Leasing and Other Agreements
Vornado also provides us with leasing services for a fee of 3% of rent for the first ten years of a lease term, 2% of rent for the eleventh through
the twentieth year of a lease term, and 1% of rent for the twenty-first through thirtieth year of a lease term, subject to the payment of rents by tenants. In the event third-party real estate brokers are used, the fees to Vornado increase by 1% and
Vornado is responsible for the fees to the third-party real estate brokers. Vornado is also entitled to a commission upon the sale of any of our assets equal to 3% of gross proceeds, as defined, for asset sales less than $50,000,000 and 1% of gross
proceeds, as defined, for asset sales of $50,000,000 or more.
We also have agreements with Building Maintenance Services, a wholly owned
subsidiary of Vornado, to supervise (i) cleaning, engineering and security services at our Lexington Avenue property and (ii) security services at our Rego Park I and Rego Park II properties and The Alexander apartment tower.
During the year ended December 31, 2017, we incurred $2,800,000 in management fees, $29,000 in development fees, $1,829,000 in leasing fees and
$4,114,000 in management, property management and other fees under our agreements with Vornado. At December 31, 2017, we owed Vornado $1,811,000 for leasing fees, $658,000 for management, property management and other fees, and $21,000 for
development fees.
Relationship with Toys R Us (Toys)
As of March 19, 2018, our affiliate, Vornado owned 32.5% of Toys. Toys leases approximately 47,000 square feet of retail space at our Rego Park II
shopping center (approximately $2,600,000 of annual revenue). Joseph Macnow, our Treasurer, and Vornados Executive Vice President, Chief Financial Officer and Chief Administrative Officer and Ms. Silverstein, our Director, each serve as
members of Toys Board of Directors. On September 18, 2017, Toys filed for Chapter 11 bankruptcy relief. On March 15, 2018, Toys sought authorization to wind down U.S. operations, including closing U.S. stores and liquidating all U.S.
inventory, which relief was granted on an interim basis on March 22, 2018.
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