Vornado Realty Trust

1 EXHIBIT INDEX ON PAGE 29 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q [XX] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended: JUNE 30, 1999 ------------------------------------------------- or [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to ------------------------ ----------------------- Commission File Number: 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 or organization) Identification Number) PARK 80 WEST, PLAZA II, SADDLE BROOK, NEW JERSEY 07663 - ------------------------------------------------ ------------------------ (Address of principal executive offices) (Zip Code) (201) 587-1000 - -------------------------------------------------------------------------------- (Registrant's telephone number, including area code) N/A - -------------------------------------------------------------------------------- (Former name, former address and former fiscal year, if changed since last report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. [X] Yes [ ] No As of July 16, 1999 there were 85,924,934 common shares of the registrant's shares of beneficial interest outstanding. Page 1

2 INDEX PART I. FINANCIAL INFORMATION: --------------------- Item 1. Financial Statements: Page Number ----------- Consolidated Balance Sheets as of June 30, 1999 and December 31, 1998......................................................................... 3 Consolidated Statements of Income for the Three and Six Months Ended June 30, 1999 and June 30, 1998..................................................... 4 Consolidated Statements of Cash Flows for the Six Months Ended June 30, 1999 and June 30, 1998..................................................... 5 Notes to Consolidated Financial Statements................................................ 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations................................................................. 15 Item 3. Quantitative and Qualitative Disclosures About Market Risks............................... 26 PART II. OTHER INFORMATION: ----------------- Item 1. Legal Proceedings......................................................................... 27 Item 4. Submission of Matters to a Vote of Security Holders....................................... 27 Item 6. Exhibits and Reports on Form 8-K.......................................................... 27 Signatures .......................................................................................... 28 Exhibit Index .......................................................................................... 29 Page 2

3 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS VORNADO REALTY TRUST CONSOLIDATED BALANCE SHEETS (amounts in thousands except share amounts) JUNE 30, DECEMBER 31, 1999 1998 ----------------- --------------- ASSETS Real estate, at cost: Land..................................................... $ 754,822 $ 743,324 Buildings and improvements............................... 2,734,556 2,561,383 Leasehold improvements and equipment.......................................... 12,884 11,184 ----------------- --------------- Total...................................... 3,502,262 3,315,891 Less accumulated depreciation and amortization....................................... (264,063) (226,816) ----------------- --------------- Real estate, net......................................... 3,238,199 3,089,075 Cash and cash equivalents, including U.S. government obligations under repurchase agreements of $27,750 and $56,500........................ 61,514 167,808 Restricted cash............................................. 19,647 44,195 Marketable securities....................................... 77,983 77,156 Investments and advances to partially-owned entities, including Alexander's of $101,835 and $104,038.................................... 1,166,034 827,840 Due from officers........................................... 17,797 17,165 Accounts receivable, net of allowance for doubtful accounts of $4,936 and $3,044................... 32,714 35,517 Notes and mortgages receivable.............................. 57,281 10,683 Deposits in connection with real estate acquisitions............................................. 16,276 22,947 Receivable arising from the straight-lining of rents.................................................... 65,104 49,711 Other assets................................................ 113,883 83,682 ----------------- --------------- TOTAL ASSETS $ 4,866,432 $ 4,425,779 ================= =============== JUNE 30, DECEMBER 31, 1999 1998 ------------------ --------------- LIABILITIES AND SHAREHOLDERS' EQUITY Notes and mortgages payable............................................. $ 1,497,260 $ 1,363,750 Revolving credit facility............................................... 467,250 687,250 Accounts payable and accrued expenses................................... 92,151 109,925 Officer's deferred compensation payable................................. 36,395 35,628 Deferred leasing fee income............................................. 8,594 10,051 Other liabilities....................................................... 3,855 3,196 ------------------ --------------- 2,105,505 2,209,800 ------------------ --------------- Minority interest....................................................... 739,853 433,301 ------------------ --------------- Commitments and contingencies Shareholders' equity: Preferred shares of beneficial interest: no par value per share; authorized, 20,000,000 shares; Series A: liquidation preference $50.00 per share; issued 5,789,239 shares....................... 284,195 282,758 Series B: liquidation preference $25.00 per share; issued 3,400,000 shares....................... 82,011 -- Series C: liquidation preferrence $25.00 per share; issued 4,600,000 shares....................... 111,271 -- Common shares of beneficial interest: $.04 par value per share; authorized, 150,000,000 shares; issued 85,924,934 and 85,076,542 shares.................................... 3,437 3,403 Additional capital.............................................. 1,682,996 1,653,208 Accumulated deficit............................................. (120,408) (132,837) ------------------ --------------- 2,043,502 1,806,532 Accumulated other comprehensive loss............................ (17,604) (18,957) Due from officers for purchase of common shares................................................... (4,824) (4,897) ------------------ --------------- Total shareholders' equity......................... 2,021,074 1,782,678 ------------------ --------------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY............................................ $ 4,866,432 $ 4,425,779 ================== =============== See notes to consolidated financial statements. Page 3

4 VORNADO REALTY TRUST CONSOLIDATED STATEMENTS OF INCOME (amounts in thousands except per share amounts) FOR THE THREE MONTHS ENDED FOR THE SIX MONTHS ENDED JUNE 30 JUNE 30 ------------------------------ ------------------------------ 1999 1998 1999 1998 ------------ ------------- -------------- ----------- Revenues: Property rentals......................................... $ 141,724 $ 109,362 $ 279,883 $ 181,727 Expense reimbursements................................... 21,143 17,094 41,871 32,790 Other income (including fee income from related parties of $349 and $777 in each three month period and $814 and $1,185 in each six month period).................. 3,321 2,067 7,998 4,217 ------------ ------------- -------------- ----------- Total revenues.............................................. 166,188 128,523 329,752 218,734 ------------ ------------- -------------- ----------- Expenses: Operating................................................ 65,925 51,454 130,962 85,607 Depreciation and amortization............................ 19,585 15,029 38,877 25,395 General and administrative............................... 10,169 7,070 19,797 12,017 ------------ ------------- -------------- ----------- Total expenses.............................................. 95,679 73,553 189,636 123,019 ------------ ------------- -------------- ----------- Operating income............................................ 70,509 54,970 140,116 95,715 Income applicable to Alexander's............................ 1,839 1,490 3,341 3,146 Income from partially owned entities........................ 21,925 5,756 41,018 9,676 Interest and other investment income........................ 4,900 5,271 8,358 12,837 Interest and debt expense................................... (35,284) (26,679) (70,901) (46,502) Minority interest........................................... (11,863) (4,492) (20,978) (7,069) ------------ ------------- -------------- ----------- Net income.................................................. 52,026 36,316 100,954 67,803 Preferred stock dividends (including accretion of issuance expenses of $719 and $1,438 in each three and six month period)......................... (8,381) (5,422) (14,093) (10,845) ------------ ------------- -------------- ----------- Net income applicable to common shares...................... $ 43,645 $ 30,894 $ 86,861 $ 56,958 ============ ============= ============== =========== Net income per common share - basic......................... $ .51 $ .38 $ 1.02 $ .74 ============ ============= ============== =========== Net income per common share - diluted....................... $ .50 $ .37 $ 1.00 $ .72 ============ ============= ============== =========== Dividends per common share.................................. $ .44 $ .40 $ .88 $ .80 ============ ============= ============== =========== See notes to consolidated financial statements. Page 4

5 VORNADO REALTY TRUST CONSOLIDATED STATEMENTS OF CASH FLOWS (amounts in thousands) For The Six Months Ended June 30, --------------------------------- 1999 1998 ------------ ------------- Cash Flows From Operating Activities: Net income.............................................................................. $ 100,954 $ 67,803 Adjustments to reconcile net income to net cash provided by operations: Depreciation and amortization (including debt issuance costs).................... 38,877 26,834 Straight-lining of rental income................................................. (15,393) (6,414) Minority interest................................................................ 20,978 7,069 Equity in income of Alexander's, including depreciation of $300 in each period................................. (816) (297) Equity in net income of partially-owned entities................................. (41,018) (9,676) Gain on marketable securities.................................................... (382) (1,447) Changes in operating assets and liabilities............................................. (16,404) (1,661) ------------ ------------ Net cash provided by operating activities............................................... 86,796 82,211 ------------ ------------ CASH FLOWS FROM INVESTING ACTIVITIES: Acquisitions of real estate and other................................................... (45,000) (681,387) Investments in partially-owned entities................................................. (13,200) (165,633) Proceeds from sale of Cold Storage assets............................................... 22,769 -- Investment in notes and mortgages receivable............................................ (60,567) (2,875) Repayment of mortgage loans receivable.................................................. 19,367 57,663 Cash restricted for tenant improvements................................................. 24,548 590 Additions to real estate................................................................ (86,731) (47,450) Purchases of securities available for sale.............................................. (3,939) (22,420) Proceeds from sale or maturity of securities available for sale......................... 6,992 14,903 Real estate deposits and other.......................................................... (6,559) (133,072) ------------ ------------ Net cash used in investing activities................................................... (142,320) (979,681) ------------ ------------ CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from borrowings................................................................ 165,000 1,295,855 Repayments of borrowings................................................................ (306,490) (863,258) Debt issuance costs..................................................................... (3,504) (6,533) Proceeds from issuance of common shares................................................. -- 445,282 Proceeds from issuance of preferred stock............................................... 193,282 -- Distributions to minority partners...................................................... (12,226) (2,577) Dividends paid on common shares......................................................... (74,432) (58,893) Dividends paid on preferred shares...................................................... (12,655) (10,845) Exercise of stock options............................................................... 255 69 ------------ ------------ Net cash (used in) provided by financing activities..................................... (50,770) 799,100 ------------ ------------ Net decrease in cash and cash equivalents............................................... (106,294) (98,370) Cash and cash equivalents at beginning of period........................................ 167,808 355,954 ------------ ------------ Cash and cash equivalents at end of period.............................................. $ 61,514 $ 257,584 ============ ============ SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash payments for interest (including capitalized interest of $1,410 in 1999)..................................................................... $ 69,222 $ 43,370 NON-CASH TRANSACTIONS: Financing assumed in acquisitions....................................................... $ 55,000 $ 420,000 Minority interest in connection with acquisitions....................................... 297,800 116,398 Unrealized gain on securities available for sale........................................ 1,353 3,304 See notes to consolidated financial statements. Page 5

6 VORNADO REALTY TRUST NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. ORGANIZATION Vornado Realty Trust is a fully-integrated real estate investment trust ("REIT"). In April 1997, Vornado transferred substantially all of its assets to Vornado Realty L.P., a Delaware limited partnership (the "Operating Partnership"). As a result, Vornado conducts its business through the Operating Partnership. Vornado is the sole general partner of, and owned approximately 86% of the common limited partnership interest in, the Operating Partnership at July 16, 1999. All references to the "Company" and "Vornado" refer to Vornado Realty Trust and its consolidated subsidiaries, including the Operating Partnership. 2. BASIS OF PRESENTATION The consolidated balance sheet as of June 30, 1999, the consolidated statements of income for the three and six months ended June 30, 1999 and 1998 and the consolidated statements of changes in cash flows for the six months ended June 30, 1999 and 1998 are unaudited. In the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to present fairly the financial position, results of operations and changes in cash flows have been made. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. These condensed consolidated financial statements should be read in conjunction with the financial statements and notes thereto included in Vornado's consolidated Form 10-K for the year ended December 31, 1998 as filed with the Securities and Exchange Commission. The results of operations for the six months ended June 30, 1999 are not necessarily indicative of the operating results for the full year. The accompanying consolidated financial statements include the accounts of Vornado Realty Trust and its majority-owned subsidiary, Vornado Realty L.P., as well as equity interests acquired that individually (or in the aggregate with prior interests) exceed a 50% interest and the Company exercises unilateral control. All significant intercompany amounts have been eliminated. Equity interests in partially-owned entities include partnerships, joint ventures and preferred stock affiliates (corporations in which the Company owns all of the preferred stock and none of the common equity) and are accounted for under the equity method of accounting as the Company exercises significant influence. These investments are recorded initially at cost and subsequently adjusted for net equity in income (loss) and cash contributions and distributions. Ownership of the preferred stock entitles the Company to substantially all of the economic benefits in the preferred stock affiliates. The common stock of the preferred stock affiliates is owned by Officers and Trustees of Vornado. Management has made estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates. Certain amounts in the prior year's financial statements have been reclassified to conform to the current year presentation. 3. ACQUISITIONS AND FINANCINGS ACQUISITIONS 888 Seventh Avenue In January 1999, the Company completed the acquisition of 888 Seventh Avenue, a 46 story Manhattan office building for approximately $100,000,000. Newkirk Joint Ventures In March 1999, the Company and its joint venture partner completed the acquisition of additional equity interests in certain limited partnerships. The Company's additional investment of $52,435,000 consisted of $47,790,000 in Operating Partnership Units and $4,645,000 in cash. Page 6

7 VORNADO REALTY TRUST NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED) Charles E. Smith Commercial Realty L.P. ("CESCR") In March 1999, the Company made an additional $242,000,000 investment in CESCR by contributing to CESCR the land under certain CESCR office properties in Crystal City, Arlington, Virginia and partnership interests in certain CESCR subsidiaries. The Company acquired these assets from Commonwealth Atlantic Properties, Inc. ("CAPI"), an affiliate of Lazard Freres Real Estate Investors L.L.C., immediately prior to the contribution to CESCR. Together with the Company's investment in CESCR made in 1997 and the units it reacquired in March 1999 from Vornado Operating Company, the Company owns approximately 34% of CESCR's limited partnership units. In addition, the Company acquired from CAPI for $8,000,000 the land under a Marriott Hotel located in Crystal City. The purchase price was paid to CAPI by the Company issuing $250,000,000 of 6% Convertible Preferred Units of the Company's Operating Partnership. The Preferred Units are convertible at $44 per unit and the coupon increases to 6.50% over the next three years and then fixes at 6.75% in year eight. The Company has the right to appoint one of three members to CESCR's Board of Managers, increasing under certain circumstances to two of four members in March 2002. In connection with these transactions, the Company made a five-year $41,000,000 loan to CAPI with interest at 8%, increasing to 9% ratably over the term. The loan is secured by approximately $55,000,000 of the Operating Partnership's units issued to CAPI as well as certain real estate assets. FINANCINGS Two Penn Plaza Refinancing In February 1999, the Company completed a $165,000,000 refinancing of its Two Penn Plaza office building and prepaid the then existing $80,000,000 debt on the property. The new 5-year debt matures in February 2004 and bears interest at 7.08%. Offering of Preferred Shares In March 1999, the Company completed the sale of 3 million 8.5% Series B Cumulative Redeemable Preferred Shares, at a price of $25.00 per share, pursuant to an effective registration statement with net proceeds to the Company of approximately $72,200,000. Additionally in March 1999, 400,000 shares were sold when the underwriters exercised their over-allotment option resulting in additional net proceeds to the Company of $9,700,000. The perpetual preferred shares may be called without penalty at the option of the Company commencing on March 17, 2004. In May 1999, the Company completed the sale of 4 million 8.5% Series C Cumulative Redeemable Preferred Shares, at a price of $25.00 per share, pursuant to an effective registration statement with net proceeds to the Company of approximately $96,900,000. Additionally in May 1999, 600,000 shares were sold when the underwriters exercised their over-allotment option resulting in additional net proceeds to the Company of $14,500,000. The perpetual preferred shares may be called without penalty at the option of the Company commencing on May 17, 2004. In May 1999, the Company sold an aggregate of $27,500,000 of 8.375% Series D-2 Cumulative Redeemable Preferred Units in the Operating Partnership to an institutional investor in a private placement, resulting in net proceeds of approximately $27,467,000. The perpetual Preferred Units may be called without penalty at the option of the Operating Partnership commencing on May 27, 2004. Page 7

8 VORNADO REALTY TRUST NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED) PRO FORMA INFORMATION The pro forma condensed consolidated operating results for Vornado for the six months ended June 30, 1999 and 1998 are presented as if the acquisitions described above and those included in Investments and Advances to Partially-Owned Entities and the financings attributable thereto had occurred on January 1, 1998. Condensed Consolidated Pro Forma Operating Results Pro Forma -------------------------------------------- Six Months Ended June 30, -------------------------------------------- 1999 1998 ------------------- ----------------- (amounts in thousands, except per share amounts) Revenues................................................................. $ 330,907 $ 314,444 ================ ================ Net income............................................................... $ 103,448 $ 77,806 Preferred stock dividends................................................ (14,093) (10,845) ---------------- ---------------- Net income applicable to common shares................................... $ 89,355 $ 66,961 ================ ================ Net income per common share - basic...................................... $ 1.04 $ .78 ========== ========== Net income per common share - diluted.................................... $ 1.02 $ .76 ========== ========== 4. INVESTMENTS AND ADVANCES TO PARTIALLY-OWNED ENTITIES The Company's investments and advances to partially-owned entities and income recognized from such investments are as follows: Investments and Advances June 30, 1999 December 31, 1998 -------------------- ---------------------- (amounts in thousands) Alexander's......................................... $ 101,835 $ 104,038 Cold Storage Companies.............................. 457,296 459,172 CESCR............................................... 316,942 49,151 Hotel Pennsylvania.................................. 50,933 47,813 Newkirk Joint Ventures.............................. 114,971 58,665 Mendik Partially-Owned Office Buildings............. 59,051 59,902 Vornado Management Corp., Mendik Management Company, Merchandise Mart Properties, Inc. and other............... 65,006 49,099 --------------- --------------- $ 1,166,034 $ 827,840 =============== =============== Page 8

9 VORNADO REALTY TRUST NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED) Income Three Months Ended Six Months Ended June 30, June 30, ------------------------------------ ---------------------------------- 1999 1998 1999 1998 -------------- ---------------- ------------- ------------- (amounts in thousands) Income Applicable to Alexander's................ $ 1,839 $ 1,490 $ 3,341 $ 3,146 ============= ============= ============= ============= Other Partially-Owned Entities: Cold Storage Companies....................... $ 8,506 $ 1,450 $ 20,496 $ 3,164 CESCR........................................ 6,072 1,352 9,201 2,351 Hotel Pennsylvania........................... 2,425 1,445 2,568 1,389 Newkirk Joint Ventures....................... 3,277 -- 5,309 -- Mendik Partially-Owned Office Buildings......... 433 409 750 1,322 Vornado Management Corp., Mendik Management Company, Merchandise Mart Properties Inc. and other......................... 1,212 1,100 2,694 1,450 ------------- ------------- ------------- ------------- $ 21,925 $ 5,756 $ 41,018 $ 9,676 ============= ============= ============= ============= Alexander's The Company owns 29.3% of the outstanding shares of common stock of Alexander's. In March 1995, the Company lent Alexander's $45,000,000. The loan, which was originally scheduled to mature in March 1998, has been renewed for two additional one year periods and currently matures in March 2000. The interest rate was reset in March 1999 from 13.87% per annum to 14.18% per annum. Alexander's is managed by and its properties are leased by the Company, pursuant to agreements with a one-year term expiring in March of each year which are automatically renewable. Subject to the payments of rents by Alexander's tenants, the Company is due $2,896,000 under its leasing agreement with Alexander's which amount is included in Investments in and Advances to Alexander's. Included in income from Vornado Management Corp. is management fee income from Alexander's of $1,072,000 and $938,000 for the three months ended June 30, 1999 and 1998 and $2,214,000 and $1,875,000 for the six months ended June 30, 1999 and 1998. Cold Storage Companies In March 1999, the partnerships in which affiliates of the Company have a 60% interest and affiliates of Crescent Real Estate Equities Company have a 40% interest ("Vornado/Crescent Partnerships") sold all of the non-real estate assets of the Cold Storage Companies encompassing the operations of the cold storage business for approximately $48,000,000 to a new partnership owned 60% by Vornado Operating Company and 40% by Crescent Operating Inc. The new partnership leases the underlying cold storage warehouses used in this business from the Vornado/Crescent Partnerships which continue to own the real estate. The leases have a 15 year term with two-five year renewal options and provide for the payment of fixed base rent and percentage rent based on customer revenues. The new partnership is required to pay for all costs arising from the operation, maintenance and repair of the properties, as well as property capital expenditures in excess of $5,000,000 annually. Fixed base rent and percentage rent for the initial lease year is projected to be approximately $151,000,000. The new partnership has the right to defer a portion of the rent for up to three years beginning in March 1999 to the extent that available cash, as defined in the leases, is insufficient to pay such rent. Page 9

10 VORNADO REALTY TRUST NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED) In connection with the sale of the Cold Storage non-real estate assets, the Company lent $18,587,000 to Vornado Operating pursuant to a $75,000,000 unsecured five-year revolving credit facility. The balance outstanding under the facility is $4,587,000 at June 30, 1999. Borrowing under the facility bears interest at LIBOR plus 3% (currently 8.06%). 5. OTHER RELATED PARTY TRANSACTIONS The Company currently manages and leases the real estate assets of Interstate Properties pursuant to a management agreement. Management fees earned by the Company pursuant to the management agreement were $195,000 and $574,000 for the three months ended June 30, 1999 and 1998 and $465,000 and $772,000 for the six months ended June 30, 1999 and 1998. The Mendik Group owns an entity which provides cleaning and related services and security services to office properties, including the Company's Manhattan office properties. The Company was charged fees in connection with these contracts of $8,286,000 and $5,957,000 for the three months ended June 30, 1999 and 1998 and $19,297,000 and $11,224,000 for the six months ended June 30, 1999 and 1998. 6. MINORITY INTEREST The minority interest represents limited partners', other than Vornado, interests in the Operating Partnership and are comprised of: Outstanding Units at Preferred or --------------------------------- Per Unit Annual Conversion June 30, December 31, Liquidation Distribution Rate Into Unit Series 1999 1998 Preference Rate Class A Units - ----------- --------------- --------------- ------------- --------------- --------------- Class A.................................. 2,664,399 1,887,781 -- $ 1.76 (a) Class C.................................. 3,529,098 3,534,098 -- $ 1.69 (b) 1.0 (c) Class D.................................. 1,267,122 1,332,596 -- $ 2.015 1.0 (d) 5.0% B-1 Convertible Preferred........... 899,566 899,566 $ 50.00 $ 2.50 .914 8.0% B-2 Convertible Preferred........... 499,783 449,783 $ 50.00 $ 4.00 .914 6.5% C-1 Convertible Preferred........... 747,912 747,912 $ 50.00 $ 3.25 1.1431 8.5% D-1 Cumulative Redeemable Preferred........................ 3,500,000 3,500,000 $ 25.00 $ 2.125 (e) 8.375% D-2 Cumulative Redeemable Preferred........................ 549,336 -- $ 50.00 $4.1875 (e) 6.0% E-1 Convertible Preferred........... 4,998,000 -- $ 50.00 $ 3.00 1.1364 - -------------- (a) Class A units are redeemable at the option of the holder for cash or, at Vornado's option, one common share of beneficial interest in Vornado. (b) Class C unit holders participate in distributions at an annual rate of $1.69, then pari passu with Class A. Based on the current level of dividends, Class C units will convert into Class A units in the third quarter of 1999. (c) Mandatory conversion of Class C units into Class A units occurs after four consecutive quarters of distributions of at least $.4225 per Class A unit ($1.69 annually). (d) Mandatory conversion of Class D units into Class A units occurs after four consecutive quarters of distributions of at least $.50375 per Class A unit ($2.015 annually). (e) Convertible into an equivalent Vornado preferred share. Page 10

11 VORNADO REALTY TRUST NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED) 7. CONTINGENCIES At June 30, 1999, in addition to the $467,250,000 balance outstanding under the Company's revolving credit facility, the Company had utilized approximately $40,415,000 of availability under the facility for letters of credit and guarantees primarily related to pending acquisitions. There are various legal actions against the Company in the ordinary course of business. In the opinion of management, after consultation with legal counsel, the outcome of such matters will not have a material effect on the Company's financial condition, results of operations or cash flows. 8. EARNINGS PER SHARE The following table sets forth the computation of basic and diluted earnings per share: Three Months Ended June 30, Six Months Ended June 30, ----------------------------- ------------------------------- 1999 1998 1999 1998 ----------- ------------- ------------ ------------ (amounts in thousands except per share amounts) Numerator: Net income........................................... $ 52,026 $ 36,316 $ 100,954 $ 67,803 Preferred stock dividends............................ (8,381) (5,422) (14,093) (10,845) ----------- ------------- ------------ ------------- Numerator for basic and diluted earnings per share - net income applicable to common shares............................................... $ 43,645 $ 30,894 $ 86,861 $ 56,958 =========== ============ ============ ============ Denominator: Denominator for basic earnings per share - weighted average shares.............................. 85,634 82,159 85,362 77,197 Effect of dilutive securities: Employee stock options............................ 2,189 2,085 1,883 2,286 ----------- ------------ ------------ ------------ Denominator for diluted earnings per share - adjusted weighted average shares and assumed conversions............................... 87,823 84,244 87,245 79,483 =========== ============ ============ ============ Net income per common share - basic.................. $ .51 $ .38 $ 1.02 $ .74 ========== ============ ============ ============ Net income per common share - diluted................ $ .50 $ .37 $ 1.00 $ .72 ========== ============ ============ ============ 9. COMPREHENSIVE INCOME The following table sets forth the Company's comprehensive income: Three Months Ended June 30, Six Months Ended June 30, ---------------------------------- ------------------------------------ 1999 1998 1999 1998 --------------- --------------- ----------------- --------------- (amounts in thousands) Net income applicable to common shares...... $ 43,645 $ 30,894 $ 86,861 $ 56,958 Other comprehensive income.................. 2,378 1,753 1,353 3,304 --------------- --------------- --------------- --------------- Comprehensive income........................ $ 46,023 $ 32,647 $ 88,214 $ 60,262 =============== =============== =============== =============== Page 11

12 VORNADO REALTY TRUST NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED) 10. SEGMENT INFORMATION The Company has four business segments: Office, Retail, Merchandise Mart Properties and Cold Storage. (amounts in thousands) Three Months Ended June 30, --------------------------------------------------------------------------------- 1999 --------------------------------------------------------------------------------- Merchandise Office Retail Mart Cold Storage Other(2) Total --------- --------- ---------------- ------------- -------- ------- Total revenues......................... $ 87,876 $ 43,009 $ 33,367 $ -- $ 1,936 $ 166,188 Total expenses......................... 52,313 17,884 17,853 -- 7,629 95,679 -------- -------- ------------- --------- -------- --------- Operating income....................... 35,563 25,125 15,514 -- (5,693) 70,509 Income applicable to Alexander's........................ -- -- -- -- 1,839 1,839 Income from partially-owned entities........................... 6,617 223 728 8,506 5,851 21,925 Interest and other investment income............................. 318 -- 69 -- 4,513 4,900 Interest and debt expense.............. (11,778) (8,085) (6,869) -- (8,552) (35,284) Minority interest...................... (5,480) (3,081) (1,697) (1,605) -- (11,863) -------- -------- ------------- --------- -------- --------- Net income............................. 25,240 14,182 7,745 6,901 (2,042) 52,026 Minority interest...................... 5,480 3,081 1,697 1,605 -- 11,863 Interest and debt expense(4)........... 22,101 8,740 6,869 6,893 14,735 59,338 Depreciation and amortization(4)....... 14,693 4,252 4,105 7,615 2,027 32,692 Straight-lining of rents(4)............ (4,902) (682) (1,172) (627) (273) (7,656) Other.................................. -- -- -- 1,114(3) 1,641 2,755 -------- -------- ------------- --------- -------- --------- EBITDA(1).............................. $ 62,612 $ 29,573 $ 19,244 $ 23,501 $ 16,088 $ 151,018 ======== ======== ============= ========= ======== ========= Three Months Ended June 30, ---------------------------------------------------------------------------------- 1998 ---------------------------------------------------------------------------------- Merchandise Office Retail Mart Cold Storage Other(2) Total ----------- -------- ----------- ------------ -------- --------- Total revenues......................... $ 56,870 $ 40,973 $ 28,310 $ -- $ 2,370 $ 128,523 Total expenses......................... 35,045 16,679 16,452 -- 5,377 73,553 ----------- -------- --------- ---------- -------- --------- Operating income....................... 21,825 24,294 11,858 -- (3,007) 54,970 Income applicable to Alexander's......................... -- -- -- -- 1,490 1,490 Income from partially-owned entities............................ 1,767 -- 948 1,450 1,591 5,756 Interest and other investment income.............................. 1,429 1,003 321 -- 2,518 5,271 Interest and debt expense.............. (4,689) (8,101) (6,412) -- (7,477) (26,679) Minority interest...................... (2,039) (1,737) (566) (150) -- (4,492) ----------- -------- --------- ---------- -------- --------- Net income............................. 18,293 15,459 6,149 1,300 (4,885) 36,316 Minority interest...................... 2,039 1,737 566 150 -- 4,492 Interest and debt expense(4)........... 8,992 8,101 6,412 6,336 8,911 38,752 Depreciation and amortization(4)..................... 9,778 3,802 3,226 8,303 1,455 26,564 Straight-lining of rents(4)............ (2,056) (721) (1,283) -- (259) (4,319) Other.................................. -- -- -- 1,786 625 2,411 ----------- -------- --------- ---------- -------- --------- EBITDA(1).............................. $ 37,046 $ 28,378 $ 15,070 $ 17,875 $ 5,847 $ 104,216 =========== ======== ========= ========== ======== ========= - ------------------- See footnotes 1-4 on page 14. Page 12

13 VORNADO REALTY TRUST NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED) (amounts in thousands) Six Months Ended June 30, -------------------------------------------------------------------------------------- 1999 -------------------------------------------------------------------------------------- Merchandise Office Retail Mart Cold Storage Other(2) Total --------- -------- ------------- ------------ -------- -------- Total revenues......................... $ 175,152 $ 84,366 $ 66,355 $ -- $ 3,879 $ 329,752 Total expenses......................... 103,797 35,041 36,355 -- 14,443 189,636 --------- -------- ------------- --------- -------- --------- Operating income....................... 71,355 49,325 30,000 -- (10,564) 140,116 Income applicable to Alexander's......................... -- -- -- -- 3,341 3,341 Income from partially-owned entities............................ 10,024 423 1,904 20,496 8,171 41,018 Interest and other investment income.............................. 856 -- 367 -- 7,135 8,358 Interest and debt expense.............. (22,259) (16,117) (13,165) -- (19,360) (70,901) Minority interest...................... (9,445) (5,296) (3,010) (3,227) -- (20,978) --------- -------- ------------- --------- -------- --------- Net income............................. 50,531 28,335 16,096 17,269 (11,277) 100,954 Minority interest...................... 9,445 5,296 3,010 3,227 -- 20,978 Interest and debt expense(4)........... 36,706 17,429 13,165 13,558 28,179 109,037 Depreciation and amortization(4)..................... 27,977 8,384 8,178 16,012 3,859 64,410 Straight-lining of rents(4)............ (8,615) (1,317) (2,280) (627) 306 (12,533) Other.................................. -- -- -- (3,009)(3) 3,110 101 --------- -------- ------------- --------- -------- --------- EBITDA(1).............................. $ 116,044 $ 58,127 $ 38,169 $ 46,430 $ 24,177 $ 282,947 ========= ======== ============= ========= ======== ========= June 30, 1999 ------------------------------------------------------------------------------------- Balance sheet data: Real estate, net.................. $ 1,892,885 $ 593,039 $ 736,649 $ -- $ 15,626 $ 3,238,199 Investments and advances to partially-owned entities....................... 385,663 3,202 26,913 457,296 292,960 1,166,034 Six Months Ended June 30, ---------------------------------------------------------------------------------- 1999 ---------------------------------------------------------------------------------- Merchandise Office Retail Mart Cold Storage Other(2) Total ---------- -------- --------------- ------------ ---------- --------- Total revenues......................... $ 103,715 $ 82,439 $ 28,310 $ -- $ 4,270 $ 218,734 Total expenses......................... 62,160 34,307 16,452 -- 10,100 123,019 --------- -------- ------------- --------- --------- --------- Operating income....................... 41,555 48,132 11,858 -- (5,830) 95,715 Income applicable to Alexander's......................... -- -- -- -- 3,146 3,146 Income from partially-owned entities............................ 3,872 -- 948 3,164 1,692 9,676 Interest and other investment income.............................. 2,944 2,159 321 -- 7,413 12,837 Interest and debt expense.............. (8,707) (15,879) (6,412) -- (15,504) (46,502) Minority interest...................... (3,340) (2,897) (566) (266) -- (7,069) --------- -------- ------------- --------- --------- --------- Net income............................. 36,324 31,515 6,149 2,898 (9,083) 67,803 Minority interest...................... 3,340 2,897 566 266 -- 7,069 Interest and debt expense(4)........... 16,547 15,879 6,412 13,610 17,802 70,250 Depreciation and amortization(4)..................... 17,221 7,755 3,226 17,819 2,623 48,644 Straight-lining of rents(4)............ (3,497) (1,654) (1,283) -- (522) (6,956) Other.................................. -- -- -- 1,786 849 2,635 --------- -------- ------------- --------- --------- --------- EBITDA(1).............................. $ 69,935 $ 56,392 $ 15,070 $ 36,379 $ 11,669 $ 189,445 ========= ======== ============= ========= ========= ========= December 31, 1998 ------------------------------------------------------------------------------------- Balance sheet data: Real estate, net.................. $ 1,777,919 $ 565,723 $ 729,485 $ -- $ 15,948 $ 3,089,075 Investments and advances to partially-owned entities....................... 118,337 2,946 26,638 459,172 220,747 827,840 - -------------------------- See footnotes 1-4 on the next page. Page 13

14 VORNADO REALTY TRUST NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED) Notes to segment information: (1) EBITDA represents net income before interest, taxes, depreciation and amortization, extraordinary or non-recurring items, gains or losses on sales of real estate and the effect of straight-lining of property rentals for rent escalations. Management considers EBITDA a supplemental measure for making decisions and assessing the performance of its segments. EBITDA may not be comparable to similarly titled measures employed by other companies. (2) Other includes (i) the operations of the Company's warehouse and industrial properties, (ii) investments in the Hotel Pennsylvania, Alexander's, and Newkirk Joint Ventures, (iii) corporate general and administrative expenses and (iv) unallocated investment income and interest and debt expense. (3) Includes a charge of $1,114 for the three months ended June 30, 1999 and a benefit of $3,210 for the six months ended June 30, 1999 for income taxes, which are considered non-recurring because of the expected conversion of the Cold Storage Companies to REITs. (4) Interest and debt expense, depreciation and amortization and straight-lining of rents included in the reconciliation of net income to EBITDA reflects amounts which are netted in income from partially-owned entities. 11. SUBSEQUENT EVENTS 350 North Orleans Financing On July 8, 1999, the Company completed a $70,000,000 mortgage financing of its 350 North Orleans property in Chicago. The Company received proceeds of $40,000,000 and is expected to receive the remaining $30,000,000 during the next year upon meeting certain debt service coverage requirements. The new 3-year debt matures in June 2002 and bears interest at LIBOR + 1.65% (currently 6.83%). Acquisition of 909 Third Avenue On July 22, 1999, the Company acquired 909 Third Avenue, a 33 story Manhattan office building for approximately $123,000,000, including $109,000,000 of indebtedness. Hotel Pennsylvania On August 5, 1999, the Company increased its interest in the Hotel Pennsylvania to 100% by acquiring Planet Hollywood International, Inc.'s ("Planet Hollywood") 20% interest in the hotel. Under the agreement, the Company will purchase the 20% interest for approximately $18,000,000 and will assume $24,000,000 of existing debt. In connection with the transaction, Vornado also terminated the licensing agreement with Planet Hollywood for an Official All-Star Hotel. The Hotel Pennsylvania is located in New York City on Seventh Avenue opposite Madison Square Garden. The acquisition is expected to close in the third quarter of 1999. Page 14

15 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (All of the amounts presented are in thousands, except share amounts and percentages) Certain statements contained herein constitute forward-looking statements as such term is defined in Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, as amended. Certain factors could cause actual results to differ materially from those in the forward-looking statements. Factors that might cause such a material difference include, but are not limited to, (a) changes in the general economic climate, (b) local conditions such as an oversupply of space or a reduction in demand for real estate in the area, (c) conditions of tenants, (d) competition from other available space, (e) increased operating costs and interest expense, (f) the timing of and costs associated with property improvements, (g) changes in taxation or zoning laws, (h) government regulations, (i) failure of Vornado to continue to qualify as a REIT, (j) availability of financing on acceptable terms, (k) potential liability under environmental or other laws or regulations, (l) general competitive factors and (m) failure by Vornado, or by other companies with which it does business, to remediate possible Year 2000 problems in computer software or embedded technology. OVERVIEW The Company's net income was $52,026 in the three months ended June 30, 1999, as compared to $36,316 in the prior year's quarter, an increase of $15,710. The Company's net income was $100,954 in the six months ended June 30, 1999, as compared to $67,803 in the prior year's six months, an increase of $33,151. EBITDA, as defined,(1) was $151,018 in the three months ended June 30, 1999, as compared to $104,216 in the prior year's quarter, an increase of $46,802. EBITDA was $282,947 in the six months ended June 30, 1999 as compared to $189,445 in the prior year's six months, an increase of $93,502. Below is a summary of net income and EBITDA by segment for the three and six months ended June 30, 1999 and 1998: For The Three Months Ended June 30, 1999 --------------------------------------------------------------------------- Merchandise Total Office Retail Mart Cold Storage Other(2) ---------- -------- ------- ----------- ------------- ----------- Total revenues.......................... $166,188 $ 87,876 $ 43,009 $ 33,367 $ -- $ 1,936 Total expenses.......................... 95,679 52,313 17,884 17,853 -- 7,629 -------- -------- -------- --------- --------- --------- Operating income........................ 70,509 35,563 25,125 15,514 -- (5,693) Income applicable to Alexander's ....... 1,839 -- -- -- -- 1,839 Income from partially-owned entities.... 21,925 6,617 223 728 8,506 5,851 Interest and other investment income.... 4,900 318 -- 69 -- 4,513 Interest and debt expense............... (35,284) (11,778) (8,085) (6,869) -- (8,552) Minority interest....................... (11,863) (5,480) (3,081) (1,697) (1,605) -- -------- -------- -------- --------- --------- --------- Net income.............................. 52,026 25,240 14,182 7,745 6,901 (2,042) Minority interest....................... 11,863 5,480 3,081 1,697 1,605 -- Interest and debt expense (4)........... 59,338 22,101 8,740 6,869 6,893 14,735 Depreciation and amortization (4)....... 32,692 14,693 4,252 4,105 7,615 2,027 Straight-lining of rents (4)............ (7,656) (4,902) (682) (1,172) (627) (273) Other................................... 2,755 -- -- -- 1,114(3) 1,641 -------- -------- -------- --------- --------- --------- EBITDA (1).............................. $151,018 $ 62,612 $ 29,573 $ 19,244 $ 23,501 $ 16,088 ======== ======== ======== ========= ========= ========= For The Three Months Ended June 30, 1998 ----------------------------------------------------------------------------- Merchandise Total Office Retail Mart Cold Storage Other(2) ---------- -------- --------- ----------- ------------ ---------- Total revenues.......................... $ 128,523 $ 56,870 $ 40,973 $ 28,310 $ -- $ 2,370 Total expenses.......................... 73,553 35,045 16,679 16,452 -- 5,377 --------- -------- -------- ---------- ---------- -------- Operating income........................ 54,970 21,825 24,294 11,858 -- (3,007) Income applicable to Alexander's ....... 1,490 -- -- -- -- 1,490 Income from partially-owned entities.... 5,756 1,767 -- 948 1,450 1,591 Interest and other investment income.... 5,271 1,429 1,003 321 -- 2,518 Interest and debt expense............... (26,679) (4,689) (8,101) (6,412) -- (7,477) Minority interest....................... (4,492) (2,039) (1,737) (566) (150) -- --------- -------- -------- ---------- ---------- -------- Net income.............................. 36,316 18,293 15,459 6,149 1,300 (4,885) Minority interest....................... 4,492 2,039 1,737 566 150 -- Interest and debt expense (4)........... 38,752 8,992 8,101 6,412 6,336 8,911 Depreciation and amortization (4)....... 26,564 9,778 3,802 3,226 8,303 1,455 Straight-lining of rents (4)............ (4,319) (2,056) (721) (1,283) -- (259) Other................................... 2,411 -- -- -- 1,786 625 --------- -------- -------- ---------- ---------- -------- EBITDA (1).............................. $ 104,216 $ 37,046 $ 28,378 $ 15,070 $ 17,875 $ 5,847 ========= ======== ======== ========== ========== ======== Footnotes 1-4 are explained on the following page. Page 15

16 For The Six Months Ended June 30, 1999 ------------------------------------------------------------------------------------- Merchandise Total Office Retail Mart Cold Storage Other(2) ----------- --------- --------- ------------- ------------- ------------- Total revenues........................... $ 329,752 $ 175,152 $ 84,366 $ 66,355 $ -- $ 3,879 Total expenses........................... 189,636 103,797 35,041 36,355 -- 14,44 ------- ------- ------ ----------- ------- ----- Operating income......................... 140,116 71,355 49,325 30,000 -- (10,564) Income applicable to Alexander's ........ 3,341 -- -- -- -- 3,341 Income from partially-owned entities..... 41,018 10,024 423 1,904 20,496 8,171 Interest and other investment income..... 8,358 856 -- 367 -- 7,135 Interest and debt expense................ (70,901) (22,259) (16,117) (13,165) -- (19,360) Minority interest........................ (20,978) (9,445) (5,296) (3,010) (3,227) -- ------- ------ ------ ----------- ------ --------- Net income............................... 100,954 50,531 28,335 16,096 17,269 (11,277) Minority interest........................ 20,978 9,445 5,296 3,010 3,227 -- Interest and debt expense (4)............ 109,037 36,706 17,429 13,165 13,558 28,17 Depreciation and amortization (4)........ 64,410 27,977 8,384 8,178 16,012 3,859 Straight-lining of rents (4)............. (12,533) (8,615) (1,317) (2,280) (627) 306 Other.................................... 101 -- -- -- (3,009)(3) 3,110 -------- ------- ------- ----------- ------ ------ EBITDA (1)............................... $ 282,947 $ 116,044 $ 58,127 $ 38,169 $ 46,430 $ 24,177 ======== ======= ======= =========== ====== ====== For The Six Months Ended June 30, 1999 ------------------------------------------------------------------------------------- Merchandise Total Office Retail Mart Cold Storage Other(2) ----------- --------- --------- ------------- ------------- ------------ Total revenues............................ $218,734 $ 103,715 $ 82,439 $ 28,310 $ -- $ 4,270 Total expenses............................ 123,019 62,160 34,307 16,452 -- 10,100 ------- ------ ------ --------- -------- ------ Operating income.......................... 95,715 41,555 48,132 11,858 -- (5,830) Income applicable to Alexander's ......... 3,146 -- -- -- -- 3,146 Income from partially-owned entities...... 9,676 3,872 -- 948 3,164 1,692 Interest and other investment income...... 12,837 2,944 2,159 321 -- 7,413 Interest and debt expense................. (46,502) (8,707) (15,879) (6,412) -- (15,504) Minority interest ........................ (7,069) (3.340) (2,897) (566) (266) -- ------ ------ --------- -------- ------ -------- Net income................................ 67,803 36,324 31,515 6,149 2,898 (9,083) Minority interest......................... 7,069 3,340 2,897 566 266 -- Interest and debt expense (4)............. 70,250 16,547 15,879 6,412 13,610 17,802 Depreciation and amortization (4)......... 48,644 17,221 7,755 3,226 17,819 2,623 Straight-lining of rents (4).............. (6,956) (3,497) (1,654) (1,283) -- (522) Other..................................... 2,635 -- -- -- 1,786 849 -------- -------- --------- --------- --------- -------- EBITDA (1)................................ $189,445 $ 69,935 $ 56,392 $ 15,070 $ 36,379 $ 11,669 ======== ====== ======= ======= ======== ======== (1) EBITDA represents net income before interest, taxes, depreciation and amortization, extraordinary or non-recurring items, gains or losses on sales of real estate and the effect of straight-lining of property rentals for rent escalations. Management considers EBITDA a supplemental measure for making decisions and assessing the performance of its segments. EBITDA may not be comparable to similarly titled measures employed by other companies. (2) Other includes (i) the operations of the Company's warehouse and industrial properties, (ii) investments in the Hotel Pennsylvania, Alexander's, and Newkirk Joint Ventures, (iii) corporate general and administrative expenses and (iv) unallocated investment income and interest and debt expense. (3) Includes a charge of $1,114 for the three months ended June 30, 1999 and a benefit of $3,210 for the six months ended June 30, 1999 for income taxes which are considered non-recurring because of the expected conversion of the Cold Storage Companies to REITs. (4) Interest and debt expense, depreciation and amortization and straight-lining of rents included in the reconciliation of net income to EBITDA reflects amounts which are netted in income from partially-owned entities. Page 16

17 RESULTS OF OPERATIONS THREE MONTHS ENDED JUNE 30, 1999 AND JUNE 30, 1998 Below are the details of the changes by segment in EBITDA. The change in the Cold Storage EBITDA is discussed in Income from partially-owned entities. Merchandise Cold Total Office Retail Mart Storage Other ----------- ------------ ------------ ------------- ----------- ------------ Three months ended June 30, 1998....................... $ 104,216 $ 37,046 $ 28,378 $ 15,070 $ 17,875 $ 5,847 1999 Operations: Same store operations(1)............ 6,187 4,537 688 756 397 (191) Acquisitions and other.............. 40,615 21,029 507 3,418 5,229 10,432 --------- ------------- ----------- ----------- ---------- ----------- Three months ended June 30, 1999....................... $ 151,018 $ 62,612 $ 29,573 $ 19,244 $ 23,501 $ 16,088 ========= ============ =========== =========== ========== =========== % increase in same store operations................. 5.9% 12.2% 2.4% 5.0% 2.2% (3.3%) (1) Represents operations which were owned for the same period in each year. Revenues The Company's revenues, which consist of property rentals, tenant expense reimbursements and other income were $166,188 in the three months ended June 30, 1999, compared to $128,523 in the prior year's quarter, an increase of $37,665. This increase by segment resulted from: Date of Merchandise Acquisition Total Office Retail Mart Other ----------- ---------- ------------ ----------- --------------- ------------ Property Rentals: Acquisitions: 888 Seventh Avenue............ January 1999 $ 6,086 $ 6,086 $ -- $ -- $ -- Market Square Complex......... December 1998 3,932 -- -- 3,932 -- Mendik RELP Properties........ December 1998 7,338 7,338 -- -- -- 20 Broad Street............... August 1998 2,742 2,742 -- -- -- 689 Fifth Avenue.............. August 1998 861 861 -- -- -- 770 Broadway.................. July 1998 3,069 3,069 -- -- -- 40 Fulton Street.............. June 1998 1,037 1,037 -- -- -- -------- ------------ ---------- ------------ ---------- 25,065 21,133 -- 3,932 -- --------- ------------ ---------- ------------ ---------- Leasing activity, including $312 of step-ups in Retail..................... 7,297 6,758 258 366 (85) -------- ------------ ---------- ------------ ---------- Total increase in property rentals....................... 32,362 27,891 258 4,298 (85) -------- ------------ ---------- ------------ ---------- Tenant expense reimbursements: Increase in tenant expense reimbursements due to acquisitions.................. 1,942 1,308 -- 634 -- Other .............................. 2,107 338 1,802 (37) 4 -------- ------------ ---------- ------------ ---------- Total increase in tenant expense reimbursements........ 4,049 1,646 1,802 597 4 -------- ------------ ---------- ------------ ---------- Other income........................ 1,254 1,469 (24) 162 (353) -------- ------------ ---------- ------------ ---------- Total increase in revenues.......... $ 37,665 $ 31,006 $ 2,036 $ 5,057 $ (434) ======== ============ ========== ============ ========== Page 17

18 Expenses The Company's expenses were $95,679 in the three months ended June 30, 1999 compared to $73,553 in the prior year's quarter, an increase of $22,126. This increase by segment resulted from: Merchandise Total Office Retail Mart Other -------- --------- -------- ------------- ------------ Operating: Acquisitions...................... $ 11,859 $ 10,691 $ -- $ 1,168 $ -- Same store operations............. 2,612 2,441 1,044(3) (820) (53) ------ ----- ----- ---------- ------------ 14,471 13,132 1,044 348 (53) ------ ------ ----- ---------- ------------ Depreciation and amortization: Acquisitions...................... 2,989 2,341 -- 648 -- Same store operations............. 1,567 1,246 129 231 (39) ----- ------ ----- ---------- ------------ 4,556 3,587 129 879 (39) ----- ------ ----- ---------- ------------ General and administrative: 3,099(2) 579 2 174 $ 2,344(1) ------ ------ ----- ---------- ------------ $ 22,126 $ 17,298 $ 1,175 $ 1,401 $ 2,252 ====== ====== ===== ========== ============ (1) Retail general and administrative expenses are included in corporate expenses which are not allocated. (2) Of this increase: (i) $201 is attributable to acquisitions, (ii) $2,501 resulted from payroll, primarily for additional employees and corporate office expenses, and (iii) $397 resulted from professional fees. (3) Increase in common area maintenance expense of $2,047, partially offset by a decrease in repairs and maintenance and bad debt expense. Income applicable to Alexander's (loan interest income, equity in income and depreciation) was $1,839 in the three months ended June 30, 1999, compared to $1,490 in the prior year's quarter, an increase of $349. Income from partially-owned entities was $21,925 in the three months ended June 30, 1999, compared to $5,756 in the prior year's quarter, an increase of $16,169. This increase by segment resulted from: Date of Merchandise Cold Acquisition Total Office Retail Mart Storage Other --------------- -------- --------- --------- ----------- ---------- -------- Acquisitions: Cold Storage.......................... June/July 1998 $ 3,720 $ -- $ -- $ -- $ 3,720 $ -- Newkirk Joint Ventures................ July 1998 3,277 -- -- -- -- 3,277 Caguas................................ November 1998 223 -- 223 -- -- -- CESCR................................. March 1999 4,720 4,720 -- -- -- -- ------ ------ ----- ------- ----- ------ 11,940 4,720 223 -- 3,720 3,277 Increase (decrease) in equity in income: Cold Storage........................ 3,168(1) -- -- -- 3,168(1) -- Hotel Pennsylvania.................. 980 -- -- -- -- 980 Mendik partially-owned office buildings................. (175)(2) (175)(2) -- -- -- -- Merchandise Mart Management Company............... (220) -- -- (220) -- -- Other............................... 476 305 -- -- 168 3 ----- ------ ---- ------- ----- ----- $16,169 $ 4,850 $ 223 $ (220) $ 7,056 $ 4,260 ====== ====== === ======= ===== ====== (1) Includes a charge for income taxes of $1,114 resulting from the reversal of income taxes because of the expected conversion of the Cold Storage Companies to REITs. (2) Reflects the elimination of the Company's equity in income of Two Park Avenue which is wholly-owned as of November 17, 1998 and accordingly is consolidated in 1999. Page 18

19 Interest and other investment income (interest income on mortgage loans receivable, other interest income, dividend income and net gains on marketable securities) was $4,900 for the three months ended June 30, 1999, compared to $5,271 in the prior year's quarter, a decrease of $371. This decrease resulted primarily from lower average investments this year. Interest and debt expense was $35,284 for the three months ended June 30, 1999, compared to $26,679 in the prior year's quarter, an increase of $8,605. This increase resulted primarily from debt in connection with acquisitions. Minority interest was $11,863 for the three months ended June 30, 1999, compared to $4,492 in the prior year's quarter, an increase of $7,371. Of this increase $5,525 is due to acquisitions and $1,846 results from higher income. Preferred stock dividends were $8,381 for the three months ended June 30, 1999, compared to $5,422 in the prior year's quarter, an increase of $2,959. This increase resulted from the issuance of the Company's Series B Cumulative Redeemable Preferred shares in March 1999 and Series C Cumulative Redeemable Preferred Shares in May 1999. SIX MONTHS ENDED JUNE 30, 1999 AND JUNE 30, 1998 Below are the details of the changes by segment in EBITDA. The change in the Cold Storage EBITDA is discussed in Income from partially-owned entities. Merchandise Cold Total Office Retail Mart Storage Other ---------- ----------- -------------- ------------- ---------- ---------- Six months ended June 30, 1998....................... $ 189,445 $ 69,935 $ 56,392 $ 15,070 $ 36,379 $ 11,669 1999 Operations: Same store operations(1)............ 10,778 8,196 2,067 756 582 (823) Acquisitions and other.............. 82,724 37,913 (332) 22,343 9,469 13,331 ------ ------- ---------- -------- ----- ------ Six months ended June 30, 1999....................... $ 282,947 $ 116,044 $ 58,127 $ 38,169 $ 46,430 $ 24,177 ======= ======== ========== ======== ====== ====== % increase in same store operations................. 5.7% 11.7% 3.7% 5.0% 1.6% (7.0%) (1) Represents operations which were owned for the same period in each year. Page 19

20 Revenues The Company's revenues, which consist of property rentals, tenant expense reimbursements and other income were $329,752 in the six months ended June 30, 1999, compared to $218,734 in the prior year's six months, an increase of $111,018. This increase by segment resulted from: Date of Merchandise Acquisition Total Office Retail Mart Other ------------- --------- -------- --------- ------------ ------- Property Rentals: Acquisitions: 888 Seventh Avenue.... January 1999 $ 11,364 $ 11,364 $ -- $ -- $ -- Market Square Complex. December 1998 7,390 -- -- 7,390 -- Mendik RELP Properties December 1998 14,164 14,164 -- -- -- 20 Broad Street....... August 1998 5,444 5,444 -- -- -- 689 Fifth Avenue...... August 1998 1,722 1,722 -- -- -- 770 Broadway.......... July 1998 5,747 5,747 -- -- -- 40 Fulton Street..... June 1998 2,605 2,605 -- -- -- Merchandise Mart Properties.......... April 1998 27,227 -- -- 27,227 -- 150 East 58th Street.. March 1998 2,403 2,403 -- -- -- One Penn Plaza........ February 1998 5,478 5,478 -- -- -- Westport.............. January 1998 274 274 -- -- -- ------ -------- ------- --------- ------- 83,818 49,201 -- 34,617 -- ------ -------- ------- --------- ------- Leasing activity, including $624 of step-ups in Retail............. 14,338 13,737 672 366 (437) ------ -------- ------- --------- ------- Total increase in property rentals............... 98,156 62,938 672 34,983 (437) ------ -------- ------- --------- ------- Tenant expense reimbursements: Increase in tenant expense reimbursements due to acquisitions.......... 6,327 3,741 -- 2,586 -- Other.................... 2,754 1,169 1,685 (37) (63) ----- -------- ------- --------- ------- Total increase in tenant expense reimbursements 9,081 4,910 1,685 2,549 (63) ----- -------- ------- --------- ------- Other income............. 3,781 3,589 (430) 513 109 ----- -------- ------- --------- ------- Total increase in revenues $ 111,018 $ 71,437 $ 1,927 $ 38,045 $ (391) ======= ======== ======= ========= ======= Expenses The Company's expenses were $189,636 in the six months ended June 30, 1999 compared to $123,019 in the prior year's six months, an increase of $66,617. This increase by segment resulted from: Merchandise Total Office Retail Mart Other ---------- ---------- --------- --------------- ----------- Operating: Acquisitions......... $ 39,448 $ 25,459 $ -- $ 13,989 $ -- Same store operations 5,907 5,883 696(3) (820) 148 ----- ----- ---- ----------- ------- 45,355 31,342 696 13,169 148 ------ ------ ---- ----------- ------- Depreciation and amortization: Acquisitions......... 10,600 5,879 ---- 4,721 -- Same store operations 2,882 2,689 36 231 (74) ----- ----- ---- ----------- ------- 13,482 8,568 36 4,952 (74) ------ ----- ---- ----------- ------- General and administrative: 7,780(2) 1,727 2 1,782 4,269(1) ------ ----- ---- ----------- ------- $ 66,617 $ 41,637 $ 734 $ 19,903 $ 4,343 ====== ====== ==== =========== ======= (1) Retail general and administrative expenses are included in corporate expenses which are not allocated. (2) Of this increase: (i) $2,382 is attributable to acquisitions, (ii) $3,745 resulted from payroll, primarily for additional employees and corporate office expenses, and (iii) $1,653 resulted from professional fees. (3) Increase in common area maintenance expense of $1,915, partially offset by a decrease in repairs and maintenance and bad debt expense. Page 20

21 Income applicable to Alexander's (loan interest income, equity in income and depreciation) was $3,341 in the six months ended June 30, 1999, compared to $3,146 in the prior year's six months, an increase of $195. Income from partially-owned entities was $41,018 in the six months ended June 30, 1999, compared to $9,676 in the prior year's six months, an increase of $31,342. This increase by segment resulted from: Date of Merchandise Cold Acquisition Total Office Retail Mart Storage Other ---------------- -------- --------- --------- ------------- --------- ---------- Acquisitions: Cold Storage........... June/July 1998 $7,628 $ -- $ -- $ -- $ 7,628 $ -- Newkirk Joint Ventures. July 1998 5,309 -- -- -- -- 5,309 Merchandise Mart Management Company... April 1998 956 -- -- 956 -- -- Caguas................. November 1998 423 -- 423 -- -- -- CESCR.................. 6,850 6,850 -- -- -- -- ------ ----- ---- ------- ------ ----- 21,166 6,850 423 956 7,628 5,309 Increase (decrease) in equity in income: Cold Storage.......... 9,369(1) -- -- -- 9,369(1) -- Hotel Pennsylvania.... 1,179 -- -- -- -- 1,179 Mendik partially-owned office buildings.... (771)(2) (771)(2) -- -- -- -- Other................. 399 73 -- -- 335 (9) ------- ----- -- ------- ------ ----- $31,342 $6,152 $ 423 $ 956 $ 17,332 $ 6,479 ======= ===== === ======= ====== ===== (1) Includes a benefit for income taxes of $3,210 resulting from the reversal of income taxes because of the expected conversion of the Cold Storage Companies to REITs. (2) Reflects the elimination of the Company's equity in income of Two Park Avenue which is wholly-owned as of November 17, 1998 and accordingly is consolidated in 1999. Interest and other investment income (interest income on mortgage loans receivable, other interest income, dividend income and net gains on marketable securities) was $8,358 for the six months ended June 30, 1999, compared to $12,837 in the prior year's six months, a decrease of $4,479. This decrease resulted primarily from lower average investments this year. Interest and debt expense was $70,901 for the six months ended June 30, 1999, compared to $46,502 in the prior year's six months, an increase of $24,399. This increase resulted primarily from debt in connection with acquisitions. Minority interest was $20,978 for the six months ended June 30, 1999, compared to $7,069 in the prior year's six months, an increase of $13,909. Of this increase $9,857 is due to acquisitions and $4,052 results from higher income. Preferred stock dividends were $14,093 for the six months ended June 30, 1999, compared to $10,845 in the prior year's six months, an increase of $3,248. This increase resulted from the issuance of the Company's Series B Cumulative Redeemable Preferred shares in March 1999 and Series C Cumulative Redeemable Preferred Shares in May 1999. LIQUIDITY AND CAPITAL RESOURCES Six Months Ended June 30, 1999 Cash flows provided by operating activities of $86,796 was primarily comprised of (i) income of $100,954 and (ii) adjustments for non-cash items of $2,246, offset by (iii) the net change in operating assets and liabilities of $16,404. The adjustments for non-cash items are primarily comprised of (i) depreciation and amortization of $38,877 and (ii) minority interest of $20,978, partially offset by (iii) the effect of straight-lining of rental income of Page 21

22 $15,393 and (iv) equity in net income of partially-owned entities of $41,018. The net change in operating assets and liabilities primarily reflects an increase in prepaid expenses of $29,246. Net cash used in investing activities of $142,320 was primarily comprised of (i) capital expenditures of $86,731 (see detail below), (ii) investment in notes and mortgages receivable of $60,567 (including $41,200 loan to CAPI and $18,587 loan to Vornado Operating Company), (iii) acquisitions of real estate of $45,000 (see detail below) and (iv) investments in partially-owned entities of $13,200 (see detail below), partially offset by (vii) the use of cash restricted for tenant improvements of $24,548, (viii) proceeds from sale of Cold Storage assets of $22,769 and (ix) proceeds from the repayment of mortgage loans receivable of $19,367 (including $14,000 from Vornado Operating Company). Acquisitions of real estate and investments in partially-owned entities are comprised of: Debt Value of Assets Cash Assumed Units Issued Acquired ---------- --------- ------------- ------------ Real Estate: 888 Seventh Avenue Office Building...... $ 45,000 $ 55,000 $ -- $ 100,000 ======== ======== ========= ========== Investments in Partially Owned Entities: Charles E. Smith Commercial Realty L.P.: Additional investment................. $ -- $ -- $ 242,000 $ 242,000 Reacquired units from Vornado Operating Company............................. 13,200 -- -- 13,200 Crystal City hotel land............... -- -- 8,000 8,000 Additional investment in Newkirk Joint Ventures............................ -- -- 47,800 47,800 -------- -------- --------- ---------- $ 13,200 $ -- $ 297,800 $ 311,000 ======== ======== ========= ========== Capital expenditures were comprised of: New York Merchandise City Office Retail Mart Other Total ------------- -------- ----------- -------- --------- Expenditures to maintain the assets.. $ 2,338 $ 411 $ 5,433 $1,479 $ 9,661 Tenant allowances and leasing commissions.......................... 12,360 711 9,791 -- 22,922 Redevelopment expenditures........... 38,097 16,051 -- -- 54,148 ------- ------ --------- ------ ------- $52,795 $ 17,233 $ 15,224 $1,479 $86,731 ======= ====== ========= ====== ======= Net cash used in financing activities of $50,770 was primarily comprised of (i) repayments of borrowings of $306,490, (ii) dividends paid on common shares $74,432 and (iii) dividends paid on preferred shares of $12,655, and (iv) distributions to minority partners of $12,226 partially offset by, (v) proceeds from issuance of preferred shares of $193,282 and (vi) proceeds from borrowings of $165,000. Six Months Ended June 30, 1998 Cash flows provided by operating activities of $82,211 was primarily comprised of (i) net income of $67,803 and (ii) adjustments for non-cash items of $16,069, offset by (iii) the net change in operating assets and liabilities of $1,661. The adjustments for non-cash items are primarily comprised of (i) depreciation and amortization of $26,834 and (ii) minority interest of $7,069, partially offset by (iii) the effect of straight-lining of rental income of $6,414 and (iv) equity in net income of partially-owned entities of $9,676. Net cash used in investing activities of $979,681 was primarily comprised of (i) acquisitions of real estate of $681,387 (see detail below), (ii) investments in partially-owned entities of $165,633 (see detail below), (iii) deposits in connection with real estate acquisitions of $133,072 and (iv) capital expenditures of $47,450, partially offset by Page 22

23 (v) proceeds from the repayment of mortgage loans receivable of $57,663 (Rickel and Riese mortgage loans). Acquisitions of real estate and investments in partially-owned entities comprised of: Value of Total Cash Debt Assumed Units Issued Consideration ---------- ------------- ------------- -------------- Real Estate: Merchandise Mart Properties............ $187,000* $327,000* $116,000 $ 630,000 One Penn Plaza Office Building......... 317,000 93,000 -- 410,000 150 East 58th Street Office Building... 118,000 -- -- 118,000 40 Fulton Street Office Building....... 54,000 -- -- 54,000 Other.................................. 5,387 -- -- 5,387 -------- -------- -------- ---------- $681,387 $420,000 $116,000 $1,217,387 ======== ======== ======== ========== Investments in Partially Owned Entities: Hotel Pennsylvania (acquisition of additional $ 22,000 $ 48,000 $ -- $ 70,000 40% interest increasing ownership to 80%) 570 Lexington Avenue Office Building (increased interest from 5.6% to approximately 50%) 32,300 4,900 -- 37,200 Acquisition of Freezer Services, Inc. (60% interest)......................... 58,000 16,000 6,000 80,000 Reduction in Cold Storage Companies debt (60% interest)...................... 44,000 -- -- 44,000 Other.................................. 9,333 -- -- 9,333 -------- -------- -------- --------- $165,633 $ 68,900 $ 6,000 $ 240,533 ======== ======== ======== ========= * Reflects July 1998 repayment of $26,000 of debt. Net cash provided by financing activities of $799,100 was primarily comprised of (i) proceeds from borrowings of $1,295,855 and (ii) proceeds from the issuance of common shares of $445,282, partially offset by (iii) repayment of borrowings of $863,258, (iv) dividends paid on common shares of $58,893, (v) dividend paid on preferred shares of $10,845 (includes accretion of expenses of issuing the preferred shares of $1,438) and (vi) distributions to minority partners of $2,577. Page 23

24 Funds from Operations for the Three and Six Months Ended June 30, 1999 and 1998 Funds from operations was $74,987 in the three months ended June 30, 1999, compared to $54,752 in the prior year's quarter, an increase of $20,235. Funds from operations was $140,414 in the six months ended June 30, 1999, compared to $99,181 in the prior year's six months, an increase of $41,233. The following table reconciles funds from operations and net income: For the Three Months Ended For the Six Months Ended June 30, June 30, ----------------------------- -------------------------- 1999 1998 1999 1998 ------------ ------------ ------------ ---------- Net income applicable to common shares $43,645 $30,894 $86,861 $56,958 Depreciation and amortization of real property.......................... 18,945 14,839 37,697 25,033 Straight-lining of property rentals for rent escalations.................. (6,555) (4,122) (11,850) (6,414) Leasing fees received in excess of income recognized................. 421 369 801 737 Proportionate share of adjustments to equity in net income of partially-owned entities to arrive at funds from operations........................ 13,603 13,429 22,505 24,376 Appreciation of securities held in officer's deferred compensation trust. 747 -- 1,667 -- Gain on sale of securities available for sale.......................... (89) -- (383) -- Minority interest in excess of preferential distributions........ (1,153) (657) (2,307) (1,509) ------- ------- ------- ------- 69,564 54,752 134,991 99,181 Dilutive effect of Series A preferred shares............................ 5,423 -- 5,423 -- ------- ------- ------- ------- Funds from Operations - diluted...... $74,987 $54,752 $140,414 $99,181 ======= ======= ======== ======= The number of shares that should be used for determining funds from operations per share is as follows: For the Three Months Ended For the Six Months Ended June 30, June 30, ----------------------------- --------------------------- 1999 1998 1999 1998 ------------ ------------ ---------- ----------- Weighted average shares.............. 85,634 82,159 85,362 77,197 Effect of dilutive securities: Employee stock options............ 2,189 2,085 1,883 2,286 Series A preferred shares......... 8,018 -- 4,009 -- ------- ------- ------- ------- Denominator for diluted funds from operations per share - adjusted weighted average shares and assumed conversions ..................... 95,841 84,244 91,254 79,483 ======= ======= ======= ======= Page 24

25 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 reported by other REITs since a number of REITs, including the Company, calculate funds from operations in a manner different from that used by the National Association of Real Estate Investment Trusts ("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. Below are the cash flows provided by (used in) operating, investing and financing activities: For the Three Months Ended June 30, For the Six Months Ended June 30, -------------------------------------- ----------------------------------- 1999 1998 1999 1998 --------------- ------------ --------------- --------------- Operating activities........... $ 66,456 $ 46,780 $ 86,796 $ 82,211 =========== =========== =========== =========== Investing activities........... $ (1,228) $ (435,816) $ (142,320) $ (979,681) =========== =========== =========== =========== Financing activities........... $ (83,853) $ 409,963 $ (50,770) $ 799,100 =========== =========== =========== =========== Financings In February 1999, the Company completed a $165,000 refinancing of its Two Penn Plaza office building and prepaid the then existing $80,000 debt on the property. The new 5-year debt matures in February 2004 and bears interest at 7.08%. In February 1999, the Company also exercised its option to extend the maturity date on the $250,000 loan on its Chicago Merchandise Mart building from March 31, 1999 to September 30, 1999. In connection therewith, the Company paid a fee of 1/8%. In March 1999, the Vornado/Crescent Partnerships sold all of the non-real estate assets of the Cold Storage Companies encompassing the operations of the cold storage business for approximately $48,000 to a new partnership owned 60% by Vornado Operating Company and 40% by Crescent Operating Inc. In March 1999, the Company completed the sale of 3 million 8.5% Series B Cumulative Redeemable Preferred Shares, at a price of $25.00 per share, pursuant to an effective registration statement with net proceeds to the Company of approximately $72,200. Further in March 1999, 400,000 shares were sold when the underwriters exercised their over-allotment option resulting in additional net proceeds to the Company of $9,700. The perpetual preferred shares may be called without penalty at the option of the Company commencing on March 17, 2004. In May 1999, the Company completed the sale of 4 million 8.5% Series C Cumulative Redeemable Preferred Shares, at a price of $25.00 per share, pursuant to an effective registration statement with net proceeds to the Company of approximately $96,900. Additionally in May 1999, 600,000 shares were sold when the underwriters exercised their over-allotment option resulting in additional net proceeds to the Company of $14,500. The perpetual preferred shares may be called without penalty at the option of the Company commencing on May 17, 2004. In May 1999, the Company sold an aggregate of $27,500 of 8.375% Series D-2 Cumulative Redeemable Preferred Units in the Operating Partnership to an institutional investor in a private placement, resulting in net proceeds of approximately $27,467. The perpetual Preferred Units may be called without penalty at the option of the Operating Partnership commencing on May 27, 2004. Page 25

26 On July 8, 1999, the Company completed a $70,000 mortgage financing of its 350 North Orleans property in Chicago. The Company received proceeds of $40,000 and is expected to receive the remaining $30,000 during the next year upon meeting certain debt service coverage requirements. The new 3-year debt matures in June 2002 and bears interest at LIBOR + 1.65% (currently 6.83%). The Company anticipates that cash from continuing operations will be adequate to fund business operations and the payment of dividends and distributions on an on-going basis for more than the next twelve months; however, capital outlays for significant acquisitions will require funding from borrowings or equity offerings. Year 2000 Issues Year 2000 compliance programs and information systems modification were initiated by the Company in early 1998 to address the risk posed by the year 2000 issue. The Company developed a plan to address their affected informational (accounting, billing, payroll) and operational (refrigeration, HVAC, security, elevators, lighting, energy management) systems. The Company's plan also considers statements from outside vendors as to their year 2000 readiness. The Company and its partially-owned entities have completed their initial assessment, inventory and planning phases of their plan and have determined that the majority of their systems, including all mission critical systems are already year 2000 compliant. The Company anticipates that any issues encountered with informational or operational systems will be remediated. The Company expects that where appropriate, all mission critical systems will be tested by September 30, 1999. The cost of the Company's year 2000 plan is not expected to be material to 1999 operations. The Company believes that its exposure may be the failure of third parties (i.e., energy providers) in meeting their commitments which may result in temporary business interruption at the Company's buildings, retail centers, mart properties, cold storage warehouses and other real estate related properties. The Company has contingency plans for its own day to day informational and operational systems that will be completed by October 31, 1999. Failure of third parties with which the Company conducts business to successfully respond to their year 2000 issues may have an adverse effect on the Company. Recently Issued Accounting Standards In June 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities". This statement establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities. It is effective for all fiscal quarters of fiscal years beginning after June 15, 2000. Because the Company does not currently utilize derivatives or engage in significant hedging activities, management does not anticipate that implementation of this statement will have a material effect on the Company's financial statements. In April, 1998 the American Institute of Certified Public Accountants issued Statement of Position 98-5, "Reporting on the Costs of Start-up Activities" ("SOP 98-5"), which is effective for the Company in the first quarter of 1999. The Company has no deferred organization costs or other deferred start-up costs as defined in SOP 98-5, and therefore adoption of SOP 98-5 had no material impact in 1999. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS At June 30, 1999, the Company had $1,180,431,000 of variable rate debt bearing interest at a weighted average interest rate of 6.26% and $784,112,000 of fixed rate debt bearing interest at a weighted average interest rate of 7.02%. A one-percent increase in the base used to determine the interest rate of the variable rate debt would result in a $11,804,000 increase in the Company's annual interest expense. Additionally, the Company's share of partially-owned entities (i) variable rate debt was $166,132,000 bearing interest at a weighted average interest rate of 7.03% and (ii) fixed rate debt was $1,030,008,000 bearing interest at a weighted average interest rate of 7.51%. A one-percent increase in the base used to determine the interest rate on the Company's share of the variable rate debt from partially-owned entities would result in a $1,661,000 decrease in the Company's annual income from partially-owned entities. The total decrease in the Company's annual net income for a one-percent increase in the base is $11,580,000 or $.13 per diluted share, after the minority interest's share of such decrease. Page 26

27 PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS The Company is from time to time involved in legal actions arising in the ordinary course of its business. In the opinion of management, after consultation with legal counsel, the outcome of such matters will not have a material adverse effect on the Company's financial condition, results of operations or cash flows. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS On June 2, 1999 the Company held its annual meeting of shareholders. The matters on which the shareholders voted, in person or by proxy, were (i) for the election of two nominees to serve on the Board of Trustees for a term of three years or until their respective successors are duly elected and qualify and (ii) an amendment to Vornado's Omnibus Share Plan (the "Plan") to authorize the allocation of an additional 7,000,000 common shares of beneficial interest to be reserved for sale and issuance under the Plan. The two nominees were elected and the amendment to the Plan was approved. The results of the voting are shown below: Election of Trustees: Votes Cast Against or Trustee Votes Cast For Withheld -------------- -------------- ----------- Stanley Simon 71,657,536 1,253,655 Ronald Targan 72,029,875 881,316 Amendment to Omnibus Share Plan: Votes Cast Against or Votes Cast For Withheld -------------- ----------- 52,010,826 10,943,025 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits required by Item 601 of Regulation S-K are filed herewith and are listed in the attached Exhibit Index. (b) Reports on Form 8-K During the quarter ended June 30, 1999, Vornado Realty Trust filed the reports on Form 8-K described below: Date of Report (Date of Earliest Event Reported) Item Reported Date Filed --------------------- ------------- ---------- May 17, 1999 Agreement to sell Series C Preferred Shares in public May 26, 1999 offering Page 27

28 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. VORNADO REALTY TRUST ------------------------------------------ (Registrant) Date: August 5, 1999 By: /s/ Irwin Goldberg ------------------------------------------ IRWIN GOLDBERG Vice President, Chief Financial Officer Page 28

29 EXHIBIT INDEX EXHIBIT NO. - ---------- 3.1 -- Amended and Restated Declaration of Trust of Vornado, amended April 3, 1997--Incorporated by reference to Exhibit 3.1 of Vornado's Registration Statement on Form S-8 (File No. 333-29011), filed on June 12, 1997......................... * 3.2 -- Articles of Amendment of Declaration of Trust of Vornado, as filed with the State Department of Assessments and Taxation of Maryland on April 22, 1998 Incorporated by reference to Exhibit 3.1 of Vornado's Current Report on Form 8-K, dated April 22, 1998 (File No. 001-11954), filed on April 28, 1998....................................................... * 3.3 -- Articles Supplementary Classifying Vornado's $3.25 Series A Preferred Shares of Beneficial Interest, liquidation preference $50.00 per share Incorporated by reference to Exhibit 4.1 of Vornado's Current Report on Form 8-K, dated April 3, 1997 (File No. 001-11954), filed on April 8, 1997. * 3.4 -- Articles Supplementary Classifying Vornado's Series D-1 8.5% Cumulative Redeemable Preferred Shares of Beneficial Interest, no par value (the "Series D-1 Preferred Shares") - Incorporated by reference to Exhibit 3.1 of Vornado's Current Report on Form 8-K, dated November 12, 1998 (File No. 001-11954), filed on November 30, 1998................. * 3.5 -- Articles Supplementary Classifying Additional Series D-1 Preferred Shares Incorporated by reference to Exhibit 3.2 of Vornado's Current Report on Form 8-K/A, dated November 12, 1998 (File No. 001-11954), filed on February 9, 1999... * 3.6 -- Articles Supplementary Classifying 8.5% Series B Cumulative Redeemable Preferred Shares of Beneficial Interest, liquidation preference $25.00 per share, no par value - Incorporated by reference to Exhibit 3.3 of Vornado's Current Report on Form 8-K, dated March 3, 1999 (File No. 001-11954), filed on March 17, 1999........................ * 3.7 -- Articles Supplementary to Declaration of Trust of Vornado Realty Trust with Respect to Series C Preferred Shares - Incorporated by reference to Exhibit 3.7 of Vornado's Registration Statement on Form 8-A (File No. 001-11954), filed on May 19, 1999...................................... * 3.8 -- Articles Supplementary to Declaration of Trust of Vornado Realty Trust with respect to the Series D-2 Preferred Shares, dated as of May 27, 1999, as filed with the State Department of Assessments and Taxation of Maryland on May 27, 1999 - Incorporated by reference to Exhibit 3.1 of Vornado's Current Report on Form 8-K, dated May 27, 1999 (File No. 001-11954), filed July 7, 1999................... * 3.9 -- By-laws of Vornado, as amended on April 28, 1997 - Incorporated by reference to Exhibit 3(b) of Vornado's Quarterly Report on Form 10-Q for the period ended March 31, 1997 (File No. 001-11954), filed on May 14, 1997.......................... * 3.10 -- Second Amended and Restated Agreement of Limited Partnership of the Operating Partnership, dated as of October 20, 1997 - Incorporated by reference to Exhibit 3.4 of Vornado's Annual Report on Form 10-K for the year ended December 31, 1997 filed on March 31, 1998 (the "1997 10-K")............. * 3.11 -- Amendment to Second Amended and Restated Agreement of Limited Partnership of Vornado Realty L.P., dated as of December 16, 1997- Incorporated by reference to Exhibit 3.5 of the 1997 10-K.................................................. * - --------------------------- * Incorporated by reference Page 29

30 EXHIBIT NO. - ---------- 3.12 -- Second Amendment to Second Amended and Restated Agreement of Limited Partnership of the Operating Partnership, dated as of April 1, 1998 - Incorporated by reference to Exhibit 3.5 of Vornado's Registration Statement on Form S-3 (File No. 333-50095), filed on April 14, 1998.......................... * 3.13 -- Third Amendment to Second Amended and Restated Agreement of Limited Partnership of the Operating Partnership, dated as of November 12, 1998 Incorporated by reference to Exhibit 3.2 of Vornado's Current Report on Form 8-K, dated November 12, 1998 (File No. 001-11954), filed on November 30, 1998.... * 3.14 -- Fourth Amendment to Second Amended and Restated Agreement of Limited Partnership of the Operating Partnership, dated as of November 30, 1998 Incorporated by reference to Exhibit 3.1 of Vornado's Current Report on Form 8-K, dated December 1, 1998 (File No. 001-11954), filed on February 9, 1999...... * 3.15 -- Exhibit A, dated as of December 22, 1998, to Second Amended and Restated Agreement of Limited Partnership of the Operating Partnership - Incorporated by reference to Exhibit 3.4 of Vornado's Current Report on Form 8-K/A, dated November 12, 1998 (File No. 001-11954), filed on February 9, 1999........ * 3.16 -- Fifth Amendment to Second Amended and Restated Agreement of Limited Partnership of the Operating Partnership, dated as of March 3, 1999 Incorporated by reference to Exhibit 3.1 of Vornado's Current Report on Form 8-K, dated March 3, 1999 (File No. 001-11954), filed on March 17, 1999............... * 3.17 -- Exhibit A to Second Amended and Restated Agreement of Limited Partnership of the Operating Partnership, dated as of March 11, 1999 - Incorporated by reference to Exhibit 3.2 of Vornado's Current Report on Form 8-K, dated March 3, 1999 (File No. 001-11954), filed on March 17, 1999............... * 3.18 -- Sixth Amendment to Second Amended and Restated Agreement of Limited Partnership of Vornado Realty L.P., dated as of March 17, 1999 Incorporated by reference to Exhibit 3.2 of Vornado's Current Report on Form 8-K, dated May 27, 1999 (File No. 001-11954), filed on July 7, 1999................. * 3.19 -- Seventh Amendment to Second Amended and Restated Agreement of Limited Partnership of Vornado Realty L.P., dated as of May 20, 1999 - Incorporated by reference to Exhibit 3.3 of Vornado's Current Report on Form 8-K, dated May 27, 1999 (File No. 001-11954), filed on July 7, 1999................. * 3.20 -- Eighth Amendment to Second Amended and Restated Agreement of Limited Partnership of Vornado Realty L.P., dated as of May 27, 1999 - Incorporated by reference to Exhibit 3.4 of Vornado's Current Report on Form 8-K, dated May 27, 1999 (File No. 001-11954), filed on July 7, 1999................. * 4.1 -- Instruments defining the rights of security holders (see Exhibits 3.1 through 3.20 of this Quarterly Report on Form 10-Q)....................................................... 4.2 -- Indenture dated as of November 24, 1993 between Vornado Finance Corp. and Bankers Trust Company, as Trustee - Incorporated by reference to Vornado's current Report on Form 8-K dated November 24, 1993 (File No. 001-11954), filed December 1, 1993....................................................... * - --------------------------- * Incorporated by reference Page 30

31 EXHIBIT NO. - ---------- 4.3 -- Specimen certificate representing Vornado's Common Shares of Beneficial Interest, par value $0.04 per share - Incorporated by reference to Exhibit 4.1 of Amendment No. 1 to Registration Statement on Form S-3 (File No. 33-62395), filed on October 26, 1995.................................. * 4.4 -- Specimen certificate representing Vornado's $3.25 Series A Preferred Shares of Beneficial Interest, liquidation preference $50.00 per share - Incorporated by reference to Exhibit 4.2 of Vornado's Current Report on Form 8-K, dated April 3, 1997 (File No. 001-11954), filed on April 8, 1997...................................................... * 4.5 -- Specimen certificate evidencing Vornado's Series B 8.5% Cumulative Redeemable Preferred Shares of Beneficial Interest - Incorporated by reference to Exhibit 4.2 of Vornado's Registration Statement on Form 8-A (File No. 001-11954), filed on March 15, 1999...................... * 4.6 -- Specimen certificate evidencing Vornado's 8.5% Series C Cumulative Redeemable Preferred Shares of Beneficial Interest, liquidation preference $25.00 per share, no par value - Incorporated by reference to Exhibit 4.2 of Vornado's Registration Statement on Form 8-A (File No. 001-11954), filed on May 19, 1999............................................... * 10.1 -- Second Amendment, dated as of June 12, 1997, to Vornado's 1993 Omnibus Share Plan, as amended - Incorporated by reference to Vornado's Registration Statement on Form S-8 (File No. 333-29011) filed on June 12, 1997............................. * 10.2 -- Master Agreement and Guaranty, between Vornado, Inc. and Bradlees New Jersey, Inc. dated as of May 1, 1992 - Incorporated by reference to Vornado's Quarterly Report on Form 10-Q for quarter ended March 31, 1992 (File No. 001-11954), filed May 8, 1992................................................... * 10.3** -- Mortgage, Security Agreement, Assignment of Leases and Rents and Fixture Filing dated as of November 24, 1993 made by each of the entities listed therein, as mortgagors to Vornado Finance Corp., as mortgagee - Incorporated by reference to Vornado's Current Report on Form 8-K dated November 24, 1993 (File No. 001-11954), filed December 1, 1993.............. * 10.4** -- 1985 Stock Option Plan as amended - Incorporated by reference to Vornado's Quarterly Report on Form 10-Q for quarter ended May 2, 1987 (File No. 001-11954), filed June 9, 1987........... * 10.5** -- Form of Stock Option Agreement for use in connection with incentive stock options issued pursuant to Vornado, Inc. 1985 Stock Option Plan Incorporated by reference to Vornado's Quarterly Report on Form 10-Q for quarter ended October 26, 1985 (File No. 001-11954), filed December 9, 1985........................................................... * 10.6** -- Form of Stock Option Agreement for use in connection with incentive stock options issued pursuant to Vornado, Inc. 1985 Stock Option Plan--Incorporated by reference to Vornado's Quarterly Report on Form 10-Q for quarter ended May 2, 1987 (File No. 001-11954), filed June 9, 1987....................... * 10.7** -- Form of Stock Option Agreement for use in connection with incentive stock options issued pursuant to Vornado, Inc. 1985 Stock Option Plan--Incorporated by reference to Vornado's Quarterly Report on Form 10-Q for quarter ended October 26, 1985 (File No. 001-11954), filed December 9, 1985.. * - --------------------------- * Incorporated by reference ** Management contract or compemsatory plan Page 31

32 EXHIBIT NO. - ---------- 10.8** -- Employment Agreement between Vornado Realty Trust and Joseph Macnow dated January 1, 1998 - Incorporated by reference to Exhibit 10.7 of Vornado's Quarterly Report on Form 10-Q for the quarter ended September 30, 1998 (File No. 001-11954), filed November 12, 1998...................................... * 10.9** -- Employment Agreement between Vornado Realty Trust and Richard Rowan dated January 1, 1998 - Incorporated by reference to Exhibit 10.8 of Vornado's Quarterly Report on Form 10-Q for the quarter ended September 30, 1998 (File No. 001-11954), filed November 12, 1998...................................... * 10.10** -- Employment Agreement between Vornado Realty Trust and Irwin Goldberg, dated December 11, 1997 - Incorporated by reference to Exhibit 10.10 of Vornado's Annual Report on Form 10-K/A for the year ended December 31, 1997 (File No. 001-11954), filed on April 14, 1998........................... * 10.11** -- Employment Agreement between Vornado Realty Trust and Michael D. Fascitelli dated December 2, 1996 - Incorporated by reference to Vornado's Annual Report on Form 10-K for the year ended December 31, 1996 (File No. 001-11954), filed March 13, 1997................................................ * 10.12 -- Promissory Notes from Steven Roth to Vornado, Inc. dated December 29, 1992 and January 15, 1993 - Incorporated by reference to Vornado's Annual Report on Form 10-K for the year ended December 31, 1992 (File No. 001-11954), filed February 16, 1993............................................. * 10.13 -- Registration Rights Agreement between Vornado, Inc. and Steven Roth Dated December 29, 1992 - Incorporated by reference to Vornado's Annual Report on Form 10-K for the year ended December 31, 1992 (File No. 001-11954), filed February 16, 1993. * 10.14 -- Stock Pledge Agreement between Vornado, Inc. and Steven Roth dated December 29, 1992 - Incorporated by reference to Vornado's Annual Report on Form 10-K for the year ended December 31, 1992 (File No. 001-11954), filed February 16, 1993. * 10.15 -- Promissory Note from Steven Roth to Vornado Realty Trust dated April 15, 1993 and June 17, 1993 - Incorporated by reference to Vornado's Annual Report on Form 10-K for the year ended December 31, 1993 (File No. 001-11954), filed March 24, 1994................................................ * 10.16 -- Promissory Note from Richard Rowan to Vornado Realty Trust - Incorporated by reference to Vornado's Annual Report on Form 10-K for the year ended December 31, 1993 (File No. 001-11954), filed March 24, 1994............................... * 10.17 -- Promissory Note from Joseph Macnow to Vornado Realty Trust - Incorporated by reference to Vornado's Annual Report on Form 10-K for the year ended December 31, 1993 (File No. 001-11954), filed March 24, 1994............................... * 10.18 -- Management Agreement between Interstate Properties and Vornado, Inc. dated July 13, 1992 -Incorporated by reference to Vornado's Annual Report on Form 10-K for the year ended December 31, 1992 (File No. 001-11954), filed February 16, 1993. * 10.19 -- Real Estate Retention Agreement between Vornado, Inc., Keen Realty Consultants, Inc. and Alexander's, Inc., dated as of July 20, 1992 - Incorporated by reference to Vornado's Annual Report on Form 10-K for the year ended December 31, 1992 (File No. 001-11954), filed February 16, 1993................... * - --------------------------- * Incorporated by reference ** Management contract or compemsatory plan Page 32

33 EXHIBIT NO. - ---------- 10.20 -- Amendment to Real Estate Retention Agreement dated February 6, 1995 Incorporated by reference to Vornado's Annual Report on Form 10-K for the year ended December 31, 1994 (File No. 001-11954), filed March 23, 1995.............................. * 10.21 -- Stipulation between Keen Realty Consultants Inc. and Vornado Realty Trust re: Alexander's Retention Agreement - Incorporated by reference to Vornado's annual Report on Form 10-K for the year ended December 31, 1993 (File No. 001-11954), filed March 24, 1994.............................. * 10.22 -- Stock Purchase Agreement, dated February 6, 1995, among Vornado Realty Trust and Citibank, N.A. Incorporated by reference to Vornado's Current Report on Form 8-K dated February 6, 1995 (File No. 001-11954), filed February 21, 1995............ * 10.23 -- Management and Development Agreement, dated as of February 6, 1995 Incorporated by reference to Vornado's Current Report on Form 8-K dated February 6, 1995 (File No. 001-11954), filed February 21, 1995....................................... * 10.24 -- Standstill and Corporate Governance Agreement, dated as of February 6, 1995 Incorporated by reference to Vornado's Current Report on Form 8-K dated February 6, 1995 (File No. 001-11954), filed February 21, 1995........................... * 10.25 -- Credit Agreement, dated as of March 15, 1995, among Alexander's Inc., as borrower, and Vornado Lending Corp., as lender - Incorporated by reference from Annual Report on Form 10-K for the year ended December 31, 1994 (File No. 001 - 11954), filed March 23, 1995.................................. * 10.26 -- Subordination and Intercreditor Agreement, dated as of March 15, 1995 among Vornado Lending Corp., Vornado Realty Trust and First Fidelity Bank, National Association - Incorporated by reference to Vornado's Annual Report on Form 10-K for the year ended December 31, 1994 (File No. 001-11954), filed March 23, 1995................................................ * 10.27 -- Revolving Credit Agreement dated as of February 27, 1995 among Vornado Realty Trust, as borrower, and Union Bank of Switzerland, as Bank and Administrative Agent - Incorporated by reference to Exhibit 10(F)9 of Vornado's Annual Report on Form 10-K for the year ended December 31, 1994 (File No. 001-11954), filed March 23, 1995............... * 10.28 -- Form of Intercompany Agreement between Vornado Realty L.P. and Vornado Operating, Inc. -Incorporated by reference to Exhibit 10.1 of Amendment No. 1 to Vornado Operating, Inc.'s Registration Statement on Form S-11 (File No. 333-40701), filed on January 23, 1998......................... * 10.29 -- Form of Revolving Credit Agreement between Vornado Realty L.P. and Vornado Operating, Inc., together with related form of Note - Incorporated by reference to Exhibit 10.2 of Amendment No. 1 to Vornado Operating, Inc.'s Registration Statement on Form S-11 (File No.333-40701).................... * 10.30 -- Amended and Restated Revolving Credit Agreement, dated as of February 23, 1998, between Vornado Realty L.P., as Borrower, Vornado Realty Trust, as General Partner and Union Bank of Switzerland (New York Branch), as Bank, the other banks signatory hereto, each as a bank, Union Bank of Switzerland (New York Branch), as Administrative Agent and Citicorp Real Estate, Inc., The Chase Manhattan Bank and Nationsbank, as Syndication Agents - Incorporated by reference to Exhibit 10.29 of the 1997 10-K................... * 10.31 -- Registration Rights Agreement, dated as of April 15, 1997, between Vornado Realty Trust and the holders of Units listed on Schedule A thereto Incorporated by reference to Exhibit 10.2 of Vornado's Current Report on Form 8-K (File No. 001-11954), filed on April 30, 1997....................... * - --------------------------- * Incorporated by reference Page 33

34 EXHIBIT NO. - ---------- 10.32 -- Noncompetition Agreement, dated as of April 15, 1997, by and among Vornado Realty Trust, the Mendik Company, L.P., and Bernard H. Mendik - Incorporated by reference to Exhibit 10.3 of Vornado's Current Report on Form 8-K (File No. 001-11954), filed on April 30, 1997........................ * 10.33 -- Employment Agreement, dated as of April 15, 1997, by and among Vornado Realty Trust, The Mendik Company, L.P. and David R. Greenbaum - Incorporated by reference to Exhibit 10.4 of Vornado's Current Report on Form 8-K (File No. 001-11954), filed on April 30, 1997........................ * 10.34 -- Agreement, dated September 28, 1997, between Atlanta Parent Incorporated, Portland Parent Incorporated and Crescent Real Estate Equities, Limited Partnership - Incorporated by reference to Exhibit 99.6 of Vornado's Current Report on Form 8-K (File No. 001-11954), filed on October 8, 1997............................................. * 10.35 -- Contribution Agreement between Vornado Realty Trust, Vornado Realty L.P. and The Contributors Signatory - thereto - Merchandise Mart Properties, Inc. (DE) and Merchandise Mart Enterprises, Inc. Incorporated by reference to Exhibit 10.34 of Vornado's Annual Report on Form 10-K/A for the year ended December 31, 1997 (File No. 001-11954), filed on April 8, 1998............................................... * 10.36 -- Sale Agreement executed November 18, 1997, and effective December 19, 1997, between MidCity Associates, a New York partnership, as Seller, and One Penn Plaza LLC, a New York Limited liability company; as purchaser. Incorporated by reference to Exhibit 10.35 of Vornado's Annual Report on Form 10-K/A for the year ended December 31, 1997 (File No. 001-11954), filed on April 8, 1998........................... * 10.37 -- Promissory Notes from Michael D. Fascitelli to Vornado Realty Trust dated March 2, 1998 and April 30, 1998. Incorporated by reference to Exhibit 10.37 of Vornado's Quarterly Report on Form 10-Q for the quarter ended March 31, 1998 (File No. 001-11954), filed May 13, 1998............................ * 10.38 -- Credit Agreement dated as of June 22, 1998 among One Penn Plaza, LLC, as Borrower, The Lenders Party Hereto, The Chase Manhattan Bank, as Administrative Agent Incorporated by reference to Exhibit 10 of Vornado's Quarterly Report on Form 10-Q for the quarter ended June 30, 1998 (File No. 001-11954), filed August 13, 1998............................ * 10.39 -- Registration Rights Agreement, dated as of April 1, 1998 between Vornado and the Unit Holders named herein - Incorporated by reference to Exhibit 10.2 of Amendment No. 1 to Vornado's Registration Statement on Form S-3 (File No. 333-50095), filed on May 6, 1998............................. * 10.40 -- Underwriting Agreement, dated April 9, 1998, among Vornado, Vornado Realty L.P. and Goldman, Sachs & Co. - Incorporated by reference to Exhibit 1.1 of Vornado's Current Report on Form 8-K, dated April 9, 1998 (File No. 001-11954), filed on April 16, 1998.......................................... * 10.41 -- Pricing Agreement, dated April 9, 1998, between Vornado and Goldman, Sachs & Co. - Incorporated by reference to Exhibit 1.2 of Vornado's Current Report on Form 8-K, dated April 9, 1998 (File No. 001-11954), filed on April 16, 1998............ * 10.42 -- Underwriting Agreement, dated April 23, 1998, among Vornado, Vornado Realty L.P. and Merrill Lynch, Pierce, Fenner & Smith Incorporated - Incorporated by reference to Exhibit 1.1 of Vornado's Current Report on Form 8-K, dated April 22, 1998 (File No. 001-11954), filed on April 28, 1998........................................................... * - --------------------------- * Incorporated by reference Page 34

35 EXHIBIT NO. - ---------- 10.43 -- Underwriting Agreement, dated March 12, 1999, among Vornado, Vornado Realty L.P., Merrill Lynch, Pierce, Fenner & Smith Incorporated - Incorporated by reference to Exhibit 1.1 of Vornado's Current Report on Form 8-K, dated March 3, 1999 (File No. 001-11954), filed on March 17, 1999.................. * 27 -- Financial Data Schedule.......................................... 36 Page 35

5 This schedule contains summary financial information extracted from the Company's unaudited financial statements for the six months ended June 30, 1999 and is qualified in its entirety by reference to such financial statements.

6-MOS DEC-31-1999 JUN-30-1999 61,514 77,983 37,650 4,936 0 0 3,502,262 (264,063) 4,866,432 0 1,964,510 0 477,477 3,437 1,540,160 4,866,432 0 329,752 0 130,962 58,674 1,954 70,901 100,954 0 100,954 0 0 0 86,861 1.02 1.00