and 1994, and the related consolidated statements of income, shareholders' equity (deficit) and cash flows for each of the three years in the period ended December 31, 1995. Our audits also included the financial statement schedules listed in the Index at Item 14. These financial statements and financial statement schedules are the responsibility of the Company's management. Our responsibility is to express an opinion on the financial statements and financial statement schedules based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Vornado Realty Trust and subsidiaries at December 31, 1995 and 1994, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1995 in conformity with generally accepted accounting principles. Also, in our opinion, such financial statement schedules, when considered in relation to the basic consolidated financial statements taken as a whole, present fairly in all material respects the information set forth therein. DELOITTE & TOUCHE LLP Parsippany, New Jersey March 7, 1996 -21-

22 CONSOLIDATED BALANCE SHEETS - ------------------------------------------------------------------------------------------------------ (amounts in thousands except share amounts) DECEMBER 31, 1995 December 31, 1994 - ------------------------------------------------------------------------------------------------------ ASSETS: Real estate, at cost: Land $ 61,278 $ 61,269 Buildings and improvements 314,265 298,277 Leasehold improvements and equipment 6,933 6,286 - ------------------------------------------------------------------------------------------------------ Total 382,476 365,832 - ------------------------------------------------------------------------------------------------------ Less accumulated depreciation and amortization 139,495 128,705 - ------------------------------------------------------------------------------------------------------ Real estate, net 242,981 237,127 - ------------------------------------------------------------------------------------------------------ Cash and cash equivalents, including U.S. government obligations under repurchase agreements of $12,575 and $15,275 19,127 23,559 Marketable securities 70,997 87,206 Investment in and advances to Alexander's, Inc. 109,686 7,350 Investment in and advances to Vornado Management Corp. 5,074 -- Due from officer 8,418 8,418 Accounts receivable, net of allowance for doubtful accounts of $578 and $457 7,086 4,898 Receivable arising from the straight-lining of rents 14,376 11,807 Other assets 13,751 13,173 - ------------------------------------------------------------------------------------------------------ $491,496 $393,538 ====================================================================================================== -22-

23 CONSOLIDATED BALANCE SHEETS (CONTINUED) - ------------------------------------------------------------------------------------------------------- (amounts in thousands except share amounts) DECEMBER 31, 1995 December 31, 1994 - ------------------------------------------------------------------------------------------------------- LIABILITIES AND SHAREHOLDERS' EQUITY: Notes and mortgages payable $233,353 $234,160 Due for U.S. Treasury Obligations 43,875 34,275 Accounts payable and accrued expenses 6,545 4,275 Deferred leasing fee income 8,888 -- Other liabilities 4,561 4,140 - ------------------------------------------------------------------------------------------------------- Total liabilities 297,222 276,850 - ------------------------------------------------------------------------------------------------------- Commitments and contingencies Shareholders' equity: Preferred shares of beneficial interest: no par value per share; authorized, 1,000,000 shares; issued, none Common shares of beneficial interest: $.04 par value per share; authorized, 50,000,000 shares; issued, 24,246,913 and 21,654,285 shares 970 866 Additional capital 279,231 198,184 Accumulated deficit (79,380) (79,513) - ------------------------------------------------------------------------------------------------------- 200,821 119,537 Unrealized (loss)/gain on securities available for sale (1,362) 2,336 Due from officer for purchase of common shares of beneficial interest (5,185) (5,185) - ------------------------------------------------------------------------------------------------------- Total shareholders' equity 194,274 116,688 - ------------------------------------------------------------------------------------------------------- $491,496 $393,538 ======================================================================================================= See notes to consolidated financial statements. -23-

24 CONSOLIDATED STATEMENTS OF INCOME - ---------------------------------------------------------------------------------------------------------- YEAR ENDED Year Ended Year Ended (amounts in thousands DECEMBER 31, December 31, December 31, except share amounts) 1995 1994 1993 - ---------------------------------------------------------------------------------------------------------- Revenues: Property rentals $ 80,429 $70,755 $67,213 Expense reimbursements 24,091 21,784 19,839 Other income (including fee income from related parties of $4,123, $1,144 and $1,663) 4,198 1,459 1,738 - ---------------------------------------------------------------------------------------------------------- Total revenues 108,718 93,998 88,790 - ---------------------------------------------------------------------------------------------------------- Expenses: Operating 32,282 30,223 27,994 Depreciation and amortization 10,790 9,963 9,392 General and administrative 6,687 6,495 5,890 Costs incurred in connection with the merger of Vornado, Inc. into Vornado Realty Trust -- -- 856 - ---------------------------------------------------------------------------------------------------------- Total expenses 49,759 46,681 44,132 - ---------------------------------------------------------------------------------------------------------- Operating income 58,959 47,317 44,658 - ---------------------------------------------------------------------------------------------------------- Income/(loss) applicable to Alexander's: Equity in loss (1,972) -- -- Depreciation (417) -- -- Interest income on loan 6,343 -- -- Income from investment in and advances to Vornado Management Corp. 788 -- -- Interest and dividend income 5,439 7,489 11,620 Interest and debt expense (16,426) (14,209) (31,155) Net gain on marketable securities 294 643 263 - ---------------------------------------------------------------------------------------------------------- Income from continuing operations before income taxes 53,008 41,240 25,386 Provision (benefit) for income taxes -- -- (6,369) - ---------------------------------------------------------------------------------------------------------- Income from continuing operations 53,008 41,240 31,755 - ---------------------------------------------------------------------------------------------------------- Loss from discontinued operation -- -- (600) - ---------------------------------------------------------------------------------------------------------- Income before extraordinary item 53,008 41,240 31,155 Extraordinary item - loss on early extinguishment of debt -- -- (3,202) - ---------------------------------------------------------------------------------------------------------- NET INCOME $53,008 $41,240 $27,953 - ---------------------------------------------------------------------------------------------------------- NET INCOME (LOSS) PER SHARE based on 23,579,669, 21,853,720, and 19,790,448 shares outstanding: Continuing operations $2.25 $1.89 $1.60 Discontinued operation -- -- (.03) Extraordinary item -- -- (.16) - ---------------------------------------------------------------------------------------------------------- NET INCOME $2.25 $1.89 $1.41 ========================================================================================================== See notes to consolidated financial statements. -24-

25 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY - ------------------------------------------------------------------------------------------------------------------------------- Unrealized Gains on Total (amounts in thousands Retained Securities Due Share- except share amounts) Common Additional Earnings Available from Treasury holders' Shares Capital (Deficit) for Sale Officer Stock Equity - ------------------------------------------------------------------------------------------------------------------------------- BALANCE, December 31, 1992 $842 $ 75,726 $107,945 $ -- $(4,705) $(183,050) $ (3,242) Net income -- -- 27,953 -- -- -- 27,953 Net proceeds from issuance of common shares 208 171,843 -- -- -- -- 172,051 Distribution of accumulated earnings and profits -- -- (54,022) -- -- -- (54,022) Dividends paid -- -- (30,460) -- -- -- (30,460) Retirement of common stock held in treasury (200) (53,917) (128,933) -- -- 183,050 -- Common shares issued under employees' share plans 14 3,923 -- -- -- -- 3,937 Due from officers for purchase of common shares -- -- -- -- (480) -- (480) - ------------------------------------------------------------------------------------------------------------------------------- BALANCE, December 31, 1993 864 197,575 (77,517) -- (5,185) -- 115,737 Unrealized gains on securities available for sale at January 1, 1994 -- -- -- 8,565 -- -- 8,565 Net income -- -- 41,240 -- -- -- 41,240 Dividends paid -- -- (43,236) -- -- -- (43,236) Common shares issued under employees' share plans 2 609 -- -- -- -- 611 Change in unrealized gains (losses) on securities available for sale -- -- -- (6,229) -- -- (6,229) - ------------------------------------------------------------------------------------------------------------------------------- BALANCE, December 31, 1994 866 198,184 (79,513) 2,336 * (5,185) -- 116,688 Net income -- -- 53,008 -- -- -- 53,008 Net proceeds from issuance of common shares 100 79,731 -- -- -- -- 79,831 Dividends paid -- -- (52,875) -- -- -- (52,875) Common stock issued under employees' stock plans 4 1,316 -- -- -- -- 1,320 Change in unrealized gains (losses) on securities available for sale -- -- -- (3,698) -- -- (3,698) - ------------------------------------------------------------------------------------------------------------------------------- BALANCE, DECEMBER 31, 1995 $970 $279,231 $ (79,380) $(1,362) $(5,185) $ -- $194,274 =============================================================================================================================== * Includes $3,435 in unrealized gains attributable to the Company's investment in the common stock of Alexander's, Inc. (see Note 3). See notes to consolidated financial statements. -25-

26 CONSOLIDATED STATEMENTS OF CASH FLOWS - --------------------------------------------------------------------------------------------------------------- YEAR ENDED Year Ended Year Ended ---------- ---------- ---------- DECEMBER 31, December 31, December 31, (amounts in thousands) 1995 1994 1993 - --------------------------------------------------------------------------------------------------------------- CASH FLOWS FROM OPERATING ACTIVITIES: Income from continuing operations before extraordinary item $ 53,008 $ 41,240 $ 31,755 Adjustments to reconcile income to net cash provided by continuing operations: Depreciation and amortization (including debt issuance costs) 11,779 10,839 11,435 Straight-lining of rental income (2,569) (2,181) (2,200) Equity in loss of Alexander's including $417 of depreciation 2,389 -- -- Deferred income taxes -- (6,369) Net (gain) on marketable securities (294) (643) (263) Extraordinary item - loss on early extinguishment of debt -- -- (3,202) Changes in assets and liabilities: Trading securities (2,069) 1,485 279 Accounts receivable (2,188) (699) (156) Due to officer -- -- (12,753) Accounts payable and accrued expenses 2,270 (3,920) 2,611 Other 556 827 7,188 - --------------------------------------------------------------------------------------------------------------- Net cash provided by operating activities of continuing operations 62,882 46,948 28,325 - --------------------------------------------------------------------------------------------------------------- Net cash used in operating activities of discontinued operation -- -- (600) - --------------------------------------------------------------------------------------------------------------- Net cash provided by operating activities 62,882 46,948 27,725 - --------------------------------------------------------------------------------------------------------------- CASH FLOWS FROM INVESTING ACTIVITIES: Investment in and advances to Alexander's (100,482) -- -- Investment in and advances to Vornado Management Corp. (5,074) -- -- Additions to real estate (16,644) (25,417) (26,986) Purchases of securities available for sale (4,027) -- (22,918) Proceeds from sale of securities available for sale 22,336 9,983 51,254 - --------------------------------------------------------------------------------------------------------------- Net cash (used in) provided by investing activities (103,891) (15,434) 1,350 - --------------------------------------------------------------------------------------------------------------- CASH FLOWS FROM FINANCING ACTIVITIES: Net proceeds from issuance of common shares 79,831 -- 172,051 Distribution of accumulated earnings and profits -- -- (54,022) Proceeds from borrowings on U.S. Treasury obligations 40,000 11,428 -- Repayment of borrowings on U.S. Treasury obligations (30,400) -- (30,048) Proceeds from borrowings 60,000 -- 227,000 Payments on borrowings (60,807) (877) (333,664) Costs of refinancing debt (492) -- (5,247) Dividends paid (52,875) (43,236) (30,460) Exercise of share options 1,320 611 3,937 Net loans to officers -- -- (5,980) - --------------------------------------------------------------------------------------------------------------- Net cash provided by (used in) financing activities 36,577 (32,074) (56,433) - --------------------------------------------------------------------------------------------------------------- Net decrease in cash and cash equivalents (4,432) (560) (27,358) Cash and cash equivalents at beginning of year 23,559 24,119 51,477 - --------------------------------------------------------------------------------------------------------------- Cash and cash equivalents at end of year $ 19,127 $ 23,559 $ 24,119 - --------------------------------------------------------------------------------------------------------------- -26-

27 CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED) - -------------------------------------------------------------------------------------------------------- YEAR ENDED Year Ended Year Ended ---------- ---------- ---------- DECEMBER 31, December 31, December 31, (amounts in thousands) 1995 1994 1993 - -------------------------------------------------------------------------------------------------------- SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash payments for income taxes $ -- $ -- $ -- - -------------------------------------------------------------------------------------------------------- Cash payments for interest $ 15,881 $ 14,915 $ 29,382 - -------------------------------------------------------------------------------------------------------- NON-CASH TRANSACTIONS: During the year ended December 31, 1995, the unrealized gain on securities available for sale included in shareholders' equity was adjusted to reflect (i) a reduction of $3,435 to the Company's investment in Alexander's as a result of the change from fair value to the equity method of accounting and (ii) a net decrease of $263 in the market value of other securities available to sale. During 1994, a credit to shareholders' equity of $2,336 was recorded to reflect an unrealized gain on securities available for sale. In May 1993, 5,007,024 shares of common stock held in treasury were retired. The retirement of the shares was recorded by reducing the common stock account ($200), additional capital ($53,917) and retained earnings ($128,933). - ------------------------------------------------------------------------------- See notes to consolidated financial statements. -27-

28 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - ------------------------------------------------------------------------------- 1. ORGANIZATION AND BUSINESS On May 6, 1993, Vornado, Inc. merged into Vornado Realty Trust, a Maryland real estate investment trust ("REIT"). Vornado Realty Trust was formed on March 29, 1993, as a wholly-owned subsidiary of Vornado, Inc., specifically for the purpose of the merger. The Company is a fully-integrated REIT which owns, leases, develops, redevelops and manages retail and industrial properties primarily located in the Midatlantic and Northeast regions of the United States. In addition, the Company owns 29.3% of the common stock of Alexander's, Inc. which has nine properties in the greater New York metropolitan area. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES BASIS OF PRESENTATION: The accompanying consolidated financial statements include the accounts of Vornado Realty Trust and its subsidiaries, all of which are wholly-owned. All significant intercompany balances and transactions have been eliminated. The consolidated financial statements are prepared in conformity with generally accepted accounting principles. Management has made estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates. The financial statements for the applicable periods present the fleece apparel wholesaling business as a discontinued operation. REAL ESTATE: Real estate is carried at cost, net of accumulated depreciation and amortization. Betterments, major renewals and certain costs directly related to the acquisition, improvement and leasing of real estate are capitalized. Maintenance and repairs are charged to operations as incurred. Depreciation is provided on a straight-line basis over the assets estimated useful lives. Additions to real estate include interest expense capitalized during construction of $442,000 and $1,582,000 for the years ended December 31, 1995 and 1994. The Company's policy is to assess any impairment in value by making a comparison of the current and projected operating cash flows of each of its properties into the foreseeable future on an undiscounted basis, to the carrying amount of such property. Such carrying amount would be adjusted, if necessary, to reflect an impairment in the value of the asset. This is in accordance with Financial Accounting Standards Board Statement No. 121 - Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of (SFAS No. 121). CASH AND CASH EQUIVALENTS: Cash and cash equivalents consist of highly liquid investments purchased with original maturities of three months or less. MARKETABLE SECURITIES: Marketable securities are carried at fair market value. The Company has classified debt and equity securities which it intends to hold for an indefinite period of time as securities available for sale and equity securities it intends to buy and sell on a short term basis as trading securities. Unrealized gains and losses are included in earnings for trading securities and as a component of shareholder's equity for securities available for sale. Realized gains or losses on the sale of securities are recorded based on average cost. REVENUE RECOGNITION: Base rents, additional rents based on tenants' sales volume and reimbursement of the tenants' share of certain operating expenses are generally recognized when due from tenants. The straight-line basis is used to recognize base rents under leases entered into after November 14, 1985 which provide for varying rents over the lease terms. INCOME TAXES: The Company operates in a manner intended to enable it to continue to qualify as a REIT under Sections 856-860 of the Internal Revenue Code of 1986 as amended. Under those sections, a REIT which distributes at least 95% of its REIT taxable income as a dividend to its shareholders each year and which meets certain other conditions will not be taxed on that portion of its taxable income which is distributed to its shareholders. The Company has distributed to -28-

29 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) - ------------------------------------------------------------------------------- 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED shareholders an amount greater than its taxable income. Therefore, no provision for Federal income taxes is required. As a result of the Company's conversion to a REIT in 1993, the deferred tax balance at December 31, 1992 was reversed in 1993. The basis in the Company's assets and liabilities for both financial reporting purposes and tax purposes is approximately the same. AMOUNTS PER SHARE: Amounts per share are computed based upon the weighted average number of shares outstanding during the year and the dilutive effect of stock options. 3. INVESTMENT IN AND ADVANCES TO ALEXANDER'S In March 1995, the Company purchased all of the 1,353,468 shares of common stock of Alexander's then owned by Citibank, N.A. ("Citibank") representing 27.1% of the outstanding shares of common stock of Alexander's for $40.50 per share in cash or $56,615,000 (including $1,800,000 of costs incurred in the purchase). At December 31, 1994, the Company owned 113,100 shares of Alexander's common stock. The investment was carried at market value of $5,980,000 at December 31, 1994 (cost was $2,545,000). As a result of the acquisition, the Company owns 29.3% of the common stock of Alexander's and has changed its accounting for its investment in Alexander's to the equity method. This required a reduction of its investment by the unrealized gain recorded in shareholders' equity at December 31, 1994, of $3,435,000. Prior years' financial statements were not restated as a result of the change in accounting for the Company's investment in Alexander's due to it not being material. In accordance with purchase accounting, Vornado's investment in Alexander's in excess of carrying amounts has been allocated two-thirds to land and one-third to building. The building allocation in excess of Alexander's carrying amount is being depreciated over a 35 year period. Also, in March 1995, the Company lent Alexander's $45 million, the subordinated tranche of a $75 million secured financing, the balance of which was funded by a bank. The Company's loan has a three-year term and bears interest at 16.43% per annum for the first two years and at a fixed rate for the third year of 992 basis points over the one-year Treasury bill rate. In addition, the Company received a loan origination fee of $1,500,000 from Alexander's to be amortized over the term of the loan. Investment in and advances to Alexander's consists of: - -------------------------------------------------------------------------------------------------------- December 31, 1995 December 31, 1994 - -------------------------------------------------------------------------------------------------------- Common stock, net of $417,000 of accumulated depreciation of buildings (at fair value) in 1995 $ 58,693,000 $ 5,980,000 Loan receivable 45,000,000 - Deferred loan origination income (1,083,000) - Leasing fees and other receivables 8,182,000 526,000 Equity in loss since March 2, 1995 (1,972,000) - Deferred expenses 866,000 844,000 ------------ ----------- $109,686,000 $ 7,350,000 ============ =========== - -------------------------------------------------------------------------------------------------------- -29-

30 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) - -------------------------------------------------------------------------------- 3. INVESTMENT IN AND ADVANCES TO ALEXANDER'S - CONTINUED Below is a summarized Balance Sheet as at December 31, 1995 and Statement of Operations of Alexander's for the period from March 2, 1995 to December 31, 1995: - ----------------------------------------------------------------------------------- Balance Sheet: Assets: Real estate, net $ 150,435,000 Cash 8,471,000 Other assets 39,635,000 ------------- $ 198,541,000 ============= Liabilities and Deficiency in Net Assets: Debt $ 182,883,000 Other liabilities 34,794,000 Deficiency in net assets (19,136,000) ------------- $ 198,541,000 ============= - ----------------------------------------------------------------------------------- Statement of Operations: Revenues $ 11,734,000 Expenses 9,255,000 ------------- Operating income 2,479,000 Interest and debt expense (11,330,000) Interest and other income 1,651,000 ------------- Loss from continuing operations before income tax benefit (7,200,000) Reversal of deferred taxes 469,000 ------------- Loss from continuing operations $ (6,731,000) ============= Vornado's 29.3% equity in loss $ (1,972,000) ============= The unaudited proforma information set forth below presents the condensed statement of income for Vornado for the years ended December 31, 1995 and 1994, as if on January 1, 1994, the investment in Alexander's and related agreements were consummated and 1,880,000 common shares of beneficial interest of Vornado were issued to partially fund the investment. - --------------------------------------------------------------------------------------------------------------- Proforma Year Ended -------------------------------- December 31, December 31, 1995 1994 - --------------------------------------------------------------------------------------------------------------- Revenues $108,578,000 $ 99,041,000 Expenses 49,759,000 47,681,000 ------------ ------------ Operating income 58,819,000 51,360,000 Income/(loss) applicable to Alexander's: Equity in loss (2,483,000) (1,582,000) Depreciation (521,000) (630,000) Interest income on loan 7,894,000 7,894,000 Income from investment in and advances to Vornado Management Corp. 788,000 Interest and dividend income 4,818,000 4,480,000 Interest and debt expense (15,583,000) (14,209,000) Net gain on marketable securities 294,000 643,000 ------------ ------------ Net income $ 54,026,000 $ 47,956,000 ============ ============ Net income per share $2.26 $2.02 ===== ===== - --------------------------------------------------------------------------------------------------------------- -30-

31 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) - -------------------------------------------------------------------------------- 3. INVESTMENT IN AND ADVANCES TO ALEXANDER'S - CONTINUED In March 1995, the Company and Alexander's entered into a three-year management and development agreement (the "Management Agreement"). The annual management fee payable to the Company by Alexander's is $3,000,000, plus 6% of development costs with a minimum guaranteed fee for the development portion of $1,650,000 in the first year and $750,000 in each of the second and third years. On July 6, 1995, the Company assigned this Management Agreement to Vornado Management Corp. Management fees subsequent to July 6, 1995 of $2,250,000 were received by Vornado Management Corp. (see Note 12). The fee pursuant to the Management Agreement is in addition to the leasing fee the Company receives from Alexander's under the leasing agreement (the "Leasing Agreement") which has been in effect since 1992 and has been extended to be coterminous with the term of the Management Agreement. The Company recognized $1,448,000 of leasing fee income in 1995. The Leasing Agreement provides for the Company to generally receive a fee of (i) 3% of sales proceeds and (ii) 3% of lease rent for the first ten years of a lease term, 2% of lease rent for the eleventh through the twentieth years of a lease term and 1% of lease rent for the twenty-first through thirtieth year of a lease term. Subject to the payment of rents by Alexander's tenants, the Company is due $7,868,000 at December 31, 1995. Such amount is receivable annually in an amount not to exceed $2,500,000 until the present value of such installments (calculated at a discount rate of 9% per annum) equals the amount that would have been paid had it been paid on September 21, 1993, or at the time the transactions which gave rise to the commissions occurred, if later. Two leases which the Company had previously negotiated on behalf of Alexander's for its Paramus property terminated in the second quarter of 1995 because governmental approvals to begin construction on a timely basis could not be obtained as a result of a pending condemnation, resulting in $2,424,000 of previously recorded leasing fees receivable and a corresponding credit (deferred leasing fee income) being reversed. As of December 31, 1995, Interstate Properties owned 27.7% of the common shares of the Company and 27.1% of Alexander's common stock. Steven Roth is the Chairman of the Board and Chief Executive Officer of the Company, the managing general partner of Interstate Properties and the Chief Executive Officer, and a director of Alexander's. Effective March 2, 1995, for a three-year period, the Company and Interstate agreed not to own in excess of two-thirds of Alexander's common stock or to enter into certain other transactions with Alexander's, other than the transactions described above, without the consent of Alexander's independent directors. -31-

32 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) - -------------------------------------------------------------------------------- 4. MARKETABLE SECURITIES The aggregate cost and market value of securities held at December 31, 1995 and 1994 were as follows: - ------------------------------------------------------------------------------------------------------ December 31, 1995 December 31, 1994 ----------------- ----------------- Cost Market Cost Market - ------------------------------------------------------------------------------------------------------ Securities available for sale: U.S.treasury obligations $56,065,000 $56,621,000 $66,327,000 $66,285,000 Other equity and debt securities 10,802,000 8,884,000 19,215,000 18,158,000 - ------------------------------------------------------------------------------------------------------ 66,867,000 65,505,000 85,542,000 84,443,000 Trading securities - equity 5,384,000 5,492,000 2,755,000 2,763,000 - ------------------------------------------------------------------------------------------------------ Total $72,251,000 $70,997,000 $88,297,000 $87,206,000 - ------------------------------------------------------------------------------------------------------ Gross unrealized gains and losses at December 31, 1995 and 1994 were as follows: - --------------------------------------------------------------------------------------------------------- December 31, 1995 December 31, 1994 ----------------- ----------------- Gains (Losses) Gains (Losses) - --------------------------------------------------------------------------------------------------------- Securities available for sale: U.S.treasury obligations $ 556,000 -- $ 149,000 $ (191,000) Other equity and debt securities 90,000 $(2,008,000) -- (1,057,000) - --------------------------------------------------------------------------------------------------------- 646,000 (2,008,000) 149,000 (1,248,000) Trading securities - equity 108,000 -- 8,000 -- - --------------------------------------------------------------------------------------------------------- Total $ 754,000 $(2,008,000) $ 157,000 $(1,248,000) - --------------------------------------------------------------------------------------------------------- Of the U.S. treasury obligations at December 31, 1995, $40,604,000 (market value $40,781,000) matured in the first quarter of 1996, $4,993,000 (market value $5,064,000) matures in the fourth quarter of 1996 and $10,468,000 (market value $10,776,000) matures in the fourth quarter of 1997. U.S. treasury obligations with a fair market value of $56,621,000 and $35,205,000 were held as collateral for amounts due for U.S. treasury obligations at December 31, 1995 and 1994. Amounts due for U.S. treasury obligations bear variable interest rates which averaged 6.08% and 4.36% for the years ended December 31, 1995 and 1994. -32-

33 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) - -------------------------------------------------------------------------------- 5. FAIR VALUE OF FINANCIAL INSTRUMENTS The estimated fair value of cash and cash equivalents, due from officer, accounts receivable, amounts due for U.S. Treasury obligations, accounts payable, and accrued expenses are reflected in the balance sheet. The fair value of marketable securities is based on quoted market prices. At December 31, 1995 and 1994, the fair value of marketable securities was $70,997,000 and $87,206,000 compared to carrying value of $72,251,000 and $88,297,000 at their respective dates. The fair value of the loan receivable from Alexander's and the notes and mortgages payable have been estimated by discounting cash flows at the current rate at which similar loans would be made to borrowers with similar credit ratings for the remaining term. At December 31, 1995, the fair value of the loan receivable was estimated at $46,100,000 compared to a carrying value of $45,000,000. At December 31, 1995 and 1994, the fair value of notes and mortgages payable was estimated to be $233,900,000 and $205,496,000, compared to carrying value of $233,353,000 and $234,160,000 at their respective dates. The fair value estimates presented herein are based on pertinent information available to management as of December 31, 1995 and 1994. 6. NOTES AND MORTGAGES PAYABLE In November 1993, a private placement of $227,000,000 aggregate principal amount of secured notes due December 1, 2000 was completed by Vornado Finance Corp., a wholly-owned, special-purpose subsidiary of the Company. The 7-year notes bear a fixed rate of interest of 6.36% per annum. The net proceeds from the offering, together with working capital of Vornado Realty Trust, were used to prepay $327,132,000 of debt, including $313,539,000 under a blanket mortgage loan which bore interest at a rate of 9.36% per annum and was scheduled to mature in January 1994. As a result of the early extinguishment of debt, a fourth quarter extraordinary charge of $3,202,000, which primarily represented prepayment penalties, was recorded in 1993. Notes and mortgages are summarized by range of interest rates as follows: - -------------------------------------------------------------------------------- Interest rate Principal amount - -------------------------------------------------------------------------------- 5.35% $ 3,879,000 6.36% 227,000,000 8.00% 1,249,000 8.25% 1,225,000 - -------------------------------------------------------------------------------- The net carrying value of property securing the notes and mortgages amounted to $172,306,000 at December 31, 1995. As at December 31, 1995, the maturities for the next five years are as follows: - -------------------------------------------------------------------------------- Year ending December 31: Amount - -------------------------------------------------------------------------------- 1996 $ 975,000 1997 1,046,000 1998 870,000 1999 535,000 2000 227,295,000 - -------------------------------------------------------------------------------- On February 27, 1995, the Company entered into a three-year unsecured revolving credit facility with a bank providing for borrowings of up to $75,000,000. Borrowings bear annual interest, at the Company's election, at LIBOR plus 1.50% or the higher of the federal funds rate plus 1% or prime rate plus .50%. At December 31, 1995 the Company had no borrowings outstanding under the facility. -33-

34 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) - -------------------------------------------------------------------------------- 7. EMPLOYEES' SHARE OPTION PLAN Various officers and key employees have been granted incentive share options and/or nonqualified options to purchase common shares. Options granted are at prices equal to 100% of the market price of the Company's shares at date of grant, become exercisable up to 27 months after grant, and expire ten years after the date of grant. The changes in number of shares under option for the three years ended December 31, 1995 were as follows: - -------------------------------------------------------------------------------- Number of shares Option price - -------------------------------------------------------------------------------- Outstanding, December 31, 1992 597,293 $9.87-$19.83 - -------------------------------------------------------------------------------- Outstanding, December 31, 1992, adjusted * 672,812 $8.72-$19.83 Granted * 281,379 $22.84-$37.94 Exercised * (334,923) $8.72-$22.84 - -------------------------------------------------------------------------------- Outstanding, December 31, 1993 619,268 $8.72-$37.94 Granted -- -- Exercised (51,019) $8.72-$22.84 Canceled (10,681) $22.84-$34.25 - -------------------------------------------------------------------------------- Outstanding, December 31, 1994 557,568 $8.72-$37.94 Granted 75,000 $35.50 Exercised (92,628) $8.72-$22.84 - -------------------------------------------------------------------------------- OUTSTANDING, DECEMBER 31, 1995 539,940 $11.71-$37.94 - -------------------------------------------------------------------------------- * Option prices and number of shares have been adjusted, as applicable, to reflect the impact of a $3.36 special dividend paid in June 1993, in accordance with the terms of the Plan. - -------------------------------------------------------------------------------- Shares available for future grant at December 31, 1995 were 1,252,816. - -------------------------------------------------------------------------------- DECEMBER 31, December 31, 1995 1994 - -------------------------------------------------------------------------------- Options exercisable 442,506 420,200 Price range $11.71-$35.50 $8.72-$34.25 - -------------------------------------------------------------------------------- In October 1995, the Financial Accounting Standards Board adopted Statement No. 123, "Accounting for Stock-Based Compensation". The statement is effective for fiscal years beginning after December 15, 1995. Pursuant to the new standard, companies are required to adopt the fair value method of accounting for employee stock-based transactions. The new standard requires expanded disclosures of stock-based compensation arrangements with employees and encourages, but does not require, application of the "fair value" recognition provisions in the new statement. Beginning with the first quarter of 1996, the Company will disclose in a note to the financial statements pro forma net income and earnings per share based on the new method of accounting. -34-

35 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) - -------------------------------------------------------------------------------- 8. RETIREMENT PLAN The Company's qualified retirement plan covers all full-time employees. The Plan provides annual pension benefits that are equal to 1% of the employee's annual compensation for each year of participation. The funding policy is in accordance with the minimum funding requirements of ERISA. Pension expense includes the following components: - ------------------------------------------------------------------------------------------------------------------ YEAR Year Year ENDED Ended Ended ------------ ------------ ------------ DECEMBER 31, December 31, December 31, 1995 1994 1993 - ------------------------------------------------------------------------------------------------------------------ Service cost -- benefits earned during the period $ 70,000 $ 81,000 $ 89,000 Interest cost on projected benefit obligation 573,000 558,000 577,000 Actual return on assets (307,000) 130,000 (656,000) Net amortization and deferral 66,000 (359,000) 436,000 - ------------------------------------------------------------------------------------------------------------------ Net pension expense $ 402,000 $ 410,000 $ 446,000 - ------------------------------------------------------------------------------------------------------------------ Assumptions used in determining the net pension expense were: - ------------------------------------------------------------------------------------------------------------------ Discount rate 7-1/4% 8-1/2% 7-1/2% Rate of increase in compensation levels 6-1/2% 6-1/2% 6-1/2% Expected rate of return on assets 8% 8% 8% - ------------------------------------------------------------------------------------------------------------------ The following table sets forth the Plan's funded status and the amount recognized in the Company's balance sheet: - --------------------------------------------------------------------------------------------- DECEMBER 31, December 31, 1995 1994 - --------------------------------------------------------------------------------------------- Actuarial present value of benefit obligations: Vested benefit obligation $ 7,652,000 $ 6,665,000 - --------------------------------------------------------------------------------------------- Accumulated benefit obligation $ 7,717,000 $ 6,742,000 - --------------------------------------------------------------------------------------------- Projected benefit obligation $ 8,066,000 $ 6,992,000 Plan assets at fair value 3,494,000 3,219,000 - --------------------------------------------------------------------------------------------- Projected benefit obligation in excess of plan assets 4,572,000 3,773,000 Unrecognized net obligations (2,122,000) (1,173,000) Adjustment required to recognize minimum liability 1,773,000 923,000 - --------------------------------------------------------------------------------------------- Accrued pension costs $ 4,223,000 $ 3,523,000 - --------------------------------------------------------------------------------------------- Plan assets are invested in U.S. government obligations and securities backed by U.S. government guaranteed mortgages. - -------------------------------------------------------------------------------- -35-

36 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) - -------------------------------------------------------------------------------- 9. LEASES As lessor: The Company leases properties to tenants. The lease terms range from less than five years for smaller tenant spaces to as much as thirty years for major tenants. Most of the leases provide for the payment of fixed base rentals payable monthly in advance, and for the payment by the lessee of additional rents based on a percentage of the tenants' sales as well as reimbursements of real estate taxes, insurance and maintenance. As of December 31, 1995, future base rental revenue under noncancellable operating leases, excluding rents for leases with an original term of less than one year and rents resulting from the exercise of renewal options, is as follows: - -------------------------------------------------------------------------------- Year ending December 31: Amount - -------------------------------------------------------------------------------- 1996 $ 81,994,000 1997 82,011,000 1998 80,011,000 1999 75,287,000 2000 69,943,000 Thereafter 563,754,000 - -------------------------------------------------------------------------------- These amounts do not include rentals based on tenants' sales. These percentage rents approximated $959,000, $887,000 and $954,000 for the years ended December 31, 1995, 1994 and 1993. Bradlees, Inc. accounted for 21%, 19% and 18% of total property rentals for each of the three years ended December 31, 1995, respectively. In June 1995, Bradlees filed for protection under Chapter 11 of the U.S. Bankruptcy Code. The Company leases 21 locations to Bradlees of which 19 are fully guaranteed by Stop & Shop Companies, Inc. Further, Montgomery Ward & Co., Inc. remains liable on eight of such leases including the rent it was obligated to pay - approximately 70% of current rent. Bradlees has not affirmed any of these leases. As lessee: The Company is a tenant under leases for certain properties. These leases will expire principally during the next twenty years. Future minimum lease payments under operating leases at December 31, 1995, are as follows: Year ending December 31: Amount - -------------------------------------------------------------------------------- 1996 $ 1,473,000 1997 1,118,000 1998 940,000 1999 864,000 2000 699,000 Thereafter 26,519,000 - -------------------------------------------------------------------------------- Rent expense was $1,395,000, $1,313,000, and $1,366,000 for the years ended December 31, 1995, 1994 and 1993. -36-

37 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) - -------------------------------------------------------------------------------- 10. CONTINGENCIES In order to comply with environmental laws and with relevant health-based standards, the Company has an active monitoring and maintenance program for asbestos-containing materials ("ACMs") on its properties. The Company's program to remove friable ACMs has been completed, except for one location. Pursuant to the lease for this location, it is the tenant's responsibility to remove such ACMs. The Company has received an estimate of $500,000 to remove such ACMs; if the Company has to make such expenditure, it will not have a material adverse effect on the Company's financial condition or results of operations. The Company also has certain other existing and potential environmental liabilities with respect to compliance costs relating to underground storage tanks and cleanup costs relating to tanks at three Company sites at which preexisting contamination was found. The Company believes that known and potential environmental liabilities will not have a material adverse effect on the Company's business, assets or results of operation. However, there can be no assurance that the identification of new areas of contamination, change 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. At December 31, 1995, the Company had outstanding $900,000 of real estate related standby letters of credit which were drawn under a $5,000,000 unsecured line of credit with a bank bearing interest at prime. 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 or results of operations. 11. REPURCHASE AGREEMENTS The Company enters into agreements for the purchase and resale of U.S. government obligations for periods of up to one week. The obligations purchased under these agreements are held in safekeeping in the name of the Company by various money center banks. The Company has the right to demand additional collateral or return of these invested funds at any time the collateral value is less than 102% of the invested funds plus any accrued earnings thereon. -37-

38 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) - -------------------------------------------------------------------------------- 12. VORNADO MANAGEMENT CORP. On July 6, 1995, the Company assigned its Management Agreement with Alexander's (see Note 3) to Vornado Management Corp. ("VMC"), a newly formed New Jersey corporation. In exchange, the Company received 100% of the non-voting preferred stock of VMC which entitles it to 95% of the distributions by VMC to its shareholders. Steven Roth and Richard West, Trustees of the Company, own the common stock of VMC. In addition, the Company lent $5,000,000 to VMC for working capital purposes under a three year term loan bearing interest at the prime rate plus 2%. VMC is responsible for its pro-rata share of compensation and fringe benefits of common employees and 30% of other common expenses. This entity is not consolidated and the Company accounts for its investment in VMC on the equity method. Below is a summarized Statement of Operations of VMC for the period from July 6, 1995 to December 31, 1995: Revenues: Management fees from Alexander's $ 2,250,000 Expenses: General and administrative (1,130,000) Interest, net (115,000) ----------- Income before income taxes 1,005,000 Income taxes 411,000 ----------- Net income 594,000 Preferred dividends (565,000) ----------- Net income available to common shareholders $ 29,000 =========== Vornado's 95% equity in income $ 565,000 =========== 13. OTHER RELATED PARTY TRANSACTIONS At December 31, 1995, the loans due from Mr. Roth ($13,122,500) Mr. Rowan ($253,000) and Mr. Macnow ($227,000) in connection with their stock option exercises aggregated $13,602,500 ($5,185,000 of which is shown as a reduction in shareholders' equity). The loans bear interest at a rate equal to the broker call rate (7.50% at December 31, 1995) but not less than the minimum applicable federal rate provided under the Internal Revenue Code. Interest on the loan to Mr. Roth is payable quarterly. Mr. Roth's loan is due on December 29, 1997. The loans to Messrs. Rowan and Macnow are due March 31, 1996. The Company currently manages and leases the six shopping centers of Interstate Properties pursuant to a Management Agreement for which the Company receives a quarterly fee equal to 4% of base rent and percentage rent and certain other commissions. The Management Agreement has a term of one year and is automatically renewable unless terminated by either of the parties on sixty days' notice at the end of the term. Although the Management Agreement was not negotiated at arms length, the Company believes based upon comparable fees charged by other real estate companies, that its terms are fair to the Company. For the years ended December 31, 1995, 1994 and 1993, $1,150,000, $894,000 and $913,000 of management fees were earned by the Company pursuant to the Management Agreement. -38-

39 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) - -------------------------------------------------------------------------------- 14. SUMMARY OF QUARTERLY RESULTS (UNAUDITED) The following summary represents the results of operations for each quarter in 1995 and 1994: Net Net Income Revenue Income Per Share ----------- ----------- --------- 1995 March 31 $26,216,000 $11,837,000 $ .54 June 30 27,056,000 13,185,000 .56 September 30 26,630,000 13,567,000 .56 December 31 28,816,000 14,419,000 .59 1994 * March 31 $23,027,000 $10,104,000 $ .46 June 30 23,960,000 10,114,000 .46 September 30 22,856,000 10,530,000 .48 December 31 24,155,000 10,492,000 .48 * The total for the year ended December 31, 1994 differs from the sum of the quarters as a result of the weighting of the average number of shares outstanding and the dilutive effect of stock options. 15. DIVIDEND DISTRIBUTIONS Dividends are characterized for Federal income tax purposes as follows: 1995 1994 1993* ----- ----- ----- Ordinary income 100.0% 96.0% 83.7% Return of capital (generally non- taxable) -- 4.0 16.3 ----- ----- ----- Total 100,0% 100.0% 100.0% ===== ===== ===== * For shareholders who received all dividends distributed during 1993. 16. SUBSEQUENT EVENT On January 11, 1996, the Company provided $17 million of debtor-in-possession financing to Rickel Home Centers, Inc. ("Rickel"), which is operating under Chapter 11 of the Bankruptcy Code. The loan is secured by 29 of Rickel's leasehold properties and has a term of one year plus two annual extensions, but is due not later than the date on which Rickel's plan of reorganization is confirmed. The loan earns interest at 13% per annum for the first year and at a fixed rate of LIBOR plus 7.50% for the extension periods. In addition, the Company received a loan origination fee of 2% or $340,000 and will receive an additional fee of 2% of the outstanding principal amount on each extension. -39-

40 PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT Information relating to trustees of the Registrant will be contained in a definitive Proxy Statement involving the election of trustees which the Registrant will file with the Securities and Exchange Commission pursuant to Regulation 14A under the Securities Exchange Act of 1934 not later than 120 days after December 31, 1995, and such information is incorporated herein by reference. Information relating to Executive Officers of the Registrant appears at page 10 of this Annual Report on Form 10-K. ITEM 11. EXECUTIVE COMPENSATION Information relating to executive compensation will be contained in the Proxy Statement referred to above in Item 10, "Directors and Executive Officers of the Registrant", and such information is incorporated herein by reference. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT Information relating to security ownership of certain beneficial owners and management will be contained in the Proxy Statement referred to in Item 10, "Directors and Executive Officers of the Registrant", and such information is incorporated herein by reference. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS Information relating to certain relationships and related transactions will be contained in the Proxy Statement referred to in Item 10, "Directors and Executive Officers of the Registrant", and such information is incorporated herein by reference. -40-

41 PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K (a) The following documents are filed as part of this report: 1. The consolidated financial statements are set forth in Item 8 of this Annual Report on Form 10-K. 2. Financial Statement Schedules. The following financial statement schedules should be read in conjunction with the financial statements included in Item 8 of this Annual Report on Form 10-K. Pages in this Annual Report on Form 10-K ------------- Independent Auditors' Report II - Valuation and Qualifying Accounts - years ended December 31, 1995, 1994 and 1993 43 III - Real Estate and Accumulated Depreciation as of December 31, 1995 44 Schedules other than those listed above are omitted because they are not applicable or the information required is included in the consolidated financial statements or the notes thereto. The consolidated financial statements of Alexander's, Inc. for the year ended December 31, 1995 are hereby incorporated by reference to Item 14(a)1 of the Annual Report on Form 10-K of Alexander's, Inc. 3. Exhibits. See the Exhibit Index at page 48 of this Annual Report on Form 10-K. The following exhibits listed on the Exhibit Index are filed with this Annual Report on Form 10-K. Exhibit No. - ----------- 11 Statement Re Computation of Per Share Earnings. 12 Consolidated Ratios of Earnings to Fixed Charges and Combined Fixed Charges and Preferred Share Dividend Requirements 21 Subsidiaries of the Registrant. 23 Consent of Independent Auditors to Incorporation by Reference. 27 Financial Data Schedule. (b) Reports on Form 8-K None -41-

42 SIGNATURES Pursuant to the requirements of Section 13 or 15 (d) 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 By: s/JOSEPH MACNOW ------------------------------ Joseph Macnow, Vice President, Chief Financial Officer Date: March 25, 1996 ---------------------------- Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated: Signature Title Date --------- ----- ---- By: s/STEVEN ROTH Chairman of the Board of Trustees March 25, 1996 - --------------------------- (Principal Executive Officer) (Steven Roth) By: s/JOSEPH MACNOW Vice President-Chief Financial March 25, 1996 - --------------------------- Officer and Controller (Principal (Joseph Macnow) Financial and Accounting Officer) By: s/DAVID MANDELBAUM Trustee March 25, 1996 - --------------------------- (David Mandelbaum) By: s/STANLEY SIMON Trustee March 25, 1996 - --------------------------- (Stanley Simon) By: s/RONALD G. TARGAN Trustee March 25, 1996 - --------------------------- (Ronald G. Targan) By: s/RUSSELL B. WIGHT, JR. Trustee March 25, 1996 - --------------------------- (Russell B. Wight, Jr.) By: s/RICHARD R. WEST Trustee March 25, 1996 - --------------------------- (Richard R. West) -42-

43 VORNADO REALTY TRUST AND SUBSIDIARIES SCHEDULE II VALUATION AND QUALIFYING ACCOUNTS - --------------------------------------------------------------------------------------------------------------------------- Column A Column B Column C Column D Column E - --------------------------------------------------------------------------------------------------------------------------- (amounts in thousands) Balance Additions Deductions Balance at beginning charged against ------------------------------------ at end Description of year operations Description Amount of year ----------- ------------ --------------- ---------------------- ------- ------- YEAR ENDED DECEMBER 31, 1995: Deducted from accounts receivable, Uncollectible accounts allowance for doubtful accounts $ 457 $ 613 written-off $ 492 $ 578 ======= ======= ======= ======= YEAR ENDED DECEMBER 31, 1994: Deducted from accounts receivable, Uncollectible accounts allowance for doubtful accounts $ 402 $ 385 written-off $ 330 $ 457 ======= ======= ======= ======= YEAR ENDED DECEMBER 31, 1993: Deducted from accounts receivable Uncollectible accounts allowance for doubtful accounts $ 337 $ 432 written-off $ 367 $ 402 ======= ======= ======= ======= -43-

44 VORNADO REALTY TRUST AND SUBSIDIARIES SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION DECEMBER 31, 1995 (amounts in thousands) - --------------------------------------------------------------------------------------------------- COLUMN A COLUMN B COLUMN C COLUMN D - --------------------------------------------------------------------------------------------------- Initial cost to company (1) Costs --------------------------- capitalized Buildings and subsequent Description Encumbrances Land improvements to acquisition - ------------------------------- ------------ ------- ------------- -------------- Shopping Centers New Jersey Atlantic City $ 2,135 * $ 358 $ 2,143 $ 612 Bordentown 3,276 * 498 3,176 1,175 Bricktown 9,919 * 929 2,175 9,183 Cherry Hill 9,706 * 915 3,926 3,321 Delran 2,848 * 756 3,184 1,937 Dover 3,635 * 224 2,330 2,180 East Brunswick 8,205 * 172 3,236 3,232 East Hanover 11,066 * 376 3,063 3,272 Hackensack - 536 3,293 7,037 Jersey City 10,381 * 652 2,962 1,811 Kearny (4) - 279 4,429 (1,362) Lawnside 5,708 * 851 2,222 1,181 Lodi 2,420 * 245 2,315 957 Manalapan 6,397 * 725 2,447 4,970 Marlton 5,398 * 1,514 4,671 808 Middletown 7,761 * 283 1,508 4,019 Morris Plains 6,600 * 1,254 3,140 3,402 North Bergen (4) - 510 3,390 (955) North Plainfield 3,879 500 13,340 335 Totowa 15,646 * 1,097 5,359 11,457 Turnersville 2,116 * 900 2,132 75 Union 15,975 * 1,014 4,527 1,902 Vineland 2,358 * 290 1,594 1,258 Watchung (4) - 451 2,347 6,674 Woodbridge 8,792 * 190 3,047 552 ------- ------ ------ ------ Total New Jersey 144,221 15,519 85,956 69,033 ------- ------ ------ ------ New York 14th Street and Union Square, Manhattan - 12,566 4,044 3,457 Albany (Menands) - 460 1,677 2,683 Buffalo (Amherst) 4,863 * 402 2,019 1,842 Freeport 8,021 * 1,231 3,273 2,827 New Hyde Park 2,043 * - - 122 North Syracuse - - - 23 Rochester (Henrietta) 2,203 * - 2,124 1,181 Rochester 2,832 * 443 2,870 655 ------- ------ ------ ------ Total New York 19,962 15,102 16,007 12,790 ------- ------ ------ ------ - ---------------------------------------------------------------------------------------------------------------------------- COLUMN A COLUMN E COLUMN F COLUMN G - ---------------------------------------------------------------------------------------------------------------------------- Gross amount at which carried at close of period ------------------------------------------------- Accumulated Buildings and depreciation Date of Description Land improvements Total (2) and amortization construction (3) - ------------------------------- ------- ------------- --------- ---------------- ---------------- Shopping Centers New Jersey Atlantic City $ 358 $ 2,755 $ 3,113 $ 1,746 1965 Bordentown 713 4,136 4,849 3,338 1958 Bricktown 929 11,358 12,287 3,591 1968 Cherry Hill 915 7,247 8,162 4,267 1964 Delran 756 5,121 5,877 2,418 1972 Dover 205 4,529 4,734 2,402 1964 East Brunswick 172 6,468 6,640 4,295 1957 East Hanover 477 6,234 6,711 3,623 1962 Hackensack 536 10,330 10,866 3,458 1963 Jersey City 652 4,773 5,425 3,122 1965 Kearny (4) 290 3,056 3,346 822 1938 Lawnside 741 3,513 4,254 1,783 1969 Lodi 245 3,272 3,517 2,014 1955 Manalapan 725 7,417 8,142 2,909 1971 Marlton 1,611 5,382 6,993 3,441 1973 Middletown 283 5,527 5,810 2,207 1963 Morris Plains 1,214 6,582 7,796 3,372 1961 North Bergen (4) 2,309 636 2,945 36 1993 North Plainfield 500 13,675 14,175 3,003 1955 Totowa 1,097 16,816 17,913 4,592 1957 Turnersville 900 2,207 3,107 1,563 1974 Union 1,014 6,429 7,443 4,371 1962 Vineland 290 2,852 3,142 1,514 1966 Watchung (4) 4,200 5,272 9,472 223 1994 Woodbridge 220 3,569 3,789 2,595 1959 ------ ------- ------- ------ Total New Jersey 21,352 149,156 170,508 66,705 ------ ------- ------- ------ New York 14th Street and Union Square, Manhattan 12,581 7,486 20,067 221 1965 Albany (Menands) 460 4,360 4,820 1,619 1965 Buffalo (Amherst) 636 3,627 4,263 2,141 1968 Freeport 1,231 6,100 7,331 2,233 1981 New Hyde Park - 122 122 122 1970 North Syracuse - 23 23 22 1967 Rochester (Henrietta) - 3,305 3,305 1,806 1971 Rochester 443 3,525 3,968 2,140 1966 ------ ------- ------- ------ Total New York 15,351 28,548 43,899 10,304 ------ ------- ------- ------ - ------------------------------------------------------------------------ COLUMN A COLUMN H COLUMN I - ------------------------------------------------------------------------ Life on which depreciation in latest Date income statement Description acquired is computed - ------------------------------- -------- ---------------------- Shopping Centers New Jersey Atlantic City 1965 14 - 40 Years Bordentown 1958 10 - 40 Years Bricktown 1968 27 - 40 Years Cherry Hill 1964 15 - 40 Years Delran 1972 20 - 40 Years Dover 1964 16 - 40 Years East Brunswick 1957 13 - 33 Years East Hanover 1962 16 - 40 Years Hackensack 1963 17 - 40 Years Jersey City 1965 19 - 40 Years Kearny (4) 1959 28 - 40 Years Lawnside 1969 19 - 40 Years Lodi 1975 11 - 27 Years Manalapan 1971 18 - 40 Years Marlton 1973 21 - 40 Years Middletown 1963 27 - 40 Years Morris Plains 1985 14 - 19 Years North Bergen (4) 1959 30 Years North Plainfield 1989 26 - 30 Years Totowa 1957 22 - 40 Years Turnersville 1974 23 - 40 Years Union 1962 10 - 40 Years Vineland 1966 22 - 40 Years Watchung (4) 1959 30 Years Woodbridge 1959 11 - 40 Years Total New Jersey New York 14th Street and Union Square, Manhattan 1993 40 Years Albany (Menands) 1965 27 - 40 Years Buffalo (Amherst) 1968 14 - 40 Years Freeport 1981 19 - 40 Years New Hyde Park 1976 6 - 7 Years North Syracuse 1976 11 - 12 Years Rochester (Henrietta) 1971 22 - 40 Years Rochester 1966 15 - 40 Years Total New York ----- CONTINUED ----- -44-

45 VORNADO REALTY TRUST AND SUBSIDIARIES SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION DECEMBER 31, 1995 (amounts in thousands) - --------------------------------------------------------------------------------------------------- COLUMN A COLUMN B COLUMN C COLUMN D - --------------------------------------------------------------------------------------------------- Initial cost to company (1) Costs --------------------------- capitalized Buildings and subsequent Description Encumbrances Land improvements to acquisition - ------------------------------- ------------ ------- ------------- -------------- Pennsylvania Allentown 7,696 * 70 3,446 9,138 Bensalem 3,967 * 1,198 3,717 1,582 Bethlehem - 278 1,806 3,318 Broomall 3,260 * 734 1,675 1,122 Glenolden 4,245 * 850 1,295 712 Lancaster 2,312 * 606 2,312 2,483 Levittown 2,283 * 193 1,231 155 10th and Market Streets, Philadelphia - 933 3,230 3,688 Upper Moreland 3,517 * 683 2,497 128 York 1,463 * 421 1,700 1,239 ------- ------ ------- ------- Total Pennsylvania 28,743 5,966 22,909 23,565 ------- ------ ------- ------- Maryland Baltimore (Belair Rd.) - 785 1,333 2,985 Baltimore (Towson) 5,779 * 581 2,756 501 Baltimore (Dundalk) 4,084 * 667 1,710 2,923 Glen Burnie 2,299 * 462 1,741 526 Hagerstown - 168 1,453 988 ------- ------ ------- ------- Total Maryland 12,162 2,663 8,993 7,923 ------- ------ ------- ------- Connecticut Newington 3,042 * 502 1,581 547 Waterbury 3,889 * - 2,103 1,345 ------- ------ ------- ------- Total Connecticut 6,931 502 3,684 1,892 ------- ------ ------- ------- Massachusetts Chicopee 1,999 * 510 2,031 373 Springfield (4) - 505 1,657 805 ------- ------ ------- ------- Total Massachusetts 1,999 1,015 3,688 1,178 ------- ------ ------- ------- Texas Dallas Lewisville 764 * 2,433 2,271 682 Mesquite 3,445 * 3,414 4,704 1,134 Skillman 1,987 * 3,714 6,891 991 ------- ------ ------- ------- Total Texas 6,196 9,561 13,866 2,807 ------- ------ ------- ------- Total Shopping Centers 220,214 50,328 155,103 119,188 ------- ------ ------- ------- - ------------------------------------------------------------------------------------------------------------------------------- COLUMN A COLUMN E COLUMN F COLUMN G - ------------------------------------------------------------------------------------------------------------------------------- Gross amount at which carried at close of period ------------------------------------------------- Accumulated Buildings and depreciation Date of Description Land improvements Total (2) and amortization construction (3) - ------------------------------- ------- ------------- --------- ---------------- ---------------- Pennsylvania Allentown 334 12,320 12,654 3,625 1957 Bensalem 1,198 5,299 6,497 3,131 1972 Bethlehem 278 5,124 5,402 2,455 1966 Broomall 850 2,681 3,531 1,728 1966 Glenolden 850 2,007 2,857 897 1975 Lancaster 606 4,795 5,401 2,449 1966 Levittown 193 1,386 1,579 1,036 1964 10th and Market Streets, Philadelphia 933 6,918 7,851 57 1977 Upper Moreland 683 2,625 3,308 1,788 1974 York 421 2,939 3,360 1,483 1970 ------ ------- ------- ------- Total Pennsylvania 6,346 46,094 52,440 18,649 ------ ------- ------- ------- Maryland Baltimore (Belair Rd.) 785 4,318 5,103 2,608 1962 Baltimore (Towson) 581 3,257 3,838 1,844 1968 Baltimore (Dundalk) 667 4,633 5,300 2,106 1966 Glen Burnie 462 2,267 2,729 1,689 1958 Hagerstown 168 2,441 2,609 1,176 1966 ------ ------- ------- ------- Total Maryland 2,663 16,916 19,579 9,423 ------ ------- ------- ------- Connecticut Newington 502 2,128 2,630 1,371 1965 Waterbury 667 2,781 3,448 1,610 1969 ------ ------- ------- ------- Total Connecticut 1,169 4,909 6,078 2,981 ------ ------- ------- ------- Massachusetts Chicopee 510 2,404 2,914 1,647 1969 Springfield (4) 2,586 381 2,967 35 1993 ------ ------- ------- ------- Total Massachusetts 3,096 2,785 5,881 1,682 ------ ------- ------- ------- Texas Dallas Lewisville 2,469 2,917 5,386 522 1989 Mesquite 3,414 5,838 9,252 1,047 1988 Skillman 3,714 7,882 11,596 1,363 1988 ------ ------- ------- ------- Total Texas 9,597 16,637 26,234 2,932 ------ ------- ------- ------- Total Shopping Centers 59,574 265,045 324,619 112,676 ------ ------- ------- ------- - ------------------------------------------------------------------------- COLUMN A COLUMN H COLUMN I - ------------------------------------------------------------------------- Life on which depreciation in latest Date income statement Description acquired is computed - ------------------------------- -------- ---------------------- Pennsylvania Allentown 1957 24 - 42 Years Bensalem 1972 20 - 40 Years Bethlehem 1966 13 - 40 Years Broomall 1966 13 - 40 Years Glenolden 1975 23 - 40 Years Lancaster 1966 14 - 40 Years Levittown 1964 14 - 40 Years 10th and Market Streets, Philadelphia 1994 Upper Moreland 1974 22 - 40 Years York 1970 19 - 40 Years Total Pennsylvania Maryland Baltimore (Belair Rd.) 1962 26 - 33 Years Baltimore (Towson) 1968 19 - 40 Years Baltimore (Dundalk) 1966 16 - 40 Years Glen Burnie 1958 22 - 33 Years Hagerstown 1966 13 - 40 Years Total Maryland Connecticut Newington 1965 15 - 40 Years Waterbury 1969 23 - 40 Years Total Connecticut Massachusetts Chicopee 1969 20 - 40 Years Springfield (4) 1966 30 Years Total Massachusetts Texas Dallas Lewisville 1990 28 - 30 Years Mesquite 1990 28 - 30 Years Skillman 1990 27 - 30 Years Total Texas Total Shopping Centers --- CONTINUED --- -45-

46 VORNADO REALTY TRUST AND SUBSIDIARIES SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION DECEMBER 31, 1995 (amounts in thousands) - --------------------------------------------------------------------------------------------------- COLUMN A COLUMN B COLUMN C COLUMN D - --------------------------------------------------------------------------------------------------- Initial cost to company (1) Costs --------------------------- capitalized Buildings and subsequent Description Encumbrances Land improvements to acquisition - ------------------------------- ------------ ------- ------------- -------------- Warehouse/Industrial New Jersey East Brunswick 147 4,772 2,834 East Hanover 8,210 * 576 7,752 6,499 Edison 2,455 * 705 2,839 1,245 Garfield 1,249 96 8,068 3,658 -------- ------- -------- -------- Total Warehouse/ Industrial 11,914 1,524 23,431 14,236 -------- ------- -------- -------- Other Properties New Jersey Paramus 1,225 8,345 2,028 Montclair - 66 470 329 Rahway - 25 -------- ------- -------- -------- Total Other Properties 1,225 66 8,815 2,382 -------- ------- -------- -------- Leasehold Improvements and Equipment TOTAL - DECEMBER 31, 1995 $233,353 $51,918 $187,349 $135,806 ======== ======= ======== ======== - ----------------------------------------------------------------------------------------------------------------------------- COLUMN A COLUMN E COLUMN F COLUMN G - ----------------------------------------------------------------------------------------------------------------------------- Gross amount at which carried at close of period ------------------------------------------------- Accumulated Buildings and depreciation Date of Description Land improvements Total (2) and amortization construction (3) - ------------------------------- ------- ------------- --------- ---------------- ---------------- Warehouse/Industrial New Jersey East Brunswick 147 7,606 7,753 3,402 1972 East Hanover 691 14,136 14,827 7,483 1963 - 1967 Edison 704 4,085 4,789 1,655 1954 Garfield 96 11,726 11,822 7,619 1942 ------- -------- -------- -------- Total Warehouse/ Industrial 1,638 37,553 39,191 20,159 ------- -------- -------- -------- Other Properties New Jersey Paramus - 10,373 10,373 2,096 1967 Montclair 66 799 865 472 1972 Rahway - 25 25 21 1972 ------- -------- -------- -------- Total Other Properties 66 11,197 11,263 2,589 ------- -------- -------- -------- Leasehold Improvements and Equipment 7,403 7,403 4,071 -------- -------- -------- TOTAL - DECEMBER 31, 1995 $61,278 $321,198 $382,476 $139,495 ======= ======== ======== ======== - ----------------------------------------------------------------------- COLUMN A COLUMN H COLUMN I - ----------------------------------------------------------------------- Life on which depreciation in latest Date income statement Description acquired is computed - ------------------------------- -------- ---------------------- Warehouse/Industrial New Jersey East Brunswick 1972 19 - 40 Years East Hanover 1963 5 - 40 Years Edison 1982 17 - 25 Years Garfield 1959 17 - 33 Years Total Warehouse/ Industrial Other Properties New Jersey Paramus 1987 33 - 40 Years Montclair 1972 15 Years Rahway 1972 14 Years Total Other Properties Leasehold Improvements and Equipment 3 - 20 Years TOTAL - DECEMBER 31, 1995 * These encumbrances are cross collateralized under a blanket mortgage in the amount of $227,000,000 at December 31, 1995. Notes: 1) Initial cost is cost as of January 30, 1982 (the date on which Vornado commenced real estate operations) unless acquired subsequent to that date - see Column H. 2) Aggregate cost is approximately the same for federal income tax purposes. 3) Date of original construction - many properties have had substantial renovation or additional construction - see Column D. 4) Buildings on these properties were demolished in 1993. As a result, the cost of the buildings and improvements, net of accumulated depreciation, were transferred to land. In addition, the cost of the land in Kearny is net of a $1,615,000 insurance recovery. -46-

47 VORNADO REALTY TRUST AND SUBSIDIARIES SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION (amounts in thousands) The following is a reconciliation of real estate assets and accumulated depreciation: Year Ended Year Ended Year Ended December 31, 1995 December 31, 1994 December 31, 1993 ----------------- ----------------- ----------------- Real Estate Balance at beginning of period $365,832 $340,415 $314,651 Additions during the period: Land 161 989 15,191 Buildings & improvements 16,635 24,428 14,332 -------- -------- -------- 382,628 365,832 344,174 Less: Cost of assets written-off 152 - 3,759 -------- -------- -------- Balance at end of period $382,476 $365,832 $340,415 ======== ======== ======== Accumulated Depreciation Balance at beginning of period $128,705 $118,742 $111,142 Additions charged to operating expenses 10,790 9,963 9,392 -------- -------- -------- 139,495 128,705 120,534 Less: Accumulated depreciation on assets written-off - - 1,792 -------- -------- -------- Balance at end of period $139,495 $128,705 $118,742 ======== ======== ======== -47-

48 EXHIBIT INDEX Page Number in Sequential Exhibit No. Numbering - ----------- -------------- 3(a) Amended and Restated Declaration of Trust of the Registrant, * dated March 29, 1993 - Incorporated by reference from Form S-4, filed April 15, 1993. (b) By-laws of Vornado dated March 10, 1994 - Incorporated by * reference from Annual Report on Form 10-K for the year ended December 31, 1993, filed March 24, 1994. 4 Indenture dated as of November 24, 1993 between Vornado Finance * Corp. and Bankers Trust Company, as Trustee - Incorporated by reference from Current Report on Form 8-K dated November 24, 1993, filed December 1, 1993. 10(a) 1 Master Agreement and Guaranty, between Vornado, Inc. and Bradlees * New Jersey, Inc. dated as of May 1, 1992 - Incorporated by reference from Quarterly Report on Form 10-Q for quarter ended March 31, 1992, filed May 8, 1992. (a) 2 Mortgage, Security Agreement, Assignment of Leases and Rents and * Fixture Filing dated as of November 24, 1993 made by each of the entities listed therein, as mortgagors to Vornado Finance Corp., as mortgagee - Incorporated by reference from Current Report on Form 8-K dated November 24, 1993, filed December 1, 1993. (b) 1 ** 1985 Stock Option Plan as amended - Incorporated by reference * from Quarterly Report on Form 10-Q for quarter ended May 2, 1987, filed June 9, 1987. (b) 2 ** Form of Stock Option Agreement for use in connection with * incentive stock options issued pursuant to Vornado, Inc. 1985 Stock Option Plan - Incorporated by reference from Quarterly Report on Form 10-Q for quarter ended October 26, 1985, filed December 9, 1985. (b) 3 ** Form of Stock Option Agreement for use in connection with incentive * stock options issued pursuant to Vornado, Inc. 1985 Stock Option Plan - Incorporated by reference from Quarterly Report on Form 10-Q for quarter ended May 2, 1987, filed June 9, 1987. (b) 4 ** Form of Stock Option Agreement for use in connection with non- * qualified options issued pursuant to Vornado, Inc. 1985 Stock Option Plan - Incorporated by reference from Quarterly Report on Form 10-Q for quarter ended October 26, 1985, filed December 9, 1985. - -------------------- * Incorporated by reference ** Management contract or compensatory plan -48-

49 10(c) 1 ** Employment Agreement between Vornado, Inc. and Joseph Macnow * dated January 1, 1992 - Incorporated by reference from Annual Report on Form 10-K for the year ended December 31, 1991, filed March 30, 1992. (c) 2 ** Employment Agreement between Vornado, Inc. and Richard Rowan * dated January 1, 1992 - Incorporated by reference from Annual Report on Form 10-K for the year ended December 31, 1991, filed March 30, 1992. (d) 1 Promissory Notes from Steven Roth to Vornado, Inc. dated * December 29, 1992 and January 15, 1993 - Incorporated by reference from Annual Report on Form 10-K for the year ended December 31, 1992, filed February 16, 1993. * (d) 2 Registration Rights Agreement between Vornado, Inc. and Steven * Roth dated December 29, 1992 - Incorporated by reference from Annual Report on Form 10-K for the year ended December 31, 1992, filed February 16, 1993. (d) 3 Stock Pledge Agreement between Vornado, Inc. and Steven Roth * dated December 29, 1992 - Incorporated by reference from Annual Report on Form 10-K for the year ended December 31, 1992, filed February 16, 1993. (d) 4 Promissory Notes from Steven Roth to Vornado Realty Trust * dated April 15, 1993 and June 16, 1993 - Incorporated by reference from Annual Report on Form 10-K for the year ended December 31, 1993, filed March 24, 1994. (d) 5 Promissory Note from Richard Rowan to Vornado Realty Trust - * Incorporated by reference from Annual Report on Form 10-K for the year ended December 31, 1993, filed March 24, 1994. (d) 6 Promissory Note from Joseph Macnow to Vornado Realty Trust - * Incorporated by reference from Annual Report on Form 10-K for the year ended December 31, 1993, filed March 24, 1994. (e) 1 Management Agreement between Interstate Properties and Vornado, * Inc. dated July 13, 1992 - Incorporated by reference from Annual Report on Form 10-K for the year ended December 31, 1992, filed February 16, 1993. (f) 1 Real Estate Retention Agreement between Vornado, Inc., Keen Realty * Consultants, Inc. and Alexander's, Inc., dated as of July 20, 1992 - Incorporated by reference from Annual Report on Form 10-K for the year ended December 31, 1992, filed February 16, 1993. (f) 2 Amendment to Real Estate Retention Agreement dated * February 6, 1995 - Incorporated by reference from Annual Report on Form 10-K for the year ended December 31, 1994, filed March 23, 1995. (f) 3 Stipulation between Keen Realty Consultants Inc. and Vornado Realty * Trust re: Alexander's Retention Agreement - Incorporated by reference from Annual Report on Form 10-K for the year ended December 31, 1993, filed March 24, 1994. - -------------------- * Incorporated by reference ** Management contract or compensatory plan -49-

50 10(f) 4 Stock Purchase Agreement, dated February 6, 1995, among Vornado * Realty Trust and Citibank, N.A. - Incorporated by reference from Current Report on Form 8-K dated February 6, 1995, filed February 21, 1995. (f) 5 Management and Development Agreement, dated as of February 6, 1995 - * Incorporated by reference from Current Report on Form 8-K dated February 6, 1995, filed February 21, 1995. (f) 6 Standstill and Corporate Governance Agreement, dated as of * February 6, 1995 - Incorporated by reference from Current Report on Form 8-K dated February 6, 1995, filed February 21, 1995. (f) 7 Credit Agreement, dated as of March 15, 1995, among Alexander's, Inc., * as borrower, and Vornado Lending Corp., as lender - Incorporated by reference from Annual Report on Form 10-K for the year ended December 31, 1994, filed March 23, 1995 (f) 8 Subordination and Intercreditor Agreement, dated as of March 15, 1995 * among Vornado Lending Corp., Vornado Realty Trust and First Fidelity Bank, National Association - Incorporated by reference from Annual Report on Form 10-K for the year ended December 31 1994, filed March 23, 1995. (f) 9 Revolving Credit Agreement dated as of February 27, 1995 among * Vornado Realty Trust, as borrower, and Union Bank of Switzerland, as Bank and Administrative Agent - Incorporated by reference from Annual Report on Form 10-K for the year ended December 31, 1994, filed March 23, 1995. 11 Statement Re Computation of Per Share Earnings. 51 12 Consolidated Ratios of Earnings to Fixed Charges and Combined Fixed Charges and Preferred Share Dividend Requirements 52 13 Not applicable. 16 Not applicable. 18 Not applicable. 19 Not applicable. 21 Subsidiaries of the Registrant. 53 22 Not applicable. 23 Consent of independent auditors to incorporation by reference. 55 25 Not applicable. 27 Financial Data Schedule. 56 29 Not applicable. - -------------------- * Incorporated by reference -50-

1 EXHIBIT 11 VORNADO REALTY TRUST STATEMENT RE COMPUTATION OF PER SHARE EARNINGS Year Ended Year Ended Year Ended December 31, December 31, December 31, 1995 1994 1993 ------------ ------------ ------------ Weighted average number of shares outstanding 23,382,809 21,619,312 19,457,485 Common share equivalents for options after applying treasury stock method 196,860 234,408 332,963 ----------- ----------- ----------- Weighted average number of shares and common stock equivalents outstanding 23,579,669 21,853,720 19,790,448 =========== =========== =========== Income from continuing operation $53,008,000 $41,240,000 $31,755,000 Loss from discontinued operation - - (600,000) Extraordinary item - loss on early extinguishment of debt - - (3,202,000) ----------- ----------- ----------- Net income $53,008,000 $41,240,000 $27,953,000 =========== =========== =========== Net income (loss) per share: Continuing operations $2.25 $1.89 $1.60 Discontinued operation - - (.03) Extraordinary item - - (.16) ----- ----- ----- $2.25 $1.89 $1.41 ===== ===== ===== -51-

1 EXHIBIT 12 VORNADO REALTY TRUST CONSOLIDATED RATIOS OF EARNINGS TO FIXED CHARGES AND COMBINED FIXED CHARGES AND PREFERRED SHARE DIVIDEND REQUIREMENTS Year Ended --------------------------------------------------------------------------------- December 31, December 31, December 31, December 31, December 31, 1995 1994 1993 1992 1991 ------------ ------------ ------------ ------------ ------------ Income from continuing operations before income taxes $53,008 $41,240 $25,386 $ 2,263 $18,000 Fixed charges 17,333 14,647 31,610 34,392 35,410 ------- ------- ------- ------- ------- Income from continuing operations before income taxes and fixed charges $70,341 $55,887 $56,996 $36,655 $53,410 ======= ======= ======= ======= ======= Fixed charges: Interest and debt expense $16,426 $14,209 $31,155 $33,910 $34,930 1/3 of rent expense - interest factor 465 438 455 482 480 ------- ------- ------- ------- ------- 16,891 14,647 31,610 34,392 35,410 Capitalized interest 442 1,582 282 - - ------- ------- ------- ------- ------- $17,333 $16,229 $31,892 $34,392 $35,410 ======= ======= ======= ======= ======= Ratio of earnings to fixed charges 4.06 3.44 1.79 1.07 1.51 Note: For purposes of this calculation, earnings before fixed charges consist of earnings before income taxes plus fixed charges. Fixed charges consist of interest expense on all indebtedness (including amortization of deferred debt issuance costs) and the portion of operating lease rental expense that is representative of the interest factor (deemed to be one third of operating lease rentals). Rent Expense $ 1,395 $ 1,313 $ 1,366 $ 1,446 $ 1,441 ======= ======= ======= ======= ======= -52-

1 EXHIBIT 21 STATE OF PERCENTAGE NAME OF SUBSIDIARY ORGANIZATION OF OWNERSHIP - ------------------------------------------ ------------ ------------ 14th Street Acquisition Corporation New York 100% Amherst Holding Corporation New York 100% Amherst Industries, Inc. New York 100% Atlantic City Holding Corporation New Jersey 100% Bensalem Holding Company Pennsylvania 100% Bethlehem Holding Company Pennsylvania 100% Bordentown Holding Corporation New Jersey 100% Brentwood Development Corp. New York 100% Bridgeland Warehouses, Inc. New Jersey 100% Camden Holding Corporation New Jersey 100% Chicopee Holding Corporation Massachusetts 100% Clementon Holding Corporation New Jersey 100% Cross Avenue Broadway Corporation New York 100% Cumberland Holding Corporation New Jersey 100% Dallas Skillman Abrams Crossing Corporation Texas 100% Delran Holding Corporation New Jersey 100% Dover Holding Corporation New Jersey 100% Dundalk Stores Corporation Maryland 100% Durham Leasing Corp. New Jersey 100% Eudowood Holding Corporation Maryland 100% Evesham Holding Corporation New Jersey 100% Gallery Market Holding Company Pennsylvania 100% Glen Burnie Shopping Plaza, Inc. Maryland 100% Greenwich Holding Corporation New York 100% Hackbridge Corporation New Jersey 100% Hagerstown Holding Corporation Maryland 100% Hanover Holding Corporation New Jersey 100% Hanover Industries, Inc. New Jersey 100% Hanover Leasing Corporation New Jersey 100% Hanover Public Warehousing, Inc. New Jersey 100% Henrietta Holding Corp. New York 100% HEP Acquisition Corporation Delaware 100% Jersey City Leasing Corporation New Jersey 100% Kearny Holding Corp. New Jersey 100% Kearny Leasing Corporation New Jersey 100% Lancaster Holding Company Pennsylvania 100% Landthorp Enterprises, Inc. Delaware 100% Lawnside Holding Corporation New Jersey 100% Lawnside Leasing Corporation New Jersey 100% Lawnwhite Holding Corporation New Jersey 100% Lewisville Town Centre Corporation Texas 100% Littleton Holding Corporation New Jersey 100% Lodi Industries Corp. New Jersey 100% Lodi Leasing Corporation New Jersey 100% Manalapan Industries, Inc. New Jersey 100% Marple Holding Company Pennsylvania 100% -53-

2 STATE OF PERCENTAGE NAME OF SUBSIDIARY ORGANIZATION OF OWNERSHIP - ---------------------------------------- ------------ ------------ Menands Holding Corporation New York 100% Mesquite Crossing Corporation Texas 100% Middletown Holding Corporation New Jersey 100% Montclair Holding Corporation New Jersey 100% Morris Plains Leasing Corp. New Jersey 100% National Hydrant Corporation New York 100% New Hanover, Inc. New Jersey 100% Newington Holding Corporation Connecticut 100% New Woodbridge, Inc. New Jersey 100% North Bergen Stores, Inc. New Jersey 100% North Plainfield Holding Corporation New Jersey 100% Oak Trading Company New Jersey 100% Philadelphia Holding Company Pennsylvania 100% Phillipsburg Holding Corporation New Jersey 100% Pike Holding Company Pennsylvania 100% Princeton Corridor Holding Corporation New Jersey 100% Rahway Leasing Corporation New Jersey 100% RMJ Company, Inc. New Jersey 100% Rochester Holding Corporation New York 100% Silver Lane Properties, Inc. Connecticut 100% Springfield Holding Corporation Massachusetts 100% Star Universal Corporation New Jersey 100% T.G. Hanover, Inc. New Jersey 100% T.G. Stores, Inc. Maryland 100% Terrill Holding Corporation New Jersey 100% The Second Lawnside Corporation New Jersey 100% The Second Rochester Corporation New York 100% Turnersville Holding Corporation New Jersey 100% Two Guys - Conn., Inc. Connecticut 100% Two Guys - Mass., Inc. Massachusetts 100% Two Guys from Harrison, Inc. New Jersey 100% Two Guys from Harrison Company Pennsylvania 100% Two Guys from Harrison - N.Y., Inc. New York 100% Unado Corp. New Jersey 100% Upper Moreland Holding Company Pennsylvania 100% Vornado, Inc. New York 100% Vornado Acquisition Corporation Delaware 100% Vornado Finance Corp. Delaware 100% Vornado Holding Corporation Delaware 100% Vornado Investments Corporation Delaware 100% Vornado Lending Corp. New Jersey 100% Watchung Holding Corporation New Jersey 100% Watchung Mountain Corporation New Jersey 100% White Horse Lawnside Corporation New Jersey 100% West Windsor Holding Corporation New Jersey 100% York Holding Company Pennsylvania 100% -54-

1 EXHIBIT 23 INDEPENDENT AUDITORS' CONSENT We consent to the incorporation by reference in Amendment No. 5 to Registration Statement No. 33-62395 on Form S-3 and Registration Statement No. 33-62344 on Form S-8 of Vornado Realty Trust of our report dated March 7, 1996, appearing in this Annual Report on Form 10-K of Vornado Realty Trust for the year ended December 31, 1995. Parsippany, New Jersey March 22, 1996

5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE COMPANY'S AUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.

YEAR DEC-31-1995 DEC-31-1995 19,127 70,997 7,086 578 0 0 382,476 139,495 491,496 0 233,353 0 0 970 193,304 491,496 0 108,718 0 32,282 17,477 0 16,426 53,008 0 53,008 0 0 0 53,008 2.25 2.25