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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
| Filed by the Registrantý | ||
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| ý | Definitive Proxy Statement | |
| o | Definitive Additional Materials | |
| o | Soliciting Material under §240.14a-12 | |
| VORNADO REALTY TRUST | ||||
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888 Seventh Avenue
New York, New York 10019
Notice of Annual Meeting of Shareholders to Be Held on May 17, 201816, 2019
To our Shareholders:
The 20182019 Annual Meeting of Shareholders of Vornado Realty Trust, a Maryland real estate investment trust ("Vornado" or the "Company"), will be held at the Saddle Brook Marriott, Interstate 80 and the Garden State Parkway, Saddle Brook, New Jersey 07663, on Thursday, May 17, 2018,16, 2019, beginning at 11:30 A.M., New York City time, for the following purposes:
(1) To consider and vote upon the election of sevennine persons to the Board of Trustees of the Company, each to serve for a one-year term expiring at the 20192020 annual meeting of shareholders of the Company and until his or her successor is duly elected and qualified.
(2) To consider and vote upon the ratification of the appointment of Deloitte & Touche LLP as the Company's independent registered public accounting firm for the current fiscal year.
(3) To consider and vote upon an amendment (the "Amendment") to our Company's Declaration of Trust (the "Declaration") to permit shareholders to vote on amendments to our Bylaws to the extent provided in the Bylaws and confirm the power of shareholders to vote on certain additional matters.
(4) To consider and vote upon the approval of a non-binding, advisory resolution on executive compensation.
(4) To consider and vote upon the Company's 2019 Omnibus Share Plan.
(5) To transact any other business as may properly come before the meeting or any postponement or adjournment of the meeting.
The Board of Trustees of the Company has fixed the close of business on March 19, 201818, 2019 as the record date for the determination of shareholders entitled to notice of, and to vote at, the meeting.
Please review the accompanying proxy statement and proxy card or voting instruction form. Whether or not you plan to attend the meeting, it is important that your shares be represented and voted. You may authorize your proxy through the Internet or by touch-tone telephone as described on the proxy card or voting instruction form. Alternatively, you may sign the proxy card or voting instruction form and return it in accordance with the instructions included with the proxy card or voting instruction form. You may revoke your proxy by (1) timely executing and submitting a later-dated proxy card or voting instruction form, (2) subsequently authorizing a proxy through the Internet or by telephone, (3) timely sending a written revocation of proxy to our Secretary at our principal executive office located at 888 Seventh Avenue, New York, New York 10019, or (4) attending the meeting and voting in person. To be effective, later-dated proxy cards, voting instruction forms, proxies authorized via the Internet or telephone or written revocations of proxies must be received by us by 11:59 P.M., New York City time, on Wednesday, May 16, 2018.15, 2019.
| By Order of the Board of Trustees, | ||
Alan J. Rice | ||
April |
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OVERVIEW OF VOTING ITEMS This summary highlights certain information that is covered elsewhere in this Proxy Statement. You are encouraged to read our complete Proxy Statement before voting. Election of nine Trustees Ratification of appointment of Independent Accounting Firm For Advisory approval of executive compensation For Approval of the Company's 2019 Omnibus Share Plan Total Funds From Operations ("FFO") for the year ended December 31, 2018 was $3.82 per diluted share, compared to $3.75 per diluted share for 2017. FFO, as adjusted Overview of Voting ItemsShareholder Voting ItemsSHAREHOLDER VOTING ITEMS Board VoteBOARD VOTERecommendationRECOMMENDATION
Proposal 1For Proposal 1:Election of seven TrusteesFor
Proposal 2:2 Proposal 3:Approval of amendment to the Company's Declaration of Trust to permit shareholders to vote on amendments to the Company's Bylaws to the extent provided in the Bylaws and confirm the power of shareholders to vote on certain additional mattersFor
Proposal 4:3
Proposal 4For
For 2018, the following highlights were among the factors considered in the compensation decision process:BUSINESS HIGHLIGHTS •We made significant progress in furthering our simplification and focus strategy by completingNet income for the spin-off of our Washington, D.C. segment and combining it with the management business and certain Washington, D.C. assets of The JBG Companies, a Washington D.C. real estate company. The combined company, JBG SMITH Properties (NYSE: JBGS), is the largest, market-leading, best-in-class, pure-play Washington, D.C. real estate company. Over the past several years, including the spin-off of Urban Edge Properties and the JBG SMITH Properties transaction, we have distributed $9.7 billion of assetsyear ended December 31, 2018 was $2.01 per diluted share, compared to shareholders and exited $6.2 billion of non-core assets.$0.85 per diluted share for 2017.•Net Operating Income ("NOI") at share increased by $37.3 million in 2017 over 2016. NOI and NOI at share are non-GAAP measures defined on page 22 of this Proxy Statement. "GAAP" means Generally Accepted Accounting Principles applicable in the United States.•We achieved a 2.7% increase in same store NOI at share in 2017 over 2016 for our New York Office and Retail portfolio, theMART and our 555 California Street complex.•increased $30.4 million (or $0.14for the year ended December 31, 2018 was $3.76 per diluted share) in 2017 over 2016.share, compared to $3.73 per diluted share for 2017. FFO and FFO, as adjusted, are non-GAAP measures defined on page 22 ofAnnex A to this Proxy Statement.
Company-wide cash basis Net Operating Income ("NOI") for 2018 was $1.338 billion, compared to $1.315 billion for 2017. 2018 cash basis "same store" NOI increased 3.9%. NOI is a non-GAAP measure defined on Annex A to this Proxy Statement.
Our Manhattan Street Retail assets produced $324.2 million of cash NOI in 2018, well ahead of the $309 million minimum we guided in the beginning of 2018, which we increased to $315 million in the third quarter.
Our 2018 leasing activity for the year, across the entire business including New York, theMART and 555 California Street and Retail, totaled approximately 2.6 million square feet in 230 leases, with industry leading mark-to-market increases of 25.6% GAAP and 18.4% cash.
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| At year end, office occupancy for New York, theMART and 555 California Street was 97.0% and retail occupancy was 97.3%. |
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| We completed the following acquisitions during 2018: • $442 million acquisition of the retail condominium at 1535 Broadway; • $44 million acquisition of 537 West 26th Street and 55,000 square feet of additional zoning air rights; and • $42 million purchase price to increase our ownership interest in the joint venture that is developing the Farley Office and Retail Building to 95.0% from 50.1% where we are developing 850,000 square feet of unique office and retail space. |
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| We completed the following sale transactions during 2018: •
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• $82 million sale of the • $45 million sale of 27 Washington Square North. |
Please also see our Chairman's Letter that can be found on our website atwww.vno.com/chairmansletter.
Shareholder Engagement and Recent Governance Changes
During the last four years, our Board Our Chairman's Letter is not a part of Trustees has adopted, or is proposing, a number of significant governance changes. These changes follow extensive engagement with our shareholders to better understand their views on our corporate governance practices. The Chair of our Corporate Governance and Nominating Committee was an active participantincorporated by reference in these meetings with investors and she and members of ourthis Proxy Statement.
management team reported and discussed the feedback received with the full Board. As part of this engagement, we held in-person or telephonic meetings with shareholders representing approximately 50% of our outstanding common shares of beneficial interest in each of the last four years. In addition to the changes outlined below, we have also significantly enhanced the corporate governance, sustainability and executive compensation disclosures in our proxy statement.
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VORNADO ENVIRONMENTAL STEWARDSHIP, SOCIAL RESPONSIBILITY |
We regularly engage with our shareholders regarding ESG matters and continuously review and strive to improve our characteristics and performance. For instance, over the past five years in response to shareholder input, we have made a new independent Trustee.
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Corporate Governance Highlights
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| Regular Shareholder Engagement | • During each of the past five years, we have regularly met in person, or over the telephone, with shareholders holding over 50% of our shares. • Ms. Candace Beinecke, our Lead Independent Trustee, has participated in many of these meetings or calls. | |||
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| Strong, Independent, Diverse and Engaged Board | • In the past three years, we have added two new Trustees.We are committed to a continuous process of Board refreshment. • Over 80% of our Board is independent, with the only non-independent members being the current and former Chief Executive Officers. • 22% percent of our Board members are female. • Our Board members are invested in our Company—they are required (within five years of election or appointment) to hold Company equity having a value of at least 5x their annual cash retainer. • We have a Lead Independent Trustee with significant authority and responsibility. • Our Board is actively engaged in strategic, risk and management oversight. • Our Board and Board Committees undertake a robust self-evaluation at least annually lead by our Lead Independent Trustee. • Our Board actively monitors, oversees and participates in management succession planning. • The diverse skills and experiences of our Board members, enhanced by the fresh perspectives brought by our newer Trustees, and the industry and company-specific expertise of our longer-tenured Trustees, support in the oversight of Company business and strategy. • Our Board actively monitors our sustainability initiatives and compliance with our ethical and social policies. | |||
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| Strong Shareholder Rights | • We have a single class of Trustees, elected annually. • We have adopted proxy access with a 3/3/20/20 market standard. • Our shareholders may amend our Bylaws. • We changed our voting standards for • We do not have a poison pill. • Our charter may be amended by a majority vote of our outstanding Shares other than with respect to limited provisions intended to protect our real estate investment trust tax status and the removal of Trustees. | |||
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| Strong Ethical and Social Policies | • We maintain a strong Code of Business Conduct and Ethics that applies to all our Trustees and employees. • We have a clawback policy. • We have an anti-hedging policy. • We have adopted a refreshed and renewed anti-harassment policy. • Our policies and manuals prohibit bribes, money laundering and other corruption. • We restrict conflicts of interest. • We restrict political contributions. • We have established and circulated straight-forward procedures for reporting any policy violations or other wrongdoing. • We comply with the strictest rules regarding employing child labor, respecting human rights and not purchasing conflict minerals. • We actively monitor and audit internal compliance with our policies. • Our Board ultimately oversees our internal compliance with policies. | |||
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| Leader in Sustainability Practices | • We have received the Energy Star Partner of the Year Award with Sustained Excellence three times, most recently in 2018. • In every year since 2013, we have received the Global Real Estate Sustainability Benchmark Green Star Ranking and we were recognized as sector leader in 2017 and we scored in the top 6% of over 800 responding companies in 2018. • We have received the National Association of Real Estate Investment Trusts (Nareit) Leader in the Light Award for every year since 2010. • We are one of the largest owners of LEED-certified property in the United States. | |||
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EXECUTIVE COMPENSATION HIGHLIGHTS |
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Executive Compensation Highlights
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| Substantial Performance-Based and At-Risk Components |
Over 90% of the total value of the CEO's compensation is •
requires the achievement of significant performance hurdles for the equity to haveany value. •
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Executive Compensation Program Objectives:
other named executive officers is in the form of equity.
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We have a formula-driven annual bonus plan.
Proxy StatementTable of Contents
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EXECUTIVE COMPENSATION |
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| ALIGN the interests of executives with shareholders by linking payouts under annual incentives to performance measures that promote the creation of long-term shareholder value. | ||
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| ACHIEVE an appropriate balance between risk and reward in our compensation programs that does not encourage excessive or inappropriate risk-taking. |
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TABLE OF CONTENTS | | | | VORNADO REALTY TRUST | | | | a | | |
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TABLE OF CONTENTS
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2019 PROXY STATEMENT | | | | VORNADO REALTY TRUST | | | | 1 | | |
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888 Seventh Avenue
New York, New York 10019
PROXY STATEMENT
Annual Meeting of Shareholders to Be Held on May 17, 201816, 2019
The accompanying proxy is being solicited by the Board of Trustees (the "Board of Trustees" or the "Board") of Vornado Realty Trust, a Maryland real estate investment trust ("we," "us," "our" or the "Company"), for exercise at our 20182019 Annual Meeting of Shareholders (the "Annual Meeting") to be held on Thursday, May 17, 2018,16, 2019, beginning at 11:30 A.M., New York City time, at the Saddle Brook Marriott, Interstate 80 and the Garden State Parkway, Saddle Brook, New Jersey 07663. Our principal executive office is located at 888 Seventh Avenue, New York, New York 10019. Our proxy materials, including this proxy statement, the Notice of Annual Meeting of Shareholders, the proxy card or voting instruction form and our 20172018 Annual Report are being distributed and made available on or about April 6, 2018.the date of this proxy statement.
In accordance with rules and regulations adopted by the U.S. Securities and Exchange Commission (the "SEC"), we have elected to provide our shareholders access to our proxy materials on the Internet. Accordingly, a notice of Internet availability of proxy materials will be mailed on or about April 6, 2018the date of this proxy statement to our shareholders of record as of the close of business on March 19, 2018.18, 2019. Shareholders may (1) access the proxy materials on the website referred to in the notice or (2) request that a printed set of the proxy materials be sent, at no cost to them, by following the instructions in the notice.You will need your 12-digit control number that is included with the notice mailed on or about April 6, 2018,the date of this proxy statement, to authorize your proxy for your Shares (as defined below) through the Internet. If you have not received a copy of this notice of internet availability, please contact our investor relations department at 201-587-1000 or send an e-mail toircontact@vno.com. If you wish to receive a printed version of these materials, you may request them atwww.proxyvote.com or by dialing 1-800-579-1639 and following the instructions at that website or phone number.
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QUESTIONS AND ANSWERS ABOUT THE ANNUAL MEETING |
If you hold your Sharesshares of record in your own name, you may vote in person at the Annual Meeting or you may authorize your proxy over the Internet (atwww.proxyvote.com), by telephone (at 1-800-690-6903) or by executing and returning a proxy card or voting instruction form. Once you authorize a proxy, you may revoke that proxy by (1) timely executing and submitting a later-dated proxy card or voting instruction form, (2) subsequently authorizing a proxy through the Internet or by telephone, (3) timely sending a written revocation of your proxy to our Secretary at our principal executive office or (4) attending the Annual Meeting and voting in person. Attending the Annual Meeting without submitting a new proxy or voting in person will not automatically revoke your prior authorization of your proxy.
If you hold your Sharesshares in "street name" (that is, as beneficial owner through a bank, broker or other nominee), your nominee will not vote your shares (other than with respect to the ratification of the appointment of our independent registered public accounting firm) unless you provide instructions to your nominee on how to vote your Shares.shares. If you hold Shares in "street name," you will receive instructions and a voting instruction form from your nominee that you must follow in order to have your proxy authorized, or you may contact your nominee directly to request these voting instructions. You should instruct your nominee how to vote your Sharesshares by following the directions provided by your nominee.
To be effective, later-dated proxy cards, voting instruction forms, proxies authorized via the Internet or telephone or written revocations of proxies must be received by us by 11:59 P.M., New York City time, on Wednesday, May 16, 2018.15, 2019.
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We will pay the cost of soliciting proxies. We have hired MacKenzie Partners, Inc. to solicit proxies for a fee not to exceed $5,500. In addition to solicitation by mail, by telephone and by e-mail or the Internet, arrangements may be made with brokerage houses and other custodians, nominees and fiduciaries to send proxies and proxy materials to their principals and we may reimburse them for their expenses in so doing. Trustees or members of management of the Company may also solicit votes.proxies.
Only holders of record of our common shares of beneficial interest, par value $0.04 per share (the "Shares"), as of the close of business on March 19, 201818, 2019 are entitled to notice of and to vote at the Annual Meeting. We refer to this date as the "record date." On that date, 190,167,582190,743,262 of our Shares were outstanding. Holders of Shares as of the record date are entitled to one vote per Share on each matter properly presented at the Annual Meeting.
How do you attend the meeting in person?
If you hold your Shares in your own name, you will need only to present satisfactory evidence of your identity. If you hold your Shares in "street name" and would like to attend the Annual Meeting in person, you will need to bring an account statement or other evidence acceptable to us of ownership of your Shares as of the close of business on the record date. If you hold Shares in "street name" and wish to vote in person at the Annual Meeting, you will need to contact your bank, broker or other nominee and obtain a "legal proxy" from your nominee and bring it to the Annual Meeting. Obtaining a legal proxy may take several days. Directions to attend the Annual Meeting and vote in person are available upon request to the Secretary of the Company at its offices.
What is the quorum necessary for the meeting?
The holders of a majority of the outstanding Shares as of the close of business on the record date, present in person or by proxy, will constitute a quorum for the transaction of business at the Annual Meeting.
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2019 PROXY STATEMENT | | | | VORNADO REALTY TRUST | | | | 3 | | |
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How will your votes be counted?
Any proxy, properly executed and returned, will be voted as directed and, if no direction is given, will be voted as recommended by the Board of Trustees in this proxy statement and in the discretion of the proxy holder as to any other matter that may properly come before the meeting. A broker non-vote and any proxy marked "withhold" or an abstention, as applicable, will count for the purposes of determining a quorum, but will have no effect on the result of the votevotes on the election of Trustees (Proposal 1), the ratificationany of the appointment of our registered independent public accounting firm (Proposal 2), or the non-binding, advisory vote on executive compensation (Proposal 4). However, because the vote required to amend our Amended and Restated Declaration of Trust (the "Declaration") to permit shareholders to vote on amendments to our Amended and Restated Bylaws (the "Bylaws") (Proposal 3) is based on votes entitled to be cast at the meeting (rather than votes actually cast at the meeting), abstentions and broker non-votes, if any,proposals, except that an abstention will have the effect of votesa vote against the Amendment.Company's 2019 Omnibus Share Plan. A broker non-vote is a vote that is not cast on a non-routine matter because the Shares entitled to cast the vote are held in street name, the broker lacks discretionary authority to vote the Shares on that matter and the broker has not received voting instructions from the beneficial owner.
The election of each of our nominees for Trustee (Proposal 1) requires a plurality of the votes cast at the Annual Meeting,Meeting; however, any nominee for Trustee who does not receive the approval of a majority of the votes cast (more "for" votes than "withhold" votes) will be required, pursuant to our Corporate Governance Guidelines (the "Guidelines"), to tender his or her offer of resignation to the Board of Trustees for its consideration. The ratification of the appointment of Deloitte & Touche LLP as our independent registered public accounting firm (Proposal 2), and the approval of the non-binding, advisory vote on executive compensation (Proposal 3), and the approval of the Company's 2019 Omnibus Share Plan (Proposal 4), each requires the affirmative vote of a majority of the votes cast on such matter at the Annual Meeting. The approvalFor the purposes of Proposal 4, abstentions will count as votes against the amendment to the Declaration to permit shareholders to vote on amendments to the Bylaws (the "Amendment") (Proposal 3) requires the affirmative vote by holders of not less than a majority of our Shares outstanding and entitled to vote thereon.Proposal.
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PROPOSAL 1: ELECTION OF TRUSTEES
PROPOSAL 1: ELECTION OF TRUSTEES |
Trustees Standing for Election
Trustees Standing for Election |
Our Board has 10 Trustees. On February 8, 2018,Trustees, nine of whom will be standing for election at our Annual Meeting. Our Board, on the recommendation of our Corporate Governance and Nominating Committee, has nominated each of Messrs.Mr. Steven Roth, Ms. Candace K. Beinecke, Messrs. Michael D. Fascitelli, Michael LynneWilliam W. Helman IV and David M. Mandelbaum, Ms. Mandakini Puri, and Messrs.Mr. Daniel R. Tisch, Dr. Richard R. West and Mr. Russell B. Wight, Jr. for election at our Annual Meeting. SuchIf elected, such persons will be elected to serve until the Annual Meeting of Shareholders in 20192020 and until their respective successors are duly elected and qualified. Each of these nominees currently serves as a member of our Board. Our organizational documents provide that the TrusteesOn March 24, 2019, Mr. Michael Lynne, who were elected at the 2016 annual meeting of shareholders will serve until the 2019 annual meeting. Beginning with the 2019 annual meeting of shareholders, all Trustees will be electedhad served as a single class annually, in each casemember of our Board of Trustees from 2005, passed away. On April 3, Mr. Robert P. Kogod, an existing Trustee, determined not to servestand for a term expiringre-election at the next succeeding annual meeting and until their respective successors have been duly elected and qualified.our Annual meeting.
Unless you direct otherwise in your signed and returned proxy, each of the persons named in the accompanying proxy will vote your Shares for the election of each of the sevennine nominees for Trustees listed below. If any nominee at the time of election is unavailable to serve, it is intended that each of the persons named in the proxy will vote for an alternate nominee who will be recommended by the Corporate Governance and Nominating Committee of our Board and nominated by the Board. Alternatively, the Board may reduce the size of the Board and the number of nominees. Proxies may be exercised only for the nominees named or such alternates. We do not currently anticipate that any nominee for Trustee will be unable to serve as a Trustee.
The Board of Trustees recommends that shareholders vote "FOR" the election of each of the nominees listed below to serve as a Trustee until the Annual Meeting of Shareholders in 20192020 and until his or her respective successor has been duly elected and qualified.
Under our Bylaws, a plurality of all the votes cast at the Annual Meeting, if a quorum is present, is sufficient to elect a Trustee. However, any Trustee who does not receive the affirmative vote of a majority of the votes cast for his or her election to the Board (a greater number of "for" votes than "withhold" votes) in an uncontested election (such as this election) will be required, pursuant to our Corporate Governance Guidelines, to tender his or her offer of resignation to the Board for its consideration. AAn abstention or a broker non-vote will have no effect on the result of this vote.
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The following table lists the nominees and the other present members of the Board who will continue to serve following the 2018 Annual Meeting. For each such person, the table lists the age, principal occupation, position presently held with the Company, if any, and the year in which the person first became a member of our Board or a director of our predecessor, Vornado, Inc.
Name | | Age | | Principal Occupation and, if applicable, Present Position with the Company | | Year Term Will Expire | | Year First Elected as Trustee | |
Nominees for Election to Serve as Trustees Until the Annual Meeting in 2019 | | ||||||||
Steven Roth(1) | | 76 | | Chairman of the Board of Trustees of the Company since May 1989; Chief Executive Officer of the Company from May 1989 to May 2009 and since April 15, 2013; Managing General Partner of Interstate Properties | | 2019 | | 1979 | |
Michael D. Fascitelli | | 61 | | Owner, MDF Capital LLC since June 2013. From May 2009 to April 15, 2013, President and Chief Executive Officer of the Company | | 2019 | | 1996 | |
Michael Lynne(2)(3) | | 76 | | Principal of Unique Features | | 2019 | | 2005 | |
David M. Mandelbaum(2)(4) | | 82 | | A member of the law firm of Mandelbaum & Mandelbaum, P.C.; a general partner of Interstate Properties | | 2019 | | 1979 | |
Mandakini Puri(2)(5) | | 57 | | Independent consultant | | 2019 | | 2016 | |
Daniel R. Tisch(2)(3)(5) | | 66 | | Managing Member of TowerView LLC | | 2019 | | 2012 | |
Russell B. Wight, Jr.(1)(2)(4) | | 78 | | A general partner of Interstate Properties | | 2019 | | 1979 | |
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Present Trustees Elected to Serve as Trustees Until the Annual Meeting in 2019 | | ||||||||
Candace K. Beinecke(1)(2)(4)(6) | | 71 | | Chair of Hughes Hubbard & Reed LLP | | 2019 | | 2007 | |
Robert P. Kogod(2) | | 86 | | President of Charles E. Smith Management LLC | | 2019 | | 2002 | |
Dr. Richard R. West(2)(3)(5) | | 80 | | Dean Emeritus, Leonard N. Stern School of Business, New York University | | 2019 | | 1982 | |
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Ms. Beinecke has served as Chair of Hughes Hubbard & Reed LLP, a New York law firm, since 1999 and is a practicing partner in Hughes Hubbard's Corporate Department. Ms. Beinecke also serves as Chairperson of the Board of Arnhold & S. Bleichroeder Advisors LLC's First Eagle Funds, Inc. (a U.S. public mutual fund family), and as a board member of ALSTOM (a public French transport and power company).
Mr. Fascitelli has served as a member of our Board of Trustees since December 1996. Since June 2013, Mr. Fascitelli has been the owner and principal of MDF Capital LLC (a private investment firm). Since November 2017, Mr. Fascitelli has served as Co-Founder and Managing Partner of Imperial Companies (a private real estate company). Also since November 2017, Mr. Fascitelli has served as a Founder and Non-Executive Director of Landscape Acquisitions (a special purpose acquisitions company focusing on real estate operating companies and listed on the London Stock Exchange). Since December 2014, Mr. Fascitelli has served as Chair of the Investment Committee, Senior Advisor and Board Member of Quadro Partners Inc. (a private online real estate investment platform). Previously, Mr. Fascitelli served as our President from
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The following table lists the nominees for election to the Board at the 2019 Annual Meeting for a term of one year. For each such person, the table lists the age, principal occupation, position presently held with the Company, if any, and the year in which the person first became a member of our Board or a director of our predecessor, Vornado, Inc.
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| Name | | Age | | Principal Occupation and, if applicable, Present Position with the Company | | Year First Elected as Trustee | | |||||||||
Steven Roth(1) | 77 | Chairman of the Board of Trustees of the Company since May 1989; Chief Executive Officer of the Company from May 1989 to May 2009 and since April 15, 2013; Managing General Partner of Interstate Properties | 1979 | |||||||||||||
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Candace K. Beinecke(1)(2)(3)(4) | 72 | The Senior Partner of Hughes Hubbard & Reed LLP | 2007 | |||||||||||||
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Michael D. Fascitelli | 62 | Owner, MDF Capital LLC since June 2013. From May 2009 to April 15, 2013, President and Chief Executive Officer of the Company | 1996 | |||||||||||||
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William W. Helman IV(2)(3)(5) | 60 | General Partner of Greylock Partners | 2019 | |||||||||||||
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David M. Mandelbaum(2) | 83 | A member of the law firm of Mandelbaum & Mandelbaum, P.C.; a general partner of Interstate Properties | 1979 | |||||||||||||
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Mandakini Puri(2)(3)(6) | 58 | Independent consultant | 2016 | |||||||||||||
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Daniel R. Tisch(2)(5)(6) | 67 | Managing Member of TowerView LLC | 2012 | |||||||||||||
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Dr. Richard R. West(2)(5)(6) | 81 | Dean Emeritus, Leonard N. Stern School of Business, New York University | 1982 | |||||||||||||
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Russell B. Wight, Jr.(1)(2) | 79 | A general partner of Interstate Properties | 1979 | |||||||||||||
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Biographies of our Trustees |
Mr. Roth has been the Chairman of our Board of Trustees since May 1989 and Chairman of the Executive Committee of the Board since April 1980. From May 1989 until May 2009, Mr. Roth served as our Chief Executive Officer. Since April 15, 2013, Mr. Roth has again been serving in that position. Since 1968, he has been a general partner of Interstate Properties (an owner of shopping centers and investor in securities and partnerships, "Interstate") and he currently serves as its Managing General Partner. He is the Chairman of the Board and Chief Executive Officer of our affiliate, Alexander's, Inc. (a New York Stock Exchange-listed real estate investment trust 32.4% of which is owned by the Company). Since January 2015, Mr. Roth has been a member of the Board of Trustees of Urban Edge Properties
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| | 6 | | | | VORNADO REALTY TRUST | | | | 2019 PROXY STATEMENT |
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(a New York Stock Exchange-listed real estate investment trust and the spin-off of the Company's former shopping center business, "Urban Edge"). Since July 18, 2017, Mr. Roth has been the Chairman of the Board of Trustees of JBG SMITH Properties (a New York Stock Exchange-listed real estate investment trust and the spun-off successor to our former Washington D.C. business, "JBG SMITH" and the "Washington Spin"). Each of these other Boards upon which Mr. Roth serves is either a current affiliate of the Company or a company recently spun-off from Vornado. Our board believes the presence of Mr. Roth on each of these Boards is beneficial to the Company and/or the broadly overlapping shareholder base of the Company, Urban Edge, and JBG SMITH.
Ms. Beinecke has served as Senior Partner or Chair of Hughes Hubbard & Reed LLP, a New York law firm, since 1999 and is a practicing partner in Hughes Hubbard's Corporate Department. Ms. Beinecke serves as Chairperson of the Board of Arnhold & S. Bleichroeder Advisors LLC's First Eagle Funds, Inc. (a U.S. public mutual fund family). Since September 2018, Ms. Beinecke has also served as a member of the Board of Directors of CBS Corporation (a New York Stock Exchange-listed U.S. media company).
Mr. Fascitelli has served as a member of our Board of Trustees since December 1996. Since June 2013, Mr. Fascitelli has been the owner and principal of MDF Capital LLC (a private investment firm). Since November 2017, Mr. Fascitelli has served as Co-Founder and Managing Partner of Imperial Companies (a private real estate company). Since December 2014, Mr. Fascitelli has served as Chair of the Investment Committee, Senior Advisor and Board Member of Quadro Partners Inc. (a private online real estate investment platform). Previously, Mr. Fascitelli served as our President from December 1996, and as our Chief Executive Officer from May 2009, until his resignation from both positions effective April 15, 2013. Until May 23, 2013, he was also a director of our affiliate, Alexander's, Inc. ("Alexander's") (a real estate investment trust 32.4% of which is owned by the Company), and served as its President until April 15, 2013. From 2004 until 2013, he also served as a director of our affiliate, Toys "R" Us, Inc. (a retailer). Since January 16, 2014, Mr. Fascitelli has served on the Board of Trustees of Invitation Homes Inc. (a publicly-tradedNew York Stock Exchange-listed residential real estate company)investment trust) or its predecessors Colony Starwood Homes and Starwood Waypoint Residential Trust. Sincepredecessors. From 2015 to 2017, Mr. Fascitelli has also served as a member of the Board of Commissioners of the Port Authority of New York and New Jersey.
Since June 2018, Mr. KogodFascitelli has also served as a memberdirector of our Board of Trustees since 2002. Currently, Mr. Kogod is the President of Charles E. SmithOch Ziff Capital Management Group LLC (a privately-owned investment firm that is not affiliated with the Company)New York Stock Exchange-listed, global, institutional, alternative asset manager). Previously, Mr. Kogod was Co-Chief Executive Officer and Co-Chairman of the Board of Directors of Charles E. Smith Commercial Realty L.P., from October 1997 through December 2001, and was Co-Chief Executive Officer and Co-Chairman of the Board of Directors of Charles E. Smith Residential Realty from June 1994 to October 2001.
Mr. Lynne has beenHelman is a principal of Unique Features (a media company) since its formationgeneral partner at Greylock Partners, a venture capital firm. He joined Greylock in 2008. Prior to that, he was Co-Chairman1984 and Co-Chief Executive Officer of New Line Cinema Corporation (a subsidiary of Time Warner, Inc. and a motion picture company) since 2001. Prior to 2001, Mr. Lynne served as President and Chief Operating Officer of New Line Cinema, starting in 1990. From 2006 until 2008,its managing partner from 1999 to 2013. Mr. Lynne served on the Board of Directors of Time Warner Cable Inc. (a telecommunications company). Since July 2013, Mr. LynneHelman has been a member of the Board of Directors of IMAX Corporation (an entertainment technologythe Ford Motor Company (a public company). since 2011 and serves on its finance committee, nominating and governance committee and as chair of the sustainability and innovation committee. In addition, Mr. Helman currently serves on the boards of the Broad Institute, Harvard Management Company, Isabella Stewart Gardner Museum, Dartmouth-Hitchcock Medical Center and the Steppingstone Foundation.
Mr. Mandelbaum has been a member of the law firm of Mandelbaum & Mandelbaum, P.C. since 1960. Since 1968, he has been a general partner of Interstate Properties (an owner of shopping centers and investor in securities and partnerships, "Interstate").Interstate. Mr. Mandelbaum is also a director of Alexander's.
Ms. Puri has been an independent consultant since May 2013. From May 2011 until May 2013, she served as a Managing Director and Co-Head of BlackRock Private Equity, a private equity business affiliated with BlackRock, Inc. From April 2009 until April 2011, Ms. Puri served as a consultant to Bank of America/Merrill Lynch Global Private Equity and prior to that she co-founded and served as Chief Investment Officer of Merrill Lynch Global Private Equity. She iswas a member of the Board of Validus Holdings Ltd., a public insurance holding company until it was acquired in July 2018, where she servesserved as Chair of the Executive and Compensation Committees. She is also a member of the Wharton School Graduate Executive Board. Ms. Puri has a Bachelor of Commerce degree from Delhi University and an MBA from the Wharton School at the University of Pennsylvania and is a member of the Indian Institute of Chartered Accountants.
Mr. Roth has been the Chairman of our Board of Trustees since May 1989 and Chairman of the Executive Committee of the Board since April 1980. From May 1989 until May 2009, Mr. Roth served as our Chief Executive Officer. Since April 15, 2013, Mr. Roth has again been serving in that position. Since 1968, he has been a general partner of Interstate and he currently serves as its Managing General Partner. He is the Chairman of the Board and Chief Executive Officer of Alexander's. Since January 2015, Mr. Roth has been a member of the Board of Trustees of Urban Edge Properties (a real estate investment trust and former subsidiary of the Company which operates our former shopping center business, "Urban Edge"). Since July 18, 2017, Mr. Roth has been the Chairman of the Board of Trustees of JBG SMITH Properties (a real estate investment trust and the successor to our former Washington D.C. business, "JBG SMITH"). Mr. Roth was a director of J. C. Penney Company, Inc. (a retailer) from 2011 until September 2013. Mr. Roth serves on three other affiliated public company boards: Alexander's; Urban Edge and JBG SMITH. The Company owns 32.4% of Alexander's. Urban Edge is the company that resulted from the spin-off of our retail business outside of New York City. The Company owns 4.5% of Urban Edge. JBG SMITH is the resulting entity of the spin-off of our Washington D.C. segment and its combination with the management business and certain Washington, D.C. assets of The JBG Companies (the "Washington Spin"). Our board believes the presence of Mr. Roth on each of these Boards is beneficial to the Company and/or the broadly overlapping shareholder base of the Company, Urban Edge, and JBG SMITH.
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Mr. Tisch has been the Managing Member of TowerView LLC (a private investment partnership) since 2001. Mr. Tisch also serves as a member of the Board of Directors of Tejon Ranch Company (a New York Stock Exchange-listed real estate development and agribusiness company). Mr. Tisch is also a Board member and member of the Finance, Audit and Investment Committees of New York University.
Dr. West is Dean Emeritus of the Leonard N. Stern School of Business at New York University. He was a professor there from September 1984 until September 1995 and Dean from September 1984 until August 1993. Prior thereto, Dr. West was Dean of the Amos Tuck School of Business Administration at Dartmouth College. Dr. West is also a director of Alexander's.
Mr. Wight has been a general partner of Interstate since 1968. Mr. Wight is also a director of Alexander's.
Relationships Among our Trustees
Relationships Among our Trustees |
We are not aware of any family relationships among any of our Trustees or executive officers or persons nominated or chosen by us to become Trustees or executive officers.
Messrs. Roth, Wight and Mandelbaum each are general partners of Interstate. Since 1992, Vornado has managed all the operations of Interstate for a fee as described in "Certain Relationships and Related Transactions—Transactions Involving Interstate Properties."
Messrs. Roth, Wight and Mandelbaum and Dr. West are also directors of Alexander's. As of the record date, the Company, together with Interstate and its general partners, beneficially owns approximately 59% of the outstanding common stock of Alexander's.
For more information concerning Interstate, Alexander's and other relationships involving our Trustees, see "Certain Relationships and Related Transactions."
The common shares of the Company or its predecessor have been continuously listed on the NYSE since January 1962 and the Company is subject to the NYSE's Corporate Governance Standards.
Our Corporate Governance Framework
Vornado is committed to effective corporate governance and high ethical standards. Our Board believes that these values are conducive to strong performance and creating long-term shareholder value. Our governance framework gives our highly experienced independent Trustees the structure necessary to provide oversight, advice and counsel to the Company. The Board of Trustees has adopted the following documents, which are available on our website (www.vno.com/governance/overview):
We will post any future changes to these documents to our website and may not otherwise publicly file such changes. Our regular filings with the SEC and our Trustees' and executive officers' filings under Section 16(a) of the Securities Exchange Act of 1934, as amended (the "Securities Exchange Act"), are also available on our website. In addition, copies of these documents are available free of charge from the Company upon your
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written request. Requests should be sent to our investor relations department located at our principal executive office.
The Code of Business Conduct and Ethics applies to all of our Trustees, executive officers and other employees.
The Board has determined that Mses. Beinecke and Puri and Messrs. Kogod, Lynne, Mandelbaum, Tisch and Wight and Dr. West are independent under the Corporate Governance Standards of the NYSE, with the result that eight of our 10 Trustees are independent. The Board reached this conclusion after considering all applicable relationships between or among such Trustees and the Company or management of the Company. These relationships are described in the sections of this proxy statement entitled "Relationships Among Our Trustees" and "Certain Relationships and Related Transactions." Among other factors considered by the Board in making its determinations regarding independence was the Board's determination that these Trustees met all of the "bright-line" requirements of the NYSE's Corporate Governance Standards as well as the categorical standards adopted by the Board as contained in our Corporate Governance Guidelines.
Our Board is actively involved in strategic, risk and management oversight. Our Board regularly has in-depth discussions concerning the Company's strategies and risks during which the Board actively questions and considers these topics. Furthermore, the Board regularly meets with the most senior executive officers as well as the officers who directly report to the most senior executives. The Board believes a good working knowledge of these multiple levels of management aid it considerably in its important role of management oversight as well as with succession planning.
Shareholder Engagement and Governance Changes
During the past four years we have adopted or are proposing a number of significant governance changes following outreach to our shareholders for their views. During each of the last four years, we met with or spoke to holders of more than 50% of our Shares. Based on that outreach, we believe the combination of actions we have taken present an overall governance structure responsive to their views. The changes implemented include:
Changes made since the date of our last proxy statement
Changes made between 2016 and 2017 proxy statements
Other changes made since 2015
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| | 8 | | | | VORNADO REALTY TRUST | | | | |
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CORPORATE GOVERNANCE |
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Regular Shareholder | | | • During each of the past five years, we have regularly met in person, or over the telephone, with shareholders holding over 50% of our Shares. • Ms. Candace Beinecke, our Lead Independent Trustee, has participated in many of these meetings or calls. | |
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Strong, Independent, | | | • In the past three years, we have added two new Trustees. We are committed to a continuous process of Board refreshment. • Over 80% of our Board is independent, with the only non-independent members being the current and former Chief Executive Officers. • 22% of our Board members are female. • Our Board members are invested in our Company—they are required (within five years of appointment or election) to hold Company equity having a value of at least 5x their annual cash retainer. • We have a Lead Independent Trustee with significant authority and responsibility. • Our Board is actively engaged in strategic, risk and management oversight. • Our Board and Board Committees undertake a robust self-evaluation at least annually lead by our Lead Independent Trustee. • Our Board actively monitors, oversees and participates in management succession planning. • The diverse skills and experiences of our Board members, enhanced by the fresh perspectives brought by our newer Trustees, and the industry and company-specific expertise of our longer-tenured Trustees, support in the oversight of Company business and strategy. • Our Board actively monitors our sustainability initiatives and compliance with our ethical and social policies. | |
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2019 PROXY STATEMENT | | | | VORNADO REALTY TRUST | | | | 9 | | |
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Strong Shareholder Rights | | | • We have a single class of Trustees, elected annually. • We have adopted proxy access with a 3/3/20/20 market standard. • Our shareholders may amend our Bylaws. • We changed our voting standards for Trustees so that if a Trustee does not receive majority support, he or she must tender his or her offer of resignation. • We have a clawback policy. • We have an anti-hedging policy. • We do not have a poison pill. • Our charter may be amended by a majority vote of our outstanding Shares other than with respect to limited provisions intended to protect our real estate investment trust tax status and the removal of Trustees. | |
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Shareholder Engagement and Governance Changes |
During the past four years we have adopted a number of significant governance changes following outreach to our shareholders for their views. During each of the last five years, we met with or spoke to holders of more than 50% of our Shares. Based on that outreach, we believe the combination of actions we have taken present an overall governance structure responsive to our shareholders' views. The changes implemented include:
NYSE-Listed |
The common shares of the Board.Company or its predecessor have been continuously listed on the NYSE since January 1962 and the Company is subject to the NYSE's Corporate Governance Standards.
Our Corporate Governance Framework |
Vornado is committed to effective corporate governance and high ethical standards. Our Board believes that these values are conducive to strong performance and creating long-term shareholder value. Our governance framework gives our highly experienced independent Trustees the structure necessary to provide oversight, advice and counsel to the Company. The Board would then determine whether to accept or rejectof Trustees has adopted the resignation and disclose its rationale for its decision.following documents, which are available on our website (www.vno.com/governance/overview):
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| | 10 | | | | VORNADO REALTY TRUST | | | | 2019 PROXY STATEMENT |
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We will post any future changes to these documents to our website and may not otherwise publicly file such changes. Our regular filings with the SEC and our Trustees' and executive officers' filings under Section 16(a) of the Securities Exchange Act of 1934, as amended (the "Securities Exchange Act"), are also available on our website. In addition, copies of these documents are available free of charge from the Company upon your written request. Requests should be sent to our investor relations department located at our principal executive office.
The Code of Business Conduct and Ethics applies to all of our Trustees, executive officers and other employees.
Corporate Governance at a Glance |
Board Independence |
Board Composition |
Board Committees |
Leadership Structure |
We have also significantly enhanced the corporate governance, sustainabilitydiscussed in depth at regular Board meetings and executive compensation disclosures in our proxy statement in the last four years.
We believe that our Company has been a leader in promoting sustainability practices. We regularly report to the Board on our sustainability programs and our Board playstakes an active role in the oversight of Vornado's sustainability practices, recognizing that sustainability and energy efficiency are central to Vornado's business strategy. In connectionengaging with our sustainability programs, we focus on:
We are recognized as an industry leader in sustainability and energy efficiency.
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Our greatest and most scarce asset is our people. We strongly believe in training and retaining talented employees and having management at many levels engage with our Board.
Furthermore, a good relationship with the communities in which we operate is essential. We foster and encourage community engagement and volunteerism for all employees.
Corporate Governance at a Glance
Board Independence
Board Composition
Board Committees
Leadership Structure
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Risk Oversight |
Open Communication and Shareholder Engagement |
Trustee Stock Ownership Management Succession Planning Sustainability and Corporate Responsibility Board Independence The Board in making its determinations regarding independence was the Board's determination that these Trustees met all of the "bright-line" requirements of the NYSE's Corporate Governance Standards as well as the categorical standards adopted by the Board as contained in our Corporate Governance Guidelines. Approval of Related Party Transactions Our Code of Business Conduct and Ethics include a policy for the review and approval of transactions involving the Company and related parties. Under the policy, "related parties" means our executive officers and Trustees, as well as any such person's immediate family members. The policy also covers entities that are owned or controlled by related parties, or entities in or of which related parties have a substantial ownership interest or control. Under the policy, all related party transactions are submitted to the Board or an independent committee thereof for review and are subject to approval. Board Participation Our Board is actively involved in strategic, risk and management oversight. Our Board regularly has in-depth discussions concerning the Company's strategies and risks during which the Board actively questions and considers these topics. Furthermore, the Board regularly meets with the most senior executive officers as well as the officers who directly report to the most senior executives. The Board believes a good working knowledge of these multiple levels of management aid it considerably in its important role of management oversight as well as with succession planning. Developing an Effective Board Our Board believes that the Board should be comprised of members who encompass a broad range of skills, expertise, industry knowledge and diversity of opinion, experience, perspective and contacts relevant to our business. Our Board is deeply involved in the business and strategy of our Company and the great depth of experience and insight that our Board members bring to meetings continues to be invaluable. The Board has not established any minimum qualifications that must be met by Trustee candidates or any set of specific qualities or skills that it believes our trustees must possess. The Corporate Governance and Nominating Committee and the Board believe that considering a Board candidate involves various objective and subjective assessments, many of which are difficult to quantify or categorize. However, the Corporate Governance and Nominating Committee and the Board do consider the following characteristics, competencies, and attributes when considering candidates for inclusion on our Board. Personal Characteristics Core competencies Commitment to our Company Team and Company considerations Nomination of a candidate should not be based solely on these listed factors.Sustainabilityresponsibility.responsibility and receives updates regularly at Board meetings.Our has determined that Mses. Beinecke and Puri and Messrs. Helman, Mandelbaum, Tisch and Wight and Dr. West are independent under the Corporate Governance Standards of the NYSE, with the result that seven out of nine standing for election are independent. The Board believeshad previously determined that each of Messrs. Kogod and Lynne was independent during his term of service on the Board. The Board should be comprisedreached these conclusions after considering all applicable relationships between or among such Trustees and the Company or management of members who encompass a broad range of skills, expertise, industry knowledge and diversity of opinion and contacts relevant to our business. Our Board is deeply involvedthe Company. These relationships are described in the businesssections of this proxy statement entitled "Relationships Among Our Trustees" and strategy of our Company"Certain Relationships and Related Transactions." Among other factors considered by the great depth of experience and insightBoard 2018 PROXY STATEMENTVORNADO REALTY TRUST11 that our Board members bring to meetings has been invaluable. The Board considers the following characteristics, competencies, and attributes when considering candidates for inclusion on our Board.Personal Characteristics•Integrity and Accountability: High ethical standards, integrity and strength of character in his or her personal and professional dealings and a willingness to act on and be accountable for his or her decisions.•Informed Judgment: Demonstrate intelligence, wisdom and thoughtfulness in decision-making. Demonstrate a willingness to thoroughly discuss issues, ask questions, express reservations, and voice dissent.•Financial Literacy: An ability to read and understand financial statements, financial ratios and various other indices for evaluating the Company's performance.•Mature Confidence: Assertive, responsible and supportive in dealing with others. Respect for others, openness to others' opinions and the willingness to listen.•High Standards: History of achievements that reflect high standards for himself or herself and others.Core competencies•Accounting and Finance: Experience in financial accounting and corporate finance, especially with respect to the industry in which our Company operates.•Business Judgment: Record of making good business decisions and evidence that he or she will act in good faith and in a manner that is in the best interests of our Company.•Strategic Insight: Record of insight with respect to our industry and market and other trends and conditions and applying such insight to create value or limit risk.•Management: Experience in corporate management. Understand management trends in general and in the areas in which we conduct our business.•Crisis Response: Ability and time to perform during periods of both short-term and prolonged crisis.•Industry: Specialized experience and skills in areas in which the Company conducts its business, including real estate, investments, capital markets and technology relevant to the Company.•Local Markets: Experience in markets in which our Company operates.•Leadership: Understand and possess skills and have a history of motivating high-performing, talented managers.•Strategy and Vision: Skills and capacity to provide strategic insight and direction by encouraging innovations, conceptualizing key trends, evaluating strategic decisions, and challenging our management to sharpen its vision.Commitment to our Company•Time and Effort: Able and willing to commit the time and energy necessary to satisfy the requirements of Board and Board committee membership. Expected to attend and participate in all Board meetings and Board committee meetings for which they are a member. Encouraged to attend all annual meetings of shareholders. A willingness to rigorously prepare prior to each meeting and actively participate in the
20182019 PROXY STATEMENT
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The following chart summarizes the competencies currently represented on our Board; the details of each of our Trustee's (other than Mr. Kogod, who will be retiring from the Board following the Annual Meeting) competencies are included in each Trustee's profile.
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| Competency/Attribute | | | Roth | | | | Beinecke | | | | Fascitelli | | | | Helman | | | | Mandelbaum | | | | Puri | | | | Tisch | | | | West | | | | Wight | | | |||||||||
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| | | Experience over several business cycles | | | | x | | | | x | | | | x | | | | x | | | | x | | | | x | | | | x | | | | x | | | | x | | | |||||||
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2019 PROXY STATEMENT | | | | VORNADO REALTY TRUST | | | | 15 | | |
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Board Leadership Structure |
Our Board is deeply focused on our corporate governance practices. We value independent board oversight as an essential component of strong corporate performance to enhance shareholder value. All of our Trustees are independent, except our current and former Chief Executive Officers. In addition, all of the members of our Board's committees, except the Executive Committee, are independent.
Our Board of Trustees is responsible for selecting the Chairman of the Board and the CEO. The Board annually reviews its leadership structure. The Board has determined that the combined role of Chairman and CEO, alongside an active and independent Lead Trustee position, is currently the best structure for Vornado and its shareholders. In its review of our leadership structure, the Board considered the following:
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A Lead Trustee is elected annually by the independent Trustees. We refer to this role as the Lead Trustee or the Lead Independent Trustee. Ms. Beinecke was first elected by our independent Trustees to serve as Lead Trustee for a one-year term on March 16, 2016, and was most-recently reelectedmost recently re-elected on February 8, 2018.7, 2019. When making the selection, the Board considered the attributes desired in a Lead Trustee, including being an effective communicator, having the ability to provide leadership and encourage open dialogue, and having a relevant background and the ability to devote sufficient time and attention to the position.
Our Lead Trustee position has clearly defined duties and responsibilities, which are set forth in our Governance Guidelines. They include the following authorities and responsibilities:
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| | 16 | | | | VORNADO REALTY TRUST | | | | 2019 PROXY STATEMENT |
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As Lead Trustee, Ms. Beinecke works closely with Mr. Roth identifying overall Company strategy and other matters to be discussed in depth at regular Board meetings and takes an active role in engaging with our investors.
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As both Lead Trustee and Chair of the Corporate Governance and Nominating committee, Ms. Beinecke has been actively involved in governance-related discussions with our shareholders. As Lead Trustee, Ms. Beinecke has worked closely with our Chairman, Mr. Roth, to develop Board meeting agenda items and ensure sufficient time allocation to these items and Ms. Beinecke has also facilitated robust discussions regarding long-term strategy and shareholder value creation and talent retention and development.
The strong working relationships among the Lead Trustee, Chairman and other Trustees are supported by a board governance culture that fosters open communications among the members, both during meetings and in the intervals between meetings. Open communication is important to develop an understanding of issues, promote appropriate oversight, and encourage the frank discussion of matters essential to leading a complex and dynamic enterprise.
In December 2016,
Board Refreshment |
Over the last three years, we welcomed ahave added two new member,independent trustees, Ms. Mandakini Puri to our Board of Trustees.and Mr. Helman. We are committed to ongoing Board refreshment and will continue to actively pursue qualified, diverse candidates for election to our Board.
Committees of the Board of Trustees
Committees of the Board of Trustees |
The Board has an Executive Committee, an Audit Committee, a Compensation Committee, and a Corporate Governance and Nominating Committee and an Executive Committee. Other than the Executive Committee, each committee is comprised solely of independent Trustees.
The Board held 1011 meetings during 2017.2018. Each Trustee attended at least 75% of the combined total of the meetings of the Board and all committees on which he or she served during 2017.2018.
In addition to full meetings of the Board, our non-management Trustees met seven times in sessions without members of management present. Ms. Beinecke, as Lead Trustee, acted as presiding member during these non-management sessions. We do not have a formal policy with regard to Trustees' attendance at Annual Meetings of Shareholders. All of our Trustees serving at the time of our 20172018 Annual Meeting of Shareholders were present at the meeting.
Audit Committee |
The Audit Committee held five meetings during 2017.2018. The members of the Audit Committee are Dr. West, as Chairman, Ms. Puri and Mr. Tisch. Until May 18, 2017, Mr. Kogod served on our Audit Committee. Ms. Puri joined our Audit Committee on that date.
The Board has adopted a written Audit Committee Charter, which sets forth the membership requirements and responsibilities of the Audit Committee, among other matters. The Audit Committee Charter is available on our website (www.vno.com/governance/committee-charters). The Board has determined that all existing Audit Committee members meet the NYSE and SEC standards for independence and the NYSE standards for financial literacy. Previously our Board had determined that Mr. Kogod had met those standards during his service on the Audit Committee.
The Board has determined that each of Dr. West, Ms. Puri and Mr. Tisch is an "audit committee financial expert," as defined by SEC Regulation S-K (and thus has three such experts serving on its Audit Committee)
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Committee members meet the NYSE and SEC standards for independence and the NYSE standards for financial literacy.
The Board has determined that each of Dr. West, Ms. Puri and Mr. Tisch is an "audit committee financial expert," as defined by SEC Regulation S-K (and thus has three such experts serving on its Audit Committee) and that each of such persons also meets the NYSE standards for financial management expertise. The Board reached this conclusion based on the relevant experience of each of Dr. West, Ms. Puri and Mr. Tisch, including as described above under "Biographies of our Trustees."
The Audit Committee's purposes are to: (i) assist the Board in its oversight of (a) the integrity of our financial statements, (b) our compliance with legal and regulatory requirements, (c) the independent registered public accounting firm's qualifications and independence and (d) the performance of the independent registered public accounting firm and the Company's internal audit function; and (ii) prepare an Audit Committee report as required by the SEC for inclusion in our annual proxy statement. The function of the Audit Committee is oversight. The management of the Company is responsible for the preparation, presentation and integrity of our financial statements and for the effectiveness of internal control over financial reporting. Management is responsible for maintaining appropriate accounting and financial reporting principles and policies and internal controls and procedures that provide for compliance with accounting standards and applicable laws and regulations. The independent registered public accounting firm is responsible for planning and carrying out a proper audit of our annual financial statements prior to the filing of our Annual Report on Form 10-K, reviewing our quarterly financial statements prior to the filing of each of our Quarterly Reports on Form 10-Q and annually auditing the effectiveness of internal control over financial reporting and other procedures. Persons interested in contacting our Audit Committee members with regard to accounting, auditing or financial concerns will find information on how to do so on our website (www.vno.com/governance/confidential-board-contact).
Compensation Committee The Compensation Committee is responsible for establishing the terms of the compensation of the executive officers and the granting and administration of awards under the Company's omnibus share plans. The committee, which held five meetings during Compensation decisions for our executive officers are made by the Compensation Committee. Decisions regarding compensation of other employees are made by our Chief Executive Officer or other senior managers and are subject to review and approval of the Compensation Committee. Compensation decisions for our Trustees are made by the Compensation Committee and/or the full Board. The agenda for meetings of the Compensation Committee is determined by its Chairman with the assistance of the Company's Secretary and/or other members of management. Compensation Committee meetings are attended from time to time by members of management at the invitation of the Compensation Committee. The Compensation Committee's Chairman reports the committee's determination of executive compensation to the Board. The Compensation Committee has authority under its charter to elect, retain and approve fees for, and to terminate the engagement of, compensation consultants, special counsel or other experts or consultants as it deems appropriate to assist in the fulfillment of its responsibilities. The Compensation Committee reviews the total fees paid by us to outside consultants to ensure that such consultants maintain their objectivity and independence when rendering advice to the committee. The Compensation Committee may receive advice from compensation consultants, special counsel or other experts or consultants only after consideration of relevant factors related to their fees, services and potential conflicts of interests, as outlined in the Compensation Committee's Charter. The Compensation Committee may, in its discretion, delegate all or a portion of its duties and responsibilities to a subcommittee of the committee. In particular, the Compensation Committee may delegate the approval of certain transactions to a subcommittee consisting solely of members of the committee who are (i) "Non-Employee Directors" for the purposes of SEC Rule 16b-3; and (ii) "outside directors" for the purposes of Section 162(m) of the Internal Revenue Code of 1986, as amended. Currently, all members of the Compensation Committee meet these criteria. See "Compensation Discussion and Analysis" below for a discussion of the role of executive officers in determining or recommending compensation for our executive officers. We have also included under Corporate Governance and Nominating Committee The Corporate Governance and Nominating Committee, which met once during In nominating Steven Roth for re-election at the 2019 annual meeting and assuming Mr. Roth were to be re-elected at all the boards on which he currently serves, the Corporate Governance and Nominating Committee (and later the full Board) considered that Mr. Roth would serve on boards of three public companies in addition to our Board. However, the Committee noted that one of those companies, Alexander's, is an affiliate for which we manage its properties and the two other companies (JBG SMITH and Urban Edge) resulted from spinning business units out of our company and have a broadly overlapping shareholder base. The Corporate Governance and Nominating Committee and the full Board each determined that Mr. Roth's service on these other Boards does not detract from his ability to represent, and devote time to, our company and such other Board service may in fact benefit our company. Executive Committee The Executive Committee possesses and may exercise certain powers of the Board in the direction of the management of the business and affairs of the Company. The Executive Committee consists of three members, Mr. Roth, Ms. Beinecke and Mr. Wight. Mr. Roth is the Chairman of the Executive Committee. The Executive Committee did not meet in 2018. The Board's Role in Risk Oversight While day-to-day risk management is primarily the responsibility of the Company's senior management team, the Board of Trustees is responsible for the overall supervision of the Company's risk management activities. The Board's oversight of the material risks faced by our Company occurs at both the full Board level and at the committee level. The Board's role in the Company's risk oversight process includes receiving reports from members of senior management on areas of material risk to the Company, including operational, financial, legal and regulatory, strategic, reputational, environmental and * * * * * Persons wishing to contact the independent members of the Board should call (866) 537-4644. A recording of each phone call to this number will be sent to one independent member of the Audit Committee as well as to a member of management who may respond to any such call if the caller provides a return number. This means of contact should not be used for solicitations or communications with us of a general nature. Information on how to contact us generally is available on our website (www.vno.com). CORPORATE SOCIAL RESPONSIBILITY We believe that sound corporate citizenship and governance and environmental principles are essential to our success. Our goal is to operate with the highest level of integrity and in a sustainable manner. We believe that an integrated approach to business strategy, corporate governance, sustainability and corporate citizenship provides for a better operating company, creates more attractive properties and creates long-term value. The following table highlights certain of our policies and initiatives in the area of corporate social responsibility. Strong Ethical and Social Policies Employee Inclusion Leader in Sustainability Practices Sustainability We believe that our Company has been a leader in promoting sustainability practices. We regularly report to the Board on our sustainability programs and our Board plays an active role in the oversight of Vornado's sustainability practices, recognizing that sustainability and energy efficiency are central to Vornado's business strategy. In connection with our sustainability programs, we focus on: Social Engagement Our greatest and most scarce asset is our people. We strongly believe in training and retaining talented employees and having management at many levels engage with our Board. Furthermore, a good relationship with the communities in which we operate is essential. We foster and encourage community engagement and volunteerism for all employees. The following table lists the number of Shares and Units beneficially owned, as of March Named Executive Officers and Trustees Steven Roth(5)(6)(7)(8) David Mandelbaum(5)(8)(10) Russell B. Wight, Jr.(5)(8)(11) Michael D. Fascitelli(7)(8)(12) Robert P. Kogod(8)(13) David R. Greenbaum(7)(8)(14) Joseph Macnow(7)(8)(15) Michael J. Franco(7)(8) Mitchell N. Schear(8) Daniel R. Tisch(8)(16) Richard R. West(8)(17) Candace K. Beinecke(8) Stephen Theriot(8) Michael Lynne(8) Mandakini Puri(8) All Trustees and executive officers as a group (15 persons)(7)(8) Other Beneficial Owners The Vanguard Group, Inc.(18) Vanguard Specialized Funds—Vanguard REIT Index Fund(19) BlackRock, Inc.(20) Norges Bank (The Central Bank of Norway)(21) State Street Corporation(22) as indicated: Steven Roth— Section 16(a) Beneficial Ownership Reporting Compliance Section 16(a) of the Securities Exchange Act requires our Trustees and executive officers, and persons who own more than 10% of a registered class of our equity securities, to file reports of ownership of, and transactions in, certain classes of our equity securities with the SEC. Such Trustees, executive officers and 10% shareholders are also required to furnish us with copies of all Section 16(a) reports they file. Based solely on a review of the Forms 3, 4 and 5, and any amendments thereto, furnished to us, and on written representations from certain reporting persons, we believe that the only filing deficiency under Section 16(a) by our COMPENSATION DISCUSSION AND ANALYSIS Executive Compensation Highlights Substantial Share Ownership Requirements No Excessive Change of Control or Severance Payments Other Shareholder Friendly Compensation-Related Provisions Executive Summary One of the fundamental objectives of our Compensation Committee is to ensure we provide a comprehensive compensation program that aids us in our efforts to attract, retain and appropriately reward a "best-in-class" executive management team. Such a program is critical to our achieving continued success in the highly-competitive commercial real estate industry. To better align the interests of our executive officers with those of our shareholders in a pay-for-performance setting, a significant portion of each executive's total compensation is variable through a combination of performance-based, short- and long-term incentives, which are described in more detail below. Our executive compensation program is intended to reward the achievement of annual, long-term and strategic goals of both the Company and the individual executive. To achieve this, our executive compensation program includes both fixed and variable components, as well as annual and long-term components, as described below. In particular, a majority of the compensation for our In addition to the goals and objectives of our compensation program, we are also committed to promoting appropriate governance applicable to compensation that serves the interests of both our executive management team and shareholders. The table below highlights key features of our compensation for our NEOs and governance programs: As an indication of the positive response of our shareholders to our approach, at our 2018 Annual Meeting approximately 85% of the votes cast on our advisory vote on executive compensation were cast FOR our compensation program. Our Compensation Committee considered the results of the 2018 votes and has continued our compensation program design which it believes embodies shareholder-friendly practices. Business Highlights For 2018, the following highlights were among the factors considered in the compensation decision process: • $442 million acquisition of the retail condominium at 1535 Broadway; • $44 million acquisition of 537 West 26th Street and 55,000 square feet of additional zoning air rights; and • $42 million purchase price to increase our ownership interest in the joint venture that is developing the Farley Office and Retail Building to 95.0% from 50.1% where we are developing 850,000 square feet of unique office and retail space. We completed the following sale transactions during 2018: NOI at share FFO, as adjusted FFO 1-year TSR Our The overall levels of compensation and the allocation among these components are determined annually by our Compensation Committee based upon an analysis of the Company's performance during the year and a review of the prevailing competitive market for executive talent in which we operate. Historically, a substantial majority of the total compensation for our CEO The components of our compensation program for our senior management can be described as shown in the chart below. As noted below, each component of compensation is subject to a cap. Key Features/Actions: • Fixed Compensation • No executive receives more than $1,000,000 in salary (not including the effect of an "extra" pay period in 2016) • NEO base salaries remain unchanged since 2008 Key Features/Actions: • Variable, short-term cash compensation awards • Aggregate pool only funded upon the achievement of a threshold level of FFO, as adjusted • Aggregate pool capped at 1.25% of FFO, as adjusted • Allocated based on objective and subjective Company, business unit and individual performance • Committee can decide to pay out less than the full amount of the funded pool Key Features/Actions: • Vest ratably over a four-year period • Subject to a two-year holding period (regardless of vesting) and a "book-up" event (typically an increase in Share price) to have value Objective: Designed to (1) enhance our pay-for-performance structure by requiring a meaningful and sustained Share price increase before awards have value and (2) align compensation with shareholder interests, while motivating and rewarding senior management for superior share price performance Key Features/Actions: • Awards only have value if there has been a specified increase in the Company's share price over a defined and limited period so that the performance conditions are met • Vest ratably over a four-year period Objective: Designed to (1) enhance our pay-for-performance structure and (2) align compensation with shareholder interests, while motivating and rewarding management for increases in share price Key Features/Actions: • Awards only have value upon conversion to the extent of an increase in the Company's Share price • Vest ratably over a four-year period • Convertible into Class A Units of Vornado Realty L.P. for up to 10 years Key Features/Actions: • Only provides value to our executives upon the creation of meaningful shareholder value above specified hurdles over a three-year performance period • Subject to a maximum plan value of $35 million (for grants in 2018) • Under the Absolute TSR component, the Company must achieve a return in excess of 21% (or 7% per annum) for OPP Units to earn any value • Under the Relative TSR Component, the Company must achieve a return above an applicable industry index or indices (the "Index") for OPP Units to earn any value. OPP Units awarded in 2018 used the SNL Office Index (70%) and the SNL Retail Index (30%). • Under the Relative TSR Component, to the extent the Company underperforms the Index by more than 600 basis points (or 200 basis points per annum), the Absolute TSR Component payout, if any, is reduced • The Relative TSR Component value is reduced if the Absolute TSR is below 3% per annum with a maximum payout of 50% of the awards if the Absolute TSR is less than 0% • Earned payouts are subject to two years of additional time-based vesting and an additional one year holding period following vesting Pay Mix We believe that the executive management team's compensation should be appropriately at-risk and meaningfully dependent upon the achievement of robust and objective performance requirements. As illustrated below, approximately 91% of the Chief Executive Officer's total direct 2018 compensation and 80% of the other NEOs' total direct 2018 compensation is variable and subject to Company results; as a subset of variable compensation, approximately 43% of our Chief Executive Officer's total direct 2018 compensation and 28% of the other NEOs' total direct 2018 compensation reflects pay at-risk based on prospective Share price or TSR performance. Approach of this Compensation Discussion and Analysis Section This Compensation Discussion and Analysis, or "CD&A," describes our executive compensation program for fiscal year 2018, certain elements of our 2019 program and the executive pay philosophy adhered to by our Compensation Committee in making executive compensation decisions. We use our executive compensation program to attract, retain and appropriately reward the members of our senior executive management team who lead our Company. In particular, this CD&A explains how the Compensation Committee made 2018 compensation decisions for our senior executive management team, including the following named executive officers (the "Named Executive Officers" or "NEOs"): Biographical information for our current Named Executive Officers is available in Part III to our Form 10-K for the year ended December 31, 2018, as filed with the SEC. Under the rules and regulations of the SEC, each year the "Summary Compensation Table" must disclose the salary paid and cash bonus earned during that year. This table also requires disclosure of all equity-based awards in the year granted, even if that year is different than the year such compensation was earned. Because the equity we grant in any one year is awarded in recognition of performance in the prior year, the SEC's approach requires that we disclose our equity awards granted in respect of 2017 performance on the 2018 line in the Summary Compensation Table. Although we believe the most appropriate disclosure of our executive compensation would combine the annual cash salary paid in 2018 with annual cash incentive award (if applicable), and the equity-based compensation paid or granted in 2019 for 2018 performance, the rules and regulations do not permit that. In other words, we grant our annual incentives and equity-based compensation and make our compensation decisions retrospectively—in the first quarter of a fiscal year for the actual performance of an executive in the just-then-completed prior year. To more accurately present our compensation information in line with how our decisions are actually made (as described in more detail under "—Comparison of 2016-2018 Direct Compensation"), the following discussion of compensation is with respect to both the annual incentive paid with respect to a stated year and the equity being granted following the close of that applicable year after performance has been assessed. We also present (under "—Realized Compensation Table"), the actual compensation received by our NEOs in 2018, 2017 and 2016. We believe that realized compensation information is a useful method for evaluating the effectiveness of the alignment of our compensation program with our Share performance. In addition, when making compensation decisions, our Compensation Committee uses the potentially earnable dollar amount of long-term performance awards ("Notional Amount"), such as our Performance Conditioned AO LTIP and OPP awards, as one of the guideposts for year over year changes. Due to changes in the accounting cost of awards from year-to-year (due to, among other things, changes in the volatility of our Shares or changes to the terms of our awards to conform more closely to the standards for such plans adopted by other companies, including our peers) the accounting cost of awards may fluctuate from year to year in a manner inconsistent with the Notional Amount of awards. How Pay Aligns with Performance 2018 Performance Metrics Considered For 2018 compensation, among the factors considered, both objectively and subjectively, were the changes in the Company's and the applicable division's operating and performance results during the year (NOI at share, FFO, as adjusted, and FFO), our TSR for the year, and the factors mentioned below. Increases or decreases in pay and allocations for 2018, 2017 and 2016 of various compensation elements to our Named Executive Officers were based, in part, upon the results of our review of these factors. "NOI" (or Net Operating Income) means total revenues less operating expenses. "FFO" means funds from operations as defined by the Nareit. "FFO, as adjusted," means FFO as adjusted to exclude non-comparable gains and losses, impairments and non-real estate-related items. Each of these metrics is provided in our regular annual and quarterly reports as well as reconciliations to the most comparable metric presented in accordance with Generally Accepted Accounting Principles applicable in the United States ("GAAP"). Although they are non-GAAP metrics, we use these metrics in making our compensation decisions because they facilitate meaningful comparisons in operating performance between periods and among our peers. TSR means our total shareholder return (including dividends) for a given period. Key Year-Over-Year Comparisons Our TSR for 2018 was a negative 17.8% while that of the FTSE Nareit Office Index ("Office REIT") was a negative 14.5%. For 2018, we have kept flat or decreased each of our NEO's base and total compensation as reflected in the "Direct Compensation Table." In addition, as shown in the "Realized Compensation Table," in 2018 our CEO's total realized compensation was 57% of his total direct compensation reflecting the alignment of his compensation with shareholder returns. The same is the case for our other NEO's where the average of the total realized compensation was 72% of the average of their total direct compensation. Key Considerations We operate in a highly competitive commercial real estate industry where we actively compete for business opportunities and executive talent. In determining annual incentive and long-term equity compensation levels earned for 2018, our Compensation Committee did not weight any one factor, but sought to find a balance among (i) appropriately rewarding the significant operational achievements by the Company during the year, (ii) ensuring annual incentive, long-term equity and total compensation levels were in line with the prevailing competitive market and adequate to address our recruitment and retention needs and (iii) maintaining a balanced compensation program designed to foster alignment of management and shareholder interests in a manner that reflects evolving market "best practices" as well as views of our shareholders. No numerical weight is attributed to any one factor. Alignment of Pay with Performance Our Compensation Committee made compensation decisions for 2018 in line with our pay-for-performance philosophy. Our Compensation Committee determines compensation for our Named Executive Officers and, We make our compensation decisions generally in the first quarter of a fiscal year. These decisions cover the prior year and are based on the prior year's performance by the Company and/or division or functional area and that of the applicable executive. In addition, in the first quarter of a fiscal year, we establish that year's performance threshold for our formula-based, short-term annual incentive program. Our decisions on compensation for our Named Executive Officers are based primarily upon our assessment of each executive's leadership, operational performance and potential to enhance long-term shareholder value. For our CEO, this assessment is made by the Compensation Committee. For our other Named Executive Officers, this assessment is initially made by our CEO subject to the review and approval of the Compensation Committee. Our annual, short-term incentive program provides for a minimum performance threshold for, and a cap on, a bonus pool comprising the aggregate dollar value of annual incentive awards we can make to our senior executive management team. We believe that this method, as opposed to an entirely formulaic method of determining compensation, provides us with the ability to adjust compensation based on responsibility, including success in creating a culture of unyielding integrity and compliance with applicable laws and our ethics policies. These factors may be considered on an absolute and/or relative basis with respect to other companies or indices. In determining individual pay levels and opportunities, we also consider each executive's current salary and prior-year bonus (or annual incentive award), the value of an executive's equity stake in the Company, and the appropriate balance between incentives for long-term and short-term performance and the compensation paid to the executive's peers within the Company. We also consider competitive market compensation paid by other companies that operate in our business or that compete for the same talent pool, such as other S&P 500 REITs, other real estate companies operating in our core markets and, in some cases, investment banking, hedge fund and private equity firms. However, we do not formulaically tie our compensation decisions to any particular range or level of total compensation paid to executives at these companies. In addition, we encourage alignment with shareholders' interests through long-term, equity-based compensation. We apportion cash payments and equity incentive awards as we think best in order to provide the appropriate incentives to meet our compensation objectives both individually and in the aggregate for executives and other employees. The factors we consider in evaluating compensation for any particular year may not be applicable to determinations in other years. Typically, our Chairman and CEO receives a higher proportion of his compensation in the form of equity than other Named Executive Officers who, in turn, receive a higher proportion of their compensation in the form of equity than our other employees. This allocation is based on (1) the relative seniority of the applicable executives and (2) a determination that the applicable executives should have a greater proportion of their compensation in a form that further aligns their interests with those of shareholders. We regularly review our compensation program to determine whether we have given the proper incentives to our Named Executive Officers to deliver superior performance on a cost-effective basis and for them to continue their careers with us. Role of the Corporate Governance and Nominating Committee, the Compensation Committee, and the CEO The Corporate Governance and Nominating Committee of our Board is responsible for evaluating potential candidates for Chairman and CEO, and for overseeing the development of executive succession plans. The Compensation Committee of our Board (1) reviews and approves the compensation of our executive officers and other employees whose total cash compensation exceeds $200,000 per year, (2) oversees the administration and implementation of our incentive compensation and other equity-based awards, and (3) regularly evaluates the effectiveness of our overall executive compensation program. As part of this responsibility, the Compensation Committee oversees the design, development and implementation of the compensation program for our CEO and our other Named Executive Officers. The Compensation Committee evaluates the performance of our CEO and sets his compensation. Our CEO and the Compensation Committee together assess the performance of our other senior executives and determine their compensation, based on the initial recommendations of our CEO. The other Named Executive Officers do not play a role in determining their own compensation, other than discussing individual performance objectives with our CEO. In support of these responsibilities, members of our senior executive management team, in conjunction with other senior executives, have the initial responsibility of reviewing the performance of the employees reporting to him or her and recommending compensation actions for such employees. This process involves multiple meetings among our CEO, our Compensation Committee and our Compensation Committee's independent compensation consultant. Typically, in the third and fourth quarters of each year, these parties meet to discuss and establish an overall level of compensation for the year and the base compensation for the following year. For Role of Compensation Consultants Our Compensation Committee has retained Willis Towers Watson Public Limited Company ("Willis Towers Watson") as its independent compensation consultant to provide the Compensation Committee with relevant data concerning the marketplace and our peer group as well as its own independent analysis and recommendations concerning For Consistent with prior years, the Compensation Committee reviewed and discussed the analyses prepared by Willis Towers Watson, and determined that the analyses were useful in indicating that the compensation opportunities awarded to executive officers are in line with the prevailing competitive market. Furthermore, realized awards duly reflect the performance of the Company and the shareholder value created. From time to time, the Company also engages the services of FTI Consulting, Inc., as a compensation consultant, to provide assistance with gathering and presenting third-party data used in determining industry-or market-specific results. Analysis of Risk Associated with Our Executive Compensation Program Our Compensation Committee has discussed the concept of risk as it relates to our executive compensation program and the Compensation Committee does not believe our executive compensation program encourages excessive or inappropriate risk-taking for the reasons stated below. We structure our pay to consist of both fixed and variable compensation. The fixed portion (base salary) of compensation is designed to provide a base level of income regardless of our financial or share price performance. The variable portions of compensation (annual incentive and long-term incentive equity) are designed to encourage and reward both short- and long-term corporate performance. For short-term performance, annual incentives are awarded based on the formulaic funding of our annual incentive pool and assessments of performance during the prior year. For long-term performance, our As demonstrated above, our executive compensation program is structured to achieve its objectives by (i) providing incentives to our Named Executive Officers to manage the Company for the creation of long-term shareholder value, (ii) avoiding the type of disproportionately large, short-term incentives that could encourage our Named Executive Officers to take risks that may not be in the Company's long-term interests, (iii) requiring our Named Executive Officers to maintain a significant investment in the Company and (iv) evaluating annually an array of performance criteria in determining executive compensation rather than focusing on a singular metric that may encourage unnecessary risk-taking. We believe this combination of factors encourages our Named Executive Officers to manage the Company prudently. Elements of Our Compensation Program Our Named Executive Officers' compensation currently has three primary components: The overall levels of compensation and the allocation among these components are determined annually by our Compensation Committee based upon an analysis of the Company's performance during the year and a review of the prevailing competitive market for executive talent in which we operate. Historically, a substantial majority of the total compensation for our CEO has been in the form of long-term equity awards, including performance-based awards subject to performance thresholds such as those awarded under our OPP. These longer-term awards further the Compensation Committee's desire to directly align management and shareholder interests and to provide incentives for each executive to successfully implement our long-term strategic goals. Annual Base Salary Base salaries for our Named Executive Officers are established based on the scope of their responsibilities, taking into account the compensation paid by other companies for similar positions as well as salaries paid to the executives' peers within the Company and any applicable employment agreement. In accordance with our pay-for-performance philosophy, we structure an executive's annual base salary to be a relatively low percentage of total compensation. There were no increases in our Named Executive Officers' base salary levels for of 2017, and there have not been any increases in our Named Executive Officers' base salary levels since 2008 (not including the impact of an extra pay period in 2016) For 2019, each of Messrs. Roth and Greenbaum elected to receive 80% of their annual base salary Annual Incentive Awards Our Compensation Committee has established an annual short-term incentive program for the senior executive management team that formulaically ties a maximum award pool to achieving an FFO, as adjusted, performance threshold. The Company views and, we believe our shareholders view, FFO, as adjusted, as one of the key operating metrics within the REIT industry and, we believe, a primary driver of long-term TSR performance. Our Compensation Committee has elected to use FFO, as adjusted, as the primary metric for our annual incentive awards rather than total FFO. FFO, as adjusted, excludes the impact of certain non-recurring items, such as gains on the sale of non- depreciable property, non-cash impairment losses, income or loss from discontinued operations and sold properties, gains and losses from the early extinguishment of debt and restructuring costs, among others, and thus the Compensation Committee believes it provides a better metric than total FFO for assessing management's performance for the year. Under our annual compensation program, members of our senior executive management team, including all of our Named Executive Officers, will have the ability to earn annual cash incentive payments and/or equity awards if and only if the Company achieves FFO, as adjusted, of at least 80% or more of the prior year's FFO, as adjusted. In the event that the Company fails to achieve FFO, as adjusted, of 80% or more of the prior year's FFO, as adjusted, no incentive payments would be earned or paid under the program. Moreover, even if the Company does achieve the stipulated FFO, as adjusted, performance requirement under the annual incentive program, the Compensation Committee Aggregate incentive awards earned under the annual short-term incentive program by our senior executive management team are subject to a cap of 1.25% of FFO, as adjusted, earned by the Company for the year, with individual award allocations under the program determined by the Compensation Committee based on an assessment of individual and Any awards earned under the annual incentive program are payable in cash and/or equity awards, generally in the first quarter of each year for the prior year's performance. Long-Term Equity Incentives Compensation is typically awarded to our Named Executive Officers in the form of long-term equity incentives issued under our 2010 Plan through performance-based equity awards, such as those that may be earned under our Performance Conditioned AO LTIP Units or our OPP Units, and For 2018 performance, employees other than our NEOs received awards of securities such as AO LTIP Units or stock options in lieu of Performance Conditioned AO LTIP Units. There were no OPP Description of Awards: Performance Conditioned AO LTIP Units: "Performance Conditioned AO LTIP Units" are AO LTIP Units that require the achievement of certain performance conditions by a specified date or they are forfeited. Performance Conditioned AO LTIP Units have been awarded only to our NEOs. The performance condition for Performance Conditioned AO LTIP Units granted in 2019 to our NEOs is that, prior to the fourth anniversary of the date of grant, the Company's Shares must trade (for each of 20 consecutive trading days) at a price at least equal to 110% of the price per Share on the date of grant of the awards. If the performance conditions are not met, the awards are forfeited. If the performance conditions are met, once vested, the awards may be converted into Class A common units of Vornado Realty L.P. in the same manner as other AO LTIP units until 10 years from the date of grant. AO LTIPs. "AO LTIP Units" are limited partnership units in Vornado Realty L.P. that are intended to produce for holders a substantially similar non-tax economic effect as that of options. AO LTIP Units are issued under the Company's Appreciation-Only Long-Term Incentive Plan. Awards of AO LTIP Units have been awarded to executives other than our NEOs. None of our Named Executive Officers has been awarded AO LTIP Units (except in the form of Performance Conditioned AO LTIP Units). AO LTIP Units are potentially convertible into Class A Units of Vornado Realty L.P. and then are ultimately redeemable by the holder for Company Shares or cash at the option of the Company. AO LTIP Units are issued under our 2010 Plan and may be convertible for up to a period of 10 years from the date of grant. Awards of AO LTIP Units granted to date vest ratably over four years from the date of grant. On the date of grant, each AO LTIP Unit is awarded with a specified strike price. That strike price will be equal to or greater than the price for one Share on the date of grant. Each AO LTIP Unit, on exercise, will be converted into such number of Class A Units that have a value equal to the excess of the closing price per Share on the date of conversion on the New York Stock Exchange over the strike price. After a required two-year holding period, those Class A Units, in turn, may be redeemable by the holder for Shares or cash, at the option of the Company. OPP Awards. We did not make any OPP awards in 2019 for 2018 performance. Our most recent OPP award was in 2018 for 2017 performance. These awards were made to both NEOs and other executives. These performance-based awards are earned over a three-year period, which is then followed by back-end vesting requirements (during years three, four and five) to act as a retention device and provide a strong incentive to the executives to increase shareholder value long after they performed the services for which the equity awards were initially granted. In particular, the awards provide for immediate cancellation if the executive voluntarily leaves or is terminated for cause (and, in either case, such person is no longer providing services to the Company or any of its affiliates as an employee, trustee or otherwise), excluding certain outstanding awards held by retirement eligible executives and employees above the age of 65 (or above the age of 60 with at least 20 years of service to the Company). Furthermore, we require our Our OPP is designed to provide compensation in a "pay-for-performance" structure. Awards under the OPP are a class of units (collectively referred to as "OPP Units") of the Company's Operating Partnership, Vornado Realty L.P., issued under our 2010 Plan. If the specific performance objectives of the OPP are achieved, the earned OPP Units become convertible into Class A common units of the Operating Partnership (and ultimately into Shares) following vesting, and their value fluctuates with changes in the value of our Shares. If the performance objectives are not met, the OPP Units are cancelled. Generally, unvested OPP Units are forfeited if the executive leaves the Company, except that OPP Units vest automatically on death. OPP Units are intended to also provide recipients with better income tax attributes than grants of options. With regard to awards under our OPP, participants have the opportunity to earn compensation payable in the form of equity if and only if we outperform a predetermined TSR and/or outperform the market with respect to relative TSR over a three-year performance period as determined at the end of the third year. Specifically, awards under our OPP may potentially be earned if the Company (i) achieves a TSR above that of an applicable industry index or indices over a three-year performance period (the "Relative Component"), and/or (ii) achieves a TSR level greater than 21% (over the three-year performance period) (the "Absolute Component"). For the 2018 OPP Plan (awarded for 2017 performance), we used a combination of the SNL Office Index (70%) and the SNL Retail Index (30%). For the 2017 OPP Plan (awarded for 2016 performance), we used the SNL REIT Index. To the extent that awards would be earned under the Absolute Component, but the Company underperforms the Index by more than a specified margin, such awards earned under the Absolute Component would be reduced based on the degree to which the Company underperforms the Index. In certain circumstances, if the Company outperforms the Index, but awards would not otherwise be earned under the Absolute Component, awards may still be earned under the Relative Component. Moreover, to the extent awards would otherwise be earned under the Relative Component but the Company fails to achieve at least a 3% per annum absolute TSR level, such awards earned under the Relative Component would be reduced based on the Company's absolute TSR performance. For the 2018 OPP, if the TSR is less than 0% the maximum payout is 50% of the total award regardless of relative performance. If the designated performance objectives are achieved, OPP Units are also subject to time-based vesting requirements. This creates, in the aggregate, years until full vesting (plus the additional one-year holding period for Executives), holders will continue to bear the same Share price and total return risk as our shareholders and be subject to the same "book-up" requirements as apply to Restricted Units and which are described below. Dividend payments on Shareholders and unit holders OPP Unitholders Restricted Shares and Units. "Restricted shares" are grants of Shares issued under our 2010 Plan that generally vest in three or four equal annual installments beginning approximately one year after the grant date. "Restricted units" are grants of limited partnership interests in Vornado Realty L.P., our operating partnership, through which we conduct substantially all of our business. These units also generally vest in three or four equal annual installments beginning approximately one year after the grant date and are exchangeable on a one-for-one basis into Vornado Realty L.P.'s Class A common units in certain circumstances. These circumstances principally include the requirement that Vornado Realty L.P. must have gone through certain tax "book-up" events whereby sufficient profits have been allocated to the restricted units so that they have the same capital account (and value) as Class A common units. In addition, there is a two-year holding requirement. Vornado Realty L.P.'s Class A common units can be redeemed for Shares on a one-for-one basis (or for the equivalent value in cash at the Company's option) with only limited restrictions, such as a 60-day waiting period between the time that a redemption notice is given and the date that Shares may be delivered. Restricted units are intended to also provide recipients with better income tax attributes than restricted shares and unlike option grants, grants of restricted units do not have a term at which they expire. During the restricted period, each restricted share or restricted unit entitles the recipient to receive payments from the Company equal to the dividends on one Share. Restricted equity awards further contribute in aligning management and shareholder interests, and the multi-year vesting requirements ranging from three to five years aid in our efforts to retain our executives and key employees over the long term. Further, our Compensation Committee believes restricted equity awards are a key component of a balanced equity compensation program, because incorporating time-based restricted equity awards into the equity compensation mix, as opposed to an equity compensation program comprised solely of awards subject to performance-based vesting requirements, ensures that a portion of each executive's equity compensation retains value even in a depressed market and provides executives with a baseline of value that lessens the likelihood that executives will take unreasonable risks to keep their market-based performance equity award vehicles "in the money." Stock Options. Since 2012, we have awarded stock options only to employees who do not receive AO LTIP Units, Performance Conditioned AO LTIP Units or OPP awards. Stock option awards issued under our 2010 Plan provide our executives the opportunity to purchase Shares at an exercise price determined on the date of grant. Historically, our stock option awards have either been in the form of at-the-money stock options, whereby the option exercise price is equal to the market price of Shares on the date of grant, or in the form of premium stock options, whereby the option exercise price is established at a level above the market price of Shares on the date of grant. In both instances, the market price of Shares must increase to a level above the option exercise price in order for the Nonqualified Deferred Compensation Plans We maintain two nonqualified deferred compensation plans, the Vornado Realty Trust Nonqualified Deferred Compensation Plan ("Plan I") and the Vornado Realty Trust Nonqualified Deferred Compensation Plan II ("Plan II"). Plan I and Plan II are substantially similar, except that Plan II, which applies to deferrals on and after January 1, 2005, is designed to comply with the deferred compensation restrictions of Section 409A of the Internal Revenue Code of 1986, as amended. Employees having annual compensation of at least $200,000 are eligible to participate in Plan II,provided that they qualify as "accredited investors" under securities laws. Members of our Board of Trustees are also eligible to participate. To participate, an eligible individual must make an irrevocable election to defer at least $20,000 of his or her compensation (whether cash or equity) per year. Participant deferrals are always fully vested. The Company is permitted to make discretionary credits to the Plans on behalf of participants, but as of yet has not done so. Deferrals are credited with earnings based on the rate of return of specific security investments or various "benchmark funds" selected by the individual, some of which are based on the performance of the Company's securities. Participants may elect to have their deferrals credited to a "Retirement Account" or a "Fixed Date Account." Retirement Accounts are generally payable following retirement or termination of employment. Fixed Date Accounts are generally payable at a time selected by the participant, which is at least two full calendar years after the year for which deferrals are made. Participants may elect to receive distributions as a lump sum or in the form of annual installments over no more than 10 years. In the event of a change of control of the Company, all accounts become immediately payable in a lump sum. Plan I also permits a participant to withdraw all or a portion of his or her account at any time, subject to a 10% withdrawal penalty. Retirement and 401(k) Plans We offer a 401(k) Retirement Plan to all of our employees in which we provide matching contributions (up to 75% of the statutory maximum but not more than 7.5% of cash compensation) that fully vest after five years of employment. We do not have any other retirement plan. Retirement plans are not a factor in our current compensation determinations. Perquisites and Other Compensation We provide our Named Executive Officers with certain perquisites that we believe are reasonable and in line with the prevailing competitive market. These perquisites include supplemental life insurance and an allowance for financial counseling and tax preparation services for certain Named Executive Officers. Additionally, due to the location of our corporate offices in New York City and the extensive business-related travel requirements of our Named Executive Officers, we provide certain of our Named Executive Officers with the use of a car and/or driver. Providing a car and driver allows these executive officers to use their travel time efficiently and productively for business purposes, including (i) telephonic meetings and (ii) visiting our properties and meeting with our tenants. Accordingly, we believe providing these benefits serves the best interests of our Equity Ownership Guidelines To further foster the strong ownership culture among our senior executive management team and ensure the continued direct alignment of management and shareholder interests, and consistent with emerging corporate governance trends, we have adopted executive equity ownership guidelines requiring that our NEOs and other members of our senior executive management team maintain a minimum ownership level of Shares or related Company equity. The equity ownership requirements (comprised of Shares and certain securities convertible or redeemable for Shares) for our executives are as follows: Executive officers have five years from the date of becoming an executive officer to satisfy the ownership requirement. All of our Named Executive Officers satisfy these guidelines. We have also adopted equity ownership guidelines for members of our Board of Trustees. Under the equity ownership guidelines adopted for our Board of Trustees, all non-employee Trustees are required to maintain a minimum ownership level of Shares or other Company equity having a value equal to at least five times their annual cash Comparison of 2016-2018 Direct Compensation Under the rules and regulations of the SEC, each year the "Summary Compensation Table" must disclose the salary paid during that year, the annual incentive earned for that year and the equity-based, long-term incentive granted during that year, which for us represents the equity-based, long-term incentive award earned for theprior year. As discussed above, because the equity-based pay we award in the first quarter of each year (similar to the cash bonus paid in the first quarter of each year) was earned based on performance in the prior year, the SEC's approach prevents us from showing together all the pay—salary, annual cash incentive and equity-based pay—earned for any one year. In order to provide our shareholders with the aggregate amount of compensationearned by each Named Executive Officer for a given calendar year, we are including below a supplemental The principal difference between the Direct Compensation Table The Direct Compensation earned by our Named Executive Officers for the 2016-2018 period was as follows: Steven Roth Joseph Macnow David R. Greenbaum Michael J. Franco(6) Comparison of Realized Compensation with Direct Compensation The following table illustrates pay awarded to and earned by each of the Named Executive Officers for service and performance with respect to 2016 through 2018. This table is prepared on the same basis as the "Direct Compensation Table" except that the value actually realized from the respective performance-based compensation (in this case, OPP Units) maturing each applicable year is shown instead of the accounting cost of what was awarded. The amounts reported below meaningfully differ from the amounts determined under SEC rules and reported in the "Summary Compensation Table" and this table is not a substitute for the "Summary Compensation Table." Realized Compensation Table The Realized Compensation and Direct Compensation earned by our Named Executive Officers for the 2016-2018 period were as follows: Steven Roth Joseph Macnow David R. Greenbaum Michael J. Franco(6) Current Year Compensation Decisions As explained above, we make our incentive compensation decisions generally in the first quarter of a fiscal year with respect to the prior year. In addition, in the first quarter of 2019, we established the 2019 performance thresholds and caps for our formula-based short-term annual incentive program. The compensation levels discussed in this Compensation Discussion and Analysis section are not directly comparable to the amounts presented in the Summary Compensation Table later in this proxy statement for the reasons discussed above under "How We Determine Executive Compensation," "Comparison of 2016-2018 Total Direct Compensation" and "Comparison of 2016-2018 Total Direct Compensation and Realized Compensation." In addition, in the discussion below, when we discuss the "Fair Value" of equity awards, we refer to the "fair value" for such awards determined in accordance with applicable securities and accounting rules (excluding the impact of estimated forfeitures related to service-based vesting conditions). Fair Value is the method used for presenting values for equity awards in our "Summary Compensation Table" and elsewhere under "Executive Compensation." Steven Roth Joseph Macnow Stephen W. Theriot David R. Greenbaum Michael J. Franco(4) Mitchell N. Schear Total Compensation of Our CEO (with equity determined at Fair Value) For 2018, Mr. Roth's total direct compensation was $11,198,258 compared to $11,238,630 in the prior year, a 0.4% decrease. For 2018, Mr. Roth's total realized compensation was $6,391,468 compared to $5,625,071 in the prior year, a 13.6% increase. For 2017, Mr. Roth's total direct compensation Mr. Roth's salary, incentives and equity awards were based on an evaluation of those factors previously described and were approved by the Compensation Committee. Among the factors considered, both objective and subjective, were the strategic position of the Company, the changes in the Company's operating and performance metrics over the applicable period (NOI at share, FFO, as adjusted and FFO per Share), our TSR over the applicable period and the other factors previously described. These factors were considered as a whole, and no numerical weight was attributed to any particular factor. The majority of Mr. Roth's compensation is in the form of equity to further align his interests with those of our shareholders. Cash Compensation of Our CEO Mr. Roth has served as our CEO since April 15, 2013. Mr. Roth's base salary of $1,000,000 was established in March 2001 and has remained unchanged since then. Mr. Roth's total cash compensation for 2018, 2017 Equity Compensation of Our CEO Mr. Roth's long-term equity incentive compensation award for 2018 performance (granted in 2019) was 258,152 Performance Conditioned AO LTIP Units and 74,547 restricted units (collectively having a Market Value of $9,613,581). The Fair Value at the date of grant of these Performance Conditioned AO LTIP Units and restricted units was $9,373,241 and represents no increase in Table. Mr. Roth's long-term equity incentive compensation award for 2017 performance (granted in 2018) was 238,257 OPP Units and For our other Named Executive Officers (Messrs. Macnow, Greenbaum were considered as a whole and no numerical weight was attributed to any particular factor. In the aggregate, total compensation (with equity determined at Fair Value) awarded to these Named Executive Officers for Other Compensation Policies and Practices Equity Grant Practices All of our equity-based compensation awards are made under our shareholder-approved 2010 Plan. The 2010 Plan provides that we are able to issue up to 6,000,000 Share equivalents with each award of a Share (or other securities that have the value equivalent to one Share when earned or vested) counting as one Share equivalent and each award of an option to acquire our Shares (or other securities that by their terms require the payment of an exercise price or deduction of a strike price) counting as one-half of a Share equivalent. Under the 2010 Plan, the exercise price of each stock option awarded must be (or must have been) no less than the average of the high and low price of our Shares on the New York Stock Exchange on the date that the award was granted by the Compensation Committee. The vast majority of our equity awards are determined and granted in the first quarter of each year at the same time as management and the Compensation Committee conclude their annual evaluation of the performance of our senior executive management team as a group and each executive individually. In addition and from time to time, additional equity awards may be granted in connection with new hires or promotions. We have never repriced options and our 2010 Plan does not permit repricing of options without shareholder approval. Employment, Severance and Change of Control Agreements We do, from time to time, enter into employment agreements with some members of our senior executive management team. Otherwise, our senior executive management team and other employees serve "at will." Except as may be provided in these employment agreements or pursuant to our compensation plans generally, we have not entered into any separate severance or change of control agreements. For those of our senior executive management team who have employment agreements, these agreements generally provide for a severance payment (for termination by us without cause or by the executive with good reason (each as defined in the applicable employment agreement and further described below under "Employment Contracts")) and change of control payment (if employment is terminated following a change of control) in the range of one to three times the applicable executive's annual salary and incentive. Since 2012, the agreements evidencing awards under the 2010 Plan have provided for the satisfaction of a "double trigger" as a condition to the acceleration of the vesting of any unvested equity awards. These change of control arrangements are designed to compensate management in the event of a termination following a fundamental change in the Company, their employer, and to provide an incentive to these executives to continue with the Company at least through such time. Severance and change of control arrangements do not generally affect other compensation arrangements for a particular period. A more complete description of employment agreements, severance and change of control arrangements pertaining to the Named Executive Officers is set forth under "Employment Contracts" and "Severance and Change of Control Arrangements." Tax Deductibility of Compensation The tax efficiency of compensation is one of many factors that enter into the design of our compensation programs. We look at a combination of the rates at which our executives will be taxed and the value of any deduction that we may be entitled to when developing our approach to compensation. We believe that the limitations of Section 162(m) of the Internal Revenue Code (which limits the corporate tax deduction for certain executive officer compensation that exceeds $1 million a year) does not apply to most of the compensation we paid to our Named Executive Officers for The Compensation Committee of the Board of Trustees of Vornado Realty Trust, a Maryland real estate investment trust (the "Company"), has reviewed and discussed the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K of the Securities and Exchange Commission with management and, based on such review and discussions, the Compensation Committee recommended to the Board that the Compensation Discussion and Analysis be included in the proxy statement and incorporated by reference in the Company's Annual Report on Form 10-K for the year ended December 31, EXECUTIVE COMPENSATION The following table sets forth (in accordance with the reporting requirements of the SEC) the compensation of each of the Company's Chief Executive Officer, Chief Financial Officers and the Summary Compensation Table Steven Roth Chairman and Chief Executive Officer (Principal Executive Officer) Executive Officer (Principal Executive Officer) Joseph Macnow Chief Financial Officer (Principal Financial Officer) from February 15, 2017 Stephen W. Theriot Chief Financial Officer (Principal Financial Officer) until February 15, 2017 Chief Financial Officer (Principal Financial Officer) from February 15, 2017 David R. Greenbaum President—New York Division Michael J. Franco Executive Vice President—Chief Investment Officer since May 21, 2015) Mitchell N. Schear President—Vornado/ Charles E. Smith Washington, D.C. Division until July 18, 2017 Steven Roth Joseph Macnow David R. Greenbaum Michael J. Franco The following table describes each component of the All Other Compensation column in the Summary Compensation Table. Steven Roth Joseph Macnow Stephen W. Theriot David R. Greenbaum Michael J. Franco Mitchell N. Schear Grants of Plan-Based Awards in 2018 The following table lists all grants of plan-based awards to the Named Executive Officers made in Steven Roth Joseph Macnow Stephen W. Theriot David R. Greenbaum Michael J. Franco Mitchell N. Schear Outstanding Equity Awards at Year-End The following tables summarize the number and value of equity awards held at December 31, Steven Roth 1/13/17 1/14/16 1/14/15 1/10/14 3/15/13 2/28/11 3/11/10 2/27/09 Joseph Macnow 1/13/17 1/14/16 1/14/15 1/10/14 3/15/13 2/28/11 3/11/10 2/27/09 Stephen W. Theriot(4) 1/13/17 1/14/16 1/14/15 David R. Greenbaum Steven Roth 3/15/18 1/13/17 1/14/16 1/14/15 1/10/14 3/15/13 2/28/11 3/11/10 2/27/09 Michael J. Franco Joseph Macnow 3/15/18 1/13/17 1/14/16 1/14/15 1/10/14 3/15/13 2/28/11 3/11/10 David R. Greenbaum 3/15/18 1/13/17 1/14/16 1/14/15 1/10/14 2/28/11 3/11/10 Michael J. Franco 3/15/18 1/13/17 1/14/16 1/14/15 1/10/14 2/28/11 12/10/10 Mitchell N. Schear(4) 1/14/16 1/14/15 Aggregate Option Exercises in 2018 and Units Vested Steven Roth Joseph Macnow Stephen W. Theriot David R. Greenbaum Michael J. Franco Mitchell N. Schear Employee Retirement Plan The Company does not maintain a retirement plan other than a 401(k) plan. Deferred Compensation The following table summarizes the contributions, earnings, withdrawals and balance for the Named Executive Officers for and at year-end Non-Qualified Deferred Compensation Steven Roth Joseph Macnow Stephen W. Theriot David R. Greenbaum Michael J. Franco Mitchell N. Schear Employment Contracts Joseph Macnow Mr. Macnow has had an employment agreement with the Company since November 21, 1980. Mr. Macnow currently serves as Executive Vice President, Chief Financial Officer and Chief Administrative Officer pursuant to his Amended and Restated Employment Agreement, dated as of July 27, 2006. This agreement provides that on each December 31 the employment term shall automatically be extended for one additional year unless either the Company or Mr. Macnow gives written notice not to extend the agreement at least 90 days before such date. Mr. Macnow's employment agreement provides that his base salary will not be reduced during the term of the agreement and is currently $1,000,000. Mr. Macnow's employment agreement provides that he will be entitled to participate at a level commensurate with his position in any equity compensation payable to senior executives of the Company. In accordance with the terms of his employment agreement, Mr. Macnow has also been provided with a car and driver. The agreement also provides that, if Mr. Macnow's employment is terminated by the Company without cause or by him for good reason (as defined in the agreement to include, among other things, a change in his responsibilities, change in control of the Company, relocation of the Company's principal executive offices, the failure of the Company to comply with the terms of the agreement or the failure of the Company to renew the agreement upon expiration), he will receive: (a) a lump-sum payment of three times the sum (not to exceed $3.3 million, in the aggregate) of (i) his annual base compensation plus (ii) the average of the annual bonuses earned by him in the two fiscal years ending immediately prior to his termination; (b) immediate vesting in any equity awards granted to him by the Board; and (c) continued provision of benefits to him and his family for three years. The agreement further provides that, if Mr. Macnow's employment is terminated by him without good reason or by the Company for cause (as defined in the agreement to include conviction of, or plea of guilty or nolo contendere to, a felony, failure to perform his duties or willful misconduct), payment of salary will cease. David R. Greenbaum Mr. Greenbaum has an employment agreement that commenced on April 15, 1997 pursuant to which he serves as President—New York Division. The employment agreement provides that, commencing on April 30, 2000, and on each April 30 thereafter, the employment term shall automatically be extended for one additional year unless either the Company or Mr. Greenbaum gives written notice not to extend the agreement at least 90 days before such date. The employment agreement provides that Mr. Greenbaum's base salary shall not be reduced during the term of the agreement. Mr. Greenbaum's current annual base salary is $1,000,000. Mr. Greenbaum's employment agreement provides that he will be entitled to participate at a level commensurate with his position in any equity and/or incentive compensation payable to senior executives of the Company. In accordance with the terms of his employment agreement, he has also been The agreement also provides that if Mr. Greenbaum's employment is terminated by the Company without cause or by him for good reason (as defined in the agreement to include, among other things, a change in his responsibilities, change in control of the Company, relocation of the New York Division's principal executive offices, the failure of the Company to comply with the terms of the agreement or the failure of the Company to renew the agreement upon expiration), Mr. Greenbaum will receive (a) a lump-sum payment equal to three times the sum of (i) his annual base compensation and (ii) the average of the annual bonuses earned by him in the two fiscal years ending immediately prior to his termination and (b) continued provision of benefits to him and his family for three years. The agreement further provides that if his employment is terminated by him without good reason or by the Company for cause (as defined in the agreement to include conviction of, or plea of guilty or nolo contendere to, a felony, failure to perform his duties or willful misconduct), payment of his salary will cease. Michael J. Franco Mr. Franco renewed his employment agreement with the Company as of January 10, 2014, pursuant to which he currently serves as Executive Vice President—Chief Investment Officer. Mr. Franco's employment agreement provides for an initial four-year term with automatic renewals unless either party gives written notice not to extend the agreement 120 days prior to its scheduled termination date. Mr. Franco's employment agreement provides that his base salary will not be reduced during the term of the agreement and is currently $1,000,000. During his employment, Mr. Franco will be entitled to receive an annual bonus, determined at the discretion of the Company with an annual target of $1,500,000. Upon entering into the employment agreement, Mr. Franco received an initial equity grant of $3,000,000 of restricted units. These units conviction of, or pleas of guilty or nolo contendere to, a felony, failure to perform his duties or willful misconduct), payment of his salary will cease. Other Named Executive Officers Mr. Roth (our Chairman and CEO) does not have an employment agreement. Of our Named Executive Officers, each of Messrs. Macnow, Greenbaum and Franco has an employment Our employment agreements are negotiated on a case-by-case basis. As discussed under "Compensation Discussion and Analysis," we believe that in certain circumstances such agreements are in the best interests of the Company and our shareholders to ensure the continued dedication of such employees, notwithstanding the possibility, threat or occurrence of a change of control. Generally, our agreements govern severance payments under the following circumstances: (1) termination of the employee for "cause"; (2) termination by the employee for "good reason" (such as breach of the employment agreement by the Company or, in certain cases, if a change of control occurs and the employee then decides to terminate his employment) or by the Company without "cause"; (3) termination following a disability; (4) termination due to death; and (5) in certain cases, termination upon retirement after the employee reaches the age of 65. Reference should be made to the actual employment agreements for the specific terms. Generally, however, on any termination, the applicable executive officer will receive his accrued and unpaid salary and other benefits until the date of termination. For "cause" terminations by the Company, the employee will not receive any additional payment. If the employee terminates his employment for "good reason" or the Company terminates his employment without "cause," the employee typically receives an additional payment (or payments over a specified period) that may vary from one year of salary and bonus to up to three years of salary and bonus. Generally, cash payments are in a lump sum other than in the case of termination on disability or death when the costs of benefits may be paid for a period of one to three years (depending upon the applicable executive's agreement). For terminations due to disability or death, an executive who has this provision in the applicable agreement typically receives between one year of salary or bonus and three years of salary. In certain cases, the employment agreements also provide for continued benefits for specified periods. Historically, severance payments following a change of control under employment agreements for our Named Executive Officers require that the change of control must occur and be followed by any termination of employment (for whatever reason) in order for there to be a payment. We believe that our current severance provisions appropriately achieve the benefits of ensuring the dedication of employees in connection with a change of control without providing for an automatic payment under the employment agreement for a change of control. Our equity-based compensation awards are governed by the individual award agreements issued under our omnibus share plans. Generally, upon terminations of employment, no unvested awards are accelerated but employees are entitled to keep awards that have already vested if they exercise options or similar awards within specified periods after termination. In Mr. Franco's case, however, his employment agreement provides that on a termination by the Company without cause or by Mr. Franco with good reason, his unvested equity awards (other than unearned OPP Units) then vest. Our forms of award agreements for annual equity awards provide that unvested equity awards vest following a change of control only if the applicable employee's employment is terminated by the Company without "cause" or by such employee with "good reason." We believe these vesting provisions for equity awards following a change of control are appropriate due to the change in the nature of the The information presented below reflects the estimated payments that each of our Named Executive Officers would have received under the employment termination scenarios (including following a change of control) if employment termination were to have occurred on December 31, Steven Roth (amounts in dollars) Bonus Severance Unvested Options Unvested Restricted Units Unvested OPP Units Benefits Continuation Total Joseph Macnow (amounts in dollars) Bonus Severance Unvested Options Unvested Restricted Units Unvested OPP Units Benefits Continuation(3) Total David R. Greenbaum (amounts in dollars) Bonus Severance Unvested Options Unvested Restricted Units Unvested OPP Units Benefits Continuation(3) Total Michael J. Franco (amounts in dollars) Bonus Severance Unvested Options Unvested Restricted Units Unvested OPP Units Benefits Continuation Total Pay Ratio Disclosure Rule In August 2015, pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act, the SEC adopted a rule requiring annual disclosure of the ratio of the median employee's annual total compensation to the total annual compensation of the principal executive officer ("PEO"). The Company's PEO is Mr. Roth. Pursuant to the SEC rules, we determined a "Median Employee" and compared such employee's total annual compensation to that of Mr. Roth. For purposes of this ratio, we calculated the annual total compensation of each of the Median Employee and Mr. Roth in accordance with the methodology that we use to calculate total compensation for purposes of the Summary Compensation Table. As of December 31, 2018, the Company employed 3,928 persons of which 2,838 persons are employed by Building Maintenance Services, our cleaning and maintenance services business ("BMS Employees"). The applicable information is set forth below: Median Employee total annual compensation Median Employee (excluding BMS Employees) total annual compensation Mr. Roth ("PEO") total annual compensation Ratio of PEO to Median Employee Compensation Ratio of PEO to Median Employee Compensation (excluding BMS Employees) In determining the median employee, we prepared a listing of all employees as of December 31, 2018. Employees on leave of absence on December 31, 2018 were excluded from the list and wages and salaries were annualized for those permanent employees who were not employed for the full year of 2018. The median employee was selected from the annualized list. Bonus Severance Unvested Options Unvested Restricted Units Unvested OPP Units Benefits Continuation Total Bonus Severance Unvested Options Unvested Restricted Units Unvested OPP Units Benefits Continuation(3) Total Bonus Severance Unvested Options Unvested Restricted Units Unvested OPP Units Benefits Continuation(3) Total Bonus Severance Unvested Options Unvested Restricted Units Unvested OPP Units Benefits Continuation Total Median Employee total annual compensation Median Employee (excluding BMS Employees) total annual compensation Mr. Roth ("PEO") total annual compensation Ratio of PEO to Median Employee Compensation Ratio of PEO to Median Employee Compensation (excluding BMS Employees) Trustees who are not officers of the Company receive an annual retainer. During The following table sets forth the compensation that was earned or paid in Candace K. Beinecke Michael D. Fascitelli Robert P. Kogod Michael Lynne David M. Mandelbaum Mandakini Puri Daniel R. Tisch Richard R. West Russell B. Wight, Jr. Candace K. Beinecke Michael D. Fascitelli Robert P. Kogod Michael Lynne(2) David M. Mandelbaum Mandakini Puri Daniel R. Tisch Richard R. West Russell B. Wight, Jr. The Review and Approval of Related Person Transactions We review all relationships and transactions in which we and our significant shareholders, Trustees and our executive officers or their respective immediate family members are participants (including transactions required to be disclosed under Item 404 of Regulation S-K) to determine whether such persons have a direct or indirect material interest in the transaction. Our policy (as set forth in our Code of Business Conduct and Ethics) is to determine whether such an interest exists, applying the standards set forth in Item 404 of Regulation S-K and our Corporate Governance Guidelines. Our legal and financial staff is primarily responsible for the development and implementation of processes and controls to obtain information from our significant shareholders, Trustees and our executive officers with respect to related person transactions and for then determining, based on the facts and circumstances, whether we or a related person has a direct or indirect material interest in the transaction. As required under SEC rules, transactions that are determined to be directly or indirectly material to the Company or a related person are disclosed in this proxy statement. We also disclose transactions or categories of transactions we consider in determining that a Trustee is independent. In addition, our Audit Committee and/or our Corporate Governance and Nominating Committee reviews and, if appropriate, approves or ratifies any related person transaction that is required to be disclosed. These committees, in the course of their review of a disclosable related-party transaction, consider: (1) the nature of the related person's interest in the transaction; (2) the material terms of the transaction; (3) the importance of the transaction to the related person; (4) the importance of the transaction to the Company; (5) whether the transaction would impair the judgment of a Trustee or executive officer to act in the best interest of the Company; and (6) any other matters these committees deem appropriate. Transactions Involving Interstate Properties As of March We manage and lease the real estate assets of Interstate pursuant to a management agreement for which we receive an annual fee equal to 4% of annual base rent and percentage rent. The management agreement has a term of one year and automatically renews unless terminated by either of the parties on 60 days' notice at the end of the term. We believe, based upon comparable fees charged by other real estate companies, that the terms are fair to us. We earned Transactions Involving Alexander's As of March Officer and Chief Administrative Officer, We manage, lease and develop Alexander's properties pursuant to the agreements described below, which expire in March of each year and renew automatically. Management and Development Agreements. Pursuant to our management and development agreement with Alexander's, we receive an annual fee for managing Alexander's and all of its properties equal to the sum of (i) $2,800,000, (ii) 2% of the gross revenue from the Rego Park II Shopping Center, (iii) $0.50 per square foot of the tenant-occupied office and retail space at 731 Lexington Avenue, and (iv) In addition, we are entitled to a development fee of 6% of development costs, as defined. Leasing Agreements. We provide Alexander's with leasing services for a fee of 3% of rent for the first ten years of a lease term, 2% of rent for the eleventh through the twentieth year of a lease term, and 1% of rent for the twenty-first through thirtieth year of a lease term, subject to the payment of rents by Alexander's tenants. In the event that third-party real estate brokers are used, our leasing fee increases by 1% and we are responsible for the fees to the third-party real estate brokers. We are also entitled to a commission upon the sale of any of Alexander's assets of 3% of gross proceeds, as defined, for asset sales of less than $50,000,000, or 1% of gross proceeds, as defined, for asset sales of $50,000,000 or more. Other Agreements. Building Maintenance Services ("BMS"), our wholly-owned subsidiary supervises (i) the cleaning, engineering and security services at Alexander's 731 Lexington Avenue property and (ii) security services at Alexander's Rego Park I and Rego Park II properties. During the year ended December 31, At December 31, Certain Other Transactions or Relationships With respect to our building at 888 Seventh Avenue, we are the lessee under a ground lease that expires in 2067. The lessor under the ground lease is a limited liability company that is owned by several members, some of which include trusts for the benefit of the family of Mr. David M. Mandelbaum (one of our Trustees), his children, his brother, his sister and his sister's family. Mr. Mandelbaum has no voting or pecuniary interest in these trusts or in the ground lease. The underlying fee property was purchased by the parents of Mr. Mandelbaum in 1961 and placed into trusts at that time for the benefit of their children and grandchildren. Since 1961, this property has been owned 20% by these trusts and, when the trusts expired, descendants of Mr. Mandelbaum's parents. The remaining 80% of the limited liability company is owned by two unrelated families. One family owns 55% of the limited liability company and is its managing member. Mr. Mandelbaum's personal interest in the property is an indirect 2.66% interest. We acquired the building at 888 Seventh Avenue (and the tenant's interest under the ground lease) from an unrelated party in 1998. The limited liability company owning the ground receives under the ground lease an aggregate payment of $3,350,000 a year in rent. In February 2016, each of Mr. Mandelbaum and his brother entered into an agreement to purchase an apartment at the Company's development at 220 Central Park South for $23,571,000 and $16,247,500, respectively (which amounts represent a discount to the asking price equal to the brokerage fee saved by the Company), and the Company holds related deposits of $9,954,625. MDF Capital LLC, which is owned by Mr. Michael D. Fascitelli, one of our Trustees, leases space at our building at 888 Seventh Avenue in New York City. During 2018, MDF Capital paid $601,499 of rent to the Company for this space. Steven Roth, our Chairman and Chief Executive Officer, also serves as a member of the Board of Trustees of Urban Edge Properties and as Chairman of the Board of JBG SMITH Properties, both of which are former affiliates of the Company. During Daryl Roth Productions is also a tenant at our building at 888 Seventh Avenue in New York Other Transactions or Relationships Considered in Determining Trustee Independence Daniel R. Tisch, a Trustee, is also a member of the Board of Trustees of New York University. New York University (or an affiliate thereof) is a tenant at our building at One Park Avenue in New York City. Mr. Tisch was in no way affiliated with such relationship nor does he receive any compensation in connection with such relationship. The Audit Committee's purposes are to (i) assist the Board of Trustees (the "Board of Trustees" or the "Board") of Vornado Realty Trust, a Maryland real estate investment trust (the "Company"), in its oversight of (a) the integrity of the Company's financial statements, (b) the Company's compliance with legal and regulatory requirements, (c) the qualifications and independence of the Company's independent registered public accounting firm, and (d) the performance of the Company's independent registered public accounting firm and the Company's internal audit function; and (ii) prepare an Audit Committee report as required by the Securities and Exchange Commission (the "SEC") for inclusion in the Company's annual proxy statement. The function of the Audit Committee is oversight. The Board of Trustees, in its business judgment and upon the recommendation of the Corporate Governance and Nominating Committee of the Board, has determined that all members of the Audit Committee are "independent," as required by applicable listing standards of the New York Stock Exchange (the "NYSE"), as currently in effect, and in accordance with the rules and regulations promulgated by the SEC. The Board of Trustees has also determined that each member of the Audit Committee is financially literate and has accounting or related financial management expertise, as such qualifications are defined under the rules of the NYSE and that each of Dr. West, Ms. Puri and Mr. Tisch is an "audit committee financial expert" within the meaning of the rules of the SEC. The Audit Committee operates pursuant to an Audit Committee Charter. Management is responsible for the preparation, presentation and integrity of the Company's financial statements and for the establishment and effectiveness of internal control over financial reporting, and for maintaining appropriate accounting and financial reporting principles and policies and internal controls and procedures that provide for compliance with accounting standards and applicable laws and regulations. The independent registered public accounting firm, Deloitte & Touche LLP, is responsible for planning and carrying out a proper audit of the Company's annual financial statements in accordance with the auditing standards of the Public Company Accounting Oversight Board (United States) ("PCAOB"), expressing an opinion as to the conformity of such financial statements with generally accepted accounting principles and auditing the effectiveness of internal control over financial reporting. In performing its oversight role, the Audit Committee has considered and discussed the audited consolidated financial statements with management and Deloitte & Touche LLP. The Audit Committee has also discussed with Deloitte & Touche LLP the matters required to be discussed by PCAOB Auditing Standard No. 16,Communications with Audit Committees. The Audit Committee has received the written disclosures and the letter from the independent registered public accounting firm required by PCAOB Ethics and Independence Based on the reports and discussions described in the preceding paragraph and subject to the limitations on the role and responsibilities of the Audit Committee referred to below and in the Audit Committee Charter in effect during Members of the Audit Committee rely without independent verification on the information provided to them and on the representations made by management and the independent registered public accounting firm. Accordingly, the Audit Committee's oversight does not provide an independent basis to determine that management has maintained appropriate accounting and financial reporting principles or appropriate internal controls and procedures designed to assure compliance with accounting standards and applicable laws and regulations. Furthermore, the Audit Committee's considerations and discussions referred to above do not assure that the audit of the Company's consolidated financial statements has been carried out in accordance with the auditing standards of the PCAOB, that the consolidated financial statements are presented in accordance with accounting principles generally accepted in the United States of America or that Deloitte & Touche LLP is in fact "independent" or the effectiveness of the Company's internal controls. Deloitte & Touche LLP, the member firms of Deloitte Touche Tohmatsu and their respective affiliates (collectively, the "Deloitte Entities") have been the Company's independent registered public accounting firm since 1976. The Audit Committee selected Deloitte & Touche LLP as the Company's independent registered public accounting firm for the fiscal year ending December 31, Even if the selection of the Deloitte Entities is ratified at the Annual Meeting, the Audit Committee, in its discretion, may change the appointment at any time during the year. We expect that representatives of the Deloitte Entities will be present at the Annual Meeting. They will have an opportunity to make a statement if they so desire, and will be available to respond to appropriate questions. Audit Fees The aggregate fees billed by the Deloitte Entities for the years ended December 31, Audit-Related Fees The aggregate fees billed by the Deloitte Entities for the years ended December 31, Tax Fees The aggregate fees billed by the Deloitte Entities for the years ended December 31, Other than those described above under "Audit Fees," "Audit-Related Fees" and "Tax Fees," there were no other fees billed by the Deloitte Entities for the years ended December 31, Pre-approval Policies and Procedures In May 2003, the Audit Committee established a policy of reviewing and approving engagement letters with the Deloitte Entities for the services described above under "Audit Fees" before the provision of those services commences. For all other services, the Audit Committee has detailed policies and procedures pursuant to which it has pre-approved the use of the Deloitte Entities for specific services for which the Audit Committee has set an aggregate quarterly limit of $250,000 on the amount of other services that the Deloitte Entities can provide the Company. Any services not specified that exceed the quarterly limit, or which would cause the amount of total other services provided by the Deloitte Entities to exceed the quarterly limit, must be approved by the Audit Committee Chairman before the provision of such services commences. The Audit Committee also requires management to provide it with regular quarterly reports of the amount of services provided by the Deloitte Entities. Since the adoption of such policies and procedures, all of such fees were approved by the Audit Committee in accordance therewith. The Board of Trustees recommends that you vote "FOR" the ratification of the appointment of Deloitte & Touche LLP as the Company's independent registered public accounting firm for The affirmative vote of holders of a majority of the votes cast on this proposal at the Annual Meeting, assuming a quorum is present, is required for its approval. Because banks, brokers and other nominees are entitled to vote on this matter in their discretion, if they do not receive instructions from the applicable beneficial owner of Shares, we do not expect there to be significant broker non-votes on this proposal. Abstentions will have no effect on the result of this vote. The Compensation Discussion and Analysis section appearing earlier in this proxy statement describes our executive compensation program and the compensation decisions made by the Compensation Committee in or for Proposal: That the shareholders of Vornado Realty Trust (the "Company") approve, by a non-binding, advisory resolution, the compensation of the Company's executive officers named in the Summary Compensation Table, as disclosed in the proxy statement for this Annual Meeting pursuant to the compensation disclosure rules of the Securities and Exchange Commission (which disclosure includes the Compensation Discussion and Analysis, the tables and the related footnotes and narrative accompanying the tables contained in our "Executive Compensation" section). Supporting Statement: In accordance with the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, our shareholders have the opportunity to vote to approve, on an advisory and non-binding basis, the compensation of our Our executive compensation programs are described in detail in this proxy statement in the section titled "Compensation Discussion and We The results of this advisory vote are not binding on the Compensation Committee, the Company or our Board of Trustees. Nevertheless, The Board of Trustees unanimously recommends a vote "FOR" the non-binding, advisory resolution on executive compensation. The affirmative vote of a majority of all the votes cast on this proposal at the Annual Meeting, assuming a quorum is present, is necessary to approve, on an advisory basis, the compensation of our Named Executive Officers. Abstentions and broker non-votes will not be counted as votes cast and will have no effect on the result of the vote. PROPOSAL 4: APPROVAL OF THE COMPANY'S 2019 OMNIBUS SHARE PLAN The Board of Trustees is asking the Upon recommendation of the Compensation Committee, the Board of Trustees has determined that it is in the best interests of the Company and its shareholders to adopt the 2019 Plan, which was unanimously approved by the Board on March 26, 2019. Including the number of Shares remaining available under the 2010 Plan as of March 18, 2019, which was approximately 1,705,253 Shares, the 2019 Plan provides for the issuance of equity-based awards covering up to 5,500,000 Shares if all awards were full value awards (restricted stock and full value restricted units) and up to 11,000,000 Shares if all awards were not full value awards (awards that require the grantee to pay an exercise or conversion price or otherwise do not deliver the full value of the underlying Share or underlying OP Unit). Awards maynot be granted under the 2010 Plan as of the effective date of the 2019 Plan. The Board of Trustees believes that the maximum of 11,000,000 Shares that would be available for grant under the 2019 Plan would provide sufficient Shares for equity-based compensation needs of the Company from May 2019 through the 2024 annual shareholder meeting. This estimate is based on our recent usage of equity-based awards and growth estimates and is adjusted upward to allow for the potential that performance-based awards may be earned above target goals and for flexibility around the types of equity-based awards that may be used. Actual issuances could be materially different from this estimate. As of March 18, 2019, approximately 1,705,253 Shares remained available for issuance under the 2010 Plan, which, based on the analysis above and our "burn rate" discussed below, we believe to be sufficient to continue our current grant practices for no more than approximately one year. Additionally, the 2010 Plan is scheduled to expire in 2019 Omnibus Share Plan Burn Rate and Overhang The Burn Rate. The following table sets forth information regarding awards granted and earned, the "burn rate" for (a) (b) (c) (d) (e) (f) (g) Share Overhang. As commonly calculated, the total potential dilution or A copy of the full text of the 2019 Plan is attached as Annex B to this proxy statement and the summary below of the 2019 Plan is qualified in its entirety by reference to the text of the 2019 Plan. For additional information regarding equity-based compensation granted to our Named Executive Officers, see "Compensation Discussion and Analysis." Purpose The purpose of the 2019 Plan is to promote the interests of the Company by encouraging its employees and the employees of its subsidiaries, including officers (together, the "Employees"), its non-employee trustees and non-employee directors of its subsidiaries (together, the "Non-Employee Trustees) and certain non-employee advisors and consultants that provide bona fide services to the Company or its subsidiaries (together, the "Consultants") to acquire an ownership position in the Company, enhancing its ability to attract and retain Employees, Non-Employee Trustees and Consultants of outstanding ability and providing such Employees, Non-Employee Trustees and Consultants with Overview Under the 2019 Plan, eligible participants may be granted awards of stock options, stock appreciation rights, performance shares, restricted stock, other stock-based awards (including the grant or offer for sale of unrestricted Shares) and limited partnership units ("OP Units") of Vornado Realty L.P. (or any successor entity), the entity through which the Shares Available for Grant under the 2019 Plan Subject to adjustment as described below, awards may be granted under the 2019 Plan with respect to a maximum of 5,500,000 Share Equivalents (as defined below), which, in accordance with the share counting provisions of the The 2019 Plan is commonly referred to as a fungible unit plan. Restricted shares, restricted units or 2017,2018, consists of the following members: Mr. Tisch, as Chair, Mr. Helman and Dr. West. Mr. Michael Lynne, a member of our Board of Trustees until his passing on March 24, 2019, served as Chairman Dr. West and Mr. Tisch. All members of the Compensation Committee during 2018 and until his passing. Mr. Helman was appointed to the Compensation Committee upon his joining the Board on April 3, 2019. Each of Mr. Lynne, Mr. Helman, Mr. Tisch and Dr. West had or have been determined by the Board to be independent. The Board has adopted a written Compensation Committee Charter which is available on our website (www.vno.com/governance/committee-charters).
16VORNADO REALTY TRUST2018 PROXY STATEMENT "Compensation "Compensation Discussion and Analysis" a discussion of the role of compensation consultants in determining or recommending the amount or form of executive or Trustee compensation.2017, consists2018, consisted of Ms. Beinecke, as Chair, and Messrs. Mandelbaum and Wight. In addition, during 2017,response to shareholder input, following the Annual Meeting in 2018 the Board determined to change the membership of the Committee. As of April 3, 2019, the Committee consists of Ms. Beinecke as Chair and Mr. Helman and Ms. Puri as the two other members. During 2018, members of the Corporate Governance and Nominating Committee led several discussions of governance matters with the full Board. Further, in the past year Ms. Beinecke (and members of management) met in person or telephonically with several significant shareholders to discuss our governance practices. Each of Ms. Beinecke, Mr. Helman, Mr. Mandelbaum, Ms. Puri and Messrs. Mandelbaum andMr. Wight hashave been determined by the Board to be independent. The Board has adopted a written Corporate Governance and Nominating Committee Charter, which is available on our website (www.vno.com/governance/committee-charters). The committee's responsibilities include the selection of potential candidates for the Board and the development and review of our governance principles. It also reviews Trustee compensation and benefits, and oversees annual self-evaluations of the Board and its committees. The committee also makes recommendations to the Board concerning the structure and membership of the other Board committees as well as management succession plans. The committee selects and evaluates candidates for the Board in accordance with the criteria set out in the Company's Corporate Governance Guidelines and as are set forth below. The committee is then responsible for recommending to the Board a slate of candidates for Trustee positions for the Board's approval. Generally, candidates for a position as a member of the Board are suggested by existing Board members; however, the Corporate Governance and Nominating Committee will consider shareholder recommendations for candidates for the Board sent to the Corporate Governance and Nominating Committee, c/o Alan J. Rice, Secretary, Vornado Realty Trust, 888 Seventh Avenue, New York, New York 10019, and will evaluate any such recommendations using the criteria set forth in the Corporate Governance and Nominating Committee Charter and our Corporate Governance Guidelines.The Board's Role in Risk Oversight
reputationalclimate change risks. The full Board (or the appropriate committee in the case of risks that are under the purview of a particular committee) receives these reports from the appropriate "risk owner" within our organization or in connection with other management-prepared presentations of risk to enable the Board (or committee, as applicable) to understand our risk identification, risk management and risk mitigation strategies. By "risk owner," we mean that person or group of persons who is or are primarily responsible for overseeing a particular risk. As part of its charter, the Audit Committee discusses our guidelines and policies with respect to risk assessmentwhich our management assesses and manages the Company's exposure to risk management and reports to the full Board its conclusions as a partial basis for further discussion by the full Board. This enables the Board and the applicable committees to coordinate the risk oversight role, particularly with respect to risk interrelationships. In addition to the Board's review of risks applicable to the Company generally, the Board conducts regular strategic and personnel reviews.
20182019 PROXY STATEMENT1721
19, 2018,18, 2019, by (i) each person who holds more than a 5% interest in the Company or our operating partnership, Vornado Realty L.P., a Delaware limited partnership (the "Operating Partnership"), (ii) Trustees of the Company, (iii) the executive officers of the Company defined as "Named Executive Officers" in "Executive Compensation" below, and (iv) the Trustees and all current executive officers of the Company as a group. Unless otherwise specified, "Units" are Class A units of limited partnership interest of our Operating Partnership and other classes of units convertible into Class A units. The Company's ownership of Units is not reflected in the table but is described in footnotes (1) and (2).Name of Beneficial Owner Address of
Beneficial
Owner Number of
Shares and Units
Beneficially
Owned(1)(2) Percent
of All
Shares(1)(2)(3) Percent of All
Shares and
Units(1)(2)(4) (9) 9,969,470 5.20% 4.89% (9) 8,960,622 4.71% 4.42% (9) 5,959,379 3.13% 2.94% (9) 2,921,370 1.53% 1.43% (9) 2,062,086 1.08% 1.02% (9) 825,123 * * (9) 316,526 * * (9) 257,708 * * (9) 186,441 * * (9) 62,950 * * (9) 36,733 * * (9) 13,520 * * (9) 8,231 * * (9) 13,312 * * (9) 0 * * (9) 20,586,375 10.56% 10.04% 100 Vanguard Blvd Malvern, PA 19355 30,211,674 15.89% 14.90% 100 Vanguard Blvd Malvern, PA 19355 11,481,507 6.04% 5.66% 55 East 52nd Street New York, NY 10022 17,002,601 8.94% 8.38% Bankplassen 2 PO Box 1179 Sentrum NO 0107 Oslo Norway 12,382,373 6.51% 6.11% One Lincoln Street
Boston, MA 02111 9,703,831 5.10% 4.78% *Less than 1%.Name of Beneficial Owner Address of
Beneficial Owner Number of
Shares and Units
Beneficially
Owned(1)(2) Percent of
All
Shares(1)(2)(3) Percent of All
Shares and
Units(1)(2)(4)
Named Executive Officers and Trustees Steven Roth(5)(6)(7)(8) (9) 9,757,160 5.09% 4.78% David Mandelbaum(5)(8)(10) (9) 8,961,985 4.70% 4.40% Russell B. Wight, Jr.(5)(8)(11) (9) 5,960,742 3.12% 2.93% Michael D. Fascitelli(7)(8)(12) (9) 2,509,032 1.31% 1.23% Robert P. Kogod(8)(13) (9) 2,063,449 1.08% 1.01% David R. Greenbaum(7)(8)(14) (9) 658,426 * * Joseph Macnow(7)(8)(15) (9) 293,687 * * Michael J. Franco(7)(8) (9) 279,173 * * Daniel R. Tisch(8)(16) (9) 64,313 * * Richard R. West(8)(17) (9) 38,096 * * Candace K. Beinecke(8) (9) 16,664 * * William W. Helman IV(8) (9) 5,000 * * Mandakini Puri(8) (9) 0 * *
All Trustees and current executive
officers as a group (13 persons)(7)(8) (9) 19,600,631 10.09% 9.57%
Other Beneficial Owners The Vanguard Group, Inc.(18) 100 Vanguard Blvd
Malvern, PA
19355 27,207,051 14.26% 13.37% BlackRock, Inc.(19) 55 East 52nd Street
New York, NY
10055 16,934,287 8.88% 8.32% JPMorgan Chase & Co.(20) 270 Park Avenue
New York, NY
10017 13,382,921 7.02% 6.57%
182019 PROXY STATEMENT2018 PROXY STATEMENT23Name of Beneficial Owner Address of
Beneficial Owner Number of
Shares and Units
Beneficially
Owned(1)(2) Percent of
All
Shares(1)(2)(3) Percent of All
Shares and
Units(1)(2)(4) Norges Bank
(The Central Bank of Norway)(21) Bankplassen 2
PO Box 1179 Sentrum
NO 0107 Oslo
Norway 12,382,373 6.49% 6.08% State Street Corporation(22) One Lincoln Street
Boston, MA
02111 9,693,447 5.08% 4.76% 190,167,582190,743,262 Shares and 12,655,40712,806,174 Units (other than Units held by the Company) outstanding as of March 19, 2018.18, 2019.19, 201818, 2019 (one Unit for each Share outstanding). Generally, any time after one year from the date of issuance (or two years in the case of certain holders), holders of Units (other than the Company) have the right to have their Units redeemed in whole or in part by the Operating Partnership for cash equal to the fair market value, at the time of redemption, of one Share for each Unit redeemed or, at the option of the Company, cash or one Share for each Unit tendered, subject to customary anti-dilution provisions (the "Unit Redemption Right"). Holders of Units may be able to sell publicly Shares received upon the exercise of their Unit Redemption Right pursuant to registration rights agreements with the Company or otherwise pursuant to applicable securities laws and rules. The Company has filed registration statements with the SEC to register the issuance or resale of certain of the Shares issuable upon the exercise of the Unit Redemption Right.887,022;473,321; Michael D. Fascitelli—887,022;473,321; David R. Greenbaum—249,600;194,442; Joseph Macnow—199,144;148,066; Michael J. Franco—80,906; and all Trustees and executive officers as a group—2,303,694.1,370,056.37,964;0; David Mandelbaum—8,236;9,599; Russell B. Wight, Jr.—8,236;9,599; Michael D. Fascitelli—3,898;5,261; Robert P. Kogod—8,236;9,599; David R. Greenbaum—20,991;0; Joseph Macnow—14,871;0; Michael J. Franco—18,054; Mitchell N. Schear—27,727;0; Daniel R. Tisch—7,950;9,313; Richard R. West—7,628;8,991; Candace K. Beinecke—10,777; Michael Lynne—11,040; Stephen W. Theriot—6,940;12,140; Mandakini Puri—0; and all Trustees and executive officers as a group—192,548.64,502. The number of Shares or Units beneficially owned by the following persons does not include the number of unvested or unredeemable restricted units
186,512;275,739; David Mandelbaum—3,928;3,973; Russell B. Wight, Jr.—3,928;3,973; Michael D. Fascitelli—3,928;3,973; Robert P. Kogod—3,928;3,973; David R,R. Greenbaum—112,686;170,393; Joseph Macnow—77,144;107,461; Michael J. Franco—144,619; Mitchell N. Schear—17,163;170,447; Daniel R. Tisch—3,928;3,973; Richard R. West—3,928;3,973; Candace K. Beinecke—3,928; Michael Lynne—3,928; Stephen W. Theriot—11,952;3,973; Mandakini Puri—4,034;6,662; and all Trustees and executive officers as a group—585,534.758,513. The number of Shares or Units beneficially owned by the following persons does not include the number of unearned and unvested Outperformance Plan Units ("OPP Units") as indicated: Steven Roth—424,908; David R. Greenbaum—143,407; Joseph Macnow—92,949; Michael J. Franco—132,783; and all Trustees and executive officers as a group—794,047. The number of Shares or Units beneficially owned by the following persons does not include the number of unearned and unvested Appreciation Only Long-Term Incentive Plan Units as indicated: Steven Roth—258,152; David R. Greenbaum—87,127; Joseph Macnow—56,472; Michael J. Franco—80,675 and all Trustees and executive officers as a group—482,426.
20182019 PROXY STATEMENT1925the following persons also includes the number of earned and vested Outperformance Plan Units ("OPP Units") as indicated: Steven Roth—72,258; David R. Greenbaum—19,298; Joseph Macnow—14,905; Michael J. Franco—18,437; Mitchell N. Schear—23,030; and all Trustees and executive officers as a group—147,928. The number of Shares or Units beneficially owned by the following persons does not include the number of unearned and unvested OPP Units as indicated: Steven Roth—667,576; David R. Greenbaum—224,204; Joseph Macnow—146,364; Michael J. Franco—208,838; Mitchell N. Schear—36,941; Stephen W. Theriot—29,285; and all Trustees and executive officers as a group—1,313,208.(9)The address of such person(s) is c/o Vornado Realty Trust, 888 Seventh Avenue, New York, New York 10019.(10)Of these Shares, 2,909,252 are held in a partnership of which the general partner is Mr. Mandelbaum and the limited partners are Mr. Mandelbaum and trusts for the benefit of Mr. Mandelbaum and his issue. In addition, 122,002 of these Shares are held in trusts for the benefit of Mr. Mandelbaum's grandchildren.(11)Includes 31,907 Shares owned by the Wight Foundation, over which Mr. Wight holds sole voting power and sole investment power. Does not include 20,575 Shares owned by the spouse and children of Mr. Wight as to which Mr. Wight disclaims any beneficial interest.(12)The number of Shares beneficially owned by Mr. Fascitelli includes 67,537 Shares held by a limited partnership and 105,191 Shares held in a limited liability company and does not include 3,150 Shares owned by his children as to which Mr. Fascitelli disclaims any beneficial interest.(13)Includes 1,099,796 Units held through corporations (individually or jointly with his spouse). Excludes 188,972 Shares/Units held by his spouse as to which Mr. Kogod disclaims any beneficial interest.(14)Includes 49,817 Units held by a limited liability company and 71,137 Shares held in grantor trusts and 30,700 Shares held in a family trust. Excludes 53,960 Shares and 3,040 Units held in trusts for the benefit of his children and 12,948 Units held by his spouse as to which Mr. Greenbaum disclaims any beneficial interest.(15)Excludes 4,884 Shares held by Mr. Macnow's spouse.(16)50,000 of these Shares are held through a foundation. Mr. Tisch maintains the right to control the vote and disposition of these Shares, but disclaims any pecuniary interest therein.(17)Dr. West and his wife own 3,231 of these Shares jointly. Also included are 1,953 Shares that may be acquired upon conversion of 1,000 Series A preferred shares of beneficial interest owned by Dr. West.(18)According to an amendment to Schedule 13G filed on February 9, 2018.(19)According to an amendment to Schedule 13G filed on February 2, 2018.(20)According to an amendment to Schedule 13G filed on January 23, 2018.(21)According to an amendment to Schedule 13 G filed on January 5, 2018.(22)According to a Schedule 13G filed on February 13, 2018. Section 16(a) Beneficial Ownership Reporting Compliancetrustees,Trustees, executive officers and 10% shareholders in the year ended December 31, 20172018 (or in 2018,2019, prior to the mailing of this proxy statement) was one late filing by Ms. Candace K. Beinecke, a trustee,Mr. Steven Roth with regard to onea transaction reported on a Form 4.
202620182019 PROXY STATEMENTExecutive SummarySubstantial Performance-Based and At-Risk ComponentsThe objectives of our executive compensation program are to:•Retain a highly-experienced, "best-in-class" team of executives who have worked together as a team for a long period of time and who make major contributions to our success.•Attract other highly-qualified executives to strengthen that team as needed.•Motivate our executives to contribute to the achievement of company-wide and business-unit goals as well as to pursue individual goals.•Emphasize equity-based incentives with long-term performance measurement periods and vesting conditions.•Align the interests of executives with shareholders by linking payouts under annual incentives to performance measures that promote the creation of long-term shareholder value.•Achieve an appropriate balance between risk and reward in our compensation programs that does not encourage excessive or inappropriate risk-taking.Our executive compensation program is intended to reward the achievement of annual, long-term and strategic goals of both the Company and the individual executive. In order to achieve these intentions, our executive compensation program includes both fixed and variable components, as well as annual and long-term components, as described below. In particular, for our Chairman and Chief Executive Officer (or "CEO"), a majority of his compensation has been provided in the form of equity compensation. This equity compensation is awarded in a combination of "future performance" awards and/or time-based vesting provisions. The "future performance" awards made in 2018 (for 2017 performance) to our CEO and other named executive officers (who are identified in the Summary Compensation Table below, the "Named Executive Officers" or "NEOs") are subject to multi-year TSR performance (OPP Units). In addition to our NEOs, our Executive Vice Presidents also received OPP Units in 2018 (for 2017 performance). "TSR" means our total shareholder return including dividends. The "future performance" requirements and/or time-based vesting provisions are designed to ensure that the value of our CEO's ultimately realized compensation is based on our share price performance, further aligning his interests with those of the Company and our shareholders. "OPP" means our outperformance plans and "OPP Units" are the awards granted under those plans. Awards made to executives other than our CEO and other Named Executive Officers in 2018 (for 2017 performance) were in the form of Appreciation-Only Long-Term Incentive Plan ("AO LTIP") grants. Executive Vice Presidents other than our NEO's received awards of both AO LTIP Units as well as OPP Units. AO LTIPs are awards of units in our Operating Partnership ("AO LTIP Units") that only have value if our share price at the time of conversion has increased from the share price on the date of grant.
2018 PROXY STATEMENTVORNADO REALTY TRUST21 In addition to the goals and objectives of our compensation program, we are also committed to promoting appropriate governance that serves the interests of both our executive management team and shareholders. The table below highlights key features of our senior executive compensation and governance programs:ü WHAT WE DO× WHAT WE DON'T DOü Directly align pay with performance as evidenced by our annual bonus program, which is formula-driven and our annual equity awards, which are tied to a material increase in our share price or absolute and relative TSR× No excise tax gross-up provisionsü Create significant alignment with shareholders and pay the majority of our executive compensation in the form of equity× No guaranteed cash incentives, equity compensation or salary increases for Named Executive Officersü Maintain a cap on incentive compensation payments× No excessive perquisites or benefitsü Include robust hurdles in our Outperformance Plans based on absolute and relative TSR performance over a 3-year period to encourage long-term strategic planning× No dividends or distributions on unearned equity awards subject to performance-based vesting (except limited distributions for tax purposes)ü Mandatory hold periods. Members of senior management receive OPP Units with a 1-year holding period on earned awards after vesting× No excessive retirement benefitsü Robust equity ownership requirementsCEO: 6x salaryOther executives: 3x salaryTrustees: 5x cash retainer× No hedging or pledging of our equity securitiesü "Double trigger" acceleration of the vesting of any unvested equity awards in connection with a change of control× No golden parachute for our CEOü Clawback policy× No repricing of optionsü Annual compensation risk assessmentü Annual say-on-pay voteü Independent compensation consultantAs an indication of the positive response of our shareholders to our approach, at our 2017 Annual Meeting approximately 97% of the votes cast on our advisory vote on executive compensation were cast FOR our compensation program. Our Compensation Committee considered the results of the 2017 votes and has continued our compensation program design which it believes embodies shareholder-friendly practices. 22VORNADO REALTY TRUST2018 PROXY STATEMENT Business HighlightsDuring 2017, we continued our simplification and focusing strategy while recording strong financial results. For 2017, the following highlights were among the factors considered in the compensation decision process:•We made significant progress in furthering our simplification and focus strategy by completing the spin-off our Washington, D.C. segment and combining it with the management business and certain Washington, D.C. assets of The JBG Companies, a Washington D.C. real estate company. The combined company, JBG SMITH Properties (NYSE: JBGS), is the largest, market-leading, best-in-class, pure-play Washington, D.C. real estate company. Over the past several years, including the spin-off of Urban Edge Properties and the JBG SMITH Properties transaction, we have distributed $9.7 billion of assets to shareholders and exited $6.2 billion of non-core assets.•Net Operating Income ("NOI") at share increased by $37.3 million in 2017 over 2016. ("NOI" is our total revenues less our operating expenses. "NOI at share" means our NOI less NOI attributable to non-controlling interests in consolidated subsidiaries plus our share of NOI from partially owned entities.) Please refer to page 53 of the Company's Annual Report on Form 10-K for the year ended December 31, 2017 for a reconciliation of NOI at share to the most comparable measure presented in accordance with Generally Accepted Accounting Principles applicable in the United States ("GAAP").•We achieved a 2.7% increase in same store NOI at share in 2017 over 2016 for our New York Office and Retail portfolio, theMART and our 555 California Street complex.•FFO, as adjusted, increased $30.4 million (or $0.14 per diluted share) in 2017 over 2016. "FFO" means our funds from operations as defined by the National Association of Real Estate Investment Trusts (NAREIT). "FFO, as adjusted," means our FFO as adjusted to exclude non-comparable gains and losses, impairments and non-real estate-related items. Please refer to Annex D to this Proxy Statement for a reconciliation of FFO, as adjusted, to the most comparable measure presented in accordance with GAAP. Please refer to page 33 of the Company's Annual Report on Form 10-K for the year ended December 31, 2017 for a reconciliation of FFO to the most comparable measure presented in accordance with GAAP.•In 2017, we completed $4.8 billion of financings in 10 transactions.•Strong leasing performance in 2017. In our New York portfolio, we leased approximately 1,900,000 square feet of office space with strong mark-to-markets of 12.8% GAAP (as defined below) and 9.9% cash and 126,000 square feet of retail space with positive mark-to-markets of 26.5% GAAP and 25.4% cash.•In 2017, we made a $230 million upfront contribution for the acquisition of a 99-year leasehold of the Farley Post Office (a 50.1% interest).Compensation ComponentsOur Named Executive Officers' compensation currently has three primary components:•annual base salary;•annual incentive awards, which include cash payments and/or awards of equity; and•long-term equity incentives, which include restricted units and long-term incentive performance awards such as those awarded under our OPP.The overall levels of compensation and the allocation among these components are determined annually by our Compensation Committee based upon an analysis of the Company's performance during the year and a review of the prevailing competitive market for executive talent in which we operate. Historically, a substantial majority of the total compensation for our CEO has been in the form of long-term equity awards, including performance-based awards subject to material performance thresholds such as those awarded under our OPP. These longer-term awards further the Compensation Committee's desire to directly align management and 2018 PROXY STATEMENTVORNADO REALTY TRUST23 shareholder interests and to provide incentives for each executive to successfully implement our long-term strategic goals.The components of our compensation program for our senior management can be described as shown in the chart below. As noted below, each component of compensation is subject to a cap.PAY ELEMENTCOMPENSATION TYPEOBJECTIVE AND KEY FEATURESBase SalaryCashObjective: To provide an appropriate level of fixed compensation that will promote executive retention and recruitment Key Features/Actions:•Fixed Compensation•No executive receives in excess of $1,000,000 in salary (not including the effect of an "extra" pay period in 2016)•NEO base salaries were unchanged for 2017 from 2016, nor have there been any increases in NEO base salary levels for the past several years Annual Incentive AwardsShort-Term Variable Incentive Cash and Restricted EquityObjective: To reward the achievement of financial and operating objectives based on the Compensation Committee's quantitative and qualitative assessment of the executive's contributions to that performance. All or a portion of such award is typically given in restricted equity to further align executive's interests with those of shareholders.Key Features/Actions:•Variable, short-term cash compensation and time-based equity awards•Funded upon the achievement of a threshold level of FFO, as adjusted•Aggregate pool capped at 1.25% of FFO, as adjusted•Allocated based on objective and subjective Company, business unit and individual performance•Committee can decide to pay out less than the full amount of the funded pool 24VORNADO REALTY TRUST2018 PROXY STATEMENT PAY ELEMENTCOMPENSATION TYPEOBJECTIVE AND KEY FEATURESAnnual Restricted Equity GrantsLong-Term Variable Incentive EquityObjective: To align executive and shareholder interests, promote executive retention with multi-year vesting and provide stable long-term compensation. Key Features/Actions:•Vest ratably over a four-year period•Subject to a two-year holding period (regardless of vesting) and a "book-up" event (typically an increase in Share price) to have value Outperformance PlanLong-Term Variable Incentive At-Risk EquityObjective: Designed to enhance the pay-for-performance structure and shareholder alignment, while motivating and rewarding senior management for superior TSR performance based on rigorous absolute and relative hurdles.Key Features/Actions:•Only provides value to our executives upon the creation of meaningful shareholder value above specified hurdles over a three-year performance period•Subject to a maximum plan value of $35 million (for grants in 2018)•Under the Absolute TSR component, the Company must achieve a return in excess of 21% (or 7% per annum) for OPP Units to earn any value•Under the Relative TSR Component, the Company must achieve a return above an applicable industry index or indices (the "Index") for OPP Units to earn any value. The 2018 Plan used the SNL Office Index (70%) and the SNL Retail Index (30%).•Under the Relative TSR Component, to the extent the Company underperforms the Index by more than 600 basis points (or 200 basis points per annum), the Absolute TSR Component payout, if any, is reduced 2018 PROXY STATEMENTVORNADO REALTY TRUST25 PAY ELEMENTCOMPENSATION TYPEOBJECTIVE AND KEY FEATURES•The Relative TSR Component value is reduced if the Absolute TSR is below 3% per annum with a maximum payout of 50% of the awards if the Absolute TSR is less than 0%•Earned payouts are subject to two years of additional time-based vesting and an additional one year holding period following vesting AO LTIPLong-Term Variable Incentive At-Risk EquityAppreciation-Only Long-Term Incentive Plan Units ("AO LTIP Units") are grants of interests in Vornado Realty L.P. which are intended to replicate the non-tax economic characteristics of option grants. AO LTIP Units are awarded with a strike price never lower than the price of one Share on the date of grant and are convertible into class A common units of Vornado Realty L.P. having a value equal to the excess of the Company's common share price on the date of conversion over the strike price. Awards of AO LTIP Units were made in 2018 (for 2017 performance) to executives other than NEOs. No NEOs have received awards of AO LTIPs.Objective: Designed to enhance our pay-for-performance structure and shareholder alignment, while motivating and rewarding senior management for superior share price performance Key Features/Actions:•Awards only have value upon conversion to the extent of an increase in the Company's share price•Vest over four years•Convertible for 10 years.•Subject to a two-year holding period (regardless of vesting) and a "book-up" event (typically an increase in Share price) to have value 26VORNADO REALTY TRUST2018 PROXY STATEMENT Pay MixWe believe that the executive management team's compensation should be appropriately at-risk and meaningfully dependent upon the achievement of robust and objective performance requirements. As illustrated below, approximately 91% of the Chief Executive Officer's total direct 2017 compensation and 77% of the other NEOs' total direct 2017 compensation is variable and subject to Company and individual performance results; as a subset of variable compensation, approximately 49% of our Chief Executive Officer's total direct 2017 compensation and 28% of the other NEOs' total direct 2017 compensation reflects pay at-risk based on prospective TSR performance.
Approach of this Compensation Discussion and Analysis SectionThis Compensation Discussion and Analysis, or "CD&A," describes our executive compensation program for fiscal year 2017, certain elements of our 2018 program and the executive pay philosophy adhered to by our Compensation Committee in making executive compensation decisions. We use our executive compensation program to attract, retain and appropriately reward the members of our senior executive management team who lead our Company. In particular, this CD&A explains how the Compensation Committee made 2017 compensation decisions for our senior executive management team, including the following named executive officers (the "Named Executive Officers" or "NEOs"):•Steven Roth, Chairman and Chief Executive Officer (our "CEO")•Joseph Macnow, Chief Financial Officer and Chief Administrative Officer since February 15, 2017 and, prior to that, our Executive Vice President—Finance and Chief Administrative Officer•Stephen W. Theriot, Chief Financial Officer until February 15, 2017 (when he became Chief Financial Officer of JBG SMITH which was a wholly owned subsidiary of the Company in Washington, D.C. until the consummation of the Washington Spin on July 18, 2017)•David R. Greenbaum, President, New York Division•Michael J. Franco, Executive Vice President and Chief Investment Officer•Mitchell N. Schear, President—Vornado/Charles E. Smith Washington, D.C. Division until July 18, 2017 upon the consummation of the Washington Spin 20182019 PROXY STATEMENTBiographical informationThe objectives of our executive compensation program are to: RETAIN a highly-experienced, "best-in-class" team of executives who have worked together as a team for a long period of time and who make major contributions to our success. ATTRACT other highly qualified executives to strengthen that team as needed. MOTIVATE our executives to contribute to the achievement of company-wide and business-unit goals as well as to pursue individual goals. EMPHASIZE equity-based incentives with long-term performance measurement periods and vesting conditions. ALIGN the interests of executives with shareholders by linking payouts under annual incentives to performance measures that promote the creation of long-term shareholder value. ACHIEVE an appropriate balance between risk and reward in our compensation programs that does not encourage excessive or inappropriate risk-taking. current NamedChairman and Chief Executive Officers is available in Part III toOfficer and our Form 10-K for the year ended 2017, as filed with the SEC.Under the rules and regulations of the SEC, each year the "Summary Compensation Table" must disclose the salary paid and cash bonus earned during that year. This table also requires disclosure of all equity-based awards in the year granted, even if that year is different than the year such compensation was earned. Because the equity we grant in any one year is awarded in recognition of performance in the prior year, the SEC's approach requires that we disclose our equity awards granted in respect of 2016 performance on the 2017 lineother named executive officers (who are identified in the Summary Compensation Table. Although we believeTable below, the most appropriate disclosure"Named Executive Officers" or "NEOs") has been in the form of equity compensation. This equity compensation is awarded in a combination of "future performance" awards and/or awards with time-based vesting provisions. The "future performance" awards made in 2019 (for 2018 performance) to our executive compensation would combineCEO and our other NEOs were in the annual cash compensation paidform of Performance Conditioned Appreciation-Only Long-Term Incentive Plan Units ("Performance Conditioned AO LTIP Units"). Performance Conditioned AO LTIP Units are grants of units in 2017 (for instance) withour operating partnership (Vornado Realty L.P.) that require the equity-based compensationachievement of certain performance conditions by a specified date or they are forfeited. The performance condition for Performance Conditioned AO LTIP Units granted in 2018 for 2017 performance, the rules and regulations do not permit that. In other words, we grant our annual incentives and equity-based compensation and make our compensation decisions retrospectively—in the first quarter of a fiscal year for the actual performance of an executive in the just-then-completed2019 is that, prior year. To more accurately present our compensation information in line with how our decisions are actually made (as described in more detail below under "—Comparison of 2015-2017 Total Direct Compensation"), the following discussion of compensation is with respect to both the annual incentive paid with respect to a stated year combined with the equity being granted following the close of that applicable year after performance has been assessed.In addition, Mr. Franco's four-year employment agreement, entered into in 2014, provided that Mr. Franco would be entitled to a grant of $2,000,000 in face amount of restricted units (vesting in one year) on his three-year anniversary in 2017 (the "Employment Agreement Grant"). In January 2017, the Company granted Mr. Franco that equity and an additional grant of $3,000,000 in face amount of restricted units (vesting on the fourth anniversary of the date of grant) as consideration for superior service rendered in connection withgrant, the formationCompany's Shares must trade (for each of JBG SMITH and the Washington Spin (the "Special Service Grant" and, together with the Employment Agreement Grant, the "Contract and Service Grants"). The aggregate Fair Value (as defined below) of these grants was $4,900,187. We view these grants20 consecutive trading days) at a price at least equal to not be reflective of historic and on-going compensation levels and, consequently, in certain specified circumstances in this discussion, we have provided information in two formats: one including the impact110% of the Contractprice per Share on the date of grant of the awards. In 2018 and Service Grants2017, the "future performance" awards granted (for 2017 and one excluding that impact. How Pay Aligns with Performance2017 Performance Metrics ConsideredFor 2017 compensation, among the factors considered, both objectively2016 performance) to our CEO and subjectively,other NEOs were the changes in the Company's and the applicable division's operating and performance results during the year (NOI at share, FFO, as adjusted, and FFO), ourform of OPP Units which are subject to multi-year TSR for the year, and the factors mentioned below. Increases or decreases in pay and allocations for 2017, 2016 and 2015 of various compensation elements to our Named Executive Officers were based, in part, upon the results of our review of these factors. "NOI" (or Net Operating Income) means total revenues less operating expenses. "FFO" means funds from operations as defined by the National Association of Real Estate Investment Trusts (NAREIT). "FFO, as adjusted," means FFO as adjusted to exclude non-comparable gains and losses, impairments and non-real estate-related items. Each of these metrics is provided in our regular annual and quarterly reports as well as reconciliations to the most comparable metric presented in accordance with Generally Accepted Accounting Principles applicable in the United States ("GAAP"). Although they are non-GAAP metrics, we use these metrics in making our compensation decisions because they facilitate meaningful comparisons in operating performance between periods and among our peers. TSRperformance. "TSR" means our total shareholder return (including dividends) forincluding dividends. The "future performance" requirements and/or time-based vesting provisions are designed to ensure that the value of our CEO's ultimately realized compensation is based on our share price performance, further aligning his interests with those of the Company and our shareholders. "OPP" means our outperformance plans and "OPP Units" are the awards granted under those plans. Awards made to executives other than our CEO and other Named Executive Officers made in 2019 (for 2018 performance) were in a given period. Our NOI at share, FFO, as adjusted, FFOcombination of AO LTIP Units (as described under "Compensation Components") and TSR for 2017, 2016 and 2015 are presented below.restricted units.
20182019 PROXY STATEMENT✓ WHAT WE DO ✗ WHAT WE DON'T DO ✓ Directly align pay with performance as evidenced by our annual bonus program, which is formula-driven and our annual equity awards, which are tied to a material increase in our share price or absolute and relative TSR ✗ No excise tax gross-up provisions ✓ Create significant alignment with shareholders by paying the majority of our NEO compensation in the form of equity ✗ No guaranteed cash incentives, equity compensation or salary increases for Named Executive Officers ✓ Maintain a cap on incentive compensation payments ✗ No excessive perquisites or benefits ✓ Include robust hurdles in our future performance awards for them to have any value ✗ No dividends or distributions on unearned equity awards subject to performance-based vesting (except limited distributions for tax purposes) ✓ Robust equity ownership requirements
CEO: 6x salary
Other executives: 3x salary
Trustees: 5x annual cash retainer✗ No excessive retirement benefits ✓ "Double trigger" acceleration of the vesting of any unvested equity awards in connection with a change of control ✗ No hedging or pledging of our equity securities ✓ Clawback policy ✗ No golden parachute for our CEO ✓ Annual compensation risk assessment ✗ No repricing of options ✓ Annual say-on-pay vote ✓ Independent compensation consultant
BUSINESS HIGHLIGHTS Net income for the year ended December 31, 2018 was $2.01 per diluted share, compared to $0.85 per diluted share for 2017.
Total Funds From Operations ("FFO") for the year ended December 31, 2018 was $3.82 per diluted share, compared to $3.75 per diluted share for 2017. FFO, as adjusted for the year ended December 31, 2018 was $3.76 per diluted share, compared to $3.73 per diluted share for 2017. FFO and FFO, as adjusted, are non-GAAP measures defined on Annex A of this Proxy Statement.
Company-wide cash basis Net Operating Income ("NOI") for 2018 was $1.338 billion, compared to $1.315 billion for 2017. 2018 cash basis "same store" NOI increased 3.9%. NOI is a non-GAAP measure defined on Annex A to this Proxy Statement.
Our Manhattan Street Retail assets produced $324.2 million of cash NOI in 2018, well ahead of the $309 million minimum we guided in the beginning of 2018, which we increased to $315 million in the third quarter.
Our 2018 leasing activity for the year, across the entire business including New York, theMART and 555 California Street and Retail, totaled approximately 2.6 million square feet in 230 leases, with industry leading mark-to-market increases of 25.6% GAAP and 18.4% cash.
At year end, office occupancy for New York, theMART and 555 California Street was 97.0% and retail occupancy was 97.3%.
In 2018, we completed $2.6 billion of financings in seven transactions. We completed the following acquisitions during 2018:
2017 2016 2015 $1,401 million $1,364 million $1,342 million $714 million $683 million $648 million $718 million $1,458 million $1,039 million (4.3%) 7.3% (3.9%) Key Year-Over-Year ComparisonsCompensation ComponentsTSR for 2017 was a negative 4.3% while that of the Office REIT was 5.3%. For 2017, we have kept flat our CEO's baseNamed Executive Officers' compensation and annual incentive award (paid for 2017 in restricted units and for 2016 in cash) and the grant date value of restricted equity awards (as reflected in the "Total Direct Compensation Table" in this proxy statement). In addition, the total dollar value (after excluding the Contract and Service Grants made for 2016) of the long-term incentive awards for our CEO (and our other NEOs) was also kept flat for 2017. When making compensation decisions, we use the potentially earnable dollar amount of OPP awards ("Notional Amount") as one of the guideposts for year-over-year changes. We made changes to the terms of the 2018 OPP for 2017 performance and the 2017 OPP for 2016 performance to conform more closely to the standards for such plans adopted by other companies, including our peers. As a result of these changes and an increased volatility in our Share price, the accounting cost for a grant of the same Notional Amount of outperformance award increased for 2017 from 2016 and for 2016 from 2015. Consequently, while the aggregate actual salaries, bonuses, value of restricted equity awards and the Notional Amounts of outperformance awards were unchanged between 2017 and 2016 and between 2016 and 2015, the accounting cost for the aggregate compensation for our CEO and other NEOs increased by 0.8% for 2017 from 2016 and 2.5% for 2016 from 2015 (in each case not including the impact of the Contract and Service Grants). We also exclude from these comparisons the compensation of Messrs. Theriot and Schear as they only worked for the Company a partial year in 2017. Including the impact of the Contract and Service Grants, the accounting cost for the aggregate compensation for our CEO and other NEOs increased by 21.3% for 2016 from 2015.Key ConsiderationsWe operate in a highly competitive commercial real estate industry where we actively compete for business opportunities and executive talent. In determining annual incentive and long-term equity compensation levels earned for 2017, our Compensation Committee sought to find a balance among (i) appropriately rewarding the significant operational achievements by the Company during the year, as highlighted above, (ii) ensuring annual incentive, long-term equity and total compensation levels were in line with the prevailing competitive market and adequate to address our recruitment and retention needs and (iii) maintaining a balanced compensation program designed to foster alignment of management and shareholder interests in a manner that reflects evolving market "best practices" as well as views of our shareholders. No numerical weight is attributed to any one factor.Alignment of Pay with PerformanceOur Compensation Committee made compensation decisions for 2017 in line with our pay-for-performance philosophy.currently has three primary components:For each of our NEOs,annual base salaries were maintained at 2016 levels (with no change since 2008) to focus on the performance-oriented components of compensation.salary;Forannual incentive awards, which include cash payments and/or awards of equity; andapproximately 60% of his equity grants (other than grants in lieu of cash bonus which are described in footnote (2) of the Summary Compensation Table) werehas been in the form of long-term equity awards, including performance-based equity.awards subject to material performance thresholds such as those awarded under our Performance Conditioned AO LTIPs or our OPP. These longer-term awards further the Compensation Committee's desire to directly align management and shareholder interests and to provide incentives for each executive to successfully implement our long-term strategic goals.PAY ELEMENT COMPENSATION TYPE OBJECTIVE AND KEY FEATURES Base Salary Cash Objective: To provide an appropriate level of fixed compensation that will promote executive retention and recruitment Annual Incentive Awards Short-Term Variable
Incentive Cash and
Restricted Equity Objective: To reward the achievement of financial and operating objectives based on the Compensation Committee's quantitative and qualitative assessment of the executive's contributions to that performance. All or a portion of earned annual incentive awards are typically given in restricted equity to further align executive's interests with those of shareholders.
20182019 PROXY STATEMENT2931PAY ELEMENT COMPENSATION TYPE OBJECTIVE AND KEY FEATURES Annual Restricted Equity
Grants Long-Term Variable
Incentive Equity Objective: To align executive and shareholder interests, promote executive retention with multi-year vesting and provide stable long-term compensation. Performance Conditioned
AO LTIP (for NEOs) Long-Term Variable
Incentive At-Risk Equity Performance Conditioned Appreciation-Only Long-Term Incentive Plan Units ("Performance Conditioned AO LTIP Units") are grants of Appreciation-Only Long-Term Incentive Plan Units that require the achievement of certain performance conditions by a specified date or they are forfeited. The performance condition for the Performance Conditioned AO LTIP Units granted in 2019 is that, prior to the fourth anniversary of the date of grant, the Company's Shares must trade (for each of 20 consecutive trading days) at a price at least equal to 110% of the price per Share on the date of grant of the awards. If the performance conditions are not met, the awards are forfeited. If the performance conditions are met, once vested, the awards may be converted into Class A common units of Vornado Realty L.P. in the same manner as other AO LTIP units until 10 years from the date of grant.
PAY ELEMENT COMPENSATION TYPE OBJECTIVE AND KEY FEATURES AO LTIP (for executives
other than NEOs) Long-Term Variable
Incentive At-Risk Equity Appreciation-Only Long-Term Incentive Plan Units ("AO LTIP Units") are grants of interests in Vornado Realty L.P. which are intended to replicate the non-tax economic characteristics of option grants. AO LTIP Units are awarded with a strike price that may not be less than the price of one Share on the date of grant and are convertible into Class A common units of Vornado Realty L.P. having a value equal to the excess of the Company's Share price on the date of conversion over the strike price. Awards of AO LTIP Units have been made to executives other than NEOs. No NEOs have received awards of AO LTIP Units.
PAY ELEMENT COMPENSATION TYPE OBJECTIVE AND KEY FEATURES Outperformance Plan
(awarded in 2018, 2017
and 2016 for 2017, 2016
and 2015 performance,
respectively) Long-Term Variable
Incentive At-Risk Equity Objective: Designed to enhance the pay-for-performance structure and shareholder alignment, while motivating and rewarding senior management for superior TSR performance based on rigorous absolute and relative hurdles.
60%51% of their equity grants (other than grants in lieu of cash bonus which are described in footnote (2) of the Summary Compensation Table) were in the form of performance-based equity.To demonstrate the alignment of our pay with performance, the following chart illustrates how our CEO's Total Direct Compensation (as defined below under "—Comparison of 2015-2017 Total Direct Compensation") compares to our FFO, as adjusted, for the applicable year.isduring 2018 and until the passing of Michael Lynne on March 24, 2019, was comprised of three independent trustees, MichaelMr. Lynne (Chairman)(Chair), Daniel R.Mr. Tisch and Dr. Richard R.West. Our Compensation Committee is currently comprised of Mr. Tisch, as Chair, Mr. Helman and Dr. West. Our Compensation Committee exercises independent judgment with respect to executive compensation matters and administers our equity incentive programs, including reviewing and approving equity grants to our executives pursuant to our 2010 Omnibus Share Plan (as may be amended, the "2010 Plan"). Our Compensation Committee operates under a written charter adopted by the Board, a copy of which is available on our website ((www.vno.com/governance/committee-charterscommittee-charters)).a number ofvarious performance factors affecting an individual executive within a formulaic cap. It also has the added benefit of reducing the risk to the Company that could potentially be associated with entirely formulaic compensation decisions. Key factors we consider when making annual compensation decisions include: actual performance compared to the financial, operational and strategic goals established for the Company or the executive's operating division at the beginning of the year; the nature, scope and level of the executive's responsibilities; the executive's contribution to the Company's financial results, particularly with respect to key metrics such as NOI at share, FFO, FFO, as adjusted, and TSR for the year; and the executive's contribution to the Company's commitment to corporate 30VORNADO REALTY TRUST2018 PROXY STATEMENT
2017,2018, as has been our historical practice, our CEO obtained individual recommendations from division heads as to compensation levels for those persons reporting to the division heads. These recommendations are discussed among our CEO and the division heads prior to a recommendation being presented to the Compensation Committee. For our senior executive management team, other than our CEO, recommendations are prepared based upon discussions among the Compensation Committee and our CEO. These recommendations are based upon our objectives described above and may include factors such as information obtained from compensation consultants. Our CEO discusses these recommendations with our other senior executives in one-on-one meetings. After these discussions, certain allocations or other aspects of compensation may be revised to some degree and the revised recommendations are presented to the Compensation Committee for discussion and review and, ultimately, through a continued process, approval. The compensation of our CEO is determined in accordance with a similar process involving direct discussions among the Compensation Committee, our CEO and the Compensation Committee's compensation consultants.
2018 PROXY STATEMENT312019 PROXY STATEMENTinclude factors such as information obtained from compensation consultants. Our CEO discusses these recommendations with our other senior executives in one-on-one meetings. After these discussions, certain allocations or other aspects of compensation may be revised to some degree and the revised recommendations are presented to the Compensation Committee for discussion and review and, ultimately, through a continued process, approval. The compensation of our CEO is determined in accordance with a similar process involving direct discussions among the Compensation Committee, our CEO and the Compensation Committee's compensation consultants.Role of Compensation ConsultantsOur Compensation Committee has retained Willis Towers Watson Public Limited Company ("Willis Towers Watson") as its independent compensation consulting firm to provide the Compensation Committee with relevant data concerning the marketplace and our peer group as well as its own independent analysis and recommendations concerning executive compensation. Willis Towers Watson regularly participates in Compensation Committee meetings. Our Compensation Committee has the authority to set Willis Towers Watson's compensation and to replace Willis Towers Watson as its independent outside compensation consultant or hire additional consultants at any time. In addition, prior to the 2016 merger of Towers Watson & Co. with Willis Group, Willis Group had provided us with insurance-related services including services to our captive insurance company. Willis Towers Watson has continued to provide us with such insurance-related services and, in 2017,2018, we paid Willis Towers Watson approximately $740,500$607,000 in fees for such services and $132,700 for compensation-related services. In 2015, in light of the then anticipated merger of Towers Watson & Co. and Willis Group, and in each year since then, the Compensation Committee assessed the independence of Willis Towers Watson pursuant to SEC rules (including Item 407(e)(3)(iv) of Regulation S-K) and the NYSE listing standards and concluded that no conflict of interest existed that would prevent Willis Towers Watson from independently advising the Compensation Committee. In particular, the Compensation Committee considered a presentation it received from Willis Towers Watson that described Willis Towers Watson's policies and procedures to prevent or mitigate conflicts of interest. The Compensation Committee also reviewed and was satisfied that there were no business or personal relationships between members of the Compensation Committee and the individuals at Willis Towers Watson supporting the Compensation Committee. The Compensation Committee considered that Willis Towers Watson reports directly to the Chair of the Compensation Committee and that the Compensation Committee has the authority to set Willis Towers Watson's compensation and to replace Willis Towers Watson as its independent outside compensation consultant or hire additional consultants at any time. Finally, the Compensation Committee considered other factors relevant to Willis Towers Watson's independence from management, including all of the factors set forth in the NYSE listing standards. The Compensation Committee regularly assesses the independence of its compensation consultants.20172018 compensation decisions, Willis Towers Watson prepared, among other reports, an analysis of compensation levels and performance at the following companies that it identified as peer companies within the context of the executive pay philosophy of the Compensation Committee: American Tower Corporation; Boston Properties, Inc.; CBRE Group, Inc.; Equity Residential; General Growth Properties, Inc.; HCP, Inc.; Host Hotels & Resorts, Inc.; Kimco Realty Corporation; ProLogis;Prologis, Inc.; Public Storage; Simon Property Group, Inc.; SL Green Realty Corp.; Welltower,Ventas, Inc.; and Ventas,Welltower, Inc. Our Compensation Committee has elected to use the foregoing executive compensation peer group, asbecause the competitive landscape in which we compete for investment capital and executive talent is comprised of other publicly-traded REITs as well as real estate operating companies. Additionally, as many of our competitors in the markets in which we operate, particularly with respect to our New York division, are asset managers not structured as REITs and private entities such as real estate opportunity funds, sovereign wealth funds and pension funds, among others, our Compensation Committee, from time to time, has also considered compensation levels and trends among our non-public competitors as obtained from surveys and other proprietary data sources. 32VORNADO REALTY TRUST2018 PROXY STATEMENT
options, restricted shares, restricted units, Performance Conditioned AO LTIPsLTIP Units, AO LTIP Units, options and awards under our OPP generally vest over three, four or five years. Awards of options,Performance Conditioned AO LTIPsLTIP Units, AO LTIP Units, options or OPP Units only have value only if our Share price increases over time. Awards of restricted units only have an ability tocan be redeemed for Shares only if our Share price increases over time. Awards of restricted shares only increase in value if our Share price increases over time. Awards of Performance Conditioned AO LTIPsLTIP Units and AO LTIP Units and of restricted units require a two-year holding period (regardless of vesting). Furthermore, with regard to grants of OPP awards made since 2013, we require our Named Executive Officers to hold the equity received with respect to earned and vested awards for one additional year after they have vested. We believe that these variable elements of compensation are a sufficient percentage of total compensation to provide incentives to executives to produce superior short- and long-term corporateCompany results, while the fixed element is also sufficiently highprovides a level of compensation that thewe believe encourages our executives are not encouraged to take unnecessary or excessive risks in doing so. We and our Compensation Committee also believe that the mix of formulaic criteria and a non-formulaic evaluation of historic performance provides an incentive for our executives to produce superior performance without the distorting effects of providing a pre-determinable compensation award based on the performance of only one division or business unit or upon other results that may not reflect the long- or short-term results of the Company as a whole. Elements of Our Compensation Programunit awards such as those awarded under our OPP.Performance Conditioned AO LTIP Units and/or OPP Units. 2018 PROXY STATEMENTVORNADO REALTY TRUST33 20172018 over that
, nor have there been any increases in our Named Executive Officers'.levels forin the past several years.form of restricted units (which vest pro-rata over 2019).always retains the right, consistent with best practices, to elect to reduce or make no payments under the program. Our Compensation Committee has elected to use FFO, as adjusted, as the primary metric for our annual incentive award rather than total FFO. FFO, as adjusted, excludes the impact of certain non-recurring items such as income or loss from discontinued operations, the sale or mark-to-market of marketable securities or derivatives and early extinguishment of debt, restructuring costs and non-cash impairment losses, among others, and thus the Compensation Committee believes it provides a better metric than total FFO for assessing management's performance for the year.overallCompany performance. Performance criteria evaluated by the Compensation Committee when determining individual incentive awards under the annual incentive program assuming the Company has achieved the required FFO, as adjusted, performance threshold necessary for our senior executive management team to be eligible to earn incentive awards under the program, will include, among others, the following: 34VORNADO REALTY TRUST2018 PROXY STATEMENT Long-Term Equity IncentivesWith regard to annual incentive awards paid in 2019 (for 2018 performance), each of our NEOs elected to receive all or a portion of that award in the form of restricted units (which vest upon grant, but which may not be redeemed for Shares for two years).
future out-performance plans, grants of stock options andtime-based restricted units. The granting of equity awards links a Named Executive Officer's compensation directly to the performance of our Share price. We believe this encourages our NEOs to make business decisions with an ownership mentality.Awards.Unit awards for 2018 performance. Our OPP waslong-term equity incentive programs were developed with the guidance and input of FTI Consulting, Inc. (a compensation consultant retained by the Company) and Willis Towers Watson.executive officers (as defined in accordance with SEC rules, "Executives")NEOs to hold the equity received with respect to earned and vested awards for one additional year after they have vested.
up to a five-year retention period (plus the additional one-year holding period for Executives) with respect to participants in the OPP. Even after achieving the performance thresholds, during the remaining two 2018 PROXY STATEMENTVORNADO REALTY TRUST35 awardsOPP Units issued accrue during the performance period and are paid to participants if and only if awards are ultimately earned based on the achievement of the designated performance objectives. Furthermore, if the maximum award is earned (through any combination of the Relative and Absolute Components), the number of units actually awarded will be based on the Share price during a 120-day measurement period preceding the end of the three-year performance period whichthat causes the award to be fully earned. On January 10, 2018, our 2015 OPP Plan expired unearned.The following charts show some of the key components of our awards of OPP Units and, for illustration purposes only (and not as a projection of actual performance), present our most recent awards (made in 2018) as if they had been fully earned at March 15, 2021.Earning and Vesting of OPP Awards
In addition, senior executive officers, including all our NEOs, are required to hold their earned and vested OPP Units for one year following vesting.Allocation of Wealth CreatedOn an absolute total shareholder return basis, our 2018 OPP is designed to award management with equity at the rate of 2% for every dollar of shareholder value created after returning the first 21% of value created to shareholders over a three-year performance period, subject to a $35 million cap (if the full amount of the authorized OPP pool is actually awarded). While the earning of OPP awards not only requires performance under the Absolute Component, but also the Relative Component, for presentation purposes the table below is simplified to present only the results derived under the Absolute Component. Using this simplified format, the table below illustrates the rate at which OPP unitholders will share in the increases in shareholder value above the OPP initial share price along with shareholders and other unitholders.Participation Percentage
in Shareholder Value
Creation under Terms of
the 2018 OPP for: 0% to 21% 21% to 35% Above 35% 100 % 98 % 100 % 0 % 2 % 0 % AO LTIPs. "AO LTIP Units" are limited partnership units in Vornado Realty L.P. that are intended to produce for holders a substantially similar non-tax economic effect as that of options. AO LTIP Units are issued under the Company's Appreciation-Only Long-Term Incentive Plan. This plan was adopted in January 2018. None of our Named Executive Officers has been awarded AO LTIPs. AO LTIP Units are potentially convertible into 36VORNADO REALTY TRUST2018 PROXY STATEMENT Class A Units of Vornado Realty L.P. if certain tax book-up events occur, and then are ultimately redeemable for Company Common Shares or cash at the option of the Company. AO LTIP Units are issued under our 2010 Plan2016 and may be convertible for up to a period of 10 years from the date of grant. Awards of AO LTIP Units granted to date vest ratably over four years from the date of grant. On the date of grant, each AO LTIP Unit is awarded with a specified strike price. That strike price will be equal to or greater than the price for one Share on the date of grant. Each AO LTIP Unit, on exercise, will be converted into such number of Class A Units that have a value equal to the excess of the closing price per Share on the date of conversion on the New York Stock Exchange over the strike price. After a required two-year holding period, those Class A Units, in turn, may be redeemable for Shares. On January 12, 2018, we first granted AO LTIP Units to members of management other than our NEOs in lieu of2015 OPP Units (except in certain instances) which they had received in prior years.Stock Options. None of our Named Executive Officers was awarded stock options for 2017, 2016, or 2015 performance. The most recent stock option award to such executives was in 2011 for 2010 performance. Executives who do not receive AO LTIP or OPP awards may receive awards of stock options. Stock option awards issued under our 2010 Plan provide our executives the opportunity to purchase Shares at an exercise price determined on the date of grant. Historically, our stock option awards have either been in the form of at-the-money stock options, whereby the option exercise price is equal to the market price of Shares on the date of grant, or in the form of premium stock options, whereby the option exercise price is established at a level above the market price of Shares on the date of grant. In both instances, the market price of Shares must increase to a level above the option exercise price in order for the executives to achieve any value from their stock option awards. Generally, the stock options vest and become exercisable in equal annual installments over a four- or five-year period beginning one year after the date of grant, and remain exercisable for a period of ten years from the date of grant. Our 2010 Plan (i) prohibits the granting of in-the-money stock options and (ii) prohibits, without shareholder approval, the repricing of outstanding stock options that have fallen out of the money. Recipients of stock options do not receive any dividends paid on Shares on their outstanding option awards.Plans expired unearned.
20182019 PROXY STATEMENT3743Nonqualified Deferred Compensation Plansexecutives to achieve any value from their stock option awards. Generally, the stock options vest and become exercisable in equal annual installments over a four -year period beginning one year after the date of grant, and remain exercisable for a period of ten years from the date of grant. Our 2010 Plan (i) prohibits the granting of in-the-money stock options and (ii) prohibits, without shareholder approval, the repricing of outstanding stock options that have fallen out of the money. Recipients of stock options do not receive any dividends paid on Shares on their outstanding option awards.shareholdersCompany as it allows our executives to continue to focus on Company matters while traveling. While providing a car and driver does provide an incidental personal benefit to the executive, the cost of this personal benefit constitutes only a small percentage of the executive's total compensation. Nevertheless, the amounts disclosed in this proxy statement for car and driver costs include the entire value of the benefit, both business purpose and personal.In order to further foster the strong ownership culture among our senior executive management team and ensure the continued direct alignment of management and shareholder interests, and consistent with emerging corporate governance trends, we have adopted executive equity ownership guidelines requiring that our NEOs and other members of our senior executive management team maintain a minimum ownership level of Shares
384420182019 PROXY STATEMENTChairman and CEO 6 times his annual base salary All Other Executive Officers 3 times their annual base salaries retainer.retainers. Non-employee Trustees have five years from the time of initial election or appointment to satisfy the guidelines. All non-employee Trustees currently satisfy these guidelines or are expected to satisfy these guidelines within the prescribed period. Ownership of units of Vornado Realty L.P. (regardless of the occurrence of a book-up event) are considered to be Company equity for the purposes of these calculations. Comparison of 2015-2017 Total Direct CompensationTotal Direct Compensation Table. We believe the Total Direct Compensation Table enables a more meaningful year-over-year compensation comparison than the Summary Compensation Table presented later in this proxy statement. The Total Direct Compensation Table consists of (i) the actual salary paid for the year, (ii) the annual incentives awarded for the year and (iii) the annual grant date fair value of equity grants awarded for service and performance for the year, irrespective of when such amounts ultimately were granted, paid and/or vested. This table illustrates one of the analyses undertaken by our Compensation Committee in determining each element of our Named Executive Officers' compensation for the particular year in light of such executive's performance during the year. We also believe it demonstrates further the ongoing correlation between the executive's pay and overall Company performance.Total Direct Compensation Table and the Summary Compensation Table is that the Total Direct Compensation Table achieves an "apples to apples" presentation of both cash and equity-based incentives by showing the value of equity awards in the year to which such grants relate, rather than the year in which such grants were made, as reflected in the Summary Compensation Table. Other companies may calculate Total Direct Compensation differently than we do.
Name Year Salary
($)(1) Cash
Bonus
($) Grant Date
Fair Value of
Restricted
Unit Awards
in Lieu of
Cash Bonus
($)(2) Grant Date
Fair Value of
Restricted Unit
Awards as
Long-Term
Equity
Compensation
($)(3) Grant Date
Fair Value of
At-Risk
Multi-Year
Performance-
Based
Awards ($)(4) Total Direct
Compensation
($)(5) 2018 1,000,000 — 825,017 4,566,451 4,806,790 11,198,258 2017 1,000,000 — 825,047 3,800,024 5,613,559 11,238,630 2016 1,038,462 1,005,700 — 3,800,082 5,307,506 11,151,750 2018 1,000,000 — 1,031,258 998,963 1,051,509 4,081,730 2017 1,000,000 — 1,031,295 831,306 1,227,966 4,090,567 2016 1,038,462 505,700 618,769 831,308 1,161,017 4,155,256 2018 1,000,000 — 1,485,020 1,541,201 1,622,305 5,648,526 2017 1,000,000 — 1,485,029 1,282,525 1,894,576 5,662,130 2016 1,038,462 805,700 825,083 1,282,539 1,791,283 5,743,067 2018 1,000,000 750,000 618,776 1,427,020 1,502,169 5,297,965 2017 1,000,000 750,000 618,800 1,187,552 1,754,237 5,310,589 2016 1,038,462 816,743 618,769 6,087,756 1,658,596 10,220,326
Name Year Salary
($)(1) Cash
Bonus
($) Grant Date
Fair Value of
Restricted
Unit Awards
in Lieu of
Cash Bonus
($)(2) Grant Date
Fair Value of
Restricted Unit
Awards as
Long-Term
Equity
Compensation
($)(3) OPP Awards
(Value
Earned)
($)(4) Total Realized
Compensation
($)(5) Total Direct
Compensation
($)(5) 2018 1,000,000 — 825,017 4,566,451 — 6,391,468 11,198,258 2017 1,000,000 — 825,047 3,800,024 — 5,625,071 11,238,630 2016 1,038,462 1,005,700 — 3,800,082 9,817,036 15,661,280 11,151,750 2018 1,000,000 — 1,031,258 998,963 — 3,030,221 4,081,730 2017 1,000,000 — 1,031,295 831,306 — 2,862,601 4,090,567 2016 1,038,462 505,700 618,769 831,308 2,231,145 5,225,384 4,155,256 2018 1,000,000 — 1,485,020 1,541,201 — 4,026,221 5,648,526 2017 1,000,000 — 1,485,029 1,282,525 — 3,767,554 5,662,130 2016 1,038,462 805,700 825,083 1,282,539 3,034,357 6,986,141 5,743,067 2018 1,000,000 750,000 618,776 1,427,020 — 3,795,796 5,297,965 2017 1,000,000 750,000 618,800 1,187,552 — 3,556,352 5,310,589 2017 1,038,462 816,743 618,769 6,087,756 3,123,603 11,685,333 10,220,326
20182019 PROXY STATEMENT3947The Total Direct Compensation earned by our Named Executive Officers for the 2015-2017 period was as follows:Name Year Salary(1) Cash
Incentive Grant Date
Fair Value of
Restricted
Unit Awards
in Lieu of
Cash Bonus Grant Date
Fair Value of
Restricted Unit
Awards as
Long-Term
Equity
Compensation Grant Date
Fair Value of
At-Risk,
Multi-Year
Performance-
Based
OPP Awards(2) Total Direct
Compensation(3) 2017 $ 1,000,000 — $ 950,055 $ 3,800,024 $ 5,613,559 $ 11,363,638 2016 $ 1,038,462 $ 1,005,700 — $ 3,800,082 $ 5,307,506 $ 11,151,750 2015 $ 1,000,000 $ 1,000,000 — $ 3,800,033 $ 5,050,847 $ 10,850,880
2017
$
1,000,000
—
$
1,187,552
$
831,306
$
1,227,966
$
4,246,824 2016 $ 1,038,462 $ 505,700 $ 712,522 $ 831,308 $ 1,161,017 $ 4,249,009 2015 $ 1,000,000 $ 500,000 $ 712,578 $ 831,282 $ 1,104,873 $ 4,148,733
2017
$
557,692
—
—
—
—
$
557,692 2016 $ 1,038,462 $ 255,700 $ 237,573 $ 285,009 $ 398,063 $ 2,214,807 2015 $ 1,000,000 $ 250,000 $ 237,585 $ 285,013 $ 378,814 $ 2,151,412
2017
$
1,000,000
—
$
1,710,033
$
1,282,525
$
1,894,576
$
5,887,134 2016 $ 1,038,462 $ 805,700 $ 950,095 $ 1,282,539 $ 1,791,283 $ 5,868,079 2015 $ 1,000,000 $ 800,000 $ 950,074 $ 1,282,517 $ 1,704,661 $ 5,737,252
2017
$
1,000,000
$
750,000
$
712,557
$
1,187,552
$
1,754,237
$
5,404,346 2016 $ 1,038,462 $ 816,743 $ 712,522 $ 6,087,756 $ 1,658,596 $ 10,314,079 2015 $ 1,000,000 $ 811,043 $ 712,578 $ 1,187,571 $ 1,578,390 $ 5,289,582
2017
$
561,538
$
976,438
—
—
—
$
1,537,976 2016 $ 1,038,462 $ 1,805,700 — — — $ 2,844,162 2015 $ 1,000,000 $ 800,000 $ 950,074 $ 688,819 $ 915,466 $ 4,354,359 (1)Total base salary in 2016 is 1/26th more than 2017 and 2015 because 2016 had 27 bi-weekly pay periods as opposed to 26 bi-weekly pay periods in 2017 and 2015.(2)Represents the grant date fair value of each Named Executive Officer's allocation in 2017 under the OPP, which is a performance-based program under which participants may earn equity compensation awards if and only if certain absolute and/or relative TSR objectives are achieved over a three-year performance period.(3)Does not include the value of certain perquisites such as financial counseling and tax services, supplemental life insurance or automobile benefits provided to certain of our Named Executive Officers. The total value of these perquisites represents a de minimis component of total compensation.(4)In 2017 (for 2016 performance), Mr. Franco received two grants of restricted units (referred to elsewhere herein as the Contract and Service Grants) with an aggregate grant date Fair Value of $4,900,187. Current Year Compensation DecisionsAs explained above, we make our incentive compensation decisions generally in the first quarter of a fiscal year with respect to the prior year. In addition, in the first quarter of 2018, we established the 2018 performance thresholds for our formula-based short-term annual incentive program.The compensation levels discussed in this Compensation Discussion and Analysis section are not directly comparable to the amounts presented in the Summary Compensation Table later in this proxy statement for the reasons discussed above under "How We Determine Executive Compensation" and "Comparison of 2015-2017 Total Direct Compensation." 40VORNADO REALTY TRUST2018 PROXY STATEMENT In addition, in the discussion below, when we discuss the "Fair Value" of equity awards, we refer to the "fair value" for such awards determined in accordance with applicable securities and accounting rules (excluding the impact of estimated forfeitures related to service-based vesting conditions). Fair Value is the method used for presenting values for equity awards in our "Summary Compensation Table" and elsewhere under "Executive Compensation." When we discuss the "Market Value" of equity awards, we refer to values based on the market price of our Sharesa Share at the date of grant (the values considered by our Compensation Committee in making compensation decisions).Total Compensation of Our CEO(with equity determined at Fair Value) was $11,363,638,$11,238,630 compared to $11,151,750 in the prior year, or a 1.9%0.8% increase. For 2016,2017, Mr. Roth's total realized compensation (with equity determined at Fair Value) was $11,151,750,$5,625,071 compared to $10,850,880$15,661,280 in the prior year, or a 2.8% increase. However, as discussed earlier, the aggregate value for all of Mr. Roth's compensation other than OPP awards decreased by 1.6% in 2017 from 2016 and increased 0.1% in 2016 from 2015 and the total dollar value of the long-term incentive award potentially earnable (the "Notional Amount") of the OPP awards made to Mr. Roth for 2017 and 2016 was unchanged from 2015. Accordingly, the increase in compensation for Mr. Roth in 2017 from 2016 and in 2016 from 2015 was due primarily to an increase in the accounting cost for OPP awards with the same notional value. For 2015, Mr. Roth's total compensation (with equity determined at Fair Value) was $10,850,880, compared to $9,801,951 in the prior year or a 10.7% increase. Our one-year TSR for 2017 was -4.3%, 7.3% for 2016 and -3.9% for 2015.64.1% decrease.2016, and 20152016 was $1,000,000, $2,044,162,$1,000,000 and $2,000,000,$2,044,162, respectively. The decrease in 2018 and 2017 as compared to 2016 was due to Mr. Roth receiving for 2017 restricted units in lieu of a cash bonus.bonus in those years. For 2019, Mr. Roth has elected to receive 80% (or $800,000) of his annual salary in the form of restricted units (which vest ratably over 2019).2016 asthe Market Value and a 0.4% decrease in Fair Value of long-term equity grants compared to 2015the prior year. In addition, Mr. Roth elected to receive all of his annual bonus for 2018 (awarded in 2019) in the form of 15,509 restricted units having a Market Value and Fair Value of $1,000,020 and $825,017, respectively, on the date of grant. Equity received in lieu of cash bonus is due to 2016 having 27 bi-weekly pay periods as opposed to 26 bi-weekly pay periodsincluded in 2015.Equitythe short-term bonus column of the Summary Compensation of Our CEO73,12258,497 restricted units (collectively having a Market Value of $10,613,641)$9,613,584). The aggregate Fair Value at the date of grant of these OPP and restricted units was $10,363,638$9,413,583 and represents a 13.8%3.3% increase (ain Market Value and a 3.4% increase if the restricted units awarded in lieu of cash bonus are not included) in the aggregate valueFair Value of long-term equity grants compared to the prior year. Mr. Roth's long-term equity incentive compensation award for 2016 performance (granted in 2017) was 151,683 OPP Units and 38,293 restricted units (collectively having a Market Value of $9,307,593). The aggregate Fair Value at the date of grant of these OPP and restricted units was $9,107,588 and represents a 2.9% increase in the aggregate valueboth the Market Value and Fair Value of long-term equity grants of restricted and OPP Units compared to the prior year. The increase in the Fair Value of granted OPP Units for 2017 and 2016 primarily reflects increases in the accounting cost for such units. The Notional Amount of such grants has remained constant since 2014. For 2015 performance, Mr. Roth was granted (in 2016) 165,626 OPP Units and 43,025 restricted units (collectively having a Market Value of $9,050,881). The aggregate Fair Value at the date of grant of these OPP and restricted units was $8,850,880 and represents a Basis for Compensation of Other Named Executive Officers 2018 PROXY STATEMENTVORNADO REALTY TRUST41 13.5% increase in the aggregate value of long-term equity grants of restricted and OPP Units compared to 2014.Basis for Compensation of Other Named Executive OfficersFranco, Schear and Theriot)Franco), such executive's salary, annual incentive and long-term equity awards were based on an evaluation of those factors previously described and were approved by the Compensation Committee. Among the factors considered, both objectively and subjectively, were the strategic position of the Company, the changes in the Company's operating and performance metrics over the applicable period (NOI at share, FFO, as adjusted, and FFO per Share), our TSR over the applicable period and the other factors previously mentioned. With regard to each of Messrs.Mr. Macnow, and Theriot, we considered these factors as they apply to our Company as a whole as his responsibilities are company-wide. For Messrs. Greenbaum Franco and Schear,Franco, we also considered these factors as they pertain to the division which such executive heads. Mr. Greenbaum is President—New York Division and Mr. Franco is Executive Vice President—Chief Investment Officer and Mr. Schear was President—Vornado/Charles E. Smith Washington, D.C. Division.Officer. In all cases, these factors
20172018 decreased by 23.9%0.3% as compared to the prior year. In 2017,For 2019, Mr. Franco receivedGreenbaum has elected to receive 80% (or $800,000) of his annual salary in the Contract and Service Grants (two grantsform of restricted units (which vest ratably over 2019). In connection with an aggregate Fair Valueour equity awards made in 2019 (for 2018 performance), we amended the existing awards made to Mr. Franco so that awards of $4,900,187). If the impactequity in lieu of the Contract and Service Grants is excluded, total compensation (with equity determined at Fair Value) awarded to these four Named Executive Officers for 2017 increased by 0.1% as compared to the prior year. We exclude from these comparisons the compensation of Messrs. Theriot and Schear as they only worked for the Company a partial year in 2017.cash bonus vest immediately upon grant. Other Compensation Policies and PracticesEquity Grant 42VORNADO REALTY TRUST2018 PROXY STATEMENT 20172018 and only a small portion of their compensation may not be deductible due to that limitation.
20182019 PROXY STATEMENT43492017.2018.
The Compensation Committee of the Board of Trustees:
MICHAEL LYNNE
DANIEL R. TISCH
DR. RICHARD R. WEST
Mr. Lynne approved this Compensation Committee Report prior to his passing on March 24, 2019.
445020182019 PROXY STATEMENTthreetwo other most highly-compensated executive officers for 2018, 2017 2016 and 20152016 (the "Named Executive Officers" or "NEOs").Name and
Principal Position Year Salary
($)(1) Cash
Bonus
($)(2) Restricted
Share/Unit
Awards
($)(3) Option
Awards
($)(3) Non-Equity
Incentive
Plan
Compensation
($)(4) Changes in
Pension Value
and
Non-qualified
Deferred
Compensation
Earnings
($) All Other
Compensation
($)(5) Total ($) Year Salary
($)(1) Bonus
($)(2) Restricted
Share/Unit
Awards
($)(3) Option
Awards
($)(3) Non-Equity
Incentive
Plan
Compensation
($)(4) Changes in
Pension
Value and
Non-qualified
Deferred
Compensation
Earnings ($) All Other
Compensation
($)(5) Total
($) 2017 1,000,000 — 9,107,588 — — — 359,929 10,467,517 2018 1,000,000 825,017 9,413,583 — — — 360,670 11,599,270 2016 1,038,462 1,005,700 8,850,880 — — — 331,536 11,226,578 2017 1,000,000 950,055 9,107,588 — — — 359,930 11,417,573 2015 1,000,000 1,000,000 7,800,051 — 4,626 — 326,530 10,131,207 2016 1,038,462 1,005,700 8,850,880 — — — 331,536 11,226,578
2017
1,000,000
—
2,704,847
—
—
—
359,240
4,064,087 2018 1,000,000 1,031,258 2,059,272 — — — 366,248 4,456,778 2016 1,038,462 505,700 2,648,733 — 4,857 — 372,711 4,570,463 2015 1,000,000 500,000 2,418,811 — — — 358,570 4,277,381
2017
557,692
—
920,645
—
—
—
22,525
1,500,862 2016 1,038,462 255,700 901,412 — — — 23,873 2,219,447 2015 1,000,000 250,000 822,573 — — — 23,873 2,096,446 2017 1,000,000 1,187,552 1,992,325 — — — 359,240 4,539,117 2016 1,038,462 1,212,522 1,936,155 — 4,857 — 372,711 4,564,707
2017
1,000,000
—
4,023,917
—
5,405
—
279,729
5,309,051 2018 1,000,000 1,485,020 3,177,101 — — — 309,179 5,971,300 2016 1,038,462 805,700 3,937,252 — — — 270,003 6,051,417 2017 1,000,000 1,710,033 3,073,822 — 5,405 — 279,729 6,068,989 2015 1,000,000 800,000 3,582,684 — — — 268,508 5,651,192 2016 1,038,462 1,750,095 2,987,178 — — — 270,003 6,045,738
2017
1,000,000
750,000
8,458,874
—
—
—
32,884
10,241,758 2018 1,000,000 1,368,776 2,941,789 — — — 37,627 5,348,192 2016 1,038,462 816,743 3,478,539 — — — 33,346 5,367,090 2017 1,000,000 1,462,557 2,846,165 — — — 32,884 5,341,606 2015 1,000,000 811,043 3,150,084 — — — 32,884 4,994,011 2016 1,038,462 1,462,522 2,765,961 — — — 33,346 5,300,291
2017
561,538
976,438
—
—
—
—
5,155,772
6,693,748 2016 1,038,462 1,805,700 2,554,360 — — — 79,988 5,478,510 2015 1,000,000 800,000 2,363,857 — — — 79,582 4,243,439 20172018 and 20152017 because 2016 had 27 bi-weekly pay periods as opposed to 26 bi-weekly pay periods in 20172018 and 2015.2017.$1,710,033, respectively, which, pursuant to SEC rules and regulations, is not reflected in this table. In prior years, all or a portion of such NEO's cash bonus was paid in restricted units. Onon March 15, 2018, Mr. Franco also received restricted units with a grant date fair value of $618,776 and $712,557, respectively, in lieu of a portion of his 2018 and 2017 cash bonus.bonuses. Per his employment agreement, Mr. Franco received an additional bonus equal to the dividend equivalent with respect to an additional equity award of $2,000,000 that he received in January 2017. This amount was $0 in 2018 and 2017 and $61,043 in 2016.
20182019 PROXY STATEMENT4551employment agreement, Mr. Franco received an additional bonus equal toValue of time-based restricted unit awards and the dividend equivalent with respect to an additional equity awardGrant Date Fair Value of $2,000,000 that he received in January 2017. This amount was $0 in 2017, $61,043 in 2016, and $61,043 in 2015.OPP awards for the following persons were as follows: Year Restricted Unit Awards
Other than Awards
In Lieu of Cash Bonus ($) OPP Awards ($) 2018 3,800,024 5,613,559 2017 3,800,082 5,307,506 2016 3,800,033 5,050,847 2018 831,306 1,227,966 2017 831,308 1,161,017 2016 831,282 1,104,873 2018 1,282,525 1,894,576 2017 1,282,539 1,791,283 2016 1,282,517 1,704,661 2018 1,187,552 1,754,237 2017 1,187,569 1,658,596 2016 1,187,571 1,578,390 (3)Information presented in this table includes the value of grants of Restricted Units in lieu of cash bonuses, Restricted Units and OPP Units made during the applicable period. Information presented in these columns reflects the aggregate grant date fair value of equity awards granted in the applicable fiscal year computed in accordance with FASB ASC Topic 718. Assumptions used in the calculation of these amounts are included in footnote 13 to our consolidated financial statements included in our Annual Report on Form 10-K (the "Form 10-K") for the applicable fiscal year as filed with the SEC. Pursuant to the rules and regulations of the SEC, the amounts shown exclude the impact of estimated forfeitures related to service-based vesting conditions. Dividends or dividend equivalents are paid on both the vested and unvested portion of restricted share and restricted unit awards. In accordance with applicable SEC rules, amounts shown include the impact of bonuses paid in equity in the year actually granted. For the Named Executive Officers, the Restricted Share/Unit Awards set forth above reflect the grant of equity-based bonuses in lieu of cash in 2017, 2016, and 2015, respectively, in the following amounts: Mr. Roth—$0, $0, and $0; Mr. Macnow—$712,522, $712,578, and $712,546; Mr. Theriot—$237,573, $237,585, and $237,555; Mr. Greenbaum—$950,095, $950,074, and $950,101; Mr. Franco—$712,522, $712,578, and $712,546; and Mr. Schear—$0, $950,074, and $950,101.Name Year Use of Car
and Driver
($)(1) Supplemental
Life
Insurance
Premiums
($) Reimbursement
For Medical/
Dental Not
Covered
($) Severance
($) Tax and
Financial Planning
Assistance Per
Employment
Contract
($) Matching
401(k)
Contribution
($) Total ($) Year Use of Car
and Driver
($)(1) Supplemental
Life
Insurance
Premiums
($) Reimbursement
for Medical/
Dental
Not Covered
($) Tax and
Financial
Planning
Assistance Per
Employment
Contract
($) Matching
401(k)
Contribution
($) Total
($) 2017 297,319 44,610 — — — 18,000 359,929 2018 298,119 44,176 — — 18,375 360,670 2016 272,290 41,246 — — — 18,000 331,536 2017 297,319 44,611 — — 18,000 359,930 2015 261,724 46,806 — — — 18,000 326,530 2016 272,290 41,246 — — 18,000 331,536
2017
181,302
144,938
—
—
15,000
18,000
359,240 2018 187,935 144,938 — 15,000 18,375 366,248 2016 200,147 139,564 — — 15,000 18,000 372,711 2017 181,302 144,938 — 15,000 18,000 359,240 2015 187,805 137,765 — — 15,000 18,000 358,570 2016 200,147 139,564 — 15,000 18,000 372,711
2017
—
4,525
—
—
—
18,000
22,525 2016 — 5,873 — — — 18,000 23,873 2015 — 5,873 — — — 18,000 23,873
2017
202,887
33,842
10,000
—
15,000
18,000
279,729 2018 214,150 51,654 10,000 15,000 18,375 309,179 2016 193,161 33,842 10,000 — 15,000 18,000 270,003 2017 202,887 33,842 10,000 15,000 18,000 279,729 2015 191,481 34,027 10,000 — 15,000 18,000 268,508 2016 193,161 33,842 10,000 15,000 18,000 270,003
2017
12,000
7,384
—
—
—
13,500
32,884 2018 14,870 8,882 — — 13,875 37,627 2016 12,462 7,384 — — — 13,500 33,346 2017 12,000 7,384 — — 13,500 32,884 2015 12,000 7,384 — — — 13,500 32,884 2016 12,462 7,384 — — 13,500 33,346
2017
27,622
23,237
10,000
5,076,913(2)
—
18,000
5,155,772 2016 28,751 23,237 10,000 — — 18,000 79,988 2015 28,345 23,237 10,000 — — 18,000 79,582 (except Mr. Theriot) was provided with a car (or a car allowance) and (for Messrs. Roth, Macnow and Greenbaum)(other than for Mr. Franco) a driver. Each such Named Executive Officer has used the car and driver for both business and personal purposes and the amounts shown for such executive reflect the aggregate incremental cost to the Company for the car, driver and related expenses without allocating costs between business and personal uses. See also "Certain Other Transactions or Relationships" for additional information regarding certain of our Named Executive Officers.
465220182019 PROXY STATEMENTexecutive reflect the aggregate incremental cost to the Company for the car, driver and related expenses without allocating costs between business and personal uses. See also "Certain Other Transactions or Relationships" for additional information regarding certain of our Named Executive Officers.(2)Includes $438,462 for transition services provided to the Company.20172018 and their grant date fair value. Estimated Future Payouts
Under Equity Incentive Plan
Awards(1) Estimated Future Payouts Under
Equity Incentive Plan Awards(1) All Other
Stock
Awards:
Number
of Units (#)(3) All Other
Stock
Awards:
Number
of Units (#)(3) Grant Date
Fair Value of
Awards ($)(4) Grant Date
Fair Value of
Awards ($)(4)Name Grant
Date Threshold
($) Target
($)(2) Maximum
($) Grant Date Threshold
($) Target
($)(2) Maximum
($) 01/13/17 — 6,486,360 13,559,322 5,307,506 03/15/18 — 4,288,276 13,559,322 5,613,559 01/13/17 38,293 3,800,082 03/15/18 73,122 4,750,078 01/13/17 — 1,418,891 2,966,102 1,161,017 03/15/18 — 938,060 2,966,102 1,227,966 01/13/17 15,557 1,543,830 03/15/18 31,078 2,018,858 01/13/17 — 486,477 1,016,949 398,063 01/13/17 5,266 522,582 01/13/17 — 2,189,146 4,576,271 1,791,283 03/15/18 — 1,447,293 4,576,271 1,894,576 01/13/17 22,498 2,232,634 03/15/18 46,067 2,992,558 01/13/17 — 2,026,987 4,237,288 1,658,596 03/15/18 — 1,340,086 4,237,288 1,754,237 01/13/17 19,147 1,900,091 03/15/18 29,250 1,900,109 01/10/17 (5) 18,961 1,900,096 01/13/17 (6) 28,720 3,000,091 01/13/17 — — — 01/13/17 20172018 OPP. The awards of OPP Units, if earned, vest ratably in the third, fourth and fifth year from the date of grant.20172018 OPP.(other than for Mr. Roth) represents the grant of restricted units in lieu of cash bonus.bonus for the previous year which vest on grant. No options have been granted to the Named Executive Officers since 2011.2017.2018. Pursuant to the rules and regulations of the SEC, the amounts shown exclude the impact of estimated forfeitures related to service-based vesting conditions. The grant date fair value, including the impact of estimated forfeitures related to service-based vesting conditions, is the amount we would expense in our consolidated financial statements over the award's vesting schedule. For additional information on our value assumptions, refer to footnote 1316 of our consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2017,2018, as filed with the SEC.(5)The amount represents consideration for superior service rendered in connection with the Washington Spin. This award is referred to in the Compensation Discussion and Analysis section as the "Special Service Grant."(6)The amount represents an award made in accordance with the terms of Mr. Franco's employment agreement and which vested on January 9, 2018. This award is referred to in the Compensation Discussion and Analysis section as the "Employment Agreement Grant."
20182019 PROXY STATEMENT4753 Outstanding Equity Awards at Year-End20172018 and the aggregate option exercises in 20172018 by, and restricted unit awards that vested in 20172018 for, the Named Executive Officers. Pursuant to the terms of our omnibus share plans, the exercise price and number of Shares underlying options originally made at any date of grant may be adjusted to compensate the holder for special or extraordinary dividends that may be subsequently declared. The following table reflects such adjustments. Option Awards Share and Unit Awards Name and
Applicable
Grant Date Number of
Securities
Underlying
Unexercised
Options (#)
Exercisable Number of
Securities
Underlying
Unexercised
Options (#)
Unexercisable Option
Exercise
Price ($) Option
Expiration
Date Number of
Shares or
Units That
Have Not
Vested (#) Market Value
of Shares
or Units That
Have Not
Vested ($) Equity
Incentive
Plan
Awards:
Number of
Unearned
Shares,
Units or
Other
Rights That
Have Not
Vested (#) Equity
Incentive
Plan
Awards:
Market or
Payout
Value of
Unearned
Shares,
Units or
Other
Rights That
Have Not
Vested ($) (1) 47,121 3,683,920 186,651 14,592,375 (1) 39,708 3,104,371 203,808 15,933,709 (1) 21,955 1,716,442 138,952 10,863,267 (1) 91,693 7,168,559 (1) 33,398 2,611,056 (2) 187,868 66.49 2/27/21 (2) 285,453 52.64 3/11/20 (3) 413,701 24.52 2/27/19 (1) 19,143 1,496,600 40,830 3,192,089 (1) 16,132 1,261,200 44,583 3,485,499 (1) 8,920 697,366 30,395 2,376,281 (1) 22,788 1,781,566 (1) 6,073 474,787 (2) 31,309 66.49 2/27/21 (2) 116,757 52.64 3/11/20 (3) 51,078 24.52 2/27/19 (1) 13,999 1,094,442 (1) 15,286 1,195,059 (1) 10,421 814,714 (table continued on following page) 48VORNADO REALTY TRUST2018 PROXY STATEMENT Option Awards Share and Unit Awards Name and
Applicable
Grant Date Number of
Securities
Underlying
Unexercised
Options (#)
Exercisable Number of
Securities
Underlying
Unexercised
Options (#)
Unexercisable Option
Exercise
Price ($) Option
Expiration
Date Number of
Shares or
Units That
Have Not
Vested (#) Market Value
of Shares
or Units That
Have Not
Vested ($) Equity
Incentive
Plan
Awards:
Number of
Unearned
Shares,
Units or
Other
Rights That
Have Not
Vested (#) Equity
Incentive
Plan
Awards:
Market or
Payout
Value of
Unearned
Shares,
Units or
Other
Rights That
Have Not
Vested ($) Number of
Securities
Underlying
Unexercised
Options (#)
Exercisable Number of
Securities
Underlying
Unexercised
Options (#)
Unexercisable Option
Exercise
Price ($) Option
Expiration
Date Number of
Shares or
Units That
Have Not
Vested (#) Market Value
of Shares
or Units That
Have Not
Vested ($) Equity
Incentive
Plan
Awards:
Number of
Unearned
Shares,
Units or
Other
Rights That
Have Not
Vested (#) Equity
Incentive
Plan
Awards:
Market or
Payout
Value of
Unearned
Shares,
Units or
Other
Rights That
Have Not
Vested ($) (1) 73,122 4,535,758 238,257 14,779,082 (1) 27,684 2,164,335 62,995 4,924,949 (1) 35,341 2,192,202 186,651 11,577,962 (1) 23,330 1,823,939 68,786 5,377,689 (1) 26,473 1,642,120 203,808 12,642,210 (1) 12,899 1,008,444 46,896 3,666,329 (1) 10,978 680,965 (1) 30,918 2,417,169 (1) 38,860 2,410,486 (1) 7,287 569,698 (2) 31,309 66.49 2/27/21 (2) 187,868 66.49 2/27/21 (2) 163,133 52.64 3/11/20 (2) 285,453 52.64 3/11/20 (3) 55,158 24.52 2/27/19
(1) 31,078 1,927,768 52,119 3,232,942 (1) 82,234 6,429,054 58,328 4,560,083 (1) 14,358 890,627 40,830 2,532,685 (1) 19,856 1,552,342 63,690 4,979,284 (1) 10,755 667,133 44,583 2,765,483 (1) 10,978 858,260 43,422 3,394,732 (1) 4,461 276,716 (1) 30,786 2,406,849 (1) 8,832 547,849 (1) 6,073 474,787 (2) 31,309 66.49 2/27/21 (2) 116,757 52.64 3/11/20 (1) 46,067 2,857,536 80,412 4,987,956 (1) 20,764 1,287,991 62,995 3,907,580 (1) 15,554 964,815 68,786 4,266,796 (1) 6,450 400,094 (1) 12,011 745,042 (2) 31,309 66.49 2/27/21 (2) 163,133 52.64 3/11/20 (1) 29,250 1,814,378 74,455 4,618,444 (1) 53,013 3,288,396 58,328 3,618,086 (1) 13,237 821,091 63,690 3,950,691 (1) 5,490 340,545 (1) 12,365 767,001 (2) 7,827 66.49 2/27/21 (2) 7,827 66.49 2/27/21 (2) 73,079 59.29 12/10/20 (2) 73,079 59.29 12/10/20
(1) 36,941 2,888,047 (1) 25,185 1,968,963 2016, and 20152016 do not have any value unless specified performance criteria are met and specified criteria for converting and/or redeeming units for Shares are also met. As of December 31, 2017,2018, these criteria had not been met. On January 10, 2019, the 2016 OPP plan and on January 10, 2018, the 2015 OPP plan, respectively, did not meet the applicable performance requirements and the applicable units are no longer earnable. Accordingly, the Equity Incentive Plan Awards for 2016 and 2015 no longer have any value. In accordance with applicable SEC rules, the values presented in the table for these OPP Units are calculated based on our year-end Share price as if the performance, converting and redemption conditions for these units had been met as of that date.(3)These awards vested ratably over five years from the date of grant.(4)In connection with the JBG SMITH transactions, the Compensation Committee determined to treat equity awards granted to persons employed with our Washington D.C. business (including Mr. Theriot and Mr. Schear) in the following manner: (a) for awards of stock options, restricted stock and/or restricted units, the vesting of awards was accelerated so that all awards became vested as of the date of the
2018 PROXY STATEMENT492019 PROXY STATEMENTconsummation of the transactions, and (b) for OPP awards, treating the transactions as a special dividend and treating service with JBG SMITH or one of its affiliates as continued service with the Company or one of its affiliates. Aggregated Option Exercises in 2017 and Units Vested Option Awards Unit Awards Option Awards Unit Awards Name Shares
Acquired on
Exercise (#) Value Realized
on Exercise
($)(1) Number of Units
Acquired on
Vesting (#)(2) Value Realized
on Vesting
($)(1)(2) Shares
Acquired on
Exercise (#) Value Realized
on Exercise
($)(1) Number of Units
Acquired on
Vesting (#)(2) Value Realized
on Vesting
($)(1)(2) — — 169,186 14,299,279 413,701 18,839,447 122,223 8,745,330 — — 45,758 3,886,335 51,078 2,316,581 34,650 2,494,106 — — 28,997 2,324,232 — — 60,952 5,182,862 55,158 2,582,431 47,339 3,411,868 — — 66,655 5,668,327 — — 65,822 4,761,713 185,788 4,224,673 47,815 4,065,086 2017.2018. 50VORNADO REALTY TRUST2018 PROXY STATEMENT Name Type of Deferred
Compensation
Plan Executive
Contributions
in Last Fiscal
Year ($)(1) Company
Contributions
in Last Fiscal
Year ($) Aggregate
Earnings (Loss)
in Last Fiscal
Year ($)(2) Aggregate
Withdrawals/
Distributions ($) Aggregate
Balance at
12/31/17 ($)(3) Type of Deferred
Compensation
Plan Executive
Contributions
in Last Fiscal
Year ($) Company
Contributions
in Last Fiscal
Year ($) Aggregate
Earnings (Loss)
in Last Fiscal
Year ($)(1) Aggregate
Withdrawals/
Distributions ($) Aggregate
Balance at
12/31/18 ($)(2) Deferred Compensation Plans — — (254,867) 20,771,790 2,776,000 Deferred Compensation Plans — — (240,220) 2,535,780 —
Deferred Compensation Plans
—
—
788,059
—
6,961,125 Deferred Compensation Plans — — (434,926) — 6,526,199
Deferred Compensation Plans
125,000
—
(34,425)
—
389,277
Deferred Compensation Plans
772,726
—
2,551,960
—
35,308,033 Deferred Compensation Plans — — 492,850 8,361,718 26,453,465
Deferred Compensation Plans
—
—
—
—
— Deferred Compensation Plans — — — — —
Deferred Compensation Plans
—
—
12,532
252,159
— Reflects the following amounts for each of the Named Executive Officers which are reported as compensation to such Named Executive Officer in the Summary Compensation Table for 2017: Mr. Roth, $0; Mr. Macnow, $0; Mr. Theriot, $125,000; Mr. Greenbaum, $772,726; Mr. Franco, $0; and Mr. Schear, $0. These amounts represent the deferred portion for each of such Named Executive Officer's annual salary and/or applicable bonus.(2)(3)(2)Joseph MacnowTable of Contents2018 PROXY STATEMENTVORNADO REALTY TRUST51 given the use ofprovided with a Company car and driver.
vestvested ratably over three years from the date of grant. Pursuant to Mr. Franco's employment agreement, on January 10, 2017 Mr. Franco was awarded an additional $2,000,000 of restricted units which vested on January 9, 2018. Upon any termination of Mr. Franco's employment for good reason or by the Company without cause, Mr. Franco will be entitled to (a) a severance payment equal to one times his annual salary and average bonus over the last two years; and (b) accelerated vesting of all then-unvested equity awards (other than unearned OPP Units) made by the Company to Mr. Franco. Mr. Franco is also entitled to a car allowance of $1,000 per month. The agreement further provides that if his employment is terminated for cause (as defined in the agreement to include 52VORNADO REALTY TRUST2018 PROXY STATEMENT Mitchell N. SchearMitchell N. Schear served as the President of our Charles E. Smith/Washington, D.C. Division from 2003 until the completion of the Washington Spin in July 2017. The terms of Mr. Schear's employment with us were governed by an employment agreement dated April 19, 2007. This agreement provided for a term of five years and was automatically renewable for one-year terms thereafter. The agreement also provided for a minimum salary of $1,000,000 per year and bonuses and other customary benefits. The agreement also provided that if we terminate Mr. Schear's employment without cause or if he terminated his employment for breach of his employment agreement by us, he would receive a lump-sum payment equal to one year's salary and bonus, up to a maximum of $2,000,000.In connection with the Washington Spin, on March 10, 2017, we entered into an amendment to Mr. Schear's employment agreement. The amendment provides the terms of certain payments that Mr. Schear became eligible to receive in connection with certain post-employment services related to the Washington Spin. In addition to the severance payments and benefits under his existing employment agreement to which he became entitled upon his termination of employment from us without cause upon the spin-off (which were subject to Mr. Schear's execution of a release), the material terms of the amendment included:(1) transition services payments at a rate of $1,000,000 per year plus continuation of his existing auto allowance, supplemental life insurance and certain benefits, in each case for so long as he is actively providing services to us in connection with the spin-off (but not to exceed two years). Mr. Schear provided active services to us until December 31, 2017;(2) spin-off payments of $1,800,000 upon consummation of the spin-off and $1,800,000 in January 2018;(3) payment of a pro rata $1,800,000 bonus for 2017, based on the portion of 2017 during which Mr. Schear was employed by us preceding the spin-off date; and(4) continuation of certain health, welfare, and other benefits for two years following his termination of employment upon the spin-off (including payment of COBRA premiums, to the extent applicable).In connection with the Washington Spin, equity awards granted to persons employed by our Washington D.C. business (including Mr. Schear) were treated in the following manner: (a) for awards of stock options, restricted stock and/or restricted units, the vesting of awards were accelerated so that all awards vested as of the date of the consummation of the Washington Spin and Mr. Schear received a one-time cash payment to compensate him for the value of the unexpired terms of his options, and (b) OPP awards were proportionately adjusted in accordance with their terms to maintain the grantee's rights, so that performance is measured based on the aggregate value of Company and JBG SMITH common shares on the NYSE and service with JBG SMITH or one of its affiliates will be treated as continued service with the Company or one of its affiliates (provided that Mr. Schear's earned OPP awards vested as of the date of the consummation of the transaction and his unearned OPP awards are subject only to achieving the applicable performance criteria without regard to his continued service). The employment agreement for Mr. Theriot expired upon the Washington Spin and the Company has no further obligations under that agreement.Severance and Change of Control Arrangements 2018 PROXY STATEMENTVORNADO REALTY TRUST53 Severance and Change of Control Arrangementsagreementsagreement that provideprovides for certain payments in the event of a termination of employment, including one following a change of control. Each of Messrs. Theriot and Schear had employment agreements with us during their employment with us, but those agreements are no longer applicable. Neither Mr. Roth nor any of our Trustees has an employment agreement or other severance arrangement. Our omnibus share plans, which govern all of our equity-based awards and the related forms of equity award agreements, provide that annual equity awards do not vest automatically upon a change of control. In addition, our deferred compensation plans provide that all applicable deferred compensation is paid out to an executive or Trustee upon his or her departure from the Company. The Company does not maintain a retirement plan other than a 401(k) plan. In addition, upon the death or disability of an executive, that executive, or his or her estate, may be entitled to insurance benefits under policies with third parties maintained by us.
form of award caused by a change of control. In the case of retirement after the age of 65 (or, in some cases, after attainment of age 60 with at least 20 years of service), options (but no other equity-based award) automatically vest.vest and OPP Units continue to vest on their original schedule subject to the applicable performance conditions. Beginning in 2019, in the case of retirement (as defined above), Performance Conditioned AO LTIP Units, restricted shares and restricted units will continue to vest on their original schedule (subject to performance conditions, as applicable). In the case of a disability, options, Performance Conditioned AO LTIP Units and OPP Units vest and in the case of death, all equity awards vest.2017. As neither2018. In calculating the value of equity-based awards, the presentation uses a price per Share of $62.03, the closing price of our Shares on the New York Stock Exchange on the last trading day in 2018. In addition, in estimating bonuses payable for the calculation of severance payments, we have used the actual bonuses paid in 2019 for 2018 performance (including, for these presentation purposes only, the value of all restricted units granted as a bonus in the first quarter of 2019). The actual amounts that would be paid on any termination of employment can only be determined at the time of any actual separation from the Company.Payments on
Termination Voluntary
Termination on
Retirement(1) Involuntary
For Cause
Termination Involuntary Not
For Cause
Termination
/Good
Reason
Termination Voluntary
Termination
Following a
Change of
Control(2) Death Disability — — — — — — — — — — — — — — — — — — — — — — 5,422,477 — 2,410,486 — 2,410,486 — 2,410,486 2,410,486 — — — — — — 2,410,486 — 2,410,486 — 7,832,963 2,410,486
Payments on
Termination Voluntary
Termination on
Retirement(1) Involuntary
For Cause
Termination Involuntary Not
For Cause
Termination
/Good
Reason
Termination Voluntary
Termination
Following a
Change of
Control(2) Death Disability 1,250,000 — 1,250,000 1,250,000 1,250,000 1,250,000 — — 3,300,000 3,300,000 — — — — — — — — — — 3,762,244 3,762,244 3,762,244 3,762,244 547,849 — 547,849 547,849 547,849 547,849 — — 463,611 463,611 9,599 463,611 1,797,849 — 9,323,704 9,323,704 5,569,692 6,023,704 Payments on
Termination Voluntary
Termination on
Retirement(1) Involuntary
For Cause
Termination Involuntary Not
For Cause
Termination
/Good
Reason
Termination Voluntary
Termination
Following a
Change of
Control(2) Death Disability — — 1,800,000 1,800,000 1,800,000 1,800,000 — — 8,400,000 8,400,000 1,000,000 — — — — — — — — — — — 5,510,435 — 745,042 — 745,042 — 745,042 745,042 — — 212,088 212,088 19,042 212,088 745,042 — 11,157,130 10,412,088 9,074,519 2,757,130 Payments on
Termination Voluntary
Termination on
Retirement(1) Involuntary
For Cause
Termination Involuntary Not
For Cause
Termination
/Good
Reason
Termination Voluntary
Termination
Following a
Change of
Control(2) Death Disability — — — — — — — — 2,500,000 — — — — — — — — — — — 6,264,410 6,264,410 6,264,410 — — — 767,001 767,001 767,001 767,001 — — — — — — — — 9,531,411 7,031,411 7,031,411 767,001 Theriot orRoth, Macnow and Greenbaum would have qualified for retirement at December 31, 2018. Except as otherwise provided in these tables, no payments are due upon any other voluntary termination prior to retirement.
$ 61,701 $ 82,456 $ 11,599,270 188.0:1.0 140.7:1.0
546020182019 PROXY STATEMENTSchear was employed by us at that date, information pertaining to them was not included in the tables below. In calculating the value of equity-based awards, the presentation uses a price per Share of $78.18, the closing price of our Shares on the New York Stock Exchange on the last trading day in 2017. In addition, in estimating bonuses payable for the calculation of severance payments, we have used the actual bonuses paid in 2018 for 2017 performance (including, for these presentation purposes only, the value of all restricted units granted as a bonus in the first quarter of 2018). The actual amounts that would be paid on any termination of employment can only be determined at the time of any actual separation from the Company. Steven Roth(amounts in dollars)Payments on
Termination Voluntary
Termination on
Retirement(1) Involuntary
For Cause
Termination Involuntary Not
For Cause
Termination
/Good
Reason
Termination Voluntary
Termination
Following a
Change of
Control(2) Death Disability — — — — — — — — — — — — — — — — — — — — — — 9,597,142 — 8,687,205 — 8,687,205 — 8,687,205 8,687,205 — — — — — — 8,687,205 — 8,687,205 — 18,284,347 8,687,205 Joseph Macnow(amounts in dollars)Payments on
Termination Voluntary
Termination on
Retirement(1) Involuntary
For Cause
Termination Involuntary Not
For Cause
Termination
/Good
Reason
Termination Voluntary
Termination
Following a
Change of
Control(2) Death Disability 1,250,000 — 1,250,000 1,250,000 1,250,000 1,250,000 — — 3,300,000 3,300,000 — — — — — — — — — — 4,034,244 4,034,244 4,034,244 4,034,244 1,855,759 — 1,855,759 1,855,759 1,855,759 1,855,759 — — 462,467 462,467 9,218 462,467 3,105,759 — 10,902,470 10,902,470 7,149,221 7,602,470 David R. Greenbaum(amounts in dollars)Payments on
Termination Voluntary
Termination on
Retirement(1) Involuntary
For Cause
Termination Involuntary Not
For Cause
Termination
/Good
Reason
Termination Voluntary
Termination
Following a
Change of
Control(2) Death Disability — — 1,800,000 1,800,000 1,800,000 1,800,000 — — 8,400,000 8,400,000 1,000,000 — — — — — — — — — — — 5,535,848 — 2,447,738 — 2,447,738 — 2,447,738 2,447,738 — — 159,180 159,180 19,218 159,180 2,447,738 — 12,806,918 10,359,180 10,802,804 4,406,918 Michael J. Franco(amounts in dollars)Payments on Termination Voluntary
Termination on
Retirement(1) Involuntary
For Cause
Termination Involuntary Not
For Cause
Termination
/Good
Reason
Termination Voluntary
Termination
Following a
Change of
Control(2) Death Disability — — — — — — — — 2,500,000 — — — — — — — — — — — 9,313,193 9,313,193 9,313,193 — — — 2,408,100 2,408,100 2,408,100 2,408,100 — — — — — — — — 14,221,293 11,721,293 11,721,293 2,408,100 (1)Payments upon retirement from the Company are available to those Named Executive Officers who retire after reaching the age of 65 or are over 60 and have 20 years of service with the Company. Each of Messrs. Roth, Macnow and Greenbaum would have qualified for retirement at December 31, 2017. Except as otherwise provided in these tables, no payments are due upon any other voluntary termination prior to retirement.(2)Our annual award agreements provide that unvested grants of options and restricted units vest following a change of control only upon specified terminations of employment. These amounts do not include the value of equity that vests for those persons due to their retirement after the age of 65 as opposed to amounts payable solely due to a change of control.(3)Information presented as to the costs of benefits is based on an estimated total annual cost of benefits for such Named Executive Officer. In certain cases, continued benefits made available following a termination will be less than the total benefits currently payable.In August 2015, pursuant to a mandate of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the "Dodd - Frank Act"), the SEC adopted a rule requiring annual disclosure of the ratio of the median employee's annual total compensation to the total annual compensation of the principal executive officer 56VORNADO REALTY TRUST2018 PROXY STATEMENT ("PEO"). The Company's PEO is Mr. Roth. Pursuant to the SEC rules, we determined a "Median Employee" and compared such employee's total annual compensation to that of Mr. Roth. For purposes of this ratio, we calculated the annual total compensation of each of the Median Employee and Mr. Roth in accordance with the methodology that we use to calculate total compensation for purposes of the Summary Compensation Table. As of December 31, 2017, the Company employed 3,989 persons of which 2,788 persons are employed by our cleaning and maintenance services business ("BMS Employees"). The applicable information is set forth below: $ 61,824 $ 75,320 $ 10,467,517 169.3:1.0 139.0:1.0 In determining the median employee, we prepared a listing of all employees as of December 31, 2017. Employees on leave of absence on December 31, 2017 were excluded from the list and wages and salaries were annualized for those permanent employees that were not employed for the full year of 2017. The median employee was selected from the annualized list.2017,2018, Mr. Roth received no compensation for his service as a Trustee. Non-management members of the Board of Trustees are compensated as follows: (1) each such member receives an annual cash retainer equal to $75,000; (2) each such member receives an annual grant of restricted shares or restricted units with a value equal to $125,000$175,000 (not to be sold while such member is a Trustee, except in certain circumstances); (3) the Lead Trustee receives an additional annual cash retainer of $75,000; (4) the Audit Committee Chairman receives an additional annual cash retainer of $50,000 and other Audit Committee members each receive an annual cash retainer of $25,000; and (5) the Chairman and members of all other committees (other than the Executive Committee) each receive an additional annual cash retainer of $10,000$30,000 and $5,000, respectively.20172018 for the non-management members of our Board.Name Fees Earned or
Paid in Cash ($) Share/Unit
Awards ($)(1) Total ($) 180,000 103,821 283,821 75,000 103,821 178,821 84,476 109,456 193,932 105,000 103,821 208,821 80,000 103,821 183,821 94,556 311,385 405,941 105,000 103,821 208,821 130,000 103,821 233,821 80,000 103,821 183,821 Name Fees Earned or Paid in
Cash ($) Share/Unit Awards ($)(1) Total ($) 180,000 148,771 328,771 75,000 148,771 223,771 75,000 157,522 232,522 105,000 148,771 253,771 80,000 148,771 228,771 100,000 148,771 248,771 105,000 148,771 253,771 130,000 148,771 278,771 80,000 148,771 228,771 2017.2018. The grant date fair value is the amount we would expense in our consolidated financial statements over the award's anticipated vesting schedule. These amounts differ from that set forth in the first introductory paragraph above as that amount is based on the market price for our Shares on the date of grant. For additional information on our value assumptions, refer to footnote 1316 of our consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 20172018 as filed with the SEC. Dividends are paid on both the vested and unvested portion of Restricted Share and Restricted Unit awards. For information concerning the aggregate equity awarded to non-management Trustees under our omnibus share plans, see Note 8 to the Principal Security Holders table.Share/Unit Awards granted to Ms. Puri include an initial grantCompensation Committee, consisting of equity in connection with joiningDr. West, Mr. Helman (since April 3, 2019) and Mr. Tisch (and during 2018 and until his passing on March 24, 2019, Mr. Lynne), grants awards under the Company's omnibus share plans and makes all other executive compensation determinations. Mr. Roth is the only officer or employee of the Company who is also a member of the Board. There are no interlocking relationships involving the Board in 2016.
20182019 PROXY STATEMENT5761 COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION19, 2018,18, 2019, Interstate and its partners collectively beneficially owned approximately 7% of our outstanding Shares and approximately 26% of Alexander's outstanding common stock. Interstate is a general partnership in which Steven Roth, David Mandelbaum and Russell B. Wight, Jr. are the partners. Mr. Roth is Chairman of the Board and CEOChief Executive Officer of the Company, the Managing General Partner of Interstate, and the Chairman of the Board and Chief Executive Officer of Alexander's. Messrs. Mandelbaum and Wight are Trustees of the Company and also directors of Alexander's.$501,006$453,000 in management fees under the agreement for the year ended December 31, 2017.2018.19, 2018,18, 2019, Interstate and its three general partners—Steven Roth (Chairman of the Board and CEOChief Executive Officer of the Company and Chairman of the Board and Chief Executive Officer of Alexander's), David Mandelbaum (a Trustee of the Company and director of Alexander's) and Russell B. Wight, Jr. (a Trustee of the Company and director of Alexander's)—beneficially owned approximately 7% of our outstanding Shares and approximately 26% of Alexander's outstanding common stock. The Company beneficially owns approximately 32% of the outstanding common stock of Alexander's. Joseph Macnow, our Executive Vice President, Chief Financial 58VORNADO REALTY TRUST2018 PROXY STATEMENT has served as Treasurer of Alexander's since May 18, 2017. Prior to May 18, 2017, Mr. Macnow served as Executive Vice President of Alexander's and prior to April 26, 2017 he also served as Chief Financial Officer of Alexander's. Prior to his becoming the Chief Financial Officer of JBG SMITH on February 15, 2017, Mr. Stephen W. Theriot served as both our Chief Financial Officer and the Assistantis Treasurer of Alexander's.
$306,000,$315,000, escalating at 3% per annum, for managing the common area of 731 Lexington Avenue.2017,2018, Alexander's incurred $2,800,000 in management fees, $29,000$125,000 in development fees, $1,829,000$13,000 in leasing fees, and $4,114,000$4,101,000 for property management and other fees under its agreements with the Company and/or BMS.2017,2018, Alexander's owed the Company (i) $21,000$146,000 for development fees, (ii) $658,000$549,000 for management, property management, and cleaning, engineering and security fees and (iii) $1,811,000$13,000 for leasing fees.On December 28, 2010, the Company acquiredOur property (managed by Urban Edge), Wayne Town Center, is subject to a ground lease owned by members of David Mandelbaum's family or trusts for their benefit. The rent on the ground lease in 20172018 was $3,768,466$3,994,574 and increases at 6% per year. Mr. Mandelbaum has no direct voting or pecuniary interest in these trusts or in the ground lease.
20182019 PROXY STATEMENT5963Charles E. Smith Management LLC, which is owned by Mr. Kogod, one of our Trustees, and his family members, leases space in our former Crystal City location, which was included in the Washington Spin. During 2017, prior to the Washington Spin this company paid to us rent of $407,126. This entity is not affiliated with the Company. Mr. Kogod and his spouse each own a 25% interest in this entity.MDF Capital LLC, which is owned by Mr. Michael D. Fascitelli, one of our Trustees, leases space at our building at 888 Seventh Avenue in New York City. During 2017, MDF Capital paid $958,148 of rent to the Company for this space.Mr. Fascitelli also serves as a member of the Board of Commissioners of The Port Authority of New York and New Jersey. Mr. Fascitelli receives no compensation for his service as a member of the Board of Commissioners. The Company does business with the Port Authority of New York and New Jersey from time to time.Steven Roth, our Chairman and Chief Executive Officer also serves as a member of the Board of Trustees of Urban Edge Properties and as Chairman of the Board of JBG SMITH Properties, both of which are former affiliates of the Company.During 2017,2018, the Company reimbursed a company owned by Mr. Roth $331,220$274,225 for the use, for Company-business purposes, of an airplane owned by such company.2017,2018, companies affiliated with Mr. Roth's wife, Daryl Roth Productions, paid to us $429,760$413,338 in connection with fair market leases of signage space from us.City. TheCity pursuant to a lease commenced on January 1, 2016 and is at market terms. Pursuant to the lease, during 2017,2018, Daryl Roth Productions paid rent of $474,518.$483,983.
606420182019 PROXY STATEMENTRulesRule 3526,Communication with Audit Committees Concerning Independence. The Audit Committee has also discussed with the independent registered public accounting firm its independence. The independent registered public accounting firm has free access to the Audit Committee to discuss any matters the firm deems appropriate.2017,2018, the Audit Committee recommended to the Board of Trustees that the audited consolidated financial statements be included in the Annual Report on Form 10-K for the fiscal year ended December 31, 2017.2018. DR. RICHARD R. WEST
MANDAKINI PURI
DANIEL R. TISCH
20182019 PROXY STATEMENT616520172018 as a result of a process by which the Audit Committee and management solicited and received proposals from and met with and interviewed several other independent registered public accounting firms. The Audit Committee initiated this process after consultation with management because it determined that there were possible benefits to be considered with regard to cost, audit firm independence and obtaining a fresh look at the Company's financial accounting and internal controls processes. This process was not related to the quality of services provided by the Deloitte Entities. After consideration of each of the proposals, the Audit Committee retained the Deloitte Entities as the Company's independent registered public accounting firm and has determined to continue that retention for 2018.2019. Among other matters, the Audit Committee concluded that current requirements for audit partner rotation, limitation of services and other regulations affecting the audit engagement process substantially assist in supporting auditor independence. As a matter of good corporate governance, the Audit Committee has determined to submit its selection to shareholders for ratification. In the event that this selection of an independent registered public accounting firm is not ratified by the affirmative vote of a majority of the votes cast on the proposal, the Audit Committee will review its future selection of an independent registered public accounting firm but will retain all rights of selection.20172018 and 2016,2017, for professional services rendered for the audits of the Company's annual consolidated financial statements included in the Company's Annual Reports on Form 10-K, for the reviews of the consolidated interim financial statements included in the Company's Quarterly Reports on Form 10-Q and reviews of other filings or registration statements under the Securities Act of 1933, as amended, and Securities Exchange Act during those fiscal years were $3,249,000$3,333,000 and $3,855,000,$3,249,000, respectively.20172018 and 20162017 for professional services rendered that are related to the performance of the audits or reviews of the Company's consolidated financial statements which are not reported above under "Audit Fees" were $3,777,000$1,900,000 and $3,770,000 (including $1,340,000 for work performed in connection with the spin-off of Vornado's Washington D.C. segment) and $5,986,000 (including $3,500,000 for work performed in connection with the spin-off of Vornado's Washington D.C. segment), respectively. "Audit-Related Fees" generally include fees for stand-alone audits of subsidiaries and due diligence associated with mergers/acquisitions.20172018 and 20162017 for professional services rendered for tax compliance, tax advice and tax planning were $992,000$1,444,000 and $1,168,000,$992,000, respectively. "Tax Fees" generally include fees for tax consultations regarding return preparation and REIT tax law compliance.
626620182019 PROXY STATEMENT20172018 and 2016.2017. Pre-approval Policies and Procedures2018.2019.
20182019 PROXY STATEMENT6367 PROPOSAL 3: APPROVAL OF AN AMENDMENT TO THE COMPANY'S DECLARATION OF TRUST TO PERMIT SHAREHOLDERS TO PROPOSE BINDING AMENDMENTS TO THE COMPANY'S BYLAWS AND TO VOTE ON AMENDMENTS TO THE COMPANY'S BYLAWSThis proposal seeks approval to amend our organizational documents to permit shareholders to propose binding amendments to our Bylaws and to vote on amendments to our Bylaws. These actions would be undertaken in the several steps described below.Subsection 3.2(x) of the Company's Amended and Restated Declaration of Trust (the "Declaration") grants the Board the power and authority to amend the Bylaws of the Company (the "Bylaws"). Furthermore, as permitted under Maryland law, Article XIV of the Bylaws provides that the Board has the exclusive power to "adopt, alter or repeal any provision of these Bylaws and to make new Bylaws." Accordingly, Section 7.2 of the Declaration, which provides for the voting rights of shareholders, does not permit the shareholders to vote on Bylaw amendments. Consequently, for shareholders to have the right to vote on amendments to the Bylaws, we would have to amend (i) the Declaration as well as (ii) our Bylaws.In advance of this annual meeting, we and members of the Corporate Governance and Nominating Committee engaged in an extensive shareholder outreach with the holders of over 50% of our Shares to discuss governance matters, including granting shareholders the power to amend the Bylaws. While these holders generally supported permitting shareholders to propose binding Bylaw amendments, they expressed differing views as to whether we should require parties making proposals to amend the Bylaws to satisfy some sort of shareholding criteria or require a supermajority vote to adopt amendments. A plurality of the shareholders did express a preference for there being no significant share ownership or supermajority vote requirements.After careful consideration, the Corporate Governance and Nominating Committee recommended to the Board that, although there continue to be strong arguments in favor of continuing to permit only the Board to amend the Bylaws, it was advisable to amend the Declaration (the "Amendment") to provide shareholders with the power to vote on amendments to the Bylaws to the extent provided in the Bylaws and, if the Amendment is approved by shareholders, for the Board to amend the Bylaws to grant shareholders the right to amend the Bylaws. The Board carefully considered the recommendation of the Corporate Governance and Nominating Committee as well as the reasons for that recommendation and determined that it was advisable to recommend to shareholders that they approve the Amendment. The Corporate Governance and Nominating Committee also recommended, and the Board determined, that should the shareholders approve the Amendment, the Board would amend the Bylaws (the "Proposed Bylaw Amendment") to provide that shareholders may adopt, alter or repeal any Bylaw by a majority vote of the shares entitled to be cast to the extent permitted by applicable law. That right would be in addition to the right of the Trustees to amend the Bylaws, not in lieu of such power of the Trustees. The Board's decision was consistent with the views of a plurality of the shareholders contacted during our shareholder outreach. The text of the Amendment is attached as Annex B to this Proxy Statement. The Proposed Bylaw Amendment, which the Board has resolved to adopt if the Amendment is approved, is attached as Annex C to this Proxy Statement.If the Amendment is approved by the Company's shareholders, then the Company will file Articles of Amendment to the Declaration containing the Amendment text as set forth in Annex B to this Proxy Statement with the State Department of Assessments and Taxation of Maryland and the Board will adopt the Proposed Bylaw Amendment. The Proposed Bylaw Amendment provides that, in addition to the Board's power to adopt, alter or repeal any provision of the Bylaws, the shareholders may also take such actions by the affirmative vote of the holders of a majority of the votes then entitled to be cast on the matter. Of course, any Bylaw proposed by shareholders would have to be permitted by applicable law. In addition, to eliminate any ambiguity as to whether Section 7.2 of the Declaration is a permissive or an exclusive listing of matters on which shareholders are permitted to vote, the Amendment adds to such matters those matters which the Board has recommended that the shareholders approve and those matters upon which, as a matter of federal or state law or securities exchange rule (including advisory votes), shareholders are entitled to vote.The Board of Trustees recommends that you vote "FOR" the approval of the Amendment to the Company's Declaration.PROPOSAL 3: NON-BINDING, ADVISORY RESOLUTION ON EXECUTIVE COMPENSATION 64VORNADO REALTY TRUST2018 PROXY STATEMENT The affirmative vote of holders of not less than a majority of the Shares outstanding and entitled to vote on this proposal, assuming a quorum is present, is required to approve the Amendment. Abstentions and broker non-votes will have the effect of votes against the Amendment.If the Amendment is approved by the shareholders, it will become effective upon the acceptance for record of the Articles of Amendment by the State Department of Assessments and Taxation of Maryland, which we would expect to occur promptly after the Annual Meeting. If the Amendment is not approved by the shareholders, the Declaration will remain as currently in effect and the Bylaws will not be amended to provide shareholders with the contemplated powers. 2018 PROXY STATEMENTVORNADO REALTY TRUST65 PROPOSAL 4: NON-BINDING, ADVISORY RESOLUTION ON EXECUTIVE COMPENSATION20172018 with respect to our Chief Executive Officer and other officers named in the Summary Compensation Table (whom we refer to as the "Named Executive Officers"). In accordance with the rules and regulations of the SEC, the Board of Trustees is asking shareholders to vote for the following non-binding, advisory resolution:
Advisory Resolution on Executive Compensationnamed executive officers.Named Executive Officers. At our 20172018 Annual Meeting of Shareholders, our shareholders elected, via an affirmative vote of a majority of all votes cast on the matter, to hold such non-binding, advisory votes on executive compensation on an annual basis, and, accordingly, we have elected to continue to annually hold an advisory vote on the compensation of our named executive officers.Named Executive Officers.Analysis"Analysis," the accompanying tables and the accompanying tables.related narrative disclosure in this Proxy Statement. These programs are designed to attract and retain talented individuals who possess the skills and expertise necessary to lead Vornado.The Compensation Committee regularly assesses all elements of the compensation paidVornado and to our Named Executive Officers. A summary of our current compensation programs, inclusive of the aforementioned modifications, is presented in the Compensation Discussion and Analysis section and the accompanying tables and related narrative disclosure in this proxy statement. The Compensation Committee believes that the Company's present compensation programs promote our business objectives while aligning the interests of the Named Executive Officers with our shareholders to enhance continued positive financial results. During 2017,The Compensation Committee regularly assesses all elements of the Company recorded strong financial results while continuingcompensation paid to our simplification and focusing strategy. Named Executive Officers.have continuedcontinue to deliver long-term growth to our shareholders, with a TSR of approximately 75.7%101.8% for the ten-year period through 2017, outperforming the Office REIT return of 70.1%. As part of our simplification strategy, in July 2017 we spun off our Washington, D.C. segment and combined it with the management business and certain Washington, D.C. assets of The JBG Companies. The combined company, JBG SMITH Properties, is the largest, market-leading, best-in-class, pure-play Washington, D.C. real estate company. Following the spin-off, Vornado is a best-in-class, highly-focused, New York-centric office and high street retail REIT that owns 17.5 million square feet of Class A Manhattan office properties.2018. We believe the compensation programs for our Named Executive Officers are a key factor in motivating our executives to continue to deliver such results.theour Board of Trustees values input from our shareholders and will consider carefully the results of this vote when making future decisions concerning executive compensation.
666820182019 PROXY STATEMENTToextent this proxy statementCompany's shareholders to approve the 2019 Omnibus Share Plan of Vornado Realty Trust (the "2019 Omnibus Share Plan" or the "2019 Plan"). The 2019 Omnibus Share Plan is incorporated by reference into any other filing byintended to supersede and replace the CompanyCompany's 2010 Omnibus Share Plan (the "2010 Plan") that is currently in effect. If the 2019 Plan is approved, upon such approval, no additional awards will be made to employees or consultants under the Securities Act2010 Plan, but the terms and conditions of 1933, as amended, orany outstanding awards granted under the Securities Exchange Act, the sections entitled "Compensation Committee Report on Executive Compensation" and "Report of the Audit Committee" (to the extent permitted by the rules of the SEC)2010 Plan will not be deemed incorporated unless providedaffected. If the 2019 Plan is not approved by shareholders, no awards will be made under the 2019 Plan, the 2019 Plan will be null and void in its entirety, and the 2010 Plan will remain in full force and effect with respect to employees and consultants in accordance with its terms and conditions.such filing.2020. Therefore, if shareholders do not approve the 2019 Plan, our future ability to issue equity-based awards, other than cash-settled awards, will be limited after the 2010 Plan expires. This could have significant negative consequences and could, among other things, inhibit our ability to align employees' interests with those of shareholders through equity-based compensation and impede our ability to attract and retain talent.ADDITIONAL MATTERS TO COME BEFORE THE MEETINGThe Board does not intend to present any other matter, nor does it have any information that any other matter will be brought, beforeTherefore, the Annual Meeting. However, if any other matter properly comes before the Annual Meeting, it is the intention of each of the individuals named in the accompanying proxy to vote said proxy in accordance with his or her discretion on such matters. PROXY AUTHORIZATION VIA THE INTERNET OR BY TELEPHONEWe have established procedures by which shareholders may authorize their proxies via the Internet or by telephone. You may also authorize your proxy by mail. Please see the proxy card or voting instruction form accompanying this proxy statement for specific instructions on how to authorize your proxy by any of these methods.Proxies authorized via the Internet or by telephone must be received by 11:59 P.M., New York City time, on Wednesday, May 16, 2018. Authorizing your proxy via the Internet or by telephone will not affect your right to revoke your proxy should you decide to do so.The Internet and telephone proxy authorization procedures are designed to authenticate shareholders' identities, to allow shareholders to give their voting instructions and to confirm that shareholders' instructions have been recorded properly. The Company has been advised that the Internet and telephone proxy authorization procedures that have been made available are consistent with the requirements of applicable law. Shareholders authorizing their proxies via the Internet or by telephone should understand that there may be costs associated with voting in these manners, such as charges for Internet access providers and telephone companies that must be borne by the shareholder. ADVANCE NOTICE FOR SHAREHOLDER NOMINATIONS AND SHAREHOLDER PROPOSALSThe Bylaws of the Company currently provide that in order for a shareholder to nominate a candidate for election as a Trustee at an Annual Meeting of Shareholders outside of the proxy access provision in the Bylaws described below or propose business for consideration at such meeting, notice must be given to the Secretary of the Company no more than 120 days nor less than 90 days prior to the first anniversary of the preceding year's Annual Meeting and must include certain information specified in the Bylaws. As a result, any notice given by or on behalf of a shareholder pursuant to the provisions of our current Bylaws (other than the proxy access provision) must comply with the requirements of the Bylaws and be delivered to the Secretary of the Company at the principal executive office of the Company, 888 Seventh Avenue, New York, New York 10019, not earlier than January 17, 2019 and not later than the close of business on February 16, 2019.Shareholders who wish to submit a "proxy access" nomination for inclusion in our proxy statement in connection with our 2019 Annual Meeting of Shareholders must submit a written notice in compliance with the procedures and along with the other information required by our Bylaws to the Secretary of the Company at the principal executive office of the Company, 888 Seventh Avenue, New York, New York 10019, not earlier than November 8, 2018 and not later than the close of business on December 8, 2018.The Board of Trustees may amendurges you to vote to approve the Bylaws from time to time.Shareholders interested in presenting a proposal for inclusion in the proxy statement for the Company's Annual Meeting of Shareholders in 2019 may do so by following the procedures in Rule 14a-8 under the 2018 PROXY STATEMENTVORNADO REALTY TRUST67 Securities Exchange Act of 1934. To be eligible for inclusion, shareholder proposals must be received at the principal executive office of the Company, 888 Seventh Avenue, New York, New York 10019, Attention: Secretary, not later than December 8, 2018.By Order of the Board of Trustees,Alan J. RiceSecretaryNew York, New YorkApril 6, 2018It is important that proxies be returned promptly. Please authorize your proxy over the Internet, by telephone or by requesting, executing and returning a proxy card or voting instruction form. 68VORNADO REALTY TRUST2018 PROXY STATEMENT CORPORATE GOVERNANCE GUIDELINESThe Board of Trustees (the "Board") of Vornado Realty Trust (the "Trust"), acting on the recommendation of its Corporate Governance and Nominating Committee, has developed and adopted a set of corporate governance principles (the "Guidelines") to promote the functioning Features of the Board and its committees and to set forth a common set of expectations as to how the Board should perform its functions. These Guidelines are in addition to the Trust's Amended and Restated Declaration of Trust and Amended and Restated Bylaws, in each case as amended. References to the masculine, feminine or neuter gender herein shall be deemed to include the others whenever the context so indicates or requires. II. Board CompositionThe composition of the Board should balance the following goals:size2019 Plan does not contain an evergreen provision and authorizes a fixed number of Shares available for grant. Shares tendered by a participant or withheld by the Company in payment of the Board should facilitate substantive discussions of the whole Board in which each Trustee can participate meaningfully;exercise price or consideration required to be paid, or to satisfy any tax withholding obligation, with respect to an award arenot available for future awards.The composition of the Board should encompass a broad range of skills, expertise, industry knowledge, diversity of opinion and contacts relevant to the Trust's business; and•A majority of the Board shall consist of Trustees who the Board has determined are "independent" under the Corporate Governance Rules (the "NYSE Rules") of The New York Stock Exchange, Inc. (the "NYSE"). III. Selection of Chairman of the Board and Chief Executive OfficerThe Board of Trustees is responsible for the selection of the Chairman of the Board and the Chief Executive Officer. The Board annually reviews its leadership structure to ensure effective guidance to and oversight of management.Nominations.No Discounted Awards or Repricings. The Board is responsible for selectingexercise price per Share of options and stock appreciation rights may not be less than the nominees for election to the Board. The Corporate Governance and Nominating Committee is responsible for recommending to the Boardfair market value of a slate of Trustees or one or more nominees to fill vacancies occurring between annual meetings of shareholders. The Corporate Governance and Nominating Committee may, in its discretion, work or otherwise consult with members of management of the Trust in preparing the Corporate Governance and Nominating Committee's recommendations.Criteria. The Board should, basedShare on the recommendation of the Corporate Governancegrant date and Nominating Committee, consider new nominees for the position of independent Trustee on the basis of the following criteria:•Personal qualities and characteristics, accomplishments and reputation in the business community;may not be repriced without shareholder approval.Current knowledgeClawback, Equity Ownership and contacts inAnti-Hedging Policies. Awards under the communities in which the Trust does business2019 Plan will be subject to our policies, including our clawback policy, equity ownership guidelines and in the Trust's industry or other industries relevant to the Trust's business;anti-hedging policy.Ability and willingnessOne-Year Minimum Vesting for All Award Types. Subject to commit adequate timeacceleration of vesting for certain events to Board and committee matters;the extent permitted under the 2019 Plan, awards are subject to a minimum of one-year vesting with a limited exception that up to five percent of available Shares may be subject to awards without this minimum vesting period.
20182019 PROXY STATEMENT•fitCompany's historical share usage under its equity compensation plans (sometimes referred to as "burn rate") and the potential dilution of the individual's skills and personality with those of other Trustees and potential Trustees in maintainingCompany's shareholders that could occur as a Board that is effective, collegial and responsive to the interestsresult of the Trust; and•Diversity of viewpoints, experience and other demographics (including race, age and gender). The Trust is committedCompany's equity plans (sometimes referred to including persons of diverse backgrounds in candidate pools when seeking new members of the Board. However, nomination of a candidate shouldas "overhang") are summarized below. As noted above, subject to shareholder approval, awards may not be based solely on these factors.Independence Standards. To qualify as independentgranted under the NYSE Rules,2019 Plan until the Board must affirmatively determine that a Trustee has no material relationship with the Trust and/or its consolidated subsidiaries. The Board has adopted the following categorical standards to assist it in making determinations of independence. For purposes of these standards, references to the "Trust" mean Vornado Realty Trust and its consolidated subsidiaries.The following relationships have been determined not to be material relationships that would categorically impair a Trustee's ability to qualify as independent:1.Payments to and from other organizations. A Trustee's or his immediate family member's status as executive officer or employee of an organization that has made payments to the Trust, or that has received payments from the Trust, not in excess of the greater of:(i)$1 million; or(ii)2% of the other organization's consolidated gross revenues for the fiscal year inday on which the payments were made.In2010 Plan expires, and any Shares remaining available for issuance under the case where an organization has received payments2010 Plan on that ultimately represent amounts due to the Trust and such amounts are not due in respect of property or services from the Trust, these paymentsdate will not be considered amounts paid toavailable for issuance under the Trust2019 Plan.purposes of determining (i) and (ii) above so long as the organization does not retain any remuneration based upon such payments.2.Beneficial ownershipeach of the Trust's equity securities. Beneficial ownership by a Trusteelast three fiscal years and the average burn rate over the last three years. 2016 2017 2018 Average Time-based restricted stock/units granted(1) 221,059 319,973 275,805 272,279 Performance-based OPP Units earned in the respective years(2) 254,111 0 0 84,704 Options /AO LTIP Units granted to employees(1) 42,466 29,867 218,943 97,092 Net increase in diluted shares due to equity awards (a+b+c)(1) 517,636 349,840 494,748 454,075 Weighted-average shares outstanding 188,837,000 189,526,000 190,219,000 189,527,333 Burn rate (e/f)(3) 0.27% 0.18% 0.26% 0.24% Adjusted burn rate(4) 0.78% 0.52% 0.55% 0.62% his immediate family member of not more than 10%"overhang" resulting from the adoption of the Trust's equity securities. A Trustee or his immediate family member's position as an equity owner, director, executive officer or similar position with an organization that beneficially owns not more than 10% of the Trust's equity securities.3.Common ownership2019 Omnibus Share Plan would be 5.40%, with the Trust. Beneficial ownership by, directly or indirectly, a Trustee, either individually or with other Trustees, of equity interests in an organization in which the Trust also has an equity interest.4.Directorships with, or beneficial ownership of, other organizations. A Trustee's or his immediate family member's interest in a relationship or transaction where the interest arises from either or both of:(i)his or his family member's position as a director with an organization doing business with the Trust; or(ii)his or his family member's beneficial ownership in an organization doing business with the Trust so long as the level of beneficial ownership in the organization is 25% or less, or less than the Trust's beneficial ownership in such organization, whichever is greater.5.Affiliations with charitable organizations. The affiliation of a Trustee or his immediate family member with a charitable organization that receives contributionsincremental overhang from the Trust, or an affiliate2019 Omnibus Share Plan equal to 2.88%. We calculate the overhang as follows, in each case as of March 18, 2019:(a) Shares available under the 2019 Omnibus Share Plan 5,500,000 (b) Shares underlying outstanding awards under the 2010 Omnibus Share Plan and the 2002 Omnibus Share Plan(1) 4,800,900 (c) Shares remaining available under the 2010 Omnibus Share Plan (upon adoption of the 2019 Omnibus Share Plan) 0 (d) Total Shares authorized for or outstanding under equity awards (a+b+c) 10,300,900 (e) Common Shares outstanding 190,743,262 (f) Overhang (d/e) 5.40% Trust, so long as such contributions do not exceed for a particular fiscal yearaverage remaining term is 4.3 years. In addition, there are awards of 2,134,032 shares and units outstanding of which (a) 894,913 are performance-based awards and (b)18,808 of which are awards of restricted units remaining outstanding under the greater of:
2002 Omnibus Share Plan.(i)$1 million; or(ii)2% of the organization's consolidated gross revenues for that fiscal year.
20182019 PROXY STATEMENT6.
SUMMARY OF THE 2019 OMNIBUS SHARE PLANorganizationsa way to acquire or increase their proprietary interest in the Company's success and to further align the interests of Employees, Non-Employee Trustees and Consultants with shareholders.Trust owes moneyCompany conducts substantially all its business (including appreciation-only OP Units). A Trustee'sAwards of performance shares, restricted stock and other stock-based awards may provide the holder with dividends or his immediate family member's status as an executive officerdividend equivalents and voting rights prior to vesting. If dividends or employee of an organizationdividend equivalents are granted, dividend and dividend equivalents will be paid to which the Trust was indebtedholder at the endsame time as the Company pays dividends to holders of the Trust's most recent fiscal year so long as that total amount of indebtedness isCompany's Shares but not in excess of 5% ofless than annually. Notwithstanding the Trust's total consolidated assets.7.Relationships with organizations that owe moneyforegoing, a holder's right to the Trust. A Trustee's or his immediate family member's status as an executive officer or employee of an organization which is indebted to the Trust at the end of the Trust's most recent fiscal year so long as that total amount of indebtedness is not in excess of 15% of the organization's total consolidated assets.8.Personal indebtedness to the Trust. A Trustee's or his immediate family member's being indebted to the Trust at any time since the beginning of the Trust's most recently completed fiscal year so long as such amount does not exceed the greater of:(i)$1 million; or(ii)2% of the individual's net worth.9.Leasing or retaining space from the Trust. The leasing or retaining of space from the Trust by:(i)a Trustee;(ii)a Trustee's immediate family member; or(iii)an affiliate of a Trustee or an affiliate of a Trustee's immediate family member;so long as in each case the rental ratedividends and other lease terms are at market rates and terms in the aggregate at the time the lease is entered into or,dividend equivalent payments in the case of a non-contractual renewal, at the time of the renewal.10.Other relationships that do not involve more than $100,000. Any other relationship or transactionan award that is not covered by any of the categorical standards listed above and that does not involve payment of more than $100,000 in the most recently completed fiscal year of the Trust.11.Personal relationships with management. A personal relationship between a Trustee or a Trustee's immediate family member and a member of the Trust's management.12.Partnership and co-investment relationships between or among Trustees. A partnership or co-investment relationship between or among a Trustee or a Trustee's immediate family member and other members of the Trust's Board of Trustees, including management Trustees,subject to performance-based conditions will be treated as unvested so long as the existenceperformance conditions have not been met, and any such dividend equivalent payments that would otherwise have been paid during the performance period will instead be accumulated and paid within 30 days following the date on which such award is determined by the Company to have been earned.relationship has been previously disclosed2019 Plan, would result in the Trust's reports and/issuance of up to a maximum of 5,500,000 Shares if all awards granted under the 2019 Plan were Full Value Awards (as defined below) and 11,000,000 Shares if all of the awards granted under the 2019 Plan were Not Full Value Awards (as defined below) (which includes 1,705,253 Shares remaining under the 2010 Plan on March 18, 2019). "Share Equivalents" are the measuring unit for determining the number of Shares that may be subject to awards.proxy statements filedother securities that have a value equivalent to a full Share are referred to as "Full Value Awards." Securities such as options, appreciation-only OP Units or stock appreciation rights that require the grantee to pay an exercise or conversion price or otherwise do not deliver the full value of the underlying Share or underlying OP Unit due to the deduction of a strike price are referred to as "Not Full Value Awards." When a grant is made under the 2019 Plan, we will reduce the number of Share Equivalents available under the 2019 Plan (1) one Share Equivalent for each Share awarded pursuant to an award that is a Full Value Award and (2) one-half a Share Equivalent for each Share awarded pursuant to an award that is a Not Full Value Award. This means, for instance, if we were to award only restricted shares under the 2019 Plan, we could award 5,500,000 restricted shares. On the other hand, if we were to award only options under the 2019 Plan, we could award options to purchase 11,000,000 Shares (at the applicable exercise price). We also could issue any combination of the foregoing (or of other securities available under the 2019 Plan) with the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended.
The fact that a particular transaction or relationship falls within one or more of the above categorical standards does not eliminate a Trustee's obligationreductions in availability to disclose the transaction or relationship to the Trust, the Board of Trustees or management as and when requested for public disclosure and other relevant purposes. For relationships that are either not covered by or do not satisfy the categorical standards above, the determination of whether the relationship is material and therefore whether the Trustee qualifies as independent may be made by the Corporate Governance and Nominating Committee or the Board. The Trust shall explain in the annual meeting proxy statement immediately following any such determination the basis for any determination that a relationship was immaterial despite the fact that it did not meetaccordance with the foregoing categorical standards.
Invitation. The invitation to join the Board should be extended by the Board itself via the Chairman of the Board and CEO of the Trust, together with an independent Trustee, when deemed appropriate.ratios.
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OrientationIf any award granted under the 2019 Plan expires or is forfeited, terminated or cancelled, or is paid in cash in lieu of Shares, then the Shares underlying any such award will again become available for grant under the 2019 Plan in an amount equal to one Share Equivalent for each Share that is subject to a Full Value Award and Continuing Education. Management, workingby one-half Share Equivalent for each Share that is subject to an award that is a Not Full Value Award, in each case, at the time such award expires or is forfeited, terminated or cancelled. Awards that are settled in cash do not affect the number of Share Equivalents available for awards under the 2019 Plan to the extent paid or settled in cash.
The number of Share Equivalents available under the 2019 Plan will be reduced (1) upon the exercise of a stock option, appreciation-only OP Unit or a stock appreciation right by one-half of the gross number of Shares for which the award is exercised even if the award is exercised by means of a net-settlement exercise procedure or if Shares are withheld to satisfy any tax withholding obligation and (2) by one Share for each Share withheld to satisfy any tax withholding obligation with respect to any Full Value Award. Awards issued or assumed under the Board,2019 Plan in connection with any merger, consolidation, acquisition of property or stock, reorganization or similar transaction will provide an orientation process for new Trustees, including background materialnot count against the number of Share Equivalents that may be granted under the 2019 Plan.
No more than 11,000,000 Shares (subject to adjustment as described below) may be issued upon the exercise of "incentive stock options" (within the meaning of Section 422 of the Internal Revenue Code) granted under the 2019 Plan.
Shares issued under the 2019 Plan would be authorized and unissued Shares. The fair market value of one Share on March 18, 2019 was $67.31 per Share (the average of the high and low market price on the Trust, its business plan and its risk profile, and meetings with senior management. MembersNew York Stock Exchange on that date).
Estimate of Benefits |
Because awards under the Board2019 Plan are required to undergo continuing education as recommendedmade on a discretionary basis by the NYSE. In connection therewith, the Trust will reimburse Trustees for all reasonable costs associated with the attendance at or the completion of any continuing education program supported, offered or approved by the NYSE or approved by the Trust.
The Board does not believe it should establish term limits.
The Board believes it should not establish a mandatory retirement age.
The Board currently plans at least four meetings each year, with further meetings to occur (or action to be taken by unanimous written consent) at the discretion of the Board. The meetings will usually consist of committee meetings and the Board meeting.
The agenda for each Board meeting will be established by the Chairman and CEO, with assistance of the Lead Trustee, the Trust's Secretary and internal Corporation Counsel. Any Trustee may suggest the inclusion of additional subjects on the agenda. Management will seek to provide to all Trustees an agenda and appropriate materials in advance of meetings, although the Board recognizes that this will not always be consistent with the timing of transactions and the operations of the business and that in certain cases it may not be possible.
Materials presented to the Board or its committees should be as concise as possible, while still providing adequate information for the Trustees to make an informed judgment.
To ensure free and open discussion and communication among the non-management Trustees, the non-management Trustees will meet in executive sessions periodically, with no members of management present. Non-management Trustees who are not independent under the NYSE Rules may participate in these executive sessions, but the independent Trustees should meet separately in executive session at least once per year.
At any time that the independent Trustees have not appointed a Lead Trustee or the Lead TrusteeCompensation Committee, it is not present,possible to determine the participantsbenefits that will be received by our executive officers and other key employees. Information on our most recent equity awards is set forth under "Compensation Discussion and Analysis," "Executive Compensation" and under "New Plan Benefits."
Adjustment of and Changes in Shares |
In the event of any change in the outstanding Shares by reason of any executive sessions will select by majority voteshare dividend or split, reverse split, recapitalization, merger, consolidation, spinoff, combination or exchange of those attending a presiding Trustee for such sessionsShares or other corporate change, or any such session.
In order that interested parties may be abledistributions to make their concerns known to the non-management Trustees, the Trust shall disclose a method for such parties to communicate directly with the Lead Trustee or the non-management Trustees as a group. For the purposes hereof, communication through a third party such as an external lawyer or a third-party vendor who relays information to non-management members of the Board will be considered direct.
IX. The Committees of the Board
The Trust shall have at least the committees required by the NYSE Rules. Currently, these are the Audit Committee,shareholders other than regular cash dividends, the Compensation Committee will make such substitution or adjustment, if any, as it deems equitable to the number of Share Equivalents for which awards may be granted under the 2019 Plan or the number or kind of Shares or other securities issued or reserved for issuance pursuant to outstanding awards and a nominating/corporate governance committee, whichthe number of Shares that can be issued through incentive stock options.
Administration |
The 2019 Plan will be administered and interpreted by the Compensation Committee. The Compensation Committee is authorized to select Employees, Non-Employee Trustees and Consultants to receive awards, determine the type of awards to be made, determine the number of equity-based securities subject to any award and the other terms and conditions of such awards. Our Board of Trustees, in our Trust is calledits sole discretion, also may grant awards or administer the Corporate Governance2019 Plan.
Eligibility |
All Employees, Non-Employee Trustees and NominatingConsultants are eligible to receive awards under the 2019 Plan, as determined by the Compensation Committee. EachAs of these three committees must have a written charter satisfying the rulesDecember 31, 2018, 693 Employees, 18 Non-Employee Trustees (including nine non-employee directors of the NYSE.
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All Trustees, whether members of a committee or not, are invitedCompany's subsidiaries) and six Consultants would have been eligible to make suggestions to a committee chair for additions to the agenda of his or her committee or to request that an item from a committee agenda be considered by the Board. Each committee chair will give a periodic report of his or her committee's activities to the Board.
Each of the Corporate Governanceparticipate in and Nominating Committee, the Audit Committee and the Compensation Committee shall be composed of at least such number of Trustees as may be required by the NYSE Rules who the Board has determined are "independent"receive awards under the NYSE Rules. Any additional qualifications for the members of each committee shall be set out in the respective committee's charter. A Trustee may serve on more than one committee for which he or she qualifies.
Each committee may take any action in a meeting of the full Board,2019 Plan, if it had been adopted and actions of the Board, including the approval ofeffective at such actions by a majority of the members of the Committee, will be deemed to be actions of that committee. In such circumstance only the votes cast by members of the committee shall be counted in determining the outcome of the vote on matters upon which the committee acts.
At least annually, the Board shall review and concur in a succession plan, developed by management, addressing the policies and principles for selecting a successor to the CEO, both in an emergency situation and in the ordinary course of business. The succession plan should include an assessment of the experience, performance, skills and planned career paths for possible successors to the CEO.
When the position of Chairman is not held by an independent Trustee, the independent Trustees will elect a Lead Trustee from among the independent Trustees. In such event, the Lead Trustee will be elected annually, and will serve as a resource to the Chairman and to the other independent Trustees.
The Lead Trustee's authorities and responsibilities include:
The Board may assign additional responsibilities to the Lead Trustee position as needed.time.
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| | 72 | | | | VORNADO REALTY TRUST | | | | 2019 PROXY STATEMENT |
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Transfer Restrictions |
Awards are not assignable or transferable except by will or the laws of descent and distribution and no right or interest of any holder may be subject to any lien, obligation or liability of the holder. The Compensation Committee may determine, at the time of grant or thereafter, that an award (other than stock options intended to be incentive stock options within the meaning of Section 422 of the Internal Revenue Code) is transferable by a holder to such holder's immediate family members (or trusts, partnerships or limited liability companies established for such immediate family members).
Clawback/Recoupment |
Awards granted under the 2019 Plan will be subject to the requirement that the awards be forfeited or repaid to the Company after they have been distributed to the participant (i) to the extent set forth in an award agreement or (ii) to the extent covered by any clawback or recapture policy adopted by the Company from time to time, or any applicable laws that impose mandatory forfeiture or recoupment, under circumstances set forth in such applicable laws.
Term; Amendment and Termination |
The 2019 Plan has a term through May 16, 2029, but any award granted prior to such date, and the Compensation Committee's authority to administer the terms of such awards, will remain in effect until the award is settled or lapses. The 2019 Plan will be effective, subject to its approval by the shareholders, as of the date of the approval by the requisite number of shareholders of the Trust at the 2019 Annual Meeting. The Compensation Committee may amend or terminate the 2019 Plan or any portion of the 2019 Plan at any time, except that no amendment may be made without shareholder approval if such amendment (i) would increase the maximum aggregate number of Shares that may be issued under the 2019 Plan, (ii) would materially expand the class of service providers eligible to participate in the 2019 Plan, (iii) would result in a material increase in the benefits accrued to participants under the 2019 Plan, (iv) would reduce the exercise or conversion price of outstanding stock options or stock appreciation rights or cancel outstanding stock options or stock appreciation rights in exchange for cash, other awards or stock options or stock appreciation rights with an exercise or conversion price that is less than the exercise or conversion price of the original stock options or stock appreciation rights or (v) requires shareholder approval to comply with any applicable laws, regulations or rules, including the rules of a securities exchange or self-regulatory agency. If there is a change in applicable tax law such that OP Units become taxable to the holder of such OP Units as ordinary income, the Operating Partnership, at any time in the sole discretion of the Company or the general partner of the Operating Partnership, may cause the OP Units to be restructured and/or substituted for other awards in a way that permits a tax deduction to the Operating Partnership or the Company while preserving substantially similar pre-tax economics to the holder of such OP Units.
Types of Awards |
Operating Partnership Units
OP Units are valued by reference to the value of the underlying Shares to which such award relates. The employment conditions, the length of the period for vesting and other applicable conditions and restrictions of OP Unit awards, including computation of financial metrics and/or achievement of pre-established performance goals, are established by the Compensation Committee. Such OP Unit awards may provide the holder with dividend-equivalent rights prior to vesting.
Appreciation-Only OP Units (or AO LTIP Units).
"AO LTIP Units" are a class of OP Units that are intended to produce for holders a substantially similar non-tax economic effect as that of options. Each AO LTIP Unit is potentially convertible into Class A OP Units (each one of which is ultimately redeemable for one Share or cash at the option of the Company). Each AO LTIP Unit will be issued under the 2019 Plan and may be convertible for up to a period of 10 years from the date of grant. The employment conditions, the length of the period for vesting and other applicable conditions and restrictions of AO LTIP Unit awards, including computation of financial metrics and/or achievement of pre-established performance
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XII. Executivegoals, are established by the Compensation
Committee. On the date of grant, each AO LTIP Unit is awarded with a specified conversion price. That conversion price will never be lower (and may be significantly higher) than the price for one Share on the date of grant. Each AO LTIP Unit, on conversion, will be converted into such number of Class A OP Units that has a value equal to the excess of the closing price per Share on the date of conversion on the New York Stock Exchange over the specified conversion price. After a required two-year holding period, those Class A OP Units, in turn, may be redeemable for Shares. Such AO LTIP Unit awards may provide the holder with dividend-equivalent rights prior to vesting.
Evaluating and Approving Compensation forStock Options
Stock options entitle the CEO. The Board, acting throughholder to purchase the Company's Shares at a per Share price determined by the Compensation Committee, annually evaluateswhich in no event may be less than the performancefair market value of the CEO andShares on the Trust againstdate of grant. Options may be either "incentive stock options" within the Trust's goals and objectives and approves the compensation levelmeaning of Section 422 of the CEO.Internal Revenue Code or "non-qualified" stock options.
Evaluating and Approving Compensation of Management. The Board, acting throughStock options are exercisable for such period as is determined by the Compensation Committee, evaluatesbut in no event may options be exercisable after 10 years from the date of grant. The option price for Shares purchased upon the exercise of an option must be paid in full at the time of exercise and approvesmay be paid in cash, by tender of Shares, by such other consideration as the proposalsCompensation Committee deems appropriate or by a combination of cash, Shares and such other consideration. Like the 2010 Plan, the 2019 Plan does not provide for overall compensation policiesthe grant of "reload stock options" (meaning, if a grantee were to pay the applicable to executive officers.
The Board should conductexercise in Shares already owned, the grantee would automatically be granted a review at least once every three yearsnew option in the amount of the components andsurrendered Shares).
Stock Appreciation Rights
Stock appreciation rights entitle the holder to receive from the Company an amount equal to the amount by which the fair market value of Trustee compensation in relation to other similarly situated companies. Trustee compensation should be consistent with market practices but shoulda Share on the date of exercise exceeds the grant price. The Compensation Committee will establish the grant price, which may not be set at a level that would call into questionless than the Board's objectivity.
XIV. Prohibition on Short Sales
In accordance with Federal securities laws, the Trust should prohibit short sales by its executive officers of its equity securities.
The business and affairsfair market value of the Trust are managedShares on the date of grant and the term, which will not be more than 10 years from the date of grant. Stock appreciation rights may be granted in tandem with a stock option or in addition to a stock option or may be freestanding and unrelated to a stock option. The Compensation Committee is authorized to determine whether a stock appreciation right will be settled in cash, Shares or a combination thereof. Stock appreciation rights settled in cash will not reduce the number of Shares issuable under the direction2019 Plan.
Performance Shares
Performance share awards consist of a grant of actual Shares or Share units having a value equal to an identical number of the BoardCompany's Shares in accordance with Maryland law. In performing his or her duties,amounts determined by the primary responsibilityCompensation Committee at the time of each Trustee isgrant. Performance share awards consisting of actual Shares entitle the holder to exercise his or her business judgmentreceive Shares in a manner he or she reasonably believes to be in the best interestsan amount based upon performance conditions of the Trust.Company over a performance period as determined by the Compensation Committee at the time of grant. Such performance share awards may provide the holder with dividends and voting rights prior to vesting, subject to dividend accumulation until vested as described above. Performance share awards consisting of Share units entitle the holder to receive the value of such units in cash, Shares or a combination thereof based upon performance conditions and over a performance period as determined by the Compensation Committee at the time of grant.
Restricted Shares
Restricted share awards consist of a grant of actual Shares or Share units having a value equal to an identical number of Shares of the Company. Restricted share awards consisting of actual Shares entitle the holder to receive Shares of the Company. Such restricted share awards may provide the holder with dividends and voting rights prior to vesting. Restricted share awards consisting of Share units entitle the holder to receive the value of such units in cash, Shares or a combination thereof as determined by the Compensation Committee and may provide the holder with dividends. The Board has developed the following specific expectations of Trustees to promote the discharge of this responsibilityemployment or other conditions and the efficient conductlength of the Board's business.
Commitment and Attendance. All independent and management Trustees should make every reasonable effort to attend meetingsperiod for vesting of restricted share awards are established by the Board and meetings of committees of which they are members. Members may attend by telephone or similar communications equipment if all persons participating in the meeting can hear each otherCompensation Committee at the same time. The Board may act by unanimous written consent in lieutime of a meeting.
Participation in Meetings. Each Trustee should be sufficiently familiar with the business of the Trust, including its financial statements and capital structure, and the risks and competition it faces, to facilitate active and effective participation in the deliberations of the Board and of each committee on which he or she serves. Upon request, management will make appropriate personnel available to answer any questions a Trustee may have about any aspect of the Trust's business. Trustees should also review the materials provided by management and advisors in advance of the meetings of the Board and its committees and should arrive prepared to discuss the issues presented.
Loyalty and Ethics. Each Trustee should act in good faith. This duty mandates that the best interests of the Trust take precedence over any interests of a Trustee.
The Trust has adopted a Code of Business Conduct and Ethics (the "Code"), including a compliance program to enforce the Code. Certain portions of the Code deal with activities of Trustees, particularly with respect to transactions in securities of the Trust, potential conflicts of interest, the taking of corporate opportunities for personal use, and competing with the Trust. Each Trustee should be familiar with the Code's provisions in these areas and should consult with any member of the Trust's Corporate Governance and Nominating Committee or the Trust's internal Corporation Counsel in the event of any concerns. The Corporate Governance and Nominating Committee is ultimately responsible for applying the Code to specific situations and has the authority to interpret the Code in any particular situation.grant.
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Other Directorships.Stock-Based Awards
Other types of equity-based or equity-related awards, including the grant or offer for sale of unrestricted Shares, may be granted under such terms and conditions as may be determined by the Compensation Committee.
Vesting |
The Compensation Committee will determine the time or times at which awards become vested, unrestricted or may be exercised, subject to the following limitations. Subject to accelerated vesting upon certain events that may be specified in an award agreement, including upon an involuntary termination of employment or service, the occurrence of a change in control or a grantee's retirement, disability, hardship or death, (i) awards that are not Full Value Awards will not vest or be exercisable earlier than the first anniversary of the date on which such award is granted, (ii) time-based vesting awards of Full Value Awards will be subject to a minimum one-year vesting period and (iii) performance-based vesting awards of Full Value Awards will have a performance period that ends no earlier than the first anniversary of the commencement of the period over which performance is evaluated. Notwithstanding the foregoing, a maximum of 5% of the maximum aggregate number of Share Equivalents available under the 2019 Plan in respect of awards can be subject to awards without regard to the minimum vesting limits in the preceding sentence.
Change in Control |
In the event of a change in control (as defined in the 2019 Plan), the Compensation Committee may take one or more of the following actions with respect to outstanding awards, in its sole discretion: (i) settle awards for an amount of cash or securities, where in the case of stock options and stock appreciation rights, the value of such amount, if any, will be equal to the in-the-money spread value of such awards; (ii) provide for the assumption of or the issuance of substitute awards; (iii) modify the terms of such awards to add events, conditions or circumstances upon which the vesting of such awards or lapse of restrictions thereon will accelerate; (iv) deem any performance conditions satisfied or provide for the performance conditions to continue (in accordance with their terms or as adjusted by the Compensation Committee) after the change in control or (v) provide that for a period of at least 20 days prior to the change in control, any stock options or stock appreciation rights that would not otherwise become exercisable prior to the change in control will be exercisable as to all Shares subject thereto (but any such exercise will be contingent upon and subject to the occurrence of the change in control) and that any stock options or stock appreciation rights not exercised prior to the consummation of the change in control will terminate.
Material U.S. Federal Income Tax Consequences of Awards |
Below is a brief summary of the principal U.S. federal income tax consequences of awards under the 2019 Plan under current law. This summary is not intended to be exhaustive and does not describe, among other things, state, local or foreign income, withholding and payroll tax matters, and other tax consequences. The specific tax consequences to a participant will depend on that participant's individual circumstances.
Incentive Stock Options. Upon the grant or exercise of an incentive stock option, no income will be recognized by the optionee for federal income tax purposes, and the Company will not be entitled to any deduction. If the Shares acquired upon exercise are not disposed of within the one-year period beginning on the date of the transfer of the Shares to the optionee, nor within the two-year period beginning on the date of the grant of the option, any gain or loss realized by the optionee upon the disposition of such Shares will be taxed as long-term capital gain or loss. In such event, no deduction will be allowed to the Company. If such Shares are disposed of within the periods referred to above, the excess of the fair market value of the Shares on the date of exercise (or, if less, the fair market value on the date of disposition) over the exercise price will be taxable as ordinary income to the optionee at the time of disposition, and the Company will be entitled to a corresponding deduction. The amount by which the fair market value of the Shares at the time of exercise of an incentive stock option exceeds the option price will constitute an item of tax preference that could subject the optionee to the alternative minimum tax. Whether the optionee will be subject to such tax depends on the facts and circumstances applicable to the individual.
Non-Qualified Stock Options. Upon the grant of a non-qualified stock option, no income will be realized by the optionee, and the Company will not be entitled to any deduction. Upon the exercise of such an option, the amount
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2019 PROXY STATEMENT | | | | VORNADO REALTY TRUST | | | | 75 | | |
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by which the fair market value of the Shares at the time of exercise exceeds the exercise price will be taxed as ordinary income to the optionee, and the Company will be entitled to a corresponding deduction. All option grants to Non-Employee Trustees and Consultants are treated as non-qualified options for federal income tax purposes.
Stock Appreciation Rights. Upon the grant of a stock appreciation right, no taxable income will be realized by the holder, and the Company will not be entitled to any tax deduction. Upon the exercise of a stock appreciation right, the amount by which the fair market value of the Shares at the time of exercise exceeds the grant price will be taxed as ordinary income to the holder, and the Company will be entitled to a corresponding deduction.
Performance Shares and Restricted Shares. A participant will not be subject to tax upon the grant of a restricted share unit, or upon the grant of actual restricted Shares, unless such participant makes the election referred to below with respect to restricted Shares. Upon the vesting date (the date of lapse of the applicable forfeiture conditions or transfer restrictions, in the case of Share awards and, in the case of unit awards, the date of vesting and distribution of the Shares and/or cash underlying the units), the participant will recognize ordinary income equal to the fair market value of the Shares and/or cash received (less any amount such participant may have paid for the Shares), and the Company generally will be entitled to a deduction equal to the amount of income recognized by such participant. In the case of an award of actual restricted Shares, if any dividends are paid on such common shares prior to the vesting date, they will be includible in a participant's income during the restricted period as additional compensation (and not as dividend income).
A participant may elect to recognize immediately, as ordinary income, the fair market value of restricted Shares (less any amount paid for the Shares) on the date of grant, without regard to applicable forfeiture conditions and transfer restrictions. This election is referred to as a Section 83(b) election. If a participant makes this election, the holding period will begin the day after the date of grant, dividends paid on the Shares will be subject to the normal rules regarding distributions on stock and no additional income will be recognized by such participant upon the vesting date. However, if a participant forfeits the restricted Shares before the vesting date, no deduction or capital loss will be available to that participant (even though the participant previously recognized income with respect to such forfeited Shares). In the event that the Shares are forfeited by such participant, the Company generally will include in its income the amount of its original deduction.
OP Units. OP Unit awards (including AO LTIP Unit awards) are intended to be structured to qualify as "profits interests" for federal income tax purposes, meaning that, under current law, no income will be recognized by the recipient upon grant or vesting, and the Company will not be entitled to any deduction. If OP Units are not disposed of within the three-year period beginning on the date of grant of the OP Unit award, any gain realized by the recipient upon disposition will be taxed as long-term capital gain (assuming the applicable tax elections are made by the grantee in connection with the grant of the award).
Disposition of Shares. Unless stated otherwise above, upon the subsequent disposition of Shares acquired under any of the preceding awards, the participant will recognize capital gain or loss based upon the difference between the amount realized on such disposition and the participant's basis in the Shares, and such amount will be long term capital gain or loss if such Shares were held for more than 12 months.
Additional Medicare Tax. Participants are subject to a 3.8% tax on the lesser of (i) the participant's "net investment income" for the relevant taxable year and (ii) the excess of the participant's modified adjusted gross income for the taxable year over a certain threshold (between $125,000 and $250,000, depending on the participant's circumstances). A participant's net investment income generally includes dividend income and net gains from the disposition of Shares. Participants are urged to consult their tax advisors regarding the applicability of this Medicare tax to their income and gains in respect of their investment in Shares.
Section 409A. If an award is subject to Section 409A of the Code, but does not comply with the requirements of Section 409A of the Code, the taxable events as described above could apply earlier than described, and could result in the imposition of additional taxes and penalties. Participants are urged to consult with their tax advisors regarding the applicability of Section 409A of the Code to their awards.
Non-Employee Trustees. The Board valuesdiscussion above generally applies to awards to Non-Employee Trustees; provided that Non-Employee Trustees are not eligible to receive grants of incentive stock options, and any amounts taxable to Non-Employee Trustees in respect of awards are not subject to FICA taxation (but may instead be subject to certain
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self-employment taxes). Generally, cash-based awards, including retainers and fees, will be taxable to the experience Trustees bring from other boards on which they serve, but recognizes that those boards may also present demands on a Trustee'srecipient as ordinary income at the time and availability and may present conflicts or legal issues. A Trustee should advisepaid.
New Plan Benefits |
No awards will be granted under the Chairman2019 Plan prior to its approval by our shareholders. Awards under the 2019 Plan will be granted at the discretion of the Corporate Governance and Nominating Committee andCompensation Committee. As a result, it is not possible to determine the CEO before accepting membership on other boardsnumber or type of directors or other significant commitments involving affiliation with other businesses or governmental units.
Contact with Management. Trustees have complete access to senior management and management information. Managementawards that will be responsivegranted to requestsany person under the 2019 Plan. The awards granted in 2019 (for 2018 performance) under the 2010 Plan, which would not have changed if the 2019 Plan had been in place instead of the 2010 Plan, are set forth in the table below.
| | 2010 Omnibus Share Plan | | ||||||
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| Name and Position | | Dollar Value ($)(1) | | Number of Shares and Units | | |||
|---|---|---|---|---|---|---|---|---|
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Steven Roth | | 10,878,261 | | | 360,615 | | ||
Joseph Macnow | | 3,081,730 | | | 92,166 | | ||
David R. Greenbaum | | 5,328,528 | | | 152,610 | | ||
Michael J. Franco | | 3,547,965 | | | 115,603 | | ||
Current executive officers as a group (includes NEOs) | | 22,836,484 | | | 720,994 | | ||
Current Non-Employee Trustees as a group | | 1,198,920 | | | 21,024 | | ||
Employees other than executive officers as a group | | 8,013,559 | | | 301,221 | | ||
The Board encouragesof Trustees unanimously recommends a vote "FOR" the Chief Executive Officer, from time to time, to bring to Board meetings managers who can provide additional insightapproval of the Company's 2019 Omnibus Share Plan.
Unless you direct otherwise in your proxy, proxies will be voted for the proposal. The affirmative vote of holders of the majority of the votes cast on the proposal is required for approval of the 2019 Omnibus Share Plan. For purposes of the vote on this proposal, abstentions will have the effect of a vote against the proposal and broker non-votes will have no effect on the outcome of the proposal.
INCORPORATION BY REFERENCE |
To the extent this proxy statement is incorporated by reference into any other filing by the items being discussed. Any other meetings or contacts with officers or employees that a Trustee wishes to initiate may be arranged throughCompany under the Chief Executive OfficerSecurities Act of 1933, as amended, or the Corporate Secretary or directlySecurities Exchange Act, the sections entitled "Compensation Committee Report on Executive Compensation" and "Report of the Audit Committee" (to the extent permitted by the Trustee. rules of the SEC) will not be deemed incorporated unless provided otherwise in such filing.
ADDITIONAL MATTERS TO COME BEFORE THE MEETING |
The Trustees will use their judgmentBoard does not intend to ensurepresent any other matter, nor does it have any information that any such contactother matter will be brought, before the Annual Meeting. However, if any other matter properly comes before the Annual Meeting, it is not disruptive to the business operationsintention of each of the Trust, and will,individuals named in the accompanying proxy to the extent not inappropriate, copy the Chief Executive Officer on any written communications between a Trustee and an officer or employee of the Trust.
Contact with Other Constituencies. It is important that the Trust speaks to employees and outside constituencies with a single voice, and that management serve as the primary spokesperson.
Confidentiality. The proceedings and deliberations of the Board and its committees are confidential. Each Trustee shall maintain the confidentiality of information receivedvote said proxy in connectionaccordance with his or her service as a Trustee.discretion on such matters.
XVI. Evaluating Board Performance
The Board, acting through the Corporate Governance and Nominating Committee, should conduct a self-evaluation at least annually to determine whether it is functioning effectively. The Corporate Governance and Nominating Committee should periodically consider the mix of skills and experience that Trustees bring to the Board to assess whether the Board has the necessary tools to perform its oversight function effectively.
Each committee of the Board should conduct a self-evaluation at least annually and report the results to the Board, acting through the Corporate Governance and Nominating Committee. Each committee's evaluation must compare the performance of the committee with the requirements of its written charter, if any.
XVII. Reliance on Management and Outside Advice
In performing its functions, the Board is entitled to rely on the advice, reports and opinions of management, counsel, accountants, auditors and other expert advisors. The Board has the authority to retain and approve the fees and retention terms of its outside advisors.
XVIII. Trustee Resignation Policy
The Bylaws of the Trust provide that a nominee for election as a Trustee is elected by a plurality of votes cast. Notwithstanding such vote requirement, any nominee in an uncontested election who does not receive a greater number of "for" votes than votes "withhold" shall be elected as a Trustee but shall promptly tender to the Board his or her offer of resignation from the Board following certification of the vote. A contested election is one in which (i) the Secretary of the Trust receives a notice pursuant to these Bylaws that a shareholder intends to nominate a person or persons for election and (ii) such proposed nomination has not been withdrawn by such shareholder on or prior to the tenth day preceding the date on which the Trust first mails its notice of meeting for such meeting to the shareholders. The Corporate Governance and Nominating Committee shall consider the offer to resign and shall recommend to the Board the action to be taken in response to the offer. In determining its recommendation to the Board, the Corporate Governance and Nominating Committee may consider all factors deemed relevant by the members of the Corporate Governance and Nominating Committee, which may include, without limitation, (i) the stated reason or reasons, if any, why shareholders withheld votes for such Trustee's election, (ii) the qualifications of the Trustee (including, for example, whether the Trustee serves on the Audit Committee of the Board as an "audit
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committee financial expert" and whether there are one or more other Trustees qualified, eligible and available to serve on the Audit Committee in such capacity), (iii) whether the resignation would cause the Trust to be in violation of any of its constituent documents, any legal or regulatory requirements, agreements, or the rules of any national securities exchange on which its securities are then listed, and (iv) whether the Trustee's resignation from the Board would be in the best interests of the Trust. The Corporate Governance and Nominating Committee also may consider a range of possible alternatives concerning the Trustee's offer to resign as the members of the Corporate Governance and Nominating Committee deem appropriate. In considering the Committee's recommendation, the Board may consider the information, factors and alternatives considered by the Committee and such additional information, factors and alternatives as the Board deems relevant. Each Trustee, whether acting as a member of the Corporate Governance and Nominating Committee or as a member of the Board, may give such weight to any of the foregoing factors as he or she deems appropriate.
The Board shall take action no later than the next regularly scheduled Board meeting to be held no earlier than ten days after the date of the election, unless such action would cause the Trust to fail to comply with any requirement of the New York Stock Exchange or any rule or regulation promulgated under the Securities Exchange Act of 1934, in which event the Board shall take action as promptly as is practicable while continuing to meet such requirements. The Board will promptly disclose its decision and the reasons therefor in a Form 8-K furnished to the Securities and Exchange Commission.
No Trustee whose offer to resign, in accordance with this policy, is required to be considered by the Board shall participate in the Corporate Governance and Nominating Committee's deliberations or recommendation, or in the Board's deliberations or determination, with respect to accepting or rejecting his or her offer to resign as a Trustee.
If each member of the Corporate Governance and Nominating Committee is required to offer to resign pursuant to this policy, the Board may appoint a special committee composed of Trustees who are not so required to offer to resign to consider the offers to resign and recommend to the Board whether to accept any or all of them. In the event that every Trustee is required to offer to resign pursuant to this policy, the Board shall make a final determination whether to accept any or all offers to resign.
If the offer to resign is not accepted, the Trustee will continue to serve until the expiration of his or her term and his or her successor is duly elected and qualifies or until the Trustee's earlier resignation or removal.
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Amendment to the Company's Declaration of Trustto Permit Shareholders to Propose Binding Amendments to the Company's Bylawsand to Vote on Amendments to the Company's Bylaws
The Declaration of Trust of the Company is hereby amended by deleting Section 7.2 in its entirety and inserting the following in lieu thereof:
SECTION 7.2 Voting Rights of Shareholders. Subject to the provisions of any class or series of Shares then outstanding, the Shareholders shall be entitled to vote only on the following matters: (a) election or removal of Trustees as provided in Sections 7.1 and 2.3; (b) amendment of this Declaration of Trust as provided in Section 9.1; (c) termination of the Trust as provided in Section 10.1; (d) reorganization or other actions of the Trust as provided in Section 9.2; (e) merger, consolidation or share exchange of the Trust, or the sale or disposition of all or substantially all of the Trust Property, as provided in Section 9.3; (f) if provided by the Bylaws of the Trust, amendment of the Bylaws of the Trust to the extent provided in the Bylaws of the Trust; (g) such matters with respect to which the Board of Trustees has adopted a resolution declaring advisable or recommending a proposal and directing that the matter be submitted to the Shareholders for consideration; and (h) such matters with respect to which Shareholders are required to vote (whether in a binding or advisory capacity) by federal law, state law or securities exchange rule. Except with respect to the foregoing matters, no action taken by the Shareholders at any meeting shall in any way bind the Trustees.
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PROXY AUTHORIZATION VIA THE INTERNET OR BY TELEPHONE |
We have established procedures by which shareholders may authorize their proxies via the Internet or by telephone. You may also authorize your proxy by mail. Please see the proxy card or voting instruction form accompanying this proxy statement for specific instructions on how to authorize your proxy by any of these methods.
Proxies authorized via the Internet or by telephone must be received by 11:59 P.M., New York City time, on Wednesday, May 15, 2019. Authorizing your proxy via the Internet or by telephone will not affect your right to revoke your proxy should you decide to do so.
The Internet and telephone proxy authorization procedures are designed to authenticate shareholders' identities, to allow shareholders to give their voting instructions and to confirm that shareholders' instructions have been recorded properly. The Company has been advised that the Internet and telephone proxy authorization procedures that have been made available are consistent with the requirements of applicable law. Shareholders authorizing their proxies via the Internet or by telephone should understand that there may be costs associated with voting in these manners, such as charges for Internet access providers and telephone companies that must be borne by the shareholder.
ADVANCE NOTICE FOR SHAREHOLDER NOMINATIONS AND SHAREHOLDER PROPOSALS |
The Bylaws of the Company currently provide that in order for a shareholder to Bylawsto Be Adopted ifnominate a candidate for election as a Trustee at an Annual Meeting of Shareholders outside of the Amendmentproxy access provision in the Bylaws described below or propose business for consideration at such meeting, notice must be given to the DeclarationSecretary of Trust is Approved
Article XIVthe Company no more than 120 days nor less than 90 days prior to the first anniversary of the preceding year's Annual Meeting and must include certain information specified in the Bylaws. As a result, any notice given by or on behalf of a shareholder pursuant to the provisions of our current Bylaws (other than the proxy access provision) must comply with the requirements of the Bylaws is hereby amended by deletingand must be delivered to the ArticleSecretary of the Company at the principal executive office of the Company, 888 Seventh Avenue, New York, New York 10019, not earlier than January 17, 2020 and not later than the close of business on February 16, 2020.
Shareholders who wish to submit a "proxy access" nomination for inclusion in its entirety and inserting the followingour proxy statement in lieu thereof:
ARTICLE XIVAMENDMENT OF BYLAWS
The Boardconnection with our 2020 Annual Meeting of Trustees is vestedShareholders must submit a written notice in compliance with the power to alter or repeal any provision of theseprocedures and along with the other information required by our Bylaws and to adopt new Bylaws. In addition, to the extent permitted by law, the shareholders may alter or repeal any provision of these Bylaws and adopt new Bylaw provisions if any such alteration, repeal or adoption is approved by the affirmative vote of a majoritySecretary of the votes entitled to be castCompany at the principal executive office of the Company, 888 Seventh Avenue, New York, New York 10019, not earlier than November 7, 2019 and not later than the close of business on the matter.December 7, 2019.
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The Board of Trustees may amend the Bylaws from time to time.
Shareholders interested in presenting a proposal for inclusion in the proxy statement for the Company's Annual Meeting of Shareholders in 2020 may do so by following the procedures in Rule 14a-8 under the Securities Exchange Act of 1934. To be eligible for inclusion, shareholder proposals must be received at the principal executive office of the Company, 888 Seventh Avenue, New York, New York 10019, Attention: Secretary, not later than December 7, 2019.
By Order of the Board of Trustees, | ||
Alan J. Rice | ||
New York, New York |
It is important that proxies be returned promptly. Please authorize your proxy over the Internet, by telephone or by requesting, executing and returning a proxy card or voting instruction form.
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2019 PROXY STATEMENT | | | | VORNADO REALTY TRUST | | | | 79 | | |
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VORNADO REALTY TRUST
RECONCILIATION OF NON-GAAP METRICS
Below is a reconciliation of net income to NOI at share and NOI at share—cash basis for year ended December 31, 2018 and 2017.
| | | For the Year Ended December 31, | | ||||
|---|---|---|---|---|---|---|---|
| (Amounts in thousands) | | 2018 | | 2017 | | ||
Net income | | $ | 422,603 | | $ | 264,128 | |
Deduct: | | | | ||||
Income from partially owned entities | | (9,149 | ) | (15,200 | ) | ||
Loss (income) from real estate fund investments | | 89,231 | | (3,240 | ) | ||
Interest and other investment income, net | | (17,057 | ) | (30,861 | ) | ||
Net gains on disposition of wholly owned and partially owned assets | | (246,031 | ) | (501 | ) | ||
Purchase price fair value adjustment | | (44,060 | ) | — | | ||
(Income) loss from discontinued operations | | (638 | ) | 13,228 | | ||
NOI attributable to noncontrolling interests in consolidated subsidiaries | | (71,186 | ) | (65,311 | ) | ||
Add: | | | | ||||
Depreciation and amortization expense | | 446,570 | | 429,389 | | ||
General and administrative expense | | 141,871 | | 150,782 | | ||
Transaction related costs, impairment loss and other | | 31,320 | | 1,776 | | ||
Our share of NOI from partially owned entities | | 253,564 | | 269,164 | | ||
Interest and debt expense | | 347,949 | | 345,654 | | ||
Income tax expense | | 37,633 | | 42,375 | | ||
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NOI at share | | 1,382,620 | | 1,401,383 | | ||
Non-cash adjustments for straight-line rents, amortization of acquired below-market leases, net and other | | (44,704 | ) | (86,842 | ) | ||
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NOI at share—cash basis | | $ | 1,337,916 | | $ | 1,314,541 | |
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NOI represents total revenues less operating expenses. We consider NOI to be the primary non-GAAP financial measure for making decisions and assessing the unlevered performance of our segments as it relates to the total return on assets as opposed to the levered return on equity. As properties are bought and sold based on NOI, we utilize this measure to make investment decisions as well as to compare the performance of our assets to that of our peers. NOI should not be considered a substitute for net income. NOI may not be comparable to similarly titled measures employed by other companies. We calculate NOI on an operating partnership (Vornado Realty L.P.) basis which is before allocation to the noncontrolling interest of the operating partnership.
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| | 80 | | | | VORNADO REALTY TRUST | | | | 2019 PROXY STATEMENT |
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The following table reconciles net income attributable to common shareholders to FFO attributable to common shareholders plus assumed conversions:
| | | For the Year Ended December 31, | | ||||
|---|---|---|---|---|---|---|---|
| (Amounts in thousands, except per share amounts) | | 2018 | | 2017 | | ||
Net income attributable to common shareholders | | $ | 384,832 | | $ | 162,017 | |
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Per diluted share | | $ | 2.01 | | $ | 0.85 | |
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FFO adjustments: | | | | ||||
Depreciation and amortization of real property | | $ | 413,091 | | $ | 467,966 | |
Net gains on sale of real estate | | (158,138 | ) | (3,797 | ) | ||
Real estate impairment losses | | 12,000 | | — | | ||
Decrease in fair value of marketable securities | | 26,453 | | — | | ||
After-tax purchase price fair value adjustment on depreciable real estate | | (27,289 | ) | — | | ||
Proportionate share of adjustments to equity in net income of partially owned entities to arrive at FFO: | | | | ||||
Depreciation and amortization of real property | | 101,591 | | 137,000 | | ||
Net gains on sale of real estate | | (3,998 | ) | (17,777 | ) | ||
Real estate impairment losses | | — | | 7,692 | | ||
Decrease in fair value of marketable securities | | 3,882 | | — | | ||
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| | 367,592 | | 591,084 | | |||
Noncontrolling interests' share of above adjustments | | (22,746 | ) | (36,420 | ) | ||
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FFO adjustments, net | | $ | 344,846 | | $ | 554,664 | |
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FFO attributable to common shareholders (non-GAAP) | | $ | 729,678 | | $ | 716,681 | |
Convertible preferred share dividends | | 62 | | 77 | | ||
Earnings allocated to Out-Performance Plan units | | — | | 1,047 | | ||
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FFO attributable to common shareholders plus assumed conversions (non-GAAP) | | $ | 729,740 | | $ | 717,805 | |
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Per diluted share (non-GAAP) | | $ | 3.82 | | $ | 3.75 | |
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Table of ContentsRECONCILIATION OF NON-GAAP METRICS
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2019 PROXY STATEMENT | | | | VORNADO REALTY TRUST | | | | 81 | | |
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The following table reconciles our FFO attributable to common shareholders plus assumed conversions (non-GAAP) to FFO attributable to common shareholders plus assumed conversions, as adjusted (non-GAAP):
| | For the Years Ended December 31, | | For the Year Ended December 31, | | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| (Amounts in thousands, except per share amounts) | 2017 | 2016 | | 2018 | | 2017 | | |||||||
FFO (non-GAAP) | $ | 717,805 | $ | 1,457,583 | ||||||||||
FFO attributable to common shareholders plus assumed conversions (non-GAAP) | | $ | 729,740 | | $ | 717,805 | | |||||||
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Per diluted share (non-GAAP) | $ | 3.75 | $ | 7.66 | | $ | 3.82 | | $ | 3.75 | | |||
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Certain items that impact FFO: | | | ||||||||||||
JBG SMITH Properties which is treated as a discontinued operation: | ||||||||||||||
Transaction costs | $ | (68,662 | ) | $ | (16,586 | ) | ||||||||
Operating results through July 17, 2017 spin-off | 122,201 | 226,288 | ||||||||||||
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| | 53,539 | | 209,702 | ||||||||||
Certain (income) expense items that impact FFO attributable to common shareholders plus assumed conversions: | | | | |||||||||||
After-tax net gain on sale of 220 Central Park South condominium units | | $ | (67,336 | ) | $ | — | | |||||||
Our share of FFO from real estate fund investments (excluding our $4,252 share of One Park Avenue potential additional transfer taxes) | | 23,749 | | 10,804 | | |||||||||
FFO from discontinued operations and sold properties (primarily related to JBG SMITH Properties operating results and transaction costs through July 17, 2017 spin-off and 666 Fifth Avenue Office Condominium operations through August 3, 2018 sale) | | (2,834 | ) | (73,240 | ) | |||||||||
Tax expense related to the reduction of our taxable REIT subsidiaries deferred tax assets | (34,800 | ) | — | | — | | 34,800 | | ||||||
Expense related to the prepayment of our 2.50% senior unsecured notes due 2019 | | (4,836 | ) | | — | |||||||||
666 Fifth Avenue Office Condominium (49.5% interest) | 13,164 | 10,925 | ||||||||||||
Income (loss) from real estate fund investments, net | | (10,804 | ) | | (21,042 | ) | ||||||||
Net gain on extinguishment of Skyline properties debt | — | 487,877 | ||||||||||||
Income from the repayment of our investments in 85 Tenth Avenue loans and preferred equity | | — | | 160,843 | ||||||||||
Our share of impairment on India non-depreciable real estate | — | (13,962 | ) | |||||||||||
Impairment loss on our investment in Pennsylvania REIT | | (44,465 | ) | | — | |||||||||
Net gain resulting from Urban Edge Properties operating partnership unit issuances | 21,100 | — | ||||||||||||
Our share of potential additional New York City transfer taxes based on a Tax Tribunal interpretation which Vornado is appealing | | 23,503 | | — | | |||||||||
Preferred share issuance costs | | 14,486 | | — | | |||||||||
Net gain on the repayment of our loan investment in 666 Fifth Avenue Office Condominium | | (7,308 | ) | — | | |||||||||
Impairment loss on investment in PREIT | | — | | 44,465 | | |||||||||
Net gain resulting from UE operating partnership unit issuances | | — | | (21,100 | ) | |||||||||
Net gain on repayment of our Suffolk Downs JV debt investments | | 11,373 | | — | | — | | (11,373 | ) | |||||
Our share of write-off of deferred financing costs | (3,819 | ) | — | |||||||||||
Preferred share issuance costs (Series J redemption) | | — | | (7,408 | ) | |||||||||
Other | 3,801 | (2,454 | ) | | 4,033 | | 10,328 | | ||||||
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| | 4,253 | | 824,481 | ||||||||||
| | (11,707 | ) | (5,316 | ) | ||||||||||
Noncontrolling interests' share of above adjustments | (264 | ) | (50,293 | ) | | 727 | | 534 | | |||||
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Total of certain items that impact FFO, net | $ | 3,989 | $ | 774,188 | ||||||||||
Total of certain (income) expense items that impact FFO attributable to common shareholders plus assumed conversions, net | | $ | (10,980 | ) | $ | (4,782 | ) | |||||||
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FFO, as adjusted (non-GAAP) | $ | 713,816 | $ | 683,395 | ||||||||||
FFO attributable to common shareholders plus assumed conversions, as adjusted (non-GAAP) | | $ | 718,760 | | $ | 713,023 | | |||||||
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Per diluted share (non-GAAP) | $ | 3.73 | $ | 3.59 | | $ | 3.76 | | $ | 3.73 | | |||
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FFO is computed in accordance with the definition adopted by the Board of Governors of the National Association of Real Estate Investment Trusts ("NAREIT"Nareit"). NAREITNareit defines FFO as GAAP net income or loss adjusted to exclude net gains from sales of depreciateddepreciable real estate assets, real estate impairment losses, depreciation and amortization expense from real estate assets and other specified non-cash items, including the pro rata share of such adjustments of unconsolidated subsidiaries. FFO and FFO per diluted share are non-GAAP financial measures used by management, investors and analysts to facilitate meaningful comparisons of operating performance between periods and among our peers because it excludes the effect of real estate depreciation and amortization and net gains on sales, which are based on historical costs and implicitly assume that the value of real estate diminishes predictably over time, rather than fluctuating based on existing market conditions. FFO does not represent cash generated from operating activities and is not necessarily indicative of cash available to fund cash requirements and should not be considered as an alternative to net income as a performance measure or cash flow as a liquidity measure. FFO may not be comparable to similarly titled measures employed by other companies. In addition to FFO, we also disclose FFO, as adjusted. Although this non-GAAP measure clearly differs from Nareit's definition of FFO, we believe it provides a meaningful presentation of operating performance.
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| | 82 | | | | VORNADO REALTY TRUST | | | | 2019 PROXY STATEMENT |
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2019 PROXY STATEMENT | | | | VORNADO REALTY TRUST | | | | 83 | | |
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2019 OMNIBUS SHARE PLAN
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Vornado Realty Trust |
2019 Omnibus Share Plan |
(If approved by shareholders on May 16, 2019) |
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| | | | VORNADO REALTY TRUST | | | | | | |
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The purpose of the 2019 Omnibus Share Plan of Vornado Realty Trust, as amended from time to time (the "Plan"), is to promote the interests of Vornado Realty Trust (the "Trust"), including its growth and performance, by encouraging employees of the Trust and its subsidiaries, including officers (together, the "Employees"), its non-employee trustees of the Trust and non-employee directors of its subsidiaries (together, the "Non-Employee Trustees") and certain non-employee advisors and consultants that providebona fideservices to the Trust or its subsidiaries (together, the "Consultants") to acquire an ownership position in the Trust, enhancing the ability of the Trust and its subsidiaries to attract and retain Employees, Non-Employee Trustees and Consultants of outstanding ability, and providing Employees, Non-Employee Trustees and Consultants with a way to acquire or increase their proprietary interest in the Trust's success and to further align the interests of the Employees, Non-Employee Trustees and Consultants with shareholders of the Trust. Each of the terms set forth in the Appendix is defined in the Section of the Plan set forth opposite such term.
The Plan replaces the 2010 Omnibus Share Plan of Vornado Realty Trust, as amended (the "Predecessor Plan"), for awards granted on or after the Effective Date (as defined inSection 22). Awards may not be granted under the Predecessor Plan beginning on the Effective Date, but the adoption and effectiveness of the Plan will not affect the terms or conditions of any outstanding grants under the Predecessor Plan prior to the Effective Date.
Subject to the provisions of thisSection 2 or any adjustment as provided inSection 18, awards may be granted under the Plan with respect to 5,500,000 Share Equivalents (as defined below), which, in accordance with the share counting provisions of thisSection 2, would result in the issuance of up to a maximum of 5,500,000 common shares, par value $0.04, of beneficial interest in the Trust (the "Shares") if all awards granted under the Plan were Full Value Awards (as defined below) and 11,000,000 Shares if all awards granted under the Plan were not Full Value Awards (which includes the number of Shares remaining under the Predecessor Plan as of March 18, 2019). The Shares issued under the Plan may be authorized and unissued Shares or treasury Shares, as the Trust may from time to time determine. Any Shares that are subject to awards that are not Full Value Awards shall be counted against the number of Share Equivalents available for the grant of awards under the Plan, as set forth in the first sentence of thisSection 2, as one-half Share Equivalent for every Share granted pursuant to an award; any Shares that are subject to awards that are Full Value Awards shall be counted as one Share Equivalent for every Share granted pursuant to an award.
"Share Equivalent" shall be the measuring unit for purposes of the Plan to determine the number of Shares that may be subject to awards hereunder, which number of Shares shall not in any event exceed 11,000,000, subject to the provisions of thisSection 2 or any adjustment as provided inSection 18. "Full Value Award" means an award under the Plan other than a stock option, stock appreciation right or other award that does not deliver on the grant date of such award the full value of the underlying Shares or underlying OP Units. "OP Units" are undivided fractional limited partnership interests in Vornado Realty L.P. (together with any successor entity, the "Operating Partnership"), of one or more classes established pursuant to the Operating Partnership's agreement of limited partnership, as amended from time to time. The Operating Partnership is a Delaware limited partnership, the entity through which the Trust conducts its business and an entity that has elected to be treated as a partnership for federal income tax purposes.
The Compensation Committee (the "Committee") of the Board of Trustees of the Trust (the "Board of Trustees") may, without affecting the number of Share Equivalents available pursuant to thisSection 2, authorize the issuance or assumption of benefits under the Plan in connection with any merger, consolidation, acquisition of property or stock, reorganization or similar transaction upon such terms and conditions as it may deem appropriate, subject to compliance with Section 409A of the Code ("Section 409A") and any other applicable provisions of the Internal Revenue Code of 1986, as amended (the "Code").
Shares subject to an award granted under the Plan that expires unexercised, that is forfeited, terminated or cancelled, in whole or in part, or is paid in cash in lieu of Shares, shall thereafter again be available for grant under the Plan;provided,however, that the number of Share Equivalents that shall again be available for the grant under the Plan shall be increased by one Share Equivalent for each Share that is subject to a Full Value Award at the time
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| | 86 | | | | VORNADO REALTY TRUST | | | | 2019 PROXY STATEMENT |
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such Full Value Award expires or is forfeited, terminated or cancelled and by one-half Share Equivalent for each Share that is subject to an award that is not a Full Value Award at the time such award expires or is forfeited, terminated or cancelled. Awards that use Shares as a reference but that are paid or settled in whole or in part in cash shall not affect the number of Share Equivalents available under the Plan pursuant to thisSection 2 to the extent paid or settled in cash. The number of Share Equivalents available for the purpose of awards under the Plan shall be reduced by (i) one-half of the gross number of Shares for which stock options or stock appreciation rights are exercised, regardless of whether any of the Shares underlying such awards are not actually issued as the result of a net settlement or to satisfy any tax withholding obligation and (ii) one Share for each Share withheld to satisfy any tax withholding obligation with respect to any Full Value Award, as described further inSection 15.
The maximum aggregate number of Share Equivalents that may be granted under the Plan, as set forth in thisSection 2, shall be cumulatively increased from time to time by the number of Shares subject to, or acquired pursuant to, that portion of any award granted under the Predecessor Plan and outstanding as of the Effective Date that, on or after the Effective Date, expires unexercised, that is forfeited, terminated or cancelled, in whole or in part, or is paid in cash in lieu of Shares;provided,however, that the number of Share Equivalents that shall again be available for grant under the Plan shall be increased by one-half Share Equivalent for each Share that is subject to an award granted under the Predecessor Plan that would not have been a Full Value Award if granted under the Plan at the time such award expires or is forfeited, terminated or cancelled.
The maximum aggregate number of Shares that may be issued under the Plan pursuant to the exercise of incentive stock options within the meaning of Section 422 of the Code shall not exceed 11,000,000 Shares (as adjusted pursuant to the provisions ofSection 18).
The Plan shall be administered by the Committee. Notwithstanding anything to the contrary contained herein, the Board of Trustees may, in its sole discretion, at any time and from time to time, grant awards or administer the Plan. In any such case, the Board of Trustees will have all of the authority and responsibility granted to the Committee herein.
Subject to the provisions of the Plan, the Committee shall select the Employees, Non-Employee Trustees and Consultants who will be participants in the Plan (together, the "Participants"). The Committee shall (i) determine the type of awards to be made to Participants, determine the Shares or share units subject to awards, and (ii) have the authority to interpret the Plan, to establish, amend, and rescind any rules and regulations relating to the Plan, to determine the terms and provisions of any agreements entered into hereunder, and to make all other determinations necessary or advisable for the administration of the Plan, based on, among other things, information made available to the Committee by the management of the Trust. The Committee may correct any defect, supply any omission or reconcile any inconsistency in the Plan or in any award in the manner and to the extent it shall deem desirable to carry it into effect. The determinations of the Committee in its administration of the Plan, as described herein, shall be final and conclusive.
The Committee's determinations under the Plan and awards need not be uniform and any such determinations may be made by it selectively among persons who receive, or are eligible to receive, awards under the Plan (whether or not such persons are similarly situated). Without limiting the generality of the foregoing, the Committee will be entitled, among other things, to make non-uniform and selective determinations under award agreements and to enter into non-uniform and selective award agreements, as to (a) the persons to receive awards and (b) the provisions of awards.
All Employees, Non-Employee Trustees and Consultants, in each case as determined by the Committee, are eligible to be Participants in the Plan.
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2019 PROXY STATEMENT | | | | VORNADO REALTY TRUST | | | | 87 | | |
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Awards under the Plan may consist of the following: stock options (either incentive stock options within the meaning of Section 422 of the Code or non-qualified stock options), stock appreciation rights, performance shares, grants of restricted stock and other-stock based awards, including OP Units. Awards of performance shares, restricted stock or share units and other-stock based awards may provide the Participant with dividends or dividend equivalents and voting rights prior to vesting (whether based on a period of time or based on attainment of specified performance conditions). Unless the Committee otherwise specifies in the award agreement, if dividends or dividend equivalent rights are granted, (x) dividends and dividend equivalents shall be paid in respect of any award that is not subject to performance vesting conditions to the Participant at the same time as the Trust pays dividends to common shareholders (even if the Shares subject to the underlying award are held by the Trust) but not less than annually and not later than the fifteenth day of the third month following the end of the calendar year in which the dividends or dividend equivalents are credited (or, if later, the fifteenth day of the third month following the end of the calendar year in which the dividends or dividend equivalents are no longer subject to a "substantial risk of forfeiture" within the meaning of Section 409A and (y) dividend and dividend equivalent payments in the case of an award that is subject to performance vesting conditions shall be treated as unvested so long as such award remains unvested, and any such dividend and dividend equivalent payments that would otherwise have been paid during the vesting period shall instead be accumulated (and, if paid in cash, reinvested in additional Shares based on the Surrender Value of the Shares on the date of reinvestment) and paid within 30 days following the date on which such award is determined by the Committee to have satisfied such performance vesting conditions. "Surrender Value" means, with respect to a Share, the closing price reported for the Shares on the applicable date as reported on the New York Stock Exchange or, if not so reported, as determined in accordance with a valuation methodology approved by the Committee in a manner consistent with Section 409A, unless determined as otherwise specified herein.
Notwithstanding any other provision of the Plan to the contrary and except for acceleration in the event of the Participant's involuntary termination, retirement, death, disability or hardship (as determined by the Committee) or upon a Change in Control (as defined inSection 13), (1) Full Value Awards (a) that vest on the basis of the Participant's continued employment or service shall be subject to a minimum vesting schedule of at least one year and (b) that vest on the basis of the attainment of performance goals shall provide for a performance period that ends no earlier than the first anniversary of the commencement of the period over which performance is evaluated; and (2) awards that are not Full Value Awards may not vest or be exercisable earlier than the first anniversary of the date on which such award is granted. Notwithstanding the foregoing, Awards with respect to 5% of the maximum aggregate number of Share Equivalents available for the purpose of awards under the Plan pursuant toSection 2 may be granted under the Plan to any one or more Participants without respect to such minimum vesting provisions.
Awards may be granted under the Plan in the form of OP Units. Awards of OP Units shall be valued by reference to, or otherwise determined by reference to or based on, Shares. OP Units awarded under the Plan may be (1) convertible, exchangeable or redeemable for other limited partnership interests in the Operating Partnership (including OP Units of a different class or series) or Shares, or (2) valued by reference to the book value, fair value or performance of the Operating Partnership. Except as otherwise determined by the Committee, awards of OP Units are intended to qualify as "profits interests" within the meaning of IRS Revenue Procedure 93-27, as clarified by IRS Revenue Procedure 2001-43, with respect to a Participant in the Plan who is rendering services to or for the benefit of the Operating Partnership, including its subsidiaries.
For purposes of calculating the number of Shares underlying an award of OP Units relative to the total number of Share Equivalents available for issuance under the Plan, the Committee shall establish in good faith the maximum number of Shares to which a Participant receiving such award of OP Units may be entitled upon fulfillment of all applicable conditions set forth in the relevant award documentation, including vesting conditions, partnership capital account allocations, value accretion factors, conversion ratios, exchange ratios and other similar criteria. If and when any such conditions are no longer capable of being met, in whole or in part, the number of Shares underlying such awards of OP Units shall be reduced accordingly by the Committee, and the number of Share Equivalents available for issuance under the Plan shall be increased by one Share Equivalent for each Share so reduced. Awards of OP Units may be granted either alone or in addition to other awards granted under the Plan. The Committee shall determine the eligible Participants to whom, and the time or times at which, awards of OP Units
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| | 88 | | | | VORNADO REALTY TRUST | | | | 2019 PROXY STATEMENT |
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shall be made; the number of OP Units to be awarded; the price, if any, to be paid by the Participant for the acquisition of such OP Units; and the restrictions and conditions applicable to such award of OP Units. Conditions may be based on continuing employment (or other service relationship), computation of financial metrics (including with reference to the book value of the Operating Partnership or the value of Shares) and/or achievement of pre-established performance goals and objectives, with related length of the service period for vesting, minimum or maximum performance thresholds, measurement procedures and length of the performance period to be established by the Committee at the time of grant, in its sole discretion. The Committee may allow awards of OP Units to be held through a limited partnership, or similar "look-through" entity, and the Committee may require such limited partnership or similar entity to impose restrictions on its partners or other beneficial owners that are not inconsistent with the provisions of thisSection 6.
NotwithstandingSection 5 of the Plan, the award agreement or other award documentation in respect of an award of OP Units may provide that the recipient of an award under thisSection 6 shall be entitled to receive, currently or on a deferred or contingent basis, dividends or dividend equivalents with respect to the number of Shares underlying the award or other distributions from the Operating Partnership prior to vesting (whether based on a period of time or based on attainment of specified performance conditions), as determined at the time of grant by the Committee, in its sole discretion, and the Committee may provide that such amounts (if any) shall be deemed to have been reinvested in additional Shares or OP Units.
OP Units awarded under thisSection 6 may be issued for no cash consideration.
The Committee shall establish the option price per Share at the time each stock option is granted, which price shall not be less than 100% of the Fair Market Value (as defined below) of a Share. Stock options shall be exercisable for such period as specified by the Committee but in no event may options be exercisable more than ten years after their date of grant. The option price of each Share as to which a stock option is exercised shall be paid in full at the time of such exercise. Such payment shall be made (i) in cash, (ii) by tender of Shares owned by the Participant valued at Surrender Value as of the date of exercise, (iii) to the extent approved by the Committee in its sole discretion, by surrender of all or part of the Shares issuable upon exercise of the option by the largest whole number of Shares with a Surrender Value that does not exceed the aggregate exercise price;provided,however, that the Trust shall accept a cash or other payment from the Participant to the extent of any remaining balance of the aggregate exercise price not satisfied by such reduction in the number of whole Shares to be issued, (iv) in such other consideration as the Committee deems appropriate, or (v) by a combination of cash, Shares and such other consideration.
For purposes of the Plan, "Fair Market Value" means, with respect to a Share, the average of the high and the low prices reported for the Shares on the applicable date as reported on the New York Stock Exchange or, if not so reported, as determined in accordance with a valuation methodology approved by the Committee in a manner consistent with Section 409A, unless determined as otherwise specified herein. For purposes of the grant of any award, the applicable date will be the trading day on which the award is granted or, if the date the award is granted is not a trading day, the trading day immediately prior to the date the award is granted. For purposes of the exercise of any award, the applicable date is the date a notice of exercise is received by the Trust or, if such date is not a trading day, the trading day immediately following the date a notice of exercise is received by the Trust.
Stock appreciation rights may be granted in tandem with a stock option, in addition to a stock option, or may be freestanding and unrelated to a stock option. Stock appreciation rights granted in tandem with or in addition to a stock option may be granted either at the same time as the stock option or at a later time. The Committee shall establish the grant price of each stock appreciation right granted at the time each such stock appreciation right is granted, which price shall not be less than 100% of the Fair Market Value of the Shares subject to such award. No stock appreciation right shall be exercisable later than 10 years from the grant date of such award. A stock appreciation right shall entitle the Participant to receive from the Trust an amount equal to the increase of the Fair Market Value of the Shares on the exercise of the stock appreciation right over the grant price. The Committee, in its
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sole discretion, shall determine whether the stock appreciation right shall be settled in cash, Shares or a combination of cash and Shares.
Performance shares may be granted in the form of actual Shares or share units having a value equal to an identical number of Shares. In the event that a certificate is issued in respect of Shares subject to a grant of performance shares, such certificate shall be registered in the name of the Participant but shall be held by the Trust until the time the Shares subject to the grant of performance shares are earned. The performance conditions and the length of the performance period shall be determined by the Committee subject to the terms of the Plan. The Committee, in its sole discretion, shall determine whether performance shares granted in the form of share units shall be paid in cash, Shares, or a combination of cash and Shares.
Restricted stock may be granted in the form of actual Shares or share units having a value equal to an identical number of Shares. In the event that a certificate is issued in respect of Shares subject to a grant of restricted stock, such certificate shall be registered in the name of the Participant but shall be held by the Trust until the end of the restricted period. The employment conditions and the length of the period for vesting of restricted stock shall be established by the Committee at time of grant. The Committee, in its sole discretion, shall determine whether restricted stock granted in the form of share units shall be paid in cash, Shares, or a combination of cash and Shares.
Other types of equity-based or equity-related awards (including the grant or offer for sale of unrestricted Shares) may be granted under such terms and conditions as may be determined by the Committee in its sole discretion.
Each award under the Plan shall be evidenced by an agreement setting forth the terms and conditions, as determined by the Committee, which shall apply to such award, in addition to the terms and conditions specified in the Plan.
In the event of a Change in Control, after consideration of the requirements of Section 409A, the Committee may take one or more of the following actions with respect to outstanding awards, in its sole discretion: (i) settle such awards for an amount (as determined in the sole discretion of the Committee) of cash or securities, where in the case of stock options and stock appreciation rights, the value of such amount, if any, will be equal to the in-the-money spread value (if any) of such awards; (ii) provide for the assumption of or the issuance of substitute awards that will substantially preserve the otherwise applicable terms of any affected awards previously granted under the Plan, as determined by the Committee in its sole discretion; (iii) modify the terms of such awards to add events, conditions or circumstances (including termination of employment within a specified period after a Change in Control) upon which the vesting of such awards or lapse of restrictions thereon will accelerate; (iv) deem any performance conditions satisfied at target, maximum or actual performance through closing or provide for the performance conditions to continue (in accordance with their terms or as adjusted by the Committee) after the Change in Control or (v) provide that for a period of at least 20 days prior to the Change in Control, any stock options or stock appreciation rights that would not otherwise become exercisable prior to the Change in Control will be exercisable as to all Shares subject thereto (but any such exercise will be contingent upon and subject to the occurrence of the Change in Control and if the Change in Control does not take place within a specified period after giving such notice for any reason whatsoever, the exercise will be null and void) and that any stock options or stock appreciation rights not exercised prior to the consummation of the Change in Control will terminate and be of no further force and effect as of the consummation of the Change in Control. In the event that the consideration paid in
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| | 90 | | | | VORNADO REALTY TRUST | | | | 2019 PROXY STATEMENT |
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the Change in Control includes contingent value rights, earn-out or indemnity payments or similar payments, then the Committee will determine if awards settled under clause (i) above are (a) valued at closing taking into account such contingent consideration (with the value determined by the Committee in its sole discretion) or (b) entitled to a share of such contingent consideration. For the avoidance of doubt, in the event of a Change in Control where all stock options and stock appreciation rights are settled for an amount (as determined in the sole discretion of the Committee) of cash or securities, the Committee may, in its sole discretion, terminate any stock option or stock appreciation right for which the exercise price is equal to or exceeds the per share value of the consideration to be paid in the Change in Control transaction without payment of consideration therefor.
Unless otherwise set forth in an award agreement, a "Change in Control" of the Trust means the occurrence of one of the following events:
(i) individuals who, on the date hereof, constitute the Board of Trustees (the "Incumbent Trustees") cease for any reason to constitute at least a majority of the Board of Trustees, provided that any person becoming a trustee subsequent to the date hereof whose election or nomination for election was approved by a vote of at least two-thirds of the Incumbent Trustees then on the Board of Trustees (either by a specific vote or by approval of the proxy statement of the Trust in which such person is named as a nominee for trustee, without objection to such nomination) shall be an Incumbent Trustee; provided, however, that no individual initially elected or nominated as a trustee of the Trust as a result of an actual or threatened election contest with respect to trustees or as a result of any other actual or threatened solicitation of proxies by or on behalf of any person other than the Board of Trustees shall be an Incumbent Trustee;
(ii) any "person" (as such term is defined in Section 3(a)(9) of the Securities Exchange Act of 1934 (the "Exchange Act") and as used in Sections 13(d)(3) and 14(d)(2) of the Exchange Act) is or becomes, after the date hereof, a "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Trust representing 30% or more of the combined voting power of the Trust's then outstanding securities eligible to vote for the election of the Board of Trustees (the "Trust Voting Securities"); provided, however, that an event described in this paragraph (ii) shall not be deemed to be a Change in Control if any of following becomes such a beneficial owner: (A) the Trust or any majority-owned subsidiary of the Trust (provided that this exclusion applies solely to the ownership levels of the Trust or the majority-owned subsidiary), (B) any tax-qualified, broad-based employee benefit plan sponsored or maintained by the Trust or any such majority-owned subsidiary, (C) any underwriter temporarily holding securities pursuant to an offering of such securities, (D) any person pursuant to a Non-Qualifying Transaction (as defined in paragraph (iii)), (E) (a) any of the partners (as of the date hereof) in Interstate Properties including immediate family members and family trusts or family-only partnerships and any charitable foundations of such partners (the "Interstate Partners"), (b) any entities the majority of the voting interests of which are beneficially owned by the Interstate Partners, or (c) any "group" (as described in Rule 13d-5(b)(1) under the Exchange Act) including the Interstate Partners (the persons in (a), (b) and (c) shall be individually and collectively referred to herein as "Interstate Holders"); or
(iii) the consummation of a merger, consolidation, share exchange or similar form of transaction involving the Trust or any of its subsidiaries, or the sale of all or substantially all of the Trust's assets (a "Business Transaction"), unless immediately following such Business Transaction (a) more than 50% of the total voting power of the entity resulting from such Business Transaction or the entity acquiring the Trust's assets in such Business Transaction (the "Surviving Corporation") is beneficially owned, directly or indirectly, by the Interstate Holders or the Trust's shareholders immediately prior to any such Business Transaction, and (b) no person (other than the persons set forth in clauses (A), (B), (C), or (E) of paragraph (ii) above or any tax-qualified, broad-based employee benefit plan of the Surviving Corporation or its affiliates) beneficially owns, directly or indirectly, 30% or more of the total voting power of the Surviving Corporation (a "Non-Qualifying Transaction"); or
(iv) Board of Trustees approval of a liquidation or dissolution of the Trust, unless the voting common equity interests of an ongoing entity (other than a liquidating trust) are beneficially owned, directly or indirectly, by the Trust's shareholders in substantially the same proportions as such shareholders owned the Trust Voting Securities immediately prior to such liquidation and such ongoing entity assumes all
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2019 PROXY STATEMENT | | | | VORNADO REALTY TRUST | | | | 91 | | |
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alternativeexisting obligations of the Trust to net incomeParticipants under this Plan and the award agreements issued thereunder.
Awards granted under the Plan will be subject to the requirement that the awards be forfeited or repaid to the Trust after they have been distributed to the Participant (i) to the extent set forth in an award agreement or (ii) to the extent covered by (A) any clawback or recapture policy adopted by the Trust from time to time or (B) any applicable laws that impose mandatory forfeiture or recoupment, under circumstances set forth in such applicable laws.
The Trust shall have the right to deduct from any payment to be made pursuant to the Plan, or to require prior to the issuance or delivery of any Shares or the payment of cash under the Plan, any taxes required by law to be withheld therefrom. The Committee, in its sole discretion, may permit a Participant who is an employee of the Trust or its subsidiaries to elect to satisfy such withholding obligation by having the Trust retain the number of Shares (rounded up to the nearest whole number unless the Committee determines otherwise) whose Fair Market Value equals the amount of taxes required by applicable law to be withheld, as determined by the Trust.
No award under the Plan shall be assignable or transferable except by will or the laws of descent and distribution, and no right or interest of any Participant shall be subject to any lien, obligation or liability of the Participant. Notwithstanding the foregoing, the Committee may determine, at the time of grant or thereafter, that an award (other than stock options intended to be incentive stock options within the meaning of Section 422 of the Code) is transferable by the Participant to such Participant's immediate family members (or trusts, partnerships, or limited liability companies established for such immediate family members). For this purpose, immediate family member means, except as otherwise defined by the Committee, the Participant's children, stepchildren, grandchildren, parents, stepparents, grandparents, spouse, siblings (including half brothers and sisters), in-laws and persons related by reason of legal adoption. Such transferees may transfer an award only by will or the laws of descent or distribution. An award transferred pursuant to thisSection 16 shall remain subject to the provisions of the Plan, and shall be subject to such other rules as the Committee shall determine. Upon transfer of a performance measurestock option, any related stock appreciation right shall be canceled. Except in the case of a holder's incapacity, an award shall be exercisable only by the holder thereof.
No person shall have any claim or cash flow as a liquidity measure. FFO mayright to be granted an award, and the grant of an award shall not be comparableconstrued as giving a Participant any right to similarly titled measures employedcontinue his or her service to the Trust or its subsidiaries as an Employee, Non-Employee Trustee or Consultant. Further, the Trust and its subsidiaries expressly reserve the right at any time to dismiss a Participant free from any liability, or any claim under the Plan, except as provided herein or in any agreement entered into hereunder.
In the event of any change in the outstanding Shares by reason of any share dividend or split, reverse split, recapitalization, merger, consolidation, spinoff, combination or exchange of Shares or other companies. Please refercorporate change, or any distributions to page 33common shareholders other than regular cash dividends, the Committee shall make such substitution or adjustment, if any, as it deems to be equitable, as to (i) the number of Share Equivalents for which awards may be granted under the Plan, (ii) the number or kind of Shares or other securities issued or reserved for issuance pursuant to outstanding awards, and (iii) the number of Shares set forth inSection 2 that can be issued through incentive stock options within the meaning of Section 422 of the Company's Annual Report on Form 10-K forCode;provided,however, that no such substitution or adjustment shall be required if the year ended December 31, 2017 for a reconciliationCommittee determines that such action could cause an award to fail to satisfy the conditions of FFO for toan applicable exception from the most comparable metric presented in accordance with GAAP. In addition to FFO, we also disclose FFO, as adjusted. Although this non-GAAP measure clearly differs from NAREIT's definitionrequirements of FFO, we believe it provides a meaningful presentation of operating performance.Section 409A or otherwise could
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| | 92 | | | | VORNADO REALTY TRUST | | | | 2019 PROXY STATEMENT |
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subject a Participant to the additional tax imposed under Section 409A in respect of an outstanding award; andfurther provided that no Participant shall have the right to require the Committee to make any adjustment or substitution under thisSection 18 or have any claim or right whatsoever against the Trust or any of its subsidiaries or affiliates or any of their respective trustees, directors, officer or employees in respect of any action taken or not taken under thisSection 18.
The Committee may amend or terminate the Plan or any portion thereof from time to time, provided that no amendment shall be made without shareholder approval if such amendment (i) would increase the maximum aggregate number of Shares that may be issued under the Plan (other than pursuant toSection 18), (ii) would materially expand the class of service providers eligible to participate in the Plan, (iii) would result in a material increase in the benefits accrued to Participants under the Plan, (iv) would reduce the exercise price of outstanding stock options or stock appreciation rights or cancel outstanding stock options or stock appreciation rights in exchange for cash, other awards or stock options or stock appreciation rights with an exercise price that is less than the exercise price of the original stock options or stock appreciation rights (other than pursuant toSection 18) or (v) requires shareholder approval to comply with any applicable laws, regulations or rules, including the rules of a securities exchange or self-regulatory agency. Notwithstanding anything contrary in this Plan, if there is a change in applicable tax law such that OP Units become taxable to the holder of such OP Units as ordinary income, the Operating Partnership, at any time in the sole discretion of the general partner of the Operating Partnership, may cause the OP Units to be restructured and/or substituted for other awards in a way that permits a tax deduction to the Operating Partnership or the Trust while preserving substantially similar pre-tax economics to the holder of such OP Units.
It is the Trust's intent that awards under the Plan be exempt from, or comply with, the requirements of Section 409A, and that the Plan be administered and interpreted accordingly. Without limiting the generality of the foregoing, if and to the extent that any award made under the Plan is determined by the Trust to constitute "non-qualified deferred compensation" subject to Section 409A then:
(i) Any payment due by reason of the Participant's termination of employment, then (i) such payment or benefit shall be made or provided to the Participant only upon a "separation from service" as defined for purposes of Section 409A under applicable regulations and (ii) if the Participant is a "specified employee" (within the meaning of Section 409A and as determined by the Trust), such payment or benefit shall not be made or provided before the date that is six months after the date of the Participant's separation from service (or the Participant's earlier death);
(ii) Any payment due upon a Change in Control will be paid only if such Change in Control constitutes a "change in ownership" or "change in effective control" within the meaning of Section 409A, and in the event that such Change in Control does not constitute a "change in the ownership" or "change in the effective control" within the meaning of Section 409A, such Award will vest upon the Change in Control and any payment will be delayed until the first compliant date under Section 409A;
(iii) If the award includes a "series of installment payments" (within the meaning of Section 1.409A-2(b)(2)(iii) of the Treasury Regulations), the participant's right to the series of installment payments will be treated as a right to a series of separate payments and not as a right to a single payment; and
(iv) If the award includes dividend equivalents, the participant's right to the dividend equivalents will be treated separately from the right to other amounts under the award.
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2019 PROXY STATEMENT | | | | VORNADO REALTY TRUST | | | | 93 | | |
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The Plan and all awards made and actions taken thereunder will be governed by and construed in accordance with the laws of the state of Maryland, without reference to principles of conflict of laws.
The Plan was adopted on March 26, 2019 by the Board of Trustees upon recommendation of the Committee, subject to the approval by the shareholders of the Trust, and shall be effective as of the date of the approval by the requisite shareholders of the Trust at the 2019 Annual Meeting on May 16, 2019 (the "Effective Date"). If the Plan is not so approved by the requisite shareholders of the Trust, then the Plan will be null and void in its entirety and the Predecessor Plan will remain in full force and effect with respect to awards to be granted to Employees and Consultants. Subject to earlier termination pursuant toSection 19, the Plan shall have a term of ten years from the Effective Date;provided,however, that all awards made under the Plan before its termination, and the Committee's authority to administer the terms of such awards, will remain in effect until such awards have been satisfied or terminated in accordance with the terms and provisions of the Plan and the applicable award agreements.
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| | 94 | | | | VORNADO REALTY TRUST | | | | 2019 PROXY STATEMENT |
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| Term | Section | |
|---|---|---|
Board of Trustees | 2 | |
Business Transaction | 13 | |
Change in Control | 13 | |
Code | 2 | |
Committee | 2 | |
Consultants | 1 | |
Effective Date | 22 | |
Employees | 1 | |
Exchange Act | 13 | |
Fair Market Value | 7 | |
Full Value Award | 2 | |
Incumbent Trustees | 13 | |
Interstate Holders | 13 | |
Interstate Partners | 13 | |
Non-Employee Trustees | 1 | |
Non-Qualifying Transaction | 13 | |
OP Units | 2 | |
Operating Partnership | 2 | |
Participants | 3 | |
Plan | 1 | |
Predecessor Plan | 1 | |
Section 409A | 2 | |
Shares | 2 | |
Share Equivalent | 2 | |
Surrender Value | 5 | |
Surviving Corporation | 13 | |
Trust | 1 | |
Trust Voting Securities | 13 |
888 Seventh Avenue, New York, New York 10019
VIEW MATERIALS & VOTE w SCAN TO VORNADO REALTY TRUST 888 SEVENTH AVENUE NEW YORK, NY 10019 VOTE BY INTERNET - www.proxyvote.com or scan the QR Barcode above Use the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 P.M. Eastern Time the day before the cut-off date or meeting date. Have your proxy card in hand when you access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form. ELECTRONIC DELIVERY OF FUTURE PROXY MATERIALS If you would like to reduce the costs incurred by our company in mailing proxy materials, you can consent to receiving all future proxy statements, proxy cards and annual reports electronically via e-mail or the Internet. To sign up for electronic delivery, please follow the instructions above to vote using the Internet and, when prompted, indicate that you agree to receive or access proxy materials electronically in future years. VOTE BY PHONE - 1-800-690-6903 U s e a n y to u c h-t o ne t e le p ho n e to t r an s m i t y o u r vo t i ng i n st r u ct i o n s u p u nt i l 11:59 P.M. Eastern Time the day before the cut-off date or meeting date. Have your proxy card in hand when you call and then follow the instructions. VOTE BY MAIL Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717. TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: E37296-P03921E69140-P17134 KEEP THIS PORTION FOR YOUR RECORDS DETACH AND RETURN THIS PORTION ONLY THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. VORNADO REALTY TRUST The Board of Trustees recommends you vote FOR the following: For Withhold For All AllAllExcept To withhold authority to vote for any individual nominee(s), mark "For All Except" and write the number(s) of the nominee(s) on the line below. ! ! ! 1. Election of Trustees Nominees: 01) 02) 03) 04) Steven Roth Michael D. Fascitelli Michael Lynne David M. Mandelbaum 05) 06) 07) 08) 09) Mandakini Puri Daniel R. Tisch Richard R. West Russell B. Wight, Jr. For Against Abstain01) 02) 03) 04) 05) Steven Roth Candace K. Beinecke Michael D. Fascitelli William W. Helman IV David M. Mandelbaum The Board of Trustees recommends you vote FOR proposals 2, 3 and 4. For Against Abstain ! ! ! ! ! ! ! ! ! 2. RATIFICATION OF THE APPOINTMENT OF DELOITTE & TOUCHE LLP AS THE COMPANY'S INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE CURRENT FISCAL YEAR. APPROVAL OF AN AMENDMENT TO THE COMPANY’S DECLARATION OF TRUST TO PERMIT SHAREHOLDERS TO VOTE ON AMENDMENTS TO THE COMPANY’S BYLAWS TO THE EXTENT PROVIDED IN THE BYLAWS AND CONFIRM THE POWER OF SHAREHOLDERS TO VOTE ON CERTAIN ADDITIONAL MATTERS. NON-BINDING, ADVISORY VOTE TO APPROVERESOLUTION ON EXECUTIVE COMPENSATION. 3. 4. APPROVAL OF THE COMPANY'S 2019 OMNIBUS SHARE PLAN. NOTE: SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING OR ANY ADJOURNMENT THEREOF. ! For address changes and/or comments, please check this box and write them on the back where indicated. Please sign exactly as your name(s) appear(s) hereon. When signing as attorney, executor, administrator, or other fiduciary, please give full title as such. Joint owners should each sign personally. All holders must sign. If a corporation or partnership, please sign in full corporate or partnership name by authorized officer. Signature [PLEASE SIGN WITHIN BOX] Date Signature (Joint Owners) Date
Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting: The Notice and Proxy Statement and Form 10-K are available at www.proxyvote.com. E37297-P03921E69141-P17134 VORNADO REALTY TRUST This proxy is solicited on behalf of the Board of Trustees for the 20182019 Annual Meeting of Shareholders May 17, 201816, 2019 11:30 A.M. The undersigned shareholder, revoking all prior proxies, hereby appoints Steven Roth and Michael D. Fascitelli, or either of them, as proxies for the undersigned, each with full power of substitution, to attend the Annual Meeting of Shareholders of Vornado Realty Trust, a Maryland real estate investment trust (the "Company"), to be held at the Saddle Brook Marriott, Interstate 80 and the Garden State Parkway, Saddle Brook, New Jersey 07663 on Thursday, May 17, 201816, 2019 at 11:30 A.M., local time, and any postponements or adjournments thereof, to cast on behalf of the undersigned all votes that the undersigned is entitled to cast at such meeting and otherwise represent the undersigned at the meeting with all powers possessed by the undersigned if personally present at the meeting. Each proxy is authorized to vote as directed on the reverse side hereof upon the proposals which are more fully set forth in the Proxy Statement and otherwise in his discretion upon such other business as may properly come before the meeting and all postponements or adjournments thereof, all as more fully set forth in the Notice of Annual Meeting of Shareholders and Proxy Statement. Receipt of the Notice of Annual Meeting of Shareholders, the Proxy Statement in connection with such meeting and the 20172018 Annual Report to Shareholders is hereby acknowledged. WHEN PROPERLY EXECUTED, THIS PROXY WILL BE VOTED IN THE MANNER DIRECTED BY THE UNDERSIGNED SHAREHOLDER. IF THIS PROXY IS EXECUTED BUT NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED (1) "FOR" THE ELECTION OF EACH NOMINEE FOR TRUSTEE, (2) "FOR" THE RATIFICATION OF THE SELECTION OF THE INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM, (3) "FOR" THE AMENDMENT TO THE DECLARATION OF TRUST, AND (4) "FOR" THE NON-BINDING, ADVISORY VOTE TO APPROVE EXECUTIVE COMPENSATION.COMPENSATION, AND (4) "FOR" THE APPROVAL OF THE COMPANY'S 2019 OMNIBUS SHARE PLAN. THE VOTES ENTITLED TO BE CAST BY THE UNDERSIGNED WILL BE CAST IN THE DISCRETION OF THE PROXY HOLDER ON ANY OTHER MATTERS THAT MAY COME BEFORE THE MEETING OR ANY ADJOURNMENT OR POSTPONEMENT THEREOF. (If you noted any Address Changes/Comments above, please mark corresponding box on the reverse side.) Continued and to be signed on reverse side Address Changes/Comments:
