1 EXHIBIT INDEX ON PAGE 113 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Fiscal Year Ended: DECEMBER 31, 2000 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 (I.R.S. Employer incorporation or organization) Identification Number) 888 SEVENTH AVENUE, NEW YORK, NEW YORK 10019 (Address of Principal Executive Offices) (Zip Code) Registrant's telephone number including area code: (212) 894-7000 Securities registered pursuant to Section 12(b) of the Act: Title of Each Class Name of Each Exchange on Which Registered ------------------- ----------------------------------------- Common Shares of beneficial New York Stock Exchange interest, $.04 par value per share Series A Convertible New York Stock Exchange Preferred Shares of beneficial interest, no par value 8.5% Series B Cumulative New York Stock Exchange Redeemable Preferred Shares of beneficial interest, no par value 8.5% Series C Cumulative New York Stock Exchange Redeemable Preferred Shares of beneficial interest, no par value Securities registered pursuant to Section 12(g) of the Act: NONE Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES X NO Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X] The aggregate market value of the voting shares held by non-affiliates of the registrant, i.e. by persons other than officers and trustees of Vornado Realty Trust as reflected in the table in Item 12 of this Form 10-K, at February 1, 2001 was $2,460,912,000. As of February 1, 2001, there were 86,809,450 common shares of the registrant's shares of beneficial interest outstanding. Documents Incorporated by Reference PART III: Portions of Proxy Statement for Annual Meeting of Shareholders to be held on May 30, 2001. -1-
2 TABLE OF CONTENTS ITEM PAGE ---- ---- PART I. 1. Business.................................................... 3 2. Properties.................................................. 12 3. Legal Proceedings........................................... 45 4. Submission of Matters to a Vote of Security Holders......... 45 Executive Officers of the Registrant........................ 45 PART II. 5. Market for the Registrant's Common Equity and Related Stockholder Matters......................................... 46 6. Selected Consolidated Financial Data........................ 47 7. Management's Discussion and Analysis of Financial Condition and Results of Operations................................... 49 7A. Quantitative and Qualitative Disclosures about Market Risk.. 68 8. Financial Statements and Supplementary Data................. 69 9. Changes In and Disagreements With Independent Auditors on Accounting and Financial Disclosure......................... 69 PART III. 10. Directors and Executive Officers of the Registrant.......... (1) 11. Executive Compensation...................................... (1) 12. Security Ownership of Certain Beneficial Owners and (1) Management.................................................. 13. Certain Relationships and Related Transactions.............. (1) PART IV. 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.................................................... 103 SIGNATURES................................................................. 104 - ------------ (1) These items are omitted because the Registrant will file a definitive Proxy Statement pursuant to Regulation 14A involving the election of directors with the Securities and Exchange Commission not later than 120 days after December 31, 2000, which is incorporated by reference herein. Information relating to Executive Officers of the Registrant appears on page 45 of this Annual Report on Form 10-K. Certain statements contained herein constitute forward-looking statements as such term is defined in Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). 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, and (l) general competitive factors. -2-
3 PART I ITEM 1. BUSINESS THE COMPANY Vornado Realty Trust is a fully-integrated real estate investment trust ("REIT"). Vornado conducts its business through Vornado Realty L.P., a Delaware limited partnership (the "Operating Partnership"). Vornado is the sole general partner of, and owned approximately 86% of the common limited partnership interest in, the Operating Partnership at February 1, 2001. All references to the "Company" and "Vornado" refer to Vornado Realty Trust and its consolidated subsidiaries, including the Operating Partnership. The Company currently owns directly or indirectly: Office Properties ("Office"): (i) all or portions of 22 office properties in the New York City metropolitan area (primarily Manhattan) aggregating approximately 14.4 million square feet; (ii) a 34% limited partnership interest in Charles E. Smith Commercial Realty L.P. ("CESCR"), a limited partnership which owns and manages approximately 12.5 million square feet of office properties in Northern Virginia and Washington, D.C., and manages an additional 5.8 million square feet of office and other commercial properties in the Washington, D.C. area; Retail Properties ("Retail"): (iii) 55 shopping center properties in six states and Puerto Rico aggregating approximately 11.3 million square feet, including 1.4 million square feet built by tenants on land leased from the Company; Merchandise Mart Properties: (iv) the Merchandise Mart Properties portfolio containing approximately 8.1 million square feet, including the 3.4 million square foot Merchandise Mart in Chicago; Temperature Controlled Logistics: (v) a 60% interest in partnerships that own 88 warehouse facilities nationwide with an aggregate of approximately 438.9 million cubic feet of refrigerated space leased to AmeriCold Logistics; Other Real Estate Investments: (vi) 33.1% of the outstanding common stock of Alexander's, Inc. ("Alexander's"); (vii) the Hotel Pennsylvania in New York City consisting of a hotel portion containing 800,000 square feet with 1,700 rooms and a commercial portion containing 400,000 square feet of retail and office space; (viii) a 30% interest in the Newkirk joint ventures which own various equity and debt interests relating to 120 limited partnerships which own real estate, primarily office and retail, net leased to credit rated tenants; (ix) eight dry warehouse/industrial properties in New Jersey containing approximately 2.0 million square feet; and (x) other real estate investments. -3-
4 OBJECTIVES AND STRATEGY The Company's business objective is to maximize shareholder value. The Company intends to achieve its business objective by continuing to pursue its investment philosophy and executing its operating strategies through: - Maintaining a superior team of operating and investment professionals and an entrepreneurial spirit; - Investing in properties in the New York City metropolitan area and other selected markets where the Company believes there is high likelihood of capital appreciation; - Acquiring high quality properties at a discount to replacement cost and where there is a significant potential for higher rents; - Investing in retail properties in selected understored locations such as the New York City metropolitan area; - Investing in fully integrated operating companies that have a significant real estate component with qualified, experienced operating management and strong growth potential which can benefit from the Company's access to efficient capital; - Developing/redeveloping the Company's existing properties to increase returns and maximize value; and - On occasion, providing specialty financing to real estate companies. The Company expects to finance its growth, acquisitions and investments using internally generated funds, proceeds from possible asset sales and by accessing the public and private capital markets. ACQUISITIONS AND INVESTMENTS Since January 1, 2000, the Company completed approximately $404.1 million of real estate acquisitions and investments. The following table lists the acquisitions and investments by business segment (excluding the acquisitions of the Temperature Controlled Logistics segment and CESCR which are described in Item 2: Properties): TOTAL CONSIDERATION (IN LOCATION MILLIONS) -------------------------------- --------- OFFICE: 7 West 34th Street ........................ New York City $ 128.0 RETAIL: Vornado-Ceruzzi Joint Venture (80% interest) ......................... Northeast and Mid-Atlantic states 21.9 MERCHANDISE MART: 33 North Dearborn Street .................. Chicago 35.0 L.A. Mart ................................. Los Angeles 54.0 OTHER REAL ESTATE INVESTMENTS: Investments in Partially-Owned Entities: Newkirk Joint Ventures - additional investments........................... Various 10.5 Alexander's Inc. - increase in investment from 32% to 33.1%.......... New York City 3.4 Student Housing Joint Ventures (90% interest) ......................... Florida 24.3 Investments in Notes and Mortgages Receivable: Loan to NorthStar Partnership L.P. ...... 65.0 Loan to Primestone Investment Partners, L.P......................... 62.0 -------- Total Acquisitions and Investments.. $ 404.1 ======== -4-
5 OFFICE: 7 West 34th Street On November 1, 2000 the Company acquired 7 West 34th Street, a 479,000 square foot Manhattan office building, for $128,000,000. RETAIL: Vornado-Ceruzzi Joint Ventures In the first quarter of 2000, the Company and its joint venture partner acquired 2 fee interests containing 210,000 square feet and 6 leasehold interests containing 567,000 square feet in properties located in Pennsylvania, Virginia, Maryland and Ohio formerly occupied by Hechinger, Inc., a home improvement retailer which was liquidated. The purchase price was $27,425,000, of which the Company's share was 80%. MERCHANDISE MART: 33 North Dearborn Street On September 21, 2000 the Company acquired 33 North Dearborn Street, a 321,000 square foot office building in Chicago for $35,000,000 of which $19,000,000 was indebtedness. L.A. Mart On October 2, 2000, the Company acquired the 724,000 square foot L.A. Mart in Los Angeles and its 9.3 acre site for $54,000,000, of which $10,000,000 was indebtedness. OTHER REAL ESTATE INVESTMENTS: Student Housing Joint Venture On January 28, 2000, the Company and its joint venture partner, acquired a 252-unit student housing complex in Gainesville, Florida, for $27,000,000, of which $19,600,000 was indebtedness. The Company's share of this investment is 90%. Alexander's On March 31, 2000, the Company increased its ownership in Alexander's from 32% to 32.9% by acquiring 41,500 shares of Alexander's common stock for $2,740,000. On April 11, 2000, the Company acquired an additional 10,400 shares of Alexander's common stock for $674,000, thereby increasing its ownership interest to 33.1%. Newkirk Joint Ventures During 2000, the Company completed acquisitions of additional equity investments in certain limited partnerships for $10,526,000, including $1,334,000 in cash and $9,192,000 in Operating Partnership units. -5-
6 Loan to NorthStar Partnership L.P. On September 19, 2000, the Company acquired $75,000,000 of subordinated unsecured debt of NorthStar Partnership L.P. ("NorthStar"), a private real estate company, for $65,000,000. The loan bears interest at 11.5% per annum, requires quarterly principal payments of $2,500,000 and matures in May 2002. The effective yield on the loan is approximately 22% including the amortization of the discount. During the third quarter of 2000, NorthStar filed suit against the Company seeking to enjoin Vornado from taking any action with respect to the debt, to rescind the Company's acquisition of the debt and for damages. In the opinion of management, after consultation with legal counsel, NorthStar's suit is without merit and the Company intends to vigorously defend against it. On January 19, 2001, the Company agreed to withdraw its motion to dismiss NorthStar's complaint without prejudice and NorthStar agreed to take no action in the proceeding until after providing written notice that NorthStar wishes to recommence proceedings in the action. If NorthStar does not give such notice by April 2, 2001, its complaint will be dismissed without prejudice. Loan to Primestone Investment Partners, L.P. On September 28, 2000, the Company made a $62,000,000 subordinated loan to Primestone Investment Partners, L.P. secured by partnership units in Prime Group Realty LP, the operating partnership of Prime Group Realty Trust (NYSE:PGE). The Company has received a 1% upfront fee and will be entitled to receive certain other fees aggregating approximately 3% upon repayment of the loan. The debt bears interest at 16% per annum and matures on October 26, 2001 with an eleven month extension option. The effective yield on the loan is approximately 20% including the fees. World Trade Center On February 22, 2001, the Company entered into a 20-day exclusive negotiation period with the Port Authority of NY & NJ to complete the contract and associated documents for the net lease of the 11 million square foot World Trade Center complex in New York. The 99-year net lease of the World Trade Center has been valued by the Port Authority's advisors at approximately $3.25 billion. The Board of the Commissioners of the Port Authority has instructed their staff and advisors to present the final contract for approval at a special Port Authority Board meeting scheduled for March 14, 2001. In connection therewith, the Company has provided the Port Authority with a $100 million refundable and non-drawable letter of credit. DISPOSITIONS The Company sold (i) its three shopping centers located in Texas on March 2, 2000 for $25,750,000, resulting in a gain of $2,560,000, and (ii) its Westport, Connecticut office property on August 30, 2000 for $24,000,000, resulting in a gain of $8,405,000. In addition, the Company entered into an agreement on February 1, 2001 to sell its 50% interest in 570 Lexington Avenue, a New York City office property, for approximately $60,000,000, which will result in a gain of approximately $9,000,000. The sale is expected to be completed in the third quarter of 2001 subject to customary closing conditions. -6-
7 DEVELOPMENT AND REDEVELOPMENT PROJECTS The following table sets forth certain information for development/redevelopment projects: ($ in millions) The Company's Share of ----------------------------------------------------------------- Costs Expended --------------------------- From Inception Estimated Year Ended through Estimated Completion Project December 31, December 31, Costs to Projects Date Cost 2000 2000 Complete - ----------- ---------- --------- ------------ -------------- --------- COMPLETED IN 2000: Office: 770 Broadway - refurbishment of 1,050,000 square foot office property............ $ 36.0 $ 13.4 $ 36.0 Merchandise Mart: Market Square Complex - 335,000 square foot expansion project.......... 23.0 7.8 23.0 ------- -------- -------- $ 59.0 $ 21.2 $ 59.0 ======= ======== ======== IN PROCESS: Office: Penn Plaza Area: 2 Penn Plaza - construction of 42,000 square feet of retail space and the redevelopment of 45,000 square feet of existing retail space............... Fall 2002 $ 50.8 $ 3.4 $ 3.4 $ 47.4 435 Seventh Avenue - demolition of existing buildings and the construction of 37,000 square feet of retail space and 176,000 square Summer feet of office space....... 2002 78.6 .5 .5 78.1 GreenPoint site adjacent to One Penn Plaza - redevelopment of 41,000 square feet of retail Spring space...................... 2002 12.1 .7 .7 11.4 Merchandise Mart: Market Square on Main Street, High Point - construction of 465,000 square feet of showrooms... Fall 2001 38.7 9.9 9.9 28.8 Other: Park Laurel (80% interest) - construction and sale of 119,000 square foot residential condominium tower in Manhattan (as of March 1, 2001, 52 of the 53 units have been presold for an aggregate Summer of $135.6)................. 2001 106.9 47.9 70.8 36.1 Fort Lee, New Jersey (75% interest) - construction of an 800,000 square foot high rise rental Summer apartment complex.......... 2002 100.3 25.5 43.3 57.0 ------- -------- -------- ------- $ 387.4 $ 87.9 $ 128.6 $ 258.8 ======= ======== ======== ======= The above table does not include the capital requirements of Alexander's, Temperature Controlled Logistics and CESCR which are described in Item II: Properties. In addition to the projects noted above, the Company has identified the following opportunities for future development or redevelopment: (i) the redevelopment of the former Bradlees retail site at 14th Street and Union Square to include a combination of office and retail space, (ii) the refurbishment of the Hotel Pennsylvania to include the redevelopment of existing retail space, (iii) the construction of an office tower in excess of 1,000,000 square feet at 20 Times Square (70% interest), (iv) the redevelopment of office space at 640 Fifth Avenue, and (v) the redevelopment of retail space at 34th Street and Eighth Avenue. There can be no assurance that the above projects will be commenced or will be successful. -7-
8 OPERATIONS OF VORNADO OPERATING COMPANY In October 1998, Vornado Operating Company ("Vornado Operating") was spun off from the Company in order to own assets that the Company could not itself own and conduct activities that the Company could not itself conduct. The Company and Vornado Operating are parties to certain agreements described below. Revolving Credit Agreement Vornado Operating was granted a $75,000,000 unsecured revolving credit facility from the Company (the "Revolving Credit Agreement") which expires on December 31, 2004. Borrowings under the Revolving Credit Agreement bear interest at LIBOR plus 3%. The Company receives a commitment fee equal to 1% per annum on the average daily unused portion of the facility. No amortization is required to be paid under the Revolving Credit Agreement during its term. The Revolving Credit Agreement prohibits Vornado Operating from incurring indebtedness to third parties (other than certain purchase money debt and certain other exceptions) and prohibits Vornado Operating from paying dividends. As of December 31, 2000, $19,782,000 was outstanding under the Revolving Credit Agreement. Agreement with Vornado Operating The Company and Vornado Operating are parties to an Agreement pursuant to which, among other things, (a) the Company will under certain circumstances offer Vornado Operating an opportunity to become the lessee of certain real property owned now or in the future by the Company (under mutually satisfactory lease terms) and (b) Vornado Operating will not make any real estate investment or other REIT-Qualified Investment unless it first offers the Company the opportunity to make such investment and the Company has rejected that opportunity. Under the Agreement, the Company provides Vornado Operating with certain administrative, corporate, accounting, financial, insurance, legal, tax, data processing, human resources and operational services. For these services, Vornado Operating compensates the Company in an amount determined in good faith by the Company as the amount an unaffiliated third party would charge Vornado Operating for comparable services and reimburses the Company for certain costs incurred and paid to third parties on behalf of Vornado Operating. Pursuant to the Agreement, compensation for such services was approximately $330,000 for the years ended December 31, 2000 and 1999. Vornado Operating and the Company each have the right to terminate the Agreement if the other party is in material default of the Agreement or upon 90 days written notice to the other party at any time after December 31, 2003. In addition, the Company has the right to terminate the Agreement upon a change in control of Vornado Operating. Vornado Operating's Management Messrs. Roth, Fascitelli, West and Wight are directors of Vornado Operating. Mr. Roth is also Chairman of the Board and Chief Executive Officer of Vornado Operating, Mr. Fascitelli is also President of Vornado Operating, and certain other members of the Company's senior management hold corresponding positions with Vornado Operating. Temperature Controlled Logistics Business On March 11, 1999, the Vornado/Crescent Partnerships sold all of the non-real estate assets of Temperature Controlled Logistics encompassing the operations of the temperature controlled business for approximately $48,700,000 to a new partnership owned 60% by Vornado Operating Company and 40% by Crescent Operating Inc. ("AmeriCold Logistics"). AmeriCold Logistics leases the underlying temperature controlled warehouses used in this business from the Vornado/Crescent Partnerships ("the Landlord") which continue to own the real estate. The leases, as amended, generally 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 revenue AmeriCold Logistics receives from its customers. AmeriCold is also 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. AmeriCold Logistics has the right to defer a portion of the rent for up to three years beginning on March 11, 1999 to the extent that available cash, as defined in the leases, is insufficient to pay such rent. -8-
9 Total contractual rent was $160,494,000 and $130,213,000 ($164,464,000 and $133,100,000 including the effect of the straight-lining of rents) for the year ended December 31, 2000 and the period from March 11, 1999 to December 31, 1999. As at December 31, 2000, the balance of the tenant's deferred rent was $22,444,000(1) ($17,044,000(1) in 2000 and $5,400,000 in the fourth quarter of 1999) of which the Company's share was $13,466,000. Based on the Company's policy of recognizing rental income when earned and collection is assured or cash is received, the Company did not recognize $9,780,000 of income in the year ended December 31, 2000. On February 22, 2001, the Landlord restructured the AmeriCold Logistics leases to, among other things, (i) reduce 2001's contractual rent to $146,000,000 (the same amount recognized as rental income in 2000's Funds from Operations), (ii) reduce 2002's contractual rent to $150,000,000 (plus contingent rent in certain circumstances), (iii) increase the Landlord's share of annual maintenance capital expenditures by $4,500,000 to $9,500,000 effective January 1, 2000 and (iv) extend the deferred rent period to December 31, 2003 from March 11, 2002. FINANCING ACTIVITIES During 2000, the Company sold an aggregate of $210,000,000 of Cumulative Redeemable Preferred Units resulting in net proceeds of approximately $204,750,000. On March 1, 2000, the Company completed a $500,000,000 private placement of 10-year, 7.93% mortgage notes, cross-collateralized by 42 shopping center properties, resulting in net proceeds of approximately $490,000,000. In connection therewith, the Company repaid $228,000,000 of existing mortgage debt scheduled to mature on December 1, 2000 and $262,000,000 outstanding under its revolving credit facility. On March 21, 2000, the Company renewed its $1,000,000,000 revolving credit facility for an additional three years. The covenants of the facility include, among others, maximum loan to value ratio, minimum debt service coverage and minimum capitalization requirements. Interest is at LIBOR plus .90% (7.66% at December 31, 2000). The Company paid origination fees of $6,700,000 and pays a commitment fee quarterly of .20% per annum on the facility amount. As of December 31, 2000, $425 million was outstanding under the revolver. In addition, the Company completed property level refinancings of $90,000,000 in 2000 and $105,000,000 in 2001. Further detail of the Company's financing activities are disclosed in Management's Discussion and Analysis of Financial Condition and Results of Operations in Part II of this document. At December 31, 2000, the ratio of debt-to-enterprise value (market equity value plus debt less cash) was 43% based on debt of $3.8 billion which included the Company's proportionate share of debt of partially-owned entities. In the future, in connection with its strategy for growth, this percentage may change. The Company's policy concerning the incurrence of debt may be reviewed and modified from time to time by the Company without the vote of shareholders. The Company may seek to obtain funds through equity offerings, debt financings or asset sales, although there is no express policy with respect thereto. The Company may offer its shares or Operating Partnership units in exchange for property and may repurchase or otherwise re-acquire its shares or any other securities in the future. - ------------ (1) An additional $1,956,000 applicable to the receivable arising from the straight-lining of rents was also deferred in the year ended December 31, 2000. -9-
10 EBITDA BY SEGMENT AND REGION The following table sets forth the percentage of the Company's EBITDA(1) by segment and region for the years ended December 31, 2000, 1999, and 1998. PERCENTAGE OF EBITDA ------------------------ Years Ended December 31, ------------------------ SEGMENT 2000 1999 1998 ---- ---- ---- Office........................... 45% 42% 37% Retail........................... 16% 19% 26% Merchandise Mart Properties...... 12% 12% 9% Temperature Controlled Logistics. 13% 16% 20% Other............................ 14% 11% 8% --- --- -- 100% 100% 100% === === === REGION New York City metropolitan area.. 50% 48% 54% Washington D.C./Northeast Virginia 12% 12% 7% Chicago.......................... 9% 8% 6% Philadelphia metropolitan area... 3% 4% 5% Puerto Rico...................... 2% 2% 2% Other (2)........................ 24% 26% 26% --- --- -- 100% 100% 100% === === === ------------------ (1) EBITDA represents income before interest, taxes, depreciation and amortization, extraordinary or non-recurring items, gains or losses on sales of real estate, the effect of straight-lining of property rentals for rent escalations and minority interest. Management considers EBITDA a supplemental measure for making decisions and assessing the performance of its segments. EBITDA may not be comparable to similarly titled measures employed by other companies. (2) Other includes the Temperature Controlled Logistics segment which has facilities in 33 states and Alberta, Canada. See page 36 for details. -10-
11 RELATIONSHIP WITH ALEXANDER'S The Company owns 33.1% of the outstanding shares of common stock of Alexander's. See "Interstate Properties" below for a description of Interstate's ownership of the Company and Alexander's. Alexander's has seven properties (see Item 2. Properties--Alexander's). At December 31, 2000, the Company has loans receivable from Alexander's of $115,000,000, including $20,000,000 drawn under the $50,000,000 line of credit the Company granted to Alexander's on August 1, 2000. The terms of the line of credit are the same as Alexander's original $95,000,000 loan from the Company, including the interest rate of 15.72%. The maturity date of the original $95,000,000 loan has been extended to March 15, 2002, which is also the maturity date of the new line of credit. The interest rate on the loan and line of credit will reset on March 15, 2001, using the same spread to treasuries as presently exists. The Company manages, develops and leases the Alexander's properties under a management and development agreement (the "Management Agreement") and a leasing agreement (the "Leasing Agreement") pursuant to which the Company receives annual fees from Alexander's. These agreements have a one-year term expiring in March of each year and are automatically renewable. See Item 2. Properties for a description of Alexander's Development and Redevelopment projects. Alexander's common stock is listed on the New York Stock Exchange under the symbol "ALX". INTERSTATE PROPERTIES As of December 31, 2000, Interstate Properties and its partners owned approximately 17.7% of the common shares of beneficial interest of the Company, 27.5% of Alexander's common stock and beneficial ownership of 17.7% of Vornado Operating. Interstate Properties is a general partnership in which Steven Roth, David Mandelbaum and Russell B. Wight, Jr. are partners. Mr. Roth is the Chairman of the Board and Chief Executive Officer of the Company, the Managing General Partner of Interstate Properties, and the Chief Executive Officer and a director of both Alexander's and Vornado Operating. Mr. Wight is a trustee of the Company and is also a director of both Alexander's and Vornado Operating. Mr. Mandelbaum is a trustee of the Company and is also a director of Alexander's. COMPETITION The Company's four business segments, Office, Retail, Merchandise Mart Properties and Temperature Controlled Logistics, operate in highly competitive environments. The Company's success depends upon, among other factors, the trends of the national and local economies, the financial condition and operating results of current and prospective tenants and customers, the availability and cost of capital, construction and renovation costs, income tax laws, governmental regulations, legislation and population trends. The Company competes with a large number of real estate property owners and developers. Principal factors of competition are rent charged, attractiveness of property and the quality and breadth of services provided. The Company has a large concentration of properties in the New York City metropolitan area, a highly competitive market. The economic condition of this market may be significantly influenced by supply and demand for space and the financial performance and productivity of the publishing, retail, pharmaceutical, insurance and finance industries. ENVIRONMENTAL REGULATIONS The Company's properties are subject to a variety of environmental laws and regulations in each of the jurisdictions in which it operates governing, among other things, soil and groundwater contamination, the use, handling and disposal of hazardous substances, air emissions, wastewater discharges, and employee health and safety. Under various Federal and state laws and regulations, a current or previous owner or operator of real estate may be required to investigate and clean up hazardous substances released at a property, and may be held liable to a governmental entity or to third parties for property damage or personal injuries and for investigation and clean-up costs incurred by the parties in connection with the contamination. Such laws can impose liability without regard to whether the owner or operator knew of, or caused, the release of such substances. The presence of contamination or the failure to remediate contamination may adversely affect the owner's ability to sell or lease real estate or to borrow using the real estate as collateral. Other Federal, state and local laws and regulations require abatement or removal of asbestos-containing materials that are damaged, decayed or distributed by demolition, or renovation or remodeling. The laws also govern emissions of and exposure to asbestos fibers in the air. Air emissions and waste-water discharges and the operation and subsequent removal of underground storage tanks are also regulated by Federal and state laws. In connection with the ownership, operation and management of its properties, the Company could be held liable for the costs of remedial action with respect to such regulated substances and tanks and related claims for personal injury, property damage or fines. -11-
12 Each of the Company's properties has been subjected to varying degrees of environmental assessment at various times. The environmental assessments did not reveal any material environmental condition. However, there can be no assurance that the identification of new compliance concerns or undiscovered areas of contamination, changes in the extent or known scope of contamination, the discovery of additional sites, or changes in cleanup or compliance requirements would not result in significant costs to the Company. INSURANCE The Company carries comprehensive liability, fire, flood, extended coverage and rental loss insurance with respect to its properties with policy specifications and insured limits customarily carried for similar properties. Management of the Company believes that the Company's insurance coverage conforms to industry norms. CERTAIN ACTIVITIES Acquisitions and investments are not necessarily required to be based on specific allocation by type of property. The Company has historically held its properties for long-term investment; however, it is possible that properties in the portfolio may be sold in whole or in part, as circumstances warrant, from time to time. Further, the Company has not adopted a policy that limits the amount or percentage of assets which would be invested in a specific property. While the Company may seek the vote of its shareholders in connection with any particular material transaction, generally the Company's activities are reviewed and may be modified from time to time by its Board of Trustees without the vote of shareholders. EMPLOYEES The Company has approximately 1,300 employees consisting of 90 in the Office Properties segment, 37 in the Retail Properties segment, 520 in the Merchandise Mart Properties segment, 505 at the Hotel Pennsylvania and 148 corporate staff. This does not include employees of partially-owned entities. SEGMENT DATA The Company operates in four business segments: Office Properties, Retail Properties, Merchandise Mart Properties and Temperature Controlled Logistics. The Company engages in no foreign operations other than one temperature controlled warehouse in Canada. The Company's principal executive offices are located at 888 Seventh Avenue, New York, New York 10019; telephone (212) 894-7000. ITEM 2. PROPERTIES The Company currently owns, directly or indirectly, Office properties, Retail properties, Merchandise Mart properties and Temperature Controlled Logistics refrigerated warehouses. The Company also owns or has investments in Alexander's, Hotel Pennsylvania, Newkirk Joint Ventures, and dry warehouses and industrial buildings. -12-
13 OFFICE The office properties currently consist of (i) all or a portion of 22 office buildings in the New York City metropolitan area (primarily Manhattan) aggregating approximately 14.4 million square feet (collectively, the "New York City Office Properties") and (ii) a 34% interest in Charles E. Smith Commercial Realty, L.P. which owns interests in and manages approximately 12.5 million square feet of office properties in Northern Virginia and Washington, D.C. (the "CESCR Office Properties"). The following data on pages 13 to 18 covers the New York City Office Properties. The CESCR Office Properties are described on pages 19 to 22. New York City Office Properties: The New York City Office Properties contain: (i) 13,215,000 square feet of office space, (ii) 844,000 square feet of retail space and (iii) 336,000 square feet of garage space (5 garages). The following table sets forth the percentage of the New York City Office Properties revenue by tenants' industry: Industry Percentage ---------- Publishing................................................... 11% Retail....................................................... 10% Legal........................................................ 7% Media and Entertainment...................................... 7% Finance...................................................... 6% Technology................................................... 6% Insurance.................................................... 5% Government................................................... 5% Pharmaceuticals.............................................. 5% Apparel...................................................... 4% Service Contractors.......................................... 4% Engineering.................................................. 3% Advertising.................................................. 3% Bank Branches................................................ 3% Other........................................................ 21% The Company's New York City Office property lease terms range from 5 to 7 years for smaller tenant spaces to as long as 20 years for major tenants. Leases typically provide for step-ups in rent periodically over the term of the lease and pass through to tenants the tenant's share of increases in real estate taxes and operating expenses over a base year. Electricity is provided to tenants on a submetered basis or included in rent based on surveys and adjusted for subsequent utility rate increases. Leases also typically provide for tenant improvement allowances for all or a portion of the tenant's initial construction costs of its premises. The Company's new PowerSpace flexible shared office space business was launched in September 2000. Offices range in size from 80 to 1,200 square feet. Lease terms range from one month to a year. The PowerSpace product line includes individual offices, group rooms and multi-room suites. Operations commenced in November 2000 at 330 Madison Avenue, with 75,000 square feet. Operations are expected to commence at 770 Broadway and 909 Third Avenue in the first half of 2001. Agreements provide for base rent and billings for ancillary services, such as telephones, internet access, conference room access and other office equipment and supplies. -13-
14 No tenant in the office segment accounted for more than 10% of the Company's total revenue. Below is a listing of tenants which accounted for 2% or more of the New York City Office Properties revenues in 2000: (in thousands, except percentages) Square Feet 2000 Tenant Leased Revenues Percentage ------ ----------- -------- ---------- Sterling Winthrop Inc............ 429 $ 18,101 4% Times Mirror Company............. 520 16,208 3% The McGraw Hill Companies Inc................ 498 15,764 3% CitiBank, N.A.................... 150 9,791 2% The following table sets forth lease expirations for the New York Office property leases for each of the next 10 years, as of December 31, 2000, assuming that none of the tenants exercise their renewal options. Annual Escalated Percentage of Rent of Expiring Leases Number of Square Feet of Total Leased ----------------------------- Year Expiring Leases Expiring Leases Square Feet Total Per Square Foot - ---- --------------- --------------- ------------- ----------- --------------- 2001.................................... 215 818,000 5.9% $28,052,000 $34.29 2002.................................... 144 645,000 4.7% 20,623,000 31.98 2003.................................... 144 1,185,000(1) 8.5% 26,439,000 22.32 2004.................................... 141 987,000 7.1% 35,667,000 36.15 2005.................................... 115 622,000 4.5% 22,459,000 36.12 2006.................................... 111 1,151,000 8.3% 31,172,000 27.09 2007.................................... 85 818,000 5.9% 28,164,000 34.42 2008.................................... 96 1,162,000 8.4% 36,636,000 31.53 2009.................................... 63 618,000 4.5% 21,587,000 34.95 2010.................................... 96 1,529,000 11.0% 52,748,000 34.50 (1) Includes 492,000 square feet at 909 Third Avenue leased to the U.S. Post Office. The annual escalated rent is $3,216,000 or $6.53 per square foot. The U.S. Post Office has 7 five-year renewal options remaining. As of February 1, 2001, the occupancy rate of the Company's New York City Office properties was 96%. The following table sets forth the occupancy rate and the average annual escalated rent per square foot for the New York City Office properties at the end of each of the past three years. Average Annual As of Rentable Escalated Rent December 31, Square Feet Occupancy Rate Per Square Foot - ----------------------- ----------- -------------- --------------- 2000.................. 14,396,000 96% $ 32.18 1999.................. 14,028,000 95% $ 30.16 1998.................. 12,437,000 91% $ 28.14 -14-
15 In 2000, 1,533,268 square feet of New York City office space was leased at a weighted average initial rent per square foot of $46.38. The Company's ownership interest in the leased square footage is 1,407,333 square feet at a weighted average initial rent per square foot of $45.91, a 50.3% increase over the weighted average escalated rent per square foot of $30.54 for the expiring leases. Following is the detail by building: 2000 Leases -------------------------------- Average Initial Rent Per Square Location Square Feet Foot(1) - -------- ----------- --------------- 909 Third Avenue.................... 262,646 $ 53.49 One Penn Plaza...................... 246,066 46.09 Eleven Penn Plaza................... 173,607 36.27 Two Penn Plaza...................... 115,879 50.91 330 West 34th Street................ 109,072 34.23 150 East 58th Street................ 103,987 40.43 Two Park Avenue..................... 82,720 43.42 330 Madison Avenue (25%)............ 69,673 51.71 866 UN Plaza........................ 66,304 46.04 595 Madison Avenue.................. 57,935 66.13 570 Lexington Avenue (50%).......... 56,623 57.78 888 Seventh Avenue.................. 52,819 61.19 20 Broad Street (60%)............... 42,643 31.42 1740 Broadway....................... 41,845 44.80 90 Park Avenue...................... 17,793 52.00 550/600 Mamaroneck.................. 17,538 23.25 40 Fulton Street.................... 13,340 27.54 770 Broadway........................ 2,778 35.00 --------- Total............................... 1,533,268 46.38 ========= Vornado's Ownership interest........ 1,407,333 45.91 ========= (1) Most leases include periodic step-ups in rent, which are not reflected in the initial rent per square foot leased. In addition to the office space noted above, the Company leased 37,000 square feet of retail space, primarily below grade, at $48.64 per square foot. During 1999 and 2000, the Company granted non-exclusive rights to six companies to install fiber-optic networks and to provide broadband data, video and voice communications services in its office buildings in return for a share of revenues and warrants to purchase common stock. The Company has invested approximately $23.2 million in these entities, representing interests in each entity of less than 3%. -15-
16 New York City Office Properties The following table sets forth certain information for the New York City Office Properties owned by the Company as of December 31, 2000. ANNUALIZED ANNUALIZED YEAR APPROXIMATE BASE RENT ESCALATED ORIGINALLY LAND LEASABLE NUMBER PER RENT DEVELOPED AREA BUILDING SQUARE OF SQ. FT. PER SQ. FT. PERCENT LOCATION OR ACQUIRED (SQ. FT.) FEET TENANTS (1) (2) LEASED (1) -------- ----------- --------- ---- ------- --- --- ---------- MANHATTAN One Penn Plaza (3) 1998 128,000 2,474,000 222 $ 30.43 $ 31.37 98% Two Penn Plaza 1997 117,000 1,498,000 52 29.16 29.94 98% 909 Third Avenue (3) 1999 82,000 1,312,000 22 26.39 28.36 95% 770 Broadway 1998 63,000 1,050,000 11 28.52 29.33 99% LEASE PRINCIPAL TENANTS EXPIRATION/ (50,000 SQUARE FEET OR OPTION ENCUMBRANCES LOCATION MORE) EXPIRATION (THOUSANDS) -------- ----- ---------- ----------- MANHATTAN One Penn Plaza (3) Buck Consultants 2008 $ 275,000 Cisco Systems 2005/2011 First Albany 2008/2013 General Motor Acceptance 2004/2009 Corp. Kmart Corporation 2016/2036 Metropolitan Life 2002-2004 Miller Freeman Inc. 2011/2021 MWB Leasing 2006 Parsons Brinkerhoff 2008/2013 Public Service Commission 2004 Stone & Webster 2008 Two Penn Plaza Compaq Computer 2003 160,518 Forest Electric 2006/2011 Information Builders, Inc. 2013/2023 Madison Square Garden 2007/2017 McGraw Hill Co., Inc. 2020/2030 Ogden Services 2008 US Healthcare Service 2006 909 Third Avenue (3) Bear Stearns 2011 107,879 Citibank 2008 Fischbein Badillo 2008 Forest Laboratories 2010/2020 IDG Books 2010 Ogilvy Public Relations 2009/2014 Shearman & Sterling 2007/2012 U.S. Post Office (4) 2003/2033 770 Broadway J. Crew 2012/2017 94,073 Kmart 2016/2036 MTVN Online 2010/2015 V.N.U. U.S.A, Inc 2015/2020 -16-
17 ANNUALIZED ANNUALIZED YEAR APPROXIMATE BASE RENT ESCALATED ORIGINALLY LAND LEASABLE NUMBER PER RENT DEVELOPED AREA BUILDING SQUARE OF SQ. FT. PER SQ. FT. PERCENT LOCATION OR ACQUIRED (SQ. FT.) FEET TENANTS (1) (2) LEASED (1) -------- ----------- --------- ---- ------- --- --- ---------- Eleven Penn Plaza 1997 56,000 981,000 73 27.98 30.46 93% Two Park Avenue 1997 44,000 953,000 43 27.12 27.59 99% 90 Park Avenue 1997 38,000 882,000 27 33.75 38.95 100% 888 Seventh Avenue (3) 1999 32,000 865,000(5) 50 31.47 33.69 94% 330 West 34th Street (3) 1998 46,000 630,000 11 14.62 18.81 100% 1740 Broadway 1997 30,000 556,000 15 34.60 35.98 92% 150 East 58th Street 1998 21,000 548,000 124 35.47 37.28 95% 7 West 34th Street 2000 35,000 479,000 4 27.23 32.48 100% 866 United Nations Plaza 1997 90,000 388,000 80 32.69 33.92 90% 595 Madison (Fuller 1999 13,000 294,000 79 58.81 64.49 89% Building) LEASE PRINCIPAL TENANTS EXPIRATION/ (50,000 SQUARE FEET OR OPTION ENCUMBRANCES LOCATION MORE) EXPIRATION (THOUSANDS) -------- ----- ---------- ----------- Eleven Penn Plaza Crowthers McCall 2010 52,289 EMC Corp. 2008 Executive Office Network 2012 Faulkner & Gray 2006/2011 Federated Dept Stores 2015 General Media 2009 Two Park Avenue Herrick Feinstein 2010/2015 90,000 Medical Liability Mutual Ins 2009 Schiefflin & Somerset 2006/2010 Times Mirror Company 2010/2025 United Way 2013/2018 90 Park Avenue HQ Global Workplace 2008 -- Sterling Winthrop Inc. 2015/2035 Warnaco 2004 888 Seventh Avenue (3) Golden Books 2013 55,000 New Line Realty 2007 Soros Fund 2004/2010 Stanley H. Kaplan 2006/2011 The Limited 2014 330 West 34th Street (3) City of New York 2012/2017 -- Live Person Inc. 2010 NBC Internet 2012 Props for Today 2006/2016 1740 Broadway Davis & Gilbert 2013 -- Mutual Life Insurance 2016/2026 William Douglas McAdams 2007 150 East 58th Street -- -- 7 West 34th Street Capital Cities Media 2006 -- Health Insurance Plan of NY 2011 866 United Nations Plaza Fross & Zelnick 2009 33,000 595 Madison (Fuller -- 79,427 Building) -17-
18 ANNUALIZED ANNUALIZED YEAR APPROXIMATE BASE RENT ESCALATED ORIGINALLY LAND LEASABLE NUMBER PER RENT DEVELOPED AREA BUILDING SQUARE OF SQ. FT. PER SQ. FT. PERCENT LOCATION OR ACQUIRED (SQ. FT.) FEET TENANTS (1) (2) LEASED (1) -------- ----------- --------- ---- ------- --- --- ---------- 640 Fifth Avenue 1997 22,000 259,000 12 58.89 61.78 83% 40 Fulton Street 1998 18,000 233,000 29 28.51 29.14 100% 689 Fifth Avenue 1998 6,000 88,000 7 57.24 58.94 65% 330 Madison Avenue 1997 33,000 774,000 47 37.35 39.82 99% (25% Ownership) 20 Broad Street (3) 1998 20,000 461,000 19 28.17 29.18 95% (60% Ownership) 825 Seventh Avenue 1996 18,000 165,000 3 27.12 28.97 100% (50% Ownership) WESTCHESTER 550/600 Mamaroneck Avenue 1998 666,000 235,000 46 20.68 20.70 97% (3) NEW JERSEY Paramus (3) 1987 148,000 118,000(5) 26 17.76 17.76 99% TOTAL OFFICE BUILDINGS 1,726,000 15,243,000 1,002 $ 30.29 $ 32.18 96% =========== =========== ======== ======== VORNADO'S OWNERSHIP INTEREST 1,684,000 14,396,000 96% =========== =========== PROPERTY UNDER CONTRACT FOR SALE 570 Lexington Avenue (49.9% ownership) 1997 16,000 425,000 55 $ 35.73 $ 37.10 99% LEASE PRINCIPAL TENANTS EXPIRATION/ (50,000 SQUARE FEET OR OPTION ENCUMBRANCES LOCATION MORE) EXPIRATION (THOUSANDS) -------- ----- ---------- ----------- 640 Fifth Avenue BSMG Worldwide 2008/2013 -- Hennes & Mauritz 2014 40 Fulton Street -- -- -- 689 Fifth Avenue -- -- -- 330 Madison Avenue Bank Julius Baer 2005 60,000 (25% Ownership) BDO Seidman 2010/2015 PowerSpace & Services 2016 20 Broad Street (3) N.Y. Stock Exchange 2003-2010/2066 -- (60% Ownership) 825 Seventh Avenue Young & Rubicom 2010/2015 23,768 (50% Ownership) WESTCHESTER 550/600 Mamaroneck Avenue -- -- -- (3) NEW JERSEY Paramus (3) -- -- -- TOTAL OFFICE BUILDINGS $1,030,954 ========== VORNADO'S OWNERSHIP INTEREST $ 974,070 ========== PROPERTY UNDER CONTRACT FOR SALE 570 Lexington Avenue (49.9% ownership) -- -- -- (1) Represents annualized monthly base rent for tenants excluding rent for leases which had not commenced as of December 31, 2000, which are included in percent leased. (2) Represents annualized monthly escalated rent for tenants including tenant pass-throughs of operating expenses (exclusive of tenant electricity costs) and real estate taxes. (3) 100% ground leased property. (4) The U.S. Post Office leases approximately 492,000 square feet at this location at annualized escalated rent per square foot of $6.53. (5) The Company occupies 34,000 square feet in 888 Seventh Avenue for its principal Executive offices and New York City Office operations and 47,000 square feet in Paramus for its accounting and administrative departments and Retail real estate operations. -18-
19 CESCR Office Properties: CESCR owns 50 office buildings in the Northern Virginia and Washington D.C. area containing 12.5 million square feet. The Company owns a 34% interest in CESCR. As of December 31, 2000, 42.5 percent of CESCR's property portfolio was leased to various agencies of the U.S. government (General Services Administration "GSA" lessee); the largest U.S. government agencies include the U.S. Patent Trade Office (1.93 million square feet in 17 buildings), the U.S. Social Security Administration (283,000 square feet in one building) and the U.S. Navy Sea Systems Command (271,000 square feet in 7 buildings). One additional tenant, US Airways, Inc. occupied 317,000 square feet in one building. As of December 31, 2000, no other tenants occupied more than 2% of CESCR's office properties. During 2000, CESCR acquired 5 properties containing 1,838,000 square feet in 11 buildings for a total cost of $367 million. In addition, CESCR is constructing a 398,000 square foot office building in its existing Skyline Place Complex for the GSA at an estimated cost of $68,000,000 of which $42,000,000 has been expended as of December 31, 2000. CESCR office leases are typically for 3 to 5 year terms, and may provide for extension options at prenegotiated rates. Most leases provide for annual rental escalations throughout the lease term, plus recovery of increases in real estate taxes and certain property operating expenses. Annual rental escalations are typically based upon either fixed percentage increases or the consumer price index. Leases also typically provide for tenant improvement allowances for all or a portion of the tenant's initial construction costs of its premises. The following table sets forth the percentage of CESCR's office property revenues by tenants' industry: Industry Percentage -------- ---------- Government 43% Government Consultants 29% Communication 4% Transportation 4% Retail 3% Legal 3% Technology 2% Real Estate 2% Accounting & Auditing Services 2% Trade Associations 1% Printing/Publishing 1% Health Services 1% Other 5% Below is a listing of tenants which accounted for 2% or more of the CESCR Office properties revenues: Square Feet 2000 Tenant Leased Revenues Percentage ------ ------ -------- ---------- U.S. Patent Trade Office 1,933 $ 50,733,000 15.8% US Airways, Inc. 317 $ 10,410,000 3.2% U.S. Navy Sea Systems Command 271 $ 7,493,000 2.3% U.S. Social Security Administration 283 $ 6,671,000 2.1% -19-
20 The following table sets forth as of December 31, 2000 CESCR lease expirations for each of the next 10 years, assuming that none of the tenants exercise their renewal options. Annual Escalated Percentage of Rent of Expiring Leases Number of Square Feet of Total Leased ----------------------------- Year Expiring Leases Expiring Leases Square Feet Total Per Square Foot - ---- --------------- --------------- ----------- ----- --------------- 2001...................... 320 3,355,000 27.4% $ 88,973,000 $ 26.52 2002...................... 227 1,673,000 13.7 45,574,000 27.24 2003...................... 235 1,911,000 15.6 55,192,000 28.88 2004...................... 144 2,916,000 23.8 79,607,000 27.30 2005...................... 108 707,000 5.8 20,128,000 28.47 2006...................... 34 413,000 3.4 11,337,000 27.47 2007...................... 16 180,000 1.5 5,273,000 29.26 2008...................... 14 448,000 3.7 14,261,000 31.83 2009...................... 21 438,000 3.6 10,018,000 22.88 2010...................... 20 129,000 1.1 3,801,000 29.54 Of the square feet expiring in 2001, 2,721,000 square feet has been renewed or is currently in negotiations to be renewed. Included in the above table are 30 U.S. Patent Trade Office leases, expiring from 2001 through 2005 as follows: 683,000 square feet in 2001, 79,000 square feet in 2002, 206,000 square feet in 2003, 953,000 square feet in 2004 and 12,000 square feet in 2005. The U.S. Patent Trade Office is scheduled to relocate their offices in the second half of 2004. CESCR expects that all leases expiring prior to 2004 will be extended or renewed to that date. As of February 1, 2001, the occupancy rate of the CESCR office portfolio was 98%. The following table sets forth the occupancy rate and the average annual escalated rent per square foot for the CESCR properties: Average Annual As of Rentable Escalated Rent December 31, Square Feet Occupancy Rate Per Square Foot ------------ ----------- -------------- --------------- 2000.................. 12,495,000 98% $ 27.38 1999.................. 10,657,000 99% 26.46 1998.................. 10,657,000 98% 25.22 -20-
21 During 2000, CESCR leased 2,729,000 square feet (space previously occupied) at an average initial rent per square foot of $29.39, a 13% increase over the weighted average escalated rent per square foot of $25.97 for the expiring leases. The following is the detail by property. Average Initial Rent Location Square Feet Per Square Foot --------------------------------- ----------- -------------------- 1750 Penn Avenue................. 5,000 $ 34.82 1101 17th Street................. 98,000 32.98 1730 M Street.................... 37,000 30.22 1140 Conn Avenue................. 65,000 32.46 1150 17th Street................. 39,000 30.80 Crystal Mall..................... 456,000 27.45 Crystal Plaza.................... 196,000 30.05 Crystal Square................... 224,000 30.49 Crystal Gateway.................. 223,000 30.60 Crystal Park..................... 641,000 29.25 1919 S. Eads Street.............. 27,000 32.05 Skylines......................... 391,000 27.31 Skyline Tower.................... 68,000 27.19 Arlington Plaza.................. 20,000 27.08 Democracy Plaza I................ 16,000 31.81 Courthouse Plaza................. 120,000 29.49 Tysons Dulles.................... 86,000 35.06 Commerce Executive............... 17,000 34.00 --------- Total............................ 2,729,000 29.39 ========= CESCR manages an additional 5.8 million square feet of office and other commercial properties in the Washington, D.C. area for third parties. -21-
22 CESCR Office Properties The following table sets forth certain information for the CESCR Office Properties (in which the Company has a 34% interest), as of December 31, 2000. YEAR APPROXIMATE ORIGINALLY LEASABLE NUMBER ANNUALIZED ANNUALIZED DEVELOPED NUMBER OF BUILDING SQUARE OF BASE RENT PER ESCALATED RENT LOCATION OR ACQUIRED BUILDINGS FEET TENANTS SQ. FT.(1) PER SQ. FT.(2) - ----------------------------------------------------------------------------------------------------------------- Crystal Mall 1968 4 1,068,000 13 24.27 25.05 Crystal Plaza 1964-1969 7 1,223,000 123 24.55 25.17 Crystal Square 1974-1980 4 1,388,000 174 28.08 28.91 Crystal Gateway 1983-1987 4 1,081,000 97 27.83 28.17 Crystal Park 1984-1989 5 2,154,000 99 28.65 29.89 Arlington Plaza 1985 1 174,000 16 25.18 27.57 1919 S. Eads Street 1990 1 93,000 6 29.18 29.49 Skyline Place 1973-1984 6 1,595,000 174 24.76 25.06 One Skyline Tower 1988 1 477,000 5 23.68 24.74 Courthouse Plaza 1988-1989 2 609,000 56 26.56 28.44 1101 17th Street 1963 1 204,000 48 28.59 30.50 1730 M Street 1963 1 190,000 36 26.03 26.72 1140 Conn Avenue 1966 1 175,000 40 29.01 29.46 1150 17th Street 1970 1 226,000 33 29.32 30.05 1750 Penn Avenue 2000 1 262,000 11 31.68 31.75 Democracy Plaza I 2000 1 203,000 27 28.98 29.38 Tysons Dulles 2000 3 474,000 49 25.94 26.38 Commerce Executive 2000 3 412,000 27 23.92 25.11 Reston Executive 2000 3 487,000 22 26.36 26.69 --- ---------- ----- 50 12,495,000 1,056 $ 26.57 $ 27.38 === ========== ===== LEASE PRINCIPAL TENANTS EXPIRATION/ PERCENT (50,000 SQUARE FEET OPTION ENCUMBRANCES LOCATION LEASED(1) OR MORE) EXPIRATION (THOUSANDS) - ----------------------------------------------------------------------------------------------------- Crystal Mall 100% General Services Administration 2001/2011 64,567 General Services Administration 2001/2006 Crystal Plaza 100% General Services Administration 2004/2014 73,256 General Services Administration 2008 Crystal Square 99% General Services Administration 2003/2008 191,879 Lockheed Martin 2003/2008 Oblon Spivak 2004/2009 Crystal Gateway 99% Analytical Services, Inc. 2001/2006 149,458 General Services Administration 2004 Lockheed Martin 2002/2005 Science Applications Int'l Corp. 2002 Crystal Park 100% CE Smith Headquarters 2004/2009 288,215 General Services Administration 2001/2011 Techmatics 2002/2007 US Airways Headquarters 2008/2018 Vitro Corp 2002/2007 Arlington Plaza 100% Georgetown University 2002/2007 18,025 Science Research Analysis Corp. 2001/2011 1919 S. Eads Street 100% Vitro Corp 2001/2004 13,519 Skyline Place 96% Electronic Data Services 2003 131,328 Science Applications Int'l Corp. 2003/2008 Science Research Analysis Corp. 2001 One Skyline Tower 98% General Services Administration 2004 & 2009 67,417 Science Research Analysis Corp. 2003/2008 Courthouse Plaza 100% Arlington County 2003/2008 81,814 KPMG Peat Marwick 2001 1101 17th Street 99% American Iron and Steel Institute 2006/2010 26,440 1730 M Street 99% League of Women Voters 2004/2009 16,508 1140 Conn Avenue 98% Michaels & Wishner, P.C. 2002/2007 19,555 1150 17th Street 98% American Enterprise Institute 2002/2012 31,928 Arthur Andersen LLP 2004 1750 Penn Avenue 53% General Services Administration 2010 34,780 PA Consulting Group Holdings 2011/2016 Democracy Plaza I 100% Optical Technology Group 2002 27,732 Tysons Dulles 100% Keane Federal Systems, Inc. 2006/2011 70,000 Commerce Executive 95% BAE Systems Mission Solutions 2002/2007 54,758 Concert Management Services 2004/2009 Reston Executive 100% Science Applications Int'l Corp. 2004/2014 72,500 ---------- 98% $1,433,679 ========== NOTES: (1) Represents annualized monthly base rent excluding rent for leases which had not commenced as of December 31, 2000, which are included in percent leased. (2) Represents annualized monthly escalated rent for office properties including tenant pass-throughs of operating expenses (exclusive of tenant electricity costs) and real estate taxes. -22-
23 RETAIL The Company owns 55 shopping center properties of which 52 are strip shopping centers primarily located in the Northeast and Midatlantic states, two are regional centers located in San Juan, Puerto Rico and one, the Green Acres Mall, is a super-regional center located in Nassau County, Long Island, New York. The Company's shopping centers are generally located on major regional highways in mature, densely populated areas. The Company believes its shopping centers attract consumers from a regional, rather than a neighborhood market place because of their location on regional highways. The following table sets forth the percentage of the Retail Portfolio rentals by tenants' industry: Industry Percentage -------- ---------- Discount Department Stores........ 24% Supermarkets...................... 11% Women's Apparel................... 5% Home Improvement.................. 5% Electronic Stores................. 5% Family Apparel.................... 5% Restaurants....................... 4% Financial/Insurance............... 4% Membership Warehouse Clubs........ 3% Drug Stores....................... 3% Office Supply Stores.............. 3% Other............................. 28% As of February 1, 2001, the occupancy rate of the retail properties was 93%. The following tables set forth the occupancy rate and the average annual base rent per square foot (excluding the Green Acres Mall) for the properties at the end of each of the past five years. Average Annual Rentable Base Rent Year End Square Feet Occupancy Rate Per Square Foot -------- ----------- -------------- --------------- 2000 11,293,000 92% $ 11.70 1999 10,505,000 92% 11.16 1998 10,625,000 92% 10.53 1997 10,550,000 91% 9.78 1996 10,019,000 90% 9.09 The average annual base rent per square foot for the Green Acres Mall was $13.97 and $13.46 in total, and $35.91 and $35.29 for mall tenants only, at December 31, 2000 and 1999, respectively. The Company's shopping center lease terms range from 5 years or less in some instances, for smaller tenant spaces to as long as 25 years for major tenants. Leases generally provide for additional rents based on a percentage of tenants' sales and pass through to tenants of the tenants' share of all common area charges (including roof and structure in strip shopping centers, unless it is the tenant's direct responsibility), real estate taxes and insurance costs and certain capital expenditures. Percentage rent accounted for less than 2% of total shopping center revenues in 2000. None of the tenants in the Retail Segment accounted for more than 10% of the Company's total revenues. -23-
24 Below is a listing of tenants which accounted for 2% or more of the Retail property revenues in 2000: (in thousands, except percentages) 2000 Square Feet Property Tenant Leased Rentals Percentage ------ ------ ------- ---------- Bradlees, Inc. ("Bradlees") 1,625 $18,419 14.3% The Home Depot, Inc. 409 5,165 4.0% The TJX Companies, Inc. 298 2,965 2.3% The Gap 104 2,940 2.3% Staples, Inc. 199 2,861 2.2% Toys "R" Us/Kids "R" Us 330 2,775 2.1% Bradlees filed for protection under Chapter 11 of the U.S. Bankruptcy Code on December 26, 2000 and closed all of its stores in February 2001. The Company leases 16 locations to Bradlees. Of these 16 locations, the leases for 14 are fully guaranteed, and the fifteenth lease is guaranteed as to 70% of the rent, by Stop & Shop Companies, Inc., under a Master Agreement and Guaranty, dated May 1, 1992. Stop & Shop is a wholly-owned subsidiary of Koninklijke Ahold NV (formerly Royal Ahold NV), a leading international food retailer. The effectiveness of Stop & Shop's guarantee to Vornado of Bradlees' lease obligations is not affected by Bradlees' bankruptcy. None of these leases have been either rejected or assumed. The 16th location, the 14th Street and Union Square property is not guaranteed. In 1999, the Company paid Bradlees $11,000,000 to modify the terms of this lease to increase the rent by approximately $1,100,000 per annum to $4,600,000 effective March 2000, and to change the lease expiration date from October 2019 to March 15, 2002. On February 9, 2001, Bradlees rejected this lease. The Company is currently considering various redevelopment alternatives for this site which will include a combination of office and retail space. The following table sets forth as of December 31, 2000 lease expirations for each of the next 10 years assuming that none of the tenants exercise their renewal options. Annual Base Rent of Expiring Leases Number of Square Feet of Percentage of Total ------------------------------ Year Expiring Leases Expiring Leases Leased Square Feet Total Per Square Foot - ---- --------------- --------------- ------------------ ----------- --------------- 2001......... 126 317,000 3.1% $ 4,961,000 $ 15.65 2002......... 79 965,000 9.4% 12,219,000 12.67 2003......... 63 545,000 5.3% 6,884,000 12.64 2004......... 93 984,000 9.6% 11,607,000 11.79 2005......... 102 541,000 5.2% 9,929,000 18.37 2006......... 49 789,000 7.7% 6,159,000 7.80 2007......... 90 608,000 5.9% 5,978,000 9.84 2008......... 53 340,000 3.3% 2,940,000 8.66 2009......... 46 595,000 5.8% 6,176,000 10.37 2010......... 31 547,000 5.3% 6,493,000 11.87 -24-
25 In 2000, approximately 350,000 square feet of retail space was leased at a weighted average base rent per square foot of $14.73, a 12.9% increase over the weighted average escalated rent per square foot of $13.05 for the expiring leases. Following is the detail by property: 2000 Leases -------------------------- Average Initial Rent Square Per Square Location Feet Foot(1) ---------------- -------- ------------ Space Leases: East Hanover 66,000 $ 7.51 Hagerstown 50,000 3.32 Towson 39,000 4.23 Woodbridge 37,000 11.50 Valley Stream 30,000 47.57 Allentown 19,000 16.00 Jersey City 14,000 13.85 Union 13,000 29.90 Totowa 11,000 30.00 Bensalem 10,000 18.90 Hackensack 10,000 20.99 Middletown 9,000 19.78 Morris Plains 9,000 22.78 Dundalk 8,000 12.30 Bethlehem 7,000 5.75 Bricktown 6,000 19.35 Cherry Hill 4,000 14.75 Marlton 2,000 12.28 North Plainfield 2,000 20.14 Las Catalinas 2,000 37.00 Amherst 1,000 17.00 Baltimore 1,000 8.00 ------- Total 350,000 14.73 ======= Land Leases(2): Rochester 204,000 $ 3.10 Lancaster 130,000 3.25 Newington 130,000 5.00 - ---------- (1) Most leases include periodic step-ups in rent, which are not reflected in the initial rent per square foot leased. (2) The land in Rochester (pending site plan approval) and in Newington is leased to Wal*Mart and the land in Lancaster is leased to Lowes Home Centers. The Company's strip shopping centers are substantially (over 80%) leased to large stores (over 20,000 square feet). Tenants include destination retailers such as discount department stores, supermarkets, home improvements stores, discount apparel stores, membership warehouse clubs and "category killers." Category killers are large stores which offer a complete selection of a category of items (e.g., toys, office supplies, etc.) at low prices, often in a warehouse format. Tenants typically offer basic consumer necessities such as food, health and beauty aids, moderately priced clothing, building materials and home improvement supplies, and compete primarily on the basis of price. The Company's two regional shopping centers located in Montehiedra and Caguas, Puerto Rico, (both of which are in the San Juan area) contain 1,014,000 square feet of which the Company owns 727,000 square feet. The centers are anchored by four major stores: Sears, Roebuck and Co., Kmart (one in each of the centers) and a Builders Square Home Improvement store. The Green Acres Mall is a 1.6 million square foot super-regional enclosed shopping mall complex situated in Nassau County, Long Island, New York, approximately one mile east of the borough of Queens, New York. The Green Acres Mall is anchored by four major department stores: Sears, Roebuck and Co., J.C. Penney Company, Inc. and Federated Department Stores, Inc. doing business as Macy's and Stern's (on February 8, 2001, Sterns announced they are closing this store). The complex also includes The Plaza at Green Acres, a 188,000 square foot strip shopping center which is anchored by Kmart and Waldbaums. -25-
26 Retail Properties The following table sets forth certain information for the Retail Properties as of December 31, 2000. APPROXIMATE LEASABLE BUILDING SQUARE FOOTAGE ----------------------- OWNED BY YEAR TENANT ON ORIGINALLY OWNED/ LAND ANNUALIZED DEVELOPED LAND LEASED LEASED NUMBER BASE RENT OR AREA BY FROM OF PER LOCATION ACQUIRED (ACRES) COMPANY COMPANY TENANTS SQ. FT.(1) - ---------------------------- ---------- ------- ---------- --------- ------- ---------- NEW JERSEY Bordentown 1958 31.2 179,000 -- 4 $ 6.66 Bricktown 1968 23.9 260,000 3,000 20 10.66 Cherry Hill 1964 37.6 231,000 64,000 15 9.38 Delran 1972 17.5 168,000 4,000 5 5.70 Dover 1964 19.6 173,000 -- 13 6.73 East Brunswick 1957 19.2 216,000 10,000 6 14.25 East Hanover I 1962 24.6 271,000 -- 19 11.36 East Hanover II 1979 8.1 91,000 -- 13 11.50 Hackensack 1963 21.3 208,000 59,000 20 16.25 Jersey City 1965 16.7 223,000 3,000 12 13.09 Kearny 1959 35.3 42,000 62,000 4 13.49 Lawnside 1969 16.4 145,000 -- 3 10.50 LEASE EXPIRATION/ PERCENT PRINCIPAL TENANTS OPTION ENCUMBRANCES LOCATION LEASED(1) (30,000 SQUARE FEET OR MORE) EXPIRATION (THOUSANDS) - ---------------------------- --------- ---------------------------- ----------- ------------ NEW JERSEY Bordentown 98% Bradlees(2) 2011/2021 $ 8,236(7) Shop-Rite 2011/2016 Bricktown 96% Kohl's 2008/2018 16,645(7) Shop-Rite 2002/2017 Cherry Hill 97% Bradlees(2) 2006/2026 15,308(7) Drug Emporium 2002 Shop & Bag(4) 2007/2017 Toys "R" Us 2012/2042 Delran 94% Sam's Wholesale 2011/2021 6,561(7) Dover 98% Ames 2017/2037 7,502(7) Shop-Rite 2012/2022 East Brunswick 98% Bradlees(2) 2003/2023 23,242(7) Shoppers World 2007/2012 T.J. Maxx 2004/2009 Circuit City 2018/2038 East Hanover I 98% Home Depot 2009/2019 27,864(7) Marshalls 2004/2009 Pathmark 2009/2024 Today's Man 2009/2014 East Hanover II 100% -- -- -- Hackensack 99% Bradlees(2) 2012/2017 25,534(7) Pathmark 2014/2034 Staples 2003/2013 Jersey City 100% Bradlees(2) 2002/2022 19,548(7) Shop-Rite 2008/2028 Kearny 68% Pathmark 2013/2033 3,816(7) Lawnside 100% Home Depot 2012/2027 10,817(7) Drug Emporium 2007 -26-
27 APPROXIMATE LEASABLE BUILDING SQUARE FOOTAGE ----------------------- OWNED BY YEAR TENANT ON ORIGINALLY OWNED/ LAND ANNUALIZED DEVELOPED LAND LEASED LEASED NUMBER BASE RENT OR AREA BY FROM OF PER LOCATION ACQUIRED (ACRES) COMPANY COMPANY TENANTS SQ. FT.(1) - ---------------------------- ---------- ------- ---------- --------- ------- ---------- Lodi 1975 8.7 171,000 -- 2 10.05 Manalapan 1971 26.3 194,000 2,000 5 9.28 Marlton 1973 27.8 173,000 7,000 9 9.53 Middletown 1963 22.7 180,000 52,000 19 12.38 Morris Plains 1985 27.0 172,000 1,000 18 11.12 North Bergen 1959 4.6 7,000 55,000 2 26.00 North Plainfield(3) 1989 28.7 217,000 -- 14 8.95 Totowa 1957 40.5 178,000 139,000 7 16.73 Turnersville 1974 23.3 89,000 7,000 3 5.98 Union 1962 24.1 257,000 -- 11 18.96 Vineland 1966 28.0 143,000 -- 3 4.82 Watchung 1959 53.8 50,000 116,000 6 18.57 Woodbridge 1959 19.7 233,000 3,000 10 14.50 NEW YORK Albany (Menands) 1965 18.6 141,000 -- 2 8.94 Buffalo (Amherst)(3) 1968 22.7 185,000 112,000 10 9.62 LEASE EXPIRATION/ PERCENT PRINCIPAL TENANTS OPTION ENCUMBRANCES LOCATION LEASED(1) (30,000 SQUARE FEET OR MORE) EXPIRATION (THOUSANDS) - ---------------------------- --------- ---------------------------- ----------- ------------ Lodi 100% National Wholesale 2013/2023 9,586(7) Liquidators Manalapan 83% Bradlees(2) 2002/2022 12,793(7) Grand Union 2012/2022 Marlton 99% Kohl's(2) 2011/2031 12,439(7) Shop-Rite 2004/2009 Middletown 94% Bradlees(2) 2002/2022 16,792(7) Grand Union 2009/2029 Morris Plains 97% Kohl's 2023 12,292(7) Shop-Rite 2002 North Bergen 95% A&P 2012/2032 4,047(7) North Plainfield(3) 94% Kmart 2006/2016 11,112(7) Pathmark 2001/2011 Totowa 100% Bradlees(2) 2013/2028 30,155(7) Home Depot 2015/2025 Marshalls 2007/2012 Circuit City 2018/2038 Turnersville 100% Bradlees(2) 2011/2031 4,172(7) Union 99% Bradlees(2) 2002/2022 34,245(7) Toys "R" Us 2015 Cost Cutter Drug 2001 Vineland 17% -- -- -- Watchung 97% B.J.'s Wholesale 2024 13,817(7) Woodbridge 90% Bradlees(2) 2002/2022 22,572(7) Foodtown 2007/2014 Syms 2000/2005 NEW YORK Albany (Menands) 74% Fleet Bank 2004/2014 6,348(7) People of the State of NY 2004/2014 Buffalo (Amherst)(3) 81% Circuit City 2017 7,153(7) Media Play 2007/2017 Toys "R" Us 2013 T.J. Maxx 2004 -27-
28 APPROXIMATE LEASABLE BUILDING SQUARE FOOTAGE ----------------------- OWNED BY YEAR TENANT ON ORIGINALLY OWNED/ LAND ANNUALIZED DEVELOPED LAND LEASED LEASED NUMBER BASE RENT OR AREA BY FROM OF PER LOCATION ACQUIRED (ACRES) COMPANY COMPANY TENANTS SQ. FT.(1) - ---------------------------- ---------- ------- ---------- --------- ------- ---------- Freeport 1981 12.5 167,000 -- 3 12.52 New Hyde Park(3) 1976 12.5 101,000 -- 1 15.77 North Syracuse(3) 1976 29.4 98,000 -- 1 2.74 Rochester 1971 15.0 148,000 -- -- -- (Henrietta)(3) Rochester 1966 18.4 -- -- -- -- Valley Stream 1958 100.0 1,525,000 71,000 149 (5) (Green Acres)(3) PENNSYLVANIA Allentown 1957 86.8 267,000 354,000 21 10.41 Bensalem 1972 23.2 119,000 7,000 12 10.04 Bethlehem 1966 23.0 157,000 3,000 12 5.51 Broomall 1966 21.0 146,000 22,000 5 9.41 Glenolden 1975 10.0 101,000 -- 3 10.76 Lancaster 1966 28.0 64,000 -- 4 3.53 Levittown 1964 12.8 104,000 -- 1 5.98 10th and Market Streets, Philadelphia 1994 1.8 271,000 -- 2 9.23 LEASE EXPIRATION/ PERCENT PRINCIPAL TENANTS OPTION ENCUMBRANCES LOCATION LEASED(1) (30,000 SQUARE FEET OR MORE) EXPIRATION (THOUSANDS) - ---------------------------- --------- ---------------------------- ----------- ------------ Freeport 100% Home Depot 2011/2021 15,110(7) Cablevision 2004 New Hyde Park(3) 100% Mayfair Supermarkets 2019/2029 7,626(7) North Syracuse(3) 100% Reisman Properties 2014 -- Rochester -- -- (Henrietta)(3) Rochester -- Wal*Mart(6) (6) -- Valley Stream (Green Acres)(3) 94% Macy's 2006/2036 154,928 Sterns(4) 2007/2017 JC Penney 2012/2017 Sears 2002/2005 Kmart 2010/2038 Dime Savings Bank 2020 Circuit City 2020/2040 GreenPoint Bank 2009 Waldbaum(4) 2011/2039 PENNSYLVANIA Allentown 100% (4) 2011/2031 23,729(7) Shop-Rite 2011/2021 Burlington Coat 2017 Factory Wal*Mart 2024/2094 Sam's Wholesale 2024/2094 T.J. Maxx 2003/2013 Bensalem 100% Kohl's(2) 2020/2040 6,557(7) Bethlehem 78% Pathmark 2008/2033 4,150(7) Super Petz 2005/2015 Broomall 100% Bradlees(2) 2006/2026 9,979(7) Glenolden 100% Bradlees(2) 2012/2022 7,484(7) Lancaster 100% Weis Markets 2008/2018 -- Lowe's Home Center(6) (6) Levittown 100% (2) 2006/2026 -- 10th and Market Streets, Philadelphia 80% Kmart 2010/2035 9,140(7) Rouse Co. 2012/2072 -28-
29 APPROXIMATE LEASABLE BUILDING SQUARE FOOTAGE ----------------------- OWNED BY YEAR TENANT ON ORIGINALLY OWNED/ LAND ANNUALIZED DEVELOPED LAND LEASED LEASED NUMBER BASE RENT OR AREA BY FROM OF PER LOCATION ACQUIRED (ACRES) COMPANY COMPANY TENANTS SQ. FT.(1) - ---------------------------- ---------- ------- ---------- --------- ------- ---------- Upper Moreland 1974 18.6 122,000 -- 1 8.50 York 1970 12.0 113,000 -- 1 5.50 MARYLAND Baltimore (Belair Rd.) 1962 16.0 206,000 -- 4 4.88 Baltimore (Towson) 1968 14.6 146,000 7,000 7 10.92 Baltimore (Dundalk) 1966 16.1 183,000 -- 17 7.25 Glen Burnie 1958 21.2 65,000 57,000 5 7.80 Hagerstown 1966 13.9 133,000 15,000 6 3.42 CONNECTICUT Newington 1965 19.2 32,000 -- 4 18.02 Waterbury 1969 19.2 140,000 3,000 7 7.47 MASSACHUSETTS Chicopee 1969 15.4 112,000 3,000 2 4.71 Milford(3) 1976 14.7 83,000 -- 1 5.26 Springfield 1966 17.4 8,000 117,000 2 12.25 LEASE EXPIRATION/ PERCENT PRINCIPAL TENANTS OPTION ENCUMBRANCES LOCATION LEASED(1) (30,000 SQUARE FEET OR MORE) EXPIRATION (THOUSANDS) - ---------------------------- --------- ---------------------------- ----------- ------------ Upper Moreland 100% Sam's Wholesale 2010/2015 7,095(7) York 100% Kmart(4) 2009/2018 4,196(7) MARYLAND Baltimore (Belair Rd.) 81% Disabled American 2009/2014 -- Veterans(4) Food Depot 2003 TJ Maxx(4) 2004/2024 Baltimore (Towson) 99% Staples 2004 11,628(7) Cost Saver Supermarket 2005/2020 Drug Emporium 2004/2009 Baltimore (Dundalk) 77% A & P 2002/2017 6,301(7) Ollie's 2003/2008 Glen Burnie 99% Weis Markets 2018/2053 5,984(7) Hagerstown 100% Big Lots 2002/2012 3,353(7) Pharmhouse 2014 Weis Markets(4) 2004/2009 CONNECTICUT Newington 100% Wal*Mart(6) 2020/2050 6,683(7) Waterbury 82% Toys "R" Us(4) 2010 -- Shaws Supermarkets(4) 2003/2018 MASSACHUSETTS Chicopee 83% Bradlees(2) 2002/2022 -- Milford(3) 100% Bradlees(2) 2004/2009 -- Springfield 100% Wal*Mart 2018/2092 3,190(7) -29-
30 APPROXIMATE LEASABLE BUILDING SQUARE FOOTAGE ----------------------- OWNED BY YEAR TENANT ON ORIGINALLY OWNED/ LAND ANNUALIZED DEVELOPED LAND LEASED LEASED NUMBER BASE RENT OR AREA BY FROM OF PER LOCATION ACQUIRED (ACRES) COMPANY COMPANY TENANTS SQ. FT.(1) - ---------------------------- ---------- ------- ---------- --------- ------- ---------- PUERTO RICO (SAN JUAN) Montehiedra 1997 57.1 525,000 -- 96 16.85 Caguas (50% Ownership) 1998 35.0 343,000 -- 108 25.56 ------- ---------- --------- --- TOTAL SHOPPING CENTERS 1,332.7 10,076,000 1,358,000 730 $ 11.70 ------- ---------- --------- --- VORNADO'S OWNERSHIP INTEREST 1,317.1 9,935,000 1,358,000 ======= ========== ========= LEASE EXPIRATION/ PERCENT PRINCIPAL TENANTS OPTION ENCUMBRANCES LOCATION LEASED(1) (30,000 SQUARE FEET OR MORE) EXPIRATION (THOUSANDS) - ---------------------------- --------- ---------------------------- ----------- ------------ PUERTO RICO (SAN JUAN) Montehiedra 100% Kmart 2022/2072 61,021 Builders Square 2022/2072 Marshalls 2010/2025 Caribbean Theatres 2021/2026 Caguas (50% Ownership) 96% Kmart 2064 69,430 TOTAL SHOPPING CENTERS 92% $ 780,180 ========= VORNADO'S OWNERSHIP INTEREST 92% $ 745,465 ========= - ---------- (1) Represents annualized monthly base rent excluding ground leases, storage rent and rent for leases which had not commenced as of December 31, 2000, which are included in percent leased. (2) These leases are fully guaranteed by Stop & Shop, a wholly-owned subsidiary of Korinklijke Ahold NV (formerly Royal Ahold NV), except in the case of Totowa, which is guaranteed as to 70% of rent. (3) 100% ground and/or building leasehold interest; other than Green Acres, where approximately 10% of the ground is leased. (4) The tenant has ceased operations at this location but continues to pay rent (in Allentown, Hechinger's mortgagee has assumed the lease). (5) Annualized rent per square foot is $13.97 in total and $35.91 for the mall tenants only. (6) These tenants have leased land from the Company to construct their own buildings. Governmental approvals have been received in Newington and Lancaster and construction has commenced. (7) These encumbrances are part of a cross-collateralized mortgage financing in the amount of $500,000,000 completed on March 1, 2000. -30-
31 MERCHANDISE MART PROPERTIES The Merchandise Mart Properties are a portfolio of 9 properties comprised of: Square Feet Percentage ----------- ---------- Showrooms......................... 5,044,000 62% Offices........................... 2,869,000 36% Retail Stores..................... 173,000 2% --------- --- 8,086,000 100% ========= === Of these properties, the 724,000 square foot L.A. Mart in Los Angeles and the 321,000 square foot 33 North Dearborn Street office property in Chicago were acquired in 2000 for a total cost of $89,000,000. Office Space The following table sets forth the percentage of the Merchandise Mart Properties office revenues by tenants' industry: Industry Percentage -------- ---------- Government........................ 26.4% Service........................... 25.8% Telecommunications................ 13.1% Banking........................... 11.8% Insurance......................... 11.8% Pharmaceutical.................... 4.2% Other............................. 6.9% The average lease term ranges from 1 to 5 years for smaller tenants to as long as 15 years for major tenants. Leases typically provide for step-ups in rent periodically over the term of the lease and pass through to tenants the tenants' share of increases in real estate taxes and operating expenses for a building over a base year. Electricity is provided to tenants on a submetered basis or included in rent based on surveys and adjusted for subsequent utility rate increases. Leases also typically provide for tenant improvement allowances for all or a portion of the tenant's initial construction of its premises. None of the tenants in the Merchandise Mart Properties segment accounted for more than 10% of the Company's total revenue. Below is a listing of the Merchandise Mart Properties office tenants which accounted for 2% or more of the Merchandise Mart Properties' revenues in 2000: Square Feet Tenant Leased 2000 Revenues Percentage ------ ----------- ------------- ---------- General Services Administration... 297,000 $10,063,000 6.6% Bankers Life and Casualty......... 303,000 5,595,000 3.7% Ameritech......................... 234,000 4,600,000 3.0% Bank of America................... 202,000 4,237,000 2.8% Chicago Transit Authority......... 252,000 3,784,000 2.5% -31-
32 As of February 1, 2001, the occupancy rate of the Merchandise Mart Properties' office space was 91%. The following table sets forth the occupancy rate and the average escalated rent per square foot for the Merchandise Mart Properties' office space at the end of each of the past five years. Average Annual Escalated Rentable Rent Year End Square Feet Occupancy Rate Per Square Foot -------- ----------- -------------- --------------- 2000 2,869,000 90% $ 23.52 1999 2,414,000 93% 20.12 1998 2,274,000 95% 19.68 1997 2,160,000 91% 19.50 1996 2,026,000 88% 19.42 The following table sets forth as of December 31, 2000 office lease expirations for each of the next 10 years assuming that none of the tenants exercise their renewal options. Annual Escalated Percentage of Rent of Expiring Leases Number of Square Feet of Total Leased ------------------------------- Year Expiring Leases Expiring Leases Square Feet Total Per Square Foot - ---- --------------- --------------- ------------- ----- --------------- 2001...................... 28 87,000 3.6% $ 2,100,000 $ 24.11 2002...................... 28 138,000 5.7% 3,243,000 23.49 2003...................... 12 60,000 2.5% 1,426,000 23.68 2004...................... 19 79,000 3.3% 1,828,000 23.03 2005...................... 10 137,000 5.7% 2,189,000 15.97 2006...................... 13 277,000 11.4% 7,112,000 25.65 2007...................... 13 456,000 18.8% 8,346,000 18.32 2008...................... 6 434,000 17.9% 8,620,000 19.86 2009...................... 9 278,000 11.5% 5,740,000 20.67 2010...................... 6 358,000 14.8% 11,813,000 32.98 In 2000, 378,000 square feet of office space was leased at a weighted average initial rent per square foot of $30.54, an increase of 32.8% over the weighted average escalated rent per square foot of $22.99 for the leases expiring. Following is the detail by building. 2000 Leases ------------------------------- Average Initial Square Feet Rent psf (1) ----------- --------------- Washington Office Center.............. 261,000 $ 34.56 Merchandise Mart...................... 84,000 21.47 350 North Orleans..................... 26,000 22.65 33 North Dearborn Street.............. 6,000 16.90 South Capitol......................... 1,000 12.00 ------- Total............................... 378,000 30.54 ======= (1) Most leases include periodic step-ups in rent, which are not reflected in the initial rent per square foot leased. -32-
33 Showroom Space The Merchandise Mart Properties' showroom space aggregates 5,044,000 square feet of which 2,419,000 square feet is located in the Merchandise Mart building and 350 North Orleans in Chicago, 1,572,000 square feet is located in the Market Square Complex (including the National Furniture Mart) in High Point, North Carolina, 329,000 square feet is located in the Design Center in Washington, D.C. and 724,000 square feet is located in the L.A. Mart in Los Angeles (acquired on October 2, 2000). The showroom space consists of 3,364,000 square feet of permanent mart space (leased to manufacturers and distributors whose clients are retailers, specifiers and end users), 949,000 square feet of permanent design center space (leased to wholesalers whose principal clientele is interior designers), and 731,000 square feet of temporary market suite space (used for trade shows). The showrooms provide manufacturers and wholesalers with permanent and temporary space in which to display products for buyers, specifiers and end users. The showrooms are also used for hosting trade shows for the contract furniture, casual furniture, giftware, carpet, residential furnishings, crafts, and design industries. The Merchandise Mart Properties own and operate five of the leading furniture/gift-ware trade shows including the contract furniture industry's largest trade show, NeoCon, which attracts over 50,000 attendees annually and is hosted at the Merchandise Mart building in Chicago. The Market Square Complex co-hosts the home furniture industry's semi-annual market weeks which occupy over 8,800,000 square feet in the High Point, North Carolina region. The following table sets forth the percentage of the Merchandise Mart properties showroom revenues by tenants' industry: Industry Percentage -------- ---------- Gift....................... 23% Residential Design......... 23% Residential Furnishings.... 16% Contract Furnishings....... 15% Market Suites.............. 12% Apparel.................... 5% Casual Furniture........... 4% Building Products.......... 2% As of February 1, 2001 the occupancy rate of the Merchandise Mart Properties' showroom space was 98%. The following table sets forth the occupancy rate and the average escalated rent per square foot for this space at the end of each of the past five years. Average Annual Rentable Square Escalated Rent Year End Feet Occupancy Rate Per Square Foot -------- --------------- -------------- --------------- 2000 5,044,000 98% $ 22.85(1) 1999 4,174,000 98% 21.29(1) 1998 4,266,000 95% 21.97(1) 1997 2,817,000 94% 20.94 1996 2,942,000 84% 20.65 (1) Average annual escalated rent per square foot excluding the Market Square Complex is $27.76, $25.72 and $22.13 for 2000, 1999 and 1998 respectively. -33-
34 The following table sets forth as of December 31, 2000 showroom lease expirations for each of the next 10 years assuming that none of the tenants exercise their renewal options. Percentage of Annual Escalated Number of Square Feet of Total Leased Rent of Expiring Leases --------------------------------- Year Expiring Leases Expiring Leases Square Feet Total Per Square Foot ---- --------------- --------------- ----------- ------------- --------------- 2001...................... 326 735,000 18.7% $ 13,119,000 $ 17.85 2002...................... 304 579,000 14.7% 12,632,000 21.81 2003...................... 251 630,000 16.0% 13,442,000 21.34 2004...................... 162 531,000 13.5% 10,971,000 20.65 2005...................... 140 438,000 11.1% 9,648,000 22.03 2006...................... 46 182,000 4.6% 5,469,000 29.99 2007...................... 37 209,000 5.3% 4,793,000 22.97 2008...................... 28 151,000 3.8% 4,177,000 27.68 2009...................... 31 149,000 3.8% 3,817,000 25.67 2010...................... 36 136,000 3.5% 2,789,000 20.48 In 2000, 819,000 square feet of showroom space was leased at a weighted average initial rent per square foot of $16.61, a 4.4% increase over the weighted average escalated rent per square foot of $15.91 for the leases expiring. Following is the detail by building. 2000 Leases ------------------------------- Average Initial Square Feet Rent psf (1) ----------- --------------- Market Square Complex.................... 558,000 $ 13.25 Merchandise Mart......................... 101,000 27.68 Washington Design Center................. 89,000 24.30 National Furniture Mart.................. 34,000 13.63 350 North Orleans........................ 28,000 20.85 L.A. Mart................................ 9,000 22.87 ------- Total.............................. 819,000 16.61 ======= (1) Most leases include periodic step-ups in rent which are not reflected in the initial rent per square foot leased. Retail Stores The Merchandise Mart Properties' portfolio also contains approximately 173,000 square feet of retail stores which were 87% occupied at February 1, 2000. -34-
35 MERCHANDISE MART PROPERTIES: The following table sets forth certain information for the Merchandise Mart Properties owned by the Company as of December 31, 2000. YEAR APPROXIMATE ANNUALIZED ANNUALIZED ORIGINALLY LAND LEASABLE NUMBER BASE RENT ESCALATED RENT DEVELOPED AREA BUILDING OF PER PER SQ. FT. PERCENT LOCATION OR ACQUIRED (ACRES) SQUARE FEET TENANTS SQ. FT. (1) (2) LEASED (1) - ----------------------------------------------------------------------------------------------------------------------------------- ILLINOIS Merchandise Mart, Chicago 1930 6.7 3,441,000 728 $ 22.40 $ 24.83 97% 350 North Orleans, Chicago 1977 4.3 1,149,000 281 19.55 21.01 88% 33 North Dearborn Street, Chicago 2000 0.5 321,000 79 17.96 24.56 91% WASHINGTON, D.C. Washington Office Center 1990 1.2 398,000 20 27.87 30.13 88% Washington Design Center 1919 1.2 388,000 84 24.70 25.01 98% Other 1.3 93,000 5 9.33 12.33 64% HIGH POINT, NORTH CAROLINA Market Square Complex 1902 - 1989 13.1 1,320,000 240 11.92 13.27 99% National Furniture Mart 1964 0.7 252,000 32 13.40 13.42 100% CALIFORNIA L.A. Mart 2000 9.3 724,000 279 15.35 17.79 94% ---- --------- ----- TOTAL MERCHANDISE MART PROPERTIES 38.3 8,086,000 1,748 $ 21.01 $ 23.27 95% ==== ========= ===== LEASE EXPIRATION/ PRINCIPAL TENANTS OPTION ENCUMBRANCES LOCATION (30,000 SQUARE FEET OR MORE) EXPIRATION (THOUSANDS) - -------------------------------------------------------------------------------------------------- ILLINOIS Merchandise Mart, Chicago Baker, Knapp & Tubbs 2007/2013 $ 250,000 Bankers Life & Casualty 2008/2018 CCC Information Services 2008/2018 Chicago Teachers Union 2005 Chicago Transit Authority 2007/2027 Holly Hunt Ltd. 2003 Monsanto 2007 Office of the Special Deputy 2007 Robert Allen Group 2005 Steelcase 2007 350 North Orleans, Chicago RCN Telecom Services 2012/2022 70,000 Ameritech 2011/2021 Art Institute of Illinois 2009/2019 Bank of America 2009/2019 Chicago Transit Authority 2007/2017 Fox Sports 2007/2017 Fiserv Solutions 2010/2020 33 North Dearborn Street, Chicago -- -- 19,000 WASHINGTON, D.C. Washington Office Center General Services 2000/2010 48,102 Administration Washington Design Center -- -- 23,632 Other District of Columbia 2001 -- HIGH POINT, NORTH CAROLINA Market Square Complex Century Furniture Company 2004 63,424 La-Z-Boy 2004 -- National Furniture Mart -- -- 13,568 CALIFORNIA L.A. Mart -- -- 10,840 --------- TOTAL MERCHANDISE MART PROPERTIES $ 498,566 ========= (1) Represents annualized monthly base rent excluding rent for leases which had not commenced as of December 31, 2000, which are included in percent leased. (2) Represents annualized monthly base rent including tenant pass-throughs of operating expenses (exclusive of tenant electricity costs) and real estate taxes. 35
36 TEMPERATURE CONTROLLED LOGISTICS The Company has a 60% interest in the Vornado/Crescent Partnerships ("the Landlord") that own 88 refrigerated warehouses with an aggregate of approximately 438.9 million cubic feet (excludes 11 additional warehouses containing approximately 79.4 million cubic feet managed by AmeriCold Logistics). AmeriCold Logistics leases all of the partnerships' facilities. The Temperature Controlled Logistics segment is headquartered in Atlanta, Georgia. On March 11, 1999, the Vornado/Crescent Partnerships sold all of the non-real estate assets of Temperature Controlled Logistics encompassing the operations of the temperature controlled business for approximately $48,700,000 to a new partnership owned 60% by Vornado Operating Company and 40% by Crescent Operating Inc. ("AmeriCold Logistics"). AmeriCold Logistics leases the underlying temperature controlled warehouses used in this business from the Vornado/Crescent Partnerships which continue to own the real estate. The leases, as amended, generally 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 revenue AmeriCold Logistics receives from its customers. AmeriCold is also 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. AmeriCold Logistics has the right to defer a portion of the rent for up to three years beginning on March 11, 1999 to the extent that available cash, as defined in the leases, is insufficient to pay such rent. Total contractual rent was $160,494,000 and $130,213,000 ($164,464,000 and $133,100,000 including the effect of the straight-lining of rents) for the year ended December 31, 2000 and the period from March 11, 1999 to December 31, 1999. As at December 31, 2000, the balance of the tenant's deferred rent was $22,444,000 ($17,044,000 in 2000 and $5,400,000 in the fourth quarter of 1999) of which the Company's share was $13,466,000. Based on the Company's policy of recognizing rental income when earned and collection is assured or cash is received, the Company did not recognize $9,780,000 of income in the year ended December 31, 2000. On February 22, 2001, the Landlord restructured the AmeriCold Logistics leases to, among other things, (i) reduce 2001's contractual rent to $146,000,000 (the same amount recognized as rental income in 2000's Funds from Operations), (ii) reduce 2002's contractual rent to $150,000,000 (plus contingent rent in certain circumstances), (iii) increase the Landlord's share of annual maintenance capital expenditures by $4,500,000 to $9,500,000 effective January 1, 2000 and (iv) extend the deferred rent period to December 31, 2003 from March 11, 2002. During 2000, the Landlord (i) completed a 496,000 square foot warehouse expansion in Carthage, Missouri, and a 43,400 square foot warehouse expansion in Tarboro, North Carolina, (ii) constructed a 163,000 square foot warehouse in Massillon, Ohio and (iii) purchased a 55,900 square foot warehouse in Ontario, California, previously subject to a capital lease. The total cost of these projects was $42,722,000, of which the remaining balance of $21,764,000 was expended in 2000. In addition, the Landlord is constructing a 125,000 square foot warehouse at its Atlanta, Georgia complex and has entered into an agreement to acquire the original 104,000 square foot warehouse in Tarboro, North Carolina, which is subject to a capital lease. These transactions are expected to be completed in the first half of 2001 at a total cost of $25,174,000, of which $3,881,000 has been expended through December 31, 2000. AmeriCold Logistics provides the frozen food industry with refrigerated warehousing and transportation management services. Refrigerated warehouses are comprised of production and distribution facilities. Production facilities typically serve one or a small number of customers, generally food processors, located nearby. These customers store large quantities of processed or partially processed products in the facility until they are shipped to the next stage of production or distribution. Distribution facilities primarily warehouse a wide variety of customers' finished products until future shipment to end-users. Each distribution facility generally services the surrounding regional market. AmeriCold Logistics' transportation management services include freight routing, dispatching, freight rate negotiation, backhaul coordination, freight bill auditing, network flow management, order consolidation and distribution channel assessment. AmeriCold Logistics' temperature-controlled logistics expertise and access to both frozen food warehouses and distribution channels enable its customers to respond quickly and efficiently to time-sensitive orders from distributors and retailers. AmeriCold Logistics' customers consist primarily of national, regional and local frozen food manufacturers, distributors, retailers and food service organizations. A breakdown of AmeriCold Logistics' largest customers include: % of 2000 Revenue ----------------- H.J. Heinz & Co.......................... 18% Con-Agra, Inc............................ 8% Sara Lee Corp............................ 6% Tyson Foods, Inc......................... 5% McCain Foods, Inc........................ 4% General Mills............................ 4% Pro-Fac Cooperative, Inc................. 4% J.R. Simplot............................. 3% Flowers Industries, Inc.................. 1% Norpac Foods, Inc........................ 1% Other.................................... 46%
37 Facilities The following is a summary of Temperature Controlled Logistics facilities as of December 31, 2000: CUBIC SQUARE NUMBER OF FEET FEET TYPE FACILITIES (IN MILLIONS) (IN THOUSANDS) ---- ---------- ------------- -------------- Owned/leased by Vornado/Crescent partnerships: Owned 83 423.9 17,067.2 Leased 5 15.0 427.9 ------- ------- -------- 88 438.9 17,495.1 Managed by AmeriCold Logistics 11 79.4 2,484.6 ------- ------- -------- Total 99 518.3 19,979.7 ======= ======= ======== Below are the details by location, size and type of facility: SQUARE OWNED/ CUBIC FEET FEET PROPERTY LOCATION LEASED (IN MILLIONS) (IN THOUSANDS) -------- -------- ------ ------------ -------------- FACILITIES OWNED/LEASED BY THE VORNADO/CRESCENT PARTNERSHIPS: ALABAMA Birmingham West 25th Avenue Owned 2.0 85.6 Montgomery Newcomb Avenue Owned 1.2 68.1 Gadsden East Air Depot Road Leased 4.0 119.0 Albertville Railroad Avenue Owned 2.2 64.5 -------- -------- TOTAL ALABAMA 9.4 337.2 -------- -------- ARIZONA Phoenix 455 South 75th Avenue Owned 2.9 111.5 -------- -------- ARKANSAS Fort Smith Midland Boulevard Owned 1.4 78.2 West Memphis South Airport Road Owned 5.3 166.4 Texarkana Genoa Road Owned 4.7 137.3 Russellville 300 El Mira Owned 5.6 164.7 Russellville 203 Industrial Boulevard Owned 9.5 279.4 Springdale 1200 N. Old Missouri Road Owned 6.6 194.1 -------- -------- TOTAL ARKANSAS 33.1 1,020.1 -------- -------- CALIFORNIA Ontario Malaga Place Owned 24% 8.1 279.6 Leased 76% Burbank West Magnolia Boulevard Owned 0.8 33.3 Fullerton South Raymond Avenue Leased 2.8 107.7 Pajaro Salinas Road Leased 1.4 53.8 Los Angeles Jesse Street Owned 2.7 141.6 Turlock 5th Street Owned 2.5 108.4 Watsonville West Riverside Drive Owned 5.4 186.0 Turlock South Kilroy Road Owned 3.0 138.9 Ontario Santa Ana Road Leased 1.9 55.9 -------- -------- TOTAL CALIFORNIA 28.6 1,105.2 -------- -------- COLORADO -37-
38 SQUARE OWNED/ CUBIC FEET FEET PROPERTY LOCATION LEASED (IN MILLIONS) (IN THOUSANDS) -------- -------- ------ ------------ -------------- Denver East 50th Street Owned 52% 2.8 116.3 -------- -------- FLORIDA Tampa South Lois Avenue Owned 0.4 22.2 Plant City South Alexander Street Owned 0.8 30.8 Bartow U.S. Highway 17 Owned 1.4 56.8 Tampa 50th Street Owned 80% 3.9 150.0 Leased 20% Tampa Port of Tampa Owned 1.0 38.5 -------- -------- TOTAL FLORIDA 7.5 298.3 -------- -------- GEORGIA Atlanta Xavier Drive, SW Owned 11.1 476.7 Atlanta Lakewood Avenue, SW Owned 2.9 157.1 Augusta Laney-Walker Road Owned 1.1 48.3 Atlanta Westgate Parkway Owned 11.4 334.7 Montezuma South Airport Drive Owned 4.2 175.8 Atlanta Westgate Parkway Owned 6.9 201.6 Thomasville 121 Roseway Drive Owned 6.9 202.9 -------- -------- TOTAL GEORGIA 44.5 1,597.1 -------- -------- IDAHO Burley U.S. Highway 30 Owned 10.7 407.2 Nampa 4th Street North Owned 8.0 364.0 -------- -------- TOTAL IDAHO 18.7 771.2 -------- -------- ILLINOIS Rochelle AmeriCold Drive Owned 6.0 179.7 East Dubuque 18531 U.S. Route 20 West Owned 5.6 215.4 -------- -------- TOTAL ILLINOIS 11.6 395.1 -------- -------- INDIANA Indianapolis Arlington Avenue Owned 9.1 311.7 -------- -------- IOWA Fort Dodge Maple Drive Owned 3.7 155.8 Bettendorf State Street Owned 8.8 336.0 -------- -------- TOTAL IOWA 12.5 491.8 -------- -------- KANSAS Wichita North Mead Owned 2.8 126.3 Garden City 2007 West Mary Street Owned 2.2 84.6 -------- -------- TOTAL KANSAS 5.0 210.9 -------- -------- KENTUCKY Sebree 1541 U.S. Highway 41 North Owned 2.7 79.4 -------- -------- MAINE Portland Read Street Owned 1.8 151.6 -------- -------- -38-
39 SQUARE OWNED/ CUBIC FEET FEET PROPERTY LOCATION LEASED (IN MILLIONS) (IN THOUSANDS) -------- -------- ------ ------------ -------------- MASSACHUSETTS Gloucester East Main Street Owned 1.9 95.5 Gloucester Railroad Avenue Owned 0.3 13.6 Gloucester Rogers Street Owned 2.8 95.2 Gloucester Rowe Square Owned 2.4 126.4 Boston Wildett Circle Owned 3.1 218.0 -------- -------- TOTAL MASSACHUSETTS 10.5 548.7 -------- -------- MISSOURI Marshall West Highway 20 Owned 4.8 160.8 Carthage No. 1 Civil War Road Owned 42.0 2,564.7 -------- -------- TOTAL MISSOURI 46.8 2,725.5 -------- -------- MISSISSIPPI West Point 751 West Churchill Road Owned 4.7 180.8 -------- -------- NEBRASKA Fremont 950 South Schneider Street Owned 2.2 84.6 Grand Island East Roberts Street Owned 2.2 105.0 -------- -------- TOTAL NEBRASKA 4.4 189.6 -------- -------- NEW YORK Syracuse Farrell Road Owned 11.8 447.2 -------- -------- NORTH CAROLINA Charlotte West 9th Street Owned 1.0 58.9 Charlotte Exchange Street Owned 4.1 164.8 Tarboro Sara Lee Road Leased 4.9 147.4 -------- -------- TOTAL NORTH CAROLINA 10.0 371.1 -------- -------- OHIO Massillon* 2140 17th Street SW Owned 5.5 163.2 -------- -------- OKLAHOMA Oklahoma City South Hudson Owned 0.7 64.1 Oklahoma City Exchange Street Owned 1.4 74.1 -------- -------- TOTAL OKLAHOMA 2.1 138.2 -------- -------- OREGON Hermiston Westland Avenue Owned 4.0 283.2 Milwaukie S.E. McLoughlin Blvd. Owned 4.7 196.6 Salem Portland Road N.E. Owned 12.5 498.4 Woodburn Silverton Road Owned 6.3 277.4 Brooks Brooklake Road Owned 4.8 184.6 Ontario N.E. First Street Owned 8.1 238.2 -------- -------- TOTAL OREGON 40.4 1,678.4 -------- -------- PENNSYLVANIA Leesport RD2, Orchard Lane Owned 5.8 168.9 Fogelsville Mill Road Owned 21.6 683.9 -------- -------- TOTAL PENNSYLVANIA 27.4 852.8 -------- -------- -39-
40 SQUARE OWNED/ CUBIC FEET FEET PROPERTY LOCATION LEASED (IN MILLIONS) (IN THOUSANDS) -------- -------- ------ ------------ -------------- SOUTH CAROLINA Columbia Shop Road Owned 1.6 83.7 -------- -------- SOUTH DAKOTA Sioux Falls 2300 East Rice Street Owned 2.9 111.5 -------- -------- TENNESSEE Memphis East Parkway South Owned 5.6 246.2 Memphis Spottswood Avenue Owned 0.5 36.8 Murfreesboro Stephenson Drive Owned 4.5 106.4 -------- -------- TOTAL TENNESSEE 10.6 389.4 -------- -------- TEXAS Amarillo 10300 South East Third Street Owned 3.2 123.1 Ft. Worth 200 Railhead Drive Owned 3.4 102.0 -------- -------- TOTAL TEXAS 6.6 225.1 -------- -------- UTAH Clearfield South Street Owned 8.6 358.4 -------- -------- VIRGINIA Norfolk East Princess Anne Road Owned 1.9 83.0 Strasburg 545 Radio Station Rd Owned 6.8 200.0 -------- -------- TOTAL VIRGINIA 8.7 283.0 -------- -------- WASHINGTON Burlington South Walnut Owned 4.7 194.0 Moses Lake Wheeler Road Owned 7.3 302.4 Walla Walla 14th Avenue South Owned 3.1 140.0 Connell West Juniper Street Owned 5.7 235.2 Wallula Dodd Road Owned 1.2 40.0 Pasco Industrial Way Owned 6.7 209.0 -------- -------- TOTAL WASHINGTON 28.7 1,120.6 -------- -------- WISCONSIN Tomah Route 2 Owned 4.6 161.0 Babcock 1524 Necedah Road Owned 3.4 111.1 Plover 110th Street Owned 9.4 358.4 -------- -------- TOTAL WISCONSIN 17.4 630.5 -------- -------- TOTAL - OWNED/LEASED 438.9 17,495.1 ======== ======== -40-
41 SQUARE CUBIC FEET FEET PROPERTY LOCATION MANAGED (IN MILLIONS) (IN THOUSANDS) -------- -------- ------- ------------ -------------- FACILITIES MANAGED BY AMERICOLD LOGISTICS: ALABAMA Birmingham 4th Street, West Managed 0.1 0.1 -------- -------- CALIFORNIA Ontario Wanamaker Avenue Managed 3.2 122.0 Ontario Airport Drive Managed 13.5 450.0 Wilmington Coil Avenue Managed 4.5 173.1 -------- -------- TOTAL CALIFORNIA 21.2 745.1 -------- -------- MINNESOTA Park Rapids U.S. Highway 71 South Managed 5.9 173.5 -------- -------- PENNSYLVANIA Bethlehem 2600 Brodhead Road Managed 16.1 473.5 Bethlehem 4000 Miller Circle North Managed 7.3 214.7 -------- -------- TOTAL PENNSYLVANIA 23.4 688.2 -------- -------- SOUTH DAKOTA Sioux Falls 802 East Rice Street Managed 3.4 130.8 -------- -------- TEXAS Ft. Worth 1006 Railhead Drive Managed 13.0 382.4 Ft. Worth 1005 Railhead Drive Managed 7.6 223.5 -------- -------- TOTAL TEXAS 20.6 605.9 -------- -------- CANADA ALBERTA Taber Managed 4.8 141.0 -------- -------- TOTAL-MANAGED 79.4 2,484.6 ======== ======== GRAND TOTAL-OWNED/LEASED AND MANAGED 518.3 19,979.7 ======== ======== * New facility in 2000 -41-
42 ALEXANDER'S PROPERTIES The Company owns 33.1% of Alexander's outstanding common shares. The following table shows as of December 31, 2000 the location, approximate size and leasing status of each of the properties owned by Alexander's, excluding the Fordham Road property which was sold on January 12, 2001. APPROXIMATE LEASABLE SQUARE AVERAGE APPROXIMATE FOOTAGE/ ANNUALIZED AREA IN SQUARE NUMBER BASE RENT PERCENT LOCATION FEET/OR ACREAGE OF FLOORS PER SQ. FOOT LEASED - -------- --------------- --------- ------------ ------ OPERATING PROPERTIES NEW YORK: Kings Plaza Regional Shopping Center--Brooklyn.......................... 24.3 acres 766,000/4(1)(2) $ 30.73 91% Rego Park--Queens.............................. 4.8 acres 351,000/3(1) 29.02 100% Flushing--Queens (3)........................... 44,975 SF 177,000/4(1) -- -- Third Avenue--Bronx............................ 60,451 SF 173,000/4 5.00 100% --------- 1,467,000 ========= SIGNIFICANT LEASE TENANTS (30,000 EXPIRATION/ SQUARE FEET OR OPTION LOCATION MORE) EXPIRATION - -------- ----- ---------- OPERATING PROPERTIES NEW YORK: Kings Plaza Regional Shopping Center--Brooklyn.......................... Sears 2023/2033 Rego Park--Queens.............................. Bed Bath & 2013 Beyond Circuit City 2021 Marshalls 2008/2021 Sears 2021 Flushing--Queens (3)........................... -- -- Third Avenue--Bronx............................ An affiliate 2023 of Conway DEVELOPMENT PROPERTIES NEW YORK: 59th Street and Lexington Avenue--Manhattan.... 84,420 SF -- Rego Park II--Queens........................... 6.6 acres -- NEW JERSEY: Paramus--New Jersey............................ 30.3 acres (4) (1) Excludes parking garages. (2) Excludes 339,000 square foot Macy's store, owned and operated by Federated Department Stores, Inc. (3) Leased by the Company through January 2027. (4) Governmental approvals have been obtained to develop a shopping center at this site containing approximately 550,000 square feet. -42-
43 Kings Plaza Regional Shopping Center: Alexander's has completed a renovation of the Mall in connection with the overall renovation of the Center at an estimated cost of $33,000,000, of which $27,893,000 has been expended as of December 31, 2000. The remainder of the Center renovation (the exterior) is expected to be completed in 2001. 59th Street and Lexington Avenue: Alexander's has completed the excavation and laying the foundation for its Lexington Avenue property as part of the proposed development of a large multi-use building. The proposed building is expected to be comprised of a commercial portion, which may include retail stores, offices, hotel space, extended-stay residences, residential rentals and parking; and a residential portion, consisting of condominium units. The capital required for the proposed building will be in excess of $650,000,000. If the residential portion of the property is developed, the air rights representing the residential portion would be transferred to a taxable REIT subsidiary, as a REIT is not permitted to sell condominiums without being subject to a 100% excise tax on the gain from the sale of such condominiums. While Alexander's anticipates that financing will be available after tenants have been obtained for these projects, there can be no assurance that such financing will be obtained, or if obtained, that such financings will be on terms that are acceptable. In addition, it is uncertain as to when these projects will commence. Paramus: Alexander's may develop a shopping center of approximately 550,000 square feet on this site. The estimated cost of such development is approximately $100,000,000. Alexander's has received municipal approvals on tentative plans to develop the site. No redevelopment plans have been finalized. Fordham Road On January 12, 2001, Alexander's sold its Fordham Road property located in the Bronx, New York for $25,500,000, which resulted in a gain of $19,100,000. In addition, Alexander's paid off the mortgage on this property at a discount, which resulted in an extraordinary gain from early extinguishment of debt of $3,500,000 in the first quarter of 2001. HOTEL PENNSYLVANIA The Hotel Pennsylvania is located in New York City on Seventh Avenue opposite Madison Square Garden. The Company intends to refurbish the Hotel. Under the terms of the mortgage on this property, in connection with the refurbishment, the Company has escrowed $24,000,000 in cash and $29,000,000 through letters of credit. The Hotel Pennsylvania consists of a hotel portion containing 800,000 square feet of hotel space with 1,700 rooms and a commercial portion containing 400,000 square feet of retail and office space. The following table presents rental information for the hotel: Year Ended December 31, ----------------------- 2000 1999 1998 ---- ---- ---- Average occupancy rate 76% 80% 79% Average daily rate $114 $105 $ 99 REVPAR $ 87 $ 84 $ 78 As of December 31, 2000, the property's retail and office space was 85% and 63% occupied. Twenty-five tenants occupy the retail and commercial space. Annual rent per square foot of retail and office space in 2000 was $45.00 and $17.00. In January 2001, as part of its plan to redevelop the retail portion of the Hotel, the Company paid $750,000 to the Sports Authority to terminate its 44,000 square foot lease which was scheduled to expire in 2009 and contained options to renew for an additional 15 years. In the year ended December 31, 2000, the Sports Authority paid the Company approximately $1,770,000 of rent. -43-
44 NEWKIRK JOINT VENTURES The Newkirk Joint Ventures ("Newkirk") own various equity and debt interests relating to 120 limited partnerships which own real estate primarily net leased to credit rated tenants. The Company owns a 30% interest in Newkirk with the balance owned by affiliates of Apollo Real Estate Investment Fund III, L.P. The following table sets forth the real estate owned by the limited partnerships and the Company's interest therein: Square Feet (in 000's) ---------------------------------------------- Newkirk Vornado's Number of Ownership Ownership Properties Total Interest Interest ---------- ----- -------- -------- Office............. 30 8,399 4,507 1,352 Retail............. 166 6,963 3,736 1,121 Other.............. 14 5,073 2,722 817 ------- --------- --------- --------- 210 20,435 10,965 3,290 ======= ========= ========= ========= These properties are located throughout the United States. The tenant leases have a weighted average expiration of 2007 and contain ten to thirty year renewal options at fixed rates. DRY WAREHOUSE/INDUSTRIAL PROPERTIES The Company's dry warehouse/industrial properties consist of eight buildings in New Jersey containing approximately 2.0 million square feet. At February 1, 2001 the occupancy rate of the properties was 90%. The average term of a tenant's lease is three to five years. The following table sets forth the occupancy rate and average annual rent per square foot at the end of each of the past three years. Average Annual As of Rent Per December 31, Occupancy Rate Square Foot ------------ -------------- ----------- 2000 90% $ 3.52 1999 92% 3.37 1998 82% 3.19 -44-
45 ITEM 3. LEGAL PROCEEDINGS The Company is from time to time involved in legal actions arising in the ordinary course of its business. In the opinion of management, after consultation with legal counsel, the outcome of such matters will not have a material adverse effect on the Company's financial condition or results of operations. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS No matters were submitted to a vote of security holders during the fourth quarter of the year ended December 31, 2000. EXECUTIVE OFFICERS OF THE REGISTRANT The following is a list of the names, ages, principal occupations and positions with Vornado of the executive officers of Vornado and the positions held by such officers during the past five years. All executive officers of Vornado have terms of office which run until the next succeeding meeting of the Board of Trustees of Vornado following the Annual Meeting of Shareholders unless they are removed sooner by the Board. PRINCIPAL OCCUPATION, POSITION AND OFFICE (CURRENT AND NAME PAGE DURING PAST FIVE YEARS WITH VORNADO UNLESS OTHERWISE STATED) - ---- --- ------------------------------------------------------------ Steven Roth................ 59 Chairman of the Board, Chief Executive Officer and Chairman of the Executive Committee of the Board; the Managing General Partner of Interstate Properties, an owner of shopping centers and an investor in securities and partnerships; Chief Executive Officer of Alexander's, Inc. since March 1995 and a Director since 1989; Chairman and CEO of Vornado Operating since 1998. Michael D. Fascitelli...... 44 President and a Trustee since December 1996; Director of Alexander's, Inc. since December 1996; Director of Vornado Operating since 1998; Partner at Goldman, Sachs & Co. in charge of its real estate practice from December 1992 to December 1996; and Vice President at Goldman, Sachs & Co., prior to December 1992. Melvyn H. Blum............. 54 Executive Vice President--Development since January 2000; Senior Managing Director at Tishman Speyer Properties in charge of its development activities in the United States from July 1998 to January 2000; and Managing Director of Development and Acquisitions at Tishman Speyer Properties prior to July 1998. Michelle Felman............ 38 Executive Vice President--Acquisitions since September 2000; Independent Consultant to Vornado from October 1997 to September 2000; Managing Director-Global Acquisitions and Business Development of GE Capital from 1991 to July 1997. Irwin Goldberg............. 56 Vice President--Chief Financial Officer from January 1998 to February 2001; Vice President--Chief Financial Officer of Vornado Operating since 1998; Secretary and Treasurer of Alexander's Inc. since June 1999; Partner at Deloitte & Touche LLP from September 1978 to January 1998. Joseph Hakim............... 52 Executive Vice President--Chief Operating Officer since September 2000; Chief Executive Officer of the Merchandise Mart Division since April 1998 (date of the Company's acquisition); President and Chief Executive Officer of Merchandise Mart Properties, Inc., the main operating subsidiary of Joseph P. Kennedy Enterprises, Inc. (the predecessor to the Merchandise Mart Division) from 1992 to April 1998. Joseph Macnow.............. 55 Executive Vice President--Finance and Administration since January 1998 and Chief Financial Officer since March 2001; Executive Vice President - Finance and Administration of Vornado Operating since 1998; Vice President-Chief Financial Officer from 1985 to January 1998; Vice President--Chief Financial Officer of Alexander's, Inc. since August 1995. David R. Greenbaum......... 49 Chief Executive Officer of the New York Office Division since April 1997 (date of the Company's acquisition); President of Mendik Realty (the predecessor to the Mendik Division) from 1990 until April 1997. Richard T. Rowan........... 54 Executive Vice President-Retail Real Estate Division since January 1982. Christopher Kennedy........ 37 President of the Merchandise Mart Division since September 2000; Executive Vice President of the Merchandise Mart Division from 1994 to September 2000. -45-
46 PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS Vornado's common shares are traded on the New York Stock Exchange under the symbol "VNO". Quarterly price ranges of the common shares and dividends paid per share for the years ended December 31, 2000 and 1999 were as follows: YEAR ENDED YEAR ENDED QUARTER DECEMBER 31, 2000 DECEMBER 31, 1999 ------- ---------------------------------- ----------------------------------- HIGH LOW DIVIDENDS HIGH LOW DIVIDENDS ---- --- --------- ---- --- --------- 1st........................ $ 35.25 $ 29.88 $ .48 $ 37.75 $ 32.06 $ .44 2nd........................ 36.50 33.69 .48 39.50 33.06 .44 3rd........................ 40.75 35.50 .48 36.06 32.19 .44 4th........................ 38.94 33.38 .53 33.31 30.06 .48 On February 1, 2001, the number of record holders of common shares of Vornado was 2,324. -46-
47 ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA YEAR ENDED DECEMBER 31, -------------------------------------------------------------------------- 2000 1999 1998 1997 1996 ---- ---- ---- ---- ---- (in thousands, except share and per share amounts) OPERATING DATA Revenues: Property rentals ............................ $ 695,078 $ 591,270 $ 425,496 $ 168,321 $ 87,424 Expense reimbursements ...................... 120,056 96,842 74,737 36,652 26,644 Other income ................................ 11,398 8,846 9,627 4,158 2,819 ----------- ----------- ----------- ----------- ----------- Total Revenues ................................... 826,532 696,958 509,860 209,131 116,887 ----------- ----------- ----------- ----------- ----------- Expenses: Operating ................................... 318,360 282,118 207,171 74,745 36,412 Depreciation and amortization ............... 99,846 83,585 59,227 22,983 11,589 General and administrative .................. 47,911 40,151 28,610 13,580 5,167 Amortization of officer's deferred compensation expense ...................... -- -- -- 22,917 2,083 ----------- ----------- ----------- ----------- ----------- Total Expenses ................................... 466,117 405,854 295,008 134,225 55,251 ----------- ----------- ----------- ----------- ----------- Operating Income ................................. 360,415 291,104 214,852 74,906 61,636 Income applicable to Alexander's ................. 13,053 7,427 3,123 7,873 7,956 Income from partially-owned entities ............. 90,404 82,310 32,025 4,658 1,855 Interest and other investment income ............. 32,926 18,359 24,074 23,767 6,643 Interest and debt expense ........................ (170,273) (141,683) (114,686) (42,888) (16,726) Net gain on sales of real estate ................. 10,965 -- -- -- -- Net gain from condemnation proceeding ............ -- -- 9,649 -- -- Minority interest: Perpetual preferred unit distributions ....... (62,089) (19,254) (756) -- -- Minority limited partnership earnings ........ (38,320) (33,904) (14,822) (7,293) -- Partially-owned entities ..................... (1,965) (1,840) (605) -- -- ----------- ----------- ----------- ----------- ----------- Income before extraordinary item ................. 235,116 202,519 152,854 61,023 61,364 Extraordinary item ............................... (1,125) -- -- -- -- ----------- ----------- ----------- ----------- ----------- Net income ....................................... 233,991 202,519 152,854 61,023 61,364 ----------- Preferred stock dividends ........................ (38,690) (33,438) (21,690) (15,549) -- ----------- ----------- ----------- ----------- ----------- Net income applicable to common shares ........... $ 195,301 $ 169,081 $ 131,164 $ 45,474 $ 61,364 =========== =========== =========== =========== =========== Income per share--basic(1) .................... $ 2.26 $ 1.97 $ 1.62 $ .83 $ 1.26 Income per share--diluted(1) .................. $ 2.20 $ 1.94 $ 1.59 $ .79 $ 1.25 Cash dividends declared for common shares ..... $ 1.97 $ 1.80 $ 1.64 $ 1.36 $ 1.22 BALANCE SHEET DATA Total assets .................................. $ 6,370,314 $ 5,479,218 $ 4,425,779 $ 2,524,089 $ 565,204 Real estate, at cost .......................... 4,294,842 3,921,507 3,315,891 1,564,093 397,298 Accumulated depreciation ...................... 393,787 308,542 226,816 173,434 151,049 Debt .......................................... 2,656,897 2,048,804 2,051,000 956,654 232,387 Shareholders' equity .......................... 2,078,720 2,055,368 1,782,678 1,313,762 276,257 -47-
48 YEAR ENDED DECEMBER 31, ------------------------------------------------------------------ 2000 1999 1998 1997 1996 ---- ---- ---- ---- ---- (in thousands) OTHER DATA Funds from operations(2): Net income applicable to common shares ......... $195,301 $169,081 $131,164 $45,474 $61,364 Extraordinary item ............................. 1,125 -- -- -- -- Depreciation and amortization of real property .................................... 97,744 82,216 58,277 22,413 11,154 Straight-lining of property rentals for rent escalations ................................. (28,893) (22,881) (14,531) (3,359) (2,676) Leasing fees received in excess of income recognized .................................. 1,259 1,705 1,339 1,733 1,805 Net gain on sale of real estate ................ (10,965) -- -- -- -- Net gain from insurance settlement and condemnation proceedings .................... -- -- (9,649) -- -- Appreciation/(depreciation) of securities held in officer's deferred compensation trust ....................................... 4,765 (340) 340 -- -- Gains on sale of securities available for sale ..................................... -- (383) (898) -- -- Proportionate share of adjustments to equity in income of partially-owned entities to arrive at funds from operations: Temperature Controlled Logistics ........... 35,565 31,400 41,988 4,183 -- Alexander's ................................ 93 1,324 4,023 (2,471) (2,331) Partially-owned office buildings ........... 2,926 50 3,561 2,891 -- Hotel Pennsylvania ......................... 5,779 4,866 4,083 457 -- Charles E. Smith Commercial Realty L.P. .... 15,767 12,024 2,974 1,298 -- Other ...................................... 9,448 7,463 219 -- -- Minority interest in partially owned entities in excess of preferential distributions ........ (16,445) (9,020) (3,991) -- -- Dilutive effect of Series A Preferred Stock dividends ................................... 21,689 16,268 -- -- -- -------- -------- -------- ------- ------- Funds from operations ............................ $335,158 $293,773 $218,899 $72,619 $69,316 ======== ======== ======== ======= ======= Cash flow provided by (used in): Operating activities ........................... $249,921 $176,895 $189,406 $115,473 $70,703 Investing activities ........................... (699,375) (494,204) (1,257,367) (1,064,484) 14,912 Financing activities ........................... 473,813 262,131 879,815 1,215,269 (15,046) (1) The earnings per share amounts prior to 1997 have been restated to comply with Statement of Financial Accounting Standards No. 128, "Earnings Per Share" (SFAS 128). For further discussion of earnings per share and the impact of SFAS 128, see the notes to the consolidated financial statements. All share and per share information has also been adjusted for a 2-for-1 share split in October 1997. (2) Funds from operations does not represent cash generated from operating activities in accordance with generally accepted accounting principles and is not necessarily indicative of cash available to fund cash needs which is disclosed in the Consolidated Statements of Cash Flows for the applicable periods. There are no material legal or functional restrictions on the use of funds from operations. Funds from operations should not be considered as an alternative to net income as an indicator of the Company's operating performance or as an alternative to cash flows as a measure of liquidity. Management considers funds from operations a supplemental measure of operating performance and along with cash flow from operating activities, financing activities and investing activities, it provides investors with an indication of the ability of the Company to incur and service debt, to make capital expenditures and to fund other cash needs. Funds from operations may not be comparable to similarly titled measures employed by other REITs since a number of REITs, including the Company, 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 from this definition to adjust primarily for (i) the effect of straight-lining of property rentals for rent escalations and leasing fee income, and (ii) the reversal of income taxes (benefit) which are considered non-recurring because of the conversion of Temperature Controlled Logistics Companies to REITs in 2000. -48-
49 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS ($ in thousands, except where indicated) OVERVIEW Below is a summary of net income and EBITDA(1) by segment for the years ended December 31, 2000, 1999, and 1998: December 31, 2000 ------------------------------------------------------------------------------------------ Temperature Merchandise Controlled Total Office Retail Mart Logistics Other(2) ----- ------ ------ ---- --------- -------- Total revenues ..................... $ 826,532 $ 472,527 $ 177,787 $ 155,213 $ -- $ 21,005 Total expenses ..................... 466,117 267,899 73,802 83,006 -- 41,410 --------- --------- --------- --------- --------- --------- Operating income ................... 360,415 204,628 103,985 72,207 -- (20,405) Income applicable to Alexander's ... 13,053 -- -- -- -- 13,053 Income from partially-owned entities 90,404 29,210 667 2,111 28,778(6) 29,638 Interest and other investment income 32,926 6,162 -- 1,474 -- 25,290 Interest and debt expense .......... (170,273) (62,162) (53,180) (38,566) -- (16,365) Net gain on sale of real estate .... 10,965 8,405 2,560 -- -- -- Minority interest .................. (102,374) (46,917) (16,550) (12,660) (12,483) (13,764) --------- --------- --------- --------- --------- --------- Income before extraordinary item ... 235,116 139,326 37,482 24,566 16,295 17,447 Extraordinary item ................. (1,125) -- (1,125) -- -- -- --------- --------- --------- --------- --------- --------- Net income ......................... 233,991 139,326 36,357 24,566 16,295 17,447 Extraordinary item ................. 1,125 -- 1,125 -- -- -- Minority interest .................. 102,374 46,917 16,550 12,660 12,483 13,764 Net gain on sale of real estate .... (10,965) (8,405) (2,560) -- -- -- Interest and debt expense (4) ...... 260,573 96,224 55,741 38,566 27,424 42,618 Depreciation and amortization (4) .. 167,268 76,696 18,522 20,627 34,015 17,408 Straight-lining of rents (4) ....... (30,001) (19,733) (2,295) (5,919) (1,121) (933) Other .............................. 14,510 -- (1,654) 1,358 4,064(3) 10,742(7) --------- --------- --------- --------- --------- --------- EBITDA(1) .......................... $ 738,875 $ 331,025 $ 121,786 $ 91,858 $ 93,160 $ 101,046 ========= ========= ========= ========= ========= ========= December 31, 2000 ------------------------------------------------------------------------------------------ Temperature Merchandise Controlled Total Office Retail Mart Logistics Other(2) ----- ------ ------ ---- --------- -------- Total revenues ..................... $ 696,958 $ 379,795 $ 170,538 $ 135,921 $ -- $ 10,704 Total expenses ..................... 405,854 227,680 74,062 74,624 -- 29,488 --------- --------- --------- --------- --------- --------- Operating income ................... 291,104 152,115 96,476 61,297 -- (18,784) Income applicable to Alexander's ... 7,427 -- -- -- -- 7,427 Income from partially-owned entities 82,310 19,055 938 -- 36,722 25,595 Interest and other investment income 18,359 1,786 -- 737 -- 15,836 Interest and debt expense .......... (141,683) (49,624) (27,635) (29,509) -- (34,915) Minority interest .................. (54,998) (25,854) (14,628) (6,819) (7,697) -- --------- --------- --------- --------- --------- --------- Net income ......................... 202,519 97,478 55,151 25,706 29,025 (4,841) Minority interest .................. (54,998) (25,854) (14,628) (6,819) (7,697) -- --------- --------- --------- --------- --------- --------- Interest and debt expense (4) ...... 226,253 82,460 30,249 29,509 27,520 56,515 Depreciation and amortization (4) .. 143,499 64,702 16,900 17,702 31,044 13,151 Straight-lining of rents (4) ....... (25,359) (16,386) (2,120) (4,740) (1,698) (415) Other .............................. 7,451 365 -- -- 2,054(3) 5,032 --------- --------- --------- --------- --------- --------- EBITDA(1) .......................... $ 609,361 $ 254,473 $ 114,808 $ 74,996 $ 95,642 $ 69,442 ========= ========= ========= ========= ========= ========= See supplemental information on page 61 for a summary of net income and EBITDA by segment for the three months ended December 31, 2000 and 1999. -49-
50 December 31, 1998 ------------------------------------------------------------------------------------------ Temperature Merchandise Controlled Total Office Retail Mart Logistics Other(2) ----- ------ ------ ---- --------- -------- Total revenues ..................... $ 509,860 $ 247,499 $ 167,155 $ 86,521 $ -- $ 8,685 Total expenses ..................... 295,008 151,573 70,334 50,761 -- 22,340 --------- --------- --------- --------- --------- --------- Operating income ................... 214,852 95,926 96,821 35,760 -- (13,655) Income applicable to Alexander's ... 3,123 -- -- -- -- 3,123 Income from partially-owned entities 32,025 10,854 258 (1,969) 15,191 7,691 Interest and other investment income 24,074 4,467 2,159 639 -- 16,809 Interest and debt expense .......... (114,686) (25,175) (32,249) (18,711) -- (38,551) Net gain from insurance settlement and condemnation proceeding .... 9,649 -- -- -- -- 9,649 Minority interest .................. (16,183) (7,236) (5,853) (2,070) (1,024) -- --------- --------- --------- --------- --------- --------- Net income ......................... 152,854 78,836 61,136 13,649 14,167 (14,934) Minority interest .................. 16,183 7,236 5,853 2,070 1,024 -- Interest and debt expense (4) ...... 164,478 40,245 32,709 18,711 26,541 46,272 Depreciation and amortization (4) .. 104,299 39,246 15,520 9,899 33,117 6,517 Net gain from insurance Settlement and condemnation proceeding .... (9,649) -- -- -- -- (9,649) Straight-lining of rents (4) ....... (16,132) (6,845) (3,203) (4,882) -- (1,202) Other .............................. 15,055 (79) -- -- 8,872(3) 6,262(5) --------- --------- --------- --------- --------- --------- EBITDA(1) .......................... $ 427,088 $ 158,639 $ 112,015 $ 39,447 $ 83,721 $ 33,266 ========= ========= ========= ========= ========= ========= (1) EBITDA represents income before interest, taxes, depreciation and amortization, extraordinary or non-recurring items, gains or losses on sales of real estate, the effect of straight-lining of property rentals for rent escalations and minority interest. Management considers EBITDA a supplemental measure for making decisions and assessing the performance of its segments. EBITDA may not be comparable to similarly titled measures employed by other companies. (2) Other EBITDA is comprised of: 2000 1999 1998 ---- ---- ---- Investment in Newkirk Joint Ventures .......... $ 50,985 $ 39,796 $ 5,379 Investments in other partially-owned entities (Hotel Pennsylvania,*Alexander's and other) . 43,067 34,827 25,323 Investment Income ............................. 25,290 15,836 16,809 Unallocated general and administrative expenses (25,166) (23,288) (18,147) Other ......................................... 6,870 2,271 3,902 --------- --------- --------- Total ................................ $ 101,046 $ 69,442 $ 33,266 ========= ========= ========= * The commercial portion of the Hotel was wholly-owned as of August 5, 1999, and accordingly consolidated. (3) Includes (i) the reversal of income taxes (benefit) which are considered non-recurring because of the conversion of the Temperature Controlled Logistics Companies to REIT's in 2000 and (ii) the add back of non-recurring unification costs. (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. (5) Primarily represents the Company's equity in Alexander's loss for the write-off resulting from the razing of Alexander's building formerly located at its Lexington Avenue site. (6) Net of $9,780 of rent not recognized as income. (7) Includes the reversal of $4,765 of expenses in connection with a deferred compensation arrangement. -50-
51 RESULTS OF OPERATIONS Years Ended December 31, 2000 and December 31, 1999 Below are the details of the changes by segment in EBITDA. Temperature Merchandise Controlled Total Office Retail Mart Logistics Other -------- -------- -------- ----------- ----------- -------- Year ended December 31, 1999 $609,361 $254,473 $114,808 $ 74,996 $ 95,642 $ 69,442 2000 Operations: Same store operations(1) 65,139 41,860 5,573 13,314 (2,482)(3) 6,874 Acquisitions and other 64,375 34,692 1,405 3,548 -- 24,730 -------- -------- -------- -------- -------- -------- Year ended December 31, 2000 $738,875 $331,025 $121,786 $ 91,858 $ 93,160 $101,046 ======== ======== ======== ======== ======== ======== % increase in same store operations 10.7% 16.5%(2) 4.9% 17.8% (2.6%)(3) 9.9% (1) Represents operations, which were owned for the same period in each year. (2) Same store percentage increase was 20.0% for the New York City office portfolio and 4.2% for the CESCR portfolio. (3) Subsequent to March 11, 1999 (date the operations of the AmeriCold Logistics Company were sold), the Company reflects its 60% share of the Vornado/Crescent Partnerships' ("the Landlord") equity in the rental income it receives from AmeriCold Logistics Company, its tenant, which leases the underlying temperature controlled warehouses used in its business. Prior to that date the Company reflected its equity in the operations. Total contractual rent was $35,672 and $160,494 for the fourth quarter and the year ended December 31, 2000, of which the tenant deferred $7,500 and $17,044. As at December 31, 2000, the balance of the tenant's deferred rent is as follows: The Company's Total Share ------- ------------- 2000: Quarter ended December 31 $ 7,500 $ 4,500 Quarter ended September 30 4,800 2,880 Quarter ended June 30 4,744 2,846 ------- ------- 17,044 10,226 1999: Quarter ended December 31 5,400 3,240 ------- ------- $22,444 $13,466 ======= ======= In addition to the amounts deferred above, $1,956 applicable to the receivable arising from the straight-lining of rents was also deferred in the year ended December 31, 2000. Based on the Company's policy of recognizing rental income when earned and collection is assured or cash is received, the Company did not recognize $4,500 of income from this tenant in the quarter ended December 31, 2000 and $9,780 in the year ended December 31, 2000. On February 22, 2001, the Landlord restructured the AmeriCold Logistics leases to, among other things, (i) reduce 2001's contractual rent to $146,000 (the same amount recognized as rental income in 2000's Funds from Operations), (ii) reduce 2002's contractual rent to $150,000 (plus contingent rent in certain circumstances), (iii) increase the Landlord's share of annual maintenance capital expenditures by $4,500 to $9,500 effective January 1, 2000 and (iv) extend the deferred rent period to December 31, 2003 from March 11, 2002. -51-
52 Revenues The Company's revenues, which consist of property rentals, tenant expense reimbursements and other income were $826,532 in the year ended December 31, 2000 compared to $696,958 in the prior year, an increase of $129,574. These increases by segment resulted from: Date of Merchandise Acquisition Total Office Retail Mart Other ----------- -------- -------- -------- ----------- -------- Property Rentals: Acquisitions: 7 West 34th Street ................... November 2000 $ 2,428 $ 2,428 $ -- $ -- $ -- 33 North Dearborn Street ............. September 2000 1,535 -- -- 1,535 -- L.A. Mart ............................ October 2000 2,709 -- -- 2,709 -- 595 Madison Avenue ................... September 1999 10,195 10,195 -- -- -- Hotel Pennsylvania (20%) ............. August 1999 4,638 -- -- -- 4,638 909 Third Avenue ..................... July 1999 16,223 16,223 -- -- -- 888 Seventh Avenue ................... January 1999 765 765 -- -- -- Student Housing Complex .............. January 2000 4,227 -- -- -- 4,227 Leasing activity ..................... 61,088 46,780 3,354 12,021 (1,067) -------- -------- -------- -------- -------- Total increase in property rentals .............................. 103,808 76,391 3,354 16,265 7,798 -------- -------- -------- -------- -------- Tenant expense reimbursements: Increase in tenant expense reimbursements due to acquisitions ....................... 10,733 9,071 -- 899 763 Other ................................ 12,481 8,319 2,484 1,510 168 -------- -------- -------- -------- -------- Total increase in tenant expense reimbursements .................... 23,214 17,390 2,484 2,409 931 -------- -------- -------- -------- -------- Other income ........................... 2,552 963 719 618 252 -------- -------- -------- -------- -------- Total increase in revenues ............. $129,574 $ 94,744 $ 6,557 $ 19,292 $ 8,981 ======== ======== ======== ======== ======== The following sets forth certain information for properties the Company owns directly or indirectly, including leasing activity for space previously occupied: Office Merchandise Mart ------------------------ ----------------------- Temperature New York Controlled City CESCR(1) Retail Office(2) Showroom(2) Logistics -------- -------- ------ --------- ----------- ----------- (square feet and cubic feet in thousands) As of December 31, 2000: Square feet ...................... 14,396 4,248 11,293 2,869 5,044 17,495 Cubic feet ....................... -- -- -- -- -- 438,900 Number of properties ............. 22 50 55 9 9 88 Occupancy rate ................... 96% 98% 92% 90% 98% 95% Leasing Activity: For the year ended December 31, 2000: Square Feet ................ 1,407 927 350 378 819 -- Rent per Square Foot: Initial rent (3) ......... $ 45.91 $ 29.39 $ 14.73 $ 30.54 $ 16.61 -- Prior escalated rent ..... $ 30.54 $ 25.97 $ 13.05 $ 22.99 $ 15.91 -- Percentage increase ...... 50% 13% 13% 33% 4% -- As of December 31, 1999: Square feet ...................... 14,028 3,623 11,960 2,414 4,174 16,998 Cubic feet ....................... -- -- -- -- -- 428,300 Number of properties ............. 22 39 56 7 7 89 Occupancy rate ................... 95% 99% 92% 93% 98% 95% (1) Represents the Company's 34% interest. (2) The office and showroom space is contained in the same mixed-use properties. (3) Most leases include periodic step-ups in rent, which are not reflected in the initial rent per square foot leased. -52-
53 Expenses The Company's expenses were $466,117 in the year ended December 31, 2000, compared to $405,854 the prior year, an increase of $60,263. These increases by segment resulted from: Merchandise Total Office Retail Mart Other -------- -------- -------- ----------- -------- Operating: Acquisitions ................... $ 23,639 $ 16,743 $ -- $ 2,310 $ 4,586 Same store operations .......... 12,603 13,374 (2,501) 2,294 (564) -------- -------- -------- -------- -------- 36,242 30,117 (2,501) 4,604 4,022 -------- -------- -------- -------- -------- Depreciation and amortization: Acquisitions ................... 5,952 3,735 -- 528 1,689 Same store operations .......... 10,309 6,197 2,147 2,397 (432) -------- -------- -------- -------- -------- 16,261 9,932 2,147 2,925 1,257 -------- -------- -------- -------- -------- General and Administrative: Appreciation in value of Vornado shares and other securities held in officer's deferred compensation Trust ........... 5,105 -- -- -- 5,105 Other expenses ................. 2,655(1) 170 94 853 1,538 -------- -------- -------- -------- -------- 7,760 170 94 853 6,643 -------- -------- -------- -------- -------- $ 60,263 $ 40,219 $ (260) $ 8,382 $ 11,922 ======== ======== ======== ======== ======== (1) This increase primarily resulted from higher payroll and professional fees. Income applicable to Alexander's (loan interest income, equity in income (loss) and depreciation) was $13,053 in the year ended December 31, 2000, compared to $7,427 in the prior year, an increase of $5,626. This increase resulted from interest income on higher outstanding loan balances to Alexander's. Income from partially-owned entities was $90,404 in the year ended December 31, 2000, compared to $82,310 in the prior year, an increase of $8,094. This increase by segment resulted from: Temperature Date of Merchandise Controlled Acquisition Total Office Retail Mart Logistics Other ----------- ----- ------ ------ ---------- ----------- ----- Acquisitions: Newkirk Joint Ventures ............... Various $ 4,604 $ -- $ -- $ -- $ -- $ 4,604 Other ................................ Various (2,750) -- -- -- -- (2,750) Increase (decrease) in equity in income: Temperature Controlled Logistics ......................... (7,944)(1) -- -- -- (7,944)(1) -- CESCR ............................... 6,907 6,907 -- -- -- -- Hotel Pennsylvania .................. 2,977(2) -- -- -- -- 2,977(2) Partially-owned office buildings .................. 1,089 1,089 -- -- -- -- Other ............................... 3,211 2,159 (271) 2,111 -- (788) -------- -------- -------- -------- -------- -------- $ 8,094 $ 10,155 $ (271) $ 2,111 $ (7,944) $ 4,043 ======== ======== ======== ======== ======== ======== (1) Reflects $9,780 of rent not recognized in the year ended December 31, 2000. (2) Reflects the elimination of the Company's equity in income of the commercial portion of the Hotel Pennsylvania which was wholly-owned as of August 5, 1999, and accordingly consolidated. -53-
54 Interest and other investment income (interest income on mortgage loans receivable, other interest income, dividend income and net gains on sales of marketable securities) was $32,926 for the year ended December 31, 2000, compared to $18,359 in the prior year, an increase of $14,567. This increase resulted primarily from the acquisition of NorthStar subordinated unsecured debt (22% effective rate) on September 19, 2000 and a loan to Primestone Investment Partners, L.P. (20% effective rate) on September 28, 2000. Interest and debt expense was $170,273 for the year ended December 31, 2000, compared to $141,683 in the prior year, an increase of $28,590. This increase resulted primarily from higher average outstanding balances and higher interest rates during the year. Net gain on sale of real estate of $10,965, resulted from (i) sale of three Texas shopping center properties on March 2, 2000, for $25,750, resulting in a gain of $2,560 and (ii) the sale of the Company's Westport Connecticut office property on August 30, 2000 for $24,000 resulting in a gain of $8,405. Minority interest was $102,374 for the year ended December 31, 2000, compared to $54,998 for the prior year, an increase of $47,376. This increase is primarily due to higher income. Preferred stock dividends were $38,690 for the year ended December 31, 2000, compared to $33,438 in the prior year, an increase of $5,252. The 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. The Company incurred an extraordinary loss of $1,125 in the first quarter of this year due to the write-off of unamortized financing costs in connection with a prepayment of debt. The Company operates in a manner intended to enable it to continue to qualify as a REIT under Sections 856-860 of the Internal Revenue Code of 1986 as amended. Under those sections, a REIT which distributes at least 95% of its REIT taxable income as a dividend to its shareholders each year and which meets certain other conditions will not be taxed on that portion of its taxable income which is distributed to its shareholders. The Company has distributed to its shareholders an amount greater than its taxable income. Therefore, no provision for Federal income taxes is required. Years Ended December 31, 1999 and December 31, 1998 Below are the details of the changes by segment in EBITDA. Temperature Merchandise Controlled Total Office Retail Mart Logistics Other -------- -------- --------- ----------- ----------- -------- Year ended December 31, 1998 ... $427,088 $158,639 $ 112,015 $39,447 $83,721 $ 33,266 1999 Operations: Same store operations(1) ... 27,410 18,074 3,797 6,556 -- (1,017) Acquisitions and other ..... 154,863 77,760 (1,004) 28,993 11,921 37,193 -------- -------- --------- ------- ------- -------- Year ended December 31, 1999 ... $609,361 $254,473 $ 114,808 $74,996 $95,642 $ 69,442 ======== ======== ========= ======= ======= ======== % increase in same store operations ......... 8.0% 11.4% 3.4% 16.6% N/A(2) (3.1)% - ----------------- (1) Represents operations which were owned for the same period in each year. (2) Not comparable because prior to March 11, 1999 (date the operations of the Temperature Controlled Logistics Companies were sold), the Company reflected its equity in the operations of the Temperature Controlled Logistics Companies. Subsequent thereto, the Company reflects its equity in the rent it receives from the Temperature Controlled Logistics Companies. -54-
55 Revenues The Company's revenues, which consist of property rentals, tenant expense reimbursements and other income were $696,958 in the year ended December 31, 1999 compared to $509,860 in the prior year, an increase of $187,098. These increases by segment resulted from: Date of Merchandise Acquisition Total Office Retail Mart Other ----------- -------- -------- ------- ----------- ------- Property Rentals: Acquisitions: 595 Madison Avenue .................... September 1999 $ 4,202 $ 4,202 $-- $-- $-- Hotel Pennsylvania (20%) .............. August 1999 2,670 -- -- -- 2,670 909 Third Avenue ...................... July 1999 11,626 11,626 -- -- -- 888 Seventh Avenue .................... January 1999 22,683 22,683 -- -- -- Market Square Complex ................. December 1998 13,303 -- -- 13,303 -- Mendik RELP Properties ................ December 1998 26,410 26,410 -- -- -- 20 Broad Street ....................... August 1998 8,112 8,112 -- -- -- 689 Fifth Avenue ...................... August 1998 2,152 2,152 -- -- -- 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 -- -- -- -------- -------- ------- -------- ------- 134,892 91,692 -- 40,530 2,670 Leasing activity ......................... 30,426 25,090 2,935 2,806 (405) -------- -------- ------- -------- ------- Total increase in property rentals ....... 165,318 116,782 2,935 43,336 2,265 -------- -------- ------- -------- ------- Tenant expense reimbursements: Increase in tenant expense reimbursements due to acquisitions .... 12,754 8,462 -- 3,922 370 Other .................................... 2,755 887 448 1,668 (248) -------- -------- ------- -------- ------- Total increase in tenant expense reimbursements ................ 15,509 9,349 448 5,590 122 -------- -------- ------- -------- ------- Other income ............................. 6,271 6,165 -- 474 (368) -------- -------- ------- -------- ------- Total increase in revenues ............... $187,098 $132,296 $ 3,383 $ 49,400 $ 2,019 ======== ======== ======= ======== ======= -55-
56 Expenses The Company's expenses were $405,854 in the year ended December 31, 1999, compared to $295,008 in the prior year, an increase of $110,846. These increases by segment resulted from: Merchandise Total Office Retail Mart Other --------- ------- ------- ----------- ------- Operating: Acquisitions ................... $ 68,828 $51,291 $ -- $ 15,946 $ 1,591 Same store operations .......... 6,119 6,234 3,332 (3,316) (131) --------- ------- ------- -------- ------- 74,947 57,525 3,332 12,630 1,460 --------- ------- ------- -------- ------- Depreciation and amortization: Acquisitions ................... 17,498 11,180 -- 5,756 562 Same store operations .......... 6,860 4,654 334 2,047 (175) --------- ------- ------- -------- ------- 24,358 15,834 334 7,803 387 --------- ------- ------- -------- ------- General and Administrative: Corporate expenses(2) ......... 11,593 2,748 62(1) 3,430 5,353 Reduction in value of Vornado shares and other securities held in officer's deferred compensation trust ........... (52) -- -- -- (52) --------- ------- ------- -------- ------- 11,541 2,748 62 3,430 5,301 --------- ------- ------- -------- ------- $ 110,846 $76,107 $ 3,728 $ 23,863 $ 7,148 ========= ======= ======= ======== ======= - ----------------- (1) Retail general and administrative expenses are included in corporate expenses, which are not allocated. (2) Of this increase: (i) $2,546 is attributable to acquisitions, (ii) $5,654 resulted from payroll, primarily for additional employees, and corporate office expenses, and (iii) $3,393 resulted from professional fees. Income applicable to Alexander's (loan interest income, equity in income (loss) and depreciation) was $7,427 in the year ended December 31, 1999, compared to $3,123 in the prior year, an increase of $4,304. This increase resulted from lower equity in Alexander's income in the prior year due primarily to the write-off resulting from the razing of its building formerly located at its Lexington Avenue site. Income from partially-owned entities was $82,310 in the year ended December 31, 1999, compared to $32,025 in the prior year, an increase of $50,285. This increase by segment resulted from: Temperature Date of Merchandise Controlled Acquisition Total Office Retail Mart Logistics Other ----------- ------- ------- ------ ----------- ----------- ------- Acquisitions: CESCR .................................. March 1999 $14,063 $14,063 $ -- $ -- $ -- $ -- Newkirk Joint Ventures ................. July 98/Mar. 99 16,510 -- -- -- -- 16,510 Las Catalinas .......................... November 1998 680 -- 680 -- -- -- Temperature Controlled Logistics ............................ June/July 1998 8,423 -- -- -- 8,423 -- Merchandise Mart Management Company ................... April 1998 (207) -- -- (207) -- -- ------- ------- ------ -------- ------- ------- 39,469 14,063 680 (207) 8,423 16,510 Increase (decrease) in equity in income: Temperature Controlled Logistics ........................... 12,528 -- -- -- 12,528(1) -- Hotel Pennsylvania .................... 1,417 -- -- -- -- 1,417(2) Partially-owned office buildings .................... (1,533) (1,533)(3) -- -- -- -- Other ................................. (1,596) (4,329) -- 2,176 580 (23) ------- ------- ------ -------- ------- ------- $50,285 $ 8,201 $ 680 $ 1,969 $21,531 $17,904 ======= ======= ====== ======== ======= ======= (1) Primarily reflects equity interest in lease payments (March 11, 1999-December 31, 1999) and equity interest in the operations (January 1, 1999-March 11, 1999) for 1999 in excess of equity in the operations of such companies in 1998. (2) Reflects the elimination of the Company's equity in income of the commercial portion of the Hotel Pennsylvania which was wholly-owned as of August 5, 1999, and accordingly consolidated. (3) Reflects the elimination of the Company's equity in income of Two Park Avenue which was wholly-owned as of November 17, 1998 and accordingly consolidated. -56-
57 Interest and other investment income (interest income on mortgage loans receivable, other interest income, dividend income and net gains on marketable securities) was $18,359 for the year ended December 31, 1999, compared to $24,074 in the prior year, a decrease of $5,715. This decrease resulted primarily from lower average investments. Interest and debt expense was $141,683 for the year ended December 31, 1999, compared to $114,686 in the prior year, an increase of $26,997. This increase resulted primarily from debt in connection with acquisitions. Minority interest was $54,998 for the year ended December 31, 1999, compared to $16,183 for the prior year, an increase of $38,815. This increase is primarily due to higher income. Preferred stock dividends were $33,438 for the year ended December 31, 1999, compared to $21,690 in the prior year, an increase of $11,748. The 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. -57-
58 SUPPLEMENTAL INFORMATION THREE MONTHS ENDED DECEMBER 31, 2000 AND DECEMBER 31, 1999 Below is a summary of net income and EBITDA by segment for the three months ended December 31, 2000 and 1999: For The Three Months Ended December 31, 2000 -------------------------------------------------------------------------------------- Temperature Merchandise Controlled Total Office Retail Mart Logistics Other(3) --------- --------- -------- ----------- ----------- -------- Total revenues ........................ $ 216,853 $ 120,942 $ 47,123 $ 43,048 $ -- $ 5,740 Total expenses ........................ 125,509 70,170 19,943 23,887 -- 11,509 --------- --------- -------- -------- -------- -------- Operating income ...................... 91,344 50,772 27,180 19,161 -- (5,769) Income applicable to Alexander's ...... 5,590 -- -- -- -- 5,590 Income from partially-owned entities .. 15,957 6,622 (320) (2,641) 4,094(4) 8,202 Interest and other investment income .. 14,657 3,501 -- 755 -- 10,401 Interest and debt expense ............. (49,033) (17,332) (20,047) (10,706) -- (948) Net Gain on sale of real estate ....... -- -- -- -- -- -- Minority interest ..................... (26,792) (11,671) (4,005) (3,124) (3,214) (4,778) --------- --------- -------- -------- -------- -------- Income before extraordinary item ...... 51,723 31,892 2,808 3,445 880 12,698 Extraordinary item .................... -- -- -- -- -- -- --------- --------- -------- -------- -------- -------- Net income ............................ 51,723 31,892 2,808 3,445 880 12,698 Extraordinary item .................... -- -- -- -- -- -- Minority interest ..................... 26,792 11,671 4,005 3,124 3,214 4,778 Net Gain on sale of real estate ....... -- -- -- -- -- -- Interest and debt expense(2) .......... 70,755 25,160 20,663 10,706 6,478 7,748 Depreciation and amortization(2) ...... 46,913 21,137 4,345 5,835 9,593 6,003 Straight-lining of rents(2) ........... (5,860) (3,916) (318) (1,396) (136) (94) Other ................................. 7,546 252 (1,923) 1,358 3,706(5) 4,153(6) --------- --------- -------- -------- -------- -------- EBITDA(1) ............................. $ 197,869 $ 86,196 $ 29,580 $ 23,072 $ 23,735 $ 35,286 ========= ========= ======== ======== ======== ======== For the Three Months Ended December 31, 1999 ---------------------------------------------------------------------------------------- Temperature Merchandise Controlled Total Office Retail Mart Logistics Other(3) --------- --------- -------- ----------- ----------- -------- Total revenues ....................... $ 183,651 $ 103,942 $ 42,854 $ 33,210 $ -- $ 3,645 Total expenses ....................... 111,680 62,635 20,860 18,183 -- 10,002 --------- --------- -------- -------- -------- -------- Operating income ..................... 71,971 41,307 21,994 15,027 -- (6,357) Income applicable to Alexander's ..... 2,476 -- -- -- -- 2,476 Income (loss) from partially-owned entities .......... 24,015 5,442 298 (1,201) 8,760 10,716 Interest and other investment income . 5,779 494 -- 171 -- 5,114 Interest and debt expense ............ (35,697) (14,180) (6,032) (8,178) -- (7,307) Minority interest .................... (19,789) (9,692) (5,206) (2,116) (2,775) -- --------- --------- -------- -------- -------- -------- Net income ........................... 48,755 23,371 11,054 3,703 5,985 4,642 Minority interest .................... 19,789 9,692 5,206 2,116 2,775 -- Interest and debt expense(2) ......... 58,346 23,289 6,681 8,178 7,430 12,768 Depreciation and amortization(2) ..... 41,604 18,825 4,372 5,061 7,441 5,905 Straight-lining of rents(2) .......... (5,294) (3,268) (119) (1,236) (527) (144) Other ................................ 6,224 407 -- -- 2,306(5) 3,511 --------- --------- -------- -------- -------- -------- EBITDA(1) ............................ $ 169,424 $ 72,316 $ 27,194 $ 17,822 $ 25,410 $ 26,682 ========= ========= ======== ======== ======== ======== (1) EBITDA represents income before interest, taxes, depreciation and amortization, extraordinary or non-recurring items, gains or losses on sales of real estate, the effect of straight-lining of property rentals for rent escalations and minority interest. Management considers EBITDA a supplemental measure for making decisions and assessing the performance of its segments. EBITDA may not be comparable to similarly titled measures employed by other companies. (2) 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. (3) Other EBITDA is comprised of: 2000 1999 -------- -------- Investment in Newkirk Joint Ventures ..... $ 13,151 $ 15,621 Investments in other partially-owned ..... 16,250 12,706 entities (Hotel Pennsylvania*, Alexander's and other) Investment Income ........................ 10,401 5,114 Unallocated general and administrative expenses .............................. (7,505) (7,723) Other .................................... 2,989 964 -------- -------- Total ............................ $ 35,286 $ 26,682 ======== ======== * The commercial portion of the Hotel was wholly-owned as of August 5, 1999, and accordingly consolidated. (4) Net of $4,500 of rent not recognized as income. (5) Includes the reversal of income taxes which are considered non-recurring because of the conversion of the Temperature Controlled Logistics Companies to REITs in 2000. (6) Net of $2,272, the Company's share of the reversal of Alexander's stock appreciation rights expense. -58-
59 Below are the details of the changes by segment in EBITDA. Temperature Merchandise Controlled Total Office Retail Mart Logistics Other -------- ------- ------- ----------- ----------- ------- Three months ended December 31, 1999 ............. $169,424 $72,316 $27,194 $17,822 $ 25,410 $26,682 2000 Operations: .................. 12,898 8,923 1,414 2,102 (1,675) 2,134 Same store operations(1) ...... Acquisitions and other ........ 15,547 4,957 972 3,148 -- 6,470 -------- ------- ------- ------- -------- ------- Three months ended December 31, 2000........................... $197,869 $86,196 $29,580 $23,072 $ 23,735 $35,286 ======== ======= ======= ======= ======== ======= % increase in same store operations ............ 7.6% 12.3% 5.2% 11.8% (6.6%) 8.0% (1) Represents operations, which were owned for the same period in each year. (2) Same Store percentage increase was 14.4% for the New York City office portfolio and 5.3% for the CESCR portfolio. The following table sets forth leasing activity for space previously occupied for the three months ended December 31, 2000: Office Merchandise Mart ---------------------- ------------------------ New York (square feet in thousands) City CESCR(1) Retail Office(2) Showroom(2) -------- -------- ------- --------- ----------- Square Feet ................ 325 335 25 13 111 Rent per Square Foot: Initial rent(3) .......... $ 53.34 $ 30.61 $ 19.44 $ 21.93 $ 21.16 Prior escalated rent ..... $ 30.12 $ 25.85 $ 12.81 $ 20.12 $ 21.29 Percentage increase ...... 77% 18% 52% 9% -- (1) Represents the Company's 34% interest. (2) The office and showroom space is contained in the same mixed-use properties. (3) Most leases include periodic step-ups in rent, which are not reflected in the initial rent per square foot leased. ECONOMIC CONDITIONS Substantially all of the Company's office, retail and permanent showroom leases contain step-ups in rent. Such rental increases are not designed to, and in many instances do not, approximate the cost of inflation, but do have the effect of mitigating the adverse impact of inflation. In addition, substantially all of the Company's leases contain provisions that require the tenant to reimburse the Company for the tenant's share of common area charges (including roof and structure in strip shopping centers, unless it is the tenant's direct responsibility) and real estate taxes or for increases of such expenses over a base amount, thus offsetting, in part, the effects of inflation on such expenses. Inflation did not have a material effect on the Company's results for the periods presented. -59-
60 LIQUIDITY AND CAPITAL RESOURCES Cash Flows for the Years Ended December 31, 2000, 1999 and 1998 Year Ended December 31, 2000 Cash flows provided by operating activities of $249,921 was primarily comprised of (i) income of $233,991 and (ii) adjustments for non-cash items of $66,557 offset by (iii) the net change in operating assets and liabilities of $40,787 and (iv) the net gain on sale of real estate of $10,965. The adjustments for non-cash items are primarily comprised of (i) depreciation and amortization of $99,846 and (ii) minority interest of $102,374, partially offset by (iii) the effect of straight-lining of rental income of $32,206 and (iv) equity in net income of partially-owned entities and income applicable to Alexander's of $103,457. Net cash used in investing activities of $699,375 was primarily comprised of (i) capital expenditures of $171,782, (ii) investment in notes and mortgages receivable of $144,225, (iii) acquisitions of real estate of $199,860, (iv) investments in partially-owned entities of $99,974, (v) cash restricted of $183,788, of which $173,500 represents funds escrowed in connection with a mortgage financing, partially offset by (vi) proceeds from the sale of real estate of $47,945 and distributions from partially-owned entities of $68,799. Below are the details of acquisitions of real estate, investments in partially-owned entities, investments in notes and mortgages receivable and capital expenditures. Debt Value of Cash Assumed Units Issued Investment -------- -------- ------------ ---------- Acquisitions of Real Estate: Student Housing Complex (90% Interest) ............. $ 6,660 $ 17,640 $ -- $ 24,300 33 North Dearborn Street ........................... 16,000 19,000 -- 35,000 7 West 34th Street ................................. 128,000 -- -- 128,000 L.A. Mart .......................................... 44,000 10,000 -- 54,000 Other .............................................. 5,200 -- -- 5,200 -------- -------- -------- -------- $199,860 $ 46,640 $ -- $246,500 ======== ======== ======== ======== Investments in Partially-Owned Entities: Vornado Ceruzzi Joint Venture (80% interest) ...... $ 21,940 $ -- $ -- $ 21,940 Additional investment in Newkirk Joint Ventures .... 1,334 -- 9,192 10,526 Loan to Alexander's ................................ 15,000 -- -- 15,000 Alexander's - increase in investment to 33% ........ 3,400 -- -- 3,400 Funding of Development Expenditures: Fort Lee (75% interest) .......................... 10,400 -- -- 10,400 Park Laurel (80% interest) ....................... 47,900 -- -- 47,900 -------- -------- -------- -------- $ 99,974 $ -- $ 9,192 $109,166 ======== ======== ======== ======== Investments in Notes and Mortgages receivable: Loan to NorthStar Partnership L.P. ................. $ 65,000 $ -- $ -- $ 65,000 Loan to Primestone Investment Partners, L.P. ....... 62,000 -- -- 62,000 Advances to Vornado Operating Company .............. 15,251 -- -- 15,251 Other .............................................. 1,974 -- -- 1,974 -------- -------- -------- -------- $144,225 $ -- $ -- $144,225 ======== ======== ======== ======== New York Merchandise Total City Office Retail Mart Other -------- ----------- ------- ----------- ------- Capital expenditures: Expenditures to maintain the assets ...... $ 33,113 $ 15,661 $ 414 $11,437 $ 5,601 Tenant allowances ........................ 60,850 51,017 3,307 6,301 225 -------- -------- ------- ------- ------- Total recurring capital expenditures ..... 93,963 66,678 3,721 17,738 5,826 Redevelopment and development expenditures ........................... 63,348 40,124 3,600 19,624 -- Corporate ................................ 14,471 -- -- -- 14,471 -------- -------- ------- ------- ------- $171,782 $106,802 $ 7,321 $37,362 $20,297 ======== ======== ======= ======= ======= In addition to the expenditures noted above, the Company recorded leasing commissions of $26,133 in the year ended December 31, 2000, of which $24,333 was attributable to New York City Office properties, $647 was attributable to Retail properties and $1,153 was attributable to Merchandise Mart properties. -60-
61 Net cash provided by financing activities of $473,813 was primarily comprised of (i) proceeds from borrowings of $1,195,108, (ii) proceeds from issuance of preferred units of $204,750, partially offset by, (iii) repayments of borrowings of $633,655, (iv) dividends paid on common shares of $168,688 (v) dividends paid on preferred shares of $35,815, and (vi) distributions to minority partners of $80,397. Year Ended December 31, 1999 Cash flows provided by operating activities of $176,895 were comprised of (i) net income of $202,519 and (ii) adjustments for non-cash items of $26,686 offset by (iii) the net change in operating assets and liabilities of $50,907 (primarily prepaid expenses). The adjustments for non-cash items are primarily comprised of (i) depreciation and amortization of $83,585 and (ii) minority interest of $54,998, partially offset by (iii) the effect of straight-lining of rental income of $29,587 and (iv) equity in income of partially-owned entities of $82,310. Net cash used in investing activities of $494,204 was primarily comprised of (i) capital expenditures of $153,591 (see detail below), (ii) investment in mortgage loans receivable of $59,787 (including $41,200 loan to CAPI and $18,587 loan to Vornado Operating Company), (iii) acquisitions of real estate of $224,654 (see detail below) and (iv) investments in partially-owned entities of $118,409 (see detail below), partially offset by (v) the use of cash restricted for tenant improvements of $13,624, (vi) proceeds from the sale of Temperature Controlled Logistics assets of $22,769 and (vii) proceeds from the repayment of mortgage loans receivable of $20,751 (of which $14,000 is from Vornado Operating Company). Acquisitions of real estate and investments in partially-owned entities are comprised of: Debt Value of Cash Assumed Units Issued Investment -------- -------- ------------ ---------- Real Estate: 595 Madison Avenue ........................... $125,000 $ -- $ -- $125,000 909 Third Avenue ............................. 12,400 109,000 1,600 123,000 888 Seventh Avenue ........................... 45,000 55,000 -- 100,000(1) GreenPoint leasehold interest ................ 37,300 -- -- 37,300 Other ........................................ 4,954 -- -- 4,954 -------- -------- -------- -------- $224,654 $164,000 $ 1,600 $390,254 ======== ======== ======== ======== Investments in Partially Owned Entities: Charles E. Smith Commercial Realty L.P.: Increase in investment to 34% .............. $ -- $ -- $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 ................................... 16,420 -- 50,500 66,920 Hotel Pennsylvania - increase in investment to 100% .................................... 18,000 24,000 -- 42,000 Alexander's - increase in investment to 32% .. 8,956 -- -- 8,956 Loan to Alexander's .......................... 50,000 -- -- 50,000 Loan to Temperature Controlled Logistics ..... 9,000 -- -- 9,000 Other ........................................ 2,833 -- -- 2,833 -------- -------- -------- -------- $118,409 $ 24,000 $300,500 $442,909 ======== ======== ======== ======== - ----------- (1) Total consideration for 888 Seventh Avenue was $117,000 of which $17,000 was expended in 1998. -61-
62 Capital expenditures were comprised of: New York City Merchandise Total Office Retail Mart Other -------- -------- ------- ----------- ------ Expenditures to maintain the assets .......... $ 27,251 $13,176 $ 1,945 $ 8,221 $3,909 Tenant allowances ............................ 40,242 20,890 927 18,384 41 Redevelopment and Development expenditures ... 86,098 52,288(1) 19,281 14,529 -- -------- ------- ------- ------- ------ $153,591 $86,354 $22,153 $41,134 $3,950 ======== ======= ======= ======= ====== - ----------------- (1) Includes $27,544 to buyout the tenant's lease on 28,000 square feet of office space at 640 Fifth Avenue, thereby permitting re-leasing for retail use and $24,744 for the refurbishment of 770 Broadway. In addition to the expenditures noted above, the Company recorded leasing commissions of $16,853 in the year ended December 31, 1999, of which $14,003 was attributable to New York City Office properties, $638 was attributable to Retail properties and $2,212 was attributable to Merchandise Mart properties. Net cash provided by financing activities of $262,131 was primarily comprised of (i) proceeds from issuance of preferred shares of $192,953, (ii) proceeds from issuance of preferred units of $525,013 and (iii) proceeds from borrowings of $455,000 partially offset by, (iv) repayments of borrowings of $668,957, (v) dividends paid on common shares of $153,223, (vi) dividends paid on preferred shares of $30,563, and (vii) distributions to minority partners of $52,491. Years Ended December 31, 1998 Cash flows provided by operating activities of $189,406 were primarily comprised of (i) income of $143,205 (net income of $152,854 less net gain from insurance settlement and condemnation proceeding of $9,649), (ii) adjustments for non-cash items of $27,657, and (iii) the net change in operating assets and liabilities of $18,544. The adjustments for non-cash items are primarily comprised of (i) depreciation and amortization of $59,227 and (ii) minority interest of $16,183, partially offset by (iii) the effect of straight-lining of rental income of $17,561 and (iv) equity in net income of partially-owned entities of $32,025. Net cash used in investing activities of $1,257,367 was primarily comprised of (i) acquisitions of real estate of $896,800 (see detail below), (ii) investments in partially-owned entities of $308,000 (see detail below), (iii) capital expenditures of $68,085 (see detail below) and investments in securities of $73,513 (including purchase of Capital Trust Preferred Stock of $48,700), partially offset by (iv) proceeds from the repayment of mortgage loans receivable of $57,600. -62-
63 Acquisitions of real estate and investments in partially-owned entities were comprised of: Value of Debt Shares or Cash Assumed Units Issued Investment -------- -------- ------------ ---------- Real Estate: Merchandise Mart Properties ..................... $187,000 $327,000 $ 116,000 $ 630,000 One Penn Plaza .................................. 317,000 93,000 -- 410,000 770 Broadway .................................... 131,000 -- 18,000 149,000 150 East 58th Street ............................ 118,000 -- -- 118,000 40 Fulton Street ................................ 38,000 -- -- 38,000 888 Seventh Avenue .............................. 17,000 -- -- 17,000(1) 689 Fifth Avenue ................................ 33,000 -- -- 33,000 Mendik RELP Properties .......................... 31,000 46,000 29,000 106,000 Market Square Complex ........................... 11,000 60,000 44,000 115,000 Other ........................................... 13,800 -- -- 13,800 -------- -------- ---------- ---------- $896,800 $526,000 $ 207,000 $1,629,800 ======== ======== ========== ========== Investments in Partially-Owned Entities: Hotel Pennsylvania (acquisition of additional 40% interest increasing ownership to 80%) ............................... $ 22,000 $ 48,000 $ -- $ 70,000 570 Lexington Avenue (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 Temperature Controlled Logistics ... Companies debt (60% interest) ................... 44,000 -- -- 44,000 Acquisition of Carmar Group (60% interest) ...... 86,400 8,400 -- 94,800 Investment in Newkirk Joint Ventures ............ 56,000 -- -- 56,000 Las Catalinas Mall (50% interest) ............... -- 38,000 -- 38,000 Other ........................................... 9,300 -- -- 9,300 -------- -------- ---------- ---------- $308,000 $115,300 $ 6,000 $ 429,300 ======== ======== ========== ========== - ------------------------ (1) Acquisition was completed in 1999 for a total of $117,000. Capital expenditures were comprised of: New York City Merchandise Total Office Retail Mart Other ------- --------- ------- ----------- ------ Expenditures to maintain the assets .... $14,460 $ 4,975 $ 3,138 $ 5,273 $1,074 Tenant allowances ...................... 53,625 46,187 2,397 5,041 -- ------- ------- ------- ------- ------ $68,085 $51,162 $ 5,535 $10,314 $1,074 ======= ======= ======= ======= ====== In addition to the expenditures noted above, the Company recorded leasing commissions of $17,142 in the year ended December 31, 1998, of which $13,299 was attributable to New York City Office properties, $763 was attributable to Retail properties and $3,080 was attributable to Merchandise Mart properties. Net cash provided by financing activities of $879,815 was primarily comprised of (i) proceeds from borrowings of $1,427,821, (ii) proceeds from the issuance of common shares of $445,247 and (iii) proceeds from the issuance of preferred shares of $85,313, partially offset by (iv) repayment of borrowings of $883,475, (v) dividends paid on common shares of $154,440 and (vi) dividends paid on preferred shares of $18,816. -63-
64 Funds from Operations for the Years Ended December 31, 2000 and 1999 Funds from operations was $335,158 in the year ended December 31, 2000, compared to $293,773 in the prior year, an increase of $41,385. The following table reconciles funds from operations and net income: YEAR ENDED DECEMBER 31, ------------------------- 2000 1999 --------- --------- Net income applicable to common shares .................................. $ 195,301 $ 169,081 Extraordinary item ...................................................... 1,125 -- Depreciation and amortization of real property .......................... 97,744 82,216 Straight-lining of property rentals for rent escalations ................ (28,893) (22,881) Leasing fees received in excess of income recognized .................... 1,259 1,705 Appreciation (depreciation) of securities held in officer's deferred Compensation trust ................................................... 4,765 (340) Net gain on sale of real estate ......................................... (10,965) -- Gains on sale of securities available for sale .......................... -- (383) Proportionate share of adjustments to equity in income of partially-owned entities to arrive at funds from operations .......... 69,578 57,127 Minority interest in excess of preferential distributions ............... (16,445) (9,020) --------- --------- 313,469 277,505 Series A Preferred Stock dividends ...................................... 21,689 16,268 --------- --------- Funds from operations ................................................... $ 335,158 $ 293,773 ========= ========= The number of shares that should be used for determining funds from operations per share is as follows: YEAR ENDED DECEMBER 31, ----------------------- 2000 1999 -------- ---------- Weighted average shares used for determining diluted income per share ......................... 88,692 87,287 Series A preferred shares ......... 8,018 6,015 ------ ------ Shares used for determining diluted funds from operations per share ......................... 96,710 93,302 ====== ====== 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 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 from this definition to adjust primarily for (i) the effect of straight-lining of property rentals for rent escalations and leasing fee income, and (ii) the reversal of income taxes (benefit) which are considered non-recurring because of the conversion of Temperature Controlled Logistics Companies to REITs in 2000. -64-
65 Below are the cash flows provided by (used in) operating, investing and financing activities: YEAR ENDED DECEMBER 31, -------------------------- 2000 1999 --------- --------- Operating activities ..... $ 249,921 $ 176,895 ========= ========= Investing activities ..... $(699,375) $(494,204) ========= ========= Financing activities ..... $ 473,813 $ 262,131 ========= ========= Certain Cash Requirements The Company has budgeted approximately $101,017 for capital expenditures (excluding acquisitions) over the next year as follows: Temperature New York Merchandise Controlled Total City Office Retail Mart Logistics Other -------- ----------- -------- ----------- ----------- -------- Expenditures to maintain $ 66,036 $ 21,969 $ 5,580 $ 14,018 $ 5,700(1) $ 18,769(2) the assets Tenant allowances 34,981 21,349 1,847 11,785 -- -- -------- -------- -------- -------- -------- -------- $101,017 $ 43,318 $ 7,427 $ 25,803 $ 5,700 $ 18,769 ======== ======== ======== ======== ======== ======== - ----------------- (1) Represents the Company's 60% share of the Vornado/Crescent Partnerships obligation to fund $9,500 of capital expenditures per annum. (2) Includes $11,269 in connection with the Hotel Pennsylvania. In addition to the expenditures noted above, the Company has budgeted leasing commissions of $12,900, of which $11,000 attributable to New York City Office properties and $1,900 is attributable to Merchandise Mart properties. Tenant allowances and leasing commissions for the New York City Office properties approximate $17.00 per square foot for renewal space and $42.00 per square foot for vacant space. Historically, approximately two-thirds of existing tenants renew their leases. In addition to the capital expenditures reflected above, the Company is currently engaged in or considering certain development and redevelopment projects for which it has budgeted approximately $258.8 million to be expended as outlined in the "Development and Redevelopment Projects" section of Item 1--Business. The $258.8 million does not include amounts for other projects which are also included in the "Development and Redevelopment Projects" section of Item 1 -Business, as no budgets for them have been finalized. There can be no assurance that any of the above projects will be ultimately completed, completed on time or completed for the budgeted amount. No cash requirements have been budgeted for the capital expenditures and amortization of debt of Alexander's, CESCR, or Newkirk, which are partially owned by the Company. These investees are expected to fund their own cash requirements. Alexander's is prohibited by its loan agreements from paying dividends. In 2001, the Company expects to receive at a minimum, preferred distributions from CESCR of approximately $15 million (a blended yield of 6.2%) and common distributions of approximately $4.1 million based on 2000's dividend rate. The minimum preferred distribution rate increases from 6.2% in 2001 to 6.46% in 2002 and 6.5% thereafter. Further, the Company will receive distributions of approximately $8.5 million from its investment in the Newkirk Joint Ventures. Financing Activities CORPORATE On March 1, 2000 the Company completed a $500,000 private placement of 10-year, 7.93% mortgage notes, cross-collateralized by 42 shopping center properties, resulting in net proceeds of approximately $490,000. In connection therewith, the Company repaid $228,000 of existing mortgage debt scheduled to mature on December 1, 2000 and $262,000 outstanding under its revolving credit facility. -65-
66 On March 21, 2000, the Company renewed its $1,000,000 revolving credit facility for an additional three years. The covenants of the facility include, among others, maximum loan to value ratio, minimum debt service coverage and minimum capitalization requirements. Interest is at LIBOR plus .90% (7.66% at December 31, 2000). The Company paid origination fees of $6,700 and pays a commitment fee quarterly of .20% per annum on the facility amount. On May 1, 2000 the Company sold an aggregate of $21,000 of 8.25% Series D-6 Cumulative Redeemable Preferred Units in the Operating Partnership to an institutional investor in a private placement, resulting in net proceeds of approximately $20,475. The Perpetual Preferred Units may be called without penalty at the option of the Operating Partnership commencing on May 1, 2005. On May 25, 2000 the Company sold an aggregate of $180,000 of 8.25% Series D-7 Cumulative Redeemable Preferred Units in the Operating Partnership to institutional investor in a private placement, resulting in net proceeds of approximately $175,500. The Perpetual Preferred Units may be called without penalty at the option of the Operating Partnership commencing on May 25, 2005. On December 8, 2000, the Company sold an aggregate of $9,000 of 8.25% Series D-8 Cumulative Redeemable Preferred Units in the Operating Partnership to institutional investors in a private placement, resulting in net proceeds of approximately $8,775. The Perpetual Preferred Units may be called without penalty at the option of the Operating Partnership commencing on December 8, 2005. OFFICE On March 1, 2000, the Company refinanced its Two Park Avenue office building for $90,000. Of the proceeds received, the Company repaid the existing debt of $65,000. The new 3-year debt matures on February 28, 2003 and bears interest at Libor + 1.45% (8.21% at December 31, 2000). On August 11, 2000, the Company completed a $173,500 mortgage financing, cross-collaterized by its 770 Broadway and 595 Madison Avenue office buildings. The loan bears interest at LIBOR + .40% (7.16% at December 31, 2000) and matures on August 1, 2002. At December 31, 2000, the proceeds of the loan are in a restricted mortgage escrow account, which bears interest at the same rate as the loan. On January 11, 2001, the Company completed a $105,000 refinancing of its 888 Seventh Avenue office building. The loan bears interest at a fixed rate of 6.6% and matures on January 1, 2006. A portion of the proceeds received were used to repay the then existing mortgage of $55,000. The Company has an effective shelf registration under which it can offer an aggregate of approximately $1.4 billion of equity securities and an aggregate of $1.0 billion of debt securities. 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. ACQUISITION ACTIVITY As a result of acquisitions, the book value of the Company's assets have grown from $5,479,218 at December 31, 1999 to $6,370,314 at December 31, 2000. -66-
67 World Trade Center On February 22, 2001, the Company entered into a 20-day exclusive negotiation period with the Port Authority of NY & NJ to complete the contract and associated documents for the net lease of the 11 million square foot World Trade Center complex in New York. The 99-year net lease of the World Trade Center has been valued by the Port Authority's advisors at approximately $3.25 billion. The Board of the Commissioners of the Port Authority has instructed their staff and advisors to present the final contract for approval at a special Port Authority Board meeting scheduled for March 14, 2001. In connection therewith, the Company has provided the Port Authority with a $100 million refundable and non-drawable letter of credit. The Company's future success will be affected by its ability to integrate the assets and businesses it acquires and to effectively manage those assets and businesses. The Company currently expects to continue to grow at a relatively fast pace. However, its ability to do so will be dependent on a number of factors, including, among others, (a) the availability of reasonably priced assets that meet the Company's acquisition criteria and (b) the price of the Company's common shares, the rates at which the Company is able to borrow money and, more generally, the availability of financing on terms that, in the Company's view, make such acquisitions financially attractive. RECENTLY ISSUED ACCOUNTING STANDARDS The Financial Accounting Standards Board (FASB) has issued Statement of Financial Accounting Standards No. 133, Accounting for Derivative Instruments and Hedging Activities, as amended, which establishes accounting and reporting standards requiring that every derivative instrument (including certain derivative instruments embedded in other contracts) be recorded in the balance sheet as either an asset or liability measured at its fair value. The Statement requires that changes in the derivative instrument's fair value be recognized currently in earnings unless specific hedge accounting criteria are met. In 2001, the Company will reclassify a previously recognized charge of approximately $4,000, from other comprehensive income to income, relating to the mark-to-market on public and private technology company warrants, as the cumulative effect of adopting Statement 133. The Company does not currently anticipate utilizing hedge accounting for its derivative positions following the adoption of Statement 133. -67-
68 ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The Company's exposure to a change in interest rates on its wholly-owned and partially-owned debt (all of which arises out of non-trading activity) is as follows: ($ in thousands, except per share amounts) 2000 1999 --------------------------------------- ----------------------- Weighted Effect of Weighted Average 1% Change Average December 31, Interest In Base December 31, Interest Balance Rate Rates Balance Rate ----------- -------- ---------- ----------- --------- Wholly-owned debt: Variable rate............. $1,593,751 8.00% $15,938(1) $1,275,168 7.59% Fixed rate................ 1,063,146 7.61% -- 773,636 7.02% ---------- ---------- ---------- $2,656,897 15,938 $2,048,804 ========== ---------- ========== Partially-owned debt: Variable rate............. $ 204,462 8.40% 2,045 $ 85,380 8.02% Fixed rate................ 1,123,926 7.54% -- 1,109,185 7.72% ---------- ---------- ---------- $1,328,388 2,045 $1,194,565 ========== ---------- ========== Minority interest............... (2,608) ---------- Total decrease in the Company's annual net income... $ 15,375 ========== Per share-diluted........... $ .17 ========== The fair value of the Company's debt at December 31, 2000, based on discounted cash flows at the current rate at which similar loans would be made to borrowers with similar credit ratings for the remaining term of such debt approximates its carrying value. In July 1998, the Company entered into an interest rate cap agreement to reduce the impact of changes in interest rates on its $275,000 One Penn Plaza loan. The agreement caps the Company's interest rate in the event that LIBOR increases above 8.5% through January 20, 2000 and 9% thereafter, until the termination date of the cap agreement on July 30, 2001 (the debt matures in June 2002). The Company is exposed to credit loss in the event of nonperformance by the other parties to the interest rate cap agreement. However, the Company does not anticipate nonperformance by the counterparty. The fair value of the interest rate cap agreement at December 31, 2000 approximates its cost. On September 21, 1999, the Company bought an interest rate cap, capping the interest rate on its $250,000 Merchandise Mart loan in the event that LIBOR increases above 9.25% through the termination date of the agreement in September 2002. Simultaneously with this transaction, the Company sold an interest rate cap to a third party on the same terms as the cap the Company purchased. - --------------- (1) Excludes the effect of a $173,500 mortgage financing, cross-collateralized by the Company's 770 Broadway and 595 Madison Avenue office properties, as the proceeds are in a restricted mortgage escrow account which bears interest at the same rate as the loan. -68-
69 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA INDEX TO FINANCIAL STATEMENTS PAGE ---- Independent Auditors' Report................................................................. 70 Consolidated Balance Sheets at December 31, 2000 and 1999.................................... 71 Consolidated Statements of Income for the years ended December 31, 2000, 1999 and 1998....... 72 Consolidated Statements of Shareholders' Equity for the years ended December 31, 2000, 1999 and 1998.................................................................................. 73 Consolidated Statements of Cash Flows for the years ended December 31, 2000, 1999 and 1998... 75 Notes to Consolidated Financial Statements................................................... 76 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH INDEPENDENT AUDITORS ON ACCOUNTING AND FINANCIAL DISCLOSURE Not applicable. -69-
70 INDEPENDENT AUDITORS' REPORT Shareholders and Board of Trustees Vornado Realty Trust New York, New York We have audited the accompanying consolidated balance sheets of Vornado Realty Trust as of December 31, 2000 and 1999, and the related consolidated statements of income, shareholders' equity and cash flows for each of the three years in the period ended December 31, 2000. Our audits also included the financial statement schedules listed in the Index at Item 14. These financial statements and financial statement schedules are the responsibility of the Company's management. Our responsibility is to express an opinion on the financial statements and financial statement schedules based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Vornado Realty Trust at December 31, 2000 and 1999, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2000 in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, such financial statement schedules, when considered in relation to the basic consolidated financial statements taken as a whole, present fairly in all material respects the information set forth therein. DELOITTE & TOUCHE LLP Parsippany, New Jersey March 1, 2001 -70-
71 VORNADO REALTY TRUST CONSOLIDATED BALANCE SHEETS DECEMBER 31, ---------------------------- 2000 1999 ----------- ----------- (amounts in thousands, except share and per share amounts) ASSETS Real estate, at cost: Land .................................................................................... $ 870,023 $ 826,477 Buildings and improvements .............................................................. 3,395,024 3,080,174 Leasehold improvements and equipment .................................................... 29,795 14,856 ----------- ----------- Total .............................................................................. 4,294,842 3,921,507 Less accumulated depreciation and amortization .......................................... (393,787) (308,542) ----------- ----------- Real estate, net ................................................................... 3,901,055 3,612,965 Cash and cash equivalents, including U.S. government obligations under repurchase agreements of $27,793 and $43,675 ............................................ 136,989 112,630 Escrow deposits and restricted cash ....................................................... 214,359 30,571 Marketable securities ..................................................................... 120,340 106,503 Investments and advances to partially-owned entities, including Alexander's of $178,413 and $159,148 .................................................... 1,459,211 1,315,387 Due from officers ......................................................................... 20,549 17,190 Accounts receivable, net of allowance for doubtful accounts of $9,343 and $7,292 .................................................................... 47,937 36,408 Notes and mortgage loans receivable ....................................................... 188,722 49,719 Receivable arising from the straight-lining of rents ...................................... 111,504 79,298 Deposits in connection with real estate acquisitions ...................................... 3,309 8,128 Other assets .............................................................................. 166,339 110,419 ----------- ----------- $ 6,370,314 $ 5,479,218 =========== =========== LIABILITIES AND SHAREHOLDERS' EQUITY Notes and mortgages payable ............................................................... $ 2,231,897 $ 1,681,804 Revolving credit facility ................................................................. 425,000 367,000 Accounts payable and accrued expenses ..................................................... 130,464 107,036 Officer's compensation payable ............................................................ 38,424 34,996 Deferred leasing fee income ............................................................... 7,852 8,349 Other liabilities ......................................................................... 1,798 2,634 ----------- ----------- Total liabilities ....................................................................... 2,835,435 2,201,819 ----------- ----------- Minority interest of unitholders in the Operating Partnership ............................. 1,456,159 1,222,031 ----------- ----------- Commitments and contingencies Shareholders' equity: Preferred shares of beneficial interest: no par value per share; authorized 45,000,000 shares; Series A: liquidation preference $50.00 per share; issued and outstanding 5,789,239 shares ........................................................ 288,507 285,632 Series B: liquidation preference $25.00 per share; issued and outstanding 3,400,000 shares ........................................................ 81,805 81,805 Series C: liquidation preference $25.00 per share; issued and outstanding 4,600,000 shares ........................................................ 111,148 111,148 Common shares of beneficial interest: $.04 par value per share; authorized, 150,000,000 shares; issued and outstanding, 86,803,770 and 86,335,741 shares ...................................................................... 3,472 3,453 Additional capital ...................................................................... 1,709,284 1,696,557 Accumulated deficit ..................................................................... (90,366) (116,979) ----------- ----------- 2,103,850 2,061,616 Accumulated other comprehensive loss .................................................... (20,426) (1,448) Due from officers for purchase of common shares of beneficial interest .................. (4,704) (4,800) ----------- ----------- Total shareholders' equity ......................................................... 2,078,720 2,055,368 ----------- ----------- $ 6,370,314 $ 5,479,218 =========== =========== See notes to consolidated financial statements. -71-
72 VORNADO REALTY TRUST CONSOLIDATED STATEMENTS OF INCOME YEAR ENDED DECEMBER 31, ------------------------------------------ 2000 1999 1998 --------- --------- --------- (amounts in thousands, except per share amounts) Revenues: Property rentals ...................................... $ 695,078 $ 591,270 $ 425,496 Expense reimbursements ................................ 120,056 96,842 74,737 Other income (including fee income from related parties of $1,978, $1,857 and $2,327) ..... 11,398 8,846 9,627 --------- --------- --------- Total revenues ........................................... 826,532 696,958 509,860 --------- --------- --------- Expenses: Operating ............................................. 318,360 282,118 207,171 Depreciation and amortization ......................... 99,846 83,585 59,227 General and administrative ............................ 47,911 40,151 28,610 --------- --------- --------- Total expenses ........................................... 466,117 405,854 295,008 --------- --------- --------- Operating income ......................................... 360,415 291,104 214,852 Income applicable to Alexander's ......................... 13,053 7,427 3,123 Income from partially-owned entities ..................... 90,404 82,310 32,025 Interest and other investment income ..................... 32,926 18,359 24,074 Interest and debt expense ................................ (170,273) (141,683) (114,686) Net gain on sales of real estate ......................... 10,965 -- -- Net gain from insurance settlement and condemnation proceeding ............................................ -- -- 9,649 Minority interest: Perpetual preferred unit distributions ................ (62,089) (19,254) (756) Minority limited partnership earnings ................. (38,320) (33,904) (14,822) Partially-owned entities .............................. (1,965) (1,840) (605) --------- --------- --------- Income before extraordinary item ......................... 235,116 202,519 152,854 Extraordinary item ....................................... (1,125) -- -- --------- --------- --------- Net income ............................................... 233,991 202,519 152,854 Preferred stock dividends (including accretion of issuance expenses of $2,875 in 2000, 1999 and 1998) ............ (38,690) (33,438) (21,690) --------- --------- --------- NET INCOME applicable to common shares ................... $ 195,301 $ 169,081 $ 131,164 ========= ========= ========= NET INCOME PER COMMON SHARE-BASIC ........................ $ 2.26 $ 1.97 $ 1.62 ========= ========= ========= NET INCOME PER COMMON SHARE-DILUTED ...................... $ 2.20 $ 1.94 $ 1.59 ========= ========= ========= See notes to consolidated financial statements. -72-
73 VORNADO REALTY TRUST CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY ACCUMULATED OTHER PREFERRED COMMON ADDITIONAL ACCUMULATED COMPREHENSIVE SHARES SHARES CAPITAL DEFICIT LOSS ---------- ---------- ----------- ----------- ------------- (amounts in thousands, except per share amounts) BALANCE, JANUARY 1, 1998 ............... $ 279,884 $ 2,887 $ 1,146,385 $ (109,561) $ (840) Net Income ............................. -- -- -- 152,854 -- Dividends paid on Series A Preferred Shares ($3.25 share) ....... -- -- -- (21,690) -- Dividends paid on common shares ($1.64 per share) .................... -- -- -- (131,110) -- Net proceeds from issuance of common shares ..................... -- 445 444,118 -- -- Common shares issued in connection with Mendik RELP properties acquisition ............... -- 34 29,029 -- -- Common shares issued under employees' share plan ................ -- 2 907 -- -- Conversion of units to common shares ............................... -- 35 32,745 -- -- Capital contribution to Vornado Operating Company ............ -- -- -- (23,330) -- Accretion of issuance expenses on preferred shares .................. 2,874 -- -- -- -- Common shares issued in connection with dividend reinvestment plan .................... -- -- 24 -- -- Change in unrealized losses on securities available for sale ............................. -- -- -- -- (5,047) Appreciation of securities held in officer's deferred compensation trust ................... -- -- -- -- (10,464) Pension obligations .................... -- -- -- -- (2,606) Forgiveness of amount due from officers ......................... -- -- -- -- -- ----------- ----------- ----------- ----------- ----------- BALANCE, DECEMBER 31, 1998 ............. 282,758 3,403 1,653,208 (132,837) (18,957) Net Income ............................. -- -- -- 202,519 -- Dividends paid on Preferred Shares Series A Preferred Shares ($3.25 per share) ................... -- -- -- (21,690) -- Series B Preferred Shares ($1.68 per share) ................... -- -- -- (5,720) -- Series C Preferred Shares ($1.31 per share) ................... -- -- -- (6,028) -- Net proceeds from issuance of preferred shares ..................... 192,953 -- -- -- -- Dividends paid on common shares ($1.80 per share) .................... -- -- -- (153,223) -- Common shares issued under employees' share plan ................ -- 5 2,458 -- -- Conversion of units to common shares .............................. -- 44 40,214 -- -- Accretion of issuance expenses on preferred shares ..................... 2,874 -- -- -- -- Common shares issued in connection with dividend reinvestment plan....... -- 1 677 -- -- Change in unrealized net loss on securities available for sale...... -- -- -- -- 15,603 Depreciation of securities held in officer's deferred compensation trust ................... -- -- -- -- 579 Pension obligations .................... -- -- -- -- 1,327 Forgiveness of amount due from officers ........................ -- -- -- -- -- ----------- ----------- ----------- ----------- ----------- BALANCE, DECEMBER 31, 1999 ............. $ 478,585 $ 3,453 $ 1,696,557 $ (116,979) $ (1,448) =========== =========== =========== =========== =========== DUE FROM SHAREHOLDERS' COMPREHENSIVE OFFICERS EQUITY INCOME ------------ ----------- ------------- (amounts in thousands, except per share amounts) BALANCE, JANUARY 1, 1998 ............... $ (4,993) $ 1,313,762 $ 61,181 =========== Net Income ............................. -- 152,854 $ 152,854 Dividends paid on Series A Preferred Shares ($3.25 share) ...... -- (21,690) -- Dividends paid on common shares ($1.64 per share) .................... -- (131,110) -- Net proceeds from issuance of common shares ..................... -- 444,563 -- Common shares issued in connection with Mendik RELP properties acquisition ............... -- 29,063 -- Common shares issued under employees' share plan ................ -- 909 -- Conversion of units to common shares ............................... -- 32,780 -- Capital contribution to Vornado Operating Company ............ -- (23,330) -- Accretion of issuance expenses on preferred shares .................. -- 2,874 -- Common shares issued in connection with dividend reinvestment plan .................... -- 24 -- Change in unrealized losses on securities available for sale ............................. -- (5,047) (5,047) Appreciation of securities held in officer's deferred compensation trust ................... -- (10,464) (10,464) Pension obligations .................... -- (2,606) (2,606) Forgiveness of amount due from officers ......................... 96 96 -- ------- ---------- ----------- BALANCE, DECEMBER 31, 1998 ............. (4,897) 1,782,678 $ 134,737 =========== Net Income ............................. -- 202,519 $ 202,519 Dividends paid on Preferred Shares Series A Preferred Shares ($3.25 per share) ................... -- (21,690) -- Series B Preferred Shares ($1.68 per share) ................... -- (5,720) -- Series C Preferred Shares ($1.31 per share) ................... -- (6,028) -- Net proceeds from issuance of preferred shares ..................... -- 192,953 -- Dividends paid on common shares ($1.80 per share) .................... -- (153,223) -- Common shares issued under employees' share plan ................ -- 2,463 -- Conversion of units to common shares .............................. -- 40,258 -- Accretion of issuance expenses on preferred shares ..................... -- 2,874 -- Common shares issued in connection with dividend reinvestment plan....... -- 678 -- Change in unrealized net loss on securities available for sale...... -- 15,603 15,603 Depreciation of securities held in officer's deferred compensation trust ................... -- 579 579 Pension obligations .................... -- 1,327 1,327 Forgiveness of amount due from officers ........................ 97 97 -- ----------- ----------- ----------- BALANCE, DECEMBER 31, 1999 ............. $ (4,800) $ 2,055,368 $ 220,028 =========== =========== =========== See notes to consolidated financial statements. -73-
74 ACCUMULATED OTHER PREFERRED COMMON ADDITIONAL ACCUMULATED COMPREHENSIVE SHARES SHARES CAPITAL DEFICIT LOSS ---------- ---------- ----------- ----------- ------------- (amounts in thousands, except per share amounts) BALANCE, DECEMBER 31, 1999 ....... $ 478,585 $ 3,453 $ 1,696,557 $ (116,979) $ (1,448) Net Income ....................... -- -- -- 233,991 -- Dividends paid on Preferred Shares Series A Preferred Shares ($3.25 per share) ............. -- -- -- (21,689) -- Series B Preferred Shares ($1.68 per share) ............. -- -- -- (7,225) -- Series C Preferred Shares ($1.31 per share) ............. -- -- -- (9,776) -- Dividends paid on common shares ($1.97 per share) .............. -- -- -- (168,688) -- Common shares issued under employees' share plan .......... -- 15 9,913 -- -- Conversion of units to common shares .................. -- 3 1,789 -- -- Accretion of issuance expenses on preferred shares ............... 2,875 -- -- -- -- Common shares issued in connection with dividend reinvestment plan -- 1 1,025 -- -- Change in unrealized net loss on securities available for sale -- -- -- -- (18,399) Appreciation of securities held in officer's deferred compensation trust ............... -- -- -- -- (579) Forgiveness of amount due from officers .................. -- -- -- -- -- ----------- ----------- ----------- ----------- ----------- BALANCE, DECEMBER 31, 2000 ....... $ 481,460 $ 3,472 $ 1,709,284 $ (90,366) $ (20,426) =========== =========== ============ ============ ============ DUE FROM SHAREHOLDERS' COMPREHENSIVE OFFICERS EQUITY INCOME ------------ ----------- ------------- (amounts in thousands, except per share amounts) BALANCE, DECEMBER 31, 1999 ....... $ (4,800) $ 2,055,368 $ 220,028 =========== Net Income ....................... -- 233,991 $ 233,991 Dividends paid on Preferred Shares Series A Preferred Shares ($3.25 per share) ............. -- (21,689) -- Series B Preferred Shares ($1.68 per share) ............. -- (7,225) -- Series C Preferred Shares ($1.31 per share) ............. -- (9,776) -- Dividends paid on common shares ($1.97 per share) .............. -- (168,688) -- Common shares issued under employees' share plan .......... -- 9,928 -- Conversion of units to common shares .................. -- 1,792 -- Accretion of issuance expenses on preferred shares ............... -- 2,875 -- Common shares issued in connection with dividend reinvestment plan -- 1,026 -- Change in unrealized net loss on securities available for sale -- (18,399) (18,399) Appreciation of securities held in officer's deferred compensation trust ............... -- (579) (579) Forgiveness of amount due from officers .................. 96 96 -- ----------- ----------- ----------- BALANCE, DECEMBER 31, 2000 ....... $ (4,704) $ 2,078,720 $ 215,013 ============ ============ =========== See notes to consolidated financial statements. -74-
75 VORNADO REALTY TRUST CONSOLIDATED STATEMENTS OF CASH FLOWS YEAR ENDED DECEMBER 31, ----------------------------------------------- 2000 1999 1998 ----------- ----------- ----------- (amounts in thousands) CASH FLOWS FROM OPERATING ACTIVITIES: Net income ............................................. $ 233,991 $ 202,519 $ 152,854 Adjustments to reconcile net income to net cash provided by operations: Extraordinary item ................................. 1,125 -- -- Depreciation and amortization (including debt issuance costs) .................................. 99,846 83,585 59,227 Straight-lining of rental income ................... (32,206) (29,587) (17,561) Net gain on sales of real estate ................... (10,965) -- -- Minority interest .................................. 102,374 54,998 16,183 Equity in (income) loss of Alexander's ............ (13,053) (1,021) 3,363 Equity in income of partially-owned entities ....... (90,404) (82,310) (32,025) Gain on marketable securities ...................... -- (382) (1,530) Gain from insurance settlement and condemnation proceeding ....................................... -- -- (9,649) Changes in operating assets and liabilities ........ (40,787) (50,907) 18,544 ----------- ----------- ----------- Net cash provided by operating activities ................. 249,921 176,895 189,406 ----------- ----------- ----------- CASH FLOWS FROM INVESTING ACTIVITIES: Acquisitions of real estate and other .................. (199,860) (224,654) (896,800) Additions to real estate ............................... (171,782) (171,139) (68,085) Investments in partially-owned entities ................ (99,974) (118,409) (308,000) Proceeds from sale of real estate ...................... 47,945 -- -- Proceeds from sale of Temperature Controlled Logistics assets ............................................... -- 22,769 -- Investments in mortgage loans receivable ............... (144,225) (59,787) (6,620) Repayment of mortgage loans receivable ................. 5,222 20,751 57,600 Cash restricted, primarily mortgage escrows ............ (183,788) 13,624 (14,716) Distributions from partially-owned entities ............ 68,799 16,938 3,200 Real estate deposits and other ......................... 4,819 14,819 23,788 Purchases of securities available for sale ............. (26,531) (21,614) (73,513) Proceeds from sale or maturity of securities available for sale ............................................. -- 12,498 25,779 ----------- ----------- ----------- Net cash used in investing activities ..................... (699,375) (494,204) (1,257,367) ----------- ----------- ----------- CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from borrowings ............................... 1,195,108 455,000 1,427,821 Repayments of borrowings ............................... (633,655) (668,957) (883,475) Costs of refinancing debt .............................. (18,445) (8,059) (11,418) Proceeds from issuance of preferred shares ............. -- 192,953 -- Proceeds from issuance of preferred units .............. 204,750 525,013 85,313 Proceeds from issuance of common shares ................ -- -- 445,247 Dividends paid on common shares ........................ (168,688) (153,223) (154,440) Dividends paid on preferred shares ..................... (35,815) (30,563) (18,816) Distributions to minority shareholders ................. (80,397) (52,491) (11,229) Exercise of share options .............................. 10,955 2,458 812 ----------- ----------- ----------- Net cash provided by financing activities ................. 473,813 262,131 879,815 ----------- ----------- ----------- Net increase (decrease) in cash and cash equivalents ...... 24,359 (55,178) (188,146) Cash and cash equivalents at beginning of year ............ 112,630 167,808 355,954 ----------- ----------- ----------- Cash and cash equivalents at end of year .................. $ 136,989 $ 112,630 $ 167,808 =========== =========== =========== Supplemental Disclosure of Cash Flow Information: Cash payments for interest (including capitalized interest of $12,269, $7,012 and $1,410 in 2000, 1999 and 1998) ............................................ $ 165,325 $ 143,665 $ 111,089 =========== =========== =========== NON-CASH TRANSACTIONS: Financing in connection with acquisitions .............. $ 46,640 $ 188,000 $ 526,000 Shares issued in connection with acquisitions .......... -- -- 29,000 Minority interest in connection with acquisitions ...... 9,192 302,100 184,000 Unrealized (loss) gain on securities available for sale (18,399) 15,603 (5,047) (Appreciation) depreciation of securities held in officer's deferred compensation trust ................ (579) 579 10,464 See notes to consolidated financial statements. -75-
76 VORNADO REALTY TRUST NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ($ in thousands, except where indicated) 1. ORGANIZATION AND BUSINESS Vornado Realty Trust is a fully-integrated real estate investment trust ("REIT"). Vornado conducts its business through Vornado Realty L.P., ("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 February 1, 2001. All references to the "Company" and "Vornado" refer to Vornado Realty Trust and its consolidated subsidiaries, including the Operating Partnership. The Company currently owns directly or indirectly: Office Properties ("Office"): (i) all or portions of 22 office properties in the New York City metropolitan area (primarily Manhattan) aggregating approximately 14.4 million square feet; (ii) a 34% limited partnership interest in Charles E. Smith Commercial Realty L.P. ("CESCR"), a limited partnership which owns and manages approximately 12.5 million square feet of office properties in Northern Virginia and Washington, D.C., and manages an additional 5.8 million square feet of office and other commercial properties in the Washington, D.C. area; Retail Properties ("Retail"): (iii) 55 shopping center properties in six states and Puerto Rico aggregating approximately 11.3 million square feet, including 1.4 million square feet built by tenants on land leased from the Company; Merchandise Mart Properties: (iv) the Merchandise Mart Properties portfolio containing approximately 8.1 million square feet, including the 3.4 million square foot Merchandise Mart in Chicago; Temperature Controlled Logistics: (v) a 60% interest in partnerships that own 88 warehouse facilities nationwide with an aggregate of approximately 438.9 million cubic feet of refrigerated space leased to AmeriCold Logistics; Other Real Estate Investments: (vi) 33.1% of the outstanding common stock of Alexander's, Inc. ("Alexander's"); (vii) the Hotel Pennsylvania in New York City consisting of a hotel portion containing 800,000 square feet with 1,700 rooms and a commercial portion containing 400,000 square feet of retail and office space; (viii) a 30% interest in the Newkirk joint ventures which own various equity and debt interests relating to 120 limited partnerships which own real estate, primarily office and retail, net leased to credit rated tenants; (ix) eight dry warehouse/industrial properties in New Jersey containing approximately 2.0 million square feet; and (x) other real estate investments. -76-
77 VORNADO REALTY TRUST NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES BASIS OF PRESENTATION: The accompanying consolidated financial statements include the accounts of Vornado Realty Trust and its majority-owned subsidiary, Vornado Realty L.P. as well as 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. On January 1, 2001, the Company acquired the common stock of the preferred stock affiliates and converted them to taxable REIT subsidiaries. Accordingly, these entities will be consolidated in 2001. 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. RECLASSIFICATIONS: Certain prior year balances have been reclassified in order to conform to current year presentation. REAL ESTATE: Real estate is carried at cost, net of accumulated depreciation and amortization. Betterments, major renewals and certain costs directly related to the acquisition, improvement and leasing of real estate are capitalized. Maintenance and repairs are charged to operations as incurred. Depreciation is provided on a straight-line basis over the assets estimated useful lives which range from 7 to 40 years. Tenant allowances are amortized on a straight-line basis over the lives of the related leases. Additions to real estate include interest expense capitalized during construction of $12,269, $7,012 and $1,410 for the years ended December 31, 2000, 1999 and 1998. The Company's properties are reviewed for impairment if events or changes in circumstances indicate that the carrying amount of the property may not be recoverable. In such an event, a comparison is made of the current and projected operating cash flows of each such property into the foreseeable future on an undiscounted basis to the carrying amount of such property. Such carrying amount would be adjusted, if necessary, to estimate fair value to reflect an impairment in the value of the asset. CASH AND CASH EQUIVALENTS: Cash and cash equivalents consist of highly liquid investments purchased with original maturities of three months or less. Cash and cash equivalents does not include cash escrowed under loan agreements and cash restricted in connection with an officer's deferred compensation payable. MARKETABLE SECURITIES: The Company has classified debt and equity securities which it intends to hold for an indefinite period of time (including warrants to acquire equity securities to be classified as available for sale) as securities available for sale, equity securities it intends to buy and sell on a short term basis as trading securities and its preferred stock investment in Capital Trust as securities held to maturity. Unrealized gains and losses are included in earnings for trading securities and as a component of shareholders' equity and other comprehensive income for securities available for sale. Realized gains or losses on the sale of securities are recorded based on average cost. At December 31, 2000 and 1999, marketable securities had an aggregate cost of $129,023 and $96,787 and an aggregate market value of $120,340 and $106,503 (of which $12,213 and $9,826 represent trading securities and $48,682 and $48,606 represent securities held to maturity and reported at amortized cost). Gross unrealized gains and losses were $8,159 and $16,842 at December 31, 2000, and $19,374 and $9,658 at December 31,1999. Included in marketable securities available for sale at December 31, 2000 are warrants to acquire 2,781,718 common shares with a market value of $1,595. NOTES AND MORTGAGE LOANS RECEIVABLE: The Company evaluates the collectibility of both interest and principal of each of its loans, if circumstances warrant, to determine whether it is impaired. A loan is considered to be impaired, when based on current information and events, it is probable that the Company will be unable to collect all amounts due according to the existing contractual terms. When a loan is considered to be impaired, the amount of the loss accrual is calculated by comparing the recorded investment to the value determined by discounting the expected future cash flows at the loan's effective interest rate. Interest on impaired loans is recognized on a cash basis. -77-
78 VORNADO REALTY TRUST NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) DEFERRED CHARGES: Direct financing costs are deferred and amortized over the terms of the related agreements as a component of interest expense. Direct costs related to leasing activities are capitalized and amortized on a straight-line basis over the lives of the related leases. All other deferred charges are amortized on a straight-line basis, which approximates the effective interest rate method, in accordance with the terms of the agreements to which they relate. FAIR VALUE OF FINANCIAL INSTRUMENTS: All financial instruments of the Company are reflected in the accompanying consolidated balance sheets at amounts which, in management's estimation, based upon an interpretation of available market information and valuation methodologies (including discounted cash flow analyses with regard to fixed rate debt) are considered appropriate, and reasonably approximate their fair values. Such fair value estimates are not necessarily indicative of the amounts that would be realized upon disposition of the Company's financial instruments. REVENUE RECOGNITION: Base rents, additional rents based on tenants' sales volume and reimbursement of the tenants' share of certain operating expenses are generally recognized when due from tenants. The straight-line basis is used to recognize base rents under leases entered into after November 14, 1985, which provide for varying rents over the lease terms. Contingent rents are not recognized until realized. INCOME TAXES: The Company operates in a manner intended to enable it to continue to qualify as a REIT under Sections 856-860 of the Internal Revenue Code of 1986 as amended. Under those sections, a REIT which distributes at least 95% of its REIT taxable income as a dividend to its shareholders each year and which meets certain other conditions will not be taxed on that portion of its taxable income which is distributed to its shareholders. The Company has distributed to shareholders an amount greater than its taxable income. Therefore, no provision for Federal income taxes is required. Dividend distributions for the years ended December 31, 2000 and 1999, were characterized for Federal income tax purposes as ordinary income. Dividend distributions for the tax year ended December 31, 1998 were characterized as ordinary income (81%), return of capital (17%) and capital gain (2%). The net basis of the Company's assets and liabilities for tax purposes is approximately $1,033,000 lower than the amount reported for financial statement purposes. AMOUNTS PER SHARE: Basic earnings per share is computed based on average shares outstanding. Diluted earnings per share considers the effect of outstanding options, warrants and convertible securities. STOCK OPTIONS: The Company accounts for stock-based compensation using the intrinsic value method. Under the intrinsic value method compensation cost is measured as the excess, if any, of the quoted market price of the Company's stock at the date of grant over the exercise price of the option granted. Compensation cost for stock options, if any, is recognized ratably over the vesting period. The Company's policy is to grant options with an exercise price equal to the quoted market price of the Company's stock on the grant date. Accordingly, no compensation cost has been recognized for the Company's stock option plans. RECENTLY ISSUED ACCOUNTING STANDARDS The Financial Accounting Standards Board (FASB) has issued Statement of Financial Accounting Standards No. 133, Accounting for Derivative Instruments and Hedging Activities as amended, which establishes accounting and reporting standards requiring that every derivative instrument (including certain derivative instruments embedded in other contracts) be recorded in the balance sheet as either an asset or liability measured at its fair value. The Statement requires that changes in the derivative instrument's fair value be recognized currently in earnings unless specific hedge accounting criteria are met. -78-
79 VORNADO REALTY TRUST NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) In 2001, the Company will reclassify a previously recognized charge of approximately $4,000, from other comprehensive income to income, relating to the mark-to-market on public and private technology company warrants, as the cumulative effect of adopting Statement 133. The Company does not currently anticipate utilizing hedge accounting for its derivative positions following the adoption of Statement 133. 3. ACQUISITIONS AND DISPOSITIONS The Company completed approximately $404.1 million of real estate acquisitions or investments from January 1, 2000 through March 2001 and $771.0 million in 1999. These acquisitions were consummated through subsidiaries or preferred stock affiliates of the Company and were recorded under the purchase method of accounting. Related net assets and results of operations have been included in these financial statements since their respective dates of acquisition. The respective purchase costs were allocated to acquired assets and assumed liabilities using their relative fair values as of the closing dates, based on valuations and other studies that are not yet complete. Accordingly, the initial valuations are subject to change as such information is finalized. The Company believes that any such change will not be significant since the allocations were principally to real estate. ACQUISITIONS: Office: CHARLES E. SMITH COMMERCIAL REALTY INVESTMENT ("CESCR") In December 1998, the Company sold approximately 1.7% of the outstanding partnership units of CESCR to Vornado Operating for an aggregate price of approximately $12,900. In connection with this purchase, the Company granted Vornado Operating an option to require the Company to repurchase the units. The option was exercised on March 4, 1999. Accordingly, the Company reacquired the CESCR units from Vornado Operating for $13,200. On March 4, 1999 the Company made an additional $242,000 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 from Vornado Operating, Vornado now owns approximately 34% of CESCR's limited partnership units. In addition, the Company acquired from CAPI for $8,000 the land under a Marriott Hotel located in Crystal City. The purchase price was paid to CAPI by Vornado issuing $250,000 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 will 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 agreed to make a five-year $41,200 loan to CAPI with interest at 8%, increasing to 9% ratably over the term. The loan is secured by approximately $55,000 of the Company's Operating Partnership units issued to CAPI as well as certain real estate assets. 888 SEVENTH AVENUE On January 12, 1999, the Company acquired 888 Seventh Avenue, a 46 story Manhattan office building, for $117,000, of which $55,000 was indebtedness. 909 THIRD AVENUE On July 21, 1999, the Company acquired 909 Third Avenue, a 33 story Manhattan office building, for $123,000, of which $109,000 was indebtedness. -79-
80 VORNADO REALTY TRUST NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 595 MADISON AVENUE On September 15, 1999, the Company acquired 595 Madison Avenue (the "Fuller Building"), a 40 story Manhattan office building, for $125,000 in cash. GREENPOINT LEASEHOLD INTEREST On December 16, 1999, the Company acquired GreenPoint Financial Corporation's 99-year leasehold interest in 56,000 square feet, adjacent to One Penn Plaza, as part of its redevelopment plan for the Penn Plaza district for $37,300. 7 WEST 34TH STREET On November 1, 2000, the Company acquired 7 West 34th Street, a Manhattan office building containing 479,000 square feet for $128,000. Retail: VORNADO-CERUZZI JOINT VENTURES In the first quarter of 2000, the Company and its joint venture partner acquired 2 fee interests containing 210,000 square feet and 6 leasehold interests containing 567,000 square feet in properties located in Pennsylvania, Virginia, Maryland and Ohio formerly occupied by Hechinger, Inc., a home improvement retailer which was liquidated. The purchase price was $27,425, of which the Company's share was 80%. Merchandise Mart Properties: 33 NORTH DEARBORN STREET On September 21, 2000 the Company acquired 33 North Dearborn Street, a 321,000 square foot office building in Chicago for $35,000 of which $19,000 was indebtedness. L.A. MART On October 2, 2000, the Company acquired the 724,000 square foot L.A. Mart in Los Angeles and its 9.3 acre site for $54,000, of which $10,000 was indebtedness. Other Real Estate Investments: HOTEL PENNSYLVANIA On August 5, 1999, the Company increased its interest in the Hotel Pennsylvania by acquiring Planet Hollywood International, Inc.'s ("Planet Hollywood") 20% interest in the hotel for approximately $18,000 and by assuming $24,000 of existing debt. In connection with the transaction, the Company 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. After the acquisitions noted above, the Company owns 100% of the commercial portion of the building (retail and office space) and 98% of the hotel portion which is owned through a preferred stock affiliate in which the Company owns all of the preferred equity and none of the common equity. -80-
81 VORNADO REALTY TRUST NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) NEWKIRK JOINT VENTURES On March 9, 1999, the Company and its joint venture partner completed an acquisition of additional equity interests in certain limited partnerships. The Company's additional investment of $52,435 consisted of $47,790 in Operating Partnership Units and $4,645 in cash. On October 15, 1999, the Company completed the acquisition of $15,600 of securitized debt of the Newkirk Joint Ventures which has an average yield of 14.28%. During 2000, the Company completed acquisitions of additional equity investments in certain limited partnerships for $10,526, including $1,334 in cash and $9,192 in Operating Partnership units. STUDENT HOUSING JOINT VENTURE On January 28, 2000, the Company and its joint venture partner, acquired a 252-unit student housing complex in Gainesville, Florida, for approximately $27,000, of which $19,600 was indebtedness. The Company's share of this investment is 90%. ALEXANDER'S On March 31, 2000, the Company increased its ownership in Alexander's from 32% to 32.9% by acquiring 41,500 shares of Alexander's common stock for $2,740. On April 11, 2000, the Company acquired an additional 10,400 shares for $674, thereby increasing its ownership interest to 33.1%. LOAN TO NORTHSTAR PARTNERSHIP L.P. On September 19, 2000, the Company acquired $75,000 of subordinated unsecured debt of NorthStar Partnership, L.P. ("NorthStar"), a private real estate company, for $65,000. The loan bears interest at 11.5% per annum, requires quarterly principal payments of $2,500 and matures in May 2002. The effective yield on the loan is approximately 22% including the amortization of the discount. During the third quarter of 2000, NorthStar filed suit against the Company seeking to enjoin Vornado from taking any action with respect to the debt, to rescind the Company's acquisition of the debt and for damages. In the opinion of management, after consultation with legal counsel, NorthStar's suit is without merit and the Company intends to vigorously defend against it. On January 19, 2001, the Company agreed to withdraw its motion to dismiss NorthStar's complaint without prejudice and NorthStar agreed to take no action in the proceeding until after providing written notice that NorthStar wishes to recommence proceedings in the action. If NorthStar does not give such notice by April 2, 2001, its complaint will be dismissed without prejudice. LOAN TO PRIMESTONE INVESTMENT PARTNERS, L.P. On September 28, 2000, the Company made a $62,000 subordinated loan to Primestone Investment Partners, L.P. secured by partnership units in Prime Group Realty LP, the operating partnership of Prime Group Realty Trust (NYSE:PGE). The Company has received a 1% upfront fee and will be entitled to receive certain other fees aggregating approximately 3% upon repayment of the loan. The debt bears interest at 16% per annum and matures on October 26, 2001 with an eleven month extension option. The effective yield on the loan is approximately 20% including the fees. DISPOSITIONS: The Company sold (i) its three shopping centers located in Texas on March 2, 2000 for $25,750, resulting in a gain of $2,560 and (ii) its Westport, Connecticut office property on August 30, 2000 for $24,000, resulting in a gain of $8,405. In addition, the Company entered into an agreement on February 1, 2001 to sell its 50% interest in 570 Lexington Avenue, a New York City office property, for approximately $60,000, which will result in a gain of approximately $9,000. The sale is expected to be completed in the third quarter of 2001 subject to customary closing conditions. -81-
82 VORNADO REALTY TRUST NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 4. INVESTMENTS IN PARTIALLY-OWNED ENTITIES The Company's investments in partially-owned entities and income recognized from such investments is disclosed below. Summarized financial data is provided for (i) investments in entities which exceed 10% of the Company's total assets and (ii) investments in which the Company's share of partially-owned entities pre-tax income exceeds 10% of the Company's net income. BALANCE SHEET DATA: 100% OF THESE ENTITIES ------------------------------------------------------------------------ COMPANY'S INVESTMENT TOTAL ASSETS TOTAL DEBT TOTAL EQUITY ----------------------- ----------------------- ---------------------- --------------------- 2000 1999 2000 1999 2000 1999 2000 1999 ---- ---- ---- ---- ---- ---- ---- ---- INVESTMENTS: Temperature Controlled Logistics (60% interest) ....... $ 469,613 $ 481,808 $1,406,299 $1,524,385 $ 561,321 $ 630,540 $ 755,603 $ 756,808 ========== ========== ========== ========== ========= ========= Alexander's (33.1% interest) ..... 178,413 159,148 $ 403,305 $ 366,496 $ 367,788 $ 329,161 $ 17,695 $ 12,498 ========== ========== ========= ========== ========= ========= Charles E. Smith Commercial Realty L.P. (34% interest) ....... 325,328 317,812 $1,279,810 $ 951,414 $1,492,301 $1,152,164 $(318,963) $(241,399) ========== ========== ========== ========== ========= ========= Newkirk Joint Ventures.............. 163,157 142,670 Hotel Pennsylvania....... 73,531 59,176 Partially - Owned Office Buildings...... 61,002 59,510 Vornado Ceruzzi Joint Ventures........ 28,847 -- Fort Lee................. 28,208 16,663 Park Laurel.............. 70,007 24,695 Management companies and other.............. 61,105 53,905 ---------- ---------- $1,459,211 $1,315,387 ========== ========== -82-
83 VORNADO REALTY TRUST NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Below is a summary of the debt of partially owned entities as of December 31, 2000 and 1999, none of which is guaranteed by the Company. AMOUNT OF PARTIALLY-OWNED ENTITIES DEBT ------------------------- 2000 1999 ---- ---- Alexander's (33.1% interest): Term loan secured by all of Alexander's assets except for the Kings Plaza Regional Shopping Center: Portion financed by the Company due on March 15, 2002 with interest at 15.72% prepayable without penalty (see below)............................... $ 95,000 $ 95,000 Portion financed by a bank, due March 15, 2001, with interest at LIBOR + 1.85% (8.56% at December 31, 2000)(1)..................................... 20,000 20,000 Unsecured Line of Credit financed by the Company, due on March 15, 2002 with interest at 15.72% (see below)................................................... 20,000 -- Kings Plaza Regional Shopping Center mortgage payable, due on June 1, 2001, with interest at LIBOR plus 1.25% (8.06% at December 31, 2000) (prepayable without penalty)(2).................................................. 114,525 95,676 Rego Park mortgage payable, due in 2009, with interest at 7.25% (prepayable after June 2004 without penalty)................................................. 82,000 82,000 Other notes and mortgages payable.................................................. 36,262 36,485 Temperature Controlled Logistics (60% interest): Mortgage notes payable collateralized by 58 temperature controlled warehouses, due in 2008, requires amortization based on a 25 year term with interest at 6.89% (prepayable with yield maintenance)............................ 527,207 536,502 Other notes and mortgages payable.................................................. 34,114 94,038 Hotel Pennsylvania - Hotel (98% interest): Mortgage payable, due in 2002, requires amortization based on a 25 year term, with interest at LIBOR + 1.60% (8.42% at December 31, 2000) (prepayable without penalty)..................................................... 70,514 71,641(3) Newkirk Joint Ventures (30% interest): Portion of first mortgages and contract rights held by 96 of the 120 Limited Partnerships, collateralized by the partnerships' real estate, due from 2001 to 2024, with a weighted average interest rate of 8.06% at December 31, 2000....................................................... 1,560,354 800,060 Other debt......................................................................... -- 28,000 Charles E. Smith Commercial Realty L.P. (34% interest): 28 mortgages payable due from 2001 through 2025, with interest from 6.51% to 10.21% at December 31, 2000 (prepayable with yield maintenance)............... 1,458,301 1,152,164 Unsecured line of credit due in 2003, with interest at 9.39% at December 31, 2000 (prepayable without penalty)...................... 34,000 -- Partially Owned Office Buildings: 330 Madison Avenue (25% interest) mortgage note payable, due in 2008, with interest at 6.52% (prepayable with yield maintenance)..................... 60,000 60,000 Other notes and mortgages payable (50% owned by Vornado)........................... 43,768 43,968 Las Catalinas Mall (50% interest): Mortgage notes payable, due in 2013 with interest at 6.97% (prepayable after December 2002 with yield maintenance)........................................... 69,430 70,212 Other mortgages payable............................................................... 13,000 13,000 - ---------- (1) This loan has been extended to March 15, 2002 at the same interest rate. (2) Alexander's is currently negotiating the refinancing of the debt. (3) The balance of the mortgage of $47,009 applicable to the commercial portion of the building is reflected in the Company's wholly-owned debt in 2000, see Note 5. -83-
84 VORNADO REALTY TRUST NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) INCOME STATEMENT DATA: COMPANY'S INCOME 100% OF THESE ENTITIES FROM PARTIALLY OWNED ---------------------------------------------------------------- ENTITIES TOTAL REVENUES NET INCOME (LOSS) --------------------------- ------------------------------ -------------------------------- 2000 1999 1998 2000 1999 1998 2000 1999 1998 ---- ---- ---- ---- ---- ---- ---- ---- ---- Income Applicable to Alexander's:(1).............. 33.1% share of equity in income (loss) (29.3% prior to October 1999)..... $ 1,105 $ 1,021 $(2,272) $ 63,965 $ 64,390 $ 51,663 $ 5,197 $ 5,524(2) $(6,055)(2) ======== ======== ======== ======= ======= ======= Interest income.............. 11,948 6,406 5,395 ------- ------- ----- $13,053 $ 7,427 $ 3,123 ======= ======= ======= Temperature Controlled Logistics: 60% share of equity in net income(3).................. $23,244 $31,468 $10,249 $154,341 $264,266 $567,867 $37,284 $54,198 $16,988 ======== ======== ======== ======== ======= ======= Management Fee (40% of 1% per annum of the Total Combined Assets, as defined)................ 5,534 5,254 4,942 ------ ------ ------ 28,778 36,722 15,191 Charles E. Smith Commercial Realty L.P.(4)................ 25,724 18,817 4,754 $344,043 $310,038 $76,695 $61,102 ======== ======== ======= ======= Newkirk Joint Ventures.......... 24,526 19,922 2,712 Hotel Pennsylvania.............. 8,072 5,095 3,678 Partially-Owned Office Buildings(5)................. 2,832 1,743 3,276 Management Companies and other.................... 472 11 2,414 ------- ------- ------- $90,404 $82,310 $32,025 ======= ======= ======= - ---------- (1) Fee income is included in equity in income of Management Companies. (2) 1999 is net of $4,877 resulting from the write-off of the asset arising from the straight-lining of rents; 1998 includes the write-off of the carrying value of the Lexington Avenue buildings of $15,096. (3) Revenues and net income reflect lease payments from AmeriCold Logistics from March 11, 1999 through December 31, 1999 and business operations for the periods prior. (4) 15% interest from October 1997 to December 1998, 9.6% interest from January 1999 to March 1999 and 34% interest thereafter. (5) Represents the Company's interests in 330 Madison Avenue (24.8%), and 570 Lexington Avenue (50%). In 1998 the Company had a 40% interest in Two Park Avenue which is now wholly-owned. ALEXANDER'S The investment in and loans and advances to Alexander's are comprised of: DECEMBER 31, ------------------- 2000 1999 -------- -------- Common stock, net of $3,396 and $2,796 of accumulated depreciation of buildings.................................... $ 58,719 $ 59,912 Loan receivable................................................. 115,000 95,000 Leasing fees and other receivables.............................. 1,146 2,393 Equity in income................................................ 3,548 1,843 -------- -------- $178,413 $159,148 ======== ======== -84-
85 VORNADO REALTY TRUST NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) On October 21, 1999, the Company increased its ownership in Alexander's from 29.3% to 32% by acquiring an additional 135,600 shares of Alexander's common stock for approximately $8,956. On March 31, 2000, the Company increased its ownership in Alexander's from 32% to 32.9% by acquiring 41,500 shares of Alexander's common stock for approximately $2,740. On April 11, 2000, the Company acquired an additional 10,400 shares of Alexander's common stock for approximately $674 thereby increasing its ownership interest to 33.1%. At December 31, 2000, the Company has loans receivable from Alexander's of $115,000, including $20,000 drawn under the $50,000 line of credit the Company granted to Alexander's on August 1, 2000. The terms of the line of credit are the same as Alexander's original $95,000 loan from the Company, including the interest rate of 15.72%. The maturity date of the original $95,000 loan has been extended to March 15, 2002, which is also the maturity date of the new line of credit. The interest rate on the loan and line of credit will reset on March 15, 2001, using the same spread to treasuries as presently exists. Alexander's has completed the excavation and lying foundation for its Lexington Avenue property as part of the proposed development of a large multi-use building. The proposed building is expected to be comprised of a commercial portion, which may include retail stores, offices, hotel space, extended-stay residences, residential rentals and parking; and a residential portion, consisting of condominium units. The capital required for the proposed building will be in excess of $650,000. If the residential portion of the property is developed, the air rights representing the residential portion would be transferred to a taxable REIT subsidiary, as a REIT is not permitted to sell condominiums without being subject to a 100% excise tax on the gain from the sale of such condominiums. 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. The annual management fee payable to the Company by Alexander's is equal to the sum of (i) $3,000, (ii) 3% of the gross income from the Kings Plaza Mall, and (iii) 6% of development costs with minimum guaranteed fees of $750 per annum. The leasing agreement provides for the Company to generally receive a fee of (i) 3% of sales proceeds and (ii) 3% of lease rent for the first ten years of a lease term, 2% of lease rent for the eleventh through the twentieth years of a lease term and 1% of lease rent for the twenty-first through thirtieth year of a lease term, subject to the payment of rents by Alexander's tenants. Such amount is receivable annually in an amount not to exceed $2,500 until the present value of such installments (calculated at a discount rate of 9% per annum) equals the amount that would have been paid had it been paid on September 21, 1993, or at the time the transactions which gave rise to the commissions occurred, if later. At December 31, 2000, there are no fees due to the Company. On January 12, 2001, Alexander's sold its Fordham Road property located in Bronx, New York for $25,500, which resulted in a gain of $19,100. In addition, Alexander's paid off the mortgage on this property at a discount, which resulted in an extraordinary gain from early extinguishment of debt of $3,500 in the first quarter of 2001. As of December 31, 2000, Interstate Properties and its partners owned approximately 17.7% of the common shares of beneficial interest of the Company and 27.5% of Alexander's common stock. Interstate Properties is a general partnership in which Steven Roth, David Mandelbaum and Russell B. Wight, Jr. are partners. Mr. Roth is the Chairman of the Board and Chief Executive Officer of the Company, the Managing General Partner of Interstate Properties, and the Chief Executive Officer and a director of Alexander's. Messrs. Mandelbaum and Wight are trustees of the Company and are also directors of Alexander's. -85-
86 VORNADO REALTY TRUST NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 5. DEBT Following is a summary of the Company's debt: DECEMBER 31, -------------------------- (amounts in thousands) 2000 1999 ---------- ---------- Notes and Mortgage Payable: Fixed Interest: Cross collateralized mortgages payable, due in 2010, requires amortization based on a 30 year term with interest at 7.93% (prepayable with penalty until 2009)(1) ..... $ 496,764 $ 224,865 Eleven Penn Plaza mortgage payable, due in 2007, requires amortization based on a 25 year term with interest at 8.39% (prepayable after 2003 with yield maintenance) .................................................................... 52,289 53,129 866 UN Plaza mortgage payable, due in 2004, with interest at 7.79% (prepayable without penalty) ............................................................... 33,000 33,000 Monteheidra Town Center mortgage pass-through certificates, due in 2007 ($51,044) and 2009 ($9,977), requires amortization based on 30 year term with interest at 8.23% (prepayable with yield maintenance) ....................... 61,021 61,618 Two Penn Plaza mortgage payable, due in 2004, requires amortization based on a 25 year term with interest at 7.08% (prepayable with penalty fee)(2) ............................................................................ 160,518 163,147 Washington Office Center mortgage payable, due in 2004, requires amortization based on a 25 year term with interest at 6.80% (prepayable with yield maintenance) ........................................................ 48,102 49,537 Green Acres Mall and Plaza mortgage payable, due in 2008, requires amortization based on a 30 year term with interest at 6.75% (prepayable with yield maintenance) ........................................................ 154,928 156,798 Other mortgages payable ...................................................................... 56,524 31,542 ---------- ---------- 1,063,146 773,636 Variable Interest: Washington Design Center mortgage payable, due on November 27, 2001, requires amortization based on a 25 year term with interest at LIBOR plus 1.35% (8.11% at December 31, 2000) (prepayable without penalty) .................................. 23,632 23,932 Two Park Avenue mortgage payable, due on March 1, 2003, interest at LIBOR plus 1.45% (8.21% at December 31, 2000) (prepayable without penalty)(3) ......................... 90,000 65,000 Merchandise Mart mortgage payable, due in September 2002, interest at LIBOR plus 1.50% (7.39% at December 31, 2000) (prepayable with penalty fee)(4) ............. 250,000 250,000 33 North Dearborn Street mortgage payable, due in 2003, interest at LIBOR + 1.75% (8.21% at December 31, 2000) (prepayable without penalty) .................................. 19,000 -- One Penn Plaza mortgage payable, due in 2002, interest at LIBOR plus 1.25% (8.00% at December 31, 2000) (prepayable without penalty) (3) ........................ 275,000 275,000 Hotel Pennsylvania - (commercial) mortgage payable, due in 2002, requires amortization based on a 25 year term, with interest at LIBOR + 1.60% (8.42% at December 31, 2000) (prepayable without penalty) .................................. 47,009 47,761 350 North Orleans mortgage payable, due in 2002, interest at LIBOR + 1.65% (8.46% at December 31, 2000) (prepayable with yield maintenance)(5) ........................ 70,000 40,000 909 Third Avenue mortgage payable, due in 2003, interest at LIBOR + 1.65% (8.43% at December 31, 2000) (prepayable with penalty fee) ................................. 107,879 108,754 888 Seventh Avenue mortgage payable, due in 2001, interest at LIBOR + 1.75% (8.50% at December 31, 2000) (prepayable with yield maintenance)(6) ........................ 55,000 55,000 770 Broadway/595 Madison Avenue cross-collateralized mortgage payable, due on August 1, 2002, interest at LIBOR + .40% (7.16% at December 31, 2000)(7) ............ 173,500 -- Five individual notes or mortgages payable collateralized by the Market Square Complex with maturity dates ranging from 2001 through 2011 and interest rates ranging from 8.76% to 9.38% at December 31, 2000 ........................................... 57,731 42,721 ---------- ---------- Total notes and mortgages payable .......................................................... 2,231,897 1,681,804 Unsecured revolving credit facility, interest at LIBOR plus .90% (7.66% at December 31, 2000) (prepayable without penalty)(8) ............................................. 425,000 367,000 ---------- ---------- Total Debt ................................................................................. $2,656,897 $2,048,804 ========== ========== -86-
87 VORNADO REALTY TRUST NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (1) On March 1, 2000 the Company completed a $500,000 private placement of 10-year, 7.93% mortgage notes, cross-collateralized by 42 shopping center properties, resulting in net proceeds of approximately $490,000. In connection therewith, the Company repaid $228,000 of existing mortgage debt scheduled to mature on December 1, 2000 and $262,000 outstanding under its revolving credit facility. In connection with the repayment of this debt, the Company recorded an extraordinary loss of $1,125 in the first quarter of 2000 due to the write-off of unamortized financing costs. (2) On February 18, 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. (3) On March 1, 2000, the Company refinanced its Two Park Avenue office building for $90,000. Of the proceeds received, the Company repaid the existing debt of $65,000. The new 3-year debt matures on February 28, 2003 and bears interest at Libor + 1.45% (8.21% at December 31, 2000). (4) On September 21, 1999, the Company completed a $250,000 mortgage refinancing of its Merchandise Mart property in Chicago of which $50,000 is further secured by a letter of credit. The letter of credit will be reduced over the term of the loan as cash flow increases. The Company bought an interest rate cap with a notional amount of $250,000, capping the interest rate in the event that LIBOR increases above 9.25% through the termination date of the agreement in September 2002. Simultaneously with this transaction, the Company sold an interest rate cap with a notional amount of $250,000 to a third party on the same terms as the cap the Company purchased. (5) On July 18, 1999, the Company completed a $70,000 mortgage financing of its 350 North Orleans property in Chicago. On such date, the Company received proceeds of $40,000. The balance of the proceeds were received on March 14, 2000. (6) On January 11, 2001, the Company completed a $105,000 refinancing of its 888 Seventh Avenue office building. The loan bears interest at a fixed rate of 6.6% and matures on January 1, 2006. A portion of the proceeds received were used to repay the then existing mortgage of $55,000. (7) On August 11, 2000, the Company completed a $173,500 mortgage financing, cross-collaterized by its 770 Broadway and 595 Madison Avenue office buildings. The loan bears interest at LIBOR + .40% (7.16% at December 31, 2000) and matures on August 1, 2002. At December 31, 2000, the proceeds of the loan are in a restricted mortgage escrow account, which bears interest at the same rate as the loan. (8) On March 21, 2000, the Company renewed its $1,000,000 revolving credit facility for an additional three years. The covenants of the facility include, among others, maximum loan to value ratio, minimum debt service coverage and minimum capitalization requirements. Interest is at LIBOR plus .90% (7.66% at December 31, 2000). The Company paid origination fees of $6,700 and pays a commitment fee quarterly of .20 % per annum on the facility amount. The net carrying value of properties collateralizing the notes and mortgages amounted to $2,952,979 at December 31, 2000. As at December 31, 2000, the maturities for the next five years and thereafter are as follows: YEAR ENDING DECEMBER 31, AMOUNT - ------------------------ ------ 2001 ............... $ 27,308 2002 ............... 914,643 2003 ............... 651,800 2004 ............... 241,620 2005 ............... -- Thereafter ......... 821,526 -87-
88 VORNADO REALTY TRUST NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 6. SHAREHOLDERS' EQUITY During the three years ended December 31, 2000, the Company sold $445,000 of Common Shares and $193,300 of Cumulative Redeemable Preferred Shares. The following are the details of the sales. Sale of Common Shares In April 1998, the Company completed the sale of 10,000,000 common shares of beneficial interest, par value $.04 per share pursuant to an effective registration statement with net proceeds to the Company of approximately $401,000. On April 29, 1998, the Company sold 1,132,420 common shares to a unit investment trust, which were valued for the purpose of the trust at $41.06 per share, resulting in net proceeds of approximately $44,000. Sale of Cumulative Redeemable Preferred Shares On March 17, 1999, the Company completed the sale of 3 million 8.5% Series B Cumulative Redeemable Preferred Shares, at a price $25.00 per share, pursuant to an effective registration statement with net proceeds to the Company of approximately $72,200. Further on March 22, 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. On May 17, 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, on May 19, 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. -88-
89 VORNADO REALTY TRUST NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 7. EMPLOYEES' SHARE OPTION PLAN Under the Omnibus Share Plan (the "Plan"), various officers and employees have been granted incentive share options and non-qualified options to purchase common shares. Options granted are at prices equal to 100% of the market price of the Company's shares at the date of grant. 921,697 shares vest on a graduated basis, becoming fully vested 27 months after grant, 3,500,000 shares (granted in connection with Mr. Fascitelli's employment agreement) vest on a graduated basis becoming fully vested 60 months after grant, and 7,050,655 shares vest on a graduated basis, becoming fully vested 36 months after grant. All options expire ten years after grant. The Plan also provides for the award of Stock Appreciation Rights, Performance Shares and Restricted Stock, as defined, none of which have been awarded as of December 31, 2000. If compensation cost for Plan awards had been determined based on fair value at the grant dates, net income and income per share would have been reduced to the pro-forma amounts below, for the years ended December 31, 2000, 1999 and 1998: DECEMBER 31, -------------------------------------- 2000 1999 1998 ----------- ----------- ----------- (amounts in thousands, except share amounts) Net income applicable to common shares: As reported ............................................. $195,301 $169,081 $131,164 Pro-forma ............................................... 177,075 151,836 117,938 Net income per share applicable to common shares: Basic: As reported ........................................... $ 2.26 $ 1.97 $ 1.62 Pro-forma ............................................. 2.05 1.77 1.46 Diluted: As reported ........................................... $ 2.20 $ 1.94 $ 1.59 Pro forma ............................................. 2.00 1.74 1.43 -89-
90 VORNADO REALTY TRUST NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The fair value of each option grant is estimated on the date of grant using an option-pricing model with the following weighted-average assumptions used for grants in the periods ending December 31, 2000, 1999 and 1998. DECEMBER 31, ------------------------- 2000 1999 1998 ------ ------ ------ Expected volatility.................................................. 17% 19% 19% Expected life........................................................ 5 years 5 years 5 years Risk-free interest rate.............................................. 5.0% 6.4% 4.6% Expected dividend yield.............................................. 6.0% 5.9% 5.3% A summary of the Plan's status, and changes during the years then ended, is presented below: 2000 1999 1998 --------------------- -------------------- ----------------------- WEIGHTED- WEIGHTED- WEIGHTED- AVERAGE AVERAGE AVERAGE EXERCISE EXERCISE EXERCISE SHARES PRICE SHARES PRICE SHARES PRICE ---------- -------- --------- -------- --------- --------- Outstanding at January 1............. 11,472,352 $32.65 8,724,316 $32.35 5,529,917 $24.43 Granted.............................. 4,863,750 31.02 3,301,550 33.53 3,436,250 44.99 Exercised............................ (377,440) 26.29 (132,119) 18.64 (41,851) 21.95 Cancelled............................ (97,402) 34.86 (421,395) 37.71 (200,000) 32.93 ---------- --------- --------- Outstanding at December 31........... 15,861,260 $32.26 11,472,352 $32.65 8,724,316 $32.35 ========== ========== ========= Options exercisable at December 31... 7,272,878 4,546,429 2,703,407 ========== ========== ========= Weighted-average fair value of options granted during the year ended December 31 (per option)....................... $2.98 $4.43 $5.33 ========== ========== ========= -90-
91 VORNADO REALTY TRUST NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The following table summarizes information about options outstanding under the Plan at December 31, 2000: OPTIONS OUTSTANDING OPTIONS EXERCISABLE ------------------------------------------------------ ------------------------------------ NUMBER NUMBER OUTSTANDING WEIGHTED-AVERAGE EXERCISABLE AT RANGE OF AT DECEMBER 31, REMAINING WEIGHTED-AVERAGE DECEMBER 31, WEIGHTED-AVERAGE EXERCISE PRICE 2000 CONTRACTUAL LIFE EXERCISE PRICE 2000 EXERCISE PRICE -------------- -------------- ---------------- ---------------- --------------- ---------------- $ 6- $12 43,402 2.1 Years $11 43,402 $11 $17- $19 339,644 4.1 Years 18 339,644 18 $23- $24 3,500,000 5.9 Years 23 2,800,000 23 $26- $27 164,500 6.1 Years 26 164,500 26 $30- $32 5,143,917 8.8 Years 31 596,867 30 $32- $36 3,470,602 8.1 Years 34 1,197,341 34 $36- $40 277,565 7.4 Years 39 164,485 39 $41- $44 101,075 7.1 Years 43 69,922 43 $45- $46 2,555,555 7.0 Years 45 1,719,167 45 $48- $49 265,000 7.1 Years 48 177,550 48 ---------- --------- $ 6- $49 15,861,260 7.5 Years 32 7,272,878 32 ========== ========= Shares available for future grant under the Plan at December 31, 2000 were 6,956,879. In connection with the acquisition of Arbor in December 1997, the Company issued 60,000 options to a third party outside of the Plan parameters. These options were granted at $43.75 per share and immediately vested. No expense was incurred related to this issuance as it was accounted for as component of the acquisition price. 8. RETIREMENT PLAN In December 1997, benefits under the Plan were frozen. Prior to December 31, 1997, the Company's qualified retirement plan covered all full-time employees. The Plan provided annual pension benefits that were equal to 1% of the employee's annual compensation for each year of participation. The funding policy is in accordance with the minimum funding requirements of ERISA. Pension expense includes the following components: YEAR ENDED DECEMBER 31, ---------------------------------- 2000 1999 1998 ----- ----- ----- (amounts in thousands, except percentages) Interest cost on projected benefit obligation...... $ 567 $ 559 $ 594 Actual return on assets............................ (374) (387) (334) Net amortization and deferral...................... 30 53 51 ----- ----- ----- Net pension expense................................ $ 223 $ 225 $ 311 ===== ===== ===== Assumptions used in determining the net pension expense: Discount rate...................................... 7 3/4% 7 3/4% 6 3/4% Rate of increase in compensation levels............ --* --* --* Expected rate of return on assets.................. 7% 7% 7% * Not applicable, as benefits under the Plan were frozen in December 1997. -91-
92 VORNADO REALTY TRUST NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The following table sets forth the Plan's funded status and the amount recognized in the Company's balance sheet: YEAR ENDED DECEMBER 31, -------------------------------------------- 2000 1999 1998 ------- ------- ------- Change in benefit obligation Benefit obligation at beginning of year........................ $ 7,918 $ 8,952 $ 8,337 Interest cost.................................................. 567 559 594 Benefit payments............................................... (637) (777) (599) Experience loss/(gain)......................................... (318) (816) 620 ------- ------- ------- Benefit obligation at end of year.............................. 7,530 7,918 8,952 Change in plan assets Fair value of plan assets at beginning of year................. 5,284 5,551 4,254 Employer contribution.......................................... 698 362 1,531 Benefit payments............................................... (637) (777) (599) Actual return on assets........................................ 387 148 365 ------- ------- ------- Fair value of plan assets at end of year....................... 5,732 5,284 5,551 Funded status....................................................... (1,798) (2,634) (3,401) Unrecognized loss.............................................. 1,279 1,279 2,270 ------- ------- ------- Net Amount Recognized............................................... $ 519 $(1,355) $(1,131) ======= ======= ======= Amounts recognized in the statement of financial position consist of: Accrued benefit liability...................................... $(1,798) $(2,634) $(3,401) Accumulated other comprehensive income......................... 1,279 1,279 2,270 ------- ------- ------- Net amount recognized............................................... $ (519) $(1,355) $(1,131) ======= ======= ======= Plan assets are invested in U.S. government obligations and securities backed by U.S. government guaranteed mortgages. 9. LEASES As lessor: The Company leases space to tenants in shopping centers and office buildings under operating leases. Most of the leases provide for the payment of fixed base rentals payable monthly in advance. Shopping center leases provide for the pass-through to tenants of real estate taxes, insurance and maintenance. Office building leases generally require the tenants to reimburse the Company for operating costs and real estate taxes above their base year costs. Shopping center leases also provide for the payment by the lessee of additional rent based on a percentage of the tenants' sales. As of December 31, 2000, future base rental revenue under non-cancelable operating leases, excluding rents for leases with an original term of less than one year and rents resulting from the exercise of renewal options, is as follows: YEAR ENDING DECEMBER 31: AMOUNT - ------------------------ ------ 2001.................................................... $ 646,149 2002.................................................... 620,774 2003.................................................... 578,014 2004.................................................... 539,107 2005.................................................... 485,822 Thereafter.............................................. 2,673,476 These amounts do not include rentals based on tenants' sales. These percentage rents approximated $4,825, $2,213 and $2,493 for the years ended December 31, 2000, 1999 and 1998. Bradlees, which accounts for 14.3% of the Retail property rentals and 2.2% of total property rentals, filed for protection under Chapter 11 of the U.S. Bankruptcy Code and closed all of its stores in February 2001. The Company leases 16 locations to Bradlees. Of these 16 locations, the leases for 14 are fully guaranteed and the fifteenth is guaranteed as to 70% of the rent by Stop & Shop Companies, Inc., under a Master Agreement and Guaranty, dated May 1, 1992. Stop & Shop is a wholly-owned subsidiary of Koninklijke Ahold NV (formerly Royal Ahold NV), a leading international Food retailer. The effectiveness of Stop & Shop's guarantee to Vornado of Bradlees' lease obligations is not affected by Bradlees' bankruptcy. None of these leases have been either rejected or assumed. The lease for the 14th Street and Union Square property is not guaranteed. In 1999, the Company paid Bradlees $11,000 to modify the terms of this lease to increase the rent by approximately $1,100 per annum to $4,600 effective March 2000, and to change the lease expiration date from October 2019 to March 15, 2002. On February 9, 2001, Bradlees rejected this lease. The Company is currently considering various redevelopment alternatives for this site which will include a combination of office and retail space. None of the Company's tenants represented more than 10% of the Company's total revenues for the year ended December 31, 2000. -92-
93 VORNADO REALTY TRUST NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) As lessee: The Company is a tenant under operating leases for certain properties. These leases will expire principally during the next thirty years. Future minimum lease payments under operating leases at December 31, 2000, are as follows: YEAR ENDING DECEMBER 31: AMOUNT - ------------------------ ------ 2001........................................................ $ 14,800 2002........................................................ 14,400 2003........................................................ 13,700 2004........................................................ 12,800 2005........................................................ 12,800 Thereafter.................................................. 392,000 Rent expense was $15,248, $14,269 and $5,937 for the years ended December 31, 2000, 1999 and 1998. 10. COMMITMENTS AND CONTINGENCIES At December 31, 2000, in addition to the $425.0 million balance outstanding under the Company's revolving credit facility, the Company had utilized $93.6 million of availability under the facility for letters of credit and guarantees primarily related to pending acquisitions. Each of the Company's properties has been subjected to varying degrees of environmental assessment at various times. The environmental assessments did not reveal any material environmental contamination. However, there can be no assurance that the identification of new areas of contamination, changes in the extent or known scope of contamination, the discovery of additional sites, or changes in cleanup requirements would not result in significant costs to the Company. From time-to-time, the Company has disposed of substantial amounts of real estate to third parties for which, as to certain properties, it remains contingently liable for rent payments or mortgage indebtedness. There are various legal actions against the Company in the ordinary course of business. In the opinion of management, after consultation with legal counsel, the outcome of such matters will not have a material effect on the Company's financial condition, results of operations or cash flow. 11. NET GAIN FROM INSURANCE SETTLEMENT AND CONDEMNATION PROCEEDING In September 1998, Atlantic City condemned the Company's vacant property. In the third quarter of 1998, the Company recorded a gain of $1,694, (which reflects the condemnation award of $3,100, net of the carrying value of the property of $1,406). The Company is appealing the amount of the award. In April 1997, the Company's Lodi shopping center was destroyed by a fire. In the third quarter of 1998, the Company and its insurer agreed that the estimated cost to reconstruct the shopping center is approximately $9,012 and the Company recorded a gain of $7,955 (the agreed upon amount, net of the carrying value of the shopping center of $1,057). The insurance carrier has previously advanced $5,550 to the Company. The reconstruction of the shopping center was completed in 1999. -93-
94 VORNADO REALTY TRUST NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED) 12. REPURCHASE AGREEMENTS The Company enters into agreements for the purchase and resale of U.S. government obligations for periods of up to one week. The obligations purchased under these agreements are held in safekeeping in the name of the Company by various money center banks. The Company has the right to demand additional collateral or return of these invested funds at any time the collateral value is less than 102% of the invested funds plus any accrued earnings thereon. 13. OTHER RELATED PARTY TRANSACTIONS At December 31, 2000, the loan due from Mr. Roth, in accordance with his employment arrangement, was $13,123 ($4,704 of which is shown as a reduction in shareholders' equity). During 1999, the Company amended Mr. Roth's loan to, (i) reset the interest rate to 4.49% per annum (based on the applicable Federal rate) from a floating rate equal to the broker call rate and (ii) extend the maturity to January 2006 from December 2002. The Company also provided Mr. Roth with the right to draw up to $15,000 of additional loans on a revolving basis. Each additional loan will bear interest, payable quarterly, at the applicable Federal rate on the date the loan is made and will mature on the sixth anniversary of the loan. At December 31, 2000, loans due from Mr. Fascitelli, in accordance with his employment agreement, aggregated $8,600. The loans mature in 2003 and bear interest, payable quarterly at a weighted average interest rate of 5.39% (based on the applicable Federal rate). In addition, in accordance with his employment agreement, in December 1996 Mr. Fascitelli received a deferred payment consisting of $5,000 in cash and a $20,000 convertible obligation payable at the Company's option in 919,540 of its common shares or the cash equivalent of their appreciated value but not less than $20,000. Accordingly, the cash and common shares are being held in an irrevocable trust (the fair value of this obligation was $37,544 at December 31, 2000). The Company recorded a charge to equity of $10,464 which represented the appreciation in the value of the stock from the date the trust was established (at which time the price of the stock was $21.75 per share) to September 30, 1998 (at which time the price of the stock was $33.13 per share). In all subsequent periods, appreciation in the stock's price above $33.13 is recognized as compensation expense and, if the price fluctuates between $33.13 and $21.75, equity is adjusted. For the year ended December 31, 2000, the Company recognized approximately $1,968 of compensation expense. For the year ended December 31, 1999, approximately $340 was recognized as a reduction of compensation expense and approximately $579 was recorded as a reduction of stockholders' equity. Two other executive officers of the Company have loans outstanding pursuant to employment agreements of $3,000 at December 31, 2000. The loans bear interest at either the applicable Federal rate provided or the broker call rate (8.25% at December 31, 2000). The Company currently manages and leases the real estate assets of Interstate Properties pursuant to a management agreement for which the Company receives a quarterly fee equal to 4% of base rent and percentage rent and certain other commissions. The management agreement has a term of one year and is automatically renewable unless terminated by either of the parties on sixty days' notice at the end of the term. Although the management agreement was not negotiated at arms length, the Company believes based upon comparable fees charged by other real estate companies, that its terms are fair to the Company. For the years ended December 31, 2000, 1999 and 1998, $1,418, $1,262 and $1,365 of management fees were earned by the Company pursuant to the management agreement. The Mendik Group (Messrs. Mendik and Greenbaum and certain entities controlled by them) owns an entity which provides cleaning and related services and security services to office properties, including the Company's Manhattan office properties. Although the terms and conditions of the contracts pursuant to which these services are provided were not negotiated at arms length, the Company believes, based upon comparable amounts charged to other real estate companies, that the terms and conditions of such contracts are fair to the Company. In connection with these contracts, the Company paid $47,493, $40,974 and $25,686 for the years ended December 31, 2000, 1999 and 1998. At December 31, 2000, the common stock of the preferred stock affiliates which owned interests in the Temperature Controlled Logistics Companies, Hotel Pennsylvania and related management companies was owned by Officers and Trustees of Vornado. In January 2001, the Company acquired the common stock of the preferred stock affiliates and converted them to taxable REIT Subsidiaries. -94-
95 VORNADO REALTY TRUST NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED) 14. MINORITY INTEREST The minority interest represents limited partners', other than the Company's, interests in the Operating Partnership and are comprised of: Outstanding Units at Preferred --------------------------- Per Unit or Annual Conversion December 31, December 31, Liquidation Distribution Rate Into Unit Series 2000 1999 Preference Rate Class A Units - ----------- ------------ ------------ ----------- ------------ ------------- Common: Class A (a) ..................... 6,456,749 6,247,829 -- $1.97 N/A Class D ......................... 869,387 876,543 -- $2.04125 1.0 (b) Convertible Preferred: 5.0% B-1 Convertible Preferred .. 899,566 899,566 $ 50.00 $2.50 .914 8.0% B-2 Convertible Preferred .. 449,783 449,783 $ 50.00 $4.00 .914 6.5% C-1 Convertible Preferred .. 747,912 747,912 $ 50.00 $3.25 1.1431 6.25% E-1 Convertible Preferred 4,998,000 4,998,000 $ 50.00 $3.09375 (c) 1.1364 Perpetual Preferred: (d) 8.5% D-1 Cumulative Redeemable Preferred .......... 3,500,000 3,500,000 $ 25.00 $2.125 N/A 8.375% D-2 Cumulative Redeemable Preferred ..................... 549,336 549,336 $ 50.00 $4.1875 N/A 8.25% D-3 Cumulative Redeemable Preferred ..................... 8,000,000 8,000,000 $ 25.00 $2.0625 N/A 8.25% D-4 Cumulative Redeemable Preferred ..................... 5,000,000 5,000,000 $ 25.00 $2.0625 N/A 8.25% D-5 Cumulative Redeemable Preferred ..................... 7,480,000 7,480,000 $ 25.00 $2.0625 N/A 8.25% D-6 Cumulative Redeemable Preferred ..................... 840,000 -- $ 25.00 $2.0625 N/A 8.25% D-7 Cumulative Redeemable Preferred ..................... 7,200,000 -- $ 25.00 $2.0625 N/A 8.25% D-8 Cumulative Redeemable Preferred ..................... 360,000 -- $ 25.00 $2.0625 N/A - ------------------- (a) Class A units are redeemable at the option of the holder for common shares of beneficial interest in Vornado, on a one-for-one basis, or at the Company's option for cash. (b) Mandatory conversion of Class D units into Class A units will occur after four consecutive quarters of distributions of at least $.50375 per Class A unit ($2.015 annually). (c) Increases to $3.25 over the next two years and fixes at $3.38 in March 2007. (d) Convertible at the option of the holder for an equivalent amount of the Company's preferred shares and redeemable at the Company's option after the 5th anniversary of the date of issuance (ranging from December 1998 to December 2000). -95-
96 VORNADO REALTY TRUST NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED) 15. INCOME PER SHARE The following table sets forth the computation of basic and diluted income per share: YEAR ENDED DECEMBER 31, -------------------------------------------------- 2000 1999 1998 ------------ ------------ ------------ (amounts in thousands, except per share amounts) Numerator: Income before extraordinary item ........................... $ 235,116 $ 202,519 $ 152,854 Extraordinary item ......................................... (1,125) -- -- ------------ ------------ ------------ Net income ................................................. 233,991 202,519 152,854 Preferred stock dividends .................................. (38,690) (33,438) (21,690) ------------ ------------ ------------ Numerator for basic and diluted income per share--net income applicable to common shares .............................. $ 195,301 $ 169,081 $ 131,164 ============ ============ ============ Denominator: Denominator for basic income per share--weighted average shares ................................................... 86,521,195 85,666,424 80,724,132 Effect of dilutive securities: Employee stock options ................................... 2,170,894 1,621,386 1,931,818 ------------ ------------ ------------ Denominator for diluted income per share--adjusted weighted average shares and assumed conversions .......... 88,692,089 87,287,810 82,655,950 ============ ============ ============ INCOME PER COMMON SHARE - BASIC: Income before extraordinary item ......................... $ 2.27 $ 1.97 $ 1.62 Extraordinary item ....................................... (.01) -- -- ------------ ------------ ------------ Net income per common share .............................. $ 2.26 $ 1.97 $ 1.62 ============ ============ ============ INCOME PER COMMON SHARE - DILUTED: Income before extraordinary item ......................... $ 2.21 $ 1.94 $ 1.59 Extraordinary item ....................................... (0.1) -- -- ------------ ------------ ------------ Net income per common share .............................. $ 2.20 $ 1.94 $ 1.59 ============ ============ ============ -96-
97 VORNADO REALTY TRUST NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED) 16. SUMMARY OF QUARTERLY RESULTS (UNAUDITED) The following summary represents the results of operations for each quarter in 2000 and 1999: NET INCOME NET INCOME PER APPLICABLE TO COMMON SHARE(1) COMMON --------------- REVENUE SHARES BASIC DILUTED -------- ------------- ----- ------- (amounts in thousands, except share amounts) 2000 March 31 ..................................... $195,279 $47,523(2) $.55 $.54 June 30 ...................................... 198,745 47,281 .55 .53 September 30 ................................. 215,655 58,447(2) .68 .65 December 31 .................................. 216,853 42,050 .48 .47 1999 March 31 ..................................... $163,564 $42,754(3) $.50 $.49 June 30 ...................................... 166,188 42,758(3) .50 .49 September 30 ................................. 183,555 44,487(3) .52 .51 December 31 .................................. 183,651 39,082 .45 .45 - ------------------- (1) The total for the year may differ from the sum of the quarters as a result of weighting. (2) Net income for the quarters ended March 31, 2000 and September 30, 2000 included net gains on sale of real estate of $2,560 ($.03 per share) and $8,405 ($.09 per share), respectively. (3) Net income for each of the first three quarters of 1999 has been restated to reflect a correction for depreciation expense of a partially-owned entity. The effect of such restatement for each of the first three quarters on net income and net income per common share is as follows: $462 ($.01 per share), $887 ($.01 per share), and $887 ($.01 per share), respectively. -97-
98 VORNADO REALTY TRUST NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED) 17. SEGMENT INFORMATION The Company has four business segments: Office, Retail, Merchandise Mart Properties and Temperature Controlled Logistics. December 31, 2000 ---------------------------------------------------------------------------------------- Temperature Merchandise Controlled Total Office Retail Mart Logistics Other(2) ----------- ----------- --------- ----------- ------------ --------- Total revenues ..................... $ 826,532 $ 472,527 $ 177,787 $ 155,213 $ -- $ 21,005 Total expenses ..................... 466,117 267,899 73,802 83,006 -- 41,410 ----------- ----------- --------- --------- --------- --------- Operating income ................... 360,415 204,628 103,985 72,207 -- (20,405) Income applicable to Alexander's ... 13,053 -- -- -- -- 13,053 Income from partially-owned entities 90,404 29,210 667 2,111 28,778(6) 29,638 Interest and other investment income 32,926 6,162 -- 1,474 -- 25,290 Interest and debt expense .......... (170,273) (62,162) (53,180) (38,566) -- (16,365) Net gain on sale of real estate .... 10,965 8,405 2,560 -- -- -- Minority interest .................. (102,374) (46,917) (16,550) (12,660) (12,483) (13,764) ----------- ----------- --------- --------- --------- --------- Income before extraordinary item ... 235,116 139,326 37,482 24,566 16,295 17,447 Extraordinary item ................. (1,125) -- (1,125) -- -- -- ----------- ----------- --------- --------- --------- --------- Net income ......................... 233,991 139,326 36,357 24,566 16,295 17,447 Extraordinary item ................. 1,125 -- 1,125 -- -- -- Minority interest .................. 102,374 46,917 16,550 12,660 12,483 13,764 Net gain on sale of real estate .... (10,965) (8,405) (2,560) -- -- -- Interest and debt expense (4) ...... 260,573 96,224 55,741 38,566 27,424 42,618 Depreciation and amortization (4) .. 167,268 76,696 18,522 20,627 34,015 17,408 Straight-lining of rents (4) ....... (30,001) (19,733) (2,295) (5,919) (1,121) (933) Other .............................. 14,510 -- (1,654) 1,358 4,064 10,742(7) ----------- ----------- --------- --------- --------- --------- EBITDA(1) .......................... $ 738,875 $ 331,025 $ 121,786 $ 91,858 $ 93,160 $ 101,046 =========== =========== ========= ========= ========= ========= Balance sheet data: Real estate, net ............... $ 3,901,055 $ 2,388,393 $ 551,183 $ 862,003 $ -- $ 99,476 Investments and advances to partially-owned entities ..... 1,459,211 394,089 31,660 41,670 469,613 522,179 Capital expenditures: Acquisitions ................. 246,500 128,000 -- 89,000 -- 29,500 Other ........................ 200,181 106,689 7,251 37,362 28,582 20,297 - ------------------- Footnotes are explained on page 101. -98-
99 VORNADO REALTY TRUST NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED) December 31, 1999 --------------------------------------------------------------------------------------- Temperature Merchandise Controlled Total Office Retail Mart Logistics Other(2) ----------- ----------- ---------- ----------- --------- --------- Total revenues ......................... $ 696,958 $ 379,795 $ 170,538 $ 135,921 $ -- $ 10,704 Total expenses ......................... 405,854 227,680 74,062 74,624 -- 29,488 ----------- ----------- --------- --------- --------- --------- Operating income ....................... 291,104 152,115 96,476 61,297 -- (18,784) Income applicable to Alexander's ....... 7,427 -- -- -- -- 7,427 Income from partially-owned entities ... 82,310 19,055 938 -- 36,722 25,595 Interest and other investment income ... 18,359 1,786 -- 737 -- 15,836 Interest and debt expense .............. (141,683) (49,624) (27,635) (29,509) -- (34,915) Minority interest ...................... (54,998) (25,854) (14,628) (6,819) (7,697) -- ----------- ----------- --------- --------- --------- --------- Net income ............................. 202,519 97,478 55,151 25,706 29,025 (4,841) Minority interest ...................... 54,998 25,854 14,628 6,819 7,697 -- Interest and debt expense (4) .......... 226,253 82,460 30,249 29,509 27,520 56,515 Depreciation and amortization (4) ...... 143,499 64,702 16,900 17,702 31,044 13,151 Straight-lining of rents (4) ........... (25,359) (16,386) (2,120) (4,740) (1,698) (415) Other .................................. 7,451 365 -- -- 2,054(3) 5,032 ----------- ----------- --------- --------- --------- --------- EBITDA(1) .............................. $ 609,361 $ 254,473 $ 114,808 $ 74,996 $ 95,642 $ 69,442 =========== =========== ========= ========= ========= ========= Balance sheet data: Real estate, net ................... $ 3,612,965 $ 2,208,510 $ 575,633 $ 753,416 $ -- $ 75,406 Investments and advances to partially-owned entities ......... 1,315,387 382,417 3,057 32,524 481,808 415,581 Capital expenditures: Acquisitions ..................... 394,006 388,436 -- -- -- 5,570 Other............................. 204,591 85,833 22,859 41,134 51,000 3,765 - ------------------- Footnotes are explained on page 101. -99-
100 VORNADO REALTY TRUST NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED) December 31, 1998 ------------------------------------------------------------------------------------ Temperature Merchandise Controlled Total Office Retail Mart Logistics Other(2) ----------- ----------- --------- ----------- ------------ --------- Total revenues ....................... $ 509,860 $ 247,499 $ 167,155 $ 86,521 $ -- $ 8,685 Total expenses ....................... 295,008 151,573 70,334 50,761 -- 22,340 ----------- ----------- --------- --------- --------- --------- Operating income ..................... 214,852 95,926 96,821 35,760 -- (13,655) Income applicable to Alexander's ..... 3,123 -- -- -- -- 3,123 Income from partially-owned entities . 32,025 10,854 258 (1,969) 15,191 7,691 Interest and other investment income . 24,074 4,467 2,159 639 -- 16,809 Interest and debt expense ............ (114,686) (25,175) (32,249) (18,711) -- (38,551) Net gain from insurance settlement and condemnation proceeding .......... 9,649 -- -- -- -- 9,649 Minority interest .................... (16,183) (7,236) (5,853) (2,070) (1,024) -- ----------- ----------- --------- --------- --------- --------- Net income ........................... 152,854 78,836 61,136 13,649 14,167 (14,934) Minority interest .................... 16,183 7,236 5,853 2,070 1,024 -- Interest and debt expense (4) ........ 164,478 40,245 32,709 18,711 26,541 46,272 Depreciation and amortization (4) .... 104,299 39,246 15,520 9,899 33,117 6,517 Net gain from insurance settlement and condemnation proceeding .......... (9,649) -- -- -- -- (9,649) Straight-lining of rents (4) ......... (16,132) (6,845) (3,203) (4,882) -- (1,202) Other................................. 15,055 (79) -- -- 8,872(3) 6,262(5) ----------- ----------- --------- --------- --------- --------- EBITDA(1) ............................ $ 427,088 $ 158,639 $ 112,015 $ 39,447 $ 83,721 $ 33,266 =========== =========== ========= ========= ========= ========= Balance sheet data: Real estate, net ................. $ 3,089,075 $ 1,777,919 $ 565,723 $ 729,485 $ -- $ 15,948 Investments and advances to partially-owned entities ....... 827,840 118,337 2,946 26,638 459,172 220,747 Capital expenditures: Acquisitions ................... 2,059,000 923,000 38,000 745,000 175,000 178,000 Other .......................... 80,548 51,162 5,535 10,314 12,463 1,074 - ------------------- Footnotes are explained on page 101. -100-
101 VORNADO REALTY TRUST NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED) Notes to segment information: (1) EBITDA represents income before interest, taxes, depreciation and amortization, extraordinary or non-recurring items, gains or losses on sales of real estate, the effect of straight-lining of property rentals for rent escalations and minority interest. Management considers EBITDA a supplemental measure for making decisions and assessing the performance of its segments. EBITDA may not be comparable to similarly titled measures employed by other companies. (2) Other EBITDA is comprised of: 2000 1999 1998 --------- -------- -------- Investment in Newkirk Joint Ventures .......... $ 50,985 $ 39,796 $ 5,379 Investments in other partially-owned entities (Hotel Pennsylvania,* Alexander's and other) 43,067 34,827 25,323 Investment Income ............................. 25,290 15,836 16,809 Unallocated general and administrative expenses (25,166) (23,288) (18,147) Other ......................................... 6,870 2,271 3,902 --------- -------- -------- Total ................................ $ 101,046 $ 69,442 $ 33,266 ========= ======== ======== * The Commercial portion of the Hotel was wholly-owned as of August 5, 1999, and accordingly consolidated. (3) Includes (i) the reversal of income taxes (benefit) which are considered non-recurring because of the conversion of the Temperature Controlled Logistics Companies to REIT's in 2000 and (ii) the add back of non-recurring unification costs. (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. (5) Primarily represents the Company's equity in Alexander's loss for the write-off resulting from the razing of Alexander's building formerly located at its Lexington Avenue site. (6) Net of $9,780, of rent not recognized as income. (7) Includes the reversal of $4,765 of expenses in connection with a deferred compensation arrangement. 18. SUBSEQUENT EVENTS On February 22, 2001, the Company entered into a 20-day exclusive negotiation period with the Port Authority of NY & NJ to complete the contract and associated documents for the net lease of the 11 million square foot World Trade Center complex in New York. The 99-year net lease of the World Trade Center has been valued by the Port Authority's advisors at approximately $3.25 billion. The Board of the Commissioners of the Port Authority has instructed their staff and advisors to present the final contract for approval at a special Port Authority Board meeting scheduled for March 14, 2001. In connection therewith, the Company has provided the Port Authority with a $100 million refundable and non-drawable letter of credit. -101-
102 PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT Information relating to trustees of the Registrant will be contained in a definitive Proxy Statement involving the election of trustees which the Registrant will file with the Securities and Exchange Commission pursuant to Regulation 14A under the Securities Exchange Act of 1934 not later than 120 days after December 31, 2000, and such information is incorporated herein by reference. Information relating to Executive Officers of the Registrant appears at page 45 of this Annual Report on Form 10-K. ITEM 11. EXECUTIVE COMPENSATION Information relating to executive compensation will be contained in the Proxy Statement referred to above in Item 10, "Directors and Executive Officers of the Registrant", and such information is incorporated herein by reference. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT Information relating to security ownership of certain beneficial owners and management will be contained in the Proxy Statement referred to in Item 10, "Directors and Executive Officers of the Registrant", and such information is incorporated herein by reference. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS Information relating to certain relationships and related transactions will be contained in the Proxy Statement referred to in Item 10, "Directors and Executive Officers of the Registrant", and such information is incorporated herein by reference. -102-
103 PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K (a) The following documents are filed as part of this report: 1. The consolidated financial statements are set forth in Item 8 of this Annual Report on Form 10-K. The following financial statement schedules should be read in conjunction with the financial statements included in Item 8 of this Annual Report on Form 10-K. PAGES IN THIS ANNUAL REPORT ON FORM 10-K ------------- II--Valuation and Qualifying Accounts--years ended December 31, 2000, 1999 and 1998............................................................... 105 III--Real Estate and Accumulated Depreciation as of December 31,2000............ 106 Schedules other than those listed above are omitted because they are not applicable or the information required is included in the consolidated financial statements or the notes thereto. The following exhibits listed on the Exhibit Index are filed with this Annual Report on Form 10-K. EXHIBIT NO. 12 Consolidated Ratios of Earnings to Fixed Charges and Combined Fixed Charges and Preferred Share Dividend Requirement 21 Subsidiaries of the Registrant 23 Consent of Independent Auditors (b) Reports on Form 8-K and Form 8-K/A During the last quarter of the period covered by this Annual Report on Form 10-K the reports on Form 8-K and Form 8-K/A described below were filed. PERIOD COVERED: (DATE OF EARLIEST EVENT REPORTED) ITEMS REPORTED DATE FILED - ----------------- -------------- ---------- December 8, 2000 Issuance of Series D-8 Preferred Units of Vornado Realty L.P. December 28, 2000 -103-
104 SIGNATURES Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. VORNADO REALTY TRUST By: /s/ Joseph Macnow ------------------------------------- Joseph Macnow, Executive Vice President- Finance and Administration and Chief Financial Officer Date: March 1, 2001 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated: SIGNATURE TITLE DATE --------- ----- ---- By: /s/ Steven Roth Chairman of the Board of March 1, 2001 ------------------------------------------ Trustees (Principal Executive (Steven Roth) Officer) By: /s/ Michael D. Fascitelli President and Trustee March 1, 2001 ------------------------------------------ (Michael D. Fascitelli) By: /s/ Joseph Macnow Executive Vice President- March 1, 2001 ------------------------------------------ Finance and Administration (Joseph Macnow) and Chief Financial Officer By: /s/ David Mandelbaum Trustee March 1, 2001 ------------------------------------------ (David Mandelbaum) By: /s/ Stanley Simon Trustee March 1, 2001 ------------------------------------------ (Stanley Simon) By: /s/ Ronald G. Targan Trustee March 1, 2001 ------------------------------------------ (Ronald G. Targan) By: /s/ Richard R. West Trustee March 1, 2001 ------------------------------------------ (Richard R. West) By: /s/ Russell B. Wight, Jr. Trustee March 1, 2001 ------------------------------------------ (Russell B. Wight, Jr.) -104-
105 VORNADO REALTY TRUST AND SUBSIDIARIES SCHEDULE II VALUATION AND QUALIFYING ACCOUNTS COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E - ------------------------------------ -------------- ------------------ --------------------------------- --------- BALANCE ADDITIONS DEDUCTIONS BALANCE AT BEGINNING CHARGED AGAINST --------------------------------- AT END OF YEAR OPERATIONS DESCRIPTION AMOUNT OF YEAR -------------- ------------------ --------------------- ------ --------- (AMOUNTS IN THOUSANDS) DESCRIPTION YEAR ENDED DECEMBER 31, 2000: Deducted from accounts receivable, Uncollectible accounts allowance for doubtful accounts..... $7,292 $2,957 written-off $ 906 $ 9,343 ====== ====== ====== ======== YEAR ENDED DECEMBER 31, 1999: Deducted from accounts receivable Uncollectible accounts allowance for doubtful accounts..... $3,044 $5,131 written-off $ 883 $ 7,292 ====== ====== ====== ======== YEAR ENDED DECEMBER 31, 1998: Deducted from accounts receivable, Uncollectible accounts allowance for doubtful accounts..... $ 658 $2,547 written-off $ 161 $ 3,044 ====== ====== ====== ======== -105-
106 VORNADO REALTY TRUST AND SUBSIDIARIES SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION DECEMBER 31, 2000 (AMOUNTS IN THOUSANDS) COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E - --------------------------------------------------------------------------------------------------------------------------------- GROSS AMOUNT AT WHICH INITIAL COST TO COMPANY(1) COSTS CARRIED AT CLOSE OF PERIOD -------------------------- CAPITALIZED ------------------------------------ SUBSEQUENT BUILDINGS BUILDINGS AND TO AND DESCRIPTION ENCUMBRANCES LAND IMPROVEMENTS ACQUISITION LAND IMPROVEMENTS TOTAL(2) - ----------- ------------ ---- ------------ ----------- ------- ------------ ---------- OFFICE BUILDINGS NEW YORK MANHATTAN One Penn Plaza $ 275,000 $ -- $ 412,169 $ 55,780 $ -- $ 467,949 $ 467,949 Two Penn Plaza 160,518 53,615 164,903 48,009 52,689 213,838 266,527 909 Third Avenue 107,879 -- 120,723 9,118 -- 129,841 129,841 770 Broadway 94,072 52,898 95,686 68,340 52,898 164,026 216,924 Eleven Penn Plaza 52,289 40,333 85,259 8,387 40,333 93,646 133,979 Two Park Avenue 90,000 43,609 69,715 3,694 43,609 73,409 117,018 90 Park Avenue -- 8,000 175,890 13,316 8,000 189,206 197,206 888 Seventh Avenue 55,000 -- 117,269 18,364 -- 135,633 135,633 330 West 34th Street -- -- 8,599 3,985 -- 12,584 12,584 1740 Broadway, -- 26,971 102,890 6,899 26,971 109,789 136,760 150 East 58th Street -- 39,303 80,216 6,337 39,303 86,553 125,856 866 United Nations Plaza 33,000 32,196 37,534 6,187 32,196 43,721 75,917 595 Madison (Fuller 79,427 62,731 62,888 873 62,731 63,761 126,492 Building) 640 Fifth Avenue -- 38,224 25,992 29,921 38,224 55,913 94,137 40 Fulton Street -- 15,732 26,388 2,341 15,732 28,729 44,461 689 Fifth Avenue -- 19,721 13,446 1,011 19,721 14,457 34,178 20 Broad Street -- -- 28,760 2,010 -- 30,770 30,770 7 West 34th Street -- 34,595 93,703 -- 34,595 93,703 128,298 WESTCHESTER 550/600 Mamaroneck Avenue -- -- 21,770 985 -- 22,755 22,755 ---------- --------- --------- --------- -------- ---------- --------- Total New York 947,185 467,928 1,743,800 285,557 467,002 2,030,283 2,497,285 ---------- --------- --------- --------- -------- ---------- --------- NEW JERSEY PARAMUS -- -- 8,345 9,174 -- 17,519 17,519 ---------- --------- --------- --------- -------- ---------- --------- Total New Jersey -- -- 8,345 9,174 -- 17,519 17,519 ---------- --------- --------- --------- -------- ---------- --------- TOTAL OFFICE BUILDINGS 947,185 467,928 1,752,145 294,731 467,002 2,047,802 2,514,804 ---------- --------- --------- --------- -------- ---------- --------- SHOPPING CENTERS NEW JERSEY Bordentown 8,236* 498 3,176 1,096 713 4,057 4,770 Bricktown 16,645* 929 2,175 9,181 929 11,356 12,285 Cherry Hill 15,308* 915 3,926 3,296 915 7,222 8,137 COLUMN F COLUMN G COLUMN H COLUMN I ------------------------------------------------------- LIFE ON WHICH DEPRECIATION ACCUMULATED IN LATEST DEPRECIATION INCOME AND DATE OF DATE STATEMENT AMORTIZATION CONSTRUCTION(3) ACQUIRED IS COMPUTE ------------ --------------- -------- ---------- OFFICE BUILDINGS NEW YORK MANHATTAN One Penn Plaza $32,765 1972 1998 39 Years Two Penn Plaza 21,509 1968 1997 39 Years 909 Third Avenue 4,951 1969 1999 39 Years 770 Broadway 6,777 1907 1998 39 Years Eleven Penn Plaza 9,184 1923 1997 39 Years Two Park Avenue 8,167 1928 1998 39 Years 90 Park Avenue 15,744 1964 1997 39 Years 888 Seventh Avenue 6,163 1980 1999 39 Years 330 West 34th Street 476 1925 1998 39 Years 1740 Broadway, 10,780 1950 1997 39 Years 150 East 58th Street 5,923 1969 1998 39 Years 866 United Nations Plaza 4,508 1966 1997 39 Years 595 Madison (Fuller 2,095 1968 1999 39 Years Building) 640 Fifth Avenue 3,844 1950 1997 39 Years 40 Fulton Street 2,100 1987 1998 39 Years 689 Fifth Avenue 819 1925 1998 39 Years 20 Broad Street 1,868 1956 1998 39 Years 7 West 34th Street 389 2000 40 Years WESTCHESTER 550/600 Mamaroneck Avenue 1,340 1971/1969 1998 39 Years ------- Total New York 139,402 ------- NEW JERSEY PARAMUS 3,827 1967 1987 26 - 40 Years Total New Jersey ------- 3,827 ------- TOTAL OFFICE BUILDINGS 143,229 ------- SHOPPING CENTERS NEW JERSEY Bordentown 3,822 1958 1958 7 - 40 Years Bricktown 5,396 1968 1968 22 - 40 Years Cherry Hill 5,664 1964 1964 12 - 40 Years -106-
107 VORNADO REALTY TRUST AND SUBSIDIARIES SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION DECEMBER 31, 2000 (AMOUNTS IN THOUSANDS) COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E - ---------------------------------------------------------------------------------------------------------------------------------- GROSS AMOUNT AT WHICH INITIAL COST TO COMPANY(1) COSTS CARRIED AT CLOSE OF PERIOD -------------------------- CAPITALIZED ------------------------------------- SUBSEQUENT BUILDINGS BUILDINGS AND TO AND DESCRIPTION ENCUMBRANCES LAND IMPROVEMENTS ACQUISITION LAND IMPROVEMENTS TOTAL(2) ----------- ------------ ----- -------------- ----------- ---- ------------ ----------- Delran 6,561 * 756 3,184 2,626 756 5,810 6,566 Dover 7,502 * 224 2,330 2,437 204 4,787 4,991 East Brunswick 23,242 * 319 3,236 6,506 319 9,742 10,061 East Hanover I 27,864 * 376 3,063 3,645 476 6,608 7,084 East Hanover II -- 1,756 8,706 -- 1,756 8,706 10,462 Hackensack 25,534 * 536 3,293 7,261 536 10,554 11,090 Jersey City 19,548 * 652 2,962 1,796 652 4,758 5,410 Kearny (4) 3,816 * 279 4,429 (1,208) 290 3,210 3,500 Lawnside 10,817 * 851 2,222 1,351 851 3,573 4,424 Lodi 9,586 * 245 9,339 117 245 9,456 9,701 Manalapan 12,793 * 725 2,447 4,972 725 7,419 8,144 Marlton 12,439 * 1,514 4,671 566 1,611 5,140 6,751 Middletown 16,792 * 283 1,508 3,939 283 5,447 5,730 Morris Plains 12,292 * 1,254 3,140 3,166 1,104 6,456 7,560 North Bergen (4) 4,047 * 510 3,390 (956) 2,308 636 2,944 North Plainfield 11,112 * 500 13,340 394 500 13,734 14,234 Totowa 30,155 * 1,097 5,359 10,941 1,163 16,234 17,397 Turnersville 4,172 * 900 2,132 597 900 2,729 3,629 Union 34,245 * 1,014 4,527 2,947 1,014 7,474 8,488 Vineland -- 290 1,594 1,253 290 2,847 3,137 Watchung (4) 13,817 * 451 2,347 6,857 4,178 5,477 9,655 Woodbridge 22,572 * 190 3,047 709 220 3,726 3,946 ------- ------- ------ ------ ------ ------- ------- Total New Jersey 349,095 17,064 99,543 73,489 22,938 167,158 190,096 ------- ------- ------ ------ ------ ------- ------- NEW YORK 14th Street and Union Square, Manhattan -- 12,566 4,044 15,146 24,079 7,677 31,756 Albany (Menands) 6,348 * 460 1,677 2,649 460 4,326 4,786 Buffalo (Amherst) 7,153 * 402 2,019 2,162 636 3,947 4,583 Freeport 15,110 * 1,231 3,273 2,848 1,231 6,121 7,352 New Hyde Park 7,626 * -- -- 4 -- 4 4 North Syracuse -- -- -- 23 -- 23 23 Rochester (Henrietta) -- -- 2,124 1,151 -- 3,275 3,275 COLUMN F COLUMN G COLUMN H COLUMN I -------------------------------------------------------- LIFE ON WHICH DEPRECIATION ACCUMULATED IN LATEST DEPRECIATION INCOME AND DATE OF DATE STATEMENT DESCRIPTION AMORTIZATION CONSTRUCTION(3) ACQUIRED IS COMPUTE ----------- ------------- --------------- -------- -------------- Delran 3,228 1972 1972 16 - 40 Years Dover 3,174 1964 1964 16 - 40 Years East Brunswick 6,018 1957 1957 8 - 33 Years East Hanover I 4,998 1962 1962 9 - 40 Years East Hanover II 490 1979 1998 40 Years Hackensack 5,341 1963 1963 15 - 40 Years Jersey City 3,928 1965 1965 11 - 40 Years Kearny (4) 1,275 1938 1959 23 - 29 Years Lawnside 2,363 1969 1969 17 - 40 Years Lodi 293 1999 1975 40 Years Manalapan 4,297 1971 1971 14 - 40 Years Marlton 3,910 1973 1973 16 - 40 Years Middletown 3,049 1963 1963 19 - 40 Years Morris Plains 5,212 1961 1985 7 - 19 Years North Bergen (4) 142 1993 1959 30 Years North Plainfield 5,308 1955 1989 21 - 30 Years Totowa 6,557 1957/1999 1957 19 - 40 Years Turnersville 1,740 1974 1974 23 - 40 Years Union 5,436 1962 1962 6 - 40 Years Vineland 1,973 1966 1966 18 - 40 Years Watchung (4) 1,112 1994 1959 27 - 30 Years Woodbridge 3,097 1959 1959 11 - 40 Years ------ Total New Jersey 87,823 ------ NEW YORK 14th Street and Union Square, Manhattan 1,188 1965 1993 36 - 39 Years Albany (Menands) 2,219 1965 1965 22 - 40 Years Buffalo (Amherst) 2,810 1968 1968 13 - 40 Years Freeport 3,151 1981 1981 15 - 40 Years New Hyde Park 123 1970 1976 6 - 10 Years North Syracuse 23 1967 1976 11 - 12 Years Rochester (Henrietta) 2,239 1971 1971 15 - 40 Years -107-
108 VORNADO REALTY TRUST AND SUBSIDIARIES SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION DECEMBER 31, 2000 (AMOUNTS IN THOUSANDS) COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E - ---------------------------------------------------------------------------------------------------------------------------------- GROSS AMOUNT AT WHICH INITIAL COST TO COMPANY(1) COSTS CARRIED AT CLOSE OF PERIOD -------------------------- CAPITALIZED ------------------------------------ SUBSEQUENT BUILDINGS BUILDINGS AND TO AND DESCRIPTION ENCUMBRANCES LAND IMPROVEMENTS ACQUISITION LAND IMPROVEMENTS TOTAL(2) ----------- ------------ ------ ------------- ----------- ---- ------------ --------- Rochester -- 443 2,870 958 443 3,828 4,271 Valley Stream (Green Acres) 161,900 140,069 99,586 4,751 139,910 104,496 244,406 ------- ------- ------- ------ ------- ------- ------- Total New York 198,137 155,171 115,593 29,692 166,759 133,697 300,456 ------- ------- ------- ------ ------- ------- ------- PENNSYLVANIA Allentown 23,728 * 70 3,446 10,197 334 13,379 13,713 Bensalem (4) 6,557 * 1,198 3,717 1,177 2,727 3,365 6,092 Bethlehem 4,150 * 278 1,806 3,904 278 5,710 5,988 Broomall 9,979 * 734 1,675 1,455 850 3,014 3,864 Glenolden 7,484 * 850 1,295 728 850 2,023 2,873 Lancaster -- 606 2,312 2,732 606 5,044 5,650 Levittown -- 193 1,231 35 183 1,276 1,459 10th and Market Streets, Philadelphia 9,140 * 933 3,230 5,729 933 8,959 9,892 Upper Moreland 7,095 * 683 2,497 564 683 3,061 3,744 York 4,196 * 421 1,700 1,173 409 2,885 3,294 ------- ------- ------- ------ ------- ------- ------- Total Pennsylvania 72,329 5,966 22,909 27,694 7,853 48,716 56,569 ------- ------- ------- ------ ------- ------- ------- MARYLAND Baltimore (Belair Rd.) -- 785 1,333 3,419 785 4,752 5,537 Baltimore (Towson) 11,628 * 581 2,756 678 581 3,434 4,015 Baltimore (Dundalk) 6,301 * 667 1,710 3,222 667 4,932 5,599 Glen Burnie 5,984 * 462 1,741 1,489 462 3,230 3,692 Hagerstown 3,353 * 168 1,453 984 168 2,437 2,605 ------- ------- ------- ------ ------- ------- ------- Total Maryland 27,266 2,663 8,993 9,792 2,663 18,785 21,448 ------- ------- ------- ------ ------- ------- ------- CONNECTICUT Newington 6,683 * 502 1,581 2,003 1,652 2,434 4,086 Waterbury -- -- 2,103 1,435 667 2,871 3,538 ------- ------- ------- ------ ------- ------- ------- Total Connecticut 6,683 502 3,684 3,438 2,319 5,305 7,624 ------- ------- ------- ------ ------- ------- ------- MASSACHUSETTS Chicopee -- 510 2,031 358 510 2,389 2,899 Springfield (4) 3,190 * 505 1,657 808 2,586 384 2,970 ------- ------- ------- ------ ------- ------- ------- Total Massachusetts 3,190 1,015 3,688 1,166 3,096 2,773 5,869 ------- ------- ------- ------ ------- ------- ------- COLUMN F COLUMN G COLUMN H COLUMN I ---------------------------------------------------------- LIFE ON WHICH DEPRECIATION ACCUMULATED IN LATEST DEPRECIATION INCOME AND DATE OF DATE STATEMENT AMORTIZATION CONSTRUCTION(3) ACQUIRED IS COMPUTE ------------ --------------- --------- ---------------- Rochester 2,616 1966 1966 10 - 40 Years Valley Stream (Green Acres) 7,915 1956 1997 39 - 40 Years ------- Total New York 22,284 ------- PENNSYLVANIA Allentown 5,876 1957 1957 20 - 42 Years Bensalem (4) 1,291 1972/1999 1972 40 Years Bethlehem 3,888 1966 1966 9 - 40 Years Broomall 2,206 1966 1966 9 - 40 Years Glenolden 1,166 1975 1975 18 - 40 Years Lancaster 3,419 1966 1966 12 - 40 Years Levittown 1,212 1964 1964 7 - 40 Years 10th and Market Streets, Philadelphia 1,502 1977 1994 27 - 30 Years Upper Moreland 2,050 1974 1974 15 - 40 Years York 1,878 1970 1970 15 - 40 Years ------- Total Pennsylvania 24,488 ------- MARYLAND Baltimore (Belair Rd.) 3,227 1962 1962 10 - 33 Years Baltimore (Towson) 2,362 1968 1968 13 - 40 Years Baltimore (Dundalk) 3,157 1966 1966 12 - 40 Years Glen Burnie 1,930 1958 1958 16 - 33 Years Hagerstown 1,533 1966 1966 9 - 40 Years ------- Total Maryland 12,209 ------- CONNECTICUT Newington 1,687 1965 1965 9 - 40 Years Waterbury 1,954 1969 1969 21 - 40 Years ------- Total Connecticut 3,641 ------- MASSACHUSETTS Chicopee 1,900 1969 1969 13 - 40 Years Springfield (4) 99 1993 1966 28 - 30 Years ------- Total Massachusetts 1,999 ------- -108-
109 COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E - ---------------------------------------------------------------------------------------------------------------------------------- GROSS AMOUNT AT WHICH INITIAL COST TO COMPANY(1) COSTS CARRIED AT CLOSE OF PERIOD -------------------------- CAPITALIZED ------------------------------------- SUBSEQUENT BUILDINGS BUILDINGS AND TO AND DESCRIPTION ENCUMBRANCES LAND IMPROVEMENTS ACQUISITION LAND IMPROVEMENTS TOTAL(2) ----------- ------------ --------- ------------- ----------- ------- ------------ -------- PUERTO RICO (SAN JUAN) Montehiedra 61,022 9,182 66,701 314 9,182 67,015 76,197 ------- ------- ------- ------- ------- ------- ------- TOTAL SHOPPING CENTERS 717,722 191,563 321,111 145,585 214,810 443,449 658,259 ------- ------- ------- ------- ------- ------- ------- MERCHANDISE MART PROPERTIES ILLINOIS Merchandise Mart, Chicago 250,000 64,528 319,146 20,531 64,528 339,677 404,205 350 North Orleans Chicago 70,000 14,238 67,008 21,817 14,238 88,825 103,063 33 North Dearborn Chicago 19,000 6,624 30,680 -- 6,624 30,680 37,304 WASHINGTON, D.C. Washington Office Center 48,102 10,719 69,658 342 10,719 70,000 80,719 Washington Design Center 23,632 12,274 40,662 5,780 12,274 46,442 58,716 Other -- 9,175 6,273 29 9,175 6,302 15,477 NORTH CAROLINA Market Square Complex, High Point 63,424 11,969 85,478 39,029 14,010 122,466 136,476 National Furniture Mart, High Point 13,568 1,069 16,761 189 1,069 16,950 18,019 CALIFORNIA Gift and Furniture Mart, Los Angeles 10,840 10,141 43,422 997 10,141 44,419 54,560 ------- ------- ------- ------- ------- ------- ------- TOTAL MERCHANDISE MART 498,566 140,737 679,088 88,714 142,778 765,761 908,539 ------- ------- ------- ------- ------- ------- ------- COLUMN F COLUMN G COLUMN H COLUMN I ---------------------------- --------------------------- LIFE ON WHICH DEPRECIATION ACCUMULATED IN LATEST DEPRECIATION INCOME AND DATE OF DATE STATEMENT AMORTIZATION CONSTRUCTION(3) ACQUIRED IS COMPUTE ------------ ------------- ----------- -------------- PUERTO RICO (SAN JUAN) Montehiedra 6,292 1996 1997 40 Years ------- TOTAL SHOPPING CENTERS 158,736 ------- MERCHANDISE MART PROPERTIES ILLINOIS Merchandise Mart, Chicago 24,033 1930 1998 40 Years 350 North Orleans Chicago 7,474 1977 1998 40 Years 33 North Dearborn Chicago 255 2000 40 Years WASHINGTON, D.C. Washington Office Center 4,877 1990 1998 40 Years Washington Design Center 3,477 1919 1998 40 Years Other 436 1998 40 Years NORTH CAROLINA Market Square Complex, High Point 5,234 1902-1989 1998 40 Years National Furniture Mart, High Point 911 1964 1998 40 Years CALIFORNIA L.A. Mart, Los Angeles 271 2000 40 Years ------- TOTAL MERCHANDISE MART 46,968 ------- -109-
110 VORNADO REALTY TRUST AND SUBSIDIARIES SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION DECEMBER 31, 2000 (AMOUNTS IN THOUSANDS) COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E - ----------------------------------------------------------------------------------------------------------------------------------- GROSS AMOUNT AT WHICH COSTS CARRIED AT CLOSE OF PERIOD INITIAL COST TO COMPANY(1) CAPITALIZED ------------------------------------ -------------------------- SUBSEQUENT BUILDINGS BUILDINGS AND TO AND DESCRIPTION ENCUMBRANCES LAND IMPOVEMENTS AQUISITION LAND IMPROVEMENTS TOTAL(2) ----------- ------------ -------- ------------- ----------- -------- ----------- ---------- WAREHOUSE/INDUSTRIAL NEW JERSEY East Brunswick -- -- 4,772 2,869 -- 7,641 7,641 East Hanover -- 576 7,752 7,248 693 14,883 15,576 Edison -- 705 2,839 1,435 704 4,275 4,979 Garfield -- 96 8,068 4,918 96 12,986 13,082 ---------- -------- ---------- -------- -------- ---------- ---------- TOTAL WAREHOUSE/INDUSTRIAL -- 1,377 23,431 16,470 1,493 39,785 41,278 ---------- -------- ---------- -------- -------- ---------- ---------- OTHER PROPERTIES NEW JERSEY Montclair 1,964* 66 470 330 66 800 866 ---------- -------- ---------- -------- -------- ---------- ---------- Total New Jersey 1,964 66 470 330 66 800 866 ---------- -------- ---------- -------- -------- ---------- ---------- NEW YORK Hotel Pennsylvania (Commercial) 47,009 12,542 51,047 -- 12,542 51,047 63,589 1135 Third Avenue -- 7,844 7,844 -- 7,844 7,844 15,688 Riese -- 19,135 7,294 1,391 19,725 8,095 27,820 ---------- -------- ---------- -------- -------- ---------- ---------- Total New York 47,009 39,521 66,185 1,391 40,111 66,986 107,097 ---------- -------- ---------- -------- -------- ---------- ---------- COLUMN A COLUMN F COLUMN G COLUMN H COLUMN I - ------------------------------------------------------------------------------------------------ LIFE ON WHICH DEPRECIATION ACCUMULATED IN LATEST DEPRECIATION INCOME AND DATE OF DATE STATEMENT DESCRIPTION AMORTIZATION CONSTRUCTION(3) AQUIRED IS COMPUTE ----------- ------------ --------------- ------- ------------- WAREHOUSE/INDUSTRIAL NEW JERSEY East Brunswick 4,608 1972 1972 18-40 Years East Hanover 10,803 1963-1967 1963 7-40 Years Edison 2,508 1954 1982 12-25 Years Garfield 9,988 1942 1959 11-33 Years -------- TOTAL WAREHOUSE/INDUSTRIAL 27,907 -------- OTHER PROPERTIES NEW JERSEY Montclair 554 1972 1972 4-15 Years -------- Total New Jersey 554 -------- NEW YORK Hotel Pennsylvania (Commercial) 4,166 1919 1997 40 Years 1135 Third Avenue 588 1997 40 Years Riese 662 1911-1987 1997 39 Years -------- Total New York 5,416 -------- -110-
111 COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E ----------- ---------- ----------------------- -------- ------------------------------------ GROSS AMOUNT AT WHICH COSTS CARRIED AT CLOSE OF PERIOD INITIAL COST TO COMPANY(1) CAPITALIZED ------------------------------------ -------------------------- SUBSEQUENT BUILDINGS BUILDINGS AND TO AND DESCRIPTION ENCUMBRANCES LAND IMPROVEMENTS ACQUISITION LAND IMPROVEMENTS TOTAL(2) ----------- ------------ -------- ------------- ----------- -------- ----------- ---------- FLORIDA Student Housing Joint Venture 19,451 3,722 21,095 473 3,763 21,527 25,290 ---------- -------- ---------- -------- -------- ---------- ---------- Total Florida 19,451 3,722 21,095 473 3,763 21,527 25,290 ---------- -------- ---------- -------- -------- ---------- ---------- TOTAL OTHER PROPERTIES 68,424 43,309 87,750 2,194 43,940 89,313 133,253 ---------- -------- ---------- -------- -------- ---------- ---------- LEASEHOLD IMPROVEMENTS, EQUIPMENT AND OTHER 38,709 38,709 38,709 -------- ---------- ---------- TOTAL - DECEMBER 31, 2000 $2,231,897 $844,914 $2,863,525 $586,403 $870,023 $3,424,819 $4,294,842 ========== ======== ========== ======== ======== ========== ========== COLUMN F COLUMN G COLUMN H COLUMN I -------- --------- -------- ------------- LIFE ON WHICH DEPRECIATION ACCUMULATED IN LATEST DEPRECIATION INCOME AND DATE OF DATE STATEMENT DESCRIPTION AMORTIZATION CONSTRUCTION(3) ACQUIRED IS COMPUTED ----------- ------------ --------------- -------- ------------- FLORIDA Student Housing Joint Venture 494 1996-1997 2000 40 Years -------- Total Florida 494 -------- TOTAL OTHER PROPERTIES 6,464 -------- LEASEHOLD IMPROVEMENTS, EQUIPMENT AND OTHER 10,483 3 - 20 Years -------- TOTAL - DECEMBER 31, 2000 $393,787 ======== * These encumbrances are cross collateralized under a blanket mortgage in the amount of $496,764 at December 31, 2000. Notes: 1) Initial cost is cost as of January 30, 1982 (the date on which Vornado commenced real estate operations) unless acquired subsequent to that date -- see Column H. 2) The net basis of the company's assets and liabilities for tax purposes is approximately $1,033,000 lower than the amount reported for financial statement purposes. 3) Date of original construction ---- many properties have had substantial renovation or additional construction ---- see Column D. 4) Buildings on these properties were demolished. As a result, the cost of the buildings and improvements, net of accumulated depreciation, were transferred to land. In addition, the cost of the land in Kearny is net of a $1,615 insurance recovery. -111-
112 VORNADO REALTY TRUST AND SUBSIDIARIES SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION (AMOUNTS IN THOUSANDS) The following is a reconciliation of real estate assets and accumulated depreciation: YEAR ENDED DECEMBER 31, ---------------------------------------- 2000 1999 1998 ---------- ---------- ---------- Real Estate Balance at beginning of period................ $3,921,507 $3,315,891 $1,564,093 Additions during the period: Land........................................ 57,669 83,153 308,261 Buildings & improvements.................... 357,367 522,463 1,464,595 ---------- ---------- ---------- 4,336,543 3,921,507 3,336,949 Less: Asset sold and written-off 41,701 -- 21,058 ---------- ---------- ---------- Balance at end of period $4,294,842 $3,921,507 $3,315,891 ========== ========== ========== ACCUMULATED DEPRECIATION Balance at beginning of period $ 308,542 $ 226,816 $ 173,434 Additions charged to operating expenses....... 91,236 81,726 59,227 ---------- ---------- ---------- 399,778 308,542 232,661 Less: Accumulated depreciation on assets sold and written-off........................ 5,991 -- 5,845 ---------- ---------- ---------- Balance at end of period...................... $ 393,787 $ 308,542 $ 226,816 ========== ========== ========== -112-
113 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 October 14, 1997 - Incorporated by reference to Exhibit 3.2 of Vornado's Registration Statement on Form S-3 (File No. 333-36080), filed on May 2, 2000.................... * 3.3 -- 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.......................................................... * 3.4 -- Articles of Amendment of Declaration of Trust of Vornado, as filed with the State Department of Assessments and Taxation of Maryland on November 24, 1999 - Incorporated by reference to Exhibit 3.4 of Vornado's Registration Statement on Form S-3 (File No. 333-36080), filed on May 2, 2000.................... * 3.5 -- Articles of Amendment of Declaration of Trust of Vornado, as filed with the State Department of Assessments and Taxation of Maryland on April 20, 2000 - Incorporated by reference to Exhibit 3.5 of Vornado's Registration Statement on Form S-3 (File No. 333-36080), filed on May 2, 2000.................... * 3.6 -- 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.... * 3.7 -- 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........................ * 3.8 -- 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.......... * 3.9 -- 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....................................... * 3.10 -- Articles Supplementary Classifying Vornado's 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............................. * - --------------- * Incorporated by reference -113-
114 EXHIBIT NO. ------- 3.11 -- Articles Supplementary Classifying Vornado Realty Trust's Series D-2 Preferred Shares, dated as of May 27, 1999, as filed with the State Department of Assessments and Taxation of Maryland on Incorporated May 27, 1999 - Incorporated by reference to Exhibit 3.1 of Vornado's Current Report on Form by 8-K, dated May 27, 1999 (File No. 001-11954), filed on July 7, 1999....................................................... * 3.12 -- Articles Supplementary Classifying Vornado's Series D-3 Preferred Shares, dated September 3, 1999, as filed with the State Department of Assessments and Taxation of Maryland on September 3, 1999 - Incorporated by reference to Exhibit 3.1 of Vornado's Current Report on Form 8-K, dated September 3, 1999 (File No. 001-11954), filed on October 25, 1999.......... * 3.13 -- Articles Supplementary Classifying Vornado's Series D-4 Preferred Shares, dated September 3, 1999, as filed with the State Department of Assessments and Taxation of Maryland on September 3, 1999 - Incorporated by reference to Exhibit 3.2 of Vornado's Current Report on Form 8-K, dated September 3, 1999 (File No. 001-11954), filed on October 25, 1999.......... * 3.14 -- Articles Supplementary Classifying Vornado's Series D-5 Preferred Shares - Incorporated by reference to Exhibit 3.1 of Vornado's Current Report on Form 8-K, dated November 24, 1999 (File No. 001-11954), filed on December 23, 1999.............. * 3.15 -- Articles Supplementary to Declaration of Trust of Vornado Realty Trust with respect to the Series D-6 Preferred Shares, dated May 1, 2000, as filed with the State Department of Assessments and Taxation of Maryland on May 1, 2000 - Incorporated by reference to Exhibit 3.1 of Vornado's Current Report on Form 8-K, dated May 1, 2000 (File No. 001-11954), filed May 19, 2000............................................ * 3.16 -- Articles Supplementary to Declaration of Trust of Vornado Realty Trust with respect to the Series D-7 Preferred Shares, dated May 25, 2000, as filed with the State Department of Assessments and Taxation of Maryland on June 1, 2000 - Incorporated by reference to Exhibit 3.1 of Vornado's Current Report on Form 8-K, dated May 25, 2000 (File No. 001-11954), filed on June 16, 2000........................................ * 3.17 -- Articles Supplementary to Declaration of Trust of Vornado Realty Trust with respect to the Series D-8 Preferred Shares - Incorporated by reference to Exhibit 3.1 of Vornado's Current Report on Form 8-K, dated December 8, 2000 (File No. 1-11954), filed on December 28, 2000.................................... * 3.18 -- Amended and Restated Bylaws of Vornado, as amended on March 2, 2000 - Incorporated by reference to Exhibit 3.12 of Vornado's Annual Report on Form 10-K for the period ended December 31, 1999 (File No. 1-11954), filed on March 9, 2000............... * 3.19 -- 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")........................... * 3.20 -- 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.......................................................... * 3.21 -- 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........................... * - --------------- * Incorporated by reference -114-
115 EXHIBIT NO. ------- 3.22 -- 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 ................................................................................ * 3.23 -- 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 ....................................................................... * 3.24 -- 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 ................................................................................. * 3.25 -- 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 ... * 3.26 -- 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 ........................................................................................ * 3.27 -- 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 .......................................................................................... * 3.28 -- 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 ....... * 3.29 -- Eighth 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 3.4 of Vornado's Current Report on Form 8-K, dated May 27, 1999 (File No. 001-11954), filed on July 7, 1999 ....... * 3.30 -- Ninth 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 September 3, 1999 (File No. 001-11954), filed on October 25, 1999 ............................................................................................. * 3.31 -- Tenth 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 3.4 of Vornado's Current Report on Form 8-K, dated September 3, 1999 (File No. 001-11954), filed on October 25, 1999 ............................................................................................. * 3.32 -- Eleventh Amendment to Second Amended and Restated Agreement of Limited Partnership of Vornado Realty L.P., dated as of November 24, 1999 - Incorporated by reference to Exhibit 3.2 of Vornado's Current Report on Form 8-K, dated November 24, 1999 (File No. 001-11954), filed on December 23, 1999 ................................................................................ * - ------------- * Incorporated by reference -115-
116 EXHIBIT NO. ------- 3.33 -- Twelfth Amendment to Second Amended and Restated Agreement of Limited Partnership of Vornado Realty L.P., dated as of May 1, 2000 - Incorporated by reference to Exhibit 3.2 of Vornado's Current Report on Form 8-K, dated May 1, 2000 (File No. 001-11954), filed on May 19, 2000....... * 3.34 -- Thirteenth Amendment to Second Amended and Restated Agreement of Limited Partnership of Vornado Realty L.P., dated as of May 25, 2000 - Incorporated by reference to Exhibit 3.2 of Vornado's Current Report on Form 8-K, dated May 25, 2000 (File No. 001-11954), filed on June 16, 2000..... * 3.35 -- Fourteenth Amendment to Second Amended and Restated Agreement of Limited Partnership of Vornado Realty L.P., dated as of December 8, 2000 - Incorporated by reference to Exhibit 3.2 of Vornado's Current Report on Form 8-K, dated December 8, 2000 (File No. 001-11954), filed on December 28, 2000............................................................................... * 4.1 -- Instruments defining the rights of security holders (see Exhibits 3.1 through 3.18 of this Annual Report on Form 10-K)..................................................................... 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........................................... * 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 preferences $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 May 19, 1999.................................................................. * 4.7 -- Indenture and Servicing Agreement, dated as of March 1, 2000, among Vornado, Lasalle Bank National Association, ABN Amro Bank N.V. and Midland Loan Services, Inc. - Incorporated by reference to Exhibit 10.48 of Vornado's Annual Report on Form 10-K for the period ended December 31, 1999 (File No. 1-11954), filed on March 9, 2000.................................... * 10.1 -- Vornado Realty Trust's 1993 Omnibus Share Plan, as amended - Incorporated by reference to Exhibit 4.1 of Vornado Realty Trust's registration statement on Form S-8 (File No. 001-11954), filed on July 30, 1996.......................................................................... * 10.2 -- 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.......................................................................... * 10.3 -- 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.................................... * - ------------- * Incorporated by reference -116-
117 EXHIBIT NO. ------- 10.4** -- 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 ........................ * 10.5** -- 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................. * 10.6** -- 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 October 26, 1985 (File No. 001-11954), filed December 9, 1985................................................................................. * 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 May 2, 1987 (File No. 001-11954), filed June 9, 1987.......................................................................................... * 10.8** -- 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................................................................................. * 10.9** -- 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................... * 10.10** -- 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................... * 10.11** -- 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....................... * 10.12** -- 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.................................... * 10.13 -- 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.................................. * 10.14 -- 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........................................... * 10.15 -- 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........................................... * - ------------- * Incorporated by reference ** Management contract or compensatory plan -117-
118 EXHIBIT NO. ------- 10.16 -- 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 ................................... * 10.17 -- 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 ............................................................... * 10.18 -- 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 ............................................................... * 10.19 -- 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 .................................. * 10.20 -- 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 ....................................................................................... * 10.21 -- 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 ............................................................... * 10.22 -- 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 .................... * 10.23 -- 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 ........................................................ * 10.24 -- 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 .............................................................................. * 10.25 -- 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 ........................................................................ * 10.26 -- 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 ...................... * 10.27 -- 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 ........................................................... * 10.28 -- 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 ....... * - ------------- * Incorporated by reference -118-
119 EXHIBIT NO. ------- 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 -- 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 ............... * 10.31 -- 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 ............... * 10.32 -- 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 ......................... * 10.33 -- 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 ............................................................................... * 10.34 -- 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 .................... * 10.35 -- 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 ................................................................................. * 10.36 -- 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 .......... * 10.37 -- 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 ...................................................... * 10.38 -- 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 .................... * 10.39 -- Registration Rights Agreement, dated as of August 5, 1998 between Vornado and the Unit Holders named therein - Incorporated by reference to Exhibit 10.1 of Vornado's Registration Statement on Form S-3 (File No. 333-89667), filed on October 25, 1999 ...................................... * 10.40 -- Registration Rights Agreement, dated as of July 23, 1998 between Vornado and the Unit Holders named therein - Incorporated by reference to Exhibit 10.2 of Vornado's Registration Statement on Form S-3 (File No. 333-89667), filed on October 25, 1999 ...................................... * - ------------- * Incorporated by reference -119-
120 EXHIBIT NO. ------- 10.41 -- Consolidated and Restated Mortgage, Security Agreement, Assignment of Leases and Rents and Fixture Filing, dated as of March 1, 2000, between Entities named therein (as Mortgagors) and Vornado (as Mortgagee) - Incorporated by reference to Exhibit 10.47 of Vornado's Annual Report on Form 10-K for the period ended December 31, 1999 (File No. 1-11954), filed on March 9, 2000.... * 10.42 -- Employment Agreement, dated January 22, 2000, between Vornado Realty Trust and Melvyn Blum - Incorporated by reference to Exhibit 10.49 of Vornado's Annual Report on Form 10-K for the period ended December 31, 1999 (File No. 1-11954), filed on March 9, 2000......................... * 10.43 -- First Amended and Restated Promissory Note of Steven Roth, dated November 16, 1999 - Incorporated by reference to Exhibit 10.50 of Vornado's Annual Report on Form 10-K for the period ended December 31, 1999 (File No. 1-11954), filed on March 9, 2000......................... * 10.44 -- Letter agreement, dated November 16, 1999, between Steven Roth and Vornado Realty Trust - Incorporated by reference to Exhibit 10.51 of Vornado's Annual Report on Form 10-K for the period ended December 31, 1999 (File No. 1-11954), filed on March 9, 2000......................... * 10.45 -- Promissory Note of Melvyn Blum, dated March 24, 2000 - Incorporated by reference to Vornado's Quarterly Report on Form 10-Q for the quarter ended March 31, 2000 (File No. 001-11954) filed on May 5, 2000.................................................................................... * 10.46 -- Promissory Note of Melvyn Blum, dated April 4, 2000 - Incorporated by reference to Vornado's Quarterly Report on Form 10-Q for the quarter ended March 31, 2000 (File No. 001-11954) filed on May 5, 2000.................................................................................... * 10.47 -- Revolving Credit Agreement dated as of March 21, 2000 among Vornado Realty L.P., as borrower, Vornado Realty Trust, as general partner, and UBS AG, as Bank - Incorporated by reference to Vornado's Quarterly Report on Form 10-Q for the quarter ended March 31, 2000 (File No. 001-11954) filed on May 5, 2000................................................................... * 12 -- Consolidated Ratios of Earnings to Fixed Charges and Combined Fixed Charges and Preferred Share Dividend Requirements 13 -- Not applicable 14 -- Not applicable 15 -- Not applicable 19 -- Not applicable 21 -- Subsidiaries of the Registrant 22 -- Not applicable 23 -- Consent of independent auditors 25 -- Not applicable 29 -- Not applicable - ------------- * Incorporated by reference -120-
1 EXHIBIT 12 VORNADO REALTY TRUST CONSOLIDATED RATIOS OF EARNINGS TO FIXED CHARGES AND COMBINED FIXED CHARGES AND PREFERRED SHARE DIVIDEND REQUIREMENTS DECEMBER 31, ------------------------------------------------------------------ 2000 1999 1998* 1997* 1996* ---------- ---------- ---------- ---------- ---------- EARNINGS: Net income applicable to common shareholders $ 195,301 $ 169,081 $ 131,164 $ 45,474 $ 61,364 Minority interest not reflected in fixed charges below 16,668 14,428 3,732 -- -- Equity in income from certain partially owned entities in excess of distributions (19,757) (16,391) (983) (1,325) (1,108) Fixed Charges 312,021 227,459 152,217 66,397 17,214 ---------- ---------- ---------- ---------- ---------- Earnings $ 504,233 $ 394,577 $ 286,130 $ 110,546 $ 77,470 ========== ========== ========== ========== ========== FIXED CHARGES: Interest and debt expense $ 170,273 $ 141,683 $ 114,686 $ 42,888 $ 16,726 Capitalized interest 12,269 7,012 1,410 -- -- Preferred stock dividends 38,690 33,438 21,690 15,549 -- Preferred unit distributions reflected in minority interest 85,706 40,570 12,452 7,293 -- 1/3 of rent expense--interest factor 5,083 4,756 1,979 667 488 ---------- ---------- ---------- ---------- ---------- Total Fixed Charges $ 312,021 $ 227,459 $ 152,217 $ 66,397 $ 17,214 ========== ========== ========== ========== ========== Ratio of Earnings to Fixed Charges 1.62 1.73 1.88 1.66 4.50 ========== ========== ========== ========== ========== Rent Expense $ 15,248 $ 14,268 $ 5,937 $ 2,001 $ 1,465 ========== ========== ========== ========== ========== * Restated to reflect equity in income from certain partially owned entities in excess of distributions and preferred unit distributions.
1 EXHIBIT 21 VORNADO REALTY TRUST SUBSIDIARIES OF THE REGISTRANT STATE OF NAME OF SUBSIDIARY ORGANIZATION - ------------------ ------------ 14 West 64th Street Corporation New York 150 East 58th Street L.L.C. New York 1740 Broadway Associates, L.P. Delaware 20 Broad Company L.L.C. New York 20 Broad Lender L.L.C. New York 201 East 66th Street Corp. New York 201 East 66th Street L.L.C. New York 314 West 40th Street L.L.C. New York 330 Madison Company L.L.C. New York 34th & 7th Ave. L.L.C. New York 350 North Orleans L.L.C. Illinois 40 East 14 Realty Associates L.L.C. New York 40 Fulton Street L.L.C. New York 401 Commercial L.P. New York 401 Commercial Son, L.L.C. New York 401 General Partner L.L.C. New York 401 Hotel General Partner L.L.C. New York 401 Hotel L.P. New York 527 West Kinzie L.L.C. Illinois 570 Lexington Associates, L.P. New York 570 Lexington Company, L.P. New York 689 Fifth Avenue L.L.C. New York 7 West 34th Street L.L.C. New York 715 Lexington Avenue L.L.C. New York 770 Broadway Company L.L.C. New York 825 Seventh Avenue Holding Corporation New York 825 Seventh Avenue Holding L.L.C. New York 866 U.N. Plaza Associates L.L.C. New York 888 Seventh Avenue L.L.C. New York 909 Third Avenue Assignee L.L.C. New York 909 Third Company L.P. New York 909 Third GP L.L.C. Delaware 909 Third Mortgage Holder L.L.C. Delaware 968 Third L.L.C. New York 969 Third Avenue L.L.C. New York Allentown VF L.L.C. Pennsylvania Allentown VF L.P Pennsylvania AmeriCold Corporation Oregon AmeriCold Real Estate, L.P. Delaware AmeriCold Realty, Inc. Delaware Amherst Holding L.L.C. New York Amherst II VF L.L.C. New York Amherst Industries L.L.C. New York Amherst VF L.L.C. New York Arbor Property L.P. Delaware
2 STATE OF NAME OF SUBSIDIARY ORGANIZATION - ------------------ ------------ Atlanta Parent Inc. Delaware Atlantic City Holding L.L.C. New Jersey B & B Park Avenue, L.P. Delaware BBE GP Corporation Delaware Bensalem Holding Company L.L.C. Pennsylvania Bensalem Holding Company L.P. Pennsylvania Bensalem VF L.L.C. Pennsylvania Bensalem VF L.P. Pennsylvania Bethlehem Holding Company L.L.C. Pennsylvania Bethlehem Holding Company L.P. Pennsylvania Bethlehem Properties Holding Co. L.L.C. Pennsylvania Bethlehem Properties Holding Co. L.P. Pennsylvania Bethlehem VF L.L.C. Pennsylvania Bethlehem VF L.P. Pennsylvania Bordentown Holding L.L.C. New Jersey Bordentown II VF L.L.C. New Jersey Bordentown VF L.L.C. New Jersey Brentwood Development L.L.C. New York Bricktown VF L.L.C. New Jersey Bridgeland Warehouses L.L.C. New Jersey Broomall VF L.L.C. Pennsylvania Broomall VF L.P. Pennsylvania Camden Holding L.L.C. New Jersey Canadian Craft Show LTD. Canada Carmar Freezers Russelville L.L.C. Delaware Carmar Group, Inc. Delaware Charles E. Smith Commercial Realty L.P. Delaware Cherry Hill VF L.L.C. New Jersey Chicopee Holding L.L.C. Massachusetts Clementon Holding L.L.C. New Jersey Conrans VF L.L.C. New Jersey Cross Avenue Broadway Corporation New York Cumberland Holding L.L.C. New Jersey Darby Development Corp. Florida Delran Holding L.L.C. New Jersey Delran VF L.L.C. New Jersey Design Center Owner (D.C.) L.L.C. Delaware Dover Holding L.L.C. New Jersey Dover VF L.L.C. New Jersey DSAC L.L.C. Texas Dundalk VF L.L.C. Maryland Durham Leasing L.L.C. New Jersey East Brunswick VF L.L.C. New Jersey Eleven Penn Plaza L.L.C. New York Evesham Holding L.L.C. New Jersey Freeport VF L.L.C. New York Freezer Services Kentucky Inc. Delaware Fuller Madison L.L.C. New York Gallery Market Holding Company L.L.C. Pennsylvania Gallery Market Holding Company L.P Pennsylvania Gallery Market Properties Holding Co. L.L.C. Pennsylvania Gallery Market Properties Holding Co. L.P. Pennsylvania Glen Bernie VF L.L.C. Maryland Glenolden VF L.L.C. Pennsylvania Glenolden VF L.P. Pennsylvania Green Acres Mall L.L.C. Delaware
3 STATE OF NAME OF SUBSIDIARY ORGANIZATION - ------------------ ------------ Greenwich Holding Corporation New York Guillford Associates L.L.C. Delaware Hackbridge L.L.C. New Jersey Hackensack VF L.L.C. New Jersey Hagerstown VF L.L.C. Maryland Hanover Conran's Plaza L.L.C. New Jersey Hanover Holding L.L.C. New Jersey Hanover Industries L.L.C. New Jersey Hanover Leasing L.L.C. New Jersey Hanover Public Warehousing L.L.C. New Jersey Hanover VF L.L.C. New Jersey Henrietta Holding L.L.C. New York HHC L.L.C. Maryland Interior Design Show Inc. Canada Jersey City Leasing L.L.C. New Jersey Jersey City VF L.L.C. New Jersey Kearny Holding L.L.C. New Jersey Kearny Holding VF L.L.C. New Jersey Kearny Leasing L.L.C. New Jersey Kearny Leasing VF L.L.C. New Jersey L.A. Mart Properties L.L.C. Delaware Lancaster Leasing Company L.L.C. Pennsylvania Lancaster Leasing Company L.P. Pennsylvania Landthorp Enterprises L.L.C. Delaware Lawnside Holding L.L.C. New Jersey Lawnside II VF L.L.C. New Jersey Lawnside III VF L.L.C. New Jersey Lawnside VF L.L.C. New Jersey Lawnwhite Holding L.L.C. New Jersey Littleton Holding L.L.C. New Jersey Lodi II VF L.L.C. New Jersey Lodi Industries L.L.C. New Jersey Lodi Leasing L.L.C. New Jersey Lodi VF L.L.C. New Jersey M 393 Associates L.L.C. New York M/H Two Park Associates New York Manalapan Industries L.L.C. New Jersey Manalapan VF L.L.C. New Jersey Market Square Hotel L.L.C. Delaware Market Square Main Street L.L.C. Delaware Market Square Condominium L.L.C. Delaware Market Square Furniture Plaza L.L.C. Delaware Market Square Hamilton Center L.L.C. Delaware Market Square L.L.C. Delaware Marlton VF L.L.C. New Jersey Marple Holding Company L.L.C. Pennsylvania Marple Holding Company L.P. Pennsylvania Mart Franchise Center, Inc. Illinois Mart Franchise Venture, L.L.C. Delaware Mart Parking L.L.C. Delaware Menands Holding Corporation New York Menands Holding L.L.C. New York Menands VF L.L.C. New York Mendik Management Inc. New York Merchandise Mart Enterprises, Inc. Delaware Merchandise Mart L.L.C. Illinois
4 STATE OF NAME OF SUBSIDIARY ORGANIZATION - ------------------ ------------ Merchandise Mart Properties, Inc. (NC) Delaware Merchandise Mart Properties, Inc. (IL) Illinois Merchandise Mart Properties, Inc. (DE) Delaware Middletown Holding L.L.C. New Jersey Middletown VF L.L.C. New Jersey Montclair Holding L.L.C. New Jersey Montclair VF L.L.C. New Jersey Morris Plains Holding VF L.L.C. New Jersey Morris Plains Leasing L.L.C. New Jersey Morris Plains Leasing VF L.L.C. New Jersey MRC Management L.L.C. New York National Furniture Mart (NC) L.L.C. Delaware National Hydrant Corporation New York National Hydrant L.L.C. New York New Hanover L.L.C. New Jersey New Hyde Park VF L.L.C. New York New Woodbridge L.L.C. New Jersey Newington Connecticut Holding L.L.C. Connecticut Newington VF L.L.C. Connecticut NFM Corp. Delaware NFM Partners L.P. Delaware Ninety Park Lender L.L.C. New York Ninety Park Lender QRS, Inc. Delaware Ninety Park Manager L.L.C. New York Ninety Park Option L.L.C. New York Ninety Park Property L.L.C. New York North Plainfield Holding L.L.C. New Jersey North Bergen Stores L.L.C. New Jersey North Bergen VF L.L.C. New Jersey North Dearborn L.L.C. Delaware North Plainfield VF L.L.C. New Jersey Office Center Owner (D.C.) L.L.C. Delaware One Penn Plaza L.L.C. New York Philadelphia Holding Company L.L.C. Pennsylvania Philadelphia Holding Company L.P. Pennsylvania Philadelphia VF L.L.C. Pennsylvania Philadelphia VF L.P. Pennsylvania Phillipsburg Holding L.L.C. New Jersey Pike Holding Company L.L.C. Pennsylvania Pike Holding Company L.P. Pennsylvania Portland Parent Inc. Delaware PowerSpace & Services, Inc. New York Rochester Holding L.L.C. New York South Capital L.L.C. Delaware Springfield Holding L.L.C. Massachusetts Springfield Member VF L.L.C. Delaware Springfield VF L.L.C. Massachusetts SR VC Investments, L.L.C. Delaware Star Universal L.L.C. New Jersey Stardial GP Corporation Delaware T 53 Condominium, L.L.C. New York T.G. Hanover L.L.C. New Jersey TGSI L.L.C. Maryland The Second Lawnside L.L.C. New Jersey The Second Rochester Holding L.L.C. New York Totowa VF L.L.C. New Jersey
5 STATE OF NAME OF SUBSIDIARY ORGANIZATION - ------------------ ------------ Towson VF L.L.C. Maryland Turnersville Holding L.L.C. New Jersey Turnersville VF L.L.C. New Jersey Two Guys From Harrison Holding Co. L.P. Pennsylvania Two Guys From Harrison Holding Co. L.L.C. Pennsylvania Two Guys From Harrison L.L.C. New Jersey Two Guys from Harrison N.Y. L.L.C. Delaware Two Guys From Harrison N.Y. L.L.C. New York Two Guys From Harrison NY, Inc. New York Two Guys Mass. L.L.C. Massachusetts Two Guys-Connecticut Holding L.L.C. Connecticut Two Park Company New York Two Penn Plaza REIT, Inc. New York Unado L.L.C. New Jersey Union Square East L.L.C. New York Union VF L.L.C. New Jersey Upper Moreland Holding Company L.L.C. Pennsylvania Upper Moreland Holding Company L.P. Pennsylvania Upper Moreland VF L.L.C. Pennsylvania Upper Moreland VF L.P. Pennsylvania URS Logistics, Inc. Delaware URS Real Estate, L.P. Delaware URS Realty, Inc. Delaware VC Freezer Amarillo, L.P. Delaware VC Freezer Babcock, L.L.C. Delaware VC Freezer Bartow L.L.C. Delaware VC Freezer Fort Worth L.L.C. Delaware VC Freezer Fremont, L.L.C. Delaware VC Freezer Garden City, L.L.C. Delaware VC Freezer Massillon, L.L.C. Delaware VC Freezer Omaha Amarillo, L.L.C. Delaware VC Freezer Ontario L.L.C. Delaware VC Freezer Phoenix, L.L.C. Delaware VC Freezer Russelville, L.L.C. Delaware VC Freezer Sioux Falls, L.L.C. Delaware VC Freezer Springdale, L.L.C. Delaware VC Freezer Strasburg, L.L.C. Delaware VC Freezer Texarkana L.L.C. Delaware VC Missouri Holdings, L.L.C. Delaware VC Missouri Real Estate Holdings, L.L.C. Delaware VC Omaha Holdings, L.L.C. Delaware VC Omaha Real Estate Holdings, L.L.C. Delaware VFC Connecticut Holding L.L.C. Delaware VFC Massachusetts Holding L.L.C. Delaware VFC New Jersey Holding L.L.C. Delaware VFC Pennsylvania Holding L.L.C. Delaware VFC Pennsylvania Holding L.P. Delaware VNK Corp. Delaware VNO 63rd Street L.L.C. New York VNO Hotel L.L.C. Delaware Vornado - Westport L.L.C. Connecticut Vornado / VNJ L.L.C. Delaware Vornado 1740 Broadway L.L.C. New York Vornado 175 Lex, Inc. Delaware Vornado 330 West 34th Street L.L.C. New York Vornado 401 Commercial L.L.C. New York
6 STATE OF NAME OF SUBSIDIARY ORGANIZATION - ------------------ ------------ Vornado 401 Hotel II, Inc. New York Vornado 401 Hotel Inc. New York Vornado 550-600 Mamaroneck L.P. New York Vornado 570 Lexington L.L.C. New York Vornado 63rd Street Inc. New York Vornado 640 Fifth Avenue L.L.C. New York Vornado 90 Park Avenue L.L.C. New York Vornado 90 Park QRS, Inc. New York Vornado B&B L.L.C. New York Vornado Ballantrae Holdings, Inc. Delaware Vornado Caguas GP Inc. Delaware Vornado Caguas L.L.C. Delaware Vornado Caguas L.P. Delaware Vornado CAPI L.L.C. Delaware Vornado Catalinas GP Inc. Delaware Vornado Catalinas L.L.C. Delaware Vornado Catalinas L.P. Delaware Vornado CCA Gainesville, L.L.C. Delaware Vornado Center Building L.L.C. New York Vornado CESCR Holdings L.L.C. Delaware Vornado CESCR II L.L.C. Delaware Vornado CESCR L.L.C. Delaware Vornado Communications L.L.C. Delaware Vornado Crescent Atlanta Partnership Delaware Vornado Crescent Holding L.P. Delaware Vornado Crescent Omaha Partnership Delaware Vornado Crescent Portland Partnership Delaware Vornado Finance Corporation Delaware Vornado Finance GP L.L.C. Delaware Vornado Finance L.L.C. Delaware Vornado Finance L.P. Delaware Vornado Finance SPE, Inc. Delaware Vornado Fort Lee L.L.C. New Jersey Vornado Green Acres Acquisition L.L.C. Delaware Vornado Green Acres Delaware L.L.C. Delaware Vornado Green Acres Funding L.L.C. Delaware Vornado Green Acres Holdings, L.L.C. Delaware Vornado Green Acres SPE Managing Member, Inc. Delaware Vornado Holding Corporation New York Vornado Investments Corporation Delaware Vornado Investments L.L.C. Delaware Vornado Lending L.L.C. New Jersey Vornado M 330 L.L.C. New York Vornado M 393 L.L.C. New York Vornado M 393 QRS, Inc. New York Vornado Mamaroneck L.L.C. New York Vornado Management Corp. New Jersey Vornado MH L.L.C. New York Vornado Montehiedra Acquisition L.L.C. Delaware Vornado Montehiedra Acquisition L.P Delaware Vornado Montehiedra Holding II L.P. Delaware Vornado Montehiedra Holding L.L.C. Delaware Vornado Montehiedra Holding L.P. Delaware Vornado Montehiedra Inc. Delaware Vornado Montehiedra OP L.P. Delaware Vornado Montehiedra OP L.L.C. Delaware
7 STATE OF NAME OF SUBSIDIARY ORGANIZATION - ------------------ ------------ Vornado Newkirk L.L.C. Delaware Vornado NK Loan L.L.C. Mass Vornado Omaha Holdings, Inc. Delaware Vornado PS, L.L.C. Delaware Vornado Realty L.L.C. Delaware Vornado Realty L.P. Delaware Vornado Riese Inc. New York Vornado RR Midtown L.L.C. New York Vornado RR, Inc. New York Vornado RTR, Inc. Delaware Vornado SC Properties L.L.C. Delaware Vornado TSQ L.L.C. Delaware Vornado Two Park Holding L.L.C. Delaware Vornado Two Penn Plaza L.L.C. New York Vornado/Tea Room L.L.C. New York VR L.L.C. Delaware VRT Development Rights L.L.C. New York VRT Massachusetts Holding L.L.C. Delaware VRT New Jersey Holding L.L.C. Delaware Washington Design Center L.L.C. Delaware Washington Office Center L.L.C. Delaware Watchung Holding L.L.C. New Jersey Watchung VF L.L.C. New Jersey Wayne VF L.L.C. New Jersey West Windsor Holding L.L.C. New Jersey Whitehorse Lawnside L.L.C. New Jersey Woodbridge VF L.L.C. New Jersey York Holding Company L.L.C. Pennsylvania York Holding Company L.P. Pennsylvania York VF L.L.C. Pennsylvania York VF L.P. Pennsylvania
1 EXHIBIT 23 INDEPENDENT AUDITORS' CONSENT We consent to the incorporation by reference in the following Registration Statements of our report dated March 1, 2001 appearing in this Annual Report on Form 10-K of Vornado Realty Trust for the year ended December 31, 2000: Vornado Realty Trust: Amendment No. 1 to Registration Statement No. 333-36080 on Form S-3 Registration Statement No. 333-64015 on Form S-3 Amendment No. 1 to Registration Statement No. 333-50095 on Form S-3 Registration Statement No. 333-52573 on Form S-8 Registration Statement No. 333-29011 on Form S-8 Registration Statement No. 333-09159 on Form S-8 Registration Statement No. 333-76327 on Form S-3 Amendment No. 1 to Registration Statement No. 333-89667 on Form S-3 Registration Statement No. 333-81497 on Form S-8 Vornado Realty Trust and Vornado Realty L.P. (Joint Registration Statements): Amendment No. 4 to Registration Statement No. 333-40787 on Form S-3 Amendment No. 4 to Registration Statement No. 333-29013 on Form S-3 DELOITTE & TOUCHE LLP Parsippany, New Jersey March 1, 2001