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Section 1: 8-K (8-K)


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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549

FORM 8-K

CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported):
December 30, 2014

URBAN EDGE PROPERTIES
(Exact Name of Registrant as Specified in Charter)

Maryland
(State or Other
Jurisdiction of
Incorporation)
  No. 001-36523
(Commission
File Number)
  No. 47-6311266
(IRS Employer
Identification No.)

 

888 Seventh Avenue
New York, New York
(Address of Principal Executive offices)
  10019
(Zip Code)

        Registrant's telephone number, including area code: (212) 956-2556

Former name or former address, if changed since last report: N/A

        Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instructions A.2.):

   


Items 8.01    Other Events.

        In connection with the planned spin-off of Urban Edge Properties ("UE") from Vornado Realty Trust ("VNO") on January 15, 2015, the information statement attached hereto as Exhibit 99.1 will be distributed to VNO common shareholders and holders of common limited partnership units of Vornado Realty L.P. as of January 7, 2015.

Item 9.01.    Financial Statements and Exhibits.

(d)
Exhibits.

  99.1   Information Statement of Urban Edge Properties dated December 30, 2014.

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SIGNATURE

        Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

    URBAN EDGE PROPERTIES
(Registrant)

 

 

By:

 

/s/ Donald P. Casey

Name: Donald P. Casey
Title: General Counsel and Secretary

Date: December 31, 2014

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EXHIBIT INDEX

  99.1   Information Statement of Urban Edge Properties dated December 30, 2014.

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Section 2: EX-99.1 (EX-99.1)


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Exhibit 99.1

GRAPHIC

December 30, 2014

Dear Vornado Realty Trust shareholders and Vornado Realty L.P. limited partners:

        We are pleased to inform you that, on December 18, 2014, Vornado Realty L.P. ("VRLP"), the operating partnership of Vornado Realty Trust ("Vornado"), declared the distribution of all of the outstanding common shares of Urban Edge Properties ("UE"), a wholly-owned subsidiary of VRLP, to Vornado and the other holders of common limited partnership units of VRLP. On the same date, the board of trustees of Vornado declared the distribution of all of the UE common shares to be received by Vornado in the distribution by VRLP to Vornado common shareholders as of the record date (as described below). UE is a newly formed indirect subsidiary of Vornado that will hold, directly or indirectly, Vornado's shopping center business, consisting of 79 strip shopping centers located primarily in the Northeast and three malls, one located in New Jersey and two located in San Juan, Puerto Rico. UE's properties will also include a warehouse park adjacent to our East Hanover strip shopping center property.

        This is a significant transaction that we believe will unlock the potential of the strip shopping centers and malls to be owned by UE. We believe we are creating a new company that will be well positioned to deliver both internal growth through active asset management and redevelopments and external growth through acquisitions and selective new developments. At the same time, this transaction allows Vornado to focus on its core New York City and Washington, D.C. office portfolios and its Manhattan street retail portfolio.

        The distribution of UE common shares will occur on January 15, 2015. Vornado will distribute all of its UE common shares by way of a pro rata special distribution to Vornado common shareholders as of the record date. Immediately prior to such distribution by Vornado, VRLP will distribute all of the outstanding UE common shares on a pro rata basis to the holders of its common limited partnership units, consisting of Vornado and the other common limited partners of VRLP. Each Vornado common shareholder will be entitled to receive one UE common share for every two Vornado common shares held by such shareholder as of the close of business on January 7, 2015, which is the record date for the distribution by each of Vornado and VRLP. Vornado and each of the other limited partners of VRLP will be entitled to receive one UE common share for every two common limited partnership units in VRLP held as of the close of business on the record date. The UE common shares will be issued in book-entry form only, which means that no physical share certificates will be issued. We expect that the separation of Vornado's shopping center business from Vornado's other businesses and the distribution of UE common shares by each of Vornado and VRLP will qualify as tax-free for U.S. federal income tax purposes.

        No vote of Vornado shareholders or VRLP limited partners is required to approve the distribution by either Vornado or VRLP, and you are not required to take any action to receive your UE common shares. Following the distribution, each Vornado common shareholder will own common shares in Vornado and UE and each VRLP common limited partner (other than Vornado) will own both VRLP common limited partnership units and UE common shares. The number of Vornado common shares that each Vornado common shareholder owns and the number of common limited partnership units of VRLP that each common limited partner owns will not change as a result of this distribution. Vornado's common shares will continue to trade on the New York Stock Exchange under the symbol "VNO". UE has applied to list its common shares on the New York Stock Exchange under the symbol "UE".

        The information statement, which is being mailed to all holders of Vornado common shares and to all holders of common limited partnership units of VRLP (other than Vornado) as of the record date for the distribution by each of Vornado and VRLP, describes the distribution in detail and contains


important information about UE, its business, financial condition and operations. We urge you to read the information statement carefully.

        We want to thank you for your continued support of Vornado and VRLP, and we look forward to your future support of UE.

    Sincerely,

 

 

Steven Roth
Chairman and Chief Executive Officer of Vornado Realty Trust

INFORMATION STATEMENT

URBAN EDGE PROPERTIES

        This information statement is being furnished in connection with the distribution by Vornado Realty Trust ("Vornado") and Vornado Realty L.P. ("VRLP"), the operating partnership of Vornado, to the holders of common shares of beneficial interest, par value $0.04 per share ("Vornado common shares"), of Vornado and holders of VRLP common limited partnership units, respectively, of all of the outstanding common shares of beneficial interest, par value $0.01 per share ("UE common shares"), of Urban Edge Properties, a Maryland real estate investment trust ("UE"). UE is a newly formed wholly-owned subsidiary of VRLP that will hold, directly or indirectly, the assets and liabilities associated with Vornado's shopping center business, consisting of 79 strip shopping centers and three malls. UE's properties will also include a warehouse park adjacent to our East Hanover strip shopping center property. To implement the distribution, Vornado will distribute all of its UE common shares by way of a pro rata special distribution to Vornado common shareholders. Immediately prior to such distribution by Vornado, VRLP will distribute all of the outstanding UE common shares on a pro rata basis to the holders of VRLP's common limited partnership units, consisting of Vornado and the other common limited partners of VRLP. As a result of such distribution by VRLP, Vornado is expected to receive approximately 94% of the outstanding UE common shares, while the other common limited partners of VRLP, as a group, are expected to receive approximately 6%. The separation of Vornado's shopping center business from Vornado's other businesses is expected to qualify as tax-free for U.S. federal income tax purposes.

        For every two Vornado common shares held of record by you as of the close of business on January 7, 2015, the record date for the distribution by each of Vornado and VRLP, you will receive one UE common share. For every two common limited partnership units of VRLP held of record by you as of the close of business on the record date, you will receive one UE common share. You will receive cash in lieu of any fractional UE common shares that you would have received after application of the above ratios. As discussed under "The Separation—Trading Between the Record Date and Distribution Date," if you sell your Vornado common shares in the "regular-way" market after the record date and before the distribution, you also will be selling your right to receive UE common shares in connection with the separation. We expect the UE common shares to be distributed to Vornado common shareholders and VRLP common limited partners on January 15, 2015. We refer to the date of the distribution of the UE common shares as the "distribution date." You will continue to own the same number of Vornado common shares and common limited partnership units of VRLP, as the case may be, as you own immediately before the distribution date.

        No vote of Vornado shareholders or VRLP limited partners is required for the distribution by either Vornado or VRLP. We are not asking you for a proxy and you are requested not to send us a proxy. You do not need to pay any consideration, exchange or surrender your existing Vornado common shares or VRLP common limited partnership units or take any other action to receive your UE common shares.

        There is no current trading market for UE common shares, although we expect that a limited market, commonly known as a "when-issued" trading market, will develop on or shortly before the record date for the distribution by each of Vornado and VRLP, and we expect "regular-way" trading of UE common shares to begin on the first trading day following the completion of the distribution. UE has applied to list its common shares on the New York Stock Exchange under the symbol "UE".

        UE intends to elect and qualify to be taxed as a real estate investment trust ("REIT") for U.S. federal income tax purposes, from and after UE's taxable year that includes the distribution of our common shares by each of Vornado and VRLP. To assist UE in qualifying as a REIT, among other purposes, UE's declaration of trust will contain various restrictions on the ownership and transfer of its

   


We were formerly named Vornado SpinCo. As of October 9, 2014, we changed our name to Urban Edge Properties.

shares of beneficial interest, including a provision pursuant to which shareholders will generally be restricted from owning more than 9.8% of the outstanding shares of beneficial interest of any class or series, including UE common shares, or preferred shares of beneficial interest, par value $0.01 per share ("UE preferred shares"), of UE of any class or series. Please refer to "Description of Shares of Beneficial Interest—Common Shares—Restrictions on Ownership of Common Shares."

        In reviewing this information statement, you should carefully consider the matters described under the caption "Risk Factors" beginning on page 29.



        Neither the U.S. Securities and Exchange Commission nor any state securities commission has approved or disapproved these securities or determined if this information statement is truthful or complete. Any representation to the contrary is a criminal offense.



        This information statement does not constitute an offer to sell or the solicitation of an offer to buy any securities.

        The date of this information statement is December 30, 2014.

        This information statement will be mailed to Vornado common shareholders and holders of common limited partnership units of VRLP as of January 7, 2015.



TABLE OF CONTENTS

 
  Page

INFORMATION STATEMENT SUMMARY

  1

SUMMARY HISTORICAL COMBINED FINANCIAL DATA

  24

RISK FACTORS

  29

CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS

  48

DIVIDEND POLICY

  49

CAPITALIZATION

  50

SELECTED HISTORICAL COMBINED FINANCIAL DATA

  51

UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS

  53

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

  60

BUSINESS

  82

MANAGEMENT

  100

COMPENSATION DISCUSSION AND ANALYSIS

  107

CERTAIN RELATIONSHIPS AND RELATED PERSON TRANSACTIONS

  120

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

  127

THE SEPARATION

  130

DESCRIPTION OF MATERIAL INDEBTEDNESS

  143

DESCRIPTION OF SHARES OF BENEFICIAL INTEREST

  146

CERTAIN PROVISIONS OF MARYLAND LAW AND OF OUR DECLARATION OF TRUST AND BYLAWS

  152

MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES

  158

SHARES ELIGIBLE FOR FUTURE SALE

  174

PARTNERSHIP AGREEMENT

  175

WHERE YOU CAN FIND MORE INFORMATION

  178

INDEX TO FINANCIAL STATEMENTS

  F-1


Presentation of Information

        Except as otherwise indicated or unless the context otherwise requires, the information included in this information statement about UE assumes the completion of all of the transactions referred to in this information statement in connection with the separation and distribution by each of Vornado Realty Trust and Vornado Realty L.P. Unless the context otherwise requires, references in this information statement to "UE," "our company," "the company," "us," "our," and "we" refer to Urban Edge Properties, a Maryland real estate investment trust, and its combined subsidiaries. References to UE's historical business and operations refer to the business and operations of Vornado's shopping center business that will be transferred to UE in connection with the separation. Unless the context otherwise requires, references in this information statement to "Vornado" refer to Vornado Realty Trust, a Maryland real estate investment trust, and its consolidated subsidiaries, including Vornado Realty L.P. ("VRLP"), a Delaware limited partnership through which Vornado conducts its business and holds substantially all of its interests in properties. Base rent data presented in this information statement represents the weighted average contractual rent for in-place leases for the applicable period. Except as otherwise indicated or unless the context otherwise requires, all references to UE per share data assume a distribution ratio of one UE common share for every two Vornado common shares, for purposes of the distribution by Vornado to its common shareholders, and one UE common share for every two common limited partnership units of VRLP, for purposes of the distribution by VRLP to its holders of common limited partnership units (also referred to in this information statement as "common limited partners").

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INFORMATION STATEMENT SUMMARY

        The following is a summary of material information discussed in this information statement. This summary may not contain all of the details concerning the separation or other information that may be important to you. To better understand the separation and UE's business and financial position, you should carefully review this entire information statement. Except as otherwise indicated or unless the context otherwise requires, the information included in this information statement assumes the completion of all of the transactions referred to in this information statement in connection with the separation and distribution by each of Vornado Realty Trust and Vornado Realty L.P.

        This information statement discusses the business to be transferred to UE by Vornado in the separation as if the transferred business were UE's business for all historical periods described. References in this information statement to UE's historical assets, liabilities, products, businesses or activities are generally intended to refer to the historical assets, liabilities, products, business or activities of the transferred business as the business was conducted as part of Vornado prior to the separation.

Our Company

        Our mission will be to own and operate high-quality strip shopping centers ("strip centers") and malls located in high barrier-to-entry markets. We plan to grow the business through proactive leasing and management of our portfolio, through the redevelopment of certain of our existing properties and through the selective acquisition and development of additional assets that meet our investment criteria. We believe that the creation of a stand-alone organization with focused management will position the organization to generate attractive risk-adjusted returns for shareholders.

        Upon completion of the separation, we will operate a well-leased portfolio of retail assets located in high barrier-to-entry markets, due to land scarcity and formidable zoning and approval requirements, that we believe could not be replicated today. This portfolio will consist of 83 properties, comprising 79 strip centers, three malls and a warehouse park adjacent to our East Hanover strip center, that are primarily located on major retail corridors and proximate to regional highways. These properties comprise 15.4 million square feet and are located in ten states and Puerto Rico, with concentrations in New Jersey, New York and Pennsylvania. Our strip centers have a diverse, high-quality tenant base that includes national retailers such as The Home Depot, Wal-Mart/Sam's Wholesale, Best Buy, Lowe's, Stop & Shop, the TJX Companies, Kohl's, ShopRite, Sears and Kmart, BJ's Wholesale Club, Whole Foods and PetCo. Our strip center portfolio also has superior, industry-leading demographics, with average three-mile population of 151,000 and median three-mile household income of $71,000 for neighborhood centers and average seven-mile population of 886,000 and median seven-mile household income of $67,000 for power centers. The three malls and the strip centers are in dense, supply constrained trade areas, have overlapping tenancies and require the same asset management and leasing skills. Mall tenants include Target, Century 21, Kmart, Sears, Whole Foods, the TJX Companies, Forever 21, H&M and other popular national merchants. We consider Bergen Town Center, with its mix of Target, Century 21, Whole Foods, Nordstrom Rack, Bloomingdale's Outlet, Off Fifth by Saks, Neiman Marcus Last Call Studio, Marshalls, HomeGoods, Nike and a variety of outlets and food offerings, to be the best hybrid retail offering in America.

        A key element of our business plan will be to increase revenue and property value through intensive asset management of the existing portfolio. Planned activities include leasing of existing vacancy, construction of new space on owned land, identifying and replacing underperforming tenants wherever possible, and functional and aesthetic improvements. We employ various methods to identify underperforming tenants including, but not limited to, evaluating tenant sales levels to the extent reported to us, comparing the market rent potential of the tenant's space to the tenant's current rent, assessing the tenant's contribution to the subject property's merchandising mix and analyzing the

 

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collectability of outstanding tenant receivables. With respect to elective functional/aesthetic improvements prior to re-tenanting, we consider the age and condition of the visible improvements, the quality of the improvements with respect to those at directly competitive properties, the expectations of trade area shoppers and prospective tenants, and the capital required to make such improvements.

        In addition, we expect to acquire additional properties and to initiate ground-up development projects in the geographic regions in which we currently operate that are consistent with our investment criteria. We may also pursue such opportunities outside of the regions in which we currently operate if we determine that conditions are favorable and fit with our mission and business strategy.

        We will be self-managed and led by a dedicated management team and a board consisting of a majority of independent trustees. Industry veteran, Jeffrey S. Olson, joined Vornado on September 1, 2014 in order to work on the separation, and upon completion of the separation will become UE's Chairman of the Board of Trustees and Chief Executive Officer. Robert Minutoli, currently Vornado's Executive Vice President-Retail, will be UE's Chief Operating Officer. They will be joined by the highly experienced team that manages the strip center and mall portfolio today. Key department heads have an average tenure of over ten years at Vornado and over 20 years in the real estate industry. Steven Roth, Vornado Chairman and Chief Executive Officer, will serve as a trustee of UE.

        Vornado will provide certain interim transitional support to us via a Transition Services Agreement for approximately two years.

        For the year ended December 31, 2013, we generated net income of $109.3 million, same property net operating income ("NOI") of $188.1 million and comparable funds from operations ("FFO") of $121.7 million. For the nine months ended September 30, 2014, we generated net income of $49.5 million, same property NOI of $147.1 million and comparable FFO of $94.4 million. Please refer to "Summary Historical Combined Financial Data—Net Operating Income" and "—Funds From Operations" in this information statement for a discussion of same property NOI and comparable FFO, which are non-GAAP measures, and a reconciliation of these measures to their most directly comparable GAAP measures.

        We anticipate that we will pursue a balance sheet strategy that provides access to multiple capital markets. Over time, we intend to pursue an investment grade credit rating. As of September 30, 2014, the portfolio had approximately $1.292 billion of total combined debt outstanding.

        We plan to elect to be treated as a real estate investment trust ("REIT") in connection with the filing of our federal income tax return for the taxable year that includes the distribution of our common shares by each of Vornado and VRLP, subject to our ability to meet the requirements of a REIT at the time of election, and we intend to maintain this status in future periods.

        We will have our executive headquarters in New York City, with operations in Paramus, New Jersey.

Competitive Strengths

        Exceptionally high-quality portfolio of well-leased shopping centers concentrated in densely populated, high barrier-to-entry markets.    We will initially own 83 retail properties primarily concentrated in densely populated markets near major urban centers. Within these markets, our assets are primarily located on major retail corridors and proximate to regional highways. Approximately 80% of our 2013 same property NOI was generated by centers located in New Jersey, New York and Pennsylvania. Average portfolio occupancy was 95.4% as of September 30, 2014. A majority of our assets are located within the Greater New York City metropolitan area, the most populous demographic area in the United States with a population of approximately 20 million. High barriers-to-entry in our markets limit the potential for new supply and support the long-term ability to increase rents.

 

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        Industry leading population density and income demographics.    Our assets are primarily located in densely populated and affluent areas in the Northeastern United States, with household incomes far in excess of the national median of $51,017 as reported by the U.S. Census Bureau for the period 2011-2012. Our strip center portfolio is located in markets with average three-mile population of 151,000 and median three-mile household income of $71,000 for neighborhood centers and average seven-mile population of 886,000 and median seven-mile household income of $67,000 for power centers.

        High-quality, diversified tenant base.    Our tenant base consists of approximately 323 different retailers in our strip centers and approximately 250 different retailers in our malls and is well diversified by industry and format. Merchants include department stores, grocers, category killers, discounters, entertainment offerings, health clubs, do-it-yourself or "DIY" stores, in-line specialty shops, restaurants and other food and beverage vendors, service providers and other specialized retailers. 58% of our top 25 tenants by 2013 rental revenue have investment grade credit ratings from Standard & Poor's or Moody's. Approximately 73% of our 2013 rental revenue came from large tenants, defined as merchants occupying more than 10,000 square feet. Our large number of high credit quality anchor tenants results in strong customer traffic, which in turn drives sales and rent growth.

        Strong grocer sales.    Our superior demographics and premier locations are further demonstrated by the sales of our grocers. Of the 79 strip centers in the portfolio, 13 are grocery anchored. Of these merchants, the 12 that have at least one full year of operations reported average sales of $726 per square foot during 2013, well above the national average and that of UE's peer group. Grocers include Stop & Shop, ShopRite, Whole Foods, Giant Food and Food Basics (A&P).

        Accomplished management team with a demonstrated track record in the retail sector and deep knowledge of the portfolio.    Jeffrey S. Olson will be Chairman of the Board of Trustees and Chief Executive Officer of UE. Mr. Olson served as Chief Executive Officer of Equity One, Inc. ("Equity One") from 2006 to 2014, where he was widely recognized as the driving force behind Equity One's transformative portfolio makeover into higher quality assets in densely populated core coastal markets. Previously, Mr. Olson was President of Kimco Realty Corporation's Eastern and Western Divisions. While at Equity One, Mr. Olson successfully directed the company's growth into several high barrier-to-entry markets, including the Northeastern United States, Miami and California. Robert Minutoli will be Chief Operating Officer of UE and has headed Vornado's strip center and mall division since 2012. Prior to joining Vornado in 2009, Mr. Minutoli was Executive Vice President-New Business at The Rouse Company, where he spent 27 years and held various construction, development, acquisitions/dispositions and business development positions. Mr. Olson and Mr. Minutoli will be joined by Vornado's existing, highly experienced retail team (key department heads average 10-plus years with Vornado and 20-plus years in the retail industry), which has consistently delivered strong performance from the portfolio.

        Balance sheet providing significant liquidity and capacity to support growth.    We will be capitalized to enable access to multiple forms of capital. As of September 30, 2014, the portfolio had approximately $1.292 billion of total combined debt outstanding. We believe our moderate leverage and strong liquidity will enable us to take advantage of attractive redevelopment, development, and acquisition opportunities. To provide additional liquidity following the separation, we are arranging a revolving credit facility under which, upon completion of the separation and distribution and subject to the satisfaction of customary conditions, we expect to have significant borrowing capacity. We do not expect to have any outstanding borrowings under the revolving credit facility upon the completion of the separation.

        Significant growth potential from embedded development and redevelopment opportunities.    Our portfolio has significant embedded development and redevelopment opportunities. We have identified

 

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approximately $175 million of current expansion and redevelopment opportunities that are expected to generate strong investment returns.

        Consistent operating performance demonstrated by continued strong occupancy and rent growth.    Our portfolio has delivered consistent operating performance over the past five years. Our portfolio, which was 95.4% occupied as of September 30, 2014, maintained average annual occupancy exceeding 94% during that time despite substantial economic volatility resulting from the recession. We have achieved 9.4% annual growth in cash leasing spreads over expiring rents for the five year period ended December 31, 2013, and 14.3% annual growth in cash leasing spreads over expiring rents for the ten year period ended December 31, 2013. We believe our well-laddered lease expiration schedule with less than 10.0% of total square footage expiring in any year will contribute to our expected continued consistent performance in the future.

        Experienced trustees possessing substantial expertise with public REITs and UE's portfolio.    The majority of our trustees will be independent. Mr. Olson will be Chief Executive Officer and Chairman of the Board of Trustees. In addition to Mr. Olson's prior experience as Chief Executive Officer of Equity One and President of the Eastern and Western Divisions of Kimco Realty Corporation, he has been a director of Equity One since 2006. Steven Roth, Chairman and Chief Executive Officer of Vornado, will also be a trustee. Mr. Roth is one of the most tenured and respected executives in the REIT industry and has substantial experience across all real estate sectors. Further, Mr. Roth has decades of personal experience with many of UE's strip centers, having been personally involved in their development, redevelopment and management since 1980.

Company Strategies

        Redevelop and/or expand existing properties to increase returns and maximize value.    While our properties have been well-maintained and have benefited from significant capital investment under Vornado's ownership, we believe that our properties will benefit from greater executive management focus and capital allocation priorities tailored to unlocking and growing their value.

        Our management team will seek to identify investment opportunities that will create value for our shareholders, that are consistent with our strategic objectives and that have attractive risk-return profiles. We will have a smaller asset base as compared to Vornado, and, therefore, strategic initiatives may have a more meaningful impact on us than they would otherwise have had on Vornado. In short, we expect that we will devote substantial executive management attention to value creating investment opportunities that may generate attractive growth in revenues and cash flow and thus enhance the value of our portfolio.

        We have identified a pipeline of potential new development and redevelopment projects within the existing portfolio of properties totaling approximately $175 million. These projects generally consist of renovations and ground-up development projects on owned land. We may also proactively recapture space occupied by underperforming users and replace those users with merchants that can enhance our tenant mix and potentially pay higher rents.

        Focus on high barrier-to-entry markets.    The majority of our properties are located in densely populated, affluent markets, with particularly strong presence in the Greater New York City metropolitan area. We will continue to invest in our existing markets, and, over time, may expand into new markets that have significant barriers-to-entry and attractive demographics. We believe that shopping centers located in high barrier-to-entry markets represent a more attractive risk-return profile relative to other markets.

        Maximize value and cash flow growth through proactive asset management and leasing.    Given the favorable competitive factors that characterize our shopping centers, we believe we are well-positioned to drive growth in cash flow and to maximize the value of our portfolio by proactive leasing and asset

 

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management. We believe our portfolio's positioning in trade areas with desirable demographics provides us with strong negotiating leverage with tenants. Our historical 9.4% and 14.3% annual growth in cash leasing spreads over expiring rents for the five and ten year periods ended December 31, 2013, respectively, reflects our competitive positioning and the strategic importance of our portfolio's location to tenants.

        Maintain a flexible balance sheet to support growth.    We will proactively manage our balance sheet to be flexible and to provide significant capacity for growth. Over time, we intend to pursue an investment grade credit rating and expect that internally generated funds and funds from selective asset sales will also be available to support growth.

        Target a diverse and creditworthy tenant base.    Our tenant base comprises a diverse group of merchants, including department stores, grocers, category killers, discounters, entertainment offerings, health clubs, DIY stores, in-line specialty shops, restaurants and other food and beverage vendors, service providers and other specialized retailers. We believe that this diversification provides stability to our cash flows as no specific retail category comprises more than 20% of our portfolio's annual base rental revenue and no one retailer contributed more than 7% of our annual base rental revenue in 2013. We intend to maintain the credit quality of our tenant base, which currently has 58% of our top 25 tenants by 2013 rental revenue possessing investment grade credit ratings from Standard & Poor's or Moody's.

        Constant portfolio evaluation and, where appropriate, pruning.    We intend to constantly evaluate the future prospects for each shopping center and, where appropriate, to dispose of those properties that we do not believe will meet our investment criteria in the long-term. The proceeds from any such disposition would typically be reinvested in our portfolio via acquisition or redevelopment or used to pay down debt.

Our Portfolio

        Initially, our portfolio will consist of 83 properties, including 79 strip centers aggregating 12.5 million square feet, three malls aggregating 2.0 million square feet and a warehouse park adjacent to our East Hanover strip center. Our properties include existing, vested entitlements for approximately 425,000 square feet of new development where most infrastructure such as utilities and paving is already in place. They also include an additional 30 acres of unentitled and unimproved land adjacent to existing centers that could support approximately 125,000 square feet of new development once entitled and infrastructured.

        The following tables set forth our occupancy rates and average annual base rent per square foot for our strip center and mall properties as of September 30, 2014 and as of December 31 for the last five years.

Strip Centers

As of
  Square Feet
Owned
  Occupancy
Rate
  Average Annual
Base Rent per
Square Foot
 

September 30, 2014

    12,073,000     95.4 % $ 17.34  

December 31, 2013

    12,075,000     95.5 %   17.27  

December 31, 2012

    11,822,000     95.2 %   17.03  

December 31, 2011

    11,824,000     95.4 %   16.68  

December 31, 2010

    11,951,000     95.0 %   15.97  

December 31, 2009

    11,719,000     94.5 %   15.71  

 

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Malls

As of
  Square Feet
Owned
  Occupancy
Rate
  Average Annual
Base Rent per
Square Foot
 

September 30, 2014

    1,849,000     95.7 % $ 28.24  

December 31, 2013

    1,848,000     95.8 %   27.99  

December 31, 2012

    1,823,000     93.8 %   28.48  

December 31, 2011

    1,798,000     93.0 %   27.64  

December 31, 2010

    1,762,000     94.8 %   27.33  

December 31, 2009

    1,700,000     94.9 %   25.71  

Top Ten Tenants

        As of December 31, 2013, our top ten tenants measured by 2013 rental revenue are as follows:

Tenant
  Square Feet
Leased
  2013 Rental
Revenues
  Percentage of
Total Annual
Rental
Revenues
 

The Home Depot

    865,000   $ 13,954,000     6.1 %

Wal-Mart/Sam's Wholesale

    1,439,000     10,458,000     4.6 %

Lowe's

    976,000     8,520,000     3.7 %

Stop & Shop

    633,000     7,449,000     3.3 %

The TJX Companies, Inc. 

    518,000     7,308,000     3.2 %

Kohl's

    716,000     6,656,000     2.9 %

Best Buy

    313,000     6,448,000     2.8 %

ShopRite

    337,000     5,298,000     2.3 %

Sears and Kmart

    547,000     5,001,000     2.2 %

BJ's Wholesale Club

    454,000     4,864,000     2.1 %
               

    6,798,000   $ 75,956,000     33.2 %
               
               

        As of December 31, 2013, the composition of our 2013 rental revenue by type of retail tenant is as follows:

Discount Stores

    20 %

Home Improvement

    11 %

Supermarkets

    11 %

Family Apparel

    9 %

Restaurants

    7 %

Home Entertainment and Electronics

    6 %

Banking and Other Business Services

    4 %

Personal Services

    4 %

Sporting Goods, Toys and Hobbies

    4 %

Home Furnishings

    3 %

Women's Apparel

    3 %

Membership Warehouse Clubs

    2 %

Other

    16 %
       

    100 %
       
       

 

6



Lease Expirations

        The table below sets forth lease expirations for all of our properties as of September 30, 2014, assuming none of the tenants exercise renewal options.

 
   
   
   
  Weighted Average Annual
Base Rent of Expiring
Leases
  % of
Weighted
Average
Annual Base
Rent of
Expiring
Leases
 
 
   
   
  Percentage
of Retail
Properties
Square Feet
 
Year
  Number of
Expiring
Leases
  Square Feet of
Expiring
Leases
  Total   Per Square
Foot
 

Month to month

    11     257,868     1.9 % $ 1,840,032   $ 7.14     0.8 %

2014

    23     119,862     0.9 %   2,982,084     24.88     1.4 %

2015

    72     360,997     2.7 %   10,420,092     28.86     4.8 %

2016

    88     665,241     4.9 %   13,832,472     20.79     6.3 %

2017

    79     577,202     4.2 %   10,356,384     17.94     4.7 %

2018

    71     1,209,313     8.9 %   17,662,620     14.61     8.1 %

2019

    96     1,192,431     8.8 %   25,017,600     20.98     11.4 %

2020

    62     1,135,568     8.4 %   18,834,972     16.59     8.6 %

2021

    43     675,065     5.0 %   12,022,452     17.81     5.5 %

2022

    50     1,042,328     7.7 %   12,783,624     12.26     5.8 %

2023

    46     1,044,252     7.7 %   18,724,884     17.93     8.6 %

2024

    53     1,317,347     9.7 %   17,692,176     13.43     8.1 %

Subsequent

    79     3,987,941     29.4 %   56,436,264     14.15     25.9 %

The Separation

        On April 11, 2014, Vornado announced that it intended to separate its shopping center business, consisting of 79 strip centers, three malls and a warehouse park adjacent to our East Hanover strip center, from Vornado's other businesses. The separation will be effectuated by means of a pro rata distribution by Vornado to its common shareholders of all UE common shares held by Vornado. UE was formed as a subsidiary of VRLP to hold the assets and liabilities associated with Vornado's shopping center business. Immediately prior to such distribution by Vornado, VRLP will distribute all outstanding UE common shares on a pro rata basis to holders of VRLP's common limited partnership units, consisting of Vornado and the other common limited partners of VRLP. On December 18, 2014, the board of trustees of Vornado declared the distribution of all UE common shares to be received by Vornado in the distribution by VRLP on the basis of one UE common share for every two Vornado common shares held of record as of the close of business on January 7, 2015, which is the record date for the distribution by each of Vornado and VRLP (the "record date"). On the same date, VRLP declared the distribution of all of the outstanding UE common shares to Vornado and the other holders of common limited partnership units of VRLP on the basis of one UE common share for every two common limited partnership units of VRLP held of record as of the close of business on the record date. Following the distribution by each of Vornado and VRLP, Vornado and UE will be two independent, publicly held companies.

        Prior to or concurrently with the separation of the shopping center business from Vornado's other businesses and the distribution by each of Vornado and VRLP of UE common shares, Vornado will engage in certain restructuring transactions that are designed to consolidate the ownership of a portfolio of interests in the strip centers and malls currently owned directly or indirectly by VRLP into UE, facilitate the separation and distribution by each of Vornado and VRLP and provide us with our initial capital.

 

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        In connection with the separation and distribution of UE common shares by each of Vornado and VRLP, the following transactions have occurred or are expected to occur concurrently with or prior to completion of the separation and distribution by each of Vornado and VRLP:

        Immediately following the separation and distribution of UE common shares by each of Vornado and VRLP, we will contribute our interest in the properties we receive from VRLP to our operating partnership, UELP.

 

8


 

        In general, we intend to own our properties and conduct substantially all of our business through our operating partnership and its subsidiaries. The following diagram depicts our expected organizational structure upon the completion of the separation and distribution by each of Vornado and VRLP and the completion of the contribution by us of our interest in the properties we receive from VRLP to our operating partnership, UELP.

GRAPHIC

Our Post-Separation Relationship with Vornado

        We will enter into a Separation Agreement with Vornado. In addition, we will enter into various other agreements to effect the separation and provide a framework for its relationship with Vornado after the separation, such as a transition services agreement (the "Transition Services Agreement"), a tax matters agreement (the "Tax Matters Agreement") and an employee matters agreement (the "Employee Matters Agreement"). These agreements will provide for the allocation between us and Vornado of Vornado's assets, liabilities and obligations (including its properties, employees and tax-related assets and liabilities) attributable to periods prior to, at and after our separation from Vornado and will govern certain relationships between us and Vornado after the separation.

 

9


 

        Except as expressly set forth in the Separation Agreement or in any ancillary agreement, each of Vornado, VRLP and UE will be responsible for paying its own costs and expenses incurred in connection with the separation and distribution by each of Vornado and VRLP, whether before or after the distribution date, including costs and expenses relating to legal and tax counsel, financial advisors and accounting advisory work related to the separation and distribution by each of Vornado and VRLP.

        We and Vornado will enter into a Transition Services Agreement prior to the distribution pursuant to which Vornado and its subsidiaries will provide various corporate support services to us. The services to be provided to us will include initially treasury management, human resources, information technology, tax, financial reporting, SEC compliance and insurance, and possibly other matters. The costs of the services to be provided to us are estimated to be approximately $3.4 million annually and are expected to diminish over time as UE fills vacant positions and builds its own infrastructure. We believe that the terms are comparable to those that would have been negotiated on an arm's-length basis. In addition, we will provide certain services to Vornado on terms and conditions set forth in property management and leasing agreements to be entered into by Vornado and us. The services to be provided to Vornado will include initially property management and leasing services and possibly other matters in connection with Vornado's Springfield Town Center and 22 retail assets which Vornado plans to sell; management and leasing of Alexander's Inc. (32.4% owned by Vornado) non-Manhattan retail properties; and the management of certain assets of Interstate Properties. The income from these services is estimated to be $3.2 million on an annual basis and will diminish over time as Vornado sells properties. We believe that the terms are comparable to those that would have been negotiated on an arm's-length basis.

        For additional information regarding the Separation Agreement and other transaction agreements, please refer to the sections entitled "Risk Factors—Risks Related to the Separation" and "Certain Relationships and Related Person Transactions."

        In addition, after the separation, approximately 5.4% of the common limited partnership units of our operating partnership, UELP will be held by VRLP. For a discussion of the limited partnership agreement of UELP, please see "Partnership Agreement."

Reasons for the Separation

        Vornado's board of trustees believes that separating the UE business and assets from the remainder of Vornado's businesses and assets is in the best interests of Vornado for a number of reasons, including the following:

 

10


 

        Vornado's board of trustees also considered a number of potentially negative factors in evaluating the separation. Vornado's board of trustees concluded that the potential benefits of the separation outweighed these factors. For more information, please refer to the sections entitled "The Separation—Reasons for the Separation" and "Risk Factors" included elsewhere in this information statement.

Corporate Information

        UE was formed as a Maryland real estate investment trust on June 18, 2014 for the purpose of holding the shopping center business of Vornado. Prior to the contribution of this business to UE, which will occur prior to the distribution by each of Vornado and VRLP of UE common shares, UE will have no operations. The address of UE's principal executive office is 888 Seventh Avenue, New York, New York, 10019. The telephone number for UE's principal executive office is (212) 956-0031.

        UE will also maintain a website at www.uedge.com. UE's website and the information contained therein or connected thereto will not be deemed to be incorporated herein, and you should not rely on any such information in making any investment decision.

Reason for Furnishing this Information Statement

        This information statement is being furnished solely to provide information to Vornado common shareholders and holders of common limited partnership units of VRLP who will receive UE common shares in the distribution by each of Vornado and VRLP. It is not and is not to be construed as an inducement or encouragement to buy or sell any of UE's securities. The information contained in this information statement is believed by UE to be accurate as of the date set forth on its cover. Changes

 

11


 

may occur after that date and neither Vornado nor UE will update the information except in the normal course of their respective disclosure obligations and practices.

Risks Associated with UE's Business and the Separation

        An investment in our common shares is subject to a number of risks, including risks relating to the separation. The following list of risk factors is not exhaustive. Please read the information in the section captioned "Risk Factors" for a more thorough description of these and other risks.

 

12


 

 

13


 


QUESTIONS AND ANSWERS ABOUT THE SEPARATION

What is UE and why is Vornado separating UE's business and distributing UE's shares?

  UE, which is currently an indirect wholly-owned subsidiary of Vornado, was formed to hold the shopping center business of Vornado (which we refer to as the "UE portfolio"). The separation of UE from Vornado and the distribution of UE common shares by each of Vornado and VRLP will enable each of UE and Vornado to focus on its own operations and respond more effectively to the different needs of its businesses. UE and Vornado expect that the separation will result in enhanced long-term performance of each business for the reasons discussed in the sections entitled "The Separation—Background" and "The Separation—Reasons for the Separation."

What is a REIT?

 

Following the separation, UE intends to qualify and elect to be taxed as a REIT under Sections 856 through 859 of the Internal Revenue Code of 1986, as amended (the "Code"), from and after UE's taxable year that includes the distribution of our common shares by each of Vornado and VRLP. As a REIT, UE generally will not be subject to U.S. federal income tax on its REIT taxable income that it distributes to its shareholders. A company's qualification as a REIT depends on its ability to meet, on a continuing basis, through actual investment and operating results, various complex requirements under the Code relating to, among other things, the sources of its gross income, the composition and values of its assets, its distribution levels and the diversity of ownership of its shares. UE believes that, immediately after the separation, it will be organized in conformity with the requirements for qualification and taxation as a REIT under the Code, and that its intended manner of operation enables it to meet the requirements for qualification and taxation as a REIT. UE anticipates that distributions it makes to its shareholders generally will be taxable to its shareholders as ordinary income, although a portion of the distributions may be designated by UE as qualified dividend income or capital gain or may constitute a return of capital. For a more complete discussion of the U.S. federal income taxation of REITs and the tax treatment of distributions to shareholders of UE, please refer to "Material U.S. Federal Income Tax Consequences."

 

14


 

Why am I receiving this document?

 

You are receiving this document because you are either a Vornado common shareholder or a holder of VRLP common limited partnership units. If you are a Vornado common shareholder as of the close of business on January 7, 2015, you are entitled to receive one UE common share for every two Vornado common shares that you held at the close of business on such date. If you are a holder of VRLP common limited partnership units as of the close of business on January 7, 2015, you are entitled to receive one UE common share for every two VRLP common limited partnership units that you held at the close of business on such date. This document will help you understand how the separation will affect your investment in Vornado and your investment in UE after the separation.

How will the separation of UE from Vornado work?

 

To accomplish the separation, Vornado will distribute all of its UE common shares to Vornado common shareholders on a pro rata basis. Immediately prior to such distribution by Vornado, VRLP will distribute all of the outstanding UE common shares to the holders of its common limited partnership units on a pro rata basis, consisting of Vornado and the other common limited partners of VRLP.

What is the record date for the distribution?

 

The record date for the distribution by each of Vornado and VRLP will be the close of business on January 7, 2015.

When will the distribution occur?

 

It is expected that Vornado will distribute all of its UE common shares on January 15, 2015 to holders of record of Vornado common shares on the record date. Immediately prior to such distribution, it is expected that all of the outstanding UE common shares will be distributed by VRLP on January 15, 2015 to holders of record of its common limited partnership units at the close of business on the record date.

What do shareholders need to do to participate in the distribution?

 

Vornado common shareholders and holders of common limited partnership units of VRLP as of the record date will not be required to take any action to receive UE common shares in the distribution by either Vornado or VRLP, but you are urged to read this entire information statement carefully. No shareholder or limited partner approval of the distribution by either Vornado or VRLP is required. You are not being asked for a proxy. You do not need to pay any consideration, exchange or surrender your existing Vornado common shares or VRLP common limited partnership units or take any other action to receive your UE common shares. Please do not send in your Vornado share certificates. The distribution will not affect the number of outstanding Vornado common shares or the number of outstanding common limited partnership units of VRLP or any rights of Vornado common shareholders or VRLP common limited partners, although it will affect the market value of each outstanding Vornado common share.

 

15


 

How will UE common shares be issued?

 

You will receive UE common shares through the same channels that you currently use to hold or trade Vornado common shares or common limited partnership units of VRLP, whether through a brokerage account, 401(k) plan or other channel. Receipt of UE common shares will be documented for you in the same manner that you typically receive limited partner or shareholder updates, such as monthly broker statements and 401(k) statements.

 

If you own Vornado common shares as of the close of business on the record date, including shares owned in certificated form, Vornado, with the assistance of American Stock Transfer & Trust Company, LLC, the settlement and distribution agent, will electronically distribute UE common shares to you or to your brokerage firm on your behalf in book-entry form. American Stock Transfer & Trust Company, LLC will mail you a book-entry account statement that reflects your UE common shares, or your bank or brokerage firm will credit your account for the shares. If you own Vornado common shares through the Vornado dividend reinvestment plan, the UE common shares you receive will be distributed to a new UE dividend reinvestment plan account that will be created for you. Following the distribution, shareholders whose shares are held in book-entry form may request that their UE common shares held in book-entry form be transferred to a brokerage or other account at any time, without charge.

If I was enrolled in the Vornado dividend reinvestment plan, will I automatically be enrolled in the UE dividend reinvestment plan?

 

Yes. If you elected to have your Vornado cash dividends applied toward the purchase of additional Vornado common shares, the UE common shares you receive in the distribution will be automatically enrolled in the UE dividend reinvestment plan sponsored by American Stock Transfer & Trust Company, LLC, unless you notify American Stock Transfer & Trust Company, LLC that you do not want to reinvest any UE cash dividends in additional UE shares. For contact information for American Stock Transfer & Trust Company, LLC, please refer to "Description of Shares of Beneficial Interest—Transfer Agent and Registrar."

 

16


 

How many UE common shares will I receive in the distribution?

 

Vornado will distribute to you one UE common share for every two Vornado common shares held by you as of the record date. VRLP will distribute to you one UE common share for every two common limited partnership units of VRLP held by you as of the record date. Based on approximately 187,883,573 Vornado common shares and approximately 10,586,292 common limited partnership units of VRLP not held by Vornado outstanding as of December 22, 2014, a total of approximately 99,234,932 UE common shares will be distributed. For additional information on the distribution, please refer to "The Separation."

Will UE issue fractional shares in the distribution?

 

No. UE will not issue fractional shares in the distribution. Fractional shares that Vornado common shareholders or VRLP common limited partners would otherwise have been entitled to receive will be aggregated and sold in the public market by the distribution agent following the distribution. The aggregate net cash proceeds of these sales will be distributed pro rata (based on the fractional share such holder would otherwise be entitled to receive) to those common shareholders or common limited partners who would otherwise have been entitled to receive fractional shares, and will be taxable upon receipt for U.S. federal income tax purposes to Vornado common shareholders to the extent described under "The Separation—Material U.S. Federal Income Tax Consequences of the Distribution to U.S. Holders of Vornado Common Shares." Recipients of cash in lieu of fractional shares will not be entitled to any interest on the amounts of payment made in lieu of fractional shares.

What are the conditions to the distribution?

 

The distribution is subject to a number of conditions, including, among others:

 

The receipt of an opinion of Roberts & Holland LLP, special tax counsel to Vornado, satisfactory to the Vornado board of trustees, to the effect that the distribution by each of Vornado and VRLP, together with certain related transactions, will, with respect to UE, VRLP, Vornado and the shareholders of Vornado, qualify as transactions that are generally tax-free for U.S. federal income tax purposes under Sections 351, 355, and 731 of the Code, including with respect to certain matters relating to these transactions that are not covered by the private letter ruling that Vornado has received from the IRS;

 

17


 

 

The U.S. Securities and Exchange Commission (which we refer to as the "SEC") declaring effective the registration statement of which this information statement forms a part, and the mailing of the information statement to Vornado common shareholders and common limited partners of VRLP;

 

No order, injunction, or decree issued by any court of competent jurisdiction or other legal restraint or prohibition preventing the consummation of the separation, distribution by each of Vornado and VRLP or any of the related transactions shall be in effect;

 

The UE common shares to be distributed shall have been accepted for listing on the New York Stock Exchange, subject to official notice of distribution;

 

The transfer of assets and liabilities between Vornado and UE contemplated by the Separation Agreement shall have been completed, other than the transfer of those assets, if any, which are to be transferred immediately after the distribution by each of Vornado and VRLP;

 

Each of the various agreements contemplated by the Separation Agreement shall have been executed;

 

All required actions or filings with governmental authorities shall have been taken or made; and

 

No other event or development existing or having occurred that, in the judgment of Vornado's board of trustees, in its sole discretion, makes it inadvisable to effect the separation, distribution by each of Vornado and VRLP and other related transactions.

 

Vornado and UE cannot assure you that any or all of these conditions will be met. In addition, Vornado can decide at any time not to go forward with the separation. For a complete discussion of all of the conditions to the distribution, please refer to "The Separation—Conditions to the Distribution."

What is the expected date of completion of the separation?

 

The completion and timing of the separation are dependent upon a number of conditions. It is expected that Vornado will distribute its UE common shares on January 15, 2015 to the holders of record of Vornado common shares at the close of business on the record date. It is expected that, on the same date, immediately prior to such distribution by Vornado, all of the outstanding UE common shares will be distributed by VRLP to holders of record of VRLP common limited partnership units at the close of business on the record date. However, no assurance can be provided as to the timing of the separation or that all conditions to the separation will be met.

 

18


 

Can Vornado decide to cancel the distribution of UE common shares by each of Vornado and VRLP, even if all the conditions have been met?

 

Yes. The distribution by each of Vornado and VRLP is subject to the satisfaction or waiver of certain conditions. Please refer to "The Separation—Conditions to the Distribution." Until the distribution by VRLP has occurred, Vornado has the right to terminate such distribution, even if all of the conditions are satisfied.

What if I want to sell my Vornado common shares or my UE common shares?

 

You should consult with your financial advisors, such as your stockbroker, bank or tax advisor.

What is "regular-way" and "ex-distribution" trading of Vornado common shares?

 

Beginning on or shortly before the record date and continuing up to and through the distribution date, it is expected that there will be two markets in Vornado common shares: a "regular-way" market and an "ex-distribution" market. Vornado common shares that trade in the "regular-way" market will trade with an entitlement to UE common shares distributed pursuant to the distribution by Vornado. Shares that trade in the "ex-distribution" market will trade without an entitlement to UE common shares distributed pursuant to the distribution by Vornado.

 

If you decide to sell any Vornado common shares before the distribution date, you should make sure your stockbroker, bank or other nominee understands whether you want to sell your Vornado common shares with or without your entitlement to UE common shares pursuant to the distribution by Vornado.

Where will I be able to trade UE common shares?

 

UE has applied to list its common shares on the New York Stock Exchange under the symbol "UE". UE anticipates that trading in its common shares will begin on a "when-issued" basis on or shortly before the record date and will continue up to and through the distribution date and that "regular-way" trading in UE common shares will begin on the first trading day following the completion of the separation. If trading begins on a "when-issued" basis, you may purchase or sell UE common shares up to and through the distribution date, but your transaction will not settle until after the distribution date. UE cannot predict the trading prices for its common shares before, on or after the distribution date.

What will happen to the listing of Vornado shares?

 

Vornado's common shares will continue to trade on the NYSE after the distribution under the symbol "VNO."

Will the number of Vornado common shares or common limited partnership units of VRLP that I own change as a result of the distribution?

 

No. The number of Vornado common shares or common limited partnership units of VRLP that you own will not change as a result of the distribution.

 

19


 

Will the distribution affect the market price of my Vornado shares?

 

Yes. As a result of the distribution, Vornado expects the trading price of Vornado common shares immediately following the distribution to be lower than the "regular-way" trading price of such shares immediately prior to the distribution because the trading price will no longer reflect the value of the portfolio held by UE. Furthermore, until the market has fully analyzed the value of Vornado without the UE portfolio, the trading price of Vornado common shares may fluctuate. Vornado believes that, over time following the separation, assuming the same market conditions and the realization of the expected benefits of the separation, the Vornado common shares and the UE common shares should have a higher aggregate market value as compared to what the market value of Vornado common shares would be if the separation did not occur. There can be no assurance, however, that such a higher aggregate market value will be achieved. It is possible that, after the separation, the combined equity value of Vornado and UE will be less than Vornado's equity value before the separation.

What are the material U.S. federal income tax consequences of the separation and the distribution?

 

Vornado has received a private letter ruling from the IRS to the effect that the distribution by each of Vornado and VRLP, together with certain related transactions, will, with respect to UE, VRLP, Vornado and the shareholders of Vornado, qualify as transactions that are generally tax-free for U.S. federal income tax purposes under Sections 351 and 355 of the Code. It is a condition to the completion of the separation that Vornado obtain an opinion of Roberts & Holland LLP, special tax counsel to Vornado, satisfactory to the Vornado board of trustees, to the effect that the distribution by each of Vornado and VRLP, together with certain related transactions, will, with respect to UE, VRLP, Vornado and the shareholders of Vornado, qualify as transactions that are generally tax-free for U.S. federal income tax purposes under Sections 351, 355, and 731 of the Code, including with respect to certain matters relating to these transactions that are not covered by the private letter ruling from the IRS.

 

20


 

 

You should consult your own tax advisor as to the particular consequences of the distribution to you, including the applicability and effect of any U.S. federal, state and local tax laws, as well as foreign tax laws, which may result in the distribution being taxable to you. For more information regarding the private letter ruling and the tax opinion and certain U.S. federal income tax consequences of the separation, please refer to the discussion under "The Separation—Material U.S. Federal Income Tax Consequences of the Distribution to U.S. Holders of Vornado Common Shares" and "—Material U.S. Federal Income Tax Consequences of the Distribution to U.S. Holders of VRLP Common Limited Partnership Units."

What will UE's relationship be with Vornado following the separation?

 

We will enter into a Separation Agreement with Vornado. In addition, UE will enter into various other agreements to effect the separation and provide a framework for its relationship with Vornado after the separation, such as a Transition Services Agreement, a Tax Matters Agreement and an Employee Matters Agreement. These agreements will provide for the allocation between UE and Vornado of Vornado's assets, liabilities and obligations (including its properties, employees and tax-related assets and liabilities) attributable to periods prior to, at and after our separation from Vornado and will govern certain relationships between UE and Vornado after the separation.

 

For additional information regarding the Separation Agreement and other transaction agreements, please refer to the sections entitled "Risk Factors—Risks Related to the Separation" and "Certain Relationships and Related Person Transactions."

 

In addition, after the separation, approximately 5.4% of the common limited partnership units of our operating partnership, UELP, will be held by VRLP. For additional information regarding VRLP's ownership of a portion of UELP, please refer to the section entitled "Certain Relationships and Related Person Transactions."

Who will manage UE after the separation?

 

Jeffrey S. Olson will be UE's Chairman of the Board of Trustees and Chief Executive Officer and Robert Minutoli will be UE's Chief Operating Officer after the separation. UE's management team will include experienced members of Vornado's existing strip center and mall management team which has detailed historical knowledge of our properties. For more information regarding UE's management please refer to "Management."

 

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Are there risks associated with owning UE common shares?

 

Yes. Ownership of UE common shares is subject to both general and specific risks relating to UE's business, the industry in which it operates, its ongoing contractual relationships with Vornado and its status as a separate, publicly traded company. Ownership of UE common shares is also subject to risks relating to the separation. These risks are described in the "Risk Factors" section of this information statement beginning on page 29. You are encouraged to read that section carefully.

Does UE plan to pay dividends?

 

We are a newly formed company that has not commenced operations, and as a result, we have not paid any dividends as of the date of this information statement. We expect to distribute 100% of our REIT taxable income to our shareholders out of assets legally available therefor. We estimate that our dividend for the quarter ending March 31, 2015 will be $0.20 per share (or approximately $20 million in the aggregate), an indicative run rate of $0.80 per share for fiscal year 2015 (approximately $80 million in the aggregate). This assumes a distribution ratio of one UE common share for every two common shares of Vornado and for every two common limited partnership units of VRLP. We expect that the cash required to fund our dividends will be covered by cash generated from operations and to the extent they are not so covered, from our $225 million of cash on hand upon our separation. Our dividends must be authorized by our Board of Trustees, in its sole discretion.

 

To qualify as a REIT, we must distribute to our shareholders an amount at least equal to:

 

(i)    90% of our REIT taxable income, determined before the deduction for dividends paid and excluding any net capital gain (which does not necessarily equal net income as calculated in accordance with GAAP); plus

 

(ii)   90% of the excess of our net income from foreclosure property over the tax imposed on such income by the Code; less

 

(iii)  Any excess non-cash income (as determined under the Code). Please refer to "Material U.S. Federal Income Tax Consequences."

 

Although UE currently expects that it will pay a regular cash dividend, the declaration and payment of any dividends in the future by UE will be subject to the sole discretion of its board of trustees and will depend upon many factors. Please refer to "Dividend Policy."

 

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Who will be the distribution agent, transfer agent and registrar for the UE common shares?

 

The distribution agent, transfer agent and registrar for the UE common shares will be American Stock Transfer & Trust Company, LLC. For questions relating to the transfer or mechanics of the share distribution, you should contact:

 

American Stock Transfer & Trust Company, LLC,
6201 15th Avenue
Brooklyn, NY 11219.
www.amstock.com/shareholder/sh_general_info.asp
(800) 937-5449

Where can I find more information about Vornado and UE?

 

Before the distribution by each of Vornado and VRLP, if you have any questions, you should contact:

 

Vornado Realty Trust
210 Route 4 East
Paramus, New Jersey 07652
Attention: Investor Relations
(201) 587-1000
vno.com/investor-relations/stock-info

 

After the distribution by each of Vornado and VRLP, UE shareholders who have any questions relating to UE should contact UE at:

 

Urban Edge Properties
888 Seventh Avenue
New York, New York 10019
Attention: Investor Relations
(212) 956-0031
www.uedge.com

 

The UE investor website will be operational as of January 1, 2015.

 

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SUMMARY HISTORICAL COMBINED FINANCIAL DATA

        The following table sets forth the selected historical combined financial and other data of our business, which was carved-out from the financial information of Vornado, as described below. We were formed for the purpose of holding certain assets and assuming certain liabilities of Vornado. Prior to the effective date of the Form 10 registration statement, of which this information statement forms a part, and the completion of the distribution by each of Vornado and VRLP, we did not conduct any business and did not have any material assets or liabilities. The selected historical financial data set forth below as of December 31, 2013 and 2012 and for the years ended December 31, 2013, 2012 and 2011 has been derived from our audited combined financial statements, which are included elsewhere in this information statement. The selected historical combined financial data as of December 31, 2011 has been derived from our unaudited combined financial statements, which are not included in this information statement. The income statement data for each of the nine months ended September 30, 2014 and 2013 and the balance sheet data as of September 30, 2014 have been derived from our unaudited interim combined financial statements included elsewhere in this information statement. Our unaudited interim combined financial statements as of September 30, 2014 and for the nine months ended September 30, 2014 were prepared on the same basis as our audited combined financial statements as of December 31, 2013 and 2012 and for each of the years ended December 31, 2013, 2012 and 2011 and, in the opinion of management, include all adjustments, consisting only of normal, recurring adjustments, necessary to present fairly our financial position and results of operations for these periods. The interim results of operations are not necessarily indicative of operations for a full fiscal year.

        The accompanying combined financial statements include the accounts of Vornado's 79 strip center properties, three malls and a warehouse park, all of which are under common control of Vornado. The assets and liabilities in these combined financial statements have been carved-out of Vornado's books and records at their historical carrying amounts. All significant intercompany transactions have been eliminated.

        The historical financial results for the carved-out properties reflect charges for certain corporate costs which we believe are reasonable. These charges were based on either actual costs incurred or a proportion of costs estimated to be applicable to UE based on an analysis of key metrics including total revenues, real estate assets, leasable square feet and operating income. Such costs do not necessarily reflect what the actual costs would have been if UE were operating as a separate stand-alone public company. These charges are discussed further in Note 4—Related Party Transactions in our audited combined financial statements included elsewhere in this information statement.

        The accompanying combined financial statements have been prepared on a carve-out basis in accordance with accounting principles generally accepted in the United States ("GAAP"). GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, and revenues and expenses during the reporting periods. Actual results could differ from these estimates.

        Subsequent to the transfer of properties to UE and the distribution of UE's common shares to the holders of the common limited partnership units of VRLP, and the subsequent distribution by Vornado of the UE common shares it receives from VRLP to Vornado's common shareholders, UE expects to operate in a manner intended to enable it to qualify as a REIT under Sections 856-860 of the Internal Revenue Code of 1986, as amended. Under those sections, a REIT which distributes at least 90% of its REIT taxable income as a dividend to its shareholders each year and which meets certain other conditions will not be taxed on that portion of its taxable income which is distributed to its shareholders. Since Vornado operates as a REIT and distributes 100% of taxable income to its shareholders, no provision for Federal income taxes has been made in the accompanying combined financial statements. Our two Puerto Rico malls are subject to income taxes which are based on

 

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estimated taxable income and which are included in income tax expense in the combined statements of income. The carved-out properties are also subject to certain other taxes, including state and local taxes and franchise taxes which are included in general and administrative expenses in the combined statements of income.

        Presentation of earnings per share information is not applicable in these carved-out combined financial statements, since these assets and liabilities are owned by Vornado.

        UE plans to aggregate all of its properties into one reportable segment because all of these properties have similar economic characteristics and UE will provide similar products and services to similar types of retail tenants.

 
  As of September 30,   As of December 31,  
 
  (Unaudited)   (Audited)   (Audited)   (Unaudited)  
 
  2014   2013   2012   2011  
 
  (Amounts in thousands)
 

Balance Sheet Data:

                         

Total assets

  $ 1,873,595   $ 1,749,965   $ 1,857,055   $ 1,877,107  

Real estate, at cost

    2,006,991     1,984,172     2,045,258     2,028,940  

Accumulated depreciation and amortization

    456,753     421,756     436,137     391,547  

Mortgages payable

    1,292,075     1,200,762     1,251,234     1,275,441  

Noncontrolling interest in consolidated subsidiary

    335     319     298     285  

Vornado equity

    376,439     341,265     389,590     365,439  

 

 
  (Unaudited)
Nine Months Ended
September 30,
  (Audited)
Year Ended December 31,
 
 
  2014   2013   2013   2012   2011  
 
  (Amounts in thousands)
 

Income Statement Data:

                               

Total revenue

  $ 236,150   $ 286,389 (1) $ 362,995 (1) $ 304,233   $ 299,856  

Operating income

    91,819     156,803 (1)   167,213 (1)(2)   124,966 (3)   144,038 (4)

Net income (loss) attributable to noncontrolling interest in consolidated subsidiary

    16     20     21     13     (3 )

Net income attributable to Vornado

    49,484     112,058 (1)   109,314 (1)(2)   69,837 (3)   87,463 (4)

Cash Flow Statement Data:

   
 
   
 
   
 
   
 
   
 
 

Provided by operating activities

    79,766     206,667 (5)   240,527 (5)   108,364     97,730  

Used in investing activities

    23,695     20,686     27,013     32,886     39,023  

(Provided by) used in financing activities

    (71,531 )   182,419     212,636     73,385     58,673  

Other Financial Data:

   
 
   
 
   
 
   
 
   
 
 

NOI(6)

    150,189     207,392 (1)   256,523 (1)   196,901     210,472 (4)

Same property NOI(6)

    147,092     143,514     188,071     184,294     180,581  

FFO(7)

    89,733     150,050 (1)   181,793 (1)   128,440     138,074 (4)

Comparable FFO(7)

    94,416     89,951     121,694     119,751     113,611  

(1)
Includes $59,599 of income pursuant to a settlement agreement with Stop & Shop.

(2)
Includes a real estate impairment loss of $19,000.

 

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(3)
Includes a real estate impairment loss of $6,000.

(4)
Includes $19,463 for the reversal of an allowance for doubtful accounts as a result of the favorable outcome of Vornado's litigation with Stop & Shop.

(5)
Includes $124,000 of cash received from Stop & Shop pursuant to the settlement agreement.

(6)
Net operating income ("NOI") and same property NOI do not represent income from operations as defined by GAAP. We use NOI and same property NOI as supplemental measures of our operating performance. For definitions of NOI and same property NOI, as well as an important discussion of their uses and inherent limitations, please refer to "Net Operating Income" below.

(7)
Funds from operations ("FFO") and comparable FFO do not represent cash flow from operations as defined by GAAP and may not be reflective of our operating performance due to changes in our capital structure in connection with the separation and distribution. We use FFO and comparable FFO as supplemental measures of our operating performance. For a definition of FFO and comparable FFO, as well as a discussion of their uses and inherent limitations, please refer to "Funds From Operations" below.

Net Operating Income ("NOI")

        NOI and same property NOI are supplemental non-GAAP measures that aid in the assessment of the unlevered performance of our properties and portfolio as it relates to the total return on assets. The most directly comparable GAAP financial measure is operating income. We calculate NOI by adjusting GAAP operating income to add back depreciation and amortization expense, general and administrative expenses, real estate impairment losses and non-cash ground rent expense, and deduct non-cash rental income resulting from the straight-lining of rents and amortization of acquired below market leases net of above market leases. NOI does not include a deduction for property management fee expenses because they are eliminated in consolidation against intercompany property management fee income. Intercompany property management fees were approximately $6.6 million and $6.5 million for the nine months ended September 30, 2014 and 2013, respectively, and $8.7 million, $8.6 million and $8.5 million for the years ended December 31, 2013, 2012 and 2011, respectively. Same property NOI is calculated as NOI for properties that were owned and operated for the entirety of the reporting periods being compared, and excludes properties that were under development/redevelopment and properties acquired or sold during the periods being compared. The properties that were under redevelopment and excluded from same property NOI are as follows: Bergen Town Center East and East Hanover warehouse park for all periods presented; and North Plainfield, NJ, Paramus, NJ, and Garfield, NJ, for the years ended December 31, 2013, 2012 and 2011. There we no properties acquired or sold during any of the periods being compared. We believe NOI and same property NOI are meaningful non-GAAP financial measures because real estate acquisitions and dispositions are evaluated based on, among other considerations, property NOI applied to market capitalization rates. We utilize these measures to make investment and capital allocation decisions and to compare the unlevered performance of our properties to our peers. NOI and same property NOI should not be considered substitutes for operating income or net income and may not be comparable to similarly titled measures employed by others.

 

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        The following table reconciles operating income to NOI and same property NOI for the nine months ended September 30, 2014 and 2013 and for each of the last three years.

 
  (Unaudited)
Nine Months Ended
September 30,
  (Unaudited)
Year Ended December 31,
 
 
  2014   2013   2013   2012   2011  
 
  (Amounts in thousands)
 

Operating income

  $ 91,819   $ 156,803   $ 167,213   $ 124,966   $ 144,038  

Depreciation and amortization

    40,586     38,445     54,043     52,960     50,981  

General and administrative

    19,250     19,323     25,881     27,209     27,698  

Transaction costs

    4,683                  

Real estate impairment losses

            19,000     6,000      
                       

Subtotal

    156,338     214,571     266,137     211,135     222,717  

Less: non-cash rental income

    (7,325 )   (8,635 )   (11,455 )   (15,920 )   (14,457 )

Add: non-cash ground rent expense

    1,176     1,456     1,841     1,686     2,212  
                       

NOI

    150,189     207,392     256,523     196,901     210,472  
                       

Adjustments:

                               

Settlement income from Stop & Shop(1)

        (59,599 )   (59,599 )        

Income recognized pursuant to Stop & Shop Guarantee which was terminated upon settlement in February 2013(1)

        (500 )   (500 )   (5,917 )   (5,000 )

Properties taken out of service for redevelopment

    (3,084 )   (3,114 )   (7,479 )   (5,823 )   (4,207 )

Other

    (13 )   (665 )   (874 )   (867 )   (1,221 )

Reversal of allowance for doubtful accounts in connection with the Stop & Shop settlement(1)

                    (19,463 )
                       

Subtotal adjustments

    (3,097 )   (63,878 )   (68,452 )   (12,607 )   (29,891 )
                       

Same Property NOI

  $ 147,092   $ 143,514   $ 188,071   $ 184,294   $ 180,581  
                       
                       

(1)
See Note 10—Stop & Shop Settlement, in the notes to the audited combined financial statements and Note 7—Stop & Shop Settlement in the notes to the unaudited combined interim financial statements for further details.

Funds From Operations ("FFO")

        We calculate FFO in accordance with the National Association of Real Estate Investment Trusts' ("NAREIT") definition. NAREIT defines FFO as GAAP net income adjusted to exclude net gains from sales of depreciated real estate assets, real estate impairment losses, real property depreciation and amortization expense, extraordinary items and other specified non-cash items. We believe FFO and comparable FFO are meaningful non-GAAP financial measures useful in comparing our levered operating performance both internally from period to period and among our peers because these non-GAAP measures exclude net gains on sales of depreciable real estate, real estate impairment losses, and real property depreciation and amortization expense which implicitly assumes that the value of real estate diminishes predictably over time rather than fluctuating based on market conditions. FFO and comparable FFO do not represent cash generated from operating activities and are 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 and comparable FFO may not be comparable to similarly titled measures employed by others.

 

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        The following table reconciles net income attributable to Vornado to FFO and comparable FFO for the nine months ended September 30, 2014 and 2013 and for each of the last three years.

 
  (Unaudited)
Nine Months Ended
September 30,
  (Unaudited)
Year Ended December 31,
 
 
  2014   2013   2013   2012   2011  
 
  (Amounts in thousands)
 

Net income attributable to Vornado

  $ 49,484   $ 112,058   $ 109,314   $ 69,837   $ 87,463  

Depreciation and amortization of real property

    40,249     37,992     53,479     52,603     50,611  

Real estate impairment losses

            19,000     6,000      
                       

FFO

    89,733     150,050     181,793     128,440     138,074  
                       

Non-comparable items:

                               

Transaction costs

    4,683                  

Settlement income from Stop & Shop(1)

        (59,599 )   (59,599 )        

Income recognized pursuant to Stop & Shop Guarantee which was terminated upon settlement in 2013(1)

        (500 )   (500 )   (5,917 )   (5,000 )

Accelerated amortization of acquired below market lease intangible liabilities     

                (2,772 )    

Reversal of allowance for doubtful accounts in connection with the Stop & Shop settlement(1)

                    (19,463 )
                       

Subtotal adjustments

    4,683     (60,099 )   (60,099 )   (8,689 )   (24,463 )
                       

Comparable FFO

  $ 94,416   $ 89,951   $ 121,694   $ 119,751   $ 113,611  
                       
                       

(1)
See Note 10—Stop & Shop Settlement, in the notes to the audited combined financial statements and Note 7—Stop & Shop Settlement in the notes to the unaudited combined interim financial statements for further details.

 

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RISK FACTORS

        You should carefully consider the following risks and other information in this information statement in evaluating our company and our common shares. Any of the following risks could materially and adversely affect our business, results of operations and financial condition. These risks have been separated into three groups: Risks Related to Our Business and Operations and to Our Status as a REIT, Risks Related to the Separation, and Risks Related to Our Common Shares.

RISKS RELATED TO OUR BUSINESS AND OPERATIONS AND TO OUR STATUS AS A REIT

        Material factors that may adversely affect our business and operations are summarized below. The risks and uncertainties described herein may not be the only ones we face. Additional risks and uncertainties not presently known to us or that we currently believe to be immaterial may also adversely affect our business. See "Forward-Looking Statements" contained herein.

Real Estate Investments' Value and Income Fluctuate Due to Various Factors.

        The value of real estate fluctuates depending on conditions in the general economy and the real estate business. These conditions may also adversely impact our revenues and cash flows.

        The factors that affect the value of our real estate include, among other things:

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        The rents we receive and the occupancy levels at our properties may decline as a result of adverse changes in any of these factors. If our rental revenues and/or occupancy levels decline, we generally would expect to have less cash available to pay our indebtedness and for distribution to our shareholders. In addition, some of our major expenses, including mortgage payments, real estate taxes and maintenance costs generally do not decline when the related rents decline.

Capital markets and economic conditions can materially affect our liquidity, financial condition and results of operations, as well as the value of our debt and equity securities.

        There are many factors that can affect the value of our equity securities and any debt securities we may issue in the future, including the state of the capital markets and economy. Demand for office and retail space may decline nationwide as it did in 2008 and 2009, due to the economic downturn, bankruptcies, downsizing, layoffs and cost cutting. Government action or inaction may adversely affect the state of the capital markets. The cost and availability of credit may be adversely affected by illiquid credit markets and wider credit spreads may adversely affect our liquidity and financial condition, including our results of operations, and the liquidity and financial condition of our tenants. Our inability or the inability of our tenants to timely refinance maturing liabilities and access the capital markets to meet liquidity needs may materially affect our financial condition and results of operations and the value of our equity securities and any debt securities we may issue in the future.

We are subject to risks that affect the general retail environment.

        Our properties are in the retail shopping center real estate market. This means that we are subject to factors that affect the retail environment generally, including the level of consumer spending and consumer confidence, unemployment rates, the threat of terrorism and increasing competition from discount retailers, outlet malls, retail websites and catalog companies. These factors could adversely affect the financial condition of our retail tenants and the willingness of retailers to lease space in our shopping centers.

Real estate is a competitive business.

        We compete with a large number of property owners and developers, some of which may be willing to accept lower returns on their investments than we are. Principal factors of competition include rents charged, attractiveness of location, the quality of the property and breadth and quality of services provided. Our success depends upon, among other factors, trends affecting national and local economies, the financial condition and operating results of current and prospective tenants and customers, availability and cost of capital, construction and renovation costs, taxes, governmental regulations, legislation and population trends.

We depend on leasing space to tenants on economically favorable terms and collecting rent from tenants who may not be able to pay.

        Our financial results depend significantly on leasing space in our properties to tenants on economically favorable terms. In addition, because a majority of our income is derived from renting real property, our income, funds available to pay indebtedness and funds available for distribution to shareholders will decrease if certain of our tenants cannot pay their rent or if we are not able to maintain our occupancy levels on favorable terms. If a tenant does not pay its rent, we might not be able to enforce our rights as landlord without delays and might incur substantial legal and other costs. During periods of economic adversity, there may be an increase in the number of tenants that cannot pay their rent and an increase in vacancy rates.

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Bankruptcy or insolvency of tenants may decrease our revenues, net income and available cash.

        From time to time, some of our tenants have declared bankruptcy, and other tenants may declare bankruptcy or become insolvent in the future. In the case of our shopping centers, the bankruptcy or insolvency of a major tenant could cause us to have difficulty leasing the remainder of the affected property. Our leases generally do not contain restrictions designed to ensure the creditworthiness of our tenants. As a result, the bankruptcy or insolvency of a major tenant could result in a lower level of net income and funds available to pay our indebtedness or make distributions to shareholders.

We depend upon our anchor tenants to attract shoppers.

        Our shopping centers are typically anchored by well-known department stores and other tenants who generate shopping traffic at the mall or shopping center. The value of our properties would be adversely affected if tenants or anchors failed to meet their contractual obligations, sought concessions in order to continue operations or ceased their operations, including as a result of bankruptcy. If the sales of stores operating in our properties were to decline significantly due to economic conditions, closing of anchors or for other reasons, tenants may be unable to pay their minimum rents or expense recovery charges. In the event of a default by a tenant or anchor, we may experience delays and costs in enforcing our rights as landlord.

We derive a significant portion of our revenues from four of our properties.

        As of December 31, 2013, four of our properties in the aggregate generated in excess of 25% of our total gross annual base minimum rental revenues. The occurrence of events that have a negative impact on one or more of these properties, such as an economic downturn in the surrounding area or a natural disaster that damages one or more of the properties, would have a much larger adverse effect on our revenues than a corresponding occurrence affecting a less significant property. If the revenues generated by one or more of these properties were to decline substantially, our financial condition could be negatively impacted in a material fashion.

Anchor or major tenants influence the performance of certain of our properties, and decisions made by these tenants or adverse developments in the businesses of these tenants could have a negative impact on us.

        Some of our properties, such as our Springfield, MA and Carlstadt, NJ properties, have anchor or major tenants that occupy all or a significant portion of a center's total leasable area, pay all or a significant portion of a property's total rent and, if not the sole tenant in a property, contribute to the success of other tenants by drawing customers to a property. If an anchor tenant closes, such closure could adversely affect the property even if the tenant continues to pay rent due to the loss of the anchor tenant's drawing power. Additionally, closure of an anchor tenant could result in lease terminations by, or reductions in rent from, other tenants if the other tenants' leases have "co-tenancy" clauses that permit cancellation or rent reduction if an anchor tenant closes. Retailer consolidation, store rationalization, competition from internet sales and general economic conditions may decrease the number of tenants available to fill available anchor tenant spaces. As a result, in the event one or more anchor tenants were to leave one or more of our centers, we cannot be sure that we would be able to quickly re-lease the vacant space on equivalent terms or at all. In addition, we may not be able to recover costs owed us by the closed tenant. In certain cases, co-tenancy issues can arise solely from the loss of one or more non-anchor tenants and some anchor and non-anchor tenants may be able to terminate their leases if they do not achieve defined sales levels. Any of these developments could have a negative impact on our financial condition and results of operations.

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We face risks associated with our tenants being designated "Prohibited Persons" by the Office of Foreign Assets Control.

        Pursuant to Executive Order 13224 and other laws, the Office of Foreign Assets Control of the United States Department of the Treasury ("OFAC") maintains a list of persons designated as terrorists or who are otherwise blocked or banned ("Prohibited Persons") from conducting business or engaging in transactions in the United States. Our leases, loans and other agreements may require us to comply with OFAC requirements. If a tenant or other party with whom we conduct business is placed on the OFAC list we may be required to terminate the lease or other agreement. Any such termination could result in a loss of revenue or otherwise negatively affect our financial results and cash flows.

Our business and operations would suffer in the event of system failures.

        Despite system redundancy, the implementation of security measures and the existence of a disaster recovery plan for our internal information technology systems, our systems are vulnerable to damages from any number of sources, including computer viruses, unauthorized access, energy blackouts, natural disasters, terrorism, war and telecommunication failures. Any system failure or accident that causes interruptions in our operations could result in a material disruption to our business. We may also incur additional costs to remedy damages caused by such disruptions.

The occurrence of cyber incidents, or a deficiency in our cybersecurity, could negatively impact our business by causing a disruption to our operations, a compromise or corruption of our confidential information, and/or damage to our business relationships, all of which could negatively impact our financial results.

        A cyber incident is considered to be any adverse event that threatens the confidentiality, integrity, or availability of our information resources. More specifically, a cyber incident is an intentional attack or an unintentional event that can include gaining unauthorized access to systems to disrupt operations, corrupt data, or steal confidential information. As our reliance on technology has increased, so have the risks posed to our systems, both internal and those we have outsourced. Our three primary risks that could directly result from the occurrence of a cyber incident include operational interruption, damage to our relationship with our tenants, and private data exposure. We have implemented processes, procedures and controls to help mitigate these risks, but these measures, as well as our increased awareness of a risk of a cyber incident, do not guarantee that our financial results will not be negatively impacted by such an incident.

We may incur significant costs to comply with environmental laws and environmental contamination may impair our ability to lease and/or sell real estate.

        Our operations and properties are subject to various federal, state and local laws and regulations concerning the protection of the environment including air and water quality, hazardous or toxic substances and health and safety. Under some environmental laws, a current or previous owner or operator of real estate may be required to investigate and clean up hazardous or toxic substances released at a property. The owner or operator may also be held liable to a governmental entity or to third parties for property damage or personal injuries and for investigation and clean-up costs incurred by those parties because of the contamination. These laws often impose liability without regard to whether the owner or operator knew of the release of the substances or caused such release. The presence of contamination or the failure to remediate contamination may impair our ability to sell or lease real estate or to borrow using the real estate as collateral. Other laws and regulations govern indoor and outdoor air quality including those that can require the abatement or removal of asbestos-containing materials in the event of damage, demolition, renovation or remodeling and also govern emissions of and exposure to asbestos fibers in the air. The maintenance and removal of lead paint and certain electrical equipment containing polychlorinated biphenyls (PCBs) are also regulated by federal and state laws. We are also subject to risks associated with human exposure to chemical or biological

32


contaminants such as molds, pollens, viruses and bacteria which, above certain levels, can be alleged to be connected to allergic or other health effects and symptoms in susceptible individuals. We could incur fines for environmental compliance and be held liable for the costs of remedial action with respect to the foregoing regulated substances or related claims arising out of environmental contamination or human exposure at or from our properties.

        Most of our properties have been subjected to varying degrees of environmental assessment at various times. To date, these environmental assessments have not revealed any environmental condition material to our business. However, identification of new compliance concerns or undiscovered areas of contamination, changes in the extent or known scope of contamination, human exposure to contamination or changes in cleanup or compliance requirements could result in significant costs to us.

Some of our potential losses may not be covered by insurance.

        Vornado maintains general liability insurance with limits of $300,000,000 per occurrence and all-risk property and rental value insurance coverage with limits of $2.0 billion per occurrence, with sub-limits for certain perils such as floods and earthquakes on each of Vornado's properties. Insurance premiums are charged directly to each of the retail properties. UE intends to obtain appropriate insurance coverage on its own and coverages may differ from those noted above. Also, the resulting insurance premiums may differ materially from amounts included in the accompanying combined financial statements. UE will be responsible for deductibles and losses in excess of insurance coverage, which could be material.

        As previously announced, the Terrorism Risk Insurance Program Reauthorization Act ("TRIPRA") expires on December 31, 2014. As a result, Vornado's current coverage for terrorist acts, with limits of $4.0 billion per occurrence and in the aggregate, and $2.0 billion per occurrence and in the aggregate for nuclear, biological, chemical and radiological ("NBCR") terrorism events, as defined by TRIPRA, will be reduced to $600 million per occurrence and in the aggregate, and the NBCR coverage will expire. UE will continue to monitor the state of the insurance market and the scope and costs of coverage; however, there is uncertainty regarding the extent and adequacy of terrorism coverage that will be available on commercially reasonable terms in the future to protect our interests in the event of future terrorist attacks that impact our properties.

        UE's mortgage loans are non-recourse and contain customary covenants requiring adequate insurance coverage. Although we believe that we currently have adequate insurance coverage for purposes of these agreements, we may not be able to obtain an equivalent amount of coverage at reasonable costs in the future. If lenders insist on greater coverage than UE is able to obtain, it could adversely affect the ability to finance or refinance the properties.

Compliance or failure to comply with the Americans with Disabilities Act or other safety regulations and requirements could result in substantial costs.

        The Americans with Disabilities Act ("ADA") generally requires that public buildings, including our properties, meet certain federal requirements related to access and use by disabled persons. Noncompliance could result in the imposition of fines by the federal government or the award of damages to private litigants and/or legal fees to their counsel. If, under the ADA, we are required to make substantial alterations and capital expenditures in one or more of our properties, including the removal of access barriers, it could adversely affect our financial condition and results of operations, as well as the amount of cash available for distribution to shareholders.

        Our properties are subject to various federal, state and local regulatory requirements, such as state and local fire and life safety requirements. If we fail to comply with these requirements, we could incur fines or private damage awards. We do not know whether existing requirements will change or whether compliance with future requirements will require significant unanticipated expenditures that will affect our cash flow and results of operations.

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Our Investments Are Concentrated In The Northeast And Puerto Rico. Circumstances Affecting These Areas Generally Could Adversely Affect Our Business.

Our properties are generally located in the Northeast and in Puerto Rico and are affected by the economic cycles and risks inherent in these areas.

        Real estate markets are subject to economic downturns and we cannot predict how economic conditions will impact this market in either the short- or long-term. Declines in the economy or declines in the real estate market in this area could hurt our financial performance and the value of our properties. In addition to the factors affecting the national economic condition generally, the factors affecting economic conditions in this area include:

        It is impossible for us to assess the future effects of trends in the economic and investment climates in the Northeast and Puerto Rico, and more generally of the United States, on the real estate market in these areas. Local, national or global economic downturns, would negatively affect our business and profitability.

Natural Disasters could have a concentrated impact on the area in which we operate and could adversely impact our results.

        Our retail properties are generally located in the Northeast and in Puerto Rico and since they are concentrated along the Eastern Seaboard, natural disasters, including hurricanes, could have an impact. Potentially adverse consequences of "global warming" could similarly have an impact on our properties. As a result, we could become subject to significant losses and/or repair costs which may or may not be fully covered by insurance and to the risk of business interruption. The incurrence of these losses, costs or business interruptions may adversely affect our operating and financial results.

We May Acquire Or Sell Assets Or Develop Properties. Our Failure Or Inability To Consummate These Transactions Or Manage These Transactions Could Adversely Affect Our Operations And Financial Results.

We may acquire, develop or redevelop properties and these activities may create risks, including failing to complete such activities on time or within budget, competition for such activities that could increase our costs, being unable to lease newly acquired, developed or redeveloped properties at rents sufficient to cover our costs, difficulties in integrating acquisitions and weaker than expected performance.

        We may acquire, develop or redevelop properties when we believe that an acquisition, development or redevelopment project is consistent with our business strategy. We may not, however, succeed in consummating desired acquisitions or in completing developments or redevelopments on time or within budget. In addition, we may face competition in pursuing acquisition, development or redevelopment opportunities that could increase our costs. When we do pursue a project or acquisition,

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we may not succeed in leasing newly developed, redeveloped or acquired properties at rents sufficient to cover costs of acquisition, development or redevelopment and operations. Difficulties in integrating acquisitions may prove costly or time-consuming and could divert management's attention. Acquisitions or developments in new markets or types of properties where we do not have the same level of market knowledge may result in weaker than anticipated performance. We may abandon acquisition, development or redevelopment opportunities that we have begun pursuing and consequently fail to recover expenses already incurred and have devoted management time to a matter not consummated.

It may be difficult to buy and sell real estate quickly, which may limit our flexibility.

        Real estate investments are relatively difficult to buy and sell quickly. Consequently, we may have limited ability to vary our portfolio promptly in response to changes in economic or other conditions. Moreover, our ability to buy, sell, or finance real estate assets may be adversely affected during periods of uncertainty or unfavorable conditions in the credit markets as we, or potential buyers of our assets, may experience difficulty in obtaining financing.

Our Organizational And Financial Structure Gives Rise To Operational And Financial Risks.

Substantially all of our assets will be owned by subsidiaries. We depend on dividends and distributions from these subsidiaries. The creditors of these subsidiaries are entitled to amounts payable to them by the subsidiaries before the subsidiaries may pay any dividends or other distributions to us.

        Substantially all of our properties and assets are held through wholly-owned subsidiaries. We depend on cash distributions from our subsidiaries for substantially all of our cash flow. The creditors of each of our subsidiaries are entitled to payment of that subsidiary's obligations to them when due and payable before that subsidiary may make distributions or dividends to us. Thus, our ability to pay dividends, if any, to our security holders depends on our subsidiaries' ability to first satisfy their obligations to their creditors and our ability to satisfy our obligations, if any, to our creditors.

        In addition, our participation in any distribution of the assets of any of our subsidiaries upon the liquidation, reorganization or insolvency of the subsidiary, is only after the claims of the creditors, including trade creditors, and preferred security holders, if any, of the applicable direct or indirect subsidiaries are satisfied.

Our existing financing documents contain covenants and restrictions that may adversely affect our financial condition and our acquisition and development activities.

        The mortgages on our properties contain customary covenants such as those that limit our ability, without the prior consent of the lender, to further mortgage the applicable property or to discontinue insurance coverage. Our unsecured indebtedness and debt that we may obtain in the future may contain customary restrictions, requirements and other limitations on our ability to incur indebtedness, including covenants that limit our ability to incur debt based upon the level of our ratio of total debt to total assets, our ratio of secured debt to total assets, our ratio of earnings before interest, tax, depreciation and amortization (EBITDA) to interest expense, and fixed charges, and that require us to maintain a certain level of unencumbered assets to unsecured debt. Our ability to borrow is subject to compliance with these and other covenants. In addition, failure to comply with our covenants could cause a default under the applicable debt instrument, and we may then be required to repay such debt with capital from other sources or give possession of a secured property to the lender. Under those circumstances, other sources of capital may not be available to us, or may be available only on unattractive terms.

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We have outstanding debt, and the amount of debt and its cost may increase and refinancing may not be available on acceptable terms.

        As of December 31, 2013, total combined debt outstanding was $1.2 billion. For the year ended December 31, 2013, our scheduled cash payments for principal and interest were $69.4 million. As of September 30, 2014, the portfolio had approximately $1.292 billion of total combined debt outstanding. To provide additional liquidity following the separation, we are arranging a revolving credit facility under which, upon completion of the separation and distribution and subject to the satisfaction of customary conditions, we expect to have significant borrowing capacity. We do not expect to have any outstanding borrowings under the revolving credit facility upon the completion of the separation. We may incur additional debt in the future which may increase the risk of default which could adversely affect our financial condition and results of operations. In addition, in a rising interest rate environment, the cost of refinancing our existing debt and any new debt or market rate security or instrument may increase. Continued uncertainty in the equity and credit markets may negatively impact our ability to obtain financing on reasonable terms or at all, which may negatively affect our ability to refinance our debt.

We may not be able to obtain capital to make investments.

        We depend primarily on external financing to fund the growth of our business. This is because one of the requirements of the Code for a REIT is that it distributes at least 90% of its taxable income, excluding net capital gains, to its shareholders. There is a separate requirement to distribute net capital gains or pay a corporate level tax in lieu thereof. Our access to debt or equity financing depends on the willingness of third parties to lend or make equity investments and on conditions in the capital markets generally. Although we believe that we will be able to finance any investments we may wish to make in the foreseeable future, there can be no assurance that new financing will be available or available on acceptable terms. For information about our available sources of funds, see "Management's Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources" and the notes to the consolidated financial statements in this information statement.

UE may fail to qualify or remain qualified as a REIT and may be required to pay income taxes at corporate rates.

        Although we believe that we will remain organized and will continue to operate so as to qualify as a REIT for federal income tax purposes, we may fail to remain so qualified. Qualifications are governed by highly technical and complex provisions of the Internal Revenue Code for which there are only limited judicial or administrative interpretations and depend on various facts and circumstances that are not entirely within our control. In addition, legislation, new regulations, administrative interpretations or court decisions may significantly change the relevant tax laws and/or the federal income tax consequences of qualifying as a REIT. If, with respect to any taxable year, we fail to maintain our qualification as a REIT and do not qualify under statutory relief provisions, we could not deduct distributions to shareholders in computing our taxable income and would have to pay federal income tax on our taxable income at regular corporate rates. The federal income tax payable would include any applicable alternative minimum tax. If we had to pay federal income tax, the amount of money available to distribute to shareholders and pay our indebtedness would be reduced for the year or years involved, and we would no longer be required to make distributions to shareholders. In addition, we would also be disqualified from treatment as a REIT for the four taxable years following the year during which qualification was lost, unless we were entitled to relief under the relevant statutory provisions.

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REIT distribution requirements could adversely affect our liquidity and our ability to execute our business plan.

        In order for us to qualify to be taxed as a REIT, and assuming that certain other requirements are also satisfied, we generally must distribute at least 90% of our REIT taxable income, determined without regard to the dividends paid deduction and excluding any net capital gains, to our shareholders each year, so that U.S. federal corporate income tax does not apply to earnings that we distribute. To the extent that we satisfy this distribution requirement and qualify for taxation as a REIT, but distribute less than 100% of our REIT taxable income, determined without regard to the dividends paid deduction and including any net capital gains, we will be subject to U.S. federal corporate income tax on our undistributed net taxable income. In addition, we will be subject to a 4% nondeductible excise tax if the actual amount that we distribute to our shareholders in a calendar year is less than a minimum amount specified under U.S. federal income tax laws. We intend to distribute 100% of our REIT taxable income to our shareholders out of assets legally available therefor.

        From time to time, we may generate taxable income greater than our cash flow as a result of differences in timing between the recognition of taxable income and the actual receipt of cash or the effect of nondeductible capital expenditures, the creation of reserves, or required debt or amortization payments. If we do not have other funds available in these situations, we could be required to borrow funds on unfavorable terms, sell assets at disadvantageous prices, distribute amounts that would otherwise be invested in future acquisitions, capital expenditures or repayment of debt, or make taxable distributions of our shares or debt securities to make distributions sufficient to enable us to pay out enough of our taxable income to satisfy the REIT distribution requirement and avoid corporate income tax and the 4% excise tax in a particular year. These alternatives could increase our costs or reduce our equity. Further, amounts distributed will not be available to fund investment activities. Thus, compliance with the REIT requirements may hinder our ability to grow, which could adversely affect the value of our shares. Any restrictions on our ability to incur additional indebtedness or make certain distributions could preclude us from meeting the 90% distribution requirement. Decreases in funds from operations due to unfinanced expenditures for acquisitions of properties or increases in the number of shares outstanding without commensurate increases in funds from operations each would adversely affect our ability to maintain distributions to our shareholders. Consequently, there can be no assurance that we will be able to make distributions at the anticipated distribution rate or any other rate. Please refer to "Dividend Policy."

If certain portions of a recently released discussion draft of tax reform legislation were introduced as legislation and enacted in their current form, the separation and distribution of UE could be treated as a taxable transaction to Vornado and its shareholders.

        On February 26, 2014, House Ways and Means Committee Chairman Dave Camp (R-MI) released a discussion draft of tax reform legislation (the "Discussion Draft"). Among the proposals in the Discussion Draft is a provision that would prohibit REITs from conducting tax-free spin-offs under Section 355 of the Code. The Discussion Draft provides that this prohibition would be effective for distributions made on or after February 26, 2014. However, under a transition rule, the prohibition will not apply to REITs that make distributions pursuant to an agreement that was binding on February 26, 2014 and at all times thereafter. It is unclear whether the Discussion Draft will be introduced as legislation or enacted and, if so and in either case, in what form. On April 11, 2014 Vornado publicly announced its plan to spin off its strip centers and malls in a tax-free transaction. Vornado and UE had not yet entered into binding agreements as of February 26, 2014. If the Discussion Draft were to be introduced as legislation and enacted into law in its present form and it was later determined by the IRS or the courts that the law would have retroactive effect to the date it was first proposed for discussion, the distribution and separation of UE from Vornado would be treated as a taxable transaction to Vornado and its shareholders.

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RISKS RELATED TO THE SEPARATION

We have no history operating as an independent company, and our historical and pro forma financial information is not necessarily representative of the results that we would have achieved as a separate, publicly traded company and may not be a reliable indicator of our future results.

        The historical information about us in this information statement refers to our business as operated by and integrated with Vornado. Our historical and pro forma financial information included in this information statement is derived from the consolidated financial statements and accounting records of Vornado. Accordingly, the historical and pro forma financial information included in this information statement does not necessarily reflect the financial condition, results of operations or cash flows that we would have achieved as a separate, publicly traded company during the periods presented or those that we will achieve in the future. Factors which could cause our results to differ from those reflected in such historical and pro forma financial information and which may adversely impact our ability to receive similar results in the future may include, but are not limited to, the following:

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        Other significant changes may occur in our cost structure, management, financing and business operations as a result of operating as an independent company. For additional information about the past financial performance of our business and the basis of presentation of the historical combined financial statements and the unaudited pro forma combined financial statements of our business, please refer to "Unaudited Pro Forma Combined Financial Statements," "Selected Historical Combined Financial Data," "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the historical financial statements and accompanying notes included elsewhere in this information statement.

We are dependent on Vornado to provide services to us pursuant to the Transition Services Agreement, and it may be difficult to replace the services provided under such agreement.

        Historically, we have relied on the financial, administrative and other support functions of Vornado to operate our business and we will continue to rely on Vornado for these and other vital services on a transitional basis pursuant to the Transition Services Agreement that we expect to enter into with Vornado. See "Certain Relationships and Related Person Transactions—Transition Services Agreement." In addition, it may be difficult for us to replace the services provided by Vornado under the Transition Services Agreement, and the terms of any agreements to replace such services may be less favorable to us. Any failure by Vornado in the performance of such services, or any failure on our part to successfully transition these services away from Vornado by the expiration of the Transition Services Agreement, could materially harm our business and financial performance.

If the distribution by each of Vornado and VRLP, together with certain related transactions, does not qualify as a transaction that is generally tax-free for U.S. federal income tax purposes, Vornado and Vornado shareholders could be subject to significant tax liabilities and UE will indemnify Vornado for certain material tax obligations that could arise as addressed in the Tax Matters Agreement.

        Vornado has received a private letter ruling from the IRS to the effect that the distribution of UE common shares by each of Vornado and VRLP, together with certain related transactions, will, with respect to UE, VRLP, Vornado and the shareholders of Vornado, qualify as transactions that are generally tax-free for U.S. federal income tax purposes under Sections 351 and 355 of the Code. It is a condition to the completion of the separation that Vornado obtain an opinion of Roberts & Holland LLP, special tax counsel to Vornado, satisfactory to the Vornado board of trustees, to the effect that the distribution of UE common shares by each of Vornado and VRLP, together with certain related transactions, will, with respect to UE, VRLP, Vornado and the shareholders of Vornado, qualify as transactions that are generally tax-free for U.S. federal income tax purposes under Sections 351, 355, and 731 of the Code, including with respect to certain matters relating to these transactions that are not covered by the private letter ruling from the IRS. The private letter ruling is, and the opinion of Roberts & Holland LLP will be, based on, among other things, certain facts and assumptions, as well as certain representations, statements and undertakings of Vornado and UE (including those relating to the past and future conduct of Vornado and UE). If any of these representations, statements or undertakings are, or become, inaccurate or incomplete, or if Vornado or UE breach any of their respective covenants in the separation documents, the private letter ruling from the IRS and the opinion of Roberts & Holland LLP may be invalid and the conclusions reached therein could be

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jeopardized. In such case, the IRS could assert that the distribution of UE common shares by each of Vornado and VRLP, together with certain related transactions, should be treated as a taxable transaction. The opinion of Roberts & Holland LLP will not be binding on the IRS or the courts.

        If the distribution, together with certain related transactions, failed to qualify for tax-free treatment, in general, Vornado would recognize taxable gain as if it had sold the UE common shares in a taxable sale for its fair market value and Vornado shareholders who receive UE common shares in the distribution could be subject to tax as if they had received a taxable distribution equal to the fair market value of such shares. For more information, please refer to "The Separation—Material U.S. Federal Income Tax Consequences of the Distribution to U.S. Holders of Vornado Common Shares."

        Under the Tax Matters Agreement that UE will enter into with Vornado, UE may be required to indemnify Vornado against any additional taxes resulting from (i) an acquisition of all or a portion of the equity securities or assets of UE, whether by merger or otherwise, (ii) other actions or failures to act by UE, or (iii) any of UE's representations or undertakings being incorrect or violated. For a more detailed discussion, please refer to "Certain Relationships and Related Person Transactions—Tax Matters Agreement."

We may not be able to engage in desirable strategic or capital-raising transactions following the separation. In addition, if we were able to engage in such transactions, we could be liable for adverse tax consequences resulting therefrom.

        To preserve the tax-free treatment of the separation, for the two-year period following the separation, UE will be prohibited, except in specific circumstances, from: (i) entering into any transaction pursuant to which all or a portion of UE's shares would be acquired, whether by merger or otherwise, (ii) issuing equity securities beyond certain thresholds and except in certain circumscribed manners, (iii) repurchasing UE common shares, (iv) ceasing to actively conduct certain of its businesses, or (v) taking or failing to take any other action that prevents the distribution and certain related transactions from being tax-free.

        These restrictions may limit UE's ability to pursue strategic transactions or engage in new business or other transactions that may maximize the value of UE's business. For more information, please refer to "The Separation—Material U.S. Federal Income Tax Consequences of the Distribution to U.S. Holders of Vornado Common Shares" and "Certain Relationships and Related Person Transactions—Tax Matters Agreement."

Potential indemnification liabilities to Vornado pursuant to the Separation Agreement could materially adversely affect our operations.

        The Separation Agreement with Vornado provides for, among other things, the principal corporate transactions required to effect the separation, certain conditions to the separation and distribution and provisions governing our relationship with Vornado with respect to and following the separation and distribution. Among other things, the Separation Agreement provides for indemnification obligations designed to make us financially responsible for substantially all liabilities that may exist relating to our business activities, whether incurred prior to or after the separation and distribution, as well as those obligations of Vornado that we will assume pursuant to the Separation Agreement. If we are required to indemnify Vornado under the circumstances set forth in this agreement, we may be subject to substantial liabilities. For a description of this agreement, please refer to "Certain Relationships and Related Person Transactions—The Separation Agreement."

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Vornado may not be able to transfer its interests in certain properties that are subject to certain debt arrangements, are partially owned through a joint venture or similar structure, or are leased to or from a third party due to the need to obtain the consent of third parties.

        Certain covenants and other restrictions contained in agreements governing indebtedness secured by certain of our properties and the co-owned or leased nature of some of our properties may require Vornado to obtain lender, co-venturer, or landlord or tenant consent in order to transfer such properties to us prior to completion of the separation. There is no assurance that Vornado will be able to obtain these consents on terms that it determines to be reasonable, or at all. Failure to obtain these consents could require Vornado to retain such properties, which could have a material adverse effect on our business, results of operations and financial condition.

After the separation, certain of our trustees and executive officers may have actual or potential conflicts of interest because of their previous or continuing equity interest in, or positions at, Vornado.

        We expect that some of our trustees and executive officers will be persons who are or have been employees of Vornado. Because of their current or former positions with Vornado, certain of our expected trustees and executive officers may own Vornado common shares or other equity awards. Following the separation, even though our board of trustees will consist of a majority of trustees who are independent, we expect that some of our executive officers and some of our trustees will continue to have a financial interest in Vornado common shares. In addition, one of our trustees will continue serving on the board of trustees of Vornado. Continued ownership of Vornado common shares, or service as a trustee at both companies, could create, or appear to create, potential conflicts of interest.

Vornado will not be required to present investments to us that satisfy our investment guidelines before pursuing such opportunities on Vornado's behalf.

        Our agreements with Vornado will not require Vornado to present to us investment opportunities that satisfy our investment guidelines before Vornado pursues such opportunities. While Vornado does not intend to continue to operate within the strip shopping center and mall sector after the separation, should it choose to do so Vornado will be free to direct investment opportunities away from UE, and we may be unable to compete with Vornado in pursuing such opportunities.

We may not achieve some or all of the expected benefits of the separation, and the separation may adversely affect our business.

        We may not be able to achieve the full strategic and financial benefits expected to result from the separation, or such benefits may be delayed due to a variety of circumstances, not all of which may be under our control. The separation is expected to provide the following benefits, among others: (i) a distinct investment identity allowing investors to evaluate our merits, performance and future prospects as an independent company; (ii) more efficient allocation of capital for both Vornado and for us; and (iii) direct access by us to the capital markets.

        We may not achieve these and other anticipated benefits for a variety of reasons, including, among others: (i) the separation will require significant amounts of management's time and effort, which may divert management's attention from operating and growing our business; (ii) following the separation, we may be more susceptible to market fluctuations and other adverse events than if we were still a part of Vornado; (iii) following the separation, our business will be less diversified than Vornado's business prior to the separation; and (iv) the other actions required to separate our business from that of Vornado could disrupt our operations. If we fail to achieve some or all of the benefits expected to result from the separation, or if such benefits are delayed, our business, financial conditions and results of operations could be materially adversely affected.

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Our agreements with Vornado in connection with the separation and distribution involve potential conflicts of interest, and may not reflect terms that would have resulted from negotiations between unaffiliated third parties.

        Because the separation and distribution involves the division of certain of Vornado's existing businesses into two independent companies, we expect to enter into certain agreements with Vornado to provide a framework for our relationship with Vornado following the separation and distribution, including the Separation Agreement, a Transition Services Agreement, a Tax Matters Agreement and an Employee Matters Agreement. The terms of these agreements between Vornado and us will be determined while we are still an indirect wholly-owned subsidiary of Vornado and will be determined by persons who are at the time employees, officers or trustees of Vornado or its subsidiaries and, accordingly, have a conflict of interest. For example, during the period in which the terms of those agreements will be prepared, we will not have a board of trustees that will be independent of Vornado. As a result, the terms of those agreements are not the result of arm's-length negotiations between unaffiliated third parties. However, payments made in connection with such agreements will be on terms intended to reflect terms arrived at by parties negotiating at arm's-length. Arm's-length negotiations between Vornado and an unaffiliated third party in another form of transaction, such as a buyer in a sale of a business transaction, may have resulted in more favorable terms to the unaffiliated third party. See "Certain Relationships and Related Person Transactions."

No vote of Vornado shareholders is required in connection with the separation and distribution.

        No vote of Vornado shareholders is required in connection with the separation and distribution. Accordingly, if this transaction occurs and you do not want to receive our common shares in the distribution, your only recourse will be to divest yourself of your Vornado common shares prior to the record date for the distribution.

Vornado's board of trustees has reserved the right, in its sole discretion, to amend, modify or abandon the separation and distribution and the related transactions at any time prior to the distribution date. In addition, the separation and distribution and related transactions are subject to the satisfaction or waiver by Vornado's board of trustees in its sole discretion of a number of conditions. We cannot assure you that any or all of these conditions will be met.

        The Vornado board of trustees has reserved the right, in its sole discretion, to amend, modify or abandon the separation and distribution and the related transactions at any time prior to the distribution date. This means that Vornado may cancel or delay the planned separation and distribution of our common shares if at any time the board of trustees of Vornado determines that it is not in the best interests of Vornado. If Vornado's board of trustees makes a decision to cancel the separation, shareholders of Vornado will not receive any distribution of our common shares and Vornado will be under no obligation whatsoever to its shareholders to distribute such common shares. In addition, the separation and distribution and related transactions are subject to the satisfaction or waiver by Vornado's board of trustees in its sole discretion of a number of conditions. We cannot assure you that any or all of these conditions will be met.

In connection with our separation from Vornado, Vornado will indemnify us for certain pre-distribution liabilities and liabilities related to Vornado assets. However, there can be no assurance that these indemnities will be sufficient to protect us against the full amount of such liabilities, or that Vornado's ability to satisfy its indemnification obligation will not be impaired in the future.

        Pursuant to the Separation Agreement, Vornado will agree to indemnify us for certain liabilities. However, third parties could seek to hold us responsible for any of the liabilities that Vornado agrees to retain, and there can be no assurance that Vornado will be able to fully satisfy its indemnification obligations. Moreover, even if we ultimately succeed in recovering from Vornado any amounts for

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which we are held liable, such indemnification may be insufficient to fully offset the financial impact of such liabilities and/or we may be temporarily required to bear these losses while seeking recovery from Vornado.

Failure to maintain effective internal control over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act could have a material adverse effect on our business and share price.

        As a public company, we will become subject to the reporting requirements of the Exchange Act, the Sarbanes-Oxley Act and the Dodd-Frank Act and will be required to prepare our financial statements according to the rules and regulations required by the SEC. In addition, the Exchange Act requires that we file annual, quarterly and current reports. Our failure to prepare and disclose this information in a timely manner or to otherwise comply with applicable law could subject us to penalties under federal securities laws, expose us to lawsuits and restrict our ability to access financing.

        In addition, the Sarbanes-Oxley Act requires that we, among other things, establish and maintain effective internal controls and procedures for financial reporting and disclosure purposes. Internal control over financial reporting is complex and may be revised over time to adapt to changes in our business, or changes in applicable accounting rules. We cannot assure you that our internal control over financial reporting will be effective in the future or that a material weakness will not be discovered with respect to a prior period for which we had previously believed that internal controls were effective. If we are not able to maintain or document effective internal control over financial reporting, our independent registered public accounting firm will not be able to certify as to the effectiveness of our internal control over financial reporting.

        Matters impacting our internal controls may cause us to be unable to report our financial information on a timely basis, or may cause our company to restate previously issued financial information, and thereby subject us to adverse regulatory consequences, including sanctions or investigations by the SEC, or violations of applicable stock exchange listing rules. There could also be a negative reaction in the financial markets due to a loss of investor confidence in our company and the reliability of our financial statements. Confidence in the reliability of our financial statements is also likely to suffer if we or our independent registered public accounting firm report a material weakness in our internal control over financial reporting. This could materially adversely affect our company by, for example, leading to a decline in our share price and impairing our ability to raise additional capital.

Substantial sales of our common shares may occur in connection with the distribution, which could cause our share price to decline.

        The shares that Vornado intends to distribute to its shareholders generally may be sold immediately in the public market. Upon completion of the distribution, based on the number of outstanding Vornado common shares and common limited partnership units of VRLP as of December 22, 2014, we expect that we will have an aggregate of approximately 99,234,932 common shares issued and outstanding. These shares will be freely tradable without restriction or further registration under the U.S. Securities Act of 1933, as amended (the "Securities Act"), unless the shares are owned by one of our "affiliates," as that term is defined in Rule 405 under the Securities Act.

        Although we have no actual knowledge of any plan or intention on the part of any 5% or greater shareholder to sell our common shares following the distribution, it is possible that some Vornado shareholders, including possibly some of our large shareholders, will sell our common shares that they receive in the distribution. For example, Vornado shareholders may sell our common shares because our business profile or market capitalization as an independent company does not fit their investment objectives or because our common shares are not included in certain indices after the distribution. A portion of Vornado's shares is held by index funds tied to the Standard & Poor's 500 Index or other indices, and if we are not included in these indices at the time of the distribution, these index funds may be required to sell our common shares. The sales of significant amounts of our common shares, or the perception in the market that this will occur, may result in the lowering of the market price of our common shares.

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RISKS RELATED TO OUR COMMON SHARES

No market currently exists for the UE common shares and we cannot be certain that an active trading market for our common shares will develop or be sustained after the separation. Following the separation, our share price may fluctuate significantly.

        A public market for our common shares does not currently exist. We anticipate that on or prior to the record date for the distribution, trading of our common shares will begin on a "when-issued" basis and will continue through the distribution date. However, we cannot guarantee that an active trading market will develop or be sustained for our common shares after the separation. Nor can we predict the prices at which our common shares may trade after the separation. Similarly, we cannot predict the effect of the separation on the trading prices of our common shares or whether the combined market value of our common shares and Vornado's common shares will be less than, equal to, or greater than the market value of Vornado's common shares prior to the separation. The market price of our common shares may fluctuate significantly due to a number of factors, some of which may be beyond our control, including:

        In addition, when the market price of a company's common shares drops significantly, shareholders often institute securities class action lawsuits against the company. A lawsuit against us could cause us to incur substantial costs and could divert the time and attention of our management and other resources.

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We cannot guarantee the timing, amount, or payment of dividends on our common shares.

        Although we expect to pay regular cash dividends following the separation, the timing, declaration, amount and payment of future dividends to shareholders will fall within the discretion of our board of trustees. Our board of trustees' decisions regarding the payment of dividends will depend on many factors, such as our financial condition, earnings, capital requirements, debt service obligations, limitations under our financing arrangements, industry practice, legal requirements, regulatory constraints, and other factors that it deems relevant. Our ability to pay dividends will depend on our ongoing ability to generate cash from operations and access capital markets. We cannot guarantee that we will pay a dividend in the future or continue to pay any dividend if we commence paying dividends. For more information, please refer to "Dividend Policy."

Your percentage of ownership in our company may be diluted in the future.

        In the future, your percentage ownership in us may be diluted because of equity issuances for acquisitions, capital market transactions or otherwise. We also anticipate granting compensatory equity awards to our trustees, officers, employees, advisors and consultants who will provide services to us after the distribution. Such awards will have a dilutive effect on our earnings per share, which could adversely affect the market price of our common shares.

        In addition, our declaration of trust will authorize us to issue, without the approval of our shareholders, one or more classes or series of preferred shares having such designation, voting powers, preferences, rights and other terms, including preferences over our common shares respecting dividends and distributions, as our board of trustees generally may determine. The terms of one or more classes or series of preferred shares could dilute the voting power or reduce the value of our common shares. For example, we could grant the holders of preferred shares the right to elect some number of our trustees in all events or on the occurrence of specified events, or the right to veto specified transactions. Similarly, the repurchase or redemption rights or liquidation preferences we could assign to holders of preferred shares could affect the residual value of the common shares. Please refer to "Description of Shares of Beneficial Interest."

OUR DECLARATION OF TRUST AND APPLICABLE LAW MAY HINDER ANY ATTEMPT TO ACQUIRE US.

Our declaration of trust sets limits on the ownership of our shares.

        Generally, for UE to maintain its qualification as a REIT under the Code, not more than 50% in value of the outstanding shares of beneficial interest of UE may be owned, directly or indirectly, by five or fewer individuals at any time during the last half of UE's taxable year. The Code defines "individuals" for purposes of the requirement described in the preceding sentence to include some types of entities. Under UE's declaration of trust, no person may own more than 9.8% of our outstanding shares of any class or series, with some exceptions for persons approved by UE's board of trustees. These restrictions on transfer and ownership may delay, deter or prevent a change in control of UE or other transaction that might involve a premium price or otherwise be in the best interest of the shareholders.

Maryland law contains provisions that may reduce the likelihood of certain takeover transactions.

        Maryland imposes conditions and restrictions on certain "business combinations" (including, among other transactions, a merger, consolidation, share exchange, or, in certain circumstances, an asset transfer or issuance or reclassification of equity securities) between a Maryland real estate investment trust and certain persons who beneficially own at least 10% of the real estate investment trust's shares (an "interested shareholder"). Unless approved in advance by the board of trustees of the real estate investment trust, or otherwise exempted by the statute, such a business combination is

45


prohibited for a period of five years after the most recent date on which the interested shareholder became an interested shareholder. After such five-year period, a business combination with an interested shareholder must be: (a) recommended by the board of trustees of the real estate investment trust, and (b) approved by the affirmative vote of at least (i) 80% of the real estate investment trust's outstanding shares entitled to vote and (ii) two-thirds of the real estate investment trust's outstanding shares entitled to vote which are not held by the interested shareholder with whom the business combination is to be effected, unless, among other things, the real estate investment trust's common shareholders receive a "fair price" (as defined by the statute) for their shares and the consideration is received in cash or in the same form as previously paid by the interested shareholder for his or her shares.

        In approving a transaction, the board of trustees may provide that its approval is subject to compliance, at or after the time of approval, with any terms and conditions determined by the board. The business combination provisions of Maryland law may have the effect of delaying, deferring or preventing a change in control of UE or other transaction that might involve a premium price or otherwise be in the best interest of our shareholders. The business combination statute may discourage others from trying to acquire control of UE and increase the difficulty of consummating any offer.

Until the 2018 annual meeting of shareholders, UE will have a classified board of trustees and that may reduce the likelihood of certain takeover transactions.

        Our declaration of trust, which will be amended and restated prior to the separation, will initially divide our board of trustees into three classes. The initial terms of the first, second and third classes will expire at the first, second and third annual meetings of shareholders, respectively, held following the separation. Initially, shareholders will elect only one class of trustees each year. Shareholders will elect successors to trustees of the first class for a two-year term and successors to trustees of the second class for a one-year term, in each case upon the expiration of the terms of the initial trustees of each class. Commencing with the 2018 annual meeting of shareholders, each trustee shall be elected annually for a term of one year and shall hold office until the next succeeding annual meeting and until a successor is duly elected and qualifies. There is no cumulative voting in the election of trustees. Until the 2018 annual meeting of the shareholders, UE's board will be classified, which may reduce the possibility of a tender offer or an attempt to change control of UE, even though a tender offer or change in control might be in the best interest of UE's shareholders.

We may issue additional shares in a manner that could adversely affect the likelihood of certain takeover transactions.

        UE's declaration of trust authorizes the board of trustees, without shareholder approval, to:

        The board of trustees could establish a class or series of common or preferred shares whose terms could delay, deter or prevent a change in control of UE or other transaction that might involve a premium price or otherwise be in the best interest of UE's shareholders, although the board of trustees does not now intend to establish a class or series of common or preferred shares of this kind. UE's declaration of trust and bylaws contain other provisions that may delay, deter or prevent a change in

46


control of UE or other transaction that might involve a premium price or otherwise be in the best interest of our shareholders.

We may change our policies without obtaining the approval of our shareholders.

        Our operating and financial policies, including our policies with respect to acquisitions of real estate or other companies, growth, operations, indebtedness, capitalization and dividends, are exclusively determined by our board of trustees. Accordingly, our shareholders do not control these policies.

47



CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS

        Certain statements contained herein constitute forward-looking statements. Forward-looking statements are not guarantees of future performance. They represent our intentions, plans, expectations and beliefs and are subject to numerous assumptions, risks and uncertainties. Our future results, financial condition and business may differ materially from those expressed in these forward-looking statements. You can find many of these statements by looking for words such as "approximates," "believes," "expects," "anticipates," "estimates," "intends," "plans," "would," "may" or other similar expressions in this information statement. In particular, information included under "Risk Factors," "Management's Discussion and Analysis of Financial Condition and Results of Operations," "Business," and "The Separation" contains forward-looking statements. Many of the factors that will determine the outcome of these and our other forward-looking statements are beyond our ability to control or predict. For a discussion of factors that could materially affect the outcome of our forward-looking statements, see "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operation" in this information statement.

        You are cautioned not to place undue reliance on our forward-looking statements, which speak only as of the date of this information statement or the date of any document incorporated by reference. All subsequent written and oral forward-looking statements attributable to us or any person acting on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this section. We do not undertake any obligation to release publicly any revisions to our forward-looking statements to reflect events or circumstances occurring after the date of this information statement.

48



DIVIDEND POLICY

        We are a newly formed company that has not commenced operations, and as a result, we have not paid any dividends as of the date of this information statement. We expect to distribute 100% of our REIT taxable income to our shareholders out of assets legally available therefor. We estimate that our dividend for the quarter ending March 31, 2015 will be $0.20 per share (or approximately $20 million in the aggregate), an indicative run rate of $0.80 per share for fiscal year 2015 (approximately $80 million in the aggregate). This assumes a distribution ratio of one UE common share for every two common shares of Vornado and for every two common limited partnership units of VRLP. We expect that the cash required to fund our dividends will be covered by cash generated from operations and to the extent they are not so covered, from our $225 million of cash on hand upon our separation. Our dividends must be authorized by our Board of Trustees, in its sole discretion.

        To qualify as a REIT, we must distribute to our shareholders an amount at least equal to:

        We cannot assure you that our distribution policy will remain the same in the future, or that any estimated distributions will be made or sustained. Distributions made by us will be authorized by our board of trustees, in its sole discretion, and declared by us out of legally available funds, and will be dependent upon a number of factors, including restrictions under applicable law, actual and projected financial condition, liquidity, funds from operations and results of operations, the revenue we actually receive from our properties, our operating expenses, our debt service requirements, our capital expenditures, prohibitions and other limitations under our financing arrangements, the annual REIT distribution requirements and such other factors as our board of trustees deems relevant. For more information regarding risk factors that could materially and adversely affect our ability to make distributions, please refer to "Risk Factors."

        Our distributions may be funded from a variety of sources. In particular, we expect that initially our distributions may exceed our net income under GAAP because of non-cash expenses, principally depreciation and amortization expense, included in net income. To the extent that our cash available for distribution is less than 100% of our taxable income, we may consider various means to cover any such shortfall, including borrowing, selling certain of our assets or using a portion of the net proceeds we receive from future offerings of equity, equity-related or debt securities or declaring taxable share dividends. In addition, our declaration of trust allows us to issue shares of preferred equity that could have a preference on distributions, and if we do, the distribution preference on the preferred equity could limit our ability to make distributions to the holders of our common shares.

        For a discussion of the tax treatment of distributions to holders of our common shares, please refer to "Material U.S. Federal Income Tax Consequences."

49



CAPITALIZATION

        The following table sets forth UE's capitalization as of September 30, 2014 on an unaudited historical basis and on a pro forma basis to give effect to the pro forma adjustments included in UE's unaudited pro forma financial information. The information below is not necessarily indicative of what UE's capitalization would have been had the separation, distribution by each of Vornado and VRLP and related transactions been completed as of September 30, 2014. In addition, it is not indicative of UE's future capitalization. This table should be read in conjunction with "Unaudited Pro Forma Combined Financial Statements," "Selected Historical Combined Financial Data," "Management's Discussion and Analysis of Financial Condition and Results of Operations," and UE's audited combined financial statements and notes and unaudited combined interim financial statements and notes included elsewhere in this information statement.

 
  As of September 30, 2014  
(in thousands)
  Actual   Pro Forma
Adjustments
  Pro Forma  

Cash and cash equivalents(1)

  $ 132,825   $ 119,175   $ 252,000  
               

Mortgages

    1,292,075         1,292,075  
               

Total debt

    1,292,075         1,292,075  

Vornado equity(1)

    376,439     (376,439 )    

Shareholders' equity(1)

        338,770     338,770  

Noncontrolling interest in UELP(1)

        133,844     133,844  

Noncontrolling interest in consolidated subsidiary

    335         335  
               

Total Capitalization

  $ 1,801,674   $ 215,350   $ 2,017,024  
               
               

(1)
Pursuant to the separation and distribution by each of Vornado and VRLP, these adjustments reflect:

(i)
Vornado's contribution of cash in connection with the separation and distribution, which results in a pro forma cash balance of $225 million, after reduction for transaction costs, that is to be used by Urban Edge Properties for general corporate purposes;

(ii)
the issuance of common limited partnership units by Urban Edge Properties LP ("UELP") to VRLP in exchange for seven of VRLP's retail properties with a net book basis of $133.8 million;

(iii)
the reclassification of Vornado equity to shareholders' equity; and

(iv)
the execution of a $500 million revolving credit agreement under which no amounts will be drawn and outstanding as of the date of the separation.

50



SELECTED HISTORICAL COMBINED FINANCIAL DATA

        The following table sets forth the selected historical combined financial and other data of our business, which was carved-out from the financial information of Vornado, as described below. We were formed for the purpose of holding certain assets and assuming certain liabilities of Vornado. Prior to the effective date of the Form 10 registration statement, of which this information statement forms a part, and the completion of the distribution of our common shares by each of Vornado and VRLP, we did not conduct any business and did not have any material assets or liabilities. The selected historical financial data set forth below as of December 31, 2013 and 2012 and for the years ended December 31, 2013, 2012 and 2011 has been derived from our audited combined financial statements, which are included elsewhere in this information statement. The selected historical combined financial data as of December 31, 2011, 2010 and 2009 and for the years ended December 31, 2010 and 2009 has been derived from our unaudited combined financial statements, which are not included in this information statement. The income statement data for each of the nine months ended September 30, 2014 and 2013 and the balance sheet data as of September 30, 2014 have been derived from our unaudited interim combined financial statements included elsewhere in this information statement. Our unaudited interim combined financial statements as of September 30, 2014 and for the nine months ended September 30, 2014 were prepared on the same basis as our audited combined financial statements as of December 31, 2013 and 2012 and for each of the years ended December 31, 2013, 2012 and 2011 and, in the opinion of management, include all adjustments, consisting only of normal, recurring adjustments, necessary to present fairly our financial position and results of operations for these periods. The interim results of operations are not necessarily indicative of operations for a full fiscal year.

        The historical results set forth below do not indicate results expected for any future periods. The selected financial data set forth below are qualified in their entirety by, and should be read in conjunction with, "Management's Discussion and Analysis of Financial Condition and Results of Operations" and our combined financial statements and related notes thereto included elsewhere in this information statement.

        The following tables set forth selected financial and operating data. This data may not be comparable to, or indicative of, future operating results.

 
  (Unaudited)
As of
September 30,
  As of December 31,  
 
   
  (Audited)   (Audited)   (Unaudited)   (Unaudited)   (Unaudited)  
 
  2014   2013   2012   2011   2010   2009  
 
  (Amounts in thousands)
 

Balance Sheet Data:

                                     

Total assets

  $ 1,873,595   $ 1,749,965   $ 1,857,055   $ 1,877,107   $ 1,858,978   $ 1,850,179  

Real estate, at cost

    2,006,991     1,984,172     2,045,258     2,028,940     1,993,247     1,964,663  

Accumulated depreciation and amortization

    456,753     421,756     436,137     391,547     346,926     305,706  

Mortgages payable

    1,292,075     1,200,762     1,251,234     1,275,441     1,235,332     600,355  

Noncontrolling interest in consolidated subsidiary

    335     319     298     285     288     292  

Vornado equity

    376,439     341,265     389,590     365,439     372,066     1,001,852  

51



 
  (Unaudited)
Nine Months Ended
September 30,
  (Audited)
Year Ended December 31,
  (Unaudited)
Year Ended
December 31,
 
 
  2014   2013   2013   2012   2011   2010   2009  
 
  (Amounts in thousands)
 

Income Statement Data:

                                           

Total revenue

  $ 236,150   $ 286,389 (1) $ 362,995 (1) $ 304,233   $ 299,856   $ 297,784   $ 279,192  

Operating income

    91,819     156,803 (1)   167,213 (1)(2)   124,966 (3)   144,038 (4)   121,427     116,966  

Net income (loss) attributable to noncontrolling interest

    16     20     21     13     (3 )   (4 )   (1 )

Net income attributable to Vornado

    49,484     112,058 (1)   109,314 (1)(2)   69,837 (3)   87,463 (4)   83,853     60,019  

Cash Flow Statement Data:

                                           

Provided by operating activities

    79,766     206,667 (5)   240,527 (5)   108,364     97,730     128,962     83,749  

Used in investing activities

    23,695     20,686     27,013     32,886     39,023     35,839     108,782  

Used in (provided by) financing activities

    (71,531 )   182,419     212,636     73,385     58,673     92,430     (25,645 )

(1)
Includes $59,599 of income pursuant to a settlement agreement with Stop & Shop.

(2)
Includes a real estate impairment loss of $19,000.

(3)
Includes a real estate impairment loss of $6,000.

(4)
Includes $19,463 for the reversal of an allowance for doubtful accounts as a result of the favorable outcome of Vornado's litigation with Stop & Shop.

(5)
Includes $124,000 of cash received from Stop & Shop pursuant to the settlement agreement.

52



UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS

        The following unaudited pro forma combined financial statements have been prepared by adjusting the historical combined financial statements to reflect the separation of UE from Vornado as described elsewhere in this information statement. The unaudited pro forma combined balance sheet gives effect to the transaction as if it had occurred on September 30, 2014. The unaudited pro forma combined statements of income give effect to the transaction as if it had occurred on January 1, 2013. All significant pro forma adjustments and underlying assumptions are described in the notes to the unaudited pro forma combined financial statements.

        The unaudited pro forma adjustments include the following:

        The unaudited pro forma combined financial statements are presented for illustrative purposes only and are not necessarily indicative of the financial position or financial results that would have actually been reported had the transaction occurred on January 1, 2013 or September 30, 2014, as applicable, nor is it indicative of our future financial position or financial results.

        Our combined financial statements were carved-out from the financial information of Vornado. Our historical financial results reflect charges for certain corporate expenses which include, but are not limited to, costs related to human resources, security, payroll and benefits, legal, corporate communications, information services and restructuring and reorganization. Costs of the services that were allocated or charged to us were based on either actual costs incurred or a proportion of costs estimated to be applicable to us based on a number of factors, most significantly, our percentage of Vornado's adjusted revenue and the number of properties. We believe these charges are reasonable; however, these results may not reflect what our expenses would have been had we been operating as a separate stand-alone public company.

        The unaudited pro forma combined financial statements should be read in conjunction with the combined financial statements and related notes thereto contained elsewhere in this information statement.

53



Urban Edge Properties
Unaudited Combined Balance Sheet
As of September 30, 2014
(Amounts in thousands)

ASSETS
  Historical   Adjustments   Notes   Pro Forma  

Real estate, at cost:

                       

Land

  $ 378,096   $       $ 378,096  

Buildings and improvements

    1,619,242             1,619,242  

Construction in progress

    5,507             5,507  

Leasehold improvements and equipment

    4,146             4,146  
                   

Total

    2,006,991             2,006,991  

Accumulated depreciation and amortization

    (456,753 )           (456,753 )
                   

Real estate, net

    1,550,238             1,550,238  

Cash and cash equivalents

    132,825     119,175   A     252,000  

Restricted cash

    9,687             9,687  

Tenant and other receivables, net of allowance for doubtful accounts of $2,257

    11,045             11,045  

Receivable arising from the straight-lining of rents

    88,601             88,601  

Identified intangible assets, net of accumulated amortization of $21,706

    35,445             35,445  

Deferred leasing costs, net of accumulated amortization of $12,873

    19,432             19,432  

Deferred financing costs, net of accumulated amortization of $6,368

    10,547     4,000   A     14,547  

Prepaid expenses and other assets

    15,775             15,775  
                   

  $ 1,873,595   $ 123,175       $ 1,996,770  
                   
                   

LIABILITIES AND EQUITY

                       

Mortgages payable

  $ 1,292,075   $       $ 1,292,075  

Identified intangible liabilities, net of accumulated amortization of $65,148

    163,641             163,641  

Accounts payable and accrued expenses

    32,287     27,000   B     59,287  

Other liabilities

    8,818             8,818  
                   

Total liabilities

    1,496,821     27,000         1,523,821  
                   

Commitments and contingencies

                       

Vornado equity

    376,439     (376,439 ) A      

Shareholders' equity

        338,770   A     338,770  

Noncontrolling interest in UELP

        133,844   A     133,844  

Noncontrolling interest in consolidated subsidiary

    335             335  
                   

Total equity

    376,774     96,175         472,949  
                   

  $ 1,873,595   $ 123,175       $ 1,996,770  
                   
                   

54



Urban Edge Properties
Unaudited Combined Statement of Income
For the Year Ended December 31, 2013
(Amounts in thousands)

 
  Historical   Adjustments   Notes   Pro Forma  

REVENUE

                       

Property rentals

  $ 228,282   $       $ 228,282  

Tenant expense reimbursements

    73,170             73,170  

Income from Stop & Shop settlement

    59,599             59,599  

Other income

    1,944     2,541   C     4,485  
                   

Total revenue

    362,995     2,541         365,536  
                   

EXPENSES

                       

Depreciation and amortization

    54,043             54,043  

Real estate taxes

    46,715             46,715  

Property operating

    39,340     2,610   D     41,950  

General and administrative

    25,881     6,655   D     32,536  

Real estate impairment losses

    19,000             19,000  

Ground rent

    10,137             10,137  

Provision for doubtful accounts

    666             666  
                   

Total expenses

    195,782     9,265         205,047  
                   

Operating income

    167,213     (6,724 )       160,489  

Interest income

    11             11  

Interest and debt expense

    (55,789 )           (55,789 )
                   

Income before taxes

    111,435     (6,724 )       104,711  

Income tax expense

    (2,100 )           (2,100 )
                   

Net income

    109,335     (6,724 )       102,611  

Net income attributable to noncontrolling interest in consolidated subsidiary

    (21 )           (21 )

Net income attributable to noncontrolling interest in UELP

        (5,592 ) F     (5,592 )
                   

Net income attributable to common shareholders

  $ 109,314   $ (12,316 )     $ 96,998  
                   
                   

Weighted average shares outstanding—Basic and Diluted

              G     99,136  
                       
                       

Basic and Diluted earnings per share

              G   $ 0.98  
                       
                       

55



Urban Edge Properties
Unaudited Combined Statement of Income
For the Nine Months Ended September 30, 2014
(Amounts in thousands)

 
  Historical   Adjustments   Notes   Pro Forma  

REVENUE

                       

Property rentals

  $ 173,175   $       $ 173,175  

Tenant expense reimbursements

    61,751             61,751  

Other income

    1,224     1,963   C     3,187  
                   

Total revenue

    236,150     1,963         238,113  
                   

EXPENSES

                       

Depreciation and amortization

    40,586             40,586  

Real estate taxes

    37,230             37,230  

Property operating

    34,025     1,957   D     35,982  

General and administrative

    19,250     4,991   D     24,241  

Ground rent

    7,803             7,803  

Transaction costs

    4,683     (4,683 ) E      

Provision for doubtful accounts

    754             754  
                   

Total expenses

    144,331     2,265         146,596  
                   

Operating income

    91,819     (302 )       91,517  

Interest income

    25             25  

Interest and debt expense

    (40,769 )           (40,769 )
                   

Income before income taxes

    51,075     (302 )       50,773  

Income tax expense

    (1,575 )           (1,575 )
                   

Net income

    49,500     (302 )       49,198  

Net income attributable to noncontrolling interest in consolidated subsidiary

    (16 )           (16 )

Net income attributable to noncontrolling interest in UELP

        (2,681 ) F     (2,681 )
                   

Net income attributable to common shareholders

  $ 49,484   $ (2,983 )     $ 46,501  
                   
                   

Weighted average shares outstanding—Basic and Diluted

              G     99,622  
                       
                       

Basic and Diluted earnings per share

              G   $ 0.47  
                       
                       

   

See notes to unaudited pro forma combined financial statements.

56



Urban Edge Properties

Unaudited Notes to Pro Forma Combined Financial Statements

(Amounts in thousands)

A.    Capital Structure:

        Pursuant to the separation and distribution by each of Vornado and VRLP, these adjustments reflect:

B.    Accounts Payable and Accrued Expenses:

        Pursuant to the Separation Agreement between Vornado and Urban Edge Properties ("UE"), this adjustment reflects UE's costs incurred in connection with the spin-off including investment banking fees, preparation of all related agreements, SEC filings, organization documents, professional fees, consent fees and transfer taxes. These costs have not been reflected in the Pro Forma Combined Statement of Income.

C.    Management Fee Income:

        Reflects adjustments related to UE management and leasing of Vornado's Springfield Town Center and 22 retail assets which Vornado plans to sell; management and leasing of Alexander's Inc. (32.4% owned by Vornado) non-Manhattan retail properties; and the management of certain assets of Interstate Properties. Fees are based on the fee arrangements agreed by Vornado and UE in the relevant property management and leasing services agreements.

D.    Property Operating and General and Administrative Expenses:

        Reflects adjustments related to (i) the employment of Jeffrey S. Olson, Chairman and Chief Executive Officer of UE, (ii) fees pursuant to the Transition Services Agreement for various services to be performed by Vornado on behalf of UE, including human resources, information technology, public

57



Urban Edge Properties

Unaudited Notes to Pro Forma Combined Financial Statements (Continued)

(Amounts in thousands)

reporting and tax reporting, and (iii) fees pursuant to the lease by UE from Vornado of office space in New York and New Jersey.

 
  Nine Months
Ended
September 30, 2014
  Year Ended
December 31, 2013
 

Rent and expense reimbursements for space leased from Vornado

  $ 614   $ 819  

Estimated transition services fees classified as property operations (including information technology)

    1,343     1,791  
           

Total Property Operating Expenses

  $ 1,957   $ 2,610  
           
           

Components of Mr. Olson's compensation expense:

             

Annual base salary

  $ 750   $ 1,000  

Estimated annual bonus paid in cash

    375     500  

Amortization of annual bonus to be paid in stock and to vest ratably over 4 years (fair value of $500,000)

    94     125  

Estimated amortization of annual stock-based compensation awards to vest ratably over 4 years (fair value of $500,000)

    94     125  

Estimated amortization of initial stock option award which vests 25% in year 3, 25% in year 4 and 50% in year 5 (estimated grant date fair value of $12.8 million)

    2,506     3,342  
           

Total compensation expense

    3,819     5,092  

Estimated transition services fees classified as general and administrative (including human resources, public reporting and tax)

    1,172     1,563  
           

Total general and administrative expense

  $ 4,991   $ 6,655  
           
           

E.    Transaction costs:

        Transaction costs incurred through September 30, 2014 have been removed as a pro forma adjustment. Transaction costs consist primarily of a $3.2 million cash make whole payment to Mr. Olson in accordance with his employment agreement and professional fees in connection with the spin off of UE.

F.    Noncontrolling Interest in UELP:

        Represents the allocation of net income to VRLP as a 5.4% noncontrolling interest in UELP, as discussed in Note A.

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Urban Edge Properties

Unaudited Notes to Pro Forma Combined Financial Statements (Continued)

(Amounts in thousands)

G.    Pro Forma Earnings and Earnings Per Share:

        Reflects the estimated number of basic and diluted weighted average shares outstanding, based on the distribution ratio of one share of UE for every two common shares of Vornado and for every two common units of Vornado Realty L.P.

 
  Nine Months
Ended
September 30, 2014
  Year Ended
December 31, 2013
 

Vornado's basic and diluted weighted average shares outstanding:

             

Basic

    187,503     186,941  
           
           

Diluted

    188,592     187,709  

Vornado Realty L.P. common units owned by third parties

    10,651     10,563  
           

    199,243     198,272  
           
           

Urban Edge Properties pro forma basic and diluted shares outstanding(1)

   
99,622
   
99,136
 
           
           

(1)
On a fully diluted operating partnership basis, there were 105,309, for the nine months ended September 30, 2014, and 104,795, for the year ended December 31, 2013, weighted average units outstanding, inclusive of Vornado's 5.4% ownership interest in UELP.

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

        You should read the following discussion in conjunction with the audited combined financial statements and the corresponding notes, the unaudited interim combined financial statements and the corresponding notes, and the unaudited pro forma combined financial statements and the corresponding notes included elsewhere in this information statement. This Management's Discussion and Analysis of Financial Condition and Results of Operations contains forward-looking statements. The matters discussed in these forward-looking statements are subject to risk, uncertainties, and other factors that could cause actual results to differ materially from those made, projected or implied in the forward-looking statements. Please refer to "Risk Factors" and "Cautionary Statement Concerning Forward-Looking Statements" for a discussion of the uncertainties, risks and assumptions associated with these statements.

Separation from Vornado

        On April 11, 2014, Vornado Realty Trust (NYSE: VNO) ("Vornado") announced that it intended to separate its shopping center business, consisting of 79 strip centers, three malls and a warehouse park adjacent to our East Hanover strip center, from Vornado's other businesses. The separation will be effectuated by means of a pro rata distribution by Vornado to its common shareholders of all UE common shares held by Vornado. UE was formed as a subsidiary of Vornado Realty L.P., the operating partnership through which Vornado conducts its business ("VRLP"), to hold the assets and liabilities associated with Vornado's shopping center business. Immediately prior to such distribution by Vornado, VRLP will distribute pro rata all outstanding UE common shares to holders of VRLP's common limited partnership units, consisting of Vornado and the other common limited partners of VRLP. On December 18, 2014, the board of trustees of Vornado declared the distribution of all UE common shares to be received by Vornado in the distribution by VRLP on the basis of one UE common share for every two Vornado common shares held of record as of the close of business on January 7, 2015, which is the record date for the distribution by each of Vornado and VRLP (the "record date"). On the same date, VRLP declared the distribution of all of the outstanding UE common shares to Vornado and the other holders of common limited partnership units of VRLP on the basis of one UE common share for every two common limited partnership units of VRLP held of record as of the close of business on the record date. Following the distribution by each of Vornado and VRLP, Vornado and UE will be two independent, publicly held companies.

Overview

        Urban Edge Properties ("UE") is a newly formed entity created to own and operate Vornado's 83 properties, comprised of 79 strip centers aggregating 12,499,000 square feet, three malls aggregating 1,988,000 square feet and a warehouse park adjacent to our East Hanover strip center (collectively, the "UE Businesses"). UE is currently a wholly-owned subsidiary of VRLP. UE intends to elect and qualify to be taxed as a real estate investment trust ("REIT") for U.S. Federal income tax purposes. All references to "we," "us," "our," and "the company" refer to UE and its combined retail properties.

        Pursuant to a Separation Agreement, VRLP will distribute 100% of the outstanding UE common shares on a pro rata basis to the holders of its common limited partnership units as of the record date, which include Vornado and the other common limited partners. As a result, Vornado is expected to receive approximately 94% of the outstanding UE common shares, while the other common limited partners as a group will receive approximately 6%. Vornado will distribute all of the UE common shares it receives from VRLP to its common shareholders as of the record date on a pro rata basis. To date, UE has not conducted any business as a separate company and has no material assets and liabilities. The operations of the properties to be transferred to UE are presented as if the transfer had been consummated prior to all historical periods presented in the accompanying combined financial

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statements at the carrying amounts of such assets and liabilities reflected in Vornado's books and records.

        UE will enter into agreements with Vornado under which Vornado will provide various services to UE, including treasury management, human resources, information technology, tax, financial reporting, SEC compliance and insurance, and possibly other matters. We believe that the terms are comparable to those that would have been negotiated on an arm's-length basis.

        The accompanying combined financial statements have been prepared on a carve-out basis in accordance with accounting principles generally accepted in the United States ("GAAP"). GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, and revenues and expenses during the reporting periods. Actual results could differ from these estimates. The historical financial results for the carved-out properties reflect charges for certain corporate costs which we believe are reasonable. These charges were based on either actual costs incurred or a proportion of costs estimated to be applicable to UE based on an analysis of key metrics including total revenues, real estate assets, leasable square feet and operating income. Such costs do not necessarily reflect what the actual costs would have been if UE were operating as a separate stand-alone public company. These charges are discussed further in Note 4—Related Party Transactions in our audited combined financial statements included elsewhere in this information statement.

        Subsequent to the transfer of properties to UE and the distribution of UE's common shares to the holders of the common limited partnership units of VRLP, and the subsequent distribution by Vornado of the UE common shares it receives from VRLP to Vornado's common shareholders, UE expects to operate in a manner intended to enable it to qualify as a REIT under Sections 856-860 of the Internal Revenue Code of 1986, as amended. Under those sections, a REIT which distributes at least 90% of its REIT taxable income as a dividend to its shareholders each year and which meets certain other conditions will not be taxed on that portion of its taxable income which is distributed to its shareholders. Since Vornado operates as a REIT and distributes 100% of taxable income to its shareholders, no provision for Federal income taxes has been made in the accompanying combined financial statements. Our two Puerto Rico malls are subject to income taxes which are based on estimated taxable income and which are included in income tax expense in the combined statements of income. The UE Businesses are also subject to certain other taxes, including state and local taxes and franchise taxes which are included in general and administrative expenses in the combined statements of income.

        Presentation of earnings per share information is not applicable in the accompanying combined financial statements, since these assets and liabilities are wholly-owned by Vornado and such presentation is not permitted under GAAP.

        UE plans to aggregate all of its properties into one reportable segment because all of these properties have similar economic characteristics and UE will provide similar products and services to similar types of retail tenants.

        We compete with a large number of property owners and developers. Our success depends upon, among other factors, trends affecting national and local economies, the financial condition and operating results of current and prospective tenants, the availability and cost of capital, interest rates, construction and renovation costs, taxes, governmental regulations and legislation, population trends, zoning laws, and our ability to lease, sublease or sell our properties, at profitable levels. Our success is also subject to our ability to refinance existing debt on acceptable terms as it comes due.

Critical Accounting Policies and Estimates

        Real Estate—Real estate is carried at cost, net of accumulated depreciation and amortization. Maintenance and repairs are expensed as incurred. Depreciation requires an estimate by management

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of the useful life of each property and improvement as well as an allocation of the costs associated with a property to its various components. As real estate is undergoing redevelopment activities, all property operating expenses directly associated with and attributable to, the redevelopment, including interest expense, are capitalized to the extent that we believe such costs are recoverable through the value of the property. The capitalization period begins when redevelopment activities are underway and ends when the project is substantially complete. General and administrative costs are expensed as incurred. Depreciation is recognized on a straight-line basis over estimated useful lives, which range from three to 40 years. Tenant allowances are amortized on a straight-line basis over the lives of the related leases, which approximate the useful lives of the tenant improvements.

        Upon the acquisition of real estate, we assess the fair value of acquired assets (including land, buildings and improvements, identified intangibles, such as acquired above and below-market leases, acquired in-place leases and tenant relationships) and acquired liabilities and we allocate the purchase price based on these assessments. We assess fair value based on estimated cash flow projections that utilize appropriate discount and capitalization rates and available market information. Estimates of future cash flows are based on a number of factors including historical operating results, known trends, and market/economic conditions. We record acquired intangible assets (including acquired above-market leases, acquired in-place leases and tenant relationships) and acquired intangible liabilities (including below-market leases) at their estimated fair value separate and apart from goodwill. We amortize identified intangibles that have finite lives over the period they are expected to contribute directly or indirectly to the future cash flows of the property or business acquired.

        Our properties and related intangible assets are individually reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. An impairment exists when the carrying amount of an asset exceeds the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset. Estimates of future cash flows are based on our current plans, intended holding periods and available market information at the time the analyses are prepared. An impairment loss is recognized only if the carrying amount of the asset is not recoverable and is measured based on the excess of the property's carrying amount over its estimated fair value. If our estimates of future cash flows, anticipated holding periods, or fair values change, based on market conditions or otherwise, our evaluation of impairment charges may be different and such differences could be material to our consolidated financial statements. Estimates of future cash flows are subjective and are based, in part, on assumptions regarding future occupancy, rental rates and capital requirements that could differ materially from actual results. Plans to hold properties over longer periods decrease the likelihood of recording impairment losses. As a result of Vornado's decision to shorten the estimated holding period for certain properties, a $19,000,000 impairment loss was recognized on the Bruckner Blvd. property in the year ended December 31, 2013, and a $6,000,000 impairment loss was recognized on the Englewood property in the year ended December 31, 2012.

        Cash and Cash Equivalents—Cash and cash equivalents consist of highly liquid investments with original maturities of three months or less and are carried at cost, which approximates fair value, due to their short-term maturities.

        Allowance for Doubtful Accounts—We periodically evaluate the collectability of amounts due from tenants, including the receivable arising from the straight-lining of rents, and maintain an allowance for doubtful accounts for the estimated losses resulting from the inability of tenants to make required payments under the lease agreements. We exercise judgment in establishing these allowances and consider payment history and current credit status in developing these estimates.

        Deferred Costs—Deferred costs include deferred financing and leasing costs. Deferred financing costs are amortized over the terms of the related debt agreements as a component of interest expense. Deferred leasing costs are amortized on a straight-line basis over the lives of the related leases.

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        Revenue Recognition—Property rentals are recognized over the non-cancelable term of the related leases on a straight-line basis, which includes the effects of rent steps and free rent abatements under the leases. We commence rental revenue recognition when the tenant takes possession of the leased space and the leased space is substantially ready for its intended use. In addition, in circumstances where we provide a tenant improvement allowance for improvements that are owned by the tenant, we recognize the allowance as a reduction of rental revenue on a straight-line basis over the term of the lease. Percentage rents are contingent upon the sales of tenants exceeding predefined thresholds. Percentage rents are recognized only after the tenants' sales thresholds have been achieved. Percentage rents are not a material portion of the combined revenue of UE and are included in property rentals. Tenant expense reimbursements provide for the recovery of all or a portion of the operating expenses and real estate taxes of the respective properties. Tenant expense reimbursements are accrued in the same periods as the related expenses are incurred.

Results of Operations—Nine Months Ended September 30, 2014 compared to September 30, 2013

Property Rentals

        Property rentals were $173,175,000 in the nine months ended September 30, 2014, compared to $170,557,000 in the prior year's nine months, an increase of $2,618,000. This increase was primarily due to leasing activity in the current period partially offset by $500,000 of rent in the prior year under the Stop & Shop Guarantee which was settled in February 2013. See Note 7—Stop & Shop Settlement, in the notes to the combined interim financial statements (included elsewhere in this information statement) for further details.

Tenant Expense Reimbursements

        Tenant expense reimbursements were $61,751,000 in the nine months ended September 30, 2014, compared to $54,711,000 in the prior year's nine months, an increase of $7,040,000. This increase was primarily due to higher real estate taxes and snow removal costs included in reimbursable operating expenses.

Income from Stop & Shop Settlement

        Income from Stop & Shop settlement of $59,599,000 in the nine months ended September 30, 2013 was the result of a litigation settlement pursuant to which Stop & Shop paid Vornado $124,000,000. See Note 7—Stop & Shop Settlement, in the notes to the combined interim financial statements (included elsewhere in this information statement) for further details.

Other Income

        Other income was $1,224,000 in the nine months ended September 30, 2014, compared to $1,522,000 in the prior year's nine months, a decrease of $298,000.

Depreciation and Amortization

        Depreciation and amortization was $40,586,000 in the nine months ended September 30, 2014, compared to $38,445,000 in the prior year's nine months, an increase of $2,141,000. This increase was primarily due to depreciation of building and tenant improvements and amortization of leasing commissions incurred since the beginning of 2013.

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Results of Operations—Nine Months Ended September 30, 2014 compared to September 30, 2013—continued

Real Estate Taxes

        Real estate taxes were $37,230,000 in the nine months ended September 30, 2014, compared to $35,164,000 in the prior year's nine months, an increase of $2,066,000. This increase was primarily due to higher tax rates and assessments across the portfolio.

Property Operating Expenses

        Property operating expenses were $34,025,000 in the nine months ended September 30, 2014, compared to $28,501,000 in the prior year's nine months, an increase of $5,524,000. This increase was primarily due to higher snow removal costs.

General and Administrative Expenses

        General and administrative expenses were $19,250,000 in the nine months ended September 30, 2014, compared to $19,323,000 in the prior year's nine months, a decrease of $73,000.

Ground Rent Expense

        Ground rent expense was $7,803,000 in the nine months ended September 30, 2014, compared to $7,587,000 in the prior year's nine months, an increase of $216,000.

Transaction Costs

        Transaction costs were $4,683,000 in the nine months ended September 30, 2014 and consist primarily of a $3,157,000 cash make whole payment to Jeffrey S. Olson, Chairman and Chief Executive Officer of UE, in accordance with his employment agreement and professional fees in connection with the spin off of UE.

Provision for Doubtful Accounts

        Provision for doubtful accounts was $754,000 in the nine months ended September 30, 2014, compared to $566,000 in the prior year's nine months, an increase of $188,000.

Interest and Other Income

        Interest and other income was $25,000 in the nine months ended September 30, 2014, compared to $3,000 in the prior year's nine months, an increase of $22,000.

Interest and Debt Expense

        Interest and debt expense was $40,769,000 in the nine months ended September 30, 2014, compared to $42,269,000 in the prior year's nine months, a decrease of $1,500,000. This decrease was primarily due to the repayment of the Las Catalinas Mall mortgage loan of $54,101,000 in October 2013 and the $17,000,000 refinancing of the Forest Plaza mortgage loan in July 2013 which bears interest at LIBOR plus 1.30% (1.45% at September 30, 2014) compared to the maturing $16,939,000 loan which bore interest at a fixed rate of 6.38%, partially offset by the $300,000,000 refinancing of the Bergen Town Center mortgage loan in March 2013 which bears interest at a fixed rate of 3.56%, compared to the maturing $282,312,000 loan which bore interest at LIBOR plus 150 basis points (1.70% at March 31, 2013).

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Results of Operations—Nine Months Ended September 30, 2014 compared to September 30, 2013—continued

Income Tax Expense

        Income tax expense was $1,575,000 in the nine months ended September 30, 2014, compared to $2,459,000 in the prior year's nine months, a decrease of $884,000. These amounts represent income taxes on our Puerto Rico properties based on estimated taxable income and the anticipated income tax rates in effect in each period. The prior year's nine months was overaccrued based on an anticipated increase in the income tax rate that did not occur during 2013.

Non-GAAP Financial Measures—Nine Months Ended September 30, 2014 and 2013

Net Operating Income ("NOI")

        NOI and same property NOI are supplemental non-GAAP measures that aid in the assessment of the unlevered performance of our properties and portfolio as it relates to the total return on assets. The most directly comparable GAAP financial measure is operating income. We calculate NOI by adjusting GAAP operating income to add back depreciation and amortization expense, general and administrative expenses, real estate impairment losses and non-cash ground rent expense, and deduct non-cash rental income resulting from the straight-lining of rents and amortization of acquired below market leases net of above market leases. NOI does not include a deduction for property management fee expenses because they are eliminated in consolidation against intercompany property management fee income. Intercompany property management fees were approximately $6.6 million and $6.5 million for the nine months ended September 30, 2014 and 2013, respectively. Same property NOI is calculated as NOI for properties that were owned and operated for the entirety of the reporting periods being compared, and excludes properties that were under development/redevelopment and properties acquired or sold during the periods being compared. The properties that were under redevelopment and excluded from same property NOI are as follows: Bergen Town Center East and East Hanover warehouse park. There were no properties acquired or sold during the periods presented. We believe NOI and same property NOI are meaningful non-GAAP financial measures because real estate acquisitions and dispositions are evaluated based on, among other considerations, property NOI applied to market capitalization rates. We utilize these measures to make investment and capital allocation decisions and to compare the unlevered performance of our properties to our peers. NOI and same property NOI should not be considered substitutes for operating income or net income and may not be comparable to similarly titled measures employed by others.

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        The following table reconciles operating income to NOI and same property NOI for the nine months ended September 30, 2014 and 2013.

 
  Nine Months Ended
September 30,
 
 
  2014   2013  
 
  (Amounts in thousands)
 

Operating income

  $ 91,819   $ 156,803  

Depreciation and amortization

    40,586     38,445  

General and administrative

    19,250     19,323  

Transaction costs

    4,683      
           

Subtotal

    156,338     214,571  

Less: non-cash rental income

    (7,325 )   (8,635 )

Add: non-cash ground rent expense

    1,176     1,456  
           

NOI

    150,189     207,392  
           

Adjustments:

             

Settlement income from Stop & Shop(1)

        (59,599 )

Income recognized pursuant to Stop & Shop Guarantee which was terminated upon settlement in February 2013(1)

        (500 )

Properties taken out of service for redevelopment

    (3,084 )   (3,114 )

Other

    (13 )   (665 )
           

Subtotal adjustments

    (3,097 )   (63,878 )
           

Same property NOI

  $ 147,092   $ 143,514  
           
           

(1)
See Note 7—Stop & Shop Settlement, in the notes to the unaudited combined interim financial statements for further details.

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        Same property NOI for the nine months ended September 30, 2014 was $147,092,000, compared to $143,514,000 for the prior year's nine months, an increase of $3,578,000. This increase was primarily driven by the changes in average annual base rent per square foot summarized in the tables below.

Strip Centers

As of
  Square Feet
Owned
  Occupancy
Rate
  Average Annual
Base Rent per
Square Foot
 

September 30, 2014

    12,073,000     95.4 % $ 17.34  

December 31, 2013

    12,075,000     95.5 %   17.27  

Malls

As of
  Square Feet
Owned
  Occupancy
Rate
  Average Annual
Base Rent per
Square Foot
 

September 30, 2014

    1,849,000     95.7 % $ 28.24  

December 31, 2013

    1,848,000     95.8 %   27.99  

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Funds From Operations ("FFO")

        We calculate FFO in accordance with the National Association of Real Estate Investment Trusts' ("NAREIT") definition. NAREIT defines FFO as GAAP net income adjusted to exclude net gains from sales of depreciated real estate assets, real estate impairment losses, real property depreciation and amortization expense, extraordinary items and other specified non-cash items. We believe FFO and comparable FFO are meaningful non-GAAP financial measures useful in comparing our levered operating performance both internally from period to period and among our peers because these non-GAAP measures exclude net gains on sales of depreciable real estate, real estate impairment losses, and real property depreciation and amortization expense which implicitly assumes that the value of real estate diminishes predictably over time rather than fluctuating based on market conditions. FFO and comparable FFO do not represent cash generated from operating activities and are not necessarily indicative of cash available to fund cash requirements and should not be considered as alternatives to net income as a performance measure or cash flow as a liquidity measure. FFO and comparable FFO may not be comparable to similarly titled measures employed by others.

        The following table reconciles net income attributable to Vornado to FFO and comparable FFO for the nine months ended September 30, 2014 and 2013.

 
  Nine Months Ended
September 30,
 
 
  2014   2013  
 
  (Amounts in thousands)
 

Net income attributable to Vornado

  $ 49,484   $ 112,058  

Depreciation and amortization of real property

    40,249     37,992  
           

FFO

    89,733     150,050  
           

Non-comparable items:

             

Transaction costs

    4,683      

Settlement income from Stop & Shop(1)

        (59,599 )

Income recognized pursuant to Stop & Shop Guarantee which was terminated upon settlement in 2013(1)

        (500 )
           

Subtotal adjustments

    4,683     (60,099 )
           

Comparable FFO

  $ 94,416   $ 89,951  
           
           

(1)
See Note 7—Stop & Shop Settlement, in the notes to the unaudited combined interim financial statements for further details.

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Liquidity—Cash Flows

        Cash and cash equivalents were $132,825,000 at September 30, 2014, compared to $5,223,000 at December 31, 2013, an increase of $127,602,000. This increase resulted from $79,766,000 of net cash provided by operating activities and $71,531,000 of net cash provided by financing activities, partially offset by $23,695,000 of net cash used in investing activities. Our combined outstanding debt was $1,292,075,000 at September 30, 2014, a $91,313,000 increase from the balance at December 31, 2013.

        Net cash provided by operating activities of $79,766,000 was primarily comprised of (i) net income of $49,500,000, (ii) $39,141,000 of non-cash adjustments, which include depreciation and amortization and the effect of straight-lining of rental income, partially offset by (iii) the net change in operating assets and liabilities of $8,875,000.

        Net cash used in investing activities of $23,695,000 was comprised of (i) $18,980,000 of construction in progress and real estate additions and (ii) acquisition of real estate of $6,077,000, partially offset by (iii) $1,362,000 of changes in restricted cash.

        Net cash provided by financing activities of $71,531,000 was comprised of (i) $130,000,000 of proceeds from borrowings, partially offset by (ii) $38,881,000 for the repayments of borrowings, (iii) $17,298,000 of net distributions to Vornado and (iv) $2,290,000 of debt issuance costs.

        Cash and cash equivalents were $7,907,000 at September 30, 2013, compared to $4,345,000 at December 31, 2012, an increase of $3,562,000. This increase resulted from $206,667,000 of net cash provided by operating activities, partially offset by $152,419,000 of net cash used in financing activities and $20,686,000 of net cash used in investing activities. Combined outstanding debt was $1,257,173,000 at September 30, 2013, a $5,939,000 increase from the balance at December 31, 2012.

        Net cash provided by operating activities of $206,667,000 was primarily comprised of (i) net income of $112,078,000, (ii) $35,333,000 of non-cash adjustments, which include depreciation and amortization and the effect of straight-lining of rental income, and (iii) the net change in operating assets and liabilities of $59,257,000.

        Net cash used in investing activities of $20,686,000 was comprised of (i) $17,861,000 of construction in progress and real estate additions and (ii) $2,825,000 of changes in restricted cash.

        Net cash used in financing activities of $152,419,000 was comprised of (i) $311,235,000 for the repayments of borrowings, (ii) $156,622,000 of net distributions to Vornado, and (iii) $1,562,000 of debt issuance costs, partially offset by (iv) $317,000,000 of proceeds from borrowings.

Results of Operations—Year Ended December 31, 2013 compared to December 31, 2012

Property Rentals

        Property rentals were $228,282,000 in the year ended December 31, 2013, compared to $232,031,000 in the prior year, a decrease of $3,749,000. This decrease was primarily due to $5,917,000 of rent in 2012 under the Stop & Shop guarantee which was settled in February 2013, partially offset by higher rents in 2013. See Note 10—Stop & Shop Settlement, in the notes to the audited combined financial statements for further details.

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Tenant Expense Reimbursements

        Tenant expense reimbursements were $73,170,000 in the year ended December 31, 2013, compared to $70,453,000 in the prior year, an increase of $2,717,000. This increase was primarily due to higher snow removal costs included in reimbursable property operating expenses.

Stop & Shop Settlement Income

        Stop & Shop settlement income of $59,599,000 in the year ended December 31, 2013 was the result of a litigation settlement pursuant to which Stop & Shop paid Vornado $124,000,000. See Note 10—Stop & Shop Settlement, in the notes to the audited combined financial statements for further details.

Other Income

        Other income was $1,944,000 in the year ended December 31, 2013, compared to $1,749,000 in the prior year, an increase of $195,000.

Depreciation and Amortization

        Depreciation and amortization was $54,043,000 in the year ended December 31, 2013, compared to $52,960,000 in the prior year, an increase of $1,083,000. This increase was primarily due to depreciation of tenant improvements and amortization of leasing commissions incurred since the beginning of 2013.

Real Estate Taxes

        Real estate taxes were $46,715,000 in the year ended December 31, 2013, compared to $45,978,000 in the prior year, an increase of $737,000.

Property Operating Expenses

        Property operating expenses were $39,340,000 in the year ended December 31, 2013, compared to $36,855,000 in the prior year, an increase of $2,485,000. This increase was primarily due to higher snow removal costs.

General and Administrative Expenses

        General and administrative expenses were $25,881,000 in the year ended December 31, 2013, compared to $27,209,000 in the prior year, a decrease of $1,328,000. This decrease was primarily due to lower average head count. General and administrative expenses include $11,893,000 and $11,579,000 in the years ended December 31, 2013 and 2012, respectively, representing an allocation of certain costs borne by Vornado for management and other services, including reporting, legal, tax, information technology and human resources.

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Real Estate Impairment losses

        As a result of Vornado's decision to shorten the estimated holding period for certain properties, the following impairment losses were recognized in the years ended December 31, 2013 and 2012:

 
  For the Year Ended
December 31,
 
 
  2013   2012  
 
  (Amounts in thousands)
 

Bruckner Blvd. 

  $ 19,000   $  

Englewood

        6,000  
           

  $ 19,000   $ 6,000  
           
           

Ground Rent Expense

        Ground rent expense was $10,137,000 in the year ended December 31, 2013, compared to $10,029,000 in the prior year, an increase of $108,000.

Provision for Doubtful Accounts

        Provision for doubtful accounts was $666,000 in the year ended December 31, 2013, compared to $236,000 in the prior year, an increase of $430,000. This increase was primarily due to a $400,000 write-off of the receivable arising from straight line rent in connection with the early termination of two tenants.

Interest and Other Income

        Interest and other income was $11,000 in the year ended December 31, 2013, compared to $20,000 in the prior year, a decrease of $9,000.

Interest and Debt Expense

        Interest and debt expense was $55,789,000 in the year ended December 31, 2013, compared to $53,772,000 in the prior year, an increase of $2,017,000. This increase was primarily due to (i) the $300,000,000 refinancing of the Bergen Town Center mortgage loan in March 2013 which bears interest at a fixed rate of 3.56%, compared to the maturing $282,312,000 loan which bore interest at LIBOR plus 150 basis points (1.71% at December 31, 2012), partially offset by (ii) the repayment of the Las Catalinas Mall mortgage loan of $54,101,000 in October 2013 and (iii) the $17,000,000 refinancing of the Forest Plaza mortgage loan in July 2013 which bears interest at LIBOR plus 1.30% (1.47% at December 31, 2013) compared to the maturing $16,939,000 loan which bore interest at a fixed rate of 6.38%.

Income Tax Expense

        Income tax expense was $2,100,000 in the year ended December 31, 2013, compared to $1,364,000 in the prior year, an increase of $736,000. These amounts represent income taxes on our Puerto Rico properties based on estimated taxable income and an increase in the expected tax rate in 2013.

Results of Operations—Year Ended December 31, 2012 compared to December 31, 2011

Property Rentals

        Property rentals were $232,031,000 in the year ended December 31, 2012, compared to $223,883,000 in the prior year, an increase of $8,148,000. This increase was primarily due to lease up of

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the Bergen Town Center mall and the adjacent strip center upon completion of the redevelopment in 2011.

Tenant Expense Reimbursements

        Tenant expense reimbursements were $70,453,000 in the year ended December 31, 2012, compared to $73,863,000 in the prior year, a decrease of $3,410,000. This decrease was primarily due to lower operating expenses and real estate taxes subject to reimbursement.

Other Income

        Other income was $1,749,000 in the year ended December 31, 2012, compared to $2,110,000 in the prior year, a decrease of $361,000.

Depreciation and Amortization

        Depreciation and amortization was $52,960,000 in the year ended December 31, 2012, compared to $50,981,000 in the prior year, an increase of $1,979,000. This increase was primarily due to the completion of the redevelopment of the Bergen Town Center mall and adjacent strip center in 2011.

Real Estate Taxes

        Real estate taxes were $45,978,000 in the year ended December 31, 2012, compared to $46,517,000 in the prior year, a decrease of $539,000.

Property Operating Expenses

        Property operating expenses were $36,855,000 in the year ended December 31, 2012, compared to $39,447,000 in the prior year, a decrease of $2,592,000. This decrease was primarily due to lower snow removal costs.

General and Administrative Expenses

        General and administrative expenses were $27,209,000 in the year ended December 31, 2012, compared to $27,698,000 in the prior year, a decrease of $489,000. General and administrative expenses include $11,579,000 and $11,208,000 in the years ended December 31, 2012 and 2011, respectively, representing an allocation of certain costs borne by Vornado for management and other services, including accounting, reporting, legal, tax, information technology and human resources.

Real Estate Impairment losses

        As a result of Vornado's decision to shorten the estimated holding period for the Englewood strip center, a $6,000,000 impairment loss was recognized in year ended December 31, 2012.

Ground Rent Expense

        Ground rent expense was $10,029,000 in the year ended December 31, 2012, compared to $9,265,000 in the prior year, an increase of $764,000.

Provision for Doubtful Accounts

        Provision for doubtful accounts was expense of $236,000 in the year ended December 31, 2012, compared to income of $18,090,000 in the prior year. Income in the prior year was due to a 2011 court ruling in Vornado's favor in the Stop & Shop litigation which resulted in Vornado reversing a $19,463,000 allowance for doubtful accounts established in prior years in connection with the litigation.

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See Note 10—Stop & Shop Settlement, in the notes to the audited combined financial statements for further details.

Interest and Other Income

        Interest and other income was $20,000 in the year ended December 31, 2012, compared to zero in the prior year.

Interest and Debt Expense

        Interest and debt expense was $53,772,000 in the year ended December 31, 2012, compared to $55,138,000 in the prior year, a decrease of $1,366,000. This decrease was primarily due to the repayment of the $7,304,000 Carlstadt strip center mortgage loan in 2012.

Income Tax Expense

        Income tax expense was $1,364,000 in the year ended December 31, 2012, compared to $1,440,000 in the prior year, a decrease of $76,000. These amounts represent income taxes on our Puerto Rico properties based on taxable income reported in each period.

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Non-GAAP Financial Measures—Years Ended December 31, 2013, 2012 and 2011

Net Operating Income ("NOI")

        NOI and same property NOI are supplemental non-GAAP measures that aid in the assessment of the unlevered performance of our properties and portfolio as it relates to the total return on assets. The most directly comparable GAAP financial measure is operating income. We calculate NOI by adjusting GAAP operating income to add back depreciation and amortization expense, general and administrative expenses, real estate impairment losses and non-cash ground rent expense, and deduct non-cash rental income resulting from the straight-lining of rents and amortization of acquired below market leases net of above market leases. NOI does not include a deduction for property management fee expenses because they are eliminated in consolidation against intercompany property management fee income. Intercompany property management fees were approximately $8.7 million, $8.6 million and $8.5 million for the years ended December 31, 2013 2012 and 2011, respectively. Same property NOI is calculated as NOI for properties that were owned and operated for the entirety of the reporting periods being compared, and excludes properties that were under development/redevelopment and properties acquired or sold during the periods being compared. The properties that were under redevelopment and excluded from same property NOI are as follows: Bergen Town Center East, East Hanover warehouse park, North Plainfield, NJ, Paramus, NJ, and Garfield, NJ. There were no properties acquired or sold during the periods presented. We believe NOI and same property NOI are meaningful non-GAAP financial measures because real estate acquisitions and dispositions are evaluated based on, among other considerations, property NOI applied to market capitalization rates. We utilize these measures to make investment and capital allocation decisions and to compare the unlevered performance of our properties to our peers. NOI and same property NOI should not be considered substitutes for operating income or net income and may not be comparable to similarly titled measures employed by others.

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        The following table reconciles operating income to NOI and same property NOI for each of the last three years.

 
  (Unaudited)
Year Ended December 31,
 
 
  2013   2012   2011  
 
  (Amounts in thousands)
 

Operating income

  $ 167,213   $ 124,966   $ 144,038  

Depreciation and amortization

    54,043     52,960     50,981  

General and administrative

    25,881     27,209     27,698  

Real estate impairment losses

    19,000     6,000      
               

Subtotal

    266,137     211,135     222,717  

Less: non-cash rental income

    (11,455 )   (15,920 )   (14,457 )

Add: non-cash ground rent expense

    1,841     1,686     2,212  
               

NOI

    256,523     196,901     210,472  
               

Adjustments:

                   

Settlement income from Stop & Shop(1)

    (59,599 )        

Income recognized pursuant to Stop & Shop Guarantee which was terminated upon settlement in February 2013(1)

    (500 )   (5,917 )   (5,000 )

Properties taken out of service for redevelopment

    (7,479 )   (5,823 )   (4,207 )

Other

    (874 )   (867 )   (1,221 )

Reversal of allowance for doubtful accounts in connection with the Stop & Shop settlement(1)

            (19,463 )
               

Subtotal adjustments

    (68,452 )   (12,607 )   (29,891 )
               

Same Property NOI

  $ 188,071   $ 184,294   $ 180,581  
               
               

(1)
See Note 10—Stop & Shop Settlement, in the notes to the audited combined financial statements for further details.

        Same property NOI for the year ended December 31, 2013 was $188,071,000, compared to $184,294,000 for the prior year, an increase of $3,777,000. Same property NOI for the year ended December 31, 2012 was $184,294,000, compared to $180,581,000 for the prior year, an increase of $3,713,000. These increases were primarily driven by the changes in average annual base rent per square foot summarized in the tables below.

Strip Centers

As of
  Square Feet
Owned
  Occupancy
Rate
  Average Annual
Base Rent per
Square Foot
 

December 31, 2013

    12,075,000     95.5 % $ 17.27  

December 31, 2012

    11,822,000     95.2 %   17.03  

December 31, 2011

    11,824,000     95.4 %   16.68  

Malls

As of
  Square Feet
Owned
  Occupancy
Rate
  Average Annual
Base Rent per
Square Foot
 

December 31, 2013

    1,848,000     95.8 % $ 27.99  

December 31, 2012

    1,823,000     93.8 %   28.48  

December 31, 2011

    1,798,000     93.0 %   27.64  

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Funds From Operations ("FFO")

        We present FFO and comparable FFO in this information statement as supplemental measures of our performance that are not required by, or presented in accordance with, GAAP. See "—Non-GAAP Financial Measures—Nine Months Ended September 30, 2014 and 2013" for a discussion of our use of FFO and comparable FFO.

        The following table reconciles net income attributable to Vornado to FFO and comparable FFO for each of the last three years.

 
  (Unaudited)
Year Ended December 31,
 
 
  2013   2012   2011  
 
   
  (Amounts in
thousands)

   
 

Net income attributable to Vornado

  $ 109,314   $ 69,837   $ 87,463  

Depreciation and amortization of real property

    53,479     52,603     50,611  

Real estate impairment losses

    19,000     6,000      
               

FFO

    181,793     128,440     138,074  
               

Non-comparable items:

                   

Settlement income from Stop & Shop(1)

    (59,599 )        

Income recognized pursuant to Stop & Shop Guarantee which was terminated upon settlement in 2013(1)

    (500 )   (5,917 )   (5,000 )

Accelerated amortization of acquired below market lease intangible liabilities

        (2,772 )    

Reversal of allowance for doubtful accounts in connection with the Stop & Shop settlement(1)

            (19,463 )

Subtotal adjustments

    (60,099 )   (8,689 )   (24,463 )
               

Comparable FFO

  $ 121,694   $ 119,751   $ 113,611  
               
               

(1)
See Note 10—Stop & Shop Settlement, in the notes to the audited combined financial statements for further details.

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Liquidity and Capital Resources

        Property rental income is our primary source of cash flow and is dependent on a number of factors including the occupancy level and rental rates, as well as the tenants' ability to pay rent. Our properties provide us with a relatively consistent stream of cash flow that enables us to pay operating expenses, debt service and recurring capital expenditures. Other sources of liquidity to fund cash requirements include proceeds from financings and asset sales. We anticipate that cash flows from continuing operations over the next 12 months, together with existing cash balances, will be adequate to fund our business operations, debt amortization and recurring capital expenditures.

Financing Activities and Contractual Obligations

        Below is a summary of our outstanding debt and maturities as of September 30, 2014.

 
   
   
  Balance at  
 
  Maturity   Interest Rate at
September 30,
2014
  September 30,
2014
  December 31,
2013
 
 
   
   
  (Amounts in thousands)
 

First mortgages secured by:

                         

Crossed collateralized mortgage on 40 properties:

                         

Fixed Rate

    09/20     4.28 % $ 550,589   $ 560,465  

Variable Rate(1)

    09/20     2.36 %   60,000     60,000  
                   

Total crossed collateralized

                610,589     620,465  

Bergen Town Center

    04/23     3.56 %   300,000     300,000  

Las Catalinas

    08/24     4.43 %   130,000      

Montehiedra Town Center(2)

    07/16     6.04 %   120,000     120,000  

North Bergen (Tonnelle Avenue)

    01/18     4.59 %   75,000     75,000  

Wilkes Barre(3)

                    19,898  

Forest Plaza

    07/18     1.45 %   17,000     17,000  

Mount Kisco (Target)

    11/34     7.30 %   15,746     16,003  

Mount Kisco (A&P)

    02/15     7.20 %   12,110     12,203  

Englewood

    10/18     6.22 %   11,630     11,760  

Lodi(4)