1 Exhibit Index on Page 34 As filed with the Securities and Exchange Commission on February 12, 1999 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported) AUGUST 12, 1998 Commission File Number: 1-11954 VORNADO REALTY TRUST (Exact name of registrant as specified in its charter) MARYLAND 22-1657560 (State or other jurisdiction of incorporation) (I.R.S. Employer Identification Number) PARK 80 WEST, PLAZA II, SADDLE BROOK, NEW JERSEY 07663 (Address of principal executive offices) (Zip Code) (201) 587-1000 (Registrant's telephone number, including area code) N/A (Former Name or Former Address, if Changed Since Last Report) Page 1
2 ITEM 1. NOT APPLICABLE ITEM 2. On August 12, 1998, Vornado Realty Trust ("Vornado") acquired 689 Fifth Avenue, an 84,000 square foot Manhattan office building, for approximately $33 million. The transaction was financed with borrowings under Vornado's revolving credit facility. On November 18, 1998, Vornado completed the previously announced acquisition of certain properties from the Mendik Real Estate Limited Partnership ("Mendik RELP") (an unaffiliated entity) in accordance with a previously disclosed Settlement Agreement between Vornado and certain limited partners of Mendik RELP. The acquired real estate assets include (i) the Saxon Woods Corporate Center located in Harrison, New York, which contains approximately 232,000 square feet, (ii) the remaining 60% interest in an office building located at Two Park Avenue in Manhattan, which contains approximately 946,000 square feet (Vornado already owned the other 40%) and (iii) a leasehold interest in an office building located at 330 West 34th Street in Manhattan, which contains approximately 637,000 square feet (collectively, the "Mendik RELP properties"). The aggregate purchase price was approximately $106 million, consisting of $31 million of cash from borrowings under Vornado's revolving credit facility, $29 million of Vornado common shares and $46 million of assumed debt. On December 2, 1998, Vornado completed its previously announced acquisition of the 1.05 million square foot Market Square Complex of showrooms in High Point, North Carolina. The consideration was approximately $95 million in the aggregate consisting of approximately $45 million in debt, $44 million in a combination of Class A Units of Vornado Realty L.P. (the "Operating Partnership") and Series C-1 Preferred Operating Partnership Units and $6 million of cash. On January 12, 1999, Vornado completed its previously announced acquisition of the leasehold interest in 888 Seventh Avenue, a 46 story office building located in midtown Manhattan which contains approximately 847,000 square feet. The aggregate purchase price was approximately $100 million, consisting of $45 million of cash from borrowings under Vornado's revolving credit facility and $55 million of assumed debt. These transactions were consummated through subsidiaries of the Operating Partnership, a limited partnership of which Vornado owns an approximate 88.7% limited partnership interest at December 22, 1998 and is the sole general partner. ITEMS 3-6. NOT APPLICABLE Page 2
3 ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS. The Consolidated Financial Statements for Mendik Real Estate Limited Partnership for the Year Ended December 31, 1997 (including the report thereon of KPMG Peat Marwick LLP) and the nine months ended September 30, 1998 and 1997 are incorporated herein by reference to the Vornado Form 8-K filed with the Securities and Exchange Commission on August 12, 1998 and to Exhibit 10.1 of this document, respectively. There are filed herewith: (a) The Statement of Revenues and Certain Expenses for (i) 689 Fifth Avenue, New York, New York, (ii) the Statements of Income and Expense for Market Square Limited Partnership and (iii) the Statements of Revenues and Certain Expenses for 888 Seventh Avenue. (b) The Condensed Consolidated Pro Forma Balance Sheet of Vornado as of September 30, 1998 and the Condensed Consolidated Pro Forma Income Statement of Vornado for the nine months ended September 30, 1998 and the year ended December 31, 1997 commencing on page 21, prepared to give pro forma effect to the completed acquisitions of 689 Fifth Avenue, the Mendik RELP Properties, the Market Square Complex, 888 Seventh Avenue, and the previously reported acquisitions and investments reflected in the Form 8/K-A filed with the Securities and Exchange Commission on July 15, 1998 for the completed acquisitions of 770 Broadway and the additional interest in 570 Lexington Avenue and those previously reported acquisitions (Mendik Company, Arbor Property Trust, 90 Park Avenue, Americold Corporation and URS Logistics, Inc., The Montehiedra Town Center, The Riese Transaction, 15% investment in Charles E. Smith Commercial Realty L.P., 40% investment in the Hotel Pennsylvania, 640 Fifth Avenue, One Penn Plaza, 150 East 58th Street and the Merchandise Mart Group of Properties) and the financings attributable thereto. Page 3
4 PAGE REFERENCE --------- 689 Fifth Avenue New York, New York Independent Auditors' Report............................................................... 6 Statement of Revenues and Certain Expenses for the Year Ended December 31, 1997 (audited) and for the Six Months Ended June 30, 1998 and 1997 (unaudited)...................................................................... 7 Notes to Statement of Revenues and Certain Expenses....................................... 8 Market Square Limited Partnership Report of Independent Certified Public Accountants........................................ 10 Statement of Income and Expense for the Year Ended December 31, 1997 (audited)............................................................... 11 Notes to Financial Statement for the Year Ended December 31, 1997 (audited)............................................................... 12 Accountants' Compilation Report........................................................... 14 Statements of Income and Expense for the Nine Months Ended September 30, 1998 and 1997 (unaudited)................................................... 15 888 Seventh Avenue Independent Auditors' Report.............................................................. 16 Statements of Revenues and Certain Expenses for the Year ended December 31, 1997 (audited) and for the Nine Months Ended September 30, 1998 and 1997 (unaudited)............................................. 17 Notes to Statements of Revenues and Certain Expenses...................................... 18 Page 4
5 PAGE REFERENCE --------- Pro Forma financial information: Condensed Consolidated Pro Forma Balance Sheet at September 30, 1998........................................................................ 21 Condensed Consolidated Pro Forma Unaudited Income Statement for the Nine Months Ended September 30 1998...................................................................................... 22 Condensed Combining Pro Forma Unaudited Income Statement for the Periods in 1998 Prior to Acquisition.................................... 24 Condensed Combining Pro Forma Unaudited Income Statement for Previously Reported Acquisitions for the Periods in 1998 Prior to Acquisition...................................................... 25 Condensed Consolidated Pro Forma Unaudited Income Statement for the Year Ended December 31, 1997............................................ 26 Condensed Combining Pro Forma Income Statement for the Year Ended December 31, 1997...................................................... 28 Condensed Combining Pro Forma Unaudited Income Statement for Previously Reported Acquisitions for the Year Ended December 31, 1997 or the Periods in 1997 Prior to Acquisition...................................................................... 29 Notes to Condensed Consolidated Pro Forma Financial Statements................................................................................ 30 EXHIBIT NO. EXHIBIT - ----------- ------- 10.1 Item 1 of Form 10-Q of Mendik Real Estate Limited Partnership for the nine months ended September 30, 1998 23.1 Consent of Friedman Alpren & Green LLP 23.2 Consent of Sharrard, McGee & Co., P.A. 23.3 Consent of KPMG Peat Marwick LLP 23.4 Consent of Deloitte & Touche LLP ITEM 8. NOT APPLICABLE. Page 5
6 INDEPENDENT AUDITORS' REPORT TO THE PARTNERS OF ARDEN-ESQUIRE REALTY COMPANY We have audited the accompanying statement of revenues and certain expenses of the property located at 689 Fifth Avenue, New York, New York, described in Note 1 (the "Property"), for the year ended December 31, 1997. This financial statement is the responsibility of the Partnership's management. Our responsibility is to express an opinion on this financial statement based on our audit. We conducted our audit 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 statement is free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statement. 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 audit provides a reasonable basis for our opinion. The accompanying statement of revenues and certain expenses was prepared for the purpose of complying with the rules and regulations of the Securities and Exchange Commission and, as described in Note 1, is not intended to be a complete presentation of the Property's revenues and expenses. In our opinion, the financial statement referred to above presents fairly, in all material respects, the revenues and certain expenses of the Property for the year ended December 31, 1997, in conformity with generally accepted accounting principles. FRIEDMAN ALPREN & GREEN LLP July 14, 1998 Page 6
7 689 FIFTH AVENUE NEW YORK, NEW YORK STATEMENT OF REVENUES AND CERTAIN EXPENSES (In Thousands) Six Months Ended June 30, Year Ended ------------------------ December 31, 1998 1997 1997 ---------- -------- ---------- (Unaudited) Revenues Base rents $1,650 $1,622 $3,289 Escalation charges 7 148 176 Water and sprinkler 4 2 3 Miscellaneous 7 28 52 ------ ------ ------ 1,668 1,800 3,520 ------ ------ ------ Certain expenses Renting 2 2 7 Administrative 83 51 99 Operating 490 438 802 Real estate taxes 396 384 787 ------ ------ ------ 971 875 1,695 ------ ------ ------ Excess of revenues over certain expenses $ 697 $ 925 $1,825 ====== ====== ====== The accompanying notes are an integral part of this financial statement. Page 7
8 689 FIFTH AVENUE NEW YORK, NEW YORK NOTES TO STATEMENT OF REVENUES AND CERTAIN EXPENSES 1 - ORGANIZATION AND BASIS OF PRESENTATION The Property is a 15-story office building located at 689 Fifth Avenue in New York City. It has an aggregate net rentable area of approximately 84,000 square feet (approximately 68% of which is leased at June 30, 1998). The Property's accounting records are maintained in accordance with generally accepted accounting principles. The accompanying financial statement is presented in conformity with Rule 3-14 of the Securities and Exchange Commission. Accordingly, the financial statement is not representative of the actual operations for the periods presented, as certain expenses, which may not be comparable to the expenses expected to be incurred in the future operations of the acquired property, have been excluded. Expenses excluded consist of interest, depreciation and amortization, and certain professional fees not directly related to the future operations of the Property. The preparation of the financial statement in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates. The statement of revenues and certain expenses for the six months ended June 30, 1998 and 1997 is unaudited. However, in the opinion of management, all adjustments (consisting solely of normal recurring adjustments) necessary for the fair presentation of this statement of revenues and certain expenses for the interim periods on the basis described above have been included. The results for such interim periods are not necessarily indicative of the results for an entire year. 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICY Revenue Recognition Rental income is recognized from leases with scheduled rent increases on a straight-line basis over the lease term. Escalation rents based on payments for real estate taxes, insurance, utilities and maintenance by tenants are estimated and accrued. Page 8
9 689 FIFTH AVENUE NEW YORK, NEW YORK NOTES TO STATEMENT OF REVENUES AND CERTAIN EXPENSES 3 - OPERATING LEASES Office and retail space in the Property is rented to tenants under various operating leases. Approximate minimum future rentals required under these leases at December 31, 1997 are as follows: Year Ending December 31, ------------ 1998 $ 3,200,000 1999 3,191,000 2000 3,256,000 2001 3,350,000 2002 3,392,000 Thereafter 13,426,000 ---------------- $ 29,815,000 ================ Page 9
10 [HARRAD, MCGEE & CO., P.A. LETTERHEAD] REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS September 30, 1998 Market Square Limited Partnership High Point, North Carolina We have audited the accompanying Statement of Income and Expense of Market Square Limited Partnership, as described in Note 2, for the year ended December 31, 1997. This Statement is the responsibility of the management of Market Square Limited Partnership. Our responsibility is to express an opinion on the Statement of Income and Expense based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the Statement is free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the Statement of Income and Expense. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the Statement of Income and Expense. We believe our audit provides a reasonable basis for our opinion. The accompanying Statement was prepared for the purpose of complying with the provisions of the Contribution Agreement as described in Note 2 and is not intended to be a complete presentation of Market Square Limited Partnership's revenues and expenses. In our opinion, the Statement of Income and Expense referred to above present fairly, in all material respects, the Income and Expense as described in Note 2 of Market Square Limited Partnership for the year ended December 31, 1997, in conformity with generally accepted accounting principles. /s/ Sharrad, McGee & Co. P.A. ----------------------------- Sharrad, McGee & Co. P.A. Page 10
11 MARKET SQUARE LIMITED PARTNERSHIP STATEMENT OF INCOME AND EXPENSE YEAR ENDED DECEMBER 31, 1997 REVENUES: Showroom and Office $ 12 653 115 Hotel and Restaurant 2 471 147 ------------ Total 15 124 262 ------------ COSTS AND EXPENSES (EXCLUDING DEPRECIATION AND INTEREST): Showroom and Office 4 439 012 Hotel and Restaurant 1 883 831 ------------ Total 6 322 843 ------------ Operating profit 8 801 419 INTEREST EXPENSE 3 760 703 ------------ NET INCOME BEFORE DEPRECIATION 5 040 716 DEPRECIATION 1 393 310 ------------ NET INCOME $ 3 647 406 ============ See accompanying summary of accounting policies and notes to financial statements. Page 11
12 MARKET SQUARE LIMITED PARTNERSHIP SUMMARY OF ACCOUNTING POLICIES ACCOUNTING BASIS The accompanying Statement of Income and Expense has been prepared on the accrual method of accounting. BASIS OF REPORTING This report does not give effect to any assets that the partners may have outside their interests in the Partnership nor to any personal obligations, including income taxes, of the partners. It also does not give effect to any assets or liabilities of the Partnership that are not part of the Contribution Agreement. DEPRECIATION Depreciation is computed over the estimated useful life of assets using the straight-line method for financial reporting and accelerated methods for income tax purposes. MANAGEMENT ESTIMATES The presentation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. See accompanying summary of accounting policies and notes to financial statements. Page 12
13 MARKET SQUARE LIMITED PARTNERSHIP NOTES TO FINANCIAL STATEMENTS NOTE 1 - OPERATIONS The Partnership is engaged in showroom rentals, office rentals, hotel operations and restaurant operations located in High Point, North Carolina. NOTE 2 - CONTRIBUTION AGREEMENT The accompanying Statement of Income and Expense has been prepared to comply with the provisions of the Contribution Agreement between Vornado Realty, L.P. and Market Square Limited Partnership, dated August 18, 1998. This Statement includes income and expenses of all properties included in the Contribution Agreement, and does not include income and expenses of other properties owned by Market Square Limited Partnership that are not part of the Contribution Agreement. NOTE 3 - RELATED PARTY TRANSACTIONS The Partnership has various transactions with partners and entities that are controlled by partners in the Partnership. Following is a summary of transactions and balances with related entities for 1997 that pertain to the properties included in the Contribution Agreement described in Note 2. Due from related entities $ 3 813 Rental income from related entities $ 417 456 Rent paid related entities $ 22 827 Management fees paid related entities $ 576 319 NOTE 4 - ADVERTISING The Partnership expenses advertising costs as incurred. Total advertising costs were $123,364 in 1997. See accompanying summary of accounting policies and notes to financial statements. Page 13
14 [SHARRARD, MCGEE & CO., P. A. LETTERHEAD] ACCOUNTANTS' COMPILATION REPORT November 12, 1998 Market Square Limited Partnership High Point, North Carolina We have compiled the accompanying Statements of Income and Expense of Market Square Limited Partnership, as described below, for the nine months ended September 30, 1998 and 1997, in accordance with the Statements on Standards for Accounting and Review Services issued by the American Institute of Certified Public Accountants. A compilation is limited to presenting in the form of statements information that is the representation of management. We have not audited or reviewed the accompanying Statements of Income and Expense and, accordingly, do not express an opinion or any other form of assurance on them. The accompanying Statements of Income and Expense have been prepared to comply with the provisions of the Contribution Agreement between Vornado Realty, L.P. and Market Square Limited Partnership, dated August 18, 1998. The Statements include income and expenses of all properties included in the Contribution Agreement, and do not include income and expenses of other properties owned by Market Square Limited Partnership that are not part of the Contribution Agreement. The Statements are not intended to be a complete presentation of Market Square Limited Partnership's income and expenses. Management has elected to omit substantially all of the disclosures required by generally accepted accounting principles. If the omitted disclosures were included in the financial statements, they might influence the user's conclusions about the Company's income and expenses. Accordingly, these financial statements are not designed for those who are not informed about such matters. /S/ SHARRARD, MCGEE & CO., P.A. ------------------------------- SHARRARD, MCGEE & CO., P.A. Page 14
15 Market Square Limited Partnership STATEMENTS OF INCOME AND EXPENSE Nine months ended September 30, 1998 1997 ----------- ------------- REVENUES: Showroom and Office $ 8 908 153 $ 8 512 008 Hotel and Restaurant 1 828 677 1 747 248 ----------- ------------ Total 10 736 830 10 259 256 ----------- ------------ COSTS AND EXPENSES (EXCLUDING DEPRECIATION AND INTEREST): Showroom and Office 3 497 183 3 116 251 Hotel and Restaurant 1 437 836 1 332 431 ----------- ------------ Total 4 935 019 4 448 682 ----------- ------------ Operating profit 5 801 811 5 810 574 INTEREST EXPENSE 2 730 820 2 848 480 ----------- ------------ NET INCOME BEFORE DEPRECIATION 3 070 991 2 962 094 DEPRECIATION 1 011 128 1 045 530 ----------- ------------ NET INCOME $ 2 059 863 $ 1 916 564 =========== ============ See accountants' compilation report. Page 15
16 INDEPENDENT AUDITORS' REPORT To the Shareholders of Vornado Realty Trust: We have audited the statement of revenues and certain expenses of 888 7th Avenue, as described in Note 1 for the year ended December 31, 1997. This financial statement is the responsibility of management. Our responsibility is to express an opinion on the financial statement based on our audit. We conducted our audit 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 statement is free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statement. 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 audit provides a reasonable basis for our opinion. The accompanying statement of revenues and certain expenses was prepared for the purpose of complying with the rules and regulations of the Securities and Exchange Commission (for inclusion in the filing of Form 8-K of Vornado Realty Trust and Vornado Realty L.P.) as described in Note 1 and is not intended to be a complete presentation of 888 7th Avenue's revenues and expenses. In our opinion, such financial statement presents fairly, in all material respects, the revenues and certain expenses of 888 7th Avenue as described in Note 1 for the year ended December 31, 1997, in conformity with generally accepted accounting principles. Deloitte & Touche LLP New York, New York March 20, 1998 Page 16
17 888 7TH AVENUE STATEMENTS OF REVENUES AND CERTAIN EXPENSES Year Ended Nine Months Ended December 31, September 30, 1997 1997 1998 ------------ ------------ ------------ (Unaudited) REVENUES: Rental income $ 18,175,531 $ 12,887,618 $ 17,248,942 Tenant recoveries 3,343,023 2,584,472 2,558,590 Other income 1,225,912 596,067 865,318 ------------ ------------ ------------ Total operating revenues 22,744,466 16,068,157 20,672,850 ------------ ------------ ------------ CERTAIN EXPENSES: Building operating expenses 10,944,200 8,289,363 6,915,756 Real estate taxes 3,929,900 2,909,400 2,770,241 Ground lease expense 375,000 281,250 1,297,109 Other expense (income) 572,296 245,775 (191,691) ------------ ------------ ------------ Total certain expenses 15,821,396 11,725,788 10,791,415 ------------ ------------ ------------ REVENUES IN EXCESS OF CERTAIN EXPENSES $ 6,923,070 $ 4,342,369 $ 9,881,435 ============ ============ ============ See notes to statements of revenues and certain expenses. Page 17
18 888 7TH AVENUE NOTES TO STATEMENTS OF REVENUES AND CERTAIN EXPENSES 1. ORGANIZATION AND BASIS OF PRESENTATION 888 7th Avenue (the "Property") is a 46-story office building located on Seventh Avenue at 56th Street in New York City. The Property has an aggregate net rentable area of approximately 843,000 square feet (approximately 95% leased as of September 30, 1998). The accounting records for the Property are maintained in accordance with generally accepted accounting principles. The statements of revenues and certain expenses include information related to the operations of the Property as recorded by its current owner. The accompanying historical financial information is presented in conformity with Rule 3-14 of the Securities and Exchange Commission. Accordingly, the financial statements are not representative of the actual operations for the periods presented as certain expenses, which may not be comparable to the expenses expected to be incurred in the future operations of the acquired property, have been excluded. Expenses excluded consist of interest, depreciation and amortization and other costs not directly related to the future operations of the Property. The preparation of the financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of revenues and expenses during the reported period. Actual results could differ from those estimates. The statements of revenues and certain expenses for the nine months ended September 30, 1997 and 1998 are unaudited, however, in the opinion of management, all adjustments (consisting solely of normal recurring adjustments) necessary for the fair presentation of these statements of revenues and certain expenses for the interim periods, on the basis described above, have been included. The results of such interim periods are not necessarily indicative of the results for an entire year. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES REVENUE RECOGNITION - Rental income is recognized from leases with scheduled rent increases on a straight-line basis over the lease term. Escalation rents based upon payments for real estate taxes, insurance, utilities and maintenance by tenants are estimated and accrued. Page 18
19 OPERATING LEASES The Property leases office space to various tenants with lease terms expiring in various years. The following is a schedule, by years, of the approximate minimum future rentals required under these operating leases as of December 31, 1997: YEAR ENDING DECEMBER 31, - ------------ 1998 $ 19,619,000 1999 18,124,000 2000 17,594,000 2001 16,704,000 2002 16,353,000 Thereafter $114,861,000 GROUND LEASE The office building is located on land subject to a ground lease which expires in 2066. The ground lease, which was amended effective May 29, 1998, provided for annual rent, exclusive of real estate taxes and other expenses, of $375,000 through May 28, 1998. Effective May 29, 1998 annual rent increased to $3,350,000. The ground lease provides for further increases in rent during 2028 and 2048 based upon increases in the value of the land. Page 19
20 PRO FORMA FINANCIAL INFORMATION: The unaudited condensed consolidated pro forma financial information attached presents: (A) the Condensed Consolidated Pro Forma Income Statements of Vornado Realty Trust ("Vornado") for the year ended December 31, 1997 and for the nine months ended September 30, 1998, as if the following had occurred on January 1, 1997 (i) the completed acquisitions of 689 Fifth Avenue, the Mendik RELP Properties, the Market Square Complex and 888 Seventh Avenue with the financings attributable thereto and (ii) the previously reported acquisitions and investments reflected in the Form 8-K/A filed with the Securities and Exchange Commission on July 15, 1998 for the completed acquisition of 770 Broadway and the additional interest in 570 Lexington Avenue and previously reported acquisitions (Mendik Company, 90 Park Avenue, Arbor Property Trust, Americold Corporation and URS Logistics, Inc., The Montehiedra Town Center, The Riese Transaction, 15% investment in Charles E. Smith Commercial Realty L.P., 40% investment in The Hotel Pennsylvania, 640 Fifth Avenue, One Penn Plaza, 150 East 58th Street and the Merchandise Mart Group of Properties) and the financings attributable thereto and (B) the Condensed Consolidated Pro Forma Balance Sheet of Vornado as of September 30, 1998, as if all of the above acquisitions had occurred on September 30, 1998. The unaudited condensed consolidated pro forma financial information is not necessarily indicative of what Vornado's actual results of operations or financial position would have been had these transactions been consummated on the dates indicated, nor does it purport to represent Vornado's results of operations or financial position for any future period. The unaudited condensed consolidated pro forma financial information should be read in conjunction with the Consolidated Financial Statements and notes thereto included in Vornado's Annual Report on Form 10-K for the year ended December 31, 1997, the Consolidated Financial Statements and notes thereto included in Vornado's Quarterly Report on Form 10-Q for the quarter ended September 30, 1998, the Consolidated Financial Statements and notes thereto included in Mendik RELP's Annual Report on Form 10-K for the year ended December 31, 1997, and the Consolidated Financial Statements and notes thereto of Mendik RELP's Quarterly Report on Form 10-Q for the quarter ended September 30, 1998. In management's opinion, all adjustments necessary to reflect these transactions have been made. Page 20
21 CONDENSED CONSOLIDATED PRO FORMA BALANCE SHEET SEPTEMBER 30, 1998 (UNAUDITED) (AMOUNTS IN THOUSANDS) HISTORICAL PRO FORMA TOTAL VORNADO ADJUSTMENTS PRO FORMA ------------- ------------- ------------ ASSETS: Real estate, net $ 2,803,795 $ 106,000 (A) $ 3,150,085 94,500 (B) 45,790 (C) 100,000 (D) Cash and cash equivalents 269,952 (31,000)(A) 263,552 (6,400)(B) (45,000)(D) 31,000 (E) 45,000 (E) Investment in partially-owned entities, including investment in and advances to Alexander's 840,986 (19,790)(C) 821,196 Mortgage loans receivable 10,625 10,625 Receivable arising from straight- lining of rents 41,847 41,847 Other assets 160,515 160,515 ------------- ---------- ------------ $ 4,127,720 $ 320,100 $ 4,447,820 ============= ========== ============ LIABILITIES: Notes and mortgages payable $ 1,234,314 $ 46,000 (A) $ 1,405,914 44,600 (B) 26,000 (C) 55,000 (D) Revolving credit facility 683,250 31,000 (E) 759,250 45,000 (E) Deferred leasing fee income 9,868 9,868 Officer's deferred compensation payable 34,664 34,664 Other liabilities 78,948 78,948 ------------- ---------- ------------ 2,041,044 247,600 2,288,644 ------------- ---------- ------------ Minority interest of unitholders in the Operating Partnership 302,549 43,500 (B) 346,049 ------------- ---------- ------------ EQUITY: Total equity 1,784,127 29,000 (A) 1,813,127 ------------- ---------- ------------ $ 4,127,720 $ 320,100 $ 4,447,820 ============= ========== ============ Page 21
22 CONDENSED CONSOLIDATED PRO FORMA UNAUDITED INCOME STATEMENT FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 (AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) HISTORICAL- PREVIOUSLY CURRENT HISTORICAL REPORTED COMPANY ACQUISITIONS PRO FORMA TOTAL VORNADO ACQUISITIONS PRO FORMA COMBINED ADJUSTMENTS PRO FORMA --------- ------------ ---------- ------------ ----------- ---------- Revenues: Property rentals $ 299,924 $ 40,628 $ 340,552 $ 58,080 $ 5,969 (F) $ 403,184 -- -- -- -- (1,417) (G) Expense reimbursements 53,000 1,955 54,955 2,570 3 57,528 Other income 6,482 1,481 7,963 872 2 8,837 --------- --------- ---------- --------- --------- ---------- 359,406 44,064 403,470 61,522 4,557 469,549 --------- --------- ---------- --------- --------- ---------- EXPENSES: Operating 144,214 19,582 163,796 32,005 (1,216) (G) 194,585 Depreciation and amortization 41,605 6,049 47,654 1,159 3,848 (H) 52,661 General and administrative 18,792 -- 18,792 506 21 19,319 --------- --------- ---------- --------- --------- ---------- 204,611 25,631 230,242 33,670 2,653 266,565 --------- --------- ---------- --------- --------- ---------- Operating income 154,795 18,433 173,228 27,852 1,904 202,984 Income applicable to Alexander's 806 -- 806 -- -- 806 Income from partially owned entities 20,871 (519) 20,352 -- (1,118) (I) 19,234 Interest and other investment income 18,067 (786) 17,281 246 -- 17,527 Interest and debt expense (80,536) (17,867) (99,403) (6,888) (10,278) (J) (115,569) Net gain from insurance settlement and condemnation proceedings 9,649 -- 9,649 -- -- 9,649 Minority interest of unitholders in the Operating Partnership (10,767) (1,379) (12,146) (2,714) 2,714 (K) (2,390)(L) (14,536) --------- --------- ---------- --------- --------- ---------- Net income 112,885 (2,118) 110,767 18,496 (9,168) 120,095 Preferred stock dividends (16,268) -- (16,268) -- -- (16,268) --------- --------- ---------- --------- --------- ---------- Net income applicable to common shares $ 96,617 $ (2,118) $ 94,499 $ 18,496 $ (9,168) $ 103,827 ========= ========= ========== ========= ========= ========== Net income per common share - basic (based on 79,407 shares and 85,064 shares) $ 1.22 $ 1.22 ========= ========== Net income per common share - diluted (based on 81,482 shares and 87,139 shares) $ 1.19 $ 1.19 ========= ========== Page 22
23 CONDENSED CONSOLIDATED PRO FORMA UNAUDITED INCOME STATEMENT FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 (AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) HISTORICAL- PREVIOUSLY CURRENT HISTORICAL REPORTED COMPANY ACQUISITIONS PRO FORMA TOTAL VORNADO ACQUISITIONS PRO FORMA COMBINED ADJUSTMENTS PRO FORMA ----------- ------------ --------- ------------ ----------- --------- OTHER DATA: Funds from Operations (1): Net income applicable to common shares $ 96,617 $ (2,118) $ 94,499 $ 18,496 $ (9,168) $ 103,827 Depreciation and amortization of real property 41,002 6,049 47,051 1,159 3,848 52,058 Straight-lining of property rent -- escalations (10,218) (551) (10,769) (435) (2,221) (13,425) Leasing fees received in excess of income recognized 1,047 -- 1,047 -- -- 1,047 Proportionate share of adjustments to equity in net income of partially owned entities to arrive at funds from operations 41,691 320 42,011 -- (1,318) 40,693 Net gain from insurance settlement and condemnation proceeding (9,649) -- (9,649) -- -- (9,649) Minority interest in excess of preferential distributions (2,701) -- (2,701) -- (1,434) (4,135) ----------- ----------- --------- -------- --------- ------------ $ 157,789 $ 3,700 $ 161,489 $ 19,220 $ (10,293) $ 170,416 =========== =========== ========= ======== ========= ============ CASH FLOW PROVIDED BY (USED IN): Operating activities $ 99,885 $ 113,891 Investing activities $(1,184,759) $(1,267,159) Financing activities $ 869,773 $ 945,773 - ----------- (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 which is disclosed in the Consolidated Statements of Cash Flows for the applicable periods. There are no material legal or functional restrictions on the use of funds from operations. 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. Management considers funds from operations a supplemental measure of operating performance and along with cash flow from operating activities, financing activities, and investing activities, it provides investors with an indication of the ability of the Company to incur and service debt, to make capital expenditures and to fund other cash needs. Funds from operations may not be comparable to similarly titled measures employed by other REITs since a number of REITs, including the Company's, method of calculating funds from operations is different from that used by NAREIT. Funds from operations, as defined by NAREIT, represents net income applicable to common shares before depreciation and amortization, extraordinary items and gains or losses on sales of real estate. Funds from operations as disclosed above has been modified to adjust for the effect of straight-lining of property rentals for rent escalations and leasing fee income. Page 23
24 CONDENSED COMBINING PRO FORMA UNAUDITED INCOME STATEMENT FOR THE PERIODS IN 1998 PRIOR TO ACQUISITION (AMOUNTS IN THOUSANDS) SIX MONTHS ENDED JUNE 30, 1998 NINE MONTHS ENDED SEPTEMBER 30, 1998 ---------------- ------------------------------------------ HISTORICAL- MENDIK MARKET CURRENT 689 FIFTH RELP SQUARE 888 SEVENTH ACQUISITIONS AVENUE (1) PROPERTIES COMPLEX AVENUE COMBINED ---------- ---------- -------- ----------- ------------ Revenues: Property rentals $ 1,650 $ 28,444 $ 10,737 $17,249 $ 58,080 Expense reimbursements 11 -- -- 2,559 2,570 Other income 7 -- -- 865 872 ------- -------- -------- ------- -------- 1,668 28,444 10,737 20,673 61,522 ------- -------- -------- ------- -------- EXPENSES: Operating 888 15,391 4,935 10,791 32,005 Depreciation and amortization -- 148 1,011 -- 1,159 General and administrative 83 423 -- -- 506 ------- -------- -------- ------- -------- 971 15,962 5,946 10,791 33,670 ------- -------- -------- ------- -------- Operating income 697 12,482 4,791 9,882 27,852 Equity in net income of investees -- -- -- -- -- Interest and dividend income -- 246 -- -- 246 Interest and debt expense -- (4,157) (2,731) -- (6,888) Minority interest -- (2,714) -- -- (2,714) ------- -------- -------- ------- -------- Net income $ 697 $ 5,857 $ 2,060 $ 9,882 $ 18,496 ======= ======== ======== ======= ======== (1) Certain revenue and expense items have been reclassified to conform to Vornado's presentation. Page 24
25 CONDENSED COMBINING PRO FORMA UNAUDITED INCOME STATEMENT FOR PREVIOUSLY REPORTED ACQUISITIONS FOR THE PERIODS IN 1998 PRIOR TO ACQUISITION (AMOUNTS IN THOUSANDS) MERCHANDISE MERCHANDISE PREVIOUSLY ONE PENN 150 EAST MART GROUP 770 PRO FORMA REPORTED PLAZA 58TH STREET OF PROPERTIES BROADWAY ADJUSTMENTS ACQUISITIONS -------- ----------- ------------- -------- ----------- ------------ Revenues: Property rentals $4,034 $ 2,896 $ 25,729 $ 7,418 $ 551 $ 40,628 Expense reimbursements 430 427 -- 1,098 -- 1,955 Other income 661 114 580 126 -- 1,481 ------ ------- -------- ------- -------- -------- 5,125 3,437 26,309 8,642 551 44,064 ------ ------- -------- ------- -------- -------- EXPENSES: Operating 3,126 1,692 12,957 2,804 (997) 19,582 Depreciation and amortization -- -- -- -- 6,049 6,049 General and administrative -- -- -- -- -- -- ------ ------- -------- ------- -------- -------- 3,126 1,692 12,957 2,804 5,052 25,631 ------ ------- -------- ------- -------- -------- Operating income 1,999 1,745 13,352 5,838 (4,501) 18,433 Equity in net income of investees -- -- -- -- (519) (519) Interest and dividend income -- -- -- -- (786) (786) Interest and debt expense -- -- -- -- (17,867) (17,867) Minority interest -- -- (1,012) (367) -- (1,379) ------ ------- -------- ------- -------- -------- Net income $1,999 $ 1,745 $ 12,340 $ 5,471 $(23,673) $ (2,118) ====== ======= ======== ======= ======== ======== Page 25
26 CONDENSED CONSOLIDATED PRO FORMA UNAUDITED INCOME STATEMENT FOR THE YEAR ENDED DECEMBER 31, 1997 (AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) HISTORICAL- PREVIOUSLY CURRENT HISTORICAL REPORTED COMPANY ACQUISITIONS PRO FORMA TOTAL VORNADO ACQUISITIONS PRO FORMA COMBINED ADJUSTMENTS PRO FORMA ---------- ------------ --------- ------------ ------------ --------- Revenues: Property rentals $ 168,321 $ 244,202 $ 412,523 $ 72,777 $ 9,432 (M) $ 492,261 -- -- -- -- (2,471)(N) Expense reimbursements 36,652 33,552 70,204 3,522 -- 73,726 Other income 4,158 11,175 15,333 4,199 (2,921)(O) 16,611 --------- --------- --------- -------- --------- --------- 209,131 288,929 498,060 80,498 4,040 582,598 --------- --------- --------- -------- --------- --------- EXPENSES: Operating 74,745 137,769 212,514 44,567 (1,884)(N) 255,197 Depreciation and amortization 22,983 36,469 59,452 6,640 139 (P) 66,231 General and administrative 13,580 4,668 18,248 735 -- 18,983 Amortization of officer's deferred compensation expense 22,917 (22,917) -- -- -- -- --------- --------- --------- -------- --------- --------- 134,225 155,989 290,214 51,942 (1,745) 340,411 --------- --------- --------- -------- --------- --------- Operating income 74,906 132,940 207,846 28,556 5,785 242,187 Income applicable to Alexander's 7,873 -- 7,873 -- -- 7,873 Income from partially owned entities 4,658 16,382 21,040 -- (672)(Q) 20,368 Interest and other investment income 23,767 (3,475) 20,292 245 -- 20,537 Interest and debt expense (42,888) (81,882) (124,770) (9,923) (14,062)(R) (148,755) Gain on marketable securities -- -- -- -- -- -- Minority interest of unitholders in the Operating Partnership (7,293) (9,010) (16,303) (1,370) 1,370 (S) (2,780)(T) (19,083) --------- --------- --------- -------- --------- --------- Net income 61,023 54,955 115,978 17,508 (10,359) 123,127 Preferred stock dividends (15,549) (5,137) (20,686) -- -- (20,686) --------- --------- --------- -------- --------- --------- Net income applicable to common shares $ 45,474 $ 49,818 $ 95,292 $ 17,508 $ (10,359) $ 102,441 ========= ========= ========= ======== ========= ========= Net income per common share - basic (based on 55,098 shares and 85,064 shares) $ 0.83 $ 1.20 ========= ========= Net income per common share - diluted (based on 57,217 shares and 87,139 shares) $ 0.79 $ 1.18 ========= ========= Page 26
27 CONDENSED CONSOLIDATED PRO FORMA UNAUDITED INCOME STATEMENT FOR THE YEAR ENDED DECEMBER 31, 1997 (AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) HISTORICAL- PREVIOUSLY CURRENT HISTORICAL REPORTED COMPANY ACQUISITIONS PRO FORMA TOTAL VORNADO ACQUISITIONS PRO FORMA COMBINED ADJUSTMENTS PRO FORMA ------------ ------------ --------- ------------ ----------- --------- OTHER DATA: Funds from Operations (1): Net income applicable to common shares $ 45,474 $ 49,818 $ 95,292 $ 17,508 $ (10,359) $ 102,441 Depreciation and amortization of real property 22,413 34,368 57,781 6,640 139 63,560 Straight-lining of property rent escalations (3,359) 4,186 827 589 (3,266) (1,850) Leasing fees received in excess of income recognized 1,733 -- 1,733 -- -- 1,733 Proportionate share of adjustments to equity in net income of partially owned entities to arrive at funds from operations 6,358 35,639 41,997 -- (1,360) 40,637 Non-recurring lease cancellation income and write-off of related costs -- (11,581) (11,581) -- -- (11,581) Minority interest in excess of preferential distributions -- (553) (553) -- (1,927) (2,480) ------------ --------- --------- -------- --------- ------------ $ 72,619 $ 111,877 $ 184,496 $ 24,737 $ (16,773) $ 192,460 ============ ========= ========= ======== ========= ============ CASH FLOW PROVIDED BY (USED IN): Operating activities $ 110,754 $ 260,022 Investing activities $ (1,064,484) $ (2,007,943) Financing activities $ 1,219,988 $ 1,440,961 - ----------- (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 which is disclosed in the Consolidated Statements of Cash Flows for the applicable periods. There are no material legal or functional restrictions on the use of funds from operations. 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. Management considers funds from operations a supplemental measure of operating performance and along with cash flow from operating activities, financing activities, and investing activities, it provides investors with an indication of the ability of the Company to incur and service debt, to make capital expenditures and to fund other cash needs. Funds from operations may not be comparable to similarly titled measures employed by other REITs since a number of REITs, including the Company's, method of calculating funds from operations is different from that used by NAREIT. Funds from operations, as defined by NAREIT, represents net income applicable to common shares before depreciation and amortization, extraordinary items and gains or losses on sales of real estate. Funds from operations as disclosed above has been modified to adjust for the effect of straight-lining of property rentals for rent escalations and leasing fee income. Page 27
28 CONDENSED COMBINING PRO FORMA INCOME STATEMENT FOR THE YEAR ENDED DECEMBER 31, 1997 (AMOUNTS IN THOUSANDS) HISTORICAL- MENDIK MARKET CURRENT 689 FIFTH RELP SQUARE 888 SEVENTH ACQUISITIONS AVENUE (1) PROPERTIES COMPLEX AVENUE COMBINED ---------- ---------- -------- ----------- ------------ Revenues: Property rentals $ 3,289 $ 36,189 $ 15,124 $18,175 $ 72,777 Expense reimbursements 179 -- -- 3,343 3,522 Other income 52 2,921 -- 1,226 4,199 ------- -------- -------- ------- -------- 3,520 39,110 15,124 22,744 80,498 ------- -------- -------- ------- -------- EXPENSES: Operating 1,596 20,827 6,323 15,821 44,567 Depreciation and amortization -- 5,247 1,393 -- 6,640 General and administrative 99 636 -- -- 735 Amortization of officer's deferred compensation expense -- -- -- -- -- ------- -------- -------- ------- -------- 1,695 26,710 7,716 15,821 51,942 ------- -------- -------- ------- -------- Operating income 1,825 12,400 7,408 6,923 28,556 Equity in net income of investees -- -- -- -- -- Interest and dividend income -- 245 -- -- 245 Interest and debt expense -- (6,162) (3,761) -- (9,923) Minority interest -- (1,370) -- -- (1,370) ------- -------- -------- ------- -------- Net income $ 1,825 $ 5,113 $ 3,647 $ 6,923 $ 17,508 ======= ======== ======== ======= ======== (1) Certain revenue and expense items have been reclassified to conform to Vornado's presentation. Page 28
29 CONDENSED COMBINING PRO FORMA UNAUDITED INCOME STATEMENT FOR PREVIOUSLY REPORTED ACQUISITIONS FOR THE YEAR ENDED DECEMBER 31, 1997 OR THE PERIODS IN 1997 PRIOR TO ACQUISITION (AMOUNTS IN THOUSANDS) ARBOR THE MENDIK PROPERTY 90 PARK MONTEHIEDRA THE RIESE 640 FIFTH ONE PENN COMPANY TRUST AVENUE TOWN CENTER TRANSACTION AVENUE PLAZA -------- -------- ------- ----------- ----------- --------- -------- Revenues: Property rentals $ 34,928 $ 19,837 $12,418 $2,059 $ 805 $ 5,053 $48,412 Expense reimbursements 2,908 16,089 2,975 470 43 1,837 5,155 Other income 3,187 72 264 57 23 -- 7,936 -------- -------- ------- ------ ------ ------- ------- 41,023 35,998 15,657 2,586 871 6,890 61,503 -------- -------- ------- ------ ------ ------- ------- EXPENSES: Operating 12,805 16,500 6,420 585 667 4,355 37,511 Depreciation and amortization 4,682 4,301 -- -- -- -- -- General and administrative 2,684 1,539 -- -- -- -- -- Amortization of officer's deferred compensation expense -- -- -- -- -- -- -- -------- -------- ------- ------ ------ ------- ------- 20,171 22,340 6,420 585 667 4,355 37,511 -------- -------- ------- ------ ------ ------- ------- Operating income 20,852 13,658 9,237 2,001 204 2,535 23,992 Equity in net income of investees 362 -- -- -- -- -- -- Interest and dividend income 899 -- -- -- -- -- -- Interest and debt expense (7,967) (10,272) -- -- -- -- -- Minority interest (3,077) -- -- -- -- -- -- Preferred stock dividends -- -- -- -- -- -- -- -------- -------- ------- ------ ------ ------- ------- Net income $ 11,069 $ 3,386 $ 9,237 $2,001 $ 204 $ 2,535 $23,992 ======== ======== ======= ====== ====== ======= ======= MERCHANDISE PREVIOUSLY 150 EAST MART GROUP 770 PRO FORMA REPORTED 58TH STREET OF PROPERTIES BROADWAY ADJUSTMENTS ACQUISITIONS ----------- ------------- -------- ----------- ------------ Revenues: Property rentals $ 13,901 $ 99,087 $ 14,910 $ (7,208) $ 244,202 Expense reimbursements 2,049 -- 2,026 -- 33,552 Other income 547 1,711 -- (2,622) 11,175 -------- --------- -------- --------- --------- 16,497 100,798 16,936 (9,830) 288,929 -------- --------- -------- --------- --------- EXPENSES: Operating 8,121 49,339 6,235 (4,769) 137,769 Depreciation and amortization -- -- -- 27,486 36,469 General and administrative -- -- -- 445 4,668 Amortization of officer's deferred compensation expense -- -- -- (22,917) (22,917) -------- --------- -------- --------- --------- 8,121 49,339 6,235 245 155,989 -------- --------- -------- --------- --------- Operating income 8,376 51,459 10,701 (10,047) 132,940 Equity in net income of investees -- -- -- 16,020 16,382 Interest and dividend income -- 897 -- (5,271) (3,475) Interest and debt expense -- -- -- (63,643) (81,882) Minority interest -- (4,048) (734) (1,151) (9,010) Preferred stock dividends -- -- -- (5,137) (5,137) -------- --------- -------- --------- --------- Net income $ 8,376 $ 48,308 $ 9,967 $ (69,257) $ 49,818 ======== ========= ======== ========= ========= Page 29
30 NOTES TO CONDENSED CONSOLIDATED PRO FORMA FINANCIAL STATEMENTS (AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) The unaudited Condensed Consolidated Pro Forma Financial Statements were prepared to give pro forma effect to the completed acquisitions of 689 Fifth Avenue, the Mendik RELP Properties, the Market Square Complex, and 888 Seventh Avenue, the previously reported completed acquisitions and investments (Mendik Company, Arbor Property Trust, 90 Park Avenue, Americold Corporation and URS Logistics, Inc., The Montehiedra Town Center, The Riese Transaction, 15% investment in Charles E. Smith Commercial Realty L.P., 40% investment in The Hotel Pennsylvania, 640 Fifth Avenue, One Penn Plaza, 150 East 58th Street, the Merchandise Mart Group of Properties, 770 Broadway and additional interest in 570 Lexington Avenue (all included in the column headed "Previously Reported Acquisitions")) and the financings attributable thereto, for the period of time during 1998 prior to their acquisition. The Pro Forma data for certain previously completed acquisitions, which were disclosed in Forms 8-K previously filed with the Securities and Exchange Commission has been updated to (i) include information through September 30, 1998 and (ii) reflect pro forma adjustments to revenues for straight-line rents for the period, depreciation adjustments based upon the new basis of the acquired assets, interest expense on debt used to fund the acquisition and additional minority interest. The column headed "Historical - Current Acquisitions Combined" included in the Condensed Consolidated Pro Forma Income Statement for the nine months ended September 30, 1998 and the year ended December 31, 1997, includes the revenues and expenses from the Mendik RELP's Consolidated Statement of Operations for the nine months ended September 30, 1998 as filed on Mendik RELP's Form 10-Q and the Consolidated Statement of Operations for the year ended December 31, 1997 as filed on Mendik RELP's Annual Report on Form 10-K. These amounts include the 40% interest in Two Park Avenue that was owned by Vornado prior to the acquisition of the remaining 60% interest and accordingly, adjustments are required to eliminate this equity investment. Such adjustments are included in the column headed "Pro Forma Adjustments". The "Historical - Current Acquisitions Combined" column in the Condensed Consolidated Pro Forma Unaudited Income Statement for the Nine Months Ended September 30, 1998 reflects revenues and certain expenses for the six months ended June 30, 1998 for 689 Fifth Avenue. This asset was acquired on August 12, 1998 and accordingly, adjustments are required to record historical revenues and expenses from June 30, 1998 through the acquisition date. Such adjustments are included in the Pro Forma Adjustment column. The "Historical - Current Acquisitions Combined" column also includes the revenues and certain expenses for the nine months ended September 30, 1998 for the Mendik RELP Properties, the Market Square Complex and 888 Seventh Avenue. Acquisitions were consummated through subsidiaries or preferred stock affiliates of Vornado Realty L.P. (the "Operating Partnership") (of which Vornado owns an approximate 88.7% limited partnership interest at December 22, 1998 and is the sole general partner) and were recorded under the purchase method of accounting. The respective purchase costs were allocated to acquired assets and assumed liabilities using their relative fair values as of the closing dates, based on valuations and other studies which are not yet complete. Accordingly, the initial valuations are subject to change as such information is finalized. Vornado believes that any such change will not be significant since the allocations were principally to real estate. Page 30
31 NOTES TO CONDENSED CONSOLIDATED PRO FORMA FINANCIAL STATEMENTS (CONTINUED) (AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) The following adjustments were required to give pro forma effect to the transactions being reported: Pro Forma September 30, 1998 Balance Sheet: (A) Reflects the acquisition of the Mendik RELP Properties (330 West 34th Street, the Saxon Woods Corporate Center and the additional 60% interest in Two Park Avenue) for approximately $106 million, consisting of $31 million in cash from borrowings under the revolving credit facility, the issuance of $29 million of common shares and assumed debt of $46 million. (B) To record the acquisition of the Market Square Complex for approximately $94.5 million, consisting of $44.6 million in debt, $43.5 million in a combination of Class A Operating Partnership Units and Series C-1 Preferred Operating Partnership Units and $6.4 million in cash. (C) Reflects the reclassification of the equity investment in the original 40% interest in Two Park Avenue into its balance sheet components. (D) To record the acquisition of 888 Seventh Avenue for approximately $100 million, consisting of $45 million of cash from borrowings under the revolving credit facility and $55 million of assumed debt. (E) Reflects borrowings under the revolving credit facility to fund the cash portion of the purchase price. Pro Forma September 30, 1998 Income Statement: (F) To adjust property rentals arising from the straight-lining of tenant leases that contain escalations over the lease term. (G) To eliminate revenues and expenses of non-real estate operations of the Market Square Complex. (H) To adjust depreciation expense for the new basis of the acquired assets, offset by the elimination of historical depreciation as recorded on the Mendik RELP and Market Square income statements. (I) To eliminate income accounted for under the equity method on the original 40% interest in Two Park Avenue included in Vornado's historical income statement. (J) To record interest expense from assumed debt, at applicable rates, and from borrowings on the revolving credit facility used to finance the cash portion of the acquisitions of the Mendik RELP Properties, 689 Fifth Avenue and 888 Seventh Avenue at an assumed borrowing rate of 6.5%. (K) To eliminate historical minority interest in the Mendik RELP. (L) To record minority interest in income from acquisitions. Pro Forma December 31, 1997 Income Statement: (M) To adjust property rentals arising from the straight-lining of tenant leases that contain escalations over the lease term. (N) To eliminate revenues and expenses of non-real estate operations of the Market Square Complex. (O) To eliminate gain relating to the Mendik RELP properties which would not be a part of the proposed future operations of the properties being acquired. Page 31
32 NOTES TO CONDENSED CONSOLIDATED PRO FORMA FINANCIAL STATEMENTS (CONTINUED) (AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) (P) To adjust depreciation expense for the new basis of the acquired assets, offset by the elimination of historical depreciation as recorded on the Mendik RELP and Market Square income statements. (Q) To eliminate income accounted for under the equity method on the original 40% interest in Two Park Avenue included in Vornado's historical income statement. (R) To record interest expense from assumed debt, at applicable rates, and from borrowings on the revolving credit facility used to finance the cash portion of the acquisitions of the Mendik RELP Properties, 689 Fifth Avenue and 888 Seventh Avenue at an assumed borrowing rate of 6.5%. (S) To eliminate historical minority interest in the Mendik RELP. (T) To record minority interest in income from acquisitions. Page 32
33 VORNADO REALTY TRUST SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. VORNADO REALTY TRUST ---------------------------------- (Registrant) Date: February 12, 1999 /s/ Irwin Goldberg ---------------------------------- IRWIN GOLDBERG Vice President, Chief Financial Officer Page 33
34 INDEX TO EXHIBITS EXHIBIT NO. EXHIBIT 10.1 Item 1 of Form 10-Q of Mendik Real Estate Limited Partnership for the nine months ended September 30, 1998 23.1 Consent of Friedman Alpren & Green LLP 23.2 Consent of Sharrard, McGee & Co., P.A. 23.3 Consent of KPMG Peat Marwick LLP 23.4 Consent of Deloitte & Touche LLP Page 34
1 EXHIBIT 10.1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) X Quarterly Report Pursuant to Section 13 or 15(d) of the Securities -- Exchange Act of 1934 For the Quarterly Period Ended September 30, 1998 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: 0-15463 MENDIK REAL ESTATE LIMITED PARTNERSHIP Exact Name of Registrant as Specified in its Charter New York 11-2774249 State or Other Jurisdiction of I.R.S. Employer Identification No. Incorporation or Organization 3 World Financial Center, 29th Floor, New York, NY Attn.: Andre Anderson 10285 Address of Principal Executive Offices Zip Code (212) 526-3183 Registrant's Telephone Number, Including Area Code 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
2 2 CONSOLIDATED BALANCE SHEETS At September 30, At December 31, 1998 1997 --------------- -------------- Assets Properties held for disposition $123,611,589 $119,791,043 Cash and cash equivalents 5,168,539 4,786,697 Restricted cash 7,195,419 7,041,844 Rent and other receivables, net of allowance for doubtful accounts of $118,611 in 1997 1,125,578 903,270 Deferred rent receivable 12,990,489 11,191,096 Other assets, net of accumulated amortization of $4,886,815 in 1998 and $4,941,591 in 1997 12,814,407 8,426,941 ------------ ------------ Total Assets $162,906,021 $152,140,891 ============ ============ Liabilities and Partners' Capital (Deficit) Liabilities: Accounts payable and accrued expenses $ 4,396,808 $ 1,572,939 Deferred income 5,196,287 5,904,654 Due to affiliates 2,874,256 2,956,140 Security deposits payable 1,195,419 1,116,249 Accrued interest payable 807,670 727,944 Mortgages payable 71,500,000 71,500,000 Notes payable to affiliates 2,230,000 2,230,000 ------------ ------------ Total Liabilities 88,200,440 86,007,926 ------------ ------------ Minority interest 24,159,722 21,445,577 ------------ ------------ Partners' Capital (Deficit): General Partners (361,198) (419,783) Limited Partners (395,169 units outstanding) 50,907,057 45,107,171 ------------ ------------ Total Partners' Capital 50,545,859 44,687,388 ------------ ------------ Total Liabilities and Partners' Capital $162,906,021 $152,140,891 ============ ============ CONSOLIDATED STATEMENT OF PARTNERS' CAPITAL (DEFICIT) For the nine months ended September 30, 1998 Special Limited General Limited Partners Partners Partner Total ----------- --------- -------- ----------- Balance at December 31, 1997 $45,107,171 $(419,783) $ -- $44,687,388 Net income 5,799,886 58,585 -- 5,858,471 ----------- --------- -------- ----------- Balance at September 30, 1998 $50,907,057 $(361,198) $ -- $50,545,859 =========== ========= ======== =========== See accompanying notes to the consolidated financial statements.
3 3 CONSOLIDATED STATEMENTS OF OPERATIONS Three months ended September 30, Nine months ended September 30, 1998 1997 1998 1997 ----------- ----------- ----------- ----------- Income Rent $10,069,140 $ 9,856,922 $28,444,487 $27,819,819 Interest 87,198 58,314 246,310 140,595 ----------- ----------- ----------- ----------- Total Income 10,156,338 9,915,236 28,690,797 27,960,414 ----------- ----------- ----------- ----------- Expenses Property operating 5,520,553 5,834,010 15,391,129 15,856,654 Depreciation and amortization 49,183 1,906,374 147,550 5,898,739 Interest 1,331,371 1,453,476 4,156,508 4,685,227 General and administrative 206,161 171,763 422,994 438,948 ----------- ----------- ----------- ----------- Total Expenses 7,107,268 9,365,623 20,118,181 26,879,568 ----------- ----------- ----------- ----------- Income before minority interest 3,049,070 549,613 8,572,616 1,080,846 Minority interest in consolidated venture (915,681) (297,233) (2,714,145) (698,896) ----------- ----------- ----------- ----------- Net Income $ 2,133,389 $ 252,380 $ 5,858,471 $ 381,950 =========== =========== =========== =========== Net Income Allocated: To the General Partners $ 21,334 $ 2,524 $ 58,585 $ 3,820 To the Special Limited Partner -- -- -- -- To the Limited Partners 2,112,055 249,856 5,799,886 378,130 ----------- ----------- ----------- ----------- $ 2,133,389 $ 252,380 $ 5,858,471 $ 381,950 =========== =========== =========== =========== Per limited partnership unit (395,169) outstanding: $ 5.35 $ 0.63 $ 14.68 $ 0.96 ------ ------ ------- ------ See accompanying notes to the consolidated financial statements.
4 4 CONSOLIDATED STATEMENTS OF CASH FLOWS For the nine months ended September 30, 1998 1997 ----------- ----------- Cash Flows From Operating Activities Net income $ 5,858,471 $ 381,950 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation -- 4,614,851 Amortization 147,550 1,283,888 Minority interest in consolidated venture 2,714,145 698,896 Increase (decrease) in cash arising from changes in operating assets and liabilities: Restricted cash (153,575) (4,548,815) Rent and other receivables (222,308) (160,681) Deferred rent receivable (1,799,393) (821,827) Other assets (4,535,016) (1,351,829) Accounts payable and accrued expenses 2,823,869 450,897 Deferred income (708,367) (459,669) Due to affiliates (81,884) (789,583) Security deposits payable 79,170 71,444 Accrued interest payable 79,726 (116,884) ----------- ----------- Net cash provided by (used for) operating activities 4,202,388 (747,362) ----------- ----------- Cash Flows From Investing Activities Additions to real estate assets (3,820,546) (1,190,202) Accounts payable - real estate assets -- (1,076,267) U.S. Treasuries and Agencies -- 2,121,910 ----------- ----------- Net cash used for investing activities (3,820,546) (144,559) ----------- ----------- Cash Flows From Financing Activities Mortgage refinancing costs -- (565,609) ----------- ----------- Net cash used for financing activities -- (565,609) ----------- ----------- Net increase (decrease) in cash and cash equivalents 381,842 (1,457,530) Cash and cash equivalents, beginning of period 4,786,697 4,727,720 ----------- ----------- Cash and cash equivalents, end of period $ 5,168,539 $ 3,270,190 =========== =========== Supplemental Disclosure of Cash Flow Information Cash paid during the period for interest $ 4,076,782 $ 4,802,111 ----------- ----------- See accompanying notes to the consolidated financial statements.
5 5 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS The unaudited consolidated financial statements should be read in conjunction with the Partnership's annual 1997 audited financial statements within Form 10-K. The unaudited consolidated interim financial statements include all normal and reoccurring adjustments which are, in the opinion of management, necessary to present a fair statement of financial position as of September 30, 1998 and the results of operations for the three and nine months ended September 30, 1998 and 1997, statements of cash flows for the nine months ended September 30, 1998 and 1997 and the statement of partners' capital (deficit) for the nine months ended September 30, 1998. Results of operations for the period are not necessarily indicative of the results to be expected for the full year. The following significant events occurred subsequent to fiscal year 1997, and no material contingency exists which would require disclosure in this interim report per Regulation S-X, Rule 10-01, Paragraph (a)(5). ACQUISITION OR DISPOSITION OF ASSETS The Partnership has previously discussed the existence of three purported class action lawsuits that have been brought in the Supreme Court of the State of New York for New York County (the "Court") against the General Partners of the Partnership and certain affiliates of Mendik RELP Corporation by certain limited partners of the Partnership (the "Actions"). The parties to the Actions entered into a settlement of the Actions on June 24, 1998 that contemplates the sale of the Partnership's interests in Saxon Woods Corporate Center, Two Park Avenue and 330 West 34th Street (collectively, the "Properties"; the sale transaction is referred to herein as the "Transaction"), the subsequent liquidation and dissolution of the Partnership and the distribution of the Partnership's remaining assets after the payment of the Partnership's liabilities. On July 9, 1998, the Court issued an order preliminarily approving the settlement, certifying the proposed plaintiff class, and directing that notice of the settlement be sent to members of the class, including to current limited partners. The settlement was approved by the Court on September 23, 1998 and that decision became final and subject to no further appeal on November 6, 1998. The Transaction contemplates that the Partnership will sell the Properties for approximately $64.5 million, net of existing mortgage debt on Two Park Avenue. The Partnership's approximate 60% interest in Two Park Avenue is to be purchased by an affiliate of Vornado Realty Trust for approximately $34.5 million, after deducting $39 million of existing mortgage debt, to be paid in a combination of cash and common stock of Vornado Realty Trust. Saxon Woods Corporate Center and 330 West 34th Street are to be purchased for an aggregate price of $30 million in cash by Vornado Realty, L.P., or an affiliate thereof. Both Vornado Realty Trust and Vornado Realty, L.P. are affiliates of Mendik RELP Corporation. The Transaction is scheduled to close on or before December 7, 1998. There can be no assurance that the Transaction will close as anticipated.
6 6 Part I, Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations During the nine months ended September 30, 1998, the Partnership funded operating costs, the cost of tenant improvements, leasing commissions, and building capital improvements from four sources: (i) cash flow generated by the property located at Two Park Avenue ("Two Park Avenue" or the "Park Avenue Property"), the Partnership's leasehold interest in 550/600 Mamaroneck Avenue, Harrison, New York (the "Saxon Woods Corporate Center") and the Partnership's leasehold interest in the property located at 330 West 34th Street, New York, New York (the "34th Street Property"), (ii) Partnership reserves, (iii) the deferral of property management fees and leasing commissions with respect to certain of the Properties by Mendik Management Company Inc., an affiliate of Mendik RELP Corporation, and (iv) the deferral of interest payments on the NYRES1 Loan. The Partnership has previously discussed the existence of three purported class action lawsuits that have been brought in the Supreme Court of the State of New York for New York County (the "Court") against the General Partners of the Partnership and certain affiliates of Mendik RELP Corporation by certain limited partners of the Partnership (the "Actions"). The parties to the Actions entered into a settlement of the Actions on June 24, 1998 that contemplates the sale of the Partnership's interests in Saxon Woods Corporate Center, Two Park Avenue and 330 West 34th Street (collectively, the "Properties"; the sale transaction is referred to herein as the "Transaction"), the subsequent liquidation and dissolution of the Partnership and the distribution of the Partnership's remaining assets after the payment of the Partnership's liabilities. On July 9, 1998, the Court issued an order preliminarily approving the settlement, certifying the proposed plaintiff class, and directing that notice of the settlement be sent to members of the class, including to current limited partners. The settlement was approved by the Court on September 23, 1998 and that decision became final and subject to no further appeal on November 6, 1998. The Transaction contemplates that the Partnership will sell the Properties for approximately $64.5 million, net of existing mortgage debt on Two Park Avenue. The Partnership's approximate 60% interest in Two Park Avenue is to be purchased by an affiliate of Vornado Realty Trust for approximately $34.5 million, after deducting $39 million of existing mortgage debt, to be paid in a combination of cash and common stock of Vornado Realty Trust. Saxon Woods Corporate Center and 330 West 34th Street are to be purchased for an aggregate price of $30 million in cash by Vornado Realty, L.P., or an affiliate thereof. Both Vornado Realty Trust and Vornado Realty, L.P. are affiliates of Mendik RELP Corporation. The Transaction is scheduled to close on or before December 7, 1998. There can be no assurance that the Transaction will close as anticipated. Park Avenue Property - As of September 30, 1998, the Park Avenue Property was approximately 98% leased. The costs of leasing space at the Property are being funded with existing Property cash flow and reserves maintained by the joint venture that owns the Park Avenue Property. Pursuant to the new Park Avenue mortgage loan, as discussed below, as of September 30, 1998, the Partnership had placed approximately $6.0 million in a reserve account to fund the costs of future leasing commissions and tenant improvements.
7 7 The Partnership refinanced the existing loan on the Park Avenue property in April 1997. Under the new mortgage, which matures on March 1, 2000, interest is payable at a floating rate (LIBOR plus 150 basis points), which should reduce the Partnership's debt service costs (assuming short-term LIBOR rates remain stable). Additionally, there will be no prepayment penalty (other than in connection with breakage costs of any LIBOR contract), in the event the Partnership repays the full amount due under the mortgage prior to maturity, which should provide the Partnership with flexibility in connection with the Partnership's plan to sell its approximate 60% interest in Two Park Avenue (see above). The remaining 40% interest in the Park Avenue Property is owned by B&B Park Avenue L.P. ("B&B"), of which Mendik RELP Corporation was a general partner. On December 13, 1996, FW/Mendik REIT LLC, an affiliate of Mendik RELP Corporation, entered into a contract with the partners that owned substantially all of the interest in B&B to acquire their interest in B&B. The closing under the contract took place on April 15, 1997. Following the closing, FW/Mendik REIT LLC conveyed its interest in B&B to an affiliate of Vornado Realty Trust ("Vornado"), a real estate investment trust whose shares of stock are traded on the New York Stock Exchange. The conveyance to the affiliate of Vornado was in connection with the consolidation of Vornado and Mendik Realty Company, Inc. and certain of its affiliates, which consolidation was also consummated on April 15, 1997. In connection with this transaction, Mendik Management assumed all property management and leasing responsibilities at the Properties, which were formerly performed by Mendik Realty. Major tenants at the Park Avenue Property are The Times Mirror Company Inc., which leases approximately 292,000 square feet (approximately 31% of the total leaseable area in the Property) under leases expiring on September 30, 2010, and United Way. United Way leases approximately 61,000 square feet (approximately 6% of the total leaseable area in the Property) under a lease expiring on November 30, 2013. Saxon Woods Corporate Center - The Saxon Woods Corporate Center consists of two office buildings, which had a combined leased rate of approximately 98% as of September 30, 1998. Individually, the 550 Mamaroneck building was 97% leased and the 600 Mamaroneck building was 98% leased. During the third quarter of 1996, the Partnership obtained a one-year extension of the mortgage indebtedness to September 1997. Subsequently, extensions of the maturity date until December 26, 1998 were obtained to facilitate a sale of the Property. 34th Street Property - As of September 30, 1998, the 34th Street Property was 100% leased. The largest tenant in the Property is the City of New York Human Resources Administration (the "City") occupying approximately 48% of the total leaseable area under a lease which is scheduled to expire in February 2007. Information regarding the amendment and extension of the City's lease is contained with the Partnership's annual report on Form 10-K for the year ended December 31, 1997. The 34th Street Property is no longer encumbered by a mortgage obligation. The previous mortgage was paid off in June 1995. Funding for the payoff was provided by an affiliate of NYRES1. The NYRES1 Loan bears interest at the prime rate less one and one-quarter percent and matures upon the earlier of December 31, 2025 or the termination of the Partnership. Accrued interest and principal are payable on a current basis to the extent there is net cash flow available from the property. The loan is an unsecured obligation of the Partnership. In connection with the loan, Mendik Management agreed to continue to defer its management fees and leasing commissions with respect to the property.
8 8 Operating Cash Reserves and Other Assets The Partnership's consolidated cash reserves were $5,168,539 at September 30, 1998, increased from $4,786,697 at December 31, 1997. The increase is due to cash flow from operating activities exceeding real estate additions. Restricted cash was $7,195,419 at September 30, 1998 and $7,041,844 at December 31, 1997. Rent and other receivables totaled $1,125,578 at September 30, 1998, compared to $903,270 at December 31, 1997. The $222,308 increase is primarily due to the timing of rental payments made by certain tenants at the Partnership's Properties. The increase in deferred rent receivable from $11,191,096 at December 31, 1997 to $12,990,489 at September 30, 1998 is attributable to the cumulative effect of new leases. Other assets increased from $8,426,941 at December 31, 1997 to $12,814,407 at September 30, 1998. The $4,387,466 increase is primarily attributable to prepaid leasing commissions. Short- and Long-term Liabilities Accounts payable and accrued expenses increased by $2,823,869 to $4,396,808 at September 30, 1998, compared to $1,572,939 at December 31, 1997. The increase is primarily attributable to the accrual of leasing commissions with respect to the 330 West 34th Street property. Results of Operations For the three and nine months ended September 30, 1998, the Partnership generated net income of $2,133,389 and $5,858,471, respectively, compared to $252,380 and $381,950 for the corresponding periods in 1997. The increase in net income is primarily attributable to a decrease of depreciation and amortization expense as a result of the Two Park Avenue and 330 West 34th Street properties being "held for sale" as of September 30, 1997. Rental income for the three and nine months ended September 30, 1998 totaled $10,069,140 and $28,444,487, respectively, compared to $9,856,922 and $27,819,819 for the corresponding periods in 1997. The increase in the three-month period is the result of increased base rent at the Two Park Avenue Property, and the increase in the nine-month period is primarily attributable to increased leasing activity. Property operating expenses decreased slightly from the 1997 periods, totaling $5,520,553 and $15,391,129 for the three and nine months ended September 30, 1998, respectively, compared to $5,834,010 and $15,856,654 for the corresponding periods in 1997. The decrease is primarily attributable to decreases in real estate tax, and repairs and maintenance expense. Depreciation and amortization expense for the three and nine months ended September 30, 1998 totaled $49,183, and $147,550, respectively, compared to $1,906,374 and $5,898,739 for the corresponding periods in 1997. Since all of the Properties were "held for sale," commencing September 30, 1997, the Partnership ceased recording depreciation as required by Statement of Financial Accounting Standards No. 121. Interest expense declined from $1,453,476 and $4,685,227 for the three and nine months ended September 30, 1997, respectively, to $1,331,371 and $4,156,508 for the corresponding periods in 1998 as a result of the refinancing of the Two Park Avenue mortgages as of April 15, 1997.
9 9 General and administrative expenses totaled $206,161 and $422,994 for the three and nine months ended September 30, 1998, respectively, compared to $171,763 and $438,948 for the corresponding periods in 1997. The $34,398 increase for the quarter was primarily the result of quarterly audit fee billing and legal expenses. The $15,954 decrease for the nine-month period was primarily attributable to reduced postage expenses. Part II Other Information Item 1 Not applicable. Item 2 Not applicable. Item 3 Legal. The Partnership has previously discussed the existence of three purported class action lawsuits that have been brought in the Supreme Court of the State of New York for New York County (the "Court") against the General Partners of the Partnership and certain affiliates of Mendik RELP Corporation by certain limited partners of the Partnership (the "Actions"). The parties to the Actions entered into a settlement of the Actions on June 24, 1998 that contemplates the sale of the Partnership's interests in Saxon Woods Corporate Center, Two Park Avenue and 330 West 34th Street (collectively, the "Properties"; the sale transaction is referred to herein as the "Transaction"), the subsequent liquidation and dissolution of the Partnership and the distribution of the Partnership's remaining assets after the payment of the Partnership's liabilities. On July 9, 1998, the Court issued an order preliminarily approving the settlement, certifying the proposed plaintiff class, and directing that notice of the settlement be sent to members of the class, including to current limited partners. The settlement was approved by the Court on September 23, 1998 and that decision became final and subject to no further appeal on November 6, 1998. The Transaction contemplates that the Partnership will sell the Properties for approximately $64.5 million, net of existing mortgage debt on Two Park Avenue. The Partnership's approximate 60% interest in Two Park Avenue is to be purchased by an affiliate of Vornado Realty Trust for approximately $34.5 million, after deducting $39 million of existing mortgage debt, to be paid in a combination of cash and common stock of Vornado Realty Trust. Saxon Woods Corporate Center and 330 West 34th Street are to be purchased for an aggregate price of $30 million in cash by Vornado Realty, L.P., or an affiliate thereof. Both Vornado Realty Trust and Vornado Realty, L.P. are affiliates of Mendik RELP Corporation. The Transaction is scheduled to close on or before December 7, 1998. There can be no assurance that the Transaction will close as anticipated. Item 4 Not applicable. Item 5 Not applicable.
10 10 Item 6 Exhibits and reports on Form 8-K. (a) Exhibits - (2) Purchase and Sale Agreement between the Partnership and Vornado relating to the sale of the Properties (incorporated by reference to Exhibit 2 to the Form 8-K filed on October 9, 1998). (27) Financial Data Schedule (b) Reports on Form 8-K On July 8, 1998 the Partnership filed a Current Report on Form 8-K reporting that the Partnership had entered into a settlement of certain class action lawsuits, which settlement contemplates the sale of the Partnership's interests in the Properties. On October 9, 1998, the Partnership filed a Current Report on Form 8-K reporting the execution of a definitive Purchase and Sale Agreement regarding the Transaction.
11 11 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. MENDIK REAL ESTATE LIMITED PARTNERSHIP BY: NY REAL ESTATE SERVICES 1 INC. General Partner Date: November 16, 1998 BY: /s/Mark J. Marcucci -------------------------- Mark J. Marcucci President and Chief Financial Officer
1 EXHIBIT 23.1 INDEPENDENT AUDITORS' CONSENT We consent to the incorporation by reference in Registration Statement No. 333-64015 of Vornado Realty Trust on Form S-3, Amendment No. 1 to Registration Statement No. 333-50095 of Vornado Realty Trust on Form S-3 and Registration Statement Nos. 333-52573, 333-29011 and 333-09159 on Form S-8 of Vornado Realty Trust and Amendment No. 4 to Registration Statement No. 333-40787 and Amendment No. 4 to Registration Statement No. 333-29013 of Vornado Realty Trust and Vornado Realty L.P. both on Form S-3, of our report dated July 30, 1998 on the statement of revenues and certain expenses of 689 Fifth Avenue New York, New York, for the year ended December 31, 1997, which report appears in the Form 8-K of Vornado Realty Trust and Vornado Realty L.P. filed with the Securities and Exchange Commission on or about February 10, 1999. FRIEDMAN ALPREN & GREEN LLP New York, New York February 10, 1999
1 EXHIBIT 23.2 INDEPENDENT AUDITORS' CONSENT We consent to the incorporation by reference in Registration Statement No. 333-64015 of Vornado Realty Trust on Form S-3, Amendment No. 1 to Registration Statement No. 333-50095 of Vornado Realty Trust on Form S-3 and Registration Statement Nos. 333-52573, 333-29011 and 333-09159 on Form S-8 of Vornado Realty Trust and Amendment No. 4 to Registration Statement No. 333-40787 and Amendment No. 4 to Registration Statement No. 333-29013 of Vornado Realty Trust and Vornado Realty L.P. both on Form S-3, of our report dated September 30, 1998 on the statement of income and expense of the Market Square Limited Partnership for the year ended December 31, 1997 and our report dated November 12, 1998 on the statement of income and expense of the Market Square Limited Partnership for the nine months ended September 30, 1998 and 1997, which reports appear in the Form 8-K of Vornado Realty Trust and Vornado Realty L.P. dated February 12, 1999. SHARRARD, MCGEE & CO., P.A. High Point, NC February 10, 1999
1 EXHIBIT 23.3 INDEPENDENT AUDITORS' CONSENT We consent to the incorporation by reference in Registration Statement No. 333-64015 of Vornado Realty Trust on Form S-3, Amendment No. 1 to Registration Statement No. 333-50095 of Vornado Realty Trust on Form S-3 and Registration Statement Nos. 333-52573, 333-29011 and 333-09159 on Form S-8 of Vornado Realty Trust and Amendment No. 4 to Registration Statement No. 333-40787 and Amendment No. 4 to Registration Statement No. 333-29013 of Vornado Realty Trust and Vornado Realty L.P. both on Form S-3, of our report dated March 20, 1998 with respect to the consolidated balance sheets of Mendik Real Estate Limited Partnership and consolidated venture as of December 31, 1997 and 1996, and the related consolidated statements of operations, partners' capital (deficit), and cash flows for each of the years in the three-year period ended December 31, 1997, which report is incorporated by reference in the Form 8-K of Vornado Realty Trust as filed with the Securities and Exchange Commission on February 12, 1999. KPMG Peat Marwick LLP Boston, Massachusetts February 12, 1999
1 EXHIBIT 23.4 INDEPENDENT AUDITORS' CONSENT We consent to the incorporation by reference in the following Registration Statements of our report dated March 20, 1998 on the statement of revenues and certain expenses of 888 7th Avenue for the year ended December 31, 1997, which report appears in the Form 8-K of Vornado Realty Trust filed with the Securities and Exchange Commission on or about February 12, 1999. Vornado Realty Trust: Registration Statement No. 333-64015 on Form S-3 Amendment No. 1 to Registration Statement No. 333-50095 on Form S-3 Registration Statement No. 333-52573 on Form S-8 Registration Statement No. 333-29011 on Form S-8 Registration Statement No. 333-09159 on Form S-8 Vornado Realty Trust and Vornado Realty L.P. (Joint Registration Statements): Amendment No. 4 to Registration Statement No. 333-40787 on Form S-3 Amendment No. 4 to Registration Statement No. 333-29013 on Form S-3 DELOITTE & TOUCHE LLP New York, New York February 8, 1999