Vornado Realty Trust

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1 Exhibit Index on Page 18 As filed with the Securities and Exchange Commission on February 24, 1999 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 8-K/A 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 This Form 8-K/A amends Item 7 of Vornado Realty Trust's current report on Form 8-K, dated August 12, 1998, as previously filed with the Securities and Exchange Commission on February 12, 1999 (the "Prior 8-K"), to replace the Condensed Consolidated Pro Forma Financial Statements in Item 7. ITEM 1. NOT APPLICABLE ITEM 2. See Item 2 of the Prior 8-K. ITEMS 3-6. NOT APPLICABLE ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS. There are filed herewith the Condensed Consolidated Pro Forma Balance Sheet of Vornado Realty Trust ("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 5, 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. These Condensed Consolidated Pro Forma Financial Statements replace the Condensed Consolidated Pro Forma Financial Statements that were filed with the Prior 8-K. Page 2

3 PAGE REFERENCE --------- Pro Forma financial information: Condensed Consolidated Pro Forma Balance Sheet at September 30, 1998........................................................................ 5 Condensed Consolidated Pro Forma Unaudited Income Statement for the Nine Months Ended September 30 1998...................................................................................... 6 Condensed Combining Pro Forma Unaudited Income Statement for the Periods in 1998 Prior to Acquisition.................................... 8 Condensed Combining Pro Forma Unaudited Income Statement for Previously Reported Acquisitions for the Periods in 1998 Prior to Acquisition...................................................... 9 Condensed Consolidated Pro Forma Unaudited Income Statement for the Year Ended December 31, 1997............................................ 10 Condensed Combining Pro Forma Income Statement for the Year Ended December 31, 1997...................................................... 12 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...................................................................... 13 Notes to Condensed Consolidated Pro Forma Financial Statements................................................................................ 14 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 (incorporated by reference to exhibit 10.1 to the Prior 8-K). 23.1 Consent of Friedman Alpren & Green LLP (incorporated by reference to Exhibit 23.1 to the Prior 8-K). 23.2 Consent of Sharrard, McGee & Co., P.A.(incorporated by reference to Exhibit 23.2 to the Prior 8-K). 23.3 Consent of KPMG Peat Marwick LLP (incorporated by reference to Exhibit 23.3 to the Prior 8-K). 23.4 Consent of Deloitte & Touche LLP (incorporated by reference to Exhibit 23.4 to the Prior 8-K0. ITEM 8. NOT APPLICABLE. Page 5

4 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 4

5 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 5

6 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) (12,070) (92,606) (6,888) (10,278) (J) (109,772) 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) (2,571)(L) (14,717) --------- --------- ---------- --------- --------- ---------- Net income 112,885 3,679 116,564 18,496 (9,349) 125,711 Preferred stock dividends (16,268) -- (16,268) -- -- (16,268) --------- --------- ---------- --------- --------- ---------- Net income applicable to common shares $ 96,617 $ 3,679 $100,296 $ 18,496 $ (9,349) $ 109,443 ========= ========= ========== ========= ========= ========== Net income per common share - basic (based on 79,407 shares and 85,064 shares) $ 1.22 $ 1.29 ========= ========== Net income per common share - diluted (based on 81,482 shares and 87,139 shares) $ 1.19 $ 1.26 ========= ========== Page 6

7 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 $ 3,679 $ 100,296 $ 18,496 $ (9,349) $ 109,443 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) (134) (2,835) -- (1,578) (4,413) ----------- ----------- --------- -------- --------- ------------ $ 157,789 $ 9,363 $ 167,152 $ 19,220 $ (10,618) $ 175,754 =========== =========== ========= ======== ========= ============ CASH FLOW PROVIDED BY (USED IN): Operating activities $ 99,885 $ 118,862 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 7

8 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 8

9 CONDENSED COMBINING PRO FORMA UNAUDITED INCOME STATEMENT FOR PREVIOUSLY REPORTED ACQUISITIONS FOR THE PERIODS IN 1998 PRIOR TO ACQUISITION (AMOUNTS IN THOUSANDS) 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 -- -- -- -- (12,070) (12,070) Minority interest -- -- (1,012) (367) -- (1,379) ------ ------- -------- ------- -------- -------- Net income $1,999 $ 1,745 $ 12,340 $ 5,471 $(17,876) $ 3,679 ====== ======= ======== ======= ======== ======== Page 9

10 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) (69,233) (112,121) (9,923) (14,062)(R) (136,106) 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 67,604 128,627 17,508 (10,359) 135,776 Preferred stock dividends (15,549) (5,137) (20,686) -- -- (20,686) --------- --------- --------- -------- --------- --------- Net income applicable to common shares $ 45,474 $ 62,467 $ 107,941 $ 17,508 $ (10,359) $ 115,090 ========= ========= ========= ======== ========= ========= Net income per common share - basic (based on 55,098 shares and 85,064 shares) $ 0.83 $ 1.35 ========= ========= Net income per common share - diluted (based on 57,217 shares and 87,139 shares) $ 0.79 $ 1.32 ========= ========= Page 10

11 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 $ 62,467 $ 107,941 $ 17,508 $ (10,359) $ 115,090 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 -- (1,417) (1,417) -- (2,135) (3,552) ------------ --------- --------- -------- --------- ------------ $ 72,619 $ 123,662 $ 196,281 $ 24,737 $ (16,981) $ 204,037 ============ ========= ========= ======== ========= ============ CASH FLOW PROVIDED BY (USED IN): Operating activities $ 110,754 $ 271,020 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 11

12 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 12

13 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 -- -- -- (50,994) (69,233) Minority interest -- (4,048) (734) (1,151) (9,010) Preferred stock dividends -- -- -- (5,137) (5,137) -------- --------- -------- --------- --------- Net income $ 8,376 $ 48,308 $ 9,967 $ (56,608) $ 62,467 ======== ========= ======== ========= ========= Page 13

14 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 14

15 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 15

16 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 16

17 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 24, 1999 /s/ Irwin Goldberg ---------------------------------- IRWIN GOLDBERG Vice President, Chief Financial Officer Page 17

18 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 (incorporated by reference to Exhibit 10.1 to the Prior 8-K) 23.1 Consent of Friedman Alpren & Green LLP (incorporated by reference to Exhibit 23.1 to the Prior 8-K) 23.2 Consent of Sharrard, McGee & Co., P.A. (incorporated by reference to Exhibit 23.2 to the Prior 8-K) 23.3 Consent of KPMG Peat Marwick LLP (incorporated by reference to Exhibit 23.3 to the Prior 8-K) 23.4 Consent of Deloitte & Touche LLP (incorporated by reference to Exhibit 23.4 to the Prior 8-K) Page 18