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front on the wide avenues. We expanded the site by
building two, twenty foot high below-grade floors (nine
foot basements would not have worked), one of which
Sandeep leased to The Home Depot and the other was
leased to Bloomberg. |
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The office component makes money, and also serves as a
pedestal 475 feet in the air on which sits the 23 story apartment
component, creating towering views and terrific value. |
In February 2004, Alexander's completed a $400 million
ten-year financing of the office portion of the 59th Street
project, at a 5.33% interest rate. Thanks again Wendy.
Last year's annual letter had a section entitled "The Anti-
Reality Show Called Accounting." Here's another interesting
accounting quirk. Alexander's has outstanding 100,000
stock options and 850,000 stock appreciation rights (SARs)
at an average strike price of about $72. Accounting requires
that these SARs be marked-to-market each quarter. Let's
look at the effect. Alexander's trading price has been
bouncing around, but let's assume a price of $150 per
share, a price that exceeds the strike price by about $78.
Therefore, Alexander's earnings has or will be charged
about $66 million and Vornado's share of this charge is
about $22 million – all this at the same time Vornado is
enjoying a $129 million mark-to-market increase in the value
of its Alexander's investment, which under today's accounting
is not reflected in earnings – strange. |
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It is our foremost priority to conduct our business with
the highest level of ethics and corporate responsibility –
and we do. Our trustees' refined sense of right and wrong,
knowledge of our business, questioning nature, devotion to
and ownership stake in Vornado are the foundation of our
governance.
We have now completed codification of our Corporate
Governance Program, putting us in compliance with the
applicable securities laws and stock exchange requirements.
This program included the adoption/amendment of charters,
guidelines and codes which are all available on our
website. In addition, our Board has determined that five
existing trustees, constituting a majority, are independent.
Our Corporate Governance Committee and the Board
have the following observations:
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Six of our nine Trustees have a nine-figure investment in
Vornado and a seventh has an eight-figure investment –
extraordinary. And, believe me, these Trustees really care
about their investment. |
| • |
Six of our nine Trustees are life-long real estate professionals,
which is very helpful. But, it should be noted that
the Board believes that it would benefit from the addition
of one or more generalist members. |
| • |
Our Board believes it would benefit from a dose of youth. |
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Our Board thinks that it would be better to increase the
current five to four ratio of independent to non-independent
Trustees by adding one or two independent Trustees, and we will. |
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For the moment, our Board has determined to maintain
its classified structure and that it is okay for me to serve
as Chairman and CEO.(17) |
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